In reply to your communication dated 12 October 1999 (Doc. No: 99-7558-D / Ref. No: SAM 030.98.005), please accept the following.

1. Norwegian film policy

Norwegian film policy is an integral element of Norwegian cultural policy. The purpose of public funding is to encourage the production of films in Norwegian that reflect Norwegian culture, contemporary life, mores and traditions. Public financing is an essential precondition for the continued existence of a Norwegian film sector.

Norway is a restricted language area. Hence, the market potential for cultural products based on the native language is restricted. The costs involved in film production, however, are the same as for larger markets. It remains a fact that, despite efforts to promote wider circulation of European films, few are circulated outside markets defined by language barriers. This also holds true for Norwegian feature film productions.

Without public funding, virtually no feature films would be produced in the Norwegian language for a Norwegian audience. In cultural policy terms, the feature film market is dysfunctional in that it requires support not only at the production stage, but also at the stages upstream and downstream to the production stage. Thus, in addition to the various incentives and funding schemes directed towards the production of audiovisual works, public support is also granted to the training of professionals and dissemination of such works. An overview of existing public funding schemes for the production of feature films is given in our communication to the ESA dated 05.11.1999 in reply to your communication Doc. No: 99-7559-D Ref. No: SAM 051.400.001.

 

2. Norsk Film AS - background

Norsk Film AS is a production company based in Bærum municipality, where the company holds real estate, owns administration buildings and production facilities.

The statutes, article 1 specify that the task of Norsk Film AS is to produce films on the basis of quality objectives and, through its subsidiary Norsk FilmStudio AS, to run a film-studio and to provide technical and practical services on its professional sector.

Norsk Film AS is organised as an ordinary limited company in accordance with the act on limited companies (Lov av 13.06.1997 nr. 44 om aksjeselskaper). The shareholder-structure is as follows:

The Norwegian government 77,6%

82 municipalities 20,1%

Vår Bank og Forsikring AS 2,3%

Norsk FilmStudio AS is a 100% owned subsidiary of Norsk Film AS. As of 1 January 1999, Norsk FilmStudio AS holds a 100% share in the camera-rental company Scancam AS.

Norsk Film AS was established 12 March 1932 by the association of municipal cinemas. The company’s film-studio was opened 2 March 1935. After the Second World War, the Norwegian government decides to assume greater responsibility for film-production and the film is recognised as an independent art form (St. prp nr. 2 for 1946-47). On 29 June 1948, the Norwegian government entered Norsk Film AS as a minority shareholder (with a 40% stake). Continuous crises in the company’s economical status throughout the 1950’s and 1960’s meant that the government was obliged to intervene with grants to guarantee its further existence. After the company was pronounced technically bankrupt in the late 1960’s, the government decided to assume full responsibility for the future of the company and extended its ownership to majority shareholder. This decision entailed that the government assumed a permanent responsibility for guaranteeing its further existence, i.a. by providing the company with operating aid when needed. It also entails that the government in effect controls Norsk Film AS, through the general assembly and the board of management.

3. government funding and management of norsk film As

Government participation and funding of Norsk Film AS is justified on the one hand by the need to provide Norwegian feature film production with necessary facilities and on the other hand by the pursuit of cultural objectives, by safeguarding continuity in Norwegian film production.

1. Production grant:

Since 1992, a share of the national budget allocation to film funding is earmarked productions to be carried out by Norsk Film AS. (Prior to 1992 government support to film-production in Norway was granted in the form of loan-guarantees.). The table below shows the sums granted to film Norsk Film AS for the purpose of film production 1995-1999.

 

	1995	1996	1997	1998	1999	2000*
Norsk Film - production allocation	28.200.000	28.835.000	29.406.000	28.508.000	28.250.000	29.280.000

*Proposed allocation

We would like to emphasise that Norsk Film AS does not manage a public funding mechanism and does not provide financial support to the film industry on behalf of the government. The funds made available to Norsk Film AS over the national budget are primarily invested in productions where the company is the majority producer. Between 1995 and 1999 majority productions thus accounted for approximately 90% of the company’s investment in film production. Norsk Film AS does enter into co-productions on equal terms with other investors. Unlike public bodies entrusted with the task of funding film production in Norway (e.g. the Norwegian Film Institute and Audiovisuelt Produksjonsfond), Norsk Film AS invests in film production as a co-producer proper, e.g. by demanding proceeds from the profits from a film-production.

2. Operating Grant

History has shown that both film production and studio facilities are areas of business which, left to the market alone, are not viable in Norway. In order to safeguard continuity in Norwegian film production it is considered vital to ensure the existence of at least one major production company and the studio facilities necessary for feature film production. Norsk Film receives an annual operating grant from the government. The grant provides Norsk Film AS with operating costs in its capacity as production company as well as the means to maintain a national infrastructure considered necessary for the production of feature films.

The table below gives an overview of the annual operating grant to Norsk Film AS from 1995 to 2000.

