Court Opinion

ID: 2969691
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:55:06.268184+00
Date Added: 2024-06-11T11:41:51.250431
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

 67(3+(1 3/('*(5  ;
 0$5&,$ * 3/('*(5               
                       
                                               1RV
         3ODLQWLIIV$SSHOODQWV 
                                  !
                                 
            Y                   
                                 
 81,7(' 67$7(6 2) $0(5,&$ 
          'HIHQGDQW$SSHOOHH 
                                1
        $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
      IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL
    1RnsDFN6KHUPDQsU0DJLVWUDWHsXGJH
                  $UJXHG6HSWHPEHU
             'HFLGHGDQG)LOHG'HFHPEHU
    %HIRUH*8<DQG0225(&LUFXLWsXGJHV'2:'
                     'LVWULFWsXGJH

    
     7KH +RQRUDEOH 'DYLG ' 'RZG 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ

                                   
     3OHGJHUHWDOY8QLWHG6WDWHV      1RV

                     BBBBBBBBBBBBBBBBB
                          &2816(/
$5*8('  sDPHV + 6WHWKHP 526(1%(5* +(5)(/
67(7+(0	%(1'(5&LQFLQQDWL2KLRIRU$SSHOODQWV
0DULRQ(0(ULFNVRQ86'(3$570(172)s867,&(
$33(//$7( 6(&7,21 :DVKLQJWRQ '& IRU $SSHOOHH
21%5,()sDPHV+6WHWKHP526(1%(5*+(5)(/
67(7+(0	%(1'(5&LQFLQQDWL2KLRsDPHV90DJHH
sU&LQFLQQDWL2KLRIRU$SSHOODQWV0DULRQ(0(ULFNVRQ
%UXFH 5 (OOLVHQ 86 '(3$570(17 2) s867,&(
$33(//$7(6(&7,21:DVKLQJWRQ'&IRU$SSHOOHH
                     BBBBBBBBBBBBBBBBB
                         23,1,21
                     BBBBBBBBBBBBBBBBB
  .$5(1 1(/621 0225( &LUFXLW sXGJH  7KLV FDVH
LQYROYHVWKHTXHVWLRQRIZKHWKHULQGLYLGXDOWD[SD\HUVZHUH
mDWULVNlDVGHILQHGLQ86&EZLWKUHJDUGWRD
WKUHHSDUW\ VDOHOHDVHEDFN WUDQVDFWLRQ EHWZHHQ D SDUHQW
FRPSDQ\ DQG WZR RI LWV VXEVLGLDULHV DQG FRXOG WKHUHIRUH
GHGXFWORVVHVIURPDQLQYHVWPHQWLQDWUXVWIRUPHGE\RQHRI
WKHVXEVLGLDULHV,QWKHWD[\HDUVHQGLQJLQ
DQG  3ODLQWLIIV$SSHOODQWV 6WHSKHQ m3OHGJHUl DQG
0DUFLD3OHGJHUm0UV3OHGJHUlFROOHFWLYHO\UHIHUUHGWRDV
mWKH 3OHGJHUVl FODLPHG ORVVHV GHULYLQJ IURP 3OHGJHUjV
LQYHVWPHQW LQ D WUXVW XQGHU    7KH ,QWHUQDO 5HYHQXH
6HUYLFH m,56l KRZHYHU GLVDOORZHG WKH 3OHGJHUVj ORVV
GHGXFWLRQV DQG LQVWHDG DVVHVVHG DQ DPRXQW WRWDOLQJ
DSSUR[LPDWHO\  LQ WD[HV SHQDOWLHV DQG LQWHUHVW
DJDLQVWWKH3OHGJHUV7KH3OHGJHUVSDLGWKHDVVHVVHGDPRXQW
DQG WKHQ ILOHG FODLPV IRU UHIXQGV DQG DPHQGHG LQGLYLGXDO
LQFRPHWD[UHWXUQVIRUHDFKRIWKHDIRUHPHQWLRQHGWD[\HDUV
EXWWKH,56GHQLHGWKHLUFODLPV
 7KH3OHGJHUVWKHQILOHGWKLVODZVXLWDJDLQVWWKH,56LQWKH
8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH6RXWKHUQ'LVWULFWRI2KLR
ZKLFKZDVWUDQVIHUUHGWRD8QLWHG6WDWHV0DJLVWUDWHsXGJH
   3OHGJHUHWDOY8QLWHG6WDWHV     1RV       1RV             3OHGJHUHWDOY8QLWHG6WDWHV             

RIIDFW7KHUHIRUHZHKROGWKDWWKHUHZDVQRLQFRQVLVWHQF\LQ   $IWHUKROGLQJDEHQFKWULDOSXUVXDQWWRWKHSDUWLHVjFRQVHQW
WKHGHFLVLRQVUHQGHUHGE\WKHPDJLVWUDWHMXGJHRQWKH,56jV       WKHPDJLVWUDWHMXGJHLVVXHGDQRSLQLRQZKLFKKHOGWKDWWKH
PRWLRQVIRUVXPPDU\MXGJPHQWDQG WKHPDJLVWUDWHMXGJHjV          3OHGJHUVZHUHQRWDWULVNXQGHUDQGHQWHUHGMXGJPHQW
RSLQLRQIROORZLQJWKHEHQFKWULDORQWKHPHULWV                  LQIDYRURIWKH,56
                    ,,,&21&/86,21                                7KH3OHGJHUVQRZDSSHDOWKHPDJLVWUDWHMXGJHjVGHFLVLRQ
                                                                  FODLPLQJWKDWWKHPDJLVWUDWHMXGJHHUUHGLQGHWHUPLQLQJWKDW
  )RUWKHUHDVRQVVWDWHGDERYHZH$)),50WKHPDJLVWUDWH          WKH\ ZHUH QRW DW ULVN XQGHU   DQG WKDW WKH PDJLVWUDWH
MXGJHjVGHFLVLRQ                                                 MXGJHjVGHFLVLRQIURPWKHEHQFKWULDOZDVLQFRQVLVWHQWZLWK
                                                                  KLV SUHYLRXV UXOLQJV RQ WKH ,56jV PRWLRQV IRU VXPPDU\
                                                                  MXGJPHQW)RUWKHUHDVRQVWKDWIROORZZH$)),50
                                                                                          ,%$&.*5281'
                                                                     ,Q$XJXVWRI$PHULFDQ%URDGFDVWLQJ&RPSDQLHV,QF
                                                                  m$%&l DFTXLUHG WZR VDWHOOLWH WUDQVSRQGHUV IURP 5&$
                                                                  $PHULFDQ&RPPXQLFDWLRQV,QF7UDQVSRQGHUVDUHHOHFWURQLF
                                                                  GHYLFHVWKDWUHFHLYHVHOHFWDPSOLI\DQGUHWUDQVPLWYRLFH
                                                                  GDWDDQGYLGHRVLJQDOV,Q0D\RI$%&DVVLJQHGDOORI
                                                                  LWVULJKWVEHQHILWVUHVSRQVLELOLWLHVDQGOLDELOLWLHVZLWKUHVSHFW
                                                                  WRWKHWZRWUDQVSRQGHUVWRLWVZKROO\RZQHGVXEVLGLDU\$%&
                                                                  9LGHR(QWHUSULVHV,QFm$%&9LGHRl
                                                                     2Q2FWREHUDQG,QWHJUDWHG(TXLSPHQW/HDVLQJ
                                                                  &RUSRUDWLRQ m,(/&l D ZKROO\ RZQHG VXEVLGLDU\ RI
                                                                  ,QWHJUDWHG 5HVRXUFHV ,QF m,QWHJUDWHGl DFTXLUHG WKH WZR
                                                                  WUDQVSRQGHUV IURP $%& 9LGHR IRU D SXUFKDVH SULFH RI
                                                                  HDFK7KHQRQ2FWREHUWKHYHU\VDPH
                                                                  GD\WKDW,(/&KDGFRPSOHWHGLWVSXUFKDVHRIWKHWUDQVSRQGHUV
                                                                  ,(/&HQWHUHGLQWRWZRLGHQWLFDOOHDVHDJUHHPHQWVZLWK$%&
                                                                  9LGHR
                                                                     2Q'HFHPEHU,(/&VROGWKHWZRWUDQVSRQGHUVWR
                                                                  ,QYHVWRUV&UHGLW&RUSRUDWLRQm,&&lDQRWKHUZKROO\RZQHG
                                                                  VXEVLGLDU\RI,QWHJUDWHG,&&SDLGWKHSXUFKDVHSULFHIRUWKH
                                                                  WUDQVSRQGHUV ZLWK D FDVK GRZQSD\PHQW DQG D SURPLVVRU\

