Les Mills International Club Owner CVM Report February 2008

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 2 CVM Overview

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 3 Customer Value Management is based on customer trade offs between what they get and how much they pay, organised around customer facing processes and linked to internal business processes so pragmatic changes can be implemented Customer Value Management (CVM) Products & Services Prices & Costs Customer process Les Mills process Les Mills business processes Customer view Image & Reputation

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 4 The link with business processes is vital as these processes are the levers that managers can use to change customer perceptions of value and ultimately impact EBIT HR Operations Finance Sales and Marketing Customer Service Recruiting, retaining and training the right people Training Billing Communicating the value proposition of the Les Mills programmes effectively Providing the required level of service to the customers e.g. Initiative: Improve Programme Quality EBIT Impact Business processes… (across LMI and its agents) …influence customer perceptions of Les Mills performance… …which are modelled… …to provide clarity as to where Les Mills can focus its business improvement efforts and quantify what's at stake… Direct Financial Impact Cost of project Revenue gain Indirect Financial Impact Impact on customer perceptions which impacts share of wallet

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 5 We also know that what is important to customers can vary across their lifecycle so we also measure the key decision criteria customers use when deciding to spend on Les Mills programmes Performance on Key Decision Criteria determine likelihood to spend with Les Mills High Low New Relationship Trigger Point Customer perceptions (as shown by CVM) determine likelihood to change spend levels Time Illustrative e.g. Renegotiation of contract, bad service experience, new entrant in the market Level of consideration given to selection / changing Group Fitness Provider

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 6 A Customer Value Model has three key metrics which each serve a purpose in understanding perceptions of performance CVM x.x ±xx Image and Reputation xx%x.x ± xx Prices and Costs xx%x.x ± xx Products and Services xx%x.x ± xx Absolute performance 1=poor, 10=excellent Change relative to 2004 survey Level of impact of driver 0-100% Impact weights vary by CVM model and by competitor CVM is a measure of the markets perceptions – as a result CVM scores take time to move as perceptions lag actions and therefore slowly change over time

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 7 There are a few things that need to be borne in mind when considering the results of a CVM survey

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 8 Number of Les Mills programmes Length of time using Les Mills programmes Proportion of timetable devoted to Les Mills programmes Number of members within the club Size of Group Fitness facilities in the club Attendance Internet connections of clubs Other Business Information Likelihood to reduce usage of Les Mills programmes in the next twelve months Customer views on who the main competition for Les Mills programmes are in each market Customer views on performance of main competition identified eClub usefulness Advanced Instructor Training usefulness Scorecard usefulness BODYPUMP ™ weight attributes Other Business Issues The five factors (rated in importance) which the customer considered in buying the Les Mills programmes initially Key Decision Criteria In addition to the customer value data, we collected data on key decision criteria, other business issues and information about the customers’ businesses as part of the survey

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 9 Actions that need to be carried out across all markets e.g. addressing programme quality issues Actions that need to be carried out on a market by market basis but are common across markets e.g. addressing price issues Actions that can only be carried out by LMI to address a particular issue in market e.g. change to programme content to address individual market issue Actions that need to be carried out to address issues particular to individual markets e.g. addressing billing issues Local Global LMIAgents Scope of Action Implementation of Actions The purpose of collecting this information is to form action plans to maximise profitability across the lifecycle, which because of the supply chain for Les Mills programmes, are undertaken by either LMI and / or the agent Les Mills CVM Action Framework

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 10 Response rates from the clubs were good enabling detailed information to be provided for seven markets – Australia, Brazil, France, Germany, the Netherlands, Baltic and U.S.A. – and indicative results for Japan China 1 response Brazil 88 responses Spain 2 responses France 74 responses Australia 81 responses Germany 59 responses The Netherlands 83 responses Baltic 92 responses Total Sample = 649 Japan 19 responses USA 151 responses The United States did not participate in the last CVM study and as a result this sample is different to the last study and this will influence the results shown

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 11 Baltic

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 12 CVM Performance

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 13 Financial and non-financial costs are the leading drivers of perceived value in the Baltic, with the Baltic region having different performance in these areas The Baltic region is relatively price conscious driven by an emphasis on the licence and non-licence costs associated with running a program There has been significant decreases in the high impact non-financial cost drivers of convenience of workshops and managing resistance from staff and this is where attention should be focused to reverse the trend Baltic performs well on having programs with a reputation for bringing in and retaining customers which is key to improving perceptions of price However the Baltic region has shown a significant increase in performance on other operating costs, which is an area that other markets perform poorly in and therefore initiatives from Baltic could be leveraged in to other markets Insights and Implications Baltic Significantly higher than 2004 Significantly lower than

