List of pending litigation of UBS Funds as of September 7, 2022 which are: (1) any bankruptcy, receivership or similar proceeding with respect to the Fund or any of its significant subsidiaries; (2) any proceeding to which any director, officer or other affiliated person of the Fund is a party adverse to the Fund or any of its subsidiaries; and (3) any proceeding involving the revocation or suspension of the right of the Registrant to sell securities:
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Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.
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Commonwealth Court
Case No. KAC2014-0072 (505)
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Shareholders’s derivative action filed by twelve (12) individual plaintiffs and a retirement plan, on behalf of several Puerto Rico investment companies against UBS Financial Services, Inc., UBS Financial Services Incorporated of Puerto Rico, Inc., UBS Trust Company of Puerto Rico and each current and certain former members of the Board of Directors of such investment companies (the "UBS Defendants"). The complaint alleges that the Nominal Defendants suffered millions of dollars in losses due to alleged mismanagement, concealment of conflict of interests, and improper recommendations by the UBS Defendants to retail customers to request and obtain from UBS Bank USA credit lines to purchase shares issued by the Nominal Defendants. Plaintiffs further alleged that UBS Defendants manipulated the Nominal Defendants' market by sustaining inflated prices of shares by acquiring and retaining high volumes of inventory and not disclosing to clients the lack of market liquidity. They seek relief from the UBS Defendants for unjust enrichment, failure to act in good faith and breach of their fiduciary duties in the form of actual and compensatory damages to be determined at trial, pre-and-post-judgment interest, disgorgement of all fees, and the constitution of a constructive trust over all fees paid by the Nominal Defendants and an award of attorney's fees and litigation cost.
After seven years of litigation, the parties in this case finally reached a settlement agreement. Pursuant to the Stipulation, all disputes asserted or that could be asserted in the complaint will be finally and completely resolved. In exchange for this, the UBS Defendants will pay the Funds $15,000,000 in cash (the “Settlement Amount”) and for fees and expense award in an amount up to 33% of the Settlement Amount. Fees and expenses will be paid from interests earned by the Settlement Amount. The Settlement Fund, less any fees and expenses, will be allocated among the Funds pro rata, based upon the market value of their holdings of bonds issued by Puerto Rico issuers and shares of Puerto Rico bond funds as of January 31, 2014.
On August 26, 2022, final judgment based on the settlement agreement was entered by the Puerto Rico Commonwealth Court. Disbursement of settlement funds is pending further court determination as to the allocation of certain litigation expenses.
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RAUL E. CASASNOVAS BALADO, LOLITA G. DE CASASNOVAS, DORIS LÓPEZ GARCÍA, REYNALDO QUINTANA LATORRE, MANUEL PORRO AS TRUSTEE FOR MANUEL PORRO RETIREMENT PLAN, RAQUEL SILVA RAMÍREZ, ROMUALDO RIVERA, AURIMIR AROCHO TORRES, MANUEL MARTINEZ UMPIERRE, GLAFIRA PORRO VIZCARRA, SARIBEL MATIENZO, BLANCA ORTEGA, FIDEICOMISO PUNTA GORDA, PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Plaintiffs.
UBS Financial Services, INC.; UBS Financial Services Incorporated of Puerto Rico; UBS Trust Company of Puerto Rico; Mario S. Belaval; Miguel A. Ferrer; Vicente J León; Carlos V. Ubiñas; José Villamil; Agustín Cabrer-Roig; Gabriel Dolagaray Balado; Carlos Nido; Luis M. Pellot-González; Clotilde Pérez; Leslie Highley Jr., Stephen C. Roussin; Does 1-100; and Insurance Companies 1-100, Defendants. PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Nominal Defendants
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
Title III case filed under the Puerto Rico Oversight, Management and Economic Stability Act ("PROMESA"), The Oversight Board, representing the Employees Retirement System of the Government of Puerto Rico 17-3566:
Adversary Proceeding No. 17-0213:
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Action filed by the Oversight Board, representing the ERS, seeking declaratory judgment stating that the security interests asserted by Defendants and described in a security agreement, pursuant to the pension fund bonding resolution of 2008 were not properly perfected. Additionally, plaintiffs sought declaratory judgment stating that Defendants did not have a perfected security interests in loans made by the ERS or any proceeds received on account of said loans. Even if they did have perfected security interests, Section 552 of the Bankruptcy Code operates to cut off that lien in post-petition assets of the ERS.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. The confirmation order has been appealed to the Court of Appeals for the First Circuit by various organizations that represent some public-school teachers and educators participating in the Commonwealth’s pension system, that object to the manner in which the Plan treats their claim to current and future pension plans. The Confirmation Order was affirmed. The appealing parties filed a Certiorari before the Supreme Court, and the Supreme Court denied expedition of the Certiorari.
