| Alright, so you woke up one day, checked
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| | real estate investments, and other
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| your Swiss Bank Account, called your
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| | alternative investments.
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| family office planner, had breakfast with
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| | *There is a huge demand, audience, and
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| your private client service wealth
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| | growing distribution structure for
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| manager, got your tax accountant on the
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| | specialty independent, ,crime, horror,
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| phone, and between three of you, you
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| | and other low budget films as exemplified
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| decided to invest your proceeds from your
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| | by the success of such films as
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| latest company's Merger or Acquisition
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| | "Brokeback Mountain", "Sideways",
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| not into some dubious hedge fund or
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| | "Capote", "Garden State", "Napolean
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| start-up biotech venture, but into
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| | Dynamite", "Y Tu Mama Tambien", "My Big
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| financing Hollywood films because you
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| | Fat Greek Wedding", "Memento", "Crash" ,
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| figure you need the State tax Credits,
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| | "Saw 1 &2", Friday The 13th",
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| the Federal tax write-offs, as well as a
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| | "Halloween", "Texas Chain Saw Massacre",
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| nice hedge of revenues from a few movies.
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| | "Hostel" and "WOLF CREEK", which was made
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| Now, this may not ring too well initially
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| | for $800,000, bought for nearly 4 million
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| with your hedge fund manager neighbors in
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| | dollars prior to its release by
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| Connecticut or your oil and gas investor
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| | Dimension, as well as "Hustle and Flow"
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| friends in Bahrain or Dubai, but aren't
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| | which was made for $2 million dollars and
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| these the same guys who are financing
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| | bought for $16 million by Paramount
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| Hollywood blockbusters? And the only
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| | Pictures.
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| question for you, how do you get in the
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| | *Apart from large blockbusters such as
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| game without feeling like the Uncle of
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| | "King Kong", "Harry Potter", and other
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| the film school student who wrote his
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| | large scale studio films, the majority of
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| nephew a $1,000,000 check for a film that
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| | studio-produced films have been under
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| starred his theater department classmates
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| | performing at the box office. The films
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| and ended up as a free download on
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| | that have been successful for studios
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| So after doing your share of homework,
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| | were all externally financed and or
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| here's what you discover may be the
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| | co-financed with studios, sold for 2-3 x
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| opportunity to spice up your wealthy but
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| | their costs, and a majority of them
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| boring life:
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| | retained foreign sales rights to maximize
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| *Sergey Brin And Larry Page Of Google,
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| | revenues.
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| Fred Smith, the CEO of Federal Express,
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| | So after looking at all the great
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| Norman Waitt, the Co-Founder of Gateway
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| | benefits, how do you actually go about
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| Computers, Jeff Skoll Of Ebay, Todd
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| | finding a deal or movie project where you
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| Wagner and Marc Cuban (formerly of
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| | are certain that half your money isn't
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| broadcast.com), Max Levchin and David
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| | going to be used by a Hollywood producer
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| Grodnick Of PAYPAL, Marc Turtletaub of
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| | as a down payment on a new mansion in
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| The Money Store, Roger Marino Of EMC
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| | Pacific Palisades?
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| Corp, former Chicago bulls co-owner Jim
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| | The key that separates the successful
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| Stern, Sidney Kimmel Of Jones Apparel
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| | film financiers vs. the newbie Oil
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| Group, Minnesota Twins owner Bill Pohlad;
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| | magnates who come to Los Angeles with a
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| Real Estate Developers Tom Rosenberg, Bob
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| | pocketful of money and end up leaving
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| Yari; and, financiers Robert Sturm,
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| | with half a pocketful of money is called
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| Sheikh Waleed Al Ibrahim, Zeid Masri of
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| | several things: structured finance,
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| SilverHaze Partners, Michael Singer, Mark
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| | leverage, risk minimization, multiple
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| Esses, David Larcher, Michael Goguen,
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| | exit strategies, tax credits, and the
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| Richard Landry, Michael Reilly, Rafael
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| | ethical consciousness of the filmmaker
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| Fogel, and Philip Anschutz are just a
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| | producer.
