FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from..............to..................
Commission file number 0-14421
SILVER SCREEN PARTNERS II, L.P.
(a Delaware Limited Partnership)
(Exact name of registrant as specified in its
Certificate and Agreement of Limited Partnership)
Delaware 13-3276962
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Chelsea Piers - Pier 62, Ste. 300
New York, New York 10011
- --------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 336-6700
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
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PART I
ITEM 1. BUSINESS.
Silver Screen Partners II, L.P. ("Silver Screen II") was organized in June
1985. A public offering of units of limited partnership interests was completed
in November 1985, which raised approximately $192.6 million. After payment of
offering costs and fees, $173.1 million was available for investment in films
(the "Partnership Contribution").
Silver Screen II filed a Certificate of Cancellation with the
Secretary of State of the State of Delaware to formally terminate its legal
existence as of December 30, 1996. Silver Screen II has distributed all of its
assets, net of liabilities, to the partners and has been dissolved in accordance
with the terms of its Agreement of Limited Partnership. The Certificate of
Cancellation has been filed as an exhibit to Silver Screen II's current report
on Form 8-K dated January 8, 1997 and the terms thereof are incorporated herein
by reference. This is the final report on Form 10-K that will be filed by Silver
Screen II.
Silver Screen II entered into a Joint Venture agreement (the "Joint Venture
Agreement") with Walt Disney Productions ("Disney") for the purpose of
financing, producing and exploiting all feature length theatrical motion
pictures selected for production by Disney until all of Silver Screen II's funds
had been committed (the "Joint Venture Films"). In addition to providing
financing for the Joint Venture Films, Silver Screen II entered into a Loan
Agreement with Disney (the "Loan Agreement") whereby a portion of Silver Screen
II's funds were used to finance a portion of certain specified completed Disney
films (the "Completed Films" and, together with the Joint Venture Films, the
"Films"). Buena Vista Pictures Distribution, Inc. (formerly Buena Vista
Distribution, Inc.) ("BV"), a wholly-owned subsidiary of Disney, was licensed to
distribute all Films in all media and in all territories directly or indirectly
throughout the world. BV paid the expenses in connection with the worldwide
distribution of each Film. The Partnership Contribution was fully committed.
The business of Silver Screen II is managed by Silver Screen Management,
Inc., a Delaware corporation which is a general partner of Silver Screen II (the
"Managing General Partner"). Silver Screen II participates through Disney-Silver
Screen II Joint Venture (the "Joint Venture") in the production, ownership and
exploitation of the Joint Venture Films and in the distribution and marketing of
the Joint Venture Films in all primary and ancillary markets. The Managing
General Partner is responsible for the preparation of reports and tax
information to be provided to the Limited Partners.
The Joint Venture financed films designed to appeal to children and family
audiences under the Walt Disney label and motion pictures produced and released
under the name of Touchstone Films to appeal to all segments of the audience.
All Joint Venture Films were rated "G," "PG," "PG-13," or "R."
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Silver Screen II committed approximately $22,000,000 towards the Completed
Films pursuant to the Loan Agreement. In addition, Silver Screen II became
committed to fund ten films and part of one additional film, all of which were
completed and released with total budgets amounting to approximately
$150,690,000, of which substantially all was expended as of December 31, 1992.
Accordingly, the Partnership Contribution has been fully committed and Silver
Screen II will not finance or purchase any additional motion pictures. The four
Completed Films are: "Return to Oz," released June 21, 1985; "The Black
Cauldron," released July 19, 1985; "My Science Project," released August 9, 1985
and "The Journey of Natty Gann," released September 27, 1985. The Joint Venture
Films are "One Magic Christmas," released November 22, 1985; "Down and Out in
Beverly Hills," released January 31, 1986; "Off Beat" released April 11, 1986;
"Ruthless People," released June 27, 1986; "The Great Mouse Detective," released
July 2, 1986 and re-released February 14, 1992 under the title "The Adventures
of the Great Mouse Detective;" "Tough Guys," released October 3, 1986; "The
Color of Money," released October 17, 1986; "Outrageous Fortune," released
January 30, 1987; "Tin Men," released March 6, 1987 and "Ernest Goes to Camp,"
released May 22, 1987. "Stakeout," which was financed approximately 75% by
Silver Screen II and 25% by Silver Screen Partners III, L.P. (a separate limited
partnership with the same Managing General Partner formed to finance subsequent
Disney films), was released August 5, 1987.
Buyout
- ------
Silver Screen II entered into a Letter Agreement (the "Buyout Agreement")
with Disney dated September 11, 1995 providing for the sale to Disney of all of
Silver Screen II's interest in the Joint Venture. In accordance with the Buyout
Agreement the closing of such sale occurred on January 2, 1996 and the purchase
price paid to Silver Screen II was $44,678,304 in cash after an adjustment for
certain film revenues totaling $321,696 received in 1995. The Buyout Agreement
has been filed as an exhibit to Silver Screen II's quarterly report on Form 10-Q
dated September 30, 1995 and the terms thereof are incorporated herein by
reference.
Joint Venture Agreement
- -----------------------
Each Joint Venture Film was produced in accordance with the Joint Venture
Agreement. Under the Joint Venture Agreement, Silver Screen II contributed to
the Joint Venture all amounts available for investing in films (the "Partnership
Commitment") less the amounts furnished for financing the Completed Films.
Disney contributed all motion picture projects developed and selected for
production until the Partnership Contribution was fully committed. Disney also
furnished production services for all the Joint Venture Films, and furnished or
obtained all financing not furnished by Silver Screen II.
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Contributions by Silver Screen II to the Joint Venture were made on a
film-by-film basis and were based upon budgeted production cost (the "Budgeted
Film Cost") of all Joint Venture Films. The Partnership Contribution was
committed to the Joint Venture, film-by-film, in the order that each Joint
Venture Film commenced principal photography by the Joint Venture, in an amount
equal to 100% of the Budgeted Film Cost of each such Joint Venture Film until
such time as the entire Partnership Contribution was so committed. Silver Screen
II was not obligated to commit funds with respect to any one Joint Venture Film
in excess of $20,000,000 in the case of any Disney animated film or Touchstone
Joint Venture Film, or in excess of $10,000,000, in the case of any Disney
non-animated Joint Venture Film.