Another group of creditors object the treatment of their claims under the Plan, because it violates the takings clause of the Fifth Amendment of the United States Constitution. The Court of Appeals affirmed the District Court’s decision.
The FOMB has informed the Court that on the effective date of the Plan (March 15, 2022), the ERS cases were deemed dismissed and/or denied with prejudice. Accordingly, this case is effectively terminated.
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The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Defendants.
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Adversary Proceedings 17-0219 and 17-0220 |
Action filed by certain ERS Bondholder, seeking declaratory judgment, stating that (i) Joint Resolution 188 violated the automatic stay and was void ab initio; (ii) any transfer of pledged property pursuant to Resolution 188 would result in unjust enrichment of the Commonwealth; (iii) the collateral was not for public use, within the meaning of the United States and the Puerto Rico Constitution; (iv) Resolution 188 constitutes a violation of the takings and contracts clauses in the United States and the Puerto Rico Constitution; and (v) requesting a determination of the ERS bondholders' secure status in the ERS Title III case.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Plaintiffs.
The Commonwealth of Puerto Rico; the Financial Oversight and Management Board of the Commonwealth of Puerto Rico; the Puerto Rico Fiscal Agency and Financial Advisory Authority; the Employees Retirement System of the Commonwealth of Puerto Rico; Governor Ricardo Roselló, in his official capacity as the Governor of Puerto Rico; and Raúl Maldonado, in his capacity as Secretary of the Treasury of the Commonwealth of Puerto Rico, Defendants
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Adversary Proceeding 19-00359
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Action filed by Plaintiffs to avoid and recover alleged fraudulent transfers made to Defendants and to disallow claims filed by Defendants in the Title III cases.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Special Claims Committee of the Financial Oversight and Management Board for Puerto Rico and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as co-trustees of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Defendants 1H-78H, which were not disclosed in the complaint, but which include Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund VI, Inc. (now Tax Free Fixed Income Fund VI for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Mortgaged-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgaged-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax-Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax-Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund.
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Adversary Proceeding 19-00367 |
This action was filed by the Oversight Board, representing the Employees Retirement System of the Government of Puerto Rico (“ERS”) to determine the scope of the ERS Bondholders asserted security interests in the Pledged Property that serves as collateral of the ERS Bonds.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as Section 926 trustee of the Commonwealth of Puerto Rico, Plaintiffs
Glendon Opportunities Fund, L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund (now Puerto Rico Residents Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund II, Inc.; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.; Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Resident, Inc.); UBS IRA Select Growth & Income Puerto Rico Fund.
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Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents |
Commonwealth Court
Case No. KAC2014-0072 (505) |
Shareholders’s derivative action filed by twelve (12) individual plaintiffs and a retirement plan, on behalf of several Puerto Rico investment companies against UBS Financial Services, Inc., UBS Financial Services Incorporated of Puerto Rico, Inc., UBS Trust Company of Puerto Rico and each current and certain former members of the Board of Directors of such investment companies (the "UBS Defendants"). The complaint alleges that the Nominal Defendants suffered millions of dollars in losses due to alleged mismanagement, concealment of conflict of interests, and improper recommendations by the UBS Defendants to retail customers to request and obtain from UBS Bank USA credit lines to purchase shares issued by the Nominal Defendants. Plaintiffs further alleged that UBS Defendants manipulated the Nominal Defendants' market by sustaining inflated prices of shares by acquiring and retaining high volumes of inventory and not disclosing to clients the lack of market liquidity. They seek relief from the UBS Defendants for unjust enrichment, failure to act in good faith and breach of their fiduciary duties in the form of actual and compensatory damages to be determined at trial, pre-and-post-judgment interest, disgorgement of all fees, and the constitution of a constructive trust over all fees paid by the Nominal Defendants and an award of attorney's fees and litigation cost.
