Raindance.tv PLC
Investment Memorandum containing an offer for subscription under the Enterprise Investment Scheme
Promoted by: Park Caledonia Capital Limited Hillgate House 26 Old Bailey London EC4M 7HW 020 7429 2777 Authorised and regulated by the Financial Services Authority
March 2008 1
Important Notice
The content of this document has been issued and approved by Park Caledonia Capital Limited. Reliance on this document for the purpose of engaging in any investment activity may expose an individual to a significant risk of losing all of the property or other assets invested. It may be difficult to sell your investment or to get accurate information about how much it is worth or how risky it is.
An investment in the Company is suitable only for financially sophisticated investors who are capable of evaluating the merits and risks of such investment, who do not require immediate liquidity for their investment and who have sufficient resources to bear any loss which might result from such investment.
If you are in any doubt about the action you should take or the contents of this document, you should contact your stockbroker, solicitor, accountant, bank manager or other professional adviser authorised under the Financial Services and Markets Act 2000, who specialises in advising on investment in shares and other securities.
Your attention is drawn to Part 6 of this document, which sets out certain risk factors relating to any investment in Ordinary Shares. All statements regarding the Company's business, financial position and prospects should be viewed in the light of the risk factors set out in Part 6 of this document.
It may be difficult to sell or realise your investment or to obtain reliable information about its value or other risks to which it is exposed and you may not get back the full amount invested. Investment in Raindance.tv PLC is intended to be for the long term and dividend income is unlikely to be payable. Past performance is not necessarily a guide to the future. Your investment can fluctuate in price or value.
This document does not constitute a prospectus as defined by the Prospectus Regulations 2005 ("the Regulations"), and has not been prepared in accordance with the requirements of the Regulations. Investors not within the United Kingdom should consider the contents of paragraph (d) of Appendix 2 of this document carefully. To the best of the knowledge and belief of the Directors of the Company who have taken all reasonable care to ensure that such is the case, the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
Park Caledonia Capital Limited is authorised and regulated by the Financial Services Authority (FSA) for the conduct of regulated activities in the UK (FSA registration number 402192). Registered Office: Erskine House 4 th Floor, 68-73 Queen Street, Edinburgh EH2 4NR. Registered in Scotland SC252132
Park Caledonia Capital Limited, Hillgate House, 26 Old Bailey, London EC4M 7HW.
March 2008 2 Raindance.tv PLC
(Incorporated in England and Wales under the Companies Act 1985 with registered number 6444502).
Investment Memorandum containing an offer for subscription
Promoted by Park Caledonia Capital Limited
Comprising
An offer of up to 1500000 Ordinary Shares of 1p each in the Company at £1.10 per share (with a minimum subscription of £5,000 per Investor)
Securities issued by the Company are not and will not be listed or dealt in on any stock exchange in the immediate term.
Park Caledonia Capital Limited, which is authorised and regulated by the Financial Services Authority for the conduct of regulated activities in the UK, is acting as Sponsor in connection with the arrangements set out in this document and is not acting for anyone else and will not be responsible to anyone other than Raindance.tv PLC for providing the protections offered to customers of Park Caledonia Capital Limited or for providing advice in respect of the contents of this document or the Offer. No liability is accepted by Park Caledonia Capital Limited for the accuracy of any information or opinions contained in or for the omission of any material information from this document, for which the Company and the Directors are solely responsible. An investment in the Company may not be suitable for all recipients of this document. A prospective investor should consider carefully whether an investment in the Company is suitable for them in the light of their personal circumstances and the financial resources available to them.
The minimum investment per Investor under the Offer is £5,000. Once the Minimum Subscription is raised, the Directors will proceed to allot Ordinary Shares even if the Offer is not subscribed in full.
An application has been submitted to HM Revenue & Customs for provisional approval, that the Company and its activities will qualify under the Enterprise Investment Scheme (as set out in the Income Tax Act 2007), based on information disclosed. Although provisional tax clearance has been applied for, there is no guarantee that either provisional or formal clearance will be achieved or that it will not be subsequently withdrawn. Investors are advised to take their own taxation advice.
Your attention is drawn to Part 6 of this document, which sets out certain risk factors relating to any investment in Ordinary Shares. All statements regarding the Company's business, financial position and prospects should be viewed in the light of the risk factors set out in Part 6 of this document.
Note: This document is distributed by Park Caledonia Capital Limited which is authorised and regulated by the Financial Services Authority for the conduct of regulated activities in the UK. This document has been prepared with the assistance of Raindance.tv PLC management and third party information. All statements of opinion and/or belief in this document and all views expressed regarding Raindance.tv PLC projections, forecasts and statements relating to expectations of future events are those of the Company and the Directors and no other person. No representation or warranty is made, or assurance given that such statements, views, projections or forecasts are correct or that Raindance.tv PLC's objectives will be achieved. The information and opinions stated are given for your assistance are not to be relied upon as authoritative and no responsibility is accepted by Park Caledonia and any of their respective
March 2008 3 directors, officers, employees or agents in respect thereof. Information is provided on a confidential basis. This document does not constitute an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not authorised or to anyone to whom it is unlawful to make such a solicitation.
Prospective investors should inform themselves of and observe all applicable laws and regulations including any taxation or exchange control legislation in the countries of their citizenship, residence, domicile or such other status as may be relevant in connection with any subscription of shares. An investment in the Company is suitable only for financially sophisticated investors who are capable of evaluating the merits and risks of such investment, who do not require immediate liquidity for their investment and who have sufficient resources to bear any loss which might result from such investment. If you are in doubt about the contents of this document, you should consult your stockbroker, bank manager, solicitor or other professional adviser. Park Caledonia Capital Limited is regulated and authorised by the Financial Services Authority in the United Kingdom for the conduct of regulated activities in the UK. Park Caledonia Capital Limited is entered on the FSA's Register with registration number 402192 and can be contacted at Hillgate House, 26 Old Bailey, London, EC4M 7HW.
The distribution of this document in certain jurisdictions may be restricted by law and such distribution could result in violation of the laws of such jurisdictions. In particular, there are restrictions on its distribution in the United States of America, Australia, the Republic of Ireland, the Republic of South Africa, Canada or Japan. Persons outside the United Kingdom into whose possession this document comes should inform themselves about and observe any restrictions and legal requirements in relation to the distribution of this document and their participation in any proposals as set out in this document. Any failure to comply with these requirements may constitute a violation of the laws of the relevant jurisdiction.
The information contained in this document is confidential. It is made available only on the basis that none of the information contained herein or subsequently supplied prior to or in connection with a proposed subscription or other acquisition for shares or securities in the Company may be published, reproduced, copied or disclosed to any person other than the recipient and its professional advisers, nor used for any purpose other than for the purpose specified above, and on the basis that the recipient shall, upon request, promptly return or destroy all material received from the Company (including without limitation this document) and associated documentation, without retaining any copies.
March 2008 4 Contents
Part I: Information about the Company
Part 2: Details of the Offer
Part 3: The Enterprise Investment Scheme
Part 5: Other information
Part 6: Risk factors
Part 7: Management and Administration
Part 8: Costs, Fees and Incentive Arrangements
Part 9: Realisation
Appendix I: Statutory and General Information
Appendix 2: Terms and Conditions of Application
Appendix 2A: Financial Promotion Order
Appendix 3: Guide to the Application Form
March 2008 5 Definitions and Terms
Act. The Companies Act 1985, as amended.
Articles. The articles of association of the Company, a summary of which is set out in Part Appendix I of this document.
Board or Directors. The board of directors of the Company, whose names appear on page 3.
The Company Raindance.tv PLC. This is also referred to as RDTV or Raindance TV
EIS or the Enterprise The Enterprise Investment Scheme as set out in the Taxes Investment Scheme. Act.
FSA. Financial Services Authority.
FSMA. Financial Services and Markets Act 2000.
Investors. Persons who subscribe for shares pursuant to the Offer.
Taxes Act. Income Tax Act 2007.
Maximum Subscription. The aggregate maximum subscription of £1,650,000 by Investors pursuant to the Offer.
Minimum Subscription. The aggregate minimum subscription of £250,000, by Investors pursuant to the Offer.
Offer or Offer. The arrangements whereby Investors will subscribe for Ordinary Shares in the Company under the Offer or the Second Offer as contained within this document.
Ordinary Shares or Shares. Ordinary shares of 0.01p each in the share capital of the Company.