Disney was solely responsible for the development of motion picture
projects for contribution to the Joint Venture, the production by the Joint
Venture of each Joint Venture Film and the delivery by the Joint Venture of each
such Joint Venture Film to BV in full compliance with the terms and conditions
of the Distribution Agreement between the Joint Venture and BV (the
"Distribution Agreement"). Disney's production responsibilities included all
services customarily performed by a major studio. Disney was responsible for any
cost overruns and acted in effect as completion guarantor.
The Budgeted Film Cost of each Joint Venture Film consisted of all costs
customarily included as direct production costs in the motion picture industry,
including overhead of 17-1/2%. The Budgeted Film Cost also included all fixed
deferments, bonuses and participation's in gross receipts payable before the
Joint Venture has recouped its investment in that Joint Venture Film and all
additional fixed deferments and bonuses payable prior to the payment of net
profits or out of first net profits. The budget of each Joint Venture Film was
approved in writing by both parties prior to the commencement of principal
photography. Disney was empowered to grant participation's in the profits of any
Joint Venture Film to third parties on behalf of the Joint Venture up to an
amount no greater in the aggregate than 50% of 100% of the net profits of any
Joint Venture Film.
The revenue formula under the Joint Venture Agreement was designed to
assure that Silver Screen II would receive Joint Venture distributions equal to
not less than 100% of the Partnership Contribution applied toward the Joint
Venture Films on a film-by-film basis before Disney recoups cost overruns or
receives any share of profits. All revenues of the Joint Venture were derived
exclusively from the revenues allocated to the Joint Venture pursuant to the
Distribution Agreement during the term thereof. Revenues received by the Joint
Venture in respect of Joint Venture Films have been allocated between the
parties as follows:
---100% to Silver Screen II and Disney in proportion to their
respective actual investments in the Budgeted Film Cost of each Joint
Venture Film until they have recovered the amount of the Budgeted Film Cost
actually expended of such Joint Venture Film;
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---thereafter, 100% to Disney until Disney has recouped any cost
overruns; and
---thereafter, after payment of applicable participations, 75% to
Silver Screen II and 25% to Disney.
In addition, certain other payments in respect of "Revenue Shortfalls" were
payable to the Joint Venture. The Revenue Shortfall for each Joint Venture Film
was the difference, if any, between the Budgeted Film Cost actually expended and
the sum of all revenues actually received by the Joint Venture from BV as of a
settlement date (the "Settlement Date") occurring not later than five years
after the U.S. theatrical release of such Joint Venture Film. On the Settlement
Date of each Joint Venture Film, BV was obligated to pay to the Joint Venture an
amount equal to the Revenue Shortfall (the "Revenue Shortfall Payment"), if any,
provided, that in no event would the Revenue Shortfall Payment be greater than
the revenues retained by BV with respect to such Joint Venture Film from all
markets, subject to adjustment in certain cases.
In the event that 15 years after release of the first Joint Venture Film,
Silver Screen II had not recouped the amount of the Partnership Contribution for
all Joint Venture Films (including amounts received as Revenue Shortfall
Payments, if any), such amounts would be contributed by Disney to the Joint
Venture for distribution to Silver Screen II (the "Ultimate Revenue Shortfall
Payment"); provided, that Disney shall be entitled to recoup such amount from
Silver Screen II's share of additional Joint Venture revenues. The last Revenue
Shortfall Payment was due and received during 1992.
Loan Agreement
- --------------
Pursuant to the Loan Agreement, Silver Screen II loaned to Disney
approximately $22 million, or an amount equal to approximately 25% of the
production costs of the Completed Films plus interest and overhead thereon as
expended or estimated at July 1, 1985 (the "Completed Film Cost"). Repayment of
the loan was completed during 1990.
Silver Screen II's loan was an unsecured obligation of Disney. Payments on
the loan were made by Disney only out of revenues received by Disney pursuant to
the distribution agreement regarding the Completed Films (the "Completed Films
Distribution Agreement"), provided, however, that the amount loaned with respect
to a particular Completed Film must in any event have been repaid by Disney on
the fifth anniversary of the theatrical release of such Completed Film.
In the case of each Completed Film, the revenues received by Disney
pursuant to the Completed Films Distribution Agreement were allocated between
Disney and Silver Screen II as follows, after deduction of applicable
third-party participations:
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---100% to Silver Screen II and Disney payable pro rata in the
proportion that Silver Screen II's loan with respect to such film bears to
the Completed Film Cost supplied by Disney until the Completed Film Cost
has been recouped and the full amount of Silver Screen II's loan in respect
of such Completed Film is repaid;
---thereafter, 100% to Disney in an amount equal to cost overruns, if
any; and
---thereafter, 81-1/4% to Disney and 18-3/4% to Silver Screen II.
The provisions of the Loan Agreement with respect to the Completed Films
were substantially similar to those of the Joint Venture Agreement with respect
to the Joint Venture Films, other than those provisions dealing with commitments
to the Joint Venture out of the Partnership Contributions and with the Joint
Venture ownership rights with respect to Joint Venture Films. The Completed
Films are owned and are being exploited by Disney.
Distribution Agreements
- -----------------------
Pursuant to the Distribution Agreement and the Completed Films Distribution
Agreement, BV distributed the Joint Venture Films for a term ending March 31,
1996, and will distribute the Completed Films for the full term of their
copyrights (typically, 75 years), in all media throughout the world.
BV (either directly or through third-party licensees or affiliated
companies) was obligated to release and distribute each of the Films delivered
to it in accordance with and subject to customary and reasonable business
practices in the motion picture industry in all media throughout the world,
including theatrical, non-theatrical, television, cable television, home video,
syndication, music, print publication, merchandising and new technologies.
BV has paid and will pay all costs incurred in connection with the
promotion, marketing and distribution of each Film. In connection with the U.S.
theatrical release of each Joint Venture Film, BV was required to and did expend
certain minimum amounts. The Distribution Agreement provides that BV is entitled
to customary distribution fees, which vary in each medium, and that the Joint
Venture is entitled to an escalating percentage of the gross proceeds generated
by theatrical distribution of each Film.
