ATLANTIC SCREEN SCORES Business Plan under the Enterprise Investment Scheme Disclaimer The Company has taken all reasonable care to ensure that the facts stated in this Business Plan are true and accurate in all material respects and that there are no other material facts the omission of which would make any statement in this Business Plan misleading. All statements regarding the Company’s business, financial position and prospects should be viewed in the light of the risk factors set out in the section entitled ‘Risk Factors’ in this document. None of the officers, employees, agents, advisers or representatives of the Company makes any representations or gives any warranties or indemnities or undertakings, express or implied, with respect to the truthfulness, accuracy or completeness of the contents of this Business Plan. None of the information in this Business Plan, including the illustrative financial projections, constitutes a profit forecast or a prediction. Such information is included for illustrative purposes only. These projections seek to give an indication of one possible outcome if all the assumptions are attained. Use of Photographic Images This Business Plan contains publicity images of completed films whose music compositions or score have been created, facilitated or administered by Management in their capacity as directors of third party companies. The images do not purport to represent music compositions or scores of film productions with which the Company has been, or is to be involved, or has created or will create in the future. They represent solely an indication of the types of films in respect of which the Company is intending to create music compositions or scores. Permission has been granted to the Company by the copyright owner of the images concerned to allow the use of such images in this Business Plan. Business Plan Overview Atlantic Screen Scores Limited has been established for the purposes of creating and exploiting intellectual property in the form of original music composed for major internationally released films and television productions. Atlantic Screen Scores will work with producers to create original music for film and television by contracting with established international composers to create these music compositions. The majority of music created will be the incidental and background music (known as ‘the score’) for films and television. Atlantic Screen Scores Limited will own the intellectual property in the composed music from origination and will retain ownership of the copyright created. Atlantic Screen Scores Limited will exploit the ownership of the copyrights, earning income in the form of copyright royalties collected worldwide from television companies and theatres by the local performing right societies. In order to maximise the income arising, Atlantic Screen Scores Limited will engage Copyright Administration Services Limited to administer the efficient collection of royalties on its behalf. Copyright Administration Services Limited is one of the UK’s leading music publishing administration companies and administers many catalogues owned by third party rights holders. The Business Plan anticipates a maximum Subscription of £2m. Strictly Private and Confidential 1 2 Strictly Private and Confidential CONTENTS 1 Glossary of Defined Terms 4 2 Executive Summary 6 3 The Investment 7 4 Operating The Company 8 5 Business Plan Summary 9 6 Management Of Company 11 7 Established Industry Expertise 12 8 Commercial Assumptions 14 9 Risk Factors 15 10 Indicative Investors’ Outcome 17 11 Corporate Structure 18 12 Related Party Contracts 20 13 Shareholders’ Possible Exit Strategies 21 Appendix A: The Music Publishing Industry 22 Appendix B: Business Plan Fundamentals 27 Appendix C: Management Profiles In Detail 32 Appendix D: Commercial Assumptions 34 Strictly Private and Confidential 3 1 Glossary of Defined Terms Advance Assurance An assurance from HMRC, in advance of applications for Shares, that, on the basis of the information provided, HMRC will regard the Shares issued as satisfying the requirements of EIS Articles of Association The agreement providing for the management of the Company and the conduct of its business under the Companies Act, recording the rights, duties and responsibilities of its members Atlantic Screen Scores Atlantic Screen Scores Limited Business Plan A description of the intended activities and financial projections of the Company as set out in this document Catalogue The various Compositions owned by the Company Commercial Assumptions The assumptions set out in Section 8 and Appendix D Companies Act Companies Act 2006 Company Atlantic Screen Scores Completion Bond A guarantee that the film will be completed without further recourse to the film’s investors or financiers for additional funding Composition An original work comprising music or music and lyrics fixed in tangible form in respect of which a copyright subsists EIS The Enterprise Investment Scheme as described in Part 5 of ITA EIS Deferral