Inside this issue:
The Film Industry Front Page
The Current Position The History THE TRUTH
The Film Industry in the Isle of Man
Liberal Vannin notes that, in its response, Treasury did not specifically agree to report to Tynwald by December
The film industry has been reported by Government as being
2011 but neither did it refuse to.
a huge success with much benefit generated for the Island. Prior to 2007 film producers could obtain grants direct from a
A Tynwald Committee has revealed that up to 31 March
Government Department or Government controlled entity.
2010 £25,110,462 has been invested in the film industry
In August 2007, the then Treasury Minister, Alan Bell,
and £2,218,062 has been received by way of return on
entered into an agreement with CinemaNX Limited.
Logically, it has to be assumed that
£27,107,600 remained in the fund on 31 March 2010. CinemaNX Limited is a private company but has had a £50 million fund placed under its control.
Liberal Vannin acknowledges that from inception this is a complicated issue but we have attempted to set out the
A Tynwald Committee has raised concerns over various
history and the current situation of the film industry,
aspects of this arrangement including whether or not it is
including the problems.
producing the financial benefits that should be expected. The concerns raised by the Tynwald Committee regarding This agreement comes to an end in August next year and
the potential for a conflict of interest are discussed further
one of the recommendations made by the Tynwald
at the end of this booklet. The facts are printed – it will be
up to you to form your own opinion.
Development consider options for the longer term support and development for the film and media industry post August 2012. Including possible alternative models, and report to Tynwald by December 2011.”
We invite you to read on.
Film Industry from 1995 to 2009
The normal investment was up to 25% of the production
1993 The Isle of Man Film Commission was created under
the Department of Tourism and Leisure. It was transferred
requirements which were publicly stated.
to the Department of Trade and Industry in July 1996 and then to the Department of Economic Affairs following the
The usual process was as follows:
Governments restructure in April 2010.
The consultants to the Department of Trade and Industry submitted a formal report The application was assessed by Film Commission staff
From 1995 to 1997 the funding to attract film makers was via a combination of tax credits worth a maximum of £350,000
If accepted by Film Commission staff, it was
and a potential loan from the Department of Trade and
Industry worth up to £150,000. The total package had a
Chief Executive of the Department of Trade and
maximum value of £500,000. The first seven films made in
the Isle of Man utilised this scheme.
the Film Commission Board and the
Agreement of Treasury was sought
Contracts were signed
In 1997/98 it was decided to make an annual allocation of funds available in the form of direct grants to film
When all these steps had been taken the Department of
Trade and Industry the agreed financial assistance was paid by the Department of Trade and Industry direct to the production company.
The budgets for these years were as follows: 1997/1998
The two primary functions of the Isle of Man Film
Commission were promotion of the Isle of Man as a
location for film production and investment by assessing
production scripts with a view to providing financial support.
This duality of responsibilities was believed to be confusing
This report identified a number of concerns:
to the production companies and it was decided to separate
In the 2002 Budget speech, the then Treasury Minister, Alan Bell, announced the creation of a new fund to supplement the money already available via the Department of Trade and Industry’s annual budgets.
This “new financial
mechanism” was to be Isle of Man Film Limited.
Succession planning Sustainability Local spend
In 2006 the UK Government announced tax relief changes that would affect the film industry in the Isle of Man. In 2007 the new revenue sharing arrangement between the UK and Isle of Man Governments came into effect. The combination of these circumstances led to a change in the
This company was incorporated on 17 June 2003. It was a
Isle of Man Government’s approach to financing the film
company limited by guarantee whose sole member was the
industry and on 22 February 2007 a new company,
CinemaNX Limited, was incorporated to handle the
The Isle of Man Film Commission retained the promotional aspect under the new title of Isle of Man Film. Under this new structure, grants were no longer paid by the Department of Trade and Industry direct to the film production companies.
