confidential information memorandum cim - april... · 1.1 transaction overview 5 1.2 business...

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Confidential Information Memorandum

This Confidential Information Memorandum (“Memorandum”) is based on information provided by Cine Latino, Inc.

(“Cinelatino” or the “Company”). It is being delivered on behalf of Cinelatino by Morgan Stanley & Co. LLC (“Morgan

Stanley”), subject to the prior execution of a Confidentiality and Non-Disclosure Agreement (the “Confidentiality Agreement”),

to a number of parties who may be interested in purchasing the Company. The sole purpose of this Memorandum is to assist the

recipient in deciding whether to proceed with a further investigation of the Company. This Memorandum does not purport to be

all-inclusive or to necessarily contain all the information that a prospective purchaser may desire in investigating the Company.

In all cases, the prospective purchaser should conduct its own investigation and analysis of the Company, its assets, financial

condition and prospects and the data set forth in this Memorandum and should rely solely on its own judgment, review and

analysis in evaluating the Company.

By accepting this Memorandum, the recipient agrees to keep confidential the information contained herein or made available in

connection with any further investigation of the Company in accordance with the Confidentiality Agreement. This

Memorandum and all of such other information constitutes “Evaluation Material” for purpose of the Confidentiality Agreement,

except as otherwise provided therein. The recipient should become familiar with this and other obligations which the recipient is

subject to pursuant to the Confidentiality Agreement. This Memorandum may not be photocopied, reproduced, or distributed to

others at any time without the prior written consent of Cinelatino or Morgan Stanley or as otherwise provided in the

Confidentiality Agreement. Upon request, the recipient will promptly return or destroy all material received from Cinelatino or

Morgan Stanley (including this Memorandum) in accordance with such Confidentiality Agreement.

This Memorandum has been prepared for informational purposes relating to this transaction only and upon the express

understanding that it will be used only for the purposes set forth above. Neither Cinelatino nor Morgan Stanley makes any

express or implied representation or warranty as to the accuracy or completeness of the information contained herein or made

available in connection with any further investigation of the Company. Each of Cinelatino and Morgan Stanley expressly

disclaims any and all liability which may be based on such information, errors therein or omissions therefrom. The recipient

shall be entitled to rely solely on the representations and warranties made to it by Cinelatino in any final purchase agreement

when and if executed and delivered by the parties.

In furnishing this Memorandum, neither Cinelatino nor Morgan Stanley undertakes any obligation to provide the recipient with

access to any additional information.

This Memorandum includes “forward looking statements” and other estimates and projections provided by the Company’s

management with respect to its subjective views of the anticipated future performance of the Company. Such statements,

estimates and projections reflect various assumptions by the Company’s management concerning anticipated results, which

assumptions may or may not prove to be correct. The projected financial information contained herein was prepared expressly

for use herein and is based on certain assumptions and management’s analysis of information available to it at the time this

Memorandum was prepared. This Memorandum speaks as of the date hereof and shall not be deemed to be an indication of the

state of affairs of, or the absence of any changes or developments in, the Company’s business at any point in time and none of

its advisors or representatives have any obligation to update any such information.

Cinelatino and its advisor, Morgan Stanley, reserve the right, at any time, in their sole discretion and without assigning or

specifying any reasons therefore, and without any financial obligation or liability of any kind, to alter or terminate this process,

to refuse to provide information to or enter into discussions with any or all prospective purchasers, to terminate discussions with

any or all prospective purchasers, to reject any or all indications of interest or offers, or to negotiate with one or more

prospective purchasers and enter into one or more definitive agreements involving Cinelatino without notice to any other

prospective purchasers. It is understood that each prospective purchaser will bear all the costs of its own investigation and

evaluation of this opportunity.

All communications, inquiries and requests for information relating to these materials should be addressed to the Morgan

Stanley persons listed to the left, as representatives of Cinelatino. Pursuant to the terms of the Confidentiality Agreement, you

may not contact personnel of Cinelatino directly or indirectly.

Contacts

Todd J. Davison Managing Director Co-Head of North American Media 212-761-6051 [email protected]

Chris Bartlett Managing Director 212-761-4220 [email protected]

Asad Husain Vice President 212-761-6858 [email protected]

Vu Ho Associate 212-761-3107 [email protected]

Bill Glennon Analyst 212-761-4313 [email protected]

Morgan Stanley 1585 Broadway New York, NY 10036 Tel: 212-761-4000 Fax: 212-761-0516

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Page

Table of Contents

Confidential Information Memorandum 2 Table of Contents 3

1. Executive Summary

1.1 Transaction Overview 5 1.2 Business Description 6 1.3 Financial Summary 9

2. Investment Highlights

2.1 Investment Highlights 13

3. Industry Overview

3.1 The U.S. Hispanic Market 24 3.2 The Latin American Market 27 3.3 Spanish-Language Film Industry 27

4. Cinelatino Overview

4.1 Business Overview 27 4.2 MVS Service Agreements 27 4.3 Management and Employees 27

5. Growth Opportunities

5.1 Growth in U.S. Subscribers 27 5.2 Grow Subscribers in Latin America 27 5.3 Capitalize on Significant Advertising Opportunity 27 5.4 Digital Platforms 27

6. Detailed Financial Review

6.1 Basis of Presentation 27 6.2 Historical and Projected Financial Summary 27 6.3 Management’s Discussion and Analysis 27 6.4 Bridge to Adjusted EBITDA 27 6.5 Bridge to Audited Financial Statements 27 6.6 Cable Advertising Buildup 27

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SECTION 1

Executive Summary

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1 EXECUTIVE SUMMARY

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1.1 Transaction Overview

InterMedia Partners, LP (“InterMedia”) and MVS Multivision, S.A. de C.V. (“MVS” and together, the “Shareholders”) are considering a sale of Cine Latino, Inc. (“Cinelatino”), the leading Spanish-language cable television movie network, programmed with a lineup featuring the best contemporary films and original television series. Cinelatino is broadly distributed in the U.S. and internationally through established satellite, cable and telecommunications partners. The Company is projected to generate approximately $25 million in revenue and $17 million in Adjusted EBITDA in 2012. (1)

Note

1. Adjusted EBITDA includes pro forma adjustments for certain services provided by MVS and commissions paid to MVS, which will terminate upon a sale. These adjustments are more fully described in Section 6

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1 EXECUTIVE SUMMARY

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1.2 Business Description

Cinelatino is the leading Spanish-language cable movie network, programmed with the best contemporary films and original television series from Mexico, Latin America, the U.S. and Spain. Cinelatino is distributed by all major U.S. cable, satellite and telecommunications operators, and by many Latin American operators, for a combined footprint of approximately 11 million subscribers globally. With over 4 million subscribers in the U.S., Cinelatino has over 50% more subscribers than its nearest competitor. Cinelatino is distributed on Hispanic programming packages in the U.S. and generally on basic video packages internationally. The Company is currently commercial-free and generates 100% of its revenues from subscriber fees pursuant to multi-year distribution agreements. Cinelatino is the dominant rights holder of the biggest and most important Spanish-language movies, including over 85% of the highest grossing box office films in Mexico from 2007 to 2010.

Cinelatino highlights:

The #1 rated U.S. Hispanic cable network

A unique asset serving the large and rapidly growing Hispanic audience

The only fully-distributed Spanish-language cable movie network in the U.S.

Exclusive rights to virtually every significant Spanish-language film released in the last five years

The only television destination for U.S. Hispanics to view current Spanish-language box office hits and critical favorites

A highly-rated, attractive platform for Hispanic-targeted advertisers as the Company transitions to a planned advertising model by 2013

A highly visible, significantly profitable business model with near 100% cash flow conversion

Cinelatino is the premier destination for Spanish-language movies and original premium television series, and appeals to a broad Hispanic audience in the U.S. and Latin America. The Company targets a large and growing U.S. Hispanic population that consumes significantly more filmed entertainment than the general population, and a large and rapidly growing population throughout Latin America that is increasingly migrating to pay-

Introduction

Exhibit 1: Cinelatino Leads in U.S. Hispanic Cable Channel Primetime Ratings Full Year 2011, M-Sun 9:00PM-

3:00AM ET, Hispanic Adults 18-49

0.52 0.52

0.370.31

0.26

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Dis

cove

ryen

Esp

añol

Gal

avis

ion

ES

PN

Dep

orte

s

Fox

Dep

orte

s

Source Nielsen Media Research

One

Business Overview

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1 EXECUTIVE SUMMARY

1.2 Business Description (cont’d)

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TV. Cinelatino’s programming is licensed from studios and producers in Mexico, Latin America, the U.S. and Spain, and includes:

The biggest current Latin American box office hits

Critically-acclaimed award winning movies and compelling original productions

Blockbuster Hollywood movies with Hispanic stars dubbed into Spanish

Premium original television series

Cinelatino is distributed by all major U.S. cable, satellite and telecommunications operators, and by many Latin American operators, for a combined global footprint of approximately 11 million subscribers. Cinelatino is distributed on Hispanic programming packages in the U.S., and generally on basic video packages internationally. Hispanic packages distributed in the U.S. generally consist of 20 or more Spanish-language channels including WAPA America, CNN en Español, Discovery en Español, History en Español, ESPN Deportes and Fox Deportes. While the U.S. represents approximately 37% of Cinelatino’s subscriber base, in 2012, the Company expects to derive 80% of its revenues from U.S. distributors.

Table 1: Cinelatino Summary Distribution

U.S. Mexico LatAm (1) 2011 Subscribers (MM) 4.0 2.1 4.8

Packaging Hispanic Packages Primarily Basic Various Packages

2012 Total Revenue (% of Total) $20MM (80%) $2MM (10%) $3MM (10%)

Note

1. Includes approximately 7k subscribers in Canada

Source Management

Cinelatino serves its markets with two distinct feeds of its service. One feed is dedicated solely to the U.S., and the second feed serves Mexico, Latin America and Canada. Separate feeds allow the Company to acquire content specifically for the U.S. audience, and more broadly tailor its programming strategy across the U.S. Hispanic and Latin American audiences. Cinelatino offers a “red carpet” experience to its U.S. audience by serving as the

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1 EXECUTIVE SUMMARY

1.2 Business Description (cont’d)

8

premiere window for many Spanish-language blockbusters in the U.S. The distinct U.S. feed has been critical to Cinelatino’s leading ratings position.

The Company acquires premium content through its extensive industry relationships and has developed a programming strategy that reflects the tastes of Hispanic communities across its distribution footprint. Cinelatino is the only buyer of scale for television rights to Spanish-language movies for both the U.S. and Latin American markets. Titles are typically acquired on an exclusive basis for a 3-4 year period and generally provide for unlimited runs. Cinelatino’s library currently includes nearly 500 titles.

Cinelatino is well-positioned to capitalize on its leadership position in the U.S. and Latin America. The key growth drivers include:

Continued strong growth in the U.S. Hispanic population

Robust growth in U.S. subscribers to Hispanic pay-TV programming packages

Increased distribution of Cinelatino in Latin America through a combination of rapid growth in pay-TV subscribers and new launches on key cable and satellite distributors

Significant advertising revenue opportunity to monetize Cinelatino’s leading ratings position within the U.S. Hispanic market

New sources of revenue as Cinelatino leverages its licensing rights on emerging distribution platforms (e.g., digital, mobile, video-on-demand, etc.)

Management has included the revenues and costs associated with the growth initiatives listed above in its financial projections, more fully described in Section 6.

