EFTA00596077.pdf

FrMO New Business Formation: Animation Feature Film Development & Production Company December 11, 2014 EFTA00596077 Table of Contents I. Executive Summary II. Business Description III. Barry Josephson's Bio IV. Investment Analysis V. Industry Overview EFTA00596078  Executive Summary Barry Josephson is forming a company to develop & produce animated films • Form and fund Animation Feature Film Development & Production company ("Josephson Animated Company") New Venture • Attractive market — global box office for animated feature films growing at a Overview 12.5% CAGR since 2008 and grossed -$5B in 2013 • Proposed deal structure: By contributing equity to the venture, equity investors will share in the profits of all the films funded under this venture pari passu and share in the copyright ownership of all underlying rights • With Josephson Animated Company self-funding the entire production cost, Capital there is a request for $175mm in Equity to launch development and production for the first three to four films, and associated overhead for the entity Request • After a film is released, it will enter into a secured $150mm Debt Facility which will finance the production and release of the future films, of which you will retain equity ownership and profit share • Former President of Columbia / Sony Pictures Barry • 36-year career in film, TV, and music with extensive industry relationships Josephson's • Makes profitable feature films on-budget & on-time — superior business acumen Leadership combined with talent for assembling & managing high-performing teams • Barry's impact: 15 films grossed over $2.6B at WWBO / returned 3.1x budget • Josephson Entertainment's box office production successes include: • Enchanted: $340MM in WWBO / returned 4.0x budget with 93% RT • Other involved titles: Wild Wild West, Men In Black, Air Force One 2 EFTA00596079  Executive Summary Barry Josephson is forming a company to develop & produce animated films Partnering with Josephson Entertainment offers investors an extraordinary Investment opportunity to: Highlights • Win big by participating in tremendous growth potential that exists for compelling family content and Animated feature films, with significant potential equity returns • Invest in a successful and proven Entertainment executive / entrepreneur Utilizing Base Case estimates for the films, equity investors can expect to see: Investor • IRR of 15.4°/0 Returns • Invested capital Payback within 7 years, or 3 years after the first film release • Subsequent equity returns after Payback point, as fund start-up and initial production/development costs have been recouped Under an Upside Scenario, equity investors can expect to see: • IRR of 25.0°/0 • Invested capital Payback within 6 years, or 2 years after the first film release 3 EFTA00596080 Table of Contents I. Executive Summary II. Business Description III. Profile - Barry Josephson IV. Investment Analysis V. Industry Overview 4 EFTA00596081 Seeking $175 Million to Develop, Produce & Market Initial Slate of Six Animated Feature Films • Create self-sustaining, film production company to develop, produce and oversee marketing for its family-oriented animated features • Equity will fund initial development and production costs of films. and fund overhead/administration costs of $1.5M-$2M a year, with future cash flows financing the operations/production of future slate films Amount Amount O/O Sources ($MM) Uses ($MM) Total Equity — Investor $175.0 54% Acquisition, Production $315.0 97% Capital and Release Expenses Debt — Secured Credit $150.0 46% Overhead/Administration $10.0 3% Facility Total Sources $325.0 10_0%1 Total Uses $325.0 10_0Y0 Representative Investment Per Film: IP Acquisition $ 2.5MM Film Production 50.0MM Prints & Advertising 40.0MM Total Investment