Soft Money, Cold Cash: Money Shopping for Animated Feature Films — Part 1: Non-Asian Territories

More and more countries/co-operatives worldwide are coming up with funding to help animated features get made these days. With the holidays right around the corner, a little window shopping is going to be necessary to start preparing those producer wish lists in order to usher in the New Year with a smile. So get those globetrotting sensible shoes out and that matching handbag, girlfriend were going money shopping!

Soft Money and Cold Cash (Non-Asian)

Feature film funding comes from two sources: public, soft money (or direct funding) and/or private equity (i.e., cold, hard cash). Government funding of films, in the form of subsidies, tax shelters, regional funds, public broadcasters, etc. has a relatively long history in just about every major member country of the European Union with few exceptions: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Portugal, Spain, Sweden, The Netherlands and the U.K. (Although not a member of the EU, Norway also heavily subsidizes filmmaking.)

As EU members, Cyprus, The Czech Republic, Estonia, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia also qualify for European subsidies through the European-wide MEDIA program (and, in most cases, through Eurimages as well), but have less-developed infrastructures for film production and film financing. (For the anecdote, Lichtenstein, Bulgaria and Iceland also qualify for MEDIA.) Its a fairly safe bet to say that any film, animated or otherwise, originating or involved in any co-production from one or several of these territories has taken advantage of the free money available there, in most cases quite substantial.

The same can be said of Australia,Canada,Fuji,Iceland,New Zealand and South Africa.

While Hollywood has traditionally financed films out-of-pocket, subsidies have become such a big part of international film financing these days that even the United States has started using them. Louisiana, New Jersey,New Mexico and Pennsylvania all now offer subsidies in one form or another, for example. But Hollywood, unknown for the most part to American audiences, has also been taking advantage of a legal loophole to, in some cases, fully finance films out of Germany. The law there doesnt require local spending, only that spending be done through a local producer and that a film generate a profit, something blockbuster American movies consistently do.

But Germany is the exception to the rule. The goal of subsidies is essentially to promote national or regional culture in the form of talent, to develop local infrastructure and to attract outside investment. The rule of thumb is, generally speaking, the money raised there must be spent there and must transit through a local producer (where a national or resident alien controls a majority of the capital). Normally, there are requirements for the minimum amount of local expenditure or percentage of the budget as well as artistic (above-the-line) contributions.

Amounts vary, but production budget percentages are normally between a low of 20% and a high of 30%-40% depending on the budget. The laws governing these subsidies are subject to elections and evolving policies, are normally valid for a limited period of time and subject to renewal/vote. Theyre too vast to list here, but an astonishing database can be found at http://korda.obs.coe.int/web/en, courtesy of the European Audiovisual Observatory. Some 169 organizations (56 national, 100 regional/local/community, seven supranational and six other international funds) in 31 countries are listed.

Regional funds have particular significance since they outnumber national funds, represent more money in certain territories like Austria and Germany, local government is the main source of funding, 89% of regional funding goes toward production and they tend to be more economically-driven than cultural. The major regional funds are: Filmstiftung Nordrhein-Westfalen (North Rhine-Westphalia), Film Fernseh Fonds Bayern (Bavaria), Filmboard Berlin-Brandenburg (Berlin and Brandenburg), Mitteldeutsche Medienförderung (Saxony, Saxony-Anhalt and Thuringia), Gaelic Broadcasting Committee (Western Isles, Scotland), Filmförderung Hamburg Nordmedia (Hamburg), Medien-und Filmgesellschaft Baden-Württemberg (Baden-Württemberg/Stuttgart), Filmfonds Wien (Austria), Film i Väst (Sweden), Conseil Régional dIle-de-France (Paris), Scottish Screen (Scotland), Filmpool Nord (Swedish Lapland), Wallimage (Belgium), Conselleriade Cultura (Galicia), Comunicacion Social e Turismo, Xunta de Galicia (Galicia), Rhône-Alpes Cinéma (Marseille), Rotterdams Fonds voorde Film en Audiovisuele Media (The Netherlands), Direccio General de Política Linguística de la Generalitat de Catalunya (Barcelona).