Instead, the Media Development
financing of new projects. This was not debated by or approved by Tynwald. Isle of Man Film Limited was retained, and still exists, as it is still able to receive funds due from contracts held with distributors under the previous structure.
Fund, controlled by Treasury, paid money into Isle of Man
Film Limited who then paid the film producers.
production was transferred from the Department of Trade
In June 2004 Treasury’s Internal Audit Division produced a
and Industry to Treasury.
report on their detailed audit work of Isle of Man Film Limited
There are some very significant differences between the
covering the period April to December 2003.
old structure, utilising Isle of Man Film Limited and the new structure involving CinemaNX Limited
Isle of Man Film Limited
Isle of Man Film Limited is a company limited by guarantee
CinemaNX Limited is privately owned. Its directors are:
and wholly owned by Treasury. The directors are:
James Stephen Christian
Andrew James Fingret
The Department of Trade and Industry Minister
Marc Jack Wylie Samuelson
The Department of Trade and Industry Chief Executive
Gillian Elizabeth Duffield – stated by the Tynwald
Treasury’s Financial Controller
Committee as having resigned in September 2009
James Stephen Christian
but no resignation is recorded at Companies
Andrew James Fingret
Kenneth Clive McGreal (Financial Controller) – a
Isle of Man Film Limited would invoice Treasury in
board member on behalf of Treasury who has less
respect of individual projects.
influence on the company’s decisions than other Directors under the Shareholders’ Agreement
Isle of Man Film Limited does not make a profit as any surplus it generates is transferred back to the Media Development Fund. Audited accounts are laid before Tynwald and are available to the public.
Its shareholders are:
James Stephen Christian
4290 “A” shares
Andrew James Fingret
2310 “A” shares
Marc Jack Wylie Samuelson 1700 “B” shares
Gillian Elizabeth Duffield
1700 “B” shares
Treasury approval is needed for each individual project but the entire £50 million has been handed over to the company.
Treasury is only entitled to 20% of CinemaNX Limited’s profit
A Public Accounts Committee was tasked with producing
while the Media Development Fund is entitled to the bulk of
a report on “The Media Development and Public
any profit shares generated by individual films.
Investments on the Film Industry from 1995 to 2009. The
CinemaNX Limited has to provide Treasury with two seats for
recommendations arising from that report are revealing
the UK premiere for each completed film.
but equally so are the responses from the Treasury
Treasury has described the relationship with CinemaNX Limited as the company acting as a Fund Manager to the Treasury. This relationship has not had Tynwald approval. Treasury seems to have a different interpretation of the relationship with CinemaNX Limited to that of the Department of Economic Development who describe CinemaNX Limited as an investment partner of Isle of Man Film.
Minister. Recommendation 1 “That Financial Regulations be amended to ensure that, where an FD8 waiver is sought by Treasury itself, such a waiver shall not be granted unless it is first approved by the Council of Ministers.” Below is an excerpt from the Financial Regulations of
Fund managers operating in the Isle of Man have to be
“Where it is not possible or practicable to seek competitive
CinemaNX Limited does not appear to be registered with
tenders (e.g. only one known supplier, in an emergency,
the Financial Supervision Commission in any capacity.
or where the timing of delivery is of the essence) the
formal tendering process may only be waived upon the CinemaNX Limited does not have to file its accounts, they are not laid before Tynwald and they are not available to the public.
prior written approval of the Accounting Officer, or his deputy in his absence, where the value of the order is likely to exceed £50,000 but be less than £100,000.
The Ministers of the two departments responsible at the time
Where the value is likely to exceed £100,000 the prior
were Alan Bell as Treasury Minister and David Cretney as
approval of the Treasury must be sought.
Minister for the Department of Trade and Industry.
In all instances where strict competitive tendering is not the
Local spend, or approved expenditure, is defined as being
method used, the Accounting Officer must satisfy himself
“Island based expenditure made by the Isle of Man
that the methodology used is transparent, accountable and
resident production services company with Isle of Man
produces a cost effective solution and shall be documented
based individuals and companies”.
and retained for audit purposes.”
