UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Commission File No. 1-14880

LIONS GATE ENTERTAINMENT CORP.

(Exact Name of Registrant as Specified in Its Charter)

(Address of Principal Executive Offices, Zip Code)

Registrant’s telephone number, including area code:

(604) 983-5555

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

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

None

      Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 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 an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2004 (the last business day of the Company’s most recently completed second fiscal quarter) was approximately $817,298,071.

      As of June 1, 2005, 101,834,044 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 2005 annual meeting of shareholders are incorporated by reference into Part III.

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,” “should,” “could,” “would,” “expect,” “believe,” “estimate,” “expect,” “plan” 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.

PART I

Overview

      Lions Gate Entertainment Corp. (“Lions Gate”, “Company”, “we”, “us” or “our”) is a diversified independent producer and distributor of motion pictures, television programming, home entertainment, family entertainment and video-on-demand 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 122 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 6,200 motion picture titles and 1,800 television episodes and programs directly to retailers, video rental stores, and pay and free television channels and indirectly to international markets through third parties. We also own a minority interest in CinemaNow, Inc., or CinemaNow, an internet video-on-demand provider, and own and operate a film and television production studio in Vancouver, British Columbia. We also own a minority interest in Maple Pictures Corp., or Maple Pictures, a Canadian film and television distributor based in Toronto, Canada. We have an output agreement with Maple Pictures through which we distribute our library and new titles in Canada.

      A key element of our strategy is to acquire individual properties, including films and television programs, libraries, and entertainment studios, to enhance our competitive position and generate significant financial returns. Our December 2003 acquisition of Artisan Entertainment Inc., or Artisan, added a diversified motion picture, family and home entertainment company to Lions Gate and the fully integrated distribution network we acquired from Artisan included direct-to-store distribution capabilities and output agreements with pay television and pay-per-view providers.

      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 www.lgf.com.

Our Industry

      General. According to the Veronis Suhler Stevenson (“VSS”), overall domestic box office revenue was approximately $9.5 billion in 2004. Although it fluctuates from year to year, in general, the domestic motion picture exhibition industry has maintained relatively steady growth in revenues and attendance over the past 10 years. VSS’s reports that total domestic box office revenues grew at a compound annual growth rate of 7.0% from 1998 through 2003, and annual attendance for the period 2000-2004 grew from 1.4 billion to 1.5 billion.

      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”), which includes Focus Features; Warner Bros., which includes New Line Cinema, Castle Rock Entertainment, Fine Line Features and Warner Independent Pictures; Twentieth Century Fox, which includes Searchlight Pictures; Sony Pictures Entertainment (“Sony”), which includes Columbia Pictures, TriStar Pictures, Screen Gems Pictures, Metro-Goldwyn Mayer Pictures (“MGM”), United Artists Pictures (“UA”) and Sony Pictures Classics; Paramount Pictures, which includes Paramount Classics; The Walt Disney Company (“Disney”), which includes Buena Vista, Hollywood Pictures, Touchstone, Dimension Films and Miramax Film Corp. (“Miramax”). Competitors less diversified than the major studios include Dreamworks SKG, Newmarket Films, Motion Picture Distribution LP and IFC Entertainment.

      According to the Motion Picture Association of America (“MPAA”), the average cost to produce and distribute a major studio film in 2004 was $98.0 million, including $63.6 million of production costs and $34.4 million of distribution and marketing expenses (typically called “P&A” or “prints and advertising”). In

comparison, films released by independent studios typically cost less than $40.0 million to produce and market in the same period. 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, Diary of a Mad Black Woman and Crash highlight moviegoers’ willingness to support high quality motion pictures despite limited marketing and production budgets.

      Product Life Cycle. Successful motion pictures may continue to play in theaters for over 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*

Home Video

      In its 2004 State of Home Video Report, Kagan Research, LLC (“KR”) estimated the size of the U.S. home video market to be $24.0 billion in 2004. Growth in this sector has been driven by increased DVD penetration that reached 59.7% in 2004, up from 43.1% in 2003. KR projects that DVD technology will be in 94.3% of all U.S. television households by 2013. Declining prices of DVD players, enhanced video and audio quality and special features such as inclusion of previously-deleted scenes, film commentaries and “behind the scenes” footage have all helped increase the popularity of the DVD format, sparking sharply 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 VSS’s 2004 Communications Industry Forecast & Report, spending on cable and satellite television increased 8.4% to $83.5 billion in 2003. Spending on cable and satellite television is expected to reach a combined $122.2 billion by 2008, rising at a compound annual growth rate of 7.9% from 2003-2008, 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

      Maple Pictures Corp. On April 13, 2005, we announced our new library and output agreements with Maple Pictures, a Canadian corporation, for the distribution of Lions Gate’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 key Lions Gate distribution assets in Canada. Maple Pictures was formed by two former Lions Gate executives and a third-party equity investor. We also acquired a minority interest in Maple Pictures. On April 8, 2005, we amended our credit agreement with JP Morgan and the other lenders that are parties thereto to allow for the transactions with Maple Pictures. In addition, the amendment eliminates our US$15 million Canadian dollar facility, increases our U.S. dollar revolving credit facility by the same amount and increases our permitted overhead expense for the fiscal year ended March 31, 2005.

      Motion Pictures. Historically, we have primarily produced English-language motion pictures with production 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 2005, we produced or completed or substantially completed principal photography on seven motion pictures, including:

The following motion pictures are currently in or slated for production in fiscal 2006, assuming all arrangements and agreements relating to the material elements are put in place:

      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, including Diary of A Mad Black Woman.

      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 2005 we produced approximately 58 hours of television programming, which included one-hour dramas, movies-of-the-week, mini-series, animated series, and reality and non-fiction programming. To date, Lions Gate remains a leading non-network affiliated independent producer of television product in the US. In fiscal 2005 we reduced our operations in Termite Art Production and ceased to utilize the label for new productions. The Termite Art Production label was used for such productions as What Were You Thinking, More Than Human, Cheating Death, and Outrageous Vacation Videos. We still remain active in the reality format area. In fiscal 2006 Lions Gate intends to have five series on the air, and numerous movies-of-the-week slated for production.

