Court Opinion

ID: 2969925
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:00:31.520866+00
Date Added: 2024-06-11T12:03:29.729049
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
           3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

   (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
               )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6
             )257+(6,;7+&,5&8,7
               BBBBBBBBBBBBBBBBB

:,//,$0 3 0&'$112/'HW ;
DO                           
        3ODLQWLIIV$SSHOOHHV 
                                    1RV
                                    
          Y                    !
                               
                               
67$5 %$1. 1$ s2+1          
(1'5(6 s2<&( / 5,&+7(5      
7+20$6 $ 6,0216 s5         
*5$<'21 +($' 	 5,7&+(< 
                               
     'HIHQGDQWV$SSHOODQWV 
                               
                               
/,1'+2567 	 '5(,'$0(          
:,//,$0 .,5.+$0               
*5$',621 	 &2 ,1&          
                               
      'HIHQGDQWV$SSHOOHHV 
                               
:,//,$0 s +$5(HWDO       
                 'HIHQGDQWV 
                               
                              1

     $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
     IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW'D\WRQ
    1Rn:DOWHU+5LFH'LVWULFWsXGJH

                           
        0F'DQQROGY                       1RV
         6WDU%DQNHWDO

                    $UJXHG)HEUXDU\
               'HFLGHGDQG)LOHG$XJXVW
    %HIRUH0(55,77DQG&2/(&LUFXLWsXGJHV+22'
                     'LVWULFWsXGJH
                       BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('  7KRPDV 5 6FKXFN 7$)7 67(77,1,86 	
+2//,67(5&LQFLQQDWL2KLRIRU$SSHOODQWV6WHSKHQ0
3HUU\&$61(5	(':$5'6%RVWRQ0DVVDFKXVHWWVIRU
$SSHOOHH  0LFKDHO 6FKORVV 86 '(3$570(17 2)
/$%252)),&(2)7+(62/,&,725:DVKLQJWRQ'&
IRU$PLFXV&XULDH21%5,()7KRPDV56FKXFN0DUFLD
( $QGUHZ 7$)7 67(77,1,86 	 +2//,67(5
&LQFLQQDWL 2KLR sRKQ : +XVW 0LFKDHO ( 0DXQGUHOO
6&+52('(50$81'5(//%$5%,(5(	32:(56
&LQFLQQDWL 2KLR 'DYLG & *UHHU %,(6(5 *5((5 	
/$1',6'D\WRQ2KLRIRU$SSHOODQWV6WHSKHQ03HUU\
&$61(5 	 (':$5'6 %RVWRQ 0DVVDFKXVHWWV sXGLWK
%R\HUV*HH&RYLQJWRQ.HQWXFN\5*DU\:LQWHUV&OHPHQW
s 'H0LFKHOLV 0F&$6/,1 ,0%86 	 0F&$6/,1
&LQFLQQDWL 2KLR sDPHV ( %XUNH ,,, 'DQLHO ( ,]HQVRQ
.($7,1*08(7+,1*	./(.$03&LQFLQQDWL2KLR
IRU$SSHOOHHV0LFKDHO6FKORVV86'(3$570(172)
/$%252)),&(2)7+(62/,&,725:DVKLQJWRQ'&
IRU$PLFXV&XULDH

     
     7KH +RQRUDEOH sRVHSK 0 +RRG 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
(DVWHUQ 'LVWULFW RI .HQWXFN\ VLWWLQJ E\ GHVLJQDWLRQ
    0F'DQQROGY                        1RV          1RV                          0F'DQQROGY           
      6WDU%DQNHWDO                                                                                               6WDU%DQNHWDO

WKHGHFLVLRQRIWKH'LVWULFW&RXUWGHQ\LQJ6WDU%DQNjVFODLP                                    BBBBBBBBBBBBBBBBB
WRWKHIXQGDVSURFHHGVRIWKHSOHGJHGFROODWHUDO
                                                                                                    23,1,21
  $V WR 1R  ZH 9$&$7( WKH GHFLVLRQ RI WKH                                     BBBBBBBBBBBBBBBBB
'LVWULFW&RXUWDQG5(0$1'IRUDGHWHUPLQDWLRQRISRVVLEOH
QRQILGXFLDU\ OLDELOLW\ XQGHU +DUULV 7UXVW DV DIIHFWLQJ               0(55,77&LUFXLWsXGJH7KRXJKWKLVFRPELQHGDSSHDO
DSSHOODQWVj FODLPHG ULJKW RI FRQWULEXWLRQ  :H H[SUHVV QR        UDLVHVGHWDLOHGTXHVWLRQVRIVHFXUHGWUDQVDFWLRQVDQGHPSOR\HH
YLHZ DV WR WKH H[LVWHQFH RI WKDW ULJKW RU WKH QHHG IRU DQ    EHQHILWVODZWKHLVVXHLVHDVLO\VWDWHG:HPXVWGHFLGHKRZ
HYLGHQWLDU\ IDLUQHVV KHDULQJ  7KH 'LVWULFW &RXUW VKRXOG          WRGLVWULEXWHPLOOLRQLQVHWWOHPHQWPRQLHVFODLPHGE\
GHWHUPLQH LQ WKH ILUVW LQVWDQFH KRZ +DUULV 7UXVW DIIHFWV       SODLQWLIIVDQGDVHFXUHGFUHGLWRUDQGZKDWHIIHFWLIDQ\WKH
DSSHOODQWVjWKHRU\RIFRPPRQOLDELOLW\DQGZKHWKHULWVXSSRUWV           IXQGVKRXOGKDYHXSRQWKHQRQVHWWOLQJGHIHQGDQWV,Q1R
WKHLU FODLPHG ULJKW WR FRQWULEXWLRQ  %HFDXVH WKH LVVXH RI       6WDU %DQN DV WKH VHFXUHG FUHGLWRU FODLPV WKH
QRQILGXFLDU\ OLDELOLW\ UHPDLQV XQGHFLGHG ZH GR QRW UHDFK         VHWWOHPHQWIXQGDVmSURFHHGVlIURPLWVORDQWRWKHSODQ,Q
DSSHOODQWVj FKDOOHQJH WR WKH VWUXFWXUH RI WKH VHWRII RU WKH    1RDSSHOODQWVDUHWKHQRQVHWWOLQJGHIHQGDQWVZKR
DGHTXDF\RIWKHVHWWOHPHQWLQWKLVFDVH:HQRWHRQO\WKDW             FRQWLQXHWRREMHFWWRWKHIRUPDQGHIIHFWRIWKHVHWWOHPHQW
ZHUH WKH VHWWOLQJ GHIHQGDQWV DOVR SRWHQWLDOO\ OLDEOH XQGHU        :H $)),50 WKH GHFLVLRQ RQ WKH LVVXH RI SURFHHGV EXW
(5,6$ IRU WKHLU UROH LQ WKLV WUDQVDFWLRQ DOO DVSHFWV RI WKH   9$&$7( WKH FRXUWjV DSSURYDO RI WKH VHWWOHPHQW DQG
VHWWOHPHQW VKRXOG EH UHHYDOXDWHG IRU WKHLU IDLUQHVV DQG           5(0$1' IRU IXUWKHU FRQVLGHUDWLRQ RI D SRVVLEOH ULJKW WR
DGHTXDF\DVWRVHWWOLQJDQGQRQVHWWOLQJGHIHQGDQWVDOLNH               FRQWULEXWLRQDQGWKHRYHUDOOIDLUQHVVRIWKHVHWWOHPHQWDQGVHW
                                                                         RIILQOLJKWRIQHZ6XSUHPH&RXUWDXWKRULW\
                                                                                                       ,)$&76
                                                                            ,QsRKQ(QGUHVGHFLGHGWRVHOOKLVLQWHUHVWLQ(OHFWUR
                                                                         sHW7RRO	0DQXIDFWXULQJDQDHURVSDFHPDFKLQHVKRSWKDWKH
                                                                         IRXQGHGDQGORQJPDQDJHG$IWHUIUXLWOHVVQHJRWLDWLRQVZLWK
                                                                         D&DQDGLDQILUPKHDJUHHGWRVHOOKLVVWDNHLQ(OHFWUR
                                                                         sHW WR WKH FRPSDQ\jV RZQ HPSOR\HHV  $V SDUW RI WKH
                                                                         WUDQVDFWLRQ WKH WKHQH[LVWLQJ SURILW VKDULQJ SODQ ZDV
                                                                         FRQYHUWHG LQWR DQ HPSOR\HH VWRFN RZQHUVKLS SODQ mWKH
                                                                         (623l RU mWKH SODQl DV GHILQHG LQ WKH (PSOR\PHQW
                                                                         5HWLUHPHQW ,QFRPH 6HFXULW\ $FW RI   6HH  86&
                                                                         G7RILQDQFHWKHPLOOLRQSXUFKDVHWKHSODQ
                                                                         FRQWULEXWHG  PLOOLRQ RI LWV RZQ SHQVLRQ DVVHWV DQG
                                                                         REWDLQHGDQRQUHFRXUVHORDQRIPLOOLRQIURP6WDU%DQN