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 14 Although prices and costs account for the majority of perceived value, the Baltic is more brand conscious than other regions and the strong performance in this area translates to relatively high overall perceived value Prices and costs account for over half of overall perceived value and showed indicative improvement to be above other markets Image and reputation is relatively important accounting for a third of overall perceived value and performance for image and reputation is very strong Products and services are less important but are also performing well Insights and Implications Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Perceived value of Les Mills products to clubs Image and Reputation Products and Services Prices and Costs Overall CVM Performance (1) Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004 Perceived value of the Les Mills system to clubs

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 15 Brings in and retains customers Recognised brand Recognised as effective and safe Image and reputation is important to customers and Les Mills performs very well in these drivers with stable to improving performance across all aspects Image and Reputation Image and Reputation CVM Performance (1) Fair, likeable and credible people Technical and leading edge Performance on all drivers and overall value are very high at or above 8.0 Perceived value is driven having a reputation of fair, likeable and credible people, bringing in and retaining customers and being technical and leading edge All of these important drivers saw improvement, particularly having technical and leading edge programs which improved significantly Insights and Implications Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 16 Using the programs Getting set up and going Using the services Products and services are of low impact on overall perceived value in the Baltic and performance is relatively high Products and Services Product and Services CVM Performance (1) Account management Billing The most important aspect of products and services is account management which is consistent with the high impact of having a reputation for fair, likeable and credible people and which Baltic performs well on The other two factors that impact overall perceived value are using the programs and billing both of which are performing well with scores above 8.0 Using the services currently has no impact on customers but saw a significant improvement Insights and Implications Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 17 Providing me with programs that suit my needs Providing me with training and education on programs Agreeing a fair and reasonable contract Getting set up and going Getting Set Up and Going CVM Performance (1) Assisting me with launching my programs The initial training of my staff Getting set up and going has no impact on overall perceived value which is most likely because most clubs have had programs for a number of years Performance across all drivers is good and showed indicative improvement It is however important that the strong performance in this area be maintained in order to ensure relationships get off to a good start Insights and Implications Providing training and education to run Group Fitness Getting set up and going currently has no impact on overall perceived value but saw improvement across all aspects Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 18 Ensuring programs are innovative and exciting Ensuring ongoing quality of programs Providing programs that generate a return on investment Using the programs is a strength of products and services with strong performance across all aspects Using the programs Using the programs CVM Performance (1) Providing updated programs on a timely basis Providing programs and training to recruit and retain the best instructors Overall performance is high at 8.4 Clubs in the Baltic region perceives that the programs generate a return on investment, and this is the most important aspect of using the programs Ensuring the ongoing quality of the programs is also relatively high impact and improved significantly to a very high 8.6 Providing updated programs on a timely basis is also important and performance is very high at 8.7 Insights and Implications Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 19 Training my instructors Providing assistance with marketing any programs Assisting me in keeping my staff happy and motivated Using the services currently has no impact on perceived value but improved overall and across most subdrivers, and in particular is assisting the club with measuring the success of the programs Using the services Using the Services CVM Performance (1) Assisting me with measuring the success of my programs Providing certification of my instructors The performance of the services associated with the programs is perceived to be less than performance on the programs themselves Although still relatively low, the Baltic region has improved its performance in assisting the clubs with measurement of the success of the programs Initiatives that have been used in assisting in the measurement of the success of the programs should be introduced in to other markets, where performance is also relatively low The other area of lower performance is in assisting with marketing the programs Insights and Implications Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 20 Available when I need them Committed to my business Provide me with information when I need Account management is the leading contributor to the overall perceived value for products and services and performance is generally good Account management Account Management CVM Performance (1) Assist me in sorting out issues related to my programs Respect me as a valued customer In the Baltic, the important aspects of account management are showing that the customer is valued, being available to the customer when needed and proactively contacting to add value to the business As in other markets showing respect and being available when needed are performing well Proactive contact is the lowest performing driver and effort should be made to determine how perceptions can be improved in this important area of customer contact especially as clubs believe that Les Mills have a reputation for having fair, likeable and credible people Insights and Implications Proactively contacting me to add value to my business Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 21 The bills I receive are simple to understand The bills I receive are accurate There is a convenient payment system Billing performs very well overall Billing Billing CVM Performance (1) Ensuring confidentiality of financial arrangement There are fair payment terms Billing performance is generally rating well by clubs in the Baltic region Although indicative declines were seen across all drivers performance is still high Insights and Implications Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 22 Financial Costs Non Financial Costs Prices and costs account for half of overall perceived value driven mostly by financial costs, which have indicatively increased Prices and Costs Indicative improvement was seen on performance on financial costs while performance on non-financial costs weakened Despite this financial costs still rate relatively poorly and so efforts should be made to shift perceptions away from price onto the programs themselves where Les Mills performs well in order to continue the improvement seen in financial costs Insights and ImplicationsPrices and Costs CVM Performance (1) Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 23 Costs of setting up the program such as marketing and training Licence Fee Costs to use the program eg music, video, headsets, uniforms, training etc Financial costs improved overall driven by improvement across all subdrivers but remains the lowest performing aspect of the experience Financial Costs Improvements were seen across all aspects of financial costs, particularly for operational costs which improved significantly Initiatives that have been introduced to drive this performance increase should be examined to understand if they can be leveraged into other markets where performance is also poor As in other countries, the focus should be on trying to continue to improve the perception of costs without impacting the EBIT by shifting focus toward the programs themselves where performance is stronger Insights and ImplicationsFinancial Costs CVM Performance (1) Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 24 Time and effort in operating the program Time and effort involved in setting up the program Managing the resistance from staff eg instructors Non-financial costs perform better than financial costs but performance has declined especially in the time and effort in operating the program and managing resistance from instructors Non Financial Costs Overall Non Financial Costs CVM Performance (1) Convenience of workshops All aspects of non-financial costs impact overall perceived value Performance on all subdrivers declined, particularly the time and effort in operating the programs and managing the resistance from instructors which declined significantly from 2004 levels The Instructor CVM shows that the convenience and frequency of initial training and quarterly workshops are the key areas of concern for instructors Addressing these areas and understanding why clubs feel performance on non-financial costs has declined needs to be investigated to understand how performance on these high impact drivers can be improved Insights and Implications Baltic Note: (1) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process xx%x.x±x.x Key: Impact Weight 2007 CVM Score Change in CVM Score from 2004

