5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH &RPPXQLW\$VVjQY6ODWHUHWDO (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU )LOH 1DPH DS 5(0$1' IRU IXUWKHU SURFHHGLQJV FRQVLVWHQW ZLWK WKLV RSLQLRQ 81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB 6287+:(67 :,//,$0621 ; &2817< &20081,7< $662&,$7,21 ,1&DQRQ 1R SURILW7HQQHVVHH&RUSRUDWLRQ 3ODLQWLII$SSHOODQW ! Y 52'1(< ( 6/$7(5LQKLV RIILFLDOFDSDFLW\DV6HFUHWDU\ RIWKH8QLWHG6WDWHV 'HSDUWPHQWRI7UDQVSRUWDWLRQ s$1( ) *$59(<LQKHU RIILFLDOFDSDFLW\DV$FWLQJ $GPLQLVWUDWRU)HGHUDO +LJKZD\$GPLQLVWUDWLRQ s2+1 %58&( 6$/760$1 65 LQKLVRIILFLDOFDSDFLW\DV &RPPLVVLRQHU7HQQHVVHH 'HSDUWPHQWRI7UDQVSRUWDWLRQ s$0(6 6&$3(//$72 'HIHQGDQWV$SSHOOHHV 1 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW VHFRQGWHVWWKDWWKHUHOHYDQWIHGHUDOGHFLVLRQPDNHUVGRQRW IRUWKH0LGGOH'LVWULFWRI7HQQHVVHHDW1DVKYLOOH KDYHDXWKRULW\WRH[HUFLVHVXIILFLHQWFRQWURORUUHVSRQVLELOLW\ 1Rn7RGGs&DPSEHOO'LVWULFWsXGJH RYHU5RXWH6RXWKVRDVWRLQIOXHQFHWKHRXWFRPHRIWKH SURMHFWZHDJUHHQRSUHOLPLQDU\LQMXQFWLRQVKRXOGLVVXH $UJXHG6HSWHPEHU 9,&21&/86,21 'HFLGHGDQG)LOHG0DUFK %DVHG RQ RXU DQDO\VHV XQGHU RXU DOWHUQDWLYH WHVWV ZH %HIRUH%2**6DQG0225(&LUFXLWsXGJHV'2:' FRQFOXGHWKDWWKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQE\ 'LVWULFWsXGJH GHFLGLQJ WKDW WKH $VVRFLDWLRQ ZDV XQDEOH WR VKRZ D VXEVWDQWLDOOLNHOLKRRGRIVXFFHVVRQWKHPHULWVRILWVFODLPIRU BBBBBBBBBBBBBBBBB DSUHOLPLQDU\LQMXQFWLRQKDOWLQJFRQVWUXFWLRQRI 5RXWH 6RXWK7KHUHIRUHZH$)),50WKHGLVWULFWFRXUWjVGHQLDORI &2816(/ WKH PRWLRQ IRU D SUHOLPLQDU\ LQMXQFWLRQ :H REVHUYH KRZHYHUWKDWRQO\WKHPRWLRQIRUDSUHOLPLQDU\LQMXQFWLRQ $5*8('sRH:0F&DOHE+HQGHUVRQYLOOH7HQQHVVHHIRU ZDVEHIRUHWKHGLVWULFWFRXUW7KHGLVSRVLWLRQRIWKLVFDVHGRHV $SSHOODQW 0LFKDHO / 5RGHQ $66,67$17 81,7(' QRWGLVSRVHRIWKH$VVRFLDWLRQjVRWKHUFODLPVIRUDGHFODUDWRU\ 67$7(6 $77251(< 1DVKYLOOH 7HQQHVVHH 0LFKDHO : MXGJPHQW DQG D SHUPDQHQW LQMXQFWLRQ 7KXV ZH DOVR &DWDODQR 2)),&( 2) 7+( $77251(< *(1(5$/ 1DVKYLOOH7HQQHVVHHIRU$SSHOOHHV21%5,()s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mGHVHJPHQWDWLRQl WKHRU\ .$5(1 1(/621 0225( &LUFXLW sXGJH 3ODLQWLII $SSHOODQW 6RXWKZHVW :LOOLDPVRQ &RXQW\ &RPPXQLW\ :H QHHG QRW GHFLGH IRU SXUSRVHV RI WKLV FDVH XQGHU ZKDW $VVRFLDWLRQm$VVRFLDWLRQlDSSHDOVWKHGLVWULFWFRXUWjVGHQLDO FLUFXPVWDQFHV WKH WRWDOLW\ RI IHGHUDO DJHQF\ LQYROYHPHQW LQ D QRQIHGHUDO RI LWV DSSOLFDWLRQ IRU D SUHOLPLQDU\ LQMXQFWLRQ WR KDOW SURJUDP ZRXOG ULVH WR WKH OHYHO RI mPDMRU IHGHUDO DFWLRQl ZKHQ DW OHDVW FRQVWUXFWLRQ RQ 5RXWH 6RXWK D PLOH OHQJWK RI RQH IHGHUDO DJHQF\ KDV MXULVGLFWLRQ RYHU D SRUWLRQ RI WKH VWDWH SURMHFW :H RQO\ QRWH WKDW XQGHU VRPH FLUFXPVWDQFHV VXFK IHGHUDO LQYROYHPHQW FOHDUO\ ZRXOG LQGLFDWH WKDW WKH IHGHUDO DJHQFLHV KDYH DXWKRULW\ WR H[HUFLVH VXIILFLHQW FRQWURO RU UHVSRQVLELOLW\ RYHU WKH QRQIHGHUDO SURMHFW VR DV WR 7KH +RQRUDEOH 'DYLG ' 'RZG sU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU LQIOXHQFH WKH RXWFRPH RI WKH SURMHFW VXIILFLHQW WR FUHDWH D mPDMRU IHGHUDO WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ DFWLRQl 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO 0DFKW)GDW7KLVFDVHZRXOGEHGLIIHUHQWLIWKH KLJKZD\ZKLFKZDVGHVLJQHGWRE\SDVV1DVKYLOOH7HQQHVVHH $VVRFLDWLRQVRXJKWDQLQMXQFWLRQEHFDXVH)+:$KDGUHIXVHG E\UXQQLQJVRXWKRIWKHFLW\DQGFRQQHFWLQJ,QWHUVWDWHm, RUKDGQRW\HWKDGWKHRSSRUWXQLW\WRUHYLHZWKHLQWHUFKDQJH l:HVWZKLFKUDGLDWHVZHVWRIWKHFLW\DQG,(DVW7KH ($VRUWKH$UP\&RUSVRI(QJLQHHUVKDGQRW\HWUHVSRQGHG LVVXH EHIRUH XV LV ZKHWKHU WKH GLVWULFW FRXUW DEXVHG LWV WR WKH VWDWHjV ZHWODQG ($V $V WKH GLVWULFW FRXUW IRXQG GLVFUHWLRQ LQ GHQ\LQJ WKH $VVRFLDWLRQjV PRWLRQ IRU D KRZHYHU DOO DSSOLFDEOH IHGHUDO DJHQFLHV IXOILOOHG RU ZHUH SUHOLPLQDU\LQMXQFWLRQDIWHUILQGLQJWKDWWKH$VVRFLDWLRQZDV IXOILOOLQJ WKHLU GXW\ SXUVXDQW WR WKHLU UHVSHFWLYH VWDWXWRU\ QRWOLNHO\WRVXFFHHGRQWKHPHULWVRILWVFDVH7KHGLVWULFW MXULVGLFWLRQV WR LVVXH WKH DSSURSULDWH HQYLURQPHQWDO FRXUWHQWHUWDLQHGWKH$VVRFLDWLRQj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mPDMRU )HGHUDO DFWLRQ>@l XQGHU 86& VWDWHG WKH $VVRFLDWLRQ LV IUHH WR FRQWHVW WKH DJHQFLHVj & VXFK WKDW WKH )HGHUDO +LJKZD\ $GPLQLVWUDWLRQ UHVSRQVHVDVLQVXIILFLHQWXQGHU1(3$VKRXOGLWVRFKRRVH m)+:$lLVUHTXLUHGWRUHVSRQGWRWKHVWDWHjV(QYLURQPHQWDO 1R FRXUW KDV HYHU DSSURYHG WKH NLQG RI LQMXQFWLRQ WKH $VVHVVPHQW m($l ZLWK FHUWDLQ GRFXPHQWDWLRQ RQ WKH $VVRFLDWLRQUHTXHVWV %HFDXVHZHFRQFOXGHSXUVXDQWWRRXU KLJKZD\jVHQYLURQPHQWDOLPSDFW%HFDXVHZHFRQFOXGHWKDW WKHGLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQZH$)),50WKH GHQLDO RI WKH SUHOLPLQDU\ LQMXQFWLRQ DQG 5(0$1' IRU IXUWKHUSURFHHGLQJVFRQVLVWHQWZLWKWKLVRSLQLRQ :H QRWH WKDW WKH DSSOLFDEOH DQDO\VLV LV QRW QHFHVVDULO\ KRZ ODUJH D SHUFHQWDJH RI WKH SURMHFW UHTXLUHV IHGHUDO DSSURYDO 7KH GLVWULFW FRXUW ,)$&76 REVHUYHG WKDW mWKH DUHDV FRQWUROOHG E\ )+:$ WKH 1DWLRQDO 3DUN 6HUYLFH DQG WKH $UP\ &RUSV RI (QJLQHHUV FRQVWLWXWH D YHU\ VPDOO SHUFHQWDJH RI WKH RYHUDOO PLOH 6RXWK SURMHFWl 6RXWKZHVW ,,, ) 6XSS G DW 7KLVFDVHFRPHVWRXVRQDSSHDOIRUWKHVHFRQGWLPHDQG +DG QRQH RI WKHVH DJHQFLHV KDG WKH RSSRUWXQLW\ WR UHYLHZ WKH VWDWHjV ZH WKHUHIRUH LQFRUSRUDWH DV IDFWXDO EDFNJURXQG RXU HDUOLHU SODQV IRU FRQVWUXFWLQJ WKH KLJKZD\ ZKHQ WKH VWDWH KDG EHJXQ WR EXLOG RSLQLRQ6RXWKZHVW:LOOLDPVRQ&RXQW\&RPPXQLW\$VVjQY YDULRXV VHJPHQWV KRZHYHU WKH $VVRFLDWLRQ ZRXOG PRUH HDVLO\ KDYH EHHQ 6ODWHU)GWK&LU6RXWKZHVW,,7KH DEOH WR GHPRQVWUDWH WKDW VWDWH DFWLRQ ZDV OLPLWLQJ IHGHUDO GHFLVLRQPDNHUVj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mPDMRU )HGHUDO DFWLRQVl GHVSLWH D IHGHUDO DJHQF\jV ODFN RI MXULVGLFWLRQ RYHU WKH QRQIHGHUDO SURMHFW