Annual Business Review Meeting October 2004 BRAZIL

Economic outlook 2002 2003 2004 2005f GDP (real growth rate, %) 1.6 1.8 4.2 4.0 GDP per capita (US$) 2,183 3,029 3,191 3,128 Exchange rate (Reais/US$) 2.71 2.88 3.08 3.23 Inflation (y-o-y, %) 12.6 9.3 11.8 7.5 Unemployment (%) 11.7 12.3 11.1 9.5 Fiscal Balance (% GDP) -4.1 -5.2 -2.9 -2.5 Total External Debt (US$bn) 227.7 235.4 209.5 148.7 Trade Balance (US$bn) 12.9 24.8 22.0 20.6 Exports (fob, US$bn) 60.3 73.1 80.0 85.6 Imports (cif, US$bn) 47.4 48.3 58.0 65.0 Reserves (US$bn) 37.8 49.3 44.6 40.9

SCREENS PER INHABITANT: exemples in the world

NEW LAW: A THREAT A law project is being prepared by the Ministry of Culture (MINC) creating the Audiovisual National Agency (ANCINAV) and it brings taxes increases in general. ANCINAV would be an organ to rule and fiscalize all the activity, including:

NEW LAW: A THREAT The project has the opposition of all important companies of Brazilian audiovisual, including producers, distribuitors, exhibitors, TV and Pay TV broadcasts and telecommunication companies. There are news that some Ministries are against the project.

NEW LAW: A THREAT MINC has retreated several original proposals, but even though, the taxes remain high. The main taxes are: 3% over all the advertising campaigns in Free and Pay TV made in Brazil; 5% over the sales price of VHS and DVD;

NEW LAW: A THREAT Percentage not defined yet over the TVs, videos and DVD players 3% over the remittance made by the Pay TV programmer(HBO, TNT, Disney, Warner, Sony, Fox, Cartoon, etc.) Permanent amount before the importation of the master for the HE, Pay and Free TV markets.

NEW LAW: A THREAT 6. Permanent amount paid for the importation of internegative for theatrical market, according to the following table: Up to 10 prints: R$ 3,000 From 11 to 30 prints: R$ 6,000 From 31 to 80 prints: R$ 15,000 From 81 to 150 prints:R$ 30,000

NEW LAW: A THREAT From 151 to 300 prints: R$ 40,000 More than 450 prints: R$ 80,000 7.Presently, the title pays, per media: R$ 3,000

NEW LAW: A THREAT It will cause a decrease on the number of prints with consequences for the theatres of the small towns and from the popular areas of the big cities. It will affect the growth of the number of screens in these areas and it will favour the concentration of the market in the big exhibitors.

NEW LAW: A THREAT The new taxes may cause an increase of de 6% in the total of the Release costs. Based on the BVI and Sony releases in 2003 and 2004, I estimate a general reduction of printing between 10 and 15%.

Key Titles Released

Home on the range

King Arthur

The Village

LOCAL PRODUCTION More and more the Brazilian films co-produced through the fiscal benefits, assume great importance for the Distributors; For Sony, in 2003, the Brazilian films represented 48% of the Gross Revenue and 84% of the Net Contribution, before overhead and royalties.

In 2004, despite of and due to the Spider-Man 2, the Brazilian films should represent 25% of the Gross Revenue and 35% of the Net Contribution before overhead and royalties. For BVI the estimate is that the Brazilian films released in FY 05 represent 25% of the Gross Revenue and 27% of the Net Brazil (before overhead and basics).

Savings of the PCS Plan The implementation of the new Franchise Agreement in April 2003, wich changed the Parent Company Share from 60% of the Gross Revenues to 85% of the Net Income Before Taxes, provided savings of 2.5 millions in FY 04.