Court Opinion

ID: 2970796
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:22:13.720117+00
Date Added: 2024-06-11T15:01:21.471947
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
            3XUVXDQW WR 6L[WK &LUFXLW 5XOH                    2UDQJH3ODFH/WG                   1RV
   (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                                                                  3DUWQHUVKLSHWDOY1/5%
               )LOH 1DPH DS

                                                               %HIRUH1(/621DQG&2/(&LUFXLWsXGJHV526(1
81,7('67$7(6&28572)$33($/6                                                  'LVWULFWsXGJH

              )257+(6,;7+&,5&8,7                                               BBBBBBBBBBBBBBBBB
                BBBBBBBBBBBBBBBBB                                                      &2816(/
                                                           $5*8('  6DQIRUG *URVV *5266 	 *5266 //&
 25$1*( 3/$&( /,0,7(' ;                                &OHYHODQG 2KLR IRU 3HWLWLRQHUV  .DWKOHHQ /\RQ
3$571(56+,3GED                                        1$7,21$//$%255(/$7,216%2$5':DVKLQJWRQ
%HDFKZRRG+ROLGD\,QQ                                    '&IRU5HVSRQGHQW21%5,()6DQIRUG*URVV5REHUW
                                      1RV   /*URVV*5266	*5266//&&OHYHODQG2KLRIRU
61$9(/< '(9(/230(17 &2                                  3HWLWLRQHUV.DWKOHHQ/\RQ$LOHHQ$$UPVWURQJ)UHG/
,1&DND6QDYHO\                 !                      &RUQQHOO 1$7,21$/ /$%25 5(/$7,216 %2$5'
                                   
0DQDJHPHQW6HUYLFHV                                      :DVKLQJWRQ'&IRU5HVSRQGHQW
61$9(/< +27(/ 6(59,&(6            
//&                                                                              BBBBBBBBBBBBBBBBB
                                   
                     3HWLWLRQHUV                                                    23,1,21
            &URVV5HVSRQGHQWV                                                   BBBBBBBBBBBBBBBBB
                                   
                                                              526(1'LVWULFWsXGJH
            Y                     
                                                                                ,,1752'8&7,21
1$7,21$/ /$%25 5(/$7,216 
%2$5'                                                       3HWLWLRQHUV&URVV5HVSRQGHQWV2UDQJH3ODFH/LPLWHG
                    5HVSRQGHQW                           3DUWQHUVKLS m2UDQJH 3ODFHl 6QDYHO\ 'HYHORSPHQW
                                                          &RPSDQ\,QFm0DQDJHPHQW6HUYLFHVlDQG6QDYHO\+RWHO
               &URVV3HWLWLRQHU                          6HUYLFHV//&m+RWHO6HUYLFHVlSHWLWLRQIRUUHYLHZRIWKH
                                  1                        $XJXVW'HFLVLRQDQG2UGHURI5HVSRQGHQW&URVV
      2Q3HWLWLRQIRU5HYLHZDQG&URVV$SSOLFDWLRQ         3HWLWLRQHUWKH1DWLRQDO/DERU5HODWLRQV%RDUGWKHm%RDUGl
                IRU(QIRUFHPHQWRIDQ2UGHU               UHTXLULQJ3HWLWLRQHUVDVVXFFHVVRUHPSOR\HUVWRUHFRJQL]H
          RIWKH1DWLRQDO/DERU5HODWLRQV%RDUG           EDUJDLQ ZLWK DQG SURYLGH LQIRUPDWLRQ WR WKH 6HUYLFH
   1RV&$&$&$            (PSOR\HHV,QWHUQDWLRQDO8QLRQ/RFDOWKHm8QLRQlDVWKH
                                                           FROOHFWLYHEDUJDLQLQJUHSUHVHQWDWLYHRIWKHKRXVHNHHSLQJXQLW
                 $UJXHG0D\                      DWWKH+ROLGD\,QQ%HDFKZRRGm+,%l7KH%RDUGjVGHFLVLRQ

           'HFLGHGDQG)LOHGsXQH
                                                               
                                                                7KH +RQRUDEOH *HUDOG ( 5RVHQ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
                                                           (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ

                           
1RV               2UDQJH3ODFH/WG                     2UDQJH3ODFH/WG                 1RV
                              3DUWQHUVKLSHWDOY1/5%                    3DUWQHUVKLSHWDOY1/5%

DQG RUGHU DIILUPHG WKH $SULO   FRQFOXVLRQ RI WKH          6XPPLW7UDQVIHUVWKH+RWHOVWRWKH%DQN
$GPLQLVWUDWLYH/DZsXGJHWKHm$/slWKDW3HWLWLRQHUVKDG
FRPPLWWHG XQIDLU ODERU SUDFWLFHV LQ YLRODWLRQ RI 6HFWLRQV         2Q2FWREHU6XPPLWWUDQVIHUUHG+,%DQG+,0WR
DDQGRIWKH1DWLRQDO/DERU5HODWLRQV$FW86&        WKH %DQN LQ OLHX RI IRUHFORVXUH  ,Q FRQMXQFWLRQ ZLWK WKLV
  HW VHT WKH m$FWl  7KH %RDUG FURVVSHWLWLRQV IRU   WUDQVIHUWKH%DQNUHWDLQHG%HFN*URXS0DQDJHPHQW&RUS
HQIRUFHPHQWRILWVILQDORUGHU                                       m%HFNl WR RSHUDWH WKH KRWHOV  %HFN LQ WXUQ UHWDLQHG
                                                                      +RVSLWDOLW\ (PSOR\HH /HDVLQJ 3URJUDP ,QF m+(/3l WR
  )RU WKH UHDVRQV VWDWHG EHORZ ZH *5$17 WKH %RDUGjV          PDQDJH WKH IDFLOLWLHV  8QGHU WKH WHUPV RI WKH 2FWREHU 
SHWLWLRQDQGGLUHFWWKHHQIRUFHPHQWRILWVILQDORUGHU                &OLHQW 6HUYLFHV $JUHHPHQW HQWHUHG LQWR ZLWK %HFN
                                                                      +(/3DJUHHGWRIXUQLVKSHUVRQQHOLQFOXGLQJKRXVHNHHSLQJ
                     ,,%$&.*5281'                                  HPSOR\HHV WR %HFN WR RSHUDWH +,% DQG +,0  %HFN DQG
                                                                      +(/3IXUWKHUDJUHHGWKDWDOOLQGLYLGXDOVDVVLJQHGE\+(/3WR
$)DFWXDO%DFNJURXQG                                                WKHKRWHOVZRXOGUHPDLQ+(/3HPSOR\HHV7KH$/sIRXQG
                                                                      WKDWDPDMRULW\RIWKHKRXVHNHHSLQJHPSOR\HHVUHWDLQHGE\
  2ZQHUVKLSRI+,%DIXOOVHUYLFHKRWHOLQ%HDFKZRRG2KLR          +(/3 WR ZRUN DW WKH KRWHOV ZHUH IRUPHU /DQH HPSOR\HHV
FKDQJHGKDQGVWKUHHWLPHVEHWZHHQ2FWREHUDQGsDQXDU\            )XUWKHUPRUH QR EUHDN LQ RSHUDWLRQV RFFXUUHG GXULQJ WKH
IURP6XPPLW$VVRFLDWHV,QFm6XPPLWlWR&LWL]HQV            WUDQVIHU RI RZQHUVKLS DQG PDQDJHPHQW IURP 6XPPLW DQG
6HUYLFH&RUSRUDWLRQWKHm%DQNlWR3HWLWLRQHU2UDQJH3ODFH           /DQHWRWKH%DQN%HFNDQG+(/3
WR3DWULRW$PHULFDQ+RVSLWDOLW\2SHUDWLQJ3DUWQHUVKLS/3
m3DWULRWl                                                              ,QDQ2FWREHUOHWWHU6XPPLWQRWLILHGWKH8QLRQWKDW
                                                                      LW ZDV WHUPLQDWLQJ WKH &%$ DQG LWV FRYHUHG HPSOR\HHV LQ
  6XPPLWDQG/DQH2ZQDQG0DQDJH+,%                              FRQMXQFWLRQZLWKWKHWUDQVIHURI+,%DQG+,0WRWKH%DQN
                                                                      7KLV FRUUHVSRQGHQFH LQFOXGHG D GUDIW WHUPLQDWLRQ OHWWHU WR
   (DUO\LQ2FWREHU6XPPLWRZQHG+,%DORQJZLWKD             HPSOR\HHV LQGLFDWLQJ WKDW +(/3 ZRXOG KDYH HPSOR\PHQW
VLVWHU SURSHUW\ WKH +ROLGD\ ,QQ 0D\ILHOG m+,0l  /DQH      DSSOLFDWLRQ IRUPV DW WKH IURQW GHVN  8SRQ WUDQVIHU RI WKH
+RVSLWDOLW\ m/DQHl PDQDJHG ERWK KRWHOV RQ EHKDOI RI          KRWHOV WR WKH %DQN QHLWKHU WKH %DQN %HFN QRU +(/3
6XPPLW6XPPLWDXWKRUL]HG/DQHWRHQWHULQWRDFROOHFWLYH            DVVXPHGWKH&%$
EDUJDLQLQJDJUHHPHQWZLWKWKH8QLRQHIIHFWLYH0D\
WR$SULOWKHm&%$l'HQQLV'LQJRZWKH8QLRQjV                +(/3jV,QWHUDFWLRQVZLWKWKH8QLRQ
EXVLQHVVUHSUHVHQWDWLYHWHVWLILHGEHIRUHWKH$/sWKDWWKH&%$
UHSUHVHQWHG WKH PRVW UHFHQW HPERGLPHQW LQ D VHULHV RI            ,QDQ2FWREHUOHWWHUWKH8QLRQQRWLILHG+(/3RI
FROOHFWLYH EDUJDLQLQJ DJUHHPHQWV EHWZHHQ WKH SDUWLHV            WKH8QLRQjVSRVLWLRQWKDW+(/3ZDVDVXFFHVVRUHPSOR\HUWR
$OWKRXJKWKH&%$GLGQRWVSHFLILFDOO\GHILQHWKHEDUJDLQLQJ           /DQH REOLJDWLQJ +(/3 WR EDUJDLQ ZLWK DQG SURYLGH
XQLW UHSUHVHQWHG E\ WKH 8QLRQ 'LQJRZ H[SODLQHG WKDW WKH      LQIRUPDWLRQWRWKH8QLRQ7KH8QLRQVHQWIROORZXSOHWWHUV
KRWHOVjKRXVHNHHSLQJGHSDUWPHQWVFRQVWLWXWHGWKHKLVWRULFDO           WR+(/3RQ2FWREHUDQG1RYHPEHUUHTXHVWLQJ
EDUJDLQLQJXQLWUHSUHVHQWHGE\WKH8QLRQ'LQJRZIXUWKHU             LQIRUPDWLRQ RQ HPSOR\HHV DQG GDWHV WR FRPPHQFH
WHVWLILHGWKDWWKHEDUJDLQLQJXQLWLQFOXGHGKRXVHNHHSHUVDQG          QHJRWLDWLRQV  ,Q D 1RYHPEHU   UHVSRQVH +(/3jV
KRXVHPHQSRUWHUVEXWH[FOXGHGLQVSHFWUHVVHVDQGODXQGU\            DWWRUQH\REMHFWHGWRWKHFRQGXFWRI8QLRQUHSUHVHQWDWLYHVDW
ZRUNHUV
1RV                 2UDQJH3ODFH/WG                           2UDQJH3ODFH/WG                     1RV
                                3DUWQHUVKLSHWDOY1/5%                          3DUWQHUVKLSHWDOY1/5%

+,%EXWH[SUHVVO\DVVXUHGWKH8QLRQWKDW+(/3ZDVmQRW                     WKH PDQDJHPHQW DJUHHPHQW RQ EHKDOI RI ERWK SDUWLHV  1R
UHIXVLQJWREDUJDLQl>s$DW@                                       KLDWXVLQRSHUDWLRQVRFFXUUHGGXULQJWKHWUDQVIHURIRZQHUVKLS
                                                                            DQGPDQDJHPHQWIURPWKH%DQNDQG+(/3WR2UDQJH3ODFH
  7KHUHDIWHUDWD'HFHPEHUPHHWLQJ+(/3DQGWKH                  DQG0DQDJHPHQW6HUYLFHV
8QLRQ GLVFXVVHG GHPRQVWUDWLRQV DW +,% DQG WKH 8QLRQjV
HDUOLHU LQIRUPDWLRQ UHTXHVWV  )ROORZLQJ WKLV IDFHWRIDFH              3HWLWLRQHUVj RZQ ZLWQHVV sDPHV *HULVK VXEPLWWHG DQ
PHHWLQJ+(/3jVDWWRUQH\VHQWDIROORZXSOHWWHUWRWKH8QLRQ               DIILGDYLWWRWKH$/sLQGLFDWLQJWKDW2UDQJH3ODFH0DQDJHPHQW
RQ 'HFHPEHU    7KLV OHWWHU FDSWLRQHG m6(,8 	              6HUYLFHV KLUHG WZHQW\WZR KRXVHNHHSLQJ HPSOR\HHV XSRQ
1HJRWLDWLRQVZLWK+(/3,QFlSURYLGHGLQSHUWLQHQWSDUW                 WDNLQJSRVVHVVLRQRI+,%WZHOYHRIZKLFKZHUHIRUPHU+(/3
                                                                            HPSOR\HHV  %DVHG RQ WKLV DIILGDYLW DQG D FRPSDULVRQ RI
  3HU\RXUUHTXHVWDWWDFKHGLVDEUHDNGRZQRIWKHFRVWVIRU                SD\UROODQGRWKHUUHFRUGVIRUWKHUHOHYDQWSHULRGWKH%RDUG
  KHDOWKLQVXUDQFHDQGDGHVFULSWLRQRIWKHFRYHUDJH,Q                   IRXQG WKDW 2UDQJH 3ODFH0DQDJHPHQW 6HUYLFHV UHWDLQHG D
  DGGLWLRQ ZH KDYH DWWDFKHG D OLVW RI WKH KRXVHNHHSLQJ             PDMRULW\RI+(/3jVKRXVHNHHSLQJHPSOR\HHV
  HPSOR\HHV DW WKH 0D\ILHOG DQG %HHFKZRRG IDFLOLWLHV
  DORQJZLWKWKHLUKRXUO\UDWHV:HDUHLQWKHSURFHVVRI                          2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHV5HIXVHWR
  GHYHORSLQJ D FRQWUDFW SURSRVDO DQG VKRXOG KDYH                                %DUJDLQZLWKWKH8QLRQ
  VRPHWKLQJWRGLVFXVVZLWK\RXVRPHWLPHLQsDQXDU\
                                                                              2Q 0D\  DQG 0D\   ERWK VKRUWO\ EHIRUH DQG
>s$DW@'HVSLWHD)HEUXDU\IROORZXSOHWWHU                 VKRUWO\DIWHU2UDQJH3ODFHjVDFTXLVLWLRQRI+,%WKH8QLRQ
IURPWKH8QLRQ+(/3GLGQRWSURYLGHWKH8QLRQDFRQWUDFW                   VHQWOHWWHUVWR0DQDJHPHQW6HUYLFHVUHTXHVWLQJLQIRUPDWLRQ
SURSRVDOSULRUWRWKH%DQNjVVDOHRI+,0DQG+,%WRVHSDUDWH                RQ+,%jVKRXVHNHHSLQJHPSOR\HHVDQGGDWHVWRFRPPHQFH
SDUWLHVLQ)HEUXDU\DQG0D\RIUHVSHFWLYHO\                         QHJRWLDWLRQV RYHU D QHZ FROOHFWLYH EDUJDLQLQJ DJUHHPHQW
                                                                            &RXQVHO IRU 0DQDJHPHQW 6HUYLFHV DQG 2UDQJH 3ODFH
  2UDQJH3ODFH$FTXLUHV+,%                                             UHVSRQGHG WR WKH 8QLRQ RQ 0D\   LQGLFDWLQJ WKDW
                                                                            2UDQJH3ODFHRZQHG+,%DQGWKDWKLVRIILFHZDVORRNLQJLQWR
  3HWLWLRQHU2UDQJH3ODFHDFTXLUHG+,%IURPWKH%DQNRQ                     WKH LVVXHV UDLVHG E\ WKH 8QLRQ  5HFHLYLQJ QR IXUWKHU
0D\   DQG WKDW VDPH GD\ UHWDLQHG 3HWLWLRQHU
0DQDJHPHQW6HUYLFHVWRRSHUDWHWKHKRWHO7KHPDQDJHPHQW
DJUHHPHQWEHWZHHQ2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHV                           
JUDQWHG0DQDJHPHQW6HUYLFHVWKHSRZHUWRKLUHDQGGLVFKDUJH                       3HWLWLRQHUVj VWDWHPHQW DW SDJH WZHOYH RI WKHLU LQLWLDO EULHI WKDW WKH
                                                                            8QLRQjV 0D\  UHTXHVW WR EDUJDLQ mFDPH ZHOO RYHU VHYHQ  PRQWKV
HPSOR\HHVRI+,%sRKQ76QDYHO\WKHPDQDJLQJSDUWQHURI                 SDVW WKH ODVW GHPDQG E\ WKH 8QLRQ WR EDUJDLQ ZLWK +(/3 LQ 2FWREHU
2UDQJH3ODFHDQGDQRZQHURI0DQDJHPHQW6HUYLFHVVLJQHG                    l LV VLPSO\ LQDFFXUDWH ,Q SRLQW RI IDFW DV GHVFULEHG DERYH WKH
                                                                            8QLRQ VHQW D IROORZXS OHWWHU WR +(/3 LQ 1RYHPEHU  +(/3 DQG WKH
                                                                            8QLRQ KHOG D PHHWLQJ LQ 'HFHPEHU  DQG WKH 8QLRQ VHQW DQRWKHU
                                                                            IROORZXS OHWWHU WR +(/3 LQ )HEUXDU\ 
    
