Court Opinion

ID: 2969855
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:58:49.991382+00
Date Added: 2024-06-11T12:03:29.567432
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
    ,QUH$GPLQLVWUDWLYH6XESRHQD                 1R                       3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

                                                                              (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU

DVVHUWHG E\ D SODLQWLII PD\ QRW EH EDVHG RQ WKH LPSURSHU                        )LOH 1DPH DS

PRWLYHVRIDQLQGLYLGXDODJHQF\HPSOR\HHEXWLQVWHDGPXVW
EH IRXQGHG XSRQ HYLGHQFH WKDW WKH DJHQF\ LWVHOI LQ DQ
LQVWLWXWLRQDO VHQVH DFWHG LQ EDG IDLWK ZKHQ LW VHUYHG WKH   81,7('67$7(6&28572)$33($/6
VXESRHQD/D6DOOH86                                         )257+(6,;7+&,5&8,7
   'RHDVVHUWVWKDWEHFDXVHWKLVLVWKHWKLUGVXESRHQDVHUYHG                             BBBBBBBBBBBBBBBBB
WRKLPLQWZR\HDUVLWFRQVWLWXWHVKDUDVVPHQW:KLOHZHDUH
WURXEOHGE\WKHIDFWWKDWWKHJRYHUQPHQWDIWHUWZR\HDUVRI
LQYHVWLJDWLRQ DQG WZR VXESRHQDV KDV QRZ LPSRVHG \HW            ,QUH$'0,1,675$7,9(            ;
DQRWKHU GRFXPHQW UHTXHVW RQ 'RH 'RH KDV SURIIHUHG QR          68%32(1$                           
HYLGHQFHQRULVWKHUHDQ\LQWKHUHFRUGWKDWZRXOGVXSSRUWD                                            
FRQFOXVLRQ WKDW WKH '2s ZDV PRWLYDWHG E\ DQ LPSURSHU                                                1R
SXUSRVHZKHQLVVXLQJWKLVVXESRHQD'RHKDVQRWPHWKLV               s2+1 '2( '30                  
mKHDY\lEXUGHQRIVKRZLQJLQVWLWXWLRQDOEDGIDLWKLQWKLVFDVH                  3HWLWLRQHU$SSHOODQW !
                                                                                                          
/D6DOOH86DW                                                                                 
                                                                                   Y                     
                     ,,,&21&/86,21                                                                     
  7KXV EHFDXVH DOO WKH UHTXLUHPHQWV IRU HQIRUFLQJ DQ           81,7(' 67$7(6 2) $0(5,&$ 
DGPLQLVWUDWLYH VXESRHQD KDYH EHHQ PHW LQ WKLV FDVH ZH                  5HVSRQGHQW$SSHOOHH 
$)),50 WKH GLVWULFW FRXUWjV GHFLVLRQ HQIRUFLQJ WKH                                                  
DGPLQLVWUDWLYHVXESRHQD                                                                                 1
                                                                              $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
                                                                             IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG
                                                                       1R0&n3DWULFLD$*DXJKDQ'LVWULFWsXGJH
                                                                                           $UJXHG$SULO
                                                                                     'HFLGHGDQG)LOHGsXQH
                                                                        %HIRUH6,/(5DQG0225(&LUFXLWsXGJHV67$**
                                                                                          'LVWULFWsXGJH

                                                                          
                                                                           7KH +RQRUDEOH 7RP 6WDJJ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
                                                                      :HVWHUQ 'LVWULFW RI /RXLVLDQD VLWWLQJ E\ GHVLJQDWLRQ

                                                                                                         
     ,QUH$GPLQLVWUDWLYH6XESRHQD                 1R       1R                ,QUH$GPLQLVWUDWLYH6XESRHQD          

                     BBBBBBBBBBBBBBBBB                                SUHVXPDEO\ WKH VRXUFH RI WKDW PRQH\ ZDV KLV KHDOWKFDUH
                                                                      EXVLQHVVls$DW'2s/HWWHUWR'RHjV$WWj\
                          &2816(/
                                                                         $V KLV DWWRUQH\ DFNQRZOHGJHG DW RUDO DUJXPHQW 'RHjV
$5*8('/HRQDUG:<HOVN\<(/6.<	/21$5'2                         FKLOGUHQ DUH PLQRUV  sXVW DV 'RH FRXOG HDVLO\ FRPPLQJOH
&OHYHODQG 2KLR IRU $SSHOODQW  6XERGK &KDQGUD                DVVHWVEHWZHHQKLVSHUVRQDODQGEXVLQHVVILQDQFLDODFFRXQWV
$66,67$1781,7('67$7(6$77251(<&OHYHODQG                          VR DOVR FRXOG KH WUDQVIHU LOOJRWWHQ JDLQV LQWR WKH SHUVRQDO
2KLR IRU $SSHOOHH  21 %5,()  /HRQDUG : <HOVN\           DFFRXQWV RI KLV XQVXVSHFWLQJ PLQRU FKLOGUHQ  %HFDXVH WKH
<(/6.< 	 /21$5'2 &OHYHODQG 2KLR IRU $SSHOODQW               JRYHUQPHQWKDVEHHQFDUHIXOWRDYRLGDVZHHSLQJH[SORUDWLRQ
6XERGK &KDQGUD $66,67$17 81,7(' 67$7(6                           RI'RHjVFKLOGUHQjVDVVHWVZHKROGWKDWWKHOLNHO\UHOHYDQFHRI
$77251(<&OHYHODQG2KLRIRU$SSHOOHH                            WKHVH GRFXPHQWV WR WKH JRYHUQPHQWjV KHDOWK FDUH IUDXG
                                                                      LQYHVWLJDWLRQ RXWZHLJKV WKH FKLOGUHQjV KHLJKWHQHG SULYDF\
                     BBBBBBBBBBBBBBBBB                                LQWHUHVWVLQJXDUGLQJWKLVLQIRUPDWLRQ'RHKDVPDGHQRRWKHU
                                                                      VKRZLQJRIZK\WKHSURGXFWLRQRIWKHVHGRFXPHQWVZRXOGEH
                         23,1,21                                      XQGXO\EXUGHQVRPHDQGDVVXPLQJWKHILQDOHOHPHQWVRIWKH
                     BBBBBBBBBBBBBBBBB                                UHDVRQDEOH UHOHYDQFH WHVW DUH PHW ZH ZLOO HQIRUFH WKH
                                                                      JRYHUQPHQWjVQDUURZO\WDLORUHGUHTXHVWIRUVSHFLILFSHUVRQDO
   .$5(1 1(/621 0225( &LUFXLW sXGJH  3HWLWLRQHU              ILQDQFLDOGRFXPHQWVEHORQJLQJWR'RHjVFKLOGUHQ
$SSHOODQW sRKQ 'RH m'RHl RU mSHWLWLRQHUl DSSHDOV WKH
GLVWULFW FRXUWjV RUGHU GHQ\LQJ KLV PRWLRQ WR TXDVK DQ           +DYLQJ FRQFOXGHG RXU DQDO\VLV RI WKH UHOHYDQFH RI WKH
DGPLQLVWUDWLYHVXESRHQDLVVXHGE\WKH'HSDUWPHQWRIsXVWLFH           UHTXHVWHGGRFXPHQWVWRWKHJRYHUQPHQWjVKHDOWKFDUHIUDXG
SXUVXDQW WR D KHDOWK FDUH IUDXG LQYHVWLJDWLRQ  'RH D       LQYHVWLJDWLRQZHQRZSURFHHGWRWKHUHPDLQLQJHOHPHQWVRI
SRGLDWULVW LV XQGHU LQYHVWLJDWLRQ IRU DQ DOOHJHG NLFNEDFN     WKHUHDVRQDEOHUHOHYDQFHWHVW
DUUDQJHPHQW ZLWK WZR PHGLFDO WHVWLQJ ODERUDWRULHV  7KH
DGPLQLVWUDWLYHVXESRHQDLVVXHGSXUVXDQWWRWKH'HSDUWPHQW                 ,VWKH ,QIRUPDWLRQWKH'2s6HHNV$OUHDG\LQ,WV
RI sXVWLFHjV DXWKRULW\ XQGHU   RI WKH +HDOWK ,QVXUDQFH          3RVVHVVLRQ"
3RUWDELOLW\	$FFRXQWDELOLW\$FWm+,3$$lRUGHUHG'RHWR
WXUQRYHUDQXPEHURIGRFXPHQWVLQFOXGLQJUHFRUGVUHODWLQJ            'RH GRHV QRW FRQWHQG WKDW WKH '2s DOUHDG\ KDV LQ LWV
WRKLVSURIHVVLRQDOHGXFDWLRQDQGHWKLFDOWUDLQLQJ SHUVRQDO         SRVVHVVLRQWKHGRFXPHQWVLWVHHNVWKURXJKWKLVVXESRHQDQRU
DQGEXVLQHVVILQDQFLDOUHFRUGVUHFRUGVHYLGHQFLQJDQ\DVVHW          LVWKHUHDQ\HYLGHQFHWKDWWKLVLVWKHFDVH
WUDQVIHUVE\'RHWRKLVFKLOGUHQDQGYDULRXVSDWLHQWILOHV
                                                                           :LOO (QIRUFLQJ WKH 6XESRHQD $EXVH WKH &RXUWjV
  :H $)),50 WKH GLVWULFW FRXUWjV RUGHU GHQ\LQJ 'RHjV                  3URFHVV"
PRWLRQWRTXDVKWKHDGPLQLVWUDWLYHVXESRHQDDQGFRPSHOOLQJ
FRPSOLDQFHWKHUHZLWK                                                   7KH 6XSUHPH &RXUW KDV VWDWHG WKDW D FRXUWjV SURFHVV LV
                                                                      DEXVHG ZKHUH WKH VXESRHQD LV mLVVXHG IRU DQ LPSURSHU
                     ,%$&.*5281'                                   SXUSRVHVXFKDVWRKDUDVVWKH>LQYHVWLJDWLRQjVWDUJHW@RUWRSXW
                                                                      SUHVVXUHRQKLPWRVHWWOHDFROODWHUDOGLVSXWHRUIRUDQ\RWKHU
  sRKQ 'RH '30 D SRGLDWULVW RSHUDWLQJ D FOLQLF LQ WKH   SXUSRVH UHIOHFWLQJ RQ WKH JRRG IDLWK RI WKH SDUWLFXODU
&OHYHODQGPHWURSROLWDQDUHDLVXQGHULQYHVWLJDWLRQE\WKH)%,        LQYHVWLJDWLRQl  3RZHOO  86 DW   )XUWKHUPRUH LQ
DQG D IHGHUDO JUDQG MXU\ IRU DQ DOOHJHG mNLFNEDFNl            8QLWHG6WDWHVY/D6DOOHWKH&RXUW KHOGWKDWDQ\EDGIDLWK
    ,QUH$GPLQLVWUDWLYH6XESRHQD                  1R       1R                ,QUH$GPLQLVWUDWLYH6XESRHQD           

