-----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, K5B3hYSeCYUk1CiBJL5xj8VYVmsT5ls1+skOnaAlS+99FwafPR2BCvhEVYxTYEte +Dv8uiIK+MvqtDtlFaS3Tw== 0000912057-01-532297.txt : 20010917 0000912057-01-532297.hdr.sgml : 20010917 ACCESSION NUMBER: 0000912057-01-532297 CONFORMED SUBMISSION TYPE: PRER14A PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20010914 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JONES PROGRAMMING PARTNERS 1-A LTD CENTRAL INDEX KEY: 0000873800 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 841088820 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRER14A SEC ACT: 1934 Act SEC FILE NUMBER: 033-21970-02 FILM NUMBER: 1737600 BUSINESS ADDRESS: STREET 1: 9697 E MINERAL AVE STREET 2: P O BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155 BUSINESS PHONE: 3037923111 MAIL ADDRESS: STREET 1: C/O JONES INTERCABLE INC STREET 2: 9697 E MINERAL AVE PO BOX 3309 CITY: ENGLEWOOD STATE: CO ZIP: 80155-3309 PRER14A 1 a2057914zprer14a.txt PRER14A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 JONES PROGRAMMING PARTNERS 1-A, LTD. (Name of Registrant as Specified In Its Charter) (Name of Person(s) Filing Proxy Statement, if other than the Registrant) - -------------------------------------------------------------------------------- Payment of Filing Fee (Check the appropriate box): [ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. 1) Title of each class of securities to which transaction applies: LIMITED PARTNERSHIP INTERESTS ---------------------------------------------------------------------- 2) Aggregate number of securities to which transaction applies: 12,743 ---------------------------------------------------------------------- 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ESTIMATED VALUE OF ASSETS TO BE SOLD IS BASED UPON THE DISCOUNTED PRESENT VALUE OF THE FILM RIGHTS OF $945,000. ---------------------------------------------------------------------- 4) Proposed maximum aggregate value of transaction: $945,000 ---------------------------------------------------------------------- 5) Total fee paid: $189.00 ---------------------------------------------------------------------- [X] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: Page 1 REVISED PRELIMINARY COPY JONES PROGRAMMING PARTNERS 1-A, LTD. 9697 E. MINERAL AVENUE ENGLEWOOD, COLORADO 80112 (303) 792-3111 NOTICE OF SPECIAL MEETING OF THE LIMITED PARTNERS OF JONES PROGRAMMING PARTNERS 1-A, LTD. To the Limited Partners of Jones Programming Partners 1-A, Ltd.: As your general partner, Jones Entertainment Group, Ltd. (the "General Partner") believes that it is time to sell all the assets and to dissolve your partnership, Jones Programming Partners 1-A, Ltd. (the "Partnership"). Accordingly, a special meeting of the limited partners of your Partnership is to be held at the corporate offices of the General Partner, 9697 E. Mineral Avenue, Englewood, Colorado, on _________, ________, 2001, at 9:30 a.m., Mountain Time, for the purpose of obtaining limited partner approval for the sale to an unaffiliated and as yet unidentified, third party or parties, of the assets of the Partnership consisting of various rights to original programming entitled "The Story Lady," "The Little Kidnappers" and "Curacao" (collectively, the "Film Rights"), followed by the dissolution of the Partnership. If the limited partners approve the proposed sale of the Film Rights and if the Film Rights are sold, the net sale proceeds, if any, will be distributed by the Partnership to the partners, including the General Partner which has a one percent interest. Thereafter, your Partnership will be dissolved. No date for the sale of the Film Rights or the dissolution of the Partnership has been determined. The proposal covers the sale of the Film Rights and the ultimate dissolution of your Partnership (the "Proposal"), and a vote in favor of the Proposal will constitute a vote in favor of each of these matters. Only limited partners of record at the close of business on _______, 2001 will be entitled to notice of and to vote at the meeting. It is important that all limited partners participate. The Proposal will be adopted only if approved by the holders of a majority of the limited partnership interests. Each limited partnership interest entitles the holder thereof to one vote on the Proposal. Abstentions and non-votes will be treated as votes against the Proposal. A properly executed proxy card returned to the General Partner on which a limited partner does not mark a vote will be counted as a vote in favor of the Proposal. Because limited partners do not have dissenters' or appraisal rights in connection with the proposed sale of the Film Rights, if the holders of a majority of the limited partnership interests approve the Proposal, all partners, including the General Partner, will receive a distribution of the net sale proceeds, if any, in accordance with the Page 2 procedures proscribed by the limited partnership agreement regardless of how or whether they vote on the Proposal. Also included in this package is the most recent financial and other information prepared regarding your Partnership. Jones Entertainment Group, Ltd., as General Partner of your Partnership, urges you to sign and return the enclosed proxy card as promptly as possible in the enclosed envelope -- whether or not you plan to attend the meeting. If you do attend the meeting, you may withdraw your proxy at that time. JONES ENTERTAINMENT GROUP, LTD. General Partner ------------------------------------- Lorri Ellis Secretary __________, 2001 Page 3 REVISED PRELIMINARY COPY JONES PROGRAMMING PARTNERS 1-A, LTD. 9697 E. MINERAL AVENUE ENGLEWOOD, COLORADO 80112 (303) 792-3111 PROXY STATEMENT SPECIAL MEETING OF THE LIMITED PARTNERS OF JONES PROGRAMMING PARTNERS 1-A, LTD. This Proxy Statement and the accompanying Proxy are being furnished for use at the Special Meeting of the limited partners of Jones Programming Partners 1-A, Ltd., a Colorado limited partnership (the "Partnership"), by Jones Entertainment Group, Ltd., the General Partner of the Partnership (the "General Partner"), on behalf of the Partnership, for the purpose of obtaining limited partner approval of the sale of the Partnership's assets, consisting of various rights to original programming entitled "The Story Lady," "The Little Kidnappers" and "Curacao" (collectively, the "Film Rights"), followed by dissolution of the Partnership (collectively, the "Proposal"). THE GENERAL PARTNER HAS APPROVED THE TRANSACTIONS CONTEMPLATED BY THE PROPOSAL AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. The Special Meeting will be held on ____, _______, 2001, at 9:30 a.m., Mountain Time, at the corporate offices of the General Partner located at 9697 E. Mineral Avenue, Englewood, Colorado 80112. Proxies in the form enclosed, properly executed and duly returned, will be voted in accordance with the instructions thereon. Limited partners are urged to sign and return the enclosed proxy card as promptly as possible. Proxies cannot be revoked except by delivery of a proxy dated as of a later date, by voting in person at the Special Meeting, or by giving written or oral notice of revocation to the Secretary of the General Partner. Officers and other employees of the General Partner may, on behalf of the Partnership, solicit proxies by mail, by fax, by telephone or by personal interview. The General Partner may adjourn the Special Meeting, from time to time, and continue to solicit proxies if the holders of a majority of the limited partnership interests have not voted on the Proposal. If the General Partner adjourns the meeting, the limited partners will be informed by mail of the reason for the adjournment and when the meeting will be resumed. The cost of the proxy solicitation will be paid by the Partnership. See "Voting on the Proposal." The Partnership has only one class of limited partners and no limited partner has a right of priority over any other limited partner. The participation of the limited partners is divided into limited partnership interests and each limited partner owns one limited partnership interest Page 4 for each $500 of capital contributed to the Partnership. The General Partner and its affiliates do not own any limited partnership interests. THE PROPOSAL IS SUBJECT TO NUMEROUS RISK AND OTHER FACTORS. SEE "RISK FACTORS" FOR A MORE COMPLETE DISCUSSION OF RISK FACTORS THAT SHOULD BE CONSIDERED BY LIMITED PARTNERS REGARDING THE PROPOSAL. THE TRANSACTIONS DESCRIBED HEREIN HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR THE MERITS OF SUCH TRANSACTIONS NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. The approximate date on which this Proxy Statement and Form of Proxy are being sent to limited partners is _________, 2001. Page 5 TABLE OF CONTENTS SUMMARY......................................................................... 8 The Film Rights............................................................ 8 Potential Value of the Film Rights......................................... 9 Possible Methods of Sale................................................... 10 Dissolution of the Partnership if the Proposal is Approved................. 11 Effect of the Proposal..................................................... 11 Reasons for the Proposal................................................... 11 Consideration of Alternatives.............................................. 12 Federal Income Tax Consequences............................................ 12 The General Partner's Recommendation....................................... 12 Participation of the General Partner....................................... 12 RISK FACTORS.................................................................... 13 The Amount of Sales Proceeds and Distributions to the Limited Partners is Uncertain.................................................... 13 You Will Have No Opportunity to Approve the Specific Terms of Any Sales.... 13 The Status of Certain Film Rights May be Unclear........................... 13 You Might Receive Less Money if the Proposal is Approved................... 14 The Market for the Film Rights is Uncertain and the Sales Prices for the Partnership's Film Rights may be Low..................................... 14 You Will Have No Appraisal or Dissenter's Rights........................... 14 No Independent Representative Will be Retained for Limited Partners........ 14 Unfavorable Tax Consequences of Sale....................................... 15 THE PROPOSAL.................................................................... 15 General.................................................................... 15 Proxy Solicitation ........................................................ 15 Proposal to Sell the Partnership's Film Rights............................. 15 Retention of Sales Agent................................................... 16 Timing of Asset Sales if the Proposal is Approved.......................... 17 Consequences of the Partnership Not Approving the Proposal or if the Film Rights are Not Sold............................................. 17 Potential Prices for the Film Rights....................................... 17 Potential Value of the Film Rights......................................... 17 Reasons for the Proposal................................................... 19 Distribution Objectives Met........................................... 19 The Partnership is Over 11 Years Old and is Ready to Cease Operations and Dissolve...................................... 19 Avoiding Ongoing Operating Costs of Partnership....................... 19 Lack of Significant Current Revenue .................................. 19 Benefits of Selling a Film Library.................................... 20 Taxes................................................................. 20
Page 6 Consideration of Alternatives.............................................. 20 Steps to Implement the Proposal............................................ 21 Estimated Selling Costs.................................................... 21 THE PARTNERSHIP................................................................. 22 General.................................................................... 22 Principal Assets........................................................... 22 Amounts Invested and Cash Distributions.................................... 26 Cash Distributions......................................................... 26 Transactions Between the General Partner and the Partnership............... 26 No Trading Market.......................................................... 27 List of Limited Partners................................................... 27 Books and Records.......................................................... 27 Legal Proceedings.......................................................... 27 VOTING ON THE PROPOSAL.......................................................... 27 Vote Required; Principal Holders........................................... 27 Proxies; Revocation........................................................ 28 Solicitation............................................................... 28 No Appraisal or Dissenters' Rights Provided................................ 29 Recommendation of the General Partner...................................... 29 FEDERAL INCOME TAX CONSEQUENCES................................................. 29 General.................................................................... 29 Taxable Gain or Loss Upon Sale of Programming Assets....................... 30 Dissolution of the Partnership............................................. 30 Capital Gains Tax.......................................................... 31 Passive Loss Limitations................................................... 31 DOCUMENTS INCLUDED.............................................................. 32 FORWARD-LOOKING STATEMENTS...................................................... 32 OTHER MATTERS................................................................... 32 Incorporation by Reference................................................. 32 FORM OF PROXY................................................................... 33
Page 7 SUMMARY This summary highlights selected information from this proxy statement, but may not contain all of the information that is important to you. This proxy statement includes specific terms of the Proposal, information about the Partnership and its financial status. We encourage you to read this proxy statement, including the "Risk Factors" section, the attachments and the documents incorporated by reference before making a decision on how to vote on the Proposal. THE FILM RIGHTS The Partnership's Film Rights consist of various interests in the three films described below. The Partnership does not own all of the various rights in all of the three films. See "The Partnership, Principal Assets." o THE LITTLE KIDNAPPERS. In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which included a production and overhead fee of $300,000 paid to the General Partner. From inception to June 30, 2001, the Partnership recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. As of March 1999, the Partnership had amortized its net investment in this film. Revenues to the Partnership from The Little Kidnappers for the year 2000 and the six months ended June 30, 2001 were $469 and $33,587, respectively. o THE STORY LADY. In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBC") for the production of a full-length, made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. The Partnership licensed back the foreign rights to NBC for an eight year term (which expired at the end of 1999 and was extended until July 12, 2001, when it terminated) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television and non theatrical. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to June 30, 2001, the Partnership recognized approximately $2,299,000 of revenue from this film. As of December 1995, the Partnership has amortized its net investment in this film. Revenues to the Partnership from The Story Lady for the year 2000 and the six months ended June 30, 2001 were $0. o CURACAO. In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length made-for-television film entitled "Curacao." The total production cost of the film incurred by the Partnership was approximately $4,410,000. In addition to the Page 8 costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime presale and supervising production of this picture. From inception through June 30, 2001, the Partnership recognized approximately $4,064,000 of revenue from this film, which includes the initial license fee, home video advances and certain talent costs from Showtime of $2,650,000, which was used to finance the film's production. In December 1999, after consideration of amortization and write-downs, the Partnership fully amortized its net investment in this film. Revenues to the Partnership from Curacao for the year 2000 and the six months ended June 30, 2001 were $26,807 and $1,162, respectively. POTENTIAL VALUE OF THE FILM RIGHTS To obtain assistance in determining the potential value of the Film Rights, the Partnership has retained the services of Tulip Media Ltd. ("Tulip"), Los Angeles, California, which conducted the valuation in consort with Marrinan Multimedia Group Inc. ("MMG"). As compensation for such valuation services, the Partnership has paid or is obligated to pay Tulip $5,500 plus reimbursement of certain expenses. The principals of Tulip and MMG have years of worldwide film and production experience. Except as described in this paragraph, neither Tulip nor MMG has any prior relationship with the Partnership, the General Partner or any of the Films. Todd P. Leavitt, the principal shareholder (through nominees) of Tulip, previously was employed at NBC Productions, Inc. at the time the Partnership entered into its agreement with NBC with respect to the film "The Story Lady" and was actively involved on behalf of NBC in negotiating the agreement. Tulip has also been retained as the Partnership's exclusive agent to sell the Film Rights. Tulip was selected based on a recommendation from the General Partner's outside counsel regarding film matters and after negotiation of the terms of the engagement of Tulip. The Partnership instructed Tulip to undertake an arm's-length, independent valuation of the present value of the worldwide revenue opportunities to be derived from the Films during the balance of each Film's copyright, its useful life. The sole limitation imposed was the understanding that, based on Tulip's time estimate, that Tulip not expend in excess of fifteen hours, at its negotiated hourly rate, in undertaking the valuation. Tulip later informed the Partnership that it was not able to complete its review of rights status, historical performance or subjective quality of individual Films within such time frame. The Partnership and Tulip negotiated an additional fee in order for Tulip to complete its review. In arriving at its estimate of the fair market value of the Film Rights, Tulip reviewed the potential sales opportunity for each Film on a worldwide, media-by-media, territory-by-territory basis. In each case, sales estimates for each media and each territory were made with "low," "mid-value" and "high" cases. Tulip has categorized each of the Films as "mid-value" (which refers to Tulip's general subjective expectation regarding the revenue generating capacity of the Films). Tulip prepared hypothetical sales results of the Film Rights over a ten-year period beginning July 2001. Sales were projected with an initial re-run value (assuming all Films have been previously licensed in all major territories) and a residual value for additional sales income during the balance of the ten-year period. In its estimated valuation, Tulip also made the following assumptions: o all sales results are subject to a hypothetical distribution fee of 35% of gross revenues and a hypothetical distribution/marketing expense recoupment of 5% of gross revenues. Such fees and expenses would be paid to third party distributors and vendors as part of the distribution processes in various media and reflect typical industry arrangements (and costs thereof) which potential buyers will likely take into account in determining whether there will be an adequate return on investment. o residual value after ten years was at 10% of all re-run values. o Union/guild residual payments are estimated to be 11% of sales revenue for all Films. Based on the above approach, Tulip concluded that the fair market value of the Film Rights, discounted at various interest rates to arrive at net present values rounded to the nearest thousand ("NPV"), is as follows: Page 9
Net Present Value of NPV of Little NPV of the Story NPV of Discount Interest Rate All Film Rights Kidnapper Rights Lady Rights Curacao Rights - ---------------------- -------------------- ---------------- ---------------- -------------- 8% $945,000 $243,000 $372,000 $330,000 10% $882,000 $230,000 $351,000 $302,000 12% $826,000 $217,000 $332,000 $277,000 15% $753,000 $201,000 $308,000 $245,000