Competition
- -----------
Silver Screen II was in competition with other institutions which provide
financing for films, some of which had substantially greater financial and
personnel resources than the Managing General Partner and Silver Screen II.
These institutions included the major film studios and television networks.
There was substantial competition in the industry for a limited number of
producers, directors, actors and properties which were able to attract major
distribution in all media and markets throughout the world.
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There is intense competition within the industry for exhibition time at
theaters and for the attention of the movie-going public. Competition for
distribution in other media is as intense as the competition for theatrical
distribution.
Employees
- ---------
Silver Screen II has no employees. Silver Screen II's business was
administered by the staff of the Managing General Partner.
ITEM 2. PROPERTIES.
Silver Screen II neither owned nor leased any physical properties. The
Managing General Partner leases offices in New York, New York.
ITEM 3. LEGAL PROCEEDINGS.
Silver Screen II knows of no legal proceedings of a material nature to
which it is a party or of which any of its properties is the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the year ended
December 31, 1996.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED
PARTNERSHIP INTEREST AND RELATED SECURITY HOLDER MATTERS.
Silver Screen II was terminated on December 30, 1996 by filing of a
Certificate of Cancellation with the Secretary of State of the State of
Delaware. The Certificate of Cancellation has been filed as an exhibit to Silver
Screen II's current report on Form 8-K dated January 8, 1997 and the terms
thereof are incorporated herein by reference. The Units were not traded
securities in any established trading market.
Silver Screen II filed a Form 15 -- Certificate and Notification of
Termination of Registration under Section 12(g) of the Securities Exchange Act
of 1934, as amended on January 8, 1997 with the Securities and Exchange
Commission pursuant to which Silver Screen II will cease filing periodic reports
within 90 days after such Form 15 filing.
The Agreement of Limited Partnership of the Partnership (the "Partnership
Agreement") provided for quarterly distributions to Limited Partners out of
receipts from operations, net of certain expenses and reserves. See the material
set forth under "Item 11. Executive Compensation." Two distributions were made
to the Limited Partners in 1996 which aggregated $40,291,920. The distributions
per Unit were as follows: February 16 - $82.75 and December 26 - $21.85. A
distribution was made to the Limited Partners in 1995 which totaled $963,000.
The distribution was made on April 28, for $2.50 per unit.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Income from Joint Venture .... $43,186,462 $ 5,332,543 $ 3,523,841 $ 8,883,054 $ 5,385,005
Interest income .............. 870,595 162,096 118,603 132,122 138,326
----------- ----------- ----------- ----------- -----------
44,057,057 5,494,639 3,642,444 9,015,176 5,523,331
EXPENSES:
General and administrative
expenses .................... 1,034,392 666,949 473,094 494,674 491,621
----------- ----------- ----------- ----------- -----------
Income before tax ............ 43,022,665 $ 4,827,690 $ 3,169,350 $ 8,520,502 $ 5,031,710
Unincorporated business tax... 393,864 - - - -
----------- ----------- ----------- ----------- -----------
Net income ................... 42,628,801 $ 4,827,690 $ 3,169,350 $ 8,520,502 $ 5,031,710
========== =========== =========== =========== ===========
Net income per
$500 limited
partnership unit
(based on 385,200
Units outstanding)........... $ 94.07 $$ 10.65 $ 7.40 $ 21.90 $ 12.93
=========== =========== =========== =========== ===========
Cash distribution
per $500 limited
partnership unit ............. $ 104.60 $ 2.50 $ 7.60 $ 36.50 $ 18.75
=========== =========== =========== =========== ===========
Total assets ................. $ - $ 4,904,301 $ 2,509,623 $ 3,549,120 $ 8,152,392
=========== =========== =========== =========== ===========
</TABLE>
See notes to financial statements
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Results of Operations
- ---------------------
The following is an analysis of the results of operations of Silver Screen
II for the years ended 1996, 1995 and 1994.
Silver Screen II was a partnership and therefore generally not subject to
U.S. federal income taxes. No provision has been made with respect to Silver
Screen II's income since income or loss of Silver Screen II is required to be
reported by the respective partners on their income tax returns.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
- ---------------------------------------------------------------------
Net income for the year ended December 31, 1996 was approximately
$42,629,000, compared to net income of approximately $4,828,000 for the year
ended December 31, 1995. Revenues for the year ended December 31, 1996 consisted
of income from the Joint Venture of approximately $43,186,000 compared to
approximately $5,333,000 for the prior year. Silver Screen II sold its assets in
the Joint Venture (see Item 5) on January 1, 1996 resulting in a gain of
approximately $37,853,000.
Interest income generated by temporary investments of cash which was
distributed to the partners for the year ended December 31, 1996 was
approximately $871,000, a $709,000 increase from the prior year. A decrease in
interest rates in 1996 was offset by an increase in funds available for
investment. Interest rates ranged from 4.8% to 5.79% while those for 1995 ranged
between 5.1% to 6.04%. General and administrative expenses were approximately
$1,034,000 for the year ended December 31, 1996 compared to $667,000 for year
ended December 31, 1995. Silver Screen II incurred $412,000 in expenses relating
to the termination of the partnership which were offset by a decrease of $45,000
associated with the sale of Silver Screen II's interest in the Joint Venture.
On September 30, 1996, the Partnership received an assessment from New York
City regarding unincorporated business tax covering all periods from inception
through December 31, 1995 of $420,300 (including interest). This liability was
paid on the date of assessment. The Unincorporated Business Tax Expense reflects
the excess of this payment over an amount previously established as a
contingency reserve plus a provision for 1996.
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Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
- ---------------------------------------------------------------------
Net income for the year ended December 31, 1995 was approximately
$4,828,000, compared to net income of approximately $3,169,000 for the year
ended December 31, 1994. Income for the year ended December 31, 1995 consisted
of income from the Joint Venture of approximately $5,333,000, an increase of
approximately $1,809,000 from the prior annual period. This increase was the
result of U.S. and foreign home video sales of "The Great Mouse Detective".