                                                                             
                                                                              7KH DSSHOODQWV DUH DOO GHIHQGDQWV DQG WKLUGSDUW\ GHIHQGDQWV WR WKH
                                                                         (5,6$ VXLW ZLWK WKH H[FHSWLRQ RI FHUWDLQ IRUPHU (OHFWURsHW H[HFXWLYHV
                                                                         ZKR GLG QRW MRLQ LQ WKLV DSSHDO
     0F'DQQROGY                       1RV         1RV                        0F'DQQROGY        
      6WDU%DQNHWDO                                                                                           6WDU%DQNHWDO

WKHQNQRZQDV7KH)LUVW1DWLRQDO%DQNRI&LQFLQQDWL7KH              GLVJRUJHPHQWZDVXQDYDLODEOHDVDJDLQVWWKHP$VDIRUPRI
EDQN ZDV VHFXUHG DPRQJ RWKHU FROODWHUDO E\ D SOHGJH RI      HTXLWDEOH UHOLHI KRZHYHU GLVJRUJHPHQW LV DOORZHG XQGHU
VKDUHVLQ(OHFWURsHWWKDWSRUWLRQRIVWRFNSXUFKDVHG         +DUULV7UXVW86DWGHVFULELQJWKHVWDWXWRU\WHUP
ZLWK WKH ORDQ DPRXQW  6WDU %DQN SHUIHFWHG LWV LQWHUHVW E\   mDSSURSULDWHHTXLWDEOHUHOLHIlE\UHIHUHQFHWRWUXVWODZ2Q
WDNLQJ SRVVHVVLRQ RI WKH VKDUHV ZKLFK DSSDUHQWO\ LW VWLOO     UHPDQGVKRXOGWKH'LVWULFW&RXUWILQGWKDW+DUULV7UXVWUDLVHV
UHWDLQV                                                               WKH SRVVLELOLW\ RI QRQILGXFLDU\ OLDELOLW\ LQ WKLV FDVH WKH
                                                                       VHWWOHPHQW DJUHHPHQW ZRXOG WKHQ IDLO WR UHIOHFW WKH IXOO
   /LWLJDWLRQHQVXHGZKHQSODLQWLIIVGLVFRYHUHGWKDWWKHVKDUHV        GDPDJHVHTXDOO\DYDLODEOHDJDLQVWDOOGHIHQGDQWV:KHWKHU
WKH\ ERXJKW ZHUH ZRUWKOHVVnDQG DFFRUGLQJ WR SODLQWLIIV         WKDWIDFWUHQGHUVWKHDJUHHPHQWXQIDLUHLWKHUDVWRSODLQWLIIVRU
ZHUH HVVHQWLDOO\ ZRUWKOHVV DW WKH WLPH RI WKH WUDQVDFWLRQ     DSSHOODQWVLVDPDWWHUZHOHDYHWRWKH'LVWULFW&RXUW
3ODLQWLIIVWKHWUXVWHHDQGEHQHILFLDULHVRIWKHSODQFODLPWKDW
WKHPLOOLRQSXUFKDVHSULFHIRUWKH(OHFWURsHWVWRFNZDV         % $OORFDWLRQRI&RVWVRQ$SSHDO
JURVVO\ RYHUYDOXHG  3ODLQWLIIV QRWH WKDW TXDOLW\ FRQWURO
SUREOHPVOHG(OHFWURsHWjVODUJHVWFXVWRPHU*HQHUDO(OHFWULF           ,Q1RFRVWVZLOOEHWD[HGDJDLQVWDSSHOODQW6WDU
WRVLJQLILFDQWO\UHGXFHLWVRUGHUV$VDUHVXOWSODLQWLIIVDOOHJH   %DQNLQDFFRUGDQFHZLWK)HG5$SS3D,Q1R
(OHFWURsHWVDOHVIRUWKHODVWWKUHHFDOHQGDUPRQWKVRI           WKHDSSHOODQWVKDYHILOHGDPRWLRQWRLPSRVHWKHFRVWRI
ZHUH RQH KDOI WKDW RI WKH SUHYLRXV \HDUjV  $FFRUGLQJ WR     WKH DSSHQGLFHV RQ WKH DSSHOOHHV DUJXLQJ WKDW WKH\ KDYH
SODLQWLIIVQRLQGHSHQGHQWDXGLWZDVFRQGXFWHGRIILQDQFLDO            LQFOXGHGXQQHFHVVDU\SDUWVRIWKHUHFRUG$VZHUHPDQGWKH
VWDWHPHQWV IRU WKH ILVFDO \HDU HQGLQJ 6HSWHPEHU        FDVH IRU IXUWKHU SURFHHGLQJV DQG XQGRXEWHGO\ DGGLWLRQDO
WKRXJK E\ WKHQ WKH FRPSDQ\ ZDV RSHUDWLQJ DW D ORVV IURP      H[SHQVHIRUDOOSDUWLHVZHVHHQRUHDVRQWRGHSDUWIURPWKH
ZKLFKLWQHYHUUHFRYHUHG                                            GHIDXOWSRVLWLRQRI)HG5$SS3EZKLFKUHTXLUHV
                                                                       WKH DSSHOODQW WR SD\ IRU WKH DSSHQGLFHV  (YHQ LI WDNHQ
   3ODLQWLIIVDVVHUWWKDWWKH\NQHZQRQHRIWKLV7KH\FODLP          WRJHWKHUWKHDSSHQGLFHVIRUWKLVDSSHDOVSDQIRXUYROXPHVIRU
WKDW(QGUHVDQGWKHRIILFHUVRI(OHFWURsHWNHSWWKHVHRSHUDWLQJ       SDJHVnZLWKDIHZGXSOLFDWLYHGHVLJQDWLRQVnZHILQGQR
ORVVHVVHFUHWZKLOHQHJRWLDWLQJWKHEX\RXW7KH\IXUWKHUFODLP        SDUWSURIOLJDWHRUZKROO\XQQHFHVVDU\:HWKHUHIRUHRUGHUWKDW
WKDW 6WDU %DQN DV IRUPHU WUXVWHH RI WKH SODQ IDLOHG WR     WKHDSSHOODQWVSD\WKHFRVWRISURGXFLQJWKHDSSHQGLFHV$OO
LQYHVWLJDWHRUEULQJDQ\DFWLRQRQEHKDOIRIWKHSODLQWLIIVRQFH       RWKHU FRVWV LQ 1R  DUH WR EH ERUQH E\ WKH SDUWLHV
WKHORVVHVZHUHGLVFRYHUHG3ODLQWLIIVVXHG(QGUHV6WDU%DQN        WKHPVHOYHV
DQG VHYHUDO IRUPHU (OHFWURsHW H[HFXWLYHV IRU EUHDFK RI
ILGXFLDU\GXW\XQGHU(5,6$(QGUHVLQWXUQQDPHGDVWKLUG                                9&21&/86,21
SDUW\GHIHQGDQWVKLVODZ\HU7KRPDV$6LPRQVDQG6LPRQVj
IRUPHUODZILUP                                                         $VWR1RZHFRQFOXGHWKDWWKHSODQjVILQDQFLDO
                                                                       DQGOHJDODGYLVRUVZHUHUHVSRQVLEOHIRUWKHTXDOLW\RIWKHLU
  3ODLQWLIIVDOVRVXHGWKHSURIHVVLRQDODGYLVRUVZKRPWKHSODQ         ZRUN EXW QRW IRU WKH GHYDOXDWLRQ RI WKH (OHFWURsHW VWRFN
UHWDLQHG WR VWUXFWXUH WKH WUDQVDFWLRQ  7KLV VHFRQG VHW RI    LWVHOI7KHPDOSUDFWLFHVHWWOHPHQWDFFRUGLQJO\FRPSHQVDWHG
GHIHQGDQWVnFROOHFWLYHO\WKHmVHWWOLQJGHIHQGDQWVlnFRQVLVWV            SODLQWLIIV IRU GHILFLHQW SURIHVVLRQDO VHUYLFHV UDWKHU WKDQ
RI :LOOLDP .LUNKDP ZKR UHSUHVHQWHG WKH SODQ GXULQJ WKH        GDPDJH WR FRPSDQ\ VWRFN ZKRVH WUXH YDOXH KDG DOUHDG\
EX\RXW .LUNKDPjV ILUP /LQGKRUVW 	 'UHLGDPH DQG                GHFOLQHG%HFDXVHWKHVHWWOHPHQWGLGQRWDIIHFWWKHRZQHUVKLS
*UDGLVRQ 	 &RPSDQ\ D FRQVXOWLQJ ILUP WKDW IXUQLVKHG DQ        RIWKHSOHGJHGVWRFNRUUHVXOWLQLWVGLVSRVLWLRQZH$)),50
    0F'DQQROGY                       1RV         1RV                       0F'DQQROGY         
      6WDU%DQNHWDO                                                                                          6WDU%DQNHWDO