Relevant Period or Three Year The period beginning on the date on which the Shares are Period. issued and ending three years after that date or three years after the commencement of the Company's trade, whichever is later.
Park Caledonia. Park Caledonia Capital Limited, which is authorised and regulated by the FSA for the conduct of regulated activities in the United Kingdom.
Venture Capital Trust. A venture capital trust as defined in Part 6 of the Taxes Act.
March 2008 6
Directors and Advisers
Directors Chris Auty Suzanne Ballantyne Andre Burgess Keith Greenhalgh Andrew Williams
Secretary Harmile Nominees
Registered Office Harmile House, 54 St Marys Lane, Upminster Essex, RM14 2QT
Promoter Park Caledonia Capital Limited, registered office: Erskine House, 4 th Floor, 68-73 Queen Street, Edinburgh EH2 4NR
Auditors Tony Robinson, JPB Harris, Harmile House, 54 St Marys Lane, Upminster Essex, RM14 2QT
Taxation Advisors to the Vic Miles, JPB Harris, Harmile House, 54 St Marys Lane, Company Upminster Essex, RM14 2QT
Solicitors to the Offer Taylor Wessing, 50 Victoria Embankment, London EC4Y 0DX
March 2008 7 Part 1: Information about the Company
Raindance.tv PLC intends to operate within the restrictions laid down by the Enterprise Investment Scheme rules. The Company is seeking to raise funds from Investors who are attracted by the objectives of the Company and by the tax reliefs potentially available.
Being able to watch the movies you want, when you want and where you want is becoming a reality
Increasingly it is the case that if someone has a computer or laptop with a good broadband connection they can have access to a wide and growing range of movies and television shows, delivered in good enough quality to be similar to or the same as a television experience. At the same time the advent of services such as YouTube, Joost, MSN Video, Dailymotion, Babelgum, Blinkx, Vuze and others is increasingly enabling viewers to seek and find programming that is of interest to them. This is resulting in the emergence among certain demographic groups of smaller and more segmented audiences online who are increasingly more able to exercise their preferences in taste and choice and who are spending less time proportionately with traditional broadcast and distribution media. Furthermore revenue models for the consumption of online video content which are both accessible and transparent to the consumer have now emerged and are becoming widespread.
What this adds up to is a new and more accessible way for film makers to have their films distributed around the world, while offering consumers a wider range of choice and cheaper access to the films they like.
Raindance.tv intends to participate in this opportunity by assembling a broad, deep and regularly refreshed range of high-quality, independently-produced, feature and short films and offering this to consumers: this combines two of the three most popular leisure activities amongst Europeans, watching films and surfing the Internet.
It is Raindance.tv’s intention to become an online focus for both independent film makers and their audiences from all over the world.
Raindance.tv went live with its first services on Joost (see below) in September 2007 and since then has launched channels of content on Vuze, Blinkx, Dailymotion, Blinkbox, Jalipo and Nokia video centre. Channels are due to launch on ZVUE, Babelgum, and Raindance.tv is confident of launching on FilmNight’s mobile portal on T-mobile in Q2 2008. Discussions with 15 further distribution outlets are underway .
Yvette Alberdingk Thijm, executive vice president, content strategy and acquisition for Joost stated at the launch of Raindance.tv on their service:
“We are delighted to partner with Raindance.TV and look forward to offering our viewers a channel devoted to some of the best independent film making. With a broad mix of high quality content, including the eagerly awaited Gingerbread Man, we’re confident that there will be something for everybody on the Raindance.tv channel.”
The Marketplace
March 2008 8 Raindance.tv is focused on distribution via the internet and via mobile. The broadband entertainment sector is in a period of significant growth:
• Worldwide residential broadband connections is projected to reach 584m by 2011. Internet penetration already at 15.7% of the world’s population. • iSuppli predicted that the value of the global IPTV market would grow from less than $1 billion in 2006 to $26 billion by 2010. This excludes figures from advertising (expected to be worth $1 billion a year by 2010) or value-added TV services. • More than 2 billion people now have mobile telephones worldwide. Predicted to reach three billion before 2011. • By 2012, an estimated 120 million mobile users will be accessing video clips (including sports, movies and adult entertainment), generating revenues of nearly $12 billion. • Advertisers are already spending more online than on radio (£582m), outdoor-poster sites (£932.5m) and in business magazines (£1 billion). Online grew by 41% last year, and the IAB is forecasting the sector to attract at least another £500m in the UK in 2007. • Global spending on internet advertising increased from $18.7 million in 2005 to $31.2 million last year, according to ZenithOptimedia, the media-buying agency. • Global mobile advertising and text marketing revenues will top £11 billion by 2012. • Surfing the Internet is the third most popular leisure activity amongst Europeans after watching films and listening to music.
The Service
The service is centred on Raindance.tv’s own broadband website, the first phase of which is intended to launch in April 2008. It is intended that: • Users will be able to access short films and feature films, which will either be offered for free with advertising, or on a pay per view basis, for certain premium content. • Raindance.tv users can build networks with others in the film-making community and share information with their peers, as well as gain access to online tutorials and other information for film-makers. • Users can submit their own films to be vetted with the best of these being accepted into Raindance.tv.
Raindance.tv intends to distribute packages of content via third party services, including Dailymotion, Joost, Blinkx, Vuze and mobile networks. • These packages will be regularly refreshed and tailored to the requirements of each partner (e.g. for mobile Raindance.tv will show shorter films and extracts only).
Future plans include syndicating the brand to local partners who can manage their own localised channels of film content.
It is the directors’ intention that this structure will enable Raindance.tv to maintain a pervasive presence in this sector, reaching consumers through numerous touch points.
March 2008 9
What makes Raindance.tv different?
New services or “platforms” delivering video content over the internet to viewers are emerging regularly. Of these services, Raindance.tv is appealing and competitive for the following reasons:
1. Raindance.tv has been formed out of Raindance Festivals Limited. 16 years of experience and brand building has made Raindance an important brand in the British independent film sector and to grass roots film makers worldwide • Formed in 1992, it has always aimed to bridge the gap between independent filmmakers and audiences desperate for new and exciting cinema outside of Hollywood. • Raindance has always aimed to take an innovative approach to filmmaking and programming which continues with its 15th anniversary festival in 2007 featuring 180 shorts and features plus special events. • Raindance created the British Independent Film Awards ten years ago, now considered by the British film industry to be one of the most important film events in the country. • In 2003, Raindance created and launched the Nokia Shorts film competition which ran for four years, which received hundreds of high quality submissions and garnered significant publicity for Nokia.
2. Off-line presence: The Raindance Film Festival and the British Independent Film Awards have increased in size and public awareness year on year. In addition, throughout the year Raindance runs courses for aspiring film makers
March 2008 10 3. Content: After 15 years of screening independent – and professionally produced - shorts, features and documentaries from around the world, Raindance.tv receives over 1500 submissions a year. This is enabling Raindance.tv to become an aggregator - which means filmmakers can send in films, and if they are good enough, Raindance.tv in turn licenses them and distributes them, under the Raindance.tv banner to an increasing number of IPTV and mobile networks around the world. For film makers, there is the opportunity that their films may get seen by a wider audience than they are currently reaching and that they may make money on the viewings of their films. Raindance.tv’s access into the global film- making community gives it a significant advantage in accessing and distributing the best of independent film. At the same time, many of the new ‘IPTV’ services are investing heavily in the roll out of their services and have a strong demand for quality content packages such as those which Raindance.tv provides.
4. Experienced team: the board and founding shareholders of Raindance.tv PLC has been formed by people with a combined 57 years in film production and distribution and 22 years in new media. Among other activities the principals behind Raindance.tv teamed up in 2003 to create the Nokia Shorts, a short film competition for mobile phones which ran for four years, sponsored by Nokia.
5. Industry support: internationally recognised film makers such as Mike Leigh and Ewan MacGregor are strong supporters and advocates of Raindance. Raindance has helped launch many successful film careers in the global film industry, Chris Nolan, Guy Ritchie and Matthew Vaughan to name three. Raindance has through its various activities worked with a large percentage of the stars, writers, directors and producers in the country.
6. A multi platform approach: as well as tying up deals with IPTV networks which are available to a worldwide audience via the ‘fixed line’ internet, Raindance.tv is concluding in deals with mobile service providers and handset manufacturers to offer video content over mobile networks. This increases the reach and the types of audience for Raindance.tv
7. Raindance.tv has access to Raindance festival’s existing database of over 24,100 members and recipients of the newsletter.
