Entertainment One Regulatory News (ETO)

THIS ANNOUNCEMENT DOES NOT CONSTITUTE A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT AND NEITHER THIS ANNOUNCEMENT NOR ANYTHING HEREIN FORMS THE BASIS FOR ANY OFFER TO PURCHASE OR SUBSCRIBE FOR ANY SHARES OR OTHER SECURITIES IN THE COMPANY NOR SHALL IT FORM THE BASIS FOR ANY CONTRACT OR COMMITMENT WHATSOEVER.

ENTERTAINMENT ONE LTD.

23 May 2013

NOTIFICATION OF TRANSFER TO A PREMIUM LISTING

Entertainment One Ltd. ("eOne" or the "Company") announces that it is proposing to transfer the listing category of all of its Common Shares from a Standard Listing to a Premium Listing in accordance with Listing Rule 5.4A (the "Transfer"). It is anticipated that the Transfer will take effect at 8.00 a.m. on 1 July 2013, conditional upon the passing of certain resolutions to be proposed to shareholders at the annual and special meeting of the Company to be held on 28 June 2013 and the approval of the UK Listing Authority.

The Shareholder Circular, which includes the notice convening the annual and special meeting, contains more detail on such proposed resolutions and will be distributed to shareholders and holders of depository interests today.

1. Background and reasons for the Transfer

eOne is an international entertainment company specialising in the acquisition, productionand distribution of film and television content. As set out in the Company's announcement on 21 May 2013 of its results for the year ended 31 March 2013, following the acquisition of Alliance Films Holdings Inc. ("Alliance") and the resulting restructuring of the Group's operations, the Group has updated the reporting of its divisional segments. The two new reporting segments are Film and Television. The Film division focuses on the Group's acquisition and exploitation of film distribution rights, including physical distribution activities which were previously reported as a separate segment. The Television division focuses on the Group's Television and Family production activities and includes the results of the Group's music label. The Group's network extends around the globe including Canada, the US, the UK, Ireland, Spain, Benelux, France, Germany, Scandinavia, Australia, New Zealand, South Africa and South Korea. The Group provides extensive expertise in film distribution, television and music production, family programming and merchandising and licensing. Its current rights library is exploited across all media formats and includes more than 35,000 film and television titles, 2,700 hours of television programming and 45,000 music tracks.

The Company completed the acquisition of Alliance on 8 January 2013, establishing the Group as the world's largest independent film distributor with market leading positions in it its two main territories, Canada and the UK. Financial information on Alliance is contained in part 10 of this announcement.

The entire share capital of Entertainment One (Cayman) Limited was admitted to trading on AIM on 29 March 2007. Following a reorganisation and the incorporation of eOne as the Group's holding company, the Common Shares were admitted to a Standard Listing and to trading on the Main Market of the LSE on 15 July 2010. The Company stated in its trading update on 28 March 2012 that it was considering applying to the Financial Services Authority for a transfer of its Common Shares from a Standard Listing to a Premium Listing and it was expected that this would be completed by March 2013. As disclosed in the Prospectus, this proposal was put on hold pending completion of the Alliance acquisition and the subsequent integration of Alliance into the Group.

The Board believes that given eOne's profile, a Premium Listing is the most appropriate listing category for its Common Shares and will assist in increasing the profile of the Company, providing it with exposure to a wider potential investor base and enhancing the liquidity of the Common Shares. The FTSE Nationality Committee, which determines eligibility for the FTSE UK Index Series, is scheduled to next meet on 13 August 2013. It is anticipated that, subject to the Transfer becoming effective and other conditions being met, the Company will be considered for inclusion into the FTSE UK Index Series, which includes FTSE 100, FTSE 250 and FTSE All Share indices. This would further enhance the Company's profile and access to a wider potential investor base. Accordingly, the Board has concluded that it is in the best interests of the Company and its shareholders as a whole to transfer to a Premium Listing and to implement the proposed amendments to the Company's Articles, as described below.

The Company has therefore requested that the UK Listing Authority approve the Transfer with effect from 8.00 a.m. on 1 July 2013. As at 22 May 2013, the Company had 273,619,314 Common Shares in issue.

2. Proposed amendments to the Company's Articles in connection with the Transfer and the Undertaking to Vote Agreement

In order to meet certain Canadian regulatory requirements for film and television distribution companies and to enable the Group to qualify to receive various Canadian federal and provincial government funding incentives and tax credits, it is in the best interests of the Company to ensure that it remains Canadian controlled for the purposes of the Investment Canada Act (the "ICA") in both fact and law. Failure to remain Canadian controlled may limit the Group's film and television distribution business in Canada and its continued access to Canadian federal and provincial government funding incentives and tax credits.

Currently, the Company has a number of safeguards to ensure it meets these requirements for Canadian control including by structuring its share capital to incorporate an outstanding class of Preferred Variable Voting Shares ("PVVS"). The votes attached to the PVVS are required to be held by a resident Canadian and are automatically adjusted so that they, together with the votes attached to the Common Shares that are owned by Canadians, equal a minimum of 51% of the votes attached to all shares in the capital of the Company and therefore ensure Canadian voting control. In addition to the PVVS, the Board of eOne comprises over two-thirds Canadians.

