10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended March 31, 2006
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from           to

Commission File No. 1-14880

LIONS GATE ENTERTAINMENT CORP.

(Exact Name of Registrant as Specified in Its Charter)

British Columbia, Canada	N/A
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

1055 West Hastings Street, Suite 2200
Vancouver, British Columbia V6E 2E9
(604) 721-0719 2700 Colorado Avenue, Suite 200
Santa Monica, California 90404
(310) 449-9200

(Address of Principal Executive Offices, Zip Code)

Registrant’s telephone number, including area code:

(604) 721-0719

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Common Shares, without par value	Toronto Stock Exchange New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes þ         No o

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act.    Yes o         No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes þ         No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

     Large accelerated filer þ         Accelerated filer o         Non-accelerated filer o

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.    Yes o         No þ

     The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2005 (the last business day of the Company’s most recently completed second fiscal quarter) was approximately $986,283,703, based on the closing sale price as reported on the New York Stock Exchange.

     As of June 1, 2006, 104,531,510 shares of the registrant’s no par value common shares were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A and relating to its 2006 annual meeting of shareholders are incorporated by reference into Part III.

		Page
PART I
Item 1.	Business		3
Item 1A.	Risk Factors		13
Item 1B.	Unresolved Staff Comments		23
Item 2.	Properties		23
Item 3.	Legal Proceedings		23
Item 4.	Submission of Matters to a Vote of Security Holders		23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities		23
Item 6.	Selected Consolidated Financial Data		26
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 8.	Financial Statements and Supplementary Data		43
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure		44
Item 9A.	Controls and Procedures		44
Item 9B.	Other Information		46
PART III
Item 10.	Directors and Executive Officers of the Registrant		47
Item 11.	Executive Compensation		47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters		47
Item 13.	Certain Relationships and Related Transactions		47
Item 14.	Principal Accountant Fees and Services		47
PART IV
Item 15.	Exhibits and Financial Statement Schedules		47
Exhibit 3.2
Exhibit 10.7
Exhibit 10.11
Exhibit 10.12
Exhibit 10.13
Exhibit 10.28
Exhibit 10.29
Exhibit 10.30
Exhibit 10.31
Exhibit 10.32
Exhibit 10.33
Exhibit 21.1
Exhibit 23.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1

FORWARD-LOOKING STATEMENTS

      All statements, other than statements of historical fact, contained within this report constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases you can identify forward-looking statements by terms such as “may,” “intend,” “will,” “could,” “would,” “expect,” “believe,” “estimate,” “expect” or the negative of these terms, and similar expressions intended to identify forward-looking statements.

      These forward-looking statements reflect our current views with respect to future events and are based on assumptions and are subject to risks and uncertainties. Also, these forward-looking statements present our estimates and assumptions only as of the date of this report. Except for our ongoing obligation to disclose material information as required by federal securities laws, we do not intend to update you concerning any future revisions to any forward-looking statements to reflect events or circumstances occurring after the date of this report.

      Factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements include, but are not limited to, those described in “Risk Factors” found elsewhere in this report.

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PART I

ITEM 1. BUSINESS.

Overview

      Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a diversified independent producer and distributor of motion pictures, television programming, home entertainment, family entertainment, video-on-demand and music content. We release approximately 15 to 18 motion pictures theatrically per year. Our theatrical releases include films we produce in-house and films we acquire from third parties. We also have produced approximately 97 hours of television programming on average each of the last three years. Our disciplined approach to production, acquisition and distribution is designed to maximize our profit by balancing our financial risks against the probability of commercial success of each project. We currently distribute our library of approximately 3,000 motion picture titles and 2,500 television episodes and programs directly to retailers, video rental stores, and pay and free television channels in the US, UK and Ireland, and indirectly to other international markets through third parties. We own a minority interest in CinemaNow, Inc. (“CinemaNow”), an internet video-on-demand provider. We also own a minority interest in Maple Pictures Corp. (“Maple Pictures”), a Canadian film and television distributor based in Toronto, Canada. We have an output arrangement with Maple Pictures through which we distribute our library and titles in Canada. During fiscal 2006, we purchased an aggregate of 4,033,996 shares of Image Entertainment, Inc. (“Image”), representing 18.94% of Image’s outstanding common shares as of March 31, 2006. Image is a home video and television distribution company specializing in digital media distribution of television programs, public domain and copyrighted feature films and music concerts.

      A key element of our strategy is to acquire individual properties, including films and television programs, libraries, and entertainment studios and companies, to enhance our competitive position and generate significant financial returns. During previous periods, we acquired and integrated into our business Artisan Entertainment Inc. (December 2003), a diversified motion picture, family and home entertainment company, and Trimark Holdings, Inc. (October 2000), a worldwide distributor of entertainment content that distributed directly in the US and through third parties to the rest of the world. During fiscal 2006 (on August 17, 2005), we acquired certain of the film assets and accounts receivable of Modern Entertainment, Ltd. (“Modern”), a licensor of film rights to DVD distributors, broadcasters and cable networks. In addition, on October 17, 2005, we acquired all outstanding shares of Redbus, an independent United Kingdom film distributor. We now have the ability to self-distribute our motion pictures in the UK and Ireland. As part of the Redbus transaction, we also acquired the Redbus library of approximately 130 films.

      The Company’s annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on the Company’s website at http://www.lionsgate.com. The Company’s Corporate Governance Guidelines, Standards for Director Independence, Code of Business Conduct and Ethics for Directors, Officers and Employees, Code of Ethics for Senior Financial Officers, Charter of Audit Committee, Charter of Compensation Committee and Charter of the Nominating and Corporate Governance Committee are also available on the Company’s website, as well as in print to any stockholder who requests them.

      Our revenues are derived from the following business segments: Motion Pictures (which includes Theatrical, Home Entertainment, Television and International Distribution); Television; and Studio Facilities (which the company sold on March 15, 2006). (See note 18 of our accompanying consolidated financial statements.) Our revenues are derived from the United States, Canada and other foreign countries, none of which individually comprised greater than 10% of total revenue. (See note 18 of our accompanying consolidated financial statements.)

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Our Industry

Motion Pictures

      General. According to the Motion Picture Association’s U.S. Theatrical Market: 2005 Statistics, overall domestic box office revenue was approximately $9.0 billion in 2005. Although it fluctuates from year to year (including a moderate decline from 2004 to 2005), the domestic motion picture exhibition industry has grown in revenues and attendance over the past ten years, with box office receipts up 63.7% and admissions up 11.1% from 1995 to 2005. However, revenues and attendance numbers have remained fairly flat from 2002 to 2005.

      Competition. Major studios have historically dominated the motion picture industry. The term major studios is generally regarded in the entertainment industry to mean: Universal Pictures (“Universal”); Warner Bros.; Twentieth Century Fox; Sony Pictures Entertainment (“Sony”); Paramount Pictures; and The Walt Disney Company (“Disney”). Competitors less diversified than the major studios include Dreamworks SKG, Newmarket Films, Motion Picture Distribution LP and IFC Entertainment.

      Despite the limited resources generally available to independent studios, independent films have gained wider market approval and increased share of overall box office receipts in recent years. Past successful independent films such as My Big Fat Greek Wedding, Bend It Like Beckham, Saw II and Crash highlight moviegoers’ willingness to support high quality motion pictures despite limited pre-marketing and production budgets.

      Product Life Cycle. Successful motion pictures may continue to play in theaters for more than three months following their initial release. Concurrent with their release in the United States, motion pictures are generally released in Canada and may also be released in one or more other foreign markets. After the initial theatrical release, distributors seek to maximize revenues by releasing movies in sequential release date windows, which are generally exclusive against other non-theatrical distribution channels:

Typical Film Release Windows*

	Months After			Approximate
Release Period	Initial Release			Release Period
Theatrical		—			0-3 months
Home video/ DVD (1st cycle)		3-6 months			1-3 months
Pay-per-transaction (pay per-view and video-on-demand)		4-8 months			3-4 months
Pay television		9-12 months	**		18 months
Network or basic cable		21-28 months			18-60 months
Syndication		48-70 months			12-36 months
Licensing and merchandising		Concurrent			Ongoing
All international releasing		Concurrent			Ongoing

*  These patterns may not be applicable to every film, and may change with the emergence of new technologies.

**  First pay television window.

Home Video

      Growth in the home video sector has been driven by increased DVD penetration. According to estimates from the DVD Entertainment Group (“DEG”), a non-profit trade consortium, DVD unit sales increased 10% and rentals increased 14% in 2005 from 2004 levels. Of the $24.3 billion in overall home video industry revenues during 2005, about $16.3 billion came from DVD sales. According to the Motion Picture Association’s US Entertainment Industry: 2005 MPA Market Statistics, DVD players were in 84.0 million U.S. households in 2005, a 76.2% penetration of the television households (up from 59.7% in 2004 and 43.1% in 2003). Declining prices of DVD players, enhanced video and audio quality and special features such as

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inclusion of previously-deleted scenes, film commentaries and “behind the scenes” footage have all helped increase the popularity of the DVD format, sparking increased home video rentals and sales in recent years.

Television Programming

      Continued growth in the cable and satellite television markets has driven increased demand for nearly all genres of television programming. According to Veronis Suhler Stevenson’s (“VSS”) 2005 Communications Industry Forecast & Report, total spending on cable and satellite television subscriptions, advertising and license fees was expected to increase 8.7% to $101.54 billion in 2005, driven by growth in license fees and advertising rates. Total spending on cable and satellite television is expected to reach a combined $134.22 billion in 2009, rising at a compound annual rate of 7.5% from 2005-2008, according to VSS. Increased capacity for channels on upgraded digital cable systems and satellite television has led to the launch of new networks seeking programming to compete with traditional broadcast networks as well as other existing networks.

The Company

Recent Developments

      Image. As described above, we own 18.94% of Image’s outstanding common shares as of March 31, 2006. In October 2005, we proposed to purchase 100% of Image’s outstanding common shares for $4.00 per common share in cash. This proposal was rejected by a special committee of Image’s board of directors. In connection with our consideration of strategic alternatives with respect to Image and to clarify Image’s corporate bylaws, we sought declaratory relief in the Delaware Court of Chancery. On June 5, 2006, the Court held that Image’s board of directors will not become classified until its 2006 annual meeting of stockholders, all of Image’s board of directors are up for election at the 2006 annual meeting of stockholders, and the board of directors does not have authority to amend Image’s bylaws, nor to amend Image’s certificate of incorporation without a stockholder vote. Subsequently, we selected a new slate for the Image board of directors and, on June 6, 2006, we submitted notice to Image of our intent to nominate this slate at Image’s 2006 annual meeting of stockholders.

Production

      Motion Pictures. Historically, we have primarily produced English-language motion pictures with production budgets of $35 million or less. Most of our productions have budgets of $20 million or less. Films intended for theatrical release are generally budgeted between $5 million and $35 million, and films intended for release directly to video or cable television are generally budgeted between $1 million and $5 million. We take a disciplined approach to film production with the goal of producing content that we can distribute to theatrical and ancillary markets, which include home video and pay and free television, both domestically and internationally. In fiscal 2006, we produced, participated in the production of or completed or substantially completed principal photography on the following six motion pictures:

•  Bug — Based on the play, Oscar^® winner Billy Wilder directs Ashley Judd in this disturbing drama that investigates paranoia.

•  Crank — After finding out that he has been poisoned and has only 24 hours to live, a professional hit man, played by Jason Stathem (Transporter), races around Los Angeles in search of his killer and in pursuit of the antidote.

•  Employee of the Month — Jessica Simpson, Dane Cook and Dax Shepherd star in this raucous comedy set in a superstore where rumor has it that the beautiful cashier will only date the “employee of the month.”

•  Madea’s Family Reunion — Tyler Perry’s successful play continues the story of Madea in the follow-up to the urban hit Diary of a Mad Black Woman. (Released February 2006.)

•  Saw II — In this sequel to the highly successful Saw, a new group of characters are forced to participate in the twisted game. (Released October 2005.)

•  Leonard Cohen I’m Your Man — A documentary on the legendary singer-songwriter, with performances by those musicians he has influenced.

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The following motion pictures are currently in or slated for production in fiscal 2007:

•  P.D.R. — Bernie Mac and Academy Award^® nominee Terrance Howard star in the inspirational story of Jim Ellis, who in the early 1970s overcame racism to create a world-class swim team out of a group of inner city youths.

•  Rogue — This contemporary action picture stars Jet Li and Jason Stathem, who start as adversaries and then team up to destroy two rival gangs.

•  Saw 3 — The third installment of the successful Saw franchise. The game continues.

•  Daddy’s Little Girl — Tyler Perry’s next movie is a romantic comedy starring Gabrielle Union as a lawyer who cannot find love until she realizes it is right in front of her — the new limo driver.

•  Delta Farce — The rednecks join the army in this star vehicle for “Larry the Cable Guy.”

•  Ivy League — In this Animal House style comedy, a computer glitch admits 12 of the worst students in the country into an Ivy League school.

•  Kidnapped — When three siblings are kidnapped, they turn the tables on the kidnappers to collect the ransom for themselves.

•  Stir of Echoes 2 — The sequel to the successful thriller brings the ghost story to a woman returning from the war in Iraq.

•  Punisher 2 — The sequel to The Punisher brings Frank Castle face to face with a lethal mobster.

•  The U.S. vs. John Lennon — A documentary on the life of John Lennon, with a focus on the time in his life when he transformed from a musician into an antiwar activist.

      Our production team has developed a track record for producing reasonably budgeted films with commercial potential. Our production division reviews hundreds of scripts, looking for material that will attract top talent. We then actively develop such scripts, working with the major talent agencies and producers to recruit talent that appeals to the film’s target audience. We believe the commercial and/or critical success of our films should enhance our reputation and continue to give us access to top talent, scripts and projects. We also develop films in other niche markets, as evidenced by the successes of our urban films, such as Madea’s Family Reunion.

      The decision whether to “greenlight” (or proceed with production of) a film is a diligent process that involves numerous key executives of the Company. Generally, the production division presents projects to a committee comprised of the heads of our production, theatrical distribution, home entertainment, international distribution, legal and finance departments. In this process, scripts are discussed for both artistic merit and commercial viability. The committee considers the entire package, including the script, the talent that may be attached or pursued and the production division’s initial budget. They also discuss talent and story elements that could make the project more successful. Next, the heads of domestic and international distribution prepare estimates of projected revenues and the costs of marketing and distributing the film. Our finance and legal professionals review the projections and financing options, and the committee decides whether the picture is worth pursuing by balancing the risk of a production against its potential for financial success or failure. We typically seek to mitigate the financial risk associated with film production by negotiating co-production agreements, pre-selling international distribution rights on a selective basis and capitalizing on government subsidies and tax credits, where possible. We often attempt to minimize our production exposure by structuring deals with talent that provide for them to participate in the financial success of the motion picture in exchange for reducing up-front payments. In addition, we use certain Canadian tax credits, German tax structures, United Kingdom subsidy programs, U.S. domestic tax incentives and other structures that may help reduce our financial risk.

      Television. During fiscal 2006, we delivered approximately 93 hours of television programming, which included one-hour and half-hour dramas, movies-of-the-week, mini-series, animated series and reality and non-fiction programming. To date, we remain a leading non-network affiliated independent producer of television product in the U.S. In fiscal 2007, we intend to have six series on the air, and numerous movies-of-the-week slated for production.

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      Series. In fiscal 2006, we delivered:

•  23 episodes of the drama The Dead Zone, starring Anthony Michael Hall, which is shown on USA Network in the United States and is distributed by Paramount International Television internationally;

•  19 episodes of the crime series Missing (formerly referred to as 1-800 Missing), starring Vivica A. Fox, which airs on Lifetime Television in the United States and is distributed by Sony Television International Distribution internationally;

•  ten episodes of the comedy Weeds, starring Golden Globe^® winner Mary-Louise Parker, which premiered on Showtime in August 2005;

•  25 episodes of the drama Wildfire, which premiered on the ABC Family Channel in June 2005; and

•  13 episodes of The Cut, a one-hour reality program with fashion icon Tommy Hilfiger, which debuted on CBS in June 2005.

In addition to continuing to deliver Weeds (12 episodes) and Wildfire (26 episodes), in fiscal 2007 we intend to deliver the following projects:

•  eight episodes of Hidden Palms, a Kevin Williamson (Dawson’s Creek) project for CW Network;

•  13 episodes of The Dresden Files for SCI FI Channel;

•  six episodes of the reality series I Pity the Fool for TV Land;

•  13 episodes of Lovespring International, a half-hour improvisational comedy series on Lifetime Television;

•  eight episodes of a reality series based upon the feature film Dirty Dancing on the WE network; and

•  eight episodes of Motel Man on SCI FI Channel.

      Animation. We are involved in the development, acquisition, production and distribution of a number of animation projects for full theatrical release, television and DVD release.

•  DVD Production — After having delivered Avengers 1 and Avengers 2, we are currently producing two additional direct-to-home video animated movies with Marvel Characters, Inc., Dr. Strange and Iron Man. We have also greenlighted a fifth title to be based on the characters from The Avengers and their offspring. We have also delivered the production of Arthur, based on the best-selling children’s book series, and Amazing Screw on the Head (from the creator of Hellboy) is in the final stages of delivery.

•  Television Production — We have a production order for 26 half-hours from Nickelodeon Networks on a new action adventure series and intend to announce the series with the broadcaster in July 2006. The series is based on a well-known franchise and we will have participation in the production as well as handling international sales, overseeing merchandising and licensing and distributing DVD and video. We are also attempting to finalize a pilot order from another children’s broadcaster based on a best-selling book and in conjunction with comedy creator-producer Lorne Michaels.

•  Theatrical Films — We have the following computer-generated animated projects in pre-production or production: (1) two original productions in our partnership with Rich Crest, (2) Sylvester and the Magic Pebble, which is in the advanced stages of pre-production, and (3) Alpha and Omega, which is in preproduction. We also have acquired the following computer-generated animated projects: (a) Foodfight!, starring Eva Longoria, Hilary Duff, Charlie Sheen and Wayne Brady, in the later stages of production, and (b) Happily N’Ever After, starring Sarah Michelle Geller, Freddie Prinze, Jr. and Sigourney Weaver, in the final stages of financing.

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      Television Movies, Mini-Series and Specials. We are actively involved in the development, acquisition, production and distribution of television productions in the movie-of-the-week, mini-series and reality special formats. During fiscal 2006, we produced and distributed one movie-of-the-week, Three Wise Guys for Fox. We also delivered one reality special, Dear Santa for USA Network.

      Music. We have recently undertaken to grow a music portion of our business. We do not currently generate a significant amount of revenue from our music operations.

Distribution

      Domestic Theatrical Distribution. We distribute motion pictures directly to U.S. movie theaters. Over the past nine years our releases have included the following in-house productions: Monster’s Ball, starring Halle Berry and Billy Bob Thornton; The Punisher, starring John Travolta and Thomas Jane; Godsend, starring Robert DeNiro, Greg Kinnear and Rebecca Romijn Stamos; Tyler Perry’s Diary of a Mad Black Woman and Madea’s Family Reunion; the horror film sequel Saw II; Akeelah and the Bee, starring Keke Palmer, Laurence Fishburne and Angela Bassett; and the Academy Award^® nominee for Best Documentary Grizzly Man. Motion pictures that we have acquired and distributed in this same time period include: Dogma, starring Ben Affleck, Matt Damon and Chris Rock; O, starring Julia Stiles and Mekhi Phifer; The Red Violin, starring Samuel L. Jackson; The Cooler, starring Alec Baldwin, William H. Macy and Maria Bello; Gods and Monsters, starring Brendan Fraser, Ian McKellan and Lynn Redgrave; Affliction, starring Nick Nolte and Sissy Spacek; Girl With A Pearl Earring, starring Scarlett Johannson and Colin Firth; the highly successful horror film Saw; Michael Moore’s Fahrenheit 9/11; Open Water; Lord of War, starring Nicholas Cage; Hostel; Hard Candy; and Paul Haggis’ Best Picture Academy Award^® winning tale of race relations in post-9/11 Los Angeles Crash, starring Don Cheadle, Sandra Bullock, Matt Dillon and Brendan Fraser, among others. In the last eight years, films we have distributed have earned 25 Academy Award^® nominations and won five Academy Awards^®, and have been nominated for and won numerous Golden Globe, Screen Actors Guild, BAFTA and Independent Spirit Awards.

      Our strategy is to release approximately 15 to 18 titles per year in theaters, which includes both our in-house productions and acquisitions. Our approach to acquiring films for theatrical release is similar to our approach to film production in that we generally seek to limit our financial exposure while adding films of quality and commercial viability to our release schedule and our video library. The decision whether to acquire a motion picture for theatrical release entails a process involving key executives at the Company, including those from the releasing, home entertainment and acquisitions departments. The team meets to discuss a film’s expected critical reaction, marketability, and potential for commercial success, as well as the cost to acquire the picture, the distribution and estimated marketing expenses (typically called “P&A” or “prints and advertising”) required to bring the film to its widest possible target audience and the ancillary market potential for the film after its theatrical release. We have recently begun to release more films on a wider basis, as demonstrated by the theatrical releases of such films as The Punisher, Fahrenheit 9/11, Open Water, Saw, Saw II, Diary of a Mad Black Woman, Madea’s Family Reunion, Lord of War and Crash.

      We generally prepare our marketing campaign and release schedules to minimize financial exposure while maximizing revenue potential. We construct release schedules taking into account moviegoer attendance patterns and competition from other studios’ scheduled theatrical releases. We use either wide or limited initial releases depending on the film. We generally spend less on P&A for a given film than a major studio and we design our marketing plan to cost effectively reach a large audience.

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      Our remaining fiscal 2007 theatrical release schedule may include (in anticipated order of release):

			Produced*
Title	Summary	Principal Actors	or Acquired		Release Date
Leonard Cohen I’m Your Man	A documentary on the legendary singer-songwriter, with performances by those musicians he has influenced.	Documentary		Produced	June 2006
The Descent	A group of female friends led by Juno (Natalie Mendoza) encounter bloodthirsty creatures when they get trapped in a mountain cave due to rockfall. Worst of all, their friendships sour and they discover their real fear is from each other.	Shauna Macdonald, Natalie Jackson Mendoza, Alex Reid, Saskia Mulder		Acquired	August 2006
Crank	A hit man (Statham) learns that the poison in his body will kill him if his heart rate drops below a certain point.	Jason Statham, Amy Smart		Produced	September 2006
Employee of the Month	Hearing that a beautiful clerk will date the employee of the month, two slacker Costco workers vie for the honor.	Dane Cook, Jessica Simpson, Dax Shepherd, Andy Dick		Produced	September 2006
The U.S. vs. John Lennon	A documentary on the life of John Lennon, with a focus on the time in his life when he transformed from a musician into an antiwar activist.	Documentary		Produced	September 2006
Trade	A young Mexican girl is abducted and forced into becoming a sex slave. Her brother tries finding her and teams up with a police officer, who discovers that his own daughter, unbeknownst to him, has also been kidnapped. And from Moldova, a young woman is also pressed into becoming a sex slave after being promised a better life in the US.	Kevin Kline		Acquired	October 2006
Saw 3	Torture-friendly serial killer Jigsaw continues to “teach” those who are undeserving of life alongside his new apprentice.	Tobin Bell, Shawnee Smith, Bahar Soomekh, Angus MacFayden		Produced	October 2006

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			Produced*
Title	Summary	Principal Actors	or Acquired		Release Date
Slow Burn	A district attorney (Ray Liotta) is involved in a 24-hour showdown with a gang leader (LL Cool J) and is, at the same time, being manipulated by an attractive assistant district attorney and a cryptic stranger.	Ray Liotta, LL Cool J, Jolene Blalock		Acquired	November 2006
Bug	A paranoid, unhinged war veteran who sees insects everywhere holes up with a lonely woman in a spooky Oklahoma motel room.	Ashley Judd, Harry Connick Jr., Lynn Collins, Michael Shannon		Produced	December 2006
P. D. R.	Tells the real-life story of Jim Ellis, who in the 1970s started a swim team in one of Philadelphia’s roughest neighborhoods. Ellis recruited troubled teens and led them to the state championships.	Terence Howard, Bernie Mac		Produced	December 2006
Right at Your Door	A dirty bomb goes off in Los Angeles, jamming freeways and spreading a toxic cloud.	Mary McCormack, Rory Cochrane		Acquired	January 2007
Happily N’Ever After	An animated retelling of several fairy tales.	Sarah Michelle Gellar, Freddie Prinze, Jr., Sigourney Weaver		Acquired	February 2007

* Includes significant participation in production.

      We may revise the release date of a motion picture as the production schedule changes or in such a manner as we believe is likely to maximize revenues. Additionally, there can be no assurance that any of the motion pictures scheduled for release will be completed, that completion will occur in accordance with the anticipated schedule or budget, that the film will ever be released, or that the motion pictures will necessarily involve any of the creative talent listed above.

      International Distribution. Our international division, Lions Gate International (“LGI”), distributes our in-house productions and third party acquisitions to the international marketplace, both on a territory by territory basis through third parties, and directly in the United Kingdom and Ireland. International territories are often pre-sold to cover a significant portion of the production budget on new releases, and we have licensed international rights for approximately 1,200 of the motion picture titles and television episodes in our library.

      The primary components of our international business are (1) the licensing of rights in all media to our in-house theatrical titles on a territory by territory basis, and (2) the licensing of catalogue product or libraries of acquired titles (such as Modern). We have also leveraged our infrastructure to generate revenue through a sales agency business for third party product, and we have expanded our sales and distribution of original Lionsgate television series such as Weeds, Wildfire and Frankenstein.

      As part of our effort to expand our global footprint in certain strategic markets, LGI now includes a self-sustaining, full service distribution company serving the United Kingdom and Ireland. In addition to gaining greater control over releases and capturing incremental margin on our own product and the Marvel DTV titles such as Ultimate Avengers, Lionsgate UK is expected to release 18-22 films theatrically in fiscal 2007, with titles including Good Night and Good Luck and the Nicolas Cage thriller Wicker Man.

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      Home Video Distribution. Our U.S. video distribution operation is branded to consumers as Lions Gate Home Entertainment and aims to exploit our filmed and television content library of approximately 3,000 motion picture titles and 2,500 television episodes and programs. We have established a track record for building on the awareness generated from our theatrical releases, including the recent video releases of Saw 2, Lord of War, Crash and Waiting.

      In addition to our approximately 15 to 18 theatrical releases each year, we also acquire approximately 65 titles annually for direct-to-video distribution, adding approximately 80 films to our library each year. We also produce and acquire motion pictures that are not theatrically released, but have commercial potential in video and ancillary markets, including The Triangle, an epic miniseries starring Eric Stoltz and Catherine Bell that premiered on the Sci-Fi Channel, State Property 2: Philly Streets, a tale of three notorious gangsters and their bloody battle for supremacy in Philadelphia, Marvel’s Man Thing and A Different Loyalty starring Sharon Stone. We distribute successful television product on video, including the Saturday Night Live product currently in our library and the first and second seasons of the hit comedy series Will and Grace, both from NBC.

      We entered into an agreement with Marvel Characters, Inc. in May 2004 to distribute up to eight original animated DVD features based on certain Marvel characters. We also have the right to exploit the pictures in other entertainment media domestically and internationally, including pay and free television and video-on-demand. The first picture to be produced and distributed under this arrangement, The Ultimate Avengers, was released on DVD on February 21, 2006.

      We directly distribute to the rental market through Blockbuster, Inc., Hollywood Entertainment Corporation, Movie Gallery, Inc. and Rentrak Corporation. We also distribute or sell directly to mass merchandisers, such as Wal-Mart, K-Mart, Best Buy Co Inc., Target Corporation and Costco Wholesale Corporation, and others who buy large volumes of our videos and DVDs to sell directly to consumers. Sales to Wal-Mart account for over 10% of our gross revenues, the loss of which could have a material adverse effect on us.

      Our Family Home Entertainment division, which targets the youth audience, distributes such titles as eight direct to video Barbie movies for Mattel, as well as the PBS series Clifford the Big Red Dog from Scholastic Entertainment. Upcoming releases include The Doodlebops, the hit children’s series running on the Disney Channel, and the first full-length animated movie based on Arthur, the popular children’s character.

      In February 2006, we announced our intent to release titles on high definition Blu-ray Disc (BD) format to coincide with the arrival of the first commercially offered BD players in stores. Our initial slate being released on BD in June 2006 includes Crash, Lord of War, The Punisher, Saw and T2 (Terminator 2).

      Pay and Free Television Distribution. We have approximately 480 titles in active distribution in the domestic cable, free and pay television markets. We sell our library titles and new product to major cable channels such as Lifetime, Showtime, HBO, FX, Turner Networks, Starz, Family Channel, Disney Channel, Cartoon Network and IFC. We have an arrangement with Warner Home Entertainment for pay-per-view and video-on-demand distribution of Lions Gate Home Entertainment product, which expires July 31, 2006. Beginning August 31, 2006, we will distribute pay-per-view and video-on-demand directly. We also have an output contract with Showtime for pay television.

      Canadian Distribution. Until April 2005, we operated a full service theatrical, video/ DVD and television distribution business in English speaking Canada. Following the acquisition of Artisan, we terminated Artisan’s output agreement with Motion Picture Distribution LP. Artisan had granted Canadian distribution rights to all Artisan titles recently released in the United States to Motion Picture Distribution LP. Consequently, we retain Canadian distribution rights to future titles released, but Motion Picture Distribution LP retained Canadian distribution rights for those titles released before such termination, which rights extend for 18 years from the initial release date. We also assumed two Library Servicing Agreements with Motion Picture Distribution LP that grant Canadian distribution rights with respect to Artisan’s existing library titles. One of these agreements expired in November 2004 and the other expires on July 1, 2006, subject to a six-month sell off period.

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      In April 2005, we entered into a library output and new picture output arrangement with Maple Pictures. When the 18 year term ends for titles which were distributed under the Motion Picture Distribution LP output agreement, we intend to distribute titles previously distributed in Canada by Motion Picture Distribution LP through Maple Pictures.

      Electronic Distribution. We own a minority interest in CinemaNow, a broadband video-on-demand company founded in 1999. CinemaNow offers licensed content from a library of more than 7,500 new and classic movies, television programs, music concerts and music videos from Twentieth Century Fox, ABC News, Disney, HDNET, Lionsgate, Metro-Goldwyn Mayer Pictures, Miramax Film Corp., Universal, Sony, Sundance Channel, Warner Bros. and more than 250 other licensors via downloading or streaming. In 2006, CinemaNow introduced electronic-sell-through of media content from Lionsgate, Sony, Disney and Warner Bros. Additional CinemaNow investors include Menlo Ventures, Microsoft Corporation, Cisco Systems, Inc. and Blockbuster Inc. Lionsgate content is also available for electronic-sell-through on the MovieLink service.

Studio Facilities

      We rent studio space on an as-needed basis. We previously owned and operated Lions Gate Studios, a film and television production studio in North Vancouver, British Columbia, but sold such interest in March 2006. We may own and operate studio facilities in the future.

Intellectual Property

      We are currently using a number of trademarks including “LIONS GATE ENTERTAINMENT,” “LIONS GATE HOME ENTERTAINMENT,” “ARTISAN HOME ENTERTAINMENT,” “FAMILY HOME ENTERTAINMENT,” “TRIMARK HOME VIDEO,” “DIRTY DANCING,” “THE BLAIR WITCH PROJECT” and “RESERVOIR DOGS” in connection with our domestic home video distribution, “LIONS GATE FILMS,” “LGF FILMS,” “ARTISAN ENTERTAINMENT” and “TRIMARK PICTURES” in connection with films distributed domestically and licensed internationally and “LIONS GATE TELEVISION” and “TRIMARK TELEVISION” in connection with licenses to free, pay and cable television.

      The trademarks “LIONS GATE HOME ENTERTAINMENT,” “LIONS GATE SIGNATURE SERIES,” “ARTISAN ENTERTAINMENT,” “FAMILY HOME ENTERTAINMENT” “F.H.E. FAMILY HOME ENTERTAINMENT KIDS,” “TRIMARK PICTURES,” “DIRTY DANCING,” “THE BLAIR WITCH PROJECT” and “RESERVOIR DOGS,” among others, are registered with the United States Patent and Trademark Office. The trademarks “LIONS GATE ENTERTAINMENT” “LIONSGATE FAMILY ENTERTAINMENT” “LIONSGATE,” and “ARTISAN HOME ENTERTAINMENT” have been filed with the United States Patent and Trademark Office. Additionally we have registered the trademark “TRIMARK ULTRA SPORTS” which is used in connection with our extreme sports video releases. We regard our trademarks as valuable assets and believe that our trademarks are an important factor in marketing our products.

      Copyright protection is a serious problem in the videocassette and DVD distribution industry because of the ease with which cassettes and DVDs may be duplicated. In the past, certain countries permitted video pirating to such an extent that we did not consider these markets viable for distribution. Video piracy continues to be prevalent across the entertainment industry. We and other video distributors have taken legal actions to enforce copyright protection when necessary.

Competition

      Television and motion picture production and distribution are highly competitive businesses. We face competition from companies within the entertainment business and from alternative forms of leisure entertainment, such as travel, sporting events, outdoor recreation, video games, the internet and other cultural and computer-related activities. We compete with the major studios, numerous independent motion picture and television production companies, television networks and pay television systems for the acquisition of literary and film properties, the services of performing artists, directors, producers and other creative and

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technical personnel and production financing, all of which are essential to the success of our entertainment businesses. In addition, our motion pictures compete for audience acceptance and exhibition outlets with motion pictures produced and distributed by other companies. Likewise, our television product faces significant competition from independent distributors as well as major studios. As a result, the success of any of our motion pictures and television product is dependent not only on the quality and acceptance of a particular film or program, but also on the quality and acceptance of other competing motion pictures or television programs released into the marketplace at or near the same time.

Employees

      As of May 31, 2006 we had 354 full-time employees in our worldwide operations. We also hire additional employees on a picture-by-picture basis in connection with the production of our motion pictures and television programming. We believe that our employee and labor relations are good.

      None of our full-time employees are members of unions.

RISK FACTORS

Item 1A.     Risk Factors

      You should carefully consider the following risks and other information in this Form 10-K before making an investment decision with respect to our Common Shares. The following risks and uncertainties could materially adversely affect our business, results of operations and financial condition. The risks described below are not the only ones facing the Company. Additional risks that we are not presently aware of or that we currently believe are immaterial may also impair our business operations.

We have had losses, and we cannot assure future profitability.

      We have reported operating income for fiscal years 2003, 2005 and 2006 and operating losses for fiscal years 2002 and 2004. We have reported net income for fiscal 2005 and 2006 and net losses for the fiscal years 2002 through 2004. Our accumulated deficit was $177.1 million at March 31, 2006. We cannot assure you that we will operate profitably, and if we do not, we may not be able to meet our debt service requirements, working capital requirements, capital expenditure plans, anticipated production slate, acquisition and releasing plans or other cash needs. Our inability to meet those needs could have a material adverse effect on our business, results of operations and financial condition.

We face substantial capital requirements and financial risks.

      Our business requires a substantial investment of capital. The production, acquisition and distribution of motion pictures and television programs require a significant amount of capital. A significant amount of time may elapse between our expenditure of funds and the receipt of commercial revenues from or government contributions to our motion pictures or television programs. This time lapse requires us to fund a significant portion of our capital requirements from our revolving credit facility and from other financing sources. Although we intend to continue to reduce the risks of our production exposure through financial contributions from broadcasters and distributors, tax shelters, government and industry programs, other studios and other sources, we cannot assure you that we will continue to implement successfully these arrangements or that we will not be subject to substantial financial risks relating to the production, acquisition, completion and release of future motion pictures and television programs. If we increase (through internal growth or acquisition) our production slate or our production budgets, we may be required to increase overhead and/or make larger up-front payments to talent and consequently bear greater financial risks. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

      The costs of producing and marketing feature films have steadily increased and may further increase in the future, which may make it more difficult for a film to generate a profit or compete against other films. The costs of producing and marketing feature films have generally increased in recent years. These costs may continue to increase in the future, which may make it more difficult for our films to generate a profit or

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compete against other films. Historically, production costs and marketing costs have risen at a higher rate than increases in either the number of domestic admissions to movie theaters or admission ticket prices. A continuation of this trend would leave us more dependent on other media, such as home video, television, international markets and new media for revenue, and the revenues from such sources may not be sufficient to offset an increase in the cost of motion picture production. If we cannot successfully exploit these other media, it could have a material adverse effect on our business, results of operations and financial condition.

      Budget overruns may adversely affect our business. Our business model requires that we be efficient in the production of our motion pictures and television programs. Actual motion picture and television production costs often exceed their budgets, sometimes significantly. The production, completion and distribution of motion pictures and television productions are subject to a number of uncertainties, including delays and increased expenditures due to creative differences among key cast members and other key creative personnel or other disruptions or events beyond our control. Risks such as death or disability of star performers, technical complications with special effects or other aspects of production, shortages of necessary equipment, damage to film negatives, master tapes and recordings or adverse weather conditions may cause cost overruns and delay or frustrate completion of a production. If a motion picture or television production incurs substantial budget overruns, we may have to seek additional financing from outside sources to complete production. We cannot make assurances regarding the availability of such financing on terms acceptable to us, and the lack of such financing could have a material adverse effect on our business, results of operations and financial condition.

      In addition, if a motion picture or television production incurs substantial budget overruns, we cannot assure you that we will recoup these costs, which could have a material adverse effect on our business, results of operations and financial condition. Increased costs incurred with respect to a particular film may result in any such film not being ready for release at the intended time and the postponement to a potentially less favorable time, all of which could cause a decline in box office performance, and thus the overall financial success of such film. Budget overruns could also prevent a picture from being completed or released. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

      Our credit facility contains certain covenants and financial tests that limit the way we conduct business. Our credit facility contains various covenants limiting our ability to incur or guarantee additional indebtedness, pay dividends and make other distributions, pre-pay any subordinated indebtedness, make investments and other restricted payments, make capital expenditures, make acquisitions and sell assets. These covenants may prevent us from raising additional financing, competing effectively or taking advantage of new business opportunities. Under our credit facility, we are also required to maintain specified financial ratios and satisfy certain financial tests. If we cannot comply with these covenants or meet these ratios and other tests, it could result in a default under our credit facility, and unless we are able to negotiate an amendment, forbearance or waiver, we could be required to repay all amounts then outstanding, which could have a material adverse effect on our business, results of operations and financial condition depending upon our outstanding balance at the time.

      Borrowings under our credit facility also are secured by liens on substantially all of our assets and the assets of our subsidiaries. If we are in default under our credit facility, the lenders could foreclose upon all or substantially all of our assets and the assets of our subsidiaries. We cannot assure you that we will generate sufficient cash flow to repay our indebtedness, and we further cannot assure you that, if the need arises, we will be able to obtain additional financing or to refinance our indebtedness on terms acceptable to us, if at all. Any such failure to obtain financing could have a material adverse effect on our business, results of operations and financial condition.

      Substantial leverage could adversely affect our financial condition. Historically, we have been highly leveraged and may be highly leveraged in the future. We have access to capital through our $215 million credit facility with J.P. Morgan Chase Bank, National Association. In addition, we have $385 million Convertible Senior Subordinated Notes outstanding, with $60 million maturing December 15, 2010, $150 million maturing October 15, 2024 and $175 million maturing March 15, 2025. At March 31, 2006, we had approximately

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$47.0 million in cash and cash equivalents and $167.1 million in highly liquid investments, principally auction rate preferreds and municipal bonds. While the outstanding balance under our credit facility is currently zero, we could borrow some or all of the permitted amount in the future. The amount we have available to borrow under this facility depends upon our borrowing base, which in turn depends on the value of our existing library of films and television programs, as well as accounts receivable and cash held in collateral accounts. If several of our larger motion picture releases are commercial failures or our library declines in value, our borrowing base could decrease. Such a decrease could have a material adverse effect on our business, results of operations and financial condition. For example, it could:

•  require us to dedicate a substantial portion of our cash flow to the repayment of our indebtedness, reducing the amount of cash flow available to fund motion picture and television production, distribution and other operating expenses;

•  limit our flexibility in planning for or reacting to downturns in our business, our industry or the economy in general;

•  limit our ability to obtain additional financing, if necessary, for operating expenses, or limit our ability to obtain such financing on terms acceptable to us; and

•  limit our ability to pursue strategic acquisitions and other business opportunities that may be in our best interests.

Failure to achieve and maintain effective disclosure controls or internal controls could have a material adverse effect on our ability to report our financial results timely and accurately.

      Section 404 of the Sarbanes-Oxley Act requires that this report on Form 10-K for the fiscal year ended March 31, 2006 include a report containing management’s assessment of our internal controls over financial reporting and a related attestation of management’s assessment and an opinion on the effectiveness of our internal controls by our independent registered public accounting firm. We are incurring, and will continue to incur, substantial additional expense and diversion of management’s time as a result of performing the internal control systems evaluation, testing and remediation required in order to comply with the requirements of Section 404 of the Sarbanes-Oxley Act.

      In connection with our documentation, evaluation and testing of our internal controls over financial reporting at March 31, 2005, we discovered material weaknesses. The material weaknesses we identified related to calculating our participations expense and the related liability for financial reporting purposes, calculating amortization of investment in film and television programs, monitoring certain charges billed to us by our outsourced home entertainment distribution service provider and our financial statement close process. In light of the material weaknesses related to our internal controls and processes over financial reporting, we and our independent registered public accounting firm concluded that our disclosure controls and procedures and our internal controls and processes over financial reporting were ineffective at March 31, 2005.

      During fiscal 2006, we remediated these material weaknesses, and we and our independent registered public accounting firm concluded that our disclosure controls and procedures and our internal controls and processes over financial reporting were effective at March 31, 2006. However, these measures may not ensure that we will implement and maintain adequate controls over our financial reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementations, could cause us to fail to meet our future reporting obligations. In addition, we may in the future identify further material weaknesses or significant deficiencies in our internal controls over financial reporting. Any of the foregoing could materially and adversely affect our business, our financial condition and the market value of our securities.

Our revenues and results of operations may fluctuate significantly.

      Revenues and results of operations are difficult to predict and depend on a variety of factors. Our revenues and results of operations depend significantly upon the commercial success of the motion pictures and television programming that we distribute, which cannot be predicted with certainty. Accordingly, our

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revenues and results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future periods. Furthermore, largely as a result of these predictive difficulties, we may not be able to achieve our publicly projected earnings. In fiscal 2006, we revised our projected earnings downward twice. Future revisions to projected earnings could cause investors to lose confidence in us, which in turn could materially and adversely affect our business, our financial condition and the market value of our securities.

      In addition, historically, our revenues and results of operations have been significantly impacted by the success of critically acclaimed and award winning films, including Academy Award winners and nominees. We cannot assure you that we will manage the production, acquisition and distribution of future motion pictures (including any films in the Saw or Tyler Perry franchise) as successfully as we have done with these recent critically acclaimed, award winning and/or commercially popular films or that we will produce or acquire motion pictures that will receive similar critical acclaim or perform as well commercially. Any inability to achieve such commercial success could have a material adverse effect on our business, results of operations and financial condition.

      We lack output agreements with cable and broadcast channels. We had an agreement with one cable broadcast channel to exhibit our films, but that agreement does not cover films released theatrically after 2003. We have an output arrangement with another cable broadcast channel that covers some but not all of our films that are theatrically released through December 31, 2008. While similar broadcasters exhibit our films, they license such rights on a film-by-film, rather than an output, basis. We cannot assure you that we will be able to secure other output agreements on acceptable terms, if at all. Without multiple output agreements that typically contain guaranteed minimum payments, our revenues may be subject to greater volatility, which could have a material adverse effect on our business, results of operations and financial condition.

      We rely on a few major retailers and distributors for a material portion of our business and the loss of any of those retailers or distributors could reduce our revenues and operating results. Wal-Mart represented over 10% of our revenues in fiscal 2006. In addition, a small number of other retailers and distributors account for a significant percentage of our revenues. We do not have long-term agreements with the retailers. We cannot assure you that we will continue to maintain favorable relationships with our retailers and distributors or that they will not be adversely affected by economic conditions. If any of these retailers or distributors reduces or cancels a significant order, it could have a material adverse effect on our business, results of operations and financial condition.

      Our revenues and results of operations are vulnerable to currency fluctuations. We report our revenues and results of operations in U.S. dollars, but a significant portion of our revenues is earned outside of the United States. Our principal currency exposure is between Canadian and U.S. dollars. We enter into forward foreign exchange contracts to hedge future production expenses. We cannot accurately predict the impact of future exchange rate fluctuations on revenues and operating margins, and fluctuations could have a material adverse effect on our business, results of operations and financial condition.

      From time to time we may experience currency exposure on distribution and production revenues and expenses from foreign countries, which could have a material adverse effect on our business, results of operations and financial condition.

      Accounting practices used in our industry may accentuate fluctuations in operating results. In addition to the cyclical nature of the entertainment industry, our accounting practices (which are standard for the industry) may accentuate fluctuations in our operating results. In accordance with U.S. generally accepted accounting principles and industry practice, we amortize film and television programming costs using the

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“individual-film-forecast” method. Under this accounting method, we amortize film and television programming costs for each film or television program based on the following ratio:

Revenue earned by title in the current period

Estimated total revenues by title

      We regularly review, and revise when necessary, our total revenue estimates on a title-by-title basis. This review may result in a change in the rate of amortization and/or a write-down of the film or television asset to its estimated fair value. Results of operations in future years depend upon our amortization of our film and television costs. Periodic adjustments in amortization rates may significantly affect these results. In addition, we are required to expense film advertising costs as incurred, but are also required to recognize the revenue from any motion picture or television program over the entire revenue stream expected to be generated by the individual picture or television program.

Failure to manage future growth may adversely affect our business.

      We are subject to risks associated with possible acquisitions, business combinations, or joint ventures. From time to time we engage in discussions and activities with respect to possible acquisitions, business combinations, or joint ventures intended to complement or expand our business. For example, we are currently considering a transaction with respect to Image that may or may not be friendly, as discussed under the heading “Business.” We may not realize the anticipated benefit from any of the transactions we pursue. Regardless of whether we consummate any such transaction, the negotiation of a potential transaction (including, in connection with the potential Image transaction and similar transactions, associated litigation and proxy contests), as well as the integration of the acquired business, could require us to incur significant costs and cause diversion of management’s time and resources. Any such transaction could also result in impairment of goodwill and other intangibles, development write-offs and other related expenses. Any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

      We may be unable to integrate any business that we acquire or have acquired or with which we combine or have combined. Integrating any business that we acquire or have acquired or with which we combine or have combined is distracting to our management and disruptive to our business and may result in significant costs to us. We could face challenges in consolidating functions and integrating procedures, information technology and accounting systems, personnel and operations in a timely and efficient manner. If any such integration is unsuccessful, or if the integration takes longer than anticipated, there could be a material adverse effect on our business, results of operations and financial condition. We may have difficulty managing the combined entity in the short term if we experience a significant loss of management personnel during the transition period after the significant acquisition.

      Claims against us relating to any acquisition or business combination may necessitate our seeking claims against the seller for which the seller may not indemnify us or that may exceed the seller’s indemnification obligations. There may be liabilities assumed in any acquisition or business combination that we did not discover or that we underestimated in the course of performing our due diligence investigation. Although a seller generally will have indemnification obligations to us under an acquisition or merger agreement, these obligations usually will be subject to financial limitations, such as general deductibles and maximum recovery amounts, as well as time limitations. We cannot assure you that our right to indemnification from any seller will be enforceable, collectible or sufficient in amount, scope or duration to fully offset the amount of any undiscovered or underestimated liabilities that we may incur. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, results of operations and financial condition.

      We may not be able to obtain additional funding to meet our requirements. Our ability to grow through acquisitions, business combinations and joint ventures, to maintain and expand our development, production and distribution of motion pictures and television programs and to fund our operating expenses depends upon our ability to obtain funds through equity financing, debt financing (including credit facilities) or the sale or syndication of some or all of our interests in certain projects or other assets. If we do not have access to such financing arrangements, and if other funding does not become available on terms acceptable to us, there could be a material adverse effect on our business, results of operations and financial condition.

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A significant portion of our filmed and television content library revenues comes from a small number of titles.

      We depend on a limited number of titles for the majority of the revenues generated by our filmed and television content library. In addition, many of the titles in our library are not presently distributed and generate substantially no revenue. If we cannot acquire new product and the rights to popular titles through production, distribution agreements, acquisitions, mergers, joint ventures or other strategic alliances, it could have a material adverse effect on our business, results of operations and financial condition.

We are limited in our ability to exploit a portion of our filmed and television content library.

      Our rights to the titles in our filmed and television content library vary; in some cases we have only the right to distribute titles in certain media and territories for a limited term. We cannot assure you that we will be able to renew expiring rights on acceptable terms and that any failure to renew titles generating a significant portion of our revenue would not have a material adverse effect on our business, results of operations or financial condition.

Our success depends on external factors in the motion picture and television industry.

      Our success depends on the commercial success of motion pictures and television programs, which is unpredictable. Operating in the motion picture and television industry involves a substantial degree of risk. Each motion picture and television program is an individual artistic work, and inherently unpredictable audience reactions primarily determine commercial success. Generally, the popularity of our motion pictures or programs depends on many factors, including the critical acclaim they receive, the format of their initial release, for example, theatrical or direct-to-video, the actors and other key talent, their genre and their specific subject matter. The commercial success of our motion pictures or television programs also depends upon the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure activities, general economic conditions and other tangible and intangible factors, many of which we do not control and all of which may change. We cannot predict the future effects of these factors with certainty, any of which factors could have a material adverse effect on our business, results of operations and financial condition.

      In addition, because a motion picture’s or television program’s performance in ancillary markets, such as home video and pay and free television, is often directly related to its box office performance or television ratings, poor box office results or poor television ratings may negatively affect future revenue streams. Our success will depend on the experience and judgment of our management to select and develop new investment and production opportunities. We cannot make assurances that our motion pictures and television programs will obtain favorable reviews or ratings, that our motion pictures will perform well at the box office or in ancillary markets or that broadcasters will license the rights to broadcast any of our television programs in development or renew licenses to broadcast programs in our library. The failure to achieve any of the foregoing could have a material adverse effect on our business, results of operations and financial condition.

      Licensed distributors’ failure to promote our programs may adversely affect our business. Licensed distributors’ decisions regarding the timing of release and promotional support of our motion pictures, television programs and related products are important in determining the success of these pictures, programs and products. We do not control the timing and manner in which our licensed distributors distribute our motion pictures or television programs. Any decision by those distributors not to distribute or promote one of our motion pictures, television programs or related products or to promote our competitors’ motion pictures, television programs or related products to a greater extent than they promote ours could have a material adverse effect on our business, results of operations and financial condition.

      We could be adversely affected by strikes or other union job actions. We are directly or indirectly dependent upon highly specialized union members who are essential to the production of motion pictures and television programs. A strike by, or a lockout of, one or more of the unions that provide personnel essential to the production of motion pictures or television programs could delay or halt our ongoing production activities. Such a halt or delay, depending on the length of time, could cause a delay or interruption in our release of new

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motion pictures and television programs, which could have a material adverse effect on our business, results of operations and financial condition.

We face substantial competition in all aspects of our business.

      We are smaller and less diversified than many of our competitors. As an independent distributor and producer, we constantly compete with major U.S. and international studios. Most of the major U.S. studios are part of large diversified corporate groups with a variety of other operations, including television networks and cable channels, that can provide both the means of distributing their products and stable sources of earnings that may allow them better to offset fluctuations in the financial performance of their motion picture and television operations. In addition, the major studios have more resources with which to compete for ideas, storylines and scripts created by third parties as well as for actors, directors and other personnel required for production. The resources of the major studios may also give them an advantage in acquiring other businesses or assets, including film libraries, that we might also be interested in acquiring. Our inability to compete successfully could have a material adverse effect on our business, results of operations and financial condition.

      The motion picture industry is highly competitive and at times may create an oversupply of motion pictures in the market. The number of motion pictures released by our competitors, particularly the major U.S. studios, may create an oversupply of product in the market, reduce our share of box office receipts and make it more difficult for our films to succeed commercially. Oversupply may become most pronounced during peak release times, such as school holidays and national holidays, when theater attendance is expected to be highest. For this reason, and because of our more limited production and advertising budgets, we typically do not release our films during peak release times, which may also reduce our potential revenues for a particular release. Moreover, we cannot guarantee that we can release all of our films when they are otherwise scheduled. In addition to production or other delays that might cause us to alter our release schedule, a change in the schedule of a major studio may force us to alter the release date of a film because we cannot always compete with a major studio’s larger promotion campaign. Any such change could adversely impact a film’s financial performance. In addition, if we cannot change our schedule after such a change by a major studio because we are too close to the release date, the major studio’s release and its typically larger promotion budget may adversely impact the financial performance of our film. The foregoing could have a material adverse effect on our business, results of operations and financial condition.

      The limited supply of motion picture screens compounds this product oversupply problem. Currently, a substantial majority of the motion picture screens in the U.S. typically are committed at any one time to only ten to 15 films distributed nationally by major studio distributors. In addition, as a result of changes in the theatrical exhibition industry, including reorganizations and consolidations and the fact that major studio releases occupy more screens, the number of screens available to us when we want to release a picture may decrease. If the number of motion picture screens decreases, box office receipts, and the correlating future revenue streams, such as from home video and pay and free television, of our motion pictures may also decrease, which could have a material adverse effect on our business, results of operations and financial condition.

We must successfully respond to rapid technological changes and alternative forms of delivery or storage to remain competitive.

      The entertainment industry in general and the motion picture and television industries in particular continue to undergo significant technological developments. Advances in technologies or alternative methods of product delivery or storage or certain changes in consumer behavior driven by these or other technologies and methods of delivery and storage could have a negative effect on our business. Examples of such advances in technologies include video-on-demand, new video formats and downloading and streaming from the internet. An increase in video-on-demand could decrease home video rentals. In addition, technologies that enable users to fast-forward or skip advertisements, such as Digital Video Recorders (DVRs), may cause changes in consumer behavior that could affect the attractiveness of our products to advertisers, and could therefore adversely affect our revenues. Similarly, further increases in the use of portable digital devices that allow users to view content of their own choosing while avoiding traditional commercial advertisements could

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adversely affect our revenues. Other larger entertainment distribution companies will have larger budgets to exploit these growing trends. While we have a minority interest in CinemaNow, its commercial success is impossible to predict. We cannot predict how we will financially participate in the exploitation of our motion pictures and television programs through these emerging technologies or whether we have the right to do so for certain of our library titles. If we cannot successfully exploit these and other emerging technologies, it could have a material adverse effect on our business, results of operations and financial condition.

      In addition, the technologies we choose to invest in could prove to be less successful than we expect. For example, we have plans to release titles in high-definition Blu-ray Disc format, which could negatively impact our business if that format is not generally accepted by the public.

We face risks from doing business internationally.

      We distribute motion picture and television productions outside the United States directly in the UK and Ireland and through third party licensees elsewhere and derive revenues from these sources. As a result, our business is subject to certain risks inherent in international business, many of which are beyond our control. These risks include:

•  laws and policies affecting trade, investment and taxes, including laws and policies relating to the repatriation of funds and withholding taxes, and changes in these laws;

•  changes in local regulatory requirements, including restrictions on content;

•  differing cultural tastes and attitudes;

•  differing degrees of protection for intellectual property;

•  financial instability and increased market concentration of buyers in foreign television markets, including in European pay television markets;

•  the instability of foreign economies and governments;

•  fluctuating foreign exchange rates;

•  the spread of communicable diseases; and

•  war and acts of terrorism.

      Events or developments related to these and other risks associated with international trade could adversely affect our revenues from non-U.S. sources, which could have a material adverse effect on our business, financial condition and results of operations.

Protecting and defending against intellectual property claims may have a material adverse effect on our business.

      Our ability to compete depends, in part, upon successful protection of our intellectual property. We do not have the financial resources to protect our rights to the same extent as major studios. We attempt to protect proprietary and intellectual property rights to our productions through available copyright and trademark laws and licensing and distribution arrangements with reputable international companies in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain countries. We also distribute our products in other countries in which there is no copyright or trademark protection. As a result, it may be possible for unauthorized third parties to copy and distribute our productions or certain portions or applications of our intended productions, which could have a material adverse effect on our business, results of operations and financial condition.

      Litigation may also be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and the diversion of resources and could have a material adverse effect on our business, results of operations and financial condition. We cannot assure you that infringement or invalidity claims will not materially adversely affect our business, results of operations and financial condition. Regardless of the validity or the success of the assertion of these claims, we could incur significant costs and diversion of resources in enforcing our intellectual

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property rights or in defending against such claims, which could have a material adverse effect on our business, results of operations and financial condition.

Others may assert intellectual property infringement claims against us.

      One of the risks of the film production business is the possibility that others may claim that our productions and production techniques misappropriate or infringe the intellectual property rights of third parties with respect to their previously developed films, stories, characters, other entertainment or intellectual property. We are likely to receive in the future claims of infringement or misappropriation of other parties’ proprietary rights. Any such assertions or claims may materially adversely affect our business, financial condition or results of operations. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs and diversion of resources in defending against them, which could have a material adverse effect on our business, financial condition or results of operations. If any claims or actions are asserted against us, we may seek to settle such claim by obtaining a license from the plaintiff covering the disputed intellectual property rights. We cannot provide any assurances, however, that under such circumstances a license, or any other form of settlement, would be available on reasonable terms or at all.

Our business involves risks of liability claims for media content, which could adversely affect our business, results of operations and financial condition.

      As a distributor of media content, we may face potential liability for:

•  defamation;

•  invasion of privacy;

•  negligence;

•  copyright or trademark infringement (as discussed above); and

•  other claims based on the nature and content of the materials distributed.

      These types of claims have been brought, sometimes successfully, against producers and distributors of media content. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our business, results of operations and financial condition.

Piracy of motion pictures, including digital and internet piracy, may reduce the gross receipts from the exploitation of our films.

      Motion picture piracy is extensive in many parts of the world, including South America, Asia, the countries of the former Soviet Union and other former Eastern bloc countries, and is made easier by technological advances and the conversion of motion pictures into digital formats. This trend facilitates the creation, transmission and sharing of high quality unauthorized copies of motion pictures in theatrical release, on videotapes and DVDs, from pay-per-view through set top boxes and other devices and through unlicensed broadcasts on free television and the internet. The proliferation of unauthorized copies of these products has had and will likely continue to have an adverse effect on our business, because these products reduce the revenue we received from our products. Additionally, in order to contain this problem, we may have to implement elaborate and costly security and anti-piracy measures, which could result in significant expenses and losses of revenue. We cannot assure you that even the highest levels of security and anti-piracy measures will prevent piracy.

      In particular, unauthorized copying and piracy are prevalent in countries outside of the U.S., Canada and Western Europe, whose legal systems may make it difficult for us to enforce our intellectual property rights. While the U.S. government has publicly considered implementing trade sanctions against specific countries that, in its opinion, do not make appropriate efforts to prevent copyright infringements of U.S. produced motion pictures, there can be no assurance that any such sanctions will be enacted or, if enacted, will be effective. In addition, if enacted, such sanctions could impact the amount of revenue that we realize from the

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international exploitation of motion pictures. If no embargoes or sanctions are enacted, or if other measures are not taken, we may lose revenue as a result of motion picture piracy.

An investment by non-Canadians in our business is potentially reviewable under the ICA, which could adversely affect our results.

      The Investment Canada Act (Canada) or ICA is administered by the Minister of Industry and, in the case of investments in a Canadian cultural business, by the Minister of Canadian Heritage (both referred to herein as the “Minister”). A “Canadian cultural business” is defined in the ICA as a business activity relating to Canada’s cultural heritage or national identity, and includes a business engaged in the production, distribution, sale or exhibition of film or video products.

      The ICA contains rules, the application of which determines whether an entity (as the term is defined in the ICA) is Canadian-controlled and whether it carries on a Canadian cultural business. We may or may not be operating a Canadian cultural business for the purposes of the ICA. Under the ICA, the Minister has discretion to determine, after considering any information or evidence submitted by the entity or otherwise made available to the Minister or the Director of Investments, that an investment by a non-Canadian in a Canadian cultural business may constitute an acquisition of control by that non-Canadian, notwithstanding the provisions in the ICA that state that certain investments do not or may not constitute an acquisition of control that would require notification or review under the ICA.

