Elie Samaha's Franchise Pictures has secured a new source of film financing through the German Commerzbank-backed Academy Film Fund (AFF), which has tapped Australian entertainment financiers frustrated by the tax changes in their own market.

The AFF aims to raise up to Euros 200m ($176m) from private German individuals by the end of October 2001, to fully finance the production of three to four Franchise features.

According to AFF's prospectus, Commerzbank has promised a placement guarantee of Euros 100m for the fund, and the fund's volume could rise above Euro 200m should the shareholders assembly so decide.

Although structured as a so-called "blind pool" fund, projects currently in development at Franchise which could benefit from AFF backing are the $35m thriller Ecks Vs. Sever, with Antonio Banderas and Lucy Liu, and Rennie Harlin's $80m time-travel adventure A Sound Of Thunder.

"What makes this fund different from the other players", explains Ernst-August Schnieder of Commerzbank, "is that Franchise Pictures - and Commerzbank through an assumption of liabilities - guarantees the fund 100% of its capital back in 2007. The special aspect about this guarantee is that it is per film; i.e. there won't be any pooling. In addition there is a further upside potential from the participation in revenues which would all be 'on top'".

The fund is being managed by Schnieder along with fellow Commerzbank executive Wolfgang Schamburg and German producer Oliver Hengst, with Justin Pearce of Australia's Entertainment Finance Group's (EFG) and Gary Hannam of New Zealand's Film Investment Corporation (FIC) advising AFF on the assessment of projects and other production matters.

According to EFG's Justin Pearce, who brought Franchise together with Commerzbank as part of EFG and FIC's moves to expand their operations outside of Australia and New Zealand, the fund had undertaken "extensive due diligence" on the litigation between Franchise and Intertainment and has "set up protective mechanisms in the fund to get rid of any perception of budgetary risk".

"If Franchise say the film costs $ 50m, then they have to pay a minimum guarantee of $50m", Schnieder explained. "If it costs $60m, then the guarantee will have to be $60m. In addition, we have Justin and Gary Hannam [of FIC] and Oliver Hengst, who has 30 years of production experience, to look over the projects".

Each of the selected projects will receive a wide US theatrical release through Warner Bros. - with whom Franchise has an output agreement -, while the foreign distributors include the KirchGroup's Epsilon in Germany and Mediaset in Italy.

Schnieder added that the distribution of the worldwide revenues will be calculated according to a "waterfall" construction with a back-end split of 45% for AFF and 55% for Franchise, and the fund has the possibility of investing in the films' P&A costs as well "if the fund has money over, but this is not a primary goal for us".

The AFF is the primary media fund launched by Frankfurt-based Commerzbank AG, although another division: CFB Commerz Fonds Beteiligungsgesellschaft, was behind two film funds for Sony Pictures Entertainment and launched IWP International West Pictures with Cologne-based Gemini Filmproduktion this spring .