UK-basedtax financier Grosvenor Park, Serbian media group Pink International andWashington-based government lobbyist OCo International have partnered toco-produce a slate of horror films and build a new $20m film studio inBelgrade.

Theinitial five low-budget productions will be set up as internationalco-productions accessing Serbian tax credits that the partners expect to beintroduced this summer. They will be produced through Midnight MayhemProductions under US-based producers Craig Baumgarten, Mike Marcus, BuddyEpstein and Lou Arkoff.

Thefilms will initially use another studio near Belgrade, Arvla Film Studios, butthe partners broke ground this week on a studio bankrolled by PinkInternational. US distribution will be handled by Monterey Entertainment, a newventure set up with former PolyGram executive Andrew Fogelson heading marketingand distribution.

GregStevens, co-founder of OCo, said that Serbia is set to introduce a 20% taxrebate on local film expenditure in July, although the law is yet to befinalised. He added that Serbia wanted to first see if the newly-introducedHungarian tax support, on which the Serbian model is based, had any kinks thatneeded to be ironed out.

"Thereis a commitment from Parliament to fast track it," Stevens said. "The financeminister has said three separate times that it will be passed."

As aco-producer on the slate of the horror films, Grosvenor Park aims to access UKtax-based support when the replacement for the Section 48 tax deferral launchesnext year. It expects Serbia & Montenegro to be admitted into the EuropeanConvention on Cinematic Co-production in mid-June.

EchoingUK financier Future Film's move into Germany today Grosvenor Park's tie-up withSerbia comes as the change in UK tax laws is aimed at forcing out intermediaryfinanciers and providing tax support directly to producers.

GrosvenorPark founder Don Starr said the move "gives us the opportunity to spend asubstantial amount of money in Britain, employing young writer-directors, aswell as using our own very skilled production team."

Alongwith stressing Serbia's wealth of locations, Stevens said that labour costs are"the most economical in Europe," noting a "lack of heavy encroachment ofregulation."