Key Initiatives and Growth Strategy

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1 EXECUTIVE SUMMARY

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1.3 Financial Summary

Cinelatino is currently commercial-free and generates 100% of its revenue through subscriber fees pursuant to multi-year distribution agreements. Long-term distribution agreements with satellite, cable and telecommunications partners have generated a highly visible, predictable and robust growth business for Cinelatino since its inception. The Company has grown revenue at an annual rate of approximately 9% since 2009, increasing from $19 million in 2009 to $23 million in 2011. Cinelatino’s scale distribution and efficient cost structure generate attractive Adjusted EBITDA margins, consistently greater than 65%. Positive working capital and minimal capital investment requirements drive exceptionally high free cash flow.

The financial information in Table 2 presents historical financial results for calendar years 2009, 2010 and 2011. The financial projections for the period 2012–2016 have been developed in ordinary course, consistent with past practice by the management team and are more fully described in Section 6.

Table 2: Historical and Projected Financials $MMs

Historical Projected ’09A-’11A ’11A-’16E

2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E CAGR CAGR Revenue

Affiliate Fee Revenue $19.4 $22.2 $22.9 $24.8 $30.5 $34.2 $37.7 $41.1 8.7% 12.4%

Advertising Revenue, net – – – – 10.3 14.0 16.7 18.4

Licensing Revenue – – 0.0 0.1 0.5 0.8 1.0 1.3

Total Revenue 19.4 22.2 22.9 24.9 41.3 49.0 55.3 60.8 8.7% 21.5%

% Growth 14.3% 3.4% 8.6% 65.8% 18.6% 13.0% 9.8%

Total Operating Expenses 9.8 11.9 11.2 11.5 13.8 14.8 15.6 16.4 6.8% 7.9%

% Growth 20.7% (5.4%) 2.3% 20.3% 6.8% 5.6% 5.2%

% of Total Revenue 50.8% 53.6% 49.0% 46.2% 33.5% 30.2% 28.2% 27.0%

EBITDA 9.5 10.3 11.7 13.4 27.4 34.2 39.7 44.4 10.6% 30.6%

% Growth 7.7% 13.7% 14.7% 104.7% 24.5% 16.2% 11.6%

% Margin 49.2% 46.4% 51.0% 53.8% 66.5% 69.8% 71.8% 73.0%

Adjustments

Satellite and Support Services 1.8 1.8 1.8 1.0 0.3 0.3 0.3 0.2

Affiliate Fee Commissions 2.6 2.8 2.9 2.9 3.2 3.6 4.0 4.4

Adjusted EBITDA 14.0 14.9 16.4 17.3 31.0 38.1 44.0 49.0 8.2% 24.5%

% Growth 6.2% 10.2% 5.9% 78.7% 23.0% 15.5% 11.3%

% Margin 72.2% 67.0% 71.4% 69.6% 75.0% 77.8% 79.5% 80.6%

Capex 0.0 – 0.0 0.0 0.0 0.0 0.0 0.0

Unlevered Free Cash Flow (1) 14.0 14.9 16.4 17.3 31.0 38.1 44.0 49.0 8.2% 24.5%

% Growth 6.3% 10.1% 5.9% 78.7% 23.0% 15.5% 11.3%

% Margin 72.1% 67.0% 71.4% 69.6% 75.0% 77.8% 79.5% 80.6%

Summary Revenue Mix (%): (2)

U.S. Revenue 85.4% 83.6% 81.1% 79.9% 77.0% 77.9% 78.6% 78.9%

Non-U.S. Revenue 14.6% 16.4% 18.9% 20.1% 23.0% 22.1% 21.4% 21.1%

Notes

1. Unlevered Free Cash Flow defined as Adjusted EBITDA less Capex

2. Includes Licensing and Advertising Revenue solely in the U.S. from 2012E-2016E

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1 EXECUTIVE SUMMARY

1.3 Financial Summary (cont’d)

10

Exhibit 2: 2012E Adjusted EBITDA

$MM

$17.3$0.4$2.5$1.0$13.4

0

5

10

15

20

2012EEBITDA

Satellite andSupport Services

U.S. LatAm 2012E AdjustedEBITDA

Affiliate Fee Commissions

Source Management

One

The Company has made certain adjustments in calculating Adjusted EBITDA to better reflect the cost of operating Cinelatino unaffiliated with the current ownership. These adjustments are attributable to expenses incurred in connection with the MVS Service Agreements, described more fully in Section 4.2.

1) Satellite and Support Services: MVS provides origination and delivery services for both of the network feeds, master control, monitoring, playlist coordination, dubbing, subtitling, close captioning, IT support, website hosting and bandwidth, and creative and promotional services. The original agreement provided for a step down in the fee by $100k per month ($1.2 million annually), effective August 1, 2012. The agreements have since been amended to eliminate the value-added tax (VAT) effective January 1, 2012, reducing the annual fees by $0.2 million. Despite the forthcoming reductions in the fees payable to MVS, the annual fee remains approximately $0.3 million higher than a quote obtained by the Company (which the Company has not negotiated) for the provision of such services from independent third-parties. The adjustments to EBITDA reflect the pro forma effect of (a) the elimination of the VAT effective January 1, 2012, (b) the lower fees payable to MVS effective August 1, 2012, and (c) the difference between the annual fee payable to MVS (effective August 1, 2012) and the market rate from the third-parties. The satellite and support services agreement may be terminated as of the first anniversary of a change of control event by MVS or the new owner, or on such earlier date as specified by the new owner.

Bridge to 2012E Adjusted EBITDA

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1 EXECUTIVE SUMMARY

1.3 Financial Summary (cont’d)

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2) Affiliate Fee Commissions: Pursuant to agreements between Cinelatino and MVS, the Company pays MVS affiliate fee commissions equal to 13.5% of the Company’s subscriber fees received from all U.S. and Latin American distributors of Cinelatino.(1) The agreements governing the affiliate fee commissions terminate immediately upon a change of control. Accordingly, the adjustments to calculate Adjusted EBITDA reflect the elimination of the affiliate fee commissions.

Please refer to Section 4.2 for additional details on the MVS Service Agreements.

Note

1. MVS receives 13.5% of subscriber fees from distributors in Mexico, other than DISH Mexico, which is owned in part by MVS, and not subject to the commission

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SECTION 2

Investment Highlights

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2 INVESTMENT HIGHLIGHTS

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2.1 Investment Highlights

Unique Opportunity to Own the Leading Spanish-Language Movie Network

Cinelatino is the only Spanish-language cable television movie network distributed by all major U.S. cable, satellite and telecommunications operators

Cinelatino occupies a unique position as the only Spanish-language network programmed exclusively with the best contemporary movies and original television series from Mexico, Latin America, the U.S. and Spain. With over 4 million U.S. subscribers, Cinelatino has the largest subscriber base of any Spanish-language cable television movie network and over 50% more subscribers than its nearest competitor.

Table 3: Cinelatino’s U.S. Distribution

Distribution Partners

Satellite Cable Telco

2011

Subscribers (MM) DISH DirecTV Comcast

Time Warner

Cable Cablevision Cox AT&T Verizon

4.0

Source Management

Investment Highlights

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2.1 Investment Highlights (cont’d)

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Highest Rated U.S. Hispanic Cable Network

#1-rated Spanish-language cable network in primetime among Hispanic Adults 18-49

With broad distribution and exclusive premium content, Cinelatino has enjoyed strong ratings performance. In primetime, among Hispanic Adults 18-49, Cinelatino is more highly rated than all other Spanish-language cable networks, including Discovery en Español, Galavision, ESPN Deportes and Fox Deportes.

Exhibit 3: Cinelatino is the Leading U.S. Spanish-Language Cable Network in Primetime Full Year 2011, M-Sun 9:00PM-3:00AM ET, Hispanic Adults 18-49

0.52 0.52

0.370.31

0.260.22

0.09 0.08 0.06 0.03

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Discovery enEspañol

Galavision ESPNDeportes

Fox Deportes Mun2 MTV TR3S Gol TV Utilisima NUVO


One

Cinelatino’s programming is strategically aligned with the viewing preference of U.S. Hispanics.

Hispanics Love to Watch Movies: In 2010, Hispanics had the highest per capita movie attendance, visiting theaters on average 7 times per year compared to about 4 times for the overall population. Hispanics make up 19% of the movie-going population and 26% of movie ticket sales.(1) Hispanics’ love for movies makes Cinelatino an important and attractive destination for television viewing.

Hispanics Prefer Television in Spanish: Spanish remains the preferred language in the homes of most U.S. Hispanics, and this powerfully

Note

1. MPAA, Theatrical Market Statistics, 2010

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15

influences television viewing habits. According to Nielsen, approximately 61% of Hispanics aged 18 and over prefer to speak Spanish in their homes.(1) Spanish-dominant or bilingual homes comprise about 67% of U.S. Hispanic households, and these homes exhibit a strong preference to watch television in their native language. Spanish-dominant households view 78% of television in Spanish and bilingual homes view about 50% in Spanish.(2)

Exhibit 4: Spanish Language Preference in Homes

Exhibit 5: Spanish Dominant Homes

% of Total U.S. Hispanic TV HHs % of Total U.S. Hispanic TV HHs

Only Spanish15%

Mostly Spanish27%

Spanish & English Equal25%

Mostly English22%

Only English11% Spanish Dominant

42%

English Dominant33%

Bilingual25%

Source Nielsen 2011, U.S. Trends by Ethnicity


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Notes

1. Nielsen Hispanic Media, 2011

2. Ibid

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Differentiated Programming with Expansive Library of World-Class Spanish-Language Content Valued by Hispanic Viewers

Cinelatino has the largest library of contemporary Spanish-language movies

Cinelatino provides a differentiated service offering focused on airing the most popular contemporary films from across the Spanish-speaking world. No other network matches Cinelatino’s breadth and depth of current and commercial movies.

Table 4: Successful Box Office Hits

2007 2008 2009 2010 2011

Successful Mexican

Box Office Hits

#1

#3

#1

#1

#1

Successful Non-

Mexican Box Office

Hits

Colombia

Puerto Rico

Brazil

Peru

Dominican Republic

Critically Acclaimed

Guadalajara

International Film Festival

Mexican Academy

Awards

Tribeca

International Film Festival Selection

Mexican Academy

Awards

Los Angeles Latino International Film

Festival

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U.S. Hispanic and Latin American viewers turn to Cinelatino as their primary source for the latest Spanish-language hits. Cinelatino’s library includes:

The biggest current Latin American box office hits

Critically-acclaimed award winning movies and compelling original productions

Blockbuster Hollywood movies with Hispanic stars dubbed into Spanish

Premium original television series

Cinelatino is the dominant rights holder of current Mexican box office hits, acquiring the rights to 85% to 95% of the top 20 highest grossing Mexican films from 2007 to 2010.