In general, feature films/TV series/specials/music videos (live action, documentary or animation) are covered by the laws governing subsidies, tax shelters, etc. Advertising, news, current affairs programs, violent or socially unacceptable material and that perennial moneymaker, pornography, are ineligible for subsidies and tax shelters of any stripe. And again, generally speaking, the rules they change for each country and case usually stipulate that a film be at least 70 minutes in length, for theatrical release, have some advantage for local economy/culture and the key people and production company (not owned by a television station) must be experienced. Funds must be used on what they were destined for and spent within a year of award. Disbursed in installments, budgets are subject to ceilings on the percentage of total national subsidies obtained.

International co-productions are subject to complex sets of requirements: a completion guaranty must be in place, some of the financing has to be out of the producers pocket, some of the financing must already be guaranteed in one form or another and an unprojected copy of the film for archives is furnished with mention and logo of the awarding body in the credits. These are not hard and fast rules, just general guidelines.

It deserves mention that financing is also possible for just about every phase from development, production and exploitation (participation at international festivals, market-related events, competitions, etc.) to distribution, advertising, training, etc. It is also important to remember that a film is a special to a broadcaster and can take advantage of TV subsidies in some cases as such.

On that note, lets go global

Australia

(www.ffc.gov.au/ and www.afc.gov.au/filminginaustralia/copros/fiapage_2.aspx) Australias Film Finance Corp. is the Governments principal agency for funding the production of film and television in Australia and a wholly owned government company. The FFC requires a minimum of 25% of the production budget to be guaranteed either through distribution advances/guarantees from distributors/sales agents or through pre-sales to Australian television (equity investment does not qualify). The FFC will generally not expect to invest more than 40% of the budget. The remainder should be a combination of genuine market attachments (an Australian theatrical distributor, a distributor in at least one major territory except for films with budgets of US$3.9 million or less and an international sales agent) and other non-FFC finance (i.e., tax funds, state agency funds, private investment, broadcaster.) It will not guarantee more than 30% for co-productions and will not surpass US$3.9 million for any one project. Films are evaluated according to the creative team attached and their commercial potential.

Animal Logics penguin-themed CGI feature film for Warner Bros. Pictures/Village Roadshow Pictures, Happy Feet, is currently in production.

Austria

(www.filmfonds-wien.at/en/upload/downloads/englische%20Richtlinien.pdf) The Vienna Film Fund, financed by the council of the city of Vienna has a budget of approximately US$12 million per year and subsidizes different phases of production: development, production, distribution and film festival participation. Aid is limited to 50% of the total production costs (or the Austrian spend in co-productions.) At least 100% of the award must be spent in the Viennese film sector or no more than 80% of total production costs and at least 20% of the total production costs can be spent in another EU member state. Repayment will depend on box office success and on a pre-determined formula in the subsidy agreement, but only needs to be paid after the producers investment has been recouped after which the fund participates pari passu. Holdback periods, the time between the first showing of the film and exploitation elsewhere (broadcast, DVD, etc.), are required.

Payments must be made by March 31 of the subsequent year for a period of 72 months from the premiere. Project development funding, including for the screenplay, can amount to half the total development costs up to a maximum of US$66, 000. The maximum non-repayable grant is US$465, 000 for productions but up to US$1.3 million in subsidies is possible. Private funding, however, must amount to at least 5% of the net production costs. First-time producers or directors are eligible for up to US$531, 000.

Belgium

(www.tax-shelter.be) Belgian producers can deduct up to 50% of their yearly taxable profits, or a maximum of US$664, 000, to invest in features. About 40% of their investment can take the form of a bank loan but must be repaid within at least 18 months of accreditation. Also, 150% of the tax shelter funds invested must be spent in Belgium (i.e., for every euro invested, 1.5 euros must be spent in Belgium, but the equivalent amount, 150%, is deductible.) The total amount invested cannot be more than 50% of the total budget and must be spent in the 18 months following the signature of the accreditation agreement.

Look for Blanche Neige La Suite from randy, bawdy Picha (aka Jean-Paul Walravens), responsible for such adult fare as Jungle Burger, B.C. Rock and The Big Bang. Blanche Neige is a co-production between Y.C. Aligator Film/Defamilie Janssen Cvba Motionworks (BEL), Tchin Tchin Production (FR) and Steve Walsh Productions (U.K.).

