5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH 8QLWHG6WDWHVY5LGJHHWDO 1RV (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU )LOH 1DPH D S BBBBBBBBBBBBBBBBB &2816(/ 81,7('67$7(6&28572)$33($/6 $5*8(' %DUU\ / $EERWW &$9(77 $%%277 )257+(6,;7+&,5&8,7 &KDWWDQRRJD7HQQHVVHHIRU$SSHOODQW3DXO:/D\PRQsU BBBBBBBBBBBBBBBBB $66,67$1781,7('67$7(6$77251(<&KDWWDQRRJD 7HQQHVVHH IRU $SSHOOHH 21 %5,() %DUU\ / $EERWW &$9(77 $%%277 &KDWWDQRRJD 7HQQHVVHH sHUU\ + 81,7(' 67$7(6 2) $0(5,&$ ; 6XPPHUVsLPP\)65RGJHUVsU6800(56 :<$77 3ODLQWLII$SSHOOHH &KDWWDQRRJD7HQQHVVHHIRU$SSHOODQWV3DXO:/D\PRQ sU $66,67$17 81,7(' 67$7(6 $77251(< 1RV &KDWWDQRRJD7HQQHVVHHIRU$SSHOOHH Y ! BBBBBBBBBBBBBBBBB $1'< 5,'*( '$11< %$.(5 23,1,21 BBBBBBBBBBBBBBBBB 'HIHQGDQWV$SSHOODQWV .$5(11(/6210225(&LUFXLWsXGJH'HIHQGDQW 1 $SSHOODQW$QG\5LGJH m5LGJHl DSSHDOVKLVFRQYLFWLRQIRU $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW SRVVHVVLRQRIDILUHDUPGXULQJDGUXJWUDIILFNLQJRIIHQVHDQG IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW&KDWWDQRRJD 'HIHQGDQW$SSHOODQW 'DQQ\ %DNHU m%DNHUl DSSHDOV KLV 1Rn&XUWLV/&ROOLHU'LVWULFWsXGJH VHQWHQFHIRUFRQVSLUDF\WRPDQXIDFWXUHPHWKDPSKHWDPLQH 2IILFHUV VWRSSHG D YDQ GULYHQ E\ %DNHU DQG 5LGJH DV LW $UJXHGDQG6XEPLWWHG 0DUFK DSSURDFKHGWKHVLWHRIDNQRZQPHWKDPSKHWDPLQHODERUDWRU\ ZKHUHWKHRIILFHUVZHUHFRQGXFWLQJDVHDUFK2QHRIILFHUKDG 'HFLGHGDQG)LOHG 0D\ LQWHUFHSWHGDSKRQHFDOOWZHQW\PLQXWHVHDUOLHUDQGZDVWROG m'DQQ\jV RQ WKH ZD\ ZLWK WKH PRQH\l sRLQW $SSHQGL[ %HIRUH 0225(DQG&/$<&LUFXLWsXGJHV /$:621 ms$l DW 3ULFKDUG7HVW $IWHU5LGJHZDVUHPRYHG 'LVWULFWsXGJH IURP WKH YDQ RIILFHUV VHL]HG D ILUHDUP WKDW ZDV VLWWLQJ RQ 5LGJHjVVHDW5LGJHILOHGDPRWLRQWRVXSSUHVVDOOHYLGHQFH JDWKHUHGDVDUHVXOWRIWKHVWRS7KHGLVWULFWFRXUWGHQLHGWKH PRWLRQDQG5LGJHZDVFRQYLFWHGRQDFRQGLWLRQDOJXLOW\SOHD WRSRVVHVVLQJDILUHDUPGXULQJDGUXJWUDIILFNLQJRIIHQVH+H DSSHDOVKLVFRQYLFWLRQRQWKHJURXQGWKDWWKHILUHDUPVKRXOG KDYHEHHQVXSSUHVVHG%HFDXVHWKHRIILFHUVKDGDUHDVRQDEOH DUWLFXODEOHVXVSLFLRQVXIILFLHQWWRMXVWLI\DVWRSZH$)),50 5LGJHjVFRQYLFWLRQ 7KH +RQRUDEOH 'DYLG 0 /DZVRQ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ 1RV 8QLWHG6WDWHVY5LGJHHWDO 8QLWHG6WDWHVY5LGJHHWDO 1RV %DNHU SOHDGHG JXLOW\ WR FRQVSLUDF\ WR PDQXIDFWXUH 7HVW 3ULFKDUG WROG WKH FDOOHU m2ND\ ZHjOO EH ZDLWLQJl PHWKDPSKHWDPLQH DQG ZDV VHQWHQFHG WR PRQWKV RI EHIRUHWKHFDOOZDVGLVFRQQHFWHGs$DW 3ULFKDUG7HVW LPSULVRQPHQW$WVHQWHQFLQJWKHJRYHUQPHQWPRYHGIRUD :KHQ3ULFKDUGUHODWHGWKHFRQYHUVDWLRQWRWKHRWKHURIILFHUV GRZQZDUG GHSDUWXUH IRU VXEVWDQWLDO DVVLVWDQFH SXUVXDQW WR /LHXWHQDQW 'DQ '\HU m'\HUl DQG 'HWHFWLYH 0DUN .LQJ 8QLWHG6WDWHV6HQWHQFLQJ*XLGHOLQHV m866*l . m.LQJl VDLGWKHFDOOHUPD\KDYHEHHQUHIHUULQJWR'DQQ\ DQG %DNHU PRYHG IRU GRZQZDUG GHSDUWXUHV SXUVXDQW WR %DNHU 1LFKROVRQjV LQIRUPDQW KDG PHQWLRQHG %DNHU RQ 866*$RQWKHJURXQGWKDWKLVFULPLQDOVWDWXVDVD VHYHUDO RFFDVLRQV VWDWLQJ WKDW %DNHU FRRNHG FDUHHURIIHQGHUVLJQLILFDQWO\RYHUUHSUHVHQWHGWKHVHULRXVQHVV PHWKDPSKHWDPLQHLQ6WRFNOHPjVODERUDWRU\.LQJDGYLVHG RIKLVFULPLQDOKLVWRU\DQG866*.EDVHGRQWKH WKHRWKHUVWKDWKHNQHZWKDW%DNHUKDGEHHQDUPHGGXULQJD WRWDOLW\RIWKHFLUFXPVWDQFHV7KHGLVWULFWFRXUWJUDQWHGWKH SUHYLRXVDUUHVW .PRWLRQGHSDUWLQJGRZQZDUGWKUHHOHYHOVEXWGHQLHG %DNHUjV PRWLRQV %DNHU DSSHDOV ERWK WKH H[WHQW RI KLV 6HYHUDORIILFHUVH[LWHGWKHUHVLGHQFHDQGKLGWKHPVHOYHVLQ . GHSDUWXUH DQG WKH GLVWULFW FRXUWjV IDLOXUH WR GHSDUW WKH DUHD VXUURXQGLQJ WKH GULYHZD\ $ERXW WZHQW\ PLQXWHV SXUVXDQWWR$DQG.