Table 5: Dominant Rights Holder of Mexican Top 20 Theatrical Releases 2006 2007 2008 2009 2010

Cansada De Besar Sapos Kilómetro 31 Rudo Y Cursi El Estudiante No Eres Tu, Soy Yo

Efectos Secundarios Niñas Mal La Misma Luna Recien Cazado El Infierno

Bandidas Hasta El Viento Tiene Miedo Arráncame La Vida Amar A Morir Hidalgo: La Historia

Un Mundo Sultanes Del Sur Navidad, S.A. Paradas Continuas Abel

Asi Del Precipicio Fuera Del Cielo Casi Divas Todo Incluido Te Presento A Laura

Sexo, Amor Y Otras Cañitas. Presencia Volverte A Ver El Libro De Piedra Regresa

Guadalupe La Santa Muerte Amor Letra Por Letra Cabeza De Buda HIM - Más Allá De La Luz

Solo Dios Sabe Malos Hábitos Bajo La Sal El Traspatio El Atentado

Cronicas El Bufalo De La Noche Divina Confusión Sólo Quiero Caminar Sin Ella

Amor Xtremo El Violín Deficit Amar La Profecia De Los Justos

Bienvenido Paisano Morirse Está En Hebreo Spam Enemigos Íntimos 2033

Los Pajarracos Cuando Las Cosas Suceden La Zona Amor, Dolor Y Viceversa Marcelino Pan Y Vino

En El Hoyo La Niña En La Piedra Llamando A Un Ángel Secretos De Familia Seres: Genesis

Como Tu Me Has Deseado Morirse En Domingo Kada Kien Su Karma Al Limite Del Terror La Ultima Y Nos Vamos

Hijas De Su Madre J-ok’el El Viaje De La Nonna Cosas Insignificante El Show De Polo Polo

Dios O Demonio Eros Una Vez María Párpados Azules Morenita, El Escanda Rock Mari

Tu Te Lo Pierdes El Clavel Negro El Viaje De Teo Oveja Negra Daniel Y Ana

Gente Comun J.C. Chávez Satanás Condones.com Contracorriente

Cuatro Labios Propiedad Ajena El Brindis Los Bastardos El Secreto

Ocho Candelas Mosquita Muerta Quemar Las Naves El Brassier De Emma Juegoes Inocentes

Cinelatino Contracted / Under Negotiation Other Network Not Available Yet Pass

Source Rentrak

Titles are typically acquired on an exclusive basis for a 3-4 year period and generally provide for unlimited runs. In most cases, Cinelatino’s content license agreements include rights to Video-on-Demand (“VOD”) and digital rights. The Company believes there is a significant opportunity to drive revenue growth by exploiting digital rights to Cinelatino’s content library through emerging distribution platforms (e.g., Netflix, Hulu, iTunes, etc.), and VOD through the Company’s existing cable, satellite and telecommunications distributors.

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Large and Growing U.S. Hispanic Population

Direct exposure to the dynamic U.S. Hispanic demographic

The large and growing U.S. Hispanic population of approximately 50 million represents the largest minority group in the country and 16% of the total U.S. population. U.S. Hispanics also represent the second largest Hispanic economy in the world after Mexico.

Exhibit 6: U.S. Hispanic Population Growth

Exhibit 7: U.S. Hispanic Composition

Population MM % of Total U.S. Population 2010, % of Total U.S. Hispanics

22

35

50

66

86

9%13%

16%19%

23%

0

25

50

75

100

1990A 2000A 2010A 2020E 2030E

0

10

20

30

40

% of Total U.S. Population

U.S. Hispanic Population

Mexican63%

Puerto Rican9%

Cuban4%

Salvadoran3%

Dominican3%

Guatemalan2%

Other16%

Source U.S. Census Bureau


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U.S. Hispanics are the fastest-growing demographic segment in the country, and more than half of the growth in the total U.S. population between 2000 and 2010 was attributable to the 15 million increase in the Hispanic population. The Hispanic population is expected to grow to 66 million by 2020, an increase of 32%.(1) As the Hispanic population continues to grow rapidly, Cinelatino will benefit from significant growth in subscribers.

Table 6: U.S. Hispanic Profile MM ’06A-’11A ’11A-’14E 2006A 2011A 2014E Growth Growth Hispanic TV Households 11.6 14.0 15.3 20% 10%

Hispanic Pay-TV Subscribers 8.8 11.8 13.0 34% 10%

% of Hispanic TVHH (2) 76% 85% 85%

Hispanic Package Subscribers 2.6 4.0 5.3 55% 31%

% of Hispanic Pay-TV Subscribers 30% 34% 41%

Source Management, Nielsen

Notes

1. U.S. Census Bureau, Population Division

2. Nielsen Universe Estimates through 2011; Penetration held constant to estimate 2014

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19

Significant Growth in Latin America Market

Latin America’s television household growth and pay-TV subscribers continue to increase rapidly

Cinelatino is distributed to nearly 7 million subscribers in 16 countries in Latin America, and is well-positioned for strong subscriber growth given the rapid growth of pay-TV subscribers in Latin America and projected new distributor launches in 2012 and 2013.

There are approximately 83 million television households in Latin America (excluding Brazil), which grew by 10 million, or 14%, from 2006 to 2011. Television households are expected to increase by another 11 million, or 13%, to 94 million, between 2011 and 2016. (1) Pay-TV penetration in Latin America has increased dramatically, especially as satellite operators have begun launching a greater variety of lower-cost services to capture new households. Pay-TV penetration expanded dramatically from 27% to 39% between 2006 and 2011. Through the combination of growth in television households and the pay-TV penetration rate, pay-TV subscribers have increased from 20 million in 2006 to 33 million in 2010. Pay-TV penetration is expected to continue to increase to 47% by 2016, which equates to an additional 12 million new pay-TV households by 2016. (2)

Table 7: Latin America Profile MM

’06A-’11A ’11A-’16E 2006A 2011A 2016E Growth Growth TV Households 73.4 83.3 94.4 14% 13%

Pay-TV Subscribers 19.6 32.6 44.3 66% 36%

% Latin America TVHH 27% 39% 47%

Source SNL Kagan

Notes

1. SNL Kagan, Global Multichannel Forecasts, 2011, Latin America excluding Brazil

2. Ibid

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20

Cinelatino’s subscriber base in Latin America represents approximately 21% of pay-TV subscribers as of 2011. The Company believes there is a significant opportunity to grow subscribers through new launches, particularly in key markets such as Mexico where there are approximately 10 million subscribers that do not currently receive Cinelatino.

Table 8: Cinelatino Latin America Distribution 2011, MM

Cinelatino

Subscribers Pay-TV HH Cinelatino

Penetration (%) Mexico 2.1 11.6 18%

Argentina 1.5 6.8 22%

Colombia 1.7 3.6 46%

Chile 0.2 2.1 9%

Peru 0.1 1.1 13%

Other (1) 1.3 7.3 18%

Total 6.9 32.6 21%

Source Management, SNL Kagan

Note

1. Other category includes subscribers from Trinidad, Venezuela, Dominican Republic, Guatemala, Costa Rica, Uruguay, El Salvador, Honduras, Nicaragua, Panama and Ecuador

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Major Opportunity to Drive Growth Through Advertising Sales

Capitalize on the large and rapidly growing U.S. Hispanic advertising market

As the Company transitions to an advertising-supported model, Cinelatino is well-positioned to capitalize on the sizeable and growing U.S. Hispanic television advertising market. Advertising on Spanish-language cable channels has more than doubled over the last five years, as advertisers recognize that such targeted channels are often a more efficient and attractive way of powerfully reaching their target audience.

Specifically, advertising on U.S. Hispanic cable networks has increased from $122 million in 2006, to $251 million in 2011, growing at a 16% CAGR.(1) Going forward, advertising on U.S. Hispanic cable networks is expected to grow to $378 million in 2014, representing a CAGR of 15%.

Table 9: Advertisers Increasing Focus on U.S. Hispanic Consumers $MM

’06A-’11A ’11A-’14E 2006A 2011A 2014E CAGR CAGR U.S. Hispanic Cable Network Advertising $122 $251 $378 16% 15%

U.S. Cable Network Advertising $23,174 $31,625 $41,126 6% 9%

U.S. Broadcast Advertising (2) $42,961 $37,335 $40,602 (3%) 3%

Source SNL Kagan

Notes

1. SNL Kagan, Hispanic Television and Radio Markets, 2011

2. Includes broadcast TV stations and broadcast TV networks

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Attractive Business Model with High Revenue Visibility and Margins, Leading to Strong Free Cash Flow

Cinelatino has an established, highly profitable business model

Cinelatino is currently commercial-free and generates 100% of its revenues through subscriber fees pursuant to multi-year distribution agreements. Long-term distribution agreements with established satellite, cable and telecommunications partners have generated a highly visible, predictable, high-margin and robust growth business for Cinelatino since its inception. The Company has grown revenue at an annual rate of approximately 14% since 2005, more than doubling from $11 million in 2005 to $23 million in 2011. Cinelatino’s scale distribution and efficient cost structure generate attractive Adjusted EBITDA margins consistently greater than 65%. Positive working capital and minimal capital investment drive exceptionally high free cash flow conversion rates.

Exhibit 8: Historical Revenue Exhibit 9: Historical Adj. EBITDA $MM $MM % Margin

$11$14

$17 $18 $19$22 $23

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011

CAGR: 14%

$7$10

$12 $14 $14 $15 $16

68% 69%74% 78%

72%

67%71%

0

10

20

30

40

2005 2006 2007 2008 2009 2010 2011

40

50

60

70

80

Source Management

Source Management

wo

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SECTION 3

Industry Overview

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3.1 The U.S. Hispanic Market

U.S. Hispanics

Hispanics are the fastest-growing demographic segment in the U.S., with more than half the growth in the total population of the United States between 2000 and 2010 attributable to the increase in the Hispanic population. As of the 2010 U.S. Census, 50 million Hispanics resided in the United States, which represents an increase of 15 million people, or 43%, between 2000 and 2010. (1) U.S. Hispanics represent the second largest Hispanic economy in the world.

About 63% of the U.S. Hispanic population reported their origin as Mexican, followed by Puerto Ricans, the second largest Hispanic group, at 9%.(2) Additionally, the Hispanic population on average is significantly younger than the overall population. The median age of U.S. Hispanics is 27.3, which is ten years younger than the overall U.S. median age. (3)

Hispanic Television and Pay-TV Landscape

U.S. Hispanic television households grew by over 20% from 2006 to 2011, from 11.6 million households to 14.0 million households, dramatically outpacing overall U.S. television household growth of only 3%. In the 2010–2011 television season, 40% of new television households in the U.S. were Hispanic households.(4) Continuing this trend, in the 2011–2012 television season, Hispanic television households increased by 600,000, while overall television households declined by 1.2 million. (5) Strong growth in Hispanic television households in the U.S. is expected to continue, with projected growth of 10% from 2011 to 2014, equating to 1.3 million new Hispanic television households. (6) The continuing rapid growth of Hispanic television households creates a significant opportunity to reach an attractive audience at a time when overall household growth in the U.S. is more modest.

