##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File
    No. 001-34102
 RHI ENTERTAINMENT,
    INC.
 (Exact name of registrant as
    specified in its charter)
  Delaware

36-4614616(State or Other Jurisdiction
    of

(I.R.S. EmployerIncorporation or
    Organization)

Identification No.)1325 Avenue of Americas,
    21st

    Floor New York, New York(Address of Principal
    Executive Offices)

10019(Zip Code)   Registrants Telephone Number, Including Area Code:
 (212) 977-9001
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Stock, $0.01 par value

NASDAQ Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ
    DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K.




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##### 





RHI
    ENTERTAINMENT, INC.
  FORM 10-K
  TABLE OF
    CONTENTS
   
  
  Available Information


iiForward-Looking Statements


iiPART I


1Item 1.

Business


1Item 1A.

Risk Factors


8Item 1B.

Unresolved Staff Comments


22Item 2.

Properties


22Item 3.

Legal Proceedings


22Item 4.

Submission of Matters to a Vote of Security
    Holders


22PART II


22Item 5.

Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


22Item 6.

Selected Financial Data


24Item 7.

Managements Discussion and Analysis of
    Financial Condition and Results of Operations


26Item 7A.

Quantitative & Qualitative Disclosures
    About Market Risk


39Item 8.

Financial Statements and Supplemental Data


40Item 9.

Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


40Item 9A(T).

Controls and Procedures


40Item 9B.

Other Information


41PART III


42Item 10.

Directors, Executive Officers and Corporate
    Governance


42Item 11.

Executive Compensation


42Item 12.

Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


42Item 13.

Certain Relationships and Related Transactions,
    and Director Independence


42Item 14.

Principal Accountant Fees and Services


42PART IV


42Item 15.

Exhibits and Financial Statement Schedules


42EX-10.8.C: AMENDMENT #3 TO THE FIRST LIEN CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENTEX-10.8.D: AMENDMENT #4 TO THE FIRST LIEN CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENTEX-21.1: LIST OF SUBSIDIARIESEX-23.1: CONSENT OF KPMG LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATION   i




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AVAILABLE
    INFORMATION  www.rhitv.com http://ir.rhitv.com Form 10-K, Form 10-Q, Form 8-K Form 10-K.
  1-800-SEC-0330. http://www.sec.gov
    FORWARD-LOOKING
    STATEMENTS       ii




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PART I  Item 1.
    Business  Overview
  made-for-television made-for-television,
    Development
    and production
  Made-for-television
    movies
  and/or pay-per-view
    Mini-series
  Lonesome Dove, Gullivers Travels, Human Trafficking,
    Tin Man Mitch Alboms The Five People You Meet
    in Heaven picture-by-picture
  Episodic
    series
   1




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Long-form
    television library
  Cleopatra Alice In Wonderland Call of the
    Wild Dinotopia Arabian Nights Merlin The Odyssey The Lion in Winter
  Company
    strengths
  Proven production model
  
    adhering to our general practice of commencing production when
    we have a firm order from an initial licensee;
    collecting a significant portion of this contracted cash during
    the production cycle and prior to delivery of our
    content; and
    contracting with additional customers to license or pre-sell
    rights which account for a majority of our production costs
    prior to delivery of our content.  Long-term contracted library cash flows
  Expanding customer base
  Leading content provider Tin Man ®
  Highly experienced management team ®
 2




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Company
    strategy
    Exploit our growing library
      Capture growth opportunities in the worldwide television
    market
  Adapt our product to meet the demands of a diverse customer
    base
  Target new distribution platforms
   3




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The
    production, marketing and distribution of our films
  Project
    development
        Licensing
        Production
   4




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Production
    incentives and subsidies
      Talent
    Sales
    and distribution
     5




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Customers
    Seasonality
    2007
    through 2008  Quarterly Revenue by
    Percent
  
  Intellectual
    property
   6




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Competition
    Employees
    Recent
    Developments
   7




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Item 1A.
    Risk
    Factors  Risks
    related to our business
  We
    have incurred net losses in the past and may continue to
    experience net losses in the future, which may reduce our
    ability to raise needed capital.
    We
    principally operate in one business: the development, production
    and distribution of long-form television content; our lack of a
    diversified business could adversely affect us.
    Delays
    and changed delivery dates can have a material impact on the
    timing of our revenue recognition and receipt of cash, which may
    affect our financial results and ultimately decrease the value
    of our stock price.
    Our
    success depends on our ability to develop, produce and
    distribute quality MFT movies and
    mini-series
    that achieve acceptance from our target audiences.
  18-34 year
 8




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and/or
    We
    have a significant concentration of our revenue from a limited
    number of licensees.
      We
    rely on third party licensees to promote, market and advertise
    our programming to their customer base in order to sustain high
    television ratings.
   9




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We
    place significant reliance on third party production companies
    to produce our MFT movies and
    mini-series.
      Our
    business involves risks of liability claims for entertainment
    content, which could adversely affect our business, results of
    operations and financial condition.
    
    defamation;
    invasion of privacy;
    right of publicity or misappropriation;
    actions for royalties and accountings;
    breach of contract;
    negligence;
    copyright or trademark infringement (as discussed
    below); and
    other claims based on the nature and content of the materials
    distributed.    Our
    success depends on certain key employees.
    We
    must continue to augment our film library with new titles on an
    annual basis in order to maintain contracted cash flows
    generated by our film library.
   10




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We may
    not be able to sustain our production model of generating
    contractual sales and collecting a significant portion of our
    production costs in advance of the delivery of our content to an
    initial licensee.
    We
    face risks relating to the international distribution of our
    films and related products.
    
    laws and policies affecting trade, investment and taxes,
    including laws and policies relating to the repatriation of
    funds and withholding taxes and changes in these laws;
    differing cultural tastes and attitudes, including various
    censorship laws;
    differing degrees of protection for intellectual property;
    financial instability and increased market concentration of
    buyers in foreign television markets;
    the instability of foreign economies and governments;
    fluctuating foreign exchange rates; and
    war and acts of terrorism.  The
    advancement of video technologies may cause advertisers to shift
    their expenditures to media in which their commercial messages
    are not circumvented by technology, leading to a reduction in
    television advertising and a reduction in demand for our
    programming.
   11




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Our
    agreement with ION poses additional risks to our business,
    including our direct reliance on advertising revenue instead of
    our traditional revenue generated from licensing
    fees.
    We
    could be adversely affected by strikes and other union
    activity.
    Business
    interruptions and disasters could adversely affect our
    operations.
   12




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We may
    incur significant expenses in order to protect and defend
    against intellectual property claims, including claims where
    others may assert intellectual property infringement claims
    against us.
    We
    face a potential loss in the copyrighted works in our library if
    it is determined that authors or artists have a right to
    recapture rights in those works under the U.S. Copyright
    Act.
    Our
    intellectual property rights may not be enforceable in certain
    foreign jurisdictions.
    Competition
    within our industry could reduce our licensing revenue and our
    ability to achieve profitability.
   13




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Our
    preliminary plans for developing additional revenue and
    distribution opportunities may not be implemented, may require
    substantial expenditures and may not be achieved.
    We may
    incur accelerated film amortization or significant write-offs if
    our estimate of total revenue for each film is not
    accurate.
    We
    have accessed a variety of film production incentives and
    subsidies offered by foreign countries and the United States
    which reduce our production costs. If these incentives and
    subsidies become less accessible to us or to our production
    partners, or if they are eliminated, modified, denied or
    revoked, our production costs could substantially
    increase.
   14




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We
    have been managing a public company for less than one
    year.
    Our
    substantial indebtedness could adversely affect our financial
    health and prevent us from fulfilling our obligations under our
    existing senior secured credit facilities.
        
    our vulnerability to adverse general economic conditions is
    heightened;
    we will be required to dedicate a portion of our cash flow from
    operations to repayment of debt, limiting the availability of
    cash for other purposes;
    we are and will continue to be limited by financial and other
    restrictive covenants in our ability to borrow additional funds,
    consummate asset sales, enter into transactions with affiliates
    or conduct mergers and acquisitions; 15




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
    our flexibility in planning for, or reacting to, changes in our
    business and industry will be limited; and
    our ability to obtain additional financing in the future for
    working capital, capital expenditures, acquisitions, general
    corporate purposes or other purposes may be impaired.    Our
    results of operations may be adversely impacted by a worldwide
    macroeconomic downturn. As a result, the market price of our
    common stock may decline.
    Our
    focus on managing our resources in the most efficient manner may
    result in a reduction in our production slate.
    Risks
    related to our corporate structure
  We are
    a holding company with no operations of our own, and we will
    depend on the distributions from Holdings II to meet our
    ongoing obligations and to pay cash dividends on our common
    stock.
   16