In light of the Company's proposed Premium Listing and in order to satisfy certain eligibility criteria for the Premium Listing, the Board proposes that the PVVS voting structure be cancelled and replaced with other safeguards to be incorporated into the Company's Articles, so as to ensure that Canadian control requirements continue to be met for the purposes of the ICA.

In that regard, the Company will shortly publish the Shareholder Circular which includes notice convening an annual and special meeting of its shareholders to be held on 28 June 2013 at which the resolutions set out below will be proposed (the "Proposed Resolutions"):

·; The Company's existing PVVS be redeemed and cancelled and the Articles be amended to delete the existence of the PVVS structure such that the only outstanding shares of the Company will be Common Shares.

·; To create additional safeguards to ensure that the Company continues to meet its Canadian control requirements in light of the cancellation of the PVVS structure, the Company will propose amending its Articles to include requirements relating to the nationality, residency and independence of Directors, substantially as follows:

o at least two-thirds of the Directors must be Canadian;

o a majority of the Directors must be resident Canadian;

o a majority of the Directors must be independent;

o at least two-thirds of those Directors present must be Canadian, and a majority of Directors present must be independent to constitute a quorum for the transaction of business at any Board meeting of the Company;

o Canadians must comprise at least half of the Directors on the Audit Committee and any other such committee of Directors, the chair of any committee of the Directors must be Canadian and at least half of the Directors present must be Canadian to constitute a quorum for the transaction of business at a meeting of any committee.

The Company has concluded that, after seeking advice from its Canadian counsel, these additional safeguards will be an effective replacement of the PVVS to ensure that the Company continues to meet its Canadian control requirements.

·; The Company has its registered office as well as its place of central management and control in Canada and is therefore not subject to the UK Takeover Code. However, the Company has incorporated the main provisions of the mandatory bid provisions set out in Rule 9 of the UK Takeover Code into Article 6 of its Articles. There is currently an exception in the Articles regarding the applicability of these mandatory bid provisions to any shareholder that held more than 30% of the voting rights of the Company upon its admission to the Standard Listing segment of the Official List. Immediately following the Transfer, the Company will adhere to the General Principles of the UK Takeover Code to the extent reasonably possible and will propose to remove this exception from its Articles in order to facilitate that adherence.

In order to create an additional safeguard to ensure the Company remains Canadian controlled at all times (in law and in fact) for regulatory purposes, Marwyn Value Investors LP ("Marwyn"), a substantial shareholder of the Company, has agreed to enter into an Undertaking to Vote Agreement. The Undertaking to Vote Agreement enables the independent Canadian Directors to direct Marwyn to vote in a certain way on a shareholder resolution to elect or dismiss a Director, but only if the independent Canadian Directors have reasonable grounds to believe that Marwyn intends to vote in such a way that would jeopardize the Canadian status of the Company. The Undertaking to Vote Agreement terminates when Marwyn beneficially holds less than 20% of the outstanding Common Shares of the Company. At a 20% voting stake, certain rebuttable presumptions of control can apply under Canadian law. Once Marwyn's voting stake falls below 20%, it will be unnecessary to maintain this additional safeguard because those control block presumptions would therefore not apply.

The Transfer will become effective following approval of the Proposed Resolutions and the approval of the UK Listing Authority. In the event that approval of all the Proposed Resolutions is not obtained, the Company will retain its existing Standard Listing.

3. Effect of the Transfer 

Following the Transfer, certain additional provisions of the Listing Rules will apply to the Company. These provisions, set out in Chapters 6 to 13 (inclusive) of the Listing Rules, relate to the following matters:

·; the application of certain requirements that are specific to companies with a Premium Listing (Chapter 6);

·; the application of the Listing Principles (Chapter 7);

·; the requirement to appoint a sponsor (Chapter 8);

·; the requirement to comply with various continuing obligations, including compliance with the Model Code and compliance with all relevant provisions of the UK Corporate Governance Code (or provide an explanationfor any non-compliance, if applicable, in its annual financial report) (Chapter 9);

·; the requirement to announce, or obtain shareholder approval for, certain transactions (depending on their size and nature) and for certain transactions with "related parties" of the Company (Chapters 10 and 11);

·; certain restrictions in relation to the Company dealing in its own securities and treasury shares (Chapter 12); and

·; various specific contents requirements that will apply to circulars issued by the Company to its shareholders (Chapter 13).

4. Working capital

In the opinion of the Company, the Group has sufficient working capital available for the Group's requirements for at least the next 12 months from the date of this announcement.

5. Corporate governance

The Board recognises the importance and value of good corporate governance. The Group will comply with the recommendations set out in the UK Corporate Governance Code immediately prior to the Transfer, other than as set out below:

·; the Chairman, James Corsellis, is not an independent Director, due to his relationship with Marwyn. James Corsellis is a partner of Marwyn Capital LLP and Marwyn Investment Management LLP as well as a director of Marwyn Partners Limited and Marwyn Investments Group Limited, all of which are affiliates of Marwyn. In view of the Chairman's involvement with eOne over a period of over six years, the Board is unanimously of the opinion that his continued involvement is important to the success of the Company following the Transfer;

·; the UK Corporate Governance Code recommends that directors should have notice periods of one year or less. Darren Throop and Patrice Theroux have notice periods in excess of one year (please note that Mr Theroux is currently in the process of agreeing a new contract with the Company). The Directors believe that such notice periods are market standard for comparable senior executives of Canadian film distribution businesses, and are in the best interest of the Company;

·; the constitution of the Audit Committee and Remuneration Committee are currently not in compliance with the UK Corporate Governance Code because James Corsellis is not considered to be independent. The Board believes that given Mr Corsellis' experience and contribution to date that his continued membership of these committees is beneficial to the Company.

