Court Opinion

ID: 2970094
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:04:10.083855+00
Date Added: 2024-06-11T15:00:31.896216
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
    &KDRY+RVSLWDO6WDIILQJ                1RV                     3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

      6HUYLFHV,QFHWDO                                                 (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                                                                                         )LOH 1DPH DS

RUUHJXODWRU\SRZHUjUHIHUVWRWKHHQIRUFHPHQWRIVWDWHODZV
DIIHFWLQJ KHDOWK ZHOIDUH PRUDOV DQG VDIHW\ EXW QRW            81,7('67$7(6&28572)$33($/6
UHJXODWRU\ODZVWKDWGLUHFWO\FRQIOLFWZLWKWKHFRQWURORIWKH
UHVRUSURSHUW\E\WKHEDQNUXSWF\FRXUWl,G7KXVWKLVFDVH                        )257+(6,;7+&,5&8,7
SURYLGHVJXLGDQFHDVWRZKHQWKHSROLFHSRZHUVH[FHSWLRQWR                              BBBBBBBBBBBBBBBBB
WKHDXWRPDWLFVWD\GRHVQRWDSSO\nLHZKHQJRYHUQPHQW
DFWLRQEURXJKWSXUVXDQWWRWKHSROLFHRUUHJXODWRU\SRZHUVRI
D VWDWH RU WKH IHGHUDO JRYHUQPHQW LV QRW UHODWHG WR WKH
HQIRUFHPHQW RI ODZV DIIHFWLQJ KHDOWK ZHOIDUH PRUDOV RU         (/$,1( &+$26HFUHWDU\RI      ;
VDIHW\VXFKDVZKHQWKHDFWLRQLVDFWXDOO\EURXJKWWRLQWHUIHUH         /DERU8QLWHG6WDWHV            
ZLWK WKH MXULVGLFWLRQ RI WKH EDQNUXSWF\ FRXUW  ,Q HIIHFW ,   'HSDUWPHQWRI/DERU            
EHOLHYHWKDWWKHPDMRULW\jVGLVFXVVLRQRIWKHSXEOLFSROLF\WHVW                                               1RV
                                                                                     3ODLQWLII$SSHOOHH 
QDUURZV WKH WHVW FRQVLGHUDEO\ DQG , ILQG WKLV LQIULQJHPHQW                                       !
XSRQ WKH ODZIXO DXWKRULW\ RI VWDWH DQG IHGHUDO DJHQFLHV LQ                                      
IDYRU RI YHVWLQJ LQFUHDVHG SRZHU LQ WKH EDQNUXSWF\ FRXUWV                    Y                  
SDUWLFXODUO\WURXEOLQJ&I%RDUGRI*RYHUQRUVRIWKH)HGHUDO                                           
5HVHUYH 6\V Y 0&RUS )LQ ,QF  86          +263,7$/ 67$)),1*               
FRPPHQWLQJWKDWLQGHFLGLQJDFDVHXQGHUWKHSROLFHSRZHUV             6(59,&(6 ,1& &$3,7$/         
H[FHSWLRQVDSURSRVHGLQWHUSUHWDWLRQZDVmSUREOHPDWLFERWK             )$&7256 ,1& 521 /86.        
EHFDXVHLWFRQIOLFW>HG@ZLWKWKHEURDGGLVFUHWLRQ&RQJUHVVKDV                                           
H[SUHVVO\JUDQWHGPDQ\DGPLQLVWUDWLYHHQWLWLHVDQGEHFDXVHLW            LQGLYLGXDOO\DQGDV3UHVLGHQW   
>ZD@V LQFRQVLVWHQW ZLWK WKH OLPLWHG DXWKRULW\ &RQJUHVV KDV        RI+RVSLWDO6WDIILQJ6HUYLFHV  
YHVWHGLQEDQNUXSWF\FRXUWVl                                           ,QF                           
                                                                                            'HIHQGDQWV 
  7KXVDQXPEHURIFRXUWVLQFOXGLQJWKLVRQHKDYHKHOGWKDW                                           
WKH SROLFH SRZHUV H[FHSWLRQ WR WKH DXWRPDWLF VWD\ DSSOLHV                                        
ZKHUHLQWKHPDMRULW\jVZRUGVWKHJRYHUQPHQWDJHQF\jVmVXLW            .(11(7+ :(/7%DQNUXSWF\
                                                                                                         
VHUYHV OLWWOH SXEOLF SXUSRVH RWKHU WKDQ D JHQHUDO LQWHUHVW LQ   7UXVWHHIRU+RVSLWDO6WDIILQJ   
VHHLQJODZHQIRUFHGlDWOHDVWZKHUHWKHODZDWLVVXHLVUHODWHG         6HUYLFHV,QF                 
WR KHDOWK ZHOIDUH PRUDOV RU VDIHW\  7KH ZDJH DQG KRXUV             'HIHQGDQW$SSHOODQW 
ODZVDWLVVXHLQWKLVFDVHDUHUHODWHGWRVXFKFRQFHUQVDQGWKXV                                       1
WKH PDMRULW\jV KROGLQJ FDQQRW EH UHFRQFLOHG ZLWK PDQ\
SUHFHGHQWVnLQFOXGLQJRXURZQnLQWHUSUHWLQJDQGDSSO\LQJ
WKHSXEOLFSROLF\H[FHSWLRQWRWKHDXWRPDWLFVWD\)RUWKLV
UHDVRQ,UHVSHFWIXOO\GLVVHQW                                                $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
                                                                            IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV
                                                                            1Rn%HUQLFH%'RQDOG'LVWULFWsXGJH
                                                                                        $UJXHGsDQXDU\

                                                                                                     
       &KDRY+RVSLWDO6WDIILQJ                1RV        1RV                &KDRY+RVSLWDO6WDIILQJ        
        6HUYLFHV,QFHWDO                                                                                  6HUYLFHV,QFHWDO

             'HFLGHGDQG)LOHG2FWREHU                         GLIILFXOW  ,QVWHDG ZH PHUHO\ UHTXLUHG WKDW WKH DJHQF\jV
                                                                          H[HUFLVHRILWVUHJXODWRU\SRZHUVEHUHODWHGWRWKHGHFODUHG
%HIRUH%2**6DQG0225(&LUFXLWsXGJHVDQG%(//                       SXEOLFSROLFLHVVXSSRUWLQJWKRVHSRZHUV7KLVZDVWKHFDVH
                   'LVWULFWsXGJH
                                       HYHQWKRXJKWKHDFWXDOEHQHILWVGHULYHGIURPWKHSURFHHGLQJ
                                                                          ZRXOGIORZWRSDUWLFXODULQGLYLGXDOV
                       BBBBBBBBBBBBBBBBB
                                                                             2WKHUFLUFXLWVKDYHUHDFKHGVLPLODUFRQFOXVLRQV,Q((2&
                            &2816(/                                       Y5DWK3DFNLQJ&R)GWK&LUFHUWGHQLHG
                                                                          86IRUH[DPSOHWKH(LJKWK&LUFXLWKHOGWKDW
$5*8('$UWKXU+5LFH5,&(	52%,16210LDPL                          WKHSROLFHSRZHUVH[FHSWLRQWRWKHDXWRPDWLFVWD\DSSOLHGWR
)ORULGD IRU $SSHOODQW  (OOHQ 5 (GPRQG 86                     D 7LWOH 9,, DFWLRQ HYHQ WKRXJK VXFK DFWLRQV DUH FOHDUO\
'(3$570(17 2) /$%25 2)),&( 2) 7+(                                   EURXJKW mDW WKH EHKHVW RI DQG IRU WKH EHQHILW RI VSHFLILF
62/,&,725:DVKLQJWRQ'&IRU$SSHOOHH21%5,()                     LQGLYLGXDOVl6HHLGDWTXRWDWLRQRPLWWHG7KHPDMRULW\
$UWKXU + 5LFH /LVD 0 6FKLOOHU 5,&( 	 52%,1621                FLWHV 5DWK 3DFNLQJ DQG HYHQ UHFRJQL]HV WKDW JLYHQ VXFK
0LDPL )ORULGD IRU $SSHOODQW  (OOHQ 5 (GPRQG 3DXO             SUHFHGHQWV mPDQ\ FDVHV ZLOO EH FORVHl  %XW WKH PDMRULW\
)ULHGHQ 86 '(3$570(17 2) /$%25 2)),&( 2)                        FRPSOHWHO\ DYRLGV H[SODLQLQJ KRZ WKH SUHVHQW FDVH FDQ EH
7+(62/,&,725:DVKLQJWRQ'&IRU$SSHOOHH                            GLVWLQJXLVKHG IURP WKDW DW LVVXH LQ 5DWK 3DFNLQJ  ,QGHHG
                                                                          XQGHUWKHPDMRULW\jVYHUVLRQRIWKHSROLFHSRZHUVH[FHSWLRQ
  %2**6sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK                 5DWK3DFNLQJDVZHOODVDQ\QXPEHURIRWKHUFDVHVZRXOG
%(// ' s MRLQHG  0225( s SS  GHOLYHUHG D        OLNHO\KDYHEHHQGHFLGHGWKHRWKHUZD\
VHSDUDWHGLVVHQWLQJRSLQLRQ
                                                                            $WWKHVDPHWLPHWKHPDMRULW\LVFRUUHFW WRQRWHWKDWDOO
                       BBBBBBBBBBBBBBBBB                                  JRYHUQPHQW DFWLRQV DUH QRW FRYHUHG E\ WKH SROLFH SRZHUV
                                                                          H[FHSWLRQWRWKHDXWRPDWLFVWD\7KXVLQ0LVVRXULY86
                           23,1,21                                        %DQNUXSWF\&RXUW)GWK&LUFHUWGHQLHG
                       BBBBBBBBBBBBBBBBB                                  86WKH(LJKWK&LUFXLWKHOGWKDWWKH6WDWH
   %2**6&LUFXLWsXGJH,QWKH8QLWHG6WDWHV'LVWULFW&RXUW             RI0LVVRXULjVHIIRUWVWRLQWHUIHUHZLWKWKHEDQNUXSWF\FRXUWjV
IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHWKH6HFUHWDU\RI/DERU             MXULVGLFWLRQRYHUWKHDFWXDOSURSHUW\RIWKHGHEWRUE\PHDQVRI
ILOHG VXLW VHHNLQJ DQ LQMXQFWLRQ WR SURKLELW WKH WUXVWHH RI D   WKHVWDWHjVJUDLQODZVGLGQRWIDOOZLWKLQWKHSROLFHSRZHUV
EDQNUXSW FRUSRUDWLRQ WKHQ XQGHUJRLQJ OLTXLGDWLRQ LQ WKH             H[FHSWLRQ6HHLGDW%DVHGRQWKHOHJLVODWLYHKLVWRU\
EDQNUXSWF\ FRXUW IRU WKH 6RXWKHUQ 'LVWULFW RI )ORULGD IURP        DQGFDVHODZWKH(LJKWK&LUFXLWVWDWHGWKDWmWKHWHUPµSROLFH
PRYLQJ LQ FRPPHUFH FHUWDLQ UHFRUGV WKDW WKH 6HFUHWDU\
GHHPHGmKRWJRRGVl7KHZRUNHUVZKRSURGXFHGWKHUHFRUGV
IRUWKHFRUSRUDWLRQKDGQRWEHHQSDLGLQDFFRUGDQFHZLWKWKH                  
                                                                                6HHHJ (GGOHPDQ Y 'HSjW RI /DERU   )G  WK &LU
PLQLPXP ZDJH DQG RYHUWLPH SURYLVLRQV RI WKH )DLU /DERU             KROGLQJ WKDW /DERU 'HSDUWPHQW DFWLRQ EURXJKW WR UHFRYHU XQSDLG
                                                                          ZDJHV XQGHU WKH 6HUYLFH &RQWUDFW $FW IHOO ZLWKLQ WKH SROLFH SRZHUV
                                                                                                         RYHUUXOHG RQ RWKHU JURXQGV E\ 7HPH[
                                                                          H[FHSWLRQ WR WKH DXWRPDWLF VWD\
                                                                          (QHUJ\ ,QF Y 8QGHUZRRG :LOVRQ %HUU\ 6WHLQ 	 sRKQVRQ    )G
    
     7KH +RQRUDEOH 5REHUW +ROPHV %HOO &KLHI 8QLWHG 6WDWHV 'LVWULFW        WK &LU   6HH DOVR (GGOHPDQ      )G DW  Q
sXGJH IRU WKH :HVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ       FROOHFWLQJ VLPLODU FDVHV
    &KDRY+RVSLWDO6WDIILQJ               1RV        1RV               &KDRY+RVSLWDO6WDIILQJ         
      6HUYLFHV,QFHWDO                                                                                6HUYLFHV,QFHWDO

FRQFHGHVnEXWVLPSO\DQDFWLRQE\WKH/DERU'HSDUWPHQWWR             6WDQGDUGV$FW7KH7UXVWHHFODLPHGWKHGLVWULFWFRXUWODFNHG
UHFRYHUXQSDLGZDJHVRQEHKDOIRISDUWLFXODULQGLYLGXDOV              MXULVGLFWLRQ WR HQWHUWDLQ WKH LQMXQFWLRQ DFWLRQ EHFDXVH WKH
                                                                       UHFRUGVKDGEHFRPHVXEMHFWWRWKHH[FOXVLYHMXULVGLFWLRQRI
  ,Q P\ YLHZ KRZHYHU LW LV LUUHOHYDQW ZKHWKHU WKLV FDVH     WKHEDQNUXSWF\FRXUW7KHGLVWULFWFRXUWGLVDJUHHGDQGDIWHU
LQYROYHVmKRWJRRGVlEHFDXVHXQGHURXUSUHFHGHQWVWKHSROLFH          SHUPLWWLQJWKH7UXVWHHWRFRQVROLGDWHDOOWKHWDLQWHGJRRGVLQ
SRZHUV H[FHSWLRQ ZRXOG DSSO\ HYHQ LI WKLV ZHUH D mSXUHl       0HPSKLV DQG GLVSRVH RI WKHP DV KH VDZ ILW HQWHUHG D
FVXLWWRUHFRYHUXQSDLGZDJHV,Q2KLRY0DQVILHOG           SUHOLPLQDU\LQMXQFWLRQRUGHULQJWKH7UXVWHHWRGHSRVLWZLWK
7LUH	5XEEHU&R,QUH0DQVILHOG7LUH	5XEEHU&R             WKHFOHUNRIWKHFRXUWWKHDPRXQWWKH6HFUHWDU\FODLPHGZDV
)G  WK &LU  IRU H[DPSOH ZH KHOG WKDW WKH     QHFHVVDU\WRmSXUJHWKHWDLQWlIURPWKHUHFRUGVLHWRFKDQJH
SROLFHSRZHUVH[FHSWLRQH[FHSWHGIURPWKHDXWRPDWLFVWD\WKH           WKHVWDWXVRIWKHUHFRUGVIURPmKRWJRRGVlWRRUGLQDU\JRRGV
HIIRUWV RI WKH 2KLR FRPPLVVLRQ FKDUJHG ZLWK DGMXGLFDWLQJ        9LHZHG LQ OLJKW RI WKH SDUWLFXODU IDFWV RI WKLV FDVH WKH
ZRUNHUVjFRPSHQVDWLRQFODLPV,QWKDWFDVHZHFRQFOXGHG              6HFUHWDU\jVVXLWLVQRWLQIXUWKHUDQFHRIKHUVWDWXWRU\SRZHUV
WKDWIRUSXUSRVHVRIWKHSROLFHSRZHUVH[FHSWLRQWKHUHZDV           WRUHJXODWHDQGHQIRUFHODERUVWDQGDUGVEXWUDWKHULVGHVLJQHG
QRGLVWLQFWLRQEHWZHHQWKHVWDWHRI2KLRjVYDOLGH[HUFLVHRILWV       WR DQG ZRXOG LI DOORZHG WR SURFHHG SURPRWH WKH SULYDWH
SROLFHSRZHUVLQHQDFWLQJZRUNHUVjFRPSHQVDWLRQODZVDQG               ULJKWV RI XQSDLG ZRUNHUV YLVDYLV RWKHU FUHGLWRUV RI WKH
WKHH[WHQVLRQRIWKDWSRZHUWKURXJKWKHDGPLQLVWUDWLRQRIVXFK         GHEWRUjV HVWDWH  6XFK D VXLW GRHV QRW IDOO ZLWKLQ WKH
FODLPV  6HH LG DW   :H GLG QRW UHTXLUH WKH 2KLR     %DQNUXSWF\&RGHjVEH[FHSWLRQWRWKHDXWRPDWLF
FRPPLVVLRQWRGHPRQVWUDWHVRPHFOHDUFRQQHFWLRQEHWZHHQ                VWD\  7KHUHIRUH WKH GLVWULFW FRXUW KDV QR MXULVGLFWLRQ WR
WKRVHFODLPVDQGDEURDGHUSXEOLFLQWHUHVWnLQHIIHFWWKH            HQWHUWDLQWKH6HFUHWDU\jVVXLW:HUHYHUVHWKHGLVWULFWFRXUW
FRPPLVVLRQjV HIIRUWV WR DGPLQLVWHU WKH ZRUNHUVj                   YDFDWHLWVRUGHUVDQGUHPDQGZLWKLQVWUXFWLRQVWRGLVPLVVWKH
FRPSHQVDWLRQFODLPVRISDUWLFXODULQGLYLGXDOVZDVVXIILFLHQW           FDVH
IRUWKHDFWLRQWRIDOOZLWKLQWKHSROLFHSRZHUVH[FHSWLRQ
                                                                                                        ,
   6LPLODUO\LQ1/5%Y(GZDUG&RRSHU3DLQWLQJ,QF
)GWK&LUZHKHOGWKDWDQ1/5%SURFHHGLQJ                 +RVSLWDO 6WDIILQJ 6HUYLFHV ,QF DQG IRXUWHHQ DIILOLDWHG
DJDLQVWDQHPSOR\HUIRUXQIDLUODERUSUDFWLFHVIHOOZLWKLQWKH         FRPSDQLHV FROOHFWLYHO\ m+66,l RU WKH mGHEWRUl
SROLFHSRZHUVH[FHSWLRQWRWKHDXWRPDWLFVWD\DQGZDVWKXV             XQVXFFHVVIXOO\ HQJDJHG LQ WKH EXVLQHVV RI SURYLGLQJ KRPH
HQIRUFHDEOH GHVSLWH WKH HPSOR\HUjV VXEVHTXHQW EDQNUXSWF\          KHDOWK FDUH DQG RWKHU KHDOWKUHODWHG VHUYLFHV WR SDWLHQWV LQ
ILOLQJ7KHHPSOR\HULQWKDWFDVHKDGHQJDJHGLQXQIDLUODERU         YDULRXV ORFDWLRQV WKURXJKRXW WKH FRXQWU\ SULPDULO\ LQ
SUDFWLFHVE\XQLODWHUDOO\WHUPLQDWLQJLWVFROOHFWLYHEDUJDLQLQJ        7HQQHVVHHDQG1HZ(QJODQG:KLOHPXFKRI+66,jVUHYHQXH
DJUHHPHQW ZLWK LWV WKUHH HPSOR\HHV  6HH LG DW   7KH   FDPHIURP0HGLFDUHDQGSULYDWHLQVXUDQFHUHLPEXUVHPHQWV
1/5%RUGHUDWLVVXHPDQGDWHGLQWHUDOLDWKHUHLQVWDWHPHQWRI         LWUHOLHGRQDVHFXUHGUHYROYLQJORDQDJUHHPHQWZLWK&DSLWDO
RQH RI WKRVH HPSOR\HHV ZLWK EDFN SD\  6HH LG DW    +HDOWKFDUH)LQDQFLQJm&+)lDGLYLVLRQRI&DSLWDO)DFWRUV
1HYHUWKHOHVV ZH KHOG WKDW WKLV SURFHHGLQJ VDWLVILHG WKH        ,QFIRUPRVWRILWVRSHUDWLQJFDSLWDO2Q0DUFK
mSXEOLFSROLF\lWHVWSXUSRUWHGO\DSSOLHGE\WKHPDMRULW\LQWKH        +66, ILOHG D SHWLWLRQ IRU &KDSWHU  UHRUJDQL]DWLRQ LQ WKH
SUHVHQWFDVH6HHLGDW:HGLGQRWUHTXLUHWKH1/5%WR         %DQNUXSWF\ &RXUW IRU WKH 6RXWKHUQ 'LVWULFW RI )ORULGD WKH
GHPRQVWUDWH WKH SRWHQWLDO HIIHFWV RI WKH FKDOOHQJHG XQIDLU      mEDQNUXSWF\FRXUWl
ODERUSUDFWLFHRQEURDGHUSXEOLFLQWHUHVWVZKLFKJLYHQWKH
VPDOO QXPEHU RI HPSOR\HHV LQYROYHG ZRXOG KDYH EHHQ
       &KDRY+RVSLWDO6WDIILQJ               1RV         1RV                &KDRY+RVSLWDO6WDIILQJ        
        6HUYLFHV,QFHWDO                                                                                  6HUYLFHV,QFHWDO