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We are
    required to pay KRH for most of the benefits relating to any
    additional tax depreciation or amortization deductions we may
    claim as a result of the tax basis
    step-up we
    receive in connection with our acquisition of units of
    Holdings II from KRH and related
    transactions.
  one-for-one
     17




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The
    Holdings II LLC Agreement, Director Designation Agreement
    and other corporate organizational documents effectively provide
    for KRH, under certain circumstances, to exercise a greater
    degree of influence in, and control over, the operation of our
    business and the management of our affairs. Even though KRH or
    its affiliates own a minority economic interest in Holdings II,
    they may be able to continue to exercise a greater degree of
    influence in Holdings II.
      KRH or
    its affiliates may have interests that differ from those of our
    public stockholders and they may be able to influence our
    affairs.
    The
    agreements between us and KRH were made in the context of an
    affiliated relationship and may contain different terms than
    comparable agreements with unaffiliated third
    parties.
    Any
    future exchange of common membership units by Holdings II
    for common stock could dilute the voting power of our common
    stockholders and adversely affect the market value of our common
    stock.
  one-for-one
 18




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If we
    or KRH are determined to be an investment company, we would
    become subject to burdensome regulatory requirements and our
    business activities could be restricted.
        Our
    certificate of incorporation, bylaws and other material
    agreements contain anti-takeover protections that may discourage
    or prevent strategic transactions, including a takeover of our
    company, even if such a transaction would be beneficial to our
    stockholders.
    
    establish supermajority approval requirements by our directors
    before our board may take certain actions;
    authorize the issuance of blank check preferred
    stock that could be issued by our board of directors to increase
    the number of outstanding shares, making a takeover more
    difficult and expensive;
    establish a classified board of directors;
    allow removal of directors only for cause;
    prohibit stockholder action by written consent;
    do not permit cumulative voting in the election of directors,
    which would otherwise allow less than a majority of stockholders
    to elect director candidates; and
    provide that KRH will be able to exercise a greater degree of
    influence over the operations of Holdings II, which may
    discourage other nominations to our board of directors, if any
    director nominee designated by KRH is not elected by our
    stockholders.   19




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Risks
    related to an investment in our common stock
  Our
    future issuance of preferred stock could dilute the voting power
    of our common stockholders and adversely affect the market value
    of our common stock.
    The
    sale of a substantial number of our shares of common stock in
    the public market could adversely affect the market price of our
    shares, which in turn could negatively impact our share
    price.
    Because
    we have not paid dividends and do not anticipate paying
    dividends on our common stock in the foreseeable future, you
    should not expect to receive dividends on shares of our common
    stock.
   20




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Our
    stock price may be volatile.
    
    actual or anticipated quarterly fluctuations in our operating
    results;
    changes in expectations of future financial performance or
    changes in estimates of securities analysts;
    changes in the market valuations of other companies;
    announcements relating to actions of other media companies,
    strategic relationships, acquisitions or industry consolidation;
    terrorist acts or wars; and
    general economic, market and political conditions not related to
    our business.  While
    we believe we currently have adequate internal control over
    financial reporting, we are required to assess our internal
    control over financial reporting on an annual basis and any
    future adverse results from such assessment could result in a
    loss of investor confidence in our financial reports,
    significant expenses to remediate any internal control
    deficiencies and ultimately have an adverse effect on our stock
    price.
    The
    requirements of being a public company may strain our resources,
    divert managements attention and affect our ability to
    attract and retain qualified board members
     21




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Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Location

Business Use

Owned/LeasedNew York, NY

Corporate headquarters

LeasedKansas City, MO

Corporate office

LeasedLos Angeles, CA

Vault for film library

LeasedLos Angeles, CA

Sales and distribution

LeasedLondon, UK

Sales and distribution

LeasedSydney, AUS

Sales and distribution

Leased   Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Use of
    Proceeds from IPO
  Form S-1 (File No. 333-146098)
   22




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Price
    Range of RHI Entertainments Common Stock, par value
    $.01
      Sales PriceHigh


LowYear Ending December 31, 2009First Quarter (Through March 2, 2009)

$
10.04


$
2.36Year Ended December 31, 2008Fourth Quarter

$
15.03


$
2.65Third Quarter


16.00



10.42Second Quarter (Since June 25, 2008)


13.20



12.85   Dividend
    Policy
    Securities
    Authorized for Issuance Under Equity Compensation
    Plans
    Number of SecuritiesRemaining Available forFuture Issuance UnderNumber of Securities to



Weighted-Average



Equity CompensationBe Issued upon Exercise



Exercise Price of



Plans (Excludingof Outstanding Options,



Outstanding Options,



Securities Reflected inPlan Category



Warrants and Rights



Warrants and Rights



Column (a))Equity compensation
    plans approved by
    shareholders

RHI
    Entertainment, 
    Inc. 2008
    Equity
    Incentive Plan(1)


796,352
(2)


$
3.54
(3)



1,438,648
(4)     (1)
    
    The RHI Entertainment, Inc. 2008 Equity Incentive Plan was
    approved by our stockholders immediately prior to our initial
    public offering in June 2008.(2)
    
    Includes 529,154 options and 267,198 restricted stock units
    outstanding on December 31, 2008. Does not include the
    (i) 550,000 stock options and 150,000 restricted stock
    units granted to Mr. Halmi, Jr. on February 9, 2009
    and (ii) 350,000 stock options and 350,000 restricted stock
    units granted to Mr. Sagansky on February 9, 2009.(3)
    
    Represents the weighted-average exercise price of options
    outstanding as of December 31, 2008. Restricted stock units
    outstanding on December 31, 2008 do not have an exercise
    price and are excluded from this calculation. Does not include
    the stock options granted to Messrs. Halmi, Jr. and
    Sagansky on February 9, 2009.(4)
    
    Represents the remaining shares of our common stock available
    for issuance under the 2008 Equity Incentive Plan on
    December 31, 2008. Following the February 9, 2009
    grant of stock options and restricted stock units to
    Messrs. Halmi, Jr. and Sagansky, a total of
    38,647 shares remained available for grant. 23




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Item 6.
    Selected
    Financial Data  Successor


Predecessor


Initial PredecessorPeriod from


Period fromJune 23 to


January 1 toDecember 31,


June 22,


Year Ended December 31,


Year Ended December 31,2008


2008


2007


2006(1)


2005


2004(Dollars in thousands)Results of operations data:RevenueProduction

$
72,889


$
6,602


$
133,149


$
108,035


$
158,034


$
262,327Library


80,302



66,643



98,862



83,732



91,970



62,188Total revenue


153,191



73,245



232,011



191,767



250,004



324,515Gross profit (loss)(2)


48,918



23,849



94,937



73,637



(199,153
)


115,706Gross profit percentage


32
%


33
%


41
%


38
%


N/M



36
%(Loss) income from operations


(40,891
)


(2,911
)


47,326



28,616



(367,592
)


94,250Net (loss) income(3)


(36,195
)


(22,212
)


(22,597
)


(9,241
)


(389,090
)


82,895Other financial data:Net cash provided by (used in):Operating activities

$
(22,788
)

$
(32,331
)

$
(88,778
)

$
(99,518
)

$
13,742


$
(117,234
)Investing activities


(91
)


(81
)


(132
)


(579,865
)


(206
)


(177
)Financing activities


11,737



64,520



86,566



683,134



58,800



116,400Purchase of property and equipment


(91
)


(81
)


(132
)


(223
)


(206
)


(177
)   Successor


Predecessor


Initial PredecessorAs ofDecember 31,


As of December 31,


As of December 31,2008


2007


2006


2005


2004(Unaudited)(Dollars in thousands)Consolidated balance sheet data (end of period):Cash

$
22,373


$
1,407


$
3,751


$
73,401


$
1,065Film production costs, net


780,122



754,337



702,578



458,036



729,414Total assets


1,014,182



953,395



859,655



786,656



1,129,615Debt


576,789



655,951



565,000







Notes and amounts payable to affiliates, net














641,938



556,631Members equity (deficit)


102,162



100,413



132,858



(85,642
)


300,448   2008


2007


2006


2005


2004(Dollars in thousands)Other operating data (unaudited):Number of films delivered during the year ended December 31,


