FILM FINANCE TERMS D - F

Debenture     Technically a legal document evidencing indebtedness, but commonly used to mean a fixed and floating charge over the assets and undertaking of a company.

Deferment     A sum payable to a writer, performer, director, producer or someone else connected with a film out of revenues derived from the exploitation of the film, but after the deduction of distribution fees and expenses and, usually, after the financiers and the completion guarantor have recovered all of the sums (and where agreed together with interest) they have advanced towards the cost of production and delivery of the film.

Deferred Tax     An accounting entry which is included in, amongst other things, a company’s financial statements to reflect a potential liability to tax. Conventionally, deferred tax is established where reliefs and/or allowances (particularly capital allowances) have the effect of deferring liabilities to tax which would otherwise have crystallized. These are called `timing differences.’

Deferee     A person to whom a deferment is payable.

Discount     To discount, for example, a distribution agreement means the assignment to al ender of the benefit of a distribution agreement under which advances are payable on delivery of the film in return for a loan, which can be used to meet the costs of production of the film as they are incurred. The agreement is `discounted’ because the sum made available by way of loan is less than the amount of the advance. The difference covers the lender’s fees and legal expenses and the interest calculated to be payable on the loan during the period under the contracted repayment date.

Discounted Cash-flow or DCF     An investment appraisal technique which takes account of the time value of money by assessing the present value of future income and expenditure. It is often used in valuing an investment or to show the viability of a project. See internal rate of return.

Distribution Agreement     An agreement under which rights to exploit a film in one or more media are granted. The distributor grants rights as principal, not as agent. The agreement will provide either for a lump sum payment by the distributor or for a sharing of revenues.

Distributor     A party which organizes film distribution under a distribution agreement. See also sales agent.

Domestic Rights     The rights to distribute a film in North America. The world excluding North America is, just as confusingly for a non-American, often collectively referred to as `foreign’.

Eady Levy     A levy, abolished by the Thatcher government, on all UK cinema tickets paid to the government and then shared among the producers of films produced in the UK (including films with only a tenuous link to the UK). payment of the sums secured. English law prohibits any impediment - known as a `clog on the equity’ -on the borrower’s right to redeem the mortgage or the inclusion in a mortgage of a side benefit in favor of the lender.

Errors & Omissions (E&0) Insurance     Insurance against claims arising out of infringements of copyright, defamation and unauthorized use of names, trade names, trademarks or characters. This insurance is usually taken out by the producer, particularly if the film is intended to be distributed in North America, on a film by film basis. Insurance will be with effect either from the first day of principal photography or from delivery. Some broadcasters carry blanket insurance to cover everything they transmit. Cover will be forfeited if the claim arises out of an actor failure to act which is `willful, wanton, intentional, malicious or conspiratorial’ or if the production procedures laid down in the policy are not adhered to. The principal insured may be asked to have the interests of financiers and distributors noted on the policy or to have them named as additional insured. 


European Co-Production Fund 
A fund administered by British Screen Finance Limited, from which moneys are lent towards the cost of films produced as European co-productions.

Favored Nation Terms     The most favorable terms accorded to any party to a transaction, including that no-one will get any better terms or if any improved terms are granted to a third party then the favored nation' will be treated equally.

The Film Council     Distributor of UK government money. An easy target for criticism by film critics such as Alexander Walker and disgruntled filmmakers, the Film Council is nonetheless the best chance for filmmakers to get government or "soft" money in the UK. As of 2002, the Film Council has three distinct areas of financing; The New Cinema Fund run by maverick producer Paul Trijbits. This fund specializes in filmmaking which utilizes new technology. The Premiere Fund is headed by proven producer Robert Jones, (Usual suspects). The third fund is the Development Fund headed by Jenny Borgers. The Development Fund recognizes the importance of the screenplay. The Film Council has enjoyed success by funding films that were hits like Gosford Park, My Brother Tom and The Warrior.

Final Cut      The final say on the editing of a film. This right will usually lie with the production company (subject to its obligations to financiers and distributors), unless the director is of sufficient stature to be able to insist on this right as a term of his agreement with the production company. 


Financial Covenants
 The undertakings within loan documents requiring the borrower to maintain certain financial ratios, for example, current assets to current liabilities, or total debt to total equity, or to maintain a minimum net worth during the term of the loan. Such covenants would not be applicable where the business of the borrower consists only of the production of a single film.

Fine Cut     The final edit of the film.

First Trial Prin      See answer print

Floating Charge     A charge which floats' above the assets subject to it (typically a company's debts and trading stock), allowing the company to deal in those assets in the ordinary course of the company's business until the occurrence of stated events of default. On any such event, the charge crystallizes' and becomes a fixed charge over the relevant assets then owned by the company.

Floating Rate     Interest at a rate which fluctuates, typically by reference to changes in LIBOR or the base lending rate of a specified bank.

Foreign Rights     The converse of domestic rights, they are the rights to distribute a film outside America.

Forward Rate Agreement or FRA     An agreement to fix a rate of interest for a future period where the borrower would otherwise be paying at a floating rate. Typically, on the date on which the fixed rate first becomes operative the borrower or the bank will settle the discounted difference between the fixed rate for the period and the floating rate for the same period.

Four Walling     The practice where a producer rents all the seat for all the shows for a week (usually at a discount) and then puts in he’s/her own film and collects the box office.

Free Television     A television broadcast intended for reception by the public where no charge is made to the viewer other than any government license fee or tax. See standard television.

Fringes     Social security and, in some cases, pension payments due to the cast and crew on top of wages shown in the below the line section of the budget. Fringes are often detailed in a separate schedule and summarized in a line in the final section of the budget top sheet.

FRSs     Financial Reporting Standards issued by the Accounting Standards Board and which apply to all financial statements whose purpose is to give a true and fair view of a company’s position under the Companies Act 1985.The FRSs are successors to the Statements of Standard Accounting Practice (SSAPs) formerly prepared by the Accounting Standards Committee. Many of the SSAPs are still in force as accounting standards although by FRSs

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