Important disclosures appear at the back of this report.

GP Bullhound Ltd. is authorised and regulated by the Financial Services Authority in the United Kingdom

Sector Update

July 2009

Imaging Technologies

HOW REAL CAN WE MAKE GAMES AND VIRTUAL WORLDS?

Hugh Campbell

hugh@gpbullhound.com

London: +44 207 101 7566

Alec Dafferner

alec@gpbullhound.com

San Francisco: +1415 986 0168

Remy Valette

remy@gpbullhound.com

London: +44 207 101 7565

Digital entertainment is growing at breakneck speed

We are spending more and more time in front of screens consuming more and more digital

entertainment. In fact each year approximately 16 billion square meters of screens is

added to the market. This is the equivalent of over two A4-sized screens for every person

on Earth. And we are hungry for more. Broadband internet access is approaching 100%

penetration in developed economies and wireless broadband usage is growing fast in the

developing world. This has allowed for ever more realistic entertainment to be delivered to

a screen near you – from computer games and animated films to virtual worlds and mobile

communities. The consumer is pushing the boundaries of what can be delivered using

current business models and existing software and hardware.

Demand creates profitability problems for incumbents

As the consumer demands more realistic entertainment environments so production costs,

using traditional methods, have skyrocketed. Reality is not cheap to replicate. It requires

more manpower as well as 3D imaging and animation technology. Whilst unit sales in the

computer games industry are holding up in the recession, the share prices of the large

computer games vendors are off over 50% versus 12 months ago and off 30% versus the

S&P 500.

New online business models popular with consumers

New business models and techniques are required to provide the consumer with digital

entertainment in a sustainable and ultimately profitable way. In fact, within the computer

games industry, for those companies that look at the world differently, there are huge

profits to be made. Take ActivisionBlizzard. Its most popular game, World of Warcraft, is

marketed, distributed and played online. In addition, it is charged at $15 per month. This is

no “one hit wonder.” In Europe, CCP Games has adopted a similar model with EVE Online

a space simulation game.

Animation software may hold the key

However, the whole film and computer games industry is not going online. To reduce time-

to-market and to drive cost out of these traditional industries, we believe that a new

generation of animation software may hold the key. Companies such as Natural Motion,

Image Metrics and Illuminate Labs allow studios to save costs without sacrificing integrity.

Now it is possible to create more realistic and controllable characters, in many cases

without the need for actors, motion capture, set pieces or props.

Whenever a traditional industry comes under pressure, investment opportunities exist.

This report also touches on the advances in hardware, computer peripherals, holography

and 3D systems – all of which help make our digital lives more realistic.

INDEPENDENT TECHNOLOGY RESEARCH

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THE OMNIPRESENCE OF IMAGING TECHNOLOGIES

Explosion of screen availability for high quality content viewing and interaction

According to DisplaySearch more than 340 million 40” screens, 156 million

smartphones and 184 million laptops were shipped in 2008 - a total of 15.9 billion

square meters of additional screen available to play content each year. This is the

equivalent of 2.1 A4 sheets per people. As a matter of fact we are constantly

surrounded by screens and displays at work, in transportation and at home.

All these devices are constantly visually interacting with us. For example, cars

have screens for speedometers, mapping systems and movie players providing

information, services and entertainment. As a consumer we always want better

image quality and intuitive interfaces. The iPhone is the perfect illustration of a

device which answers these needs, the applications are visually attractive and the

way to access and navigate them is easy and intuitive.

For manufacturers and publishers these requirements mean more sophisticated

graphic interface and higher resolution for content. This leads to technical

challenges on processing power, communication bandwidth and storage. On the

consumer side the situation is much more comfortable because devices able to

play such content are multiples, widely available and affordable. Exhibit 1

illustrates visual devices that are constantly around us.

Exhibit 01 – Imaging technology devices sample

Source: Ostendo, Microsoft, NVIDIA, Apple, Archos

TV screen PC monitorPortable playersSmartphone3D vision glasses

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Increasing number of imaging technology applications

Imaging technologies are employed in the manufacturing or the delivery of

product and services in a number of different ways. The main objective is often to

improve realism, accuracy, reduce cost or enhance performance. Industries such

as entertainment (3D animation), advertising, computer aided design (CAD - 3D

modeling), healthcare (diagnostic) and internet (3D virtual world, virtual help

desks, interactive websites) are increasingly dependent on imaging technologies.

