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The Sovereign EIS Fund is a discretionary portfolio service that will invest in a minimum of five media companies, including film production, television production and music publishing. The target return is £1.40 for every £1 invested over 4.5 years, excluding tax relief and after fees. Returns will be focused on capital gains, and investors are unlikely to receive any dividends. The fund is aimed at the current tax year.

Why invest

Positives

  • Strategy: Exposure to a portfolio of media companies developing IP, including film production, television production and music publishing.

Issues

  • Track record: Sovereign has a limited track record, but has so far reached target returns with no capital losses.

 

The investment consultant

Positives

  • Team: The directors have a great track record in the film, television and music industries, and an extensive network of contacts.

Issues

  • Company size: The Sovereign team is small, although capacity has been grown over the past 12-18 months with support from investee company producers too.

 

Nuts & bolts

  • Duration: The next fund close date is 25 March 2022, with quarterly closes thereafter.
  • Diversification: The aim is to invest in five companies, three being film production companies, one television production company and a music publishing company.
  • Valuation: Station12 will issue valuations every six months.

 

Fees

  • Fees: All fees are charged directly to the investee companies.
  • Performance fee: This is subject to a threshold of £1.20 for each £1 invested. Above this, Sovereign receives 25% of the investor share of the return.

 

Risks

  • Target returns: The target return of £1.40 for each £1 invested after 4.5 years suggests a medium-risk profile within the EIS sector.
  • Companies: Revenue share with the Talent reduces upside prospects on each individual film or television production but reduces costs. Overall, Sovereign has created a structure that should give a smaller-than-usual budget for its expected production quality, improving the prospects of the production companies. Music publishing has low upfront costs and industry-standard revenue-sharing arrangements.
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