Notes

1. U.S. Census Bureau, The Hispanic Population: 2010, May 2011

2. Ibid

3. U.S. Census Bureau, Intercensal Estimates of the Hispanic Resident Population by Sex and Age, September 2011

4. Nielsen Hispanic Media, 2011, Nielsen Universe Estimates, SNL Kagan

5. Nielsen Universe Estimates

6. Ibid

Exhibit 10: U.S. Hispanic Composition 2010

%

Puerto Rican9%

Cuban4%

Salvadoran3%

Dominican3%

Guatemalan2% Other

16%

Mexican63%


One

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3 INDUSTRY OVERVIEW

3.1 The U.S. Hispanic Market (cont’d)

25

Exhibit 11: Attractive Hispanic TV Household Growth (1) MM TV Households

12.111.6 12.7 13.0 13.4 14.0 14.3 14.8 15.3

0

4

8

12

16

2006A 2007A 2008A 2009A 2010A 2011A 2012E 2013E 2014EHispanic TVHH % Growth 4.4% 4.3% 2.3% 3.1% 4.6% 2.6% 3.4% 3.3%

TV Households

Source Nielsen, SNL Kagan

ne

Cinelatino is one of only a few fully-distributed Spanish-language cable networks in the U.S. Hispanic programming packages distributed in the U.S. generally consist of 20 or more channels featuring Spanish-language programming. Other fully distributed channels featured in Hispanic programming packages include WAPA America, CNN en Español, Discovery en Español, History en Español, ESPN Deportes and Fox Deportes. Within the U.S. cable network industry, the U.S. Hispanic demographic is attractive for a number of reasons:

Growth in Hispanic pay-TV subscribers: Hispanic pay-TV subscribers are expected to grow significantly, driven not only by the rapid growth in Hispanic television households, but also by increased penetration of pay-TV among Hispanics. Hispanic pay-TV subscribers increased 34% from 2006 to 2011, growing from 8.8 to 11.8 million subscribers, nearly six times the 6% increase in overall U.S. subscribers during the same period. This 34% growth also significantly over-indexes the 20% Hispanic television household growth during the same period. By 2014, Hispanic pay-TV subscribers are expected to grow to 13 million.

High growth of Hispanic package subscribers: Subscribers to Hispanic programming packages in the U.S. increased by approximately 55%, from 2.6 million to 4.0 million subscribers from 2006 to 2011. Hispanic programming package subscribers represented 30% of Hispanic pay-TV households in 2006 and 34% in 2011.(2) In an effort to capitalize on the

Notes

1. Based on Nielsen data for TV Households from 2006-2011 and SNL Kagan thereafter

2. Management Estimates

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strong growth of the U.S. Hispanic population, pay-TV distributors have been more aggressively marketing Hispanic programming packages. The number of subscribers to the Hispanic programming packages is expected to increase to approximately 5.3 million by 2014. This represents an incremental 1.3 million additional Hispanic package subscribers in the U.S., or growth of approximately 31%, over the next three years.

Table 10: U.S. Hispanic Profile MM

’06A-’11A ’11A-’14E 2006A 2011A 2014E Growth Growth Hispanic TV Households 11.6 14.0 15.3 20% 10%

Hispanic Pay-TV Subscribers 8.8 11.8 13.0 34% 10%

% of Hispanic TVHH (1) 76% 85% 85%

Hispanic Programming Package Subscribers 2.6 4.0 5.3 55% 31%

% of Hispanic Pay-TV Subscribers 30% 34% 41%

Source Management, Nielsen

Exhibit 12: Growth Composition of Hispanic TV Subscribers in the U.S. MM

Source Nielsen, Management

hor

Notes




2006A 2011A 2014E

15.3

13.0

5.3

14.0

11.8

4.0

Total Hispanic TVHHs (1) Hispanic Cable / Satellite / Telco Subscribers (2) Hispanic Package Subscribers (3)

11.6

8.8

2.6

~8MM HH Growth Opportunity

2006A 2011A 2014E

15.3

13.0

5.3

14.0

11.8

4.0


11.6

8.8

2.6


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Television Viewing and Language Preferences

Hispanics Love to Watch Movies: In 2010, Hispanics had the highest per capita movie attendance, visiting theaters on average 7 times per year compared to about 4 times for the overall population. Hispanics make up 19% of the movie-going population and 26% of movie ticket sales. (1)

Hispanics Prefer Television in Spanish: Spanish remains the preferred language in the homes of most U.S. Hispanics, and this powerfully influences television viewing habits. According to Nielsen, approximately 61% of Hispanics aged 18 and over prefer to speak Spanish in their homes.(2) Spanish-dominant or bilingual homes comprise about 67% of U.S. Hispanic households, and these homes exhibit a strong preference to watch television in their native language. Spanish-dominant households view 78% of television in Spanish and bilingual homes view about 50% in Spanish. (3)

Exhibit 13: Spanish-Language Preference in Homes

Exhibit 14: Spanish Dominant Homes

% of Total U.S. Hispanic TV HHs % of Total U.S. Hispanic TV HHs

Only Spanish15%

Mostly Spanish27%

Spanish & English Equal25%

Mostly English22%

Only English11% Spanish Dominant

42%

English Dominant33%

Bilingual25%



wo

Hispanics Watch More Television: Hispanic television households watch more television than the overall U.S. population. Over the last five years, Hispanics have consistently had higher levels of household television viewing than the overall U.S. population. In 2011, Hispanic households

Notes

1. MPAA, Theatrical Market Statistics, 2010

2. Nielsen Hispanic Media, 2011

3. Ibid

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watched an average of 60 hours and 8 minutes per week, versus 59 hours and 28 minutes of television viewing for the overall population. (1)

Exhibit 15: Hispanic TV Household Viewing Trends Exceeds Overall U.S. Composite

Hours:Minutes

58:39

61:4961:04

59:29 59:4160:08

57:54 57:4758:27 58:29 58:25

59:28

56:00

58:00

60:00

62:00

2006 2007 2008 2009 2010 2011

Hispanic Composite

Source Nielsen

One

Spanish-Language Cable Television Viewing: Spanish-language cable viewing has grown rapidly in all time periods, with primetime viewership among Adults 18-49 reaching nearly 500,000 persons. From 2008 to 2011, Spanish-language cable viewership grew 61% for the total day, and 35% for weekday primetime hours.

Exhibit 16: Spanish-Language Cable TV Viewing Continues to Increase in the U.S. 2008-2011, Adult 18-49 Persons

000s

213

338274

326250

348 315395

269362 335

433343

456383

446

0

250

500

750

Total Day Weekday Prime Weekend Day Weekend Prime

Growth: 61%

2008 2009 2010 2011

Growth: 35% Growth: 40% Growth: 37%

Source Nielsen

One

Note

1. Nielsen Television Audience 2010 & 2011

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Spanish-language cable viewing now comprises a 19% share of overall Spanish-language television viewing among Adults 18-49, up from 12% only three years ago. (1)

Exhibit 17: Spanish-Language Cable Television Viewing in the U.S. % Spanish Cable Share of M-Su 7AM–1AM Spanish TV Viewing

13% 12%15%15% 14%

19%16% 16%

22%20% 19%

25%

0

10

20

30

40

P18-34 P18-49 M18-49

Growth: 59%

Jan '08 Jan '09 Jan '10 Jan '11

Growth: 55% Growth: 64%

Source Nielsen

One

Hispanic Advertising Market

Hispanic households represent over 16% of the total U.S. population and approximately 9% of the total U.S. discretionary consumption, but only 5% of the aggregate media spend targets U.S. Hispanics.(2) As a result, advertisers have been allocating a higher proportion of marketing dollars to the Hispanic market. This is especially true for Hispanic cable networks where advertising has more than doubled over the last five years, and is projected to continue to grow at a 15% CAGR from 2011 to 2014.(3)

U.S. Hispanic cable network advertising growth has significantly outpaced overall U.S. cable advertising growth as well as Hispanic broadcast growth. U.S. Hispanic cable network advertising revenue grew at a 16% CAGR from 2006 to 2011, more than doubling from $122 million to $251 million. Going forward, advertising on U.S. Hispanic cable networks is expected to grow to $378 million in 2014, representing a CAGR of 15%. By contrast, from 2006 to 2011, overall U.S. cable network advertising grew by 6% CAGR and U.S. Hispanic broadcast advertising grew by only 0.5% CAGR.(4) Growth in U.S.

Notes

1. Nielsen, NPower Ratings Report, Hispanic Sample, Spanish Cable and Spanish Bcast Viewing Source Buckets, 2011

2. Advertising Age, Hispanic Fact Pack: 2011, July 2011

3. SNL Kagan, Summary of Hispanic Television and Radio Markets, 2011

4. Ibid

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Hispanic cable network advertising represented virtually all of the growth in U.S. Hispanic television advertising from 2006 to 2011.

Exhibit 18: Cable Network Advertising Spend CAGR

%

16% 15%

6%9%

0%

7%

0

5

10

15

20

2006A–2011A 2011A–2014E

U.S. Hispanic Cable U.S. Cable U.S. Hispanic Broadcast

Source SNL Kagan

Two S

Nonetheless, U.S. Hispanic cable network advertising still significantly under-indexes relative to its share of the Spanish-language television audience. In 2011, U.S. Hispanic cable networks garnered only 8% of total U.S. Hispanic television advertising, compared to a 19% share of the Spanish-language television audience. U.S. Hispanic cable network advertising growth is expected to continue to outpace other media as audiences continue to grow and advertisers shift more dollars to targeted, higher-growing audiences.

Exhibit 19: U.S. Hispanic Cable Advertising Under-Indexes Viewing Share

%

6%8%

12%

19%

0

5

10

15

20

2008 2011

U.S. Hisp. Cable Advertising % of Total Hispanic U.S. Hisp. Cable Viewing Share

Source Nielsen, SNL Kagan

One

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3.2 The Latin American Market

Latin America remains an attractive region for investment due to its large population, shared language, strong economic growth and growing discretionary spend. The Hispanic population in Latin America is 372 million, larger than the total U.S. population,(1) and is projected to grow to 395 million by 2016.

Exhibit 20: Latin America TV Households (1)

Exhibit 21: Latin America Pay-TV Households (1)

Exhibit 22: Latin America Pay-TV Penetration (1)

MM MM %

7383

94

0

40

80

120

2006A 2011A 2016E

29% Growth

20

33

45

0

15

30

45

60

2006A 2011A 2016E

130% Growth

27%

39%47%

0

20

40

60

80

2006A 2011A 2016E

+2,000 bps

Source SNL Kagan Source SNL Kagan Source SNL Kagan

Pay-TV penetration in Latin America is approximately 39% as of the end of 2011. Pay-TV subscribers in Latin America are projected to grow from 33 million in 2011 to 45 million in 2016, representing a CAGR of 7%, and increasing penetration to 47%. This growth is expected to be driven by a sizeable and growing population, as well as a strong macroeconomic backdrop and rising disposable income across geographies. In addition, investments in network infrastructure have improved service and performance, leading to increased penetration for cable operators.

Note

1. Global Insight World Overview, 2011, SNL Kagan, Global Multichannel Forecasts, 2011; Latin America excludes Brazil

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3.2 The Latin American Market (cont’d)

32

Table 11: Pay-TV Penetration by Latin American Country MM

2011A 2011A Pay-TV Penetration (%) Pay-TV Subs TV HH 2011A 2016E (1)

Mexico 11.6 27.0 43% 61%

Colombia 3.6 10.5 35% 39%

Argentina 6.8 11.1 61% 67%

Venezuela 2.6 7.2 36% 43%

Peru 1.1 4.5 24% 27%

Chile 2.1 4.3 50% 56%

Dominican Republic 0.7 2.8 25% 30%

Guatemala 0.6 1.9 31% 33%

Costa Rica 0.5 1.1 48% 51%

Uruguay 0.5 1.3 35% 38%

El Salvador 0.4 1.4 28% 36%

Other (2) 2.0 10.1 19% 15%

Total 32.6 83.3 39% 47%

Source SNL Kagan

Notes

1. 2016E pay-TV penetration rate reflects continued growth in TV households and pay-TV subscribers

2. Other category includes Bolivia, Ecuador, Honduras, Nicaragua, Paraguay, Panama and Trinidad

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33

3.3 Spanish-Language Film Industry

The Spanish-language film industry is highly fragmented. Unlike the U.S., where a handful of major movie studios produce and/or distribute the overwhelming majority of theatrical films released each year, an organized and formal Spanish-language movie studio system does not exist within Mexico, or more broadly throughout all of Latin America.

The absence of an organized film industry is attributable in part to the limited opportunities for theatrical releases for most Spanish-language titles outside of their home market. The cost of marketing theatrical releases makes international theatrical distribution impractical. As a result, Cinelatino provides its audience with the “red carpet” premiere for many Spanish-language films in the United States. This distinguishes Cinelatino from English-language premium movie channels, such as HBO and Showtime, which air movies during a much later distribution window subsequent to their theatrical release (often a year or so), as well as release on home video and pay per view. In contrast, Cinelatino is often the first window for U.S. audiences to see these movies. Cinelatino secures the first window as the only television network licensing current Spanish-language movies consistently and in significant quantities for the U.S. and Latin American markets.

Spanish-language films are produced by numerous independent producers, and the producers do not generally release a consistent number of films in any given year, and in some cases may not produce any films at all. In 2011, Cinelatino acquired 167 titles from 33 distributors, with the single largest licensor accounting for 28 titles. Yet such distributor licensed to Cinelatino an aggregate of 8 titles during the previous three years, exhibiting the lack of consistent output each year. Accordingly, Cinelatino’s current library consists of product from over 50 producers and distributors. Cinelatino relies on its buying power, its market knowledge and its deep relationships to license films.

While Cinelatino sources the majority of its programming from Mexico, which is the most prolific Spanish-language film producing country, Cinelatino’s U.S. programming strategy is to target all Hispanics, not exclusively the Mexican majority. Accordingly, Cinelatino licenses the best titles from over 20 Latin American countries, and though a film from the Dominican Republic, for example, may have limited appeal to Mexican-Americans, given the relatively few films produced in the Dominican Republic, it will be a “must see” for the U.S. Dominican population. Cinelatino is the only channel where Hispanic viewers can see current movies from their home country. This puts Cinelatino in a unique position with both viewers and its distribution partners.

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SECTION 4

Cinelatino Overview

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35

4.1 Business Overview

Since its launch in 1993, Cinelatino has grown into the leading premium, Spanish-language cable movie network with approximately 11 million subscribers across the U.S., Latin America and Canada. Cinelatino is the premier destination for Spanish-language entertainment, providing the best contemporary films and original television series from Mexico, Latin America, the U.S. and Spain. Cinelatino is the #1-rated Spanish-language pay-TV channel in the U.S., driven by the strength of its programming and distribution. Cinelatino attracts a broad Hispanic demographic that loves to watch movies.

The Company has demonstrated strong financial performance:

Consistent revenue growth with a 14% revenue CAGR from 2005-2011

Highly profitable with Adjusted EBITDA margins consistently exceeding 65%

No material capital expenditure requirements, which yields significant free cash flow

InterMedia Partners acquired a 50% economic interest in Cinelatino from MVS in 2007. Shortly thereafter, InterMedia hired Jim McNamara, the former CEO of Telemundo, as Chairman. Concurrently, Mr. McNamara acquired a 5.0% interest (giving each of MVS and InterMedia a 47.5% ownership interest).

Exhibit 23: Cinelatino Ownership Structure

CineLatino, Inc.

Delaware

Jim McNamara

MVS Multivision,S.A. de C.V.

InterMedia CineLatino, LLC

Delaware

5.0% 47.5% 47.5%

CineLatino, Inc.

Delaware

Jim McNamara

MVS Multivision,S.A. de C.V.

InterMedia CineLatino, LLC

Delaware

5.0% 47.5% 47.5%

Source Management

One

Current Investors

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4.1 Business Overview (cont’d)

36

Cinelatino’s programming is distributed to the U.S. and Latin America via two distinct feeds, which allows the Company to tailor its programming strategy specifically to each audience. With a dedicated feed for the U.S., Cinelatino has been able to acquire titles for the U.S. even if the title is unavailable in Latin America, thereby expanding its acquisition opportunities for the U.S. market. The dedicated U.S. feed has been critical to Cinelatino’s ranking as the #1 Spanish-language cable network in primetime among Hispanic Adults 18-49. In addition, Cinelatino is a strong second in total day ratings behind only Galavision, which benefits from Mexican soccer rights, and ahead of Discovery en Español.

Exhibit 24: Cinelatino is the Leading U.S. Spanish-Language Cable Network in Primetime Full Year 2011, M-Sun 9:00PM-3:00AM ET, Hispanic Adults 18-49

0.52 0.52

0.370.31

0.260.22

0.09 0.08 0.06 0.03

0.0

0.1

0.2

0.3

0.4

0.5

0.6

Discovery enEspañol

Galavision ESPNDeportes



One

Exhibit 25: Spanish-Language Cable Network Ratings Full Year 2011, M-Sun 6:00AM-6:00AM ET, Hispanic Adults 18-49

0.43

0.31 0.30

0.220.19 0.17

0.10 0.090.05

0.02

0.0

0.1

0.2

0.3

0.4

0.5

Galavision Discovery enEspañol

ESPNDeportes



One

Programming

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37

Cinelatino sources the majority of its films from Mexico and supplements those titles with films acquired from other Latin American countries. In fact, in 2011, Cinelatino acquired 167 titles from 33 distributors, across 20 Latin American countries. In addition, Cinelatino has longstanding relationships with major U.S. studios such as Warner Brothers, Lionsgate, Sony, Walt Disney Studios and MGM.

The Company’s acquisition strategy is specifically intended to provide the audience with the broadest selection of blockbuster and award-winning titles. All of the popular genres are included and every effort is made to acquire films from all Latin American countries which have significant populations in the U.S., including Puerto Rico, the Dominican Republic, Colombia and Venezuela. Cinelatino is the only U.S. cable movie network programmed with the top titles from these countries, and, as a result, has built tremendous loyalty from these viewers.

Consistent with its programming strategy, Cinelatino is the dominant rights holder of the biggest and most important Spanish-language movies, having acquired the rights to over 85% of the highest grossing box office films in Mexico from 2007 to 2010.

Table 12: Dominant Rights Holder of Mexican Top 20 Theatrical Releases 2006 2007 2008 2009 2010

Cansada De Besar Sapos Kilómetro 31 Rudo Y Cursi El Estudiante No Eres Tu, Soy Yo

Efectos Secundarios Niñas Mal La Misma Luna Recien Cazado El Infierno

Bandidas Hasta El Viento Tiene Miedo Arráncame La Vida Amar A Morir Hidalgo: La Historia

Un Mundo Sultanes Del Sur Navidad, S.A. Paradas Continuas Abel

Asi Del Precipicio Fuera Del Cielo Casi Divas Todo Incluido Te Presento A Laura

Sexo, Amor Y Otras Cañitas. Presencia Volverte A Ver El Libro De Piedra Regresa

Guadalupe La Santa Muerte Amor Letra Por Letra Cabeza De Buda HIM - Más Allá De La Luz

Solo Dios Sabe Malos Hábitos Bajo La Sal El Traspatio El Atentado

Cronicas El Bufalo De La Noche Divina Confusión Sólo Quiero Caminar Sin Ella

Amor Xtremo El Violín Deficit Amar La Profecia De Los Justos

Bienvenido Paisano Morirse Está En Hebreo Spam Enemigos Íntimos 2033

Los Pajarracos Cuando Las Cosas Suceden La Zona Amor, Dolor Y Viceversa Marcelino Pan Y Vino

En El Hoyo La Niña En La Piedra Llamando A Un Ángel Secretos De Familia Seres: Genesis

Como Tu Me Has Deseado Morirse En Domingo Kada Kien Su Karma Al Limite Del Terror La Ultima Y Nos Vamos

Hijas De Su Madre J-ok’el El Viaje De La Nonna Cosas Insignificante El Show De Polo Polo

Dios O Demonio Eros Una Vez María Párpados Azules Morenita, El Escanda Rock Mari

Tu Te Lo Pierdes El Clavel Negro El Viaje De Teo Oveja Negra Daniel Y Ana

Gente Comun J.C. Chávez Satanás Condones.com Contracorriente

Cuatro Labios Propiedad Ajena El Brindis Los Bastardos El Secreto

Ocho Candelas Mosquita Muerta Quemar Las Naves El Brassier De Emma Juegoes Inocentes

Cinelatino Contracted / Under Negotiation Other Network Not Available Yet Pass

Source Rentrak

Exhibit 26: Major Studio Partnerships

wo

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In a typical year, Cinelatino acquires 160–200 titles, and has an expansive library of nearly 500 of the best titles from suppliers across the globe. Cinelatino has a unique advantage as the only network that buys the television rights for the U.S. and Latin America, allowing the Company to serve as a “one-stop shop.”

The Company is able to leverage its extensive industry relationships to acquire titles at efficient prices, with an average license fee per title of $15,557 in 2011. In most cases, in addition to pay-TV, Cinelatino’s content license agreements include rights to VOD and digital rights.

During 2008, Cinelatino’s content strategy and programming philosophy were transformed to focus on expanding its base of programming and acquiring the most popular, contemporary titles. The Company believes the volume of titles and the current cost of content acquired to be at a level consistent with its objective to be the premier Spanish-language cable movie network.

Table 13: Programming Acquisition History

2006 2007 2008 2009 2010 2011 # of Distributors 26 23 20 26 38 33

# of Titles Acquired 157 132 89 194 192 167

Average Licensing Fee per Title $8,175 $8,834 $19,112 $13,843 $13,487 $15,557

Programming Commitment ($MM) $1.7 $1.2 $1.7 $2.7 $2.6 $2.6

Source Management

Cinelatino has expanded its programming variety by licensing exclusive first run television series. Cinelatino’s series all share extremely high production values, promotable stars and compelling stories. These original series provide Cinelatino with high quality and repeatable content that can also be aired in multiple formats (single episodes, double episodes and feature length packaging). Cinelatino has achieved significant success with series such as Tiempo Final from Colombia and Los Simuladores from Mexico. In addition, original television movies have all generated strong ratings and provide solid and exclusive movie programming for years to come.

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Table 14: Additional Cinelatino Programming

Los Simuladores The acclaimed television series produced by Sony Pictures Television and Televisa, Los Simuladores centers on the adventures of four highly-skilled operatives, trained and prepared to carry out sting operations to solve the complex problems of their clients

Tiempo Final Produced by Fox Telecolombia, Tiempo Final is considered one of the greatest Latin American productions. Winner of “Best Series” at the Cartagena Film Festival, each episode is a self-contained story filled with powerful suspense

Estado de Gracia A radical new series from Mexico. Never-before-seen anywhere in the world, the controversial series shines light on Mexico’s illegal drug trade, and touches on the sensitive and relevant topics of drug legalization, police corruption, kidnappings and the powerful drug cartels

Original Productions Cinelatino’s original productions include thrillers Oscura Seducción, Crimenes de Lujuria, and Sex, Lies and Death

Special Television Events Cinelatino plans to launch a variety of new and original programming including major concerts and the hottest stand up comedy specials

Source Management

Cinelatino has grown to be one of the most widely distributed Spanish-language cable networks, distributed to over 4 million U.S. subscribers and to nearly 7 million Latin American subscribers. Cinelatino is distributed on Hispanic programming packages in the U.S. and generally on basic video packages internationally.