      Series. In fiscal 2005 we delivered 12 episodes of The Dead Zone, which is shown on USA Network in the United States and is distributed by Paramount International Television internationally. The Dead Zone is currently in production for season four, which will begin airing in summer 2005. We also delivered 18 episodes of Missing (formerly referred to as 1-800 Missing) which airs on Lifetime Television in the United States and is distributed by Sony Television International Distribution internationally. Missing is currently in production for season three and it will begin airing in the United States in summer 2005. Lions Gate Television is also in production on The Cut, a one-hour reality program with fashion icon Tommy Hilfiger and which debuted on CBS in June 2005. Other series in production are Wildfire, currently slated to air in summer 2005 on the ABC Family Channel and Weeds which is scheduled to premiere on Showtime in August 2005.

      Animation. We are involved in the development, acquisition, production and distribution of a number of animation projects. We are currently producing four direct-to-home video animated movies with Marvel Characters, Inc. The projects are: Avengers 1, Avengers 2, Dr. Strange and Iron Man. We are involved with the production of Arthur, based on the best-selling children’s book series, and Amazing Screw on Head from the creator of Hellboy. We have completed production of direct-to-home video Inspector Gadget. We are

developing a series in connection with Nickelodeon called Freddy the Pig. We have two CGI theatrical projects currently in the works, FoodFIGHT which is in the early stages of production and Sylvester and the Magic Pebble which is in development.

      Television Movies. We are actively involved in the development, acquisition, production and distribution of television productions in the movie-of-the-week and mini-series formats. During fiscal 2005 we produced and distributed five movies-of-the-week and one mini-series. The movies-of-the-week were: Brave New Girl for ABC Family Channel, Infidelity for Showtime, Frankenstein for USA Network, Baby For Sale for Lifetime and Widow on the Hill for Lifetime. We also delivered the five hour mini-series Five Days To Midnight which aired on USA Network.

      Domestic Theatrical Distribution. We distribute motion pictures directly to U.S. movie theaters. Over the past eight 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; and Tyler Perry’s Diary of a Mad Black Woman. 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; and Paul Haggis’ 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 seven years, films we have distributed have earned eighteen Academy Award nominations and won four 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 estimated P&A 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, Diary of a Mad Black Woman and Crash.

      We prepare our marketing campaign and release schedules to attract the widest possible target audience, with P&A typically tailored 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 the widest possible audience.

      Our remaining fiscal 2006 theatrical release schedule may include (in anticipated order of release):

      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.

      Until April 2005, we distributed French-language films in Quebec through Christal Films Distribution, in which we held an equity and voting interest. In fiscal 2005, Christal Films Distribution distributed the following motion pictures on Lions Gate’s behalf: Le Dernier Tunnel; L’incomparable Mlle C; L’Espérance; Le Mystère de la Chambre Jaune; Le goût des jeunes filles; Nouvelle-France; Les Égarés; Daniel et les Super Dogs; Twist; La Vengeauce d’Elvis Wong (aka Elvis Gratton 3 ); Les Ripoux 3; La Lune viendra d’elle-même; 7 ans de mariage; Nos Enfants Chéris; Cette Femme-là; Le Bison; Je reste; Le Coût de la vie; RRRrrr; Bienvenue au gîte; Un été avec les Fantômes; Maman Last Call; L ’Exécution; Brodeuses; and La vie avec mon Père.

      International Distribution. Our division, Lions Gate Films International (“LGI”) distributes our in-house productions and third party acquisitions to the international marketplace on a territory by territory basis through third parties. We have licensed international rights for approximately 1200 of the motion picture and television episode titles in our library.

      International territories are often pre-sold to cover a significant portion of the production budget. During the Cannes 2005 Film Festival, we were selling on our in-house theatrical productions including Saw2, and Catacombs. Catacombs is the second film in our collaboration with production company Twisted Pictures. Successful sales were also completed on previously announced titles including: The Devil’s Rejects, Fierce

People, Happy Endings and Grizzly Man produced with the Discovery Channel. In prior years, we have also overseen the international launch of in-house productions like Confidence starring Dustin Hoffman, Frailty starring Matthew McConaughey and the Academy Award winning Monster’s Ball starring Halle Berry.

      In addition to in-house productions, LGI directed international sales of studio titles, and worked with international distributors to facilitate successful launches worldwide. The latest in this trend toward larger productions was launched in Cannes, Dean Devlin’s $60 million WWI epic, Flyboys, starring James Franco and Jean Reno. During Oscar season, LGI received three Academy Award nominations for Hotel Rwanda, the epic tale of heroism starring Don Cheadle, Sophie Okonedo and Nick Nolte — released domestically by MGM/UA. LGI also oversaw the international release of The Prince and Me starring Julia Stiles, released domestically by Paramount Pictures.

      LGI also facilitates our international distributor launches of worldwide acquisitions on films like, Waiting, Rize and Hard Candy. Last year LGI oversaw the international releases of acquisitions Open Water and Saw and prior to that, launched House of 1000 Corpses, and Cabin Fever. LGI has expanded our sales and distribution of original Lions Gate television series like Weeds, Wildfire and Frankenstein.

      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 6,200 motion picture titles and 1,800 television episodes and programs. We have established a track record for building on the awareness generated from our theatrical releases, including the recent video release of our in-house productions Confidence, Wonderland and Shattered Glass and our acquisitions The Cooler, Cabin Fever and House of the Dead.

      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 Devil’s Pond, starring Tara Reid, Quicksand starring Michael Keaton and Michael Cain and 29 Palms starring Rachel Leigh Cook and Chris O’Donnell. We distribute successful television product on video, including the Saturday Night Live product 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. on May 18, 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.

      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 six direct to video Barbie movies and the Hot Wheels movie for Mattel, The Rescue Heroes Movie and the Little People video series for Fisher Price, as well as the PBS series Clifford the Big Red Dog from Scholastic Entertainment. Upcoming releases include the new NICK Jr. series Miss Spider, a new CGI animated Inspector Gadget movie and an all new Care Bears movie.