      If the Minister exercises such discretion and deems an investment by a non-Canadian in a cultural business to be an acquisition of control, the investment is potentially subject to notification and/or review. If the investment is subject to review, the Minister must be satisfied that the investment is likely to be of net benefit to Canada. Such a determination is often accompanied by requests that the non-Canadian provide undertakings supportive of Canadian cultural policy. These undertakings may, in some circumstances, include a request for financial support of certain initiatives. The determination by the Minister of whether a proposed investment is of net benefit to Canada also includes consideration of sector specific policies of the Canadian federal government, some of which restrict or prohibit investments by non-Canadians in certain types of Canadian cultural businesses.

Our success depends on certain key employees.

      Our success depends to a significant extent on the performance of a number of senior management personnel and other key employees, including production and creative personnel. We do not currently have “key person” life insurance for any of our employees, other than our Chief Executive Officer, Jon Feltheimer. We have entered into employment agreements with many (but not all) of our top executive officers and production executives. However, although it is standard in the motion picture industry to rely on employment agreements as a method of retaining the services of key employees, these agreements cannot assure us of the continued services of such employees. The employment agreement for Mr. Feltheimer expires March 31, 2007. The employment agreement for Michael Burns, our Vice Chairman, expires August 31, 2006. Although we intend to negotiate and enter into new employment agreements with each of Messrs. Feltheimer and Burns, we cannot assure you that we will be able to do so on favorable terms or at all. In addition, competition for the limited number of business, production and creative personnel necessary to create and distribute our entertainment content is intense and may grow in the future. Our inability to retain or successfully replace where necessary members of our senior management and other key employees could have a material adverse effect on our business, results of operations and financial condition.

To be successful, we need to attract and retain qualified personnel.

      Our success continues to depend to a significant extent on our ability to identify, attract, hire, train and retain qualified professional, creative, technical and managerial personnel. Competition for the caliber of talent required to produce our motion pictures and television programs continues to increase. We cannot assure you that we will be successful in identifying, attracting, hiring, training and retaining such personnel in the future. If we were unable to hire, assimilate and retain qualified personnel in the future, such inability would have a material adverse effect on our business, results of operations and financial condition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

      Not applicable.

ITEM 2. PROPERTIES.

      Our corporate head office is located at 1055 West Hastings Street, Suite 2200, Vancouver, British Columbia V6E 2E9. Our principal executive offices are located at 1055 West Hastings Street, Suite 2200 and 2700 Colorado Avenue, Suite 200, Santa Monica, California, 90404. At the Santa Monica address, we occupy approximately 48,000 square feet, including an approximately 4,000 square foot screening room.

      In March 2006, the Company sold its studios facilities located at 555 Brooksbank Avenue, North Vancouver, British Columbia.

      We believe that our current facilities are adequate to conduct our business operations for the foreseeable future. We believe that we will be able to renew these leases on similar terms upon expiration. If we cannot renew, we believe that we could find other suitable premises without any material adverse impact on our operations.

ITEM 3. LEGAL PROCEEDINGS.

      The Company is involved in certain claims and legal proceedings which have arisen in the normal course of business. Management does not believe that the outcome of any currently pending claims or legal proceedings in which the Company is currently involved will have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flow.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2006.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

      Our common shares are listed on the Toronto Stock Exchange, or the TSX, and the New York Stock Exchange, or NYSE, and trades under the symbol “LGF.”

Toronto Stock Exchange

      The following table sets forth the range of high and low closing sale prices for our Common Shares, as reported by the TSX in Canadian dollars, for our two most recent fiscal years:

		High		Low
Year ended March 31, 2006
	Fourth Quarter	$	11.90	$	8.86
	Third Quarter		11.99		8.92
	Second Quarter		12.69		10.64
	First Quarter		13.79		11.62
Year ended March 31, 2005
	Fourth Quarter	$	14.30	$	11.01
	Third Quarter		12.86		12.50
	Second Quarter		11.28		10.98
	First Quarter		9.31		8.41

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New York Stock Exchange

      The following table sets forth the range of high and low closing sale prices for our Common Shares, as reported by the NYSE in U.S. dollars, for our two most recent fiscal years:

		High		Low
Year ended March 31, 2006
	Fourth Quarter	$	10.29	$	7.79
	Third Quarter		10.07		7.56
	Second Quarter		10.55		9.10
	First Quarter		11.20		9.23
Year ended March 31, 2005
	Fourth Quarter	$	11.63	$	9.09
	Third Quarter		11.40		8.77
	Second Quarter		8.79		6.30
	First Quarter		6.98		5.57

Holders

      As of June 1, 2006, there were 104,531,510 shares issued and outstanding and 343 registered holders of our common shares.

Dividend Policy

      We have not paid any dividends on our outstanding common shares since our inception and do not anticipate doing so in the foreseeable future. The declaration of dividends on our common shares is restricted by our amended credit facility and is within the discretion of our board of directors and will depend upon the assessment of, among other things, our earnings, financial requirements and operating and financial condition. At the present time, given our anticipated capital requirements we intend to follow a policy of retaining earnings in order to finance further development of our business. We may be limited in our ability to pay dividends on our common shares by restrictions under the Business Corporations Act (British Columbia) relating to the satisfaction of solvency tests.

Securities Authorized for Issuance Under Equity Compensation Plans

      The information required by this item is contained under the caption “Equity Compensation Plan Information for 2006” in a definitive Proxy Statement, which we will file with the Securities and Exchange Commission no later than 120 days after March 31, 2006 (the “Proxy Statement”), and such information is incorporated herein by reference.

Recent Sales of Unregistered Securities

      On March 31, 2006, Lionsgate completed a private exchange with certain shareholders of Image Entertainment, Inc. whereby Lionsgate issued 218,746 common shares with a value as of March 31, 2006 of approximately $2,220,272, or $10.15 per share (the “IM Shares”), in consideration of the purchase of certain of their shares in Image Entertainment, Inc. The IM Shares were not registered under the Securities Act and were issued in reliance on an exemption from registration provided by Rule 506 of Regulation D of the Securities Act.

Taxation

      The following is a general summary of certain Canadian income tax consequences to U.S. Holders (who deal at arm’s length with the Company) of the purchase, ownership and disposition of common shares. For the purposes of this Canadian income tax discussion, a “U.S. Holder” means a holder of common shares who (1) for the purposes of the Income Tax Act (Canada) is not, has not, and will not be resident in Canada at any

24

time while he, she holds common shares, (2) at all relevant times is a resident of the United States under the Canada-United States Income Tax Convention (1980) (the “Convention”), and (3) does not and will not use or be deemed to use the common shares in carrying on a business in Canada. This summary does not apply to U.S. Holders who are insurers. Such U.S. Holders should seek tax advice from their advisors. An actual or prospective investor that is a United States limited liability company in some circumstances may not be considered to be a resident of the United States for the purposes of the Convention and therefore may not be entitled to benefits thereunder.

      This summary is not intended to be, and should not be construed to be, legal or tax advice to any prospective investor and no representation with respect to the tax consequences to any particular investor is made. The summary does not address any aspect of any provincial, state or local tax laws or the tax laws of any jurisdiction other than Canada or the tax considerations applicable to non-U.S. Holders. Accordingly, prospective investors should consult with their own tax advisors for advice with respect to the income tax consequences to them having regard to their own particular circumstances, including any consequences of an investment in common shares arising under any provincial, state or local tax laws or the tax laws of any jurisdiction other than Canada.

      This summary is based upon the current provisions of the Income Tax Act (Canada), the regulations thereunder and the proposed amendments thereto publicly announced by the Department of Finance, Canada before the date hereof and our understanding of the current published administrative and assessing practices of the Canada Revenue Agency. It does not otherwise take into account or anticipate any changes in law, whether by legislative, governmental or judicial action.

      The following summary applies only to U.S. Holders who hold their common shares as capital property. In general, common shares will be considered capital property of a holder where the holder is neither a trader nor dealer in securities, does not hold the common shares in the course of carrying on a business and is not engaged in an adventure in the nature of trade in respect thereof. This summary does not apply to holders who are “financial institutions” within the meaning of the mark-to-market rules contained in the Income Tax Act (Canada).

      Amounts in respect of common shares paid or credited or deemed to be paid or credited as, on account or in lieu of payment of, or in satisfaction of, dividends to a shareholder who is not a resident of Canada within the meaning of the Income Tax Act (Canada) will generally be subject to Canadian non-resident withholding tax. Canadian withholding tax applies to dividends that are formally declared and paid by the Company and also to deemed dividends that may be triggered by a cancellation of common shares if the cancellation occurs otherwise than as a result of a simple open market transaction. For either deemed or actual dividends, withholding tax is levied at a basic rate of 25%, which may be reduced pursuant to the terms of an applicable tax treaty between Canada and the country of residence of the non-resident shareholder. Under the Convention, the rate of Canadian non-resident withholding tax on the gross amount of dividends received by a U.S. Holder is generally 15%. However, where such beneficial owner is a company that owns at least 10% of the voting shares of the company paying the dividends, the rate of such withholding is 5%.

      In addition to the Canadian withholding tax on actual or deemed dividends, a U.S. holder also needs to consider the potential application of Canadian capital gains tax. A U.S. Holder will generally not be subject to tax under the Income Tax Act (Canada) in respect of any capital gain arising on a disposition of common shares (including on a purchase by the Company on the open market) unless at the time of disposition such shares constitute taxable Canadian property of the holder for purposes of the Income Tax Act (Canada) and such U.S. Holder is not entitled to relief under the Convention. If the common shares are listed on a prescribed stock exchange at the time they are disposed of, they will generally not constitute taxable Canadian property of a U.S. Holder unless, at any time during the five year period immediately preceding the disposition of the common shares, the U.S. Holder, persons with whom he, she or it does not deal at arm’s length, or the U.S. Holder together with non-arm’s length persons, owned 25% or more of the issued shares of any class or series of the capital stock of the Company. In any event, under the Convention, gains derived by a U.S. Holder from the disposition of common shares will generally not be subject to tax in Canada unless the value of the company’s shares is derived principally from real property or certain other immovable property situated in Canada.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA.

      On March 29, 2004, the new British Columbia Business Corporations Act came into force, which allows the Company to prepare its financial statements either under Canadian or U.S. GAAP. The Company elected to prepare financial statements under U.S. GAAP commencing April 1, 2004. Prior to April 1, 2004, the Company’s consolidated financial statements were prepared under Canadian GAAP. The consolidated financial statements for all periods prior to April 1, 2004 presented in this Form 10-K have been converted to U.S. GAAP. U.S. GAAP conforms, in all material respects, with Canadian GAAP, except as described in the notes to the financial statements (specifically, note 22 of the notes to consolidated financial statements beginning on page F-40).

      The Selected Consolidated Financial Data below include the results of Artisan and Redbus from their acquisition dates of December 16, 2003 and October 17, 2005, respectively, onwards. Due to the acquisition, the Company’s results of operations for the year ended March 31, 2006 and 2005 and financial positions as at March 31, 2006, 2005 and 2004 are not directly comparable to prior reporting periods.

			Year Ended March 31,
			2006			2005			2004			2003			2002
			(Amounts in thousands, except per share amounts)
Statement of Operations Data:
Revenues			$	951,228		$	842,586		$	375,910		$	264,914		$	234,770
Expenses:
	Direct operating			460,943			355,922			181,298			133,922			133,051
	Distribution and marketing			399,299			364,281			207,045			87,403			73,763
	General and administration			70,326			69,460			42,826			29,267			32,034
	Severance and relocation costs			—			—			5,575			—			—
	Write-down of other assets			—			—			11,686			—			—
	Gain on sale of studio facility			(4,872	)		—			—			—			—
	Depreciation			2,504			3,159			3,198			1,846			1,492
		Total expenses		928,200			792,822			451,628			252,438			240,340
Operating Income (Loss)				23,028			49,764			(75,718	)		12,476			(5,570	)
Other Expenses (Income):
	Interest expense			19,933			26,421			14,178			9,011			8,870
	Interest rate swaps mark-to-market			(205	)		(2,752	)		(206	)		3,163			—
	Interest and other income			(4,304	)		(3,440	)		(136	)		(77	)		(435	)
	Minority interests			—			107			—			—			91
	Other expense			—			—			—			—			1,351
		Total other expenses, net		15,424			20,336			13,836			12,097			9,877
Income (Loss) Before Items Related to Equity Method Investees and Income Taxes				7,604			29,428			(89,554	)		379			(15,447	)
Write-down of equity interests				—			—			—			—			(24,052	)
Gain on dilution of equity interests				—			—			—			—			2,186
Gain on sale of equity interests				—			—			—			2,131			—
Equity interests				(74	)		(200	)		(2,169	)		(2,112	)		(6,019	)
Income (Loss) Before Income Taxes				7,530			29,228			(91,723	)		398			(43,332	)
Income tax provision (benefit)				1,434			8,947			373			1,821			(61	)
Net Income (Loss)				6,096			20,281			(92,096	)		(1,423	)		(43,271	)
Modification of warrants				—			—			(2,031	)		—			—
Dividends on Series A preferred shares				—			—			(387	)		(1,584	)		(1,592	)
Accretion and amortization on Series A preferred shares				—			—			(643	)		(1,383	)		(1,323	)
Net Income (Loss) Available to Common Shareholders			$	6,096		$	20,281		$	(95,157	)	$	(4,390	)	$	(46,186	)
Basic Income (Loss) Per Common Share			$	0.06		$	0.21		$	(1.35	)	$	(0.10	)	$	(1.08	)
Diluted Income (Loss) Per Common Share			$	0.06		$	0.20		$	(1.35	)	$	(0.10	)	$	(1.08	)
Weighted average number of shares used in the computation of basic income (loss) per share				103,066			97,610			70,656			43,232			42,753
Weighted average number of shares used in the computation of diluted income (loss) per share				106,102			103,375			70,656			43,232			42,753

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		Year Ended March 31,
		2006			2005			2004			2003			2002
		(Amounts in thousands, except per share amounts)
In Accordance with Canadian GAAP:
	Revenues	$	951,228		$	842,586		$	384,891		$	293,073		$	270,255
	Net Income (Loss)	$	(8,405	)	$	12,424		$	(96,633	)	$	(562	)	$	(46,959	)
	Basic Income (Loss) Per Common Share	$	(0.08	)	$	0.13		$	(1.42	)	$	(0.10	)	$	(1.18	)
	Diluted Income (Loss) Per Common Share	$	(0.08	)	$	0.12		$	(1.42	)	$	(0.10	)	$	(1.18	)
Other Data:
Cash flow provided by (used in) operating activities			123,012			95,496			(116,411	)		17,490			(41,738	)
Cash flow provided by (used in) investing activities			(165,334	)		(1,312	)		(149,730	)		4,840			2,624
Cash flow provided by (used in) financing activities			(23,065	)		10,918			267,171			(22,848	)		40,188
Balance Sheet Data (at end of period):
Cash and cash equivalents			46,978			112,839			7,089			6,851			6,510
Investment in films and television programs			417,750			367,376			406,170			177,689			155,591
Total assets			1,053,249			854,629			762,683			340,691			337,791
Bank loans			—			1,162			326,174			125,345			139,857
Subordinated notes			385,000			390,000			65,000			—			—
Total liabilities			903,979			737,490			693,074			269,028			263,125
Redeemable preferred shares			—			—			—			28,031			26,928
Shareholders’ equity			149,270			117,139			69,609			43,632			47,738

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

      Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a diversified independent producer and distributor of motion pictures, television programming, home entertainment, family entertainment, video-on-demand and music content. We release approximately 15 to 18 motion pictures theatrically per year. Our theatrical releases include films we produce in-house and films we acquire from third parties. We also have produced approximately 97 hours of television programming on average each of the last three years. Our disciplined approach to production, acquisition and distribution is designed to maximize our profit by balancing our financial risks against the probability of commercial success of each project. We currently distribute our library of approximately 3,000 motion picture titles and 2,500 television episodes and programs directly to retailers, video rental stores, and pay and free television channels in the US, UK and Ireland and indirectly to other international markets through third parties. We own a minority interest in CinemaNow, Inc. (“CinemaNow”), an internet video-on-demand provider. We also own a minority interest in Maple Pictures Corp. (“Maple Pictures”), a Canadian film and television distributor based in Toronto, Canada. We have an output arrangement with Maple Pictures through which we distribute our library and titles in Canada. During fiscal 2006, we purchased an aggregate of 4,033,996 shares of Image Entertainment, Inc. (“Image”), representing 18.94% of Image’s outstanding common shares as of March 31, 2006. Image is a home video and television distribution company specializing in digital media distribution of television programs, public domain and copyrighted feature films and music concerts.

      A key element of our strategy is to acquire individual properties, including films and television programs, libraries, and entertainment studios and companies, to enhance our competitive position and generate significant financial returns. During previous periods, we acquired and integrated into our business Artisan Entertainment Inc. (December 2003), a diversified motion picture, family and home entertainment company, and Trimark Holdings, Inc. (October 2000), a worldwide distributor of entertainment content that distributed directly in the US and through third parties to the rest of the world. During fiscal 2006 (on August 17, 2005), we acquired certain of the film assets and accounts receivable of Modern Entertainment, Ltd. (“Modern”), a licensor of film rights to DVD distributors, broadcasters and cable networks. In addition, on October 17, 2005, we acquired all outstanding shares of Redbus, an independent United Kingdom film distributor. We now have the ability to self-distribute our motion pictures in the UK and Ireland. As part of the Redbus transaction, we also acquired the Redbus library of approximately 130 films.

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      Our revenues are derived from the following business segments:

•  Motion Pictures, which includes Theatrical, Home Entertainment, Television and International Distribution. Theatrical revenues are derived from the domestic theatrical release of motion pictures in North America. Home entertainment revenues are derived from the sale of video and DVD releases of our own productions and acquired films, including theatrical releases and direct-to-video releases. Television revenues are primarily derived from the licensing of our productions and acquired films to the domestic cable, free and pay television markets. International revenues are derived from the licensing of our productions and acquired films to international markets on a territory-by-territory basis.

•  Television, which includes the licensing to domestic and international markets of one-hour and half-hour drama series, television movies and mini-series and non-fiction programming.

•  Studio Facilities, which included Lions Gate Studios and the leased facility Eagle Creek Studios, which derive revenue from rental of sound stages, production offices, construction mills, storage facilities and lighting equipment to film and television producers. The Company sold its studios facilities located in Vancouver, British Columbia on March 15, 2006. Our lease with Eagle Creek Studios ended on August 31, 2005. We are considering building a studio in New Mexico. Studios facilities comprised the Company’s studios facilities reporting segment (see note 18 of our accompanying consolidated financial statements). Therefore, the Company does not intend to report this segment in fiscal 2007.

      Our primary operating expenses include the following:

•  Direct Operating Expenses, which include amortization of production or acquisition costs, participation and residual expenses and provision for doubtful accounts.

•  Distribution and Marketing Expenses, which primarily include the costs of theatrical “prints and advertising” and of video and DVD duplication and marketing.

•  General and Administration Expenses, which include salaries and other overhead.

Our financial results include the results of Artisan and Redbus from their acquisition dates of December 16, 2003 and October 17, 2005, respectively, onwards. Due to the acquisition, the Company’s results of operations for the year ended March 31, 2006 and 2005 and financial positions as at March 31, 2006, 2005 and 2004 are not directly comparable to prior reporting periods.

Recent Developments

      Generally Accepted Accounting Principles (“GAAP”). On March 29, 2004, the new British Columbia Business Corporations Act came into force, which allows us to prepare our financial statements either under Canadian or U.S. GAAP. We have elected to prepare financial statements under U.S. GAAP commencing April 1, 2004. Therefore, these consolidated financial statements have been prepared in accordance with U.S. GAAP and amounts previously reported under Canadian GAAP have been restated under U.S. GAAP. We must disclose and quantify material differences with Canadian GAAP in our interim and annual financial statements through March 31, 2006. The differences for the years ended March 31, 2006 and 2005 are described in note 22 of our accompanying consolidated financial statements.

      Maple Pictures Corp. On April 8, 2005, we entered into library and output agreements with Maple Pictures, a Canadian corporation, for the distribution of Lionsgate’s motion picture, television and home video product in Canada. As part of this transaction, Maple Pictures purchased a majority of our interest in Christal Distribution, a number of production entities and other Lionsgate distribution assets in Canada. Maple Pictures was formed by two former Lionsgate executives and a third-party equity investor. We also acquired a minority interest in Maple Pictures. As a result of these transactions with Maple Pictures, Lionsgate recorded an investment in Maple Pictures of $2.0 million as of March 31, 2006 in other assets in the consolidated balance sheet.

      Our remaining interest in Christal Distribution was repurchased by Christal Distribution. As a result of the sale and repurchase of our interests, effective April 8, 2005, we no longer consolidate Christal Distributions.

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      Modern Entertainment. On August 17, 2005, the Company acquired certain of the film assets, which included approximately 300 titles, and accounts receivable of Modern, a licensor of film rights to DVD distributors, broadcasters and cable networks for total consideration of $7.3 million, comprised of $3.5 million in cash and 399,042 shares of the Company’s common shares valued at $3.8 million. In addition, the Company recorded $0.2 million in direct transaction costs comprised primarily of legal costs incurred in connection with the purchased assets. The allocation of the Modern purchase price to the tangible assets acquired was $5.3 million to investment in films and television programs and $2.2 million to accounts receivable.

      Image. As described above, we own 18.94% of Image’s outstanding common shares as of March 31, 2006. In October 2005, we proposed to purchase 100% of Image’s outstanding common shares for $4.00 per common share in cash. This proposal was rejected by a special committee of Image’s board of directors. In connection with our consideration of strategic alternatives with respect to Image and to clarify Image’s corporate bylaws, we sought declaratory relief in the Delaware Court of Chancery. On June 5, 2006, the Court held that Image’s board of directors will not become classified until its 2006 annual meeting of stockholders, all of Image’s board of directors are up for election at the 2006 annual meeting of stockholders, and the board of directors does not have authority to amend Image’s bylaws, nor to amend Image’s certificate of incorporation without a stockholder vote. Subsequently, we selected a new slate for the Image board of directors and, on June 6, 2006, we submitted notice to Image of our intent to nominate this slate at Image’s 2006 annual meeting of stockholders.

      Redbus. On October 17, 2005, the Company acquired all outstanding shares of Redbus, an independent United Kingdom film distributor. Consideration for the Redbus acquisition was $35.5 million, comprised of a combination of $28.0 million in cash, $6.4 million in Lionsgate common shares and direct transaction costs of $1.1 million. In addition, the Company assumed other obligations (including accounts payable and accrued liabilities and film obligations) of $19.1 million. At the closing of the transaction the Company issued 643,460 common shares to Redbus Group Limited (“RGL”) valued at approximately $5.6 million, or $8.77 per share, and will issue up to an expected additional 94,937 common shares to RGL valued at approximately $0.8 million upon satisfaction of the terms of the escrow agreement to terminate on May 17, 2007. Direct transaction costs are considered liabilities assumed in the acquisition and, as such, are included in the purchase price. Direct transaction costs consist primarily of legal and accounting fees. The Company now has the ability to self-distribute its motion pictures in the UK and Ireland. The Company also acquired the Redbus library of approximately 130 films. Effective October 17, 2005, the Company’s credit facility was amended in connection with the acquisition of Redbus, to make available a portion of the credit facility for borrowing by Redbus in either U.S. dollars or British pounds sterling.

      The Redbus acquisition was accounted for as a purchase, with the results of operations of Redbus consolidated from October 17, 2005. Goodwill of $26.7 million represents the excess of purchase price over the fair value of the net identifiable tangible and intangible assets acquired. The allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values is preliminary and subject to completion of final appraisals.

      Lionsgate Studios. On March 15, 2006, the Company sold its studios facilities located in Vancouver, British Columbia. The purchase price of $35.3 million (net of commissions) was paid in cash. Certain assets, including, cash and accounts receivable, were excluded from the transaction. At March 15, 2006, the carrying value of studios’ property and equipment sold in the agreement was $28.3 million and was comprised primarily of land and buildings, with carrying values of $12.6 million and $14.8 million, respectively. At March 15, 2006, the carrying value of the goodwill within the studios reporting unit was $1.9 million. The agreement also required the Company to repay the remaining balances of its mortgages payable at the close of the transaction. On March 15, 2006, the Company paid the remaining mortgages balances of $16.8 million. The Company incurred mortgage penalty costs of less than $0.1 million in connection with the repayment of the mortgages which reduced the gain on sale of studios facilities recorded during the year ended March 31, 2006 in the consolidated statements of operations. In connection with the repayment of the remaining balances of its mortgages payable on its studio facilities, the Company terminated its CDN$20 million interest rate swap (see note 10 of our accompanying consolidated financial statements). The close-out value of the CDN$20 million interest rate swap was approximately $0.1 million, which the Company paid on March 15,

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2006. The Company recorded a gain on the sale of the studio facilities of $4.9 million during the year ended March 31, 2006 in the consolidated statements of operations. The studios facilities reporting unit had revenues of $5.8 million for the year ended March 31, 2006 (2005 — $4.5 million; 2004 — $6.3 million) and segment profit of $3.5 million for the year ended March 31, 2006 (2005 — $2.2 million; 2004 — $4.0 million).

      Republic. In November 2005, our distribution rights to the Republic library expired and were not renewed. Following the expiration of these distribution rights, we entered into the six month non-exclusive sell-off period with respect to the Republic titles. During the sell-off period, the Company was permitted to sell its remaining Republic inventory. On May 31, 2006, our six month non-exclusive sell-off period with respect to the Republic titles expired.

CRITICAL ACCOUNTING POLICIES

      The application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. For a summary of all of our accounting policies, including the accounting policies discussed below, see note 2 to our audited consolidated financial statements.

      Generally Accepted Accounting Principles. Our consolidated financial statements have been prepared in accordance with U.S. GAAP which conforms, in all material respects, with Canadian GAAP, except as described in the notes to the consolidated financial statements.

      On March 29, 2004, the new British Columbia Business Corporations Act came into force, which allows the Company to prepare its financial statements either under Canadian or U.S. GAAP. The Company elected to prepare financial statements under U.S. GAAP commencing April 1, 2004. Prior to April 1, 2004, the Company’s consolidated financial statements were prepared under Canadian GAAP. Amounts presented in prior years in the consolidated financial statements have been converted to U.S. GAAP. The Company must disclose and quantify material differences with Canadian GAAP in its interim and annual financial statements through March 31, 2006.

      Accounting for Films and Television Programs. In June 2000, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position 00-2 “Accounting by Producers or Distributors of Films” (“SoP 00-2”). SoP 00-2 establishes accounting standards for producers or distributors of films, including changes in revenue recognition, capitalization and amortization of costs of acquiring films and television programs and accounting for exploitation costs, including advertising and marketing expenses.

      We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in films and television programs. These costs are amortized to direct operating expenses in accordance with SoP 00-2. These costs are stated at the lower of unamortized films or television program costs or estimated fair value. These costs for an individual film or television program are amortized and participation and residual costs are accrued in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the year expected to be recognized from exploitation, exhibition or sale of such film or television program over a period not to exceed ten years from the date of initial release. For previously released film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed twenty years from the date of acquisition. Management regularly reviews and revises when necessary its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or write-down of all or a portion of the unamortized costs of the film or television program to its estimated fair value. No assurance can be given that unfavorable changes to revenue and cost estimates will not occur, which may result in significant write-downs affecting our results of operations and financial condition.

      Revenue Recognition. Revenue from the sale or licensing of films and television programs is recognized upon meeting all recognition requirements of SoP 00-2. Revenue from the theatrical release of feature films is recognized at the time of exhibition based on the Company’s participation in box office receipts. Revenue from the sale of videocassettes and DVDs in the retail market, net of an allowance for estimated returns and

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other allowances, is recognized on the later of receipt by the customer or “street date” (when it is available for sale by the customer). Under revenue sharing arrangements, rental revenue is recognized when the Company is entitled to receipts and such receipts are determinable. Revenues from television licensing are recognized when the feature film or television program is available to the licensee for telecast. For television licenses that include separate availability “windows” during the license period, revenue is allocated over the “windows.” Revenue from sales to international territories are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the sales contract, and the right to exploit the feature film or television program has commenced. For multiple media rights contracts with a fee for a single film or television program where the contract provides for media holdbacks, the fee is allocated to the various media based on management’s assessment of the relative fair value of the rights to exploit each media and is recognized as each holdback is released. For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on management’s assessment of the relative fair value of each title.

      Rental revenue from short-term operating leases of studio facilities is recognized over the term of the lease.

      Cash payments received are recorded as deferred revenue until all the conditions of revenue recognition have been met. Long-term, non-interest bearing receivables are discounted to present value.

      Reserves. Revenues are recorded net of estimated returns and other allowances. We estimate reserves for video returns based on previous returns and our estimated expected future returns related to current period sales on a title-by-title basis in each of the video businesses. There may be differences between actual returns and our historical experience. We estimate provisions for accounts receivable based on historical experience and relevant facts and information regarding the collectability of the accounts receivable.

      Income Taxes. The Company is subject to income taxes in the United States, and in several states and foreign jurisdictions in which we operate. We account for income taxes according to Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”). SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and certain temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not or a valuation allowance is applied.

      Goodwill. On April 1, 2001, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets.” Goodwill is reviewed annually for impairment within each fiscal year or between the annual tests if an event occurs or circumstances change that indicate it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. The Company performs its annual impairment test as of December 31 in each fiscal year. The Company performed its annual impairment test on its goodwill as of December 31, 2005. No goodwill impairment was identified in any of the Company’s reporting units. Determining the fair value of reporting units requires various assumptions and estimates.

      Business Acquisitions. The Company accounts for its business acquisitions as a purchase, whereby the purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair value. The excess of the purchase price over estimated fair value of the net identifiable assets is allocated to goodwill. Determining the fair value of assets and liabilities requires various assumptions and estimates.

Recent Accounting Pronouncements

      Statement of Financial Accounting Standards Staff Position 115-1. In March 2004, the FASB ratified the measurement and recognition guidance and certain disclosure requirements for impaired securities as described in EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” In November 2005, the FASB issued FASB Staff Position SFAS 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“the FSP”). The FSP nullifies certain requirements of EITF Issue 03-1 and supersedes EITF Topic D-44, “Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value.” The FSP addresses the determination as to when an investment is considered impaired, whether that

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impairment is other-than-temporary, and the measurement of an impairment loss. The FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than temporary impairments. The FSP is effective for reporting periods beginning after December 15, 2005. The Company believes that the adoption of the FSP will not have a material effect on its results of operations, financial position or cash flows.

      Statement of Financial Accounting Standards No. 154. In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of Accounting Principles Board Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” (“SFAS 154”). SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle (including voluntary changes). Previously, changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. The Company will adopt this pronouncement beginning in fiscal year 2007 and does not believe adoption of SFAS 154 will have a material effect on its results of operations, financial position or cash flows.

      Statement of Financial Accounting Standards No. 123R. In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123(R)). SFAS 123(R) revises SFAS No. 123 and eliminates the alternative to use the intrinsic method of accounting under APB No. 25. SFAS 123(R) requires all public companies accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments to account for these types of transactions using a fair-value-based method. The Company currently accounts for share-based payments to employees using the intrinsic value method as set forth in APB No. 25 “Accounting for Stock Issued to Employees.” As such, the Company generally recognizes no compensation cost for employee stock options. SFAS No. 123(R) eliminates the alternative to use APB No. 25’s intrinsic value method of accounting. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have an impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income (loss) available to common shareholders and basic and diluted income (loss) per share in note 2(p). SFAS No. 123(R) permits companies to adopt its requirements using either a modified prospective method or a modified retrospective method. The Company has not yet determined which method it will utilize. The provisions of SFAS No. 123(R) are effective for financial statements with the first interim or annual reporting period beginning after June 15, 2005. However, the SEC announced on April 14, 2005 that it would provide for a phased-in implementation process for SFAS No. 123(R). As a result, the Company is not required to apply SFAS No. 123(R) until the period beginning April 1, 2006.

      EITF Issue No. 04-8. During the year ended March 31, 2005, the Company adopted EITF Issue No. 04-8 “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share,” which applied to reporting periods ending after the effective date of December 15, 2004. Under EITF Issue No. 04-8, all instruments that have embedded conversion features that are contingent on market conditions indexed to an issuer’s share price are included in diluted earnings per share computations (if dilutive) regardless of whether the market conditions have been met. On October 4, 2004, Lions Gate Entertainment Inc. sold the 2.9375% Notes. The 2.9375% Notes are convertible at the option of the holder, at any time prior to maturity, upon satisfaction of certain conversion contingencies, into common shares of Lions Gate Entertainment Corp., and therefore the 2.9375% Notes would be included in diluted earnings per share computations for the years ended March 31, 2006 and 2005 (if dilutive).

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      Variable Interest Entities. In January 2003, the FASB issued FIN 46, which is effective for financial statements of public companies that have special purpose entities for periods ending after December 15, 2003 and for public companies without special purpose entities for periods ending after March 15, 2004. The standard establishes criteria to identify Variable Interest Entities (“VIEs”) and the primary beneficiary of such entities. An entity that qualifies as a VIE must be consolidated by its primary beneficiary. Accordingly, the Company has consolidated its VIE Christal Distribution as of March 31, 2005 and 2004. On April 8, 2005, we entered into library and output agreements with Maple Pictures, a Canadian corporation, for the distribution of Lionsgate’s motion picture, television and home video product in Canada. As part of this transaction, Maple Pictures purchased a majority of our interest in Christal Distribution. Our remaining interest in Christal Distribution was repurchased by Christal Distribution. As a result of the sale and repurchase of our interests, effective April 8, 2005, we no longer consolidated Christal Distributions, previously consolidated as a variable interest entity under FIN 46.

RESULTS OF OPERATIONS

Fiscal 2006 Compared to Fiscal 2005

      Consolidated revenues in fiscal 2006 of $951.2 million increased $108.6 million, or 12.9%, compared to $842.6 million in fiscal 2005.

      Motion pictures revenue of $812.4 million in fiscal 2006 increased $57.1 million, or 7.6%, compared to $755.3 million in fiscal 2005 due to the theatrical and video performance of theatrical releases during fiscal 2006. Theatrical revenue included in motion picture revenue of $145.5 million in fiscal 2006 increased $2.7 million, or 1.9%, compared to $142.8 million in fiscal 2005. In fiscal 2006, our top four performing theatrical titles represented individually between 13% to 26% of total theatrical revenue and in the aggregate 73% of total theatrical revenue. In fiscal 2005, our top four performing theatrical titles represented individually between 10% to 34% of total theatrical revenue and in the aggregate 77% of total theatrical revenue. Significant theatrical releases in fiscal 2006 included Saw II, Madea’s Family Reunion, Crash, Hostel, Lord of War, The Devil’s Rejects and Waiting. Significant theatrical releases in fiscal 2005 included Fahrenheit 9/11, Saw, Diary of a Mad Black Woman, The Punisher, Open Water, Godsend and The Cookout. Video revenue included in motion picture revenue of $527.2 million in fiscal 2006 increased $61.9 million, or 13.3%, compared to $465.3 million in fiscal 2005. Significant video releases in fiscal 2006 included Saw II, Crash, Diary of a Mad Black Woman, Lord of War, Waiting, The Devil’s Reject, Barbie and the Magic of Pegasus and Barbie Mermaidia. Significant video releases in fiscal 2005 included Saw, The Punisher, Barbie in the Princess and the Pauper, Open Water, Godsend, Dirty Dancing: Havana Nights, Barbie Fairytopia, The Cookout, The Cooler and Girl With a Pearl Earring. International revenue included in motion picture revenue of $61.2 million in fiscal 2006 decreased $18.3 million, or 23.0%, compared to $79.5 million in fiscal 2005. Significant international sales in fiscal 2006 included Saw II, In the Mix, Saw, Happy Endings, Hotel Rwanda and The Devil’s Rejects. Significant international sales in fiscal 2005 included The Punisher, Godsend, Prince and the Freshman, Final Cut, Open Water and Saw. Television revenue included in motion picture revenue of $72.9 million in fiscal 2006 increased $11.3 million, or 18.3%, compared to $61.6 million in fiscal 2005. Significant television license fees in fiscal 2006 included Saw, Diary of a Mad Black Woman, Crash, Open Water and The Cookout. Significant television license fees in fiscal 2005 included Fahrenheit 9/11, The Punisher, Cabin Fever, Godsend and Dirty Dancing: Havana Nights.

      Television production revenue of $132.9 million in fiscal 2006 increased by $50.1 million, or 60.5%, compared to $82.8 million in fiscal 2005. In fiscal 2006, 82 hours of one-hour series and 10 half-hours of half hour drama series were delivered, contributing domestic licensing revenue of $102.8 million and international and other revenue on one-hour series was $16.1 million. Also in fiscal 2006, television movies contributed revenue of $10.8 million, video releases of television product contributed revenue of $2.2 million, non-fiction programming contributed revenue of $0.5 million and other revenue was $0.5 million. In fiscal 2005, 48 hours of one-hour drama series were delivered contributing revenue of $42.0 million and international and other revenue on one-hour drama series was $16.6 million. Also in fiscal 2005, television movies contributed revenue of $18.1 million, video releases of television product contributed revenue of $1.3 million and other revenue was $1.9 million. Domestic deliveries of one-hour drama series in fiscal 2006 included 25 hours of Wildfire,

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23 hours of The Dead Zone, 19 hours of Missing, 13 hours of The Cut and 10 half-hours of the drama series Weeds. Television movies in fiscal 2006 included Three Wise Guys. In fiscal 2005, domestic deliveries of one-hour series included 18 hours of Missing, 13 hours of Second Verdict, 12 hours of The Dead Zone and 5 hours of Five Days to Midnight. Television movies in fiscal 2005 included Widow on the Hill, Frankenstein, Baby for Sale, Infidelity and Brave New Girl. Video releases in fiscal 2005 included The Dead Zone, Five Days to Midnight and Brave New Girl. Fifteen hours of non-fiction programming were delivered during fiscal 2005.

      Studio facilities revenue of $5.8 million in fiscal 2006 increased $1.3 million, or 28.9%, compared to $4.5 million in fiscal 2005 due to increases in occupancy and rental rates year over year. On March 15, 2006, the Company sold its studios facilities located in Vancouver, British Columbia (see note 14 to our accompanying consolidated financial statements).

      Direct operating expenses include amortization, participation and residual expenses and provision for doubtful accounts. Direct operating expenses of $460.9 million for fiscal 2006 were 48.5% of revenue, compared to direct operating expenses of $355.9 million, which were 42.2% of revenue for fiscal 2005. Direct operating expenses as a percentage of revenue for the motion pictures segment increased year over year due to lower margins on the mix of titles released during fiscal 2006. The television segment in particular generated significant revenues during the period associated with higher direct operating expenses as a percentage of revenue. Direct operating expenses as a percentage of revenue for the motion pictures segment also increased due to a provision for doubtful accounts recorded this period, primarily for a video retail customer of $4.4 million and a reversal in the prior year of a $4.6 million provision for certain accounts receivable balances that had been previously reserved. These amounts were collected during fiscal 2005.

      Distribution and marketing expenses of $399.3 million in fiscal 2006 increased $35.0 million, or 9.6%, compared to $364.3 million in fiscal 2005 due to the theatrical releases during fiscal 2006. Theatrical P&A in fiscal 2006 of $173.5 million increased $17.4 million, or 11.1%, compared to $156.1 million in fiscal 2005. Theatrical P&A in fiscal 2006 included significant expenditure on the release of titles such as Saw II, Crash, Lord of War, Madea’s Family Reunion, In the Mix, The Devil’s Rejects, High Tension, Rize, Undiscovered, and Waiting. Undiscovered, Rize and Happy Endings, released theatrically during fiscal 2006 are not expected to be ultimately profitable titles. Theatrical P&A in fiscal 2005 included significant expenditures on the release of titles such as Saw, Open Water, Godsend, The Punisher, Diary of a Mad Black Woman, Fahrenheit 9/11, The Cookout and Beyond the Sea. Video distribution and marketing costs on motion picture and television product in fiscal 2006 of $209.8 million increased $12.1 million, or 6.1%, compared to $197.7 million in fiscal 2005 due to an increase in marketing and duplication costs related to the increase in video revenues generated during the year, primarily due to the release of Saw II, Diary of a Mad Black Woman, Crash, Lord of War, Waiting, The Devil’s Rejects, Ultimate Avenger and, Barbie and the Magic of Pegasus. Video distribution and marketing costs in fiscal 2005 included significant expenditure on the release of titles such as Saw, The Punisher, Open Water, Barbie in the Princess and the Pauper, Dirty Dancing: Havana Nights, Godsend, Barbie Fairytopia and The Cookout.

      General and administration expenses of $70.3 million in fiscal 2006 increased $0.8 million, or 1.2%, compared to $69.5 million in fiscal 2005, primarily due to a decrease in stock-based compensation expense, offset by an increase in professional fees. The decrease in stock-based compensation expense consists of a decrease in share appreciation rights expense of $8.2 million (fiscal 2006 included a recovery of SARs’ expense of $0.3 million and fiscal 2005 included an expense of $7.9 million), offset by an increase in amortization of unearned compensation expense on restricted share units granted during the year ended March 31, 2006 of $1.7 million. The Company did not grant any restricted share units in any period prior to the year ended March 31, 2006. The decrease in stock-based compensation expense was further offset by an increase in professional fees primarily due to fees associated with the documentation, assessment and testing of our internal controls as required by Section 404 of the Sarbanes Oxley Act. Fiscal 2005 included general and administration expenses for Christal of $1.7 million, a variable interest entity no longer consolidated effective April 2005 due to the sale of our interest in Christal. In fiscal 2006, $5.2 million of production overhead was capitalized compared to $2.8 million in fiscal 2005.

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      During the year ended March 31, 2006, the Company recorded a gain of $4.9 million on the sale of its studios facilities located in Vancouver, British Columbia. The transaction was completed on March 15, 2006. Studios facilities comprised the Company’s studios facilities reporting segment.

      Depreciation of $2.5 million in fiscal 2006 decreased $0.7 million, or 21.9%, from $3.2 million in fiscal 2005, primarily due to certain assets reaching the end of their useful lives during fiscal 2006 and thus becoming fully depreciated.

      Fiscal 2006 interest expense of $19.9 million decreased $6.5 million, or 24.6%, from $26.4 million in fiscal 2005, primarily due to a write-off of deferred financing costs in the prior year and a decrease in interest and amortization of deferred financing fees on the credit facility, offset by an increase in interest and amortization of deferred financing fees on the subordinated notes. No amounts were outstanding under the credit facility during the year ended March 31, 2006, resulting in a decrease in interest on the credit facility. Fiscal 2006 includes a full year’s interest on the 4.875% Convertible Senior Subordinated Noted (“4.875% Notes”) issued December 2003, the 2.9375% Notes issued October 2004 and the 3.625% Notes issued February 2005, whereas fiscal 2005 includes a year’s interest on the 4.875% Notes, approximately six months of interest and amortization on the 2.9375% Notes and approximately two months of interest and amortization on the 3.625% Notes. Fiscal 2005 includes amortization of increased deferred financing fees on the amended credit facility and write-off of increased deferred financing fees of $3.4 million on the term loan portion of the amended credit facility which was repaid December 31, 2004.

      Interest rate swaps do not meet the criteria of effective hedges and, therefore, a fair valuation gain of $0.2 million was recorded in fiscal 2006 as compared to a fair valuation gain of $2.8 million recorded in fiscal 2005. The $100 million interest rate swap the Company had entered into commencing January 2003 ended September 30, 2005. The CDN$20 million interest rate swap a subsidiary of the Company had entered into commencing September 2003 and ending September 2008 was terminated on March 15, 2006 in connection with the repayment of the remaining balances of the mortgages payable on the studio facilities.

      Interest and other income of $4.3 million for the year ended March 31, 2006 increased $0.9 million, or 26.5% compared to $3.4 million for the year ended March 31, 2005. Interest income in fiscal 2006 was earned on the cash balance and available-for-sale investments held during the year ended March 31, 2006.

      Equity interests of $0.1 million for the year ended March 31, 2006 period includes $0.1 million equity interest in the loss of Maple Pictures consisting of 10% of the losses of Maple Pictures. Equity interests of $0.2 million in fiscal 2005 includes $0.2 million equity interest in the loss of CinemaNow which consists of approximately 30% of the losses of CinemaNow. The investment in CinemaNow made in July 2004 was reduced to nil by September 30, 2004 and, therefore, we did not record any additional losses, as we have no further funding requirements.

      The Company had income tax provision of $1.4 million in fiscal 2006, compared to $8.9 million in fiscal 2005. The Company’s actual income tax provision differs from these amounts as a result of several factors, including non-temporary differences, foreign income taxed at different rates, state and local income taxes and the utilization of acquired net operating losses. For fiscal 2006, the release of $0.8 million of valuation allowance was recorded as a reduction of goodwill for the initial recognition of tax benefits related to acquired deductible temporary differences and net operating losses, resulting in a non-cash deferred tax expense upon the utilization of pre-acquisition net operating losses. Income tax loss carryforwards amount to approximately $180.8 million for U.S. federal income tax purposes available to reduce income taxes over twenty years, $88.4 million for US state income tax purposes available to reduce income taxes over future years with varying expirations, $38.5 million for Canadian income tax purposes available to reduce income taxes over eight years and $4.5 million for United Kingdom income tax purposes available indefinitely to reduce future income taxes.

      Net income for the year ended March 31, 2006 was $6.1 million, or income per share of $0.06, on 103.1 million weighted average common shares outstanding. Diluted income per share for the year ended March 31, 2006 was $0.06. This compares to net income for the year ended March 31, 2005 was $20.3 million, or income per share of $0.21, on 97.6 million weighted average common shares outstanding. Diluted income per share for the year ended March 31, 2005 was $0.20.

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Fiscal 2005 Compared to Fiscal 2004

      Consolidated revenues in fiscal 2005 of $842.6 million increased $466.7 million, or 124.2%, compared to $375.9 million in fiscal 2004.

      Motion pictures revenue of $755.3 million in fiscal 2005 increased $446.4 million, or 144.5%, compared to $308.9 million in fiscal 2004 due to significant releases during fiscal 2005 and to the inclusion of Artisan revenues for the full fiscal year in fiscal 2005. Theatrical revenue included in motion picture revenue of $142.8 million in fiscal 2005 increased $111.9 million, or 362.1%, compared to $30.9 million in fiscal 2004. Significant theatrical releases in fiscal 2005 included Fahrenheit 9/11, Saw, Diary of a Mad Black Woman, The Punisher, Open Water, Godsend and The Cookout. Significant theatrical releases in fiscal 2004 included Cabin Fever, House of 1000 Corpses, Confidence, Dirty Dancing: Havana Nights, Girl with a Pearl Earring and The Cooler. Video revenue included in motion picture revenue of $465.3 million in fiscal 2005 increased $241.9 million, or 108.3%, compared to $223.4 million in fiscal 2004. Significant video releases in fiscal 2005 included Saw, The Punisher, Barbie in the Princess and the Pauper, Open Water, Godsend, Dirty Dancing: Havana Nights, Barbie Fairytopia, The Cookout, The Cooler and Girl With a Pearl Earring. Significant video releases in fiscal 2004 included Cabin Fever, House of 1000 Corpses, Confidence, House of the Dead, Will and Grace Season 1 and 2, Secretary and Saturday Night Live: Will Ferrell. International revenue included in motion picture revenue of $79.5 million in fiscal 2005 increased $45.5 million, or 133.8%, compared to $34.0 in fiscal 2004. Significant international sales in fiscal 2005 included The Punisher, Godsend, Prince and the Freshman, Final Cut, Open Water and Saw. Significant international sales in fiscal 2004 included Confidence, Wonderland, Cabin Fever and Shattered Glass. Television revenue included in motion picture revenue of $61.6 million in fiscal 2005 increased $44.8 million, or 266.7%, compared to $16.8 million in fiscal 2004. Significant television license fees in fiscal 2005 included Fahrenheit 9/11, The Punisher, Cabin Fever, Godsend and Dirty Dancing: Havana Nights. Significant television license fees in fiscal 2004 included The Boat Trip, House of 1000 Corpses and Confidence.

      Television production revenue of $82.8 million in fiscal 2005 increased by $22.1 million, or 36.4%, compared to $60.7 million in fiscal 2004. In fiscal 2005, 48 hours of one-hour series were delivered contributing domestic licensing revenue of $42.0 million and international and other revenue on one-hour series was $16.6 million. Also in fiscal 2005, television movies contributed revenue of $18.1 million, video releases of television product contributed revenue of $2.9 million, non-fiction programming contributed revenue of $1.3 million and other revenue was $1.9 million. In fiscal 2004, 27 hours of one-hour drama series were delivered contributing revenue of $27.4 million and international and other revenue on one-hour drama series was $11.2 million. Also in fiscal 2004, television movies contributed revenue of $8.4 million, video releases of television product contributed revenue of $2.7 million and non-fiction programming contributed revenue of $9.6 million. Domestic deliveries of one-hour series in fiscal 2005 included 18 hours of Missing, 13 hours of Second Verdict, 12 hours of The Dead Zone and five hours of Five Days to Midnight. Television movies in fiscal 2005 included Widow on the Hill, Frankenstein, Baby for Sale, Infidelity and Brave New Girl. Video releases in fiscal 2005 included The Dead Zone, Five Days to Midnight and Brave New Girl. In fiscal 2004, domestic deliveries of one-hour series included Missing and The Dead Zone; television movies included Lucky Seven and Inappropriate Behavior and video releases included The Dead Zone, The Pilot’s Wife and Lucky Seven. 15 hours of non-fiction programming were delivered during fiscal 2005 compared to 84.5 hours in fiscal 2004. The decrease in revenue and hours of non-fiction programming is due to the disposition in July 2004 of the production operations of Termite Art, a division of the television segment.

      Studio facilities revenue of $4.5 million in fiscal 2005 decreased $1.8 million, or 28.6%, compared to $6.3 million in fiscal 2004 due to a decrease in occupancy and rental rates year over year.

      Direct operating expenses include amortization, participation and residual expenses and provision for doubtful accounts. Direct operating expenses of $355.9 million for fiscal 2005 were 42.2% of revenue, compared to direct operating expenses of $181.3 million, which were 48.2% of revenue in fiscal 2004. Direct operating expenses as a percentage of revenue for the motion pictures segment decreased year over year due to the margins on the mix of titles released during each year and fiscal 2004 also included additional amortization recorded on acquired libraries. Included in direct operating expenses in fiscal 2005 is a reversal of the provision

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for doubtful accounts of $4.6 million. The reversal is primarily due to collection of accounts receivable during fiscal 2005 that were previously reserved.

      Distribution and marketing expenses of $364.3 million in fiscal 2005, increased $157.3 million, or 76.0%, compared to $207.0 million in fiscal 2004 due to significant releases during fiscal 2005 and to the inclusion of Artisan expenses for the full fiscal year in fiscal 2005. Theatrical P&A in fiscal 2005 of $156.1 million, increased $66.2 million, or 73.6%, compared to $89.9 million in fiscal 2004. Theatrical P&A in fiscal 2005 included significant expenditure on the release of titles such as Saw, Open Water, Godsend, The Punisher, Diary of a Mad Black Woman, Fahrenheit 9/11, The Cookout and Beyond the Sea. Theatrical P&A in fiscal 2004 included significant expenditures on the release of titles such as Dirty Dancing: Havana Nights, Confidence, Cabin Fever, Girl With A Pearl Earring, The Cooler and House of 1000 Corpses, as well as pre-release expenditure on The Punisher and Godsend. Video distribution and marketing costs on motion picture and television product in fiscal 2005 of $197.7 million increased $90.7 million, or 84.8%, compared to $107.0 million in fiscal 2004 due to an increase in marketing and duplication costs related to the increase in video revenues generated during the year, primarily due to the release of Saw, The Punisher, Open Water, Barbie in the Princess and the Pauper, Dirty Dancing: Havana Nights, Godsend, Barbie Fairytopia and The Cookout. Video distribution and marketing costs in fiscal 2004 included significant expenditure on the release of titles such as Confidence, Cabin Fever, House of 1000 Corpses, Will and Grace Season 1 and 2, Secretary, House of the Dead and Saturday Night Live: Will Ferrell.

      General and administration expenses of $69.5 million in fiscal 2005 increased $26.7 million, or 62.4%, compared to $42.8 million in fiscal 2004, primarily due to an increase in salaries and benefits, professional fees and office and operations costs as a result of the increase in the number of employees and volume of operations due to the acquisition of Artisan in December 2003, offset by a decrease in legal fees and settlement expenses. Salaries and benefits also increased as fiscal 2005 included stock-price bonuses due under employment contracts and stock-based compensation expense related to share appreciation rights of $7.9 million. Professional fees increased primarily due to fees associated with the documentation, assessment and testing of our internal controls as required by section 404 of the Sarbanes Oxley Act. Effective March 31, 2004, Christal, a variable interest entity, was consolidated and, therefore, general and administration expenses of $2.5 million for Christal are recorded in fiscal 2005, but are not recorded in fiscal 2004. In fiscal 2005, $2.8 million of production overhead was capitalized compared to $2.9 million in fiscal 2004.

      Severance and relocation costs of $5.6 million in fiscal 2004 represent costs incurred by Lionsgate, associated with the acquisition of Artisan, which include property and lease abandonment costs of $2.5 million, the write-off of capital assets no longer in use of $2.1 million and severance of $1.0 million.

      Write-down of other assets of $11.7 million in fiscal 2004 consists of a provision of $3.6 million against a convertible promissory note and a provision of $8.1 million against convertible debentures and other receivables due from CinéGroupe. On November 8, 2002, the Company sold its investment in Mandalay for cash of $4.3 million and an interest bearing convertible promissory note totaling $3.3 million. The note, bearing interest at 6%, is payable $1.3 million on December 31, 2005, $1.0 million on December 31, 2006 and $1.0 million on December 31, 2007. At March 31, 2004, it was determined that the collectibility of the $3.3 million note and $0.3 million interest accrued on the note to March 31, 2004 was not reasonably assured and accordingly a provision was recorded against the note. During the year ended March 31, 2005, $0.2 million was collected on the note which was recorded as other income and the note was cancelled by the Company. In consideration, effective July 1, 2004, Mandalay agreed to pay contingent compensation based upon its receipt of investor funds and/or the production or performance of certain titles.

      During the year ended March 31, 2004, the Company evaluated it investment in CinéGroupe as CinéGroupe was unable to meet its financial obligations in the ordinary course of business and sought protection under the Companies Creditors Arrangement Act (“CCAA”) in December 2003. As a result of a CCAA filing, we determined that we do not have the ability to significantly influence CinéGroupe and that the collectibility of the amounts owing is unlikely. We recorded a provision at December 31, 2003 against convertible debentures and other receivables due from CinéGroupe, resulting in a write-down of amounts owed to us to nil.

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      Depreciation of $3.2 million in fiscal 2005 remained consistent with depreciation of $3.2 million in fiscal 2004.

      Fiscal 2005 interest expense of $23.1 million increased $9.1 million, or 65.0%, from $14.0 million in fiscal 2004, primarily due to an increase in interest and amortization on subordinated notes, an increase in amortization and write-off of deferred financing costs on the credit facility and interest on promissory notes and advances acquired as part of the acquisition of Artisan. Fiscal 2005 includes interest and amortization on the 4.875% Convertible Senior Subordinated Noted (“4.875% Notes”) issued December 2003, the 2.9375% Notes issued October 2004 and the 3.625% Notes issued February 2005, whereas fiscal 2004 includes approximately three months of interest and amortization on the 4.875% Notes only. Fiscal 2005 includes amortization of increased deferred financing fees on the amended credit facility and write-off of increased deferred financing fees of $3.4 million on the term loan portion of the amended credit facility which was repaid December 31, 2004. Fiscal 2004 includes amortization of deferred financing fees and write-off of deferred financing fees of $2.0 million on the previous credit facility repaid December 2003. Interest on the credit facility decreased only slightly even though the credit facility balance was paid down significantly in the last six months of fiscal 2005 as interest rates also increased year over year. In fiscal 2005, $1.0 million interest is capitalized to production costs, compared to $1.3 million in fiscal 2004.

      Interest rate swaps do not meet the criteria of effective hedges and, therefore, a fair valuation gain of $2.8 million was recorded in fiscal 2005 and a fair valuation gain of $0.2 million was recorded in fiscal 2004.

      Equity interests of $0.2 million in fiscal 2005 includes $0.2 million equity interest in the loss of CinemaNow which consists of approximately 30% of the losses of CinemaNow. The investment in CinemaNow made in July 2004 was reduced to nil by September 30, 2004 and, therefore, we did not record any additional losses, as we have no further funding requirements. Equity interests of $2.2 million in the prior year’s period includes $1.9 million equity interest in the loss of CinéGroupe, $0.2 million equity interest in the loss of CinemaNow and $0.1 million equity interest in the income of Christal. Effective January 1, 2004, we began accounting for CinéGroupe under the cost method of accounting, as we no longer had the ability to significantly influence CinéGroupe due to a CCAA filing, and therefore no equity interest is recorded during fiscal 2005. Effective March 31, 2004, Christal was consolidated as a variable interest entity and, therefore, no equity interest is recorded in fiscal 2005.

      The Company had income tax provision of $8.9 million in fiscal 2005, compared to $0.4 million in fiscal 2004. The Company’s actual income tax provision differs from these amounts as a result of several factors, including non-temporary differences, foreign income taxed at different rates, state and local income taxes and capital losses. For fiscal 2005, the Company reduced goodwill and the valuation allowance by $6.3 million resulting in a non-cash deferred tax expense upon the utilization of pre-acquisition net operating losses. Income tax loss carry-forwards amount to approximately $212 million for U.S. income tax purposes available to reduce income taxes over twenty years and $29.8 million for Canadian income tax purposes available to reduce income taxes over eight years.

      Net income for the year ended March 31, 2005 was $20.3 million, or income per share of $0.21, on 97.6 million weighted average common shares outstanding. Diluted income per share for the year ended March 31, 2005 was $0.20. This compares to net loss for the year ended March 31, 2004 of $92.1 million, or loss per share of $1.35, on 70.7 million weighted average common shares outstanding (after giving effect to modification of warrants and to the Series A Preferred Share dividends and accretion on the Series A Preferred Shares).

EBITDA

      EBITDA, defined as earnings before interest, interest rate swaps mark-to-market, income tax provision, depreciation, gain on sale of studio facility and minority interests of $20.6 million for the year ended March 31, 2006 decreased $32.3 million compared to EBITDA of $52.9 million for the year ended March 31, 2005, which increased $127.6 million compared to negative EBITDA of $74.7 million for the year ended March 31, 2004.

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      EBITDA is a non-GAAP financial measure. Management believes EBITDA to be a meaningful indicator of our performance that provides useful information to investors regarding our financial condition and results of operations. Presentation of EBITDA is consistent with our past practice, and EBITDA is a non-GAAP financial measure commonly used in the entertainment industry and by financial analysts and others who follow the industry to measure operating performance. While management considers EBITDA to be an important measure of comparative operating performance, it should be considered in addition to, but not as a substitute for, net income and other measures of financial performance reported in accordance with GAAP. EBITDA does not reflect cash available to fund cash requirements. Not all companies calculate EBITDA in the same manner and the measure as presented may not be comparable to similarly-titled measures presented by other companies.

      The following table reconciles EBITDA to net income (loss):

	Year Ended March 31,
	2006			2005			2004
	(Amounts in thousands)
EBITDA, as defined	$	20,586		$	52,882		$	(74,689	)
Depreciation		(2,504	)		(3,159	)		(3,198	)
Interest expense		(19,933	)		(26,421	)		(14,178	)
Interest rate swaps mark-to-market		205			2,752			206
Interest income		4,304			3,281			136
Gain on sale of studio facility		4,872			—			—
Minority interests		—			(107	)		—
Income tax provision		(1,434	)		(8,947	)		(373	)
Net income (loss)	$	6,096		$	20,281		$	(92,096	)

      Refer to note 22 of the consolidated financial statements for reconciliation of net income (loss) reported under U.S. GAAP to net income (loss) reported under Canadian GAAP.

Liquidity and Capital Resources

      Our liquidity and capital resources are provided principally through cash generated from operations, issuance of subordinated notes, a credit facility with JP Morgan and a syndicate of banks and sale of common shares.

      Convertible Senior Subordinated Notes. In December 2003, Lions Gate Entertainment Inc. sold $60.0 million of 4.875% Notes that mature on December 15, 2010. We received $57.0 million of net proceeds, after paying placement agents’ fees. Offering expenses were $0.7 million. The 4.875% Notes are convertible, at the option of the holder, at any time before the close of business on the business day immediately preceding the maturity date of the 4.875% Notes, unless previously redeemed, into common shares of the Company at a conversion rate of 185.0944 shares per $1,000 principal amount of the 4.875% Notes, which is equal to a conversion price of approximately $5.40 per share. Lions Gate Entertainment Inc. may redeem the 4.875% Notes at its option on or after December 15, 2006 at 100% of their principal amount plus accrued and unpaid interest if the closing price of our common shares exceeds $9.45 per share for at least 20 trading days within a period of 30 consecutive trading days ending on the trading day before the date of notice of redemption.

