Somerset Entertainment

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Q1 2007 Results Investors Update 05/10/07
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Somerset Entertainment Income Fund

• Somerset is the leading North American producer
  and distributor of specialty music sold
  internationally through non-traditional
  retailers using interactive displays
• Provide a wide range of concept-based music
  targeted at a predominantly female, over 30-year
  old demographic
• Distribute through retailers who serve target
  demographic including mass merchants, specialty
  chains and independent gift stores
• Employ attractive interactive music displays for
  consumers to sample music and stimulate impulse
  sales

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2006 Financial Highlights

• Sales increased 31.1 to 99.9 million
• Sales in the U.S. increased 41.7 to 78.9
  million (an 11.3 decrease excluding Compass
  7.5 excluding currency appreciation)
• Sales in Canada increased 6.2 to 11.9 million
• International sales declined slightly by 2.2 to
  9.1 million
• EBITDA rose 8.8 to 18.6 million
• Generated 16.0 million in distributable cash,
  for a payout ratio of 92.8

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First Quarter 2007 Financial Highlights

• Sales decreased 2.1 to 22.5 million
• U.S. sales decreased 2.2 to 18.1 million.
  Excluding Compass, sales in the US increased
  22.4 to 13.2 million
• Canadian sales decreased 16.7 while
  International sales rose 17.9
• Gross profit decreased 12.8 to 7.2 million
• EBITDA decreased 40.3 to 2.4 million (excluding
  Compass, EBITDA was 2.8 million, comparable to
  prior year)
• 1.2 million was generated in distributable cash

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Selected Financial Information Q1 07
(unaudited)

Three months ended
Three months ended
March 31,
2007 March 31,
2006 (000s) of sales (000s)
of sales   Sales United
States 18,090 80.3 18,495 80.3
Canada 2,120 9.4 2,546 11.1
International 2,331 10.3 1,978 8.6 Total
Sales 22,541 100.0 23,019 100.0 Cost of
goods sold
15,343 68.1 14,767 64.1 Gross
profit 7,198 31.9 8,252 35.9 Selling, general
and administrative 5,122 22.7 4,867 21.1 Provinci
al sound tax credit (225) (1.0) (236) (1.0) Fo
reign exchange loss (gain) (136) (0.6) (460) (1.9)
EBITDA 2,437 10.8 4,081 17.7
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Distributable Cash
(unaudited)
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Operational Highlights Canada

• Signed an agreement with CMC, a new distributor
  in Canada for the Precious MomentsTM music line
  for the Christian music market
• Received approval from a regional grocer for a
  Christmas Prepak program to ship in Q4

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Operational Highlights U.S.

• A major U.S. mass merchant added the 24-title
  Reflections display to new 500 doors and the
  Fisher-Price Music display to 100 new doors
• Another mass merchant authorized a temporary
  Fisher-Price program for 1400 stores and another
  1,000 doors for a Compass seasonal program
• Somerset shipped almost 1 million (USD) of 2
  incremental promotional CDs to Hallmark
• Shipped Precious MomentsTM to 96 doors of a
  regional book chain
• Secured an order for 199 locations of a major
  craft retailer with an anticipated Q2 shipment

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Operational Highlights International

• An additional 42 Fisher-Price Music displays
  were shipped to the leading hypermarket in France
  for a total of 71 doors
• 38 Reflections displays were rolled out to
  various hypermarket stores in France
• Received approval from a major club chain in
  Mexico to roll out to all 30 doors

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2007 A Look Ahead

• Somerset is currently exploring both video and
  digital music opportunities
• Sourced and developed content to test four
  ambient DVD titles on an existing display at a
  major mass merchant in the U.S.
• Aggressively pursuing opportunities with its top
  accounts to list Somerset CDs on their e-commerce
  sites
• Secured a deal to test three ring tone soft packs
  for a major Canadian wireless company, including
  Nature, Classical and World

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