After seven years of litigation, the parties in this case finally reached a settlement agreement. Pursuant to the Stipulation, all disputes asserted or that could be asserted in the complaint will be finally and completely resolved. In exchange for this, the UBS Defendants will pay the Funds $15,000,000 in cash (the “Settlement Amount”) and for fees and expense award in an amount up to 33% of the Settlement Amount. Fees and expenses will be paid from interests earned by the Settlement Amount. The Settlement Fund, less any fees and expenses, will be allocated among the Funds pro rata, based upon the market value of their holdings of bonds issued by Puerto Rico issuers and shares of Puerto Rico bond funds as of January 31, 2014.
On August 26, 2022, final judgment based on the settlement agreement was entered by the Puerto Rico Commonwealth Court. Disbursement of settlement funds is pending further court determination as to the allocation of certain litigation expenses.
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RAUL E. CASASNOVAS BALADO, LOLITA G. DE CASASNOVAS, DORIS LÓPEZ GARCÍA, REYNALDO QUINTANA LATORRE, MANUEL PORRO AS TRUSTEE FOR MANUEL PORRO RETIREMENT PLAN, RAQUEL SILVA RAMÍREZ, ROMUALDO RIVERA, AURIMIR AROCHO TORRES, MANUEL MARTINEZ UMPIERRE, GLAFIRA PORRO VIZCARRA, SARIBEL MATIENZO, BLANCA ORTEGA, FIDEICOMISO PUNTA GORDA, PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Plaintiffs.
UBS Financial Services, INC.; UBS Financial Services Incorporated of Puerto Rico; UBS Trust Company of Puerto Rico; Mario S. Belaval; Miguel A. Ferrer; Vicente J León; Carlos V. Ubiñas; José Villamil; Agustín Cabrer-Roig; Gabriel Dolagaray Balado; Carlos Nido; Luis M. Pellot-González; Clotilde Pérez; Leslie Highley Jr., Stephen C. Roussin; Does 1-100; and Insurance Companies 1-100, Defendants. PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Nominal Defendants
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
Title III case filed under the Puerto Rico Oversight, Management and Economic Stability Act ("PROMESA"), the Oversight Board representing the Employees Retirement System of the Government of Puerto Rico 17-3566:
Adversary Proceeding No. 17-0213: |
Action filed by the Oversight Board, representing the ERS, seeking declaratory judgment stating that the security interests asserted by Defendants and described in a security agreement, pursuant to the pension fund bonding resolution of 2008 were not properly perfected. Additionally, plaintiffs sought declaratory judgment stating that Defendants did not have a perfected security interests in loans made by the ERS or any proceeds received on account of said loans. Even if they did have perfected security interests, Section 552 of the Bankruptcy Code operates to cut off that lien in post-petition assets of the ERS.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. The confirmation order has been appealed to the Court of Appeals for the First Circuit by various organizations that represent some public-school teachers and educators participating in the Commonwealth’s pension system, that object to the manner in which the Plan treats their claim to current and future pension plans. The Confirmation Order was affirmed. The appealing parties filed a Certiorari before the Supreme Court, and the Supreme Court denied expedition of the Certiorari.
Another group of creditors object the treatment of their claims under the Plan, because it violates the takings clause of the Fifth Amendment of the United States Constitution. The Court of Appeals affirmed the District Court’s decision.
The FOMB has informed the Court that on the effective date of the Plan (March 15, 2022), the ERS cases were deemed dismissed and/or denied with prejudice. Accordingly, this case is effectively terminated.
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The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Defendants.
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Adversary Proceedings 17-0219 and 17-0220 |
Action filed by certain ERS Bondholder, seeking declaratory judgment, stating that (i) Joint Resolution 188 violated the automatic stay and was void ab initio; (ii) any transfer of pledged property pursuant to Resolution 188 would result in unjust enrichment of the Commonwealth; (iii) the collateral was not for public use, within the meaning of the United States and the Puerto Rico Constitution; (iv) Resolution 188 constitutes a violation of the takings and contracts clauses in the United States and the Puerto Rico Constitution; and (v) requesting a determination of the ERS bondholders' secure status in the ERS Title III case.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated.
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Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Plaintiffs.