%HFDXVHWKHGLVWULFWFRXUW DIWHU WKH SKRQH FDOO D YDQ HQWHUHG 6WRFNOHPjV GULYHZD\ SURSHUO\H[HUFLVHGLWVGLVFUHWLRQXQGHU.ZHFDQQRW %DNHU ZDV GULYLQJ DQG 5LGJH ZDV LQ WKH SDVVHQJHU VHDW UHYLHZ WKH H[WHQW RI WKH . GRZQZDUG GHSDUWXUH 2IILFHUV PRYHG LQ EHKLQG WKH YDQ DQG IROORZHG LW XQWLO LW 0RUHRYHUEHFDXVHWKHGLVWULFWFRXUWZDVDZDUHRILWVDXWKRULW\ VWRSSHG 7KH RIILFHUV UHPRYHG %DNHU DQG 5LGJH IURP WKH WRGHSDUWGRZQZDUGXQGHU$DQG.WKHGLVWULFW YHKLFOH FRXUWjVUHIXVDOWRGHSDUWGRZQZDUGRQWKHVHJURXQGVLVQRW UHYLHZDEOH $V 5LGJH H[LWHG WKH YDQ 1LFKROVRQ REVHUYHG D 5XJHU PLOOLPHWHUVHPLDXWRPDWLFSLVWRORQWKHSDVVHQJHUVHDWZKHUH ,)$&76$1'352&('85( 5LGJHKDGDSSDUHQWO\EHHQVLWWLQJRQLW1LFKROVRQDQQRXQFHG m*XQls$DW 1LFKROVRQ7HVW '\HU7HVW 2QFH $7KH6WRSRI5LGJHDQG%DNHU %DNHU DQG 5LGJH ZHUH RXW RI WKH YHKLFOH RIILFHUV DOVR REVHUYHG D EOXH OLJKW VLPLODU WR WKRVH XVHG RQ XQPDUNHG $ FRQILGHQWLDO LQIRUPDQW WROG 2IILFHU &KULV 1LFKROVRQ SROLFH FDUV SODVWLF WXELQJ HOHFWURQLF VFDOHV DQG D WRUFK m1LFKROVRQl RI WKH 5HG %DQN 3ROLFH 'HSDUWPHQW LQ 5HG %DNHUZDVLQSRVVHVVLRQRIDEDJFRQWDLQLQJDZKLWHVXEVWDQFH %DQN7HQQHVVHHWKDW7KRPDV6WRFNOHP m6WRFNOHPl ZDV DQGDFFRUGLQJWRWKHSROLFHVHYHUDOKXQGUHGGROODUV RSHUDWLQJ D PHWKDPSKHWDPLQH ODERUDWRU\ LQ KLV UHVLGHQFH 1LFKROVRQVHFXUHGDVHDUFKZDUUDQWIRU6WRFNOHPjVKRPHDQG %DNHUDQG5LGJHFODLPWKDWWKH\KDGDQLQQRFHQWSXUSRVH VHYHUDO RIILFHUV H[HFXWHG WKH VHDUFK RQ sXO\ DW IRUJRLQJWR6WRFNOHPjVKRXVH%DNHUjVVLVWHU$OOLVRQ7XUQHU DSSUR[LPDWHO\ SP 'XULQJ WKH VHDUFK ZKLFK ODVWHG m7XUQHUl KDGOHIWDFDUDW6WRFNOHPjVKRXVHIRUUHSDLUVD XQWLO HDUO\ sXO\ RIILFHUV GLVFRYHUHG D PHWKDPSKHWDPLQH PRQWKHDUOLHU2QsXO\VRPHRQHDOOHJHGO\FDOOHG7XUQHU ODERUDWRU\ DQG LWHPV DVVRFLDWHG ZLWK LWV RSHUDWLRQ LQ DQGWROGKHUmWKDWVRPHERG\ZDVXSWKHUHIRROLQJZLWK>KHU@ 6WRFNOHPjVEDVHPHQW FDUlDQGVKHVKRXOGmFRPHDQGVHHZKDWZDVJRLQJRQDERXW LWls$DW 7XUQHU7HVW :KHQ7XUQHUDVNHG%DNHUWR :KLOHWKHRIILFHUVZHUHH[HFXWLQJWKHZDUUDQW6WRFNOHP FKHFNRQWKHFDUKHmVDLGWKDWKHZRXOGJRJHW>5LGJH@DQGJR UHFHLYHG D FDOO RQ KLV FHOOXODU SKRQH 'HWHFWLYH %REE\ 3ULFKDUG m3ULFKDUGl DQVZHUHGWKHSKRQHDQGKHDUGmZKDW DSSHDUHG WR EH D PDOH YRLFH RQ WKH WHOHSKRQH WKDW VDLG %DNHU PDLQWDLQV WKDW KH RQO\ KDG VL[ GROODUV LQ KLV SRVVHVVLRQ DW WKH µ'DQQ\jVRQWKHZD\ZLWKWKHPRQH\jls$DW 3ULFKDUG WLPH 7KH PRQH\ ZDV QRW OLVWHG RQ WKH SROLFH LQYHQWRU\ RI LWHPV VHL]HG 1RV 8QLWHG6WDWHVY5LGJHHWDO 8QLWHG6WDWHVY5LGJHHWDO 1RV RYHU WKHUH DQG ORRNl s$ DW 7XUQHU 7HVW $IWHU GHSDUWXUH DUJXLQJ WKDW KLV FDUHHU RIIHQGHU VWDWXV RYHU %DNHUjVDUUHVW7XUQHUSLFNHGXSWKHFDUKHUVHOI,WKDGQRW UHSUHVHQWHG WKH VHULRXVQHVV RI KLV FULPLQDO KLVWRU\ +H EHHQUHSDLUHG VXEVHTXHQWO\ ILOHG D VXSSOHPHQWDO PRWLRQ IRU D GRZQZDUG GHSDUWXUH EDVHG RQ KLV SRVWFRQYLFWLRQ GUXJ UHKDELOLWDWLRQ 5LGJHILOHGDPRWLRQWRVXSSUHVVDOOHYLGHQFHVHL]HGDVD 7KH8QLWHG6WDWHVPRYHGIRUD.GRZQZDUGGHSDUWXUH UHVXOWRIWKHRIILFHUjVVWRSRIWKHYDQ7KHPDJLVWUDWHMXGJH IRU VXEVWDQWLDO DVVLVWDQFH DQG ILOHG D VXSSOHPHQWDO PRWLRQ FRQGXFWHGDQHYLGHQWLDU\KHDULQJDQGUHFRPPHQGHGWKDWWKH GHVFULELQJ%DNHUjVWHVWLPRQ\EHIRUHDIHGHUDOJUDQGMXU\ PRWLRQEHGHQLHG $W VHQWHQFLQJ WKH GLVWULFW FRXUW IRXQG WKDW %DNHU ZDV D >*@LYHQ WKH LQIRUPDWLRQ WKH RIILFHUV KDG DERXW 'DQQ\ FDUHHURIIHQGHUDQGWKDWKLVRIIHQVHOHYHOZDV7KHSDUWLHV %DNHU FDUU\LQJ D JXQ LQ WKH SDVW KLV LQYROYHPHQW LQ WKHQ DUJXHG WKHLU GRZQZDUG GHSDUWXUH PRWLRQV EHIRUH WKH PHWKDPSKHWDPLQHDQGWKHIDFWWKDWGUXJGHDOHUVRIWHQ FRXUW7KHJRYHUQPHQWVXPPDUL]HG%DNHUjVDVVLVWDQFHWKXV FDUU\ZHDSRQVWKHRIILFHUVKDGDUHDVRQDEOHEHOLHIEDVHG IDUDQGLQGLFDWHGWKDW%DNHUZRXOGOLNHO\EHXVHGDVDZLWQHVV RQVSHFLILFDQGDUWLFXODEOHIDFWVWKDWWKHRFFXSDQWVRIWKH LQFDVHVWKDWZHUHDOUHDG\SHQGLQJRUZRXOGEHEURXJKWLQWKH YDQPLJKWEHDUPHGDQGGDQJHURXV IXWXUH7KHIROORZLQJFROORTX\RFFXUUHG s$DW 0DJLVWUDWHsXGJHjV5HSRUW 5HF 7KHGLVWULFW &RXUW $QG VKRXOG KH UHQGHU VXEVWDQWLDO FRXUWDGRSWHGWKHPDJLVWUDWHjVUHFRPPHQGDWLRQ DVVLVWDQFH LQ WKRVH FDVHV ZRXOG \RX DQWLFLSDWH ILOLQJ D PRWLRQ SXUVXDQW WR 5LGJH WKHQ SOHDGHG JXLOW\ WR SRVVHVVLRQ RI D ILUHDUP LQ 5XOH" IXUWKHUDQFH RI D GUXJ WUDIILFNLQJ FULPH LQ YLRODWLRQ RI 86& F DQGFRQVSLUDF\WRPDQXIDFWXUHILIW\JUDPVRU *RYHUQPHQW ,ZRXOGsXGJH2IFRXUVHDVWKH&RXUW PRUHRIPHWKDPSKHWDPLQHLQYLRODWLRQRI86& LVFOHDUnDVWKH&RXUWZHOONQRZV\RX D DQG E % +H ZDV VHQWHQFHG WR NQRZ ZH FDQjW FRQVLGHU KLV IXWXUH PRQWKV RI LPSULVRQPHQW VL[W\ PRQWKV RI ZKLFK DUH DVVLVWDQFHRUWKHSRVVLELOLW\RIKLVIXWXUH DWWULEXWDEOH WR WKH ILUHDUP FRQYLFWLRQ 3XUVXDQW WR KLV DVVLVWDQFH LQ DVVHVVLQJ WKH . %XW WR FRQGLWLRQDO JXLOW\ SOHD 5LGJH DSSHDOV KLV FRQYLFWLRQ IRU DQVZHU\RXUTXHVWLRQV\HV\RXNQRZ, SRVVHVVLRQRIDILUHDUPLQIXUWKHUDQFHRIDGUXJWUDIILFNLQJ ZRXOGDQWLFLSDWHWKRVHHYHQWVRFFXUULQJ FULPHRQWKHJURXQGWKDWWKHGLVWULFWFRXUWHUUHGLQGHQ\LQJKLV PRWLRQWRVXSSUHVVEHFDXVHWKHVWRSRIWKHYHKLFOHYLRODWHGKLV s$DW 6HQWHQFLQJ7U )RXUWK$PHQGPHQWULJKWV 7KHGLVWULFWFRXUWGHQLHG%DNHUjVPRWLRQVIRUGRZQZDUG %%DNHUjV6HQWHQFLQJ GHSDUWXUHEXWJUDQWHGWKHJRYHUQPHQWjV.PRWLRQIRU DGRZQZDUGGHSDUWXUH7KHFRXUWUHGXFHG%DNHUjVJXLGHOLQH %DNHU SOHDGHG JXLOW\ WR FRQVSLUDF\ WR PDQXIDFWXUH ILIW\ UDQJH IURP PRQWKV WR PRQWKV GHSDUWLQJ JUDPV RU PRUH RI D PL[WXUH RU VXEVWDQFH FRQWDLQLQJ GRZQZDUGWZROHYHOVIRUKLVmJHQHUDOFRRSHUDWLRQlDQGRQH PHWKDPSKHWDPLQHLQYLRODWLRQRI86&%HIRUH DGGLWLRQDO OHYHO IRU KLV mWHVWLPRQ\ EHIRUH WKH JUDQG MXU\l VHQWHQFLQJ%DNHUILOHGVHYHUDOREMHFWLRQVWRKLVSUHVHQWHQFH s$ DW 6HQWHQFLQJ 7U %DNHU ZDV VHQWHQFHG WR LQYHVWLJDWLRQUHSRUW m365l ZKLFKUHFRPPHQGHGWKDWKHEH PRQWKVRILPSULVRQPHQW+HDSSHDOVKLVVHQWHQFH FODVVLILHG DV D FDUHHU RIIHQGHU DQG DVVLJQHG DQ DGMXVWHG RIIHQVH OHYHO RI +H ILOHG D PRWLRQ IRU D GRZQZDUG 1RV 8QLWHG6WDWHVY5LGJHHWDO 8QLWHG6WDWHVY5LGJHHWDO 1RV ,,$1'<5,'*( 027,217268335(66 LQGLYLGXDOLVDUPHG7HUU\ 86DW2IILFHUVmQHHG QRW UXOH RXW WKH SRVVLELOLW\ RI LQQRFHQW FRQGXFWl WR KDYH 5LGJH DUJXHV WKDW WKH GLVWULFW FRXUW HUUHG LQ GHQ\LQJ KLV UHDVRQDEOHVXVSLFLRQ$UYL]X86DW PRWLRQWRVXSSUHVVWKHILUHDUPEHFDXVHWKHVWRSYLRODWHGKLV )RXUWK$PHQGPHQWULJKWV:KHQUHYLHZLQJDGLVWULFWFRXUWjV 7KLVFRXUWKDVFRQFOXGHGWKDW7HUU\VWRSVFRQGXFWHGXQGHU UXOLQJRQDPRWLRQWRVXSSUHVVZHUHYLHZOHJDOFRQFOXVLRQV VLPLODU IDFWXDO FLUFXPVWDQFHV ZHUH MXVWLILHG E\ UHDVRQDEOH GHQRYRDQGILQGLQJVRIIDFWIRUFOHDUHUURU8QLWHG6WDWHVY VXVSLFLRQ,Q8QLWHG6WDWHVY%DUUHWW )G WK&LU )XOOHUWRQ)G WK&LU FHUWGHQLHG D SDQHO RI WKLV FRXUW FRQFOXGHG WKDW DQ RIILFHU KDG 86 7KXVZHUHYLHZGHQRYRWKHGLVWULFW UHDVRQDEOHVXVSLFLRQWRFRQGXFWDQLQYHVWLJDWRU\VWRSZKHUH FRXUWjV FRQFOXVLRQ WKDW WKH VWRS ZDV FRQVWLWXWLRQDO ZKLOH VRPHRQH GURYH XS WR D UHVLGHQFH WKDW WKH RIILFHU KDG MXVW JLYLQJmGXHZHLJKWWRLQIHUHQFHVGUDZQIURP>KLVWRULFDO@IDFWV ILQLVKLQJVHDUFKLQJ,GDW7KHRIILFHUNQHZWKDWD E\ UHVLGHQW MXGJHV DQG ORFDO ODZ HQIRUFHPHQW RIILFHUVl GUXJ GHDOHU OLYHG LQ WKH UHVLGHQFH WKH UHVLGHQFH ZDV D 2UQHODVY8QLWHG6WDWHV86 GLVWULEXWLRQSRLQWIRURWKHUGHDOHUVFRXULHUVIUHTXHQWO\PDGH GHOLYHULHV WKHUH DQG WKH GHOLYHU\ RI D VSHFLILF TXDQWLW\ RI :KHQDQRIILFHUFRQGXFWVDEULHILQYHVWLJDWRU\VWRSRID GUXJV ZDV H[SHFWHG DW WKDW WLPH ,G )LQDOO\ WKH RIILFHU SHUVRQRUYHKLFOHmWKH)RXUWK$PHQGPHQWLVVDWLVILHGLIWKH REVHUYHGWKHGULYHUjVVXVSLFLRXVGHPHDQRU,GDW7KH RIILFHUjV DFWLRQ LV VXSSRUWHG E\ UHDVRQDEOH VXVSLFLRQ WR WRWDOLW\ RI WKHVH FLUFXPVWDQFHV HVWDEOLVKHG UHDVRQDEOH EHOLHYHWKDWFULPLQDODFWLYLW\PD\EHDIRRWl8QLWHG6WDWHVY VXVSLFLRQVXIILFLHQWWRMXVWLI\DVWRS $UYL]X 86 TXRWDWLRQV RPLWWHG FI ,OOLQRLVY:DUGORZ86 QRWLQJWKDW ,QWKLVFDVHWKHRIILFHUVZHUHH[HFXWLQJDVHDUFKZDUUDQWLQ DQRIILFHUFRQGXFWLQJDQLQYHVWLJDWRU\VWRSmPXVWEHDEOHWR D UHVLGHQFH KRXVLQJ D PHWKDPSKHWDPLQH ODERUDWRU\ ZKHUH DUWLFXODWH PRUH WKDQ DQ LQFKRDWH DQG XQSDUWLFXODUL]HG 'DQQ\%DNHUZDVNQRZQWRFRRNPHWKDPSKHWDPLQH/LNHWKH VXVSLFLRQRUKXQFKRIFULPLQDODFWLYLW\l TXRWDWLRQVRPLWWHG RIILFHULQ%DUUHWWWKHVHRIILFHUVZHUHDZDLWLQJWKHDUULYDORI ,Q UHYLHZLQJ D UHDVRQDEOH VXVSLFLRQ GHWHUPLQDWLRQ ZH VRPHWKLQJ n QRW DQ H[SHFWHG GHOLYHU\ EXW D PDQ QDPHG FRQVLGHU WKH mWRWDOLW\ RI