03a0183p.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
7,027+< 5$< *($1 -2+1
(5,& *5((1( &+5,6723+(5
/<11 &5266
3ODLQWLIIV$SSHOOHHV
Y
*(25*( : +$77$:$<
&RPPLVVLRQHURIWKH
7HQQHVVHH'HSDUWPHQWRI
&KLOGUHQ¶V6HUYLFHV
0$5*$5(7 '256('LUHFWRU
)LVFDO6HUYLFHV7HQQHVVHH
'HSDUWPHQWRI&KLOGUHQ¶V
6HUYLFHV& :$55(1 1((/
&RPPLVVLRQHURIWKH
7HQQHVVHH'HSDUWPHQWRI
)LQDQFHDQG$GPLQLVWUDWLRQ
,QGLYLGXDOO\DQGLQWKHLU
2IILFLDO&DSDFLWLHV
'HIHQGDQWV$SSHOODQWV
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH0LGGOH'LVWULFWRI7HQQHVVHHDW1DVKYLOOH
1RV²7RGG-&DPSEHOO
'LVWULFW-XGJH
*HDQHWDOY+DWWDZD\HWDO 1R
7KH +RQRUDEOH $QQ $OGULFK 8QLWHG 6WDWHV 'LVWULFW -XGJH IRU WKH
1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ
$UJXHG0DUFK
'HFLGHGDQG)LOHG-XQH
%HIRUH%$7&+(/'(5DQG&/$<&LUFXLW-XGJHV
$/'5,&+'LVWULFW-XGJH
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' ( %ODLQH 6SURXVH 2)),&( 2) 7+(
$77251(< *(1(5$/ 1DVKYLOOH 7HQQHVVHH IRU
$SSHOODQWV 7KHUHVD9D\ 6PLWK 585$/ /(*$/
6(59,&(62)7(11(66((,1&2DN5LGJH7HQQHVVHH
IRU$SSHOOHHV21%5,()(%ODLQH6SURXVH2)),&(2)
7+( $77251(< *(1(5$/ 1DVKYLOOH 7HQQHVVHH IRU
$SSHOODQWV7KHUHVD9D\6PLWK/HQQ\/&URFH585$/
/(*$/ 6(59,&(6 2) 7(11(66(( ,1& 2DN 5LGJH
7HQQHVVHH ,UZLQ % 9HQLFN '2%%,16 9(1,&.
1DVKYLOOH7HQQHVVHHIRU$SSHOOHHV
%$7&+(/'(5-GHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQ
ZKLFK$/'5,&+'-MRLQHG&/$<- S GHOLYHUHG
DVHSDUDWHRSLQLRQFRQFXUULQJLQWKHRXWFRPHUHDFKHGE\WKH
PDMRULW\RSLQLRQ
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
$/,&( 0 %$7&+(/'(5 &LUFXLW -XGJH ,Q WKLV
LQWHUORFXWRU\ DSSHDO WKH GHIHQGDQWV FKDOOHQJH WKH GLVWULFW
FRXUW¶VGHQLDORIWKHLUPRWLRQWRGLVPLVVWKHSODLQWLIIV¶FODLPV
RQJURXQGVRIVRYHUHLJQDQGTXDOLILHGLPPXQLW\7KHGLVWULFW
FRXUW KHOG WKDW WKH GHIHQGDQWV ZHUH HQWLWOHG WR QHLWKHU

-- 1 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
$OWKRXJK HDFK SODLQWLII LQLWLDOO\ EURXJKW D VHSDUDWH DFWLRQ DJDLQVW WKH
GHIHQGDQWV WKH GLVWULFW FRXUW FRQVROLGDWHG WKH WKUHH FDVHV E\ RUGHU RI
$SULO
TXDOLILHGQRUVRYHUHLJQLPPXQLW\DQGWKDWDOOEXWRQHRIWKH
FODLPVVHWIRUWKE\WKHSODLQWLIIVVHWIRUWKIDFWVZKLFKLIWUXH
FRXOGHQWLWOHSODLQWLIIVWRUHOLHI%HFDXVHWKHGLVWULFWFRXUW
IDLOHGWRDSSO\WKHDSSURSULDWHOHJDOVWDQGDUGWRDQXPEHURI
WKHLVVXHVUDLVHGDQGLQOLJKWRIWKH6XSUHPH&RXUW¶VUHFHQW