     )ROORZLQJ D VHULHV RI WUDQVDFWLRQV WKH %DQN WUDQVIHUUHG +,0 WR D
                                                                                 
WKLUG SDUW\ LQ )HEUXDU\ RI  7KH %RDUG IRXQG WKDW WKH VDOH RI +,%             3HWLWLRQHUVj GHSLFWLRQ RI WKH UHFRUG DW SDJH WZHOYH RI WKHLU LQLWLDO
DQG +,0 WR VHSDUDWH SDUWLHV FRQVWLWXWHG FRPSHOOLQJ FLUFXPVWDQFHV            EULHI LQGLFDWLQJ WKDW 2UDQJH 3ODFH UHVSRQGHG WR WKH 8QLRQ LQ D 0D\ 
MXVWLI\LQJ WKH GLYLVLRQ RI WKH KLVWRULF EDUJDLQLQJ XQLW LQWR WZR VHSDUDWH    OHWWHU WKDW mQR REOLJDWLRQ H[LVWHG WR EDUJDLQ ZLWK WKH 8QLRQl LV
XQLWV D KRXVHNHHSLQJ XQLW DW +,0 DQG D VHSDUDWH KRXVHNHHSLQJ XQLW DW       VLPLODUO\ PLVOHDGLQJ     ,Q UHDOLW\ FRXQVHO IRU 2UDQJH 3ODFH DQG
+,% 2Q DSSHDO 3HWLWLRQHUV GR QRW FRQWHVW WKLV ILQGLQJ                    0DQDJHPHQW 6HUYLFHV LQGLFDWHG LQ WKH 0D\  OHWWHU WKDW mRXU RIILFH VKDOO
1RV               2UDQJH3ODFH/WG                       2UDQJH3ODFH/WG                    1RV
                              3DUWQHUVKLSHWDOY1/5%                      3DUWQHUVKLSHWDOY1/5%

UHVSRQVHRQsXO\WKH8QLRQILOHGDQXQIDLUODERU            +,% XQGHU FRQWUDFW ZLWK 3DWULRW WKDW +RWHO 6HUYLFHV ZDV
SUDFWLFH FKDUJH DJDLQVW 2UDQJH 3ODFH DOOHJLQJ WKDW DV D       XQGHU QR OHJDO REOLJDWLRQ WR EDUJDLQ ZLWK RU SURYLGH
VXFFHVVRUHPSOR\HU2UDQJH3ODFHZDVXQODZIXOO\UHIXVLQJWR            LQIRUPDWLRQ WR WKH 8QLRQ DQG WKDW +RWHO 6HUYLFHV GLG QRW
UHFRJQL]HEDUJDLQZLWKDQGSURYLGHLQIRUPDWLRQWRWKH8QLRQ          EHOLHYH WKDW WKH 8QLRQ UHSUHVHQWHG D PDMRULW\ RI WKH
LQYLRODWLRQRIWKH$FW5HVSRQGLQJWRWKH8QLRQjVFKDUJHWKH        HPSOR\HHVDW+,%LQDQDSSURSULDWHXQLW
%RDUGjV*HQHUDO&RXQVHOLVVXHGDFRPSODLQWDJDLQVW2UDQJH
3ODFHRQ$XJXVW                                              %3URFHGXUDO+LVWRU\
  2UDQJH3ODFH6HOOV+,%WR3DWULRW                                 2Q0D\WKH8QLRQILOHGDQXQIDLUODERUSUDFWLFH
                                                                       FKDUJH DJDLQVW 2UDQJH 3ODFH 0DQDJHPHQW 6HUYLFHV DQG
  2QsDQXDU\ZKLOHWKH*HQHUDO&RXQVHOjVXQIDLU              +RWHO 6HUYLFHV DOOHJLQJ WKDW WKH HQWLWLHV ZHUH YLRODWLQJ
ODERUSUDFWLFHFRPSODLQWDJDLQVW2UDQJH3ODFHZDVSHQGLQJ             6HFWLRQVDDQGRIWKH$FWE\UHIXVLQJWRUHFRJQL]H
2UDQJH 3ODFH VROG +,% WR QRQSDUW\ 3DWULRW  $W WKLV WLPH   EDUJDLQZLWKDQG SURYLGHLQIRUPDWLRQWRWKH8QLRQ7KH
3HWLWLRQHU +RWHO 6HUYLFHV DVVXPHG WKH RSHUDWLRQ DQG              *HQHUDO &RXQVHO FRQVROLGDWHG WKH FDVH ZLWK WKH 
PDQDJHPHQWRI+,%IURP0DQDJHPHQW6HUYLFHVZLWKRXWD                  FRPSODLQW DJDLQVW 2UDQJH 3ODFH DQG LVVXHG DQ DPHQGHG
EUHDNLQRSHUDWLRQV+RWHO6HUYLFHVZKRVH3UHVLGHQWsDPHV            FRQVROLGDWHG FRPSODLQW DJDLQVW 3HWLWLRQHUV RQ $XJXVW 
*HULVK ZDV DOVR DQ HPSOR\HH DQG IRUPHU 3UHVLGHQW RI            
0DQDJHPHQW6HUYLFHVLVDOLPLWHGOLDELOLW\FRPSDQ\ZKRVH
VROH PHPEHU LV 0DQDJHPHQW 6HUYLFHV  7KH HQWLWLHV DUH             )ROORZLQJ D WZRGD\ KHDULQJ LQ sDQXDU\  WKH $/s
HQJDJHGLQWKHVDPHEXVLQHVVWKHPDQDJHPHQWRIKRWHOV            LVVXHGDQ$SULOGHFLVLRQFRQFOXGLQJLQWHUDOLDWKDW
DQG VKDUH RIILFHV DV ZHOO DV WKH VDPH KXPDQ UHVRXUFHV          WKH KRXVHNHHSLQJ HPSOR\HHV DW +,% FRQVLVWLQJ RI
GLUHFWRU,WLVXQGLVSXWHGWKDWXSRQDVVXPLQJPDQDJHPHQW              KRXVHNHHSHUV DQG KRXVHPHQ RQO\ FRQVWLWXWHG D XQLW
UHVSRQVLELOLWLHVIURP0DQDJHPHQW6HUYLFHV+RWHO6HUYLFHV              DSSURSULDWH IRU FROOHFWLYH EDUJDLQLQJ XQGHU WKH $FW
UHWDLQHG DOO VHYHQWHHQ KRXVHNHHSLQJ HPSOR\HHV DW +,%             2UDQJH 3ODFH DQG 0DQDJHPHQW 6HUYLFHV EHFDPH MRLQW
ZLWKRXWDSSOLFDWLRQVRULQWHUYLHZV                                    HPSOR\HUV DW +,% ZKHQ WKH %DQN WUDQVIHUUHG WKH KRWHO WR
                                                                       2UDQJH3ODFH0DQDJHPHQW6HUYLFHVDQG+RWHO6HUYLFHV
     +RWHO 6HUYLFHV $OVR 5HIXVHV WR %DUJDLQ ZLWK WKH          ZHUHDVLQJOHHPSOR\HUZLWKLQWKHPHDQLQJRIWKH$FWDQG
       8QLRQ                                                           2UDQJH3ODFH0DQDJHPHQW6HUYLFHVDQG+RWHO6HUYLFHV
                                                                       DVVXFFHVVRUHPSOR\HUVHDFKYLRODWHG6HFWLRQVDDQG
  2Q 0D\   WKH 8QLRQ VHQW D OHWWHU WR 3DWULRW         RI WKH $FW E\ IDLOLQJ WR UHFRJQL]H EDUJDLQ ZLWK DQG
0DQDJHPHQW 6HUYLFHV DQG +RWHO 6HUYLFHV GHWDLOLQJ WKH           SURYLGH LQIRUPDWLRQ WR WKH 8QLRQ  ,Q DQ $XJXVW  
8QLRQjVQXPHURXVHIIRUWVWRSXUVXHLWVEDUJDLQLQJULJKWVDQG           'HFLVLRQDQG2UGHUWKH%RDUGDIILUPHGWKH$/sjVUXOLQJV
UHQHZLQJWKH8QLRQjVUHTXHVWIRULQIRUPDWLRQDQGEDUJDLQLQJ            ILQGLQJV DQG FRQFOXVLRQV DQG DGRSWHG ZLWK PLQRU
RQEHKDOIRIWKHKRXVHNHHSLQJHPSOR\HHVDW+,%&RXQVHOIRU
+RWHO 6HUYLFHV UHVSRQGHG WR WKH 8QLRQ RQ 0D\  
LQGLFDWLQJ WKDW +RWHO 6HUYLFHV ZDV WKH FXUUHQW HPSOR\HU DW         
                                                                             7KH $FW SURYLGHV WKDW LW LV DQ XQIDLU ODERU SUDFWLFH IRU DQ HPSOR\HU
                                                                       mWR LQWHUIHUH ZLWK UHVWUDLQ RU FRHUFH HPSOR\HHV LQ WKH H[HUFLVH RI WKH
                                                                       ULJKWV JXDUDQWHHG LQ VHFWLRQ  RI WKLV WLWOHl RU mWR UHIXVH WR EDUJDLQ
LPPHGLDWHO\ ORRN LQWR WKH LVVXHV UDLVHG LQ \RXU FRUUHVSRQGHQFH DQG     FROOHFWLYHO\ ZLWK WKH UHSUHVHQWDWLYHV RI KLV HPSOR\HHV VXEMHFW WR WKH
UHVSRQG WR VDPH DV VRRQ DV SRVVLEOHl >s$ DW @                   SURYLVLRQV RI VHFWLRQ D RI WKLV WLWOHl  86& D DQG 
1RV               2UDQJH3ODFH/WG                   2UDQJH3ODFH/WG                  1RV
                              3DUWQHUVKLSHWDOY1/5%                   3DUWQHUVKLSHWDOY1/5%