Additional revenue was generated by "Stakeout", "The Color of Money" and "Down
and Out in Beverly Hills".
Interest income generated by temporary investments of revenues pending
distribution to partners for the year ended December 31, 1995 was approximately
$162,000, a $43,000 increase from the prior annual period. The increase in the
weighted average daily interest rate from 4.25% in 1994 to 5.81% in 1995 was
responsible for the increase. General and administrative expenses for the year
ended December 31, 1995 were approximately $667,000 compared to $473,000 for the
prior annual period. The increase was attributable to expenses related to the
reporting to partners of $20,000 and to costs associated with preparations for
negotiation of the sale of the Partnership's interest in the Joint Venture,
which amounted to approximately $215,000, which was offset by a reduction of
approximately $42,000 in payroll related expenses. Costs related to the sale of
the partnership's interest in the Joint Venture which are considered to benefit
each of the Partnership, Silver Screen Partners III, L.P. and Silver Screen
Partners IV, L.P. (collectively and together with the Partnership, the "Silver
Screen Partnerships"), have been allocated among the Silver Screen Partnerships
pro rata to the total original limited partner capital contributions to each of
the Silver Screen Partnerships.
Liquidity and Capital Resources
- -------------------------------
Silver Screen II no longer has requirements for liquidity as it has been
terminated as of December 30, 1996.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the financial statements referenced in Item 14 of this annual report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Silver Screen II was a limited partnership managed by the Managing General
Partner and had no officers or directors. The Managing General Partner also
serves as managing general partner of Silver Screen Partners, L.P. and Silver
Screen Partners III, L.P., limited partnerships formed to finance, own and
exploit feature-length motion pictures pursuant to a license agreement with a
subsidiary of Home Box Office, Inc. and pursuant to a joint venture agreement
with Disney, respectively. The officers and directors of the Managing General
Partner are also officers and directors of Silver Screen Management Services,
Inc. ("SSMS"), which serves as managing general partner of Silver Screen
Partners IV, L.P. a limited partnership formed to finance, own and exploit
feature-length motion pictures pursuant to a joint venture agreement with Disney
since the organization of SSMS in 1987. Neither the Limited Partners nor any
general partner of Silver Screen II other than the Managing General Partner has
the power to participate in the management of, have any control over the
business of or act for, sign for or bind Silver Screen II.
Roland W. Betts, 50, is the President, Treasurer, a Director, principal
shareholder and founder of the Managing General Partner. Mr. Betts is also the
President, Treasurer, a Director and principal shareholder of SSMS. He is the
Individual General Partner of Silver Screen Partners, L.P., Silver Screen
Partners II, L.P., Silver Screen Partners III, L.P. and Silver Screen Partners
IV, L.P. Mr. Betts has been President and a Director of International Film
Investors, Inc. ("IFI"), which is the Managing General Partner of International
Film Investors, L.P., since 1982 and has been an officer since 1980. Mr. Betts
is also the Individual General Partner of that Partnership. Mr. Betts is also
the lead owner of the Texas Rangers Baseball Club; and the Chairman and largest
shareholder of the Chelsea Piers Management, Inc. which is the general partner
of the Chelsea Piers, L.P., a limited partnership which developed and operates a
major public recreation and entertainment complex at the Chelsea Piers in New
York City. Prior to joining IFI in 1980, Mr. Betts was engaged in the practice
of law as an attorney in the Entertainment Department of the law firm of Paul,
Weiss, Rifkind, Wharton & Garrison in New York.
In addition to Mr. Betts, the executive officers and directors of the
Managing General Partner are as follows:
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Name Positions Held
---- --------------
Paul Bagley Chairman of the Board, Director
Tom A. Bernstein Executive Vice President,
Secretary, Director
John A. Tommasini Director
William Turchyn, Jr. Director
Paul Bagley, 54, is the founding partner of Stone Pine Capital LLC (1994),
and is Chairman of FCM Fiduciary Capital Managers, LLC (1989 to date), the
advisor to mezzanine and private equity funds. For more than twenty years prior
to 1988, Mr. Bagley was engaged in investment banking activities with Shearson
Lehman Hutton Inc. and its predecessor, E.F. Hutton & Company Inc. Mr. Bagley
serves as Chairman of the Board of Directors of Silver Screen Management, Inc.
and International Film Investors, Inc., which manage film portfolios with
aggregate assets of $1.0 billion. Mr.Bagley has served on the boards of a number
of public and private companies. Currently he is on the boards of America First
Financial Fund, Fiduciary Capital, EurekaBank, Hollis-Eden Pharmaceuticals,
Lithium Technology, Consolidated Capital, Logan Machinery Corp. and Pacific
Consumer Funding. Mr. Bagley graduated from the University of California at
Berkeley in 1965 with a B.S. in Business and Economics and from Harvard Business
School in 1968 with an M.B.A. in Finance.
Tom A. Bernstein, 44, has been Executive Vice President of the Managing
General Partner since June 1983 and Secretary, a Director and a principal
shareholder since March 1985. He has also been Executive Vice President,
Secretary, a Director and a principal shareholder of SSMS since its
organization. Mr. Bernstein is also President and Treasurer of Chelsea Piers
Management, Inc. which is the general partner of Chelsea Piers, L.P.; and a
limited partner of the Texas Rangers Baseball Club. Prior to June 1983, Mr.
Bernstein was engaged in the practice of law as an attorney in the Entertainment
Department of the law firm of Paul, Weiss, Rifkind, Wharton & Garrison in New
York.
John A. Tommasini, 52, the President of Laidlaw Equities, Inc., has been a
Director of the Managing General Partner since 1985 and a Director of SSMS since
its organization. He was Senior Vice President of Shearson Lehman Hutton from
January 1988 until March 30, 1990. He was associated with E.F. Hutton & Company
from 1972 until 1988 and served as First Vice President from January 1985 to
January 1988. He is also an Officer and a Director of American National
Security, Inc.
William Turchyn, Jr., 51, has been a Director of the Managing General
Partner and SSMS since their respective organizations. He was Executive Vice
President of Shearson from January 1988 until April 1989. He was associated with
E.F. Hutton & Company, Inc. from 1970 until 1988, was named First Vice President
in 1982 and served as Senior Vice President from 1983 until January 1988. Mr.
