In a highly ambitious move,the Italian government is launching a private equity fund to support theItalian film industry.

Cinefund will have a targetbudget of Euros 50-70m per year, to be spent on 30 to 40 Italian films andco-productions 'with high box office potential.' The fund will investan average of Euros 1-2m per film.

The five-year fund has beenset up through Cinecitta Holding, the Italian state company whose interestsinclude state distributor and producer Istituto Luce and the exhibition circuitMediaport, now renamed Cinecitta Cinema.

Cinecitta Holding'smanaging director, Ubaldo Livolsi, said the initiative's sponsors have alreadycommitted Euros 15m to the fund. By the end of this year, Cinefund will have abudget of Euros 25m, he said.

Carlo Fuscagni, presidentof Cinecitta Holding, said the decision to set up a private equity fund tosupport the film industry had been taken in light of this year's drastic cutsto the FUS, the government's entertainment fund.

The local film industry,which has recently suffered a dearth in production due to government cuts,needs to find new funds on the market, he said.

But while the local filmindustry has been lobbying the government for years to establish a tax shelter,Livolsi admitted that this 'was not likely to happen in the nearfuture.'

As such, Livolsi saidCinecitta had decided to set up Cinefund, which will have three types ofinvestors, who must each invest at least Euros 250,000 in a film.

Investors will includesponsors who will not obtain a return on their investment, such as CinecittaHolding and Istituto Luce, who are jointly pouring Euros 5m into the fund.

Bank foundations and otherinstitutional organizations will be able to invest and receive a limited returnon their investment. Finally, Cinefund will be supported by private Italian andinternational investors who will be able to receive a 'high' returnon their investment, Livolsi said.

However, less than 20% ofItalian pictures released in 2003 grossed Euros 1m, which is considered thethreshold between a picture being successful or a flop.

Livolsi, one of Italy'smost prominent financiers, was appointed managing director of Cinecitta Holdingin January 2003. He is also president of Italian investment bank Livolsi andPartners and the Convergence Fund, a Euros 200m Fund targeted at media,telecommunications and e-business interests.

In 2000, Livolsi - a formerexecutive at Silvio Berlusconi's media empire, Fininvest - decided to investEuros 75m over four years to finance 20 pictures produced by Rita Rusic, theex-wife of embattled movie mogul Vittorio Cecchi Gori, under the Moviewebbanner.

However, Livolsi and Rusicparted ways after three of the producer's pictures flopped at the box office.Since then, Movieweb has decided to only invest in English-language films, suchas $10m upcoming picture The Shadow Dancer, with Harvey Keitel.

Still, Livolsi said hehasn't been deterred by his previous venture in Italian film production and isoptimistic about the outcome of Cinefund.

'We had to interveneto support Italian cinema,' he said, adding: 'We will reduce the riskby having lower investments on many more productions, and we will have sponsorswho are renouncing a financial return on their investment.'

'Plus, I will neverput myself on the commission that decides which films the fund will investin,' he quipped.

Cinefund's board will beappointed by Cinecitta Holding by the end of the year