SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Exact name of registrant as specified in charter)
(Address of principal executive offices) (Zip code)
(Name and address of agent for service)
2017 Mandatory Exchangeable Trust
Annual Report
Financial Statements as of and for the year
ended December 31, 2019
Table of Contents
2017 Mandatory Exchangeable Trust
Allocation of Portfolio Assets
December 31, 2019
(Expressed as Percentages of Total Investments)
2017 Mandatory Exchangeable Trust
Schedule of Investments
December 31, 2019
Security Description | Maturity Date | Par Value | Amortized Cost | Fair Value | ||||||||||
Stripped United States Treasury Securities - 3.90%* | ||||||||||||||
Stripped United States Treasury Security | 2/15/2020 | 3,729,000 | 3,720,947 | 3,721,747 | ||||||||||
Stripped United States Treasury Security | 5/15/2020 | 3,729,000 | 3,704,342 | 3,706,305 | ||||||||||
Stripped United States Treasury Security | 8/15/2020 | 3,729,000 | 3,686,288 | 3,691,538 | ||||||||||
Stripped United States Treasury Security | 11/15/2020 | 3,729,000 | 3,667,455 | 3,675,474 | ||||||||||
Total Stripped United States Treasury Securities | 14,779,032 | 14,795,064 | ||||||||||||
Forward Agreements - 96.10%* | ||||||||||||||
2017 Mandatory Exchangeable Trust Forward Agreements^ | 239,912,754 | 364,883,308 | ||||||||||||
Total Forward Agreements | 239,912,754 | 364,883,308 | ||||||||||||
Total Investments - 100.00%* | $ | 254,691,786 | $ | 379,678,372 | ||||||||||
Other assets and liabilities, net | 2,988 | |||||||||||||
TOTAL NET ASSETS - 100.00%* | $ | 379,681,360 |
Footnotes
* | Percentages are stated as a percent of net assets. |
^ | Restricted from sale. |
The accompanying Notes to Financial Statements are an integral part of these statements.
2017 Mandatory Exchangeable Trust
Schedule of Investments, continued
December 31, 2019
The detail of outstanding Forward Agreements are as follows as of December 31, 2019
Description | Trust Shares Subject to Exchange | Fair Value | |||||||
Forward Purchase Agreements with similar terms (with below noted counterparties) which are linked to the fair value of the common stock of the New York Times Co. (NYT-Publishing Industry) in the 40 day observation period before the Settlement Date of December 1, 2020, subject to maximum and minimum exchange rates of 5.6338 and 4.6948 shares, respectively. All such agreements are non-income producing and involve the use of significant unobservable inputs in the determination of their fair value. | |||||||||
Inversora Carso, S.A de C.V. (cost $102,435,063)-Acquired 12/15/17 | 980,375 | $ | 155,793,487 | ||||||
Control Empresarial de Capitales, S.A. de C.V. (cost $19,722,194)-Acquired 12/15/17 | 271,687 | 29,995,485 | |||||||
Banco Inbursa, S.A. Institucion de Banca Multiple, Grupo Financiero Inbursa (cost $117,755,497)-Acquired 12/15/17 | 1,622,938 | 179,094,336 | |||||||
$ | 364,883,308 |
The accompanying Notes to Financial Statements are an integral part of these statements.
2017 Mandatory Exchangeable Trust
Statement of Assets and Liabilities
December 31, 2019
Assets: | ||||
Investments in stripped U.S. Treasury Securities, at fair value (cost $14,779,032) | $ | 14,795,064 | ||
Investment in Forward Agreements, at fair value (cost $239,912,754) | 364,883,308 | |||
Total investments | 379,678,372 | |||
Cash | 2,988 | |||
Total Assets | 379,681,360 | |||
Net Assets | $ | 379,681,360 | ||
Net Assets Consist of: | ||||
2017 Mandatory Exchangeable Trust Securities ("Trust Securities") No Par Value, 2,875,001 Trust Securities Issued and Outstanding | $ | 254,153,099 | ||
Total distributable earnings | 125,528,261 | |||
Net Assets | $ | 379,681,360 | ||
Net Asset Value per share | $ | 132.06 |
The accompanying Notes to Financial Statements are an integral part of these statements.