     F'RHjV&KLOGUHQjV)LQDQFLDO5HFRUGV                            DUUDQJHPHQW ZLWK WZR PHGLFDO WHVWLQJ ODERUDWRULHV  0RUH
                                                                       VSHFLILFDOO\ LW LV DOOHJHG WKDW 'RH UHFHLYHG SD\PHQWV IURP
  ,QDGGLWLRQWR'RHjVSHUVRQDOILQDQFLDOUHFRUGVWKH'2sjV           WKHVH ODEV IRU UHIHUULQJ KLV SDWLHQWV WR WKHP IRU PHGLFDOO\
DGPLQLVWUDWLYH VXESRHQD DOVR UHTXHVWHG m>F@RSLHV RI UHFHQW       XQQHFHVVDU\ YDVFXODU DQG HOHFWURGLDJQRVWLF WHVWV  7KH
EDQNDQGRWKHUILQDQFLDOUHFRUGVVXIILFLHQWWRVKRZFXUUHQW            JRYHUQPHQWDOOHJHVWKDWWKHVHNLFNEDFNVZHUHGLVJXLVHGDV
ORFDWLRQ DPRXQW DQG YDOXH RI DOO DVVHWV IRU DQ\ DQG DOO    UHQWDOSD\PHQWVWKDWWKHODEVPDGHWR'RHIRUWKHSHULRGLFXVH
FKLOGUHQRI>sRKQ'RH@'30LQVRIDUDVWKRVHDVVHWVZHUH           RI RQH URRP LQ KLV FOLQLF  7KH JRYHUQPHQW KDV REWDLQHG
SURYLGHGRUGHULYHGIURPLQGLYLGXDORUMRLQWO\KHOGDVVHWVRI          GRFXPHQWV WKURXJK SUHYLRXV VXESRHQDV HYLGHQFLQJ OHDVH
sRKQ 'RH '30l  s$ DW  $GPLQ 6XESRHQD  7KH        DJUHHPHQWV ZLWK WKH ODEV WKDW VKRZ WKDW LQ OHVV WKDQ WKUHH
JRYHUQPHQWUHTXHVWVWKHVHGRFXPHQWVIRUPDQ\RIWKHVDPH               \HDUVDSSUR[LPDWHO\ZDVSDLGWR'RHIRUWKHXVHRI
UHDVRQV LW UHTXHVWHG 'RHjV SHUVRQDO DQG EXVLQHVV ILQDQFLDO      DVLQJOHURRPLQKLVFOLQLFIRUDIHZKRXUVHDFKPRQWK%\
GRFXPHQWVWRGHWHUPLQHWKHGHJUHHWRZKLFK'RHSURILWHG              FRQWUDVW'RHKLPVHOIRQO\SDLGDERXWLQUHQWIRUWKH
IURPWKLVSRWHQWLDOO\LOOHJDODFWLYLW\DQGWKHDVVHWVWKDWPD\        HQWLUHRIILFHRYHUWKDWVDPHSHULRGRIWLPH7KHJRYHUQPHQW
EHIRUIHLWDEOHDVDUHVXOW$SSHOOHHjV%UDW                     FODLPVWKDWEDVHGRQLQIRUPDWLRQGLVFRYHUHGWKXVIDU'RH
                                                                       PD\KDYHDLGHGRQH RI WKHODERUDWRULHVLQVXEPLWWLQJIDOVH
  :H DUH PRUH WURXEOHG E\ WKH JRYHUQPHQWjV UHTXHVW IRU         FODLPVDSSUR[LPDWLQJWRYDULRXVKHDOWKFDUHEHQHILW
SHUVRQDOILQDQFLDOGRFXPHQWVRIWKHFKLOGUHQRIWKHWDUJHWRI          SURJUDPV7KHVHSURJUDPVSDLGDSSUR[LPDWHO\RQ
D KHDOWK FDUH IUDXG LQYHVWLJDWLRQ  ,QGHHG LQ RWKHU           WKHFODLPV
DGPLQLVWUDWLYHVXESRHQDFDVHVWKH86&RXUWVRI$SSHDOVIRU
WKH6HFRQGDQG1LQWK&LUFXLWVKDYHUHFRJQL]HGWKDWIDPLO\                7KH JRYHUQPHQW DOVR KDV HYLGHQFH IURP LQGHSHQGHQW
PHPEHUV RI DQ LQYHVWLJDWLRQjV WDUJHW mKDYH D JUHDWHU            PHGLFDO H[SHUWV VWDWLQJ WKDW RQH RI WKH ODEV WR ZKLFK 'RH
UHDVRQDEOHH[SHFWDWLRQRISULYDF\LQWKHLUSHUVRQDOILQDQFLDO          UHIHUUHGSDWLHQWVZDVSHUIRUPLQJDJURVVO\H[FHVVLYHDPRXQW
DIIDLUVWKDQGRWKRVHLQGLYLGXDOVZKRGRSDUWLFLSDWHLQVXFK           RIHOHFWURGLDJQRVWLFWHVWLQJ)XUWKHUPRUHWKHJRYHUQPHQWKDV
PDWWHUVl0F9DQH)GDWTXRWDWLRQRPLWWHGVHH            HYLGHQFHWKDWRQHRIWKHPHGLFDOFRQGLWLRQVIRUZKLFK'RH
DOVR*DUQHU)GDW                                      UHIHUUHGKLVSDWLHQWVIRUIXUWKHUWHVWLQJFRXOGQRWKDYHEHHQ
                                                                       DFFXUDWHO\GLDJQRVHGE\WKLVODEjVWHFKQLFLDQVDVLWUHTXLUHG
  $OWKRXJKZHDUHPRUHUHOXFWDQWWRHQIRUFHWKLVDVSHFWRIWKH         PHGLFDOO\LQYDVLYHDQGQRQURXWLQL]HGWHVWLQJWHVWLQJZKLFK
DGPLQLVWUDWLYH VXESRHQD ZH EHOLHYH WKDW LW LV VXIILFLHQWO\     WKH2KLR6WDWH0HGLFDO%RDUGKDVFRQFOXGHGPD\QRWXQGHU
QDUURZO\WDLORUHGWRSDVVWKHUHDVRQDEOHUHOHYDQFHVWDQGDUG           2KLRODZEHSHUIRUPHGE\WHFKQLFLDQV
7KH'2sjVUHTXHVWIRU'RHjVFKLOGUHQjVILQDQFLDOGRFXPHQWV
H[SOLFLWO\ OLPLWV LWV UHDFK WR RQO\ WKRVH UHFRUGV FRQFHUQLQJ     3XUVXDQWWRWKH'2sjVLQYHVWLJDWLRQDVHULHVRIVXESRHQDV
DVVHWVmSURYLGHGRUGHULYHGIURPLQGLYLGXDORUMRLQWO\KHOG            ZHUHLVVXHGWR'RHUHTXHVWLQJYDULRXVGRFXPHQWV,QWKHILUVW
DVVHWVRI>sRKQ'RH@'30ls$DW$GPLQ6XESRHQD           VXESRHQDLVVXHG$XJXVWWKH'2sUHTXHVWHG OHDVH
)XUWKHUHYLGHQFHRIWKHJRYHUQPHQWjVHIIRUWVWRFRQILQHWKH            DJUHHPHQWVEHWZHHQ'RHDQGWKHODEVDQ\SD\PHQWVPDGHWR
VFRSH RI WKLV SRUWLRQ RI WKH VXESRHQD FDQ EH IRXQG LQ        'RHE\DQ\PHGLFDOVHUYLFHSURYLGHULQFOXGLQJODERUDWRULHV
FRUUHVSRQGHQFHEHWZHHQWKHJRYHUQPHQWDQG'RHjVDWWRUQH\               DQG LQIRUPDWLRQ RQ WHVWV SHUIRUPHG RQ SDWLHQWV E\ DQ\
IROORZLQJ WKH LVVXDQFH RI WKH VXESRHQD LQ ZKLFK WKH           PHGLFDO VHUYLFH SURYLGHU  7KH VHFRQG VXESRHQD LVVXHG
JRYHUQPHQW VWDWHG WKDW mWKH UHTXHVW FRQFHUQLQJ >'RHjV@           0D\   UHTXHVWHG LQIRUPDWLRQ RQ YDULRXV SDWLHQWV
FKLOGUHQjV DVVHWV LV OLPLWHG WR LQIRUPDWLRQ UHODWLQJ WR         7KH WKLUG VXESRHQD DQ DGPLQLVWUDWLYH VXESRHQD DQG WKH
DVVHWVPRQH\V ZKHUH >'RH@ ZDV WKH VRXUFH DQG ZKHUH            VXESRHQDDWLVVXHLQWKLVFDVHZDVRUGHUHGSXUVXDQWWRWKH
        ,QUH$GPLQLVWUDWLYH6XESRHQD                          1R        1R                  ,QUH$GPLQLVWUDWLYH6XESRHQD                    

'2sjVDXWKRULW\XQGHURIWKH+,3$$ZKLFKDOORZVWKH                         DSSHDUV WR EH WKH FDVH ZLWK 'RH FDQ HDVLO\ WUDQVIHU DVVHWV
$WWRUQH\*HQHUDORUKHUGHVLJQHHWRLVVXHVXESRHQDVUHTXLULQJ                      IURPEXVLQHVVDFFRXQWVWRSHUVRQDODFFRXQWVDUJXDEO\HYHQ
WKH SURGXFWLRQ RI UHFRUGV mZKLFK PD\ EH UHOHYDQW WRl D                    PRUH UHDGLO\ WKDQ WKH FRUSRUDWH RIILFHUV ZKRVH SHUVRQDO
m)HGHUDO KHDOWKFDUH RIIHQVHl LQYHVWLJDWLRQ   86&                     ILQDQFLDOGRFXPHQWVZHUHUHTXHVWHGSXUVXDQWWRWKH)',&DQG
D$                                                                   57&VXESRHQDV7RDSSO\DPRUHVWULQJHQWVWDQGDUGWR'RHjV
                                                                                   SHUVRQDOILQDQFLDOUHFRUGVLQWKLVFDVHLQOLJKWRIWKHHDVHZLWK
  7KH DGPLQLVWUDWLYH VXESRHQD RUGHUHG 'RHjV UHFRUGV                           ZKLFK SHUVRQDO DQG FRUSRUDWH DVVHWV FRXOG EH FRPPLQJOHG
FXVWRGLDQWRWXUQRYHUDQXPEHURIGRFXPHQWVE\$XJXVW                         DQG VKXWWOHG IURP RQH DFFRXQW WR DQRWKHU ZRXOG EH
  7KH GRFXPHQWV UHTXHVWHG ZHUH GLYLGHG LQWR WKH                       LQFRQVLVWHQW ZLWK WKH &RQJUHVVLRQDO PDQGDWH JLYHQ WKH
IROORZLQJQLQHFDWHJRULHV                                                         $WWRUQH\*HQHUDOLQWRXQFRYHULQIRUPDWLRQUHOHYDQW
                                                                                   WRLWVKHDOWKFDUHIUDXGLQYHVWLJDWLRQ
     DOOSURIHVVLRQDOMRXUQDOVPDJD]LQHVDQGQHZVOHWWHUV
       VXEVFULEHGWRRUUHFHLYHGE\'RHIURPsDQXDU\                             $SSO\LQJ WKH UHDVRQDEOH UHOHYDQFH VWDQGDUG WR WKH
       WKURXJK0DUFK                                                         JRYHUQPHQWjV UHTXHVWV IRU 'RHjV SHUVRQDO DQG EXVLQHVV
                                                                                   ILQDQFLDOUHFRUGVZHDJDLQKROGWKDWWKHOLNHO\UHOHYDQFHRI
     FRSLHV RI UHFHQW EDQN DQG RWKHU ILQDQFLDO UHFRUGV                    WKHVHGRFXPHQWVRXWZHLJKVWKHEXUGHQLPSRVHGRQ'RHLQ
       VKRZLQJWKHFXUUHQWORFDWLRQDPRXQWDQGYDOXHRI                          SURGXFLQJ WKHP  'RH KDV QRW H[SODLQHG ZK\ SURGXFLQJ
       DOO'RHjVSHUVRQDODQGKHDOWKFDUHUHODWHGEXVLQHVV                         GRFXPHQWV UHODWHG WR WKLV SRUWLRQ RI WKH VXESRHQD ZRXOG
       DVVHWVZKHWKHUMRLQWO\RULQGLYLGXDOO\KHOG                               EXUGHQKLPQRUKDVKHSURIIHUHGDQ\DUJXPHQWWRUHIXWHWKH
                                                                                   JRYHUQPHQWjVH[SODQDWLRQRIWKHGRFXPHQWVjUHOHYDQFH6R
     FRSLHV RI UHFHQW EDQN DQG RWKHU ILQDQFLDO UHFRUGV                    ORQJDVWKHUHPDLQLQJHOHPHQWVRIWKHUHDVRQDEOHUHOHYDQFH
       VKRZLQJWKHFXUUHQWORFDWLRQDPRXQWDQGYDOXHRI                          WHVWDUHPHWZHZLOOHQIRUFHWKLVDVSHFWRIWKHJRYHUQPHQWjV
       DOO 'RHjV FKLOGUHQjV DVVHWV LQVRIDU DV WKRVH DVVHWV                  DGPLQLVWUDWLYHVXESRHQD
       ZHUH SURYLGHG RU GHULYHG IURP WKH LQGLYLGXDO RU
       MRLQWO\KHOGDVVHWVRI'RH
     DOO GRFXPHQWV DQG SDWLHQW ILOHV HYLGHQFLQJ 'RHjV
       UHIHUUDORISDWLHQWVIRUFHUWDLQHOHFWURGLDJQRVWLFWHVWV                        
       DIWHU$SULO                                                             (YHQ LI ZH LPSRVHG D KLJKHU VWDQGDUG WKDQ UHDVRQDEOH UHOHYDQFH IRU
                                                                                   WKH UHTXHVW RI 'RHjV SHUVRQDO ILQDQFLDO GRFXPHQWV ZH DUH FRQILGHQW WKDW
                                                                                   WKLV VWDQGDUG ZRXOG EH PHW LQ WKLV FDVH   7KH PRVW GLIILFXOW VWDQGDUG IRU
     DOOGRFXPHQWVDQGSDWLHQWILOHVDIWHUsDQXDU\                       VXESRHQDLQJ   SHUVRQDO   ILQDQFLDO   UHFRUGV   DQQRXQFHG   E\   DQ\   FRXUW    RI
       HYLGHQFLQJ 'RHjV UHIHUUDO RI SDWLHQWV WR D VSHFLILF                  DSSHDOV ZDV WKDW LQ WKH ZLWKGUDZQ )LUVW &LUFXLW GHFLVLRQ LQ           3DUNV   LQ
                                                                                   ZKLFK WKH FRXUW KHOG WKDW DQ DJHQF\ ZRXOG KDYH WR VKRZ mD UHDVRQDEOH
                                                                                   VXVSLFLRQ  RI ZURQJGRLQJ>@l 3DUNV  :/  DW 
 ,Q WKLV FDVH
                                                                                   WKH '2s KDV DUWLFXODWHG D UHDVRQDEOH VXVSLFLRQ RI ZURQJGRLQJ RQ WKH SDUW
     
