intandem films plc

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubtabout the contents of this document or the action to be taken, you should consult a person authorised under theFinancial Services and Markets Act 2000 who specialises in advising on the acquisition of shares and other securities.You should also carefully consider the section entitled “Risk Factors” in Part II of this document before taking anyaction.

Application will be made for all of the Ordinary Shares of the Company in issue immediately following the Placing tobe admitted to trading on AIM.

AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to beattached than to larger or more established companies. AIM securities are not admitted to the Official List of the UKListing Authority.

A prospective investor should be aware of the risks of investing in such companies and should make the decision toinvest only after careful consideration and, if appropriate, consultation with an independent financial adviser. Neitherthe UKLA nor London Stock Exchange Plc has examined or approved the contents of this document.

It is expected that Admission will become effective and dealings in the Ordinary Shares will commence on 22 April, 2005.

This document, which comprises a prospectus, has been drawn up in accordance with the Public Offers of SecuritiesRegulations 1995, as amended (the “POS Regulations”) as required by the AIM Rules. A copy of this document has beendelivered to the Registrar of Companies in England and Wales in accordance with Regulation 4(2) of the POS Regulations.

The Directors, whose names are set out on page 4, accept responsibility for the information set out in this document. To thebest of the knowledge and belief of the Directors (who have taken all reasonable care that such is the case) the informationcontained in this document is in accordance with the facts and does not omit anything likely to affect the import of suchinformation.

INTANDEM FILMS PLC(Incorporated in England and Wales under the Companies Act 1985 with

Registered number 5360907)

Placing of up to 25,000,000 Ordinary Shares of 0.1p each at 5p per share

andAdmission to trading on AIM

Broker and Nominated Adviser

City Financial Associates Limited

SHARE CAPITAL ON ADMISSIONAuthorised Issued

Amount Number Amount up to Number up to£200,000 200,000,000 Ordinary Shares of 0.1p each £85,175 85,175,000

City Financial Associates Limited, which is authorised and regulated by The Financial Services Authority, is the Company’s

Nominated Adviser and Broker for the purposes of the AIM Rules. Its responsibilities as the Company’s Nominated Adviser

and Broker under the AIM Rules are owed solely to London Stock Exchange Plc and are not owed to the Company or any

Director. Cirty Financial Associates Limited will not be responsible to anyone other than the Company for providing the

protections afforded to customers of City Financial Associates Limited or for advising any other person on the Placing and

other arrangements described in this document.

The Placing described in this document is only being made in the United Kingdom. This document does not constitute an offer

to sell, or the solicitation of an offer to buy, shares in any jurisdiction in which such offer or solicitation is unlawful and, in

particular, is not for distribution into the United States, Canada, Australia, the Republic of Ireland, South Africa or Japan or to

any national, resident or citizen of the United States, Canada, Australia, the Republic of Ireland, South Africa or Japan. The

issue of Ordinary Shares has not been and will not be registered under the applicable securities laws of the United States,

Canada, Australia, the Republic of Ireland, South Africa or Japan. The distribution of this document in other jurisdictions may

be restricted by law and therefore persons into whose possession this document comes should inform themselves about and

observe any such restriction. Any failure to comply with these restrictions may constitute a violation of the securities laws of

any such jurisdictions.

In making any investment decision in respect of the Placing, no information or representation should be relied upon in relation

to the Placing or in relation to the Placing Shares other than as contained in this document. No person has been authorised to

give any information or make any representation other than that contained in this document and, if given or made, such

information or representation must not be relied upon as having been authorised.

CONTENTS

Page

Placing statistics 3

Expected timetable 3

Directors and advisers 4

Definitions 5

Part I Information on the Group 7

Part II Risk factors 14

Part III Accountants’ report on the Group 16

Part IV Additional information 34

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PLACING STATISTICS

Placing Price 5p

Number of Existing Ordinary Shares 60,175,000

Number of Placing Shares being issued under the Placing 25,000,000

Number of Ordinary Shares in issue following the Placing 85,175,000

Number of Ordinary Shares capable of being issued following Admission on exercise of the Warrants 3,500,000

Percentage of Enlarged Issued Share Capital being placed 29%

Gross proceeds of the Placing £1,250,000

Net proceeds of the Placing receivable by the Company £980,000

Market capitalisation following the Placing at the Placing Price £4,258,750

Note: the table above, together with all figures in this document, assumes that the Maximum Subscription isplaced, except where otherwise indicated.

EXPECTED TIMETABLE

2005

Admission and dealings commence in the Ordinary Shares on AIM 22 April

CREST accounts credited by 22 April

Despatch of definitive share certificates (where applicable) by 6 May

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DIRECTORS AND ADVISERS

Directors Gary Smith ACA, Executive ChairmanColin Andrew McWhirter FCA, Finance DirectorAndrew Barry Brown, Executive DirectorWilliam Albert Hurman, Executive DirectorJohn Anthony James, Non-Executive Director

All of: 22 Soho SquareLondon W1D 4NS

Company Secretary and Colin Andrew McWhirter Registered Office 22 Soho Square

London W1D 4NS

Nominated Adviser and Broker City Financial Associates LimitedPountney Hill House6 Laurence Pountney HillLondon EC4 0BL

Reporting Accountants and Baker TillyAuditors 2 Bloomsbury Street

London WC1B 3ST

Solicitors to the Company DLA Piper Rudnick Gray Cary UK LLPVictoria Square HouseVictoria SquareBirmingham B2 4DL

Solicitors to the Placing Memery Crystal44 Southampton BuildingsLondon WC2A 1AP

Bankers Royal Bank of Scotland Plc65 PiccadillyLondon W1A 2PP

Registrars and Receiving Agent Share Registrars LimitedCraven HouseWest StreetFarnhamSurrey GU9 7EN

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DEFINITIONS

The following terms apply in this document unless the context requires otherwise:

“Act” the Companies Act 1985, as amended

“Admission” admission of all of the Ordinary Shares, issued and to be issued, to trading onAIM and such admission becoming effective in accordance with the AIMRules

“AIM” a market operated by the London Stock Exchange

“AIM Rules” the rules of the London Stock Exchange regulating admission to and theoperation of AIM

“Articles” the articles of association of the Company

“Board” or “Directors” the directors of the Company whose names are set out on page 4 of thisdocument

“CFA” City Financial Associates Limited

“Combined Code” the principles of good governance and code of best practice prepared by theCommittee on Corporate Governance (as amended)

“Company” or “Intandem” Intandem Films Plc

“Concert Party” certain shareholders and their associates as listed in paragraph 14 of Part IV

“CREST” the computerised settlement system (as defined in the CREST Regulations)operated by CRESTCo which facilitates the transfer of title to shares inuncertificated form

“CRESTCo” CRESTCo Limited

“Crest Regulations” the Uncertificated Securities Regulations 2001 (SI 2001/3755)

“EMI Plan” the Intandem Films (2005) Enterprise Management Incentive Plan

“EMI Options” or “Options” options granted under the EMI Plan as described in paragraph 5.2 of Part IVof this document

“Enlarged Issued Share Capital” the 85,175,000 Ordinary Shares in issue assuming the Maximum Subscriptionhas been issued

“Existing Ordinary Shares” the 60,175,000 Ordinary Shares in issue prior to the Placing

“FSA” Financial Services Authority

“FSMA” Financial Services and Markets Act 2000

“Group” the Company Intandem Pictures Limited and Intandem Entertainment Limited(formerly Intandem Films Limited), (both wholly owned subsidiaries of theCompany)

“London Stock Exchange” London Stock Exchange Plc

“Maximum Subscription” 25,000,000 Placing Shares

“Minimum Subscription” 18,000,000 Placing Shares

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“Number 9 Films” Number 9 Films Ltd

“Official List” the Official List of the UK Listing Authority

“Ordinary Shares” the ordinary shares of 0.1p each in the capital of the Company

“Placees” those persons subscribing for the Placing Shares in the Placing at the PlacingPrice

“Placing” the conditional placing by City Financial Associates Limited of the PlacingShares at the Placing Price as described in this document, pursuant to thePlacing Agreement

“Placing Agreement” the conditional agreement dated 19 April, 2005, between the Company (1), theDirectors (2) and CFA (3) relating to the Placing, summary details of whichare set out in paragraph 12 of Part IV of this document

“Placing Price” 5p per Placing Share

“Placing Shares” up to 25,000,000 new Ordinary Shares to be issued pursuant to the Placing

“POS Regulations” the Public Offers of Securities Regulations 1995, as amended

“UK Listing Authority” the FSA acting in its capacity as the competent authority for the purpose ofPart VI of FSMA

“US or major Studio” any of the following distributors in North America: Disney, MGM, TwentiethCentury Fox, Sony Pictures, Paramount Pictures, Universal Studios,Dreamworks SKG

“Warrants” the warrants to subscribe for Ordinary Shares, full details of which are set outin paragraph 8 of Part IV of this document

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PART I

INFORMATION ON THE GROUP

Introduction

Intandem is a feature film group specialising in executive production and international sales and marketing. Thebusiness was established in 2003 by Gary Smith and Andrew Brown, formerly, respectively, Chief Executive andSenior Vice President International Sales and Marketing of Winchester Entertainment Plc. Management wasstrengthened in May 2004 when Billy Hurman joined the Group from ContentFilm Plc, where he was Senior VicePresident International Sales and Marketing.

The management team has marketed films at major film markets and festivals, such as Cannes, Sundance, Berlinand Toronto, and has been involved in the acquisition, financing and international sales of approximately twentyfilms; including Shooting Fish, Last Orders and Heartbreakers, each of which were released in cinemas in NorthAmerica by a US Studio.

It is an experienced team, which intends to establish Intandem, in due course, as a leading independent filmcompany.

Intandem focuses on two main activities within the feature film industry, namely:

executive production – which means assisting the producer in organising the financing of a film. For itsservices as an executive producer, Intandem earns fees, typically between 1 per cent. and 3 per cent. of thebudget, payable out of the budget of the film; and

international sales and marketing – which generates income through commission, which typically rangesbetween 10 per cent. and 25 per cent. of gross sales generated from international distributors.

Since commencing trading in November 2003, the Group has helped to arrange the financing for three films;‘Return to Sender’ which is completed; ‘Stoned’ (previously titled ‘Wild and Wycked: The World of Brian Jones’)which is in post production; and ‘Irresistible’, which started production in March 2005. The Group has earnedexecutive production fees of approximately £188,000 and secured sales rights for all three films. It has generatedsales to international distributors of approximately $3.6 million on which the Group is contractually entitled toearn commission of between 10 per cent. and 25 per cent.

Intandem has a relationship with the experienced producer, Stephen Woolley’s company, Number 9 Films Ltd. TheGroup, as part of a consortium consisting of Channel 4, The Irish Film Board and Tartan Films (an independentUK film distributor), has backed Number 9 Films in its successful bid to win funding from the UK Film Councilto pay for the development of feature films. The consortium has secured total funding of £800,000 per annum forthree years of which Intandem has agreed to contribute £100,000 per annum. It is intended that Intandem will beappointed as the international sales agent for each film which is produced through the consortium.

The Group’s audited revenues from incorporation to 31 December 2004 were £422,669, the loss after taxation was£142,038 and the Group had net cash of £3,070.

The Group is raising up to £1,250,000 through the Placing to provide working capital for the Group’s operationsto be expanded and to provide development funding for the Group’s participation in the consortium backingNumber 9 Films.

Background to the film industry

The film industry is an international, multi-billion dollar industry in which revenues can be generated from manysources. For example, once a film is completed, it can be sold in cinemas, on DVD and video and to free and paytelevision, airlines and hotels throughout the world.

The main players in the international independent film market are:

Scriptwriters: The first step in producing a film is to develop and write a script, which may be an originalidea, based on a book or other media or based on an event.

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Producers: The producer is responsible for the physical organisation of the film. He/she will normally liaisewith the scriptwriter, director, cast, senior crew members and will organise the preparation of the budget,financing and ultimate delivery of the film.

Directors: The director is the person who is creatively responsible for shooting the film, directing the actors,and physically turning the script into a completed film.

Financiers: Films can be financed from a variety of sources and the producer will normally engage anexecutive producer, such as Intandem, to assist in raising production finance. For further details on sourcesof finance see “The Group’s business” below.

International sales agents: The financiers and producer will appoint a sales agent, such as Intandem, tomarket and sell the film to international distributors.

Distributors: Distributors, which include major Studios, are responsible for marketing and exploiting thefilm in individual countries. Each distributor will typically pay a minimum guaranteed amount based on theexpected net revenue to be generated by the film from all sources. Distributors are Intandem’s clients in theGroup’s capacity as a sales agent.

The international film business is competitive and dominated by the small number of major Studios, who can actas the producer, financier and distributor, and larger independent sales companies and distributors.

However, the market is project-driven, which the Directors believe provides opportunities for smaller independentfilm companies, such as Intandem, to be able to achieve success on the basis of film projects produced, sold andmarketed by creative teams. Independent films such as ‘Shooting Fish’ (which was marketed by Intandem’smanagement team, in their previous employment), ‘My Big Fat Greek Wedding’ and ‘Bend It Like Beckham’ wereeach a commercial success.

Key strengths

The Directors believe that Intandem has several key strengths, including:

• an experienced and ambitious management team;

• a small focused team committed to controlling overheads as the business expands;

• a continuing flow of film projects, from which the Directors are able to select those which they believe havecommercial potential; and

• a network of international production, finance and distribution contacts.

Strategy

Intandem’s strategy is to act as executive producer and an international sales company for commercial, revenue-generating films. The range of budgets will vary depending on genre and cast but the Group is currently innegotiations in relation to films with individual budgets of up to £15 million.

Intandem’s participation in a consortium which has successfully bid for development funding from the UK FilmCouncil is an indication of its intent to be proactive in selecting commercial films and working with experiencedpartners.

The Directors intend to oversee Intandem’s expansion in a controlled manner in accordance with the Group’sbusiness plan.

The Group’s business

The Group generates income from executive producer fees for helping to organise the finance for the productionof a film that are paid out of the budget of each film and from commission on revenue generated from sales tointernational distributors.

The Directors believe that the combination of creating efficient financing solutions, a creative team and dynamic,innovative and effective marketing should increase the chances of a film achieving commercial success.

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Executive production

Intandem organises the financing of a film through third party financiers. Production financing will usually begenerated from a combination of the following sources:

Equity investors: Equity investors can take the form of individuals, equity funds or companies. Intandem isan administration partner in a film production and financing partnership, Audley Films LLP, which it helpedto establish in December 2003 on behalf of an individual. Audley was the main financier of Intandem’s firsttwo films, ‘Return To Sender’ and ‘Stoned’.

Co-production partners: International co-productions are another source of funding for feature films.‘Return To Sender’ was a Danish-UK co-production and other countries in which Intandem is negotiatingco-productions include Canada, Hungary and Australia.

Government subsidies and loans: Several countries offer tax-based incentives and/or subsidies for the filmindustry. Organisations such as Telefilm in Canada, the Film Finance Corporation in Australia and the FilmCouncil in the UK are all Government-backed organisations/agencies.