Local spend is obviously one of the reasons for
When creating the new structure and relationship with
encouraging the film industry to produce films on the
CinemaNX Limited Treasury approved its own waiver as, for
reasons yet to be explained, it did not want to follow normal
members that the local spend for the first 86 films was £67
procedure and go out to public tender.
Treasury’s written response
In 2003/04 Internal Audit was concerned that, whilst the
“The preferred position would be for Treasury to
production companies’ statements of local spend had
determine each case on its merits and refer such
been independently audited, they had not been reviewed
applications to the Council of Ministers as it considered
by Film Commission staff for reasonableness but had
been accepted on face value.
This recommendation was debated in Tynwald on 14 December 2010. The block vote of the Council of Ministers and the Treasury members came into play and the recommendation was rejected.
In October 2007 it was reported to Tynwald
Internal Audit went on to do a detailed study of three productions and found that the local spend figures included a number of items that should not have been considered as local spend. On the basis of this sample they calculated that the figure
taken as likely to accrue to Government general revenue
“That Treasury review the methodology of defining local
as a result of local spend had been overstated by almost
The 2010 Public Accounts Committee reported “……….we
The Chief Internal Auditor responded that no formal follow
are concerned that that there could still be some inaccuracy
up work had been undertaken and that it was not planned
in the reporting of local spend.”
to be subject to a systematic review in its three year planning horizon.
Treasury’s written response “The Treasury is of the opinion that the definition of
Treasury’s written response
“local spend” in the present context of film budgets is of
“As a matter of principle Treasury does not accept
little consequence and not worth investigating any
that there is any fundamental flaw in the definition or
certification of local spend.
However, Treasury is content to review the
Department of Economic Development.”
The current audit process is exhaustive, rigorous and not open to interpretation. These processes currently
This recommendation was agreed by Tynwald on 14
satisfy the requirements of a formal certificate to the
UK Film Council, UK Auditors, Completion Border and
any third party financiers.
“That the Treasury take steps to foster the development
Treasury maintain that Tynwald can be reassured and
of a film audit specialism within the Island’s financial
place confidence in such statements.
sector, with the aim of improving the confidence Tynwald can place in statements of local spend.”
In respect of the development of a film audit specialism within the Island, Treasury is obviously
In light of the concerns raised by the 2003/04 Internal Audit
supportive of the idea however, given the relative
and the concerns raised by the 2004 Public Accounts
volume, size and nature of Isle of Man Films, the
Committee, the 2010 Public Accounts Committee raised the
market for such work is relatively low value and
issue with the Chief Internal Auditor and asked about any
unlikely to sustain any local industry specialists.
follow-up work done in respect of the local spend issue.
Treasury will take forward the recommendation and test the local financial services sector with the proposal.” This recommendation was agreed by Tynwald on 14 December 2010.
film industry and on 22 February 2007 a new company, CinemaNX Limited, was incorporated to handle the financing of new projects. The Committee concluded that between 2002 and 2007
the Media Development Fund appeared to have achieved
“That Treasury and the Department of Economic
what it had been set up to do but stated that from 2007
Development jointly publish, by December 2011, a
onwards there remains a lack of evidence.
specific financial performance target for CinemaNX Limited – such target to be accompanied by details of
The Committee also noted/concluded/stated:
any performance management framework in place in
respect of the less tangible benefits attributed to the activities of the film industry in general.”
management, a target that each investment break-
The 2010 Public Accounts Committee noted that the film
even would not be acceptable compared to existing
industry had brought benefits to the Island but looked at the
benchmarks for fund managers.”
cost of obtaining these benefits and the financial return for Government on its investment in this industry. In 2006 the UK Government announced tax relief changes
the Isle of Man Government’s approach to financing the
“From 1997 to 31 March 2010 £25,110,462 has been invested in the film industry.”
and Isle of Man Governments came into effect. The combination of these circumstances led to a change in
“CinemaNX Limited is not being treated as a fund manager.”
that would affected the film industry in the Isle of Man. In 2007 the new revenue sharing arrangement between the UK
“The Financial Controller of CinemaNX Limited indicated that each film investment should seek to break even.” “In the context of mainstream investment
“From 1997 to 31 March 2010 £2,218,062 has been the return from that investment.”
investment target it set for CinemaNX Limited.”