Board composition and committees

As a result of the amendments proposed to be made to the Articles in connection with the Transfer, it is anticipated that Mark Watts, a representative of Marwyn, will step down from the Board immediately prior to Transfer but will be given observer status at the invitation of the Board and will continue to attend Board meetings. The Board of Directors thank Mark for his valuable contribution to eOne to date.

In addition, immediately prior to Transfer, Mark Watts will resign from the Audit Committee and the Nominations Committee and Ron Atkey will be appointed to the Nominations Committee in his place. Also, immediately prior to Transfer, James Corsellis will be replaced as the chairman of the Nominations Committee by Clare Copeland but will continue on as a member.

6. UK Takeover Code

The Company has its registered office as well as its place of central management and control in Canada and is therefore not subject to the UK Takeover Code. However, the Company will adhere to the General Principles of the UK Takeover Code to the extent reasonably possible.

7. Appointment of Sponsor

The Group has appointed J.P. Morgan Cazenove to act as its Sponsor in relation to the Transfer and, subject to the Transfer taking place, as joint corporate broker to eOne.

8. Executive incentive plan

As set out in the announcement on 21 May 2013 of the Company's results for the year ended 31 March 2013, the Board has decided to put in place an executive incentive plan that is broadly similar to those of premium listed FTSE 250 companies for the benefit of Darren Throop, Patrice Theroux and Giles Willits. This scheme will include new proposals on salary, bonus and a long term incentive plan ("LTIP"). Performance will be measured against adjusted earnings per share, adjusted return on capital employed and total shareholder return. Shareholder approval will be sought in relation to the proposed adoption of the LTIP. Further details are set out in the Shareholder Circular and a separate announcement will be made in due course.

9. Financial information on eOne

The documents listed below are incorporated by reference into this document and are available free of charge from the offices of Mayer Brown International LLP, 201 Bishopsgate, London EC2M 3AF up to and including the date of Transfer, and from the Company's website at www.entertainmentonegroup.com.

10. Financial information on Alliance Films

Accountant's report

The Board of Directors

on behalf of Entertainment One Ltd

175 Bloor Street

Suite 1400

North Tower

Toronto, Ontario

M4W 3R8

J.P. Morgan Securities plc

25 Bank Street

Canary Wharf

London

E14 5JP

22 May 2013

Dear Sirs

Alliance Films Holdings Inc

We report on the financial information for the three periods ended 7 January 2013 set out in Part 10 of the Intention to Transfer announcement dated 23 May 2013 of Entertainment One Ltd. (the "Company") (the "ITT Announcement"). This financial information relating to Alliance Films Holdings Inc ("Alliance") has been prepared for inclusion in the ITT Announcement on the basis of the accounting policies set out in note 3 to the financial information. This report is required by obligations that the Company has under Listing Rule 6.1.3R and is given for the purpose of complying with that requirement and for no other purpose.

Responsibilities

The Directors of the Company are responsible for preparing the financial information in accordance with International Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion on the financial information and to report our opinion to you. To the fullest extent permitted by law we do not assume any responsibility and will not accept any liability to any other person for any loss suffered by any such other person as a result of, arising out of, or in connection with this report or our statement.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing Practices Board in the United Kingdom. Our work included an assessment of evidence relevant to the amounts and disclosures in the financial information. It also included an assessment of significant estimates and judgments made by those responsible for the preparation of the financial information and whether the accounting policies are appropriate to the entity's circumstances, consistently applied and adequately disclosed.

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

Our work has not been carried out in accordance with auditing or other standards and practices generally accepted in jurisdictions outside the United Kingdom, including the United States of America, and accordingly should not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion on financial information

In our opinion, the financial information gives, for the purposes of the ITT Announcement, a true and fair view of the state of affairs of Alliance as at 7 January 2013, 31 December 2011 and 31 December 2010 and of its profits, cash flows and changes in equity for the three years and seven days ended 7 January 2013 in accordance with IFRS as adopted by the European Union.

Yours faithfully

Deloitte LLP

Chartered Accountants

Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 2 New Street Square, London EC4A 3BZ, United Kingdom. Deloitte LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu Limited ("DTTL"), a UK private company limited by guarantee, whose member firms are legally separate and independent entities. Please see www.deloitte.co.uk/about for a detailed description of the legal structure of DTTL and its member firms.

Consolidated Income Statement

for the period ended 7 January 2013

Consolidated Statement of Comprehensive Income

for the period ended 7 January 2013

Consolidated Balance Sheet

at 7 January 2013

This financial information was approved by the Board of Directors on 21 May 2013.

Giles Willits

Director

Consolidated Statement of Changes in Equity

for the period ended 7 January 2013

Consolidated Cash Flow Statement

for the period ended 7 January 2013

Notes to the Financial Information

for the period ended 7 January 2013

1. Nature of operations and general information

Alliance Films Holdings Inc. and subsidiaries ("the AF group") is a leading independent entertainment group focused on the acquisition, production and distribution of film and television content rights across all media throughout the world. Entertainment One Ltd. is the Group's ultimate parent company (the "Company") and is incorporated and domiciled in Canada. The Company has a standard listing on the London Stock Exchange. Segmental information is disclosed in Note 5.