Pre-sales: Pre-sales are achieved when the sales company, such as Intandem, sells distribution rights in thefilm to distributors in selected territories prior to the film completing production. Bank finance can then beraised against an agreed value for such distribution contracts.

Sale and leaseback: Sale and leaseback, which is a tax based method of financing, is capable of providingapproximately 14 per cent. of the budget of UK qualifying films.

Gap financing through a bank: There are a number of specialist film financing banks certain of which arewilling to provide up to 20 per cent. of the film’s production budget based on sales estimates provided byreputable sales agents.

There are therefore several sources of finance available for the production of a feature film. The Directors havecontacts with a wide range of these sources and intend to continue to identify new sources of film financing, suchas Audley Films LLP, as well as strengthening the Group’s relationships with existing sources of finance.

International sales and marketing

As an international sales agent, Intandem prepares sales estimates for each film on behalf of the producer andfinanciers. The estimates, prepared in US dollars, are based on the minimum guaranteed payments which theDirectors expect distributors to pay in advance of the film being released for each territory throughout the world.They are used as a guide to potential financiers of each film but are not guarantees of revenue and take into accounta number of factors including the film’s genre, quality of script, director, lead actors and the budget.

A marketing plan is also prepared by the Group and approved by the producer. During the course of theproduction, the creation of marketing materials such as stills photographs, interviews with the producer, directorand cast, and other publicity are all monitored by Intandem.

The Directors believe that it is important to create and implement effective marketing campaigns for the films theGroup represents, particularly at film markets such as the American Film Market in Los Angeles and the CannesFilm Festival. The Group creates campaigns in-house from the script stage following consultation with the film’sdirector and producer as well as specialist design and marketing companies. The marketing campaigns typicallyinclude the following elements:

• e-mail campaign to film distributors informing them of the key elements of the film;

• promotional trailer of selected scenes from the film;

• sales brochure highlighting the key aspects of the film;

• attendance at major film markets;

• advertising and publicity in trade magazines;

• poster advertising at the Cannes Film Festival; and

• personal visits by the Group’s management to distributors in their own territories.

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Intandem provides relevant information to international distributors throughout the creation of a film with the aimof increasing the distributors’ awareness of that film.

Current trading and prospects

The Directors believe that the Group has formed a solid foundation on which to grow. The core team has beenestablished which the Directors believe is capable of managing at least six films per annum.

The Group is currently selling 3 films: ‘Return To Sender’ (directed by Oscar winner, Bille August), ‘Stoned’(directed by Stephen Woolley, whose previous producer credits include, ‘Scandal’, ‘The Crying Game’ and‘Interview With A Vampire’) and ‘Irresistible’ (starring Susan Sarandon whose previous credits include ‘DeadMan Walking’ and ‘Thelma and Louise’ and Sam Neill, whose previous credits include ‘Jurassic Park’ and ‘Omen3’). Sales to international distributors of these films to date have reached $3.6million on which Intandem will earncommission of between 10 and 25 per cent.

A summary of the trading record of the Group for the 14 months to 31 December 2004, which has been extractedfrom the accountants’ report on the Group set out in Part III of this document, is set out below:

14 months to31 December 2004

Turnover £422,669Gross profit £314,800Loss after taxation £(142,038)

The unaudited management accounts of the Group as at 28 February 2005 show a net asset position ofapproximately £76,000.

Directors and senior management

Gary Smith, age 48, Executive Chairman

Mr Smith is a Chartered Accountant and former investment manager. He founded Winchester Entertainment Plc(‘Winchester’) in 1993, which he floated on AIM in 1995. Mr Smith left Winchester in 2003 prior to its mergerwith ContentFilm Plc. Mr Smith is an executive producer of fifteen films, including ‘Shooting Fish’ with KateBeckinsale and Stuart Townsend, ‘Heartbreakers’ with Sigourney Weaver and Gene Hackman and ‘Last Orders’with Bob Hoskins and Michael Caine. Mr Smith is responsible for the strategy of the Group.

Andrew Brown, age 36, Executive Director

Mr Brown is responsible for the commercial development, daily management, sales and acquisitions of the Group.Mr Brown was formerly Senior Vice President of International Sales and Marketing at Winchester. Before joiningWinchester in 1995, he was International Project Director for Screen International, a film industry weeklymagazine, where he worked in Los Angeles.

Billy Hurman, age 48, Executive Director

Mr Hurman joined Intandem in May 2004 from Winchester, which he joined at the same time as Mr Brown.Together they have worked closely with Mr Smith in establishing marketing campaigns for a wide range of films.Mr Hurman has worked in the marketing department at Screen International and helped to establish the Europeanoffice of the Hollywood Reporter, a weekly film industry magazine. He has produced a film and has experienceof working with producers in creating and implementing marketing plans. Together with Mr Brown, he isresponsible for acquisitions and sales of films for the Group.

Andrew McWhirter, age 50, Finance Director

Mr McWhirter is a Chartered Accountant with a range of financial and commercial experience. After qualifyingwith Price Waterhouse in London, he spent most of his early career in divisional financial management roles withcompanies such as Smiths Industries and Thorn EMI. In 1997, he was finance director of World Telecom Plc whenit successfully floated on AIM. For the last seven years, he has been running a financial and managementconsultancy business providing advice to limited companies and professional partnerships. Mr McWhirter isresponsible for the financial controls and systems of the Group.

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John James, age 59, Non Executive Director

Mr James is a qualified solicitor who was a Partner at Edge and Ellison, now Hammonds, for 19 years. He was aformer non-executive Chairman of Remainders Ltd, a chain of 170 bookshops with turnover in excess of £75million until it was successfully sold to its management in 2003. Whilst at Edge and Ellison, he advised onmergers and acquisitions and joint ventures both in the public and private sectors. He was responsible forintroducing new and international clients to the firm and was a point of liaison with the Cadbury Committee thatintroduced a code of corporate governance. Mr James is responsible for the implementation of corporategovernance at Intandem.

Reasons for the Placing, Admission and use of proceeds

The proceeds of the Placing will be used to provide working capital for the Group’s operations to be expandedand to provide development funding for the Group’s participation in the consortium backing Number 9 Films.

The Directors believe that the benefits for the Group of the Placing and Admission include:

• increased awareness of the Group to potential film financiers;

• ability to issue shares as consideration for potential future acquisitions;

• the ability to raise further funds in the future, either to enable a proposed acquisition to be completed and/orto raise additional working capital or development capital for the Group; and

• the enhanced opportunities to attract and reward employees for their efforts in developing and growing thebusiness, while aligning their interests with those of the shareholders, through share-based incentiveschemes.

Details of the Placing

The Company is raising £1,250,000 before expenses through the placing of up to 25,000,000 new Ordinary Sharesat the Placing Price with institutional and other investors, representing 29 per cent. of the Enlarged Issued ShareCapital of the Company on Admission (assuming the Maximum Subscription is placed).

The Placing is conditional, inter alia, on Admission. Dealings in the Placing Shares are expected to commence on22 April, 2005.

Further details of the Placing Agreement are set out in paragraph 12 of Part IV of this document.

Warrants

The Company has issued Warrants conditional on Admission, in respect of 3,500,000 Ordinary Shares to certainorganisations, including CFA, further details of which are set out in paragraph 5 of Part IV of this document. Theprincipal terms of the Warrants are summarised in paragraph 8 of Part IV of this document.

Employee share options

In order to incentivise the management of the Company and current and future senior employees, the Directorshave established the EMI Plan. The principal terms of the EMI Plan are summarised in paragraph 4 of Part IV ofthis document.

In addition, the Company has granted, conditional upon Admission, EMI Options in respect of 5,000,000 OrdinaryShares in aggregate to Directors and employees of the Group. These optionholders (and persons connected withthem) represent a Concert Party for the purposes of the City Code on Takeovers and Mergers (“City Code”). TheOptions are exercisable three years from grant subject to certain performance conditions being met.

Further details concerning the terms of these options are set out in paragraph 4 of Part IV of this document.

Corporate governance

The Directors recognise the importance of sound corporate governance, whilst taking into account the size andnature of the Group. The Directors intend to comply with the main provisions of the Combined Code, in so far aspracticable given the Group’s size and the constitution of the Board.

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The Directors have established an audit committee and a remuneration committee with formally delegated rulesand responsibilities. Each of these committees currently comprise the non-executive Director, Mr James, and atleast one executive Director and will meet regularly, and at least twice each year.

On Admission the audit committee will comprise Mr James, Mr Smith and Mr McWhirter and will be chaired byMr James. The audit committee will determine and examine any matters relating to the financial affairs of theCompany including the terms of engagement of the Company’s auditors and, in consultation with the auditors, thescope of the audit. It will receive and review reports from management and the Company’s auditors relating to theinterim and annual accounts and the accounting and the internal control systems in use throughout the Company,in addition to ensuring that the financial performance, position and prospects of the Company are properlymonitored and reported on. The audit committee will have unrestricted access to the Company’s auditors.

The remuneration committee of the Company, comprising Mr James, who will chair the committee, and Mr Smithwill review the scale and structure of the executive Directors’ remuneration and benefits packages, including shareoptions and the terms of their service contracts, with due regard to the interests of shareholders. The remunerationcommittee will also make recommendations to the Board concerning the allocation of share options to employees.The remuneration, terms and conditions of appointment of Mr Smith will be determined by the Board.

The Company has adopted a model code for Directors’ and key employees’ share dealings which is appropriatefor an AIM-listed company. The Directors will comply with Rule 19 of the AIM Rules relating to Directors’dealings.

By special resolution of the shareholders of the Company passed on 5 April 2005 the Directors have the authority,inter alia, following Admission to issue Ordinary Shares up to a maximum aggregate nominal value of £21,200(representing 25 per cent. of the Company’s Enlarged Issued Share Capital) for cash without seeking priorshareholder approval. Although this exceeds the recommended limits of certain institutional investor guidelines,the Directors believe this authority will benefit the Company by giving it greater flexibility to raise cash, byissuing further equity securities quickly, without incurring additional expense during its formative stage. Furtherdetails are set out in paragraph 2 of Part IV of this document.

Dividend policy

At this early stage in the Company’s development the Directors believe that it is inappropriate to give an indicationof the timing or likely level of future dividends.

Taxation

The attention of investors is drawn to the information regarding taxation in relation to the Placing and Admissionthat is set out in paragraph 7 of Part IV of this document. These details are, however, intended only as a generalguide to the current tax position under UK taxation law. Shareholders who are in any doubt as to their tax positionor who are subject to tax in jurisdictions other than the UK are strongly advised to consult their professionaladvisers.

The Company has obtained provisional assurance from the Inland Revenue that, subject to the satisfactory issueof eligible Ordinary Shares and the Company meeting the relevant requirements, it should be able to authorise theCompany to issue certificates to qualifying shareholders for the purposes of the Enterprise Investment Scheme(“EIS”).

The continuing availability of EIS relief will be conditional, inter alia, on the Company continuing to satisfy therequirements for a qualifying company throughout the “relevant” period of three years from the date of theinvestor making his investment. There can be no assurance that the Company will continue to satisfy theserequirements.

The Company has applied for provisional approval from the Inland Revenue that the Ordinary Shares will be aneligible VCT investment for the purposes of the Income and Corporation Taxes Act 1988 Schedule 28B and hasreceived provisional confirmation to this effect.

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Admission, settlement and dealings

The Company has applied for the Ordinary Shares in issue immediately following the Placing to be admitted totrading on AIM. It is expected that Admission will take place, and that dealings in the Ordinary Shares willcommence, on 22 April 2005.

Lock-in arrangements

Each of the Directors has agreed, in accordance with Rule 7 of the AIM Rules, that he will not (and will procurethat his related parties will not) dispose of any interest in Ordinary Shares for a period of one year fromAdmission. Each of the Directors has further agreed with CFA and the Company not to dispose of any interest inOrdinary Shares without the Company’s broker’s consent, not to be unreasonably withheld or delayed, for afurther twelve months after the first anniversary of the date of Admission. Further details of these lock-inarrangements are set out in paragraph 12 of Part IV of this document.

The City Code on Takeovers and Mergers

Upon Admission a Concert Party as defined by the City Code on Takers and Mergers will exist of certain foundershareholders and parties associated with them as set out in paragraph 14 of Part IV.

Shareholders should be aware that upon Admission the Concert Party will, in aggregate, hold approximately42.1 per cent. of the issued share capital of the Company. Furthermore if the Concert Party were to exercise theirOptions and no other option-holder or warrant holder were to exercise their options or warrants the Concert Partywould be interested in approximately 44.5 per cent. of the Issued Share Capital so enlarged.

Consequently the Concert Party will have the ability to exert a very significant degree of control over the futureconduct of the Company. Furthermore, under Rule 9 of the City Code any person who acquires shares which,taken together with shares already held by him or shares held or acquired by persons acting in concert with him,carry 30 per cent. or more of the voting rights of a company which is subject to the City Code, is normally requiredto make a general offer to all its shareholders to acquire for cash the remaining shares in that company at not lessthan the highest price paid by him or any persons acting in concert with him within the preceding twelve months.

Rule 9 of the City Code also provides, inter alia, that where any person, together with persons acting in concertwith him, holds shares carrying not less than 30 per cent. but not more than 50 per cent. of a company’s votingrights, and such person, or any other person acting in concert with him, acquires additional shares which increasehis percentage of voting rights of such company, that person is normally required to make a general offer to allshareholders of the company for the shares not owned by him at not less than the highest price paid by him or anyperson acting in concert with him within the preceding twelve months.

This provision will apply to the future acquisition of Ordinary Shares by any member of the Concert Partyin these circumstances and hence further purchases of shares or grant of options (other than as describedon page 11 of this document) to any member of the Concert Party will be subject to the provisions of Rule 9 of the City Code.

If any person, together with persons acting in concert with him, holds shares carrying more than 50 per cent. of acompany’s voting rights, then there are no further constraints on such a person acquiring additional shares.

CREST

Application will be made for the Ordinary Shares to be admitted to CREST upon Admission. Accordingly,settlement of transactions in the Ordinary Shares following Admission may take place through CREST.

Additional information

Prospective investors should carefully consider Parts II, III and IV of this document, which provide additionalinformation on the Group.

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PART II

RISK FACTORS

Investment in the Ordinary Shares involves a high degree of risk. Accordingly, prospective investors shouldcarefully consider the specific risk factors set out below in addition to the other information contained in thisdocument before investing in the Ordinary Shares. The Directors consider the following risks and other factors tobe the most significant for potential investors in the Company, but the risks listed do not necessarily comprise allthose associated with an investment in the Company and are not set out in any particular order of priority.Additional risks and uncertainties not currently known to the Directors may also have an adverse effect on theGroup’s business.

If any of the following risks actually occur, the Group’s business, financial condition, capital resources, results orfuture operations could be materially adversely affected. In such a case, the price of the Ordinary Shares coulddecline and investors may lose all or part of the value of their investment.

