Accounting Policies

The following policies, will be consistently applied, and are considered material in relation to the Group’s financial statements.

Basis of Preparation

Upon establishment of the Parent Network and its subsidiaries, financial statements will be prepared under the historical accounting rules set out in the UK Companies Act 2006, and any other requirements made in territories in which subsidiaries may exist and operate will be observed lawfully and without fear of causing or being party to fiscal controversy. All attempts have been made to apply the same basis in the preparation of this proposal. Supplier quotations, recommendations, and institutional knowledge have been applied to the modelling of the proposed Network.

Future & Operational Financial Reports

As soon as is practicable as part of the process of financing and subsequently as a requirement of registering The Network and its subsidiaries as a corporate entity, howsoever that may be accomplished, with subsidiaries as laid out in the business plan, it is the intention that the Group’s appointed auditors will prepare an annual report on the Group and its accounting practices. This report will detail and relate to:

  • Date of incorporation and name under which the company and subsidiaries are incorporated.
  • Any subsequent changes in the nature of incorporation of the company and its subsidiaries.
  • The nature of the company’s business during the period covered by the report.
  • Detail of subsequent acquisitions and significant activities.
  • Details relating to the appointed auditors.
  • The financial statements, projections, and any forecasts made for and in each financial period will be subject to the scrutiny of the appointed auditors.

The financial information set out in reports will be based upon the audited financial statements and audited management accounts unless specifically stated to the contrary, and will be subject to and presented after making such adjustments as the appointed accountants consider necessary. The accountant’s work will be carried out in accordance with the appropriate UK and International auditing guidelines.

The financial information compiled by the Group will be expected to reflect a true and fair view of any accounting period to which they relate, and of the state of affairs of the Group at the end of each of those financial periods. The accountants will accept responsibility for their reports in the form and context in which they are given, and will consent to their inclusion in any prospectus or published company statements.

Audited management accounts for any financial period as required by the Registrar of Companies for the UK parent company, or any regulator of other territories in which the Group is registered as a corporate entity will be made and duly filed. Audited management accounts will be the ultimate responsibility of the Directors and the Directors will consent to their inclusion in any company reports or prospectuses as may be required.

Basis of Consolidation

The Group’s financial statements will consolidate those of the Company and its subsidiary undertakings as at each period end. The results of any subsidiary undertakings acquired during a financial year will be included from the date of acquisition. Profits or losses on intra-network transactions will be eliminated in full. In the event of acquisition of a subsidiary, all of the subsidiary’s assets and liabilities which exist at the date of acquisition will be recorded at their fair values reflecting their condition at that date.

Goodwill arising on consolidation, representing the excess of the fair value of the consideration given over the fair values of the identifiable net assets acquired, will be written off to reserves immediately on acquisition.

Turnover

Turnover will comprise principally of revenue from broadcasting, advertising, premium services, business reporting, and sale of secondary rights to documentary and archive material, excluding VAT or Sales tax.

Depreciation

Depreciation is to be charged at rates calculated to write off the cost of fixed assets over their estimated useful lives once the assets have been brought into use. Charges will be calculated by either a straight line or reducing balance method on a monthly basis. Rates varying between 12.5% and 33% per annum as appropriate to the asset will apply.

Deferred Taxation

Deferred tax will be provided on all material timing differences at the rate of tax likely to apply on the reversal of such timing differences. Provision will only be made where the liability is likely to crystallise within the foreseeable future.

Stock

Stock will comprise of consumable broadcast items such as any unused and virgin digital memory cards, tape and film stock, or equipment held in reserve for later transfer to use or sale by the company, and in accordance with the accounting requirements laid down by HMRC or any other territorial regulator of revenues.

Finance Leases & Hire Purchase

Assets held under finance lease are to be capitalised in the balance sheet and depreciated over their expected useful life. The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is to be charged to the profit and loss account over the period of the lease.

Goodwill

Purchased goodwill is to be eliminated by immediate write off on acquisition against reserves.