This financial information was approved for issue by the Board of Directors on 21 May 2013.

2. New, amended, revised and improved Standards and Interpretations

Amendments to Standards adopted during the year

During the year, the following amendments were adopted by the AF group:

The above amendments have had no material impact on the AF group's financial position, performance or its disclosures.

New, amended, revised and improved Standards and Interpretations issued but not adopted during the year

At the date of authorisation of this financial information, the following Standards and Interpretations, which have not been applied in this financial information are in issue but not yet effective for periods beginning 1 April 2012:

3. Significant accounting policies

Basis of preparation

This financial information has been prepared on a going concern basis and in accordance with the accounting policies of Entertainment One Ltd.

Use of additional performance measures

The group presents underlying EBITDA, one-off items, adjusted profit before tax and adjusted earnings per share information. The terms "underlying", "one-off items", and "adjusted" may not be comparable with similarly titled measures reported by other companies. The term "underlying EBITDA" refers to operating profit or loss excluding operating one-off items, depreciation and amortisation of intangible assets. The terms "adjusted profit before tax" and "adjusted earnings per share" refer to the reported measures excluding operating one-off items, amortisation of intangible assets arising on acquisitions, one-off items relating to the Group's financing arrangements, and, in the case of adjusted earnings per share, one-off tax items.

Basis of presentation

This financial information has been prepared under the historical cost convention (except for derivative financial instruments and share-based payments that have been measured at fair value) and in accordance with applicable International Financial Reporting Standards as adopted by the EU and IFRIC interpretations ("IFRS"). The AF group financial information comply with Article 4 of the EU IAS Regulation.

3. Significant accounting policies (continued)

Basis of consolidation

This financial information comprises the financial information of the Alliance Films Holdings Inc.and its subsidiaries (the "AF group"). The financial information of the subsidiaries is prepared for the same reporting periods as the parent company of the AF group, using consistent accounting policies. Subsidiaries are fully consolidated from the date of acquisition and continue to be consolidated until the date of disposal. All intra-group balances, transactions, income and expenses and unrealised profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of a business combination is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree's identifiable net assets.

The cost of a business combination is measured as the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the AF group in exchange for control of the acquiree. Acquisition-related costs are recognised in the consolidated income statement as incurred.

Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, is recognised either in the consolidated income statement or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not re-measured until it is finally settled within equity.

Goodwill arising on a business combination is recognised as an asset and initially measured at cost, being the excess of aggregate of the consideration transferred and the amount recognised for non-controlling interests over the fair value of net identifiable assets (including other intangible assets) acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary or business acquired, any negative goodwill is recognised immediately in the consolidated income statement.

Revenue recognition

Revenue represents the amounts receivable for goods and services provided in the normal course of business, net of discounts and excluding value added tax (or equivalent). Revenue is derived from the licensing, marketing and distribution of feature films, television, video programming and music rights. Revenue is also derived from television production and licensing and merchandising sales. The following is a summary of the Group's main revenue recognition policies:

n Revenue from the exploitation of film and music rights is recognised based upon the contractual terms of each agreement. Revenue is recognised where there is reasonable contractual certainty that the revenue is receivable and will be received.

n Revenue from television licensing represents the contracted value of licence fees which is recognised when the licence term has commenced, the production is available for delivery, substantially all technical requirements have been met and collection of the fee is reasonably assured.

n Revenue from the sale of own or co-produced television productions is recognised when the production is available for delivery and there is reasonable contractual certainty that the revenue is receivable and will be received.

n Revenue from the sale of DVD, video and audio inventory is recognised at the point at which goods are despatched. A provision is made for returns based on historical trends.

n Revenue from licensing and merchandising sales represents the contracted value of licence fees which is recognised when the licence terms have commenced and collection of the fee is reasonably assured.

Pension costs

Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

Operating leases

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date, whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that right is not explicitly specified in an arrangement. Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the lease term.

Borrowing costs

Borrowing costs, including finance expense, are recognised in the consolidated income statement in the period in which they are incurred. Borrowing costs are accounted for using the effective interest rate method.

Borrowing costs directly attributable to the acquisition or production of a qualifying asset (such as investment in programmes) form part of the cost of that asset and are capitalised.

Foreign currencies

(a) Within individual companies

The individual financial information of each AF group entity is presented in the currency of the primary economic environment in which it operates (its functional currency). For the purpose of this financial information, the results and financial position of each AF group entity is expressed in pounds sterling, which is the presentation currency for this financial information.

In preparing the financial information of the individual companies, transactions in currencies other than the entity's functional currency (foreign currencies) are recorded at the rates of exchange prevailing on the dates of the transactions. Foreign exchange differences arising on the settlement of such transactions and from translating monetary assets and liabilities denominated in foreign currencies at year end exchange rates are recognised in the income statement.

(b) Retranslation within the financial information

For the purpose of presenting financial information, the assets and liabilities of the AF group's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at average exchange rates for the period. Foreign exchange differences arising, if any, are classified as equity and transferred to the translation reserve. Such translation differences are recognised as income or expenses in the period in which the operation is disposed of.

3. Significant accounting policies (continued)

One-off items

One-off items are items of income and expenditure that are non-recurring and, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, in order to provide a better understanding of the AF group's financial performance and enable comparison of financial performance between periods.