The Commonwealth of Puerto Rico; the Financial Oversight and Management Board of the Commonwealth of Puerto Rico; the Puerto Rico Fiscal Agency and Financial Advisory Authority; the Employees Retirement System of the Commonwealth of Puerto Rico; Governor Ricardo Roselló, in his official capacity as the Governor of Puerto Rico; and Raúl Maldonado, in his capacity as Secretary of the Treasury of the Commonwealth of Puerto Rico, Defendants. |
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Adversary Proceeding 19-00359 |
Action filed by Plaintiffs to avoid and recover alleged fraudulent transfers made to Defendants and to disallow claims filed by Defendants in the Title III cases.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Special Claims Committee of the Financial Oversight and Management Board for Puerto Rico and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as co-trustees of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Defendants 1H-78H, which were not disclosed in the complaint, but which include Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund VI, Inc. (now Tax Free Fixed Income Fund VI for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Mortgaged-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgaged-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax-Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax-Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund.
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Adversary Proceeding 19-00367 |
This action was filed by the Oversight Board, representing the Employees Retirement System of the Government of Puerto Rico (“ERS”) to determine the scope of the ERS Bondholders asserted security interests in the Pledged Property that serves as collateral of the ERS Bonds.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as Section 926 trustee of the Commonwealth of Puerto Rico, Plaintiffs
Glendon Opportunities Fund, L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund (now Puerto Rico Residents Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund II, Inc.; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.; Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Resident, Inc.); UBS IRA Select Growth & Income Puerto Rico Fund.
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Tax-Fund II for Puerto Rico Residents, Inc. |
Commonwealth Court
Case No. KAC2014-0072 (505) |
Shareholders’s derivative action filed by twelve (12) individual plaintiffs and a retirement plan, on behalf of several Puerto Rico investment companies against UBS Financial Services, Inc., UBS Financial Services Incorporated of Puerto Rico, Inc., UBS Trust Company of Puerto Rico and each current and certain former members of the Board of Directors of such investment companies (the "UBS Defendants"). The complaint alleges that the Nominal Defendants suffered millions of dollars in losses due to alleged mismanagement, concealment of conflict of interests, and improper recommendations by the UBS Defendants to retail customers to request and obtain from UBS Bank USA credit lines to purchase shares issued by the Nominal Defendants. Plaintiffs further alleged that UBS Defendants manipulated the Nominal Defendants' market by sustaining inflated prices of shares by acquiring and retaining high volumes of inventory and not disclosing to clients the lack of market liquidity. They seek relief from the UBS Defendants for unjust enrichment, failure to act in good faith and breach of their fiduciary duties in the form of actual and compensatory damages to be determined at trial, pre-and-post-judgment interest, disgorgement of all fees, and the constitution of a constructive trust over all fees paid by the Nominal Defendants and an award of attorney's fees and litigation cost.
After seven years of litigation, the parties in this case finally reached a settlement agreement. Pursuant to the Stipulation, all disputes asserted or that could be asserted in the complaint will be finally and completely resolved. In exchange for this, the UBS Defendants will pay the Funds $15,000,000 in cash (the “Settlement Amount”) and for fees and expense award in an amount up to 33% of the Settlement Amount. Fees and expenses will be paid from interests earned by the Settlement Amount. The Settlement Fund, less any fees and expenses, will be allocated among the Funds pro rata, based upon the market value of their holdings of bonds issued by Puerto Rico issuers and shares of Puerto Rico bond funds as of January 31, 2014.
On August 26, 2022, final judgment based on the settlement agreement was entered by the Puerto Rico Commonwealth Court. Disbursement of settlement funds is pending further court determination as to the allocation of certain litigation expenses.
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RAUL E. CASASNOVAS BALADO, LOLITA G. DE CASASNOVAS, DORIS LÓPEZ GARCÍA, REYNALDO QUINTANA LATORRE, MANUEL PORRO AS TRUSTEE FOR MANUEL PORRO RETIREMENT PLAN, RAQUEL SILVA RAMÍREZ, ROMUALDO RIVERA, AURIMIR AROCHO TORRES, MANUEL MARTINEZ UMPIERRE, GLAFIRA PORRO VIZCARRA, SARIBEL MATIENZO, BLANCA ORTEGA, FIDEICOMISO PUNTA GORDA, PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Plaintiffs.