Company Objective
Raindance.tv intends to become the leading broadband Independent Film channel in the UK in 2008/9 and seeks to establish itself globally by the end of 2009.
Raindance.tv intends to attain a leading market position in order to achieve maximum leverage with content suppliers and online distribution channels. This requires investment in marketing, technology and human resources to enable it to accelerate its business activities.
Operation strategy
Raindance.tv’s strategy is to utilise its existing relationships with content owners, the grass roots film making community and the emerging digital distribution channels to become:
An essential supplier of content to IPTV platforms
A preferred choice for independent film makers, both established and grass-roots, who are looking to exploit both their long tail of product, get a wider audience for their creations or simply kick start their careers.
An essential viewing destination for anyone who wants something innovative and high quality – i.e. not just You Tube or Spiderman 3.
An attractive destination for sponsors and promotional partners.
March 2008 11
A helpful glossary…..
Every business has buzz words and definitions. Here is a handy introduction to some of the words used in the new media world:
Ad-funded: a business model such as a dot com which gives free access to its information and depends on the sale of advertising space for revenue
Aggregator: A company or body that collects and distributes content, such as Raindance.tv
Fixed Line: Content delivered over a fixed line, i.e.: telephone or cable.
IPTV: television content that, instead of being delivered through traditional broadcast and cable formats, is received by the viewer through the technologies used for computer networks
Long Tail: used to describe certain business and economic models such as Amazon.com or Netflix. These businesses with distribution power can sell a greater volume of otherwise hard to find items at small volumes than of popular items at large volumes.
Peer-to-peer: A system for delivering movies on the internet that relies on the computing power of local area networks, and not the expensive server-based systems.
Platform: a technical means of delivering content. For example: television and radio are two platforms.
Web 2.0: refers to a perceived second generation of web-based communities and hosted services — such as social-networking sites, wikis and folksonomies — which aim to facilitate collaboration and sharing between users.
Board of Directors
Chris Auty
March 2008 12 Chris Auty started his professional career as a film journalist, running the film department of Time Out from 1979-1981. From 1984-85 he was European Editor of The Hollywood Reporter.
In 1985, he launched a UK film distribution company (Oasis), releasing some 45 films over the next five years, as well as acquiring and re-launching two of Britain’s best-known art house cinemas (the Gate in London, and Cameo in Edinburgh). In 1989 he acted as world sales agent for Peter Greenaway’s THE COOK, THE THIEF, HIS WIFE AND HER LOVER.
From 1991–99, he was Managing Director of Jeremy Thomas’ Recorded Picture Company (RPC) and served as a producer on several of its films, as well as initiating the creation of RPC’s own international sales company, Hanway.
In 1999, he became a founding Board Member of the UK Film Council – the government- backed body responsible for all public funding of film in the UK, with an annual budget of over £50m.
From mid 1999, Chris Auty became CEO of the Virgin-backed Film Consortium, a lottery franchise company. In October 2001, Chris also became Chief Executive of the group incorporating The Film Consortium -– The Works Media Group plc (an AIM-listed company). Under his leadership the company developed its international rights business, and in 2005 successfully launched a new UK distribution subsidiary, which subsequently secured a home entertainment output deal with Universal Pictures UK.
Having completed the re-structuring of The Works into a distribution-led business, Chris stood down as Chief Executive in 2007. Since then he has been a visiting lecturer at the National Film and Television School, while working on the launch of RDTV.
Andre Burgess Experience of the digital media ecosystem is essential to the success of Raindance.tv. For the past nine years Andre has specialized in working with content owners, brands and media companies, including Aardman Animations, AETN, Alliance Atlantis, The Cousteau Society, Jongleurs Comedy, Universal Pictures, Walker Books, and Working Title Films to exploit emerging digital platforms. Areas he covers include strategic planning, product and proposition development, marketing, licensing and distribution, contract negotiation and rights management.
His experience includes the development and delivery of broadband interactive content services across multiple platforms and negotiating and managing content licenses for new digital platforms. Before founding Crucible Media, the digital consultancy, he worked at Three UK, the 3rd Generation mobile operator, where he managed the end-to-end development of Three’s entertainment services, including Games and personalised Multi Media content, as well as establishing and delivering partnerships with several leading content owners; and ntl, where he managed the development of a multi-platform entertainment services for the interactive division.
Before entering the world of new media, Andre started his career in Los Angeles, where he was an agent at United Talent Agency and subsequently set up a film production and talent management company in London, International Arts Entertainment. Andre also produced the feature film, E=MC2, starring Jeremy Piven and Richard Attenborough.
Keith Greenhalgh
March 2008 13 Keith qualified as a Chartered Accountant with Solomon Hare in 1991. Whilst training, his focus was on corporate finance and business administration. Subsequently he moved to New Zealand and into the media industry, working for The Radio Network (owned by Clear Channel and the Independent Media Group) as Operations Director (Central) where he ran 22 radio stations and the National Sports Network.
After three years overseas Keith returned to the UK and joined Capital Radio Group PLC where he undertook a number of roles and then became Finance Director for Capital Advertising, and Finance and Commercial Director for Capital Interactive, Capital’s online division (the first company to launch licensed narrow-cast radio stations and personalised radio in the UK).
After leaving Capital he joined 3 (Hutchinson 3G) as Director of Media Business Development, where he was responsible for the negotiation and partner management of all media rights contracts and relationships for 3 UK, and for all of the International deals signed by the group for its 11 territories spread across four continents.
For the past four years he has been working as a consultant on a number of projects, the most prominent being for IE Music on Robbiewilliams.com, and was responsible for the launch and marketing of the new subscription site in 2004. In the first year the site gained over 150,000 subscribers and sold over 500,000 tickets to the Robbie Williams tour.
Keith is a founder shareholder and director of Chapter Media Ltd, a media and technology consultancy company, and sits on the board of several digital technology companies as an adviser.
Andrew Williams Branding, promotion and content production are central to the success of Raindance.tv. For the past six years Andrew has worked for broadcasters, distributors and entertainment brands including The BBC, The Walt Disney Company, Aardman Animations, Flextech, RDF and Turner Entertainment. His work covers branding, commercials, programme production and development. He has won numerous national and international awards for his work in the fields of television branding, direction and producing. In 2004 he collected a Children’s BAFTA in the Best Animated Series Category; his other awards include a Gold Promax/BDA award and a Gold New York Festival Awards.
Andrew has worked extensively with the BBC to develop a cross-platform interactive drama series.
Before co-founding Dandy Productions in 2002, he worked as a Senior Producer for Creative Services at the Walt Disney Company, working on Channel branding and promotions. He was a producer on The Disney Channel Kids Awards 2000 for which year it collected a BAFTA viewers’ choice award.
Suzanne Ballantyne Sourcing film content and programming the release of this content is another fundamental element of the business, which is overseen by Suzanne. British born Suzanne was raised in Toronto. She started out as a script reader and analyst of over 500 screenplays before moving on to form Re:Vision, a company providing scouting services for acquisition executives and programmers. In 1995 she joined Raindance Film Festival where she is now Senior Programmer, supervising the submission process and the selection of each film which screens at the festival from the thousands received each year. Her eye for films has catapulted Raindance into one of the leading independent film festivals in Europe and she is regularly requested to serve as a juror at other festivals. In 1998 she co-founded the British Independent Film Awards, and is currently a member of the board.
Capital growth
March 2008 14 In order to build out its plan, the RDTV financial model assumes the following drivers of revenue: • Ad funded consumption of video content online and via mobile • Paid for (premium) consumption of video content online and via mobile • Sponsorship of the Raindance.tv site and channels • Subscription fees to Raindance.tv services (a mix of online and off line) • Sales of Raindance training packages, DVD’s and other film-related products. • As traffic to the Raindance.tv site and its various channels increases so does revenue from all the above areas grow.
Financial summary
A detailed 5 year financial plan with accompanying assumptions is available, along with the business’ operational and marketing plans.