                                                                      
                                                                       :LWK   WKH H[FHSWLRQ RI WKH IDFWV GHWDLOLQJ WKH DFWLYLWLHV WKDW RFFXUUHG
                                                                  DIWHU WKH 3OHGJHUV ILOHG WKLV ODZVXLW WKH EDFNJURXQG IDFWV DUH GHULYHG IURP
                                                                  WKH sRLQW 6WLSXODWLRQ RI )DFWV ILOHG ZLWK WKH PDJLVWUDWH MXGJH
       3OHGJHUHWDOY8QLWHG6WDWHV        1RV          1RV         3OHGJHUHWDOY8QLWHG6WDWHV       

QRWH SD\DEOH WR ,(/&  $OVR RQ 'HFHPEHU   ,&&              &6WDQGDUG)RU7ULDO9HUVXV6XPPDU\sXGJPHQW
DJUHHG WR OHDVH WKH WUDQVSRQGHUV EDFN WR ,(/&  7KLV
DJUHHPHQW UHTXLUHG ,(/& WR SD\ ,&& IL[HG UHQW WKDW                   7KH3OHGJHUVDOVRDUJXHWKDWWKHEHQFKWULDOGHFLVLRQLQWKLV
DSSUR[LPDWHO\ HTXDOHG LQ ERWK WLPH DQG DPRXQW WKH                 FDVH LV LQFRQVLVWHQW ZLWK WKH PDJLVWUDWH MXGJHjV SUHYLRXV
SD\PHQWVWKDW,&&RZHGWR,(/&$VDQLQFHQWLYHIRU,&&WR                GHFLVLRQVRQWKH,56jVPRWLRQVIRUVXPPDU\MXGJPHQW:H
HQWHULQWRWKLVPDVWHUOHDVHDJUHHPHQWZLWK,(/&,QWHJUDWHG               GLVDJUHH7KHVWDQGDUGWKDWWKHPDJLVWUDWHMXGJHZDVUHTXLUHG
DJUHHGWRJXDUDQWHHXQFRQGLWLRQDOO\,(/&jVUHQWDOSD\PHQWV                 WR DSSO\ LQ UHQGHULQJ D GHFLVLRQ RQ WKH ,56jV PRWLRQV IRU
XQGHUWKHPDVWHUOHDVHDJUHHPHQW                                          VXPPDU\MXGJPHQWVXEVWDQWLDOO\GLIIHUHGIURPWKHVWDQGDUG
                                                                           IRUGHFLGLQJWKHLVVXHVLQWKHFDVHDIWHUWULDO
   2Q WKH YHU\ VDPH GD\ LQ ZKLFK LW KDG ERWK ERXJKW DQG
OHDVHGWKHWZRWUDQVSRQGHUV,&&IRUPHG6DWHOOLWH(TXLSPHQW                   :KHQ FRQVLGHULQJ WKH ,56jV PRWLRQV IRU VXPPDU\
7UXVW $ mWKH 7UXVWl DV D JUDQWRU WUXVW WUDQVIHUUHG WKH         MXGJPHQWWKHPDJLVWUDWHMXGJHZDVUHTXLUHGWRYLHZDOOIDFWV
WUDQVSRQGHUVWRWKH7UXVWDQGDVVLJQHGDOORILWVULJKWVDQG              DQG LQIHUHQFHV GUDZQ LQ WKH OLJKW PRVW IDYRUDEOH WR WKH
OLDELOLWLHVZLWKUHVSHFWWRWKHWUDQVSRQGHUVWRWKH7UXVW3ULRU          3OHGJHUVWKHQRQPRYDQWVLQWKLVFDVHDQGWKHQWRGHWHUPLQH
WR WKH IRUPDWLRQ RI WKH 7UXVW D FRQILGHQWLDO PHPRUDQGXP           DVDPDWWHURIODZZKHWKHUDUHDVRQDEOHMXU\FRXOGILQGIRUWKH
RIIHULQJIRUW\XQLWVRIEHQHILFLDOLQWHUHVWLQWKH7UXVWIRUVDOH          3OHGJHUV EDVHG XSRQ DOO WKH HYLGHQFH SUHVHQWHG  6HH
WR SULYDWH LQYHVWRUV ZDV UHOHDVHG  $FFRUGLQJ WR WKH 7UXVW        0DWVXVKLWD(OHF,QGXV&RY=HQLWK5DGLR&RUS86
GRFXPHQWV1HZ<RUNODZJRYHUQHGWKHLQWHUSUHWDWLRQRIWKH                 ,QRWKHUZRUGVWKHPDJLVWUDWHMXGJHFRXOG
DJUHHPHQW                                                                 QRWJUDQWVXPPDU\MXGJPHQWWRWKH,56LIKHIRXQGWKDWWKHUH
                                                                           ZDVDJHQXLQHLVVXHRIPDWHULDOIDFW)(' 5 &,9 3 F,Q
  )ROORZLQJ WKH UHOHDVH RI WKH FRQILGHQWLDO PHPRUDQGXP              FRQVLGHULQJERWKRIWKH,56jVPRWLRQVIRUVXPPDU\MXGJPHQW
3OHGJHUDFTXLUHGRQHXQLWRIEHQHILFLDOLQWHUHVWLQWKH7UXVWE\           WKH PDJLVWUDWH MXGJH GHWHUPLQHG WKDW WKHUH ZHUH JHQXLQH
SD\LQJLQFDVKWR,&&DQGLVVXLQJSURPLVVRU\QRWHV                 LVVXHV RI PDWHULDO IDFW UHJDUGLQJ WKH H[WHQW RI ,QWHJUDWHGjV
LQWKHDPRXQWVRIDQGWRDQRWKHUZKROO\                   SDUWLFLSDWLRQDQGFRQWURORYHU,&&WKHUHIRUHKHFRXOGQRW
RZQHGVXEVLGLDU\RI,QWHJUDWHGDQGWR,&&UHVSHFWLYHO\7KH              JUDQWVXPPDU\MXGJPHQWWRWKH,56RQHLWKHUPRWLRQ6HH
SD\PHQWVWKDW3OHGJHUZDVREOLJDWHGWRPDNHWR,&&HTXDOHG                 6WHUOLQJ)5'DWm$GHWHUPLQDWLRQRIGRPLQDWLRQ
KLVVKDUHRIWKHSD\PHQWVWKDW,(/&ZDVREOLJDWHGWRSD\WKH               DQG FRQWURO E\ WKH SDUHQW RYHU WKH GDLO\ RSHUDWLRQV RI D
7UXVWXQGHUWKHPDVWHUOHDVHDJUHHPHQWZLWK,&&7KHIL[HG                VXEVLGLDU\LVXVXDOO\DPDWWHUIRUWKHWULHURIIDFWl
UHQWDO SD\PHQWV WKDW WKH 7UXVW UHFHLYHG IURP ,(/& ZHUH
DSSOLHGWRVDWLVI\WKHSD\PHQWV3OHGJHUZDVUHTXLUHGWRSD\                   'XULQJWKHEHQFKWULDOKRZHYHUWKHPDJLVWUDWHMXGJHZDV
,&&                                                                       DOVRWKHILQGHURIIDFW7KHUHIRUHKHFRXOGZHLJKDQGEDODQFH
                                                                           WKHFUHGLELOLW\DQGUHOLDELOLW\RIWKHHYLGHQFHSODFHGEHIRUH
  :KHQ WKH 3OHGJHUV ILOHG WKHLU MRLQW WD[ UHWXUQV IRU WKH         KLP DQG PDNH WKH IDFWXDO ILQGLQJV QHFHVVDU\ WR GHFLGH
WD[DEOH \HDUV HQGLQJ LQ    DQG  WKH\          ZKHWKHU,&&ZDVDPHUHLQVWUXPHQWDOLW\RI,QWHJUDWHG2QFH
FODLPHGORVVGHGXFWLRQVZLWKUHVSHFWWR3OHGJHUjVLQYHVWPHQW               WKHPDJLVWUDWHMXGJHUHDFKHGDGHFLVLRQRQWKHUHOHYDQWIDFWXDO
LQWKH7UXVWIRUWKDWSDUWRIWKHLQYHVWPHQWDWWULEXWDEOHWRKLV           ILQGLQJV UHJDUGLQJ ,&&jV FRQWURO RYHU LWV GD\WRGD\
SURPLVVRU\QRWHWR,&&7KH,56KRZHYHUGHWHUPLQHGWKDW                 RSHUDWLRQVDQG,QWHJUDWHGjVLQYROYHPHQWLQ,&&jVRSHUDWLRQV
                                                                           DQGWKHFUHDWLRQRIWKH7UXVWWKHPDJLVWUDWHMXGJHZDVIUHHWR
                                                                           UHQGHUDGHFLVLRQRQWKHLVVXHRIZKHWKHUWKH3OHGJHUVZHUHDW
                                                                          ULVNXQGHUHYHQLIWKHSDUWLHVGLVSXWHGPDWHULDOLVVXHV
     )RU SXUSRVHV RI FODULW\ WKLV ,&&,(/& OHDVH LV UHIHUUHG WR DV mWKH
PDVWHU OHDVH DJUHHPHQWl
    3OHGJHUHWDOY8QLWHG6WDWHV        1RV         1RV          3OHGJHUHWDOY8QLWHG6WDWHV        