  $V'HEWRULQ3RVVHVVLRQ+66,VWD\HGDIORDWIRUDOPRVWRQH                                    BBBBBBBBBBBBBBBBB
\HDU,QRUGHUWRIXQGLWVRSHUDWLRQV+66,VRXJKWEDQNUXSWF\
FRXUWDSSURYDOWRLQFXUGHEWDQGREWDLQFUHGLWIURP&+)2Q                                        ',66(17
sXO\   WKH EDQNUXSWF\ FRXUW DSSURYHG WKH FUHGLW                                  BBBBBBBBBBBBBBBBB
UHODWLRQVKLSLWJUDQWHG&+)DQVXSHUSULRULW\OLHQ
SXUVXDQWWR86&GRQDOORIWKHGHEWRUjVDVVHWV              .$5(1 1(/621 0225( &LUFXLW sXGJH GLVVHQWLQJ
LQH[FKDQJHIRU&+)jVFRQWLQXLQJWRDGYDQFHIXQGVXQGHUD                 7KH GLVWULFW FRXUW KHOG WKDW WKH /DERU 'HSDUWPHQWjV mKRW
IRUPXOD GHSHQGHQW XSRQ WKH GHEWRUjV DFFRXQWV UHFHLYDEOH            JRRGVlDFWLRQDWLVVXHLQWKLVFDVHIDOOVZLWKLQWKH%DQNUXSWF\
ELOOLQJ DQG FROOHFWLRQV  3XUVXDQW WR WKH WHUPV RI WKH          &RGHjVSROLFHSRZHUVH[FHSWLRQ86&EDQG
EDQNUXSWF\ FRXUWjV RUGHU &+) DSSOLHG IXQGV IURP DOO               WKXV LV QRW VXEMHFW WR WKH DXWRPDWLF VWD\  7KH PDMRULW\
UHFHLYDEOHVFROOHFWHGGXULQJWKHSHQGHQF\RIWKH&KDSWHU               GLVDJUHHVFRQFOXGLQJWKDWEDVHGRQmWKHSDUWLFXODUIDFWVRI
FDVHWRSD\RII+66,jVSUHSHWLWLRQGHEWV%\0D\RQO\             WKLV FDVHl WKH SROLFH SRZHUV H[FHSWLRQ GRHV QRW DSSO\
SRVWSHWLWLRQGHEWVUHPDLQHG                                             %HFDXVH , GR QRW DJUHH ZLWK WKH PDMRULW\jV QDUURZ
                                                                          LQWHUSUHWDWLRQRIWKHSROLFHSRZHUVH[FHSWLRQ,UHVSHFWIXOO\
  +66, GLG QRW HPHUJH IURP &KDSWHU   ,Q ODWH sDQXDU\         GLVVHQW,QVXP,GRQRWEHOLHYHWKDWWKHmWKHSDUWLFXODUIDFWV
 WKH ERUURZLQJ EDVH RQ ZKLFK WKH GHEWRUjV ILQDQFLQJ          RIWKLVFDVHlFDQSODXVLEO\EHGLVWLQJXLVKHGIURPRWKHUFDVHV
UHOLHG KDG GHWHULRUDWHG WR WKH H[WHQW WKDW LWV ILQDQFLQJ         nLQFOXGLQJ6L[WK&LUFXLWSUHFHGHQWVnLQZKLFKWKHSROLFH
DJUHHPHQW OHIW LW RQO\  LQ DYDLODEOH FUHGLW WR IXQG      SRZHUVH[FHSWLRQKDVEHHQKHOGWRDSSO\
RYHUKHDG H[SHQVHV LQFOXGLQJ HPSOR\HH VDODULHV  &+)
H[WHQGHGWKLVILQDODPRXQWRQ)HEUXDU\7KHGHEWRU                 ,QWKHSUHVHQWFDVHWKHPDMRULW\FRQFOXGHVWKDWWKH/DERU
QHYHUWKHOHVVVWRSSHGSD\LQJFHUWDLQHPSOR\HHVjZDJHVDVRI                'HSDUWPHQWjVDFWLRQmLQFLGHQWDOO\VHUYHVSXEOLFLQWHUHVWVEXW
sDQXDU\+66,jVSUHVLGHQWRUGHUHGFHVVDWLRQRIDOO              PRUHVXEVWDQWLDOO\DGMXGLFDWHVSULYDWHULJKWVlDQGWKXVIDOOV
7HQQHVVHH RSHUDWLRQV E\ )HEUXDU\   DQG DOO 1HZ            RXWVLGHRI WKHSROLFHSRZHUVH[FHSWLRQ7KHDFWLRQmPRUH
(QJODQGRSHUDWLRQVE\)HEUXDU\+66,FRQYHUWHGLWV              VXEVWDQWLDOO\ DGMXGLFDWHV SULYDWH ULJKWVl EHFDXVH LQ WKH
&KDSWHU  UHRUJDQL]DWLRQ WR D &KDSWHU  OLTXLGDWLRQ WKH          PDMRULW\jVHVWLPDWLRQWKLVFDVHLQYROYHVRQO\WKHUHFRYHU\RI
IROORZLQJGD\7KHEDQNUXSWF\FRXUWDSSRLQWHG.HQQHWK:HOW               ZDJHVRZHGE\WKHGHEWRUWRLWVHPSOR\HHVDQGWKXVGRHVQRW
DV WKH GHEWRUjV WUXVWHH m7UXVWHHl  :HOW XOWLPDWHO\              LPSOLFDWH EURDGHU SXEOLF LQWHUHVWV  (YHQ WKH /DERU
UHSUHVHQWHG WR WKH EDQNUXSWF\ FRXUW WKDW KH H[SHFWHG WR           'HSDUWPHQWjVHIIRUWWRFDVWWKLVDVDmKRWJRRGVlDFWLRQLH
PDUVKDODQGOLTXLGDWHDSSUR[LPDWHO\LQDVVHWVRI               DV DQ DFWLRQ WR HQMRLQ WKH PRYHPHQW RI WDLQWHG JRRGV LQ
WKH GHEWRU D ILJXUH ZHOO EHORZ WKH DPRXQW RI &+)jV ORDQ        LQWHUVWDWH FRPPHUFH IDLOV DFFRUGLQJ WR WKH ORJLF RI WKH
VHFXUHGE\WKHVXSHUSULRULW\GOLHQ                              PDMRULW\DVWKHmKRWJRRGVlLQTXHVWLRQDUHKRVSLWDOUHFRUGV
                                                                          DQG WKXV QRW UHDOO\ mJRRGVl DW DOO  %HFDXVH WKH UHFRUGV LQ
  2Q )HEUXDU\   VL[ GD\V DIWHU WKH FRQYHUVLRQ WR         TXHVWLRQZLOOQRWFRPSHWHZLWKJRRGVSURGXFHGLQFRPSOLDQFH
&KDSWHU$OH[LV+HUPDQWKHQ8QLWHG6WDWHV6HFUHWDU\RI                 ZLWKIHGHUDOZDJHDQGKRXUVVWDQGDUGVWKHPDMRULW\UHDVRQV
/DERUm6HFUHWDU\lILOHGVXLWLQWKH8QLWHG6WDWHV'LVWULFW            WKDW QR EURDGHU SXEOLF LQWHUHVW LV LPSOLFDWHG E\ WKH /DERU
                                                                          'HSDUWPHQWjVDFWLRQ,QWKHPDMRULW\jVYLHZWKHQWKLVLVQRW
                                                                          UHDOO\DmKRWJRRGVlFDVHnIRUPRVWVXFKDFWLRQVZLOOIDOO
                                                                         ZLWKLQ WKH SROLFH SRZHUV H[FHSWLRQ DV HYHQ WKH PDMRULW\
     (ODLQH &KDR SUHVHQWO\ VHUYHV DV 6HFUHWDU\ RI /DERU 6KH KDV
DXWRPDWLFDOO\ EHHQ VXEVWLWXWHG DV SODLQWLIIDSSHOOHH LQ WKLV PDWWHU IRU
IRUPHU 6HFUHWDU\ +HUPDQ SXUVXDQW WR )         !!
                                             5 $  3 F 7KH
    &KDRY+RVSLWDO6WDIILQJ                 1RV         1RV                    &KDRY+RVSLWDO6WDIILQJ              
      6HUYLFHV,QFHWDO                                                                                        6HUYLFHV,QFHWDO

7KXVFODLPVRWKHUWKDQWKRVHIRUDQDGPLQLVWUDWLYHH[SHQVH               &RXUWIRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHmGLVWULFWFRXUWl
WKDWDULVHDIWHUWKHRULJLQDOILOLQJEXWEHIRUHFRQYHUVLRQDUH            WRHQIRUFHFHUWDLQSURYLVLRQVRIWKH)DLU/DERU6WDQGDUGV$FW
WUHDWHG IRU SXUSRVHV RI WKH  D OLPLWDWLRQ RQ WKH       m)/6$l7KH)/6$UHTXLUHVDPRQJRWKHUWKLQJVSD\PHQW
DXWRPDWLFVWD\DVLIWKH\KDGDULVHQEHIRUHWKHRULJLQDOILOLQJ          RIPLQLPXPDQGRYHUWLPHZDJHVWRFHUWDLQHPSOR\HHV6HH
DQGDUHDFFRUGLQJO\FRYHUHGE\WKHVWD\&ODLPVVSHFLILHGLQ           86&PLQLPXPZDJHPD[LPXPKRXUVDQG
EKRZHYHUDUHQRWWUHDWHGDVLIWKH\DURVHEHIRUHWKH            RYHUWLPHH[HPSWLRQV7KH6HFUHWDU\FRQWHQGHGWKDW
RULJLQDOSHWLWLRQDQGUHWDLQWKHLUDGPLQLVWUDWLYHH[SHQVHVWDWXV          FHUWDLQ RI WKH GHEWRUjV UHFRUGV LQFOXGLQJ FOLQLFDO SDWLHQW
HYHQDIWHUFRQYHUVLRQ$Q\VXFKFODLPPXVWEHILOHGZLWKWKH             UHSRUWV DQG ELOOLQJ LQIRUPDWLRQ KDG EHHQ SURGXFHG LQ
EDQNUXSWF\ FRXUW DV D PRWLRQ IRU DOORZDQFH RI DQ                  YLRODWLRQ RI WKH )/6$jV ZDJH SURYLVLRQV EHFDXVH
DGPLQLVWUDWLYHH[SHQVHVHH86&DRUDQRUGLQDU\            DSSUR[LPDWHO\+66,HPSOR\HHVKDGQRWEHHQSDLGWKHLU
FODLPDJDLQVWWKHHVWDWHVHH86&6HHDOVR)('             ZDJHVGXULQJWKHFRPSDQ\jVODVWZHHNVRIRSHUDWLRQ7KH
5 %$1.5 3 D VSHFLI\LQJ WKDW SURRIV RI FODLP            6HFUHWDU\ VRXJKW DQ LQMXQFWLRQ EDUULQJ WKH 7UXVWHH IURP
mVKDOOEHILOHGZLWKWKHFOHUNLQWKHGLVWULFWZKHUH WKHFDVH            WUDQVSRUWLQJ VXFK UHFRUGV DFURVV VWDWH OLQHV XQGHU WKH mKRW
XQGHU WKH &RGH LV SHQGLQJl FI  86&  D           JRRGVlSURYLVLRQRI86&DPDNLQJLWmXQODZIXO
VWD\LQJnZLWKRXWOLPLWDWLRQDVWRZKHQWKHDFWVJLYLQJULVH              IRU DQ\ SHUVRQn  WR WUDQVSRUW RIIHU IRU WUDQVSRUWDWLRQ
WRDFODLPWRRNSODFHRUWKHFODLPLWVHOIDURVHnDQ\mDFWWR              VKLS GHOLYHU RU VHOO LQ FRPPHUFH    DQ\ JRRGV LQ WKH
REWDLQSRVVHVVLRQRISURSHUW\RIWKHHVWDWHRUWRH[HUFLVH          SURGXFWLRQRIZKLFKDQ\HPSOR\HHZDVHPSOR\HGLQYLRODWLRQ
FRQWURORYHUSURSHUW\RIWKHHVWDWHl                                    RI VHFWLRQ  RU VHFWLRQ  RI WKLV WLWOH    l  7KH
                                                                          6HFUHWDU\FODLPVVKHLQLWLDWHGWKLVFDVHLQWKHGLVWULFWFRXUW
   ,I WKH 6HFUHWDU\jV VXLW LV D FODLP IRU DQ DGPLQLVWUDWLYH      XQGHU WKH HQIRUFHPHQW SRZHUV FRQIHUUHG XSRQ KHU LQ WKH
H[SHQVHnRQWKHWKHRU\WKDWHPSOR\HHVj86&E                 )/6$
ULJKWV WR EDFN ZDJHV DQG GDPDJHV IRU )/6$ YLRODWLRQV
FRQVWLWXWH DGPLQLVWUDWLYH H[SHQVHV RI WKH HVWDWH DQG D SXUH
FVXLWE\WKH6HFUHWDU\DVVHUWVWKRVHULJKWVRQEHKDOIRI
WKHHPSOR\HHVnLWKDGWREHILOHGLQWKHEDQNUXSWF\FRXUW,I            m6HFUHWDU\l UHIHUV WR &KDR +HUPDQ RU WKHLU SUHGHFHVVRUV DV DSSURSULDWH

WKH FODLP WKH 6HFUHWDU\jV VXLW DVVHUWV LV QRW D FODLP IRU DQ       
DGPLQLVWUDWLYHH[SHQVH86&GGLUHFWVWKDWLWEH                   %HFDXVH WKH 7UXVWHH KDV QRW DSSHDOHG WKH GLVWULFW FRXUWjV UXOLQJ WKDW
                                                                          WKH UHFRUGV VXEMHFW WR WKH 6HFUHWDU\jV DFWLRQ DUH mJRRGVl ZLWKLQ WKH
WUHDWHGDVLILWDURVHSULRUWRFRPPHQFHPHQWRIWKHRULJLQDO              PHDQLQJ RI  86&  L D ZH H[SUHVV QR RSLQLRQ RQ WKH
EDQNUXSWF\SURFHHGLQJDQGWKHLQVWDQWDFWLRQWKHUHIRUHIDOOV             PDWWHU
ZLWKLQWKHUHDFKRID,QHLWKHUHYHQWGLVWULFWFRXUW
KDGQRMXULVGLFWLRQWRHQWHUWDLQWKH6HFUHWDU\jVVXLW                        
                                                                                6HH  86&  F m7KH 6HFUHWDU\ PD\ EULQJ DQ DFWLRQ LQ DQ\
                                                                          FRXUW RI FRPSHWHQW MXULVGLFWLRQ WR UHFRYHU WKH DPRXQW RI XQSDLG PLQLPXP
                                 ,9                                       ZDJHV RU RYHUWLPH FRPSHQVDWLRQ DQG DQ HTXDO DPRXQW DV OLTXLGDWHG
                                                                          GDPDJHV 7KH ULJKW SURYLGHG E\ VXEVHFWLRQ E RI WKLV VHFWLRQ WR EULQJ DQ
  )RUWKHUHDVRQVVHWIRUWKDERYHWKHMXGJPHQWRIWKHGLVWULFW           DFWLRQ E\ RU RQ EHKDOI RI DQ\ HPSOR\HH WR UHFRYHU >XQSDLG PLQLPXP

FRXUW LV5(9(56(' LWV RUGHUV DUH9$&$7(' DQG WKLV                 ZDJHV DQG RYHUWLPH FRPSHQVDWLRQ@ VKDOO WHUPLQDWH XSRQ WKH ILOLQJ RI D
                                                                          FRPSODLQW E\ WKH 6HFUHWDU\     $Q\ VXPV WKXV UHFRYHUHG E\ WKH
FDVHLV5(0$1'('ZLWKLQVWUXFWLRQVWR',60,66IRUZDQW                    6HFUHWDU\ RI /DERU RQ EHKDOI RI DQ HPSOR\HH SXUVXDQW WR WKLV VXEVHFWLRQ
RIMXULVGLFWLRQ                                                          VKDOO EH KHOG LQ D VSHFLDO GHSRVLW DFFRXQW DQG VKDOO EH SDLG    GLUHFWO\ WR
                                                                          WKH HPSOR\HH RU HPSOR\HHV DIIHFWHGl VHH DOVR  86&   m7KH
                                                                          GLVWULFW FRXUWV    VKDOO KDYH MXULVGLFWLRQ IRU FDXVH VKRZQ WR UHVWUDLQ
      &KDRY+RVSLWDO6WDIILQJ              1RV        1RV                &KDRY+RVSLWDO6WDIILQJ         
       6HUYLFHV,QFHWDO                                                                                6HUYLFHV,QFHWDO

