Review - Goldfinch SEIS
Film and TV have long been a fascination for investors. The rags-to-riches stories are the ones that grab the attention. Who can forget the amazing success of Harry Potter? Or the global phenomenon of Star Wars that started out as a low budget sci-fi romp? These projects are like a needle in a haystack. However, by taking advantage of generous SEIS tax reliefs, you can invest in films and other media in a lower-risk manner. You could profit not only if there is a big hit but also from general production activities which do not depend solely on the success of the film.
- Provides investors
access to 5-10 companies developing film, TV and video games
- Investors will
access a diverse range of revenue streams (from script sales to general
production activities) which don’t depend on a project’s ultimate success
- Minimum target
return of £1.25 per £1 invested
- Experienced team
- Structure helps
- SEIS tax relief: up
to 50% income tax and capital gains tax relief
- Invests in tax year 2016/17 so investors can offset this year’s or last year’s tax bill
The Goldfinch SEIS invests in a portfolio of 5-10 companies set up to develop film, TV or video games. Goldfinch’s main objective is to return investors’ capital and provide a clear path to exit, although of course neither are guaranteed.
The management team prefers projects based on established intellectual property. When investing in new content, they avoid very early-stage projects. For instance Goldfinch won’t invest before a script is ready, the cast lined up, and a finance plan and full budget in place. All projects need to receive Advance Assurance from HMRC prior to investment and must be viable without the added benefit of SEIS tax relief.
One example is the TV programme ‘Go 8-Bit’, hosted by comedian Dara Ó Briain. It’s based on the smash-hit live show of the same name which debuted at the Edinburgh Fringe Festival in 2014. In April 2016 Goldfinch SEIS Fund invested in the production company that turned the concept into a TV show. The first series aired on ‘Dave’ to public and critical acclaim and is now one of the channel’s five biggest shows. A second and third series have just been commissioned.
The project portfolio for the 2016/17 fund looks just as promising. To give you an idea, Goldfinch plans to invest in Cube Kids Limited, a mobile app developer with an existing portfolio of over 5,000,000 downloads and sales in 114 territories. The SEIS will fund the continuing development of four apps based on the global pre-school hit Teletubbies. The apps were launched in 2016 and Goldfinch has already completed one round of SEIS funding. On paper, those investing in the new fundraise for the 2016/17 tax year have already recouped their investment. The exit is planned for the 2019/20 tax year.
Another example is ‘Eating ourselves to extinction’ – a documentary that explores the impact of agricultural farming on global warming, narrated by Kate Winslet and with other stars committed as contributors such as Sir Richard Branson, Natalie Imbruglia, Moby and Brian May MBE so far – none of them is charging. Distribution is secured: the producers are nephews of Sir Richard who will distribute on Virgin media platforms. The exit is planned for the 2019/20 tax year.
Goldfinch is a relatively new venture – it has been advising on media investments for just over three years. It has already been involved in more than 115 projects and deployed over £60 million of finance, of which 45 have received £4.6 million in SEIS investment.
Goldfinch is run and managed by experienced sector specialists. Kirsty Bell, founder and MD, has been heavily involved in all aspects of film finance as both a successful film producer and a Chartered Tax Adviser who has spent much of her career at top-ten accountancy firms. This combined expertise has seen her focus on the structuring of film companies and their financing, raising close to £200 million in the last 18 years.
Goldfinch’s involvement doesn’t end with the investment. It sees every project through, acting as an executive producer and advising on distribution. The team is so established, every week they’re approached with two or three projects. However, only a minority receive investment. Goldfinch is in charge of the review process but the final decision is made by the fund manager, Kin Capital. This is more than a rubber stamp process – one potential investment was rejected as the investee company refused to grant the rights and consents routinely put in place to protect investors’ interests.
The minimum target return is £1.25 per £1 invested. Remember, it’s an objective and not guaranteed: any SEIS investment is higher risk as it invests in the smallest companies.
The manager’s performance fee is aligned with the target return as they only receive the fee for returns above this level. The performance fee is a strong motivator to align interests between investors, Goldfinch and Kin. It is charged at a portfolio, not an individual company level.
Whilst it’s too soon for any exit, the initial signs are promising. Goldfinch has indicated 13 of those SEIS projects are exceeding revenue expectations, 31 are in line and one falls short.
As media and entertainment is a predominantly cash-based business, the likely scenario for many of the investments is cash coming back into the SEIS and being used to fund share buybacks. In addition, projects can be sold outright to film or TV production companies and film scripts can be sold on elsewhere.
This is an SEIS investing in the smallest unquoted companies. SEIS investments are illiquid and capital is at risk. Investors should only invest money they can afford to lose. Tax rules can change and tax benefits depend on individual circumstances.
There is an initial charge of £500 on investment into Goldfinch, charged to the investor. The annual fee will be 2%, paid by the underling companies, for a maximum of five years, plus an additional 0.5% per annum admin fee. The performance fee of 20% is only payable once investors have received £1.25 back for every £1 invested. There is an exit fee of £30 per company, subject to a maximum of £300.
This is an interesting way of investing in the media and entertainment industry, with the benefit of SEIS tax relief. The manager is committed and very experienced and the fee structure aligns investors’ interests with those of the manager. This offer is worthy of consideration. Your money should be invested this tax year, so you can offset the tax relief against this or last year’s income tax bill, as well as being able to reduce capital gains tax by up to 50%.
This review is not intended to be advice or a personal recommendation to buy the investment mentioned, nor is it a research recommendation. Wealth Club aims to highlight investments we believe have merit, but investors should form their own view on any proposed investment and read the provider's documents carefully.