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 the United States. The receipts fluctuate based on consumer interest in the nostalgia appeal of older songs and the overall popularity of the songs contained in the Catalogue. The Catalogue also generates royalty income in foreign countries in which copyright is claimed.

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 the U.S. Copyright Act of 1909 (the "1909 Act") between 1926 and 1958. 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 2021 and 2053, 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 $167,500 per quarter (the "Minimum Payment Obligation").



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
March 31, 2022                       0
June 30, 2022                   70,709
September 30, 2022              83,438
December 31, 2022                    0

Total                      $ 1,056,027




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As of the date hereof, the Trust has not received the Underpayments, and EMI has expressly disagreed with the Trust.

In addition, on October 1, 2020, the Trust engaged Citrin Cooperman & Company LLP, an accounting firm specializing in auditing royalty income (" Citrin"), to conduct a special audit of the books and records of EMI administered by Sony/ATV to determine the areas and extent of underpayment, if any, of quarterly Contingent Portion payments payable to the Trust for the periods beginning January 1, 2016 and ended December 31, 2020 (the "Audit Period"). Citrin's final report (the "Citrin Report") was delivered to the Trustees on April 4, 2022. The Citrin Report identified multiple asserted royalty omissions and expense over-deductions from the Contingent Portion during the Audit Period in addition to the Underpayments. The Trust distributed the Citrin Report to EMI on or about April 13, 2022. EMI has disputed the findings of the Citrin Report. As part of an effort to settle any disagreement regarding the computation or payment of the Contingent Portion, including the Underpayments and the other amounts identified in the Citrin Report, on October 3, 2022, EMI and the Trust executed a Tolling Agreement pursuant to which the parties agreed to suspend, effective as of January 1, 2022, the running of any relevant statute of limitations applicable to any claim relating to the royalty omissions and expense over-deductions identified in the Citrin Report until June 1, 2023.

The Trust can offer no assurance that it will be able to recover any of the Underpayments or other amounts identified in the Citrin Report, or that it will resolve the dispute relating to the New Calculation Method with respect to future payments of the Contingent Portion.

Unit Holder Distributions and Trust Expenses

Recent Payments

During the year ended December 31, 2022, the Trust received a total of $1,127,613 from EMI, all of which was attributable to ordinary Contingent Portion Payments which EMI made to the Trust during the 2022 calendar year. During the year ended December 31, 2021, the Trust received a total of $1,061,519 from EMI, all of which was attributable to ordinary Contingent Portion Payments which EMI made to the Trust during the 2021 calendar year.

Recent Distributions

During the year ended December 31, 2022, the Trust made cash distributions to Unit Holders in the aggregate amount of $800,903 ($2.88 per Trust Unit), as compared to cash distributions to Unit Holders in the aggregate amount of $830,151 ($2.99 per Trust Unit) during the year ended December 31, 2021. For computation details regarding the distributions made during the year ended December 31, 2022, please refer to the Current Report on Form 8-K, which the Trust filed with the Securities and Exchange Commission on December 22, 2022.

Cash and Administrative Expenses

As of December 31, 2022 the Trust had an aggregate of $37,658 in unpaid administrative expenses for services rendered to the Trust. As of March 27, 2023, the Trust had received invoices for an aggregate of $87,981 in unpaid administrative expenses for services rendered to the Trust.

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 December 31, 2022 and 2021.


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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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