,&&jVRIILFHWKHDPRXQWRIEXVLQHVVGLVFUHWLRQGLVSOD\HG           WKH3OHGJHUVZHUHQRWDWULVNXQGHUZLWKUHVSHFWWRWKH
E\ WKH GRPLQDWHG FRPSDQ\ DV VKRZQ E\ ,QWHJUDWHGjV                QRWH WR ,&& DQG DVVHVVHG DGGLWLRQDO WD[HV SHQDOWLHV DQG
LQYROYHPHQWLQ,&&jVELOOLQJDQGDFFRXQWLQJZRUNDQGWKH                LQWHUHVWDJDLQVWWKH3OHGJHUV7KH3OHGJHUVWKHQIXOO\SDLG
FUHDWLRQRIWKH7UXVWWKHFRUSRUDWLRQVjIDLOXUHWRGHDOZLWK       WKHVHDPRXQWVDQGILOHGFODLPVIRUUHIXQGVEXWWKHLUFODLPV
HDFK RWKHU DW DUPjV OHQJWK DV VKRZQ E\ ,&&jV XVH RI           ZHUHGHQLHG
,QWHJUDWHGjV IRUPV LQ FUHDWLQJ WKH 7UXVW DQG ,QWHJUDWHGjV
FRXQVHODQGHPSOR\HHVLQUHYLHZLQJWKHQHFHVVDU\GRFXPHQWV                7KH3OHGJHUV WKHQ ILOHGWKLVODZVXLWLQWKH8QLWHG6WDWHV
WKHFRUSRUDWLRQVjIDLOXUHWRWUHDWWKHDOOHJHGO\GRPLQDWHG          'LVWULFW&RXUWIRUWKH6RXWKHUQ'LVWULFWRI2KLR2QsXQH
FRUSRUDWLRQDVDQLQGHSHQGHQWSURILWFHQWHUDVVKRZQE\WKH             WKH,56ILOHGDPRWLRQIRUVXPPDU\MXGJPHQWDVVHUWLQJ
IDFWWKDWDOOSD\PHQWVRILQWHUHVWDQGGHEWVZHUHGLUHFWHGWR           WKDWWKH3OHGJHUVZHUHQRWDWULVNXQGHUEHFDXVH,&&WR
,QWHJUDWHGDQGWKDWQRQHRIWKHSD\PHQWGRFXPHQWVLQFOXGLQJ            ZKLFK3OHGJHUZDVUHTXLUHGWRPDNHSD\PHQWVZDVPHUHO\DQ
FKHFNVIURP3OHGJHUOLVWHG,&&RQWKHPWKHSD\PHQWRI             LQVWUXPHQWDOLW\ RI ,QWHJUDWHG DQG WKHUHIRUH ,QWHJUDWHG ZDV
GHEWV DQG JXDUDQWHHV E\ WKH SDUHQW IRU WKH EHQHILW RI WKH     ERWKWKHSD\HHDQGJXDUDQWRULQWKHWKUHHSDUW\VDOHOHDVHEDFN
VXEVLGLDU\DVVKRZQWKURXJKWKH'HFHPEHU*XDUDQW\              DUUDQJHPHQW7KHPDJLVWUDWHMXGJHGHQLHGWKH,56jVPRWLRQ
$JUHHPHQWHQWHUHGLQWREHWZHHQ,QWHJUDWHGDQG,&&DQG             IRUVXPPDU\MXGJPHQWRQWKHJURXQGWKDWWKHUHZHUHJHQXLQH
WKHVXEVLGLDU\jVXVHRIWKHSDUHQWjVSURSHUW\DVLILWZHUHLWV         LVVXHV RI PDWHULDO IDFW UHJDUGLQJ WKH UHODWLRQVKLS EHWZHHQ
RZQDVVKRZQE\,&&jVXVHRI,QWHJUDWHGjVRIILFHVSDFHDQG             ,QWHJUDWHGDQG,&&
GRFXPHQW IRUPV  ,Q VXP WKH UHOHYDQW IDFWRUV XQGHU 1HZ
<RUNODZDOOZHLJKLQIDYRURIWKHPDJLVWUDWHMXGJHjVUXOLQJ               7KH,56WKHQGHSRVHG%HQMDPLQsXQJZKRIRUPHUO\ZDV
WKDW,&&ZDVDPHUHLQVWUXPHQWDOLW\RI,QWHJUDWHG                      WKH *HQHUDO &RXQVHO RI ,QWHJUDWHGjV HTXLSPHQW OHDVLQJ
                                                                        GLYLVLRQ DQG D 6HQLRU 9LFH 3UHVLGHQW RI ,QWHJUDWHG  ,Q KLV
   %HFDXVH ,&& ZDV D PHUH LQVWUXPHQWDOLW\ RI ,QWHJUDWHG         GHSRVLWLRQsXQJWHVWLILHGWKDW%LOO$GDLUZKRIRUPHUO\ZDV
,QWHJUDWHGHIIHFWLYHO\EHFDPHERWKWKHJXDUDQWRUDQGSD\HHRI           WKHKHDGRI,QWHJUDWHGjVHTXLSPHQWOHDVLQJJURXSGHFLGHGWR
WKHWKUHHSDUW\VDOHOHDVHEDFNWUDQVDFWLRQDWLVVXH7KHUHIRUH        FUHDWHWKH7UXVWWRSURYLGHILQDQFLQJWRLQYHVWRUVsXQJDOVR
WKLVFDVHLVXQOLNH(PHUVKDZZKHUHWKHJXDUDQWRUZDVDWKLUG           WHVWLILHG WKDW ,QWHJUDWHGjV PDUNHWLQJ VWDII GHYHORSHG WKH
SDUW\WKDWZDVQRWRWKHUZLVHFRQQHFWHGWRWKHWUDQVDFWLRQDQG           XQGHUO\LQJHTXLSPHQWOHDVLQJWUDQVDFWLRQIRUWKH7UXVWWKDW
KDG WKH SRWHQWLDO WR H[SRVH WKH (PHUVKDZV WR SHUVRQDO           ,QWHJUDWHGjV HTXLSPHQW OHDVLQJ JURXS RULJLQDWHG WKH
OLDELOLW\ZLWKRXWUHFRXUVHE\UHIXVLQJWRKRQRULWVJXDUDQW\           WUDQVDFWLRQLQYROYLQJWKH7UXVWDQGWKDW,QWHJUDWHGjVHTXLW\
+HUH LI ,QWHJUDWHG ZHUH WR UHIXVH WR KRQRU LWV JXDUDQW\ RI   PDUNHWLQJ JURXS DQDO\]HG WKH SURSRVHG WUDQVDFWLRQ WR
,(/&jVREOLJDWLRQVWRWKH 7UXVWRUWRJREDQNUXSW3OHGJHU             GHWHUPLQH KRZ LW FRXOG EH VWUXFWXUHG LQWR RQH RI WKH
ZRXOGKDYHDVROLGGHIHQVHDJDLQVWDQ\DFWLRQEURXJKWE\,&&            FRPSDQ\jV SURGXFWV  $GGLWLRQDOO\ sXQJ WHVWLILHG WKDW
WRUHFRYHUSD\PHQWVWKDWWKHLQYHVWRUVLQWKH7UXVWRZHGWR             ,QWHJUDWHGjVHTXLSPHQWOHDVLQJJURXSDQGHTXLW\VDOHVJURXS
,&&EHFDXVHDQ\ OLDELOLW\WR,&&RULQHVVHQFH,QWHJUDWHG            ZHUH LQYROYHG LQ QHJRWLDWLQJ WKH WHUPV RI WKH LQYHVWRUVj
ZRXOG EH FDQFHOHG RXW E\ ,QWHJUDWHGjV SURPLVH WR FRYHU          SURPLVVRU\QRWHVWR,&&DQGWKDWWKHSURPLVVRU\QRWHVLVVXHG
,(/&jV SD\PHQWV WR WKH 7UXVW  ,Q HVVHQFH WKH WKUHHSDUW\     E\WKHLQYHVWRUVWR,&&ZHUHEDVHGXSRQVWDQGDUGIRUPQRWHV
VDOHOHDVHEDFNWUDQVDFWLRQLQWKLVFDVH HIIHFWLYHO\LQVXODWHG          FUHDWHGE\HPSOR\HHVRI,QWHJUDWHGsXQJIXUWKHUWHVWLILHGWKDW
3OHGJHU IURP DQ\ UHVSRQVLELOLW\ KH KDG WR FRYHU KLV             KHZDVLQYROYHGLQWKHSURFHVVRIGUDIWLQJWKHFRQILGHQWLDO
REOLJDWLRQVWR,&&7KXVZHDIILUPWKHPDJLVWUDWHMXGJHjV             PHPRUDQGXPWKDWRIIHUHGIRUW\XQLWVRIEHQHILFLDOLQWHUHVWLQ
GHFLVLRQ WKDW WKH 3OHGJHUV ZHUH QRW mDW ULVNl ZLWKLQ WKH       WKH7UXVWWRSULYDWHLQYHVWRUVDQGWKDWKHm>D@VFRXQVHO
PHDQLQJRI                                                       ZRXOGUHYLHZDQGVXSHUYLVHWKHGUDIWLQJRIWKDWPHPRUDQGXP
     3OHGJHUHWDOY8QLWHG6WDWHV        1RV         1RV           3OHGJHUHWDOY8QLWHG6WDWHV       