Taxation

(a) Income tax

The income tax expense/credit represents the sum of the income tax currently payable and deferred tax.

The income tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The AF group's asset or liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

(b) Deferred tax assets and liabilities

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial information and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the AF group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the consolidated income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt within equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities. This applies when they relate to income taxes levied by the same taxation authority and the AF group intends to settle its current tax assets and liabilities on a net basis.

Goodwill

Goodwill arising on a business combination is recognised as an asset and initially measured at cost, being the excess of aggregate of the consideration transferred and the amount recognised for non-controlling interests over the fair value of net identifiable assets (including other intangible assets) acquired and liabilities assumed. Transaction costs directly attributable to the acquisition form part of the acquisition cost for business combinations prior to 1 January 2010 but from that date such costs are written off to the consolidated income statement and do not form part of goodwill. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is allocated to cash generating units ("CGUs") which are tested for impairment annually or more frequently if there are indications that goodwill might be impaired. The CGUs identified are the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other groups of assets. Gains or losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Other intangible assets

Other intangible assets acquired by the AF group are stated at cost less accumulated amortisation. Amortisation is charged to administrative expenses in the consolidated income statement on a straight-line basis over the estimated useful life of intangible fixed assets unless such lives are indefinite.

Other intangible assets mainly comprise amounts arising on consolidation of acquired subsidiaries such as exclusive content agreements and libraries, exclusive distribution rights, brands and trade names and non-compete agreements. They also include amounts arising in relation to costs of software.

Other intangible assets are generally amortised over the following periods:

Exclusive content agreements and libraries 10-20 years

Exclusive distribution rights 13-20 years

Investment in programmes

Investment in programmes that are in development and for which the realisation of expenditure can be reasonably determined, are classified and capitalised in accordance with IAS 38 "Intangible assets" as productions in progress within investment in programmes. On completion of production the cost of investment is reclassified as investment in programmes. Also included within investment in programmes are programmes acquired on acquisition of subsidiaries.

Amortisation of investment in programmes, including government grants credited, is charged to cost of sales unless it arises from revaluation on acquisition of subsidiaries in which case it is charged to administrative expenses. The maximum useful life is considered to be 10 years.

3. Significant accounting policies (continued)

Government grants

A government grant is recognised and credited as part of investment in programmes when there is reasonable assurance that any conditions attached to the grant will be satisfied and the grants will be received and programme has been delivered. Government grants are recognised at fair value.

Property, plant and equipment

Property, plant and equipment are stated at original cost less accumulated depreciation. Depreciation is charged to write-off cost less estimated residual value of each asset over their estimated useful lives using the following methods and rates:

Leasehold improvements Over the term of the lease

The carrying amounts of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may not be recoverable. The AF group reviews residual values and useful lives on an annual basis and any adjustments are made prospectively.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the derecognition of the asset (determined as the difference between the sales proceeds and the carrying amount of the asset) is recorded in the consolidated income statement in the period of derecognition.

Interests in joint ventures

The AF group has interests in joint ventures which are jointly controlled entities. The AF group recognises its interest in joint ventures using proportionate consolidation, under which the AF group combines its share of each of the assets, liabilities, income and expenses of the joint venture with similar items, line-by-line, in financial information. The financial information of the AF group's joint ventures are prepared for the same reporting period as the AF group. Where necessary, adjustments are made to bring the accounting policies in line with those of the AF group.

Impairment of non-financial assets

The carrying amounts of the AF group's non-financial assets are tested annually for impairment (as required by IFRS in the case of goodwill) or when circumstances indicate that the carrying amounts may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the AF group makes an estimate of the asset's recoverable amount. The recoverable amount is the higher of an asset's or cash-generating unit's ("CGU") fair value less costs to sell and its value-in-use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered to be impaired and is written down to its recoverable amount. In assessing value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples or other available fair value indicators.

Inventories

Inventories are stated at the lower of cost, including direct expenditure and other appropriate attributable costs incurred in bringing inventories to their present location and condition, and net realisable value. The cost of inventories is calculated using the weighted average method. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Investment in content rights

In the ordinary course of business the AF group contracts with film producers to acquire rights to exploit films. Certain of these agreements require the AF group to pay minimum guaranteed advances ("MGs"), the largest portion of which often becomes due when the film is received by the AF group, usually some months subsequent to signing the contract. MGs are recognised in the consolidated balance sheet when a liability arises, usually on delivery of the film to the AF group.

Investments in content rights are recorded in the consolidated balance sheet if such amounts are considered recoverable against future revenues. These costs are amortised to cost of sales on a revenue forecast basis over a period not exceeding 10 years from the date of initial release. Acquired libraries are amortised over a period not exceeding 20 years. Amounts capitalised are reviewed at least quarterly and any portion of the unamortised amount that appears not to be recoverable from future revenues is written off to cost of sales during the period the loss becomes evident. Balances are included within current assets if they are expected to be realised within the normal operating cycle of the business. The normal operating cycle of the business can be greater than 12 months. In general 75% of film content is amortised within 12 months of theatrical release.

Trade and other receivables

Trade receivables are generally not interest bearing and are stated at their fair value as reduced by appropriate allowances for estimated irrecoverable amounts.