Tulip's use of a range of discount rates reflects what Tulip believes the capital markets would use and what potential purchasers are likely to use in their own evaluations. As with any valuation exercise, the results suggested are hypothetical and are the reflection of reasonable reliance upon historical performance as well as current market-place factors, including whether the Film is in the English language, the age of the Film, the time periods for the distribution rights, and the trends in the various possible film markets. Such factors are subject to constant variation on a media-by-media and territory-by-territory basis. Further, factors unique to any specific Film, such as cast and genre, can result in significant variations in marketplace performance. Tulip considered, to the extent relevant, all of such factors in reaching its evaluation that the Partnership's Film Rights were all "mid value." Accounts receivable of the Films were not deemed to have a material effect on the amount available for distribution. Rights availabilities by media and territory were assumed by Tulip, based on information provided by the Partnership. There is no assurance that the Partnership will be able to sell the Film Rights for the values described above or at any specific prices. POSSIBLE METHODS OF SALE Currently there are no buyers for the Film Rights and the actual prices at which the Film Rights may be sold have not yet been determined. The Film Rights may be sold as one package, or separately in a number of transactions or may be sold in various combinations. Neither the General Partner nor its affiliates will bid on or purchase any of the Partnership's Film Rights. Buyers may be sought in the following ways: o NEGOTIATED SALES -- The Partnership has entered into an agreement with Tulip, an unaffiliated broker, to sell the Partnership's Film Rights on an exclusive basis through December 31, 2001. The brokerage fee is ten percent (10%) of the sale proceeds. Tulip will seek to sell the Film Rights through direct contact with unaffiliated potential purchasers and negotiating sales prices and terms with them. The owner of some of the rights associated with a film may be a potential purchaser. The General Partner is also the general partner of Jones Programming Partners 2-A, Ltd., a publicly held limited partnership which owns certain rights in two films. That partnership is also seeking to sell its film rights and to dissolve. The General Partner may combine the films of such partnership with those of the Partnership in an effort to attract buyers with a larger, more diversified offering. In such an instance, the sale proceeds would be divided either according to actual, separate sales prices (if determinable) or by appraisal, or by such method that the General Partner believes to be the most accurate method. The General Partner does not have a greater percentage interest in one or the other selling partnership. It would not receive any relatively greater amount from one or the other depending on which entity happens to receive more proceeds. o BID - A possible method of sale will be through a bid procedure. Bids may be solicited from unaffiliated third parties for the sale of the Films as one package, but bids may be considered for less than all of the Films or for a portion of the Rights associated with each Film. If a bid process is used, the General Partner will determine if a minimum bid price will be established; however, the highest bid price from an unaffiliated third party, if any, may not necessarily be accepted, if, in the judgement of the General Partner, the bid does not reflect the value of the Film Rights involved. The bid process will likely be used only in conjunction with the broker the Partnership has retained. Page 10 DISSOLUTION OF THE PARTNERSHIP IF THE PROPOSAL IS APPROVED If the limited partners approve the Proposal, the Partnership will seek to sell all of its assets, wind up its business and dissolve. The Partnership will receive only cash for the Film Rights, although some deferred payment arrangements could be made for some or all of the Film Rights, if that is in the best interests of the Partnership. Limited partners will receive cash distributions, if any, in amounts according to their respective percentage ownership interests in the Partnership. See "The Proposal--Effect of the Proposal." EFFECT OF THE PROPOSAL The event of future sales proceeds is not known in the absence of any actual buyers. After payment of (and reserves for) Partnership obligations, any remaining sales proceeds will be used to make distributions to the partners in the Partnership and the Partnership will be dissolved. Partnership obligations will include expenses of sale (including the 10% sales commission and legal expenses), amounts owed to the General Partner and to third parties, and potentially, the legal costs and expenses of resolving the disputes with NBC. The total amount of such obligations is not determinable in part because actual sales proceeds are not known, nor is the outcome of the NBC disputes. All of such obligations will be paid or reserved for prior to distributions being made to the limited partners. Any such distribution(s) will result in the acceleration of the distribution to limited partners of the remaining value of the Partnership's assets. However, the limited partners in any event are not expected to receive a return of the amount of their initial investments. Interests in the Partnership were offered at $500 per interest, with a minimum purchase of 10 interests. As of June 30, 2001, limited partners had received aggregate distributions of $335 per $500 interest. Because of uncertainties concerning the value of the Film Rights, no assurance is given that there will be any cash to be distributed to the limited partners from the sale of the Film Rights. REASONS FOR THE PROPOSAL The General Partner believes that the continuation of the Partnership's operations is no longer justified and that it is in the best interests of limited partners to dissolve the Partnership at this time because: o The original expected life of the Partnership (6 to 8 years) has been exceeded. The Partnership was formed in 1989. o Our distribution objectives have been met. The films have been through at least one distribution cycle already. The last phase of operations is to dispose of our library of film rights. o The Partnership has very little current cash flow. o Our fixed administrative costs continue while revenues have greatly decreased. o No capital is available to develop additional programming. Page 11 o "The Story Lady" revenue prospects are uncertain because NBC has not recovered its original investment plus imputed interest. The Partnership has disputed the claimed interest amount. NBC also has made claims regarding the proper allocation of revenues from this film which the Partnership is disputing, and in any event the Partnership does not have the funds to satisfy such claims. o Approving the sale of the Partnership's assets at this time will accelerate your receipt of any remaining net cash value of the Partnership's assets. o Upon the sale of the Film Rights, in addition to realizing long-term capital gain, there may be unrealized passive losses which the limited partners could claim in the year in which the Partnership completes the sale of all the Film Rights. Through December 31, 2000, the amount of such losses was approximately $108 per each interest. o The Partnership may have an opportunity to sell one or more Film Rights as part of a package where the same Film Rights would be more difficult to sell individually because of the lack of interest in that specific film (i.e., a popular film may be bundled with less popular ones as a way to sell the latter.) CONSIDERATION OF ALTERNATIVES The General Partner has given consideration to alternatives before submitting the Proposal to you for approval. The General Partner believes that the only real alternative to the sale of the Film Rights is the continued operation of the Partnership. See "The Proposal--Consideration of Alternatives." FEDERAL INCOME TAX CONSEQUENCES Limited partners that are subject to federal income tax are expected to realize and recognize taxable gain or loss, or a combination of both gain and loss, on the sale of Film Rights and the dissolution of the Partnership. For a more complete discussion of the federal income tax consequences of a sale of assets and partnership dissolution, see "Federal Income Tax Consequences." THE GENERAL PARTNER'S RECOMMENDATION Jones Entertainment Group, Ltd., in its capacity as General Partner of the Partnership, recommends that limited partners of the Partnership vote "FOR" the Proposal. The General Partner believes the terms of the Proposal are fair to limited partners. See "Risk Factors." PARTICIPATION OF THE GENERAL PARTNER The General Partner will share in any net proceeds of the sale of the Film Rights through the General Partner's one percent (1%) interest in the profits/losses and distributions of the Partnership. It will receive no compensation from the sale of the Film Rights. Page 12 RISK FACTORS In addition to the other information contained in this proxy statement, the following factors should be considered carefully in evaluating how to vote on the Proposal. THE AMOUNT OF SALES PROCEEDS AND DISTRIBUTIONS TO THE LIMITED PARTNERS IS UNCERTAIN The General Partner has not determined at what price or prices it expects to sell the Film Rights, nor is there a minimum price set for any of them. The General Partner has obtained an independent valuation of the Film Rights from Tulip. Appraisals are only estimates of value and there is no assurance that the Film Rights will be sold for the appraised price or at all. Tulip has experience in selling film rights, including films which have been through cycles of distribution and are not producing large revenue amounts. Two of the Films, "Little Kidnappers" and "Curacao" are not presently generating any significant revenues and it is uncertain at what prices they can be sold. The third Film, "The Story Lady" has been producing some revenue, but the Partnership owns only certain limited distribution rights regarding this Film (as opposed to the copyright and other rights in the work itself). In addition, there are outstanding disputes with NBC, which produced the film, regarding (i) the amount of fees owed NBC for the statement periods June 30, 1993 to December 31, 1994 for distribution of the film in ancillary markets (such as in airplanes) and (ii) whether NBC is entitled to first receive interest on its film production costs before the Partnership shares in certain past and future revenues. The Partnership's principal basis for disputing the NBC claims is the lack of required timeliness of NBC in claiming the amounts owed. NBC denies any lack of timeliness. These disputes will likely adversely affect the ability of the Partnership to either sell its rights regarding this Film or to realize as high a price as it would otherwise realize. The Partnership has had only limited discussions with NBC to resolve these disputes, which have not been fruitful. No assurance can be given that such disputes will be timely or favorably resolved. Litigation could result because of the disputes with NBC. In addition, no assurance can be given that the Partnership would be able to pay NBC if NBC's positions are upheld. There exists the possibility that the Partnership and NBC will negotiate a settlement of their disputes which will result in NBC acquiring some or all of the Partnership's rights in this Film. The terms of any such future settlement cannot be predicted. The Partnership will withhold proceeds from the sale of the Film Rights in order to provide for a resolution of its disputes with NBC, including amounts necessary to cover legal costs and expenses. This will reduce or even eliminate any amounts that otherwise would be distributed to the Limited Partners. The Partnership does not intend to distribute any amounts to limited partners that would be recoverable by NBC if litigation results over these disputes, nor will the limited partners be assessed for any amounts, or made to return any prior distributions. YOU WILL HAVE NO OPPORTUNITY TO APPROVE THE SPECIFIC TERMS OF ANY SALES Because the Film Rights will not be sold until limited partners approve the Proposal, no purchasers or purchase prices have yet been determined. In voting for the Proposal, limited partners do not have the opportunity to approve or reject the specific terms of any particular sale of any Film Rights to third parties, including the sales prices. THE STATUS OF CERTAIN FILM RIGHTS MAY BE UNCLEAR The Film Rights consist of a variety of rights granted or provided by a number of parties and which concern different media and territories. The General Partner believes that the Partnership possesses the necessary ownership of these rights to satisfy potential buyers of the Film Rights. However, there may be lack of certainty in some cases regarding such matters as termination rights, the provision of reports, renewal rights, division of proceeds, rights of first Page 13 negotiation, and other matters. In such instances, the Partnership may be required to obtain third party consents, waivers or other clarification, and may be required to provide compensation to such parties. There is no assurance that the Partnership will be successful in such efforts. In addition, the failure to fully document all of the Partnership's Film Rights could affect the timing of the sale and the price obtained for such rights. YOU MIGHT RECEIVE LESS MONEY IF THE PROPOSAL IS APPROVED Although you might receive the value of your interest in the Partnership sooner and in one lump sum payment if the Partnership's assets are sold now, you might receive a smaller amount upon dissolution than if the Partnership's operations continue and if cash distributions are made in the future. However, it is unlikely that the Partnership will make any future distributions from regular operations. THE MARKET FOR THE FILM RIGHTS IS UNCERTAIN AND THE SALES PRICES FOR THE PARTNERSHIP'S FILM RIGHTS MAY BE LOW The General Partner believes that there is no ready or established market for films like the ones represented by the Film Rights. Instead, sellers rely on contacts within the industry to assist in finding buyers and negotiating deals. The Partnership will therefor encounter some difficulty in finding potential buyers for the Film Rights. Because the Films are several years old and because they have been through at least one distribution cycle (i.e. licensing and re-licensing the Films in the various media and in various geographic areas), they are not expected to attract a large number of buyers. All those factors may result in low prices being offered by buyers, or no offers at all. YOU WILL HAVE NO APPRAISAL OR DISSENTER'S RIGHTS If the Proposal is approved, limited partners have no right to ask for appraisal or dissenters' rights relating to the sale and dissolution described herein. This may result in a lower amount received than if such rights were available, as they are for corporate shareholders. NO INDEPENDENT REPRESENTATIVE WILL BE RETAINED FOR LIMITED PARTNERS The General Partner will not retain an independent representative to act on behalf of the limited partners in the Partnership in structuring and negotiating the terms and conditions for implementation of the Proposal. No limited partners were empowered to negotiate the terms and conditions of the Proposal or to determine what procedures should be in place to safeguard the rights and interests of the limited partners. In addition, no investment banker, attorney, financial consultant or expert was engaged to represent the interests of the limited partners. On the contrary, the General Partner has been responsible for structuring all the terms and conditions of the Proposal. Page 14 UNFAVORABLE TAX CONSEQUENCES OF SALE For tax purposes, the costs of the Film Rights have been written off, with the exception of the estimated salvage value for each film. Thus, any amounts received on the sale of the Film Rights in excess of the salvage value will be a taxable gain. To the extent the gains do not exceed the original cost of the Film Rights, they will be taxed as ordinary income due to the depreciation recapture provisions of IRC Section 1245. It is anticipated that all gains or losses will be treated as ordinary. There may be unrecognized passive losses which the limited partners can deduct in the year in which the Partnership completes the sale of all the Film Rights. Such passive losses could be as high as approximately $108 per limited partner interest, if such losses have not been previously deducted. See "Federal Income Tax Consequences." THE PROPOSAL GENERAL This proxy statement is submitted on behalf of the Partnership by Jones Entertainment Group, Ltd. in its capacity as the General Partner of the Partnership to ask your approval of a proposal to sell to unaffiliated and as yet unidentified, third party or parties, all of the Partnership's film programming assets consisting of various rights to original films entitled "The Story Lady," "The Little Kidnappers" and "Curacao," followed by the dissolution of the Partnership. PROXY SOLICITATION This proxy statement is furnished in connection with the Special Meeting of the limited partners of the Partnership to be held at 9:30 a.m., Mountain Time, at the corporate offices of the General Partner, at 9697 E. Mineral Avenue, Englewood, Colorado 80112. Proxies in the form enclosed, properly executed and duly returned, will be voted in accordance with the instructions thereon. Limited partners are urged to sign and return the enclosed proxy card as promptly as possible. Proxies cannot be revoked except by delivery of a proxy dated as of a later date, by voting in person at the Special Meeting, or by giving written or oral notice of revocation to the Secretary of the General Partner. Officers and other employees of the General Partner may, on behalf of the Partnership, solicit proxies by mail, by fax, by telephone or by personal interview. The General Partner may adjourn the Special Meeting, from time to time, and continue to solicit proxies if the holders of a majority of the limited partnership interests have not voted on the Proposal. If the General Partner adjourns the meeting, the limited partners will be informed by mail of the reason for the adjournment and when the meeting will be resumed. The cost of the proxy solicitation will be paid by the Partnership. PROPOSAL TO SELL THE PARTNERSHIP'S FILM RIGHTS Currently there are no buyers for the Film Rights and the actual prices at which the Film Rights may be sold have not yet been determined. The Film Rights may be sold as one Page 15 package, or separately in a number of transactions or may be sold in various combinations. Neither the General Partner nor its affiliates will bid on or purchase any of the Partnership's Film Rights. Buyers may be sought in the following ways: o NEGOTIATED SALES -- The Partnership has entered into an agreement with Tulip, an unaffiliated broker, to sell the Partnership's Film Rights on an exclusive basis through December 31, 2001. The brokerage fee is ten percent (10%) of the sale proceeds. Tulip will seek to sell the Film Rights through direct contact with unaffiliated potential purchasers and negotiating sales prices and terms with them. The owner of some of the rights associated with a film may be a potential purchaser. The General Partner is also the general partner of Jones Programming Partners 2-A, Ltd., a publicly held limited partnership which owns certain rights in two films. That partnership is also seeking to sell its film rights and to dissolve. The General Partner may combine the films of such partnership with those of the Partnership in an effort to attract buyers with a larger, more diversified offering. In such an instance, the sale proceeds would be divided either according to actual, separate sales prices (if determinable) or by appraisal, or by such method that the General Partner believes to be the most accurate method. The General Partner does not have a greater interest in one or the other selling partnership and would not receive any significantly greater amount from one or the other depending on which entity happens to receive more proceeds. o BID - A possible method of sale will be through a bid procedure. Bids may be solicited from unaffiliated third parties for the sale of the Films as one package, but bids may be considered for less than all of the Films or for a portion of the Rights associated with each Film. If a bid process is used, the General Partner will determine if a minimum bid price will be established; however, the highest bid price from an unaffiliated third party, if any, may not necessarily be accepted, if, in the judgement of the General Partner, the bid does not reflect the value of the Film Rights involved. The bid process will likely be used only in conjunction with the broker the Partnership has retained. RETENTION OF SALES AGENT The Partnership has engaged Tulip as its exclusive agent to sell (and not to license or distribute) all rights in the Films, in all media and worldwide, for a period commencing February 16, 2001 and continuing through December 31, 2001 (the "Term"), which period may be extended by the parties. See "Potential Value of the Film Rights," regarding the prior Page 16 involvement of the principal of Tulip regarding the negotiation of the original agreement for "The Story Lady." Tulip has experience in selling film rights, including films which have been through cycles of distribution and are not producing large revenues. The General Partner has absolute approval over accepting any offers obtained by Tulip; provided that the General Partner must exercise its good faith in rejecting any offer. Tulip shall receive a sales agency fee equal to 10% ("Sales Agency Fee") of all proceeds from the sale of all the Film Rights (or any rights derived therefrom as approved by the General Partner). Proceeds consist of the cash consideration received and any accounts payable-type liabilities expressly assumed by the buyer(s). Tulip shall be entitled to its Sales Agency Fee for any sale of Film Rights consummated by or agreed to by the General Partner during the Term or for a period of up to six (6) months thereafter