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January 13, 2011

Private Equity Investment Advisory Committee


New Mexico State Investment Office
Santa Fe, NM 87507

Dear Sir or Madam,

I reviewed the following documents:

• Lions Gate Statement for “The Burrowers “ through September 2010


• Lions Gate Statement for “Wildfire” through September 30, 2010
• Lions Gate Statement for “Employee of the Month” through June 30, 2010
• Alcon Film Fund, LLC Statement for “The Book of Eli” through September 30, 2010
• Fintage Statement for “Swing Vote” through August 31, 2010

My initial reaction to the Lions Gate statements was that the projects were so unrecouped that any
auditing would not be cost beneficial. With your permission, I contacted David Shankwiler, the VP of
Participations at Lions Gate and asked if they were projecting any payments to the State. David assured
me that Lions Gate’s internal ultimates do not include any payment to the State. Although his response is
not dispositive, it did confirm my opinion.

Under normal circumstances, we would like to wait between 1½ and two years after release of a film
before auditing. By then, the picture would have been through its theatrical and home video exploitation
and the distributor would be entering into long term television contracts. “The Book of Eli” was released
in January 2010. There is minimal television revenue on the September 2010 statement and video
revenue is reflected for the first time. I would like to wait for additional statements before making my
recommendation. However, again with your permission, I placed a call to executives at Alcon to see if
they would share when they expected to start making payments to the State. I am still waiting for them to
respond. Paragraph 5 of the Participation Interest Agreement provides for a three year statute of
limitations before incontestability. Therefore, we have until at least the end of 2012 to commence any
audit. I suggest we continue to monitor the statements for “The Book of Eli” and revisit the audit in early
2012.

The Fintage statement indicates that revenues from the distribution of “Swing Vote” are slowing down
substantially. Over the last 6 months, approximately $180,000 was received. The summary from Fintage
indicates a net profit split between the State and the Producer of 8.5% and 91.5%. However, the summary
does not indicate any net profits and appears to require additional payments from the Producer to the
State before profits are reached as well as a payment of “Excess Costs”. Before I can determine if it would
be beneficial to audit, I would need to see the agreement between the parties and understand the waterfall
of payments before net profits to determine when such profits would be reached, if ever. It would also be
helpful to contact the distributor to see if they are projecting any profits. Since Fintage is only a collection
agency, it would not be practical to audit them. However, some work could be done at the distributor to
confirm that all of the contracts are being paid through Fintage.

An independent member of HLB International, a worldwide network of accounting firms and business advisors.
New Mexico State Investment Office
January 13, 2011
Page 2
 

In summary, I think we should pass on any auditing of Lions Gate; wait for additional statements before
deciding whether to audit Alcon; and attempt to obtain additional information on “Swing Vote”.

Best regards,

Green Hasson Janks

Steven D. Sills
Partner

cc: Greg Kulka


Peter J. Dekom, Esq.

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