FRUUHFWLRQVWKH$/sjVUHFRPPHQGHGRUGHUWKDW3HWLWLRQHUV            WKH6XSUHPH&RXUWKDVGLVWLOOHGWKHUHVSRQVLELOLWLHVRIQHZ
DPRQJRWKHULWHPVFHDVHDQGGHVLVWIURPWKHLUYLRODWLRQVRI          HPSOR\HUV WR LQFXPEHQW XQLRQV IROORZLQJ D FKDQJH LQ
WKH$FWDQGSURYLGHLQIRUPDWLRQWRDQGHQJDJHLQEDUJDLQLQJ           RZQHUVKLS$OWKRXJKDQHZHPSOR\HULVQRWERXQGE\WKH
ZLWKWKH8QLRQ                                                       VXEVWDQWLYH WHUPV RI D FROOHFWLYH EDUJDLQLQJ DJUHHPHQW
                                                                      HQWHUHGLQWRE\LWVSUHGHFHVVRUDEVHQWDQH[SUHVVRULPSOLHG
  3HWLWLRQHUVQRZSHWLWLRQIRUUHYLHZRIWKH%RDUGjV'HFLVLRQ         DVVXPSWLRQRIWKHDJUHHPHQWDPHUHFKDQJHRIRZQHUVKLS
DQG2UGHUDUJXLQJWKDWWKH%RDUGPLVDSSOLHGIHGHUDOODERU            GRHV QRW LSVR IDFWR DEVROYH D QHZ HPSOR\HU RI DOO
ODZE\OLPLWLQJLWVVXFFHVVRUVKLSDQDO\VLVWRWKHUHODWLRQVKLS        UHVSRQVLELOLWLHVWREDUJDLQ5DWKHUXQGHUWKHVXFFHVVRUVKLS
DPRQJ DQG EHWZHHQ 3HWLWLRQHUV DQG +(/3 UDWKHU WKDQ            GRFWULQH LI WKH QHZ HPSOR\HU FRQVWLWXWHV D mVXFFHVVRU
H[DPLQLQJ ZKHWKHU DQ XQEURNHQ FKDLQ RI VXFFHVVRUVKLS            HPSOR\HUl IRU SXUSRVHV RI IHGHUDO ODERU ODZ VXFK QHZ
H[LVWHGDFURVV+,%jVFKDLQRIRZQHUVKLS(YHQLIWKH%RDUG           HPSOR\HULVREOLJDWHGWRUHFRJQL]HEDUJDLQZLWKDQGSURYLGH
FDQ HVWDEOLVK VXFK DQ XQEURNHQ FKDLQ 3HWLWLRQHUV IXUWKHU      LQIRUPDWLRQWRWKHLQFXPEHQWXQLRQ6HH)DOO5LYHU'\HLQJ
FRQWHQG WKDW IRU PDQ\ UHDVRQV GLVFXVVHG LQ GHWDLO EHORZ     	)LQLVKLQJ&RUSY1/5%866&W
VXEVWDQWLDOHYLGHQFHGRHVQRWVXSSRUWWKH%RDUGjVFRQFOXVLRQ          %XUQV86DW6&WDW
WKDW WKH\ DUH VXFFHVVRU HPSOR\HUV ZLWK DQ REOLJDWLRQ WR       6WUDLJKW&UHHN)GDWVHHDOVR'HWURLW(GLVRQ&R
UHFRJQL]H EDUJDLQ ZLWK DQG SURYLGH LQIRUPDWLRQ WR WKH        Y 1/5%  86    6 &W   
8QLRQ  /DVWO\ 3HWLWLRQHUV DVVHUW D YDULHW\ RI DIILUPDWLYH   QRWLQJWKDWWKHGXW\WREDUJDLQXQGHU6HFWLRQDRIWKH
GHIHQVHVDQGHYLGHQWLDU\REMHFWLRQV,QUHVSRQVHWKH%RDUG          $FWLQFOXGHVDGXW\WRSURYLGHUHOHYDQWLQIRUPDWLRQ
FURVVSHWLWLRQVIRUHQIRUFHPHQWRILWV$XJXVWRUGHU
                                                                         7KLVUXOHVWULNHVDFDUHIXOEDODQFHEHWZHHQWKHEDUJDLQLQJ
                       ,,,$1$/<6,6                                 IUHHGRPRIQHZHPSOR\HUVDQGWKHOHJLWLPDWHH[SHFWDWLRQRI
                                                                      HPSOR\HHV WR FRQWLQXHG UHSUHVHQWDWLRQ E\ WKHLU XQLRQ
$6WDQGDUGRI5HYLHZ                                                IROORZLQJ D FKDQJH RI RZQHUVKLS  $V H[SODLQHG E\ WKH
                                                                      6XSUHPH&RXUWLQ%XUQV
   $OWKRXJKZHUHYLHZGHQRYRWKH%RDUGjVOHJDOFRQFOXVLRQ
UHJDUGLQJWKHSURSHUVFRSHRIWKHVXFFHVVRUVKLSDQDO\VLVLQ             $ SRWHQWLDO HPSOR\HU PD\ EH ZLOOLQJ WR WDNH RYHU D
WKLV FDVHVHH 0LFKLJDQ &PW\ 6HUYLFHV ,QF Y 1/5%        PRULEXQG EXVLQHVV RQO\ LI KH FDQ PDNH FKDQJHV LQ
)GWK&LUZHPXVWXSKROGWKH%RDUGjV               FRUSRUDWHVWUXFWXUHFRPSRVLWLRQRIWKHODERUIRUFHZRUN
IDFWXDOILQGLQJVLQFOXGLQJLWVGHWHUPLQDWLRQRIVXFFHVVRUVKLS         ORFDWLRQ WDVN DVVLJQPHQW DQG QDWXUH RI VXSHUYLVLRQ
LIWKH\DUHVXSSRUWHGE\VXEVWDQWLDOHYLGHQFHLQWKHUHFRUGDV          6DGGOLQJVXFKDQHPSOR\HUZLWKWKHWHUPVDQGFRQGLWLRQV
DZKROH6WUDLJKW&UHHN0LQLQJ,QFY1/5%)G            RIHPSOR\PHQWFRQWDLQHGLQWKHROGFROOHFWLYHEDUJDLQLQJ
WK&LU                                                    FRQWUDFWPD\PDNH WKHVHFKDQJHVLPSRVVLEOHDQGPD\
                                                                        GLVFRXUDJH DQG LQKLELW WKH WUDQVIHU RI FDSLWDO  2Q WKH
%7KH6XFFHVVRUVKLS'RFWULQH                                          RWKHU KDQG D XQLRQ PD\ KDYH PDGH FRQFHVVLRQV WR D
                                                                        VPDOORUIDLOLQJHPSOR\HUWKDWLWZRXOGEHXQZLOOLQJWR
  6HWWLQJ DVLGH IRU WKH PRPHQW 3HWLWLRQHUVj DIILUPDWLYH           PDNHWRDODUJHRUHFRQRPLFDOO\VXFFHVVIXOILUP7KH
GHIHQVHVDQGHYLGHQWLDU\FKDOOHQJHVWKHSUHVHQWFDVHWXUQVRQ          FRQJUHVVLRQDOSROLF\PDQLIHVWLQWKH$FWLVWRHQDEOHWKH
WKHRIWHQOLWLJDWHGLVVXHRIVXFFHVVRUVKLS8QGHUDORQJOLQH          SDUWLHV WR QHJRWLDWH IRU DQ\ SURWHFWLRQ HLWKHU GHHPV
RI FDVHV VWUHWFKLQJ EDFN WR 1/5% Y %XUQV ,QWHUQDWLRQDO
6HFXULW\6HUYLFHV,QF866&W
1RV                2UDQJH3ODFH/WG                   2UDQJH3ODFH/WG                1RV
                               3DUWQHUVKLSHWDOY1/5%                    3DUWQHUVKLSHWDOY1/5%

  DSSURSULDWH EXW WR DOORZ WKH EDODQFH RI EDUJDLQLQJ            & 7KH %RDUG 3URSHUO\ /LPLWHG ,WV 6XFFHVVRUVKLS
  DGYDQWDJHWREHVHWE\HFRQRPLFSRZHUUHDOLWLHV                         $QDO\VLVWR3HWLWLRQHUVDQG+(/3
86DW6&WDW                                    5HWXUQLQJWRWKHSUHVHQWFDVHZHILUVWDGGUHVV3HWLWLRQHUVj
                                                                        WKUHVKROGOHJDOFRQWHQWLRQWKDWWKH%RDUGPLVDSSOLHGIHGHUDO
   ,Q GHWHUPLQLQJ ZKHWKHU DQ HQWLW\ FRQVWLWXWHV D VXFFHVVRU      ODERU ODZ E\ OLPLWLQJ LWV VXFFHVVRUVKLS LQTXLU\ WR WKH
HPSOR\HUWKH%RDUGPDNHVDIDFWXDOGHWHUPLQDWLRQEDVHGRQ              UHODWLRQVKLSDPRQJDQGEHWZHHQ3HWLWLRQHUVDQG+(/3
WKHWRWDOLW\RIWKHFLUFXPVWDQFHV)DOO5LYHU'\HLQJ86
DW6&WDW:KLOHWKH%RDUGZHLJKVDQXPEHU               :KLOH FRQFHGLQJ WKDW LQ D W\SLFDO VXFFHVVRUVKLS FDVH
RI IDFWRUV WKH SULPDU\ IRFXV FHQWHUV RQ ZKHWKHU WKHUH LV D   LQYROYLQJWKHWUDQVIHURIDEXVLQHVVIURPRQHSDUW\WRWKHQH[W
mVXEVWDQWLDOFRQWLQXLW\lEHWZHHQWKHHQWHUSULVHVPHDQLQJWKH           WKH%RDUGRQO\QHHGVWRH[DPLQHWKHUHODWLRQVKLSEHWZHHQD
QHZ HPSOR\HU KDV mDFTXLUHG VXEVWDQWLDO DVVHWV RI LWV             QHZ HPSOR\HU DQG LWV LPPHGLDWH SUHGHFHVVRU 3HWLWLRQHUV
SUHGHFHVVRUDQGFRQWLQXHGZLWKRXWLQWHUUXSWLRQRUVXEVWDQWLDO          DUJXHWKDWLQFDVHVLQYROYLQJPXOWLSOHFKDQJHVRIRZQHUVKLS
FKDQJH WKH SUHGHFHVVRUjV EXVLQHVV RSHUDWLRQVl  ,G              WKH%RDUGPXVWEURDGHQWKHLQTXLU\DQGHVWDEOLVKDQXQEURNHQ
TXRWDWLRQV DQG FLWDWLRQV RPLWWHG  $V RXWOLQHG LQ RXU         FKDLQ RI VXFFHVVRUVKLS DFURVV WKH FKDQJH RI RZQHUVKLS
SUHYLRXVFDVHV                                                         8QGHU3HWLWLRQHUVjWKHRU\WKH%RDUGWKHUHIRUHHUUHGE\ILUVW
                                                                        IDLOLQJ WR HVWDEOLVK WKDW WKH %DQN %HFN DQG +(/3 ZHUH
  7KHWKUHVKROGLQTXLU\IRUDVFHUWDLQLQJWKHH[LVWHQFHRI               VXFFHVVRU HPSOR\HUV SULRU WR H[DPLQLQJ ZKHWKHU 2UDQJH
  VXFKmVXEVWDQWLDOFRQWLQXLW\lLVZKHWKHUWKHPDMRULW\RI              3ODFHDQG0DQDJHPHQW6HUYLFHVZHUHVXFFHVVRUHPSOR\HUVWR
  WKHQHZHPSOR\HUjVZRUNIRUFHZDVSUHYLRXVO\HPSOR\HG                  +(/3  ,Q UHVSRQVH WKH %RDUG DVVHUWV WKDW EHFDXVH +(/3
  E\WKHSUHGHFHVVRU,IVRWKH%RDUGWKHQPXVWH[DPLQH               YROXQWDULO\ UHFRJQL]HG DQG EDUJDLQHG ZLWK WKH 8QLRQ
  D QXPEHU RI DGGLWLRQDO IDFWRUV WR GHWHUPLQH ZKHWKHU            VWDQGDUG VXFFHVVRUVKLS DQDO\VLV DSSOLHV DQG WKH %RDUG
  mVXEVWDQWLDOFRQWLQXLW\lH[LVWVLQFOXGLQJZKHWKHUWKH           SURSHUO\ OLPLWHG LWV LQTXLU\ WR WKH UHODWLRQVKLS DPRQJ DQG
  EXVLQHVV RI WKH WZR HQWLWLHV UHPDLQV XQFKDQJHG                 EHWZHHQ3HWLWLRQHUVDQG+(/3,QOLJKWRIWKHXQLTXHIDFWXDO
  ZKHWKHUWKHHPSOR\HHVFRQWLQXHWRSHUIRUPWKHVDPH                FLUFXPVWDQFHVRIWKLVFDVHZHDJUHHZLWKWKH%RDUG
  MRE IXQFWLRQV XQGHU XQFKDQJHG ZRUNLQJ FRQGLWLRQV
  ZKHWKHUWKHSURGXFWLRQSURFHVVHVUHPDLQWKHVDPH                    $OWKRXJKWKLV&LUFXLWKDVQRWDGGUHVVHGWKHSUHFLVHWKHRU\
  DQG  ZKHWKHU WKH QHZ HQWLW\ SURYLGHV WKH VDPH              UDLVHG E\ 3HWLWLRQHUV IRU WKH UHDVRQV VHW IRUWK EHORZ
  FXVWRPHUVZLWKWKHVDPHSURGXFW                                      UHVROXWLRQ RI WKH LVVXH WXUQV RQ ZKHWKHU +(/3 YROXQWDULO\
                                                                        UHFRJQL]HGWKH8QLRQSULRUWRWKH%DQNjVWUDQVIHURIWKHKRWHO
6WUDLJKW&UHHN)GDWFLWLQJ)DOO5LYHU'\HLQJ           WR2UDQJH3ODFH,IVRWKH8QLRQLVHQWLWOHGWRDSUHVXPSWLRQ
 86 DW   6 &W DW   7KXV mLI WKH QHZ    RI PDMRULW\ VWDWXV DQG WKLV FDVH UHTXLUHV DV WKH %RDUG
HPSOR\HUPDNHVDFRQVFLRXVGHFLVLRQWRPDLQWDLQJHQHUDOO\               FRQWHQGVRQO\DmUXQRIWKHPLOOlVXFFHVVRUVKLSH[DPLQDWLRQ
WKH VDPH EXVLQHVV DQG WR KLUH D PDMRULW\ RI LWV HPSOR\HHV     RI 3HWLWLRQHUV DQG WKHLU LPPHGLDWH SUHGHFHVVRU +(/3  $V
IURP LWV SUHGHFHVVRU WKH EDUJDLQLQJ REOLJDWLRQ RI VHFWLRQ       FRJHQWO\VXPPDUL]HGE\WKH6XSUHPH&RXUW
D RI WKH 1/5$ WR QHJRWLDWH ZLWK WKH PDMRULW\
UHSUHVHQWDWLYHLVDFWLYDWHGl/LQFROQ3DUN=RRORJLFDO6RFj\              :KHUHDVKHUHWKHXQLRQKDVDUHEXWWDEOHSUHVXPSWLRQ
Y1/5%)GWK&LUFLWLQJ)DOO5LYHU             RI PDMRULW\ VWDWXV WKLV VWDWXV FRQWLQXHV GHVSLWH WKH
'\HLQJ86DW6&WDW                           FKDQJH LQ HPSOR\HUV  $QG WKH QHZ HPSOR\HU KDV DQ
1RV                    2UDQJH3ODFH/WG                        2UDQJH3ODFH/WG                    1RV
                                   3DUWQHUVKLSHWDOY1/5%                         3DUWQHUVKLSHWDOY1/5%