Cinelatino is currently commercial-free and generates 100% of its revenues from subscriber fees pursuant to multi-year distribution agreements. The

Distribution

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40

distribution agreements provide for annual rate increases that ensure steady and predictable cash flows.

With over 4 million subscribers in the U.S., Cinelatino has over 50% more subscribers than its nearest competitor, and the Company believes its broad distribution provides a significant built-in competitive advantage. While other Spanish-language movie networks are generally programmed with older, lower-budget movies, Cinelatino is the only Spanish-language movie network focused exclusively on premium, contemporary films.

Table 15: U.S. Competitive Landscape for Spanish-Language Cable Movie Networks

Distribution Partners

Satellite Cable Telco

Cable Network Ownership Description

2011

Subscribers

(MM) DISH DirecTV Comcast

Time Warner

Cable Cablevision Cox AT&T Verizon

InterMedia Partners /

MVS

Premium Contemporary

Movies 4.0

De Pelicula /

De Pelicula

Clasico

Univision

Mexican Movies

(1970–1990) /

B&W Mexican Movies

(1940–1970)

2.6

Cine Estelar /

Cine Nostalgia

Carlos Vasallo

Mexican Movies

(1970–1990) /

B&W Mexican Movies

(1950–1970)

1.3

Viendo Movies SomosTV

Contemporary Movies

Mostly from Spain &

Argentina

1.0

Cine Mexicano Olympusat Low Budget Mexican

Movies 0.7

Gran Cine Olympusat

Contemporary Movies

Mostly from Argentina

& Chile

0.2

Mi Cine Carlos Vasallo

VOD Folder with

Mexican Movies

(1940–1990)

N/A (1)

Note

1. Available on Comcast VOD Only

Source Management

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While the U.S. represents approximately 37% of Cinelatino’s subscriber base, 81% of Cinelatino’s 2011 revenues were derived from U.S. distributors.

Exhibit 27: Subscribers by Region Exhibit 28: Revenue by Region 2011 2011

% %

U.S.37%

Mexico19%

ROW44%

(1)

U.S.81%

Mexico9%

ROW10%

(1)

Source Management

Source Management

wo

Cinelatino’s nearly 7 million Latin American subscribers are distributed among 16 countries throughout Latin America. Dish Mexico, owned in part by MVS, and DirecTV Latin America combined represent more than 50% of Cinelatino’s subscribers in Latin America.

Note

1. ROW (Rest of World) includes Argentina, Canada, Chile, Colombia, Mexico, Peru, Venezuela, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Nicaragua, Panama, Trinidad and Uruguay

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Exhibit 29: Cinelatino Latin American Distribution

Mexico2.1MM SubscribersDish Mexico

Central America358k subscribers Telmex, DirecTV Latin America (DTVLA), Amnet, Propago Satelital, Compania de Telecomunicaciones de El Salvador, Servicios de Comunicacion de Honduras, Telecomunicaciones de Guatemala

Ecuador and Peru372k subscribersDTVLA, TV Cable, Telmex

Argentina, Chile and Uruguay1.7MM subscribersTelmex, DTVLA

Colombia1.7MM subscribersTelmex, DTVLA, EPM, Ingelcom, Cable Cauca

Venezuela450k subscribersDTVLA, Corporacion Telemic, Asotel

Caribbean199k subscribersDTVLA, Compania Dominicana de Telefonos

Mexico2.1MM SubscribersDish Mexico

Central America358k subscribers Telmex, DirecTV Latin America (DTVLA), Amnet, Propago Satelital, Compania de Telecomunicaciones de El Salvador, Servicios de Comunicacion de Honduras, Telecomunicaciones de Guatemala

Ecuador and Peru372k subscribersDTVLA, TV Cable, Telmex

Argentina, Chile and Uruguay1.7MM subscribersTelmex, DTVLA

Colombia1.7MM subscribersTelmex, DTVLA, EPM, Ingelcom, Cable Cauca

Venezuela450k subscribersDTVLA, Corporacion Telemic, Asotel

Caribbean199k subscribersDTVLA, Compania Dominicana de Telefonos

Source Management

diu

Cinelatino is presently not distributed by several major cable and satellite distributors throughout Latin America, representing a significant growth opportunity.

Table 16: Detailed Cinelatino Latin American Snapshot 2011, MM

Cinelatino

Subscribers Pay TV HH Cinelatino

Penetration (%) Mexico 2.1 11.6 18%

Argentina 1.5 6.8 22%

Colombia 1.7 3.6 46%

Chile 0.2 2.1 9%

Peru 0.1 1.1 13%

Other (1) 1.3 7.3 18%

Total 6.9 32.6 21%

Source SNL Kagan, Management

Note

1. Other category includes subscribers from Trinidad, Venezuela, Dominican Republic, Guatemala, Costa Rica, Uruguay, El Salvador, Honduras, Nicaragua, Panama and Ecuador

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4.2 MVS Service Agreements

MVS was founded in 1976, and is one of the largest media and telecommunications conglomerates in Mexico, with a presence in television, broadband, mobile telecom, radio and publishing. MVS operates several cable channels in Mexico and throughout Latin America. In 2008, MVS partnered with DISH Network to create DISH Mexico, a satellite television service in Mexico, with currently over 1.8 million subscribers. MVS also provides broadband service covering Mexico’s largest metropolitan areas, and has launched a nationwide mobile network.

The Company leverages its relationship with MVS to provide operational and technical expertise pursuant to the following agreements:

Table 17: Detailed Profile of MVS Agreements

Services Fees Term Commission Agreement (Satellite and Support Services Agreement)

Delivery of two feeds of the service (U.S. and Latin America)

Master control, 24/7 monitoring

Monitoring, traffic, scheduling and playlist coordination

Dubbing, subtitling and close captioning

Administer programming acquisition

Affiliate marketing

$3.3MM per year, stepping down to $2.1MM per year pursuant to the agreement effective August 1, 2012 (paid monthly)

Upon a change of control, the agreement may be terminated without penalty as of the first anniversary of the change of control event by the new owner or MVS, or on such earlier date as specified by new owner

Distribution Agreement MVS has the exclusive right to negotiate the terms of the distribution of Cinelatino throughout the U.S.

13.5% of subscriber fees received from all distributors in the U.S.

Terminates automatically upon a sale of the Company

Master License Agreement MVS has the exclusive right to distribute the Company’s service in Latin America and Mexico

Mexico: 13.5% of subscriber fees received from all distributors other than Dish Mexico, which is owned in part by MVS, and is not subject to commissions

Latin America: 13.5% of subscriber fees received from all distributors in Latin America

Terminates automatically upon a sale of the Company

Source Management

MVS Overview

MVS Agreements

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4.3 Management and Employees

Organizational Structure

Cinelatino is led by Jim McNamara, who oversees a senior corporate staff, including the department heads of finance, programming, distribution, on-air promotions, marketing and public relations.

Exhibit 30: Organizational Structure

Cinelatino Employees and Consultants

Jim McNamara

Chairman

Finance Programming TechnicalOperations

Distribution On-Air Promotions / Marketing and Public Relations

Sandra AustinChief Financial

Officer

Cristina SuarezController

Accounts Receivable

Latin America MVS

Blanca MunozAssistant Director of

Programming

Ricardo LeonDirector of

Programming

Claudia MoralesManager of

ProgrammingAcquisitions

Alejandro VelaVP of Programming

MVS

Latin AmericaMVS

U.S.InterMedia and

CondistaThird-Party Consultant

CanadaTLN Third-Party

Consultant

Bernardo GonzalezDirector of Promotions

Carolina BilbaoDirector of Promotions

Katie HamlinDirector of Public

Relations and Affiliate Marketing

MVS EmployeesCinelatino Employees and Consultants

Jim McNamara

Chairman

Finance Programming TechnicalOperations

Distribution On-Air Promotions / Marketing and Public Relations

Sandra AustinChief Financial

Officer

Cristina SuarezController

Accounts Receivable

Latin America MVS

Blanca MunozAssistant Director of

Programming

Ricardo LeonDirector of

Programming

Claudia MoralesManager of

ProgrammingAcquisitions

Alejandro VelaVP of Programming

MVS

Latin AmericaMVS

U.S.InterMedia and

CondistaThird-Party Consultant

CanadaTLN Third-Party

Consultant

Bernardo GonzalezDirector of Promotions

Carolina BilbaoDirector of Promotions

Katie HamlinDirector of Public

Relations and Affiliate Marketing

MVS Employees

Source Management

diu

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4.3 Management and Employees (cont’d)

45

Management Biographies

The management team consists of individuals who have spent most of their professional careers in Hispanic media and/or Hispanic television content production and distribution. Their extensive experience and insight into the Hispanic media landscape is a significant advantage for the Company.

James M. McNamara Chairman

Jim McNamara is a veteran of the media industry, with more than 30 years of experience in the Hispanic entertainment business. As Chairman and part owner of Cinelatino, Mr. McNamara oversees the channel’s programming, distribution, finances, and marketing strategy. Under his direction, Cinelatino created a separate, U.S. dedicated feed, allowing the channel to acquire the most up-to-date box office hits from Mexico and Latin America and offer the largest variety of Spanish-language movies to the US Hispanic audience. Concurrently, Mr. McNamara serves as founder and Chairman of Panamax Films, the largest producer of Latino films in the United States, and Chairman of Pantelion Films, a theatrical motion picture production and distribution company in partnership with Lionsgate and Televisa that targets the U.S. Latino market.

Prior to joining Cinelatino, Mr. McNamara served as President and Chief Executive Officer of Telemundo Communications Group, Inc., where he oversaw the sale of Telemundo to NBC and the company’s transformation from acquirer of finished product into the most dynamic producer of Spanish-language television content in the world. He held previous positions as President of Universal Television Enterprises and CEO of New World Entertainment. Mr. McNamara started his career as an agent at Mark H. McCormack’s International Management Group.

Sandra Austin Chief Financial Officer

Sandra Austin joined Cinelatino in July of 2008. As the Chief Financial Officer, she presides over the company’s budget, including managing Cinelatino’s annual expenses, contractual agreements, financial planning, corporate strategy and development, brand management, acquisitions, corporate alliances, controller functions, information systems, and taxes. Under Mrs. Austin’s oversight, the Company has grown Adjusted EBITDA margins, increased free cash flow and deleveraged the company since 2007.

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4.3 Management and Employees (cont’d)

46

Mrs. Austin was Vice President of Finance at Metro Goldwyn Mayer Latin America. She was a team leader in their cable television network distribution efforts in Latin America, including Brazil. While at MGM, Mrs. Austin successfully oversaw the launch of advertising sales to their existing business model.

Prior to joining Cinelatino, Mrs. Austin held a position as a Senior Auditor at Deloitte & Touche.

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SECTION 5

Growth Opportunities

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5 GROWTH OPPORTUNITIES

48

5.1 Growth in U.S. Subscribers

As the Hispanic population continues to grow, Cinelatino expects to capitalize on projected robust growth in subscribers to Hispanic programming packages.

Growth in Hispanic television households: U.S. Hispanic television households grew by over 20% from 2006 to 2011, from 11.6 million households to 14.0 million households, dramatically outpacing overall U.S. television household growth of only 3%. Strong growth in Hispanic television households in the U.S. is expected to continue, with projected growth of 10% from 2011 to 2014, equating to 1.3 million new Hispanic television households. (1)

Growth in Hispanic pay-TV subscribers: Hispanic pay-TV subscribers are expected to grow significantly, driven not only by the rapid growth in Hispanic television households, but also by increased penetration of pay-TV among Hispanics. Hispanic pay-TV subscribers increased 34% from 2006 to 2011, growing from 8.8 to 11.8 million subscribers, nearly six times the 6% increase in overall U.S. subscribers during the same period. This 34% growth also significantly over-indexes the 20% Hispanic television household growth during the same period. By 2014, Hispanic pay-TV subscribers are expected to grow to 13 million.