Per Film $92.5MM 5 EFTA00596082 Josephson Entertainment's Animation Business High-Level Approach Josephson Entertainment Value Proposition • Company is built off of Barry Josephson's keen eye and a focus towards properties with strong performance across multiple quadrants, franchise potential and ability to be exploited across multiple revenue streams (Enchanted, Men in Black, Bones) • Strong track record of profitability and accountability with budgets and timing, which will minimize fund cash needs and expenditures, and generate and return cash flow quickly Development Philosophy • Only select/acquire material it intends to produce and initiate development on one film per year with the intention of releasing one film per year • Have three to four films in various stages of development, production and release at a time, utilizing all sources of capital to self-sustain and create cash flow generating assets Film Production • Outsource to best-of-breed animation studios, reducing costly entity overhead needs Marketin • Costs • Fund own expenditures, greatly reducing shared economics with distributor to only a distribution fee, and exercising increased control over film marketing campaign and positioning 6 EFTA00596083 Fundamentals of Family Content Make it Very Valuable & Ultra Competitive Industry Segment Family content continues to have value as other genres decline Superior Monetization of Content • Willingness to pay Licensing & merchandising potential - Parents as key customer will continue to - Disney Pixar's Cars generated estimated purchase non-discretionary items related to $8B in merchandising revenue before animated films to make their kids happy release of Cars 2 • Repeat consumption Home video sales - Children watch their favorite stories over and - For given level of box office, animated films over, thus strengthening the value of generate 15 — 20% more HV revenue than purchase other genres International Growth Expanding Buyer Universe • Foreign box office • Growing consumer demand - FBO for family films has grown at 7.4% - Family WWBO has tripled in last 15 years CAGR since 2005 (vs. 1.0% for DBO) • Powerful film & TV content buyers - Qualitatively, animated films are visually - Increase in size & importance of major cable appealing and overcome language barriers and pay TV networks benefits content • International TV markets owners - "Disney Channel has become biggest - Netflix, Amazon, Hulu and Microsoft making franchise grower for the company presence felt(original & licensed content) worldwide" — Disney CFO Jay Rasulo 7 EFTA00596084  Despite Higher Up-Front Capital & Longer Time Horizon, Animation Provides Unique Opportunity Animation thesis Favorable Supply / Demand Dynamics Superior Operating Leverage • Heavy skew to live-action movies — only 19 • Gross participations generally limited to producers; animated films were released in 2013 voice talent unlikely to command significant ownership share • Higher barriers to entry — unique skill set & capital requirements • Voice talent does not drive WWBO - films that market stars perform no better than films that don't Reduced Execution Risk Superior Home Video & IP Monetization • Combination of (i) limited supply of movies and (ii) • For a given box office result, HV for animated fare children having less discriminating tastes runs 15-20% higher than live-action • A+ quality not always necessary — Cars 2 received • Original characters can be exploited through RT score of 39%, but still earned $560MM at box licensing and merchandising office - Disney Pixar's Cars generated estimated $8B in merchandising revenue before release of Cars 2 • From 2005 to 2012, 50 movies with RT scores of 25% or less earned / returned: - (12) Animated: $156.3 WWBO / 3.0x budget - (38) Live-Action: $105.9 WWBO / 1.8x budget 