-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rd6Q8IKWpeNiLae41SxpXsxSc+fsKoRravsDL26/l1zM5BqBk1OJ/RWQEGZBYEai WxW2UKdua6NKTfSOAByqwg== 0000950123-00-003043.txt : 20000331 0000950123-00-003043.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950123-00-003043 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILLS MUSIC TRUST CENTRAL INDEX KEY: 0000066496 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 136183792 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-02123 FILM NUMBER: 587672 BUSINESS ADDRESS: STREET 1: C/O JOEL FADEN & COMPANY STREET 2: 1775 BROADWAY SUITE 708 CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2122467203 MAIL ADDRESS: STREET 1: 1775 BROADWAY SUITE 708 CITY: NEW YORK STATE: NY ZIP: 10019 10-K 1 MILLS MUSIC TRUST 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 1999 Omission file number 2-22997 MILLS MUSIC TRUST ---------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-6183792 ----------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) c/o HSBC Bank USA, 140 Broadway, New York, NY 10015 - -------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (212) 658-6014 ----------------------------------------------------------------- Securities Registered Pursuant to Section 12(b) of the Act: NONE ----------------------------------------------------------------- (Title of Class) Securities Registered Pursuant to Section 12(g) of the Act: UNITS OF BENEFICIAL INTEREST ----------------------------------------------------------------- (Title of Class) 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 report), and (2) has been subject to such filing requirements for at least the past 90 days. YES X NO --- --- As of March 6,2000, 277,712 Trust Units were outstanding. The aggregate market value of the Units of Mills Music Trust held by nonaffiliates was $8,331,360. DOCUMENTS INCORPORATED BY REFERENCE NONE 2 2 PART I Item 1. Business. Mills Music Trust (the "Trust") was created by a Declaration of Trust dated December 3, 1964, for the purpose of acquiring from Mills Music, Inc. ("OLD Mills") the rights to receive payment of a deferred contingent purchase price obligation payable to OLD Mills. The purchase price obligation arose as the result of the sale by OLD Mills of its musical copyright catalogue to a newly formed company ("New Mills"). In payment for the aforementioned catalogue, New Mills agreed to make quarterly payments to Old Mills (the "Contingent Portion") measured by the royalty income generated from the catalogue and, subject to certain limitations and conditions, from any copyrights thereafter acquired by New Mills. The contingent Portion for each quarterly period to and including the last quarter of 2009 is to be an amount equal to the excess, if any, of (a) the gross royalty income from the exploitation of the purchased copyrights during such period (whether received by New Mills, its affiliated companies or any other party) over (b) the sum of (i) the greater of (x) 25% of such gross royalty income or (y) the lesser of $87,500 (as adjusted for inflation by reflecting changes in average weekly earnings of employees in the printing, publishing and allied industries since 1964) or 30% of such gross royalty income; and (ii) royalties required to be paid to composers, authors and others with respect to the existing copyrights. If the Contingent Portion as so computed is less than $167,500, then the Contingent Portion will be computed on the basis of the gross royalty income and related expense of New Mills, its affiliated companies and their successors and assigns during such period not only from the exploitation of purchased copyrights, but also from any copyrights originated or acquired by New Mills and its affiliated companies subsequent to December 5, 1964 (with the deductions referred to in (i) and (ii) above) except that, when computed in this manner, the Contingent Portion cannot exceed $167,500. In addition, for any quarterly period in which the contingent portion as calculated above exceeds $250,000, the percentage specified in (x) above is increased to as high as 35% based upon gross royalties for the quarter. Commencing with the first quarter of the year 2010, the Contingent Portion for each quarterly period is to be an amount equal to 75% of the gross royalty income of New Mills and/or its affiliated companies and their successors and assigns from the exploitation of the existing copyrights for such period, less the related royalty expense. 