      In March 2005 we announced our intent to release a number of our top movie titles on the Universal Media Disk (“UMD”) format that plays on Play Station Portables. Our initial slate being released on UMD includes The Punisher, T2 (Terminator 2), Open Water, Saw and National Lampoon’s Van Wilder.

      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. We also have an output deal with Showtime.

      Canadian Distribution. Until April 2005, we operated a full service theatrical, video/DVD and television distribution business in English speaking Canada. Until December 31, 2003, we partnered with TVA Films, Inc. in an equally owned joint venture that serviced each company’s motion picture and television product through all distribution media in Canada until April 2005. 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 Pictue 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. These agreements expire on July 1, 2006 and November 9, 2004, with each subject to a six-month sell off period.

      In April 2005, we entered into a library output and new picture output arrangement with Maple Pictures. When the Motion Picture Distribution LP agreement expires we intend to distribute titles previously distributed in Canada by Motion Picture Distribution LP through Maple Pictures.

      Video-on-Demand. We own a minority interest in CinemaNow (www.cinemanow.com), a broadband video-on-demand company. 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, Lions Gate, MGM, Miramax, Universal, Sony, Sundance Channel, Warner Bros. and more than 250 other licensors via downloading or streaming. Founded in 1999, CinemaNow recently introduces high-definition content and support for portable media devices. Additional CinemaNow investors include Menlo Ventures, Microsoft Corporation, Cisco Systems, Inc. and Blockbuster Inc.

      We own and operate Lions Gate Studios, a state-of-the-art film and television production studio with eight sound stages occupying nearly 14 acres in North Vancouver, British Columbia. We also lease two 17,000 square foot sound stages with accompanying office space at Eagle Creek Studios in Burnaby, British Columbia.

      Motion picture and television production is well established in Canada. This can be attributed to numerous factors, including: i) close professional contacts between Canadian and U.S. studios, independent producers, distributors and buyers resulting from Canada’s geographic proximity to the United States; ii) lower production costs in Canada than in the U.S. and other countries due, in part, to lower guild and union minimums; iii) historically, the favorable exchange rate of the Canadian dollar; iv) government tax incentives; v) the availability of location assistance to motion picture and television producers offered by many Canadian cities and several provinces; vi) a large number of highly trained and professional crews, technicians and production personnel; vii) flexible trade unions that insist upon less onerous requirements than their U.S. counterparts; and viii) Canada’s wide-ranging topography that makes Canada ideally suited for location shooting.

      A stronger Canadian dollar resulted in a slowing of the Canadian industry this past year, but the studio facility continued to achieve occupancy averaging 80% for the year. Occupancy over the past five years has averaged 85% for both Lions Gate and Eagle Creek Studios combined, with most of the major studios leasing space at one or both of the sites.

      We are currently using a number of trademarks including “LIONS GATE ENTERTAINMENT,” “LIONS GATE HOME ENTERTAINMENT,” “ARTISAN HOME ENTERTAINMENT,” “FAMILY

HOME ENTERTAINMENT” and “TRIMARK HOME VIDEO” 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” and “TRIMARK PICTURES”, among others, are registered with the United States Patent and Trademark Office. The trademarks “LIONS GATE ENTERTAINMENT” 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 initiated legal actions to enforce copyright protection when necessary.

      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 and other cultural 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 technical personnel and production financing. In addition, our motion pictures compete for audience acceptance and exhibition outlets with motion pictures produced and distributed by other companies. As a result, the success of any of our motion pictures is dependent not only on the quality and acceptance of a particular picture, but also on the quality and acceptance of other competing motion pictures released into the marketplace at or near the same time.

      As of May 31, 2005 we had 297 full-time employees and 14 regular part-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

      The information under this section is contained under the caption “Risk Factors” in the Form 8-K filed on June 29, 2005 and such information is incorporated herein by reference.

      Our corporate head office is located at 555 Brooksbank Avenue, North Vancouver, British Columbia and occupies approximately 600 square feet of space under a month to month agreement. Our principal executive offices are located at 555 Brooksbank Avenue and 2700 Colorado Avenue, Suite 200, Santa Monica, California, 90404, where we occupy approximately 49,000 square feet, including an approximately 4,000 square foot screening room. Prior to April 2005, our Canadian operations and financial personnel were located in leased space of 6,018 square feet expiring in 2006 in Toronto, Ontario. As part of the Maple Pictures

transaction, Maple Pictures assumed the lease in Toronto and also employed a majority of the former Lions Gate employees in Toronto.

      Our studios complex is located at 555 Brooksbank Avenue, North Vancouver, British Columbia and occupies an approximately 14-acre site in a landscaped setting. We own the land on which the facilities are situated, which is currently subject to mortgages under four separate term loans totaling $18,640,000 as of March 31, 2005. We also have a five year operating lease for 50,000 square feet with Eagle Creek Studios in Burnaby, British Columbia expiring in August of 2005 and it is likely it will not be renewed.

      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.

      We currently, and from time to time, are involved in litigation incidental to the conduct of our business. We maintain comprehensive general liability and other insurance that we believe to be adequate for the purpose. We are not currently a party to any lawsuit or proceeding that we believe is likely to have a material adverse effect on our financial condition or results of operations.

      No matters were submitted to a vote of security holders during the fourth quarter of fiscal 2005.

Executive Officers

      The following table provides information about our executive officers at June 10, 2005:

      Jon Feltheimer. Mr. Feltheimer became a director in January 2000 and has been our Chief Executive Officer since March 2000. Mr. Feltheimer worked for Sony Pictures Entertainment from 1991-1999, serving as Founder and President of TriStar Television from 1991-1993, as President of Columbia TriStar Television from 1993-1995 and from 1995-1999 as President of Columbia TriStar Television Group and EVP of Sony Pictures Entertainment.

      André Link. Mr. Link has been our President since April 2000 and our Chairman Emeritus since December 2004. From May 2003 until December 2004, he served as our Chairman. Since 1962, Mr. Link has been Chief Executive Officer of Cinepix Inc. and C.F.P., which became Lions Gate Films Corp. Mr. Link has been a director since November 1997. Mr. Link is also a consultant for Christal Films Distribution Inc.