Exhibit 02 – Sample applications of imaging technologies

Source: Autodesk, Dreamworks, AP, Inteliwise, s3.images.com

The fastest growing application where multiple types of content are integrated into

a highly engaging and interactive 3D graphic format is virtual worlds. In-stat

forecasts more than 1 billion registered users and $3 billion of revenue by 2012,

of which 90% is generated from the sale of virtual items.

In the healthcare industry imaging technologies are used to improve our

understanding of the human body and to cure patients more efficiently. Advances

in medical imaging technologies are redefining the way physicians diagnose and

treat diseases. For example at the IRCAD-EITS (cancer research center) they

use 3D image rendering software and imaging technologies to improve the use of

surgical devices as well as sharing medical images with surgeons around the

world. This enables doctors to remotely capitalize on the knowledge from other

specialists and also serves as the basis for eLearning materials. It is not

surprising that more than 50% of General Electric’s healthcare revenue is coming

from imaging technologies which accounts for more that $8.6 billion in 2008.

CAD Architecture

Movies & Games Avatar & Virtual Worlds Healthcare Diagnostic

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SUCCESS OF COMPUTER GENERATED ENTERTAINMENT

The macroeconomic trend in the entertainment industry is towards a growing

consumption of digital content. In fact, a study from PricewaterhouseCoopers and

Wilkofsky Gruen Associates reveals that spending on digital entertainment will

grow 10% by 2013 in comparison to non digital entertainment which will be flat or

declining.

Over the last 10 years, after the launch of Toy Story by Buena Vista, computer

generated entertainment has become a strong competitor to traditional movies.

For example Shrek 2 (the best selling title from Dreamworks) is ranked 11 on the

period 1900 – 2009 just behind Jurassic Park, Star Wars and Harry Potter. The

Exhibit 03 below shows the ranking of top 10 computer generated images (CGI)

movies and video games.

The common characteristics between the top ranked CGI movies are a good

story line supported by innovative technology. Special effect and 3D animation

technologies enable creators to produce more immersive entertainment. The

manufacturing techniques have a lot of similarities with the video games industry.

Both share 3D animation and character modeling, the key differentiator is the live

interaction engine for games which adds a lot of complexity. This prevents video

games from reaching the image quality and finished aspect of “single story” of

animated movies.

Exhibit 03 – Top 10 computer generated movies and video games

Top 10 Movies

Top 10 video games

Source: www.the-numbers.com, VGChartz.com

Rank Movie Distributor Box Office Release date

1 Shrek 2 Dreamworks SKG $441m 2004

2 Finding Nemo Buena Vista $340m 2003

3 Toy Story 2 Buena Vista $246m 1999

4 Shrek Dreamworks SKG $268m 2001

5 Shrek the Third Paramount Pictures $323m 2007

6 Monsters, Inc. Buena Vista $256m 2001

7 Toy Story Buena Vista $192m 1995

8 The Incredibles Buena Vista $261m 2004

9 Up Buena Vista $275m 2009

10 Cars Buena Vista $244m 2006

Rank Movie Publisher Platform Sales(Units) Release Date

1 Mario Kart Nintendo Wii 13.64m November 05'

2 Wii Fit Nintendo Wii 13.05m April 08'

3 Wii Play Nintendo Wii 11.00m December 06'

4 Super Smash Brothers Brawl Nintendo Wii 8.31m June 08'

5 Grand Theft Auto 4 Take Two X-Box 360 6.64m April 08'

6 New Super Mario Brothers Nintendo DS 5.53m June 06'

7 Brain Training Nintendo DS 5.45m June 06'

8 Grand Theft Auto 4 Take Two PS3 5.25m April 08'

10 Nintendogs Nintendo DS 4.52m October 05'

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A competitive industry exposed to consumer purchasing power and high innovation cost

In 2008, despite the recession, spending on filmed entertainment declined only

2% and spending on video games increased 22% reaching respectively $38bn

and $15.4bn (**). It shows that the consumer flow of money into the animated

entertainment industry is considerable but despite healthy revenues, profitability

issues remain for some players in the industry. Exhibit 4 below compares stock

performance of digital entertainment companies versus the economy in general

and technology companies in particular. The average drop over the past year for

Electronic Arts, Crest Animation Studios and Rainmaker Entertainment is 57%

whereas it is only -21% for S&P 500 and Nasdaq composite.