ZKLFKZDVGUDIWHGE\RXWVLGHFRXQVHODQG>KDG@LQSXWRQ          ZHUHHPSOR\HHVRI,QWHJUDWHGs$DWsXQJ'HSDW
DORWRIIDFWXDOPDWWHUVDQGMXVWUHYLHZLQJWKHGHYHORSPHQWRI            /LNHZLVH WKH PDJLVWUDWH MXGJHjV FRQFOXVLRQV WKDW
WKHGRFXPHQWlsRLQW$SSHQGL[ms$lDWsXQJ'HSDW            ,QWHJUDWHGZDVLQYROYHGLQVHWWLQJXSWKH7UXVWWKDW,QWHJUDWHG
                                                                    DQG,&&GLGQRWGHDOZLWKHDFKRWKHUDWDUPjVOHQJWKWKDW,&&
                                                                        ZDVIRUPHGWRSURYLGHILQDQFLQJWRLQYHVWRUVDQGWKDW,&&
   :LWK UHJDUG WR WKH RSHUDWLRQ RI ,&& sXQJ WHVWLILHG WKDW    GLGQRWKDYHDQ\GLVFUHWLRQLQLWVDFWLYLWLHVDQGGLGQRWDFW
,&&jVGD\WRGD\RSHUDWLRQVFRQVLVWHGRIELOOLQJFROOHFWLQJ           LQGHSHQGHQWO\ IURP ,QWHJUDWHG DUH VXSSRUWHG E\ sXQJjV
DQGDFFRXQWLQJIRUWUDQVDFWLRQVEHWZHHQLQYHVWRUVDQG,&&               WHVWLPRQ\WKDW,&&ZDVIRUPHGE\,QWHJUDWHGWRKHOSILQDQFH
EXW WKDW ,QWHJUDWHGjV DFFRXQWLQJ GHSDUWPHQW KDQGOHG WKH           LQYHVWPHQWVLQWKH7UXVWWKDWWKHLQYHVWRUVjSURPLVVRU\QRWHV
UHFRUGLQJ DQG UHSRUWLQJ IXQFWLRQV IRU ,&&  sXQJ IXUWKHU        WR ,&& ZHUH VWDQGDUG IRUP QRWHV GHYHORSHG LQ SDUW E\
H[SODLQHG WKDW ,&&jV RIILFHV ZHUH ORFDWHG DW WKH RIILFHV RI    ,QWHJUDWHGHPSOR\HHVWKDWsXQJSDUWLFLSDWHGLQDQGVXSHUYLVHG
,QWHJUDWHG DQG ZKLOH KH WHVWLILHG WKDW ,&&jV RIILFHUV DQG      WKHGUDIWLQJRIWKH&RQILGHQWLDO0HPRUDQGXPIRUWKH7UXVW
GLUHFWRUVFRQWUROOHGWKHGD\WRGD\RSHUDWLRQVRI,&&KHGLG           DQGWKDW,QWHJUDWHGjVDFFRXQWLQJGHSDUWPHQWKDQGOHG,&&jV
QRWLGHQWLI\WKHGDLO\WDVNVWKH\SHUIRUPHGIRU,&&sXQJDOVR         UHFRUGLQJ DQG UHSRUWLQJ IXQFWLRQV  s$ DW  
VWDWHG WKDW ZLWK RQH H[FHSWLRQ DOO RI WKH RIILFHUV DQG       sXQJ'HSDW)LQDOO\WKHPDJLVWUDWHMXGJHjV
GLUHFWRUVRI,&&ZHUHDOVRRIILFHUVRI,QWHJUDWHGsXQJIXUWKHU        ILQGLQJ WKDW ,QWHJUDWHGjV JXDUDQW\ XQGHU WKH PDVWHU OHDVH
VWDWHGWKDWKHZDVmIDLUO\FHUWDLQlWKDWDOOPRQLHVWKDWZHUH           DJUHHPHQWLQXUHGWRWKHEHQHILWRIWKH3OHGJHUVLVVXSSRUWHG
UHPLWWHGIURPLQYHVWRUVWR,&&ZHQWWR,QWHJUDWHGs$DW         E\D'HFHPEHU*XDUDQW\$JUHHPHQWHQWHUHGLQWR
sXQJ'HSDW:LWKDOOWKLVVDLGWKRXJKLQUHVSRQVHWR          EHWZHHQ,QWHJUDWHGDQG,&&s$DWm*XDUDQW\lDW
DTXHVWLRQE\WKH3OHGJHUVjFRXQVHOUHJDUGLQJZKHWKHUsXQJ              
EHOLHYHGWKDWm,&&ZDVDVHSDUDWHHQWLW\LQWKHOHJDOVHQVHl
sXQJDVVHUWHGm,GRls$DWsXQJ'HSDWHPSKDVLV            ,QOLJKWRIWKHPDJLVWUDWHMXGJHjVIDFWXDOILQGLQJVZKLFKDUH
DGGHG                                                                 QRWFOHDUO\HUURQHRXVZHFRQFOXGHWKDWWKHPDJLVWUDWHMXGJH
                                                                        GLGQRWHUULQFRQFOXGLQJWKDW,&&ZDVDQLQVWUXPHQWDOLW\RI
   8VLQJWKHWHVWLPRQ\IURPsXQJjVGHSRVLWLRQDVLWVVXSSRUW           ,QWHJUDWHG  2I WKH WHQ IDFWRUV OLVWHG LQ WKH DSSOLFDEOH WHVW
WKH,56WKHQILOHGDUHQHZHGPRWLRQIRUVXPPDU\MXGJPHQW               XQGHU 1HZ <RUN ODZ DOO RI WKHP DUH VXSSRUWHG E\ WKH
$JDLQ WKH PDJLVWUDWH MXGJH GHQLHG WKLV PRWLRQ GXH WR WKH      PDJLVWUDWHMXGJHjVIDFWXDOILQGLQJVDQGWKHUHE\ZHLJKLQIDYRU
H[LVWHQFHRIJHQXLQHLVVXHVRIPDWHULDOIDFW$IWHUKROGLQJD          RI D FRQFOXVLRQ WKDW ,&& LV D PHUH LQVWUXPHQWDOLW\ RI
EHQFK WULDO RQ WKH PHULWV RI WKH FDVH WKH PDJLVWUDWH MXGJH   ,QWHJUDWHG7KHVHILQGLQJVDUHDVIROORZVWKHDEVHQFHRI
LVVXHGDQRSLQLRQILQGLQJWKDWWKH3OHGJHUVZHUHQRWDWULVN           FRUSRUDWHIRUPDOLWLHVDVVKRZQE\,&&jVODFNRILQGHSHQGHQW
XQGHU   EHFDXVH ,&& ZDV D PHUH LQVWUXPHQWDOLW\ RI          RIILFHVSDFHWKHLQWHUPLQJOLQJRIILQDQFHVDQGWKHRYHUODSRI
,QWHJUDWHG                                                             RIILFHUVDQGGLUHFWRUVEHWZHHQ,&&DQG,QWHJUDWHGDQG,&&jV
                                                                        OLPLWHG FDSLWDO RU DVVHWV  LQDGHTXDWH FDSLWDOL]DWLRQ DV
                         ,,$1$/<6,6                                  VKRZQE\,&&jVLQLWLDOFDSLWDOL]DWLRQIXQGVWUDQVIHUUHGWR
                                                                        WKHSDUHQWIRUWKHSDUHQWjVXVHDVVKRZQE\WKHGLUHFWLRQRI
   2Q DSSHDO WKH 3OHGJHUV DUJXH WKDW WKH PDJLVWUDWH MXGJH      SD\PHQWV WR ,QWHJUDWHG  RYHUODS LQ RZQHUVKLS RIILFHUV
HUUHG LQ ILQGLQJ WKDW ,&& ZDV D PHUH LQVWUXPHQWDOLW\ RI        GLUHFWRUVDQGSHUVRQQHODVVKRZQE\WKHIDFWWKDWDOORI,&&jV
,QWHJUDWHGDQGWKHUHIRUHHUUHGLQKROGLQJWKDWWKH\ZHUHQRWDW         GLUHFWRUVDQGRIILFHUVZHUH,QWHJUDWHGHPSOR\HHVDQGWKDWRQO\
ULVNDVGHILQHGLQE:HKROGWKDWWKHPDJLVWUDWHMXGJH         RQH ,&& RIILFHU ZDV QRW DOVR DQ RIILFHU IRU ,QWHJUDWHG 
GLGQRWHUULQGHWHUPLQLQJWKDWWKH3OHGJHUVZHUHQRWmDWULVNl         FRPPRQRIILFHVSDFHDQGDGGUHVVDVVKRZQE\WKHORFDWLRQRI
XQGHU   EHFDXVH ,&& ZDV D PHUH LQVWUXPHQWDOLW\ RI
       3OHGJHUHWDOY8QLWHG6WDWHV     1RV       1RV         3OHGJHUHWDOY8QLWHG6WDWHV      

