SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
---------------------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 1999
0-16690
(Commission File Number)
ML MEDIA OPPORTUNITY PARTNERS, L.P.
(Exact name of registrant as specified in its governing instruments)
Delaware
(State or other jurisdiction of organization)
13-3429969
(IRS Employer Identification No.)
World Financial Center
South Tower - 14th Floor
New York, New York 10080-6114
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 236-6472
N/A
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No .
---- ----
<PAGE>
ML Media Opportunity Partners, L.P.
Part I - Financial Information.
Item 1. Financial Statements.
TABLE OF CONTENTS.
Consolidated Balance Sheets as of September 30, 1999 (Unaudited) and December
31, 1998 (Unaudited)
Consolidated Statements of Operations for the three and nine months ended
September 30, 1999 (Unaudited) and September 30, 1998 (Unaudited)
Consolidated Statements of Cash Flows for the nine months ended September 30,
1999 (Unaudited) and September 30, 1998 (Unaudited)
Consolidated Statements of Changes in Partners' Capital for the nine months
ended September 30, 1999 (Unaudited)
Notes to Consolidated Financial Statements for the nine months ended September
30, 1999 (Unaudited)
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1999 (UNAUDITED)
AND DECEMBER 31, 1998 (UNAUDITED)
September 30, December 31,
Notes 1999 1998
----- ------------- -------------
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 10,517,680 $ 10,152,858
Interest and other receivables 24,818 37,403
Other assets - 89,191
------------- -------------
TOTAL ASSETS $ 10,542,498 $ 10,279,452
============= =============
LIABILITIES AND PARTNERS' CAPITAL:
Liabilities:
Accounts payable and accrued liabilities $ 2,219,984 $ 2,071,911
------------- -------------
Total Liabilities 2,219,984 2,071,911
------------- -------------
Commitments and contingencies 2,3
Partners' Capital:
General Partner:
Capital contributions, net of offering expenses 1,019,428 1,019,428
Additional capital contributions 30,956,740 29,573,143
Transfer from General Partner to Limited partners (30,883,892) (29,514,131)
Cumulative cash distributions (362,496) (362,496)
Cumulative loss (626,062) (613,376)
------------- -------------
103,718 102,568
------------- -------------
Limited partners:
Capital contributions, net of offering expenses
(112,147.1 Units of Limited Partnership Interest) 100,914,316 100,914,316
Transfer from General Partner to Limited partners 30,883,892 29,514,131
Tax allowance cash distribution (2,040,121) (2,040,121)
Other cumulative cash distributions (59,559,029) (59,559,029)
Cumulative loss (61,980,262) (60,724,324)
------------- -------------
8,218,796 8,104,973
------------- -------------
Total Partners' Capital 8,322,514 8,207,541
------------- -------------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $ 10,542,498 $ 10,279,452
============= =============
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1999 (UNAUDITED)
AND SEPTEMBER 30, 1998 (UNAUDITED)
Three Months Nine Months
------------ -----------
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest and other income $ 116,588 $ 85,782 $ 340,680 $ 252,319
------------- ------------- ------------- -------------
Partnership Operating Expenses:
Professional fees and other 42,066 21,311 225,707 206,726
Services provided by the
General Partner 461,199 453,490 1,383,597 1,360,470
------------- ------------- ------------- -------------
503,265 474,801 1,609,304 1,567,196
------------- ------------- ------------- -------------
NET LOSS $ (386,677) $ (389,019) $ (1,268,624) $ (1,314,877)
============= ============= ============= =============
Per Unit of Limited Partnership
Interest:
NET LOSS $ (3.41) $ (3.43) $ (11.20) $ (11.61)
============= ============= ============= =============
Number of Units 112,147.1 112,147.1 112,147.1 112,147.1
============= ============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1999(UNAUDITED)
AND SEPTEMBER 30, 1998(UNAUDITED)
September 30, September 30,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,268,624) $ (1,314,877)
Adjustments to reconcile net loss
to net cash provided by/(used in)
operating activities:
Services provided by the General
Partner 1,383,597 1,360,470
Changes in operating assets and liabilities:
Interest and other receivables 12,585 2,115
Other assets 89,191 -
Accounts payable and accrued
liabilities 148,073 (127,257)
------------- -------------
Net cash provided by/(used in) operating activities 364,822 (79,549)
------------- -------------
Net increase/(decrease) in cash and cash equivalents 364,822 (79,549)
Cash and cash equivalents at beginning of year 10,152,858 13,324,291
------------- -------------
Cash and cash equivalents at end of period $ 10,517,680 $ 13,244,742
============= =============
</TABLE>
See Notes to Consolidated Financial Statements (Unaudited).