The large amount of investment required offer more engaging entertainment

experiences, is putting profitability under pressure. In addition companies are

largely exposed to the success of individual titles whilst the cost associated with

the production process is fixed. For example Disney Studios will produce 40.0%

of its CGI films with 3D features in 2009 and this will be increased to 55.6% in

2010. This will enable Disney to charge consumer a premium of $2 per seat

versus a non 3D movie.

Exhibit 04 – Stock performance of animation & games companies

Source: Capital IQ

0

20

40

60

80

100

120

140

Jul-

08

Au

g-0

8

Au

g-0

8

Se p

-08

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-08

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-08

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-08

No

v-08

No

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-08

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-08

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-09

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-09

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-09

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-09

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-09

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r-09

Ap

r-09

Ap

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-09

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-09

Jun

-09

Jun

-09

Jul-

09

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09

S&P 500

Nasdaq Composite

Rainmaker Entertainment Inc.

Crest Animation Studios Ltd.

Electronic Arts Inc.

(**) Source: PricewaterhouseCoopers, Wilkofsky Gruen Associates

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INNOVATIVE SERVICE PROVIDERS REQUIRED

Software industry overview for digital content production

Digital movie and game producers employs three types of tools, proprietary

software, specialized software for a segment of the process (i.e. modeling or

rendering) and software packaged from large providers.

Proprietary software suite

A number of leading publishers and studios have developed their own proprietary

software. For example Blue Sky (subsidiary of Fox Entertainment, creator of “Ice

Age”) has developed a proprietary software called CGI Studio. The software suite

is a programming language and renderer that can manipulate and visualize 3D

elements. The core of the technology is a ray tracing engine that can simulate the

way light behaves on objects and surfaces in a natural environment.

Specialized software

Specialized software is dedicated to a particular segment of the production

process. It can be a full software solution for modeling, visual effects, rendering,

lighting or a plug-in to integrate in a larger software package. Most start-ups are

part of this category.

Software package

This class of software can do the same functions as the proprietary software with

more features but less customization as they can address multiples domains.

This includes major software provider for content creation, simulation and

computer-aided design such as Autodesk (Maya, 3ds max), Adobe (after effect,

lifecycle), Dassault System (3DVIA, Catia design).

Exhibit 07 – Simplified overview of the 3D animation industry

Source: GP Bullhound

3D animation studios

ProprietaryOutsourced Specialized Multi purpose

Solution & services

3D animation universe

Publishers Animation software

Software providers

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The steps in computer generated content production

A quick summary on how the industry works and is structured will help to

understand the positioning and offering of companies that operates in the CGI

entertainment value chain. Exhibit 5 shows the various production steps of digital

entertainment.

Exhibit 05 – Computer generated movies production process

Source: Dreamworks Studio, Pipal Research

Modeling

The modeling phase consists of the creation of 3D shapes for characters, objects

and buildings. It is highly creative work done by artists and “digital sculptors”. In

this area, Autodesk provides 3D modeling software called 3ds Max. However in

2008 the company bought Softimage to extend its offering to content creation for

digital movies and games. Specialized studios like Sparx have dedicated teams

of digital artists in charge of building 3D key frame for animated productions for

clients such as Disney and TF1.

Rigging

This step is where all the possible movement and attitudes of the character are

defined in order to create uniformity of the animation across the entire movie. The

outcomes of rigging are computer scripts that will be used by the animation as a

frame work. Proprietary software packages are quite common in this area but

character rigging can also be implemented via modeling software including Maya

from Autodesk.

Layout

The layout department of an animation studio ensures the appearance of the

story shot by shot is consistent and establishes a shooting style as well as

defining the spatial relationships between objects in a scene.

