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Terra Firma's commitment to EMI is total and we have invested more financially, both personally as individuals and as an organization, in EMI than any other company in our history.

HANDS ON AT EMI

Terra Firma Boss Speaks Out About Plans for Music Company
The following is the text of a letter sent to EMI employees by Terra Firma's Guy Hands:

Dear colleague,

Last Friday, I was on a panel on embracing change at the UK's annual major convention on broadcasting at which all the industry's major players were represented and which received some press coverage.

I made the point that Terra Firma's biggest successes over the years had been when we had bought those businesses in need of the most change and in sectors facing the biggest challenges and that EMI fits that model perfectly. I went on to say that Terra Firma's model transforms companies that have been in the past poorly managed and have lost their direction and EMI had to date not disappointed in its potential for transformation. However, this is not just an EMI issue as the recorded music industry as a whole has not positioned itself well for the changing environment over the last ten years and has failed to anticipate or adapt to the new market place.

With regard to EMI specifically, I believe that there has been too much management focus over the last seven years on a potential merger with Warner and on a continuous cost-cutting program which has failed to deliver a new business model and sadly has led to the loss of many talented people from the business. Terra Firma has inherited EMI past management's business plan which is currently being executed. However our future focus is to develop a plan that ensures that EMI's Recorded Music business, as an independent company (i.e. without a merger with Warner), can best serve its artists, the music industry, its customers and employees. Put simply, focusing alone on the production of multi-million selling albums cannot produce a sustainable business model. In developing the business plan for EMI Recorded Music, we intend initially to look at these areas:

* The relationship between EMI and its artists and what contractual relationship best serves those artists

* Digitalization and how EMI's recorded music business can embrace and benefit from it

* How EMI can be the most efficient partner in recorded music for artists who are likely to sell less than 200,000 copies of their albums

* How EMI can develop a closer and more valuable relationship with its customers

*What services and products EMI should be developing and delivering to its artists and customers

* How EMI can provide multi-million selling artists with a top quality service internationally.

In short, how EMI can be big enough to serve anyone but small enough to truly care.

So far, we have not spent a huge amount of time on analyzing what might be done with EMI's publishing business. As I said at the broadcaster's convention "if it ain't broke, don't fix it." However, Roger Faxon has a number of new initiatives which he is intending to roll out to ensure that EMI Publishing will continue to grow and prosper which Terra Firma supports.

In the near term, I am embarking on a roadshow over the next month in which I intend to meet as many of EMI's employees as possible. At those meetings, I will be happy to answer your questions. Additionally, feel free to email me in confidence on the following email ([email protected]) any ideas as to how we can make the business work better to the benefit of EMI, its staff and its artists.

In spite of a lack of clear direction and an extremely challenging market, EMI's artists and employees have delivered a huge number of successes in recent years and have much to be proud of. I continue to be impressed by your commitment and creativity and would simply ask that you continue to be focused on the work you are doing for EMI and its artists. Terra Firma's commitment to EMI is total and we have invested more financially, both personally as individuals and as an organization, in EMI than any other company in our history. We are absolutely committed to making EMI the world's most innovative and consumer-focused music company and the best home for musical talent. I look forward to working with you in order to achieve just that.

Guy Hands
Chairman

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