Pinewood Shepperton Plc Annual Report 2010

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Pinewood Shepperton plcAnnual Report & Accounts 2010


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Contents

Highlights 01

Chairmans statement 03

Operating review 05

Financial review 12

Board of Directors 16

Directors report 18

Key business risks 23

Corporate governance 26

Employees 32

Corporate responsibility 34

Directors remuneration report 36

Company financial statements(UK GAAP)Independent auditors report 93

Company statement of financialposition

95

Notes to the financial statements 96

Company information 108

Consolidated financial statements

Independent auditors report 48

Group income statement 50

Group statement of othercomprehensive income

51

Group statement of financialposition

52

Group statement of cash flows 53

Group reconciliation of movementin net debt

54

Group statement of changesin equity

55

Notes to the consolidated financialstatements

56

Pinewood Shepperton plc is a leading provider of studio andrelated services to the global film and television industry.Our services support film production, filmed television and studio

television recording, digital content services and facilities for

media related businesses.

The Groups strategy is to:

Optimise the use of existing facilities;Enhance the Studios through improvement and expansion; andDevelop other opportunities that provide benefits to the Group.


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Pinewood Shepperton plc Annual Report & Accounts 2010 1

Highlights

Revenue increased 8% to 43.4m (2009: 40.3m)Operating profit increased 20% to 9.1m (2009: 7.6m)Profit before tax increased 31% to 5.8m (2009: 4.5m)Basic earnings per share 9.3p (2009: 9.1p)EBITDA increased 13% to 12.8m (2009: 11.4m)Increased total dividend of 3.60p (2009: 3.45p)Further progress on international strategyAdditional stage capacity to be built at Pinewood StudiosCommitment to low risk investment in smaller UK films


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2 Pinewood Shepperton plc Annual Report & Accounts 2010

Harry Potter and the Deathly Hallows: Part 1 on D Stage at Pinewood Studios 2011 Warner Bros. Entertainment Inc. Harry Potter Publishing Rights J.K.R.Harry Potter Characters, names and related indicia are trademarks of and Warner Bros. Ent. All rights reserved.


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Chairmans statement

Pinewood Shepperton plcs performance during 2010 has delivered tangible progress on the clear long-term strategy that

the Company is pursuing. The Company continues to focus on developing its core film, television and media parkbusinesses and ensuring that the studios possess up-to-date infrastructure to service its diverse and growing client base.

The Company is committed to building on its unique assets to develop a dedicated cluster for the creative industries in theUK whilst leveraging the Pinewood brand and expertise to create international revenues.

It is this strategy which provides a foundation for stability and growth. Against the backdrop of a poor economic climate,the Company has produced strong results as it has tackled head-on increased international competition in film, pricing

pressures in UK television and a challenging property rental market.

In line with its stated goals, the Company has targeted new markets and established a brand presence in Canada,

Germany, Malaysia and recently the Dominican Republic, bringing marketing and revenue benefits to the Company with

minimal investment. Likewise the Company continues to ensure that its Media Park builds upon its reputation as one ofthe foremost creative hubs in the UK and Europe. This would be further enhanced by the Companys proposed long-term

scheme to create a living and working community for the creative industries Project Pinewood.

The Board is pleased to be recommending an increased final dividend of 2.50p making a total dividend for the year of

3.60p (2009: 3.45p).

During the year the Board invited Steven Underwood, currently a full-time executive of the Peel Group (Peel), to jointhe Board as a Non-Executive Director with effect from 29 June 2010. As a result the Nomination Committee is leadinga process to recruit an additional independent Non-Executive Director.

It is worth recording that our shareholder register has consolidated materially over the last year. Two (mutually

independent) shareholders now currently hold 54.61% between them.

On 30 September 2011, Pinewood Studios will celebrate its 75th anniversary. Its rich heritage of film and televisionproduction and state-of-the-art facilities make it the UKs premier destination for film-makers, television producers andincreasingly for video game developers and the wider creative industries. Building on this rich film heritage, and our

successful strategy to date gives us confidence to begin increasing our capacity and to make further commitment to theUK film industry.

One of the key factors that contributed to the Companys strong performance is the contribution and commitment ofPinewood Sheppertons staff. On behalf of my fellow Board colleagues, I would like to thank all of them for their efforts it is they who drive our success.

Lord Grade of Yarmouth, CBEChairman

7 March 2011


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Dancing On Ice broadcast live in HD from Shepperton Studios on J and K Stages ITV Studios


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Operating review

Com pany Overview

Pinewood Shepperton plc is a world-class film studio that has an unrivalled heritage and access to an invaluable skill basefor makers of film and television programmes. The Company owns substantial freehold land and has a media park with a

diverse range of media related tenants.

The Companys unique assets in the UK, together with its international and strategic initiatives, mean that it is well placed

to cater for the existing and planned global growth in creative content. Pinewood is now an expanding global brand,allowing access to premium services around the world.

The global entertainment and media market is expected to grow by 5.0% compounded annually between now and 2014reaching US$1.7trn1. Global film box-office sales have reached an all-time high at US$31.8bn2. Meanwhile, global

television is expected to increase from US$185.9bn in 2009 to US$258.1bn in 20143. More than 245 European television

channels were launched in 2009, bringing the total to 7,2004

. UK television industry revenue in 2009 was 11.1bn5

.

Pinewood Shepperton plc has three complementary revenue streams film, television and media park.

In film, the Company aims to capitalise on the strength of its infrastructure, service offering and brand by maximising

utilisation of its studio facilities in the UK. It is also taking opportunities to extend the brand to other global regions,through joint venture and operating agreements with minimal capital commitment. This has been evidenced so far by fourlong-term agreements with strategic partners in Canada, Germany, Malaysia and most recently the Dominican Republic.

The Company has developed a leading television business which often utilises its film stages to host major television

productions (and vice versa). This ability to interchange the Companys assets to meet market demand gives the businessa competitive edge. During the course of the year, several television productions were recorded on film stages and,

conversely, a major film used all the television facilities at Pinewood Studios during the second half of 2010.

The third revenue stream is Media Park. The Company has invested for the long-term in its Media Park assets to ensure

that its studios remain the preferred destination for leading companies in the screen-based industries. The Companystands ready to take full advantage of its unique property assets and infrastructure which it has outline planning consents

to expand and develop as soon as the economy and demand allow.

Film

Film revenues for 2010 were 29.1m (2009: 22.6m), an increase of 28%. In the second half of 2010, film generatedrevenues of 18.2m (2009: 10.8m). Despite the increasingly competitive international market, both Pinewood Studiosand Shepperton Studios were near full capacity during the second half of 2010.

On 14 January 2011 the American Federation of Television and Radio Artists (AFTRA) and Screen Actors Guild (SAG)ratified a new three-year agreement with the Alliance of Motion Picture and Television Producers. This latest agreement

will be effective from 1 July 2011, until 30 June 2014 and will provide certainty around US film production. This is a

welcome development.

1Global Entertainment and Media Outlook: 20102014, PricewaterhouseCoopers 15 June 2010

2Theatrical Market Statistics Report for 2010, Motion Picture Association of America, 23 Feb 2011

3Global Entertainment and Media Outlook: 20102014, PricewaterhouseCoopers 15 June 2010

4European Audiovisual Observatory, 2009 Yearbook, 13 January 2010

5The Communications Market 2010, Ofcom, 2010


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6 Pinewood Shepperton plc Annual Report & Accounts 2010Operating review continued

Meet the Doyles recorded at Teddington Studios in Studio 1 Caryn Mandabach Productions


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Pinewood Shepperton plc Annual Report & Accounts 2010 7Operating review continued

Film continuedThe Companys film facilities include 34 high quality stages which range from 2,000 sq ft to the 59,000 sq ft 007 Stage.In addition, Pinewood Studios offers globally unique water filming facilities, which include one of the worlds largest water

tanks with an 800,000 gallon capacity and a specialist underwater stage. All of the Companys stages are fully equippedwith power, lighting, heating, large loading doors and many have internal water tanks. There are 67 workshops totalling218,646 sq ft, 286 production offices totalling 67,277 sq ft and three backlots for outdoor filming.