Animation

The animation process gathers the information and data from the modeling,

rigging and voice recording steps so as to create movements and actions of the

3D objects and characters. This step involves various techniques to create

realistic animations. Physic simulation models based on scientific laws are used

in order to make movements as realistic as possible. Other techniques include

motion capture to digitalize facial movements and gestures.

Development Pre‐Production Production Post‐Production

Script Writing

Storyboarding

Design ‐ Modelling

Character Rigging

Voice Recording

Layout

Animation

Visual Effects

Lighting

Sound Effects

Music

Final Delivery

3‐4 Years

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The animation segment is a convergent area where a wide range of companies

are focusing on the various aspects of animation i.e. global motion, specific

movements and real time interaction.

The company Natural Motion is focusing on Dynamic Motion Synthesis (DMS)

specially targeted for real time interactions employed during video games, movies

and simulations. The technology is used by clients such as Electronic Arts or

Sony Imageworks for games and Airbus or Northrop Grumman for simulations.

The startup Image Metrics is focusing on facial animation where modeling is a

complex task to achieve and physics models cannot be utilized. The company

has developed a facial motion capture technology that creates 3D models based

on the expressions and emotions of real actors.

In 2007 Intel bought Havok for $110m a provider of animation tools for games.

The company offers an animation software development kit which can be

combined with physics and a special effects platform to produce realistic

graphical designs and motions.

In terms of market size the segment is difficult to measure. According to

jonpeddie.com the worldwide 3D modeling and animation market is estimated at

$221m today growing at +11% CAGR between 2010 and 2013.

Exhibit 06 – Worldwide 3D modelling and animation market size

Source: www.jonpeddie.com

The potential growth for the animation market is considerable as more and more

activities are done on screens. For example the company Animantz employs

animation techniques to improve e-learning interfaces and it has worked for

clients including Loreal and Asayahi Airlines.

Lighting

The light is a key element in the perception of volume and perspective in 3D

animation. The task of generating realistic lighting conditions especially in real

time is quite complex as it impacts all characters and objects in a scene.

Companies like Geomerics and Illuminate labs are specifically focusing on

providing solutions for dynamic lighting creation and optimization.

219

237

221

238

262

293

329

100

150

200

250

300

350

2007 2008 2009 2010 2011 2012 2013

$m

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Visual Effect

Special effects are built using specific plug-ins to existing 3D modeling and

animation software. For example visual effects for object explosion can be

simulated using Havok Destruction. Autodesk has several plug-ins for smoke and

light simulation (Autodesk Smoke, Autodesk Lustre). Blue Sky uses proprietary

software tools to create animated effects in order to highlight actions and transmit

emotions. Particular programs have been coded to simulated even tiny details

such as the impact of the rain on the character’s fur.

Exhibit 07 – ICE Age Character and Visual effects to create immersive entertainment

Source: Blue Sky Studio

Rendering

The rendering process is the creation of the final image at full resolution from the

scene’s modeling and animation characteristics. This process requires the most

processing power and memory. To decrease the amount of work, various layers

can be rendered separately and then assembled into the final movie using

compositing software. In 2007 NVIDIA bought Mental Images for $80m, the

company sells rendering software that combines physically correct light

simulation and high performance images.

Actions

Rain

Emotions

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DISRUPTIVE HARDWARE TECHNOLOGIES

3D stereo vision systems

One major area of innovation that will enable the entertainment industry to charge

higher price and generate better margins is 3D stereoscopic imaging. NVIDIA is

already selling its GeForce 3D Stereo Vision system for gaming applications in

partnership with Samsung. The technology requires 120Hz LCDs and shutter

glasses in order to recreate the illusion of true 3D images. The illusion of depth is

created by playing two different images, representing two perspectives of the

same object to each eye. Disney’s Digital 3-D (*) process that plays 3D film, uses

polarized glasses associated with fast cinema projector at 144 frames per

second, six times as fast as a normal movie. Every 1/24 of a second (the

projection frame rate for normal 2D movies) the two scene views called "right eye"

and "left eye" are each shown 3 times. Due to persistence of vision, the 72 image

frames and 72 black frames fed to each eye in a given second will recreate true

3D flicker-free images.

