☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

New York		13-6183792
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒		Smaller reporting company		☒
				Emerging growth company		☐

PART I — FINANCIAL STATEMENTS			3
ITEM 1. FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			6
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			9
ITEM 4. CONTROLS AND PROCEDURES			9
PART II — OTHER INFORMATION			9
ITEM 1. LEGAL PROCEEDINGS			9
ITEM 1A. RISK FACTORS			9
ITEM 2. UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS			10
ITEM 3. DEFAULT UPON SENIOR SECURITIES			10
ITEM 4. MINE SAFETY DISCLOSURES			10
ITEM 5. OTHER INFORMATION			10
ITEM 6. EXHIBITS			10
SIGNATURES			11

		Three Months Ended June 30								Six Months Ended June 30
		2021				2020				2021				2020
Receipts from EMI		$	240,626			$	229,717			$	521,538			$	488,752
Undistributed Cash at Beginning of Period		$	51,161	(1)		$	46			$	46			$	46
Disbursements - Administrative Expenses			(134,242	)			(78,186	)			(134,242	)			(115,703	)
Balance Available for Distribution			157,545				151,577				387,342				373,095
Cash Distributions to Unit Holders			(157,499	)			(151,530	)			(387,296	)			(373,048	)
Undistributed Cash at End of Period		$	46			$	47			$	46			$	47
Cash Distributions Per Unit (based on 277,712 Trust Units Outstanding)		$	0.57			$	0.55			$	1.39			$	1.34

(1)	Includes amounts reserved for administrative expenses in the aggregate amount of $51,115 attributable to the three-months ended March 31, 2021 which were actually paid by the Trust on April 15, 2021.

NOTE 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Background

Mills Music Trust (the “

Trust

”) was created by a Declaration of Trust, dated December 3, 1964 (the “

Declaration of Trust

”), for the purpose of acquiring from Mills Music, Inc. (“

Old Mills

”), the rights to receive payment of a deferred contingent purchase price obligation (the “

Contingent Portion

”) payable to Old Mills. The obligation to pay the Contingent Portion arose as the result of the sale by Old Mills of its music and lyric copyright catalogue (the “

Catalogue

”) to a newly formed company pursuant to an asset purchase agreement dated December 5, 1964 (the “

Asset Purchase Agreement

”). Pursuant to the Asset Purchase Agreement, payment of the Contingent Portion to the Trust continues until the end of the year in which the last copyright in the Catalogue expires and cannot be renewed.

The Contingent Portion amounts are currently payable by EMI Mills Music Inc. (“

EMI

”), the owner of the copyrighted materials contained in the Catalogue. The Trust has been advised that Sony/ATV Music Publishing LLC is the administrator and manager of EMI and the Catalogue.

HSBC Bank, USA, N.A. is the Corporate Trustee of the Trust (the “

Corporate Trustee

”), and Lee Eastman and Michael E. Reiss are the Individual Trustees of the Trust (the “

Individual Trustees

” and together with the Corporate Trustee, the “

Trustees

”).

Proceeds from Contingent Portion Payments

The Trust receives quarterly payments of the Contingent Portion from EMI and distributes the amounts it receives to the registered owners of Trust certificates (the “

Unit Holders

”) representing interests in the Trust (the “

Trust Units

”), after payment of, or withholdings in connection with, expenses and liabilities of the Trust. The Declaration of Trust provides that these are the Trust’s sole responsibilities and that the Trust is prohibited from engaging in any business activities.

Payments of the Contingent Portion to the Trust are based on royalty income which the Catalogue generates. 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 as its Contingent Portion payment obligation, in accordance with the terms of the Asset Purchase Agreement.

Calculation of Contingent Portion

The amount of each payment of the Contingent Portion is based on a formula set forth in the Asset Purchase Agreement. For information regarding the calculation of the Contingent Portion and a related dispute between EMI and the Trust see “Contingent Portion Payments” under Part I — Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.