“Treasury should publish its wider film strategy and
This recommendation was agreed by Tynwald on 14
explain to Tynwald and the public how they are
assessing the less tangible benefits.”
“The eight years since 2002 have seen a steady reduction in the Treasury’s aspirations.”
“Will there be any tangible return on the Government’s investment of £50 million over five years?”
“Will Treasury justify the amount of time devoted to CinemaNX Limited and in particular by the senior official required to act as a Director of the company?”
Recommendation 5 That Treasury and the Department of Economic Development consider options for the longer term support and development for the film and media industry alternative
December 2011. In reaching this recommendation the Committee stated:
“We would urge Treasury to remain hard-nosed and to
That they had serious concerns that the model
demand evidence of tangible returns on its investment.”
adopted in 2007 may not be sustainable.
Treasury’s written response
“Treasury accept that the wider less tangible benefits
resulting from the historic success of the film industry
commercial risk represented by the CinemaNX
have not been made explicit in demonstrating the wider
economic benefit derived by the Island. Treasury will work with the Department of Economic
The five year contract with CinemaNX Limited ends
Development in determining appropriate performance
in August 2012 and the Committee was not
targets for CinemaNX Limited and the film industry in
convinced that it should be renewed in its current
Treasury’s written response “Treasury
methodologies of single film finance are becoming less likely to provide a return on investment as have been generated historically. Efforts to redefine what “media development” will consist of into the future will determine the nature and shape of the industry. Whether this is in the form of video, games, mobile advertising, music download, broadcasting services etc. each will be considered on its merits in the final analysis.
“That any extension of the Agreement dated 13 August 2007 between Treasury, CinemaNX Limited and Isle of Man Film Limited, or any similar agreement by way of replacement, should only occur with the approval of Tynwald.” The Committee stated. “In line with the recommendations of our previous report on Reserve Funds we consider that the detail of any new scheme or mechanism should be put to Tynwald for approval.
Even before that stage is
reached, however, it is essential that Tynwald be properly consulted as to any broad change of course.”
Where any changes to the definition, application or use
Treasury’s written response
of the current Media Development Fund is concerned
“Treasury is of the opinion that the commercial agreement
Treasury will consult with the Department of Economic
concluded through Treasury and Isle of Man Film Limited
Development and seek approval of Tynwald.”
with CinemaNX Limited was clearly with the authority of
NB Treasury’s response did not include a commitment to report to Tynwald by December 2011 as had been recommended.
the respective Ministers of Treasury and the Department of Trade and Industry at that time. Treasury is opposed to any requirement to obtain the approval in principle of Tynwald to extend or engage
This recommendation was agreed by Tynwald on 14
This recommendation was debated in Tynwald on 14
monitored by the Investment Committee of the Treasury
December 2010. The block vote of the Council of Ministers
and the Treasury members came into play and the
Transparency would be improved if Treasury were to
recommendation was rejected.
publish a benchmark “return on investment” against which
Other comments made in the Report are worth noting: “We note that in 2007 the company (CinemaNX Limited)
received the entire balance of the Media Development Fund,
Potential Conflict of Interest
some 50 million pounds.”