Complete solution from content to viewing

IMAX offers a 3D viewing experience with proprietary technology that combines

specific projection systems, audio settings, geometry of the facilities and also

specific camera and shooting conditions for the content creation. THR Research

shows that admission prices for 3D-Imax movies are $5 above standard

technologies which accounts for an increase of 33% on the average price of a

cinema ticket charge.

Holographic projections

Hologram technologies are based on the reproduction of the interference and

diffraction of the light coming from an object in order to create a 3D image. This

technology doesn’t require the viewer to wear any specific glasses. 3D animated

holograms are often projected using a combination of laser beams. The company

ViZoo offers Cheoptics360, a free floating display that can produce large 3D

animated images viewable on a 360˚ angle.

Blending virtual and real for more immersive entertainment

It is now also possible to connect real life physical experiences to movies and

games. Ambient features such as back ground color, airflow and vibration can be

automatically played and adjusted during the entertainment with pre-recorded

effects for movies and real-time actions for video games. Elaborated discrete

systems are available, for example the company amBX (spin off from Philips

research) provides full “sensory surround” entertainment experiences with its

proprietary technology for games, movies and web enhancements.

(*) Source: http://en.wikipedia.org/wiki/Disney_Digital_3-D

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Augmented reality is part of the trend toward immersion and engagement with the

viewers. The concept is to link images and real objects with an added layer of

interaction. The startup Total Immersion delivers augmented reality solutions

where virtual components are dynamically merged into live video. The application

range of this type of technology is wide and covers entertainment, publishing,

digital marketing and theme parks.

Competition between CPU and GPU to take control of the processing priority for 3D animations and modeling calculations.

GPU has primarily been designed to render graphics at higher resolution and

higher frame rates without increasing the workload on the main processor. Today

their performance enables GPU vendors to position their GPU offering as “co-

processor” within the computer architecture. In addition new operating systems

such as Mac OS X10.6 and Windows 7 have a stronger dependency on GPU

processing capabilities. For example NVIDIA’s product line called PhysX enables

the GPU hardware to do physics calculations that are the core of movement

animation in CGI movies and games. The company bought AGEIA Technologies

for $30m in 2008, a provider of hardware accelerated physics software that

enables realistic 3D motion for PC game.

Exhibit 8 shows the growth in revenue from hardware GPU vendors has

increased 14% on the period 2005-2007 compared with a 7% decline in CPU

revenues.

Exhibit 08 – Relative revenue growth between CPUs and GPUs

Source: Mercury Research

80%

85%

90%

95%

100%

105%

110%

115%

120%

2005 2007

CPU GPU

-7%

+14%

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SELECTED COMPANY PROFILES

Animantz was established in 2005. It started with a

small team, catering to animation and eLearning

services and currently four different business-units, eLearning, 2D Animation,

Flash Games and Preproduction.

amBX is a technology licensing business which delivers

“sensory surround” entertainment experiences. amBX

enables content creators to add real world effects using light, color, rumble and

air flow, through licensed amBX devices, to the virtual worlds of computers,

games, music, movies and TV entertainment.

Geomerics was established in 2005, the company is

specialized in graphics software for the games industry. Its product, Enlighten,

provides real time the light effects for a particular scene. This introduces film

quality lighting and atmosphere into games.

Illuminate Labs develops rendering and baking technology for games developers.

Its two products are Beast, a game engine-independent content pipeline tool used

for advanced global illumination and dynamic relighting of characters, and Turtle,

a product for Autodesk Maya that combines advanced rendering technology with

baking functionality.

Image Metrics provides superior facial animation

solutions to the entertainment industry. Its mission is

to create believable facial performances that emotionally connect audiences to

digital characters in films, games and other forms of entertainment. The company

was founded in the UK in 2000

NaturalMotion Ltd is the creator of Dynamic Motion

Synthesis (DMS), a break-through in 3D character

animation. Based on Oxford University research,

Dynamic Motion Synthesis creates high-quality 3D character animation in real

time by combining artificial intelligence, biomechanics, and dynamics simulation.

PixelPlay is the leading provider of games, and

entertainment services and technologies for Interactive TV and IPTV. PixelPlay's

distribution network reaches over 50m digital TV households worldwide creating

an unparalleled offering to game brand licensors, pay-TV operators and

advertisers.

