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Investor Education for Global Private Investment Funds in Film and Media Finance, Private Equity, Hedge Funds, Section 181 Investors

Alright, so you woke up one day, checked yourpositions in most public entertainment and
Swiss Bank Account, called your family officeother public companies, real estate
planner, had breakfast with your privateinvestments, and other alternative
client service wealth manager, got your taxinvestments.
accountant on the phone, and between three of
you, you decided to invest your proceeds from*There is a huge demand, audience, and
your latest company's Merger or Acquisitiongrowing distribution structure for specialty
not into some dubious hedge fund or start-upindependent, ,crime, horror, and other low
biotech venture, but into financing Hollywoodbudget films as exemplified by the success of
films because you figure you need the Statesuch films as "Brokeback Mountain",
tax Credits, the Federal tax write-offs, as"Sideways", "Capote", "Garden State",
well as a nice hedge of revenues from a few"Napolean Dynamite", "Y Tu Mama Tambien", "My
movies.Big Fat Greek Wedding", "Memento", "Crash" ,
"Saw 1 &2", Friday The 13th", "Halloween",
Now, this may not ring too well initially"Texas Chain Saw Massacre", "Hostel" and
with your hedge fund manager neighbors in"WOLF CREEK", which was made for $800,000,
Connecticut or your oil and gas investorbought for nearly 4 million dollars prior to
friends in Bahrain or Dubai, but aren't theseits release by Dimension, as well as "Hustle
the same guys who are financing Hollywoodand Flow" which was made for $2 million
blockbusters? And the only question for you,dollars and bought for $16 million by
how do you get in the game without feelingParamount  Pictures.
like the Uncle of the film school student who
wrote his nephew a $1,000,000 check for a*Apart from large blockbusters such as "King
film that starred his theater departmentKong", "Harry Potter", and other large scale
classmates and ended up as a free download onstudio films, the majority of studio-produced
films have been under performing at the box
office. The films that have been successful
So after doing your share of homework, here'sfor studios were all externally financed and
what you discover may be the opportunity toor co-financed with studios, sold for 2-3 x
spice  up  your  wealthy  but  boring  life:their costs, and a majority of them retained
foreign  sales  rights  to maximize revenues.
*Sergey Brin And Larry Page Of Google, Fred
Smith, the CEO of Federal Express, NormanSo after looking at all the great benefits,
Waitt, the Co-Founder of Gateway Computers,how do you actually go about finding a deal
Jeff Skoll Of Ebay, Todd Wagner and Marcor movie project where you are certain that
Cuban (formerly of broadcast.com), Maxhalf your money isn't going to be used by a
Levchin and David Grodnick Of PAYPAL, MarcHollywood producer as a down payment on a new
Turtletaub of The Money Store, Roger Marinomansion  in  Pacific  Palisades?
Of EMC Corp, former Chicago bulls co-owner
Jim Stern, Sidney Kimmel Of Jones ApparelThe key that separates the successful film
Group, Minnesota Twins owner Bill Pohlad;financiers vs. the newbie Oil magnates who
Real Estate Developers Tom Rosenberg, Bobcome to Los Angeles with a pocketful of money
Yari; and, financiers Robert Sturm, Sheikhand end up leaving with half a pocketful of
Waleed Al Ibrahim, Zeid Masri of SilverHazemoney is called several things: structured
Partners, Michael Singer, Mark Esses, Davidfinance, leverage, risk minimization,
Larcher, Michael Goguen, Richard Landry,multiple exit strategies, tax credits, and
Michael Reilly, Rafael Fogel, and Philipthe ethical consciousness of the filmmaker
Anschutz are just a handful of high net worthproducer.
entrepreneurs who entered the motion picture
finance and production business withWhat does that translate to you in a real
successful  results.world scenario. Lets say you want to finance
100% of a $1.5 million dollar low budget
*There are various tradable state, federal,genre film whose worst case scenario is a DVD
and international tax credit incentives thatrelease and profits from international sales
would offer a premium based on an equityand perhaps some other equity sweeteners in
position. Assuming there is a 10 millionthe conversion of the securities that you
dollar budget film, where 50% of it is insubscribe  for  as  part  of  the  deal.
equity, and 50% is through international
distribution guarantees prior to release. NowWell, if you write a check for $1.5 million,
assume there is a 20-25% tax credit on theand the film is shot in a state that has 30%
entire amount of $10 million dollars, whichin tax credits, you get back $450,000 in tax
will immediately translate into $2-2.5credits + under Section 181, you are able to
million  tax  credit  to  an  investor.write off that amount under Federal. So you
are already making a nice return before the
*Numerous hedge funds such as Reed, Conner &profits kick in. Then you figure you sell the
Birdwell (DISNEY), Legendary Fund (Warnerfilm to 50 countries, and if you are really
Brothers), Melrose Fund (Paramount Pictures),lucky, you sell the film for 3-4 times it
Ingenious Media's 700 Million dollar Float oncost to a studio at a swanky festival like
London's AIM, Benjamin Waisbren Investments,Sundance, Toronto, Cannes, etc. Do this over
and a host of other funds and fund managers5-10 films and you can make a very profitable
are  entering  the  film  finance  arena.name  for yourself among the Hollywood elite.
*The explosion of international DVD,But lets really take this a step further and
pay-per-view, home video, cable, megaplexsee how the bigger boys leverage film
theaters, the future of multi-lingualinvesting because they can get a bigger star
Internet video on demand downloads, andwhich can translate in larger overseas sales.
cross-market digital distribution including
low-cost theatrical digital projection, theLets say a filmmaker/producer has a $10
movie industry is accelerating at anmillion film and you want in on the action.
unprecedented  growth  rate.You would park $5 million in equity, receive
an 20-30% tax credit on $10 million which
*The American Jobs Creation Act of 2004,will be $2-$3 million, the producer will get
which amends the Internal Revenue Code ofthe biggest star he can, get a studio to kick
1986, was signed into law . The Act createsin the other $5 million dollars, you wont
three tax incentives expressly applicable toworry about ever seeing a penny from the
motion pictures, one of which - § 181 oftheatrical release because you know your DVD
the Internal Revenue Code - is especiallyprofits and international sales will cover
significant to independent film producers andyour  equity  position.  Make  sense?
their passive investors on qualifying films
with  budgets  under  $20  million  dollars.Now leverage this with different budgets,
genres, stars, distribution, places where you
*The filmed and other entertainment sectorscan get high tax credits (Ie Puerto Rico is
are constantly outperforming and beating40%), other exit strategies where you can
analyst expectations with regards to growth,find your shares on the London AIM, and you
and are the only industries resistant toare on your new career path as a
untimely global events and adverse economicsophisticated and educated film financier.
conditions.Off course, if you want to go even further
and guarantee 100% of your capital, there are
*Movie Investor returns may be more favorabletricks to that as well.
and more liquid than holding direct equity



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