CASE17CASE 19 Instructor VersionCopyright 2014 Health .docx
CAIC SFA
1. Banker / Producer
$
Distributor / Co-Producer
$
Media
Funding
Vehicle
Seeks High Returns
and Principal Protection
TV
Network
or Studio
Seeks Balance Sheet
Risk Reduction
Media
Mitigation
Holdings
Agency / Insurer
Increases Returns
and Eliminates Risk
T H E T O O L
2. A+ Insurer
Hedge Fund
Film LP
Major Bank
C
a
s
t and Crew
Labor & Services,
Families
Slate Fund
Studio / Network
$
$ 30%-40%
Tax Credits!
$
CAIC
$$$$
$$$
$$$
$$
$$
$
$
SAFETY!
T H E T O O L
50%
50%
Insurance Premiums
(L&H)
3. Srvs. Credit = $ 125,000,000
Picture Sub. = $ 125,000,000
Labr. Credit = $ 125,000,000
CAN = $ 50,000,000
B.O. = $ 75,000,000
C.V. = $ 500,000,000
Liquid Cash = $1,000,000,000
$1B FUND
$500,000,000 $500,000,000
Negative Cost Insurance Cost
CAIC
$1B
FACE
AMOUNTS
$500M
CASH
VALUES
$500,000,000
Negative Cost
Fund spend:
$500,000,000
Negative Cost
Studio spend:
$1B SLATE
25% Profits 75% Profits
100% break-even for
bank or equity facility
Retain F.A. + $1,000,000,000
(FMV OF $1B FACE AMOUNT IS APPROX $500M)
Hit films? C.V. $ 500,000,000
(FAMILIES AND FUND RUNNERS RETAIN $500M)
If the film facility breaks even,
the fund keeps $1,000,000,000
M.G.A. = $75M to $ 95,000,000
T H E T O O L
5. What is the legal basis of the CAIC structure ?
IRS tax code 264(a)(1) – L&H cost deductions
46 years of proven COLI, BOLI and NQDC law
PS-58 and PS-38 insurance table standards
US theatrical film tax credit stautes and rules
Perfect historic record of L&H contracts
CAIC ownership for loan perfections
T H E T O O L
6. T H E T O O L
Year
States
with
Film
Incentiv
e
Program
Incentive
Amounts
Offered
1999
and
earlier
4
$2
million
2000 4
$3
million
2001 4
$1
million
2002 5
$1
million
2003 5
$2
million
2004 9
$68
million
2005 15
$129
million
2006 24
$369
million
2007 33
$489
million
2008 35
$807
million
2009 40
$1.247
billion
$1.396
Source: Tax Foundation.org, Movie Production Incentives
US
7. 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
T H E T O O L
KEY - Slate Funding: 1). $500mm is spent on negative costs 2). $500mm is spent on CAIC. 3). $500mm is spent on negative costs by a major studio or TV network. $1,500,000,000 is spent on qualified film or television production expenditures in TOTAL costs. CAIC is “ C ash A ccumulation I nsurance C ontracts ”. Costs are paid for insurance on film’s cast. F.A. refers to “ F ace A mounts ” of policies paid to cast or crew in the event of demise (benefit). Srvs. Credit refers to approx 25% recoup for CAIC services spending on $500mm of $1.5b. Picture Sub. refers to approx 25% recoup for in-state film spending on $500mm of $1.5b. Labr. Credit refers to approx 25% recoup for in-state labor spending on $500mm of $1.5b. CAN refers to “ CAN adian tax credits available for CGI/FX crews used in selected provinces. B.O. refers to “ B ox O ffice ” net of 5% on the total spending of $1.5b (from 25% of net profits). C.V. refers to “ C ash V alues ” of policies that are liquid, cash accumulations (inside build-up). M.G.A. refers to “ M aster G eneral A gent ” commissions paid by insurance company to broker. 25% Profit refers to the FUND receiving 25% of the box office and DVD/VOD/CATV sales. 75% Profit refers to the STUDIO receiving 75% of the box office and DVD/VOD/CATV sales. ( ASSUMPTIONS : STUDIO PAYS 100% OF PRINT & ADVERTISING COST & REMITS 100% OF TAX INCENTIVES FROM STATES OR PROVINCES BACK TO THE FUND)