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Presagis offers a commercial-off-the-shelf

(COTS) modeling, simulation, and embedded

display graphics software. Its solutions are used in for games, military and

industrial applications. Customers includes including Vivendi Games, Boeing,

Lockheed Martin, Airbus, Thales and Northrop Grumman.

Founded in 1995 and based in Paris, France, Sparx is

a 3D animation studio. It employs 100 digital artists in

Paris, and 120 digital artists and programmers at its

fully-owned studio in Ho Chi Min City, Vietnam. The company has earned over

100 credits in feature films, direct-to-video movies, television shows, television

commercials and music videos.

The Ballistic Pixel Lab. is a full service Post

Production / Development company providing

2D/3D animation, special effects, video

compositing/editing & game development.

Total Immersion delivers augmented reality solutions for

digital marketing, publishing and theme parks. Its

technology enables interactive experiences where live

video is merged with real objects.

Trinigy is a privately owned company selling game

engine technology and support to video game

development studios across the globe. Engineered to provide creative and

technical freedom, the company´s Vision Engine is currently in use in more than

100 commercial game productions by companies such as Ubisoft, Take 2,

Dreamcatcher, NeoWiz, Spellbound, Nitro Games and more.

ViZoo is a 3D holographic vision system provider. Its

technology enables free-floating 3D images, the

company also assists its clients in producing content

for 360 viewing.

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KEY EVENTS AND SECTOR CONFERENCES

Develop Awards, Date: annually in July, Location: Hilton

Metropole Hotel Brighton,UK, The Develop Awards are

the UK's only peer-voted awards for the European

development industry. Every July, Develop hosts the biggest awards night on the

game development industry calendar with over 400 people attending

Technology and Engineering Award Emmy, Date: annually in

January, Location: The Venician, Las Vegas. Launched in 1948,

Technology and Engineering Awards Emmy honor development

and innovation in broadcast technology and recognize

companies and individuals for breakthroughs in technology.

GDC '09 Europe, Date: August 17 - 19, 2009 , Location:

Cologne, Germany. GDC Europe focuses on Business, Game

Design, Production, Programming, and Visual Arts.

NAB Show, Date: annually in April, Location: Las

Vegas Convention Center, NAB Show is the world’s

largest digital media industry event attended by

media, entertainment and communications

professionals who share a passion for the next generation of video and audio

content across multiple platforms

The Academy Awards, Date: March 7th 2010, Location:

Kodak Theater , Hollywood, The Academy Award for

Visual Effects is an Oscar given to one film each year that shows highest

achievement in visual effects.

8th Annual VES Awards, Date:

February 2010, Location: Los

Angeles, California, The Visual

Effects Society (VES) is the entertainment industry's only organization

representing the full breadth of visual effects practitioners including artists,

technologists, model makers, studio leaders, supervisors and producers in all

areas of entertainment.

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SECTOR VALUATIONS

M&A Activity

 

Date Target Buyers Deal Size ($m)

EV / Sales

EV / EBITDA

Business Description

17-Nov-08 Softimage Co. Autodesk, Inc. (NasdaqGS:ADSK)

33.5 na na Develops 3D animation tools to digital artists in the games, f ilm, and TV industries

04-Feb-08 AGEIA Technologies, Inc. NVIDIA Corporation 29.7 na na Develops hardw are-accelerated physics for PC games

31-Dec-07 Colorland Animation Ltd. China Animal Healthcare Ltd. (SGX:EP4)

na na na Operates as a hand draw n (2D) and computer-generated (3D) animation studio

01-Dec-07 Activision Vivendi 5,759.8 4.1x 19.2x Develops and publishes entertainment softw are for creating games

30-Nov-07 mental images GmbH & Co. KG

NVIDIA Corporation 80.5 na na Provides rendering and 3D modeling technology to the entertainment, computer-aided design, scientif ic visualization, and architecture industries

08-Nov-07 GameOn Co Ltd. NEOWIZ Games Corporation; TStone Corp.