<PAGE>
<TABLE>
<CAPTION>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CHANGES
IN PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
General Limited
Partner Partners Total
------------- ------------- -------------
<S> <C> <C> <C>
Partners' Capital as of January 1, 1999 $ 102,568 $ 8,104,973 $ 8,207,541
Net loss (12,686) (1,255,938) (1,268,624)
Additional capital contributions 1,383,597 - 1,383,597
Transfer from General Partner to
Limited partners (1,369,761) 1,369,761 -
------------- ------------- -------------
Partners' Capital as of September 30, 1999 $ 103,718 $ 8,218,796 $ 8,322,514
============= ============= =============
See Notes to Consolidated Financial Statements (Unaudited).
</TABLE>
<PAGE>
ML MEDIA OPPORTUNITY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 (UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
ML Media Opportunity Partners, L.P. (the "Partnership") was formed and the
Certificate of Limited Partnership was filed under the Delaware Revised Uniform
Limited Partnership Act on June 23, 1987. Operations commenced on March 23, 1988
with the first closing of the sale of units of limited partnership interest
("Units"). Subscriptions for an aggregate of 112,147.1 Units were accepted and
are now outstanding.
Media Opportunity Management Partners (the "General Partner") is a joint
venture, organized as a general partnership under the laws of the State of New
York, between RP Opportunity Management, L.P. ("RPOM"), a limited partnership
under Delaware law, and ML Opportunity Management Inc. ("MLOM"), a Delaware
corporation and an indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc.
The General Partner was formed for the purpose of acting as general partner of
the Partnership. The General Partner's total initial capital contribution
amounted to $1,132,800 which represents 1% of the total Partnership capital
contributions.
Pursuant to the terms of the Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement"), the General Partner is liable for all
general obligations of the Partnership to the extent not paid by the
Partnership. The limited partners are not liable for the obligations of the
Partnership in excess of the amount of their contributed capital.
The Partnership was formed to acquire, finance, hold, develop, improve,
maintain, operate, lease, sell, exchange, dispose of and otherwise invest in and
deal with Media Businesses and direct and indirect interests therein. As of
September 22, 1997, with the closing of the sale of MV Technology Limited
("MVT"), the Partnership disposed of its last Media Business (as defined in the
Partnership Agreement). As a result, as of September 22, 1998 (one year
following the disposition of its last Media Business), pursuant to the
Partnership Agreement, the Partnership is in dissolution and its only remaining
activity is to wind up its affairs, which includes providing for or resolving
its remaining obligations and contingencies, and making a final cash
distribution, if any, to its partners.
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
They do not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of the
General Partner, the financial statements include all adjustments necessary to
reflect fairly the financial position of the Partnership as of September 30,
1999 and the results of operations, cash flows and partners' capital of the
Partnership for the interim periods presented. All adjustments are of a normal
recurring nature. The results of operations for the nine months ended September
30, 1999, are not necessarily indicative of the results of operations for the
entire year.
Additional information, including the audited year end 1998 Financial Statements
and the Summary of Significant Accounting Policies, is included in the
Partnership's filing on Form 10-K for the year ended December 31, 1998 on file
with the Securities and Exchange Commission.
2. Liquidity and Summary of Investment Status
As of September 30, 1999, the Partnership had $10,517,680 in cash and cash
equivalents.
During the first nine months of 1999, the General Partner continued to work to
resolve the Partnership's obligations and contingencies relating to its former
investments. As of September 30, 1999, these obligations and contingencies
amounted to approximately $1.7 million in the aggregate, and are recorded as a
liability in the financial statements of the Partnership. The General Partner is
working diligently to resolve these obligations and contingencies as soon as
practicable.
The General Partner currently anticipates that the pendency of certain
litigation, as described below, related claims against the Partnership for
indemnification, other costs and expenses related to such litigation, and the
involvement of management, will adversely affect (a) the timing of the
termination of the Partnership, (b) the amount of proceeds which may be
available for distribution, and (c) the timing of the distribution to limited
partners of any net proceeds that remain after resolving such obligations and
contingencies.