The Committee noted that Internal Audit had pointed out
“Treasury and CinemaNX Limited are handling large sums of money on behalf of Tynwald and the public. We believe that
in 2004 that there was the potential for a conflict of interest.
more could be done by Treasury to explain what is being
The 2004 Internal Audit noted that specialists hired on a
done with that money, how it is being done, and why.”
consultancy basis to provide legal and film development
“The committee asked various questions regarding the performance of CinemaNX Limited in its capacity as Fund
investment was actually made. The Committee commented that “this could encourage the
Manager.” Following a
services were only paid a fee for productions where an
response from the
Controller the committee stated, “We infer from this response, and from the Agreement with CinemaNX Limited
consultants to recommend marginal productions for investment when this might not be in the best interest of the Film Commission.”
and the Treasury, that no specific financial performance
Liberal Vannin wonder if the Tynwald Committee were
target has been set for CinemaNX Limited in their capacity
referring to the seemingly bizarre selection criteria used
as Fund Managers. We would also point out that the target
when the investment was made in Me and Orson Welles
performance of CinemaNX Limited does not appear to be
(details printed later in this booklet).
The Committee also noted that this potential for conflict of
to Gasworks Media Limited (Stephen Christian) and to
interest had not gone away, having learned from the
Samuelson Productions Limited (Marc Samuelson).
accounts of Isle of Man Film Limited that the following sums
In fact, the accounts of CinemaNX Limited for the period to
were paid out each year in “producer fees”.
June 2008 show:
The explanation in the notes to the accounts was, “Isle of
Gasworks Media Limited received fees totalling £150,000
Samuelson Productions Limited received fees totalling £116,667
Out of a total cost of £787,811 in respect of wages,
Man Film Limited has no responsibility to pay fees to third
salaries and social security costs, £516,666 were
party advisors in respect of individual transactions, however,
related to payments to directors
Isle of Man Film Limited invoices and collects, legal and production fees on behalf of Cains Advocates and Gasworks
In addition: £53,397,255
Media Limited respectively. Isle of Man Film Limited is only
potentially due to Government by way of the
responsible for paying such fees to the extent that they are
agreement between CinemaNX Limited, Isle of Man
first recovered from third parties, thus not exposing Isle of
Film Limited and the Isle of Man Treasury
Man Film Limited to any net third party transaction costs”. The committee noted that the leading players in Cains Advocates and Gasworks Media Limited were Andrew
The company made an operating loss of £1,686,392 in the period
The company owed £682,304 at 30 June 2008 in respect of social security costs and other taxes
Fingret and Steven Christian respectively – both of whom are Directors of Isle of Man Film Limited. The committee also noted that in the accounting period to 30 June 2008 substantial fees were paid by CinemaNX Limited
The company owns two subsidiaries – Lime Swordfish Limited and Cinemanx Films One Limited which in turns owns 100% of Cinemanx Productions One Limited.
Liberal Vannin is sure that you will remember from earlier in
Me and Orson Welles
this publication that:
Investment received £11,723,782 Producers
Andrew Fingret is a director of Isle Man Films Limited
Stephen Christian is a director of Isle Man Films
Stephen Christian is both a director and shareholder of
Holly Gent Palmo
Marc Samuelson is a shareholder in CinemaNX
Limited. The Tynwald Committee report showed the films that had
benefitted from investment since the incorporation of
Investment received £850,000
CinemaNX Limited to 31 March 2010.
These films are as follows:
A Bunch of Amateurs Investment received £2,911,000 Producer
Stephen Christian Marc Samuelson Jon Diamond
Heartless Investment received £1,415,000 Producer
Andrew Fingret Marc Samuelson Stephen Christian
Investment received £2,825,848
Investment received £2,661,409
Michael Rose Co-Producer
Marc Samuelson Stephen Christian
Andrew Fingret Richard Hewitt
Potential Conflicts of Interest
Albatross Investment received £1,645,000
Liberal Vannin can understand why the Tynwald Committee
had concerns about potential conflicts of interest.
Liberal Vannin also wonders what criteria have to be met
for films looking for investment using Manx taxpayers’
money. Me and Orson Welles
totalling £11,723,782 and we will use this film to illustrate
has received Investment
our concerns. Chico & Rita Investment received £1,078,423
Me and Orson Welles
Select footage was screened at the 2008 Cannes Film
Festival where financing sales agency, Cinetic Media were
looking to sell the film to a distributor but it failed to secure
any American acquisitions.