in the event all or some Film Rights are sold to any entity to whom Tulip contacted during the Term. TIMING OF ASSET SALES IF THE PROPOSAL IS APPROVED The General Partner anticipates that the sale of the Film Rights and the dissolution of the Partnership could be completed by December 31, 2001, although the precise length of the sales process is unknown, and the sale of the Film Rights could take longer. CONSEQUENCES OF THE PARTNERSHIP NOT APPROVING THE PROPOSAL OR IF THE FILM RIGHTS ARE NOT SOLD If the limited partners in the Partnership do not approve the Proposal, the Partnership will continue to operate with no change in its investment objectives, policies or restrictions and in accordance with the terms of its limited partnership agreement. If the limited partners in the Partnership approve the Proposal and the Film Rights are not sold, the Partnership will continue and dissolution will not occur until such time as substantially all of the Film Rights are sold. In such circumstance, another vote of limited partners would not be taken. POTENTIAL PRICES FOR THE FILM RIGHTS Although the General Partner has not identified any prospective purchaser for any of the Partnership's Film Rights, nor does it know the prices at which these rights will actually be sold, given the likely range of possible prices being paid in the entertainment market for films which have been through at least one distribution cycle, the General Partner anticipates that the amounts, if any, distributed to limited partners upon sale of the Partnership's assets, together with cash distributions made to date, will not return to limited partners the amount they initially invested in the Partnership. As of June 30, 2001, limited partners had received aggregate distributions of approximately $335 per $500 interest. The disputes with NBC will also affect the Partnership's ability to make any distribution of sales proceeds. POTENTIAL VALUE OF THE FILM RIGHTS To obtain assistance in determining the potential value of the Film Rights, the Partnership has retained the services of Tulip, which conducted the valuation in consort with MMG. As compensation for such valuation services, the Partnership has paid or is obligated to Page 17 pay Tulip $5,500 plus reimbursement of certain expenses. The principals of Tulip and MMG have years of worldwide film and production experience. Except as described in this paragraph, neither Tulip nor MMG has any prior relationship with the Partnership, the General Partner or any of the Films. Todd P. Leavitt, the principal shareholder (through nominees) of Tulip, previously was employed at NBC Productions, Inc. at the time the Partnership entered into its agreement with NBC with respect to the film "The Story Lady" and was actively involved on behalf of NBC in negotiating the agreement. Tulip was selected based on a recommendation from the General Partner's outside counsel regarding film matters and after negotiation of the terms of the engagement of Tulip. The Partnership instructed Tulip to undertake an arm's-length, independent valuation of the present value of the worldwide revenue opportunities to be derived from the Films during the balance of each Film's copyright, its useful life. The sole limitation imposed was the understanding that, based on Tulip's time estimate, that Tulip not expend in excess of fifteen hours, at its negotiated hourly rate, in undertaking the valuation. Tulip later informed the Partnership that it was not able to complete its review of rights status, historical performance or subjective quality of individual Films within such time frame. The Partnership and Tulip negotiated an additional fee in order for Tulip to complete its review. In arriving at its estimate of the fair market value of the Film Rights, Tulip reviewed the potential sales opportunity for each Film on a worldwide, media-by-media, territory-by-territory basis. In each case, sales estimates for each media and each territory were made with "low," "mid-value" and "high" cases. Tulip has categorized each of the Films as "mid-value" (which refers to Tulip's general subjective expectation regarding the revenue generating capacity of the Films). Tulip prepared hypothetical sales results of the Film Rights over a ten-year period beginning July 2001. Sales were projected with an initial re-run value (assuming all Films have been previously licensed in all major territories) and a residual value for additional sales income during the balance of the ten-year period. In its estimated valuation, Tulip also made the following assumptions: o all sales results are subject to a hypothetical distribution fee of 35% of gross revenues and a hypothetical distribution/marketing expense recoupment of 5% of gross revenues. Such fees and expenses would be paid to third party distributors and vendors as part of the distribution processes in various media and reflect typical industry arrangements (and costs thereof) which potential buyers will likely take into account in determining whether there will be an adequate return on investment. o residual value after ten years was at 10% of all re-run values. o Union/guild residual payments are estimated to be 11% of sales revenue for all Films. Based on the above approach, Tulip concluded that the fair market value of the Film Rights, discounted at various interest rates to arrive at net present values rounded to the nearest thousand ("NPV"), is as follows:
Discount Interest Net Present Value NPV of Little NPV of the Story NPV of Rate of All Film Rights Kidnapper Rights Lady Rights Curacao Rights - ----------------- ------------------ ---------------- ---------------- -------------- 8% $945,000 $243,000 $372,000 $330,000 10% $882,000 $230,000 $351,000 $302,000 12% $826,000 $217,000 $332,000 $277,000 15% $753,000 $201,000 $308,000 $245,000
Tulip's use of a range of discount rates reflects what Tulip believes the capital markets would use and what potential purchasers are likely to use in their own evaluations. As with any valuation exercise, the results suggested are hypothetical and are the reflection of reasonable reliance upon historical performance as well as current market-place factors, including whether the Film is in the English language, the age of the Film, the time periods for the distribution rights, and the trends in the various possible film markets. Such factors are subject to constant variation on a media-by-media and territory-by-territory basis. Further, factors unique to any specific Film, such as cast and genre, can result in significant variations in marketplace performance. Tulip considered, to the extent relevant, all of such factors in reaching its evaluation that the Partnership's Film Rights were all "mid-value." Accounts receivable of the Films were not deemed to have a material effect on the amount available for distribution. Rights availabilities by media and territory were assumed by Tulip, based on information provided by the Partnership. There is no assurance that the Partnership will be able to sell the Film Rights for the values described above or at any specific prices. Copies of the Tulip report are available to Limited Partners, at no cost, by contacting Ms. Lorri Ellis, Jones Entertainment Group, Ltd., 9697 E. Mineral Avenue, Englewood, Colorado 80112, (303) 784-8486. Page 18 The principal of Tulip is Todd P. Leavitt and valuation and brokerage services are being performed by Tulip in consort with MMG and its principal, James P. Marrinan. Mr. Leavitt has been involved with the entertainment business since 1977, first as an attorney and for many years as an executive with a number of large production and distribution companies in this industry. He founded Tulip in 1998. Mr. Marrinan has been involved in this industry, in a variety of positions, since 1974. His experience includes marketing, sales, management and financial, and administration. He founded MMG in 1995. REASONS FOR THE PROPOSAL DISTRIBUTION OBJECTIVES MET. The distribution objectives of the Partnership have been met. The three films have already been through at least one distribution cycle. Individual rights to individual films will have to be negotiated and these rights may not provide any significant resources. Therefore, the General Partner believes that it is in the best interest of limited partners for the Partnership to sell its assets at this time, make a final distribution of proceeds, if any, to its limited partners and dissolve the Partnership. It is the General Partner's view that this is an appropriate time in which to seek to sell the Partnership's assets. The continued operation of the Partnership is no longer practical for a number of reasons, including those discussed below. THE PARTNERSHIP IS OVER 11 YEARS OLD AND IS READY TO CEASE OPERATIONS AND DISSOLVE. The prospectus for the Partnership said that the term of the Partnership would be for 25 years, but it is likely that sales of programming assets would begin in the range of 6-8, keyed to when the first round of film distribution was concluded. The Partnership is past that period for some or all of the films and actually has done re-licensing of some film rights and in some geographic areas. Generally, the films are producing very little revenue and, while expenses are also small (except film distribution expenses which are generally keyed to revenues), the General Partner believes that the Partnership may have realized substantially all it can from routine licensing transactions (as opposed to sale of all of its Film Rights). AVOIDING ONGOING OPERATING COSTS OF PARTNERSHIP. If the Film Rights can be sold within a reasonable period, even the generally low cost of operating the Partnership can be eliminated, possibly providing more funds for the limited partners, as well as eliminating the need for each limited partner to report the Partnership's K-1 tax information with the limited partners' tax returns. The Partnership has fixed administrative costs (such as tax returns, K-1s, annual audits, SEC filings), while revenues have steadily declined. This will ultimately deplete any funds available to distribute to limited partners. There is no capital available to develop additional programming. The Partnership's small asset base, coupled with decreasing revenues and cash flow no longer justify the continuation of Partnership operations. LACK OF SIGNIFICANT CURRENT REVENUE. For approximately the last 24 months, the Partnership's Film Rights have not generated significant revenues and, in the case of The Little Kidnappers and Curacao, the revenue stream is very small. For the three-year period January 1, 1998 through December 31, 2000 and the six month period ending June 30, 2001, total revenues recognized by the Partnership were $30,545 and $1,162 for Curacao, respectively, and $17,334 and $33,587 for The Little Kidnappers, respectively. The only Film Rights which have provided any material revenues recently are those related to The Story Lady. As is discussed under the "Risk Factors", there are disputes regarding the allocation of both past and future revenues with NBC, the owner of the principal remaining rights to this film. If such disputes are not resolved, it is uncertain whether the Partnership will realize anything from Page 19 its rights to The Story Lady, and there exists the possibility that the Partnership will owe NBC amounts ranging from approximately $176,000 to $368,000 (as of June 2001), which the Partnership does not have and cannot fund. This would directly affect the amount of funds available for distribution by the Partnership. BENEFITS OF SELLING A FILM LIBRARY. A possible advantage to the Partnership in attempting to group the sale of all of its Film Rights will be that the Partnership may have an opportunity to sell one or more film rights as part of a package where the same film rights would be more difficult to sell on an individual basis because of the lack of interest in that specific film right, i.e. one good film may be bundled with less popular ones as a way to sell the latter. The Film Rights of the Partnership may be conducive to this principally because all these films were made initially for television. However, the General Partner will attempt to get the best price it can for each of the Film Rights, whether that be by grouping the Film Rights or selling them individually. There is no assurance that the General Partner will be successful in these efforts. In the discretion of the General Partner, the Partnership's Film Rights could be grouped with those held by Jones Programming Partners 2-A, Ltd. in an effort to provide a potentially more attractive package to buyers. TAXES. For tax purposes, the costs of the Film Rights have been written off, with the exception of the estimated salvage value for each film. Thus, any amounts received on the sale of the Film Rights in excess of the salvage value will be a taxable gain. To the extent the gains do not exceed the original cost of the Film Rights, they will be taxed as ordinary income due to the depreciation recapture provisions of IRC Section 1245. It is anticipated that all gains or losses will be treated as ordinary. There may be unrecognized passive losses which the limited partners can deduct in the year in which the Partnership completes the sale of all the Film Rights. Such passive losses could be as high as approximately $108 per limited partner interest, if such losses have not been previously deducted. See "Federal Income Tax Consequences." CONSIDERATION OF ALTERNATIVES PARTNERSHIP CONTINUATION. The General Partner has given consideration to some alternatives for the Partnership before submitting the Proposal to you for approval. The only viable alternative would be the continued operation of the Partnership. BORROWING. The General Partner has not sought to borrow any funds for the development of any additional film projects, nor does the General Partner believe that any borrowed funds would be available, if sought. ASSESSING THE LIMITED PARTNERS. The Partnership has no funds with which to pursue other film projects, nor is borrowing for such purpose a realistic possibility. In addition, the limited partnership agreement does not provide for any form of voluntary or mandatory assessment for further capital contributions by limited partners in the Partnership. Given the purpose of the Partnership when it was formed, and the explicit partnership provisions and disclosures that no assessments would be made, the General Partner does not consider it appropriate to suggest amending the Partnership agreement to allow assessments. Because there is no ability to obtain financing, the only realistic options to the Partnership are to sell its assets or to continue operations. As set forth in the Proxy Statement, the General Partner favors the sale of the Partnership's assets, followed by the dissolution of the Partnership. Page 20 STEPS TO IMPLEMENT THE PROPOSAL Assuming the approval of the Proposal by the limited partners, of which there is no assurance, the General Partner intends to take the following steps to implement the Proposal: i. Sell all of the Partnership's programming assets through one or more of the methods discussed in this proxy statement, probably in multiple transactions; ii. Receive the sales proceeds for the programming assets and execute assignments and other instruments to accomplish such sale; iii. Pay or provide for payment of (and reserves for) the Partnership's liabilities and obligations to creditors, if any, using the Partnership's cash on hand and net sales proceeds; iv. Conduct a final accounting in accordance with the limited partnership agreement and make final cash distributions; v. Cause the Partnership's final tax returns to be prepared and filed with the Internal Revenue Service and appropriate state taxing authorities; vi. Distribute to the limited partners final Form K-1 tax information; and vii. File a Cancellation of Domestic Certificate of Limited Partnership on behalf of the Partnership with the Secretary of State of the State of Colorado. ESTIMATED SELLING COSTS The expenses associated with the sale of the Film Rights are expected to be approximately 15-25% of the sales proceeds of the Partnership's programming assets, primarily comprised of third party costs incurred, including the fees and costs of Tulip, legal counsel, auditors, printing and mailing costs and related out-of-pocket expenses. The general and administrative costs of the General Partner anticipated to be incurred in connection with the Proposal and related transactions will be met through the normal ongoing procedure set out in the limited partnership agreement. Such expenses are not anticipated to be material in relation to the proceeds from the sale of the Partnership's assets. These expenses would be prior in right to any distributions to the partners. Page 21 THE PARTNERSHIP GENERAL The Partnership was formed to acquire, develop and own rights to produce and license original programming. The primary objectives of the Partnership have been to own a group of programming assets and to license the rights to the programming on television and in other media throughout the world, and to generate a positive cash flow to permit cash returns in the form of distributions to the limited partners. It was contemplated from the outset of the Partnership's existence that after the programming had been initially exploited in all applicable markets, the General Partner would begin to liquidate its library of programming assets, which was expected to begin in approximately six to eight years. The decision when to dissolve the Partnership is to be made by the General Partner in its sole discretion. The General Partner believes that enough additional revenues have been generated to justify keeping the Partnership in existence until now. However, revenues have diminished significantly and the General Partner believes no material purpose would be served to continue the Partnership's existence. The Partnership was formed on April 27, 1989 when subscriptions for the minimum offering amount were received. Sales of interests closed in October 17, 1990 with proceeds of $6,371,500. PRINCIPAL ASSETS The Partnership's Film Rights are in the following three films: o THE LITTLE KIDNAPPERS. In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000 in the film, which included a production and overhead fee of $300,000 to the General Partner. The Partnership made production advances to complete the film and received all distribution rights, excluding theatrical rights, in perpetuity in all markets except Canada. The rights in Canada have since reverted to the Partnership. Theatrical rights are held by the writer. Page 22 The Partnership has agreements with third parties to distribute the film in various markets. The following rights will not be available for a purchaser to exploit until expiration of the agreements. In November 1990, international home video rights were licensed to a third party for no earlier than 10 years following completion of delivery, said rights terminated in December 2000. Such party has licensed all international pay television and video rights in Brazil until June 2002. Another licensee has the international television and satellite rights to distribute the film in France, the UK, French Belgium, the Benelux countries, Iceland, Sweden, Norway, Denmark & Finland, Africa & the Middle East and Turkey until between March 2003 and February 2005. International television and satellite rights are held in Germany by another licensee until September 2010. North American home video rights are licensed to a third party. The Partnership also has the right to a home video royalty based on the net retail sales proceeds earned by the third party. Although these rights expire in June 2002, the Partnership has the option to terminate the agreement, by giving six months' written notice, if the licensee fails to sell a minimum number of video units of the film within the first three years of the term which concluded in June 2000. The licensee has failed to meet the minimum sales provision. The General Partner has exercised its option to terminate said agreement, effective November 1, 2001. A buyer of the Partnership's rights in The Little Kidnapper will be required to assume a variety of obligations related to the film, including writer and producer royalties which are based in part on gross receipts and actors' union royalties, also based on gross receipts. From inception to June 30, 2001, the Partnership recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to help finance the film's production. As of March 1999, the Partnership has amortized its net investment in this film. o THE STORY LADY. In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC for the production of a full-length, made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000, which included a production and overhead fee of $120,000 paid to the General Partner. In return, the Partnership received all distribution rights to this film, excluding all United States network distribution rights retained by NBC, after the required airings on the NBC television network. These airings have occurred. The Partnership in turn granted certain worldwide rights to NBC , including exclusive rights of theatrical distribution and all print publishing rights, merchandising rights and subsidiary rights with respect to the film. In 1991, the Partnership sub-licensed the exclusive worldwide distribution rights (excluding the United States, its territories and possessions) to NBC Enterprises, an affiliate of NBC, for a period of eight years. These rights expired in September 1999; however, the parties extended the agreement on a month-to-month basis, with a thirty-day right of termination. On June 12, 2001, the General Partner provided