   7KHGLVWULFWFRXUWHQWHUHGDWHPSRUDU\UHVWUDLQLQJRUGHUD                                           ,,,
ZHHN ODWHU SHUPLWWLQJ WKH 7UXVWHH WR PDUVKDO WKH GHEWRUjV
DVVHWVEXWHQMRLQLQJWKH7UXVWHHIURPWUDQVIHUULQJRUUHPRYLQJ            7KH6HFUHWDU\SUHVHQWVDQDOWHUQDWLYHDUJXPHQW6KHFODLPV
DQ\PHVVDJHVGRFXPHQWVELOOVLQYRLFHVRURWKHUJRRGVIURP          WKDWDGRHVQRWVWD\WKHLQVWDQWDFWLRQEHFDXVHWKLV
WKHGHEWRUjVKHDGTXDUWHUVLQ0HPSKLV7KH7UXVWHHQHHGHG              MXGLFLDO SURFHHGLQJ UHODWHV WR SRVWSHWLWLRQ FRQGXFW RI WKH
WKHVHUHFRUGV RI DQGUHODWLQJWRVHUYLFHVUHQGHUHGE\+66,           GHEWRULQVRIDUDVWKHUHFRUGVLQTXHVWLRQGLGQRWH[LVWDWWKH
HPSOR\HHV LQ RUGHU WR ELOO SDWLHQWV DQG VHHN 0HGLFDUH DQG     WLPH RI WKH RULJLQDO EDQNUXSWF\ ILOLQJ DQG WKH GHEWRUVj
SULYDWHLQVXUDQFHUHLPEXUVHPHQW7KH7UXVWHHTXHVWLRQHGWKH           HPSOR\HHVKDGQRWSHUIRUPHGWKHZRUNWKDWJHQHUDWHGWKHP
GLVWULFWFRXUWjVMXULVGLFWLRQWRHQWHUWDLQWKHVXLWDQGWKHFRXUW     $VWKH6HFUHWDU\IRUPXODWHVLWKHUDUJXPHQWDSSDUHQWO\VHHNV
WRRNKLVGLVPLVVDOPRWLRQXQGHUDGYLVHPHQW,QUHVSRQVHWR            WR LQYRNHWKHOLPLWDWLRQRQWKHDDXWRPDWLFVWD\
DVHULHVRIPRWLRQVE\ERWKVLGHVWKHGLVWULFWFRXUWKHOGWKDW        ZKLFKDSSOLHVRQO\WR DQmDFWLRQRUSURFHHGLQJDJDLQVWWKH
LWKDGMXULVGLFWLRQRYHUWKH6HFUHWDU\jVVXLWDQGWKHDOOHJHGO\        GHEWRU WKDW    FRXOG KDYH EHHQ FRPPHQFHG EHIRUH WKH
KRW JRRGV UHDVRQLQJ WKDW WKH VXLW ZDV DQ H[HUFLVH RI WKH    FRPPHQFHPHQW RI WKH FDVH XQGHU WKLV WLWOHl   86&
6HFUHWDU\jV SROLFH SRZHU ZKLFK H[FHSWHG LW IURP WKH            D7KH6HFUHWDU\jVDUJXPHQWGHSHQGVIXUWKHURQKHU
DXWRPDWLFVWD\SURYLVLRQRI86&D1HYHUWKHOHVV         FRQWHQWLRQ WKDW +66,jV FRQYHUVLRQ RI LWV EDQNUXSWF\ IURP
WKHGLVWULFWFRXUWSHUPLWWHGWKH7UXVWHHWRSURFHHGZLWKDQ\           &KDSWHUWR&KDSWHUKDGQRHIIHFWRQDWWHPSWVWRFROOHFW
VWHSV QHFHVVDU\ WR FROOHFW RXWVWDQGLQJ GHEWV RZHG WR WKH       D SRVWSHWLWLRQGHEW EHFDXVH VXFK FRQYHUVLRQ GRHV QRW UH
GHEWRU IRU VHUYLFHV UHQGHUHG E\ +66,jV HPSOR\HHV LQ WKH        WULJJHU WKH DXWRPDWLF VWD\ SURYLVLRQ VR DV WR UHLPSRVH WKH
ZDQLQJ GD\V RI RSHUDWLRQV  7KH FRXUW ODWHU LVVXHG D          VWD\  6HH ,Q UH 6WDWH $LUOLQHV ,QF  )G  
SUHOLPLQDU\ LQMXQFWLRQ RUGHULQJ WKH 7UXVWHH WR GHSRVLW           WK&LUUHIXVLQJWRUHLPSRVHWKHVWD\DJDLQVWSDUWLHV
WKHDPRXQWWKH6HFUHWDU\HVWLPDWHGZDVQHFHVVDU\             SUHYLRXVO\ JUDQWHG UHOLHI WKHUHIURP EXW VHH 0DWWHU RI
WRSXUJHWKHmWDLQWlIURPWKHDOOHJHGO\KRWJRRGVZLWKWKH            1LFKROV%5%DQNU6'2KLRLPSRVLQJD
&OHUN RI WKH 'LVWULFW &RXUW IRU WKH :HVWHUQ 'LVWULFW RI       QHZ VWD\ DQG ,Q UH 3DUNHU  %5 6' 2KLR 
7HQQHVVHH                                                             KROGLQJWKDWFRXUWPD\LQLWVGLVFUHWLRQLPSRVHDQHZVWD\
  0HDQZKLOH LQ )ORULGD &+) DQG WKH WUXVWHH UHDFKHG DQ           7KH &RGH GRHV QRW FOHDUO\ DGGUHVV ZKHWKHU FRQYHUVLRQ
DJUHHPHQW DSSURYHG E\ WKH EDQNUXSWF\ FRXUW ZLWK PLQRU          mUHLPSRVHVlWKHDXWRPDWLFVWD\DQGFRXUWVKDYHVSOLWRQWKH
PRGLILFDWLRQV WR GLVWULEXWH WKH GHEWRUjV DVVHWV  8QGHU WKH   TXHVWLRQ  %XW WKLV QRWLRQ RI LQTXLULQJ ZKHWKHU FRQYHUVLRQ
SODQ WKH 7UXVWHH ZRXOG PDUVKDO DQG OLTXLGDWH DOO RI WKH      mUHLPSRVHVlWKHVWD\IRUSXUSRVHVRIDQDO\]LQJWKHOLPLWDWLRQ
GHEWRUjV DVVHWV  7KH SODQ LQFOXGHG XVLQJ WKH UHFRUGV          RQ  D VHHPV DFDGHPLF EHFDXVH RWKHU &RGH
RULJLQDOO\ VXEMHFW WR WKH 6HFUHWDU\jV VXLW IRU SXUSRVHV RI     SURYLVLRQV DGHTXDWHO\ DGGUHVV WKH TXHVWLRQ DW LVVXH  7KH
ELOOLQJ FOLHQWV 0HGLFDUH DQG SULYDWH LQVXUDQFH  )URP WKH    &RGH SURYLGHV WKDW m>D@ FODLP DJDLQVW    WKH GHEWRU WKDW
7UXVWHHjV FROOHFWLRQV &+) ZRXOG LPPHGLDWHO\ UHFHLYH              DULVHVDIWHUWKHRUGHUIRUUHOLHI>LHWKHRULJLQDOILOLQJRIWKH
 WKDW LW KDG SDLG WR ILQDQFH FHUWDLQ DVSHFWV RI WKH   SHWLWLRQVHH86&@EXWEHIRUHFRQYHUVLRQLQDFDVH
EDQNUXSWF\SURFHHGLQJDIWHUWKH&KDSWHUFRQYHUVLRQ$IWHU           WKDWLVFRQYHUWHGXQGHUVHFWLRQRIWKLVWLWOHRWKHU
UHFHLYLQJ WKLV LQLWLDO SD\PHQW &+) DJUHHG WR SD\ IRU DQ\     WKDQ D FODLP VSHFLILHG LQ VHFWLRQ E RI WKLV WLWOH >DQ
                                                                       DGPLQLVWUDWLYHH[SHQVH@VKDOOEHWUHDWHGIRUDOOSXUSRVHVDVLI
                                                                       VXFK FODLP KDG DULVHQ LPPHGLDWHO\ EHIRUH WKH GDWH RI WKH
                                                                       ILOLQJRIWKHSHWLWLRQl86&GHPSKDVLVDGGHG
YLRODWLRQV RI VHFWLRQ  RI WKLV WLWOHl
     &KDRY+RVSLWDO6WDIILQJ                    1RV           1RV                 &KDRY+RVSLWDO6WDIILQJ           
       6HUYLFHV,QFHWDO                                                                                          6HUYLFHV,QFHWDO

FRPSHWH ZLWK IDLUO\ SURGXFHG JRRGV  ,QVWHDG WKH SXUSRVH               SURIHVVLRQDOVHQJDJHGDQGH[SHQVHVLQFXUUHGE\WKH7UXVWHH
VHUYHG E\ WKH 6HFUHWDU\jV mKRW JRRGVl LQMXQFWLRQ DFWLRQ LV              LQ FRPSOHWLQJWKHOLTXLGDWLRQDQGWKHQVSOLWWKHUHPDLQLQJ
PHUHO\WRHQIRUFHDJDLQVWWKH7UXVWHHWKHIDLUODERUVHUYLWXGH                 DVVHWV ZLWK RWKHU FUHGLWRUV  8QGHU WKH SODQ &+) ZRXOG
WKHEHQHILFLDULHVRIZKLFKDUHWKHZRUNHUVZKRZHQWXQSDLG                      UHFHLYHRIWKHUHPDLQLQJDVVHWVFROOHFWHGE\WKH7UXVWHH
E\ +66, LQ ODWH sDQXDU\ DQG )HEUXDU\   ,Q WKLV                 ZLWK  JRLQJ WR D &UHGLWRU 3RRO FRQWDLQLQJ WKH RWKHU
SDUWLFXODUFDVHWKHQWKHLQMXQFWLRQDFWLRQLVPHUHO\DYHKLFOH                RXWVWDQGLQJFODLPVDJDLQVWWKHHVWDWHDOORIZKLFKZHUHSRVW
WRHQIRUFHWKHSULYDWHULJKWVRIWKHHPSOR\HHVWRWKHPLQLPXP                   SHWLWLRQDGPLQLVWUDWLYHH[SHQVHV7KH7UXVWHHZDVWRGUDZKLV
SRUWLRQRIWKHLUZDJHV&RQJUHVVJXDUDQWHHG7KHUHIRUHWRWKH                  VWDWXWRU\IHHIURPWKH&UHGLWRU3RROjVVKDUH+RZHYHULIWKH
H[WHQWWKLVODZVXLWLVDmKRWJRRGVlDFWLRQSXUVXDQWWR                  6HFUHWDU\jVVXLWZHUHXOWLPDWHO\VXFFHVVIXODQ\IXQGVXVHGWR
LWLVQRWFRYHUHGE\WKHSROLFHSRZHUH[FHSWLRQ                                SD\ D MXGJPHQW RU mFOHDU D WDLQWl IURP WKH JRRGV ZRXOG
                                                                                FRPHRXWRIWKH&UHGLWRU3RROjVVKDUH
    8QGHUZKLFKHYHUDXWKRULW\WKH6HFUHWDU\EURXJKWWKLVVXLW
LWIDLOVWKHmSXEOLFSROLF\lWHVWRIZKHWKHUDJRYHUQPHQWDOXQLW                  )ROORZLQJ WKH GLVWULFW FRXUWjV GHQLDO RI KLV PRWLRQ WR
EURXJKWVXLWmWRHQIRUFHVXFKJRYHUQPHQWDOXQLWjVSROLFH                  GLVPLVVWKH7UXVWHHPRYHGWKHEDQNUXSWF\FRXUWWRDVVHUWLWV
DQGUHJXODWRU\SRZHUlVRWKHEH[FHSWLRQWRWKH                      MXULVGLFWLRQRYHUWKHGHEWRUDQGDOOLWVDVVHWVWRWKHH[FOXVLRQ
DXWRPDWLFVWD\GRHVQRWDSSO\WRWKHLQVWDQWDFWLRQ%HFDXVH                   RIDOORWKHUFRXUWV7KHEDQNUXSWF\FRXUWDSSDUHQWO\DJUHHG
WKHSROLFHSRZHUH[FHSWLRQGRHVQRWDSSO\WKHDXWRPDWLFVWD\                   ZLWKWKH7UXVWHHjVYLHZRIWKHFDVH,QUHFRPPHQGHGILQGLQJV
EDUVmWKHFRPPHQFHPHQWRUFRQWLQXDWLRQRI>WKLV@MXGLFLDO                 RI IDFW DQG FRQFOXVLRQV RI ODZ WKH EDQNUXSWF\ FRXUW
SURFHHGLQJDJDLQVWWKHGHEWRUWKDWZDVRUFRXOGKDYHEHHQ                 GHWHUPLQHGWKDWWKH6HFUHWDU\KDGHQJDJHGLQIRUXPVKRSSLQJ
FRPPHQFHG EHIRUH WKH FRPPHQFHPHQW RI WKHl GHEWRUjV                        DQG WKDW WKH GLVWULFW FRXUW IRU WKH :HVWHUQ 'LVWULFW RI
EDQNUXSWF\FDVH86&DDQGSUHYHQWVWKLVmDFW                  7HQQHVVHH KDG LQWHUIHUHG ZLWK WKH EDQNUXSWF\ FRXUWjV
WR REWDLQ SRVVHVVLRQ RI SURSHUW\ RI WKH HVWDWH    >DQG@           H[FOXVLYH MXULVGLFWLRQ RYHU WKH GHEWRUjV HVWDWH EHFDXVH WKH
H[HUFLVHFRQWURORYHUSURSHUW\RIWKHHVWDWHl86&                6HFUHWDU\jVVXLWZDVWDQWDPRXQWWRDQDFWLRQWRFROOHFWDGHEW
D+HQFHWKH%DQNUXSWF\&RXUWIRUWKH6RXWKHUQ                      UDWKHUWKDQDQH[HUFLVHRIDJRYHUQPHQWDOXQLWjVSROLFHSRZHU
'LVWULFWRI)ORULGDKDGH[FOXVLYHMXULVGLFWLRQRYHUWKHGHEWRU                  m>'@XH WR WKH VHQVLWLYH QDWXUH RI WKH MXULVGLFWLRQDO LVVXH DW
DQGWKHSURSHUW\RILWVEDQNUXSWF\HVWDWH7KHGLVWULFWFRXUW                  KDQGlWKHEDQNUXSWF\FRXUWGHFOLQHGWRHQWHUDQRUGHUDQG
VKRXOGKDYHGLVPLVVHGWKHFDVHIRUODFNRIMXULVGLFWLRQ                        UHIHUUHG WKH PDWWHU WR WKH GLVWULFW FRXUW IRU WKH 6RXWKHUQ
                                                                                'LVWULFWRI)ORULGD
                                                                                   7KHGLVWULFWFRXUWIRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHILUVW
                                                                                DGGUHVVHGWKHMXULVGLFWLRQDOLVVXHLQLWVsXO\ILQGLQJV
                                                                              DQGFRQFOXVLRQVDVVRFLDWHGZLWKLWV2UGHU'HQ\LQJWKH0RWLRQ
        7KH 6HFUHWDU\ GLG QRW REMHFW WR WKH GLVWULFW FRXUWjV RUGHU DOORZLQJ
WKH 7UXVWHH WR PRYH WKH UHFRUGV LQ LQWHUVWDWH FRPPHUFH WR 0HPSKLV DQG           WR'LVPLVV7KHFRXUWHIIHFWLYHO\LQFRUSRUDWHGWKHVHILQGLQJV
WKHQ XVH WKH UHFRUGV WR JHQHUDWH DFFRXQWV UHFHLYDEOH ,QVWHDG VKH DGRSWHG      DQG FRQFOXVLRQV LQ LWV 2UGHU RQ :HOWjV 0RWLRQ IRU
WKH QRYHO WKHRU\ RI GHVFULELQJ IXQGV FROOHFWHG RQ WKH DFFRXQWV UHFHLYDEOH       5HFRQVLGHUDWLRQZKLFKUHVXOWHGLQWKHSUHOLPLQDU\LQMXQFWLRQ
DV mWDLQWHG IXQGVl DQG VRXJKW WKH RUGHU GLUHFWLQJ GHSRVLW RI HQRXJK IXQGV
WR FOHDU WKH WDLQW IURP WKH JRRGV ZLWK WKH GLVWULFW FRXUW FOHUN $OWKRXJK
                                                                                7KH7UXVWHHWLPHO\DSSHDOHGIURPWKHSUHOLPLQDU\LQMXQFWLRQ
WKH 6HFUHWDU\jV DFWLRQ LQ WKH FRXUVH RI OLWLJDWLRQ FDQQRW RI FRXUVH EH XVHG   ZKLFKDSSHDOZDVFRQVROLGDWHGZLWKKLVHDUOLHUDSSHDOIURP
WR UHPRYH DQ\ MXULVGLFWLRQ WKH GLVWULFW FRXUW PD\ KDYH KDG LW GRHV FRQILUP     WKHRUGHUGLUHFWLQJKLPWRGHSRVLWZLWKWKHFOHUNRI
WKDW WKH 6HFUHWDU\jV UHDO LQWHUHVW LQ SURVHFXWLQJ WKLV HQIRUFHPHQW DFWLRQ LV    WKH FRXUW  ,Q WKLV FRXUW WKH 7UXVWHH FKDOOHQJHV WKH GLVWULFW
WKH YLQGLFDWLRQ RI WKH ZRUNHUVj SULYDWH ULJKWV
     &KDRY+RVSLWDO6WDIILQJ                 1RV         1RV                 &KDRY+RVSLWDO6WDIILQJ         
      6HUYLFHV,QFHWDO                                                                                     6HUYLFHV,QFHWDO