WKH FLUFXPVWDQFHVl WR GHWHUPLQH m'DQQ\l n EHFDXVH WKH\ KDG LQWHUFHSWHG D SKRQH FDOO LQ ZKHWKHU WKH GHWDLQLQJ RIILFHUV KDG D mSDUWLFXODUL]HG DQG ZKLFKWKHFDOOHUmVDLGµ'DQQ\jVRQWKHZD\ZLWKWKHPRQH\jl REMHFWLYHEDVLVIRUVXVSHFWLQJWKHSDUWLFXODUSHUVRQVWRSSHGRI s$ DW 3ULFKDUG 7HVW 7ZR RIILFHUV VWDWHG WKDW WKH FULPLQDO DFWLYLW\l 8QLWHG 6WDWHV Y &RUWH] 86 m'DQQ\lUHIHUUHGWRE\WKHFDOOHUPLJKWEH'DQQ\%DNHUZKR VHH7HUU\Y2KLR 86 WKH\ KDG OHDUQHG IURP DQ LQIRUPDQW KDG FRRNHG H[SODLQLQJWKDWDQRIILFHUjVDFWLRQVDUHmMXGJHGDJDLQVWDQ PHWKDPSKHWDPLQHDWWKHGUXJODERUDWRU\WKH\ZHUHVHDUFKLQJ REMHFWLYHVWDQGDUG ZRXOGWKHIDFWVDYDLODEOHWRWKHRIILFHUDW $WKLUGRIILFHUVDLG%DNHUKDGEHHQDUPHGGXULQJDSUHYLRXV WKHPRPHQWRIWKHVHL]XUHRUWKHVHDUFKµZDUUDQWDPDQRI DUUHVW7KXVZKHQWKHYDQGURYHXSWR6WRFNOHPjVUHVLGHQFH UHDVRQDEOH FDXWLRQ LQ WKH EHOLHIj WKDW WKH DFWLRQ WDNHQ ZDV DSSUR[LPDWHO\ WZHQW\ PLQXWHV DIWHU WKH DQRQ\PRXV SKRQH DSSURSULDWH"l FLWDWLRQ RPLWWHG ,W LV LQDSSURSULDWH WR FDOOWKHRIILFHUVKDGUHDVRQDEOHVXVSLFLRQWKDWRQHRIWKHPHQ H[DPLQH HDFK LQGLYLGXDO FLUFXPVWDQFH LQ LVRODWLRQ UDWKHU ZDVm'DQQ\lDQGWKDWKHKDGFRPHWR6WRFNOHPjVUHVLGHQFH WKH\ PXVW EH FRQVLGHUHG LQ WKHLU WRWDOLW\ 8QLWHG 6WDWHV Y WRWUDIILFLQPHWKDPSKHWDPLQH$OWKRXJKWKHRIILFHUVGLGQRW 2UVROLQL)G WK&LU 0RUHRYHUDV KDYHDQRSSRUWXQLW\WRREVHUYH%DNHUjVEHKDYLRUEHIRUHWKH\ ORQJ DV mD UHDVRQDEO\ SUXGHQW PDQ LQ WKH FLUFXPVWDQFHV HIIHFWXDWHGWKHVWRSWKH\KDGVWURQJUHDVRQWREHOLHYHWKDWD ZRXOG EH ZDUUDQWHG LQ WKH EHOLHI WKDW KLV VDIHW\ RU WKDW RI VSHFLILFLQGLYLGXDONQRZQWRFRRNPHWKDPSKHWDPLQHDWWKDW RWKHUVZDVLQGDQJHUlDQRIILFHUQHHGQRWEHFHUWDLQWKDWDQ ORFDWLRQZDVVFKHGXOHGWRDUULYH 1RV 8QLWHG6WDWHVY5LGJHHWDO 8QLWHG6WDWHVY5LGJHHWDO 1RV 0RUHRYHU m>W@KH SRVVLEOH GDQJHU SUHVHQWHG E\ DQ E\866*.l8QLWHG6WDWHVY%XUHDX)G LQGLYLGXDO DSSURDFKLQJ DQG HQWHULQJ D VWUXFWXUH KRXVLQJ D WK&LU GUXJ RSHUDWLRQ LV REYLRXV ,Q IDFW LW ZRXOG KDYH EHHQ IRROKDUG\IRUDQREMHFWLYHO\UHDVRQDEOHRIILFHUQRWWRFRQGXFW 3XUVXDQWWR.DVHQWHQFLQJMXGJHPD\ VHQWHQFHD DVHFXULW\IULVNXQGHUWKHFLUFXPVWDQFHVl8QLWHG6WDWHVY GHIHQGDQW EHORZ WKH DSSOLFDEOH JXLGHOLQH UDQJH LI WKH %RKDQQRQ )G WK &LU TXRWDWLRQ GHIHQGDQW KDV SURYLGHG VXEVWDQWLDO DVVLVWDQFH LQ WKH RPLWWHG ,Q%RKDQQRQDSDQHORIWKLVFRXUWH[SODLQHGWKDW LQYHVWLJDWLRQDQGSURVHFXWLRQRIRWKHUV866*. EHFDXVH WKH RIILFHUV ZHUH VHDUFKLQJ D VXVSHFWHG 5XOHDOORZVDGLVWULFWFRXUWWRUHVHQWHQFHDGHIHQGDQWWR PHWKDPSKHWDPLQHODEmDQRIILFHUFRXOGUHDVRQDEO\LQIHUWKDW UHIOHFWVXEVWDQWLDODVVLVWDQFHUHQGHUHGDIWHUWKHLQLWLDOVHQWHQFH DFXVWRPHURUGLVWULEXWRUZRXOGDUULYHRQWKHSUHPLVHV7KH ZDV LPSRVHG )HG 5 &ULP 3 :H ZLOO YDFDWH D DJHQWV KDG UHDVRQDEOH VXVSLFLRQ WKDW >KH@ ZDV LQYROYHG LQ GHIHQGDQWjVVHQWHQFHDQGUHPDQGIRUUHVHQWHQFLQJZKHUHWKH FULPLQDODFWLYLW\l,G7KLVVXJJHVWVWKDWHYHQLIWKHRIILFHUV GLVWULFW FRXUW mORRN>HG@ WR D SRWHQWLDO 5XOH PRWLRQl LQ GLGQRWKDYHVSHFLILFUHDVRQWRNQRZWKDWm'DQQ\lZRXOGEH UXOLQJRQD.PRWLRQ DUULYLQJZLWKPRQH\VKRUWO\WKH\PD\KDYHEHHQMXVWLILHGLQ VWRSSLQJLQGLYLGXDOVZKRDSSURDFKHGWKHUHVLGHQFHWKDWWKH\ >7@KH PDWWHU RI VHQWHQFLQJ LV UHPDQGHG IRU ZHUHVHDUFKLQJ UHFRQVLGHUDWLRQE\WKHGLVWULFWFRXUWZKRZHH[SHFWZLOO LQIRUP XV DV WR ZKHWKHU RU QRW WKH GRZQZDUG ,Q OLJKW RI %RKDQQRQ DQG %DUUHWW ZH DIILUP WKH GLVWULFW GHSDUWXUHIXOO\FRPSUHKHQGHGWKHJURXQGVVWDWHGE\WKH FRXUWjVGHQLDORI5LGJHjVPRWLRQWRVXSSUHVV7KHRIILFHUV JRYHUQPHQWLQPDNLQJWKH.PRWLRQRUZKHWKHU KDGDUHDVRQDEOHDUWLFXODEOHVXVSLFLRQVXIILFLHQWWRMXVWLI\D WKHGLVWULFWFRXUWNQHZWKHERXQGVRILWVGLVFUHWLRQ\HW VWRSZKLFKOHGQDWXUDOO\WRWKHGLVFRYHU\RIWKHZHDSRQLQ FKRVH WR mNHHS WKH FDUURW GDQJOLQJ MXVW RXW RI >WKH SODLQYLHZZKHQ%DNHUH[LWHGWKHYDQ GHIHQGDQWjV@UHDFKWKHUHE\FRQWLQXLQJWKHLQFHQWLYHWKDW SURPSWHG KLV SUH VHQWHQFH FRRSHUDWLRQ LQWR WKH SRVW ,,,'$11<%$.