NBC with a written notice to terminate said agreement effective 30 days after receipt. NBC Enterprises has entered into distribution agreements with third Page 23 parties beyond the initial term provided in the sub-license agreement with the Partnership. These distribution rights will not be available for a purchaser to exploit until their expiration, including international video rights in Mexico and the Philippines. International pay television rights are not available in Argentina. International free television rights are not available in Argentina, Colombia, Czech Republic, France, Honduras, Mexico, Romania, Slovakia, South America, Ukraine, Venezuela, Turkey, Panama, Chile, Nicaragua, Cyprus, Sri Lanka and Africa. These agreements are set to expire between June 2001 and November 2003. All international distribution rights, other than set forth above, are available. The Partnership controls non-network television distribution (i.e., syndication, cable, pay cable) in the United States and domestic home video distribution. North American home video rights are licensed to a third party. The Partnership also has the right to a home video royalty based on the net retail sales proceeds earned by the third party. Although these rights expire in June 2002, the Partnership has the option to terminate the agreement, by giving six months' written notice, if the licensee fails to sell a minimum number of video units of the film within the first three years of the term which concluded in June 2000. The licensee has failed to meet the minimum sales provision. The General Partner has exercised its option to terminate said agreement, effective November 1, 2001. The Partnership also has an agreement granting rights to distribute "The Story Lady" in the domestic home video market, only through direct sales and telecommunications sales, or other means outside normal retail channels whereby consumers purchase copies for their own home viewing, not for resale or rental. This agreement expires in October 2001. The licensee has the option to extend the licensing term for up to four additional one year periods after the October 2001, in exchange for additional annual license fees. All domestic distribution rights, other than set forth above, are available for exploitation. A buyer of these film rights will be required to assume certain obligations. Under the agreement with NBC, once the Partnership has recouped its distribution advance plus interest, NBC is entitled to recoup its imputed deficit (as defined) out of remaining gross receipts. NBC's imputed deficit is defined as the difference between (a) the sum of the approved budgeted direct costs (costs incurred in connection with the development and production of The Story Lady and the rights for two network broadcasts) including 7 1/2% as an overhead allowance and a portion of the over budget direct costs; and (b) the sum of the imputed license fee deemed paid by NBC television company for two network broadcasts and the distribution advance paid to NBC by the Partnership. Since the Partnership has fully recouped the required amount, NBC is entitled to recoup its imputed deficit and interest therein, which totaled approximately $508,000, as claimed by NBC as of June 30, 2000. After NBC recoupment of its imputed deficit and its recoupment of certain third party participants and deferments, NBC is entitled to 5% of the remaining net profits. Third party participants and deferments include various percentages of revenues payable to writers, producers and actors. NBC is responsible for payment of the third party participation and deferred compensation; provided, however, that NBC is entitled to recoup such payments. Furthermore, NBC has agreed that the third party participation shall not exceed 35% of the adjusted gross (defined as gross receipts less distribution expenses, the Partnership's distribution advance including interest and NBC's imputed deficit) of "The Story Lady." The agreement with NBC allows the Partnership to assign the agreement in connection with a sale of all or substantially all of the Partnership's assets, provided the assignee assumes all of the Partnership's obligations under the agreement. Any other assignment requires NBC's prior written approval. In September 1999, NBC first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $192,500. NBC mistakenly failed to take a 50% Page 24 subsidiary rights distribution fee on airline revenues reported on statements June 30, 1993 to December 31, 1994 for total revenue of $384,854. The agreement with NBC provides that any statement to which no objection has been made by the party receiving the statement within two years after submission will be deemed conclusive on all parties. Therefore, the General Partner does not believe that NBC is entitled to the additional distribution fees claimed. NBC also reported that it has not recouped approximately $508,000 of its original investment, including interest. NBC is entitled to recover its unrecouped amount under the agreement, which makes it unlikely that the Partnership will receive any income from this film in the near future, or if at all. The Partnership has also received approximately $175,600 from distributors, which has not been applied to NBC's unrecouped amount. As of March 31, 1999, the Partnership has reported this amount as an accrued liability, but believes a basis exists to deny some or all of such liability. Litigation could result because of these disputes with NBC. Such litigation would likely be costly and time consuming. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make such payments, nor is it likely that the Partnership could borrow the necessary funds. From inception to June 30, 2001, the Partnership received approximately $2,299,000 of revenue from this film. As of December 1995, the Partnership has amortized its net investment in this film. o CURACAO. In June 1992, the General Partner, on behalf of the Partnership, entered into an agreement with a third party for the production of the full-length film "Curacao". The Partnership provided financing for the film and received all worldwide distribution rights, except certain distribution rights granted to a third party which have now reverted back to the Partnership. Circling Curacao, N.V., which provided certain production services, holds distribution rights in the Netherland Antilles, Aruba and Surinam, in perpetuity. In November 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") to assist with financing the production of "Curacao". The total cost of the film was approximately $4,410,000. In addition to the costs of production, the Partnership paid $500,000 to the General Partner as a production and overhead fee. The Partnership received a licensing fee of $1,675,000 and $675,000 as a recoupable advance for home video rights. In addition, Showtime paid the Partnership for certain talent costs. The Partnership has received no additional revenues from Showtime. Showtime was granted certain rights, including an exclusive pay television license and exclusive home video rights in the United States and islands of the Caribbean. Showtime's pay television and certain other domestic rights may not expire for a number of years, unless Showtime waives certain commercial windows, of which there is no assurance. The home video rights expired in February 2001; however, such rights may be contractually suspended until expiration of Showtime's pay television rights. International theatrical, free television and home video rights are licensed to a third party until October 2003. International pay television rights in Australia are licensed until April 2002. All other international distribution rights are available. Page 25 A potential buyer of these film rights will be required to assume certain obligations, in addition to those set forth above. These are principally writer and union royalties and certain amounts that may be owed to musical talent. From inception to June 30, 2001, the Partnership received approximately $4,064,000 of revenue from this film, which includes the initial license fee and advances from Showtime of $2,650,000. In December 1999, after consideration of amortization and write-downs, the Partnership fully amortized its net investment in this film. AMOUNTS INVESTED AND CASH DISTRIBUTIONS Limited partners made contributions of $6,371,500 in the aggregate to the Partnership, the net proceeds of which have all been invested. The General Partner made a capital contribution with respect to its general partner interest of $1,000. From inception through June 30, 2001, the Partnership made cash distributions to its limited partners totaling $4,201,502. On a per interest basis, the limited partners had received, as of June 30, 2001, approximately $335 per $500 interest, or approximately 66% of their initial capital contributions. Details of the amounts of cash distributions made to partners over the three years ended December 31, 2000 are set out under "Cash Distributions" below. From inception through June 30, 2001, the General Partner has received cash distributions from the Partnership of $42,440 with respect to its general partner interest. CASH DISTRIBUTIONS During the three years ended December 31, 2000, total cash distributions and cash distributions per interest were:
Total Per $500 Interest ----- ----------------- 2000 $ 0 $ 0 1999 $ 0 $ 0 1998 $ 160,897 $ 12.50
TRANSACTIONS BETWEEN THE GENERAL PARTNER AND THE PARTNERSHIP The General Partner was reimbursed for all offering costs up to 3.75% of gross offering proceeds, which reimbursement was $238,931. Ten percent commission costs ($637,150) paid to an affiliate of the General Partner and reimbursements to the General Partner for costs for raising Partnership capital were charged to limited partners' capital. The following summarizes the transactions between the General Partner and the Partnership pursuant to which the General Partner has been paid or has had its expenses reimbursed on an ongoing basis: o The General Partner has received from inception through June 30, 2001 production and overhead fees of $920,000, all of which were received prior to 1997. o The General Partner is entitled to be reimbursed for general and administrative costs incurred on behalf of and allocable to the Partnership, including employee salaries and Page 26 office overhead. Administrative services to the Partnership consist primarily of accounting services, allocated to the Partnership at cost. Through June 30, 2001, the General Partner has received a total of $261,804 as general and administrative expense reimbursements from the Partnership, of which $15,442, $10,856, $9,680 and $10,552 was reimbursed for the years ended December 31, 1998, 1999 and 2000 and the six months ended June 30, 2001, respectively. NO TRADING MARKET There is no trading market for the limited partnership interests, and only very limited sales of such interests have occurred since inception. LIST OF LIMITED PARTNERS A limited partner of the Partnership is entitled to request copies of the names of the limited partners showing the names and addresses of all limited partners in the Partnership. The right to receive a limited partner list may be conditioned upon the requesting limited partner paying the cost of copying and a showing that the request is for a proper purpose. Reasonable requests would include requests for the limited partner list for the purpose of opposing the Proposal. Requests for limited partner lists may be addressed to ACS Securities Services, Inc., at 3988 N. Central Expressway, Building 5, 6th Floor, Dallas, TX 75204; Attention: Ms. Shari Eastwood. BOOKS AND RECORDS The Partnership's limited partnership agreement provides that its books and records are available for inspection by limited partners or their duly authorized representatives at all reasonable times at the Partnership's principal office in Englewood, Colorado. A written request must be received stating a proper purpose for inspection of such books and records, with the inspection to be conducted at the limited partner's expense. A limited partner may request in writing and receive without charge copies of the Partnership's limited partnership agreement, certificate of limited partnership and tax returns. LEGAL PROCEEDINGS The General Partner is not aware of any material pending legal proceedings to which the Partnership is a party or of which any of the Film Rights are the subject. There are, however, pending disputes with NBC regarding whether certain amounts are owed to NBC regarding "The Story Lady." See "Principal Assets--THE STORY LADY." VOTING ON THE PROPOSAL VOTE REQUIRED; PRINCIPAL HOLDERS Under the limited partnership agreement, the Proposal must be approved by the affirmative vote of the limited partners holding a majority of the limited partnership interests in the Partnership as of the record date. As of July 31, 2001, the number of interests Page 27 outstanding was 12,743 and the number of record holders was 834. Each limited partner appearing on the records of the Partnership as of ______, 2001, the "record date," is entitled to notice of, and to participate in, this vote of limited partners. It is very important that all limited partners participate in the voting. The ability of the Partnership to complete the transaction discussed in this proxy statement and the Partnership's ability to make a distribution to its limited partners of the net proceeds of the sale of the Partnership's assets are dependent upon the approval of the transaction by the holders of a majority of the Partnership's limited partnership interests. An abstention by a limited partner will have the same effect as a vote against the Proposal. The General Partner and its affiliates own no limited partnership interests. The General Partnership interest in the Partnership does not have a vote on the Proposal, but the General Partner has approved the Proposal and recommends that the limited partners vote in favor of it. To the General Partner's knowledge, there is no holder of interests of more than 5% of the interests, except for Mr. Herbert Borbe. Mr. Borbe owns 800 of the 12,743 interests outstanding as of December 31, 2000. Mr. Borbe's address is 1709 134th Avenue, S.E., Belleview, Washington 98005. Mr. Borbe is not a director, officer or employee of the General Partner or any of its affiliates. PROXIES; REVOCATION A sample of the form of proxy is attached to this proxy statement. The actual proxy to be used to register your vote on the Proposal is the separate sheet of paper included with this proxy statement. If you wish, you can fax your executed proxy to us at 214-887-7198, Attention: Shari Eastwood, of ACS Securities Services, Inc. Investors may also vote by toll-free telephone at 1-866-ACS-VOTE (1-866-227-8683). PLEASE USE THE ENCLOSED PROXY TO CAST YOUR VOTE ON THE PROPOSAL OR SEE THE ACCOMPANYING INSTRUCTION PAGE FOR MORE DETAILS ON VOTING BY TELEPHONE. If the proxy is properly signed and is not revoked by a limited partner, the interests it represents will be voted in accordance with the instructions of the limited partner. If no specific instructions are given, the interests will be counted as a vote "FOR" the Proposal and the grant of authority to extend the solicitation period. Proxies cannot be revoked except by delivery of a proxy dated as of a later date, by voting in person at the Special Meeting, or by giving written or oral notice of revocation to the Secretary of the General Partner. SOLICITATION The solicitation is being made by Jones Entertainment Group, Ltd. in its capacity as General Partner on behalf of the Partnership. The Partnership will bear the costs of the preparation of this proxy statement and of the solicitation of proxies, which is estimated at $15,000. Such costs will be allocated to the limited partners and to the General Partner according to their respective percentage interests pursuant to the limited partnership agreement. Solicitations will be made primarily by mail. However, a number of regular employees of the General Partner may, to ensure the presence of a quorum, solicit proxies in person or by telephone. The General Partner may contact brokers and representatives who originally sold the interests to limited partners and request their assistance in encouraging limited partners to return their proxies or to vote by telephone. These brokers or Page 28 representatives would not be compensated for this assistance nor would they be asked to make any recommendation as to how the limited partners should vote. Additionally, the General Partner may retain a proxy solicitor to assist in contacting brokers or limited partners to encourage the return of proxies, although it does not anticipate doing so. Should such a solicitor be retained, its costs would be part of the aforesaid estimated $15,000. NO APPRAISAL OR DISSENTERS' RIGHTS PROVIDED Limited partners are not entitled to any dissenters' or appraisal rights with respect to the Proposal, as would be available to shareholders in a corporation engaging in a corporate transaction. RECOMMENDATION OF THE GENERAL PARTNER The General Partner believes that it is in the best interests of the limited partners to sell the Film Rights and to dissolve the Partnership. The General Partner believes the terms of the Proposal are fair to the limited partners. Dissolution will allow the limited partners to receive any remaining value of the Partnership's programming assets currently, rather than receiving distributions, if any, over the remaining life of the Partnership. If operations continue, revenues will continue to decline while direct, operating, general and administrative expenses continue, reducing the likelihood of cash distributions. Continued operations also mean continuation of the additional costs incurred by the limited partners, including the costs associated with inclusion of information from the Schedule K-1 relating to the Partnership in their personal income tax returns. Dissolution of the Partnership will allow preparation of final tax returns. THE GENERAL PARTNER RECOMMENDS THAT LIMITED PARTNERS VOTE FOR THE PROPOSAL. FEDERAL INCOME TAX CONSEQUENCES GENERAL The following summarizes the material federal income tax consequences to the limited partners if the Proposal to sell the Partnership's assets and dissolve the Partnership is approved. This discussion is not based upon an opinion of counsel and it is possible that different results than those described may occur. Statements regarding tax consequences are based upon relevant provisions of the Internal Revenue Code of 1986, as amended, the "Code", Treasury Regulations in effect on the date hereof, reported judicial decisions, published positions of the IRS, further assumptions that the Partnership constitutes a partnership for federal tax purposes, and that the Partnership will be dissolved as described herein. The laws, regulations, administrative rulings and judicial decisions which form the basis for conclusions regarding the tax consequences described herein are complex, are subject to prospective or retroactive change at any time, and any change may adversely affect the limited partners. This summary does not describe all the tax aspects which may affect limited partners because the tax consequences may vary depending upon the individual circumstances of a limited Page 29 partner. It is directed to the limited partners that are the original purchasers of the interests and hold interests as "capital assets," generally, property held for investment. Each limited partner that is a corporation, trust, estate, tax-exempt entity or other partnership is strongly encouraged to consult its own tax advisor as to the rules which are specifically applicable to it. This summary does not address foreign, state or local tax consequences, and is inapplicable to nonresident aliens, foreign corporations, debtors under the jurisdiction of a court in a case under federal bankruptcy laws or in a receivership, foreclosure or similar proceeding, or an investment company, financial institution or insurance company. TAXABLE GAIN OR LOSS UPON SALE OF PROGRAMMING ASSETS A limited partner will realize and recognize gain or loss, or a combination of both, on the Partnership's sale of its programming assets prior to dissolution. The amount of gain realized with respect to each programming asset, or related asset, will be an amount equal to the excess of the amount realized by the Partnership and allocated to the limited partner, for example, cash or consideration received, over the limited partner's adjusted tax basis for such programming asset. Conversely, the amount of loss realized with respect to each programming asset or related asset will be an amount equal to the excess of the limited partner's tax basis over the amount realized by the Partnership for such programming asset and allocated to the limited partner. It is projected that net taxable gain will be realized upon the sale of Partnership programming assets and that such gain will be allocated among the limited partners in accordance with the limited partnership agreement. The limited partnership agreement includes an allocation provision that requires allocations pursuant to a dissolution be made among partners in a fashion that equalizes capital accounts of the partners so that the amount in each partner's capital account will reflect such partner's sharing ratio of income and loss. The extent to which capital accounts can be equalized, however, is limited by the amount of gain and loss available to be allocated. Realized gains and losses generally must be recognized and reported in the year the sale occurs. Accordingly, each limited partner will realize and recognize his or her allocable share of gains and losses in his tax year within which the