Pursuant to an amendment to the Partnership Agreement dated March 24, 1997, the
Partnership's obligation to pay a Partnership Management Fee and a Property
Management Fee for 1996 and subsequent periods was terminated. Therefore,
although the General Partner continues to provide services on behalf of the
Partnership, the Partnership did not pay for these services and will not pay for
such services in the future. However, in accordance with generally accepted
accounting principles, for financial reporting purposes, amounts equal to these
services for the three and nine months ended September 30, 1999 of $461,199 and
$1,383,597 respectively, and for the three and nine months ended September 30,
1998 of $453,490 and $1,360,470, respectively, have been treated in the
accompanying statements of operations as an expense with a corresponding
increase in General Partner's capital due to the capital contributions for
services provided by the General Partner. In conjunction with the General
Partner's capital increase, a transfer was made to the limited partners' capital
for the limited partners' share (99%) of the capital contribution of such
services. The foregoing expense and capital transfer have no effect on the
capital of the limited partners or the General Partner.
3. Legal Proceedings
On August 29, 1997, a purported class action was commenced in New York Supreme
Court, New York County, on behalf of the limited partners of the Partnership,
against the Partnership, the General Partner, the General Partner's two
partners, MLOM and RPOM, Merrill Lynch & Co., Inc. and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"). The action concerns the
Partnership's payment of certain management fees and expenses to the General
Partner and the payment of certain purported fees to an affiliate of RPOM.
Specifically, the plaintiffs allege breach of the Partnership Agreement, breach
of fiduciary duties and unjust enrichment by the General Partner in that the
General Partner allegedly: (1) improperly failed to return to plaintiffs and the
alleged class members certain uninvested capital contributions in the amount of
$18.5 million (less certain reserves), (2) improperly paid itself management
fees in the amount of $18.3 million, and (3) improperly paid MultiVision Cable
TV Corp., an affiliate of RPOM, supposedly duplicative management fees in an
amount in excess of $6 million. In addition, plaintiffs assert a claim for
quantum meruit, supposedly seeking credit for, and counsel fees based on, the
benefit received by the limited partners as a result of the voluntary payment
made by Merrill Lynch to the Partnership in March 1997, in the amount of
approximately $23 million, representing management fees, certain expenses, and
interest paid by the Partnership to the General Partner since 1990.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLOM and RPOM,
plaintiffs claim that these defendants aided and abetted the General Partner in
the alleged breach of the Partnership Agreement and in the alleged breach of the
General Partner's fiduciary duties. Plaintiffs seek, among other things, an
injunction barring defendants from paying themselves management fees or expenses
not expressly authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses, return of
uninvested capital contributions, counsel fees, and compensatory and punitive
damages. Defendants believe that they have good and meritorious defenses to the
action, and vigorously deny any wrongdoing with respect to the alleged claims.
Defendants moved to dismiss the complaint and each claim for relief therein. On
March 3, 1999, the New York Supreme Court issued an order granting defendants'
motion and dismissing plaintiffs' complaint in its entirety, principally on the
grounds that the claims are derivative and plaintiffs lack standing to bring
suit because they failed to make a pre-litigation demand on the General Partner.
Plaintiffs have both appealed this order and moved, inter alia, for leave to
amend their complaint in order to re-assert certain of their claims as
derivative claims on behalf of the Partnership. The appeal and the motion for
leave to amend are pending. Defendants have not yet responded to the appeal,
which is being adjourned until February 2000, and have served papers in
opposition to the plaintiffs' motion for leave to amend their complaint.
The Partnership Agreement provides for indemnification, to the fullest extent
provided by law, for any person or entity named as a party to any threatened,
pending or completed lawsuit by reason of any alleged act or omission arising
out of such person's activities as a General Partner or as an officer, director
or affiliate of either RPOM, MLOM or the General Partner, subject to specified
conditions. In connection with the purported class action noted above, the
Partnership has received notices of requests for indemnification from the
following defendants named therein: the General Partner, MLOM, RPOM, Merrill
Lynch & Co., Inc., and Merrill Lynch. For the three and nine months ended
September 30, 1999, the Partnership incurred approximately $30,000 and $111,000,
respectively, for legal costs relating to such indemnification. For the three
and nine months ended September 30, 1998, the Partnership incurred approximately
$18,000 and $183,000 respectively, for legal costs relating to such
indemnification. Such cumulative costs amount to approximately $478,000 through
September 30, 1999.