QRULJKWRIFRQWULEXWLRQWKHFRXUWREVHUYHGWKHQRQVHWWOLQJ         DSSUDLVDORIWKH(OHFWURsHWVWRFN&ODLPLQJPDOSUDFWLFHDQG
GHIHQGDQWVZHUHQRWHQWLWOHGWRDKHDULQJ                           PLVUHSUHVHQWDWLRQXQGHUVWDWHODZSODLQWLIIVDOOHJHGWKDWWKHVH
                                                                       OHJDO DQG ILQDQFLDO DGYLVRUV IDLOHG WR UHSUHVHQW WKH SODQ
  $V SUHYLRXVO\ GLVFXVVHG KRZHYHU WKH EDVLV IRU WKDW          SURSHUO\E\XVLQJLQFRPSOHWHDSSUDLVDOVDQGILQDQFLDOUHSRUWV
FRQFOXVLRQKDVVLQFHEHHQPRGLILHGE\+DUULV7UXVW7RWKH            WKDWGLGQRWUHYHDOWKHH[WHQWRI(OHFWURsHWjVORVVHV
H[WHQW+DUULV7UXVWVXSSRUWVFRPPRQOLDELOLW\DQGDULJKWWR
FRQWULEXWLRQLQWKLVFDVHWKH'LVWULFW&RXUWVKRXOGUHDVVHVVWKH         +HUHZHQHHGQRWFRQVLGHUWKHPHULWVRIHLWKHUWKH(5,6$
IDLUQHVVDQGVXIILFLHQF\RIWKHVHWRIIDVWRWKHQRQVHWWOLQJ         RU WKH PDOSUDFWLFH FODLPV  :KLOH WKH IRUPHU DZDLW IXUWKHU
GHIHQGDQWV6HH,Q5H0DVWHUV0DWHV	3LORWV)GDW             SURFHHGLQJVLQ'LVWULFW&RXUWWKHODWWHUHYHQWXDOO\VHWWOHGIRU
GHVFULELQJWKHYDULRXVIRUPVRIVHWRIIEXWUHYHUVLQJ             PLOOLRQ  ,QVWHDG ZH QDUURZ RXU IRFXV WR WKH
LPSRVLWLRQRIDVHWWOHPHQWEDUEHFDXVHQRLQTXLU\ZDVPDGH             PDOSUDFWLFH VHWWOHPHQW IXQG ZKRVH GLVWULEXWLRQ KDV EHHQ
LQWR WKH SDUWLHVj UHODWLYH IDXOW DQG WKH DGHTXDF\ RI WKH      VWD\HGXQWLOUHVROXWLRQRIWKLVDSSHDO2XUWDVNLVWZRIROG
VHWWOHPHQWDVWRDSSHOODQWjVORVWULJKWRIFRQWULEXWLRQ              :HPXVWGHFLGHZKHWKHUDVHFXUHGFUHGLWRULVHQWLWOHGWRWKH
                                                                       VHWWOHPHQWDVmSURFHHGVlRIDVWRFNSOHGJHDQGZKDWHIIHFWLI
                    ,927+(5&/$,06                                  DQ\WKHVHWWOHPHQWVKRXOGKDYHXSRQWKHRQJRLQJOLWLJDWLRQ
                                                                       EHWZHHQSODLQWLIIVDQGWKHUHPDLQLQJGHIHQGDQWV
$ $GHTXDF\RIWKH6HWWOHPHQW
                                                                             ,,6(77/(0(17)81'6$6352&(('6
  3XUVXDQW WR )HG 5 &LY 3  WKH 'LVWULFW &RXUW                           1R
DSSURYHGWKHVHWWOHPHQWDJUHHPHQWDVIDLUUHDVRQDEOHDQG
DGHTXDWHDVWRWKHSODLQWLIIVDQGSODQSDUWLFLSDQWV$SSHOODQWV          $VVHFXUHGFUHGLWRUWRWKHWUDQVDFWLRQEHWZHHQ(OHFWURsHW
FRQWHQGWKDWWKHFRXUWDEXVHGLWVGLVFUHWLRQEHFDXVHLWGLGQRW        DQGWKHHPSOR\HHEHQHILWSODQ6WDU%DQNWRRNSRVVHVVLRQRI
GHWHUPLQH WKH WRWDO YDOXH RI WKH FDVH LQ UHODWLRQ WR    FRPSDQ\ VWRFN DV FROODWHUDO IRU LWV  PLOOLRQ ORDQ
PLOOLRQVHWWOHPHQW:LWKFODLPVGLVPLVVHGDJDLQVWWKHVHWWOLQJ        )ROORZLQJ SODLQWLIIVj VHWWOHPHQW RI WKH PDOSUDFWLFH FODLPV
GHIHQGDQWVDSSHOODQWVSURWHVWWKDWWKH\DUHOHIWZLWKDIL[HG         6WDU %DQN FODLPHG DQ LQWHUHVW LQ WKH UHVXOWLQJ IXQG DV
PLOOLRQVHWRIIDJDLQVWDEDOORRQLQJOLDELOLW\:HGRQRW       SURFHHGVRIWKHSOHGJHGVWRFN7KH'LVWULFW&RXUWGHQLHGWKH
DJUHHKRZHYHUWKDWWKH'LVWULFW&RXUWHUUHGE\JLYLQJRQO\           EDQNjVPRWLRQIRUSDUWLDOVXPPDU\MXGJPHQWRQWKLVFODLP
JHQHUDO UDQJHV IRU WKH SRWHQWLDO UHFRYHU\ DJDLQVW WKH           DQGWKLVDSSHDOIROORZHG6WDU%DQNDUJXHVWKDWWKH'LVWULFW
GHIHQGDQWV$VZHKDYHSUHYLRXVO\QRWHGWKH'LVWULFW&RXUW           &RXUW PLVLQWHUSUHWHG ERWK WKH VWRFN SOHGJH DJUHHPHQW DQG
HQMR\V ZLGH GLVFUHWLRQ LQ HYDOXDWLQJ WKH VHWWOHPHQW RI          2KLR ODZ ZKLFK WKH SDUWLHV DJUHHG ZRXOG JRYHUQ WKHLU
GHULYDWLYH DFWLRQV XQGHU 5XOH   *UDQDGD ,QYHVWPHQWV       WUDQVDFWLRQ  :H GLVDJUHH ZLWK WKH EDQN DQG DIILUP WKH
,QFY':*&RUS)GWK&LU             MXGJPHQWRIWKH'LVWULFW&RXUW
:HILQGWKHFRXUWjVDQDO\VLVRIWKHVHWWOHPHQWILJXUHVWREH
FDUHIXOO\FRQVLGHUHGDQGLQIRUPHGE\DKHDULQJDWZKLFKDOO              8QGHU(5,6$&RQJUHVVVRXJKWWRSURWHFWSODQDVVHWVE\
SDUWLHVZHUHSUHVHQW                                                 SODFLQJQDUURZUHVWULFWLRQVRQWKHW\SHVDQGWHUPVRIVWRFN
                                                                       SXUFKDVH WUDQVDFWLRQV LQ ZKLFK SODQV PD\ HQJDJH  6HH 
  :HGRQRWHKRZHYHUWKDWRXUUHPDQGIRUUHFRQVLGHUDWLRQ             86&SURKLELWLQJFHUWDLQWUDQVDFWLRQVZLWK
LQ OLJKW RI +DUULV 7UXVW PLJKW DIIHFW WKH 'LVWULFW &RXUWjV    EHQHILWSODQVDQGRXWOLQLQJVWULQJHQWH[HPSWLRQV2QHVXFK
DSSUDLVDORIWKHVHWWOHPHQW%HFDXVHWKHVHWWOLQJGHIHQGDQWV          OLPLWDWLRQFLUFXPVFULEHVWKHSODQDVVHWVWKDWPD\EHSODFHGDW
ZHUHQRQILGXFLDULHVXQGHU(5,6$WKHFRXUWFRQFOXGHGWKDW
     0F'DQQROGY                        1RV          1RV                        0F'DQQROGY         
      6WDU%DQNHWDO                                                                                             6WDU%DQNHWDO