3 3 The acquisition purchase agreement provides that the obligation to make payments will terminate on the last day of the year in which the last purchased copyright, or a renewal thereof, expires and cannot be renewed. When the existing copyrights begin to expire, the size of each payment through the year 2009 will become increasingly dependent on the success which New Mills has in acquiring and exploiting new copyrights. The composition of Old Mills Catalogue is estimated to be in the excess of 25,000 titles of which approximately 1,500 are at present producing royalty income. The major portion of the royalty income generated by the catalogue in recent years, however, was produced by a relatively small number of well-known songs, many of which have remained popular and have generated substantial royalty income over a long period. The Declaration of Trust prohibits the Trust from engaging in any business; the Trust's sole activity is the receipt of the periodic installments of the purchase price and the distribution thereof, (after payment of expenses of the Trust) to the owners of units of beneficial interest in the Trust. ITEM 2. Properties. The administrative office of the Mills Music Trust is at 140 Broadway, New York, New York 10015. There is no expense being charged or paid for office space and office equipment being utilized by the Trust. ITEM 3. Legal Proceedings NONE ITEM 4. Submission of Matters to a Vote of Security Holders. NONE 4 4 PART II ITEM 5. Is not applicable. ITEM 6. Selected Financial Data. The following selected financial data for the years ended December 31, 1999 through 1995 are derived from the trust's audited financial statements. The data set forth below should be read in connection with financial statements of the Trust and the notes thereto and "management discussions and analysis" appearing elsewhere herein. Cash Cash Year Ended Receipts From Distributions Distribution December 31, Mills Music, Inc. To Unit Holders Per Unit* ------------ ----------------- --------------- --------- 1999 $ 915,168 $ 871,523 $3.14 1998 $1,035,853 $ 999,705 $3.60 1997 $1,137,919 $1,101,434 $3.97 1996 $1,175,543 $1,148,285 $4.13 1995 $1,268,400 $1,227,155 $4.42 * Based on the 277,712 Trust Units outstanding ITEM 7. Management's Discussion and Analysis of the Trust's Receipts. The Trust's receipts are derived principally from copyrights established prior to 1964 and such receipts fluctuate based upon public interest in the "nostalgia" appeal of older copyrighted songs. ITEM 8. Financial Statements. The financial statements begin on page 5 of this report. 5 6 MILLS MUSIC TRUST STATEMENTS OF CASH RECEIPTS AND DISBURSEMENTS YEARS ENDED DECEMBER 31 1999 1998 1997 ---------- ----------- ---------- Receipts from Mills Music, Inc. $ 915,168 $1,035,853 $1,137,919 Total Receipts $ 915,168 $1,035,853 $1,137,919 Undistributed Cash at Beginning 39 8 21 of Year Disbursements - Administrative Expenses ( 43,653) ( 36,117) ( 36,498) ---------- ----------- ---------- Balance Available for Distribution 871,554 999,744 1,101,442 Cash Distributions to Unit Holders ( 871,523) ( 999,705) (1,101,434) ---------- ----------- ---------- Undistributed Cash at End of the year $ 31 $ 39 $ 8 ---------- ---------- ---------- Cash Distributions Per Unit (based on the 277,712 Trust Units Outstanding) $ 3.14 $ 3.60 $ 3.97 ========== ========== ========== The Trust does not prepare a balance sheet or a statement of cash flows. See accompanying Notes to Statements of Cash Receipts and Disbursements. 6 7 MILLS MUSIC TRUST NOTES TO STATEMENTS OF CASH RECEIPTS AND DISBURSEMENTS THREE YEARS ENDED DECEMBER 31, 1999 Note 1. Accounting Policies and General Information. Mills Music Trust (the "Trust") was created in 1964 for the purpose of acquiring the rights to receive payment of a deferred contingent purchase price contract obligation payable by Mills Music, Inc. ("Mills"). The contingent payments are determined quarterly and are based on a formula which takes into account gross royalty income paid to composers, authors and others, and less amounts deducted by Mills in accordance with contract terms. Payments from Mills to the Trust are made in March, June, September and December and include net royalty income of the preceding calendar quarter. The payments received are accounted for on a cash basis, as are expenses. The Declaration of Trust requires the distribution of all funds received by the Trust to the unit holders after payment of expenses. The statements of cash receipts and disbursements reflect only cash transactions and do not present transactions that would be included in financial statements presented on the accrual basis of accounting, as contemplated by generally accepted accounting principles. Note 2. Federal Income Taxes No provision for income taxes has