Partnership programming assets are sold. Each limited partner's recognized allocable share of the net partnership Section 1231 gains or losses must be netted with that limited partner's individual Section 1231 gains and losses recognized during the year in order to determine the character of such net gains or net losses under Section 1231. Net gains will be treated as capital gains except to the extent recharacterized as ordinary income due to recapture and net losses will be treated as ordinary losses. IT IS ANTICIPATED THAT ALL GAINS ON THE SALE OF THE FILM RIGHTS WILL BE TREATED AS ORDINARY INCOME DUE TO THE DEPRECIATION RECAPTURE PROVISION OF SECTION 1245 OF THE CODE. DISSOLUTION OF THE PARTNERSHIP After the sale of its Film Rights, the Partnership's assets will consist solely of any net cash remaining after payment of the Partnership's obligations. Any such cash will be distributed to the partners in liquidation of his or her partnership interest. The Partnership will not realize gain or loss upon such distribution of cash to its partners. If the amount of cash distributed to a limited partner in liquidation of his or her partnership interest is less than such limited partner's adjusted tax basis in his or her interests, the limited partner will realize and recognize a capital loss to the extent of the excess. If the amount of cash distributed is greater than such limited partner's adjusted tax basis in his or her interests, the limited partner will recognize a capital gain to the extent of the excess. Page 30 CAPITAL GAINS TAX Net long-term capital gains of individuals, trusts and estates generally will be taxed at a maximum rate of 20%, while ordinarily income, including income from the recapture of depreciation, will be taxed at a maximum rate of 35.5% or 39.1%, depending on the taxpayer's taxable income. The amount of net capital losses that can be utilized to offset ordinary income will be limited to the sum of net capital gains from other sources recognized by the limited partner during the tax year, plus $3,000, or $1,500, in the case of a married individual filing a separate return. The excess amount of such net long-term capital loss may be carried forward and utilized in subsequent years subject to the same limitations. Corporations are taxed on net long-term capital gains at their ordinary Section 11 rates and are allowed to carry net capital losses back three years and forward five years. Section 1231 net losses can be fully utilized to offset ordinary income. PASSIVE LOSS LIMITATIONS Limited partners that are individuals, trusts, estates, or personal service corporations are subject to the passive activity loss limitations rules that were enacted as part of the Tax Reform Act of 1986. Generally, losses from a passive activity can only be deducted to the extent of income from other passive activities. A limited partner's allocable share of partnership income, gain, loss, and deduction is treated as derived from a passive activity, except to the extent of partnership portfolio income, which includes interest, dividends, royalty income and gains from the sale of property held for investment purposes. A limited partner's allocable share of any gain realized on sale of Partnership assets (other than gain from the sale of portfolio investments) will be characterized as passive activity income that may be offset by passive activity losses from other passive activity investments. Moreover, because the sale of all of the Partnership's assets will terminate the limited partner's interest in the passive activity, a limited partner's allocable share of any loss (i) previously realized as a limited partner in the Partnership and suspended because of its passive characterization, (ii) realized on the sale of partnership assets, or (iii) realized by the limited partner upon liquidation of his or her partnership interest, will not be characterized as losses from a passive activity. Through December 31, 2000, the passive activity losses from inception of the Partnership are approximately $108 per $500 limited partner interest. These losses can be deducted on disposition of the Film Rights if they have not previously been utilized by the limited partners. THE FOREGOING DISCUSSION IS INTENDED TO BE A SUMMARY OF THE MATERIAL INCOME TAX CONSIDERATIONS OF THE SALE OF PARTNERSHIP ASSETS AND DISSOLUTION. EACH LIMITED PARTNER SHOULD CONSULT ITS OWN TAX ADVISOR CONCERNING ITS PARTICULAR TAX CIRCUMSTANCES AND THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES TO IT OF THE SALE OF PARTNERSHIP ASSETS AND THE DISSOLUTION OF THE PARTNERSHIP. Page 31 DOCUMENTS INCLUDED Included with this proxy statement are the following documents: o The Partnership's Annual Report on Form 10-K for the year ended December 31, 2000. o The Partnership's Amendment No. 1 to its Annual Report on Form 10-K for the year ended December 31, 2000. o The Partnership's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001. o The Partnership's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001. FORWARD-LOOKING STATEMENTS Some of the information included in this proxy statement, any attachments and the documents incorporated by reference contain forward-looking statements. Forward-looking statements use forward-looking terms such as "believe," "expect," "may," "intend," "will," "project," "should" or "anticipate" or other similar words. These statements discuss "forward-looking" information such as: o future net revenues from film distribution; o future cash distributions to investors in the Partnership; and o amounts or ranges of net proceeds from sales of the Partnership's assets. Other factors that could cause actual results to differ materially from those anticipated are discussed in the Partnership's periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2000. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this proxy statement, any attachment and the documents incorporated by reference. The Partnership will not update these forward-looking statements unless the securities laws require an updating. OTHER MATTERS INCORPORATION BY REFERENCE The Partnership's Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2000 and the Partnership's Quarterly Report on Form 10-Q for the fiscal quarters ended March 31, 2001 and June 30, 2001 are incorporated by reference in their entirety in this Proxy Statement. All subsequent documents filed by the Partnership prior to the vote pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934 are hereby incorporated by reference. JONES ENTERTAINMENT GROUP, LTD. as General Partner of the Partnership -------------------------------------- Lorri Ellis Secretary Page 32 FORM OF PROXY JONES PROGRAMMING PARTNERS 1-A, LTD. **VOTING OPTIONS** YOU MAY VOTE BY TELEPHONE (OR COMPLETE THE PROXY CARD BELOW AND RETURN IT BY MAIL IN THE ENCLOSED ENVELOPE) If voting by proxy, you may vote either by mail, fax or telephone. Your telephone vote authorizes the named proxies to vote your interests in the same manner as if you marked, signed and returned your proxy card by mail. To vote by telephone, please read the accompanying proxy statement and then follow these steps: TO VOTE BY PHONE: CALL TOLL FREE 1-866-227-8683 ANY TIME ON A TOUCH-TONE TELEPHONE. THERE IS NO CHARGE TO YOU FOR THE CALL. PLEASE HAVE THIS FORM AVAILABLE WHEN YOU CALL THE TOLL-FREE NUMBER. Enter the 10-digit pin number located below. To vote YES on the Proposal, as the General Partner recommends, PRESS 1. To vote AGAINST the Proposal PRESS 2. To ABSTAIN on the Proposal PRESS 3. If you vote by telephone, please DO NOT mail back the proxy. THANK YOU FOR VOTING! / / PIN NUMBER FOR TELEPHONIC VOTING FOLD AND DETACH HERE - -------------------------------------------------------------------------------- THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER FOR A SPECIAL MEETING OF THE LIMITED PARTNERS The undersigned hereby appoints Timothy J. Burke and Lorri Ellis as Proxies, each with the power to appoint his or her substitute, and hereby authorizes them to represent and to vote, as designed herein, all limited partnership interests of JONES PROGRAMMING PARTNERS 1-A, LTD. held of record by the undersigned on ________, 2001 for a special meeting of limited partners to be held at the corporate offices of the General Partner, 9697 E. Mineral Avenue, Englewood, Colorado, on ___________, ________, 2001, at 9:30 a.m., Mountain Time. THE GENERAL PARTNER RECOMMENDS A VOTE "FOR" THE FOLLOWING ITEM: 1) The adoption of a proposal for the sale of substantially all of the assets of the Partnership and the ultimate dissolution of the Partnership. (Note: The asset sale and dissolution of the Partnership comprise a single proposal, and a vote in favor of the proposal will constitute a vote in favor of each of these matters.) / / FOR / / AGAINST / / ABSTAIN THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE SPECIFICATIONS MADE HEREON. IF NO SPECIFICATION IS MADE, IT WILL BE VOTED FOR THE PROPOSAL. (TO BE SIGNED ON OTHER SIDE.) Page 33 IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO ACT UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. ---------------------------------------- Date ---------------------------------------- Signature ---------------------------------------- (Signature if held jointly) Please sign exactly as your name appears at the left. When partnership interests are held by joint tenants, both should sign. When signing as attorney, executor, administrator, trustee or corporation, please sign in full corporate name by president or other authorized person. If a partnership, please sign in partnership name by authorized person. YOU MAY FAX YOUR SIGNED PROXY TO 214-887-7198. Page 34 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 2000 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: 0-19075 JONES PROGRAMMING PARTNERS 1-A, LTD. ------------------------------------ (Exact name of registrant as specified in its charter) COLORADO 84-1088820 - -------------------------- --------------------------------- (State of Organization) (IRS Employer Identification No.) 9697 E. MINERAL AVENUE, ENGLEWOOD, COLORADO 80112 (303) 792-3111 - ------------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no. including area code)
Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes X No ------- ------- Aggregate market value of the voting stock held by non-affiliates of the registrant: N/A Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ------- DOCUMENTS INCORPORATED BY REFERENCE: None Information contained in this Form 10-K Report contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-K Report that address activities, events or developments that the General Partner or the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements are based upon certain assumptions and are subject to a number of risks and uncertainties. Actual results could differ materially from the results predicted by these forward-looking statements. PART I. ITEM 1. BUSINESS Jones Programming Partners 1-A, Ltd. (the "Partnership") is a Colorado limited partnership that was formed in April 1989 pursuant to the public offering of limited partnership interests in the Jones Programming Partners Limited Partnership Program. Jones Entertainment Group, Ltd. is the general partner of the Partnership (the "General Partner"). The Partnership was formed to acquire, develop and own rights to produce and license original programming. All the Partnership's films are subject to a variety of license agreements for various markets. Some of these agreements will last beyond the year 2001. The General Partner charges the Partnership for certain direct costs incurred on the Partnership's behalf. See further discussion of such costs charged to the Partnership by the General Partner in ITEM 8, FINANCIAL STATEMENTS, NOTE 4. As of December 31, 2000, the Partnership had three programming properties: "The Little Kidnappers," "The Story Lady" and "Curacao." It is not anticipated that the Partnership will invest in any additional programming, but instead will focus on the distribution and/or sale of its existing programming. Following is a description of the Partnership's programming. THE LITTLE KIDNAPPERS In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length made-for-television film entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which included a production and overhead fee of $300,000 paid to the General Partner. In March 1999, the Partnership fully amortized its net investment in this film. From inception to December 31, 2000, the Partnership has recognized approximately $3,003,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to help finance the film's production. THE STORY LADY In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBCP") for the production of a full-length, made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for certain distribution rights to this film. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. In December 1995, the Partnership fully amortized its net investment in this film. From inception to December 31, 2000, the Partnership has recognized approximately $2,299,000 of revenue from this film. The Partnership has an agreement with NBCP to distribute "The Story Lady" in foreign markets. Under this agreement, the Partnership paid $1,000,000 for all the distribution rights to "The Story Lady" except for NBC network exhibition and certain other rights. The Partnership licensed back the foreign rights to NBCP for an eight year term (which expired at the end of 1999 and has been extended on a month to month basis) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television, and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each receives its original investment plus interest (the "unrecouped amount"). The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $200,000. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. 2 As of December 31, 2000, NBCP reported that it had not recouped approximately $469,000 of its original investment, plus interest. While the Partnership disputes whether NBCP is entitled to recover its entire claimed unrecouped amount under the agreement, an unfavorable outcome to the Partnership would make it unlikely that the Partnership will receive income from this film in the near future, or at all. Through December 31, 2000, the Partnership had received approximately $190,000 from distributors which was not applied to NBCP's unrecouped amount. As of December 31, 2000, the Partnership had reported this amount as an accrued liability. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make such payment, nor is it likely that the Partnership could borrow the necessary funds. Any proceeds from the sale of the Partnership's programming interests will likely have to be applied to some or all of the amounts claimed by NBCP. CURACAO In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length, made-for-television film entitled "Curacao." The total production cost of the film incurred by the Partnership was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime presale and supervising production of this picture. In December 1999, the Partnership fully amortized its net investment in this film. From inception to December 31, 2000, the Partnership has recognized approximately $4,062,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000, which was used to finance the film's production. GENERAL MATTERS The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's interests in its programming. See further discussion of the Partnership's distribution efforts concerning these films in ITEM 7, MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. None of the Partnership's films are presently generating any significant revenue. There is no assurance that the Partnership will be successful in obtaining a buyer or buyers for the assets of the Partnership or that the terms or conditions of any sale will be favorable to the Partnership. Many of the factors set forth below which affect the distribution of the films will also affect the saleability of the films themselves. If efforts to sell the Partnership's assets are not successful, the Partnership will continue to seek distribution for its films. The Partnership has obtained the services of a broker to assist in the sale of the Partnership's films. Pursuant to the services agreement, the broker will receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The Partnership has encountered intense competition in connection with its attempts to distribute its programming. There is competition within the television programming industry for exhibition time on cable television networks, broadcast networks and independent television stations. Acceptance of the programming in certain distribution media may be limited and the programming will compete with other types of television programming in all domestic and international distribution media and markets. The age and technical specifications of the Partnership's programming may also limit distribution in certain international and domestic markets. The success of programming is also dependent in part on public taste, which is unpredictable and susceptible to change. In international markets, the Partnership has, in the past, and may again encounter additional risks, such as foreign currency rate fluctuations, compliance and regulatory requirements, differences in tax laws, and economic and political environments. The Partnership's films have been distributed in a number of markets. It is not known whether the Partnership can successfully exploit any of its films in these or other markets in the future. There can be no assurance that the distribution efforts made by the Partnership, the General Partner or unaffiliated parties on behalf of the Partnership for its programming will be successful. 3 ITEM 2. PROPERTIES SEE ITEM 1. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS While the Partnership is publicly held, there is no public market for the limited partnership interests and it is not expected that such a market will develop in the future. As of February 28, 2001, the number of equity security holders in the Partnership was 832. 4 ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED DECEMBER 31, --------------------------------------------------------------------------- 1996 1997 1998 1999 2000 -------------- -------------- ---------------------------- --------------- Gross revenues $ 211,669 $ 222,714 $ 195,717 $ 9,077 $ 27,273 Costs of filmed entertainment 107,418 93,983 11,546 6,027 - Distribution fees and expenses 58,229 98,471 196,695 119,104 15,463 Loss from write-down of film production cost 656,744 - - 58,946 - Operating, general and administrative expenses 62,499 94,162 115,247 61,810 43,239 Operating loss (673,221) (63,902) (127,771) (236,810) (31,429) Net loss (654,916) (54,372) (117,496) (237,119) (25,626) Net loss per limited partnership unit (50.88) (4.22) (9.13) (18.42) (1.99) Weighted average number of limited partnership units outstanding 12,743 12,743 12,743 12,743 12,743 General partner's deficit (49,284) (49,828) (52,612) (54,983) (55,239) Limited partners' capital (deficit) 517,422 463,594 187,985 (46,763) (72,133) Total assets 657,221 442,164 265,317 90,254 72,725 General partner advances 15,600 8,303 11,045 10,273 1,973
