An angel waiting in the wings

BACKING A new stage musical is an enjoyable investment option for theatre aficionados, offering the prospect of lucrative returns if the show is a hit. Angels - as investors like this are called - will sometimes get to meet the stars and see the show at a special viewing.

Sometimes, too, the curtain does go up on a real winner. Andrew Lloyd Webber's Cats took its initial development capital from a collection of small investors, who bought into the show in 1981 with packages priced at just pounds 750 each.

One of those investors was Eddie Jones, 78, who has had a return of some pounds 25,000 from his single unit of pounds 750 in Cats over the past 18 years.Mr Jones's current investments include the London productions of Whistle Down the Wind, Copenhagen, Miss Saigon and The Weir. He says: "I'm in 14 shows in the West End, four on tour in this country, and four in America on Broadway. I started in 1961 and lost for the first 20 years. Don't invest if you can't afford to lose."

The risks involved in finding a hit means that becoming an angel is unlikely to prove an alternative to other more staid, but more viable investments. This is because the percentage of hits to flops is infin- itesimally small. Even if you are lucky enough to find a production which makes a profit, you could still lose out because of the producers' creative accounting or signing a deal which bars small investors from a share in merchandising.

Now Tess, a planned new West End musical, hopes to raise pounds 1.5m from private investors. Durbyfield, the limited company behind Tess, claims this is the first ever stage show to raise its funds through the Government's tax-efficient Enterprise Investment Scheme (EIS).

Bruce Athol MacKinnon, producer of Tess, says: "Normal theatre angels put some money in and, if the show does very well at the box office, they do very well. If it doesn't do well at the box office, but does with its CDs and everything else, they don't get a look in. With an EIS investment, you get a chunk of the company and the merchandising."

The EIS gives individual investors a 20 per cent income tax break on the way in on sums of up to pounds 150,000 a year. Any profits from an EIS investment can be taken free of capital gains tax. Proceeds from other investments can be taken with no immediate CGT liability arising, providing the money goes into an EIS within three years.

The idea is to encourage wealthy private investors to buy shares in qualifying unquoted companies such as Durbyfield, which are inevitably high-risk investments. The shares must be held for at least five years to qualify for the tax breaks involved. The show, based on Thomas Hardy's Tess of the D'Urbervilles, has raised about pounds 400,000 so far.

Meanwhile, Andre Ptaszynski, of producers Pola Jones, is hoping small investors will help provide the second half of the pounds 1.4m needed for his London staging of Spend Spend Spend, a musical based on the life of pools winner Viv Nicholson.

For more information on becoming an angel, call the Society of London Theatres on 0171-557 6700; to invest in `Tess', call the JFK Repertory Company on 0171-266 5767

A Ticket to Heaven?

PUTTING MONEY into a show will always be a risky business. Before you hand over your cash, run through the checklist below.

l I think of this not as money invested, but money spent. I am committing no more than I can afford to lose, any return is a bonus.

l I am at or near the top of the pecking order of those involved when it comes to returning our initial capital and sharing profits.

l I understand just which rights my money entitles me to a part of. I have thought about issues like touring income, merchadising and spin-off projects such as soundtrack albums.

l I know just how many weeks at what percentage of the theatre's seating capacity the show will have to run before recouping its costs from the box office alone. This figure is not high enough to frighten me. (In the case of Tess, it's 120 weeks at capacity of 60 per cent).

l I have done all I can to investigate the track record of the central figures involved in my chosen project. Their experience is impressive and I have no reason to doubt their honesty.