  GD\WRGD\DFWLYLWLHVWKDWZHUHEHLQJSHUIRUPHGE\,&&             ,QWHJUDWHG  7KH UHFRUG VXSSRUWV WKH PDJLVWUDWH MXGJHjV
  ,QVWHDGKHWHVWLILHGWKDW,QWHJUDWHGjVVWDIIPDQDJHGWKH           FRQFOXVLRQ WKDW ,QWHJUDWHG H[HUFLVHG VXFK FRQWURO DQG
  DFFRXQWLQJ DFWLYLWLHV  0U sXQJ DWWHPSWHG WR LGHQWLI\       GRPLQLRQRYHU,&&WKDW,&&ZDVDGXPP\FRUSRUDWLRQIRU
  FHUWDLQPDUNHWLQJIXQFWLRQVWKDWZHUHSHUIRUPHGE\,&&              ,QWHJUDWHGWKHUHE\PDNLQJ,QWHJUDWHGERWKWKHJXDUDQWRUDQG
  DVHVVHQWLDOO\DmZKROHVDOHUlWKDWSUHVHQWHGSDFNDJHVWR            SD\HHLQWKHWKUHHSDUW\VDOHOHDVHEDFNWUDQVDFWLRQDWLVVXH,Q
  ,QWHJUDWHGjVHTXLW\VDOHVJURXS+RZHYHU0UsXQJWKHQ            VXP ZH EHOLHYH WKDW WKH PDJLVWUDWH MXGJH ZDV FRUUHFW LQ
  H[SODLQHG WKDW D ZKROHVDOHU JURXS ZLWKLQ ,QWHJUDWHG           FRQFOXGLQJWKDWWKH3OHGJHUVZHUHQRWmDWULVNlRILQFXUULQJ
  SHUIRUPHGWKHVHWDVNV                                              DQ\ORVVHVIURPWKHLQYHVWPHQWLQWKH7UXVWHYHQLILWSURYHG
                                                                      WREHXQSURILWDEOHEHFDXVHDQ\GHEWVWKDWWKH\RZHGWR,&&
  7KH&RXUWILQGVWKDW,&&GLGQRWDFWLQGHSHQGHQWO\            WKURXJK WKH 7UXVW ZRXOG EH FDQFHOHG RXW E\ ,QWHJUDWHGjV
  ,QVWHDGLWVIXQFWLRQVZHUHUHYLHZHGE\RWKHU,QWHJUDWHG            JXDUDQW\RI,(/&jVREOLJDWLRQVWRWKH7UXVW
  JURXSVDQGLWZDVPDQDJHGDVDGLYLVLRQRI,QWHJUDWHG
                                                                            $6L[WK&LUFXLW,QWHUSUHWDWLRQRIm$W5LVNl
s$DWFLWDWLRQVRPLWWHG
                                                                        6HFWLRQDRIWKH,QWHUQDO5HYHQXH&RGHSURYLGHV
   :H KROG WKDW WKHVH IDFWXDO ILQGLQJV DUH QRW FOHDUO\        WKDWDWD[SD\HUZKRLVHQJDJHGLQFHUWDLQGHVLJQDWHGDFWLYLWLHV
HUURQHRXVEHFDXVHWKHUHLVVXIILFLHQWHYLGHQFHLQWKHUHFRUGWR       PD\GHGXFWORVVHVRFFXUULQJIURPWKHVHDFWLYLWLHVRQO\WRWKH
VXSSRUWDOORIWKHP7REHJLQWKH&RQILGHQWLDO0HPRUDQGXP           H[WHQWWKDWWKHWD[SD\HULVmDWULVNlIRUVXFKDFWLYLWLHVDWWKH
IRUWKH7UXVWUHYHDOVWKDW,&&jVWRWDODVVHWVDVRI1RYHPEHU          FORVHRIDWD[DEOH\HDU86&D(TXLSPHQW
  LQFOXGHG RQO\  LQ FDVK DQG D        OHDVLQJZKLFKLVWKHW\SHRIDFWLYLW\LQYROYHGLQWKLVFDVH
GHPDQGSURPLVVRU\QRWHIURP,QWHJUDWHGjVSXUFKDVHRI,&&jV            FRPHVZLWKLQWKHWHUPVRI86&F&
FRPPRQ VWRFN  s$ DW  6DWHOOLWH (TXLSPHQW 7UXVW $
&RQILGHQWLDO0HPRUDQGXPm%DODQFH6KHHWRI,&&lDW                 8QGHU  E D WD[SD\HU LV mDW ULVNl IRU DPRXQWV RI
$GGLWLRQDOO\ WKH PDJLVWUDWH MXGJHjV FRQFOXVLRQ WKDW DOO RI    PRQH\DQGWKHDGMXVWHGEDVLVRIRWKHUSURSHUW\FRQWULEXWHGE\
3OHGJHUjVSD\PHQWVRQKLV,&&QRWHZHUHVHQWWR,QWHJUDWHGjV          WKH WD[SD\HU WR WKH GHVLJQDWHG DFWLYLW\   86&
SODFHRIEXVLQHVVDQGZHUHXOWLPDWHO\UHFHLYHGE\,QWHJUDWHG          E$$WD[SD\HULVDOVRmDWULVNlIRUDPRXQWVRI
LV VXSSRUWHG E\ SKRWRFRSLHV RI ELOOLQJ VWDWHPHQWV IURP         PRQH\ERUURZHGIRUXVHLQWKHDFWLYLW\WRWKHH[WHQWWKDWKHLV
,QWHJUDWHGWR3OHGJHUZKLFKGRQRWKDYH,&&jVQDPHRQWKHP           SHUVRQDOO\OLDEOHIRUWKHUHSD\PHQWRIVXFKDPRXQWVRUWRWKH
DQG ZKLFK UHTXLUH WKDW TXHVWLRQV DQG FRUUHVSRQGHQFH EH         H[WHQWWKDWKHKDVSOHGJHGSURSHUW\RWKHUWKDQWKHSURSHUW\
GLUHFWHGWR,QWHJUDWHG6XFKFRQFOXVLRQLVDOVRVXSSRUWHGE\         XVHGLQWKHDFWLYLW\DVVHFXULW\IRUVXFKERUURZHGDPRXQWV
SKRWRFRSLHVRIFKHFNVIURP3OHGJHUZKLFKZHUHVHQWWRWKH            86&E$WD[SD\HUKRZHYHULVQRWmDWULVN
7UXVW mFRl ,QWHJUDWHG  s$ DW   )XUWKHUPRUH WKH   ZLWK UHVSHFW WR DPRXQWV SURWHFWHG DJDLQVW ORVV WKURXJK
PDJLVWUDWHMXGJHjVFRQFOXVLRQVWKDW,&&ZDVORFDWHGDWWKH            QRQUHFRXUVHILQDQFLQJJXDUDQWHHVVWRSORVVDJUHHPHQWVRU
RIILFHV RI ,QWHJUDWHG DQG WKDW ,&& DQG ,QWHJUDWHG KDYH DQ    RWKHUVLPLODUDUUDQJHPHQWVl86&E
RYHUODSLQRIILFHUVGLUHFWRUVDQGSHUVRQQHODUHVXSSRUWHGE\
sXQJjV GHSRVLWLRQ WHVWLPRQ\ WKDW ,&& ZDV ORFDWHG DW              7KH6L[WK&LUFXLWKDVDQDO\]HGWKHmDWULVNlSURYLVLRQVLQ
,QWHJUDWHGjVRIILFHVDQGWKDWDOORI,&&jVRIILFHUVDQGGLUHFWRUV     ZLWKUHVSHFWWRDWKUHHSDUW\VDOHOHDVHEDFNWUDQVDFWLRQ
                                                                      LQ RQO\ WZR SXEOLVKHG RSLQLRQV  6HH 0DUWXFFLR Y
                                                                      &RPPLVVLRQHU  )G   WK &LU 
                                                                      (PHUVKDZY&RPPLVVLRQHU)GWK&LU,Q
                                                                     WKHVHFDVHVWKH6L[WK&LUFXLWUHMHFWHGWKHUHDVRQLQJRIHYHU\
     ,&& ZDV LQFRUSRUDWHG LQ 1RYHPEHU 
     3OHGJHUHWDOY8QLWHG6WDWHV        1RV        1RV         3OHGJHUHWDOY8QLWHG6WDWHV       

