UK National Lottery franchise The Film Consortium has secured lottery funding for another three years after it cleared a mid-term review by film super body the Film Council.

Although some Council board members were highly critical of the consortium, the Council said that it accepted that the operation had performed below expectations in some areas. The Council was encouraged by an injection of new capitol and a revised business plan from start-up UK media concern Civilian Content, which agreed to take over the franchise early this year.

"It's a huge relief," said Civilian chief Richard Holmes.

One area of concern for the Council appears to have been a shortfall in the number of films produced by the consortium. Production levels were apparently hindered by the departure of Colin Vaines to head development at Miramax Films in New York and disagreements between the consortium's producer partners, which include Parallax, Greenpoint/Skreba and Scala.

The Council is understood to have originally wanted the consortium - which has access to $46m-plus in lottery cash over six years - to use one method of financing for its films rather than its traditional combination of sources such as pre-sales and lottery cash.

But it now seems to have accepted a more flexible system. The consortium is proposing to use a combination of equity, co-production financing and lottery money but is also developing plans to bring in funding through a UK distribution partnership and a tax-driven structure.

Holmes said he aims for the consortium to establish a more regular financing model. "We want to concentrate on development and production," he said. "Piecing together financing for our movies may have previously taken the edge off some films."

Momentum Pictures, the UK distributor with which the consortium partnered on The 51st State, is seen as one potential distribution partner in the UK. But the franchise may also seek to renew a physical distribution arrangement with UIP.

A UIP deal will hang on the consortium finding the private p&a cash it needs in order to pull down lottery distribution support. The consortium needs to find matching private funding in order to access lottery cash. A deal with video distributor VCI that provided 50% of theatrical p&a costs has not been renewed, leaving the consortium without its private p&a share.

The franchise was able to side-step the p&a issue on its highest budget project to date, 51st State, which it boarded only as an equity financier without taking any UK rights. Momentum will handle UK distribution.

Also on the cards is an increased investment in sales operation The Sales Co, in which the consortium has a 25% holding. However, this is still to be negotiated with the operation's fellow stakeholders, which include BBC commercial arm BBC Worldwide and UK production outfit Zenith. Some BBC sources are known to be in favour of raising the broadcaster's investment in the operation.

The Council was also impressed by current and upcoming projects at the consortium, which were expected to include Michael Winterbottom's 24hr Party People. Fellow lottery franchise Pathe Pictures will be next to complete a mid-term review, possibly next month, with DNA Films to follow after that.