Turchyn is presently Senior Managing Director of the Private Client Group at
Furman Selz Capital Management.
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ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the fees, income, distributions and the
amounts payable to the General Partners of Silver Screen II and their affiliates
in connection with the management of Silver Screen II. The executive officers
and directors of the Managing General Partner serve without direct compensation
from Silver Screen II. Except as set forth below, the General Partners and their
affiliates will receive no remuneration of any type whatsoever from Silver
Screen II in connection with the administration of Silver Screen II's affairs.
CASH COMPENSATION TABLE1
- --------------------------------------------------------------------------------
(A) (B) (C)
- --------------------------------------------------------------------------------
Name of Entity Capacities in which Cash compensation
served
Silver Screen Managing General Overhead fee calculated as four
Management, Inc. Partner percent of the Budgeted Film
Cost (excluding overhead) of
each Joint Venture Film.
Pursuant to the Partnership
Agreement, the overhead fee was
paid in full on January 2,
1990. In addition, until the
holders of Units received cash
distributions sufficient to
reduce their Adjusted Capital
Contributions to zero, the
Managing General Partner was
allocated 0.9% of the profits,
losses and Disbursable Cash;
from that time forward the
Managing General Partner has
received 14.9% of such items.
During, 1996 $7,062,884 was
distributed from Disbursable
Cash to the Managing General
Partner.
- ----------------
1 See definitions below.
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Roland W. Betts Individual General Mr. Betts was allocated 0.1%
Partner of the profits, losses and
Disbursable Cash. Mr. Betts
received $47,402 therefrom in
1996.
Definitions Used in Cash Compensation Table
-------------------------------------------
Initial Capital
Contribution .......... $500 per Unit
Adjusted Capital
Contribution .......... With respect to each Unit, the Initial Capital
Contribution reduced by all cash distributions thereon,
and increased, at the beginning of each calendar year,
by an amount equal to 10% per annum of the balance of
the outstanding Initial Capital Contribution as so
adjusted from time to time during the preceding year.
The Adjusted Capital Contribution may not, however, be
less than zero. Adjusted Capital contributions differ
from the Limited Partners' capital accounts for tax and
accounting purposes.
Disbursable Cash ...... Receipts from operations, after deducting cash used to
pay operating expenses (including expenses reimbursable
to the Managing General Partner), debt service, and
amounts used for the creation or restoration of
reserves, but without deduction for depreciation or
amortization of film investments. Receipts from
operations include all items of income, whether ordinary
or extraordinary.
Budgeted Film Cost .... The estimated cost of a Joint Venture Film, including
contingency reserves of 7-1/2% and overhead of 17-1/2%.
The Budgeted Film Cost also includes all fixed
deferments, bonuses and participations in gross receipts
payable before the Joint Venture has recouped its
investment in that Joint Venture Film, fixed deferments
and bonuses payable prior to the payment of net profits
or out of first net profits.
15
<PAGE>
The Partnership Agreement provided that all Silver Screen II expenses,
including, among other things, legal, auditing and accounting expenses, and the
expenses of preparing and distributing reports to the Limited Partners, will be
billed to and paid by Silver Screen II. Subject to restrictions contained in the
Partnership Agreement, the Managing General Partner has been reimbursed for
certain administrative services. In addition, the Managing General Partner has
been reimbursed for expenses incurred in connection with the organization of
Silver Screen II and the public offering of the Units.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
No officer or Director of the Managing General Partner beneficially owns
any equity securities of Silver Screen II. To the knowledge of Silver Screen II,
no unitholder beneficially owns more than 5% of the Units of Silver Screen II.
Roland W. Betts and Tom A. Bernstein are controlling shareholders of the
Managing General Partner. 2,000,000 shares of the 3,750,000 issued and
outstanding shares of Common Stock of the Managing General Partner are owned by
Roland W. Betts and 1,250,000 shares are owned by Tom A. Bernstein. An
additional 500,000 shares have been issued to International Film Investors, L.P.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Items 10, 11 and 12 hereof.
16
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.
(a)1. Financial Statements
The following financial statements of Silver Screen Partners II, L.P. (a
Limited Partnership) are included pursuant to Item 8 hereof:
Page
----
Independent auditors' reports ......................... F-1
Balance sheets as of December 31, 1996 and
1995 ......................................... F-2
Statement of operations for the years ended
December 31, 1996, 1995 and 1994 .............. F-3
Statement of partners' equity for the years
ended December 31, 1996, 1995 and 1994......... F-4
Statement of cash flows for the years ended
December 31, 1996, 1995 and 1994 .............. F-5
Notes to Financial Statements........................... F6-10
(a)2. Financial Statement Schedules
No schedules are listed because they are not applicable or the required
information is shown in the financial statements or notes thereto.
(a)3. Exhibits
4 Certificate and Agreement of Limited
Partnership2
- ------------------------
2 Incorporated by reference to Silver Screen II's
Registration Statement on Form S-1, Registration No.
2-96230.
17
<PAGE>
10(a) Joint Venture Agreement dated as of April 29, 1985 by and
between Silver Screen II and Walt Disney Productions.3
10(b) Loan Agreement dated as of April 29, 1985 by and between
Silver Screen II and Walt Disney Productions.4
10(c) Distribution Agreement dated as of April 29, 1985 by and
between Disney -- Silver Screen II Joint Venture and BV
Distribution Co., Inc.5
10(d) Completed Pictures Distribution Agreement dated as of April
29, 1985 and between Walt Disney Productions and BV
Distribution Co., Inc.6
10(e) Letter Agreement dated September 11, 1995 by and between
Silver Screen II and the Walt Disney Company.7
99.1 Certificate of Cancellation of Silver Screen II, L.P.8
99.2 Form 15 -- Certificate and Notification of Termination of
Registration under Section 12(g) filed on January 8, 1997.9
(b) Reports on Form 8-K
On January 8, 1997 a report on Form 8-K was filed by Silver Screen II
reflecting the termination the legal existence of the Partnership effective as
of December 30, 1996.