(5 027,216)25'2:1:$5' VHQWHQFHSHULRGl '(3$5785( %XUHDX )G DW FLWDWLRQ RPLWWHG 8QGHU WKH $ 6HFWLRQ . DQG )HGHUDO 5XOH RI &ULPLQDO JXLGHOLQHVmWKHVHQWHQFLQJMXGJHKDVDQREOLJDWLRQWRUHVSRQG 3URFHGXUH WRD.PRWLRQDQGWRWKHQVWDWHWKHJURXQGVIRUDFWLRQ DWVHQWHQFLQJZLWKRXWUHJDUGWRIXWXUHHYHQWVl,G7KHUHIRUH %DNHU DUJXHV WKDW ZH VKRXOG YDFDWH KLV VHQWHQFH DQG mWKH SURVSHFW RI 5XOH E UHOLHI LQ WKH IXWXUH FDQQRW EH UHPDQGIRUUHVHQWHQFLQJEHFDXVHWKHGLVWULFWFRXUWFRQVLGHUHG DOORZHGWRDOWHURULQIOXHQFHWKHGHFLVLRQVRIWKHSURVHFXWLRQ WKHSRVVLELOLW\RIDSRVWVHQWHQFLQJ)HGHUDO5XOHVRI&ULPLQDO RUWKHGHOLEHUDWLRQVRIWKHFRXUWDWVHQWHQFLQJl8QLWHG6WDWHV 3URFHGXUH5XOHPRWLRQZKHQUXOLQJRQWKHJRYHUQPHQWjV Y'URZQ )G VW&LU .PRWLRQDWVHQWHQFLQJ7KHJRYHUQPHQWFODLPVWKDW %DNHU LV DFWXDOO\ FKDOOHQJLQJ WKH H[WHQW RI KLV GRZQZDUG 2WKHU FLUFXLWV KDYH UHFRJQL]HG WKDW D GLVWULFW FRXUW LV GHSDUWXUH ZKLFK JHQHUDOO\ LV QRW UHYLHZDEOH RQ DSSHDO UHTXLUHGWRUXOHRQD.PRWLRQDWVHQWHQFLQJDQGFDQQRW 8QLWHG6WDWHVY1HVELWW )G WK&LU KROG WKH PRWLRQ RSHQ XQWLO DIWHU VHQWHQFLQJ 6HH 8QLWHG :H RUGLQDULO\ GR QRW KDYH MXULVGLFWLRQ WR HYDOXDWH WKH 6WDWHVY0LWFKHOO )G WK&LU 8QLWHG DSSURSULDWHQHVV RI D . GHSDUWXUH EXW ZH KDYH 6WDWHVY+RZDUG )G WK&LU 7KH MXULVGLFWLRQWRGHWHUPLQHZKHWKHUDGLVWULFWFRXUWjVUHGXFWLRQ JRYHUQPHQW VKRXOG QRW GHIHU LWV GHWHUPLQDWLRQ DERXW WKH RIDVHQWHQFHmUHSUHVHQWVWKHH[HUFLVHRIGLVFUHWLRQHQYLVLRQHG VXEVWDQWLDOLW\RIDGHIHQGDQWjVDVVLVWDQFHXQWLODIWHUVHQWHQFLQJ 1RV 8QLWHG6WDWHVY5LGJHHWDO 8QLWHG6WDWHVY5LGJHHWDO 1RV HYHQZKHUHLWVHHPVSUHPDWXUHWRDVVHVVWKHDVVLVWDQFH m$W WKH*XLGHOLQHUDQJHLQWRWKHSRVWVHQWHQFLQJUHDOPRI5XOH WKHWLPHRIVHQWHQFLQJD\HVRUQRGHFLVLRQPXVWEHPDGHRQ E ZKHWKHUWRILOHDVHFWLRQ.PRWLRQ DQGWKDWGHFLVLRQPXVW EHEDVHGRQDJRRGIDLWKHYDOXDWLRQRIWKHDVVLVWDQFHUHQGHUHG $W %DNHUjV VHQWHQFLQJ WKH GLVWULFW FRXUW HQJDJHG LQ D WRWKDWGDWHl'URZQ )GDW Q'HIHUULQJDUXOLQJ FROORTX\ZLWKWKHJRYHUQPHQWDERXWWKHSRVVLELOLW\RI%DNHUjV RQDPRWLRQIRUGRZQZDUGGHSDUWXUHXQGHU.XQWLODIWHU FRQWLQXHGFRRSHUDWLRQDIWHUVHQWHQFLQJ7KHJRYHUQPHQWVDLG VHQWHQFLQJ PD\ YLRODWH 5XOH V OLPLWDWLRQ RQ WKH GLVWULFW WKDWLWDQWLFLSDWHGVXFKFRRSHUDWLRQDQGZRXOGILOHD5XOH FRXUWjV DXWKRULW\ WR UHGXFH D SUHYLRXVO\LPSRVHG YDOLG PRWLRQLQWKHHYHQWRIVXFKFRRSHUDWLRQEXWUHPLQGHG WKH VHQWHQFH WR FDVHV LQ ZKLFK WKH JRYHUQPHQW PDNHV DQ FRXUWWKDWLWZRXOGEHLQDSSURSULDWHWRFRQVLGHUWKHSRVVLELOLW\ DSSURSULDWHPRWLRQZLWKLQWKHSUHVFULEHGWLPHSHULRG RIIXWXUHDVVLVWDQFHDWVHQWHQFLQJ mDVWKH&RXUWZHOONQRZV \RX NQRZ ZH FDQjW FRQVLGHU KLV IXWXUH DVVLVWDQFH RU WKH %XUHDX UHTXLUHV XV WR VHHN FHUWDLQ DVVXUDQFHV mIURP D SRVVLELOLW\RIKLVIXWXUHDVVLVWDQFHLQDVVHVVLQJWKH.ls$ UHDGLQJ RI WKH UHFRUG WKDW WKH GLVFUHWLRQ YHVWHG LQ WKH DW 6HQWHQFLQJ 7U $IWHU WKH JRYHUQPHQW DQG %DNHU VHQWHQFLQJ MXGJH KDV EHHQ H[HUFLVHG UDWKHU WKDQ SDUWLDOO\ GHVFULEHG %DNHUjV DVVLVWDQFH WKXV IDU WKH GLVWULFW FRXUW µUHVHUYHGj IRU D IXWXUH WLPH 2QO\ WKHQ FDQ ZH GHWHUPLQH JUDQWHGWKH.PRWLRQIRUDGRZQZDUGGHSDUWXUH/DWHU ZKHWKHUWKHVHQWHQFLQJMXGJHDEXVHGWKHGLVFUHWLRQZKLFKKH WKHFRXUWFDUHIXOO\FRQVLGHUHGWKHDSSURSULDWHH[WHQWRIWKH KDV H[HUFLVHGl %XUHDX )G DW ,Q %XUHDX DIWHU GHSDUWXUH LQ OLJKW RI mWKH DVVLVWDQFH JLYHQl GHSDUWLQJ LQTXLULQJDERXWWKHSRVVLELOLW\RISRVWVHQWHQFLQJGHSDUWXUHV GRZQZDUGWZROHYHOVIRU%DNHUjVJHQHUDOFRRSHUDWLRQZKLFK DW VHQWHQFLQJ WKH GLVWULFW FRXUW H[SOLFLWO\ VWDWHG mWKDW WKH mLQGLUHFWO\OHGWRWKHJXLOW\SOHDVRI>KLV@FRGHIHQGDQWVlDQG &RXUWjV GRZQZDUG GHSDUWXUH ZLOO WDNH LQWR DFFRXQW WKH RQHOHYHOIRU%DNHUjVJUDQGMXU\WHVWLPRQ\DERXWmKRZWKLV SRVVLELOLW\ WKDW WKHUH PD\ EH D IXUWKHU UHGXFWLRQ ODWHU RQ SDUWLFXODU W\SH RI RIIHQVH WKDW LV PHWKDPSKHWDPLQH SXUVXDQWWRD5XOHPRWLRQl,GDW,QOLJKWRIWKDW PDQXIDFWXULQJWDNHVSODFHls$DW 6HQWHQFLQJ7U VWDWHPHQW WKLV FRXUW GHFLGHG WKDW WKH GLVWULFW FRXUW KDG $IWHUUXOLQJRQWKH.PRWLRQWKHGLVWULFWFRXUWDJDLQ REYLRXVO\ PLVFRQVWUXHG WKH QDWXUH RI