“THE ROAD TO BEIJING” (“TRtB”) DOCUMENTARY INVESTMENT PLAN/SPONSORSHIP

Enterprise Investment Scheme 2006/7

The following commentary is intended as a general guide to certain aspects of current UK tax legislation and current practice of the UK Inland Revenue as they apply to holders of Ordinary Shares who are resident or ordinarily residents in the United Kingdom. The following statements are not exhaustive and all persons are strongly advised to obtain their own professional advice on the tax implications of acquiring, owning and/or disposing of Ordinary Shares.

It is intended that the Company will continue to comply with all the conditions to ensure the EIS relief is available to Investors.

Assuming the qualifying conditions are met investors will be able to take advantages of the usual EIS benefits:

Income tax relief at 20% on a maximum investment of up to £200,000 (applicable to current tax year) with:

• Loss relief at marginal rate, or

• Full tax exemption for any capital gain in the event of the shares being realized at a profit.

And

• Capital Gains Tax deferral with a maximum limit on investment (can be claimed back up to 3 years). Tax deferral up to 40 per cent. This applies to gains made on other investments 3 years before or 1 year after the investment in TRtB is made; the deferred gain is brought back in to charge when the TRtB shares are sold.
   

Provided the shares qualify for EIS income relief, any Capital Gain from winding up or selling [The Road to Beijing] should be tax free to the individual – though [The Road to Beijing] itself is liable to tax in the normal manner.

It is anticipated that within six months of investment Investors will receive E1S3 certificates (i.e. Inland Revenue certification of qualifying EIS status) which allows them to seek repayment of the tax

Potential Tax Saving / Deferral – Example

The investor’s downside: -

Cost of documentary                                                                                     100%

EIS Tax relief assuming no CGT deferral relief                                                 (20%)

Cost of investment                                                                                          80%

Given that investors can offset any loss against income tax.

Loss “relief”                                                                                                    (32%)

Worst cast loss scenario                                                                                 48%

It is anticipated that the company will endeavour to find sponsorship for the project, in which case the potential downside will be reduced considerably further.

Once the investor receives his initial investment back in full, the profits will be shared 50/50 by:-

a)     the investors

b)     the talent involved in the making of the documentary

All investors will have a named credit at the end of the film.
 

Please get in touch about any further questions regarding Sponsorship or Investment.