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| handful of high net worth entrepreneurs
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| | What does that translate to you in a real
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| who entered the motion picture finance
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| | world scenario. Lets say you want to
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| and production business with successful
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| | finance 100% of a $1.5 million dollar low
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| results.
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| | budget genre film whose worst case
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| *There are various tradable state,
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| | scenario is a DVD release and profits
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| federal, and international tax credit
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| | from international sales and perhaps some
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| incentives that would offer a premium
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| | other equity sweeteners in the conversion
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| based on an equity position. Assuming
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| | of the securities that you subscribe for
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| there is a 10 million dollar budget film,
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| | as part of the deal.
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| where 50% of it is in equity, and 50% is
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| | Well, if you write a check for $1.5
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| through international distribution
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| | million, and the film is shot in a state
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| guarantees prior to release. Now assume
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| | that has 30% in tax credits, you get back
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| there is a 20-25% tax credit on the
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| | $450,000 in tax credits + under Section
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| entire amount of $10 million dollars,
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| | 181, you are able to write off that
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| which will immediately translate into
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| | amount under Federal. So you are already
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| $2-2.5 million tax credit to an investor.
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| | making a nice return before the profits
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| *Numerous hedge funds such as Reed,
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| | kick in. Then you figure you sell the
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| Conner & Birdwell (DISNEY), Legendary
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| | film to 50 countries, and if you are
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| Fund (Warner Brothers), Melrose Fund
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| | really lucky, you sell the film for 3-4
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| (Paramount Pictures), Ingenious Media's
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| | times it cost to a studio at a swanky
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| 700 Million dollar Float on London's AIM,
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| | festival like Sundance, Toronto, Cannes,
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| Benjamin Waisbren Investments, and a host
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| | etc. Do this over 5-10 films and you can
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| of other funds and fund managers are
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| | make a very profitable name for yourself
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| entering the film finance arena.
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| | among the Hollywood elite.
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| *The explosion of international DVD,
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| | But lets really take this a step further
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| pay-per-view, home video, cable, megaplex
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| | and see how the bigger boys leverage film
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| theaters, the future of multi-lingual
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| | investing because they can get a bigger
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| Internet video on demand downloads, and
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| | star which can translate in larger
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| cross-market digital distribution
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| | overseas sales.
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| including low-cost theatrical digital
| |
| | Lets say a filmmaker/producer has a $10
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| projection, the movie industry is
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| | million film and you want in on the
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| accelerating at an unprecedented growth
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| | action. You would park $5 million in
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| rate.
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| | equity, receive an 20-30% tax credit on
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| *The American Jobs Creation Act of 2004,
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| | $10 million which will be $2-$3 million,
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| which amends the Internal Revenue Code of
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| | the producer will get the biggest star he
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| 1986, was signed into law . The Act
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| | can, get a studio to kick in the other $5
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| creates three tax incentives expressly
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| | million dollars, you wont worry about
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| applicable to motion pictures, one of
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| | ever seeing a penny from the theatrical
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| which - § 181 of the Internal Revenue
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| | release because you know your DVD profits
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| Code - is especially significant to
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| | and international sales will cover your
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| independent film producers and their
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| | equity position. Make sense?
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| passive investors on qualifying films
| |
| | Now leverage this with different budgets,
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| with budgets under $20 million dollars.
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| | genres, stars, distribution, places where
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| *The filmed and other entertainment
| |
| | you can get high tax credits (Ie Puerto
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| sectors are constantly outperforming and
| |
| | Rico is 40%), other exit strategies where
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| beating analyst expectations with regards
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| | you can find your shares on the London
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| to growth, and are the only industries
| |
| | AIM, and you are on your new career path
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| resistant to untimely global events and
| |
| | as a sophisticated and educated film
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| adverse economic conditions.
| |
| | financier. Off course, if you want to go
|
| *Movie Investor returns may be more
| |
| | even further and guarantee 100% of your
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| favorable and more liquid than holding
| |
| | capital, there are tricks to that as
|
| direct equity positions in most public
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| | well.
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| entertainment and other public companies,
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|