2017 Mandatory Exchangeable Trust
Statement of Operations
For the year ended December 31, 2019
Investment Income | ||||
Interest income | $ | 396,254 | ||
Total Investment Income | 396,254 | |||
Expenses | ||||
Professional fees | 109,994 | |||
Administration, custody and transfer agent fees | 137,983 | |||
Trustees' fees | 27,949 | |||
Total Expenses | 275,926 | |||
Expenses offset by Sellers | (275,926 | ) | ||
Net Expenses | — | |||
Net investment income | 396,254 | |||
Net change in unrealized appreciation on investments | 98,468,330 | |||
Net Increase in Net Assets Resulting from Operations | $ | 98,864,584 |
The accompanying Notes to Financial Statements are an integral part of these statements.
2017 Mandatory Exchangeable Trust
Statement of Changes in Net Assets
For the year ended December 31, 2019 | For the year ended December 31, 2018 | |||||||
Change in Net Assets Resulting from Operations: | ||||||||
Net investment income | $ | 396,254 | $ | 633,980 | ||||
Net change in unrealized appreciation (depreciation) on investments | 98,468,330 | 38,249,518 | ||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 98,864,584 | 38,883,498 | ||||||
Distributions Paid to Securities Holders: | ||||||||
Net Investment Income | (396,654 | ) | (125,707 | ) | ||||
Return of Capital to Securities Holders | (14,517,696 | ) | (14,208,468 | ) | ||||
Change in Net Assets from Distributions Paid to Securities Holders | (14,914,350 | ) | (14,334,175 | ) | ||||
Change in Net Assets Resulting from Capital Transactions: | ||||||||
Contribution by Sellers | — | 410,413 | ||||||
Net Increase in Net Assets Resulting from Capital Transactions | — | 410,413 | ||||||
Net Increase in Net Assets | 83,950,234 | 24,959,736 | ||||||
Net Assets, Beginning of Year | 295,731,126 | $ | 270,771,390 | |||||
Net Assets, End of Year | $ | 379,681,360 | $ | 295,731,126 |
The accompanying Notes to Financial Statements are an integral part of these statements.
2017 Mandatory Exchangeable Trust
Statement of Cash Flows
For the year ended December 31, 2019
Cash Flows from Operating Activities: | ||||
Net change in net assets resulting from operations | $ | 98,864,584 | ||
Adjustments to reconcile net change in net assets from operations to net cash provided by operating activities | ||||
Maturity of U.S. Treasury Securities | 14,916,000 | |||
Net change in unrealized appreciation on investments | (98,468,330 | ) | ||
Amortization | (396,254 | ) | ||
Net change in other assets | 100 | |||
Net Cash Provided by Operating Activities | 14,916,100 | |||
Cash Flows from Financing Activities: | ||||
Proceeds from the sale of Securities, net of selling commissions | $ | — | ||
Distributions to Securities holders | (14,914,350 | ) | ||
Net Cash Provided by Financing Activities | (14,914,350 | ) | ||
Net Increase in Cash | 1,750 | |||
Cash - Beginning of Year | 1,238 | |||
Cash - End of Year | $ | 2,988 |
The accompanying Notes to Financial Statements are an integral part of these statements.