      2Q 'HFHPEHU   VHYHUDO PRQWKV DIWHU WKH VXESRHQD ZDV                  RI 'RH 7KH JRYHUQPHQW KDV HYLGHQFH RI PHGLFDO WHVWLQJ ODERUDWRULHV
LVVXHG LQ WKLV FDVH WKH 3UHVLGHQWLDO 7KUHDW 3URWHFWLRQ $FW RI  3XE          PDNLQJ XQXVXDO UHQWDO SD\PHQWV WR 'RH DV ZHOO DV HYLGHQFH IURP
/ 1R   6WDW  DOWHUHG WKH SUHFLVH VWDWXWRU\ ODQJXDJH             LQGHSHQGHQW PHGLFDO H[SHUWV VWDWLQJ WKDW RQH RI WKH ODEV WR ZKLFK 'RH
DXWKRUL]LQJ   WKH   $WWRUQH\   *HQHUDO   WR   LVVXH   DGPLQLVWUDWLYH   VXESRHQDV   UHIHUUHG    SDWLHQWV ZDV    SHUIRUPLQJ    H[FHVVLYH  DQG   XQQHFHVVDU\
SXUVXDQW WR IHGHUDO KHDOWK FDUH LQYHVWLJDWLRQV $OWKRXJK ZH DSSO\             HOHFWURGLDJQRVWLF WHVWLQJ   7KXV HYHQ XQGHU D VWDQGDUG UHTXLULQJ D
DV LW H[LVWHG DW WKH WLPH WKH VXESRHQD ZDV LVVXHG ZH QRWH WKDW WKH FKDQJHV        UHDVRQDEOH VXVSLFLRQ RI ZURQJGRLQJ EHIRUH D VXESRHQD FDQ EH HQIRUFHG
PDGH LQ WKH ODQJXDJH RI   ZRXOG QRW DOWHU WKH XOWLPDWH RXWFRPH LQ             WKH JRYHUQPHQW KDV PDGH D VXIILFLHQW VKRZLQJ WR UHTXHVW 'RHjV SHUVRQDO
WKLV FDVH                                                                         ILQDQFLDO UHFRUGV
       ,QUH$GPLQLVWUDWLYH6XESRHQD                  1R        1R                 ,QUH$GPLQLVWUDWLYH6XESRHQD             

  6HYHUDO FRXUWV KDYH UHFRJQL]HG WKDW KHLJKWHQHG SULYDF\                     PHGLFDO WHVWLQJ ODERUDWRU\ IRU FHUWDLQ GLDJQRVWLF
LQWHUHVWVDUHDWVWDNHZKHQGHDOLQJZLWKSHUVRQDODVRSSRVHG                      XOWUDVRXQGWHVWV
WRFRUSRUDWHILQDQFLDOUHFRUGV6HH)',&Y:HQW])G
  G &LU  m:KHQ SHUVRQDO GRFXPHQWV RI                  FRPSOHWH DFDGHPLF WUDQVFULSWV DQG UHFRUGV IURP
LQGLYLGXDOV DV FRQWUDVWHG ZLWK EXVLQHVV UHFRUGV RI                       PHGLFDO RU SRGLDWULF VFKRRO DV ZHOO DV DQ\ RWKHU
FRUSRUDWLRQVDUHWKHVXEMHFWRIDQDGPLQLVWUDWLYHVXESRHQD                    SRVWJUDGXDWHWUDLQLQJ
SULYDF\ FRQFHUQV PXVW EH FRQVLGHUHGl  'HVSLWH WKHVH
KHLJKWHQHGSULYDF\FRQFHUQVWKH86&RXUWVRI$SSHDOVIRU                   DOO GRFXPHQWV FRQFHUQLQJ WKH H[WHQW RI 'RHjV
WKH6HFRQG1LQWKDQG'LVWULFWRI&ROXPELD&LUFXLWV KDYH                      FRQWLQXLQJPHGLFDOHGXFDWLRQLQFOXGLQJDOLVWDQG
KHOGWKDWWKHVDPHVWDQGDUGRIUHDVRQDEOHUHOHYDQFHDSSOLHGWR                  GHVFULSWLRQ RI FRXUVHV WDNHQ FUHGLW KRXUV HDUQHG
FRUSRUDWH UHFRUGV ZKHQ UHTXHVWHG SXUVXDQW WR WKH                          DQGDQ\PDWHULDOVSURYLGHGLQWKRVHFRXUVHV
DGPLQLVWUDWLYHVXESRHQDSRZHUJUDQWHGWRWKH)',&DQGWKH
QRZGHIXQFW 5HVROXWLRQ 7UXVW &RUSRUDWLRQ m57&l WR                      DOO GRFXPHQWV FRQFHUQLQJ HWKLFV SURIHVVLRQDO
LQYHVWLJDWHIUDXGXOHQWDVVHWWUDQVIHUVVKRXOGDOVREHDSSOLHGWR                UHVSRQVLELOLW\DQGPHGLFDOELOOLQJLVVXHVLQ'RHjV
UHTXHVWV IRU WKH SULYDWH ILQDQFLDO UHFRUGV RI FRUSRUDWH                  FXVWRG\DQG
RIILFLDOV6HH)',&Y*DUQHU)GWK
&LU,QUH0F9DQH)GG&LU                  UHWDLQHGFRSLHVRIIHGHUDOVWDWHDQGORFDOWD[UHWXUQV
5HVROXWLRQ7UXVW&RUSY:DOGH)G'&                      ERWKIRU'RHDQGDQ\RIKLVEXVLQHVVHVIURPWR
&LU  VHH DOVR .DWKHULQH 6FKHUE &RPPHQW                           WKHSUHVHQW
$GPLQLVWUDWLYH 6XESRHQDV )RU 3ULYDWH )LQDQFLDO 5HFRUGV               sRLQW$SSHQGL[ms$lDW$GPLQ6XESRHQD'RHGLG
:KDW3URWHFWLRQ)RU3ULYDF\'RHV7KH)RXUWK$PHQGPHQW                      QRWWXUQRYHUWKHVHGRFXPHQWV,QVWHDGRQ$XJXVW
$IIRUG":LV/5HY%XWVHH3DUNVY                'RHILOHGLQWKHGLVWULFWFRXUWDPRWLRQWRTXDVKWKHVXESRHQD
)',&1R:/DW
6HSW                 RU LQ WKH DOWHUQDWLYH WR LVVXH D SURWHFWLYH RUGHU  ,Q WKLV
ZLWKGUDZQIURPSXEOLFDWLRQIROORZLQJJUDQWRIUHKjJHQEDQF                PRWLRQ'RHFDOOHGWKHJRYHUQPHQWjVODWHVWGRFXPHQWUHTXHVW
KROGLQJWKDW)',&PXVWmDUWLFXODWHDUHDVRQDEOHVXVSLFLRQRI              mXQUHDVRQDEO\ EXUGHQVRPHl DQG TXHVWLRQHG LWV UHOHYDQFH
ZURQJGRLQJlEHIRUHDVXESRHQDIRUSHUVRQDOILQDQFLDOUHFRUGV               s$DW0HPLQ6XSSRI0RWWR4XDVK
FDQEHHQIRUFHG
                                                                              2Q 2FWREHU   IROORZLQJ WKH JRYHUQPHQWjV
  :HDJUHHZLWKWKHUHDVRQLQJRIWKHVHFLUFXLWVDSSO\LQJWKH               FRPELQHGPRWLRQLQRSSRVLWLRQWR'RHjVPRWLRQWRTXDVKDQG
UHDVRQDEOH UHOHYDQFH VWDQGDUG WR VXESRHQDV UHTXHVWLQJ WKH            FRXQWHUPRWLRQWRFRPSHO'RHWRFRPSO\ZLWKWKHVXESRHQD
SHUVRQDO ILQDQFLDO GRFXPHQWV RI FRUSRUDWH RIILFLDOV DQG             WKHGLVWULFWFRXUWGHQLHG'RHjVPRWLRQWRTXDVKWKHVXESRHQD
EHOLHYH WKDW DSSO\LQJ WKH UHDVRQDEOH UHOHYDQFH VWDQGDUG LV          DQGJUDQWHGWKHJRYHUQPHQWjVPRWLRQWRFRPSHOFRPSOLDQFH
SDUWLFXODUO\ DSSURSULDWH LQ OLJKW RI WKH IDFWV RI WKLV FDVH      ZLWKWKHVXESRHQD7KHGLVWULFWFRXUWGHQLHGWKHPRWLRQWR
'RFWRUVRSHUDWLQJWKHLURZQPHGLFDOFOLQLFVRUSUDFWLFHVDV               TXDVKEHFDXVHmWKHVXESRHQDZDVLVVXHGZLWKLQWKHDXWKRULW\
                                                                           RI WKH 86 $WWRUQH\ *HQHUDO WKH UHFRUGV VRXJKW >ZHUH@
     