Canada

(www.cra-arc.gc.ca/taxcredit/ftc/ftcsum-e.html and www.telefilm.gc.ca/accueil.asp) A Canadian producer can receive the Canadian Film or Video Production Tax Credit (FTC), a rebate, at a rate of 25% of qualified labor expenditures, which cannot exceed 48% of the cost of production at the end of the year, net of aid received. The tax credit is therefore limited to 12% of the cost of production, net of aid received. Co-productions between Canada and other countries are eligible when co-produced under an official treaty and certified by Telefilm Canada. In order to obtain a certificate to access the FTC, the producer must apply directly to the Canadian Audio-Visual Certification Office (CAVCO). CAVCO and the Canada Revenue Agency (CRA), who jointly administer the FTC program.

The latest fare from Canada is the impressive CGI picture P3K: Pinocchio 3000 from CinéGroupe, Filmax (SP) and Animakids (FR), to be released in the U.S. this Christmas.

France

(www.cnc.fr) Funding for the Centre National de Cinématographie (CNC) comes from a tax on public broadcaster ad revenue, a tax on private TV subscriptions/ad revenue, a percentage of the tax paid by TV set owners and a tax deducted from every movie ticket, cassette and DVD sold. Aid is either selective for first-time producers or automatic for established producers. A producer receives an advance (avance sur recettes) based on estimated ticket sales and the amounts paid by the broadcasters and the DVD distributor (a portion of which must be repaid once the film comes out.) This, in turn, can be used to finance other films. A film must meet certain criteria for being European and for the amount of money spent in Europe, measured as points on two different scales.

Under a film-financing tax shelter called a SOFICA, a company or an individual can also write off up to 50% of tax on its investment (and individuals up to 25% of their income with a 100% tax write-off.) SOFICAs can invest either in a particular film (but cannot exceed 50% of the films total budget) or in a production company.

The French government is also implementing a new tax credit scheme (crédit dimpot) where producers, regardless of nationality, will be able to write off between 10% and 20% of below-the-line costs (with a ceiling of US$664, 000) done by French companies in France on qualifying films.

The bad news is, as a result of Vivendi Universals recent troubles, Canal Plus, formerly the European patron of the seventh art, has drastically reduced its investment in feature films. That said, no less than 30 feature films, in a variety of media, are in pre-production, production or post-production in France at the present time! Belokan, which produced The Rain Children in 2003, is going into production on a new film, Princess of the Sun, with Canal Plus on board (and France 3.)

Others in production or on the drawing board, with or without Canal Plus, are Pathés Sprung: The Magic Roundabout, The Little Prince and The Wizard of Oz), The Triplets of Bellevilles producer Les Armateurs Why I Did (Not) Eat My Dad, Brendan and the Secret of Kells and Kirikou 2, Its Raining Cats and Frogs producer Folimages Mia et le Migou, Millimages Piccolo, Saxo and Company and Pablo the Little Red Fox, Method Films Renaissance (to be distributed in the US by Buena Vista), Luc Bessons Arthur, M6 Studios Asterix and the Vikings, Prima Lineas U, etc. Of special interest is Samaltas cut-out feature Mauvaise Graine (Bad Seed) from producer Bernard Maltaverne.

Germany

(www.sjberwin.com/media/pdf/publications/media/pdf/mediafocus_eng.pdf German film funds operate under section 248/2 of the Commercial Code and section 5/2 of the Income Tax Code, which permit producers to deduct production expenditures from their taxes. A production company can either create a film fund as exclusive content provider or produce films through an existing fund. Usually, a fund will insist on guarantees in the form of talent attached and guaranteed minimum sales (distribution MGs) and will acquire all underlying rights and all dealings be done through a local producer. Investment raised represents approximately US$2 billion per year!

While most of the money is funneled into live action, prospects for animation may improve with the arrival of Carl Woebcken at the Babelsberg Studios, a former finance executive with TV-Loonland who has been running the Berlin Animation Film (BAF) for the past two years (the US$100 million private media fund by Dresdner Bank and GreenlightMedia.) He and partner Christoph Fisser, who runs a movie and TV studio facility in Munich, paid a symbolic 1 euro (US$1.32) for the troubled studio (where Cartoon Movie takes place every year) and, as part of the deal, Vivendi invested US$22 million. (Coincidentally, the live-action Aeon Flux is currently being shot there with Charlize Theron.) Whats more, in 2003, regional film fund Medienboard Berlin-Brandenburg celebrated its most successful year in the 10 years since it was created.

