An $80m (£40m) investment fund has been set up to cashflow the new UK tax credit.
The Limelight Fund is offering producers who qualify for the incentive finance on what it says is a competitive terms.
UK producers David Parfitt and Christopher Figg are amongst the scheme's designers and sit on Limelight's board. They promise a finance scheme that is geared towards producer needs rather than tax avoidance.
'We first got involved with this because, like most independent producers, we were finding financing more and more complex. What attracted us about this fund is that it is very, very straightforward,' said Parfitt.
At the simplest level, Limelight will cashflow the credit, worth up to 20% of a qualifying production or co-production. Theoretically, that means each year the fund could support films with an aggregated budget of up to $400m (£200m).
Participants can also benefit from other funding support, including:
- Sales agency advances and distribution expenses
- Lending against contracted pre-sales of British films
- And development finance of up to 5% of a film's anticipated tax credit to finance the development of a participating producer's
The fund is set up to encourage producers to gain from staying with the fund in what will be a competitive market - what Parfitt calls a 'loyalty bonus.'
Development loans on projects which are successfully put into production will be 'rolled over' to provide development finance for the producer's subsequent project.
The initial slate covers eight films with an aggregate budget of $50.28 (£25.1m).
The fund will take a fee and a cut of revenues. There is therefore a degree of risk which means that the films supported will be expected to have commercial potential.'The good thing is that the scheme is not based on tax avoidance which rules out the fly-by-nights,' says Parfitt.
'Investors will be able to spread their risk across a slate and we will look at scripts and budgets and so on to make sure we have the right projects but the initial slate shows we will support quite a wide range of films.'
But what has made Limelight particularly attractive, says Parfitt, is that it is based on a Venture Capital Trust (VCT). Technically it is a collection of funds, initiated byLimelight VCT plc, the only venture capital trust investing in filmslisted on the London Stock Exchange.
VCTs are attractive to investors because they offer substantial tax benefits.
But producers have the comfort of knowing that VCTs have to go through a complicated and thorough approval process. Hence, they come with less risk of investment being turned down by the tax authorities.
The structure, as set up by lawyer/financier Michael Henry the Fund's promoter, also means that Limelight do not have to charge legal fees.
'The Limelight deal is extremely attractive to producers,' said Keith Evans, founding director of Baker Street Media Finance and producer of two films on the initial slate.
'Michael Henry has managed very cleverly to raise a lot of money under what were the old VCT rules, which were 40% income tax relief and all the other things that go with it.
'The other good thing for us (at Baker Street), focusing on smaller British independent films, is that we are trying to offer a combined package to British films in conjunction with Limelight. If a producer comes along and offers a film and we like it, within reason we can do about 80% (of the budget). It's a one-stop shop.'
There's a lot of credibility riding on the success of the fund, suggests Evans, after recent financial crises, which have dented investor confidence.
'We all need Limelight to work from an industry point of view. If it doesn't, it sort of proves that the tax credit is not worth having.'
Christine Corner, a partner at Grant Thornton accountants, believes there is reason for confidence: 'This is real money. It is producer friendly. It is not fleecing the producers. It is giving money to the producers for future development, which is the hardest money to get, but is also cash flowing their productions on very good terms. It's excellent.'
Jo Welman, Chief Executive of EPIC SpecialistInvestments andLimelight investment manager, predicted that the business model will'not only produce solid investment returns for its investors andshareholders, but also a much-needed source of competitively-pricedproduction finance for the British film industry.'
Jack Taylor former senior private banker is in charge of investor relations for the Limelight Capital LLP fund.
Initial Slate of films
Agent Crush $9.4 (£4.7m) Producer: Andrew Wanniaratchy
Bunch of Amateurs $10m (£5m) Producer: David Parfitt
Finding Bin Laden $7.4m (£3.4m) Producer: Christopher Figg
I Know You Know $2.6m (£1.3m) Producer: Sally Hibbin
Kitchen Games $6m (£3m) Producer: Keith Evans
Lesbian Vampire Killers $4m (£2m) Producer: Keith Evans
School for Lovers $9m (£4.5m) Producer: Stephen Evans
Yarko $2m (£1m) Producer: Sally Hibbin