5 Years Total Revenues 26,463,059 Total Cost of Ownership 15,945,271 NPV of Project Cash Flows 5,574,177
5 Year Amounts in £000's year 1 year 2 year 3 year 4 year 5 Total
Total Revenues 223,421 1,301,437 4,113,880 8,299,956 12,524,365 26,463,059 Direct and Operating Costs 866,013 1,504,558 2,449,238 3,986,091 5,558,570 14,364,471 Profit before tax -642,593 -203,121 1,664,642 4,313,864 6,965,796 12,098,588 Depreciation 68,080 120,500 180,720 245,940 316,160 931,400 Working capital -61,263 -21,191 -25,160 16,397 -3,379 -94,595 Contribution -635,775 -103,812 1,820,202 4,576,202 7,278,577 12,935,393 0 Capital Expenditure 340,400 262,100 301,100 326,100 351,100 1,580,800 Equity Investment 0 0 0 0 0 Cash Flow excluding tax -976,175 -365,912 1,519,102 4,250,102 6,927,477 11,354,593
Cumulated Cash-Flow -976,175 -1,342,087 177,015 4,427,116 11,354,593
NPV -976,175 -304,926 1,054,932 2,459,550 3,340,797 5,574,177
NPV = 20.0% discount factor 1 0.83333333 0.69444444 0.5787037 0.48225309
By Year 5, RDTV’s revenues are projected to comprise:
Ad funded shorts £4,988,964 39.83%
March 2008 15 Ad funded features £658,219 5.26%
Pay per view shorts* £947,668 7.57%
Pay per view features* £662,628 5.29%
Sponsorship £340,000 2.71%
Premium Subscription £3,319,669 26.51%
Site advertising £1,164,717 9.3%
e-commerce £442,501 3.53%
TOTAL £12,524,365 100%
* Includes revenues from mobile PPV and content subscription services. RDTV projects operating margins of approximately 56% and net income before taxes of £7m and positive cash flows in excess of £5.5m for that year. RDTV estimates that it will be cash flow positive by the third quarter of year 3 and profitable by the end of that year Total capital investment at that point is expected to be £1.4m Tax liabilities are projected as follows: Year 3: £208,659 Year 4: £1,210,000 Year 5: £1,957,280
At the end of the five-year horizon, both the business and the industry remain in the growth phase and RDTV will continue to invest in marketing, new service upgrades and customer and content acquisition.
With respect to costs, the most significant expenditures in the model are the costs associated with:
• Staff overhead for service, marketing, distribution and licensing operations • Marketing costs to support audience traffic [and customer retention] • Content production and encoding costs • Service development and management
For pay outs to third party content owners, the standard model is 30% distribution fee then a 50/50 split. As a starter incentive we have offered some film makers a 15% dist fee and 60/50 split in their favour.
For premium subscription to the film-makers network, the revenues are shared with Raindance Festivals as both Raindance TV and Raindance Festivals are supplying services into the premium subscription.
It is intended that fixed costs are deducted off the top of the subscription service which are distributed to both parties according to their pre-agreed costs. This is capped at 25% of the premium subscription fee. The net remaining is split 35% to Raindance festivals and the rest to Raindance.tv.
For e-commerce, it is intended that Raindance.tv will receive a 30% (approx.) commission for re-selling Raindance training courses and will receive a minimum 4% affiliate commission for DVD sales. Part 2: Details of the Offer
March 2008 16
The Offer
The Offer comprises an offer of up to 1,500000 Ordinary Shares at the Offer Price with the aggregate consideration to be received by the Company limited to a maximum of £1650000. Applications must be made for a minimum of 4,546 Ordinary Shares under the Offer, which equates to £5,000.60 and thereafter in multiples of 500 Ordinary Shares
Minimum Investment
The minimum investment under the Offer is £5,000.60. The maximum investment (per Investor) on which EIS income tax relief is available is £400,000 in the 2007/2008 tax year. There is no limit on the amount on which CGT deferral relief is available.
Maximum Investment
The maximum investment under the Offer is £1,000,000.10.
Minimum Subscription
The Minimum Subscription that must be raised under the Offer is £250,000. Subject to receipt of the Minimum Subscription, Ordinary Shares may be allotted and issued at any time according to the receipt of application forms. The Directors reserve the right to reject any application in whole or part or to scale down any application on a "first come, first served" basis within the Offer.
The Directors also reserve the right, should it be necessary, to allocate applications between the Offer as they see fit, subject to the Minimum Investment for each Offer being applied for by an Investor.
After the 2007 Finance Act receives Royal Assent a maximum of 1,818,000 Shares may be issued with a view to qualifying under the EIS.
Offer Costs and Commission
The issue costs in relation to the Offer have been fixed at 3.95 per cent of the funds raised pursuant to the Offer. Included in the issue costs is introductory commission, usually at a rate of 2.5 per cent of the funds raised pursuant to the Offer and is payable to authorised financial advisers who introduce successful applicants. Further details are set out in Part 8 of this document.
Closing Date
The Offer will close on the earlier of Maximum Subscription or 3 rd October 2008 unless extended. The subscription monies will be kept in a separate bank account and, if the Minimum Subscription has not been achieved by 3rd October 2008, the Offer will be withdrawn and the subscription monies will be refunded without interest within 14 days of the Offer closing or being withdrawn and no commission will be payable to introducers of potential investors. The attention of applicants is drawn to Part 3 of this document on page 18 headed 'Tax Relief For Investors" which sets out more details on UK tax and tax reliefs.
March 2008 17 Part 3: Tax Relief for Investors
The Enterprise Investment Scheme
The Company intends to operate within the restrictions laid down by the EIS legislation so that the EIS taxation reliefs should be potentially available to subscribers.
The Company has submitted an application for provisional approval to HM Revenue & Customs that its activities will qualify under EIS legislation. There is no guarantee that either provisional or formal clearance will be achieved or that it will not be subsequently withdrawn.
To obtain the tax reliefs described below it is necessary to subscribe in cash for fully paid-up new ordinary shares in a qualifying company and claim the relief. Please note that the value of any relief depends on your individual circumstances.
The summary below only gives a brief outline of how the tax reliefs are given assuming the Investor is a 40 per cent tax payer. It does not set out all the rules which must be met by the Investor and the Company. The summary is intended only as a general guide and is not a substitute for the Investor obtaining professional tax advice before applying for shares. EIS relief as it currently stands has four elements:
1. EIS Income Tax Relief
Provided a qualifying investment is held for three years from the date of issue or from when the trade commences, if later, individuals may obtain income tax relief of up to £80,000 on the amount subscribed for shares in the tax year 2007/2008 (corresponding to the maximum investment of £400,000 in the tax year 2007/2008) in one or more qualifying companies provided they are not connected with the issuing company.
Husbands and wives can each subscribe up to £400,000 per tax year.
The relief is given at the lower rate of tax (currently 20 per cent.) and is given against (but cannot exceed) the individual's income tax liability for the tax year in which the shares are issued.
Where an individual subscribes for qualifying shares before 6 October in a tax year, a claim may be made to carry back one half of the amount subscribed to the previous tax year, subject to a maximum of £50,000.
2. Exemption from CGT
Any capital gains realised on disposal after three years from the date of issue of the shares or the date the Company started trading (if later) on which EIS income tax relief has been given and not withdrawn are tax free.
3. Loss Relief Against Income or Gains
Tax relief is available where there is a loss on a disposal at any time of shares on which EIS income tax relief (see i above) has been given and not withdrawn, provided the relevant requirements of the legislation are satisfied.
The amount of the loss (after deducting any amount of any income tax relief which remains attributable to the shares sold) can be set against the individual's gains or taxable income in the tax year in which the disposal occurs, or against taxable income of the previous year. Any excess would be carried forward as a capital loss to be set off against future capital gains.
March 2008 18 4. CGT Deferral
To the extent to which a UK resident Investor (an individual or in some cases a trustee) subscribes for qualifying shares, he can claim to defer paying tax on all or part of a chargeable gain arising on the disposal of any asset. Although there is an annual investment limit of £400,000 for EIS income tax relief and the exemption from CGT there is no limit on the amount of gains that can be deferred. The subscription must be made within one year before or three years after the date of the disposal which gives rise to the gain or the date when a previously deferred gain crystallises. The gain is deferred until there is a chargeable event such as a disposal of shares or breach of the EIS rules. The Investor must be UK resident or ordinarily resident for tax purposes both at the time of the original gain and at the time the shares are issued, and generally must not become non-resident for three years after reinvestment or the date the trade commenced, if later.
It was announced in the 2007 Budget that an investment limit of £2 million would be placed on amounts that a company could receive under the EIS in the 12 month period prior to shares being issued. If this limit is exceeded, none of the shares within the issue which caused the investment limit to be breached would qualify for EIS relief. It was announced that this limit would apply to shares issued after the date on which the 2007 Finance Bill receives Royal Assent.