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the Partnership's financial condition and results of operations contains, in addition to historical information, forward-looking statements that are based upon certain assumptions and are subject to a number of risks and uncertainties. The Partnership's actual results may differ significantly from the results predicted in such forward-looking statements. RESULTS OF OPERATIONS 2000 COMPARED TO 1999 Revenues of the Partnership increased $18,196, from $9,077 in 1999 to $27,273 in 2000. This increase was primarily the result of revenue collection efforts made by the General Partner with respect to "Curacao". Revenue from "Curacao" was $3,703 in 1999 as compared to $26,807 in 2000. International and domestic sales of "The Little Kidnappers" and "The Story Lady" decreased, resulting in Partnership revenue of $4,455 and $919, respectively, in 1999 compared to $469 and $0, respectively, in 2000. "The Story Lady" was actively being distributed in 2000, however, due to the unrecouped position of NBCP, the Partnership was not entitled to any of the revenue generated by the film. Filmed entertainment costs decreased $6,027, from $6,027 in 1999 to $0 in 2000. This decrease was the result of the full amortization of the capitalized production costs relating to "The Little Kidnappers" in March 1999 and to "Curacao" in December 1999. Filmed entertainment costs are amortized over the life of the film in the ratio that current gross revenues bear to anticipated gross revenues. Distribution fees and expenses decreased $103,641, from $119,104 in 1999 to $15,463 in 2000. This decrease was due primarily to the Partnership recording $119,081 in royalties owed NBCP for the "Story Lady" in 1999 compared to $15,000 in 2000. These distribution fees and expenses relate to the compensation due and costs incurred by distributors in selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. The Partnership did not have a loss on write-down of film production in 2000. The loss from the write-down of film production of $58,946 in 1999, was the result of a full write-down of the Partnership's net investment in 5 "Curacao", as of December 31, 1999. As of December 31, 1999, the Partnership had expensed all costs related to the production of each of its three films. Operating, general and administrative expenses decreased $18,571, from $61,810 in 1999 to $43,239 in 2000. This decrease was due primarily to the Partnership writing off an outstanding receivable of $26,129 in 1999. A similar write off did not occur in 2000. This decrease was partially offset by an increase in legal expenses related to the potential sale of the Partnership's assets. Interest income increased $2,466, from $3,337 in 1999 to $5,803 in 2000. This increase in interest income was the result of higher interest rates and higher levels of invested cash balances during 2000 compared to 1999. Limited Partners' net loss per partnership unit decreased $16.43, from $(18.42) in 1999 to $(1.99) in 2000. This change was due to the results of operations as discussed above. 1999 COMPARED TO 1998 Revenues of the Partnership decreased $186,640, from $195,717 in 1998 to $9,077 in 1999. This decrease was due primarily to a decrease in domestic and international sales of "The Little Kidnappers" and "The Story Lady," which were $12,354 and $183,324, respectively, for 1998 as compared to $4,455 and $919, respectively, in 1999. International sales of "Curacao" increased $3,664, from $39 in 1998 to $3,703 in 1999. Filmed entertainment costs decreased $5,519, from $11,546 in 1998 to $6,027 in 1999. This decrease resulted primarily from the decrease in Partnership revenues and the full amortization in March 1999 of the "Little Kidnappers". Filmed entertainment costs are amortized over the life of the film in the ratio that current gross revenues bear to anticipated gross revenues. Distribution fees and expenses decreased $77,591, from $196,695 in 1998 to $119,104 in 1999. This decrease was due primarily to royalties that became due to artisan guilds in 1998 related to "Story Lady" and the decrease in revenues received from the three films. These distribution fees and expenses relate to the compensation due and costs incurred by distributors in selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. Loss on write-down of film production of $58,946 in 1999, was the result of a full write-down of the Partnership's net investment in "Curacao", as of December 31, 1999. No such write-down was taken in 1998. As of December 31, 1999, the Partnership had expensed all costs related to the production of films. Operating, general and administrative expenses decreased $53,437, from $115,247 in 1998 to $61,810 in 1999. This decrease was due primarily to an allowance of $80,300 made during 1998 related to the potential uncollectibility of an outstanding international income receivable. Interest income decreased $6,198, from $9,535 in 1998 to $3,337 in 1999. This decrease in interest income was the result of lower average levels of invested cash balances existing during 1999 as compared to 1998. Limited Partners' net income per partnership unit changed $(9.29), from $(9.13) in 1998 to $(18.42) in 1999. This change was due to the results of operations as discussed above. FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Partnership's principal sources of liquidity are cash on hand and amounts received from the domestic and international distribution of the Partnership's programming. The Partnership had approximately $73,000 in cash as of December 31, 2000. The Partnership will not invest in any additional programming projects, but instead will focus on the distribution and/or sale of its three existing films. 6 The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's interests in its programming. The General Partner has no obligation to purchase any assets of the Partnership, nor is it anticipated that the General Partner will purchase any of such assets. The Partnership will retain a certain level of working capital, including any necessary reserves, to fund its operating activities. It is anticipated that any future distributions will only be made from proceeds received from the sale of the Partnership's assets. There is no assurance regarding the timing or amount of any future distributions. The General Partner has initiated sales efforts but cannot predict at this time when or at what price the Partnership's interests in its programming ultimately will be sold. The films may be sold as a group or on a one by one basis, in the judgement of the General Partner. Any direct costs incurred by the General Partner on behalf of the Partnership in soliciting and arranging for the sale, or sales, of the Partnership's programming projects will be charged to the Partnership. The Partnership does not have the funds necessary to pay NBCP its claimed unrecouped costs involved with "The Story Lady" and even if the Partnership is successful in finding a buyer or buyers for all of its property, the proceeds may not be sufficient to allow for any distributions to the Partners. It is probable that the distributions of the proceeds from the sales of the Partnership's programming projects, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. The Partnership has obtained the services of a broker to assist in the sale of the Partnership's films. Pursuant to the services agreement, the broker will receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The General Partner believes that the Partnership has, and will continue to have, sufficient liquidity to fund its ongoing operations and to meet its obligations so long as quarterly distributions are suspended and provided the Partnership is able to reach a satisfactory resolution with respect to the claims made by NBCP. However, there can be no assurance that such a resolution can be achieved. The General Partner does not anticipate cash flow from the films to increase significantly in the future. The lack of significant cash flow presently being generated by the Partnership's films may negatively effect the ultimate sales price of the films. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The Partnership does not hold any financial instruments which present significant interest or market risk. 7 ITEM 8. FINANCIAL STATEMENTS JONES PROGRAMMING PARTNERS 1-A, LTD. FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 2000 INDEX
PAGE ----------- Report of Independent Public Accountants 9 Statements of Financial Position 10 Statements of Operations 11 Statements of Partners' Capital (Deficit) 12 Statements of Cash Flows 13 Notes to Financial Statements 14
8 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Jones Programming Partners 1-A, Ltd.: We have audited the accompanying statements of financial position of Jones Programming Partners 1-A, Ltd. (a Colorado limited partnership) as of December 31, 1999 and 2000, and the related statements of operations, partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 2000. These financial statements are the responsibility of the General Partner's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. 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 Jones Programming Partners 1-A, Ltd. as of December 31, 1999 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States. ARTHUR ANDERSEN LLP Denver, Colorado, March 2, 2001. 9 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, ------------------------------------- 1999 2000 ------------ ------------ ASSETS CASH AND CASH EQUIVALENTS (Note 2) $ 86,626 $ 72,725 RECEIVABLES: International income receivable 156 - Domestic income receivable 3,472 - INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION, net of accumulated amortization of $8,887,206 and $8,887,206 as of December 31, 1999 and 2000, respectively (Notes 2 and 5) - - ------------ ------------ Total assets $ 90,254 $ 72,725 =========== =========== LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Accounts payable to affiliates $ 10,273 $ 1,973 Accrued liabilities 181,727 198,124 ----------- ----------- Total liabilities 192,000 200,097 ----------- ----------- PARTNERS' CAPITAL (DEFICIT) (Note 3): General partner - Contributed capital 1,000 1,000 Distributions (42,440) (42,440) Accumulated deficit (13,543) (13,799) ------------ ----------- Total general partner's deficit (54,983) (55,239) ----------- ----------- Limited partners - Contributed capital (12,743 units outstanding as of December 31, 1999 and 2000) 5,459,327 5,459,327 Distributions (4,201,502) (4,201,502) Accumulated deficit (1,304,588) (1,329,958) ------------ ----------- Total limited partners' deficit (46,763) (72,133) ------------ ------------ Total partners' deficit (101,746) (127,372) ------------ ------------ Total liabilities and partners' deficit $ 90,254 $ 72,725 =========== ===========
The accompanying notes are an integral part of these financial statements. 10 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, ----------------------------------- 1998 1999 2000 --------- --------- --------- REVENUES (Notes 2 and 5) $ 195,717 $ 9,077 $ 27,273 COSTS AND EXPENSES: Costs of filmed entertainment (Notes 2 and 5) 11,546 6,027 -- Distribution fees and expenses (Note 2) 196,695 119,104 15,463 Loss from write-down of film production cost (Notes 2 and 5) -- 58,946 -- Operating, general and administrative expenses (Note 4) 115,247 61,810 43,239 --------- --------- --------- Total costs and expenses 323,488 245,887 58,702 --------- --------- --------- OPERATING LOSS (127,771) (236,810) (31,429) --------- --------- --------- OTHER INCOME (EXPENSE): Interest income 9,535 3,337 5,803 Other income (expense), net 740 (3,646) -- --------- --------- --------- Total other income (expense), net 10,275 (309) 5,803 --------- --------- --------- NET LOSS $(117,496) $(237,119) $ (25,626) ========= ========= ========= ALLOCATION OF NET LOSS: General partner $ (1,175) $ (2,371) $ (256) ========= ========= ========= Limited partners $(116,321) $(234,748) $ (25,370) ========= ========= ========= NET LOSS PER LIMITED PARTNERSHIP UNIT $ (9.13) $ (18.42) $ (1.99) ========= ========= ========= WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 12,743 12,743 12,743 ========= ========= =========
The accompanying notes are an integral part of these financial statements. 11 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, -------------------------------------------------------- 1998 1999 2000 -------------- -------------- ------------- GENERAL PARTNER: Balance, beginning of year $ (49,828) $ (52,612) $ (54,983) Distributions (1,609) - - Net loss (1,175) (2,371) (256) ----------- ----------- ----------- Balance, end of year $ (52,612) $ (54,983) $ (55,239) =========== =========== =========== LIMITED PARTNERS: Balance, beginning of year $ 463,594 $ 187,985 $ (46,763) Distributions (159,288) - - Net loss (116,321) (234,748) (25,370) ----------- ----------- ----------- Balance, end of year $ 187,985 $ (46,763) $ (72,133) =========== =========== =========== TOTAL PARTNERS' CAPITAL (DEFICIT) $ 135,373 $ (101,746) $ (127,372) =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 12 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------- 1998 1999 2000 --------------- ------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (117,496) $ (237,119) $ (25,626) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Amortization of filmed entertainment costs 11,546 6,027 - Loss from write-down of film production cost - 58,946 - Decrease in international income receivable 97,253 25,119 156 Decrease (increase) in domestic income receivable (76,122) 77,650 3,472 Decrease in other assets - 3,275 - Net change in amounts due to/from affiliates 2,742 (772) (8,300) Increase in accrued liabilities 98,804 62,828 16,397 ---------- ------------ ----------- Net cash provided by (used in) operating activities 16,727 (4,046) (13,901) ---------- ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners (160,897) - - ---------- ------------ ----------- Net cash used in financing activities (160,897) - - ---------- ------------ ----------- DECREASE IN CASH AND CASH EQUIVALENTS (144,170) (4,046) (13,901) CASH AND CASH EQUIVALENTS, beginning of year 234,842 90,672 86,626 ---------- ------------ ----------- CASH AND CASH EQUIVALENTS, end of year $ 90,672 $ 86,626 $ 72,725 =========== =========== ===========
The accompanying notes are an integral part of these financial statements. 13 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (1) ORGANIZATION AND BUSINESS Organized in April 1989, Jones Programming Partners 1-A, Ltd. (the "Partnership") is a limited partnership formed pursuant to the laws of the State of Colorado to engage in the development, production, acquisition, licensing and distribution of original entertainment programming. Jones Entertainment Group, Ltd. is the "General Partner" of the Partnership. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CASH AND CASH EQUIVALENTS - The Partnership considers all highly-liquid investments with a maturity when purchased of three months or less to be cash equivalents. FILM REVENUE RECOGNITION - The Partnership recognizes revenue in accordance with the provisions of Statement of Financial Accounting Standards No. 139 ("SFAS No. 139") and AICPA Statement of Position No. 00-2 ("SOP 00-2"). Pursuant to SFAS No. 139 and SOP 00-2, revenues from domestic and international licensing agreements for programming are recognized when such amounts are known and the film is available for exhibition or telecast, and when certain other criteria set forth in SFAS No. 139 and SOP 00-2 are met. Advances received for licensing or other purposes prior to exhibition or telecast are deferred and recognized as revenue when the above conditions are met. The adoption of SFAS No. 139 and SOP 00-2 in 2000 did not materially effect the manner in which the Partnership recognizes revenue. INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION - Investment in and advances for film production consists of advances to production entities for story rights, production, and film completion costs, and is stated at the lower of cost or estimated net realizable value. In addition, film production and overhead fees payable to the General Partner have been capitalized and included as investment in film production. Film production costs are amortized based upon the individual-film-forecast method. Estimated losses, if any, will be provided for in full when determined by the General Partner (see Note 5.) DISTRIBUTION COSTS - Distribution fees and expenses incurred in connection with domestic and international film distribution are recorded at the time that the related licensing fees are recognized as revenue by the Partnership. Similarly, the Partnership expenses film advertising costs related to distribution when the advertising takes place. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (3) PARTNERS' CAPITAL (DEFICIT) The capitalization of the Partnership is set forth in the accompanying Statements of Partners' Capital (Deficit). No limited partner is or will be obligated to make any additional contributions to the Partnership. The General Partner purchased its interest in the Partnership by contributing $1,000 to Partnership capital. Profits, losses and distributions of the Partnership are allocated 99 percent to the limited partners and 1 percent to the General Partner until the limited partners have received distributions equal to 100 percent of their capital contributions plus an annual return thereon of 12 percent, cumulative and non-compounded. Thereafter, profits/losses and distributions will generally be allocated 80 percent to the limited partners and 20 percent to the General Partner. Interest income earned prior to the start of the Partnership's first production was allocated 100 percent to the limited partners. It is probable that the 14 distributions of the proceeds from the sales of the Partnership's programming, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. (4) TRANSACTIONS WITH AFFILIATES The General Partner is entitled to reimbursement from the Partnership for its direct and indirect expenses allocable to the operations of the Partnership, which shall include, but not be limited to, rent, supplies, telephone, travel, legal expenses, accounting expenses, preparation and distribution of reports to investors and salaries of any full or part-time employees. Because the indirect expenses incurred by the General Partner on behalf of the Partnership are immaterial, the General Partner generally does not charge indirect expenses to the Partnership. The General Partner charged $15,442, $10,856, and $9,680 to the Partnership for direct expenses for the years ended December 31, 1998, 1999, and 2000, respectively. (5) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION "THE LITTLE KIDNAPPERS" In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which included a production and overhead fee of $300,000 paid to the General Partner. From inception to December 31, 2000, the Partnership has recognized approximately $3,003,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. In March 1999, the Partnership fully amortized its net investment in this film. "THE STORY LADY" In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBCP") for the production of a full-length made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to December 31, 2000, the Partnership has recognized approximately $2,299,000 of revenue from this film. In December 1999, the Partnership wrote off the outstanding receivable of $26,129. This write off is reflected in operating, general and administrative expenses in the accompanying statement of operations. In December 1995, the Partnership fully amortized its net investment in this film. The Partnership has an agreement with NBCP to distribute "The Story Lady" in foreign markets. Under this agreement, the Partnership paid $1,000,000 for all the distribution rights to "The Story Lady" except for NBC network exhibition and certain other rights. The Partnership licensed back the foreign rights to NBCP for an eight year term (which expired at the end of 1999 and has been extended on a month to month basis) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television, and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each receives its original investment plus interest (the "unrecouped amount"). The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $200,000. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. As of December 31, 2000, NBCP reported that it had not recouped approximately $469,000 of its original investment, plus interest. Through December 31, 2000, the Partnership had received approximately 15 $190,000 from distributors, which was not applied to NBCP's unrecouped amount. As of December 31, 2000, the Partnership had reported this amount as an accrued liability. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make such payments, nor is it likely that the Partnership could borrow the necessary funds. "CURACAO" In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length, made-for-television film entitled "Curacao." The total production cost of the film was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime pre-sale and supervising production of this picture. From inception to December 31, 2000, the Partnership has recognized approximately $4,062,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000 which was used to finance the film's production. During the fourth quarter 1999, the General Partner reassessed the anticipated gross revenue remaining from the distribution of "Curacao" based on revised estimated television sales projections and actual results of the film's distribution in comparison to the film's prior projections. A determination was made by the General Partner that the Partnership's net investment in "Curacao" exceeded the film's estimated net realizable value as of December 31, 1999, resulting in a write down of $58,946. These revenue projections were estimated by the General Partner based on the film's prior distribution history, the remaining international and domestic territories available to the film for future television distribution and the General Partner's previous distribution experience with other films. In December 1999, after consideration of amortization and write-downs, the Partnership fully amortized its net investment in this film. (6) INCOME TAXES Income tax provision (benefit) resulting from the Partnership's operations are not reflected in the accompanying financial statements as such amounts accrue directly to the partners. The Federal and state income tax returns of the Partnership are prepared and filed by the General Partner. The Partnership's tax returns, the qualification of the Partnership as a limited partnership for tax purposes, and the amount of distributable Partnership income or loss are subject to examination by Federal and state taxing authorities. If such examinations result in changes with respect to the Partnership's tax status or to the Partnership's recorded income or loss, the tax liability of the general and limited partners would be adjusted accordingly. The Partnership's only significant book-tax differences between the financial reporting and tax bases of the Partnership's assets and liabilities are associated with: 1) the difference between the amount of film production cost amortization and loss from write-down of film production cost recognized under generally accepted accounting principles and the amount of expense allowed for tax purposes; and 2) the allowance for doubtful accounts which is not yet deductible for tax purposes. Film production cost recognized under accounting principles generally accepted in the United States exceeded (was less than) the amount of expense recognized for tax purposes by approximately $91,300, ($472,400) and $0 for the years ended December 31, 1998, 1999 and 2000, respectively. 16 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 The Partnership itself has no officers or directors. Certain information concerning directors and executive officers of the General Partner of the Registrant is set forth below. Each of the directors serves until the next annual meeting of the shareholders of the General Partner and until their successors shall be elected and qualified.