      In October 2004, Lions Gate Entertainment Inc. sold $150 million of the 2.9375% that mature on October 15, 2024. We received $146.0 million of net proceeds after paying placement agents’ fees. Offering expenses were $0.7 million. The 2.9375% Notes are convertible at the option of the holder, at any time prior to maturity, upon satisfaction of certain conversion contingencies, into common shares of the Company at a conversion rate of 86.9565 shares per $1,000 principal amount of the 2.9375% Notes, which is equal to a conversion price of approximately $11.50 per share, subject to adjustment upon certain events. From October 15, 2009 to October 14, 2010, Lions Gate Entertainment Inc. may redeem the 2.9375% Notes at

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100.839%; from October 15, 2010 to October 14, 2011, Lions Gate Entertainment Inc. may redeem the 2.9375% Notes at 100.420%; and thereafter at 100%.

      In February 2005, Lions Gate Entertainment Inc. sold $175 million of the 3.625% Notes that mature on March 15, 2025. We received $170.2 million of net proceeds after paying placement agents’ fees. Offering expenses were approximately $0.6 million. The 3.625% Notes are convertible at the option of the holder, at any time prior to maturity into common shares of the Company at a conversion rate of 70.0133 shares per $1,000 principal amount of the 3.625% Notes, which is equal to a conversion price of approximately $14.28 per share, subject to adjustment upon certain events. Lions Gate Entertainment Inc. may redeem the 3.625% Notes at its option on or after March 15, 2012 at 100% of their principal amount plus accrued and unpaid interest.

      Credit Facility. The Company entered into a $350 million credit facility in December 2003 consisting of a $200 million U.S. dollar-denominated revolving credit facility, a $15 million Canadian dollar-denominated revolving credit facility and a $135 million U.S. dollar-denominated term-loan. In anticipation of the proceeds from the 2.9375% Notes, the Company repaid $60 million of term loan with the revolving credit facility on September 30, 2004 and on October 4, 2004 used the proceeds from the 2.9375% Notes to partially repay the revolving credit facility. Therefore, on September 30, 2004, the term loan was reduced to $75 million and the credit facility to $290 million. On December 31, 2004, the Company repaid the term loan in full, thereby reducing the credit facility to $215 million at March 31, 2005. The repayment of the term loan resulted in the write-off of deferred financing fees of $3.4 million on the term loan portion of the credit facility which is recorded as interest expense. Effective March 31, 2005, the credit facility was amended to eliminate the $15 million Canadian dollar-denominated credit facility and increase the U.S. dollar denominated revolving credit facility by the same amount. At March 31, 2006, the Company had no borrowings (March 31, 2005 — nil) under the credit facility. The credit facility expires December 31, 2008 and bears interest at 2.75% over the Adjusted LIBOR or the Canadian Bankers Acceptance rate, or 1.75% over the U.S. or Canadian prime rates. The availability of funds under the credit facility is limited by the borrowing base, which is calculated on a monthly basis. Amounts available under the credit facility are also limited by outstanding letters of credit which amounted to $3.8 million at March 31, 2006. The borrowing base assets at March 31, 2006 totaled $461.6 million (March 31, 2005 — $405.1 million) and therefore $211.2 million is available under the credit facility at March 31, 2006. The Company is required to pay a monthly commitment fee of 0.50% per annum on the total credit facility of $215 million less the amount drawn. Right, title and interest in and to all personal property of Lions Gate Entertainment Corp. and Lions Gate Entertainment Inc. is pledged as security for the credit facility. The credit facility is senior to the Company’s film obligations and subordinated notes. The Company entered into a $100 million interest rate swap at an interest rate of 3.08%, commencing January 2003 and ended September 2005. The swap was in effect as long as three month LIBOR was less than 5.0%. The value of the interest rate swap at the maturity date of September 30, 2005 is nil (March 31, 2005 — $0.1 million). Changes in the fair value representing a fair valuation loss on the interest rate swap during the year ended March 31, 2006 are $0.1 million (2005 — gain of $2.5 million) and are included in the consolidated statements of operations. Our credit facility contains various covenants, including limitations on indebtedness, dividends, capital expenditures and overhead costs, and maintenance of certain financial ratios. There can be no assurances that we will remain in compliance with such covenants or other conditions under our credit facility in the future.

      Mortgages Payable. In connection with the sale of its studio facility, the Company paid the remaining mortgages balances of $16.8 million on March 15, 2006. As a result, the Company had mortgages payable of nil at March 31, 2006. The studio facility subsidiary of the Company had mortgages payable at March 31, 2005 of $18.6 million.

      Filmed Entertainment Backlog. Backlog represents the amount of future revenue not yet recorded from executed contracts for the licensing of films and television product for television exhibition and in international markets. Backlog at March 31, 2006 and 2005 is $143.9 million and $100.3 million, respectively. The increase in backlog is primarily due to contracts entered into on titles such as Saw II, Hostel, Lord of War, Madea’s Family Reunion, Devil’s Rejects, Waiting and In the Mix during the year ended March 31, 2006.

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      Cash Flows Provided by/ Used in Operating Activities. Cash flows provided by operating activities in the year ended March 31, 2006 were $123.0 million compared to cash flows provided by operating activities in the year ended March 31, 2005 of $95.5 million and cash flows used in operating activities of $116.4 million in the year ended March 31, 2004. The increase in cash flows provided by operating activities in fiscal 2006 as compared to fiscal 2005 is primarily due to increases in amortization of films and television programs, film obligations and accounts payable and accrued liabilities, offset by an increase in investment in films and television programs and lower net income in fiscal 2006 as compared to fiscal 2005. In fiscal 2005, the Company earned net income of $20.3 million compared to net losses of $92.1 million in fiscal 2004, resulting in an increase in cash flows provided by operating activities.

      Cash Flows Used in Investing Activities. Cash flows used in investing activities of $165.3 million in the year ended March 31, 2006 included the purchase of a net $170.6 million of investments available-for-sale, $27.1 million for our acquisition of Redbus, net of cash acquired, less $5.5 million for purchases of property and equipment partially offset by cash received from the sale of our studios facilities of $34.9 million and from the sale of our investment in Christal Distribution of $2.9 million. Cash flows used in investing activities of $1.3 million in the year ended March 31, 2005 includes cash received on the disposition of the assets and liabilities of Termite Art, a division of the television segment, less $2.5 million for purchases of property and equipment. Cash flows used in investing activities of $149.7 million in the year ended March 31, 2004 were primarily for the acquisition of Artisan consisting of $168.8 million purchase price less cash acquired of $19.9 million.

      Cash Flows Provided by/ Used in Financing Activities. Cash flows used in financing activities in the year ended March 31, 2006 of $23.1 million were comprised primarily of $18.9 million used to pay off the remaining mortgages payable in connection with the Company’s sale of its studio facility and $5 million for the repayment of a promissory note. Cash flows provided by financing activities in the year ended March 31, 2005 of $10.9 million were primarily cash flows from the issuance of common shares due to the exercise of stock options and warrants and from the issuance of the 2.9375% and 3.625% Notes, offset by repayment of the credit facility. Cash flows provided by financing activities of $267.2 million in the year ended March 31, 2004 were primarily proceeds from the issuance of common shares and 4.875% Notes and an increase in funds from the credit facility, offset by payment for the repurchase of Series A preferred shares, payment of financing fees and net repayment of production loans and debt.

      Anticipated Cash Requirements. The nature of our business is such that significant initial expenditures are required to produce, acquire, distribute and market films and television programs, while revenues from these films and television programs are earned over an extended period of time after their completion or acquisition. We believe that cash flow from operations, cash on hand, credit facility availability and production financing availability will be adequate to meet known operational cash requirements for the foreseeable future, including the funding of future film and television production, film rights acquisitions and theatrical and video release schedules.

      Our current financing strategy is to fund operations and to leverage investment in films and television programs through our cash flow from operations, our credit facility, single-purpose production financing, government incentive programs and distribution commitments. In addition, we may acquire businesses or assets, including individual films or libraries, that are complementary to our business. Such a transaction could be financed through our cash flow from operations, credit facilities, equity or debt financing.

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      Future annual repayments on debt and other financing obligations, initially incurred for a term of more than one year, as of March 31, 2006 are as follows:

	Year Ended March 31,
	2007		2008		2009		2010		2011		Thereafter		Total
	(Amounts in thousands)
Film obligations — Minimum guarantees and film production obligations initially incurred for a term of more than one year	$	2,676	$	31,185	$	12,985	$	—	$	29,975	$	—	$	76,821
Film obligations — Film productions		19,205		—		—		—		—		—		19,205
Subordinated notes		—		—		—		—		60,000		325,000		385,000
	$	21,881	$	31,185	$	12,985	$	—	$	89,975	$	325,000	$	481,026

      Principal debt and other financing obligation repayments due during the year ending March 31, 2007 of $21.9 million consists of $19.2 million owed to film production entities on delivery of titles. Principal repayments due are expected to be paid through cash generated from operations or from the available borrowing capacity from our revolving credit facility with JP Morgan. Approximately $57.4 million of our film production obligations initially incurred for a term of more than one year are non-interest bearing.

      Future commitments under contractual obligations by expected maturity date at March 31, 2006 are as follows:

	Year Ended March 31,
	2007		2008		2009		2010		2011		Thereafter		Total
	(Amounts in thousands)
Operating leases	$	3,543	$	3,655	$	3,837	$	3,833	$	3,913	$	2,551	$	21,332
Employment and consulting contracts		11,953		5,556		1,121		—		—		—		18,630
Unconditional purchase obligations		41,926		23,168		3,000		2,900		900		—		71,894
Distribution and marketing commitments		17,728		19,999		—		—		—		—		37,727
	$	75,150	$	52,378	$	7,958	$	6,733	$	4,813	$	2,551	$	149,583

      Unconditional purchase obligations relate to the purchase of film rights for future delivery, future film production and development obligations. Amounts due during the year ended March 31, 2007 of $75.2 million are expected to be paid through cash generated from operations or from the available borrowing capacity from our revolving credit facility with JP Morgan.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Currency and Interest Rate Risk Management

      Market risks relating to our operations result primarily from changes in interest rates and changes in foreign currency exchange rates. Our exposure to interest rate risk results from the financial debt instruments that arise from transactions entered into during the normal course of business. As part of our overall risk management program, we evaluate and manage our exposure to changes in interest rates and currency exchange risks on an ongoing basis. Hedges and derivative financial instruments will be used in the future in order to manage our interest rate and currency exposure. We have no intention of entering into financial derivative contracts, other than to hedge a specific financial risk.

      Currency Rate Risk. We incur certain operating and production costs in foreign currencies and are subject to market risks resulting from fluctuations in foreign currency exchange rates. Our principal currency exposure is between Canadian and U.S. dollars. The Company enters into forward foreign exchange contracts

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to hedge foreign currency exposures on future production expenses denominated in Canadian dollars. As of March 31, 2006, we had outstanding contracts to sell US$12.8 million in exchange for CDN$14.9 million over a period of five weeks at a weighted average exchange rate of CDN$1.1642. Changes in the fair value representing an unrealized fair value loss on foreign exchange contracts outstanding during the year ended March 31, 2006 amounted to less than $0.1 million and are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity. During the year ended March 31, 2006, we completed foreign exchange contracts denominated in Canadian dollars. The net gains resulting from the completed contracts were $1.1 million. These contracts are entered into with a major financial institution as counterparty. We are exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of replacing the contracts, at current market rates. We do not require collateral or other security to support these contracts.

      Interest Rate Risk. Our principal risk with respect to our debt is interest rate risk, to the extent not mitigated by interest rate swaps. We currently have minimal exposure to cash flow risk due to changes in market interest rates related to our outstanding debt and other financing obligations. Our credit facility has a nil balance at March 31, 2006. Other financing obligations subject to variable interest rates include $38.7 million owed to film production entities on delivery of titles.

      The table below presents repayments and related weighted average interest rates for our interest-bearing debt and other obligations at March 31, 2006.

		Year Ended March 31,
		2007		2008		2009		2010		2011		Thereafter		Total
		(Amounts in thousands)
Bank loans:
Variable(1)		$	—	$	—	$	—	$	—	$	—	$	—	$	—
Film obligations —
	Film productions:
Variable(2)			19,205		19,448		—		—		—		—		38,653
Subordinated notes:
Fixed(3)			—		—		—		—		60,000		—		60,000
Fixed(4)			—		—		—		—		—		150,000		150,000
Fixed(5)			—		—		—		—		—		175,000		175,000
		$	19,205	$	19,448	$	—	$	—	$	60,000	$	325,000	$	423,653

(1)	Revolving credit facility, which expires December 31, 2008. At March 31, 2006, the Company had no borrowings under this facility.
(2)	Amounts owed to film production entities on delivery of titles. The film production entities incurred average variable interest rates at March 31, 2006 of U.S. prime minus 4.44%.
(3)	4.875% Notes with fixed interest rate equal to 4.875%.
(4)	2.9375% Notes with fixed interest rate equal to 2.9375%.
(5)	3.625% Notes with fixed interest rate equal to 3.625%.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      The Auditors’ Report and our Consolidated Financial Statements and Notes thereto appear in a separate section of this report (beginning on page F-1 following Part IV). The index to our Consolidated Financial Statements is included in Item 15.

43

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

      Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

      We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We periodically review the design and effectiveness of our disclosure controls and internal control over financial reporting. We make modifications to improve the design and effectiveness of our disclosure controls and internal control structure, and may take other corrective action, if our reviews identify a need for such modifications or actions.

      As of March 31, 2006, the end of the period covered by this report, the Company’s management had carried out an evaluation under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer of the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were effective.

Internal Control Over Financial Reporting

Management’s Annual Report on Internal Control Over Financial Reporting

      Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that:

•  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

•  provide reasonable assurance that (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and (b) that our receipts and expenditures are being recorded and made only in accordance with management’s authorizations;

•  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets.

      A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      Our management has made an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2006. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

44

      Based on this assessment, our management has concluded that, as of March 31, 2006, the Company maintained effective internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

      As previously disclosed in our Annual Report on Form 10-K for 2005, and our Quarterly Reports on Form 10-Q for the first three quarters of our fiscal year ended March 31, 2006 management had identified material weaknesses in internal controls over financial reporting as a result of its annual assessment of its internal controls over financial reporting for the year ended March 31, 2005 related to the following areas:

•  Calculating participations expense and related liabilities for financial reporting purposes;

•  Calculating amortization of investment in film and television programs;

•  Monitoring certain charges billed to us by our outsourced home entertainment distribution service provider; and

•  Financial statement close process.

      Notwithstanding these material weaknesses, there were no restatements of any previously issued financial statements of the Company as a result of these identified control deficiencies.

      As disclosed in our Quarterly Reports on Form 10-Q for the first three quarters of our fiscal year ended March 31, 2006 management was addressing the material weaknesses noted above. In the fourth quarter we completed the implementation and testing of the previously disclosed remedial measures put in place to address these material weaknesses. In connection with this testing, and in connection with the evaluation described in the above paragraph (“Disclosure Controls and Procedures”), management has determined the material weaknesses identified above have been remediated as of March 31, 2006.

      The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on management’s assessment of the Company’s internal control over financial reporting. Their report is included below.

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Lions Gate Entertainment Corp.

      We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting, that Lions Gate Entertainment Corp. maintained effective internal control over financial reporting as of March 31, 2006, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Lions Gate Entertainment Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

45

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that Lions Gate Entertainment Corp. maintained effective internal control over financial reporting as of March 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Lions Gate Entertainment Corp. maintained, in all material respects, effective internal control over financial reporting as of March 31, 2006, based on the COSO criteria.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Lions Gate Entertainment Corp. as of March 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2006 of Lions Gate Entertainment Corp. and our report dated June 14, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Los Angeles, California

June 14, 2006

ITEM 9B.     OTHER INFORMATION

      Not applicable.

PART III

Corporate Governance

      The Company’s Corporate Governance Guidelines are also available on the Company’s website at http://www.lionsgate.com. You may obtain a copy of the Company’s Corporate Governance Guidelines without charge through either of the Company’s principal executive offices.

      The Company has filed with the Securities and Exchange Commission its exhibits to Form 10-K, which include the Chief Executive Officer and Chief Financial Officer certifications required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. The Company has also filed with the NYSE the annual certification of its Chief Executive Officer for fiscal 2006, confirming that the Company was in compliance with NYSE corporate governance listing standards.

46

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Directors

      The information relating to directors required by this item will be contained under the captions “Information Regarding Our Board of Directors and Committees of Our Board of Directors” in the Proxy Statement, and such information is incorporated herein by reference.

      The information required pursuant to Item 405 of Regulation S-K will be contained under the caption “Section 16(a) Beneficial Ownership Compliance” in the Proxy Statement, and such information is incorporated herein by reference.

      The information required pursuant to Item 406 of Regulation S-K will be contained under the caption “Codes of Conduct and Ethics” in the Proxy Statement, and such information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION.

      The information required by this item will be contained under the captions “Executive Compensation” and “Employment Contracts, Termination of Employment and Change-in-Control Arrangements” in the Proxy Statement, and such information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS.

      The information required by this item will be contained under the captions “Executive Compensation” and “Equity Compensation Plan Information for Fiscal 2006” in the Proxy Statement, and such information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      The information required by this item will be contained under the caption “Certain Relationships and Related Transactions” in the Proxy Statement, and such information is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

      The information required by this item will be contained under the items “Audit Fees,” “Audit-Related Fees,” “Tax Fees” and “All Other Fees” in the Proxy Statement, and such information is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

      (a) The following documents are filed as part of this report:

      1. Financial Statements

      The financial statements listed on the accompanying Index to Financial Statements are filed as part of this report at pages F-1 to F-60.

      2. Financial Statement Schedules

      Financial statement schedules are omitted because the required information is not applicable, or because the information required is included in the consolidated financial statements and notes thereto.

      3. Exhibits

      The exhibits listed on the accompanying Index to Exhibits are filed as part of this report.

47

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on June 14, 2006.

LIONS GATE ENTERTAINMENT CORP.

By:  /s/ James Keegan

James Keegan

Chief Financial Officer

DATE: June 14, 2006

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons in the capacities and on the dates so indicated.

      Each person whose signature appears below authorizes each of Jon Feltheimer, Michael Burns, Wayne Levin and James Keegan, severally and not jointly, to be his or her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in such person’s name, place and stead, in any and all capacities, to sign any amendments to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2006; granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully for all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, shall lawfully do or cause to be done by virtue hereof.

Signature	Title	Date
/s/ Mark Amin Mark Amin	Director	June 14, 2006
/s/ Normal Bacal Normal Bacal	Director	June 14, 2006
/s/ Michael Burns Michael Burns	Director	June 14, 2006
/s/ Arthur Evrensel Arthur Evrensel	Director	June 14, 2006
/s/ Jon Feltheimer Jon Feltheimer	Chief Executive Officer (Principal Executive Officer) and Co-Chairman of the Board of Directors	June 14, 2006
/s/ James Keegan James Keegan	Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)	June 14, 2006
/s/ Morley Koffman Morley Koffman	Director	June 14, 2006

48

Signature	Title	Date
/s/ Harald Ludwig Harald Ludwig	Co-Chairman of the Board of Directors	June 14, 2006
/s/ Laurie May Laurie May	Director	June 14, 2006
/s/ G. Scott Paterson G. Scott Paterson	Director	June 14, 2006
/s/ Daryl Simm Daryl Simm	Director	June 14, 2006
Hardwick Simmons	Director	June 14, 2006
/s/ Brian V. Tobin Brian V. Tobin	Director	June 14, 2006

49

INDEX TO EXHIBITS

Exhibit
Number			Description of Documents
	3	.1(14)	Articles
	3	.2	Notice of Articles
	3	.3(14)	Vertical Short Form Amalgamation Application
	3	.4(14)	Certificate of Amalgamation
	4	.1(2)	Indenture dated as of December 3, 2003 among Lions Gate Entertainment Inc., Lions Gate Entertainment Corp. and J.P. Morgan Trust Company, National Association
	4	.2(2)	Form of 4.875% Convertible Senior Subordinated Notes Due 2010
	4	.3(2)	Form of Guaranty of 4.875% Convertible Subordinated Notes Due 2010
	4	.4(3)	Indenture dated as of October 4, 2004 among Lions Gate Entertainment Inc., Lions Gate Entertainment Corp. and J.P. Morgan Trust Company, National Association
	4	.5(3)	Form of 2.9375% Convertible Senior Subordinated Notes due 2024
	4	.6(3)	Form of Guaranty of 2.9375% Convertible Senior Subordinated Notes due 2024
	4	.7(4)	Indenture dated as of February 24, 2005 among Lions Gate Entertainment Inc., Lions Gate Entertainment Corp. and J.P. Morgan Trust Company, National Association
	4	.8(4)	Form of 3.625% Convertible Senior Subordinated Notes due 2025
	4	.9(4)	Form of Guaranty of 3.625% Convertible Senior Subordinated Notes due 2025
	10	.1(5)	Amended Employees’ and Directors’ Equity Incentive Plan
	10	.2(6)	Form of Incentive Plan Stock Option Agreement
	10	.3(14)	2004 Performance Plan Restricted Share Unit Agreement
	10	.4(13)	2004 Performance Incentive Plan
	10	.5(14)	Form of 2004 Performance Incentive Plan Nonqualified Stock Option Agreement
	10	.6(7)	Registration Rights Agreement by and among the Company, Mark Amin and Reza Amin, dated as of June 6, 2000
	10	.7	Director Compensation Summary
	10	.8(9)	Employment Agreement between the Company and Jon Feltheimer, dated August 15, 2003
	10	.9(10)	Employment Agreement between the Company and Steve Beeks for employment by Lions Gate Entertainment Inc., dated December 15, 2003
	10	.10(9)	Employment Agreement between the Company and Michael Burns, dated September 1, 2003
	10	.11	Employment Agreement between the Company and James Keegan, dated February 21, 2006 and entered into as of April 4, 2006
	10	.12	Employment Agreement between the Company and Wayne Levin, dated April 1, 2006 and entered into as of May 9, 2006
	10	.13	Employment Agreement between the Company and Marni Wieshofer, dated January 5, 2006 and entered into as of March 7, 2006
	10	.14(9)	Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of December 15, 2003 among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase Bank (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003
	10	.15(2)	Amendment No. 1 to the Company’s Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of June 15, 2004, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase Bank (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003

50

Exhibit
Number			Description of Documents
	10	.16(3)	Amendment No. 2 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of September 22, 2004, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase Bank (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003
	10	.17(11)	Amendment No. 3 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of December 31, 2004, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, JP Morgan Chase Bank (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003
	10	.18(11)	Amendment No. 4 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of February 15, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003
	10	.19(12)	Amendment No. 5 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of March 31, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003
	10	.20(16)	Amendment No. 6 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of June 21, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003
	10	.21(16)	Amendment No. 7 to the Amended and Restated Credit, Security, Guaranty and Pledge Agreement, dated as of October 17, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Entertainment Inc., the Guarantors referred to therein, the Lenders referred to therein, JP Morgan Chase Bank, National Association, JP Morgan Chase Bank, National Association (Toronto Branch), Fleet National Bank and BNP Paribas, dated as of December 15, 2003
	10	.22(14)	Amendment to January 5, 2000 Incentive Plan Stock Option Agreement between the Company and Michael Burns, dated December 11, 2001
	10	.23(14)	Amendment to January 5, 2000 Incentive Plan Stock Option Agreement between the Company and Jon Feltheimer, dated December 11, 2001
	10	.24(14)	Share Appreciation Rights Award Agreement between the Company and Steve Beeks, dated February 2, 2004
	10	.25(14)	Clarification of Stock Appreciation Rights Award Letter for Steve Beeks, dated November 18, 2004
	10	.26(15)	Partnership Interest Purchase Agreement, dated December 22, 2005, by and among Lions Gate Entertainment Corp., Lions Gate Films Corp., Bosa Development Corp., and 0742102 B.C. LTD.
	10	.27(15)	Amendment to Partnership Interest Purchase Agreement Amendment and Removal of Conditions Precedent, January 23, 2006, by and among Lions Gate Entertainment Corp., Lions Gate Films Corp., Bosa Development Corp., and 0742102 B.C. LTD.
	10	.28	Agreement dated as of December 6, 2005 between Lions Gate Film, Inc. and Sobini Films, with respect to the distribution rights to the motion picture entitled “The Prince and Me II.”
	10	.29	Agreement dated as of March 24, 2005 between Lions Gate Films Inc. and Sobini Films, with respect to the distribution rights to the motion picture entitled “Streets of Legend.”
	10	.30	Agreement dated as of December 6, 2005 between Lions Gate Films Inc. and Sobini Films, with respect to the distribution rights to the motion picture entitled “Peaceful Warrior.”
	10	.31	Purchase Agreement dated March 17, 2006 between Lions Gate Entertainment Corp. and Icon International, Inc.

51

Exhibit
Number			Description of Documents
	10	.32	Vendor Subscription Agreement dated March 17, 2006 between Lions Gate Entertainment Corp. and Icon International, Inc.
	10	.33	Agreement, by and between Ignite, LLC and Lions Gate Films Inc., entered into June 13, 2006 and dated and effective as of March 13, 2006
	21	.1	Subsidiaries of the Company
	23	.1	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
	24	.1	Power of Attorney (Contained on Signature Page)
	31	.1	Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
	31	.2	Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act of 2002
	32	.1	Certification of CEO and CFO pursuant to Section 906 of Sarbanes-Oxley Act of 2002

(1)	Incorporated by reference to the Company’s Current Report on Form 8-K as filed on December 30, 2003 (File No. 1-14880)
(2)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2004 (File No. 1-14880).
(3)	Incorporated by reference to the Company’s Current Report on Form 8-K as filed on October 4, 2004 (File No. 1-14880).
(4)	Incorporated by reference to the Company’s Current Report on Form 8-K as filed on February 25, 2005 (File No. 1-14880).
(5)	Incorporated by reference to the Company’s Definitive Proxy Statement dated August 13, 2001 (File No. 1-14880).
(6)	Incorporated by reference to the Company’s Registration Statement on Form S-2 under the Securities Act of 1933 dated April 30, 2003 (File No. 333-104836).
(7)	Incorporated by reference to the Company’s Registration Statement on Form F-4 under the Securities Act of 1933 dated August 18, 2000 (File No. 333-12406).
(8)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2003 as filed on June 30, 2003 (File No. 1-14880).
(9)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2003 (File No. 1-14880).

(10)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2004 as filed on June 29, 2004 (File No. 1-14880).
(11)	Incorporated by reference to the Company’s Current Report on Form 8-K as filed on February 22, 2005 (File No. 1-14880).
(12)	Incorporated by reference to the Company’s Current Report on Form 8-K as filed on April 14, 2005 (File No. 1-14880).
(13)	Incorporated by reference to Amendment No. 1 to the Company’s Definitive Proxy Statement dated August 13, 2004 (File No. 1-14880).
(14)	Incorporated by reference to the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2005 as filed on June 29, 2005 (File No. 1-14880).
(15)	Incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2005 (File No. 1-14880).
(16)	Incorporated by reference to the Company’s Current Report on Form 8-K as filed on October 18, 2005 (File No. 1-14880).

52

INDEX TO FINANCIAL STATEMENTS

		Page
		Number
Audited Financial Statements			F-1
	Report of Independent Registered Public Accounting Firm — Ernst & Young LLP		F-2
	Consolidated Balance Sheets — March 31, 2006 and 2005		F-3
	Consolidated Statements of Operations — Years Ended March 31, 2006, 2005 and 2004		F-4
	Consolidated Statements of Shareholders’ Equity — Years Ended March 31, 2006, 2005 and 2004		F-5
	Consolidated Statements of Cash Flows — Years Ended March 31, 2006, 2005 and 2004		F-6
	Notes to Audited Consolidated Financial Statements		F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of Lions Gate Entertainment Corp.

      We have audited the accompanying consolidated balance sheets of Lions Gate Entertainment Corp. as of March 31, 2006 and 2005, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lions Gate Entertainment Corp. at March 31, 2006 and 2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2006, in conformity with U.S. generally accepted accounting principles.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Lions Gate Entertainment Corp.’s internal control over financial reporting as of March 31, 2006, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 14, 2006 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Los Angeles, California

June 14, 2006

F-2

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS

	March 31,			March 31,
	2006			2005
	(Amounts in thousands,
	except share amounts)
ASSETS
Cash and cash equivalents	$	46,978		$	112,839
Restricted cash		820			2,913
Investments — auction rate preferreds and municipal bonds		167,081			—
Investments — equity securities		14,921			—
Accounts receivable, net of reserve for video returns and allowances of $73,366 (2005 — $58,449) and provision for doubtful accounts of $10,934 (2005 — $6,102)		182,659			150,019
Investment in films and television programs		417,750			367,376
Property and equipment		7,218			30,842
Goodwill		185,117			161,182
Other assets		30,705			29,458
	$	1,053,249		$	854,629
LIABILITIES
Bank loans	$	—		$	1,162
Accounts payable and accrued liabilities		188,793			134,200
Unpresented bank drafts		14,772			—
Film obligations		284,987			130,770
Subordinated notes		385,000			390,000
Mortgages payable		—			18,640
Deferred revenue		30,427			62,459
Minority interests		—			259
		903,979			737,490
Commitments and Contingencies
SHAREHOLDERS’ EQUITY
Common shares, no par value, 500,000,000 shares authorized, 104,422,765 at March 31, 2006 and 101,843,708 shares at March 31, 2005 issued and outstanding		328,771			305,662
Series B preferred shares (10 shares issued and outstanding)		—			—
Restricted common share units		5,178			—
Unearned compensation		(4,032	)		—
Accumulated deficit		(177,130	)		(183,226	)
Accumulated other comprehensive loss		(3,517	)		(5,297	)
		149,270			117,139
	$	1,053,249		$	854,629

See accompanying notes.

F-3

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

			Year Ended			Year Ended			Year Ended
			March 31,			March 31,			March 31,
			2006			2005			2004
			(Amounts in thousands,
			except per share amounts)
Revenues			$	951,228		$	842,586		$	375,910
Expenses:
	Direct operating			460,943			355,922			181,298
	Distribution and marketing			399,299			364,281			207,045
	General and administration			70,326			69,460			42,826
	Severance and relocation costs			—			—			5,575
	Write-down of other assets			—			—			11,686
	Gain on sale of studio facility			(4,872	)		—			—
	Depreciation			2,504			3,159			3,198
		Total expenses		928,200			792,822			451,628
Operating income (loss)				23,028			49,764			(75,718	)
Other expenses (income):
	Interest expense			19,933			26,421			14,178
	Interest rate swaps mark-to-market			(205	)		(2,752	)		(206	)
	Interest and other income			(4,304	)		(3,440	)		(136	)
	Minority interests			—			107			—
		Total other expenses, net		15,424			20,336			13,836
Income (loss) before equity interests and income taxes				7,604			29,428			(89,554	)
Equity interests				(74	)		(200	)		(2,169	)
Income (loss) before income taxes				7,530			29,228			(91,723	)
Income tax provision				1,434			8,947			373
Net income (loss)				6,096			20,281			(92,096	)
Modification of warrants				—			—			(2,031	)
Dividends on Series A preferred shares				—			—			(387	)
Accretion and amortization on Series A preferred shares				—			—			(643	)
Net income (loss) available to common shareholders			$	6,096		$	20,281		$	(95,157	)
Income (loss) per common share:
Basic income (loss) per common share			$	0.06		$	0.21		$	(1.35	)
Diluted income (loss) per common share			$	0.06		$	0.20		$	(1.35	)
Weighted average number of common shares outstanding:
	Basic			103,066			97,610			70,656
	Diluted			106,102			103,375			70,656

See accompanying notes.

F-4

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

						Series B				Restricted												Accumulated
		Common Shares				Preferred Shares				Common									Comprehensive			Other
										Share			Unearned			Accumulated			Income			Comprehensive
		Number		Amount		Number		Amount		Units			Compensation			Deficit			(Loss)			Loss			Total
		(Amounts in thousands, except share amounts)
Balance at March 31, 2003			43,231,921	$	159,549		10	$	—	$	—		$	—		$	(108,350	)				$	(7,567	)	$	43,632
Issuance of common shares			44,951,056		103,176																					103,176
Exercise of stock options			955,562		2,609																					2,609
Exercise of warrants			275,400		1,377																					1,377
Impact of previously modified stock options			—		1,740																					1,740
Modification of warrants			—		2,031												(2,031	)								—
Redemption of Series A preferred shares			—		566																					566
Conversion of Series A preferred shares			4,201,957		9,453																					9,453
Dividends on Series A preferred shares																	(387	)								(387	)
Accretion and amortization on Series A preferred shares																	(643	)								(643	)
Comprehensive income (loss):
Net loss																	(92,096	)	$	(92,096	)					(92,096	)
	Foreign currency translation adjustments																			(440	)		(440	)		(440	)
	Net unrealized gain on foreign exchange contracts																			622			622			622
	Comprehensive loss																		$	(91,914	)					—
Balance at March 31, 2004			93,615,896	$	280,501		10	$	—	$	—		$	—		$	(203,507	)					(7,385	)	$	69,609
Exercise of stock options			4,991,141		13,871																					13,871
Exercise of warrants			3,220,867		10,842																					10,842
Issuance to directors for services			15,804		137																					137
Impact of previously modified stock options			—		311																					311
Comprehensive income (loss):
Net income																	20,281		$	20,281						20,281
	Foreign currency translation adjustments																			2,374			2,374			2,374
	Net unrealized loss on foreign exchange contracts																			(286	)		(286	)		(286	)
	Comprehensive income																		$	22,369						—
Balance at March 31, 2005			101,843,708	$	305,662		10	$	—	$	—		$	—		$	(183,226	)				$	(5,297	)	$	117,139
Exercise of stock options			361,310		1,408																					1,408
Issuance to directors for services			20,408		203																					203
Impact of previously modified stock options			—		27																					27
Issuance of common shares in connection with acquisition of film assets			399,042		3,775																					3,775
Issuance of common shares in connection with acquisition of common shares of Image Entertainment			1,104,004		11,537																					11,537
Issuance of common shares in connection with acquisition of Redbus			643,460		5,643																					5,643
Issuance of restricted share units											5,694			(5,694	)											—
Amortization of restricted share units														1,662												1,662
Vesting of restricted share units			50,833		516						(516	)														—
Comprehensive income (loss)
	Net income																6,096			6,096						6,096
	Foreign currency translation adjustments																			2,223			2,223			2,223
	Net unrealized loss on foreign exchange contracts																			(356	)		(356	)		(356	)
	Unrealized loss on investments — available for sale																			(87	)		(87	)		(87	)
	Comprehensive income																		$	7,876						—
Balance at March 31, 2006			104,422,765	$	328,771		10	$	—	$	5,178		$	(4,032	)	$	(177,130	)				$	(3,517	)	$	149,270

See accompanying notes.

F-5

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

		Year Ended			Year Ended			Year Ended
		March 31,			March 31,			March 31,
		2006			2005			2004
		(Amounts in thousands)
Operating Activities:
Net income (loss)		$	6,096		$	20,281		$	(92,096	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Depreciation of property and equipment		2,504			3,159			3,198
	Amortization and write-off of deferred financing costs		3,804			6,945			4,073
	Amortization of films and television programs		253,279			213,346			136,082
	Amortization of intangible assets		2,004			2,192			—
	Non-cash stock-based compensation		1,881			448			1,740
	Interest rate swaps mark-to-market		(205	)		(2,752	)		(206	)
	Gain on disposition of assets		—			(666	)		—
	Gain on sale of studio facility		(4,872	)		—			—
	Deferred income taxes		297			6,283			—
	Relocation costs		—			—			2,131
	Write-down of other assets		—			—			11,686
	Minority interests		—			107			—
	Equity interests		74			200			2,169
Changes in operating assets and liabilities, excluding the effects of acquisitions:
	(Increase) decrease in restricted cash		2,093			(2,913	)		—
	Accounts receivable, net		(33,294	)		(21,284	)		(17,249	)
	Increase in investment in films and television programs		(284,711	)		(171,272	)		(192,098	)
	Other assets		(5,302	)		(2,395	)		6,913
	Accounts payable and accrued liabilities		48,732			4,335			12,170
	Unpresented bank drafts		14,772			—			—
	Film obligations		147,218			15,594			1,818
	Deferred revenue		(31,358	)		23,888			3,258
Net Cash Flows Provided By (Used In) Operating Activities			123,012			95,496			(116,411	)
Investing Activities:
Purchases of investments — auction rate preferreds and municipal bonds			(307,031	)		—			—
Purchases of investments — equity securities			(3,470	)		—			—
Sales of investments — auction rate preferreds and municipal bonds			139,950			—			—
Cash received from sale of investment			2,945			—			—
Cash received from disposition of assets, net			34,860			1,172			—
Acquisition of Redbus, net of cash acquired			(27,138	)		—			—
Acquisition of Artisan Entertainment Inc., net of cash acquired			—			—			(148,870	)
Purchases of property and equipment			(5,450	)		(2,484	)		(860	)
Net Cash Flows Used In Investing Activities			(165,334	)		(1,312	)		(149,730	)
Financing Activities:
Issuance of common shares			1,408			24,713			107,162
Redemption of Series A preferred shares			—			—			(18,090	)
Dividends paid on Series A preferred shares			—			—			(387	)
Financing fees			(546	)		(1,612	)		(11,402	)
Increase in subordinated notes, net of issue costs			—			314,822			56,347
Repayment of subordinated notes			(5,000	)		—			—
Increase (decrease) in bank loans			—			(325,111	)		143,033
Proceeds from production loans			—			—			505
Repayment of production loans			—			—			(1,778	)
Proceeds from mortgages payable			—			—			16,148
Repayment of mortgages payable			(18,927	)		(1,894	)		(24,367	)
Net Cash Flows Provided By (Used In) Financing Activities			(23,065	)		10,918			267,171
Net Change In Cash And Cash Equivalents			(65,387	)		105,102			1,030
Foreign Exchange Effects On Cash			(474	)		648			(792	)
Cash And Cash Equivalents — Beginning Of Year			112,839			7,089			6,851
Cash And Cash Equivalents — End Of Year		$	46,978		$	112,839		$	7,089

See accompanying notes.

F-6

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Operations

      Lions Gate Entertainment Corp. (“the Company” or “Lionsgate”) is a fully integrated entertainment company engaged in the development, production and distribution of feature films, television series, television movies and mini-series, non-fiction programming and animated programming. As an independent distribution company, the Company also acquires distribution rights from a wide variety of studios, production companies and independent producers.

      On December 15, 2003, the Company acquired Film Holdings Co., the parent company of Artisan Entertainment Inc. (“Artisan”) as described in note 14. The acquisition is included in the consolidated balance sheet and all operating results and cash flows have been included in the consolidated statements of operations and cash flows from the acquisition date.

      On October 17, 2005, the Company acquired all outstanding shares of Redbus, an independent United Kingdom film distributor as described in note 14. The acquisition is included in the consolidated balance sheet and all operating results and cash flows have been included in the consolidated statements of operations and cash flows from the acquisition date.

      On January 23, 2006, the Company entered into an amended agreement to sell its studios facilities located in Vancouver, British Columbia as described in note 14. The transaction was completed on March 15, 2006. Studios facilities comprised the Company’s studios facilities reporting segment. Certain assets, including, cash and accounts receivable, excluded from the transaction are included in the consolidated balance sheet as of March 31, 2006 and all operating results and cash flows have been included in the consolidated statements of operations and cash flows through the disposition date.

2. Significant Accounting Policies

     (a) Generally Accepted Accounting Principles

      These consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) which conforms, in all material respects, with the accounting principles generally accepted in Canada (“Canadian GAAP”), except as described in note 22. The Canadian dollar and the U.S. dollar are the functional currencies of the Company’s Canadian and U.S. based businesses, respectively.

      On March 29, 2004, the new British Columbia Business Corporations Act came into force, which allows the Company to prepare its financial statements either under Canadian or U.S. GAAP. The Company elected to prepare financial statements under U.S. GAAP commencing April 1, 2004. Prior to April 1, 2004, the Company’s consolidated financial statements were prepared under Canadian GAAP. Amounts presented in these consolidated financial statements for periods prior to April 1, 2004 have been converted to U.S. GAAP. The Company must disclose and quantify material differences with Canadian GAAP in its interim and annual financial statements through March 31, 2006.

     (b) Principles of Consolidation

      The accompanying consolidated financial statements of the Company include the accounts of Lionsgate and all of its majority-owned and controlled subsidiaries, with a provision for minority interests. The Company reviews its relationships with other entities to identify whether it is the primary beneficiary of a variable interest entity (“VIE”). If the determination is made that the Company is the primary beneficiary, then the entity is consolidated in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. (“FIN”) 46, “Consolidation of Variable Interest Entities.” FIN 46 is effective for periods ending after March 15, 2004.

F-7

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Investments in which the Company exercises significant influence, but does not control, are accounted for using the equity method of accounting. Investments in which there is no significant influence are accounted for using the cost method of accounting.

      All significant intercompany balances and transactions have been eliminated on consolidation.

     (c) Revenue Recognition

      Revenue from the sale or licensing of films and television programs is recognized upon meeting all recognition requirements of Statement of Position (SoP) 00-2 “Accounting by Producers or Distributors of Films.” Revenue from the theatrical release of feature films is recognized at the time of exhibition based on the Company’s participation in box office receipts. Revenue from the sale of videocassettes and digital video disks (“DVDs”) in the retail market, net of an allowance for estimated returns and other allowances, is recognized on the later of shipment to the customer or “street date” (when it is available for sale by the customer). Under revenue sharing arrangements, rental revenue is recognized when the Company is entitled to receipts and such receipts are determinable. Revenues from television licensing are recognized when the feature film or television program is available to the licensee for telecast. For television licenses that include separate availability “windows” during the license period, revenue is allocated over the “windows.” Revenue from sales to international territories are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the sales contract, and the right to exploit the feature film or television program has commenced. For multiple media rights contracts with a fee for a single film or television program where the contract provides for media holdbacks, the fee is allocated to the various media based on management’s assessment of the relative fair value of the rights to exploit each media and is recognized as each holdback is released. For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on management’s assessment of the relative fair value of each title.

      Rental revenue from short-term operating leases of studio facilities is recognized over the term of the lease.

      Shipping and handling costs are included under distribution and marketing expenses in the consolidated statements of operations.

      Cash payments received are recorded as deferred revenue until all the conditions of revenue recognition have been met. Long-term, non-interest bearing receivables are discounted to present value. At March 31, 2006, $16.7 million of accounts receivable are due beyond one year. The accounts receivable are due as follows: $11.2 million in fiscal 2008, $2.8 million in fiscal 2009, $2.6 million in fiscal 2010 and $0.1 million in fiscal 2011.

     (d) Cash and Cash Equivalents

      Cash and cash equivalents include cash and highly liquid debt investments with original maturities of ninety days or less when purchased and investments in money market mutual funds.

     (e) Restricted Cash

      Restricted cash represents an amount on deposit with a financial institution that is contractually designated for theatrical marketing expenses for a specific title. Refer to note 8 for the theatrical marketing obligation.

     (f) Investments

      Investments classified as available-for-sale are reported at fair value based on quoted market prices, with unrealized gains and losses excluded from earnings and reported as other comprehensive income (see

F-8

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

note 12). The cost of investments sold is determined in accordance with the specific identification method and realized gains and losses are included in interest income. The Company periodically assesses its available-for-sale investments for other than temporary impairment. Any such other than temporary impairment loss is recognized as a realized loss and measured as the excess of carrying value over fair value at the time the assessment is made.

     (g) Investment in Films and Television Programs

      Investment in films and television programs includes the unamortized costs of completed films and television programs which have been produced by the Company or for which the Company has acquired distribution rights, libraries acquired as part of acquisitions of companies, films and television programs in progress and in development and home video product inventory.

      For films and television programs produced by the Company, capitalized costs include all direct production and financing costs, capitalized interest and production overhead. For acquired films and television programs, these capitalized costs consist of minimum guarantee payments to acquire the distribution rights.

      Costs of acquiring and producing films and television programs and of acquired libraries are amortized using the individual-film-forecast method, whereby these costs are amortized and participation and residual costs are accrued in the proportion that current year’s revenue bears to management’s estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of the films or television programs.

      Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release or from the date of delivery of the first episode for episodic television series. For titles included in acquired libraries, ultimate revenue includes estimates over a period not to exceed twenty years following the date of acquisition.

      Investment in films and television programs is stated at the lower of amortized cost or estimated fair value. The valuation of investment in films and television programs is reviewed on a title-by-title basis, when an event or change in circumstances indicates that the fair value of a film or television program is less than its unamortized cost. The fair value of the film or television program is determined using management’s future revenue and cost estimates and a discounted cash flow approach. Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film or television program. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in management’s future revenue estimates.

      Films and television programs in progress include the accumulated costs of productions, which have not yet been completed by the Company.

      Films and television programs in development include costs of acquiring film rights to books, stage plays or original screenplays and costs to adapt such projects. Such costs are capitalized and, upon commencement of production, are transferred to production costs. Projects in development are written off at the earlier of the date they are determined not to be recoverable or when abandoned, or three years from the date of the initial investment.

      Home video product inventory consists of videocassettes and DVDs and are stated at the lower of cost or market value (first-in, first-out method).

F-9

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     (h) Property and Equipment

      Property and equipment is carried at cost less accumulated depreciation. Depreciation is provided for using the following rates and methods:

Buildings	25 years straight-line
Computer equipment and software	2 - 5 years straight-line
Furniture and equipment	2 - 10 years straight-line
Leasehold improvements	Over the lease term or the useful life, whichever is shorter

      The Company periodically reviews and evaluates the recoverability of property and equipment. Where applicable, estimates of net future cash flows, on an undiscounted basis, are calculated based on future revenue estimates, if appropriate and where deemed necessary, a reduction in the carrying amount is recorded.

     (i) Goodwill

      Goodwill represents the excess costs of acquisition costs over the tangible and intangible assets acquired and liabilities assumed in various business acquisitions by the Company. Under Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” goodwill is no longer amortized but is reviewed for impairment annually within each fiscal year or between the annual tests if an event occurs or circumstances change that indicate it is more-likely-than-not that the fair value of a reporting unit is less than its carrying value. The impairment test follows a two-step approach. The first step determines if the goodwill is potentially impaired, and the second step measures the amount of the impairment loss, if necessary. Under the first step, goodwill is considered potentially impaired if the value of the reporting unit is less than the reporting unit’s carrying amount, including goodwill. Under the second step, the impairment loss is then measured as the excess of recorded goodwill over the fair value of the goodwill, as calculated. The fair value of goodwill is calculated by allocating the fair value of the reporting unit to all the assets and liabilities of the reporting unit as if the reporting unit was purchased in a business combination and the purchase price was the fair value of the reporting unit. The Company has three reporting units with goodwill within its businesses: Motion Pictures; Television; and Studio Facilities. The Company performs its annual impairment test as of December 31 in each fiscal year. The Company performed its annual impairment test on its goodwill as of December 31, 2005. No goodwill impairment was identified in any of the Company’s reporting units. In March 2006, the Company sold its studios facilities as described in note 14. Studios facilities comprised the Company’s studios facilities reporting unit. The Company’s goodwill of $1.9 million within its studios facilities was completely recovered by the proceeds of the sale.

     (j) Other Assets

      Other assets include intangible assets, deferred print costs, an interest bearing convertible promissory note, deferred debt financing costs, equity investments and prepaid expenses.

      Intangible Assets. Intangible assets acquired in connection with the purchase of Artisan of $5.1 million represent distribution and personal service agreements and are amortized over a period of two to four years from the date of acquisition. In June 2005, the Company acquired all of the publishing assets of a music publishing company, for a total purchase price of $1.3 million in cash. The publishing rights are amortized over a three-year period from the date of acquisition. Amortization expense of $2.0 million was recorded for the year ended March 31, 2006 (2005 — $2.2 million; 2004 — $0.7 million). Based on the current amount of intangibles subject to amortization, the estimated amortization expense for each of the succeeding years is $0.9 million, $0.5 million and $0.1 million for the years ending March 31, 2007, 2008 and 2009, respectively. The Company reviews its intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized

F-10

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. If an asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. No impairment was identified as of March 31, 2006. The Company also determined that the estimated useful lives of the intangible assets properly reflect the current estimated useful lives.

      Prints, Advertising and Marketing Expenses. The cost of film prints are expensed upon theatrical release and are included in operating expenses. The costs of advertising and marketing expenses are expensed as incurred. Advertising expenses for the year ended March 31, 2006 were $209.3 million (2005 — $175.8 million, 2004 — $109.8 million) which were recorded as distribution and marketing expenses.

      Debt Financing Costs. Amounts incurred in connection with obtaining debt financing are deferred and amortized, as a component of interest expense, over the earlier of the date of the earliest put option or term to maturity of the related debt obligation.

      Equity Method Investees. Other investments include companies, which are accounted for using the equity method. The Company’s equity method investees are periodically reviewed to determine whether there has been a loss in value that is other than a temporary decline. Estimates of net future cash flows on an undiscounted basis are used to assess whether there is a loss in value. At March 31, 2006, the Company held a 10% minority interest in Maple Pictures Corp. (“Maple Pictures”). The Company is accounting for the investment in Maple Pictures using the equity method. For further discussion of this investment refer to note 6.

      At March 31, 2006, other than our investment in Maple Pictures, all our other investments in equity method investees have been reduced to nil. Amounts recorded in the statement of operations related to these equity method investees are included in the gain on sale of equity interest and equity interests. For further discussion of these items refer to note 6.

     (k) Unpresented Bank Drafts

      Unpresented bank drafts represent checks issued and not yet presented for payment in excess of the cash balances at custodial banks. The applicable bank accounts are funded at the time the checks are presented for payment.

     (l) Income Taxes

      Income taxes are accounted for using SFAS No. 109, “Accounting for Income Taxes.” SFAS 109 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred assets based upon the likelihood of realization of tax benefits in future years. Under this method, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances are established when management determines that it is more likely than not that some portion or all of the net deferred tax asset will not be realized. The financial effect of changes in tax laws or rates is accounted for in the period of enactment. The subsequent realization of net operating loss and general business credit carryforwards acquired in acquisitions accounted for using the purchase method of accounting is recorded as a reduction of goodwill.

     (m) Government Assistance

      The Company has access to government programs that are designed to promote film and television production and distribution in Canada. The Company also has access to similar programs in certain states within the U.S. that are designed to promote film and television production in those states.

F-11

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Tax credits earned with respect to expenditures on qualifying film and television productions are included as an offset to investment in films and television programs when the qualifying expenditures have been incurred provided that there is reasonable assurance that the credits will be realized (refer to note 17).

     (n) Foreign Currency Translation

      Monetary assets and liabilities denominated in currencies other than the functional currency are translated at exchange rates in effect at the balance sheet date. Resulting unrealized translation gains and losses are included in the consolidated statement of operations.

      Foreign company assets and liabilities in foreign currencies are translated into United States dollars at the exchange rate in effect at the balance sheet date. Foreign company revenue and expense items are translated at the average rate of exchange for the fiscal year. Gains or losses arising on the translation of the accounts of foreign companies are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity.

     (o) Derivative Instruments and Hedging Activities

      Derivative financial instruments are used by the Company in the management of its foreign currency and interest rate exposures. The Company’s policy is not to use derivative financial instruments for trading or speculative purposes.

      The Company enters into interest rate swap contracts in order to reduce the impact of fluctuating interest rates on its interest-bearing debt. These swap contracts require the periodic exchange of the difference between fixed-rate, generally the same rate being paid on the Company’s underlying debt obligations, and floating-rate interest amounts calculated based on the notional principal amount of the swap contract, which are recorded as interest expense. The related amount payable to or receivable from counterparties is included as an adjustment to interest payable or receivable. The Company evaluates whether the interest rate swap contracts qualify for hedge accounting at the inception of the contract. The fair value of the swap contracts are reflected as an asset or liability on the consolidated balance sheet. Changes in the fair value of the swap contracts that are effective hedges are reflected in accumulated other comprehensive income (loss), a separate component of shareholders’ equity and changes in the fair value of the swap contracts that are ineffective hedges are reflected in the consolidated statement of operations. The interest rate swap contracts entered into by the Company do not qualify for hedge accounting and accordingly the changes in the fair value of the swaps are recorded in the consolidated statement of operations.

      The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses denominated in Canadian dollars. The Company evaluates whether the foreign exchange contracts qualify for hedge accounting at the inception of the contract. The fair value of the forward exchange contracts are recorded on the consolidated balance sheet. Changes in the fair value of the foreign exchange contracts that are effective hedges are reflected in accumulated other comprehensive income (loss), a separate component of shareholders’ equity and changes in the fair value of foreign exchange contracts that are ineffective hedges are reflected in the consolidated statement of operations. Gains and losses realized upon settlement of the foreign exchange contracts are amortized to the consolidated statement of operations on the same basis as the production expenses being hedged. The foreign exchange contracts entered into by the Company are considered effective cash flow hedges and accordingly the changes in the fair value of the foreign exchange contracts are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity until realized.

F-12

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     (p) Stock-Based Compensation

      The Company elected to use the intrinsic value method in accounting for stock based compensation set forth in APB No. 25, “Accounting for Stock Issued to Employees.” In accordance with SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an amendment of SFAS No. 123” the following disclosures are provided about the costs of stock-based compensation awards using the fair value method for companies that elect to use the intrinsic value method. See Recent Accounting Pronouncements for SFAS 123(R).

      The weighted average estimated fair value of each stock option granted in the year ended March 31, 2006 was $3.61 (2005 — $2.80, 2004 — $0.86). The total stock compensation expense for disclosure purposes for the year ended March 31, 2006, based on the fair value of the stock options granted, was $2.0 million (2005 — $1.9 million, 2004 — $1.6 million) and the fair value of stock option modifications was nil (2005 — $0.3 million, 2004 — $0.9 million).

      For disclosure purposes the fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted: a dividend yield of 0%, expected volatility of 33% (2005 — 33%, 2004 — 30%), risk-free interest rate of 4.0% (2005 — 4.0%, 2004 — 3.8%) and expected life of five years.

      The following pro forma basic and diluted income (loss) per common share includes stock-based compensation expense for stock options issued and modified, as described above:

		Year Ended			Year Ended			Year Ended
		March 31,			March 31,			March 31,
		2006			2005			2004
		(Amounts in thousands,
		except per share amounts)
Numerator:
	Net income (loss) available to common shareholders	$	6,096		$	20,281		$	(95,157	)
	Add: stock-based compensation expense calculated using intrinsic value method		27			311			1,740
	Less: stock-based compensation expense for options issued and modified calculated using the fair value method		(2,044	)		(2,257	)		(2,460	)
	Pro forma net income (loss) available to common shareholders	$	4,079		$	18,335		$	(95,877	)
Denominator:
	Weighted average common shares outstanding used in the computation of pro forma basic income (loss) per common share		103,066			97,610			70,656
	Weighted average common shares outstanding used in the computation of pro forma diluted income (loss) per common share		106,102			103,375			70,656
Pro forma basic income (loss) per common share		$	0.04		$	0.19		$	(1.36	)
Pro forma diluted income (loss) per common share		$	0.04		$	0.18		$	(1.36	)

F-13

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     (q) Earnings Per Share

      The Company calculates earnings per share in accordance with SFAS No. 128, “Earnings Per Share.” Basic earnings per share is calculated based on the weighted average common shares outstanding for the period. Diluted earnings per share includes the impact of the convertible senior subordinated notes, convertible promissory notes, share purchase warrants, Series A preferred shares and stock options, if dilutive.

		Year Ended		Year Ended		Year Ended
		March 31,		March 31,		March 31,
		2006		2005		2004
		(Amounts in thousands,
		except per share amounts)
Basic and diluted income (loss) per common share is calculated as follows:
Numerator:
	Net income (loss) available to common shareholders	$	6,096	$	20,281	$	(95,157	)
Denominator:
	Weighted average common shares outstanding (basic)		103,066		97,610		70,656
	Share purchase options		3,036		4,861		—
	Share purchase warrants		—		904		—
	Weighted average common shares outstanding (diluted)		106,102		103,375		70,656
Basic income (loss) per common share		$	0.06	$	0.21	$	(1.35	)
Diluted income (loss) per common share		$	0.06	$	0.20	$	(1.35	)

      Options to purchase 5,170,104 common shares (2005 — 5,767,266 common shares; 2004 — 9,267,163 common shares) at an average price of $4.19 (2005 — $4.29; 2004 — $2.77) were outstanding at March 31, 2006. No share purchase warrants to purchase common shares (2005 — nil; 2004 — 5,249,600 common shares at exercise prices of 2005 — nil; 2004 — $5.00) were outstanding at March 31, 2006. Effective June 27, 2005 the Company, pursuant to its 2004 Performance Incentive Plan, entered into restricted share unit agreements with certain employees and directors. During the year ended March 31, 2006, the Company awarded 570,375 restricted common share units under these agreements. At March 31, 2006, 508,667 restricted share units were outstanding. The 4.875% convertible senior subordinated notes with a principal amount of $60.0 million were outstanding at March 31, 2006 (2005 — $60.0 million; 2004 — $60.0 million ). These notes are convertible into common shares at a conversion rate of 185.0944 common shares per $1,000 principal amount of notes, which is equal to a conversion price of approximately $5.40 per share. The 2.9375% convertible senior subordinated notes with a principal amount of $150.0 million were outstanding at March 31, 2006 (2005 — $150.0 million; 2004 — nil). These notes are convertible into common shares at a conversion rate of 86.9565 common shares per $1,000 principal amount of notes, which is equal to a conversion price of approximately $11.50 per share. The 3.625% convertible senior subordinated notes with a principal amount of $175.0 million were outstanding at March 31, 2006 (2005 — $175.0 million; 2004 — nil). These notes are convertible into common shares at a conversion rate of 70.0133 common shares per $1,000 principal amount of notes, which is equal to a conversion price of approximately $14.28 per share.

      The restricted share units were anti-dilutive in the year ended March 31, 2006 and were not reflected in diluted income per common share for that period. The shares issuable on the potential conversion of the 4.875%, 2.9375% and 3.625% convertible senior subordinated notes were anti-dilutive in each of the years ended March 31, 2006 and 2005 and were not reflected in diluted income per common share for those periods. The share purchase options, the share purchase warrants, the Series A preferred shares, the convertible

F-14

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

promissory notes and the 4.875% convertible senior subordinated notes, if outstanding, were anti-dilutive in the year ended March 31, 2004 and were not reflected in diluted loss per common share for that period.

     (r) Use of Estimates

      The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. The most significant estimates made by management in the preparation of the financial statements relate to ultimate revenue and costs for investment in films and television programs; estimates of sales returns, provision for doubtful accounts, fair value of assets and liabilities for allocation of the purchase price of companies acquired, income taxes and accruals for contingent liabilities; and impairment assessments for investment in films and television programs, property and equipment, goodwill and intangible assets. Actual results could differ from such estimates.

     (s) Reclassifications

      Certain amounts presented in prior years have been reclassified to conform to the current year’s presentation.

     (t) Recent Accounting Pronouncements

      Statement of Financial Accounting Standards Staff Position 115-1. In March 2004, the FASB ratified the measurement and recognition guidance and certain disclosure requirements for impaired securities as described in EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” In November 2005, the FASB issued FASB Staff Position SFAS 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“the FSP”). The FSP nullifies certain requirements of EITF Issue 03-1 and supersedes EITF Topic D-44, “Recognition of Other-Than-Temporary Impairment upon the Planned Sale of a Security Whose Cost Exceeds Fair Value.” The FSP addresses the determination as to when an investment is considered impaired, whether that impairment is other-than-temporary, and the measurement of an impairment loss. The FSP also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than temporary impairments. The FSP is effective for reporting periods beginning after December 15, 2005. The Company believes that the adoption of the FSP will not have a material effect on its results of operations, financial position or cash flows.

      Statement of Financial Accounting Standards No. 154. In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of Accounting Principles Board Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements” (“SFAS 154”). SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting principle (including voluntary changes). Previously, changes in accounting principles were generally required to be recognized by way of a cumulative effect adjustment within net income during the period of the change. SFAS 154 requires retrospective application to prior periods’ financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does not change the transition provisions of any existing accounting pronouncements. The Company will adopt this pronouncement beginning in fiscal year 2007 and does not believe adoption of SFAS 154 will have a material effect on its results of operations, financial position or cash flows.