ULVNDVFROODWHUDOm1RSHUVRQHQWLWOHGWRSD\PHQWXQGHUWKH            FRQWULEXWLRQ:HDUHORDWKWRXQGHUWDNHWKLVLQTXLU\QRZDV
H[HPSWORDQVKDOOKDYHDQ\ULJKWWRDVVHWVRIWKH(623RWKHU             VLJQLILFDQW IDFWXDO TXHVWLRQV UHPDLQ  7KH UHFRUG GRHV QRW
WKDQFROODWHUDOJLYHQIRUWKHORDQFRQWULEXWLRQVRWKHU       LQGLFDWH ZKHWKHU WKLV ZDV D SURKLELWHG WUDQVDFWLRQ XQGHU
WKDQFRQWULEXWLRQVRIHPSOR\HUVHFXULWLHVWKDWDUHPDGHXQGHU           (5,6$RUZKHWKHUWKHVHWWOLQJGHIHQGDQWVUHFHLYHGSODQDVVHWV
DQ (623 WR PHHW LWV REOLJDWLRQV XQGHU WKH ORDQ DQG         QRZVXEMHFWWRUHVWLWXWLRQGLVJRUJHPHQWRURWKHUHTXLWDEOH
HDUQLQJVDWWULEXWDEOHWRVXFKFROODWHUDODQGWKHLQYHVWPHQWRI           UHOLHI  3ODLQWLIIV FRQWHQG LQ WKHLU EULHI WKDW .LUNKDP
VXFKFRQWULEXWLRQVl&)5EH6WDU%DQN             /LQGKRUVW 	 'UHLGDPH DQG *UDGLVRQ QHYHU UHFHLYHG SODQ
DQGWKHHPSOR\HHSODQH[SUHVVO\LQFRUSRUDWHGWKLVUHVWULFWLRQ            DVVHWVZKLOHDWRUDODUJXPHQWFRXQVHOIRUDSSHOODQWVDVVHUWHG
LQWKHLUORDQDJUHHPHQWDQG6WDU%DQNGRHVQRWFRQWHVWLWV              WKDWWKLVZDVDQXQUHVROYHGIDFWXDOTXHVWLRQ1RUGRHVWKH
DSSOLFDELOLW\QRZs$$FFRUGLQJO\WKHEDQNPXVWILW            UHFRUGVKRZZKHWKHUWKHVHWWOLQJGHIHQGDQWVZHUHSDUWLHVLQ
WKHVHWWOHPHQWIXQGXQGHURQHRIWKHVHWKUHHKHDGLQJVIRULWV            LQWHUHVW RU WKH H[WHQW RI WKHLU NQRZLQJ SDUWLFLSDWLRQ LQ WKH
LQWHUHVWWRDWWDFK                                                      DOOHJHG EUHDFK RI ILGXFLDU\ GXWLHV  )RU WKHVH DQG RWKHU
                                                                         TXHVWLRQV QHZO\ UDLVHG E\ +DUULV 7UXVW ZH UHPDQG WR WKH
  6WDU %DQN EULHIO\ DUJXHV WKDW WKH VHWWOHPHQW IXQG FDQ EH      'LVWULFW&RXUW
FRQVLGHUHG mHDUQLQJVl DWWULEXWDEOH WR WKH (OHFWURsHW VWRFN
7KLVDVVHUWLRQPDGHZLWKRXWFLWDWLRQRUOHJDOVXSSRUWLVQRW           % )RUPRIWKH6HW2II
ZHOOWDNHQ7KHWHUPmHDUQLQJVlJHQHUDOO\GHVFULEHVLQFRPH
REWDLQHG IURP WKH SHUIRUPDQFH RI ODERU WKH SURYLVLRQ RI           $FFRUGLQJWRWKHVHWWOHPHQWDJUHHPHQWWKHPLOOLRQ
VHUYLFHV WKH VDOH RI JRRGV RU JDLQ IURP LQYHVWPHQW  6HH     IXQGUHGXFHVWKHOLDELOLW\RIWKHQRQVHWWOLQJGHIHQGDQWVRQD
%ODFNjV/DZ'LFWLRQDU\WKHG,QRWKHUZRUGV              SURWDQWREDVLV7KHQRQVHWWOLQJGHIHQGDQWVREMHFWHGWRWKH
HDUQLQJV IORZ IURP GHOLEHUDWH DQG SURGXFWLYH XVH RI               IRUPRIWKLVVHWRIIDUJXLQJWKDWWKH\DUHHQWLWOHGWRDIDLUQHVV
UHVRXUFHVQRWDVLVDOOHJHGLQWKLVFDVHWKHPDOIHDVDQFHRI           KHDULQJDVWRWKHQDWXUHDQGDPRXQWRIWKHMXGJPHQWFUHGLW
RWKHUV  3ODLQWLIIVj VHWWOHPHQW RI WKHLU PDOSUDFWLFH FODLPV       7KH\PDLQWDLQWKDWWKHLUOLDELOLW\VKRXOGEHUHGXFHGDFFRUGLQJ
FOHDUO\GRHVQRWFRQVWLWXWHmHDUQLQJVlRQWKHVWRFN                     WR WKH SURSRUWLRQDWH IDXOW RI WKH SDUWLHV  2YHU WKHVH
                                                                         REMHFWLRQVWKH'LVWULFW&RXUWHQGRUVHGWKHVHWWOLQJSDUWLHVj
   ,QWKHDOWHUQDWLYH6WDU%DQNDUJXHVWKDWWKHVHWWOHPHQWIXQG         PHWKRG RI MXGJPHQW UHGXFWLRQ  2UGLQDULO\ WKLV GHFLVLRQ
FRQVWLWXWHV mFROODWHUDOl WR WKH ORDQ  $OWKRXJK WKH SOHGJHG      ZRXOG KDYH WULJJHUHG D KHDULQJ WR GHWHUPLQH ZKHWKHU WKH
VWRFN VWLOO UHPDLQV LQ WKH EDQNjV SRVVHVVLRQ 6WDU %DQN          VHWWOHPHQWDQGVHWRIIZHUHIDLUWRWKHQRQVHWWOLQJGHIHQGDQWV
FRQWHQGV WKDW LWV LQWHUHVW LQ WKH FROODWHUDO DOVR UHDFKHV DQ\   6HH,QUHsLII\/XEH6HF/LWLJ)GDWQQRWLQJ
WUDFHDEOHSURFHHGV8QGHUWKH8QLIRUP&RPPHUFLDO&RGHDV                WKDWWKHSURWDQWRPHWKRGRIMXGJPHQWUHGXFWLRQmH[SRVHVWKH
DGRSWHGLQ2KLRDWWKHWLPHWKLVDFWLRQZDVFRPPHQFHGLWLV             QRQVHWWOLQJGHIHQGDQWWR OLDELOLW\IRUDQ\GHILFLHQF\LQWKH
WUXH WKDW DQ LQWHUHVW VHFXUHG E\ FROODWHUDO FRQWLQXHV LQ DQ\    MXGJPHQW VR D KHDULQJ IRFXVVLQJ RQ >WKH@ IDLUQHVV RI WKH
mLGHQWLILDEOHSURFHHGVlRIWKDWFROODWHUDO2KLR5HY&RGH              VHWWOHPHQW WR WKH QRQVHWWOLQJ GHIHQGDQWV LV UHTXLUHG IRU
%7KHTXHVWLRQWKHQLVRQHRIFKDUDFWHUL]DWLRQ           DSSURYDOl+HUHWKH'LVWULFW&RXUWDVVXPHGWKDWWKHVHWWOLQJ
ZKHWKHUWKHVHWWOHPHQWIXQGFRQVWLWXWHVSURFHHGVRIWKHVWRFN            GHIHQGDQWVDVQRQILGXFLDULHVZHUHQRWOLDEOHXQGHU(5,6$
VXEMHFWWRDFRQWLQXHGVHFXULW\LQWHUHVW8QGHUWKHYHUVLRQRI          DQG WKHUHIRUH QRW VXEMHFW WR FODLPV RI FRQWULEXWLRQ
WKHVWDWXWHWKDWJRYHUQVWKLVFDVHWKHWHUPmSURFHHGVl                 0F'DQQROGY6WDU%DQN86'LVW/(;,6DW
                                                                         6'2KLRsXQH%HFDXVHWKHVHWWOHPHQWEDUUHG
    0F'DQQROGY                      1RV         1RV                             0F'DQQROGY            
      6WDU%DQNHWDO                                                                                               6WDU%DQNHWDO