Subject to the above, please note that the taxation levels, bases and reliefs described in this document are based on existing law and what is understood to be current HM Revenue & Customs practice, but these may be subject to change.
An application has been submitted to HM Revenue & Customs for provisional approval, that the Company and its activities will qualify under the EIS, based on information disclosed.
Following the issue of EIS Shares and after the Company has traded for four months, the Company can apply to HM Revenue & Customs for authorisation to issue tax relief certificates (Form EIS 3) to Investors. Although the time taken by HM Revenue Customs to grant authorisation cannot be controlled by the Company, every effort will be made by the Directors to expedite matters and, as soon as authorisation is given, EIS 3 certificates will be distributed to Investors. Investors should then submit the EIS 3 certificates to the Inspector of Taxes dealing with their own affairs if they wish to claim their relief before their 2007/2008 tax return is submitted.
Where the Investor wishes to treat some of the shares as issued in 2006/07 (as referred to above), it would be necessary to make a separate claim using the EIS 3 certificate. This would amend the tax return for 2006/07.
Inheritance Tax and Business Property Relief
Provided a shareholder has owned shares in a qualifying unquoted trading company for at least two years and certain conditions are met at the time of transfer, 100 per cent business asset relief is available. This reduces the inheritance tax liability on the transfer to nil.
Please note that this part is only a condensed summary of the tax rules and should not be construed as constituting advice, which a potential investor should obtain from his or her own investment or taxation adviser before applying for shares.
March 2008 19 Part 5: Other information
Dividend Policy
The Company's objective is to seek to achieve capital growth which, under the exemption from CGT for EIS shares (as referred to above), should not be subject to capital gains tax. Therefore, the Directors do not currently anticipate paying dividends.
Part 6: Risk Factors
Prospective Investors should be aware that the value of the Shares, which will be unquoted, can fluctuate. In addition, there is no certainty that Investors will get back the full amount which they invest. Having regard to the Company's investment strategy and the tax reliefs available, the Ordinary Shares should be considered as a medium to long term investment.
An investment in Shares is subject to a number of risks. Before making any investment decision, prospective Investors should consider carefully the factors and risks attaching to an investment in Shares, together with all other information contained in this document, including, in particular, the risk factors described below. The information below does not purport to be exhaustive. Additional risks and uncertainties not presently known to the Company, or that the Company currently deems immaterial, may also have an adverse effect on its business. Prospective Investors should consider carefully whether an investment in Shares is suitable for them in the knowledge of the information in this document and their personal circumstances. Prospective Investors should very carefully review the risks associated with investing in Shares with their professional advisers. The Directors believe that the principal risk factors relevant to investing in the Company are:
Risks relating to the Company
The value of Shares may go up or down. An Investor in the Company may not get back the full amount invested; consequently, they may lose some or all of the funds invested. There is no market, nor is there intended to be a market for the Shares at the present time for the foreseeable future. As such, the Shares will not be readily realisable unless the Directors decide otherwise.
There is no guarantee that the Company's investment strategy will be successful. There can be no guarantee that consumer take up will continue on the growth rates which are projected or an alternative distribution platform(s) of content similar to that supplied by the Company will prove more successful.
Risks relating to the EIS qualifying status of the Company
Investors are strongly advised to seek professional advice in relation to the taxation implications of an investment in an EIS qualifying company. There are circumstances in which an Investor could cease to qualify for the taxation reliefs offered by the EIS. In addition, an Investor could cease to qualify for the EIS reliefs if they received value from the Company during the period beginning one year before the Shares are issued and ending three years after the date of issue or from when the Company commences trading, if later.
A sale of Shares by Investors within the three years after the date of issue (or from when the Company commences trading, if later) will result in EIS Income Tax Relief available upon investment of those Shares becoming repayable to HM Revenue & Customs, and any gains being subject to capital gains tax (both the gain on the disposal of the Shares and any gain deferred under CGT Deferral Relief).
March 2008 20 If the Company ceases to carry on the business outlined in this document during the three years after the date of issue (or from when the Company commences trading, if later), this could prejudice its qualifying status under the EIS. A failure to meet the qualifying requirements for an EIS could result in:
Investors being required to repay any EIS Income Tax Relief received on subscription for Shares and interest on the same; a liability to capital gains tax on a disposal of the Shares; and any deferred gain crystallising.
Although the Company is applying for provisional approval from HM Revenue Customs for the Company and its activities to qualify under the EIS, there is no guarantee that either provisional or formal EIS clearance will be agreed or that such agreement will not be subsequently withdrawn. In those circumstances, subscription monies will not be returned to Investors. Returns to Investors will be lower in the event that the Company fails to obtain EIS tax relief or if it is subsequently withdrawn, in which case the EIS Income Tax Relief and CGT Deferral Relief referred to above would not be granted.
Under EIS rules the Company is required to have employed 80 per cent. of its net funds (after the deduction of issue costs in relation to the Offer) within 12 months of the date that the Shares are issued, and the remaining 20 per cent within the subsequent 12 months. If the Company fails to employ this level of funds within the required deadlines, the Company would be in breach of the EIS regulations and tax relief may be withdrawn from investors.
Amendments to the EIS legislation were announced in the 2007 Budget which are intended to come into force from the date that Royal Assent is granted. If the proposed amendments differ from those announced in the Budget when they become law, it could prevent EIS relief from being available.
It is possible for Investors to lose their EIS tax reliefs by taking or not taking certain steps; Investors are advised to take appropriate independent professional advice on the tax aspects of their investment.
Risks relating to the trading nature of the Company
The Company will be subject to the trading risks associated with the operation of an internet based company. The marketplace for IPTV and similar content related digital services is still evolving rapidly but as yet the true value of such a market has not been established and this may not emerge in the foreseeable future.
The Audiovisual Media Services Directive was adopted by the European Union in November 2007. Member States will then have two years to implement it. The Raindance.tv service will be classified as an audiovisual media service under this Directive. Whilst this may involve additional compliance costs, it is unlikely that the adoption of the Directive will have a material adverse effect on the operations of the Raindance.tv business. However no assurance can be given that this will be the case; as member states are free to implement stricter rules than those rules that are set out in the Directive.
Matters arising from licensing and distribution of the content that are outside the reasonable control of the Company may delay or cause some of the intended activities of the Company to be curtailed
The emergence of other operators in the same marketplace may impose restraints on the Company's ability to meet its financial and other targets.
The performance of the Company may be affected from time to time by factors outside the control of the Directors, such as a general slow down in the growth of the audiences for internet television or the adverse effects on advertising revenue from a general downturn in the global or regional economies.
March 2008 21
The past performance and experience of the management team are not a guide to the future performance of the Company.
Whether or not the Company is profitable and regardless of how much is raised under the Offer (subject to receipt of the Minimum Subscription), the Company is required to meet certain fixed costs, including administrative and operating expenses and advisory fees.
General risks
The information in this document is based upon current taxation and other legislation and any changes in the legislation or in the levels and basis of, and reliefs from, taxation may affect the value of an investment in the Company.
The subscription for Shares and the performance of Shares will not be covered by the Financial Services Compensation Scheme or by any other compensation scheme.
If the Minimum Subscription is not reached by 3rd October 2008 no Shares will be issued and Investors' monies will be returned without interest.
The investment described in this document may not be suitable for all investors. Investors are accordingly advised to consult an investment adviser authorised under the Financial Services and Markets Act 2000 and an appropriately qualified taxation adviser, prior to investing.
March 2008 22 Part 7: Management and Administration
Responsibilities of the Board: a. Initial Responsibilities
It is the responsibility of the Board to complete the hiring of the management team and agree a final budget. Day to day liaison with investors and shareholders will be managed by Park Caledonia. b. Ongoing Responsibilities
It is the Board’s ongoing responsibility to monitor the performance of the business against the budget on a quarterly basis and to adopt and review from time to time the marketing and distribution strategy
Following acquisition, the Board will implement and monitor the following operational controls: i. setting an annual performance budget for the following 12 months; ii. monitoring the performance of the Company against budget on a monthly basis. Depending upon performance, after the first year of operation following the closing of the offer, this may be reduced to a bi-monthly review but with monthly reports still circulated to Board members; iii. implementing any corrective action required as a result of a failure to achieve the budgeted performance level;
The Company intends to create an option scheme for its key staff whereby options on up to 500,000 shares will be awarded in order to attract and retain, whenever possible, employees who can play a pivotal role in increasing the value of the Company.