Cash and cash equivalents

Cash and cash equivalents in the consolidated balance sheet comprise cash at bank and in-hand. For the purpose of the consolidated cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the consolidated balance sheet.

Interest-bearing loans and borrowings

All interest-bearing loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the consolidated income statement when the liabilities are derecognised as well as through the amortisation process.

3. Significant accounting policies (continued)

Deferred finance charges

All costs incurred by the AF group that are directly attributable to the issue of debt are initially capitalised and deducted from the amount of gross borrowings. Such costs are then amortised through the consolidated income statement over the term of the instrument using the effective interest rate method.

Should there be a material change to the terms of the underlying instrument, any remaining unamortised deferred finance charges are immediately written-off to the consolidated income statement as a one-off items. Any new costs incurred as a result of the change to the terms of the underlying instrument are capitalised and then amortised over the term of the new instrument, again using the effective interest rate method.

Trade and other payables

Trade payables are generally not interest bearing and are stated at their nominal value.

Provisions

Provisions are recognised when the AF group has a present obligation (legal or constructive) as a result of a past event, where the obligation can be estimated reliably, and where it is probable that an outflow of economic benefits will be required to settle that obligation. Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material. Where discounting is used, the increase in the provision due to unwinding the discount is recognised as a finance expense.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the AF group are recorded at the proceeds received, net of direct issue costs.

4. Significant accounting judgements and key sources of estimation uncertainty

The preparation of financial information under IFRS requires the AF group to make estimates and assumptions that affect the amounts reported for assets and liabilities at the balance sheet date and amounts reported for revenues and expenses during the year. The nature of estimation means that actual outcomes could differ from those estimates.

Estimates and judgements are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects that period only, or in the period of the revision and future periods if the revision affects both current and future

periods.

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are discussed below.

Impairment of goodwill

The Group is required to test, at least annually, whether goodwill has suffered any impairment. The recoverable amount is determined based on value-in-use calculations (as in 2010 and 2011) or is based on the fair value less costs of disposal method (which was the method used at 7 January 2013 due to the sale of Alliance). The value-in-use method requires the estimation of future cash flows and the choice of a suitable discount rate in order to calculate the present value of these cash flows. At 7 January 2013, the carrying amount of goodwill was £139.1 million (2011: £140.9 million; 2010: £131.2 million). Further details of goodwill are contained in Note 12.

Acquired intangible assets

The Group recognises intangible assets acquired as part of business combinations at fair value at the date of acquisition. The determination of these fair values is based upon management's judgement and includes assumptions on the timing and amount of future incremental cash flows generated by the assets and selection of an appropriate cost of capital. Furthermore, management must estimate the expected useful lives of intangible assets and charge amortisation on these assets accordingly. At 7 January 2013, the total carrying amount of the Group's acquired intangibles was £26.2 million (2011: £33.6 million; 2010: £38.4 million). Further details of acquired intangibles are contained in Note 13.

Investment in content rights

The Group capitalises investment in content rights and amortises to cost of sales on a revenue forecast basis. Amounts capitalised are reviewed at least quarterly and any that appear to be irrecoverable from future revenues are written-off to cost of sales during the period the loss becomes evident. The estimate of future revenues depends on management judgement and assumptions based on the pattern of historical revenue streams and the remaining life of each contract. At 7 January 2013, the carrying amount of investment in content rights was £90.7 million (2011: £111.5 million; 2010: £109.8 million). Further details of investment in content rights are contained in Note 16.

Provisions for onerous film contracts

The Group recognises a provision for an onerous film title when the unavoidable costs of meeting the obligations under the contract exceed the expected benefits to be received under it. The estimate of the amount of the provision requires management to make judgements and assumptions of future cash inflows and outflows and also an assessment of the least cost of exiting the contract. To the extent that events, revenues or costs differ in the future, the carrying amount of provisions may change. Further details of provisions are contained in Note 21.

Deferred tax

Deferred tax assets and liabilities require management's judgement in determining the amounts to be recognised. In particular, judgement is used when assessing the extent to which deferred tax assets should be recognised with consideration to the timing and level of future taxable income. At 7 January 2013, the net carrying amount of deferred tax was liability of £2.1 million (2011: liability of £1.6 million; 2010: £10.0million). Further details of deferred tax are contained in Note 11.

Income tax

The actual tax on the result for the year is determined according to complex tax laws and regulations. Where the effect of these laws and regulations is unclear, estimates are used in determining the liability for tax to be paid on past profits which are recognised in the financial information. The AF group considers the estimates, assumptions and judgements to be reasonable but this can involve complex issues which may take a number of years to resolve. The final determination of prior year tax liabilities could be different from the estimates reflected in the financial information.

5. Segmental analysis

Operating segments

On 8 January 2013, Alliance Films Holdings Inc. was acquired by Entertainment One Ltd ("eOne"). For internal reporting and management purposes, eOne is currently organised into two main reportable segments based on the types of products and services from which each segment derives its revenue - Film and Television. These divisions are the basis on which the eOne reports its operating segment information.

The types of products and services from which each of eOne's reportable segments derives its revenues are as follows:

Film - the acquisition and exploitation of film distribution rights across all media, including theatrical revenue, revenue from physical

home entertainment sales, revenue from sales over digital platforms and revenue from sales to operators of traditional television

networks.

Television - the production of television and music content and the exploitation of such content.