FRXUWjVDVVHUWLRQRIMXULVGLFWLRQWRHQWHUWDLQWKH6HFUHWDU\jV            µOLHQj RQ WKH DVVHWV VXSHULRU WR WKDW RI D VHFXUHG FUHGLWRUl
VXLW                                                                     &LWLFRUS86DW
                                  ,,                                        7KH6XSUHPH&RXUWWUHDWHGDVGHFODULQJFRQWUDEDQG
                                                                          DQ\ JRRGV WDLQWHG E\ WKHLU KDYLQJ EHHQ SURGXFHG LQ
   7KLV FRXUW UHYLHZV D GLVWULFW FRXUWjV GHFLVLRQ WR JUDQW D     VXEVWDQGDUG FRQGLWLRQV  7KH (OHYHQWK &LUFXLW DGGHG WKDW
SUHOLPLQDU\LQMXQFWLRQIRUDEXVHRIGLVFUHWLRQ6HH6DQGLVRQ             m&RQJUHVVHVWDEOLVKHGWKHSD\PHQWRIDPLQLPXPZDJHDVD
Y 0LFKLJDQ +LJK 6FK $WKOHWLF $VVjQ  )G           FRQGLWLRQSUHFHGHQWWRWKHVKLSPHQWRIPDQXIDFWXUHGJRRGVl
WK &LU  FLWLQJ $PHULFDQ ,PDJLQJ 6YFV Y (DJOH          5XVFR,QGXV)GDW2QHFRPPHQWDWRUDQDO\]HG
3LFKHU,QGXV,QUH(DJOH3LFKHU,QGXV)G             WKHVHREVHUYDWLRQVE\FRQVLGHULQJWKHNLQGRISURSHUW\ULJKW
WK&LU$FRXUWDEXVHVLWVGLVFUHWLRQZKHQLWUHOLHV           WKDW UHVXOWHG IURP WKH &LWLFRUS KROGLQJ  +H PDGH WKUHH
RQFOHDUO\HUURQHRXVILQGLQJVRIIDFWDSSOLHVDQLQDSSURSULDWH           SUHOLPLQDU\ REVHUYDWLRQV  QHLWKHU WKH 6HFUHWDU\ QRU WKH
OHJDOVWDQGDUGRULPSURSHUO\DSSOLHVWKHODZZLWKVXFKOHJDO            ZRUNHUVKDYHDOLHQRQWKHJRRGVRIHLWKHURUGLQDU\RUVXSHU
TXHVWLRQVUHFHLYLQJGHQRYRUHYLHZLQWKH&RXUWRI$SSHDOV               SULRULW\VWDWXVQRWUXVWLVFUHDWHGEHFDXVHWKHFUHGLWRUGRHV
6HH 6DQGLVRQ  )G DW  (DJOH3LFKHU  )G DW         QRW KROG WKH SURSHUW\ IRU WKH EHQHILW RI WKH ZRUNHUV RU WKH
7KHUHIRUHDmOHJDORUIDFWXDOHUURUPD\EHVXIILFLHQWWR           6HFUHWDU\DQGGHVFULELQJWKH6HFUHWDU\jVDXWKRULW\WREULQJ
GHWHUPLQH WKDW WKH GLVWULFW FRXUW DEXVHG LWV GLVFUHWLRQ           VXLWDVUHSUHVHQWLQJDQmH[WRUWLYHLQWHUHVWlGRHVQRWDGHTXDWHO\
+RZHYHUDEVHQWVXFKHUURUWKHGLVWULFWFRXUWjVZHLJKLQJDQG             GHVFULEHWKHFLUFXPVWDQFHVEHFDXVHWKHHQFXPEUDQFHFUHDWHG
EDODQFLQJRIWKHHTXLWLHVLVRYHUUXOHGµRQO\LQWKHUDUHVWRI             E\   JRHV ZHOO EH\RQG SXUH H[WRUWLRQ  6HH +HQU\
FDVHVjl6DQGLVRQ)GDWTXRWLQJ(DJOH3LFKHU                %UHJVWHLQ6HFXUHG&UHGLWRUVDQG6HFWLRQDRIWKH)DLU
)GDWFLWLQJ1$$&3Y&LW\RI0DQVILHOG)G              /DERU 6WDQGDUGV $FW 7KH 6XSUHPH &RXUW &UHDWHV D 1HZ
  WK &LU   6LQFH ERWK RI WKH 7UXVWHHjV        3URSHUW\ ,QWHUHVW  &$5'2=2 / 5(9  
DUJXPHQWVFKDOOHQJHWKHGLVWULFWFRXUWjVMXULVGLFWLRQWRKHDU             
WKH6HFUHWDU\jV)/6$DFWLRQZHUHYLHZWKHGLVWULFWFRXUWjV
FRQFOXVLRQVZLWKUHVSHFWWRLWVMXULVGLFWLRQGHQRYR                        $V%UHJVWHLQFRQFOXGHGWKHSURSHUW\LQWHUHVWDWVWDNHLQD
                                                                          mKRWJRRGVlDFWLRQLVEHVWGHVFULEHGDVDIDLUODERUVHUYLWXGH
   7KH 7UXVWHH DGYDQFHV DQ DUJXPHQW EDVHG RQ EDQNUXSWF\            ZLWKWKHXQSDLGZRUNHUVDVLWVEHQHILFLDULHV6HHLGDW
SROLF\LIWKH6HFUHWDU\jVVXLWZHUHDOORZHGDQGVKHREWDLQHG             2UGLQDULO\WKH6HFUHWDU\jVHQIRUFHPHQWVXLWYLQGLFDWHVWKH
D MXGJPHQW UHTXLULQJ WKH HVWDWH WR SD\ PRUH WKDQ KDOI D         LQWHUHVWVRIERWKWKHXQSDLGZRUNHUEHQHILFLDULHVRIWKHIDLU
PLOOLRQGROODUVWRFOHDUWKHWDLQWRQWKHUHFRUGVLQTXHVWLRQ            ODERUVHUYLWXGHDQGGHULYDWLYHO\mDOORIWKHZRUNHUVZKRDUH
VKHZLOOKDYHHVVHQWLDOO\HOHYDWHGWKHXQSDLGZRUNHUVjFODLP              HPSOR\HG LQ FRPPHUFH RU WKH SURGXFWLRQ RI JRRGV IRU
DJDLQVWWKHHVWDWHIURPWKHOHYHORIDQDGPLQLVWUDWLYHH[SHQVH            FRPPHUFH ZKRVH OLYHOLKRRGV DUH WKUHDWHQHG E\ WKH
WR D VXSHUVXSHUSULRULW\ FODLP WKDW WUXPSV HYHQ &+)jV             LQWURGXFWLRQRIWDLQWHGJRRGVLQWRWKHQDWLRQDOHFRQRP\l,G
VHFXUHGVXSHUSULRULW\GLQWHUHVWE\PDNLQJWKHHVWDWHjV           DW
DFFHVV WR WKH UHFRUGV GHSHQGHQW XSRQ SD\PHQW RI WKH
HPSOR\HHVjZDJHFODLPV,QVXSSRUWRIWKLVFRQWHQWLRQWKH                 ,Q WKLV SDUWLFXODU FDVH KRZHYHU DV GHVFULEHG DERYH WKH
7UXVWHH UHDVRQV WKDW WKH EDQNUXSWF\ FRXUW DVVXPHG                   6HFUHWDU\jVHQIRUFHPHQWDFWLRQGRHVQRWSURWHFWRWKHUZRUNHUV
MXULVGLFWLRQ RYHU WKH GHEWRU DQG DOO RI LWV DVVHWV DV RI WKH   LQWKHHFRQRP\EHFDXVHWKHUHFRUGVDWLVVXHKHUHZLOOQRWn
RULJLQDO&KDSWHUILOLQJLQ0DUFKQHDUO\D\HDUEHIRUH            XQOLNHJDUPHQWVRUZLQGRZVDQGGRRUVnHQWHUFRPPHUFHDQG
     &KDRY+RVSLWDO6WDIILQJ                  1RV           1RV                &KDRY+RVSLWDO6WDIILQJ         
       6HUYLFHV,QFHWDO                                                                                       6HUYLFHV,QFHWDO

JHQHUDWHDFFRXQWVUHFHLYDEOH,QGHHGWKHLUmPRYHPHQWlLQ                  WKH6HFUHWDU\ILOHGVXLWLQWKHGLVWULFWFRXUW6HH86&
LQWHUVWDWHFRPPHUFHLVH[WUHPHO\OLPLWHGWKH7UXVWHHDVNHG                   GHILQLQJSURSHUW\RIDGHEWRUjVHVWDWHDVDQ\DQGDOO
WR PRYH WKHP LQ FRPPHUFH RQO\ IRU SXUSRVHV RI EULQJLQJ               LQWHUHVWV LQ SURSHUW\ QR PDWWHU ZKHUH ORFDWHG DQG E\
WKHPWR0HPSKLVZKHUHKHZRXOGJDWKHULQIRUPDWLRQIURP                       ZKRPHYHU KHOG DV RI WKH GDWH RI ILOLQJ WKH SHWLWLRQ  7KH
WKHUHFRUGVLQRUGHUWRELOOFXVWRPHUVIRUVHUYLFHVUHQGHUHG                 7UXVWHH DVVHUWV WKDW WKH YHVWLQJ RI MXULVGLFWLRQ RYHU WKH
7KH 6HFUHWDU\jV  VXLW WKHUHIRUH GRHV QRW SUHYHQW XQIDLU              GHEWRUjVSURSHUW\LQWKHEDQNUXSWF\FRXUWZDVWRWKHH[FOXVLRQ
FRPSHWLWLRQ  ,W GRHV KRZHYHU SURPRWH D VLJQLILFDQW                RIDOORWKHUFRXUWV&RQFHUQHGWKDWWKH6HFUHWDU\jVVXLWLQWKH
SURSHUW\ LQWHUHVWn D SURSHUW\ LQWHUHVW KHOG E\ WKH DIIHFWHG           GLVWULFW FRXUW ZLOO GLVUXSW WKH %DQNUXSWF\ &RGHjV HTXLWDEOH
HPSOR\HHV                                                                    GLVWULEXWLRQVFKHPHDQGLQWHUIHUHZLWKWKHEDQNUXSWF\FRXUWjV
                                                                              MXULVGLFWLRQRYHUWKHOLTXLGDWLRQWKH7UXVWHHGUDZVDFRQWUDVW
  &LWLFRUSjVDSSOLFDWLRQRIWKH)/6$WRIDLOHGEXVLQHVVHVDQG                 EHWZHHQ WKH &RGHjV RPLVVLRQ RI DQ\ UHIHUHQFH WR WKH
WKHLUFUHGLWRUVZKRVHL]HWDLQWHGFROODWHUDOVHHPHGWRFUHDWHD               DSSOLFDELOLW\ DQG RSHUDWLRQ RI WKH )/6$ LQ EDQNUXSWF\
QHZSURSHUW\ULJKW,QGHFLGLQJWKHFDVHWKH6XSUHPH&RXUW                  SURFHHGLQJVDQGWKH&RGHjVVSHFLILFPHQWLRQRIFHUWDLQRWKHU
QRWHGWKDWDSSOLFDWLRQRIWKHmKRWJRRGVlSURYLVLRQGRHVQRW                  IHGHUDO VWDWXWHV  6HH  86&    H[SODLQLQJ
JUDQWHPSOR\HHVDSULRULW\LQWKHJRRGVVXSHULRUWRWKDWJLYHQ                LQWHUDFWLRQEHWZHHQFHUWDLQ%DQNUXSWF\&RGHSURYLVLRQVDQG
DVHFXUHGFUHGLWRUXQGHUVWDWHODZEHFDXVHWKHFUHGLWRUVWLOO                 WKH3HULVKDEOH$JULFXOWXUDO&RPPRGLWLHV$FWRIDQGWKH
RZQV WKH JRRGV DQG WKH HPSOR\HHV KDYH QR SRVVHVVRU\                   6HFXULWLHV,QYHVWRU3URWHFWLRQ$FWRI7KLVDEVHQFHRI
LQWHUHVWLQWKHPm7KDW>WKH VHFXUHGFUHGLWRU@FDQFXUHWKH                 UHIHUHQFH WR WKH )/6$ WKH 7UXVWHH FRQWHQGV PHDQV WKDW
HPSOR\HUjVYLRODWLRQRIWKH)/6$E\SD\LQJWKHHPSOR\HHV                      EDQNUXSWF\jVHTXLWDEOHGLVWULEXWLRQVFKHPHWUXPSVWKHVRFLDO
WKHVWDWXWRULO\UHTXLUHGZDJHVGRHVQRWJLYHWKHHPSOR\HHVD                  SROLF\HPERGLHGLQWKH)/6$6HH'HI%UDW
                                                                                )RUKHU SDUWWKH6HFUHWDU\GRHVQRWLQYRNH)/6$VRFLDO
     
       7KH GLVWULFW FRXUW H[SODLQHG WKDW WKH UHFRUGV DUH QRW MXVW LQWHUQDO
                                                                              SROLF\EXWLQVWHDGUHOLHVGLUHFWO\RQWKH%DQNUXSWF\&RGHIRU
GRFXPHQWV 7KH\ DUH SURGXFHG E\ +66, LQ SDUW WR IXOILOO LWV FRQWUDFWXDO       WZRDUJXPHQWVLQWKHDOWHUQDWLYHWKHDXWRPDWLFVWD\SURYLVLRQ
REOLJDWLRQ WR SDWLHQWV WR UHSUHVHQW WKHP LQ GHDOLQJ ZLWK SULYDWH LQVXUHUV     86&DGRHVQRWDSSO\WRSRVWSHWLWLRQDFWLRQV
DQG 0HGLFDUH DQG KDYH VRPH YDOXH WR RWKHUV LQFOXGLQJ SDWLHQWV DQG            DQG WKH DXWRPDWLF VWD\ SURYLVLRQjV H[FHSWLRQ SHUPLWWLQJ
GRFWRUV ZKR XVH WKHP WR GHYHORS D SODQ RI FDUH 7KHVH DVSHFWV RI WKH          HQIRUFHPHQW DFWLRQV E\ D JRYHUQPHQWDO XQLW XQGHUWDNHQ LQ
UHFRUGVj OLPLWHG LQWULQVLF YDOXH FRQILUP WKDW WKHLU XVH LQ LQWHUVWDWH
FRPPHUFH ZLOO QRW HQJHQGHU XQIDLU FRPSHWLWLRQ ZLWK VHUYLFH SURYLGHUV
                                                                              IXUWKHUDQFHRILWVSROLFHRUUHJXODWRU\SRZHUVHH86&
ZKR SD\ PLQLPXP ZDJHV                                                        EDSSOLHVWRWKLVVXLW
     
       $Q\ XQIDLU FRPSHWLWLRQ WKDW PD\ KDYH RFFXUUHG LQ ODWH sDQXDU\ DQG
                                                                                8QOLNHWKH7UXVWHHjVSROLF\DUJXPHQWVKLVSRLQWFRQFHUQLQJ
)HEUXDU\  UHVXOWHG QRW IURP WKH VHUYLFHV RI +66,jV HPSOR\HHV EHLQJ        WKHMXULVGLFWLRQRIWKHEDQNUXSWF\FRXUWLVZHOOWDNHQ%XWLW
UHQGHUHG LQ VXEVWDQGDUG FRQGLWLRQV EXW +66,jV LQVROYHQF\              7KH    FRQWUROVRQO\WRWKHH[WHQWWKDWWKH%DQNUXSWF\&RGHIRUELGV
XQIDLUQHVV WR +66,jV FRPSHWLWRUV FDPH QRW IURP D YLRODWLRQ RI WKH )/6$        WKURXJK WKH DXWRPDWLF VWD\ SURFHHGLQJV WKDW LQYROYH WKH
EXW WKH IDFW WKDW +66, ZDV PDUNHWLQJ LWV VHUYLFHV DW D WLPH ZKHQ LW ZDV QRW   GHEWRU RU LWV HVWDWH  7KDW LV WKH EDQNUXSWF\ FRXUW KDV
PHHWLQJ LWV FRQWLQXLQJ ILQDQFLDO REOLJDWLRQV DV WKH\ FDPH GXH 7KLV
XQIDLUQHVV LQHYLWDEO\ RFFXUV LQ DQ HFRQRP\ WKDW SHUPLWV FRPSDQLHV WR JR
                                                                              H[FOXVLYHMXULVGLFWLRQRYHUWKHGHEWRURQO\WRWKHH[WHQWWKDW
EDQNUXSW ,W VWHPV QRW IURP D YLRODWLRQ RI ZDJH DQG KRXU ODZV EXW IURP        WKH&RGHPDNHVLWVMXULVGLFWLRQH[FOXVLYH6HHLQIUD3DUW,,%
WKH DELOLW\ RI EXVLQHVVHV WR SD\ FUHGLWRUVn LQFOXGLQJ HPSOR\HHVn OHVV         7KHDXWRPDWLFVWD\SURYLVLRQSURWHFWVWKHEDQNUXSWF\FRXUWjV
WKDQ WKH PDUNHW YDOXH RU RWKHU DJUHHGXSRQ SULFH IRU WKH VHUYLFHV           MXULVGLFWLRQE\IRUELGGLQJWKHFRPPHQFHPHQWRUSURVHFXWLRQ
UHQGHUHG RU JRRGV VXSSOLHG WR WKH IDLOLQJ EXVLQHVV
       &KDRY+RVSLWDO6WDIILQJ                  1RV           1RV                 &KDRY+RVSLWDO6WDIILQJ         
         6HUYLFHV,QFHWDO                                                                                        6HUYLFHV,QFHWDO

RI PRVW DFWLRQV DJDLQVW WKH GHEWRU RU LWV SURSHUW\ EXW WKH           SUHYHQWPRYHPHQWRIWDLQWHGJRRGVLQLQWHUVWDWHFRPPHUFH
DXWRPDWLFVWD\KDVH[FHSWLRQV6HHLQIUD3DUW,,$7KHSROLFH                <HW FRXUWV KDYH ORQJ KHOG WKDW WKH 6HFUHWDU\ KDV LPSOLFLW
SRZHUH[FHSWLRQRUGLQDULO\ZRXOGSHUPLW)/6$mKRWJRRGVl                        SRZHUXQGHUWRVXHWRHQMRLQPRYHPHQWRImKRWJRRGVl
DFWLRQV WR SURFHHG  6HH LQIUD 3DUW ,,&  7KH SHFXOLDU               LQLQWHUVWDWHFRPPHUFH6HHHJ3RZHOOY6WDWHRI)ORULGD
FLUFXPVWDQFHVRIWKLVFDVHKRZHYHUUHYHDOWKDWWKH6HFUHWDU\                  )GWK&LU0RUHORFNY1&5&RUS
KDVXQGHUWDNHQWKLVHQIRUFHPHQWDFWLRQQRWLQIXUWKHUDQFHRI                    )GWK&LUUHYjGRQRWKHUJURXQGV
SXEOLFSROLF\EXWSULPDULO\WRDVVHUWDQGSURWHFWWKHSULYDWH                   86:LUW]Y0DOWKRU)GWK&LU
ULJKWV RI FHUWDLQ LQGLYLGXDOV  6HH LQIUD 3DUW ,,&                    :LUW]YsRQHV)GWK&LU6HH
$FFRUGLQJO\WKHSROLFHSRZHUH[FHSWLRQGRHVQRWDSSO\WKH                     DOVR86&DVWDWLQJWKDWmWKH$GPLQLVWUDWRUVKDOO
DXWRPDWLFVWD\JRYHUQVDQGWKHGLVWULFWFRXUWWKHUHIRUHKDGQR                 EULQJ DOO DFWLRQV XQGHU VHFWLRQ  RI WKLV WLWOH WR UHVWUDLQ
MXULVGLFWLRQWRHQWHUWDLQWKH6HFUHWDU\jVVXLW                                 YLRODWLRQV RI WKLV FKDSWHUl WKHUHE\ LPSOLFLWO\ UHFRJQL]LQJ
                                                                                DXWKRULW\WRVHHNLQMXQFWLRQVXQGHU
                                     $
                                                                                   7KHVH FDVHV UHFRJQL]H WKH LPSRUWDQW FRQWLQXLQJ SXEOLF
   )LOLQJDSHWLWLRQXQGHUWKH%DQNUXSWF\&RGHVHH86&                   LQWHUHVW LQ UHVWUDLQLQJ IXWXUH YLRODWLRQV RI WKH )/6$jV
FUHDWHVDQHVWDWHFRQVLVWLQJRIDOOnVXEMHFW                  PLQLPXPZDJHDQGRYHUWLPHSURYLVLRQV7KH6XSUHPH&RXUW
WRFHUWDLQH[HPSWLRQVIRULQGLYLGXDOGHEWRUVVHH86&                     LQ &LWLFRUS GLVFHUQHG WKH VLJQLILFDQW SXEOLF LQWHUHVW LQ
 n RI WKH GHEWRUjV SURSHUW\ EURDGO\ GHILQHG VHH                UHVWUDLQLQJOLQJHULQJFRQVHTXHQFHVRISDVW)/6$ZDJHDQG
86&DWWKHPRPHQWRIWKHILOLQJDQGFHUWDLQRWKHU                     KRXUYLRODWLRQV,QWKDWFDVHWKH&RXUWUHMHFWHGWKHDUJXPHQW
SURSHUW\ UHFDSWXUHG E\ WKH HVWDWH GXULQJ WKH EDQNUXSWF\                  WKDWD)/6$mKRWJRRGVlDFWLRQVKRXOGQRWEHEURXJKWDJDLQVW
SURFHHGLQJ VHH HJ  86&   SUHIHUHQFHV               DVHFXUHGFUHGLWRUZKHQWKHHPSOR\HUKDVFHDVHGRSHUDWLRQV
IUDXGXOHQWWUDQVIHUV7KLVSURSHUW\EHFRPHVWKHmSRWlIURP                   EHFDXVHWKHmKRWJRRGVlJDUPHQWVLQWKDWFDVHPDLQWDLQHG
ZKLFKDOOFODLPVDJDLQVWWKHGHEWRUVHH86&                   WKHLUDELOLW\WRFRPSHWHXQIDLUO\LQWKHPDUNHWSODFHHYHQDIWHU
ZLOOEHSDLGSXUVXDQWWRWKH&RGHjVSULRULW\VFKHPHVHH                   &LWLEDQN VHL]HG WKHP DV FROODWHUDO  7KH (OHYHQWK &LUFXLW
 86&    &RPPHQFHPHQW RI D VXLW DXWRPDWLFDOO\                 H[WHQGHGWKLVUHDVRQLQJWRDGHIXQFWPDQXIDFWXUHURIZLQGRZV
LPSRVHVDEURDGVWD\RIRWKHUSURFHHGLQJVDJDLQVWWKHGHEWRU                    DQGGRRUV6HH5XVFR,QGXV)GDW%RWK&LWLFRUS
DQGLWVSURSHUW\6HH86&Dm7KHSXUSRVHRI                    DQG5XVFR,QGXVWULHVGHVFULEHGWKHSXEOLFLQWHUHVWVDWVWDNHLQ
WKH DXWRPDWLF VWD\ LV WR SURWHFW FUHGLWRUV LQ D PDQQHU                 DW\SLFDOmKRWJRRGVlDFWLRQWKDWUHPDLQHGHYHQWKRXJKWKH
FRQVLVWHQWZLWKWKHEDQNUXSWF\JRDORIHTXDOWUHDWPHQW7KH                    HPSOR\HUKDGJRQHRXWRIEXVLQHVVVSHFLILFDOO\WKHXQIDLU
                                                                                FRPSHWLWLRQWKDWUHVXOWVZKHQSURGXFWVRIXQGHUSDLGZRUNHUV
                                                                                HQWHULQWHUVWDWHFRPPHUFH&I86&D
     