ZKHQ WKH FRXUW GHWHUPLQHV HLWKHU WKDW WKH VWDWH ZDV LPSURSHUO\ DWWHPSWLQJ WR mVHJPHQWl LWV SURMHFW LQWR GLVFUHWH VHFWLRQV LQ 7KH $VVRFLDWLRQ QDPHG DV GHIHQGDQWV 5RGQH\ ( 6ODWHU 6HFUHWDU\ RUGHU WR FLUFXPYHQW 1(3$ UHTXLUHPHQWV RU WKDW WKH VWDWH ZDV RI WKH 'HSDUWPHQW RI 7UDQVSRUWDWLRQ sDQH ) *DUYH\ $FWLQJ LPSURSHUO\ DWWHPSWLQJ WR mGHVHJPHQWl D PDMRU IHGHUDO DFWLRQ WR SHUPLW $GPLQLVWUDWRU RI WKH )+:$ sDPHV 6FDSHOODWR 'LYLVLRQ $GPLQLVWUDWRU FRQVWUXFWLRQ RI RQH VHJPHQW ZLWKRXW FRPSO\LQJ ZLWK 1(3$ 6HH 5RVV RI WKH )+:$ DQG sRKQ %UXFH 6DOWVPDQ 6U WKH &RPPLVVLRQHU RI WKH )G DW KROGLQJ WKDW KLJKZD\ ZKLFK ZDV SODQQHG LQ FRQMXQFWLRQ 7HQQHVVHH 'HSDUWPHQW RI 7UDQVSRUWDWLRQ m7'27l :H ZLOO UHIHU WR WKH ZLWK )+:$ DQG IXQGHG E\ &RQJUHVV ZDV PDMRU IHGHUDO DFWLRQ DQG WKDW 6HFUHWDU\ RI WKH 'HSDUWPHQW RI 7UDQVSRUWDWLRQ DQG WKH )+:$ RIILFLDOV 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO DOWHUQDWLYHURXWHDURXQG1DVKYLOOHEHJLQVDW,:HVWUXQV VWDWHWKHFUXFLDOGLVWLQFWLRQEHWZHHQWKH$VVRFLDWLRQjVFODLPV VRXWK RI WKH FLW\ WKURXJK VHYHUDO FRXQWLHV LQFOXGLQJ DQG WKRVH LQ *LOFKULVW ZKLFK WKH $VVRFLDWLRQ XUJHV XV WR :LOOLDPVRQ&RXQW\DQGFURVVHVWZRIHGHUDOLQWHUVWDWHV, IROORZLVWKDWWKHUHOHYDQWIHGHUDODJHQFLHVLQ*LOFKULVWKDG 6RXWK DQG , EHIRUH WHUPLQDWLQJ DW , (DVW 7KH QRW \HW KDG WKH RSSRUWXQLW\ WR LVVXH WKHLU HQYLURQPHQWDO $VVRFLDWLRQjVVXLWDOOHJHGWKDWGHIHQGDQWVZHUHYLRODWLQJWKH UHYLHZRIWKHFRXQW\jVSURSRVDOSULRUWRWKHLQLWLDWLRQRIWKH 1DWLRQDO (QYLURQPHQWDO 3ROLF\ $FW m1(3$l 86& KLJKZD\jVFRQVWUXFWLRQGHVSLWHWKHIDFWWKDWWKHDJHQFLHVKDG HW VHT DQG WKH ,QWHUPRGDO 6XUIDFH 7UDQVSRUWDWLRQ RU ZRXOGKDYH MXULVGLFWLRQ RYHU FHUWDLQ VHFWLRQV RI WKH (IILFLHQF\ $FWm,67($l86&,WDOVR KLJKZD\ &RQFHUQHGWKDWWKHIHGHUDODJHQFLHVjKDQGVZRXOG DOOHJHGDVWDWHODZFODLPXQGHUWKH3HWUROHXP3URGXFWVDQG EHWLHGLIWKHVWDWHZHUHSHUPLWWHGWRFRQWLQXHFRQVWUXFWLQJWKH $OWHUQDWLYH )XHOV 7D[ $FW 7HQQ &RGH $QQ KLJKZD\WKH*LOFKULVWFRXUWGHWHUPLQHGWKDWWKHDJJUHJDWHRI 7KHGLVWULFWFRXUWLQDPHPRUDQGXPRSLQLRQGLVPLVVHGWKH WKHIHGHUDODSSURYDOVQHHGHGIRUWKHSURMHFWZDVVXIILFLHQWWR $VVRFLDWLRQjV FODLPV 6HH 6RXWKZHVW :LOOLDPVRQ &RXQW\ IHGHUDOL]H WKH KLJKZD\ VR WKDW WKH FRXUW FRXOG HQMRLQ VWDWH &RPPXQLW\$VVjQY6ODWHU)6XSS0'7HQQ FRQVWUXFWLRQ LQ RUGHU WR DOORZ WKH IHGHUDO DJHQFLHV WLPH WR 6RXWKZHVW , 7KH GLVWULFW FRXUW IRXQG WKH 1(3$ IXOILOOWKHLU1(3$REOLJDWLRQV FODLPV EDUUHG E\ WKH DSSOLFDEOH VWDWXWH RI OLPLWDWLRQV DQG GLVPLVVHGWKH,67($FODLPDIWHUILQGLQJWKDWWKHVWDWXWHGLG 7KHVLWXDWLRQZHDUHFRQIURQWHGZLWKLVQRWRQHLQZKLFK WKH$VVRFLDWLRQVHHNVWRHQMRLQmVWDWHDFWLRQRQDQHQWLUH SURMHFW XQWLO WKH IHGHUDO DJHQFLHV WKDW PXVW DSSURYH SDUWLFXODUSRUWLRQVRIWKHSURMHFWKDYHFRPSOLHGZLWK1(3$l DV WKH mIHGHUDO GHIHQGDQWVl 7KH SRUWLRQ RI WKH KLJKZD\ IURP , (DVW WR , LV FRPSOHWH DQG LV QRW FRQWHVWHG LQ WKLV ODZVXLW 7KH RWKHU WZR VHFWLRQV RI WKH KLJKZD\ :LOOLDPVRQ &RXQW\ DQG WKH VWDWHjV IRUPDO DSSOLFDWLRQ WR WKH )+:$ IURP , WR WKH , 6RXWK LQWHUFKDQJH DQG IURP , 6RXWK WR WKH , LQ 1RYHPEHU IRU LQWHUVWDWH VWDWXV ZKLFK ZDV VXEVHTXHQWO\ :HVW LQWHUFKDQJH DUH DW YDULRXV VWDJHV RI FRQVWUXFWLRQ DQG DUH DW LVVXH LQ ZLWKGUDZQ :H DJUHH ZLWK WKH GLVWULFW FRXUWjV DVVHVVPHQW WKDW WKHVH DUH WKLV DSSHDO QRW WKH VRUW RI IHGHUDO DJHQF\ DSSURYDOV WKDW PD\ WUDQVIRUP D QRQIHGHUDO SURMHFW LQWR D PDMRU IHGHUDO DFWLRQ 6HH 6RXWKZHVW ,,, ) 6XSS G DW 7KH\ DOVR GR QRW UHVWULFW D IHGHUDO GHFLVLRQPDNHUjV FKRLFH RI 1(3$ ZKLFK LV mRXU EDVLF QDWLRQDO FKDUWHU IRU SURWHFWLRQ RI WKH UHDVRQDEOH DOWHUQDWLYHV UHJDUGLQJ DSSURYDOV IRU FRQVWUXFWLRQ RI WKH HQYLURQPHQWl &)5 D UHTXLUHV DOO IHGHUDO DJHQFLHV WR KLJKZD\ XQGHU RXU ILUVW WHVW SUHSDUH DQ HQYLURQPHQWDO LPSDFW VWDWHPHQW RU m(,6l IRU mPDMRU )HGHUDO DFWLRQV VLJQLILFDQWO\ DIIHFWLQJ WKH TXDOLW\ RI WKH KXPDQ HQYLURQPHQWl 86& & 7KH UHVSRQVLEOH IHGHUDO RU LQ VRPH FLUFXPVWDQFHV 7KLV FDVH LV DOVR QRW OLNH WKH RQH LQ6DYH %DUWRQ &UHHN LQ ZKLFK VWDWH DJHQF\ PD\ ILUVW FKRRVH WR SUHSDUH DQ HQYLURQPHQWDO DVVHVVPHQW RU WKH )LIWK &LUFXLW HYDOXDWHG ZKHWKHU WKH FRQVWUXFWLRQ RI VWDWHIXQGHG m($l D SUHOLPLQDU\ GRFXPHQW ZKLFK m>E@ULHIO\ SURYLGH>V@ VXIILFLHQW KLJKZD\ VHJPHQWV FRQVWLWXWHG D mPDMRU IHGHUDO DFWLRQl EHFDXVH WKH HYLGHQFH DQG DQDO\VLV IRU GHWHUPLQLQJ ZKHWKHU WR SUHSDUH DQ SURSRVHG KLJKZD\ RI ZKLFK WKH\ ZHUH D SDUW PLJKW RQH GD\ EH HOLJLEOH IRU HQYLURQPHQWDO LPSDFW VWDWHPHQW RU D ILQGLQJ RI QR VLJQLILFDQW LPSDFWl IHGHUDO IXQGLQJ 1RWLQJ WKDW m>W@KH RQO\ IHGHUDO WRXFKLQJ RI WKH SURMHFWV &)5 $IWHU FRQVLGHULQJ WKH ($ WKH DJHQF\ PD\ WKHQ GHFLGH DW DOO FRQVLVWV RI VWDWH RIILFLDOV WDNLQJ DGYDQWDJH RI WKH )+:$jV HDUO\ WR LVVXH HLWKHU D ILQGLQJ RI QR VLJQLILFDQW LPSDFW m)216,l RU D PRUH FRRUGLQDWLRQ SURFHGXUH DQG EHJLQQLQJ WR FRPSLOH 1(3$ FRPSOLDQFH GHWDLOHG (,6 ,VVXDQFH RI HLWKHU GRFXPHQW FRQVWLWXWHV mILQDO DJHQF\ GRFXPHQWDWLRQ VR DV WR SUHVHUYH VWDWH HOLJLELOLW\ IRU IHGHUDO IXQGLQJl WKH DFWLRQl IRU SXUSRVHV RI 1(3$ DFWLRQV EURXJKW SXUVXDQW WR WKH )LIWK &LUFXLW IRXQG WKDW QHLWKHU KLJKZD\ VHJPHQW KDG m\HW DFTXLUHG WKH $GPLQLVWUDWLYH 3URFHGXUH $FW DQG WULJJHUV WKH UHOHYDQW VWDWXWH RI VWDWXV RI D IRUPDO SURSRVDO UHTXLULQJ IHGHUDO DFWLRQl 6DYH %DUWRQ &UHHN OLPLWDWLRQV VHH 86& RQ DQ\ FODLPV DULVLQJ IURP WKH DJHQF\ )G DW ,Q RXU FDVH LQ FRQWUDVW WKH )+:$ KDV LVVXHG WZR DFWLRQ 6HH 6RXWKZHVW ,, )G DW )216,V DOUHDG\ LQ UHVSRQVH WR VWDWH SURSRVDOV 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVj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jVGHFLVLRQ2QWKH1(3$ $VWKHFRXUWQRWHGm>D@OWKRXJK DUHYLHZRIHQYLURQPHQWDO FODLPV ZKLFK LQYROYHG DOOHJDWLRQV WKDW WKH GHIHQGDQWV LPSDFWE\)(5&RIDUHDVRXWVLGHRILWVUHTXLUHGMXULVGLFWLRQ YLRODWHG)+:$UHJXODWLRQVWKDWLPSOHPHQW1(3$DVZHOODV PLJKW EH GHVLUDEOH 1(3$ FDVH ODZ UHTXLUHV RQO\ WKDW DQ D YLRODWLRQ RI 1(3$ LWVHOI WKLV FRXUW DIILUPHG WKH GLVWULFW DJHQF\ FRPSO\ ZLWK WKH µVWDWXWRU\ PLQLPDjl ,G DW FRXUWjV GLVPLVVDO RQ VWDWXWHRIOLPLWDWLRQV JURXQGV DV WR TXRWLQJ 9HUPRQW @lXQGHU :H QRWH WKDW WKH DJHQFLHVj ODFN RI MXULVGLFWLRQ RYHU WKH KLJKZD\ 86&&7KLVFRXUWUHPDQGHGWRWKHGLVWULFWFRXUW FRUULGRU ZRXOG QRW LQIOXHQFH RXU DQDO\VLV XQGHU WKH ILUVW WHVW QDPHO\ ZKHWKHU WKH IHGHUDO GHFLVLRQPDNHUVj FKRLFH RI UHDVRQDEOH DOWHUQDWLYHV WR GHWHUPLQH ZKHWKHU LQGHHG WKH KLJKZD\ FRUULGRU ZDV D ZDV UHVWULFWHG E\ WKH VWDWHjV DFWLRQV :H HVWDEOLVKHG XQGHU RXU ILUVW WHVW PDMRUIHGHUDODFWLRQIRU1(3$SXUSRVHV:HWKHQYDFDWHG WKDW WKH IHGHUDO GHFLVLRQPDNHUV LQ WKLV FDVH GLG QRW UHQGHU GHFLVLRQV WKHGLVWULFWFRXUWjVGHFLVLRQZLWKUHVSHFWWRWKH,67($FODLP XQGHU SUHVVXUH IURP WKH VWDWHjV DFWLYLWLHV +DG ZH FRQFOXGHG WKDW WKH DQGUHPDQGHGIRUIXUWKHUSURFHHGLQJVQRWLQJWKDWWKHGLVWULFW IHGHUDO GHFLVLRQPDNHUVj FKRLFHV ZHUH OLPLWHG E\ VWDWH DFWLRQV WKHQ ZH ZRXOG KDYH GHHPHG WKH QRQIHGHUDO SURMHFW D mPDMRU IHGHUDO DFWLRQl GHVSLWH WKH DJHQFLHVj ODFN RI MXULVGLFWLRQ :KHQ WKHUH LV QR SUHVVXUH RQ IHGHUDO GHFLVLRQPDNHUV KRZHYHU WKHQ WKH DEVHQFH RI MXULVGLFWLRQ EHFRPHV WKH GHWHUPLQDWLYH IDFWRU 7KLV FRXUW GLVPLVVHG WKH VWDWH GHIHQGDQW 7'27 EHFDXVH LW FRQFOXGHG WKDW WKH $VVRFLDWLRQ FRXOG QRW EULQJ VXLW DJDLQVW WKH DJHQF\ XQGHU 1(3$ ZKLFK GRHV QRW DXWKRUL]H D SULYDWH ULJKW RI DFWLRQ RU WKH 7KH $VVRFLDWLRQ GRHV QRW DOOHJH WKDW WKHUH DUH DQ\ RWKHU SURSRVDOV $GPLQLVWUDWLYH 3URFHGXUH $FW m$3$l 86& ZKLFK GRHV UHODWLQJ WR FRQVWUXFWLRQ RI WKH KLJKZD\ SHQGLQJ EHIRUH DQ\ RWKHU IHGHUDO QRW DSSO\ WR VWDWH DJHQFLHV 6HH 6RXWKZHVW ,, )G DW DJHQF\ ,Q LWV DPHQGHG FRPSODLQW WKH $VVRFLDWLRQ GRHV SRLQW WR VHYHUDO RWKHU IHGHUDO DJHQF\ LQYROYHPHQWV LQ WKH FRQVWUXFWLRQ RI 5RXWH 6RXWK QDPHO\ )+:$jV SDUWLDO IXQGLQJ DQG DSSURYDO RI WKH 1DVKYLOOH /RQJ 7KH ILUVW ($ ZDV DQ DQDO\VLV RI WKH SURSRVHG LQWHUFKDQJHV DW WKH 5DQJH 7UDQVSRUWDWLRQ 3ODQ &RQIRUPLW\ 5HGHWHUPLQDWLRQ UHTXLUHG E\ WKH LQWHUVHFWLRQV RI 5RXWH 6RXWK ZLWK , (DVW DQG , 7KH VHFRQG ($ &OHDQ $LU $FW $PHQGPHQWV RI )+:$ IXQGLQJ RI WKH ZDV DQ DQDO\VLV IRU SURSRVHG LQWHUFKDQJHV DW , 6RXWK DQG , :HVW 1DVKYLOOH0HWURSROLWDQ 3ODQQLQJ 2UJDQL]DWLRQjV 8QLILHG 3ODQQLQJ :RUN %RWK ($V ZHUH SUHSDUHG E\ WKH 7'27 LQ 7KH )+:$ LVVXHG D 3URJUDPV IURP WKURXJK ZKLFK LQFOXGHG WKUHH WUDIILF FDSDFLW\ )216, ZLWK UHVSHFW WR WKH ILUVW ($ LQ )HEUXDU\ DQG ZLWK UHVSHFW WR DQDO\VHV IRU LQWHUFKDQJHV LQ :LOVRQ &RXQW\ 5XWKHUIRUG &RXQW\ DQG WKH VHFRQG LQ 0D\ 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO FRXUW VKRXOG UHYLHZ LWV GHFLVLRQ WR GHFOLQH WR H[HUFLVH IXQGLQJIRU5RXWH6RXWK6HH6RXWKZHVW,,,)6XSS VXSSOHPHQWDOMXULVGLFWLRQRYHUWKHVWDWHODZFODLPLQOLJKWRI GDW,QGHHGVKRXOGWKHVWDWHVHHNIHGHUDOIXQGLQJLQWKH WKH mSRWHQWLDO FRQWLQXHG YLDELOLW\l RI WKH IHGHUDO FODLPV IXWXUHDEVHQWDFKDQJHLQWKHIHGHUDOUHJXODWLRQVLWVIDLOXUHWR 6RXWKZHVW,,)GDW Q FRPSO\ZLWK1(3$ZRXOGPDNHLWLQHOLJLEOHWRUHFHLYHVXFK IXQGLQJ6HH5RVVY)+:$)GWK )ROORZLQJ UHPDQG WKH IHGHUDO GHIHQGDQWV DUJXHG WR WKH &LU m6WDWHV VHHNLQJ IHGHUDO KLJKZD\ IXQGV PXVW GLVWULFWFRXUWWKDWWKHFDVHZDVPRRWWKH$VVRFLDWLRQODFNV VXEPLWWR)+:$DOLVWRISURSRVHGWUDQVSRUWDWLRQSURMHFWV VWDQGLQJWKHUHLVQRSULYDWHULJKWRIDFWLRQXQGHU,67($DQG 8SRQILQDODSSURYDORIWKHSURMHFWDQGFRPSOLDQFHZLWK WKH GRFWULQH RI ODFKHV VKRXOG EDU WKH OLWLJDWLRQ sRLQW DSSOLFDEOH IHGHUDO ODZV DQG UHJXODWLRQV LQFOXGLQJ 1(3$ $SSHQGL[ms$lDW)HGHUDO'HIHQGDQWVj5HVSRQVHRQ )+:$ UHLPEXUVHV WKH VWDWH IRU D SRUWLRQ RI WKH SURMHFWjV 5HPDQG$VWKHGLVWULFWFRXUWQRWHGWKHIHGHUDOGHIHQGDQWV FRVWl6DYH%DUWRQ&UHHN$VVjQY)+:$)GDW FRPSOHWHO\IDLOHGWRDGGUHVVWKLVFRXUWjVTXHVWLRQZKHWKHUWKH Qm,QDGGLWLRQWREHLQJSDUWRIDQ)+:$DSSURYHGIHGHUDO FRQVWUXFWLRQRIWKHFRUULGRURI5RXWH6RXWKFRQVWLWXWHVD DLG KLJKZD\ V\VWHP D SURMHFW PXVW DOVR PHHW WKH PDMRUIHGHUDODFWLRQQRWZLWKVWDQGLQJWKHDEVHQFHRIIHGHUDO UHTXLUHPHQWVRIHQYLURQPHQWDOUHJXODWLRQVWRTXDOLI\DVDQ IXQGLQJVXFKWKDW1(3$UHTXLUHPHQWVDSSO\6HH6RXWKZHVW )+:$ SURMHFWl 7KXV WKHUH LV QR VWDWXWRU\ EDVLV WR :LOOLDPVRQ&RXQW\&RPPXQLW\$VVjQY6ODWHU)6XSS HVWDEOLVK)+:$DXWKRULW\RYHUWKHKLJKZD\FRUULGRU G Q 0' 7HQQ 6RXWKZHVW ,,, m$OWKRXJKWKHSLYRWDOLVVXHLQWKLVFDVHLVZKHWKHU6RXWK 7KLVFDVHSUHVHQWVIDFWVVLPLODUWRWKRVHLQ1RUWK&DUROLQD LV D µPDMRU IHGHUDO DFWLRQj WKH )HGHUDO 'HIHQGDQWV GR QRW Y&LW\RI9LUJLQLD%HDFKLQZKLFK1RUWK&DUROLQDVRXJKWWR DGGUHVV KRZ WKH LVVXH DSSOLHV WR WKH WRWDOLW\ RI WKH IHGHUDO FRPSHO )(5& WR FRQGXFW DQ HQYLURQPHQWDO UHYLHZ RI DOO DFWLRQVDOOHJHGE\WKH3ODLQWLIIl7KH$VVRFLDWLRQWKHQILOHG SRWHQWLDOHIIHFWVRIWKH&LW\jVSLSHOLQHFRQVWUXFWLRQLQFOXGLQJ DQ DPHQGHG FRPSODLQW LQ WKH GLVWULFW FRXUW VHHNLQJ D DQ\ HIIHFWV ZKLFK IHOO RXWVLGH )(5&jV GHFLVLRQPDNLQJ GHFODUDWRU\MXGJPHQWWKDWWKHXQILQLVKHGSRUWLRQRI5RXWH MXULVGLFWLRQ 7KH )RXUWK &LUFXLW HQJDJHG LQ D UHYLHZ RI 6RXWKLVDmPDMRUIHGHUDODFWLRQlDVZHOODVDQRUGHUWRUHTXLUH )(5&jV MXULVGLFWLRQ DQG QRWHG WKDW WKH m)(5& KDV QR WKHIHGHUDOGHIHQGDQWVWRSUHSDUHDQ(,6IRUWKHXQILQLVKHG OLFHQVLQJSRZHURUYHWRSRZHURYHUWKRVHSDUWVRIWKHSLSHOLQH SRUWLRQ RI WKH KLJKZD\ D SUHOLPLQDU\ LQMXQFWLRQ KDOWLQJ WKDW IDOO RXWVLGH RI WKH K\GURSRZHU IDFLOLW\ DW /DNH FRQVWUXFWLRQDQGDSHUPDQHQWLQMXQFWLRQ7KH$VVRFLDWLRQ *DVWRQ>@l 9LUJLQLD %HDFK )G DW 7KH FRXUW SUHVVHGLWV1(3$FODLPVDVZHOODVLWVVWDWHODZFODLPEXW DEDQGRQHG LWV ,67($ FODLP 7KH $VVRFLDWLRQ WKHQ ILOHG D PRWLRQIRUDSUHOLPLQDU\LQMXQFWLRQ $FFRUGLQJ WR &)5 D m>I@HGHUDODLG IXQGV VKDOO QRW SDUWLFLSDWH LQ DQ\ FRVW ZKLFK LV QRW LQFXUUHG LQ FRQIRUPLW\ ZLWK DSSOLFDEOH $IWHU KROGLQJ D KHDULQJ WKH GLVWULFW FRXUW GHQLHG