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 25 Competition and Retention Analysis

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 26 Freestyle continues to be seen as the main competitor to Les Mills by almost half the customers but there is still relatively little organised competition Customers Views on the Main Competition for Les Mills programs (1)(2) Baltic Notes: (1) 2007 Sample size n = 85; (2) 2004 Sample size n = 78 Significantly higher than 2004 Significantly lower than 2004 Change since % +1% NC -7%

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 27 Les Mills considerably outperforms the competitors overall driven by superior performance on image and reputation and products and services and being at parity for prices and costs Customers Views of Les Mills programs Main Competition (1)(2) Products and Services Image and Reputation Prices and Costs Perceived Value of Competitors Products to Clubs Notes: (1) Excludes responses that say there are “no competitors”; (2) Sample size n = 92; (3) Customers who rated 8 to 10 on a scale of 1 to 10 where 1 = ‘not likely” and 10 = “highly likely”; (4) Sample size n = 92 Significantly higher than 2004 Significantly lower than 2004 Process x.x±x.x Key: 2007 RVS Score Change in RVS Score from 2004 RVS calculated as Les Mills Scorex 100 Competitors Score1 Baltic Likelihood to Reduce Usage of Les Mills programs in the Next 12 Months (3)(4) Overall Perceived Value Proportion Expecting to Decrease Number of Les Mills programs Used in Next 12 Months % of customer base at risk

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 28 Key Decision Criteria Performance

J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 29 The Baltic region performs well on the leading key decision criteria particularly for those related to qualities of the programs Marketing of the programs to raise awareness should focus on the programs themselves where performance is strong Efforts should also be placed into demonstrating how the programs add value and contribute to retention and growth of membership Work on protecting the intellectual property and standardization of branding is vital to protect the image and reputation of the program as this is a key selling point Price ranks seventh with a 7% weighting Insights and Implications Baltic