Madacy Entertainment Income Fund reports fourth quarter and 2007 year-end results



    /NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR FOR DISSEMINATION IN
    THE U.S./

    MONTREAL, March 28 /CNW Telbec/ - Madacy Entertainment Income Fund
(TSX: MEG.UN) (the "Fund" or "Madacy") today announced financial and operating
results for its fourth quarter ("Fourth Quarter") and its fiscal year ended
December 31, 2007 ("Fiscal 2007 Year").

    
    - Reported net sales of $93.2 million in the Fiscal 2007 Year, an
      increase of 20.9% compared to the prior year (Fourth Quarter:
      $20.1 million, a decrease of 20.6%)

    - Reported EBITDA of $4.7 million in the Fiscal 2007 Year, a decrease of
      13.2% compared to the prior year (Fourth Quarter:
      $0.2 million, a decrease of 91.5%)

    "This has been a positive sales year for Madacy, a year during which we
rolled-out an innovative, new product line and witnessed an enthusiastic
response from both our customers and the end-consumer" said Hillel Frankel,
President of Madacy. "Overall, Madacy experienced a continued strong retail
performance of our products; an important achievement given the continued
overall decline of music industry sales. As a consequence, Madacy was able to
increase its overall unit sales market share and further position itself as
the dominant supplier of value music products to virtually all of the major
retailers of recorded music. However, Madacy's overall product mix, and
consequently its gross margin, continued to be challenged during the year as
the new product line, while generating significantly higher sales, generates a
lower gross margin percentage than Madacy's historic average. In addition,
lower margin product sourced from the Major Labels continues to be a
significant part of Madacy's overall business." said Mr. Frankel.
    "2007 was, from a sales perspective, a year of growth and customer
entrenchment" said Amos Alter, CEO and founder of Madacy. "Madacy continued to
increase its market share and take advantage, in a significant way, of a new
product line introduced in the second half of 2006. Most importantly, our
customers share the retail sales excitement created by this new product line
and are looking for ways to increase the exposure of this product at retail.
In addition, we continue to focus our energy on our licensing business and to
seek ways to grow this high margin area of business. We remain committed to
executing on our numerous opportunities and creating value for our
unitholders" said Mr. Alter.

    Review of Operations for the Fourth Quarter and Fiscal 2007 Year

    Madacy recorded net sales of $93.195 million in the Fiscal 2007 Year, an
increase of $16.086 million from the prior year. In the Fourth Quarter, Madacy
had net sales of $20.102 million, a decrease of $5.227 million from the
comparative period of the prior year.
    EBITDA was $4.720 million in the Fiscal 2007 Year, a decrease of
$0.715 million from the prior year. In the Fourth Quarter, EBITDA was
$0.237 million, a decrease of $2.542 million from the comparative period of
the prior year.
    Distributable Cash was $2.766 million in the Fiscal 2007 Year, an increase
of $0.181 million from the prior year. In the Fourth Quarter, Distributable
Cash was ($0.174) million, a decrease of $2.399 from the comparative period of
the prior year.

    Tax Information

    In 2007, the Fund paid the distribution in the amount of $0.09375 per unit
which had been declared in July 2006. The Fund has determined that 100% of
this distribution paid to unitholders will be an allocation of income for
Canadian residents.
    References to "EBITDA" are to earnings (loss) before interest, income
taxes, amortization, mark-to-market (unrealized) gains or losses on foreign
exchange and interest rate swap contracts, realized foreign exchange gains or
losses on foreign exchange contracts entered into to eliminate foreign
exchange exposure on distributions to unitholders and the share of net
earnings (loss) of the Exchangeable Units interest. EBITDA is not an earnings
measure recognized by GAAP and does not have a standardized meaning prescribed
by GAAP. Investors are cautioned that EBITDA should not replace net earnings
or loss (as determined in accordance with GAAP) as an indicator of the Fund's
performance, or cash flows from operating, investing and financing activities
as a measure of the Fund's liquidity and cash flows. Our method of calculating
EBITDA may differ from the methods used by other issuers. Therefore, our
EBITDA may not be comparable to similar measures presented by other issuers.

    Forward-Looking Statements

    Certain statements in this news release may contain forward-looking
statements, which reflect management's expectations regarding the future
growth, results of operations, performance and business prospects, and
opportunities of the Fund. Such forward-looking statements reflect
management's current beliefs and are based on information currently available
to us. Forward-looking statements involve significant risks and uncertainties.
A number of factors could cause actual results to differ materially from
results discussed in the forward-looking statements.

    About Madacy Entertainment Income Fund

    Madacy operates in the business of recorded music and home video products
with a primary focus on the development and marketing of budget and mid-priced
recorded music products. Madacy is also involved in the licensing of its
proprietary recordings. According to industry data, Madacy is the largest
independent budget and mid-priced music label in North America by number of
units sold. Madacy also develops and markets budget and mid-priced home video
products.
    Additional information relating to Madacy Entertainment Income Fund,
including Audited Financial Statements and the Management Discussion and
Analysis of the Fund as at December 31, 2007, is available at www.sedar.com
and on Madacy's website at www.madacy.com.