141.4 2.4x 8.9x Provides online gaming services

08-Nov-07 TT Games Group Warner Bros. Home Entertainment Group

210.9 1.7x 15.2x Develops and publishes games for young players and their families

17-Oct-07 Kenjitsu Oberon Media, Inc. na na na Interactive digital media asset outsourcing services to the multimedia industry

14-Sep-07 Havok Intel Corp 110.0 na na A provider of interactive softw are and services used by digital media creators in the game and movie industries

02-Mar-07 The Mill The Carlyle Group 118.3 na na Operates as a visual effects company. It offers consultancy and processing services for various data acquisition shoots

24-Oct-06 ATI Technologies Inc. Advanced Micro Devices Inc. 4,709.7 2.0x nm Engages in the design, manufacture, and sale of graphics and multimedia processing products and technologies

26-Jun-06 Pixmantec ApS Adobe Systems Inc. na na na Develops digital imaging softw are that provides advanced w orkflow management and processing capabilities for digital camera raw files

31-May-06 Patagonik Film Group, S.A. Telefonica de Contenidos, S.A.U.

na na na Offers a digital studio, characters' designers, 3D animators, and computer artists

16-May-06 Digital Domain Wyndcrest Holdings, LLC 35.0 na na Creates digital imagery for feature f ilms to provide visual special effects and/or animation

05-May-06 Pixar, Inc. Walt Disney Co. (NYSE:DIS) 7,618.7 24.1x 32.1x Operates as a digital animation studio w hich creates animated feature f ilms

04-Oct-05 Alias Systems Corp. Autodesk, Inc. 197.0 na na Develops, markets, and supports computer graphics softw are products

01-Sep-05 BGT BioGraphic Technologies, Inc.

Presagis Inc. 2.6 na na Develops artif icial intelligence softw are for game developers, animators, and military simulation

25-Jan-05 Visual Concepts Entertainment, Inc.

Take-Tw o Interactive Softw are Inc.

24.0 na na Provides technical and creative services to producers and distributors of television programming, commercials, multimedia, and feature f ilms

28-Jul-04 Criterion Softw are Group Ltd.

Electronic Arts Inc. 67.0 na na The company assists in game-specif ic engineering, performance optimization, pre-production multi-platform toolchain development

18-Jun-01 Altamira Group LizardTech Inc. na na na Develops softw are that enables high resolution graphics using advanced imaging technology.

20-Aug-98 Discreet Logic Inc. Autodesk, Inc. 453.4 3.0x 11.2x Engaged in digital systems and softw are for the creation of imagery and special effects for f ilm, video, HDTV, broadcast, and Web

Source : GP Bullhound, Capital IQ Mean 7.1x 17.3xMedian 3.0x 15.2x

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Private Placements

Date Company Investors Deal Size ($m)

Business Description

09-Jul-09 Emergent Game Technologies Inc.

Adena Ventures; Hopew ell Ventures, L.P.; Jerusalem Venture Partners; Walker Ventures; WorldView Technology Partners, Inc.

14.4 Offers video game development tools and middlew are for gaming design

18-Feb-09 Vertex Animation Studio FZ-LLC

Intel Capital na Provides services in virtual reality applications, and 3D multiplatform games

16-Dec-08 Image Metrics, Ltd. Saffron Hill Ventures, Ltd. 6.5 Provides facial animation solutions to the entertainment industry

17-Nov-08 Softimage Co. Autodesk, Inc. (NasdaqGS:ADSK) 33.5 Develops 3D animation tools to digital artists in the games, f ilm, and TV industries

27-Jun-08 aniBoom, Ltd. Draper Fisher Jurvetson; Evergreen Venture Partners; Tamir Fishman Ventures

10.0 Virtual animation studio that creates, produces, and distributes cartoons and animations

05-Jul-07 Geomerics Trinity Hall, University of Cambridge 4.0 Provides graphics radiosity lighting product softw are for the games industry

03-Jul-07 Emergent Game Technologies Inc.

Adena Ventures; Cisco Systems, Inc. (NasdaqGS:CSCO); Copan; Jerusalem Venture Partners; Walker Ventures; WorldView Technology Partners, Inc.

