Court Opinion

ID: 2970379
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:11:00.658927+00
Date Added: 2024-06-11T11:43:29.772018
License: Public Domain

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

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

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

 ),9(&$3 ,1&                 ;
                                 
                       3HWLWLRQHU
                &URVV5HVSRQGHQW 
                                    1RV
                     
                                  ! 
                                 
           Y                    
                                 
 1$7,21$/ /$%25 5(/$7,216 
 %2$5'                          
                  5HVSRQGHQW 
                                 
              &URVV3HWLWLRQHU 
          
                                1
   2Q3HWLWLRQVIRU5HYLHZDQG&URVV$SSOLFDWLRQIRU
                 (QIRUFHPHQWRI2UGHUV
        RIWKH1DWLRQDO/DERU5HODWLRQV%RDUG
            1RV&$&$
                      $UJXHG$SULO
                'HFLGHGDQG)LOHGsXQH
  %HIRUH0$57,1&KLHI&LUFXLWsXGJH&2/(&LUFXLW
            sXGJH6+$53'LVWULFWsXGJH

    
     7KH +RQRUDEOH * .HQGDOO 6KDUS 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
WKH 0LGGOH 'LVWULFW RI )ORULGD VLWWLQJ E\ GHVLJQDWLRQ

                                    
     )LYH&$3,QFY1/5%          1RV        1RV          )LYH&$3,QFY1/5%        
                                                             

                    BBBBBBBBBBBBBBBBB                               FRQFOXVLRQWKDW)LYH&$3KDVYLRODWHGWKLVVHFWLRQE\IDLOLQJ
                                                                    WREDUJDLQZLWKWKH8QLRQSULRUWRLQVWLWXWLQJWKHVHFKDQJHV
                         &2816(/
                                                                                     ,,,8QFRQWHVWHG9LRODWLRQV
$5*8('  5LFKDUG ' 0F1XOW\ &2+/ 672.(5 	
726.(< /DQVLQJ 0LFKLJDQ IRU 3HWLWLRQHU  sLOO *ULIILQ      )LYH&$3 GRHV QRW DSSHDO QRU FKDOOHQJH WKH %RDUGjV
1$7,21$//$%255(/$7,216%2$5'2)),&(2)                           FRQFOXVLRQV UHJDUGLQJ D QXPEHU RI YLRODWLRQV RI 6HFWLRQV
7+( *(1(5$/ &2816(/ :DVKLQJWRQ '& 'HLUGUH                 D D DQG D  7KHUHIRUH )LYH&$3 KDV
)LW]SDWULFN 1$7,21$/ /$%25 5(/$7,216 %2$5'                    HVVHQWLDOO\mDGPLWWHGWKHWUXWKRIWKRVHILQGLQJVl1/5%Y
$33(//$7( &2857 %5$1&+ :DVKLQJWRQ '& IRU                  *HQ)DEULFDWLRQV&RUS)GWK&LU
5HVSRQGHQW  21 %5,()  5LFKDUG ' 0F1XOW\ &2+/           TXRWLQJ 1/5% Y .HQWXFN\ 0D\ &RDO &R  )G 
672.(5	726.(</DQVLQJ0LFKLJDQIRU3HWLWLRQHUsLOO           WK&LU7KLVFRXUWLVREOLJHGWRVXPPDULO\
*ULIILQ 1$7,21$/ /$%25 5(/$7,216 %2$5'                        HQIRUFH WKH %RDUGjV RUGHU DV WR WKRVH ILQGLQJV 6HH *HQ
2)),&(2)7+(*(1(5$/&2816(/:DVKLQJWRQ'&                    )DEULFDWLRQV&RUS)GDW1/5%Y$XWRGLH,QWjO
'HLUGUH )LW]SDWULFN $LOHHQ $ $UPVWURQJ &KDUOHV 3          ,QF)GWK&LU
'RQQHOO\sU1$7,21$//$%255(/$7,216%2$5'
$33(//$7( &2857 %5$1&+ :DVKLQJWRQ '&                                                &RQFOXVLRQ
0HUHGLWK / sDVRQ 1$7,21$/ /$%25 5(/$7,216
%2$5':DVKLQJWRQ'&IRU5HVSRQGHQW                             )RU WKH DIRUHPHQWLRQHG UHDVRQV ZH (1)25&( WKH
                                                                    %RDUGjVRUGHUVH[FHSWDVWRLWVGHWHUPLQDWLRQRIWKHOD\RIIRI
                    BBBBBBBBBBBBBBBBB                               $UW%XUNHOIURP$XJXVWXQWLO$XJXVW
                        23,1,21
                    BBBBBBBBBBBBBBBBB
   5 *8< &2/( s5 &LUFXLW sXGJH  7KLV FDVH LQYROYHV
HYHQWV DULVLQJ RXW RI D XQLRQ RUJDQL]LQJ FDPSDLJQ E\ WKH
*HQHUDO7HDPVWHUV/RFDO1RmWKH8QLRQlDW)LYH&$3
,QF m)LYH&$3l D QRQSURILW FRUSRUDWLRQ  7KH 1DWLRQDO
/DERU5HODWLRQV%RDUGm1/5%lRUmWKH%RDUGlSHWLWLRQVIRU
HQIRUFHPHQWRIWZRRUGHUVDJDLQVW)LYH&$3)LUVWWKH1/5%
VHHNVHQIRUFHPHQWRIDQ$XJXVW'HFLVLRQDQG2UGHU
ILQGLQJ WKDW )LYH&$3 HQJDJHG LQ DQWLXQLRQ DFWLYLW\ LQ
YLRODWLRQRI6HFWLRQVDDDDQGDRI
WKH 1DWLRQDO /DERU 5HODWLRQV $FW m1/5$l RU mWKH $FWl
ZKLFKFRUUHVSRQGWR6HFWLRQVDDD
DQGDRI7LWOHRIWKH8QLWHG6WDWHV&RGH6HFRQG
WKH 1/5% VHHNV HQIRUFHPHQW RI DQ 2FWREHU  
'HFLVLRQDQG2UGHUILQGLQJWKDW)LYH&$3FRPPLWWHGIXUWKHU
YLRODWLRQVXQGHU6HFWLRQVDDDDQGD
    )LYH&$3,QFY1/5%           1RV          1RV                )LYH&$3,QFY1/5%              
                                                                

8QGHU D )LUVW 1DWjO DQDO\VLV DUJXHV )LYH&$3 LW ZDV QRW      RI WKH $FW ZKLOH ODERU SURFHHGLQJV ZHUH SHQGLQJ DJDLQVW
UHTXLUHG WR EDUJDLQ RYHU WKH HOLPLQDWLRQ RI HLWKHU RI WKHVH   )LYH&$3)RUWKHIROORZLQJUHDVRQVWKLV&RXUW(1)25&(6
SRVLWLRQV                                                           ERWKRUGHUVH[FHSWDVWRWKHWHPSRUDU\OD\RIIRI$UW%XUNHO
   :HILQGWKLVDUJXPHQWWREHZLWKRXWPHULWDQGDJUHHZLWK
WKH1/5%WKDWWKHHOLPLQDWLRQRIWKHVHSRVLWLRQVFRQVWLWXWHV                                   )DFWXDO%DFNJURXQG
DIDLOXUHWREDUJDLQXQGHU6HFWLRQD:KLOH)LYH&$3
ULJKWO\SRLQWVRXWWKDWGHFLVLRQVRQO\SHULSKHUDOWRWKHWHUPV           )LYH&$3
DQG FRQGLWLRQV RI HPSOR\PHQW DUH QRW HQFRPSDVVHG E\
6HFWLRQDVHHHJ1/5%Y3O\PRXWK6WDPSLQJ'LY              )LYH&$3 LV D QRQSURILW FRUSRUDWLRQ WKDW DGPLQLVWHUV
(OWHF&RUS)GWK&LUWKHOLQHWKDW        JHQHUDOZHOIDUHSURJUDPVLQIRXULPSRYHULVKHGFRXQWLHVLQ
LV WR EH GUDZQ EHWZHHQ mFRQGLWLRQV RI HPSOR\PHQWl DQG          0LFKLJDQ  ,Q SDUWLFXODU )LYH&$3 PDLQWDLQV DQ HQHUJ\
IXQGDPHQWDOEXVLQHVVFKDQJHVLVDIDLUO\EROGRQH,QJHQHUDO        DVVLVWDQFHSURJUDPDOVRFDOOHGDmZHDWKHUL]DWLRQlSURJUDP
m>D@JXLGHOLQHWRIROORZLVZKHWKHUUHTXLULQJEDUJDLQLQJ        +HDG 6WDUW HGXFDWLRQDO DVVLVWDQFH SURJUDPV KRXVLQJ
RYHUWKLVVRUWRIGHFLVLRQZLOODGYDQFHWKHQHXWUDOSXUSRVHVRI        SURJUDPV DQG PHDO DVVLVWDQFH SURJUDPV  0DU\ 7UXFNV
WKH$FWQDPHO\SURPRWLRQRIODERUPDQDJHPHQWUHODWLRQVDQG            m7UXFNVlVHUYHVDV)LYH&$3jVH[HFXWLYHGLUHFWRUDQGZRUNV
WKHFROOHFWLYHEDUJDLQLQJSURFHVVZLWKRXWXQGXO\EXUGHQLQJ             LQ)LYH&$3jVSULQFLSDORIILFHLQ6FRWWVYLOOH0LFKLJDQ,Q
PDQDJHPHQW
VULJKWIUHHO\WRFKRRVHWKHEDVLFGLUHFWLRQRID           WKH SDVW 7UXFNV KDV RSHQO\ RSSRVHG WKH RUJDQL]DWLRQ RI
FRUSRUDWHHQWHUSULVHl,GDWTXRWLQJ)LUVW1DWjO           )LYH&$3HPSOR\HHVE\XQLRQV
86DWDQG)LEUHERDUG3DSHU3URGV&RUSY1/5%
866WHZDUWsFRQFXUULQJ'HIHUULQJWR           )LYH&$3 UHFHLYHV IHGHUDO IXQGLQJ IURP WKH &RPPXQLW\
WKH %RDUGjV IDFWXDO ILQGLQJ WKDW WKH FKDQJHV PDGH E\           6HUYLFHV%ORFN*UDQW$FWm&6%*l6HH86&
)LYH&$3ZHUHQRWIXQGDPHQWDORSHUDWLRQDOFKDQJHVZHILQG                3XUVXDQW WR WKH &6%* DQG DQDORJRXV 0LFKLJDQ ODZ
WKDW WKHVH FKDQJHV GLG QRW DOWHU WKH GLUHFWLRQ RU VFRSH RI   )LYH&$3 LV UHTXLUHG WR PDLQWDLQ D WULSDUWLWH ERDUG RI
)LYH&$3jVmEXVLQHVVlDVUHTXLUHGXQGHU)LUVW1DWjO,QGHHG           GLUHFWRUVRQHWKLUGRILWVPHPEHUVDUHHOHFWHGSXEOLFRIILFLDOV
WKHGHFLVLRQWRSXUFKDVHDFRPPRQFRPSXWHUQHWZRUNZKLOH              RUWKHLUUHSUHVHQWDWLYHVRQHWKLUGDUHVHOHFWHGIURPWKHSULYDWH
SHUKDSV FDXVLQJ FKDQJHV WR DVSHFWV RI )LYH&$3jV                  VHFWRUDQGRQHWKLUGDUHmSHUVRQVFKRVHQLQDFFRUGDQFHZLWK
LQIUDVWUXFWXUHFDQQRWEHFRQVLGHUHGWRDOWHUWKHVHUYLFHVDQG         GHPRFUDWLFVHOHFWLRQSURFHGXUHVDGHTXDWHWRDVVXUHWKDW>WKH\@
FDSDELOLWLHV RI )LYH&$3 IURP D EXVLQHVV SHUVSHFWLYH             DUHUHSUHVHQWDWLYHRIORZLQFRPHLQGLYLGXDOVDQGIDPLOLHVLQ
6LPLODUO\ WKH GHFLVLRQ WR FRQVROLGDWH WKUHH +HDG 6WDUW         WKHQHLJKERUKRRGVHUYHGl86&$VWRWKLVWKLUG
FODVVURRPV LQWR WZR OLNHZLVH GRHV QRW HIIHFW WKH W\SH RI
DOWHUDWLRQ UHTXLUHG E\ )LUVW 1DWjO  ,QGHHG QRWKLQJ LQ WKH       
UHFRUGVXJJHVWVWKDWWKHVHFKDQJHVZHUHUHODWHGWRDSDUWLDO                 $00 0LFK &RPS /DZV   m2QHWKLUG RI WKH PHPEHUV
VKXW GRZQ RI )LYH&$3jV RSHUDWLRQV RU VRPH IXQGDPHQWDO           VKDOO EH ORZ LQFRPH HOGHUO\ RU FRQVXPHUV ZLWK GLVDELOLWLHV UHVLGLQJ LQ WKH

FKDQJHLQWKHVHUYLFHVWKDW)LYH&$3RIIHUV%HFDXVHWKHVH             VHUYLFH DUHD RI WKH FRPPXQLW\ DFWLRQ DJHQF\ 2QHWKLUG RI WKH PHPEHUV
                                                                       VKDOO EH UHSUHVHQWDWLYHV RI WKH XQLWV RI ORFDO JRYHUQPHQW DQG SXEOLF
FKDQJHVDUHQRWRIWKHPDJQLWXGHHYLVFHUDWHGLQ)LUVW1DWjO           DJHQFLHV ZLWKLQ WKH VHUYLFH DUHD RI WKH FRPPXQLW\ DFWLRQ DJHQF\
DQGLQVWHDGDUHZKROO\UHODWHGWRWKHWHUPVDQGFRQGLWLRQVRI          2QHWKLUG RI WKH PHPEHUV VKDOO UHSUHVHQW WKH SULYDWH VHFWRU LQFOXGLQJ
8QLRQHPSOR\HHVWKHFKDQJHVDUHZHOOZLWKLQWKHVFRSHRI              UHSUHVHQWDWLYHV RI EXVLQHVV DQG LQGXVWU\ DJULFXOWXUH ODERU DQG UHOLJLRXV
6HFWLRQ D  :H WKXV ILQG QR HUURU LQ WKH %RDUGjV       DQG FLYLF RUJDQL]DWLRQV ORFDWHG ZLWKLQ WKH VHUYLFH DUHD RI WKH FRPPXQLW\
                                                                       DFWLRQ DJHQF\l
      )LYH&$3,QFY1/5%          1RV         1RV            )LYH&$3,QFY1/5%         
                                                               