NAME AGE POSITIONS WITH THE GENERAL PARTNER Glenn R. Jones 71 Chairman of the Board, Chief Executive Officer and President Timothy J. Burke 50 Vice President and Director
Mr. Glenn R. Jones has served as Chairman of the Board of Directors and Chief Executive Officer of the General Partner since its inception and he has served as President of the General Partner since April 1994. Mr. Jones is also the Chairman of the Board of Directors and Chief Executive Officer of the General Partner's principal shareholder, Jones 21st Century, Inc., a subsidiary of Jones International, Ltd. He is also an officer and director of a number of subsidiaries for Jones Media Networks, Ltd. (formerly known as Jones International Networks, Ltd.). For more than five years, until April 1999, Mr. Jones was Chairman of the Board of Directors and Chief Executive Officer of Jones Intercable, Inc., a multiple system cable television operator. In addition, Mr. Jones is a member of the Board and Education Council of the National Alliance of Business. In 1994, Mr. Jones was inducted into Broadcasting and Cable's Hall of Fame. Mr. Jones received a B.S. in Economics from Allegheny College and a J.D. from the University of Colorado School of Law. Mr. Timothy J. Burke is Vice President and Director of the General Partner. Mr. Burke is a Group Vice President of Jones International, Ltd. and an officer and/or director of many other Jones International, Ltd. affiliated companies. He has over 24 years of financial experience, and has been employed with Jones for 18 years. Prior to the Jones companies, Mr. Burke was a Tax Manager with Arthur Andersen & Co. He received a B.A. in Accounting and a J.D from the University of Iowa. ITEM 11. EXECUTIVE COMPENSATION The Partnership has no employees; however, various personnel are required to operate its business. Such personnel are employed by the General Partner or an affiliate of the General Partner and, pursuant to the terms of the Partnership's limited partnership agreement, the cost of such employment can be charged by the General Partner to the Partnership as a reimbursement item. SEE ITEM 13. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of February 28, 2001, no person or entity owns more than 5 percent of the limited partnership interests in the Partnership, except for Herbert Borbe. Mr. Borbe owns 800 of the 12,743 partnership interests outstanding as of December 31, 2000. Mr. Borbe's address is 1709 134th Avenue S.E., Unit 21, Bellview, Washington 98005. Mr. Borbe is not a director, officer or employee of the General Partner or any of its affiliates. 17 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The General Partner and its affiliates engage in certain transactions with the Partnership as contemplated by the limited partnership agreement of the Partnership. The General Partner believes that the terms of such transactions are generally as favorable as could be obtained by the Partnership from unaffiliated parties. This determination has been made by the General Partner in good faith, but none of the terms were or will be negotiated at arm's-length and there can be no assurance that the terms of such transactions have been or will be as favorable as those that could have been obtained by the Partnership from unaffiliated parties. 18 PART IV. ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT: -------------------------------------------------------- 1. Financial statements 2. The following exhibits are filed herewith: 4.1 Limited Partnership Agreement. (1) (1) Incorporated by reference from the Partnership's Annual Report on Form 10-K for year ended December 31, 1989. (b) REPORTS ON FORM 8-K: ------------------- None. 19 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. JONES PROGRAMMING PARTNERS 1-A, LTD., a Colorado limited partnership By Jones Entertainment Group, Ltd., its General Partner By: /s/ GLENN R. JONES ---------------------------------- Glenn R. Jones Chairman of the Board, Chief Executive Officer Dated: March 21, 2001 and President Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. By: /s/ GLENN R. JONES ---------------------------------- Glenn R. Jones Chairman of the Board, Chief Executive Officer and President Dated: March 21, 2001 (Principal Executive Officer) By: /s/ TIMOTHY J. BURKE ---------------------------------- Dated: March 21, 2001 Timothy J. Burke 20 FORM 10-K/A NO. 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number: 0-19075 ------- JONES PROGRAMMINNG PARTNERS 1-A, LTD. ------------------------------------------------------ (Exact name of registrant as specified in its charter) COLORADO 84-1088820 --------- ---------- (State of Organization) (IRS Employer Identification No.) 9697 E. MINERAL AVENUE, ENGLEWOOD, COLORADO 80112 (303) 792-3111 - -------------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no. including area code) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None ---------------------------------------------------------- SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Limited Partnership - ---------------------------------------------------------- Interests Indicate by check mark whether the registrant, (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- Aggregate market value of the voting stock held by non-affiliates of the registrant: N/A Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section229.405) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X --- PART IV ITEM 14. EXHIBITS , FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K The following document is filed as part of this report: (3) Exhibits. 4.1 Limited Partnership Agreement and Amendment No. 1 to the Limited Partnership Agreement. (1) - ---------------- (1) Incorporated by reference from the Registrant's Revised Schedule 14A filed on August 24, 2001. SIGNATURES Pursuant to the requirements of the Securities Act of 1934, as amended, the Registrant has caused this Amendment No. 1 to its Annual Report on Form 10-K to be signed on its behalf by the undersigned hereunto duly authorized. JONES PROGRAMMING PARTNERS 1-A, LTD., a Colorado limited partnership By: Jones Entertainment Group, Ltd., its General Partner Dated: September 14, 2001 By: /s/ Timothy J. Burke ----------------------------------- Timothy J. Burke Vice President and Director FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number: 0-19075 JONES PROGRAMMING PARTNERS 1-A, LTD. (Exact name of registrant as specified in charter) COLORADO 84-1088820 -------- ---------- (State of organization) (I.R.S. Employer Identification No.) 9697 E. MINERAL AVENUE, ENGLEWOOD, COLORADO 80112 (303) 792-3111 - -------------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___ JONES PROGRAMMING PARTNERS 1-A, LTD. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Statements of Financial Position December 31, 2000 and March 31, 2001 3 Unaudited Statements of Operations Three Months Ended March 31, 2000 and 2001 4 Unaudited Statements of Cash Flows Three Months Ended March 31, 2000 and 2001 5 Notes to Unaudited Financial Statements March 31, 2001 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. OTHER INFORMATION 10
JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF FINANCIAL POSITION
December 31, March 31, 2000 2001 ------------- -------------- ASSETS CASH AND CASH EQUIVALENTS $ 72,725 $ 62,595 ACCOUNTS RECEIVABLE - 33,500 INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION, net of accumulated amortization of $8,887,206 as of December 31, 2000 and March 31, 2001, respectively - - ------------- -------------- Total assets $ 72,725 $ 96,095 ============= ============== LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Accounts payable to affiliates $ 1,973 $ 31,902 Accrued liabilities 198,124 175,559 ------------- -------------- Total liabilities 200,097 207,461 ------------- -------------- PARTNERS' DEFICIT: General partner - Contributed capital 1,000 1,000 Distributions (42,440) (42,440) Accumulated deficit (13,799) (13,639) ------------- -------------- Total general partner's deficit (55,239) (55,079) ------------- -------------- Limited partners - Contributed capital, net of offering costs (12,743 units outstanding as of December 31, 2000 and March 31, 2001) 5,459,327 5,459,327 Distributions (4,201,502) (4,201,502) Accumulated deficit (1,329,958) (1,314,112) ------------- -------------- Total limited partners' deficit (72,133) (56,287) ------------- -------------- Total partners' deficit (127,372) (111,366) ------------- -------------- Total liabilities and partners' deficit $ 72,725 $ 96,095 ============= ==============
The accompanying notes are an integral part of these financial statements. -3- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, ----------------------------------- 2000 2001 ------------- ------------- REVENUES $ - $ 34,695 COSTS AND EXPENSES: Distribution fees and expenses - 8,079 Operating, general and administrative expenses 13,907 11,284 ------------- ------------- Total costs and expenses 13,907 19,363 ------------- ------------- OPERATING INCOME (LOSS) (13,907) 15,332 ------------- ------------- INTEREST INCOME 1,143 674 ------------- ------------- NET INCOME (LOSS) $ (12,764) $ 16,006 ============= ============= ALLOCATION OF NET INCOME (LOSS): General Partner $ (128) $ 160 ============= ============= Limited Partners $ (12,636) $ 15,846 ============= ============= NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ (.99) $ 1.24 ============= ============= WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 12,743 12,743 ============= =============
The accompanying notes are an integral part of these financial statements. -4- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, -------------------------------- 2000 2001 -------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (12,764) $ 16,006 Adjustments to reconcile net loss to net cash provided by (used in) operating activities Net change in assets and liabilities: Decrease (increase) in foreign income receivable 156 (33,500) Decrease in domestic income receivable 3,472 - Net change in amounts due to affiliates 32,335 29,929 Decrease in accrued liabilities (4,006) (22,565) -------------- ------------ Net cash provided by (used in) operating activities 19,193 (10,130) -------------- ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 19,193 (10,130) CASH AND CASH EQUIVALENTS, beginning of period 86,626 72,725 -------------- ------------ CASH AND CASH EQUIVALENTS, end of period $ 105,819 $ 62,595 ============== ============
The accompanying notes are an integral part of these financial statements. -5- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION This Form 10-Q is being filed in conformity with the SEC requirements for unaudited financial statements and does not contain all of the necessary footnote disclosures required for a fair presentation of the Statements of Financial Position and Statements of Operations and Cash Flows in conformity with accounting principles generally accepted in the United States. However, in the opinion of management, this data includes all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Jones Programming Partners 1-A, Ltd. (the "Partnership") as of December 31, 2000 and March 31, 2001 and its results of operations and its cash flows for the three month periods ended March 31, 2000 and 2001. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. (2) TRANSACTIONS WITH AFFILIATED ENTITIES Jones Entertainment Group, Ltd. ("General Partner") is entitled to reimbursement from the Partnership for its direct and indirect expenses allocable to the operations of the Partnership, which shall include, but not be limited to, rent, supplies, telephone, travel, legal expenses, accounting expenses, preparation and distribution of reports to investors and salaries of any full or part-time employees. Because the indirect expenses incurred by the General Partner on behalf of the Partnership are immaterial, the General Partner generally does not charge indirect expenses to the Partnership. The General Partner charged direct expenses of $4,681 and $5,847, to the Partnership for the three-month periods ended March 31, 2000 and 2001, respectively. (3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION "THE LITTLE KIDNAPPERS" In January 1990, the General Partner, on behalf of the Partnership, entered into an agreement with Jones Maple Leaf Productions to produce a full-length feature film for television entitled "The Little Kidnappers." The total film cost was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which includes a production and overhead fee of $300,000 paid to the General Partner. From inception to March 31, 2001, the Partnership has recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. In March 1999, the Partnership fully amortized its net investment in this film. "THE STORY LADY" In April 1991, the General Partner, on behalf of the Partnership, entered into an agreement with NBC Productions, Inc. ("NBCP") for the production of a full-length made-for-television film entitled "The Story Lady." The total cost of the film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to March 31, 2001, the Partnership has recognized approximately $2,299,000 of revenue from this film. In December 1995, the Partnership fully amortized its net investment in this film. The Partnership has an agreement with NBCP to distribute "The Story Lady" in foreign markets. The Partnership licensed back the foreign rights to NBCP for an eight year term (which expired at the end of 1999 and has been extended on a month to month basis) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television, and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each receives its original investment plus interest (the "unrecouped amount"). The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $200,000. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. -6- As of March 31, 2001, NBCP reported that it had not recouped approximately $170,000 of its original investment in this film and approximately $283,000 in interest thereon. Interest will continue to accrue on this unrecouped balance. Through March 31, 2001, the Partnership had received approximately $174,000 from distributors, which was not applied to NBCP's unrecouped amount. As of March 31, 2001, the Partnership had reported this amount as an accrued liability. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make any such payments to NBCP, nor is it likely that the Partnership could borrow the necessary funds. "CURACAO" In October 1992, the General Partner, on behalf of the Partnership, entered into an agreement with Showtime Networks, Inc. ("Showtime") for the production of a full-length, made-for-television film entitled "Curacao." The total production cost of the film incurred by the Partnership was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime pre-sale and supervising production of this picture. From inception to March 31, 2001, the Partnership has recognized approximately $4,064,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000, which was used to finance the film's production. In December 1999, after consideration of approximately $3,450,000 in amortization and approximately $960,000 in write-downs, the Partnership fully amortized its net investment in this film. -7- JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Partnership's principal sources of liquidity are cash on hand and amounts received from the domestic and international distribution of the Partnership's programming. As of March 31, 2001, the Partnership had approximately $63,000 in cash. Cash used in operations for the three months ended March 31, 2001 was approximately $10,000. The Partnership will not invest in any additional programming projects, but instead will focus on the distribution and/or sale of its three existing films. The Partnership will retain a certain level of working capital, including any necessary reserves, to fund its operating activities. It is anticipated that future distributions, if any, will only be made from proceeds received from the sale of the Partnership's assets. There is no assurance regarding the timing or amount of any future distributions. The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's interests in its programming. The General Partner has no obligation to purchase any assets of the Partnership, nor is it anticipated that the General Partner will purchase any of such assets. The General Partner cannot predict when or at what price the Partnership's interests in its programming ultimately will be sold, but has initiated sales efforts. The films may be sold as a group or on an individual basis, in the judgement of the General Partner. The films could also be packaged with the films of an affiliated public limited partnership. Any direct costs incurred by the General Partner on behalf of the Partnership in soliciting and arranging for the sale, or sales, of the Partnership's programming projects will be charged to the Partnership. The Partnership does not have the funds necessary to pay NBCP its claimed fees and unrecouped cost and interest involved with "The Story Lady" and even if the Partnership is successful in finding a buyer or buyers for some or all of its programming, the proceeds may not be sufficient to allow for any distributions to the Partners. It is probable that the distributions of the proceeds from the sales of the Partnership's programming projects, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. The Partnership has retained the services of a broker to assist in the sale of the Partnership's films. Pursuant to the services agreement, the broker will receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The General Partner believes that the Partnership has, and will continue to have, sufficient liquidity to fund its ongoing operations and to meet its obligations so long as quarterly distributions are suspended and provided the Partnership is able to reach a satisfactory resolution with respect to the claims made by NBCP. However, there can be no assurance that such a resolution can be achieved. The General Partner does not anticipate cash flow from the films to increase significantly in the future. The lack of significant cash flow presently being generated by the Partnership's films may negatively effect the ultimate sales price of the films. RESULTS OF OPERATIONS Revenues of the Partnership increased $34,695, from $0 to $34,695 for the three months ended March 31, 2000 and 2001, respectively. This increase in revenue was the result of royalties received from "Curacao" and distribution revenue recognized for "The Little Kidnappers". Distribution fees and expenses increased $8,079, from $0 to $8,079 for the three months ended March 31, 2000 and 2001, respectively. This increase was primarily the result of an $8,000 payment made to an unaffiliated company to perform technical work on "The Little Kidnappers", potentially allowing for the film to be redistributed in parts of Europe. Distribution fees and expenses typically relate to the compensation due and costs incurred in connection with selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. -8- Operating, general and administrative expenses decreased $2,623, from $13,907 to $11,284 for the three months ended March 31, 2000 and 2001, respectively. This decrease was primarily due to a decrease in legal and accounting expenses during the three months ended March 31, 2001 compared to the same period in 2000. Interest income decreased $469, from $1,143 to $674 for the three months ended March 31, 2000 and 2001, respectively. This decrease in interest income was primarily the result of lower average levels of invested cash balances and lower interest rates during the first three months of 2001 compared to the same period in 2000. Limited Partners' net income (loss) per partnership unit changed $2.23, from $(.99) to $1.24 for the three months ended March 31, 2000 and 2001, respectively. This change was due to the result of the operations as discussed above. -9- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. a) Exhibits None b) Reports on Form 8-K None -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JONES PROGRAMMING PARTNERS 1-A, LTD. BY: JONES ENTERTAINMENT GROUP, LTD. General Partner By: /s/ Timothy J. Burke -------------------------------------- Timothy J. Burke Vice President Dated: May 10, 2001 -11- FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to ________________ Commission File Number: 0-19075 JONES PROGRAMMING PARTNERS 1-A, LTD. (Exact name of registrant as specified in charter) Colorado 84-1088820 -------- ---------- (State of organization) (I.R.S. Employer Identification No.) 9697 E. Mineral Avenue, Englewood, Colorado 80112 (303) 792-3111 - -------------------------------------------------- -------------- (Address of principal executive office and Zip Code) (Registrant's telephone no, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interest Indicate by check mark whether the registrant (l) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of l934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / JONES PROGRAMMING PARTNERS 1-A, LTD. INDEX
