1. Les Mills International Club Owner CVM Report February 2008

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

3. 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

4. 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

5. 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

6. 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 3 2 1 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

7. 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

8. 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

9. 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

10. 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

11. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 11 Japan All results are indicative only due to small sample size

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

13. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 13 The Japanese market is price sensitive with relatively poor performance in financial and non-financial costs Although pricing is determined on a market by market basis the current perceived underperformance can be addressed at both an Les Mills International level and a market level At a market level costs of operating the programs should be investigated to see how they can be reduced without impacting EBIT Les Mills International, working with the agents, should look to further develop and promote tools such as the scorecard and benefit calculators that club owners can use to measure success of the programs which will put the price in context and switch focus to the inherent qualities of the program which currently rate well Performance is relatively poor on non-financial costs which are also high impact drivers Issues causing this low performance should be investigated to understand what is causing this performance People associated with the Les Mills programs have a reputation for being fair, likeable and credible, which is important to customers Insights and Implications Japan Indicative only due to small sample size

14. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 14 Overall perceived value is good in Japan but the poor performance and high importance for prices and costs is reducing the overall score Prices and costs are important in Japan but performing poorly at 6.2 Image and reputation is also relatively important and like in most other countries Les Mills performs well in this area in Japan Performance on products and services is also relatively good at 7.6 Insights and Implications Japan Note: (1) Sample size n = 19 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 Key: Impact Weight 2007 CVM Score Indicative only due to small sample size Perceived value of the Les Mills system to clubs

15. 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 All aspects of image and reputation are important to customers in Japan with performance being good across all subdrivers Image and Reputation Image and Reputation CVM Performance (1) Fair, likeable and credible people Technical and leading edge All aspects of image and reputation contribute to the overall perceived value Having a reputation for fair, likeable and credible people is the most important factor followed by having a reputation for being technical and leading edge both of which are rated slightly lower Within Japan, Les Mills reputation for bringing in and retaining customers and having a recognised brand both perform well at above 8.0 Insights and Implications Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

16. 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 account for a relatively small amount of perceived value in Japan with performance generally being good although definitely lower for using the services and account management Products and Services Product and Services CVM Performance (1) Account management Billing Billing is one of the main drivers of perceived value and performs well Account management is the other leading driver but performance is relatively poor at 6.9 Using the services is also underperforming suggesting that some investigation should be placed into how to improve perceptions of the non-program aspects of the Les Mills system Insights and Implications Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

17. 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 Although getting set up and going has little impact on perceptions of value across the customer base it is a hygiene factor that must be performed to a reasonable standard so as not to prejudice customer perceptions early in the relationship Although Les Mills is rated relatively well on initial training of staff it is rated less highly for providing training on how to run group fitness introducing a need for GFM in the Japanese markets Insights and Implications Providing training and education to run Group Fitness Getting set up and going is relatively unimportant but will be an important driver to new customers in ensuring the relationship gets off to the right start Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

18. 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 In general customers are happy with the inherent qualities of the programs, although they are less convinced that programs provide a return on investment 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 All aspects contribute to overall perceived value of using the programs However the two leading drivers, provision of programs and training to recruit and retain the best instructors and having programs that generate a return on investment are both underperforming All other aspects are performing well close to or above 8.0 Proving the return on investment of the programs is important in addressing poor price perceptions Although indicative due to small sample size, it is interesting to note that clubs perceive that programs do have a reputation for bringing in and retaining customers but do not rate the programs as highly on generating a return on investment As in other markets work is required to assist in the recruitment and retention of instructors Insights and Implications Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

19. 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 Customer perceptions of the value they receive from the services associated with the programs are less other product and services factors and is likely to explain some of the poor performance on prices and costs Using the services Using the Services CVM Performance (1) Assisting me with measuring the success of my programs Providing certification of my instructors Performance across all aspects of using the services associated with the Les Mills programs is relatively poor Of particular concern is the customers rating of Les Mills performance on assisting with the measurement of success of the programs Assisting with measurement of success of the programs would also be of value in focusing customers on the return on investment they make from the programs and therefore put in context the price of the programs Assisting in keeping staff of clubs happy and motivated would also address another concern of clubs in an area where Les Mills is currently underperforming and could be achieved by reallocating some marketing spend towards instructors Insights and Implications Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