    The financial statements of the Fund are expressed in United States
dollars and are in accordance with Canadian GAAP.

    Attachments:
    ------------
    Selected Financial Information
    Consolidated Statements of Earnings
    Consolidated Balance Sheets
    Consolidated Statements of Cash Flows


    Exhibit 1
    MADACY ENTERTAINMENT INCOME FUND
    Selected Consolidated Financial Information

    (in thousands
     of U.S. dollars       Quarter       Quarter          Year          Year
     except where            ended         ended         ended         ended
     indicated)        December 31,  December 31,  December 31,  December 31,
                              2007          2006          2007          2006
    Statement of
     Earnings Data:
      Net Sales          $  20,102     $  25,329     $  93,195     $  77,109
      Cost of Sales         14,009        17,248        67,765        52,721
      Gross Margin           6,093         8,081        25,430        24,388
        Gross Margin %        30.3%         31.9%         27.3%         31.6%
      Selling, General
       and
       Administrative
       Expenses              6,092         5,300        21,448        19,468
      Net Earnings
       (Loss)               (1,201)      (23,036)         (750)      (23,899)
      EBITDA             $     237     $   2,779     $   4,720     $   5,435

    Distributable Cash
     and Distributions:
      Distributable
       Cash              $    (174)    $   2,225     $   2,766     $   2,585
      Cash
       Distributions
       on Fund Units     $       -     $       -     $       -     $   4,374
      Cash
       Distributions
       on Exchangeable
       Units             $       -     $       -     $       -     $     212

    Balance Sheet Data:
      Total Assets       $  78,901     $  78,994     $  78,901     $  78,994
      Current Portion
       of Long-term
       Debt              $       -     $  10,000     $       -     $  10,000
      Long-term Debt     $  12,870     $       -     $  12,870     $       -

    Per Unit information:
    Fund Units
    ----------
      Basic and Diluted
       Net Earnings
       (Loss)            $  (0.159)    $  (3.055)    $  (0.100)    $  (3.170)
      Distributable
       Cash per
       Fund Unit(1)      $  (0.023)    $   0.295     $   0.367     $   0.343
      Cash
       Distributions
       on Fund Units     $       -     $       -     $       -     $   0.580
      Distributable
       Cash per
       Fund Unit(2)     C$  (0.028)   C$   0.358    C$   0.445    C$   0.416
      Cash
       Distributions
       on Fund Units    C$       -    C$       -    C$       -    C$   0.656

    Exchangeable Units
    ------------------
      Distributable
       Cash per
       Exchangeable
       Unit(1,2)        C$       -    C$       -    C$       -    C$       -
      Cash
       Distributions
       on Exchangeable
       Units            C$       -    C$       -    C$       -    C$       -

    -----------------------------
    (1) Distributable Cash per Fund Unit and per Exchangeable Unit is derived
        by dividing the portion of Distributable Cash allocable to the Fund
        Units and to the Exchangeable Units by the aggregate number of issued
        Fund Units and Exchangeable Units, respectively.  On an annual basis,
        Distributable Cash is allocated between the Fund Units and the
        Exchangeable Units based on distributions effected with respect to
        the year in accordance with the terms of the subordination agreement.
        In 2007, Distributable Cash is being allocated in its entirety to the
        Fund Units as a result of the continuing suspension of distributions
        to holders of the Exchangeable Units.

    (2) Distributable Cash per Fund Unit and per Exchangeable Unit is
        presented in Canadian dollars for purposes of comparison to the
        Canadian dollar denominated cash distributions.  For this purpose,
        United States dollar denominated Distributable Cash is converted into
        Canadian dollars applying the exchange rate of the Fund's foreign
        exchange contracts relating to the period, which is C$1.2122/US$1.00.


    Exhibit 2

    MADACY ENTERTAINMENT INCOME FUND
    Consolidated Statements of Earnings

    (in thousands of U.S. dollars except per unit amounts)


                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                  ------------- -------------

    Net Sales                                       $   93,195    $   77,109
    Cost of Sales                                       67,765        52,721
                                                  ------------- -------------
    Gross Margin                                        25,430        24,388
                                                  ------------- -------------
    Expenses
      Selling, general & administrative                 21,448        19,468
      Interest on bank indebtedness                        706           976
      Interest on long-term debt                         1,162           658
      Loss (gain) on derivative financial
       instruments and foreign currency
       translation                                      (1,738)         (436)
      Amortization of property and equipment               548           533
      Amortization of master recordings                  1,319         1,259
      Amortization of deferred financing charges             -           142
      Amortization of intangible assets                  3,051         3,051
      Write-down of goodwill                                 -        35,336
                                                  ------------- -------------
                                                        26,496        60,987
                                                  ------------- -------------
    Earnings (Loss) Before Income Taxes
     and Exchangeable Units Interest                    (1,066)      (36,599)
    Income taxes                                            88           169
                                                  ------------- -------------
    Earnings (Loss) Before Exchangeable
     Units Interest                                     (1,154)      (36,768)
    Exchangeable Units interest                           (404)      (12,869)
                                                  ------------- -------------
    Net Earnings (Loss)                             $     (750)   $  (23,899)
                                                  ------------- -------------
                                                  ------------- -------------