      Statement of Financial Accounting Standards No. 123R. In December 2004, the FASB issued SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123(R)). SFAS 123(R) revises

F-15

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

SFAS No. 123 and eliminates the alternative to use the intrinsic method of accounting under APB No. 25. SFAS 123(R) requires all public companies accounting for share-based payment transactions in which an enterprise receives employee services in exchange for (a) equity instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments to account for these types of transactions using a fair-value-based method. The Company currently accounts for share-based payments to employees using the intrinsic value method as set forth in APB No. 25 “Accounting for Stock Issued to Employees.” As such, the Company generally recognizes no compensation cost for employee stock options. SFAS No. 123(R) eliminates the alternative to use APB No. 25’s intrinsic value method of accounting. Accordingly, the adoption of SFAS No. 123(R)’s fair value method will have an impact on our results of operations, although it will have no impact on our overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had we adopted SFAS No. 123(R) in prior periods, the impact would have approximated the impact of SFAS No. 123 as described in the disclosure of pro forma net income (loss) available to common shareholders and basic and diluted income (loss) per share in paragraph (p) above. SFAS No. 123(R) permits companies to adopt its requirements using either a modified prospective method or a modified retrospective method. The Company has not yet determined which method it will utilize. The provisions of SFAS No. 123(R) are effective for financial statements with the first interim or annual reporting period beginning after June 15, 2005. However, the SEC announced on April 14, 2005 that it would provide for a phased-in implementation process for SFAS No. 123(R). As a result, the Company will not be required to apply SFAS No. 123(R) until the period beginning April 1, 2006.

      EITF Issue No. 04-8. During the year ended March 31, 2005, the Company adopted EITF Issue No. 04-8 “The Effect of Contingently Convertible Debt on Diluted Earnings Per Share,” which applied to reporting periods ending after the effective date of December 15, 2004. Under EITF Issue No. 04-8, all instruments that have embedded conversion features that are contingent on market conditions indexed to an issuer’s share price are included in diluted earnings per share computations (if dilutive) regardless of whether the market conditions have been met. On October 4, 2004, Lions Gate Entertainment Inc., a wholly owned subsidiary of the Company sold $150.0 million 2.9375% Convertible Senior Subordinated Notes (“2.9375% Notes”) with a maturity date of October 15, 2024. The 2.9375% Notes are convertible at the option of the holder, at any time prior to maturity, upon satisfaction of certain conversion contingencies, into common shares of Lions Gate Entertainment Corp., and therefore the 2.9375% Notes would be included in diluted earnings per share computations for the years ended March 31, 2006 and 2005 (if dilutive).

      Variable Interest Entities. In January 2003, the FASB issued FIN 46, which is effective for financial statements of public companies that have special purpose entities for periods ending after December 15, 2003 and for public companies without special purpose entities for periods ending after March 15, 2004. The standard establishes criteria to identify Variable Interest Entities (“VIEs”) and the primary beneficiary of such entities. An entity that qualifies as a VIE must be consolidated by its primary beneficiary. Accordingly, the Company has consolidated its VIE Christal Films Distribution Inc. (“Christal”) as of March 31, 2005 and 2004. On April 13, 2005, Maple Pictures Corp. purchased a majority of the Company’s interest in Christal (refer to note 6). Also on April 13, 2005, Christal repurchased the Company’s remaining interest in Christal and therefore beginning April 2005, Christal is no longer being consolidated by the Company. The divestiture of the Company’s interest in Christal is not material to our consolidated financial statements.

F-16

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Investments

      As of March 31, 2006, the cost, unrealized losses and carrying value of the Company’s available-for-sale investments were as follows:

			Unrealized
			Holding			Carrying
	Cost		Losses			Value
	(Amounts in thousands)
Auction Rate Preferreds
Auction rate preferred stock	$	107,631	$	—		$	107,631
Auction rate notes		39,000		—			39,000
		146,631		—			146,631
Municipal Obligations
Municipal obligations		20,450		—			20,450
Equity Securities
Equity securities		15,008		(87	)		14,921
	$	182,089	$	(87	)	$	182,002

      During the year ended March 31, 2006, the Company began investing in auction rate preferred stock and auction rate notes (collectively, the “auction rate preferreds”). Auction rate preferred stock is preferred stock with a dividend rate determined periodically, typically less than every 90 days, based on an auction mechanism. Auction rate notes are debt instruments. The interest rate for the auction rate notes will adjust to current market rates at each interest reset date, typically every seven, 28 or 35 days. The interest rates are impacted by various factors, including credit risk, tax risk, general market interest rate risk and other factors. Auction rate preferreds do not meet the definition of a cash equivalent since they do not have scheduled maturities of less than 90 days from investment. All of the Company’s $146.6 million investment in auction rate preferreds as of March 31, 2006 are invested in securities rated as “AAA.”

      All of the Company’s $20.5 million investments in municipal obligations as of March 31, 2006 are invested in securities rated at “AAA.”

      Equity securities are comprised of the Company’s investment in the common shares of Image Entertainment, Inc. (“Image”), a distributor of DVDs and entertainment programming. During the year ended March 31, 2006, the Company purchased in the open market 1,150,000 common shares of Image for $3.5 million in cash, representing an average cost per share of $3.02. Also during the year ended March 31, 2006 the Company completed a negotiated exchange with certain shareholders of Image in which the Company exchanged 1,104,004 of its common shares (at $10.45 per share) in return for 2,883,996 common shares of Image (at $4.00 per share). The cost on an exchanged basis of the additional 2,883,996 common shares of Image is $11.5 million. As of March 31, 2006, the Company held 4,033,996 common shares of Image acquired at an average cost per share of $3.72; the shares held by the Company represent approximately 18.9% of Image’s outstanding common shares. The closing price of Image’s common shares on March 31, 2006 was $3.70 per common share. As a result, the Company had an unrealized loss of $0.1 million on its investment in Image common shares as of March 31, 2006. The Company has reported the $0.1 million unrealized loss as other comprehensive loss in the consolidated statement of shareholder’s equity as of March 31, 2006.

F-17

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      As of March 31, 2006, the contractual maturities of the Company’s investments available-for-sale were as follows:

			Fair
	Cost		Value
	(Amounts in thousands)
Due after ten years	$	59,450	$	59,450
Auction rate preferred stock		107,631		107,631
Equity securities		15,008		14,921
Total available for sale	$	182,089	$	182,002

4. Investment in Films and Television Programs

	March 31,		March 31,
	2006		2005
	(Amounts in thousands)
Theatrical and Non-Theatrical Films
Released, net of accumulated amortization	$	154,574	$	113,536
Acquired libraries, net of accumulated amortization		105,144		109,805
Completed and not released		30,444		12,083
In progress		47,487		42,581
In development		3,104		2,302
Product inventory		28,179		26,029
		368,932		306,336
Direct-to-Television Programs
Released, net of accumulated amortization		36,003		21,098
In progress		12,311		39,221
In development		504		721
		48,818		61,040
	$	417,750	$	367,376

      Acquired libraries of $105.1 million at March 31, 2006 (March 31, 2005 — $109.8 million) include the Trimark library acquired October 2000, the Artisan library acquired December 2003 (refer to note 14), the Modern Entertainment, Ltd. (“Modern”) library acquired in August 2005 and the Redbus library acquired in October 2005 (refer to note 14). On August 17, 2005, the Company acquired certain of the film assets and accounts receivable of Modern, a licensor of film rights to DVD distributors, broadcasters and cable networks for total consideration of $7.3 million, comprised of $3.5 million in cash and 399,042 shares of the Company’s common shares valued at $3.8 million. In addition, the Company recorded $0.2 million in direct transaction costs comprised primarily of legal costs incurred in connection with the purchased assets. The allocation of the Modern purchase price to the assets acquired was $5.3 million to investment in films and television programs and $2.2 million to accounts receivable. The Trimark library is amortized over its expected revenue stream for a period of 20 years from the acquisition date. The remaining amortization period on the Trimark library at March 31, 2006 is 14.5 years on unamortized costs of $19.0 million. The Artisan library includes titles released at least three years prior to the date of acquisition and is amortized over its expected revenue stream for a period of 20 years from the date of acquisition. The remaining amortization period on the Artisan library at March 31, 2006 is 17.75 years on unamortized costs of $78.9 million. The Modern library is amortized over its expected revenue stream for a period of 20 years from the acquisition date. The remaining amortization period

F-18

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

on the Modern library at March 31, 2006 is 19.25 years on unamortized costs of $5.2 million. The Redbus library includes titles released at least three years prior to the date of acquisition and is amortized over its expected revenue stream for a period of 20 years from the date of acquisition. The remaining amortization period on the Redbus library at March 31, 2006 is 19.5 years on unamortized costs of $2.0 million.

      The Company expects approximately 46% of completed films and television programs, net of accumulated amortization will be amortized during the one-year period ending March 31, 2007. Additionally, the Company expects approximately 80% of completed and released films and television programs, net of accumulated amortization and excluding acquired libraries, will be amortized during the three year period ending March 31, 2009.

      Interest capitalized relating to productions during the year ended March 31, 2006 amounted to nil (2005 — $1.0 million; 2004 — $1.3 million).

5. Property and Equipment

	March 31, 2006				March 31, 2005
			Accumulated				Accumulated
	Cost		Depreciation		Cost		Depreciation
	(Amounts in thousands)
Land held for leasing purposes	$	—	$	—	$	11,988	$	—
Buildings held for leasing purposes		—		—		19,875		5,024
Leasehold improvements		1,518		870		971		650
Furniture and equipment		1,072		949		3,359		2,632
Computer equipment and software		10,772		4,325		8,180		5,225
	$	13,362	$	6,144	$	44,373	$	13,531
Net book value			$	7,218			$	30,842

6. Other Assets

	March 31,		March 31,
	2006		2005
	(Amounts in thousands)
Deferred financing costs, net of accumulated amortization	$	15,626	$	18,882
Prepaid expenses and other		13,037		6,476
Intangible assets, net		1,478		2,178
Deferred print costs		564		1,922
	$	30,705	$	29,458

      Deferred Financing Costs. Deferred financing costs primarily include costs incurred in connection with the credit facility (see note 7) and the issuance of the 4.875% Notes, the 2.9375% Notes and the 3.625% Notes (see note 9) and are deferred and amortized to interest expense.

      Intangible Assets. Intangible assets acquired in connection with the purchase of Artisan of $5.1 million represent distribution and personal service agreements and are amortized over a period of two to four years from the date of acquisition. In June 2005, the Company acquired all of the publishing assets of a music publishing company, for a total purchase price of $1.3 million in cash. The publishing rights are amortized over a three-year period from the date of acquisition. Amortization expense of $2.0 million was recorded for the year ended March 31, 2006 (2005 — $2.2 million). Based on the current amount of intangibles subject to

F-19

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

amortization, the estimated amortization expense for each of the succeeding years is $0.9 million, $0.5 million and $0.1 million for the years ending March 31, 2007, 2008 and 2009, respectively.

Equity Method Investees.

      Maple: On April 8, 2005, Lionsgate entered into library and output agreements with Maple Pictures, a Canadian corporation, for the distribution of Lionsgate’s motion picture, television and home video product in Canada. As part of this transaction, Maple Pictures purchased a majority of the Company’s interest in Christal Distribution, a number of production entities and other Lionsgate distribution assets in Canada. Maple Pictures was formed by two former Lionsgate executives and a third-party equity investor. Lionsgate also acquired a 10% minority interest in Maple Pictures.

      As a result of these transactions with Maple Pictures, Lionsgate recorded an investment in Maple Pictures of $2.1 million as of June 30, 2005 in other assets in the consolidated balance sheet. The Company is accounting for the investment in Maple Pictures using the equity method. For the year ended March 31, 2006, a loss of $0.1 million is recorded in equity interests in the consolidated statements of operations and the investment in Maple Pictures is $2.0 million as of March 31, 2006.

      At March 31, 2006, other investments in equity method investees have been reduced to nil, however the following transactions related to equity method investees occurred during the three years ended March 31, 2006.

      Mandalay: During fiscal 2003, the Company received distributions of $2.4 million from Mandalay Pictures, LLC (“Mandalay”) under a prior agreement and also recorded equity losses of $2.1 million against its remaining investment in Mandalay. On November 8, 2002, the Company sold its investment in Mandalay for cash of $4.3 million and an interest bearing convertible promissory note totaling $3.3 million. The gain of $2.1 million recorded on the sale was disclosed in the consolidated statement of operations for the year ended March 31, 2003 as gain on sale of equity interests. The note, bearing interest at 6%, is payable $1.3 million on December 31, 2005, $1.0 million on December 31, 2006 and $1.0 million on December 31, 2007. At March 31, 2004 it was determined that the collectibility of the note was not reasonably assured and accordingly, the Company recorded a provision of $3.6 million against its promissory note and accrued interest. The provision was disclosed in the consolidated statement of operations for the year ended March 31, 2004 as write-down of other assets. In October 2004, the Company collected $0.2 million in cash on the promissory note and recorded this amount as interest and other income in the consolidated statement of operations for the year ended March 31, 2005.

      CinemaNow: At March 31, 2006, the Company had a 30% equity interest in CinemaNow. The investment in CinemaNow was accounted for using the equity method. For the year ended March 31, 2004 a loss of $0.2 million is recorded in equity interests in the consolidated statement of operations and the investment in CinemaNow was reduced to nil by March 31, 2004. In July 2004, the Company purchased $0.2 million Series D Convertible Preferred Shares as part of an $11 million round of financing secured by CinemaNow. For the year ended March 31, 2005, a loss of $0.2 million is recorded in equity interests in the consolidated statement of operations and the investment in CinemaNow was nil at March 31, 2005.

      Christal: At March 31, 2005, the Company had a 75% economic interest and a 30% voting interest in Christal, a film distributor and sub-distributor in Quebec, Canada. At March 31, 2004, the Company identified Christal as a VIE as the voting rights of some investors in Christal are not proportional to the economic interests and substantially all of Christal’s activities either involved or were conducted on behalf of the Company with the disproportionately fewer voting rights as of the determination date. Additionally, the Company determined that it is the primary beneficiary as the Company would have to absorb greater than 50% of Christal’s expected losses and has the right to more than 50% of their expected residual returns. Under FIN 46, an entity that qualifies as a VIE must be consolidated by its primary beneficiary and therefore the

F-20

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company consolidated Christal as at March 31, 2004. Prior to March 31, 2004, the investment in Christal was accounted for using the equity method. Therefore, for the year ended March 31, 2004 a loss in the amount of $0.1 million is recorded in equity interests in the consolidated statements of operations.

      On April 13, 2005, Maple Pictures Corp. purchased a majority of the Company’s interest in Christal. Also on April 13, 2005, Christal repurchased the Company’s remaining interest in Christal and therefore beginning April 2005, Christal is no longer being consolidated by the Company. The divestiture of the Company’s interest in Christal is not material to our consolidated financial statements.

      CinéGroupe Corporation: During the year ended March 31, 2004, the Company had a 29.4% investment in CinéGroupe Corporation (together with its subsidiaries Animation Cinepix Inc., “CinéGroupe”), a Canadian animation company, which had been accounted for under the equity method. In December 2003, the Company evaluated its investment in CinéGroupe as CinéGroupe was unable to meet its financial obligations in the ordinary course of business and sought protection under the Companies’ Creditors Arrangement Act (“CCAA”). As a result of the CCAA filing, the Company determined that it no longer had the ability to significantly influence CinéGroupe and began accounting for CinéGroupe under the cost method of accounting. The Company wrote off $8.1 million of convertible debentures and other receivables due from CinéGroupe which was disclosed in the consolidated statement of operations for the year ended March 31, 2004 as write-down of other assets. For the year ended March 31, 2004, prior to cost accounting for CinéGroupe, a loss in the amount of $1.9 million was recorded in other equity interests in the consolidated statements of operations. The investment in CinéGroupe was nil at March 31, 2006 and 2005 under the cost method of accounting.

7. Bank Loans

      The Company entered into a $350 million credit facility in December 2003 consisting of a $200 million U.S. dollar-denominated revolving credit facility, a $15 million Canadian dollar-denominated revolving credit facility and a $135 million U.S. dollar-denominated term-loan. In anticipation of the proceeds from the 2.9375% Notes, the Company repaid $60 million of term loan with the revolving credit facility on September 30, 2004 and on October 4, 2004 used the proceeds from the 2.9375% Notes to partially repay the revolving credit facility. Therefore, on September 30, 2004, the term loan was reduced to $75 million and the credit facility to $290 million. On December 31, 2004, the Company repaid the term loan in full, thereby reducing the credit facility to $215 million at March 31, 2005. The repayment of the term loan resulted in the write-off of deferred financing fees of $3.4 million on the term loan portion of the credit facility which is recorded as interest expense. Effective March 31, 2005, the credit facility was amended to eliminate the $15 million Canadian dollar-denominated revolving credit facility and increase the U.S. dollar-denominated revolving credit facility by the same amount. At March 31, 2006, the Company had no borrowings (March 31, 2005 — nil) under the credit facility. The credit facility expires December 31, 2008 and bears interest at 2.75% over the Adjusted LIBOR or the Canadian Bankers Acceptance rate, or 1.75% over the U.S. or Canadian prime rates. The availability of funds under the credit facility is limited by the borrowing base, which is calculated on a monthly basis. Amounts available under the credit facility are also limited by outstanding letters of credit which amounted to $3.8 million at March 31, 2006. The borrowing base assets at March 31, 2006 totaled $461.6 million (March 31, 2005 — $405.1 million) and therefore $211.2 million is available under the credit facility at March 31, 2006. The Company is required to pay a monthly commitment fee of 0.50% per annum on the total credit facility of $215 million less the amount drawn. Right, title and interest in and to all personal property of Lions Gate Entertainment Corp. and Lions Gate Entertainment Inc. is pledged as security for the credit facility. The credit facility is senior to the Company’s film obligations and subordinated notes. The credit facility restricts the Company from paying cash dividends on its common shares. The Company entered into a $100 million interest rate swap at an interest rate of 3.08%, commencing January 2003 and ended September 2005. The swap was in effect as long as three month LIBOR was less than 5.0%. Fair market value of the interest rate swap at the maturity date of September 30, 2005 was nil

F-21

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(March 31, 2005 — $0.1 million). Changes in the fair value representing fair valuation losses on the interest rate swap during the year ended March 31, 2006 amount to $0.1 million (2005 — gains of $2.5 million) and are included in the consolidated statements of operations. On October 17, 2005, the Company amended the credit facility in connection with its acquisition of Redbus Film Distribution Limited and Redbus Pictures Limited (collectively, “Redbus”) to make available $10 million of the credit facility for borrowing by the new Redbus subsidiaries in either U.S. dollars or British pounds sterling.

8. Film Obligations

	March 31,		March 31,
	2006		2005
	(Amounts in thousands)
Minimum guarantees	$	22,865	$	5,210
Minimum guarantees and production obligations initially incurred for a term of more than one year		76,821		18,081
Participation and residual costs		164,326		95,650
Theatrical marketing		1,770		1,665
Film productions		19,205		10,164
	$	284,987	$	130,770

      The Company expects approximately 61% of accrued participants’ shares will be paid during the one-year period ending March 31, 2007.

      Refer to note 2 for restricted cash contractually designated for the theatrical marketing obligation.

9. Subordinated Notes

      3.625% Notes. In February 2005, Lions Gate Entertainment Inc. sold $150.0 million of 3.625% Convertible Senior Subordinated Notes. In connection with this sale, Lions Gate Entertainment Inc. granted the initial purchasers of the 3.625% Notes an option to purchase up to an additional $25.0 million of the 3.625% Notes for 13 days. The fair value of this option was not significant. The initial purchasers exercised this option in February 2005 and purchased an additional $25 million of the 3.625% Notes. The Company received $170.2 million of net proceeds after paying placement agents’ fees from the sale of $175.0 million of the 3.625% Notes. The Company also paid $0.6 million of offering expenses incurred in connection with the 3.625% Notes. Interest on the 3.625% Notes is payable semi-annually on March 15 and September 15 commencing on September 15, 2005. After March 15, 2012, interest will be 3.125% per annum on the principal amount of the 3.625% Notes, payable semi-annually on March 15 and September 15 of each year. The 3.625% Notes mature on March 15, 2025. Lions Gate Entertainment Inc. may redeem all or a portion of the 3.625% Notes at its option on or after March 15, 2012 at 100% of their principal amount, together with accrued and unpaid interest through the date of redemption.

      The holder may require Lions Gate Entertainment Inc. to repurchase the 3.625% Notes on March 15, 2012, 2015 and 2020 or upon a change in control at a price equal to 100% of the principal amount, together with accrued and unpaid interest through the date of repurchase. Under certain circumstances, if the holder requires Lions Gate Entertainment Inc. to repurchase all or a portion of their notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of the common shares of the Company on the effective date of the change in control. No make whole premium will be paid if the price of the common shares of the Company is less than $10.35 per share or if the price of the common shares of the Company exceeds $75.00 per share.

F-22

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The 3.625% Notes are convertible, at the option of the holder, at any time before the close of business on or prior to the trading day immediately before the maturity date, if the notes have not been previously redeemed or repurchased, at a conversion rate of 70.0133 shares per $1,000 principal amount of the 3.625% Notes, subject to adjustment in certain circumstances, which is equal to a conversion price of approximately $14.28 per share. Upon conversion of the 3.625% Notes, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company. The holder may convert the 3.625% Notes into common shares of the Company prior to maturity if the notes have been called for redemption, a change in control occurs or certain corporate transactions occur.

      The fair value of the 3.625% Notes is approximately $165 million based on current market quotes at March 31, 2006.

      2.9375% Notes. In October 2004, Lions Gate Entertainment Inc. sold $150.0 million of 2.9375% Convertible Senior Subordinated Notes. The Company received $146.0 million of net proceeds after paying placement agents’ fees from the sale of $150.0 million of the 2.9375% Notes. The Company also paid $0.7 million of offering expenses incurred in connection with the 2.9375% Notes. Interest on the 2.9375% Notes is payable semi-annually on April 15 and October 15 commencing on April 15, 2005 and the 2.9375% Notes mature on October 15, 2024. From October 15, 2009 to October 14, 2010, Lions Gate Entertainment Inc. may redeem the 2.9375% Notes at 100.839%; from October 15, 2010 to October 14, 2011, Lions Gate Entertainment Inc. may redeem the 2.9375% Notes at 100.420%; and thereafter at 100%.

      The holder may require Lions Gate Entertainment Inc. to repurchase the 2.9375% Notes on October 15, 2011, 2014 and 2019 or upon a change in control at a price equal to 100% of the principal amount, together with accrued and unpaid interest through the date of repurchase. Under certain circumstances, if the holder requires Lions Gate Entertainment Inc. to repurchase all or a portion of their notes upon a change in control, they will be entitled to receive a make whole premium. The amount of the make whole premium, if any, will be based on the price of the common shares of the Company on the effective date of the change in control. No make whole premium will be paid if the price of the common shares of the Company is less than $8.79 per share or if the price of the common shares of the Company exceeds $50.00 per share.

      The holder may convert the 2.9375% Notes into common shares of the Company prior to maturity only if the price of the common shares of the Company issuable upon conversion of a note reaches a specified threshold over a specified period, the trading price of the notes falls below certain thresholds, the notes have been called for redemption, a change in control occurs or certain corporate transactions occur. In addition, under certain circumstances, if the holder converts their notes upon a change in control they will be entitled to receive a make whole premium. Before the close of business on or prior to the trading day immediately before the maturity date if the notes have not been previously redeemed or repurchased, the holder may convert the notes into common shares of the Company at a conversion rate of 86.9565 shares per $1,000 principal amount of the 2.9375% Notes, subject to adjustment in certain circumstances, which is equal to a conversion price of approximately $11.50 per share.

      The fair value of the 2.9375% Notes is approximately $152 million based on current market quotes at March 31, 2006.

      4.875% Notes. In December 2003, Lions Gate Entertainment Inc. sold $60.0 million of 4.875% Convertible Senior Subordinated Notes. The Company received $57.0 million of net proceeds after paying placement agents’ fees from the sale of $60.0 million of the 4.875% Notes. The Company also paid $0.7 million of offering expenses incurred in connection with the 4.875% Notes. Interest on the 4.875% Notes is due semi-annually on June 15 and December 15 commencing on June 15, 2004 and the 4.875% Notes mature on December 15, 2010. Lions Gate Entertainment Inc. may redeem all or a portion of the 4.875% Notes at its option on or after December 15, 2006 at 100% of their principal amount, together with accrued and unpaid interest through the date of redemption; provided, however, that the 4.875% Notes will

F-23

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

only be redeemable if the closing price of the Company’s common shares equals or exceeds $9.45 per share for at least 20 trading days within a period of 30 consecutive trading days ending on the day before the date of the notice of optional redemption.

      The 4.875% Notes are convertible, at the option of the holder, at any time before the close of business on or prior to the trading day immediately before the maturity date if the notes have not been previously redeemed or repurchased at a conversion rate of 185.0944 shares per $1,000 principal amount of the 4.875% Notes, subject to adjustment in certain circumstances, which is equal to a conversion price of approximately $5.40 per share. Upon conversion of the 4.875% Notes, the Company has the option to deliver, in lieu of common shares, cash or a combination of cash and common shares of the Company. The holder may convert the 4.875% Notes into common shares of the Company prior to maturity if the notes have been called for redemption, a change in control occurs or certain corporate transactions occur.

      The fair value of the 4.875% Notes is approximately $115 million based on current market quotes at March 31, 2006.

      Promissory Note. On December 15, 2003, the Company assumed, as part of the purchase of Artisan, a $5.0 million subordinated promissory note to Vialta, Inc (“Promissory Note”) issued by Artisan which bears interest at 7.5% per annum compounded quarterly. The Promissory Note matured on April 1, 2005 and was paid during April 2005.

10. Mortgages Payable

      In January 2006, the Company entered into an amended agreement to sell its studios facilities located in Vancouver, British Columbia (see note 14). The agreement required the partnership to pay off the remaining balances of its mortgages payable at the close of the transaction. On March 15, 2006, the Company paid the remaining mortgages balances of $16.8 million. As a result, the Company had no mortgages payable at March 31, 2006. The studio facility subsidiary of the Company had mortgages payable at March 31, 2005 of $18.6 million (bearing interest at 5.62% to 7.51%).

      The studio facility subsidiary of the Company entered into a CDN$20 million interest rate swap at a fixed interest rate of 5.62%, commencing September 2003 and ending September 2008. In connection with the payoff of the remaining balances of its mortgages payable on its studio facilities, the Company terminated the CDN$20 million interest rate swap. The close-out value of the CDN$20 million interest rate swap was approximately $0.1 million which the Company paid on March 15, 2006. The subsidiary did not require collateral or other security to support this contract. The subsidiary entered into the interest rate swap as a condition of its loan which stated the interest rates under the facility were to be fixed either by way of a fixed rate term loan or by way of an interest rate swap. During the year ended March 31, 2006, the subsidiary recorded interest expense of $1.0 million (2005 — $1.3 million; 2004 — $1.0 million), including amounts incurred under the interest rate swap, that approximates the amount they would have paid if they had entered into a fixed rate loan agreement. Fair market value of the interest rate swap at March 31, 2006 is nil (2005 — negative $0.3 million; 2004 — negative $0.6 million). The fair valuation gain for the year ended March 31, 2006 is $0.2 million (2005 — $0.3 million; 2004 — loss of $0.6 million).

11. Series A Preferred Shares and Share Warrants

      Series A Preferred Shares. The Company’s Series A preferred shares were redeemable by the holder following certain events outside the control of the Company and accordingly were presented outside of shareholders’ equity on the consolidated balance sheet.

      On December 21, 1999, the Company issued 13,000 units at a price of $2,550 per unit. Each unit consisted of one 5.25% convertible, non-voting (except for the right to elect between one and three directors, depending on the number of preferred shares outstanding) redeemable Series A preferred share and

F-24

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

425 detachable common share purchase warrants (for a total of 5,525,000 common share purchase warrants). The proceeds received on the offering were allocated as follows: common share purchase warrants were valued at fair value, using the Black-Scholes option pricing model, of $0.706 per warrant or $3.9 million (which have been included in common shares in the consolidated statements of shareholders’ equity) and the basic preferred shares were valued at the residual value of $27.6 million, after deducting $1.7 million of share issue costs. On or after January 1, 2003, the Company could convert the preferred shares, in whole or in part, to common shares on the same terms as the holders, subject to certain conditions. The preferred shares were entitled to cumulative dividends, as and when declared by the Board, payable semi-annually on the last day of March and September of each year. The Company could pay the dividends in cash or additional preferred shares. On September 30, 2003, and March 31, 2004 the Company declared and paid cash dividends of $0.3 million or $66.94 per share and $0.1 million or $66.94 per share, respectively. On September 30, 2002, and March 31, 2003 the Company declared and paid cash dividends of $0.8 million or $66.94 per share and $0.8 million or $66.94 per share, respectively. On September 30, 2001, the Company declared and paid cash dividends of $0.8 million or $66.94 per share. On March 31, 2002, the Company declared dividends of $0.8 million or $66.94 per share, which were paid in cash and 273 additional shares with a value of $0.7 million. The number of shares to be issued was calculated by using the semi-annual dividend rate of 2.625% multiplied by the number of outstanding preferred shares at March 31, 2002, less applicable withholding taxes. The withholding taxes and fractional shares were paid in cash of $0.1 million.

      In June 2003, the Company repurchased 8,040 Series A preferred shares at a per share purchase price of $2,250, or total purchase price of $18.1 million. The difference of $0.6 million, between the purchase price of the Series A preferred shares and the assigned value of the Series A preferred shares at the time of repurchase, represents a contribution by the preferred shareholders which accrues to the benefit of the remaining common shareholders and is classified on the consolidated balance sheet as accumulated paid in capital.

      When the preferred shares were originally issued each holder of the preferred shares could convert all, but not less than all, of the preferred shares at any time into common shares at a rate of 1,000 common shares for each preferred share, subject to certain anti-dilution adjustments. During the years ended March 31, 2002, and 2000, 648 and 795 preferred shares were converted by the preferred shareholders, respectively. In September 2003, the shareholders approved a special resolution resolving that the preferred shares would be convertible at the option of the holder into common shares at a rate of 1,109 common shares for each preferred share, subject to certain anti-dilution adjustments. During the year ended March 31, 2004, 1,804 preferred shares were converted by the preferred shareholders into common shares at this amended rate. The Company exercised its right to convert the remaining 1,986 preferred shares to common shares on February 27, 2004. At March 31, 2004 there were no preferred shares outstanding.

      The difference between the initial carrying value of the preferred shares of $27.6 million and the redemption price of $34.8 million, after giving effect to conversions and repurchases through March 31, 2004, was accreted as a charge to accumulated deficit using the effective interest method over the five-year period from the date of issuance to the first available redemption date. The Company ceased accreting this charge to accumulated deficit when all remaining preferred shares were converted to common shares in February 2004.

      Warrants. Each share purchase warrant entitled the holder to purchase one common share at a price of $5.00. The warrants were not transferable except with the consent of the Company. On December 15, 2003, the Board of Directors of the Company resolved that the term of the Company’s 5,525,000 warrants issued in December 1999 would be extended by one year. The warrants expired January 1, 2005 instead of January 1, 2004. The modification of these warrants is treated as an exchange of the original warrant for a new warrant. The fair value of the new warrant is measured at the date the new warrant is issued and the value of the old warrant is its fair value immediately before its terms were modified. The additional incremental fair value of the new warrants is $2.0 million for the year ended March 31, 2004 and is considered a distribution to preferred shareholders and therefore is included in net loss available to common shareholders. On March 4,

F-25

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2004, 275,400 warrants were exercised and 275,400 common shares were issued. The Company received $1.4 million of proceeds.

      In December 2004, the Company amended the outstanding warrants to allow the holders, at their option, to exercise by cashless exercise. Each warrant was exchangeable for Company common shares determined by taking the difference in the market price of the Company’s shares (defined as the average closing trading price per common share for the twenty consecutive trading days ending on the third day before the exercise date) less the exercise price of $5.00 and dividing this number by the market price. During December 2004, 1,993,250 warrants were exercised by cashless exercise resulting in the issuance of 1,052,517 common shares. The remaining 1,088,000 warrants expired January 1, 2005. As of March 31, 2005, no warrants were outstanding.

12. Accumulated Other Comprehensive Income (Loss)

      Components of accumulated other comprehensive income (loss) are as follows:

							Unrealized
	Foreign						Gain (Loss)			Accumulated
	Currency			Unrealized			on Foreign			Other
	Translation			Loss on			Exchange			Comprehensive
	Adjustments			Securities			Contracts			Income (Loss)
	(Amounts in thousands)
Balance at March 31, 2004	$	(7,975	)	$	(32	)	$	622		$	(7,385	)
Current year change		2,374			32			(318	)		2,088
Balance at March 31, 2005		(5,601	)		—			304			(5,297	)
Current year change		2,223			(87	)		(356	)		1,780
Balance at March 31, 2006	$	(3,378	)	$	(87	)	$	(52	)	$	(3,517	)

13. Capital Stock

     (a) Common Shares

      On October 3, 2003, the Company filed a shelf registration statement to potentially offer for sale common shares, preferred shares, debt securities, warrants, purchase contracts, units and depository shares. The Company may sell any combination of the foregoing securities in one or more offerings up to an aggregate initial offering price of $250 million during the period that the registration statement remains effective.

      In October 2003, the Company sold 28,750,000 common shares at a public offering price of $2.70 per share and received $73.5 million of net proceeds, after deducting underwriting expenses. The Company incurred offering expenses of $0.5 million.

      In June 2003, the Company sold 16,201,056 common shares at a public offering price of $2.05 per share and received $31.2 million of net proceeds, after deducting underwriting expenses. The Company incurred offering expenses of $1.0 million.

     (b) Series B Preferred Shares

      As a condition of the purchase of a subsidiary, on October 13, 2000, the Company issued ten shares at $10 per share to the principal shareholder of Trimark. The shares are non-transferable and are not entitled to dividends. The shares are non-voting except that the holder, who was a principal of the subsidiary acquired, has the right to elect himself to the Board of Directors. The shares are redeemable by the Company if certain events occur. The shares have a liquidation preference equal to the stated value of $10 per share.

      The Company’s Series B preferred shares have been included in shareholders’ equity.

F-26

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     (c) Stock-Based Compensation Plans

      The shareholders approved an Employees’ and Directors’ Equity Incentive Plan (the “Plan”) that provides for the issue of up to 8.0 million common shares of the Company to eligible employees, directors and service providers of the Company and its affiliates. On July 25, 2003, the Board of Directors increased the number of shares authorized for stock options from 8.0 million to 9.0 million. Of the 9.0 million common shares allocated for issuance, up to a maximum of 250,000 common shares may be issued as discretionary bonuses in accordance with the terms of a share bonus plan. During fiscal 2004, no shares were issued under the share bonus plan.

      The Plan authorizes the granting of options to purchase Company common shares at an option price at least equal to the weighted average price of the shares for the five trading days prior to the grant. The options generally vest within three years of grant, and have a maximum term of five years.

      On June 28, 2004, the Board of Directors adopted the 2004 Performance Incentive Plan (the “2004 Plan”). The shareholders approved the 2004 Plan at the 2004 Annual Meeting held on September 14, 2004. With the approval of the 2004 Plan, no new awards were granted under the Plan subsequent to the 2004 Annual Meeting. Any remaining shares available for additional grant purposes under the Plan may be issued under the 2004 Plan. The 2004 Plan provides for the issue of up to an additional 2.0 million common shares of the Company to eligible employees, directors, officers and other eligible persons through the grant of awards and incentives for high levels of individual performance and improved financial performance of the Company. The 2004 Plan authorizes stock options, share appreciation rights, restricted shares, share bonuses and other forms of awards granted or denominated in the Company’s common shares. The per share exercise price of an option granted under the 2004 Plan generally may not be less than the fair market value of a common share of the Company on the date of grant. The maximum term of an option granted under the 2004 Plan is ten years from the date of grant. At March 31, 2006, 377,004 common shares were available for grant under the 2004 Plan.

      On November 13, 2001, the Board of Directors of the Company resolved that 750,000 options, granted to certain officers of the Company to purchase common shares of the Company, be revised as stock appreciation rights (“SARs”) which entitle the holders to receive cash only and not common shares. The amount of cash received will be equal to the amount by which the trading price of common shares on the exercise notice date exceeds the SARs price of $5.00 multiplied by the number of options exercised. Any twenty-day average trading price of common shares prior to the exercise notice date has to be $6.00 or above in order for the officers to exercise their SARs. These SARs are not considered part of the Employees’ and Directors’ Equity Incentive Plan. The Company measures compensation expense as the amount by which the market value of common shares exceeds the SARs price. At March 31, 2006, the market price of common shares was $10.15 (March 31, 2005 — $11.05) and the SARs had all vested. Due to the reduction in market price of its common shares, the Company recorded a reduction in stock compensation expense in the amount of $0.7 million in general and administration expenses in the consolidated statement of operations for the year ended March 31, 2006 (2005 expenses — $3.6 million; 2004 expenses — $0.9 million). The expense is calculated by using the market price of common shares on March 31, 2006 less the SARs price, multiplied by the 750,000 SARs vested. At March 31, 2006, the Company has a stock-based compensation accrual in the amount of $3.8 million (March 31, 2005 — $4.5 million) included in accounts payable and accrued liabilities on the consolidated balance sheets relating to these SARs.

      On February 2, 2004, an officer of the Company was granted 1,000,000 SARs, which entitle the officer to receive cash only, and not common shares. The amount of cash received will be equal to the amount by which the trading price of common shares on the exercise notice date exceeds the SARs price of $5.20 multiplied by the number of SARs exercised. The SARs vest one quarter immediately on the award date and one quarter on each of the first, second and third anniversaries of the award date. These SARs are not considered part of the Employees’ and Directors’ Equity Incentive Plan. Applying FIN 28 “Accounting for Stock Appreciation

F-27

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Rights and Other Variable Stock Option or Award Plans,” the Company is accruing compensation expense over the service period, which is assumed to be the three year vesting period, using a graded approach and measures compensation cost as the amount by which the market value of common shares exceeds the SARs price times the SARs assumed to have vested under the graded approach. At March 31, 2006, the market price of common shares was $10.15 (March 31, 2005 — $11.05). The Company recorded stock-based compensation expense related to these SARs in the amount of $0.4 million in general and administration expenses in the consolidated statement of operations for the year ended March 31, 2006 (2005 — $4.3 million; 2004 — nil). During the year ended March 31, 2005 the officer exercised 150,000 of the vested SARs and the Company paid $0.9 million. The total expense is calculated by using the market price of common shares on March 31, 2006 less the SARs price, multiplied by the remaining 779,745 SARs assumed to have vested and adding the actual expense of $0.9 million for the 150,000 SARs exercised. At March 31, 2006, the Company has a stock-based compensation accrual of $3.9 million (March 31, 2005 — $3.5 million), included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets relating to these SARs.

      Changes in stock options granted and outstanding for fiscal 2004, 2005 and 2006 were as follows:

				Weighted Average
	Number of Shares			Exercise Price
Outstanding at March 31, 2003		8,410,993		$	2.73
Granted		2,215,500			2.98
Exercised		(955,562	)		2.72
Forfeited		(260,022	)		2.77
Expired		(143,746	)		3.72
Outstanding at March 31, 2004		9,267,163			2.77
Granted		1,670,999			8.27
Exercised		(4,991,141	)		2.78
Forfeited		(116,762	)		6.48
Expired		(62,993	)		2.98
Outstanding at March 31, 2005		5,767,266			4.29
Granted		201,000			9.96
Exercised		(361,310	)		3.90
Forfeited		(429,691	)		8.48
Expired		(7,161	)		4.27
Outstanding at March 31, 2006		5,170,104		$	4.19

      Outstanding and exercisable options at March 31, 2006 were as follows:

	Weighted Average
	Remaining
	Contractual Life of						Weighted Average		Weighted Average
	Outstanding						Exercise Price of		Exercise Price of
Price Range	Options		Outstanding		Exercisable		Outstanding Options		Exercisable Options
$1.90 to $ 2.95		1.13 Years		1,878,233		1,862,224	$	2.54	$	2.53
$3.00 to $ 4.26		1.97 Years		1,986,833		1,917,911	$	3.05	$	3.04
$4.62 to $ 5.22		2.64 Years		86,666		66,497	$	4.83	$	4.71
$7.65 to $10.44		3.36 Years		1,218,372		510,790	$	8.54	$	8.30
		2.00 Years		5,170,104		4,357,422	$	4.19	$	3.47

F-28

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Effective June 27, 2005 the Company, pursuant to its 2004 Performance Incentive Plan, entered into restricted share unit agreements with certain employees and directors. During the year ended March 31, 2006, the Company awarded 570,375, restricted common share units under these agreements. Upon issuance of the restricted common share units, an unamortized compensation expense equivalent to the market value of the common shares on the date of grant was charged to shareholders’ equity as unearned compensation. This unearned compensation will be amortized over the three-year vesting period. Compensation expense recorded for these restricted common share units was $1.7 million during the year ended March 31, 2006 and is included in general and administration expenses in the condensed consolidated statements of operations.

      The Company becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted share units when the restrictions are released and the shares are issued. Restricted share units are forfeited if the employees or directors terminate prior to the lapsing of restrictions. The Company records forfeitures of restricted share units, if any, as treasury share repurchases and any compensation costs previously recorded are reversed in the period of forfeiture. At March 31, 2006, 508,667 restricted share units were outstanding.

      Changes in restricted share units granted and outstanding for fiscal 2006 were as follows:

				Weighted Average
				Grant Date Fair
	Number of Shares			Value
Outstanding at March 31, 2005		—		$	—
Granted		570,375			10.18
Vested		(50,833	)		10.16
Forfeited		(10,875	)		10.40
Outstanding at March 31, 2006		508,667		$	10.18

      During the year ended March 31, 2005, two employees of the Company terminated their employment but continued to provide services as consultants. These employees had been granted 150,000 stock options, 66,668 of which had not vested as of the date of the change in employment status. The terms of the stock options require the grants to be forfeited upon change in status; however, the Company modified the terms to permit the two individuals to continue to vest in the options. The modified stock options that have not vested are accounted for prospectively as entirely new grants. Stock-based compensation expense of less than $0.1 million for the year ended March 31, 2006 (2005 — $0.3 million;) was recorded in general and administration expenses in the consolidated statements of operations under the fair value method because the individuals are now non-employees. As of March 31, 2006, all of these stock options had vested.

      During the year ended March 31, 2004, the Company modified the terms of 3,048,000 options of certain officers of the Company, extending the expiry dates to coincide with their employment contract dates. The vesting period and exercise prices were unchanged. Under the intrinsic value method, used for reporting purposes, the modification of these options is treated as an exchange of the original award for a new award and the resulting expense is recorded as stock-based compensation expense. There was no additional compensation expense for the year ended March 31, 2006 (2005 — nil, 2004 — $0.7 million). Under the fair value method, used for disclosure purposes, the value of the new award is measured as the fair value at the date the new award is granted and the value of the old award is its fair value immediately before its terms were modified. At March 31, 2004, there are no additional service requirements on these options and the $0.8 million incremental fair value relating to these options was expensed for disclosure purposes for the year ended March 31, 2004.

      During the year ended March 31, 2004, the Company modified the terms of 250,000 options of a certain past director of the Company, amending the price of the options to be consistent with those granted to other

F-29

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Directors. The expiry date and vesting period were unchanged. Under the intrinsic value method, used for reporting purposes, the modification of these options is treated as an exchange of the original award for a new award and the resulting expense is recorded as stock-based compensation expense. The market price on the date of the modification was less than the exercise price resulting in no additional compensation cost. The options are valued using variable accounting for stock-based compensation until they are exercised, forfeited or expire. The additional compensation expense was not significant for the year ended March 31, 2005 (2004 — $0.9 million) as the options were exercised in May 2004. Under the fair value method, for disclosure purposes, the value of the new award is measured as the fair value at the date the new award is granted and the value of the old award is its fair value immediately before its terms were modified. At March 31, 2005 and 2004, there were no additional service requirements on these options and the incremental fair value relating to these options, which is not material, was expensed for disclosure purposes for the years ended March 31, 2005 and 2004.

14. Acquisitions and Divestitures

      On March 15, 2006, the Company sold its studio facility located in Vancouver, British Columbia. The purchase price of $35.3 million (net of commissions) was paid in cash. Studios facilities comprised the Company’s studios facilities reporting segment (see note 18). Certain assets, including cash and accounts receivable balances were excluded from the transaction. At March 15, 2006, the carrying value of studios’ property and equipment sold in the agreement was $28.3 million and was comprised primarily of land and buildings, with carrying values of $12.6 million and $14.8 million, respectively. At March 15, 2006, the carrying value of the goodwill within the studios reporting unit was $1.9 million. The agreement also required the Company to repay the remaining balances of its mortgages payable at the close of the transaction. On March 15, 2006, the Company paid the remaining mortgages balances of $16.8 million. The Company incurred mortgage penalty costs of less than $0.1 million in connection with the repayment of the mortgages which reduced the gain on sale of studios facilities recorded during the year ended March 31, 2006 in the consolidated statements of operations. In connection with the repayment of the remaining balances of its mortgages payable on its studio facilities, the Company terminated its CDN$20 million interest rate swap (see note 10). The close-out value of the CDN$20 million interest rate swap was approximately $0.1 million, which the Company paid on March 15, 2006. The Company recorded a gain on the sale of the studio facilities of $4.9 million during the year ended March 31, 2006 in the consolidated statements of operations. The studios facilities reporting unit had revenues of $5.8 million for the year ended March 31, 2006 (2005 — $4.5 million; 2004 — $6.3 million) and segment profit of $3.5 million for the year ended March 31, 2006 (2005 — $2.2 million; 2004 — $4.0 million).

      On October 17, 2005, the Company acquired all outstanding shares of Redbus, an independent United Kingdom film distributor. Consideration for the Redbus acquisition was $35.5 million, comprised of a combination of $28.0 million in cash, $6.4 million in Lionsgate common shares and direct transaction costs of $1.1 million. In addition, the Company assumed other obligations (including accounts payable and accrued liabilities and film obligations) of $19.1 million. At the closing of the transaction the Company issued 643,460 common shares to Redbus Group Limited (“RGL”) valued at approximately $5.6 million, or $8.77 per share, and will issue up to an additional 94,937 common shares to RGL upon satisfaction of the terms of the escrow agreement. At March 31, 2006, the additional 94,937 common shares are valued at approximately $0.8 million. Direct transaction costs are considered liabilities assumed in the acquisition, and as such, are included in the purchase price. Direct transaction costs consist primarily of legal and accounting fees. The Company now has the ability to self-distribute its motion pictures in the UK and Ireland. The Company also acquired the Redbus library of approximately 130 films. Effective October 17, 2005, the credit facility was amended in connection with the acquisition of Redbus, to make available a portion of the credit facility for borrowing by Redbus in either U.S. dollars or British pounds sterling.

F-30

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The Redbus acquisition was accounted for as a purchase, with the results of operations of Redbus consolidated from October 17, 2005. Goodwill of $26.7 million represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired. The allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values is as follows:

		(Amounts in
		thousands)
Cash and cash equivalents		$	1,962
Accounts receivable, net			3,062
Investment in films and television programs			22,024
Other tangible assets acquired			835
Goodwill			26,673
Other liabilities assumed			(19,067	)
	Total	$	35,489

      On December 15, 2003, the Company completed its acquisition of Film Holdings Co., the parent company of Artisan, an independent distributor and producer of film and entertainment content, for a total purchase price of $168.9 million consisting of $160.0 million in cash and direct transaction costs of $8.9 million. In addition, the Company assumed debt of $59.9 million and other obligations (including accounts payable and accrued liabilities, film obligations and other advances) of $144.0 million.

      The acquisition was accounted for as a purchase, with the results of operations of Artisan consolidated from December 15, 2003. Goodwill of $135.3 million represents the excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired. The allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on their fair values was as follows:

		(Amounts in
		thousands)
Cash and cash equivalents		$	19,946
Accounts receivable, net			37,842
Investment in films and television programs			170,224
Intangible assets			5,100
Other tangible assets acquired			4,472
Goodwill			135,277
Bank loans			(54,900	)
Subordinated note			(5,000	)
Other liabilities assumed			(144,024	)
	Total	$	168,937

      During the year ended March 31, 2005, the allocation of the purchase price was adjusted resulting in a decrease in accounts receivable of $0.8 million, an increase in investment in films and television programs of $3.5 million, an increase in other liabilities of $3.4 million and an increase in goodwill of $0.8 million.

      Severance and relocation costs incurred by Lionsgate, associated with the acquisition of Artisan, are not included in the purchase price and, as such, were recorded in the consolidated statement of operations for the year ended March 31, 2004. Severance and relocation costs of $5.6 million included property lease abandonment costs of $2.5 million, the write-off of capital assets no longer in use of $2.1 million and severance of $1.0 million. At March 31, 2006 and 2005, the remaining liabilities under the severance plan were nil. At

F-31

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

March 31, 2006, the remaining liabilities for the property lease abandonment are $1.3 million (March 31, 2005 — $1.7 million) and are included in accounts payable and accrued liabilities in the condensed consolidated balance sheets.

      The following unaudited pro forma condensed consolidated statements of operations presented below illustrate the results of operations of the Company as if the following transactions occurred at April 1, 2002:

      (a) sold 28,750,000 common shares at a public offering price of $2.70 per share for which the Company received $73.5 million of net proceeds, after deducting underwriting expenses, and incurred offering expenses of $0.5 million. (Refer to note 13(a)).

      (b) issued $60.0 million of 4.875% Convertible Senior Subordinated Notes by Lions Gate Entertainment Inc., a wholly owned subsidiary of the Company. The Company received $57 million of net proceeds, after paying placement agents’ fees, and incurred offering expenses of $0.3 million. (Refer to note 9).

      (c) entered into an Amended and Restated Credit, Security, Guaranty and Pledge Agreement for a $350 million credit facility consisting of a $135 million five-year term loan and a $215 million five-year revolving credit facility. (Refer to note 7).

      (d) acquired Artisan as described above.

	Year Ended March 31,
	2004
	(Unaudited)
	(Amounts in thousands,
	except per share
	amounts)
Revenues	$	589,339
Operating Income (Loss)	$	(59,623	)
Net Income (Loss)	$	(85,061	)
Net Income (Loss) Available to Common Shareholders	$	(88,122	)
Basic and Diluted Income (Loss) Per Common Share	$	(1.02	)
Weighted Average Common Shares Outstanding		86,271

15. Direct Operating Expenses

	Year Ended		Year Ended			Year Ended
	March 31, 2006		March 31, 2005			March 31, 2004
	(Amounts in thousands)
Amortization of films and television programs	$	253,279	$	213,346		$	136,082
Participation and residual expense		197,785		143,329			37,974
Amortization of acquired intangible assets		2,004		2,192			1,089
Other expenses		7,875		(2,945	)		6,153
	$	460,943	$	355,922		$	181,298

      Other expenses include direct operating expenses related to the studio facility and provision for doubtful accounts. The negative other expenses for the year ended March 31, 2005 is due to a reversal of the provision for doubtful accounts of $4.6 million. The reversal is primarily due to collection of accounts receivable during the year ended March 31, 2005 that were previously reserved. Other expenses for the years ended March 31, 2006 and 2004 includes a provision for doubtful accounts of $5.7 million and $4.1 million, respectively.

F-32

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

16. Income Taxes

      The Company’s Canadian, United Kingdom and United States pretax income (loss) are as follows:

	Year Ended			Year Ended		Year Ended
	March 31, 2006			March 31, 2005		March 31, 2004
	(Amounts in thousands)
Canada	$	7,660		$	8,359	$	(14,477	)
United Kingdom		(1,843	)		—		—
United States		1,713			20,869		(77,246	)
	$	7,530		$	29,228	$	(91,723	)

      The Company’s current and deferred income tax provision (benefits) are as follows:

	Year Ended			Year Ended		Year Ended
	March 31, 2006			March 31, 2005		March 31, 2004
	(Amounts in thousands)
Current	$	1,039		$	2,664	$	373
Deferred		395			6,283		—
	$	1,434		$	8,947	$	373
CANADA
Current	$	79		$	569	$	373
Deferred		—			—		—
		79			569		373
UNITED KINGDOM
Current	$	—		$	—	$	—
Deferred		(572	)		—		—
		(572	)		—		—
UNITED STATES
Current		960			2,095		—
Deferred		967			6,283		—
		1,927			8,378		—
Total Provision	$	1,434		$	8,947	$	373

F-33

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The differences between income taxes expected at United States statutory income tax rates and the income tax provision (benefit) are as set forth below:

		Year Ended			Year Ended			Year Ended
		March 31, 2006			March 31, 2005			March 31, 2004
		(Amounts in thousands)
Income taxes (tax benefits) computed at Federal statutory rate of 35%		$	2,636		$	10,230		$	(31,186	)
	Federal alternative minimum tax		562			—			—
	Foreign and provincial operations subject to different income tax rates		73			400			150
	State income tax		1,750			1,459			—
	Reduction to the accrual for tax liability		(1,099	)		—			—
	Foreign income tax withholding		466			—			—
	Other		(1,161	)		(491	)		1,000
	Increase (decrease) in valuation allowance		(1,793	)		(2,651	)		30,409
		$	1,434		$	8,947		$	373

      Although the Company is incorporated under Canada law, the majority of its global operations are currently subject to tax in the U.S. As a result, the Company believes it is more appropriate to use the U.S. Federal statutory rate in its reconciliation of the statutory rate to its reported income tax rate.

F-34

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The income tax effects of temporary differences between the book value and tax basis of assets and liabilities are as follows:

		March 31, 2006			March 31, 2005
		(Amounts in thousands)
CANADA
Assets
	Net operating losses	$	17,181		$	13,687
	Accounts payable		636			588
	Property and equipment		953			1,056
	Other		2,591			27
	Valuation allowance		(19,833	)		(9,733	)
			1,528			5,625
Liabilities
	Property and equipment		—			(5,611	)
	Other		(1,528	)		(14	)
Net Canada			—			—
UNITED KINGDOM
Assets
	Net operating losses	$	1,341		$	—
	Property and equipment		47			—
	Reserves		690			—
Liabilities
	Investment in film and television obligations		(3,720	)		—
Net United Kingdom			(1,642	)		—
UNITED STATES
Assets
	Net operating losses	$	73,731		$	87,083
	Accounts payable		5,630			4,662
	Other assets		18,765			7,226
	Reserves		49,899			36,781
	Property and equipment		—			1,163
	Other		—			2,888
	Valuation allowance		(90,630	)		(91,505	)
			57,395			48,298
Liabilities
	Investment in film and television programs		(49,421	)		(43,388	)
	Accounts receivable		(3,124	)		(4,085	)
	Property and equipment		—			—
	Other		(4,850	)		(825	)
Net United States			—			—
TOTAL		$	(1,642	)	$	—

      Due to the uncertainty surrounding the timing of realizing the benefits of its deferred tax assets in future tax returns, the Company has recorded a valuation allowance against its deferred tax assets. A release of

F-35

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$0.8 million of valuation allowance was recorded as a reduction of goodwill for the initial recognition of tax benefits related to acquired deductible temporary differences and net operating losses, resulting in a deferred tax expense.

      At March 31, 2006, the Company had U.S. and state net operating loss carryforwards of approximately $269.2 million available to reduce future federal and state taxable income which expire beginning in 2007 through 2024. Certain of these net operating losses are subject to limitations provided under U.S. federal and state income tax laws. The Company also has U.S. capital loss carryforwards of $25.8 million which expire in 2008. At March 31, 2006, the Company had Canadian loss carryforwards of $38.5 million which will expire beginning in 2007 through 2013 and $4.5 million of United Kingdom loss carryforwards available indefinitely to reduce future income taxes. At March 31, 2006, approximately $5.2 million of the valuation allowance attributable to U.S. loss carry forwards would, to the extent those losses were utilized, reduce goodwill. At March 31, 2006, approximately $11.1 million of the valuation allowance is attributable to deductions associated with the exercise of stock options which would be recorded as an addition to equity upon the reversal of the valuation allowance.

      U.S. income taxes were not provided for on undistributed earnings from U.K. subsidiaries. Those earnings are considered to be permanently reinvested in accordance with APB Opinion 23.

17. Government Assistance

      Tax credits earned for the year ended March 31, 2006 totaled $15.7 million (2005 — $15.1 million; 2004 — $16.7 million). Accounts receivable at March 31, 2006 includes $22.7 million with respect to tax credits receivable (2005 — $11.8 million).

      The Company is subject to routine inquiries and review by regulatory authorities of its various incentive claims which have been received or are receivable. Adjustments of claims, if any, as a result of such inquiries or reviews, will be recorded at the time of such determination.

18. Segment Information

      SFAS No. 131 “Disclosures About Segments of an Enterprise and Related Information” requires the Company to make certain disclosures about each reportable segment. The Company’s reportable segments are determined based on the distinct nature of their operations and each segment is a strategic business unit that offers different products and services and is managed separately. The Company evaluates performance of each segment using segment profit (loss) as defined below. The Company has three reportable business segments: Motion Pictures; Television; and Studio Facilities.

      Motion Pictures consists of the development and production of feature films, acquisition of North American and worldwide distribution rights, North American theatrical, video and television distribution of feature films produced and acquired and worldwide licensing of distribution rights to feature films produced and acquired.

      Television consists of the development, production and worldwide distribution of television productions including television series, television movies and mini-series and non-fiction programming.

      Studio Facilities consists of ownership and management of an eight-soundstage studio facility in Vancouver, Canada. Rental revenue is earned from soundstages, office and other services such as furniture, telephones and lighting equipment to tenants that produce or support the production of feature films, television series, movies and commercials. As discussed in note 14, the Company sold its studio facility in March 2006.

F-36

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Segmented information by business is as follows:

		Year Ended		Year Ended		Year Ended
		March 31, 2006		March 31, 2005		March 31, 2004
		(Amounts in thousands)
Segment revenues
	Motion Pictures	$	812,441	$	755,328	$	308,922
	Television		132,944		82,769		60,714
	Studio Facilities		5,843		4,489		6,274
		$	951,228	$	842,586	$	375,910
Segment profit (loss)
	Motion Pictures	$	52,342	$	80,172	$	(45,317	)
	Television		7,749		12,200		1,526
	Studio Facilities		3,500		2,155		4,021
		$	63,591	$	94,527	$	(39,770	)

      Segment profit (loss) is defined as segment revenue less segment direct operating, distribution and marketing and general and administration expenses and severance and relocation costs. The reconciliation of total segment profit (loss) to the Company’s income (loss) before income taxes is as follows:

		Year Ended			Year Ended			Year Ended
		March 31, 2006			March 31, 2005			March 31, 2004
		(Amounts in thousands)
Company’s total segment profit (loss)		$	63,591		$	94,527		$	(39,770	)
Less:
	Corporate general and administration		(42,931	)		(41,604	)		(16,577	)
	Corporate severance and relocation costs		—			—			(4,487	)
	Write-down of other assets		—			—			(11,686	)
	Depreciation		(2,504	)		(3,159	)		(3,198	)
	Interest expense		(19,933	)		(26,421	)		(14,178	)
	Interest rate swaps mark-to-market		205			2,752			206
	Interest and other income		4,304			3,440			136
	Gain on sale of studio facility		4,872			—			—
	Minority interests		—			(107	)		—
	Equity interests		(74	)		(200	)		(2,169	)
Income (loss) before income taxes		$	7,530		$	29,228		$	(91,723	)

      Revenue by geographic location, based on the location of the customers, with no other foreign country individually comprising greater than 10% of total revenue, is as follows:

	Year Ended		Year Ended		Year Ended
	March 31, 2006		March 31, 2005		March 31, 2004
	(Amounts in thousands)
Canada	$	17,782	$	45,252	$	24,620
United States		853,207		698,341		307,400
Other foreign		80,239		98,993		43,890
	$	951,228	$	842,586	$	375,910

F-37

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Assets by geographic location are as follows:

	March 31, 2006		March 31, 2005
	(Amounts in thousands)
Canada	$	21,971	$	63,379
United States		978,137		791,250
United Kingdom		53,141		—
	$	1,053,249	$	854,629

      Goodwill by reportable business segment is as follows:

	March 31, 2006		March 31, 2005
	(Amounts in thousands)
Motion Pictures	$	179,847	$	154,012
Television		5,270		5,270
Studios		—		1,900
	$	185,117	$	161,182

      Total amount of revenue from a customer representing greater than 10% of consolidated revenues for the year ended March 31, 2006 was $216.9 million (2005 — $175.5 million) and was included in the motion pictures reporting segment. Accounts receivable due from a customer was approximately 24% of consolidated gross accounts receivable at March 31, 2006. The total amount of gross accounts receivable due from this customer was approximately $73.0 million at March 31, 2006. Accounts receivable due from two customers were approximately 23% and 14%, respectively, of consolidated gross accounts receivable at March 31, 2005. The total amount of gross accounts receivable due these customers were approximately $50.7 million and $29.3 million, respectively, at March 31 2005.