Business and industry risks

The Group’s business is at an early stage of development and operates in a volatile and highly competitive industrygiving rise to a number of risks, including the following:

• to date, the Group has secured rights to three films. The Group’s ability to compete effectively with otherfilm sales and marketing companies is dependent largely upon the expertise of the Directors and their abilityto identify and acquire rights in other feature films which have international appeal (and therefore are likelyto be commercially successful);

• the Group competes in a highly competitive market which may become even more competitive in the future.The Group competes with other, larger independent film companies, as well as major Studios, many ofwhich have greater financial and human resources than the Group. Although the Directors believe that theGroup will compete favourably in its chosen markets, there can be no assurance that the Group can maintainits competitive position against current and potential competitors, especially those with greater financial,marketing and other resources;

• the film industry is a volatile industry susceptible to changes in the global economy, as well as changes inlegislation, regulation and government policy which may affect the industry, any of which may adverselyaffect consumer demand for films or the ability to successfully finance or market films.

Any of these factors could harm the Group’s business, financial condition and results.

Liquidity of the Ordinary Shares and the AIM market generally

It may be more difficult for an investor to realise his or her investment on AIM than to realise an investment in acompany whose shares and other securities are quoted on the Official List. The AIM Rules are less demandingthan those of the Official List. An investment in shares that are traded on AIM is likely to carry a higher risk thanan investment in shares quoted on the Official List. AIM has been in existence since June 1995 but its futuresuccess and future in the market for the Ordinary Shares cannot be guaranteed. The share price of publicly tradedemerging companies can be highly volatile.

The price at which the Ordinary Shares will be traded and the price at which investors may realise their investmentwill be influenced by a large number of factors, some specific to the Group and its operations and some that mayaffect quoted companies generally. Admission to AIM should not be taken as implying that there will be a liquidmarket for the Ordinary Shares, particularly as, on Admission, the Company will have a limited number ofshareholders. The market for shares in smaller public companies, including the Company’s, is less liquid than forlarger public companies. The Group is aiming to achieve capital growth and, therefore, Ordinary Shares may notbe suitable for a short term investment. Consequently, the share price may be subject to greater fluctuation onsmall volumes of shares, and thus the Ordinary Shares may be difficult to sell at a particular price. The marketprice of the Ordinary Shares may not reflect the underlying value of the Group’s net assets.

14

Management and staff

The Group is heavily reliant upon the skills of its executive Directors and senior management and the loss of anyof these key members of staff could reduce the Group’s ability to achieve its planned development objectives. TheGroup will endeavour to ensure that the principal members of its management team are suitably incentivised, butthe retention of such staff cannot be guaranteed.

The Group may need to recruit additional senior management in order to develop its business. There can be noguarantee that such individuals will be recruited in the Group’s preferred timetable or at the cost levels anticipatedby the Group. Competition for staff is strong and hence the Group may find it difficult to retain key managementand staff.

History of operating losses

The Group has experienced losses after taxation of approximately £142,000 for the period since incorporation to31 December 2004. There can be no assurances that the Group will ever achieve significant revenues orprofitability.

Requirement for additional funds

There can be no assurance that the Group will be able to raise additional funds when needed or that such fundswill be available on terms favourable to the Group. The Directors have authority following Admission to issueOrdinary Shares up to a maximum aggregate nominal value of £21,200 (representing 25 per cent. of theCompany’s Enlarged Issued Share Capital) for cash, without seeking prior shareholder approval. If additionalfunds should be raised by issuing equity securities pursuant to such authority, dilution of existing shareholdersmay result. Failure to obtain additional financing if and when needed on favourable terms, or at all, could have amaterial adverse affect on the Group’s business, operating results and financial condition.

Certain shareholders will continue to have substantial control over the Company after the Placing

Upon completion of the Placing, the Concert Party will hold, in aggregate 42.1 per cent. of the Enlarged IssuedShare Capital (of which a 29.2 per cent. interest is owned by Gary Smith and persons connected with him). As aresult, this Concert Party may be able to exercise significant control over all matters requiring shareholderapproval, which could delay or prevent an outside party from acquiring or merging with the Company. The abilityof such shareholders to prevent or delay these transactions could cause the price of the Ordinary Shares to decline.

15

PART III

ACCOUNTANTS’ REPORT

The following is the full text of a report on Intandem Films Plc from Baker Tilly, the Reporting Accountants, tothe Directors of Intandem Films Plc and City Financial Associates Limited.

2 Bloomsbury StreetLondon WC1B 3ST

www.bakertilly.co.uk

The DirectorsIntandem Films Plc22 Soho SquareLondonW1D 4NS

and

The DirectorsCity Financial Associates LimitedPountney Hill House6 Laurence Pountney HillLondonEC4R 0BL

19 April 2005

Dear Sirs

INTANDEM FILMS PLC (“the Company”)(Formerly Broomco (3710) Limited)

Introduction

We report in connection with the proposed placing of ordinary shares of the Company (“the Placing”) and theadmission of the ordinary share capital of the Company to trading on AIM (“the Admission”). This report has beenprepared for inclusion in the Prospectus dated 19 April 2005 (“the Prospectus”). We report separately on theCompany (Section A), Intandem Entertainment Limited (“Entertainment”) (Section B) and Intandem PicturesLimited (“Intandem”) (Section C). The Company, Entertainment and Intandem are together referred to as “theGroup”.

Section A – The Company

The Company was incorporated on 10 February 2005 as Broomco (3710) Limited with an authorised share capitalof £1,000 divided into 1,000 ordinary shares of £1 each, of which 1 share was issued, but not paid onincorporation. On 5 April 2005, the authorised share capital was increased to £200,000 by the creation of 199,000further ordinary shares of £1 each. On the same date, each of the issued and unissued ordinary shares of £1 eachwere subdivided into 1,000 ordinary shares of £0.001 each, all such ordinary shares ranking pari passu in allrespects.

On 5 April 2005, the Company changed its name and re-registered as Intandem Films Plc from Broomco (3710)Limited.

The Company has not traded, prepared any financial statements for presentation to members, incurred neither

16

profit nor loss, and has neither declared nor paid dividends or made any other distributions since the date ofincorporation. There have been no transactions other than the allotment of shares described below and theexecution of the material contracts referred to in paragraph 13 of Part IV of the Prospectus and the acquisition of100% of the ordinary share capital of Entertainment through a share for share exchange. Accordingly, no profitand loss account information is presented in this report.

Basis of preparation

The financial information set out below has been extracted from the financial records of the Company for theperiod from incorporation to 5 April 2005, no adjustments being considered necessary.

Responsibility

The financial records are the responsibility of the directors of the Company (“the Directors”). The Directors arealso responsible for the contents of the Prospectus in which this report is included.

It is our responsibility to compile the financial information set out below from the Company’s financial recordsand to issue a report in accordance with paragraphs 45 of Schedule 1 to the Public Offers of Securities Regulations1995. Our work has been undertaken so that we might state those matters we are required to state in our reportand for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone for any other purpose for our work, for this report or for the opinions we have formed.

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards issued bythe Auditing Practices Board. Our work included an assessment of evidence relevant to the amounts anddisclosures in the financial information. It also included an assessment of the significant estimates and judgementsmade by those responsible for the preparation of the financial records and whether the accounting policies areappropriate to the Company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the financialinformation is free from material misstatement, whether caused by fraud or other irregularity or error.

Opinion

In our opinion, the financial information set out below gives, for the purpose of the Prospectus, a true and fair viewof the state of affairs of the Company at 5 April 2005.

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BALANCE SHEET

As at 5 April2005

Notes £

Fixed assetsInvestments 2 60,174

Current assetsDebtors (unpaid share capital) 1

Net assets 60,175

Capital and reservesCalled up share capital 3 60,175Profit and loss account ––

Shareholders’ equity funds 60,175

NOTES TO THE FINANCIAL INFORMATION

1 Accounting policies

The principal accounting policies, which have been applied in the Company’s financial information, are asfollows:

Basis of accounting

The financial information has been prepared under the historical cost convention and in accordance withapplicable accounting standards in the United Kingdom.

Investments

Unlisted investments are stated at cost. Provision is made for any impairment in the value of fixed assetinvestments.

2 Investments

On 5 April 2005, the Company entered into an agreement with all the shareholders of Entertainment toacquire its entire issued share capital, the consideration for which was satisfied by the allotment and issueof 60,174,000 ordinary shares of £0.001 each, credited as fully paid, in the Company.

Class of Proportion Nature ofholding directly held Business

Intandem Entertainment Limited Ordinary 100% Holding(Incorporated in England and Wales) company

3 Share capital

As at5 April 2005

£Authorised:200,000,000 ordinary shares of £0.001 each 200,000

Allotted and issued:60,175,000 ordinary shares of £0.001 each 60,175

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4 Post balance sheet events

On 6 April 2005, the Company entered into an agreement with Entertainment to acquire the entire issuedshare capital of its wholly owned subsidiary Intandem, the consideration for which was £157,876 and whichremains outstanding on inter-company loan.

5 Share options

On 5 April 2005 the Company adopted the Intandem Films (2005) Enterprise Management Incentive (“EMIPlan”), which allows the directors to grant share options to any full-time director or employee of the Group.On 18 April 2005 5 million share options were granted conditionally under the EMI Plan, by deed with noconsideration payable and are shown in the table below:

Subscription Period within Number of sharesprice per which options are for which rights

share exercisable are exercisable£

Andrew Brown 5 pence from 22 April 2008 800,000William Hurman 5 pence from 22 April 2008 1,000,000Gary Smith 5 pence from 22 April 2008 1,500,000Other employees of the Group 5 pence from 22 April 2008 1,700,000

The grant of these share options will not become unconditional unless the Admission occurs and they willhave an exercise price of five pence per ordinary share. In respect of these share options conditionallygranted on 18 April 2005, no share options can be exercised unless the consolidated profit before tax of theCompany for any one of the three financial years ending 30 June 2008 is greater than £500,000. The shareoptions may normally be exercised within the period of three to ten years after the date of grant.

In addition to the share options granted above, 3,500,000 Warrants to subscribe for ordinary shares wereissued for nil consideration conditional upon Admission, all of which will be exercisable at any time betweenAdmission and the third anniversary of Admission at an exercise price of 5 pence. No warrants were issuedto Directors of the Company.

19

Section B – Entertainment

Entertainment was incorporated on 27 April 2004 as Broomco (3453) Limited with an authorised share capital of£1,000 divided into 1,000 ordinary shares of £1 each, of which 1 share was issued and not paid on incorporation.On 7 October 2004, the authorised share capital was increased to £2,000,000 by the creation of 1,999,000 furtherordinary shares of £1 each. On the same date, each of the issued and unissued ordinary shares of £1 each werethen subdivided into 100 ordinary shares of 1 pence each, all such shares ranking pari passu in all respects.

On 15 October 2004, Entertainment changed its name to Intandem Films Limited from Broomco (3453) Limitedand on the 5 April 2005, Intandem Films Limited changed its name to Intandem Entertainment Limited.

Entertainment has not prepared any financial statements for presentation to members and has neither declared norpaid dividends or made any other distributions since the date of incorporation. There have been no transactionsother than the allotment of shares described below, the execution of the material contracts referred to in paragraph13 of Part IV of the Prospectus and the acquisition of 100% of the ordinary share capital of Intandem through ashare for share exchange and the impairment of this investment by the directors of Entertainment to Intandem’snet asset value.


The financial information set out below has been extracted from the financial records of Entertainment for theperiod from incorporation to 28 February 2005, no adjustments being considered necessary.

Responsibility

The financial records are the responsibility of the directors of Entertainment. The Directors are responsible for thecontents of the Prospectus in which this report is included.

It is our responsibility to compile the financial information set out below from Entertainment’s financial recordsand to issue a report in accordance with paragraphs 45 of Schedule 1 to the Public Offers of Securities Regulations1995. Our work has been undertaken so that we might state those matters we are required to state in our reportand for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone for any other purpose for our work, for this report or for the opinions we have formed.

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards issued bythe Auditing Practices Board. Our work included an assessment of evidence relevant to the amounts anddisclosures in the financial information. It also included an assessment of the significant estimates and judgementsmade by those responsible for the preparation of the financial records and whether the accounting policies areappropriate to Entertainment’s circumstances, consistently applied and adequately disclosed.


Opinion

In our opinion, the financial information set out below gives, for the purpose of the Prospectus, a true and fair viewof the losses of Entertainment for the period ended 28 February 2005 and the state of affairs of Entertainment atthat date.

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PROFIT AND LOSS ACCOUNTTen months ended28 February 2005

Notes £Impairment of investment in subsidiary 1 (443,873)

Retained loss for the period (443,873)

No separate Statement of Total Recognised Gains and Losses has been presented as all such gains and losses havebeen dealt with in the Profit and Loss Account.

BALANCE SHEETAs at

28 February 2005£

Fixed assetsInvestments 2

Cost 601,749Less provision to net asset value of subsidiary (443,873)

157,876Current assetsDebtors (unpaid share capital) 1

Net assets 157,877

Capital and reservesCalled up share capital 3 601,750Profit and loss account (443,873)

Shareholders’ equity funds 157,877


1 Accounting policiesThe principal accounting policies, which have been consistently applied in Entertainment’s financialinformation throughout the period under review, are as follows:

Basis of accountingThe financial information has been prepared under the historical cost convention and in accordance withapplicable accounting standards in the United Kingdom.

InvestmentsUnlisted investments are stated at cost. Provision is made for any impairment in the value of fixed assetinvestments.

2 InvestmentsOn 7 October 2004 Entertainment entered into an agreement with all the shareholders of Intandem to acquireits entire issued share capital, the consideration for which was satisfied by the allotment and issue of60,174,900 ordinary shares of 1 pence each, credited as fully paid, in Entertainment.

Entertainment’s directors reviewed the value of the investment included within Entertainment’s balancesheet and impaired the investment to an amount equal to the net asset value of Intandem as at 31 December2004.

21

3 Share capitalAs at

28 February 2005£

Authorised:200,000,000 ordinary shares of 1 pence each 2,000,000

Allotted and issued:60,175,000 ordinary shares of 1 pence each 601,750



22

Section C – Intandem


The financial information set out below is based on the audited financial statements of Intandem for the eightmonths ended 30 June 2004, no adjustments being considered necessary and has been extracted from non-statutory accounts of Intandem, for the six months ended 31 December 2004, no adjustments being considerednecessary. The accounts of Intandem for the eight months ended 30 June 2004 were audited by Baker Tilly,Chartered Accountants who gave an unqualified report thereon. No audited financial statements have beenprepared for Intandem in respect of any subsequent period.

Responsibility

The financial statements are the responsibility of the directors of Intandem who approved their issue. TheDirectors are responsible for the contents of the Prospectus in which this report is included.

It is our responsibility to compile the financial information set out below from Intandem’s financial records andto issue a report in accordance with paragraphs 45 of Schedule 1 to the Public Offers of Securities Regulations1995. Our work has been undertaken so that we might state those matters we are required to state in our reportand for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility toanyone for any other purpose for our work, for this report or for the opinions we have formed.

Basis of opinion

We conducted our work in accordance with the Statements of Investment Circular Reporting Standards issued bythe Auditing Practices Board. Our work included an assessment of evidence relevant to the amounts anddisclosures in the financial information. The evidence included that obtained by us relating to the audit of thefinancial statements underlying the financial information. It also included an assessment of the significantestimates and judgements made by those responsible for the preparation of the financial statements underlying thefinancial information and whether the accounting policies are appropriate to Intandem’s circumstances,consistently applied and adequately disclosed.


Fundamental uncertainty – going concern

The financial information has been prepared on the basis that the fundamental accounting concept of goingconcern is applied.

The Directors are seeking to raise approximately £1 million of new equity share capital under the Placing, which,in the opinion of the Directors, will provide the Group with sufficient working capital to allow Intandem withsufficient working capital to continue as a going concern. The Company has confirmed that it will provide fundsto Intandem.

On the assumption that there will be a successful outcome to the Placing, the going concern concept has beenapplied in preparing this financial information.

Opinion

In our opinion, the financial information set out below gives, for the purpose of the Prospectus, a true and fair viewof the profits, cash flow and total recognised gains and losses of Intandem for the periods ended 30 June 2004 and31 December 2004 and the state of affairs of Intandem at each of those dates.

23

PROFIT AND LOSS ACCOUNTSix months Eight months

ended 31 ended 30December 2004 June 2004

Notes £ £

Turnover 2 342,669 80,000Costs of sales (107,869) –

Gross profit 234,800 80,000Administrative expenses (301,765) (156,079)

Operating loss 3 (66,965) (76,079)Bank interest receivable 1,033 87Bank interest payable – (114)

Loss on ordinary activities before taxation (65,932) (76,106)Taxation 5 – –

Loss on ordinary activities after taxation (65,932) (76,106)

Turnover and operating losses all derive from continuing operations.

No separate Statement of Total Recognised Gains and Losses has been presented as all such gains and losses havebeen dealt with in the Profit and Loss Account.

24

BALANCE SHEET

As at 31 As at 30December 2004 June 2004

Notes £ £

Fixed assetsInvestments 6 100 100Tangible assets 7 46,084 –

46,184 100Current assetsDebtors 8 271,531 131,266Cash at bank 3,070 189,033

274,601 320,299

Creditors: amounts falling due within one year 9 (162,909) (83,825)

Net current assets 111,692 236,474

Total assets less current liabilities 157,876 236,574

Capital and reservesCalled up share capital 10 2,075 2,075Share premium account 11 297,839 310,605Profit and loss account 12 (142,038) (76,106)

Shareholders’ equity funds 13 157,876 236,574

25

CASH FLOW STATEMENT

Six months Eight monthsended 31 ended 30

December 2004 June 2004Notes £ £

Net cash outflow from operating activities 14A (131,146) (117,740)Returns on investments and servicing of finance

Interest received 1,033 87Interest paid – (114)

Net cash flow for returns on investments and servicing of finance 1,033 (27)

Capital expenditure and financial investmentPurchase of tangible fixed assets (47,584) –Purchase of investment (100) –

Net cash flow for capital expenditure and servicing of finance (47,684) –

Cash outflow before use of liquid resources and financing (177,797) (117,767)

FinancingProceeds of share issue 9,600 306,800Share issue costs (17,766) –

Net cash (outflow)/inflow for financing (8,166) 306,800

(Decrease)/increase in cash in period (185,963) 189,033

Reconciliation of net cash flow to movement in net funds 14B(Decrease)/increase in cash in period (185,963) 189,033

Movement in funds in period (185,963) 189,033

Opening net funds 189,033 –

Closing net funds 3,070 189,033

26


1 Accounting policies

The principal accounting policies, which have been consistently applied in Intandem’s financial informationthroughout the period under review, are as follows:

Basis of accounting

The financial information has been prepared under the historical cost convention and in accordance withapplicable accounting standards in the United Kingdom.

Tangible fixed assets

Fixed assets are stated at historical cost.

Depreciation is provided on all tangible fixed assets at rates calculated to write each asset down to itsestimated residual value over its expected useful life, as follows:

Office equipment Over 4 yearsFurniture and fittings Over 4 years

Investments

Fixed asset investments are included at cost less any amounts written off for permanent diminution in value.

Leases

All leases are operating leases and the annual rentals are charged to profit and loss account on a straight-linebasis over the lease term.

Deferred taxation

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at thebalance sheet date where transactions or events that result in an obligation to pay more tax in the future ora right to pay less tax in the future have occurred at the balance sheet date. Timing differences are differencesbetween Intandem’s taxable results and its results as stated in the financial information that arise from theinclusion of gains and losses in tax assessments in periods different from those in which they are recognisedin the financial statements.

Deferred tax is measured at the average tax rates that are expected to apply in the periods in which timingdifferences are expected to reverse, based on tax rates and laws that have been enacted or substantiallyenacted by the balance sheet date. Deferred tax is measured on a non-discounted basis.

Foreign currenciesAssets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at thebalance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of thetransaction. All differences are taken to the profit and loss account.

Turnover

Turnover, which excludes value added tax, represents commissions, fees and recoverable expenses on areceivable basis where the contract is signed. If receipt of the revenue is dependent on the fulfilment of futurecontractual obligations, then turnover is not recognised until those future obligations have been fulfilled.

Film sales and marketing costs

In accordance with contracts between Intandem and film producers, Intandem is entitled to recoup all itsexpenditure directly related to the promotion and distribution of films against monies received on the sale ofdistribution rights.

Where the expenditure is unrecouped on individual films the costs are carried forward unless Intandem’sdirectors are of the opinion that they are irrecoverable in which case they are written off to the profit andloss account.

27

2 Turnover and gross profit

Intandem’s turnover and gross profit is derived from its principal activity as an executive producer of featurefilms in the United Kingdom, sales commissions on sales of films to film distributors around the world andthe recovery of marketing expenses.

3 Operating loss


December 2004 June 2004£ £

Operating loss is stated after charging:Auditor’s remuneration 5,000 5,000Operating leases:

Land & buildings 12,000 –Depreciation and amounts written off tangible fixed assets

Office equipment 900 –Furniture & fittings 500 –

4 Employees


December 2004 June 2004No. No.

The average monthly number of persons (including directors)employed by Intandem was:Office and management 6 3



Staff costs for the above persons:Wages and salaries 129,775 31,216Social security costs 15,034 3,897

144,809 35,113



Directors’ emoluments included in staff costs above 70,235 17,231Directors’ emoluments charged as consultancy fees 76,668 86,837

146,903 104,068

Emoluments charged as consultancy fees relate to Gary Smith and Andrew McWhirter. See note 15.

28

5 Taxation



Factors affecting tax charges for the periodThe different factors are explained below:Loss on ordinary activities before tax: (65,932) (76,106)

Loss on ordinary activities multiplied by standard rate ofcorporation tax in the UK 30% (19,780) (22,832)Effects of:Expenses not deductible for tax purposes 7,085 2,595Depreciation in excess of capital allowances 450 –Tax losses carried forward 12,245 20,237

Tax charge for period – –

A deferred tax asset of £33,382 (eight months to 30 June 2004: £20,237) arising on trading losses carriedforward at 31 December 2004 has not been recognised due to the uncertainty of the availability of futureprofits to offset against trading losses.

6 Investments

£As at 30 June 2004 and 31 December 2004 100

Unlisted Country of registration Proportion Nature ofinvestment /incorporation directly held Business

Audley Films LLP England Less than 1% Film production and financing partnership

7 Tangible fixed assets

Office Furniture andequipment fittings Total

£ £ £CostAs at 1 July 2004 – – –Additions 10,795 36,789 47,584

As at 31 December 2004 10,795 36,789 47,584

DepreciationAs at 1 July 2004 – – –Charged in the period 900 600 1,500

As at 31 December 2004 900 600 1,500

Net book valueAs at 31 December 2004 9,895 36,189 46,084

As at 1 July 2004 – – –

29

8 Debtors


£ £

Trade debtors 81,628 -Other debtors 11,991 16,744Called up share capital not paid 1,280 10,880Prepayments and accrued income 176,632 103,642

271,531 131,266

9 Creditors: amounts falling due within one year


£ £

Trade creditors 96,828 31,761Other taxation and social security 49,320 7,694Other creditors 2,811 10,370Accruals 13,950 34,000

162,909 83,825

10 Share capital


£ £

Authorised:2,500 ordinary shares of £1 each 2,500 2,500

Allotted and issued:2,075 ordinary shares of £1 each 2,075 2,075

Intandem was incorporated on 14 October 2003 and registered in England & Wales. The authorised sharecapital on incorporation was 1,000 ordinary shares of £1 each. On 21 November 2003 the authorised sharecapital was increased to 1,500 ordinary shares of £1 each, by the creation of 500 ordinary shares of £1 each.On 24 February 2004 the authorised share capital was increased further to 2,500 ordinary shares of £1 eachby the creation of 1,000 new ordinary shares of £1 each.

During the period ended 30 June 2004 a total of 2,075 ordinary shares of £1 each were allotted and issued,with an aggregate nominal value of £2,075. A total of 1,680 ordinary shares of £1 each were issued at par,while a further 395 ordinary shares of £1 each were issued at a premium of £799 per ordinary share. The totalconsideration for these shares was £317,680, with £1,280 remaining unpaid at 31 December 2004 (£10,880at 30 June 2004).

30

11 Share premium account


£ £

At beginning of period 310,605 –Issue of ordinary shares - 315,605Issue and start up costs (12,766) (5,000)

Balance carried forward 297,839 310,605

12 Profit and loss account


£ £

Balance brought forward (76,106) –Loss for the financial period (65,932) (76,106)

Balance carried forward (142,038) (76,106)

13 Reconciliation of movement in shareholders’ funds



Loss for the financial period (65,932) (76,106)Issue of ordinary shares - 317,680Issue and start up costs (12,766) (5,000)Opening shareholders’ funds 236,574 –

Closing shareholders’ funds 157,876 236,574

14 Cash flows



A Reconciliation of operating profit to net cash outflowfrom operating activities

Operating loss (66,965) (76,079)Add back depreciation 1,500 –Increase in debtors (149,865) (120,386)Increase in creditors 84,184 78,725

Net cash outflow from operating activities (131,146) (117,740)

B Analysis of change of net funds in yearOpening net funds 189,033 –(Decrease) / Increase in cash in year (185,963) 189,033

Closing net funds 3,070 189,033

31

15 Related party transactions

Gary Smith, a director of Intandem supplied services to the business through his management company,Edge Venture Capital Limited. The total value of his services charged to the profit and loss account for thesix-month period to 31 December 2004 amounted to £60,000 (8 months to 30 June 2004: £83,337).

Andrew McWhirter, a director of Intandem supplied services to the business through his company, AndrewMcWhirter Associates Limited. The total value of his services charged to the profit and loss account for thesix-month period to 31 December 2004 amounted to £16,668 (8 months to 30 June 2004: £3,500).

On 13 May 2004 Gary Smith made an interest free loan to Intandem of £25,000, which was repaid on 24May 2004 by Intandem.

16 Capital commitments



Capital expenditure contracted for but not provided inthe financial information 21,585 –

17 Commitments under operating leases



At 31 December 2004, Intandem had annual commitments undernon cancellable operating leases as follows:

Land & buildings:Expiring between two and five years 65,000 –

Other:Expiring between two and five years 5,184 –



Nature of financial information

The financial information presented above in respect of:

• The Company as at 5 April 2005 (Section A);

• Entertainment for the ten months ended 28 February 2005 (Section B); and,

• Intandem for the eight months ended 30 June 2004 and the six months ended 31 December 2004(Section C).

does not constitute statutory accounts for each of the periods and dates.

Statutory accounts for Intandem the eight months ended 30 June 2004 have been delivered to the Registrar ofCompanies. In respect of the statutory accounts for the eight months ended 30 June 2004 we have made anunqualified report under Section 235 of the Companies Act 1985 and such report did not contain any statementunder section 237(2) or (3) of that Act.

32

Consent

We consent to the inclusion of this report in the Prospectus dated 19 April 2005 and accept responsibility for thisreport for the purposes of paragraphs 45 of Schedule 1 to the Public Offers of Securities Regulations 1995.

Yours faithfully

Baker Tilly

Chartered AccountantsRegistered Auditor

33

PART IV

Additional information

1. INCORPORATION AND ACTIVITIES

1.1 The Company was incorporated and registered in England and Wales on 10 February 2005 as Broomco(3710) Limited under the Act as a private limited company with registered number 5360907. On 5 April2005 the Company was re-registered as a public limited company under the Act with the name IntandemFilms Plc.

1.2 The principal legislation under which the Company operates is the Act. The liability of the Company’smembers is limited.

1.3 The registered and head office of each Group company is 22 Soho Square, London W1D 4NS.

1.4 The principal activity of the Company is that of a holding company of the Group. The Group’s business isoperated by Intandem Pictures Limited, a private limited company incorporated in England and Wales(registered number 4930997) and a wholly owned subsidiary of the Company, whose principal activity isacting as a film sales and marketing company. Intandem Pictures Limited has an interest of less than 1 percent in Audley Films LLP, a limited liability partnership which acts as a film production and financingbusiness. The Company has one other wholly owned subsidiary, Intandem Entertainment Limited, a privatecompany incorporated in England and Wales (registered number 5113654) a former holding company whichis currently dormant.

2 SHARE CAPITAL

2.1 Set out below are details of (i) the authorised and issued share capital of the Company as at the date of thisdocument and (ii) the authorised and issued share capital of the Company as it will be immediately followingAdmission and completion of the Placing assuming the Maximum Subscription is placed pursuant to thePlacing.

As at the date of this document Immediately following AdmissionIssued and Issued and

Authorised fully paid up Authorised fully paid up

Ordinary Shares 200,000,000 60,175,000 200,000,000 85,175,000£ 200,000 60,175 200,000 85,175

Pursuant to resolutions of the Company passed on 5 April 2005:

2.1.1 the authorised share capital of the Company was increased from £1,000 to £200,000 by the creationof 199,000 ordinary shares of £1.00 each;

2.1.2 each ordinary share of £1.00 each in the share capital of the Company (whether issued or unissued)was subdivided into 1,000 Ordinary Shares of 0.1p each, all such shares to rank pari passu in allrespects;

2.1.3 the Directors were generally and unconditionally authorised in accordance with section 80 of the Actto allot relevant securities (within the meaning of section 80 of the Act) of up to (i) £60,174 inconnection with the acquisition of Intandem Entertainment Limited; (ii) £25,000 in connection withthe Placing; (iii) £5,000 in connection with the issue of the Warrants; and (iv) otherwise up to anaggregate nominal amount of £28,390 provided that such authority shall expire at the conclusion ofthe next annual general meeting of the Company or, if earlier, 15 months from the date of the passingof the resolution;

2.1.4 the agreement for the share for share acquisition of Intandem Entertainment Limited was approvedfor the purposes of section 320 of the Act;

2.1.5 the Directors were empowered pursuant to section 95 of the Act to allot equity securities (within themeaning of section 94(2) of the Act) for cash pursuant to the authority referred to in paragraph 2.1.3

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above in respect of (i) the allotment of up to 25,000,000 new Ordinary Shares in connection with thePlacing; (ii) the issue of the Warrants in respect of up to 5,000,000 new Ordinary Shares; (iii) issuesby way of rights issue to shareholders; and (iv) otherwise up to an aggregate nominal amount of£21,200 provided that such authority shall expire at the conclusion of the next annual general meetingof the Company or, if earlier 15 months from the date of the passing of the resolution.

2.2 The Ordinary Shares in issue upon Admission will be in registered form and, following Admission, will becapable of being held in uncertificated form. Application has been made to the London Stock Exchange forthe Ordinary Shares to be admitted to trading on AIM. No temporary documents of title will be issued andit is anticipated that definitive share certificates will be posted by first class post to shareholders on or before6 May 2005.

2.3 The articles of association permit the holding and transfer of Ordinary Shares under CREST. CREST is apaperless settlement procedure enabling securities to be evidenced otherwise than by certificate andtransferred otherwise than by written instrument. The Directors have applied for the Ordinary Shares to beadmitted to CREST.

3. MEMORANDUM AND ARTICLES OF ASSOCIATION

3.1 Memorandum of association

The principal objects of the Company are set out in paragraph 4 of its memorandum of association (whichis available for inspection at the address specified in paragraph 15 of this Part IV) and include the carryingon of business as a general commercial company and acting as a holding company.

3.2 Articles of association

The articles of association of the Company adopted pursuant to a special resolution of the Company passedon 5 April 2005 (“Articles”) include provisions to the following effect:

3.2.1 Voting rights

Subject to any terms as to voting upon which any shares may have been issued or may for the timebeing be held and to any disenfranchisement in the event of non-compliance with a statutory noticerequiring disclosure of interests in shares in the Company, at a general meeting of the Company:

3.2.1.1 every member who (being an individual) is present in person or (being a corporation) ispresent by a duly authorised representative, not being himself a member, shall, on a show ofhands, have one vote; and

3.2.1.2 every member present in person or by representative (in the case of a corporate member) orby proxy shall, on a poll, have one vote for every share of which he is the holder.

Unless the Board otherwise determines, a member shall not be entitled to vote unless all calls or othersums due from him in respect of shares in the Company have been paid.

3.2.2 Dividends

Subject to the provisions of the Acts (as defined in the Articles) and of the Articles, the Company mayby ordinary resolution declare a dividend to be paid to the members according to their respectiverights and interests in the profits of the Company, but no dividend shall exceed the amountrecommended by the Board. Subject to the provisions of the Acts, the Board may declare and paysuch interim dividends (including any dividend payable at a fixed rate) as appear to the Board to bejustified by the profits of the Company available for distribution.

Except as otherwise provided by the rights attached to shares, all dividends shall be declared and paidaccording to the amounts paid up or credited as paid up (other than amounts paid in advance of calls)on the shares in respect of which the dividend is paid and shall be apportioned and paidproportionately to the amounts paid up on such shares during any portion or portions of the period inrespect of which the dividend is paid. All dividends unclaimed for a period of 12 years after havingbeen declared or becoming due for payment shall be forfeited and cease to remain owing by theCompany.

Without prejudice to the provisions of the Articles, the Board may, with the authority of an ordinaryresolution of the Company:

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3.2.2.1 offer holders of ordinary shares the right to elect to receive further ordinary shares, creditedas fully paid, instead of cash in respect of all or part of any dividend or dividends specifiedby the ordinary resolution;

3.2.2.2 direct that payment of all or part of any dividend declared may be satisfied by the distributionof specific assets.

There are no specified dates on which entitlements to dividends or interest payable by the Companyarise.

3.2.3 Distribution of assets on a winding-up

On a winding-up, the liquidator may, with the authority of an extraordinary resolution of theCompany and any other sanction required by law, divide among the members in kind the whole orany part of the assets of the Company and may value any assets and determine how the division shallbe carried out as between the members or different classes of members. The liquidator may, with thelike sanction, transfer any part of the assets of the Company to trustees on such trusts for the benefitof members as he may determine. The liquidator shall not, however (except with the consent of themember concerned) distribute to a member any asset to which there is attached a liability or potentialliability for the owner.

3.2.4 Transfer of shares

Every transfer of shares which are in certificated form must be in writing in any usual form or in anyform approved by the Board and shall be executed by or on behalf of the transferor and (in the caseof a transfer of a share which is not fully paid up) by or on behalf of the transferee.

Every transfer of shares which are in uncertificated form must be made by means of a relevant system(as defined in the Uncertificated Securities Regulations 2001).

The Board may, in its absolute discretion and without giving any reason, refuse to register anytransfer of certificated shares if: (a) it is in respect of a share which is not fully paid up; (b) it is inrespect of more than one class of share; (c) it is not duly stamped (if so required); or (d) it is notdelivered for registration to the registered office of the Company or such other place as the Board mayfrom time to time determine, accompanied (except in the case of a transfer by a recognised person(as defined in the Articles) where a certificate has not been issued) by the relevant share certificateand such other evidence as the Board may reasonably require to show the right of the transferor tomake the transfer.

The Board may, in its absolute discretion and without giving any reason, refuse to register anytransfer of shares which is in favour of: (a) a child, bankrupt or person of unsound mind; or (b) morethan four joint transferees.

In the case of shares in certificated form, the registration of transfers of shares may be suspended atsuch times and for such periods (not exceeding 30 days in any year) as the Board may from time totime determine.

In the case of shares in uncertificated form, the register shall not be closed without the consent of theOperator of the relevant system (as defined in the Articles).

3.2.5 Variation of class rights

Subject to the provisions of the Acts, all or any of the rights or privileges attached to any class ofshares in the Company may be varied or abrogated in such manner (if any) as may be provided bysuch rights, or, in the absence of any such provision, either with the consent in writing of the holdersof at least three-fourths of the nominal amount of the issued shares of that class or with the sanctionof an extraordinary resolution passed at a separate meeting of such holders of shares of that class, butnot otherwise. The quorum at any such meeting is two persons holding or representing by proxy atleast one-third in nominal amount of the issued shares of the class in question or, at an adjournedmeeting, two persons holding shares of the class in question or his proxy. Any holder of shares of theclass in question present in person or by proxy may demand a poll. Holders of shares of the class inquestion shall, on a poll, have one vote for every share of that class held by them.

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The rights attached to any class of shares shall not, unless otherwise expressly provided in the rightsattaching to such shares, be deemed to be varied or abrogated by the creation or issue of sharesranking pari passu with or subsequent to them or by the purchase or redemption by the Company ofany of its own shares.

3.2.6 Share capital, changes in capital and purchase of own shares

Subject to the provisions of the Acts and the Articles, the power of the Company to allot and issueshares shall be exercised by the Board at such times and on such terms and conditions as the Boardmay determine.

Subject to the provisions of the Acts and to any rights attached to any existing shares: (a) any sharemay be issued with such rights or restrictions as the Company may from time to time determine byordinary resolution; and (b) the Company may issue redeemable shares.

The Company may, by ordinary resolution, (a) increase its share capital; (b) consolidate, orconsolidate and then divide, all or any of its shares into shares of a larger amount; (c) sub-divide itsshares or any of them into shares of a smaller amount and as a part of such sub-division determinethat any of such shares may have any preference or other advantage or deferred or qualified rights orbe subject to any restriction as compared with the others; (d) cancel any shares which, at the date ofthe passing of the resolution, have not been taken or agreed to be taken by any person and diminishthe amount of its share capital by the amount of the shares so cancelled; and (e) convert all or any ofits paid up shares into stock, and re-convert that stock into paid up shares of any denomination.

Subject to the provisions of the Acts, the Company may by special resolution reduce its share capital,any capital redemption reserve and any share premium account in any way.

Subject to the provisions of the Acts, the Company may purchase all or any of its shares of any class(including redeemable shares).

3.2.7 Directors

Unless otherwise determined by ordinary resolution, there shall be no maximum number of directors,but the number of directors shall not be less than two.

Subject to the provisions of the Acts and provided that he has disclosed to the directors the nature andextent of any interest, a director may:

3.2.7.1 enter into or otherwise be interested in any contract, arrangement, transaction or proposalwith the Company or in which the Company is otherwise interested;

3.2.7.2 hold any other office or place of profit under the Company (except that of auditor or auditorof a subsidiary of the Company) in conjunction with the office of director and may act byhimself or through his firm in a professional capacity to the Company, and be remuneratedaccordingly;

3.2.7.3 be a director or other officer, or employed by, or a party to any transaction or arrangementwith, or otherwise interested in, any company promoted by the Company or in which theCompany is otherwise interested or as regards which the Company has any powers ofappointment; and

3.2.7.4 shall not be liable to account to the Company for any profit, remuneration or other benefitrealised by any such office, employment, contract, arrangement, transaction or proposal.

Save as otherwise provided by the Articles, a director shall not vote on, or be counted in the quorumin relation to, any resolution of the Board or of a committee of the Board concerning any contract,arrangement, transaction or proposal to which the Company is or is to be a party and in which he(together with any person connected with him) is to his knowledge materially interested, directly orindirectly (otherwise than by virtue of his interests in shares or debentures or other securities of, orotherwise in or through, the Company); provided that a director shall be entitled to vote and becounted in the quorum in circumstances where the resolution relates:

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(a) to the giving of any guarantee, security or indemnity in respect of (i) money lent orobligations incurred by him or by any other person at the request of or for the benefitof the Company or any of its subsidiary undertakings or (ii) a debt or obligation of theCompany or any of its subsidiary undertakings for which the director himself hasassumed responsibility in whole or in part under a guarantee or indemnity or by thegiving of security;

(b) to an offer of securities of the Company or any of its subsidiary undertakings in whichoffer he is or may be entitled to participate as a holder of securities or in theunderwriting or sub-underwriting of which he is to participate;

(c) to another company in which he and any persons connected with him has a direct orindirect interest of any kind, provided that he and any persons connected with him donot to his knowledge hold an interest in shares representing one per cent or more ofeither any class of equity share capital, or the voting rights, in such company;

(d) to any arrangement for the benefit of employees of the Company or of any of itssubsidiary undertakings which does not award the director any privilege or benefit notgenerally awarded to the employees to whom such arrangement relates;

(e) to any proposal concerning the purchase or maintenance of any insurance policy underwhich he may benefit.

A director shall not vote or be counted in the quorum on any resolution of the Board or anycommittee of the Board concerning his own appointment (including fixing or varying theterms of his appointment or its termination) as the holder of any office or place of profit withthe Company or any company in which the Company is interested.

Unless otherwise determined by the Company by ordinary resolution, a director (other than analternate director) who does not hold executive office shall be paid for his services as adirector fees at such rate (not exceeding £75,000 per annum) as the Board may decide. Suchmaximum level of fees shall be increased in line with the increase in the General Index ofRetail Prices. Any fee payable shall accrue from day to day and shall be distinct from anysalary, remuneration or other amounts payable to a director pursuant to other provisions of theArticles.

Each director shall be entitled to be repaid all reasonable travelling, hotel and other expensesproperly incurred by him in the performance of his duties as director, including any expensesincurred in attending meetings of the board or of any committees of the Board or generalmeetings or separate meetings of the holders of any class of shares or debentures of theCompany. Any director who performs special services for the Company may be paid suchextra remuneration by way of additional fees, salary, percentage of profits or otherwise as theBoard may determine.

At each annual general meeting of the Company, there shall be required to retire by rotation:(a) one-third of the directors who are subject to retirement by rotation or, if their number isnot three or a multiple of three, the number nearest to but not exceeding one-third; and (b) inaddition, any director who at an annual general meeting shall have been a director at each ofthe preceding two annual general meetings of the Company (provided that he was notappointed or reappointed at either such annual general meeting and he has not otherwiseceased to be a director and been reappointed by general meeting of the Company at or sinceeither such annual general meeting), and each such retiring director may, if eligible, offerhimself for re-election. The directors to retire by rotation shall first be those who wish to retireand not offer themselves for re-election and secondly those who have been longest in officesince their last appointment or reappointment and, in the case of those who have been in officean equal length of time, shall, unless they agree otherwise, be determined by lot. Any directorappointed by the Board shall hold office only until the next annual general meeting, when heshall be eligible for appointment, but shall not be taken into account in determining thedirectors to retire by rotation at that meeting.

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No person shall be or become incapable of being appointed a director by reason of his havingattained the age of 70 or any other age and no special notice shall be required in connectionwith the appointment or the approval of the appointment of any such person, nor shall adirector be required to retire by reason of his having attained that or any other age.

Directors shall not be required to hold any shares in the Company.

3.2.8 Borrowing powers

Subject to the provisions of the Acts, the Board may exercise all the powers of the Company toborrow money, to mortgage or charge its undertaking, property and assets (present and future) anduncalled capital, to issue debentures and other securities and to give security, either outright or ascollateral security for any debt, liability or obligation of the Company or of any third party. The Boardshall restrict the borrowings of the Company and, insofar as it is able, of its subsidiary undertakings,so as to procure that the aggregate principal amount outstanding in respect of borrowings by thegroup shall not, without an ordinary resolution of the Company, exceed a sum equal to four times theaggregate of the amount paid up or credited as paid up on the Company’s issued share capital and thetotal amount standing to the credit of the capital and revenue reserves of the Group as shown in thelatest audited balance sheet of the Group, after such adjustments and deductions as are specified inthe Articles.

3.2.9 Pensions and benefits

The Board may exercise all the powers of the Company to provide pensions or other retirement orsuperannuation benefits, death or disability benefits or other allowances or gratuities, by insurance orotherwise, for any person who is, or has at any time been, a director of or employed by or in theservice of the Company or of any company which is a subsidiary company of the Company, or isallied to or associated with the Company or any such subsidiary, or any predecessor in business ofthe Company or any such subsidiary, and for any member of his family (including a spouse or formerspouse) or any person who is, or was, dependent on him.

3.2.10 Untraced shareholders

The Company may sell at the best price reasonably obtainable the shares of a member or the sharesto which a person is entitled by virtue of transmission on the death or bankruptcy of a member orotherwise by operation of law if all dividends, warrants and cheques sent, or funds transferred, to suchmember or person have remained uncashed or been returned to the Company, respectively, for aperiod of 12 years; the Company has paid at least three cash dividends in respect of those sharesduring such period; and the Company has, on the expiration of such period given notice of itsintention to sell such shares in a national newspaper and an appropriate local newspaper, and noindication is received as to the whereabouts or existence of such member or persons.

The Company shall account to the member or other person entitled to such shares for the net proceedsof such sale.

4. THE EMI PLAN

On 5 April 2005 the Company adopted the EMI Plan. The EMI Plan allows the grant of EMI Options.

On 18 April 2005 a number of EMI Options were granted conditionally under the EMI Plan. The grant of theseEMI Options will not become unconditional unless Admission occurs.

Further information concerning the grant of the Options is to be found at paragraph 5.2 below. The EMI Planwill be administered by the Board. The principal features of the EMI Plan are as follows:

4.1 Eligibility

Any full-time Director and any employee of the Group who devotes a minimum of 25 hours a week (or, ifless, three quarters of his committed time under all employments) to the business of the Group is eligible toparticipate. Actual participation is at the discretion of the Board. Options are personal to the participant andmay not be assigned except on the death of the participant, to his personal representatives. Options shall begranted by deed with no consideration payable by the participant.

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4.2 Individual participation limit

The aggregate market value of Ordinary Shares (measured at the date of grant) of all outstanding optionsheld by any one participant under the EMI Plan and under any other approved company share option schemeor EMI plan adopted or operated by the Company may not exceed £99,990. Options may be granted abovethis level in the form of an unapproved option, at the discretion of the Board, but to the extent that the valueof shares over which such unapproved options are granted exceeds the limit of £99,990, the unapprovedoptions will not benefit from the tax advantages of the EMI Plan.

4.3 Exercise price of Options

For any Options granted after Admission, the exercise price will be the higher of the nominal value of anOrdinary Share at the date of grant of the Option and the market value of an Ordinary Share, as agreed withthe Inland Revenue.

In respect of the EMI Options granted conditional upon Admission the exercise price is five pence perOrdinary Share. Immediately following Admission, Inland Revenue agreement will be sought that themarket value of an Ordinary Share on the date of Admission is not greater than five pence per Share. If themarket value of an Ordinary Share is agreed by the Inland Revenue as being greater than 5 pence perOrdinary Share then the exercise price will remain at five pence per Ordinary Share. The difference betweenthe agreed market value and five pence per Ordinary Share will be brought into charge to income tax andnational insurance contributions on the exercise of the Options (see paragraph 4.6 below).

4.4 Exercise and lapse of Options

Options may normally be exercised within the period of three to ten years after the date of grant.Exceptionally, and subject to the discretion of the Board, Options may be exercised earlier than three yearsfollowing grant on the cessation of the Option holder’s employment. When exercising its discretion, theBoard will have regard to the reason for the cessation of employment and the extent to which, in the Board’sopinion, the Option holder has contributed to the success of the Company. The Board when exercising itsdiscretion shall be able to determine the number of Ordinary Shares over which the Option is exercisable,the period during which the Option may be exercised and the extent to which any performance targets towhich the exercise of the Option is subject, must be achieved (if at all) before the Option may be exercised.

In the case of any Option holder who dies, whether as an employee or not, his Option will lapse no later thantwelve months after the date of death.

4.5 Performance targets

The Board may impose objective conditions as to the performance of the Group which must normally besatisfied before Options can be exercised. Having granted Options and set a performance target, the Boardmay vary the performance target provided that the Board reasonably considers that the performance targetset no longer represents a fair measure of performance and provided that any new conditions are no moredifficult nor easy to satisfy.

It is proposed that in respect of the EMI Options conditionally granted on 18 April 2005 that no Option canbe exercised unless the consolidated profit before tax of the Company for any one of the three financialperiods ending 30 June 2006, 30 June 2007 and 30 June 2008 is greater than £500,000.

4.6 PAYE and National Insurance Contributions (“NICs”)

It is a condition of the exercise of an Option that the participant agrees to indemnify his employing companyin respect of any tax liabilities (including employers’ NICs) arising in connection with an Option.

4.7 Grant of Options

For any Options granted after Admission, other than in exceptional circumstances, Options may be grantedwithin 42 days after the announcement of the Company’s yearly or half yearly results. Options may only begranted within 10 years of the adoption of the plan.

4.8 Shares issued on exercise of Options

Ordinary Shares allotted under the plan rank pari passu with the Company’s existing issued Ordinary Shares(save that they will not qualify for any dividends or other distributions by reference to a record date prior tothe date the Options are exercised).

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4.9 Change of control

In the event of the takeover, amalgamation or reconstruction of the Company, if the performance targets towhich the exercise of any Option is subject has been satisfied then that Option may be exercised within sixmonths of such event.

If the performance target has not been satisfied then the exercise of an Option is subject to the discretion ofthe Board. When exercising its discretion, the Board will have regard to the extent to which the Optionholder has contributed to the success of the Company and the performance of the Company since the dateof grant of that Option. The Board is able to determine the number of Ordinary Shares over which the Optionis exercisable, the period during which the Option may be exercised and the extent to which any performancetargets to which the exercise of the Option is subject, must be achieved (if at all) before the Option may beexercised.

In all cases, the Options may with the agreement of the acquiring company and if certain legislativeconditions are fulfilled, be exchanged for options over shares in the acquiring company or a companyassociated with the acquiring company.

4.10 Variation of share capital

In the event of a variation of share capital by way of capitalisation, rights issue, sub-division, consolidationor reduction of share capital, then the number of Ordinary Shares subject to a subsisting Option and theexercise price may be adjusted.

4.11 Alterations to the EMI Plan

The Board may alter the EMI Plan where the amendment is to comply with or take account of applicablelegislation or statutory regulations or any change therein, or to prevent Options granted under the EMI Planbecoming non-qualifying, or to maintain favourable tax treatment for the Company, or participants in theplan, or potential participants.

No alterations may be made to the EMI Plan which would be to the material advantage of participantswithout shareholder approval, with any alteration to the material disadvantage of the participants requiringtheir prior written consent.

4.12 Pension rights

None of the benefits which may be received under the EMI Plan shall be pensionable.

4.13 Dilution limits

No Option may be granted on any date if, as a result the total number of Ordinary Shares issued or issuablepursuant to Options granted under the EMI Plan, when added to the number of Ordinary Shares issued orissuable on the exercise of Options granted and the number of Ordinary Shares issued during the previousten years, under the EMI Plan:

4.13.1 and any other ordinary share option plan operated by the Company would exceed ten per cent of theCompany’s Ordinary Shares in issue from time to time; or

4.13.2 and any other discretionary share option plan operated by the Company would exceed five per centof the Company’s Ordinary Shares in issue from time to time (including any treasury shares)

and in respect of each of the limits above when considering the limits any treasury shares will be taken intoaccount. However, Options that have lapsed or have been surrendered and the EMI Options conditionallygranted on 18 April 2005 shall not be taken into account when considering the limits set out above.

4.14 Liquidation

In the event of notice being given of a general meeting of the Company at which a resolution is proposedfor the voluntary winding up of the Company, Options may be exercised even though any performancetargets to which the exercise of the Option is subject, has not been achieved. Subject to this, Options shalllapse on the commencement of any liquidation of the Company.

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5. DIRECTORS’ AND OTHER INTERESTS

5.1 The interests (all of which are beneficial unless otherwise stated) of the Directors and persons connectedwith them (within the meaning of section 346 of the Act) in the issued share capital of the Company which(i) have been notified by each director to the Company pursuant to section 324 or section 328 of the Act, or(ii) which are required to be entered in the register maintained under section 325 of the Act, or (iii) so far asthe Directors are aware having made due and proper enquiry of such persons as are connected (within themeaning of section 346 of the Act) with each Director, are interests of a connected person of a Directorwhich would, if the connected person were a director of the Company, be required to be disclosed underparagraphs (i) or (ii) above and the existence of which is known to or could, with reasonable diligence, beascertained by that Director, as (a) at the date of this document and (b) as they will be immediately followingAdmission, are as follows assuming the Maximum Subscription is placed pursuant to the Placing:

ImmediatelyAs at the date of this document following AdmissionNumber of Percentage of Number of Percentage of

Ordinary issued share Ordinary issued shareDirector Shares capital Shares capital

Gary Smith 22,925,0001 38.1% 22,925,0001 26.9% Andrew Brown 4,930,000 8.2% 4,930,000 5.8%William Hurman 3,190,000 5.3% 3,190,000 3.7%Andrew McWhirter – – – –John James 870,000 1.4% 870,000 1.0%1 Includes 3,100,000 held by Mr Smith’s wife; 2,610,000 held by Mr Smith as trustee on behalf of his children; 12,180,000 by Edge

Venture Capital Ltd, a company in which Mr Smith is the sole shareholder; and 435,000 by the Winchester Entertainment plc DirectorsRetirement Plan of which Mr Smith is a trustee and the beneficiary.

5.2 The following EMI Options have been conditionally granted to the following Directors under the EMI Plan.The grant of these EMI Options will become unconditional on Admission:

Number ofOrdinary Shares Exercise price

Director under option per Ordinary Share Exercise period

Gary Smith 1,500,000 5 pence from 22 April 2008Andrew Brown 800,000 5 pence from 22 April 2008William Hurman 1,000,000 5 pence from 22 April 2008

EMI Options have been conditionally granted to other employees of the Group under the EMI Plan in respectof an additional 1,700,000 Ordinary Shares. Certain of these optionholders, along with the Directors (andpersons connected with them) will represent a Concert Party for the purposes of the City Code.

All of the above Options have been granted for nil consideration.

5.3 Save as disclosed in paragraphs 5.1 and 5.2 above, none of the Directors has any interest in the share capitalof the Company or of any of its subsidiaries nor does any person connected with the Directors (within themeaning of section 346 of the Act) have any such interest, whether beneficial or non-beneficial.

5.4 So far as the Directors are aware, the only persons (other than any Director) who is or will be interested,directly or indirectly, in three per cent. or more of the issued share capital of the Company (a) as at the dateof this document and (b) immediately following Admission (assuming the Maximum Subscription is issuedpursuant to the Placing) are as follows:

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ImmediatelyAs at the date of this document following AdmissionNumber of Percentage of Number of Percentage of

Ordinary issued share Ordinary issued shareShares capital Shares capital

Shane Limited 2,465,000 4.1% 2,465,000 2.9%Edge Venture Capital Limited1 12,180,000 20.2% 12,180,000 14.3%Tigerhawk Limited 3,000,000 5.0% 3,000,000 3.5%Greg Smith 1,975,000 3.3% 1,975,000 2.3%Christopher Akers 3,000,000 5.0% 3,000,000 3.5%Addworth Plc 2,500,000 4.2% 2,500,000 2.9%Hythe Securities Limited 5,000,000 8.3% 5,000,000 5.9%1 A Company in which Gary Smith is the sole shareholder

5.5 Save as disclosed in Part I of this document and in paragraphs 5.1 and 5.4 above, the Company is not awareof any persons who, directly or indirectly, jointly or severally, exercises or could exercise control over theCompany.

5.6 In addition to the Options granted (as detailed in paragraph 5.2), the following Warrants to subscribe forOrdinary Shares have been issued for nil consideration conditional upon Admission, all of which will beexercisable at any time between Admission and the third anniversary of Admission:

Number of Ordinary Shares Exercise price

City Financial Associates Limited 2,000,000 5pHansard Communications plc 500,000 5pAddworth plc 1,000,000 5p

3,500,000

5.7 Save as disclosed in paragraphs 3, 5.2 and 5.6 above and 8 below, no share or loan capital of the Companyor any of its subsidiary undertakings is under option or agreed conditionally or unconditionally to be putunder option.

5.8 Save as set out in this paragraph and 6.7, no Director has or has had any interests in any transaction whichis or was unusual in its nature or conditions or is or was significant to the business of the Group and whichwas effected by the Group in the current or immediately preceding financial year of the Group or which waseffected during an earlier financial year and remains in any respect outstanding or unperformed.

Intandem has signed a Heads of Terms with Noel Gay Media Ltd in relation to an animated feature filmprovisionally entitled, The Spirit of Old Trafford (“the Film”).

Under the terms of that agreement, Intandem is obliged to raise £112,000 for the development of the scriptand key character designs to be used in the Film.

Intandem has been appointed executive producer and international sales and marketing company and has theright to raise a minimum of 50 per cent of the production budget for the film which is estimated to be £3.2million.

Intandem has entered into an agreement with Three Strikes Ltd to provide development funds for the film.As Intandem’s stated policy is to refrain from investing in film production, Gary Smith founded ThreeStrikes Ltd to raise finance for the development and production finance for, amongst other projects, TheSpirit of Old Trafford. Gary Smith is a director and major shareholder in Three Strikes Ltd.

Intandem has received a fee of £5,000 from Three Strikes Ltd for services rendered in establishing thecompany. Intandem remains the executive producer and international sales company for the Film.

5.9 No Director has, or has had any interest, direct or indirect, in any assets which have been acquired by,disposed of by, or leased to, any member of the Group or which are proposed to be acquired of by, or leasedto, any member of the Group.

5.10 There are no outstanding loans granted by any member of the Group to any Director nor are there anyguarantees provided by any member of the Group for the benefit of any Director.

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5.11 Save as described in paragraph 8 and paragraph 12 of this Part IV and for trade suppliers, no person has atany time within the 12 months preceding the date of this document received, directly or indirectly, from theCompany or any other member of the Group or entered into any contractual arrangements to receive, directlyor indirectly, from the Company or any other member of the Group on or after Admission any fees, securitiesin the Company or any other benefit to the value of £10,000 or more.

5.12 The details of those companies and partnerships outside the Group of which the Directors have beendirectors or partners at any time during the five years prior to the date of this document are as follows:

Director Current directorships and partnerships Past directorships and partnerships

Gary Smith Base Group plc Cobalt Media Capital LimitedDigital Sport Group plc The Feature Film Company LimitedEdge Venture Capital Limited Honest Media LimitedCure Leukaemia UK Films Group PLCAudley Films LLP Optical Image LimitedThree Strikes Limited One Sport Limited

Birmingham Film and Television FestivalSmartnet LimitedBenn Media LimitedDigital Sport Publishing LimitedWinchester Beep LimitedContentfilm plcWinchester Film Distribution LimitedWinchester Film & Television SalesLimitedWinchester HeartBreakers LimitedWinchester Jellabies LimitedWinchester (Muggers) LimitedWinchester Music LimitedWinchester Pictures LimitedWinchester Productions LimitedWinchester (Rainbow) LimitedWinchester (The Sea Change) LimitedWinchester (Wheels) Limited

Andrew Brown 151 Queenstown Road Limited None

William Hurman Grosvenor Road Management Limited None

Andrew McWhirter Andrew McWhirter Associates Limited Albemarle Gallery LimitedLittle Ship Club LimitedLittle Ship Club (Members) Limited3S Technology Limited

John James City of Birmingham Community College Steel Plate and Sections LimitedEthos Trading Company Limited Janet Lee Books Limited

Birmingham ForwardBig FM Radio (West Midlands) LimitedBritish American Business Council in theMidlandsMarketing Birmingham LimitedThe Works Retail Limited Quantum PR PLCBirmingham City Pride

5.13 Save as set out in paragraphs 5.14 to 5.16 below, as at the date of this document no Director:

5.13.1 has any unspent convictions in relation to any indictable offences; or

5.13.2 has been bankrupt or entered into an individual voluntary arrangement; or

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5.13.3 was a director of any company at the time of or within 12 months preceding any receivership,compulsory liquidation, creditors voluntary liquidation, administration, company voluntaryarrangement or any composition or arrangement with that company’s creditors generally or with anyclass of its creditors; or

5.13.4 has been a partner in a partnership at the time of or within 12 months preceding any compulsoryliquidation, administration or partnership voluntary arrangement of such partnership; or

5.13.5 has had his assets the subject of any receivership or has been a partner of a partnership at the timeof or within 12 months preceding any assets thereof being the subject of a receivership; or

5.13.6 has been subject to any public criticism by any statutory or regulatory authority (including anydesignated professional body) nor has ever been disqualified by a court from acting as a director ofa company or from acting in the management or conduct of the affairs of a company.

5.14 In February 2002, Gary Smith as a director of Winchester Entertainment plc (now ContentFilm Plc) was thesubject of an FSA investigation into a profit warning and share sale. The FSA closed the investigation andconfirmed that no further action would be taken.

5.15 On 24 June 2004, a county court order was issued against Gary Smith acknowledging that he owed£815,946.55, including costs and interest, to the Inland Revenue in connection with capital gains tax owedon the sale of various shares. Subsequently, Mr Smith paid the total sum due and owing to the InlandRevenue under the order and on 14 March 2005 he received notification in writing from the Inland Revenuethat the full amount had been paid.

5.16 Andrew McWhirter was a director of 3S Technology Limited, which was the subject of a creditors voluntarywinding up and went into liquidation on 3 August 2001. The liquidator’s statement of affairs, dated 7 August2001, revealed an estimated deficiency, as regards members, of £910,852.28. The last liquidators statementof receipts and payments, dated 3 February 2004, revealed a surplus of £151.88 in respect of realisationsagainst disbursements paid. 3S Technology Limited was subsequently dissolved on 20 September 2004.

6. DIRECTORS’ SERVICE AGREEMENTS, LETTERS OF APPOINTMENT AND EMOLUMENTS

6.1 On 5 April 2005, Gary Smith entered into a service agreement with Intandem Pictures Limited under theterms of which he has agreed to act as the Executive Chairman of the Company for a salary of £120,000 perannum.

6.2 On 5 April 2005, Andrew Brown entered into a service agreement with Intandem Pictures Limited under theterms of which he has agreed to act as an Executive Director of the Company for a salary of £80,000 perannum.

6.3 On 5 April 2005, William Hurman entered into a service agreement with Intandem Pictures Limited under theterms of which he has agreed to act as an Executive Director of the Company for a salary of £80,000 per annum.

6.4 The appointments referred to at paragraphs 6.1 to 6.3 are all for a fixed term of one year from 1 April 2005and continue thereafter unless either Intandem Pictures Limited or the executive director give at least 6months’ notice to terminate the appointment, such notice to expire on or after the first anniversary of thecommencement date.

6.5 Following Admission, Gary Smith, Andrew Brown and William Hurman will be entitled to participate in abonus scheme the terms and amount of which are to be determined at the discretion of the Board.

6.6 The salaries of the executive directors referred to in paragraphs 6.1 to 6.3 above will be reviewed twiceannually (in September and March) by the Company’s remuneration committee. Each of the executivedirectors are entitled to 25 working days of paid holiday per annum. Their service agreements containrestrictive covenants which are applicable on termination of employment and apply for a period of sixmonths thereafter.

6.7 On 6 April 2005, Andrew McWhirter Associates Limited and Andrew McWhirter entered into a consultancyagreement with Intandem Pictures Limited under the terms of which Andrew McWhirter Associates Limitedagreed to provide the services of Andrew McWhirter as a finance director to the Company. Pursuant to theagreement the services will be provided for a fixed term of 12 months from 1 July 2004 and the agreement

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continues thereafter until terminated by three months’ notice by either Andrew McWhirter AssociatesLimited or Intandem Pictures Limited. Andrew McWhirter Associates Limited will be paid £2,500 permonth (plus VAT and expenses) for the provision of Andrew McWhirter’s services during the one year fixedterm (and thereafter, if applicable). Andrew McWhirter is obliged to devote no less than an average of 25hours per calendar month to providing services throughout the one year fixed term (and thereafter, ifapplicable).

6.8 John James entered into a letter of appointment with the Company dated 5 April 2005 which sets out theterms of his appointment as a non-executive Director of the Company with effect from 1 March 2005. Theappointment is subject to John James’ re-election at the next annual general meeting and his satisfactoryperformance and is terminable on three months’ notice by either party. The fee payable for his services as anon-executive Director is £15,000 per annum and is subject to annual review.

6.9 Save as disclosed in paragraphs 6.1 to 6.8 above, there are no existing or proposed service agreements orconsultancy agreements between any of the Directors and the Company or any Group company whichcannot be terminated by the Company or any Group company without payment of compensation within 12months.

6.10 The aggregate of the remuneration paid and benefits in kind (including bonus payments) granted to theDirectors by any member of the Group in respect of the financial period from 14 October 2003 to 30 June2004 was approximately £104,000.

6.11 It is estimated that based upon arrangements in force as at the date of this document, the aggregateremuneration to be paid and benefits in kind (excluding bonus payments which remain to be determined bythe Board) to be granted to the Directors by any member of the Group for the financial year ending 30 June2005 will be approximately £310,000.

6.12 There are no arrangements under which any Director has waived or agreed to waive future emoluments norhave there been any such waivers of emoluments during the financial period from 14 October 2003 to31 December 2004.

7. TAXATION

The following comments are intended as a general guide to current UK tax law and Inland Revenue practice.They are intended only for shareholders who are resident or ordinarily resident in the UK for tax purposesand who hold their Ordinary Shares as investments rather than trading stock and who are the beneficialowners thereof. The position for employees or directors subscribing for shares and warrants under thePlacing has not been addressed. Any shareholder who is in any doubt as to their tax position, or who issubject to tax in a jurisdiction other than the United Kingdom, is strongly recommended to consult theirprofessional advisers.

7.1 Dividends

7.1.1 The Company will not be required to withhold tax at source from dividend payments it makes.

7.1.2 Individual shareholders resident in the UK for tax purposes should generally be entitled to a tax creditin respect of any dividend paid by the Company which they can offset against their total income taxliability. The amount of the tax credit is one ninth of the amount of the net cash dividend. The amountof the dividend received by such an individual shareholder and the associated tax credit are bothincluded in calculating the individual shareholder’s income for UK tax purposes.

7.1.3 The rate of income tax on dividends is 10 per cent. for lower and basic rate taxpayers. The tax creditwill discharge the income tax liability of an individual shareholder who is not liable to income tax ata rate greater than the basic rate. Higher rate taxpayers will be liable to tax on such dividends at therate of 32.5 per cent., so that an individual shareholder who is a higher rate taxpayer will have furthertax to pay, after taking account of the tax credit, equal to 25 per cent. of the net cash dividend.

7.1.4 Generally, shareholders who are not liable to UK tax on dividends are no longer entitled to reclaimthe tax credit attaching to dividends paid by the Company. UK Pension funds are not entitled toreclaim any part of the tax credit associated with dividends paid by the Company.

7.1.5 A UK resident corporate shareholder will not normally be liable to corporation tax in respect of any

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dividend received.

7.2 Capital gains

7.2.1 A disposal of Ordinary Shares by a shareholder who is either resident or, in the case of an individual,ordinarily resident for tax purposes in the UK, or is not UK resident but carries on a trade, profession,or vocation in the UK through a branch or agency to which the Ordinary Shares are attributable, may,depending on the shareholder’s circumstances and subject to any available exemptions or reliefs, giverise to a chargeable gain or allowable loss for the purposes of the taxation of chargeable gains. Ashareholder who is an individual and who has, on or after 17 March 1998, ceased to be resident orordinarily resident for tax purposes in the UK for a period of less than five years and who disposesof the Ordinary Shares during that period may also be liable on his return to UK taxation ofchargeable gains (subject to any available exemptions or reliefs).

7.2.2 For UK resident individual shareholders, taper relief may be available to reduce the amount of thegain chargeable to tax. The availability and rate of taper relief will depend upon the period ofownership of the Ordinary Shares and on whether the Ordinary Shares qualify as business assets ornot for the individual in question.

7.2.3 For UK resident shareholders within the charge to corporation tax, taper relief is not available but anindexation allowance should be available to reduce the amount of the chargeable gain realised on adisposal of the Ordinary Shares.

7.3 Inheritance Tax – Business Property Relief (“BPR”)

Unquoted ordinary shares in trading companies potentially qualify for 100 per cent BPR which gives up to 100per cent. exemption from Inheritance Tax. Where an investor makes a lifetime gift of shares or dies while stillowner of the shares, no inheritance tax should be payable in respect of the value of the shares, provided therelevant conditions are met. In the case of the Company, any such relief may be unavailable to shareholders ifthe Company carries on certain excluded activities including the making or holding of investments. BPR isrestricted to the extent that the value of any of a company’s business includes excepted assets.

7.4 Stamp Duty and Stamp Duty Reserve Tax

Stamp duty and stamp duty reserve tax (“SDRT”) treatment under the Placing and in respect of thesubsequent transfer of Ordinary Shares will be as follows:

7.4.1 in relation to Ordinary Shares issued by the Company pursuant to the Placing, no liability to stampduty or SDRT will arise on issue or on the issue of definitive share certificates by the Company;

7.4.2 the transfer of Ordinary Shares will generally be liable to stamp duty at the rate of 50p per £100 ofthe amount or value of the consideration given rounded up (if necessary) to the nearest £5. Anagreement to transfer Ordinary Shares will generally be subject to SDRT at 0.5 per cent. of the agreedconsideration. However, if within the period of six years of the date of the agreement or, in the caseof a conditional agreement, the date on which it becomes unconditional, an instrument of transfer isexecuted pursuant to the agreement and stamp duty is paid on that instrument, any liability to SDRTwill be repaid or cancelled. The liability to pay stamp duty or SDRT is generally satisfied by thepurchaser or transferee;

7.4.3 no stamp duty or SDRT will arise on a transfer of Ordinary Shares into CREST, unless such transferis made for a consideration in money or money’s worth, in which case a liability to stamp duty orSDRT will arise, usually at the rate set out in 7.4.2 above;

7.4.4 a transfer of Ordinary Shares effected on a paperless basis within CREST will generally be subjectto SDRT at the rate of 0.5 per cent. of the value of the consideration.

Special rules apply to certain categories of person including intermediaries and persons connected withdepository arrangements and clearance services

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7.5 EIS tax relief

The following information provides an outline only of the EIS. It is strongly recommended that potentialinvestors obtain independent advice from a professional adviser to take into account the effect of thelegislation in the context of their particular personal circumstances.

The tax legislation in respect of the EIS income tax and EIS deferral relief is found in sections 289 – 312ICTA 1988 and schedule 5B TCGA 1992. The following is a summary of the more common conditions andshould not be construed as comprehensive.

7.5.1 EIS Relief

Income tax relief, CGT deferral relief, CGT exemption relief and loss relief may all be available toinvestors under the EIS legislation. EIS Relief can be claimed only by a “qualifying investor” (seebelow) who subscribes for new “eligible shares” (see below) issued by a “qualifying company” (seebelow).

7.5.1.1 Income tax relief

Individuals who qualify may deduct an amount that is equal to tax at the lower rate of incometax on the amounts subscribed for qualifying shares in qualifying companies from their totalliability to income tax for the tax year in which the shares are issued. EIS Relief is obtainedat a rate of up to 20 per cent. The maximum investment is £200,000 per tax year. Spousesare entitled to a maximum of £200,000 each. The minimum amount subscribed must be atleast £500.

For income tax purposes (but not CGT deferral, see below), the individual does not need tobe a UK resident. However, income tax relief is only available where an investor has a UKincome tax liability. The amount of income tax relief cannot exceed an individual’s taxliability before other reliefs given by way of discharge of tax. Relief is normally given in thetax year in which the individual invests.

7.5.1.2 CGT exemption

To the extent that EIS income tax relief is given and not withdrawn, any capital gain accruingto an individual on the first disposal of the shares issued three or more years after the date ofissue (or, if later, three or more years after the anniversary of the date trading commences) isnot chargeable to CGT. The exemption does not extend to any gain deferred by CGT deferral(see above).

7.5.1.3 Loss relief

Where an investor incurs a loss on the first disposal of their shares, the loss calculated afterdeducting EIS income tax relief from the base cost usually may be set against eitherchargeable gains or taxable income at the election of the investor.

7.5.2 “Qualifying Investor” for EIS Income Tax Relief

An individual must not be, nor have been within the previous two years prior to the date of issue ofthe shares, connected with the Company, or become connected with it within the next three years (or,if later, within the three years following the date of commencement of trading), if they are to retainthe tax reliefs. The main rules relating to connection are that:

7.5.2.1 neither the individual nor their associates may be an employee, partner or paid director of theCompany (subject to (iii) below) or its subsidiaries. An unpaid director is not disqualified ifthey are reimbursed travelling or subsistence expenses which would otherwise be allowablefor taxation;

7.5.2.2 neither the individual nor their associates may control the Company or possess more than 30per cent of the issued ordinary share or loan capital or voting powers in the Company or rightscarrying entitlements to 30 per cent of the assets available for distribution to equity holders;

7.5.2.3 an individual may become a paid director of the Company provided at the time theysubscribe for eligible shares they were not, and had not previously been, otherwise connectedwith the Company nor with the trade carried on by the Company by reference to (i) or (ii)above. Any remuneration paid to a director must be reasonable.

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There is also various anti-avoidance legislation, in particular the value received rules. Under these,EIS income tax relief may be reduced or withdrawn where the investor receives any value from theCompany. Relief of the investor may also be withdrawn where other shareholders of the Companyare repaid capital or receive value from the Company.

7.5.3 Qualifying Company

For a period of three years following the issue of the shares (or, if later, three years following the dateof commencement of the trade), the Company must only:

7.5.3.1 carry on a qualifying trade; and/or

7.5.3.2 be the parent company of a group which exists wholly, or substantially wholly for thepurposes of carrying on qualifying trades; and

7.5.3.3 not be disqualified by anti-avoidance rules.

At least 80 per cent. of the money raised by the issue of qualifying shares must be employed whollyfor the purpose of a qualifying business activity within 12 months of the date of the issue of the sharesor, if later, the commencement of trade and the balance within 24 months of the date of issue (orcommencement of trade, if later).

To be qualifying, the shares of the Company must not be quoted on a recognised stock exchange atthe time the eligible shares are issued and no arrangements must exist at that time for the Companyto become quoted.

7.5.4 Eligible Shares

Eligible EIS shares are new ordinary shares which, throughout the period of 3 years beginning withthe date on which they are issued or, if later, the date of commencement of the trade, carry no presentor future preferential right to dividends or to the Company’s assets on its winding up and carry nopresent or future right to be redeemed.

7.5.5 Provisional Approval

The Company has received from the Inland Revenue provisional approval that the Company will becarrying on a qualifying trade and that the shares to be issued will be “eligible shares”. Provisionalapproval, once given, is indicative but is not binding on the Inland Revenue. The position could alsobe affected by acts or omissions of the Company during the 3 year period from the issue of the shares(or, if later, the date of commencement of the trade).

7.5.6 Claims

Investors claim income tax relief by submitting a tax relief certificate (Form EIS 3) issued to them bythe Company to the Inspector of Taxes dealing with their own tax affairs. The claims for relief mustbe made no later than 5 years after the 31 January following the end of the tax year in which theshares are issued.

7.5.7 Carry Back of Relief

For shares subscribed on or after 6 April and before 6 October, up to one half of the investment (upto £25,000) may be effectively carried back to the previous tax year if the relevant claim is made.

7.5.8 Withdrawal of EIS Relief

If the conditions for EIS Relief relating to a company cease to be satisfied during the period of threeyears from the issue of the shares (or, if later, three years from the date of commencement of trade),the relief will be withdrawn. EIS Relief will also be wholly or partly withdrawn if, for example, theclaimant receives significant value from the Company (other than dividends) or disposes of the shareswithin three years of the date of issue (or, if later, within three years of the date of commencement ofthe trade). EIS Relief will also be lost if an investor takes out a loan under special terms connectedin any way with the shares.

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7.5.9 CGT deferral

CGT deferral enables investors to defer capital gains by reinvesting in qualifying investments.Provided a capital gain realised on any asset is reinvested in new “eligible shares” of a “qualifyingcompany” within 3 years of the disposal giving rise to the gain or not more than 1 year prior to adisposal giving rise to a gain, assessment to tax on the gain arising may be deferred until thequalifying investment is sold or (if within 3 years from subscription, or commencement of trade, iflater) otherwise ceases to qualify. At this point, the deferred gain would come back into charge,without the benefit of any additional taper relief.

The legislation, conditions and anti-avoidance rules for deferral relief are broadly similar to those forEIS income tax relief outlined above, but there are differences.

8. WARRANTS

The Company has issued for nil consideration, conditional upon Admission, Warrants to subscribe for anaggregate of 3,500,000 Ordinary Shares. The terms of the warrant instrument provide that the Warrants areexercisable at any time from Admission to the third anniversary of Admission. The exercise price payableon exercise of the Warrants is 5 pence per share. Further details of the issue of the Warrants is set out atparagraph 5.6 of this Part IV.

The principal features of the warrant instrument are as follows:

8.1 Shares issued on exercise of Warrants

Ordinary Shares allotted pursuant to the Warrants will rank pari passu with the Company’s existing issuedOrdinary Shares (save that they will not qualify for any dividends or other distributions by reference to arecord date prior to the date the relevant Warrants are exercised).

8.2 Change of control

In the event of the takeover of the Company, Warrants may be exercised or require the Company to procurethat a like offer or invitation for any Warrants is made as if the Warrants had been exercised and as if theOrdinary Shares issued pursuant to such exercise had been issued.

8.3 Variation of share capital

In the event of a variation of share capital by way of capitalisation, bonus issue, rights issue, sub-division,consolidation or reduction of share capital, then the number of Ordinary Shares subject to a subsistingwarrant and the exercise price may be adjusted.

All or any rights attached to the Warrants may be altered or abrogated with the consent in writing of theCompany and either the consent in writing of any warrantholders entitled to subscribe for not less than 75per cent. of the Ordinary Shares subject to the Warrants or the sanction of an EGM of warrantholders.

8.4 Winding up

In the event of a voluntary winding up of the Company each warrantholder shall be entitled to be treated asif he had immediately before the date of passing the resolution fully exercised his rights to acquire OrdinaryShares pursuant to his Warrants and to rank pari passu with the holders of Ordinary Shares. In the event ofa reconstruction or amalgamation, the Company will procure that each warrantholder is granted a substitutedwarrant of a value equivalent to the value of the Warrants immediately prior to such reconstruction oramalgamation.

8.5 Other provisions

For so long as any Warrants remain outstanding the Company agrees not to issue securities by way ofcapitalisation of profits or reserves except fully paid Ordinary Shares issued to holders of its OrdinaryShares; or within six weeks of the final exercise date make any offer of new Ordinary Shares for subscriptionor purchase by way of a rights issue; or modify the rights attached to the Ordinary Shares or create any newclass of shares with greater rights than the Ordinary Shares (except in accordance with any scheme involvingthe issue of shares to employees or ex-employees); or (except with the sanction of an EGM of warrantholdersor except by the redemption of redeemable shares) reduce by repayment to its shareholders its share capitalor any share premium account or capital redemption reserve fund.

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9. WORKING CAPITAL

The Directors are of the opinion, having made due and careful enquiry, taking into account available bankand other facilities and the net proceeds of the Placing receivable by the Company assuming the MinimumSubscription is issued that the working capital available to the Group is sufficient for its presentrequirements, that is for at least the next 12 months from the date of Admission.

10. SIGNIFICANT CHANGE

Save as disclosed in Part I of this document, there has been no significant change in the financial or tradingposition of the Group since 31 December 2004, the date to which the Group’s financial statements have beenaudited for the purposes of the report set out at Part III of this document.

11. LITIGATION

No member of the Group is involved in any legal or arbitration proceedings which are having or may havea significant effect on the Group’s financial position nor, so far as the Company is aware, are any suchproceedings pending or threatened by or against any member of the Group.

12. PLACING AGREEMENT

By an agreement (being the Placing Agreement) dated 19 April 2005 and made between (1) the Company(2) the Directors and (3) City Financial Associates Limited (“CFA”), CFA has agreed, subject to thefulfilment of certain conditions, to act as agent in co-ordinating and arranging the placing of the PlacingShares at the Placing Price. Such conditions include Admission taking place not later than 8.00am on 22 April 2005 (or such later time and/or date as CFA may agree, being not later than 8.00am on20 May 2005).

Under the Placing Agreement:

12.1 the Company has agreed to pay CFA, in each case conditional upon Admission, a corporate finance advisoryfee of £70,000; and to grant Warrants exercisable over 2,000,000 Ordinary Shares (in each case plus anyapplicable VAT);

12.2 certain warranties and indemnities have been given to CFA by the Company and certain warranties by theDirectors as to the accuracy of the information in this document and as to other matters in relation to theGroup and its business;

12.3 each of the Directors has severally agreed not to dispose of any Ordinary Shares (or any interest therein) andto use reasonable endeavours to procure that a person who is a connected person will not dispose of anyOrdinary Shares, before the first anniversary of Admission and any disposal of Ordinary Shares by a Directorbetween the first and second anniversaries of Admission will only be made with the Company’s broker’sconsent, not to be unreasonably withheld or delayed; and

12.4 CFA may terminate the Placing Agreement before Admission in certain circumstances, including formaterial breach of the warranties referred to above and if certain force majeure circumstances or significantevents arise before Admission.

13. MATERIAL CONTRACTS

The following contracts (not being contracts entered into in the ordinary course of business) have beenentered into in the two years preceding the date of this document by any member of the Group and are, ormay be, material to the Group or have been entered into by any member of the Group and contain anyprovision under which any member of the Group has any obligation or entitlement which is material to theGroup at the date of this document:

13.1 the Placing Agreement as summarised in paragraph 12 of Part IV of this Document;

13.2 a nominated adviser agreement dated 19 April 2005 between the Company and CFA pursuant to which CFAis appointed by the Company to act as nominated adviser for the purposes of the AIM Rules. The Companyagrees to pay an annual retainer of £20,000 (plus VAT) (or such other fee as the parties may from to time totime agree) which is payable quarterly in advance. The agreement contains certain undertakings andindemnities given by the Company. The agreement is terminable by either party giving not less than 3months’ notice in writing and forthwith in the event of the appointment of a liquidator, receiver,

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administrative receiver or administrator over the Group or any part of the Group or in the event of a materialbreach unremedied within 14 days. CFA can terminate if the Company does not pay any sums due under thisagreement, in the event of fraud and if the Company fails to comply with advice given by CFA and suchfailure CFA reasonably believes could jeopardise or damage the reputation of CFA;

13.3 a broker agreement dated 19 April 2005 between the Company and CFA appointing the Company as brokerpursuant to the AIM Rules. The Company agrees to pay an annual fee of £5,000 (plus VAT and expenses orsuch other fee as the parties may agree from time to time). Such fee is payable quarterly in advance. Theagreement terminates by either party giving not less than 3 months notice in writing or in the event of theappointment of a liquidator, receiver, administrative receiver or administrator or in the event of a materialbreach unremedied 14 days after service of a notice. CFA may terminate forthwith if the Company does notpay any sums due under this agreement, in the event of a fraudulent act by any director or the Company, abreach of laws or regulations and failure to comply with advice that in the reasonable opinion of CFA, couldjeopardise or damage the reputation of CFA;

13.4 the Intandem Pictures Limited share purchase agreement dated 7 October 2004 and entered into betweenIntandem Entertainment Limited and the shareholders of Intandem Pictures Limited in relation to thepurchase by Intandem Entertainment Limited of the entire issued share capital of Intandem Pictures Limitedin consideration of the issue and allotment of 60,174,000 ordinary shares in Intandem EntertainmentLimited, credited as fully paid up;

13.5 the Intandem Entertainment Limited share purchase agreement dated 5 April 2005 and entered into betweenthe Company and the shareholders of Intandem Entertainment Limited in relation to the purchase by theCompany of the entire issued share capital of Intandem Entertainment Limited in consideration of the issueand allotment of 60,174,000 Ordinary Shares, credited as fully paid up.

13.6 the sale and purchase agreement dated 5 April 2005 and entered into between Intandem EntertainmentLimited (formerly Intandem Films Limited) and the Company for the transfer of the entire issued sharecapital of Intandem Pictures Limited to the Company. The consideration for the shares in Intandem PicturesLimited was £157,876 and was treated in the books of both of the vendor and purchaser companies as aninterest free unsecured loan repayable on demand.

14. CITY CODE

After consultation with The Panel on Takeovers and Mergers the parties below have been identified asforming a concert party (the “Concert Party”) for the purposes of the City Code as they are consideredfounder members of the Company.

The Concert Party controls in aggregate 42.1% of the issued share capital of the Company. For so long asthe Panel considers the Concert Party exists and assuming that neither any member of the Concert Partydisposes of any Ordinary Shares nor that the Company issues any Ordinary Shares which in either casereduces or dilutes the Concert Party’s existing shareholding, if the members of the Concert Party were toexercise their options (assuming no other option holders or warrant holder were to exercise their holdings)the Concert Party would control up to 44.9% of the Issued Share Capital of the Company.

Concert Party

Interest in the Ordinary Shareson Admission

Ordinary OptionsShares % granted

Gary Smith Concert Party (see below) 24,900,000 29.2 1,500,000Andrew Brown, Director 4,930,000 5.8 800,000Billy Hurman, Director 3,190,000 3.7 1,000,000Denise Bridgeman, employee 1,740,000 2.0 400,000Sasha Dein, employee 1,160,000 1.4 500,000

35,920,000 42.1 4,200,000

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Gary Smith Concert Party

Interest in the Ordinary Shareson Admission

Ordinary OptionsShares % granted

Gary Smith 4,600,000 5.4 1,500,000Samantha Smith (wife of Gary Smith) 3,100,000 3.6 -Minor children of Gary Smith 2,610,000 3.1 -Greg Smith (brother of Gary Smith) 1,975,000 2.3 -Trustees of Winchester Entertainment Plc Director’s Retirement Plan* 435,000 0.5 -Edge Venture Capital Limited** 12,180,000 14.3

24,900,000 29.2 1,500,000

* Gary Smith is a beneficiary** A Company in which Gary Smith is the sole shareholder

15. GENERAL

15.1 The total amount being raised by the Company through the Placing is £1,250,000 assuming the MaximumSubscription is issued pursuant to the Placing. The total costs and expenses of, or incidental to, the Placingand Admission, all of which are payable by the Company, are estimated to be approximately £270,000. Theexpected net proceeds of the Placing, after deduction of such costs and expenses, is £980,000. No expensesof the Placing are being specifically charged to subscribers or purchasers under the Placing.

15.2 The Placing Price of 5 pence represents a premium of 4.9 pence above the nominal value of 0.1p perOrdinary Share. The Placing Price is payable in full on application.

15.3 The minimum amount which, in the opinion of the Directors, must be raised by the issue of new OrdinaryShares pursuant to the Placing in order to provide the sums required to be provided pursuant to paragraph21 of Schedule 1 to the Regulations is £900,000 (being the amount which would be raised by the sale of theMinimum Subscription in the Placing) which will be applied as described in Part I of this document.

15.4 The accounting reference date of the Company is 30 June.

15.5 The auditors of the Company are Baker Tilly of 2 Bloomsbury Street, London WC1B 3ST. The financialinformation set out in this document relating to the Group does not constitute statutory accounts within themeaning of section 240(5) of the Act. The Group’s first statutory accounts for the financial year ended 30June 2005 have not yet been produced or delivered to the Registrar of Companies in England and Wales.Accordingly, the auditors have not yet reported on such accounts pursuant to section 235 of the Act and noreport pursuant to section 249A(2) of the Act has been made.

15.6 The following details are (if applicable) set out in the placing letters sent to prospective investors by CityFinancial Associates Limited in connection with the Placing: the period during which the offer constitutedby the Placing is open; the arrangements for payment for the Placing Shares; the arrangements during theperiod prior to Admission for the return of monies received from such investors where their applications arenot accepted; and the timetable for the return of such monies.

15.7 Baker Tilly has given and has not withdrawn its written consent to the inclusion in this document of its nameand the report set out in Part III in the form and context in which it appears.

15.8 City Financial Associates Limited has given and has not withdrawn its written consent to the inclusion inthis document of its name and the references to it in the form and context in which they appear.

15.9 Copies of this document will be available to the public free of charge at the offices of DLA Piper RudnickGray Cary UK LLP, 3 Noble Street, London EC2V 7EE and at the registered office of the Company, fromthe date of this document until one month after Admission.

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16. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during usual business hours on anyweekday (Saturdays, Sundays and public holidays excepted) at the offices of DLA Piper Rudnick Gray CaryUK LLP, 3 Noble Street, London EC2V 7EE for a period of 14 days from the date of this document:

16.1 the memorandum and articles of association of the Company;

16.2 the audited consolidated financial statements of the Group for the financial period ended 30 June 2004;

16.3 the report by Baker Tilly set out in Part III of this document and the statement of adjustments relating to it;

16.4 the rules of the EMI Plan;

16.5 the warrant instrument referred to in paragraph 8 of this Part IV;

16.6 the Directors’ service and consultancy agreements and appointment letter referred to in paragraph 6 of thisPart IV;

16.7 the material contracts referred to in paragraph 13 of this Part IV; and

16.8 the letters of consent referred to in paragraph 15 of this Part IV.

Dated 19 April 2005

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intandem films plc

Documents