South Korea's Cinema Service is poised to tap into a new source of film financing with the launch of a public film investment fund by Hana Bank. The $7.8m Hana Cinema Trust Fund No. 1, which kicks off on Dec 3, marks the first ever involvement of the banking sector in Korean film finance.
In recent years, film investment in Korea has been dominated by venture capital, with so-called "netizen funds" also playing an increasing role in raising cash from private individuals over the internet. The Hana Cinema Trust Fund takes the concept of netizen funds to a higher level, allowing any interested party to invest between $15,000 and $40,000 in a special trust which will be used to finance, produce and distribute 10-15 films over the next two years. Neither Hana Bank nor Cinema Service will contribute directly to the funds.
The trust fund, conceived by Hana Bank, was developed in partnership with Cinema Service and Locus Holdings, the entertainment giant which owns Cinema Service, Sidus Corp. and other companies in the entertainment field. Since regulations require that the trust's funds be invested in a publicly listed company, disbursements will pass through Locus Holdings before being utilised by Cinema Service.
A special commission made up of one fund manager each from Hana Bank, Cinema Service, and Locus Holdings will decide together with honorary fund manager, actor Ahn Sung-ki which films will receive funds. At the end of the two-year period, dividends will be paid based on the performance of all films which received investment.
Investors will receive a dividend within a range of between 0.5% to 19%, with Locus Holdings making up the difference if the fund loses money.
"The Hana Cinema Trust Fund is the first instance of a bank providing a means for the public to invest in films," says Locus Holdings CEO Park Byung-moo. "It is a sign of the Korean film industry's maturity that it has been able to win this level of trust from the banking sector." Further, similar funds are to be issued by the bank in the future.
With local interest rates at their lowest level in years and economic prospects gloomy, investors of all kinds have been keen to invest in the film industry. Over the past 5 years Cinema Service has averaged a staggering 35% return on the films it has released.
The announcement of the new fund has caused a major stir in the local industry, with other banks quickly showing interest in creating similar initiatives. On the morning of November 28th, prior to the signing ceremony between the three companies, Cinema Service's website crashed under an onslaught of visitors requesting more information.