4. Recent Accounting Statement Adopted
The Partnership adopted Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities" during the
first quarter of 1999. SFAS No. 133 established accounting and reporting
standards for derivative instruments and for hedging activities, requiring the
recognition of all derivatives as either assets or liabilities and to measure
those instruments at fair value, as well as to identify the conditions for which
a derivative may be specifically designed as a hedge. The Partnership currently
does not have any derivative instruments and is not engaged in hedging
activities.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources.
As of September 30, 1999, Registrant had $10,517,680 in cash and cash
equivalents.
As of September 22, 1997, with the closing of the sale of MV Technology Limited
("MVT"), Registrant disposed of its last Media Business, as defined in the
Amended and Restated Agreement of Limited Partnership (the "Partnership
Agreement"). As a result, as of September 22, 1998 (one year following the
disposition of its last Media Business), pursuant to the Partnership Agreement,
Registrant is in dissolution and its only remaining activity is to wind up its
affairs, which includes providing for or resolving its remaining obligations and
contingencies (see below), and making a final cash distribution, if any, to its
partners. During the first nine months of 1999, the General Partner continued to
work to resolve Registrant's obligations and contingencies relating to its
former investments. As of September 30, 1999, these obligations and
contingencies amounted to approximately $1.7 million in the aggregate, and are
recorded as a liability in the financial statements of Registrant. The General
Partner is working diligently to resolve these obligations and contingencies as
soon as practicable.
Registrant's ongoing cash needs will be to fund its existing obligations and
costs in connection with the liquidation of Registrant, as well as providing for
costs and expenses related to the purported class action lawsuit described
below. Media Opportunity Management Partners (the "General Partner") currently
anticipates that the pendency of such litigation, as described below, related
claims against Registrant for indemnification, other costs and expenses related
to such litigation, and the involvement of management, will adversely affect (a)
the timing of the termination of Registrant, (b) the amount of proceeds which
may be available for distribution, and (c) the timing of the distribution to the
limited partners of any net proceeds that remain after resolving such
obligations and contingencies.
Pursuant to an amendment to the Partnership Agreement (the "Amendment") dated
March 24, 1997, Registrant's obligation to pay a Partnership Management Fee and
a Property Management Fee for 1996 and subsequent periods was terminated.
Therefore, although the General Partner continues to provide services on behalf
of Registrant, Registrant did not pay for these services and will not pay for
such services in the future. However, in accordance with generally accepted
accounting principles, for financial reporting purposes, an amount equal to
these services for the three and nine months ended September 30, 1999 of
$461,199 and $1,383,597, respectively, has been treated in the accompanying
statements of operations as an expense with a corresponding increase in General
Partner's capital due to the capital contributions for services provided by the
General Partner. In conjunction with the General Partner's capital increase, a
transfer was made to the limited partners' capital for the limited partners'
share (99%) of the capital contribution of such services. The foregoing expense
and capital transfer have no effect on the capital of the limited partners or
the General Partner.
On August 29, 1997, a purported class action was commenced in New York Supreme
Court, New York County, on behalf of the limited partners of Registrant, against
Registrant, the General Partner, the General Partner's two partners, ML
Opportunity Management Inc. ("MLOM") and RP Opportunity Management, L.P.
("RPOM"), Merrill Lynch & Co., Inc. and Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"). The action concerns Registrant's payment of
certain management fees and expenses to the General Partner and the payment of
certain purported fees to an affiliate of RPOM.
Specifically, the plaintiffs allege breach of the Partnership Agreement, breach
of fiduciary duties and unjust enrichment by the General Partner in that the
General Partner allegedly: (1) improperly failed to return to plaintiffs and the
alleged class members certain uninvested capital contributions in the amount of
$18.5 million (less certain reserves), (2) improperly paid itself management
fees in the amount of $18.3 million, and (3) improperly paid MultiVision Cable
TV Corp., an affiliate of RPOM, supposedly duplicative management fees in an
amount in excess of $6 million. In addition, plaintiffs assert a claim for
quantum meruit, supposedly seeking credit for, and counsel fees based on, the
benefit received by the limited partners as a result of the voluntary payment
made by Merrill Lynch to Registrant in March 1997, in the amount of
approximately $23 million, representing management fees, certain expenses, and
interest paid by Registrant to the General Partner since 1990.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLOM and RPOM,
plaintiffs claim that these defendants aided and abetted the General Partner in
the alleged breach of the Partnership Agreement and in the alleged breach of the
General Partner's fiduciary duties. Plaintiffs seek, among other things, an
injunction barring defendants from paying themselves management fees or expenses
not expressly authorized by the Partnership Agreement, an accounting,
disgorgement of the alleged improperly paid fees and expenses, return of
uninvested capital contributions, counsel fees, and compensatory and punitive
damages. Defendants believe that they have good and meritorious defenses to the
action, and vigorously deny any wrongdoing with respect to the alleged claims.