RWKHUFLUFXLWDGGUHVVLQJWKLVLVVXHZKLFKKHOGWKDWWKHFLUFXODU        VHQW ODWH QRWLFHV RQ LWV RZQ ELOOLQJ VWDWHPHQWV DQG WKH
RIIVHWWLQJ VWUXFWXUH RI SD\PHQWV LQ D WKUHHSDUW\                 VWDWHPHQWVSURYLGHGWKDWTXHVWLRQVDQGFRUUHVSRQGHQFH
VDOHOHDVHEDFN WUDQVDFWLRQ LV VXIILFLHQW WR WULJJHU WKH           VKRXOGEHGLUHFWHGWR,QWHJUDWHG
EH[FHSWLRQIURPmDWULVNlWUHDWPHQWIRUQRWHVWKDW
ZLOOEHSDLGWKURXJKDFLUFOHRISD\PHQWV6HHHJ:DWHUVY        ,&&LVORFDWHGDWWKHRIILFHVRI,QWHJUDWHG5HVRXUFHV
&RPPLVVLRQHU)GG&LUFHUW
GHQLHG86<RXQJY&RPPLVVLRQHU                  ,&& DQG ,QWHJUDWHG KDYH DQ RYHUODS LQ RIILFHUV
)GWK&LU0RVHUY&RPPLVVLRQHU                GLUHFWRUVDQGSHUVRQQHO$OOWKHRIILFHUVDQGGLUHFWRUVRI
 )G   	 Q WK &LU  $PHULFDQ           ,&& ZHUH HPSOR\HHV RI ,QWHJUDWHG  ,Q IDFW RQO\ RQH
3ULQFLSDOV/HDVLQJ&RUSY8QLWHG6WDWHV)G           RIILFHU RI ,&& ZDV QRW DOVR DQ RIILFHU RI ,QWHJUDWHG
 WK &LU   8QOLNH WKHVH FRXUWV ZKLFK XVH DQ        2WKHUWKDQRIILFHUV,&&GLGQRWKDYHDQ\HPSOR\HHV
HFRQRPLFUHDOLW\WHVWWRGHWHUPLQHZKHWKHUDWUDQVDFWLRQLV
VWUXFWXUHGVXFKWKDWLWUHPRYHVDQ\UHDOLVWLFSRVVLELOLW\WKDW            ,QWHJUDWHG ZDV LQWHJUDOO\ LQYROYHG LQ VHWWLQJ XS
WKHWD[SD\HUZLOOVXIIHUDQHFRQRPLFORVVLIWKHWUDQVDFWLRQ            6DWHOOLWH(TXLSPHQW7UXVW$m7KHXQGHUO\LQJHTXLSPHQW
WXUQV RXW WR EH XQSURILWDEOH WKH 6L[WK &LUFXLW DSSOLHV WKH    OHDVLQJWUDQVDFWLRQZDVGHYHORSHGWKURXJKWKH1HZ
mSD\RURIODVWUHVRUWlWHVWDQGDVNVZKHWKHULQDZRUVWFDVH           <RUN PDUNHWLQJ VWDIIl  ,QWHJUDWHGjV OHDVH PDUNHWLQJ
VFHQDULRWKHLQGLYLGXDOWD[SD\HUZLOOVXIIHUDQ\SHUVRQDORXW        JURXS VROLFLWHG YDUL>RXV@ SRWHQWLDO FOLHQWV OLNH $%&
RISRFNHWH[SHQVHV6HH(PHUVKDZ)GDW7KLV            ORRNLQJIRUDWUDQVDFWLRQ>@WKDWWKH\FRXOGVWUXFWXUH2QFH
DQDO\VLVUHJDUGLQJZKHWKHUDWD[SD\HULVmDWULVNlZLWKLQWKH           WKH SURGXFW ZDV LGHQWLILHG    ,QWHJUDWHGjV HTXLW\
PHDQLQJRIEZDVILUVWDGRSWHGE\WKH6L[WK&LUFXLWLQ           PDUNHWLQJJURXSZDVLQYROYHGLQVWUXFWXULQJWKH7UXVW
(PHUVKDZ DQG ZDV ODWHU IROORZHG E\ WKLV FRXUW LQ
0DUWXFFLR                                                             ,&&DQG,QWHJUDWHGGLGQRWGHDOZLWKHDFKRWKHUDW
                                                                        DUPVOHQJWK,QRXWOLQLQJLWVFRQIOLFWVRILQWHUHVWLQWKH
  ,Q(PHUVKDZ&,6/HDVLQJ&RUSRUDWLRQm&,6lSXUFKDVHG                RIIHULQJV PHPRUDQGXP ,QWHJUDWHG GLVFORVHG WKDW mWKH
FRPSXWHUV DQG FRPSXWHU SHULSKHUDOV IURP WKH ,%0                   WHUPVRIWKHDJUHHPHQWVDQGRWKHULQVWUXPHQWVUHIHUUHGWR
&RUSRUDWLRQ m,%0l IRU   7R ILQDQFH WKHVH            KHUHLQLQFOXGLQJWKH0DVWHU/HDVHDQGWKH%HQHILFLDU\
SXUFKDVHV&,6WRRNRXWDQXPEHURIQRQUHFRXUVHEDQNORDQV             1RWHVDQGWKHFRPSHQVDWLRQWREHSDLGWR,&&DQGLWV
$IWHUOHDVLQJWKHHTXLSPHQWWRHQGXVHUV&,6WKHQVROGWKH             $IILOLDWHVKDYHEHHQRUZLOOEHHVWDEOLVKHGE\,QWHJUDWHG
HTXLSPHQWIRUWR3URJUDP/HDVLQJ&RUSRUDWLRQ                 DQGDUHQRWDQGZLOOQRWEHWKHUHVXOWRIDUPjVOHQJWK
m3URJUDPlZKLFKSDLGLQFDVKDVDGRZQSD\PHQW              QHJRWLDWLRQVDPRQJLQGHSHQGHQWSDUWLHV>@l
DQGSDLGWKHEDODQFHRIWKHSXUFKDVHSULFHZLWKDQLQVWDOOPHQW
QRWH(PHUVKDZ)GDW3URJUDPWKHQVROGWKH                ,&&ZDVIRUPHGWRSURYLGHILQDQFLQJWRLQYHVWRUV
HTXLSPHQWIRUWR/($LQZKLFKWKH(PHUVKDZV                 7KHWHUPVRIWKHSURPLVVRU\QRWHVWKDWLQYHVWRUVLVVXHG
ZHUHSDUWQHUV)RULWVSXUFKDVH/($SDLGDVPDOOFDVKGRZQ           WR,&&ZHUHQHJRWLDWHGEHWZHHQLQYHVWRUjVFRXQVHODQG
SD\PHQWDQGJDYH3URJUDPDSDUWLDOUHFRXUVHLQVWDOOPHQWQRWH            PHPEHUVRI,QWHJUDWHGjVHTXLSPHQWOHDVHJURXS
HTXDO WR WKH LQVWDOOPHQW QRWH 3URJUDP KDG JLYHQ &,6              ,&& GLG QRW KDYH DQ\ GLVFUHWLRQ LQ LWV DFWLYLWLHV
(PHUVKDZ)GDW                                           ,QVWHDG ,QWHJUDWHG GRPLQDWHG DQGRU RYHUVDZ DOO
  /($WKHQOHDVHGWKHHTXLSPHQWEDFNWR&,6IRUPRQWKO\                 HVVHQWLDO DFWLYLWLHV  $OWKRXJK 0U sXQJ WHVWLILHG WKDW
UHQWDOSD\PHQWVHTXDOWRWKHPRQWKO\SD\PHQWV/($RZHGRQ               ,&&jV RIILFHUV DQG GLUHFWRUV FRQWUROOHG WKH GD\WRGD\
                                                                        RSHUDWLRQV RI ,&& KH GLG QRW LGHQWLI\ DQ\ RI WKH
    3OHGJHUHWDOY8QLWHG6WDWHV        1RV      1RV         3OHGJHUHWDOY8QLWHG6WDWHV        