Shareholding

It is expected that the shareholding will be distributed between Investors and the Proposing Management. Such division is foreseen to be the result of amicable resolution by negotiation during the process of acquiring funding for the project.

Use of Proceeds from the Initial Investment

The initial required investment and financial facilities received by the company, net of expenses, is intended to be used to (i) establish infrastructure worldwide (ii) employ staff (iii) acquire broadcast equipment (iv) pay broadcasting licences (v) and pay satellite and other transmission fees.

All proceeds of forthcoming funding are receivable by the company net of expenses as laid out in each of the funding ‘Options,’ and are intended to be used as laid out in the consolidated budgets within this document.

Future Acquisitions & Diversification

While the Network is not currently contemplating any specific acquisitions, it is possible that acquisition opportunities may arise in the future, particularly of smaller businesses where the management cannot obtain access to cost effective funding. The Network will consider any such acquisition opportunities at the appropriate time. There are a number of potential opportunities that may arise in the fullness of time. It is not felt that it would be appropriate to pursue diversification policies while the channel is still in the process of establishing its own brand in the marketplace, though such opportunities are already foreseeable.

Information about the Shareholding

Pursuant to the Network being fully funded as a start-up Network, and licences being granted by relevant broadcasting regulators – The total proceeds of single or multiple investor shareholdings taken in the company are expected to be in-line with the funding option realised, from which payment of expenses, and commissions that may become due upon full funding being obtained shall be deducted.

The shares, when issued, will rank pari passu in all respects with other Ordinary Shares including the right to receive dividends and other distributions made or paid after the date that the company is either legally formalised or start-up funding is complete.

Mr. Phillip Covell, Mr. Kinny Cheng, and any other appointed Directors assigned a shareholding will be required to undertake not to dispose of any beneficial interest in the Network’s shares which they have or may acquire during the Construction and pre-launch phase of the business; or for eighteen months from the date of first broadcast save with prior consent of the Directors and Investing shareholders, which consent shall not be unreasonably withheld. It is expected that the investors making the initial capital investment will commit to similar terms.

Capital Reorganisation

Notwithstanding full funding of the proposed Group being only achievable on the basis of differential classes of shareholding; if it is the case that a company or group of companies is formed prior to the acquisition or finalisation of full funding for the purposes of pursuing full funding as the result of an investment of preliminary seed monies; the purpose of which will be to pursue and finalise outstanding needs (such as licensing requirements or the need to source facilities et cetera) for final investment placement; then any existing shareholding that may result from such requirements will be redeemed or converted into Ordinary Shares upon receipt of full funding. The envisioned result will be a share capital consisting of a single class of ordinary shares of a value to be established by the final capital requirements and mutually agreed division of the shareholding between the Directors and Investors.

Dividend Policy

The Directors aim to pay a dividend of retained profits each year that profit is realised. The Directors envisage that interim and final dividends will be notified and paid in accordance with the company’s incorporated status and regulatory requirements in the trading year in which the dividend is notified and paid; in the approximate proportions of one-third and two-thirds respectively of the total annual dividend. The Directors expect that, in the absence of unforeseen circumstances, the first dividend to be paid by the Group following establishment and launch of operations as per the timetable herein, will be a dividend in respect of the first twenty-two (22) months of trading.

Inflation

Appropriate levels of inflation are applied within the financial projections within the full Proposal.

Asset Management

Assets are accounted for by appropriate class in within the full Consolidated Accounts within the full Proposal, and further detail is available by arrangement.