35



43



32



44



48Average cost per film for the year ended December 31,(4)

$
3,425


$
3,293


$
3,440


$
4,460


$
6,705Number of titles in our library as of December 31,


1,090



1,055



1,012



421



377Number of hours of programming in our library as of
    December 31,


3,949



3,864



3,746



1,297



1,162  24




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(1)
    
    The operating results for the year ended December 31, 2006
    reflect the period from January 12, 2006 (inception)
    through December 31, 2006. The Predecessor Companys
    operating results for the period January 1, 2006 to
    January 11, 2006 are excluded. From January 1, 2006 to
    January 11, 2006, the Predecessor Company generated
    $1.2 million of revenue, a $(2.5) million loss from
    operations and a $(3.2) million net loss.(2)
    
    Gross profit (loss) for the year ended December 31, 2005
    includes an impairment charge to film production costs of
    $295.2 million. In 2005, in connection with the pending
    sale of the company, a review of recoverability of assets was
    performed. As a result of this review, a $295.2 million
    charge was taken for impairment of film production costs. This
    non-cash impairment charge was recorded to reflect the net
    realizable value of the film library based on the negotiated
    purchase price for the company. There was no charge for
    impairment in 2006 or 2007.(3)
    
    Net loss for the period from June 23, 2008 to
    December 31, 2008 (Successor) includes an impairment charge
    of $59.8 million to goodwill attributable to the decline in
    our stock price during that period. Net loss for the year ended
    December 31, 2005 includes an impairment charge of
    $295.2 million to film production costs and
    $141.4 million to goodwill. In connection with the pending
    sale of the company in early 2006, a $141.4 million
    non-cash goodwill impairment charge was recorded in 2005 to
    reflect the fair value of goodwill based on the negotiated
    purchase price for the company.(4)
    
    Consists of film production costs (including negative cost net
    of any incentives or subsidies and excluding residuals,
    participations and capitalized overhead and interest) for the
    fiscal year indicated divided by the number of films delivered
    in such fiscal year. 25




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K.
  Form 10-K.
  In this discussion, unless the context otherwise requires,
    the terms RHI Inc., the Company,
    we, us and our refer to RHI
    Entertainment, Inc. and its subsidiaries including RHI
    Entertainment Holdings II, LLC and RHI Entertainment,
    LLC.
  Overview
         26




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Critical
    accounting policies and estimates
    Revenue
    recognition
  00-02,
  Allowance
    for doubtful accounts
    Film
    production costs and cost of sales
     27




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film-by-film
  Impairment
    of goodwill and other long-lived assets
        Share-based
    compensation
  Share-Based Payment
  Income
    taxes
   28




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Recent
    accounting pronouncements
  No. 07-1, EITF 07-1. EITF 07-1 EITF 07-1 EITF 07-1 EITF 07-1
   29




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30




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Results
    of Operations
    (a)


(b)Successor


Predecessor



(a) + (b) Combined


Predecessor


PredecessorPeriod fromPeriod from


Period from



(Year Ended


Year Ended


12-Jan 2006 toJune 23, 2008 to


January 1, 2008



December 31,


December 31,


December 31,December 31, 2008


to June 22, 2008



2008


2007


2006(1)(In thousands, except per share data)RevenueProduction revenue

$
72,889


$
6,602



$
79,491


$
133,149


$
108,035Library revenue


80,302



66,643




146,945



98,862



83,732Total revenue


153,191



73,245




226,436



232,011



191,767Cost of sales


104,273



49,396




153,669



137,074



118,130Gross profit


48,918



23,849




72,767



94,937



73,637Other costs and expenses:Selling, general and administrative


23,306



25,802




49,108



45,684



30,597Compensation expense - Company founder



















12,351Amortization of intangible assets


665



671




1,336



1,327



1,473Goodwill Impairment


59,838








59,838







Fees paid to related parties:Management fees






287




287



600



600Termination fee


6,000








6,000







(Loss) income from operations


(40,891
)


(2,911
)



(43,802
)


47,326



28,616Other (expense) income:Interest expense, net


(18,727
)


(21,559
)



(40,286
)


(51,487
)


(32,610
)Interest income


23



34




57



215



379Loss on extinguishment of debt















(17,297
)


Other (expense) income, net


(895
)


706




(189
)


70



715Loss before income taxes and non-controlling interest in loss of
    consolidated entity


(60,490
)


(23,730
)



(84,220
)


(21,173
)


(2,900
)Income tax (provision) benefit


(2,239
)


1,518




(721
)


(1,424
)


(6,341
)Loss before non- controlling interest in loss of consolidated
    entity


(62,729
)


(22,212
)



(84,941
)


(22,597
)


(9,241
)Non-controlling interest in loss of consolidated entity


26,534








26,534







Net loss

$
(36,195
)

$
(22,212
)


$
(58,407
)

$
(22,597
)

$
(9,241
)Basic and diluted loss per share


(2.68
)


N/A




N/A



N/A



N/A    (1)
    
    The operating results for the year ended December 31, 2006
    discussed herein (and included in the consolidated statement of
    operations) reflect the period from January 12, 2006
    (inception) through December 31, 2006. The Predecessor
    Companys operating results for the period from
    January 1, 2006 to January 11, 2006 are excluded. From
    January 1, 2006 to January 11, 2006, the Predecessor
    Company generated $1.2 million of revenue, a
    $(2.5) million loss from operations and a
    $(3.2) million net loss. 31




---



##### Table of Contents



The year
    ended December 31, 2008 compared to the year ended
    December 31, 2007
    Revenue,
    cost of sales and gross profit
  Year Ended December 31,2008


2007As a





As a


Increase/


Increase/Percentage of





Percentage of


(Decrease)


(Decrease)Amount


Revenue


Amount


Revenue


Variance $


Variance %(Dollars in thousands)Production revenue

$
79,491



35
%

$
133,149



57
%

$
(53,658
)


(40
)%Library revenue


146,945



65
%


98,862



43
%


48,083



49
%Total revenue


226,436



100
%


232,011



100
%


(5,575
)


(2
)%Cost of sales


153,669



68
%


137,074



59
%


16,595



12
%Gross profit

$
72,767



32
%

$
94,937



41
%

$
(22,170
)


(23
)%     and/or
      film-by-film
   32




---



##### Table of Contents



Other
    costs and expenses
  Increase/


Increase/Year Ended December 31,


(Decrease)


(Decrease)2008


2007


Variance $


Variance %(Dollars in thousands)Selling, general and administrative

$
49,108


$
45,684


$
3,424



7
%Amortization of intangible assets


1,336



1,327



9



1
%Goodwill Impairment


59,838







59,838



N/MManagement and termination fees


6,287



600



5,687



N/MN/M  Not meaningful         Interest
    expense, net
    Loss
    on extinguishment of debt
   33




---



##### Table of Contents



Other
    (expense) income, net
    Income
    tax provision
    Net
    loss
    The year
    ended December 31, 2007 compared to the year ended
    December 31, 2006
  Revenue,
    cost of sales and gross profit
  Year Ended December 31,2007


2006(1)As a





As a


Increase/


Increase/Percentage of





Percentage of


(Decrease)


(Decrease)Amount


Revenue


Amount


Revenue


Variance $


Variance %(Dollars in thousands)Production revenue

$
133,149



57
%

$
108,035



56
%

$
25,114



23
%Library revenue


98,862



43
%


83,732



44
%


15,130



18
%Total revenue


232,011



100
%


191,767



100
%


40,244



21
%Cost of sales


137,074



59
%


118,130



62
%


18,944



16
%Gross profit

$
94,937



41
%

$
73,637



38
%

$
21,300



29
%     (1)
    
    The operating results for the year ended December 31, 2006
    discussed herein (and included in the consolidated statement of
    operations) reflect the period from January 12, 2006
    (inception) through December 31, 2006. The Predecessor
    Companys operating results for the period from
    January 1, 2006 to January 11, 2006 are excluded. From
    January 1, 2006 to January 11, 2006, the Predecessor
    Company generated $1.2 million of revenue, a
    $(2.5) million loss from operations and a
    $(3.2) million net loss.     34




---



##### Table of Contents



Other
    costs and expenses
  Increase/


Increase/Year Ended December 31,


(Decrease)


(Decrease)2007


2006(1)


Variance $


Variance %(Dollars in thousands)Selling, general and administrative

$
45,684


$
30,597


$
15,087



49
%Compensation expense  company founder






12,351



(12,351
)