- -----------------------------
3 Incorporated by reference to exhibits filed with Silver
Screen II's Registration Statement on Form S-1, Registration
No. 2-98033.
4 See footnote three.
5 See footnote three.
6 See footnote three.
7 Incorporated by reference as exhibit 10 filed with Form 10-Q, quarterly
report dated September 30, 1995.
8 Incorporated by reference to Silver Screen II's Current Report on Form
8-K dated January 8, 1997.
9 Incorporated by reference to Silver Screen Form 15 dated
January 8, 1997.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
SILVER SCREEN PARTNERS II, L.P.
(a Delaware Limited Partnership
terminated on December 30, 1996)
By SILVER SCREEN MANAGEMENT, INC.
Managing General Partner
Dated: March 25, 1997 By /s/ Roland W. Betts
------------------------------
Roland W. Betts,
President/Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 25, 1997 By
------------------------------
Roland W. Betts,
General Partner
SILVER SCREEN MANAGEMENT, INC.
Managing General Partner
Dated: March 25, 1997 By /s/ Roland W. Betts
------------------------------
Roland W. Betts,
President/Treasurer
Silver Screen Management, Inc
Dated: March 25, 1997 By /s/ Roland W. Betts *
-------------------------------
Paul Bagley
Director,
Silver Screen Management, Inc.
Dated: March 25, 1997 By /s/ Roland W. Betts *
-------------------------------
Tom A. Bernstein
Director,
Silver Screen Management, Inc.
Dated: March 25, 1997 By /s/ Roland W. Betts *
-------------------------------
John A. Tommasini
Director,
Silver Screen Management, Inc.
19
<PAGE>
Dated: March 25, 1997 By /s/ Roland W. Betts *
------------------------------
William Turchyn, Jr.
Director,
Silver Screen Management, Inc.
- ----------
* By Roland W. Betts, Attorney-in-Fact
20
<PAGE>
SILVER SCREEN
PARTNERS II
...............
ANNUAL REPORT
1996
21
<PAGE>
Silver Screen Management
Officers:
- ---------
Roland W. Betts
President and Chief Executive Officer
Tom A. Bernstein
Executive Vice President
Barbara Stubenrauch
Senior Vice President
Richard S. Kasof
First Vice President
Dana Thayer
First Vice President
Liz A. Brevetti
Vice President
Keith C. Champagne
Vice President
Evelyn Halley
Vice President
Stuart A. Sheinbaum
Director of Investor Relations
Conchetta S. Mayfield
Director of Operations
Paul Rindone
Director of Operations
Directors:
- ----------
Paul Bagley
New York, New York
Tom A. Bernstein
New York, New York
Roland W. Betts
New York, New York
John Tommasini
New York, New York
William Turchyn, Jr.
New York, New York
(c)1997 Silver Screen Management, Inc. Design: Pentagram
22
<PAGE>
LETTER TO INVESTORS
To Our Limited Partners
Silver Screen Partners II distributed approximately $40 million in 1996,
bringing total distributions since the Partnership's inception in 1985 to over
$284 million. This represents total distributions of $739.58 per $500 unit from
the inception of the Partnership through its dissolution. Of the $284 million
distributed, approximately 68% is return of capital and 32% is income.
During 1996, the Partnership distributed the proceeds from the sale of the
Partnership's interest in the Disney-Silver Screen II Joint Venture. The final
distribution was paid in late December and the Partnership was formally
dissolved by December 31, 1996.
Tax information for preparing your 1996 income tax returns will be mailed
to you by March 15 and will constitute the final mailing from the Partnership.
In the meantime, our Investor Relations Department is available to assist you
with any questions you may have. Please note our new telephone number and
address listed on the back of this report.
Tom Bernstein and I wish to reiterate our thanks for the privilege of
serving each of you.
Sincerely,
/s/ Roland W. Betts
- --------------------
Roland W. Betts
President
January 24, 1997
23
<PAGE>
REPORT OF INDEPENDENT AUDITORS
FINANCIAL STATEMENTS
To the Partners
Silver Screen Partners II, L.P.
We have audited the accompanying balance sheets of Silver Screen Partners
II, L.P. (a limited partnership) as of December 31, 1996 and 1995, and the
related statements of operations, partners' equity, and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Silver Screen Partners II,
L.P. (a limited partnership) at December 31, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996 in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
New York, New York
January 24, 1997
24
<PAGE>
BALANCE SHEETS
December 31, 1996 and 1995 1996 1995
- -------------------------- ----------- -----------
ASSETS
Current assets:
Cash ............................................ $ -- $ 818,642
Temporary investments (at cost plus accrued
interest, which approximates market) .......... -- 3,493,817
----------- -----------
Total current assets ............................ -- 4,312,459
Investment in Joint Venture ..................... -- 591,842
----------- -----------
$ -- $ 4,904,301
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner ................. $ -- $ 30,896
----------- -----------
Total current liabilities ....................... -- 30,896
Other liabilities ............................... -- 100,000
----------- -----------
Total liabilities ............................... -- 130,896
----------- -----------
Partners' Equity:
General partners ................................ -- (958,843)
Limited partners ................................ -- 5,732,248
----------- -----------
Total partners' equity .......................... -- 4,773,405
----------- -----------
$ -- $ 4,904,301
=========== ===========
See notes to financial statements.