WKH )HGHUDO DQG 6WDWH ODZ )HGHUDO IXQGV VKDOO QRW EH SDLG RQ DFFRXQW RI $VVRFLDWLRQjV PRWLRQ IRU D SUHOLPLQDU\ LQMXQFWLRQ 7KH DQ\ FRVW LQFXUUHG SULRU WR DXWKRUL]DWLRQ E\ WKH $GPLQLVWUDWRU WR WKH 6WDWH GLVWULFW FRXUW ILUVW DVVHVVHG WKH $VVRFLDWLRQjV OLNHOLKRRG RI KLJKZD\ GHSDUWPHQW WR SURFHHG ZLWK WKH SURMHFW l $OWHUQDWLYHO\ WKH VXFFHVV RQ WKH PHULWV RI LWV FODLPV WKH ILUVW SURQJ RI WKH $GPLQLVWUDWRU PD\ DFFRUGLQJ WR E UHWURDFWLYHO\ DSSURYH WKH JUDQW RI IHGHUDODLG IXQGV WR D 6WDWH KLJKZD\ GHSDUWPHQW LI mWKHUH KDV EHHQ UHOHYDQWDQDO\VLVIRUDSUHOLPLQDU\LQMXQFWLRQ$QDO\]LQJWKH VXEVWDQWLDO FRPSOLDQFH ZLWK DOO RWKHU UHTXLUHPHQWV SUHVFULEHG E\ WKH UHOHYDQW VWDWXWRU\ ODQJXDJH DQG DVVRFLDWHG UHJXODWLRQV WKH $GPLQLVWUDWRU DQG IXOO FRPSOLDQFH ZLWK UHTXLUHPHQWV PDQGDWHG E\ GLVWULFWFRXUWQRWHGWKDWmPRVWFLUFXLWFRXUWVORRNWRZKHWKHU )HGHUDO VWDWXWHl &)5 E 8QGHU HLWKHU VFHQDULR IDLOXUH WR D IHGHUDO DJHQF\ KDV WKH DELOLW\ WR LQIOXHQFH RU FRQWURO WKH FRPSO\ ZLWK 1(3$ ZRXOG SUHFOXGH WKH VWDWH IURP UHFHLYLQJ IHGHUDODLG IXQGV 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO 0RUHRYHU LW LV FOHDU WKDW DJHQF\ DSSURYDO RI WKH QRQIHGHUDO DFWLYLW\l ZKHQ DVVHVVLQJ ZKHWKHU VXFK DFWLYLW\ LQWHUFKDQJHVPXVWFRQIRUPZLWK1(3$SURFHGXUHV)+:$ FRQVWLWXWHV D mPDMRU )HGHUDO DFWLRQ>@l XQGHU 1(3$ UHJXODWLRQV VWLSXODWH WKDW 1(3$ DQG WKH &(4 UHJXODWLRQV 6RXWKZHVW,,,)6XSSGDW$IWHUHYDOXDWLQJWKH DSSO\ WR mDFWLRQV ZKHUH WKH $GPLQLVWUDWLRQ H[HUFLVHV QXPHURXV IHGHUDO DFWLRQV ZKLFK WKH $VVRFLDWLRQ DOOHJHV VXIILFLHQWFRQWUROWRFRQGLWLRQWKHSHUPLWRUSURMHFWDSSURYDOl FRQVWLWXWH SURRI RI WKH IHGHUDOL]DWLRQ RI WKH KLJKZD\ WKH &)5D$QmDFWLRQlLQWXUQLVGHILQHGDV DQDFWLYLW\VXFKDVmFKDQJHVLQDFFHVVFRQWUROZKLFKPD\ RU PD\ QRW LQYROYH D FRPPLWPHQW RI )HGHUDO IXQGVl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jV ZKHUH 6RXWK ZLOO FURVV WKH IHGHUDOO\SURWHFWHG 1DWFKH] REOLJDWLRQ WR DSSURYH FKDQJHV WR LQWHUVWDWH LQWHUFKDQJHV 7UDFH 3DUNZD\ FRQVWLWXWHVmPDMRUIHGHUDODFWLRQl 7KH 6HFUHWDU\ RI WKH ,QWHULRUj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jV UHYLHZ DSSURYDO DQG SHUPLWWLQJ $VVRFLDWLRQQRORQJHUFODLPVWKDWWKHVWDWHLVVHHNLQJIHGHUDO WKUHH VHSDUDWH FURVVLQJV RI ZDWHUV RI WKH 8QLWHG 6WDWHV LQFOXGLQJ ILOOLQJ ZHWODQGV DORQJ WKH 6RXWK URXWH 7ZR ($)216,V LVVXHG )+:$ DSSURYDO RI WKH 1DVKYLOOH /RQJ 5DQJH 7UDQVSRUWDWLRQ 7KH IHGHUDO GHIHQGDQWV DUJXH WKDW WKH\ GLG QRW QHHG WR UHVSRQG WR 3ODQ &RQIRUPLW\ 5HGHWHUPLQDWLRQ UHTXLUHG E\ WKH &OHDQ $LU $FW WKH VWDWHjV LQWHUFKDQJH ($V EHFDXVH FKDQJHV LQ DFFHVV FRQWURO DUH mOLNHO\l $PHQGPHQWV RI ZLWKRXW ZKLFK WKH FRQWLQXHG FRQVWUXFWLRQ VXEMHFW WR D mFDWHJRULFDO H[FOXVLRQl m&(l XQGHU WKH UHJXODWLRQV RI ZRXOG QRW EH DOORZHG PHDQLQJ WKDW WKH\ DUH DFWLRQV mWKDW GR QRW LQGLYLGXDOO\ RU FXPXODWLYH>O\@ 7KH )+:$ IXQGLQJ RI D VWXG\ UHVXOWLQJ LQ WKH $LU 4XDOLW\ KDYH D VLJQLILFDQW HQYLURQPHQWDO HIIHFWl DQG DUH H[FOXGHG IURP WKH &RQIRUPLW\ 5HGHWHUPLQDWLRQ PHQWLRQHG DERYH )+:$ IXQGLQJ UHTXLUHPHQW WR SUHSDUH DQ ($ RU DQ (,6 &)5 E RI WKH 1032jV >1DVKYLOOH0HWURSROLWDQ 3ODQQLQJ :KHWKHU RU QRW FKDQJHV LQ DFFHVV FRQWURO DUH DFWLRQV WKDW PHHW WKH FULWHULD 2UJDQL]DWLRQjV@ 8QLILHG 3ODQQLQJ :RUN 3URJUDPV IURP LQ G IRU D &( .1 :HVW Y 6HFj\ RI 7UDQVS )G WKURXJK ZKLFK LQFOXGHG WKUHH WUDIILF FDSDFLW\ DQDO\VLV IRU WK &LU mFKDQJHV LQ DFFHVV FRQWUROl DV OLVWHG LQ G LQWHUFKDQJHV LQ :LOVRQ &RXQW\ 5XWKHUIRUG &RXQW\ DQG GR QRW HQFRPSDVV LQWHUFKDQJHV WKH IHGHUDO GHIHQGDQWV KDYH JORVVHG RYHU :LOOLDPVRQ &RXQW\ DQG WKH IDFW WKDW WKH\ IDLOHG WR IROORZ SURSHU SURFHGXUHV WR HVWDEOLVK WKDW WKH 7KH IRUPDO DSSOLFDWLRQ E\ WKH 6WDWH 'HIHQGDQW WR WKH )HGHUDO LQWHUFKDQJHV DUH &(V $FFRUGLQJ WR WKH SHUWLQHQW UHJXODWLRQV WKH )+:$ 'HIHQGDQW LQ 1RYHPEHU IRU IHGHUDO LQWHUVWDWH VWDWXV PD\ GHVLJQDWH DQG DSSURYH DQ DFWLRQ DV D &( XQGHU WKLV VXEVHFWLRQ RQO\ VXEVHTXHQWO\ ZLWKGUDZQ IRU WZR SULQFLSDO UHDVRQV 7KH 6WDWH DIWHU WKH DSSOLFDQW mVXEPLW>V@ GRFXPHQWDWLRQ ZKLFK GHPRQVWUDWHV WKDW WKH GLG QRW ZDQW WR FRPSO\ ZLWK 1(3$ DQG 7KH 6WDWH FDQ EXLOG VSHFLILF FRQGLWLRQV RU FULWHULD IRU WKHVH &(V DUH VDWLVILHG DQG WKDW 6RXWK WKHQ DSSO\ IRU LQWHUVWDWH VWDWXV DW D ODWHU WLPH ZKLFK VLJQLILFDQW HQYLURQPHQWDO HIIHFWV ZLOO QRW UHVXOWl &)5 G ZRXOG EH JUDQWHG DIWHU RQO\ D VLPSOH LQVSHFWLRQ WR GHWHUPLQH 7KHUH LV QR GLVSXWH WKDW VXFK GHVLJQDWLRQ DQG DSSURYDO GLG QRW RFFXU KHUH ZKHWKHU RU QRW WKH URDG ZDV EXLOW DFFRUGLQJ WR JHRPHWULF 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO GLVWULFWFRXUWGHWHUPLQHGWKDWWKHDFWLRQVLQDJJUHJDWHGLGQRW WKDWWKH$VVRFLDWLRQGRHVQRWVHHNWRHQMRLQFRQVWUXFWLRQRI mJLYH )+:$ DXWKRULW\ WR FRQWURO WKH 6RXWK +LJKZD\ WKH KLJKZD\ LQ RUGHU WR DOORZ WKH 6HFUHWDU\ RI WKH ,QWHULRU 3URMHFW DQG WKHUHE\ WXUQ LW LQWR D µPDMRU IHGHUDO DFWLRQjl WLPHWRUHVSRQGWRWKHVWDWHjV($7KHUHIRUHXQGHURXUILUVW 6RXWKZHVW,,,)6XSSGDW7KHGLVWULFWFRXUWWKHQ WHVWZHFRQFOXGHWKDWWKHVWDWHjVZRUNRQ5RXWH6RXWK EULHIO\HYDOXDWHGWKHRWKHUWKUHHIDFWRUVSHUWLQHQWWRDUHTXHVW GLG QRW UHVWULFW WKH IHGHUDO GHFLVLRQPDNHUVj FKRLFH RI IRUDSUHOLPLQDU\LQMXQFWLRQQDPHO\ZKHWKHULUUHSDUDEOHKDUP UHDVRQDEOHDOWHUQDWLYHV ZLOORFFXULQWKHDEVHQFHRIDQLQMXQFWLRQZKHWKHUVXEVWDQWLDO KDUP WR RWKHUV ZLOO RFFXU VKRXOG DQ LQMXQFWLRQ LVVXH DQG $JHQF\&RQWURORU5HVSRQVLELOLW\IRU2XWFRPH ZKHWKHU WKH SXEOLF LQWHUHVW LV DGYDQFHG E\ WKH LQMXQFWLRQ 3UHVXPLQJDUJXHQGRWKDWWKHKLJKZD\FRQVWLWXWHGDPDMRU 3XUVXDQWWRRXUVHFRQGWHVWZKLFKZHXVHDVDQDOWHUQDWLYH IHGHUDO DFWLRQ DQG WKDW LUUHSDUDEOH KDUP ZLOO RFFXU WR WKH EDVLVRIDQDO\VLVZHHYDOXDWHZKHWKHUWKH)+:$DQGRWKHU VXUURXQGLQJHQYLURQPHQWZLWKRXWDQLQMXQFWLRQWKHGLVWULFW IHGHUDODJHQFLHVKDYHVXIILFLHQWFRQWURORUUHVSRQVLELOLW\RYHU