GHFLVLRQ LQ :DVKLQJWRQ 6WDWH 'HSDUWPHQW RI 6RFLDO DQG
+HDOWK6HUYLFHVY*XDUGLDQVKLS(VWDWHRI.HIIHOHU86
BBB6&W/(GG ZHUHYHUVH
WKH MXGJPHQW RI WKH GLVWULFW FRXUW GHQ\LQJ WKH PRWLRQ WR
GLVPLVV H[FHSW DV WR WKRVH FODLPV EURXJKW XQGHU WKH
5HKDELOLWDWLRQ $FW DJDLQVW WKH GHIHQGDQWV LQ WKHLU RIILFLDO
FDSDFLWLHVDQGUHPDQGWKHFDVHIRUIXUWKHUSURFHHGLQJV
,
&KULVWRSKHU&URVV-RKQ*UHHQHDQG7LPRWK\5D\*HDQ
WRJHWKHUSODLQWLIIV DUH\RXQJPHQZKRZHUHIRUPHUO\LQWKH
FXVWRG\RIWKHVWDWHRI7HQQHVVHH7KHGHIHQGDQWVDSSHOODQWV
LQFOXGH*HRUJH+DWWDZD\WKH&RPPLVVLRQHURIWKH7HQQHVVHH
'HSDUWPHQWRI&KLOGUHQ¶V6HUYLFHV '&6 0DUJDUHW'RUVH
WKH'LUHFWRURIWKH)LVFDO6HUYLFHVEUDQFKRIWKH'&6DQG&
:DUUHQ1HHOWKH&RPPLVVLRQHURIWKH7HQQHVVHH'HSDUWPHQW
RI)LQDQFHDQG$GPLQLVWUDWLRQ WRJHWKHUGHIHQGDQWV $IWHU
WKHSODLQWLIIVKDGLQGLYLGXDOO\EHHQDGMXGLFDWHGGHOLQTXHQW
E\DVWDWHMXYHQLOHFRXUW7HQQHVVHHSODFHGWKHPLQYDULRXV
OLYHLQWUHDWPHQWIDFLOLWLHV$VFKLOGUHQLQVWDWHFXVWRG\DW
UHVLGHQWLDO WUHDWPHQW IDFLOLWLHV ZLWK LQKRXVH VFKRROV WKH\
ZHUHSUHVXPHGGLVDEOHGDQGWKHUHIRUHHQWLWOHGWRWKHEHQHILWV
RIWKH,QGLYLGXDOV:LWK'LVDELOLWLHV(GXFDWLRQ$FW ,'($
DQGRUWKH5HKDELOLWDWLRQ$FW$YDULHW\RIVWDWHDQGIHGHUDO
SURJUDPVSURYLGHGIRUWKHSODLQWLIIV¶PDLQWHQDQFHPHGLFDO
FDUHDQGHGXFDWLRQDOQHHGVZKLOHWKH\ZHUHLQFXVWRG\DQG
WKH\ZHUHWKHUHIRUHQRWSHUVRQDOO\OLDEOHIRUWKHFRVWRIWKHLU
FDUH
*HDQHWDOY+DWWDZD\HWDO 1R
*HDQ UHFHLYHG 6XSSOHPHQWDO 6HFXULW\ ,QFRPH 66, XQGHU 86&
† EHFDXVH RI KLV RZQ GLVDELOLW\ %RWK *UHHQH DQG &URVV UHFHLYHG
6RFLDO 6HFXULW\ 'LVDELOLW\ ,QVXUDQFH 66', SXUVXDQW WR 86&
† G EHFDXVH RI WKH GLVDELOLW\ RI WKHLU SDUHQWV
7HQQ &RGH $QQ † SHUPLWV '&6 WR ³>V@HHN DSSO\ IRU
UHFHLYH DQG DGPLQLVWHU IHGHUDO IXQGV DV ZHOO DV DQ\ RWKHU JUDQWV RU IXQGV
WKDW FDQ EH XVHG IRU FKLOGUHQ EHLQJ VHUYHG E\ WKH GHSDUWPHQW RI FKLOGUHQ¶V
VHUYLFHV´ 5HJXODWLRQV JRYHUQLQJ WKH 6RFLDO 6HFXULW\ $GPLQLVWUDWLRQ
SHUPLW DJHQFLHV VXFK DV '&6 WR DFW DV UHSUHVHQWDWLYH SD\HHV 6HH
&)5 † E
,Q DGGLWLRQ WR WKH EHQHILWV MXVW GHVFULEHG HDFK RI WKH
SODLQWLIIV ZDV HQWLWOHG WR UHFHLYH 6RFLDO 6HFXULW\ EHQHILWV
2QFH WKH SODLQWLIIV HQWHUHG VWDWH FXVWRG\ '&6 VRXJKW DQG
UHFHLYHG IURP WKH 6RFLDO 6HFXULW\ $GPLQLVWUDWLRQ WKH
DSSRLQWPHQWRIGHIHQGDQW'RUVHDVWKHUHSUHVHQWDWLYHSD\HH
IRU WKH SXUSRVH RI UHFHLYLQJ DQG PDQDJLQJ WKH SODLQWLIIV¶
6RFLDO6HFXULW\EHQHILWV$VDUHSUHVHQWDWLYHSD\HH'RUVH