      m([FHSW DV SURYLGHG LQ VXEVHFWLRQ E RI WKLV VHFWLRQ D SHWLWLRQ ILOHG
XQGHU VHFWLRQ   RU  RI WKLV WLWOH    RSHUDWHV DV D VWD\            ,Q WKLV SDUWLFXODU FDVH KRZHYHU WKDW VLJQLILFDQW SXEOLF
DSSOLFDEOH WR DOO HQWLWLHV RIn  WKH FRPPHQFHPHQW RU FRQWLQXDWLRQ         LQWHUHVW LQ SURWHFWLQJ RWKHU EXVLQHVVHV IURP XQIDLU
RI D MXGLFLDO DGPLQLVWUDWLYH RU RWKHU DFWLRQ RU SURFHHGLQJ DJDLQVW WKH        FRPSHWLWLRQ LV QRW SUHVHQW EHFDXVH WKH mJRRGVl DUH PHUHO\
GHEWRU WKDW ZDV RU FRXOG KDYH EHHQ FRPPHQFHG EHIRUH WKH FRPPHQFHPHQW
RI WKH FDVH XQGHU WKLV WLWOH RU WR UHFRYHU D FODLP DJDLQVW WKH GHEWRU WKDW
                                                                                UHFRUGVUHODWLQJWRVHUYLFHVDOUHDG\UHQGHUHGE\HPSOR\HHV
DURVH EHIRUH WKH FRPPHQFHPHQW RI WKH FDVH XQGHU WKLV WLWOH >DQG@         7KHUHFRUGVKDYHOLWWOHLQWULQVLFYDOXHWKH\ZLOOQRWEHVROGLQ
DQ\ DFW WR REWDLQ SRVVHVVLRQ RI SURSHUW\ RI WKH HVWDWH RU RI SURSHUW\ IURP      LQWHUVWDWHFRPPHUFHWKH\FDQEHXVHGE\WKH7UXVWHHRQO\WR
WKH HVWDWH RU WR H[HUFLVH FRQWURO RYHU SURSHUW\ RI WKH HVWDWH    l 
86&  D
    &KDRY+RVSLWDO6WDIILQJ                  1RV          1RV                 &KDRY+RVSLWDO6WDIILQJ        
      6HUYLFHV,QFHWDO                                                                                       6HUYLFHV,QFHWDO

ULJKWVZLWKRQO\DQLQFLGHQWDOSXEOLFLQWHUHVWLQWKHOLWLJDWLRQ          VWD\RISUHSHWLWLRQSURFHHGLQJVHQDEOHVWKHEDQNUXSWF\FRXUW
IRU LW WR IDOO RXWVLGH WKH SROLFH SRZHU H[FHSWLRQ  $ SXUH       WRGHFLGHZKHWKHULWZLOOH[HUFLVHLWVSRZHUXQGHUERI
FVXLWZKLFKGRHVQRWHYHQDWWHPSWWRH[FOXGHIURP                  WKH%DQNUXSWF\&RGHWRHVWDEOLVKWKHYDOLGLW\DQGDPRXQWRI
LQWHUVWDWH FRPPHUFH JRRGV SURGXFHG XQGHU VXEVWDQGDUG                   FODLPVDJDLQVWWKHGHEWRURUDOORZDQRWKHUFRXUWWRGRVRl
FRQGLWLRQV EXW VHHNV PHUHO\ WR UHFRYHU XQSDLG PLQLPXP                +XQW Y %DQNHUV 7UXVW &R  )G   WK &LU
ZDJHV XQSDLG RYHUWLPH DQG OLTXLGDWHG GDPDJHV RQO\                   IRRWQRWHV RPLWWHG  7KH VWD\ KHOSV mSUHVHUYH ZKDW
LQFLGHQWDOO\VHUYHVWKHSXEOLFLQWHUHVW$FVXLWGRHV              UHPDLQV RI WKH GHEWRUjV LQVROYHQW HVWDWH DQG    SURYLGH D
VHHNYLDWKHOLTXLGDWHGGDPDJHVDZDUGWRSXQLVKZURQJGRHUV                V\VWHPDWLFHTXLWDEOHOLTXLGDWLRQSURFHGXUHIRUDOOFUHGLWRUV
DQG WKHUHE\ SURYLGH D JHQHUDO GHWHUUHQW WR XQIDLU ODERU             VHFXUHGDVZHOODVXQVHFXUHGWKHUHE\SUHYHQWLQJDµFKDRWLF
SUDFWLFHV EXW HYHQ WKLV DZDUG LV UHPLWWHG WR DIIHFWHG              DQGXQFRQWUROOHGVFUDPEOHIRUWKHGHEWRUjVDVVHWVLQDYDULHW\
HPSOR\HHV7KH6HFUHWDU\jVSURVHFXWLRQRIVXFKDVXLWVHUYHV               RIXQFRRUGLQDWHGSURFHHGLQJVLQGLIIHUHQWFRXUWVjl+ROWNDPS
OLWWOHSXEOLFSXUSRVHRWKHUWKDQDJHQHUDOLQWHUHVWLQVHHLQJ               Y/LWWOHILHOG)GWK&LU
ODZVHQIRUFHGnDSXEOLFLQWHUHVWQRJUHDWHUWKDQWKDWVHUYHG
E\WKHK\SRWKHWLFDOVWDWHDWWRUQH\JHQHUDOVXLQJWRHQIRUFHD                  &RPSDQLHV RU LQGLYLGXDOV DWWHPSWLQJ WR UHRUJDQL]H WKHLU
SULYDWHFRQWUDFW3XUHFVXLWVIDLOWKHSXEOLFSROLF\             DIIDLUVXQGHU&KDSWHUFRQWLQXHWRFRQGXFWEXVLQHVVGXULQJ
WHVW DQG DUH WKHUHIRUH QRW FRYHUHG E\ WKH SROLFH SRZHU           WKHSHQGHQF\RIWKHSURFHHGLQJVZLWKWKHEDQNUXSWF\FDVH
H[FHSWLRQWRWKHDXWRPDWLFVWD\7RWKHH[WHQWWKH6HFUHWDU\               GHVLJQHGWRJLYH WKHGHEWRUDVHFRQGFKDQFHE\SHUPLWWLQJ
EURXJKWWKLVDFWLRQXQGHUFWKHQWKHH[FHSWLRQGRHV                GLVFKDUJHRIFHUWDLQSUHSHWLWLRQGHEWVSD\PHQWRYHUWLPH
QRWDSSO\DQGWKHDXWRPDWLFVWD\GRHV                                      DQGXQGHUFRXUWVXSHUYLVLRQRIFHUWDLQSUHSHWLWLRQFUHGLWRUV
                                                                            DQGXVHE\WKHGHEWRURISURFHHGVIURPRQJRLQJRSHUDWLRQVWR
   ,Q FHUWDLQ FDVHVn  SHUKDSV PRVW FDVHVn D )/6$ mKRW              ILQDQFHFRQWLQXLQJRSHUDWLRQVDQGJHWWKHGHEWRUEDFNRQLWV
JRRGVl DFWLRQ E\ WKH 6HFUHWDU\ VHUYHV VLJQLILFDQW SXEOLF             IHHW$&KDSWHUGHEWRULQSRVVHVVLRQUHPDLQVREOLJDWHGWR
LQWHUHVWVDSDUWIURPDQDWWHPSWWRYLQGLFDWHWKHSULYDWHULJKWV             SD\ PRVW OLDELOLWLHV DULVLQJ DIWHU FRPPHQFHPHQW RI WKH
RIHPSOR\HHV7KH6HFUHWDU\KDVORQJWUHDWHGWKLVODZVXLWDV               EDQNUXSWF\ SURFHHGLQJ SRVWSHWLWLRQ GHEWV DUH JHQHUDOO\
DmKRWJRRGVlDFWLRQDQGKHUFRPSODLQWLQYRNHG86&                   WUHDWHGDVDGPLQLVWUDWLYHH[SHQVHVWRZKLFKWKHDXWRPDWLFVWD\
LQDGGLWLRQWRFDVDXWKRULW\IRUKHUSRZHUWRILOH            SURYLVLRQGRHVQRWDSSO\6HH86&DE
VXLW6HFWLRQGRHVQRPRUHWKDQFRQIHUMXULVGLFWLRQRQ                 ,QUH+HPLQJZD\7UDQVS,QF)GVW&LU
GLVWULFW FRXUWV mWR UHVWUDLQ YLRODWLRQV RI VHFWLRQ  RI WKLV     KROGLQJ WKDW WKH WHUP DGPLQLVWUDWLYH H[SHQVHV IRU
WLWOHl,WGRHVQRWSDUDOOHOFE\H[SOLFLWO\FRQIHUULQJRQ          mSUHVHUYDWLRQRIWKHHVWDWHlLQFOXGHVSURWHFWLRQRIDVVHWVRI
WKH 6HFUHWDU\ DXWKRULW\ WR EULQJ D VXLW IRU DQ LQMXQFWLRQ WR      WKHHVWDWHDVZHOODVSRVWSHWLWLRQRSHUDWLRQRIWKHGHEWRUjV
                                                                            EXVLQHVV

                                                                                                            %
       7KH ULJKWV FRQIHUUHG E\ )/6$    DQG E F DUH
SULYDWH ULJKWV WR D PLQLPXP OHYHO RI SD\PHQW D VXEMHFW RWKHUZLVH FRYHUHG     m7KHMXULVGLFWLRQRIWKHEDQNUXSWF\FRXUWVOLNHWKDWRIRWKHU
E\ WKH SULYDWH UHODWLRQVKLS EHWZHHQ HPSOR\HU DQG HPSOR\HH $   VXLW
                                                                            IHGHUDO FRXUWV LV JURXQGHG LQ DQG OLPLWHG E\ VWDWXWHl
WR HQIRUFH D &RQJUHVVLRQDOO\ JXDUDQWHHG PLQLPXP SULYDWH ULJKW GLIIHUV
IURP DQ ((2& DFWLRQ WR HQIRUFH 7LWOH 9,, LQ WKDW WKH ULJKWV YLQGLFDWHG E\
                                                                            &HORWH[&RUSY(GZDUGV867LWOH
D 7LWOH 9,, DFWLRQ DUH &RQJUHVVLRQDOO\ FUHDWHG FLYLO ULJKWV DJDLQVW         86&ESURYLGHVWKDWmWKHGLVWULFWFRXUWVVKDOO
GLVFULPLQDWLRQ LQ SULYDWH HPSOR\PHQW ZKLFK LV D SROLF\ RYHUULGLQJ WKH      KDYH RULJLQDO EXW QRW H[FOXVLYH MXULVGLFWLRQ RI DOO FLYLO
VSHFLILFV RI SULYDWH DJUHHPHQWV
    &KDRY+RVSLWDO6WDIILQJ                1RV         1RV                 &KDRY+RVSLWDO6WDIILQJ        
      6HUYLFHV,QFHWDO                                                                                    6HUYLFHV,QFHWDO

SURFHHGLQJVDULVLQJXQGHUWLWOHRUDULVLQJLQRUUHODWHGWR            FRUUHFW DQG DV UDSLGO\ DV SUDFWLFDEOH WR HOLPLQDWH WKH
FDVHVXQGHUWLWOHl7KHGLVWULFWFRXUWVPD\LQWXUQUHIHU            FRQGLWLRQVDERYHUHIHUUHGWRLQVXFKLQGXVWULHVl
mDQ\RUDOOSURFHHGLQJVDULVLQJXQGHUWLWOHRUDULVLQJLQRU
UHODWHGWRDFDVHXQGHUWLWOHWRWKHEDQNUXSWF\MXGJHV          86&&RQJUHVVSURFHHGHGWRHVWDEOLVKDPLQLPXP
IRUWKHGLVWULFWl86&D7KHGLVWULFWFRXUWIRUWKH      ZDJHRYHUWLPHSD\UHTXLUHPHQWVUHJXODWLRQV
6RXWKHUQ'LVWULFWRI)ORULGDKDVGRQHVRDQGLWVUHIHUUDORUGHU         RI FKLOG ODERU   DQG H[HPSWLRQV IURP WKH )/6$jV
FRQIHUUHGMXULVGLFWLRQRQWKHEDQNUXSWF\FRXUW                          FRYHUDJHLQIXUWKHUDQFHRIWKHVHSROLF\JRDOV7KHVH
                                                                         UHJXODWLRQVDOOVWDWHGQDWLRQDOODERUSROLF\
   2QFH D EDQNUXSWF\ SURFHHGLQJ EHJLQV LQ RQH FRXUW WKH
FRQFXUUHQWMXULVGLFWLRQRIRWKHUFRXUWVLVSDUWLDOO\VWULSSHG              ,Q  86&   &RQJUHVV LPSRVHG SHQDOWLHV IRU
6HH,QUH8QLWHG6WDWHV%UDVV&RUS)GWK            YLRODWLRQVRIWKH)/6$DQGFUHDWHGWZRSDUDOOHOYHKLFOHVIRU
&LU   ,Q DGGLWLRQ WR H[FOXVLYH MXULVGLFWLRQ RYHU WKH     HQIRUFHPHQW6HFWLRQEFRQIHUVRQHPSOR\HHVWKHULJKW
EDQNUXSWF\SURFHHGLQJLWVHOIm>W@KHGLVWULFWFRXUWLQZKLFKD           WRVXHIRUXQSDLGPLQLPXPZDJHVXQSDLGRYHUWLPHZDJHV
FDVHXQGHUWLWOH  LV FRPPHQFHGRULVSHQGLQJVKDOOKDYH             DQGDQHTXDODPRXQWDVOLTXLGDWHGGDPDJHV6HFWLRQF
H[FOXVLYHMXULVGLFWLRQRIDOORIWKHSURSHUW\ZKHUHYHUORFDWHG         DXWKRUL]HVWKH6HFUHWDU\RI/DERUWREULQJDQDFWLRQIRUWKH
RIWKHGHEWRUDVRIWKHFRPPHQFHPHQWRIVXFKFDVHDQGRI                VDPHZDJHVDQGGDPDJHVDQGDXWRPDWLFDOO\WHUPLQDWHVWKH
SURSHUW\RIWKHHVWDWHl86&HVHHDOVR,QUH            ULJKWRIWKHLQGLYLGXDOHPSOR\HHWRVXHIRUZDJHVFRYHUHGE\
0RGHUQ %RDWV ,QF  )G   WK &LU           WKH6HFUHWDU\jVVXLWIXUWKHUVSHFLI\LQJWKDWm>D@Q\VXPVWKXV
+RZHYHU WKH H[FOXVLYLW\ RI WKH EDQNUXSWF\ FRXUWjV                 UHFRYHUHGE\WKH6HFUHWDU\RI/DERURQEHKDOIRIDQHPSOR\HH
MXULVGLFWLRQ UHDFKHV RQO\ DV IDU DV WKH DXWRPDWLF VWD\           SXUVXDQWWRWKLVVXEVHFWLRQVKDOOEHKHOGLQDVSHFLDOGHSRVLW
SURYLVLRQVRI86&7KDWLVLIWKHDXWRPDWLFVWD\           DFFRXQW DQG VKDOO EH SDLG    GLUHFWO\ WR WKH HPSOR\HH RU
DSSOLHV WR DQ DFWLRQ GLUHFWHG DW WKH GHEWRU RU LWV SURSHUW\   HPSOR\HHV DIIHFWHGl   86&  F  7KLV SURYLVLRQ
MXULVGLFWLRQ LV H[FOXVLYH LQ WKH EDQNUXSWF\ FRXUW  ,I WKH      DXWKRUL]HVWKH6HFUHWDU\WREULQJDQDFWLRQDJDLQVWHPSOR\HUV
DXWRPDWLFVWD\GRHVQRWDSSO\nHJLIDQH[FHSWLRQWRWKH              WR UHFRYHU H[DFWO\ WKH VDPH ZDJHV DQG GDPDJHV DV WKH
VWD\FRYHUVWKHDFWLRQLQTXHVWLRQnWKHEDQNUXSWF\FRXUWjV              LQGLYLGXDOHPSOR\HHZKRVHULJKWVZHUHYLRODWHGFRXOGREWDLQ
MXULVGLFWLRQ LV FRQFXUUHQW ZLWK WKDW RI DQ\ RWKHU FRXUW RI      LQKLVRZQVXLWnDQGWKHSURYLVLRQIXUWKHUVSHFLILHVWKDWDQ\
FRPSHWHQWMXULVGLFWLRQ$QGLIWKHEDQNUXSWF\FRXUWJUDQWV              VXFKUHFRYHU\EHIRUZDUGHGWRWKHHPSOR\HHIRUKLVSHUVRQDO
UHOLHIIURPWKHVWD\ZLWKUHVSHFWWRFHUWDLQSURSHUW\RUFODLPV         EHQHILW$FVXLWWKXVGRHVQRPRUHWKDQDVFHUWDLQWKH
VHH86&GHIWKHEDQNUXSWF\FRXUWUHWDLQV           ULJKWVRIDSULYDWHLQGLYLGXDODQGREWDLQDMXGJPHQWIRUWKDW
MXULVGLFWLRQ RYHU WKRVH PDWWHUV DOWKRXJK LWV MXULVGLFWLRQ LV     LQGLYLGXDOjVEHQHILW$FVXLWLVWKHUHIRUHDSULPH
FRQFXUUHQWZLWKWKDWRIRWKHUFRXUWVRIFRPSHWHQWMXULVGLFWLRQ          H[DPSOHRIDVXLWE\DJRYHUQPHQWDOXQLWWRDGMXGLFDWHSULYDWH
6HH,QUH5LGJHPRQW$SDUWPHQW$VVRFV%5%DQNU              ULJKWV6HH:LUW]Y&	36KRH&RUS)GWK
1'*DOLIWLQJVWD\ZLWKUHVSHFWWRFHUWDLQSURSHUW\LQ          &LUREVHUYLQJWKDWLQJHQHUDOLQDFVXLWmWKH
WKH EDQNUXSWF\ FRXUWjV H[FOXVLYH MXULVGLFWLRQ DQG WKHUHE\          *RYHUQPHQW EHFRPHV DQ DFWLYH SURWDJRQLVW IRU WKH GRXEOH
DOORZLQJ VWDWH FRXUW DFWLRQV UHODWLQJ WR WKH SURSHUW\ WR         SXUSRVHRISURWHFWLQJSULYDWHLQWHUHVWVDQGYLQGLFDWLQJSXEOLF
SURFHHGVHHDOVR,QUH&DUORPDJQR6KLSSLQJ6$%5             ULJKWVl
  (' /D  ,Q UH +RKHQEHUJ  %5 
%DQNU :' 7HQQ  0RUJDQ *XDU 7UXVW &R Y                6WLOODVH[SODLQHGDERYHWKLVIDFWGRHVQRWHQGWKHLQTXLU\
+HOOHQLF/LQHV%56'1<$FFRUGLQJO\              $VXLWPXVWEHXQGHUWDNHQSULQFLSDOO\WRDGMXGLFDWHSULYDWH
    &KDRY+RVSLWDO6WDIILQJ                   1RV          1RV               &KDRY+RVSLWDO6WDIILQJ        
      6HUYLFHV,QFHWDO                                                                                      6HUYLFHV,QFHWDO