8 EFTA00596085  Josephson's Animated Family Films Would be in High Demand with Major Film Distributors (1 of 3) Josephson will cover cost of Production as well as , greatly reducing anticipated fees it would pay a distributor in any output deal Film Distributor Distribution Activities • Terminated its distribution deal with DreamWorks Animation at the end of 2013 • Development and production initiative in full swing on handful of new animated properties, such as SpongeBob SquarePants and Monster Trucks, to be released A VA...OM comPArry in 2015 • Key relationship with Nickelodeon to mine children's IP • While Fox owns Blue Sky (Ice Age franchise, Rio franchise, Epic) and replaced Paramount as DreamWorks Animation's distributor, they are still in the market for other animated fare • Recently released The Book of Life and scheduled Peanuts for 2015 • Created Warner Animation Group in 2013 with first release, The LEGO Movie, grossing $468M worldwide • Seeking to distribute non-Warner Bros. developed films • Primary source of animation is through ownership interest in Illumination UNIVERSAL. mom Entertainment (Despicable Me franchise, The Lorax, Hop) • Ability to monetize successful animated fare across TV network portfolio and theme park capabilities 9 EFTA00596086  Josephson's Animated Family Films Would be in High Demand with Major Film Distributors (2 of 3) Josephson will cover cost of Production as well as , greatly reducing anticipated fees it would pay a distributor in any output deal Film Distributor Distribution Activities • Sony has in-house studio, Sony Pictures Animation, which has averaged one film per year (Cloudy with a Chance of Meatballs franchise, The Smurfs franchise) • Interested in working with other animation partners SONY PLC 1010 8 • Signed distribution deal with Reel FX, the company behind 2013's Free Birds to take worldwide rights, but are looking for other options LIONSGATE• Seeking powerhouse animated films to distribute and are rebooting Power Rangers franchise with Saban • While producing animated films sporadically, such as Hoodwinked! and Escape from Planet Earth, the Weinsteins have also signed distribution deals for independently produced films • Acquired Argentinian hit Underdogs for release in 2015 THE WEINSTEI'1 COMPANY 10 EFTA00596087  Josephson's Animated Family Films Would be in High Demand with Major Film Distributors (3 of 3) Josephson will cover cost of Production as well as , greatly reducing anticipated fees it would pay a distributor in any output deal Film Distributor Distribution Activities • Focus has extended a deal with LAIKA to distribute their films, such as The FOCUS Boxtrolls, Parallorman and Coraline, but have also distributed other F E AT URE S specialized animated projects, such as 9 Released The Nut Job in 2014, as the highest grossing independently OPENRCA'Z'. roduced animated film and have experience in releasing/servicing films with financing attached STX • New studio headed by Bob Simonds and funded by TPG, Hony Capital and ENTERTAINMENT Gigi Pritzker. • Seeking animation partner for anticipated 12 film slate with direct distribution to major exhibition chains. 11 EFTA00596088  ILLUMINATION ENTERTAINMENT Case Study Success: Illumination Entertainment Illumination Entertainment demonstrates that strict cost control and hit animated movies are not mutually exclusive too Critical Success Factors Illumination Entertainment • Very few management Animated Movie Releases layers WWBO/ Rotten • Clear decision-making Film Title Year WWBO Budget Budget Tomatoes Despicable Me 2 2013 $971 $76 12.8x 74% • Shorten development / Dr. Seuss' The 2012 349 70 5.0x 54% production cycle Lorax Hop 2011 184 63 2.9x 25% • Hire less star power — vocal talent, young animators, and Despicable Me 2010 543 69 7.9x 81% first-time