Other good news is that Wild Brain, the San Francisco-based animation company, recently signed a multi-year agreement with Miramax/Dimension Films to co-finance and co-produce CGI films, starting with Berkeley Breatheds Opus. About 50% of the financing from Wild Brains side will no doubt come from European investment holding company Syntek Capital. Prinz Franz von Auersperg, supervisory board chairman of Syntek Capital and former senior executive with BMG and EM.TV, sits on the supervisory board of Wild Trixx Media GmbH in Munich, the German subsidiary of Wild Brain created in 2001.

Irish company Magma, headed by charismatic German Ralph Christians, has recently opened an office in Munich, also.

Greece

(www.gfc.gr/) The Greek Film Centres maximum funding for an animated film is set at US$350, 000, which includes development and a pilot, but the creator and producer of the film must have prior professional experience in the field of animation. The exact amount awarded to the film is determined by negotiation, depending on the total amount of its budget, production requirements and the manner of the GFCs participation.

No minimum or maximum budget restriction exists but a project must have secured at least 30% of the production budget through capitalization of fees, private investment, equipment, services or co-production agreements. The GFC can fund a production through acquisition of a percentage of the films rights, advance on exploitation revenues or acquisition of specific exploitation rights, either by geographical territory or exhibition medium. If shooting does not start within 12 months of the award, however, it is automatically revoked.

Promotional expenses are borne exclusively by the GFC and no participation by the producer is required, including expenses for a recognized international festival and the directors airfare. Subsidies for distribution expenses can range from US$16, 000-US$46, 000 depending on rollout and, in the event a theatrical distributor participates as a co-producer, an additional US$7, 900 is available (an even more if the film wins a prize.) The GFC also provides the possibility of free commercial promotion in the form of TV spots on television channels with whom it has concluded relative agreements.

Hungary

(www.szemle.film.hu/object.95f38cc2-46c1-4189-ae58-281d57d3966a.ivy) Hungarys parliament passed a new film law (Act II of 2004) that includes a new tax incentive system and the government has committed to raising the amount of subsidies for film production to US$53 million per year by 2006. The law regulates the classification of Hungarian films and official co-productions, which can qualify for state money; and films made with Hungarian participation (work-for-hire), which can generate revenues from the tax incentives. A point system, similar to the European conventions, evaluates the contribution to the film according to nationality. The Hungarian Motion Picture Foundation, which allocates the subsidies, supports production, distribution, development, archiving, training, research, publishing and infrastructure development. Subsidies are selective (committee choices), normative (festivals, art-films and art houses) or structural support.

The law also created theNational Film Office, which registers and classifiesfilms according to an age-rating system and their cultural value (art), decides national or co-production status. It helps the market players make co-productions, gives legal assistance to producers, makes recommendations to the government and issues the certificates to access tax incentives for companies giving support to or investing in film productions. For Hungarian films, a maximum of 20% of the certified Hungarian spend can be collected from the country, whose investors expect their investment to be covered exclusively by the tax incentives as financial investors, not co-producers for a 100% tax deduction and a 16% profit (equivalent to the corporate income tax rate) for the year the investment was made and for the following three years.For co-productions, the 20% maximum still applies but, being co-producers, investors are expected to retain certain rights to the film. Hungarian investors are still entitled to a 100% tax reduction on their investment but they can exercise only a 50% tax base deduction, resulting in 8% profit. Furthermore, taxpayers can access a development tax allowance if their investment exceeds US$537, 000 and can apply a depreciation rate of 50% per year.

Its too soon perhaps to talk about Hungarian animated feature films, but Hungarys long tradition of animation and powerhouse Varga, who have already hinted at a feature in the works, are likely to blast onto the scene in the two to five years it takes to make a movie.

Ireland

(www.filmboard.ie/section_481.php) To qualify for the Section 481 tax scheme, 75% of the work must be done on Ireland soil and the film must have an Irish co-producer. Up to 66% is available for films costing US$6.7 million or less and 55% of budgets more than US$8.4 million (with a sliding scale adjustment of between 55% and 66% for films between US$6.7-US$8.4 million). Up to US$13.9 million is available for films over US$25.3 million. It is also structured in a way to provide a cash-flow benefit to the producer resulting in up to a 12% contribution to the budget. There was some concern that the tax scheme wouldnt be re-voted when it expired at the end of this year but it has been extended to 2008.