FDWHJRU\RIPHPEHUVDQ\PHPEHURIWKHFRPPXQLW\FDQEH               XQWLOILIWHHQPLQXWHVDIWHUWKHLUODVWGURSRII)LYH&$3GLG
FRQVLGHUHG IRU WKH ERDUG E\ VXEPLWWLQJ D SHWLWLRQ ZLWK WKH   QRW QRWLI\ WKH 8QLRQ WKDW LW ZDV LQVWLWXWLQJ DQ\ RI WKHVH
VLJQDWXUHV RI WZHQW\ ORZLQFRPH UHVLGHQWV  ,Q SUDFWLFH       SROLFLHVQRUGLGLWRIIHUWKH8QLRQWKHRSSRUWXQLW\WRGLVFXVV
KRZHYHU7UXFNVRIWHQKDQGSLFNHGLQGLYLGXDOVWRVHUYHRQ             WKHVH SROLFLHV RXWVLGH RI WKH XQFRPSOHWHG EDUJDLQLQJ
WKH ERDUG DQG DVNHG )LYH&$3 HPSOR\HHV WR REWDLQ WKH           QHJRWLDWLRQV
QHFHVVDU\VLJQDWXUHVIURP)LYH&$3FOLHQWV
                                                                        7KH%RDUGGLGQRWHUULQFRQFOXGLQJWKDW)LYH&$3jVIDLOXUH
    7KH8QLRQjV&DPSDLJQ                                              WRGLVFXVVWKHVHSROLFLHVZLWKWKH8QLRQFRQVWLWXWHVDIDLOXUH
                                                                      WREDUJDLQXQGHU6HFWLRQD7KHWHUPVRISD\PHQWIRU
  ,QWKHIDOORIWKH8QLRQLQLWLDWHGDQRUJDQL]DWLRQDO          +HDG6WDUWEXVGULYHUVFOHDUO\IDOOZLWKLQWKHVFRSHRID
FDPSDLJQDPRQJ)LYH&$3HPSOR\HHV2Q'HFHPEHU                   DQG)LYH&$3jVGHFLVLRQWRE\SDVVWKH8QLRQDQGLQVWLWXWHD
0DUY+ROODQGDEXVLQHVVUHSUHVHQWDWLYHDWWKH8QLRQ           FRPSHQVDWLRQ VFKHPH ZLWKRXW FRPSOHWLQJ QHJRWLDWLRQV
ZURWHDOHWWHUWR7UXFNVQRWLI\LQJKHURIWKH8QLRQjVLQWHQWLRQ       FRQVWLWXWHVVXEVWDQWLDOHYLGHQFHRIDIDLOXUHWREDUJDLQ
WR mRUJDQL]H PRVW )LYH&$3 HPSOR\HHVl  2Q sDQXDU\ 
WKH8QLRQILOHGDSHWLWLRQVHHNLQJWRUHSUHVHQW)LYH&$3           % +HDG 6WDUW &ODVVURRP &RQVROLGDWLRQ DQG WKH
HPSOR\HHV,QIXUWKHUDQFHRIWKLVSHWLWLRQWKH8QLRQKHOGD              (OLPLQDWLRQRIWKH'DWD(QWU\3RVLWLRQ
UHSUHVHQWDWLRQ KHDULQJ RQ )HEUXDU\   DQG   'DOH
6PLWK7RP%HORQJLD'DYLG0RQWRQ9HUQD)XJHUH%UXFH                  $V VWDWHG DERYH LQ )HEUXDU\  )LYH&$3 ZLWKRXW
.HQW0HOLVVD.XNODDQG$PDQGD/DQJHZHUHDVNHGE\WKH               FRQVXOWLQJWKH8QLRQGHFLGHGWRFRQVROLGDWHWKH+HDG6WDUW
8QLRQWRDWWHQGWKHKHDULQJDQGSRWHQWLDOO\WHVWLI\6PLWK          FODVVURRPV DW WKH )RXQWDLQ &HQWHU WKXV HOLPLQDWLQJ WKH
%HORQJLD0RQWRQ)XJHUHDQG.XNODDPRQJRWKHU)LYH&$3              SRVLWLRQRIRQH+HDG6WDUWWHDFKHU'XULQJWKLVVDPHSHULRG
HPSOR\HHVDFWXDOO\WHVWLILHGDWWKHKHDULQJ                        RIWLPHDIWHUSXUFKDVLQJDFRPPRQFRPSXWHUQHWZRUNIRUDOO
                                                                      )LYH&$3FHQWHUV)LYH&$3HOLPLQDWHGWKHSRVLWLRQRIGDWD
   2Q0DUFKWKH5HJLRQDO'LUHFWRURIWKH8QLRQ              HQWU\FOHUN3ULRUWRWKHLQVWDOOPHQWRIWKHFRPPRQQHWZRUN
LVVXHG D 'HFLVLRQ DQG 'LUHFWLRQ RI (OHFWLRQ m'HFLVLRQl      WKHGDWDHQWU\FOHUNZDVUHVSRQVLEOHIRUHQWHULQJLQIRUPDWLRQ
VWDWLQJWKDWZLWKWKHH[FHSWLRQRI)LYH&$3FRRUGLQDWRUVDQG          IURP WKH YDULRXV )LYH&$3 FHQWHUV RQWR D FHQWUDOL]HG
VXSHUYLVRUV DOO RWKHU FDWHJRULHV RI SRVLWLRQV ZRXOG EH        FRPSXWHU
LQFOXGHGLQWKHEDUJDLQLQJXQLW7KH'HFLVLRQDOVRVWDWHGWKDW
D8QLRQHOHFWLRQZRXOGEHKHOGRQ$SULO$WWKDW               7KH *HQHUDO &RXQVHO DOOHJHV WKDW )LYH&$3jV IDLOXUH WR
HOHFWLRQWKHPDMRULW\RI)LYH&$3HPSOR\HHVYRWHGLQIDYRU            EDUJDLQRYHUWKHHOLPLQDWLRQRIWKHVHWZR SRVLWLRQVFOHDUO\
RIUHSUHVHQWDWLRQE\WKH8QLRQ7KH8QLRQZDVFHUWLILHGDVWKH        DPRXQWV WR D IDLOXUH WR EDUJDLQ XQGHU 6HFWLRQ D  2Q
UHSUHVHQWDWLYHIRU)LYH&$3RQ0D\                            DSSHDO )LYH&$3 YHKHPHQWO\ GLVDJUHHV VWDWLQJ WKDW WKHVH
                                                                      FKDQJHV ZHUH SDUW DQG SDUFHO WR IXQGDPHQWDO HFRQRPLF
    $IWHUWKH8QLRQ&DPSDLJQ                                          FKDQJHVDW)LYH&$3,QWKHFDVHRIWKHFRQVROLGDWLRQRIWKH
                                                                      +HDG6WDUWFODVVURRPV)LYH&$3DUJXHVWKDWWKLVFKDQJHZDV
  7KH 1/5% FRQFOXGHG WKDW GXULQJ WKLV SHULRG RI WLPH         D ILQDQFLDO QHFHVVLW\ GXH WR ORZ HQUROOPHQW  $V WR WKH
7UXFNV RSHQO\ H[SUHVVHG GLVGDLQ WRZDUGV 8QLRQ                    HOLPLQDWLRQRIWKHGDWDHQWU\SRVLWLRQ)LYH&$3LQVLVWVWKDW
UHSUHVHQWDWLRQ RI )LYH&$3 HPSOR\HHV DQG RXWZDUGO\                WKLVFKDQJHZDVQHFHVVDU\GXHWRDIXQGDPHQWDOFKDQJHLQWKH
WKUHDWHQHG UHWDOLDWLRQ IRU WKRVH mXQWUXVWZRUWK\l HPSOR\HHV       ZD\LQZKLFKGDWDZDVHQWHUHGLQWRWKH)LYH&$3FRPSXWHUV
WKDWEHFDPHLQYROYHGLQ8QLRQDFWLYLWLHV7UXFNVKDGWROG
    )LYH&$3,QFY1/5%            1RV          1RV                )LYH&$3,QFY1/5%              
                                                                 

   +RZHYHUWKH1/5$PDQGDWHVWKDWHPSOR\HUVDUHUHTXLUHG               YDULRXV)LYH&$3HPSOR\HHVWKDWmLIWKH8QLRQZDVYRWHGLQ
WREDUJDLQRQO\RYHUPDWWHUVFRQFHUQLQJmZDJHVKRXUVDQG              VKHZRXOGMXVWILUHHYHU\ERG\VKHKDGGRQHLWRQFHDQGVKH
RWKHU WHUPV DQG FRQGLWLRQV RI HPSOR\PHQWl   86&           FDQGRLWDJDLQl7UXFNVDOVRVWDWHGWKDWWKRVHHPSOR\HHVWKDW
D7KH6XSUHPH&RXUWKDVKHOGWKDWDQHPSOR\HU                WHVWLIHGDWWKHUHSUHVHQWDWLRQKHDULQJFRXOG mNLVVWKHLUMREV
KDVQRGXW\WREDUJDLQRYHUPDWWHUVUHODWLQJWRIXQGDPHQWDO             JRRGE\Hl7UXFNVVWDWHGWKDWFHUWDLQHPSOR\HHVZKRWHVWLILHG
FKDQJHVLQWKHEXVLQHVVHQWHUSULVH)LUVW1DWjO0DLQW&RUS          DWWKHUHSUHVHQWDWLRQKHDULQJVQDPHO\6PLWKDQG%HORQJLD
Y1/5%86m>,QHQDFWLQJD@               FRXOGQRORQJHUEHWUXVWHGEHFDXVHRIWKHLULQYROYHPHQWLQWKH
&RQJUHVV KDG QR H[SHFWDWLRQ WKDW WKH HOHFWHG XQLRQ               8QLRQ
UHSUHVHQWDWLYHZRXOGEHFRPHDQHTXDOSDUWQHULQWKHUXQQLQJ
RIWKHEXVLQHVVHQWHUSULVHLQZKLFKWKHXQLRQjVPHPEHUVDUH               ,QPDNLQJWKHVHILQGLQJVWKH1/5%FRQFOXGHGWKDWGHVSLWH
HPSOR\HGl7KH)LUVW1DWLRQDO&RXUWKHOGWKDWFRXUWVPXVW            RIILFLDOVWDWHPHQWVE\)LYH&$3WKDWHPSOR\HHVVXSSRUWLQJWKH
PDNHDGLVWLQFWLRQEHWZHHQWKRVHFKDQJHVWKDWUHODWHVLPSO\             8QLRQ ZRXOG QRW EH WUHDWHG GLIIHUHQWO\ 7UXFNVjV WKUHDWV
WRWKHHPSOR\HUHPSOR\HHUHODWLRQVKLSDQGWKRVHPDQDJHULDO              FRQVWLWXWHG LQWHUIHUHQFH ZLWK WKH ULJKW WR RUJDQL]H DV
GHFLVLRQV WKDW UHODWH WR WKH IXQGDPHQWDO DOWHUDWLRQ RI D        SURVFULEHGE\6HFWLRQDRIWKH1/5$ )LYH&$3GRHV
SURILWDEOHEXVLQHVV(PSOR\HUVDUHRQO\UHTXLUHGWREDUJDLQ            QRWFKDOOHQJHWKDWFRQFOXVLRQKHUH
RYHU PDWWHUV SHUWDLQLQJ WR WKH IRUPHU FDWHJRU\ RI FKDQJHV
7KXV ZKHUH DQ HPSOR\HU PDNHV D IXQGDPHQWDO EXVLQHVV                7UXFNVjVRSHQGLVGDLQWRZDUGVWKHRUJDQL]DWLRQRI)LYH&$3
FKDQJHEDVHGVROHO\RQHFRQRPLFUHDVRQVWKDWHPSOR\HULV               HPSOR\HHVZDVRQO\WKHILUVWRIVHYHUDOFKDUJHVILOHGDJDLQVW
QRWUHTXLUHGWREDUJDLQRYHUWKHWHUPVRIWKHVHFKDQJHV                )LYH&$3IRUXQIDLUODERUSUDFWLFHV7KHIDFWVUHOHYDQWWRHDFK
                                                                        DOOHJHGYLRODWLRQRIWKH$FWDUHUHFRXQWHGLQGHWDLOEHORZ,Q
  7KH*HQHUDO&RXQVHODOOHJHVWKDW)LYH&$3IDLOHGWREDUJDLQ            JHQHUDO WKH ILUVW &RPSODLQW 2UGHU ILOHG E\ WKH *HQHUDO
RYHUWKUHHFKDQJHVLQWKHWHUPVDQGFRQGLWLRQVRIHPSOR\PHQW            &RXQVHOm)LYH&$3,lDOOHJHVWKDWWHQ)LYH&$3HPSOR\HHV
RIWKUHHFODVVHVRIHPSOR\HHV+HDG6WDUWEXVGULYHUVDGDWD           ZHUH XQODZIXOO\ GLVFKDUJHG ODLG RII ZLWKRXW UHFDOO RU
HQWU\SRVLWLRQDQG+HDG6WDUWWHDFKHUVDWWKH)RXQWDLQ&HQWHU         UHSULPDQGHGEDVHGXSRQWKHLULQYROYHPHQWLQWKH8QLRQLQ
  $ 7KH&RPSHQVDWLRQRI+HDG6WDUW%XV'ULYHUV
  2Q 2FWREHU  LQ WKH PLGVW RI XQFRPSOHWHG EDUJDLQLQJ
QHJRWLDWLRQVZLWKWKH8QLRQRYHUWKHFRPSHQVDWLRQSROLFLHV
IRUEXVGULYHUV)LYH&$3XQLODWHUDOO\QRWLILHGEXVGULYHUVWKDW
WKH\ ZRXOG QR ORQJHU EH DEOH WR GULYH WKHLU EXVHV WR WKHLU
KRPHV DW QLJKW LQVWHDG DOO EXVHV ZRXOG EH SDUNHG DW D
FHQWUDOL]HGORFDWLRQDWZKLFKEXVGULYHUVZRXOGPHHWHYHU\
GD\8QGHUWKLVQHZSROLF\GULYHUVZRXOGEHFRPSHQVDWHG                   
                                                                              m,W VKDOO EH DQ XQIDLU ODERU SUDFWLFH IRU DQ HPSOR\HU  WR LQWHUIHUH
IURP WKH WLPH WKH\ OHIW WKH FHQWUDOL]HG ORFDWLRQ XQWLO WKH\    ZLWK UHVWUDLQ RU FRHUFH HPSOR\HHV LQ WKH H[HUFLVH RI ULJKWV JXDUDQWHHG LQ
UHWXUQHG2Q2FWREHU)LYH&$3PRGLILHGWKLVSROLF\VXFK              VHFWLRQ  RI WKLV WLWOHl  86&  D
WKDW GULYHUV FRXOG FKRRVH EHWZHHQ WZR SROLFLHV WKLV QHZ
SROLF\ DQG WKH IRUPHU SROLF\ XQGHU ZKLFK GULYHUV ZHUH              
                                                                              7KH FODLPV DOOHJHG LQ )LYH&$3 , DUH GLVFXVVHG LQ VHFWLRQV ,$
FRPSHQVDWHGIURPILIWHHQPLQXWHVEHIRUHWKHLUILUVWSLFNXS             ,% ,& ,' DQG ,,$ LQIUD 7KH FODLPV DOOHJHG LQ )LYH&$3 ,, DUH
                                                                        GLVFXVVHG LQ VHFWLRQV ,( DQG ,,% LQIUD
        )LYH&$3,QFY1/5%              1RV              1RV           )LYH&$3,QFY1/5%         
                                                                          

YLRODWLRQ RI 6HFWLRQV D D D  7KH                   ORQJHUZRUNXQGHUWKHFRQGLWLRQVSODFHGXSRQKHUE\WKH+HDG
&RPSODLQWIXUWKHUDOOHJHVWKDW)LYH&$3IDLOHGWREDUJDLQZLWK                    6WDUW VXSHUYLVRUV  7KH *HQHUDO &RXQVHO DOOHJHV WKDW WKH
WKH8QLRQUHJDUGLQJFRPSHQVDWLRQWHUPVIRUEXVGULYHUVXQGHU                     SUHYLRXVO\GLVFXVVHGLQFLGHQWVXOWLPDWHO\FUHDWHGXQEHDUDEOH
D,QDGGLWLRQDVHFRQG&RPSODLQW2UGHUILOHGE\WKH                   ZRUNFRQGLWLRQVWKXVFDXVLQJ.XNODjVFRQVWUXFWLYHGLVFKDUJH
*HQHUDO &RXQVHO )LYH&$3 ,, DOOHJHV WKDW ZKLOH WKH                       7KH %RDUG DJUHHG WKDW )LYH&$3 IDFLOLWDWHG D SDWWHUQ RI
SURFHHGLQJVDJDLQVW)LYH&$3EHIRUHWKH1/5%ZHUHWDNLQJ                          KDUDVVPHQW DQG KXPLOLDWLRQ DJDLQVW .XNOD RQH WKDW ZRXOG
SODFH)LYH&$3FRQVWUXFWLYHO\GLVFKDUJHGRQHHPSOR\HHZKR                        LQGXFHDQ\UHDVRQDEOHSHUVRQWRUHVLJQ6XEVWDQWLDOHYLGHQFH
WHVWLILHGDJDLQVW)LYH&$3LQYLRODWLRQRI6HFWLRQVDDQG                   H[LVWVWRVXSSRUWWKLVILQGLQJ,WLVFOHDUIURPWKHUHFRUGWKDW
7KH*HQHUDO&RXQVHODOVRDOOHJHVWKDW)LYH&$3IDLOHGWR                    .XNOD ZDV PDGH VXEMHFW WR D UHSHDWHG VHULHV RI LQFLGHQWV
EDUJDLQZLWKWKH8QLRQRYHUWKHHOLPLQDWLRQRIWZRHPSOR\HH                      LQWHQGHGWRKDUDVVDQGKXPLOLDWHKHU0RUHRYHULWLVHTXDOO\
SRVLWLRQVLQYLRODWLRQRI6HFWLRQD                                       FOHDUWKDWWKHVHHYHQWVZHUHDUHVXOWRI.XNODjVLQYROYHPHQW
                                                                                 LQ WKH 8QLRQ DQG LQ SDUWLFXODU KHU LQYROYHPHQW LQ
                      3URFHGXUDO%DFNJURXQG                                      SURFHHGLQJVUHJDUGLQJSHQGLQJXQIDLUODERUFKDUJHVDJDLQVW
                                                                                 )LYH&$3)LQDOO\ZHILQGLWVHOIHYLGHQWWKDWDQ\UHDVRQDEOH
    )LYH&$3,                                                                    SHUVRQVXEMHFWHGWRVLPLODUFRQGLWLRQVUHSULPDQGVIRUIDLOLQJ
                                                                                 WRFRPSO\ZLWKFRQWULYHGSROLFLHVIDOVHDFFXVDWLRQVRIWKHIW
  $IWHULQYHVWLJDWLQJWKHFKDUJHVILOHGDJDLQVW)LYH&$3WKH                     DQG GHPRWLRQ GHVSLWH H[WHQVLYH H[SHULHQFHZRXOG EH
1/5%jV*HQHUDO&RXQVHOLVVXHGD&RPSODLQW2UGHUDOOHJLQJ                         FRPSHOOHGWRUHVLJQ7KLVXQTXHVWLRQDEO\VDWLVILHVWKLVFRXUWjV
WKDW)LYH&$3YLRODWHGWKH1/5$E\XQODZIXOO\GLVFKDUJLQJ                        FRQVWUXFWLYHGLVFKDUJHVWDQGDUGXQGHUWKH1/5$
OD\LQJ RII DQG IDLOLQJ WR UHFDOO WHQ 8QLRQ VXSSRUWHUV DQG
E\SDVVLQJWKH8QLRQE\QHJRWLDWLQJGLUHFWO\ZLWKHPSOR\HHV                                           ,,)DLOXUHWR%DUJDLQ
7KH 8QLRQ SUHVHQWHG LWV FDVH EHIRUH $GPLQLVWUDWLYH /DZ
sXGJHm$/sl6WHSKHQ)LVKRYHUWKHFRXUVHRIQLQHGD\VIURP                        6HFWLRQDRIWKH1/5$UHTXLUHVWKDWHPSOR\HUVQRWLI\
sDQXDU\WR)HEUXDU\2QsDQXDU\                      DQGEDUJDLQZLWKWKH 8QLRQRYHUFKDQJHVLQWKHWHUPVDQG
WKH$/sLVVXHGDGHFLVLRQDQGUHFRPPHQGHGRUGHUFRQFOXGLQJ                       FRQGLWLRQVRILWVHPSOR\HHVm>8@QLODWHUDODFWLRQZLWKUHVSHFW
WKDW )LYH&$3 KDG FRPPLWWHG PXOWLSOH YLRODWLRQV RI WKH                     WRDQ\PDQGDWRU\VXEMHFWRIEDUJDLQLQJLVSURKLELWHGIRULWLV
                                                                                 DFLUFXPYHQWLRQRIWKHGXW\WRQHJRWLDWHZKLFKIUXVWUDWHVWKH
                                                                                 REMHFWLYH RI VHFWLRQ D PXFK DV GRHV D IODW UHIXVDOl
                                                                                1/5%Y3ODLQYLOOH5HDG\0L[&RQFUHWH&R)G
      m,W VKDOO EH XQIDLU ODERU SUDFWLFH IRU DQ HPSOR\HU     E\            WK&LUTXRWLQJ1/5%Y.DW]86
GLVFULPLQDWLRQ LQ UHJDUG WR KLUH RU WHQXUH RI HPSOR\PHQW RU DQ\ WHUP RU
FRQGLWLRQ RI HPSOR\PHQW WR HQFRXUDJH RU GLVFRXUDJH PHPEHUVKLS LQ DQ\
                                                                                   )DLOXUH WR EDUJDLQ ZLWK DQG QRWLI\ WKH XQLRQ
ODERU RUJDQL]DWLRQ    l  86&  D
                                                                                 UHJDUGLQJ VXFK FKDQJHV PLQLPL]HV WKH LPSRUWDQFH DQG
                                                                                 HIIHFWLYHQHVVRIWKHHPSOR\HUXQLRQUHODWLRQVKLS,GDW
     