20. 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 an important driver of perceptions of value associated with products and services and there are some areas of underperformance that should be investigated further Account management Account Management CVM Performance (1) Assist me in sorting out issues related to my programs Respect me as a valued customer Account management is an important driver of perceptions of value associated with products and services Improving the scores on these factors should impact overall perceptions of value In particular addressing underperformance on both proactive contact and reactiveness are important As Les Mills and its representative have a reputation for having fair, likeable and credible people, so underperformance is likely to be related to customers not seeing enough of their account managers rather than the account managers themselves Putting additional resource into these areas would have to be carefully considered on a cost benefit basis to ensure the additional cost is more than offset in additional revenue due to increased perceptions of customer value Insights and Implications Proactively contacting me to add value to my business Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

21. 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 relatively well overall but there is room for improvement Billing Billing CVM Performance (1) Ensuring confidentiality of financial arrangement There are fair payment terms Relative to some other countries, Japan lags in this area which is of some importance to customers In particular, investigation should be made into how to improve perceptions of the fairness of the payment terms, without increasing credit risk and the ease of understanding the bills Insights and Implications Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

22. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 22 Financial Costs Non Financial Costs Performance on prices and costs is important to customers and as in other markets is an area that needs to improve in Japan Prices and Costs Financial costs are the leading driver of overall perceived value and much like other markets are the lowest performing driver Non-financial costs are also important to overall perceived value and perform well behind other countries Although pricing varies by market a common theme appears to be that customers have trouble measuring the success of the programs Addressing this issue is likely to lessen focus and improve perceptions of performance on prices and costs Insights and ImplicationsPrices and Costs CVM Performance (1) Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

23. 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 Performance on all aspects of financial costs is poor and improvement on these driver will have a significant impact on customer perceptions of value, although EBIT must be protected Financial Costs All aspects of the costs associated with Les Mills programs are important in explaining customer perceptions of financial costs Les Mills and its agents should investigate on a market by market basis how it can reduce some of the operating costs without impacting EBIT for either LMI or its agents, through negotiating down third party costs Other value drivers suggest that customers are not understanding the success of the programs LMI and its agents should develop a strategy of trying to highlight the success of the programs, with particular emphasis on return on investment in order to put the price of operating the programs in context and lessening the focus on price Insights and ImplicationsFinancial Costs CVM Performance (1) Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

24. 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 Improvement needs to be made in the area of non-financial costs which is a large contributor to overall perceived value Non Financial Costs Overall Non Financial Costs CVM Performance (1) Convenience of workshops All aspects of non-financial costs are important in explaining the overall perceived value However performance is low on these drivers especially when compared with performance in other countries Investigation of what is driving non-financial costs in the Japanese markets should be undertaken given their relative importance Insights and Implications Japan Note: (1) Sample size n = 19 Process xx%x.x Key: Impact Weight 2007 CVM Score Indicative only due to small sample size

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

26. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 26 Japan is a relatively competitive market with Freestyle the main competition followed by other branded programs Customers Views on the Main Competition for Les Mills programs (1)(2) Japan Note: (1) Sample size n = 16 Indicative only due to small sample size

27. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 27 Within Japan, Les Mills outperforms competitors across all aspects leaving only 10% of the customer base at risk 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 = 16; (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 = 19 RVS calculated as Les Mills Scorex 100 Competitors Score1 Japan 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 7.3 10% of customer base at risk Process x.x Key: 2007 RVS Score Indicative only due to small sample size

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

29. J:\Les Mills Int\8007 Club CVM Proposal\Reports and Presentations\LMI Club Owner CVM Report v6.ppt 29 The programs contribution to membership retention and growth and the image and reputation of the program are the leading key decision criteria but unlike other markets, price is relatively important The key decision criteria is programs that contribute to attracting and retaining members, an area of underperformance in general Attention should be given to emphasizing this in the sales process and following up on the programs that are purchased with tools to measure the success of the programs Marketing should be done at the program level emphasizing the qualities and image of the programs which perform well This will also help shift attention away from price, which unlike other markets, is currently a leading key decision criteria with very low performance Insights and Implications Japan Indicative only due to small sample size