FRXUWIRXQGWKDWWKHFRVWWRWKHVWDWHWKHLQFRQYHQLHQFHWRWKH WKHFRQVWUXFWLRQRI5RXWH6RXWKWRLQIOXHQFHWKHRXWFRPH SXEOLF DQG WKH $VVRFLDWLRQjV ORQJ GHOD\ LQ EULQJLQJ VXLW RIWKHSURMHFW:HIRFXVILUVWRQWKH)+:$j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jV ,,s85,6',&7,21 DXWKRULW\ ZLWK UHVSHFW WR VWDWH KLJKZD\ SURMHFWV m>D@OO DJUHHPHQWV EHWZHHQ WKH 6HFUHWDU\ DQG WKH 6WDWH KLJKZD\ 7KHGLVWULFWFRXUWKDGMXULVGLFWLRQRIWKLVDFWLRQXQGHU GHSDUWPHQWIRUWKHFRQVWUXFWLRQRISURMHFWVRQWKH,QWHUVWDWH 86& )ROORZLQJ WKH GLVWULFW FRXUWjV RUGHU WKH 6\VWHPVKDOOFRQWDLQDFODXVHSURYLGLQJWKDWWKH6WDWHZLOOQRW $VVRFLDWLRQ ILOHG D PRWLRQ ZLWK WKH GLVWULFW FRXUW IRU DGG DQ\ SRLQWV RI DFFHVV WR RU H[LW IURP WKH SURMHFW LQ LQWHUORFXWRU\UHYLHZXQGHU86&E7KHGLVWULFW DGGLWLRQWRWKRVHDSSURYHGE\WKH6HFUHWDU\LQWKHSODQVIRU FRXUW JUDQWHG WKH PRWLRQ EXW WKLV FRXUW GHQLHG LW DQG VXFK SURMHFW ZLWKRXW WKH SULRU DSSURYDO RI WKH 6HFUHWDU\l LQVWUXFWHG WKH GLVWULFW FRXUW FOHUN WR ILOH WKH PRWLRQ DV D 7KXVWKH)+:$LVUHTXLUHGWRDSSURYHDQ\VWDWHSURSRVHG UHJXODUQRWLFHRIDSSHDOXQGHU86&D:H FRQVWUXFWLRQRILQWHUFKDQJHVZLWKDIHGHUDOKLJKZD\6HH WKHUHIRUHKDYHMXULVGLFWLRQSXUVXDQWWR86&D 86&F RYHUWKH$VVRFLDWLRQjVWLPHO\ILOHGDSSHDO 7KH VWDWH DOVR HQJDJHG LQ IRUPDO FRQVXOWDWLRQ SXUVXDQW WR RI WKH (QGDQJHUHG 6SHFLHV $FW ZLWK WKH 86 )LVK DQG :LOGOLIH 6HUYLFH m86):6l DQG WKH 136 RYHU SRVVLEOH LPSDFW RQ WKH (JJHUW VXQIORZHU D VSHFLHV SURSRVHG IRU OLVWLQJ DV HQGDQJHUHG ,Q WKH 86):6 GHVLJQV GHWHUPLQHG WKDW 5RXWH 6RXWK ZRXOG QRW DGYHUVHO\ DIIHFW WKH 6RXWKZHVW ,,, ) 6XSS G DW VXQIORZHU s$ DW 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO ZLWK )216,V 7KH $VVRFLDWLRQ GRHV QRW DOOHJH WKDW WKH ,,,02271(66 6HFUHWDU\RIWKH$UP\ZDVSUHVVXUHGWRUHQGHULWVGHFLVLRQRU WKDW LWV FKRLFH RI DFWLRQ ZDV OLPLWHG E\ WKH VWDWHjV 7KHIHGHUDOGHIHQGDQWVKDYHSHUVLVWHQWO\DUJXHGWKURXJKRXW FRQVWUXFWLRQ WKLVDSSHDOWKDWWKHLQVWDQWFDVHLVPRRW$UWLFOH,,,RIWKH86 &RQVWLWXWLRQGLFWDWHVWKDWWKLVFRXUWPXVWKDYHDMXVWLFLDEOH 1H[W DIWHU VXEPLWWLQJ ILYH SUHOLPLQDU\ GUDIW ($V WR WKH FDVHRUFRQWURYHUV\EHIRUHLWLQRUGHUWRDGGUHVVWKHLVVXHV 1DWLRQDO 3DUN 6HUYLFH m136l WKH VWDWH VXEPLWWHG D ILQDO SUHVHQWHG$OWKRXJKZHSUHYLRXVO\DGMXGLFDWHGWKLVFDVHRQ GUDIW ($ LQ 2FWREHU WR WKH 6HFUHWDU\ RI WKH ,QWHULRU WKHPHULWVLQ6RXWKZHVW,,LWLVRXUFRQWLQXLQJREOLJDWLRQWR VHHNLQJDSSURYDORILWV($DQGDULJKWRIZD\WRFURVVWKH DVVHVVWKHMXVWLFLDELOLW\RIWKHFODLPVEHIRUHXVEHFDXVHm>W@KH IHGHUDOO\SURWHFWHG1DWFKH]7UDFH3DUNZD\s$DW7KH PRRWQHVV LQTXLU\ PXVW EH PDGH DW HYHU\ VWDJH RI D FDVHl 6HFUHWDU\ RI WKH ,QWHULRU KDV QRW DFFRUGLQJ WR WKH UHFRUG 0F3KHUVRQY0LFKLJDQ+LJK6FK$WKOHWLF$VVjQ)G UHVSRQGHG WR WKH VWDWHjV GUDIW ($ ZLWK HLWKHU DQ (,6 RU D WK &LU HQ EDQF 8QGHU WKH mFDVH RU )216,:KLOHZHDUHFRQFHUQHGWKDWWKHVWDWHEHJDQEXLOGLQJ FRQWURYHUV\lUHTXLUHPHQWWKLVFRXUWKDVQRDXWKRULW\WRLVVXH 5RXWH6RXWKSULRUWRUHFHLYLQJILQDODSSURYDOIURPWKH DGHFLVLRQZKLFKZRXOGQRWDIIHFWWKHULJKWVRIWKHOLWLJDQWV 6HFUHWDU\ RI WKH ,QWHULRU ZH QRWH WKDW WKH $VVRFLDWLRQ m7KHWHVWIRUPRRWQHVVLVZKHWKHUWKHUHOLHIVRXJKWZRXOGLI FRQFHGHVWKDWWKHUHKDVEHHQH[WHQVLYHFRQWDFWEHJLQQLQJDV JUDQWHG PDNH D GLIIHUHQFH WR WKH OHJDO LQWHUHVWV RI WKH HDUO\DVs$DWEHWZHHQWKHVWDWHDQGWKH136D SDUWLHVl,GLQWHUQDOTXRWDWLRQRPLWWHG GLYLVLRQRIWKH'HSDUWPHQWRIWKH,QWHULRUUHJDUGLQJZKHUH WKHKLJKZD\VKRXOGFURVVWKH3DUNZD\:HDOVRREVHUYH $FFRUGLQJWRIHGHUDOGHIHQGDQWVEHFDXVHWKH\KDYHDOUHDG\ LVVXHG DSSURYDOV IRU WKH IRXU LQWHUVWDWH LQWHUFKDQJHV RYHU ZKLFK WKH\ KDYH MXULVGLFWLRQ m>W@KHUH LV QR SURVSHFWLYH )HGHUDODFWLRQE\WKH6HFUHWDU\8QLWHG6WDWHV'HSDUWPHQWRI 7KH $VVRFLDWLRQ VWDWHV LQ LWV DPHQGHG FRPSODLQW LQ WKH GLVWULFW FRXUW WKDW m>W@KH 6WDWH 'HIHQGDQW KDV QRW \HW DSSOLHG IRU RWKHU &OHDQ :DWHU $FW 7UDQVSRUWDWLRQ WKDW PLJKW EH HQMRLQHG E\ WKLV &RXUWl SHUPLWV QHHGHG DORQJ WKH URXWHl EXW QR HYLGHQFH RI DQ\ LPSURSHU FRQGXFW $SSHOOHHjV%UDW1HLWKHUWKHIDFWWKDWIHGHUDOGHIHQGDQWV RQ WKH SDUW RI WKH VWDWH KDV EHHQ DUJXHG WR WKLV FRXUW s$ DW &RPSO KDYH LVVXHG WZR )216,V IRU WKH LQWHUFKDQJH ($V QRU WKH ,9$ )+:$jV ODFN RI DXWKRULW\ WR IRUFH WKH 6WDWH WR FHDVH FRQVWUXFWLRQRIWKHKLJKZD\PRRWVWKLVFDVH,IZHFRQFOXGH ,Q WKH VWDWH 7'27 EHJDQ FRPPXQLFDWLQJ ZLWK WKH 136 WKDWWKHKLJKZD\FRUULGRUFRQVWLWXWHVDmPDMRUIHGHUDODFWLRQl UHJDUGLQJ WKH ORFDWLRQ RI WKH 3DUNZD\ FURVVLQJ ,Q 0D\ DQG 0D\ WKHQ ZH KDYH WKH DXWKRULW\ WR LQVWUXFW WKH GLVWULFW FRXUW WR RIILFLDOV IURP WKH 136 WKH )+:$ DQG WKH 7'27 DWWHQGHG D ILHOG HQMRLQWKHVWDWHIURPIXUWKHUFRQVWUXFWLRQRQWKHKLJKZD\:H UHYLHZ RI WKH 3DUNZD\ WR H[DPLQH SURSRVHG 3DUNZD\ FURVVLQJV s$ DW 7KH VWDWH ZDV DVNHG WR UHYLHZ VHYHUDO DOWHUQDWLYHV WR LWV PD\DOVRLQVWUXFWWKH)+:$WRUHVSRQGWRWKHFRUULGRU($ SURSRVHG FURVVLQJ VLWH ZLWK D )216, RU DQ (,6 DV DSSURSULDWH 6HH 86& 6XEVHTXHQW WR SUHSDUDWLRQ RI WKH GUDIW ($ WKH VWDWH WKH 136 m7RWKHH[WHQWQHFHVVDU\WRWKHGHFLVLRQ >W@KH DQG WKH $GYLVRU\ &RXQFLO RQ +LVWRULF 3UHVHUYDWLRQ HQWHUHG LQWR D IRUPDO UHYLHZLQJFRXUWVKDOO FRPSHODJHQF\DFWLRQXQODZIXOO\ DJUHHPHQW IRU SUHVHUYDWLRQ RI WKH 1DWFKH] 7UDFH 3DUNZD\ SXUVXDQW WR ZLWKKHOGRUXQUHDVRQDEO\GHOD\HGlm&OHDUO\WKHUHIRUHWKH RI WKH 1DWLRQDO +LVWRULF 3UHVHUYDWLRQ $FW 86& HW VHT 7KH VWDWH DJUHHG WR PLWLJDWH FHUWDLQ LPSDFWV RQ WKH 3DUNZD\ s$ DW UHOLHI VRXJKW E\ WKH >$VVRFLDWLRQ@ LQ WKLV DSSHDO ZRXOG LI )RU H[DPSOH VKRXOG WKH 7'27 GLVFRYHU $PHULFDQ ,QGLDQ FXOWXUDO JUDQWHG PDNH D GLIIHUHQFH WR WKH OHJDO LQWHUHVWV RI WKH VLWHV GXULQJ WKH FRQVWUXFWLRQ RI WKH 3DUNZD\ FURVVLQJ WKH VWDWH REOLJDWHG SDUWLHVl0F3KHUVRQ)GDWLQWHUQDOTXRWDWLRQ LWVHOI WR KDOW FRQVWUXFWLRQ LPPHGLDWHO\ DQG PDNH UHDVRQDEOH HIIRUWV WR RPLWWHG7KLVFDVHLVQRWUHQGHUHGPRRWPHUHO\EHFDXVHWKH SURWHFW WKH LWHPV GLVFRYHUHG