     m,W VKDOO EH XQIDLU ODERU SUDFWLFH IRU DQ HPSOR\HU     WR GLVFKDUJH
                                                                                 m,I DQ HPSOR\HU FKDQJHV ZDJHV RU RWKHU WHUPV ZLWKRXW
RU RWKHUZLVH GLVFULPLQDWH DJDLQVW DQ HPSOR\HH EHFDXVH KH KDV ILOHG               DIIRUGLQJWKH8QLRQDQRSSRUWXQLW\IRUDGHTXDWHFRQVXOWDWLRQ
FKDUJHV RU JLYHQ WHVWLPRQ\ XQGHU WKLV VXEFKDSWHUl  86&  D        LW PLQLPL]HV WKH LQIOXHQFH RI RUJDQL]HG EDUJDLQLQJ DQG
                                                                                 HPSKDVL]HVWRWKHHPSOR\HHVWKDWWKHUHLVQRQHFHVVLW\IRUD
     
     m,W VKDOO EH XQIDLU ODERU SUDFWLFH IRU DQ HPSOR\HU  WR UHIXVH WR         FROOHFWLYHEDUJDLQLQJDJHQWlTXRWLQJ 0D\'HSjW6WRUHVY
EDUJDLQ FROOHFWLYHO\ ZLWK WKH UHSUHVHQWDWLYHV RI KLV HPSOR\HHV    l        1/5%86
86&  D
    )LYH&$3,QFY1/5%           1RV          1RV               )LYH&$3,QFY1/5%              
                                                                

UHDVVLJQHG DV )ROH\jV WHDFKLQJ DVVLVWDQW  .XNODjV SD\ DQG     1/5$,QSDUWLFXODUWKH$/sFRQFOXGHGWKDW)LYH&$3KDG
EHQHILWVUHPDLQHGWKHVDPH                                            LQ YLRODWLRQ RI 6HFWLRQV    D D DQG ZKHUH
                                                                       DSSOLFDEOHDRIWKH$FWXQODZIXOO\GLVFKDUJHG
  )LYH&$3 DOOHJHG EHIRUH WKH %RDUG WKDW WKH GHFLVLRQ WR        'DOH 6PLWK IURP WKH ZHDWKHUL]DWLRQ GHSDUWPHQW
FRQVROLGDWHWKHFODVVURRPVZDVPDGHEHFDXVHHQUROOPHQWDW               XQODZIXOO\ GLVFKDUJHG 7RP %HORQJLD IURP WKH
WKHFHQWHUZDVSDUWLFXODUO\ORZWKDW\HDUZKLOHWKHFHQWHUKDG        ZHDWKHUL]DWLRQGHSDUWPHQWXQODZIXOO\IDLOHGWRUHFDOO$UW
UHFHLYHGIXQGLQJIRUVWXGHQWVRQO\ZHUHHQUROOHG7KLV         %XUNHO DQG 'DYLG 0RQWRQ IURP WKH ZHDWKHUL]DWLRQ
ORZ QXPEHU RI VWXGHQWV GLG QRW UHTXLUH WKUHH FODVVURRPV       GHSDUWPHQW  XQODZIXOO\ GLVFKDUJHG FRPPXQLW\ VXSSRUW
:KHQDVNHGZK\WKHFRQVROLGDWLRQWRRNSODFHHOHYHQZHHNV               ZRUNHU9HUQD)XJHUHXQODZIXOO\HOLPLQDWHGWKH+RPH
EHIRUHWKHFORVHRIWKHVFKRRO\HDU)ROH\VWDWHGWKDWVKHKDG        6WDUW SURJUDP DQG LQ VR GRLQJ XQODZIXOO\ IDLOHG WR UHFDOO
FRQWLQXDOO\ WROG WKH )RXQWDLQ &HQWHU VWDII WKDW LI WKH         +RPH6WDUWWHDFKHUV0HOLVVD.XNOD$PDQGD/DQJH.DUHQ
HQUROOPHQWGLGQRWLQFUHDVHSHRSOHZRXOGKDYHWREHODLGRII         6DQGVWHGWDQGsDQH0\HUVXQODZIXOO\UHSULPDQGHG%UXFH
+RZHYHU  )ROH\ SULYDWHO\ WROG WZR YROXQWHHUV WKDW WKH         .HQW IRU WKH PDQQHU LQ ZKLFK KH UHFRUGHG KLV WLPH DQG
GHFLVLRQ WR FRQVROLGDWH ZDV D PDWWHU RI mJRRG EXVLQHVV          XQODZIXOO\ E\SDVVHG WKH 8QLRQ E\ QHJRWLDWLQJ GLUHFWO\
MXGJPHQWlDQGZDVQRWDmPDWWHURIPRQH\l                            ZLWK EXV GULYHUV DERXW FRPSHQVDWLRQ SROLFLHV  )LYH&$3
                                                                       WLPHO\ILOHGH[FHSWLRQVWRWKH$/sjVGHFLVLRQ2Q$XJXVW
   6XEVWDQWLDOHYLGHQFHVXSSRUWVWKH%RDUGjVILQGLQJWKDWWKH          WKH%RDUGLVVXHGD'HFLVLRQDQG2UGHUDIILUPLQJWKH
GHFLVLRQWRFRQVROLGDWHWKHFODVVURRPVDWWKH)RXQWDLQ&HQWHU          ILQGLQJVRIWKH$/s)LYH&$3ILOHGDSHWLWLRQWRUHYLHZWKH
DQGUHOLQTXLVK.XNODjVWHDFKLQJGXWLHVZDVQRWVXSSRUWHGE\            %RDUGjVRUGHURQ2FWREHU7KH%RDUGILOHGDFURVV
DQ\ OHJLWLPDWH SXUSRVH DQG ZDV LQVWHDG PRWLYDWHG E\ DQWL      DSSOLFDWLRQIRUHQIRUFHPHQWRQ1RYHPEHU
XQLRQ DQLPXV  :H ILQG SHUVXDVLYH WKH IDFW WKDW WKH %RDUG
IRXQG WKDW )LYH&$3 IDLOHG WR SURIIHU D FUHGLEOH UHDVRQ IRU      )LYH&$3,,
FRQVROLGDWLQJWKHFODVVURRPVHOHYHQZHHNVSULRUWRWKHFORVH
RI WKH VFKRRO \HDU  5HMHFWLQJ )ROH\jV H[SODQDWLRQ WKDW WKH     7KH1/5%jV*HQHUDO&RXQVHOLVVXHGDVHFRQG&RPSODLQW
OD\RII ZDV QHFHVVDU\ GXH WR ORZ HQUROOPHQW WKH %RDUG          2UGHU RQ sDQXDU\   DOOHJLQJ WKDW )LYH&$3 KDG
SRLQWHGWRWKHIDFWWKDWRWKHU+HDG6WDUWFHQWHUVZHUHODFNLQJ         FRPPLWWHG IXUWKHU YLRODWLRQV RI WKH $FW LQFOXGLQJ WKH
LQHQUROOPHQW\HWRQO\WKH)RXQWDLQ&HQWHUFODVVURRPVZHUH            XQODZIXOFRQVWUXFWLYHGLVFKDUJHRI0HOLVVD.XNODDVZHOODV
FRQVROLGDWHG0RUHRYHUHYHQLIWKLVZHUHWUXHLWLVXQFOHDU         WKHIDLOXUHWREDUJDLQZLWKWKH8QLRQRYHUWKHHOLPLQDWLRQRI
ZK\.XNODZKRKDGWKHPRVWWHDFKLQJH[SHULHQFHVKRXOG                WZRHPSOR\HHSRVLWLRQV7KH8QLRQSUHVHQWHGLWVFDVHEHIRUH
KDYH EHHQ GHPRWHG WR WHDFKLQJ DVVLVWDQW   *LYHQ .XNODjV      $/ssDPHV5RVHRQYDULRXVGD\VEHWZHHQ0D\WKURXJK
DFWLYH8QLRQVXSSRUWDQG)ROH\jVSULRUWUHDWPHQWRI.XNOD            sXQH    2Q 'HFHPEHU   WKH $/s LVVXHG D
ZHILQGWKDWWKHUHH[LVWHGVXEVWDQWLDOHYLGHQFHWKDW.XNODZDV         GHFLVLRQDQGUHFRPPHQGHGRUGHUFRQFOXGLQJWKDW)LYH&$3
UHPRYHGIURPKHUSRVLWLRQDVFODVVURRPWHDFKHURQWKHEDVLV            KDGXQODZIXOO\KDUDVVHGDQGUHWDOLDWHGDJDLQVW.XNODIRU
RIDQWLXQLRQDQLPXV                                                  KHU SDUWLFLSDWLRQ LQ 8QLRQ DFWLYLWLHV DQG FDXVHG KHU
                                                                       FRQVWUXFWLYH GLVFKDUJH LQ YLRODWLRQ RI 6HFWLRQV D
        &RQVWUXFWLYH'LVFKDUJH&ODLP
  6KRUWO\DIWHU)LYH&$3FRQVROLGDWHGWKHFODVVURRPVDWWKH
)RXQWDLQ&HQWHU.XNODUHVLJQHGVWDWLQJWKDWVKHFRXOGQR                 
                                                                             6PLWK %HORQJLD 0RQWRQ )XJHUH DQG .XNOD WHVWLILHG DW WKH
                                                                       UHSUHVHQWDWLRQ KHDULQJ HQWLWOLQJ WKHP WR SURWHFWLRQ XQGHU 6HFWLRQ D
       )LYH&$3,QFY1/5%           1RV           1RV            )LYH&$3,QFY1/5%          
                                                                   

DDQGDDQGIDLOHGWRQRWLI\DQGEDUJDLQZLWK           HDUOLHUWKDWGD\DQGKDGXVHGVHYHUDORIWKHFDUSHWVDPSOHV
WKH8QLRQUHJDUGLQJWKHHOLPLQDWLRQRIWKHGDWDHQWU\SRVLWLRQ            7KLVIDFWVHHPVWRLQGLFDWHWKDW)ROH\FRXOGHDVLO\VXUPLVHWKH
DQG WKH FRQVROLGDWLRQ RI WKH +HDG 6WDUW FODVVURRPV LQ             ORFDWLRQRIWKHFDUSHWVDPSOHVE\VSHDNLQJZLWK.XNODDQG
YLRODWLRQ RI 6HFWLRQV D DQG D  2Q 2FWREHU        WKDWVKHKDGQRUHDVRQWREHOLHYHWKDWWKH\KDGEHHQVWROHQ
WKH%RDUGLVVXHGD'HFLVLRQDQG2UGHUDIILUPLQJWKH                 )XUWKHUPRUH HYHQ WKRXJK )ROH\ GLG QRW GLUHFWO\ WHOO WKH
ILQGLQJVRIWKH$/s)LYH&$3ILOHGDSHWLWLRQWRUHYLHZWKH              VKHULIIjVRIILFHWKDWVKHWKRXJKWWKDW.XNODVWROHWKHFDUSHW
%RDUGjV RUGHU RQ 1RYHPEHU    7KH %RDUG ILOHG    D       VDPSOHVWKLVZDVFHUWDLQO\WKHLPSOLFDWLRQRIKHUWHOOLQJWKH
FURVVDSSOLFDWLRQIRUHQIRUFHPHQWRQsDQXDU\                    VKHULIIWKDW.XNODZDVWKHRQO\SHUVRQWRKDYHEHHQLQWKH
                                                                          EXLOGLQJ WKDW GD\  0RUHRYHU WKH 1/5% IRXQG LQFUHGLEOH
                      6WDQGDUGRI5HYLHZ                                  :KLWHjVWHVWLPRQ\WKDW)LYH&$3SROLF\PDQGDWHGWKDWWKH\
                                                                          FRQWDFW WKH SROLFH IRU DQ\ WKHIW  7KHVH IDFWV FXPXODWLYHO\
   7KLV&RXUWUHYLHZV15/%GHFLVLRQVXVLQJWKUHHVWDQGDUGV                FRQVWLWXWH VXEVWDQWLDO HYLGHQFH WKDW )LYH&$3 DFWHG
RI UHYLHZ  )LUVW WKLV &RXUW UHYLHZV WKH %RDUG
V IDFWXDO        XQODZIXOO\
GHWHUPLQDWLRQVDVZHOODVWKH%RDUGjVDSSOLFDWLRQRIODZWR
WKHVHIDFWVXQGHUDVXEVWDQWLDOHYLGHQFHVWDQGDUG6HH,77                  :H ILQG QR HUURU LQ WKH %RDUGjV FRQFOXVLRQ WKDW )ROH\jV
$XWRY1/5%)GWK&LU8QGHUWKLV             LQVLVWHQFHWKDW.XNODOHDYHKHUGRRUZDVPRWLYDWHGE\DQWL
VWDQGDUGWKH%RDUGjVGHFLVLRQVPXVWRQO\EHVXSSRUWHGE\                 XQLRQDQLPXV$VVLJQLQJWKHUHTXLVLWHGHIHUHQFHWRWKH$/sjV
mVXFKUHOHYDQWHYLGHQFHDVDUHDVRQDEOHPLQGPLJKWDFFHSWDV              FUHGLELOLW\ GHWHUPLQDWLRQ WKDW )ROH\ ZDV GLVLQJHQXRXV LQ
DGHTXDWHWRVXSSRUWDFRQFOXVLRQl,GTXRWLQJ&RQVROLGDWHG              VWDWLQJWKDWWKHRSHQGRRUPHDVXUHZDVVLPSO\LQWHQGHGWR
(GLVRQ&RY1/5%86m7KDWLVLI               UHGXFHWKHDPRXQWRIHPSOR\HHFKDWWHUDQGFRQVLGHULQJWKDW
WKHUHFRUGYLHZHGDVDZKROHSURYLGHVVXIILFLHQWHYLGHQFHIRU             WKHPHDVXUHZDVLQVWLWXWHGWKH0RQGD\DIWHU)ROH\FDOOHGWKH
DUHDVRQDEOHIDFWILQGHUWRUHDFKWKHFRQFOXVLRQVWKH%RDUGKDV            VKHULIIDQGZRXOGOLNHO\KXPLOLDWH.XNODLWDSSHDUVWKDWWKH
UHDFKHGWKHFRXUWZLOOQRWGLVWXUEWKRVHILQGLQJVl3HWHUVY            %RDUGDFWHGRQWKHEDVLVRIVXEVWDQWLDOHYLGHQFHLQFRQFOXGLQJ
1/5%)GWK&LU7KLV&RXUWGHIHUV               WKDW )LYH&$3 XQODZIXOO\ KDUDVVHG .XNOD EHFDXVH RI KHU
WR WKH %RDUG
V UHDVRQDEOH LQIHUHQFHV DQG FUHGLELOLW\                VXSSRUWIRUWKH8QLRQ
GHWHUPLQDWLRQVHYHQLIZHZRXOGFRQFOXGHGLIIHUHQWO\XQGHU
GH QRYR UHYLHZ 6HH ,77 $XWR  )G DW  VHH DOVR               5HDVVLJQLQJ.XNODWR7HDFKLQJ$VVLVWDQW
1/5%Y7D\ORU0DFK3URGV,QF)GWK
&LU  m:H DIIRUG HYHQ PRUH GHIHUHQFH WR %RDUG                 7KH)RXQWDLQ&HQWHULVFRPSULVHGRIWKUHHFODVVURRPVRI
GHWHUPLQDWLRQVRIFUHGLELOLW\DQGZLOOQRWQRUPDOO\VHWDVLGH             VWXGHQWV UDQJLQJ IURP DJHV WKUHH WR IRXU DQG D KDOI  7KH
WKH%RDUG
VFKRLFHEHWZHHQFRQIOLFWLQJWHVWLPRQ\l                      FKLOGUHQ ZHUH GLYLGHG E\ DJH LQWR WKH WKUHH FODVVURRPV
                                                                          .XNODZKRKDGWKHPRVWWHDFKLQJH[SHULHQFHWDXJKWDFODVV
  7KLV &LUFXLW DOVR DSSOLHV WZR DGGLWLRQDO VWDQGDUGV ZKHQ          RI WKH ROGHVW FKLOGUHQ 3DP sROO\ WDXJKW WKH QH[W ROGHVW
UHYLHZLQJWKH%RDUG
VFRQFOXVLRQVRIODZ:KHUHWKH%RDUG                FKLOGUHQDQG)ROH\WDXJKWWKH\RXQJHVWFKLOGUHQ
LQWHUSUHWV WKH 1/5$ WKLV &RXUW HQJDJHV LQ GHIHUHQWLDO
                                                                            6KRUWO\DIWHUWKHWKHIWLQFLGHQWRQ)HEUXDU\)LYH&$3
                                                                          PDQDJHPHQW FRQVROLGDWHG WKH WKUHH FODVVURRPV DW WKH
                                                                         )RXQWDLQ&HQWHULQWRWZRFODVVURRPV$VDUHVXOW.XNODZDV
     7KH 8QLRQ DOVR DOOHJHG D QXPEHU RI HYHQWV WKDW WKH %RDUG FRQFOXGHG
ZHUH QRW XQODZIXO      %HFDXVH WKH SDUWLHV GR QRW FKDOOHQJH WKHVH        UHOLQTXLVKHG RI KHU GXWLHV DV D FODVVURRP WHDFKHU DQG
FRQFOXVLRQV WKH\ DUH QRW DW LVVXH KHUH
    )LYH&$3,QFY1/5%           1RV         1RV              )LYH&$3,QFY1/5%            
                                                               