QRQILGXFLDU\6HH%URFNY+HQGHUVKRWW)G              LQFOXGHVZKDWHYHULVUHFHLYHGXSRQWKHVDOHH[FKDQJH
WK&LU                                                      FROOHFWLRQRURWKHUGLVSRVLWLRQRIFROODWHUDORUSURFHHGV
                                                                        ,QVXUDQFH SD\DEOH E\ UHDVRQ RI ORVV RU GDPDJH WR WKH
   ([WUDSRODWLQJIURP+DUULV7UXVWWKHDSSHOODQWVDUJXHWKDW           FROODWHUDO LV SURFHHGV H[FHSW WR WKH H[WHQW WKDW LW LV
D SDUW\jV VWDWXV DV D ILGXFLDU\ RU QRQILGXFLDU\ QR ORQJHU      SD\DEOH WR D SHUVRQ RWKHU WKDQ D SDUW\ WR WKH VHFXULW\
PDWWHUVLQGHWHUPLQLQJOLDELOLW\XQGHU(5,6$7KLVUHDGLQJ             DJUHHPHQW  $Q\ SD\PHQWV RU GLVWULEXWLRQV PDGH ZLWK
RYHUORRNVWKHOLPLWLQJSULQFLSOHVRIWKDWFDVH)LUVWDVWKH          UHVSHFWWRLQYHVWPHQWSURSHUW\FROODWHUDODUHSURFHHGV
&RXUWSRLQWHGRXWDQ\UHFRYHU\DJDLQVWDQRQILGXFLDU\XQGHU
 D LV FRQILQHG WR mDSSURSULDWH HTXLWDEOH UHOLHIl     2KLR5HY&RGH$HPSKDVLVDGGHG,QDSSO\LQJ
+DUULV7UXVW86DW7KLVPD\LQFOXGHLQWHUDOLD         WKLVGHILQLWLRQWRWKHIDFWVZHREVHUYHWKDWWKHVHWWOHPHQWIXQG
UHVWLWXWLRQRIZURQJIXOO\REWDLQHGSODQDVVHWVRUSURILWV7KLV      FDQQRWUHSUHVHQWmSD\PHQWVRUGLVWULEXWLRQVlRQLQYHVWPHQW
GRHVQRWKRZHYHULQFOXGH OHJDOUHOLHI0HUWHQVY+HZLWW          SURSHUW\ IRU WKH VDPH UHDVRQ LW FDQQRW EH FRQVLGHUHG
$VVRFLDWHV86KROGLQJWKDW(5,6$              mHDUQLQJVlDVGLVFXVVHG,I6WDU%DQNLVWRSUHYDLOLWPXVW
GRHVQRWSHUPLWDFDXVHRIDFWLRQDJDLQVWQRQILGXFLDULHVIRU          VKRZ D mGLVSRVLWLRQl RI WKH   VWRFN IURP ZKLFK SODLQWLIIV
WKH UHFRYHU\ RI GDPDJHV  6HH DOVR $OOLQGHU Y ,QWHU&LW\   UHFHLYHGWKHVHWWOHPHQWIXQG
3URGV&RUS)GWK&LU6HFRQGD
QRQILGXFLDU\LVOLDEOHRQO\IRULWVmNQRZLQJSDUWLFLSDWLRQlLQ          $GLVSRVLWLRQLVPDUNHGE\mWKHSDUWLQJZLWKDOLHQDWLRQRI
DILGXFLDU\jVEUHDFK+DUULV7UXVW86DW7KLUGDW      RUJLYLQJXSRISURSHUW\l%ODFNjV/DZ'LFWLRQDU\WK
OHDVWRQWKHIDFWVRI+DUULV7UXVWOLDELOLW\ZDVSUHPLVHGRQ         HG   7KRXJK 6WDU %DQN DFNQRZOHGJHV WKDW LW VWLOO
WKHQRQILGXFLDU\jVUROHDVDSDUW\LQLQWHUHVWWRWKHSURKLELWHG      UHWDLQVSRVVHVVLRQDQGRZQHUVKLSRIWKHSOHGJHG(OHFWURsHW
WUDQVDFWLRQWKRXJKWKH&RXUWjVUDWLRQDOHZRXOGVHHPWRDSSO\         VKDUHV LW PDLQWDLQV WKDW WKH VDWLVIDFWLRQ RI SODLQWLIIVj
WRRWKHUQRQILGXFLDULHVDVZHOO,GDW                       PDOSUDFWLFHFODLPVLQVHWWOHPHQWUHSUHVHQWVDmGLVSRVLWLRQlRI
                                                                      WKH VWRFN IURP ZKLFK WKH  PLOOLRQ IXQG IORZV DV
   'HVSLWHWKHVHOLPLWDWLRQV+DUULV7UXVWVXSSRUWVDSSHOODQWVj
FODLP WKDW D SDUW\jV QRQILGXFLDU\ VWDWXV LV QRW DOZD\V
GHWHUPLQDWLYHRIOLDELOLW\XQGHU(5,6$:HUHFRJQL]HWKDW               
                                                                           :H QRWH WKDW WKH UHYLVHG YHUVLRQ RI $UWLFOH  RI WKH 8QLIRUP
HYHQ ZHUH VHWWOLQJ DQG QRQVHWWOLQJ GHIHQGDQWV WR VKDUH        &RPPHUFLDO &RGH PLJKW ZHOO UHTXLUH D GLIIHUHQW DQDO\VLV$00 * 5D\
OLDELOLW\ XQGHU (5,6$ D ULJKW WR FRQWULEXWLRQ ZRXOG QRW      :DUQHU   /LHQ RQ 0H 7KH 5LJKW WR 3URFHHGV 8QGHU 5HYLVHG $UWLFOH 
QHFHVVDULO\ IROORZ  6HH 7H[DV ,QGXV ,QF Y 5DGFOLII        0 $1.5 167
                                                                      $ %         ,     s  $%, s1/ /(;,6  DW 
  QRWLQJ KRZ

0DWHULDOV ,QF  86    m1RU GRHV WKH     WKH UHYLVHG $UWLFOH  H[SDQGV WKH FRQFHSW RI GLVSRVLWLRQ WR LQFOXGH
                                                                      SURSHUW\ WKDW RULJLQDWHV IURP EXW QHHG QRW UHSODFH WKH XQGHUO\LQJ
MXGLFLDOGHWHUPLQDWLRQWKDWGHIHQGDQWVVKRXOGEHMRLQWO\DQG          FROODWHUDO ,Q DGRSWLQJ WKH UHYLVHG $UWLFOH  WKH 2KLR *HQHUDO $VVHPEO\
VHYHUDOO\ OLDEOH VXJJHVW WKDW FRXUWV DOVR PD\ RUGHU            KDV UHFHQWO\ DPHQGHG WKH GHILQLWLRQ RI mSURFHHGVl WR DOVR LQFOXGH LQWHU
FRQWULEXWLRQVLQFHMRLQWDQGVHYHUDOOLDELOLW\VLPSO\HQVXUHV        DOLD mULJKWV DULVLQJ RXW RI FROODWHUDOl DQG mWR WKH H[WHQW RI WKH YDOXH RI
WKDWWKHSODLQWLIIVZLOOEHDEOHWRUHFRYHUWKHIXOODPRXQWRI        FROODWHUDO FODLPV DULVLQJ RXW RI WKH ORVV QRQFRQIRUPLW\ RU LQWHUIHUHQFH
GDPDJHV IURP VRPH LI QRW DOO SDUWLFLSDQWVl  +HUH        ZLWK WKH XVH RI GHIHFWV RU LQIULQJHPHQW RI ULJKWV LQ RU GDPDJH WR WKH
                                                                      FROODWHUDOl 2KLR 5HY &RGH  $ +HUH KRZHYHU ZH PXVW
KRZHYHUWKH'LVWULFW&RXUWGLGQRWKDYHDQRSSRUWXQLW\WR            DSSO\ WKH IRUPHU YHUVLRQ RI WKH 2KLR FRPPHUFLDO FRGH DQG LWV GHILQLWLRQ
DSSO\+DUULV7UXVWWRWKHIDFWVRIWKLVFDVHDQGQDWXUDOO\GLG        RI SURFHHGV IRXQG DW 2KLR 5HY &RGH  $ 6HH 2KLR 5HY &RGH
QRWDGGUHVVZKHWKHUWKHSDUWLHVVKDUHGOLDELOLW\XQGHU(5,6$           & QRWLQJ WKDW WKH UHFHQW UHYLVLRQ RI WKH 2KLR VWDWXWH mGRHV
DQG KRZ VXFK FRPPRQ OLDELOLW\ PLJKW DIIHFW D ULJKW WR        QRW DIIHFW DQ DFWLRQ FDVH RU SURFHHGLQJ FRPPHQFHG SULRU WR sXO\ 
                                                                      l
     0F'DQQROGY                        1RV          1RV                       0F'DQQROGY        
      6WDU%DQNHWDO                                                                                            6WDU%DQNHWDO