been made since the liability therefore is that of the unit holders and not the Trust. Note 3. Related Party Transactions The Declaration of Trust provides that each trustee shall receive annual compensation of $2,500 per year for services as trustee, provided that such aggregate compensation to the trustees as a group may not exceed 3% of the monies received by the Trust in any year, and reimbursement for expenses reasonably incurred in the performance of their duties. The Declaration of Trust further provides for reimbursement to the corporate trustee for its clerical and administrative services to the Trust. Accordingly, HSBC Bank USA (formerly Marine Midland Bank), the corporate trustee, also receives reimbursement for such services (including services performed as Registrar and Transfer Agent of the Certificates representing Units). The Declaration of Trust also provides, that if in the future any trustee performs unusual or extraordinary services, reasonable compensation for such services shall be paid, subject to certain limitations and to prior confirmation by a majority in interest of Trust Certificate holders. 7 8 MILLS MUSIC TRUST NOTE TO STATEMENTS OF CASH RECEIPTS AND DISBURSEMENTS (CONTINUED) THREE YEARS ENDED DECEMBER 31, 1999 Note 3. Related Party Transactions (continued). Pursuant to these provisions, disbursements were made as follows for the years ended December 31: Trustees 1999 1998 1997 - -------- ------- ------- ------ HSBC Bank USA (formerly Marine Midland Bank) $ 2,500 $ 2,500 $ 2,500 Bernard Fischman 2,500 2,500 2,500 HSBC Bank USA (formerly Marine Midland Bank) as registrar and transfer agent 5,542 5,839 5,932 Note 4. Royalties (a) The original (1964) sale agreement assumed by the Trust's collecting/paying entity ("EMI") provides for a revised royalty calculation when the remittance to the Trust is less than $167,500 for the quarter. This occurred in the quarter ended December 31, 1999, for which the remittance was $155,717. EMI did not calculate that quarter's payment using the revised royalty calculation, and has been notified about this matter. Additional monies due to the Trust, if any, under the revised calculation would be capped at an amount that, when added to the prior distribution, would not exceed $167,500. The timing of the receipt of any additional monies due to the Trust is dependent upon EMI's ability to provide the information required under the revised royalty calculation. (b) In addition, EMI made a computational error in its remittance for the fourth quarter of 1999, resulting in a $19,000 overpayment. The net effect of (a) and (b) above will reduce the Trust's revenue in a future quarter. The maximum revenue effect to the Trust ($19,000), if no additional funds are due from EMI, is $.07 per unit. Note 5. Royalty Examination The Trust's claim against Belwin Mills Publishing Corporation, the former administrators of the Old Mills Catalogue, in connection with a 1987 royalty examination is pending final resolution by the Trust. It cannot be determined at this time, what, if any, amount may ultimately be received by the Trust. No examination of royalty information has been performed subsequent to 1987. However, the Trust has arranged for a limited royalty examination to be performed in early 2000. ITEM 9. Is not applicable. 8 9 PART III ITEM 10. Directors of the Registrant. Bernard D. Fischman is the individual Trustee and HSBC Bank USA (formerly Marine Midland Bank) is the Corporate Trustee of the Registrant. The Trustees serve until their removal, resignation, incapacity, or in the case of individual Trustees, their death. Mr. Fischman, age 85, has served as a trustee since December, 1964. He is an attorney and a member of the firm of LeBoeuf, Lamb, Green & McRae. HSBC Bank USA has been the corporate trustee since February, 1965 and is a national banking association organized under the laws of the Unites States. ITEM 11. Executive Compensation. See Item 13. ITEM 12. Security Ownership of Certain Beneficial Owners and Management. (a) Security Ownership of Certain Beneficial Owners. To the best knowledge of the Trustees, the only persons who beneficially own more than 5% of the Trust Units are as follows: Percent Name and Address of Number of of Units Beneficial Owner Units Owned Outstanding - ---------------- ----------- ----------- MPL Communications, Ltd. 39 West 54th Street New York, New York 10019 79,609 Units 28.67% Cede & Co. Fast Cod Balance P.O. Box 20 Bowling Green Station New York, New York 10004 136,470 Units 49.14% 9 10 (b) Security Ownership of Management. The present Trustees have beneficial ownership in the Trust as follows: Nature of Percentage Beneficial of Units Trustee Ownership Outstanding ------- --------- ----------- Bernard D. Fischman 351 Units .13% (Sole Owner) HSBC Bank USA None None (c) Changes in Control. The Trustees know of no contractual arrangements which may result in a change in control of the Trust at a subsequent date. ITEM 13. Certain Relationships and Related Transactions. Remunerations of Directors and Officers. The Declaration of Trust provides that each trustee shall receive annual compensation of $2,500 per year for his services as trustee, provided that such aggregate compensation to the trustees as a group may not exceed 3% of the monies received by the Trust in any year, and reimbursement for expenses reasonably incurred in the performance of his duties. The Declaration of Trust further provides for reimbursement to the corporate trustee for its clerical and administrative services to the Trust. Accordingly, HSBC Bank USA also receives reimbursement for such services (including services performed as Registrar and Transfer Agent of the Certificates representing Units). The Declaration of Trust further provides that if in the future any trustee performs unusual or extraordinary services, reasonable compensation for such services shall be paid, subject to certain limitations and to prior confirmation by a majority in interest of Trust Certificate holders. During 1999, pursuant to these provisions, Bernard D. Fischman received $2,500 and HSBC Bank USA $2,500. 10 11 PART IV ITEM 14. Exhibits, Financial Statements Schedules and Reports on Form 8-K (a) 1. Financial Statements Page ---- Independent Auditors' Report 5 Statements of cash receipts and disbursements - years ended December 31, 1999, 1998 and 1997 6 Notes to statements of cash receipts and disbursements. 7-8 2. Financial Statement Schedules None 3. Exhibits None 11 12 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. MILLS MUSIC TRUST ------------------------------ (Registrant) By: BERNARD D. FISCHMAN ------------------------------ Bernard D. Fischman, Trustee By: HSBC Bank USA ------------------------------ HSBC Bank USA Corporate Trustee Dated as of March 6, 2000 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. 12 INDEPENDENT AUDITORS' REPORT ---------------------------- The Trustees and Unit Owners Mills Music Trust We have audited the accompanying statement of cash receipts and disbursements of Mills Music Trust for each of the years in the two years ended December 31, 1999. This financial statement is the responsibility of the Trust's Management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit 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 statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion. As described in Note 1, this financial statement was prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the financial statement referred to above presents fairly, in all material respects, the cash receipts and disbursements of Mills Music Trust for each of the years in the two year period ended December 31, 1999, on the basis of accounting described on Note 1. /s/ David Berdon & Co. LLP Certified Public Accountants February 4, 2000 13 KPMG 345 Park Avenue New York, NY 10154 INDEPENDENT AUDITOR' REPORT The Trustees and Unit Owners Mills Music Trust: We have audited the accompanying statement of cash receipts and disbursements of Mills Music Trust for the year ended December 31, 1997. This financial statement is the responsibility of the Trust's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of cash receipts and disbursements is free of material misstatement. An audit of a statement of cash receipts and disbursements includes examining, on a test basis, evidence supporting the amounts and disclosures in the statement of cash receipts and disbursements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall statement of cash receipts and disbursements presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note 1, this financial statement was prepared on the basis of cash receipts and disbursements, which is a comprehensive basis of accounting other than generally accepted accounting principles. In our opinion, the statement of cash receipts and disbursements referred to above presents fairly, in all material respects, the cash receipts and disbursements of Mills Music Trust for the year ended December 31, 1997, on the basis of accounting described in Note 1. KPMG LLP March 19, 1998 New York, New York EX-27 2 FINANCIAL DATA SCHEDULE
5 YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 915,168 915,168 43,653 43,653 871,523 0 0 0 0 0 0 0 0 0 0 0
-----END PRIVACY-ENHANCED MESSAGE-----