LWV GLVFUHWLRQ XQGHU PHQWLRQHG WKH SRVVLELOLW\ RI D SRVWVHQWHQFLQJ UHGXFWLRQ . SXUVXDQWWR5XOHLQGLFDWLQJWKDWmVKRXOGWKHJRYHUQPHQW ILOHD5XOHPRWLRQEDVHGXSRQ\RXUVXEVWDQWLDODVVLVWDQFH $ GLVWULFW FRXUWjV PHUH PHQWLRQ RI SRVVLEOH IXWXUH LQRWKHUFDVHVWKH&RXUWZLOOORRNYHU\IDYRUDEO\XSRQWKDWl FRRSHUDWLRQRUWKHSRVVLELOLW\RIILOLQJD5XOHPRWLRQDORQH s$DW 6HQWHQFLQJ7U 6SHFLILFDOO\%DNHUZDVWROG ZLOOQRWLQYDOLGDWHWKHGLVWULFWFRXUWjVUXOLQJRQDPRWLRQIRU m\RX FDQ H[SHFW \HW D IXUWKHU UHGXFWLRQ LQ \RXU VHQWHQFH DGRZQZDUGGHSDUWXUHXQGHU.DWVHQWHQFLQJ:KHQD VKRXOGWKDWRFFXUls$DW 6HQWHQFLQJ7U GHIHQGDQWFKDOOHQJHVWKHVHQWHQFLQJFRXUWjVUXOLQJRQDSSHDO RQWKHJURXQGWKDWWKHGLVWULFWFRXUWjVFRQWHPSODWLRQRIIXWXUH %DNHUDUJXHVWKDWWKHVHQWHQFLQJWUDQVFULSWVKRZVWKDWWKH FRRSHUDWLRQFRQWDPLQDWHGLWVGHFLVLRQRXUWDVNLVWRH[DPLQH GLVWULFW FRXUW ZLWKKHOG DW VHQWHQFLQJ DGGLWLRQDO GLVFUHWLRQ WKHWH[WDQGFRQWH[WRIWKHUHFRUGWRGHWHUPLQHZKHWKHUmWKH FRQGLWLRQHGRQ%DNHUjVIXWXUHFRRSHUDWLRQ%XWXQOLNHWKH SURVSHFW RI 5XOH E UHOLHI LQ WKH IXWXUH DOWHU>HG@ RU GLVWULFWFRXUWLQ%XUHDXZKLFKH[SOLFLWO\DFFRXQWHGIRUIXWXUH LQIOXHQFH>G@ WKH GHOLEHUDWLRQV RI WKH WULDO MXGJH DW UHGXFWLRQVZKHQUXOLQJRQD.PRWLRQKHUHWKHGLVWULFW VHQWHQFLQJl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l $W GLVFUHWLRQWRGHSDUWGRZQZDUGXQWLODIWHUVHQWHQFLQJEHFDXVH VHQWHQFLQJ WKH GLVWULFW MXGJH GHQLHG %DNHUjV PRWLRQ IRU WKHFRXUWUHFRJQL]HGWKDWDQ\IXWXUHUHGXFWLRQZRXOGGHSHQG GHSDUWXUHRQWKLVJURXQG HQWLUHO\ XSRQ WKH JRYHUQPHQWjV GHFLVLRQ WR ILOH D 5XOH PRWLRQ7KHUHIRUHZHFRQFOXGHWKDWWKHGLVWULFWFRXUWGLGQRW *HQHUDOO\ ZH GR QRW UHYLHZ D GLVWULFW FRXUWjV UHIXVDO WR LPSURSHUO\ H[HUFLVH LWV DXWKRULW\ XQGHU . E\ H[HUFLVHLWVGLVFUHWLRQWRJUDQWDGRZQZDUGGHSDUWXUH8QLWHG FRQVLGHULQJWKHSRVVLELOLW\RIDSRVWVHQWHQFLQJUHGXFWLRQ 6WDWHVY%\UG)G WK&LU +RZHYHU ZHGRKDYHMXULVGLFWLRQWRUHYLHZDGLVWULFWFRXUWjVEHOLHImWKDW %6HFWLRQ$ %DNHUjV&ULPLQDO+LVWRU\&DWHJRU\ LW ODFNHG DQ\ DXWKRULW\ WR GHSDUW GRZQZDUG DV D PDWWHU RI ODZl 8QLWHG 6WDWHV Y (EROXP )G WK &LU 3XUVXDQWWR866*% D WKHGLVWULFWFRXUWFODVVLILHG :H UHYLHZ GH QRYR ZKHWKHU WKH GLVWULFW FRXUW ZDV %DNHUDVDFDUHHURIIHQGHUEHFDXVHKHKDGWZRSULRUIHORQ\ DZDUH RI LWV DXWKRULW\ WR PDNH D GRZQZDUG GHSDUWXUH FRQYLFWLRQVIRUFRQWUROOHGVXEVWDQFHVRIIHQVHV6HH866* H[DPLQLQJWKHWUDQVFULSWRIWKHVHQWHQFLQJKHDULQJWRPDNH %FRPPHQWDU\DSSOLFQRWH GHILQLQJDSULRUIHORQ\ WKLVGHWHUPLQDWLRQ,G:HSUHVXPHWKDWWKHVHQWHQFLQJFRXUW FRQYLFWLRQDVmDSULRUDGXOWIHGHUDORUVWDWHFRQYLFWLRQIRUDQ KDVSURSHUO\H[HUFLVHGLWVGLVFUHWLRQZKHQLWGHFLGHVWKDWD RIIHQVH SXQLVKDEOH E\ GHDWK RU LPSULVRQPHQW IRU D WHUP GHSDUWXUHLVQRWZDUUDQWHGDVmWKHUHLVQRGXW\RQWKHWULDO H[FHHGLQJ RQH \HDU UHJDUGOHVV RI ZKHWKHU VXFK RIIHQVH LV MXGJHWRVWDWHDIILUPDWLYHO\WKDWKHNQRZVKHSRVVHVVHVWKH VSHFLILFDOO\GHVLJQDWHGDVDIHORQ\DQGUHJDUGOHVVRIWKHDFWXDO SRZHUWRPDNHDGRZQZDUGGHSDUWXUHEXWGHFOLQHVWRGRVRl VHQWHQFHLPSRVHGl %DNHUGRHVQRWDUJXHWKDWWKHGLVWULFW %\UG)GDW FRXUWHUUHGE\FODVVLI\LQJKLPDVDFDUHHURIIHQGHUEXWFODLPV WKDWWKHGLVWULFWFRXUWVKRXOGKDYHGHSDUWHGGRZQZDUGEHFDXVH ,Q 6PLWK WKH 6L[WK &LUFXLW UHPDQGHG D FDVH IRU UH KLVFULPLQDOKLVWRU\FDWHJRU\VLJQLILFDQWO\RYHUUHSUHVHQWHG VHQWHQFLQJLQOLJKWRIWKHIDFWWKDWWKHGLVWULFWFRXUWPD\KDYH WKHVHULRXVQHVVRIKLVSULRUFULPLQDOFRQGXFWLQOLJKWRIIRXU EHHQ XQDZDUH RI LWV DXWKRULW\ WR GHSDUW GRZQZDUG ZKHQ D IDFWRUV %DNHU ZDV \RXQJ DW WKH WLPH RI FRQYLFWLRQV WKH FDUHHURIIHQGHUjVFULPLQDOKLVWRU\FDWHJRU\RYHUUHSUHVHQWVKLV RIIHQVHVLQYROYHGRQO\PDULMXDQD WKHFULPHVZHUHLQWKHOHDVW DFWXDO FULPLQDO KLVWRU\ )G DW ,W ZDV XQFOHDU VHULRXVFODVVRIIHORQLHVLQ7HQQHVVHH DQGKLVWZHQW\IRXU ZKHWKHU WKH GLVWULFW FRXUW ZDV DZDUH RI WKLV DXWKRULW\ DW PRQWKVHQWHQFHIRUHDFKFRQYLFWLRQZDVVXVSHQGHG VHQWHQFLQJEHFDXVHRImWKHVHQWHQFLQJMXGJHjVFRQWHQWLRQWKDW KHZDVERXQGE\&RQJUHVVjGHFLVLRQWRSXQLVKVHYHUHO\UHSHDW 