Cash Distributions to Unit Holders

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. For information regarding cash disbursements made to Unit Holders for the three and six months ended June 30, 2021 and June 30, 2020 see the table headed “Statements of Cash Receipts and Disbursements” under Part I — Item 1, “Financial Statements”.

 

The Copyright Catalogue

The Catalogue is estimated to be composed of over 

12,000

 

music

titles (the “

Copyrighted Songs

”),

of which

approximately 

1,430

 

produced

royalty income in recent years.

EMI has provided the Trust with a listing of the top 50 earning songs in the Catalogue during the 2020 calendar year (the “

Top 50 Songs

”), together with certain copyright information with respect to each of the Top 50 Songs (the “

2020 Listing

”). A copy of the 2020 Listing, as provided by EMI, is included in the Trust’s annual report on Form 10-K for the fiscal year ended December 31, 2020. The 2020 Listing does not include any information regarding Copyrighted Songs for the 2021 calendar year.

Accounting Policies

Payments to the Trust of the Contingent Portion are typically made in March, June, September and December for the prior calendar quarter. The payments received are accounted for on a cash basis, as are expenses of the Trust. The Declaration of Trust provides for the distribution of 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 Trust’s financial statements reflect only cash transactions and do not include transactions that would be recorded in financial statements presented on the accrual basis of accounting, as contemplated by generally accepted accounting principles in the United States. The Trust does not prepare a balance sheet or a statement of cash flows.

These unaudited financial statements should be read in conjunction with the financial statements and related notes in the Trust’s Annual Report on

Form 10-K

for the fiscal year ended December 31, 2020. The cash receipts and distributions for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

NOTE 2. INCOME TAXES

No provision for income taxes has been made since the liability thereof is that of the Unit Holders and not the Trust.

NOTE 3. GOVERNANCE OF THE TRUST

The Trust does not have, nor does the Declaration of Trust provide for, officers, a board of directors or any employees. HSBC Bank, USA, N.A. is the Corporate Trustee of the Trust, and Lee Eastman and Michael E. Reiss are the Individual Trustees of the Trust. Pursuant to the Declaration of Trust, Trustees of the Trust serve until their removal, resignation, incapacity, or in the case of Individual Trustees, their death.

On December 23, 2014, the Trust adopted a code of ethics (as defined in Item 406

of Regulation S-K under the

Securities Exchange Act of 1933) applicable to the Individual Trustees and the trust officers of the Corporate Trustee. A copy of the Code of Ethics will be provided to any person without charge upon written request to the Trust at its administrative office, c/o HSBC BANK USA, N.A., Corporate Trust, Issuer Services, 452 Fifth Avenue, New York, NY. In addition, the Trust relies on the Corporate Trustee to abide by HSBC Bank, USA, N.A.’s Statement of Business Principles and Code of Ethics, which is available on the Corporate Trustee’s website at http://www.us.hsbc.com.

The Trust is not a corporate entity and thus does not have an Audit Committee. The Trust has established a policy with regard to audit, audit-related

and certain non-audit engagements of

its independent auditors. Under this policy, the Trust annually approves certain limited, specified recurring services which may be provided by the Trust’s accountant or independent auditors. All other engagements for services to be performed by the Trust’s independent auditors must

be separately pre-approved by the

Trust. Joel Faden acts as Chief Financial Individual providing accounting services for the Trust.

NOTE 4. RELATED PARTY TRANSACTIONS

The Trustees are paid in accordance with the Declaration of Trust, which provides that each Trustee shall receive annual compensation of $2,500, provided that such aggregate compensation to the Trustees as a group may not

exceed 3% of the Contingent Portion amounts received by the Trust in any year. The Declaration of Trust also provides for the reimbursement of expenses reasonably incurred in the performance of a Trustee’s duties to the Trust, including clerical and administrative services. Accordingly, the Trustees are entitled to receive annual compensation and reimbursement for services performed for the Trust, including the Corporate Trustee’s services as the Registrar and Transfer Agent of the certificates representing the Trust Units. The Declaration of Trust also provides that if a Trustee performs unusual or extraordinary services, reasonable compensation for such services shall be paid, subject to the terms and conditions of the Declaration of Trust.