  /DWHUWKDWDIWHUQRRQ$SULO)ROH\D+HDG6WDUWVXSHUYLVRU         &KHYURQUHYLHZDQGUHYLHZVDOORWKHUOHJDOFRQFOXVLRQVGH
DUULYHGDWWKH)RXQWDLQ&HQWHUDQGIRXQGWKDWVHYHUDORIWKH          QRYR7KH%RDUGjVLQWHUSUHWDWLRQVRIWKH1/5$DUHUHYLHZHG
FDUSHWVDPSOHVZHUHPLVVLQJ6KHDOVRQRWHGWKDW.XNODKDG           DFFRUGLQJ WR WKH WZRVWHS SURFHVV DUWLFXODWHG LQ &KHYURQ
EHHQDWWKH)RXQWDLQ&HQWHUWKDWGD\DQGQRWLFHGWKDW.XNOD          86$,QFY1DWXUDO5HVRXUFH'HIHQVH&RXQFLO,QF
KDG XVHG VRPH RI WKH QHZ FDUSHW VDPSOHV  )ROH\ SKRQHG      86    XQGHU ZKLFK WKH FRXUW ILUVW PXVW
:KLWHZKRWROG)ROH\WRIROORZFRPSDQ\SROLF\DQGFDOOWKH           GHWHUPLQH mZKHWKHU &RQJUHVV KDV GLUHFWO\ VSRNHQ WR WKH
VKHULII7KHVKHULIIDVNHG)ROH\ZKHWKHUVKHVDZDQ\VLJQVRI        SUHFLVHTXHVWLRQDWLVVXHl,GDW,I&RQJUHVVKDVGLUHFWO\
IRUFHGHQWU\DQGLIVKHNQHZLIDQ\RQHHOVHKDGEHHQLQWKH          DGGUHVVHG WKH LVVXH WKHQ WKH FRXUW PXVW JLYH HIIHFW WR WKH
EXLOGLQJWKDWGD\)ROH\UHSOLHGWKDWLWORRNHGOLNH.XNODKDG       VWDWXWRU\WH[W,GDW,I&RQJUHVVKDVQRWVSRNHQ
EHHQ LQ WKH EXLOGLQJ  )ROH\ LPPHGLDWHO\ KDG WKH ORFNV       GLUHFWO\ WKLV &RXUW PXVW GHWHUPLQH ZKHWKHU WKH %RDUG
V
FKDQJHGRQWKHEXLOGLQJ                                              LQWHUSUHWDWLRQLVEDVHGRQDSHUPLVVLEOHLQWHUSUHWDWLRQRIWKH
                                                                      VWDWXWH,GDW8QGHUWKLVVWDQGDUGWKH%RDUGjVUHDGLQJ
  7KHQH[WGD\DVKHULIIjVGHSXW\ZHQWWR.XNODjVKRPHWR            RIWKHVWDWXWHQHHGRQO\EHUHDVRQDEOHLWQHHGQRWEHWKHEHVW
TXHVWLRQKHUDERXWWKHPLVVLQJFDUSHWVDPSOHV.XNODWROGWKH        LQWHUSUHWDWLRQ  6HH +ROO\ )DUPV &RUS Y 1/5%  86
GHSXW\WKDWVKHKDGXVHGVRPHRIWKHFDUSHWVDPSOHVDQGWKDW         m)RUWKH%RDUGWRSUHYDLOLWQHHGQRWVKRZ
VKHKDGSODFHGWKHUHPDLQGHULQWKHEDVHPHQW6KHRIIHUHGWR         WKDWLWVFRQVWUXFWLRQLVWKHEHVWZD\WRUHDGWKHVWDWXWHUDWKHU
VKRZWKHGHSXW\ZKHUHVKHOHIWWKHVDPSOHVKRZHYHUZKHQ             FRXUWV PXVW UHVSHFW WKH %RDUGjV MXGJPHQW VR ORQJ DV LWV
WKH\ DUULYHG DW WKH )RXQWDLQ &HQWHU WKH ORFNV KDG EHHQ      UHDGLQJ LV D UHDVRQDEOH RQHl  )LQDOO\ TXHVWLRQV RI ODZ
FKDQJHGDQG.XNODZDVXQDEOHWRHQWHUXVLQJKHUNH\2Q             RXWVLGHRIWKH1/5$DUHUHYLHZHGGHQRYR6HH0HLMHU,QF
0RQGD\ )HEUXDU\  WKH GHSXW\ UHWXUQHG WR WKH )RXQWDLQ      Y1/5%)GWK&LU
&HQWHUFRQFOXGHGWKDWWKHVDPSOHVZHUHPRVWO\DFFRXQWHG
IRUDQGGLGQRWSXUVXHWKHPDWWHUDQ\IXUWKHU.XNODZDVQRW                                    sXULVGLFWLRQ
PDGHVXEMHFWWRDQ\IRUPDOGLVFLSOLQDU\DFWLRQE\)LYH&$3
                                                                       7KLV&RXUWUHWDLQVMXULVGLFWLRQWRUHYLHZILQDORUGHUVRIWKH
  :KHQ.XNODUHWXUQHGWRZRUNRQ0RQGD\)ROH\QRWLILHG               %RDUGSXUVXDQWWR86&HDQGI
.XNODWKDWVKHPXVWOHDYHKHUGRRURSHQDWDOOWLPHVZKHQ
FKLOGUHQZHUHQRWSUHVHQWVRWKDW)ROH\FRXOGmNHHSDQH\HRQ           ,QWKHSURFHHGLQJVEHORZ)LYH&$3DUJXHGWKDWLWZDVQRW
KHUl  )ROH\ WHVWLILHG WKDW WKLV ZDV EHFDXVH WKH FODVVURRP   VXEMHFW WR WKH MXULVGLFWLRQ RI WKH 1/5% EHFDXVH LW LV D
WHDFKHUVRIWHQFRQJUHJDWHGLQ.XNODjVFODVVURRPWRFKDWDQG           mSROLWLFDOVXEGLYLVLRQlH[HPSWIURPWKHWHUPVRIWKH1/5$
ZRXOGQRWJHWWKHLUZRUNGRQH7KH*HQHUDO&RXQVHODOOHJHG          :HFRQFXULQWKH1/5%jVILQGLQJWKDW)LYH&$3LVLQIDFWDQ
KRZHYHUWKDWWKLVPHDVXUHZDVPHDQWWRKXPLOLDWH.XNODIRU           mHPSOR\HUlVXEMHFWWRWKHMXULVGLFWLRQRIWKH1/5$DQGLVQRW
WKHmLQYHVWLJDWLRQlRIWKHDOOHJHGmWKHIWl                           D mSROLWLFDO VXEGLYLVLRQl $ SROLWLFDO VXEGLYLVLRQ PXVW EH
                                                                      mHLWKHU  FUHDWHG GLUHFWO\ E\ WKH VWDWH VR DV WR FRQVWLWXWH
  :HILQGWKDWWKH1/5%FRUUHFWO\FRQFOXGHGWKDW)LYH&$3              GHSDUWPHQWV RU DGPLQLVWUDWLYH DUPV RI WKH JRYHUQPHQW RU
YLRODWHGWKH1/5$ERWKE\HVVHQWLDOO\UHSRUWLQJ.XNODWRWKH         DGPLQLVWHUHGE\LQGLYLGXDOVZKRDUHUHVSRQVLEOHWRSXEOLF
DXWKRULWLHVDQGE\IRUFLQJKHUWROHDYHKHUFODVVURRPRSHQ          RIILFLDOVRUWRWKHJHQHUDOHOHFWRUDWHl1/5%Y1DWXUDO*DV
:HDJUHHZLWKWKH%RDUGWKDW)ROH\DFWHGZLWKXQUHDVRQDEOH            8WLO'LVWRI+DZNLQV&RXQW\7HQQ86
KDVWHXSRQILQGLQJWKHFDUSHWVDPSOHVPLVVLQJ)ROH\WHVWLILHG        DGRSWLQJ LQ SDUW WKH %RDUGjV FRQVWUXFWLRQ RI WKH
WKDWVKHUHDOL]HGWKDW.XNODKDGEHHQLQWKH)RXQWDLQ&HQWHU          VWDWXWRU\WHUPmSROLWLFDOVXEGLYLVLRQl$QHQWLW\FDQRQO\
    )LYH&$3,QFY1/5%          1RV         1RV           )LYH&$3,QFY1/5%         
                                                              

VDWLVI\WKHVHFRQGSURQJRI+DZNLQV&RXQW\E\HQVXULQJWKDW                  (QIRUFLQJ 8QUHDVRQDEOH 3UHFRQGLWLRQV WR 7DNLQJ
DPDMRULW\RILWVERDUGRIGLUHFWRUVDUHGLUHFWO\UHVSRQVLEOHWR               7LPH2II
WKHJHQHUDOHOHFWRUDWH6HH(FRQ6HF&RUS1/5%
7KRXJKRQHWKLUGRI)LYH&$3jVERDUGRIGLUHFWRUV               )LYH&$3jVOHDYHSROLF\UHTXLUHVWKDWDQHPSOR\HHSURYLGH
FRQVLVWRISROLWLFDOO\HOHFWHGLQGLYLGXDOVDQGWKHLUGHVLJQHHV      DGRFWRUjVQRWHDIWHUDQDEVHQFHRIWKUHHFRQVHFXWLYH GD\V
DQGDQRWKHUWKLUGDUHVHOHFWHGmLQDFFRUGDQFHZLWKGHPRFUDWLF        .XNODZDVVXESRHQDHGWRWHVWLI\EHIRUHWKH1/5%UHJDUGLQJ
VHOHFWLRQSURFHGXUHVlVXIILFLHQWWRDVVXUHWKDWWKH\UHSUHVHQW       )LYH&$3jVODERUSUDFWLFHVRQ2FWREHU7KHIROORZLQJGD\
WKHORZLQFRPHFRPPXQLW\WKDW)LYH&$3VHUYHVZHDJUHH               VKHFDOOHGLQVLFNGXHWREDFNSDLQV:KHQVKHUHWXUQHGWR
ZLWKWKH%RDUGWKDWWKLVGRHVQRWPHDQWKDW)LYH&$3jVERDUG          ZRUN :KLWH UHIXVHG WR DOORZ .XNOD WR ZRUN ZLWKRXW ILUVW
LV DGPLQLVWHUHG E\ LQGLYLGXDOV ZKR DUH UHVSRQVLEOH WR WKH    SURGXFLQJDFRS\RIWKH1/5%VXESRHQDDVZHOODVDGRFWRUjV
JHQHUDOHOHFWRUDWH6HH(QULFKPHQW6HUYV3URJUDP,QF        QRWHQRWZLWKVWDQGLQJ)LYH&$3jVZULWWHQSROLF\:KHQ.XNOD
1/5%m$QµHOHFWRUDWHjRIDOOSRRUSHUVRQV           ILQDOO\SURGXFHGWKHVHGRFXPHQWV:KLWHLVVXHGDUHSULPDQG
RUJURXSVWKHUHRIGRHVQRWLQFOXGHDOOLQGLYLGXDOVLQWKHDUHD       WR.XNODIRUKHUIDLOXUHWRSURYLGHWKHPWLPHO\
VHUYHG ZKR ZRXOG EH HOLJLEOH WR YRWH LQ JHQHUDO SROLWLFDO
HOHFWLRQV$FFRUGLQJO\ZHILQGWKDWWKH(PSOR\HUjVGLUHFWRUV         :H FRQFOXGH WKDW WKH %RDUG GLG QRW HUU LQ ILQGLQJ WKDW
ZKRDUHµHOHFWHGE\WKHSRRUjDUHQRWµUHVSRQVLEOHWRWKH      :KLWHjV WUHDWPHQW RI .XNOD DPRXQWHG WR D YLRODWLRQ RI
JHQHUDOHOHFWRUDWHjZLWKLQWKHPHDQLQJRIWKH+DZNLQV&RXQW\         6HFWLRQV D DQG D  7KLV VHHPLQJO\ DUELWUDU\
WHVWl%HFDXVHWKLVSRUWLRQRI)LYH&$3jVERDUGRIGLUHFWRUV       mVXESRHQD UXOHl ZDV QRW SUHVHQW LQ DQ\ RI )LYH&$3jV
FDQQRW EH FRQVLGHUHG UHVSRQVLEOH WR WKH JHQHUDO HOHFWRUDWH   HPSOR\HHPDQXDOVDQG)LYH&$3SROLF\UHJDUGLQJGRFWRUjV
)LYH&$3FDQQRWEHFRQVLGHUHGDSROLWLFDOVXEGLYLVLRQ                QRWHVGLGQRWUHTXLUH.XNODWRSURYLGHDZULWWHQGRFWRUjVQRWH
                                                                     IRUEHLQJDEVHQWIRUMXVWRQHGD\:HDOVRSODFHZHLJKWXSRQ
                          'LVFXVVLRQ                                 WKH IDFW WKDW WKH VXESRHQD LQ TXHVWLRQ VRXJKW .XNODjV
                                                                     WHVWLPRQ\ UHJDUGLQJ )LYH&$3jV XQIDLU ODERU SUDFWLFHV
,7KH'LVFKDUJH&RQVWUXFWLYH'LVFKDUJH/D\2II)DLOXUH          )LQDOO\ZHQRWHWKDWWKH%RDUGUHMHFWHGDVLQFUHGLEOH:KLWHjV
    WR5HFDOODQG5HSULPDQGRI7HQ)LYH&$3(PSOR\HHV                FRQWHQWLRQWKDWVKHZDVDFWLQJSXUVXDQWWRFRPSDQ\SROLF\
                                                                     7KH%RDUGjVFRQFOXVLRQLVVXSSRUWHGE\VXEVWDQWLDOHYLGHQFH
   ,Q GHWHUPLQLQJ ZKHWKHU DQ HPSOR\HU KDV XQODZIXOO\           DQGWKXVPXVWEHHQIRUFHGE\WKLVFRXUW
WHUPLQDWHGRUODLGRIIDQHPSOR\HHRQWKHEDVLVRIDQWLXQLRQ
DQLPXVWKLV&RXUWDSSOLHVWKHWHVWHQXQFLDWHGLQ:ULJKW/LQH                $FFXVLQJ.XNODRI7KHIW
Y 1/5%  1/5%    6HH 1/5% Y 7UDQVS
0JPW&RUS86DGRSWLQJWKH:ULJKW/LQH             2Q )ULGD\ )HEUXDU\  WKH )RXQWDLQ &HQWHU UHFHLYHG D
WHVW8QGHU:ULJKW/LQHWKH1/5%jV*HQHUDO&RXQVHOPXVW           GRQDWLRQ RI  FDUSHW VDPSOHV  2Q 6DWXUGD\ ZKLOH LQ WKH
HVWDEOLVKDSULPDIDFLHFDVHRIGLVFULPLQDWLRQE\VHWWLQJIRUWK      )RXQWDLQ&HQWHUSUHSDULQJIRUFODVVHV.XNODDQGKHUWHDFKLQJ
HYLGHQFH WKDW VXSSRUWV DQ LQIHUHQFH WKDW WKH HPSOR\HHjV       DVVLVWDQWGLVFRYHUHGWKHFDUSHWVDPSOHVDQGWRRNVHYHUDOWRKHU
SURWHFWHGDFWLYLWLHVZHUHDPRWLYDWLQJIDFWRULQWKHHPSOR\HUjV      FODVVURRP WR UHSODFH WKH ROG FDUSHW  7KH\ SODFHG WKH ROG
GHFLVLRQ  ,Q SDUWLFXODU WKH *HQHUDO &RXQVHO PXVW            VDPSOHV LQ WKH EDVHPHQW DORQJ ZLWK WKH UHPDLQLQJ QHZ
GHPRQVWUDWHWKDWWKHHPSOR\HHZDVHQJDJHGLQSURWHFWHG           VDPSOHV
DFWLYLW\  WKDW WKH HPSOR\HU NQHZ RI WKH HPSOR\HHjV
SURWHFWHGDFWLYLW\DQGWKDWWKHHPSOR\HUDFWHGDVLWGLGRQ
    )LYH&$3,QFY1/5%           1RV         1RV          )LYH&$3,QFY1/5%        
                                                               

  ( 7KH&RQVWUXFWLYH'LVFKDUJHRI0HOLVVD.XNOD                      WKHEDVLVRIDQWLXQLRQDQLPXV1/5%Y*HQ)DEULFDWLRQV
                                                                      &RUS)GWK&LUTXRWLQJ,77$XWR
  $QHPSOR\HHFDQEULQJDFODLPIRUFRQVWUXFWLYHGLVFKDUJH            Y1/5%)GWK&LU$VWRWKLVWKLUG
EDVHG XSRQ DQWLXQLRQ DQLPXV XQGHU 6HFWLRQ D DQG       SURQJ ZH KDYH KHOG WKDW HYLGHQFH RI DQ HPSOR\HUjV DQWL
ZKHUH DSSOLFDEOH D RI WKH 1/5$ ZKHUH VKH FDQ          XQLRQ DQLPXV FDQ EH SXUHO\ FLUFXPVWDQWLDO DQG WKDW PDQ\
GHPRQVWUDWHWKDWKHUHPSOR\HUmPDNHVZRUNLQJFRQGLWLRQVVR           IDFWRUVFDQFRQWULEXWHWRDILQGLQJRIDQDQWLXQLRQPRWLYH
XQEHDUDEOH EHFDXVH RI WKH HPSOR\HHjV 8QLRQ DFWLYLW\ RU         LQFOXGLQJ
GHPRWHV DQ HPSOR\HH EHFDXVH RI 8QLRQ DFWLYLW\ DQG WKH
HPSOR\HHLVWKXVLQGXFHGRUIRUFHGWRUHVLJQl0RQWJRPHU\              WKHFRPSDQ\jVH[SUHVVHGKRVWLOLW\WRZDUGVXQLRQL]DWLRQ
:DUG	&RY1/5%)GWK&LU,Q              FRPELQHG ZLWK NQRZOHGJH RI WKH HPSOR\HHVj XQLRQ
GHWHUPLQLQJZKHWKHUZRUNFRQGLWLRQVDUHmXQEHDUDEOHlWKLV              DFWLYLWLHVLQFRQVLVWHQFLHVEHWZHHQWKHSURIIHUHGUHDVRQ
&RXUW DSSOLHV DQ REMHFWLYH VWDQGDUG XQGHU ZKLFK WKH             IRUGLVFKDUJHDQGRWKHUDFWLRQVRIWKHHPSOR\HUGLVSDUDWH
FRQGLWLRQVPXVWEHVRXQGHVLUDEOHWKDWDUHDVRQDEOHSHUVRQLQ           WUHDWPHQW RI FHUWDLQ HPSOR\HHV FRPSDUHG WR RWKHU
WKH VDPH VLWXDWLRQ ZRXOG FKRRVH WR UHVLJQ  6HH :LOVRQ Y     HPSOR\HHV ZLWK VLPLODU ZRUN UHFRUGV RU RIIHQVHV D
)LUHVWRQH7LUH	5XEEHU&R)GWK&LU               FRPSDQ\jVGHYLDWLRQIURPSDVWSUDFWLFHVLQLPSOHPHQWLQJ
TXRWLQJ <DWHV Y $YFR &RUS  )G   WK        WKH GLVFKDUJH DQG SUR[LPLW\ LQ WLPH EHWZHHQ WKH
&LU                                                             HPSOR\HHVjXQLRQDFWLYLWLHVDQGWKHLUGLVFKDUJH
  :KLOHWKHODERUFKDUJHVDJDLQVW)LYH&$3 ZHUHSHQGLQJ              :)%ROLQ&RY1/5%)GWK&LU
0HOLVVD .XNOD VRXJKW D SUHOLPLQDU\ LQMXQFWLRQ RUGHULQJ          2QFHWKH*HQHUDO&RXQVHOKDVPDGHRXWDSULPDIDFLHFDVHRI
)LYH&$3 WR UHLQVWDWH KHU WR D YDFDQW WHDFKLQJ SRVLWLRQ       DQWLXQLRQDQLPXVmWKHEXUGHQVKLIWVWRWKHHPSOR\HUWRSURYH
)LYH&$3XOWLPDWHO\FRPSOLHGDVVLJQLQJKHUWRDFODVVURRP             E\DSUHSRQGHUDQFHRIWKHHYLGHQFHWKDWLWZRXOGKDYHWDNHQ
SRVLWLRQDW)LYH&$3jV)RXQWDLQ&KLOG'HYHORSPHQW&HQWHU               WKHVDPHDFWLRQHYHQLQWKHDEVHQFHRISURWHFWHGFRQGXFWl
m)RXQWDLQ&HQWHUl2QFH.XNODZDVUHLQVWDWHGWKH*HQHUDO          1/5%Y*HQ6HF6HUYV&RUS)GWK&LU
&RXQVHO DOOHJHV WKDW VKH ZDV PDGH VXEMHFW WR VHYHUDO          
KXPLOLDWLQJDQGKDUDVVLQJLQFLGHQWVDVDUHVXOWRIKHUVXSSRUW
IRUWKH8QLRQDQGSDUWLFLSDWLRQLQSURFHHGLQJVEURXJKWDJDLQVW          $ 7KH 'LVFKDUJH RI (PSOR\HHV LQ WKH :HDWKHUL]DWLRQ
)LYH&$3  7KH *HQHUDO &RXQVHO DUJXHG DQG WKH %RDUG                'HSDUWPHQW
DJUHHGWKDWHDFKRIWKHVHLQFLGHQWVYLRODWHV6HFWLRQVD
DQGDDQGWKDWWKHFXPXODWLRQRIWKHVHHYHQWVXOWLPDWHO\         )LYH&$3jV ZHDWKHUL]DWLRQ LQLWLDWLYH DVVLVWV ORZLQFRPH
FDXVHGKHUFRQVWUXFWLYHGLVFKDUJH:HQRZFRQVLGHUWKHVH             UHVLGHQWVLQPLQLPL]LQJHQHUJ\FRVWVE\LQVSHFWLQJKRPHVDQG
LQFLGHQWVERWKWRWKHH[WHQWWKDWWKH\YLRODWHWKH$FWLQDQGRI     LQVWDOOLQJHQHUJ\VDYLQJDSSDUDWXV$WWKHWLPHWKDWWKH8QLRQ
WKHPVHOYHVDQGWRWKHH[WHQWWKH\FRQWULEXWHWRDVKRZLQJRI         ZDV FRQGXFWLQJ LWV RUJDQL]DWLRQDO FDPSDLJQ WKH
FRQVWUXFWLYHGLVFKDUJH                                               ZHDWKHUL]DWLRQGHSDUWPHQWFRQVLVWHGRIILYHHPSOR\HHV3DXOD
                                                                      &ODUNWKHGLUHFWRU7RP%HORQJLDWKHILHOGVXSHUYLVRU'DOH
                                                                      6PLWK WKH LQVSHFWRU 'DYLG 0RQWRQ FUHZ OHDGHU DQG $UW
                                                                      %XUNHOODERUHU
    )LYH&$3,QFY1/5%            1RV           1RV              )LYH&$3,QFY1/5%          
                                                                  

        7KH/D\RIIDQG6XEVHTXHQW'LVFKDUJHRI'DOH6PLWK                ' 7KH5HSULPDQGRI%UXFH.HQW
  2Q $SULO   WKH VDPH GD\ RI WKH 8QLRQ HOHFWLRQ         )LYH&$3 SROLF\ SURYLGHV WKDW EXV GULYHUV DUH WR EH
3DXOD &ODUN UHVLJQHG HIIHFWLYH LPPHGLDWHO\ $W WKDW WLPH        FRPSHQVDWHGIURPWKHWLPHWKH\SLFNXSWKHLUILUVWFKLOGRIWKH
ERWK %HORQJLD DQG %XUNHO ZHUH DZD\ RQ VLFN OHDYH  7KDW        GD\%XVGULYHUVDUHQRWSDLGIRUWKHLUGULYLQJWLPHWRDQG
VDPHHYHQLQJ'DOH6PLWKZKRZDVDQREVHUYHUDWWKH8QLRQ               IURP WKHLU ILUVW SLFN XS DQG ODVW GURS RII  $V D PDWWHU RI
HOHFWLRQ UHFHLYHG D SKRQH FDOO IURP 5XVVHOO 3RPHUR\             SUDFWLFHKRZHYHUEXVGULYHUVZKRULGHWKHVRFDOOHGm,URQV
)LYH&$3jVILVFDORIILFHU3RPHUR\WROG6PLWKWKDWEHFDXVH               URXWHlZKLFKLQFOXGHVDWKLUW\PLOHGLVWDQFHWRWKHILUVWSLFN
&ODUN KDG UHVLJQHG DQG %HORQJLD DQG %XUNHO ZHUH RQ VLFN         XSDUHSHUPLWWHGWRFKDUJHIRUWKHGULYHIURPWKHLUKRPHVWR
OHDYH 6PLWK ZRXOG EH WHPSRUDULO\ ODLG RII  6PLWK DOVR         WKH KRPH RI WKH ILUVW FKLOG 7KLV XQZULWWHQ H[FHSWLRQ ZDV
UHFHLYHGDOHWWHUWRWKLVHIIHFWGDWHG$SULOLQGLFDWLQJWKDW        HQIRUFHGXQGHU'LDQH6PROLQVNLDEXVGULYHUVXSHUYLVRU
ZLWKWKUHHRXWRIILYHHPSOR\HHVDEVHQW6PLWKZRXOGEHODLG
RII IRU WZR ZHHNV RU OHVV  &ODUN WHVWLILHG EHIRUH WKH $/s     .HQWLVHPSOR\HGDW)LYH&$3DVD+HDG6WDUWEXVGULYHU
KRZHYHUWKDWXSRQKHUUHVLJQDWLRQVKHOHIWWKUHHZHHNVZRUWK            .HQWZDVDQDFWLYHVXSSRUWHURIWKH8QLRQDQGWHVWLILHGDWWKH
RIVFKHGXOHGZRUNIRUERWKWKHLQVSHFWRUVDQGODERUHUV6PLWK           UHSUHVHQWDWLRQ KHDULQJ ,Q 6HSWHPEHU  .HQW EHJDQ
DOVRWHVWLILHGWKDWKHFRXOGKDYHSHUIRUPHG%HORQJLDjVWDVNV             GULYLQJWKH,URQVURXWHIRXUWLPHVDZHHN$IWHUVXEPLWWLQJ
ZKLOHKHZDVRQVLFN OHDYH6PLWKWROG3RPHUR\RYHUWKH                KLVWLPHVKHHWV:KLWHDVNHGKLPZK\KHZDVFKDUJLQJIRU
SKRQH WKDW KH ZLVKHG WR FRPSOHWH RQH VXFK RXWVWDQGLQJ            WLPH SULRU WR ZKHQ WKH ILUVW FKLOG ZDV SLFNHG XS  .HQW
SURMHFW LQ RUGHU WR JHW SDLG  $IWHU VSHDNLQJ ZLWK 7UXFNV     H[SODLQHGWKHXQZULWWHQm,URQVURXWHlH[FHSWLRQWKDWKHKDG
3RPHUR\SHUPLWWHG6PLWKWRFRPHLQWRFRPSOHWHWKLVSURMHFW             DOZD\VIROORZHGXQGHU6PROLQVNL+HLQYLWHG:KLWHWRVSHDN
                                                                         WR 6PROLQVNL ZKR KDG VLQFH OHIW )LYH&$3  :KLWH FDOOHG
  6PLWK UHWXUQHG WR ZRUN RQ 0D\  WR FRPSOHWH KLV               6PROLQVNLZKRFRQILUPHGWKDWWKLVZDVWKHVWDQGDUGSUDFWLFH
RXWVWDQGLQJSURMHFW:KLOHKHZDVZRUNLQJRQWKHSURMHFWKH            1RQHWKHOHVV :KLWH LVVXHG .HQW D ZULWWHQ UHSULPDQG IRU
UHFHLYHGDSKRQHFDOOIURPDZRPDQQDPHG6DQGUD)UDOH\                  RYHUFKDUJLQJKLVWLPH:KLWHLQVWUXFWHG.HQWWRFKDUJHKLV
)UDOH\ZDVDIULHQGRI'DUOHQH3LHW]DFOLHQW RI)LYH&$3              WLPHSXUVXDQWWRWKHZULWWHQSROLF\
)UDOH\DVNHG6PLWKZKHQKHZRXOGEHDEOHWRDVVLVW3LHW]ZLWK
KHUZHDWKHUL]DWLRQSURMHFWV6PLWKH[SODLQHGWR)UDOH\WKDWKH             6XEVWDQWLDOHYLGHQFHVXSSRUWVWKH1/5%jVFRQFOXVLRQWKDW
ZDV WHPSRUDULO\ ODLG RII DQG GLG QRW NQRZ ZKHQ 3LHW]jV          WKH UHSULPDQG RI .HQW ZDV OLNHO\ WKH UHVXOW RI DQWLXQLRQ
SURMHFWFRXOGEHFRPSOHWHG+HVXJJHVWHGWKDW)UDOH\RU3LHW]           DQLPXVUDWKHUWKDQDQ\OHJLWLPDWHHPSOR\HHSROLF\,QGRLQJ
FDOOWKHORFDO)LYH&$3FRQWDFWSHUVRQRUVSHDNZLWK7UXFNV               VRZHSRLQWWRWKHILQGLQJE\WKH$/sWKDWQRWZLWKVWDQGLQJ
GLUHFWO\                                                               KHUGLVFXVVLRQZLWK6PROLQVNL:KLWHLVVXHGWKHUHSULPDQGWR
                                                                         .HQWZLWKRXWILUVWLVVXLQJDZDUQLQJRUDQRWLFHRIFKDQJHLQ
  /DWHUWKDWGD\7UXFNVUHFHLYHGDSKRQHFDOOIURP/XWKHUDQ             SROLF\0RUHRYHUZHILQGUHDVRQDEOHWKH%RDUGjVFRQFOXVLRQ
6RFLDO6HUYLFHVLQGLFDWLQJWKDWWKH\KDGUHFHLYHGDFRPSODLQW           WKDW)LYH&$3GLGQRWSURIIHUDFUHGLEOHOHJLWLPDWHUHDVRQIRU
IURP )UDOH\ DERXW WKH WLPHOLQHVV RI WKH ZHDWKHUL]DWLRQ            WKHUHSULPDQG*LYHQWKLVVHWRIIDFWVWKH%RDUGGLGQRWHUU
GHSDUWPHQWjVZRUNRQ3LHW]jVPRELOHKRPH7UXFNVWHVWLILHG              LQGHWHUPLQLQJWKDW)LYH&$3KDGYLRODWHG6HFWLRQVD
WKDWLQVSHDNLQJZLWK/XWKHUDQ6RFLDO6HUYLFHVVKHUHDOL]HG             DQGRIWKH$FWE\LVVXLQJWKHUHSULPDQG
WKDW6PLWKKDGYLRODWHG)LYH&$3jVFRQILGHQWLDOLW\SROLF\E\
GLVFXVVLQJWKHEXVLQHVVRIDFOLHQWZLWKDQRQFOLHQW7KDW
    )LYH&$3,QFY1/5%           1RV          1RV           )LYH&$3,QFY1/5%        
                                                                

sDQXDU\)LYH&$3DGYHUWLVHGIRUDQXPEHURIWHDFKLQJ              DIWHUQRRQ 7UXFNV FDOOHG 6PLWK LQWR KHU RIILFH DQG DQJULO\
DQGWHDFKHUjVDLGHSRVLWLRQVWKURXJKWKHLU+HDG6WDUWSURJUDP          UHSULPDQGHG6PLWKIRUYLRODWLQJ)LYH&$3jVFRQILGHQWLDOLW\
DWWKHYDULRXVFHQWHUV.XNOD/DQJH6DQGVWHGWDQG0\HUV            SROLF\ 6PLWKDVNHG7UXFNVLIVKHZDVJRLQJWRILUHKLP
HDFKDSSOLHGIRUQXPHURXVRIWKHVHSRVLWLRQVDQGZHUHQHLWKHU          7UXFNVXOWLPDWHO\UHVSRQGHGm\RXDUHJRLQJWREHILUHGEXW
LQWHUYLHZHGQRUKLUHGIRUDQ\RIWKHVHSRVLWLRQV                      QRW ULJKW QRZl  6PLWK DQG 7UXFNV FRQWLQXHG WR DQJULO\
                                                                       H[FKDQJHZRUGVDQG6PLWKFRQWLQXHGWRDVNLIKHZDVILUHG
   :HDJUHHZLWKWKH1/5%jVILQGLQJWKDW)LYH&$3jVIDLOXUH             7UXFNVRUGHUHG6PLWKWROHDYHWKHEXLOGLQJZKHQKHUHIXVHG
WRUHFDOO.XNOD/DQJH6DQGVWHGWDQG0H\HUVWRHLWKHUWKH            7UXFNVRUGHUHGKHUVHFUHWDU\WRFDOOWKHSROLFH6PLWKWKHQ
+RPH 6WDUW SURJUDP RU VRPH DQDORJRXV SRVLWLRQ ZDV               OHIWWHOOLQJ7UXFNVWKDWKHZRXOGEHLQWRXFKZLWKKHULQWKH
XQODZIXO)LYH&DSFKDOOHQJHVWKH%RDUGjVFRQFOXVLRQDQGLQ           IRUPRIDODZVXLW
SDUWLFXODUWKH$/sjVIDFWXDOILQGLQJWKDWWKHQHZZHOIDUHODZV
ZHUHQRWDOHJLWLPDWHUHDVRQIRUHOLPLQDWLQJWKH+RPH6WDUW               7KDWVDPHGD\7UXFNVVHQW6PLWKDOHWWHULQGLFDWLQJWKDWKH
SURJUDP7KHWHVWLPRQ\RIWKH+RPH6WDUWWHDFKHUVDVWRWKHLU         KDGEHHQWHUPLQDWHGEHFDXVHRIKLVEHKDYLRULQWKHLUPHHWLQJ
SHUFHLYHG DELOLW\ WR DFFRPPRGDWH IDPLOLHV GHVSLWH WKH            6KHWHVWLILHGWKDWVKHGLGQRWKDYHDQ\LQWHQWLRQRIGLVFKDUJLQJ
FKDQJHVLQ ZHOIDUHODZDUJXHV)LYH&$3LVLQVXIILFLHQWWR            6PLWKZKHQVKHFDOOHGKLPLQWRKHURIILFHEXWKLVFRQGXFW
VXSSRUW D ILQGLQJ WKDW )LYH&$3jV UHDVRQV ZHUH SUHWH[WXDO       GXULQJ WKHLU PHHWLQJ ZDV LQDSSURSULDWH DQG PHULWHG
+RZHYHU WKH %RDUG GLG QRW ILQG )LYH&$3jV DFWLRQV WR EH       WHUPLQDWLRQ
XQODZIXORQWKHEDVLVRIWKH+RPH6WDUWWHDFKHUVjDELOLW\WR
DGMXVWWRWKHZHOIDUHODZFKDQJHV5DWKHUWKH%RDUGIRXQG               0LQGIXORIWKHIDFWRUVUHOHYDQWWRDILQGLQJRIDQWLXQLRQ
WZR IDFWRUV WR EH UHOHYDQW ILUVW WKDW 7UXFNV FRQWLQXHG WR   DQLPXVZHILQGWKDWVXEVWDQWLDOHYLGHQFHH[LVWVWRVXSSRUWWKH
FKDQJH KHU WHVWLPRQ\ DV WR WKH UHDVRQV IRU HOLPLQDWLQJ WKH    %RDUGjVGHWHUPLQDWLRQWKDWWKHOD\RIIDQGVXEVHTXHQWILULQJRI
SURJUDPDQGVHFRQGWKDW7UXFNVIDLOHGWRHYHQFRQVLGHUDQ\           6PLWKZDVXQODZIXO6PLWKZDVNQRZQE\7UXFNVWREHDQ
RIWKHKRPHYLVLWWHDFKHUVIRURWKHUSRVLWLRQVDIWHUWKH+RPH          DYLGVXSSRUWHURIWKH8QLRQKHWHVWLILHGDWWKHUHSUHVHQWDWLRQ
6WDUWSURJUDPZDVHOLPLQDWHG7KHGHIHUHQFHJLYHQWRWKH             KHDULQJDQGDOVRREVHUYHGWKH8QLRQHOHFWLRQWKDWWRRNSODFH
$/sjVFUHGLELOLW\ILQGLQJVDQGRWKHUIDFWXDOILQGLQJVVXJJHVWV         WKHVDPHGD\KHZDVODLGRII7KH%RDUGDSSURSULDWHO\IRXQG
WKDW VXEVWDQWLDO HYLGHQFH H[LVWV WR VXSSRUW WKH %RDUGjV         VXVSLFLRXV WKH KDVWH ZLWK ZKLFK 6PLWK ZDV ODLG RII
GHWHUPLQDWLRQWKDW)LYH&$3jVIDLOXUHWRUHFDOOWKHKRPHYLVLW          SDUWLFXODUO\JLYHQWKHEDFNORJRIZHDWKHUL]DWLRQSURMHFWVOHIW
WHDFKHUVZDVQRWWKHVLPSOHUHVXOWRIFKDQJHGZHOIDUHSROLFLHV        E\ &ODUN XSRQ KHU GHSDUWXUH  0RUHRYHU WKH VHYHULW\ RI
EXWLQIDFWDGHOLEHUDWHWDFWLFWRNHHS8QLRQVXSSRUWHUVIURP          7UXFNVjV SXQLVKPHQW RI 6PLWK ILUVW E\ OD\LQJ KLP RII DQG
UHWXUQLQJ WR )LYH&$3  :H WKXV PXVW HQIRUFH WKH %RDUGjV       QH[WE\WHUPLQDWLQJKLPUHODWLYHWRWKHLQVLJQLILFDQFHRIKLV
ILQGLQJDVWRWKLVFODLP                                              DFWVDOVRFRQWULEXWHVWRDILQGLQJWKDW7UXFNVZDVDFWLQJRXWRI
                                                                       DQWLXQLRQ DQLPXV ,QGHHG WKH %RDUG IRXQG LQFUHGLEOH
                                                                       7UXFNVjVMXVWLILFDWLRQIRUWKHWHUPLQDWLRQRI6PLWK)LQDOO\
                                                                       WKHIDFWWKDWDOORIWKHVHHYHQWVWUDQVSLUHGZLWKLQGD\VRIWKH
                                                                       XQLRQHOHFWLRQFHUWDLQO\VXSSRUWVWKH%RDUGjVILQGLQJRIXQIDLU
                                                                       ODERUSUDFWLFHV6HH$GDLU6WDQGLVK&RUSY1/5%)G
                                                                       WK&LUm0RUHLPSRUWDQWO\$GDLUjVGHFLVLRQ
                                                                       WR SRVW WKH WDUGLQHVV SROLF\ DORQJ ZLWK WKH XQLRQ
                                                                       DXWKRUL]DWLRQUHYRFDWLRQQRWLFHLPPHGLDWHO\DIWHUWKHXQLRQ
    )LYH&$3,QFY1/5%            1RV          1RV            )LYH&$3,QFY1/5%          
                                                                 

HOHFWLRQEHOLHVWKHFRPSDQ\jVDVVHUWLRQWKDWWKHSRVWHGSROLF\          \HDU$VDUHVXOWWKHIRXUWHDFKHUVZHUHQRWUHFDOOHGWRWKHLU
ZDV QRWKLQJ PRUH WKDQ D IRUPDO VWDWHPHQW RI H[LVWLQJ            SRVLWLRQVDV+RPH6WDUWWHDFKHUV
SURWRFROl7KH1/5%FRQFOXGHGRQWKHEDVLVRIVXEVWDQWLDO
HYLGHQFH WKDW 7UXFNV DFWHG EDVHG XSRQ KHU GLVGDLQ IRU WKH        7UXFNV WHVWLILHG WKDW VKH GLG QRW DSSO\ IRU +RPH 6WDUW
8QLRQUDWKHUWKDQDQ\OHJLWLPDWHHPSOR\HUUHODWHGUHDVRQ               IXQGLQJ EHFDXVH RI FKDQJHV LQ 0LFKLJDQ ZHOIDUH ODZV WKDW
                                                                        PDQGDWHGWKDWZHOIDUHUHFLSLHQWVLQFOXGLQJWKRVHZLWKVPDOO
        7KH'LVFKDUJHRI7RP%HORQJLD                                 FKLOGUHQ ZRUN WZHQW\ KRXUV SHU ZHHN DV D FRQGLWLRQ RI
                                                                        UHFHLYLQJZHOIDUHEHQHILWV%HFDXVHWKH+RPH6WDUWSURJUDP
   ,Q0D\%HORQJLDDQDFWLYH8QLRQVXSSRUWHUUHWXUQHGWR             UHTXLUHGSDUHQWVWREHKRPHZKHQWKHKRPHYLVLWWHDFKHULV
)LYH&$3 DIWHU D SHULRG RI VLFN OHDYH 6KRUWO\ WKHUHDIWHU       SUHVHQW VFKHGXOLQJ DURXQG ZRUN REOLJDWLRQV EHFDPH WRR
VHYHUDO)LYH&$3HPSOR\HHVLQFOXGLQJ3DXOD&ODUNLQLWLDWHG             WHGLRXV DQG WKXV WKH SURJUDP ZDV FDQFHOHG  7UXFNV DOVR
DSHWLWLRQGULYHVHHNLQJWKHUHPRYDORI7UXFNVDQG3RPHUR\              WHVWLILHGWKDWVKHGLGQRWDSSO\IRUIXQGLQJEHFDXVHWKH+RPH
IRUmLPSURSHUPDQDJHPHQWXQIDLUODERUSUDFWLFHVDQGEUHDFK            6WDUWSURJUDPZDVQRWZHOOUHFHLYHGE\WKHSDUHQWV
RIILGXFLDU\GXWLHVl$WWKHHQGRI0D\7UXFNVDQG3RPHUR\
UHDOL]HG WKDW VXFK D SHWLWLRQ ZDV EHLQJ FLUFXODWHG DQG            7KH +RPH 6WDUW WHDFKHUV WHOO D GLIIHUHQW VWRU\ KRZHYHU
LPPHGLDWHO\ EHJDQ LQWHUYLHZLQJ HPSOR\HHV DERXW WKHLU               6DQGUD5RW]HLQWKH+RPH6WDUWVXSHUYLVRUWHVWLILHGEHIRUH
NQRZOHGJH DQG LQYROYHPHQW LQ WKH SHWLWLRQ  2Q 0D\          WKH $/s WKDW SDUHQWV ZHUH SOHDVHG ZLWK WKH +RPH 6WDUW
7UXFNVFDOOHG%HORQJLDLQWRKHURIILFHWRDVNKLPLIKHKDG             SURJUDPV LQ 0DQLVWHH DQG /DNH &RXQWLHV  5RW]HLQ DOVR
DQ\NQRZOHGJHRIWKHSHWLWLRQ%HORQJLDUHOXFWDQWO\DGPLWWHG           WHVWLILHGWKDWZKLOHSUHHQUROOPHQWZDVGRZQIURPSULRU\HDUV
WRKDYLQJVHHQWKHSHWLWLRQEXWUHIXVHGWRVD\DQ\WKLQJIXUWKHU        WKHUH ZHUH VWLOO D UHODWLYHO\ VLJQLILFDQW QXPEHU RI FKLOGUHQ
DERXW LW  7UXFNV WROG %HORQJLD WKDW LQ WKH IXWXUH LW ZDV    HQUROOHGDQGSDUHQWVLQWHUHVWHGLQNHHSLQJWKHLUFKLOGUHQLQWKH
LPSRUWDQW WKDW KH WHOO KHU RI DQ\WKLQJ KH NQHZ DERXW WKH      SURJUDP)XUWKHUPRUHDOOIRXUWHDFKHUVWHVWLILHGWKDWWKHQHZ
SHWLWLRQ%HORQJLDWROG7UXFNVWKDWLIKHNQHZRIVRPHRQH              ZHOIDUHODZVZRXOGQRWEHSURKLELWLYHRIUXQQLQJWKH+RPH
WU\LQJWRKDUP)LYH&$3KHZRXOGEULQJLWWRKHUDWWHQWLRQ             6WDUWSURJUDPWKHWHDFKHUVZHUHDOOZLOOLQJWRZRUNDURXQG
EXWWKDWWKHSHWLWLRQZDVVLPSO\VXSSRUWLQJWKH8QLRQDQGKH           SDUHQWVjVFKHGXOHVVRDVWRDFFRPPRGDWHWKHLUMREVDQGWKHLU
ZRXOGQRWUHSRUWRWKHUVjLQYROYHPHQWLQLW7UXFNVVDLGWKDW           QHHGIRUHGXFDWLRQDODVVLVWDQFH7KH*HQHUDO&RXQVHODOOHJHG
LI%HORQJLDWUXO\IHOWWKDWZD\LWPLJKWEHmDJRRGWLPHIRU           WKDW7UXFNVjVIDLOXUHWRDSSO\IRUIXUWKHU+RPH6WDUWIXQGLQJ
KLP WR JRl  %HORQJLD WROG 7UXFNV WKDW KH ZDV ORRNLQJ IRU    WKXVZDVDSOR\WRHOLPLQDWHDYLG8QLRQVXSSRUWHUVLQGHHG
DQRWKHU MRE DQG KH PLJKW KDYH DQRWKHU MRE LQ D PRQWK        7UXFNVRQFHVWDWHGGXULQJWKHXQLRQFDPSDLJQWKDWmVKHZDV
7UXFNVWROG%HORQJLDWKDWKHFRXOGVWD\RQDW)LYH&$3IRU               QRW JRLQJ WR ILJKW IRU IXQGLQJ IRU MREV RI SHRSOH WKDW VKH
WKLUW\GD\VGXULQJZKLFKKHFRXOGILQGDQRWKHUMRERQWKH             FRXOGQjWWUXVWl
FRQGLWLRQ WKDW KH VKDUH DQ\ LQIRUPDWLRQ KH GLVFRYHUHG
UHJDUGLQJ WKH SHWLWLRQ  ,I KH IDLOHG WR FRPSO\ ZLWK WKLV       8SRQ ILQGLQJ WKDW WKH\ ZHUH QRW WR EH UHFDOOHG IRU WKH
FRQGLWLRQ 7UXFNV WROG KLP m, FDQ DVVXUH \RX \RXU DVV LV    XSFRPLQJVFKRRO\HDUDOOIRXUWHDFKHUVVHSDUDWHO\LQTXLUHG
JUDVV  $QG ,jP ZDUQLQJ \RX , ZLOO QRW WROHUDWH LWl  2Q   DERXW DOWHUQDWLYH WHDFKLQJ SRVLWLRQV WKDW WKH\ FRXOG ILOO
sXQH7UXFNVVHQW%HORQJLDDPHPRUDQGXPVXPPDUL]LQJ                   0HOED:KLWHWKHVXSHUYLVRULQFKDUJHRI+HDG6WDUWQRWLILHG
WKHLUPHHWLQJLQFOXGLQJWKHIDFWWKDW%HORQJLDDJUHHGWROHDYH         HDFKWHDFKHUWKDWWKHUHZHUHQRDYDLODEOHMREVIRUWKHPLQDQ\
LQWKLUW\GD\VRQWKHFRQGLWLRQWKDWKHUHSRUWWRKHUDQ\WKLQJ         RIWKH+HDG6WDUWIDFLOLWLHVRWKHUWKDQSRVLWLRQVIRUZKLFKWKH\
KHKHDUGDERXWSHWLWLRQVDJDLQVWPDQDJHPHQW                            ZHUH XQTXDOLILHG +RZHYHU EHWZHHQ $XJXVW  DQG
    )LYH&$3,QFY1/5%          1RV        1RV             )LYH&$3,QFY1/5%          
                                                             

:LOOLVZDVKLVSURWHFWHGDFWLYLW\RIFLUFXODWLQJWKHSHWLWLRQ          2QsXQH7UXFNVFDOOHG%HORQJLDLQWRKHURIILFHWRUHTXHVW
>IRULQFUHDVHGYDFDWLRQWLPH@l                                   D UHSRUW WKDW VKH KDG DVVLJQHG WR KLP RQ WKH GD\ EHIRUH
                                                                    %HORQJLDUHSOLHGWKDWKHKDGXQGHUVWRRGWKDWWKHUHSRUWZDV
   :H ILQG QR HUURU LQ WKH %RDUGjV FRQFOXVLRQ WKDW WKH     GXHWKHQH[WGD\WKDWWKHUHSRUWZDVRQO\SDUWLDOO\FRPSOHWHG
GLVFKDUJH RI )XJHUH ZDV ZKROO\ XQODZIXO ,W LV UHDGLO\      DQG WKDW KH QHHGHG WR OHDYH DW  WKDW GD\ IRU SHUVRQDO
DSSDUHQW WKDW WKH SHWLWLRQ ZDV UHODWHG WR WKH ZRUNLQJ       UHDVRQV7UXFNVWROG%HORQJLDWKDWLIKHGLGQRWFRPSOHWHWKH
FRQGLWLRQVDW)LYH&$3%\LWVYHU\WHUPVWKHSHWLWLRQVRXJKW      UHSRUWWKDWGD\KHVKRXOGQRWFRPHEDFNWRZRUN
WKH UHPRYDO RI 7UXFNV DQG 3RPHUR\ IRU WKHLU IDLOXUH WR
PDQDJH)LYH&$3SURSHUO\0RUHRYHUORFDOSUHVVFRYHUDJH              %HORQJLDLJQRUHG7UXFNVjVVWDWHPHQWDQGUHWXUQHGWRZRUN
RIWKHSHWLWLRQGULYHUHIOHFWHGERWK&RQFHUQHG&LWL]HQVjDQG        WKH QH[W GD\  8SRQ KLV DUULYDO 7UXFNV VWRSSHG KLP IURP
7UXFNVjVXQGHUVWDQGLQJWKDWWKHSHWLWLRQGULYHZDVUHODWHGWR       VLJQLQJ LQ DQG WROG KLP WR OHDYH   7KH WZR WKHQ EHJDQ WR
WKH8QLRQDQGDOOHJHGXQIDLUODERUSUDFWLFHVDW)LYH&$37KDW       DUJXH%HORQJLDWROG7UXFNVWKDWLIKHZDVILUHGKHZDQWHG
WKHSHWLWLRQH[SOLFLWO\DQGLPSOLFLWO\UHJDUGHGPDQDJHPHQW         KHUWRSXWLWLQZULWLQJ7UXFNVWROG%HORQJLDWKDWKHZRXOG
HPSOR\HHUHODWLRQVKLSVDQGWKDW7UXFNVXQGHUVWRRGLWWREH         UHFHLYH VRPHWKLQJ LQ WKH PDLO EXW KH VKRXOG OHDYH
VRLVUHSUHVHQWDWLYHRIVXEVWDQWLDOHYLGHQFHWKDW)XJHUHZDV       LPPHGLDWHO\  %HORQJLD UHIXVHG WR OHDYH VWDWLQJ WKDW KH
HQJDJLQJ LQ SURWHFWHG DFWLYLW\ DQG WKXV ZDV XQODZIXOO\       ZLVKHGWRUHWULHYHKLVSHUVRQDOEHORQJLQJV7UXFNVWROGKHU
WHUPLQDWHGLQYLRODWLRQRI6HFWLRQVDDQG                VHFUHWDU\WRFDOOWKHSROLFHDQGWROG%HORQJLDQRWWRUHWULHYH
                                                                    KLVEHORQJLQJV:KHQWKHSROLFHRIILFHUDUULYHG7UXFNVWROG
  & 7KH(OLPLQDWLRQRIWKH+RPH6WDUW3URJUDPDQGWKH              KLPWKDWVKHKDGDVNHG%HORQJLDWROHDYHILYHWLPHVDQGKH
     )DLOXUH WR 5HFDOO 0HOLVVD .XNOD $PDQGD /DQJH           KDG UHIXVHG WR GR VR  %HORQJLD H[SODLQHG WKDW KH ZDV DQ
     .DUHQ6DQGVWHGWDQGsDQH0H\HUV                               HPSOR\HH DQG 7UXFNV UHVSRQGHG  m1RW DQ\PRUHl  7KH
                                                                    SROLFHRIILFHUDVNHG%HORQJLDWROHDYHDQGKHFRPSOLHG7KH
   )LYH&$3PDLQWDLQVDIHGHUDOO\IXQGHG+HDG6WDUWSURJUDP         QH[WGD\7UXFNVVHQWDOHWWHUWR%HORQJLDLQGLFDWLQJWKDWKH
DFKLOGGHYHORSPHQWSURJUDPWKDWRSHUDWHVLQHLJKWFHQWHUVLQ       KDG EHHQ WHUPLQDWHG IRU KLV FRQGXFW LQ WKHLU PHHWLQJ RQ
)LYH&$3jV IRXU FRXQW\ DUHD  $V SDUW RI WKLV SURJUDP      sXQHQDPHO\KLVXVHRILQVXOWVDQGWKUHDWVRIYLROHQFH
)LYH&$3 DOVR PDLQWDLQV D +RPH 6WDUW SURJUDP WKURXJK
ZKLFKKRPHYLVLWWHDFKHUVWUDYHOWRWKHKRPHVRISUHVFKRRO            :H DJUHH ZLWK WKH %RDUG WKDW WKHUH H[LVWV VXEVWDQWLDO
FKLOGUHQ DQG WKHLU SDUHQWV RQ D ZHHNO\ EDVLV WR SURYLGH    HYLGHQFHWKDWWKHGLVFKDUJHRI%HORQJLDZDVXQODZIXO$VDQ
HGXFDWLRQDOVXSSRUW7KH+RPH6WDUWSURJUDPUXQVGXULQJWKH         LQLWLDOPDWWHUZHDJUHHZLWKWKH%RDUGjVILQGLQJWKDW7UXFNV
FRXUVHRIDUHJXODUVFKRRO\HDUDWWKHFORVHRIWKHVFKRRO\HDU   VXJJHVWHGWKDW%HORQJLDUHVLJQEHFDXVHRIKLVVXSSRUWRIWKH
KRPHYLVLWWHDFKHUVDUHODLGRIIXQWLOWKHEHJLQQLQJRIWKHQH[W    8QLRQDQGE\H[WHQVLRQKLVXQZLOOLQJQHVVWRUHSRUWWR7UXFNV
VFKRRO\HDU                                                       WKHDFWLYLWLHVRIIHOORZ8QLRQVXSSRUWHUV)XUWKHUPRUHZH
                                                                    DVVLJQ WKH UHTXLVLWH GHIHUHQFH WR WKH %RDUGjV ILQGLQJ WKDW
   .XNOD /DQJH 6DQGVWHGW DQG 0\HUV DFWLYH 8QLRQ           7UXFNVZDVGLVLQJHQXRXVZKHQVKHLQVLVWHGWKDWVKHKDGQR
VXSSRUWHUV ZHUH DOO +RPH 6WDUW WHDFKHUV IRU WKH     LQWHQWLRQRIWHUPLQDWLQJ%HORQJLDXQWLOKHDFWHGDVKHGLGLQ
VFKRRO \HDU LQ 0DQLVWHH &RXQW\ DQG /DNH &RXQW\ DQG DV     WKHLUsXQHPHHWLQJ*LYHQ7UXFNVjVKDVWHLQILULQJ%HORQJLD
XVXDOODLGRIIDWWKHHQGRIWKHVFKRRO\HDU7KDWVXPPHU         DQGKHUKRVWLOHEHKDYLRUWRZDUGVKLPLQWKHLUPHHWLQJDVZHOO
7UXFNVGLGQRWDSSO\IRUIXQGLQJIRUWKH+RPH6WDUWSURJUDPV        DV KHU FRQFHVVLRQ WKDW %HORQJLDjV VNLOOV ZHUH YHU\ PXFK
LQ0DQLVWHH&RXQW\DQG/DNH&RXQW\IRUWKHVFKRRO           QHHGHG LQ WKH ZHDWKHUL]DWLRQ GHSDUWPHQW WKH %RDUGjV
       )LYH&$3,QFY1/5%         1RV           1RV           )LYH&$3,QFY1/5%         
                                                                  

FRQFOXVLRQ LV VRXQG  ,QGHHG LW DSSHDUV WKDW WKH KHDWHG        7UXFNV LV DQWLXQLRQ 2QFH 7UXFNV EHFDPH DZDUH RI WKH
H[FKDQJHEHWZHHQ7UXFNVDQG%HORQJLDZDVDQH[WHQVLRQRI                 SHWLWLRQVKHFDOOHG)XJHUHLQWRKHURIILFHWRPHHWZLWKKHUVHOI
WKHODUJHUFRQIOLFWEHWZHHQWKHWZRQDPHO\WKDW%HORQJLDZDV            DQG 3RPHUR\ 7UXFNV WROG )XJHUH WKDW VKH ZRXOG EH WDSH
XQZLOOLQJ WR KHOS KHU VDERWDJH DFWLYLW\ DPRQJ )LYH&$3             UHFRUGLQJWKHLUFRQYHUVDWLRQ7UXFNVWROG)XJHUHWKDWVKHKDG
8QLRQVXSSRUWHUV7KDW7UXFNVFOHDUO\DFWHGRQWKHEDVLVRI             EUHDFKHG)LYH&$3jVDQWLVROLFLWDWLRQSROLF\DQGDGYLVHGKHU
DQWLXQLRQ DQLPXV LV PRUH WKDQ VXSSRUWHG E\ VXEVWDQWLDO           WRKLUHDQDWWRUQH\
HYLGHQFH
                                                                            7KH QH[W GD\ ZKHQ )XJHUH DUULYHG DW ZRUN 3RPHUR\
          7KH/D\RIIVRI'DYLG0RQWRQDQG$UW%XUNHO                   KDQGHG )XJHUH D W\SHG WUDQVFULSW RI KHU FRQYHUVDWLRQ ZLWK
                                                                         7UXFNVDQGDVNHG)XJHUHWRVLJQLW)XJHUHUHIXVHGWRVLJQWKH
     L 7KH/D\RIIRI%XUNHOIURP$XJXVWXQWLO$XJXVW               GRFXPHQW VWDWLQJ WKDW VKH ZRXOG ILUVW OLNH WR FRQVXOW DQ
                                                                         DWWRUQH\7UXFNVWROG)XJHUHWKDWVKHZDVILUHGZKHQ)XJHUH
                                                                         DVNHGIRUDUHDVRQ7UXFNVWROGKHUWRUHDGWKHWUDQVFULSWRI
  $IWHUERWK6PLWKDQG%HORQJLDZHUHWHUPLQDWHG0RQWRQ                  WKHLUFRQYHUVDWLRQ$IHZGD\VODWHU)XJHUHUHFHLYHGDOHWWHU
DQG %XUNHO FRQWLQXHG WR SHUIRUP WKHLU ZRUN LQ WKH                IURP7UXFNVLQGLFDWLQJWKDW)XJHUHKDGEHHQWHUPLQDWHGIRU
ZHDWKHUL]DWLRQ GHSDUWPHQW DV FUHZ OHDGHU DQG ODERUHU              JURVV LQVXERUGLQDWLRQ DULVLQJ RXW RI )XJHUHjV DFWLRQV
UHVSHFWLYHO\,QPLGsXO\0RQWRQVXIIHUHGDQRQZRUN             UHJDUGLQJWKHSHWLWLRQ
UHODWHGLQMXU\FDXVLQJKLPWRWDNHVLFNOHDYH$VWKHVROH
PHPEHURIWKHZHDWKHUL]DWLRQGHSDUWPHQW%XUNHOFRQWLQXHG                   6HFWLRQ  RI WKH 1/5$ JUDQWV HPSOR\HHV WKH ULJKW WR
WR ZRUN RQ VHYHUDO SURMHFWV E\ KLPVHOI WKRXJK VRPHWLPHV         HQJDJHLQmFRQFHUWHGDFWLYLWLHVIRUWKHSXUSRVHRIFROOHFWLYH
3RPHUR\ZRXOGDVVLVWKLP2Q$XJXVW%XUNHOZDVQRWLILHG              EDUJDLQLQJRURWKHUPXWXDODLGRUSURWHFWLRQl$QHPSOR\HU
WKDWEHFDXVH0RQWRQZDVRQVLFNOHDYHLWZRXOGEHXQVDIHIRU            YLRODWHV 6HFWLRQV D DQG  RI WKH $FW ZKHUHYHU LW
KLPWRFRPSOHWHSURMHFWVRQKLVRZQ%XUNHOZDVWKHQODLG               KLQGHUV RU LQWHUIHUHV ZLWK DQ HPSOR\HHjV SDUWLFLSDWLRQ LQ
RIIIURP$XJXVWXQWLO$XJXVWZKHQ0RQWRQUHWXUQHG                 DFWLYLWLHV HQFRPSDVVHG E\ 6HFWLRQ   $V D UXOH RI WKXPE
IURPVLFNOHDYH                                                         SURWHFWHG DFWLYLW\ PXVW UHJDUG mHPSOR\HHVj UHODWLRQV ZLWK
                                                                         WKHLUHPSOR\HUDQGWKXVFRQVWLWXWHDPDQLIHVWDWLRQRIDµODERU
  7KH%RDUGFRQGXFWHGDWZRVWHSDQDO\VLVLQGHWHUPLQLQJ                 GLVSXWHjl1/5%Y/HVOLH0HWDO$UWV&R,QF)G
WKDW WKH OD\RII RI %XUNHO IURP $XJXVW  WKURXJK  ZDV         WK&LU:KHUHHPSOR\HHDFWLYLW\LQYROYHVWKH
XQODZIXO)LUVWWKH1/5%FRQFOXGHGWKDW)LYH&$3FDUULHGLWV             FLUFXODWLRQRIDSHWLWLRQWKDWSHWLWLRQPXVWUHJDUGLQVRPHZD\
EXUGHQXQGHU:ULJKW/LQHLQGHPRQVWUDWLQJWKDWWKHUHZDVD               WKHFRQGLWLRQVRIHPSOR\PHQWRWKHUZLVHLWLVQRWFRQVLGHUHG
OHJLWLPDWHUHDVRQIRUOD\LQJRII%XUNHOIURP$XJXVWWKURXJK            SURWHFWHGDFWLYLW\,G6HHDOVRsRDQQD&RWWRQ0LOOV&RY
$XJXVW  QDPHO\ WKDW LW ZRXOG EH XQVDIH IRU %XUNHO WR        1/5%)GWK&LUFLUFXODWLRQRIDSHWLWLRQ
FRPSOHWHSURMHFWVE\KLPVHOI+RZHYHUWKH1/5%FRQFOXGHG               E\ DQ HPSOR\HHIRUWKHUHPRYDORIDIRUHPDQIRUSHUVRQDO
WKDWEHFDXVHWKHXQODZIXOGLVFKDUJHRI6PLWKDQG%HORQJLD                UHDVRQVLVQRWSURWHFWHGDFWLYLW\+RZHYHUZKHUHWKHSHWLWLRQ
ZHUH WKH SUR[LPDWH FDXVH RI WKH DEVHQFH RI HPSOR\HHV            VHHNV WKH DPHOLRUDWLRQ RI ZRUNUHODWHG FRQGLWLRQV WKH
DYDLODEOHWRDFFRPSDQ\%XUNHOKLVOD\RIIZDVDOVRXQODZIXO             FLUFXODWLRQRIDSHWLWLRQLVFRQVLGHUHGSURWHFWHGDFWLYLW\6HH
                                                                         1/5%Y3\URPDWLFV,QF)GWK&LU
                                                                         m7KHUHLVVXEVWDQWLDOHYLGHQFHWRVXSSRUWDILQGLQJWKDWWKH
                                                                        SULQFLSDO UHDVRQ RU GRPLQDQW PRWLYH IRU WKH GLVFKDUJH RI
     0HPEHU %UDPH GLVVHQWHG IURP WKLV SRUWLRQ RI WKH %RDUGjV GHFLVLRQ
    )LYH&$3,QFY1/5%            1RV          1RV            )LYH&$3,QFY1/5%          
                                                                 

  $V WR WKH WROOLQJ RI WKH EDFNSD\ RUGHU ZH DUH OLNHZLVH     7KH 1/5% UHDVRQHG WKDW HYHQ DVVXPLQJ %XUNHO ZDV D
ERXQG WR WKH %RDUGjV ILQGLQJ WKDW WKH EDFNSD\ RUGHU ZDV        µQHXWUDOjHPSOR\HH
PHUHO\DQDWWHPSWWRVDYHIDFHGD\VEHIRUHWKHKHDULQJ7KXV
ZHMRLQLQWKH%RDUGjVILQGLQJWKDWWKHEDFNSD\RUGHUZDVQRW             KLV OD\RII ZDV WKH GLUHFW UHVXOW RI DFWLRQ WKDW WKH
WROOHGDVRIsDQXDU\                                            5HVSRQGHQWFOHDUO\WRRNIRUDQXQODZIXOPRWLYH,QWKLV
                                                                          UHJDUG %XUNHOjV VLWXDWLRQ ZDV QRW XQOLNH WKDW RI
  % 7KH'LVFKDUJHRI&RPPXQLW\6XSSRUW:RUNHU9HUQD                      HPSOR\HHVZKRDUHGLVFKDUJHGRURWKHUZLVHGLVFLSOLQHG
     )XJHUH                                                               DVWKHUHVXOWRIDIDFLDOO\XQODZIXOUXOHRUDUXOHRUFKDQJH
                                                                          LQ SROLF\ ZKLFK DQ HPSOR\HU LQVWLWXWHV IRU XQODZIXO
   8SRQKHUGHSDUWXUHDVZHDWKHUL]DWLRQGLUHFWRU&ODUNDORQJ            UHDVRQV
ZLWKDQXPEHURIRWKHUIRUPHUHPSOR\HHVGLVVDWLVILHGZLWK
WKH VWDWH RI DIIDLUV DW )LYH&$3 IRUPHG D JURXS FDOOHG         7KH%RDUGUHDVRQHGWKDWUHJDUGOHVVRIZKHWKHU%XUNHOKLPVHOI
m&RQFHUQHG &LWL]HQV IRU D %HWWHU )LYH&$3l m&RQFHUQHG             ZDVDWDUJHWRIDQWLXQLRQDQLPXVWKHIDFWWKDWKLVOD\RIIZDV
&LWL]HQVl  1RWZLWKVWDQGLQJ )LYH&$3jV QRVROLFLWDWLRQ              DUHVXOWRIXQODZIXODFWLRQPDNHVLWOLNHZLVHXQODZIXODVD
SROLF\ XQGHU ZKLFK HPSOR\HHV DUH SURKLELWHG IURP                 VRUWRImIUXLWRIWKHSRLVRQRXVWUHHl
FLUFXODWLQJ SHWLWLRQV RU DQ\ RWKHU PDWHULDOV ZLWKRXW SULRU
DSSURYDOIURPPDQDJHPHQW&RQFHUQHG&LWL]HQVLQLWLDWHGD                  :HILQGWKDWWKHODWWHUSRUWLRQRIWKH%RDUGjVDQDO\VLVODFNV
SHWLWLRQGULYH7KHGULYHVRXJKWWKHUHPRYDORI7UXFNVDQG              VXEVWDQWLDO IDFWXDO VXSSRUW DQG GRHV QRW VDWLVI\ WKH WHVW LQ
3RPHUR\ IURP WKHLU UHVSHFWLYH SRVLWLRQV DW )LYH&$3               :ULJKW /LQH  %HFDXVH WKH %RDUG IRXQG WKDW )LYH&$3
&RQFHUQHG &LWL]HQV DFFXVHG 7UXFNV DQG 3RPHUR\ RI                  SRVVHVVHG D OHJLWLPDWH UHDVRQ IRU OD\LQJ RII %XUNHO WKH
PLVKDQGOLQJ )LYH&$3 IXQGV E\ FXWWLQJ SURJUDPV \HW                 EXUGHQUHPDLQVZLWKWKH*HQHUDO&RXQVHOWRGHPRQVWUDWHWKDW
DFFRUGLQJWKHPVHOYHVUDLVHVWHUPLQDWLQJQHHGHGHPSOR\HHV               )LYH&$3QRQHWKHOHVVDFWHGRQWKHEDVLVRIDQWLXQLRQDQLPXV
ZLWKRXWUHSODFLQJWKHPDQGXVLQJ)LYH&$3jVIXQGVWRGHWHU              6HH:ULJKW/LQHY1/5% )GVW&LU
WKH 8QLRQjV FDPSDLJQ 7KH JURXS DOVR EHJDQ SLFNHWLQJ              HQIRUFLQJ :ULJKW /LQH  1/5%  
RXWVLGHRI)LYH&$3jV6FRWWVYLOOHRIILFHJDUQHULQJDWWHQWLRQ            m:LWK UHVSHFW WR WKLV XOWLPDWH TXHVWLRQ RI D GHWHUPLQLQJ
IURPWKHORFDOSUHVV7ZRDUWLFOHVDSSHDUHGLQWKH/XGLQJWRQ            FDXVDO OLQN EHWZHHQ WKH EDG PRWLYH DQG WKH GLVFKDUJH WKH
'DLO\1HZVRQsXQHDQGERWKRIZKLFKFKURQLFOHG             EXUGHQ RI SHUVXDVLRQ UHPDLQV DOZD\V ZLWK WKH *HQHUDO
WKHDFWLYLWLHVRI&RQFHUQHG&LWL]HQVDQGWKHSHQGLQJXQIDLU             &RXQVHOl+RZHYHUWKH%RDUGGLGQRWUHTXLUHWKLVRIWKH
ODERU FKDUJHV WKDW KDG EHHQ ILOHG E\ WKH 15/% DJDLQVW          *HQHUDO &RXQVHO LW PHUHO\ LPSXWHG WKH EXUGHQ WKDW WKH
)LYH&$37UXFNVZDVTXRWHGLQWKHDUWLFOHDVVD\LQJWKDWWKH            *HQHUDO&RXQVHOFDUULHGZLWKUHVSHFWWR6PLWKDQG%HORQJLD
DFWLYLWLHVRI&RQFHUQHG&LWL]HQVZHUHPRVWO\DSOR\E\WKH              2QFH WKH %RDUG GHWHUPLQHG WKDW )LYH&$3 SRVVHVVHG D
8QLRQWRHOHYDWHLWVEDUJDLQLQJSRVLWLRQ0RUHRYHUVKHVWDWHG          OHJLWLPDWH UHDVRQ IRU OD\LQJ RII %XUNHO WKXV VDWLVI\LQJ LWV
WKDWWKH8QLRQKDGDOZD\VLQWHQGHGWRUHPRYHKHUIURPKHU               EXUGHQXQGHU:ULJKW/LQHWKH*HQHUDO&RXQVHOLVUHTXLUHG
SRVLWLRQDW)LYH&$3                                                    PDNH D SDUWLFXODUL]HG VKRZLQJ WKDW )LYH&$3 QRQHWKHOHVV
                                                                        DFWHGRQWKHEDVLVRIDQWLXQLRQDQLPXV7KH%RDUGFDQQRW
  ,Q ODWH 0D\  &ODUN JDYH D FRS\ RI WKLV SHWLWLRQ WR   VLPSO\LQIHUVXFKDQLPXVIURPVHSDUDWHDFWVLQYROYLQJRWKHU
)XJHUHDFRPPXQLW\VXSSRUWZRUNHULQ)LYH&$3jV0DVRQ                   HPSOR\HHVSDUWLFXODUO\KHUHZKHUHWKHUHH[LVWVDQHXWUDOIDFW
RIILFH)XJHUHLQWXUQFLUFXODWHGWKHSHWLWLRQWRVHYHUDOIHOORZ        KHDYLO\FRQWULEXWLQJWR%XUNHOjVOD\RII0RQWRQjVDEVHQFHGXH
HPSOR\HHV XUJLQJ WKHP WR VXSSRUW WKH SHWLWLRQ EHFDXVH           WRVLFNOHDYH7KHUHFRUGLQGLFDWHVWKDW0RQWRQDQG%XUNHO
    )LYH&$3,QFY1/5%           1RV         1RV            )LYH&$3,QFY1/5%         
                                                               

UHJXODUO\FRPSOHWHGSURMHFWVWRJHWKHUDQGFRQWLQXHGWRGRVR          WR %XUNHO DQG 0RQWRQ RQ sDQXDU\   WKH $/s DOVR
ZLWKRXW WKH DVVLVWDQFH RI HLWKHU 6PLWK RU %HORQJLD IRU VL[   IRXQGUHOHYDQWWKHIDFWWKDWWKHVHOHWWHUVZHUHVHQWWKUHHGD\V
ZHHNVSULRUWR0RQWRQjVDEVHQFH0RUHRYHURQFH0RQWRQ               EHIRUHWKHKHDULQJ7KH$/sFRQFOXGHGWKDW)LYH&$3VHQWWKH
UHFRYHUHG ERWK KH DQG %XUNHO ZHUH UHFDOOHG DOEHLW            OHWWHUVDWWKDWWLPHmLQDQDWWHPSWWROHQGVRPHFUHGHQFHWRLWV
WHPSRUDULO\WRZRUN7KHUHIRUHWKHXQODZIXOGLVFKDUJHRI           SXUSRUWHGGHIHQVHWKDWODFNRIVXSHUYLVLRQZDVUHVSRQVLEOHIRU
6PLWKDQG%HORQJLDZLWKRXWPRUHLVLQVXIILFLHQWWRVXVWDLQ          WKH OD\RIIl 7KH 1/5% FRQFXUUHG LQ WKH $/sjV FRQFOXVLRQ
WKH*HQHUDO&RXQVHOjVEXUGHQXQGHU:ULJKW/LQH$VVXFK             WKDWWKHVHOD\RIIVZHUHXQODZIXO
WKH %RDUGjV GHWHUPLQDWLRQ LV QRW VXSSRUWHG E\ VXEVWDQWLDO
HYLGHQFHDQGZLOOQRWEHHQIRUFHG                                       )LYH&$3FKDOOHQJHVWKH%RDUGjVGHWHUPLQDWLRQDVWRWKH
                                                                      SRVW$XJXVWOD\RIIVRI%XUNHODQG0RQWRQRQO\DVWRWKH
     LL 7KH /D\RIIV RI %XUNHO DQG 0RQWRQ 2Q DQG $IWHU        SHULRG RI WLPH IURP $XJXVW  WKURXJK 6HSWHPEHU  WKH
         $XJXVW                                                    GDWHRQZKLFK7UXFNVKLUHG9DQ$WWHU)LYH&$3DUJXHVWKDW
                                                                      LWGHPRQVWUDWHGDOHJLWLPDWHUHDVRQIRUIDLOLQJWRUHFDOO%XUNHO
  2Q$XJXVW0RQWRQFDOOHG3RPHUR\WRWHOOKLPWKDWKH             DQG 0RQWRQ GXULQJ WKLV WLPH SHULRG QDPHO\ WKDW 0DVRQ
ZDV UHDG\ WR UHWXUQ WR ZRUN 3RPHUR\ VXJJHVWHG WKDW ERWK     QHHGHGWLPHWRDFFOLPDWHWRKLVSRVWDQGDIWHUKHUHVLJQHG
%XUNHO DQG 0RQWRQ UHWXUQ WKH QH[W GD\  +RZHYHU ZKHQ        WKHGHSDUWPHQWZDVLQQHHGRI\HWDQRWKHUGLUHFWRU)LYH&$3
0RQWRQDUULYHGDWZRUNRQ$XJXVW3RPHUR\WROGKLPWKDW            DOVRDUJXHVWKDWDQ\EDFNSD\RUGHUHPDQDWLQJIURPLWVIDLOXUH
KH FRXOG QRW UHFRPPHQFH ZRUN  3RPHUR\ H[SODLQHG WKDW         WR UHFDOO 0RQWRQ DQG %XUNHO VKRXOG EH WROOHG DV RI
7UXFNVGHFLGHGWKDWEHFDXVHWKH\KDGMXVWDSSRLQWHGDQHZ             sDQXDU\  WKH GDWH RQ ZKLFK 0RQWRQ DQG %XUNHO ZHUH
ZHDWKHUL]DWLRQGLUHFWRUWKH\ ZDQWHGWKHGLUHFWRUWRKDYHD          UHFDOOHG
FKDQFHWRmJHWRQKLVIHHWlEHIRUH0RQWRQDQG%XUNHOFRXOG
UHWXUQ                                                                 )LYH&$3jV DUJXPHQWV ODFN PHULW 7KH %RDUG FRUUHFWO\
                                                                      FRQFOXGHGWKDWWKHUHZDVVXEVWDQWLDOHYLGHQFHRIDQWLXQLRQ
  0RQWRQ DQG %XUNHO XOWLPDWHO\ ZHUH UHFDOOHG WR ZRUN RQ       DQLPXV RQ WKH SDUW RI )LYH&$3 DQG WKDW WKH VHDUFK IRU D
sDQXDU\WKUHHGD\VEHIRUHWKH KHDULQJEHIRUHWKH           GLUHFWRUZDVSUHWH[WXDO$VVWDWHGSUHYLRXVO\WKLV&RXUWLV
$/s3RPHUR\H[SODLQHGWKDWZKLOH7UXFNVKDGKLUHGDQHZ             UHTXLUHG WR JLYH VXEVWDQWLDO GHIHUHQFH WR FUHGLELOLW\
GLUHFWRU sDPHV 0DVRQ RQ $XJXVW  0DVRQ UHVLJQHG RQ         GHWHUPLQDWLRQVE\WKH$/sDQGWKXVZHPXVWFUHGLWWKH$/sjV
6HSWHPEHU7UXFNVVXEVHTXHQWO\KLUHG&KDG9DQ$WWHUWR             FRQFOXVLRQWKDW3RPHUR\ZDVGLVLQJHQXRXVDERXW)LYH&$3jV
WDNH RYHU DV ZHDWKHUL]DWLRQ GLUHFWRU RQ 6HSWHPEHU           UHDVRQV IRU ZDLWLQJ WR UHFDOO %XUNHO DQG 0RQWRQ
+RZHYHU 7UXFNV DQG 3RPHUR\ GLG QRW UHFDOO %XUNHO DQG         1RWZLWKVWDQGLQJWKLVILQGLQJKRZHYHUWKHUHFRUGVHHPVWR
0RQWRQXQWLODOPRVWIRXUPRQWKVODWHU                                LQGLFDWHWKDWRWKHUPRWLYHVZHUHDWSOD\,QSDUWLFXODU%XUNHO
                                                                      DQG 0RQWRQ KDG PDQDJHG ZLWKRXW D GLUHFWRU IRU VHYHUDO
 7KH%RDUGIRXQGLQFUHGLEOH3RPHUR\jVWHVWLPRQ\WKDWKH              PRQWKV DV &ODUN UHVLJQHG RQ $SULO   0RUHRYHU ERWK
DQG7UXFNVZDQWHGWRZDLWWRUHFDOO0RQWRQDQG%XUNHOLQ              %XUNHO DQG 0RQWRQ WHVWLILHG WKDW WKHUH ZDV SOHQW\ RI
RUGHUWRDOORZ0DVRQDQGWKHQ9DQ$WWHUWLPHWRDFFOLPDWH           EDFNORJJHG ZRUN WKDW WKH WZR RI WKHP FRXOG KDYH GRQH
WRWKHSRVLWLRQRIGLUHFWRU5DWKHUWKH$/sIRXQGWKHODVW         WRJHWKHU ZLWKRXW WKH DVVLVWDQFH RI D GLUHFWRU  7KHVH IDFWV
PLQXWHGHFLVLRQWREHDSOR\RQWKHSDUWRI7UXFNVWRSURORQJ         FRQWULEXWHWRDVXEVWDQWLDOVKRZLQJRIDQWLXQLRQDQLPXV
%XUNHOjV DQG 0RQWRQjV OD\RIIV  0RUHRYHU ZKLOH WKH $/s
DFNQRZOHGJHGWKDW3RPHUR\WHVWLILHGWKDWKHVHQWUHFDOOOHWWHUV