                                                                           UHOHYDQWWRWKHJRYHUQPHQWjVKHDOWKFDUHIUDXGLQYHVWLJDWLRQ
      8QOLNH KLV SHUVRQDO ILQDQFLDO UHFRUGV 'RH KDV QR SURWHFWHG )RXUWK   WKH PDWHULDOV >ZHUH@ QRW DOUHDG\ LQ WKH SRVVHVVLRQ RI WKH
$PHQGPHQW LQWHUHVW LQ DQ\ UHFRUGV KHOG E\ KLV EDQN DV WKH\ DUH mWKH       'HSDUWPHQW RI sXVWLFH DQG >EHFDXVH WKH@ &RXUWjV SURFHVV
EXVLQHVV UHFRUGV RI WKH EDQN>@l UDWKHU WKDQ GRFXPHQWV RYHU ZKLFK KH FDQ
DVVHUW RZQHUVKLS RU SRVVHVVLRQ 8QLWHG 6WDWHV Y 0LOOHU  86 
                                                                           ZRXOGQRWEHDEXVHGE\HQIRUFHPHQWRIWKHVXESRHQDls$
 
                                                                           DW'LVW&W2UGHU'HQ0RWWR4XDVK
     ,QUH$GPLQLVWUDWLYH6XESRHQD                    1R       1R                ,QUH$GPLQLVWUDWLYH6XESRHQD          

  'RH QRZ DSSHDOV WKH GHQLDO RI KLV PRWLRQ WR TXDVK WKH        WKH VXESRHQD WR UHDFK DQ DFFRPPRGDWLRQ ZLWK WKH
DGPLQLVWUDWLYHVXESRHQDWRWKLVFRXUW                                   JRYHUQPHQW LV D FRQGLWLRQ WR ILQGLQJ WKH VXESRHQD RYHUO\
                                                                         EURDGRURSSUHVVLYH1RUKDV'RHJLYHQXVDQ\WKLQJEXWD
                         ,,$1$/<6,6                                   JHQHUDO DQG FRQFOXVRU\ VWDWHPHQW DV WR ZK\ WKLV UHTXHVW
                                                                         FRQVWLWXWHV DQ XQGXH EXUGHQ  $OWKRXJK 'RHjV DUJXPHQWV
  :HILUVWWDNHQRWHRIRXUMXULVGLFWLRQWRKHDUWKLVDSSHDO            UHJDUGLQJWKHEXUGHQRIWKLVVXESRHQDDUHUDWKHUJHQHUDODQG
$OWKRXJK D SDUW\ VHUYHG ZLWK D VXESRHQD W\SLFDOO\ FDQQRW         FRQFOXVRU\ZHGRQRWHWKDWWKHJRYHUQPHQWjVLQYHVWLJDWLRQRI
DSSHDOWKHGHQLDORIDPRWLRQWRTXDVKWKHVXESRHQDXQWLOKH             'RHKDVJRQHRQIRUPRUHWKDQWZR\HDUVDQGWKDWWKLVLVWKH
KDV UHVLVWHG WKH VXESRHQD DQG EHHQ KHOG LQ FRQWHPSW WKH        WKLUGVXESRHQDUHTXHVWLQJGRFXPHQWVIURP'RHLVVXHGRYHU
6XSUHPH&RXUWKDVWUHDWHGVXESRHQDVLVVXHGE\JRYHUQPHQW                 WKLV WLPH  :KLOH ZH GR QRW EHOLHYH WKDW WKH OHQJWK RI WKH
DJHQFLHVGLIIHUHQWO\,QWKHFDVHRIDGPLQLVWUDWLYHVXESRHQDV          LQYHVWLJDWLRQRUWKHQXPEHURIVXESRHQDVSUHYLRXVO\LVVXHGWR
SDUWLHVPD\LPPHGLDWHO\DSSHDOGLVWULFWFRXUWRUGHUVHQIRUFLQJ           'RHPDNHDQ\IXUWKHUUHTXHVWIRUGRFXPHQWVXQUHDVRQDEOHLQ
WKHVHVXESRHQDVDVWKH6XSUHPH&RXUWKDVGHHPHGWKHPWR                 WKLV FDVH VXFK IDFWRUV PD\ EH WDNHQ LQWR DFFRXQW ZKHQ
EH mVHOIFRQWDLQHG VR IDU DV WKH MXGLFLDU\ LV FRQFHUQHG>@l     GHFLGLQJ ZKHWKHU DQ DGPLQLVWUDWLYH VXESRHQD LV XQGXO\
&REEOHGLFNY8QLWHG6WDWHV86VHH               EXUGHQVRPH
DOVRsDPHV:P0RRUHHWDO0RRUHjV)HGHUDO3UDFWLFH
>@>F@                                                            ,Q VXP ZH EHOLHYH WKDW WKH VWURQJ OLNHOLKRRG RI WKH
                                                                         UHTXHVWHGGRFXPHQWVjUHOHYDQFHWRWKHJRYHUQPHQWjVKHDOWK
  2XU UHYLHZ RI WKH GLVWULFW FRXUWjV LQWHUSUHWDWLRQ DQG           FDUHIUDXGLQYHVWLJDWLRQRXWZHLJKVDQ\EXUGHQLPSRVHGRQ
DSSOLFDWLRQ RI  86&   DV ZHOO DV WKH FDVH ODZ      'RHLQSURGXFLQJWKHVHGRFXPHQWV$FFRUGLQJO\WKLVDVSHFW
UHODWLQJ WR HQIRUFHPHQW RI DGPLQLVWUDWLYH VXESRHQDV LV GH        RIWKHJRYHUQPHQWjVDGPLQLVWUDWLYHVXESRHQDZLOOEHHQIRUFHG
QRYR8QLWHG6WDWHVY0DUNZRRG)GWK&LU             VR ORQJ DV WKH ILQDO WZR HOHPHQWV RI RXU DGPLQLVWUDWLYH
                                                                   VXESRHQDWHVWDUHPHW
$ 7KH*RYHUQPHQWjV0RWLRQWR&ORVH2UDO$UJXPHQWWR                          E'RHjV3HUVRQDODQG%XVLQHVV)LQDQFLDO5HFRUGV
   WKH3XEOLF
                                                                            7KH JRYHUQPHQWjV VXESRHQD DOVR UHTXHVWHG m>F@RSLHV RI
   %HIRUH SURFHHGLQJ WR DQ DQDO\VLV RI WKH DGPLQLVWUDWLYH         UHFHQW EDQN DQG RWKHU ILQDQFLDO UHFRUGV VXIILFLHQW WR
VXESRHQD DW LVVXH LQ WKLV FDVH ZH EULHIO\ QRWH WKDW UXOLQJ   FRPSOHWHO\VKRZFXUUHQWORFDWLRQDPRXQWDQGYDOXHRIDOO
IURP WKH EHQFK ZH GHQLHG WKH JRYHUQPHQWjV PRWLRQ WR             DVVHWVIRU>sRKQ'RH@'30DQGRUKLVKHDOWKFDUHUHODWHG
FRQGXFWRUDODUJXPHQWLQDFORVHGFRXUWURRPLQWKLVFDVH7KH           EXVLQHVVHVlDVZHOODVFRSLHVRI'RHjVEXVLQHVVDQGSHUVRQDO
JRYHUQPHQWFRQFHUQHGDERXWUHYHDOLQJVHQVLWLYHPDWWHUVWKDW             WD[ UHWXUQV IURP  WR WKH SUHVHQW  s$ DW  $GPLQ
FRXOGMHRSDUGL]HLWVRQJRLQJFULPLQDOLQYHVWLJDWLRQRIRWKHU             6XESRHQD7KHJRYHUQPHQWDVVHUWVWKDWWKHVHGRFXPHQWVDUH
PHGLFDOSURIHVVLRQDOVDQGVHUYLFHSURYLGHUVILOHGDPRWLRQ             UHOHYDQWEHFDXVHWKH\JRWRVKRZm>'RH@jVSURILWPRWLYHIRU
LQDGYDQFHRIRUDODUJXPHQWDQGXQRSSRVHGE\'RHjVFRXQVHO              DOOHJHGFULPLQDODFWLYLW\WKHGHJUHHWRZKLFK>'RH@SURILWHG
WRFORVHRUDODUJXPHQWWRWKHSXEOLF                                    IURPLOOHJDODFWLYLW\DQGWKHDVVHWVWKDWPD\EHIRUIHLWDEOHDV
                                                                         DUHVXOWRIFULPLQDODFWLYLW\l$SSHOOHHjV%UDW$JDLQ
  :KLOH ZH GHOLEHUDWH LQ SULYDWH ZH UHFRJQL]H WKH                'RH RIIHUV QR VSHFLILF UHDVRQ ZK\ WKH SURGXFWLRQ RI WKHVH
IXQGDPHQWDOLPSRUWDQFHRImLVVX>LQJ@SXEOLFGHFLVLRQVDIWHU              GRFXPHQWVZRXOGEHRYHUO\EXUGHQVRPH
SXEOLF DUJXPHQWV EDVHG RQ SXEOLF UHFRUGV  7KH SROLWLFDO
EUDQFKHVRIJRYHUQPHQWFODLPOHJLWLPDF\E\HOHFWLRQMXGJHV
       ,QUH$GPLQLVWUDWLYH6XESRHQD                      1R         1R                ,QUH$GPLQLVWUDWLYH6XESRHQD           

