Turning the lens on investments with movie star qualities
Fund: A number of films in production
Manager: Gizmo Film Productions
Tell us about the fund?
Gizmo Films Productions was established over 20 years ago. It began as a conventional content producer, mainly of documentaries for TV. It then progressed into feature films. In 2012 the company began to get involved in the financing of feature films and rather than seeking finance for its own projects, assessing the very best film projects for investment and our involvement as executive producers. Investors typically invest in a new, SEIS and EIS qualifying production company formed by the producers.
What films are in production?
Mad To Be Normal with David Tennant, Michael Gambon and Gabriel Byrne was recently fully financed and completed and premiered at the Glasgow Film Festival in February. Cinema release is from the end of March, reviews have been positive and we’ve signed a major home entertainment deal.
Our main project currently is Funny Cow, which as of February 2017 wrapped and we are raising the post production finance. The film stars Maxine Peake and Paddy Considine – they are real actors’ actors and EOne, the distributors of Spotlight, 12 Years A Slave and The BFG have already bought the UK rights.
It has some great cameos from people like Vic Reeves and John Bishop and supporting actors include Stephen Graham, Kevin Eldon and Alun Armstrong. With 90% of the funding now done this will be fully funded very soon.
We are looking at new projects right now –we only look at well developed film projects with strong cast, shooting dates, and at least some sales confirmed. We want to place our investors in the best possible place to make a solid return so do not seek funding for early stage projects which may be riskier with a longer period before financial returns start. We also look for projects where the SEIS is still available for the first £150,000.
We always lead invest into the films that qw executive produce so that we are aligned with the investors and can make sure that the equity investors are getting a good deal.
What film characteristics should investors look out for?
Investors should ask questions about how it is proposed to distribute – i.e. sell the film and why they should believe that the sales will outstrip the cost of production.
It doesn’t matter who the cast are or what the storyline is if the film’s finance raise is not significantly lower than the likely sale. Film distributors understand this so look out for sales and/or distribution deals. Look out for the film qualifying for government subsidies through the UK tax credit or similar. This reduces the cost of production. Make sure the project is eligible for EIS benefits. Make sure the producers are experienced and make sure they are using major and reputable firms of media lawyers and accountants. Make sure you meet at least one of the producers face to face and ask them to these points.
What is the minimum investment?
We typically state a minimum investment of £10,000 made under the terms of high-net-worth/ sophisticated investor self-certification. Crowdfunding doesn’t really work for anything beyond micro budget productions.
How much has been raised?
For Funny Cow we have raised a total of £1.8 million including pre sales and gap (debt) finance towards a target of £2.1 million.
What return can investors expect?
EIS investors will receive 30% tax rebate and the investee company for Funny Cow, Laughing Girl Limited, has HM Revenue & Customs (HMRC) approval.
After repayment of debt finance which is loaned against the UK tax credit, the sales advance and typically some of the post production costs, equity investors then receive all of the income until they have received their full investment back plus a 20% premium.
There is then a profit share with the production companies, cast, post house with the equity investors in the case of Laughing Girl Limited receiving 45% of all ongoing receipts. Because of the 20% government subsidy this effectively means that we only need to cover the cost of production to get to the 120% position.
One benefit of EIS not often understood is that regular and long term investors in property and shares can use an EIS investment to defer capital gains tax liabilities from these heavily taxed investment activities, potentially indefinitely. Investment in film EIS should not be seen as a more risky rival to property or share investment but as a very tax efficient complementary investment within a balanced portfolio.
What are the risks?
Investing in any start-up is of course risky. That is precisely why HMRC promotes EIS and SEIS for start-up businesses. Generous tax breaks are never likely to be on offer to risk free investments. Film like all creative media involves subjective taste.
That creates a risk. We cannot judge in advance how popular a film will be with the critics and the public. That is why it is important to consider the ways of reducing risks by looking at the factors mentioned above such as the financial structure and the track record of the company selling the film. Look out for projects that do not need to be a blockbuster!
Why is the UK film industry important?
Investment in film allows people to feel part of a creative team, an ongoing project and as having provided a lasting legacy in the form of the film itself. By getting involved before shoot you can be part of a journey from pre-production, shoot – when you should be able to visit the set and meet the team through to premiere and general release. The film industry’s importance to the UK is clear enough – it is one of very few industries in receipt of government financial support. The UK has become a world leader in many of the technical as well as creative aspects of filmmaking employing thousands of talented people.