SURFHHGV,QVXSSRUWLWDGYDQFHVWKHIXQFWLRQDOFRQFHSWRI             TXHVWLRQVWKDWUHPDLQ5DWKHUZHVLPSO\ REVHUYHWKDWWKH
SURFHHGV DV DQ\ HFRQRPLF VXEVWLWXWH IRU D VHFXUHG DVVHW         EDVLVIRUWKH'LVWULFW&RXUWjVUHMHFWLRQRIWKHULJKWKDVEHHQ
8QGHUWKLVGRFWULQHRIVXEVWLWXWLRQIRUH[DPSOHLQVXUDQFH              PRGLILHGE\DUHFHQW6XSUHPH&RXUWGHFLVLRQDQGZHUHPDQG
SD\PHQWVFRQVWLWXWHSURFHHGVZKHQFROODWHUDOLVGDPDJHGE\               IRUUHFRQVLGHUDWLRQLQOLJKWRIWKDWDXWKRULW\
WKLUGSDUW\ WRUWIHDVRUV YROXQWDU\ VDOH RU H[FKDQJH E\ WKH
GHEWRULVQRWUHTXLUHG6HHHJ6LFKHUPDQY)DONHQEHUJ                ,Q VKRUW WKH 'LVWULFW &RXUW SUHPLVHG LWV UXOLQJ RQ WKH
 %5   %DQNU 1' 2KLR  KROGLQJ WKDW         DEVHQFH RI FRPPRQ OLDELOLW\ XQGHU (5,6$  %HFDXVH WKH
mSD\PHQW UHFHLYHG IURP WKH LQVXURUjV VHWWOHPHQW SURFHHGV           VHWWOLQJGHIHQGDQWVVHUYHGDVOHJDODQGILQDQFLDODGYLVHUVRQO\
UHSUHVHQWHGDFRQWLQXDWLRQRILWVSUHH[LVWLQJVHFXULW\LQWHUHVWl        WKH'LVWULFW&RXUWIRXQGWKDWWKH\ZHUHQRWILGXFLDULHVRIWKH
XQGHU2KLRODZ                                                         SODQDQGWKHUHIRUHQRWOLDEOHXQGHU(5,6$7KRXJKZHDJUHH
                                                                         WKDWWKHVHWWOLQJGHIHQGDQWVGLGQRWVHUYHDVSODQILGXFLDULHV
   :H DJUHH ZLWK WKH JHQHUDO SURSRVLWLRQ WKDW D VHFXULW\         ZH GR QRW WKLQN WKLV VWDWXV QHFHVVDULO\ GHIHDWV FRPPRQ
LQWHUHVWDWWDFKHVWRDVVHWVWKDWUHSODFHFROODWHUDORQFHGDPDJHG         OLDELOLW\XQGHU(5,6$RUGLVSRVHVRIDSSHOODQWVjFODLPHGULJKW
RUGHVWUR\HG+RZHYHUZHGLVDJUHHZLWKWKHEDQNjVGHSLFWLRQ            WRFRQWULEXWLRQ$UHFHQW6XSUHPH&RXUWFDVHGHFLGHGDIWHU
RIWKHVHWWOHPHQWDVDGLVSRVLWLRQRI(OHFWURsHWVWRFNDQGWKH          WKHRSLQLRQEHORZLOOXVWUDWHVKRZHYHQQRQILGXFLDULHVFDQEH
UHVXOWLQJ IXQG DV WKH UHSODFHPHQW YDOXH RI WKH FROODWHUDO       VXHGXQGHU(5,6$IRUHTXLWDEOHUHOLHI6HH+DUULV7UXVWDQG
6LPSO\SXWQRWKLQJKDVEHHQUHSODFHG$FFRUGLQJWRWKHORDQ            6DY %DQN Y 6DORPRQ 6PLWK %DUQH\ ,QF  86 
DJUHHPHQW WKH SOHGJHG VWRFN UHIHUV RQO\ WR WKRVH VKDUHV         
SXUFKDVHG ZLWK WKH ORDQ DQG 6WDU %DQN FRQWLQXHV WR KROG
WKHVH7KHVHWWOHPHQWKDVQREHDULQJRQWKHRZQHUVKLSRIRU                ,Q+DUULV7UXVWDXQDQLPRXV6XSUHPH&RXUWKHOGWKDWD
ULJKWVWRWKHSOHGJHGVWRFN$WPRVWWKHIXQGUHSUHVHQWVD             EURNHUGHDOHU FRXOG EH OLDEOH IRU LWV SDUWLFLSDWLRQ LQ D
GLVSRVLWLRQRISRWHQWLDOPDOSUDFWLFHOLDELOLW\QRWRI(OHFWURsHW       WUDQVDFWLRQ SURKLELWHG E\ (5,6$  D  86&
VKDUHV                                                                 D7KHUHUHVSRQGHQW6DORPRQ 6PLWK%DUQH\VROG
                                                                         QHDUO\PLOOLRQLQPRWHOSURSHUWLHVWRDQ(5,6$SHQVLRQ
   ,Q FKDUDFWHUL]LQJ WKH VHWWOHPHQW DV D GLVSRVLWLRQ RI           SODQ8SRQGLVFRYHU\WKDWWKHUHDOHVWDWHLQWHUHVWVZHUHQHDUO\
FROODWHUDO6WDU%DQNRYHUORRNVWKHFDXVDOGLVFRQQHFWEHWZHHQ            ZRUWKOHVVWKHSODQILGXFLDULHVVXHG6DORPRQIRUUHVFLVVLRQRI
WKHSOHGJHGVWRFNDQGWKHPDOSUDFWLFHFODLPV7KH'LVWULFW              WKHWUDQVDFWLRQUHVWLWXWLRQRIWKHSXUFKDVHSULFHZLWKLQWHUHVW
&RXUW IRXQG WKDW WKH mWKH DFWLRQV RI / 	 ' >/LQGKRUVW 	       DQGGLVJRUJHPHQWRISURILWVPDGHIURPWKHXVHRISODQDVVHWV
'UHLGDPH@DQG*UDGLVRQGLGQRWGLPLQLVKWKHYDOXHRIWKH                 6DORPRQPRYHGIRUVXPPDU\MXGJPHQWDUJXLQJWKDW(5,6$
VKDUHVRIVWRFN5DWKHUWKDWVWRFNZDVHIIHFWLYHO\ZRUWKOHVV           GRHVQRWSURYLGHDFDXVHRIDFWLRQDJDLQVWQRQILGXFLDULHV7KH
ZKHQLWZDVSXUFKDVHGDQGUHPDLQVVRWRGD\l0F'DQQROGY               6XSUHPH&RXUWGLVDJUHHGH[SODLQLQJWKDWDRQHRI
6WDU%DQN)6XSSG6'2KLR(YHQ              (5,6$jVUHPHGLDOSURYLVLRQVmDGPLWVRIQROLPLWRQWKH
LIWKHVHWWOLQJGHIHQGDQWVQHJOLJHQWO\LQIODWHGWKHSULFHRIWKH         XQLYHUVHRISRVVLEOHGHIHQGDQWVl,GDW$FFRUGLQJO\
VWRFN DV SODLQWLIIV DOOHJH WKH\ GLG QRW GLPLQLVK LWV ZRUWK   WKH &RXUW KHOG WKDW D FDXVH RI DFWLRQ OLHV XQGHU (5,6$
ZKLFK ZDV DOUHDG\ LPSHULOHG GXH WR EXVLQHVV VHWEDFNV              D DJDLQVW D QRQILGXFLDU\ SDUW\LQLQWHUHVW ZKR
$FFRUGLQJO\WKHVHWWOHPHQWIXQGFRPSHQVDWHVSODLQWLIIVIRU              NQRZLQJO\SDUWLFLSDWHVLQDSURKLELWHGWUDQVDFWLRQ7KLVUHVXOW
XQVRXQGOHJDODQGILQDQFLDODGYLFHQRWIRUORVVRIFROODWHUDO          FRQILUPVHDUOLHUDXWKRULW\ZLWKLQWKLV&LUFXLWWKDWSHUPLWWHGDQ
2Q DSSHDO 6WDU %DQN KDV QRW FRQYLQFLQJO\ FRQWHVWHG WKLV         DFWLRQ IRU GLVJRUJHPHQW RI SURILWV DJDLQVW DQ (5,6$
UHDVRQLQJRWKHUWKDQE\FODLPLQJLQFRQVLVWHQFLHVLQSODLQWLIIVj
       0F'DQQROGY                        1RV           1RV                            0F'DQQROGY           
         6WDU%DQNHWDO                                                                                                  6WDU%DQNHWDO