25
<PAGE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years ended December 31, 1996, 1995 and 1994 1996 1995 1994
- -------------------------------------------- ----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Income from Joint Venture ............................ $43,186,462 $ 5,332,543 $ 3,523,841
Interest income ...................................... 870,595 162,096 118,603
----------- ----------- -----------
44,057,057 5,494,639 3,642,444
COSTS AND EXPENSES:
General and administrative ........................... 1,034,392 666,949 473,094
----------- ----------- -----------
Income before income taxes ........................... 43,022,665 4,827,690 3,169,350
Unincorporated business tax .......................... 393,864 -- --
----------- ----------- -----------
Net income ........................................... $42,628,801 $ 4,827,690 $ 3,169,350
=========== =========== ===========
Net income allocated to:
General partners ..................................... $ 6,394,320 $ 724,154 $ 317,903
Limited partners ..................................... 36,234,481 4,103,536 2,851,447
----------- ----------- -----------
$42,628,801 $ 4,827,690 $ 3,169,350
=========== =========== ===========
Net income per $500 limited partnership unit
(based on 385,200 units outstanding) ................ $ 94.07 $ 10.65 $ 7.40
=========== =========== ===========
Cash distribution per $500 limited partnership unit .. $ 104.60 $ 2.50 $ 7.60
=========== =========== ===========
</TABLE>
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited
Years ended December 31, 1996, 1995 and 1994 Partners Partners Total
- -------------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Partners' (deficiency) equity, January 1, 1994 . $ (1,721,281) $ 2,667,785 $ 946,504
Net income, 1994 ............................... 317,903 2,851,447 3,169,350
Distributions, 1994 ............................ (109,678) (2,927,520) (3,037,198)
------------ ------------ ------------
Partners' (deficiency) equity, December 31, 1994 (1,513,056) 2,591,712 1,078,656
Net income, 1995 ............................... 724,154 4,103,536 4,827,690
Distributions, 1995 ............................ (169,941) (963,000) (1,132,941)
------------ ------------ ------------
Partners' (deficiency) equity, December 31, 1995 (958,843) 5,732,248 4,773,405
Net income, 1996 ............................... 6,394,320 36,234,481 42,628,801
Distributions, 1996 ............................ (7,110,286) (40,291,920) (47,402,206)
Adjustment ..................................... 1,674,809 (1,674,809) --
------------ ------------ ------------
Partners' equity December 31, 1996 ............. $ -- $ -- $ --
============ ============ ============
</TABLE>
See notes to financial statements.
26
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31, 1996, 1995 and 1994 1996 1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................. $ 42,628,801 $ 4,827,690 $ 3,169,350
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of Joint Venture .......................... (43,186,462) -- --
Decrease (increase) in accrued interest receivable ..... 48,072 1,692 (9,215)
Net change in operating assets and liabilities:
(Decrease) increase in due to managing general partner (30,896) (46,034) 38,533
Decrease in other liabilities ........................ (100,000) -- --
------------ ------------ ------------
Net cash (used in) provided by operating activities .... (640,485) 4,783,348 3,198,668
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions received from Joint Venture
(less than) equity in income ......................... -- (1,845,879) (1,210,182)
Proceeds from sale of Joint Venture .................... 43,778,304 -- --
Sales (purchases) of temporary investments with
maturities of three months or less, net .............. 3,445,745 (1,049,555) 1,060,551
------------ ------------ ------------
Net cash provided by (used in) investing activities .... 47,224,049 (2,895,434) (149,631)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners .............................. (47,402,206) (1,132,941) (3,037,198)
------------ ------------ ------------
Net (decrease) increase in cash ........................ (818,642) 754,973 11,839
Cash, beginning of year ................................ 818,642 63,669 51,830
------------ ------------ ------------
Cash, end of year ...................................... $ -- $ 818,642 $ 63,669
============ ============ ============
</TABLE>
See notes to financial statements.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Silver Screen Partners II, L.P. ("the Partnership") was formed on April 16, 1985
as a Delaware limited partnership. The Partnership entered into a Joint Venture
Agreement with The Walt Disney Company ("Disney") for the purpose of financing
(in whole or in part), producing and exploiting all feature-length theatrical
motion pictures selected for production by Disney until the Partnership's funds
were fully committed. The Partnership provided substantially all the financing
for the Joint Venture's films, while Disney was responsible for the development
and production or acquisition decisions on behalf of the Joint Venture in
connection with the films.
Silver Screen Management, Inc., a Delaware corporation, is the managing
general partner ("MGP") of the Partnership and has exclusive responsibility for
the management of the business and the affairs of the Partnership. Roland W.
Betts, the President and principal shareholder of the MGP, is the individual
general partner of the Partnership.
The Partnership Agreement provides that all Partnership income, losses and
distributable cash ("Proceeds") are distributed 99% to the limited partners and
1% to the general partners until the Partnership has satisfied certain tests.
Thereafter, all Proceeds will be allocated 85% to the limited partners and 15%
to the general partners. At the end of the first quarter of 1994, the allocation
percentages with regard to Proceeds changed from 99% for the limited partners
and 1% for the general partners to 85% and 15%, respectively. The Proceeds to
the limited partners were allocated pro rata according to the capital accounts
of the respective limited partners.
On December 31, 1996, the Partnership terminated and accordingly
distributed all of its remaining assets, net of liabilities, to the partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income taxes:
-------------
No provision has been made for income taxes except for the City of New York
unincorporated business tax since the income or loss of the Partnership is
required to be reported by the respective partners on their income tax returns
(see Note 6).
3. TEMPORARY INVESTMENTS
Temporary investments as of December 31, 1995 consisted of commercial paper of
$3,493,817, which was rated by Standard & Poor's A1 or A1+. The commercial paper
matured on January 11, 1996 and had interest rates ranging from 5.75% to 5.79%.
4. INVESTMENT IN JOINT VENTURE
The Partnership entered into a Letter Agreement (the "Buyout Agreement") with
Disney dated September 11, 1995, providing the sale to Disney of all of the
Partnership's interest in the Joint Venture. In accordance with the Buyout
Agreement, the closing of the sale occurred on January 2, 1996 and the net
proceeds received by the Partnership were $43,186,462 in cash after an
adjustment for certain film revenues totaling $321,696 received in 1995.
The investment in the Disney-Silver Screen II Joint Venture (the "Joint
Venture") was accounted for using the equity method of accounting. Under the
equity method, the investment was initially recorded at cost, and was thereafter
increased by additional investments, adjusted by the Partnership's share of the
Joint Venture's results of operations and reduced by distributions received from
the Joint Venture. The Joint Venture's fiscal year ended September 30, while the
Partnership's fiscal year ended December 31.