Pursuant to the Declaration of Trust, disbursements were made as follows to the Trustees for the three and six months ended June 30, 2021 and June 30, 2020:

 

		Three Months Ended June 30								Six Months Ended June 30
		2021				2020				2021				2020
Corporate Trustee Fees and Expenses		$	1,250			$	625			$	1,250			$	1,250
Individual Trustee Fees and Expenses			2,500				1,250				2,500				2,500
Transfer Agent and Registrar (1)			7,500				3,750				7,500				7,500
TOTALS		$	11,250	(2)		$	5,625			$	11,250			$	11,250

 

(1)	These services are performed by the Corporate Trustee.

(2)	Includes amounts reserved for administrative expenses in the aggregate amount of $5,625 attributable to the three-months ended March 31, 2021 which were actually paid by the Trust on April 15, 2021.

The administrative office of the Trust is located at the offices of the Corporate Trustee, HSBC Bank, USA, N.A., Corporate Trust Issuer Services, 452 Fifth Avenue, New York, New York 10018. Except for fees paid to the Corporate Trustee in accordance with the Declaration of Trust, no expense is being charged or paid by the Trust for the office space and office equipment of the Corporate Trustee that is being utilized for the Trust.

NOTE 5. SUBSEQUENT EVENTS

None.

Quarterly Payment Period		Amount of 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
Total		$	824,922

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 dispute relating to the New Calculation Method with respect to future payments of the Contingent Portion.

On June 23, 2021, the Trust made a distribution of $157,499 ($0.5671 per Trust Unit) to the Trust’s Unit Holders of record at the close of business on June 22, 2021. For computation details regarding the distribution please refer to the quarterly distribution report, dated June 23, 2021, attached as Exhibit 99.1 to the Current Report on filed by the Trust with the Securities and Exchange Commission on July 1, 2021.

There 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.

In late 2019, an outbreak of a novel coronavirus (“”) emerged and by March 11, 2020 was declared a global pandemic by The World Health Organization. Across the United States and the world, governments and municipalities instituted measures in an effort to control the spread of including quarantines, orders, school closings, travel restrictions and the closure of businesses. By the end of March, the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and

market volatility. The uncertain and it is plausible that the Trust’s business and results of operations may be directly and negatively impacted. As a result, the Trust’s past results may not be indicative of its future performance and historical trends in proceeds from Contingent Portion Payments and cash distributions to Unit Holders, among others, may differ materially.

As of the end of the period covered by this quarterly report, the Trust carried out an evaluation of the effectiveness of the design and operation of the Trust’s “disclosure controls and procedures” (as defined in and of the Securities Exchange Act of 1934, as amended (the “”)) under the supervision and with the participation of the Trust’s management, including the Chief Financial Individual providing accounting services and the trust officers of the Corporate Trustee. Based on that evaluation, the Chief Financial Individual providing accounting services and the trust officer of the Corporate Trustee concluded that the Trust’s disclosure controls and procedures are effective.

There were no changes in the Trust’s internal control over financial reporting (as such term in defined Exchange Act) during the fiscal period covered by this quarterly report that materially affected, or are reasonably likely to materially affect, the Trust’s internal control over financial reporting.

In late emerged and by March 11, 2020 was declared a global pandemic by The World Health Organization. Across the United States and the world, governments and municipalities instituted measures in an effort to control the spread of including quarantines, orders, school closings, travel restrictions and the closure By the end of March, the macroeconomic impacts became significant, exhibited by, among other things, a rise in unemployment and market volatility. The trajectory remains highly uncertain and it is plausible that the Trust’s business and results of operations may be directly and negatively impacted. As a result, the Trust’s past results may not be indicative of its future performance and historical trends in proceeds from Contingent Portion Payments and cash distributions to Unit Holders, among others, may differ materially.