From the date of acquisition (8 January 2013), Alliance Films Holdings Inc. has been included within eOne's Film operating segment for internal reporting and management purposes. As such for the purpose of the historical financial information Alliance Films is considered to be a single operating segment and accordingly no further disclosure of segments is required.

6. Operating profit

Operating profit for the year is stated after charging/(crediting):

7. Key management compensation

Key management personnel are composed of directors and officers of the AF group. Their compensation is comprised of directors' fees as set out below:

8. One-off items

One-off items are items of income and expenditure that are non-recurring and, in the judgement of management, should be disclosed separately on the basis that they are material, either by their nature or their size, to provide a further understanding of the AF group's financial performance and enable comparison of financial performance between periods. Items of income or expense that are considered by management for designation as one-off are as follows:

9. Finance income and finance costs

Finance income and finance costs comprise:

10. Tax

The charge for the year can be reconciled to the profit in the consolidated income statement as follows:

Income tax is calculated at the rates prevailing in the respective jurisdictions. The standard tax rates in each jurisdiction are Canada 26.9% (2011: 28.4%; 2010: 29.9%), UK 24.0% (2011: 26.0%; 2010: 28.0%) and Spain is 30.0% for all periods.

11. Deferred tax assets and liabilities

The following are the major deferred tax assets and liabilities recognised by the AF group and movements thereon during the year.

The category "Other" above includes temporary differences on provisions and royalties payable.

The deferred tax balances have been reflected in the balance sheet as follows:

12. Goodwill

The AF group has one cash generating unit ("CGU"), being Film. Goodwill arising on previous business combinations has been fully allocated to that CGU.

Amounts recorded within acquisition of subsidiaries in 2011 relates to the acquisition of Maple (see Note 26).

13. Other intangible assets

14. Property, plant and equipment

15. Inventories

Inventories at 7 January 2013 comprise finished goods of £7.1 million (2011: £11.6 million; 2010: £8.0 million).

16. Investment in content rights

17. Trade and other receivables

Trade receivables are generally non-interest bearing. Provisions for doubtful debts are based on estimated irrecoverable amounts, determined by reference to past default experience and assessment of the current economic environment.

17. Trade and other receivables (continued)

The AF group does not hold any collateral over these balances.

The movements in the provision for doubtful debts were as follows:

In determining the recoverability of a trade receivable the AF group considers any change to the credit quality of the trade receivable from the date credit was initially granted up to the reporting date.

Management has credit policies in place and the exposure to credit risk is monitored by individual operating divisions on an ongoing basis. The AF group has no significant concentration of credit risk, with exposure spread over a large number of counterparties and customers.

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

18. Cash and cash equivalents

Cash and cash equivalents are held in the following currencies:

The credit risk on cash and cash equivalents is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

The directors consider that the carrying amount of cash and cash equivalents approximates to their fair value.

19. Interest-bearing loans and borrowings

Interest-bearing loans and borrowings are held in the following currencies:

19. Interest-bearing loans and borrowings (continued)

The directors consider that the carrying amount of interest-bearing loans and borrowings approximates to their fair value.

The effective interest rate on all interest-bearing loans and borrowings for the period ending 7 January 2013 is 18.8% (2011: 19.1%; 2010: 19.4%).

Shareholder loan

In 2011, the AF group amended the shareholder loan, for which the terms are 8% interest until 30 September 2013 and 10% thereafter 10% interest payable quarterly in arrears. The terms also include a payment-in-kind ("PIK") element of 10% until 30 September 2013 and 8% thereafter. In 2015, the total 18% interest can be paid in cash if the AF group is in compliance with the terms of the revolving credit facility and term loan facilities (see below). The shareholder loan and any unpaid accumulated PIK amount are repayable in full on December 31 2015.

Bank borrowings

Bank borrowings at 7 January 2013 comprise a revolving credit facility of £13.7 million and a term loan £17.2 million (2011: £9.8 million and £4.1 million, respectively. The term loan matures on 31 March 2015 and bears interest at Canadian base rate plus a margin of 2.75% secured by the AF group's assets.

20. Trade and other payables

Trade and other payables principally comprise amounts outstanding for trade purchases and ongoing costs. For most suppliers no interest is charged but for overdue balances interest is charged at various interest rates.

The directors consider that the carrying amount of trade and other payables approximates to their fair value.

21. Provisions

Shown in the consolidated balance sheet as:

Restructuring and redundancy

The restructuring and redundancy provision represents the estimate of the liability for the severance of Maple employees. As set out in Note 26, Maple was acquired in August 2011.

Onerous contracts

Onerous contract provisions primarily represent future cash flows related to film titles which are currently forecast to make a loss over their lifetime. Provisions for onerous contracts are recognised when the unavoidable costs of meeting the obligations under the contract exceed the economic benefits expected to be received under it and the general recognition criteria of IAS 37 Provisions, Contingent Liabilities and Contingent Assets are met. As required by IFRS, before a provision for an onerous film title is recognised the AF group first fully writes-down any related assets (generally these are investment in content rights balances). This provision is expected to be utilised within two years from the balance sheet date. Also included within onerous contracts is an unfavourable lease which expires in 2017.

22. Investment in joint ventures

Details of the AF group's significant joint ventures at 7 January 2013 are as follows:

Contractual arrangements establish joint control over each joint venture listed above. No single venturer is in a position to control the activity unilaterally.