(100
)%Amortization of intangible assets


1,327



1,473



(146
)


(10
)%Management and termination fees


600



600







0
%     (1)
    
    The operating results for the year ended December 31, 2006
    discussed herein (and included in the consolidated statement of
    operations) reflect the period from January 12, 2006
    (inception) through December 31, 2006. The Predecessor
    Companys operating results for the period from
    January 1, 2006 to January 11, 2006 are excluded. From
    January 1, 2006 to January 11, 2006, the Predecessor
    Company generated $1.2 million of revenue, a
    $(2.5) million loss from operations and a
    $(3.2) million net loss.     35




---



##### Table of Contents



Interest
    expense, net
    Loss
    on extinguishment of debt
    Other
    (expense) income, net
    Income
    tax provision
    Net
    loss
    Liquidity
    and capital resources
  time-to-time,
   36




---



##### Table of Contents



The Year Ended December 31,2008(1)


2007


2006(2)(Dollars in thousands)Net cash used in operating activities

$
(55,119
)

$
(88,778
)

$
(99,518
)Net cash used in investing activities


(172
)


(132
)


(579,865
)Net cash provided by financing activities


76,257



86,566



683,134Cash (end of period)


22,373



1,407



3,751     (1)
    
    The cash flows for the year ended December 31, 2008
    represents the combined results for the Predecessor and
    Successor period presented. The combined results are non-GAAP
    financial measures and should not be used in isolation or
    substitution of Predecessor and Successor results. We believe
    the combined results help to provide a presentation of our
    results for comparability purposes to prior periods.(2)
    
    The cash flows for the year ended December 31, 2006 reflect
    the period from January 12, 2006 (inception) through
    December 31, 2006. The cash flows for the period
    January 1, 2006 to January 11, 2006 are excluded. From
    January 1, 2006 to January 11, 2006, the Predecessor
    Company used $2.7 million of net cash flow in operating
    activities. There was no net cash flow from investing or
    financing activities during this period.  Operating
    activities
   37




---



##### Table of Contents



Investing
    activities
      Financing
    activities
       38




---



##### Table of Contents



Contractual
    obligations
    Payments Due by PeriodLess Than








More ThanTotal


1 Year


1-3 Years


3-5 Years


5 YearsOff-balance sheet arrangements:Operating lease commitments(1)

$
37,658


$
3,474


$
7,388


$
7,019


$
19,777Obligations pursuant to ION Agreement(2)


25,450



19,700



5,750







Purchase obligations(3)


5,810



4,235



1,575







68,918



27,409



14,713



7,019



19,777Contractual obligations reflected on the balance sheet:Debt obligations(4)


576,789







52,500



449,289



75,000Accrued film production costs(5)


92,675



84,857



7,818







Other contractual obligations(6)


8,379



4,379



2,000



2,000



677,843



89,236



62,318



451,289



75,000Total contractual obligations(7)

$
746,761


$
116,645


$
77,031


$
458,308


$
94,777     (1)
    
    Operating lease commitments represent future minimum payment
    obligations on various long-term noncancellable leases for
    office and storage space.(2)
    
    Obligations pursuant to the ION Agreement represent the minimum
    guarantee payments associated with our arrangement to provide
    programming to ION for its primetime weekend schedule.(3)
    
    Purchase obligation amounts represent a contractual commitment
    to exclusively license the rights in and to a film that is not
    complete.(4)
    
    Debt obligations exclude interest payments and include future
    principal payments due on our bank debt (see Note 7 in our
    consolidated financial statements).(5)
    
    Accrued film production costs represent contractual amounts
    payable for the completed films as well as costs incurred for
    the buy out of certain participations.(6)
    
    Other contractual obligations primarily represent commitments to
    settle various accrued liabilities.(7)
    
    Excluded from the table are $1.6 million of unrecognized
    tax obligations associated with FIN 48 for which the timing of
    payment is not estimable.  Off-balance
    sheet arrangements
    Item 7A.
    Quantitative
    and qualitative disclosures about market risk  Interest
    rate risk
   39




---



##### Table of Contents



Foreign
    currency risk
      Credit
    risk
    Item 8.
    Financial
    Statements and Supplemental Data  page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A(T).
    Controls
    and Procedures    Rule 13a-15 Rule 13a-15(e)
        Rule 13a-15(f)
 40




---



##### Table of Contents



Item 9B.
    Other
    Information     41




---



##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance    Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Form 10-K
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services    PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules.    page F-1.
         42




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Robert
    A. Halmi, Jr.   (Principal Executive Officer)
    Signature

Capacity

Date/s/  Robert
    A. Halmi, Jr.Robert
    A. Halmi, Jr.

President and Chief Executive
    Officer & Director(Principal Executive Officer)

March 5, 2009/s/  William
    J. AliberWilliam
    J. Aliber

Chief Financial Officer(Principal Financial
    and Accounting Officer)

March 5, 2009/s/  Jeffrey
    SaganskyJeffrey
    Sagansky

Chairman of the Board

March 5, 2009/s/  Michael
    B. GoldbergMichael
    B. Goldberg

Director

March 5, 2009/s/  Frank
    J. LoverroFrank
    J. Loverro

Director

March 5, 2009/s/  Thomas
    M. HudginsThomas
    M. Hudgins

Independent Director

March 5, 2009/s/  Russel
    H. GivensRussel
    H. Givens

Independent Director

March 5, 2009/s/  J.
    Daniel SullivanJ.
    Daniel Sullivan

Independent Director

March 5, 2009  43




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  RHI
    ENTERTAINMENT, INC.
  PageReport of independent registered public
    accounting firm


F-2Consolidated balance sheets as of
    December 31, 2008 (Successor) and 2007 (Predecessor)


F-3Consolidated statements of operations for the
    period from June 23, 2008 to December 31, 2008
    (Successor), the period from January 1, 2008 to
    June 22, 2008 (Predecessor), the year ended
    December 31, 2007 (Predecessor) and the period
    January 12, 2006 (inception) to December 31, 2006
    (Predecessor)


F-4Consolidated statements of
    stockholders/members equity and comprehensive loss
    for the period from June 23, 2008 to December 31, 2008
    (Successor), the period from January 1, 2008 to
    June 22, 2008 (Predecessor), the year ended
    December 31, 2007 (Predecessor) and the period
    January 12, 2006 (inception) to December 31, 2006
    (Predecessor)


F-5Consolidated statements of cash flows for the
    period from June 23, 2008 to December 31, 2008
    (Successor), the period from January 1, 2008 to
    June 22, 2008 (Predecessor), the year ended
    December 31, 2007 (Predecessor), the period
    January 12, 2006 (inception) to December 31, 2006
    (Predecessor)


F-7Notes to consolidated financial statements


F-8  F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm            /s/ KPMG
    LLP
   
 F-2




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Consolidated
    Balance Sheets
  Successor


PredecessorDecember 31,


December 31,2008


2007(Dollars in thousands, except per share data)ASSETSCash

$
22,373


$
1,407Accounts receivable, net of allowance for doubtful accounts and
    discount to present value of $11,933 and $6,311, respectively


180,125



113,759Film production costs, net


780,122



754,337Property and equipment, net


370



399Prepaid and other assets, net


28,928



20,055Intangible assets, net


2,264



3,600Goodwill






59,838Total assets

$
1,014,182


$
953,395LIABILITIES AND STOCKHOLDERS/MEMBERS EQUITYAccounts payable and accrued liabilities


51,477



40,172Accrued film production costs


195,328



132,656Debt


576,789



655,951Deferred revenue


13,530



24,203Non-controlling interest in consolidated entity


74,896



Total liabilities


912,020



852,982Members equity






112,270Stockholders equityCommon stock, par value $0.01 per share; 125,000 shares
    authorized and 13,505 shares issued and outstanding


135



Additional paid-in capital


149,609



Accumulated deficit


(36,195
)


Accumulated other comprehensive loss


(11,387
)


(11,857
)Total stockholders/members equity


102,162



100,413Total liabilities and stockholders/members equity

$
1,014,182


$
953,395    F-3




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Consolidated
    Statements of Operations
   Successor


PredecessorPeriod from


Period from





Period fromJune 23,


January 1,





January 12, 20062008 to


2008 to


Year Ended


(Inception) toDecember 31, 2008


June 22, 2008


December 31, 2007


December 31, 2006(Dollars in thousands, except per share data)RevenueProduction revenue