      Mark Amin. Mr. Amin has been our Vice Chairman since October 2000. From 1984 to October 2000, Mr. Amin served as Chief Executive Officer or Chairman of Trimark Holdings, Inc., which he founded. Since

1998 Mr. Amin has been Chairman of CinemaNow and since 2001 the owner and Chief Executive Officer of Sobini Films. Mr. Amin became a director in October 2000.

      Steven Beeks. Mr. Beeks has been the President of Lions Gate Entertainment Inc., our wholly-owned subsidiary, since December 2003. From January 1998 until December 2003, Mr. Beeks served as President of Artisan Home Entertainment.

      Michael Burns. Mr. Burns has been our Vice Chairman since March 2000. From 1991 to March 2000, Mr. Burns served as Managing Director and Head of Prudential Securities Inc.’s Los Angeles Investment Banking Office. Mr. Burns became a director in August 1999. Mr. Burns is Chairman and a director of Novica.com.

      James Keegan. Mr. Keegan has been our Chief Administrative Officer since April 2002, our Chief Financial Officer since September 2002 and our Chief Accounting Officer since April 2005. From September 1998 to April 2002, Mr. Keegan was the Chief Financial Officer of Artisan. From April 1989 to March 1990, he was Controller of Trimark Holdings, Inc. and from March 1990 to August 1998, he was the Chief Financial Officer of Trimark Holdings, Inc.

      Wayne Levin. Mr. Levin has been our Executive Vice President, Corporate Operations since February 2004. Previously, Mr. Levin had been our Executive Vice President, Legal and Business Affairs since November 2000. Mr. Levin has been our General Counsel since November 2000. He worked for Trimark Holdings, Inc. from September 1996 to November 2000, first as Director of Legal and Business Affairs from 1996 to 1998 and then as General Counsel and Vice President from 1998 to 2000.

      Marni Wieshofer. Ms. Wieshofer has been our Executive Vice President, Corporate Development since September 2002. From April 1999 until September 2002 Ms. Wieshofer served as our Chief Financial Officer. From February 1999 to April 1999, Ms. Wieshofer was our Vice President, Finance. From October 1995 to January 1999, Ms. Wieshofer served as Vice President, Finance of Alliance Atlantis Communications Inc., an entertainment company.

PART II

      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:

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 AMEX (the principal exchange market for our common shares until August 9, 2004) and the NYSE in U.S. dollars, for our two most recent fiscal years:

Holders

      As of June 1, 2005, there were 101,834,044 shares issued and outstanding and 337 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 are also limited in our ability to pay dividends on our common shares by restrictions under the Business Corporations Act (British Columbia) relating to the sufficiency of profits from which dividends may be paid.

Securities Authorized for Issuance Under Equity Compensation Plans

      The information required by this item is contained under the caption “Equity Compensation Plan Information for 2005” in a definitive Proxy Statement, which we will file with the Securities and Exchange Commission no later than 120 days after March 31, 2005 (the “Proxy Statement”), and such information is incorporated herein by reference.

Recent Sales of Unregistered Securities

      None.

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 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.

      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 21 of the notes to consolidated financial statements beginning on page F-35).

      The Selected Consolidated Financial Data below includes the results of Artisan from the acquisition date of December 16, 2003 onwards. Due to the acquisition, the Company’s results of operations for the year ended March 31, 2005 and financial position as at March 31, 2005 and 2004 are not directly comparable to prior reporting periods.

Overview

      We are a diversified independent producer and distributor of motion pictures, television programming, home entertainment, family entertainment and video-on-demand 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 122 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 6,200 motion picture titles and 1,800 television episodes and programs directly to retailers, video rental stores, and pay and free television channels and indirectly to international markets through third parties. We also own a minority interest in CinemaNow, Inc., or CinemaNow, an internet video-on-demand provider, and own and operate a film and television production studio in Vancouver, British Columbia. Effective April 2005, we also own a minority interest in Maple Pictures, a Canadian film and television distributor based on Toronto, Canada. Our December 2003 acquisition of Artisan added a diversified motion picture, family and home entertainment company to Lions Gate and the fully integrated distribution network we acquired from Artisan included direct-to-store distribution capabilities and output agreements with pay television and pay-per-view providers.

      Our revenues are derived from the following business segments:

      Our primary operating expenses include the following:

Our financial results include the results of Artisan from the acquisition date of December 16, 2003 onwards. Due to the acquisition, the Company’s results of operations for the year ended March 31, 2005 and financial positions as at March 31, 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, 2005 and 2004 are described in note 21 of our accompanying consolidated financial statements.

      Non-fiction programming. In July 2004, we entered into a transaction with Creative Differences Productions Inc., a company owned by a former employee of Lions Gate who was primarily responsible for Termite Art, our wholly owned television division. As a result of this transaction, Creative Differences Productions Inc. assumed the responsibility for the San Fernando Valley premises and certain operations of Termite Art. The transaction resulted in a gain of $0.7 million recorded as other income in the consolidated statement of operations for the year ended March 31, 2005. The transaction also resulted in a reduction of non-fiction programming hours for the year ended March 31, 2005 compared to the prior year. Lions Gate retained the distribution operations of Termite Art.

      Stock-Based Compensation Plan. On September 14, 2004, our shareholders approved the 2004 Performance Incentive Plan that provides for the issue of 2.0 million common shares of the Company to eligible employees, directors, officers and other eligible persons of the Company and its affiliates.

      Issuance of Convertible Senior Subordinated Notes. In October 2004, Lions Gate Entertainment Inc., a wholly owned subsidiary of the Company sold 2.9375% Convertible Senior Subordinated Notes (“2.9375% Notes”) with a maturity date of October 15, 2024 for a total of $150.0 million. We received $146.0 million of net proceeds after paying placement agents’ fees. Offering expenses were approximately $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 Lions Gate Entertainment Corp. 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 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%. We used the net proceeds for repayment of outstanding indebtedness under our existing U.S. dollar revolving credit facility and term loan.