UHODWLQJWR'RHjVPHGLFDOWUDLQLQJZLOODLGLWLQOHDUQLQJWKH                  E\UHDVRQ$Q\VWHSWKDWZLWKGUDZVDQHOHPHQWRIWKHMXGLFLDO
H[WHQWWRZKLFK'RHPD\KDYHNQRZQWKDWWKHWHVWVWRZKLFK                      SURFHVVIURPSXEOLFYLHZPDNHVWKHHQVXLQJGHFLVLRQORRN
KHZDVVXEMHFWLQJKLVSDWLHQWVZHUHPHGLFDOO\XQQHFHVVDU\                      PRUH OLNH ILDW ZKLFK UHTXLUHV FRPSHOOLQJ MXVWLILFDWLRQl
                                                                                8QLRQ2LO&RY/HDYHOO)GWK&LU
   7KH JRYHUQPHQW WKURXJK LWV SURIIHUHG UHDVRQV IRU                      7R WKH H[WHQW WKH JRYHUQPHQW EHOLHYHV WKDW LW PXVW UHYHDO
UHTXHVWLQJ GRFXPHQWV UHODWLQJ WR 'RHjV SURIHVVLRQDO                        VHQVLWLYHLQIRUPDWLRQWRWKHFRXUWDVSDUWRILWVDUJXPHQWLW
HGXFDWLRQ DQG HWKLFDO WUDLQLQJ KDV VXIILFLHQWO\ VKRZQ KRZ               FDQmVXEPLWDUJXPHQWVLQZULWLQJXQGHUVHDOLQOLHXRIWKHLQ
WKHVH GRFXPHQWV DUH UHOHYDQW WR LWV XQGHUO\LQJ KHDOWK FDUH              FDPHUDRUDODUJXPHQWl1HZ<RUN7LPHV&RY8QLWHG6WDWHV
IUDXGLQYHVWLJDWLRQ7KHH[WHQWWRZKLFK'RHNQHZWKDWWKHVH                   86
WHVWVZHUHPHGLFDOO\XQQHFHVVDU\DQGWKHH[WHQWWRZKLFKKH
NQHZWKDWNLFNEDFNDUUDQJHPHQWVZHUHLOOHJDORUXQHWKLFDODUH                   % %DFNJURXQGRQWKH(QIRUFHPHQWRI$GPLQLVWUDWLYH
QRW DQFLOODU\ RU XQLPSRUWDQW LVVXHV LQ DQ LQYHVWLJDWLRQ RI                 6XESRHQDV
SRVVLEOHKHDOWKFDUHIUDXG7KXVWKLVUHTXHVWIDOOVZLWKLQWKH
EURDGFRQFHSWRIUHOHYDQFHLQWHQGHGE\&RQJUHVVLQ                        $VQRWHGLQLWVKHDGLQJ86&DXWKRUL]HVWKH
                                                                                $WWRUQH\*HQHUDORUKHUGHVLJQHHWRLVVXHm>D@GPLQLVWUDWLYH
   $VWKLVFLUFXLWKDVVWDWHGKRZHYHUWKLVFRXUWPXVWZHLJK                   VXESRHQDV LQ >I@HGHUDO KHDOWK FDUH LQYHVWLJDWLRQV>@l  'RH
DJDLQVWWKHUHOHYDQFHRIWKHUHTXHVWHGPDWHULDOWKHEXUGHQWKDW                 FODLPVWKDWE\HQIRUFLQJWKH'2sjVDGPLQLVWUDWLYHVXESRHQD
ZRXOGEHSODFHGRQ'RHLQSURGXFLQJLW)RUG0RWRU)G                    LQ WKLV FDVH KLV )RXUWK $PHQGPHQW ULJKW WR EH IUHH IURP
DW7KHH[WHQWRI'RHjVDUJXPHQWUHJDUGLQJWKHEXUGHQ                       XQUHDVRQDEOHVHDUFKHVDQGVHL]XUHVKDVEHHQYLRODWHG
LPSRVHGE\WKLVUHTXHVWLVKLVVWDWHPHQWWKDWKHmZRXOGKDYH
WR OLWHUDOO\ SXW KLV OLIH RQ KROG DQG VHDUFK IRU SDSHUV DQG            7KLV FLUFXLW KDV QRWHG WKDW D GLVWULFW FRXUW SOD\V RQO\ D
GRFXPHQWV ZKLFK VWUHWFK WHQ \HDUV LQWR WKH SDVW>@ >Z@HOO               OLPLWHGUROHLQWKHHQIRUFHPHQWRIDQDGPLQLVWUDWLYHVXESRHQD
EH\RQGDQ\VWDWXWHRIOLPLWDWLRQVWKDWWKH*RYHUQPHQWPD\                       0DUNZRRG)GDW$OOWKHGLVWULFWFRXUWPXVWGRLQ
DSSO\WRDQ\DOOHJHGKHDOWKFDUHRIIHQVHVl$SSHOODQWjV%UDW                 GHFLGLQJZKHWKHUWRHQIRUFHDQDGPLQLVWUDWLYHVXESRHQDLV
  2I WKH IRXU FDWHJRULHV RI GRFXPHQWV FXUUHQWO\ XQGHU               GHWHUPLQH ZKHWKHU WKH DGPLQLVWUDWLYH DJHQF\ WR ZKLFK
FRQVLGHUDWLRQ KRZHYHU RQO\ RQH WKH UHTXHVW IRU DOO                    &RQJUHVVKDVJUDQWHG WKHVXESRHQDSRZHULQWKLVFDVHWKH
SURIHVVLRQDOMRXUQDOVPDJD]LQHVDQGQHZVOHWWHUVVXEVFULEHG                    '2sKDVVDWLVILHGWKHVWDWXWRU\SUHUHTXLVLWHVWRLVVXLQJDQG
WR RU UHFHLYHG E\ 'RH IURP sDQXDU\  WKURXJK 0DUFK                  HQIRUFLQJWKHVXESRHQDDQGGHWHUPLQHZKHWKHUWKHDJHQF\
 KDV WKH SRWHQWLDO WR SRVH DQ\ PHDQLQJIXO EXUGHQ RQ               KDV VDWLVILHG WKH MXGLFLDOO\ FUHDWHG VWDQGDUGV IRU HQIRUFLQJ
'RH  1HYHUWKHOHVV 'RH KDV PDGH QR DWWHPSW WR UHDFK D                DGPLQLVWUDWLYHVXESRHQDV,GDW:HILUVWWXUQWRWKH
UHDVRQDEOH DFFRPPRGDWLRQ ZLWK WKH JRYHUQPHQW UHJDUGLQJ                     MXGLFLDOO\ FUHDWHG VWDQGDUGV WKDW PXVW EH PHW IRU DQ
WKLVDVSHFWRIWKHVXESRHQDDQHIIRUWWKH6XSUHPH&RXUWKDV                    DGPLQLVWUDWLYHVXESRHQDWREHHQIRUFHG
VXJJHVWHGVKRXOGEHH[SHFWHGEHIRUHDFRXUWLVZLOOLQJWRKROG
DQ DGPLQLVWUDWLYH VXESRHQD RYHUO\ EXUGHQVRPH  0RUWRQ                      ,Q 2NODKRPD3UHVV3XEOLVKLQJ&RY:DOOLQJ86
6DOW86DWVHHDOVR,QUH6XESRHQD'XFHV7HFXP                       RQH RI WKH 6XSUHPH &RXUWjV ILUVW PDMRU FDVHV
)GDWKROGLQJWKDWDQHIIRUWE\WKHSDUW\FRQWHVWLQJ                 DGGUHVVLQJWKHFRQVWLWXWLRQDOLW\RIDQDGPLQLVWUDWLYHVXESRHQD
                                                                                XQGHUWKH)RXUWK$PHQGPHQWWKH&RXUWFUHDWHGVWDQGDUGVIRU
                                                                                WKH HQIRUFHPHQW RI DGPLQLVWUDWLYH VXESRHQDV WKDW DUH VWLOO
                                                                               XVHG WRGD\  ,Q 2NODKRPD 3UHVV WKH &RXUW KHOG WKDW D
                                                                                VXESRHQD GXFHV WHFXP IRU FRUSRUDWH UHFRUGV LVVXHG E\ WKH
      )RU H[DPSOH LQ DQ DWWHPSW WR UHDFK D UHDVRQDEOH DFFRPPRGDWLRQ
ZLWK WKH JRYHUQPHQW UHJDUGLQJ WKLV UHTXHVW 'RH FRXOG KDYH VLPSO\
RIIHUHG WR SURGXFH D OLVW RI DOO SURIHVVLRQDO MRXUQDOV KH UHJXODUO\ UHFHLYHG
      ,QUH$GPLQLVWUDWLYH6XESRHQD                    1R     1R               ,QUH$GPLQLVWUDWLYH6XESRHQD        

'HSDUWPHQWRI/DERUZRXOGFRPSO\ZLWKWKH&RQVWLWXWLRQVR               DSSURDFK RI EDODQFLQJ WKH OLNHO\ UHOHYDQFH RI GRFXPHQWV
ORQJDVWKHGHPDQGIRUGRFXPHQWV                                        DJDLQVW WKH EXUGHQ RI WKHLU SURGXFWLRQ FOHDUO\ DSSHDUV
                                                                        DSSOLFDEOHLQWKLVFDVH:LWKWKLVEDFNJURXQGLQPLQGZH
    LVDXWKRUL]HGE\&RQJUHVVLVIRUDSXUSRVH&RQJUHVVFDQ            QRZ WXUQ WR DQ DQDO\VLV RI WKH UHOHYDQFH RI WKH YDULRXV
    RUGHU DQG WKH GRFXPHQWV VRXJKW DUH UHOHYDQW WR WKH         PDWHULDOVUHTXHVWHGLQWKLVVXESRHQD
    LQTXLU\%H\RQGWKLVWKHUHTXLUHPHQWRIUHDVRQDEOHQHVV
    LQFOXGLQJ SDUWLFXODULW\ LQ GHVFULELQJ WKH SODFH WR EH            D   'RFXPHQWV 5HODWLQJ WR 'RHjV 3URIHVVLRQDO
    VHDUFKHG DQG WKH SHUVRQV RU WKLQJV WR EH VHL]HG               (GXFDWLRQDQGWKH([WHQWRI+LV(WKLFDO7UDLQLQJ
    FRPHVGRZQWR>ZKHWKHU@VSHFLILFDWLRQRIWKHGRFXPHQWV
    WREHSURGXFHG>LV@DGHTXDWHEXWQRWH[FHVVLYHIRUWKH              $V QRWHG HDUOLHU RI WKH QLQH FDWHJRULHV RI GRFXPHQWV
    SXUSRVHVRIWKHUHOHYDQWLQTXLU\1HFHVVDULO\WKLV          VXESRHQDHGE\WKH'2sIRXUFDWHJRULHVUHTXHVWGRFXPHQWV
    FDQQRW EH UHGXFHG WR IRUPXOD IRU UHOHYDQF\ DQG              UHODWLQJ WR 'RHjV SURIHVVLRQDO HGXFDWLRQ DQG WUDLQLQJ
    DGHTXDF\RUH[FHVVLQWKHEUHDGWKRIWKHVXESRHQDDUH               UHJDUGLQJHWKLFDOLVVXHV7KRVHFDWHJRULHVDUH
    PDWWHUVYDULDEOHLQUHODWLRQWRWKHQDWXUHSXUSRVHVDQG
    VFRSHRIWKHLQTXLU\                                                  DOOSURIHVVLRQDOMRXUQDOVPDJD]LQHVDQGQHZVOHWWHUV
                                                                             VXEVFULEHGWRRUUHFHLYHGE\'RHIURPsDQXDU\
,GDWIRRWQRWHDQGLQWHUQDOTXRWDWLRQPDUNVRPLWWHG                  WKURXJK0DUFK
3XWPRUHVXFFLQFWO\LQ8QLWHG6WDWHVY0RUWRQ6DOW&R
86DQRWKHUFDVHLQYROYLQJDUHTXHVWIRU              FRPSOHWH DFDGHPLF WUDQVFULSWV DQG UHFRUGV IURP
FRUSRUDWH GRFXPHQWV WKH &RXUW VWDWHG WKDW DQ DJHQF\jV                PHGLFDO RU SRGLDWULF VFKRRO DV ZHOO DV DQ\ RWKHU
UHTXHVWIRUGRFXPHQWVVKRXOGEHDSSURYHGE\WKHMXGLFLDU\VR                 SRVWJUDGXDWHWUDLQLQJ
ORQJDVLWmLVZLWKLQWKHDXWKRULW\RIWKHDJHQF\WKHGHPDQG
LVQRWWRRLQGHILQLWHDQGWKHLQIRUPDWLRQVRXJKWLVUHDVRQDEO\             DOO GRFXPHQWV FRQFHUQLQJ WKH H[WHQW RI 'RHjV
UHOHYDQWl  ,Q RWKHU ZRUGV WKH DJHQF\ UHTXHVW PXVW EH              FRQWLQXLQJPHGLFDOHGXFDWLRQLQFOXGLQJDOLVWDQG
UHDVRQDEOH                                                                  GHVFULSWLRQ RI FRXUVHV WDNHQ FUHGLW KRXUV HDUQHG
                                                                             DQGDQ\PDWHULDOVSURYLGHGLQWKRVHFRXUVHVDQG
   ,WLVIURPWKHODVWPDMRU6XSUHPH&RXUWFDVHRQWKHLVVXH
8QLWHG6WDWHVY3RZHOO86WKDWWKHEDVLF                DOO GRFXPHQWV FRQFHUQLQJ HWKLFV SURIHVVLRQDO
ODQJXDJHRIWKHmUHDVRQDEOHUHOHYDQFHlWHVWHPSOR\HGE\WKLV                 UHVSRQVLELOLW\DQGPHGLFDOELOOLQJLVVXHVLQ'RHjV
FLUFXLW HPDQDWHV  ,Q3RZHOO WKH ,QWHUQDO 5HYHQXH 6HUYLFH            FXVWRG\
m,56l VXVSHFWLQJ WD[ IUDXG LVVXHG DQ DGPLQLVWUDWLYH
VXPPRQVUHTXHVWLQJFRUSRUDWHWD[UHFRUGVIURPWKHSUHVLGHQW             s$DW$GPLQ6XESRHQD
RIDFRUSRUDWLRQ3RZHOODUJXHGWKDWWKH,56FRXOGQRWXVHLWV            7KHJRYHUQPHQWFODLPVWKDWWKHVHGRFXPHQWVDUHUHOHYDQW
VXPPRQVSRZHUWRUHTXLUHSURGXFWLRQRIWKHUHFRUGVXQOHVVLW            WRLWVLQYHVWLJDWLRQEHFDXVHWKH\JRWRVKRZ'RHjVLQWHQW,I
FRXOGSURIIHUVRPHJURXQGVIRULWVVXVSLFLRQWKDWDIUDXGKDG           LW ZHUH WR SURVHFXWH 'RH IRU WKHVH DOOHJHG NLFNEDFN
EHHQFRPPLWWHG7KH&RXUWGLVDJUHHGKRZHYHUVWDWLQJWKDW             DJUHHPHQWVWKHJRYHUQPHQWVWDWHVWKDWLWZRXOGKDYHWRSURYH
WKH,56QHHGPDNHQRVKRZLQJRISUREDEOHFDXVHWRVXVSHFW               WKDW m>'RH@ NQHZ DV D JHQHUDO PDWWHU WKDW WKH FRQFHSW RI
WD[mIUDXGXQOHVVWKHWD[SD\HUUDLVHVDVXEVWDQWLDOTXHVWLRQ            UHPXQHUDWLRQIRUUHIHUUDOVZDVVRPHKRZZURQJIXOZKHWKHU
WKDW MXGLFLDO HQIRUFHPHQW RI WKH DGPLQLVWUDWLYH VXPPRQV           LOOHJDO RU XQHWKLFDO>@l  $SSHOOHHjV %U DW   7KH
ZRXOGEHDQDEXVLYHXVHRIWKHFRXUWjVSURFHVV>@l,GDW          JRYHUQPHQW IXUWKHU VWDWHV WKDW LWV UHTXHVW IRU GRFXPHQWV
    ,QUH$GPLQLVWUDWLYH6XESRHQD                 1R       1R               ,QUH$GPLQLVWUDWLYH6XESRHQD           

