Backing UK movies offers investment action

Matrix Securities put up the money for Mike Leigh's latest film, `Career Girls', and a new version of `The Professionals'. Cathy Newman reports on tax-efficient investments in television and films. A year ago Rupert Lywood, a former chartered accountant, and David Royds, a former stockbroker, came up with the idea of providing investors with a tax-efficient way to invest in British films. Three anonymous individuals contributed pounds 1.3m between them to get Mike Leigh's current film, Career Girls, off the ground; and 28 investors have come up with the majority of the pounds 11m budget needed for a follow-up to the Seventies TV series, The Professionals, which will star Kal Weber, Colin Wells, Lexa Doig and Edward Woodward.

Investors involved with the two projects have been taking advantage of "reinvestment relief", a scheme which allows high net-worth individuals to defer capital gains tax liability by reinvesting the money into a "qualifying investment", such as films or property.

Mr Lywood says he identified an opportunity in British film and television as "there are a lot of people involved in the industry who aren't business people". He added: "It's an industry where financial expertise is very fragmented. British film makers tend to make nice films, not commercial films."

Although investors in Career Girls and C15 - The Professionals were, theoretically, co-producers, and had a role in determining budgets, Mr Lywood said they were not given the opportunity to take walk-on parts. "Our business is highly commercial. It might be quite fun to have investors appearing on set, but it's a business; it's not just fun."

The "partnership", or consortium of investors, are consulted on important changes to the films, but specialist film consultants are employed by investors to monitor the production.

Mr Lywood says the way Matrix finances films is "unique", particularly as investors are guaranteed a financial return. Even if films fail to make a profit, investors will be certain of a minimum return of around 5 per cent.

Mr Lywood says Matrix has succeeded in changing the "economic profile" of film-making, as films are insured rather than pre-sold to distributors. "We insure films on the back of sales estimates," he explains, adding that producers like the system as profits are not absorbed by distributors, which usually take 15-40 per cent of profits on ordinary films.

Matrix is scrupulous about the films it chooses to invest in. "We will look at commercial films only," Mr Lywood says. "We wouldn't contemplate putting together a film which couldn't meet our financial returns."

Mr Lywood is talking to producers about other films which could be funded in this way. But he admits that the Government's review of reinvestment relief leaves future projects in limbo. "The last Budget made some sweeping statements which were not specific so it made it difficult to plan."