High growth of subscribers to Hispanic programming packages: Subscribers to Hispanic programming packages in the U.S. increased by approximately 55% from 2006 to 2011, from 2.6 million to 4.0 million subscribers. Hispanic programming package subscribers represented 30% of Hispanic pay-TV households in 2006 and 34% in 2011.(2) In an effort to capitalize on the strong growth of the U.S. Hispanic population, pay-TV distributors have been more aggressively marketing Hispanic programming packages. The number of subscribers to the Hispanic programming packages is expected to increase to approximately 5.3 million by 2014. This represents an incremental 1.3 million Hispanic programming package subscribers in the U.S., or a growth of approximately 31%, over the next three years.

Notes



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5.1 Growth in U.S. Subscribers (cont’d)

49

Exhibit 31: Growth Composition of Hispanic Television Subscribers in the U.S. MM

Source Nielsen, Management

hor

Even taking into account the significant projected growth in subscribers to Hispanic programming packages, there will remain nearly 8 million Hispanic pay-TV households in 2014 that do not subscribe to Hispanic programming packages. The Company believes there is a significant opportunity to drive penetration of Hispanic pay-TV households who do not subscribe to the Hispanic programming package, as these pay-TV households are natural subscribers to these packages.

Notes




2006A 2011A 2014E

15.3

13.0

5.3

14.0

11.8

4.0


11.6

8.8

2.6


2006A 2011A 2014E

15.3

13.0

5.3

14.0

11.8

4.0


11.6

8.8

2.6


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5.2 Grow Subscribers in Latin America

Cinelatino believes there is a significant opportunity to drive revenue growth outside the United States. Cinelatino’s current Latin American subscriber base of approximately 7 million represents just 21% of all pay-TV subscribers in the region.(3) There is a substantial opportunity for Cinelatino to expand its footprint in Latin America through (i) capitalizing on growth in pay-TV subscribers in Latin America, and (ii) new system launches.

Growth in Pay-TV Subscribers: The rapid increase in pay-TV subscribers in Latin America is expected to drive Cinelatino’s subscriber growth. Total pay-TV households of 33 million in 2011 are expected to grow to 45 million in 2016, representing 12 million incremental subscribers. (4)

New Launches: Cinelatino expects to further expand its Latin American subscriber base through new distribution arrangements with multi-channel video operators in the region. Cinelatino’s planned new launches in Latin America are expected to add approximately 7 million subscribers during 2012 and 2013, increasing the Company’s penetration of the existing Latin American subscriber base to approximately 42% by 2013.

Table 18: Summary of New Launches and Organic Growth in Latin America Subscribers (000s)

Cinelatino Subscribers Cinelatino Pay-TV HH Penetration

Country 2011A Organic

Growth (1)

New

Launches (2)

2013E 2011A 2013E Mexico 2,068 979 3,054 6,100 18% 41%

Argentina 1,489 556 1,704 3,749 22% 53%

Colombia 1,691 303 335 2,329 46% 56%

Venezuela 450 203 – 653 17% 20%

Chile 189 41 560 790 9% 33%

Guatemala 183 37 114 333 31% 49%

Peru 144 37 225 406 13% 33%

Dominican Republic 80 13 180 273 12% 33%

El Salvador 67 11 100 177 16% 37%

Uruguay 54 14 112 180 12% 36%

Costa Rica 22 3 137 162 4% 29%

Other (5) 433 118 319 870 22% 43%

Total 6,869 2,315 6,839 16,023 21% 42%

Source Management, SNL Kagan

Notes

1. Organic growth is based on Management’s estimates for subscriber growth from 2012–2013 on the current subscriber base in 2011

2. New launches include all subscribers from new distributors anticipated by Cinelatino in 2012 and 2013

3. SNL Kagan, Global Multichannel Forecasts, 2011; SNL Kagan, Global Multichannel Forecasts, 2011; Latin America excludes Brazil

4. Ibid

5. Other category includes Bolivia, Ecuador, Honduras, Nicaragua, Panama, Paraguay and Trinidad

Exhibit 32: Significant Growth Opportunity in Latin America Subscribers (000s)

16.06.8

2.36.9

0

5

10

15

20

2011ASubs

2012-2013OrganicGrowth

2011-2013New

Launches

2013ESubs

(1) (2)

Source Management

One

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5.3 Capitalize on Significant Advertising Opportunity

The Company plans to introduce advertising on Cinelatino’s U.S. feed in 2013, in an effort to further monetize Cinelatino’s strong ratings and attractive audience, and to capitalize on the growing Hispanic television advertising market. The Company’s audience offers advertisers an unmatched opportunity to target a rapidly growing demographic with high media consumption patterns. This initiative is expected to generate incremental revenue and net EBITDA of approximately $10 million and $7 million in 2013E, growing to $18 million and $14 million, respectively, in 2016E.

Rollout of an advertising model will require the renegotiation of certain elements of the Company’s affiliation agreements, and the Company expects to provide modest rate reductions in exchange for the ability sell advertising on the network. These reductions in subscriber affiliate fees are included in the Company’s financial model.

In order to maintain the premium look and feel of the network that subscribers have come to appreciate, management intends there to be fewer commercial breaks than are typically run on other cable networks. The Company also expects that the commercial breaks will allow Cinelatino to more efficiently program its schedule by filling “dead time” at the conclusion of films and prior to the beginning of the following film or program. Management currently programs this time with promotional material and interviews, which can be repetitive and not particularly additive to the viewing experience. The Company believes that the net result will be a more pleasurable viewing experience for the consumer and a major revenue opportunity for Cinelatino.

The revenue and EBITDA impact from the sale of advertising from 2013E–2016E is summarized in Table 19 below, and a more detailed schedule for the advertising model is provided in Section 6.6.

Table 19: Financial Impact of Advertising Sales $MM

2013E 2014E 2015E 2016E Advertising Revenue, net $10.3 $14.0 $16.7 $18.4

Less: Advertising Expenses (2.6) (2.9) (3.1) (3.2)

EBITDA Impact 7.7 11.1 13.6 15.2

Less: Reduction in U.S. Affiliate Revenue (1.2) (1.3) (1.4) (1.5)

Net EBITDA Impact $6.5 $9.8 $12.2 $13.7

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5.3 Capitalize on Significant Advertising Opportunity (cont’d)

52

Hispanic households represent over 16% of the total U.S. population and approximately 9% of the total U.S. discretionary consumption, but only 5% of the aggregate media spend targets U.S. Hispanics.(1) As a result, advertisers have been allocating a higher proportion of marketing dollars to tap into the Hispanic market. This is especially true for Hispanic cable networks where advertising has more than doubled over the last five years.

U.S. Hispanic cable network advertising growth has significantly outpaced overall U.S. cable advertising growth, as well as U.S. Hispanic broadcast growth. U.S. Hispanic cable network advertising revenue grew at a 16% CAGR from 2006 to 2011, more than doubling from $122 million to $251 million, and is expected to grow to $378 million in 2014, representing a CAGR of 15%.

Note

1. Advertising Age, Hispanic Fact Pack: 2011, July 2011

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53

5.4 Digital Platforms

The Company believes there is a significant opportunity to drive revenue growth by exploiting digital rights to Cinelatino’s content library through emerging distribution platforms (e.g., Netflix, Hulu, iTunes, etc.), and Video on Demand (“VOD”) through the Company’s existing cable, satellite and telecommunications distributors.

In most cases, in addition to pay-TV, Cinelatino’s content license agreements include rights to VOD and digital rights. Cinelatino has projected only modest impact from such initiatives in the financial model, given the market for Spanish-language content on these platforms is still relatively nascent.

Emerging Distribution Platforms

New distribution strategies include digital video offerings such as partnerships with Netflix, Hulu or Apple, all of which have approached the Company. Cinelatino is also considering the alternative of offering digital video through a proprietary platform or an independent portal.

The market for digital video adoption continues to grow rapidly, given the high levels of broadband penetration and faster internet connectivity in the U.S. Broadband penetration for U.S. Hispanics was 45% in 2010 and should continue to grow, given that Hispanics stream video significantly more than the general population. (1)

Video-on-Demand

VOD presents a multi-platform opportunity for Cinelatino through the Company’s distribution partners. The VOD business model would allow all subscribers to the service with access to select programs from Cinelatino’s content library for purchase on a per unit basis.

Note

1. Pew Research, Latinos and Digital Technology, 2011

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SECTION 6

Detailed Financial Review

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6 DETAILED FINANCIAL REVIEW

55

6.1 Basis of Presentation

The financial information in Table 20 presents historical financial results for calendar years 2009, 2010 and 2011. The financial information is derived from the Company’s audited financial statements.

The financial projections for the period 2012–2016 have been developed in the ordinary course, consistent with past practice by the management team. The financial projections include a new revenue stream and expense impact from converting the current business model to an advertising supported network.

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56

6.2 Historical and Projected Financial Summary

Table 20: Historical and Projected Financials $MM

Historical Projected '09A-'11A '11A-'16E

2009A 2010A 2011A 2012E 2013E 2014E 2015E 2016E CAGR CAGR

Revenue:

Affiliate Fee Revenue $19.4 $22.2 $22.9 $24.8 $30.5 $34.2 $37.7 $41.1 8.7% 12.4%

Advertising Revenue, net – – – – 10.3 14.0 16.7 18.4

Licensing Revenue – – 0.0 0.1 0.5 0.8 1.0 1.3

Total Revenue $19.4 $22.2 $22.9 $24.9 $41.3 $49.0 $55.3 $60.8 8.7% 21.5%

% Growth 14.3% 3.4% 8.6% 65.8% 18.6% 13.0% 9.8%

Operating Expenses:

Programming 2.1 2.5 2.5 2.5 2.6 2.7 2.8 2.8


Affiliate Fee Comissions (1) 2.6 2.8 2.9 2.9 3.2 3.7 4.0 4.4

Marketing 0.3 1.4 1.1 1.9 2.7 2.8 2.8 2.9

General & Administrative 1.1 1.4 1.2 1.3 3.1 3.4 3.6 3.8

Licensing – – – 0.0 0.1 0.1 0.1 0.1

Total Operating Expenses $9.8 $11.9 $11.2 $11.5 $13.8 $14.8 $15.6 $16.4 6.8% 7.9%

