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Source: Merill Lynch, Industry Overview 1995-2006

T H E P R O B L E M S. Merill Lynch: Monte Carlo Simulations INPUT. Source: Merill Lynch, Industry Overview 1995-2006. SINGLE FILMS. T H E P R O B L E M S. Merill Lynch: Monte Carlo Simulations RESULT. SLATE OF FILMS. Source: Merill Lynch, Industry Overview 1995-2006.

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Source: Merill Lynch, Industry Overview 1995-2006

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  1. T H E P R O B L E M S Merill Lynch: Monte Carlo Simulations INPUT Source: Merill Lynch, Industry Overview 1995-2006

  2. SINGLE FILMS T H E P R O B L E M S Merill Lynch: Monte Carlo Simulations RESULT SLATE OF FILMS Source: Merill Lynch, Industry Overview 1995-2006

  3. T H E P R O B L E M S Geneva Media: Monte Carlo Simulation 2006-12 “Single films packaged by top producers failed to recoup 30% of the time, and in total lost 45% of investor’s assets.“ --DyerData analysis Source: DyerData, Industry Indie Performance Survey 2006 - 2012

  4. T H E P R O B L E M S Geneva Media: Monte Carlo Simulation 2006-12 “Studio slates failed to recoup 20% of the time, and lost 35% of investor’s assets.“ --DyerData analysis Source: DyerData, Industry Slate Performance Survey 2006 - 2012

  5. T H E P R O B L E M S Box Office Mojo’s Top Independent Producers by Worldwide Box Office Gross

  6. T H E P R O B L E M S Box Office Mojo’s Top Independent Producers by Worldwide Box Office Gross MANY NEW FINANCIERS IN THE “TOP 20” HAD NO PRODUCTION EXPERIENCE PRIOR TO SECURING THEIR SLATE CAPITAL MANY ARE STILL BORROWING MONEY BECAUSE THEIR MODELS NEVER ACTUALLY WORKED FOR THEM… OR FOR INVESTORS

  7. T H E CA S E S T U D Y In simple terms, how does CAIC work? Cast and crews are bonused a salary The salaries “double” state film tax credits A “restriction” is placed on each salary bonus Restrictions removed at break even, or year 10 This provides loan collateral and liquidity CAIC also insures a cast and crew’s families (from disability and death)

  8. $1B FUND CAIC $2B FACE AMOUNTS $500M CASH VALUES $1B SLATE Studio spend: Fund spend: Retain F.A. + $2,000,000,000 ( $2B OF FAMILY INSURANCE STAYS IN-FORCE) $500,000,000 $500,000,000 Negative Cost Negative Cost Hit films? C.V. $ 500,000,000 (FAMILIES AND FUND RUNNERS RETAIN $500M) CA S E S T U D Y (Studio Financing Facility) If the film facility breaks even, the fund keeps $1,000,000,000 Srvs.Credits $ 125,000,000 Picture Sub. $ 125,000,000 LaborCredit$ 125,000,000 Canada $ 50,000,000 PreSale $ 75,000,000 C.V. = $ 500,000,000 Liquid Cash = $1,000,000,000 $500,000,000 $500,000,000 Insurance Cost Negative Cost 100% break-even for bank or equity facility 25%Profits 75% Profits M.G.A. = $75M to $ 95,000,000

  9. CA S E S T U D Y (Studio Financing Facility) 100% SAFETY regardless of box office or ancillary sales

  10. T H E CA S E S T U D Y FUND’s TOTAL OUTLAY IS $1,000,000,000 (25% incentive returns $250mm in tax credits) FUND’s TRUE SPENDING IS $750mm (50% allocated to protect the cast / crew / investors) STUDIO'S TOTAL OUTLAY IS $500mm STUDIO'S ACTUAL COST IS $500mm (studio incurs FULL AMOUNT - NO tax credit) RESULT:   FUND INVESTS……...$750mm STUDIO INVESTS……$500mm STUDIO SPENDS  50% LESS THANTHE FUND STUDIO KEEPS50% MORE THAN THE FUND

  11. T H E CA S E S T U D Y Who profits from the CAIC structure? States/provinces’ workers/businesses profit Stars and cast members have golden handcuffs Extras and crew member’s families are protected Net film revenues are pure profit to the investors CAICs earn tax-free accumulations and interest Profits are enhanced by the state tax credits At breakeven families/fund keep all gains

  12. The Funder $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ The Funder $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ The Crew ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ The Crew ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ $ $ $ Film Company FIilm Company Film Company Film Company TAX FREE CASH TO FAMILY TAX NEUTRAL CASH TO FUNDER Media Mitigation Holdings, LP (162 Bonus REBA) Collateral Protection T H E GE N E V A S T R U C T U R E Who owns the CAIC --so it qualifies as deductible? The Funding Entity: Pension Funds, V.C.s Hedge Funds,Banks, Private Equity,but NOTafilmstudio!

  13. T H E GE N E V A S T R U C T U R E InvestorsPayeePlayersParticipants Hedge Fund Cast/Crew IRS 83(b) Cast/Crew’s Families Salary Film Company LP UL Ownership always remains with Cast/Crew ERISA Major Bank Film Company LP Media MitigationLP pays premiums and holds CV assignment General Partnership (2%) Investors (1%) and Film Co. (1%) CAIC (UL Policy) Film Studio Funds Bonus Film Company LP can pay 162 Bonus to Media Mitigation, LP LPs capital contribution (98%) Cast/Crew swap bonus for equity CV (Cash Values) TV Network General Partners have CV collateral and deduct premium costs (because insurance is not purchased to cover loans, is owned by Cast and Crew, and qualifies for UL film credit reimbursements). Insurance face amounts (death benefits) are paid to the Film Company, and after filming, to; the families, their heirs, assigns, a dynastyor a family living trust. Cast and Crew receive a bonus (this earns tax credits from US film incentives for salary). Bonus is pledged as equity in exchange for valuable consideration in limited partnership interests in Media Mitigation Holdings, LLC (this acts as a capital contribution for LP interests). Media Mitigation LP applies for individual UL policies and pays the premiums from capital contributions. Cast and Crew are individual UL policyowners (who initially choose to make the death benefit payable to the Film Company), thereby making all individual UL premiums deductible (i.e., not salary or bonus, not owned by Media Mitigation LP, not used for loan collateral, not used for buy-sell purposes, not owned by key people or majority owners). The Cast and Crew’s capital contribution to the LP offsets the economic benefit of the premiums paid.

  14. T H E GE N E V A S T R U C T U R E U.S. COMPANIES HAVE USED CAIC FOR 50 YRS! CAIC HAVE BECOME THE MOST COMMONLY UTILIZED “LIQUID ASSET” FOR ALL FORTUNE 1000 CORPORATIONS PROVIDING “INSURED RISK” NQDB PLANS COMPANY CO.’s CAPITAL VALUE CAIC (LIQUID CASH) % OF CAIC Tribune Media $ 0 US $ 119,000,000 US 2.130% Washington Mu $ 0 US $ 5,072,000,000 US 3.125% Wachovia $ 0 US $ 14,575,000,000 US 3.475% JPMorgan Chase $ 481,500,000,000 US $ 10,050,000,000 US 3.545% Citibank Group $ 72,500,000,000 US $ 4,579,000,000 US 5.863% Wal-Mart $ 193,400,000,000 US $ 13,090,000,000 US 6.768% Comerica Bank $ 10,000,000,000 US $ 1,073,000,000 US 10.073% First Republic $ 34,4000,000,000 US $ 701,672,000 US 2.095%

  15. T H E GE N E V A S T R U C T U R E JPMORGAN HAS $481B ADMITTED ASSETS & $10B CAIC!

  16. T H E GE N E V A S T R U C T U R E COMERICA HAS $10B ADMITTED ASSETS & $1B CAIC!

  17. T H E GE N E V A S T R U C T U R E CITIBANK HAS $72.5B ADMITTED ASSETS & $4.6B CAIC!

  18. T H E GE N E V A S T R U C T U R E What is the legal basis of the CAIC structure? IRS tax code 264(a)(1) – L&H cost deductions Simple employee insurance benefit (162 Bonus) Restrictive Executive Benefit Agreement (REBA) Proven COLI and NQDC UL contract performance IRS tax code 181 and 199 film tax deductions US and Canadian theatrical film tax credits

