MILLS MUSIC TRUST The Copyright Catalogue
The Catalogue is estimated to be composed of over 12,000 music titles, of which
approximately 1,430 produced royalty income in recent years. Based on the
Listing, the Trust derives its receipts principally from copyrights established
in or prior to 1960 in
A number of factors create uncertainties with respect to the Catalogue's ability to continue to generate royalty income on a continuing, long-term basis for the Trust. These factors include: (i) the effect that foreign and domestic copyright laws and any changes thereto have or will have on renewal rights (e.g., vesting of renewal term rights), (ii) the length of the term of copyright protection under foreign and domestic copyright laws, (iii) reversionary rights that may affect whether EMI is able to retain its rights to the Copyrighted Songs during certain renewal terms (e.g., statutory termination of transfers or "copyright recapture") and (iv) ongoing disputes regarding the payment and calculation of the Contingent Portion.
The Trust does not own the Catalogue or any copyrights or other intellectual property rights and is not responsible for collecting royalties in connection with the Catalogue. As the current owner and administrator of the Catalogue, EMI is obligated under the Asset Purchase Agreement to use its best efforts to collect all royalties, domestic and foreign, in connection with the Catalogue and to remit a portion of its royalty income to the Trust in accordance with its Contingent Portion payment obligation.
The Trust's income is dependent, in part, on EMI's ability to maintain its rights in the Copyrighted Songs through copyright protection. Although Copyrighted Songs may continue to generate royalty revenue after their copyrights have expired, in general as the copyrights for the Copyrighted Songs expire, less royalty income will be generated, and the size of each payment of the Contingent Portion will be reduced accordingly.
Based on the Listing, most of the Top 50 Songs obtained copyright registration under theU.S. Copyright Act of 1909 (the " 1909 Act ") between 1918 and 1971. For copyrighted works subject to the 1909 Act, copyright law generally provides for a possible 95 years of copyright protection, subject to certain factors, including the initial registration date of each copyright and compliance with certain statutory provisions including notice and renewal. The Copyright expiration dates for the Top 50 Songs range between 2013 and 2066, as set forth in the Listing.
The Copyrighted Songs are subject to statutory rights of termination of transfers, which may impact whether EMI is able to retain its ownership of the Copyrighted Songs during their respective terms of copyright protection. For copyrights governed by the 1909 Act, this termination right vests at the end of two different renewal terms, which vary for each Copyrighted Song. As the owner of the Catalogue, EMI (and not the Trust) is responsible for administrating the Catalogue and seeking renewals of the Copyrighted Songs. The Asset Purchase Agreement provides that EMI is obligated to use its best efforts to secure renewals.
Contingent Portion Payments
Payments of the Contingent Portion to the Trust are ordinarily made on a quarterly basis, approximately two to three months after a quarter ends. The Trust distributes the amounts it receives in Contingent Portion payments to the Unit Holders after payment of, or withholdings in connection with, expenses and liabilities of the Trust.
The amount of each payment of the Contingent Portion is based on a formula
provided in the Asset Purchase Agreement. Prior to the first quarter of 2010,
the Contingent Portion was calculated as an amount ranging from 65% to 75% of
gross royalty income from the exploitation of the Catalogue for each quarterly
period, less royalty expenses. In addition, the Contingent Portion was
guaranteed to be at least a minimum of
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Beginning with the first quarter of 2010, the Asset Purchase Agreement provides
for certain changes with respect to the calculation of the Contingent Portion.
One such change is that the Minimum Payment Obligation is no longer in effect.
The Trust is also of the view that the Contingent Portion payable to the Trust
changed to a fixed 75% of gross royalty income from the exploitation of the
Catalogue for each quarterly period, less royalty related expenses (the "
New Calculation Method
"). However, EMI has disputed that the New Calculation Method is the correct
interpretation of the Asset Purchase Agreement. As a result of EMI not applying
the New Calculation Method, EMI's payments of the Contingent Portion have been
deficient, in the Trust's view, by the following amounts (the "
Underpayments
"):
Amount of
Quarterly Payment Period Deficiency
March 31, 2016 $ 79,889
September 30, 2016 37,529
March 31, 2017 85,359
September 30, 2017 41,557
March 31, 2018 98,901
September 30, 2018 75,712
March 31, 2019 71,489
June 30, 2019 41,786
September 30, 2019 68,571
December 31, 2019 42,572
March 31, 2020 40,025
June 30, 2020 15,557
September 30, 2020 40,085
March 31, 2021 42,742
June 30, 2021 43,148
September 30, 2021 38,846
December 31, 2021 38,112
Total $ 901,880 As of the date hereof, the Trust has not received the Underpayments, and EMI has expressly disagreed with the Trust. The Trust can offer no assurance that it will be able to recover any of the Underpayments or that it will resolve favorably the ongoing dispute relating to the New Calculation Method with respect to future payments of the Contingent Portion.
The Trust has engaged
Unit Holder Distributions and Trust Expenses
Recent Payments
During the year ended
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Recent Distributions
During the year ended
Cash and Administrative Expenses
As of
Inflation
The Trust does not believe that inflation has materially affected its activities.
Liquidity and Capital Resources
The Declaration of Trust provides for the distribution to the Unit Holders of
all funds the Trust receives after payment of, or withholdings in connection
with, expenses and liabilities of the Trust. See the table headed "Statements of
Cash Receipts and Disbursements" under Part II, Item 8, "Financial Statements
and Supplementary Data" for information regarding cash disbursements made to
Unit Holders for the years ended
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Trust's financial condition, changes in financial condition, revenues or expenses, results of operations or liquidity that is material to investors.
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