directors $2,047 $278 7.4x 54% • Keep investment in "...I like being involved in all the facets of a movie, from the inception animation technology to a of the idea to the marketing of the movie and everything in between. minimum It can start with what ideas we're going to explore as possible stories, to the hiring of the writers, to guiding the writing process, to choosing • Use licensing partners to the directors. It's a very comprehensive approach to producing." help build awareness -- Illumination's CEO Chris Meledandri in Dartmouth Now Source: NY Times, "For Illumination Entertainment, Animation Meets Economic Reality', 04/04/2011. 12 EFTA00596089  Studios Must Decide Which Activities Will be Done In-House vs. Outsourced to Specialty Firms Josephson Entertainment seeks to replicate Illumination's success & early operating model by doing development & pre-production phases in-house High-Level Phases of Animated Film-Making Pre- Post- Animation Studios Development Production Production Production Distribution 1 Disney / Pixar 2 Fox / Blue Sky Studios Oy-integrated Studios 3 Sony Pictures Animation Jill. 4 DreamWorks Animation 20th Century 1 Fox 5 Illumination Entertainment Iiiiion Entertainment's Mac Guff Mac Guff Universal ar y Operating Model i i (2011) (2011) 6 Josephson Entertainment 7 Warner Bros. 8 Paramount Pictures ' (Despicable Me 2) is going to end up being the single most profitable film in the 100 year history of Universal Studios...We love Illumination", he added about the animation producer behind the hit franchise. - NBCUniversal CEO Steve Burke in Hollywood Reporter (07/31/2013) :Company Wchsites. 13 EFTA00596090 Table of Contents I. Executive Summary II. Business Description III. Profile - Barry Josephson IV. Investment Analysis V. Industry Overview 14 EFTA00596091  Executive Barry Josephson is a 36-Year Film, TV & Music Veteran with Impressive Credentials (1 of 2) Mainstream success through many motion pictures, TV series and specials across genres, in roles ranging from film & TV producer to talent manager Barry Josephson's Entertainment Career Highlights • Former President of Sony's Columbia Pictures, responsible for such hits as Men In Black, Air Force One, In The Line Of Fire, The Fifth Element, Anaconda, Bad Boys, The Professional, and The Craft • Producer on Walt Disney Pictures' Enchanted (2007), an animated / live-action romantic comedy that grossed over $340 million at the global box office and received three Academy Award Nomination for songs • Josephson Entertainment's other box office production successes include: - Life as We Know It from Warner Bros. - Hide and Seek starring Robert De Niro from 20th Century Fox - Like Mike from 20th Century Fox - The Ladykillers written/directed by Coen Brothers / starring Tom Hanks from Disney - Wild Wild West starring Will Smith from Warner Bros. • Currently in pre-production on feature film projects, including Lionsgate's Driving Dick Kelly, 20th Century Fox & Lightstorm Entertainment's The Dive, Voltage's Apex and Focus's Circle of Treason • Executive Producer on FOX Network hit TV series Bones, now in its 10th season • Executive Producer on American Revolutionary War TV drama Turn: Washington Spies, for AMC in production for 2"c' season • Served as talent manager and has helped advance the careers of such stars as Whoopi Goldberg, Patti Labelle, the Pointer Sisters, and Paula Abdul 15 EFTA00596092  Executive Barry Josephson is a 36-Year Film, TV & Music Veteran with Impressive Credentials (2 of 2) Mainstream success through many motion pictures, TV series and specials across genres, in roles ranging from film & TV producer to talent manager Barry Josephson's Other Professional & Personal Interests Founding member of Comic Relief, the comedy concert series that raised millions of dollars to aid