      In February 2005, Lions Gate Entertainment Inc. sold 3.625% Convertible Senior Subordinated Notes (“3.625% Notes”) with a maturity date of March 15, 2025 for a total of $175.0 million. 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 Lions Gate Entertainment Corp. 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. We used a portion of the net proceeds for repayment of outstanding indebtedness under our existing U.S. dollar revolving credit facility.

      Exercise of Warrants. During the year ended March 31, 2005, 2,168,350 warrants were exercised and the Company issued 2,168,350 common shares and received proceeds of $10.8 million. During December 2004, an additional 1,993,250 warrants were exercised by cashless exercise resulting in the issuance of 1,052,517 common shares. Any remaining warrants expired January 1, 2005 and therefore no warrants are outstanding.

      Credit Facility. In anticipation of the proceeds from the 2.9375% Notes, we 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, we repaid the term loan in full with the revolving credit facility, thereby reducing the credit facility to a $215 million revolving facility at December 31, 2004. The repayment of our 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. In February 2004, we paid down the balance on our revolving credit facility, using a portion of the proceeds from the 3.625% notes resulting in a balance of zero at March 31, 2005 on our revolving credit facility. Effective March 31, 2005, we amended our credit facility to allow for the transactions with Maple Pictures and to eliminate our US$15 million Canadian dollar-denominated revolving credit facility and increase our U.S. dollar-denominated revolving credit facility by the same amount.

      Maple Pictures Corp. On April 13, 2005, we announced our new library and output agreements with Maple Pictures, a Canadian corporation, for the distribution of Lions Gate’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 key Lions Gate distribution assets in Canada. Maple Pictures was formed by two former Lions Gate executives and a third-party equity investor. We also acquired a minority interest in Maple Pictures.

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 digital video disks (“DVDs”) in the retail market, net of an allowance for estimated returns and 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 in the consolidated financial statements 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, 2004. 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 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 (n) 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. 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 year ended March 31, 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 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.

RESULTS OF OPERATIONS

      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 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. 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. Fifteen 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. The Company does not anticipate a further decrease in revenues throughout fiscal 2006.

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

      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 Lions Gate, 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 $3.3 million note and $0.3 million interest accrued on the note to March 31, 2004 may not be collectible 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 amounts owing may not be collectible. 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.

      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.

      Other income during fiscal 2005 includes $0.2 million collection of cash on a promissory note that was previously fully reserved.

      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).

      Consolidated revenues in fiscal 2004 of $375.9 million increased $111.0 million, or 41.9%, compared to $264.9 million in fiscal 2003.

      Motion pictures revenue of $308.9 million in fiscal 2004 increased $108.8 million, or 54.4%, compared to $200.1 million in fiscal 2003 due to significant releases during fiscal 2004 and to the inclusion of Artisan revenues from the date of acquisition. Theatrical revenue included in motion picture revenue of $30.9 million in fiscal 2004 increased $18.2 million, or 143.3%, compared to $12.7 million in fiscal 2003. Significant theatrical releases in fiscal 2004 included Dirty Dancing: Havana Nights, The Cooler, Girl with a Pearl Earring, Cabin Fever, House of 1000 Corpses and Confidence. Significant theatrical releases in fiscal 2003 included Frailty, Rules of Attraction, Lovely and Amazing and Secretary. Video revenue included in motion picture revenue of $223.4 million in fiscal 2004 increased $96.4 million, or 75.9%, compared to $127.0 million in fiscal 2003. 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. Significant video releases in fiscal 2003 included Monster’s Ball, Frailty, Rose Red, Rules of Attraction and State Property. International revenue included in motion picture revenue of $34.0 million in fiscal 2004 increased $2.5 million, or 7.9%, compared to $31.5 in fiscal 2003. Significant international sales in fiscal 2004 include Confidence, Cabin Fever, Wonderland, The Wash, Shattered Glass, Rules of Attraction and House of 1000 Corpses. Television revenue included in motion picture revenue of $16.8 million in fiscal 2004 decreased $4.3 million, or 20.4%, compared to $21.1 million in fiscal 2003. Significant television license fees in fiscal 2004 included The Boat Trip, House of 1000 Corpses and Confidence.

      Television production revenue of $60.7 million in fiscal 2004 increased by $1.3 million, or 2.2%, from $59.4 million in fiscal 2003. In fiscal 2004, 27 hours of one-hour drama series were delivered contributing domestic licensing 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. In fiscal 2003, 35 hours of one-hour drama series were delivered contributing domestic licensing revenue of $41.3 million, television movies contributed revenue of $2.3 million, video releases of television product contributed $3.7 million and non-fiction programming contributed revenue of $10.4 million. Domestic deliveries of one-hour drama series in fiscal 2004 included 18 hours of Missing and 8 hours of The Dead Zone. Video releases included The Dead Zone and The Pilot’s Wife. 84.5 hours of non-fiction programming were delivered during fiscal 2004 compared to 71.5 hours in fiscal 2003.

      Studio facilities revenue of $6.3 million in fiscal 2004 increased $0.9 million, or 16.7%, compared to $5.4 million in fiscal 2003 due primarily to an increase in rental rates and stage space.

      Direct operating expenses include amortization, participation and residual expenses. Direct operating expenses of $181.3 million for fiscal 2004 were 48.2% of revenue, compared to direct operating expenses of $133.9 million, which were 50.5% of revenue in fiscal 2003. Direct operating expenses as a percentage of revenue for the motion pictures segment increased year over year due to additional amortization recorded on acquired libraries. Direct operating expenses as a percentage of revenue for the television segment decreased year over year as fiscal 2003 included write-downs on Tracker.

      Distribution and marketing expenses of $207.0 million, increased $119.6 million, or 136.8%, compared to $87.4 million in fiscal 2003 due to significant releases during fiscal 2004 and to the inclusion of Artisan expenses from the date of acquisition. Theatrical P&A in fiscal 2004 of $89.9 million, increased $53.3 million, or 145.6%, compared to $36.6 million in fiscal 2003. 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 2004 of $107.0 million increased $64.3 million, or 150.6%, compared to $42.7 million in fiscal 2003 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 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.