  LPSRUWDQWWRIRFXVRQNH\VRXUFHVDIIHFWLQJOHYHOVRIWKH           $FRXUWjVSURFHVVLVDEXVHGLIWKHVXPPRQVLVmLVVXHGIRUDQ
  XQGHUO\LQJ KHDOWK FDUH FRVWV  7ZR NH\ VRXUFHV RI           LPSURSHUSXUSRVHVXFKDV WR KDUDVVWKHWD[SD\HURUWRSXW
  H[FHVVLYH FRVW DUH PHGLFDO IUDXG DQG DEXVH DQG WKH         SUHVVXUHRQKLPWRVHWWOHDFROODWHUDOGLVSXWHRUIRUDQ\RWKHU
  FXUUHQWPHGLFDOSDSHUZRUNEXUGHQ                                   SXUSRVH UHIOHFWLQJ RQ WKH JRRG IDLWK RI WKH SDUWLFXODU
                                                                      LQYHVWLJDWLRQl,GDW
  $FFRUGLQJWRWKH*HQHUDO$FFRXQWLQJ2IILFH*$2DV
  PXFKDVSHUFHQWRIWRWDOKHDOWKFDUHFRVWVDUHORVWWR              7KH3RZHOO&RXUWZDVFRQFHUQHGWKDWUHTXLULQJWKH,56WR
  IUDXGXOHQWRUDEXVLYHSUDFWLFHVE\XQVFUXSXORXVKHDOWK              VKRZ SUREDEOH FDXVH WKDW D WD[ IUDXG KDG EHHQ FRPPLWWHG
  FDUH SURYLGHUV  7KH *$2 UHSRUWV WKDW RQO\ D VPDOO         ZRXOGVHULRXVO\KLQGHUWKHDJHQF\jVDELOLW\WRFRQGXFWWKHVH
  IUDFWLRQRIWKHIUDXGDQGDEXVHFRPPLWWHGLQWKHKHDOWK             NLQGV RI LQYHVWLJDWLRQV  ,G DW   7KXV UDWKHU WKDQ
  FDUHV\VWHPLVLGHQWLILHGDQGGHDOWZLWK)HGHUDOIXQGLQJ          SUREDEOHFDXVHWKH&RXUWKHOGWKDWDOOWKH,56QHHGVKRZWR
  IRU SUHYHQWLRQ GHWHFWLRQ DQG SURVHFXWLRQV RI WKH            REWDLQ MXGLFLDO HQIRUFHPHQW RI D VXPPRQV LV mWKDW WKH
  SHUSHWUDWRUVRIKHDOWKFDUHIUDXGDQGDEXVHKDVQRWNHSW            LQYHVWLJDWLRQ ZLOO EH FRQGXFWHG SXUVXDQW WR D OHJLWLPDWH
  SDFHZLWKWKHSUREOHP&RRUGLQDWLRQRIWKHYDULRXVODZ             SXUSRVHWKDWWKHLQTXLU\PD\EHUHOHYDQWWRWKHSXUSRVHWKDW
  HQIRUFHPHQWDJHQFLHVDWWKHIHGHUDODQGVWDWHOHYHOVKDV            WKH LQIRUPDWLRQ VRXJKW LV QRW DOUHDG\ ZLWKLQ WKH
  EHHQ LQVXIILFLHQW DQG ODZ HQIRUFHPHQW DJHQFLHV DJUHH         &RPPLVVLRQHUjVSRVVHVVLRQDQGWKDWWKHDGPLQLVWUDWLYHVWHSV
  WKDWSHQDOWLHVIRUKHDOWKFDUHIUDXGDQGDEXVHVKRXOGEH            UHTXLUHGE\WKH&RGHKDYHEHHQIROORZHG>@l,GDW
  LQFUHDVHG                                                          :HVWLOOXVHWKLVWHVWWRGD\ZKHQH[DPLQLQJDGPLQLVWUDWLYH
                                                                      VXESRHQDV0DUNZRRG)GDW$VWKLVFLUFXLWKDV
+5 5HS 1R  DW  UHSULQWHG LQ             VXPPDUL]HGm>Z@KLOHWKHFRXUWjVIXQFWLRQLVQHLWKHUPLQRU
86&&$1DW,WLVVDIHWRDVVXPHWKDW&RQJUHVVLQ         QRU PLQLVWHULDOl ZKHQ GHFLGLQJ ZKHWKHU WR HQIRUFH DQ
SDVVLQJ+,3$$UHFRJQL]HGWKHVHULRXVSUREOHPWKDWKHDOWK             DGPLQLVWUDWLYHVXESRHQDmWKHVFRSHRIWKHLVVXHVZKLFKPD\
FDUH IUDXG KDG EHFRPH DQG WKDW WKURXJK WKLV OHJLVODWLRQ    EHOLWLJDWHGLQDQHQIRUFHPHQWSURFHHGLQJPXVWEHQDUURZ
&RQJUHVV ZDV LQWHQGLQJ WR VWULNH EDFN DW WKLV SUREOHP        EHFDXVH RI WKH LPSRUWDQW JRYHUQPHQWDO LQWHUHVW LQ WKH
$FFRUGLQJO\ LQ OLJKW RI ERWK WKH VWDWXWRU\ ODQJXDJH DQG      H[SHGLWLRXVLQYHVWLJDWLRQRISRVVLEOHXQODZIXODFWLYLW\l,G
OHJLVODWLYHKLVWRU\RILWDSSHDUVWKDW&RQJUHVVLQWHQGHG      DWTXRWLQJ)7&Y7H[DFR,QF)G
WRJLYHWKH$WWRUQH\*HQHUDOEURDGDXWKRULW\WRFRQGXFWKHDOWK        '&&LUHQEDQFFHUWGHQLHG86RWKHU
FDUH IUDXG LQYHVWLJDWLRQV WKXV HQWDLOLQJ D OHVV UHVWULFWHG    TXRWDWLRQVRPLWWHG
LQWHUSUHWDWLRQ RI ZKDW UHFRUGV PD\ EH VXESRHQDHG XQGHU
  EHFDXVH WKH\ DUH mUHOHYDQWl WR D KHDOWK FDUH             )ROORZLQJ3RZHOODQGWKHSUHFHGHQWRIWKLVFLUFXLWZHKROG
LQYHVWLJDWLRQ                                                        WKDWWKH'2sQHHGQRWPDNHDVKRZLQJRISUREDEOHFDXVHWR
                                                                      LVVXHDQDGPLQLVWUDWLYHVXESRHQDXQGHU86&QRU
  :KLOHWKH)RUG0RWRUFRXUWjVGHFLVLRQWRZHLJKWKHOLNHO\           GRHVSHWLWLRQHUDUJXHIRUVXFKDVWDQGDUGRQDSSHDO,Q,QUH
UHOHYDQFH RI UHTXHVWHG PDWHULDO DJDLQVW WKH EXUGHQ RI          6XESRHQD 'XFHV 7HFXP  )G   WK &LU
SURGXFLQJ WKDW PDWHULDO FDPH LQ WKH FRQWH[W RI DQ ((2&       WKH86&RXUWRI$SSHDOVIRUWKH)RXUWK&LUFXLWZDV
DGPLQLVWUDWLYHVXESRHQDZHGLGQRWFRQILQHRXUUHDVRQLQJ             WKH ILUVW FLUFXLW FRXUW WR DGGUHVV DGPLQLVWUDWLYH VXESRHQDV
RQO\WRWKDWW\SHRIDGPLQLVWUDWLYHVXESRHQDQRULVWKHUHDQ\        LVVXHG XQGHU    $V WKH )RXUWK &LUFXLW H[SODLQHG
EDVLV IRU IROORZLQJ D GLIIHUHQW FRXUVH LQ WKLV FDVH  7KH   ZKHUHDV WKH )RXUWK $PHQGPHQW PDQGDWHV D VKRZLQJ RI
DGPLQLVWUDWLYH VXESRHQD SRZHUV XQGHU ERWK 7LWOH 9,, DQG        SUREDEOHFDXVHIRUWKHLVVXDQFHRIVHDUFKZDUUDQWVVXESRHQDV
+,3$$ DUH EURDGO\ GHILQHG DQG WKH )RUG 0RWRU FRXUWjV         DUH DQDO\]HG RQO\ XQGHU WKH )RXUWK $PHQGPHQWjV JHQHUDO
        ,QUH$GPLQLVWUDWLYH6XESRHQD                                1R         1R               ,QUH$GPLQLVWUDWLYH6XESRHQD        