EHFDXVH ERWK VHWWOLQJ DQG QRQVHWWOLQJ GHIHQGDQWV VKDUH                WKHRU\RIUHFRYHU\7KHEDQNGRHVQRWDGGUHVVWKHHVVHQWLDO
FRPPRQOLDELOLW\XQGHU(5,6$                                             GLVWLQFWLRQEHWZHHQDQLPSURSHUYDOXDWLRQRIDVWRFNSULFHDV
                                                                             KHUHDQGWKHLPSDLUPHQWRILWVDFWXDOPDUNHWYDOXH
   $WWKHRXWVHWZHQRWHWKDWZHDUHQRWUXOLQJRQDQDFWLRQ
IRUFRQWULEXWLRQDJDLQVWWKHVHWWOLQJGHIHQGDQWV,QVWHDGZH                  7KLV GLVWLQFWLRQ LV LPSRUWDQW LQ OLJKW RI 0F*RQLJOH Y
DUH DVNHG WR GHFLGH ZKHWKHU VXFK D FODLP HYHQ H[LVWV  $W         &RPEVD1LQWK&LUFXLWFDVH6WDU%DQNDGYDQFHVLQVXSSRUWRI
SUHVHQWWKHUHLVDVSOLWLQWKHFLUFXLWFRXUWVDVWRZKHWKHURQH            LWVFODLP)GWK&LU,Q0F*RQLJOHFR
(5,6$ ILGXFLDU\ PD\ SXUVXH DQ DFWLRQ IRU FRQWULEXWLRQ                 RZQHUVRIDKRUVHEUHHGLQJRSHUDWLRQFDOOHG6SHQGWKULIW)DUPV
DJDLQVWDQRWKHUILGXFLDU\&RPSDUH&KHPXQJ&DQDO7UXVW                      VROGPLOOLRQZRUWKRIVWRFNLQDSULYDWHSODFHPHQW:KHQ
&R Y 6RYUDQ %DQN  0DU\ODQG  )G   G &LU           WKHVKDUHSULFHSOXPPHWHGLQYHVWRUVFKDUJHGIHGHUDODQGVWDWH
  UHFRJQL]LQJ D ULJKW WR FRQWULEXWLRQ DQG )UHH Y           VHFXULWLHVYLRODWLRQVDVZHOODVFRPPRQODZFODLPVRIIUDXG
%ULRG\)GWK&LUVDPHZLWK.LP                  DQGPLVUHSUHVHQWDWLRQ3ODLQWLIIVVHWWOHGWKHLUFODLPVDJDLQVW
Y )XMLNDZD  )G   WK &LU                   RQHRZQHUDQGWKHDSSUDLVHURIWKHEURRGPDUHVUHVXOWLQJLQ
GLVDOORZLQJDULJKWWRFRQWULEXWLRQ&RJHQWRSLQLRQVKDYH                 DVHWWOHPHQWIXQGRIPLOOLRQ%HFDXVHSODLQWLII&DVDUHV
EHHQ ZULWWHQ VXSSRUWLQJ HDFK YLHZ UHDVRQLQJ IURP                      KDG ERUURZHG PRQH\ IURP &HQWUDO %DQN WR LQYHVW LQ WKH
FRQJUHVVLRQDOLQWHQWSXEOLFSROLF\DQGWUDGLWLRQDOWUXVWODZ              HQWHUSULVHSOHGJLQJWKHVWRFNDVFROODWHUDOWKHEDQNVRXJKW
,QIDFWWKHLQVWDQWFDVHSUHVHQWVDQHYHQPRUHFKDOOHQJLQJ                  &DVDUHVj SRUWLRQ RI WKH VHWWOHPHQW IXQG DV SURFHHGV RI WKH
TXHVWLRQ DV WKH DSSHOODQWV KHUH ZRXOG FODLP D ULJKW WR              SOHGJHGVWRFN7KHFRXUWFRQFOXGHGWKDWWKHEDQNZDVHQWLWOHG
FRQWULEXWLRQDJDLQVW(5,6$QRQILGXFLDULHV<HWZHGRQRW                    WRWKHIXQGDVSURFHHGVH[SODLQLQJm7KHORFXVRIWKDWORVV
GHFLGHQRZZKHWKHUFRQWULEXWLRQFDQEHFODLPHGIURPHLWKHU                   ZDVLQWKHVHFXUHGVWRFNDQG&HQWUDO%DQNDVVHFXULW\KROGHU
ILGXFLDULHVRUQRQILGXFLDULHV7KHGLYLVLRQLQDXWKRULW\KDV                LV HQWLWOHG WR LWV OLHQ RQ WKH VHWWOHPHQW SD\PHQWV WKDW ZHUH
QRWEHHQUHVROYHGLQWKLVFLUFXLWDQGWKLVFDVHGRHVQRWSHUPLW             LQWHQGHGWRFRPSHQVDWHIRUWKDWORVWYDOXHl,GDW
XVDQRSSRUWXQLW\WRGRVR%HFDXVHWKHSDUWLHVKDYH\HWWR
OLWLJDWHWKHLU(5,6$FODLPVZHZLOOQRWDWWHPSWWRDOORFDWH                    3ODLQWLIIVjPDOSUDFWLFHFDVHKHUHLQFRQWUDVWLVERWWRPHGRQ
OLDELOLW\DPRQJWKHGHIHQGDQWVGXHWRWKHVLJQLILFDQWIDFWXDO                EDGDGYLFHUDWKHUWKDQGLPLQXWLRQRI(OHFWURsHWVWRFN+HUH
                                                                             WKHmORFXVRIWKHORVVlZDVQRWGDPDJHWRWKHFROODWHUDOEXW
                                                                             UDWKHUFRPPRQODZPDOSUDFWLFHWKHSODQZDVLQMXUHGQRWDV
                                                                            D SXUFKDVHU RI VWRFN EXW DV D SXUFKDVHU RI SURIHVVLRQDO
       7KH FRXUW DOVR QRWHG WKDW WKH WKLUGSDUW\ GHIHQGDQWVn(QGUHVj          VHUYLFHV3ODLQWLIIVH[FKDQJHGWKHLUPDOSUDFWLFHFODLPVIRU
ODZ\HU DQG WKDW ODZ\HUjV        ILUPnKDG QR ULJKW WR FRQWULEXWLRQ RU
                                                                             PLOOLRQOHDYLQJXQDIIHFWHGDOORZQHUVKLSLQWHUHVWLQWKH
LQGHPQLILFDWLRQ 7KRXJK WKHVH WKLUGSDUW\ GHIHQGDQWV MRLQHG 6WDU %DQN
DQG (QGUHV LQ EULHILQJ WKH LVVXH ZH DJUHH ZLWK WKH 'LVWULFW &RXUW DV WR
                                                                             SOHGJHGVWRFN:HFRQFOXGHWKDWWKLVIXQGQRWGHULYHGIURP
WKHLU OHJDO ULJKWV $SSHOODQWV KDYH QRW H[SODLQHG KRZ WKHVH WKLUGSDUW\      GDPDJH WR  RU GLVSRVLWLRQ RI FROODWHUDO GRHV QRW FRQVWLWXWH
GHIHQGDQWV DUH OLDEOH WR SODLQWLIIV LQ DQ\ DPRXQW RU RQ DQ\ WKHRU\ JLYLQJ    SURFHHGV
ULVH WR D FODLP IRU FRQWULEXWLRQ IURP WKH VHWWOLQJ GHIHQGDQWV        6HH
5HVWDWHPHQW 6HFRQG RI 7RUWV  $ m   ZKHQ WZR RU PRUH
SHUVRQV EHFRPH OLDEOH LQ WRUWWR WKH VDPH SHUVRQ   IRU WKH VDPH KDUP WKHUH
LV D ULJKW WR FRQWULEXWLRQ DPRQJ WKHP   l HPSKDVLV DGGHG TXRWHG LQ
                                                                                 