the plight of the homeless • Active advocate of animal rights and sponsors The Milian Foundation for Rescued Pets Played pivotal role in HBO Aspen Comedy Festival and currently does so in: - The Commitment to Life Benefit (supporting AIDS Project Los Angeles) - NHL Entertainment Board - Los Angeles Kings Advisory Board - Founding member and current board member of 20-year running Heart of Austin Film Festival for screenwriters • Graduated from American University and remains active member of its American University School of Communication Alumni program • Honored by American University with a Lifetime Achievement Award and received the Daughters the Revolution Award and the Saturn Award • Josephson lives in Pacific Palisades, CA with his wife Brooke and daughter Shira 16 EFTA00596093 Barry Josephson is a Proven Filmmaker & Knows Animation, Producing 2007 Disney Hit Enchanted Proved his mettle by purchasing original story, overcoming extended development process, and putting together pieces for highly successful film Barry Josephson's Role: Producer Genre & Plot: Animated / live-action romantic comedy — Giselle is a classic Disney Princess, who is forced from her traditional animated world of Andalasia into live-action world of NYC Cast: Amy Adams, Patrick Dempsey, James Marsden, Timothy Spall, Idina Menzel, Rachel Covey, and Susan Sarandon Development, Production & Release: • Bill Kelly's script sold in 1997 to Disney & Sonnenfeld / Josephson Productions • No support for R-rated movie — project languished after several rewrites & 3 directors • In 2005, hired 41" Director Kevin Lima and Bill Kelly returned to write new version • Renowned songwriting team of Alan Menken and Stephen Schwartz involved early in film • November 2007 wide-release with 93% Rotten Tomatoes score • Two Golden Globe nominations, four Critics' Choice Awards three Academy Award nominations, and won Critics' Choice Award for Best Family Film and Phoenix Film Critics Society Award for Best Live Action Family Film Financial: • $340MM at global box office / returned 4.0x its $85MM budget • $100MM in domestic DVD sales • Licensing deals with Mattel and Nintendo 17 EFTA00596094  Barry Josephson's Films also have Global Reach and Franchise Potential, like Men in Black NibHP MLIT1- I Barry Josephson's Role: Columbia Pictures' President of Production . Oa r . Genre & Plot: Comic science fiction action spy film. Two agents of a secret organization called ‘ • ' 6, i if • 1 i we ..ir ), fi Men in Black supervise extraterrestrial life forms who live on Earth and hide their existence from ordinary humans Cast: Tommy Lee Jones, Will Smith, Linda Fiorentino, Vincent and Rip Torn Development, Production & Release: • Optioned in 1992, based on a small circulation graphic novel, The Men in Black — • Hired Ed Solomon for the original 1st draft • Script problems — Tommy Lee Jones joined cast only after Steven Spielberg promised that the script would improve • Delayed due to Barry Sonnenfeld's commitments around Get Shorty (1995) • Original shoot locations ranged from Kansas, Washington ., and Nevada, but Sonnenfeld opted for NYC where the city's structures resembled flying saucers and rockets • July 1997 wide-release with 91% Rotten Tomatoes score Financial: • $589MM at global box office / returned 6.6x its $90MM budget (In the Top-100 all time grossing films) • $58MM in domestic DVD sales • Sequels: Men in Black II (2002) and Men in Black Ill (2012) grossed $442MM and $624MM in WWBO, respectively • WB Animated series based on film, titled Men in Black: The Series, ran from 1997 to 2001 18 EFTA00596095 There is a Strong Talent Pool of Animation Studios with whom Josephson Entertainment can partner International firms typically can offer local tax breaks & lower salaries 41. M11\ • TOONBOX u diA rCi# ANIMALLOGIC PRODUCTIONS"' ANIMATION & VISUAL EFFECTS MRFINVI CREVAMPIAT,COi L70 Fw1Es® e Aardman VANPtr ILION INDUSTRIAL LIGHT& MAGIC *Mac Guff split into 2 separate companies, with Illumination Entertainment buying the animation department to form Illumination Mac Guff in 2011. Mac Guff Effects would like to establish itself in feature animation. 