UHDVRQDEOHQHVVVWDQGDUG,GDW2QHSULPDU\UHDVRQ                               WHUPmUHOHYDQWlLQWKHVWDWXWHDXWKRUL]LQJWKH((2&WRLVVXH
IRU WKLV GLVWLQFWLRQ LV WKDW XQOLNH mWKH LPPHGLDF\ DQG                            DGPLQLVWUDWLYHVXESRHQDVKDGEHHQFRQVWUXHGEURDGO\VRDVWR
LQWUXVLYHQHVVRIDVHDUFKDQGVHL]XUHFRQGXFWHGSXUVXDQWWRD                              DOORZmWKH&RPPLVVLRQDFFHVVWRYLUWXDOO\DQ\PDWHULDOWKDW
ZDUUDQW>@l WKH UHDVRQDEOHQHVV RI DQ DGPLQLVWUDWLYH                                   PLJKW FDVW OLJKW RQ WKH DOOHJDWLRQV DJDLQVW WKH HPSOR\HUl
VXESRHQDjVFRPPDQGFDQEHFRQWHVWHGLQIHGHUDOFRXUWEHIRUH                                )RUG0RWRU)GDWTXRWDWLRQRPLWWHG:HQRWHGWKDW
EHLQJHQIRUFHG,GDW                                                               WKLV EURDG LQWHUSUHWDWLRQ RI UHOHYDQFH ZDV LQIOXHQFHG E\
                                                                                           &RQJUHVVjVLQWHQWWKDWWKH((2&KDYHWKHDXWKRULW\WRGHPDQG
   8QOLNH WKH )RXUWK &LUFXLW WKH GLVWULFW FRXUW LQ ,Q UH                         GRFXPHQWVWKDWLWGHHPHGUHOHYDQWWRLWVLQYHVWLJDWLRQ:H
6XESRHQD'XFHV7HFXPZDVPRUHWURXEOHGE\WKHQRWLRQRI                                    VWDWHG KRZHYHU WKDW ZKLOH UHOHYDQFH VKRXOG EH YLHZHG
VLPSO\ DSSO\LQJ WKH UHDVRQDEOH UHOHYDQFH VWDQGDUG WR                                 EURDGO\EHFDXVHWKHFRXUWZDVJLYHQWKHGXW\RIUHYLHZLQJ
VXESRHQDV LVVXHG XQGHU    ,Q UH 6XESRHQDV 'XFHV                             WKHDJHQF\jVGHFLVLRQWRLVVXHDVXESRHQDLWGLGQRWVLPSO\
7HFXP)6XSSG:'9D7KH                                    KDYHWRDFFHSWWKHDJHQF\jVRSLQLRQDVWRZKDWLVDQGLVQRW
GLVWULFWFRXUWGLVFXVVHGVHYHUDOFDVHVLQFOXGLQJRQHIURPWKLV                            UHOHYDQW WR DJHQF\ LQYHVWLJDWLRQV  8OWLPDWHO\ ZH GHFLGHG
FLUFXLW ZKLFK LW EHOLHYHG ZHLJKHG LQ IDYRU RI DSSO\LQJ D                         WKDWLQUHYLHZLQJZKHWKHUDQDGPLQLVWUDWLYHVXESRHQDVKRXOG
SUREDEOHFDXVHVWDQGDUGWRDGPLQLVWUDWLYHVXESRHQDVXVHGWR                                EH HQIRUFHG ZH ZRXOG mZHLJK WKH OLNHO\ UHOHYDQFH RI WKH
IXUWKHU FULPLQDO DV RSSRVHG WR FLYLO LQYHVWLJDWLRQV  :H                        UHTXHVWHGPDWHULDOWRWKHLQYHVWLJDWLRQDJDLQVWWKHEXUGHQ
EHOLHYHKRZHYHUWKDWWKHVHFDVHVDUHGLVWLQJXLVKDEOHIURPWKH                            RISURGXFLQJWKHPDWHULDOl,G
IDFWVLQWKLVFDVH
                                                                                             $VZLWKWKH((2&jVVXESRHQDSRZHULWDSSHDUVFOHDUERWK
  ,Q $EHO Y 8QLWHG 6WDWHV  86    DQG                        IURPWKHODQJXDJHRIWKHVWDWXWHDQGIURP&RQJUHVVjVLQWHQWLQ
8QLWHG6WDWHVY3KLEEV)GWK&LU                              HQDFWLQJ +,3$$ WKDW WKH '2sjV VXESRHQD SRZHU LQ
FHUWGHQLHG86WZRFDVHVFLWHGE\WKH                                 LQYHVWLJDWLQJIHGHUDOKHDOWKFDUHRIIHQVHVLVPHDQWWREHEURDG
GLVWULFW FRXUW LQ ,Q UH 6XESRHQDV 'XFHV 7HFXP ERWK WKH                           6HFWLRQDXWKRUL]HVWKH$WWRUQH\*HQHUDORUKHUGHVLJQHH
6XSUHPH&RXUWDQGWKLVFLUFXLWVSRNHLQIDYRURIXVLQJWKH                                 WR VXESRHQD DQ\ UHFRUGV mZKLFK PD\ EH UHOHYDQWl WR DQ
SUREDEOH FDXVH VWDQGDUG ZKHQ DQDO\]LQJ DGPLQLVWUDWLYH                                 DXWKRUL]HGLQYHVWLJDWLRQWKXVLOOXVWUDWLQJWKHVXEVWDQWLDOVFRSH
DJHQFLHVjHIIRUWVWRREWDLQLQIRUPDWLRQSXUVXDQWWRDFULPLQDO                             RI WKH VXESRHQD SRZHU &RQJUHVV LQWHQGHG WR JLYH WR WKH
LQYHVWLJDWLRQ,QERWKWKHVHFDVHVKRZHYHUWKHFRXUWVZHUH                              $WWRUQH\ *HQHUDO   86&  D$ HPSKDVLV
DGGUHVVLQJ DGPLQLVWUDWLYH VHDUFKHV DV RSSRVHG WR                                     DGGHG
DGPLQLVWUDWLYHVXESRHQDV$EHO86DW3KLEEV
                                                                                              $VLGH IURP WKH VWDWXWRU\ ODQJXDJH RWKHU HYLGHQFH RI
                                                                                           &RQJUHVVjV LQWHQW WR JUDQW WKH $WWRUQH\ *HQHUDO D EURDG
                                                                                          VXESRHQDSRZHUFDQEHIRXQGLQ+,3$$jVOHJLVODWLYHKLVWRU\
WKH
       %DVHG LQ SDUW RQ WKHVH FDVHV WKH GLVWULFW FRXUW UHIXVHG WR HQIRUFH
      JRYHUQPHQWjV      DGPLQLVWUDWLYH   VXESRHQD      LQVRIDU    DV   LW   VRXJKW   WKH
                                                                                           2QH RI WKH PDLQ OHJLVODWLYH SXUSRVHV RI +,3$$ ZDV WR
SHUVRQDO    ILQDQFLDO   UHFRUGV   RI   WKH   WDUJHW   RI   WKH   KHDOWK     FDUH   IUDXG   SUHYHQW>@KHDOWKFDUHIUDXGDQGDEXVH+55HS1R
LQYHVWLJDWLRQ   ,Q   70 $:s5403,8 :.08 %0.:2          ) 6XSS G DW  7KH          DW   UHSULQWHG LQ  86&&$1 
GLVWULFW FRXUW GLG HQIRUFH KRZHYHU WKH UHPDLQGHU RI WKH JRYHUQPHQWjV                       $V WKH +RXVH :D\V DQG 0HDQV &RPPLWWHH 5HSRUW
VXESRHQD 2Q DSSHDO WR WKH 86 &RXUW RI $SSHDOV IRU WKH )RXUWK &LUFXLW
                                                                                           VWDWHGLQUHFRPPHQGLQJWKDW+,3$$EHSDVVHG
WKH JRYHUQPHQW GLG QRW FURVVDSSHDO WKH GLVWULFW FRXUWjV GHQLDO RI LWV
UHTXHVW WR VXESRHQD WKH WDUJHWjV SHUVRQDO ILQDQFLDO UHFRUGV
)RXUWK &LUFXLW GLG QRW DGGUHVV WKH LVVXH 1HYHUWKHOHVV DW QR WLPH GLG WKH
                                                                             7KXV WKH
                                                                                             ,Q RUGHU WR DGGUHVV WKH SUREOHP RI KHDOWK FDUH FRVW
FRXUW RI DSSHDOV LQGLFDWH WKDW DQ\WKLQJ EXW D WHVW RI UHDVRQDEOHQHVV VKRXOG                  LQIODWLRQ DQG PDNH LQVXUDQFH PRUH DIIRUGDEOH LW LV
EH DSSOLHG WR DGPLQLVWUDWLYH VXESRHQDV LVVXHG SXUVXDQW WR  
     ,QUH$GPLQLVWUDWLYH6XESRHQD                1R       1R                 ,QUH$GPLQLVWUDWLYH6XESRHQD          

HPSKDVLV DGGHG WKH TXHVWLRQ RI WKH UHOHYDQFH RI WKH        )G DW  VWDWLQJ WKDW LI mDQ RQSUHPLVHV VHDUFK DQG
GRFXPHQWVUHTXHVWHGLVLQKHUHQWO\DTXHVWLRQRIZKHWKHUWKH           LQVSHFWLRQlLVQHHGHGWRH[HFXWHDQDGPLQLVWUDWLYHVXESRHQD
'2s KDG WKH VWDWXWRU\ DXWKRULW\ WR LVVXH WKLV VXESRHQD       WKHQDYDOLGVHDUFKZDUUDQWDQGDVKRZLQJRISUREDEOHFDXVH
1HYHUWKHOHVV EHFDXVH WKH VHFRQG HOHPHQW RI RXU WHVW IRU      LV QHHGHG  0HDQZKLOH LQ WKLV FDVH WKH '2s KDV VLPSO\
GHWHUPLQLQJWKHHQIRUFHDELOLW\RIDQDGPLQLVWUDWLYHVXESRHQD          UHTXHVWHG GRFXPHQWV IURP 'RH D UHTXHVW ZKLFK KH KDV
IRFXVHVRQWKHUHOHYDQFHRIWKHGRFXPHQWVWR WKHDJHQF\jV            GHFLGHG WR FKDOOHQJH LQ IHGHUDO FRXUW DV LV KLV ULJKW  7KH
LQYHVWLJDWLRQZHZLOODGGUHVVWKLVLVVXHXQGHUWKDWKHDGLQJ         LPPHGLDF\DQGLQWUXVLYHQHVVDVVRFLDWHGZLWKDVHDUFKDUHQRW
7KXVDVLGHIURPWKHTXHVWLRQRIUHOHYDQFHZHDUHFRQILGHQW          SUHVHQW LQ WKH GRFXPHQW UHTXHVW LQ WKLV FDVH DQG WKXV WKH
WKDWWKH'2sKDVVDWLVILHGjVVWDWXWRU\UHTXLUHPHQWVIRU        KHLJKWHQHG UHTXLUHPHQW RI SUREDEOH FDXVH LV LQDSSOLFDEOH
LVVXLQJWKLVDGPLQLVWUDWLYHVXESRHQD                                 KHUH
      'RHVWKH6XESRHQD6HHN'RFXPHQWV5HOHYDQWWRWKH                 7KH GLVWULFW FRXUW LQ,Q UH 6XESRHQDV 'XFHV 7HFXP DOVR
        '2s,QYHVWLJDWLRQ"                                            FLWHG WR WKH 6XSUHPH &RXUWjV GHFLVLRQ LQ 8QLWHG 6WDWHV Y
                                                                      /D6DOOH1DWLRQDO%DQN86DVDEDVLVIRU
   :KLOH ZH KDYH QR FLUFXLW SUHFHGHQW DGGUHVVLQJ WKH           DSSO\LQJDSUREDEOHFDXVHVWDQGDUGWRDQDJHQF\jVVXESRHQD
DGPLQLVWUDWLYHVXESRHQDUHOHYDQFHUHTXLUHPHQWDVLWUHODWHVWR        UHTXHVWLQDFULPLQDOLQYHVWLJDWLRQ,QUH6XESRHQDV'XFHV
GRFXPHQWV UHTXHVWHG XQGHU   RWKHU DGPLQLVWUDWLYH          7HFXP  ) 6XSS G DW   /D6DOOH KRZHYHU LV DOVR
VXESRHQD FDVHV LQ WKLV FLUFXLW DV ZHOO DV 6XSUHPH &RXUW     GLVWLQJXLVKDEOH$OWKRXJKWKH6XSUHPH&RXUWLQ/D6DOOHGLG
SUHFHGHQWKROGWKDWUHOHYDQFHVKRXOGEHFRQVWUXHGEURDGO\           KROG WKDW LW ZRXOG EH XQODZIXO IRU WKH ,56 WR XVH LWV
)LUVWZHQRWHWKDWWKHODQJXDJHRILQGLFDWHVWKDWWKH         DGPLQLVWUDWLYHVXESRHQDSRZHUXQGHU86&VROHO\
TXHVWLRQRIDQDGPLQLVWUDWLYHVXESRHQDjVUHOHYDQFHLVQRWD           WR JDWKHU HYLGHQFH IRU D FULPLQDO SURVHFXWLRQ WKH &RXUWjV
TXHVWLRQ RI HYLGHQWLDU\ UHOHYDQFH EXW UDWKHU LV VLPSO\ D     GHFLVLRQZDVEDVHGQRWRQFRQVWLWXWLRQDOFRQVLGHUDWLRQVEXW
TXHVWLRQRIZKHWKHUWKHGRFXPHQWVUHTXHVWHGSXUVXDQWWRWKH           RQ&RQJUHVVjVIDLOXUHWRJLYHWKH,56WKHVWDWXWRU\DXWKRULW\
VXESRHQDDUHUHOHYDQWWRWKHKHDOWKFDUHIUDXGLQYHVWLJDWLRQ          WRXVHLWVVXESRHQDSRZHULQWKLVIDVKLRQ/D6DOOH86
EHLQJXQGHUWDNHQ86&D$)XUWKHUPRUH           DW  Q,QRXUFDVHRQWKHRWKHUKDQG&RQJUHVV KDV
LQ0DUNZRRGZKLOHZHGLGQRWKDYHWRHQJDJHLQDGLVFXVVLRQ          JLYHQ WKH '2s WKH H[SUHVV SRZHU WR LVVXH DGPLQLVWUDWLYH
RI WKH UHOHYDQFH RI WKH GRFXPHQWV UHTXHVWHG WKURXJK WKH       VXESRHQDV IRU DOO GRFXPHQWV DQG WKLQJV mZKLFK PD\ EH
DGPLQLVWUDWLYHVXESRHQDZHGLGQRWHRIWHQWKHGHIHUHQFHWKDW         UHOHYDQWl WR LWV FULPLQDO KHDOWK FDUH IUDXG LQYHVWLJDWLRQ
FRXUWV PXVW VKRZ WR WKH VWDWXWRU\ DXWKRULW\ RI WKH            86&D$7KH6XSUHPH&RXUWjVUHDVRQLQJ
DGPLQLVWUDWLYH DJHQF\ VWDWLQJ WKDW VXESRHQDV VKRXOG EH         LQ/D6DOOHLVLQDSSOLFDEOHWRWKLVFDVH
HQIRUFHGZKHQmµWKHHYLGHQFHVRXJKWE\WKHVXESRHQD>LV@QRW
SODLQO\LQFRPSHWHQWRULUUHOHYDQWWRDQ\ODZIXOSXUSRVHRIWKH          :H DJUHH ZLWK WKH )RXUWK &LUFXLW WKDW WKH UHDVRQDEOH
>DJHQF\@ LQ WKH GLVFKDUJH RI >LWV@ GXWLHVjl  0DUNZRRG    UHOHYDQFHWHVWVKRXOGDSSO\WRDGPLQLVWUDWLYHVXESRHQDVXQGHU
)GDWTXRWLQJ(QGLFRWWsRKQVRQ&RUSY3HUNLQV           %RWKWKH6XSUHPH&RXUWDQGWKLVFLUFXLWKDYHORQJ
86                                                DSSOLHG WKLV WHVW ZKHQ UHYLHZLQJ DGPLQLVWUDWLYH VXESRHQD
                                                                      UHTXHVWV DQG ZH VHH QR FRQYLQFLQJ EDVLV XSRQ ZKLFK WR
  ,Q((2&Y)RUG0RWRU&UHGLW&R)GWK&LU          GLVWLQJXLVK WKHVH ELQGLQJ SUHFHGHQWV VLPSO\ EHFDXVH WKLV
 WKLV FRXUW GLVFXVVHG WKH UHOHYDQFH UHTXLUHPHQW DV LW   VXESRHQDZDVLVVXHGSXUVXDQWWRDFULPLQDODVRSSRVHGWR
UHODWHG WR DGPLQLVWUDWLYH VXESRHQDV LVVXHG E\ WKH ((2&        FLYLOLQYHVWLJDWLRQ
)ROORZLQJ6XSUHPH&RXUWSUHFHGHQWZHH[SODLQHGWKDWWKH
     ,QUH$GPLQLVWUDWLYH6XESRHQD                  1R       1R               ,QUH$GPLQLVWUDWLYH6XESRHQD         

