German Minister of FinanceHans Eichel held out an olive branch to the German film industry on Wednesday(May 4) after the Federal Cabinet agreed on proposed tax legislation which willclose the door to the old-style German media funds (, May 2).

Eichel said that a workinggroup convened by Chancellor Gerhard Schroeder earlier this year was working onan alternative new funding instrument for German films in consultation with theFinance Ministry.

Eichel's plans to curtail taxbreaks for media investment funds emerged last week as part of a governmentmove to overhaul German tax rules. They were described at the time as "acomplete catastrophe for the German film industry," by one fund manager.German media funds raised Euros 13bn between 1997 and 2004 with around 80% ofthis being invested in US productions.

Wednesday was the last day ofthe transition period for investors to sign up to funds operating under the oldregulations so long as the funds' placements had been launched before March 18.

Several of those fundscurrently on offer to prospective investors - such as Alcas/KG AllgemeineLeasing's Euros 100m "Melda" fund for Paramount Pictures featureprojects or Hannover Leasing's Euros 25m "Moratim" production fund tofinance television series for Universal - were launched after March 18.

These funds will not be ableto offer investors the so-called "protection of confidence"(Vertrauensschutz) of the transition period specified by the Finance Ministry.

One chink of light in all thegloom came from Munich-based Equity Pictures, which has previously backed filmssuch as Hostage, The Matador and RelativeStrangers. It said its fourth fund KGIV had reached its minimum placement guarantee sum of Euros 10m by last weekendand expected to raise a total of Euros 25m by the end of the transition periodon May 4. This fund was launched at a public sales and investor meeting onMarch 4 and signed up its first investors before March 10.

Equity's CEO AndreasThiesmeyer pointed out that the placement of Euros 25m would allow the fund toproduce or co-produce up to five feature film projects.