Financing of Equipment Assets

The Network has the option to lease the majority of its equipment purchases using three and four-year finance leases, however, this may be subject to investment conditions. The reflection of Leasing on capital requirements is addressed for each Budget Tier, and presented in the form of a set of Consolidated Management Accounts, and projected Table for Deficit & Surplus calculations. Full accounts for such options are available by arrangement, and this option is based on fully leasing all Equipment requirements. Additionally the Management is advised that Leasing options may be explored for Studio Design and Fitting out element, though has not at this time been explored. Leases are favoured over Hire purchase agreements due to the requirement to fully fund the VAT element in advance of the start of the contractual term in the latter case. It is expected that in the event of leasing agreements being applied, the practice would continue into the future, even if the circumstances for an IPO/ICO arise, either after a suitable operating period, or as part of the path to establishing the Network, though the Network’s gearing ratio is expected to be significantly reduced in the event of such a placing.

Overdrafts & Lines of Credit

The provision for Overdrafts or Lines of Credit is, for the greater part, to provide a buffer and contingency in regard to certain aspects of deficit and surplus modelling, which are not expected to materialise as an actual requirement. Nonetheless, circumstances where this contingency may be required can be foreseen, and so such financial devices are included within considerations, and where and if applicable costs incurred are presented in the projected consolidated accounts provided herein. The planned requirement is for credit facilities of £20m.

Taxation

Taxation has been calculated at rates appropriate to each territory as advised by either, appointed advisors, national taxation authorities or guidance documentation published by well-known global auditing advisors. Full details are to be found in Part VI of this document under the heading ‘Taxation’.

Deferred Taxation

Deferred tax will be provided on all material timing differences at the rate of tax likely to apply on the reversal of such timing differences. Provision will only be made where the liability is likely to crystallise within the foreseeable future.

Net Operating Losses (NOL)

Net Operating losses are applied according to local tax rules in the regional accounts and consolidated in the Group P&L. Net Operating Losses for Regions are calculated before Overseas Cash is repatriated to the UK, to which tax and deductions are then applied.

VAT & Sales Tax

VAT & Sales Tax Rates that currently apply or are foreseeable are:

  • UK 20%
  • Netherlands 21%
  • Singapore 7%
  • Estonia 20%
  • Ireland 23%
  • NYC 8.875%

Unrecoverable VAT

An allocation to unrecoverable VAT, due to restrictions on deductions; disallowed amounts; and petty cash receipts which do not specify the VAT rate applied or satisfy the criteria for reclamation; is calculated as a percentage of liabilities to which this may apply (Production Budgets and Miscellaneous costs etc.) in each jurisdiction.

Corporate Governance

The Network will take appointment of additional non-executive Directors under advisement (in addition to the Non-executive Chairman) as soon as practical following full financing of the Network being achieved, and an allocation for four Non-Executive Officers has been made. So far as appropriate, the Board aims to comply with current codes of best practice, having regard to the size of the Network. The Directors intend to proceed on the lines of governance required for an IPO/ICO in a regulated environment regardless of the nature of initial funding, in order to ensure all options for the future. It is intended that non-executive Directors will be independent of the Network’s management and free from any business or other relationship which could materially interfere with the exercise of his/her independent judgement. 

Particularly with a mind to the Network’s international and necessary corporate divisions, the Network will hold Board Meetings regularly throughout the year at which operating and financial reports will be considered. The Board will be responsible for formulating, reviewing and approving the Network’s strategy, budgets, major items of capital expenditure, acquisitions, and senior personnel commitments.

An Audit Committee will be established and will be comprised of the non-executive Directors, the CEO and Finance Director, and the appointed Partner from the Network’s Independent accountants. It will meet at least twice a year and be responsible for ensuring that the financial performance of the Network is properly reported on and monitored; and for meeting the auditors and reviewing the reports from the auditors relating to the accounts and internal financial control systems.

A remuneration Committee will also be established and be comprised of the non-executive Directors. It will review the performance of the executive Directors and set the scale and structure of their remuneration and the basis of their service agreements with due regard to the interests of the shareholders.

The Network’s Memorandum and Articles of Association will be consistent with the requirements of UK Law, and any overseas interests and resulting Subsidiaries will be consistent with the laws and requirements of those Nation States, and any regional or State requirements within those Nations.

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