$
72,889


$
6,602


$
133,149


$
108,035Library revenue


80,302



66,643



98,862



83,732Total


153,191



73,245



232,011



191,767Cost of sales


104,273



49,396



137,074



118,130Gross profit


48,918



23,849



94,937



73,637Other costs and expenses:Selling, general and administrative


23,306



25,802



45,684



30,597Compensation expense  Company founder (note 6)














12,351Amortization of intangible assets


665



671



1,327



1,473Goodwill impairment charge


59,838











Fess paid to related parties:Management fees






287



600



600Termination fee


6,000











(Loss) income from operations


(40,891
)


(2,911
)


47,326



28,616Other (expense) income:Interest expense, net


(18,727
)


(21,559
)


(51,487
)


(32,610
)Interest income


23



34



215



379Loss on extinguishment of debt










(17,297
)


Other (expense) income, net


(895
)


706



70



715Loss before income taxes and non-controlling interest in loss of
    consolidated entity


(60,490
)


(23,730
)


(21,173
)


(2,900
)Income tax (provision) benefit


(2,239
)


1,518



(1,424
)


(6,341
)Loss before non-controlling interest in loss of consolidated
    entity


(62,729
)


(22,212
)


(22,597
)


(9,241
)Non-controlling interest in loss of consolidated entity


26,534











Net loss

$
(36,195
)

$
(22,212
)

$
(22,597
)

$
(9,241
)Loss per share:Basic

$
(2.68
)


N/A



N/A



N/ADiluted

$
(2.68
)


N/A



N/A



N/AWeighted Average Shares OutstandingBasic


13,500



N/A



N/A



N/ADiluted


13,500



N/A



N/A



N/A    F-4




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Consolidated
    Statements of Stockholders/Members Equity and
    Comprehensive Loss
  AccumulatedOther


TotalMembers


Comprehensive


MembersEquity


Loss


Equity(Dollars in thousands)Predecessor CompanyBalance, January 12, 2006 (inception)

$



$



$
Net loss


(9,241
)






(9,241
)Unrealized loss on interest rate swap contracts (note 12)






(49
)


(49
)Comprehensive loss










(9,290
)Capital contribution, net of organizational costs of $254
    (note 6)


137,826







137,826Contributed capital  Share-based compensation
    (note 13)


4,322







4,322Balance, December 31, 2006


132,907



(49
)


132,858Net loss


(22,597
)






(22,597
)Unrealized loss on interest rate swap contracts (note 12)






(11,808
)


(11,808
)Comprehensive loss










(34,405
)Capital contribution


20







20Contributed capital  Share-based compensation
    (note 13)


1,940







1,940Balance, December 31, 2007


112,270



(11,857
)


100,413Net loss


(22,212
)






(22,212
)Unrealized gain on interest rate swap contracts (note 12)






1,232



1,232Comprehensive loss










(20,980
)Capital contribution (note 1)


29,135







29,135Distribution payable to KRH (note 1)


(728
)






(728
)Contributed capital  Share-based compensation
    (note 13)


926







926Balance, June 22, 2008

$
119,391


$
(10,625
)

$
108,766    F-5




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Consolidated
    Statements of Stockholders/Members Equity and
    Comprehensive Loss (Continued)
  AccumulatedAdditional


Other





TotalCommon Stock


Paid-In-


Comprehensive


Accumulated


StockholdersShares


Amount


Capital


Loss


Deficit


Equity(Dollars in thousands, except share amounts)Successor CompanyBalance, June 22, 2008





$



$



$



$



$
IPO, net of $15,016 of issuance costs (note 1)


13,500,100



135



173,849











173,984Contribution of Holdings II Net Assets by KRH (note 1)










119,391



(10,625
)






108,766Distribution to KRH (note 1)










(34,972
)










(34,972
)Initial allocation of non-controlling interest (note 5)










(109,304
)


4,494







(104,810
)Contributed capital  Share-based compensation
    (note 13)










1,093











1,093Issuance of common stock to employees


5,000







25











25Unrealized loss on interest rate swap contracts (note 12)














(9,109
)






(9,109
)Non-controlling interest allocation (note 5)










(473
)


3,853







3,380Net loss


















(36,195
)


(36,195
)Balance, December 31, 2008


13,505,100


$
135


$
149,609


$
(11,387
)

$
(36,195
)

$
102,162   Comprehensive loss for the period from June 23, 2008 to
    December 31, 2008:Net loss

$
(36,195
)Unrealized loss on interest rate swap contracts


(9,109
)Non-controlling interest allocation of unrealized loss on
    interest rates swap contracts


3,853Comprehensive loss

$
(41,451
)    F-6




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Consolidated
    Statements of Cash Flows
   Successor


PredecessorPeriod fromPeriod from


Period from





January 12, 2006June 23,


January 1,


Year Ended


(Inception) to2008 to


2008 to


December 31,


December 31,December 31, 2008


June 22, 2008


2007


2006(Dollars in thousands)Cash flows from operating activitiesNet loss

$
(36,195
)

$
(22,212
)

$
(22,597
)

$
(9,241
)Adjustments to reconcile net loss to net cash used in operating
    activities:Amortization of film production costs


93,481



43,579



122,493



113,186Goodwill impairment charge


59,838











Non-controlling interest in loss of consolidated entity


(26,534
)










Amortization of deferred debt financing costs


1,754



549



1,844



2,371Increase of accounts receivable reserves


1,252



4,370



5,496



100Share-based compensation


1,118



926



1,940



4,322Amortization of intangible assets


665



671



1,327



1,473Depreciation and amortization of fixed assets


107



93



204



172Deferred income taxes


(37
)


(1,558
)


(1,354
)


75Loss on disposal of fixed assets


1







2



6Amortization of debt discount






355



526



Loss on extinguishment of debt










17,297



Change in operating assets and liabilities:(Increase) decrease in accounts receivable


(67,294
)


(4,694
)


(55,545
)


8,320Decrease (increase) in prepaid and other assets


4,521



(2,457
)


(9,585
)


907Additions to film production costs


(107,936
)


(54,909
)


(174,252
)


(155,964
)(Decrease) increase in accounts payable and accrued liabilities


(2,899
)


6,327



(3,846
)


16,703Increase (decrease) in accrued film production costs


63,669



(997
)


28,079



(56,659
)(Decrease) in deferred revenue


(8,299
)


(2,374
)


(807
)


(25,289
)Net cash used in operating activities


(22,788
)


(32,331
)


(88,778
)


(99,518
)Cash flows from investing activitiesAcquisition of Hallmark Entertainment, LLC, net of cash acquired














(426,807
)Acquisition of Crown Media Distribution, LLC














(152,835
)Purchase of property and equipment


(91
)


(81
)


(132
)


(223
)Net cash used in investing activities


(91
)


(81
)


(132
)


(579,865
)Cash flows from financing activitiesSale of common stock


189,000











Payment of offering costs and fees


(15,016
)










Borrowings from credit facilities


165,679



80,093



744,378



621,000Repayments of credit facilities


(284,900
)


(44,708
)


(653,953
)


(56,000
)Deferred debt financing costs


(4,726
)






(3,879
)


(19,692
)Second lien pre-payment penalty


(2,600
)










Member capital contributions






29,135



20



138,080Organization costs














(254
)Distribution to KRH


(35,700
)










Net cash provided by financing activities


11,737



64,520



86,566



683,134Net (decrease) increase in cash


(11,142
)


32,108



(2,344
)


3,751Cash, beginning of period


33,515



1,407



3,751



Cash, end of period

$
22,373


$
33,515


$
1,407


$
3,751Supplemental disclosure of cash flow informationCash paid for interest

$
21,526


$
23,845


$
50,772


$
25,595Cash paid for income taxes


865



1,968



6,247



1,578    F-7




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes
    to Consolidated Financial Statements
 December 31,
    2008 (Successor), 2007 and 2006 (Predecessor)
  (1)
    Business
    and Organization         F-8




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (2)
    Basis of
    Presentation      (3)
    Summary
    of Significant Accounting Policies  (a)
    Revenue
    Recognition and Customer Concentrations  00-02, Accounting by Producers or Distributors of Film
    Number of


