Dear Fellow Shareholders:

The Magnetics Fund continues to deploy capital to our local businesses. We continue to engage with high quality borrowers, issuing solid collateralized short- term notes at around 8%. In keeping with our ten-year record, there were no defaults in 2019.

Circumstances have not been kind to fixed income investors. Sovereign debt yields are paltry, Germany still negative. Even the US ten year, more from flight to safety, is down. (At this writing 1.35%). Additionally, the quest for yield has buoyed the equity markets, weather those interested in capital appreciation, or dividend. Fixed income investors have also been seeking yield in emerging markets, resulting in some questionable transactions. For instance, Angola recently sold $3 billion of sovereign debt. Sovereign debt now amounts to $70 trillion representing 80% of global GDP. This is not a comfortable debt environment.

To that end The Magnetic Fund continues to generate outsized yield with relative safety. All our loans are local and tangible and our 18-24 month horizon allows our borrowers to execute their business model without undue cash flow strain. While interesting to examine global debt scenarios, The Magnetic Fund remains committed to a simple thesis: deploying capitol to small quality borrowers at an enhanced but not onerous rate. We anticipate another dull year of returning approximately 8% to our shareholders.


The Magnetics Investment Team