19. Commitments and Contingencies

      Debt and Other Financing Obligations. Future annual repayments on debt and other financing obligations, initially incurred for a term of more than one year, as of March 31, 2006 are as follows:

	Year Ended March 31,
	2007		2008		2009		2010		2011		Thereafter		Total
	(Amounts in thousands)
Film obligations — Minimum guarantees and production obligations initially incurred for a term of more than one year	$	2,676	$	31,185	$	12,985	$	—	$	29,975	$	—	$	76,821
Film obligations — Film productions		19,205		—		—		—		—		—		19,205
Subordinated notes		—		—		—		—		60,000		325,000		385,000
	$	21,881	$	31,185	$	12,985	$	—	$	89,975	$	325,000	$	481,026

F-38

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Contractual Commitments. Future annual commitments under contractual obligations as of March 31, 2006 by maturity rate are as follows:

	Year Ended March 31,
	2007		2008		2009		2010		2011		Thereafter		Total
	(Amounts in thousands)
Operating leases	$	3,543	$	3,655	$	3,837	$	3,833	$	3,913	$	2,551	$	21,332
Employment and consulting contracts		11,953		5,556		1,121		—		—		—		18,630
Unconditional purchase obligations		41,926		23,168		3,000		2,900		900		—		71,894
Distribution and marketing commitments		17,728		19,999		—		—		—		—		37,727
	$	75,150	$	52,378	$	7,958	$	6,733	$	4,813	$	2,551	$	149,583

      Unconditional purchase obligations relate to the purchase of film rights for future delivery and future film production and development obligations.

      Operating Leases. The Company has operating leases for offices and equipment. The Company incurred rental expense of $3.7 million during the year ended March 31, 2006 (2005 — $3.9 million, 2004 — $2.3 million). The Company earned sublease income of $0.7 million during the year ended March 31, 2006 (2005 — $1.1 million, 2004 — $0.7 million).

      Contingencies. The Company is from time to time involved in various claims, legal proceedings and complaints arising in the ordinary course of business. The Company does not believe that adverse decisions in any such pending or threatened proceedings, or any amount which the Company might be required to pay by reason thereof, would have a material adverse effect on the financial condition or future results of the Company.

      The Company has provided an accrual for estimated losses under the above matters as of March 31, 2006, in accordance with FAS 5 “Accounting for Contingencies.”

20. Financial Instruments

     (a) Credit Risk

      Concentration of credit risk with the Company’s customers is limited due to the Company’s customer base and the diversity of its sales throughout the world. The Company performs ongoing credit evaluations and maintains a provision for potential credit losses. The Company generally does not require collateral for its trade accounts receivable. Accounts receivable include amounts receivable from Canadian governmental agencies in connection with government assistance for productions as well as amounts due from customers. Amounts receivable from governmental agencies amounted to 12.4% of accounts receivable, net at March 31, 2006 (2005 — 7.9%).

     (b) Forward Contracts

      The Company enters into forward foreign exchange contracts to hedge its foreign currency exposures on future production expenses denominated in Canadian dollars. As of March 31, 2006, the Company had outstanding contracts to sell US$12.8 million in exchange for CDN$14.9 million over a period of five weeks at a weighted average exchange rate of CDN$1.1642. Changes in the fair value representing an unrealized fair value gain on foreign exchange contracts outstanding during the year ended March 31, 2006 amounted to $0.1 million and are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity. During the year ended March 31, 2006, the Company completed foreign exchange contracts denominated in Canadian dollars. The net gains resulting from the completed contracts were $1.1 million. These contracts are entered into with a major financial institution as counterparty. The Company

F-39

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

is exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of replacing the contracts, at current market rates. The Company does not require collateral or other security to support these contracts.

     (c) Interest Rate Swaps

      The Company entered into a $350 million credit facility in December 2003 consisting of a $200 million U.S. dollar-denominated revolving credit facility, a $15 million Canadian dollar-denominated revolving credit facility and a $135 million U.S. dollar-denominated term-loan. By December 31, 2004, the Company had repaid the term loan in full, thereby reducing the credit facility to $215 million at March 31, 2005 (refer to note 7). The revolving credit facility bears interest at 2.75% over the Adjusted LIBOR or the Canadian Bankers Acceptance rate. The Company entered into a $100 million interest rate swap at an interest rate of 3.08%, commencing January 2003 and ended September 2005. The swap was in effect as long as three month LIBOR was less than 5.0%. During the year ended March 31, 2006, the Company recorded interest income of $0.1 million (2005 — expense of $1.3 million; 2004 — expense of $1.9 million) associated with the interest swap agreement. Fair value of the interest rate swap at March 31, 2006 is nil (2005 — $0.1 million). Changes in the fair value representing a fair valuation loss on the interest rate swap during the year ended March 31, 2006 amount to $0.1 million (2005 — gain of $2.5 million 2004 — gain of $0.8 million) and is included in the consolidated statements of operations. This contract was entered into with a major financial institution as counterparty. The Company was exposed to credit loss in the event of nonperformance by the counterparty, which was limited to the cost of replacing the contract, at current market rates. The Company did not require collateral or other security to support this contract.

      A subsidiary of the Company entered into a CDN$20 million interest rate swap at a fixed interest rate of 5.62%, commencing September 2003 and ending September 2008. The subsidiary entered into the interest rate swap as a condition of its loan which states the interest rates under the facility are to be fixed either by way of a fixed rate term loan or by way of an interest rate swap. In connection with the repayment of the remaining balances of its mortgages payable on its studio facilities, the Company terminated its CDN$20 million interest rate swap (see note 10). The close-out value of the CDN$20 million interest rate swap was approximately $0.1 million, which the Company paid on March 15, 2006. During the year ended March 31, 2006, the subsidiary recorded interest expense of $1.0 million (2005 — $1.3 million; 2004 — $1.0 million), including amounts incurred under the interest rate swap, that approximates the amount they would have paid if they had entered into a fixed rate loan agreement. Fair value of the interest rate swap at March 31, 2006 is nil (2005 — negative $0.3 million; 2004 — negative $0.6 million). Change in the fair value representing a fair valuation gain on the interest rate swap during the year ended March 31, 2006 amount to $0.2 million (2005 — $0.3 million; 2004 — loss of $0.6 million) and is included in the consolidated statements of operations. This contract was entered into with a major financial institution as counterparty. The subsidiary was exposed to credit loss in the event of nonperformance by the counterparty, which was limited to the cost of replacing the contract, at current market rates.

21. Supplementary Cash Flow Statement Information

      (a) Interest paid during the year ended March 31, 2006 amounted to $16.7 million (2005 — $14.8 million; 2004 — $11.7 million).

      (b) Income taxes paid during the year ended March 31, 2006 amounted to $0.1 million (2005 — $0.5 million; 2004 — $1.9 million).

22. Reconciliation to Canadian GAAP

      The consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP. The material differences between the accounting policies used by the Company under

F-40

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

U.S. GAAP and Canadian GAAP are disclosed below in accordance with the provisions of the Securities and Exchange Commission and the National Instrument adopted by certain securities authorities in Canada.

      Under Canadian GAAP, the net income (loss) and income (loss) per share figures for the years ended March 31, 2006, 2005 and 2004, and the shareholders’ equity as at March 31, 2006 and 2005 are as follows:

	Net Income (Loss)									Shareholders’ Equity
	Year Ended			Year Ended			Year Ended
	March 31,			March 31,			March 31,			March 31,			March 31,
	2006			2005			2004			2006			2005
	(Restated)
	(Amounts in thousands, except per share amounts)
AS REPORTED UNDER U.S. GAAP	$	6,096		$	20,281		$	(92,096	)	$	149,270		$	117,139
Adjustment for capitalized pre-operating costs(a)		—			—			(614	)		—			—
Interest rate swaps mark-to-market(b)		(975	)		(632	)		(206	)		1,350			2,325
Adjustment for consolidation of CinéGroupe(j)		—			—			(2,333	)		—			—
Accounting for business combinations(c)		—			—			—			1,145			1,145
Accounting for income taxes(d)		—			—			—			(1,900	)		(1,900	)
Accounting for stock-based compensation(i)		(2,016	)		(1,946	)		(721	)		—			—
Adjustment for accretion on subordinated notes(e)		(12,631	)		(5,615	)		(809	)		(19,055	)		(6,424	)
Adjustment for amortization of subordinated note issue costs(e)		1,121			434			48			1,603			482
Adjustment for amortization and write-off of deferred bank loan financing costs(f)		—			(98	)		98			—			—
Reclassification of conversion feature of subordinated notes to shareholders’ equity(e)		—			—			—			74,854			74,854
Other comprehensive income (loss) (net of tax of nil)(g)		—			—			—			139			(304	)
NET INCOME (LOSS)/SHAREHOLDERS’ EQUITY UNDER CANADIAN GAAP	$	(8,405	)	$	12,424		$	(96,633	)	$	207,406		$	187,317
INCOME (LOSS) PER COMMON SHARE UNDER CANADIAN GAAP
BASIC	$	(0.08	)	$	0.13		$	(1.42	)
DILUTED	$	(0.08	)	$	0.12		$	(1.42	)

F-41

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Reconciliation of movement in Shareholders’ Equity under Canadian GAAP:

	March 31,			March 31,		March 31,
	2006			2005		2004
	(Amounts in thousands)
BALANCE AT BEGINNING OF THE YEAR	$	187,317		$	86,827	$	74,717
Increase in common shares, net of restricted shares		1,638			24,850		120,355
Decrease in preferred shares		—			—		(32,519	)
Increase in contributed surplus(e)(h)		24,633			60,842		20,528
Deconsolidation of CinéGroupe’s net deficiency in equity		—			—		2,333
Dividends paid on Series A preferred shares		—			—		(387	)
Accretion on Series A preferred shares(e)		—			—		(1,127	)
Net income (loss) under Canadian GAAP		(8,405	)		12,424		(96,633	)
Adjustment to cumulative translation adjustments account(g)		2,223			2,374		(440	)
BALANCE AT END OF THE YEAR	$	207,406		$	187,317	$	86,827

     (a) Accounting for Capitalized Pre-operating Period Costs — One-hour Series Business

      Under U.S. GAAP, all start-up costs are required to be expensed as incurred. Under Canadian GAAP, the Company deferred certain pre-operating costs related to the launch of the television one-hour series business amounting to $3.0 million. This amount was amortized over five years commencing in the year ended March 31, 2000 and was fully amortized by March 31, 2004.

     (b) Interest Rate Swaps Mark-to-Market

      Under U.S. GAAP, the interest swaps do not meet the criteria of effective hedges and therefore the fair valuation loss of $0.1 million for the year ended March 31, 2006 (2005 — gain of $2.5 million; 2004 — gain of $0.8 million) on the Company’s interest swap and fair valuation gain of $0.2 million for the year ended March 31, 2006 (2005 — gain of $0.3 million; 2004 — loss of $0.6 million) on a subsidiary company’s interest swap are recorded in the consolidated statement of operations.

      Under Canadian GAAP, until April 1, 2004, the interest rate swaps were determined to be effective hedges under Canadian Institute of Chartered Accountants (“CICA”) Section 3860, “Financial Instruments — Disclosure and Presentation,” and no fair valuation adjustments were recorded. In December 2001, the CICA released Accounting Guideline (“AcG-13”), “Hedging Relationships,” to be applied by companies for periods beginning on or after July 1, 2003. The standard establishes criteria to identify, designate, document and determine the effectiveness of hedging relationships, for the purpose of applying hedge accounting and provides guidance on the discontinuance of hedge accounting. Under Canadian GAAP the Company has adopted AcG-13 effective April 1, 2004 and determined the interest rate swaps do not meet the criteria of effective hedges and therefore the fair valuation loss of $0.1 million for the year ended March 31, 2006 (2005 — gain of $2.5 million) on the Company’s interest swap and fair valuation gain of $0.2 million for the year ended March 31, 2006 (2005 — $0.3 million) on a subsidiary company’s interest swap are recorded in the consolidated statement of operations, which is consistent with U.S. GAAP.

      The transitional provisions of AcG-13 provide that when an entity terminates its designation of a hedging relationship or a hedging relationship ceases to be effective, hedge accounting is not applied to gains, losses, revenues or expenses arising subsequently. However, the hedge accounting applied to the hedging relationship in prior periods is not reversed. Any gains, losses, revenues or expenses deferred previously as a result of applying hedge accounting continue to be carried forward for subsequent recognition in income in the same period as the corresponding gains, losses, revenues or expenses associated with the hedged item. Accordingly,

F-42

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

under Canadian GAAP at April 1, 2004 the Company recorded the fair values of the interest rate swaps totaling $3.0 million on the consolidated balance sheet and recorded the off-setting entry to deferred assets which is being amortized straight-line to interest expense over the terms of the interest rate swaps. This results in an additional interest expense of $1.0 million for the year ended March 31, 2006 (2005 — $0.6 million).

     (c) Accounting for Business Combinations

      Under U.S. GAAP, costs related to the acquiring company must be expensed as incurred. Under Canadian GAAP, prior to January 1, 2001, costs related to restructuring activities of an acquiring company were considered in the purchase price allocation. In fiscal 2001, the Company included $1.4 million of such costs in the purchase price for an acquired company under Canadian GAAP. The amount is presented net of income taxes of $0.3 million.

     (d) Accounting for Income Taxes

      SFAS 109 requires deferred tax assets and liabilities be recognized for temporary differences, other than non-deductible goodwill, arising in a business combination. In the year ended March 31, 2000, under U.S. GAAP, goodwill was increased to reflect the additional deferred tax liability resulting from temporary differences arising on the acquisition of Lions Gate Studios in fiscal 1999. Under Canadian GAAP, the Company recorded a charge to retained earnings when the deferred tax liability was established upon adoption of the applicable accounting standard in 2001; accordingly, there is a difference in the carrying amount of goodwill arising in the business combination of $1.9 million as at March 31, 2006 (March 31, 2005 — $1.9 million).

     (e) Reclassification of Conversion Feature of Subordinated Notes, Accretion on Subordinated Notes and Amortization of Subordinated Notes Issue Costs

      Under U.S. GAAP, the conversion feature of the 4.875% Notes, as explained in note 9, is not accounted for separately. Under Canadian GAAP, the conversion feature of the 4.875% Notes is valued at $16.3 million, net of placement agents’ fees and offering expenses of $1.0 million and, accordingly, shareholders’ equity is increased by $16.3 million. Under U.S. GAAP the principal amount and the carrying amount of the 4.875% Notes are the same and therefore no accretion is required whereas, under Canadian GAAP, the difference between the principal amount of $60.0 million and the original net carrying amount of $42.7 million is being accreted on a straight-line basis over seven years as a charge to interest. Under U.S. GAAP all of the placement agents’ fees and offering expenses are capitalized and amortized over seven years as a charge to interest expense whereas, under Canadian GAAP, the placement agents’ fees and offering expenses have been allocated to the conversion feature and to debt. The portion allocated to debt is being amortized on a straight-line basis over seven years as a charge to interest expense.

      Under U.S. GAAP, the conversion feature of the 2.9375% Notes, as explained in note 9, is not accounted for separately. Under Canadian GAAP, the conversion feature of the 2.9375% Notes is valued at $25.7 million, net of placement agents’ fees and offering expenses of $0.8 million and, accordingly, shareholders’ equity is increased by $25.7 million. Under U.S. GAAP the principal amount and the carrying amount of 2.9375% Notes are the same and therefore no accretion is required whereas, under Canadian GAAP, the difference between the principal amount of $150.0 million and the original net carrying amount of $123.5 million is being accreted on a straight-line basis over five years, the time to the first potential redemption date by the Company, as a charge to interest. Under U.S. GAAP all of the placement agents’ fees and offering expenses are capitalized and amortized through the earliest redemption date of seven years as a charge to interest expense whereas, under Canadian GAAP, the placement agents’ fees and offering expenses have been allocated to the conversion feature and to debt. The portion allocated to debt is being amortized on a straight-line basis through the scheduled maturity date of twenty years as a charge to interest expense.

F-43

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Under U.S. GAAP, the conversion feature of the 3.625% Notes, as explained in note 8, is not accounted for separately. Under Canadian GAAP, the conversion feature of the 3.625% Notes is valued at $32.9 million, net of placement agents’ fees and offering expenses of $1.0 million and, accordingly, shareholders’ equity is increased by $32.9 million. Under U.S. GAAP the principal amount and the carrying amount of 3.625% Notes are the same and therefore no accretion is required whereas, under Canadian GAAP, the difference between the principal amount of $175.0 million and the original net carrying amount of $141.1 million is being accreted on a straight-line basis over seven years, the time to the first potential redemption date by the Company, as a charge to interest. Under U.S. GAAP all of the placement agents’ fees and offering expenses are capitalized and amortized through the earliest redemption date of seven years as a charge to interest expense whereas, under Canadian GAAP, the placement agents’ fees and offering expenses have been allocated to the conversion feature and to debt. The portion allocated to debt is being amortized on a straight-line basis through the scheduled maturity date of twenty years as a charge to interest expense.

     (f) Accounting for Amortization and Write-Off of Deferred Bank Loan Financing Costs

      Under U.S. GAAP, deferred financing costs in the amount of $4.3 million allocated to the Company’s term loan was being amortized using the effective interest method over the term of the loan as a charge to interest expense whereas, under Canadian GAAP, the same amount was being amortized on a straight-line basis over the term of the loan. On December 31, 2004, the Company repaid its term loan and wrote off the deferred financing costs related to the term loan.

     (g) Comprehensive Income (Loss)

      Comprehensive loss consists of net income (loss) and other gains and losses affecting shareholders’ equity that, under U.S. GAAP are excluded from the determination of net income (loss). Under U.S. GAAP, comprehensive income (loss) includes cumulative translation adjustments, unrealized gains (losses) on securities and unrealized gains (losses) on foreign exchange contracts, net of income taxes of nil. Under Canadian GAAP, cumulative translation adjustments are included as a separate component of shareholders’ equity and unrealized gains (losses) on securities and foreign exchange contracts are not recorded.

     (h) Accounting for Stock Based Compensation

      In December 2003, the Canadian Institute of Chartered Accountants (“CICA”) amended Section 3870 to require companies to account for stock options using the fair value based method for fiscal years beginning on or after January 1, 2004. In accordance with the transitional alternatives permitted under amended Section 3870, the Company retroactively adopted the fair value based method of accounting for stock options and accordingly, the year ended March 31, 2004 has been restated. The impact of this change for the year ended March 31, 2006 was to decrease net income and increase contributed surplus by $2.0 million (2005 — $2.3 million; 2004 — $2.5 million) and to decrease basic earnings per share by $0.02 (2005 — $0.02; 2004 — $0.03).

      In accordance with CICA Section 3870, the following disclosures are provided about the costs of stock-based compensation awards using the fair value method. The weighted average estimated fair value of each stock option granted in the year ended March 31, 2006 was $3.61 (2005 — $2.80; 2004 — $0.86). The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for stock options granted: a dividend yield of 0%, expected volatility of 33% (2005 — 33%; 2004 — 30%), risk-free interest rate of 4.0% (2005 — 4.0%; 2004 — 3.8%) and expected life of five years (2005 — five years; 2004 — five years).

      During the year ended March 31, 2004, the Company modified the terms of 3,048,000 options of certain officers of the Company, extending the expiry dates to coincide with their employment contract dates. The vesting period and exercise prices were unchanged (refer to note 13). Under U.S. GAAP the intrinsic value method is applied and under Canadian GAAP the fair value method is required to be applied.

F-44

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      During the year ended March 31, 2004, the Company modified the terms of 250,000 options of a certain past director of the Company, amending the price of the options to be consistent with those granted to other Directors. The expiry date and vesting period were unchanged (refer to note 13). Under U.S. GAAP the intrinsic value method is applied and under Canadian GAAP the fair value method is required to be applied.

     (i) Income (Loss) per Share

      Basic and diluted income (loss) per common share under Canadian GAAP is calculated as follows:

		Year Ended			Year Ended		Year Ended
		March 31, 2006			March 31, 2005		March 31, 2004
		(Amounts in thousands, except per share amounts)
Numerator:
Net income (loss)		$	(8,405	)	$	12,424	$	(96,633	)
Less:
	Modification of warrants		—			—		(2,031	)
	Dividends on Series A preferred shares		—			—		(387	)
	Accretion on Series A preferred shares		—			—		(1,127	)
Net income (loss) available to common shareholders		$	(8,405	)	$	12,424	$	(100,178	)
Denominator:
Weighted average common shares outstanding:
Basic			103,066			97,610		70,656
Diluted			103,066			103,375		70,656
Income (loss) per share:
Basic		$	(0.08	)	$	0.13	$	(1.42	)
Diluted		$	(0.08	)	$	0.12	$	(1.42	)

      On December 15, 2003, the Board of Directors of the Company resolved that the term of the Company’s 5,525,000 warrants issued in December 1999 would be extended by one year. The warrants expired January 1, 2005 instead of January 1, 2004. The modification of these warrants is treated as an exchange of the original warrant for a new warrant. The fair value of the new warrant is measured at the date the new warrant is issued and the value of the old warrant is its fair value immediately before its terms were modified. Under U.S. GAAP, the additional incremental fair value of the new warrant is $2.0 million for the year ended March 31, 2004 and is considered a distribution to preferred shareholders and therefore is included in net loss available to common shareholders. Under Canadian GAAP, the additional incremental fair value of the new warrant is included for disclosure purposes only in the pro forma basic loss per common share table above.

F-45

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      Fully diluted income per common share for the year ended March 31, 2005 under Canadian GAAP is calculated as follows:

		Year Ended
		March 31, 2005
		(Amounts in
		thousands, except per
		share amounts)
Numerator:
	Net income available to common shareholders	$	12,424
Denominator:
	Weighted average common shares outstanding		97,610
	Share purchase options		4,861
	Share purchase warrants		904
	Adjusted weighted average common shares outstanding		103,375
Diluted income per common share		$	0.12

      The share purchase options and the restricted share units were anti-dilutive in the year ended March 31, 2006 and were not reflected in diluted income per common share for that period. The shares issuable on the potential conversion of the 4.875%, 2.9375% and 3.625% convertible senior subordinated notes were anti-dilutive in each of the years ended March 31, 2006 and 2005 and were not reflected in diluted income per common share for those periods. The share purchase options, the share purchase warrants, the Series A preferred shares, the convertible promissory notes and the 4.875% convertible senior subordinated notes, if outstanding, were anti-dilutive in the year ended March 31, 2004 and were not reflected in diluted loss per common share for that period.

     (j) Consolidated Financial Statements

      On July 10, 2001, as a condition of a $9.2 million equity financing with a third party, CinéGroupe’s Shareholders’ Agreement was amended to allow for certain participatory super-majority rights to be granted to the shareholders. Therefore, under U.S. GAAP, the Company was precluded from consolidating CinéGroupe and accounted for its 29.4% ownership of CinéGroupe, commencing April 1, 2001, using the equity method. Under Canadian GAAP, CinéGroupe was consolidated. For the years ended March 31, 2003 and 2002, there is no impact on net income (loss) under Canadian GAAP. During the year ended March 31, 2004, under U.S. GAAP, the Company’s investment in CinéGroupe was reduced to nil and therefore the Company did not record any additional losses under the equity method as it had no further funding requirements. However, under Canadian GAAP, under the consolidation method, the Company continued to consolidate CinéGroupe’s results until January 1, 2004 when the Company deconsolidated the assets and liabilities of CinéGroupe as described below.

      During the year ended March 31, 2004, the Company evaluated its investment in CinéGroupe as CinéGroupe was unable to meet its financial obligations in the ordinary course of business and sought protection under the Companies Creditors Arrangement Act (“CCAA”) in December 2003. Under U.S. GAAP the Company recorded a provision of $8.1 million against debentures and other receivables due from CinéGroupe at December 31, 2003. On January 1, 2004, the Company determined that as a result of a CCAA filing it no longer had the ability to control or to significantly influence CinéGroupe. Under U.S. GAAP, this determination had no effect as the investment in CinéGroupe was nil and debentures and other receivables due from CinéGroupe had been provided for at December 31, 2003. Under Canadian GAAP, effective January 1, 2004, the Company deconsolidated the assets and liabilities of CinéGroupe, resulting in a net deficiency in equity of $2.3 million which was recorded as an adjustment to accumulated

F-46

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

deficit, and wrote-off $8.1 million of convertible debentures and other receivables due from CinéGroupe, which as intercompany debentures and receivables, were previously eliminated on consolidation.

      Accounting for CinéGroupe using the consolidation method for the year ending March 31, 2003 under Canadian GAAP would increase the unaudited condensed consolidated statements of operations items to the following amounts:

	Year Ended
	March 31, 2004
	(Amounts in thousands)
Revenues	$	384,891
Direct operating expenses	$	191,849
Distribution and marketing expenses	$	207,065
General and administration expenses	$	45,446

      At March 31, 2005 and March 31, 2004, CinéGroupe is being accounted for at cost and the investment is nil under Canadian and U.S. GAAP and, therefore, there are no differences on the consolidated balance sheets at March 31, 2005 or 2004.

23. Quarterly Financial Data (Unaudited)

      Certain quarterly information is presented below:

	First Quarter			Second Quarter			Third Quarter		Fourth Quarter
	(Amounts in thousands, except per share amounts)
2006
Revenues	$	194,229		$	212,588		$	230,964	$	313,447
Direct operating expenses	$	100,264		$	109,015		$	110,681	$	140,983
Net income (loss)	$	(21,819	)	$	(14,106	)	$	3,142	$	38,879
Basic income (loss) per share	$	(0.21	)	$	(0.14	)	$	0.03	$	0.37
Diluted income (loss) per share	$	(0.21	)	$	(0.14	)	$	0.03	$	0.27

	First Quarter			Second Quarter		Third Quarter		Fourth Quarter
	(Amounts in thousands, except per share amounts)
2005
Revenues	$	188,724		$	231,064	$	190,398	$	232,400
Direct operating expenses	$	80,900		$	95,249	$	82,461	$	97,312
Net income (loss)	$	(11,462	)	$	8,330	$	3,353	$	20,060
Basic income (loss) per share	$	(0.12	)	$	0.09	$	0.03	$	0.20
Diluted income (loss) per share	$	(0.12	)	$	0.08	$	0.03	$	0.17

24. Consolidating Financial Information

      In December 2003, the Company sold $60.0 million of the 4.875% Notes, through its wholly owned U.S. subsidiary Lions Gate Entertainment Inc. (the “Issuer”). The 4.875% Notes, by their terms, are fully and unconditionally guaranteed by the Company. On April 2, 2004, the Company filed a registration statement on Form S-3 to register the resale of the 4.875% Notes and common shares issuable on conversion of the 4.875% Notes. On April 29, 2004, the registration statement was declared effective by the Securities and Exchange Commission (SEC).

F-47

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In October 2004, the Company sold $150.0 million of the 2.9375% Notes, through the Issuer. The 2.9375% Notes, by their terms, are fully and unconditionally guaranteed by the Company. On February 4, 2005, the Company filed a registration statement on Form S-3 to register the resale of the 2.9375% Notes and common shares issuable on conversion of the 2.9375% Notes. On March 3, 2005, the registration statement was declared effective by the SEC.

      In February 2005, the Company sold $175.0 million of the 3.625% Notes, through the Issuer. The 3.625% Notes, by their terms, are fully and unconditionally guaranteed by the Company. On March 29, 2005, and as amended April 6, 2005, the Company filed a registration statement on Form S-3 to register the resale of the 3.625% Notes and common shares issuable on conversion of the 3.625% Notes. On April 13, 2005, the registration statement was declared effective by the SEC.

F-48

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following tables present condensed consolidating financial information as of March 31, 2006 and 2005 and for the years ended March 31, 2006, 2005 and 2004 for (1) the Company, on a stand-alone basis, (2) the Issuer, on a stand-alone basis, (3) the non-guarantor subsidiaries of the Company (including the subsidiaries of the Issuer) on a combined basis (collectively, the “Other Subsidiaries”) and (4) the Company on a consolidated basis.

	As of March 31, 2006
	Lions Gate			Lions Gate
	Entertainment			Entertainment			Other			Consolidating			Lions Gate
	Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	6,541		$	—		$	40,437		$	—		$	46,978
Restricted cash		—			—			820			—			820
Investments — auction rate preferreds and municipal bonds		—			167,081			—			—			167,081
Investments — equity securities		—			14,921			—			—			14,921
Accounts receivable, net		299			829			181,531			—			182,659
Investment in films and television programs		—			5,245			412,505			—			417,750
Property and equipment		—			7,131			87			—			7,218
Goodwill		—			—			185,117			—			185,117
Other assets		27			16,377			14,301			—			30,705
Investment in subsidiaries		228,573			312,011			—			(540,584	)		—
	$	235,440		$	523,595		$	834,798		$	(540,584	)	$	1,053,249
Liabilities and Shareholders’ Equity (Deficiency)
Accounts payable and accrued liabilities	$	742		$	4,087		$	183,964		$	—		$	188,793
Unpresented bank drafts		—			14,772			—			—			14,772
Film obligations		—			—			284,987			—			284,987
Subordinated notes		—			385,000			—			—			385,000
Deferred revenue		—			—			30,427			—			30,427
Intercompany payables (receivables)		(168,726	)		188,859			(5,927	)		(14,206	)		—
Intercompany equity		254,154			93,217			329,948			(677,319	)		—
Shareholders’ equity (deficiency)		149,270			(162,340	)		11,399			150,941			149,270
	$	235,440		$	523,595		$	834,798		$	(540,584	)	$	1,053,249

F-49

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Year Ended March 31, 2006
		Lions Gate			Lions Gate
		Entertainment			Entertainment			Other			Consolidating			Lions Gate
		Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
		(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues		$	1,152		$	4,259		$	946,375		$	(558	)	$	951,228
EXPENSES:
	Direct operating		—			—			460,943			—			460,943
	Distribution and marketing		—			—			399,299			—			399,299
	General and administration		1,748			37,613			31,523			(558	)		70,326
	Gain on sale of studio facility		(3,248	)		—			(1,624	)		—			(4,872	)
	Depreciation		—			86			2,418			—			2,504
	Total expenses		(1,500	)		37,699			892,559			(558	)		928,200
OPERATING INCOME (LOSS)			2,652			(33,440	)		53,816			—			23,028
Other Expenses (Income):
	Interest expense		3			18,557			1,373			—			19,933
	Interest rate swaps mark-to-market		—			123			(328	)		—			(205	)
	Interest income		(63	)		(4,186	)		(55	)		—			(4,304	)
	Total other expenses, net		(60	)		14,494			990			—			15,424
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES			2,712			(47,934	)		52,826			—			7,604
Equity interests			(3,384	)		(46,822	)		74			50,206			74
INCOME BEFORE INCOME TAXES			6,096			(1,112	)		52,752			(50,206	)		7,530
Income tax provision			—			376			1,058			—			1,434
NET INCOME (LOSS)		$	6,096		$	(1,488	)	$	51,694		$	(50,206	)	$	6,096

F-50

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Year Ended March 31, 2006
		Lions Gate			Lions Gate
		Entertainment			Entertainment			Other			Consolidating		Lions Gate
		Corp.			Inc.			Subsidiaries			Adjustments		Consolidated
		(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		$	(16,993	)	$	97,369		$	42,636		$	—	$	123,012
INVESTING ACTIVITIES:
	Purchases of investments — auction rate preferreds and municipal bonds		—			(307,031	)		—			—		(307,031	)
	Purchases of investments — equity securities		—			(3,470	)		—			—		(3,470	)
	Sales of investments — auction rate preferreds and municipal bonds		—			139,950			—			—		139,950
	Cash received from sale of investment		—			—			2,945			—		2,945
	Cash received from sale of studio facility		23,238			—			11,622			—		34,860
	Acquisition of Redbus, net of cash acquired		—			(27,138	)		—			—		(27,138	)
	Purchases of property and equipment		—			(5,438	)		(12	)		—		(5,450	)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES			23,238			(203,127	)		14,555			—		(165,334	)
FINANCING ACTIVITIES:
	Issuance of common shares		1,408			—			—			—		1,408
	Financing fees paid		—			(546	)		—			—		(546	)
	Repayment of subordinated notes		—			—			(5,000	)		—		(5,000	)
	Decrease in mortgages payable		—			—			(18,927	)		—		(18,927	)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES			1,408			(546	)		(23,927	)		—		(23,065	)
NET CHANGE IN CASH AND CASH EQUIVALENTS			7,653			(106,304	)		33,264			—		(65,387	)
FOREIGN EXCHANGE EFFECT ON CASH			(2,055	)		(52	)		1,633			—		(474	)
CASH AND CASH EQUIVALENTS — BEGINNING OF YEAR			943			106,356			5,540			—		112,839
CASH AND CASH EQUIVALENTS — END OF YEAR		$	6,541		$	—		$	40,437		$	—	$	46,978

F-51

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Year Ended March 31, 2006
	Lions Gate			Lions Gate
	Entertainment			Entertainment			Other			Consolidating			Lions Gate
	Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
	(Amounts in thousands)
RECONCILIATION OF NET INCOME (LOSS) TO CANADIAN GAAP
AS REPORTED UNDER U.S. GAAP	$	6,096		$	(1,488	)	$	51,694		$	(50,206	)	$	6,096
Interest rate swaps mark-to-market		(975	)		(490	)		(485	)		975			(975	)
Accounting for stock-based compensation		(2,016	)		—			—			—			(2,016	)
Adjustment for accretion on subordinated notes		(12,631	)		(12,631	)		—			12,631			(12,631	)
Adjustment for amortization of bank loan financing costs		—			—			—			—			—
Adjustment for amortization of subordinated note issue costs		1,121			1,121			—			(1,121	)		1,121
NET INCOME (LOSS) UNDER CANADIAN GAAP	$	(8,405	)	$	(13,488	)	$	51,209		$	(37,721	)	$	(8,405	)

	As of March 31, 2006
	Lions Gate			Lions Gate
	Entertainment			Entertainment			Other			Consolidating			Lions Gate
	Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
	(Amounts in thousands)
RECONCILIATION OF SHAREHOLDERS’ EQUITY (DEFICIENCY) TO CANADIAN GAAP
AS REPORTED UNDER U.S. GAAP	$	149,270		$	(162,340	)	$	11,399		$	150,941		$	149,270
Interest rate swaps mark-to-market		1,350			1,682			945			(2,627	)		1,350
Accounting for business combinations		1,145			—			1,145			(1,145	)		1,145
Accounting for income taxes		(1,900	)		—			(1,900	)		1,900			(1,900	)
Adjustment for accretion on subordinated notes		(19,055	)		(19,055	)		—			19,055			(19,055	)
Adjustment for amortization of subordinated note issue costs		1,603			1,603			—			(1,603	)		1,603
Reclassification of conversion feature of subordinated notes to shareholders’ equity		74,854			—			—			—			74,854
Other comprehensive loss		139			139			139			(278	)		139
SHAREHOLDERS’ EQUITY (DEFICIENCY) UNDER CANADIAN GAAP	$	207,406		$	(177,971	)	$	11,728		$	166,243		$	207,406

F-52

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	As of March 31, 2005
	Lions Gate			Lions Gate
	Entertainment			Entertainment			Other			Consolidating			Lions Gate
	Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
	(Amounts in thousands)
BALANCE SHEET
Assets
Cash and cash equivalents	$	943		$	106,356		$	5,540		$	—		$	112,839
Restricted cash		—			—			2,913			—			2,913
Accounts receivable, net		35			69			149,915			—			150,019
Investment in films and television programs		—			—			367,376			—			367,376
Property and equipment		—			2,544			28,298			—			30,842
Goodwill		—			—			161,182			—			161,182
Other assets		92			19,517			9,849			—			29,458
Investment in subsidiaries		250,701			291,206			—			(541,907	)		—
Deferred income taxes		1,896			—			(1,896	)		—			—
	$	253,667		$	419,692		$	723,177		$	(541,907	)	$	854,629
Liabilities and Shareholders’ Equity (Deficiency)
Bank loans	$	—		$	—		$	1,162		$	—		$	1,162
Accounts payable and accrued liabilities		143			21,074			112,983			—			134,200
Film obligations		—			—			130,770			—			130,770
Subordinated notes		—			385,000			5,000			—			390,000
Mortgages payable		—			—			18,640			—			18,640
Deferred revenue		—			—			62,459			—			62,459
Minority interests		—			—			259			—			259
Intercompany payables (receivables)		(134,932	)		19,623			130,887			(15,578	)		—
Intercompany equity		262,269			93,217			306,515			(662,001	)		—
Shareholders’ equity (deficiency)		126,187			(99,222	)		(45,498	)		135,672			117,139
	$	253,667		$	419,692		$	723,177		$	(541,907	)	$	854,629

F-53

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Year Ended March 31, 2005
		Lions Gate			Lions Gate
		Entertainment			Entertainment			Other			Consolidating			Lions Gate
		Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
		(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues		$	593		$	—		$	842,596		$	(603	)	$	842,586
EXPENSES:
	Direct operating		—			—			355,922			—			355,922
	Distribution and marketing		—			—			364,281			—			364,281
	General and administration		1,458			40,753			27,852			(603	)		69,460
	Depreciation		89			126			2,944			—			3,159
	Total expenses		1,547			40,879			750,999			(603	)		792,822
OPERATING INCOME (LOSS)			(954	)		(40,879	)		91,597			—			49,764
Other Expenses (Income):
	Interest expense		410			24,033			1,978			—			26,421
	Interest rate swaps mark-to-market		—			(2,453	)		(299	)		—			(2,752	)
	Interest and other income		(335	)		(2,946	)		(159	)		—			(3,440	)
	Minority interests		—			—			107			—			107
	Total other expenses, net		75			18,634			1,627			—			20,336
INCOME (LOSS) BEFORE EQUITY INTERESTS AND INCOME TAXES			(1,029	)		(59,513	)		89,970			—			29,428
Equity interests			(21,316	)		(83,314	)		200			104,630			200
INCOME BEFORE INCOME TAXES			20,287			23,801			89,770			(104,630	)		29,228
Income tax provision			6			—			8,941			—			8,947
NET INCOME (LOSS)		$	20,281		$	23,801		$	80,829		$	(104,630	)	$	20,281

F-54

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Year Ended March 31, 2005
		Lions Gate			Lions Gate
		Entertainment			Entertainment			Other			Consolidating		Lions Gate
		Corp.			Inc.			Subsidiaries			Adjustments		Consolidated
		(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		$	(30,031	)	$	119,534		$	5,993		$	—	$	95,496
INVESTING ACTIVITIES:
Acquisition of Artisan Entertainment Inc., net of cash acquired			—			—			—			—		—
	Cash received from disposition of assets, net		—			—			1,172			—		1,172
	Purchase of property and equipment		—			(2,424	)		(60	)		—		(2,484	)
NET CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES			—			(2,424	)		1,112			—		(1,312	)
FINANCING ACTIVITIES:
	Issuance of common shares		24,713			—			—			—		24,713
	Financing fees paid		—			(1,612	)		—			—		(1,612	)
	Increase in subordinated notes, net of issue costs		—			314,822			—			—		314,822
	Decrease in bank loans		—			(324,700	)		(411	)		—		(325,111	)
	Decrease in mortgages payable		—			—			(1,894	)		—		(1,894	)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES			24,713			(11,490	)		(2,305	)		—		10,918
NET CHANGE IN CASH AND CASH EQUIVALENTS			(5,318	)		105,620			4,800			—		105,102
FOREIGN EXCHANGE EFFECT ON CASH			5,256			745			(5,353	)		—		648
CASH AND CASH EQUIVALENTS — BEGINNING OF YEAR			1,005			(9	)		6,093			—		7,089
CASH AND CASH EQUIVALENTS — END OF YEAR		$	943		$	106,356		$	5,540		$	—	$	112,839

F-55

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Year Ended March 31, 2005
	Lions Gate			Lions Gate
	Entertainment			Entertainment			Other			Consolidating			Lions Gate
	Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
	(Amounts in thousands)
RECONCILIATION OF NET INCOME (LOSS) TO CANADIAN GAAP
AS REPORTED UNDER U.S. GAAP	$	20,281		$	23,801		$	80,829		$	(104,630	)	$	20,281
Interest rate swaps mark-to-market		(632	)		(490	)		(142	)		632			(632	)
Accounting for stock-based compensation		(1,946	)		815			—			(815	)		(1,946	)
Adjustment for accretion on subordinated notes		(5,615	)		(5,615	)		—			5,615			(5,615	)
Adjustment for amortization of bank loan financing costs		(98	)		(98	)		—			98			(98	)
Adjustment for amortization of subordinated note issue costs		434			434			—			(434	)		434
NET INCOME (LOSS) UNDER CANADIAN GAAP	$	12,424		$	18,847		$	80,687		$	(99,534	)	$	12,424

	As of March 31, 2005
	Lions Gate			Lions Gate
	Entertainment			Entertainment			Other			Consolidating			Lions Gate
	Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
	(Amounts in thousands)
RECONCILIATION OF SHAREHOLDERS’ EQUITY (DEFICIENCY) TO CANADIAN GAAP
AS REPORTED UNDER U.S. GAAP	$	126,187		$	(99,222	)	$	(45,498	)	$	135,672		$	117,139
Interest rate swaps mark-to-market		2,325			1,840			485			(2,325	)		2,325
Accounting for business combinations		1,145			1,145			1,145			(2,290	)		1,145
Accounting for income taxes		(1,900	)		—			(1,900	)		1,900			(1,900	)
Adjustment for accretion on subordinated notes		(6,424	)		(6,424	)		—			6,424			(6,424	)
Adjustment for amortization of subordinated note issue costs		482			482			—			(482	)		482
Reclassification of conversion feature of subordinated notes to shareholders’ equity		74,854			—			—			—			74,854
Other comprehensive loss		(304	)		(304	)		(304	)		608			(304	)
SHAREHOLDERS’ EQUITY (DEFICIENCY) UNDER CANADIAN GAAP	$	196,365		$	(102,483	)	$	(46,072	)	$	139,507		$	187,317

F-56

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Year Ended March 31, 2004
		Lions Gate			Lions Gate
		Entertainment			Entertainment			Other			Consolidating			Lions Gate
		Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
		(Amounts in thousands)
STATEMENT OF OPERATIONS
Revenues		$	1,328		$	—		$	375,329		$	(747	)	$	375,910
EXPENSES:
	Direct operating		—			—			181,298			—			181,298
	Distribution and marketing		—			—			207,045			—			207,045
	General and administration		1,698			15,152			26,723			(747	)		42,826
	Severance and relocation costs		119			4,946			510			—			5,575
	Write-down of other assets		5,409			—			6,277			—			11,686
	Depreciation		146			606			2,446			—			3,198
	Total expenses		7,372			20,704			424,299			(747	)		451,628
OPERATING LOSS			(6,044	)		(20,704	)		(48,970	)		—			(75,718	)
Other Expenses (Income):
	Interest expense		12			11,655			2,511			—			14,178
	Interest rate swaps mark-to-market		—			(833	)		627			—			(206	)
	Interest and other income		(136	)		—			—			—			(136	)
	Total other expenses (income), net		(124	)		10,822			3,138			—			13,836
LOSS BEFORE EQUITY INTERESTS AND INCOME TAXES			(5,920	)		(31,526	)		(52,108	)		—			(89,554	)
Equity interests			86,176			50,358			2,169			(136,534	)		2,169
LOSS BEFORE INCOME TAXES			(92,096	)		(81,884	)		(54,277	)		136,534			(91,723	)
Income tax provision			—			—			373			—			373
NET LOSS		$	(92,096	)	$	(81,884	)	$	(54,650	)	$	136,534		$	(92,096	)

F-57

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

		Year Ended March 31, 2004
		Lions Gate			Lions Gate
		Entertainment			Entertainment			Other			Consolidating		Lions Gate
		Corp.			Inc.			Subsidiaries			Adjustments		Consolidated
		(Amounts in thousands)
STATEMENT OF CASH FLOWS
NET CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES		$	(63,538	)	$	(113,964	)	$	61,091		$	—	$	(116,411	)
INVESTING ACTIVITIES:
	Acquisition of Artisan Entertainment Inc., net of cash acquired		—			(148,870	)		—			—		(148,870	)
	Purchase of property and equipment		—			(201	)		(659	)		—		(860	)
NET CASH FLOWS USED IN INVESTING ACTIVITIES			—			(149,071	)		(659	)		—		(149,730	)
FINANCING ACTIVITIES:
	Issuance of common shares		107,162			—			—			—		107,162
	Redemption of Series A preferred shares		(18,090	)		—			—			—		(18,090	)
	Dividends paid on Series A preferred shares		(387	)		—			—			—		(387	)
	Financing fees paid		(67	)		(11,335	)		—			—		(11,402	)
	Increase in subordinated notes, net of issue costs		—			56,347			—			—		56,347
	Increase (decrease) in bank loans		(18,184	)		216,116			(54,899	)		—		143,033
	Decrease in production loans		—			—			(1,273	)		—		(1,273	)
	Increase (decrease) in mortgages payable		(12,186	)		—			3,967			—		(8,219	)
NET CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES			58,248			261,128			(52,205	)		—		267,171
NET CHANGE IN CASH AND CASH EQUIVALENTS			(5,290	)		(1,907	)		8,227			—		1,030
FOREIGN EXCHANGE EFFECT ON CASH			6,421			192			(7,405	)		—		(792	)
CASH AND CASH EQUIVALENTS — BEGINNING OF YEAR			(126	)		1,706			5,271			—		6,851
CASH AND CASH EQUIVALENTS — END OF YEAR		$	1,005		$	(9	)	$	6,093		$	—	$	7,089

F-58

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

	Year Ended March 31, 2004
	Lions Gate			Lions Gate
	Entertainment			Entertainment			Other			Consolidating			Lions Gate
	Corp.			Inc.			Subsidiaries			Adjustments			Consolidated
	(Amounts in thousands)
RECONCILIATION OF NET LOSS TO CANADIAN GAAP
AS REPORTED UNDER U.S. GAAP	$	(92,096	)	$	(81,884	)	$	(54,650	)	$	136,534		$	(92,096	)
Adjustment for capitalized pre-operating costs		(614	)		(614	)		(614	)		1,228			(614	)
Interest rate swaps mark-to-market		(206	)		(833	)		627			206			(206	)
Adjustment for consolidation of CinéGroupe		(2,333	)		—			(2,333	)		2,333			(2,333	)
Accounting for stock-based compensation		(721	)		(721	)		—			721			(721	)
Adjustment for accretion on subordinated notes		(809	)		(809	)		—			809			(809	)
Adjustment for amortization of subordinated note issue costs		48			48			—			(48	)		48
Adjustment for amortization of deferred bank loan financing costs		98			98			—			(98	)		98
NET LOSS UNDER CANADIAN GAAP	$	(96,633	)	$	(84,715	)	$	(56,970	)	$	141,685		$	(96,633	)

25. Related Party Transactions

      In February 2001, the Company entered into an agreement with Ignite, LLC, a company, in which the Vice Chairman, who is also a director, owns approximately 31% and another director owns approximately 12%. This agreement terminated pursuant to its term in February 2003 and was not renewed. The agreement provided that Ignite will be paid a producer fee and a percentage of adjusted gross receipts for projects which commenced production during the term of the agreement and which were developed through a development fund financed by Ignite, LLC. During the year ended March 31, 2006 less than $0.1 million was paid to Ignite, LLC under this agreement.

      In June 2006, we entered into an agreement dated and effective as of March 31, 2006 with Ignite. Under the agreement, in consideration for Ignite disclaiming all of its rights and interests to and in the motion picture presently entitled Employee of the Month, Ignite will be entitled to box office bonuses if certain thresholds are met. During the year ended March 31, 2006, no amounts were paid to the Vice Chairman and a director and another director under this agreement.

      In November 2002, the Company entered into a distribution agreement with Sobini Films, a company owned by a director, for international distribution rights to the film “The Prince and Me.” During the year ended March 31, 2006, the Company paid approximately $0.4 million to Sobini Films in connection with profit participation under this agreement. In March 2006, the Company entered into three distribution agreements with Sobini Films, a company owned by a director, under which the Company acquired certain distribution rights to the films The Prince and Me II, Streets of Legend and Peaceful Warrior. Another director of the Company is also an investor in Peaceful Warrior. The Company is required to pay a home video advance in the amount equal to 50% of Sobini Films’ projected share of adjusted gross receipts from the Company’s initial home video release of Streets of Legend. During the year ended March 31, 2006, the Company paid only a nominal amount to Sobini Films under these three distribution agreements.

      In December 2003 and April 2005, the Company entered into distribution agreements with Cerulean, LLC, a company in which the Chief Executive Officer, who is also a director, and the Vice Chairman, who is also a director, each hold a 28% interest. Under the agreements Lionsgate obtained rights to distribute certain

F-59

LIONS GATE ENTERTAINMENT CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

titles in home video and television media and Cerulean, LLC is entitled to receive royalties. During the year ended March 31, 2006 approximately $0.1 million was paid to Cerulean, LLC under these agreements.

      In September 2004, the Company entered into an agreement to purchase the right to a motion picture screenplay from a director. The agreement provides that the director will be paid a nominal amount for the purchase of the screenplay and will be entitled to box office bonuses and deferred compensation if certain thresholds are met. During the year ended March 31, 2006, no amounts were paid to the director under this agreement.

      In March 2005, the Company entered into an agreement with a company owned 100% by the President and Chairman Emeritus (who was Chairman until December 2004), who was also a director until March 31, 2006, to provide that the President and Chairman Emeritus will provide consulting services in connection with Lionsgate’s Canadian and French Canadian operations for a term of one year from April 1, 2005. This agreement ended March 31, 2006. During the year ended March 31, 2006, the Company paid the company owned 100% by the President and Chairman Emeritus $0.2 million for consulting services provided in connection with this agreement.

      In April 2005, we entered into library and output agreements with Maple Pictures for the distribution of our motion picture, television and home video product in Canada. During fiscal 2006, Maple Pictures paid us approximately $2.0 million pursuant to the library and output agreements. Maple Pictures was formed by a director of the Company, another former Lionsgate executive and a third-party equity investor. The director is Co-President and a director of, and holds a 19.5% equity interest in, Maple Pictures. We also have a minority interest in Maple Pictures (see Note 6).

      The brother of our Vice Chairman and a director is an employee at a private bank that is affiliated with Merrill Lynch. The bank manages a portion of our cash holdings. In fiscal 2006, the brother of our Vice Chairman and a director received less than $25,000 in connection with this relationship.

      In March 2006, the Company entered into purchase and vendor subscription agreements with Icon International, Inc., a company which directly reports to Omnicom Group, Inc. A director of the Company is the Chairman and Chief Executive Officer of Omnicom Media Group, a division of Omnicom Group, Inc. Under the purchase agreement, the Company agreed to transfer to Icon International, inc. for liquidation purposes certain excess inventory CDs, VHS tapes and DVDs in inventory. In return, Icon International, Inc. agreed to pay the Company approximately $0.7 million. The Company received the $0.7 million payment in March 2006. Under the vendor subscription agreement, the Company agreed to purchase approximately $4.1 million in net media advertising through Icon International, Inc. in order to earn approximately $0.8 million in guaranteed minimum credits under a formula set forth under the Vendor Subscription agreement in exchange for Icon International, Inc.’s media advertising procurement services. The guaranteed minimum credits will be credited against the guaranteed minimum payment to satisfy the Company’s minimum payment obligation under the vendor subscription agreement. The Company intends to spend approximately $5.6 million (approximately $4.8 million in net media advertising under the terms of the vendor subscription agreement) in media advertising through Icon International, Inc. Icon International, Inc. has acknowledged that when delivered such a purchase will extinguish the Company’s guaranteed minimum payment obligation under the vendor subscription agreement. During the year ended March 31, 2006, the Company did not pay any amounts to Icon International, Inc. under the vendor subscription agreement.

F-60 EX-3.2 2 v19602exv3w2.htm EXHIBIT 3.2

Exhibit 3.2

Notice of Articles

BUSINESS CORPORATION ACT

This Notice of Articles was issued by the Registrar on September 23, 2005 02:43 PM Pacific Time

Incorporation Number:    BC0720538

Recognition Date and Time:    April 1, 2005 12:00 AM Pacific Time as a result of an Amalgamation

NOTICE OF ARTICLES

Name of Company:

LIONS GATE ENTERTAINMENT CORP.

REGISTERED OFFICE INFORMATION
Mailing Address:	Delivery Address:
2200 — 1055 W HASTINGS ST	2200 — 1055 W HASTINGS ST
VANCOUVER BC V6E 2E9	VANCOUVER BC V6E 2E9
CANADA	CANADA

RECORDS OFFICE INFORMATION
Mailing Address:	Delivery Address:
2200 — 1055 W HASTINGS ST	2200 — 1055 W HASTINGS ST
VANCOUVER BC V6E 2E9	VANCOUVER BC V6E 2E9
CANADA	CANADA

DIRECTOR INFORMATION
Last Name, First Name, Middle Name:
FELTHEIMER, JON
Mailing Address:	Delivery Address:
SUITE 200 2700 COLORADO AVENUE SANTA MONICA CA 90404 UNITED STATES	SUITE 200 2700 COLORADO BLVD. SANTA MONICA CA 90404 UNITED STATES
Last Name, First Name, Middle Name:
LUDWIG, HARALD
Mailing Address:	Delivery Address:
2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA	2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA
Last Name, First Name, Middle Name:
Bacal, Norman
Mailing Address:	Delivery Address:
SUITE 2600, ROYAL BANK PLAZA 200 BAY ST. SOUTH TOWER TORONTO ON M5J 2J4 CANADA	SUITE 2600, ROYAL BANK PLAZA 200 BAY ST. SOUTH TOWER TORONTO ON M5J 2J4 CANADA
Last Name, First Name, Middle Name:
SIMMONS, HARDWICK
Mailing Address:	Delivery Address:
SUITE 200 2700 COLORADO AVENUE SANTA MONICA CA 90404 UNITED STATES	SUITE 200 2700 COLORADO BLVD. SANTA MONICA CA 90404 UNITED STATES
Last Name, First Name, Middle Name:
EVRENSEL, ARTHUR
Mailing Address:	Delivery Address:
2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA	2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA
Last Name, First Name, Middle Name:
May, Laurie S.
Mailing Address:	Delivery Address:
2 BLOOR STREET WEST SUITE 1001 TORONTO ON M4W 3E2 CANADA	2 BLOOR STREET WEST SUITE 1001 TORONTO ON M4W 3E2 CANADA

BC0720538 Page: 2 of 4

Last Name, First Name, Middle Name:
BURNS, MICHAEL
Mailing Address:	Delivery Address:
SUITE 200 2700 COLORADO AVENUE SANTA MONICA CA 90404 UNITED STATES	SUITE 200 2700 COLORADO BLVD. SANTA MONICA CA 90404 UNITED STATES
Last Name, First Name, Middle Name:
AMIN, MARK
Mailing Address:	Delivery Address:
SUITE 200 2700 COLORADO AVENUE SANTA MONICA CA 90404 UNITED STATES	SUITE 200 2700 COLORADO BLVD. SANTA MONICA CA 90404 UNITED STATES
Last Name, First Name, Middle Name:
PATERSON, SCOTT
Mailing Address:	Delivery Address:
2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA	2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA
Last Name, First Name, Middle Name:
SIMM, DARYL
Mailing Address:	Delivery Address:
SUITE 200 2700 COLORADO AVENUE SANTA MONICA CA 90404 UNITED STATES	SUITE 200 2700 COLORADO BLVD. SANTA MONICA CA 90404 UNITED STATES
Last Name, First Name, Middle Name:
TOBIN, BRIAN
Mailing Address:	Delivery Address:
2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA	2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA
Last Name, First Name, Middle Name:
KOFFMAN, MORLEY
Mailing Address:	Delivery Address:
2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA	2200-1055 WEST HASTINGS ST. VANCOUVER BC V6E 2E9 CANADA
AUTHORIZED SHARE STRUCTURE

BC0720538 Page: 3 of 4

1.	5,000,000,000			Common Shares		Without Par Value
						With Special Rights or Restrictions attached
2.	200,000,000			Preference Shares		Without Par Value
						With Special Rights or Restrictions attached
		1.	1,000,000		5.25% Convertible Redeemable Preferred Shares, Series A	Special Rights or Restrictions are attached
		2.	10		Preferred Shares, Restricted Voting, Non-Transferable, Series B	Special Rights or Restrictions are attached

EX-3.2

exv3w2

EX-10.7

Exhibit 10.7

Director Compensation Summary

Persons elected at our annual meetings as directors and who hold no executive office with us or any of our affiliates are entitled to receive an annual retainer of $20,000 (before May 2005, $15,000) and a further retainer of $10,000 if such director acts as chairman of the Audit Committee or $7,500 if such director acts as chairman of the Compensation Committee or Nominating & Corporate Governance Committee. Also, each non-executive director is entitled to receive a fee of $1,000 per meeting of the directors or any committee thereof, and to be reimbursed for reasonable fees and expenses incurred in connection with their service as directors. During the last fiscal year, six directors received the annual retainer in full, two directors received three-fourths of the annual retainer, one director received approximately one-half of the annual retainer, and two directors received one-quarter of the annual retainer. Such retainers and fees paid to directors will be provided, at the director’s election, 50% in cash compensation with the remaining 50% payable in our common shares, or 100% payable in our common shares. Non-employee directors are granted 12,500 restricted share units when they join the board of directors.

EX-10.11

EXHIBIT 10.11

February 21, 2006

Mr. James Keegan
2840 Bayshore Ave
Ventura, CA 93001

Re.: Employment Agreement

Dear Mr. Keegan:

     On behalf of Lions Gate Films Inc. (“Company”), this is to confirm the terms of your employment by the Company. We refer to you herein as “Employee”. The terms of Employee’s employment from this date forward are as follows:

     1. The term of this agreement (“Agreement”) will begin April 16, 2006 and end April 15, 2008 (“Term”). During the Term of this Agreement Employee will serve as Chief Financial Officer. Employee shall render such services as are customarily rendered by persons in Employee’s capacity in the motion picture industry and as may be reasonably requested by Company.

         The Company may, at its sole discretion, extend the Term of this Agreement for an additional year, commencing April 16, 2008 and ending April 15, 2009 (“Option Year”) by giving notice to Employee of its election to extend this Agreement at least ninety (90) days before that date.

         So long as this Agreement shall continue in effect, Employee shall devote Employee’s full business time, energy and ability exclusively to the business, affairs and interests of the Company and matters related thereto, shall use Employee’s best efforts and abilities to promote the Company’s interests and shall perform the services contemplated by this Agreement in accordance with policies established by the Company.

     2. The following compensation will be paid to Employee during the Term of this Agreement:

                Base Salary. During the Term of this Agreement, the Company agrees to pay Employee a base salary as follows:

April 16, 2006 through April 15, 2007 — the rate of Four Hundred Thousand dollars ($400,000.00) per year (“Base Salary — Year 1”), payable in accordance with the Company’s normal payroll practices in effect.

Mr. James Keegan
February 21, 2006
Page 2

April 16, 2007 through April 15, 2008 — the rate of Four Hundred Twenty Five Thousand dollars ($425,000.00) per year (“Base Salary — Year 2”), payable in accordance with the Company’s normal payroll practices in effect.

In the event that this Agreement is extended for a third year at the Company’s option (April 16, 2008 through April 15, 2009) in accordance with Section 1 above, Employee’s compensation shall be at the rate of Four Hundred Fifty Thousand dollars ($450,000.00) per year (“Base Salary-Option Year”), payable in accordance with the Company’s normal payroll practices in effect.

               Nothing in this Agreement shall limit the Company’s right to modify its payroll practices, as it deems necessary.

               Finally, Employee shall be entitled to receive performance bonuses at the full discretion of the CEO of the Company and the approval of the Board of the Company.

     3. As an employee of the Company, Employee will continue to be eligible to participate in all benefit plans to the same extent as other salaried employees subject to the terms of such plans.

     4. Employee shall be entitled to take paid time off without a reduction in salary, subject to (i) the approval of Employee’s supervisor, and (ii) the demands and requirements of Employee’s duties and responsibilities under the Agreement. There are no paid vacation days. Finally, Employee will be eligible to be reimbursed for any business expenses in accordance with the Company’s current Travel and Entertainment policy.