s$ DW 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO IHGHUDOGHIHQGDQWVDVVHUWWKDWXQGHUWKHLURZQLQWHUSUHWDWLRQ 5HVWULFWLQJ&KRLFHRI5HDVRQDEOH$OWHUQDWLYHV RIWKHVWDWXWHWKH\DUHQRWUHTXLUHGWRDFW)LQDOO\ZHQRWH WKDWWKHUHLVDPSOHHYLGHQFHLQWKHUHFRUGWKDWWKHKLJKZD\ (PSOR\LQJRXUILUVWWHVWZHHYDOXDWHZKHWKHUWKHVWDWHjV FRQVWUXFWLRQLVGHVSLWHWKHIHGHUDOGHIHQGDQWVjVXJJHVWLRQVWR DFWLRQV UHVWULFWHG RU OLPLWHG WKH IHGHUDO GHFLVLRQPDNHUVj WKHFRQWUDU\FOHDUO\DQRQJRLQJSURMHFWZKLFKUHLQIRUFHVRXU FKRLFH RI UHDVRQDEOH DOWHUQDWLYHV ZKHQ JUDQWLQJ IHGHUDO FRQFOXVLRQ WKDW DQ\ DFWLRQ RQ RXU SDUW ZRXOG VLJQLILFDQWO\ DSSURYDOVIRUWKHKLJKZD\FRQVWUXFWLRQ$VQRWHGSUHYLRXVO\ DIIHFWWKHSDUWLHVjLQWHUHVWV WKH )+:$LVVXHGWZR)216,VIRUWKHLQWHUFKDQJH($VLQ DQG7KHILUVWVHJPHQWRIWKHKLJKZD\LVQRWDW ,967$1'$5'2)5(9,(: LVVXHLQWKLVFDVH&RQVWUXFWLRQRQWKHVHFRQGVHJPHQWRIWKH KLJKZD\IURP,WR,6RXWKGLGQRWEHJLQXQWLO 7KHUH DUH IRXU FULWHULD IRU DVVHVVLQJ ZKHWKHU WR LVVXH D :RUNRQWKHWKLUGVHFWLRQIURP,6RXWKWR,:EHJDQ SUHOLPLQDU\LQMXQFWLRQ7KHGLVWULFWFRXUWPXVWFRQVLGHUm LQ ODWH DQG LV VWLOO VXEVWDQWLDOO\ LQFRPSOHWH $FWXDO ZKHWKHUWKHPRYDQWKDVDVWURQJOLNHOLKRRGRIVXFFHVVRQWKH FRQVWUXFWLRQDQGSDYLQJRIWKHWKLUGVHFWLRQKDVQRWDFFRUGLQJ PHULWV ZKHWKHU WKH PRYDQW ZRXOG RWKHUZLVH VXIIHU WR WKH UHFRUG EHIRUH XV HYHQ EHJXQ ,Q FRQWUDVW WR WKH LUUHSDUDEOH LQMXU\ ZKHWKHU LVVXDQFH RI D SUHOLPLQDU\ VLWXDWLRQLQ*LOFKULVWWKHQZHFRQFOXGHWKDWWKH)+:$ZDV LQMXQFWLRQ ZRXOG FDXVH VXEVWDQWLDO KDUP WR RWKHUV DQG DIIRUGHGDPSOHWLPHDQGRSSRUWXQLW\WRUHVSRQGWRWKHVWDWHjV ZKHWKHUWKHSXEOLFLQWHUHVWZRXOGEHVHUYHGE\LVVXDQFHRID SURSRVDO EHIRUH DFWLRQ E\ WKH VWDWH ZKLFK ZRXOG KDUP WKH SUHOLPLQDU\ LQMXQFWLRQl 0F3KHUVRQ )G DW HQYLURQPHQW RU OLPLW WKH DJHQF\jV FKRLFH RI UHDVRQDEOH LQWHUQDOTXRWDWLRQRPLWWHG:HUHYLHZWKHGLVWULFWFRXUWjV DOWHUQDWLYHVWKHFRQFHUQVHQXQFLDWHGE\WKH&(4UHJXODWLRQV GHFLVLRQWRGHQ\WKH$VVRFLDWLRQjVPRWLRQIRUDSUHOLPLQDU\ LQMXQFWLRQIRUDQDEXVHRIGLVFUHWLRQ8QGHUWKLVVWDQGDUGZH 7KH RWKHU IHGHUDO DJHQF\ DSSURYDOV UHTXLUHG IRU GHIHUWRWKHGLVWULFWFRXUWjVILQGLQJVRIIDFWXQOHVVWKH\DUH FRQVWUXFWLRQ RI WKH KLJKZD\ LQYROYH WKH VHFRQG DQG WKLUG FOHDUO\ HUURQHRXV EXW ZH UHYLHZ LWV OHJDO FRQFOXVLRQV GH VHFWLRQV RI 5RXWH 6RXWK ,Q UHVSRQVH WR WKH VWDWHjV QRYR6HH6DQGLVRQY0LFKLJDQ+LJK6FK$WKOHWLF$VVjQ UHTXHVWVWKH$UP\&RUSVRI(QJLQHHUVLVVXHGVHYHUDO1DWLRQ )GWK&LU$QDJHQF\jVGHWHUPLQDWLRQ :LGH3HUPLWVm1:3VlDQGSHUPLWVDOORZLQJWKHVWDWH WKDWLWVDFWLRQVGRQRWFRQVWLWXWHDmPDMRU)HGHUDODFWLRQlLV WR FURVV VHYHUDO VWUHDPV DQG ILOO DOPRVW IRXU DFUHV RI UHYLHZHG IRU UHDVRQDEOHQHVV XQGHU WKH FLUFXPVWDQFHV ZHWODQGV s$ DW 7KH 1:3 SHUPLWV IRU VWUHDP 6XJDUORDI&LWL]HQV$VVjQY)(5&)GWK FURVVLQJVZHUHDSSURYHGE\WKH$UP\&RUSVLQDQGWKH &LU RWKHU SHUPLWV DQG )216,V ZHUH LVVXHG LQ DQG UHVSHFWLYHO\ s$ DW 7KH 9$1$/<6,6 6HFUHWDU\RIWKH$UP\DOVRGXO\UHVSRQGHGWRWZRVWDWH($V 7KH$VVRFLDWLRQVHHNVWRHQMRLQSXUVXDQWWR1(3$IXUWKHU FRQVWUXFWLRQRI5RXWH6RXWKXQWLOWKH)+:$UHVSRQGVWR WKH VWDWHjV KLJKZD\ FRUULGRU ($ ZLWK HLWKHU D )216, RU D PRUHGHWDLOHG(,6$OWKRXJKLWGRHVQRWGLVSXWHWKHIDFWWKDW 5RXWH6RXWKKDVEHHQH[FOXVLYHO\IXQGHGE\WKHVWDWHWKH $VVRFLDWLRQDUJXHVWKDWWKHIHGHUDOJRYHUQPHQWKDVIDLOHGWR ,W LV WUXH DV WKH $VVRFLDWLRQ SRLQWV RXW WKDW WKH (3$ DQG WKH IXOILOOLWVREOLJDWLRQXQGHU1(3$WRDVVHVVFRPSUHKHQVLYHO\ 'HSDUWPHQW RI WKH ,QWHULRU RSSRVHG WKH LVVXDQFH RI RQH RI WKH SHUPLWV s$ DW 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO FRPSO\ZLWK1(3$lDQGWKDWmWKH$UP\&RUSVKDVGLVFUHWLRQ WKHHQYLURQPHQWDOFRQVHTXHQFHVRIFRQVWUXFWLQJDIRXUODQH RYHURQO\DQHJOLJLEOHSRUWLRQRIWKHHQWLUHSURMHFWlWKHFRXUW KLJKZD\WKURXJKDODUJHO\UXUDODUHDRIPLGGOH 7HQQHVVHH IRXQGWKDWWKHIHGHUDOLQYROYHPHQWLQWKHVWDWHSURMHFWZDV 3RLQWLQJ WR WKLUW\RQH VHSDUDWH LQVWDQFHV RI DOOHJHG IHGHUDO LQVXIILFLHQWWRmIHGHUDOL]HlLW0DFKW)GDW FRQWURODQGGHFLVLRQPDNLQJZKLFKVHUYHWRmIHGHUDOL]HlWKH HQWLUHKLJKZD\SURMHFWLQFOXGLQJWKHIRXUIHGHUDOLQWHUFKDQJH :LWK WKH &(4 UHJXODWLRQV DQG FDVH ODZ LQ PLQG ZH DSSURYDOVE\WKH)+:$WKH$VVRFLDWLRQVWURQJO\DUJXHVWKDW FRQFOXGHWKDWWKHUHDUHWZRDOWHUQDWLYHEDVHVIRUILQGLQJWKDW WKHUHLVmPDVVLYHDQGSHUYDVLYHIHGHUDOFRQWURODQGLQIOXHQFH D QRQIHGHUDO SURMHFW FRQVWLWXWHV D mPDMRU )HGHUDO DFWLRQl RYHUQHDUO\HYHU\DVSHFWRIWKHSODQQLQJDQGFRQVWUXFWLRQRI VXFK WKDW 1(3$ UHTXLUHPHQWV DSSO\ ZKHQ WKH QRQ WKH 5RXWH 6RXWK FRUULGRU LQFOXGLQJ WKH )+:$jV IHGHUDO SURMHFW UHVWULFWV RU OLPLWV WKH VWDWXWRULO\ SUHVFULEHG FRQWLQXLQJUHVSRQVLELOLW\WRHQVXUHWKHLQWHUVWDWHLQWHUFKDQJHV IHGHUDOGHFLVLRQPDNHUVjFKRLFHRIUHDVRQDEOHDOWHUQDWLYHVRU FRPSO\ZLWKIHGHUDOUHJXODWLRQl$SSHOODQWjV5HSO\%UDW ZKHQ WKH IHGHUDO GHFLVLRQPDNHUV KDYH DXWKRULW\ WR )HGHUDOGHIHQGDQWVDUJXHLQUHVSRQVHWKDW5RXWH6RXWK H[HUFLVH VXIILFLHQW FRQWURO RU UHVSRQVLELOLW\ RYHU WKH QRQ ZDVGHVLJQHGFRQVWUXFWHGDQGIXQGHGE\WKHVWDWHWKDWWKH\ IHGHUDOSURMHFWVRDVWRLQIOXHQFHWKHRXWFRPHRIWKHSURMHFW ODFN MXULVGLFWLRQ XQGHU WKH UHOHYDQW VWDWXWH RYHU WKH VWDWHjV ,I HLWKHU WHVW LV VDWLVILHG WKH QRQIHGHUDO SURMHFW PXVW EH FRQVWUXFWLRQRIWKHKLJKZD\FRUULGRUDQGWKDWWKH\ZHUHQRW FRQVLGHUHG D PDMRU IHGHUDO DFWLRQ %RWK WHVWV UHTXLUH D HYHQ REOLJDWHG E\ VWDWXWH RU UHJXODWLRQ WR LVVXH )216,V LQ VLWXDWLRQVSHFLILF DQG IDFWLQWHQVLYH DQDO\VLV $OWKRXJK LW UHVSRQVHWRWKHVWDWHjVLQWHUFKDQJH($V HPSOR\HG D VRPHZKDW GLIIHUHQW OHJDO VWDQGDUG IURP WKH DOWHUQDWLYHWHVWVWKDWZHHQXQFLDWHWRGD\ZHEHOLHYHWKDWWKH $$SSOLFDWLRQRI1(3$ GLVWULFWFRXUWGLGQRWDEXVHLWVGLVFUHWLRQZKHQLWHYDOXDWHGWKH IDFWVHYHQDVPHDVXUHGDJDLQVWHLWKHUFRUUHFWOHJDOVWDQGDUG $PRQJWKHSXUSRVHVRI1(3$DUHm>W@RGHFODUHDQDWLRQDO SROLF\ ZKLFK ZLOO HQFRXUDJH SURGXFWLYH DQG HQMR\DEOH KDUPRQ\ EHWZHHQ PDQ DQG KLV HQYLURQPHQW WR SURPRWH HIIRUWV ZKLFK ZLOO SUHYHQW RU HOLPLQDWH GDPDJH WR WKH HQYLURQPHQW