7KHJXLGHOLQHVUHFRJQL]HWKHSRVVLELOLW\WKDWWKHFULPLQDO RIIHQGHUVZKHWKHUKHDJUHHGZLWKWKDWGHFLVLRQRUQRWDORQJ KLVWRU\FDWHJRU\DVVLJQHGWRDGHIHQGDQWPD\mQRWDGHTXDWHO\ ZLWKKLVGHFODUDWLRQWKDWKHZDVLPSRVLQJµWKHEDUHPLQLPXPj UHIOHFW WKH VHULRXVQHVV RI WKH GHIHQGDQWjV SDVW FULPLQDO WKDWKHFRXOGl,G7KLVFRXUWKDVVXEVHTXHQWO\GLVWLQJXLVKHG FRQGXFWRUWKHOLNHOLKRRGWKDWWKHGHIHQGDQWZLOOFRPPLWRWKHU 6PLWKLQDQXQSXEOLVKHGRUGHU FULPHVl,G$7KLVLQFOXGHVFDVHVZKHUHWKHFULPLQDO KLVWRU\FDWHJRU\mVLJQLILFDQWO\RYHUUHSUHVHQWVWKHVHULRXVQHVV ,Q 6PLWK ZH ZHUH XQDEOH WR GLVFHUQ IURP WKH UHFRUG RI D GHIHQGDQWjV FULPLQDO KLVWRU\ RU WKH OLNHOLKRRG WKDW WKH ZKHWKHUWKHGLVWULFWFRXUWZDVDZDUHRILWVDXWKRULW\WR GHIHQGDQW ZLOO FRPPLW IXUWKHU FULPHVl ,G $ VHH GHSDUW ,Q DGGLWLRQ WKH DSSOLFDELOLW\ RI6PLWK ZDV 8QLWHG 6WDWHV Y 6PLWK )G WK &LU OLPLWHGWRWKHVSHFLILFIDFWVRIWKDWFDVH WKHPRVWVDOLHQW m>6@HQWHQFLQJMXGJHVKDYHWKHGLVFUHWLRQWRGHWHUPLQHWKDWD IDFWEHLQJWKDWWKHVHQWHQFLQJFRXUWVWDWHGWKDWLWLPSRVHG GHIHQGDQWjVFULPLQDOKLVWRU\FDWHJRU\PD\RYHUVWDWHKLVDFWXDO 1RV 8QLWHG6WDWHVY5LGJHHWDO 8QLWHG6WDWHVY5LGJHHWDO 1RV WKHmEDUHPLQLPXPlVHQWHQFHWKDWLWZDVDXWKRUL]HGE\ JRYHUQPHQWjV.PRWLRQIRUGRZQZDUGGHSDUWXUHWKHUH ODZWRLPSRVH LVDPSOHUHDVRQIRUXVWRFRQFOXGHWKDWWKHGLVWULFWMXGJHZDV DZDUHRIKLVDXWKRULW\WRGHSDUWGRZQZDUGLI%DNHUjVFULPLQDO 8QLWHG6WDWHVY%ODQFR1R:/DW KLVWRU\FDWHJRU\RYHUUHSUHVHQWHGKLVDFWXDOFULPLQDOKLVWRU\ WK&LU1RY 2UGHU ,QOLJKWRIWKLVHYLGHQFHZHGRQRWFRQVLGHULWDSSURSULDWHWR FRQVLGHULQWKLVFDVHWKHVDPHGLVWULFWMXGJHjVXQDZDUHQHVVRI 7KHVHQWHQFLQJMXGJHLQ%DNHUjVFDVHZDVWKHVDPHMXGJH KLVGLVFUHWLRQWRGHSDUWGRZQZDUGIRUWKLVUHDVRQDWDQHDUOLHU ZKR LQ 6PLWK IDLOHG WR UHFRJQL]H KLV DXWKRULW\ WR GHSDUW VHQWHQFLQJKHDULQJLQDQRWKHUFDVH%HFDXVHQRWKLQJLQWKH GRZQZDUGZKHUHDFDUHHURIIHQGHUjVFULPLQDOKLVWRU\FDWHJRU\ UHFRUGLQGLFDWHVWKDWWKHVHQWHQFLQJMXGJHZDVXQDZDUHRIKLV VLJQLILFDQWO\RYHUUHSUHVHQWHGWKHVHULRXVQHVVRIKLVFULPLQDO GLVFUHWLRQ WR GHSDUW GRZQZDUG XQGHU $ ZH FDQQRW KLVWRU\%DNHUjVDUJXPHQWWXUQVRQWZRFRPPHQWVPDGHE\ UHYLHZWKHGLVWULFWFRXUWjVH[HUFLVHRIGLVFUHWLRQLQGHQ\LQJ WKHVHQWHQFLQJMXGJH mDVHQWHQFHDWWKHORZHQGRIWKH WKLVGHSDUWXUH JXLGHOLQHUDQJHLVPRUHWKDQDGHTXDWHKHUHlDQG m\RXDUH VWLOOORRNLQJDWDERXW\HDUVLQMDLODQGWKH&RXUWEHOLHYHV &.'HSDUWXUH WKDWWKDWLVPRUHWKDQVXIILFLHQWIRUWKHRIIHQVHIRUZKLFK\RX VWDQG FRQYLFWHGl s$ DW 6HQWHQFLQJ 7U %DNHU )LQDOO\%DNHUDVNVXVWRUHYLHZWKHGLVWULFWFRXUWjVUHIXVDO VXJJHVWV WKDW WKHVH VWDWHPHQWV DUH FRPSDUDEOH WR WKH WR JUDQW D GRZQZDUG GHSDUWXUH SXUVXDQW WR . 7KH VHQWHQFLQJMXGJHjVVWDWHPHQWLQ6PLWKWKDWKHZDVVHQWHQFLQJ VHQWHQFLQJJXLGHOLQHVSURYLGH 6PLWKWRmWKHEDUHPLQLPXPlKHFRXOG)GDW 8QGHU 86& E WKH VHQWHQFLQJ FRXUW PD\ ,QWKLVFDVHWKHGLVWULFWMXGJHjVVWDWHPHQWVPD\LQGLFDWHWKDW LPSRVHDVHQWHQFHRXWVLGHWKHUDQJHHVWDEOLVKHGE\WKH KHWKLQNVWKHVHQWHQFHKLJKIRU%DNHUjVFULPHEXWWKH\GRQRW DSSOLFDEOHJXLGHOLQHVLIWKHFRXUWILQGVmWKDWWKHUHH[LVWV LQGLFDWH WKDW KH ZDV XQDZDUH RI KLV GLVFUHWLRQ WR GHSDUW DQDJJUDYDWLQJRUPLWLJDWLQJFLUFXPVWDQFHRIDNLQGRUWR GRZQZDUG%DNHUVSHFLILFDOO\WROGWKHFRXUWWKDWKLVPRWLRQV DGHJUHHQRWDGHTXDWHO\WDNHQLQWRFRQVLGHUDWLRQE\WKH IRUGRZQZDUGGHSDUWXUHFRXOGEHFRQVLGHUHGLQGLYLGXDOO\RU 6HQWHQFLQJ &RPPLVVLRQ LQ IRUPXODWLQJ WKH JXLGHOLQHV DVDWRWDOLW\RIWKHFLUFXPVWDQFHV+HFLWHGFDVHVIURPWKH WKDW VKRXOG UHVXOW LQ D VHQWHQFH GLIIHUHQW IURP WKDW 7KLUG1LQWKDQG7HQWK&LUFXLWVDVVXSSRUWIRUWKHFRXUWjV GHVFULEHGl GLVFUHWLRQ WR GHSDUW GRZQZDUG ZKHUH D GHIHQGDQWjV FDUHHU RIIHQGHUVWDWXVVLJQLILFDQWO\RYHUUHSUHVHQWVWKHVHULRXVQHVVRI 866* . 