     5. Lions Gate shall request that the Compensation Committee of Lions Gate (“CCLG”) authorize and grant Employee 25,000 common shares (“Grants”) of Lions Gate Entertainment Corp. in accordance with the terms and conditions of the existing and/or future Employee Stock Plan (collectively, the “Plan”). Employee acknowledges that this Grant of stock is subject to (i) the approval of the CCLG; and (ii) Lions Gate Entertainment Corp’s Shareholders (“Shareholders”) approving an increase to the number of options and shares available under the Plan. The next scheduled meeting of the Shareholders shall be in September, 2006. The award date (“Award Date”) shall be the date of the board meeting when the Grant is approved. The Grant shall vest as follows:

1/3 on the 1^st anniversary of the Award Date;
2/3 on the 2^nd anniversary of the Award Date;
3/3 on the 3^rd anniversary of the Award Date.

Mr. James Keegan
February 21, 2006
Page 3

     If the Grants described herein are not approved by the CCLG or Shareholders do not approve additional options and shares under the plan, Employee shall receive the cash equivalent (“Cash Equivalent”). The Cash Equivalent shall be the value of the shares on the date such shares (or a portion thereof) would have vested, and shall be paid on such date.

     In the event of Employee’s death the shares granted, if any, in this Section 5 shall be deemed fully vested.

     In the event the Company does not elect to extend this Agreement to April 15, 2009 (Option Year) per paragraph 2 of Section 1, the Grants should be deemed fully vested at the end of Year 2.

     6. Employee agrees that the Company Employee Handbook outlines other policies, which will apply to Employee’s employment, and Employee acknowledges receipt of such handbook. Please note, however, that the Company retains the right to revise, modify or delete any policy or benefit plan it deems appropriate.

     7. This Agreement shall terminate upon the happening of any one or more of the following events:

               (a) The mutual written agreement between Lions Gate and
Employee; or

               (b) The death of Employee; or

               (c) Employee’s having become so physically or mentally disabled as to be incapable, even with a reasonable accommodation, of satisfactorily performing Employee’s duties hereunder for a period of ninety (90) days or more, provided that Employee has not cured disability within ten days of written notice; or

               (d) The determination on the part of Lions Gate that “cause” exists for termination of this Agreement; “cause” being defined as any of the following: 1) Employee’s conviction of a felony or plea of nolo contendere to a felony except in connection with a traffic violation; 2) commission, by act or omission, of any material act of dishonesty in the performance of Employee’s duties hereunder; 3) material breach of this Agreement by Employee; 4) any act of misconduct by Employee having a substantial adverse effect on the business or reputation of Lions Gate.

               (e) Without Cause. In such case Employee shall be entitled to receive the Base Salary set forth in Section 2 through the conclusion of Year 2 or Option Year if the option has been exercised subject to Employee’s obligation to mitigate in accordance with California Law. In the alternative, at Lions Gate’s discretion, if Employee is terminated by Lions Gate for any reason other than as set forth in sub-paragraphs 7(a)-(d), a severance amount equal to 50% of the balance of the compensation still owing to Employee under Section 2 hereof at the time of termination, but not less

Mr. James Keegan
February 21, 2006
Page 4

than six (6) months’ salary, shall be paid to Employee by Lions Gate, which payment shall relieve Lions Gate of any and all obligations to Employee. In the event this Agreement is terminated by the Company Without Cause, the cost of maintaining Employee’s health, dental, and vision insurance coverage under COBRA shall be reimbursed to Employee by Company until the earlier of six (6) months following the date of termination or the date Employee secures new employment and is eligible for health care benefits.

     In the event that this Agreement is terminated pursuant to sub-paragraphs (a)-(d) above neither Lions Gate nor Employee shall have any remaining duties or obligations hereunder, except that (i) Lions Gate shall pay to Employee, only such compensation as is earned under Section 2 as of the date of termination and (ii) Employee shall continue to be bound by Sections 9, 11, and 12. For the sake of clarity, in all events Sections 9, 11, and 12 shall survive and be binding upon Employee post termination.

     8. Employee’s services shall be exclusive to Lions Gate during the Term. Employee shall render such services as are customarily rendered by persons in Employee’s capacity in the motion picture industry and as may be reasonably requested by Lions Gate. Employee hereby agrees to comply with all reasonable requirements, directions and requests, and with all reasonable rules and regulations made by Lions Gate in connection with the regular conduct of its business; to render services during Employee’s employment hereunder whenever and wherever and as often as Lions Gate may reasonably require in a competent, conscientious and professional manner, and as instructed by Lions Gate in all matters, including those involving artistic taste and judgment, but there shall be no obligation on Lions Gate to cause or allow Employee to render any services, or to include all or any of Employee’s work or services in any motion picture or other property or production.

     9. Employee agrees that Lions Gate shall own all rights of every kind and character throughout the universe, in perpetuity to any material and/or idea suggested or submitted by Employee or suggested or submitted to Employee by a third party that occurs during the Term or any other period of employment with the Company, its parent, affiliates, or subsidiaries that are within the scope of Employee’s employment and responsibilities hereunder. Employee agrees that during the Term and any other period of employment with the Company, its parent, affiliates, or subsidiaries, Lions Gate shall own all other results and proceeds of Employee’s services that are related to Employee’s employment and responsibilities. Employee shall promptly and fully disclose all intellectual property generated by the Employee during the Term and any other period of employment with the Company, its parent, affiliates, or subsidiaries in connection with Employee’s employment hereunder. All copyrightable works that Employee creates in connection with Employee’s obligations under this Agreement and any other period of employment with the Company, its parent, affiliates, or subsidiaries shall be considered “work made for hire” and therefore the property of the Company. To the extent any work so produced or other intellectual property so generated by Employee is not deemed to be a “work made for hire,” Employee hereby assigns and agrees to assign to the Company

Mr. James Keegan
February 21, 2006
Page 5

(or as otherwise directed by the Company) Employee’s full right, title and interest in and to all such works and other intellectual property. Employee agrees to execute any and all applications for domestic and foreign copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the intellectual property to the Company and to permit the Company to enforce any copyrights or other proprietary rights to the intellectual property. Employee will not charge the Company for time spent in complying with these obligations. This Section 9 shall apply only to that intellectual property which related at the time of conception to the Company’s then current or anticipated business or resulted from work performed by Employee for the Company. Employee hereby acknowledges receipt of written notice from the Company pursuant to California Labor Code Section 2872 that this Agreement (to the extent it requires an assignment or offer to assign rights to any invention of Executive) does not apply fully to an invention which qualifies fully under California Labor Code Section 2870.

     10. Employee shall not assign any of Employee’s rights or delegate any of Employee’s duties under this Agreement.

     11. The parties acknowledge and agree that during the Term of this Agreement and in the course of the discharge of Employee’s duties hereunder and at any other period of employment with the Company, its parent, affiliates, or subsidiaries, Employee shall have and has had access to information concerning the operation of Lions Gate and its affiliated entities, including without limitation, financial, personnel, sales, planning and other information that is owned by Lions Gate and regularly used in the operation of Lions Gate’s business and (to the extent that such confidential information is not subsequently disclosed) that this information constitutes Lions Gate’s trade secrets. Employee agrees that Employee shall not disclose any such trade secrets, directly or indirectly, to any other person or use them in any way, either during the Term of this Agreement or at any other time thereafter, except as is required in the course of Employee’s employment for Lions Gate. Employee shall not use any such trade secrets in connection with any other employment and/or business opportunities following the Term. In addition, Employee hereby expressly agrees that Employee will not disclose any confidential matters of Lions Gate that are not trade secrets prior to, during or after Employee’s employment including the specifics of this Agreement. . Employee shall not use any such confidential information in connection with any other employment and/or business opportunities following the Term. In addition, in order to protect the Confidential Information, Employee agrees that during the Term and for a period of two (2) years thereafter, Employee will not, directly or indirectly, induce or entice any other executive of the Company to leave such employment or cause anyone else to leave such employment.

     12. Any dispute, controversy or claim arising out of or in respect to this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall at the request of either party be submitted to and settled by

Mr. James Keegan
February 21, 2006
Page 6

binding arbitration conducted before a single arbitrator in Los Angeles in accordance with the Federal Arbitration Act, to the extent that such rules do not conflict with any provisions of this Agreement. Said arbitration shall be under the jurisdiction of Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in Los Angeles, California. All such actions must be instituted within one year after the controversy or claim arose or forever be waived. Failure to institute an arbitration proceeding within such period shall constitute an absolute bar to the institution of any proceedings respecting such controversy or claim, and a waiver thereof. The arbitrator shall have the authority to award damages and remedies in accordance with applicable law. Any award, order of judgment pursuant to such arbitration shall be deemed final and binding and may be entered and enforced in any state or federal court of competent jurisdiction. Each party agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such award, order of judgment. Company shall pay for the administrative costs of such hearing and proceeding.

     13. This Agreement expresses the binding and entire Agreement between Employee and the Company and shall replace and supersede all prior arrangements and representations, either oral or written, as to the subject matter hereof. All modifications or amendments to the Agreement must be in writing, signed by both parties.

     Please acknowledge your confirmation of the above terms by signing below where indicated and returning this letter to me.

     Jim, please call Nancy Coleman at (310) 255-3929 if you have any questions.

Very truly yours,

LIONS GATE FILMS INC.

/s/ Wayne Levin Wayne Levin

EVP and General Counsel

AGREED AND ACCEPTED

This 4 day of April, 2006

/s/ James Keegan James Keegan

EX-10.12

Exhibit 10.12

As of April 1, 2006

Mr. Wayne Levin
Via Personal Delivery

Re.: Employment Agreement

Dear Wayne:

     On behalf of Lions Gate Films Inc. (“Company”), this is to confirm the terms of your employment by the Company. We refer to you herein as “Employee”. The terms of Employee’s employment from this date forward are as follows:

     1. The term of this agreement (“Agreement”) will begin April 1, 2006 and end March 31, 2009 (“Term”). During the Term of this Agreement, Employee will serve as General Counsel and Executive Vice President, Corporate Operations. Employee shall report to the CEO in his capacity as General Counsel and to the COO, or person performing substantially such role in his capacity as Executive Vice President, Corporate Operations. For the purpose hereof, Employee agrees that Steve Beeks performs such function. Employee shall render such services as are customarily rendered by persons in Employee’s capacity in the motion picture industry and as may be reasonably requested by Company.

     The Company may, at its sole discretion, extend the Term of this Agreement for an additional year, commencing April 1, 2009 and ending March 31, 2010 (“Option Year”) by giving notice to Employee of its election to extend this Agreement at least 180 days before that date.

     So long as this Agreement shall continue in effect, Employee shall devote Employee’s full business time, energy and ability exclusively to the business, affairs and interests of the Company and matters related thereto, shall use Employee’s best efforts and abilities to promote the Company’s interests and shall perform the services contemplated by this Agreement in accordance with policies established by the Company.

     2. (a) The following compensation will be paid to Employee during the Term of this Agreement:

          Base Salary. During the Term of this Agreement, the Company agrees to pay Employee a base salary as follows:

          For first year of the Term, the rate of $400,000 per year, payable in accordance with the Company’s normal payroll practices in effect.

MR. WAYNE LEVIN
Page 2

          For the remainder Term, the rate of $500,000 per year, payable in accordance with the Company’s normal payroll practices in effect.

          During the Option year, the rate of $600,000 per year, payable in accordance with the Company’s normal payroll practices in effect.

          Nothing in this Agreement shall limit the Company’s right to modify its payroll practices, as it deems necessary.

     (b) Bonuses:

     (i) An annual bonus at the full discretion of the CEO;

     (ii) An annual bonus of 25% of Base Salary based upon Established Goals. The Established Goals shall be set forth in writing at the beginning of each fiscal, and shall be discussed in good faith between Company and Employee;

     (iii) An annual bonus of 25% of Base Salary based upon the EBITDA of the Company on a most favored nation basis with any person receiving an EBITDA based bonus. For the sake of clarity, the MFN basis applies to the definition of EBITDA, the EBITDA target, and the percentages of Base Salary payable at various levels if the EBITDA target; and

     (iv) Change of Control of Bonus: For the purposes of this Agreement, Change of Control shall have the same meaning as set forth in the employment agreement of Michael Burns, dated as of September 1, 2003. Company shall pay Employee a Bonus of $1,000,000 upon a Change of Control. Notwithstanding anything to the contrary, this Change of Control Bonus shall vest 100% if discussions relating and leading to the Change of Control commence during the Term hereof whether are not the Change of Control is actually consummated after the Term or the termination hereof. However, this bonus shall unvest and not be payable if the principal agreement giving rise to the Change of Control is not signed within one year of Employee’s termination of employment.

     (iv) Two Past Services Bonuses: The first in the amount of $100,000, which shall be paid April 3, 2006; and the Second in the amount of $125,000 which shall be paid April 3, 2007. These Bonuses shall not be applicable against any other Bonus and shall not be counted as any portion of Employee’s bonus for the fiscal year 2006.

     3. As an employee of the Company, Employee will continue to be eligible to participate in all benefit plans, including Senior Management Plans, to the same extent as other employees, subject to the terms of such plans.

MR. WAYNE LEVIN
Page 3

     4. Employee shall be entitled to take paid time off without a reduction in salary, subject to (i) the approval of Employee’s supervisor, and (ii) the demands and requirements of Employee’s duties and responsibilities under the Agreement. There are no paid vacation days. Finally, Employee will be eligible to be reimbursed for any business expenses in accordance with the Company’s current Travel and Entertainment policy. The forgoing notwithstanding, Employee’s travel and entertainment shall be on a most favored nations basis with all other Presidents of Divisions.

     5. Company shall request that the Compensation Committee of Lions Gate (“CCLG”) authorize and grant Employee 100,000 common share units (“Grants”) of Lions Gate Entertainment Corp. in accordance with the terms and conditions of the existing and/or future Employee Stock Plan (“Plan”). Employee acknowledges that this Grant of stock is subject to the approval of the CCLG. The award date (“Award Date”) shall be the date of the board meeting when the Grant is approved. The Grant shall vest as follows:

50% on March 31, 2008 and 50% on March 31, 2009

     When the Company obtains an additional allotment of shares under the Plan, Company shall grant Employee 25,000 common share units (“ Further Grants”) of Lions Gate Entertainment Corp. in accordance with the terms and conditions of the existing and/or future Employee Stock Plan (“Plan”). The Grant shall vest as follows:

50% on March 31, 2008 and 50% on March 31, 2009

     If the Company does not obtain an addition allotment of shares, then it shall pay Employee in cash the value of such Further Grants on the date such Further Grants were to have vested.

     If any employee’s stock options or shares that are issued under the Employee Stock Option Plan accelerate in vesting schedule as a result of a change of control, Employee’s previously stock options, Further Grants, and shares issued hereunder shall likewise accelerate in vesting schedule

     For the sake of clarity, all options granted under Employee’s prior employment agreement shall continue to vest in accordance with the terms of such prior agreement.

     Employee represents and warrants that during the Term hereof, Employee shall hold at least 5000 shares of common shares of the Company.

     6. Employee agrees that the Company Employee Handbook outlines other policies, which will apply to Employee’s employment, and Employee acknowledges receipt of such handbook. Please note, however, that the Company retains the right to revise, modify or delete any policy or benefit plan it deems appropriate.

MR. WAYNE LEVIN
Page 4

     7. This Agreement shall terminate upon the happening of any one or more of the following events:

          (a) The mutual written agreement between Company and Employee; or

          (b) The death of Employee. However, in the event of the death of Employee, all granted shares and stock options shall immediately vest; or

          (c) Employee’s having become so physically or mentally disabled as to be incapable, even with a reasonable accommodation, of satisfactorily performing his duties hereunder for a period of ninety (90) days or more, provided that Employee has not cured disability within ten days of written notice; or

          (d) The determination on the part of Company that “cause” exists for termination of this Agreement; “cause” being defined as any of the following: 1) Employee’s conviction of a felony or plea of nolo contendere to a felony except in connection with a traffic violation; 2) commission, by act or omission, of any material act of dishonesty in the performance of Employee’s duties hereunder; 3) material breach of this Agreement by Employee causing material to the Company; or 4) any act of misconduct by Employee having a substantial adverse effect on the business or reputation of Company.

          (e) Without Cause. In such case, Employee shall be entitled to receive the Base Salary and Bonuses set forth in Section 2 through the conclusion of the Term subject to Employee’s obligation to mitigate in accordance with California Law. In the alternative, at Company’s discretion, if Employee is terminated by Company for any reason other than as set forth in sub-paragraphs 7(a)-(d), a severance amount equal to 50% of the balance of the compensation still owing to Employee under Section 2(a) hereof at the time of termination shall be paid to Employee by Company (the “Pay-Out”), which payment shall relieve Company of any and all base salary obligations to Employee. Other than the Bonus set forth in paragraph 2(b)(iv) (the Change of Control Bonus – which shall vest and be payable as set forth in paragraph 2(b)(iv)), in the event that Company elects the Pay-Out, all bonuses shall be paid on a prorated basis in the year of termination in proportion to the amount of such year worked by Employee and shall not be payable in subsequent years. In the final year of the Term, the Company may not elect the Pay-Out alternative.

     The forgoing notwithstanding, if Employee is not terminated contemporaneous with a Change of Control, but is terminated subsequent thereto Without Cause or by any diminution in responsibility as measured against Employee’s responsibilities prior to the Change of Control (in which case Employee shall be entitled to terminate for Good Cause), then Company shall pay Employee in one lump sum, all compensation owing under paragraph 2 and 5 hereof. If the Company is purchased by larger entity, it shall not be considered a diminution in responsibility if Employee is made either (i) General Counsel or (ii) EVP, Operations of that larger entity. However, it shall be considered a diminution in responsibility if Employee is required to report to another person

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performing a legal role in such larger entity, General Counsel or otherwise unless Employee consents.

     In the event that this Agreement is terminated pursuant to sub-paragraphs (a)-(d) above neither Company nor Employee shall have any remaining duties or obligations hereunder, except that Company shall pay to Employee, only such compensation as is earned under Section 2 as of the date of termination.

     8. Employee’s services shall be exclusive to Company during the Term. Employee shall render such services as are customarily rendered by persons in Employee’s capacity in the motion picture industry and as may be reasonably requested by Company. Employee hereby agrees to comply with all reasonable requirements, directions and requests, and with all reasonable rules and regulations made by Company in connection with the regular conduct of its business; to render services during Employee’s employment hereunder whenever and wherever and as often as Company may reasonably require in a competent, conscientious and professional manner, and as instructed by Company in all matters, including those involving artistic taste and judgment, but there shall be no obligation on Company to cause or allow Employee to render any services, or to include all or any of Employee’s work or services in any motion picture or other property or production.

     9. Employee agrees that Company shall own all rights of every kind and character throughout the universe, in perpetuity to any material and/or idea suggested or submitted by Employee or suggested or submitted to Employee by a third party that occurs during the Term or any other period of employment with the Company, its parent, affiliates, or subsidiaries that are within the scope of Employee’s employment and responsibilities hereunder. Employee agrees that during the Term and any other period of employment with the Company, its parent, affiliates, or subsidiaries, Company shall own all other results and proceeds of Employee’s services that are related to Employee’s employment and responsibilities. Employee shall promptly and fully disclose all intellectual property generated by the Employee during the Term and any other period of employment with the Company, its parent, affiliates, or subsidiaries in connection with his employment hereunder. All copyrightable works that Employee creates in connection with his obligations under this Agreement and any other period of employment with the Company, its parent, affiliates, or subsidiaries shall be considered “work made for hire” and therefore the property of the Company. To the extent any work so produced or other intellectual property so generated by Employee is not deemed to be a “work made for hire,” Employee hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) Employee’s full right, title and interest in and to all such works and other intellectual property. Employee agrees to execute any and all applications for domestic and foreign copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the intellectual property to the Company and to permit the Company to enforce any copyrights or other proprietary rights to the intellectual property. Employee will not charge the Company for time spent in complying with these obligations. This Section 9 shall apply only to that

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intellectual property which related at the time of conception to the Company’s then current or anticipated business or resulted from work performed by Employee for the Company. Employee hereby acknowledges receipt of written notice from the Company pursuant to California Labor Code Section 2872 that this Agreement (to the extent it requires an assignment or offer to assign rights to any invention of Executive) does not apply fully to an invention which qualifies fully under California Labor Code Section 2870.

     10. Employee shall not assign any of his rights or delegate any of his duties under this Agreement.

     11. The parties acknowledge and agree that during the Term of this Agreement and in the course of the discharge of his duties hereunder and at any other period of employment with the Company, its parent, affiliates, or subsidiaries, Employee shall have and has had access to information concerning the operation of Company and its affiliated entities, including without limitation, financial, personnel, sales, planning and other information that is owned by Company and regularly used in the operation of Company’s business and (to the extent that such confidential information is not subsequently disclosed) that this information constitutes Company’s trade secrets. Employee agrees that he shall not disclose any such trade secrets, directly or indirectly, to any other person or use them in any way, either during the Term of this Agreement or at any other time thereafter, except as is required in the course of his employment for Company. Employee shall not use any such trade secrets in connection with any other employment and/or business opportunities following the Term. In addition, Employee hereby expressly agrees that Employee will not disclose any confidential matters of Company that are not trade secrets prior to, during or after Employee’s employment including the specifics of this Agreement. . Employee shall not use any such confidential information in connection with any other employment and/or business opportunities following the Term. In addition, in order to protect the Confidential Information, Employee agrees that during the Term and for a period of two (2) years thereafter, Employee will not, directly or indirectly, induce or entice any other executive of the Company to leave such employment or cause anyone else to leave such employment.

     12. Any dispute, controversy or claim arising out of or in respect to this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall at the request of either party be submitted to and settled by binding arbitration conducted before a single arbitrator in Los Angeles in accordance with the Federal Arbitration Act, to the extent that such rules do not conflict with any provisions of this Agreement. Said arbitration shall be under the jurisdiction of Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in Los Angeles, California. All such actions must be instituted within one year after the controversy or claim arose or forever be waived. Failure to institute an arbitration proceeding within such period shall constitute an absolute bar to the institution of any proceedings respecting such controversy or claim, and a waiver thereof. The arbitrator shall have the authority to award damages and remedies in accordance with applicable law. Any award, order of judgment pursuant to such arbitration shall be deemed final and binding and may be

MR. WAYNE LEVIN
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entered and enforced in any state or federal court of competent jurisdiction. Each party agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such award, order of judgment. Company shall pay for the administrative costs of such hearing and proceeding.

     13. This Agreement expresses the binding and entire Agreement between Employee and the Company and shall replace and supersede all prior arrangements and representations, either oral or written, as to the subject matter hereof. All modifications or amendments to the Agreement must be in writing, signed by both parties.

     Please acknowledge your confirmation of the above terms by signing below where indicated and returning this letter to me.

     Wayne, please call Nancy Coleman at (310) 255-3929 if you have any questions.

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Very truly yours,

LIONS GATE FILMS INC.

/s/ Steve Beeks

Steve Beeks
President, Lions Gate Entertainment

AGREED AND ACCEPTED

This 9th day of May, 2006

/s/ Wayne Levin

Wayne Levin

EX-10.13

EXHIBIT 10.13

January 5, 2006

Ms. Marni Wieshofer
16634 Calle Brittany
Pacific Palisades, CA 90272

Re.: Employment Agreement

Dear Ms. Wieshofer:

     On behalf of Lions Gate Films Inc. (“Company”), this is to confirm the terms of your employment by the Company. We refer to you herein as “Employee”. The terms of Employee’s employment from this date forward are as follows:

     1. The term of this agreement (“Agreement”) will begin February 1, 2006 and end January 31, 2008 (“Term”). During the Term of this Agreement Employee will serve as Executive Vice President, Corporate Development. Employee shall render such services as are customarily rendered by persons in Employee’s capacity in the motion picture industry and as may be reasonably requested by Company. Employee shall report to the Chief Executive Officer (“CEO”), Chief Operating Officer (“COO”) or President, as determined by the CEO.

         So long as this Agreement shall continue in effect, Employee shall devote Employee’s full business time, energy and ability exclusively to the business, affairs and interests of the Company and matters related thereto, shall use Employee’s best efforts and abilities to promote the Company’s interests and shall perform the services contemplated by this Agreement in accordance with policies established by the Company.

     2. The following compensation will be paid to Employee during the Term of this Agreement:

                Base Salary. During the Term of this Agreement, the Company agrees to pay Employee a base salary as follows:

February 1, 2006 through January 31, 2007 — the rate of Three Hundred Twenty Five Thousand dollars ($325,000.00) per year (“Base Salary — Year 1”), payable in accordance with the Company’s normal payroll practices in effect.

Ms. Marni Wieshofer
January 5, 2006
Page 2

February 1, 2007 through January 31, 2008 — the rate of Three Hundred Fifty Thousand dollars ($350,000.00) per year (“Base Salary — Year 2”), payable in accordance with the Company’s normal payroll practices in effect.

                Nothing in this Agreement shall limit the Company’s right to modify its payroll practices, as it deems necessary.

                Finally, Employee shall be entitled to receive performance bonuses at the full discretion of the CEO of the Company.

     3. As an employee of the Company, Employee will continue to be eligible to participate in all benefit plans to the same extent as other salaried employees subject to the terms of such plans.

     4. Employee shall be entitled to take paid time off without a reduction in salary, subject to (i) the approval of Employee’s supervisor, and (ii) the demands and requirements of Employee’s duties and responsibilities under the Agreement. There are no paid vacation days. Finally, Employee will be eligible to be reimbursed for any business expenses in accordance with the Company’s current Travel and Entertainment policy.

     5. Lions Gate shall request that the Compensation Committee of Lions Gate (“CCLG”) authorize and grant Employee 25,000 common shares (“Grants”) of Lions Gate Entertainment Corp. in accordance with the terms and conditions of the existing and/or future Employee Stock Plan. Employee acknowledges that this Grant of stock is subject to the approval of the CCLG. The award date (“Award Date”) shall be the date of the board meeting when the Grant is approved. The Grant shall vest as follows:

1/3 on the l^st anniversary of the Award Date:
2/3 on the 2^nd anniversary of the Award Date;
3/3 on the 3^rd anniversary of the Award Date.

However, if Employee’s contract is not renewed on February 1, 2008, the final 2/3 of unvested options will vest on January 31, 2008.

     6. Employee agrees that the Company Employee Handbook outlines other policies, which will apply to Employee’s employment, and Employee acknowledges receipt of such handbook. Please note, however, that the Company retains the right to revise, modify or delete any policy or benefit plan it deems appropriate.

     7. This Agreement shall terminate upon the happening of any one or more of the following events:

Ms. Marni Wieshofer
January 5, 2006
Page 3

               (a) The mutual written agreement between Lions Gate and Employee; or

               (b) The death of Employee; or

               (c) Employee’s having become so physically or mentally disabled as to be incapable, even with a reasonable accommodation, of satisfactorily performing Employee’s duties hereunder for a period of one hundred twenty (120) days or more; or

               (d) The determination on the part of Lions Gate that “cause” exists for termination of this Agreement; “cause” being defined as any of the following: 1) Employee’s conviction of a felony or plea of nolo contendere to a felony except in connection with a traffic violation; 2) commission, by act or omission, of any material act of dishonesty in the performance of Employee’s duties hereunder; 3) material breach of this Agreement by Employee; or 4) any act of misconduct by Employee having a substantial adverse effect on the business or reputation of Lions Gate.

               (e) Without Cause. In such case Employee shall be entitled to receive the Base Salary set forth in Section 2 through the conclusion of Year 2 subject to Employee’s obligation to mitigate in accordance with California Law. In the alternative, at Lions Gate’s discretion, if Employee is terminated by Lions Gate for any reason other than as set forth in sub-paragraphs 7(a)-(d), a severance amount equal to 50% of the balance of the compensation still owing to Employee under Section 2 hereof at the time of termination shall be paid to Employee by Lions Gate, which payment shall relieve Lions Gate of any and all obligations to Employee.

               (f) Lions Gate shall have the right, exercisable by giving written notice to you to terminate your employment at any time after you have been unable to perform the services or duties required of you hereunder as a result of physical or mental disability (or disabilities) which has (or have) continued for more than four months in the aggregate in any twelve (12) month period. In such event, Lions Gate shall pay to you your salary through to the date specified in the notice of termination; provided, however, that such date of termination shall not be less than six (6) months after the date of such notice of termination less any amounts payable to you under any plan with disability benefits.

     In the event that this Agreement is terminated pursuant to sub-paragraphs (a)-(d) above neither Lions Gate nor Employee shall have any remaining duties or obligations hereunder, except that Lions Gate shall pay to Employee, only such compensation as is earned under Section 2 as of the date of termination.

     8. Employee’s services shall be exclusive to Lions Gate during the Term. Employee shall render such services as are customarily rendered by persons in

Ms. Marni Wieshofer
January 5, 2006
Page 4

Employee’s capacity in the motion picture industry and as may be reasonably requested by Lions Gate. Employee hereby agrees to comply with all reasonable requirements, directions and requests, and with all reasonable rules and regulations made by Lions Gate in connection with the regular conduct of its business; to render services during Employee’s employment hereunder whenever and wherever and as often as Lions Gate may reasonably require in a competent, conscientious and professional manner, and as instructed by Lions Gate in all matters, including those involving artistic taste and judgment, but there shall be no obligation on Lions Gate to cause or allow Employee to render any services, or to include all or any of Employee’s work or services in any motion picture or other property or production.

     9. Employee agrees that Lions Gate shall own all rights of every kind and character throughout the universe, in perpetuity to any material and/or idea suggested or submitted by Employee or suggested or submitted to Employee by a third party that occurs during the Term or any other period of employment with the Company, its parent, affiliates, or subsidiaries that are within the scope of Employee’s employment and responsibilities hereunder. Employee agrees that during the Term and any other period of employment with the Company, its parent, affiliates, or subsidiaries, Lions Gate shall own all other results and proceeds of Employee’s services that are related to Employee’s employment and responsibilities. Employee shall promptly and fully disclose all intellectual property generated by the Employee during the Term and any other period of employment with the Company, its parent, affiliates, or subsidiaries in connection with Employee’s employment hereunder. All copyrightable works that Employee creates in connection with Employee’s obligations under this Agreement and any other period of employment with the Company, its parent, affiliates, or subsidiaries shall be considered “work made for hire” and therefore the property of the Company. To the extent any work so produced or other intellectual property so generated by Employee is not deemed to be a “work made for hire,” Employee hereby assigns and agrees to assign to the Company (or as otherwise directed by the Company) Employee’s full right, title and interest in and to all such works and other intellectual property. Employee agrees to execute any and all applications for domestic and foreign copyrights or other proprietary rights and to do such other acts (including without limitation the execution and delivery of instruments of further assurance or confirmation) requested by the Company to assign the intellectual property to the Company and to permit the Company to enforce any copyrights or other proprietary rights to the intellectual property. Employee will not charge the Company for time spent in complying with these obligations. This Section 9 shall apply only to that intellectual property which related at the time of conception to the Company’s then current or anticipated business or resulted from work performed by Employee for the Company. Employee hereby acknowledges receipt of written notice from the Company pursuant to California Labor Code Section 2872 that this Agreement (to the extent it requires an assignment or offer to assign rights to any invention of Executive) does not apply fully to an invention which qualifies fully under California Labor Code Section 2870.

Ms. Marni Wieshofer
January 5, 2006
Page 5

     10. Employee shall not assign any of Employee’s rights or delegate any of Employee’s duties under this Agreement.

     11. The parties acknowledge and agree that during the Term of this Agreement and in the course of the discharge of Employee’s duties hereunder and at any other period of employment with the Company, its parent, affiliates, or subsidiaries, Employee shall have and has had access to information concerning the operation of Lions Gate and its affiliated entities, including without limitation, financial, personnel, sales, planning and other information that is owned by Lions Gate and regularly used in the operation of Lions Gate’s business and (to the extent that such confidential information is not subsequently disclosed) that this information constitutes Lions Gate’s trade secrets. Employee agrees that Employee shall not disclose any such trade secrets, directly or indirectly, to any other person or use them in any way, either during the Term of this Agreement or at any other time thereafter, except as is required in the course of Employee’s employment for Lions Gate. Employee shall not use any such trade secrets in connection with any other employment and/or business opportunities following the Term. In addition, Employee hereby expressly agrees that Employee will not disclose any confidential matters of Lions Gate that are not trade secrets prior to, during or after Employee’s employment including the specifics of this Agreement. Employee shall not use any such confidential information in connection with any other employment and/or business opportunities following the Term. In addition, in order to protect the Confidential Information, Employee agrees that during the Term and for a period of two (2) years thereafter, Employee will not, directly or indirectly, induce or entice any other executive of the Company to leave such employment or cause anyone else to leave such employment.

     12. Any dispute, controversy or claim arising out of or in respect to this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall at the request of either party be submitted to and settled by binding arbitration conducted before a single arbitrator in Los Angeles in accordance with the Federal Arbitration Act, to the extent that such rules do not conflict with any provisions of this Agreement. Said arbitration shall be under the jurisdiction of Judicial Arbitration and Mediation Services, Inc. (“JAMS”) in Los Angeles, California. All such actions must be instituted within one year after the controversy or claim arose or forever be waived. Failure to institute an arbitration proceeding within such period shall constitute an absolute bar to the institution of any proceedings respecting such controversy or claim, and a waiver thereof. The arbitrator shall have the authority to award damages and remedies in accordance with applicable law. Any award, order of judgment pursuant to such arbitration shall be deemed final and binding and may be entered and enforced in any state or federal court of competent jurisdiction. Each party agrees to submit to the jurisdiction of any such court for purposes of the enforcement of any such award, order of judgment. Company shall pay for the administrative costs of such hearing and proceeding.

Ms. Marni Wieshofer
January 5, 2006
Page 6

     13. This Agreement expresses the binding and entire Agreement between Employee and the Company and shall replace and supersede all prior arrangements and representations, either oral or written, as to the subject matter hereof. All modifications or amendments to the Agreement must be in writing, signed by both parties.

     Please acknowledge your confirmation of the above terms by signing below where indicated and returning this letter to me.

     Marni, please call Nancy Coleman at (310) 255-3929 if you have any questions.

Very truly yours,

LIONS GATE FILMS INC.

/s/ Wayne Levin Wayne Levin

EVP and General Counsel

AGREED AND ACCEPTED

This 7^th day of March, 2005

/s/ Marni Wieshofer Marni Wieshofer

EX-10.28

Exhibit 10.28

AGREEMENT

“PRINCE & ME II: THE ROYAL WEDDING”

     This agreement (the “Agreement”) is made and entered into as of December 6, 2005 by and between Sobini Films, a California Corporation (“Grantor”), whose address is 2700 Colorado Avenue, Suite 510B, Santa Monica, California, 90404, and Lions Gate Films Inc. (“LGF”), whose principal address is 2700 Colorado Avenue, Second Floor, Santa Monica, California, 90404, with respect to that certain motion picture presently entitled “Prince & Me II: The Royal Wedding”.

1. Picture: The “Picture” shall mean that certain motion picture presently entitled “Prince & Me II: The Royal Wedding” and any and all versions thereof and all “bloopers”, footage, trims and outtakes thereof (including, without limitation, the Director’s Cut and the Final Cut and any and all versions of each of the foregoing, all versions rated by the Motion Picture Association of America and unrated versions of the Picture, “behind the scenes”, “making of” and any and all other documentary or short films concerning the Picture, and all footage, “bloopers”, trims and out-takes of each of the foregoing), produced by on behalf of or at Grantor’s direction, in the year 2005.

2. Territory: The “Territory” shall mean the Universe, excluding only the Reserved Territory. As used herein, the “Reserved Territory” shall mean the United States and Canada, and each of their territories, possessions, trusteeships and commonwealths.

3. Rights Granted:

     a. Rights Granted to LGF: Grantor hereby grants to LGF on an exclusive basis, all distribution rights in and to the Picture and the underlying material with respect thereto, under copyright and otherwise, throughout the Territory, in all languages and in all media, whether now known or hereafter devised, including, without limitation, all Theatrical, Non-Theatrical, Home Video, Television, and ancillary and derivative rights in and to the Picture, by all methods of delivery, whether now know or hereafter devised, including without limitation, all Internet Delivery Mechanisms, all as such rights may be more specifically defined in Schedule “A”, which is attached hereto and incorporated herein by this reference (collectively, the “Rights”), excluding only the sequel, prequel and remake rights in and to the Picture. Without limiting the generality of the foregoing, the Rights granted to LGF hereunder shall include, without limitation, the exclusive right to market, advertise, promote and publicize the Picture in all media, whether now known or hereafter devised.

     b. Remakes Prequels & Sequels: LGF shall have a right of first refusal (a “Right of First Refusal”) with respect to worldwide distribution rights in any motion picture produced by Grantor alone or in conjunction with others during the Term (a “Qualifying Picture”) to the extent that Grantor controls the licensing of such distribution rights, provided, that such Right of First Refusal shall not apply to any rights to distribute a Qualifying Picture which has been licensed, transferred or otherwise disposed of prior to the time that Grantor controls the licensing

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of such distribution rights unless at such later time Grantor has obtained the control of the Subject Distribution Rights. Such a Right of First Refusal shall apply to all rights to distribute the Qualifying Picture in the United States (“U.S. Rights”) and to all rights to distribute the Qualifying Picture outside of the United States (“Foreign Rights”). The rights as to which LGF has the Right of First Refusal set forth in this paragraph shall be referred to herein as “Subject Distribution Rights”.

     i. Grantor shall notify LGF in writing of any Qualifying Picture (a “First Refusal Notice”) setting forth a description of the Material Elements. For purposes of this Agreement, “Material Elements” shall mean the proposed director, lead actor and amount of the budget for the Qualifying Picture. LGF shall have until 5:00 p.m. on the eighth (8^th) business day following provision of the First Refusal Notice by Grantor (the “Exercise Period”) to notify Grantor in writing (an “Exercise Notice”) that LGF is exercising its right to negotiate in good faith to acquire the U.S. Rights and/or the Foreign Rights. If LGF so exercises its Right of First Refusal with respect to the U.S. Rights and/or with respect to the Foreign Rights, LGF shall thereupon be obligated to negotiate with Grantor in good faith for a period of ten (10) business days (“Negotiation Period”).

     ii. If the parties fail to reach agreement ( or are deemed to fail to reach agreement) prior to the expiration of the Negotiation Period with respect to U.S. Rights and/or Foreign Rights, subject to and in accordance with subsections (iv) and (v) below, Grantor may accept any third party offer to acquire U.S. rights and/or Foreign Rights on monetary terms or conditions materially more favorable to Grantor that the monetary terms and conditions last offered by LGF to Grantor during the Negotiation Period and/ or may sell or license Foreign Rights on a territory-by territory basis without any further obligation to LGF.

     iii. LGF’s failure to provide an Exercise Notice prior to the expiration of the Exercise Period shall be deemed an election by LGF to not exercise its Right of First Refusal to acquire any of the Subject Distribution Rights. In the event LGF fails to provide an Exercise Notice within the applicable Exercise Period or fails to negotiate with Grantor during the appropriate Negotiation Period, Grantor shall have the right to dispose of the Subject Distribution Rights with respect to Qualifying Picture without any further obligation to LGF.

     iv. Subject to paragraph 3(b)(v) hereinbelow, if at any time there is a substantial change in the Material Elements pertaining to a Qualifying Picture, Grantor shall within ten (10) business days following such change to provide a First Refusal Notice to LGF describing such change of Material Elements. The Exercise Period, Negotiation Period and the mechanics for LGF’s exercise or deemed election not to exercise its rights under any such First Refusal Notice shall be the same as set forth above. For purposes of this Agreement a “substantial change” in the Material Elements pertaining to a Qualifying Picture shall mean (A) any change in the proposed director or lead actor or (B) a decrease of more than ten percent (10%) in the amount of the proposed budget.

     v. Notwithstanding anything to the contrary in this Agreement, if Grantor enters into an agreement with a third party regarding the U.S. Rights or the Foreign Rights in Qualifying Picture, thereafter there is a substantial change in Material Elements pertaining to such

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Qualifying Picture, and Grantor has theretofore compiled with his first refusal obligations as set forth herein, LGF’s Right of First Refusal shall not apply to such Qualifying Picture. By way of clarification, in such event, Grantor would, among other things, not be required to provide a subsequent First Refusal Notice to LGF with respect to a Qualifying Picture, even if the Material Elements of such Qualifying Picture were to change substantially subsequent to the time such agreement is entered into.

4. Term; License Period:

     a. Term: The “Term” of this Agreement (i.e., that period of time under which LGF shall have the right to license the Picture for distribution hereunder) shall commence as of the date first written above and shall terminate seven (7) years from the earlier of (i) the date of complete Delivery (and LGF’s acceptance) of the Picture to LGF in accordance with the Delivery Schedule, (ii) the date LGF first issues a Notice of Delivery to any third party with respect to the Picture, and (iii) the date LGF first issues a Notice of Availability to any third party with respect to the Picture. Without limiting the generality of the foregoing, LGF shall have a right of first negotiation (for a period of ten (10) business days commencing on Grantor’s receipt of LGF’s written notice of its intent to commence such negotiations, which notice shall be Delivered to Grantor no later than the last day of the Term).

     b. License Periods: LGF shall have the right to enter into distribution agreements concerning the Picture with “License Periods” (i.e., that period of time under which such distributor may distribute the Picture) of up to fifteen (15) years in duration in the “major” territories (i.e., Germany, the United Kingdom, France, Italy, Spain, Benelux, Scandinavia, Latin America, Japan, South Korea, Australia and New Zealand) and of up to ten (10) years in all other parts of the Territory. Notwithstanding the foregoing, if LGF enters into a license agreement concerning the Picture with the same licensee that licensed that certain motion picture presently entitled “The Prince and Me”, then LGF shall have the right, but not the obligation, to enter into license agreements concerning the Picture with License Periods that are equal to or shorter in duration than those license periods entered into with respect to “The Prince and Me”. Any proposed License Period that is for a duration that is longer than the time periods set forth herein shall require Grantor’s prior, written approval in each instance, which approval shall not be unreasonably withheld or untimely delayed and shall be deemed given if not rejected within ten (10) business days of Grantor’s receipt of LGF’s written request for approval, except during festivals and markets, during which Grantor’s approval shall be deemed given if not rejected within two (2) days of Grantor’s receipt of LGF’s written request for approval.

5. Minimum Guarantee: None.

6. Grantor’s Participation; Distribution Fees:

     a. Grantor’s Participation: From One Hundred Percent (100%) of all monies received by LGF on a non-refundable basis from the exploitation of the Picture in all media throughout the Territory, LGF shall be entitled to deduct the following on a continuing basis and in the following order: (i) LGF’s Distribution Fee for all media; and (ii) LGF’s Distribution Expenses (as that term is defined hereinbelow). All revenues remaining after the foregoing deductions shall

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be referred to herein as “AGR”. 100% of the AGR shall be allocated to Grantor. That portion of the AGR allocated to Grantor pursuant to this paragraph shall be referred to herein as “Grantor’s Participation”. LGF shall be entitled to cross-collateralize all revenues received by LGF from the exploitation of the Picture in all media throughout the Territory for the purposes of recouping LGF’s recoupable Distribution Expenses. LGF shall not be entitled to cross-collateralize revenues received by LGF from the exploitation of the Picture with revenues received by LGF from the exploitation of any other motion picture or property distributed by LGF for any recoupment purposes, including, but not limited to, the recoupment of Distribution Expenses. The Picture shall not be treated as a “loss leader” by LGF. If LGF includes the Picture in a package of motion pictures licensed to a third party, then the price allocated to the Picture shall be on the basis of a reasonable allocation of revenues in light of the commercial worth of the motion pictures in the package as determined by LGF in the exercise of its reasonable good faith business judgment.

     b. Distribution Fees: LGF’s “Distribution Fee” shall equal Fifteen Percent (15%) of One Hundred Percent (100%) of all Gross Receipts received by LGF from the exploitation of the Picture in all media throughout the Territory. Notwithstanding the foregoing, at such time, if ever, as the aggregate of all Gross Receipts received by LGF with respect to the Picture in all media throughout the Territory equals One Million Dollars ($1,000,000.00), LGF’s Distribution Fee shall increase, on a prospective basis, to Twenty Percent (20%) of One Hundred Percent (100%) of all Gross Receipts received by LGF from the exploitation of the Picture in all media throughout the Territory.

     c. Distribution Expenses: As used herein, “Distribution Expenses” shall mean, with respect to all rights granted to LGF hereunder, one hundred percent (100%) of the aggregate of all actual, direct, out-of-pocket, third party costs expended or incurred by LGF in direct connection with the distribution and exploitation of the Picture throughout the Territory in all media, including, without limitation, all DLT Creation Costs, and all conversion, manufacturing, duplication, shipping, marketing, advertising, promotion and publicity costs, all Residual Payments, and all costs to complete Delivery of the Picture (to the extent (i) LGF elects to cure any failure of Grantor to complete Delivery of the Picture in accordance with the Delivery Schedule and/or (ii) LGF is required to take “access” to any Delivery Materials pursuant to the Delivery Schedule; and/or (iii) Grantor is not required to deliver such elements under the Delivery Schedule). LGF’s recoupment of its Distribution Expenses is subject to the Expense Cap set forth in paragraph 6(d) hereinbelow.

     d. Expense Cap: LGF’s Distribution Expenses concerning the Picture shall not exceed One Hundred Thousand Dollars ($100,000.00) (the “Expense Cap”) without Grantor’s prior, written approval (which approval shall not be unreasonably withheld or untimely delayed and shall be deemed rejected if not given within ten (10) business days of Grantor’s receipt of LGF’s written request for approval); provided that the following Distribution Expenses shall not be subject to the Expense Cap and shall be recoupable by LGF in addition thereto: (i) all actual, direct, out-of-pocket, third party costs of taking Delivery of the Picture, (ii) all actual, direct, out-of-pocket, third party costs of making Delivery of the Picture to LGF’s licensees, (iii) all actual, direct, out-of-pocket, third party Residual Payments, (iv) all actual, direct, out-of-pocket, third party participation payments, and (v) all actual, direct, out-of-pocket third party legal costs.

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     e. Residuals: Grantor represents and warrants that Grantor no residual buy-outs were capable of being obtained with respect to any guild or union affiliated with the Picture or those individuals rendering services in connection therewith (the “Residual Buy-Out”). Without limiting the generality of the foregoing, Grantor shall be responsible for any and all residual and other additional or supplemental payments required to be made by reason of the distribution or other exploitation of the Picture in the Territory. Notwithstanding the foregoing, LGF represents and warrants that it shall pay any residual payments Grantor is required to pay as a result of LGF’s exploitation of the Picture in the Territory other than the Residual Buy-Out (each, a “Residual Payment”) and, if requested by Grantor, shall sign customary Distributor’s Assumption Agreements in connection therewith. Grantor hereby represents and warrants to LGF that LGF shall not be required to pay any residual or other guild penalties hereunder (e.g. additional fees required to be paid as a result of having produced the Picture under the SAG Limited Exploitation Basic Agreement), except with respect to those penalties that may arise as a result of LGF’s failure to timely pay such residual payments (subject to LGF’s receipt of timely written notice of its obligation to pay such residuals and the amount thereof). For the purposes of clarity, LGF shall not be responsible for paying any additional up-front compensation to any guild whatsoever, including, without limitation, the WGC, ACTRA, the DGC, DGA, WOA, IATSE, SAG or to any SAG cast members in order to qualify the Picture for distribution beyond that permitted under SAG’s Limited Exhibition Basic Agreement. In this regard, Grantor shall complete the Residuals Worksheet which is attached hereto and incorporated herein by this reference as Schedule “B”. Delivery of a completed Schedule “B” is a condition precedent to Delivery of the Picture being deemed complete. LGF shall be entitled to recoup all Residual Payments as Distribution Expenses hereunder in excess of the Marketing Expense Cap.

     f. DLT Creation Costs: As used herein, the term “DLT Creation Costs” shall mean and include 100% of LGF’s actual, direct, out-of-pocket, third party costs of creating the DLT(s) for the Picture, including, without limitation, DVD mastering and authoring costs, manufacturing, duplication, and shipping and clearance costs (including, without limitation, the cost of clearing “bonus” materials for such DVD).

7. Delivery: Grantor shall deliver, at Grantor’s sole cost and expense, all Delivery Materials set forth in the Delivery Schedule, which Delivery Schedule shall be negotiated in good faith, to LGF on or before February 13, 2006 (the “Delivery Date”). Without limitation to those requirements set forth in the Delivery Schedule, all documents required to be Delivered to LGF pursuant to the Delivery Schedule shall be Delivered in the English language.

     a. Running Time: The Picture shall be Delivered to LGF with a running time of not less than ninety-four (94) minutes, nor more than one hundred ten (110) minutes, inclusive of main and end titles.

     b. Rating: The Picture shall be delivered to LGF having been judged to receive a rating by the M.P.A.A. that is no more restrictive than “PG-13”.

     c. Access to the Domestic Distributor’s Materials: LGF shall have free and unencumbered access to any and all marketing, advertising, promotional and publicity materials created by or on behalf of the distributor of the Picture in the United States (or any affiliated or subsidiary entity

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thereof), including, but not limited to, trailers, key art, DLTs and other DVD value added materials such as bonus features therefore (the “Domestic Materials”), for LGF’s and LGF’s licensees’ exploitation thereof throughout the Territory in all media, whether now known or hereafter devised, for the duration of any and all License Periods. Grantor shall use good faith efforts to ensure that the Domestic Materials shall be fully cleared (including, without limitation, the music appearing in the Domestic Materials) for the exploitation thereof throughout the Territory in all media whether now known or hereafter devised, for the duration of any and all License Periods, without any payments being required to be paid for such exploitation. In the event that the Domestic Materials are not fully cleared for LGF’s or LGF’s licensees’ exploitation thereof throughout the Territory in all media, whether now known or hereafter devised, for the duration of any and all License Periods, then LGF shall have the right, but not the obligation, to pay such clearance costs and recoup the same as Distribution Expenses hereunder in excess of the Marketing Expense Cap. LGF shall meaningfully consult with Grantor with respect to the amount of such clearance costs.

8. Credits; Editing: LGF and its licensees shall have the right to cut, edit, change or add to, delete from or revise the Picture, including the title, for rating purposes, to conform the Picture to its marketing campaign and for any other reason as LGF or its licensees may in their sole discretion determine. Subject only to Grantor’s third party contractual restrictions delivered to LGF, Grantor’s credit, and/or any guild restrictions which Grantor has informed LGF are applicable to the Picture in writing on or before the Delivery Date, LGF or its licensees may, in its sole discretion, determine and arrange the placing and size of credits including credits above the title and/or above the artwork title. Without limiting the generality of the foregoing, LGF and its licensees shall have the right to place its name and logo (at their sole, recoupable expense) on all materials concerning the Picture in the Territory, including, without limitation, in the main and end credits of the Picture (e.g., LGF’s customary presentation credit), in the billing block, and on all advertising materials. LGF shall not remove Grantor’s logo from any materials Delivered to LGF. It is the essence of this Agreement that Grantor Deliver written notice of all credit, name and likeness obligations and restrictions and all third party contractual approval and consultation rights to LGF in writing on or before the Delivery Date. Without limiting the generality of the foregoing, in the event that a performer or other agreement containing a credit, name and/or likeness provision or approval or consultation right is unexecuted as of such Delivery Date, then Grantor shall deliver the most recent draft of such agreement to LGF and LGF shall have the right to rely thereon. Without limiting the generality of the foregoing, in the event that a performer or other agreement containing a credit, name and/or likeness and/or approval or consultation provision is unexecuted as of the Delivery Date, then any and all contractual credit, name and likeness obligations and restrictions and approval rights negotiated after such Delivery Date must be approved by LGF in writing prior to Grantor entering into any agreement with respect thereto, which approval shall not be unreasonably withheld or untimely delayed. LGF shall not remove any credit or copyright notice appearing on screen as the Picture is Delivered to LGF except as follows: (a) to comply with a court order or the order of an arbitrator or mediator, (b) as required in settlement of a dispute, or (c) as required by law. No casual or inadvertent failure by LGF or any third party to comply with any credit, name or likeness obligation or restriction, or to comply with any approval or consultation right, shall be deemed a breach of this Agreement, provided that LGF takes all commercially reasonable steps to cure such failure on a prospective basis commencing on LGF’s receipt of written notice

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thereof. The sole remedy of Grantor for a breach of any of the provisions of this paragraph 8 shall be an action at law for compensatory damages, it being agreed that in no event shall Grantor be entitled to consequential or punitive damages, or to seek or obtain injunctive relief, specific performance, or any other form of equitable relief, by reason of any breach or threatened breach of any of the credit, name, likeness or other obligation or restriction or approval or consultation right, nor shall Grantor be entitled to enjoin or restrain the exhibition, distribution, marketing, advertising, promotion, or other exploitation of the Picture.

9. Holdbacks: Not applicable.

10. Grantor’s Representations and Warranties: Grantor represents and warrants as of the date hereof and also upon Delivery of the Picture that: (a) there are no non-customary credit, name or likeness obligations or restrictions or approval or consultation rights applicable to the Picture (all of which, if any, shall be Delivered to LGF in writing on or before the Delivery Date and LGF shall have the right to rely thereon) and that LGF shall have the right, but not the obligation, to utilize the likeness and name of each of the principal cast members in the artwork and in trailers for the Picture; (b) Grantor owns or controls all Rights granted to LGF under this Agreement and that all such Rights are free of all liens, claims, charges, encumbrances, restrictions, and commitments; (c) there is no agreement concerning the Picture with any person or entity which, if breached, would or could in any way impair, interfere with, abrogate or adversely or otherwise affect any of the Rights granted to LGF under this Agreement; (d) LGF’s exploitation of the Picture will not be subject to any guild liens, or residuals other than WGA and SAG liens and residuals; (e) it is a corporation duly formed and validly existing in good standing under the laws of California and has the full right, power, legal capacity and authority to enter into and carry out the terms of this Agreement; (f) neither the Picture, nor any part thereof, nor any materials contained therein or synchronized therewith, nor the title thereof, nor the exercise of any Right, license or privilege granted to LGF hereunder, violates or will violate, or infringes or will infringe, any trademark, trade name, service mark, patent, copyright (whether common law or statutory), or, to the best of Grantor’s knowledge, the literary, dramatic, musical, artistic, personal, private, civil, “droit moral” or property right or rights of privacy or any other right of any person or entity whatsoever, or unfairly competes with or slanders or libels (or constitutes a trade disparagement of) any person or entity whatsoever; (g) it has no agreement with or obligations to any third party with respect to the Picture which might conflict or interfere with any of the provisions of this Agreement or the use or enjoyment by LGF of any of the Rights granted; (h) the rights granted to LGF herein have not been previously granted, licensed, sold, assigned, transferred, conveyed or exploited by any person or entity and Grantor shall not sell, assign, transfer, convey to or authorize any person or entity any right, title or interest in and to the Picture or any part thereof or in and to the dramatic or literary material upon which the Picture is based, which is adverse to or in derogation of the Rights granted to LGF; (i) there is no litigation, arbitration, claim, demand, or investigation pending or threatened with respect to the Picture, or the literary, dramatic or musical material upon which the Picture is based or which is contained therein, or concerning the physical properties thereof; (j) Grantor has secured, or by the Delivery Date will have secured, and shall for the duration of this Agreement maintain, all clearances (including, without limitation, all music rights and music clearances) which are necessary for LGF to use and enjoy the Rights granted to LGF in and to the Picture throughout the Territory for the duration of the Term and that no supplemental or additional use payments shall be required with respect to the exploitation of the Picture (or any portion or element thereof, including, without limitation, the

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music contained therein) and/or any use or exploitation of any advertising or promotion of the Picture which contains the music as embodied in the Picture (including “in-context” uses thereof); and (k) Grantor is in all respects in compliance with the requirements of the Child Protection and Obscenity Enforcement Act of 1988, as amended by the Child Protection Restoration and Penalties Enhancement Act of 1990, and all rules and regulations promulgated thereunder (collectively, the “CPOEA”) and that the Picture is in all respects in compliance with the requirements of the CPOEA, and does not contain any material that would require Grantor to comply with the recordkeeping requirements of the CPOEA.

11. Indemnities:

     a. Grantor shall indemnify, defend and hold harmless LGF, its parent, subsidiaries, affiliates, assignees, licensees, sublicensees, distributors, sub-distributors and dealers, and the directors, officers, agents, consultants and representatives of the foregoing (the “LGF Indemnitees”), from all claims, costs, liabilities, obligations, judgments or damages (including reasonable outside attorneys’ fees but excluding lost profits and consequential damages), arising out of or for the purpose of avoiding any suit, claim, proceeding or demand or the settlement thereof, which may be brought against any of the LGF Indemnitees by reason of the production of the Picture, or the use or disposition of rights granted herein, or in connection with the breach of any of the warranties, representations or obligations made by Grantor, except to the extent that Grantor is required to be indemnified by LGF pursuant to paragraph 1 l(b) hereinbelow.

     b. LGF shall indemnify, defend and hold harmless Grantor, its parent, subsidiaries, affiliates, assignees, and the directors, officers, agents, consultants and representatives of the foregoing (the “Grantor Indemnitees”), from all claims, costs, liabilities, obligations, judgments or damages (including reasonable outside attorneys’ fees but excluding lost profits and consequential damages), arising out of or for the purpose of avoiding any suit, claim, proceeding or demand or the settlement thereof, which may be brought against any of the Grantor Indemnitees by reason of the distribution, advertising or promotion of the Picture, or in connection with the breach of any of the warranties, representations or obligations made by LGF, except to the extent that LGF is required to be indemnified by Grantor in accordance with paragraph 1l(a) hereinabove.

     c. The parties hereto shall meaningfully consult with each other with respect to the defense, institution or settlement of litigation in connection with the rights granted hereunder and LGF’s exploitation thereof during the Term and in the Territory.

12. Sales Reports: LGF shall deliver a customary sales report within 30 (thirty) days after the conclusion of every major market or festival at which the Picture is sold until the end of December, 2007.

13. Audit Rights: Grantor shall have the right to have a certified public accountant of its choice audit LGF’s books and records with respect to the Picture(s) once per year (and only once with respect to any particular records and/or statements) at Grantor’s sole cost and expense; such audit shall take place in LGF’s principal place of business and shall not unreasonably interfere with LGF’s course of business. Said audit shall be conducted at LGF’s principal place of business

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during normal business hours. Grantor shall give LGF ten (10) business days prior written notice of its intent to conduct such audit. All notices, statements and payments made pursuant to the Agreement shall be deemed valid and shall not be subject to dispute or audit unless disputed within twenty-four (24) months after first issued. In the event that an audit reveals (i) an underpayment of seven and one-half percent (7.5%) or more of the total monies owed; (ii) the underpayment is seven thousand five hundred dollars (57,500.00) or more, and (iii) the amount of the audit is reasonable and customary and does not exceed the amount of the underpayment, then LGF shall pay Grantor the amount of the underpayment plus the reasonable, actual, direct, out-of-pocket, third party costs of the audit up to the amount of the underpayment.

14. Assignment: LGF may grant, assign or sublicense this Agreement or any of its rights or obligations herein to any third party; provided that LGF shall remain primarily liable for its obligations hereunder unless such assignment is to (i) a parent, subsidiary or affiliated entity of LGF, (ii) a company that acquires all or substantially all of LGF’s assets, and/or (iii) is to a “major” or “mini-major” studio, and, in any event, provided that LGF shall remain secondarily liable for its payment obligations hereunder. Grantor shall not assign this Agreement or any of their rights or obligations herein except that Grantor shall have the right to assign its right receive payment on three (3) separate occasions in bulk. In addition, after Delivery of the Picture is accepted by LGF, Grantor shall have the right to assign its rights and obligations to a financially responsible third party that acquires all or substantially all of Grantor’s assets and who assumes all of Grantor’s obligations in writing, provided that Grantor shall remain primarily liable for its obligations hereunder. Any purported assignment in violation of this Agreement shall be null and void.

15. No Third Party Beneficiaries: Nothing contained in this Agreement shall be construed so as to create any third party beneficiary hereunder. In this regard, nothing under this Agreement shall entitle any third party to any remedies against LGF, at law, in equity, or otherwise, including, without limitation, any additional audit rights or the right to seek or obtain injunctive relief against LGF’s distribution of the Picture.