2017 Mandatory Exchangeable Trust
For the year ended December 31, 2019 | For the year ended December 31, 2019 | For the period from December 15, 2017(1) through December 31, 2017 | ||||||||||
Per Share Operating Performance: | ||||||||||||
Beginning net asset value | $ | 102.86 | $ | 94.18 | $ | 100.00 | ||||||
Initial selling commissions | — | — | (1.75 | ) | ||||||||
Beginning net asset value, net of initial selling commission | 102.86 | 94.18 | 98.25 | |||||||||
Contribution by Sellers | 0.14 | (7) | ||||||||||
Income From Investment Operations: | ||||||||||||
Net investment income | 0.14 | 0.22 | 0.01 | |||||||||
Net change in unrealized appreciation (depreciation) | 34.25 | 13.30 | (4.08 | ) | ||||||||
Total Gain (Loss) from Investment Operations | 34.39 | 13.52 | (4.07 | ) | ||||||||
Distributions to Securities Holders | ||||||||||||
Net Investment Income | (0.14 | ) | (0.04 | ) | — | |||||||
Return of Capital to Securities Holders | (5.05 | ) | (4.94 | ) | — | |||||||
Total Distributions | (5.19 | ) | (4.98 | ) | — | |||||||
Ending Net Asset Value | $ | 132.06 | $ | 102.86 | $ | 94.18 | ||||||
Total Return | 33.43 | % (8) | 14.50 | % (7)(8) | (4.14) | % (2) (6) | ||||||
Supplemental Data and Ratios: | ||||||||||||
Net assets, end of period | $ | 379,681,360 | $ | 295,731,126 | $ | 270,771,390 | ||||||
Ratio of expenses to average net assets, before expense offset | 0.08 | % (3) | 0.09 | % (3) | 0.16 | % (3) (4) | ||||||
Ratio of expenses to average net assets, after expense offset | 0.00 | % (3) | 0.00 | % (3) | 0.00 | % (3) (4) | ||||||
Ratio of net investment income to average net assets, after expense offset | 0.11 | % | 0.20 | % | 0.28 | % (4) | ||||||
Portfolio turnover rate | 0.00 | % (5) | 0.00 | % (5) | 0.00 | % (5) |
__________________________
(1) | Commencement of operations. |
(2) | Not annualized. |
(3) | The Trust is not responsible for any expenses related to its ongoing operations. See Note 4 for additional information. |
(4) | Annualized ratios of expenes and net investment income calcualated using the average of net assets upon commencement and at end of period, as well as annualized income and expense amounts, with the exception of non recurring amounts such as organizational costs and other one time fees. |
(5) | No investments were sold during the period. |
(6) | Excludes the impact of selling commissions. |
(7) | Reflects impact of the 2018 capital contribution by the Sellers. Without such contribution the total return would have been 14.36%. |
(8) | Total return has been computed without the impact of the reinvestment of distributions as the Trust has no reinvestment plan and there is no availability for investors to acquire incremental shares. |
The accompanying Notes to Financial Statements are an integral part of these statements.
2017 Mandatory Exchangeable Trust
As of and for the year ended December 31, 2019
1. | Organization |
The 2017 Mandatory Exchangeable Trust ("Trust") was established on October 10, 2017 and is registered as a non-diversified, closed-end investment company under the Investment Company Act of 1940, as amended (the "Act"). The Trust commenced operations on December 15, 2017. In December 2017, the Trust offered and sold 2017 Mandatory Exchangeable Trust Securities (“Trust Securities") to qualified institutional buyers (“QIBs”) in reliance on the non-public offering exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”) afforded by Section 4(a)(2) of this Act, and has relied on Rule 144A under the Securities Act for transactions involving the resale of Trust Securities. The Trust received an in kind contribution of U.S. Treasury securities and the Forward Agreements (the “Contracts”) for the purchase of shares of Class A common stock of the New York Times Company (the "Company") in return for the issuance of Trust Securities. The counterparties to the Contracts are certain existing shareholders of the Company (the “Sellers”). Under the terms of the Contracts, the Trust will exchange each Trust Security for between 4.6948 and 5.6338 shares of the Company’s common stock (with the ultimate amount of shares determined by reference to the future trading price of the Company shares in relation to certain prescribed amounts) on December 1, 2020 (the “Exchange Date”). The Trust will thereafter terminate.
The Trust has entered into an Administration Agreement with U.S. Bank National Association (the "Administrator") to provide administrative services to the Trust.
2. | Significant Accounting Policies |
A. Basis of Accounting
The accompanying financial statements of the Trust have been prepared on an accrual basis in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). The Trust is an investment company and follows the accounting and reporting guidance of FASB ASC Topic 946.
B. Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, recognition of income and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates.
C. Investment Valuation
Investments made by the Trust are carried at fair value. The Trust uses the following valuation methods to determine the fair value of its investments:
(i) | the U.S. Treasury Securities held by the Trust are valued at the mean between the last current bid and asked prices or, if quotations are not readily available, as determined in good faith by the Board of Trustees of the Trust (the “Board of Trustees”) pursuant to policies and procedures that have been adopted and approved by the Board of Trustees from time to time; |
(ii) | subject to review and approval by the Managing Trustee and a good faith determination by the Board of Trustees, the Contracts are valued by an independent valuation firm with expertise in valuing these types of Contracts, using an income approach (in the form of a discounted cash flow analysis), in conjunction with a Monte Carlo model that simulates potential future payouts under the Contracts. |
D. Investment Transactions and Investment Income
Investment transactions of the Trust are accounted for as of the date the securities are purchased or sold by the Trust (the “trade date”). Interest income is recorded as earned and includes accrual of discounts, using the effective yield method. Amortized cost represents original cost, adjusted for a proportional increase or decrease in cost due to the discount or premium until maturity.