      General and administration expenses of $42.8 million in fiscal 2004 increased $13.5 million, or 46.1%, compared to $29.3 million in fiscal 2003. In the current year, $2.9 million of production overhead was capitalized. Due to increased internal production spending on films and television programs, the Company began to capitalize production overhead from the beginning of fiscal 2004. Without capitalized production overhead, general and administrative expenses increased $16.4 million year-over-year, primarily due to the inclusion of Artisan expenses from the date of acquisition, an increase in professional fees and an increase in salaries and benefits, including stock-based compensation expense.

      Severance and relocation costs of $5.6 million represent costs incurred by Lions Gate, 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 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 $3.3 million note and $0.3 million interest accrued on the note to March 31, 2004 may not be collectible and accordingly a provision was recorded against the note. 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 amounts owing may not be collectible. We recorded a provision at December 31, 2003 against convertible debentures and other receivables due from CinéGroupe, resulting in a write-down of amounts owing to nil.

      Depreciation of $3.2 million in fiscal 2004 increased $1.4 million, or 77.8%, from $1.8 million in fiscal 2003 due primarily to the addition of $2.7 million of property and equipment as a result of the purchase of Artisan.

      Fiscal 2004 interest expense of $14.0 million increased $5.1 million, or 57.3%, from $8.9 million in fiscal 2003 primarily due to an increase in the credit facility balance to finance the acquisition of Artisan, the interest rate swap which was effective from January 2003, interest on the 4.875% Notes from December 2003, interest on promissory notes and advances acquired as part of the acquisition of Artisan and increased deferred financing fees on the amended credit facility and the 4.875% Notes. Interest expense was partially offset by interest capitalized to production costs of $1.3 million in fiscal 2004 and $0.3 million in fiscal 2003. Interest capitalized to production costs increased year over year due to an increased in new production financed by the credit facility in fiscal 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 2004 and a fair valuation loss of $3.2 million was recorded in fiscal 2003. Fiscal 2004 includes interest rate swaps with a notional amount of $100 million and CDN $20 million and fiscal 2003 includes only the interest rate swap with a notional amount of $100 million.

      Gain on sale of equity interests for the year ended March 31, 2003 includes a $2.1 million gain on the sale of Mandalay. On March 31, 2002, the carrying value of the Company’s investment in Mandalay was written down to its estimated fair value of $10.0 million as it was expected to be sold by the end of the fiscal year 2003. During fiscal 2003, the Company received distributions of $2.4 million from Mandalay under a prior agreement and 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. A gain was recorded on the sale as the sale price of $7.6 million exceeded the carrying value of $5.5 million.

      Equity interests for the year ended March 31, 2004 include $1.9 million equity interest in the loss of CinéGroupe which consists of 29.4% of the net loss of CinéGroupe; $0.1 million equity interest in the loss of Christal which consists of 75% of the net loss of Christal; and $0.2 million equity interest in the loss of

CinemaNow which consists of approximately 54% of the net loss of CinemaNow. Equity interests for the year ended March 31, 2003 includes $0.4 million equity interest in Christal, $0.4 million equity interest in the loss of CinemaNow, an equity interest in Mandalay which consists of operating losses of $2.1 million and an insignificant equity interest in the income of CinéGroupe. During the three months ended March 31, 2003, the Company purchased $0.4 million of Series C Convertible Preferred Shares of CinemaNow as part of a round of financing. During the year ended March 31, 2004, the Company recorded its share of the losses of CinemaNow up to its $0.4 million investment. At March 31, 2004, the investment in CinemaNow is nil. On November 8, 2002, we sold our investment in Mandalay for cash of $4.3 million and an interest bearing convertible promissory note of $3.3 million.

      The Company had income tax provision of $0.4 million in fiscal 2004, compared to $1.8 million in fiscal 2003. 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. Income tax loss carry-forwards amount to approximately $162.9 million for U.S. income tax purposes available to reduce income taxes over twenty years and $21.5 million for Canadian income tax purposes available to reduce income taxes over eight years.

      Net loss for the year ended March 31, 2004 was $92.1 million, or loss per share of $1.35, on 70.7 million weighted average common shares outstanding (after giving effect to the modification of warrants, the Series A Preferred Share dividends and accretion on the Series A Preferred Shares). This compares to net loss for the year ended March 31, 2003 of $1.4 million, or loss per share of $0.10, on 43.2 million weighted average common shares outstanding (after giving effect 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 benefit (provision), depreciation and minority interests of $52.9 million for the year ended March 31, 2005 increased $127.6 million compared to negative EBITDA $74.7 million for the year ended March 31, 2004 which decreased $89.0 million compared to EBITDA of $14.3 million for the year ended March 31, 2003.

      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):

      Refer to note 21 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 [syndicate banks] and sale of common shares.

      Issuance of 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 175% of the conversion price then in effect 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 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 $0.5 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 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 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, 2005, the Company had no borrowings (March 31, 2004 — $324.7 million) 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. The borrowing base assets at March 31, 2005 totaled $405.1 million

(March 31, 2004 — $390.9 million) and therefore the full $215 million is available under the credit facility at March 31, 2005. 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 being pledged as security for the credit facility. The credit facility is senior to the Company’s film obligations, subordinated notes and mortgages payable. The Company entered into a $100 million interest rate swap at an interest rate of 3.08%, commencing January 2003 and ending September 2005. The swap is in effect as long as three month LIBOR is less than 5.0%. Fair market value of the interest rate swap at March 31, 2005 is negative $0.1 million (March 31, 2004 — negative $2.3 million). Changes in the fair value representing a fair valuation gain on the interest rate swap during the year ended March 31, 2005 amount to $2.5 million (2004 — $0.8 million) and is 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. The studio facility subsidiary of the Company had mortgages payable at March 31, 2005 of $18.6 million (March 31, 2004 — $19.0 million) bearing interest at 5.62% to 7.51%. The 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 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. The mortgages contain negative covenants, including a financial covenant that imposes performance requirements on the operations of the studio facility subsidiary of the Company. As at March 31, 2005, the subsidiary was not in compliance with the financial covenant to maintain a certain minimum debt service coverage ratio. The subsidiary has obtained a waiver from the lender that waives this covenant default as at March 31, 2005. As a result of this covenant default, no dividend, management fees, and any other shareholder payments will be made by the studio facility subsidiary of the Company until they are in compliance with the minimum debt service coverage ratio, unless prior written consent is obtained from the lender.