The largest film production based at Pinewood Studios during the year was Pirates of the Caribbean: On Stranger Tides(Disney) and the largest production based at Shepperton Studios was Hugo Cabret (GK Films). Other productions thatused Pinewood Shepperton facilities included Clash of the Titans (Warner Bros), Captain America: The First Avenger(Marvel), X-Men: First Class (Fox), Dark Tide (Magnet Media), Johnny English Reborn (Working Title), Jane Eyre(Ruby Films), My Week with Marilyn (Trademark Films), The Woman in Black (Hammer Films) and Harry Potter and

the Deathly Hallows (Warner Bros).

The Companys state-of-the-art facilities offer attractive options for clients, enabling it to win significant business frominternational productions. The film stages and television studios were deployed interchangeably to ensure maximumutilisation of both the facilities and services. The flexibility of the film stages also allow them to be used for tour rehearsals

and promotional videos. During the course of the year the stages were used by artists such as Kylie Minogue, Shakira,Chris Rea, Stevie Wonder, Rod Stewart, Eric Clapton, Tom Jones, Status Quo and Kasabian.

The Company provided digital content services generating revenues of 5.8m (2009: 6.4m), now reflecting thetransition to a fully digital and more efficient process. These services were provided to a number of high profile film and

television productions, including Harry Potter and the Deathly Hallows (Warner Bros), 127 Hours (Cloud 8/Film 4), Hanna(Focus Features) and the fourth television series ofWould I Lie to You. Digital content services were also provided to anumber of computer games, including Driver: San Francisco (Ubisoft) and Enslaved (Ninja Theory). These digital servicesprovide game developers with premium facilities and reaffirm the Companys strategy of a flexible offering.

Following an agreement with StudioCanal in late 2009 to digitise and preserve its extensive library of film and television,audio and picture assets, the Company has completed work on a number of films and television series includingMurder on the Orient Express, Whisky Galore, Cross of Iron, Peeping Tom, Brighton Rock, Poirot, and the digital cinemare-release ofThe Railway Children. During 2010, the Company entered into a new agreement with Associated Press tohouse the GMTV programme library. The development of a digital restoration, preservation and archive facility allowed the

Company to invest in expanding its digital infrastructure providing film and television productions and tenants such as ITVand Associated Press with technology which meets their increasing needs.

The long-term agreement with Disney Character Voices International is performing well. The Company also providedinternational language versions to a wide range of other productions, including Iron Man 2 (Marvel), How to Train YourDragon (Dreamworks) and Karate Kid (Sony).

The Company opened its on-site data centre in April 2010 which is also performing well. Combined with the Sohonetmedia network, the data centre provides co-location and hosting services tailored to the requirements of the media andentertainment industries and adds to the wide range of innovative facilities at the Studios. These improvements form part

of the Companys ongoing commitment to add value through investment in its technical infrastructure.

The Company won Best Film Mix Facility of the Year in October 2010 at the UK Screen Sound Awards (The Conch).

During the year the demand for use of the Companys stage and studio assets continued to grow. Accordingly the Boardhas approved, subject to detailed planning consent, the building of a unique 30,000 sq ft stage suitable for both film and

television. This significant addition to stage capacity for the Company of 7% is at an anticipated cost of 5.1m.Completion of this new stage, is anticipated by the second half of 2012.


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Film continuedThe Company has continued to monitor the market demand for film production in the UK. 2010 has once againdemonstrated strong growth in inward investment film production. Despite the overall growth in production, smaller

budget, UK productions, have struggled to maintain a sustainable level of output as financial markets have constrictedaccess to film finance.

These smaller budget films are a valuable part of the Companys mix of revenues. The Government offers attractive fiscalincentives for such productions. The Companys unique offering and market standing provides the Company with the

ability to support productions from this segment of the market. Without unduly risking capital, the Company will targeta limited number, up to four per annum, of films, with total production budgets of circa 2m each. To that end, theCompany intends to provide facilities and co-investment of up to 20% in the equity of such small budget films.

I n te rna t iona l The Pinewood brand is well recognised and highly regarded internationally. The Companys international offering seeks to

build on that reputation and selectively leverage its brand strength and expertise.

The Companys first sales and marketing agreement was in Canada. Pinewood Toronto Studios is proving popular with a

wide range of US production companies and US television networks. Film and television productions that have used thefacilities include Scott Pilgrim vs. the World (Universal), Dreamhouse (Morgan Creek), The Thing (Universal), BreakoutKings (Fox) and Battle of the Blades (CBC).

Phase one construction of Pinewood Iskandar Malaysia Studios, the Companys second international agreement, which

will comprise 100,000 sq ft of film stages (ranging from 15,000 sq ft to 30,000 sq ft) and 24,000 sq ft of TV studios(2 x 12,000 sq ft) plus a number of offices, workshops and post production facilities is on schedule. The detailed design

work is now significantly completed and the construction phase commenced in February 2011 with a view to opening inearly 2013.

In February 2010, Pinewood Studios and Studio Hamburg entered into a joint venture that allows European andinternational filmmakers to take advantage of our joint infrastructure and skills when producing feature films in Germany.

The newly created entity, Pinewood Studios Berlin Film Services, offers international filmmakers a full range ofproduction service opportunities, targeting European producers. The venture is on track to host its first productionlater this year.

The Company entered into a long-term agreement with the Indomina Group, an investment managed by VICINI, aleading asset management company with investments in food and beverages, retail, energy, finance, tourism and real

estate in the Caribbean and Central America. This agreement is for the operation of new film and television studios to bebuilt in the Dominican Republic. Pinewood will receive annual fees for its sales and management services and an equityparticipation which accrues over time from 2013. The construction will be funded by the Indomina Group. This new

venture, Pinewood Indomina Studios is expected to commence initial operations in 2012, targeting the growing Latino

film and television market.

International revenues in 2010 of 0.6m (2009: 0.5m) are in line with the Companys expectations. Once all four

international studios are fully operational they will make incremental contributions to revenue and provide access tokey expanding markets such as in the Asia Pacific and South American regions.

Television

The Companys television revenues were, as expected, reduced for the year at 8.2m (2009: 11.3m). Revenues were

impacted by ITV and BBC deciding to direct their productions to their own in-house studio facilities. The competition forproviders of smaller television studio space has increased significantly as a result. Demand for the Companys large scaleflexible facilities is growing. This has given the Company a competitive advantage in hosting the big event television

shows. The Companys full service television offering and range of facilities which produce high quality, cost effectivesolutions continues to prove attractive to broadcasters and programme makers.


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TelevisioncontinuedPinewood and Teddington television studios played host to new and repeat business from My Family (DLT), A Leagueof Their Own (CPL), Britains Best Dish (ITVS), Would I Lie to You (Zepperton), Perrin (Objective Productions), The RobBrydon Show (Talkback Thames), Grounded for Life (Caryn Mandabach), Dick & Dom (BBC), Piers Morgans Life Stories(ITV) and IT Crowd (talkbackTHAMES).

During the year, television productions such as Episodes (Hat Trick Productions), Dragons' Den (BBC), New Tricks (Wallto Wall) and Grandma's House (Tiger Aspect) used large film stages at Pinewood Studios. R and S stages at PinewoodStudios were used for two large ITV game shows Ant & Decs Push The Button (Gallowgate) and The Whole 19 Yards(Endemol) both of which required the space to accommodate large sets and large audiences. The live ITV programmeDancing on Ice commenced pre-production late in 2010 and continues to use film stages at Shepperton Studios to hostcomplex sets and large audiences.

The Companys television facilities and film stages were used during the course of the year for a variety of television

advertising campaigns, including Virgin Atlantics 'Your airline's either got it or it hasn't', Stella Artois online TV show,CO2eux Soireand the Speedo 2010 campaign,MySpeedo.

The transmission facilities at Teddington Studios provide additional services which are attractive to smaller channels.During the course of the year channel hosting facilities were provided to CBeebies, Racing UK, Turf TV, Chinese Channel

and Ulster TV. The Company is bidding to renew its contract with Racing UK on enhanced channel hosting needs.

The Company notes the recent formal announcement by the BBC to redevelop for other uses the BBCs studio facilities

at Television Centre, White City, London.