19 EFTA00596096  Josephson Entertainment Can Leverage Strong Ties to Best Animation Directors & Writers (1 of 2) Name Role Film Credits Recognition Kevin Lima Director Enchanted, Tarzan Roger Allers Director The Lion King. Open Season Oscar Nominee Rob Minkoff Director The Lion King. Mr. Peabody & Sherman Mark Andrews Director Brave Oscar Winner Brenda Chapman Director Brave. The Prince of Egypt Oscar Winner Dan Jeup Director Finding Nemo Vicky Jenson Director Shrek. Shark Tale Ash Brannon Director Toy Story 2. Surfs Up Oscar Nominee Fabrice Joubert Director Despicable Me Oscar Nominee David Silverman Director The Simpsons Movie, Monsters. Inc. Oscar Nominee Mark Osborne Director Kung Fu Panda. The Little Prince Oscar Nominee John Stevenson Director Kung Fu Panda Oscar Nominee Eric Goldberg Director Pocahontas, Fantasia 2000 Gary Trousdale Director Beauty and the Beast. The Hunchback of Notre Dame Kirk Wise Director Beauty and the Beast. The Hunchback of Notre Dame 20 EFTA00596097  Josephson Entertainment Can Leverage Strong Ties to Best Animation Directors & Writers (2 of 2) Name Role Film Credits Recognition Steve Anderson Director Meet the Robinsons, Winnie the Pooh Mark Dindal Director Chicken Little, The Emperor's New Groove Chris Williams Director Bolt Oscar Nominee Ralph Eggleston Director For the Birds Oscar Winner John Kahrs Director Paperman Oscar Winner Chris Bailey Director Runaway Brain Oscar Nominee Mike Johnson Director Corpse Bride Oscar Nominee Minkyu Lee Director Adam & Dog Oscar Nominee Teddy Newton Director Day & Night Oscar Nominee Jim Capobianco Writer Ratatouille Oscar Nominee David Reynolds Writer Finding Nemo, The Emperor's New Groove Oscar Nominee The Hageman Bros. Writers The LEGO Movie, Hotel Transylvania, Ninjago Irene Mecchi Writer Brave, The Lion King Tab Murphy Writer Tarzan, The Hunchback of Notre Dame Oscar Nominee 21 EFTA00596098  Representative Sample of 15 Barry Josephson Films Grossing Almost $2.7B in WWBO No. Film Title Year BJ Role DBO FBO WWBO Budget WWBO/Budget 1 Life as We Know It (2010) Producer $53.4 $52.3 $105.6 $38.0 2.8x 2 Aliens in the Attic (2009) Producer 25.2 32.7 57.8 45.0 1.3x 3 Enchanted (2007) Producer 127.8 212.7 340.5 85.0 4.0x 4 Hide and Seek (2005) Producer 51.1 71.6 122.7 25.0 4.9x 5 The Ladykillers (2004) Producer 39.8 36.9 76.7 35.0 2.2x 6 Like Mike (2002) Producer 51.4 10.8 62.3 30.0 2.1x 7 Wild Wild West (1999) Exec Producer 113.8 108.3 222.1 170.0 1.3x 8 Men in Black (1997) Studio Exec 250.7 338.7 589.4 81.0 7.3x 9 Air Force One (1997) Studio Exec 173.0 142.2 315.2 85.0 3.7x 10 The Fifth Element (1997) Studio Exec 63.8 200.1 263.9 90.0 2.9x 11 Anaconda (1997) Studio Exec 65.9 71.0 136.9 45.0 3.0x 12 The Craft (1996) Studio Exec 24.8 30.9 55.7 15.0 3.7x 13 Bad Boys (1995) Studio Exec 65.8 75.6 141.4 19.0 7.4x Source: 22 EFTA00596099  Representative Sample of 15 Barry Josephson Films Grossing Almost $2.7B in WWBO No. Film Title (Year) BJ Role DBO FBO WWBO Budget WWBO/Budget Leon: The Professional 14 Studio Exec 19.5 25.8 45.3 16.0 2.8x (1994) 15 In The Line of Fire (1993) Studio Exec 102.3 74.7 177.0 40.0 4.4x Total $ 1,228.3 $1,458.5 $2,712.5 $819.0 3.3x Source: 23 EFTA00596100 Table of Contents I. Executive Summary II. Business Description III. Profile - Barry Josephson IV. Investment Analysis V. Industry Overview 24 EFTA00596101  Investor Returns Base Case • Under its Base Case, the Josephson Animated Company will return a Lifetime IRR on capital of 15.4%, with Payback