Defendants moved to dismiss the complaint and each claim for relief therein. On
March 3, 1999, the New York Supreme Court issued an order granting defendants'
motion and dismissing plaintiffs' complaint in its entirety, principally on the
grounds that the claims are derivative and plaintiffs lack standing to bring
suit because they failed to make a pre-litigation demand on the General Partner.
Plaintiffs have both appealed this order and moved, inter alia, for leave to
amend their complaint in order to re-assert certain of their claims as
derivative claims on behalf of the Partnership. The appeal and the motion for
leave to amend are pending. Defendants have not yet responded to the appeal,
which is being adjourned until February 2000, and have served papers in
opposition to the plaintiff's motion for leave to amend their complaint.
The Partnership Agreement provides for indemnification, to the fullest extent
provided by law, for any person or entity named as a party to any threatened,
pending or completed lawsuit by reason of any alleged act or omission arising
out of such person's activities as a General Partner or as an officer, director
or affiliate of either RPOM, MLOM or the General Partner, subject to specified
conditions. In connection with the purported class action noted above,
Registrant has received notices of requests for indemnification from the
following defendants named therein: the General Partner, MLOM, RPOM, Merrill
Lynch & Co., Inc., and Merrill Lynch. For the three and nine months ended
September 30, 1999, Registrant incurred approximately $30,000 and $111,000,
respectively, for legal costs relating to such indemnification. Such cumulative
costs amount to approximately $478,000 through September 30, 1999.
Forward Looking Information
In addition to historical information contained or incorporated by reference in
this report on Form 10-Q, Registrant may make or publish forward-looking
statements about management expectations, strategic objectives, business
prospects, anticipated financial performance, and other similar matters. In
order to comply with the terms of the safe harbor for such statements provided
by the Private Securities Litigation Reform Act of 1995, Registrant notes that a
variety of factors, many of which are beyond its control, affect its operations,
performance, business strategy, and results and could cause actual results and
experience to differ materially from the expectations expressed in these
statements. These factors include, but are not limited to, the effect of
changing economic and market conditions, trends in business and finance and in
investor sentiment, the level of volatility of interest rates, the impact of
current, pending, and future legislation and regulation both in the United
States and throughout the world, and the other risks and uncertainties detailed
in this Form 10-Q. Registrant undertakes no responsibility to update publicly or
revise any forward-looking statements.
Year 2000 Compliance Initiative
The year 2000 ("Y2K") problem is the result of a widespread programming
technique that causes computer systems to identify a date based on the last two
numbers of a year, with the assumption that the first two numbers of the year
are "19". As a result, the year 2000 would be stored as "00", causing computers
to incorrectly interpret the year as 1900. Left uncorrected, the Y2K problem may
cause information technology systems (e.g., computer databases) and
non-information technology systems (e.g., elevators) to produce incorrect data
or cease operating completely.
Overall, Registrant believes that it has identified and evaluated its internal
Y2K problem and that it is devoting sufficient resources to renovating
technology systems that are not already Y2K compliant. Registrant has been
working with third-party software vendors to ensure that computer programs
utilized by Registrant are Y2K compliant. In addition, Registrant has contacted
third parties to ascertain whether these entities are addressing the Y2K issue
within their own operation.
The General Partner, through MLOM, is responsible for providing administrative
and accounting services necessary to support Registrant's operations, including
maintenance of the books and records, maintenance of the partner database,
issuance of financial reports and tax information to partners and processing
distribution payments to partners. In 1995, Merrill Lynch & Co., Inc.
established the Year 2000 Compliance Initiative, which is an enterprisewide
effort (of which MLOM is a part) to address the risks associated with the Y2K
problem, both internal and external. The integration testing phase, which will
occur throughout 1999, validates that a system can successfully interface with
both internal and external systems. Merrill Lynch & Co., Inc. continues to
survey and communicate with third parties whose Year 2000 readiness is important
to the company. Based on the nature of the response and the importance of the
product or service involved, Merrill Lynch & Co., Inc.
determines if additional testing is needed.