Media Park

The Companys Media Park is an integral part of the creative industries cluster that exists at the studios the benefits of

which are well known. Media Park is a unique asset offering a variety of complementary services for film and televisionproductions utilising the studios. Media Park is an important component of the Companys strategy. Despite tough marketconditions, Media Park comprises 297 (2009: 300) media related businesses ranging from small to large, offering services

to the film, television and video game industries. The Company will continue to target prospective media tenants as itseeks to expand its unique network of related services and businesses on an occupier led basis.

Media Park revenues for 2010 were 6.2m (2009: 6.3m) including the Groups 50% interest in the Shepperton StudiosProperty Partnership (SSPP). Occupancy was 90% (2009: 88%) which was a resilient performance in a depressedcommercial property market. A contributing factor to the reduced revenues was the diversion of 30,000 sq ft of tenant

space to meet the requirement from film productions.

The Media Park facilities comprise 380,000 sq ft of tenanted areas used by technology, digital service companies, a filmprocessing laboratory and numerous other support businesses related to the film, television, video game and wider

creative industries.

The Company continues to look to exploit its master planning consents at each of the Pinewood and Shepperton Studio

sites for market led demand for new Media Park facilities.

In 2010, the Company committed to capital expenditure of 3.3m over three years for a major electricity supply upgradeat Pinewood Studios, increasing power to the site from 4.5 MVA to 15 MVA. This significant infrastructure improvementwill not only allow the Company to increase the permanent power provision available to productions at the Studio but also

to meet future demand.

The Company continues to invest in its studios, ensuring it can meet the needs of businesses that want to relocate into

one of Europes foremost creative clusters. During the course of the year the Company invested 0.7m on a 10,000 sq ft

facility for a new tenant on a 10 year lease, Take 2 Lighting, at Pinewood Studios. This new facility, the North Lamp Store,was opened on 12 November 2010.


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Project Pinewood

Project Pinewood is a long-term scheme of national significance to create a living and working community for the creativeindustries. Project Pinewood is aimed at building upon the creative hub developing at Pinewood Studios. The Companybelieves that Project Pinewood will benefit individuals, the creative industries and more widely UK plc, through jobcreation, its emphasis on skills and training and access to affordable housing. Project Pinewoods green credentials willalso enable film and television productions significantly to reduce their carbon emissions and it is a project of national

and regional significance which will be of long-term benefit to all stakeholders.

The Coalition Government has recognised that the creative industries have a crucial role to play in driving economicrecovery in the UK. Their significance to future economic prosperity has been recognised by the Prime Minister whohighlighted the need to support the growth of the creative industries in his speech Transforming the British economy:

Coalition strategy for economic growth on 28 May 2010. Private sector initiatives such as Project Pinewood are an

important contribution to the process of economic recovery.

The Companys appeal by way of Public Inquiry against the initial refusal by South Bucks District Council of planningpermission for Project Pinewood will commence on 5 April 2011. The decision will be made by the Secretary of Statefor Communities and Local Government. Separately an application by local residents in opposition to Project Pinewoodto register part of the proposed site as a Town or Village Green was heard in September 2010. On 21 December 2010the Buckinghamshire County Council Rights of Way Committee unanimously upheld the recommendation from the

Independent Inspector appointed by Buckinghamshire County Council to reject this application. Total costs incurredsince the project inception to 31 December 2010, including the Town or Village Green defence costs were 6.0m(2009: 4.8m).

Retur n on Capi ta l Em ployed ( ROCE )

As we set out in the overview section of this report, since its IPO in May 2004 the Company has followed a clearly definedstrategy for developing its business. This long-term strategy and the Companys significant and integral property assets

distinguish the Company from other businesses in the media sector.

The Companys long-term property investments add to the capital employed by the Company and returns from these

investments will impact the ROCE measure whilst the Company continues to build out its Studios in accordance with theconsented Masterplan. It is therefore particularly pleasing to see that ROCE has grown to 7.7% for 2010 (2009: 6.6%).The Board is always mindful of the need to improve ROCE as one of a basket of measures of performance and senior

management remains incentivised accordingly.

Dividend

The Board is recommending an increased final dividend of 2.50p (2009: 2.40p) making a total dividend for the year of3.60p (2009: 3.45p).

Outlook

The year has begun positively. The Company is hosting a number of international big budget films and has also attractedlarge television shows such as Dancing on Ice (ITV) and Got to Dance (Sky). Media Park revenues continue to beconsistent, reflecting the value of the Companys offering in the market place.

As a result of this performance to date, and the visibility of contracted revenues from major films for the rest of the year,the Company expects continuing growth in revenues in 2011.

Looking to the longer term, the Company intends to add to its film stage capacity to help meet an increasing demand for

its services in the UK. The Company looks to the future with confidence.

Ivan Dunleavy

Chief Executive

7 March 2011


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Virgin Atlantic commercial "Your airline's either got it or it hasn't" by ad agency RKCR and Partizan, shot atPinewood Studios


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Financial review

The Board use a number of key performance indicators (KPIs) to monitor the Companys performance, as well as

to measure progress against the Companys objectives. The KPIs used are: revenue, profitability, return on capitalemployed, cash flow and net debt which are discussed as part of this Financial Review:

Revenue

Total revenues for the year were 43.4m (2009: 40.3m), the 8% increase in total revenues reflected strong growth

in film revenues.

Film revenues of 29.1m (2009: 22.6m) increased 28%, benefitting from the Companys strong performance during thesecond half of 2010 where revenues were 18.3m, compared to 10.8m for the first half of the year. Film revenues weregenerated from the provision of services and facilities, including: stages, workshops, wardrobes, dressing rooms,

production offices, outdoor filming facilities, ancillary services and digital content services.

International revenues of 0.6m (2009: 0.5m) were generated from providing sales and marketing services in Canada

and Malaysia. These revenues provide a meaningful margin contribution with minimal capital employed.

Television revenues of 8.2m (2009: 11.3m) reflected the difficult commissioning environment and the diversion of the

Companys television facilities at Pinewood for film production where there has been high demand. The Company providesdedicated digital television studios on a fully serviced basis which includes freelance contractors, lighting, cameras,

technical equipment, dressing rooms and production offices, all of which are priced into the contract in accordance withthe requirements of each television customer.

Within film and television are revenues generated from digital content services, which covers sound and picture postproduction, foreign language versioning and archive and restoration services. For the full year revenues were 5.8m

(2009: 6.4m) now reflecting the transition to a fully digital and more efficient process.

Media Park revenues were 6.2m (2009: 6.3m) including the Companys 50% interest of 0.9m (2009: 0.9m) fromthe Shepperton Studios Property Partnership. The reduction in revenue reflected a loss of a number of tenants during theyear, and the removal of 30,000 sq ft from the tenanted property estate for future redevelopment.

Tenants within the Media Park are contracted on a range of terms inclusive of service, utility and facility charges whichvary from six months to 15 years, supporting the sustainability and resilience of the Companys overall revenues.

Prof i t per form ance and earnings per share

Gross profit was 17.4m (2009: 15.6m) with gross margins achieving 40% (2009: 39%).

Reported operating profit increased 20% to 9.1m (2009: 7.6m), resulting in an operating profit margin of 21%(2009: 19%). EBITDA, i.e. earnings before exceptional items, interest, tax, depreciation and amortisation, was 12.8m

(2009: 11.4m). Profit before tax increased 31% to 5.8m (2009: 4.5m).

Basic earnings per share were 9.3p (2009: 9.1p). Basic earnings per share after adjusting for the effects of the releaseof the provision for the potential capital gains taxation on properties and for exceptional items were 8.0p (2009: 6.3p).

Diluted earnings per share were 8.9p (2009: 8.8p). Diluted earnings per share after adjusting for the effects of therelease of the provision for potential capital gains taxation on properties and for exceptional items were 7.7p

(2009: 6.2p).

The weighted average number of shares in issue was 46.2m (2009: 46.1m). Adjusting for shares potentially issuableas a result of employee share schemes, the average number would be 48.2m (2009: 47.3m).


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Pinewood Shepperton plc Annual Report & Accounts 2010 13Financial review continued

Retur n on capi ta l em ployed

The Company measures return on capital employed which for the 12 months ended 31 December 2010 increased to7.7% (2009: 6.6%) by reference to annual operating profit, before exceptional items as a percentage of average capital

employed, being total equity plus interest-bearing loans and borrowings.