DQG ELRVSKHUH DQG VWLPXODWH WKH KHDOWK DQG ZHOIDUHRIPDQl86&7KHVWDWXWHUHTXLUHVWR :H GLVWLQJXLVK RXU DOWHUQDWLYH WHVWV IURP WKH VLQJOH WHVW HPSOR\HG E\ WKH IXOOHVW H[WHQW SRVVLEOH WKDW DOO DJHQFLHV RI WKH )HGHUDO WKH GLVWULFW FRXUW DQG YDULRXV RWKHU FLUFXLW FRXUWV 7KH GLVWULFW FRXUW *RYHUQPHQW VLPSO\ DQDO\]HG WKH YDULRXV DJHQF\ DFWLRQV WR GHWHUPLQH ZKHWKHU WKH\ FRQIHUUHG RQ )+:$ WKH mDXWKRULW\ WR FRQWUROl WKH VWDWH KLJKZD\ SURMHFW >,@QFOXGH LQ HYHU\ UHFRPPHQGDWLRQ RU UHSRUW RQ 6RXWKZHVW ,,, ) 6XSS G DW :DWHU 0JPW 'LVW 6HH DOVR 8QLWHG 6WDWHV Y 6 )ORULGD )G WK &LU FHUW GHQLHG VXE SURSRVDOVIRUOHJLVODWLRQDQGRWKHUPDMRU)HGHUDODFWLRQV QRP :HVWHUQ 3DOP %HDFK &RXQW\ )DUP %XUHDX ,QF Y 8QLWHG 6WDWHV VLJQLILFDQWO\ DIIHFWLQJ WKH TXDOLW\ RI WKH KXPDQ 86 m7KH WRXFKVWRQH RI PDMRU IHGHUDO DFWLYLW\ HQYLURQPHQW D GHWDLOHG VWDWHPHQW E\ WKH UHVSRQVLEOH FRQVWLWXWHV D IHGHUDO DJHQF\jV DXWKRULW\ WR LQIOXHQFH QRQIHGHUDO DFWLYLW\l RIILFLDORQn 9LOODJH RI /RV 5DQFKRV GH $OEXTXHUTXH Y %DUQKDUW )G WK &LU FHUW GHQLHG 86 VDPH 6DYH %DUWRQ LWKHHQYLURQPHQWDOLPSDFWRIWKHSURSRVHGDFWLRQ &UHHN )G DW m7KH GLVWLQJXLVKLQJ IHDWXUH RI µIHGHUDOj LQYROYHPHQW LV WKH DELOLW\ WR LQIOXHQFH RU FRQWURO WKH RXWFRPH LQ PDWHULDO UHVSHFWVl LQWHUQDO TXRWDWLRQ RPLWWHG :H EHOLHYH WKDW WKH mDXWKRULW\WR LLDQ\DGYHUVHHQYLURQPHQWDOHIIHFWVZKLFKFDQQRW FRQWUROl VWDQGDUG ZLOO QRW DOZD\V DGHTXDWHO\ HQFRPSDVV WKH FRQFHUQV RI EHDYRLGHGVKRXOGWKHSURSRVDOEHLPSOHPHQWHG WKH &(4 UHJXODWLRQV WR ZKLFK ZH GHIHU 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO LLLDOWHUQDWLYHVWRWKHSURSRVHGDFWLRQ WKHFLW\jVGHVLUHWRZRUNRQDVPDOOSDUWRIWKHSLSHOLQHIDOOLQJ RXWVLGHRIWKH)(5&jVMXULVGLFWLRQ6HHLGDW$OWKRXJK LYWKHUHODWLRQVKLSEHWZHHQORFDOVKRUWWHUPXVHVRI WKH FRXUW QRWHG WKDW mWKHUH PD\ FRPH D SRLQW ZKHUH WKH PDQjV HQYLURQPHQW DQG WKH PDLQWHQDQFH DQG FRQVWUXFWLRQDQGWKHFRQFRPLWDQWH[SHQGLWXUHRIIXQGVZRXOG HQKDQFHPHQWRIORQJWHUPSURGXFWLYLW\DQG FUHDWHVRPXFKSUHVVXUHWKDWWKHFRPSOHWHGSRUWLRQVRIWKH SLSHOLQHZRXOGVWDQGOLNHDJXQEDUUHODLPHGDW)(5&lWKH YDQ\LUUHYHUVLEOHDQGLUUHWULHYDEOHFRPPLWPHQWV FRXUWFRQFOXGHGWKDW9LUJLQLD%HDFKKDGQRWSUHVVHGLWVFODLP RI UHVRXUFHV ZKLFK ZRXOG EH LQYROYHG LQ WKH WKDWIDUEHFDXVHLWVRXJKWWRSURFHHGRQRQO\WZRVPDOODUHDV SURSRVHGDFWLRQVKRXOGLWEHLPSOHPHQWHG RIWKHSLSHOLQHSHQGLQJ)(5&jVDSSURYDO,GDWLQWHUQDO TXRWDWLRQRPLWWHG8OWLPDWHO\FRQFOXGLQJWKDWmFRQVWUXFWLRQ 86&&1(3$LVRQHRIRXUPRVWLPSRUWDQW ZKLFKOLHVEH\RQGWKHERXQGDULHVRI)(5&jVMXULVGLFWLRQFDQ WRROVIRUHQVXULQJWKDWDOOIHGHUDODJHQFLHVWDNHDmKDUGORRNl EH HQMRLQHG RQO\ ZKHQ LW KDV D GLUHFW DQG VXEVWDQWLDO DW WKH HQYLURQPHQWDO LPSOLFDWLRQV RI WKHLU DFWLRQV RU QRQ SUREDELOLW\ RI LQIOXHQFLQJ )(5&jV GHFLVLRQl WKH FRXUW DFWLRQV.OHSSHY6LHUUD&OXE86Q7KH GHWHUPLQHG WKDW 9LUJLQLD %HDFK KDG IDLOHG WR PHHW WKDW VWDWXWH LV SURFHGXUDO LQ QDWXUH DQG GRHV QRW UHTXLUH mWKDW VWDQGDUG,GDW DJHQFLHVDFKLHYHSDUWLFXODUVXEVWDQWLYHHQYLURQPHQWDOUHVXOWVl EXWLWLVmDFWLRQIRUFLQJlLQWKDWLWFRPSHOVDJHQFLHVWRFROOHFW ,Q0DFKWY6NLQQHU)G'&&LUWKH DQG GLVVHPLQDWH LQIRUPDWLRQ DERXW WKH HQYLURQPHQWDO '& &LUFXLW DSSURYHG RI WKH EDVLF UHDVRQLQJ LQ *LOFKULVW FRQVHTXHQFHV RI SURSRVHG DFWLRQV WKDW IDOO XQGHU WKHLU QDPHO\ WKH SURSRVLWLRQ WKDW mWKH VWDWH PD\ QRW EHJLQ UHVSHFWLYHMXULVGLFWLRQV0DUVKY2UHJRQ1DWXUDO5HVRXUFHV FRQVWUXFWLRQ RI DQ\ SDUW RI D SURMHFW LI WKH HIIHFW RI VXFK &RXQFLO86)+:$LVJRYHUQHGE\D FRQVWUXFWLRQZRXOGEHWROLPLWVLJQLILFDQWO\WKHRSWLRQVRIWKH VHW RI UHJXODWLRQV WKDW DSSO\ 1(3$ DQG &RXQFLO RQ IHGHUDORIILFLDOVZKRKDYHGLVFUHWLRQRYHUVXEVWDQWLDOSRUWLRQV (QYLURQPHQWDO4XDOLW\m&(4lUHJXODWLRQVVHH&)5 RIWKHSURMHFWl7KHLVVXHLQ0DFKWUHOHYDQWWRWKLVFDVHZDV HWVHTWR)+:$ DFWLRQV7KXVWKH)+:$LV ZKHWKHU D VWDWHIXQGHG OLJKWUDLO SURMHFW ZDV VXIILFLHQWO\ UHTXLUHGWRFRQGXFWDUHYLHZRIDOOmPDMRU)HGHUDODFWLRQ>V@l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jLQYROYHPHQWLQWKHSURMHFW7KLV SURMHFW UHTXLUHG D IHGHUDO ZHWODQGV SHUPLW IURP WKH $UP\ GHWHUPLQDWLRQDGPLWVRIQRVLPSOHOLWPXVWHVW,QRUGHUWR &RUSV RI (QJLQHHUV ,QVWHDG WKH FRXUW FKDUDFWHUL]HG WKH HYDOXDWH ZKHWKHU WKH )+:$ KDV EHHQ UHPLVV LQ LWV TXHVWLRQEHIRUHLWDVmZKHWKHUVWDWHRUSULYDWHDFWLRQRQDQ UHVSRQVLELOLWLHV XQGHU 1(3$ ZH ZLOO UHYLHZ GH QRYR WKH HQWLUHSURMHFWVKRXOGEHHQMRLQHGXQWLOWKHIHGHUDODJHQFLHV GLVWULFW FRXUWjV OHJDO FRQFOXVLRQV UHJDUGLQJ WKH H[WHQW RI WKDW PXVW DSSURYH SDUWLFXODU SRUWLRQV RI WKH SURMHFW KDYH IHGHUDO LQYROYHPHQW UHTXLUHG WR FRQYHUW D VWDWH KLJKZD\ FRPSOLHGZLWK1(3$l0DFKW)GDW1RWLQJWKDW SURMHFWLQWRDPDMRUIHGHUDODFWLRQ mWKHUH LV QR DOOHJDWLRQ WKDW WKH $UP\ &RUSV KDV IDLOHG WR 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO WKH &(4 UHJXODWLRQV VRXJKW WR DYRLG D VLWXDWLRQ ZKHUH WKH %0DMRU)HGHUDO$FWLRQV0D\$ULVH)URP QRQIHGHUDO DFWRU SUHVHQWV WKH IHGHUDO DJHQF\ ZLWK D IDLW $1RQ)HGHUDO3URMHFW DFFRPSOL ZKLFK VLJQLILFDQWO\ OLPLWV WKH IHGHUDO DJHQF\jV DELOLW\WRUHMHFWWKHSURSRVDO6HH*LOFKULVW)GDW )HGHUDO GHIHQGDQWV PD\ EH ERXQG E\ 1(3$ WR SHUIRUP &UXFLDOWRWKH)RXUWK&LUFXLWjVGHFLVLRQRIFRXUVHZDVWKH DGGLWLRQDO HQYLURQPHQWDO UHYLHZ RI 5RXWH 6RXWK IDFWWKDWWKHSODLQWLIIVRXJKWWRHQMRLQFRQVWUXFWLRQXQWLOWKH QRWZLWKVWDQGLQJ WKH IDFW WKDW WKH SURMHFW LV QRW IHGHUDOO\ DSSOLFDEOHIHGHUDODJHQFLHVZHUHDIIRUGHGWKHRSSRUWXQLW\WR IXQGHG $FFRUGLQJ WR WKH UHJXODWLRQV SURPXOJDWHG E\ WKH UHVSRQG WR WKH HQYLURQPHQWDO LVVXHV IDOOLQJ XQGHU WKHLU &(4 PDMRU IHGHUDO DFWLRQV mLQFOXGH>@ DFWLRQV ZLWK HIIHFWV UHVSHFWLYH MXULVGLFWLRQV 7KH SODLQWLII GLG QRW VHHN D WKDWPD\EHPDMRUDQGZKLFKDUHSRWHQWLDOO\VXEMHFWWR)HGHUDO FRPSUHKHQVLYH(,6IURPWKH6HFUHWDU\RIWKH,QWHULRUIRUWKH FRQWURO DQG UHVSRQVLELOLW\l &)5 7KHVH HQWLUHKLJKZD\IRUH[DPSOHUDWKHUWKHSODLQWLIIVRXJKWDQ DFWLRQVPD\EHmDVVLVWHGFRQGXFWHGUHJXODWHGRUDSSURYHG LQMXQFWLRQWRDOORZWKH6HFUHWDU\WLPHWRUHVSRQGWRWKHLVVXH E\IHGHUDODJHQFLHVl,GD7KHUHJXODWLRQJRHV RI WKH FRQYHUVLRQ RI SDUN ODQG WR D QRQUHFUHDWLRQDO XVH RQWRSURYLGH ZKLFKIHOOXQGHUWKH6HFUHWDU\jVMXULVGLFWLRQ )HGHUDODFWLRQVWHQGWRIDOOZLWKLQRQHRIWKHIROORZLQJ ,QDVXEVHTXHQWFDVHWKH)RXUWK&LUFXLWDGKHUHGWRWKHEDVLF FDWHJRULHV SULQFLSOHWKDWQRQIHGHUDODFWLRQVKRXOGQRWEHSHUPLWWHGWR OLPLW WKH DSSOLFDEOH IHGHUDO DJHQFLHVj FKRLFH RI UHDVRQDEOH DOWHUQDWLYHV,Q1RUWK&DUROLQDY&LW\RI9LUJLQLD%HDFK $SSURYDO RI VSHFLILF SURMHFWV VXFK DV FRQVWUXFWLRQ RU )GWK&LUWKH)RXUWK&LUFXLWUHYLVLWHGWKHLVVXH PDQDJHPHQWDFWLYLWLHVORFDWHGLQDGHILQHGJHRJUDSKLF ZKHQWKHDJJUHJDWHRIIHGHUDOLQYROYHPHQWWUDQVIRUPVDQRQ DUHD 3URMHFWV LQFOXGH DFWLRQV DSSURYHG E\ SHUPLW RU IHGHUDOSURMHFWLQWRDmPDMRU)HGHUDODFWLRQl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m)(5&lZKLFKOLFHQVHG 1(3$UHTXLUHPHQWV6HH&)5DVHHDOVR WKHK\GURSRZHUIDFLOLW\DW/DNH*DVWRQDQGWKHLPPHGLDWHO\ 6RXWKZHVW,,,)GDW6DYH%DUWRQ&UHHN$VVjQY VXUURXQGLQJ ODQG 7KH &LW\ ZRUULHG WKDW mDQ HQRUPRXV )+:$)GWK&LUFHUWGHQLHG86 DPRXQWRISXEOLFDQGSROLWLFDOSUHVVXUHZLOOEHSXWRQ)(5& 0DFKWY6NLQQHU)G'&&LU WRDSSURYHWKHSURMHFWDQG)(5&ZLOOEHXQDEOHWRPDNHD +LVWRULF3UHVHUYDWLRQ*XLOGRI%D\9LHZY%XUQOH\ UHDVRQHGDQGLQGHSHQGHQWGHFLVLRQlDERXWWKHHIIHFWVRIWKH )GWK&LU0DU\ODQG&RQVHUYDWLRQ SURMHFWRQWKHHQYLURQPHQW9LUJLQLD%HDFK)GDW &RXQFLO ,QF Y *LOFKULVW )G WK &LU )HGHUDOGHIHQGDQWVjHIIRUWVWRDUJXHWRWKHFRQWUDU\DUH 7KH)RXUWK&LUFXLWUHYHUVHGWKHGLVWULFWFRXUWjVJUDQWRIDQ WRWDOO\XQDYDLOLQJLQOLJKWRIWKLVFRXUWjVDQGRWKHUFLUFXLWVj LQMXQFWLRQ IRUELGGLQJ DQ\ FRQVWUXFWLRQ RQ WKH SLSHOLQH VXSSRUWLQJ SUHFHGHQW 2I FRXUVH IHGHUDO IXQGLQJ LV D EHFDXVHLWIRXQGWKDW)(5&ZRXOGQRWEHXQGXO\SUHVVXUHGE\ VLJQLILFDQWLQGLFDWLRQWKDWDSURMHFWFRQVWLWXWHVDPDMRUIHGHUDO 6RXWKZHVW:LOOLDPVRQ&RXQW\ 1R 1R 6RXWKZHVW:LOOLDPVRQ&RXQW\ &RPPXQLW\$VVjQY6ODWHUHWDO &RPPXQLW\$VVjQY6ODWHUHWDO DFWLRQ KRZHYHU WKH DEVHQFH RI IXQGLQJ LV QRW FRQFOXVLYH WKHKLJKZD\FURVVHGDFUHHN)LQDOO\KDGWKHFRXQW\ZDQWHG SURRIRIWKHFRQWUDU\6HH%D\9LHZ)GDW WR VHHN IHGHUDO IXQGV IRU WKH KLJKZD\ LW ZRXOG KDYH EHHQ UHTXLUHG WR REWDLQ WKH DSSURYDO RI WKH 6HFUHWDU\ RI ,Q DGGLWLRQ LW LV DSSDUHQW WKDW D QRQIHGHUDOO\ IXQGHG 7UDQVSRUWDWLRQ'HWHUPLQLQJWKDWm>D@QRQIHGHUDOSURMHFWLV SURMHFWPD\EHFRPHDPDMRUIHGHUDODFWLRQE\YLUWXHRIWKH FRQVLGHUHGDµIHGHUDODFWLRQjLI LWFDQQRWEHJLQRUFRQWLQXH DJJUHJDWH RI IHGHUDO LQYROYHPHQW IURP QXPHURXV IHGHUDO ZLWKRXWSULRUDSSURYDORIDIHGHUDODJHQF\l*LOFKULVW DJHQFLHVHYHQLIRQHDJHQF\jVUROHLQWKHSURMHFWPD\QRWEH )GDWLQWHUQDOTXRWDWLRQRPLWWHGWKHFRXUWKHOGWKDW VXIILFLHQWWRFUHDWHPDMRUIHGHUDODFWLRQLQDQGRILWVHOI6HH m>E@HFDXVH RI WKH LQHYLWDELOLW\ RI WKH QHHG IRU DW OHDVW RQH &)5EQRWLQJWKDWmPRUHWKDQRQH IHGHUDO DSSURYDO ZH WKLQN WKDW WKH FRQVWUXFWLRQ RI WKH DJHQF\PD\PDNHGHFLVLRQVDERXWSDUWLDODVSHFWVRIDPDMRU KLJKZD\ ZLOO FRQVWLWXWH D PDMRU IHGHUDO DFWLRQl ,G >)HGHUDO@ DFWLRQl VHH DOVR *LOFKULVW )G DW 7KHUHIRUHWKHFRXUWUHYHUVHGWKHGLVWULFWFRXUWjVGLVPLVVDORI KROGLQJWKDWm>E@HFDXVHRIWKHLQHYLWDELOLW\RIWKHQHHGIRUDW WKH SODLQWLIIjV 1(3$ FODLPV DQG UHPDQGHG IRU IXUWKHU OHDVWRQHIHGHUDO>DJHQF\@DSSURYDOWKHFRQVWUXFWLRQRI SURFHHGLQJVLQFOXGLQJDGHWHUPLQDWLRQmZKHWKHUWKHSURJUDP WKH>VWDWH@KLJKZD\ZLOOFRQVWLWXWHDPDMRUIHGHUDODFWLRQl LQ IDFW YLRODWHV 1(3$ DQG LWV UHJXODWLRQV E\ OLPLWLQJ µWKH 7KXVWKHIHGHUDOGHIHQGDQWVjDUJXPHQWWKDWWKH\ZHUHRQO\ FKRLFH RI UHDVRQDEOH DOWHUQDWLYHVj DYDLODEOH WR IHGHUDO LQYROYHGLQRQHDVSHFWRIWKHKLJKZD\jVGHVLJQDQGDSSURYDO GHFLVLRQPDNHUVl ,G DW FLWLQJ &)5 SURFHVVQDPHO\WKHIRXULQWHUFKDQJHVGRHVQRWQHFHVVDULO\ D VHUYHWRGHIHDWWKH$VVRFLDWLRQjVFODLPWKDWWKHSHUYDVLYHQHVV RIIHGHUDODFWLYLW\UHTXLUHGWRFRPSOHWHWKHKLJKZD\FRQYHUWV &OHDUO\DQLPDWLQJWKHFRXUWjVDQDO\VLVZDVWKHIDFWWKDWWKH WKHSURMHFWLQWRDPDMRUIHGHUDODFWLRQ VWDWHKDGDOUHDG\EHJXQWREXLOGWKHSRUWLRQVRIWKHKLJKZD\ WKDWHQWHUHGDQGH[LWHGWKHSDUNZLWKRXWKDYLQJREWDLQHGWKH &6WDQGDUGIRU(YDOXDWLQJ:KHQD1RQ)HGHUDO UHTXLVLWH IHGHUDO DSSURYDOV WR EXLOG WKH PLGGOH VHFWLRQ 3URMHFW%HFRPHVD0DMRU)HGHUDO$FWLRQ $FFRUGLQJ WR WKH FRXUW WKH DSSOLFDEOH DJHQFLHV mZRXOG LQHYLWDEO\ EH LQIOXHQFHG LI WKH &RXQW\ ZHUH DOORZHG WR $OWKRXJKWKLVFLUFXLWKDVQHYHUHQXQFLDWHGDVWDQGDUGIRU FRQVWUXFWPDMRUVHJPHQWVRIWKHKLJKZD\EHIRUHLVVXDQFHRI HYDOXDWLQJZKHWKHUQRQIHGHUDOSURMHFWVULVHWRWKHOHYHORI D ILQDO (,6l ,G DW +DG LW QRW UHPDQGHG IRU mPDMRU)HGHUDODFWLRQlRXUVLVWHUFLUFXLWVKDYHXQGHUWDNHQ FRQVLGHUDWLRQRIDQLQMXQFWLRQRQWKHFRQVWUXFWLRQWKHFRXUW VXFKDQH[DPLQDWLRQ,Q*LOFKULVWWKH)RXUWK&LUFXLWGHFLVLRQ UHDVRQHG WKDW m>W@KH FRPSOHWHG VHJPHQWV >RI WKH KLJKZD\@ RQ ZKLFK WKH $VVRFLDWLRQ XUJHV XV WR UHO\ WKH FRXUW ZRXOGVWDQGOLNHJXQEDUUHOVSRLQWLQJLQWRWKHKHDUWODQGRIWKH GHWHUPLQHGWKDWDFRXQW\IXQGHGKLJKZD\ZDVDPDMRUIHGHUDO SDUNl,GLQWHUQDOTXRWDWLRQRPLWWHG DFWLRQ EHFDXVH FRQVWUXFWLRQ RI WKH KLJKZD\ ZRXOG OLNHO\ UHTXLUH PXOWLSOH IHGHUDO DJHQFLHVj DSSURYDO EHIRUH 7KH )RXUWK &LUFXLWjV FRQFHUQ WKDW WKH IHGHUDO DJHQFLHVj FRPSOHWLRQ7KHKLJKZD\DWLVVXHLQ*LOFKULVWZDVGHVLJQHG GHFLVLRQPDNLQJ ZRXOG EH FRQVWUDLQHG E\ SUHPDWXUH WRFURVVDVWDWHSDUNZKLFKZDVHVWDEOLVKHGZLWKWKHJUDQWRI FRQVWUXFWLRQLVUHIOHFWHGLQ&(4UHJXODWLRQVZKLFKVWDWHWKDW IHGHUDOIXQGVWKHUHIRUHWKHFRXQW\QHHGHGWKHDSSURYDORIWKH mXQWLO DQ DJHQF\ LVVXHV D UHFRUG RI GHFLVLRQ QR DFWLRQ 6HFUHWDU\RIWKH,QWHULRUWREXLOGWKHSRUWLRQRIWKHKLJKZD\ FRQFHUQLQJWKHSURSRVDO>EHIRUHWKHDJHQF\@VKDOOEHWDNHQ WKDWWUDQVYHUVHGWKHSDUN7KH)RXUWK&LUFXLWQRWHGWKDWWKH ZKLFKZRXOGm>K@DYHDQDGYHUVHHQYLURQPHQWDOLPSDFW FRXQW\ ZDV DOVR OLNHO\ WR QHHG SHUPLWV IURP WKH RU >O@LPLW WKH >DJHQF\jV@ FKRLFH RI UHDVRQDEOH 6HFUHWDU\RIWKH$UP\WRGUHGJHZHWODQGVLQWKHSDUNZKHUH DOWHUQDWLYHVl&)5&OHDUO\DVWKHFRXUWQRWHG