Merrill Lynch & Co., Inc. participated in further industrywide testing in March
and April 1999 sponsored by the Securities Industry Association. These tests
involved an expanded number of firms, transactions, and conditions compared with
those previously conducted. Merrill Lynch & Co., Inc. has participated in and
continues to participate in numerous industry tests throughout the world.
Registrant does not anticipate the cost of the Y2K problem to be material to its
business, financial condition or results of operations in any given year.
However, there can be no guarantee that the systems of other companies on which
Registrant's systems rely will be timely converted, or that a failure to convert
by another company or a conversion that is incompatible with Registrant's
systems would not have a material adverse effect on Registrant's business,
financial condition or results of operations.
Results of Operations.
Three months ended September 30, 1999 and 1998.
Registrant generated a net loss of approximately $387,000 in the three months
ended September 30, 1999, which was comprised of services provided by the
General Partner of approximately $461,000 and professional fees and other
expenses of approximately $42,000, partially offset by interest and other income
of approximately $116,000.
Registrant generated a net loss of approximately $389,000 in the three months
ended September 30, 1998, which was comprised of services provided by the
General Partner of approximately $454,000, and professional fees and other
expenses of approximately $21,000, partially offset by interest income of
approximately $86,000.
The decrease in net loss of approximately $2,000 from the 1998 period is
primarily attributable to an increase in interest income due to higher cash
balances at Registrant's parent level for the 1999 period, partially offset by
an increase in professional fees and other expenses and an increase in services
provided by the General Partner.
Nine months ended September 30, 1999 and 1998.
Registrant generated a net loss of approximately $1.3 million in the first nine
months of 1999, which was comprised of services provided by the General Partner
of approximately $1.4 million and professional fees and other expenses of
approximately $226,000, partially offset by interest and other income of
approximately $341,000.
Registrant generated a net loss of approximately $1.3 million in the first nine
months of 1998, which was comprised of services provided by the General Partner
of approximately $1.4 million and professional fees and other expenses of
approximately $207,000, partially offset by interest income of approximately
$252,000.
The decrease in net loss of approximately $46,000 from the 1998 period is
primarily attributable to an increase in interest income due to higher cash
balances at Registrant's parent level for the 1999 period, partially offset by
an increase in professional fees and other expenses and an increase in services
provided by the General Partner.
Pursuant to the Amendment, Registrant's obligation to pay management fees for
1996 and subsequent periods was terminated. Therefore, although the General
Partner continues to provide services on behalf of Registrant, Registrant did
not pay for these services and will not pay for such services in the future.
However, in accordance with generally accepted accounting principles, for
financial reporting purposes, an amount equal to these services is treated as an
expense with a corresponding increase in General Partner's capital. The
foregoing expense and capital transfer have no effect on the capital of the
limited partners or the General Partner. Therefore, Registrant's net income,
excluding services provided by the General Partner, was approximately $75,000,
$115,000, $64,000 and $46,000 for the three and nine months ended September 30,
1999 and the three and nine months ended September 30, 1998, respectively.
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk
As of September 30, 1999, Registrant maintains a portion of its cash equivalents
in financial instruments with original maturities of three months or less. These
financial instruments are subject to interest rate risk, and will decline in
value if interest rates increase. A significant increase or decrease in interest
rates would not have a material effect on Registrant's financial position.
<PAGE>
PART II - OTHER INFORMATION.
Item 1. Legal Proceedings.
On August 29, 1997, a purported class action was commenced in New York
Supreme Court, New York County, on behalf of the limited partners of
Registrant, against Registrant, the General Partner, the General
Partner's two partners, MLOM and RPOM, Merrill Lynch & Co., Inc. and
Merrill Lynch. The action concerns Registrant's payment of certain
management fees and expenses to the General Partner and the payment of
certain purported fees to an affiliate of RPOM.
Specifically, the plaintiffs allege breach of the Partnership
Agreement, breach of fiduciary duties and unjust enrichment by the
General Partner in that the General Partner allegedly: (1) improperly
failed to return to plaintiffs and the alleged class members certain
uninvested capital contributions in the amount of $18.5 million (less
certain reserves), (2) improperly paid itself management fees in the
amount of $18.3 million, and (3) improperly paid MultiVision Cable TV
Corp., an affiliate of RPOM, supposedly duplicative management fees in
an amount in excess of $6 million. In addition, plaintiffs assert a
claim for quantum meruit, supposedly seeking credit for, and counsel
fees based on, the benefit received by the limited partners as a
result of the voluntary payment made by Merrill Lynch to Registrant in
March 1997, in the amount of approximately $23 million, representing
management fees, certain expenses, and interest paid by Registrant to
the General Partner since 1990.