within 7 years of funding and 3 years after the first release • Through strict cost control measures and low overhead, the equity investment will sustain the fund until films are seasoned into the debt facility and cash is received from the first titles 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Film Cash Flows Total Film Revenue $- $- $- $150.5 $241.8 $339.0 $152.2 $364.9 $371.1 $219.6 Total Film Expenses $10.6 $15.0 $25.6 $44.9 $138.4 $169.0 $195.9 $107.9 $202.4 $161.3 $68.6 Net Profit (Loss) ($10.6) ($15.0) ($25.6) ($44.9) $12.1 $72.8 $143.1 $44.3 $162.4 $209.8 $151.0 Cumulative Net Profit/(Loss) from Films ($1O.6) ($25.6) ($57.3) ($96.7) ($84.O) ($71.2) $131.9 $176.2 $338.6 $548.4 $6995 Overhead/Administration $1.5 $1.6 $1.6 $1.7 $1.8 $1.8 $1.9 $2.0 $2.1 $2.1 $2.2 Fund Net Profit/(Loss) ($12.1) ($16.6) ($27.2) ($46.6) $10.4 $70.9 $141.2 $42.3 $160.4 $207.7 $148.8 Cumulative Fund Net Protitr(Loss) ($12.1) ($28.7) ($55.9) ($1O2.5) ($921) ($21.2) $720.0 $162.4 $322.7 $530.4 $679.3 Discounted Cash Flow In/(Out) @ 8.0% ($11.2) ($14.2) ($21.6) ($34.2) $7.1 $44.7 $82.4 $22.9 $80.2 $96.2 $63.8 Cumulative Discounted Cash Flow In/(Out) ($11.2) ($25.4) ($47.1) ($81.3) ($74.2) ($295) $52.9 $75.8 $156.O $252.2 $316.O Financing Sources Cash Balance $1.0 $1.0 $1.0 $1.0 $18.6 $85.4 $234.1 $274.5 $438.1 $637.0 $795.2 Debt Borrowing Availability - - - - 42.8 84.5 150.0 92.5 150.0 150.0 123.5 Equity Availabile 161.9 145.3 118.1 71.5 60.7 60.7 60.7 60.7 60.7 60.7 60.7 Total Sources Available $1629 $146.3 $179.1 $725 $7221 $23O.6 $444.7 $427.6 $648.8 $847.7 $979.4 NPV of Cash Flows@ 8.0% $357.3 Lifetime IRR 15.4% First 10-Year IRR 14.3% 25 EFTA00596102 Slate Summary Base Case Summary Representation of economics for films produced in the entity in a Base Case scenario_ Animated Animated Animated Animated Animated Animated Film 1 Film 2 Film 3 Film 4 Film 5 Film 6 Release Date Jan-19 Mar-20 May-21 Nov-22 Jul-23 Aug-24 Ultimate ($M) Domestic Box Office $50.0 $90.0 $125.0 $100.0 $125.0 $75.0 Foreign Box Office 75.0 103.5 162.5 125.0 187.5 112.5 Worldwide Box Office $125.0 $193.5 $287.5 $225.0 $312.5 $187.5 Revenue Total Domestic Resenue $82.3 $142.2 $195.0 $156.0 $195.0 $118.5 Total Foreign Revenue 123.4 163.5 253.5 195.0 243.8 148.1 Total Revenue $205.6 $305.7 $448.5 $351.0 $438.8 $266.6 Expenses Production Cost $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 Production Subsidy (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) Net Production Cost $42.5 $42.5 $42.5 $42.5 $42.5 $42.5 Domestic Distribution Fee $10.3 $17.8 $24.4 $19.5 $24.4 $t4.8 Domestic 40.0 40.0 40.0 40.0 40.0 40.0 Domestic Non Expenses 10.6 18.4 24.2 19.3 24.2 t5.3 Total Domestic Distribution Expenses $60.9 $76.2 $88.5 $78.8 $88.5 $70.1 Foreign Distribution Fee $15.4 $20.4 $31.7 $24.4 $30.5 $t8.5 Foreign Distribution Expenses 24.7 32.7 50.7 39.0 48.8 29.6 Total Foreign Distribution Expenses $40.1 $53.1 $82.4 $63.4 $79.2 $48.1 Total Participations & Residuals 10.3 15.3 22.4 17.6 21.9 t3.3 Total Expenses $153.8 $187.1 $235.9 $202.3 $232.2 $174.1 Net Profit (Loss) $51.9 $118.6 $212.6 $148.7 $206.6 $92.5 26 EFTA00596103  Investor Returns Upside Case • Under its Upside Case, the Josephson Animated Company will return a Lifetime IRR on capital of 25.0%, with Payback within 6 years of funding and 2 years after the first release • Similar to the base case in how the equity investment will sustain the fund through the initial years. In an upside situation, there is significant opportunity for animated films to outperform and deliver significant equit II.,I 14 / e WI 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Film Cash Flows Total Film Revenue $- $ -- $216.8 $351.5 $594.9 $252.1 $568.8 $581.2 $336.6 Total Film Expenses $10.6 $15.0 $25.6 $45.1 $169.5 $218.3 $305.4 $145.5 $289.9 $251.5 5117.9 