WRFHUWDLQSULYDWHSDUWLHVYLVDYLVRWKHUFUHGLWRUVRIWKHHVWDWH          LIQRH[FHSWLRQWRWKHDXWRPDWLFVWD\SHUPLWWHGWKH6HFUHWDU\jV
FRQWUDU\WRWKH%DQNUXSWF\&RGHjVSULRULWLHV                             VXLWWRJRIRUZDUGWKH:HVWHUQ'LVWULFWRI7HQQHVVHHKDGQR
                                                                             MXULVGLFWLRQWRHQWHUWDLQWKHVXLWEHFDXVHWKHEDQNUXSWF\FRXUW
  7KLVFDVHLOOXVWUDWHVZHOOWKHGLVWLQFWLRQEHWZHHQJHQHUDO                 LQ)ORULGDKDGH[FOXVLYHMXULVGLFWLRQRYHUWKHGHEWRUDQGLWV
SXEOLFSROLF\LQWHUHVWVDQGWKHSULYDWHULJKWVDWVWDNHZKHQD               SURSHUW\LQFOXGLQJWKHUHFRUGVDWLVVXHLQWKLVFDVH
JRYHUQPHQWDOXQLWHQJDJHVLQDSDUWLFXODUHQIRUFHPHQWDFWLRQ
&RQJUHVVPDGHVSHFLILFILQGLQJVDQGGHFODUHGQDWLRQDOSROLF\                    1RWVXUSULVLQJO\FRXUWVKDYHXQLIRUPO\KHOGWKDWZKHQD
LQWKH)/6$LWVHOI                                                          SDUW\VHHNVWRFRPPHQFHRUFRQWLQXHSURFHHGLQJVLQRQHFRXUW
                                                                             DJDLQVW D GHEWRU RU SURSHUW\ WKDW LV SURWHFWHG E\ WKH VWD\
  7KH &RQJUHVV ILQGV WKDW WKH H[LVWHQFH LQ LQGXVWULHV                DXWRPDWLFDOO\ LPSRVHG XSRQ WKH ILOLQJ RI D EDQNUXSWF\
  HQJDJHGLQFRPPHUFHRULQWKHSURGXFWLRQRIJRRGVIRU                      SHWLWLRQWKHQRQEDQNUXSWF\FRXUWSURSHUO\UHVSRQGVWRWKH
  FRPPHUFH RI ODERU FRQGLWLRQV GHWULPHQWDO WR WKH                     ILOLQJE\GHWHUPLQLQJZKHWKHUWKHDXWRPDWLFVWD\DSSOLHVWR
  PDLQWHQDQFH RI WKH PLQLPXP VWDQGDUG RI OLYLQJ                        LHVWD\VWKHSURFHHGLQJV6HH,QUH%DOGZLQ8QLWHG&RUS
  QHFHVVDU\IRUKHDOWKHIILFLHQF\DQGJHQHUDOZHOOEHLQJ                   /LWLJ)GG&LUm:KHWKHUWKHVWD\
  RIZRUNHUVFDXVHVFRPPHUFHDQGWKHFKDQQHOVDQG                        DSSOLHV WR OLWLJDWLRQ RWKHUZLVH ZLWKLQ WKH MXULVGLFWLRQ RI D
  LQVWUXPHQWDOLWLHVRIFRPPHUFHWREHXVHGWRVSUHDGDQG                     GLVWULFWFRXUWRUFRXUWRIDSSHDOVLVDQLVVXHRIODZZLWKLQWKH
  SHUSHWXDWHVXFKODERUFRQGLWLRQVDPRQJWKHZRUNHUVRI                      FRPSHWHQFHRIERWKWKHFRXUWZLWKLQZKLFKWKHOLWLJDWLRQLV
  WKH VHYHUDO 6WDWHV  EXUGHQV FRPPHUFH DQG WKH IUHH              SHQGLQJ    DQG WKH EDQNUXSWF\ FRXUWl  $VVXPLQJ LWV
  IORZ RI JRRGV LQ FRPPHUFH  FRQVWLWXWHV DQ XQIDLU               MXULVGLFWLRQLVRWKHUZLVHVRXQGWKHQRQEDQNUXSWF\FRXUWPD\
  PHWKRGRIFRPSHWLWLRQLQFRPPHUFHOHDGVWRODERU                      HQWHURUGHUVQRWLQFRQVLVWHQWZLWKWKHWHUPVRIWKHVWD\DQG
  GLVSXWHV EXUGHQLQJ DQG REVWUXFWLQJ FRPPHUFH DQG WKH                  DQ\RUGHUVHQWHUHGE\WKHEDQNUXSWF\FRXUWUHVSHFWLQJWKHVWD\
  IUHHIORZRIJRRGVLQFRPPHUFHDQGLQWHUIHUHVZLWK                    6HH +XQW  )G DW  mRWKHU GLVWULFW FRXUWV UHWDLQ
  WKH RUGHUO\ DQG IDLU PDUNHWLQJ RI JRRGV LQ FRPPHUFH               MXULVGLFWLRQ WR GHWHUPLQH WKH DSSOLFDELOLW\ RI WKH VWD\ WR
  ,WLVGHFODUHGWREHWKHSROLF\RIWKLVFKDSWHUWR            OLWLJDWLRQ SHQGLQJ EHIRUH WKHP DQG WR HQWHU RUGHUV QRW
                                                                             LQFRQVLVWHQWZLWKWKHWHUPVRIWKHVWD\l,IIRUH[DPSOHWKH
                                                                             VXLW EHIRUH WKH GLVWULFW FRXUW PD\ SURFHHG EHFDXVH DQ
                                                                           H[FHSWLRQWRWKHDXWRPDWLFVWD\DXWKRUL]HVSURVHFXWLRQRIWKH
           HJ ,Q UH 0DQVILHOG 7LUH 	 5XEEHU &R
        6HH                                         )G       VXLWWKHGLVWULFWFRXUWPD\HQWHUQHHGIXORUGHUVQRWWKHPVHOYHV
WK &LU  UHFRJQL]LQJ DV FRYHUHG E\ WKH SROLFH SRZHU H[FHSWLRQ D      LQFRQVLVWHQWZLWKWKHDXWRPDWLFVWD\6HH&RPPRGLW\)XWXUHV
VWDWHjV DGPLQLVWUDWLRQ RI ZRUNHUVj FRPSHQVDWLRQ FODLPV ILOHG E\ D GHEWRUjV
HPSOR\HHV ZKHQ VXFFHVVIXO FODLPV ZRXOG EH SDLG QRW E\ WKH GHEWRU EXW DQ
                                                                             7UDGLQJ&RUSY&23HWUR0NWJ*URXS,QF)G
LQVXUDQFH IXQG VXFK WKDW FODLPDQWV ZRXOG JDLQ QR DGYDQWDJH RYHU RWKHU       WK&LU
                      VHH DOVR (GGOHPDQ Y 8QLWHG 6WDWHV 'HSjW RI
FUHGLWRUV RI WKH HVWDWH
/DERU                                   RYHUUXOHG LQ SDUW RQ RWKHU
         )G   WK &LU                                    ,I WKH QRQEDQNUXSWF\ FRXUWjV LQLWLDO MXULVGLFWLRQDO
JURXQGV E\ 7HPH[ (QHUJ\ ,QF Y 8QGHUZRRG :LOVRQ %HUU\ 6WHLQ 	           GHWHUPLQDWLRQLVHUURQHRXVWKHSDUWLHVUXQWKHULVNWKDWWKH
sRKQVRQ  )G  WK &LU  KROGLQJ WKDW D VXLW E\ WKH          HQWLUH DFWLRQ ODWHU ZLOO EH GHFODUHG YRLG DE LQLWLR  6HH
'HSDUWPHQW RI /DERU WR HQIRUFH WKH 6HUYLFH &RQWUDFW $FW LQ ZKLFK WKH
JRYHUQPHQW VRXJKW OLTXLGDWLRQ RI FHUWDLQ ZRUNHUVj EDFNSD\ FODLPV ZDV
                                                                             6FKZDUW] Y 8QLWHG 6WDWHV  )G   WK &LU
ZLWKLQ WKH SROLFH SRZHU H[FHSWLRQ EHFDXVH WKH VXLW HQIRUFHG WKH $FWjV        1/5%Y(GZDUG&RRSHU3DLQWLQJ,QF)G
SROLFLHV DQG mEDFNSD\ FODLPDQWV ZRXOG QRW UHFHLYH DQ\ H[WUD SULRULW\ E\     WK&LU,IDVWDWHFRXUWDQGWKHEDQNUXSWF\FRXUW
YLUWXH RI WKHl ODZVXLW EXW LQVWHDG ZRXOG KDYH WR FROOHFW WKHLU FODLPV LQ    UHDFKGLIIHULQJFRQFOXVLRQVDVWRZKHWKHUWKHDXWRPDWLFVWD\
EDQNUXSWF\
       &KDRY+RVSLWDO6WDIILQJ                 1RV           1RV               &KDRY+RVSLWDO6WDIILQJ        
         6HUYLFHV,QFHWDO                                                                                     6HUYLFHV,QFHWDO

EDUVPDLQWHQDQFHRIDVXLWLQWKHQRQEDQNUXSWF\IRUXPWKH                    GHEWRUFXVWRPHUWRHQIRUFHDFRQWUDFWREOLJDWLRQ$OWKRXJK
EDQNUXSWF\IRUXPjVUHVROXWLRQKDVEHHQKHOGGHWHUPLQDWLYH                     WKHVXLWZRXOGHIIHFWXDWHWKHVWDWHjVSXEOLFSROLF\LQIDYRURI
SUHVXPDEO\SXUVXDQWWRWKH6XSUHPDF\&ODXVH6HH5D\PDUN                      HQIRUFLQJ FRQWUDFWXDO REOLJDWLRQV RU UHTXLULQJ SD\PHQW RI
,QGXVY/DL)GG&LUEDQNUXSWF\                  GDPDJHVWKHVXLWHVVHQWLDOO\HQIRUFHVWKHVXSSOLHUjVSULYDWH
FRXUWDQGVWDWHFRXUWERWKKHOGDFWLRQLQVWDWHFRXUWQRWEDUUHG               ULJKWV DJDLQVW WKH GHEWRU DQG ZRXOG UHVXOW LQ D SHFXQLDU\
E\ WKH VWD\ EXW WKH 7KLUG &LUFXLW UHYHUVHG WKH EDQNUXSWF\            DGYDQWDJH WR WKH VWDWHIDYRUHG VXSSOLHU YLVDYLV RWKHU
FRXUW DQG UHPDQGHG ZLWK LQVWUXFWLRQV WR HQWHU DQ RUGHU                 FUHGLWRUVRIWKHGHEWRUjVHVWDWH
YDFDWLQJWKHMXGJPHQWRIWKHVWDWHFRXUWXQGHUDQH[FHSWLRQWR
WKH5RRNHU)HOGPDQGRFWULQH$GPLQLVWUDWLYHSURFHHGLQJV                         $SSO\LQJWKLVWHVWLVDGLIILFXOWXQGHUWDNLQJDQGPDQ\FDVHV
EHIRUH D IHGHUDO DJHQF\ PD\ OLNHZLVH EH GHFODUHG YRLG                  ZLOOEHFORVH)RUH[DPSOHWKH(LJKWK&LUFXLWKHOGDVXLWE\
DE LQLWLR LI D FRXUW GHWHUPLQHV WKDW WKH DJHQF\ LQFRUUHFWO\           WKH ((2& DJDLQVW D GHEWRUHPSOR\HU IRU DOOHJHG VH[
GHWHUPLQHGWKDWWKHVWD\GLGQRWEDUWKHSURFHHGLQJV6HH                    GLVFULPLQDWLRQZLWKLQWKHSROLFHSRZHUH[FHSWLRQEHFDXVHWKH
(GZDUG&RRSHU3DLQWLQJ)GDW:HDUHXQDZDUH                       ((2& DFWHG mµDW WKH EHKHVW DQG IRU WKH EHQHILW RI VSHFLILF
RI D FRQIOLFW DULVLQJ EHWZHHQ D IHGHUDO GLVWULFW FRXUW DQG D         LQGLYLGXDOV >EXW@ DOVR WR YLQGLFDWH WKH SXEOLF LQWHUHVW LQ
EDQNUXSWF\FRXUWDQGQRWHWKDWVXFKDFRQIOLFWZRXOGKDYHWR                  SUHYHQWLQJHPSOR\PHQWGLVFULPLQDWLRQjl((2&Y7KH5DWK
EH UHVROYHG E\ DQ DSSHOODWH FRXUW ZLWK MXULVGLFWLRQ WR KHDU           3DFNLQJ &R  )G   WK &LU  TXRWLQJ
DSSHDOVIURPERWKIRUD                                                        *HQHUDO 7HO &R Y ((2&  86   
                                                                               GHVFULELQJ&RQJUHVVLRQDOLQWHQWLQH[SDQGLQJWKH((2&jV
                                    &                                          7LWOH 9,, HQIRUFHPHQW SRZHU EHFDXVH LQGLYLGXDO VXLWV KDG
                                                                               SURYHG LQVXIILFLHQWO\ HIIHFWLYH LQ SURPRWLQJ QDWLRQDO FLYLO
   ,Q FRQFOXGLQJ WKDW LW KDG MXULVGLFWLRQ RYHU WKLV FDVH WKH         ULJKWVSROLF\$FFRUGLQJO\FRXUWVVKRXOGH[DPLQHWKHW\SH
GLVWULFWFRXUWUHOLHGH[FOXVLYHO\RQWKHSROLFHSRZHUH[FHSWLRQ                RIHQIRUFHPHQWDFWLRQEURXJKWDQGWKHUHODWLRQVKLSEHWZHHQ
WRWKHDXWRPDWLFVWD\SURYLVLRQZKLFKSURYLGHVWKDWm>W@KH                    DSDUWLFXODUVXLWDQG&RQJUHVVjVRUDVWDWHjVGHFODUHGSXEOLF
ILOLQJRIDSHWLWLRQGRHVQRWRSHUDWHDVDVWD\n               SROLF\  :KHQ DQ DFWLRQ IXUWKHUV ERWK SXEOLF DQG SULYDWH
                                                                               LQWHUHVWV DQG WKH SULYDWH LQWHUHVWV GR QRW VLJQLILFDQWO\
                                                                               RXWZHLJKWKHSXEOLFEHQHILWIURPHQIRUFHPHQWFRXUWVVKRXOG
                                                                              GHIHU WR WKH OHJLVODWXUHjV GHFLVLRQ WR YHVW HQIRUFHPHQW
       ,I D QRQEDQNUXSWF\ IRUXP FRUUHFWO\ GHWHUPLQHV WKDW DQ H[FHSWLRQ WR     DXWKRULW\ LQ WKH H[HFXWLYH DQG UHFRJQL]H VXFK DFWLRQV DV
WKH DXWRPDWLF VWD\ DSSOLHV DQG WKDW WKHUHIRUH DQ DFWLRQ DJDLQVW WKH GHEWRU   ZLWKLQ mVXFK JRYHUQPHQWDO XQLWjV SROLFH DQG UHJXODWRU\
RU LWV SURSHUW\ PD\ SURFHHG mGHEWRUV DUH QRW OHIW ZLWKRXW DQ DYHQXH IRU
UHOLHI LI WKH\ RU WKH HVWDWH ZRXOG EH KDUPHG     7KH EDQNUXSWF\ FRXUW
                                                                               SRZHUlDVWKDWWHUPLVXVHGLQE+RZHYHUZKHQ
KDV µmDPSOH RWKHU SRZHUVjl WR VWD\ VXFK DQ DFWLRQ LQFOXGLQJ WKH               WKH DFWLRQ LQFLGHQWDOO\ VHUYHV SXEOLF LQWHUHVWV EXW PRUH
GLVFUHWLRQDU\ SRZHU XQGHU  86&  D WR µLVVXH DQ\ RUGHU SURFHVV     VXEVWDQWLDOO\DGMXGLFDWHVSULYDWHULJKWVFRXUWVVKRXOGUHJDUG
RU MXGJPHQW WKDW LV QHFHVVDU\ RU DSSURSULDWH WR FDUU\ RXW WKH SURYLVLRQV RI    WKHVXLWDVRXWVLGHWKHSROLFHSRZHUH[FHSWLRQSDUWLFXODUO\
WKLV WLWOHjl 8QLWHG 6WDWHV Y &RPPRQZHDOWK &RV ,Q UH &RPPRQZHDOWK           ZKHQDVXFFHVVIXOVXLWZRXOGUHVXOWLQDSHFXQLDU\DGYDQWDJH
&RV  )G   WK &LU  TXRWLQJ 0LVVRXUL Y %DQNUXSWF\
&RXUW IRU WKH (' RI $UN  )G   Q WK &LU  DQG
FLWLQJ :RUG Y &RPPHUFH 2LO &R ,Q UH &RPPHUFH 2LO &R  )G
  WK &LU  3UHVXPDEO\ DQ\ DFWLRQ VR VWD\HG ZRXOG QRW EH
YRLG DE LQLWLR EHFDXVH WKH QRQEDQNUXSWF\ IRUXP KDG MXULVGLFWLRQ WR
HQWHUWDLQ LW EXW KDG WR VWD\ WKH DFWLRQ XSRQ WKH RUGHU RI WKH EDQNUXSWF\
FRXUW
    &KDRY+RVSLWDO6WDIILQJ                 1RV          1RV                   &KDRY+RVSLWDO6WDIILQJ           
      6HUYLFHV,QFHWDO                                                                                        6HUYLFHV,QFHWDO

SHFXQLDU\ LQWHUHVW WHVW DV UHILQHG E\ WKH (LJKWK &LUFXLW       XQGHUSDUDJUDSKRURIVXEVHFWLRQDRIWKLV
1HYHUWKHOHVVWKH6HFUHWDU\jVVXLWZRXOGUHVXOWLQDSHFXQLDU\             VHFWLRQRIWKHFRPPHQFHPHQWRUFRQWLQXDWLRQRIDQDFWLRQRU
DGYDQWDJHWRFHUWDLQSULYDWHSDUWLHVYLVDYLVRWKHUFUHGLWRUVj            SURFHHGLQJ E\ D JRYHUQPHQWDO XQLW    WR HQIRUFH VXFK
LQWHUHVWVLQWKHGHEWRUjVHVWDWHDVLWXDWLRQDGGUHVVHGE\WKLV            JRYHUQPHQWDO XQLWjV    SROLFH DQG UHJXODWRU\ SRZHU
FRXUWjVSXEOLFSROLF\WHVW                                                LQFOXGLQJWKHHQIRUFHPHQWRIDMXGJPHQWRWKHUWKDQDPRQH\
                                                                           MXGJPHQWREWDLQHGLQDQDFWLRQWRHQIRUFHlVXFKSRZHU
   $OODFWVRI&RQJUHVVE\GHILQLWLRQGHFODUHQDWLRQDOSROLF\              86&  E   %\ WKLV SURYLVLRQ &RQJUHVV
DQGODZVXLWVWRHQIRUFHWKRVHDFWVQHFHVVDULO\HIIHFWXDWHWKH              GHFODUHGWKDWWKHSROLF\VHWIRUWKLQWKH%DQNUXSWF\&RGHjV
SXEOLF SROLF\ RI WKH 8QLWHG 6WDWHV  %XW 5XVFR ,QGXVWULHV         DXWRPDWLF VWD\ SURYLVLRQ \LHOGV WR VWDWH DQG IHGHUDO
IDLOHGWRUHFRJQL]HWKDWWKHSXEOLFSROLF\WHVWFDOOVXSRQFRXUWV          JRYHUQPHQWDOLQWHUHVWVLQVHFXULQJFRPSOLDQFHZLWKFHUWDLQ
WRDQDO\]HZKHWKHUDSDUWLFXODUODZVXLWLVXQGHUWDNHQE\D                 DVSHFWVRIWKRVHDXWKRULWLHVjUHVSHFWLYHUHJXODWRU\DQGSROLFH
JRYHUQPHQWDOHQWLW\LQRUGHUWRHIIHFWXDWHSXEOLFSROLF\RU               SRZHUV6HH0LGDWODQWLF1DWjO%DQNY1HZsHUVH\'HSWRI
LQVWHDGWRDGMXGLFDWHSULYDWHULJKWV7KLVLVWUXHEHFDXVHLQ           (QYWO3URW86,QUH&RPPHUFH2LO
IDVKLRQLQJ  E &RQJUHVV GLG QRW H[FHSW IURP WKH           &R)GDWKROGLQJWKH7HQQHVVHH:DWHU4XDOLW\
DXWRPDWLF VWD\ DOO ODZVXLWV XQGHUWDNHQ E\ DSSURSULDWH                &RQWURO %RDUGjV SURFHHGLQJV WR IL[ FLYLO OLDELOLW\ DJDLQVW D
JRYHUQPHQWDODXWKRULWLHVLWH[SUHVVO\OLPLWHGWKHH[FHSWLRQWR            GHEWRU XQGHU WKH 7HQQHVVHH :DWHU &RQWURO $FW ZLWKLQ WKH
VXLWVE\DJRYHUQPHQWDOXQLWmWRHQIRUFHVXFKJRYHUQPHQWDO                 SROLFHSRZHUH[FHSWLRQ:KHQDJRYHUQPHQWDOXQLWGHFLGHV
XQLWjVSROLFHDQGUHJXODWRU\SRZHUl7KLVFRXUWjVSHFXQLDU\               WR XQGHUWDNH DQ HQIRUFHPHQW DFWLRQ DQG EHOLHYHV LWV DFWLRQ
LQWHUHVWDQGSXEOLFSROLF\WHVWVUHFRJQL]HWKLVOLPLWDWLRQDQG             IDOOVZLWKLQWKHSROLFHSRZHUH[FHSWLRQLWQHHGQRWSHWLWLRQ
DUH GHVLJQHG WR VRUW RXW FDVHV LQ ZKLFK WKH JRYHUQPHQW LV        WKHEDQNUXSWF\FRXUWIRUSHUPLVVLRQWRSURFHHGLQWKHRUGLQDU\
EULQJLQJVXLWLQIXUWKHUDQFHRIHLWKHULWVRZQRUFHUWDLQSULYDWH          FRXUVHEXWDVH[SODLQHGDERYHWKHDJHQF\UXQVWKHULVNWKDW
SDUWLHVjLQWHUHVWLQREWDLQLQJDSHFXQLDU\DGYDQWDJHRYHURWKHU            DFRXUWZLOOODWHUILQGLWVDFWLRQRXWVLGHWKHH[FHSWLRQjVDPELW
FUHGLWRUV6HH0LVVRXULY%DQNUXSWF\&RXUW)GDW              DQGGHFODUHWKHDFWLRQYRLGDELQLWLR6HH(GZDUG&RRSHU
UHFRJQL]LQJ VWDWH JUDLQ ODZV DV UHJXODWRU\ LQ QDWXUH EXW          3DLQWLQJ)GDW
KROGLQJDVXLWWRHQIRUFHWKHPRXWVLGHSROLFHSRZHUH[FHSWLRQ
EHFDXVHWKHVXLWUHODWHGWRSHFXQLDU\LQWHUHVWVLQWKHGHEWRUjV
SURSHUW\7KHH[LVWHQFHRIWKHSXEOLFSROLF\WHVWQDWXUDOO\
SUHVXPHVWKDWVRPHVXLWVE\JRYHUQPHQWDOXQLWVHYHQWKRXJK
WKH\ZRXOGHIIHFWXDWHFHUWDLQGHFODUHGSXEOLFSROLFLHVZLOO                   
QHYHUWKHOHVVEHUHJDUGHGDVODUJHO\LQIXUWKHUDQFHRISULYDWH                    7KH 7UXVWHHjV FRQWHQWLRQ WKDW WKH  E H[FHSWLRQ WR WKH VWD\
                                                                           RQO\ H[FHSWV DFWLRQV PHQWLRQHG LQ  D DFWLRQV WR UHFRYHU D FODLP
LQWHUHVWV$QH[WUHPHH[DPSOHRIVXFKZRXOGEHDVXLWE\D                DQG GRHV QRW WKHUHIRUH SHUPLW DFWLRQV GHVFULEHG LQ  D DFWV WR
VWDWH DWWRUQH\ JHQHUDO RQ EHKDOI RI D VXSSOLHU DJDLQVW LWV        REWDLQ SRVVHVVLRQ RU FRQWURO RYHU D GHEWRUjV SURSHUW\ VXIIHUV IURP D IDWDO
                                                                           IODZ LW UHIHUV WR D YHUVLRQ RI   QR ORQJHU LQ HIIHFW %HIRUH  WKH
                                                                           7UXVWHHjV DUJXPHQW ZRXOG KDYH ZDUUDQWHG FORVH H[DPLQDWLRQ VHH sDYHQV
                                                                           Y &LW\ RI +D]HO 3DUN  )G   WK &LU  GLVFXVVLQJ
     
        &I ,Q UH &RPPHUFH 2LO  )G DW  m3XQLVKLQJ ZURQJGRHUV    WKH RYHUODS EHWZHHQ  D DQG  D DQG WKH H[WHQW WR ZKLFK
GHWHUULQJ LOOHJDO DFWLYLW\ UHFRYHULQJ UHPHGLDO FRVWV RI GDPDJH WR WKH     WKH  E H[FHSWLRQ DSSOLHV WR FDVHV LQ WKH RYHUODSSLQJ WHUULWRU\
HQYLURQPHQW SURYLGLQJ IRU WKH FRVWV RI DGPLQLVWUDWLRQ DQG ZHLJKLQJ WKH   %XW &RQJUHVV UHZURWH  E E\ FRQVROLGDWLQJ VXEVHFWLRQ E LQWR
VRFLDO DQG HFRQRPLF YDOXH RI D GLVFKDUJH VRXUFH DUH H[HUFLVHV RI WKH       VXEVHFWLRQ E DQG DSSO\LQJ WKH QHZ VXEVHFWLRQ EjV SROLFH SRZHU
VWDWHjV UHJXODWRU\ SRZHU WR HIIHFWXDWH SXEOLF SROLF\ DQG DUH QRW DFWLRQV   H[FHSWLRQ WR DFWLRQV VWD\HG E\ VXEVHFWLRQV D  DQG  LQ DGGLWLRQ
EDVHG XSRQ WKH VWDWHjV SURSHUW\ LQWHUHVWVl                              WR VXEVHFWLRQ D 6HH 3XE /   
    &KDRY+RVSLWDO6WDIILQJ               1RV        1RV                  &KDRY+RVSLWDO6WDIILQJ         
      6HUYLFHV,QFHWDO                                                                                   6HUYLFHV,QFHWDO

  7RGHWHUPLQHZKHWKHUDQDFWLRQTXDOLILHVDVDSURFHHGLQJ             WRLQWURGXFHWKHJRRGVLQTXHVWLRQLQWRLQWHUVWDWHFRPPHUFH
SXUVXDQWWRDJRYHUQPHQWDOXQLWjVSROLFHRUUHJXODWRU\SRZHU          ,QVXFKHYHQWKHFRXOGRIFRXUVHGHVWUR\WKHJRRGV2UKH
DQGWKHUHIRUHIDOOVRXWVLGHWKHDPELWRIWKHDXWRPDWLFVWD\WKLV      FRXOG HOHFW WR FOHDU WKH WDLQW DQG IUHH KLPVHOI IURP WKH
FRXUW DSSOLHV WZR WHVWV WKH SHFXQLDU\ SXUSRVH WHVW DQG WKH   LQMXQFWLRQ VHH  86&  E$ DXWKRUL]LQJ
SXEOLFSROLF\WHVW                                                    SD\PHQWRIWKHDFWXDODQGQHFHVVDU\FRVWVRISUHVHUYLQJWKH
                                                                       HVWDWHLHDGPLQLVWUDWLYHH[SHQVHVWKHUHE\HQDEOLQJKLPWR
  8QGHUWKHSHFXQLDU\SXUSRVHWHVWUHYLHZLQJFRXUWVIRFXV             XVH WKH JRRGV WR FROOHFW GHEWV RZHG WR +66, IRU VHUYLFHV
  RQ ZKHWKHU WKH JRYHUQPHQWDO SURFHHGLQJ UHODWHV                  UHQGHUHG  7KHVH FRQVHTXHQFHV RI D VXFFHVVIXO VXLW
  SULPDULO\WRWKHSURWHFWLRQRIWKHJRYHUQPHQWjVSHFXQLDU\            GHPRQVWUDWHWKDWWKH6HFUHWDU\jVDFWLRQZRXOGQRWUHVXOWLQD
  LQWHUHVWLQWKHGHEWRUjVSURSHUW\DQGQRW WRPDWWHUVRI            SHFXQLDU\DGYDQWDJHWRWKHJRYHUQPHQWVRKHUVXLWSDVVHVWKH
  SXEOLFVDIHW\7KRVHSURFHHGLQJVZKLFKUHODWHSULPDULO\
  WRPDWWHUVRISXEOLFVDIHW\DUHH[FHSWHGIURPWKHVWD\
  8QGHU WKH SXEOLF SROLF\ WHVW UHYLHZLQJ FRXUWV PXVW
  GLVWLQJXLVKEHWZHHQSURFHHGLQJVWKDWDGMXGLFDWHSULYDWH
  ULJKWV DQG WKRVH WKDW HIIHFWXDWH SXEOLF SROLF\  7KRVH
  SURFHHGLQJVWKDWHIIHFWXDWHDSXEOLFSROLF\DUHH[FHSWHG
  IURPWKHVWD\                                                       IURP WKH VWD\ EHFDXVH WKH SROLFH SRZHU H[FHSWLRQ SHUPLWV RQO\ mWKH
                                                                       HQIRUFHPHQW RI D MXGJPHQW RWKHU WKDQ D PRQH\ MXGJPHQWl  86&
                                                                        E 7KHUHIRUH LQ H[FHSWHG FDVHV QRQEDQNUXSWF\ IRUD KDYH
,Q UH &RPPHUFH 2LO &R  )G DW  FLWLQJ (GZDUG       MXULVGLFWLRQ WR UHGXFH FODLPHG FLYLO OLDELOLW\ WR D PRQH\ MXGJPHQW :H
&RRSHU3DLQWLQJ)GDWDGRSWLQJWHVWVVHWIRUWKLQ          QRWH WKDW WKH TXHVWLRQV RI ZKHWKHU WKH GLVWULFW FRXUWjV 3D\PHQW 2UGHU RU
,QUH:HOOKDP%5%DQNU0'7HQQVHH              D VXEVHTXHQW MXGJPHQW RUGHULQJ WKH 7UXVWHH WR FOHDU WKH WDLQW RQ JRRGV
DOVR,QUH&RPPRQZHDOWK&RV)GDWUHILQLQJ             DOUHDG\ PRYHG LQ LQWHUVWDWH FRPPHUFH ZLWK WKH SHUPLVVLRQ RI WKH FRXUW

WKHmSHFXQLDU\LQWHUHVWlWHVWE\UHGLUHFWLQJWKHDQDO\VLVWRZDUG       FRQVWLWXWH mPRQH\ MXGJPHQWVl ZLWKLQ WKH PHDQLQJ RI  E DUH FORVH
                                                                       TXHVWLRQV 6HH HJ 3HQQ 7HUUD /WG Y 'HSDUWPHQW RI (QYWO 5HV 
LQTXLULQJ ZKHWKHU WKH DFWLRQ mZRXOG UHVXOW LQ D SHFXQLDU\      )G  G &LU  KROGLQJ WKDW DQ DFWLRQ E\ WKH JRYHUQPHQW WR
DGYDQWDJHWRWKHJRYHUQPHQWYLVDYLVRWKHUFUHGLWRUVRIWKH           FRPSHO FOHDQXS RI HQYLURQPHQWDO KD]DUG IHOO ZLWKLQ  E 
GHEWRUjV HVWDWHl  ,QWHUSUHWLQJ WKH SUHYLRXV YHUVLRQ RI        H[FHSWLRQV HYHQ WKRXJK LQMXQFWLYH UHOLHI UHTXLUHG H[SHQGLWXUH RI PRQH\
 E ZKLFK GLVWLQJXLVKHG EHWZHHQ SURVHFXWLRQ RI             DQG MXGJPHQW IL[HG FLYLO SHQDOWLHV IRU IDLOXUH WR FRPSO\ ZLWK FRQVHQW

SURFHHGLQJV FRYHUHG E\  E DQG HQIRUFHPHQW RI         GHFUHH

MXGJPHQWVFRYHUHGE\EWKLVFRXUWFRPPHQWHG                  
                                                                              $OWKRXJK WKH TXHVWLRQ LV QRW EHIRUH XV D FXUVRU\ UHYLHZ RI )/6$

  3DUDJUDSKH[FHSWVFRPPHQFHPHQWRUFRQWLQXDWLRQRI                ODZ VXJJHVWV WKDW WKH 7UXVWHH PD\ FOHDU WKH WDLQW E\ SD\LQJ VLJQLILFDQWO\
                                                                       OHVV WKDQ WKH IXOO DPRXQW RI DOO HPSOR\HHVj FRQWUDFWEDVHG ZDJH FODLPV
  DFWLRQVDQGSURFHHGLQJVE\JRYHUQPHQWDOXQLWVWRHQIRUFH             DJDLQVW WKH HVWDWH EHFDXVH WKH )/6$ RQO\ FRYHUV FHUWDLQ HPSOR\HHV VHH
  SROLFHRUUHJXODWRU\SRZHU7KXVZKHUHDJRYHUQPHQWDO               86&   FUHDWLQJ H[HPSWLRQV DQG PDQGDWHV RQO\ D PLQLPXP
  XQLW LV VXLQJ D GHEWRU WR SUHYHQW RU VWRS YLRODWLRQ RI     KRXUO\ ZDJH VHH   86&   DQG  RI DQ HPSOR\HHjV RUGLQDU\
  IUDXGHQYLURQPHQWDOSURWHFWLRQVDIHW\RUVLPLODUSROLFH           ZDJH IRU RYHUWLPH  86&   7KXV HYHQ LI WKH 6HFUHWDU\ ZHUH
                                                                       WR SURVHFXWH KHU VXLW VXFFHVVIXOO\ VRPH +66, HPSOR\HHV ZRXOG UHFHLYH
                                                                                          VHH

  RU UHJXODWRU\ ODZV RU DWWHPSWLQJ WR IL[ GDPDJHV IRU
                                                                       QRWKLQJ DQG RWKHUV ZRXOG UHFHLYH RQO\ D IUDFWLRQ RI WKHLU RUGLQDU\ ZDJHV
  YLRODWLRQRIVXFKDODZWKHDFWLRQRUSURFHHGLQJLVQRW                                )G DW  Q QRWLQJ WKDW SDUWLHV DJUHHG WKDW
                                                                       HPSOR\HHV ZRXOG UHFHLYH DQ\WKLQJ LQ H[FHVV RI PLQLPXP ZDJHV DQG
                                                                       &I 5XVFR ,QGXV
  VWD\HGXQGHUWKHDXWRPDWLFVWD\3DUDJUDSKPDNHV
  FOHDUWKDWWKHH[FHSWLRQH[WHQGVWRSHUPLWDQLQMXQFWLRQ             RYHUWLPH mLQ DFFRUGDQFH ZLWK WKH SULRULW\ VFKHPH RI WKH %DQNUXSWF\
                                                                       &RGHl
       &KDRY+RVSLWDO6WDIILQJ                 1RV           1RV                 &KDRY+RVSLWDO6WDIILQJ          
         6HUYLFHV,QFHWDO                                                                                       6HUYLFHV,QFHWDO

  7KH (OHYHQWK &LUFXLWjV DQDO\VLV IDOOV VKRUW RI WKH PDUN               DQGHQIRUFHPHQWRIDQLQMXQFWLRQDQGWRSHUPLWWKHHQWU\
SDUWLFXODUO\DVDSSOLHGWRWKHIDFWVRIWKLVFDVH                               RI D PRQH\ MXGJPHQW EXW GRHV QRW H[WHQG WR SHUPLW
                                                                                 HQIRUFHPHQWRIDPRQH\MXGJPHQW
   7KURXJK KHU mKRW JRRGVl DFWLRQ WKH 6HFUHWDU\ LV QRW
DWWHPSWLQJWRSURWHFWWKH8QLWHG6WDWHVjVSHFXQLDU\LQWHUHVWLQ                &RPPHUFH 2LO &R  )G DW  DFFRUG 0LVVRXUL Y
WKHGHEWRUjVSURSHUW\QRUZRXOGPDLQWHQDQFHRIKHUDFWLRQ                     %DQNUXSWF\ &RXUW  )G DW  mµSROLFH RU UHJXODWRU\
mUHVXOWLQDSHFXQLDU\DGYDQWDJHWRWKHJRYHUQPHQWYLVDYLV                   SRZHUj UHIHUV WR WKH HQIRUFHPHQW RI VWDWH ODZV DIIHFWLQJ
RWKHUFUHGLWRUVRIWKHGHEWRUjVHVWDWHl,QUH&RPPRQZHDOWK                   KHDOWKZHOIDUHPRUDOVDQGVDIHW\EXWQRWUHJXODWRU\ODZV
&RV)GDWHPSKDVLVDGGHG,IWKH6HFUHWDU\                  WKDWGLUHFWO\FRQIOLFWZLWKWKHFRQWURORIWKHUHVRUSURSHUW\E\
ZHUHWRSUHYDLOLQKHUVXLWLQHTXLW\VKHZRXOGQRWJDLQWLWOH                WKH EDQNUXSWF\ FRXUWl  $V WKH GLVWULFW FRXUW DSWO\ SXW LW
WR WKH JRRGV QRU REWDLQ D PRQH\ MXGJPHQW DJDLQVW +66,jV               m>S@XUVXDQWWRWKHVHFRPSOHPHQWDU\WHVWVDQDFWLRQZLOORQO\
EDQNUXSWF\HVWDWH,QVWHDGWKH7UXVWHHZRXOGEHIRUELGGHQ                  EHH[HPSWIURPWKHDXWRPDWLFVWD\RIWKH%DQNUXSWF\&RGHLI
                                                                               WKHDFWLRQKDVEHHQLQVWLWXWHGWRHIIHFWXDWHWKHSXEOLFSROLF\
                                                                               JRDOV RI WKH JRYHUQPHQWDO HQWLW\ DV RSSRVHG WR DFWLRQV
                                                                               LQVWLWXWHG WR SURWHFW WKH HQWLW\jV SHFXQLDU\ LQWHUHVW LQ WKH
     
      :H MRLQ WKH (LJKWK &LUFXLW LQ UHILQLQJ WKH mSHFXQLDU\ LQWHUHVWl WHVW     GHEWRUjVSURSHUW\RUWRDGMXGLFDWHSULYDWHULJKWVl
WR IRFXV RXU LQTXLU\ RQ ZKHWKHU WKH HQIRUFHPHQW DFWLRQ ZRXOG UHVXOW LQ D
SHFXQLDU\             WR WKH JRYHUQPHQW YLVDYLV RWKHU FUHGLWRUV RI WKH          7RVXSSRUWKHUFRQWHQWLRQWKDWWKHLQVWDQWVXLWIXUWKHUVWKH
EDQNUXSWF\ HVWDWH                                    )G DW 
            DGYDQWDJH

$V WKDW FRXUW H[SODLQHG mWKLV OLPLWDWLRQ RQ WKH VFRSH RI  E LV
                     6HH ,Q UH &RPPRQZHDOWK &RV
                                                                               'HSDUWPHQW RI /DERUjV SXEOLF SROLF\ JRDOV WKH 6HFUHWDU\
FRQVLVWHQW ZLWK &RQJUHVVjV UDWLRQDOH IRU QRW H[WHQGLQJ WKH H[FHSWLRQ WR        GLUHFWVXVWRWKH6XSUHPH&RXUWjVGHVFULSWLRQVHH&LWLFRUS
SHUPLW HQIRUFHPHQW RI D PRQH\ MXGJPHQWl       ,ELG UHO\LQJ RQ OHJLVODWLYH   ,QGXV &UHGLW ,QF Y %URFN  86   RI
KLVWRU\ DQG FROOHFWLQJ FDVHV UHDFKLQJ FRQVLVWHQW UHVXOWV :H GR QRW DJUHH    &RQJUHVVLRQDOODERUSROLF\DVDQQRXQFHGLQ WKH )/6$,Q
KRZHYHU ZLWK WKH (LJKWK &LUFXLWjV VHHPLQJ XQZLOOLQJQHVV WR DSSO\ WKLV
UXOH XQLIRUPO\ 6HH LG DW  Q FLWLQJ 5XVFR ,QGXVWULHV DQG GHVFULELQJ
                                                                               &LWLFRUSDILQDQFLQJFRPSDQ\ORDQHGDJDUPHQWPDQXIDFWXUHU
WKH )/6$ DV DQ H[DPSOH RI DQ LQVWDQFH mZKHUH &RQJUHVV LQWHQGHG WKDW WKH
                                                                               PLOOLRQVRIGROODUVLQRSHUDWLQJFDSLWDORQDUHYROYLQJEDVLV
SUHIHUHQFH UHVXOWLQJ IURP WKH HQIRUFHPHQW RI D SDUWLFXODU VWDWXWRU\            SXUVXDQW WR D VHFXULW\ DJUHHPHQW WKDW JDYH WKH FRPSDQ\
SURYLVLRQ ZRXOG WDNH SUHFHGHQFH RYHU WKH %DQNUXSWF\ &RGHjV GLVWULEXWLRQ        H[WHQVLYHPRQLWRULQJULJKWVDQGDVHFXULW\LQWHUHVWLQJRRGV
VFKHPHl :H PXVW DSSO\ WKH WHVW XQLIRUPO\ LQ RUGHU WR SUHYHQW D FODVV RI      LQYHQWRU\UHFHLYDEOHVDQGRWKHUDVVHWV6HHLGDW:KHQ
JRYHUQPHQWIDYRUHG FUHGLWRUV IURP REWDLQLQJ D SHFXQLDU\ DGYDQWDJH RYHU
RWKHU FUHGLWRUV ZKR PXVW VWDQG LQ WKH SODFHV DVVLJQHG E\ WKH %DQNUXSWF\
                                                                               WKH EXVLQHVV FROODSVHG WKH ILQDQFLQJ FRPSDQ\ WRRN
&RGHjV FDUHIXOO\ GUDZQ SULRULW\ VFKHPH          6LQFH &RQJUHVV KDV QRW
                                                                               SRVVHVVLRQ RI WKH FROODWHUDO LQFOXGLQJ WKH PDQXIDFWXUHUjV
H[SOLFLWO\ VWDWHG LQ HLWKHU WKH )/6$ RU WKH &RGH WKDW FUHGLWRUV ZLWK )/6$    LQYHQWRU\ RI ILQLVKHG JRRGV  (PSOR\HHV HQJDJHG LQ
FODLPV HQMR\ D SULRULW\ SRVLWLRQ GLIIHUHQW IURP VLPLODUO\ VLWXDWHG FUHGLWRUV   PDQXIDFWXULQJ WKH JRRGV KDG QRW EHHQ SDLG IRU ZRUN
ZLWKRXW )/6$ FODLPV ZH VHH QR UHDVRQ WR GHYLDWH IURP RUGLQDU\                 SHUIRUPHGLQWKHWKUHHZHHNVSULRUWRWKHFRPSDQ\jVFORVLQJ
DSSOLFDWLRQ RI WKH SHFXQLDU\ DGYDQWDJH WHVW
                                                                               LWVGRRUV7KHPDQXIDFWXUHUGLGQRWILOHIRUEDQNUXSWF\
     
       (YHQ LI WKH 6HFUHWDU\jV VXLW ZRXOG UHVXOW LQ D PRQH\ MXGJPHQW WKDW
IDFW ZRXOG QRW HOLPLQDWH WKH MXULVGLFWLRQ RI WKH GLVWULFW FRXUW 7KH SROLFH
SRZHU H[FHSWLRQ DOORZV DFWLRQV WKDW IL[ WKH FLYLO OLDELOLW\ RI D GHEWRU IRU
YLRODWLRQV RI IHGHUDO ODZ VHH (GZDUG &RRSHU 3DLQWLQJ  )G DW 
                                                                                   
 DQG ,Q UH .RYDFV  )G   WK &LU  DIIjG VXE QRP              7KH 6XSUHPH &RXUW H[SUHVVO\ DYRLGHG FRQVLGHULQJ WKH DSSOLFDWLRQ
2KLR Y .RYDFV  86   DOWKRXJK D MXGJPHQW FUHGLWRU ZLOO         RI D   mKRW JRRGVl DFWLRQ LQ WKH FRQWH[W RI D EDQNUXSWF\ SURFHHGLQJ
EH XQDEOH WR FROOHFW DQ\ PRQH\ MXGJPHQW IURP D GHEWRU ZLWKRXW UHOLHI           6HH LG DW  Q
       &KDRY+RVSLWDO6WDIILQJ                1RV          1RV              &KDRY+RVSLWDO6WDIILQJ       
         6HUYLFHV,QFHWDO                                                                                  6HUYLFHV,QFHWDO

   6LQFHVRPHRIWKHJRRGVLQWKHVHFXUHGFUHGLWRUjVKDQGVKDG               WKH LQVWUXPHQW RI FRPSHWLWLRQ LQ WKH GLVWULEXWLRQ RI JRRGV
EHHQ SURGXFHG LQ YLRODWLRQ RI WKH )/6$VHH LG DW  WKH         SURGXFHG XQGHU VXEVWDQGDUG ODERU FRQGLWLRQV ZKLFK
6HFUHWDU\ RI /DERU ILOHG VXLW WR HQMRLQ WKH FUHGLWRU IURP           FRPSHWLWLRQLVLQMXULRXVWRWKHFRPPHUFHjl,GDWTXRWLQJ
LQWURGXFLQJWKHJRRGVLQWRFRPPHUFHLHVHOOLQJWKHPDQG                  8QLWHG 6WDWHV Y 'DUE\  86     7KH
XVLQJWKHSURFHHGV6HHLGDW7KHFUHGLWRUXUJHGWKH               &RXUW ZHQW RQ WR KROG WKDW DSSOLFDWLRQ RI  D WR
&RXUW WR UHFRJQL]H DQ XQZULWWHQ H[FHSWLRQ WR  86&               VHFXUHGFUHGLWRUVIXUWKHUHGWKRVHJRDOVE\H[FOXGLQJWDLQWHG
DWKDWZRXOGSHUPLWmLQQRFHQWlVHFXUHGFUHGLWRUVWR                 JRRGVIURPLQWHUVWDWHFRPPHUFHm+DG WKH'HSDUWPHQWRI
WUDIILFLQmKRWJRRGVl7KH6XSUHPH&RXUWUHIXVHGUHO\LQJ                  /DERUQRWREWDLQHGDQLQMXQFWLRQLQWKLVFDVHWKHµKRW
ILUVW RQ FRQWUDU\ mSODLQ ODQJXDJH RI WKH VWDWXWHl DQG               JRRGVjSURGXFHGE\WKHVHXQFRPSHQVDWHGHPSOR\HHVZRXOG
DGGLWLRQDOO\GLVFHUQLQJ&RQJUHVVLRQDOLQWHQWPDNHWKHmKRW                   KDYHFRPSHWHGZLWKJRRGVSURGXFHGLQFRQIRUPLW\ZLWKWKH
JRRGVlSURYLVLRQDSSOLFDEOHWRDOOSHUVRQVLQQRFHQWRUQRW                 )/6$jVPLQLPXPZDJHDQGRYHUWLPHUHTXLUHPHQWVl,ELG
RWKHUWKDQWKRVHVSHFLILFDOO\H[HPSWHGE\DLH                 $IWHU QRWLQJ WKDW mH[FOXVLRQ IURP LQWHUVWDWH FRPPHUFH RI
FRPPRQFDUULHUVDQGJRRGIDLWKSXUFKDVHUV6HHLGDW                 JRRGVSURGXFHGXQGHUVXEVWDQGDUGFRQGLWLRQVLVLWVHOID
                                                                             FHQWUDOSXUSRVHRIWKH)/6$lLGDWQWKH&RXUWTXRWHG
  7KHILQDQFLQJFRPSDQ\DVNHGWKHFRXUWWRORRNEH\RQGWKH                   ZLWKDSSURYDODORZHUFRXUWjVUHDVRQLQJWKDWDmKRWJRRGVl
SODLQODQJXDJHRIWKHVWDWXWHFLWLQJ+RO\7ULQLW\&KXUFKY                 LQMXQFWLRQ mµZLOO DOVR GLVFRXUDJH WKH W\SH RI FRPPHUFLDO
8QLWHG 6WDWHV  86    DUJXLQJ WKDW                ILQDQFLQJ ZKLFK OHDGV WR PLQLPXP ZDJH DQG RYHUWLPH
DSSOLFDWLRQ RI WKH SURYLVLRQ WR VHFXUHG FUHGLWRUV GLG QRW            YLRODWLRQVjl,GDWTXRWLQJ)RUGY(O\*URXS,QF
IXUWKHU&RQJUHVVjVSXUSRVHRIHVWDEOLVKLQJGHFHQWKRXUVDQG                  )6XSS:'7HQQDQGDGGLQJHPSKDVLV
ZDJHVIRUZRUNHUVEHFDXVHFUHGLWRUVWKDWWDNHSRVVHVVLRQRI
FROODWHUDODUHQRWUHVSRQVLEOHIRUIDLOLQJWRSD\WKHVWDWXWRU\                &LWLFRUSGLGQRWDGGUHVVWKHDSSOLFDWLRQRIDDQG
ZDJHV7KH&RXUWDJUHHGWKDW&RQJUHVVZDQWHGWRLPSURYH                    FLQWKHFRQWH[WRIDEDQNUXSWF\EXWWKH(OHYHQWK&LUFXLW
ZRUNLQJ FRQGLWLRQV EXW LW IRXQG DGGLWLRQDO SXEOLF SROLF\             KDV7KDWFRXUWUHOLHGRQWKH6XSUHPH&RXUWjVGHVFULSWLRQRI
JRDOV GHOLQHDWHG LQ  86&  D ZKLFK mUHIOHFWV                &RQJUHVVLRQDOSROLF\DVHPERGLHGLQWKH)/6$WRFRQFOXGH
&RQJUHVVj GHVLUH WR HOLPLQDWH WKH FRPSHWLWLYH DGYDQWDJH                WKDWDmKRWJRRGVlDFWLRQIDOOVZLWKLQWKHESROLFH
HQMR\HGE\JRRGVSURGXFHGXQGHUVXEVWDQGDUGFRQGLWLRQVl                     SRZHUH[FHSWLRQWRWKHDXWRPDWLFVWD\6HH%URFNY5XVFR
,GDWmµ7KHPRWLYHDQGSXUSRVHRIWKHSUHVHQWUHJXODWLRQ               ,QGXV)GWK&LU:LWKRXWDQDO\VLV
DUHSODLQO\WKDWLQWHUVWDWHFRPPHUFHVKRXOGQRWEHPDGH                RIHLWKHUWKHSHFXQLDU\LQWHUHVWRUSXEOLFSROLF\WHVWVWKHFRXUW
                                                                             FRQFOXGHG WKDW mWKH 6HFUHWDU\ EURXJKW WKH VXLW WR SURWHFW
                                                                             OHJLWLPDWHEXVLQHVVHVIURPXQIDLUFRPSHWLWLRQDQGWRHQIRUFH
                                                                            WKHIHGHUDOODZUHJDUGLQJPLQLPXPZDJHlEULQJLQJLWZLWKLQ
      7KH ILQDQFLQJ FRPSDQ\ DOVR DUJXHG DV GRHV WKH 7UXVWHH KHUH WKDW
SURVHFXWLRQ RI D mKRW JRRGVl DFWLRQ DJDLQVW D SDUW\ RWKHU WKDQ WKH           WKHSROLFHSRZHUH[FHSWLRQWRWKHDXWRPDWLFVWD\,ELG7KH
SURGXFHU RI WKH JRRGV ZKHQ WKH SURGXFHU KDV FHDVHG RSHUDWLRQV GRHV           FRXUW FRQWLQXHG m1RW RQO\ GRHV WKH >DXWRPDWLF VWD\@
QRWKLQJ WR JXDUDQWHH WKH PLQLPXP FRPSHQVDWLRQ OHYHOV VRXJKW E\               H[FHSWLRQSHUPLWWKH6HFUHWDU\jVDFWLRQWRSURFHHGEXWLWDOVR
&RQJUHVV 7KH 6XSUHPH &RXUW GLVPLVVHG WKDW DUJXPHQW 6HH LG DW  Q
m>7@KH SODLQ ODQJXDJH RI WKH $FW    LV QRW OLPLWHG WR RQJRLQJ FRQFHUQV
                                                                             SHUPLWV WKH 6HFUHWDU\ WR HQIRUFH WKH DFWLRQ  7KLV LV DQ
DQG PDNHV QR H[FHSWLRQ IRU HPSOR\HUV ZKR DUH ILQDQFLDOO\ RU RWKHUZLVH
                                                                             LQMXQFWLRQXQGHU>86&@WRSUHYHQWWKHVDOHRIµKRW
XQDEOH WR FRPSO\ ZLWK  > @ 7KH SURSRVLWLRQ WKDW DQ HPSOR\HU        JRRGVj LQ LQWHUVWDWH FRPPHUFH LW LV QRW DQ DFWLRQ IRU
FRPSOLHV ZLWK WKH )/6$ VR ORQJ DV LWV SURPLVHG ZDJH UDWHV HTXDO RU           GDPDJHVl,ELG
H[FHHG WKH VWDWXWRU\ PLQLPXP UHJDUGOHVV RI ZKHWKHU HPSOR\HHV DFWXDOO\
UHFHLYH DQ\ FRPSHQVDWLRQ ZRXOG UHQGHU LOOXVRU\ WKH $FWjV SURWHFWLRQVl