  19. Policyowner Bank / Funder Crew exchanges bonus & Collateral Assignment of the Cash Accumulations for a L.Partners’ interests Film LP CAIC 1% G.P. Owner Major Bank $ 98% L.Partners 1+1%G.P. Media Mitigation Holdings, LLP (3rd Party REBA) 1% G.P. Owner $ A+ Insurer T H E GE N E V A S T R U C T U R E Who owns the CAIC --so it qualifies for perfection? The Funder $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ The Crew ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ ♀♂ G.P.s control the Collateral Assignment and all Cash Accumulation

  20. $ $ $ 35%-65% Tax Credits! Hedge Fund $ Film LP $ Labor &Serv Costs Studio / Network CAIC $$$$ $$$ $$$ $$ $$ Slate Fund Major Bank Families C a s t and Crew A+ Insurer T H E GE N E V A S T R U C T U R E 50% SAFETY! 50% Insurance Premium Costs

  21. T H E GE N E V A S T R U C T U R E How is a 162 Bonus structure offered to workers? Agents & Managers negotiate worker pay Film, LP also pays 162 Bonus The lower level Cast & Crew can decide to “PLAY” --or not Family is Protected

  22. T H E GE N E V A S T R U C T U R E How does a “Media Mitigation” protect the funders? 1% General Partner controls cash values Film, LP pays Extra $50,000 Cast & Crew puts $50,000 in Media Mitigation Holdings LP $50,000 UL Premium

  23. T H E CA S E S T U D Y STUDIO CO-PRODUCTION: CAICs ON 240 CREW MEMBERS (7 YEAR FUND TERM) Fund Spends $24,000,000 and a Studio Spends $12,000,000 ATLC – Above-the-Line Cost (Salary for 240 cast/crew members plus perks) $12,000,000 BTLC – Below-the-Line Cost (for physical production, rentals, negative costs) $12,000,000 CAIC – Cash Accumulation Insurance Contracts (on 240 insured employees) $12,000,000 Total Production Spending ($36,000,000) Studio’s Risk on Negative Costs ($12,000,000) Investment Fund Risk on Negative Costs ($24,000,000) Total Required for Investment Fund to Break Even $24,000,000 Recoupment from State Tax Credits (25% of film budget) $ 9,000,000 Guaranteed Cash Accumulation Insurance (CAIC) liquid cash reserves $ 6,330,000 Commissions Payable on Cash Accumulation Insurance Contracts $ 4,850,000 Foreign/Dom Distribution Revenues (Return of 10.75% of $36M budget) $ 3,870,000 Total Soft Money, CAIC Cash Values, Commissions, and Film Revenues $24,000,000

  24. T H E CA S E S T U D Y STUDIO CO-PRODUCTION: CAICs ON 240 CREW MEMBERS (7 YEAR FUND TERM) Cash Accumulation Policy, Non-MEC, Guaranteed UL: Male, age 35, non-smoker, standard health risk. Guaranteed Values Illustrated (2.5%) Assumed Values Illustrated (4.75%) Yr Age Expensed Accm CashFace Amount Accm Cash Face Amount Premium Value Value(Death Benefit)Value Value(Death Benefit) _____________________________________________________________________________________ 1 36 $50,000 45,787 37,523 1,497,006 $46,693 38,429 1,497,006 2 37 0 44,981 28,454 1,497,006 46,894 30,367 1,497,006 3 38 0 44,052 27,525 1,497,006 47,087 30,560 1,497,006 4 39 0 42,966 26,439 1,497,006 47,205 30,678 1,497,006 5 40 0 41,733 25,206 1,497,006 47,213 30,686 1,497,006 _____________________________________________________________________________________ (the death 6 41 0 41,540 25,013 750,000 48,163 31,636 750,000 benefit is 7 42 0 41,249 26,375 750,000 49,073 34,199 750,000 lowered 8 43 0 40,836 27,614 750,000 49,930 36,709 750,000in year6) 9 44 0 40,274 28,706 750,000 50,719 39,150 750,000 10 45 0 39,546 29,630 750,000 51,425 41,509750,000 11 46 0 38,633 30,369 750,000 52,070 43,806 750,000 12 47 0 37,528 30,917 750,000 52,631 46,020 750,000 13 48 0 36,254 31,296 750,000 53,119 48,161 750,000 14 49 0 34,837 31,532 750,000 53,539 50,234 750,000 15 50 0 33,241 31,589 750,000 53,893 52,241750,000 _____________________________________________________________________________________ 16 51 0 31,418 31,418 750,000 54,171 54,171 750,000 17 52 0 29,309 29,309 750,000 54,368 54,368 750,000 18 53 0 26,852 26,852 750,000 54,463 54,463 750,000 19 54 0 23,991 23,991 750,000 54,424 54,424 750,000 POLICY IS A CONSUMER GRADE UL CONTRACT ISSUED BY STATE FARM INSURANCE OF ILLINOIS

  25. T H E GE N E V A S T R U C T U R E What does the structure achieve? Protects media investors from loss Helps increase capital at major studios Provides true, film/TV slate, risk mitigation Creates millions in new media spending Provides loan collateral and liquidity Protects the film’s cast and crew

  26. T H E GE N E V A S T R U C T U R E

  27. T H E GE N E V A S T R U C T U R E 25% to 35% tax incentives for financial service costs (including L&H and P&C insurance premiums and banking fees) from all qualified lenders or carriers that are commercially domiciled in over 20 states (GA, LA, IL, FL, NM, PA, CT, CA) Productions in a number of U.S. states (and Canadian provinces) also offer: 25% to 65% qualified production labor credits; and an additional 2% to 12% additional labor incentives, or for filming in areas of economic impoverishment

  28. T H E GE N E V A S T R U C T U R E Source: Weiss Research, American and Canadian L&H Company ratings, May 2012

  29. T H E GE N E V A S T R U C T U R E US Source: Tax Foundation.org, Movie Production Incentives

  30. T H E GE N E V A S T R U C T U R E US U.S.FILM TAX INCENTIVE AMOUNTS ARE STILL GROWING: $2B+IN2013. Source: Tax Foundation.org, Movie Production Incentives

  31. T H E GE N E V A S T R U C T U R E CALIFORNIA

  32. T H E GE N E V A S T R U C T U R E CALIFORNIA

  33. T H E GE N E V A S T R U C T U R E ILLINOIS

  34. T H E GE N E V A S T R U C T U R E GEORGIA

  35. T H E GE N E V A S T R U C T U R E LOUISIANA

  36. T H E GE N E V A S T R U C T U R E PUERTO RICO

  37. T H E GE N E V A S T R U C T U R E FLORIDA

  38. T H E GE N E V A S T R U C T U R E NEW MEXICO

  39. T H E GE N E V A S T R U C T U R E PENNSYLVANIA

  40. T H E GE N E V A S T R U C T U R E CONNECTICUT

  41. T H E I N D U S T R Y LE A D E R S • Geneva Media Holdings LLC: (a risk mitigation consulting firm established in California in 1989, and incorporated in 1994) 9171 Wilshire Blvd #670, Beverly Hills, CA (424) 666-8769 • We support accounting, financial, legal and tax advisors • Offices; Beverly Hills, CA. Lake Forest, IL (100+ partners) • We are top underwriters and experienced in working with: • Media verticals (e.g., Tribune Media… etc., since 1978) • Bell-Phillip TV (e.g., Y & R… CBS… etc., since 1989) • Other key client work (e.g., Kohl’s… Pritzker’s… etc.) • Advanced financial, tax, estate and NQDC planning • Administration for COLI, BOLI, CAIC and key-man

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