% of Total


Domestic


InternationalPeriod

Customers


Revenue


Licensees


LicenseesSuccessor:Period from June 23, 2008 through December 31, 2008


10



74
%


44
%


30
%Predecessor:Period from January 1, 2008 through June 22, 2008


10



77
%


58
%


19
%Year ended December 31, 2007


10



74
%


30
%


44
%Period from January 12, 2006 (inception) through
    December 31, 2006


8



77
%


39
%


38
%     Successor


PredecessorPeriod fromPeriod from


Period from





January 12, 2006June 23, 2008 to


January 1, 2008 to


Year Ended


(Inception) toCustomer

December 31, 2008


June 22, 2008


December 31 2007


December 31, 2006Customer A

$
45,038


$
33,622


$
40,185


$
74,131Customer B


20,867



11,081




(1)



(1)Customer C


18,161




(1)



(1)



(1)     (1)
    
    Revenue from customer is less than 10% of total revenue in
    period noted. F-9




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##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
     (b)
    Cost
    of Sales    (c)
    Advertising    (d)
    Film
    Production Costs  and/or
      (e)
    Use of
    Estimates    (f)
    Fair
    Value   F-10




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (g)
    Prepaid
    and Other Assets    (h)
    Long-Lived
    and Indefinite Lived Assets        (i)
    Impairment
    of Goodwill and Other Long-Lived Assets      (j)
    Accounts
    Receivable   F-11




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (k)
    Derivatives        (l)
    Share-based
    Compensation  Share-Based Payment
  (m)
    Income
    Taxes  Accounting for Income
    Taxes Accounting for Uncertainty in Income Taxes
     F-12




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        (n)
    Comprehensive
    Loss    (o)
    Segment
    Information    (p)
    New
    Accounting Pronouncements Adopted     F-13




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      (4)
    Loss Per
    Share, Basic and Diluted    (5)
    Non-Controlling
    Interest  94-2,
 F-14




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Total Holdings II members equity as of June 22,
    2008

$
108,766RHI Inc. investment in Holdings II


173,984Non-controlling interest associated with distribution to KRH


(34,972
)Total post-IPO Holdings II members equity


247,778Non-controlling interest of KRH


42.3
%Initial allocation of non-controlling interest in consolidated
    entity


104,810Non-controlling interest in share-based compensation


473Non-controlling interest in unrealized loss on interest rate
    swaps


(3,853
)Non-controlling interest allocation for the period from
    June 23, 2008 to December 31, 2008


(3,380
)Non-controlling interest in loss of consolidated entity for the
    period from June 23, 2008 to December 30, 2008


(26,534
)Non-controlling interest in consolidated entity as of
    December 31, 2008

$
74,896   (6)
    Acquisitions  Acquisition
    of Hallmark Entertainment
           F-15




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Accounts receivable

$
63,379Film production costs


516,621Property and equipment


428Prepaid and other assets


7,803Intangible assets


6,400Goodwill


59,838Accounts payable and accrued liabilities


(15,222
)Accrued film production costs


(161,236
)Deferred revenue


(51,204
)Total purchase price, net of cash acquired

$
426,807          F-16




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Revenue

$
1,151Cost of sales


2,484Gross loss


(1,333
)Selling, general and administrative


1,180Loss from operations


(2,513
)Other expense:Interest expense


(619
)Loss before income taxes


(3,132
)Income tax expense


(81
)Net loss

$
(3,213
)     Net loss

$
(3,213
)Adjustments to reconcile net loss to cash used in operating
    activities:Depreciation and amortization of fixed assets


5Amortization of film production costs


905Change in operating assets and liabilities:Decrease in accounts receivable


3,111Decrease in prepaid and other assets


116Additions to film production costs


(986
)Increase in accounts payable and accrued liabilities


1,227Decrease in accrued film production costs


(4,144
)Increase in notes and amounts payable to affiliates, net


856Decrease in deferred revenue


(537
)Net cash used in operating activities


(2,660
)Cash at beginning of period


73,401Cash at end of period

$
70,741      F-17




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
  Pro
    Forma Information
    (Unaudited)Revenue

$
250,004Net income


27,604     Acquisition
    of Crown Media Distribution, LLC
      (7)
    Film
    Production Costs, Net    (Successor)


(Predecessor)December 31,


December 31,2008


2007Completed films

$
984,805


$
830,220Crown Film Library


145,290



144,084Films in process and development


18,012



12,2111,148,107



986,515Accumulated amortization


(367,985
)


(232,178
)$
780,122


$
754,337  F-18




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (Successor)


(Predecessor)Period fromPeriod from


Period from





January 12, 2006June 23, 2008 to


January 1,


Year Ended


(Inception) toDecember 31,


2008 to


December 31,


December 31,2008


June 22, 2008


2007


2006Overhead costs capitalized

$
6,100


$
6,775


$
14,269


$
12,114Interest capitalized


679



313



2,001



2,019Amortization of completed films


90,655



40,595



115,143



110,684Amortization of Crown Film Library


1,949



2,608



6,350



     (8)
    Prepaid
    and Other Assets, Net    (Successor)


(Predecessor)December 31,


December 31,2008


2007Deferred debt financing costs, net of accumulated amortization

$
15,450


$
6,108Deferred tax assets, net


5,046



2,453Prepaid assets


4,503



3,931Other receivables


3,929



7,563$
28,928


$
20,055   (9)
    Property
    and Equipment, Net    (Successor)


(Predecessor)December 31,


December 31,Average Useful Life

2008


2007Furniture and fixtures

Shorter of useful
    life or lease term

$
217


$
177Leasehold improvements

10 years


297



296Computers and other equipment

3 years


421



298935



771Accumulated depreciation and amortization




(565
)


(372
)$
370


$
399  F-19




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##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (Successor)


(Predecessor)Period fromPeriod from





January 12, 2006Period from


January 1,


Year Ended


(Inception) toJune 23, 2008 to


2008 to


December 31,


December 31,December 31, 2008


June 22, 2008


2007


2006Original cost of assets retired

$
8


$



$
3


$
9Loss on disposal of assets


1







2



6Depreciation expense


107



93



204



172   (10)
    Goodwill
    and Other Intangibles        (11)
    Accrued
    Film Production Costs    (Successor)


(Predecessor)December 31,


December 31,2008


2007Production

$
88,312


$
33,297Residuals


63,105



56,564Participations


43,911



42,795$
195,328


$
132,656    F-20




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##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (12)
    Debt    (Successor)


(Predecessor)December 31,


December 31,2008


2007First Lien Term Loan

$
175,000


$
175,000Revolver


326,789



225,625New Second Lien Term Loan


75,000



Second Lien Term Loan (net of $4,674 of unamortized discount)






255,326$
576,789


$
655,951   pre-amendment
       F-21




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
                 F-22




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Year Ending December 31,2011

$
17,5002012


35,0002013


449,2892014


75,000$
576,789   Interest
    Rate Swaps
            (13)
    Share-based
    Compensation    Stock
    Options
   F-23




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
      2008Expected volatility


42.04
%Expected dividends


0Expected Term (in years)


6.00Risk-free rate


2.92
%         Weighted-Average


AggregateRemaining


IntrinsicContractual


ValueStock Options

Units


Term


(000s)Options granted


529,154



10 yrsOptions vested






Options forfeited










Non-vested Balance, December 31, 2008


529,154



10 yrs


$
2,424Vested Balance, December 31, 2008










Expected to vest


502,696



10 yrs


$
2,302   Restricted
    Stock Units
   F-24




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
          AggregateIntrinsicValueRSUs

Units


(000s)Units issued


267,198Units vested


Units forfeited


Non-vested Balance, December 31, 2008


267,198


$
2,170Vested Balance, December 31, 2008






Expected to vest


253,838


$
2,061   Other
    Share-Based Compensation
     F-25




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Subsequent
    Share-based Compensation Grants
  1 3
    (14)
    Retirement
    Plan   F-26




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (15)
    Related
    Party Transactions        (16)
    Income
    Taxes   F-27




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    Successor


PredecessorPeriod fromPeriod from


Period from





January 12 2006June 23, 2008 to


January 1,


Year Ended


(Inception) toDecember 31,


2008 to June 22,


December 31,


December 31,2008


2008


2007


2006Current tax provision (benefit)Federal

$
952


$
(974
)

$
(320
)

$
1,366State and local


479



125



1,168



2,385Foreign


845



889



1,930



2,515Total current


2,276



40



2,778



6,266Deferred tax benefitFederal


(45
)


(1,440
)


(1,241
)


(965
)State and local


8



(118
)


(113
)


1,040Foreign














Total deferred


(37
)


(1,558
)


(1,354
)


75Total tax provision (benefit)

$
2,239


$
(1,518
)