JXDUDQWHHVE\WKHSDUHQWIRUWKHEHQHILWRIWKHVXEVLGLDU\DQG      LWVQRWHWR3URJUDP$GGLWLRQDOO\&,6jVUHQWDOSD\PHQWVWR
ZKHWKHUWKHVXEVLGLDU\XVHVWKHSURSHUW\RIWKHSDUHQWDV       /($ ZHUH JXDUDQWHHG E\ &,6jV SDUHQW &RQWLQHQWDO
LILWZHUHLWVRZQl6WHUOLQJ)5'DWFLWLQJ:P         ,QIRUPDWLRQ6\VWHPVm&RQWLQHQWDOl$OOSD\PHQWVRQWKH
3DVVDODFTXD%XLOGHUV,QFY5HVQLFN'HYHORSHUV6,QF       OHDVHDQGYDULRXVQRWHVZHUHPDGHE\RIIVHWWLQJERRNNHHSLQJ
)GG&LUDQDO\]LQJ1HZ<RUNODZVHH          HQWULHVSXUVXDQWWROHWWHUDJUHHPHQWVEHWZHHQWKHSDUWLHVVR
DOVR3RUWHUY/6%,QGXV,QF1<6G1<         WKDWQRDFWXDOH[FKDQJHRIPRQH\RFFXUUHG(PHUVKDZ
$SS 'LY   $V D JHQHUDO PDWWHU EHFDXVH D            )GDW
mGHWHUPLQDWLRQRIGRPLQDWLRQDQGFRQWUROE\WKHSDUHQWRYHU
WKHGDLO\RSHUDWLRQVRIDVXEVLGLDU\lRIWHQUHTXLUHVZHLJKLQJ           ,Q(PHUVKDZWKH6L[WK&LUFXLWDIILUPHGWKHGHFLVLRQRIWKH
DQG DVVHVVLQJ WKH HYLGHQFH SUHVHQWHG VXFK GHFLVLRQ mLV       7D[&RXUWZKLFKIRXQGWKDWWKH(PHUVKDZVZHUHmDWULVNl
XVXDOO\DPDWWHUIRUWKHWULHURIIDFWl6WHUOLQJ)5'DW    XQGHUIRUWKHLUSURUDWDVKDUHRI/($jVSDUWLDOUHFRXUVH
                                                                 QRWHEHFDXVHWKH\ZHUHWKHSD\RUVRIODVWUHVRUW7KHSDQHO
                                                                     H[SODLQHG WKDW LQ WKH ZRUVW FDVH VFHQDULR ZKHUH &,6 ZHQW
   ,Q WKLV FDVH WKH PDJLVWUDWH MXGJH PDGH WKH IROORZLQJ     EDQNUXSW UHQRXQFHG LWV OHDVH DQG VWRSSHG PDNLQJ UHQWDO
ILQGLQJVRIIDFWUHJDUGLQJWKHTXHVWLRQRIZKHWKHU,&&LVD          SD\PHQWV WR /($ /($ SDUWQHUV VXFK DV WKH (PHUVKDZV
PHUHLQVWUXPHQWDOLW\RI,QWHJUDWHG                                  ZRXOG VWLOO EH UHTXLUHG WR SD\ 3URJUDP WKH EDODQFH RI WKH
                                                                     SDUWLDOUHFRXUVHQRWHLVVXHGWR3URJUDP$VDUHVXOWWKHSDQHO
  ,QWHJUDWHGH[HFXWHGDJXDUDQW\WR,&&JXDUDQW\LQJ             FRQFOXGHG WKDW WKH (PHUVKDZV ZHUH mDW ULVNl ZLWKLQ WKH
  UHQWSD\PHQWVXQGHUWKHPDVWHUOHDVHDJUHHPHQW7KLV              PHDQLQJRI7KHSDQHOIXUWKHUKHOGWKDWWKHUHGLGQRW
  JXDUDQW\ LQXUHG WR WKH EHQHILW RI 3ODLQWLIIV SHU WKH      H[LVW D ORVVOLPLWLQJ DUUDQJHPHQW ZLWKLQ WKH PHDQLQJ RI
  JXDUDQWHH DV 0U 3OHGJHU ZDV D WUDQVIHUHH RI WKH           E WKURXJK mD FROODWHUDO DJUHHPHQW SURWHFWLQJ D
  HTXLSPHQWOHDVHG,QIDFWRQHRIWKHLQYHVWRUEHQHILWV           WD[SD\HUIURPORVVDIWHUWKHORVVHVKDYHRFFXUUHGHLWKHUE\
  OLVWHG LQ WKH OLWHUDWXUH SURYLGHG WR SRWHQWLDO LQYHVWRUV    H[FXVLQJKLPIURPKLVREOLJDWLRQWRPDNHJRRGRQORVVHVRU
  LQFOXGHGmJXDUDQWHHGUHQWDOREOLJDWLRQVl                          E\ FRPSHQVDWLQJ KLP IRU ORVVHV KH KDV VXVWDLQHGl
                                                                     (PHUVKDZ)GDW
                              

                                                                       ,QUHYLHZLQJWKH3OHGJHUVjFODLPLQWKLVFDVHZHEHOLHYH
    ,&&jV LQLWLDO FDSLWDOL]DWLRQ LQFOXGHG RQO\  LQ    DQGWKHSDUWLHVDJUHHWKDWLI,&&ZHUHDPHUHLQVWUXPHQWDOLW\
  FDVKIURP,QWHJUDWHGjVSXUFKDVHRIDOOLWVFRPPRQVWRFN          RI ,QWHJUDWHG DV LV DUJXHG E\ WKH ,56 WKHQ WKLV FDVH LV
  DQG D  GHPDQG SURPLVVRU\ QRWH IURP                  GLVWLQJXLVKDEOHIURP(PHUVKDZLQRQHLPSRUWDQWUHVSHFW,Q
  ,QWHJUDWHG                                                        (PHUVKDZLI&,6ZKRRZHGSD\PHQWVWR/($DQGWKXVWKH
                                                                     (PHUVKDZVEHFDPHLQVROYHQWDQGWKHJXDUDQWRU&RQWLQHQWDO
  3ODLQWLII6WHSKHQ3OHGJHU>j@VSD\PHQWVRILQWHUHVWRQ         DOVR ZHQW EDQNUXSW RU UHIXVHG WR KRQRU LWV JXDUDQW\ /($
  WKH,&&QRWHVZHUHXOWLPDWHO\UHFHLYHGE\,QWHJUDWHGQRW          ZRXOGVWLOOKDYHWRPDNHLWVSD\PHQWVWR3URJUDPXQGHUWKH
  ,&& $W OHDVW IRXU  RI 3ODLQWLIIjV LQVWDOOPHQW DQGRU   LQVWDOOPHQWQRWHWKHUHE\PDNLQJWKH(PHUVKDZVSDUWQHUVRI
  LQWHUHVWSD\PHQWVRQWKH,&&QRWHZHUHPDGHSD\DEOH                /($ SHUVRQDOO\ OLDEOH WR 3URJUDP IRU WKH SD\PHQWV /($
  GLUHFWO\WR,QWHJUDWHG2WKHUSD\PHQWVZHUHPDGHSD\DEOH           RZHGWR3URJUDP
  WR6DWHOOLWH(TXLSPHQW7UXVW$>Q@RW,&&DQGVHQWFR
  ,QWHJUDWHG$OOSD\PHQWVZHUHVHQWWR,QWHJUDWHGjVSODFH             ,Q WKH 3OHGJHUVj FDVH KRZHYHU LI ,&& ZHUH D PHUH
  RI EXVLQHVV  ,&& LV QRW LGHQWLILHG DQ\ZKHUH RQ WKH       LQVWUXPHQWDOLW\ RI LWV SDUHQW ,QWHJUDWHG WKHQ ,QWHJUDWHG
  FKHFNVRUWKHELOOLQJVWDWHPHQWV,QDGGLWLRQ,QWHJUDWHG
    3OHGJHUHWDOY8QLWHG6WDWHV          1RV         1RV         3OHGJHUHWDOY8QLWHG6WDWHV       