    Basic and Diluted Net Earnings
     (Loss) per Fund Unit                           $  (0.0995)   $  (3.1696)
                                                  ------------- -------------
                                                  ------------- -------------

    Basic and Diluted Weighted Average
     Number of Fund Units Outstanding                7,540,000     7,540,000
                                                  ------------- -------------
                                                  ------------- -------------


    Exhibit 3

    MADACY ENTERTAINMENT INCOME FUND
    Consolidated Balance Sheets

    (in thousands of U.S. dollars)
                                                   December 31,  December 31,
                                                          2007          2006
                                                  ------------- -------------
    ASSETS
    Current
      Cash                                          $      850    $      224
      Accounts receivable                               28,610        29,243
      Inventories                                       18,829        14,769
      Prepaid expenses                                     850           627
      Unrealized gain on foreign exchange
       contracts                                         1,486           197
      Supplier Advances                                  1,249             -
                                                  ------------- -------------
                                                        51,874        45,060

    Supplier Advances                                        -         1,249
    Royalty Advances                                     1,317         2,126
    Property and Equipment                                 491           901
    Master Recordings
     net of accumulated amortization of
      $3,384 (2006: $2,065)                              7,434         8,477
    Deferred Financing Charges                               -            43
    Intangible Assets                                   17,785        20,836
    Unrealized Gain on Foreign Exchange
     Contracts                                               -           302
                                                  ------------- -------------
                                                    $   78,901    $   78,994
                                                  ------------- -------------
                                                  ------------- -------------
    LIABILITIES
    Current
      Bank indebtedness                             $    5,859    $    9,049
      Accounts payable and accrued liabilities          19,848        17,987
      Income taxes payable                                  87            79
      Distribution payable on Fund Units                     -           611
      Current portion of the long-term debt                  -        10,000
                                                  ------------- -------------
                                                        25,794        37,726

    Long-Term Debt                                      12,870             -
    Accrued Pension Liability                              448           351
                                                  ------------- -------------
                                                        39,112        38,077
                                                  ------------- -------------
    Exchangeable Units Interest                         14,290        14,694
                                                  ------------- -------------
    Commitments and Contingencies

    UNITHOLDERS' EQUITY
      Fund Units                                        54,990        54,990
      Accumulated other comprehensive income                82            56
      Retained Earnings (Deficit)                      (29,573)      (28,823)
                                                  ------------- -------------
                                                        25,499        26,223
                                                  ------------- -------------
                                                     $  78,901    $   78,994
                                                  ------------- -------------
                                                  ------------- -------------


    Exhibit 4

    MADACY ENTERTAINMENT INCOME FUND
    Consolidated Statements of Cash Flows

    (in thousands of U.S. dollars)

                                                    Year ended    Year ended
                                                   December 31,  December 31,
                                                          2007          2006
                                                  ------------- -------------
    Funds Provided (Used) -
     Operating Activities
    Net earnings (loss)                              $    (750)   $  (23,899)
    Add (deduct) items not involving cash:
      Amortization of property and equipment               548           533
      Amortization of master recordings                  1,319         1,259
      Amortization of deferred financing charges             -           142
      Amortization of intangible assets                  3,051         3,051
      Write-down of goodwill                                 -        35,336
      Recovery of royalty advances                         946           738
      Write-off of royalty advances                        509            95
      Implicit interest on long-term debt                  116             -
      Employee future benefits                              97            28
      Unrealized loss (gain) on derivative
       financial instruments and foreign
       currency translation                               (861)        1,393
      Exchangeable Units interest                         (404)      (12,869)
                                                  ------------- -------------
                                                         4,571         5,807
      Changes in non-cash operating
       elements of working capital                      (1,781)       (1,555)
                                                  ------------- -------------
                                                         2,790         4,252
                                                  ------------- -------------
    Investing Activities
      Royalty advances                                    (646)         (812)
      Additions to property and equipment                 (138)         (212)
      Additions to master recordings                      (276)         (761)
                                                  ------------- -------------
                                                        (1,060)       (1,785)
                                                  ------------- -------------
    Financing Activities
      Repayment of long-term debt                      (10,000)            -
      Repayment of bank indebtedness                    (7,500)        1,549
      Increase in long-term debt                        12,853             -
      Increase (decrease) in bank indebtedness           4,254             -
      Deferred financing charges                             -           (23)
      Distributions paid on Exchangeable Units               -          (212)
      Distributions paid on Fund Units                    (711)       (4,357)
                                                  ------------- -------------
                                                        (1,104)       (3,043)
                                                  ------------- -------------
    Increase (Decrease) in Cash                            626          (576)
    Cash - Beginning of Year                               224           800
                                                  ------------- -------------
    Cash - End of Year                               $     850    $      224
                                                  ------------- -------------
                                                  ------------- -------------
    

    The foregoing unaudited attachments contain extracts from the Audited
    Financial Statements.
    %SEDAR: 00021901E




For further information:

For further information: Hillel Frankel, President, Madacy Entertainment
Income Fund, (514) 341-5600 x333

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