&$SSO\LQJWKH/DZWRWKH6XESRHQDLQWKLV&DVH                         ,Q DQ\ LQYHVWLJDWLRQ UHODWLQJ WR DQ\ DFW RU DFWLYLW\
                                                                          LQYROYLQJD)HGHUDOKHDOWKFDUHRIIHQVHWKH$WWRUQH\
   )ROORZLQJ6XSUHPH&RXUWSUHFHGHQWRQWKHHQIRUFHPHQWRI                *HQHUDORUWKH$WWRUQH\*HQHUDOjVGHVLJQHHPD\LVVXHLQ
DGPLQLVWUDWLYHVXESRHQDVWKLVFLUFXLWKDVKHOGWKDWDVXESRHQD           ZULWLQJDQGFDXVHWREHVHUYHGDVXESRHQDUHTXLULQJ
LV SURSHUO\ HQIRUFHG LI  LW VDWLVILHV WKH WHUPV RI LWV        WKH SURGXFWLRQ RI DQ\ UHFRUGV LQFOXGLQJ DQ\ ERRNV
DXWKRUL]LQJVWDWXWHWKHGRFXPHQWVUHTXHVWHGZHUHUHOHYDQW             SDSHUVGRFXPHQWVHOHFWURQLFPHGLDRURWKHUREMHFWVRU
WRWKH'2sjVLQYHVWLJDWLRQWKHLQIRUPDWLRQVRXJKWLVQRW              WDQJLEOHWKLQJVZKLFKPD\EHUHOHYDQWWRDQDXWKRUL]HG
DOUHDG\ LQ WKH '2sjV SRVVHVVLRQ DQG  HQIRUFLQJ WKH             ODZ HQIRUFHPHQW LQTXLU\ WKDW D SHUVRQ RU OHJDO HQWLW\
VXESRHQDZLOOQRWFRQVWLWXWHDQDEXVHRIWKHFRXUWjVSURFHVV             PD\SRVVHVVRUKDYHFDUHFXVWRG\RUFRQWURO>@
0DUNZRRG)GDW
                                                                         86&  D$  7KH &RGH EURDGO\ GHILQHV D
   $VQRWHGHDUOLHUWKHDGPLQLVWUDWLYHVXESRHQDDWLVVXHLQWKLV       m)HGHUDOKHDOWKFDUHRIIHQVHlDVDYLRODWLRQRIRUDFRQVSLUDF\
FDVHUHTXHVWHGQLQHFDWHJRULHVRIGRFXPHQWV2IWKHVHWZR             WRYLRODWHDQXPEHURIKHDOWKFDUHUHODWHGRIIHQVHVLQFOXGLQJ
LQYROYHUHTXHVWVIRUWKHILOHVRISDWLHQWVZKRZHUHUHIHUUHGWR          86&   IDOVH VWDWHPHQWV UHODWLQJ WR KHDOWK FDUH
RXWVLGHODEVIRUDGGLWLRQDOWHVWLQJ'RHQRORQJHUGLVSXWHVWKH        PDWWHUVDQG86&KHDOWKFDUHIUDXG86&
UHDVRQDEOHQHVV RI WKH JRYHUQPHQWjV UHTXHVW IRU SDWLHQW            D$IHGHUDOKHDOWKFDUHRIIHQVHDOVRHQFRPSDVVHVD
GRFXPHQWVKRZHYHUDQGWKXVZHZLOOQRWDGGUHVVWKLVDVSHFW            YDULHW\ RI JHQHUDO FULPLQDO YLRODWLRQV HJ PDLO DQG ZLUH
RI WKH VXESRHQD  6HH $SSHOODQWjV 5HSO\ %U DW   2I WKH   IUDXGXQGHU86&DQGLIWKRVHYLRODWLRQV
UHPDLQLQJFDWHJRULHVIRXUHQFRPSDVVGRFXPHQWVUHODWHGWR               mUHODWH>@ WR D KHDOWK FDUH EHQHILW SURJUDPl   86&
'RHjV SURIHVVLRQDO HGXFDWLRQ DQG WKH H[WHQW RI KLV HWKLFDO      D
WUDLQLQJWZRLQYROYH'RHjVSHUVRQDODQGEXVLQHVVILQDQFLDO
UHFRUGV DQG WKH ILQDO UHTXHVW VHHNV WKRVH EDQN DQG RWKHU         6HFWLRQ  DOVR UHTXLUHV WKDW DQ\ VXESRHQD LVVXHG
ILQDQFLDOUHFRUGVRI'RHjVFKLOGUHQVKRZLQJDQ\DVVHWVWKDW             GHVFULEHWKHREMHFWVWREHSURGXFHGDQGDOORZDUHDVRQDEOH
mZHUH SURYLGHG RU GHULYHG IURP LQGLYLGXDO RU MRLQWO\ KHOG       SHULRG RI WLPH IRU WKH LWHPV WR EH DVVHPEOHG   86&
DVVHWVRI>sRKQ'RH@ls$DW$GPLQ6XESRHQD                    D  7KH VXESRHQDHG SDUW\ QHHG QRW GHOLYHU DQ\
                                                                        GRFXPHQWVUHTXHVWHGSXUVXDQWWRPRUHWKDQPLOHV
  :H ZLOO QRZ DGGUHVV ZKHWKHU WKH UHTXLUHPHQWV IRU               IURPWKHSODFHZKHUHLWZDVVHUYHG86&D
HQIRUFLQJDQDGPLQLVWUDWLYHVXESRHQDKDYHEHHQPHWLQWKLV
FDVH IRFXVLQJ RQ HDFK RI WKH GLIIHUHQW FDWHJRULHV RI              7KHUHLVQRGLVSXWHWKDWWKHLQYHVWLJDWLRQDWLVVXHLQWKLV
GRFXPHQWVLQWXUQ                                                      FDVHUHODWHVWRDSRWHQWLDOIHGHUDOKHDOWKFDUHRIIHQVH:KLOH
                                                                        'RHGRHVGHVFULEHWKHVXESRHQDDVmRYHUO\EXUGHQVRPH>@l
      'RHVWKLV6XESRHQD&RPSO\ZLWKjVVWDWXWRU\               s$DW0HPLQ6XSSRI0RWWR4XDVKKHGRHVQRWDUJXH
        UHTXLUHPHQWV"                                                   WKDWWKHOHQJWKRIWLPHJLYHQKLPWRFRPSO\ZLWKWKHVXESRHQD
                                                                        RU WKH GHVLJQDWHG GHOLYHU\ ORFDWLRQ IRU WKH UHTXHVWHG
  3HWLWLRQHUGRHVQRWDUJXHWKDWWKLVDGPLQLVWUDWLYHVXESRHQD           GRFXPHQWVDUHEH\RQGWKHVFRSHRIWKHDXWKRULW\JUDQWHGLQ
IDLOV WR FRPSO\ ZLWK WKH VWDWXWRU\ UHTXLUHPHQWV RI       ,QVWHDGWKHSULPDU\SRLQWRIFRQWHQWLRQLQWKLVFDVH
,QGHHGWRGRVRZRXOGEHGLIILFXOWJLYHQWKHEURDGVXESRHQD            LVZKHWKHUWKHGRFXPHQWVUHTXHVWHGDUHUHOHYDQWWRWKH'2sjV
SRZHUWKDWWKHVWDWXWHJLYHVWRWKH$WWRUQH\*HQHUDODQGKHU            LQYHVWLJDWLRQRI'RH%HFDXVHDXWKRUL]HVVXESRHQD
GHVLJQHHV7KHSURYLVLRQVWDWHV                                       UHTXHVWV IRU GRFXPHQWV mZKLFK PD\ EH UHOHYDQW WR DQ
                                                                        DXWKRUL]HG ODZ HQIRUFHPHQW LQTXLU\l  D$