2017 Mandatory Exchangeable Trust
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended December 31, 2019
E. | Recent Accounting Pronouncements |
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) - Restricted Cash, which requires the statement of cash flows to explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. Therefore amounts generally described as restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Fund adopted ASU 2016-18 on a retrospective basis as of January 1, 2019. The adoption of this accounting guidance has no effect on the financial statements of the Fund.
3. | Forward Agreements |
On December 15, 2017, the Trust entered into the Contracts, which are derivative instruments, with the Sellers for which the Sellers received $239,912,754 in connection therewith. Pursuant to these Contracts, each of which has similar terms, the Sellers are obligated to deliver to the Trust a specified number of Company shares on the Exchange Date so as to permit the holders of Trust Securities to exchange on the Exchange Date the Trust Securities they hold for the specified number of shares of the Company.
At December 31, 2019, the Contracts had the following value:
Forward Agreements | Trade Date | Cost of Contracts | Fair Value of Contracts | Net Unrealized Appreciation | ||||||||||
Counterparties – Sellers | 12/15/2017 | $239,912,754 | $364,883,308 | $124,970,554 |
The fair value of the Contracts is included in investments in the Statement of Assets and Liabilities. The net change in unrealized depreciation is included in the Statement of Operations.
The primary risk of investing in the Contracts is the failure of the Sellers to deliver the shares of the Company on the Exchange Date, as provided under the terms and conditions of the Contracts. The Trust has received collateral in the form of Company shares, which mitigates the potential risk to investors. The Sellers’ obligation under the Contracts is collateralized by the Company shares that are held in the custody of the Trust’s Custodian, U.S. Bank National Association. At December 31, 2019 the Custodian held 16,197,175 Shares of the Company with an aggregate fair value of $521,063,120.
4. | Indemnifications |
The Trustees, on behalf of the Trust, have entered into various agreements fundamental to the operation of the Trust that contain indemnification provisions designed for the protection of the Trust. The Trust’s maximum exposure under these agreements is unknown. However, the Trust has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
5. | Expenses |
The Sellers have agreed to pay all fees and expenses relating to the offering and operation of the Trust including, but not limited to, organizational costs, offering costs, trustee fees, and administration fees. The Trust is not responsible for any fees associated with the Trust’s ongoing operations. In connection with its agreement, the Sellers contributed $1,139,000 in cash to an account held by the Administrator to cover all existing and future fees and expenses of the Trust. As of December 31, 2019, $292,433 remained in the account.
6. | Distributions |
Holders of Trust Securities are entitled to receive distributions from the maturity of U.S. Treasury Securities of $1.2969 per quarter (except for the first distribution on March 1, 2018 of $1.0951), payable quarterly, which commenced on March 1, 2018. Distributions to the Trust’s securities holders for the year ended December 31, 2019 were $14,914,350.
2017 Mandatory Exchangeable Trust
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended December 31, 2019
Dividends from net investment income and distributions from realized gains from investment transactions have been determined in accordance with Federal income tax regulations and may differ from net investment income and realized gains recorded by the Fund for financial reporting purposes. These differences, which could be temporary or permanent in nature may result in reclassification of distributions; however, net investment income, net realized gains and losses, and net assets are not affected.
7. | Income Taxes |
The Trust is not an association taxable as a corporation for Federal or State income tax purposes; accordingly, no provision is required for such taxes. Specifically, the Trust is a grantor trust under the U.S. federal and State income tax laws and, as such, holders of Trust Securities are treated as if each holder owns directly its proportionate share of the assets held by the Trust.
The Trust complies with the authoritative guidance for uncertainty in income taxes. This guidance requires the Trust to determine whether a tax position of the Trust is more likely than not to be sustained upon examination by the applicable taxing authority, including the resolution of any related appeals or litigation processes, based on the technical merits of the position. The Trust reviewed and evaluated tax positions in its major jurisdictions and determined whether or not there are uncertain tax positions that require financial statement recognition. The Trust has determined that no reserves for uncertain tax positions are required to be recorded for any of the Trust’s open tax years. The Trust is additionally not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. As a result, no income tax liability or expense has been recorded in the accompanying financial statements.