UBS Financial Services, INC.; UBS Financial Services Incorporated of Puerto Rico; UBS Trust Company of Puerto Rico; Mario S. Belaval; Miguel A. Ferrer; Vicente J León; Carlos V. Ubiñas; José Villamil; Agustín Cabrer-Roig; Gabriel Dolagaray Balado; Carlos Nido; Luis M. Pellot-González; Clotilde Pérez; Leslie Highley Jr., Stephen C. Roussin; Does 1-100; and Insurance Companies 1-100, Defendants. PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Nominal Defendants
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
Title III case filed under the Puerto Rico Oversight, Management and Economic Stability Act ("PROMESA"), the Oversight Board representing the Employees Retirement System of the Government of Puerto Rico 17-3566:
Adversary Proceeding No. 17-0213: |
Action filed by the Oversight Board, representing the ERS, seeking declaratory judgment stating that the security interests asserted by Defendants and described in a security agreement, pursuant to the pension fund bonding resolution of 2008 were not properly perfected. Additionally, plaintiffs sought declaratory judgment stating that Defendants did not have a perfected security interests in loans made by the ERS or any proceeds received on account of said loans. Even if they did have perfected security interests, Section 552 of the Bankruptcy Code operates to cut off that lien in post-petition assets of the ERS.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. The confirmation order has been appealed to the Court of Appeals for the First Circuit by various organizations that represent some public-school teachers and educators participating in the Commonwealth’s pension system, that object to the manner in which the Plan treats their claim to current and future pension plans. The Confirmation Order was affirmed. The appealing parties filed a Certiorari before the Supreme Court, and the Supreme Court denied expedition of the Certiorari.
Another group of creditors object the treatment of their claims under the Plan, because it violates the takings clause of the Fifth Amendment of the United States Constitution. The Court of Appeals affirmed the District Court’s decision.
The FOMB has informed the Court that on the effective date of the Plan (March 15, 2022), the ERS cases were deemed dismissed and/or denied with prejudice. Accordingly, this case is effectively terminated.
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The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Defendants.
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Adversary Proceedings 17-0219 and 17-0220 |
Action filed by certain ERS Bondholder, seeking declaratory judgment, stating that (i) Joint Resolution 188 violated the automatic stay and was void ab initio; (ii) any transfer of pledged property pursuant to Resolution 188 would result in unjust enrichment of the Commonwealth; (iii) the collateral was not for public use, within the meaning of the United States and the Puerto Rico Constitution; (iv) Resolution 188 constitutes a violation of the takings and contracts clauses in the United States and the Puerto Rico Constitution; and (v) requesting a determination of the ERS bondholders' secure status in the ERS Title III case.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated.
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Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Plaintiffs.
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Adversary Proceeding 19-00359 |
Action filed by Plaintiffs to avoid and recover alleged fraudulent transfers made to Defendants and to disallow claims filed by Defendants in the Title III cases.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Special Claims Committee of the Financial Oversight and Management Board for Puerto Rico and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as co-trustees of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Defendants 1H-78H, which were not disclosed in the complaint, but which include Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund VI, Inc. (now Tax Free Fixed Income Fund VI for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Mortgaged-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgaged-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax-Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax-Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund.
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Adversary Proceeding 19-00367 |
This action was filed by the Oversight Board, representing the Employees Retirement System of the Government of Puerto Rico (“ERS”) to determine the scope of the ERS Bondholders asserted security interests in the Pledged Property that serves as collateral of the ERS Bonds.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as Section 926 trustee of the Commonwealth of Puerto Rico, Plaintiffs
Glendon Opportunities Fund, L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund (now Puerto Rico Residents Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund II, Inc.; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.; Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Resident, Inc.); UBS IRA Select Growth & Income Puerto Rico Fund.