$
1,424


$
6,341   non-U.S. customers.
   F-28




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    PredecessorSuccessor


Period fromPeriod from


January 1,





Period fromJune 23, 2008 to


2008 to


Year Ended


January 12 2006December 31,


June 22,


December 31,


(Inception) to2008


2008


2007


December 31, 2006Benefit on loss before income taxes at statutory federal income
    tax rate

$
(20,567
)

$
(8,068
)

$
(7,199
)

$
(1,107
)Earnings not subject to tax at partnership level prior to
    June 23, 2008, the date of to IPO






6,493



7,699



9,260Goodwill impairment charge


9,735











Loss of non-controlling interest


9,476











Change in tax status














(6,268
)State and local income taxes, (net of federal benefit)


321



5



703



1,337Foreign income and withholding taxes net of U.S. foreign tax
    credits






58



144



1,825Change in valuation allowance


2,985











1,300Other


289



(6
)


77



(6
)Total Tax Provision

$
2,239


$
(1,518
)

$
1,424


$
6,341     Successor


PredecessorDecember 31,


December 31,2008


2007Net operating losses

$
3,011


$
2,167Deferred revenue


3,120



1,575Accrued liabilities and reserves


2,166



1,121Film production costs


667



337Excess of tax over book basis  investment in Holdings
    II


23,950



Other


453



19333,367



5,393Valuation allowance


(28,321
)


(2,940
)Net deferred tax asset

$
5,046


$
2,453      F-29




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
        Successor


PredecessorPeriod from


Period fromJune 23, 2008 to


January 1, 2008


Year EndedDecember 31,


to June 22,


December 31,2008


2008


2007Balance at beginning of period

$
1,579


$
1,579


$
1,579Increases/decreases in unrecognized tax benefit related to
    current period










Increases/decreases in unrecognized tax benefit of prior periods










Decreases related to settlements and due to a lapse of the
    applicable statute of limitations










Balance at end of period

$
1,579


$
1,579


$
1,579        F-30




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    (17)
    Commitments
    and Contingencies      (a)
    ION
    Commitments    (b)
    Lease
    Commitments   F-31




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  Notes to
    Consolidated Financial
    Statements  (Continued)
    2009

$
3,4742010


3,7272011


3,6612012


3,5412013


3,479Beyond 2013


19,776Total

$
37,658   (18)
    Quarterly
    Financial Data (Unaudited)    Predecessor


SuccessorThree Months








Three Months


Three MonthsEnded


Period from


Period from


Ended


EndedMarch 31,


4/1/2008 to


6/23/2008 to


September 30,


December 31,2008


6/22/2008


6/30/2008


2008


2008RevenueProduction revenue

$
4,941


$
1,661


$
932


$
21,833


$
50,124Library revenue


17,280



49,363



1,489



31,693



47,120Total


22,221



51,024



2,421



53,526



97,244Gross profit


4,643



19,206



1,118



15,279



32,521(Loss) income from operations


(8,753
)


5,842



(5,650
)


5,151



(40,392
)Net loss

$
(20,194
)

$
(2,018
)

$
(3,740
)

$
(3,507
)

$
(28,948
)Loss per share:Basic


N/A



N/A



(0.28
)


(0.26
)


(2.14
)Diluted


N/A



N/A



(0.28
)


(0.26
)


(2.14
)   PredecessorThree Months


Three Months


Three Months


Three MonthsEnded


Ended


Ended


EndedMarch 31,


June 30,


September 30,


December 31,2007


2007


2007


2007RevenueProduction revenue

$



$
8,682


$
14,398


$
110,069Library revenue


6,742



14,553



14,349



63,218Total


6,742



23,235



28,747



173,287Gross profit


1,785



9,311



10,733



73,108(Loss) income from operations


(6,230
)


(4,259
)


1,126



56,689Net loss

$
(17,280
)

$
(32,959
)

$
(12,397
)

$
40,039  F-32




---



##### Table of Contents



RHI
    ENTERTAINMENT, INC.
  EXHIBIT INDEX
  ExhibitNumber

Description3
.1

Amended and Restated Certificate of Incorporation RHI
    Entertainment, Inc. (incorporated by reference to Exhibit 3.1 to
    the Registrants Form 10-Q for the period ending June 30,
    2008 filed with the SEC on August 7, 2008).3
.2

Amended and Restated By-Laws of RHI Entertainment, Inc.
    (incorporated by reference to Exhibit 3.2 to the
    Registrants Form 10-Q for the period ending June 30, 2008
    filed with the SEC on August 7, 2008).10
.1

Amended and Restated Limited Liability Company Operating
    Agreement of RHI Entertainment Holdings II, LLC by and between
    RHI Entertainment, Inc. and KRH Investments LLC, dated as of
    June 23, 2008 (incorporated by reference to Exhibit 10.1 to the
    Registrants Form 10-Q for the period ending June 30, 2008
    filed with the SEC on August 7, 2008).10
.2

Tax Receivable Agreement by and among RHI Entertainment, Inc.,
    RHI Entertainment Holdings II, LLC and KRH Investments LLC,
    dated as of June 23, 2008 (incorporated by reference to Exhibit
    10.2 to the Registrants Form 10-Q for the period ending
    June 30, 2008 filed with the SEC on August 7, 2008).10
.3

Registration Rights Agreement by and between RHI Entertainment,
    Inc. and KRH Investments LLC, dated as of June 23, 2008
    (incorporated by reference to Exhibit 10.3 to the
    Registrants Form 10-Q for the period ending June 30, 2008
    filed with the SEC on August 7, 2008).10
.4

Director Designation Agreement by and between RHI Entertainment,
    Inc. and KRH Investments LLC, dated as of June 23, 2008
    (incorporated by reference to Exhibit 10.4 to the
    Registrants Form 10-Q for the period ending June 30, 2008
    filed with the SEC on August 7, 2008).10
.5

Membership Subscription Agreement by and among RHI
    Entertainment, Inc., KRH Investments LLC and RHI Entertainment
    Holdings II, LLC, dated as of June 23, 2008 (incorporated by
    reference to Exhibit 10.5 to the Registrants Form 10-Q for
    the period ending June 30, 2008 filed with the SEC on August 7,
    2008).10
.6

RHI Entertainment Senior Executive Bonus Plan, dated as of June
    23, 2008 (incorporated by reference to Exhibit 10.6 to the
    Registrants Form 10-Q for the period ending June 30, 2008
    filed with the SEC on August 7, 2008).10
.7

RHI Entertainment, Inc. 2008 Equity Incentive Award Plan, date
    as of June 23, 2008 (incorporated by reference to Exhibit 10.7
    to the Registrants Form 10-Q for the period ending June
    30, 2008 filed with the SEC on August 7, 2008).10
.8

Amended and Restated First Lien Credit, Security, Guaranty and
    Pledge Agreement, dated as of January 12, 2006, as Amended
    and Restated as of April 13, 2007, by and among RHI
    Entertainment, LLC, as Borrower, JP Morgan Chase Bank, N.A., as
    Administrative Agent and as Issuing Bank, J.P. Morgan
    Securities Inc, as Sole Bookrunner and Sole Lead Arranger, The
    Royal Bank of Scotland PLC, as Syndication Agent, and Bank of
    America, N.A., as Documentation Agent (incorporated by reference
    to Exhibit 10.11 to the Registrants Registration Statement
    on Form S-1 filed with the SEC on September 14, 2007).10
.8(a)

Amendment No. 1 dated October 12, 2007 to the Amended and
    Restated First Lien Credit, Security, Guaranty and Pledge
    Agreement, dated as of January 12, 2006, as amended and restated
    as of April 13, 2007, among RHI Entertainment, LLC, the
    Guarantors referred to therein, the Lenders referred to therein
    and JPMorgan Chase Bank, N.A., as Issuing Bank and as
    Administrative Agent for the Lenders (incorporated by reference
    to Exhibit 10.14 to Amendment No. 2 to the Registrants
    Registration Statement on Form S-1 filed with the SEC on
    November 11, 2007).10
.8(b)

Amendment No. 2 dated May 29, 2008 to the Amended and Restated
    First Lien Credit, Security, Guaranty and Pledge Agreement,
    dated as of January 12, 2006, as amended and restated as of
    April 13, 2007 and amended thereto, among RHI Entertainment,
    LLC, the Guarantors referred to therein, the Lenders referred to
    therein and JPMorgan Chase Bank, N.A., as Issuing Bank and as
    Administrative Agent for the Lenders (incorporated by reference
    to Exhibit 10.13(b) to Amendment No. 4 to the Registrants
    Registration Statement on Form S-1 filed with the SEC on May 30,
    2008). IV-1