  REOLJDWLRQWREDUJDLQZLWKWKDWXQLRQVRORQJDVWKHQHZ                          7XUQLQJ WR WKH LVVXH RI PDMRULW\ UHSUHVHQWDWLRQ XQLRQV
  HPSOR\HULVLQIDFWDVXFFHVVRURIWKHROGHPSOR\HUDQG                        JHQHUDOO\DFKLHYHPDMRULW\VWDWXVWKURXJK%RDUGFHUWLILFDWLRQ
  WKH PDMRULW\ RI LWV HPSOR\HHV ZHUH HPSOR\HG E\ LWV                     6HH)DOO5LYHU'\HLQJ86DW6&WDW
  SUHGHFHVVRU                                                                    /LQFROQ 3DUN  )G DW   2QFH FHUWLILHG E\ WKH
                                                                                 %RDUG DV D EDUJDLQLQJ XQLW UHSUHVHQWDWLYH D XQLRQ WKHQ LV
)DOO 5LYHU '\HLQJ  86 DW   6 &W DW                  HQWLWOHGWRDFRQFOXVLYHSUHVXPSWLRQRIPDMRULW\VWDWXVIRURQH
HPSKDVLV DGGHG VHH DOVR /LQFROQ 3DUN  )G DW                 \HDU IROORZLQJ FHUWLILFDWLRQ DIWHU ZKLFK WKH SUHVXPSWLRQ
H[SODLQLQJ WKDW D QHZ HPSOR\HUjV VWDWXV DV D VXFFHVVRU                  EHFRPHVUHEXWWDEOH)DOO5LYHU'\HLQJ86DW
HPSOR\HU WULJJHUV WKH $FWjV REOLJDWLRQ WR EDUJDLQ ZLWK WKH               6&WDW7KHVHSUHVXPSWLRQVUHPDLQLQWDFWDFURVV
PDMRULW\UHSUHVHQWDWLYH                                                      D FKDQJH RI RZQHUVKLS DQG IXUWKHU WKH $FWjV mRYHUULGLQJ
                                                                                 SROLF\l RI SURPRWLQJ LQGXVWULDO SHDFH ZKLFK EHFRPHV
  ,IRQWKHRWKHUKDQG+(/3GLGQRWYROXQWDULO\UHFRJQL]H                      mSDUWLFXODUO\SHUWLQHQWlLQWKHVXFFHVVRUVKLSFRQWH[W
WKH8QLRQGXULQJ+(/3jVWHQXUHDVWKHHPSOR\HUDW+,%WKHQ
3HWLWLRQHUVPD\EHFRUUHFWWKDWWKH%RDUGHUUHGE\OLPLWLQJLWV                    'XULQJDWUDQVLWLRQEHWZHHQHPSOR\HUVDXQLRQLVLQD
VXFFHVVRUVKLSDQDO\VLVWRWKHUHODWLRQVKLSDPRQJDQGEHWZHHQ                       SHFXOLDUO\ YXOQHUDEOH SRVLWLRQ ,W KDV QR IRUPDO DQG
3HWLWLRQHUVDQG+(/3,QWKLVHYHQWZHZRXOGWKHQDQGRQO\                      HVWDEOLVKHG EDUJDLQLQJ UHODWLRQVKLS ZLWK WKH QHZ
WKHQ EH UHTXLUHG WR GHWHUPLQH ZKHWKHU WKH VXFFHVVRUVKLS                    HPSOR\HULVXQFHUWDLQDERXWWKHQHZHPSOR\HU
VSODQV
GRFWULQHPDQGDWHVWKHH[DPLQDWLRQRIRWKHUHPSOR\HUVLQWKH                        DQGFDQQRWEHVXUHLIRUZKHQWKHQHZHPSOR\HUPXVW
FKDLQRIRZQHUVKLS6HHJHQHUDOO\%DNHU\&RQIHFWLRQDU\	                         EDUJDLQZLWKLW:KLOHEHLQJFRQFHUQHGZLWKWKHIXWXUHRI
7REDFFR:RUNHUV8QLRQ/RFDO1RY5\DQjV,*$                           LWVPHPEHUVZLWKWKHQHZHPSOR\HUWKHXQLRQDOVRPXVW
) 6XSS  1' 2KLR  ZKHUH LQ FRQGXFWLQJ D                     SURWHFWZKDWHYHUULJKWVVWLOOH[LVWIRULWVPHPEHUVXQGHU
%XUQVVW\OHVXFFHVVRUVKLSDQDO\VLVWKHGLVWULFWFRXUWIRFXVHG                     WKHFROOHFWLYHEDUJDLQLQJDJUHHPHQWZLWKWKHSUHGHFHVVRU
RQ WKH UHODWLRQVKLS EHWZHHQ WKH RULJLQDO HPSOR\HU DQG WKH                  HPSOR\HU$FFRUGLQJO\GXULQJWKLVXQVHWWOLQJWUDQVLWLRQ
XOWLPDWHQHZHPSOR\HUOHDYLQJDQLQWHUPHGLDU\HPSOR\HURXW                        SHULRG WKH XQLRQ QHHGV WKH SUHVXPSWLRQV RI PDMRULW\
RIWKHDQDO\VLV                                                                 VWDWXVWRZKLFKLWLVHQWLWOHGWRVDIHJXDUGLWVPHPEHUV

                                                                                   ULJKWVDQGWRGHYHORSDUHODWLRQVKLSZLWKWKHVXFFHVVRU

                                                                                  7KH SRVLWLRQ RI WKH HPSOR\HHV DOVR VXSSRUWV WKH
      &RQWUDU\ WR 3HWLWLRQHUVj UHSHDWHG DVVHUWLRQV RXU HDUOLHU GHFLVLRQ LQ        DSSOLFDWLRQ RI WKH SUHVXPSWLRQV LQ WKH VXFFHVVRUVKLS
6HUYLFH +RVSLWDO 1XUVLQJ +RPH 	 3XEOLF (PSOR\HHV 8QLRQ /RFDO  Y               VLWXDWLRQ ,I WKH HPSOR\HHV ILQG WKHPVHOYHV LQ D QHZ
&OHYHODQG 7RZHU +RWHO ,QF  )G   &LU  GLG QRW DGGUHVV
                                                WK
                                                                                   HQWHUSULVH WKDW VXEVWDQWLDOO\ UHVHPEOHV WKH ROG EXW
WKH TXHVWLRQ RI ZKHWKHU WKH %RDUG PXVW ILQG DQ XQEURNHQ FKDLQ RI
VXFFHVVRUVKLS DFURVV PXOWLSOH FKDQJHV LQ RZQHUVKLS ,Q &OHYHODQG7RZHU             ZLWKRXWWKHLUFKRVHQEDUJDLQLQJUHSUHVHQWDWLYHWKH\PD\
D KRWHO ZDV SODFHG LQ UHFHLYHUVKLS DQG WKHQ ODWHU VROG WR D OLPLWHG                ZHOO IHHO WKDW WKHLU FKRLFH RI D XQLRQ LV VXEMHFW WR WKH
SDUWQHUVKLS 'XULQJ WKH UHFHLYHUVKLS WKH UHFHLYHU HQWHUHG LQWR FROOHFWLYH         YDJDULHVRIDQHQWHUSULVH
VWUDQVIRUPDWLRQ7KLVIHHOLQJLV
EDUJDLQLQJ DJUHHPHQWV ZLWK WKH DSSHOODQW XQLRQ $IWHU DJUHHLQJ ZLWK WKH            QRWFRQGXFLYHWRLQGXVWULDOSHDFH,QDGGLWLRQDIWHUEHLQJ
GLVWULFW FRXUWjV ILQGLQJ WKDW WKH FRXUWDSSRLQWHG UHFHLYHU ZDV WKH HPSOR\HU
GXULQJ WKH UHFHLYHUVKLS ZH FRQFOXGHG WKDW WKH SDUWQHUVKLS ZDV QRW D
                                                                                   KLUHGE\DQHZFRPSDQ\IROORZLQJDOD\RIIIURPWKHROG
VXFFHVVRU HPSOR\HU WR WKH UHFHLYHU EHFDXVH WKH UHFRUG GLG QRW UHIOHFW DV
UHTXLUHG E\ %XUQV    DQG LWV SURJHQ\ WKDW WKH SDUWQHUVKLS KLUHG D PDMRULW\ RI
WKH UHFHLYHUjV HPSOR\HHV   ,G  DW  $FFRUGLQJO\ WKH FRXUW GLG QRW UHDFK
WKH TXHVWLRQ RI ZKHWKHU WKH %RDUG DOVR QHHGHG WR HVWDEOLVK WKDW WKH              UHFHLYHU ZDV D VXFFHVVRU HPSOR\HU WR WKH RULJLQDO RZQHU RI WKH KRWHO
1RV                2UDQJH3ODFH/WG                  2UDQJH3ODFH/WG                1RV
                               3DUWQHUVKLSHWDOY1/5%                   3DUWQHUVKLSHWDOY1/5%

  HPSOR\HHV LQLWLDOO\ ZLOO EH FRQFHUQHG SULPDULO\ ZLWK           HPSOR\HUjVYROXQWDU\UHFRJQLWLRQRIDXQLRQJLYHVULVHWRD
  PDLQWDLQLQJ WKHLU QHZ MREV ,Q IDFW WKH\ PLJKW EH           UHEXWWDEOHSUHVXPSWLRQRIPDMRULW\VWDWXV
  LQFOLQHG WR VKXQ VXSSRUW IRU WKHLU IRUPHU XQLRQ
  HVSHFLDOO\ LI WKH\ EHOLHYH WKDW VXFK VXSSRUW ZLOO               ,Q)DOO5LYHU'\HLQJWKH6XSUHPH&RXUWHODERUDWHGRQ
  MHRSDUGL]H WKHLU MREV ZLWK WKH VXFFHVVRU RU LI WKH\ DUH       WKHSROLF\UHDVRQVEHKLQGWKHVXFFHVVRUVKLSGRFWULQHWKH
  LQFOLQHGWREODPHWKHXQLRQIRUWKHLUOD\RIIDQGSUREOHPV              1/5$ VHHNV WR DFKLHYH mLQGXVWULDO SHDFHl E\
  DVVRFLDWHGZLWKLW:LWKRXWWKHSUHVXPSWLRQVRIPDMRULW\              PDLQWDLQLQJVWDELOLW\LQWKHDGPLQLVWUDWLRQRIFROOHFWLYH
  VXSSRUW DQG ZLWK WKH ZLGH YDULHW\ RI FRUSRUDWH                  EDUJDLQLQJ DJUHHPHQWV DQG FXUELQJ WKH WHPSWDWLRQ WR
  WUDQVIRUPDWLRQV SRVVLEOH DQ HPSOR\HU FRXOG XVH D                DYRLG JRRG IDLWK EDUJDLQLQJ WKURXJK GHOD\ WKH
  VXFFHVVRU HQWHUSULVH DV D ZD\ RI JHWWLQJ ULG RI D ODERU      VXFFHVVRUVKLSGRFWULQHLVLQDFFRUGZLWKWKH1/5$6HH
  FRQWUDFWDQGRIH[SORLWLQJWKHHPSOR\HHV
KHVLWDQWDWWLWXGH            86DW6&WDW%HFDXVHDWWULEXWLQJ
  WRZDUGVWKHXQLRQWRHOLPLQDWHLWVFRQWLQXLQJSUHVHQFH                PDMRULW\ VWDWXV WR D FHUWLILHG XQLRQ UHLQIRUFHV WKLV
                                                                         VWDELOLW\ VRXJKW E\ WKH 1/5$ WKH 6XSUHPH &RXUW
,GDW6&WDWIRRWQRWHVRPLWWHG                 DFFHSWHG WKH 1/5%jV SUHVXPSWLRQ  +HUH FUHGLWLQJ D
                                                                         XQLRQ WKDW KDV EHHQ YROXQWDULO\ UHFRJQL]HG E\ WKH
  :KLOH LQ WKLV FDVH QR %RDUG FHUWLILFDWLRQ RI WKH 8QLRQ       SUHGHFHVVRUHPSOR\HUZLWKPDMRULW\VWDWXVZRXOGKDYH
RFFXUUHGGXULQJ+(/3jVWHQXUHDW+,%LWLVZHOODFFHSWHGWKDW           WKLVVDPHVWHDG\LQJHIIHFWDQGWKXVEHFRQVLVWHQWZLWKWKH
PDMRULW\VWDWXVDOVRPD\UHVXOWIURPDQHPSOR\HUjVmYROXQWDU\            1/5$$FFRUGLQJO\ZHKROGWKDWYROXQWDU\UHFRJQLWLRQ
UHFRJQLWLRQlRIWKHXQLRQ6HH/LQFROQ3DUN)GDW            FDQ JLYH ULVH WR D UHEXWWDEOH SUHVXPSWLRQ RI PDMRULW\
([[HO$WPRV,QFY1/5%)G'&&LU                 VWDWXVLQDVXFFHVVRUVKLSVLWXDWLRQ
,WLVOHVVFOHDUKRZHYHUZKHWKHUWKHSUHVXPSWLRQVRI
PDMRULW\VWDWXVWKDWDFFRPSDQ\%RDUGFHUWLILFDWLRQRIDXQLRQ         /LQFROQ3DUN)GDWVHHDOVR([[HO$WPRV)G
DOVR DSSO\ WR YROXQWDU\ UHFRJQLWLRQ LQ WKH VXFFHVVRUVKLS        DWm,IWKHHPSOR\HUFKRRVHVYROXQWDULO\WRUHFRJQL]HWKH
FRQWH[W$OWKRXJKWKLV&LUFXLWKDVQRWDGGUHVVHGWKHTXHVWLRQ        XQLRQ    WKH XQLRQ HQMR\V D SUHVXPSWLRQ RI FRQWLQXLQJ
ZHDJUHHZLWKWKH6HYHQWK&LUFXLWDQGWKH&LUFXLW&RXUWRI             PDMRULW\VXSSRUWl
$SSHDOV IRU WKH 'LVWULFW RI &ROXPELD WKDW D SUHGHFHVVRU
HPSOR\HUjVYROXQWDU\UHFRJQLWLRQRIDXQLRQDOVRJLYHVULVHWR           7KH /LQFROQ 3DUN &RXUW WKHQ H[SODLQHG WKH VWDQGDUG IRU
DSUHVXPSWLRQRIPDMRULW\VWDWXVLQDVXFFHVVRUVKLSVLWXDWLRQ         YROXQWDU\UHFRJQLWLRQDVIROORZV
WKHUHE\REOLJDWLQJDQHZHPSOR\HUWREDUJDLQZLWKWKHXQLRQ
XQGHUWKHVXFFHVVRUVKLSGRFWULQH,G                                   ,PSOLFLW LQ WKH SURFHVV RI YROXQWDU\ UHFRJQLWLRQ DUH
                                                                         SURWHFWLRQVIRUERWKHPSOR\HUDQGHPSOR\HH)LUVWLQDQ
  ,Q/LQFROQ3DUNDSULYDWHVRFLHW\WKDWDVVXPHGRSHUDWLRQRI           LQVWDQFHRIYROXQWDU\UHFRJQLWLRQLWLVSUHVXPHGWKDWWKH
WKH/LQFROQ3DUN=RRIURPWKH&KLFDJR3DUN'LVWULFWLQ              HPSOR\HUZLOODOZD\VKDYHDQLQLWLDOFKDQFHWRUHIXVHWR
UHIXVHGWRUHFRJQL]HDQGEDUJDLQZLWKWKHSXEOLFHPSOR\HHV               UHFRJQL]H D XQLRQ  6HFRQG DW WKH WLPH RI YROXQWDU\
XQLRQWKDWKDGUHSUHVHQWHGWKH'LVWULFWjV]RRHPSOR\HHVRQWKH           UHFRJQLWLRQWKHUHLVJHQHUDOO\VRPHVKRZLQJRIPDMRULW\
JURXQGVWKDWWKHXQLRQKDGQHYHUDWWDLQHG%RDUGFHUWLILFDWLRQ           VXSSRUWVKRUWRIDQHOHFWLRQE\WKHHPSOR\HHVHJD
,QFRQFOXGLQJWKDWWKH6RFLHW\ZDVREOLJDWHGWREDUJDLQZLWK             PDMRULW\FDUGVKRZLQJ
WKH XQLRQ XQGHU WKH VXFFHVVRUVKLS GRFWULQH WKH 6HYHQWK
&LUFXLWILUVWH[SODLQHGWKDWVLPLODUWR%RDUGFHUWLILFDWLRQDQ       )GDW,QGHWHUPLQLQJWKDWWKH UHFRUGFRQWDLQHG
                                                                       VXEVWDQWLDOHYLGHQFHWRVXSSRUWDILQGLQJWKDWWKH3DUN'LVWULFW
1RV                2UDQJH3ODFH/WG                   2UDQJH3ODFH/WG                     1RV
                               3DUWQHUVKLSHWDOY1/5%                    3DUWQHUVKLSHWDOY1/5%

KDGYROXQWDULO\UHFRJQL]HGWKHXQLRQIRUSXUSRVHVRIIHGHUDO         GLVVDWLVIDFWLRQDQGGLVVHQVLRQWKDWZLOOVLPLODUO\PDNHLWDQ
ODERUODZWKHSDQHOUHDVRQHGWKDWWKH3DUN'LVWULFWKDG       XQDWWUDFWLYH RSSRUWXQLW\ IRU DFTXLVLWLRQ DQG XQGHUPLQH LWV
DIILUPHGWKHXQLRQjVPDMRULW\VWDWXVLQVXFFHVVLYHFROOHFWLYH        PDUNHWYDOXH)DFHGZLWKWKLVGLOHPPDWKHHPSOR\HUWULHVWR
EDUJDLQLQJ DJUHHPHQWV VWUHWFKLQJ EDFN WR   3DUN       GRGJH ERWK EXOOHWV E\ VHHPLQJ WR QHJRWLDWH DQG GHDO LQ D
'LVWULFWHPSOR\HHVKDGQHYHULQYRNHGWKHLUULJKWXQGHUVWDWH         FRRSHUDWLYH ZD\ DV LI ORRNLQJ WRZDUG HQWHULQJ LQWR DQ
ODZWRSHWLWLRQIRUGHFHUWLILFDWLRQRIWKHXQLRQDQGWKHUH      DJUHHPHQWEXW\HWQRWDFWXDOO\HQWHULQJLQWRDQDJUHHPHQWWKDW
ZDV QR UHFRUG RI GLVVDWLVIDFWLRQ ZLWK WKH EDUJDLQLQJ          DSXUFKDVHUZRXOGILQGXQDWWUDFWLYH
UHODWLRQVKLS,GDW
                                                                        7KLVLVSUHFLVHO\ZKDWKDSSHQHGKHUH7KXVWKHTXHVWLRQ
   $SSO\LQJWKHVHSULQFLSOHVKHUHLWLVFOHDUWKDWRXUILUVWWDVN   LV  'LG WKH HPSOR\HU +(/3 JR VR IDU LQ LWV FRQGXFW WR
LV WR GHWHUPLQH ZKHWKHU +(/3jV GHDOLQJV ZLWK WKH 8QLRQ       PDLQWDLQ D UHODWLRQVKLS ZLWK WKH 8QLRQ  DQG QRW FUHDWH D
FRQVWLWXWHG mYROXQWDU\ UHFRJQLWLRQl WKHUHE\ DOORZLQJ WKH       VFKLVPWKDWLWHIIHFWLYHO\UHFRJQL]HGWKH8QLRQjVUROHDVWKH
8QLRQWRDWWDLQDSUHVXPSWLRQRIPDMRULW\VWDWXV,IVRWKH        HPSOR\HHVjEDUJDLQLQJUHSUHVHQWDWLYH":HILQGVXEVWDQWLDO
%RDUG SURSHUO\ OLPLWHG LWV VXFFHVVRUVKLS DQDO\VLV WR           HYLGHQFHLQWKHUHFRUGWRVXSSRUWWKH%RDUGjVILQGLQJWKDWLW
3HWLWLRQHUVj LPPHGLDWH SUHGHFHVVRU HPSOR\HU +(/3               GLG
,PSOLHGO\DFNQRZOHGJLQJWKLVIDFW3HWLWLRQHUVFRQWHQGWKDW
+(/3 QHYHU UHFRJQL]HG RU EDUJDLQHG ZLWK WKH 8QLRQ               0RUH VSHFLILFDOO\ ZKHQ WKH 8QLRQ SURPSWO\ FRQWDFWHG
+RZHYHUJLYLQJDSSURSULDWHGHIHUHQFHWRWKH%RDUGjVIDFWXDO         +(/3RQO\DIHZGD\VDIWHUWKH%DQNjVDFTXLVLWLRQRI+,%
ILQGLQJVDUHYLHZRIWKHUHFRUGUHYHDOVVXEVWDQWLDOHYLGHQFH        +(/3KDGDQRSSRUWXQLW\WRUHIXVHWRUHFRJQL]HWKH8QLRQ
ZKLFKXQGHUPLQHV3HWLWLRQHUVjFRQWHQWLRQVDQGVXSSRUWVWKH           5DWKHU WKDQ H[HUFLVH WKLV RSSRUWXQLW\ +(/3jV DWWRUQH\
%RDUGjV FRQFOXVLRQ WKDW +(/3 YROXQWDULO\ UHFRJQL]HG DQG        H[SUHVVO\ LQGLFDWHG WR WKH 8QLRQ LQ D 1RYHPEHU  
EDUJDLQHGZLWKWKH8QLRQ,QUHDFKLQJWKLVFRQFOXVLRQZH           OHWWHUWKDW+(/3ZDVQRWUHIXVLQJWREDUJDLQ   7KHUHDIWHU
HPSKDVL]H WKDW RXU GHFLVLRQ UHVWV PRUH RQ WKH SDUWLFXODU     +(/3WRRNDGGLWLRQDOVSHFLILFVWHSVWRUHFRJQL]HDQGEDUJDLQ
IDFWXDOUHFRUGEHIRUHXVWKDQRQDQ\QRYHOLQWHUSUHWDWLRQRI         ZLWK WKH 8QLRQ  ,Q SDUWLFXODU RQ 'HFHPEHU  
WKHODZ                                                            UHSUHVHQWDWLYHVRI+(/3DQGWKH8QLRQPHWIDFHWRIDFHDQG
                                                                     GLVFXVVHGWKH8QLRQjVIRUPHUFROOHFWLYHEDUJDLQLQJDJUHHPHQW
   :H EHJLQ RXU DQDO\VLV E\ REVHUYLQJ WKDW WKLV FDVH ILWV   ZLWK /DQH DQG WKH 8QLRQjV SUHYLRXV LQIRUPDWLRQ UHTXHVWV
VTXDUHO\ ZLWKLQ WKH HFRQRPLF UHDOLW\ SDUDGLJP WKDW WKH        UHJDUGLQJ+(/3jVKRXVHNHHSLQJHPSOR\HHV
6XSUHPH &RXUW ILUVW LGHQWLILHG LQ %XUQV  1DPHO\ DQ
HPSOR\HUDWDILQDQFLDOO\VWUXJJOLQJEXVLQHVVWU\LQJWRDWWUDFW        2Q'HFHPEHU+(/3jVDWWRUQH\VHQWWKH8QLRQD
DSRWHQWLDOEX\HU7KHHPSOR\HUNQRZVWKDWLILWVDGGOHVWKH       IROORZXSOHWWHUH[SUHVVO\UHIHUULQJWR+(/3jVQHJRWLDWLRQV
EXVLQHVVZLWKDQRQHURXVXQLRQFRQWUDFWLWVSURVSHFWVIRUD         ZLWKWKH8QLRQ$QGLWGLGWZRRWKHUVLJQLILFDQWWKLQJVZLWK
IDYRUDEOH DFTXLVLWLRQ ZLOO EH DGYHUVHO\ SHUKDSV IDWDOO\      WKLV OHWWHU  ,W LQFOXGHG D OLVW RI KRXVHNHHSLQJ HPSOR\HHV
LPSDFWHG,WDOVRNQRZVKRZHYHUWKDWLILWUHIXVHVRXWULJKW
WREDUJDLQZLWKDQLQFXPEHQWXQLRQLWPD\ZHOOEHEX\LQJ
LWVHOI GLVUXSWLYH ODERU SUREOHPV  DQG HPSOR\HH                    
                                                                           :H UHFRJQL]H WKDW LQ WKLV VLWXDWLRQ WKH 8QLRQ WRR LV LQ VRPHWKLQJ
                                                                     RI D GLOHPPD   ,W GRHV QRW ZDQW WR SXVK D ILQDQFLDOO\ VWUXJJOLQJ EXVLQHVV
                                                                     VR KDUG WKDW D SRWHQWLDOO\ VWURQJ SXUFKDVHU RI WKH FRPSDQ\ ZLOO EH VFDUHG

                                                                    RII EXW DW WKH VDPH WLPH LW PXVW GR HYHU\WKLQJ LW FDQ WR PDLQWDLQ LWV VWDWXV
     6HH %XUQV  86 DW   6 &W DW                DV WKH HPSOR\HHVj UHFRJQL]HG EDUJDLQLQJ UHSUHVHQWDWLYH
1RV              2UDQJH3ODFH/WG                   2UDQJH3ODFH/WG               1RV
                             3DUWQHUVKLSHWDOY1/5%                    3DUWQHUVKLSHWDOY1/5%

SUHVXPDEO\VRWKDWWKH8QLRQFRXOGLGHQWLI\DOOPHPEHUVRI          '7KH%RDUGjV6XFFHVVRUVKLS)LQGLQJV
WKHEDUJDLQLQJXQLWDQGIXUWKHULQGLFDWHGWKDW+(/3ZDVLQ
WKHSURFHVVRIGHYHORSLQJDFRQWUDFWSURSRVDOIRUWKH8QLRQ           +DYLQJ IRXQG WKDW WKH %RDUG HQJDJHG LQ WKH SURSHU
(YHQ WKRXJK ZH XQGHUVWDQG +(/3jV GLOHPPD WDNHQ DV D         VXFFHVVRUVKLS DQDO\VLV ZH WXUQ RXU DWWHQWLRQ WR ZKHWKHU
ZKROHWKHVHDFWLRQVE\+(/3LQWHQGLQJWRSHUSHWXDWHVRPH           VXEVWDQWLDOHYLGHQFHVXSSRUWVWKH%RDUGjVIDFWXDOFRQFOXVLRQ
FRRSHUDWLYH UHODWLRQVKLS ZLWK WKH 8QLRQ DUH DOO FRQVLVWHQW   WKDW 3HWLWLRQHUV DUH LQ IDFW VXFFHVVRU HPSOR\HUV ZLWK DQ
ZLWKDILQGLQJRIYROXQWDU\UHFRJQLWLRQ                             REOLJDWLRQWRUHFRJQL]HEDUJDLQZLWKDQGSURYLGHLQIRUPDWLRQ
                                                                     WRWKH8QLRQ
   1HLWKHU LVRXUGHFLVLRQRQWKLVSRLQWPDGHLQDYDFXXP
:KDWLVDOVRVLJQLILFDQWKHUHLVWKHKLVWRULFDOFRQWH[WLQZKLFK           6XEVWDQWLDO (YLGHQFH 6XSSRUWV WKH %RDUGjV
WKLV GDQFH EHWZHHQ WKH HPSOR\HU DQG WKH 8QLRQ RFFXUUHG              )LQGLQJV WKDW 2UDQJH 3ODFH DQG 0DQDJHPHQW
$QDORJRXVWR/LQFROQ3DUNWKHSUHVHQWFDVHLQYROYHVDORQJ                 6HUYLFHV DUH sRLQW (PSOR\HUV DQG 6XFFHVVRU
VWDQGLQJXQLRQUHODWLRQVKLSZLWKWKHEDUJDLQLQJXQLWDW+,%                 (PSOR\HUVWR+(/3
,QGHHGDOWKRXJK+(/3RQO\GHDOWZLWKWKH8QLRQIRUDSHULRG
RIPRQWKVWKH%RDUGIRXQGWKDWWKH8QLRQKDGUHSUHVHQWHG               $VDQLQLWLDOVWHSLQLWVVXFFHVVRUVKLSDQDO\VLVWKH%RDUG
WKH KRXVHNHHSLQJ HPSOR\HHV DW WKH KRWHOV IRU XSZDUGV RI      IRXQG WKDW 3HWLWLRQHUV 2UDQJH 3ODFH DQG 0DQDJHPHQW
WZHQW\\HDUVDVHPERGLHGLQVXFFHVVLYHFROOHFWLYHEDUJDLQLQJ        6HUYLFHVZHUHMRLQWHPSOR\HUVDW+,%mµ>:@KHUHWZRRUPRUH
DJUHHPHQWVZLWK6XPPLW/DQH)LQDOO\DVZDVWKHFDVHLQ            HPSOR\HUVH[HUWVLJQLILFDQWFRQWURORYHUWKHVDPHHPSOR\HHV
/LQFROQ 3DUN WKH UHFRUG FRQWDLQV OLWWOH RU QR HYLGHQFH      ZKHUHIURPWKHHYLGHQFHLWFDQEHVKRZQWKDWWKH\VKDUHRU
LQGLFDWLQJWKDW+,%jVKRXVHNHHSLQJHPSOR\HHVHYHUVRXJKW             FRGHWHUPLQH WKRVH PDWWHUV JRYHUQLQJ HVVHQWLDO WHUPV DQG
GHFHUWLILFDWLRQ RI RU H[SUHVVHG GLVVDWLVIDFWLRQ ZLWK WKH     FRQGLWLRQVRIHPSOR\PHQWWKH\FRQVWLWXWH
MRLQWHPSOR\HUV

8QLRQ                                                               ZLWKLQWKHPHDQLQJRIWKH1/5$jl&DUULHU&RUSY1/5%
                                                                      )G   WK &LU  TXRWLQJ 1/5% Y
   :HFRQFOXGHWKLVSRUWLRQRIRXUDQDO\VLVE\REVHUYLQJWKDW        %URZQLQJ)HUULV,QGXVWULHVRI3HQQV\OYDQLD,QF)G
ZH DOVR JURXQG RXU FRQFOXVLRQ RQ WKH IDFW WKDW WKH 8QLRQ   G&LU
SXUVXHG LWV ULJKWV ZLWK DOO GHOLEHUDWH VSHHG IROORZLQJ
6XPPLWjV2FWREHUWUDQVIHURI+,%WRWKH%DQN$VD                +HUH LQ FRQQHFWLRQ ZLWK LWV DFTXLVLWLRQ RI +,% 2UDQJH
UHVXOW RI WKHVH HIIRUWV WKH 8QLRQ VHFXUHG D SURPLVH IURP   3ODFH HQWHUHG LQWR D PDQDJHPHQW DJUHHPHQW ZLWK
+(/3 WKDW +(/3 ZRXOG GHOLYHU D FRQWUDFW SURSRVDO WR WKH     0DQDJHPHQW 6HUYLFHV  ,Q WKLV DJUHHPHQW 2UDQJH 3ODFH
8QLRQE\sDQXDU\'HVSLWHWKLVSURPLVH+(/3IDLOHG            H[SUHVVO\ UHWDLQHG LWV VWDWXV DV WKH HPSOR\HU DW +,% EXW
WRGHOLYHUDFRQWUDFWSURSRVDOSULRUWRWKH%DQNjVWUDQVIHURI       JUDQWHG 0DQDJHPHQW 6HUYLFHV WKH ULJKW WR KLUH GLVFKDUJH
+,% WR 2UDQJH 3ODFH LQ 0D\   *LYHQ WKHVH               WUDLQDQGSD\HPSOR\HHVDQGWRGHWHUPLQHVXFKHPSOR\HHVj
FLUFXPVWDQFHVZHFDQQRWUHZDUG3HWLWLRQHUVIRUWKHIDFWWKDW        FRPSHQVDWLRQ,QOLJKWRIWKLVFRPLQJOLQJRIHPSOR\PHQW
+(/3HIIHFWLYHO\VWUXQJWKH8QLRQDORQJIRUVHYHUDOPRQWKV          UHVSRQVLELOLWLHV LQ WKH PDQDJHPHQW DJUHHPHQW ZH UHDGLO\
WKHUHE\SUHYHQWLQJWKH8QLRQIURPILQDOL]LQJDQHZFROOHFWLYH
EDUJDLQLQJDJUHHPHQW7RGRVRZRXOGHQFRXUDJHGHOD\LQJ
WDFWLFVDQGWKHUHE\XQGHUPLQHWKH$FWjVSULPDU\SXUSRVHRI
SURPRWLQJLQGXVWULDOSHDFH
1RV                 2UDQJH3ODFH/WG                     2UDQJH3ODFH/WG                1RV
                                3DUWQHUVKLSHWDOY1/5%                      3DUWQHUVKLSHWDOY1/5%

FRQFOXGH WKDW VXEVWDQWLDO UHFRUG HYLGHQFH VXSSRUWV WKH              KRXVHPHQ FRQWLQXHG WR SHUIRUP WKH VDPH RU VLPLODU MRE
%RDUGjVMRLQWHPSOR\HUILQGLQJ                                          IXQFWLRQVHJFOHDQLQJURRPVDQGFDUU\LQJEDJVXQGHUWKH
                                                                          VDPH RU VLPLODU ZRUNLQJ FRQGLWLRQV  ,Q VKRUW JLYHQ WKH
  +DYLQJIRXQGMRLQWHPSOR\HUVWDWXVWKH%RDUGWKHQIRXQG                WRWDOLW\RIWKHFLUFXPVWDQFHVVXEVWDQWLDOHYLGHQFHVXSSRUWV
WKDW2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHVZHUHVXFFHVVRU                  WKH%RDUGjVFRQFOXVLRQWKDW2UDQJH3ODFHDQG0DQDJHPHQW
HPSOR\HUVWR+(/3DW+,%$VQRWHGWKHWKUHVKROGLQTXLU\                6HUYLFHV ZHUH VXFFHVVRU HPSOR\HUV WR +(/3 DQG WKHUHE\
LQWKHVXFFHVVRUVKLSGHWHUPLQDWLRQLVZKHWKHU2UDQJH3ODFH                REOLJDWHGWRUHFRJQL]HEDUJDLQZLWKDQGSURYLGHLQIRUPDWLRQ
DQG 0DQDJHPHQW 6HUYLFHV UHWDLQHG D PDMRULW\ RI +(/3jV              WRWKH8QLRQXQGHU%XUQVDQGLWVSURJHQ\
KRXVHNHHSLQJHPSOR\HHVZKHQ2UDQJH3ODFHDFTXLUHG+,%
6HH 6WUDLJKW &UHHN  )G DW   $OWKRXJK WKH %RDUG              3HWLWLRQHUVj2EMHFWLRQVWRWKH%RDUGjV)LQGLQJWKDW
IRXQGVXFKDPDMRULW\EDVHGRQDVRPHZKDWPXGGOHGUHFRUG                         2UDQJH 3ODFH DQG 0DQDJHPHQW 6HUYLFHV DUH
3HWLWLRQHUVj RZQ ZLWQHVV sDPHV *HULVK VXEPLWWHG DQ                        6XFFHVVRU(PSOR\HUVWR+(/3
DIILGDYLWWRWKH$/sLQGLFDWLQJWKDWWZHOYHRIWKHWZHQW\WZR
KRXVHNHHSHUVDQGKRXVHPHQLQLWLDOO\KLUHGE\2UDQJH3ODFH                    'HVSLWH WKLV VXEVWDQWLDO HYLGHQFH VXSSRUWLQJ WKH %RDUGjV
DQG 0DQDJHPHQW 6HUYLFHV ZHUH IRUPHU +(/3 HPSOR\HHV                 FRQFOXVLRQ3HWLWLRQHUVSURIIHUWKUHHJURXQGVIRUUHYHUVLQJWKH
7KLV DIILGDYLW DORQJ ZLWK WKH FRUURERUDWLRQ SURYLGHG E\           %RDUGjVILQGLQJWKDW2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHV
SD\UROODQGRWKHUUHFRUGVUHJDUGLQJWKHQXPEHUDQGW\SHVRI               DUHVXFFHVVRUHPSOR\HUVWR+(/3)LUVW3HWLWLRQHUVFRQWHQG
HPSOR\HHVDW+,%GXULQJWKHUHOHYDQWWLPHSHULRGVSURYLGHV               WKDWWKHUHLVQREDVLVLQIDFWIRUWKH$/sjVILQGLQJWKDWWKHUH
VXEVWDQWLDOVXSSRUWIRUWKH%RDUGjVILQGLQJWKDW2UDQJH3ODFH             ZDV HYHQ D GHILQHG EDUJDLQLQJ XQLW DW +,% FRQVLVWLQJ RI
DQG 0DQDJHPHQW 6HUYLFHV LQLWLDOO\ UHWDLQHG D PDMRULW\ RI           KRXVHNHHSHUV DQG KRXVHPHQ  6HFRQG HYHQ DVVXPLQJ WKDW
+(/3jVKRXVHNHHSHUVDQGKRXVHPHQ                                         WKHUH ZDV D GHILQHG EDUJDLQLQJ XQLW 3HWLWLRQHUV DUJXH WKDW
                                                                          XSRQ DVVXPLQJ FRQWURO RI +,% WKH\ PDGH VXEVWDQWLDO
  :LWK UHVSHFW WR WKH UHPDLQLQJ VXFFHVVRUVKLS IDFWRUV               DOWHUDWLRQVLQWKHFKDUDFWHURIVXFKXQLWUHQGHULQJLWQRORQJHU
HQXPHUDWHG LQ 6WUDLJKW &UHHN VXEVWDQWLDO UHFRUG HYLGHQFH           DSSURSULDWH)LQDOO\3HWLWLRQHUVDVVHUWWKDWWKH%RDUGHUUHGE\
VXSSRUWV WKH %RDUGjV ILQGLQJ WKDW WKHUH ZDV D mVXEVWDQWLDO        ILQGLQJ WKDW WKH\ KLUHG D VXEVWDQWLDO DQG UHSUHVHQWDWLYH
FRQWLQXLW\l RI RSHUDWLRQV DW +,% DFURVV WKH WUDQVIHU RI           HPSOR\HHFRPSOHPHQWLQ0D\RI)RUWKHUHDVRQVVHW
RZQHUVKLSIURPWKH%DQNWR2UDQJH3ODFH,QSDUWLFXODUWKH             IRUWK EHORZ ZH ILQG HDFK RI 3HWLWLRQHUVj DUJXPHQWV
UHFRUGUHYHDOVWKDWWKHUHZDVQRLQWHUUXSWLRQLQRSHUDWLRQVLQ            XQSHUVXDVLYH
FRQQHFWLRQZLWKWKHVDOHWR2UDQJH3ODFHDQGWKDWWKHKRWHO
FRQWLQXHGWRSURYLGHVLPLODUKRWHOVHUYLFHVWRWKHVDPHW\SHV                     D7KH+LVWRULFDO%DUJDLQLQJ8QLW
RI FXVWRPHUV  0RUHRYHU HYHQ DFFHSWLQJ 3HWLWLRQHUVj
FRQFOXVRU\ DVVHUWLRQ WKDW WKH\ LQVWLWXWHG D QHZ mWHDP                 :LWK UHVSHFW WR WKH H[LVWHQFH DQG GHILQLWLRQ RI WKH
DSSURDFKl LQ +,%jV KRXVHNHHSLQJ GHSDUWPHQW 3HWLWLRQHUV              EDUJDLQLQJXQLW3HWLWLRQHUVjFRQWHQWLRQWKDWWKHUHFRUGODFNV
FDQQRW UHDVRQDEO\ GLVSXWH WKDW WKH KRXVHNHHSHUV DQG                 DQ\HYLGHQWLDU\EDVLVWRVXSSRUWWKH$/sjVILQGLQJVLVVLPSO\
                                                                          IDOVH  7KH $/s IRXQG DQG WKH %RDUG DJUHHG WKDW WKH
                                                                          KRXVHNHHSLQJHPSOR\HHVDW+,%FRQVLVWLQJRIKRXVHNHHSHUV
                                                                         DQG KRXVHPHQ RQO\ FRQVWLWXWHG D XQLW DSSURSULDWH IRU
                                                                          FROOHFWLYHEDUJDLQLQJXQGHUWKH$FW$OWKRXJKWKH&%$ZDV
      3HWLWLRQHUVj XQIRXQGHG REMHFWLRQV WR WKH %RDUGjV MRLQW HPSOR\HU
ILQGLQJ DUH EDVHG RQ WKH ZURQJ OHJDO VWDQGDUG 1DPHO\ WKH VWDQGDUG IRU
ILQGLQJ mVLQJOH HPSOR\HUl VWDWXV ZKLFK LV GLVFXVVHG LQ JUHDWHU GHWDLO   VLOHQWRQWKHVXEMHFWWKH$/sEDVHGKLVFRQFOXVLRQRQZKDWKH
LQIUD DW QRWH 
1RV              2UDQJH3ODFH/WG                 2UDQJH3ODFH/WG                  1RV
                             3DUWQHUVKLSHWDOY1/5%                  3DUWQHUVKLSHWDOY1/5%

GHWHUPLQHG ZDV WKH FUHGLEOH WHVWLPRQ\ RI WKH 8QLRQjV         DWWHPSWLQJ WR VKRZ WKDW KLVWRULFDO XQLWV DUH QR ORQJHU
UHSUHVHQWDWLYH 'HQQLV 'LQJRZ  ,Q SDUWLFXODU 'LQJRZ          DSSURSULDWHjlTXRWLQJ%DQNQRWH&RUSY1/5%)G
WHVWLILHGWKDWWKHVSHFLILFMREFODVVLILFDWLRQVFRYHUHGE\WKH       G &LU   ,Q WKLV UHVSHFW WKH %RDUGjV FRJHQW
&%$ ZHUH XQGHUVWRRG EHWZHHQ WKH SDUWLHV JLYHQ WKHLU          DQDO\VLVRQWKHVXEMHFWEHDUVUHSHDWLQJ
UHODWLRQVKLSJRLQJEDFNWZHQW\RUPRUH\HDUV'LQJRZIXUWKHU
WHVWLILHGWKDWLQVSHFWUHVVHVZHUHH[FOXGHGIURPWKHEDUJDLQLQJ        >3HWLWLRQHUV@ 2UDQJH 3ODFH DQG 0DQDJHPHQW 6HUYLFHV
XQLWEHFDXVHWKH\ZHUHFRQVLGHUHGSDUWRIPDQDJHPHQWDQG             DUJXH WKDW WKH XQLW KDV VLJQLILFDQWO\ FKDQJHG DQG WKDW
WKDWKLVWRULFDOO\DVHSDUDWHXQLRQKDGUHSUHVHQWHGWKHODXQGU\        ODXQGU\ZRUNHUVDQGLQVSHFWUHVVHVVKRXOGEHLQFOXGHGLQ
ZRUNHUV:KLOH3HWLWLRQHUVPD\GLVDJUHHZLWKWKHFRQFOXVLRQV         WKHXQLW,QWKLVUHVSHFW*HULVKWHVWLILHGWKDW>3HWLWLRQHUV@
GUDZQE\WKH$/sDQGWKH%RDUGIURP'LQJRZjVWHVWLPRQ\               µKDYHDWHDPDSSURDFKWRWKHKRXVHNHHSLQJGHSDUWPHQWj
WKLVIDFWGRHVQRWUHQGHUVXFKWHVWLPRQ\QRQH[LVWHQW6HH           WKDW LQFOXGHG LQVSHFWUHVVHV DQG ODXQGU\ ZRUNHUV DORQJ
6RXWK3UDLULH&RQVWU&RY2SHUDWLQJ(QJjUV/RFDO          ZLWKKRXVHNHHSHUVDQGKRXVHPHQRUKRXVHSRUWHUV+H
866&WQRWLQJWKDWWKH           VWDWHG µWKH\ DOO KHOS RXW XQGHU WKH GLUHFWLRQ RI WKH
mVHOHFWLRQRIDQDSSURSULDWHEDUJDLQLQJXQLWOLHVODUJHO\ZLWKLQ      RSHUDWLRQV PDQDJHU DQG WKH JHQHUDO PDQDJHUj  7KH
WKHGLVFUHWLRQRIWKH%RDUGZKRVHGHFLVLRQµLIQRWILQDOLV        >3HWLWLRQHUV@ DOVR FLWH FHUWDLQ SD\UROO UHFRUGV RI WKH
UDUHO\WREHGLVWXUEHGjlTXRWLQJ3DFNDUG0RWRU&DU&RY            SUHGHFHVVRU +(/3 ZKLFK RQFH LQFOXGHG WZR
1/5%866&W                 LQVSHFWUHVVHV LQ WKH KRXVHNHHSLQJ GHSDUWPHQW  7KH
                                                                      >3HWLWLRQHUV@RIIHUQRRWKHUHYLGHQFH
   0RUHRYHU3HWLWLRQHUVIDLOWRUHFRJQL]HWKDWWKH$FWGRHVQRW
UHTXLUHWKH%RDUGWRVHOHFWWKHmPRVWlDSSURSULDWHEDUJDLQLQJ                                    




XQLW6HH$P+RVS$VVjQY1/5%86
6&Wm>H@PSOR\HHVPD\VHHNWRRUJDQL]H           7KH UHFRUG VKRZV WKDW WKH MRE GXWLHV IRU
µDXQLWjWKDWLVµDSSURSULDWHjQRWQHFHVVDULO\WKHVLQJOHPRVW     KRXVHNHHSHUPDLGDQGKRXVHPHQGLGQRWFKDQJHLQDQ\
DSSURSULDWHXQLWlVHHDOVR&DO3DF0HG&WUY1/5%         VLJQLILFDQWPHDVXUHEHWZHHQWKHWLPHWKDWWKHSUHGHFHVVRU
)GWK&LUm7KH%RDUGQHHGRQO\VHOHFWDQ         HPSOR\HUVRSHUDWHG+,%DQGWKHWLPHWKDW>3HWLWLRQHUV@
DSSURSULDWHXQLWQRWWKHPRVWDSSURSULDWHXQLWl7KXVHYHQ       RSHUDWHG+,%1RUKDVWKHUHEHHQDFKDQJHLQWKHGHJUHH
LIZHZHUHWRDJUHHWKDWDPRUHDSSURSULDWHEDUJDLQLQJXQLW           WRZKLFKODXQGU\ZRUNHUVDVVLVWWKHKRXVHNHHSHUVPDLGV
ZRXOG LQFOXGH LQVSHFWUHVVHV DQG ODXQGU\ ZRUNHUV WKLV           DQG KRXVHPHQ  ,Q WKLV UHJDUG 8QLRQ %XVLQHVV
FRQFOXVLRQ ZRXOG QRW SHUPLW XV WR UHYHUVH WKH %RDUGjV         5HSUHVHQWDWLYH'HQQLV'LQJRZWHVWLILHGWKDWXQGHUWKH
ILQGLQJVUHJDUGLQJWKHEDUJDLQLQJXQLWZKLFKDUHVXSSRUWHGE\        SUHGHFHVVRUHPSOR\HUVODXQGU\ZRUNHUVSLWFKHGLQDQG
VXEVWDQWLDOUHFRUGHYLGHQFH                                          KHOSHG WKH KRXVHNHHSLQJ VWDII DW WLPHV RI KLJK
                                                                      RFFXSDQF\  ,Q WKHVH FLUFXPVWDQFHV WKH FRQFOXVRU\
       E%DUJDLQLQJ8QLW$OWHUDWLRQV                                WHVWLPRQ\ FRQFHUQLQJ WHDP ZRUN ZLWKRXW VSHFLILF
                                                                      HYLGHQFH GRHV QRW FRQVWLWXWH D mFRPSHOOLQJ
  /LNHZLVH3HWLWLRQHUVKDYHIDLOHGWRFDUU\WKHLUEXUGHQRI          FLUFXPVWDQFHlVXIILFLHQWWRRYHUFRPHWKHVLJQLILFDQFHRI
VKRZLQJ WKDW WKH\ VXEVWDQWLDOO\ DOWHUHG WKH KLVWRULFDO          EDUJDLQLQJ KLVWRU\ /DVW WKH IDFW WKDW WKH SUHGHFHVVRU
EDUJDLQLQJXQLWXSRQDVVXPLQJFRQWURORI+,%6HH7ULGHQW            FDUULHG WZR LQVSHFWUHVVHV RQ WKH KRXVHNHHSLQJ SD\UROO
6HDIRRGV,QFY1/5%)G'&&LU            VD\V QRWKLQJ DERXW WKHLU FXUUHQW DQG DFWXDO ZRUN
mµ>W@KH%RDUGSODFHVDKHDY\HYLGHQWLDU\EXUGHQRQDSDUW\
1RV                 2UDQJH3ODFH/WG                   2UDQJH3ODFH/WG                 1RV
                                3DUWQHUVKLSHWDOY1/5%                    3DUWQHUVKLSHWDOY1/5%

  FRQGLWLRQV:HWKHUHIRUHDJUHHZLWKWKHMXGJHWKDWWKH                 HPSOR\HU KDV KLUHG D VXEVWDQWLDO DQG UHSUHVHQWDWLYH
  KLVWRULFDOXQLWRIKRXVHNHHSLQJHPSOR\HHVLVDSSURSULDWH               FRPSOHPHQWRIHPSOR\HHV,G7KH%RDUGGHWHUPLQHVWKLV
                                                                          GDWHEDVHGRQWKHWRWDOLW\RIWKHFLUFXPVWDQFHVDQGZHLJKVD
>s$DW@)RUWKHUHDVRQVVWDWHGE\WKH%RDUGZHDJUHH          QXPEHURIHTXDOO\LPSRUWDQWIDFWRUVLQFOXGLQJ
       F    7KH 6XEVWDQWLDO           DQG     5HSUHVHQWDWLYH            D ZKHWKHU WKH MRE FODVVLILFDWLRQV GHVLJQDWHG IRU WKH
             &RPSOHPHQW5XOH                                                RSHUDWLRQZHUHILOOHGRUVXEVWDQWLDOO\ILOOHGEZKHWKHU
                                                                            WKH RSHUDWLRQ ZDV LQ QRUPDO RU VXEVWDQWLDOO\ QRUPDO
   /DVWO\ ZH DGGUHVV 3HWLWLRQHUVj DUJXPHQW WKDW WKH %RDUG           SURGXFWLRQFWKHVL]HRIWKHFRPSOHPHQWRQWKHGDWHRI
YLRODWHGWKHVXEVWDQWLDODQGUHSUHVHQWDWLYHFRPSOHPHQWUXOH                 QRUPDOSURGXFWLRQGWKHWLPHH[SHFWHGWRHODSVHEHIRUH
E\ FRQGXFWLQJ LWV VXFFHVVRUVKLS DQDO\VLV DV RI 0D\             DVXEVWDQWLDOO\ODUJHUFRPSOHPHQWZRXOGEHDWZRUNDQG
VKRUWO\IROORZLQJ2UDQJH3ODFHjVDFTXLVLWLRQRI+,%0RUH                  H WKH UHODWLYH FHUWDLQW\ RI WKH HPSOR\HU
V H[SHFWHG
VSHFLILFDOO\3HWLWLRQHUVFRQWHQGWKDWWKH%RDUGVKRXOGKDYH                H[SDQVLRQ
ZDLWHGXQWLODWOHDVWsXO\RIWRPDNHWKHVXFFHVVRUVKLS
GHWHUPLQDWLRQEHFDXVHWKH\LQWHQGHGWRVLJQLILFDQWO\H[SDQG              %ULJJV3OXPELQJZDUH)GDWLQWHUQDOTXRWDWLRQV
RSHUDWLRQVDW+,%LQFOXGLQJWKHKLULQJRIXSZDUGVRIWKLUW\             RPLWWHG,QDGGLWLRQWKHGHWHUPLQDWLRQGDWHPXVWIROORZD
ILYHKRXVHNHHSLQJHPSOR\HHV                                             XQLRQjV FOHDU DQG XQHTXLYRFDO GHPDQG IRU UHFRJQLWLRQ DQG
                                                                          EDUJDLQLQJ,G
  $V UHFLWHG DERYH WKH VXFFHVVRUVKLS LQTXLU\ IRFXVHV
SULPDULO\RQZKHWKHUDQHZHPSOR\HUKLUHVDPDMRULW\RILWV                 $SSO\LQJWKHVHIDFWRUVZHILQGWKDWVXEVWDQWLDOHYLGHQFH
HPSOR\HHV IURP LWV SUHGHFHVVRU  7KH VXEVWDQWLDO DQG               VXSSRUWVWKH%RDUGjVGHFLVLRQWRFRQGXFWWKHVXFFHVVRUVKLS
UHSUHVHQWDWLYH FRPSOHPHQW UXOH JRYHUQV WKH WLPLQJ RI WKLV          DQDO\VLVQRODWHUWKDQWKHHQGRI0D\E\ZKLFKWLPHWKH
DQDO\VLVE\mµIL[LQJWKHPRPHQWZKHQWKHGHWHUPLQDWLRQDVWR              8QLRQKDGWZLFHE\OHWWHUGHPDQGHGUHFRJQLWLRQEDUJDLQLQJ
WKHFRPSRVLWLRQRIWKHVXFFHVVRUjVZRUNIRUFHLVWREHPDGHjl             DQG LQIRUPDWLRQ IURP 0DQDJHPHQW 6HUYLFHV  0RUH
%ULJJV3OXPELQJZDUH,QFY1/5%)G                    VSHFLILFDOO\LPPHGLDWHO\XSRQDFTXLULQJ+,%2UDQJH3ODFH
WK&LUTXRWLQJ)DOO5LYHU'\HLQJ86DW               DQG0DQDJHPHQW6HUYLFHVVXEVWDQWLDOO\ILOOHGWKHUHOHYDQWMRE
 6 &W DW   m,I DW WKDW PRPHQW D PDMRULW\ RI WKH   FODVVLILFDWLRQV E\ KLULQJ HLJKWHHQ KRXVHNHHSHUV DQG IRXU
VXFFHVVRUjV HPSOR\HHV DUH IRUPHU HPSOR\HHV RI WKH                   KRXVHPHQ D PDMRULW\ RI ZKLFK ZHUH IRUPHU +(/3
SUHGHFHVVRU WKH VXFFHVVRUjV REOLJDWLRQ WR EDUJDLQ ZLWK WKH        HPSOR\HHV  0RUHRYHU GHVSLWH 3HWLWLRQHUVj UDWKHU VWUDLQHG
LQFXPEHQWXQLRQDFFUXHVl,G                                           DUJXPHQWVWRWKHFRQWUDU\WKHUHLVQRUHDVRQDEOHGLVSXWHWKDW
                                                                          XSRQDFTXLULQJ+,%2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHV
   $VIRUWKHVSHFLILFWLPLQJRIWKHGHWHUPLQDWLRQLIWKHQHZ            FRQWLQXHGQRUPDORSHUDWLRQVDWWKHKRWHOZLWKRXWLQWHUUXSWLRQ
HPSOR\HU FRQWLQXHV RSHUDWLRQV XQLQWHUUXSWHG  DV ZDV WKH          )LQDOO\ HYHQ DFFHSWLQJ 3HWLWLRQHUVj VHOIVHUYLQJ DQG
FDVH LQ %XUQV  WKH %RDUG JHQHUDOO\ PDNHV WKH UHTXLUHG          VSHFXODWLYH WHVWLPRQ\ UHJDUGLQJ WKHLU SODQV WR H[SDQG WR
GHWHUPLQDWLRQ DW WKH WLPH RI WUDQVIHU RI FRQWURO  6HH )DOO     WKLUW\ILYHKRXVHNHHSLQJHPSOR\HHVZKLFKQXPEHULQDQ\
5LYHU '\HLQJ  86 DW   6 &W DW  FLWLQJ       FDVHDSSHDUVWRLQFOXGHLQVSHFWUHVVHVDQGODXQGU\ZRUNHUV
%XUQV  86 DW   6 &W DW   +RZHYHU LQ      WKHVXEVWDQWLDODQGUHSUHVHQWDWLYHFRPSOHPHQWUXOHGRHVQRW
VLWXDWLRQVLQYROYLQJmDVWDUWXSSHULRGE\WKHQHZHPSOR\HU               UHTXLUH WKH %RDUG WR ZDLW WR PDNH D VXFFHVVRUVKLS
ZKLOHLWJUDGXDOO\EXLOGVLWVRSHUDWLRQVDQGKLUHVHPSOR\HHVl            GHWHUPLQDWLRQ XQWLO D QHZ HPSOR\HU KDV KLUHG LWV HQWLUH
WKH%RDUGPXVWGHWHUPLQHVRPHODWHUGDWHDWZKLFKWKHQHZ
1RV               2UDQJH3ODFH/WG                     2UDQJH3ODFH/WG                  1RV
                              3DUWQHUVKLSHWDOY1/5%                      3DUWQHUVKLSHWDOY1/5%

SURMHFWHG ZRUNIRUFH  +HUH WDNLQJ 3HWLWLRQHUVj H[SDQVLRQ       UHQGHULQJ +RWHO 6HUYLFHV D VXFFHVVRU HPSOR\HU WR
SODQVDWIDFHYDOXH2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHV             0DQDJHPHQW6HUYLFHV
VWLOOKDGUHWDLQHGQHDUO\VL[W\WKUHHSHUFHQWWZHQW\WZRRXWRI
WKLUW\ILYHRIWKHLUSURMHFWHGKRXVHNHHSLQJZRUNIRUFHE\WKH         (3HWLWLRQHUVj$IILUPDWLYH'HIHQVHV
HQG RI 0D\  &RXUWV URXWLQHO\ KDYH IRXQG WKDW VLPLODU
SHUFHQWDJHV FRQVWLWXWH D VXEVWDQWLDO DQG UHSUHVHQWDWLYH             3HWLWLRQHUVDOVRFRQWHQGWKDWWKH%RDUGHUUHGLQUHMHFWLQJ
FRPSOHPHQWRIHPSOR\HHV6HHHJ%ULJJV3OXPELQJZDUH             WKHLUDIILUPDWLYHGHIHQVHVEDVHGRQWKHVWDWXWHRIOLPLWDWLRQV
)GDWILQGLQJWKDWDQHZHPSOR\HUKDGKLUHGD             LQ6HFWLRQERIWKH$FWWKHHTXLWDEOHGRFWULQHRIODFKHV
VXEVWDQWLDO DQG UHSUHVHQWDWLYH FRPSOHPHQW RI HPSOR\HHV           DQGWKHLUDOOHJHGJRRGIDLWKGRXEWDVWRWKH8QLRQjVPDMRULW\
ZKHQ LW KDG UHWDLQHG VL[W\HLJKW SHUFHQW RI LWV SURMHFWHG     VWDWXV
ZRUNIRUFH  $FFRUGLQJO\ EDVHG RQ WKH WRWDOLW\ RI WKH
FLUFXPVWDQFHVZHILQGVXEVWDQWLDOHYLGHQFHLQWKHUHFRUGWR            6HFWLRQE
VXSSRUW WKH %RDUGjV FRQFOXVLRQ WKDW 2UDQJH 3ODFH DQG
0DQDJHPHQW 6HUYLFHV KDG KLUHG D VXEVWDQWLDO DQG                    $GGUHVVLQJ 3HWLWLRQHUVj VWDWXWH RI OLPLWDWLRQV DUJXPHQW
UHSUHVHQWDWLYHFRPSOHPHQWRI+,%jVKRXVHNHHSLQJHPSOR\HHV             6HFWLRQERIWKH$FWSURYLGHVLQSHUWLQHQWSDUWm>W@KDWQR
E\WKHHQGRI0D\                                               FRPSODLQW VKDOO LVVXH EDVHG XSRQ DQ\ XQIDLU ODERU SUDFWLFH
                                                                      RFFXUULQJ PRUH WKDQ VL[ PRQWKV SULRU WR WKH ILOLQJ RI WKH
     6XEVWDQWLDO(YLGHQFH6XSSRUWVWKH%RDUGjV)LQGLQJ              FKDUJHZLWKWKH%RDUGl86&E+HUHWKH
       WKDW +RWHO 6HUYLFHV LV D 6XFFHVVRU (PSOR\HU WR          8QLRQ ILOHG LWV LQLWLDO XQIDLU ODERU SUDFWLFH FKDUJH DJDLQVW
       0DQDJHPHQW6HUYLFHV                                            2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHVRQsXO\
                                                                      OHVVWKDQWZRPRQWKVDIWHU2UDQJH3ODFHDFTXLUHG+,%DQG
   $VWKHILQDOSLHFHLQWKHVXFFHVVRUVKLSSX]]OHWKH%RDUG          DSSUR[LPDWHO\ VL[ ZHHNV DIWHU WKH 8QLRQjV 0D\  
GHWHUPLQHGWKDW+RWHO6HUYLFHVZDVDVXFFHVVRUHPSOR\HUWR            OHWWHU WR 0DQDJHPHQW 6HUYLFHV UHTXHVWLQJ LQIRUPDWLRQ RQ
0DQDJHPHQW6HUYLFHV(YHQWKHPRVWFXUVRU\UHYLHZRIWKH             +,%jV KRXVHNHHSLQJ HPSOR\HHV DQG GDWHV WR FRPPHQFH
UHFRUG UHYHDOV VXEVWDQWLDO HYLGHQFH WR VXSSRUW WKLV ILQGLQJ   QHJRWLDWLRQV RYHU D QHZ FROOHFWLYH EDUJDLQLQJ DJUHHPHQW
0RUH VSHFLILFDOO\ LPPHGLDWHO\ IROORZLQJ 2UDQJH 3ODFHjV          7KXV DW WKH HDUOLHVW WKH E FORFN VWDUWHG WR UXQ ZKHQ
sDQXDU\  WUDQVIHU RI +,% WR 3DWULRW +RWHO 6HUYLFHV       2UDQJH3ODFHDQG0DQDJHPHQW6HUYLFHVHOHFWHGWRLJQRUHWKH
UHWDLQHGDOOVHYHQWHHQRI0DQDJHPHQW6HUYLFHVjKRXVHNHHSLQJ           8QLRQjV0D\OHWWHU/LNHZLVHWKH8QLRQILOHGLWVXQIDLU
HPSOR\HHVZLWKRXWLQWHUYLHZVRUDSSOLFDWLRQV)XUWKHUPRUH           ODERUFKDUJHDJDLQVW+RWHO6HUYLFHVRQ0D\DPHUH
WKLV WUDQVIHU GLG QRW UHVXOW LQ DQ\ KLDWXV LQ VHUYLFH RU
VLJQLILFDQWFKDQJHVLQMREIXQFWLRQVRUZRUNLQJFRQGLWLRQV
,QVKRUW3HWLWLRQHUVFDQQRWUHDVRQDEO\GLVSXWHWKDWWKHUHZDV             
                                                                            7KH %RDUG DOVR GHWHUPLQHG WKDW +RWHO 6HUYLFHV DQG 0DQDJHPHQW
mVXEVWDQWLDO FRQWLQXLW\l LQ RSHUDWLRQV DW +,% DFURVV WKH       6HUYLFHV FRQVWLWXWHG D VLQJOH HPSOR\HU :KLOH WKLV ILQGLQJ ZDV QRW
WUDQVIHURIRZQHUVKLSIURP2UDQJH3ODFHWR3DWULRWWKHUHE\           QHFHVVDU\ WR WKH %RDUGjV VXFFHVVRUVKLS DQDO\VLV ZH QRWH WKDW VXEVWDQWLDO
                                                                      UHFRUG HYLGHQFH LQFOXGLQJ EXW QRW OLPLWHG WR WKH IDFWV GLVFXVVHG LQ
                                                                      6HFWLRQ ,,$ RI WKLV RSLQLRQ VXSSRUWV WKH %RDUGjV VLQJOH HPSOR\HU
                                                                      ILQGLQJ $00 6RXWK 3UDLULH &RQVWUXFWLRQ &R Y 2SHUDWLQJ (QJLQHHUV
                                                                      /RFDO   86   Q  6 &W   Q  QRWLQJ
                                                                      WKDW WKH FRQWUROOLQJ FULWHULD IRU ILQGLQJ VLQJOH HPSOR\HU VWDWXV DUH
                                                                      LQWHUUHODWLRQ RI RSHUDWLRQV FRPPRQ PDQDJHPHQW FHQWUDOL]HG FRQWURO RI
                                                                      ODERU UHODWLRQV DQG FRPPRQ RZQHUVKLS
1RV                2UDQJH3ODFH/WG                   2UDQJH3ODFH/WG                  1RV
                               3DUWQHUVKLSHWDOY1/5%                    3DUWQHUVKLSHWDOY1/5%

IRXUGD\VDIWHU+RWHO6HUYLFHVLQIRUPHGWKH8QLRQWKDWLWKDG           ZLWKDQREOLJDWLRQWREDUJDLQZLWKDQGSURYLGHLQIRUPDWLRQ
QR LQWHQWLRQ WR EDUJDLQ  $FFRUGLQJO\ ZH ILQG 3HWLWLRQHUVj     WRWKH8QLRQ,QVKRUWWKHUHFRUGFOHDUO\UHYHDOVWKDWDWD
EDUJXPHQWZKROO\ZLWKRXWPHULW                                    PLQLPXP 0DQDJHPHQW 6HUYLFHV ZDV RQ QRWLFH RI WKH
                                                                        8QLRQjVSUHVHQFHDW+,%SULRUWR0D\3HWLWLRQHUVj
  /DFKHV                                                            DUJXPHQWWRWKHFRQWUDU\LVVLPSO\XQVXSSRUWDEOH
  3HWLWLRQHUVjODFKHVGHIHQVHLVHTXDOO\XQDYDLOLQJm/DFKHV             *RRG)DLWK'RXEWDVWRWKH8QLRQjV0DMRULW\6WDWXV
FRQVLVWVRIWZRHOHPHQWVXQUHDVRQDEOHGHOD\LQDVVHUWLQJ
RQH
V ULJKWV DQG  D UHVXOWLQJ SUHMXGLFH WR WKH GHIHQGLQJ      $VDILQDODIILUPDWLYHGHIHQVH3HWLWLRQHUVFRQWHQGWKDWWKH\
SDUW\l  %URZQ*UDYHV &R Y &HQWUDO 6WDWHV 6RXWKHDVW 	        KDUERUHGDJRRGIDLWKGRXEWDVWRWKH8QLRQjVPDMRULW\VWDWXV
6RXWKZHVW$UHDV3HQVLRQ)XQG)GWK&LU               DW+,%WKHUHE\UHEXWWLQJDQ\SUHVXPSWLRQRIPDMRULW\VWDWXV
  $V QRWHG DERYH WKH 8QLRQ GLOLJHQWO\ SXUVXHG LWV       WKDWWKH8QLRQPD\KDYHHQMR\HGDW+,%,QRUGHUWRUHEXWWKH
EDUJDLQLQJ LQWHUHVWV DW +,% LQWHUDFWLQJ ZLWK WKH YDULRXV        8QLRQjV SUHVXPSWLRQ RI PDMRULW\ VWDWXV 3HWLWLRQHUV PXVW
HPSOR\HUVDQGUHTXHVWLQJLQIRUPDWLRQDQGEDUJDLQLQJGDWHV               HVWDEOLVKWKDWWKH\mKDGDUHDVRQDEOHJRRGIDLWKGRXEWDVWR
IURP+(/3DQG3HWLWLRQHUVRQPXOWLSOHRFFDVLRQV5DWKHU                WKH8QLRQjVPDMRULW\VXSSRUWl6WUDLJKW&UHHN)GDW
WKDQUHVSRQGWRWKH8QLRQjVUHTXHVWV+(/3DQG3HWLWLRQHUV                m7KH EXUGHQ RI SURRI IRU WKH HPSOR\HU LV PHUHO\ WR
HQJDJHGLQXQUHDVRQDEOHGHOD\WDFWLFVDQGREIXVFDWLRQ,QWKLV         SURYH LW KDG REMHFWLYH UHDVRQV IRU GRXEWLQJ WKH XQLRQjV
UHJDUGZHILQGFRPSHOOLQJWKH8QLRQjV0D\OHWWHUWR            PDMRULW\VWDWXVl%ULJJV3OXPELQJZDUH)GDW
3HWLWLRQHUV GHWDLOLQJ WKH 8QLRQjV QXPHURXV HIIRUWV WR JDLQ
LQIRUPDWLRQ DQG VHFXUH EDUJDLQLQJ GDWHV IURP 3HWLWLRQHUV           +HUH 3HWLWLRQHUV KDYH IDOOHQ ZHOO VKRUW RI FDUU\LQJ WKHLU
HIIRUWVWKDWZHUHUHSHDWHGO\UHEXIIHG                                EXUGHQ,QSDUWLFXODU3HWLWLRQHUVFRQWHQGWKDWWKHLUJRRGIDLWK
                                                                        GRXEWUHVXOWHGIURPWKH8QLRQjVSXUSRUWHGDEDQGRQPHQWRI
   )XUWKHUPRUH ZH ILQG HQWLUHO\ XQSHUVXDVLYH 3HWLWLRQHUVj         WKHEDUJDLQLQJXQLWGXULQJ+(/3jVWHQXUHDVWKHHPSOR\HUDW
UHODWHGFRQWHQWLRQEDVHGRQWKHWHVWLPRQ\RIsDPHV*HULVK             +,%%XWDVQRWHGLQGHWDLODERYHWKHUHFRUGUHYHDOVWKDWWKH
WKDW WKH\ ZHUH SUHMXGLFHG E\ WKH 8QLRQjV IDLOXUH WR ILOH DQ   8QLRQ GLOLJHQWO\ SXUVXHG LWV EDUJDLQLQJ ULJKWV ZLWK +(/3
XQIDLU ODERU SUDFWLFH FKDUJH DJDLQVW +(/3  6SHFLILFDOO\        IROORZLQJ 6XPPLWjV 2FWREHU  WUDQVIHU RI +,% WR WKH
3HWLWLRQHUV DSSHDO WR HTXLW\ FRQWHQGLQJ WKDW WKH\ ZHUH          %DQN7KLVLQFOXGHGWKHGHOLYHU\RIPXOWLSOHOHWWHUVWR+(/3
SUHMXGLFHG EHFDXVH WKH\ GLG QRW HYHQ NQRZ WKDW D XQLRQ         UHTXHVWLQJ EDUJDLQLQJ GDWHV DQG LQIRUPDWLRQ IDFHWRIDFH
H[LVWHG DW +,% SULRU WR 2UDQJH 3ODFHjV 0D\              QHJRWLDWLRQVZLWK+(/3LQ'HFHPEHURIDQGDIROORZ
DFTXLVLWLRQ RI WKH SURSHUW\  8QGHU WKLV WKHRU\ 3HWLWLRQHUV    XSOHWWHURQ)HEUXDU\ZKHQ+(/3IDLOHGWRGHOLYHUD
DUJXHWKDWDQHDUOLHUFKDUJHDJDLQVW+(/3ZRXOGKDYHSODFHG             FRQWUDFW SURSRVDO DV SURPLVHG  $FFRUGLQJO\ ZH ILQG WKDW
3HWLWLRQHUV RQ QRWLFH RI WKH 8QLRQjV SUHVHQFH DQG SHUKDSV       EDVHG RQ VXEVWDQWLDO UHFRUG HYLGHQFH WKH %RDUG SURSHUO\
DIIHFWHG 2UDQJH 3ODFHjV GHFLVLRQ WR SURFHHG ZLWK WKH             UHMHFWHG 3HWLWLRQHUVj XQIRXQGHG FRQWHQWLRQ WKDW WKH 8QLRQ
SXUFKDVH7KHUHFRUGKRZHYHUSODLQO\EHOLHVWKLVFRQWHQWLRQ         DEDQGRQHGWKHEDUJDLQLQJXQLWDW+,%
,QGHHGWKH8QLRQILUVWFRQWDFWHG0DQDJHPHQW6HUYLFHVE\
OHWWHU RQ 0D\   D ZHHN SULRU WR 2UDQJH 3ODFHjV         )3HWLWLRQHUVj(YLGHQWLDU\2EMHFWLRQV
DFTXLVLWLRQRI+,%,QWKLV0D\OHWWHUWKH8QLRQLQIRUPHG
0DQDJHPHQW 6HUYLFHV RI WKH 8QLRQjV SRVLWLRQ WKDW                    :HDGGUHVVRQO\SDVVLQJO\3HWLWLRQHUVjILQDOFRQWHQWLRQWKDW
0DQDJHPHQW6HUYLFHVZRXOGEHDVXFFHVVRUHPSOR\HUDW+,%               WKH$/sLPSURSHUO\DGPLWWHGDQGFRQVLGHUHGHYLGHQFHLQ
                                                                        SDUWLFXODU FHUWDLQ GRFXPHQWV DQG WHVWLPRQ\ E\ 'HQQLV
1RV               2UDQJH3ODFH/WG          
                              3DUWQHUVKLSHWDOY1/5%

'LQJRZUHJDUGLQJWKHQDWXUHRIWKHEDUJDLQLQJXQLWDQGWKH
QXPEHU RI KRXVHNHHSLQJ HPSOR\HHV  WR VXEVWDQWLDWH WKH
$/sjVILQGLQJVLQYLRODWLRQRIWKH)HGHUDO5XOHVRI(YLGHQFH
,QPDNLQJWKLVDUJXPHQW3HWLWLRQHUVIDLOWRUHFRJQL]HWKDWWKH
$/sZDVQRWREOLJHGWRVWULFWO\DGKHUHWRWKH)HGHUDO5XOHVRI
(YLGHQFH5DWKHU6HFWLRQERIWKH$FWRQO\UHTXLUHGWKH
$/s WR FRPSO\ ZLWK WKH UXOHV mVR IDU DV SUDFWLFDEOHl 
86& E  +HUH ZH GR QRW EHOLHYH WKDW WKH $/s VR
GLVUHJDUGHGWKHUXOHVRIHYLGHQFHDVWRZDUUDQWDUHYHUVDORI
WKH%RDUGjVILQGLQJV$FFRUGLQJO\ZHDOVRILQG3HWLWLRQHUVj
HYLGHQWLDU\REMHFWLRQVZLWKRXWPHULW
                     ,9&21&/86,21
 )RU DOO RI WKH DIRUHPHQWLRQHG UHDVRQV ZH *5$17 WKH
%RDUGjVSHWLWLRQDQGGLUHFWWKHHQIRUFHPHQWRILWVILQDORUGHU