Keep your eyes peeled for Cartoon Saloons 2D animated masterpiece, Brendan and the Secret of Kells, co-produced with Frances Les Armateurs (Kirikou, The Triplets of Belleville) and about to go into production.

Italy

(www.cinema.beniculturali.it) In spite of media mogul-turned-Prime Minister Silvio Berlusconis government, tax breaks and subsidies in Italy are fairly occult. A tax incentive system along the lines of the UK model has been hinted at, with an emphasis on commercial rather than auteur films the norm for now but details are sparse. Earlier this year, Italy passed a law forcing producers to finance 50% of their film in order to do away with a longstanding tradition of arty flops. State film funding currently covers up to 60% of Italian feature film budgets, but there has been talk of deep cuts. This past August, producers including, ironically, Berlusconi-owned Medusa expressed their outrage that more than half of the US$40 million for cinema production would be slashed in the new year.

Veteran Milanese producer Franco Serra (Gertie) is preparing a sublime animated feature, Iqbal, and Romes The Animation Band legendary director Bruno Bozzettos (Allegro non Troppo) hilarious next feature, Mammuk, with RAI Cinema.

Luxembourg

(www.filmfund.lu/imperia/md/content/pdf/4.pdf) The Audiovisual Investment Certificate Program (AICP), managed by the Film Fund Luxembourg, provides a cash guarantee (in the form of certificates you can take to a bank) based on the amount of production spend in Luxembourg that can be deducted from a production companys taxable income. This can amount to up to 25% of the productions total budget.

Luxanimation, the local success story created by Lilian Eche and Ariane Payen, just recently completed work on French producer Method Films mo-capped, black-and-white, Buena Vista-distributed feature Renaissance, a Millimages (FR), Onyx Films (FR), Time Firm (FR), France 2 Cinéma (FR) and LuxAnimation co-production.

New Zealand

(www.filmfund.co.nz/invest) US$29 million is being set aside until at least 2006 for the New Zealand subsidy scheme. Producers who spend more than US$3.6 million here can, upon completion of their film, present receipts and claim back 12.5% of the local production costs. For films between US$11 million and US$36 million its the same, but at least 70% of the global production costs must have been spent in New Zealand. Only filmmakers who have already completed at least one feature film can qualify, however. Two to three films are likely to receive financial support in any given year.

For films with budgets over US$3.2 million, 40% guaranteed from elsewhere and a theatrical distributor in place can expect around 50% of the budget to be subsidized. Financial contributions from other reputable sources are encouraged. Support would take the form of equity, a loan, contracted payment or any other means considered appropriate for each particular case. Precautions will be taken to ensure that others who invest in or give financial support for a film which the Trust is also supporting receive no tax advantage, in New Zealand, other than the deduction available on the net amount of their own, direct investment or financial contribution (in other words, there is to be no additional levering off the New Zealand tax base).

Considering Nelvana recently signed a CGI comedy/adventure TV series, Jane and the Dragon, with WETA (The Lord of the Rings trilogy), animated feature films, with Nelvana or others, cant be far behind.

The Netherlands

(www.filmfund.nl and www.fine.nl/fine/index.php?lang=2) Film investments in Holland are structured as limited private partnerships and require local expenditure of 50%. Curiously, a Dutch co-production partner is not a legally necessity. Typically, 30%-40% of a budget can be financed, through the Nederlands Fonds voor de Film (Netherlands Film Fund), for films in the US$4-6 million category and production budgets cannot exceed US$19.9 million. The lone intermediary between producers, investors and banks is government organization, FINE.

The scheme was set to be dismantled but, after much lobbying by the local film industry, the government decided to keep the tax incentive going to January 1st, 2005. For the moment, its future is uncertain and there do not appear to be any animated Dutch films on the horizon.

Scandinavia

(www.nftf.net/guidelines/nftfenglish.pdf) The Nordic Film and TV Fund provides top-off money to projects from Denmark, Iceland, Finland, Greenland, Norway, and Sweden, with special emphasis on childrens fare. Each country also offers their respective subsidy system (www.geocities.com/norfilm/page5.html), too numerous and detailed to discuss here.