16. Default: If Grantor defaults (or breaches a material representation and warranty), which default remains uncured for fifteen (15) business days following Grantor’s receipt of LGF’s written notice to Grantor thereof, LGF shall be entitled to terminate this Agreement. In the event that Grantor fails to fully Deliver the Delivery Materials set forth in the Delivery Schedule, which failure is not timely cured, LGF may create such Delivery Materials, the reasonable, actual, out-of-pocket cost of which shall be recoupable by LGF, in LGF’s sole discretion, as (i) as a Distribution Expense, and/or (ii) from any other monies (e.g. Grantor’s Participation, bonuses, etc.) which are then due and owing to Grantor. LGF’s rights and remedies shall be cumulative, and none of them shall be exclusive of any other allowed by law, except that LGF shall not have the right to seek injunctive relief with respect to the exploitation of the Picture in the Reserved Territory. If LGF defaults, Grantor shall not be entitled to terminate or rescind this Agreement, nor to obtain injunctive relief with respect to the exercise by LGF of the rights granted hereunder. Grantor’s sole remedy shall be an action at law for damages.

17. Governing Law; Jurisdiction: This Agreement shall be construed and interpreted pursuant to the Laws of the State of California as it applies to contracts entered into and performed wholly

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within California or, if appropriate, the federal laws of the United States of America. Any dispute regarding the validity, construction, terms or performance of this Agreement or any other matter in connection therewith shall be submitted to binding arbitration before the JAMS in Los Angeles, California in accordance with the following provisions:

     a. If the parties cannot agree upon a single arbitrator, each party shall select one arbitrator who has experience in the motion picture industry and both arbitrators so selected shall select a third arbitrator.

     b. The third arbitrator shall adjudicate the dispute applying the laws of the state of California as it applies to contracts entered into and wholly performed within California or, if appropriate, the federal laws of the United States of America.

     c. The arbitrator shall issue a written opinion specifying the basis for their award and the types of damages awarded.

     d. There shall be a court reporter record made of the arbitration hearing and said record shall be the official transcript of the proceedings.

     e. Witness lists, production of documents and subpoenas in the arbitration shall be in accordance with Section 1280 et seq. of the California Code of Civil Procedure, except that the fifteen (15) day periods set forth in subsections (a)(2)(A) and (B) of Section 1282.2 shall be deemed to be periods of five (5) business days. If the dispute pertains to Delivery, there shall be made available to the arbitrator all relevant materials submitted by LGF or Grantor which purport to constitute completion and delivery of the Picture. The parties shall participate in an exchange of information before the hearing. If any such discovery is not voluntarily exchanged among the parties, the party desiring such discovery may apply to the arbitrator at the outset of the arbitration for particular discovery requests. The arbitrator may deny only such discovery as is unreasonable or is intended to unduly delay the prompt conclusion of the arbitration.

     f. The decision of the arbitrator (or the majority of the arbitrators, if applicable) shall be binding upon the parties, shall constitute a full and final adjudication of the controversy. The parties shall each be responsible for paying fifty percent (50%) of all the arbitrator’s and court reporter’s fees (including, without limitation, the cost of the arbitration). A judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

18. Integrated Agreement: This Agreement contains the entire agreement between the parties and supersedes any and all other representations, agreements, and understandings between them with respect to its terms.

19. Modification: No waiver of modification of this Agreement or any portion thereof (including, without limitation, this provision) shall be valid unless in a writing that is signed by both parties and no waiver of any specific provision or forbearance in the exercise of any right on any occasion shall preclude the strict enforcement of that right in the future, nor shall it preclude the strict enforcement of any other rights hereunder.

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     This Agreement (inclusive of Schedule “A”, Exhibit “A” and Exhibit “C”), when executed, is legally binding unless and until superseded by a more formal agreement incorporating the terms set forth above as well as additional provisions, which when and if executed, shall replace this Agreement. Capitalized terms used herein and not otherwise defined shall have the same meaning as in LGF’s standard long-form agreement, subject to good faith negotiations in accordance with LGF’s and Grantor’s standard business practices. All items not addressed above shall be negotiated in good faith pursuant to prevailing industry customs and standards and LGF’s and Grantor’s standard business practices.

AGREED TO AND ACCEPTED BY:
LIONS GATE FILMS INC.	SOBINI FILMS, a California Corporation
/s/ Wayne Levin	/s/ Jill Courtemanche
Signature	Signature
WAYNE LEVIN	Jill Courtemanche
Print name	Print name
EXEC. VP & GENERAL COUNSEL
BUSINESS & LEGAL AFFAIRS	Attorney
Title	Title
3/14/06	3/3/06
Date	Date

EX-10.29

Exhibit 10.29

AGREEMENT

“STREETS OF LEGEND” (a.k.a. “QUATTRO NOZA”)

     This agreement (the “Agreement”) is made and entered into as of March 24, 2005, by and between Sobini Films (“Grantor”) and Lions Gate Films Inc. (“LGF”) with respect to that certain motion picture presently entitled “Streets of Legend” (a.k.a. “Quattro Noza”).

1. Picture: The “Picture” shall mean that certain motion picture presently entitled “Streets of Legend” (a.k.a. “Quattro Noza”) and any and all versions thereof (if and as available) and all “bloopers”, footage, trims and outtakes thereof (if and as available) (including, without limitation, the Director’s Cut and the Final Cut and any and all versions of each of the foregoing, all versions rated by the Motion Picture Association of America and unrated versions of the Picture, “behind the scenes”, “making of” and any and all other documentary or short films concerning the Picture, and all footage, “bloopers”, trims and out-takes of each of the foregoing), produced by, on behalf of or at Grantor’s direction, in the year 2003, starring Robert Beaumont and Brihanna Hernandez in the principal lead and supporting roles, written by Joey Curtis and Albert Hernandez and directed by Joey Curtis.

2. Territory: The “Territory” shall mean and include each of the following: (a) United States of America (including but not limited to, Guam. Saipan, Midway Island, the Trust Territory Islands, the Caroline Islands, the Marshall Islands, the Virgin Islands, Puerto Rico and American Samoa) (“U. S.”), its territories, possessions, trusteeships and commonwealths and all military bases, ships at sea, airlines and oil rigs flying the flag of the U.S., (b) Canada (including, but not limited to, Quebec, Prince Edward Island, the Northwest Territories, the Yukon Territories and Newfoundland), its territories, possessions, trusteeships and commonwealths, and all military bases, ships at sea, airlines and oil rigs flying the flag of Canada, and (c) for the purposes of Television exploitation in the U. S. only (the “Additional Television Territory’’), Bermuda and the Bahamas Islands.

3. Rights Granted: Grantor hereby grants to LGF, on an exclusive basis, all distribution rights in and to the Picture and the underlying material with respect thereto throughout the Territory, under copyright and otherwise, in all languages and in all media, whether now known or hereafter devised, including, without limitation, all Theatrical, Non-Theatrical, Home Video, Television, and ancillary and derivative rights in and to the Picture, by all methods of delivery, whether now know or hereafter devised, including without limitation, all Internet Delivery Mechanisms, all as such rights may be more specifically defined in Schedule “A”, which is attached hereto and incorporated herein by this reference (collectively, the “Rights”), but expressly excluding the copyright in and to the Picture, all soundtrack album, Electronic Publishing Rights, literary publishing (including, without limitation, all print publication and novelization rights), merchandising rights, and all remake, prequel and sequel rights (including, without limitation, any and all television spin-off rights) in and to the Picture, except as otherwise set forth herein. Without limiting the generality of the foregoing, the Rights granted to

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LGF hereunder shall include, without limitation, the exclusive right to market, advertise, promote and publicize the Picture in all media, whether now known or hereafter devised.

     a. Remakes, Prequels & Sequels: LGF’s negotiation rights with respect to remakes, prequels and sequels of the Picture shall be pursuant to the terms of that certain executed employment agreement dated June 6, 2000 (as amended) by and between Lions Gate Entertainment Corp., a corporation incorporated under the laws of British Columbia and Mark Amin with respect to the employment of Amin.

     b. Television Exploitation: Upon LGF’s receipt of Grantor’s written request, which written request must be received by LGF no later than December 31, 2005 (the “Television Notice”), LGF shall submit the Picture to Showtime for inclusion under LGF’s pay television output agreement with Showtime Networks (the “Showtime Agreement”). If LGF does not receive the Television Notice on or before December 31, 2005, then (i) LGF shall not submit the Picture to Showtime for inclusion under the Showtime Agreement (except as otherwise set forth in this subparagraph), and (ii) LGF and Grantor shall cooperate in connection with the sale of the first cycle Television Rights in and to the Picture in the Territory. Following December 31, 2005, Grantor shall have the right to issue written notice to LGF requesting that LGF submit the Picture to Showtime for inclusion under the Showtime Agreement (the “Secondary Notice”). Upon LGF’s receipt of the Secondary Notice, LGF shall have the right, but not the obligation, to submit the Picture to Showtime for inclusion under the Showtime Agreement. If, following LGF’s receipt of the Secondary Notice, LGF elects not to submit the Picture to Showtime for inclusion under the Showtime Agreement, then LGF and Grantor shall continue to cooperate in connection with the sale of the first cycle Television Rights in and to the Picture in the Territory until such time as such sale is complete. Any submission by LGF of the Picture to Showtime for inclusion under the Showtime Agreement pursuant to the terms of this subparagraph shall be subject to Showtime’s right to accept or reject such submission pursuant to the terms of the Showtime Agreement.

4. Term: The “Term” of this Agreement shall commence as of the date first written above and shall terminate seven (7) years from LGF’s initial commercial theatrical release of the Picture in the Territory plus an additional six (6) month non-exclusive sell-off period. Notwithstanding the foregoing, if the Picture is included in the Showtime Agreement pursuant to the terms of Paragraph 3(b) hereinabove, the Term, with respect to all rights necessary to give effect to the Showtime Agreement, shall extend for the term of the Picture required under the Showtime Agreement. It is understood and agreed that LGF shall not manufacture more Home Video devices during the last six (6) months of the Term than it reasonably expects to sell during the Term exclusive of the sell-off period (provided that no inadvertent over-manufacturing shall be deemed a breach of this Agreement). Without limiting the generality of the foregoing, LGF shall have a right of first negotiation (for a period of ten (10) days commencing prior to the expiration of the Term) with respect to any extensions of the Term hereof.

5. Minimum Guarantee: Not applicable.

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6. Grantor P&A Commitment; Release Commitment:

     a. Grantor P&A Commitment: Grantor shall spend no less than Two Hundred Thousand Dollars ($200,000.00) (the “Grantor P&A Commitment”) solely in connection with the print, marketing, advertising and publicity costs for LGF’s Theatrical release of the Picture in the Territory. The Grantor P&A Commitment shall be spent pursuant to a mutually approved budget (to be negotiated in good faith by the parties) (the “P&A Budget”). Any print and advertising expenditure in connection with the initial commercial theatrical release of the Picture in excess of the Grantor P&A Commitment shall be subject to mutual written approval between the parties, which approval shall not be unreasonably withheld by Grantor and shall be deemed rejected if not given within five (5) days of Grantor’s receipt of LGF’s written request for such approval. If any such additional print and advertising costs are paid for by LGF, such costs shall be recoupable as Distribution Expenses pursuant to the terms of Paragraph 7 hereinbelow.

     b. Release Commitment: LGF shall cause the initial commercial theatrical release of the Picture on one (1) screen in the Territory.

7. Financial Terms:

     a. Grantor’s Participation: From One Hundred Percent (100%) of all monies received by LGF on a non-refundable basis from the exploitation of the Picture in all media throughout the Territory, LGF shall be entitled to deduct the following on a continuing basis and in the following order: (i) LGF’s Distribution Fee for all media; and (ii) LGF’s Distribution Expenses (as that term is defined hereinbelow), but expressly excluding the Grantor P&A Commitment. All revenues remaining after the foregoing deductions shall be referred to herein as “AGR”. The AGR shall be allocated One Hundred Percent (100%) to Grantor. That portion of the AGR allocated to Grantor pursuant to this paragraph shall be referred to herein as “Grantor’s Participation”. LGF shall be entitled to cross-collateralize all revenues received by LGF in connection with the Picture from all media throughout the Territory for the purposes of recouping LGF’s recoupable Distribution Expenses and the Home Video Advance (as that term is defined hereinbelow). LGF shall not be entitled to cross-collateralize revenues received by LGF from the exploitation of the Picture with revenues received by LGF in connection with any other motion picture property. The Picture shall not be used as a loss-leader. If LGF includes the Picture in a package of films licensed to a third party, then the price allocated to the Picture shall be on the basis of a reasonable allocation of revenues in light of the commercial worth of the motion pictures in the package, as determined by LGF in the exercise of its reasonable good faith business judgment.

     b. Home Video Advance: As an advance against Grantor’s Participation, Grantor shall be entitled to receive a “Home Video Advance” for the Picture in an amount equal to Fifty Percent (50%) of Grantor’s projected share of AGR derived from the Initial Home Video Release (as that term is defined hereinbelow) of the Picture, as projected by LGF in its reasonable good faith business judgment (which projection shall include a reserve for returns based upon LGF’s reasonable good faith business judgment). As used herein, “Initial Home Video Release” shall be the period commencing on LGF’s initial Home Video Street Date for the Picture and

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continuing until the end of the calendar quarter during which LGF’s initial Home Video Street Date for the Picture occurs. Grantor hereby acknowledges and agrees that the AGR projection made by LGF pursuant to the terms of this paragraph is an estimate that is subject to change and that the financial information contained therein is not a true and accurate statement of the actual amount of revenues that will be collected by LGF or the actual amount of revenues payable to Grantor. Grantor shall not rely on any information contained in any such projection for any purpose whatsoever. Grantor shall not have the right to dispute such projection (or any and all components thereof). One Hundred Percent (100%) of the Home Video Advance shall be payable thirty (30) days following the end of the first calendar quarter during which LGF’s initial Home Video Street Date for the Picture occurs (unless LGF’s initial Home Video Street Date for the Picture occurs in the second half of such quarter, in which event the Home Video Advance shall be payable ninety (90) days following the end of the first calendar quarter during which LGF’s initial Home Video Street Date for the Picture occurs). Notwithstanding the foregoing, if LGF’s initial Home Video Street Date for the Picture is less than thirty (30) days prior to the end of the calendar quarter, then One Hundred Percent (100%) of the Home Video Advance shall be payable thirty (30) days following the end of the second calendar quarter following LGF’s initial Home Video Street Date for the Picture.

     c. LGF’s “Distribution Fee” shall equal Fifteen Percent (15%) of One Hundred Percent (100%) of all Gross Receipts received by LGF from the exploitation of the Picture in all media throughout the Territory.

     d. As used herein, “Distribution Expenses” shall mean, with respect to all rights granted to LGF hereunder, one hundred percent (100%) of the aggregate of all actual, direct, out-of-pocket, third party costs expended or incurred by LGF in direct connection with the distribution and exploitation of the Picture throughout the Territory in all media, including, without limitation, all DLT Creation Costs, and all conversion, manufacturing, duplication, shipping, marketing, advertising, promotion and publicity costs, and all costs to complete Delivery of the Picture (to the extent (i) LGF elects to cure any failure of Grantor to complete Delivery of the Picture in accordance with the Delivery Schedule and/or (ii) LGF is required to take “access” to any Delivery Materials pursuant to the Delivery Schedule; and/or (iii) Grantor is not required to deliver such elements under the Delivery Schedule). The Grantor P&A Commitment shall not be included in Distribution Expenses hereunder.

     e. Home Video Marketing Expenses: Grantor and LGF shall mutually approve the initial marketing budget for the initial Home Video exploitation of the Picture in the Territory, which budget shall include the advertising, duplication and DVD authoring, compression and replication costs (the “Approved Marketing Budget”). LGF shall have the right to reallocate the subcategories contained in the Approved Marketing Budget for the Picture and shall have the right to spend up to ten percent (10%) above the Approved Marketing Budget. Commencing as of the date that is twelve (12) months following LGF’s initial Home Video Street Date for the Picture, LGF’s Home Video marketing expenses shall not exceed an amount that is equal to twelve percent (12%) of the Gross Receipts received by LGF from the exploitation of the Home Video Rights in and to the Picture.

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     f. DLT Creation Costs: As used herein, the term “DLT Creation Costs” shall mean and include 100% of LGF’s actual, direct, out-of-pocket, third party costs of creating the Digital Linear Tape (“DLT”) for the Picture, including, without limitation, DVD mastering and authoring costs, manufacturing, duplication, and shipping and clearance costs (including, without limitation, the cost of clearing “bonus” materials for such DVD).

8. Delivery: Grantor shall Deliver, at Grantor’s sole cost and expense, all Delivery Materials set forth in the Delivery Schedule that are required to constitute complete Delivery on or before September 30, 2005 (the “Delivery Date”). If any of the Delivery Materials are incomplete or fail to meet LGF’s technical requirements, LGF shall notify Grantor in writing specifying the defects in the Delivery Materials (the “Defect Notice”). Such Defect Notice shall be delivered within forty-five (45) days of LGF’s receipt of all Delivery Materials set forth in the Delivery Schedule. Grantor shall have fifteen (15) days from its receipt of the Defect Notice in which to cure the defects set forth therein (the “Delivery Cure Period”). If Grantor fails to cure the defects set forth in the Defect Notice prior to the expiration of the Defect Cure Period, then, without limitation to LGF’s other available rights and remedies, LGF shall have the option in its sole discretion to (A) secure acceptable replacement materials and deduct the costs thereof from Grantor’s Participation, or any other monies owing to Grantor pursuant to this Agreement, or (B) determine that it is economically prohibitive or otherwise unfeasible to secure acceptable replacement materials and, as a result, terminate this Agreement upon written notice to Grantor. In the event that LGF elects to terminate this Agreement, LGF shall be (I) relieved of its obligations hereunder, and (II) Grantor shall reimburse LGF for all of LGF’s out-of-pocket costs theretofore incurred by LGF under this Agreement. Without limitation to those requirements set forth in the Delivery Schedule, all documents required to be Delivered to LGF pursuant to the Delivery Schedule shall be Delivered in the English language.

     a. Running Time: The Picture shall be Delivered to LGF have a running time of not less than ninety (90) minutes, nor more than one hundred ten (110) minutes, inclusive of main and end titles.

     b. Rating: The Picture shall be delivered to LGF having been judged to receive a rating by the M.P.A.A. that is no more restrictive than “R”.

9. Credits; Editing: LGF shall have the right to cut, edit, change or add to, delete from or revise the Picture, including the title, for M.P.A.A. rating purposes, to conform the Picture to LGF’s marketing campaign and for any other reason as LGF may in its sole discretion determine. Subject only to Grantor’s third party contractual restrictions delivered to LGF, Grantor’s credit, and/or any guild restrictions which Grantor has informed LGF are applicable to the Picture in writing not later than the Delivery Date. LGF may, in its sole discretion, determine and arrange the placing and size of credits including credits above the title and/or above the artwork title. Without limiting the generality of the foregoing, LGF shall have the right to place its name and logo on all materials concerning the Picture in the Territory, including, without limitation, in the main and end credits of the Picture (e.g., LGF’s customary presentation credit), in the billing block, and on all advertising materials. It is the essence of this Agreement that Grantor Deliver written notice of all credit, name and likeness obligations and restrictions and all third party

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contractual approval and consultation rights to LGF in writing on or before the Delivery Date. Without limiting the generality of the foregoing, in the event that a performer or other agreement containing a credit, name and/or likeness provision or approval or consultation right is unexecuted as of such Delivery Date, then Grantor shall deliver the most recent draft of such agreement to LGF and LGF shall have the right to rely thereon. Without limiting the generality of the foregoing, in the event that a performer or other agreement containing a credit, name and/or likeness and/or approval or consultation provision is unexecuted as of the Delivery Date, then any and all contractual credit, name and likeness obligations and restrictions and approval rights negotiated after such Delivery Date must be approved by LGF in writing prior to Grantor entering into any agreement with respect thereto. LGF shall not remove any credit or copyright notice appearing on screen as the Picture is Delivered to LGF except as follows: (i) to comply with a court order or the order of an arbitrator or mediator, (ii) as required in settlement of a dispute, or (iii) as required by law. No casual or inadvertent failure by LGF or any third party to comply with any credit, name or likeness obligation or restriction, or to comply with any approval or consultation right, shall be deemed a breach of this Agreement, provided that LGF takes all commercially reasonable steps to cure such failure on a prospective basis commencing on LGF’s receipt of written notice thereof. The sole remedy of Grantor for a breach of any of the provisions of this Paragraph 9 shall be an action at law for compensatory damages, it being agreed that in no event shall Grantor be entitled to consequential or punitive damages, or to seek or obtain injunctive relief, specific performance, or any other form of equitable relief, by reason of any breach or threatened breach of any of the credit, name, likeness or other obligation or restriction or approval or consultation right, nor shall Grantor be entitled to enjoin or restrain the exhibition, distribution, marketing, advertising, promotion, or other exploitation of the Picture.

10. Holdbacks: LGF shall control the release dates of the Picture by means of the Home Video Rights as well as all television exhibition in Mexico (in the English and Spanish languages): provided that Grantor’s distributor(s) of the Picture in Mexico shall each be entitled to release the Picture day and date with LGF’s initial commercial release of the Picture in like media in the Territory. When applicable, LGF shall also control the wholesale and suggested retail price of the distribution of the Picture by means of the Home Video Rights in Mexico (in the English and Spanish languages): provided that Grantor’s distributor(s) of the Picture in Mexico shall each be entitled to release the Picture by means of the Home Video Rights at the same price point as LGF’s release of the Picture in the Territory. Grantor shall use all reasonable good faith efforts to cause the distributor(s) of the Picture in Mexico to each confirm in writing its acknowledgement of such holdback and price restrictions.

11. Grantor’s Representations and Warranties: Grantor represents and warrants as of the date hereof and also upon Delivery of the Picture that: (a) there are no non-customary credit, name or likeness obligations or restrictions or approval or consultation rights applicable to the Picture (all of which, if any, shall be Delivered to LGF in writing on or before the Delivery Date and LGF shall have the right to rely thereon) and that LGF shall have the right, but not the obligation, to utilize the likeness and name of each of the principal cast members in the artwork and in trailers for the Picture: (b) Grantor owns or controls all Rights granted to LGF under this Agreement and that all such Rights are free of all liens, claims, charges, encumbrances, restrictions, and commitments; (c) there is no agreement concerning the Picture with any person or entity which, if breached, would or

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could in any way impair, interfere with, abrogate or adversely or otherwise affect any of the Rights granted to LGF under this Agreement: (d) LGF’s exploitation of the Picture will not be subject to any guild (e.g., WGA. DGA, and SAG) liens, or residuals; (e) it is a corporation duly formed and validly existing in good standing under the laws of California and has the full right, power, legal capacity and authority to enter into and carry out the terms of this Agreement: (f) neither the Picture, nor any part thereof, nor any materials contained therein or synchronized therewith, nor the title thereof, nor the exercise of any Right, license or privilege granted to LGF hereunder, violates or will violate, or infringes or will infringe, any trademark, trade name, service mark, patent, copyright (whether common law or statutory), or, to the best of Grantor’s knowledge, the literary, dramatic, musical, artistic, personal, private, civil, “droit moral” or property right or rights of privacy or any other right of any person or entity whatsoever, or unfairly competes with or slanders or libels (or constitutes a trade disparagement of) any person or entity whatsoever; (g) it has no agreement with or obligations to any third party with respect to the Picture which might conflict or interfere with any of the provisions of this Agreement or the use or enjoyment by LGF of any of the Rights granted; (h) the Rights granted to LGF herein have not been previously granted, licensed sold, assigned, transferred, conveyed or exploited by any person or entity and Grantor shall not sell, assign, transfer, convey to or authorize any person or entity any right, title or interest in and to the Picture or any part thereof or in and to the dramatic or literary material upon which the Picture is based, which is adverse to or in derogation of the Rights granted to LGF; (i) there is no litigation, arbitration, claim, demand, or investigation pending or threatened with respect to the Picture, or the literary, dramatic or musical material upon which the Picture is based or which is contained therein, or concerning the physical properties thereof; (j) Grantor has secured, or by the Delivery Date will have secured, and shall for the duration of this Agreement maintain, all clearances (including, without limitation, all music rights and music clearances) which arc necessary for LGF to use and enjoy the Rights granted to LGF in and to the Picture throughout the Territory for the duration of the Term and that no supplemental or additional use payments shall be required with respect to the exploitation of the Picture (or any portion or element thereof, including, without limitation, the music contained therein) and/or any use or exploitation of any advertising or promotion of the Picture which contains the music as embodied in the Picture (including “in-context” uses thereof): and (k) Grantor is in all respects in compliance with the requirements of the Child Protection and Obscenity Enforcement Act of 1988, as amended by the Child Protection Restoration and Penalties Enhancement Act of 1990, and all rules and regulations promulgated thereunder (collectively, the “CPOEA”) and that the Picture is in all respects in compliance with the requirements of the CPOEA, and does not contain any material that would require Grantor to comply with the recordkeeping requirements of the CPOEA,

12. Indemnities:

          a. Grantor shall indemnify, defend and hold harmless LGF, its parent, subsidiaries, affiliates, assignees, licensees, sublicensees, distributors, sub-distributors and dealers, and the directors, officers, agents, consultants and representatives of the foregoing (the “LGF Indemnitees”), from all claims, costs, liabilities, obligations, judgments or damages (including reasonable outside attorneys’ fees but excluding lost profits and consequential damages), arising out of or for the purpose of avoiding any suit, claim, proceeding or demand or the settlement thereof, which may be brought against any of the LGF Indemnitees by reason of the actual or

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proposed production of the Picture, or the use or disposition of rights granted herein, or in connection with the breach of any of the warranties, representations or obligations made by Grantor, unless resulting from a breach of this Agreement by LGF.

          b. LGF shall indemnify, defend and hold harmless Grantor, its parent, subsidiaries, affiliates, assignees, and the directors, officers, agents, consultants and representatives of the foregoing (the “Grantor Indemnitees”), from all claims, costs, liabilities, obligations, judgments or damages (including reasonable outside attorneys’ fees but excluding lost profits and consequential damages), arising out of or for the purpose of avoiding any suit, claim, proceeding or demand or the settlement thereof, which may be brought against any of the Grantor Indemnitees by reason of the distribution, advertising or promotion of the Picture, or in connection with the breach of any of the warranties, representations or obligations made by LGF, except to the extent that LGF is required to be indemnified by Grantor in accordance with paragraph 12(a) hereinabove.

          c. The parties hereto shall meaningfully consult with each other with respect to the defense, institution or settlement of litigation in connection with the rights granted hereunder and LGF’s exploitation thereof during the Term and in the Territory.

13. Reporting Periods: Following exploitation by LGF of the rights granted herein, customary reporting shall be rendered to Grantor quarterly for the duration of the Term. Statements and payments shall be delivered to Grantor simultaneously and shall be delivered within ninety (90) days of each reporting period.

14. Audit Rights: Grantor shall have the right to have a certified public accountant of its choice audit LGF’s books and records with respect to the Picture(s) once per year (and only once with respect to any particular records and/or statements) at Grantor’s sole cost and expense: such audit shall take place in LGF’s principal place of business and shall not unreasonably interfere with LGF’s course of business. Said audit shall be conducted at LGF’s principal place of business during normal business hours. Grantor shall give LGF ten (10) business days prior written notice of its intent to conduct such audit. All notices, statements and payments made pursuant to the Agreement shall be deemed valid and shall not be subject to dispute or audit unless disputed within twenty-four (24) months after first issued. In the event that an audit reveals (i) an underpayment of seven and one-half percent (7.5%) or more of the total monies owed; (ii) the underpayment is seven thousand five hundred dollars ($7,500.00) or more, and (iii) the amount of the audit is reasonable and customary and does not exceed the amount of the underpayment, then LGF shall pay Grantor the amount of the underpayment plus the reasonable, actual, direct, out-of-pocket, third party costs of the audit up to the amount of the underpayment.

15. Assignment: LGF may grant, assign or sublicense this Agreement or any of its rights or obligations herein to any third party: provided that LGF shall remain primarily liable for its obligations hereunder unless such assignment is to (i) a parent, subsidiary or affiliated entity of LGF, (ii) a company that acquires all or substantially all of LGF’s assets, and/or (iii) is to a “major” or “mini-major’’ studio, and, in any event, provided that LGF shall remain secondarily liable for its payment obligations hereunder. Grantor shall not assign this Agreement or any of

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their rights or obligations herein except that after Delivery of the Picture is accepted by LGF. Grantor shall have the right to assign its right to receive payment on three (3) occasions in bulk during the Term. Any purported assignment in violation of this Agreement shall be null and void.

16. No Third Party Beneficiaries: Nothing contained in this Agreement shall be construed so as to create any third party beneficiary hereunder. In this regard, nothing under this Agreement shall entitle any third party to any remedies against LGF, at law, in equity, or otherwise, including, without limitation, any additional audit rights or the right to seek or obtain injunctive relief against LGF’s distribution of the Picture.

17. Default: If Grantor defaults (or breaches a material representation and warranty), which default remains uncured for fifteen (15) business days following Grantor’s receipt of LGF’s written notice to Grantor thereof, LGF shall be entitled to terminate this Agreement. In the event that Grantor fails to fully Deliver the Delivery Materials set forth in the Delivery Schedule, which failure is not timely cured, LGF may create such Delivery Materials, the reasonable, actual, out-of-pocket cost of which shall be recoupable by LGF, in LGF’s sole discretion, as (i) as a Distribution Expense, and/or (ii) from any other monies (e.g. Grantor’s Participation, bonuses, etc.) which are then due and owing to Grantor, LGF’s rights and remedies shall be cumulative, and none of them shall be exclusive of any other allowed by law. If LGF defaults, Grantor shall not be entitled to terminate or rescind this Agreement, nor to obtain injunctive relief with respect to the exercise by LGF of the rights granted hereunder and Grantor further waives all rights to seek and recover punitive damages; Grantor’s sole remedy shall be an action at law for damages. Notwithstanding the foregoing, LGF shall not be entitled to seek or obtain injunctive or equitable relief with respect to the exploitation of the Picture outside the Territory.

18. Governing Law; Jurisdiction: This Agreement shall be construed and interpreted pursuant to the Laws of the State of California as it applies to contracts entered into and performed wholly within California or, if appropriate, the federal laws of the United States of America. Any dispute regarding the validity, construction, terms or performance of this Agreement or any other matter in connection therewith shall be submitted to binding arbitration before the JAMS in Los Angeles. California in accordance with the following provisions:

          a. If the parties cannot agree upon a single arbitrator, each party shall select one arbitrator who has experience in the motion picture industry and both arbitrators so selected shall select a third arbitrator.

          b. The third arbitrator shall adjudicate the dispute applying the laws of the state of California as it applies to contracts entered into and wholly performed within California or, if appropriate, the federal laws of the United States of America.

          c. The arbitrator shall issue a written opinion specifying the basis for their award and the types of damages awarded.

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          d. There shall be a court reporter record made of the arbitration hearing and said record shall be the official transcript of the proceedings.

          e. Witness lists, production of documents and subpoenas in the arbitration shall be in accordance with Section 1280 et seq. of the California Code of Civil Procedure, except that the fifteen (15) day periods set forth in subsections (a)(2)(A) and (B) of Section 1282.2 shall be deemed to be periods of five (5) business days. If the dispute pertains to Delivery, there shall be made available to the arbitrator all relevant materials submitted by LGF or Grantor which purport to constitute completion and delivery of the Picture. The parties shall participate in an exchange of information before the hearing. If any such discovery is not voluntarily exchanged among the parties, the party desiring such discovery may apply to the arbitrator at the outset of the arbitration for particular discovery requests. The arbitrator may deny only such discovery as is unreasonable or is intended to unduly delay the prompt conclusion of me arbitration.

          f. The decision of the arbitrator (or the majority of the arbitrators, if applicable) shall be binding upon the parties, shall constitute a full and final adjudication of the controversy. The parties shall each be responsible for paying fifty percent (50%) of all the arbitrator’s and court reporter’s fees (including, without limitation, the cost of the arbitration), unless the arbitrator for the majority of the arbitrators, if applicable) decides otherwise. A judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

     This Agreement (inclusive of Schedule “A”, Exhibit “A” and Exhibit “C”), when executed, is legally binding unless and until superseded by a more formal agreement incorporating the terms set forth above as well as additional provisions, which when and if executed, shall replace this Agreement, Capitalized terms used herein and not otherwise defined shall have the same meaning as in LGF’s standard long-form agreement, subject to good faith negotiations in accordance with LGF’s and Grantor’s standard business practices. All items not addressed above shall be negotiated in good faith pursuant to prevailing industry customs and standards and LGF’s and Grantor’s standard business practices. This Agreement may not be changed, modified, amended or supplemented, except in a writing signed by both parties.

AGREED TO AND ACCEPTED BY:

LIONS GATE FILMS INC.	SOBINI FILMS
/s/ Wayne Levin	/s/ Jill Courtemanche
Signature	Signature
Wayne Levin	Jill Courtemanche
Print Name	Print Name
EVP & General Counsel	Attorney
Title	Title
3/14/06	12/19/05
Date	Date

EX-10.30

Exhibit 10.30

AGREEMENT

“THE WAY OF THE PEACEFUL WARRIOR” a/k/a “PEACEFUL WARRIOR”

     This agreement (the “Agreement”) is made and entered into as of December 6, 2005 by and between Sobini Films, a California Corporation (“Grantor”), whose address is 2700 Colorado Avenue, Suite 510B, Santa Monica, California, 90404, and Lions Gate Films Inc. (“LGF”), whose principal address is 2700 Colorado Avenue, Second Floor, Santa Monica, California, 90404, with respect to that certain motion picture presently entitled “The Way of the Peaceful Warrior” a/k/a “Peaceful Warrior”.

1. Picture: The “Picture” shall mean that certain motion picture presently entitled “The Way of the Peaceful Warrior” a/k/a “Peaceful Warrior” and any and all versions thereof and all “bloopers”, footage, trims and outtakes thereof (including, without limitation, the Director’s Cut and the Final Cut and any and all versions of each of the foregoing, all versions rated by the Motion Picture Association of America and unrated versions of the Picture, “behind the scenes”, “making of” and any and all other documentary or short films concerning the Picture, and all footage, “bloopers”, trims and out-takes of each of the foregoing), produced by, on behalf of or at Grantor’s direction, in the year 2005.

2. Territory: The “Territory” shall mean and include each of the following: (a) United States of America (including but not limited to, Guam, Saipan, Midway Island, the Trust Territory Islands, the Caroline Islands, the Marshall Islands, the Virgin Islands, Puerto Rico and American Samoa) (“U. S.”), its territories, possessions, trusteeships and commonwealths and all military bases, ships at sea, airlines and oil rigs flying the flag or serviced from of the U.S., (b) Canada (including, but not limited to, Quebec, Prince Edward Island, the Northwest Territories, the Yukon Territories and Newfoundland), its territories, possessions, trusteeships and commonwealths, and all military bases, ships at sea, airlines and oil rigs flying the flag of or serviced from Canada, and (c) for the purposes of Television exploitation in the U.S. only, Bermuda and the Bahamas Islands.

3. Rights Granted:

     a. Rights Granted to LGF: Grantor hereby grants to LGF, on an exclusive basis, all distribution rights in and to the Picture and the underlying material with respect thereto (to the extent necessary to effectuate the grant of Rights hereunder), under copyright and otherwise, throughout the Territory, in all languages and in all media, whether now known or hereafter devised, including, without limitation, all Theatrical, Non-Theatrical, Home Video, and Television Rights in and to the Picture, by all methods of delivery, whether now know or hereafter devised, including without limitation, all Internet Delivery Mechanisms, all as such rights may be more specifically defined in Schedule “A”, which is attached hereto and incorporated herein by this reference (collectively, the “Rights”), excluding without limitation, all Ancillary Rights and all the sequel, prequel and remake rights in and to the Picture (including, without limitation, any and all Television spin-off rights), the Blockbuster Store Rights (as that

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term is defined in paragraph 3(b) hereinbelow, and all Ancillary Rights (as that term is defined in paragraph 3(c) hereinbelow) in and to the Picture (collectively, the “Reserved Rights”). Without limiting the generality of the foregoing, the Rights granted to LGF hereunder shall include, without limitation, the exclusive right to market, advertise, promote and publicize the Picture in all media, whether now known or hereafter devised.

     b. Remakes, Prequels & Sequels: LGF shall have a right of first refusal (a “Right of First Refusal”) with respect to worldwide distribution rights in any motion picture produced by Grantor alone or in conjunction with others during the Term (a “Qualifying Picture”) to the extent that Grantor controls the licensing of such distribution rights; provided, that such Right of First Refusal shall not apply to any rights to distribute a Qualifying Picture which has been licensed, transferred or otherwise disposed of prior to the time that Grantor controls the licensing of such distribution rights unless at such later time Grantor has obtained the control of the Subject Distribution Rights. Such a Right of First Refusal shall apply to all rights to distribute the Qualifying Picture in the United States (“U.S. Rights”) and to all rights to distribute the Qualifying Picture outside of the United States (“Foreign Rights”). The rights as to which LGF has the Right of First Refusal set forth in this paragraph shall be referred to herein as “Subject Distribution Rights”.

     i. Grantor shall notify LGF in writing of any Qualifying Picture (a “First Refusal Notice”) setting forth a description of the Material Elements. For purposes of this Agreement, “Material Elements” shall mean the proposed director, lead actor and amount of the budget for the Qualifying Picture. LGF shall have until 5:00 p.m. on the eighth (8^th) business day following provision of the First Refusal Notice by Grantor (the “Exercise Period”) to notify Grantor in writing (an “Exercise Notice”) that LGF is exercising its right to negotiate in good faith to acquire the U.S. Rights and/or the Foreign Rights. If LGF so exercises its Right of First Refusal with respect to the U.S. Rights and/or with respect to the Foreign Rights, LGF shall thereupon be obligated to negotiate with Grantor in good faith for a period of ten (10) business days (“Negotiation Period”).

     ii. If the parties fail to reach agreement ( or are deemed to fail to reach agreement) prior to the expiration of the Negotiation Period with respect to U.S. Rights and/or Foreign Rights, subject to and in accordance with subsections (iv) and (v) below, Grantor may accept any third party offer to acquire U.S. rights and/or Foreign Rights on monetary terms or conditions materially more favorable to Grantor that the monetary terms and conditions last offered by LGF to Grantor during the Negotiation Period and/ or may sell or license Foreign Rights on a territory-by territory basis without any further obligation to LGF.

     iii. LGF’s failure to provide an Exercise Notice prior to the expiration of the Exercise Period shall be deemed an election by LGF to not exercise its Right of First Refusal to acquire any of the Subject Distribution Rights. In the event LGF fails to provide an Exercise Notice within the applicable Exercise Period or fails to negotiate with Grantor during the appropriate Negotiation Period, Grantor shall have the right to dispose of the Subject Distribution Rights with respect to Qualifying Picture without any further obligation to LGF.

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     iv. Subject to paragraph 3(b)(v) hereinbelow, if at any time there is a substantial change in the Material Elements pertaining to a Qualifying Picture, Grantor shall within ten (10) business days following such change to provide a First Refusal Notice to LGF describing such change of Material Elements. The Exercise Period, Negotiation Period and the mechanics for LGF’s exercise or deemed election not to exercise its rights under any such First Refusal Notice shall be the same as set forth above. For purposes of this Agreement, a “substantial change” in the Material Elements pertaining to a Qualifying Picture shall mean (A) any change in the proposed director or lead actor or (B) a decrease of more than ten percent (10%) in the amount of the proposed budget.

     v. Notwithstanding anything to the contrary in this Agreement, if Grantor enters into an agreement with a third party regarding the U.S. Rights or the Foreign Rights in Qualifying Picture, thereafter there is a substantial change in Material Elements pertaining to such Qualifying Picture, and Grantor has theretofore compiled with his first refusal obligations as set forth herein, LGF’s Right of First Refusal shall not apply to such Qualifying Picture. By way of clarification, in such event, Grantor would, among other things, not be required to provide a subsequent First Refusal Notice to LGF with respect to a Qualifying Picture, even if the Material Elements of such Qualifying Picture were to change substantially subsequent to the time such agreement is entered into.

     c. Blockbuster Store Rights: LGF acknowledges that Sobini has entered into a revenue sharing agreement with Blockbuster Inc. (“Blockbuster”) with respect to the rental of DVDs (including, without limitation, Blu-Ray™) of the Picture for the first twenty-six (26) weeks commencing with LGF’s initial Home Video Street Date of the Picture (the “Revenue Share Period”) via (i) Blockbuster’s “brick and mortar” retail stores or locations in the Territory with the limited exception of stores or locations located in Hawaii or Alaska or any United States’ territory or possession other than the District of Columbia (the “Blockbuster Territory”) that are wholly owned or operated by Blockbuster or its affiliates (the “Blockbuster Parties”); and (ii) blockbuster.com (collectively, the “Blockbuster Store Rights”). LGF further acknowledges that this Picture will not be a “Rental Picture” under any revenue share agreement between LGF and Blockbuster that is or will be in effect as of LGF’s initial Home Video Street Date of the Picture (i.e., any “brick and mortar” or online revenue share agreement). For clarification purposes, LGF will not be prohibited or restricted from selling Videograms (including, without limitation, DVDs) of the Picture to any of the Blockbuster Parties for retail purposes in the Blockbuster Territory prior to or during the Revenue Share Period nor will LGF be prohibited or restricted from selling Videograms (including, without limitation, DVDs) of the Picture to any of the Blockbuster Parties in the Blockbuster Territory for retail and/or rental purposes after the expiration of the Revenue Share Period. “Videograms” means and includes, without limitation, all kinds of tapes, cassettes, discs, chips, cards and other devices, whether now known or hereafter devised, including but not limited to, all formats of videotapes, videocassettes, videodiscs, chips, cards, and other technologies in which the Picture is embodied in a tangible medium of expression (including, without limitation, VHS, DVD, PSP, Blu-Ray™ and laser discs), as these terms are commonly understood in the video industry which contain the Picture, or portions thereof and are intended primarily for viewing of the Picture in its original continuity.

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     d. Specialty Home Video Markets: LGF shall use good faith efforts to engage Gaiam to handle the distribution of Video Devices of the Picture in certain non-mass-merchant and specialty Home Video markets, provided that (i) LGF approves all of the terms of such distribution agreement with Gaiam, and (ii) LGF approves of the specific retail chains to be handled by Gaiam under such agreement.

     e. Ancillary Rights: As used herein, “Ancillary Rights” shall mean and include, without limitation, all Soundtrack, Music Publishing, Literary Publishing, Electronic Publishing and Merchandising Rights in and to the Picture. Notwithstanding any reservation of the Ancillary Rights in and to the Picture, LGF is hereby granted the exclusive right to merchandise the key art in and to the Picture (e.g., posters, toys, key chains, etc.) for the purposes of promoting the Picture in the Territory.

4. Term: The “Term” of this Agreement shall commence as of the date first written above and shall terminate ten (10) years from LGF’s initial Theatrical release of the Picture in the Territory (which Theatrical release shall be deemed to have occurred on the earlier of (a) the actual initial commercial Theatrical release date of the Picture in the Territory, and (b) twelve (12) months from the date of complete Delivery (and LGF’s acceptance) of the Picture in accordance with the Delivery Schedule). Notwithstanding the foregoing, the Term of this Agreement shall be deemed extended as is necessary to comply with any license of Television Rights to Showtime Networks Inc.. After the expiration of the Term, there shall be a six (6) month exclusive sell-off period (the “Sell-Off Period”). During the Sell-Off Period, LGF shall only manufacture that number of Video Devices LGF reasonable requires in order to fill orders during the Sell-Off Period. LGF shall not manufacture more Video Devices during the last six (6) months of the Term than it reasonably expects to sell during the Term, exclusive of the Sell-Off Period. Without limiting the generality of the foregoing, LGF shall have a right of first negotiation (for a period of ten (10) business days commencing on Grantor’s receipt of LGF’s written notice of its intent to commence such negotiations, which notice shall be Delivered to Grantor no later than the last day of the Term) with respect to any extensions of the Term hereof.

5. Minimum Guarantee: None.

6. Grantor’s Participation; Distribution Fees:

     a. Grantor’s Participation: From One Hundred Percent (100%) of all monies received by LGF on a non-refundable basis from the exploitation of the Picture in all media throughout the Territory, LGF shall be entitled to deduct the following on a continuing basis and in the following order: (i) LGF’s Distribution Fee for all media, (ii) LGF’s Distribution Expenses (as that term is defined hereinbelow) plus Interest, and (iii) third party participation payments (to the extent that LGF pays such third party participation payments on Grantor’s behalf, if at all, and which shall only be payable from any monies remaining after the foregoing deductions; for the purposes of clarity, LGF shall not be required to assume any payment obligations of Grantor nor shall LGF be required to make any third party participation payment that is greater than the amount of revenues available after LGF has first deducted its Distribution Fees and Distribution Expenses). All revenues remaining after the foregoing deductions shall be referred to herein as

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“AGR”. Grantor shall be entitled to receive One Hundred Percent (100%) of the AGR. Notwithstanding the foregoing, in the event that LGF contributes Two Million Dollars ($2,000,000.00) or more in actual, direct, out-of-pocket, third party print, marketing, advertising, promotional and publicity expenses in connection with the theatrical release of the Picture, then One Hundred Percent (100%) of the AGR shall paid to Grantor until such time, if ever, as Grantor has received the aggregate of Two Million Five Hundred Thousand Dollars ($2,500,000.00) under this Agreement plus an amount equal to any and all monies drawn down from the LC by LGF pursuant to paragraph 6(c)(i) hereinbelow. Thereafter, the AGR shall be allocated and paid Ten Percent (10%) to LGF and Ninety Percent (90%) to Grantor for the duration of the Term. That portion of the AGR allocated to Grantor pursuant to this paragraph shall be referred to herein as “Grantor’s Participation”. LGF shall be entitled to cross-collateralize all revenues received by LGF from the exploitation of the Picture from all media throughout the Territory for the purposes of recouping LGF’s recoupable Distribution Expenses. LGF shall be entitled to hold a reasonable amount of Home Video Gross Receipts in reserve to accommodate bad debt, returns, damaged goods, residuals and the like, which reserves shall be liquidated on an annual basis in accordance with LGF’s standard business practices. The amount of reserves held by LGF commencing on LGF’s initial Home Video release of the Picture in the Territory and continuing for a consecutive twelve (12) month period thereafter shall not exceed twenty-seven percent (27%) of Home Video Gross Receipts. Thereafter, the amount of reserves held by LGF shall not exceed thirty (percent (30%) of Home Video Gross Receipts. Nothing set forth herein shall preclude LGF from making adjustments to its reporting statements to reflect the actual or anticipated rate of returns, damaged goods, and the like. LGF shall not be entitled to cross-collateralize revenues received by LGF from the exploitation of the Picture with revenues received by LGF from the exploitation of any other motion picture or property distributed by LGF for any recoupment purposes, including, but not limited to, recoupment of its Distribution Expenses. The Picture shall not be treated as a “loss leader” by LGF. If LGF includes the Picture in a package of motion pictures licensed to a third party, then the price allocated to the Picture shall be on the basis of a reasonable allocation of revenues in light of the commercial worth of the motion pictures in the package as determined by LGF in the exercise of its reasonable good faith business judgment.

     b. Distribution Fees: LGF’s “Distribution Fee” shall equal Fifteen Percent (15%) of One Hundred Percent (100%) of all Gross Receipts received by LGF from the exploitation of the Picture in all media throughout the Territory.

     c. Distribution Expenses: As used herein, “Distribution Expenses” shall mean, with respect to all rights granted to LGF hereunder, one hundred percent (100%) of the aggregate of all actual, direct, out-of-pocket, third party costs expended or incurred by LGF in direct connection with the distribution and exploitation of the Picture throughout the Territory in all media, including, without limitation, all DLT Creation Costs, and all conversion, manufacturing, duplication, shipping, marketing, advertising, promotion and publicity costs, all Residual Payments, and all costs to complete Delivery of the Picture (to the extent (i) LGF elects to cure any failure of Grantor to complete Delivery of the Picture in accordance with the Delivery Schedule and/or (ii) LGF is required to take “access” to any Delivery Materials pursuant to the Delivery Schedule; and/or (iii) Grantor is not required to deliver such elements under the Delivery Schedule).

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     i. P&A Contribution: Grantor shall pay LGF the sum of Two Million Dollars ($2,000,000.00) (the “P&A Contribution”) in the form of an irrevocable letter of credit (“LC”), which LC shall be Delivered to LGF on or before March 31, 2006. LGF shall be entitled to draw down from the LC, without restriction, commencing on that date which is eighteen (18) months following the first day of the initial commercial theatrical release of the Picture in the Territory (or earlier if LGF determines in good faith that it will not recoup its Distribution Fees and Distribution Expenses (including, but not limited to, its marketing, advertising, promotional, publicity and print (“P&A”) expenditure in connection with the initial Theatrical release of the Picture in the Territory) based on the performance of the Picture) and continuing until that date which is twenty-four (24) months after the commencement of the initial commercial Theatrical release of the Picture in the Territory. Such LC shall only be drawn upon to the extent that Gross Receipts fail to equal LGF’s Distribution Fees plus LGF’s Distribution Expenses (together with Interest thereon) as of the date(s) the LC is drawn upon. By way of example, if LGF spends $2,000,000.00 in connection with the initial commercial theatrical release of the Picture in the Territory (representing Grantor’s P&A Contribution), $2,000,000 in other Distribution Expenses (including interest) and Gross Receipts equal $4,000,000.00, then LGF shall only be entitled to draw $600,000.00 from the LC. One Hundred Percent (100%) of the P&A Contribution shall be spent by LGF in actual, direct, out-of-pocket, third party, print, marketing, advertising, promotional and publicity costs incurred in connection with the Theatrical release of the Picture in the Territory. LGF and Grantor shall have the right of mutual approval of the amount, if any, that LGF contributes to the theatrical release of the Picture.

     ii. Grantor’s Approval Rights: Grantor shall have the right of approval of the amount of the initial print and advertising expenditure in connection with the initial commercial theatrical release of the Picture in the Territory (provided that LGF is pre-approved to spend the P&A Contribution) and the initial marketing and advertising expenditure in connection with the initial Home Video release of the Picture in the Territory. Without limiting the generality of the foregoing, Grantor shall have the right of approval of the initial marketing plan for the initial Theatrical and Home Video releases of the Picture in the Territory. Without limiting the generality of the foregoing, Grantor shall have the right of approval of the initial markets in which the Picture shall be initially theatrically released (Los Angeles, San Francisco, San Diego, Phoenix, Portland and Seattle are pre-approved). In each instance, Grantor’s approval shall not be unreasonably withheld or untimely delayed and shall be deemed given if not rejected within ten (10) business days of Grantor’s receipt of LGF’s written request for approval, except that once the Theatrical release of the Picture has commenced, Grantor’s approval shall be deemed given if not rejected within two (2) business days of Grantor’s receipt of LGF’s written request for approval.

     d. Interest: As used herein, “Interest” shall mean the actual rate of interest charged to LGF by LGF’s principal lending syndicate, which rate, as between LGF and Grantor, shall not exceed the prime rate of interest plus two percent (2%).

     e. Residuals: Grantor represents and warrants that no residual buy-outs are permitted by any guild or union affiliated with the Picture or those individuals rendering services in

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connection therewith (the “Residual Buy-Out”). Without limiting the generality of the foregoing, Grantor shall be responsible for any and all residual and other additional or supplemental payments required to be made by reason of the distribution or other exploitation of the Picture in the Territory. Notwithstanding the foregoing, LGF represents and warrants that it shall pay any residual payments Grantor is required to pay as a result of LGF’s exploitation of the Picture in the Territory other than the Residual Buy-Out and LGF shall sign Distributor’s Assumption Agreements in connection therewith (each, a “Residual Payment”). Grantor represents and warrants to LGF that the Picture was produced under the SAG Basic Agreement and not under the SAG Low Budget, Ultra Low Budget or Modified Low Budget Basic Agreements (collectively, the “SAG Low Budget Agreements”). Grantor hereby represents and warrants to LGF that LGF shall not be required to pay any residual or other guild penalties hereunder, except with respect to those penalties that may arise as a result of LGF’s failure to timely pay such residual payments (subject to LGF’s receipt of timely written notice of its obligation to pay such residuals and the amount thereof). For the purposes of clarity, LGF shall not be responsible for paying any additional up-front compensation to any guild whatsoever, including, without limitation, the WGC, ACTRA, the DGC, DGA, WGA, IATSE, SAG or to any SAG cast members in order to qualify the Picture for distribution beyond that permitted under any SAG Low Budget Agreement. In this regard, Grantor shall complete the Residuals Worksheet which is attached hereto and incorporated herein by this reference as Schedule “B”. Delivery of a completed Schedule “B” is a condition precedent to Delivery of the Picture being deemed complete. LGF shall be entitled to recoup all Residual Payments as Distribution Expenses hereunder.

     f. DLT Creation Costs: As used herein, the term “DLT Creation Costs” shall mean and include 100% of LGF’s actual, direct, out-of-pocket, third party costs of creating the DLT(s) for the Picture, including, without limitation, DVD mastering and authoring costs, manufacturing, duplication, and shipping and clearance costs (including, without limitation, the cost of clearing “bonus” materials for such DVD).

7. Delivery: Grantor shall deliver, at Grantor’s sole cost and expense, all Delivery Materials (as that term is defined in the Delivery Schedule) set forth in the Delivery Schedule to LGF on or before March 13, 2006 (the “Delivery Date”), except with respect to long form music licenses, for which the Delivery Date shall be April 17, 2006. The Delivery Schedule shall be negotiated by the parties in good faith. Without limitation to those requirements set forth in the Delivery Schedule, all documents required to be Delivered to LGF pursuant to the Delivery Schedule shall be Delivered in the English language.

     a. Running Time: The Picture shall be Delivered to LGF with a running time of not less than ninety (90) minutes, nor more than one hundred twenty (120) minutes, inclusive of main and end titles.

     b. Rating: The Picture shall be delivered to LGF having been judged to receive a rating by the M.P.A.A. that is no more restrictive than “PG-13”. Provided that the Picture is Delivered to LGF as set forth in the preceding sentence, LGF shall not edit the Picture for M.P.A.A. rating purposes. If the Picture is not Delivered to LGF having been judged to receive an M.P.A.A.

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rating that is no more restrictive than “PG-13”, then, without limitation to LGF’s editing rights set forth in paragraph 8 hereinbelow, LGF shall have the right to edit the Picture to achieve such rating. Grantor represents and warrants to LGF that the Picture has been judged to receive a “PG-13” rating by the M.P.A.A..

     c. Access to LGF’s Marketing Materials: LGF shall afford Grantor access to any and all marketing materials created by LGF in connection with the Picture (the “LGF Materials”), at no cost to Grantor, provided that Grantor shall directly pay for any and all applicable shipping and duplication costs arising out of Grantor’s access to any such LGF Materials. LGF shall use good faith efforts, on a prospective basis commencing on the execution hereof, to clear the LGF Materials for worldwide use, provided that such worldwide clearances are granted to LGF free of charge. LGF expressly makes no representation or warranty with respect to the content or quality of any such LGF Materials, or whether any approvals, consents, consultation rights or payments need to be made or obtained in connection with the exploitation thereof outside the Territory or in languages and distribution rights not included in the Rights granted to LGF hereunder (collectively, “Third Party Obligations”) and as between LGF and Grantor, it shall be Grantor’s sole obligation to obtain, satisfy and pay for any and all such Third Party Obligations.

8. Credits; Editing: Grantor’s cut shall be deemed the final cut of the Picture. Notwithstanding the foregoing, LGF and its licensees shall have the right to cut, edit, change or add to, delete from or revise the Picture, to meet Television broadcaster standards, practices and timing requirements, to obtain distribution opportunities (e.g., the creation of ship and airline versions of the Picture), and as required by the order of a court, arbitrator or mediator, or in settlement of a dispute. With respect to any editing of the Picture in its entirety performed by LGF (e.g., as opposed to cutting trailers or clips of the Picture), and subject to any guild requirements that are applicable with respect to the editing of the Picture, LGF shall afford an employee of Grantor the first opportunity to render such editing services, provided that (a) Grantor’s employee is available at the time and place reasonably required by LGF, (b) such editing services are rendered at no cost to LGF, (c) such editing services are rendered in accordance with LGF’s reasonable instructions and time exigencies, and (d) Grantor’s employee is then customarily in the business of editing motion pictures. Grantor represents and warrants to LGF that the title of the Picture is fully cleared for LGF’s exploitation thereof in connection with the Picture in all media granted to LGF pursuant to this Agreement, throughout the Territory for the duration of the Term. Subject to the preceding sentence, LGF shall not change the title of the Picture without first obtaining Grantor’s prior, written approval (which approval shall not be unreasonably withheld or untimely delayed and shall be deemed given if not rejected within ten (10) business days of Grantor’s receipt of LGF’s written request for approval. If the title of the Picture is not fully cleared as set forth herein, then LGF shall have the right to change the title of the Picture, subject to prior, meaningful consultation with Grantor. Subject only to Grantor’s third party contractual restrictions delivered to LGF, Grantor’s credit, and/or any guild restrictions which Grantor has informed LGF are applicable to the Picture in writing on or before the Delivery Date, LGF or its licensees may, in its sole discretion, determine and arrange the placing and size of credits including credits above the title and/or above the artwork title. Without limiting the generality of the foregoing, LGF and its licensees shall have the right to place its name and logo on all materials concerning the Picture in the Territory, including,

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without limitation, in the main and end credits of the Picture (e.g., LGF’s customary presentation credit), in the billing block, and on all advertising materials. The presentation credit shall be substantially in the form of “Lionsgate Films & Sobini Films present in association with Inferno International” on a sole card, followed by a card that reads substantially in the form of “A Sobini Films Production” followed by a card that reads substantially in the form of “A MHF Zweite Academy Film Production” followed by the title card. LGF shall not remove Grantor’s logo from any materials Delivered to LGF. It is the essence of this Agreement that Grantor Deliver written notice of all credit, name and likeness obligations and restrictions and all third party contractual approval and consultation rights to LGF in writing on or before the Delivery Date. Without limiting the generality of the foregoing, in the event that a performer or other agreement containing a credit, name and/or likeness provision or approval or consultation right is unexecuted as of such Delivery Date, then Grantor shall deliver the most recent draft of such agreement to LGF and LGF shall have the right to rely thereon. Without limiting the generality of the foregoing, in the event that a performer or other agreement containing a credit, name and/or likeness and/or approval or consultation provision is unexecuted as of the Delivery Date, then any and all contractual credit, name and likeness obligations and restrictions and approval rights negotiated after such Delivery Date must be approved by LGF in writing prior to Grantor entering into any agreement with respect thereto, which approval shall not be unreasonably withheld or untimely delayed. LGF shall not remove any credit or copyright notice appearing on screen as the Picture is Delivered to LGF except as follows: (e) to comply with a court order or the order of an arbitrator or mediator, (f) as required in settlement of a dispute, or (g) as required by law. No casual or inadvertent failure by LGF or any third party to comply with any credit, name or likeness obligation or restriction, or to comply with any approval or consultation right, shall be deemed a breach of this Agreement, provided that LGF takes all commercially reasonable steps to cure such failure on a prospective basis commencing on LGF’s receipt of written notice thereof. The sole remedy of Grantor for a breach of any of the provisions of this paragraph 8 shall be an action at law for compensatory damages, it being agreed that in no event shall Grantor be entitled to consequential or punitive damages, or to seek or obtain injunctive relief, specific performance, or any other form of equitable relief, by reason of any breach or threatened breach of any of the credit, name, likeness or other obligation or restriction or approval or consultation right, nor shall Grantor be entitled to enjoin or restrain the exhibition, distribution, marketing, advertising, promotion, or other exploitation of the Picture.

9. Holdbacks:

     a. Mexico Holdback: LGF shall control the release dates of the Picture by means of the Home Video Rights as well as all television exhibition in Mexico (in the English and Spanish languages); provided that Grantor’s distributor of the Picture in Mexico (in the English and Spanish languages) shall be entitled to release the Picture day and date with LGF’s initial commercial release of the Picture in like media in the Territory. When applicable, LGF shall also control the wholesale and suggested retail price of the distribution of the Picture by means of the Home Video Rights in Mexico (in the English and Spanish languages); provided that Grantor’s distributor of the Picture in Mexico (in the English and Spanish languages) shall be entitled to release the Picture by means of the Home Video Rights at the same price point as LGF’s release of the Picture in the Territory. Grantor shall use reasonable good faith efforts to

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cause the distributor(s) of the Picture in Mexico to each confirm in writing its acknowledgement of such holdback and price restrictions.

     b. Blockbuster Store Holdback: LGF shall control the release dates of the Picture by means of the Blockbuster Store Rights; provided that Blockbuster may make Video Device copies of the Picture available for rental and sale to its consumers day and date with LGF’s initial Home Video Street Date of the Picture in the Territory. It is the essence of this Agreement that Grantor contractually require Blockbuster to comply with all of the terms of this paragraph.