Page Number ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Statements of Financial Position December 31, 2000 and June 30, 2001 3 Unaudited Statements of Operations Three and Six Months Ended June 30, 2000 and 2001 4 Unaudited Statements of Cash Flows Six Months Ended June 30, 2000 and 2001 5 Notes to Unaudited Financial Statements June 30, 2001 6-7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8-9 PART II. OTHER INFORMATION 10
JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF FINANCIAL POSITION
December 31, June 30, 2000 2001 ----------- ----------- ASSETS CASH AND CASH EQUIVALENTS $ 72,725 $ 63,585 ACCOUNTS RECEIVABLE -- 33,500 INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION, net of accumulated amortization of $8,887,206 and $8,887,206 as of December 31, 2000 and June 30, 2001, respectively (Note 3) -- -- ----------- ----------- Total assets $ 72,725 $ 97,085 =========== =========== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) LIABILITIES: Accounts payable to affiliates $ 1,973 $ 45,191 Accrued liabilities 198,124 177,184 ----------- ----------- Total liabilities 200,097 222,375 ----------- ----------- PARTNERS' CAPITAL (DEFICIT): General partner - Contributed capital 1,000 1,000 Distributions (42,440) (42,440) Accumulated deficit (13,799) (13,778) ----------- ----------- Total general partner's deficit (55,239) (55,218) ----------- ----------- Limited partners - Contributed capital, net of offering costs (12,743 units outstanding as of December 31, 2000 and June 30, 2001) 5,459,327 5,459,327 Distributions (4,201,502) (4,201,502) Accumulated deficit (1,329,958) (1,327,897) ----------- ----------- Total limited partners' deficit (72,133) (70,072) ----------- ----------- Total partners' deficit (127,372) (125,290) ----------- ----------- Total liabilities and partners' deficit $ 72,725 $ 97,085 =========== ===========
The accompanying notes are an integral part of these unaudited financial statements. 3 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITIED STATEMENTS OF OPERATIONS
For the Three Months For the Six Months Ended June 30, Ended June 30, ------------------------- -------------------------- 2000 2001 2000 2001 -------- -------- -------- -------- REVENUES $ 26,804 $ 54 $ 26,804 $ 34,749 COSTS AND EXPENSES: Distribution fees and expenses 41 -- 41 8,079 Operating, general and administrative expenses 14,660 14,914 28,567 26,198 -------- -------- -------- -------- Total costs and expenses 14,701 14,914 28,608 34,277 -------- -------- -------- -------- OPERATING INCOME (LOSS) 12,103 (14,860) (1,804) 472 -------- -------- -------- -------- INTEREST INCOME 1,456 936 2,599 1,610 NET INCOME (LOSS) $ 13,559 $(13,924) $ 795 $ 2,082 ======== ======== ======== ======== ALLOCATION OF NET INCOME (LOSS): General partner $ 136 $ (139) $ 8 $ 21 ======== ======== ======== ======== Limited partners $ 13,423 $(13,785) $ 787 $ 2,061 ======== ======== ======== ======== NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT $ 1.05 $ (1.08) $ .06 $ .16 ======== ======== ======== ======== WEIGHTED AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 12,743 12,743 12,743 12,743 ======== ======== ======== ========
The accompanying notes are an integral part of these unaudited financial statements. 4 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) UNAUDITED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, ---------------------------- 2000 2001 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 795 $ 2,082 Adjustments to reconcile net income to net cash provided by (used in) operating activities Net change in assets and liabilities: Decrease (increase) in accounts receivable 3,628 (33,500) Decrease in accrued liabilities (3,856) (20,940) Increase in accounts payable to affiliates 46,889 43,218 --------- --------- Net cash provided by (used in) operating activities 47,456 (9,140) --------- --------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 47,456 (9,140) CASH AND CASH EQUIVALENTS, beginning of period 86,626 72,725 --------- --------- CASH AND CASH EQUIVALENTS, end of period $ 134,082 $ 63,585 ========= =========
The accompanying notes are an integral part of these unaudited financial statements. 5 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) NOTES TO UNAUDITED FINANCIAL STATEMENTS (1) BASIS OF PRESENTATION This Form 10-Q is being filed in conformity with the SEC requirements for unaudited financial statements and does not contain all of the necessary footnote disclosures required for a fair presentation of the Statements of Financial Position and Statements of Operations and Cash Flows in conformity with accounting principles generally accepted in the United States. However, in the opinion of management, this data includes all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of Jones Programming Partners 1-A, Ltd. (the "Partnership") as of December 31, 2000 and June 30, 2001, its results of operations for the three and six month periods ended June 30, 2000 and 2001, and its cash flows for the six month periods ended June 30, 2000 and 2001. Results of operations for these periods are not necessarily indicative of results to be expected for the full year. (2) TRANSACTIONS WITH AFFILIATED ENTITIES Jones Entertainment Group, Ltd. (the "General Partner") is entitled to reimbursement from the Partnership for its direct and indirect expenses allocable to the operations of the Partnership, which shall include, but not be limited to, rent, supplies, telephone, travel, legal expenses, accounting expenses, preparation and distribution of reports to investors and salaries of any full or part-time employees. Because the indirect expenses incurred by the General Partner on behalf of the Partnership are immaterial, the General Partner generally does not charge indirect expenses to the Partnership. The General Partner charged direct expenses of $1,676 and $4,705, to the Partnership for the three month periods ended June 30, 2000 and 2001, respectively. For the six month periods ended June 30, 2000 and 2001, $6,357 and $10,552, respectively, were charged to the Partnership for direct expenses. (3) INVESTMENT IN AND ADVANCES FOR FILM PRODUCTION "THE LITTLE KIDNAPPERS" The total cost of this film was approximately $3,200,000. Of this amount, the Partnership invested approximately $2,794,000, which includes a production and overhead fee of $300,000 paid to the General Partner. From inception to June 30, 2001, the Partnership has recognized approximately $3,036,000 of revenue from this film, which includes the initial license fees of approximately $1,365,000 from The Disney Channel and the Canadian Broadcasting Corporation, which were used to finance the film's production. In March 1999, the Partnership fully amortized its net investment in this film. In March 2001, EuroArts Medien AG extended its license for certain foreign television rights to this film for $33,500. The Partnership expects to collect the $33,500 receivable in the second half of 2001. "THE STORY LADY" The total cost of this film was approximately $4,300,000. Of this amount, the Partnership invested approximately $1,183,000 in return for worldwide distribution rights to this film, excluding United States and Canadian broadcast television rights. Included in the total amount invested is a production and overhead fee of $120,000 paid to the General Partner. From inception to June 30, 2001, the Partnership has recognized approximately $2,299,000 of revenue from this film. In December 1995, the Partnership fully amortized its net investment in this film. The Partnership licensed back the foreign rights to NBC Productions, Inc. ("NBCP") for an eight year term (which expired at the end of 1999 and was extended until July 12, 2001, when it was terminated) and the Partnership retained domestic distribution rights, principally home video, non-network free television, pay television and non-theatrical. The Partnership and NBCP revenues are pooled and are to be paid to the parties until each recoups its original investment plus interest. The Partnership is fully recouped. In September 1999, NBCP first claimed that it had mistakenly not taken the full amount of its distribution fees, and was entitled to an additional amount of approximately $192,500. The Partnership does not believe that NBCP is entitled to the distribution fees that it claims. 6 NBCP also has reported that it has not recouped approximately $170,000 of its original investment in this film and approximately $283,000 of interest thereon. Interest will continue to accrue on this unrecouped balance. Through June 30, 2001, the Partnership had received approximately $175,000 from distributors which has not been applied to NBCP's unrecouped amount. As of June 30, 2001, the Partnership has reported this amount as an accrued liability, but believes there is a basis to deny some or all of such liability. Litigation could result because of the dispute with NBCP. Such litigation would be costly and time consuming. There is no assurance regarding the favorable resolution of this matter. The Partnership does not have the funds to make any such payments to NBCP, nor is it likely that the Partnership could borrow the necessary funds. "CURACAO" The total production cost of this film was approximately $4,410,000. In addition to the costs of production, the Partnership paid the General Partner $500,000 as a production and overhead fee for services rendered in connection with arranging the Showtime pre-sale and supervising production of this picture. From inception to June 30, 2001, the Partnership has recognized approximately $4,064,000 of revenue from this film, which includes the initial license fee and home video advance from Showtime of $2,650,000, which was used to finance the film's production. In December 1999, after consideration of approximately $3,450,000 in amortization and approximately $960,000 in write-downs, the Partnership fully amortized its net investment in this film. 7 JONES PROGRAMMING PARTNERS 1-A, LTD. (A LIMITED PARTNERSHIP) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL CONDITION LIQUIDITY AND CAPITAL RESOURCES The Partnership's principal sources of liquidity are cash on hand and amounts received from the domestic and international distribution of the Partnership's programming. As of June 30, 2001, the Partnership had approximately $64,000 in cash. Cash used in operations for the six months ended June 30, 2001 was approximately $9,000. As of June 30, 2001, accounts payable to affiliates totaled approximately $45,000. The Partnership made a $30,000 payment towards this accounts payable liability in July 2001. The Partnership will not invest in any additional programming projects, but instead will focus on the distribution and/or sale of its three films. The Partnership will retain a certain level of working capital, including any necessary reserves, to fund its operating activities. It is anticipated that future distributions, if any, will only be made from proceeds received from the sale of the Partnership's assets. There is no assurance regarding the timing or amount of future distributions, if any. The General Partner, on behalf of the Partnership, is pursuing the sale of the Partnership's assets. This activity is the principal focus of the Partnership. The General Partner will not purchase any of such assets. The General Partner cannot predict when or at what price the Partnership's interests in its programming ultimately will be sold, but has initiated sales efforts. The sale of the Partnership's assets will be subject to a vote of the limited partners. The films may be sold as a group or on an individual basis, in the judgement of the General Partner. The films could also be packaged with the films of an affiliated public limited partnership. Any direct costs incurred by the General Partner on behalf of the Partnership in soliciting and arranging for the sale, or sales, of the Partnership's assets will be charged to the Partnership. The Partnership does not have the funds necessary to pay NBCP its claimed fees and unrecouped cost and interest involved with "The Story Lady", and even if the Partnership is successful in finding a buyer or buyers for some or all of its programming, the proceeds may not be sufficient to allow for any distributions to the Partners. It is probable that the distributions of the proceeds from the sales of the Partnership's assets, if any, together with all prior distributions paid to the limited partners, will return to the limited partners less than 75% of their initial capital contributions to the Partnership. The Partnership has retained the services of a broker to assist in the sale of the Partnership's films. The broker was paid $5,500 for film evaluation services. Pursuant to the services agreement, the broker will also receive a 10% commission for arranging the sale, or sales, of the Partnership's films. The General Partner believes that the Partnership has sufficient liquidity to fund its operations and to meet its obligations through the remainder of the year, so long as distributions are suspended and provided the Partnership is able to reach a satisfactory resolution with respect to the claims made by NBCP. However, there can be no assurance that such a resolution can be achieved. The General Partner does not anticipate cash flow from the films to increase significantly in the future. The lack of significant cash flow presently being generated by the Partnership's films may negatively affect the ultimate sales price of the films. RESULTS OF OPERATIONS Revenues of the Partnership decreased $26,750, from $26,804 to $54 for the three months ended June 30, 2000 and 2001, respectively. This decrease was primarily due to a significant decrease in distribution revenue and royalties received for "Curacao" during the three months ended June 30, 2001 compared to the same period in 2000. Revenues of the Partnership increased $7,945, from $26,804 to $34,749 for the six months ended June 30, 2000 and 2001, respectively. This increase was primarily the result of an increase in international distribution revenue recognized for "The Little Kidnappers", partially offset by the decrease in "Curacao" revenue described above. Distribution fees and expenses decreased $41, from $41 to $0 for the three months ended June 30, 2000 and 2001, respectively. This decrease resulted from the payment of royalties in 2000 of $41 to artisan guilds for "The Little Kidnappers". Distribution fees and expenses increased $8,038, from $41 to $8,079 for the six months ended June 30, 2000 8 and 2001, respectively. This increase was primarily the result of an $8,000 payment made to an unaffiliated company to perform technical work on "The Little Kidnappers", allowing for the film to be redistributed in parts of Europe. Distribution fees and expenses typically relate to the compensation due and costs incurred in connection with selling the Partnership's programming in the domestic and international markets. The timing and amount of distribution fees and expenses vary depending upon the individual market in which programming is distributed. Operating, general and administrative expenses increased $254, from $14,660 to $14,914 for the three months ended June 30, 2000 and 2001, respectively. This increase was primarily due to an increase in tax preparation expenses along with an increase in accounting and professional service expenses related to the potential sale or sales of the Partnership's assets, offset by a decrease in legal expenses. Operating, general and administrative expenses decreased $2,369, from $28,567 to $26,198 for the six months ended June 30, 2000 and 2001, respectively. This decrease was primarily the result of a decrease in legal and accounting expenses partially offset by an increase in professional service expenses related to the potential sale of the Partnership's assets. Interest income decreased $520, from $1,456 to $936 for the three months ended June 30, 2000 and 2001, respectively. Interest income decreased $989, from $2,599 to $1,610 for the six months ended June 30, 2000 and 2001, respectively. The decrease in interest income was primarily the result of lower average levels of invested cash during the three and six month periods ended June 30, 2001 as compared to the same periods in 2000. Limited Partners' net income (loss) per partnership unit changed $(2.13), from $1.05 to $(1.08) for the three months ended June 30, 2000 and 2001, respectively. Limited Partners' net income per partnership unit increased $.10, from $.06 to $.16 for the six months ended June 30, 2000 and 2001, respectively. These changes were due to the results of operations as discussed above. 9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. a) Exhibits None b) Reports on Form 8-K None 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JONES PROGRAMMING PARTNERS 1-A, LTD. BY: JONES ENTERTAINMENT GROUP, LTD. General Partner By: /s/ Timothy J. Burke -------------------------------- Timothy J. Burke Vice President Dated: August 6, 2001 11 -----END PRIVACY-ENHANCED MESSAGE-----