Administration and Operations
The operational team will be responsible for day to day operations of the business to ensure it meets the objectives as laid out in the financial plan.
The team will consist of the following:
Executive Chairman Chief Executive Officer Finance Director Creative Director Programming Director Membership Director Marketing Manager Business Development Manager Licensing Manager Site Editor Site Manager Technical delivery support Office PA
Additional operational headcount will be recruited in year 2 to support the increase in back office operations around royalty calculations and payments.
The business assumes 4 interns will be used in temporary support roles.
There will be the following contractors involved
Chapter Media Limited – web development Product Manager PR
March 2008 23
Accounting
The Company will outsource the provision of its accounting and payroll services to JPB Harris, including the preparation of the agreed performance reports and management accounts, in respect of the performance. This arrangement will be reviewed as the Company grows.
March 2008 24 Part 8: Costs, Fees and Incentive Arrangements
Initial Fee
For sponsoring this investment opportunity, a fee of 13.95 per cent of funds raised by the Company under the Offer[s] will be levied on those funds before they are remitted to the Company. This fee will cover all legal, printing and marketing costs associated with the preparation and issue of this document and all other relevant documentation and the payment of introductory commission to authorised investment advisers.
Annual Costs
The estimated annual fees and salaries payable by the Company to the Directors and partners are summarised below and are all subject to review.
Chris Auty £72,000 Andre Burgess £72,000 Keith Greenhalgh £40,000 Andrew Williams £30,000 Suzanne Ballantyne £36,000 Elliot Grove £30,000
March 2008 25 Part 9: Realisation
The Board will monitor the opportunities for shareholders to realise their investment as they arise after the end of the three year EIS qualifying period. If the Company has established a successful track record there should be a number of opportunities for an exit for Shareholders.
At the present time, the Board consider a trade sale or listing as the most likely alternatives. Under a trade sale, it is likely that the shareholders will realise their investment for cash. In the case of a flotation, a market would exist for the Ordinary Shares.
The Board intends to provide an exit opportunity for the Shareholders no later than the fourth anniversary of the final fund raising.
March 2008 26 Appendix 1: Statutory and General Information
1 The Company
The Company was incorporated under the Act in England as a private company limited by shares on 4th December 2007 with registered number 6444502 and name Raindance.tv PLC. The liability of the members of the Company is limited.
The Group organisation is as follows:
Raindance.tv PLC
Raindance Technology Ltd Raindance TV (UK) Ltd
The purpose of the three operational companies within the group is as follows:
Raindance Technology Ltd: it is intended that this business will manage the development of all mobile and web based products, including the Raindance.tv site. This has been kept separate as such activities may involve partnerships to reduce development and operational costs. This may include partners taking a stake in this operational company.
Raindance TV (UK) Limited: is the operational unit for 3 rd party licensing and distribution activities. This will handle all receipts of revenues and payments from and to third parties.
2 Share Capital
2.1 The shareholding in the companies prior to the issue of shares under this offer are:
Raindance.tv PLC:
A Burgess 1200241 Dandy productions llp 1200241 S Ballantyne 1200241 C Auty 660240 E Grove 423615 M Goldberg 317711 M McCusker-Stevenson 317711 K Greenhalgh 280000
March 2008 27
Raindance TV (UK) limited:
Raindance.tv PLC 99% Dogwoof Limited 1%
Raindance TV Technology limited
Raindance.tv PLC 100%
2.2 By written resolutions passed on 2 July 2007:
2.2.1 the Directors were generally and unconditionally authorised in accordance with section 80 of the Act to exercise all the powers of the Company to allot relevant securities (as defined in that section) up to an aggregate nominal amount of £2,500,000, such authority to expire on 2 July 2012 (unless previously revoked, varied or extended by the Company in general meeting);
2.2.2 the Directors were empowered (pursuant to section 9-5 (1) of the Act) to allot or make offers or agreements to allot equity securities (as defined in section 94(2) of the Act) for cash pursuant to the authority referred to in paragraph 2.2.1 above as if section 89(1) of the Act did not apply to such allotment during the period commencing on the date of the passing of the resolution and ending on 2 July 2012;
2.2.3 The Company adopted the Articles.
2.3 At the date of this document the authorised and issued share capital of the Company is as follows:
Authorised Number of Shares Class of Share Number Issued 500,000,000 Ordinary at 1 pence per share 5,600,000
2.4 There are no arrangements known to the Company, the operation of which may at a subsequent date result in a change of control of the Company.
3 Subsidiaries
The company has subsidiaries as detailed in 1 above
4 Memorandum and Articles of Association
4.1 The Memorandum of Association of the Company states that its principal object is to carry on the business of a general commercial company. The objects of the Company are set out in full in clause 3 of the Memorandum of Association. The liability of the members is limited.
4.2 The Articles of Association of the Company adopted on 2 July 2007 include, inter alia, provisions to the following effect:
4.2.4 Voting and General Meetings a Subject to any special rights or restrictions attached to any Shares, on a show of hands every member who, being an individual, is present in person or, being a corporation, is present by a duly authorised representative, not being himself a member, shall have one vote and on a poll every member shall have one vote for every share of which he is a holder.
March 2008 28 b No member of the Company shall be entitled to vote, either personally or by proxy at any general meeting of the Company or at any separate meeting of the holders of any class of shares of the Company in respect of any share held by him unless all moneys presently payable by him in respect of that share have been paid. c No member shall vote at any general meeting or at any separate meeting of the holders of any class of shares in the Company, either in person or by proxy, in respect of any share held by him if that member has been served with a notice by the Company requiring him to state whether any share held by him is held on behalf of another person and that member has failed to respond to the notice within the time limit stipulated in the notice.
4.2.5 Variation of Rights Whenever the capital of the Company is divided into different classes of shares, the rights attached to any class may be varied with the written consent of the holders of three-fourths of the issued shares of that class, or with the sanction of an extraordinary resolution passed at a separate general meeting of such holders. Whenever the Ordinary Shares are divided into different classes of shares, the rights attached to any class may only be varied consent of the holders of all the Ordinary Shares then in issue. The necessary quorum at such meeting is five persons at least holding or representing by proxy one third of the issued shares of that class whichever is the fewer. The rights attached to any class of shares shall not be deemed to be varied by either the creation or issue of further shares ranking pari passu with them
4.2.6 Alteration of Capital The Company in general meeting may by resolution increase its share capital but unless the shares so created are uniform in all respects with a class of shares in the existing capital, the resolution creating them shall be a special resolution. By ordinary resolution the Company may consolidate and divide its share capital into shares of larger amounts or sub-divide its shares or any of them into shares of smaller amounts subject to Section 121 (3) or cancel any shares not taken or agreed to be taken at the date of the passing of the resolution. Subject to the provisions of the statutes and to any rights conferred on the holders of any class of shares, the Company may by special resolution reduce its share capital or any capital redemption reserve, share premium account in any manner authorised by law.
4.2.7 Transferability Subject to the provisions contained in the Articles shares in the Company shall be transferable by written instrument in any common form signed by or on behalf of the transferor and (unless the shares are fully paid) the transferee or by means of a relevant system for the purposes of the Uncertificated Securities Regulations 2001 in the case of shares held in uncertificated form and the transferor shall be deemed to remain the holder of the share until the name of the transferee is entered in the Register of Members as the holder of that share. The Directors may decline to register any transfer of a share which is not fully paid without assigning any reason, and may also decline to register any transfer of any share on which the Company has a lien. The Directors may suspend the registration of transfers for such periods (not exceeding 30 days in any year) as they may determine. The Directors may decline to recognise any instrument of transfer unless the instrument of transfer is duly stamped and accompanied by such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer; it relates only to one class of shares; and it is in favour of less than five transferees. If the Directors refuse to register a transfer of any shares they shall within two months after the date on which the transfer was lodged with the Company send to the transferee notice of the refusal.
4.2.8 Dividends Unclaimed dividends will be forfeited after a period of twelve years after having become due for payment and will thereupon cease to remain owing by the Company if the Directors so resolve.