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U.S. Mortgage Backed & Income Fund for Puerto Rico Residents, Inc. |
Commonwealth Court
Case No. KAC2014-0072 (505) |
Shareholders’s derivative action filed by twelve (12) individual plaintiffs and a retirement plan, on behalf of several Puerto Rico investment companies against UBS Financial Services, Inc., UBS Financial Services Incorporated of Puerto Rico, Inc., UBS Trust Company of Puerto Rico and each current and certain former members of the Board of Directors of such investment companies (the "UBS Defendants"). The complaint alleges that the Nominal Defendants suffered millions of dollars in losses due to alleged mismanagement, concealment of conflict of interests, and improper recommendations by the UBS Defendants to retail customers to request and obtain from UBS Bank USA credit lines to purchase shares issued by the Nominal Defendants. Plaintiffs further alleged that UBS Defendants manipulated the Nominal Defendants' market by sustaining inflated prices of shares by acquiring and retaining high volumes of inventory and not disclosing to clients the lack of market liquidity. They seek relief from the UBS Defendants for unjust enrichment, failure to act in good faith and breach of their fiduciary duties in the form of actual and compensatory damages to be determined at trial, pre-and-post-judgment interest, disgorgement of all fees, and the constitution of a constructive trust over all fees paid by the Nominal Defendants and an award of attorney's fees and litigation cost.
After seven years of litigation, the parties in this case finally reached a settlement agreement. Pursuant to the Stipulation, all disputes asserted or that could be asserted in the complaint will be finally and completely resolved. In exchange for this, the UBS Defendants will pay the Funds $15,000,000 in cash (the “Settlement Amount”) and for fees and expense award in an amount up to 33% of the Settlement Amount. Fees and expenses will be paid from interests earned by the Settlement Amount. The Settlement Fund, less any fees and expenses, will be allocated among the Funds pro rata, based upon the market value of their holdings of bonds issued by Puerto Rico issuers and shares of Puerto Rico bond funds as of January 31, 2014.
On August 26, 2022, final judgment based on the settlement agreement was entered by the Puerto Rico Commonwealth Court. Disbursement of settlement funds is pending further court determination as to the allocation of certain litigation expenses. |
RAUL E. CASASNOVAS BALADO, LOLITA G. DE CASASNOVAS, DORIS LÓPEZ GARCÍA, REYNALDO QUINTANA LATORRE, MANUEL PORRO AS TRUSTEE FOR MANUEL PORRO RETIREMENT PLAN, RAQUEL SILVA RAMÍREZ, ROMUALDO RIVERA, AURIMIR AROCHO TORRES, MANUEL MARTINEZ UMPIERRE, GLAFIRA PORRO VIZCARRA, SARIBEL MATIENZO, BLANCA ORTEGA, FIDEICOMISO PUNTA GORDA, PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Plaintiffs.
UBS Financial Services, INC.; UBS Financial Services Incorporated of Puerto Rico; UBS Trust Company of Puerto Rico; Mario S. Belaval; Miguel A. Ferrer; Vicente J León; Carlos V. Ubiñas; José Villamil; Agustín Cabrer-Roig; Gabriel Dolagaray Balado; Carlos Nido; Luis M. Pellot-González; Clotilde Pérez; Leslie Highley Jr., Stephen C. Roussin; Does 1-100; and Insurance Companies 1-100, Defendants. PUERTO RICO FIXED INCOME FUND, INC. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND II, INC. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.)., PUERTO RICO FIXED INCOME FUND III, INC. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND IV, INC. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND V, INC. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.), PUERTO RICO FIXED INCOME FUND VI, INC. (now Tax-Free Fixed Income Fund VI for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO TARGET MATURITY FUND, INC. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.), PUERTO RICO AAA PORTFOLIO BOND FUND, INC. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc., PUERTO RICO AAA PORTFOLIO BOND FUND II, INC. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.), TAX-FREE PUERTO RICO FUND, INC. (now Tax Free Fund for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO FUND II, INC. (now Tax Free Fund II for Puerto Rico Residents, Inc., TAX-FREE PUERTO RICO TARGET MATURITY FUND, INC. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.), and PUERTO RICO MORTGAGE-BACKED & U.S. GOVERNMENT SECURITIES FUND, INC. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.), Nominal Defendants
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF PUERTO RICO
Title III case filed under the Puerto Rico Oversight, Management and Economic Stability Act ("PROMESA"), the Oversight Board representing the Employees Retirement System of the Government of Puerto Rico 17-3566:
Adversary Proceeding No. 17-0213: |
Action filed by the Oversight Board, representing the ERS, seeking declaratory judgment stating that the security interests asserted by Defendants and described in a security agreement, pursuant to the pension fund bonding resolution of 2008 were not properly perfected. Additionally, plaintiffs sought declaratory judgment stating that Defendants did not have a perfected security interests in loans made by the ERS or any proceeds received on account of said loans. Even if they did have perfected security interests, Section 552 of the Bankruptcy Code operates to cut off that lien in post-petition assets of the ERS.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. The confirmation order has been appealed to the Court of Appeals for the First Circuit by various organizations that represent some public-school teachers and educators participating in the Commonwealth’s pension system, that object to the manner in which the Plan treats their claim to current and future pension plans. The Confirmation Order was affirmed. The appealing parties filed a Certiorari before the Supreme Court, and the Supreme Court denied expedition of the Certiorari.