As of December 31, 2019, gross unrealized appreciation and depreciation of investments, based on cost for Federal income tax purposes, equaled $124,986,586 and $0, respectively. The aggregate cost of investments for Federal income tax purposes was $254,691,786 at December 31, 2019.
The tax character of the total distributable earnings as of December 31, 2019, was as follows:
Ordinary Income | Unrealized Appreciation | Total Distributable Earnings | ||||||||
$541,675 | $124,986,586 | $125,528,261 |
8. | Fair Value Measurements |
Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.
Level 1: | Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. |
Level 2: | Valuations that are based on other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment spreads, credit risk, etc.) |
Level 3: | Valuations based on significant unobservable inputs that are not corroborated by market data. |
In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended December 31, 2019
The following is a summary of the inputs used to value the Trust’s investments as of December 31, 2019:
Fair Value Measurements at December 31, 2019 Using | ||||||||||||||||
Quoted Prices in | Significant | |||||||||||||||
Active Markets for | Significant Other | Unobservable | ||||||||||||||
Fair Value at | Identical Assets | Observable Inputs | Inputs | |||||||||||||
Description | December 31, 2019 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Other | ||||||||||||||||
U.S. Treasury | ||||||||||||||||
Securities | $ | 14,795,064 | $ | 14,795,064 | $ | — | $ | — | ||||||||
Total Other | 14,795,064 | 14,795,064 | — | — | ||||||||||||
Derivative Instruments | ||||||||||||||||
Forward | ||||||||||||||||
Agreements | 364,883,308 | — | — | 364,883,308 | ||||||||||||
Total Derivative Instruments | 364,883,308 | — | — | 364,883,308 | ||||||||||||
Total | $ | 379,678,372 | $ | 14,795,064 | $ | — | $ | 379,678,372 |
During the year ended December 31, 2019, there were no transfers between Level 1, Level 2 and Level 3.
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) for Investments for the year ended December 31, 2019 | ||||
Fair Value Beginning Balance | $ | 266,639,035 | ||
Net unrealized appreciation | 98,244,273 | |||
Investments contributed in kind | — | |||
Transfers Out of Level 3 | — | |||
Fair Value Ending Balance | $ | 364,883,308 |
The change in unrealized gains/(losses) for Level 3 investments held at year end was $98,244,273.
The following table is a summary of quantitative information about significant unobservable valuation inputs for Level 3 fair value measurement for investments held as of December 31, 2019.
Type of Asset | Fair Value as of December 31, 2019 | Valuation Technique | Unobservable Input | |||||
Forward Agreements | $ | 364,883,308 | Income Approach Pricing Model Technique | Daily volatility of stock price of underlying Assets – 1.00%. Risk Free rate of return – 2.25%. Equity risk premium – 6.14%. Size premium – 0.96%. |
9. | Investment Transactions |
For the year ended June 30, 2019, $14,916,000 in U.S. Treasury Securities matured. The proceeds were used by the Trust to make distributions to the Trust Security Holders. The Trust did not sell any securities during the year ended December 31, 2019.
2017 Mandatory Exchangeable Trust
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended December 31, 2019
10. | Capital Share Transactions |
For the year ended December 31, 2019, the Trust did not sell any Trust Securities to qualified institutional buyers in reliance on Rule 144A under the Securities Act. As of December 31, 2019, there were 2,875,001 Trust Securities issued and outstanding. During 2019 the Sellers did not make any contributions to the Trust for the purpose of funding distributions to the Trust Security Holders. This contribution is not subject to any reimbursement conditions to the Sellers.
11. | Subsequent Events |
The Trust has performed an evaluation of subsequent events through the date the financial statements were available to be issued. No subsequent events or transactions had occurred that would have materially impacted the financial statements as presented.