The northern star of animated feature films is Denmarks A Film in Copenhagen (which also has studios in Estonia and Latvia.) A Film is part of Nordisk Film, the largest producer and distributor of electronic entertainment in the Nordic region. Nordisk Film produces and co-produces national and international feature films in Denmark, Norway and Sweden, distributes all over Scandinavian (including its Nordisk Film Cinemas in Denmark and Norway) and has a distribution deal with Columbia TriStar. Total revenues in 2003 amounted to approximately US$456 million. Nordisk Film is part of the Egmont Group, wholly owned by the Egmont Foundation. Egmont employs 3, 500 people in 22 countries, is the leading provider of entertainment in Scandinavia and the largest in printed entertainment for kids and teens in Europe. In 2003, Egmont generated US$1.3 billion in revenues.

A Films US$1.2 million feature Terkel in Trouble, Denmarks first CGI film, sold an amazing 258, 000 sold tickets in its first two weeks on the screen. A Film also has US$29 million 2D extravaganza Asterix and the Vikings, the most expensive European animated feature in history, in pre-production with French broadcaster M6 and the CGI Ugly Duckling & Me in the starting blocks, a co-production with Frances Futurikon and Spains Dygra.

Scotland

(www.scottishscreen.com/downloads/FeatureProdGuide2004.pdf) Scottish Screen allocates approximately US$5.7 million per year in National Lottery funds for all aspects of film production in Scotland. A maximum of US$1.1 million per film is possible, but generally awards will not exceed 25% of the budget or US$950, 000 (whichever is less.) This can be combined with Lottery money obtained elsewhere but the total cannot amount to more than 50% of the production budget. Scottish Screen expects an acceptable amount of funding to already be in place and to recoup from first penny, pro rata and pari passu with other investors and production must have started within one year of the date of the award.

The big news is Sylvain Chomet (The Triplets of Belleville director) recently created Studio Django with wife and producing partner, Sally Chomet, in Edinburgh and has announced a feature deal with Universal to adapt the award-winning childrens novel, The Tale of Despereaux to the big screen. This 3D feature is to be directed and co-produced by Chomet, who is also preparing another 2D feature, The Illusionist, adapted from an original script by Jacques Tati in association with Ciné b (Philippe Carcassonne) and Pathe UK.

Neighbor Red Kite Films, another Scottish company poised to make headlines doing traditional animation on 2D/3D feature Nocturna, a co-production with Filmax Animation (SP) and Animakids (FR), is making plans to be Scotlands largest 2D employer.

And watch for Storylands marvelous CGI feature Atoz, too, from talented writer/creator Joe Austen.

South Africa

(www.nfvf.co.za/filmincentive.pdf) South Africahas introduced the Large Budget Film and Television Production Rebate Scheme that represents a tax rebate of 15% for foreign films and 25% for qualifying South African films. The South African Department of Trade and Industry (DTI) administers the rebate, an income tax exemption, with a ceiling at US$1.7 million. Only productions starting on or after April 1, 2004 are eligible. Minimum on production spent, Qualifying South Africa Production Expenditure, or QSAPE, must be US$4.3 million. QSAPE is defined as the production expenditure spent by the applicant on copyright and goods owned by or facilities and services provided by South African entities or individuals. For animation, an average spend of US$172, 000/hour is necessary.

Bundling of a maximum of three films is possible in any given year, on the condition that there is a commitment to spend the full budget for each. The final application cannot be processed until financing is complete and the films are completed. If the three films originate offshore, the producer should be the same for all.

Famous South African film producer Anant Singh is distributing Africas first feature film, Zimbabwe-produced Junkmation feature, The Legend of the Sky Kingdom, from Sunrise Productions. This stop-motion feature is entirely made from junk (wood, metal, wire, tin, plastic and empty containers.)

Spain

(www.cultura.mecd.es/cine/jsp/plantilla.jsp?id=16) Jose Luis Rodriguez Zapateros socialist government has nearly doubled the budget of Spains film subsidy fund, The Film Protection Fund of the Instituto de la Cinematografia y de las Artes Audiovisuales (ICAA, the Spanish Film Institute), to almost US$85 million. Single film subsidies are likely to increase, as well, from the current US$1.1 million ceiling. Aid of over US$650, 000 is available for Spanish films grossing more than US$380, 000 at the box office, and more than US$260, 000 for a first or second film. First- and second-time directors can get more US$350, 000 per movie.