      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, 2005 and at March 31, 2004 is approximately $100.3 million and $114.1 million, respectively. The decrease in backlog is due to significant international contracts at March 31, 2004 on titles including The Punisher, Godsend and The Prince and Me.

      Cash Flows Provided by/Used in Operating Activities. Cash flows provided by operating activities in the year ended March 31, 2005 were $95.5 million compared to cash flows used in operating activities in the year ended March 31, 2004 of $116.4 million and cash flows provided by operating activities of $17.5 million in the year ended March 31, 2003. In fiscal 2005, the Company increased net income compared to net losses in fiscal 2003 and 2002, resulting in an increase in cash flows provided by operating activities.

      Cash Flows Provided by/Used in Investing Activities. Cash flows used in investing activities of $1.3 million of 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 investing activities of $4.8 million in the year ended March 31, 2003 were primarily due to $2.4 million received from Mandalay Pictures as distributions under a prior agreement and $4.2 million as proceeds from the sale of the Company’s investment in Mandalay Pictures.

      Cash Flows Provided by/Used in Financing Activities. 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. Cash flows used in financing activities of $22.8 million in the year ended March 31, 2003 were primarily net repayment of bank loans and production loans.

      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. As our operations grow, our financing requirements are expected to grow and management projects the continued use of cash in operating activities and, therefore, we are dependent on continued access to external sources of financing. We believe that cash flow from operations, cash on hand, credit facility availability, tax shelter and production financing available 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. We monitor our cash flow liquidity, availability, fixed charge coverage, capital base, film spending and leverage ratios with the long-term goal of maintaining our creditworthiness.

      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.

      Future annual repayments on debt and other financing obligations, initially incurred for a term of more than one year, as of March 31, 2005 are as follows:

      Principal debt and other financing obligation repayments due during the year ending March 31, 2006 of $11.4 million consists of a $5.0 million promissory note due to Vialta Inc., assumed as part of the purchase of Artisan Entertainment, $2.7 million of mortgages on the studio facility, $2.5 million owed to film production entities on delivery of titles and $1.2 million owed under an operating line of credit available to Christal, an entity consolidated under FIN 46. 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 J.P. Morgan.

      Future commitments under contractual obligations by expected maturity date at March 31, 2005 are as follows:

      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, 2006 of $82.8 million are expected to be paid through cash generated from operations or from the available borrowing capacity from our revolving credit facility with J.P. Morgan.

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 to hedge foreign currency exposures on future production expenses denominated in Canadian dollars. As of March 31, 2005, we had outstanding contracts to sell US$8.8 million in exchange for CDN$11.1 million over a period of twenty weeks at a weighted average exchange rate of CDN$1.2609. Changes in the fair value representing an unrealized fair value gain on foreign exchange contracts outstanding during the year ended March 31, 2005 amounted to $0.3 million and are included in accumulated other comprehensive income (loss), a separate component of shareholders’ equity. During the year ended March 31, 2005, we completed foreign exchange contracts denominated in Canadian dollars. The net gains resulting from the completed contracts were $0.8 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, 2005 and any future balance up to $100 million will be mitigated by interest rate swaps. Debt and other financing obligations subject to variable interest rates include $1.2 million owed under an operating line of credit available to Christal, an entity consolidated under FIN 46 and $10.2 million owed to film production entities on delivery of titles.

      The Company entered into a $100 million interest rate swap at an interest rate of 3.08%, commencing January 2003 and ending September 2005. The swap is in effect as long as three month LIBOR is less than 5.0%. During the year ended March 31, 2005, the Company recorded interest expense of $1.3 million (2004 — $1.9 million) associated with the interest swap agreement. Fair value of the interest rate swap at March 31, 2005 is $0.1 million (March 31, 2004 — negative $2.3 million). Changes in the fair value representing a fair valuation gain on the interest rate swap during the year ended March 31, 2005 amount to $2.5 million (2004 — $0.8 million) and is included in the consolidated statements of operations. This contract is entered into with a major financial institution as counterparty. The Company is exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of replacing the contract, at current market rates. The Company does 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. During the year ended March 31, 2005, the subsidiary recorded interest expense of $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, 2005 is 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, 2005 amount to $0.3 million (2004 — loss of $0.6 million) and is included in the consolidated statements of operations. This contract is entered into with a major financial institution as counterparty. The subsidiary is exposed to credit loss in the event of nonperformance by the counterparty, which is limited to the cost of replacing the contract, at current market rates.

      The table below presents repayments and related weighted average interest rates for our interest-bearing debt and other obligations at March 31, 2005.

      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.

      Not applicable.

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.

      A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of misstatements due to error or fraud, if any, within the company have been detected.

      As of March 31, 2005, the end of the period covered by this report, the Company 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 and as a result of the material weaknesses discussed below under “Management’s Report on Internal Control Over Financial Reporting,” our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures were ineffective.

      We believe our financial statements fairly present, in all material respects, our financial position, results of operations and cash flows in our annual report on Form 10-K. The unqualified opinion of our independent registered public accounting firm on our financial statements is in included in Part IV, Item 15 of this Form 10-K.

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: (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 (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; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

      A material weakness is a control deficiency, as defined in Public Company Accounting Oversight Board’s Auditing Standard No. 2, or a combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the Company’s annual or interim financial statements would not be prevented or detected by Company personnel in the normal course of performing their assigned functions.

      Our management has made an assessment of the effectiveness of our internal control over financial reporting as of March 31, 2005. Management based its assessment on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

      Based on this assessment, our management has identified certain deficiencies in our internal control over financial reporting, which we believe are material weaknesses in internal control over financial reporting as of March 31, 2005.

      We have identified that we lack procedures and controls that are comprehensive enough to reduce the likelihood of a material misstatement to remote in the following areas (each of which we discuss below):

      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.