Net Profit (Loss) ($10.6) ($15.0) ($25.6) ($45.1) $47.4 $133.2 $289.6 $106.6 $278.9 $329.7 $218.7 Cumulative Net ProfiKoss) from Films ($10.6) ($25.6) ($51.3) ($96.4) ($49.01 $84.2 $373.8 $480.4 $759.3 $1.088.9 $1,307.6 OuerheadlAdministration $1.5 $1.6 $1.6 $1.7 $1.8 $1.8 $1.9 $2.0 $2.1 $2.1 $2.2 Fund Net Profit/(Loss) ($12.1) ($16.6) ($27.2) ($46.8) $45.6 $131.4 $287.7 $104.6 $276.8 $327.5 $216.5 Cumulative Fund Net Profit/(Lass) (512.1) (528.7) ($55.9) ($102.7) ($57.1) $74.3 $361.9 $466.5 $743.4 $1.070.9 $1,287.4 Discounted Cash Flow In/(Out) @ 8.0% ($11.2) ($14.2) ($21.6) ($34.4) $31.0 $82.8 $167.9 $56.5 $138.5 $151.7 $92.8 Cumulative Discounted Cash Flow ln/(Out) ($11.2) (525.4) ($471) 01.5) (550.4) $32.4 $200.2 $256.7 $395.2 $547.0 $639.8 Financing Sources Cash Balance $1.0 $1.0 $1.0 $1.0 $46.9 $169.3 $469.5 $561.4 $852.5 $1.166.7 $1.398.3 Debt Borrowing Mailability - - - - 57.1 120.2 150.0 148.9 150.0 150.0 150.0 Equity Availabile 161.9 145.3 118.1 71.3 67.0 67.0 67.0 67.0 67.0 67.0 67.0 Total Sources Available $1629 $146.3 $119.1 $72.3 $171.0 $356.5 $686.5 $777.4 $1.069.5 $1.383.7 $1,615.3 NPV of Cash Flows@ 8.0% $704.3 Lifetime IRR 25.0% First 10-Year IRR 24.2% 27 EFTA00596104 Slate Summary Upside Case Summary Representation of economics for films produced in the entity in an Upside Case scenario Animated Animated Animated Animated Animated Animated Film 1 Film 2 Film 3 Film 4 Film 5 Film 6 Release Date Jan-19 Mar-20 May-21 Nov 22 Jul-23 Aug-24 Ultimate (SM) Domestic Box Office $75.0 $t35.0 $225.0 $150.0 $200.0 $112.5 Foreign Box Office Has 155.3 292.5 187.5 300.0 168.8 Worldwide Box Office $187.5 $290.3 $517.5 $337.5 $500.0 $281.3 Revenue Total Domestic Revenue $118.5 $210.6 $351.0 $234.0 $312.0 $175.5 Total Foreign Revenue 177.8 242.2 456.3 292.5 390.0 219.4 Total Revenue $296.3 $452.8 $807.3 $526.5 $702.0 $394.9 Expenses Production Cost $50.0 $50.0 $50.0 $50.0 $50.0 $50.0 Production Subsidy (7.5) (7.5) (7.5) (7.5) (7.5) (7.5) Net Production Cost $42.5 $42.5 $42.5 $42.5 $42.5 $42.5 Domestic Distribution Fee $14.8 $26.3 $43.9 $29.3 $39.0 $21.9 Domestic 40.0 40.0 40.0 40.0 40.0 40.0 Domestic Nonce Expenses 15.3 26.1 43.5 29.0 38.7 2t.8 Total Domestic Distribution Expenses $70.1 $92.4 $127.4 $98.3 $117.7 $83.7 Foreign Distribution Fee $22.2 $30.3 $57.0 $36.6 $48.8 $27.4 Foreign Distribution Expenses 35.6 48.4 91.3 58.5 78.0 43.9 Total Foreign Distribution Expenses $57.8 $78.7 $148.3 $95.1 $126.8 $71.3 Total Participations & Residuals 23.7 36.2 64.6 42.1 56.2 3t.6 Total Expenses $194.1 $249.9 $382.8 $277.9 $343.1 $229.1 Net Profit (Loss) $102.1 $202.9 $424.5 $248.6 $358.9 $165.8 28 EFTA00596105 Representative Film Distribution Agreement Territory: Worldwide Rights: All rights Term: 25 years, after which distribution rights revert back to Producer Distribution Fee: 12.5% on all windows inclusive of all sub-distribution fees Commitment: Distributor has option to commit up to $10M, which will be recouped in the waterfall below Waterfall: Distributor recoups off of all gross receipts: (i) Distribution Fee (ii) Third-Party Payments (participations and residuals) and all other overhead expenses Distributor is advancing for Producer (iii) Any Distributor M Commitment and Distribution Expenses (iv) Balance to Producer per Distribution Agreement 29 EFTA00596106 Slate Details by Film — Base Case 30 EFTA00596107 Animated Film 1 Financial Detail Base Animated Film 1 Release Date Jan-19 Ultimate ($M) Domestic Box Office $50.0 Foreign Box Office 75.0 Worldwide Box Office $125.0 Revenue Expenses Domestic Production Domestic Theatrical $21.0 Production Cost $50.0 Domestic Home Video 25.0 Production Subsidy (7.5) Domestic VODIEST 14.0 Net Production Cost $42.5 Domestic Pay TV 10.5 Domestic Network TV 8.0 Domestic Domestic Licensing/Merchandise 3.8 Domestic Distribution Fee