Except ional incom e

Exceptional income amounted to 0.6m. The Company negotiated a business rates rebate of 0.5m relating to priorperiods. In addition, following a review of the Total Shareholder Return component of the Companys Long-Term Incentive

Plan awards, granted in 2008, 0.1m of the IFRS 2 charges to the Company income statement in previous years werereversed as an exceptional credit in the year.

Exceptional costs

Exceptional costs for the year amounted to 0.6m. The Company incurred costs of 0.4m in restructuring certainadministrative functions and wrote off 0.2m of the set-up costs of establishing its international initiatives.

Dividend

The Board is recommending a final dividend of 2.50p (2009: 2.40p), taken together with the interim dividend of 1.10p

(2009: 1.05p), the total dividend is 3.60p (2009: 3.45p). The dividend for 2010 is covered 2.6 times (2009: 2.5 times)by profit for the year after tax.

The dividends reflected in the statutory accounts for the 12 months to December 2010 are the final dividend in respectof 2009 of 2.40p and the interim dividend in respect of 2010 of 1.10p. The final dividend for 2010 will be accounted for

in 2011.

Subject to approval by the shareholders at the Annual General Meeting to be held on 31 May 2011, the final dividendwill be paid on 10 June 2011 to shareholders on the register at 13 May 2011 (ex-dividend date of 11 May 2011).

It remains the Boards intention to continue its progressive dividend policy.

Cash f low and net debt

The Company generated operating cash flow of 13.0m (2009: 10.7m). After adjusting for movements in workingcapital, including a 4.4m increase in deferred income, cash generated from operations was 17.6m (2009: 8.5m)

from which finance costs of 3.0m (2009: 2.8m) and corporation tax 1.9m (2009: 1.5m) were paid.

During the year cash outflow on capital expenditure was 6.7m (2009: 6.3m), including 1.9m of capital expenditure

payable carried forward from 31 December 2009. The main items of capital expenditure during the year were: investmentin the archiving and data centre projects amounting to 1.0m, life cycle expenditure of 3.0m, infrastructure power

upgrade of 1.0m, the completed 10,000 sq ft pre-let of 0.5m and Project Pinewood costs of 1.2m.

Net debt at 31 December 2010 was 42.7m (31 December 2009: 46.1m) which included 12m (2009: 12m) relatingto the Groups 50% interest in the non-recourse Aviva loan to the Shepperton Studios Property Partnership (SSPP).The reduction in debt reflects improved trading.

The Company has banking facilities of up to 70m which comprise a 35m revolving credit facility, a 30m facility for

pre-let development and a 5m overdraft facility, all of which are secured by a floating charge over the Companys assets.The revolving and pre-let facilities contain no scheduled repayments and mature in August 2013. The 5m overdraftfacility is available until August 2013 and is subject to annual reviews. At 31 December 2010, 22.5m (2009: 26m) of

the revolving credit facility and 6m (2009: 6m) of the pre-let development facility were drawn. The overdraft facilitywas undrawn at 31 December 2010 (2009: 0.9m). During the year the Company also drew down a further 1.3m ofasset financing which at 31 December 2010 totalled 1.8m (2009: 0.9m).


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14 Pinewood Shepperton plc Annual Report & Accounts 2010Financial review continued

Cash f low and net debtcontinuedThere are a range of covenants appropriate to the revolving credit facility, pre-let development facility and overdraftfacility. The Company was covenant compliant with adequate headroom on all covenants at 31 December 2010.

In addition to the 70m banking facilities, there are non-recourse facilities provided to SSPP by our joint venture partnerAviva, which total 40m, of which 24m was drawn at the year end. This loan which is 50% consolidated at 12m

(2009: 12m) is included in the Company statement of financial position. These facilities are available until 2026 and arecovenant free with no scheduled repayments.

The Companys financial risk management, objectives and policies are discussed in more detail in Note 26 to the financialstatements.

I nvestmen t p roper t y Investment property is recognised in accordance with IAS 40 as a category within assets in the Company statement of

financial position. At 31 December 2010, investment property is recorded at a carrying cost of 6.4m (2009: 6.3m).This compares to the Directors assessment of the fair value of 7.1m (2009: 6.8m). Further information can be foundin Note 15 to the financial statements.

Capi ta l comm i tm ents

The Company had capital commitments of 2.3m at 31 December 2010 (2009: nil) relating to its additional powerupgrade.

Financial gearing

At 31 December 2010, net debt including the Companys share of the SSPP non-recourse drawn loan was 42.7m

(2009: 46.1m). Financial gearing at the year end, excluding fair value and loan issue costs, was 55.8% (2009: 63.2%).

Finance costs and h edging

Net finance costs were 3.3m (2009: 3.2m) which are comparable to the previous year and include the relevantfees and margins incurred under the facilities. The Company has at its disposal undrawn facilities on which it pays

non-utilisation fees which are a percentage of the margin. Interest capitalised during the period on Project Pinewoodwas 150,000 (2009: 0.1m). Net finance costs were covered 2.8 times (2009: 2.4 times) by operating profit.

The Company continued to use interest rate derivatives to manage interest rate exposure. The Company has a 7.5mhedge with an effective rate of 2.89% plus a variable margin of 2.5% that was entered into in April 2009 and expires inJuly 2013. The Company also has a 15m hedge with an effective rate of 5.15% plus a variable margin of 2.5% that was

entered into in October 2008 and expires in July 2013. At 31 December 2010, 22.5m (2009: 22.5m) of the companysfacilities were under interest rate swaps and 1.8m (2009: 0.9m) was under a fixed interest rate asset financing facility.At 31 December 2010, 57% (2009: 51%) of the Companys borrowings were at a fixed rate of interest. The Board

regularly reviews the hedging arrangements to manage interest rate exposure. Further details on interest rate risk

management can be found in Note 26 of the financial statements.

Project Pinewood

Included within Property, plant and equipment on the statement of financial position, is 6.0m of costs incurredto 31 December 2010 (2009: 4.8m) in relation to Project Pinewood. Capitalisation of costs is based on the Boardsjudgement that the economic benefits expected from the asset will exceed the carrying costs of Project Pinewood.Costs are reviewed monthly by the Board. Taking into consideration all aspects of the project, the Board views thecarrying cost of the capitalised expenditure incurred up to 31 December 2010 to be appropriate.


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Pinewood Shepperton plc Annual Report & Accounts 2010 15Financial review continued

Taxat ion

The current corporation tax expense for the year ended 31 December 2010, based on profit before tax of 5.8m, was2.0m, a current tax rate of 35% (2009: 21%). After adjusting 0.5m for the effect of the release of a provision for

potential capital gains taxation on properties and other deferred tax adjustments, the tax charge is 26% (2009: 6%).

On 22 June 2010, the UK Government announced its intention to reduce the main rate of corporation tax from 28% to

24%. The fall will be phased in over a period of four years with a 1% reduction in the main corporation tax rate for eachyear starting on 1 April 2011. The Finance (No. 2) Act 2010 enacted on 27 July 2010, included legislation on the initial

phase to reduce the main rate of corporation tax from 28% to 27% from 1 April 2011. It is expected that the ratechanges will have an effect of reducing the net UK deferred tax position recognised at 31 December 2010 byapproximately 0.1m.

Going concernIn assessing the going concern basis, the Directors considered the Companys business activities, the financial position

of the Company and the Companys financial risk management objectives and policies. The Directors considered that theCompany has adequate resources to continue in operational existence for the foreseeable future and that it is thereforeappropriate to adopt the going concern basis in preparing these financial statements.

Patrick Garner FCAFinance Director

7 March 2011


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Directors report

The Directors present their Annual Report together with the financial statements for the year ended 31 December 2010.

Principal activities, business review and future developmentsThe principal activity of the Company is the provision of studio and related services to the global film and televisionindustry. The Board considers the Company to be well placed and views its future prospects with confidence.

The information that fulfils the requirements of the Business review can be found in the following sections, which areincorporated into this report by reference: Operating review, Financial Review, Key Business Risks, Corporate

Governance, Employees and Corporate Responsibility (pages 5 to 35).

Future developments are discussed within the Chairmans Statement and Operating Review (pages 3 to 11).

Results and dividendProfit for the financial year ended 31 December 2010 was 4.3m (2009: 4.2m). A final dividend of 2.50p (2009: 2.40p)per share is recommended for the year ended 31 December 2010.

Directors and their interestsThe Directors at 31 December 2010 and their interests in the share capital of the Company, other than those interestsin options and awards in respect of ordinary shares (which are contained within the Directors remuneration report), wereas follows:

Number of

ordinary

shares at

1 January

2010

Acquired

during

the year

Number of

ordinary

shares at

31 December

2010

Lord Grade of Yarmouth 620,486 620,486

Ivan Dunleavy 1,266,458 20,000 1,286,458

Patrick Garner 208,822 208,822

Nicholas Smith 25,196 25,196

Adrian Burn 66,660 66,660

Nigel Hall 18,289 18,289

James Donald 10,000 10,000

Steven Underwood

1. Purchased in connection with long-term incentive plan grants.

2. Steven Underwood is an Executive Director of the Peel Group which indirectly owns 26.64% of the issued share capital through Goodweather Investment

Management.

Since 31 December 2010, there have been no changes in the Directors interests in shares.

The Company has complied with the Financial Services Authority announcement on 9 January 2009 with respect toDisclosure and Transparency Rule 3.1.2, and discloses relevant information to the market via Regulatory News Service

bulletins as soon as it receives notification of transactions.


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Pinewood Shepperton plc Annual Report & Accounts 2010 19Directors report continued

Directors and their interests continuedLord Grade and Nigel Hall will retire by rotation at the forthcoming Annual General Meeting on 31 May 2011 and, beingeligible, will offer themselves for re-election. In accordance with the Companys Articles of Association, Steven Underwood

will offer himself for election as he has been appointed to the Board since the Companys last Annual General Meeting.In accordance with the Companys Articles of Association, Adrian Burn will offer himself for re-election as he has heldoffice as a Non-Executive Director for more than nine years. For the reasons set out in the section on Corporate

Governance on page 26 the Board considers that notwithstanding the fact that Adrian Burn has served on the Board for11 years, he is independent for the purposes of the Combined Code and his level of experience brings a significant and

valuable contribution to the Board.

Details of Directors service contracts are provided in the Directors remuneration report. Directors interests in contractsin the Groups business are disclosed as related party transactions in Note 25 to the accounts.

The Company appoints and replaces Directors in accordance with the Companys Articles of Association and has a processof selection and recruitment of replacements as noted in the Nomination Committee section of the Corporate GovernanceReport.

Corporate governanceDetails of the Companys corporate governance policies are incorporated into the report by reference and can be foundon pages 26 to 31.

Annual General MeetingThe notice convening the Annual General Meeting of the Company, to be held at J.P. Morgan Cazenove Limited,

20 Moorgate, London EC2R 6DA, at 10.30 am on 31 May 2011, together with an explanation of the resolutions to beproposed at the meeting, is contained in a circular to shareholders enclosed with this Annual Report.

Share capitalThe Companys share capital comprises one class of ordinary shares which carry no restrictions on the transfer of sharesor on voting rights (other than set out in the Companys Articles of Association).

There are no agreements known to the Company between holders of shares in the Company which may result inrestrictions on the transfer of shares or on voting rights in relation to the Company.

Details of issued share capital are contained in Note 20 to the accounts.

At 2 March 2011, the beneficial interests amounting to 3% or more of the issued share capital of the Company, as notifiedto the Company, comprised:

Number of sharesPercentage

held

Crystal Amber Advisers (UK) LLP 12,930,861 27.97

Goodweather Investment Management 12,318,000 26.64

Aberdeen Asset Management Group 4,577,500 9.90

SVG Capital Plc 3,410,148 7.38

Warren James Holdings Limited 2,175,000 4.70

Aegon Asset Management 1,643,602 3.56

No holder of shares in the Company has any special rights with regard to control of the Company, nor does the Sharesave

Scheme (details in the Remuneration Committee report) provide rights with regards to the control of the Company.


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20 Pinewood Shepperton plc Annual Report & Accounts 2010Directors report continued

Share capital continuedThe Board invited Steven Underwood, currently a full-time executive of the Peel Group (Peel), to join the Board as aNon-Executive Director with effect from 29 June 2010.

Peel holds 26.64% of the issued share capital of Pinewood Shepperton plc via Goodweather Investment Management.In connection with the appointment of Steven Underwood, Peel has provided undertakings pursuant to which, inter alia,

it has agreed that during the period that Steven Underwood or any other representative of Peel is a director of theCompany (the Peel Representative) and, in the event that there ceases to be a Peel Representative, for a further period

of six months thereafter, Peel shall not, without the recommendation of the Board, make an offer for the Company or putitself in a position where it is obliged to make such an offer under the Takeover Code. These restrictions shall not apply in

the event that an unconnected third party announces a firm intention to make an offer for the Company.

In addition, it has been agreed that whilst there is a Peel Representative the Company shall at all-times operateindependently of the Peel Group, in particular, there should always be a majority of directors of the Company who areindependent of the Peel Group and that all transactions, dealings and other relationships between the Peel Group andthe Pinewood Group shall be on arm's length terms and on a normal commercial basis.

In the event of a change of control of the Group, the banking facilities become repayable on demand if the Group and thesyndicate banks agent are unable to agree alternative terms within thirty days of the Groups notification of a change of

control. There are no other significant agreements to which the Company is a party to, that take effect, alter or terminateupon a change of control of the Company following a takeover bid, nor are there any agreements between Directors orEmployees providing for compensation for loss of office or employment that occurs because of a takeover bid.

The Directors have the authority to buy-back the Companys shares provided that the maximum number is 4,623,200

and subject to minimum and maximum price levels as defined in a resolution passed at the Annual General Meeting on

29 June 2010. The authority to buy-back shares expires on the date of the next Annual General Meeting, 31 May 2011.

Creditor payment policyGroup trade creditors at 31 December 2010 were equivalent to 26 days (2009: 33 days) of purchases during the year in

line with Group policy; specific terms are agreed between operating companies and their respective suppliers, and thatpayments are made to suppliers in accordance with those terms.

Charitable donationsDuring the year the Group donated 9,000 to charitable causes, and has continued to demonstrate its commitment tothe support of local charities and causes, in addition to supporting media related charities. Further details are containedin the Corporate responsibility report on page 34. No political donations were made during the year.

Financial instrumentsThe financial risk management objectives and policies of the Group are included in Note 26 to the accounts.

Subsequent developmentsThe Company has entered into a long-term agreement with the Indomina Group, an investment managed by VICINI,

a leading asset management company with investments in food and beverages, retail, energy, finance, tourism and realestate in the Caribbean and Central America. The agreement is for the operation of new film and television studios to be

built in the Dominican Republic. Pinewood will receive annual fees for its sales and management services and an equityparticipation which accrues over time from 2013. The construction will be funded by the Indomina Group. This newventure, Pinewood Indomina Studios is expected to commence initial operations in 2012.


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Pinewood Shepperton plc Annual Report & Accounts 2010 21Directors report continued

Principal risks and analysis of Key Performance IndicatorsThe principal risks to which the Group and Company are exposed are disclosed in the Key business risks section of theAnnual Report and in Note 26 to the accounts.

In monitoring and assessing business performance the Board uses a number of key performance indicators which arecovered on pages 12 to 15 in the Financial Review section of the Annual Report.

Directors liabilitiesThe Company has granted an indemnity to all its Directors against liability brought by third parties, subject to theconditions set out in the Companies Act 2006. Such qualifying third party indemnity provision remains in force as atthe date of approving the Directors report.

Going concernThe Groups business activities, together with the key business risks that may impact its future development, performanceand position are within the following sections: Operating review, Financial review, Key business risks, Corporate

governance and Corporate responsibility which form part of the Business review within the Directors report. The FinanceDirectors Financial review covers the financial position of the Group and its cash flows, liquidity position and borrowingfacilities on pages 12 to 15. In addition, Notes 21 and 26 to the financial statements include the Groups objectives,

policies and processes for managing its capital; its financial risk management objectives; details of its financialinstruments and hedging activities; and its exposure to credit risk and liquidity risk.

The Group has primary banking facilities and an overdraft facility in place until 2013, the overdraft is subject to an annual

review. In addition, the Shepperton Studios Property Partnership joint venture partnership with Aviva has a non-recoursefacility in place until 2026. The Group also has a strong brand and reputation in the marketplace with a wide number ofcustomers and suppliers in the film and television industry. As a consequence, the Directors believe that the Group is well

placed to manage its business risks and operations successfully despite the current economic environment.

The Directors have a reasonable expectation that the Group has adequate resources to continue in operational existencefor the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financialstatements, as there are no material uncertainties related to events or conditions that may cast significant doubt about

the ability of the Group to continue as a going concern. The going concern assessment has been prepared in accordancewith Going Concern and Liquidity Risk: Guidance for Directors of UK Companies 2009, published by the FinancialReporting Council in 2009.

Directors statement as to disclosure of information to auditorsThe Directors who were members of the Board at the time of approving the Directors report are listed on page 16.

Having made enquiries of fellow directors and of the Groups auditors, each of these Directors confirms that:

so far as he is aware, there is no relevant information of which the Groups auditors are unaware; andhe has taken all the steps that he ought to have taken as a Director in order to make himself aware of any relevant

audit information and to establish that the Groups auditors are aware of that information.


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22 Pinewood Shepperton plc Annual Report & Accounts 2010Directors report continued

Registered auditorsIn accordance with Section 489 of the Companies Act 2006 resolutions proposing the reappointment of Ernst & Young LLPas auditors to the Group will be proposed at the Annual General Meeting at a level of remuneration to be agreed by the

Directors.

Statement of Directors responsibilitiesThe Directors are responsible for preparing the Annual Report and the Group financial statements in accordance withapplicable United Kingdom law and International Financial Reporting Standards as adopted by the European Union.

The Directors are required to prepare Group financial statements for each financial year which present fairly the financialposition of the Group and the financial performance and cash flows of the Group for that period. In preparing those Group

financial statements, the Directors are required to:

select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates andErrors and then apply them consistently;

make judgements and estimates that are reasonable and prudent;present information, including accounting policies, in a manner that provides relevant, reliable, comparable and

understandable information;

provide additional disclosures when compliance with the specific requirements in IFRS is insufficient to enable usersto understand the impact of particular transactions, other events and conditions on the Groups financial position and

financial performance; and

state that the Group has complied with IFRS, subject to any material departures disclosed and explained in the financialstatements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any timethe financial position of the Group and parent company and enable them to ensure that the Group financial statements

comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding theassets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other

irregularities.

Each of the Directors, whose names and functions are listed on page 16, confirms that, to the best of their knowledge:

the Group financial statements, prepared in accordance with International Financial Reporting Standards as adopted bythe European Union, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and

the Chairmans statement, Operating review, Financial review and the Directors report, when taken together, includea true and fair review of the development and performance of the business and the position of the Group together with

a description of the principal risks and uncertainties that it faces.By order of the Board

Andrew M. SmithCompany Secretary

7 March 2011


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Key business risks

The Board views effective risk management as a primary part of the Groups wider strategy and is fully committed to the

identification, evaluation and management of significant risks facing the Group. The table below outlines the key risks anduncertainties identified by the Board together with an outline of mitigation activities.

1. General risksRisk Description Mitigation

Importance of keycustomers and bigbudget films

The Groups largest customers account for ahigh percentage of revenues. If big budgetfilmmakers cease to choose the Groupsfacilities this would reduce revenues.

Maintaining strong, long-standing relationshipsthrough consistent levels of service and retainingemployees to offer continuity.

Diversification of revenues through thedevelopment of the Groups strategy.

Loss of reputation Providing services to the worldwide film industryand representing studios internationally requires arobust reputation. Damage to the reputationcould have an adverse impact on the Group.

Maintaining strong relationships and an openline of communication with customers andinternational partners through the Directorsand executive management team.

Guild/Uniondisruptions

Members of the various trade guilds/unions workon a high proportion of UK inward investmentfilms.

No direct mitigating actions can be taken.

Delay in therecovery of theeconomy

A delay in the recovery of the economicenvironment may lead to a reduction incustomers and revenue.

The Board monitors the external environmentand its impact on the industry and has a numberof strategic initiatives to respond to anticipatedchanges.

Internationalagreements

Less direct and indirect control. The Board regularly monitors the performance ofthe entities it has agreements with and the widergeopolitical context.


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24 Pinewood Shepperton plc Annual Report & Accounts 2010Key business risks continued

2. Financial risksRisk Description Mitigation

Fiscal incentives The UKs film tax incentives help ensure the UKis a competitive location for film production.

No direct mitigating actions can be taken.Reasoned evidence-based arguments are putforward to the Government highlighting theeconomic contribution that film makes to theeconomy.

Exchange rates The majority of international film customers arein the US and an adverse movement in exchangerates may result in a reduction in the Groupscompetitive edge versus other European or

international locations.

No direct mitigating actions can be takenhowever, the reputation of the Group and thelong-standing relationships assist in reducingthis risk.

Treasury Risk is in a number of areas including credit risk,liquidity risk, interest rate risk and market risk.

These are discussed in detail in Note 26 to theAnnual Report.

Increases tobusiness rates andvaluation

Potential increase in business ratesand valuation would adversely impactthe business.

No direct mitigating actions can be taken albeitrepresentations would be made to Government.


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Pinewood Shepperton plc Annual Report & Accounts 2010 25Key business risks continued

3. Operational risksRisk Description Mitigation

Health and safety,environmental anddisaster recovery

A significant incident could put people and/or theenvironment at risk as well as damage theGroups reputation.

A major incident such as a fire or explosion mayresult in a number of issues including revenueloss and reputational damage.

A dedicated health, safety and fire team carriesout regular risk evaluation. Further details can befound in the Corporate responsibility section ofthe Annual Report.

A Business Continuity Team has been establishedand a policy is in place to ensure that operationalbusiness continues as far as possible in the eventof a major incident.

Adequate insurance cover is in place to mitigatethe risk of the business suffering no permanent

long-term detrimental effects from a significantnegative event.

Property Planning The Group has exposure to risk if not able tocommercially exploit existing and proposedplanning consents to the fullest potential inaccordance with long range plans.

The Group would assess alternative uses that arein line with the wider Group strategy should sucha situation occur.

Failure of keysuppliers

The current economic climate could result in keysuppliers to the Group being unable to maintainan effective supply chain.

The Group retains good supplier relationships andalternative suppliers for generic services could besourced in the medium term.

Health risk of

pandemics, acts ofterrorism andnatural disasters

Diseases, terrorist threats and natural disasters

may reduce the appeal to customers to travel andmay impact local operational capability.

With UK-based studios and operational partners

in a number of international locations the Groupconsider that the availability of location optionswould reduce the risk in this area.

The Business review contains forward-looking statements that are made by the Directors in good faith. This information

is based on the view of the Board of Directors at the date of approval of this Annual Report and based on knowledgeand information at that time together with what are considered to be reasonable judgements. By their nature, forward-

looking statements involve risks and uncertainties because they relate to events and depend on circumstances that willoccur in the future. There are a number of factors outside of the Groups control which could cause actual results anddevelopments to differ materially from those expressed or implied by these forward-looking statements, including factors

outside of the Groups control. Any forward-looking statements speak only as of the date that they are made, and theGroup gives no undertaking to update forward-looking statements to reflect any changes in its expectations with regardthereto or any changes to events, conditions or circumstances on which any such statement is based.


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Corporate governance

During the year under review, the Board has continued to support the principles of corporate governance, as advocated

by the Combined Code which can be found at www.frc.org.uk/corporate/combinedcode.cfm. The Companys approachto its application of the principles set out in the Combined Code is detailed below. The Company has remained compliant

with all requirements of the Code.

Membership of the BoardThe Board comprises the Non-Executive Chairman, Lord Grade of Yarmouth; three Executive Directors, Ivan Dunleavy,Patrick Garner and Nicholas Smith; four Non-Executive Directors, Adrian Burn, Nigel Hall, James Donald and StevenUnderwood. Further details of the Board members can be found on page 16 of the Annual Report. The Nomination

Committee is currently leading a process to recruit an additional independent Non-Executive Director.

Independence of DirectorsAdrian Burn, the Senior Independent Director, joined the Board in April 2000. Nigel Hall joined the Board in April 2004,and James Donald joined the Board in March 2006. Adrian Burn, Nigel Hall and James Donald continue to contribute

significantly to the Groups strategic direction.

The Board considers Adrian Burn, Nigel Hall and James Donald to be independent for the purposes of the Combined Code.

Adrian Burn has served on the Board for eleven years. The Combined Code points to a number of factors that may impactindependence including length of service on the Board. The Boards view is that independence is determined by the non-

executives character, objectivity and integrity and that the extended service of Adrian Burn does not compromise hisindependence and, indeed, his level of experience brings a significant and valuable contribution to the Board.

The Nomination Committee is leading a process to recruit an additional independent Non-Executive Director.

Conflicts of interestIn accordance with Section 175 of the Companies Act 2006, procedures have been put into place for the disclosure byDirectors of potential and/or actual conflicts of interest, and these have been operated effectively. Each potential and/or

actual conflict is disclosed as it arises and is considered by an appropriate quorum of Directors. Directors leave a Boardmeeting when matters relating to them or which may constitute a conflict of interest are being discussed.

The Group complies with the Model Code on share dealings and this extends beyond Directors to Persons DischargingManagerial Responsibilities (PDMRs). In accordance with the FSA requirements over PDMRs, a policy has been

introduced to ensure that PDMRs disclose appropriate and relevant information directly to the Company Secretary.

Role and responsibility of the BoardThe Board is responsible for determining corporate strategy, treasury policy, approval of capital expenditure projects inexcess of 50,000, dividend policy, interim and annual financial statements, all regulatory communications required by

the Group and appointments to the Board. In the continuing challenging economic climate the Board continues tomaintain and, where it considers necessary, enhance the financial disciplines across the Group.

In advance of the monthly Board meeting the Board members are provided with comprehensive historic and forward-looking financial and operational information to support their understanding of the business and related strategic andoperational issues, and to enable them to fulfil their responsibilities accordingly. Where there are specific items that

require Board approval, additional reports and supporting information are circulated. Directors are provided with regularaccess to the Company Secretary and to the executive management team to facilitate their understanding of significantoperational issues and assessment of the Groups prospects, including the ongoing consideration of succession planning.

This also ensures that the Directors can make further enquiries on financial, operational and strategic matters as andwhen required. There are also procedures in place to enable Board members to take independent professional adviceas necessary.


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Pinewood Shepperton plc Annual Report & Accounts 2010 27Corporate governance continued

Board evaluationThe Board regularly conducts evaluations of its performance. The Chairman reviews individual Board memberscontributions to the Board and its Committees. The Chairmans performance is likewise reviewed by the SeniorIndependent Director. These evaluations are carried out on a rolling basis.

Directors trainingPrior to their appointment to the Board, all Directors are provided with a detailed understanding of the Group, bymeeting with existing Directors, and being provided with comprehensive financial and operational information.Additionally, Directors are fully briefed and kept up-to-date on issues impacting their role and responsibilities as Directors.

Directors continue to be updated on significant financial and operational issues via Board meetings and regularcommunications from the Group, as well as being provided with direct access to the Groups executive management

team.

Meetings of DirectorsDuring the year under review the Board held 11 scheduled Board meetings. The following table sets out attendanceof the Directors at the Board and Committee meetings during 2010:

Board

meetings

Audit

Committee

meetings

Remuneration

Committee

meetings

Nomination

Committee

meetings

Chairman

Lord Grade of Yarmouth 11/11 2/2

Executive Directors

Ivan Dunleavy 11/11

Patrick Garner 11/11

Nicholas Smith 11/11

Non-Executive Directors

Adrian Burn 11/11 3/3 5/5 2/2

Nigel Hall 11/11 3/3 5/5 2/2

James Donald 10/11 3/3 4/5

Steven Underwood (appointed 29 June 2010) 5/5

Communication with institutional shareholdersExecutive Directors maintain regular and structured dialogue with major shareholders via direct scheduled meetings andcommunication in response to ad hoc queries and requests from shareholders. In addition, the Chairman and the Senior

Independent Director are available to meet significant shareholders, as required.

Share capitalThe information about share capital required to be included in this statement can be found on page 19 in theDirectors report.


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28 Pinewood Shepperton plc Annual Report & Accounts 2010Corporate governance continued

Board CommitteesThe Board has established three Committees Audit, Nomination and Remuneration. The Chairman and membersof these Committees are appointed by the Board on the recommendation of the Nomination Committee, followingconsultation with the appropriate Committees chairman.

The terms of reference of the Audit, Nomination and Remuneration Committees are contained in the Corporate

governance section of the Companys Investor Relations website at www.pinewoodshepperton.com.

Audi t Comm it tee

Adrian Burn Chairman

Nigel Hall

James Donald

Adrian Burn, Nigel Hall and James Donald are all independent Non-Executive Directors and contribute significant financialand commercial expertise following previously held senior positions in major commercial organisations.

The Committee has written terms of reference reflecting the requirements of the Combined Code, which have beenapproved by the Board. The Committee provides the Board with assurance in respect of the integrity of the Groups

financial reporting procedures, policies and controls.

The Groups external auditors meet directly with the Audit Committee in advance of full year and interim results, and on

other occasions as required.

The Audit Committee reports to the full Board of the Company. The Committee also reviews the effectiveness of the

external audit process including the issue of auditor independence. In line with best practice, the Audit Committeeintroduced a policy that defines non-audit services that the Groups auditors may or may not provide. The key point of the

policy is that the Audit Committee will not support the use of the appointed audit firm for book-keeping services and anyother services deemed incompatible with auditor independence by professional or government regulations. For certain

other types of work including, but not limited to, taxation, governance, accounting advice and consultancy services thepolicy allows for a review of a range of suppliers and costs above a predetermined level are required to be approved by

the Audit Committee.

Further unscheduled communication between the members of the Committee is conducted as required. The Audit

Committee continues to consider, that given the size of the Company, an internal audit function is not currently required.

During the year matters considered by the Committee included:

The Annual Report and Accounts;Preliminary results;Interim report and results;The Group accounting policies;The use of the going concern basis in the preparation of the accounts;Audit report from Ernst & Young on the interim and annual results;A management letter report from Ernst & Young on recommendations of improvements to internal control;Compliance with the Combined Code; andApproval of the appointment of Ernst & Young as independent external auditor together with audit scope and fees.The Committee met on three occasions during 2010.


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Board Committees continuedNominat ion Comm it tee

Nigel Hall ChairmanAdrian Burn

Lord Grade of Yarmouth

The Committee has written terms of reference reflecting the requirements of the Code, which have been approved by the

Board. The Committees purpose is to make recommendations to the Board on all proposed appointments of Directors, toreview succession plans for the Group and to review Board effectiveness. The Committee met on two occasions in 2010.

When the need arises to recruit a director a role profile will be prepared that identifies the requirements of the role

and the experience and background of a candidate. This will then be used to assess the applicants. External searchconsultants will be engaged as necessary to undertake the identification of appropriate candidates. Should the need ariseto appoint a successor to the Chairman of the Committee, then the current Chairman, Nigel Hall, would not be permitted

to chair relevant meetings.

The Committee is currently leading a process to recruit an additional independent Non-Executive Director. The Committee

has engaged search consultants to undertake the identification of appropriate candidates.

The executive management team are a key component of effective succession planning within the Group. The team

have been selected based on experience, background and ability to support the Board in delivering the Group strategyand maximising stakeholder value. Their training and development needs are regularly reviewed as this is a critical partof the succession plan for the wider business to ensure that a pipeline of talent and knowledge is developed and retained.

An overview of the executive management team can be found under the Employees section of the Annual Report.

Remunerat ion Comm it tee

Nigel Hall ChairmanAdrian Burn

James Donald

A detailed report on the Remuneration Committees activities is contained within the Directors remuneration report.The Committee met on five occasions in 2010.


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30 Pinewood Shepperton plc Annual Report & Accounts 2010Corporate governance continued

Internal controlThe Board acknowledges that it is responsible for the Groups system of internal control and has reviewed its effectivenessin accordance with the provisions of the Combined Code. The Audit Committee, in accordance with the terms of reference,has reviewed the effectiveness of the internal control systems and has found the systems to be effective. The internal

control system implemented at the Company for the year under review, and continuing, is structured in order that theGroups risks are effectively identified, evaluated and managed to provide reasonable but not absolute reassurance that

there is no material misstatement or loss. This process is consistent with the requirements of the Turnbull Guidance.