      In addition, the actions we are taking to remediate these issues are discussed in “Changes in Internal Control” below.

        Participations expenses and related liabilities are the amounts we owe to certain parties involved with a particular film based on the financial performance of the film. For financial reporting purposes, we report participations expense under the guidance provided by the AICPA’s Statement of Position No. 00-2, which is significantly different than participant reporting. Participant reporting is based on individual contracts which generally require reporting on a modified cash rather than accrual basis.

        The process of determining our participations expense and related liabilities for financial reporting purposes involves detailed calculations and analysis, a portion of which is subject to an estimation process. We perform detailed analysis to estimate these charges on a quarterly basis; however, certain amounts were miscalculated. These miscalculations were detected, either by management or our independent auditors, and adjusted for, during our financial statement close process.

        Our participations expense for financial reporting purposes amounted to approximately $130 million for the year ended March 31, 2005 and is included in direct operating expenses in our consolidated statement of operations.

        The process of determining our film investment amortization expense involves detailed calculations and analysis.

        We have a detailed methodology for determining film amortization; however, we have made mistakes in the use of source data used in the calculations and in the calculations themselves that management or our independent auditors have discovered during the financial statement close process.

        Our film and television programs amortization expense amounted to approximately $213 million for the year ended March 31, 2005 and is included in direct operating expenses in our consolidated statement of operations.

        We have lacked a rigorous monitoring process over certain distribution and marketing charges billed to us by one of our outsourced distribution service providers and we have recorded amounts billed to us without significant enough validation to ensure the information is complete and accurate. These distribution and marketing costs represented less than 5% of total distribution and marketing expense as reported in our consolidated statement of operations for the year ended March 31, 2005.

        A significant amount of accounting activity occurs when we close our books and analyze our accounts at each quarter-end and year-end reporting period. Much of this activity is subject to manual, non-routine or estimation processes. Our limited number of accounting personnel involved in the period-end close process has resulted in certain accounts not being fully analyzed on a timely basis, which has required adjustments to account balances.

      Due to the material weaknesses described above, management must conclude that we did not maintain effective internal control over financial reporting as of March 31, 2005.

      Our independent registered public accounting firm, Ernst & Young, LLP, audited management’s assessment of the effectiveness of the Company’s internal control over financial reporting and issued an attestation report thereon, which is included below under the heading “Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting”.

      Management has been aggressively addressing the material weaknesses noted above and is committed to effectively remediating known weaknesses as expeditiously as possible. Actions management has taken or plans to take are set forth below:

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 Report on Internal Control over Financial Reporting, that Lions Gate Entertainment Corp. did not maintain effective internal control over financial reporting as of March 31, 2005, because of the effect of material weaknesses in internal controls over calculating participations expense and related liabilities; calculating amortization of investment in films and television programs, monitoring certain charges billed by an outsourced service provider and the financial statement close process, 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 Lions Gate Entertainment Corp.’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.

      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.

      A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weaknesses have been identified and included in management’s assessment:

      These material weaknesses resulted in adjustments to certain accounts in the Company’s 2005 financial statements, including participations expense and related accruals, investment in films and television programs, direct operating costs, accounts payable and accrued liabilities and distribution and marketing costs.

      These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the March 31, 2005 financial statements, and this report does not affect our report dated June 29, 2005 on those financial statements.

      In our opinion, management’s assessment that Lions Gate Entertainment Corp. did not maintain effective internal control over financial reporting as of March 31, 2005, is fairly stated, in all material respects, based on the COSO control criteria. Also, in our opinion, because of the effect of the material weaknesses described above on the achievement of the objectives of the control criteria, Lions Gate Entertainment Corp. has not maintained effective internal control over financial reporting as of March 31, 2005, based on the COSO control criteria.

Los Angeles, California

June 29, 2005

      On June 27, 2005, Jon Feltheimer and Michael Burns were each awarded as performance bonuses a) $600,000 and b) 70,000 common shares that vest in two equal annual installments beginning on the first anniversary of the grant, provided that if the term of either Mr. Feltheimer’s or Mr. Burns’ employment agreement ends prior to the vesting period for the second 12 month period, then the second 50% of such restricted common shares shall vest within 6 months of the termination of the term of such employment agreement.

      On June 28, 2005, we executed an amendment to our credit agreement with JP Morgan and the other lenders that are parties thereto. This Amendment No. 6: (1) allows the Company to invest in marketable securities; (2) increases by $400,000 the permissible ceiling for us to retire the AFI certificates; (3) increases our permissible overhead expense for fiscal 2005 by $5,000,000; (4) increases acceptable debt limits of certain of our acceptable debtors; and (5) adds an acceptable domestic account debtor.

PART III

Corporate Governance

      The Company’s Corporate Governance Guidelines are also available on the Company’s website at www.lgf.com. You may obtain a copy of the Company’s Corporate Governance Guidelines without charge through the Company’s corporate headquarters.

      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 2004, confirming that the Company was in compliance with NYSE corporate governance listing standards then applicable to the Company during the transition period to NYSE corporate governance listing standards.

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

      The information relating to executive officers required by this item is included herein in Part I under the caption “Management.”

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

      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.

      The information required by this item will be contained under the captions “Executive Compensation” and “Equity Compensation Plan Information for Fiscal 2005” in the Proxy Statement, and such information is incorporated herein by reference.

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

      The information required by this item is contained under the captions “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

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

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 29, 2005.

DATE: June 29, 2005

      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 hereby authorizes each of Jon Feltheimer, Michael Burns, Wayne Levin and James Keegan as attorneys-in-fact to sign on his behalf, individually, and in the capacity stated below, and to file all amendments and/or supplements to this Annual Report on Form 10-K.

INDEX TO EXHIBITS

INDEX TO FINANCIAL STATEMENTS

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, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended March 31, 2005. 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, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended March 31, 2005, 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, 2005, 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 29, 2005 expressed an unqualified opinion on management’s assessment and an adverse opinion on the effectiveness of internal control over financial reporting thereon.

Los Angeles, California

June 29, 2005

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED BALANCE SHEETS

See accompanying notes.

LIONS GATE ENTERTAINMENT CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS