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, 1995
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 0-17713
SILVER SCREEN PARTNERS IV, L.P.
(a Delaware Limited Partnership)
(Exact name of registrant as specified in its
Certificate and Agreement of Limited Partnership)
Delaware 06-1236433
- ------------------------------- ----------------
(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 IV of this Form 10-K or any amendment to this
Form 10-K.[ ]
<PAGE>
PART I
ITEM 1. BUSINESS.
Silver Screen Partners IV, L.P. ("Silver Screen IV") was organized in
December 1987. A public offering of units of assigned limited partnership
interests was completed in October 1988, which raised $400 million. After
payment of offering costs and fees, approximately $357 million was available for
investment in films (the "Net Offering Proceeds").
Silver Screen IV entered into a Joint Venture agreement (the "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 from the time funds provided
by Silver Screen IV began to be utilized (the "Joint Venture Films"). Silver
Screen IV was obligated to use its best efforts to provide to the Joint Venture
funds in an amount equal to 150% of the gross proceeds of the offering (all
amounts being contributed toward the Joint Venture Films being hereinafter
referred to as the "Partnership Contribution"). Amounts in excess of the Net
Offering Proceeds have been derived from revenues earned on temporary
investments of Net Offering Proceeds prior to investment in Joint Venture Films,
revenues received by Silver Screen IV from the Joint Venture's investment in
Joint Venture Films and, to the extent necessary, borrowings by Silver Screen
IV. Pursuant to the terms of Silver Screen IV's Amended and Restated Agreement
of Limited Partnership ("the Partnership Agreement"), which is incorporated by
reference as Exhibit 4 hereto, Silver Screen IV had the authority to borrow
funds in an amount up to 75% of the gross proceeds of the offering.
On December 21, 1990, Silver Screen IV established a revolving credit
facility of $60,000,000 with a syndicate of commercial banks led by
Manufacturers Hanover Trust Company. On October 1, 1991 the facility was reduced
to $20,000,000, and on January 17, 1992 the facility was discontinued. This
facility was utilized by Silver Screen IV to meet its best efforts funding
obligation to provide funds to the Joint Venture equal to 150% of the gross
proceeds of the offering. Under the facility, Silver Screen IV borrowed funds at
interest rates of prime plus 1/2%.
Buena Vista Pictures Distribution, Inc. (formerly Buena Vista Distribution,
Inc.) ("BV"), a wholly-owned subsidiary of Disney, has been licensed to
distribute all Joint Venture Films in all media and in all territories
throughout the world. BV has paid and will pay the expenses in connection with
the worldwide distribution of each Joint Venture Film.
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All Silver Screen IV funds not invested in films are temporarily invested
in government securities and in time or demand deposits in commercial banks, or
in other securities as permitted under the terms of the Partnership Agreement.
The business of Silver Screen IV is managed by Silver Screen Management
Services, Inc., a Delaware corporation which is a general partner of Silver
Screen IV (the "Managing General Partner"). Silver Screen IV participates
through Disney-Silver Screen IV 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.
Silver Screen IV had commitments to thirty-three films, all of which have
been completed and released with total budgets amounting to approximately
$599,000,000, of which substantially all was expended as of December 31, 1994.
Accordingly, the Partnership will not finance or purchase any additional motion
pictures. These films are: "The Good Mother," released November 4, 1988;
"Beaches," released December 21, 1988; "Three Fugitives," released January 27,
1989; "Disorganized Crime," released April 14, 1989; "The Dead Poets Society,"
released June 2, 1989; "Turner and Hooch," released July 28, 1989; "An Innocent
Man" released October 6, 1989; "Gross Anatomy," released October 20, 1989; "The
Little Mermaid," released November 15, 1989; "Blaze," released December 13,
1989; "Where the Heart Is," released February 23, 1990; "Pretty Woman," released
March 23, 1990; "Ernest Goes to Jail," released April 6, 1990; "Spaced
Invaders," released April 27, 1990; "Dick Tracy," released June 15, 1990;
"Betsy's Wedding," released June 22, 1990; "Taking Care of Business," released
August 17, 1990; "Mr. Destiny," released October 12, 1990; "The Rescuers Down
Under," released November 16, 1990; "White Fang," released January 18, 1991;
"Run," released February 1, 1991; "Scenes From a Mall," released February 22,
1991; "The Marrying Man," released April 5, 1991; "Oscar," released April 26,
1991; "One Good Cop," released May 3, 1991; "Wild Hearts Can't Be Broken,"
released May 24, 1991; "The Rocketeer," released June 21, 1991; "The Doctor,"
released July 24, 1991; "V.I. Warshawski," released July 26, 1991; "True
Identity," released August 23, 1991; "Deceived," released September 27, 1991;
"Beauty and the Beast," released November 15, 1991; and "Blame it on the
Bellboy," released on February 28, 1992.
Buyout
- ------
Silver Screen IV has 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 IV's interest in the Joint Venture. The Buyout
Agreement provides for the payment of the purchase price of $330,000,000, in
cash (subject to certain adjustments with respect to revenues received from the
exploitation of animated films). Closing is scheduled to occur on November 30,
1998 subject to satisfaction of certain customary conditions. In addition to the
purchase price, the Buyout Agreement provides that BV will continue to account
for and make payments to the Joint Venture, as required by the Distribution
Agreement (as defined below) for all revenues received by BV through April 30,
1998. The Managing Partner expects that distributions to Silver Screen IV from
the Joint Venture will diminish, especially after 1996 when most of the Joint
Venture films have been exploited in most markets and all but one film's Revenue
Shortfall Payment will have been received. The Buyout Agreement has been filed
as an exhibit to Silver Screen IV'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 IV contributed to
the Joint Venture all amounts included in the Partnership Contribution. 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 IV.
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Some of the Joint Venture Films have been produced by third parties and
acquired by the Joint Venture in completed form (the "Acquired Films"). As
provided in the Joint Venture Agreement, the allocation of revenues from
Acquired Films are the same as for Joint Venture films, except in instances
where alternative arrangements have been entered into as permitted by the Joint
Venture Agreement.
Contributions by Silver Screen IV 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 produced by the Joint Venture and upon the
acquisition cost (the "Acquisition Cost") of all Acquired 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 (or, in the case of an
Acquired Film, the Acquisition Cost) of each such Joint Venture Film until such
time as the entire Partnership Contribution was so committed. Silver Screen IV
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, Touchstone film
and any film produced by Hollywood Pictures, Inc., a newly-created wholly-owned
subsidiary of Disney, or in excess of $15,000,000, in the case of any Disney
non-animated film.
Disney was solely responsible for the development of motion picture
projects for financing by the Joint Venture, the production (or acquisition in
the case of an Acquired Film) 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 consists 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 includes all fixed
deferments, bonuses and participations in gross receipts payable before the
Joint Venture has recouped its investment in that Joint Venture Film, all
deferred guaranteed compensation and an additional development fee to Disney in
the amount of $500,000. The budget of each Joint Venture Film must be approved
in writing by both parties, acting reasonably, prior to the commencement of
principal photography. Disney is empowered to grant participations in the
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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 55% of 100% of the net
profits of any non-animated Joint Venture Film and 50% of 100% of the net
profits of any animated Joint Venture Film.
If the average production cost per film for all Joint Venture Films is less
than $16,500,000, Silver Screen IV will pay Disney an Underbudget Bonus equal to
the difference between $16,500,000 and the average production cost, up to a
maximum of $500,000 per Joint Venture Film, multiplied by the total number of
Joint Venture Films. The Underbudget Bonus, if paid, will be deemed to increase
the Budgeted Film Cost (or Acquisition Cost) of all Joint Venture Films.
Production Cost excludes certain items included in Budgeted Film Cost. Disney
may exclude from such calculations with respect to up to two Joint Venture Films
amounts expended by Disney on the Budgeted Film Costs or Acquisition Costs in
excess of the maximum contributions of Silver Screen IV provided therefore in
the Joint Venture Agreement. Based on the cost of all Joint Venture films, no
Underbudget Bonus has been paid.
The revenue formula under the Joint Venture Agreement is designed to assure
that Silver Screen IV will 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 are 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 and will be allocated between the
parties as follows:
---100% to Silver Screen IV 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 or the Acquisition Cost of such Joint Venture Film;
---thereafter, 100% to Disney until Disney has recouped any cost
overruns;
---thereafter, after payment of applicable participations, 75% to
Silver Screen IV and 25% to Disney; provided that in the event that Silver
Screen IV has committed to less than the full amount of the Budgeted Film
Cost or Acquisition Cost of a Film as permitted by the Joint Venture
Agreement, the percentage of revenues allocable to Silver Screen IV with
respect to such Film will be equal to 75% of the percentage of such
Budgeted Film Cost or Acquisition Cost committed by Silver Screen IV, with
remainder allocated to Disney; and
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---thereafter, after payment of applicable participations, 62-1/2% to
Silver Screen IV and 37-1/2% to Disney, provided that in the event that
Silver Screen IV has committed to less than the full amount of the Budgeted
Film Cost or Acquisition Cost of a Film as permitted by the Joint Venture
Agreement, the percentage of revenues allocable to Silver Screen IV with
respect to such Film will be equal to 62-1/2% of the percentage of such
Budgeted Film Cost or Acquisition Cost committed by Silver Screen IV, with
the remainder allocated to Disney.
In addition, certain other payments in respect of "Revenue Shortfalls" will
be payable to the Joint Venture. The Revenue Shortfall for each Joint Venture
Film is the difference, if any, between the Budgeted Film Cost actually expended
or Acquisition Cost and the sum of all revenues actually received by the Joint
Venture from BV as of a settlement date (the "Settlement Date") occurring five
years after the U.S. theatrical release of such Joint Venture Film. On the
Settlement Date of each Joint Venture Film, BV is 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 will 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. During the year
ended December 31, 1995 the Partnership received Revenue Shortfall Payment on
four films amounting to $26.0 million.
Distribution Agreement
- ----------------------
Pursuant to the Distribution Agreement, BV will distribute the Joint
Venture Films for a term ending December 31, 1998, in all media throughout the
world.
BV (either directly or through third-party licensees or affiliated
companies) is obligated to release and distribute each of the Joint Venture
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.
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BV has paid and will pay all costs incurred in connection with the
promotion, marketing and distribution of each Joint Venture Film. In connection
with the U.S. theatrical release of each Joint Venture Film, BV has committed to
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 Joint Venture Film.
Competition
- -----------
Silver Screen IV is in competition with other institutions which provide
financing for films, some of which have substantially greater financial and
personnel resources than the Managing General Partner and Silver Screen IV.
These institutions include the major film studios and television networks. There
is substantial competition in the industry for a limited number of producers,
directors, actors and properties which are able to attract major distribution in
all media and all markets throughout the world.
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 IV has no employees. Silver Screen IV's business is
administered by the staff of the Managing General Partner.
ITEM 2. PROPERTIES.
Silver Screen IV neither owns nor leases any physical properties. The
Managing General Partner occupies offices in New York, New York.
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ITEM 3. LEGAL PROCEEDINGS.
Silver Screen IV 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 quarter
ended December 31, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S UNITS AND RELATED SECURITY
HOLDER MATTERS.
As of January 31, 1996, there were 51,994 Limited Partners of record
holding an aggregate of 800,000 limited partnership units of Silver Screen IV
(the "Units"). The Units are not traded securities in any market.
The Partnership Agreement of Silver Screen IV provides 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." Four distributions were made to the Limited Partners in
1995 which aggregated $60,000,000. The distributions were as follows: January 27
- - $30.00; April 28 - $15.00; July 27 - $15.00 and October 27 - $15.00. Four
distributions were made to the Limited Partners in 1994 which aggregated
$56,000,000. The distributions per Unit were as follows: January 28 - $33.00;
April 22 - $21.00; July 22 - $5.00 and October 28 - $11.00.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31,
1995 1994 1993 1992 1991
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues:
Income
from Joint Venture $ 9,531,277 $ 23,023,577 $ 60,811,416 $ 29,507,411 $ 26,414,467
Interest income ... 2,604,893 1,927,300 1,458,200 1,989,445 1,698,202
------------ ------------ ------------ ------------ ------------
12,136,170 24,950,877 62,269,616 31,496,856 28,112,669
------------ ------------ ------------ ------------ ------------
Expenses:
General and
administrative
expenses .......... 4,078,150 3,592,351 3,418,833 3,489,110 3,338,553
Interest and
borrowing costs ... -- -- -- 206,344 1,332,565
------------ ------------ ------------ ------------ ------------
4,078,150 3,592,351 3,418,833 3,695,454 4,671,118
------------ ------------ ------------ ------------ ------------
Net income ......... $ 8,058,020 $ 21,358,526 $ 58,850,783 $ 27,801,402 $ 23,441,551
============ ============ ============ ============ ============
Net income per
$500 limited
partnership unit
(based on 800,000
Units outstanding .. $ 9.97 $ 26.43 $ 72.83 $ 34.40 $ 29.01
============ ============ ============ ============ ============
Cash distribution
per $500 limited
partnership unit .. $ 75.00 $ 70.00 $ 131.00 $ 181.50 $ 48.75
============ ============ ============ ============ ============
Total assets ....... $138,506,425 $193,395,146 $225,932,541 $270,613,488 $387,022,955
============ ============ ============ ============ ============
</TABLE>
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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
IV for the years ended December 31, 1995, 1994 and 1993.
Silver Screen IV is a partnership and therefore generally not subject to
U.S. federal taxes. No provision has been made for federal income taxes with
respect to Silver Screen IV's income since income or loss of Silver Screen IV is
required to be reported by the respective partners on their income tax returns.
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
- ---------------------------------------------------------------------
Net income for the year ended December 31, 1995 was approximately
$8,058,000 compared to net income of approximately $21,359,000 for the year
ended December 31, 1994. Income for the year ended December 31, 1995 consisted
of income from the Joint Venture of approximately $9,531,000, a decrease of
approximately $13,493,000 from the prior annual period. The decrease occured
because most of the films in which the Partnership has an interest have been
released in the theatrical, home video, pay cable markets and are making their
way through the remaining markets. Income from the Joint Venture for the year
ended December 31, 1995 was primarily derived from "Beauty and the Beast,"
"Little Mermaid," and at a lesser amount for "Pretty Woman," "White Fang,"
"Where the Heart Is" and several other films.
Interest income generated by the investment of temporary investments of
revenues pending distributions to partners for the year ended December 31, 1995
was approximately $2,605,000, a $678,000 increase from the prior annual period
due to an increase in the weighted average daily interest rate to 5.82% in 1995
from 4.129% in 1994. General and administrative expenses for the year ended
December 31, 1995 were approximately $4,078,000, a $486,000 increase from the
prior annual period. The increase in expenses is due to several factors. First,
the Partnership incurred approximately $571,000 of costs associated with
preparations for negotiation of the sale by the Partnership of its interest in
the Joint Venture. These costs, which are considered to benefit each of the
Partnership, Silver Screen Partners II, L.P. and Silver Screen Partners III,
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 of each.
Second, reporting to partners increased by $40,000, while audit expenses and
payroll related expenses decreased by approximately $40,000 and $57,000,
respectively. Third, there was a $13,000 decrease in the aggregate cost of the
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10% per annum charge on the remaining overhead fee payable that was accrued in
1995 as compared to 1994. Finally, other expenses decreased overall by $15,000.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
- ---------------------------------------------------------------------
Net income for the year ended December 31, 1994 was approximately
$21,359,000 compared to net income of approximately $58,851,000 for the year
ended December 31, 1993. Income for the year ended December 31, 1994 consisted
of income from the Joint Venture of approximately $23,024,000, a decrease of
approximately $37,787,000 from the prior annual period. At this time, most of
the films in which the Partnership has an interest have been released in the
theatrical, home video and pay cable markets. Therefore, film revenues will
decline. Income from the Joint Venture for the year ended December 31, 1994 was
principally derived from foreign home video revenue from "Beauty and the Beast"
and merchandising revenues from "The Little Mermaid" and "Beauty and the Beast".
Additional income was generated by "Pretty Woman," "Rescuers Down Under" and
"Dead Poets Society."
Interest income generated by the investment of temporary investments of
revenues pending distributions to partners for the year ended December 31, 1994
was approximately $1,927,000, a $469,000 increase from the prior annual period.
A decrease in funds available for investment was offset by an increase in
interest rates. The weighted average daily interest rate increased to 4.129% in
1994 from 3.27% in 1993. General and administrative expenses for the year ended
December 31, 1994 were approximately $3,592,000, a $174,000 increase from the
prior annual period. The compounding effect of the overhead fee is responsible
for an increase of approximately $250,000, while reporting to partners and film
audit and general and administrative expenses in general decreased by
approximately $76,000.
Liquidity and Capital Resources
- -------------------------------
Inasmuch as the funding obligations of Silver Screen IV with respect to the
financing of the Joint Venture Films have been fully complied with, Silver
Screen IV has no material commitments for capital expenditures and does not
intend to enter into any such commitments. Receipts from temporary investments
and from the Joint Venture, less reserves established as determined by the
Managing General Partner, are the sources of liquidity for Silver Screen IV.
Silver Screen IV has no material requirements for liquidity other than its
general and administrative expenses and quarterly distributions to holders of
Units of limited partnership interests. Such sources are considered adequate for
such needs.
The Managing General Partner expects that Silver Screen IV will continue to
receive distribution from the Joint Venture (which will substantially diminish
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since the Joint Venture Films have been exploited in most markets) until Silver
Screen IV sells its interests in the Joint Venture on November 30, 1998.
Although the Joint Venture Films have been released in most film markets
around the world, Silver Screen IV anticipates that it will continue to receive
revenues from certain film markets. However, revenues in a particular quarter
may not be sufficient to justify making a cash distribution and therefore,
future cash distributions may fluctuate and there may be quarters where no
distributions will be paid.
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.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Silver Screen IV is a Limited Partnership managed by the Managing General
Partner and has no officers or directors. The officers and directors of the
Managing General Partner are also officers and directors of Silver Screen
Management, Inc. ("SSM"), which serves as managing general partner of Silver
Screen Partners, L.P., Silver Screen Partners II, 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., in the case of Silver Screen Partners, L.P., and
pursuant to joint venture agreements with Disney, in the case of Silver Screen
Partners II, L.P. and Silver Screen Partners III, L.P. Neither the Limited
Partners nor any General Partner of Silver Screen IV 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 IV.
Roland W. Betts, 49, 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
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is also the Individual General Partner of that Partnership. Mr. Betts is also
the largest shareholder 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 formed to develop and
operate 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:
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, 53, is the President and CEO of Laidlaw Holdings, Inc. He is
also a founding principal of Stone Pine Capital, an investment banking group
which owns a controlling interest in Laidlaw. For more than twenty years prior
to October 1988, Mr. Bagley was engaged in investment banking activities with
Shearson Lehman Hutton Inc. and it predecessor, E.F. Hutton & Company Inc. He
served in various capacities with Shearson and E.F. Hutton, including Executive
Vice President and Director, Managing Director, Head of Direct Investment
Origination and Manager of Corporate Finance. Mr. Bagley controls Fiduciary
Capital, a U.S. registered investment advisor which provides mezzanine debt and
equity capital to corporations. Mr. Bagley is also Chairman and Chief Executive
Officer of American National Security, which provides security services to
commercial and residential customers. 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 is also a Director of Logan Machinery Corporation, a manufacturer of
all-terrain vehicles, and EurekaBank, a Federal savings bank. He is also a
director of America First Financial Corporation, listed on NASDAQ. 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, 43, has been Executive Vice President, of the Managing
General Partner since June 1983 and a Secretary, a Director and a principal
shareholder since March 1985. He has also been Executive Vice President,
Secretary, a Director and principal shareholder of SSMS since its organization.
Mr. Bernstein is also President and Treasurer of Chelsea Piers Management, Inc.
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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, 51, the President of Laidlaw Equities, Inc., a NASD
registered broker dealer, 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., 50, 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.
ITEM 11. EXECUTIVE COMPENSATION.
The following table sets forth the fees, income, distributions and the
amounts payable to the General Partners of Silver Screen IV and their affiliates
in connection with the management of Silver Screen IV. The executive officers
and directors of the Managing General Partner serve without direct compensation
from Silver Screen IV. Except as set forth below, the General Partners and their
affiliates will receive no remuneration of any type whatsoever from Silver
Screen IV in connection with the administration of Silver Screen IV'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
Management, Inc. Partner four percent of the Budgeted
Film Cost (excluding overhead)
or Acquisition Cost (excluding
- ----------
1 See definitions below.
14
<PAGE>
overhead) actually contributed
by Silver Screen IV to each
Joint Venture Film (aggregate
of $11,701,154 as of December
31, 1995), plus 10% per annum,
profits, losses and compounded
quarterly, to the extent the
payment is deferred
($13,841,596 in the aggregate
as of December 31, 1995). In
addition, until the holders of
Units have received cash
distributions sufficient to
reduce their Adjusted Capital
Contributions plus an amount
equal to 8% of their Adjusted
Capital Contributions per annum
to zero, the Managing General
Partner will be allocated 0.9%
of the profits, losses and
Disbursable Cash; thereafter
until the holders of Units have
received cash distributions
sufficient to reduce their
Adjusted Capital Contributions
plus an amount equal to 15% of
their Adjusted Capital
Contributions per annum to
zero, the Managing General
Partner allocated 9.9% of the
profits, losses and Disbursable
Cash; thereafter the Managing
General Partner will receive
19.9% of such items. During
1995, $545,455 was distributed
to the Managing General Partner
from Disbursable Cash.
15
<PAGE>
Roland W. Betts Individual General Mr. Betts is
Partner allocated 0.1% of the
profits, losses and Disbursable
Cash. Mr. Betts received
$60,605 therefrom in 1995.
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.
The Adjusted Capital Contribution may not, however, be
less than zero. The Adjusted Capital Contributions
differ from the Limited Partners' capital accounts for
tax and accounting purposes.
Disbursable Cash ...... Receipts from operations, or funds released from
reserves, after deducting cash used to pay operating
expenses (including expenses reimbursable to the
Managing General Partner), debt service, capital
expenditures 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, deferred
guaranteed compensation and an additional development
fee to Disney in the amount of $500,000.
16
<PAGE>
Acquisition Cost ...... The cost to the Joint Venture to acquire an Acquired
Film plus each of the elements included in Budgeted Film
Cost; provided that the Acquisition Cost does not
include a contingency reserve.
The Partnership Agreement provides that all Silver Screen IV 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 IV. 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 IV 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 IV. To the knowledge of Silver Screen IV,
no unitholder beneficially owns more than 5% of the Units of Silver Screen IV.
Roland W. Betts and Tom A. Bernstein are controlling shareholders of the
Managing General Partner. Of the 100 issued and outstanding shares of Common
Stock of the Managing General Partner, 60 are owned by Roland W. Betts and 40
are owned by Tom A. Bernstein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Items 10, 11 and 12 hereof.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
17
<PAGE>
(a)1. Financial Statements
--------------------------
The following financial statements of Silver Screen Partners IV, L.P. (a
Limited Partnership) are included pursuant to Item 8 hereof:
Page
----
Independent auditors' reports ................... F-4
Balance sheets as of December 31, 1995 and
1994 ................................... F-5
Statement of operations for the years ended
December 31, 1995, 1994 and 1993 ....... F-6
Statement of partners' equity for the years ended
December 31, 1995, 1994 and 1993 ....... F-6
Statement of cash flows for the years ended
December 31, 1995, 1994 and 1993 ....... F-7
Notes to Financial Statements ................... F-8-11
(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 Amended and Restated Agreement of Limited Partnership2
10(a) Joint Venture Agreement dated as of December 23, 1987 by and
between Silver Screen IV and the Walt Disney Company.3
10(b) Distribution Agreement dated as of December 23, 1987 by and
between Disney -- Silver Screen IV Joint Venture and BV
Pictures Distribution Inc.4
10(c) Letter Agreement dated September 11, 1995 by and between
Silver Screen IV and The Walt Disney Company.5
- ----------
2 Incorporated by reference to Silver Screen IV's Registration Statement on
Form S-1, Registration No. 33-19249.
3 Incorporated by reference to exhibits filed with Amendment No. 1 to Silver
Screen IV's Registration Statement on Form S-1, Registration No. 33-19249.
4 See footnote three.
5 Incorporated by reference as exhibit 10 filed with Form 10-Q, quarterly
report dated September 30, 1995.
18
<PAGE>
(b) Report on Form 8-K
------------------
Silver Screen Partners IV, L.P. filed Form 8-K on November 11, 1991
reporting the incorrect allocation of income to Silver Screen Partners IV by the
Joint Venture and the restatement of prior period income for year ended December
31, 1990.
(d)1. Financial Statements
--------------------------
The following financial statements of the Disney-Silver Screen IV Joint
Venture are included as required by Regulation S-X:
Page
----
Report of Independent Auditor .................. F-14
Balance sheet as of September 30, 1995
and 1994........................................ F-15
Statement of Income for the three years ended
September 30, 1995 ............................. F-16
Statement of Venturers' Capital for the three
years ended September 30, 1995 ................. F-17
Statement of Cash Flows for the three years
ended September 30, 1995 ....................... F-18
Notes to Financial Statements................... F-19-22
Quarterly Financial Summary
(Unaudited) for 1995 and 1994................... F-23
(d)2. Financial Statement Schedules
-----------------------------------
Schedules have been omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto.
19
<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 IV, L.P.
(a Delaware Limited Partnership)
By SILVER SCREEN MANAGEMENT SERVICES, INC.
Managing General Partner
Dated: March 29, 1996 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 29, 1996 By /s/ Roland W. Betts
------------------------------
Roland W. Betts,
General Partner
SILVER SCREEN MANAGEMENT SERVICES, INC.
Managing General Partner
Dated: March 29, 1996 By /s/ Roland W. Betts
------------------------------
Roland W. Betts,
President/Treasurer
Dated: March 29, 1996 By /s/ Paul Bagley *
-------------------------------
Paul Bagley
Director,
Silver Screen Management Services, Inc.
Dated: March 29, 1996 By /s/ Tom A. Bernstein *
-------------------------------
Tom A. Bernstein
Director,
Silver Screen Management Services, Inc.
20
<PAGE>
Dated: March 29, 1996 By /s/ John A. Tommasini *
-------------------------------
John A. Tommasini
Director,
Silver Screen Management Services, Inc.
Dated: March 29, 1996 By /s/ William Turchyn, Jr. *
------------------------------
William Turchyn, Jr.
Director,
Silver Screen Management Services, Inc.
- ----------
* By Roland W. Betts, Attorney-in-Fact
21
<PAGE>
1995 Annual Report
SILVER SCREEN IV
----------------
F-1
<PAGE>
(c)1996 Silver Screen Management Services, Inc. Design: Pentagram
SILVER SCREEN MANAGEMENT
SERVICES, INC.
OFFICERS: DIRECTORS:
ROLAND W. BETTS PAUL BAGLEY
President and Chief Executive Officer New York, New York
TOM A. BERNSTEIN TOM A. BERNSTEIN
Executive Vice President New York, New York
BARBARA STUBENRAUCH ROLAND W. BETTS
Senior Vice President New York, New York
RICHARD S. KASOF JOHN TOMMASINI
First Vice President New York, New York
DANA THAYER WILLIAM TURCHYN, JR.
First Vice President New York, New York
Liz A. Brevetti
Vice President
KEITH 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
F-2
<PAGE>
LETTER TO INVESTORS
Dear Limited Partners:
Silver Screen Partners IV distributed over $48 million for the four
quarters of 1995, bringing total distributions since the Partnership's inception
in 1988 to $485 million. Of the $485 million, approximately 68% is return of
capital and 32% is income.
A substantial portion of the Partnership's 1995 revenue came in the form of
Revenue Shortfall Payments for five films: "Where the Heart is," "Ernest Goes to
Jail," "Betsy's Wedding," "Taking Care of Business," and "Mr. Destiny." Sales of
merchandise related to "The Little Mermaid" and "Beauty and the Beast" continued
to generate Partnership revenue. In addition, "The Marrying Man" and "Deceived"
generated revenue from the U.S. network television market this past year.
Three of our films became available to appear on basic cable television
(USA Network) in 1995 ("Beaches," "Three Fugitives," and "Dead Poets Society").
Next year, two of our films will become available to appear on USA Network ("An
Innocent Man" and "Blaze") and two other films will become available to the U.S.
syndicated television market ("Pretty Woman" and "Dick Tracy").
As discussed in our November 6, 1995 letter to investors, Silver Screen
Partners IV and The Walt Disney Company have agreed on the sale of the
Partnership's interest in the Disney-Silver Screen IV Joint Venture. Disney
agreed to purchase the Silver Screen Partners IV interest for $330 million. This
payment is scheduled to occur on the closing of the purchase on November 30,
1998.
Distributions for Silver Screen Partners IV will continue as many of the
Partnership's 33 films travel through U.S. and foreign television markets and as
the Partnership receives Revenue Shortfall Payments for a number of films. As
always, distributions depend on the amount of revenue generated each quarter,
and will fluctuate accordingly.
Tax information for preparing your 1995 income tax returns will be mailed
to you by March 15. In the meantime, our Investor Relations Department is
available to assist you with any questions you may have.
Sincerely,
/s/ ROLAND W. BETTS /s/ TOM A. BERNSTEIN
Roland W. Betts Tom A. Bernstein
President Executive Vice President
January 24, 1996
F-3
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Partners
Silver Screen Partners IV, L.P.
We have audited the accompanying balance sheets of Silver Screen Partners
IV, L.P. (a limited partnership) as of December 31, 1995 and 1994, and the
related statements of operations, partners' equity, and cash flows for each of
the three years in the period ended December 31, 1995. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Silver Screen Partners IV,
L.P. (a limited partnership) at December 31, 1995 and 1994, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
New York, New York
January 24, 1996
F-4
<PAGE>
BALANCE SHEETS
December 31, 1995 and 1994 1995 1994
------------ ------------
ASSETS
Current assets:
Cash ............................................. $ 392,505 $ 3,279,252
Temporary investments (at cost plus accrued
interest, which approximates market) (Note 3) ... 42,422,608 59,582,252
------------ ------------
Total current assets ............................. 42,815,113 62,861,504
Investment in Joint Venture (Note 4) ............. 95,691,312 130,533,642
------------ ------------
$138,506,425 $193,395,146
============ ============
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Due to managing general partner .................. $ 60,728 $ 7,715
Overhead fees payable (Note 6) ................... 25,542,750 27,936,444
------------ ------------
Total current liabilities ........................ 25,603,478 27,944,159
Other liabilities ................................ 100,000 100,000
------------ ------------
Total liabilities ................................ 25,703,478 28,044,159
------------ ------------
Partners' equity:
General partners (Note 1) ........................ -- --
Limited partners ................................. 112,802,947 165,350,987
------------ ------------
Total partners' equity ........................... 112,802,947 165,350,987
------------ ------------
$138,506,425 $193,395,146
============ ============
See notes to financial statements.
F-5
<PAGE>
STATEMENTS OF OPERATIONS
Years ended December 31, 1995, 1994 and 1993 1995 1994 1993
----------- ----------- -----------
Revenues:
Income from Joint Venture (Note 4) .... $ 9,531,277 $23,023,577 $60,811,416
Interest income ....................... 2,604,893 1,927,300 1,458,200
----------- ----------- -----------
12,136,170 24,950,877 62,269,616
----------- ----------- -----------
Costs and expenses:
General and administrative expenses
(Note 6) 4,078,150 3,592,351 3,418,833
----------- ----------- -----------
Net Income .............................. $ 8,058,020 $21,358,526 $58,850,783
=========== =========== -----------
Net income allocated to:
General partners ...................... $ 80,580 $ 213,585 $ 588,508
Limited partners ...................... 7,977,440 21,144,941 58,262,275
----------- ----------- -----------
$ 8,058,020 $21,358,526 $58,850,783
=========== =========== ===========
Net income per $500 limited partnership
unit (based on 800,000 units
outstanding) ......................... $ 9.97 $ 26.43 $ 72.83
=========== =========== ===========
Cash distribution per $500 limited
partnership unit ...................... $ 75.00 $ 70.00 $ 131.00
=========== =========== ===========
See notes to financial statements.
STATEMENTS OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited
Years Ended December 31, 1995, 1994 and 1993 Partners Partners Total
------------- ------------- -------------
<S> <C> <C> <C>
Partners' equity, January 1, 1993 .......... $ -- $ 247,565,920 $ 247,565,920
Net Income, 1993 ........................... 588,508 58,262,275 58,850,783
Distributions, 1993 ........................ (1,058,585) (104,800,000) (105,858,585)
Allocation under Treasury Regulation Section
1.704-1(b) (Note 1) ....................... 470,077 (470,077) --
------------- ------------- -------------
Partners' equity, December 31, 1993 ........ -- 200,558,118 200,558,118
Net income, 1994 ........................... 213,585 21,144,941 21,358,526
Distributions, 1994 ........................ (565,657) (56,000,000) (56,565,657)
Allocation under Treasury Regulation Section
1.704-1(b) (Note 1) ....................... 352,072 (352,072) --
------------- ------------- -------------
Partners' equity, December 31, 1994 ........ -- 165,350,987 165,350,987
Net income, 1995 ........................... 80,580 7,977,440 8,058,020
Distributions, 1995 ........................ (606,060) (60,000,000) (60,606,060)
Allocation under Treasury Regulation Section
1.704-1(b) (Note 1) ....................... 525,480 (525,480) --
------------- ------------- -------------
Partners' equity, December 31, 1995 ........ $ -- $ 112,802,947 $ 112,802,947
============= ============= =============
</TABLE>
See notes to financial statements.
F-6
<PAGE>
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31, 1995, 1994 and 1993 1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................... $ 8,058,020 $ 21,358,526 $ 58,850,783
Adjustments to reconcile net income to net cash
provided by operating activities:
Charge on overhead fee payable ................ 2,646,998 2,659,778 2,409,671
Net change in operating assets and liabilities:
Decrease (increase) in accrued interest
receivable ................................. 245,769 (234,429) (22,528)
Increase (decrease) in due to managing
general partner ............................ 53,013 (58,421) (2,485)
Increase in overhead fee payable ............ 9,308 68,379 19,669
Drawing on overhead fee ..................... (5,050,000) -- (100,000)
------------- ------------- -------------
Net cash provided by operating activities ....... 5,963,108 23,793,833 61,155,110
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Joint Venture .................... (78,566) (669,832) (618,450)
Distributions received from Joint Venture
in excess of equity in income ................. 34,920,896 35,073,101 54,614,312
Net sales (purchases) of temporary investments .. 16,913,875 1,543,813 (20,901,254)
------------- ------------- -------------
Net cash provided by investing activities ....... 51,756,205 35,947,082 33,094,608
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners ....................... (60,606,060) (56,565,657) (105,858,585)
------------- ------------- -------------
Net cash used in financing activities ........... (60,606,060) (56,565,657) (105,858,585)
------------- ------------- -------------
Net (decrease) increase in cash ................. (2,886,747) 3,175,258 (11,608,867)
Cash, beginning of year ......................... 3,279,252 103,994 11,712,861
------------- ------------- -------------
Cash, end of year ............................... $ 392,505 $ 3,279,252 $ 103,994
============= ============= =============
</TABLE>
See notes to financial statements.
F-7
<PAGE>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
Silver Screen Partners IV, L.P. ("the Partnership") was formed on December 16,
1987 as a Delaware limited partnership and began operations on June 16, 1988.
The Partnership formed a Joint Venture with The Walt Disney Company ("Disney")
for the purpose of financing (in whole or in part), producing, acquiring and
exploiting all feature-length theatrical motion pictures selected for production
by Disney until the Partnership's funds were fully committed. The Partnership
was obligated to use its best efforts to provide to the Joint Venture funds in
an amount equal to 150% of the gross proceeds of the offering. The Partnership
met this obligation through the use of a revolving credit facility and the
reinvestment of Partnership funds. The Partnership provided 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 Services, 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 profits, losses and
distributable cash ("Proceeds"), are allocated 99% to the limited partners and
1% to the general partners until the Partnership has satisfied certain tests.
Thereafter, all Proceeds will be allocated 90% to the limited partners and 10%
to the general partners until additional tests have been satisfied. Thereafter,
Proceeds will be allocated 80% to the limited partners and 20% to the general
partners. Cash generated by net gain from sale, as defined, will be allocated
85% to the limited partners and 15% to the general partners once the general
partners have recovered an aggregate of 15% of the total cash generated by net
gain from sale. The Partnership Agreement provides for the special allocation of
income and gain, in accordance with Treasury Regulation Section 1.704-1(b), to
eliminate any capital account deficit created through cash distributions to the
general partners. This special allocation in 1995, 1994 and 1993 amounted to
$525,480, $352,072 and $470,077, respectively, which represents $0.66, $0.44,
and $0.59 per $500 limited partnership unit, respectively. Cash distributions to
the limited partners are allocated pro rata according to the capital accounts of
the respective limited partners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Income taxes: No provision has been made for income taxes since the income
or loss of the Partnership is required to be reported by the respective partners
on their income tax returns.
3. TEMPORARY INVESTMENTS
Temporary investments consist of the following:
1995 1994
----------- -----------
Commercial paper $42,422,608 $59,582,252
=========== ===========
All commercial paper is rated by Standard & Poor's A1 or A1+.
1995 commercial paper matures between January 4 and January 29, 1996 and has
interest rates ranging from 5.6% to 5.8%.
1994 commercial paper matured between January 5 and January 30, 1995 and had
interest rates ranging from 5.42% to 6.00%.
4. INVESTMENT IN JOINT VENTURE
The investment in the Disney-Silver Screen IV Joint Venture (the "Joint
Venture") is accounted for using the equity method of accounting. Under the
equity method, the investment is initially recorded at cost, and is 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 ends September 30, while
the Partnership's fiscal year ends December 31. The 1995, 1994 and 1993
statements of operations reflect the Joint Venture's results of operations for
its fiscal years ended September 30, 1995, 1994, and 1993.
At the end of 1995, the Partnership entered into a buyout agreement (the
"Agreement") with Disney (see Note 5). Under the terms of the Agreement, the
F-8
<PAGE>
Partnership's influence over the Joint Venture has been reduced, and the amount
of future revenues to be received from the Joint Venture has been approximately
determined. As a result, the Partnership will account prospectively for its
investment in the Joint Venture using the cost method of accounting. Under this
method, distributions to be received will be recognized as income except that
the investment will be reduced in the proportion that actual distributions
received bear to ultimate revenues expected to be received.
The investment in Joint Venture at December 31, 1995 and 1994 is as follows:
1995 1994
------------- -------------
Balance, January 1 ....................... $ 130,533,642 $ 164,936,911
Investments, January 1 to December 31 .... 78,566 669,832
Income from the Joint Venture for the
fiscal year ended September 30 ......... 9,531,277 23,023,577
Distributions received, January 1
to December 31 ......................... (44,452,173) (58,096,678)
------------- -------------
Balance, December 31 ..................... $ 95,691,312 $ 130,533,642
============= =============
For each Joint Venture film, all revenues received by the Joint Venture are
allocated and distributed first to the Partnership and Disney in proportion to
their respective investments in the budgeted or acquisition cost of each film
until each has recovered its investment; second, net of participations, to
Disney until it recovers 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) until the Partnership
has received an amount equal to 150% of its investment; and thereafter, 62-1/2%
to the Partnership and 37-1/2% to Disney (adjusted for any Disney investment in
the film other than cost overruns).
The condensed balance sheets for the Joint Venture at September 30, 1995 and
1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
ASSETS
<S> <C> <C>
Receivable from Buena Vista Pictures Distribution, Inc. . $ 23,252,574 $ 32,357,177
Receivable from Silver Screen Partners IV, L.P. ......... 2,348 524,183
Film production costs, net of accumulated amortization of
$622,097,592 and $564,432,481 ........................ 132,457,711 190,665,946
------------ ------------
$155,712,633 $223,547,306
============ ============
LIABILITIES AND VENTURERS' CAPITAL
Accounts and distributions payable to:
The Walt Disney Company .............................. $ 9,922,090 $ 18,311,333
Silver Screen Partners IV, L.P. ...................... 10,066,542 8,776,150
Deferred revenue ........................................ 2,037,668 4,177,042
Venturers' capital:
The Walt Disney Company .............................. 34,993,634 40,748,959
Silver Screen Partners IV, L.P. ...................... 98,692,699 151,533,822
------------ ------------
$155,712,633 $223,547,306
============ ============
</TABLE>
The condensed statements of income for the Joint Venture for the years ended
September 30, 1995, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -------------
<S> <C> <C> <C>
Revenues ............................ $ 83,979,513 $ 105,260,918 $ 206,633,009
Amortization of film production costs (57,665,111) (50,583,867) (66,157,405)
Participation expense ............... (7,594,341) (13,902,997) (37,162,011)
------------- ------------- -------------
Net income .......................... $ 18,720,061 $ 40,774,054 $ 103,313,593
============= ============= =============
</TABLE>
The Partnership's share of the September 30, 1995, 1994 and 1993 net income was
$9,531,277, $23,023,577 and $60,811,416, respectively.
F-9
<PAGE>
Film costs include production costs, a 17.5% overhead charge on the
budgeted film cost (payable 13.5% to Disney and 4% to the MGP), a development
fee of $500,000 for each film payable to Disney, and interest on development
costs, as contractually defined, payable to Disney. Film production costs are
charged to earnings on an individual film basis in the ratio that the current
year's revenues bear to Joint Venture management's estimate of ultimate revenues
to be received from all sources. See Note 6 with respect to the Joint Venture's
distribution agreement.
Film costs are stated at the lower of cost or estimated net realizable
value on an individual film basis. Revenue forecasts for all motion pictures are
continually reviewed by Joint Venture management and revised when warranted by
changing conditions. When estimates of ultimate revenues to be received indicate
that a motion picture will result in an ultimate loss, additional amortization
is provided to reduce the film to its net realizable value.
All of the Joint Venture's motion pictures are completed and have been
released and are currently in secondary markets (home video, pay television,
free television, and syndication). Based on Joint Venture management's ultimate
revenue estimates at September 30, 1995, all unamortized film production costs
will be amortized during the next three years.
Participations represent a participant's share of a motion picture's
profits as contractually defined. An ultimate participation expense is
determined for each motion picture using ultimate revenues. Revenue forecasts
for all motion pictures are continually reviewed by Joint Venture management and
ultimate participation expense is revised when warranted. Ultimate participation
expense is charged to earnings on an individual film basis in the ratio that
current year's revenues bear to Joint Venture management's estimate of the
ultimate revenues to be received from all sources. Pursuant to the Joint Venture
agreement, Disney is entitled to a participation in the profits of all animated
films.
5. DISNEY BUYOUT OF THE PARTNERSHIP
The Partnership has entered into an agreement (the "Agreement") with Disney
providing for the sale to Disney of all of the Partnership's interest in the
Joint Venture. The Agreement provides for the payment of the purchase price of
$330,000,000 in cash (subject to certain adjustments with respect to revenues
received from the exploitation of animated films). Closing will be on November
30, 1998. In addition to the purchase price, the Agreement provides that Buena
Vista Pictures Distribution, Inc. ("Buena Vista"), a wholly owned subsidiary of
Disney, will continue to account for and make payments to the Joint Venture, as
required by the distribution agreement (defined in Note 7) for all revenues
received by Buena Vista through April 30, 1998.
6. OVERHEAD FEES PAYABLE
The Partnership Agreement provides that overhead fees received by the
Partnership for the benefit of the MGP (see Note 4) will remain on account with
the Partnership with the understanding that the MGP may draw from such account
from time to time, in order to cover its actual operating expenses not
reimbursed from other sources. Such amounts are included in the temporary
investments and earn interest which accrues to the Partnership. The fees
remaining on account will earn 10% per annum (compounded quarterly) for the MGP.
The amount included in general and administrative expenses for the years ended
December 31, 1995, 1994 and 1993 is $2,646,997, $2,659,778 and $2,409,671,
respectively. Any amount remaining in such account on January 2, 1997 will be
paid to the MGP on such date. As of December 31, 1995 and 1994, the balance of
such overhead fee payable account was $25,542,750 and $27,936,444, respectively.
7. AGREEMENT WITH RELATED PARTIES
The Joint Venture has entered into a distribution agreement with Buena Vista
whereby the Joint Venture has granted Buena Vista a license to distribute all
the Joint Venture's films in all media throughout the world through December 31,
1998. The distribution agreement further provides that if the revenues received
by the Joint Venture for a Joint Venture film are less than 100% of the film's
budgeted film cost or acquisition cost, as defined, then five years after the
release of that film, Buena Vista, to the extent it has retained revenues from
that film, will pay the Joint Venture an additional amount (the "Revenue
Shortfall Payment") sufficient to return the budgeted film cost or acquisition
cost actually expended. If revenues retained by Buena Vista are not sufficient
to return the budgeted film cost or acquisition cost, then the Joint Venture
will receive 100% of the gross receipts (net of certain distribution costs)
until the Joint Venture has received an amount equal to the unreimbursed portion
of the revenue shortfall. Buena Vista will be entitled to recoup any Revenue
Shortfall Payments from the Joint Venture's share of film revenue from such film
after the Joint Venture has recouped its investment. The Partnership received
Revenue Shortfall Payments during the years ended December 31, 1995 and 1994 of
$26.0 million and $21.7 million, respectively. Disney has guaranteed Buena
Vista's obligation to make Revenue Shortfall Payments, if any.
F-10
<PAGE>
- --------------------------------------------------------------------------------
Unaudited
VALUE PER UNIT BASED ON ANNUAL APPRAISAL
The appraised value per unit based upon projected cash flow as of December 31,
1995 is $460. The appraised value does not consider the time value of money.
CASH DISTRIBUTIONS
The Partnership made four distributions in 1995 totalling $75 or 15% per $500
unit. Cumulative distributions through December 31, 1995 totalled $595 or 119%
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 Services, Inc., 936 Broadway, New York, N.Y. 10010.
F-11
<PAGE>
Silver Screen Management Services, Inc.
936 Broadway
New York, NY 10010
Bulk Rate
U. S. Postage
PAID
Permit #9
Boston, MA
F-12
<PAGE>
DISNEY-SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Financial Statements
September 30, 1995 and 1994
F-13
<PAGE>
Price Waterhouse LLP [GRAPHIC OMITTED]
Report of Independent Accountants
---------------------------------
December 20, 1995
To the Joint Venturers of
Disney-Silver Screen IV Joint Venture
In our opinion, the accompanying balance sheet and the related statements of
income, of Venturers' capital and of cash flows present fairly, in all material
respects, the financial position of Disney-Silver Screen IV Joint Venture (a
California Joint Venture) at September 30, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Joint Venture's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/Price Waterhouse LLP
F-14
<PAGE>
DISNEY - SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Balance Sheet
September 30, September 30,
1995 1994
------------ ------------
ASSETS
------
Receivable from Buena Vista
Pictures Distribution, Inc. ............... $ 23,252,574 $ 32,357,177
Receivable from Silver
Screen Partners IV, L.P. .................. 2,348 524,183
Film production costs, less accumulated
amortization of $622,097,592 and
$564,432,481 at September 30, 1995 and
September 30, 1994, respectively .......... 132,457,711 190,665,946
------------ ------------
$155,712,633 $223,547,306
============ ============
LIABILITIES AND VENTURERS' CAPITAL
----------------------------------
Accounts and distributions payable
Silver Screen Partners IV, L.P. ........... $ 10,066,542 $ 8,776,150
The Walt Disney Company ................... 9,922,090 18,311,333
Deferred revenue ............................ 2,037,668 4,177,042
Venturers' capital
Silver Screen Partners IV, L.P. ........... 98,692,699 151,533,822
The Walt Disney Company ................... 34,993,634 40,748,959
------------ ------------
133,686,333 192,282,781
------------ ------------
$155,712,633 $223,547,306
============ ============
See accompanying notes to financial statements.
F-15
<PAGE>
DISNEY - SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Statement of Income
Year Ended
September 30,
-------------
1995 1994 1993
------------- ------------- -------------
Revenues .................... $ 83,979,513 $ 105,260,918 $ 206,633,009
Costs and expenses
Amortization of film
production costs ........... (57,665,111) (50,583,867) (66,157,405)
Participation expense
The Walt Disney Company .. (3,334,426) (6,362,580) (30,082,410)
Third party participants . (4,259,915) (7,540,417) (7,079,601)
------------- ------------- -------------
Net income .................. $ 18,720,061 $ 40,774,054 $ 103,313,593
============= ============= =============
See accompanying notes to financial statements.
F-16
<PAGE>
DISNEY - SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Statement of Venturers' Capital
Years Ended September 30, 1995, 1994, and 1993
<TABLE>
<CAPTION>
Silver Screen The Walt
Partners Disney
IV, L.P. Company Total
------------- ------------- -------------
<S> <C> <C> <C>
Balance at September 30, 1992 .......... $ 246,144,715 $ 64,892,174 311,036,889
Capital contributions (distributions) 752,686 (64,569) 688,117
Net income .......................... 60,811,416 42,502,177 103,313,593
Distributions ....................... (113,359,370) (57,070,554) (170,429,924)
------------- ------------- -------------
Balance at September 30, 1993 .......... $ 194,349,447 $ 50,259,228 $ 244,608,675
Capital contributions (distributions) 227,728 (710,974) (483,246)
Net income .......................... 23,023,577 17,750,477 40,774,054
Distributions ....................... (66,066,930) (26,549,772) (92,616,702)
------------- ------------- -------------
Balance at September 30, 1994 .......... 151,533,822 40,748,959 192,282,781
Capital (distributions) contributions (254,451) 696,107 441,656
Net income .......................... 9,531,277 9,188,784 18,720,061
Distributions ....................... (62,117,949) (15,640,216) (77,758,165)
------------- ------------- -------------
Balance at September 30, 1995 .......... $ 98,692,699 $ 34,993,634 $ 133,686,333
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
DISNEY - SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended
September 30,
-------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................... $ 18,720,061 $ 40,774,054 $ 103,313,593
Adjustments to reconcile net income to net
cash provided by operating activities:
Charges to income not requiring cash outlays
Amortization of film production costs ....... 57,665,111 50,583,867 66,157,405
Change in assets and liabilities
Decrease (increase) in receivable from Buena
Vista Pictures Distribution, Inc. ........... 9,104,603 12,742,113 (5,798,392)
(Decrease) increase in participations payable
to The Walt Disney Company .................. (9,808,498) (27,150,328) 8,658,910
(Decrease) increase in deferred revenue ..... (2,139,374) (4,358,418) 1,613,051
------------- ------------- -------------
Total adjustments ............................... 54,821,842 31,817,234 70,630,974
------------- ------------- -------------
Net cash provided by operating activities ......... 73,541,903 72,591,288 173,944,567
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions (distributions)
Silver Screen Partners IV, L.P. ............... 267,384 568,368 944,754
The Walt Disney Company ....................... 696,107 (710,974) (64,569)
Distributions
Silver Screen Partners IV, L.P. ............... (60,827,557) (54,500,151) (116,047,990)
The Walt Disney Company ....................... (13,904,590) (18,982,087) (59,489,011)
------------- ------------- -------------
Net cash used by financing activities ............. (73,768,656) (73,624,844) (174,656,816)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Film production costs reduction ................. 226,753 1,033,556 712,249
------------- ------------- -------------
Net change in cash, and cash at end of period ..... -- $ -- $ --
============= ============= =============
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
DISNEY-SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Notes to Financial Statements
September 30, 1995
(1) ORGANIZATION AND SIGNIFICANT AGREEMENTS
Organization
------------
The Disney-Silver Screen IV Joint Venture (Joint Venture) was formed under
the laws of the State of California on December 23, 1987 pursuant to a
Joint Venture agreement (JV Agreement) between the Walt Disney Company
(Disney) and Silver Screen IV, L.P. (Silver Screen), collectively referred
to as the Venturers. The Joint Venture was formed to finance, produce and
exploit feature length live action and animated theatrical motion pictures
selected for production by Disney. Silver Screen was capitalized through a
public offering of limited partnership units and has provided approximately
$600 million of funding to the Joint Venture.
Joint Venture Agreement
-----------------------
The JV Agreement sets forth the rights and obligations of the Venturers,
including their capital contribution requirements and sharing of net
proceeds and tax attributes. The JV Agreement requires Silver Screen to
provide substantially all the financing for the Joint Venture's films,
while Disney is required to finance all necessary costs in excess of Silver
Screen's limits and is solely responsible for all decisions incidental to
the development and production or acquisition of motion pictures for the
Joint Venture. Silver Screen's financing contribution is limited to 100% of
the budgeted film production costs (BFC), as contractually defined. At its
option, Silver Screen may limit its contribution to $20 million per film.
The Joint Venture is managed by Disney.
Revenues received by the Joint Venture from each film are distributed first
to Silver Screen and Disney in proportion to their respective investments
in the film's BFC until each has received an amount equal to its investment
in the film's BFC. Thereafter, revenues are distributed to Disney until it
has received an amount equal to its investment in film production costs in
excess of the film's BFC. Thereafter, revenues, net of participations, are
distributed 75% to Silver Screen and 25% to Disney, as adjusted for any
Disney investment in the film's BFC, until Silver Screen has received an
amount equal to 150% of its investment. Thereafter, all remaining revenues,
net of participations are distributed 62.5% to Silver Screen and 37.5% to
Disney, as adjusted for any Disney investment in the film's EFC.
On September 29, 1995, Disney entered into an agreement (Purchase
Agreement) with Silver Screen to purchase all of Silver Screen's rights and
interest in, to and under the JV Agreement and the distribution agreement
(as defined below). The Purchase Agreement provides for the payment of the
purchase price (subject to certain adjustments with respect to animated
films) on November 30, 1998 (or such later date as mutually agreed to by
the parties) and requires Buena Vista Pictures Distribution, Inc. (Buena
F-19
<PAGE>
DISNEY-SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Notes to Financial Statements
September 30, 1995
Vista), a wholly owned subsidiary of Disney, to continue accounting for and
making payments to the Joint Venture as required by the distribution
agreement for all revenues received through April 30, 1998. After the
payment of the purchase price, the Joint Venture will be dissolved. Until
such time, the Joint Venture financial statements will be prepared in
accordance with the accounting policies described below.
Distribution Agreement
----------------------
Concurrent with its formation, the Joint Venture entered into a
distribution agreement with Buena Vista, for the distribution of all films
produced by the Joint Venture in all media throughout the world, and shall
be renewable on terms and conditions set forth in the distribution
agreement. From the revenues received from the distribution of the Joint
Venture films net of certain contractually defined costs, Buena Vista
retains a distribution fee, as contractually defined, and an amount to
recoup residuals it has paid, and remits the balance of the revenues to the
Joint Venture. The receivable from Buena Vista relates to receivables due
to Buena Vista from exhibitors and distributors of motion picture products.
If the total revenues received by the Joint Venture five years after the
release of each film are less than 100% of the Joint Venture's investment
in the BFC of that film, Buena Vista is required to pay the Joint Venture
an additional amount (the "Revenue Shortfall Payment") to the extent it has
retained revenues from the film. Buena Vista will be entitled to recoup any
Revenue Shortfall Payment from the Joint Venture's share of revenues from
the film after the date of such payment. Disney has guaranteed Buena
Vista's obligation to make Revenue Shortfall Payments, if any.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
-------------------
All of the Joint Venture's motion pictures have been produced for
theatrical release as its primary market. Revenues from theatrical
distribution of motion pictures are recognized when revenues are reported
by distributors. Television licensing revenues are recognized when the
motion picture is available for telecasting by the licensee and when
certain other conditions are met. Revenues from the sale of home video
cassettes are recognized, net of an allowance for estimated returns, on the
date that they are made widely available for sale by retailers.
Generally, motion pictures are first made available for six months after
theatrical release for home video, one year after theatrical release for
pay television, two to three years after theatrical release for initial
free television, and approximately three to five years after theatrical
release for syndication.
F-20
<PAGE>
DISNEY-SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Notes to Financial Statements
September 30, 1995
Revenues are presented net of the amount Buena Vista retains, as described
above.
Accounting for Film Production Costs
------------------------------------
Film production costs include production costs, a 17.5% overhead charge
payable 13.5% to Disney and 4% to Silver Screen, a development fee of
$500,000 for each film payable to Disney, and interest on development
costs, as contractually defined, payable to Disney. These costs are
expected to benefit future periods. Film production costs are charged to
earnings on an individual film basis in the ratio that the current year's
revenues bear to management's estimate of ultimate revenues from all
sources.
Film production costs are stated at the lower of cost or estimated net
realizable value on an individual film basis. Revenue forecasts for all
motion pictures are continually reviewed by management and revised when
warranted by changing conditions. When estimates of ultimate revenues
indicate that a motion picture will result in an ultimate loss, additional
amortization is provided to reduce the film to its net realizable value.
All of the Joint Venture's motion pictures are completed, released, and are
currently in secondary markets (home video, pay television, free
television, and syndication). Based on management's ultimate revenue
estimates at September 30, 1995, approximately 100% of unamortized film
production costs will be amortized during the next three years.
Participation Expense
---------------------
Participations represent a participant's share of motion picture's profits
as contractually defined. An ultimate participation expense is determined
for each motion picture using ultimate revenues. Revenue forecasts for all
motion pictures are continually reviewed by management and ultimate
participation expense is revised when warranted. Ultimate participation
expense is charged to earnings on an individual film basis in the ratio
that the current year's revenues bear to management's estimate of ultimate
revenues from all sources. Pursuant to the JV Agreement, Disney is entitled
to a participation in the profits of all animated films.
Revenue Shortfall Payment
-------------------------
The Revenue Shortfall Payment (as defined above) is recognized when earned.
The revenue is earned five years after the release date of the film.
Revenue Shortfall Payments made to the Joint Venture for the years ended
September 30, 1995, 1994, and 1993 totaled $44,249,551, $10,016,536 and $0,
respectively.
F-21
<PAGE>
DISNEY-SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Notes to Financial Statements
September 30, 1995
Income Taxes
------------
The Joint Venture is treated as a partnership for Federal and State income
tax purposes. Accordingly, no provision for income taxes has been made in
the accompanying financial statements since the Joint Venture's results of
operations are reported in the income tax returns of the Venturers.
(3) RECEIVABLE FROM SILVER SCREEN
Receivable from Silver Screen Partners IV, L.P.:
September 30, September 30,
1995 1994
-------- --------
Accrued film cost funding .................... $ -- $316,371
Accrued participations funding ............... 2,348 207,812
-------- --------
$ 2,348 $524,183
======== ========
(4) ACCOUNTS AND DISTRIBUTIONS PAYABLE
September 30, September 30,
1995 1994
----------- -----------
Due to Silver Screen Partners IV, L.P.:
Distributions payable, net ................. $10,066,542 $ 8,776,150
=========== ===========
Due to The Walt Disney Company:
Participations payable .................... $ 7,524,010 $17,332,508
Distributions payable, net ................ 2,398,080 662,454
Film cost funding payable ................. -- 316,371
----------- -----------
$ 9,922,090 $18,311,333
=========== ===========
F-22
<PAGE>
DISNEY - SILVER SCREEN IV JOINT VENTURE
(A California Joint Venture)
Quarterly Financial Summary
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------
December 31 March 31 June 30 September 30
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FISCAL 1995
- -----------
Revenues ............... $ 36,536,587 $ 19,822,871 $ 16,688,328 $ 10,931,727
Costs and expenses
Amortization of film
production costs .... (30,456,341) (11,188,418) (10,567,372) ($ 5,452,980)
Participation expense (1,227,900) 1,847,356 (6,242,379) ($ 1,971,418)
------------ ------------ ------------ ------------
Net income ............. $ 4,852,346 $ 10,481,809 ($ 121,423) $ 3,507,329
============ ============ ============ ============
FISCAL 1994
- -----------
Revenues ............... $ 35,679,736 $ 24,921,795 $ 24,460,652 $ 20,198,735
Costs and expenses
Amortization of film
production costs .... (20,205,241) (12,301,885) (11,020,440) (7,056,301)
Participation expense (4,115,072) (2,809,903) (4,202,501) (2,775,521)
------------ ------------ ------------ ------------
Net income ............. $ 11,359,423 $ 9,810,007 $ 9,237,711 $ 10,366,913
============ ============ ============ ============
</TABLE>
F-23
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
AUDITED BALANCE SHEET AS OF DECEMBER 31, 1995, AND THE STATEMENT OF
OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995, 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-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 393
<SECURITIES> 42,423
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 42,815
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 138,506
<CURRENT-LIABILITIES> 25,603
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 112,803
<TOTAL-LIABILITY-AND-EQUITY> 138,506
<SALES> 9,531
<TOTAL-REVENUES> 12,136
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,058
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,058
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,058
<EPS-PRIMARY> 9.97
<EPS-DILUTED> 0
</TABLE>