With respect to Merrill Lynch & Co., Inc., Merrill Lynch, MLOM and
RPOM, plaintiffs claim that these defendants aided and abetted the
General Partner in the alleged breach of the Partnership Agreement and
in the alleged breach of the General Partner's fiduciary duties.
Plaintiffs seek, among other things, an injunction barring defendants
from paying themselves management fees or expenses not expressly
authorized by the Partnership Agreement, an accounting, disgorgement
of the alleged improperly paid fees and expenses, return of uninvested
capital contributions, counsel fees, and compensatory and punitive
damages. Defendants believe that they have good and meritorious
defenses to the action, and vigorously deny any wrongdoing with
respect to the alleged claims. Defendants moved to dismiss the
complaint and each claim for relief therein. On March 3, 1999, the New
motion and dismissing plaintiffs' complaint in its entirety,
principally on the grounds that the claims are derivative and
plaintiffs lack standing to bring suit because they failed to make a
pre-litigation demand on the General Partner. Plaintiffs have both
appealed this order and moved, inter alia, for leave to amend their
complaint in order to re-assert certain of their claims as derivative
claims on behalf of the Partnership. The appeal and the motion for
leave to amend are pending. Defendants have not yet responded to the
appeal, which is being adjourned until February 2000, and have served
papers in opposition to the plaintiffs' motion for leave to amend
their complaint.
The Partnership Agreement provides for indemnification, to the fullest
extent provided by law, for any person or entity named as a party to
any threatened, pending or completed lawsuit by reason of any alleged
act or omission arising out of such person's activities as a General
Partner or as an officer, director or affiliate of either RPOM, MLOM
or the General Partner, subject to specified conditions. In connection
with the purported class action noted above, Registrant has received
notices of requests for indemnification from the following defendants
named therein: the General Partner, MLOM, RPOM, Merrill Lynch & Co.,
Inc., and Merrill Lynch. For the three and nine months ended September
30, 1999, Registrant incurred approximately $30,000 and $111,000 for
legal costs relating to such indemnification, respectively. Such
cumulative costs amount to approximately $478,000 through September
30, 1999.
Registrant is not aware of any other material legal proceedings.
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
A). Exhibits:
Exhibit # Description
27. Financial Data Schedule
B). Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ML MEDIA OPPORTUNITY PARTNERS, L.P.
By: Media Opportunity Management Partners
General Partner
By: RP Opportunity Management, L.P.
General Partner
By: IMP Opportunity Management Inc.
Dated: November 10, 1999 /s/ I. Martin Pompadur
---------------------------------
I. Martin Pompadur
Director and President
(principal executive officer
of the Registrant)
Dated: November 10, 1999 /s/ Elizabeth McNey Yates
----------------------------------
Elizabeth McNey Yates
Executive Vice President
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ML MEDIA OPPORTUNITY PARTNERS, L.P.
By: Media Opportunity Management Partners
General Partner
By: ML Opportunity Management, Inc.
Dated: November 10, 1999 /s/ Kevin K. Albert
-------------------------------------
Kevin K. Albert
Director and President
Dated: November 10, 1999 /s/ James V. Caruso
-------------------------------------
James V. Caruso
Director and Executive Vice President
Dated: November 10, 1999 /s/ David G. Cohen
-------------------------------------
David G. Cohen
Director and Vice President
Dated: November 10, 1999 /s/ Robert J. Remick
-------------------------------------
Robert J. Remick
Treasurer
(principal accounting officer and
principal financial officer of the Registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
quarter ended September 30, 1999 Form 10-Q Consolidated Balance Sheets and
Consolidated Statements of Operations as of September 30, 1999, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 10,518
<SECURITIES> 0
<RECEIVABLES> 25
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,542
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,542
<CURRENT-LIABILITIES> 2,220
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,542
<SALES> 0
<TOTAL-REVENUES> 341
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,609
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,269)
<EPS-BASIC> (11.20)
<EPS-DILUTED> 0
</TABLE>