7KH JXLGHOLQHV DOVR mH[SOLFLWO\ WKH GHIHQGDQWjV FULPLQDO KLVWRU\ DQG RIIHQVH OHYHO 7KH DFNQRZOHGJH WKDW D FRPELQDWLRQ RU DJJUHJDWLRQ RI IDFWRUV JRYHUQPHQWGLGQRWFKDOOHQJHWKHDXWKRULW\RIWKHVHQWHQFLQJ FRXOG GLVWLQJXLVK D FDVH IURP WKH µKHDUWODQGj RI FDVHVl FRXUWWRGHSDUWGRZQZDUGDQGWKHFRXUWQHYHUH[SUHVVHGDQ\ 8QLWHG6WDWHVY&ROHPDQ)G WK&LU GRXEW DERXW WKH H[WHQW RI LWV GLVFUHWLRQ ,Q IDFW WKH HQEDQF 866*.FRPPHQWDU\%DNHUDUJXHVWKDW JRYHUQPHQW UHVSRQGHG WR WKH PHULWV RI %DNHUjV DUJXPHQW WKH GLVWULFW FRXUW IDLOHG WR DSSUHFLDWH WKH H[FHSWLRQDO H[SODLQLQJ WKDW mSXWWLQJ KLP DW D /HYHO DV D FULPLQDO VLJQLILFDQFHRIWKHIROORZLQJPLWLJDWLQJFLUFXPVWDQFHVWKH RIIHQGHULVQRWRYHUVWDWLQJKLVYHU\VHULRXVEDFNJURXQGls$ WRWDOLW\RIZKLFKKHFODLPVPHULWDGRZQZDUGGHSDUWXUHXQGHU DW 6HQWHQFLQJ7U %HFDXVHWKHGLVWULFWMXGJHKHDUGDOO . %DNHUjV FULPLQDO KLVWRU\ FDWHJRU\ RYHU RI%DNHUjVPRWLRQVIRUDGRZQZDUGGHSDUWXUHGLGmQRWILQG UHSUHVHQWHG WKH VHULRXVQHVV RI KLV FULPLQDO KLVWRU\ KLV WKDW0U%DNHUjVFDVHLVDW\SLFDOlRUmRXWVLGHWKHKHDUWODQGRI DGGLFWLRQWRPHWKDPSKHWDPLQHZDVWKHGULYLQJIRUFHEHKLQG FDVHV GHVFULEHG LQ WKH JXLGHOLQHVl DQG HYHQ JUDQWHG WKH KLV FULPH WKH WKUHHOHYHO GRZQZDUG GHSDUWXUH GLG QRW DGHTXDWHO\ UHZDUG KLV VXEVWDQWLDO DVVLVWDQFH WR WKH 1RV 8QLWHG6WDWHVY5LGJHHWDO 8QLWHG6WDWHVY5LGJHHWDO 1RV JRYHUQPHQW DQG KHPDGHH[WUDRUGLQDU\HIIRUWVDWSRVW WKH FRXUW PD\ FRQVLGHU ZKHWKHU D GHSDUWXUH LV RIIHQVHUHKDELOLWDWLRQZKLFKVXJJHVWVDORZHUOLNHOLKRRGRI ZDUUDQWHGl UHFLGLYLVP s$DW 6HQWHQFLQJ7U TXRWLQJ5HHG)GDW $IWHU KHDULQJ %DNHUjV DUJXPHQWV DERXW WKHVH PLWLJDWLQJ 7KH FRXUW DOVR H[SODLQHG WKDW mµFHUWDLQ DVSHFWV RI WKH FDVH FLUFXPVWDQFHVWKHFRXUWGHQLHG%DNHUjVPRWLRQIRUD. PXVW EH IRXQG XQXVXDO HQRXJK IRU LW WR IDOO RXWVLGH WKH GHSDUWXUH m7KH&RXUWGRHVQRWILQGWKDW0U%DNHUjVFDVHLV KHDUWODQG RI FDVHV LQ WKH JXLGHOLQHjl DQG WKDW LW ZRXOG DW\SLFDO WKDW LV WKH &RXUW GRHV QRW ILQG WKDW KLV FDVH LV FRQVLGHUHYHQIDFWRUVQRWPHQWLRQHGE\WKHJXLGHOLQHVLQWKH RXWVLGHWKHKHDUWODQGRIFDVHVGHVFULEHGLQWKHJXLGHOLQHVl FRQWH[WRIWKHVWUXFWXUHDQGWKHRU\RIWKHJXLGHOLQHVs$DW s$DW 6HQWHQFLQJ7U %DNHUDUJXHVWKDWEHFDXVHWKH 6HQWHQFLQJ7U TXRWLQJ.RRQY8QLWHG6WDWHV86 GLVWULFWFRXUWVLQJOHGRXW%DNHUjVHIIRUWVDWUHKDELOLWDWLRQZH $VWKHJRYHUQPHQWDUJXHVWKLVGLVFXVVLRQRI VKRXOG FRQFOXGH WKDW WKH GLVWULFW FRXUW ZDV XQDZDUH RI LWV 5HHGDQGWKHJXLGHOLQHVVXJJHVWVWKDWWKHGLVWULFWFRXUWZDV DXWKRULW\WRGHSDUWLQOLJKWRIWKHRWKHUWKUHHIDFWRUVLGHQWLILHG IXOO\DZDUHRILWVDXWKRULW\WRJUDQWDGRZQZDUGGHSDUWXUHDQG E\%DNHU$VH[SODLQHGDERYHZHGRQRWUHYLHZDGLVWULFW VLPSO\ GHFLGHG WKDW D GHSDUWXUH ZRXOG QRW EH DSSURSULDWH FRXUWjVUHIXVDOWRJUDQWDGRZQZDUGGHSDUWXUH%\UG)G XQGHUWKHFLUFXPVWDQFHV7KHUHIRUHZHFDQQRWUHYLHZWKH DWXQOHVVWKHFRXUWHUURQHRXVO\EHOLHYHGWKDWLWGLGQRW GLVWULFWFRXUWjVGHFLVLRQQRWWRGHSDUWGRZQZDUGSXUVXDQWWR KDYHWKHDXWKRULW\WRGHSDUWGRZQZDUG:HOOV)GDW . :H UHYLHZ GH QRYR ZKHWKHU WKH GLVWULFW FRXUW ZDV DZDUH RI LWV DXWKRULW\ WR PDNH D GRZQZDUG GHSDUWXUH ,9&21&/86,21 H[DPLQLQJWKHWUDQVFULSWRIWKHVHQWHQFLQJKHDULQJWRPDNH WKDWGHWHUPLQDWLRQ(EROXP)GDW7KHGLVWULFWFRXUW )RU WKH UHDVRQV H[SODLQHG DERYH ZH $)),50 5LGJHjV LVSUHVXPHGWRKDYHSURSHUO\H[HUFLVHGLWVGLVFUHWLRQZKHQLW FRQYLFWLRQ:HFDQQRWUHYLHZWKHH[WHQWRI%DNHUjV. GHFLGHVWKDWDGHSDUWXUHLVQRWZDUUDQWHGPHDQLQJWKDWLWQHHG GRZQZDUGGHSDUWXUHRUWKHGLVWULFWFRXUWjVUHIXVDOWRGHSDUW QRWDIILUPDWLYHO\UHFRJQL]HLWVSRZHUWRPDNHDGRZQZDUG GRZQZDUGXQGHU$DQG.DWVHQWHQFLQJ RQWKDW GHSDUWXUHZKHQLWGHFOLQHVWRGRVR%\UG)GDW EDVLVZH$)),50%DNHUjVVHQWHQFH $WVHQWHQFLQJ%DNHUPDGHVHYHUDODUJXPHQWVVXSSRUWLQJ GHSDUWXUH DQG WKH JRYHUQPHQW UHVSRQGHG WR HDFK RI WKHP 7KHGLVWULFWFRXUWWKHQTXRWHGH[WHQVLYHO\IURPD6L[WK&LUFXLW FDVH8QLWHG6WDWHV Y 5HHG)G WK&LU FHUWGHQLHG86 ZKLFKH[SODLQVWKHJURXQGV XSRQZKLFKDVHQWHQFLQJFRXUWFDQGHSDUWGRZQZDUGSXUVXDQW WR. 7KH*XLGHOLQHV0DQXDOSURYLGHVWKDWDVHQWHQFLQJFRXUW VKRXOGmWUHDWHDFKJXLGHOLQHDVFDUYLQJRXWDKHDUWODQGD VHW RI W\SLFDO FDVHV HPERG\LQJ WKH FRQGXFW WKDW HDFK JXLGHOLQHGHVFULEHV:KHQDFRXUWILQGVDQDW\SLFDOFDVH RQHWRZKLFKDSDUWLFXODUJXLGHOLQHOLQJXLVWLFDOO\DSSOLHV EXWZKHUHFRQGXFWVLJQLILFDQWO\GLIIHUVIURPWKHQRUP