	1995	1996	1997	1998	1999	2000*
Operating grant	20.715.000	21.181.000	21.600.000	21.600.000	19.600.000	20.000.000

* Proposal

The government does not support directly the purchase of technical equipment by Norsk FilmStudio AS.

3. Grant for the upgrading of Norsk Film AS’ infrastructure

In 1997 Stortinget decided to grant 36 million NOK to Norsk Film AS for the upgrading, modernisation and development of its production facilities. The grant was allocated over the national budget’s section for grants to national cultural buildings. The sum was allocated over a two-year period, with 10 million NOK in 1998 and 26 million NOK in 1999. The grant partly covered the modernisation and upgrading of the studio facilities and partly the development of new administration facilities.

4. The government’s management of Norsk Film AS

As mentioned earlier, the Norwegian government is the majority shareholder in Norsk Film AS. The act on limited companies (Lov av 13.06.1997 nr. 44 om aksjeselskaper) provides the framework for government’s role as owner of Norsk Film AS. The government directs Norsk Film AS primarily through the annual general assembly. You will find enclosed the approved minutes of Norsk Film AS` general assemblies from 1995-1999.

The company statutes (enclosed) provide further guidelines for the activities of Norsk Film AS. Article 1 states that the task of Norsk Film AS is to produce films on the basis of quality objectives and, through its subsidiary Norsk FilmStudio AS, to manage a film studio and to provide technical services on their professional areas.

The annual letter allocating funds ("tildelingsbrev") is the second major management mechanism at the government’s disposal. The allocation letters set out the terms and conditions under which the government funding is given. Furthermore, they provide a set of cultural objectives towards which the allocation of funds is meant to contribute. These objectives are general objectives common to all public funding to the film sector. You will find enclosed copies of the allocation letters from 1995 to 1999.

The allocation letters furthermore stipulate that the recipient must report on its activities in connection with the recipient’s application for funding the following year. These reports ensure that activities are compatible with the general objectives and specific terms under which the funds are granted.

 

4. Norsk Film AS – information on company activities etc.
1. Norsk Film AS

Norsk Film AS’ role as production company is explained in 3.1 above. Norsk Film AS’ participation in film production, whether it is their own (majority) production or a co-production, may comprise the company’s assets and/or the production support granted by the government. Norsk Film AS will demand proceeds only from capital invested which derives from the company’s assets.

Norsk Film AS commercial activities are restricted to the licensing of rights to the productions it produces or co-produces. Norsk Film AS has no commercial interest, for instance by an obligation to generate profits for the benefit of its shareholders. Any proceeds from the company’s activities are reinvested in film-production in accordance with its cultural objectives.

Both Norsk Film AS and Norsk FilmStudio AS are treated as benevolent organisations for taxation purposes and are as such exempt from corporate tax.

 

2. Norsk FilmStudio AS

Norsk FilmStudio was founded 1 July 1989 and is a subsidiary of Norsk Film AS. The studio facilities were previously an integral division of Norsk Film AS. Norsk FilmStudio AS was founded in order to establish a clear-cut distinction between Norsk Film AS’ role as producer and its role of managing the production facilities known as "Filmparken".

Norsk Film AS statutes are also applicable to Norsk FilmStudio AS. As mentioned earlier the statutes (article 1) require Norsk Film AS to operate a film-studio and to provide technical services. In accordance with the cultural obligations in the statutes of the parent company, and pursuant to Article 3 of Norsk FilmStudio AS statutes (cf. the enclosed copy) the company is obliged to primarily cater for film productions which qualify for public support, i.e. feature film production.

Any producer wishing to make use of the production facilities managed by FilmStudio AS must negotiate costs on equal terms. Any film production that qualifies for public support has access to Norsk FilmStudio AS services on equal terms. Projects involving Norsk Film AS as a production company are treated on equal terms with other projects.

In cases where there is a conflict over reservations for services or facilities, Norsk FilmStudio AS is obliged to give right-of way to feature film productions over production of commercials or television productions. This restriction derives from the company’s cultural obligations and represents a clear disadvantage in commercial terms.

Norsk FilmStudio AS offers services such as studio rental and technical equipment for film production on market principles and competitive terms, including the granting of possible credits. In projects where Norsk Film AS is involved, the company will attempt to ensure that the production will make use of facilities and services rendered by Norsk FilmStudio AS. In such cases, Norsk FilmStudio AS is required to deliver such services on competitive terms. Norsk FilmStudio AS may not grant credits on services rendered to projects involving Norsk Film AS.

Norsk FilmStudio AS is organised in divisions according to the market segments it offers services to. These are listed in the far-left column of the table below. Norsk FilmStudio AS does not possess exact information on their market position on these market segments. According to their own estimates their approximate market shares (for productions carried out in Norway only) may be somewhere in the region of:

	Feature films	Commercials
Studio/set	80%	30%
Grip	75%	30%
Lighting	70%	50%
Costumes	80%	60%
Post-production	80%	5%

 

3. Scancam AS

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