Another group of creditors object the treatment of their claims under the Plan, because it violates the takings clause of the Fifth Amendment of the United States Constitution. The Court of Appeals affirmed the District Court’s decision.
The FOMB has informed the Court that on the effective date of the Plan (March 15, 2022), the ERS cases were deemed dismissed and/or denied with prejudice. Accordingly, this case is effectively terminated.
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The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Defendants.
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Adversary Proceedings 17-0219 and 17-0220 |
Action filed by certain ERS Bondholder, seeking declaratory judgment, stating that (i) Joint Resolution 188 violated the automatic stay and was void ab initio; (ii) any transfer of pledged property pursuant to Resolution 188 would result in unjust enrichment of the Commonwealth; (iii) the collateral was not for public use, within the meaning of the United States and the Puerto Rico Constitution; (iv) Resolution 188 constitutes a violation of the takings and contracts clauses in the United States and the Puerto Rico Constitution; and (v) requesting a determination of the ERS bondholders' secure status in the ERS Title III case.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated.
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Altair Global Credit Opportunities Fund (A), LLC; Andalusian Global Designated Activity Company; Glendon Opportunities Fund, L.P.; Mason Capital Master Fund LP; Nokota Capital Master Fund L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Ocher Rose, L.L.C.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Bond Fund II, Inc.; Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & US Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc. II; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund (this Fund is being liquidated), Plaintiffs.
The Commonwealth of Puerto Rico; the Financial Oversight and Management Board of the Commonwealth of Puerto Rico; the Puerto Rico Fiscal Agency and Financial Advisory Authority; the Employees Retirement System of the Commonwealth of Puerto Rico; Governor Ricardo Roselló, in his official capacity as the Governor of Puerto Rico; and Raúl Maldonado, in his capacity as Secretary of the Treasury of the Commonwealth of Puerto Rico, Defendants.
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Adversary Proceeding 19-00359 |
Action filed by Plaintiffs to avoid and recover alleged fraudulent transfers made to Defendants and to disallow claims filed by Defendants in the Title III cases.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated.
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The Special Claims Committee of the Financial Oversight and Management Board for Puerto Rico and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as co-trustees of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Defendants 1H-78H, which were not disclosed in the complaint, but which include Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund VI, Inc. (now Tax Free Fixed Income Fund VI for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Mortgaged-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgaged-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax-Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax-Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund.
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Adversary Proceeding 19-00367 |
This action was filed by the Oversight Board, representing the Employees Retirement System of the Government of Puerto Rico (“ERS”) to determine the scope of the ERS Bondholders asserted security interests in the Pledged Property that serves as collateral of the ERS Bonds.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as Section 926 trustee of the Commonwealth of Puerto Rico, Plaintiffs
Glendon Opportunities Fund, L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund (now Puerto Rico Residents Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund II, Inc.; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.; Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Resident, Inc.); UBS IRA Select Growth & Income Puerto Rico Fund.
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Adversary Proceeding 19-00359 |
Action filed by Plaintiffs to avoid and recover alleged fraudulent transfers made to Defendants and to disallow claims filed by Defendants in the Title III cases.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated.
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The Special Claims Committee of the Financial Oversight and Management Board for Puerto Rico and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as co-trustees of the Employees Retirement System of the Government of Puerto Rico, Plaintiffs
Defendants 1H-78H, which were not disclosed in the complaint, but which include Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund VI, Inc. (now Tax Free Fixed Income Fund VI for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Mortgaged-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgaged-Backed & Income Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund, Inc. (now Tax-Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax-Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Residents, Inc.); and UBS IRA Select Growth & Income Puerto Rico Fund.