---



##### Table of Contents



ExhibitNumber

Description10
.8(c)*

Amendment No. 3 dated November 11, 2008 to the Amended
    and Restated First Lien Credit, Security, Guaranty and Pledge
    Agreement, dated as of January 12, 2006, as amended and
    restated as of April 13, 2007 and amended thereto, among
    RHI Entertainment, LLC, the Guarantors referred to therein, the
    Lenders referred to therein and JPMorgan Chase Bank, N.A., as
    Issuing Bank and as Administrative Agent for the Lenders.10
.8(d)*

Amendment No. 4 dated March 2, 2009 to the Amended and
    Restated First Lien Credit, Security, Guaranty and Pledge
    Agreement, dated as of January 12, 2006, as amended and
    restated as of April 13, 2007 and amended thereto, among
    RHI Entertainment, LLC, the Guarantors referred to therein, the
    Lenders referred to therein and JPMorgan Chase Bank, N.A., as
    Issuing Bank and as Administrative Agent for the Lenders.10
.9

Amended and Restated Second Lien Credit, Security, Guaranty and
    Pledge Agreement, dated as of January 12, 2006, as Amended
    and Restated as of April 13, 2007, by and among RHI
    Entertainment, LLC, as Borrower, JP Morgan Chase Bank, N.A., as
    Administrative Agent, and J.P. Morgan Securities Inc., as
    Sole Bookrunner and Sole Lead Arranger (incorporated by
    reference to Exhibit 10.12 to the Registrants Registration
    Statement on Form S-1 filed with the SEC on September 14, 2007).10
.10

Amended and Restated Intercreditor Agreement dated as of April
    13, 2007 by and among JP Morgan Chase Bank, N.A., as
    administrative agent and collateral agent for the First Priority
    Secured Parties, JP Morgan Chase Bank, N.A., as administrative
    and collateral agent for the Second Priority Secured Parties,
    and RHI Entertainment, LLC, as the Borrower (incorporated by
    reference to Exhibit 10.12 to the Registrants Registration
    Statement on Form S-1 filed with the SEC on September 14, 2007).10
.11

Replacement Amended and Restated Intercreditor Agreement, among
    JPMorgan Chase Bank, N.A. as administrative agent and collateral
    agent for the First Priority Secured Parties (as defined
    therein), JPMorgan Chase Bank, N.A., as administrative and
    collateral agent for the Second Priority Secured Parties (as
    defined therein), RHI Entertainment, LLC, as the Borrower, the
    Guarantors referred to therein, the Credit Parties (as defined
    therein), KRH Investments LLC (f/k/a RHI Entertainment Holdings,
    LLC) and RHI Entertainment Holdings II, LLC, dated as of June
    23, 2008 (incorporated by reference to Exhibit 10.2 to the
    Registrants Form 10-Q for the period ending June 30, 2008
    filed with the SEC on August 7, 2008).10
.12

Credit, Security, Guaranty and Pledge Agreement, among RHI
    Entertainment, LLC, the Guarantors referred to therein, the
    Lenders referred to therein, JPMorgan Chase Bank, N.A. as
    Administrative Agent for the Lenders and J.P. Morgan
    Securities Inc, dated June 23, 2008 (incorporated by reference
    to Exhibit 10.9 to the Registrants Form 10-Q for the
    period ending June 30, 2008 filed with the SEC on August 7,
    2008).10
.12(a)

Amendment No. 1 dated August 7, 2008 to the Credit, Security,
    Guaranty and Pledge Agreement dated as of June 23, 2008 among
    RHI Entertainment, LLC, the Guarantors referred to therein, the
    Lenders referred to therein and JPMorgan Chase Bank, N.A. as
    Administrative Agent for Lenders (incorporated by reference to
    Exhibit 10.9(a) to the Registrants Form 10-Q for the
    period ending June 30, 2008 filed with the SEC on August 7,
    2008).10
.13

Credit Agreement by and among JP Morgan Chase Bank, N.A., as
    administrative agent for the Lenders, JP Morgan Securities Inc.
    as Sole Bookrunner and Sole Lead Arranger and RHI Entertainment
    Holdings, LLC as borrower, dated as of May 8, 2008 (incorporated
    by reference to Exhibit 10.16 to Amendment No. 4 to the
    Registrants Registration Statement on Form S-1 filed with
    the SEC on May 30, 2008).10
.14

ION Agreement, dated as of October 19, 2006, by and between RHI
    Entertainment Distribution, LLC and ION Media Networks, Inc
    (incorporated by reference to Exhibit 10.15 to Amendment No. 1
    to the Registrants Registration Statement on Form S-1
    filed with the SEC on October 19, 2007).10
.15

Digital Video Download Sales Agreement, dated as of September
    11, 2007, by and between Apple Inc. and RHI Entertainment
    Distribution, LLC (incorporated by reference to Exhibit 10.16 to
    Amendment No. 1 to the Registrants Registration Statement
    on Form S-1 filed with the SEC on October 19, 2007).10
.16

Co-Production and Distribution Agreement, dated as of May 1,
    2007, by and between Genius Products LLC and RHI Distribution,
    LLC (incorporated by reference to Exhibit 10.17 to Amendment No.
    1 to the Registrants Registration Statement on Form S-1
    filed with the SEC on October 19, 2007).10
.17

Amended and Restated Employment Agreement between Robert A.
    Halmi, Jr. and RHI Entertainment, LLC (incorporated by reference
    to Exhibit 10.6 to Amendment No. 2 to the Registrants
    Registration Statement on Form S-1 filed with the SEC on
    November 19, 2007). IV-2




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##### Table of Contents



ExhibitNumber

Description10
.17(a)

Amendment to the Amended and Restated Employment Agreement of
    Robert A. Halmi, Jr. (incorporated by reference to Exhibit 10.1
    to the Registrants Current Form 8-K filed with the SEC on
    December 12, 2008).10
.18

Amended and Restated Employment Agreement between Peter N. von
    Gal and RHI Entertainment, LLC (incorporated by reference to
    Exhibit 10.7 to Amendment No. 2 to the Registrants
    Registration Statement on Form S-1 filed with the SEC on
    November 19, 2007).10
.18(a)

Amendment to the Amended and Restated Employment Agreement
    between Peter N. von Gal and RHI Entertainment, LLC
    (incorporated by reference to Exhibit 10.2 to the
    Registrants Current Form 8-K filed with the SEC on
    December 12, 2008).10
.19

Amended and Restated Employment Agreement between William J.
    Aliber and RHI Entertainment, LLC (incorporated by reference to
    Exhibit 10.8 to Amendment No. 2 to the Registrants
    Registration Statement on Form S-1 filed with the SEC on
    November 19, 2007).10
.20

Employment Agreement between  Joel E. Denton and RHI
    Entertainment, LLC (incorporated by reference to Exhibit 10.9 to
    the Registrants Registration Statement on Form S-1 filed
    with the SEC on September 14, 2007).10
.21

Employment Agreement between Henry S. Hoberman and RHI
    Entertainment, LLC (incorporated by reference to Exhibit 10.10
    to Amendment No. 3 to the Registrants Registration
    Statement on Form S-1 filed with the SEC on May 2, 2008).10
.22

Agreement and General Release between Anthony Guido and RHI
    Entertainment, LLC (incorporated by reference to Exhibit 10.11
    to Amendment No. 3 to the Registrants Registration
    Statement on Form S-1 filed with the SEC on May 2, 2008).10
.23

Letter Agreement between Jeffrey Sagansky and RHI Entertainment,
    LLC (incorporated by reference to Exhibit 10.1 to the
    Registrants Current Form 8-K filed with the SEC on
    February 9, 2009).10
.24

Code of Business Conduct and Ethics (incorporated by reference
    to Exhibit 14.1 to the Registrants Registration Statement
    on Form S-1 filed with the SEC on September 14, 2007).21
.1*

List of Subsidiaries.23
.1*

Consent of KPMG LLP.31
.1*

Certification of the Chief Executive Officer, pursuant to Rule
    13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.31
.2*

Certification of the Chief Financial Officer, pursuant to Rule
    13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the
    Sarbanes-Oxley Act of 2002.32
.1*

Certification of the Chief Executive Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.32
.2*

Certification of the Chief Financial Officer, pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002.     *
    
    Each document marked with an asterisk is filed herewith. IV-3