Review: Goldfinch SEIS Fund

The Goldfinch SEIS Fund is one of our favourite SEIS funds, investing in a range of companies developing film, TV and computer games. Runaway media successes such as Harry Potter are the ones that grab people’s attention, but finding them is like looking for a needle in a haystack. The Goldfinch SEIS Fund aims to generate returns 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.

Highlights

  • Portfolio of 5-15 companies developing film, TV and video games

  • Investors have access a diverse range of revenue streams which don’t depend on a project’s ultimate success - from script sales to general production activities
  • Minimum target return of £1.25 per £1 invested (not guaranteed)
  • Charging structure aligned with investors’ interests
  • Highly experienced team: Goldfinch has advised over 82 SEIS companies to date
  • SEIS tax relief: up to 50% income tax and capital gains tax relief. Remember tax rules can change.
  • Minimum £10,000. You can apply online with Wealth Club.

The offer

The Goldfinch SEIS invests in a portfolio of 5-15 companies set up to develop film, TV or video games. Music, theatre and other entertainment sectors may also be selected for investment.

The management team avoid very early-stage projects when investing in new content and instead prefers projects based on established intellectual property. 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 before SEIS tax relief.

Goldfinch has a modest growth target of £1.25 per £1 invested. Remember, it’s a target and not guaranteed: SEIS funds are higher risk as they invest in the smallest companies.

The manager

Goldfinch has a highly experienced team with strong industry connections, including BAFTA and Oscar winning producers and developers. Goldfinch has advised over 82 SEIS companies and raised over £8.4 million under the SEIS scheme.

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.

Goldfinch 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, Goldfinch expects to reject on average around 90% of these. Goldfinch controls 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 due diligence will focus on sales estimates, the track record of the team and ensuring the SEIS funding limit of £150,000 (plus any third-party finance) is sufficient to fund the project.

Examples of portfolio companies

Below are examples of previous or current investments made by the fund: note new investors will be exposed to different companies.

DLT Entertainment Development Limited

This was one of the first investments made by the fund. It produced 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 been commissioned.

DLT Entertainment Development Limited is currently considering further projects and is meeting with broadcasters to introduce them to a new TV series with Clive Anderson as host.

Trapped Nerve Entertainment Limited

Goldfinch Q.U.B.E 2Trapped Nerve Entertainment Ltd is a video games company. It is in the process of creating Q.U.B.E 2, a follow up to the hit video game Q.U.B.E created in 2011 by independent UK games developer Toxic Games and Trapped Nerve. Q.U.B.E stands for Quick Understanding of Block Extrusion. The game tests physics, spatial and reasoning skills in a series of increasingly challenging puzzles involving 3D blocks. The original was released to solid reviews and sold 350,000 copies (250,000 on the ‘Steam’ platform).

Q.U.B.E 2 is expected to be available on most major platforms, including Sony’s Playstation 4 and will support Sony’s ‘Project Morpheus’, allowing the game to be played through a Virtual Reality headset and gloves.

Following investment by the Goldfinch SEIS fund, ‘Q.U.B.E 2’ has won various industry awards, including Best Gameplay, Best VR Game and Indie Game of the Year, along with positive coverage in the trade press. Goldfinch believe the success of the original Q.U.B.E game, the growth in the computer games market and the fact that Q.U.B.E 2 will be virtual reality enabled, significantly reduce the sales risk when compared to a new unproven game.

George B Film Developments Limited

George B Films is developing a feature length documentary about footballer George Best. It includes key footballing moments, insightful interviews and previously unseen footage of the famous player. The film follows the ups and downs of his life. The rights of all scripts and property are owned by previous Goldfinch SEIS Fund investors.

The company has won over Barbara Best (George’s sister) to the project and the movie has the backing of the George Best foundation (now part of the Mary Peters foundation).

Prior to the project, the production team produced the successful sporting biopic on World No.1 golfer Seve Ballesteros, which following its UK release in 2014 has sold over 110,000 DVDs in the UK. In March 2016 ‘Seve the Movie’ was released in the USA to wide acclaim.

George B Film Developments has received multiple offers for UK distribution and is currently concluding a deal for UK distribution and international sales. Key relationships have been established with Northern Ireland Screen, Glentoran and Manchester United (including meetings with Man U TV).

Target return

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.

Exit strategy

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. The exit is targeted for 2021 and beyond: this is not guaranteed.

Performance

Out of the 82 SEIS companies invested in to date, 30 are considered by Goldfinch to be trading ahead of expectations, 50 are on target and two are trading behind.

Whilst it is possible that any company may fail in the future, Goldfinch do not believe any are likely to fail within the next 12 months and none have failed so far.

 Remember, past performance is not a guide to the future: capital is at risk.

Risks

This is an SEIS investing in the smallest unquoted companies. It is a high-risk investment.

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.

Fees

There is an initial charge of £500 on investment into Goldfinch, charged to the investor.

The annual fee will be 2%, paid by the investee companies, for a maximum of four years, plus an additional 0.5% per annum administration fee. There is an exit fee of £30 per company, subject to a maximum of £300.

A performance fee of 20% is payable once investors have received £1.25 back for every £1 invested. We like the fact that this is paid at the portfolio level and not by individual companies. The manager’s performance fee is aligned with the target return as they only receive the fee for returns above this level.

Summary

In our view this is a well-run and compelling media fund with the benefit of SEIS tax relief. The manager is committed and very experienced. We like the fact that the performance fee is paid at portfolio level: it shows an alignment of investors’ interests with those of the manager. For larger investments, the fixed initial charge may also be attractive. An investment in the Goldfinch SEIS Fund can be used to can offset the tax relief against this or last year’s income tax bill (via carry back), as well as being able to reduce capital gains tax by up to 50%. For those considering SEIS, we think this fund is one to go on the shortlist.

Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 20.09.17

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