12.0 Offers video game development tools and middlew are for gaming design

13-Feb-07 aniBoom, Ltd. Evergreen Venture Partners 4.5 Virtual animation studio that creates, produces, and distributes cartoons and animations

15-Aug-06 NaturalMotion Ltd. Benchmark Capital; Isis Innovation Limited na Develops and markets animation technologies for games and film post production

04-Jul-06 MoonScoop Group CDC Entreprises; FP Gestion 5.1 Creation, production and distribution of animated series

01-Jan-06 MoonScoop Group BNP Paribas Capital 14.2 Creation, production and distribution of animated series

06-Sep-05 CritterPix, Inc. Unidsclosed 1.4 Animation studio that combines original stories and computer generated entertainment. The company is based in San Rafael, California.

27-Apr-05 Illuminate Labs AB Industrifonden; Volvo Technology Transfer AB 1.0 Develops rendering, dynamic relighting and baking technology (tool for Maya)

10-Aug-04 Telekinesys Research (Havok)

Trinity Venture Capital na Provides interactive softw are and services for digital media creators in the games and movie industries

06-Oct-02 Telekinesys Research (Havok)

ICC Venture Capital; LTG Development Capital Ltd.; Trinity Venture Capital; Enterprise Ireland, Investment Arm; AIB Equity

6.9 Provides interactive softw are and services for digital media creators in the games and movie industries

02-Jul-02 Image Metrics, Ltd. Saffron Hill Ventures, Ltd.; MC Capital Europe; Close Investments Limited

4.4 Provides facial animation solutions to the entertainment industry

Source : GP Bullhound, Capital IQ

VIRTUAL REALITY

17

GP Bullhound Ltd. July 2009

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VIRTUAL REALITY

18

GP Bullhound Ltd. July 2009

Analyst Profiles

GP Bullhound is a research centric investment bank headquarted in London with offices

in San Francisco.

Hugh Campbell – Hugh is a co-founder of GP Bullhound. He previously worked

at Goldman Sachs as an equity research analyst and prior to that in corporate

finance at Citibank. He graduated from Pembroke College, Oxford University.

Alec Dafferner – Alec is a Partner and Head of GP Bullhound’s San Francisco office.

With over ten years of technology investment banking experience, Alec has executed

over 40 transactions for emerging growth companies in the U.S. and abroad, raising over

$10 billion in capital and advising on over $2.5 billion in mergers and acquisitions. Prior

to joining GP Bullhound, Alec was an Executive Director at UBS Investment Bank.

Remy Valette – Prior to GP Bullhound, Remy worked as an M&A analyst at Societe

Generale covering a number of industrial sectors. He holds a Masters in Corporate

Finance from EM Lyon Business School and also a Master in Applied Physics from Paris

VII University.

GP Bullhound Ltd, 52 Jermyn Street, London, SW1X 6LX http://www.gpbullhound.com, info@gpbullhound.com, +44 20 7101 7560

Disclaimer: Information contained in the document does not constitute an offer to buy or sell or the solicitation of any offer to buy or sell any securities. This document is made available for general information purposes only and is intended for institutional investors who have a high degree of financial sophistication and knowledge. This document and any of the products and information contained herein are not intended for the use of private investors in the UK. Although all reasonable care has been taken to ensure that the information contained in this document is accurate and current, no representation or warranty, express or implied, is made by GP Bullhound Ltd. as to its accuracy, completeness and currency. This report contains forward-looking statements, which involve risks and uncertainties. Actual results may differ significantly from the results described in the forward-looking statements. In particular, but without limiting the preceding sentences, you should be aware that statements of fact or opinion made, may not be up-to-date or may not represent the current opinion (whether public or confidential) of GP Bullhound Ltd. In addition, opinions and estimates are subject to change without notice. This report does not constitute a specific investment recommendation or advice upon which you should rely based upon, or irrespective of, your personal circumstances. Use of this document is not a substitute for obtaining proper investment advice from an authorized investment professional. Potential private investors are therefore urged to consult their own authorized investment professional before entering into any investment agreement. Past performance of securities is not necessarily a guide to future performance and the value of securities may fall as well as rise. In particular, investments in the technology sector can involve a high degree of risk and investors may not get back the full amount invested. GP Bullhound Ltd. is authorised and regulated by the Financial Services Authority in the United Kingdom.