4.2.9 Borrowing Powers The Directors may exercise all the powers of the Company to borrow money and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof, and, subject to the provisions of the Act, to issue debentures, debenture stock
March 2008 29 and other securities whether outright or as a security for any debt, liability or obligation of the Company or any third party provided that, unless approved by an ordinary resolution of the Company in general meeting, the Directors shall restrict such borrowings and exercise all voting and other rights or powers of contract exercisable by the Company in relation to its subsidiaries (if any) so as to secure (insofar as they are able as regards the Company's subsidiaries) that the aggregate borrowing of the Company and its subsidiaries for the time being shall not exceed five times the aggregate paid up on the issued share capital (including share premium) of the Company and the total of capital and revenue reserves of the Company and its subsidiaries as defined in the Articles of Association.
4.2.10 Directors a) Subject to the provisions of the Act and provided that the provisions of the Articles referred to in paragraphs (b) and (c) below are complied with, a Director: i) may enter into or otherwise be interested in any contract, arrangement, transaction or proposal with the Company or in which the Company is interested; ii may hold any other office or place of profit with the Company (other than the office of auditor of the Company or any subsidiary) in conjunction with his office of director and may act by himself or through his firm in a professional capacity to the Company, in each case on such terms (as to remuneration and otherwise) as the Board may arrange; iii may be or become a member or a director or other office, hold any other office or place of profit under, or be a party to any transaction or arrangement with or otherwise interested in any company promoted by the Company or in which the Company is otherwise interested or as regards which the Company has any powers of appointment; and shall not be liable to account to the Company for any profit, remuneration or other benefit realised by any such contract, arrangement, transaction or proposal, office, place of profit or membership and no such contract, arrangement, transaction or proposal shall be avoided on the grounds of any such interest or benefit. b Any Director who, to his knowledge, is in any way (directly or indirectly) interested in any contract, arrangement, transaction or proposal with the Company shall declare the nature of his interest at the Board meeting at which the contract, arrangement, transaction or proposal is first considered if he knows his interest then exists or, in any other case, at the first Board meeting after he knows that he is or has become so interested. Save as provided below, a Director shall not vote on or be counted in the quorum in relation to, any resolution of the Board or any committee of the Board in respect of any contract, arrangement, transaction or proposal to which the Company is or is to be a party and in which he directly or indirectly (together with any person connected with him) is to his knowledge materially interested. A Director shall be entitled to vote (and be counted in the quorum) in respect of any resolution at such meeting if such resolution relates to one of the following matters: any contract in which he is interested by virtue of an interest in shares, debentures or other securities of the Company or otherwise through the Company; the giving of any guarantee, security or indemnity in respect of money lent or obligations incurred by him or by any other person at the request of or for the benefit of the Company or any of its subsidiary undertaking or a debt or obligation of the Company or any of its subsidiary undertakings for which he himself has assumed responsibility in whole or in part, either alone or jointly with others, under a guarantee or indemnity or by the giving of security relating to any issue or offer of shares; iii any issue or offers of shares, debentures or other securities of the Company or any of its subsidiaries in respect of which he is or may be entitled to participate in his capacity as a holder of any securities or in the underwriting or subwriting of which the director is to participate; iv any other company in which he and any persons connected with him do not to his knowledge hold an interest in or options over shares (as that term is used in section 198 to 211 of the Act) representing 1% or more either of any class of the equity share capital or the voting rights available to members of that company; v an arrangement for the benefit of employees of the Company or any of its subsidiary undertakings which does not award him any privilege or benefit not generally awarded to the employees to whom such arrangements relate; and
March 2008 30 insurance which the Company proposes to maintain or purchase for the benefit of directors or for the benefit of persons including Directors. d Any Director who serves on any committee or who devotes special attention to the business of the Company, or who otherwise performs services which in the opinion of the Board are outside the scope of the ordinary duties of a director, may be paid such reasonable special remuneration as the Board may determine in addition to any remuneration provided by or pursuant to any other provision of the Articles. The remuneration and other terms and conditions of appointment of a Director to any executive office or employment of the Company shall be such as the Board (or the remuneration committee of the Board) may from time to time determine and may be by way of a fixed sum of money, or may altogether or in part be governed by business done or profits made or otherwise as determined by the Board (or the remuneration committee of the Board) and may be in addition to or in lieu of any fees payable to him for his services as a Director pursuant to the Articles.
4.3 Pensions and Benefits The Directors may exercise all the powers of the Company to give or award pensions, annuities, gratuities, superannuation and other allowances or benefits to any person who is or has at any time been a Director of or employed by or in the service of the Company or any subsidiary company of the Company and to any member of his family or any person who is dependant on him. For this purpose, the Directors may establish, maintain, support, subscribe and contribute to any scheme, trust or fund.
5 Directors' appointments and remuneration The existing service contracts, contracts for services and remuneration of the Directors are as follows:
5.1 by a letter of appointment dated 12 th July 2007 the terms of Andre Burgess's appointment as a Director of the Company were confirmed. His appointment continues until it is terminated by either himself or the Company, giving to the other not less than six months' notice in writing.
5.2 by a letter of appointment dated 12 th July 2007, Andrew Williams was appointed as a Director of the Company until his appointment is terminated by either himself or the Company, giving to the other not less than three months' notice in writing.
6 Directors' and other interests in the Company amended
6.1 The interests of the Directors and their connected persons (as defined in section 346 of the Act) in the share capital of the Company (all of which are beneficial) shown in the Register of Directors' Interests maintained under the provisions of section 325 of the Act immediately before the Offer are as follows:
A Burgess 1200241 S Ballantyne 1200241 C Auty 660240 K Greenhalgh 280000
Andrew Williams is a partner in Dandy Productions LLP, who are shareholders in Raindance.tv PLC, in which he receives a 42.5% share of profits.
March 2008 31
6.2 The Directors hold the following current directorships:
A Burgess Crucible Media (UK) Limited Crucible Media Limited Quintessential Media Limited Raindance.tv PLC Raindance TV UK Limited Mobile Comedy Limited
Chris Auty Vice Versa Films Limited Raindance.tv PLC
Keith Greenhalgh Silvertree Media Limited Chapter Media Limited Mobile Comedy Limited Raindance.tv PLC
Andrew Williams Building Block Properties Limited Rex Venture Resources Limited Rex Trade Associates Limited Raindance.tv PLC
Suzanne Ballantyne Raindance.tv PLC
6.3 As at the date of this document, none of the Directors:
6.3.1 has any convictions in relation to fraudulent offences for the previous five years;
6.3.2 has been bankrupt;
6.3.3 was a director of a company or a partner of a partnership which suffered any bankruptcy, receivership or liquidation in the previous five years; or
6.3.4 has been subject to any official public incriminations and/or sanctions of such person by statutory or regulatory authorities (including designated professional bodies) or has ever been disqualified by a court from acting as a director of a company or conduct of the affairs of any company.
6.4 There are no amounts set aside or accrued by the Company to provide pension or similar benefits to the Directors.
6.5 Save for payment during respective notice periods, none of the Directors are entitled to a payment on termination of their service agreements or letters of appointment.
7 Material contracts
7.1 By an agreement dated ("the Sponsor Agreement") made between the Company (i), the Directors (2) and Park Caledonia (3), Park Caledonia agrees to use its reasonable endeavours to procure subscribers for the Shares offered for subscription under the Offer and will be entitled to a commission of 3.95 per cent of the proceeds of the Offer, out of which Park Caledonia will be responsible for all legal, printing and marketing costs of the Offer.
March 2008 32 8 General
8.1 The Offer is not underwritten. 8.2 The accounting reference date of the Company is 30 September. The first financial year end will be 30 September 2008.
8.4 Since incorporation, there have not been any government, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Company is aware) which may have or have had in the recent past significant effects on the Company's financial position or profitability. 8.5 The Offer is promoted by Park Caledonia, which is authorised and regulated by the Financial Services Authority for the conduct of regulated activities in the UK.