Relief Capital gains deferred on reinvestment pursuant to Section 150C and Schedule 5B of TCGA EIS Relief Income tax relief and/or exemption from tax in respect of chargeable gains which is available with EIS EIS Shareholder A holder of a Share in respect of which EIS is to be claimed Film Any record, however made, of a sequence of visual images that is capable of being used as a means of showing that sequence as a moving image HMRC Her Majesty’s Revenue & Customs IFA An Independent Financial Adviser regulated by the Financial Services Authority or successor agency IRR The internal rate of return, being the annualised discounted rate at which the net present value of the relevant cash flows sum to zero, calculated as set out in the Commercial Assumptions ITA Income Tax Act 2007 (as amended) Management The directors of the Company from time to time Management Bonus A performance bonus due and payable to Management at a specified future date based on a determined share of profits Memorandum of Association The agreement under the Companies Act of the founder shareholders to form and become a member of the Company and to take at least one Share Net Publisher Share (‘NPS’) The Company’s share of publishing royalty income received on an annual basis Performing Right Society (‘PRS’) The UK organisation responsible for the collection of performance royalties 4 Strictly Private and Confidential Risk Factors The risk factors set out in Section 9 Score The incidental and background music in a completed film or television programme Share One ordinary share of £1 in the capital of the Company and subject to the rights, benefits and restrictions set out in the Articles of Association Shareholder A holder of a Share Subscription The aggregate sums raised under this Business Plan TCGA The Taxation of Chargeable Gains Act 1992 (as amended) Strictly Private and Confidential 5 2 Executive Summary Ӷ The Opportunity An investment in Atlantic Screen Scores aims to generate an attractive return from the business of creating, publishing and exploiting original music from important internationally released films and television series. It is intended that the investor will benefit from an equity investment in a company that will aggregate ownership of newly created film and television scores and thereby grow an exploitable Catalogue which will increase in value over time. The Company generates royalty income from cinemas and broadcasters, and fee income from the re-use of the music, for instance in commercials and trailers. It is intended that the Company will become a valuable asset in the hands of its Shareholders whereby it may continue as a successful business or be offered for sale subject to Shareholder approval either to another music publishing company or by way of a public offer. Under this Business Plan, Atlantic Screen Scores will be the owner of the intellectual property created and on its behalf Copyright Administration Services Limited will administer those copyrights for a fee. With the Hollywood studios cutting back on the number of films they produce, choosing to concentrate on their franchiseable sequels, and with global box office continuing to rise year on year, there is the opportunity for strong independent films to perform well. Atlantic Screen Scores relies upon investing in independent films as opposed to studio films, as the studios retain all the music copyright for the films they produce. According to the MPAA annual theatrical markets statistical report, global box office continues to grow, with box office up 4.0% in 2013 to $35.9 billion. Atlantic Screen Scores will earn royalties from the fees paid by all licensed broadcasters of film and music and in many countries from the box office receipts paid to the performing right societies in each territory where this income source is recognised. 6 Strictly Private and Confidential 3 The Investment Ӷ Atlantic Screen Scores Limited Registered in England and Wales No: 08811587 Private Placing of up to 2,000,000 Ordinary Shares at £1 per share payable in full on application Share Capital following the investment (assuming full subscription) Authorised Issued and fully paid Number £ Number £ Ordinary Shares of 2,000,001 2,000,001 2,000,001 2,000,001 £1 each Ø 1 Ordinary Share has been issued at par value and is held by Simon Fawcett. Ø 2,000,000 Shares of par value £1 each will be offered for Subscription. Strictly Private and Confidential 7 4 Operating the Company It is intended that the Company’s business will be conducted on a commercial basis based on the judgement and experience of Management. It is Management’s intention to operate the Company to enable it to be a qualifying company under EIS. The Company has applied for Advance Assurance for its proposals under EIS from HMRC. Management expect to run the Company in such a manner that it will satisfy the EIS qualifying conditions throughout the relevant period of three years from either the date the Shares are issued or, if later, from the date of commencement of trade.