The main elements of the Groups internal control system, including risk identification, are as follows:

Board

The Board of Directors is ultimately responsible for internal control procedures, with an organisational structure thatsupports clearly defined authority levels. The primary responsibility for the operation of the internal control systems lieswith the Executive Directors and the executive management team. Board meetings include consideration of strategic,financial, operational and compliance issues, which are endorsed through assessment by the Audit Committee of the

effectiveness of the internal, financial and operating control environment.

Operat ing Com pany controls

The identification and mitigation of major business risks is the responsibility of the Executive Directors and executivemanagement team who have ongoing operational responsibility. A part of this remit includes the maintenance and regularreview of procedures to identify and mitigate potential areas of risk, supported by the Groups in-house legal counsel, inaddition to external advisor guidance. This process and review also ensures that procedures comply with Group policies

and guidelines.

Author isat ion procedures

The authorisation procedures in respect of matters such as purchase commitments, capital expenditure, investment limitsand treasury transactions are clearly defined within the Group.

Insurance

The Company has granted an indemnity to all its Directors against liability brought by third parties, subject to the

conditions set out in the Companies Act 2006. The continuing adequacy of insurance cover for the Group is evaluatedon an annual basis and the Board concluded that the insurance cover for the Group is currently adequate

Financial report in g

In advance of each financial year, the Board approves a comprehensive budget, incorporating a detailed appraisal ofunderlying assumptions and business risks. The Board is provided with financial information on a monthly basis detailing

historical and forecast results against budget and prior year, incorporating monthly and year to date trading results,statement of financial position and summary notes, cash flow statements, capital expenditure, levels of indebtednessand covenant compliance. In addition, monthly Board meetings include an appraisal of current forecasts, treasury policy,financial resources, borrowing facilities and hedging strategy. The executive management team are also provided with

key financial data on a monthly basis, to assess performance against budgets and provide explanations on the results tothe Board.

Treasury management

The treasury function is managed in accordance with guidance approved by the Board and procedures are regularly

reviewed to ensure that they remain suitable. Appropriate segregation of duties is in place and significant transactions areauthorised by the Board. Financial reports and analysis are provided to the Board on a monthly basis as noted in financialreporting above.


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Internal control continuedShareholder communicat ion

Pinewood Shepperton plc maintains a strong communication strategy with its shareholders. The Company alsocommunicates regularly with the employees of the Group, a number of who are direct shareholders in the Company,

or are members of the Company Sharesave Scheme. All Company announcements are posted on the investor relationssection of the Companys website at www.pinewoodshepperton.com as they are released. Relevant shareholderpresentations, notably those given to institutional shareholders on publication of the interim and annual results for the

year, are also accessible to all investors via the website. The Companys dedicated investor relations section of its websiteincludes historic financial and share price information, as well as a link to About us which provides information on the

business and the services and facilities available.

Additionally, the Annual General Meeting, to be held this year on 31 May 2011, will provide shareholders with a furtheropportunity to meet and question the Companys Board, and to review the previous years results and business.

By order of the Board

Andrew M. SmithCompany Secretary

7 March 2011


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Employees

The Company actively considers the position of its employees rights through comprehensive and regularly reviewed

employment practices in the areas of recruitment, training, welfare, remuneration, employee relations and health andsafety. The Chief Executive has Board responsibility for these areas and regularly updates the Board on relevant issues.

At the executive management team level, the Group Director Corporate Affairs maintains responsibility for all operationalhuman resources issues and provides the Board with a monthly report.

In addition to a published grievance policy, the Company maintains a Whistleblower policy, providing an opportunity foremployees to raise grievances with senior management initially and ultimately with the Chairman of the Audit Committee.

The Companys stated policy on Equal Opportunities recognises the diversity of individuals, and has procedures in placeto ensure that recruitment and promotion recognises such diversity and is not biased by any consideration of age, gender,

disability, colour, racial origin, religion or sexual orientation, as well as seeking to provide employees with reasonable

conditions of employment and prospects.

Employees also receive regular and relevant communication in terms of operational issues and trading performance,and where appropriate, the views of employees are sought in guiding business practices and strategy.

The Group has adopted a training policy whereby all members of staff are actively encouraged to contribute to their owndevelopment. The Group believes that personal development is a partnership between the individual and the Company,

and the attitude of the individual to their own development is a key element of this process.

Training is seen as serving three main purposes: helping to meet the Groups corporate aims and objectives; helping

to improve the individuals performance in undertaking their current duties and developing the individuals abilities andpotential by extending knowledge, skills and influencing attitudes. During the year 30% of training was health and safety

related and 70% skills training and career progression. Eight staff members are studying for NVQs in customer serviceand business administration and two apprentices in Drapes and Post Production Maintenance.

Execut ive management team

The executive management team members are the first line of support for the Board and their combined experienceand backgrounds assist in delivering the Groups strategy and maximising stakeholder value. They are a key part of the

succession plan for the Group and their training and development needs are reviewed regularly to ensure that the talentpool is developed and retained.

Paul Baker MBA Group Director Sales (37). Joined in 2006 as Head of Sales, responsible for sales of the Groups filmand television facilities. In January 2008, he was promoted to Sales Director and his role expanded to cover the sale of allfacilities across the Group and late in 2010 he relocated to Los Angeles. He previously held commercial positions at DMGT,

News Corporation and Pearson.

Paul Darbyshire Managing Director, Television (59). Joined Teddington Studios in 1998 and is responsible for theGroups television and channel hosting facilities. In addition he oversees operational responsibilities for all televisionstudios and related facilities across the Group. Before joining, Paul worked for BTTV as a Channel Development Manager

and later Operations Director.

Giles Farley Managing Director, Group Digital Content Services (42). Joined in 2000 and, in 2010, was promoted toManaging Director, Group Digital Content Services. He was previously responsible for UK training, installations and

technical sales at Avid and DigiDesign.

David Godfrey MCMI Director International Operations (49). Joined in 1985 and has held positions as Assistant StudioManager, Television and Commercials Manager, Studio Manager and Head of Group Studio Operations. He was appointedDirector of International Operations for the Group in 2010 with responsibility to develop international studio offeringsworldwide. David is also responsible for Group Health and Safety.


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Pinewood Shepperton plc Annual Report & Accounts 2010 33Employees continued

Employees continuedExecut ive managem ent teamcontinued

Peter Hicks Group Studio Manager (36). Joined in 1991 and has held positions at Shepperton such as Assistant StudioManager and Studio Manager. He was appointed Group Studio Manager in June 2010 and is responsible for the

operational running of both Pinewood and Shepperton studios.

Magdalena Duke Legal Counsel (31). Solicitor responsible for the Companys legal matters including negotiation of stageand studio agreements, customer and supplier agreements and litigation. Joined in October 2010 from media law firmDavenport Lyons after a career as a broadcast journalist with the BBC.

Chris Naisby FCCA Group Financial Controller (39). Joined in 2001 as Finance Manager, having previously worked in

financial roles at various media companies, including Reed Elsevier. Promoted to Financial Controller in April 2008 withkey responsibilities of supporting the Finance Director and the Board with strategic financial information, preparation ofstatutory accounts and Board reports as well as managing the Finance team.

Andrew M. Smith Group Director Corporate Affairs & Company Secretary (48). Joined in June 2008, as Group DirectorCorporate Affairs and is responsible for communications, public affairs, human resources and corporate and social

responsibility. He was appointed Company Secretary on 20 December 2010. He is a member of the Film Skills Council.Prior to this he was Managing Partner of The Policy Partnership.

David Wight MA Cantab Head of Group Property (52). Responsible for the Companys real estate portfolio of land,buildings and Media Park occupiers, property development and planning. Joined in 2003 as Studio Manager of PinewoodStudios. Prior to this he was operations director in the independent sector of the cinema industry after a career as an

officer in the Royal Navy.

Darren Woolfson Group Director Technology (41). Joined in October 2007 having held a number of technical roles in thefilm and television post-production industry. He is responsible for the co-ordination and delivery of the Groups strategy of

enhancing its technology infrastructure. Previously was the Technical Director at Molinare Limited.


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Corporate responsibility

The Company remains committed to its staff and to the communities in which it operates. The Company is aware of the

import

Documents

Pinewood Shepperton Plc Annual Report 2010