ZKLFK JXDUDQWHHG WKH SD\PHQWV WKDW ,(/& ZDV UHTXLUHG WR           WKHHYLGHQFHWKHIDFWILQGHUjVFKRLFHEHWZHHQWKHPFDQQRWEH
PDNHWRWKH7UXVWRIZKLFK3OHGJHUZDVDQLQYHVWRUZRXOG               FOHDUO\HUURQHRXVl$QGHUVRQ86DW
DOVREHWKHSD\HHRI3OHGJHUjVQRWHXQGHUZKLFK3OHGJHUZDV
UHTXLUHGWRPDNHSD\PHQWVWR,&&ZKLFKKDGDQREOLJDWLRQ                    ,QWKLVFDVHWKH7UXVWGRFXPHQWVUHTXLUHWKDWZHORRNWR
WR ,(/&  ,Q RWKHU ZRUGV LI ,(/& IDLOHG WR PHHW LWV UHQWDO   1HZ<RUNODZLQGHWHUPLQLQJWKHUHODWLRQVKLSEHWZHHQ,&&
REOLJDWLRQVWRWKH7UXVWDQG,QWHJUDWHGZHQWEDQNUXSWRUIDLOHG           DQG,QWHJUDWHG8QGHU1HZ<RUNODZDVXEVLGLDU\FRPSDQ\
WRKRQRULWVREOLJDWLRQDVJXDUDQWRURI,(/&jVSD\PHQWVWRWKH            LV QRW GHHPHG DQ LQVWUXPHQWDOLW\ RU DJHQW RI D SDUHQW
7UXVW ZKLFK UHFHLYHG LWV ULJKWV WR WKH WUDQVSRQGHUV IURP         FRUSRUDWLRQ VROHO\ EHFDXVH WKH SDUHQW FRPSDQ\ RZQV WKH
,&& 3OHGJHUjV REOLJDWLRQV WR ,&& ZRXOG EH VHW RII E\           VXEVLGLDU\jV VWRFN  $: )LXU &R Y $WDND 	 &R 
,QWHJUDWHGjVJXDUDQW\RI,(/&jVSD\PHQWVWRWKH7UXVWZKHUH               1<6G1<$SS'LY7RmSLHUFHWKH
,&& WKH SD\HH RI 3OHGJHUjV SD\PHQWV ZDV D PHUH                  FRUSRUDWHYHLOlDQGKROGDSDUHQWFRPSDQ\OLDEOHIRUWKHDFWV
LQVWUXPHQWDOLW\RI,QWHJUDWHG7KHUHIRUH3OHGJHUXQOLNHWKH            RILWVVXEVLGLDU\ZHPXVWFRQFOXGHWKDWWKHSDUHQWFRPSDQ\
(PHUVKDZVFRXOGQHYHUEHWKHSD\RURIODVWUHVRUW                       HVVHQWLDOO\H[HUFLVHGFRQWURORYHUWKHGD\WRGD\RSHUDWLRQVRI
                                                                          LWV VXEVLGLDU\ VXFK WKDW WKH VXEVLGLDU\ KDG EHFRPH D PHUH
  ,QVXPHYHQLI,(/&EHFDPHLQVROYHQWWKH3OHGJHUVZRXOG               LQVWUXPHQWDOLW\RIWKHSDUHQW6WHUOLQJY,QWHUODNH,QGXV,QF
QHYHUVXIIHUDQ\ILQDQFLDOORVVHVDVDUHVXOWRIGHEWVRZHGWR            )5'('1<FLWLQJ%LOO\Y&RQVRO
,&&EHFDXVH,QWHJUDWHGKDGJXDUDQWHHG,(/&jVREOLJDWLRQV                 0DFK7RRO&RUS1<6G1<VHH
$V,&&ZDVHVVHQWLDOO\WKHVDPHFRPSDQ\DV,QWHJUDWHGDQ\                DOVR3ULWFKDUG6HUYV,QFY)LUVW:LQWKURS3URSV,QF
GHEWV WKDW 3OHGJHU RZHG WR ,&& ZRXOG EH FDQFHOHG RXW E\         1<6G1<$SS'LY$OWKRXJKPHUH
,QWHJUDWHGjV SURPLVH WR FRYHU WKH SD\PHQWV ,(/& RZHG WR           RZQHUVKLSGRHVQRWJLYHULVHWRLQVWUXPHQWDOLW\VWDWXVZKHQ
3OHGJHUWKURXJKWKH7UXVW&RQVHTXHQWO\WKHRXWFRPHRIWKLV             D SDUHQW H[HUFLVHV VXFK FRQWURO RYHU WKH VXEVLGLDU\ WKDW LW
FDVHWXUQVXSRQRXUUHYLHZRIWKHPDJLVWUDWHMXGJHjVGHFLVLRQ             HVVHQWLDOO\ XVHV WKH VXEVLGLDU\ IRU LWV RZQ SXUSRVHV
UHJDUGLQJ ZKHWKHU ,&& ZDV PHUHO\ DQ LQVWUXPHQWDOLW\ RI             LQVWUXPHQWDOLW\LVIRXQG6HH6WHUOLQJ)5'DW
,QWHJUDWHG                                                               m7KH GHWHUPLQDWLYH IDFWRU LV ZKHWKHU WKH VXEVLGLDU\
                                                                          FRUSRUDWLRQ LV D GXPP\ IRU WKH SDUHQW FRUSRUDWLRQl $:
     %5HODWLRQVKLS%HWZHHQ3DUHQWDQG6XEVLGLDU\                       )LXU1<6GDWVHHDOVR3ULWFKDUG1<6G
                                                                          DW
   :HUHYLHZDORZHUFRXUWjVIDFWXDOILQGLQJVIRUFOHDUHUURU
DQG LWV OHJDO FRQFOXVLRQV GH QRYR $QGHUVRQ Y &LW\ RI               ,Q GHWHUPLQLQJ ZKHWKHU D VXEVLGLDU\ LV PHUHO\ DQ
%HVVHPHU &LW\  86     $V D JHQHUDO          LQVWUXPHQWDOLW\RILWVSDUHQWWKHIDFWILQGHUVKRXOGFRQVLGHUWKH
PDWWHUZHGRQRWILQGWKHIDFWXDOGHWHUPLQDWLRQVRIDORZHU              IROORZLQJIDFWRUVmWKHDEVHQFHRIFRUSRUDWHIRUPDOLWLHV
FRXUW WR EH FOHDUO\ HUURQHRXV XQOHVV ZH DUH mOHIW ZLWK WKH          LQDGHTXDWH FDSLWDOL]DWLRQ  ZKHWKHU IXQGV DUH
GHILQLWH DQG ILUP FRQYLFWLRQ WKDW D PLVWDNH KDV EHHQ              WUDQVIHUUHGWRWKHSDUHQWIRUWKHSDUHQWjVXVHRYHUODSLQ
FRPPLWWHGl$QGHUVRQ86DWTXRWDWLRQRPLWWHG               RZQHUVKLS RIILFHUV GLUHFWRUV DQG SHUVRQQHO  FRPPRQ
:KHQ UHYLHZLQJ IRU FOHDU HUURU ZH FDQQRW VXEVWLWXWH RXU          RIILFHVSDFHDGGUHVVDQGWHOHSKRQHQXPEHUVRIWKHFRUSRUDWH
MXGJPHQWIRUWKDWRIWKHORZHUFRXUWEXWUDWKHUPXVWXSKROG               HQWLWLHVWKHDPRXQWRIEXVLQHVVGLVFUHWLRQGLVSOD\HGE\
WKHORZHUFRXUWjVDFFRXQWRIWKHHYLGHQFHLILWmLVSODXVLEOHLQ          WKH DOOHJHGO\ GRPLQDWHG FRPSDQ\  ZKHWKHU WKH
OLJKWRIWKHUHFRUGYLHZHGLQLWVHQWLUHW\l$QGHUVRQ86          FRUSRUDWLRQVGHDOZLWKHDFKRWKHUDWDUPVOHQJWKZKHWKHU
DW,QGHHGm>Z@KHUHWKHUHDUHWZRSHUPLVVLEOHYLHZVRI              WKH DOOHJHGO\ GRPLQDWHG FRUSRUDWLRQ LV WUHDWHG DV DQ
                                                                          LQGHSHQGHQW SURILW FHQWHU  WKH SD\PHQW RI GHEWV DQG