8.7 Details of the Company's share capital is set out in paragraph 2.3 of this Appendix.
March 2008 33 Appendix 2: Terms and Conditions of Application
(a) General The contract created by the acceptance of applications under the Offer[s] will be conditional upon the Sponsor Agreement described in paragraph 7.1 of Appendix i becoming unconditional and not being terminated in accordance with its terms. (b) The right is reserved by the Company to present all cheques and bankers' drafts for payment on receipt and to retain surplus application monies pending clearance of successful applicants' cheques. The Company also reserves the right to reject, in whole or in part, any application. If any application is not accepted in full or if any contract created by acceptance does not become unconditional, the application monies or as the case may be the balance thereof, will be returned by crossed cheque in favour of the applicant, through the post at the risk of the person entitled thereto, within seven days of the closing of the Offer. (c) By completing and delivering an Application Form you: (i) offer to subscribe for the number of Shares specified in your Application Form (or such lesser number for which your application is accepted) at the Offer Price of £1 per Share on the terms of and subject to this document, including these terms and conditions, and the Memorandum and Articles of Association of the Company; (ii) agree that, in consideration of the Company agreeing that it will not prior to 3rd October 2008 issue or allot any Shares which are subject to the Offer to any person other than by means of the procedures referred to in this document, your application shall not be revoked until after 3rd October 2008, and this paragraph shall constitute a collateral contract between you and the Company which will become binding upon dispatch by post to, or (in the case of delivery by hand) on receipt by, Park Caledonia Capital Limited of your Application Form; (iii) warrant that your remittance will be honoured on first presentation; (iv) agree that any monies returnable to you may be retained by Park Caledonia Capital Limited pending clearance of your remittance and that such monies will not bear interest; (v) authorise Park Caledonia Capital Limited to send a share certificate in respect of the number of Shares for which your application is accepted and/or to send a crossed cheque for any monies returnable, by post, at the risk of the person entitled thereto, to the address of the person named as the applicant in the Application Form; (vi) agree that all applications, acceptances of applications and contracts resulting therefrom under the Offer shall be governed by and construed in accordance with English law, and that you submit to the jurisdiction of the English courts and agree that nothing shall limit the right of the Company to bring any action, suit or proceedings arising out of or in connection with any such applications, acceptances of applications and contracts in any other manner permitted by law or in any court of competent jurisdiction; (vii) confirm that in making such application you are not relying on any information or representation in relation to the Company other than the information contained in this document and accordingly you agree that no person responsible solely or jointly for this document or any part thereof or involved in the preparation thereof shall have any liability for any such other information or representation; (viii) Agree that, having had the opportunity to read this document, you shall be deemed to have had notice of all information and representations concerning the Company contained herein; (ix) Confirm and warrant that you have read and complied with paragraph (d) below; Warrant that you are not under the age of 18; (xi) agree that all documents and cheques sent by post, by or on behalf of the Company or Park Caledonia Capital Limited, will be sent at the risk of the person(s) entitled thereto. (d) No person receiving a copy of this document or an Application Form in any territory other than the United Kingdom may treat the same as constituting an invitation or offer to him, nor should he in any event use such Application Form unless, in the relevant territory, such an invitation or offer could lawfully be made to him or such Application Form could lawfully be used without contravention of any registration or other legal requirements. It is the responsibility of any person outside the United Kingdom wishing to make an application hereunder to satisfy himself as to full observance of the laws of any relevant territory in connection therewith, including obtaining any requisite governmental or other consents, observing any other formalities requiring to be observed in such territory and paying any issue, transfer or other taxes required to be paid in such territory.
March 2008 34 Applicants are encouraged to submit their Application Forms early in order to be confident that their applications will be successful. In the event that applications are received for an amount in excess of the maximum subscription under the Offer, the Directors reserve the right to exercise their discretion in the allocation of successful applications although the allocation will usually be on a first come first served basis. The right is also reserved to reject in whole or in part any application or any part thereof and to treat as valid any application not in all respects completed in accordance with the instructions relating to the Application Form. Save where the context otherwise requires, words and expressions defined in this document have the same meaning when used in the Application Form and any explanatory notes in relation thereto.
Prospectus Regulations 2005
The maximum amount to be raised under the Offer is £1,650,000. Consequently, the Offer does constitute an offer within the meaning of the Prospectus Regulations 2005 as a prospectus is not required for offers of securities with a total consideration of less than EUR2,500,000 within a 12-month period. As such, this document does not constitute a prospectus within the meaning of the Prospectus Regulations 2005
March 2008 35 Appendix 3: Guide to the Application Form
The following instructions should be read in conjunction with the Application Form.
1. Insert your full name, address, national insurance number and date of birth in block capitals in Box 1. If you are an individual you must be aged 18 or over.
2. Insert in Section 2 (in figures) the number of Shares for which you are applying. Your application in respect of either Offer must be for a minimum of 4546 Shares.
3. Insert in Section 3 (in figures) the amount of your payment. Your cheque or bankers' draft should be for the amount which represents £1.10 multiplied by the number of Shares inserted in BOX 2.
4. You must affix to the completed Application Form cheques or bankers' drafts for the full amount payable. Your cheque or bankers' draft must be payable to "The Real Food Company Ltd Subscription Account" for the amount payable on application inserted in Box 3 and should be crossed "A/c Payee" No receipt will be issued for this payment which must be solely for this application. Your cheque or bankers' draft must be drawn in sterling on an account in your name at a branch (which must be in the UK, the Channel Islands or the Isle of Man) of a bank which is either a settlement member of the Cheque & Credit Clearing Company Limited or the CHAPS Town Clearing Company Limited or a member of either of the Committees of the Scottish or Belfast Clearing Houses or which has arranged for its cheques or bankers' drafts to be presented for payment through the clearing facilities provided for the members of any of those companies or committees, and must bear the appropriate sort code number in the top right hand corner. The right is reserved to reject any application in respect of which the applicant's cheques or bankers' drafts have not been cleared on first presentation. Applications may be accompanied by a cheque or bankers' draft drawn by someone other than the applicant(s), but any monies to be returned will be sent by crossed cheque in favour of the person(s) named in Box 1.
5. Sign and date the Application Form.
Money Laundering Regulations
It is a term of the Offer[s] that, to ensure compliance with the Money Laundering Regulations 2003 as amended, updated, replaced or superseded from time to time, Park Caledonia may at its absolute discretion require verification of identity from any person lodging an Application Form (the "Applicant").
If the value of the investment is equal to or greater than £10,000 the Money Laundering Regulations 2003 will apply and verification of the identity of the Applicant(s) will be required. Without prejudice to the generality of the foregoing, in particular this also applies to any person who either (i) tenders payment by way of cheque or bankers' draft drawn on an account in the name of a person or persons other than the Applicant or (ii) appears to be acting on behalf of some other person. In the former case, verification of the identity of the third party will be required. In the latter case, verification of the identity of any person on whose behalf the Applicant appears to be acting will be required.
March 2008 36 If within a reasonable period of time following a request for verification of identity, Park Caledonia has not received evidence satisfactory to it as aforesaid, Park Caledonia may, at its absolute discretion, reject any such application in which event the remittance submitted in respect of that application will be returned to the Applicant (without prejudice to the rights of Park Caledonia to undertake proceedings to recover in respect of any loss suffered by it as a result of failure to produce satisfactory evidence of identity).
Where possible Applicants should make payment by their own cheque. If a third party cheque, bankers' draft or building society cheque is used, the Applicant should: a write his/her name and address on the back of the cheque or bankers' draft and, in the case of an individual, record his/her date of birth against his/her name; and b ask the bank or building society (if relevant) to endorse the reverse of the draft or cheque with the full name and account number of the person whose account number is being debited and stamp each endorsement.
In any event, if it appears to Park Caledonia that an Applicant is acting on behalf of some other person, further verification of the identity of any person on whose behalf the Applicant appears to be acting will be required. The above information is provided by way of guidance to reduce the likelihood of difficulties, delays and potential rejection of an Application Form (but without limiting Park Caledonia's right to require verification of identity as indicated above).
Share certificates
A share certificate will be sent to you incorporating the details included in Box 1 within 30 days of the allotment and issue of Shares under the Offer.
Intermediaries
Agents who are entitled to receive commission should stamp and complete the form for intermediaries, giving their full name and address, telephone number and details of their authorisation under the Financial Services and Markets Act 2000. The right is reserved to withhold payment of any commission if Park Caledonia is not, in its sole discretion, satisfied that the agent is so authorised.
Delivery of Application Form
Send the completed Application Form together with the cheque or bankers' draft by post, or deliver it by hand, to Park Caledonia, Brunel House, 11 The Promenade, Bristol Bs8 3NN. In the event that applications are received for an amount in excess of the Maximum Subscription, Shares will normally be allocated on a first come first served basis.
If you post your Application Form you are recommended to use first class post and to allow at least two working days for delivery. Photocopied or faxed copies of the Application Form will not be accepted.
If you have any queries on the procedure for application and payment, you should contact Annette Jordan at Park Caledonia, email [email protected] or direct dial 0117 980 9632 or your normal financial adviser.
March 2008 37