% Growth 20.7% (5.4%) 2.3% 20.3% 6.8% 5.6% 5.2%

% of Total Revenue 50.8% 53.6% 49.0% 46.2% 33.5% 30.2% 28.2% 27.0%

Operating Income $9.5 $10.3 $11.7 $13.4 $27.4 $34.2 $39.7 $44.4 10.6% 30.6%

% Growth 7.7% 13.7% 14.7% 104.8% 24.6% 16.2% 11.6%

% Margin 49.2% 46.4% 51.0% 53.8% 66.5% 69.8% 71.8% 73.0%

EBITDA $9.5 $10.3 $11.7 $13.4 $27.4 $34.2 $39.7 $44.4 10.6% 30.6%

% Growth 7.7% 13.7% 14.7% 104.7% 24.5% 16.2% 11.6%

% Margin 49.2% 46.4% 51.0% 53.8% 66.5% 69.8% 71.8% 73.0%

Adjustments


Affiliate Fee Commissions 2.6 2.8 2.9 2.9 3.2 3.6 4.0 4.4

Adjusted EBITDA $14.0 $14.9 $16.4 $17.3 $31.0 $38.1 $44.0 $49.0 8.2% 24.5%

% Growth 6.2% 10.2% 5.9% 78.7% 23.0% 15.5% 11.3%

% Margin 72.2% 67.0% 71.4% 69.6% 75.0% 77.8% 79.5% 80.6%

Capex 0.0 – 0.0 0.0 0.0 0.0 0.0 0.0

Unlevered Free Cash Flow (2) $14.0 $14.9 $16.4 $17.3 $31.0 $38.1 $44.0 $49.0 8.2% 24.5%

% Growth 6.3% 10.1% 5.9% 78.7% 23.0% 15.5% 11.3%

% Margin 72.1% 67.0% 71.4% 69.6% 75.0% 77.8% 79.5% 80.6%

Summary Revenue Mix (%): (3)

U.S. Revenue 85.4% 83.6% 81.1% 79.9% 77.0% 77.9% 78.6% 78.9%

Non-U.S. Revenue 14.6% 16.4% 18.9% 20.1% 23.0% 22.1% 21.4% 21.1%

Tall

Source Management

Notes

1. Includes inconsequential amount for Affiliate Fee Commissions in Canada

2. Unlevered Free Cash Flow defined as Adjusted EBITDA less Capex

3. Includes Licensing and Advertising Revenue solely in the U.S. from 2012E-2016E

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6.3 Management’s Discussion and Analysis

Cinelatino’s primary source of revenue is affiliate fees paid to the network by cable, satellite and telecommunications operators distributing the network throughout the U.S., Mexico, other Latin American countries and Canada.

U.S. affiliate fee revenue in 2011 totaled $18.6 million, or 81% of total revenue. Cinelatino’s U.S. subscribers grew approximately 5% in 2011.

Non-U.S. affiliate fee revenue in 2011 totaled $4.3 million, or 19% of total revenue. Fees collected from distributors in Mexico represented 47% of total non-U.S. affiliate fee revenue. Cinelatino’s total non-U.S. subscribers grew 16% in 2011.

Licensing revenue is generated from licensing library content to third parties and was approximately $30k in 2011.

Programming Costs: Programming costs are the amortization of our licensed programming. We enter into multi-year license agreements with various programming distributors and capitalize the amounts paid pursuant to the license agreements. The capitalized amounts are amortized over the term of the related license agreements or the number of exhibitions, whichever occurs first. Programming costs represent approximately 22% of total operating expenses.

Satellite and Support Services: Satellite and support services are provided by MVS and include costs for the origination and delivery of the two feeds of the service, master control, monitoring, playlist coordination, dubbing, subtitling, close captioning, IT support, website hosting and bandwidth, and creative and promotional services. The cost of satellite and support services represents 32% of total operating expenses.

Affiliate Fee Commissions: Affiliate fee commissions, payable primarily to MVS, are costs attributable to the representation of the network throughout the U.S., Latin America and Canada. Fees for representation in the U.S., Mexico and Latin America are 13.5% of affiliate fees, and approximately 23% in Canada. Affiliate fee commissions represent 26% of total operating expenses.

Marketing Expenses: Marketing expenses are mainly attributable to consumer and affiliate marketing. Marketing expenses also includes costs for ratings data provided by Nielsen and Rentrak of the measurement of Hispanic cable television viewing in the U.S., and the reporting of video-on-demand

Revenue

Operating Expenses

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viewership, respectively. Marketing expenses represent 10% of total operating expenses.

General and Administrative Expenses: General and administrative expenses are attributable mainly to salaries, benefits, consultants, rent, insurance, and travel and entertainment expenses. General and administrative expenses represent 11% of total operating expenses.

Revenue

Affiliate Fee Revenue: Affiliate fee revenue increased by $732k to $22.9 million in 2011, a 3% increase from 2010, due to a combination of subscriber growth and contractual fee increases.

Licensing Revenue: Licensing revenue totaled $30k and represented a new stream of revenue in 2011. The amount was as a result of sub-licensing select movie titles.

Operating Expenses

Operating expenses decreased by $644k to $11.2 million in 2011, a 5% decline from 2010.

Programming: Programming costs of $2.5 million in 2011 were flat compared to 2010.

Satellite and Support Services: Satellite and Support services costs decreased by $249k to $3.6 million in 2011, a 7% decline from 2010, due to a contractual decrease in the fee.

Affiliate Fee Commissions: Affiliate fee commissions increased by $124k to $2.9 million in 2011, a 4% increase from 2010, due to an increase in commissionable affiliate fee revenue.

Marketing Expenses: Marketing expenses decreased by $280k to $1.1 million in 2011, a 20% decline from 2010, due to reduced consumer and affiliate marketing.

General and Administrative Expenses: General and administrative expenses decreased by $217k to $1.2 million in 2011, a 15% decline from 2010, due to lower bad-debt expenses.

CY2011 vs. CY2010

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Adjusted EBITDA

Adjusted EBITDA increased by $1.5 million to $16.4 million, a 10% increase from 2010, driven by a 3% increase in revenue and a 5% decrease in operating expenses.

Capital Expenditures

Capital expenditures were $0 in 2010 and $4k in 2011.

The Company expects total revenue to increase by 9% in 2012. Affiliate revenue is projected to increase by 8%, driven by contractual rate increases, organic subscriber growth and new system launches. Total operating expenses are projected to increase by 2% in 2012, driven primarily by a projected increase in marketing expenses of $772k and a 3% increase in programming costs, offset by a decrease in satellite and support services. As a result, Adjusted EBITDA is expected to increase to $17.3 million, yielding a margin of 70%.

2012 Outlook

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6.4 Bridge to Adjusted EBITDA

Exhibit 33: 2012E Adjusted EBITDA

$MM

$17.3$0.4$2.5$1.0$13.4

0

5

10

15

20

2012EEBITDA

Satellite andSupport Services

U.S. LatAm 2012E AdjustedEBITDA

Affiliate Fee Commissions

Source Management

One

The Company has made certain adjustments in calculating Adjusted EBITDA to better reflect the cost of operating Cinelatino unaffiliated with the current ownership. These adjustments are attributable to expenses incurred in connection with the MVS Service Agreements, described more fully in Section 4.2.

1) Satellite and Support Services: MVS provides origination and delivery services for both of the network feeds, master control, monitoring, playlist coordination, dubbing, subtitling, close captioning, IT support, website hosting and bandwidth, and creative and promotional services. The original agreement provided for a step down in the fee by $100k per month ($1.2 million annually), effective August 1, 2012. The agreements have since been amended to eliminate the value-added tax (VAT) effective January 1, 2012, reducing the annual fees by $0.2 million. Despite the forthcoming reductions in the fees payable to MVS, the annual fee remains approximately $0.3 million higher than a quote obtained by the Company (which the Company has not negotiated) for the provision of such services from independent third-parties. The adjustments to EBITDA reflect the pro forma effect of (a) the elimination of the VAT effective January 1, 2012, (b) the lower fees payable to MVS effective August 1, 2012, and (c) the difference between the annual fee payable to MVS (effective August 1, 2012) and the market rate from the third-parties. The satellite and support services agreement may be terminated as of the first anniversary of a change of control event by MVS or the new owner, or on such earlier date as specified by the new owner.

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6.4 Bridge to Adjusted EBITDA (cont’d)

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2) Affiliate Fee Commissions: Pursuant to agreements between Cinelatino and MVS, the Company pays MVS affiliate fee commissions equal to 13.5% of the Company’s subscriber fees received from all U.S. and Latin American distributors of Cinelatino.(1) The agreements governing the affiliate fee commissions terminate immediately upon a change of control. Accordingly, the adjustments to calculate Adjusted EBITDA reflect the elimination of the affiliate fee commissions.

Please refer to Section 4.2 for additional details on the MVS Service Agreements.

Note

1. MVS receives 13.5% of subscriber fees from distributors in Mexico, other than DISH Mexico, which is owned in part by MVS, and not subject to the commission

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6.5 Bridge to Audited Financial Statements

Audited financial statements in accordance with Generally Accepted Accounting Principles (GAAP) for Cinelatino for the three years ended December 31, 2009, 2010 and 2011 are complete. Table 21 below provides a reconciliation between key audited financials for 2009, 2010 and 2011 to illustrate the magnitude and nature of the adjustments made in the financial presentation included in the Confidential Information Memorandum (CIM):

(a) Revenue (b) Total Expenses (c) Operating Income

The audited financial statements report revenues from Mexico and Latin America net of affiliate fee commissions. For purposes of the CIM, the reported revenues have been grossed up for affiliate fee commissions related to Mexico and Latin America revenues. Likewise, total operating expenses were increased for the affiliate fee commission related to Mexico and Latin America. Operating income and net income remained the same in both the audited financials and the CIM.

Table 21: Reconciliation of Audited Operating Income to Adjusted EBITDA $MM

2009 2010 2011 Revenue (per audited financial statements) $19.0 $21.7 $22.4

Plus: Affiliate Fee Commissions (Mexico and Latin America)

0.4 0.4 0.5

Total Revenue $19.4 $22.2 $22.9

Total Expenses (per audited financial statements) $10.0 $11.5 $10.8

Plus: Affiliate Fee Commissions (Mexico and Latin America)

0.4 0.4 0.5

Less: Foreign Withholding Taxes (0.6) – –

Total Expenses $9.8 $11.9 $11.2

Operating Income (per audited financial statements) $9.0 $10.3 $11.7

Plus: Foreign Withholding Taxes 0.6 – –

Operating Income $9.5 $10.3 $11.7

Plus: D&A 0.0 0.0 0.0

Add Back: Satellite and Support Services 1.8 1.8 1.8

Add Back: Affiliate Fee Commissions – MVS 2.6 2.8 2.9

Adjusted EBITDA $14.0 $14.9 $16.4

Source Management

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6.6 Cable Advertising Buildup

Cinelatino’s audience is highly sought-after by advertisers, and the financial projections reflect the introduction of advertising on the U.S. feed in 2013. Net advertising revenue is projected to be $10.3 million in 2013, growing to $18.4 million in 2016. Advertising growth is expected to result from a combination of growth in Hispanic targeted advertising, the popularity of Cinelatino’s programming, the ability to sell commercial time, and subscriber growth. Converting to a cable advertising model requires renegotiation of certain distribution contracts, which would likely result in slight subscriber rate reductions, which are also reflected in the financial projection.

Table 22: Advertising Revenue and EBITDA Schedule $MM

2013E 2014E 2015E 2016E Total Gross Revenue $12.1 $16.4 $19.6 $21.7

Less: Agency Commissions (1.8) (2.5) (2.9) (3.3)

Net Revenue $10.3 $14.0 $16.7 $18.4

Expenses

Sales $1.1 $1.3 $1.4 $1.5

Marketing 0.9 1.0 1.0 1.0

G&A 0.6 0.6 0.7 0.7

Total Expenses $2.6 $2.9 $3.1 $3.2

EBITDA Impact $7.7 $11.1 $13.6 $15.2

Less: Reduction in U.S. Affiliate Revenues (1.2) (1.3) (1.4) (1.5)

Net EBITDA Impact $6.5 $9.8 $12.2 $13.7

Source Management

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