Its first full screening was at the Toronto International Film
Festival which ran from 4th to 13TH September 2008. Again
the films distribution rights were not purchased and it went
on to show at the South by Southwest festival in Austin, Texas with repeated lack of success.
Liberal Vannin calls for the Treasury Minister to:
Reconsider her position and to accept the recommendation
In May 2009, CinemaNX Limited announced that it would be
that any extension of the Agreement dated 13 August 2007
distributing the film itself whilst sharing the marketing and
between the Treasury, CinemaNX Limited and Isle of Man
advertising costs with Vue Entertainment.
Film Limited, or any similar agreement by way of replacement
The film was released in November 2009 and in December
should only occur with the approval of Tynwald.
Liberal Vannin calls upon the Public Accounts Committee to:
“The do-it-yourself release of Richard Linklater’s ME AND
for funding from producers not connected to CinemaNX
Orson Welles got off to a very nice start, averaging $15,910
have been submitted to it for funding that have been
from its four theaters, the highest PTS of all debuting
refused and what the reasons for rejection have been.
films…….While Orson Welles is one of the first examples of such a high profile film going the DIY route, if it proves
Ask CinemaNX Limited to reveal to it how many scripts
Ask who it is that is handling the reading of scripts submitted to CinemaNX Limited for vetting and what
successful, it’s going to be done a lot more in the future.”
relationship As of 26 January 2010, the movie had grossed $1,107,440 in the United States.
From the forgoing, it would appear that the film, having failed
Productions have been financed during the period of the
to secure any significant financial interest, with £11,723,782
existing contract and make that information public.
of Manx taxpayers’ money invested in it, was used to trial a DIY route.
Establish how many projects have been approved by CinemaNX for funding in the time remaining for the
Liberal Vannin contends that this is an entirely
existing contract to run before it terminates on 13 August
unacceptable risk for so large an amount of public
2012 and provide full details of what those projects are
and the reasons for funding them.
The Block Vote, the “one Party state by patronage” and the “Government Party”
The Ministers then appoint the Departmental Members from the remaining MHKs. The number varies dependent on the
The House of Keys (Keys) is made up of 24 elected MHKs
Ministry but the total of Departmental Members is 11.
Legislative Council (LegCo) has 11 unelected members. 8 of
The Ministers can fire a Departmental Member at any time.
these are elected by Keys with the other 3 automatically being the President of Tynwald, the Bishop and the Attorney General.
All MHKs receive a salary of £36,441 plus a tax-free expenses allowance of £6,178. The salary is increased if an
Keys and LegCo sit together monthly and form Tynwald.
MHK becomes a Minister or Departmental Member.
When there is a general election the Island votes for 24 MHKs
A summary of the gross remuneration, including the
based on their individual manifestos. When casting their votes,
expense allowance, is as follows:
no-one is aware of who is going to be Chief Minister so have
no idea of what government policy is likely to be.
At the first sitting of Tynwald the elected MHKs and the non elected members of LegCo vote for one of the MHKs to be Chief Minister. The Chief Minister then appoints 9 Ministers.
In addition there are various positions on Boards that will
He can fire any of these Ministers at any time.
enhance the salary of an MHK.
Government (CoMin) is now formed.
They all then sign to
agree to abide by Collective Responsibility. Collective Responsibility – The Council of Ministers meet to discuss and vote on issues. The vote of the majority carries and then all Ministers then have to support the issue, whether they agree with it or not, or resign.
He who pays the piper calls the tune – and the only piper in this town is the Chief Minister. Where are the checks and balances?
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Join Liberal Vannin now and make a difference. Applications forms are available today, online at www.liberalvannin.org or contact our membership secretary, Juan Cottier on 852775 Published and printed by: Liberal Vannin Party White Cot King Edward Road