Much like the recent British version of "Lassie" starring Peter O'Toole, "The Water Horse: Legend of the Deep" is easily one of 2007's most intelligent family films and, unlikely the vast majority of American-made films, "The Water Horse" doesn't condescend to its young audience.

Starring Alex Etel ("Millions") as 12-year-old Angus, "The Water Horse" is the story of a lonely young boy who counts the days before his father is to return from World War II by collecting sea shells and isolating himself away from his mother (Emily Watson, "Punch-Drunk Love") and newcomer Priyanka Xi.

One day, Angus finds what instantly appears to be an egg and, before long, an undefinable beast of sorts is born with a screeching way of communicating and a voracious appetite.

Before long, the family estate becomes occupied by British soldiers, led by Capt. Hamilton (David Morrissey,"The Reaping") and a new handyman (Ben Chaplin, "Stage Beauty") is hired to help the family maintain the vast estate. Angus's efforts to keep the beast, whom he affectionately names Crusoe, a secret are increasingly challenged by Crusoe's daily doubling in size.

Crusoe, created by Peter Jackson's WETA Studio, is an adorable creature combining the cuddliness of E.T., the sweet heart of Shrek and, of course, the devotion of Puff the Magic Dragon. While he obviously becomes less adorable as increases in size, there are numerous scenes of tenderness between he and Angus that manage to keep the film's storyline as believable as it is fantastic.

Much like the aforementioned "Lassie," "The Water Horse" benefits tremendously from a largely British cast that excels at intelligently bringing to life this very wondrous story based upon a book by Dick King-Smith ("Babe") and directed by Jay Russell ("My Dog Skip").

British filmmakers, far moreso than their American counterparts, are unafraid to blend very adult themes into their children's and family films. "The Water Horse," rather surprisingly, almost plays off as an anti-war film and, most certainly, plays as an anti-violence film as Crusoe is essentially turned into the Loch Ness Monster largely due to mistreatment by the adult humans in the military.

This is not to say, however, that "The Water Horse" carries with it a heavy tone. While the film's final third does contain a couple scenes that could frighten small children, "The Water Horse" is very much an innocent and family-oriented fantasy film celebrating the relationship between Crusoe and Angus and, in turn, Angus's increasing ability to enjoy his life again.

Much as he did in "Millions," Etel shines here as a young man who is wounded yet determined to become the man of the house. Etel's scenes with Crusoe are filled with a warmth and tenderness often lacking in today's special effects laden family flicks.

As always, Emily Watson adds a wondrous depth to her portrayal of Angus's mother, while Priyanka Xi shines in her debut. Ben Chaplin, David Morrissey and Brian Cox excel in supporting roles.

Unlike many American films with heavy special effects, "The Water Horse" isn't always a busy and distracting film. Russell is a patient director and there are times he patiently allows a scene to linger for an extra couple seconds to get just the right closing look or sound. While he occasionally dips too far into silliness, as in routines involving the chef's bulldog, there are few family film directors who could have so perfectly blended the special effects with the warmth and spirit of the story.

"The Water Horse" is set in Scotland, but was filmed substantially in New Zealand. The result is a film with cinematography by Oliver Stapleton that is beautiful to behold even when we are getting only a wide lens shot of the stunning countryside.

Production design is stellar and James Newton Howard's Celtic flavored musical score complements the action perfectly along with Sinead O'Connor's closing credits musical accompaniment.

"The Water Horse" may very well be a difficult sell to American audiences used to a faster pace and emphasis on special effects, but it is clearly one of 2007's family cinema highlights. While it is likely to have a long life on home video, trust me when I say that "The Water Horse" is undoubtedly one film best viewed on the big screen where Crusoe's magnificent charm and power can be fully appreciated.