&HQWHULRU 6HUY &R Y $FPH 6FUDS ,URQ 	 0HWDO &RUS         )G          %HFDXVH ZH FRQFOXGH WKDW WKLV VHWWOHPHQW IXQG GRHV QRW IDOO ZLWK WKH
 WK &LU  7KXV ZH ZLOO FRQVLGHU WKH FODLP WR FRQWULEXWLRQ       GHILQLWLRQ RI SURFHHGV SURYLGHG DW 2KLR 5HY &RGH  $ ZH QHHG
RQO\ DV EHWZHHQ WKH VHWWOLQJ DQG QRQVHWWOLQJ GHIHQGDQWV ZKR SRVVLEO\       QRW UHDFK WKH TXHVWLRQ RI ZKHWKHU (5,6$jV OLPLWHG UHFRXUVH SURYLVLRQV
VKDUH OLDELOLW\ XQGHU (5,6$ IRU WKHLU GHDOLQJV ZLWK WKH SODQ                SUHHPSW 2KLR ODZ
    0F'DQQROGY                       1RV         1RV                       0F'DQQROGY        
      6WDU%DQNHWDO                                                                                          6WDU%DQNHWDO

  ,,,7+(())(&72)7+(6(77/(0(178321                              $ $SSHOODQWVj&ODLPHG5LJKWWR&RQWULEXWLRQ
          7+(5(0$,1,1*'()(1'$176
                   1R                                         :KHQDVKHUHDVHWWOHPHQWDJUHHPHQWFRQWDLQVDEDURUGHU
                                                                       H[WLQJXLVKLQJSRVVLEOHOHJDOFODLPVRIQRQVHWWOLQJGHIHQGDQWV
   %HFDXVHSODLQWLIIVEURXJKWWKLVFDVHDVDGHULYDWLYHDFWLRQ         WKH FRXUW PXVW FRQGXFW DQ HYLGHQWLDU\ IDLUQHVV KHDULQJ WR
RQEHKDOIRIWKHPVHOYHVDQGDOOSODQSDUWLFLSDQWVWKH\ZHUH           GHWHUPLQHZKHWKHUWKHVHWWOLQJGHIHQGDQWVDUHSD\LQJWKHLUIDLU
UHTXLUHGWRREWDLQMXGLFLDODSSURYDORIDQ\VHWWOHPHQW6HH           VKDUHRIWKHOLDELOLW\6HHHJ&XOOHQY5LOH\,QUH0DVWHUV
)HG5&LY3$SSHOODQWV6WDU%DQN(QGUHVDQGWKH           0DWHV 	 3LORWV 3HQVLRQ 3ODQ DQG ,5$3 /LWLJ  )G
WUXVWHHRIWKHJUDQWRUWUXVWLQZKLFK(QGUHVKHOGKLV(OHFWUR         G&LUm>7@KLUGSDUW\SDUWLFLSDWLRQLQDQ
sHW VKDUHV FROOHFWLYHO\ WKH mQRQVHWWOLQJ GHIHQGDQWVl          HYLGHQWLDU\ IDLUQHVV KHDULQJ DQG FRXUW DSSURYDO RI WKH
REMHFWHGWRWKHVHWWOHPHQWLQWZRZD\V)LUVWWKH\SURWHVWHG         VHWWOHPHQWEDUDUHQHFHVVDU\WRSURWHFWWKHGXHSURFHVVULJKWV
WKH mEDU RUGHUl WKDW SUHYHQWV WKHP IURP DVVHUWLQJ FODLPV       RIWKLUGSDUWLHVl.RYDFVY(UQVW	<RXQJ,QUHsLII\/XEH
DJDLQVW.LUNKDP/LQGKRUVW	'UHLGDPHDQG*UDGLVRQWKH               6HF /LWLJ  )G   WK &LU  m,I WKH
GHIHQGDQWVZKRVHWWOHGWKHPDOSUDFWLFHVXLW7KHQRQVHWWOLQJ         SURSRVHGVHWWOHPHQWLVLQWHQGHGWRSUHFOXGHIXUWKHUOLWLJDWLRQ
GHIHQGDQWVUHTXHVWHGDKHDULQJWRDVVHVVWKHIDLUQHVVRIWKHEDU       E\DEVHQWSHUVRQVGXHSURFHVVUHTXLUHVWKDWWKHLULQWHUHVWEH
RUGHUZKLFKWKH\FODLPHGFXWRIIWKHLUULJKWWRFRQWULEXWLRQ         DGHTXDWHO\ UHSUHVHQWHGl TXRWLQJ 0DQXDO IRU &RPSOH[
7KH'LVWULFW&RXUWFRQFOXGHGWKDWQRKHDULQJZDVQHFHVVDU\             /LWLJDWLRQGDW7KRXJKDJUHHLQJZLWK
EHFDXVH WKH QRQVHWWOLQJ GHIHQGDQWV KDG QR ULJKW WR             WKLVUXOHWKH'LVWULFW&RXUWIRXQGLWLQDSSOLFDEOHDQGUHIXVHG
FRQWULEXWLRQ  s$   6HFRQG WKH QRQVHWWOLQJ          WR KROG DQ HYLGHQWLDU\ KHDULQJ  2Q WKLV QDUURZ SRLQW ZH
GHIHQGDQWV DUJXHG WKDW WKHLU OLDELOLW\ VKRXOG EH UHGXFHG        YDFDWHWKLVGHFLVLRQIRUWKHUHDVRQVWKDWIROORZ
SURSRUWLRQDWHO\ UDWKHU WKDQ RQ WKH SUR WDQWR RU GROODUIRU
GROODUEDVLVFRQWDLQHGLQWKHDJUHHPHQW7KH'LVWULFW&RXUW              7KH 'LVWULFW &RXUW IRXQG QR ULJKW WR FRQWULEXWLRQ XQGHU
OLNHZLVH UHMHFWHG WKLV DUJXPHQW H[SODLQLQJ WKDW D               HLWKHUIHGHUDORU2KLRODZ$VWKHDSSHOODQWVKDYHQRWEULHIHG
SURSRUWLRQDWHDOORFDWLRQRIOLDELOLW\ZDVFRQWUDU\WRWKHMRLQW       RURWKHUZLVHFKDOOHQJHGWKHFRXUWjVUXOLQJXQGHU2KLRODZZH
DQGVHYHUDO GHVLJQ RI (5,6$  ,Q VXP WKH 'LVWULFW &RXUW      FRQVLGHUWKHLUFODLPWRFRQWULEXWLRQXQGHUIHGHUDOODZDORQH
FRQFOXGHGWKDWWKHVHWWOHPHQWDJUHHPHQWZDVIDLUUHDVRQDEOH          7KLVLVDSSURSULDWHEHFDXVHWKHGHIHQGDQWVKHOSHGVWUXFWXUHD
DQGDGHTXDWHDVWRDOOSDUWLHV0F'DQQROGY6WDU%DQN1R           WUDQVDFWLRQWKDWDFFRUGLQJWRSODLQWLIIVYLRODWHGIHGHUDOODZ
&86'LVW/(;,6DW
6'              6HH'RQRYDQY5REELQV)GWK&LU
2KLRsXQHDSSO\LQJ*UHQDGD,QYHVWPHQWV,QFY              m:KHUHFRQWULEXWLRQLVVRXJKWE\RQHZKRKDVKDGWRSD\
':* &RUS  )G   WK &LU               GDPDJHV IRU YLRODWLQJ D IHGHUDO VWDWXWH WKH VFRSH DQG
H[SODLQLQJWKHIDFWRUVWREHFRQVLGHUHGZKHQUHYLHZLQJWKH            OLPLWDWLRQVRIWKHULJKWRIFRQWULEXWLRQDUHLQYDULDEO\WUHDWHG
DGHTXDF\RIDSURSRVHGVHWWOHPHQW7KHFRXUWWKHQFHUWLILHG         DVTXHVWLRQVRIIHGHUDOUDWKHUWKDQVWDWHODZ$GHSDUWXUHIURP
LWV GHFLVLRQ IRU LPPHGLDWH DSSHDO SXUVXDQW WR  86&        WKDW SULQFLSOH ZRXOG EH XQMXVWLILHG LQ WKH FDVH RI (5,6$
E                                                           ILGXFLDULHVlFLWDWLRQVRPLWWHG,IWKHDSSHOODQWVFDQFODLP
                                                                       D ULJKW WR FRQWULEXWLRQ KHUHnD TXHVWLRQ ZH UHPDQG WR WKH
                                                                       'LVWULFW&RXUWEXWGRQRWRXUVHOYHVGHFLGHnWKDWULJKWH[LVWV