Galicia, in the northwest corner of Spain, has become a hot spot. Not only is ToonDygra Films located there, which produced Europes first full-CGI animated feature, the US$3.3 million The Living Forest (US$2.38 million at the Spanish box office), but so is Spains biggest animation production facility, Filmaxs Bren Studio (9.8% of Filmax is owned by Galician state investment company XESGalicia.) Filmax has released two features, 2D El Cid: The Legend and CGI P3K: Pinocchio 3000 and has three more in development, 2D Gisaku, CGI Donkey Xote and 2D/3D Nocturna. Dygra is in production on a new CGI feature, Midsummer Dream and fellow Galician Lua Films also has its first clay animation feature in production, Pica Pica Circus.

Elsewhere, Dragon Hill creator Millimetros has a CGI feature in the pipeline, Oscar the Lion, and BRBs recently-created film production arm, Screen 21, is in pre-production on a 3D cats and dogs adaptation of Romeo & Juliet.

United Kingdom

(www.ukfilmcouncil.org.uk/funding/ and www.culture.gov.uk/ creative_industries/film/co-productionagreements.htm#2 and www.jengo.8m.com/pages/funding.html) Section 48 of the Finance (No.2) Act 1997 gives 100% tax relief for investment in the production or acquisition of British films with budgets under US$28.6 million, which can be claimed within the tax year that the film is completed. Section 42 of the Finance (No. 2) Act 1992 offers the same tax relief, but in equal amounts over a three-year period. However, Section 48 will expire at the beginning of July 2005, and at the same time Section 42 will be limited to films with budgets of US$38 million and above.

These arrangements apply only to British Qualifying films, where at least 70% of the production activity takes place in the U.K., or where the film is undertaken under the terms of one of the U.K.s official co-production treaties (currently in place with Germany, Italy, Australia, Norway, New Zealand, France, and Canada) or under the terms of the European Convention. Films made under the UKs co-production treaties with France and Italy, or under the European Convention but involving Italy, Denmark, or Iceland, have recently been tightened in order to correct an ongoing imbalance; and a complete review of all the UKs international co-production treaties is currently in progress.

In the past, both Section 48 and Section 42 have often been accessed via Sale-and-Leaseback schemes, which allow a producer to sell the negative to an acquirer, who then leases it back to the producer, with the difference between the sale price and the lease payments representing a non-recoupable net benefit to the production. The precise scale of the benefit depends on a number of factors, and can range from 7% to 15% of the total budget of the film. There are also a number of production financing schemes which are also based on these regulations and are generally able to contribute more like 20% to 30% of the budget, but in these instances the financing is supplied in the form of recoupable risk equity.

In general, though, tax-effective film finance in the UK is in a transitional phase. Section 48, for example, is due to be replaced next summer by a new tax credit system, but it is not yet clear how this will work in practice.

Dont miss Welsh über-indie Tony Johnsons sensational Coffee, from the guy who almost single-handedly brought you Fallen Angels, the first Euro-manga. Or Wallace & Grommit, the Movie, of course, from Aardman Animation.

United States

The cash doesnt get any colder or harder than at IDT Entertainment, a subsidiary of telco IDT Corp. (the inventor of callback.) With a parent company sporting $1 billion in the bank, no debt and its own secure worldwide network (Digital Production Solutions, or DPS, a flexible turnkey digital animation studio linked to artists and studios around the world), IDT has bought into Archie Comics Entertainment, Film Roman, Stan Lees POW! Entertainment, Mainframe Entertainment, DKP Effects and Japans Manga Entertainment.

It owns home video/television distribution Anchor Bay Entertainment and just announced the launch of New Arc Entertainment, a live action and animated feature film production company specializing in the supernatural/thriller/action genre. It also has deals with Pat Robertsons Christian Broadcasting Network for family entertainment and Shrek producer John Williams Vanguard Animation. Announced animated films include Vanguards Valiant (to be distributed by Disney in the U.S.), Happily NEver After with the Berlin Animation Fund and Christopher Reeves Yankee Irving.

Special thanks to Bill Allen of Baker Street, U.K, for his help with the moving sands of U.K. film financing.

Editors Note: Part 2 will deal with feature financing in Asian territories.

Chris Panzners film and television career spans 25 years. He recently created writing company Power Lines and production/distribution company Eye & Ear. He has also been known to wear white slacks after September 1st an industry-recognized fashion fox paw.