10. Grantor’s Representations and Warranties: Grantor represents and warrants as of the date hereof and also upon Delivery of the Picture that: (a) there are no non-customary credit, name or likeness obligations or restrictions or approval or consultation rights applicable to the Picture (all of which, if any, shall be Delivered to LGF in writing on or before the Delivery Date and LGF shall have the right to rely thereon) and that LGF shall have the right, but not the obligation, to utilize the likeness and name of each of the principal cast members in the artwork and in trailers for the Picture; (b) Grantor owns or controls all Rights granted to LGF under this Agreement and that all such Rights are free of all liens, claims, charges, encumbrances, restrictions, and commitments; (c) there is no agreement concerning the Picture with any person or entity which, if breached, would or could in any way impair, interfere with, abrogate or adversely or otherwise affect any of the Rights granted to LGF under this Agreement; (d) LGF’s exploitation of the Picture will not be subject to any guild liens, or residuals other than SAG, IATSE, DGA and WGA liens and residuals; (e) it is a corporation duly formed and validly existing in good standing under the laws of California and has the full right, power, legal capacity and authority to enter into and carry out the terms of this Agreement; (f) neither the Picture, nor any part thereof, nor any materials contained therein or synchronized therewith, nor the title thereof, nor the exercise of any Right, license or privilege granted to LGF hereunder, violates or will violate, or infringes or will infringe, any trademark, trade name, service mark, patent, copyright (whether common law or statutory), or, to the best of Grantor’s knowledge, the literary, dramatic, musical, artistic, personal, private, civil, “droit moral” or property right or rights of privacy or any other right of any person or entity whatsoever, or unfairly competes with or slanders or libels (or constitutes a trade disparagement of) any person or entity whatsoever; (g) it has no agreement with or obligations to any third party with respect to the Picture which might conflict or interfere with any of the provisions of this Agreement or the use or enjoyment by LGF of any of the Rights granted; (h) the rights granted to LGF herein have not been previously granted, licensed, sold, assigned, transferred, conveyed or exploited by any person or entity and Grantor shall not sell, assign, transfer, convey to or authorize any person or entity any right, title or interest in and to the Picture or any part thereof or in and to the dramatic or literary material upon which the Picture is based, which is adverse to or in derogation of the Rights granted to LGF; (i) there is no litigation, arbitration, claim, demand, or investigation pending or threatened with respect to the Picture, or the literary, dramatic or musical material upon which the Picture is based or which is contained therein, or concerning the physical properties thereof; (j) Grantor has secured, or by the Delivery Date will have secured, and shall for the duration of this Agreement maintain, all clearances (including, without limitation, all music rights and music clearances) which are necessary for LGF to use and enjoy the Rights granted to LGF in and to the Picture throughout the Territory for the duration of the Term and that no supplemental or additional use payments shall be required with respect to the exploitation of the Picture (or any portion or element thereof,

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including, without limitation, the music contained therein) and/or any use or exploitation of any advertising or promotion of the Picture which contains the music as embodied in the Picture (including “in-context” uses thereof); and (k) Grantor is in all respects in compliance with the requirements of the Child Protection and Obscenity Enforcement Act of 1988, as amended by the Child Protection Restoration and Penalties Enhancement Act of 1990, and all rules and regulations promulgated thereunder (collectively, the “CPOEA”) and that the Picture is in all respects in compliance with the requirements of the CPOEA, and does not contain any material that would require Grantor to comply with the recordkeeping requirements of the CPOEA.

11. Indemnities:

     a. Grantor shall indemnify, defend and hold harmless LGF, its parent, subsidiaries, affiliates, assignees, licensees, sublicensees, distributors, sub-distributors and dealers, and the directors, officers, agents, consultants and representatives of the foregoing (the “LGF Indemnitees”), from all claims, costs, liabilities, obligations, judgments or damages (including reasonable outside attorneys’ fees but excluding lost profits and consequential damages), arising out of or for the purpose of avoiding any suit, claim, proceeding or demand or the settlement thereof, which may be brought against any of the LGF Indemnitees by reason of the actual or proposed production of the Picture, or the use or disposition of rights granted herein, or in connection with the breach of any of the warranties, representations or obligations made by Grantor, except to the extent that Grantor is required to be indemnified by LGF pursuant to paragraph 11(b) hereinbelow.

     b. LGF shall indemnify, defend and hold harmless Grantor, its parent, subsidiaries, affiliates, assignees, and the directors, officers, agents, consultants and representatives of the foregoing (the “Grantor Indemnitees”), from all claims, costs, liabilities, obligations, judgments or damages (including reasonable outside attorneys’ fees but excluding lost profits and consequential damages), arising out of or for the purpose of avoiding any suit, claim, proceeding or demand or the settlement thereof, which may be brought against any of the Grantor Indemnitees by reason of the distribution, advertising or promotion of the Picture, or in connection with the breach of any of the warranties, representations or obligations made by LGF, except to the extent that LGF is required to be indemnified by Grantor in accordance with paragraph 11(a) hereinabove.

     c. The parties hereto shall meaningfully consult with each other with respect to the defense, institution or settlement of litigation in connection with the rights granted hereunder and LGF’s exploitation thereof during the Term and in the Territory.

12. Audit Rights: Grantor shall have the right to have a certified public accountant of its choice audit LGF’s books and records with respect to the Picture(s) once per year (and only once with respect to any particular records and/or statements) at Grantor’s sole cost and expense; such audit shall take place in LGF’s principal place of business and shall not unreasonably interfere with LGF’s course of business. Said audit shall be conducted at LGF’s principal place of business during normal business hours. Grantor shall give LGF ten (10) business days prior written notice of its intent to conduct such audit. All notices, statements and payments made pursuant to the

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Agreement shall be deemed valid and shall not be subject to dispute or audit unless disputed within twenty-four (24) months after first issued. In the event that an audit reveals (i) an underpayment of seven and one-half percent (7.5%) or more of the total monies owed; (ii) the underpayment is seven thousand five hundred dollars ($7,500.00) or more, and (iii) the amount of the audit is reasonable and customary and does not exceed the amount of the underpayment, then LGF shall pay Grantor the amount of the underpayment plus the reasonable, actual, direct, out-of-pocket, third party costs of the audit up to the amount of the underpayment.

13. Assignment: LGF may grant, assign or sublicense this Agreement or any of its rights or obligations herein to any third party; provided that LGF shall remain primarily liable for its obligations hereunder unless such assignment is to (i) a parent, subsidiary or affiliated entity of LGF, (ii) a company that acquires all or substantially all of LGF’s assets, and/or (iii) is to a “major” or “mini-major” studio, and, in any event, provided that LGF shall remain secondarily liable for its payment obligations hereunder. Grantor shall not assign this Agreement or any of their rights or obligations herein except that Grantor shall have the right to assign its right receive payment on three (3) separate occasions in bulk. In addition, after Delivery of the Picture is accepted by LGF, Grantor shall have the right to assign its rights and obligations to a financially responsible third party that acquires all or substantially all of Grantor’s assets and who assumes all of Grantor’s obligations in writing, provided that Grantor shall remain primarily liable for its obligations hereunder. Any purported assignment in violation of this Agreement shall be null and void.

14. No Third Party Beneficiaries: Nothing contained in this Agreement shall be construed so as to create any third party beneficiary hereunder. In this regard, nothing under this Agreement shall entitle any third party to any remedies against LGF, at law, in equity, or otherwise, including, without limitation, any additional audit rights or the right to seek or obtain injunctive relief against LGF’s distribution of the Picture.

15. Default: If Grantor defaults (or breaches a material representation and warranty), which default remains uncured for fifteen (15) business days following Grantor’s receipt of LGF’s written notice to Grantor thereof, LGF shall be entitled to terminate this Agreement. In the event that Grantor fails to fully Deliver the Delivery Materials set forth in the Delivery Schedule, which failure is not timely cured, LGF may create such Delivery Materials, the reasonable, actual, out-of-pocket cost of which shall be recoupable by LGF, in LGF’s sole discretion, as (i) as a Distribution Expense, and/or (ii) from any other monies (e.g. Grantor’s Participation, bonuses, etc.) which are then due and owing to Grantor. LGF’s rights and remedies shall be cumulative, and none of them shall be exclusive of any other allowed by law, except that LGF shall not have the right to seek injunctive relief with respect to the exploitation of the Picture in the Reserved Territory. If LGF defaults, Grantor shall not be entitled to terminate or rescind this Agreement, nor to obtain injunctive relief with respect to the exercise by LGF of the rights granted hereunder; Grantor’s sole remedy shall be an action at law for damages.

16. Governing Law; Jurisdiction: This Agreement shall be construed and interpreted pursuant to the Laws of the State of California as it applies to contracts entered into and performed wholly within California or, if appropriate, the federal laws of the United States of America. Any dispute

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regarding the validity, construction, terms or performance of this Agreement or any other matter in connection therewith shall be submitted to binding arbitration before the JAMS in Los Angeles, California in accordance with the following provisions:

     a. If the parties cannot agree upon a single arbitrator, each party shall select one arbitrator who has experience in the motion picture industry and both arbitrators so selected shall select a third arbitrator.

     b. The third arbitrator shall adjudicate the dispute applying the laws of the state of California as it applies to contracts entered into and wholly performed within California or, if appropriate, the federal laws of the United States of America.

     c. The arbitrator shall issue a written opinion specifying the basis for their award and the types of damages awarded.

     d. There shall be a court reporter record made of the arbitration hearing and said record shall be the official transcript of the proceedings.

     e. Witness lists, production of documents and subpoenas in the arbitration shall be in accordance with Section 1280 et seq. of the California Code of Civil Procedure, except that the fifteen (15) day periods set forth in subsections (a)(2)(A) and (B) of Section 1282.2 shall be deemed to be periods of five (5) business days. If the dispute pertains to Delivery, there shall be made available to the arbitrator all relevant materials submitted by LGF or Grantor which purport to constitute completion and delivery of the Picture. The parties shall participate in an exchange of information before the hearing. If any such discovery is not voluntarily exchanged among the parties, the party desiring such discovery may apply to the arbitrator at the outset of the arbitration for particular discovery requests. The arbitrator may deny only such discovery as is unreasonable or is intended to unduly delay the prompt conclusion of the arbitration.

     f. The decision of the arbitrator (or the majority of the arbitrators, if applicable) shall be binding upon the parties, shall constitute a full and final adjudication of the controversy. The parties shall each be responsible for paying fifty percent (50%) of all the arbitrator’s and court reporter’s fees (including, without limitation, the cost of the arbitration). A judgment upon the award rendered by the arbitrators may be entered in any court having jurisdiction thereof.

17. Integrated Agreement: This Agreement contains the entire agreement between the parties and supersedes any and all other representations, agreements, and understandings between them with respect to its terms.

18. Modification: No waiver of modification of this Agreement or any portion thereof (including, without limitation, this provision) shall be valid unless in a writing that is signed by both parties and no waiver of any specific provision or forbearance in the exercise of any right on any occasion shall preclude the strict enforcement of that right in the future, nor shall it preclude the strict enforcement of any other rights hereunder.

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     This Agreement (inclusive of Schedule “A”, Exhibit “A” and Exhibit “C”), when executed, is legally binding unless and until superseded by a more formal agreement incorporating the terms set forth above as well as additional provisions, which when and if executed, shall replace this Agreement. Capitalized terms used herein and not otherwise defined shall have the same meaning as in LGF’s standard long-form agreement, subject to good faith negotiations in accordance with LGF’s and Grantor’s standard business practices. All items not addressed above shall be negotiated in good faith pursuant to prevailing industry customs and standards and LGF’s and Grantor’s standard business practices.

AGREED TO AND ACCEPTED BY:
LIONS GATE FILMS INC.	SOBINI FILMS, a California Corporation
/s/ Wayne Levin	/s/ Jill Courtemanche
Signature	Signature
WAYNE LEVIN	Jill Courtemanche
Print Name	Print Name
EXEC. VP & GENERAL COUNSEL BUSINESS & LEGAL AFFAIRS	Attorney
Title	Title
3/14/06	3/10/06
Date	Date

EX-10.31

EXHIBIT 10.31

PURCHASE AGREEMENT

This purchase agreement (the “Purchase Agreement”), dated as of March 17, 2006, is made by and between Lions Gate Films Inc. (“Lions Gate”), a Delaware corporation and Icon International, Inc. (“Icon”), a Connecticut corporation.

In consideration of good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending legally and equitably to be bound, hereby agree as follows:

1. Sale of Products: Purchase Price

1.1. On the date hereof, Lions Gate hereby sells and transfers title to Icon and Icon hereby purchases and accepts title to the products set forth on Exhibit 1 attached hereto (the “Products”).

1.2. As full consideration for the Products, Icon shall pay to Lions Gate $650,000.00, in immediately available funds, by wire transfer to the following account:

JP Morgan Chase

1111 Fannin, 10^th Floor

Houston, TX 77002

(713)750-7923

Attn: Pearl Esparza

ABA #021000021

Account Name: Lions Gate Entertainment Inc.

Account #323-514405

2. Terms and Conditions Relating to the Resale of the Products

Icon hereby appoints Lions Gate and its duly authorized officers as its agent, and Lions Gate hereby agrees to act as agent for Icon, with full power and authority in Icon’s name, place and stead to do any and all things necessary to arrange for the resale or destruction of the Products, as it would do for itself in the ordinary course of business. In consideration for the foregoing, Lions Gate shall retain any and all cash proceeds received by Lions Gate from the sale of the Products. For the avoidance of doubt, nothing contained herein shall require Lions Gate to deliver the Products to Icon.

3. Indemnification: Insurance

Lions Gate shall defend, indemnify and hold Icon harmless from and against any claims made against Icon with respect to any of the Products; provided such claims are not the result of Icon’s gross negligence or willful misconduct and; further provided that Lions Gate is given prompt written notice of the assertion of any such claim.

4. Representations and Warranties

4.1. Icon represents and warrants that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of the state of Connecticut; (ii) it has full power and authority to enter into and perform this Purchase Agreement in accordance with its terms; (iii) the execution, delivery and performance of this Purchase Agreement by Icon have been duly authorized by all requisite corporate

action of Icon; and (iv) this Purchase Agreement is a valid and binding obligation of Icon, enforceable in accordance with its terms.

4.2. Lions Gate represents and warrants that: (i) it is a corporation duly organized, validly existing and in good standing under the laws of its state of incorporation; (ii) it has full power and authority to enter into and perform this Purchase Agreement in accordance with its terms; (iii) the execution, delivery and performance of this Purchase Agreement by Lions Gate have been duly authorized by all requisite corporate action of Lions Gate; (iv) this Purchase Agreement is a valid and binding obligation of Lions Gate, enforceable in accordance with its terms; (v) the Products are new, fully packaged in unopened original factory cartons; (vi) to the best knowledge of the Purchaser, there is no pending or threatened litigation against Lions Gate or the manufacturer of the Products with respect to the Products; and (vii) it has transferred to Icon good and marketable title to the Products, free and clear of all claims, liens or encumbrances and subject only to the terms and conditions of this Purchase Agreement.

5. Relationship of Parties

This Purchase Agreement does not in any way create the relationship of principal and agent between Lions Gate and Icon. Icon shall not act or attempt to act, or represent itself directly or by implication, as agent of Lions Gate or in any manner assume or create, or attempt to assume or create, any obligation on behalf of or in the name of Lions Gate and will not make any representations, on behalf of or in the name of Lions Gate, with respect to the Products, except such as may be expressly authorized by Lions Gate in writing, or as set forth in literature prepared or authorized by Lions Gate.

6. Assignment

Neither party may assign its obligations under this Purchase Agreement without the prior written consent of the other party.

7. Miscellaneous

7.1 This Purchase Agreement contains a complete statement of all arrangements between the parties with respect to its subject matter, and cannot be changed or terminated orally. There are no representations, warranties, or arrangements other than those set forth within this Purchase Agreement or any Exhibit attached hereto or thereto.

7.2 All notices and other communications under this Purchase Agreement shall be in writing and shall be considered given when delivered by hand against receipt or mailed by registered mail, return receipt requested, to the parties at the following addresses (or at such other address as a party may designate by notice to the other).

If to Lions Gate:	Lions Gate Films Inc.
	2700 Colorado Avenue, Suite 200
	Santa Monica, CA 90404
	Attn: Mr. Wayne Levin, General Counsel
If to Icon:	Icon International, Inc.
	107 Elm Street
	4 Stamford Plaza/15th Floor
	Stamford, CT 06902

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Attention: John P. Kramer, President

7.3 This Purchase Agreement shall be governed by and construed in accordance with the laws of the state of New York applicable to agreements made and to be performed in New York. Any dispute or controversy arising under or in connection with this Purchase Agreement shall be settled by arbitration to be held in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction, and the parties consent to the jurisdiction of the New York courts for this purpose. The Arbitration shall interpret the Purchase Agreement as drafted, and only in the event of silence, look to the laws of New York.

7.4 The provisions set forth in any Exhibit hereto or other attachments to this Purchase Agreement are hereby incorporated herein as if fully set forth herein and to the extent of any conflict between the provisions of this Purchase Agreement and any Exhibit or attachment hereto, the provisions of this Purchase Agreement shall govern.

7.5 Both Lions Gate and Icon acknowledge that during the term of this Purchase Agreement, each party may obtain access to confidential and proprietary information, trade secrets, customer lists, media information, media pricing and financial information (the “Confidential Information”) of the other party. The parties acknowledge that each party would be irreparably damaged by the disclosure of the Confidential Information to others. Therefore, the parties agree to keep secret and confidential and not to disclose the Confidential Information of each other without the prior written consent of the other party. The parties’ agreement not to disclose the Confidential Information shall survive the expiration of this Purchase Agreement.

7.6 This Purchase Agreement may be executed by fax and in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

Agreed to:

Lions Gate Films Inc.
By:	/s/ Wayne Levin
	Name:	Wayne Levin
	Title:	GC
Icon International, Inc.
By:	/s/ Clavence V. Lee III
	Name:	Clavence V. Lee III
	Title:	EVP/CFO

3

Exhibit 1

Dear Santa — Holiday Music Collection Volume 1 CD

Any VHS and/or DVD inventory Lions Gate elects to provide to Icon

4

EX-10.32

Exhibit 10.32

VENDOR SUBSCRIPTION AGREEMENT

     THlS AGREEMENT is made as of the 17^th day of March, 2006, by and between, Lions Gate Films Inc., a Delaware corporation (“Purchaser”) and Icon International, Inc., a Connecticut corporation (“Icon”).

WITNESSETH:

     WHEREAS, Icon and various of its subsidiaries are engaged in the business of, among other things, procuring media advertising for customers; and

     WHEREAS, Icon desires to procure certain media advertising for Purchaser and Purchaser desires to purchase certain media advertising through Icon; and

     WHEREAS, Purchaser desires to enter into this Agreement in order to induce Icon to maintain the resources and capabilities necessary to ensure that it will have adequate commitments to enable it to acquire media advertising sufficient to satisfy certain of Purchaser’s advertising needs;

     NOW THEREFORE, in consideration of the foregoing premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending legally and equitably to be bound, hereby agree as follows:

     1. Agreement of Purchaser. Purchaser hereby agrees to purchase media advertising in accordance with the guidelines and specifications set forth on Exhibit A (collectively, the “Specifications”) in accordance with Exhibit B hereto and made a part hereof (collectively, “Media Advertising”). Purchaser agrees to purchase media schedules that are in accordance with the Specifications with a total purchase price equal to the Purchase Price (as hereafter defined) with such Media Advertising being priced based on Purchaser’s historical costs for such Media Advertising set forth on Exhibit B hereto, adjusted based on market conditions.

     2. Agreement of Icon. Icon agrees to procure for and to sell the Media Advertising to Purchaser. Icon acknowledges that Purchaser has provided Icon with a media plan set forth on Exhibit B (the “Media Plan”) that is in accordance with the Specifications. Icon shall create and forward to the Purchaser a media placement schedule (the “Media Schedule”) from such Media Plan. Upon Purchaser providing to Icon written approval of the Media Schedule, Icon shall place such Media Schedule. Icon acknowledges and agrees that in the event Purchaser purchases the Media Plan set forth on Exhibit B. exactly as set forth thereon, upon payment by Purchaser to Icon of the Purchase Price (as defined below) for such Media Plan, sufficient Guaranteed Minimum Credits (as defined below) shall be generated to extinguish Purchaser’s Guaranteed Minimum Payment (as defined below) obligation pursuant to this Agreement.

     3. Term. The Term of this Agreement is one year commencing as of the date first above written (“Effective Date’’) and ending one year after the Effective Date (“Expiration Date”).

     4. Payment Procedures.

     (a) Purchaser shall pay to Icon the aggregate purchase price for the Media Advertising in the amount of $4,103,125.00 (the “Purchase Price”). All purchases hereunder shall be non-commissionable. The foregoing Purchase Price is an estimate

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based on the assumption that all Media Advertising purchased will have a Minimum Credit Ratio (as hereafter defined) of 20%, resulting in total Guaranteed Minimum Credits of $820,625.00. In the event that the actual mix of Media Advertising purchased shall change based on the mutual agreement of Icon and Purchaser, Purchaser shall purchase a sufficient amount of Media Advertising such that the total Guaranteed Minimum Credits accrued shall still equal $820,625.00, with the Purchase Price being adjusted up or down accordingly.

     (b) Purchases of Media Advertising pursuant to Section 4(a) will generate Guaranteed Minimum Credits (as defined in Section 7(a)(i) hereof) which are credited against the Guaranteed Minimum Payment (as defined in Section 7(a)(ii) hereof) in arriving at Purchaser’s Minimum Payment obligations pursuant to Section 7(b) hereof.

     (c) Payment for the Media Advertising shall be made to Icon as follows:

     (i) Icon will submit to Purchaser invoices, accompanied by the applicable proof of performance (affidavits of performance provided to Icon by the media providers), for the amounts payable based on the Media Schedule authorized by Purchaser. Purchaser is not responsible for making payment to Icon for any Media Advertising ordered but not provided by Icon, including make-good advertising, until such advertising is provided and the applicable proof of performance is submitted to Purchaser. Purchaser is not responsible for making payment to Icon for any Media Advertising Discrepancies until such discrepancies are resolved to the satisfaction of Purchaser. Media Advertising Discrepancies that have been resolved will be invoiced by Icon (including applicable proof of performance). For purposes of this Agreement “Media Advertising Discrepancies” shall be defined as: a) any Media Advertising ordered by Purchaser and not provided by Icon, including any make–good advertising; b) Media Advertising provided by Icon not ordered by Purchaser; and c) Media Advertising provided by Icon, ordered by Purchaser, but not provided in accordance with Purchaser’s order.

     (ii) Subject to Section 4(c)(i), Purchaser shall pay each invoice in full within thirty (30) days after the invoice date.

     (iii) Subject to Section 4(c)(i), if payment of any amounts due hereunder are not paid on time or when due and payable in strict accordance with the terms and conditions of this Agreement, Purchaser shall pay interest at the prime rate (as quoted by JP Morgan Chase Bank), plus 2% or, if less, the maximum rate allowed by law on any and all unpaid balances due hereunder.

     (iv) Without limiting the generality or effect of any other provision hereof, and subject to Section 4(c)(i), the obligation of Purchaser to pay each invoice after delivery of the applicable conforming Media Advertising, on an individual transaction by transaction basis, shall be absolute and unconditional, and not subject to any offset or recoupment right or any other defense or counterclaim which Purchaser may have against Icon, the applicable media advertising provider or any other person or entity now or in the future either hereunder or otherwise.

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     (v) Upon the occurrence of a Purchaser Default as set forth in Section 10 below, the payment and credit terms set forth in this Section 4(c) shall no longer apply and thereafter Purchaser shall be required to deliver the price for Media Advertising to Icon prior to the ordering of any of such Media Advertising. In addition, any issued and unpaid invoices not yet due under this Section 4(c) at the time of the occurrence of such Purchaser Default or determination shall become immediately due and payable.

     (vi) All payments by Purchaser shall be by check or wire transfer made payable to the order of Icon International, Inc. Checks shall be addressed as follows: Icon International, Inc., P.O. Box 533191, Atlanta, GA 30310-3191. Wire transfers shall be sent as follows: Chase Manhattan Bank, One Chase Manhattan Plaza, New York, NY 10081, ABA # 021000021, for the account of Icon International, Inc., account # 910 2 737773.

     (d) In the event Purchaser shall utilize the services of an agent in connection with the payment of Icon invoices, Purchaser shall remain liable to Icon (and its assigns) pursuant to the terms of this Agreement until such agent has fully performed Purchaser’s payment obligations hereunder. Icon shall have no obligation to pay any agency commission, service or brokers commissions, sales and use taxes, freight or delivery charges or any other similar add on fees in connection with the provision of Media Advertising or Additional Goods and Services (as hereafter defined) to Purchaser pursuant to this Agreement.

     5. Obligations and Acknowledgements of Icon.

     (a) Icon hereby acknowledges and agrees that all advertisements and other material to be used in connection with the Media Advertising (collectively, the “Advertisements”) furnished by Purchaser constitute the property of Purchaser and that Icon shall have no claim or proprietary interest in or to designs, patents, or trademarks pertaining to the goods and/or services of Purchaser, including any and all packaging, labels and logos, as well as any copyrighted material contained in the Advertisements arising out of the services rendered to Purchaser hereunder.

     (b) Icon acknowledges and agrees that all media broadcasts or publications secured under the terms of this Agreement shall be free and clear of all liens, conflicting claims or encumbrances imposed by it.

     (c) Icon shall deliver to Purchaser a Surety Bond (the “Surety Bond”) substantially in the form of Exhibit C attached hereto, with an original face value in the amount of $400,000.00 and a term of one year, terminating on March 17, 2007.

     6. Obligations and Acknowledgements of Purchaser.

     (a) Icon does not traffic the Media Advertising purchased hereunder. Accordingly, Purchaser shall furnish the Advertisements to the respective media providers sufficiently in advance of the scheduled use to permit the commitments hereunder to be fulfilled in the ordinary course of business.

     (b) Purchaser acknowledges and agrees that Purchaser shall be solely responsible for the content of each and every Advertisement and shall defend, indemnify

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and hold Icon and its affiliates harmless from and against any and all claims, demands, damages, losses, liabilities, expenses, actions or causes of action (including reasonable attorneys’ fees) arising out of the Advertisements or any claims of infringement or violation of any third party’s copyright, patent, trademark or other property right in connection with the Advertisements.

     (c) Purchaser understands that, if Purchaser cancels previously approved and placed Media Advertising. Icon may experience damage in its relationships with its vendors. Accordingly, should Purchaser cancel or fail to complete any Media Advertising after the same has been approved and ordered, for any reason other than the fault of Icon, Purchaser shall reimburse Icon for any direct out-of-pocket costs or expenses with respect to such canceled Media Advertising. The reimbursements hereunder are due and payable to Icon, without offset, within thirty (30) days of Purchaser’s receipt of the itemized accounting of such expenditures by Icon.

     (d) During the Term of this Agreement, Purchaser shall require its internal marketing department to, and shall request that its advertising agency, cooperate with and assist Icon in the placement of Media Advertising hereunder.

7.  Guaranteed Minimum Payment.

     (a) For purposes of this Agreement, the following definitions shall apply:

     (i) “Guaranteed Minimum Credits” for any Media Advertising purchased shall be equal to the Purchase Price of such Media Advertising multiplied by the Minimum Credit Ratio for such Media Advertising type. Guaranteed Minimum Credits are applicable as and when the related Purchase Price is actually paid by Purchaser.

     (ii) “Guaranteed Minimum Payment” shall be $820,625.00.

     (iii) “Minimum Credit Ratio” for each type of Media Advertising is as specified in Exhibit A attached hereto.

     (iv) “Minimum Payment” shall mean the Guaranteed Minimum Payment less the Guaranteed Minimum Credits.

     (b) As an inducement to Icon to enter into this Agreement, Purchaser agrees that on the Expiration Date, Purchaser will pay the Minimum Payment due to Icon, if any, regardless of the reason that Guaranteed Minimum Credits have not been accumulated in an amount sufficient to eliminate such Minimum Payment. Notwithstanding anything to the contrary contained herein, in the event Icon commits an Icon Delivery Default (as defined below), Purchaser shall not be required to pay any portion of such Minimum Payment that would have been extinguished had no such Icon Delivery Default occurred.

     (c) In the event Purchaser is required to make a Minimum Payment on the Expiration Date of this Agreement, Purchaser shall be entitled to use such Minimum Payment as a credit toward the purchase price multiplied by the applicable Minimum Credit Ratio for any Media Advertising purchased by Purchaser pursuant to the terms and conditions of this Agreement for a period of one year from the Expiration Date of this

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Agreement. Except as provided in this Section 7(c), under no circumstances shall Purchaser be entitled to a credit for the Minimum Payment made.

     (d) Purchaser’s obligation to pay the Purchase Price for Media Advertising that has been delivered, but not paid for by Purchaser, shall be and remain an obligation of Purchaser independent of and in addition to any Minimum Payment due, subject to Purchaser’s rights and remedies generally respecting non-conforming Media Advertising provided by Icon.

     (e) Except as set forth in Section 7(b) above, Purchaser’s obligation to pay the Minimum Payment is and shall remain absolute, unconditional and irrevocable, regardless of the reason or reasons that Purchaser does not acquire or take delivery of any or all of the Media Advertising. Without limiting the generality or effect of the foregoing and notwithstanding any other provision hereof or of general contract or equitable principles, whether or not to induce any third party to pay a purchase price, or to provide loans or other financial accommodations to Icon, and thereby assist Icon in providing the Media Advertising to Purchaser, Purchaser irrevocably acknowledges and agrees that (i) in furtherance hereof, Purchaser agrees to limit its rights and remedies as more fully described in Section 1l(b) below, and (ii) Purchaser will indemnify, defend and hold Icon harmless, from and against any and all losses, costs, liabilities or expenses suffered or incurred by Icon by reason of the failure by Icon to receive the Minimum Payment that is due and payable pursuant to the terms of this Agreement.

8. Additional Goods and Services. Purchaser may, from time to time request that Icon assist Purchaser in the purchase of the following (collectively, the “Additional Goods and Services”): (a) media that does not conform to the Specifications; or (b) non-media goods and services. Upon the mutual agreement of Purchaser and Icon, Icon may provide Purchaser with Additional Goods and Services upon prices, specifications, terms and conditions (including the Minimum Credit Ratio for such Additional Goods and Services) mutually agreed upon in advance, in writing, by the parties hereto.

9. Representations and Warranties.

     (a) Icon hereby represents and warrants to Purchaser that:

     (i) Incorporation/Corporate Power. Icon is duly organized and validly existing under the laws of the state of Connecticut and has the capacity to enter into this Agreement, and the execution and delivery of this Agreement have been duly authorized by Icon;

     (ii) No Restrictions or Prohibitions. Icon is not subject to any restriction, contractual or otherwise, which prevents it from entering into and carrying out its obligations under this Agreement, and neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will constitute a violation or default of any term or provision of any contract, commitment, indenture or other agreement or restriction (including statutory, regulatory, administrative, or judicial restrictions) to which Icon is a party or is otherwise subject;

     (iii) No Required Filings. No authorization, consent, approval, license, exemption of or filing or registration with any court or governmental

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authority or regulatory body is required of Icon for the due execution, delivery or performance by Icon of this Agreement, except for any such authorizations, consents, approvals, licenses, exemptions, filings or registrations the failure of which to be obtained would not (x) have a material adverse effect on the business, financial condition or future prospects (“Material Adverse Effect”) of Icon or (y) be reasonably expected to impair the ability of Icon to perform its obligations under this Agreement;

     (iv) Enforceability. This Agreement constitutes a legal, valid and binding obligation of Icon, enforceable against Icon in accordance with its terms, except to the extent that such enforceability may be limited by the laws now or hereafter in effect, affecting generally the enforcement of creditors’ rights, and except to the extent that the availability of the remedy of specific performance or injunctive relief is subject to general principles of equity or the discretion of the court before which any proceeding therefor may be brought;

     (v) Solvency. Both before and after giving effect to the transactions contemplated in this Agreement, Icon’s assets have a fair market value in excess of its total liabilities, it has sufficient current assets to pay its current liabilities as they become due and matured, and it has, and will continue to have, access to adequate capital for the conduct of its business:

     (vi) Licenses and Permits. Icon holds all licenses, permits and other certificates required for the operation of its business, except for those licenses, permits and other certificates where the failure to hold such documents would not have a Material Adverse Effect on Icon. Icon is in compliance, in all material respects, with all applicable state and federal laws and regulations; and

     (vii) Legal Proceedings. There are no legal proceedings or investigations pending or, to the best of Icon’s knowledge, threatened against Icon before any court, tribunal or regulatory authority which could, if adversely determined, alone or together with any other proceedings, have a Material Adverse Effect on Icon or be reasonably expected to impair the ability of Icon to perform its obligations under this Agreement.

     (b) Purchaser hereby represents and warrants to Icon that:

     (i) Incorporation/Corporate Power. Purchaser is duly organized and validly existing under the laws of the state of its incorporation and has the capacity to enter into this Agreement, and the execution and delivery of this Agreement has been duly authorized by Purchaser;

     (ii) No Restrictions or Prohibitions. Purchaser is not subject to any restriction, contractual or otherwise, which prevents it from entering into and carrying out its obligations under this Agreement, and neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will constitute a violation or default of any term or provision of any contract, commitment, indenture, or other agreement or restriction (including statutory, regulatory, administrative, or judicial restrictions) to which Purchaser is a party or is otherwise subject:

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     (iii) No Required Filings. No authorization, consent, approval, license, exemption of or filing or registration with any court or governmental authority or regulatory body is required of Purchaser for the due execution, delivery or performance by Purchaser of this Agreement, except for any such authorizations, consents, approvals, licenses, exemptions, filings or registrations the failure of which to be obtained would not (x) have a Material Adverse Effect on the Purchaser or (y) be reasonably expected to impair the ability of Purchaser to perform its obligations under this Agreement;

     (iv) Enforceability. This Agreement constitutes a legal, valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms, except to the extent that such enforceability may be limited by the laws now or hereafter in effect, affecting generally the enforcement of creditors’ rights and, except to the extent that the availability of the remedy of specific performance or injunctive relief is subject to general principles of equity or the discretion of the court before which any proceeding therefor may be brought;

     (v) Solvency. Both before and after giving effect to the transactions contemplated in this Agreement, Purchaser’s assets have a fair market value in excess of its total liabilities, it has sufficient current assets to pay its current liabilities as they become due and matured, and it has, and will continue to have, access to adequate capital for the conduct of its business;

     (vi) Licenses and Permits. Purchaser holds all licenses, permits and other certificates required for the operation of its business, except for those licenses, permits and other certificates where the failure to hold such documents would not have a Material Adverse Effect on Purchaser. Purchaser is in compliance in all material respects with all applicable state and federal laws and regulations; and

     (vii) Legal Proceedings. There are no legal proceedings or investigations pending or, to the best of Purchaser’s knowledge, threatened against Purchaser before any court, tribunal or regulatory authority which could, if adversely determined, alone or together with any other proceedings, have a Material Adverse Effect on Purchaser or be reasonably expected to impair the ability of Purchaser to perform its obligations under this Agreement.

10. Default.

     (a) Purchaser’s Default. Purchaser shall notify Icon immediately upon the existence of any of the following, each, a “Purchaser Default:”

     (i) Except as set forth in Section 7(b) above, Purchaser shall fail to pay all or any portion of the Minimum Payment on the Expiration Date;

     (ii) Purchaser shall fail to comply with any of its covenants set forth in this Agreement;

     (iii) Purchaser shall fail to perform any terms or agreements contained in this Agreement or in any other document or instrument executed or delivered in connection herewith, including Purchaser’s obligation to pay the

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Purchase Price for Media Advertising provided pursuant to this Agreement, on the payment terms set forth in Section 4 above;

     (iv) Any representation or warranty of Purchaser in this Agreement or in any other document or instrument executed or delivered in connection herewith, shall have been false in any material respect on the date when made or deemed to have been made or repeated;

     (v) Purchaser shall be in default under any other agreements Purchaser may now or hereafter have with Icon;

     (vi) Purchaser shall fail to pay at maturity or when otherwise payable in whole or in part, or within any applicable period of grace, any obligation involving more than One Million and 00/100 Dollars ($1,000,000.00) in the aggregate for borrowed money or credit received, or shall fail to observe or perform any material term, covenant or agreement contained in any agreement by which it is bound, evidencing or securing any such obligation, for such period of time as would permit (assuming the giving of any appropriate notice required) the holder or holders thereof or of any obligations issued there under to accelerate the maturity thereof;

     (vii) There shall occur a change in Purchaser’s business, financial condition, results of operations or prospects which has had or could reasonably be expected to have a Material Adverse Effect on Purchaser;

     (viii) Purchaser shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of Purchaser or of any substantial part of Purchaser’s assets or shall commence any case or other proceeding relating to Purchaser under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action to authorize or in furtherance of any the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against Purchaser; and

     (ix) Notwithstanding the foregoing, a “Purchaser Default” shall not be deemed to have occurred under subsections: (a) 10(a)(i), (ii) or (iii) involving a payment of money, unless Purchaser shall fail to pay to Icon all or any portion of a payment when due, and such failure shall not be cured within ten (10) business days of the date Purchaser first receives written notice of such failure from Icon; and (b) 10(a)(ii) or (iii) with respect to any failure by Purchaser there under not involving a payment of money, unless such failure shall not be cured by Purchaser within thirty (30) days after Purchaser first has notice of such failure (or if such failure cannot reasonably be cured within thirty (30) days, then for such longer period not to exceed an additional sixty (60) days as shall be required to cure such failure), provided, however, that Purchaser shall at all times be diligently attempting to cure such failure.

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     (b) After the occurrence of a Purchaser Default, all of Purchaser’s obligations to Icon, including any unpaid portion of the Minimum Payment, shall bear interest at a fixed rate per annum equal to the lesser of (i) the prime rate (as quoted by JP Morgan Chase Bank), plus 2%, or (ii) the highest or maximum rate of interest permissible to be charged for transactions of this type under the laws of the State of New York. Any amount paid in excess of such rate shall be considered to have been payments in reduction of the amount of the outstanding Minimum Payment.

     (c) Icon Default. Icon shall notify Purchaser immediately upon the existence of any of the following, each, an “Icon Default:”

     (i) Icon shall fail to comply with any of its covenants set forth in this Agreement;

     (ii) Icon shall fail to perform any terms or agreements contained in this Agreement or in any other document or instrument executed or delivered in connection herewith, including Icon’s obligation to deliver Media Advertising in accordance with the terms of this Agreement;

     (iii) Any representation or warranty of Icon in this Agreement or in any other document or instrument executed or delivered in connection herewith, shall have been false in any material respect on the date when made or deemed to have been made or repeated;

     (iv) Icon shall commit an Icon Delivery Default. For the purposes of this Agreement, an “Icon Delivery Default” shall be deemed to have occurred hereunder if Icon shall have failed in any material respect to comply with its obligations hereunder to deliver Media Advertising requested by Purchaser, and such failure shall have not been cured within fifteen business (15) days after Icon has received written notice from Purchaser of such failure;

     (v) Icon shall be in default under any other agreements Icon may now or hereafter have with Purchaser;

     (vi) Icon shall make an assignment for the benefit of creditors, or admit in writing its general inability to pay or generally fail to pay its debts as they mature or become due, or shall petition or apply for the appointment of a trustee or other custodian, liquidator or receiver of Icon or of any substantial part of Icon’s assets or shall commence any case or other proceeding relating to Icon under any bankruptcy, reorganization, arrangements, insolvency, readjustment of debt, dissolution or liquidation or similar law of any jurisdiction, now or hereafter in effect, or shall take any action or authorize or in furtherance of any the foregoing, or if any such petition or application shall be filed or any such case or other proceeding shall be commenced against Icon; and

     (v) Notwithstanding the foregoing, an “Icon Default” shall not be deemed to have occurred under subsections 10(c)(i) or (ii) with respect to any failure by Icon there under not involving a payment of money, unless such failure shall not be cured by Icon within thirty (30) days after Icon first has notice of such failure (or if such failure cannot reasonably be cured within thirty (30) days, then for such longer period not to exceed an additional sixty (60) days as shall be

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required to cure such failure); provided, however, that Icon shall at all times be diligently attempting to cure such failure.

11. Remedies.

     (a) Icon Remedies. Upon the occurrence of a Purchaser Default, Icon may, at its option, and upon notice to or demand upon Purchaser, declare the Minimum Payment to be immediately due and payable in full, whereupon Icon’s obligations hereunder, including without limitation Icon’s obligation to supply the Media Advertising, shall thereupon terminate, and Icon shall have no further obligations to Purchaser under this Agreement. After the occurrence of a Purchaser Default, Purchaser shall pay to Icon, within ten (10) business days following demand, any direct, out-of-pocket costs of collection incurred by Icon. Such costs of collection shall include, but not be limited to, all costs and expenses, including attorney’s fees and expenses, incurred or expended by Icon in connection with (i) the preservation, attempted collection or collection of any of Purchaser’s obligations to Icon, including the outstanding amount of the Minimum Payment, or the preservation or enforcement of any other rights or remedies of Icon against the Purchaser, including without limitation any negotiations for the resolution of any dispute and the costs incurred by Icon in connection with any arbitration proceedings, and (ii) any litigation or arbitration proceedings or other dispute, resolution proceedings relating, directly or indirectly, to this Agreement.

     (b) Purchaser’s Remedies. Purchaser’s remedies for an Icon Default shall be limited as follows:

     (i) In the event of an Icon Delivery Default, Purchaser shall not be required to pay the portion of the Minimum Payment, if any, that would have been extinguished had no such Icon Delivery Default. For example, in the event Icon commits an Icon Delivery Default with respect to Media Advertising with a purchase price of $1,000,000.00 and a Minimum Credit Ratio of twenty percent (20%), and Purchaser’s purchases of Media Advertising have generated $250,000.00 in Guaranteed Minimum Credits less than would have been required to extinguish Purchaser’s Minimum Payment obligation, Purchaser shall make a Minimum Payment in the amount of $50,000.00 and shall not be required to pay the $200,000.00 portion of the Minimum Payment that would have been extinguished in the absence of such Icon Delivery Default. Except as provided in this Section 11(b)(i). no breach, default, act (including wrongful, fraudulent, arbitrary, capricious, reckless and negligent act), shall relieve or excuse Purchaser from its obligation to make the Minimum Payment. Purchaser expressly acknowledges and agrees that Icon’s rights to the Minimum Payment are freely assignable and that Purchaser’s obligations to make the Minimum Payment, except in the event of any Icon Delivery Default, shall not be subject to any rights of setoff or recoupment, or subject to any counterclaim or defense which Purchaser may claim to have, and Purchaser agrees that in any legal or equitable proceeding to enforce this Agreement against Purchaser, Purchaser shall not interpose any such claim for setoff or recoupment or attempt to avoid its obligation to make the Minimum Payment, in whole or in part, by way of defense or counterclaim.

     (ii) Any cause of action that Purchaser may have arising out of, in whole or part, Icon’s failure to perform under this Agreement, is reserved to

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Purchaser, provided, however, that Purchaser may not assert any such claim or cause of action as a setoff or recoupment, defense or counterclaim to the Purchaser’s obligation to make the Minimum Payment, except in the event of any Icon Delivery Default as set forth in Section 11(b)(i) above; but rather Purchaser may only assert such claim or cause of action against Icon in an action that is separate and independent from any action to recover the Minimum Payment.

     (iii) Nothing herein shall preclude or prohibit Purchaser from bringing a cause of action against Icon to recover damages suffered or incurred by Purchaser as a result of Icon’s breach of this Agreement or failure to perform its obligations hereunder; provided, however, that such causes of action shall be independent of Purchaser’s obligation to make the Minimum Payment, except in the event of an Icon Delivery Default as set forth in Section 11(b)(i) above, and Purchaser shall have no offset or similar rights or defense with respect thereto as-more particularly provided in Sections 11(b)(i) and (ii) and 4(c)(v) hereof.

12. Assignment. This Agreement shall become effective when it shall have been executed by Icon and Purchaser and thereafter shall be binding upon, inure to the benefit of and be enforceable by Icon and Purchaser, and their respective permitted successors and assigns. Icon may assign any or all of its rights and interest, under this Agreement, including but not limited to its right to receive the Minimum Payment, without the consent of any other party. While Icon may delegate any of its obligations hereunder to a third party, such assignment shall not relieve Icon from such obligation. Purchaser may assign any or all of its rights or interest, but not its obligations, under this Agreement, without the consent of any other party. However, it is understood and agreed that upon reasonable advance notice from Purchaser to Icon, any entity wholly owned by Purchaser shall have the right with Purchaser’s consent, to identify and purchase under the terms hereof Media Advertising from Icon hereunder conforming to the Specifications and that any such purchases shall count towards satisfaction of Purchaser’s obligations respecting the Purchase Price and the Minimum Payment. Any assignment in violation of this Agreement shall be void.

13. Miscellaneous

     (a) Binding Arbitration. All claims, disputes and other matters in questions among the parties arising out of or relating to this Agreement, or the breach thereof, shall be decided by final and binding arbitration as provided in this Section 13. Arbitration shall be conducted in New York, New York under the Commercial Arbitration Rules of the American Arbitration Association. There shall be a single arbitrator appointed by mutual agreement of the parties. If the parties are unable to agree upon an arbitrator, there shall be three arbitrators appointed in accordance with the rules of the American Arbitration Association. The arbitrators shall award reasonable attorneys’ fees to the prevailing party or parties, (or, if no party prevails in full, the arbitrator may award reasonable attorneys’ fees based upon the extent to which the arbitrator determines that one or more of the parties prevailed). The arbitrators may not award consequential or punitive damages. The decision and award of a majority of the arbitrators may be entered as a judgment in any court of competent jurisdiction. Except as otherwise provided in this Agreement, the parties shall rely solely on the procedures set forth herein to resolve any claim, dispute or other matter arising out of or relating to this Agreement, or the breach thereof. If any party to this Agreement files an action in court in violation of this

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Agreement, that party shall indemnify the other parties for their costs and counsel fees incurred as a result of such violation.

     (b) Notices. All notices required to be given pursuant to this Agreement shall be deemed given when actually delivered personally, by overnight courier or telefax or three days after being deposited in the United States mail service, postage prepaid and addressed to the receiving party as follows:

For Icon:	Icon International, Inc.
	107 Elm Street/4 Stamford Plaza
	Stamford, Connecticut 06902
	Attn: Mr. John Kramer, President
For Purchaser:	Lions Gate Films Inc.
	2700 Colorado Avenue, Suite 200
	Santa Monica, CA 90404
	Attn: Mr. Wayne Levin, General Counsel

     (c) Severability. The invalidity, illegality or unenforceability of any provisions of this Agreement shall not affect the validity, legality or enforceability of the remaining provisions of this Agreement.

     (d) Waiver. Any waiver (whether express or implied) by any party hereto of the breach of any term or condition of this Agreement shall not constitute a waiver of any subsequent breach of the same or other term or condition of this Agreement.

     (e) Governing Law; Jurisdiction. This Agreement shall be interpreted in its entirety in accordance with the laws of the State of New York. Each of Icon and Purchaser hereby submit to the exclusive jurisdiction of the state or federal courts resident in the State of New York for purposes of enforcing any arbitration award or resolving any disputes arising under this Agreement.

     (f) No Joint Venture. Nothing contained herein shall be construed to constitute or deem either party as a partner, joint venturer, employee, associate or agent of the other.

     (g) Entire Agreement. This Agreement constitutes is the entire agreement between the parties relating to the subject matter hereof and supersedes all prior agreements, proposals, letters of intent, representations and commitments. This Agreement may be amended only by an instrument executed by the authorized representative of all parties.

     (h) Confidentiality. Both Purchaser and Icon acknowledge that during the Term of this Agreement, each party may obtain access to confidential and proprietary information, trade secrets, customer lists, media information, media pricing and financial information (the “Confidential Information”) of the other party. The parties acknowledge that each party would be irreparably damaged by the disclosure of the Confidential Information to others. Therefore, the parties agree to keep secret and confidential and not to disclose the Confidential Information of each other without the prior written consent of the other party. The parties’ agreement not to disclose the Confidential Information shall survive the expiration of this Agreement.

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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement as of the day and year first above written.

ICON INTERNATIONAL, INC.
By:	/s/ Clavence V. Lee III
	Name:	Clavence V. Lee III
	Title:	EVP/CFO

LIONS GATE FILMS INC.
By:	/s/ Wayne Levin
	Name:	Wayne Levin
	Title:	GC

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EX-10.33

EXHIBIT 10.33

AGREEMENT

     This Agreement (the “Agreement”) is dated and effective as of March 13, 2006, by and between Ignite, LLC (“Ignite”) and Lions Gate Films Inc. (“LGF”).

RECITALS

     WHEREAS, Ignite and LGF were party to that certain agreement dated as of February 15, 2001 (as amended, the “Prior Agreement”), pursuant to which Ignite was paid a producer fee and a percentage of adjusted gross receipts for projects that commenced production during the term of the Prior Agreement and that were developed through a development fund financed by Ignite;

     WHEREAS, effective February 15, 2003, the Prior Agreement terminated according to its terms, and Ignite and LGF determined not to extend the Prior Agreement; and

     WHEREAS, Ignite was entitled to certain production and distribution rights with respect to that certain motion picture presently entitled “Employee of the Month” (starring Jessica Simpson) (the “Film”);

     NOW THEREFORE, in consideration of the mutual covenants and agreements contained herein, the parties hereto agree as follows:

AGREEMENT

     1. No Rights. Ignite disclaims all rights and interests in and to the Film.

     2. Bonuses. No monies are payable to Ignite with respect to the Film, other than the following box office bonuses:

          a) at such time, if ever, as the actual box office from the initial theatrical release of the Film in the United States equals Twenty Five Million Dollars ($25,000,000.00), Ignite shall be entitled to receive a box office bonus in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00); and

          b) at such time, if ever, as the actual box office from the initial theatrical release of the Film in the United States equals Fifty Million Dollars ($50,000,000.00), Ignite shall be entitled to receive an additional box office bonus in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00).

Each of the above-referenced box office bonuses shall be paid within thirty (30) days of the date in which the applicable theatrical box office threshold is reached.

     3. Term. The provisions of this Agreement shall be effective as of March 13, 2006, and shall continue indefinitely.

     4. Miscellaneous.

          a) Governing Law/Arbitration. This Agreement shall be governed and construed in accordance with the laws of the State of California applicable to contracts entered

into and fully performed in California. Any dispute or claim arising out of or relating to this Agreement shall be submitted to binding arbitration to be held in Los Angeles, California.

          b) Amendments. This Agreement may be amended or modified only by a written instrument executed by both parties hereto.

          c) Titles and Headings. Paragraph or other headings contained herein are for convenience of reference only and shall not affect in any way the meaning or interpretation of any of the terms or provisions hereof.

          d) Entire Agreement. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements, negotiations and understandings of the parties in connection therewith.

          e) Successors and Assigns. This Agreement is binding upon the parties hereto and their respective successors, permitted assigns, heirs and personal representatives. Either party may assign its rights and duties under this Agreement.

          f) Waiver. The failure of either party at any time or times to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce the same. No waiver by either party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach, or a waiver of the breach of any other term or covenant contained in this Agreement.

          g) Mutual Drafting. Both of the parties hereto have been represented by counsel in the negotiation and drafting of this Agreement. Accordingly, no inference as to the meaning or interpretation of any clause or provision of this Agreement shall be made on the basis of which party was the “drafter” of such clause or provision.

          h) Counterparts. This Agreement, and any document or instrument entered into, given or made pursuant to this Agreement or authorized hereby, and any amendment or supplement hereto or thereto may be executed in two or more counterparts, and by both parties on a separate counterpart, each of which, when executed and delivered, shall be an original and all of which together shall constitute one instrument, with the same force and effect as though all signatures appeared on a single document.

          i) Severability. In construing this Agreement, if any portion of this Agreement shall be found to be invalid or unenforceable, the remaining terms and provisions of this Agreement shall be given effect to the maximum extent permitted without considering the void, invalid or unenforceable provision.

[Signatures Appear on Following Page]

2

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of June 13, 2006.

LIONS GATE FILMS INC.
By:  /s/ Wayne Levin
Name:	Wayne Levin
Title:	Vice President

IGNITE, LLC
By:  /s/ Michael Burns
Name:	Michael Burns
Title:	Managing Member

S-1

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF LIONS GATE ENTERTAINMENT CORP.

NAME	JURISDICTION
Lions Gate Films Corp.	CBCA
Lions Gate Television (Ontario) Corp.	ON
CinemaNow Inc.	CAL
Lions Gate Entertainment Inc.	DEL
Cinepix Films Inc.	QC
Lions Gate Music Corp.	BC
Lions Gate Films Production Corp.	CBCA
High Concept Productions Inc.	ON
Psycho Productions Services Corp.	ON
Profiler Productions Corp.	ON
Hypercube Productions Corp.	ON
Dresden Files Productions Corp.	ON
LC Productions Corp.	CBCA
Talk Productions Corp.	ON
Final Cut Productions Corp.	BC
Lions Gate Films Development Corp.	ON
Guyana Gold USA LLC	WY
Shattered Productions Inc.	QC
JV Media Inc.	ON
Lions Gate Films Inc.	DEL
Lions Gate Television Inc.	DEL
LG Pictures Inc.	DEL
Lions Gate Records, Inc.	CAL
Film Holdings Co.	DEL
AM Psycho Productions, Inc.	NY
Frailty Productions, Inc.	CAL
Attraction Productions LLC	CAL
Planetary Productions LLC	CAL
Writers on the Wave	CAL
Confidence Productions, Inc.	CAL
Blue Productions Inc.	ON
Associated Corporate Holdings Ltd.	BVI
Skipped Parts Productions Inc.	SK
Fear of Flying Productions Inc.	ON
Cut Productions Inc.	CAL
Weeds Productions Inc.	CAL
Wildfire Productions Inc.	CAL
Wildfire 2 Productions Inc.	CAL
Wildfire 3 Productions Inc.	CAL
Devils Rejects, Inc.	CAL
Lions Gate Television Development LLC	CAL
King of the World Productions LLC	CAL
Artisan Entertainment Inc.	DEL
FHCL LLC	DEL
3F Services, Inc.	DEL
Artisan Home Entertainment Inc.	DEL
Artisan Pictures Inc.	DEL
Silent Development Corp.	DEL
Artisan Filmed Productions, Inc.	CAL
Artisan Music Inc.	DEL

NAME	JURISDICTION
BL Distribution Corp.	DEL
Landscape Entertainment Corp.	DEL
Artisan Releasing Inc.	DEL
Artisan Television Inc.	DEL
Vestron Inc.	DEL
Alpha & Omega Productions, LLC	DEL
Blair Witch Films Partners Ltd.	FLA
Post Production, Inc.	CAL
Fusion Productions, Inc.	CAL
Screening Room, Inc.	CAL
Punisher Productions, Inc.	CAL
Cave Productions, Inc.	CAL
BD Optical Media, Inc.	DEL
Artisan Properties, Inc.	NY
Arima, Inc.	CAL
3 Wise Guys Productions	CAL
Doro Productions, Inc.	CAL
Fierce People Productions, Inc.	CAL
GC Films, Inc.	CAL
Lovespring Productions Inc.	CAL
Motel Man Productions Inc.	CAL
NGC Films, Inc.	CAL
Palm Springs Productions Inc.	CAL
Scarlett LLC	CAL
Cinepix Animation Inc.	CBCA
3191451 Canada Inc. (Marco Polo)	CBCA
CineGroupe Corporation	QC
CineGroupe Distribution Inc.	CBCA
CineGroupe Musik Inc.	CBCA
CinGroupe Images Inc.	CBCA
CineGroupe Asia Venture	CBCA
CineGroupe Europe Venture	CBCA
Cine-Groupe U.S. Inc.	DEL
3687295 Canada Inc. (Kids Room 402 (Series 2))	CBCA
CineGroupe Pinocchio 3301 Inc.	CBCA
3734994 Canada Inc. (Kids from Room 401 (Series 3))	CBCA
3583856 Canada Inc. (Wilderness Station)	CBCA
3611587 Canada Inc. (Emma)	CBCA
3735010 Canada Inc. (Daft Planet I, II)	CBCA
3861473 Canada Inc. (Pig City)	CBCA
3861481 Canada Inc. (Projets SAG)	CBCA
3861490 Canada Inc. (Edouard)	CBCA
3349217 Canada Inc. (Kit & Kaboodle)	CBCA
3600793 Canada Inc. (Wounchpounch)	CBCA
3583848 Canada Inc. (Kids from Room 402)	CBCA
3600815 Canada Inc. (Mega Babies)	CBCA
Animation Cine-Groupe H.M. Inc. (Heavy Metal)	CBCA
3600807 Canada Inc. (Lions of Oz)	CBCA
CineGroupe Sagwa Inc.	CBCA
4144333 Canada Inc. (Tallulah)	CBCA
4144325 Canada Inc. (11 Sumerset)	CBCA
4144236 Canada Inc. (Tofu)	CBCA
4066928 Canada Inc. (CG Services)	CBCA
3941809 Canada Inc. (Tripping the Rift)	CBCA
3941795 Canada Inc. (Pig City II)	CBCA
3891691 Canada Inc. (Galidor I, II)	CBCA

NAME	JURISDICTION
3711561 Canada Inc. (WWA)	CBCA
Cine-Groupe WWA II Inc.	CBCA
3584305 Canada Inc. (Bad Dog II)	CBCA
3899772 Canada Inc. (CG New Media)	CBCA
4144350 Canada Inc. (Boy’s Night Out)	CBCA
4144341 Canada Inc. (Baby 4 Sale)	CBCA
414276 Canada Inc. (Charlie Jade)	CBCA
3941817 Canada Inc. (Student Seduction)	CBCA
3899802 Canada Inc. (Seriously Wired)	CBCA
3851923 Canada Inc. (Big Wolf II)	CBCA
Animatoon Co. Ltd. (Vietnamese Corp.)	CBCA
AnimaKids Production S.A.	CBCA
Locatrack Inc.	QC
9102-1337 Quebec Inc.	QC
Topaze Communications	QC
Dead Zone Production Corp.	BC
Terrestrial Productions Corp.	BC
Lucky 7 Productions Corp.	BC
Five Days Productions Corp.	BC
Mother Productions Corp.	ON
Chuck Productions Corp.	BC
Fierce People Productions Corp.	BC
Rogue Films Corp.	BC
Redbus Films Distribution	UK
Redbus Pictures	UK
Redbus Home Entertainment Ltd.	UK
Grey Matters Production Ltd.	UK
Ninth Passenger	UK
Lions Gate Music Publishing LLC	CAL
Madea Productions, Inc.	GA
Rogue Films, Inc.	CAL
Spelling Bee Productions, LLC	DEL

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements (Form S-8 No. 333-122275, No. 333-111022, and No. 333-107266) and in the Registration Statements (Form S-3 No. 333-109101, No. 333-114148, No. 333-122580, No. 333-123652, No. 333-128518, No. 333-128519, No. 333-131975, and No. 333-133023) of Lions Gate Entertainment Corp. and in the related Prospectuses of our reports dated June 14, 2006, with respect to the consolidated financial statements of Lions Gate Entertainment Corp., Lions Gate Entertainment Corp. management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Lions Gate Entertainment Corp., included in this Annual Report (Form 10-K) for the year ended March 31, 2006.

/s/ ERNST & YOUNG LLP

Los Angeles, California
June 14, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jon Feltheimer, Chief Executive Officer, certify that:

     1. I have reviewed this annual report on Form 10-K of Lions Gate Entertainment Corp. (the “Company”);

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

     4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

     5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: June 14, 2006	/s/ Jon Feltheimer
	Jon Feltheimer
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, James Keegan, Chief Financial Officer, certify that:

     1. I have reviewed this annual report on Form 10-K of Lions Gate Entertainment Corp. (the “Company”);

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

     4. The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

     (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     (c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     (d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

     5. The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

     (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

     (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: June 14, 2006	/s/ James Keegan
	James Keegan
	Chief Financial Officer

EX-32.1

Exhibit 32.1

WRITTEN STATEMENT
PURSUANT TO
18 U.S.C. SECTION 1350

     The undersigned officers of Lions Gate Entertainment Corp. (the “Company”), pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, hereby certify that, to their knowledge:

          (i) The annual report on Form 10-K for the year ended March 31, 2006 of the Company, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934; and

          (ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 14, 2006	/s/ Jon Feltheimer
	Jon Feltheimer
	Chief Executive Officer
Date: June 14, 2006	/s/ James Keegan
	James Keegan
	Chief Financial Officer