ABOUT THIS INVESTMENT
Investing in The Fyzz Facility Capital Plc (TFF Capital) means you are acquiring bonds issued by TFF Capital, which will lend the money it receives from you to The Fyzz Facility Limited (TFF) on a project by project basis. In turn, TFF will build a portfolio of loans to spread risk and structure them to meet the 5% (before fees) yearly return advertised in this pack. You will not have any ownership in TFF Capital or TFF, but will benefit from TFF Capital’s security over the loans TFF makes, It is important to understand that TFF Capital is solely responsible for its financial status and, consequently, its ability to pay interest and return your capital when the bonds reach maturity. There is no guarantee of return on your investment.
For a more detailed list of the risks involved, you must read the Investment Memorandum that will be provided to you prior to signing up to The Fyzz ISA.
BONE TOMAHAWK (2014) – Co-financed by The Fyzz Facility Limited
YOUR CAPITAL IS AT RISK
Investors capital is at risk as an investment may not achieve its objective, i.e. when a loan defaults, potentially reducing or eliminating the capital and/or interest. Although TFF Capital has comprehensive controls in place, it is important you understand that such a risk exists. Although TFF Capital targets only well-collateralised, low-risk investments, any lending carries a risk. Pre-existing receivables and/or future anticipated receivables may fail to payout as anticipated. Outlined below are some of the key risks that are associated with providing Debt financing to content production and distribution companies. Please note that this list is not exhaustive.
PRODUCTIONS FAIL TO DELIVER
Filmed entertainment and content production is an inherently risky process and numerous factors, including illness, extreme weather and other unforeseen circumstances can cause a production to be delayed, the budget to increase or in some circumstances production to be abandoned.
TFF will work hard to ensure that safeguards are in place (such as Completion Guarantees or Corporate Guarantees) to minimize delivery risk. However, the physical production process is out of TFF’s control and under certain circumstances (such as force majeure) investors are exposed to the risk of a project being abandoned.
NO FSCS PROTECTION
Whilst The Fyzz ISA is managed by Northern Provident Investments Limited, an ISA plan manager regulated and authorised by the Financial Conduct Authority (‘FCA’), the bonds that you will invest in are issued by The Fyzz Facility Capital Plc (TFF Capital), which does not carry on regulated activities for which authorisation is required and so it is not authorised by the FCA. Therefore any losses incurred by the failure of the bonds would not be protected by the Financial Services Compensation Scheme (‘FSCS’). If TFF Capital ceases to exist or goes into liquidation you would not be able to put in a complaint through the FSCS.
Diversification means spreading your investments across different asset classes and sectors. All investments through The Fyzz ISA will be bonds and while The Fyzz Facility Limited (TFF) will spread the risk of their lending activity you should be aware that all monies invested will be in the same sector and through the same asset class. You should consider spreading your investment risk and seek independent advice when you are not sure if an investment is suitable. You are not able to invest more than 10% of your net assets through The Fyzz ISA unless you are a high net worth investor, a
certified sophisticated investor or a self-certified sophisticated investor.
IMPACT OF FEES
Full details of the fees payable by investors to Northern Provident Investments Limited are set out in The Fyzz ISA Terms and Conditions, and these will reduce the net return on your investment. Investors of smaller sums in The Fyzz ISA
should be particularly aware of the fees and should carefully consider the impact these could have on the proposed investment.
SALES AGENT FAILS TO SECURE SALES
TFF provides Gap Loans against the value of unsold rights in the project across the world. It is the responsibility of the Sales Agent to sell the project’s distribution rights to those territories. TFF only lends to projects that have a reputable and proven Sales Agent attached and will conservatively assess the level of lending it is willing to make against Sales Agents’ estimates of future sales across the world. However, whilst TFF will have a right of approval over sales made, it does not control the Sales Agent’s ability to reach the required number of territorial rights sales, or the market conditions in general. TFF seeks to minimize this risk by only investing in projects that meet stringent project assessment criteria.
DISTRIBUTOR(S) FAILS TO PAY BALANCE OF CONTRACT VALUE
When project rights in a territory are pre-sold (a Pre-sale), generally for a minimum purchase amount (Minimum Guarantee), a Distributor pays a percentage of the Minimum Guarantee upfront (usually 10%-20%) and the balance upon delivery of the project. However, under certain circumstances a Distributor may fail to pay such balance (e.g. if the Distributor goes out of business). While TFF has no control over this, if a Distributor fails to pay the balance, the territory rights revert to the production and the Sales Agent can re-sell the rights to a new Distributor in the same territory. TFF can also consider pursuing defaulting Distributors through the courts.
You should be aware that if the return on the bond fails to pay a return that beats inflation, especially the real value of your savings could fall.
NON READILY REALISABLE INVESTMENT
Investors should be aware that the bonds you will invest in are non-readily realisable investments. Investment in a Fyzz ISA should be viewed as a long term investment. Each bond has a maturity date of 60 months from its date
of issue and will be redeemed at par. It may be possible for the bonds to be sold but it may be difficult to sell the bonds held in your Fyzz ISA.
TAX CREDIT VALUE IS LOWER THAN ANTICIPATED
Tax credit revenues are generated as a consequence of incurring qualifying expenditure in the relevant jurisdiction. If production fails to spend as agreed and anticipated, the value of the tax credit may reduce.
Insurance taken out by the production company guaranteeing that the film will be completed without running over budget or over schedule. If a film does go over budget or over schedule, the insurance company can be called upon to either (1) repay the banks and any other financiers or (II) pay for the cost of completing the film. Such insurance policies are generally required for films with budgets over $1 million using Debt financing.
A predefined geographical area covered by a specific Distributor. Rights to distribute a project may be licensed by its producer in a territory or territories to a certain distributor.
Loans provided to finance the production of a project that is secured by the estimated Minimum Guarantees expected from the sale of the completed project to Sales Territories.
The licensing of the distribution rights to a film in a specific Sales Territory to a distributor before the project is completed. Under a pre-sales agreement the Distributor commits to pay the production company a Minimum Guarantee upon the delivery of the completed project.
Force Majeure means an event beyond the reasonable control of the affected party which does not relate to its fault or negligence. Force Majeure includes acts of god, expropriation or confiscation of facilities, any form of government intervention, war, hostilities, rebellion, terrorist activity, local or national emergency (including an emergency service to a hospital), sabotage or riots, and floods, fires, explosions or other catastrophes.
A cash advance payable by a Distributor in exchange for the exclusive rights to distribute a project in contractually stipulated media in a Sales Territory. The Distributor may pay a small deposit on signature of a distribution agreement but the majority of the Minimum Guarantee is paid on delivery of the completed film to the Distributor.
An independent third-party appointed by a project’s producer and financiers to monetise such project across the world through sales of rights to Distributors.
A company which acquires the right to distribute and exploit a project in contractually stipulated media in a Sales Territory.