KPMG LLP Suite 1500 550 South Hope Street Los Angeles, CA 90071-2629 |
The Board of Trustees and Shareholders
2017 Mandatory Exchangeable Trust:
We have audited the accompanying financial statements of 2017 Mandatory Exchangeable Trust (the "Trust"), which comprise the statement of assets and liabilities, including the schedule of investments, as of December 31, 2019, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended, and the related notes to the financial statements and the financial highlights for each of the years in the two-year period ended December 31, 2019 and for the period from December 15, 2017 (commencement of operations) to December 31, 2017.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements and financial highlights in accordance with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements and financial highlights that are free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements and financial highlights, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements and financial highlights in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. Our procedures included confirmation of securities owned as of December 31, 2019 by correspondence with the custodian and counterparties. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
KPMG LLP is a Delaware limited liability partnership and the U.S. member
firm of the KPMG network of independent member firms affiliated with
KPMG International Cooperative ("KPMG International"), a Swiss entity.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 2017 Mandatory Exchangeable Trust as of December 31, 2019, and the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the years in the two-year period then ended, and the financial highlights for each of the years in the two-year period then ended and the period from December 15, 2017 to December 31, 2017, in accordance with U.S. generally accepted accounting principles.
Los Angeles, California
February 27, 2020
2017 Mandatory Exchangeable Trust
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended December 31, 2019
December 31, 2019
(Unaudited)
Trustee Compensation
The Trust does not compensate any of its trustees who are interested persons. For the year ended December 31, 2019, no compensation was paid to the Trustees, including special compensation. The Trust's Statement of Additional Information includes additional information about the trustees and is available on the SEC's Web site at www.sec.gov.
Form N-Q
The Trust will file its complete schedule of portfolio holdings for the first and third quarters of each fiscal year with the SEC on Form N-Q. The Trust's Form N-Q and Form N-2 will be available on or before their respective filing dates without charge by visiting the SEC's Web site at www.sec.gov.
2017 Mandatory Exchangeable Trust
TRUSTEES AND OFFICERS (Unaudited)
Name, Address and Date of Birth | Position(s) | Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Complex Overseen by Trustee | Other Directorships Held by Trustee | |
Independent Trustees: | ||||||
Donald J. Puglisi Puglisi & Associates 850 Library Avenue Suite 204 Newark, DE 19711 Born 1945 | Managing Trustee | Duration of Trust, terminate automatically on December 15, 2020 Since Inception | Managing Director, Puglisi & Associates, 1973 to Present | 1 | Trustee, Mandatory Exchangeable Trust. | |
William R. Latham III Department of Economics University of Delaware Newark, DE 19716 Born 1944 | Trustee | Duration of Trust, terminate automatically on December 15, 2020 Since Inception | Associate Professor of Economics Emeritus, University of Delaware, 1971 to Present | 1 | Trustee, Mandatory Exchangeable Trust. | |
James B. O'Neill Department of Economics University of Delaware Newark, DE 19716 Born 1939 | Trustee | Duration of Trust, terminate automatically on December 15, 2020 Since Inception | Professor Emeritus of Economics, University of Delaware, 1971 to Present | 1 | Trustee, Mandatory Exchangeable Trust. |
FYE 12/31/2019 | FYE 12/31/2018 | |
Audit Fees | $60,000 | $60,000 |
Audit-Related Fees | - | - |
Tax Fees | - | - |
All Other Fees | - | - |
FYE 12/31/2019 | |
Audit-Related Fees | 0% |
Tax Fees | 0% |
All Other Fees | 0% |
Non-Audit Related Fees | FYE 12/31/2019 |
Registrant | - |
Registrant’s Investment Adviser | - |
I. | INTRODUCTION |
II. | FIDUCIARY DUTY |
III. | PROXY VOTING PROCEDURES |
IV. | ANNUAL FILING OF PROXY VOTING RECORD |
V. | PROXY VOTING DISCLOSURES |
Period | (a) Total Number of Shares (or Units) Purchased | (b) Average Price Paid per Share (or Unit) | (c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs | (d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs |
Month #1 07/01/19 – 07/31/19 | 0 | 0 | 0 | 0 |
Month #2 08/01/19 – 08/31/19 | 0 | 0 | 0 | 0 |
Month #3 09/01/19 – 09/30/19 | 0 | 0 | 0 | 0 |
Month #4 10/01/19 – 10/31/19 | 0 | 0 | 0 | 0 |
Month #5 11/01/19 – 11/31/19 | 0 | 0 | 0 | 0 |
Month #6 12/01/19 – 12/31/19 | 0 | 0 | 0 | 0 |
Total | 0 | 0 | 0 | 0 |
(a) | The Registrant’s Managing Trustee has reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d‑15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith |
(b) | Certifications pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. Furnished herewith. |