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Adversary Proceeding 19-00367 |
This action was filed by the Oversight Board, representing the Employees Retirement System of the Government of Puerto Rico (“ERS”) to determine the scope of the ERS Bondholders asserted security interests in the Pledged Property that serves as collateral of the ERS Bonds.
The parties reached an agreement to settle this case and the case is stayed until after thirty (30) days after the District Court approves or denies the Commonwealth Joint Plan of Adjustment. The Commonwealth Plan of Adjustment was confirmed on January 18, 2022, with an effective date which occurred on March 15, 2022. Accordingly, this case is effectively terminated. |
The Financial Oversight and Management Board for Puerto Rico, as representative of the Employees Retirement System of the Government of the Commonwealth of Puerto Rico, and the Official Committee of Unsecured Creditors of all Title III Debtors (other than COFINA), as Section 926 trustee of the Commonwealth of Puerto Rico, Plaintiffs
Glendon Opportunities Fund, L.P.; Oaktree-Forrest Multi-Startegy, LLC (Series B); Oaktree Opportunities Fund IX, L.P.; Oaktree Opportunities Fund IX (Parallel 2), L.P.; Oaktree Value Opportunities Fund, L.P.; Puerto Rico AAA Portfolio Bond Fund, Inc. (now Tax-Free High Grade Portfolio Bond Fund for Puerto Rico Residents, Inc.); Puerto Rico AAA Portfolio Bond Fund II, Inc. (now Tax-Free High Grade Portfolio Bond Fund II for Puerto Rico Residents, Inc., Inc.); Puerto Rico AAA Portfolio Target Maturity Fund, Inc. (now Tax-Free High Grade Portfolio Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund, Inc. (now Tax-Free Fixed Income Fund for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund II, Inc. (now Tax-Free Fixed Income Fund II for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund III, Inc. (now Tax-Free Fixed Income Fund III for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund IV, Inc. (now Tax-Free Fixed Income Fund IV for Puerto Rico Residents, Inc.); Puerto Rico Fixed Income Fund V, Inc. (now Tax-Free Fixed Income Fund V for Puerto Rico Residents, Inc.); Puerto Rico GNMA & U.S. Government Target Maturity Fund, Inc. (now GNMA & U.S. Government Target Maturity Fund for Puerto Rico Residents, Inc.); Puerto Rico Investors Bond Fund (now Puerto Rico Residents Bond Fund I; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund, Inc.; Puerto Rico Investors Tax-Free Fund II, Inc.; Puerto Rico Investors Tax-Free Fund III, Inc.; Puerto Rico Investors Tax-Free Fund IV, Inc.; Puerto Rico Investors Tax-Free Fund V, Inc.; Puerto Rico Investors Tax-Free Fund VI, Inc.; Puerto Rico Mortgage-Backed & U.S. Government Securities Fund, Inc. (now U.S. Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.; Tax-Free Puerto Rico Fund, Inc. (now Tax Free Fund for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Fund II, Inc. (now Tax Free Fund II for Puerto Rico Residents, Inc.); Tax-Free Puerto Rico Target Maturity Fund, Inc. (now Tax-Free Target Maturity Fund for Puerto Rico Resident, Inc.); UBS IRA Select Growth & Income Puerto Rico Fund.
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Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc.
In planning and performing our audit of the financial statements of US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc. (the “Company”) as of and for the year ended September 30, 2022, in accordance with the standards of the Public Company Accounting Oversight Board (United States), we considered the Company’s internal control over financial reporting, including controls over safeguarding securities, as a basis for designing our auditing procedures for the purpose of expressing our opinion on the financial statements and to comply with the requirements of Form N-CEN, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
The management of the Company is responsible for establishing and maintaining effective internal control over financial reporting. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Our consideration of the Company’s internal control over financial reporting was for the limited purpose described in the first paragraph and would not necessarily disclose all deficiencies in internal control that might be material weaknesses under standards established by the Public Company Accounting Oversight Board (United States). However, we noted no deficiencies in the Company’s internal control over financial reporting and its operation, including controls over safeguarding securities, that we consider to be a material weakness as defined above as of September 30, 2022.
This report is intended solely for the information and use of management and the Board of Directors of US Mortgage-Backed & Income Fund for Puerto Rico Residents, Inc. and the Securities and Exchange Commission and is not intended to be and should not be used by anyone other than these specified parties.
/s/ Ernst & Young LLP
New York, New York
November 29, 2022