Effect of proportional consolidation of joint ventures

The following presents, on a condensed basis, the effect of including joint ventures in the AF group financial information using proportional consolidation:

23. Financial risk management

The AF group is primarily exposed to credit risk, liquidity risk and market risk as a result of holding financial instruments. The AF group did not elect to voluntarily designate any financial instruments at fair value through profit or loss.

Market risk

Market risk is defined as the AF group's exposure to an earnings loss or a loss to the value of its financial instruments as a result of changes in market prices, whether those changes are caused by factors specific to the individual financial instruments or its issuer, or factors affecting all similar financial instruments traded in the market. The AF group is mainly exposed to foreign currency risk.

Interest rate risk sensitivity analysis

In the period to 7 January 2013 and in 2011, a 1% increase/decrease in interest rates on the revolving credit facility and the term loan would not have a significant impact on the AF group's net earnings and other comprehensive income.

Foreign currency risk management

Foreign currency risk is defined as the AF group's exposure to an earnings loss or a loss to the value of its financial instruments as a result in the fluctuations of foreign exchange rates. The AF group is exposed to the following risks from changes in foreign currency rates:

·; the majority of the AF group's distribution advance payments to producers to acquire distribution rights are denominated in US dollars, whereas revenues and the majority of the other operating expenses are mainly denominated in Canadian dollars, pounds sterling and euros;

·; The AF group's shareholder loan is denominated in US dollars and amounts are disclosed in Note 19;

As well, the Group's foreign operations' functional currencies are other than the Canadian dollar (euros and pound sterling). The Group's related exposure to the foreign currency exchange rates is primarily through cash and other working capital elements of these foreign operations. The reportable operating segments also mitigate foreign currency risks by transacting, in their functional currency for sales, procurement (other than purchase of minimum guarantees) and financing activities.

The Group uses foreign exchange forward contracts to manage its exposure from purchases in US dollars.

Credit risk management

Credit risk is defined as the AF group's exposure to a financial loss if a debtor fails to meet its obligations in accordance with the terms and conditions of its arrangements with the AF group, in relation to financial instruments. The AF group's credit risk is primarily attributable to credit risks arising from the AF group's normal commercial activities are independently managed and controlled by its three territories (Canada, UK and Spain), specifically in regards to customer credit risk. Trade accounts receivable are recognised initially at fair value and subsequently measured at amortized cost less allowance for doubtful accounts (note 4). An allowance for doubtful accounts is established when there is a reasonable expectation that the AF group will not be able to collect all amounts due according to original terms of the receivables. The carrying amount of the trade accounts receivable is reduced through the use of the allowance account and the amount of any increase to the allowance is recognized in profit or loss. When a trade receivable is uncollectible, it is written-off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written-off are recognized in the profit or loss.

23. Financial risk management (continued)

Trade receivables are widely distributed among customers in the Canadian, British and Spanish markets, which includes theatres, television broadcasters and retail outlets. The AF group maintains a provision for potential credit losses. The allowance was £5.0 million at 7 January 2013 (31 December 2011: £1.3 million; 31 December 2010 £3.0 million).

The AF group is exposed to credit risk in the event of non-performance by counterparties to its derivative financial instruments. The AF group minimises this exposure by monitoring closely the credit standing of counterparties and maintains credit insurance for certain customers in UK and Spain. Collateral or other securities to support financial instruments subject to credit risk are usually not obtained.

As presented in the previous financial instrument tables, the carrying amount represents the maximum exposure to credit risk for each respective financial asset as at the relevant dates.

The carrying amount of cash and cash equivalents and deposits recorded in the balance sheet represent the AF group's maximum exposure to credit risk.

The AF group considers its maximum exposure to credit risk as follows:

Liquidity risk management

Liquidity risk is defined as the potential that the AF group cannot meet a demand for cash or meet its obligations as they become due.

The AF group manages the risk by establishing detailed cash forecasts, as well as long-term operating and strategic plans. The management of consolidated liquidity requires a constant monitoring of expected cash inflows and outflows which is achieved through a detailed forecast of the AF group's consolidated liquidity position, to ensure adequacy and efficient use of cash resources. Liquidity adequacy is assessed in view of seasonal needs, growth requirements and capital expenditures, and the maturity profile of indebtedness, including off-balance sheet indebtedness. The AF group manages its liquidity risk to maintain sufficient liquid financial resources to fund its operations, meet its commitments and obligations on the shareholder loan.

The amounts below are the contractual undiscounted cash flows. All amounts contractually denominated in foreign currency are presented in Canadian dollars equivalent amounts using the period-end spot rate except as otherwise stated.

Analysis of the maturity profile of the AF group's financial liabilities, which will be settled on a net basis at the balance sheet date, is shown below.

Capital risk management

The AF group's objectives when managing capital are to safeguard its ability to continue as a going concern in order to grow the business and provide returns for shareholders and benefits for other stakeholders and to optimise the weighted average cost of capital and tax efficiency subject to maintaining sufficient financial flexibility to undertake its investment plans. There are no externally imposed capital requirements. The management of the AF group's capital is performed by the Board.

In order to maintain or adjust the capital structure, the AF group may issue new shares or sell assets to reduce debt.

24. Stated capital

At 7 January 2013 and at 31 December 2011 and 2010, the AF group's total share capital was £180.4 million comprising the following classes of shares: