01a0076p.06

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 DS
81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
BBBBBBBBBBBBBBBBB
0,&+$(/ +$0,/721
,QGHSHQGHQW)LGXFLDU\6&,:
+HDOWK :HOIDUH7UXVW)XQG
6287+(51 &281&,/ 2)
,1'8675,$/ :25.(56
+($/7+ :(/)$5( 75867
)81'
3ODLQWLIIV$SSHOODQWV
Y
-$0(6 : &$5(// $&+,(9(5
&25325$7,21 -: &$5(//
$'0,1,675$7256 ,1&
-: &$5(//
$'0,1,675$7256
&2168/7$176 ,1&
',9(56,),(' +($/7+
0$1$*(0(17 ,1&
'HIHQGDQWV$SSHOOHHV
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH0LGGOH'LVWULFWRI7HQQHVVHHDW1DVKYLOOH
1R²7KRPDV$+LJJLQV'LVWULFW-XGJH

-- 1 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
7KH +RQRUDEOH 'RQDOG & 1XJHQW 8QLWHG 6WDWHV 'LVWULFW -XGJH IRU
WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ
$UJXHG-DQXDU\
'HFLGHGDQG)LOHG0DUFK
%HIRUH0$57,1&KLHI-XGJH&2/(&LUFXLW-XGJH
18*(17'LVWULFW-XGJH
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 'DYLG 0 &RRN &LQFLQQDWL 2KLR IRU
$SSHOODQWV -DPHV * 7KRPDV 1($/ +$5:(//
1DVKYLOOH7HQQHVVHHIRU$SSHOOHHV21%5,()'DYLG0
&RRN&LQFLQQDWL2KLRIRU$SSHOODQWV-DPHV*7KRPDV
1($/ +$5:(//1DVKYLOOH7HQQHVVHHIRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
5*8<&2/(-5&LUFXLW-XGJH3ODLQWLIIV$SSHOODQWV
0LFKDHO +DPLOWRQ DQG WKH 6RXWKHUQ &RXQFLO RI ,QGXVWULDO
:RUNHUV+HDOWKDQG:HOIDUH7UXVW)XQGDSSHDOWKHGLVWULFW
FRXUW¶VMXGJPHQWHQWHUHGIROORZLQJDEHQFKWULDOLQIDYRURI
'HIHQGDQWV$SSHOOHHV -DPHV : &DUHOO DQG YDULRXV
FRUSRUDWLRQV RZQHG RSHUDWHG DQG FRQWUROOHG E\ &DUHOO
LQFOXGLQJ 'LYHUVLILHG +HDOWK 0DQDJHPHQW ,QF ³'+0´
7KLVDFWLRQVWHPVIURPWKHSXUFKDVHDQGKDQGOLQJRIFHUWDLQ
LQYHVWPHQWV E\ 3 6WHYHQ %HDUG ZKR ZDV HPSOR\HG DV
&RPSWUROOHU RI '+0 EXW ZKR DOVR SHUIRUPHG LQYHVWPHQW
VHUYLFHV IRU WKH WUXVW IXQG 3ODLQWLIIV RULJLQDOO\ ILOHG VXLW
DJDLQVW QXPHURXV GHIHQGDQWV PRVW RI ZKRP KDYH EHHQ
GLVPLVVHGFODLPLQJMRLQWDQGVHYHUDOOLDELOLW\IRUEUHDFKHVRI
ILGXFLDU\ GXWLHV DULVLQJ XQGHU 7LWOH , RI WKH (PSOR\HH
5HWLUHPHQW ,QFRPH 6HFXULW\ $FW ³(5,6$´ 86&
1R +DPLOWRQHWDOY&DUHOOHWDO
$OWKRXJK &DUHOO¶V YDULRXV FRUSRUDWLRQV FHUWDLQO\ KDG DQ
LGHQWLW\RILQWHUHVWV3ODLQWLIIVIDLOHGWRHVWDEOLVKWKDW1$$
ZDV D ³VKHOO´ LQ WKDW WKH FRUSRUDWH IRUP ZDV XVHG IRU
IUDXGXOHQW RU LPSURSHU SXUSRVHV VR DV WR DYRLG D OHJDO
REOLJDWLRQ7KXVZHKROGWKDWWKHGLVWULFWFRXUWGLGQRWHUULQ
UHIXVLQJ WR FROODSVH WKH FRUSRUDWH IRUP VLPSO\ VR WKDW
3ODLQWLIIV FRXOG UHFRYHU EH\RQG WKH VHWWOHPHQW DPRXQW
UHFRYHUHGIURP1$$
&21&/86,21
$FFRUGLQJO\ ZH $)),50 WKH MXGJPHQW RI WKH GLVWULFW
FRXUW

-- 2 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
VWDWH ODZ &RXUWV KDYH ZLWKRXW GLIILFXOW\ GLVUHJDUGHG
IRUPIRUVXEVWDQFHZKHUH(5,6$¶VHIIHFWLYHQHVVZRXOG
RWKHUZLVHEHXQGHUPLQHG
/RZHQ)GDW RWKHUFLWDWLRQVRPLWWHG ,QERWK
/RZHQDQG9DOOH\)LQDQFHWKHFRXUWVZHUHNHHQO\LQWHUHVWHG
LQ WKH IDFW WKDW WKH OLDEOH FRUSRUDWH HQWLWLHV ZHUH XQGHU
FDSLWDOL]HG DV DUH PRVW FRUSRUDWH HQWLWLHV WKDW DUH VHW XS
VLPSO\WRVKLHOGWKHSULQFLSDOVIURPOLDELOLW\6HH/RZHQ
)GDW9DOOH\)LQ)GDW,WLVWKLVDFWRI
VHWWLQJ XS FRUSRUDWH HQWLWLHV DV ³VKHOOV´ VR DV WR VKLHOG
SULQFLSDOVIURPOLDELOLW\WKDWLVUHIHUUHGWRDVD³VKHOOJDPH´±LW
FUHDWHV DQ XQMXVW UHVXOW E\ OHDYLQJ WKH SODLQWLIIV XQDEOH WR
UHFRYHUIURPWKHOLDEOHFRUSRUDWHHQWLWLHV
+HUH1$$ZDVVROYHQWZKHQLWVHWWOHGZLWK3ODLQWLIIVDQG
VXFK VROYHQF\ FXWV DJDLQVW 3ODLQWLIIV¶ DUJXPHQW WKDW &DUHOO
SOD\HGWKH³VKHOOJDPH´DQGVHWXSGLIIHUHQWFRUSRUDWLRQVVR
DVWRDYRLGOLDELOLW\%HFDXVH1$$ZDVVROYHQWWKHUHZDVQR
QHHGWRGLVUHJDUGWKHFRUSRUDWHIRUPVRDVWRDOORZ3ODLQWLIIV
WR REWDLQ VDWLVIDFWLRQ 3ODLQWLIIV UHFRYHUHG IURP
1$$DQGSUHVHQWHGQRHYLGHQFHWKDW1$$FRXOGQRWKDYH
IXQGHGDMXGJPHQWIRUWKHIXOODPRXQWRI3ODLQWLIIV¶GHPDQGV
'HIHQGDQWVGLUHFWWKH&RXUWWR*UHHQY:LOOLDP0DVRQ
&R)6XSS '1- DGHFLVLRQDULVLQJLQWKH
FRQWH[WRIDFRUSRUDWHGHIHQGDQW¶VPRWLRQWRGLVPLVVLQDQ
(5,6$ DFWLRQ IRU EUHDFK RI ILGXFLDU\ GXWLHV EDVHG RQ
LQDSSURSULDWH LQYHVWPHQWV LQ ³VSHFXODWLYH GHULYDWLYH
VHFXULWLHV´ ,G DW 7KH GLVWULFW FRXUW GLVPLVVHG WKH
FRPSODLQW DJDLQVW WKH FRUSRUDWH GHIHQGDQW REVHUYLQJ WKH
³JHQHUDOUXOH´WKDW³DEVHQWIUDXGRUEDGIDLWKDFRUSRUDWLRQ
ZLOO QRW EH KHOG OLDEOH IRU WKH DFWV RI LWV ZKROO\ RZQHG
VXEVLGLDULHVRURWKHUDIILOLDWHV´,GDW7KHGLVWULFWFRXUW
IXUWKHUQRWHGWKDWHYHQLQOLJKWRI(5,6$¶VSROLF\JRDOZKLFK
PD\ ZDUUDQW WKH UHOD[DWLRQ RI GHIHUHQFH DIIRUGHG WR WKH
FRUSRUDWHIRUP³DILQGLQJRIVRPHIUDXGXOHQWLQWHQWLVWKH
VLQHTXDQRQWRYHLOSLHUFLQJ´,G TXRWLQJ&UDQHY*UHHQ
)UHHGPDQ%DNLQJ&R)G VW&LU
DOWHUDWLRQRPLWWHG
1R +DPLOWRQHWDOY&DUHOOHWDO
† HWVHT2QDSSHDO3ODLQWLIIVDVVLJQHUURUWRWKH
GLVWULFW FRXUW¶V MXGJPHQW DV IROORZV WKH GLVWULFW FRXUW
FOHDUO\HUUHGLQILQGLQJWKDW&DUHOOZDVQRWDILGXFLDU\WRWKH
WUXVWGXULQJWKHDSSOLFDEOHWLPHSHULRG WKHGLVWULFWFRXUW
HUUHGLQIDLOLQJWRKROG'+0OLDEOHIRU%HDUG¶VDFWLRQVXQGHU
WKHGRFWULQHRIUHVSRQGHDWVXSHULRUDQG HYHQLIUHVSRQGHDW
VXSHULRU OLDELOLW\ FDQQRW DWWDFK WR '+0 WKH GLVWULFW FRXUW
HUUHGLQGHFOLQLQJWRLJQRUHWKHFRUSRUDWHIRUPVRDVWRILQG
WKH³&DUHOOFRUSRUDWLRQV´OLDEOHDVDVLQJOHHQWLW\XQGHUWKH
GRFWULQHRIUHVSRQGHDWVXSHULRU)RUWKHUHDVRQVWKDWIROORZ
ZH$)),50WKHMXGJPHQWRIWKHGLVWULFWFRXUW
%$&.*5281'
3ODLQWLII6RXWKHUQ&RXQFLORI,QGXVWULDO:RUNHUV+HDOWKDQG
:HOIDUH7UXVW)XQGLVDMRLQWXQLRQHPSOR\HU7DIW+DUWOH\
WUXVWIXQGZLWKLQWKHPHDQLQJRI(5,6$86&†
3ODLQWLII0LFKDHO+DPLOWRQLVDQLQGHSHQGHQWILGXFLDU\RIWKH
WUXVWIXQGDQGZDVHQJDJHGWRLQYHVWLJDWHWKHLQYHVWPHQWRI
WUXVW IXQG DVVHWV LQ GHULYDWLYH FROODWHUDOL]HG PRUWJDJH
REOLJDWLRQV ³&02V´ EHWZHHQ$XJXVWDQG$SULO
7KH WUXVW IXQG¶V ³6WDWHPHQW RI ,QYHVWPHQW
3ULQFLSOHV´SURYLGHVWKDWLQYHVWPHQWVDUHWREHPDGHLQVHFXUH
LQVWUXPHQWVRQO\DQGWKDW³LQYHVWPHQWVRIDVSHFXODWLYHQDWXUH
DUH QRW WR EH PDGH UHJDUGOHVV RI SRVVLEOH UHWXUQ´ ,W LV
XQGLVSXWHG WKDW WKH &02V DW LVVXH KHUH ZHUH QRW VXLWDEOH
LQYHVWPHQWVIRUWKHWUXVWIXQG
$OWKRXJKWKHWUXVWIXQGKDVKDGDQXPEHURIWKLUGSDUW\
DGPLQLVWUDWRUVXSXQWLO6HSWHPEHUHDFKKDVEHHQD
FRUSRUDWLRQUHODWHGDWVRPHSRLQWLQWLPHWR'HIHQGDQW-DPHV
$&DUHOO&DUHOORZQHGRSHUDWHGDQGFRQWUROOHG'HIHQGDQWV
$FKLHYHU &RUSRUDWLRQ ³$FKLHYHU´ - : &DUHOO
$GPLQLVWUDWRUV &RQVXOWDQWV,QF ³-:&$ &´ DQG'+0
&DUHOO DOVR RZQHG DQG RSHUDWHG 1RUWK $PHULFD
$GPLQLVWUDWRUV ³1$$´ DQRULJLQDOGHIHQGDQWZLWKZKRP
3ODLQWLIIV VHWWOHG DQG - : &DUHOO $GPLQLVWUDWRUV ,QF

-- 3 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
3ODLQWLIIV QDPH -:&$ LQ WKHLU QRWLFH RI DSSHDO ZKLFK LV ZK\ WKH
QDPH DSSHDUV LQ WKH FDSWLRQ GHVSLWH WKH IDFW WKDW -:&$ ZDV QHYHU D SDUW\
WR WKLV VXLW
7KH SDUWLHV WUHDW -:&$1$$ DV D VLQJOH HQWLW\ IRU SXUSRVHV RI WKLV
OLWLJDWLRQ DQG WKHUHIRUH ZH ZLOO UHIHU WR WKH WKLUGSDUW\ DGPLQLVWUDWRU
GXULQJ WKH WLPH LQ TXHVWLRQ DV 1$$ HYHQ WKRXJK -:&$ ZDV WKH WKLUG
SDUW\ DGPLQLVWUDWRU IRU D IHZ PRQWKV EHIRUH PHUJLQJ ZLWK 1$$ ,W EHDUV
UHSHDWLQJ WKDW -:&$ ZDV QHYHU D SDUW\ WR WKLV DFWLRQ DQG 1$$ VHWWOHG
ZLWK 3ODLQWLIIV IRU D VXP RI DSSUR[LPDWHO\
³-:&$´ DFRPSDQ\QHYHUQDPHGLQ3ODLQWLII¶VFRPSODLQW
8QWLO -DQXDU\ -:&$ & ZDV WKH WKLUGSDUW\
DGPLQLVWUDWRUIRUWKHWUXVWIXQGWKHUHDIWHU-:&$WRRNRYHU
DV WKH WKLUGSDUW\ DGPLQLVWUDWRU DQG UHPDLQHG VR XQWLO LW
PHUJHGZLWK1$$HIIHFWLYH2FWREHU7KHUHDIWHU
1$$EHFDPHWKHWKLUGSDUW\DGPLQLVWUDWRURIWKHWUXVWIXQG
DQGUHPDLQHGVRIRUWKHGXUDWLRQRIWKHLQYHVWPHQWSHULRGLQ
TXHVWLRQ7KXV EHFDXVHZHDUHORRNLQJDWWKHLQYHVWPHQW
SHULRGEHWZHHQ$XJXVWDQG$SULOWKHWUXVW
IXQG¶V WKLUGSDUW\ DGPLQLVWUDWRUV GXULQJ WKDW SHULRG ZHUH
-:&$ IURP$XJXVWWR2FWREHU DQGLWV
VXFFHVVRU LQ LQWHUHVW 1$$ IURP 2FWREHU WR
$SULO
2Q 0D\ &DUHOO VXIIHUHG D GHYDVWDWLQJ OLIH
WKUHDWHQLQJLQMXU\LQDZDWHUFUDIWDFFLGHQW,WLVXQGLVSXWHG
WKDWXSXQWLO0D\&DUHOOKDGSURYLGHGLQYHVWPHQW
DGYLFHWRWUXVWHHVRIWKHWUXVWIXQGKHDQGHPSOR\HHVXQGHU
KLVGLUHFWLRQDQGFRQWUROPDQDJHGWKHLQYHVWPHQWDQGDVVHWV
RI WKH WUXVW IXQG RQ D GD\WRGD\ EDVLV 2QH RI WKRVH
HPSOR\HHVZDV%HDUGZKRLQWKHODWHVDVVXPHGFHUWDLQ
LQYHVWPHQW UHVSRQVLELOLWLHV IRU -:&$ & WKH WKLUGSDUW\
DGPLQLVWUDWRURIWKHWUXVWIXQGDWWKHWLPH%HDUGDFWXDOO\ZDV
HPSOR\HGDV&RPSWUROOHURI'+0D&DUHOOFRPSDQ\LQWKH
EXVLQHVV RI PDQDJLQJ KRPH KHDOWKFDUH DJHQFLHV DQG
UHPDLQHGVRGXULQJDOOUHOHYDQWWLPHVJLYLQJULVHWRWKLVVXLW
'+0QHYHUZDVLQYROYHGLQPDNLQJLQYHVWPHQWVIRUWKHWUXVW
IXQG$VIRXQGE\WKHGLVWULFWFRXUW³0U%HDUGDVVXPHG
LQYHVWPHQWUHVSRQVLELOLWLHVIRUWKH-:&$ &RQEHKDOIRIWKH
1R +DPLOWRQHWDOY&DUHOOHWDO
:H KDYH ORRNHG WR WKH IROORZLQJ IDFWRUV LQ GHWHUPLQLQJ
ZKHWKHUWRVHWDVLGHDGLVWLQFWFRUSRUDWHIRUP
D WKH FRUSRUDWLRQ DQG VKDUHKROGHUV KDYH FRPSOHWH
LGHQWLW\ RI LQWHUHVWV E WKH FRUSRUDWLRQ LV D PHUH
LQVWUXPHQWDOLW\RIWKHVKDUHKROGHUV F WKHFRUSRUDWLRQLV
DGHYLFHWRDYRLGDOHJDOREOLJDWLRQRU G WKHFRUSRUDWLRQ
LV XVHG WR GHIHDW SXEOLF FRQYHQLHQFH MXVWLI\ D ZURQJ
SURWHFWIUDXGRUGHIHQGDFULPH
:LOFR[Y8QLWHG6WDWHV:/ WK&LU'HF
XQSXEOLVKHG TXRWLQJ%RGHQKDPHU%OGJ&RUSY
$UFKLWHFWXUDO5HVHDUFK&RUS)G WK&LU
8QGHU (5,6$ FRXUWV KDYH UHFRJQL]HG WKH
SHUPLVVLELOLW\RILJQRULQJWKHFRUSRUDWHIRUPZKHQIDLOXUHWR
GRVRZRXOGXQGHUPLQHWKHSXUSRVHVRIWKHVWDWXWH6HH5HLFK
Y/DQFDVWHU)G WK&LU /RZHQ
Y 7RZHU $VVHW 0JPW )G G &LU
9DOOH\)LQ,QFY8QLWHG6WDWHV)G
'&&LU 'DQLHOVY1DWLRQDO(PSOR\HU%HQHILW6YFV
,QF)6XSS 1'2KLR ,Q/RZHQWKH
6HFRQG&LUFXLWVWDWHG
1HLWKHU WKH VHSDUDWH FRUSRUDWH VWDWXV RI WKH WKUHH
FRUSRUDWLRQV QRU WKH JHQHUDO SULQFLSOH RI OLPLWHG
VKDUHKROGHU OLDELOLW\ DIIRUG SURWHFWLRQ ZKHUH H[DFWLQJ
REHLVDQFH WR WKH FRUSRUDWH IRUP LV LQFRQVLVWHQW ZLWK
(5,6$¶V UHPHGLDO SXUSRVHV 3DUWLHV PD\ QRW XVH
VKHOOJDPHOLNHPDQHXYHUVWRVKLIWILGXFLDU\REOLJDWLRQV
WR RQH OHJDO HQWLW\ ZKLOH FKDQQHOLQJ SURILWV IURP
VHOIGHDOLQJWRDVHSDUDWHOHJDOHQWLW\XQGHUWKHLUFRQWURO
7KH 6XSUHPH &RXUW KDV ³FRQVLVWHQWO\ UHIXVHG WR JLYH
HIIHFW WR WKH FRUSRUDWH IRUP ZKHUH LW LV LQWHUSRVHG WR
GHIHDW OHJLVODWLYH SROLFLHV´ )LUVW 1DW¶O &LW\ %DQN Y
%DQFR 3DUD HO &RPHUFLR ([WHULRU GH &XED 86
,QGHWHUPLQLQJZKHWKHUWRGLVUHJDUGWKH
FRUSRUDWHIRUPZHPXVWFRQVLGHUWKHLPSRUWDQFHRIWKH
XVH RI WKDW IRUP LQ WKH IHGHUDO VWDWXWRU\ VFKHPH DQ
LQTXLU\ WKDW JHQHUDOO\ JLYHV OHVV GHIHUHQFH WR WKH
FRUSRUDWHIRUPWKDQGRHVWKHVWULFWDOWHUHJRGRFWULQHRI

-- 4 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
FRUSRUDWLRQWKLUGSDUW\DGPLQLVWUDWRU1$$ZKLOHFRQWLQXLQJ
WREHHPSOR\HGE\DQRWKHU'+0%HFDXVH%HDUGZDVQRW
DFWLQJZLWKLQWKHFRXUVHDQGVFRSHRIKLVHPSOR\PHQWZLWK
'+0ZKHQKHSXUFKDVHGWKH&02VDWLVVXH'+0FDQQRWEH
KHOG OLDEOH IRU %HDUG¶V DFWLRQV DQG ZH QHHG QRW UHDFK WKH
EURDGHU TXHVWLRQ RI ZKHWKHU WKH GRFWULQH RI UHVSRQGHDW
VXSHULRUDSSOLHVLQ(5,6$FDVHV$FFRUGLQJO\ZH$)),50
WKHMXGJPHQWRIWKHGLVWULFWFRXUWRQWKLVJURXQG
,,,',67,1&7&25325$7()250
)LQDOO\ 3ODLQWLIIV DUJXH WKDW HYHQ LI UHVSRQGHDW VXSHULRU
OLDELOLW\ FDQQRW DWWDFK WR '+0 WKH GLVWULFW FRXUW HUUHG LQ
GHFOLQLQJWRLJQRUHWKHFRUSRUDWHIRUPVRDVWRILQGWKH³&DUHOO
FRUSRUDWLRQV´ OLDEOH IRU %HDUG¶V DFWLRQV DV D VLQJOH HQWLW\
3ODLQWLIIV DUJXH WKDW EHFDXVH &DUHOO DQG KLV FRUSRUDWLRQV
DGPLQLVWHUHGDQGSHUIRUPHGYDULRXVGXWLHVIRUWKHWUXVWIXQG
XSXQWLO6HSWHPEHUWRUHFRJQL]HDGLVWLQFWLRQDPRQJ
WKHVHFRUSRUDWLRQVVRDVWRDYRLGOLDELOLW\ZRXOGFLUFXPYHQW
(5,6$¶V FRUH SXUSRVHV DQG HYDGH SXEOLF SROLF\ 6HH
86&† E ³,WLVKHUHE\GHFODUHGWREHWKHSROLF\RI
WKLV FKDSWHU WR SURWHFW WKH LQWHUHVWV RI SDUWLFLSDQWV LQ
HPSOR\HH EHQHILW SODQV DQG WKHLU EHQHILFLDULHV E\
HVWDEOLVKLQJ VWDQGDUGV RI FRQGXFW UHVSRQVLELOLW\ DQG
REOLJDWLRQIRUILGXFLDULHVRIHPSOR\HHEHQHILWSODQVDQGE\
SURYLGLQJ IRU DSSURSULDWH UHPHGLHV VDQFWLRQV DQG UHDG\
DFFHVVWRWKH)HGHUDOFRXUWV´ 3ODLQWLIIVFODLP
&DUHOORSHUDWHGWKHVHFRUSRUDWLRQVDVDVLQJOHHQWLW\DOO
RSHUDWHG RXW RI D VLQJOH ORFDWLRQ XWLOL]LQJ WKH VDPH
RIILFHV HTXLSPHQW DQG HPSOR\HHV ZKR LQWHUFKDQJHG
EDVHG RQ IXQFWLRQ &DUHOO RZQHG DQG FRQWUROOHG HDFK
>FRUSRUDWLRQ@SDLGDOOHPSOR\HHVWKURXJKDVLQJOH
SD\UROO DFFRXQW DQG FRYHUHG DOO HPSOR\HHV XQGHU D
VLQJOHNSODQ
'HIHQGDQWVGRQRWGLVSXWHWKHVHIDFWV6XFKFKDUDFWHULVWLFV
KRZHYHUGHVFULEHDPXOWLWXGHRIFORVHO\KHOGFRUSRUDWLRQV
WKHVH IDFWV DORQH DUH QRW HQRXJK WR ZDUUDQW LJQRULQJ WKH
FRUSRUDWHIRUPXQGHUDQ\FLUFXLW¶VODZ
1R +DPLOWRQHWDOY&DUHOOHWDO
7KH HYHQWV RI WKLV PHHWLQJ DUH NH\ LQ WKDW WKH\ HVWDEOLVK WKDW WKH WUXVW
IXQG IRUPHG LWV RZQ LQYHVWPHQW FRPPLWWHH WKXV WDNLQJ EDFN DQ\
GLVFUHWLRQ DQG FRQWURO WKDW &DUHOO RQFH KDG LQ DFWLQJ DV D ILGXFLDU\ IRU WKH
WUXVW IXQG $V ZLOO EH GLVFXVVHG LQIUD IROORZLQJ WKH -XQH PHHWLQJ
&DUHOO QR ORQJHU ILW WKH GHILQLWLRQ RI DQ (5,6$ ILGXFLDU\ VXFK WKDW KH
FRXOG EH IRXQG LQGLYLGXDOO\ OLDEOH IRU DQ\ EUHDFK RI ILGXFLDU\ GXW\
IXQG´ 7KH GLVWULFW FRXUW DOVR UHFRJQL]HG ³,QGLYLGXDOV
HPSOR\HG E\ D &DUHOO FRUSRUDWLRQ FRPPRQO\ SURYLGHG
VHUYLFHV WR RWKHU &DUHOO FRUSRUDWLRQV DV ZHOO´ 3ODLQWLIIV
FRQFHGHGWKLVSRLQWLQWKHLUPRWLRQIRUVXPPDU\MXGJPHQW
VWDWLQJ ³&DUHOO HPSOR\HHV FRPPRQO\ ZRUNHG IRU VHYHUDO
GLIIHUHQW&DUHOOFRPSDQLHVGHSHQGLQJRQZKDWVHUYLFHVZHUH
EHLQJSURYLGHG´:KHQDVNHGE\3ODLQWLIIV¶FRXQVHOZKHWKHU
KHHYHUSHUIRUPHGDQ\ZRUNIRU-:&$%HDUGWHVWLILHGWKDW
KH³KDQGOHGLQYHVWPHQWVIRUWKHWUXVWIXQG´
:LWKUHJDUGWR&DUHOO¶VDFFLGHQW'HIHQGDQWVSRLQWRXWWKDW
DOWKRXJK WKH GLVWULFW FRXUW PHQWLRQHG LWV RFFXUUHQFH WKH
GLVWULFWFRXUWIDLOHGWRHPSKDVL]HWKHPDJQLWXGHRI&DUHOO¶V
LQMXULHV DQG VXFK GHWDLO LV QHFHVVDU\ IRU SXUSRVHV RI
XQGHUVWDQGLQJ ZK\ &DUHOO QHYHU UHVXPHG RU DWWHPSWHG WR
UHVXPHKLVIRUPHUUROHRIPDQDJLQJWUXVWIXQGDVVHWVDIWHU
0D\,QVKRUW&DUHOOZDVDWGHDWK¶VGRRUIRUPDQ\
PRQWKVIROORZLQJKLVDFFLGHQWKHZDVLQFKURQLFSDLQDQGRQ
H[WHQVLYH SDLQ PHGLFDWLRQ XQWLO 2FWREHU ZKHQ KH
XQGHUZHQWVXUJHU\WKDWDOORZHGKLPWRVWRSWDNLQJKLVSDLQ
PHGLFLQH )RU WKH WKUHHDQGDKDOI \HDUV IROORZLQJ KLV
DFFLGHQWKHZDVLQDKD]HRIGUXJVDQGGRHVQRWUHPHPEHU
³PXFKRIDQ\WKLQJWKDWKDSSHQHG´
0DQ\RIWKHNH\HYHQWVDWLVVXHLQWKLVVXLWWRRNSODFHDWWKH
QH[WUHJXODUO\VFKHGXOHGWUXVWHHPHHWLQJIROORZLQJ&DUHOO¶V
DFFLGHQWWKLVPHHWLQJWRRNSODFHRQ-XQH3DWV\
*URRPV FODLPV PDQDJHU IRU -:&$ DWWHQGHG WKH WUXVWHH
PHHWLQJ LQ &DUHOO¶V DEVHQFH $OVR DW WKH PHHWLQJ ZHUH
WUXVWHHV5D\:KLWHDQG&ORYLV<RXQJHDFKRIZKRPWHVWLILHG
WKDWDWWKHWLPHRIWKHPHHWLQJWKHUHZDVPXFKXQFHUWDLQW\DV
WRZKHWKHU&DUHOOZRXOGOLYHRUGLH*URRPVWHVWLILHGWKDWWKH
WUXVWHHVDVNHGKHULIVKHZRXOGKDQGOHWKHLQYHVWPHQWVIRUWKH

-- 5 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
WUXVW IXQG DQG WKDW VKH VDLG QR DV VKH KDG QR LQYHVWPHQW
H[SHULHQFH6KHWHVWLILHG
7KH WUXVWHHV ZHUH YHU\ FRQFHUQHG DERXW >WUXVW IXQG
LQYHVWPHQWV@EHFDXVHLWZDVDQDUHDZKHUHDSSDUHQWO\0U
&DUHOOKDGKDGDYHU\KDQGVRQGD\WRGD\RYHUVLJKWRI
WKHLQYHVWPHQWRQWKHLUEHKDOIDQGWKH\H[SUHVVHGWKDW
FRQFHUQ7KH\LQGLFDWHGLQWKHPHHWLQJDQG,EHOLHYHLW¶V
UHIOHFWHGLQWKHPLQXWHVWKDWWKH\ZHUHJRLQJWRIRUPDQ
LQYHVWPHQWFRPPLWWHHWKDWZRXOGFRQVLVWRI0U:KLWH
DQG0U<RXQJDQGWKDWWKH\ZHUHJRLQJWR±WKH\DGYLVHG
PHWKDWWKH\ZHUHJRLQJWREHFRPLQJWRRXURIILFHWKDW
WKH\ZHUHJRLQJWRUHYLHZDOORIWKHLQYHVWPHQWVLQGHWDLO
ZLWK 0U %HDUG DQG WKDW WKH\ ZHUH JRLQJ WR DVVXPH
UHVSRQVLELOLW\ IRU RYHUVLJKW RI WKH LQYHVWPHQW IRU WKH
6RXWKHUQ&RXQFLO

7KHWUXVWHHVKDGDFFHSWHGRUKDGDGYLVHGWKDWWKH\ZHUH
JRLQJ WR EH UHVSRQVLEOH IRU WKH LQYHVWPHQW IURP -XQH
IRUZDUG
*URRPV WHVWLILHG WKDW VKH ZDV FHUWDLQ WKDW WKH LQYHVWPHQW
FRPPLWWHHZRXOGQRWOLPLWLWVGLVFUHWLRQWRWKHLQYHVWPHQWRI
FHUWDLQ VHFXULWLHV EXW ZRXOG RYHUVHH DOO WUXVW IXQG
LQYHVWPHQWV *URRPV DOVR WHVWLILHG WKDW LW KDG EHHQ
HVWDEOLVKHGDWWKHPHHWLQJWKDWHLWKHU:KLWHRU<RXQJZRXOG
FRQWDFW%HDUGIROORZLQJWKHPHHWLQJWRLQIRUP%HDUGRIWKH
FRPPLWWHH¶V LQYHVWPHQW GHFLVLRQV ,Q $XJXVW *URRPV
OHDUQHGIURP%HDUGWKDWQHLWKHUWUXVWHHKDGFRQWDFWHGKLPVKH
VXJJHVWHGWKDW%HDUGFRQWDFWWKHWUXVWHHVDQGDUUDQJHIRUD
PHHWLQJ ZKLFK KH GLG %HDUG WHVWLILHG WKDW KH GLG LQ IDFW
FRQWDFWWUXVWHH<RXQJLQ$XJXVWDW*URRPV¶VEHKHVWDQG
WKDW<RXQJWROGKLPWRFRQWLQXHKDQGOLQJWKHLQYHVWPHQWVDV
KHDOZD\VKDG7KHUHDIWHUEHWZHHQ$XJXVWDQG
$SULO%HDUGSXUFKDVHGIRXUWHHQKLJKULVN&02V
ODWHUGHWHUPLQHGWRKDYHEHHQLQDSSURSULDWHLQYHVWPHQWVIRU
WKHWUXVWIXQGDQGWRKDYHFDXVHGWKHWUXVWIXQGWRVXVWDLQD
VXEVWDQWLDOORVV7KLVIDFWLVQRWLQGLVSXWH
1R +DPLOWRQHWDOY&DUHOOHWDO
)HGHUDWLRQ&RXUWFLWHG)LQNY1DWLRQDO6DYLQJV 7UXVW&R
)G '&&LU DQG%URFNY*HUDFH
) 6XSS '1- +RZHYHU )LQN GLG QRW
DGGUHVVUHVSRQGHDWVXSHULRUOLDELOLW\EHWZHHQDSULQFLSDODQG
DJHQWUDWKHU)LQNDGGUHVVHGWKHOLDELOLW\RIFRILGXFLDULHV
KROGLQJWKDWOLDELOLW\IRURQHILGXFLDU\¶VEUHDFKRIILGXFLDU\
GXWLHV FDQ EH LPSXWHG WR D FRILGXFLDU\ ZKR NQRZLQJO\
SDUWLFLSDWHVLQRUNQRZLQJO\FRQFHDOVWKHDFWVDQGRPLVVLRQV
RIWKHEUHDFKLQJILGXFLDU\6HH)LQN)GDW,Q
%URFN WKH FRXUW DGGUHVVHG WKH TXHVWLRQ RI ZKHWKHU QRQ
ILGXFLDULHV FDQ EH KHOG OLDEOH XQGHU (5,6$ IRU NQRZLQJO\
SDUWLFLSDWLQJLQDEUHDFKRIWUXVWE\DILGXFLDU\WKDWUHVXOWVLQ
WKH QRQILGXFLDULHV¶ XQMXVW HQULFKPHQW 6HH %URFN )
6XSS DW %URFN LQYROYHG WKH FRQFHSW RI XQMXVW
HQULFKPHQW DQG KDG QRWKLQJ ZKDWVRHYHU WR GR ZLWK WKH
SULQFLSDODJHQW UHODWLRQVKLS DQG WKH GRFWULQH RI UHVSRQGHDW
VXSHULRU
&RQVHTXHQWO\ ZH GLVDJUHH ZLWK WKH )LIWK &LUFXLW¶V
LQWHUSUHWDWLRQRIUHVSRQGHDWVXSHULRUDVUHTXLULQJDFWLYHDQG
NQRZLQJSDUWLFLSDWLRQRQWKHSDUWRIWKHSULQFLSDO,QVWHDGZH
DJUHHZLWKWKH6HYHQWK&LUFXLWWKDWWKHFRPPRQODZGRFWULQH
RIUHVSRQGHDWVXSHULRUGRHVQRWUHTXLUHDSULQFLSDO¶VDFWLYH
DQGNQRZLQJSDUWLFLSDWLRQLQWKHEUHDFKRIILGXFLDU\GXWLHV
,QDQ\HYHQWWKHUHLVQRTXHVWLRQWKDWLQRUGHUIRUUHVSRQGHDW
VXSHULRU OLDELOLW\ WR DWWDFK LQ DQ (5,6$ FRQWH[W WKH DJHQW
PXVWKDYHEUHDFKHGKLVRUKHUILGXFLDU\GXWLHVZKLOHDFWLQJLQ
WKHFRXUVHDQGVFRSHRIHPSOR\PHQW6HH1DWLRQDO)RRWEDOO
6FRXWLQJ,QFY&RQWLQHQWDO$VVXUDQFH&R)G
WK &LU $PHULFDQ )HG¶Q )G DW
6WXDUW3DUN$VVRF/WG3¶VKLSY$PHULWHFK3HQVLRQ7UXVW
)6XSS 1',OO .UDO)6XSSDW

+HUH '+0 FDQQRW EH KHOG OLDEOH XQGHU WKH GRFWULQH RI
UHVSRQGHDWVXSHULRUEHFDXVH%HDUG¶VIXQFWLRQRISURYLGLQJ
LQYHVWPHQWVHUYLFHVWRWKHWUXVWIXQGZDVQRWLQWKHFRXUVHDQG
VFRSH RI KLV HPSOR\PHQW DV &RPSWUROOHU RI '+0 7KH
GLVWULFWFRXUWH[SUHVVO\IRXQGWKLVWREHWKHFDVHGHWHUPLQLQJ
WKDW%HDUGDVVXPHGLQYHVWPHQWUHVSRQVLELOLWLHVIRURQH&DUHOO

-- 6 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
,Q $PHULFDQ )HGHUDWLRQ WKH )LIWK &LUFXLW DSSO\LQJ WKH
GRFWULQHRIUHVSRQGHDWVXSHULRUXVHGDVRPHZKDWGLIIHUHQW
DSSURDFKVWDWLQJ
7KHGRFWULQHRIUHVSRQGHDWVXSHULRUFDQEHDVRXUFHRI
OLDELOLW\LQ(5,6$FDVHV)RUUHVSRQGHDWVXSHULRU
OLDELOLW\WRDWWDFKWKHHPSOR\HHPXVWKDYHEUHDFKHGKLV
GXW\WRDWKLUGSDUW\ZKLOHDFWLQJLQWKHFRXUVHDQGVFRSH
RIKLVHPSOR\PHQW,WLVFOHDUWKDW+ROGHQGLGQRWEUHDFK
KLV ILGXFLDU\ GXWLHV ZKLOH DFWLQJ LQ WKH VFRSH RI KLV
HPSOR\PHQWDVDQ(TXLWDEOHDJHQW+HEUHDFKHGKLV
ILGXFLDU\GXWLHVWRWKH)XQGZKLOHKHZDVJUDQWLQJDQG
GHQ\LQJEHQHILWFODLPVDQGFDUU\LQJRQDFWLYLWLHVDV)XQG
DGPLQLVWUDWRU 7KHVH DFWLRQV ZHUH FOHDUO\ EH\RQG WKH
VFRSHRIKLVGXWLHVDVDQ(TXLWDEOHDJHQW1RULVWKHIDFW
WKDWVRPH(TXLWDEOHHPSOR\HHVNQHZWKDW+ROGHQZDV
DFWLQJERWKDVDQDJHQWDQGDVDQDGPLQLVWUDWRUVXIILFLHQW
WRMXVWLI\WKHLPSRVLWLRQRIUHVSRQGHDWVXSHULRUOLDELOLW\
(TXLWDEOHQHYHUDFWLYHO\DQGNQRZLQJO\SDUWLFLSDWHGLQ
+ROGHQ¶VEUHDFKRIGXW\WRWKH)XQGDVLVUHTXLUHGIRU
DILQGLQJRIUHVSRQGHDWVXSHULRUOLDELOLW\)LQDOO\
UHVSRQGHDWVXSHULRUOLDELOLW\FDQQRWDWWDFKIRU(TXLWDEOH¶V
IDLOXUHWRSURSHUO\WUDLQDQGVXSHUYLVH+ROGHQ/LDELOLW\
IRU WKH IDLOXUH WR DGHTXDWHO\ WUDLQ DQG VXSHUYLVH DQ
(5,6$ ILGXFLDU\ DULVHV ZKHUH WKH SHUVRQ H[HUFLVLQJ
VXSHUYLVRU\ DXWKRULW\ ZDV LQ D SRVLWLRQ WR DSSRLQW RU
UHPRYHSODQDGPLQLVWUDWRUVDQGPRQLWRUWKHLUDFWLYLWLHV
)G DW HPSKDVLV DGGHG VHH DOVR .UDO ,QF Y
6RXWKZHVWHUQ/LIH,QV&R)6XSS 1'
7H[ FLWLQJ $PHULFDQ )HGHUDWLRQ DQG KROGLQJ WKDW
XQGHUDWKHRU\RIUHVSRQGHDWVXSHULRU³>D@EVHQWDFWLYHDQG
NQRZLQJSDUWLFLSDWLRQLQWKHEUHDFKRIILGXFLDU\GXWLHVDQRQ
ILGXFLDU\FDQQRWEHKHOGOLDEOHIRUWKHFRQGXFWRILWVDJHQW´
$VLVFOHDUIURPWKHDERYHSDVVDJHLQ$PHULFDQ)HGHUDWLRQ
WKH FRXUW XVHG WKH WHUP ³UHVSRQGHDW VXSHULRU´±D GRFWULQH
ZKLFKUHTXLUHVQRIDXOWRQWKHSDUWRIWKHSULQFLSDO±ZKHQLW
VHHPHG WR EH UHIHUULQJ WR GLUHFW OLDELOLW\ ,Q KROGLQJ WKDW
UHVSRQGHDW VXSHULRU OLDELOLW\ UHTXLUHV DFWLYH NQRZLQJ
SDUWLFLSDWLRQ RQ WKH SDUW RI WKH SULQFLSDO WKH $PHULFDQ
1R +DPLOWRQHWDOY&DUHOOHWDO
7KHPLQXWHVRIWKH-XQHPHHWLQJFRUURERUDWH*URRPV¶V
WHVWLPRQ\
0U:KLWHVXJJHVWHGWKDWDQLQYHVWPHQWFRPPLWWHHEH
HVWDEOLVKHGDQGZLWKQRREMHFWLRQIURPWKH7UXVWHHVKH
DSSRLQWHG 0U <RXQJ WR WKH FRPPLWWHH DORQJ ZLWK
KLPVHOI0U:KLWHDQG0U<RXQJZLOOPHHWRUKDYHD
FRQIHUHQFH ZLWK 6WHYH %HDUG RI WKH $GPLQLVWUDWRU¶V
RIILFHWRGLVFXVVDSURFHGXUHIRUKDQGOLQJLQYHVWPHQWV
7UXVWHHV:KLWHDQG<RXQJWHVWLILHGKRZHYHUWKDWDOWKRXJK
WKH\GLGLQIDFWIRUPDQLQYHVWPHQWFRPPLWWHHWRPDQDJHDQG
PRQLWRU WUXVW IXQG LQYHVWPHQWV WKH LQYHVWPHQW FRPPLWWHH
ZDVOLPLWHGWRWKHPDQDJHPHQWRIDVLQJOHLQYHVWPHQW±WKH
.HPSHU+LJK<LHOG)XQG±ZKLFKKDGQRWKLQJWRGRZLWKWKH
&02V DW LVVXH KHUH 3ODLQWLIIV VWDXQFKO\ PDLQWDLQ WKLV
SRVLWLRQVRDVWRVXSSRUWWKHLUFRQWHQWLRQWKDWWKHUHZDVQR
WUXVWHHFRPSULVHGLQYHVWPHQWFRPPLWWHHIRUPHGWRRYHUVHH
WKH &02 LQYHVWPHQWV WKDW &DUHOO QHYHU UHOLQTXLVKHG
DXWKRULW\DQGFRQWURORYHUWKHSXUFKDVHDQGKDQGOLQJRIWKH
&02V DQG WKDW &DUHOO QHYHU UHOLQTXLVKHG DXWKRULW\ DQG
FRQWURORYHUWKHDFWLRQVRI%HDUG
7KH GLVWULFW FRXUW GLG QRW ILQG WKH WHVWLPRQ\ RI WUXVWHHV
:KLWH DQG <RXQJ FUHGLEOH $V QRWHG E\ 'HIHQGDQWV
UHVROXWLRQRIPXFKRIWKLVFDVHWXUQVRQWKHGLVWULFWFRXUW¶V
ILQGLQJVRIIDFWDQGFUHGLELOLW\GHWHUPLQDWLRQV$VWRZKHWKHU
WKHLQYHVWPHQWFRPPLWWHHZDVIRUPHGIRUWKHOLPLWHGSXUSRVH
RIPRQLWRULQJRQO\WKH.HPSHU+LJK<LHOG)XQGWKHGLVWULFW
FRXUWH[SUHVVO\GLVFUHGLWHGWKHWHVWLPRQ\RIWUXVWHHV:KLWH
DQG<RXQJ
7KH&RXUWVLPSO\GRHVQRWILQGWKDWWHVWLPRQ\RI0HVVUV
:KLWHDQG<RXQJWREHFUHGLEOHLQVRIDUDVWKH\FODLPWKDW
WKH\ IRUPHG WKH LQYHVWPHQW FRPPLWWHH ZLWK D OLPLWHG
SXUSRVHLHRQO\WRPRQLWRUWKHLQWHUHVWUDWHVDVWKH\
UHODWHGWRWKH.HPSHU+LJK<LHOG)XQG
7KH GLVWULFW FRXUW DOVR GHWHUPLQHG WKDW LW ZDV %HDUG QRW
&DUHOOZKRGHWHUPLQHGZKLFK&02VWRSXUFKDVHGXULQJWKH
UHOHYDQW WLPH SHULRG 7KH GLVWULFW FRXUW IXUWKHU IRXQG WKDW

-- 7 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
%HDUG PDGH WKHVH LQYHVWPHQWV DW WKH GLUHFWLRQ RI 7UXVWHH
<RXQJZKRWROGKLPWRFRQWLQXH³GRLQJZKDW>KH@KDGEHHQ
GRLQJ´ZLWKUHJDUGWRWUXVWIXQGLQYHVWPHQWV
:HDUHIDFHGZLWKWKUHHLVVXHVRQDSSHDO ZKHWKHUWKH
GLVWULFWFRXUWZDVFOHDUO\HUURQHRXVLQILQGLQJWKDW&DUHOOZDV
QRWDQLQGLYLGXDOILGXFLDU\WRWKHWUXVWIXQGEHWZHHQ$XJXVW
DQG$SULODQGWKXVEUHDFKHGQRILGXFLDU\
GXW\ ZKHWKHUWKHGLVWULFW FRXUWHUUHGLQIDLOLQJWRKROG
'+0OLDEOHIRUWKHDFWLRQVRI%HDUGXQGHUWKHGRFWULQHRI
UHVSRQGHDWVXSHULRUDQG ZKHWKHUWKHGLVWULFWFRXUWHUUHG
LQGHFOLQLQJWRLJQRUHWKHFRUSRUDWH IRUPVRDVWRILQGWKH
³&DUHOO FRUSRUDWLRQV´ OLDEOH DV D VLQJOH HQWLW\ XQGHU WKH
GRFWULQHRIUHVSRQGHDWVXSHULRU:HZLOODGGUHVVHDFKLVVXH
LQWXUQ
,(5,6$
$ 67$1'$5' 2) 5(9,(:
7KLV&RXUWKDVQRWDGGUHVVHGWKHQDUURZLVVXHRIZKHWKHU
(5,6$ILGXFLDU\VWDWXVLVVWULFWO\DIDFWXDOLVVXHVXEMHFWWRD
FOHDUO\HUURQHRXVVWDQGDUGRIUHYLHZDOHJDOLVVXHVXEMHFWWR
GHQRYRUHYLHZRUDPL[HGTXHVWLRQRIODZDQGIDFWDOVR
VXEMHFWWRGHQRYRUHYLHZ2WKHUFLUFXLWVWKDWKDYHDGGUHVVHG
WKHTXHVWLRQKDYHKHOGWKDWILGXFLDU\VWDWXVXQGHU(5,6$LVD
PL[HGTXHVWLRQRIODZDQGIDFW6HH/RSUHVWLY7HUZLOOLJHU
)G G&LU .UDPHUY6PLWK%DUQH\
)G Q WK &LU ³7KH H[LVWHQFH RI D
ILGXFLDU\UHODWLRQVKLSXQGHU(5,6$RQWKHPHULWVLVDPL[HG
TXHVWLRQRIODZDQGIDFW´ FLWLQJ5HLFKY/DQFDVWHU)G
WK &LU RWKHU FLWDWLRQ RPLWWHG
:KHUH WKH IDFWV DUH QRW LQ TXHVWLRQ D SDUW\¶V VWDWXV DV DQ
(5,6$ ILGXFLDU\ LV SXUHO\ D TXHVWLRQ RI ODZ 6HH
/LEEH\2ZHQV)RUG&RY%OXH&URVV %OXH6KLHOG0XW
)G WK&LU KROGLQJWKDWZKHWKHUDQ
DGPLQLVWUDWRU RI D VHOILQVXUHG EHQHILWV SODQ LV DQ (5,6$
ILGXFLDU\LVDFRQFOXVLRQRIODZVXEMHFWWRGHQRYRUHYLHZ
FLWDWLRQRPLWWHG :D[PDQY/XQD)G WK
&LU KROGLQJ WKDW ILQGLQJV RI IDFW WKDW UHVXOW IURP
DSSOLFDWLRQ RI OHJDO SULQFLSOHV WR VXEVLGLDU\ IDFWXDO
1R +DPLOWRQHWDOY&DUHOOHWDO
GLUHFWOLDELOLW\8QGHUWKHGRFWULQHRIUHVSRQGHDWVXSHULRUDQ
HPSOR\HULVOLDEOHGHVSLWHKDYLQJQRIDXOWZKDWVRHYHUIRUWKH
DFWV RI LWV HPSOR\HHV WDNHQ ZLWKLQ WKH VFRSH RI WKHLU
HPSOR\PHQW6HH-RQHVY)HGHUDWHG)LQ5HVHUYH&RUS
)G WK &LU ³>$@ SULQFLSDO PD\ EH
YLFDULRXVO\ OLDEOH IRU DQ DJHQW¶V WRUWV XQGHU D UHVSRQGHDW
VXSHULRUWKHRU\8QGHUDUHVSRQGHDWVXSHULRUUXOHDSULQFLSDO
LVRQO\KHOGYLFDULRXVO\OLDEOHIRUWRUWVFRPPLWWHGE\DQDJHQW
ZKHQWKHDJHQWDFWVIRUWKHEHQHILWRIKLVSULQFLSDOZLWKLQWKH
VFRSH RI KLV HPSOR\PHQW´ : 3$*( .((721 (7 $/
35266(5 $1' .((721 21 7+( /$: 2) 72576† WKHG
$V-XGJH0HUULWWH[SODLQHGLQ)OHHQRUY+HZLWW6RDS
&R)G WK&LU ZKLFKDGGUHVVHGWKHGRFWULQH
RIUHVSRQGHDWVXSHULRULQD7LWOH9,,FRQWH[W
$OWKRXJKZHHUURQHRXVO\UHIHUUHGWR>HPSOR\HUOLDELOLW\
LQFRZRUNHUKDUDVVPHQWFDVHV@DV³UHVSRQGHDWVXSHULRU´
ZH ODWHU UHDOL]HG WKDW WKH WHUP ³UHVSRQGHDW VXSHULRU´
±ZKLFKFRQQRWHVGHULYDWLYHOLDELOLW\±LVDQLQFRUUHFWODEHO
IRUFRZRUNHUKDUDVVPHQWFDVHVZKHUHWKHHPSOR\HULV
GLUHFWO\ OLDEOH IRU LWV RZQ QHJOLJHQFH 7KLV
XQGHUVWDQGLQJ WKDW WKH HPSOR\HU LV GLUHFWO\ QRW
GHULYDWLYHO\OLDEOHDQGWKHXQGHUO\LQJ³NQHZRUVKRXOG
KDYH NQRZQ´ VWDQGDUG DUH FRQVLVWHQW ZLWK WKH ODZ LQ
RWKHUFLUFXLWV7KHVWDQGDUGLVDOVRFRQVLVWHQWZLWKWKH
FRPPRQODZXQGHUVWDQGLQJRIDQHPSOR\HU¶VOLDELOLW\IRU
WKHPLVFRQGXFWRIHPSOR\HHV
,G DW FLWDWLRQV DQG VRPH LQWHUQDO TXRWDWLRQ PDUNV
RPLWWHG $V -XGJH 3RVQHU ZURWH IRU WKH 6HYHQWK &LUFXLW
³7KH OLDELOLW\ RI DQ HPSOR\HU IRU WRUWV FRPPLWWHG E\ LWV
HPSOR\HHV±ZLWKRXWDQ\IDXOWRQKLVSDUW±ZKHQWKH\DUHDFWLQJ
ZLWKLQWKHVFRSHRIWKHLUHPSOR\PHQWWKHOLDELOLW\WKDWWKHODZ
FDOOV μUHVSRQGHDW VXSHULRU¶ LV D IRUP RI VWULFW OLDELOLW\ ,W
QHLWKHUUHTXLUHVWKHSODLQWLIIWRSURYHIDXOWRQWKHSDUWRIWKH
HPSOR\HUQRUDOORZVWKHHPSOR\HUWRH[RQHUDWHKLPVHOIE\
SURYLQJKLVIUHHGRPIURPIDXOW´.RQUDGLY8QLWHG6WDWHV
)G WK&LU

-- 8 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
,,5(6321'($7683(5,25
3ODLQWLIIV¶ VHFRQG DVVLJQPHQW RI HUURU DOOHJHV WKDW WKH
GLVWULFW FRXUW HUUHG LQ IDLOLQJ WR KROG '+0 OLDEOH IRU WKH
DFWLRQVRI%HDUGXQGHUWKHGRFWULQHRIUHVSRQGHDWVXSHULRU
$OWKRXJK(5,6$VSHFLILFDOO\SURYLGHVWKDWDILGXFLDU\PD\EH
OLDEOH IRU DQRWKHU ILGXFLDU\¶V EUHDFKHV VHH 86&
† D WKHGLVWULFWFRXUWIRXQGWKDW'+0SOD\HGQRUROHLQ
WKHLQYHVWPHQWRIWUXVWIXQGDVVHWVGXULQJWKHUHOHYDQWWLPH
SHULRGDQGZDVQRWDILGXFLDU\ZLWKUHJDUGWRWKH&02VDW
LVVXH3ODLQWLIIVGRQRWGLVSXWHWKLVILQGLQJ,QGHHG3ODLQWLIIV
GR QRW DOOHJH WKDW '+0 LV GLUHFWO\ OLDEOH DV D FRUSRUDWH
ILGXFLDU\ WKDW EUHDFKHG LWV GXWLHV 5DWKHU WKH\ DOOHJH WKDW
'+0LVGHULYDWLYHO\OLDEOHXQGHUWKHGRFWULQHRIUHVSRQGHDW
VXSHULRU VLPSO\ E\ YLUWXH RI LWV DJHQF\ UHODWLRQVKLS ZLWK
%HDUG3ODLQWLIIVFRUUHFWO\SRLQWRXWWKDWWKHGLVWULFWFRXUW¶V
DQDO\VLVZDVPLVSODFHGLQVRIDUDVLWIRFXVHGRQ'+0¶VGLUHFW
OLDELOLW\ZKROO\PLVVLQJWKHGLVWLQFWLRQEHWZHHQGLUHFWDQG
GHULYDWLYHOLDELOLW\$VVXFKWKHGLVWULFWFRXUWSURYLGHGQR
ILQGLQJV RU DQDO\VLV ZLWK UHJDUG WR 3ODLQWLIIV¶ FODLP RI
UHVSRQGHDWVXSHULRUOLDELOLW\
7KXVWKHTXHVWLRQZHDUHIDFHGZLWKKHUHLVZKHWKHU'+0
DQRQILGXFLDU\FDQEHKHOGOLDEOHIRU%HDUG¶VEUHDFKHVEDVHG
RQWKHDJHQF\UHODWLRQVKLSEHWZHHQ%HDUGDQG'+07KLV
TXHVWLRQ LV QRW HDVLO\ DQVZHUHG 7KLV &RXUW KDV QRW
GHWHUPLQHGZKHWKHUWKHGRFWULQHRIUHVSRQGHDWVXSHULRUPD\
EHDSSOLHGLQFDVHVDOOHJLQJDEUHDFKRIILGXFLDU\GXW\DULVLQJ
XQGHU(5,6$$QGHYHQLIZHZHUHWRUHFRJQL]HWKHGRFWULQH
LQWKLVFRQWH[WZKLFKZHGHFOLQHWRGRWRGD\LQRUGHUIRU
UHVSRQGHDWVXSHULRUOLDELOLW\WRDWWDFKZHPXVWILQGWKDW%HDUG
ZDV LQ IDFW D ILGXFLDU\ ZKR EUHDFKHG KLV ILGXFLDU\ GXWLHV
ZKLOHDFWLQJLQWKHFRXUVHDQGVFRSHRIKLVHPSOR\PHQWZLWK
'+0
$OWKRXJK VRPH FRXUWV KDYH UHFRJQL]HG WKDW UHVSRQGHDW
VXSHULRU OLDELOLW\ PD\ DSSO\ LQ FDVHV DULVLQJ XQGHU (5,6$
DOOHJLQJEUHDFKRIILGXFLDU\GXWLHVWKLVDUHDRIWKHODZKDV
EHHQ PXGGOHG E\ WKH IDFW WKDW PDQ\ RI WKRVH FRXUWV
FRQVLVWHQWO\KDYHFRQIXVHGUHVSRQGHDWVXSHULRUOLDELOLW\ZLWK
1R +DPLOWRQHWDOY&DUHOOHWDO
5XOH VWDWHV ³)LQGLQJV RI IDFW ZKHWKHU EDVHG RQ RUDO RU
GRFXPHQWDU\ HYLGHQFH VKDOO QRW EH VHW DVLGH XQOHVV FOHDUO\ HUURQHRXV DQG
GXH UHJDUG VKDOO EH JLYHQ WR WKH RSSRUWXQLW\ RI WKH WULDO FRXUW WR MXGJH WKH
FUHGLELOLW\ RI WKH ZLWQHVVHV´ )(' 5 &,9 3 D
GHWHUPLQDWLRQV DUH VXEMHFW WR GH QRYR UHYLHZ .D\HV Y
3DFLILF /XPEHU &R )G WK &LU
+RZHYHU ZKHUH D SDUW\ FKDOOHQJHV WKH GLVWULFW FRXUW¶V
ILQGLQJV RI IDFW XQGHUO\LQJ LWV OHJDO FRQFOXVLRQ DV WR D
SHUVRQ¶VILGXFLDU\VWDWXVXQGHU(5,6$DV3ODLQWLIIVGRKHUH
WKRVHILQGLQJVUHPDLQVXEMHFWWRDFOHDUO\HUURQHRXVVWDQGDUG
RI UHYLHZ DV PDQGDWHG E\ )HG 5 &LY 3 D 6HH
/R3UHVWL )G DW GLVWLQJXLVKLQJ EHWZHHQ D WULDO
FRXUW¶VILQGLQJVRIIDFWZKLFKDUHUHYLHZHGIRUFOHDUHUURU
DQGLWVOHJDOFRQFOXVLRQVGUDZQIURPWKRVHIDFWVZKLFKDUH
UHYLHZHGGHQRYR 6WHHQY-RKQ+DQFRFN0XW/LIH,QV&R
)G WK&LU ³>7KH@FRQFOXVLRQWKDW
VRPHRQHLVQRWDQ(5,6$ILGXFLDU\LVHVVHQWLDOO\DIDFWXDO
FRQFOXVLRQ´ .UDPHU )G ³>:@KLOH WKH OHJDO
FRQFOXVLRQVWREHGUDZQIURPWKHIDFWVDUHDVVHVVHGGHQRYR
WKHKLVWRULFDOIDFWVWKDWXQGHUOLHWKHGHWHUPLQDWLRQZKHWKHU
VRPHRQHLVDQLQYHVWPHQWDGYLVRUXQGHU(5,6$DUHUHYLHZHG
IRUFOHDUHUURU´
$GLVWULFWFRXUW¶VILQGLQJVRIIDFWZLOOEHGHHPHGFOHDUO\
HUURQHRXV RQO\ ZKHQ ³WKH UHYLHZLQJ FRXUW RQ WKH HQWLUH
HYLGHQFHLVOHIWZLWKWKHGHILQLWHDQGILUPFRQYLFWLRQWKDWD
PLVWDNHKDVEHHQFRPPLWWHG´%DUWOLQJY)UXHKDXI&RUS
)G WK&LU FLWLQJ$QGHUVRQY%HVVHPHU
&RUS86 $FFRUGLQJO\RXUUHYLHZ
RI WKH GLVWULFW FRXUW¶V IDFWXDO GHWHUPLQDWLRQV LV OLPLWHG VR
ORQJDVWKHGLVWULFWFRXUW¶VYLHZRIWKHHYLGHQFHLV³SODXVLEOH
LQOLJKWRIWKHHQWLUHUHFRUGLWPXVWVWDQGHYHQWKRXJKWKH
UHYLHZLQJFRXUWKDGLWEHHQWKHILQGHURIIDFWPLJKWKDYH
MXGJHGWKHVDPHHYLGHQFHGLIIHUHQWO\´*ORYHUY-RKQVRQ
)G WK&LU FLWLQJ$QGHUVRQ86
DW )XUWKHUPRUH WR WKH H[WHQW WKDW D GLVWULFW FRXUW¶V
ILQGLQJVRIIDFWUHVWRQFUHGLELOLW\GHWHUPLQDWLRQV³5XOH
UHTXLUHVHYHQJUHDWHUGHIHUHQFH´%DUWOLQJ)GDW
$VWKH6XSUHPH&RXUWKDVKHOG

-- 9 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
:KHQILQGLQJVDUHEDVHGRQGHWHUPLQDWLRQVUHJDUGLQJWKH
FUHGLELOLW\RIZLWQHVVHV5XOH D GHPDQGVHYHQJUHDWHU
GHIHUHQFHWRWKHWULDOFRXUW VILQGLQJVIRURQO\WKHWULDO
MXGJHFDQEHDZDUHRIWKHYDULDWLRQVLQGHPHDQRUDQG
WRQH RI YRLFH WKDW EHDU VR KHDYLO\ RQ WKH OLVWHQHU¶V
XQGHUVWDQGLQJRIDQGEHOLHILQZKDWLVVDLG>:@KHQ
DWULDOMXGJH¶VILQGLQJLVEDVHGRQKLVGHFLVLRQWRFUHGLW
WKHWHVWLPRQ\RIRQHRIWZRRUPRUHZLWQHVVHVHDFKRI
ZKRPKDVWROGDFRKHUHQWDQGIDFLDOO\SODXVLEOHVWRU\WKDW
LVQRWFRQWUDGLFWHGE\H[WULQVLFHYLGHQFHWKDWILQGLQJLI
QRWLQWHUQDOO\LQFRQVLVWHQWFDQYLUWXDOO\QHYHUEHFOHDU
HUURU
$QGHUVRQ86DW LQWHUQDOFLWDWLRQVRPLWWHG
% ),'8&,$5< 67$786
8QGHU(5,6$DILGXFLDU\LVGHILQHGDVIROORZV
>$@ SHUVRQLVDILGXFLDU\ZLWKUHVSHFWWRDSODQWRWKH
H[WHQW L KH H[HUFLVHV DQ\ GLVFUHWLRQDU\ DXWKRULW\ RU
GLVFUHWLRQDU\ FRQWURO UHVSHFWLQJ PDQDJHPHQW RI VXFK
SODQ RU H[HUFLVHV DQ\ DXWKRULW\ RU FRQWURO UHVSHFWLQJ
PDQDJHPHQWRUGLVSRVLWLRQRILWVDVVHWV LL KHUHQGHUV
LQYHVWPHQWDGYLFHIRUDIHHRURWKHUFRPSHQVDWLRQGLUHFW
RULQGLUHFWZLWKUHVSHFWWRDQ\PRQH\VRURWKHUSURSHUW\
RIVXFKSODQRUKDVDQ\DXWKRULW\RUUHVSRQVLELOLW\WRGR
VR RU LLL KH KDV DQ\ GLVFUHWLRQDU\ DXWKRULW\ RU
GLVFUHWLRQDU\UHVSRQVLELOLW\LQWKHDGPLQLVWUDWLRQRIVXFK
SODQ
86&† $ (5,6$DOVRGHILQHVD³SHUVRQ´WR
LQFOXGH D FRUSRUDWLRQ 6HH 86& † 7KH
6XSUHPH &RXUW KDV UHFRJQL]HG WKDW (5,6$ ³GHILQHV
μILGXFLDU\¶ QRW LQ WHUPV RI IRUPDO WUXVWHHVKLS EXW LQ
IXQFWLRQDOWHUPVRIFRQWURODQGDXWKRULW\RYHUWKHSODQ´
0HUWHQVY+HZLWW$VVRFV86 7KH
6L[WK&LUFXLWUHFHQWO\HPSKDVL]HGWKHQHHGWRH[DPLQHWKH
FRQGXFWDWLVVXHZKHQGHWHUPLQLQJZKHWKHUDQLQGLYLGXDOLVDQ
(5,6$ILGXFLDU\
1R +DPLOWRQHWDOY&DUHOOHWDO
DFWLRQIROORZLQJ&DUHOO¶VGHSDUWXUH7KXVWKHGLVWULFWFRXUW
ZDVHQWLWOHGWRGUDZWKHLQIHUHQFHWKDW&DUHOOZDVQRWDFWLQJ
DVDQ(5,6$ILGXFLDU\GXULQJWKHUHOHYDQWWLPHSHULRG
&DUHOOGLGQRWUHFHLYHDIHHIRUUHQGHULQJLQYHVWPHQW
DGYLFHZLWKLQWKHPHDQLQJRI(5,6$¶V† $
7KHGLVWULFWFRXUWGHWHUPLQHGWKDW&DUHOOGLGQRWUHFHLYHD
IHHIRUUHQGHULQJLQYHVWPHQWDGYLFHZLWKLQWKHPHDQLQJRIWKH
VWDWXWHEHFDXVHWKHRQO\FRPSHQVDWLRQ&DUHOOUHFHLYHGZDV
SDLG SXUVXDQW WR WKH -DQXDU\ IXQG DGPLQLVWUDWLRQ
DJUHHPHQW ZKLFK VLPSO\ VWDWHG YDULRXV IXQFWLRQV RI WKH
DGPLQLVWUDWRU -:&$DWWKHWLPH QRQHRIZKLFKLQYROYHG
LQYHVWPHQWUHODWHGVHUYLFHV7KHGLVWULFWFRXUWVWDWHG
$OWKRXJKWKHFRPSHQVDWLRQRI-:&$ZDVGHULYHGLQSDUW
IURPWKHIXQG¶VLQYHVWPHQWSRUWIROLRLQWKDW-:&$¶VIHH
ZDVEDVHGRQDVOLGLQJSHUFHQWDJHRIWKHIXQG¶VPRQWKO\
JURZWKLQFRPHWKHSODLQWLIIVKDYHSUHVHQWHGQRHYLGHQFH
WKDWVXFKDIHHVWUXFWXUHZDVRXWRIWKHRUGLQDU\IRUD
JHQHUDO IXQG DGPLQLVWUDWLRQ DJUHHPHQW LQ ZKLFK QR
LQYHVWPHQWVHUYLFHVDUHSURYLGHG
3ODLQWLIIVIDLOHGWRHVWDEOLVKWKDWDIWHU&DUHOO¶VDFFLGHQWKH
UHFHLYHGIHHVVSHFLILFDOO\DWWULEXWDEOHWRLQYHVWPHQWUHODWHG
VHUYLFHV 3ODLQWLIIV GR QRW VHULRXVO\ FRQWHVW WKLV ILQGLQJ
H[FHSWWRDUJXHWKDW&DUHOOGLGUHQGHULQYHVWPHQWDGYLFHWRWKH
WUXVWHHVDSRLQWZHUHMHFW
,Q VXP ZH DUH QRW OHIW ZLWK WKH ³GHILQLWH DQG ILUP
FRQYLFWLRQWKDWDPLVWDNHKDVEHHQFRPPLWWHG´E\WKHGLVWULFW
FRXUWZLWKUHJDUGWRLWVGHWHUPLQDWLRQWKDWIURP$XJXVW
WR$SULO&DUHOOGLGQRWH[HUFLVHGLVFUHWLRQDU\
DXWKRULW\RUFRQWURORYHUWKHPDQDJHPHQWRUDGPLQLVWUDWLRQRI
WKHWUXVWIXQGRUGLVSRVLWLRQRILWVDVVHWVZLWKUHJDUGWRWKH
IRXUWHHQ&02VDWLVVXH%DUWOLQJ)GDW7KXVZH
KROGWKDWWKHGLVWULFWFRXUWZDVQRWFOHDUO\HUURQHRXVLQILQGLQJ
WKDW&DUHOOZDVQRWDQLQGLYLGXDOILGXFLDU\WRWKHWUXVWIXQG
GXULQJ WKH DSSOLFDEOH WLPH SHULRG ZLWKLQ WKH PHDQLQJ RI
† $ $FFRUGLQJO\ZH$)),50WKHMXGJPHQWRI
WKHGLVWULFWFRXUWRQWKLVJURXQG

-- 10 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
,W ZDV 6HL[ ,QYHVWPHQWV WKDW DGYLVHG OLTXLGDWLRQ RI WKH IRXUWHHQ
&02V
$GPLQLVWUDWRU´ DQG WKDW KH NQHZ QRWKLQJ DW DOO DERXW WKH
VHFRQG PHPRUDQGXP *URRPV WHVWLILHG WKDW VKH KDG QR
UHFROOHFWLRQRIWKHILUVWPHPRUDQGXPDQGKDGQRLGHDZKR
SUHSDUHG WKH VHFRQG RQH ,Q OLJKW RI WKH IDFW WKDW &DUHOO
SHUIRUPHGRQO\PLQLVWHULDOIXQFWLRQVDWWKHDERYHPHQWLRQHG
WUXVWHHPHHWLQJVEURXJKW/HJJ0DVRQUHSUHVHQWDWLYHVWRWKH
6HSWHPEHUPHHWLQJVRDVWRHQFRXUDJHWKHWUXVWHHVWRREWDLQ
DQ LQYHVWPHQW DGYLVRU DQG ZDV QRW LQYLWHG WR WKH -DQXDU\
WUXVWHHPHHWLQJWKHLQDGYHUWHQWUHIHUHQFHWR&DUHOODV
³&RQWUDFW$GPLQLVWUDWRU´LVQRWHQRXJKWRVXSSRUWDILQGLQJ
WKDW &DUHOO FRQWLQXHG WR DGPLQLVWHU WKH IXQG LQ D ILGXFLDU\
FDSDFLW\
)LQDOO\ DV DGGLWLRQDO HYLGHQFH WKDW WKH WUXVWHHV GLG QRW
FRQVLGHU &DUHOO WR KDYH KDG GLVFUHWLRQDU\ DXWKRULW\ DQG
FRQWURORYHUWKHPDQDJHPHQWDQGGLVSRVLWLRQRIWUXVWIXQG
DVVHWVGXULQJWKHUHOHYDQWWLPHSHULRGWKHGLVWULFWFRXUWUHOLHG
RQWKHIDFWWKDWWKHWUXVWHHVGLGQRWHQWHULQWRDFRQWUDFWIRU
LQGHSHQGHQW LQYHVWPHQW VHUYLFHV XQWLO -XQH $V WKH
GLVWULFWFRXUWQRWHG&DUHOOGLGQRWPHHWZLWKWKHWUXVWHHVRU
DWWHQGDQ\RWKHUWUXVWHHPHHWLQJVIROORZLQJWKH$SULO
PHHWLQJ )XUWKHUPRUH 3ODLQWLIIV¶ FRQWUDFW ZLWK 1$$ ZDV
WHUPLQDWHG DV RI 6HSWHPEHU ZKHQ $FFRUGLD D
FRPSDQ\ XQUHODWHG WR &DUHOO EHFDPH WKH WKLUGSDUW\
DGPLQLVWUDWRU%XWLWZDVQRWXQWLOHLJKWPRQWKVODWHUWKDWWKH
WUXVWIXQGHQWHUHGLQWRDFRQWUDFWIRULQYHVWPHQWVHUYLFHVZLWK
6HL[ ,QYHVWPHQW $GYLVRUV ,QF 7KH GLVWULFW FRXUW IRXQG
WKHVHIDFWVVLJQLILFDQWLQWKDWWKH\VXSSRUWHGLWVGHWHUPLQDWLRQ
WKDW³WKHWUXVWHHVWRRNFRQWURORIWKHLQYHVWPHQWVDIWHU0U
&DUHOO¶VDFFLGHQWDQGUHWDLQHGWKDWFRQWUROXQWLOWKH\GHFLGHG
ORQJ DIWHU 0U &DUHOO¶V GHSDUWXUH WR REWDLQ WKH LQYHVWPHQW
VHUYLFHV RI 6HL[ ,QYHVWPHQWV´ +DG WKH WUXVWHHV REWDLQHG
RWKHU LQYHVWPHQW VHUYLFHV LPPHGLDWHO\ IROORZLQJ &DUHOO¶V
GHSDUWXUH LW ZRXOG VXSSRUW 3ODLQWLIIV¶ SRVLWLRQ WKDW WKH
WUXVWHHV WKRXJKW XS XQWLO WKDW SRLQW &DUHOO ZDV SURYLGLQJ
VXFK VHUYLFHV +RZHYHU WKH WUXVWHHV WRRN QR LPPHGLDWH
1R +DPLOWRQHWDOY&DUHOOHWDO
7KH ILGXFLDU\ REOLJDWLRQV LPSRVHG E\ (5,6$ DUH
LPSOLFDWHGRQO\ZKHUHDQHPSOR\HUDFWVLQLWVILGXFLDU\
FDSDFLW\7KXVZHPXVWH[DPLQHWKHFRQGXFWDWLVVXHWR
GHWHUPLQH ZKHWKHU LW FRQVWLWXWHV ³PDQDJHPHQW´ RU
³DGPLQLVWUDWLRQ´ RI WKH SODQ JLYLQJ ULVH WR ILGXFLDU\
FRQFHUQVRUPHUHO\DEXVLQHVVGHFLVLRQWKDWKDVDQHIIHFW
RQDQ(5,6$SODQQRWVXEMHFWWRILGXFLDU\VWDQGDUGV
+XQWHU Y &DOLEHU 6\V ,QF )G WK &LU
LQWHUQDO TXRWDWLRQ PDUNV DOWHUDWLRQV DQG FLWDWLRQV
RPLWWHG FLWLQJ6HQJSLHOY%)*RRGULFK&R)G
WK&LU ³>7@KHIDFWWKDWDQDFWLRQWDNHQE\DQ
HPSOR\HUWRLPSOHPHQWDEXVLQHVVGHFLVLRQPD\XOWLPDWHO\
DIIHFWWKHVHFXULW\RIHPSOR\HHV¶ZHOIDUHEHQHILWVGRHVQRW
DXWRPDWLFDOO\UHQGHUWKHDFWLRQVXEMHFWWR(5,6$¶VILGXFLDU\
GXWLHV´ $NHUVY3DOPHU)G WK&LU
³(5,6$GRHVQRWUHTXLUHWKDWGD\WRGD\FRUSRUDWHEXVLQHVV
WUDQVDFWLRQV ZKLFK PD\ KDYH D FROODWHUDO HIIHFW RQ
SURVSHFWLYH FRQWLQJHQW HPSOR\HH EHQHILWV EH SHUIRUPHG
VROHO\ LQ WKH LQWHUHVW RI SODQ SDUWLFLSDQWV >2@QO\
GLVFUHWLRQDU\DFWVRISODQPDQDJHPHQWRUDGPLQLVWUDWLRQRU
WKRVHDFWVGHVLJQHGWRFDUU\RXWWKHYHU\SXUSRVHVRIWKHSODQ
DUHVXEMHFWWR(5,6$¶VILGXFLDU\GXWLHV´ 5HFRJQL]LQJWKDW
DSHUVRQGHHPHGWREHDILGXFLDU\LVQRWDILGXFLDU\IRUHYHU\
SXUSRVHEXWRQO\WRWKHH[WHQWWKDWKHSHUIRUPVRQHRIWKH
GHVFULEHGIXQFWLRQVVHH.ORVWHUPDQY:*HQ0JPW,QF
)G WK&LU WKH6HYHQWK&LUFXLWKDV
GHVFULEHG³GLVFUHWLRQ´DVWKHVLQHTXDQRQRIILGXFLDU\VWDWXV
VHH3RKOY1DW¶O%HQHILWV&RQVXOWDQWV)G WK
&LU
&DUHOO GLG QRW H[HUFLVH GLVFUHWLRQDU\ DXWKRULW\ RU
FRQWUROZLWKLQWKHPHDQLQJRI(5,6$¶V† $
7KH GLVWULFW FRXUW IRXQG WKDW &DUHOO ZDV QRW LQ IDFW DQ
(5,6$ILGXFLDU\ZLWKUHJDUGWRWKH&02VSXUFKDVHGEHWZHHQ
$XJXVW DQG $SULO EHFDXVH KH GLG QRW
H[HUFLVH GLVFUHWLRQDU\ DXWKRULW\ RYHU WKH PDQDJHPHQW RU
DGPLQLVWUDWLRQ RI WKH IRXUWHHQ &02V DW LVVXH QRU GLG KH
UHQGHU LQYHVWPHQW DGYLFH IRU D IHH 7KH GLVWULFW FRXUW¶V

-- 11 of 12 --

+DPLOWRQHWDOY&DUHOOHWDO 1R
ILQGLQJV ZHUH EDVHG LQ SDUW RQ WKH IDFW WKDW 3ODLQWLIIV
SUHVHQWHGQRHYLGHQFHVKRZLQJWKDW&DUHOOFDXVHGWKHWUXVWHHV
WRUHOLQTXLVKWKHLULQGHSHQGHQWGLVFUHWLRQDIWHUIRUPLQJWKH
LQYHVWPHQW FRPPLWWHH DQG LQVWHDG WR IROORZ D FRXUVH
SUHVFULEHG E\ KLP 7KH GLVWULFW FRXUW GUHZ WKLV OHJDO
FRQFOXVLRQ IURP D QXPEHU RI ZLWQHVV FUHGLELOLW\
GHWHUPLQDWLRQVDQGRWKHUIDFWXDOILQGLQJV3ODLQWLIIVLQWXUQ
DUJXHWKDWWKLVILQGLQJZDVFOHDUO\HUURQHRXVDQGXQVXSSRUWHG
E\WKHUHFRUG
7KHGLVWULFWFRXUWH[SUHVVO\IRXQGWKDWDWWKH-XQHWUXVWHH
PHHWLQJWKHWUXVWHHVIRUPHGWKHLURZQLQYHVWPHQWFRPPLWWHH
WRH[HUFLVHGLVFUHWLRQRYHUDOOWUXVWIXQGLQYHVWPHQWV7KH
WHVWLPRQ\ RI WUXVWHHV :KLWH DQG <RXQJ LH WKDW WKH
LQYHVWPHQWFRPPLWWHHZDVOLPLWHGWRFRQWURORIWKH.HPSHU
+LJK<LHOG)XQGRQO\ZDV³DELWWRRZHOOUHKHDUVHG´WREH
FUHGLEOH,QVWHDGWKHGLVWULFWFRXUWFUHGLWHGWKHWHVWLPRQ\RI
*URRPV DQG %HDUG ZKR FODLPHG WKDW WKH LQYHVWPHQW
FRPPLWWHH ZRXOG RYHUVHH DOO WUXVW IXQG LQYHVWPHQWV 7R
IXUWKHUEROVWHUWKLVILQGLQJWKHGLVWULFWFRXUWUHOLHGRQWKHIDFW
WKDWWKHPLQXWHVIURPWKHPHHWLQJZKLFKZHUHUHYLHZHGDQG
XQDQLPRXVO\DSSURYHGDWWKHIROORZLQJPHHWLQJGLGQRWUHIHU
WRWKH.HPSHU+LJK<LHOG)XQG
3ODLQWLIIV DUJXH WKDW &DUHOO VWHSSHG EDFN LQWR KLV UROH RI
PDQDJLQJ DQG RYHUVHHLQJ WUXVW IXQG LQYHVWPHQWV XSRQ KLV
UHWXUQ WR ZRUN LQ 6HSWHPEHU ,Q VXSSRUW RI WKLV
DUJXPHQW3ODLQWLIIVSRLQWWRWKHIDFWWKDW&DUHOODWWHQGHGVRPH
RIWKHPRQWKO\WUXVWHHPHHWLQJVVSHFLILFDOO\WKHPHHWLQJV
KHOGLQ6HSWHPEHU1RYHPEHUDQG$SULO
/LNH WKH GLVWULFW FRXUW ZH DUH QRW FRQYLQFHG WKDW &DUHOO¶V
DWWHQGDQFHDWWKHVHPHHWLQJVZDVVXIILFLHQWWRGHPRQVWUDWH
WKDWKHH[HUFLVHGGLVFUHWLRQDU\DXWKRULW\RUFRQWURORYHUWUXVW
IXQGLQYHVWPHQWV
$WWKH6HSWHPEHUPHHWLQJ&DUHOOVLPSO\UHDGVRPH
ILQDQFLDOUHSRUWVWRWKHWUXVWHHV±PXFKOLNH*URRPVGLGDWWKH
-XQH PHHWLQJ DQG VKH KDG QR LQYHVWPHQW H[SHUWLVH
&DUHOO¶VSHUIRUPDQFHZDVSXUHO\DSHUIXQFWRU\PLQLVWHULDO
IXQFWLRQ 0RUHRYHU WKH WUXVWHHV LQIRUPHG &DUHOO WKDW KLV
1R +DPLOWRQHWDOY&DUHOOHWDO
VHUYLFHVDVFRQWUDFWDGPLQLVWUDWRUZRXOGEHWHUPLQDWHGLQVL[
PRQWKVDQG&DUHOOXUJHGWKHWUXVWHHVWRREWDLQDQLQYHVWPHQW
DGYLVRU,QIDFW&DUHOOEURXJKWZLWKKLPUHSUHVHQWDWLYHVIURP
WKHLQYHVWPHQWILUPRI/HJJ0DVRQWRPDNHDSUHVHQWDWLRQ
*URRPVWHVWLILHGWKDWWKHSXUSRVHRIWKHSUHVHQWDWLRQZDVWR
HQFRXUDJH WKH WUXVWHHV WR REWDLQ DQ LQYHVWPHQW DGYLVRU
EHFDXVH WKH WUXVWHHV QRZ ZHUH UHVSRQVLEOH IRU WKHLU RZQ
LQYHVWPHQWGHFLVLRQV7KHPLQXWHVUHIOHFWWKDW/HJJ0DVRQ
VXJJHVWHG WKDW RQH RI LWV ILUP PDQDJHUV DWWHQG HLWKHU WKH
2FWREHU RU 1RYHPEHU WUXVWHH PHHWLQJ IUHH RI FKDUJH WR
SUHSDUHDZULWWHQLQYHVWPHQWSROLF\IRUWKHWUXVWIXQG&DUHOO
GLVFXVVHGWKLVVXJJHVWLRQZLWKWKHWUXVWHHVEXWWKH\GLGQRW
DYDLOWKHPVHOYHVRIVXFKVHUYLFHV$WWKH1RYHPEHUDQG
$SULO WUXVWHH PHHWLQJV &DUHOO VLPSO\ UHYLHZHG
LQYHVWPHQWV DQG GLVFXVVHG WKH SRUWIROLR SHUIRUPDQFH $V
QRWHGE\WKHGLVWULFWFRXUWWKHPLQXWHVIURPWKH$SULO
PHHWLQJUHIOHFWWKDW&DUHOODVNHGWKHWUXVWHHVIRULQYHVWPHQW
VXJJHVWLRQV³VLJQLI\LQJWKDWERWK0U&DUHOODQGWKHWUXVWHHV
XQGHUVWRRG WKDW WKH WUXVWHHV DQG QRW 0U &DUHOO ZHUH
UHVSRQVLEOHIRUGHFLGLQJWKHLQYHVWPHQWV RIWKHIXQG7KH
PLQXWHV UHIOHFW DEVROXWHO\ QR LQSXW IURP 0U &DUHOO DERXW
ZKHUHRULQZKDWWRLQYHVWWKHPRQLHVRIWKHIXQG´
3ODLQWLIIVDOVRUHO\RQWZRPHPRUDQGDIURP&DUHOOWRWKH
WUXVWHHVWRVXSSRUWWKHLUDVVHUWLRQWKDW&DUHOOZDVDILGXFLDU\
GXULQJ WKH WLPH LQ TXHVWLRQ 2Q -XQH &DUHOO
LQVWUXFWHG *URRPV WR VHQG D PHPRUDQGXP WR WKH WUXVWHHV
XQGHU KLV QDPH H[SODLQLQJ D FKDQJH LQ YDOXDWLRQ RI WKH
.HPSHU)XQG$OWKRXJKWKHFRQWUDFWDGPLQLVWUDWRUDWWKLV
SRLQW ZDV 1$$ WKH PHPRUDQGXP VWDWHG WKDW LW ZDV IURP
³-DPHV$&DUHOO&RQWUDFW$GPLQLVWUDWRU´7ZRGD\VODWHU
DQRWKHU PHPRUDQGXP ZDV VHQW WR WKH WUXVWHHV HQWLWOHG
³5HYLVLRQ 7R 7KH 0LQXWHV )URP 7KH $SULO
0HHWLQJ´$JDLQWKLVPHPRUDQGXPVWDWHGWKDWLWZDVVHQW
IURP³-DPHV$&DUHOO&RQWUDFW$GPLQLVWUDWRU´3ODLQWLIIV
SRLQWWRWKHVHWZRLWHPVDVIXUWKHUHYLGHQFHWKDWXSXQWLOWKDW
SRLQW&DUHOOFRQWLQXHGWRH[HUFLVHGLVFUHWLRQDU\DXWKRULW\DQG
UHVSRQVLELOLW\RYHUDGPLQLVWUDWLRQRIWKHWUXVWIXQG:HDUH
XQSHUVXDGHG&DUHOOWHVWLILHGWKDWKHGLGQRWNQRZZK\WKH
ILUVW PHPRUDQGXP UHIHUUHG WR KLP DV ³&RQWUDFW

-- 12 of 12 --