The investment in Joint Venture at December 31, 1995 was as follows:
1995
-----------
Balance, January 1 .............................................. $(1,254,037)
Income from Joint Venture for the fiscal year ended September 30 5,332,543
Distributions received, January 1 to December 31 ................ (3,486,664)
-----------
Balance, December 31 ............................................ $ 591,842
===========
28
<PAGE>
For each Joint Venture film, all revenues received by the Joint Venture
were allocated and distributed first to the Partnership and Disney in proportion
to their respective investments in the budgeted cost of each film until each
recovered its investment; second, net of participations, to Disney until it
recovered any amounts paid for cost overruns; and thereafter, net of
participations, 75% to the Partnership and 25% to Disney (adjusted for any
Disney investment in the film other than cost overruns).
The condensed balance sheet for the Joint Venture at September 30, 1995 was
as follows:
ASSETS
Receivable from Buena Vista Pictures Distribution, Inc. ......... $3,044,632
Film production costs, net of accumulated amortization of
$145,677,986 .................................................. 11,824
----------
$3,056,456
==========
LIABILITIES AND VENTURERS' CAPITAL
Accounts payable to:
Silver Screen Partners II, L.P. ................................ $1,892,293
The Walt Disney Company ........................................ 1,152,258
Venturers' capital:
Silver Screen Partners II, L.P. ................................ 8,876
The Walt Disney Company ........................................ 3,029
----------
$3,056,456
==========
The condensed income statements for the Joint Venture for the years ended
September 30, 1995, and 1994 were as follows:
1995 1994
----------- -----------
Revenues ..................................... $ 7,339,413 $ 7,064,964
Amortization of film production costs ........ (208,006) (621,990)
Participation expense ........................ (21,351) (1,744,516)
----------- -----------
Net income ................................... $ 7,110,056 $ 4,698,458
=========== ===========
The Partnership's share of the September 30, 1995 and 1994 net income was
$5,332,543 and $3,523,841, respectively.
Film costs included production costs, a 17.5% overhead charge on the
budgeted film cost (payable 13.5% to Disney and 4% to the MGP), and interest on
development costs, as contractually defined, payable to Disney. Film production
costs were charged to earnings on an individual film basis in the ratio that the
current year's revenues bore to Joint Venture management's estimate of the
ultimate revenues to be received from all sources.
Film costs were stated at the lower of cost or estimated net realizable
value on an individual film basis. Revenue forecasts for all motion pictures
were continually reviewed by Joint Venture management and revised when warranted
by changing conditions. When estimates of ultimate revenues to be received
indicated that a motion picture would result in an ultimate loss, additional
amortization was provided to reduce the film to its net realizable value.
All of the Joint Venture's motion pictures are completed and released.
Participations represented a participant's share of a motion picture's
profits as contractually defined. An ultimate participation expense was
determined for each motion picture using ultimate revenues. Revenue forecasts
for all motion pictures were continually reviewed by Joint Venture management
and ultimate participation expense was revised when warranted. Ultimate
participation expense was charged to earnings on an individual film basis in the
ratio that current year's revenues bore to Joint Venture management's estimate
of the ultimate revenues to be received from all sources. During fiscal years
1995 and 1994, certain charges were made to residual estimates to better reflect
actual payment history. The impact of these changes was to increase fiscal years
1995 and 1994 net income by approximately $300,000 and $1,000,000, respectively.
29
<PAGE>
5. AGREEMENT WITH RELATED PARTIES
The Joint Venture had entered into a distribution agreement with Buena Vista
Distribution Co., Inc. ("Buena Vista"), a wholly owned subsidiary of Disney. The
agreement provided that the Joint Venture grant Buena Vista a license to
distribute all the Joint Venture's films, in all media throughout the world
through March 31, 1996. The distribution agreement provided that if the revenues
received by the Joint Venture for a Joint Venture film were less than 100% of
the film's budgeted film cost, as defined, actually expended, then five years
after the release of that film (or, if earlier, seven years after the release of
the first Joint Venture film), Buena Vista, to the extent it had retained
revenues from that film, would pay the Joint Venture an additional amount (the
"Revenue Shortfall Payment") sufficient to return the budgeted film cost
actually expended. Buena Vista was entitled to recoup any Revenue Shortfall
Payments from the Joint Venture's share of film revenue from such film after the
date of such payment. During 1992, the Partnership received $400,000
representing the last Revenue Shortfall Payment. Revenue Shortfall Payments were
due on the fifth anniversary of each affected film's U.S. theatrical release.
6. UNINCORPORATED BUSINESS TAX
On September 30, 1996, the Partnership received an assessment from New York City
regarding unincorporated business tax covering all periods from inception
through December 31, 1995 of $420,300 (including interest). This liability was
paid on the date of assessment. The Unincorporated Business Tax Expense reflects
the excess of this payment over an amount previously established as a
contingency reserve plus a provision for 1996.
7. STATEMENT OF PARTNERS' EQUITY
The Partnership Agreement provides that the General Partners receive no less
than 1% of all distributions. The adjustment of $1,674,809 ($4.35 per $500
limited partner unit) eliminates a deficit in the General Partners' capital
account.
- --------------------------------------------------------------------------------
(unaudited)
Value per unit based on annual appraisal
- ----------------------------------------
The appraised value per unit as of December 31, 1996 was $0.
Cash distributions
- ------------------
The Partnership made two distributions during 1996 totalling $104.60 or 20.9%
per $500 unit. Cumulative distributions through December 31, 1996 totalled
$739.58 or 148% per unit.
Availability of Form 10-K
- -------------------------
A copy of the Partnership's Annual Report to the SEC on Form 10-K may be
obtained without charge by writing to the Partnership, c/o Silver Screen
Management, Inc., Chelsea Piers-Pier 62, Suite 300, New York, N.Y. 10011.
30
<PAGE>
Silver Screen Management, Inc. Bulk Rate
Chelsea Piers-Pier 62 U. S. Postage
Suite 300 PAID
New York, N.Y. 10011 Permit #9
(212) 336-6700 Boston, MA
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED BALANCE SHEET AS OF DECEMBER 31, 1996, AND THE STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Dec-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 43,186
<TOTAL-REVENUES> 44,057
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,034
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 43,023
<INCOME-TAX> 394
<INCOME-CONTINUING> 42,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,629
<EPS-PRIMARY> 94.07
<EPS-DILUTED> 0
</TABLE>