DFWLQJRQEHKDOIRI'&6 ZDVFRQVWUDLQHGWRXVHWKH6RFLDO
6HFXULW\ EHQHILWV VKH UHFHLYHG RQO\ IRU WKH EHQHILW RI WKH
SODLQWLIIV LQ DFFRUGDQFH ZLWK WKH 6RFLDO 6HFXULW\
$GPLQLVWUDWLRQ¶V UHJXODWLRQV DQG JXLGHOLQHV UHTXLULQJ D
UHSUHVHQWDWLYH SD\HH WR XVH WKH IXQGV IRU WKH FXUUHQW
PDLQWHQDQFH RI WKH EHQHILFLDULHV DQG WR KROG LQ WUXVW DQ\
IXQGVQRWVRXVHG'&6NHSWWKH6RFLDO6HFXULW\EHQHILWVLW
UHFHLYHGDVUHSUHVHQWDWLYHSD\HHLQDFROOHFWLYHDFFRXQWRYHU
ZKLFK'RUVHZDVWKHFXVWRGLDQDOWKRXJK'RUVHGLGQRWKDYH
WKHDXWKRULW\WRPDNHGLVEXUVHPHQWVIURPWKDWDFFRXQWDQGLW
LV QRW FOHDU DW WKLV VWDJH RI WKH OLWLJDWLRQ ZKHWKHU '&6¶V
DFFRXQWLQJ SUDFWLFHV ZLWK UHJDUG WR WKH 6RFLDO 6HFXULW\
EHQHILWVZHUHSURSHUDQGLQDFFRUGZLWKWKH6RFLDO6HFXULW\
$GPLQLVWUDWLRQ¶VUHJXODWLRQVDQGSROLFLHV
'&6 XVHG WKH SODLQWLIIV¶ 6RFLDO 6HFXULW\ EHQHILWV WR
UHLPEXUVH WKH VWDWH IRU WKH FRVW RI WKH SODLQWLIIV¶ FXUUHQW
PDLQWHQDQFH 8SRQ OHDYLQJ VWDWH FXVWRG\ HDFK SODLQWLII
UHTXHVWHG DQ DFFRXQWLQJ RI KLV 6RFLDO 6HFXULW\ EHQHILWV
:KHQWKHDFFRXQWLQJZDVPDGH'&6RIIVHWWKHDPRXQWRI
6RFLDO6HFXULW\EHQHILWVLWKDGUHFHLYHGIRUHDFKSODLQWLIIE\

-- 2 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
7KH VWDWH VSHQW IRU WKH FDUH RI &URVV DQG UHFHLYHG
LQ VRFLDO VHFXULW\ EHQHILWV -$ 7KH VWDWH VSHQW
RQ *HDQ ZKLOH UHFHLYLQJ IURP WKH 66$ -$
)RU *UHHQH WKH VWDWH VSHQW DQG UHFHLYHG -$

7KH SODLQWLIIV FRQFHGHG EHIRUH WKH GLVWULFW FRXUW WKDW WKHLU $'$
GLVFULPLQDWLRQ FODLP LV EDUUHG E\ %RDUG RI 7UXVWHHV RI WKH 8QLYHUVLW\ RI
$ODEDPD Y *DUUHWW 86
WKHDPRXQWRIPRQH\WKHVWDWHH[SHQGHGIRUKLVFDUH%HFDXVH
WKHVWDWHKDGVSHQWIDUPRUHPRQH\RQHDFKSODLQWLII¶VFXUUHQW
PDLQWHQDQFHWKDQLWKDGUHFHLYHGLQ6RFLDO6HFXULW\EHQHILWV
RQKLVEHKDOIQRQHRIWKHSODLQWLIIVZDVDEOHWRJHWDQ\PRQH\
EDFNIURPWKHVWDWHDIWHUKHOHIWLWVFXVWRG\
7KH SODLQWLIIV EURXJKW VHYHUDO FDXVHV RI DFWLRQ XQGHU
86& † ZKLFK ZH KDYH JURXSHG DV IROORZV
DOLHQDWLRQ RI 6RFLDO 6HFXULW\ EHQHILWV LQ YLRODWLRQ RI
86&† XQFRQVWLWXWLRQDOWDNLQJLQYLRODWLRQRI
WKH)LIWKDQG)RXUWHHQWK$PHQGPHQWV EUHDFKRIILGXFLDU\
GXW\ YLRODWLRQ RI WKH (TXDO 3URWHFWLRQ &ODXVH RI WKH
)RXUWHHQWK $PHQGPHQW GHQLDO RI GXH SURFHVV ULJKWV
XQGHUWKH0HGLFDLG$FW YLRODWLRQRIWKHULJKWWRDIUHH
DSSURSULDWHHGXFDWLRQXQGHUWKH,QGLYLGXDOVZLWK'LVDELOLWLHV
(GXFDWLRQ$FW ³,'($´ GLVFULPLQDWLRQRQWKHEDVLVRI
GLVDELOLW\ LQ YLRODWLRQ RI WKH 5HKDELOLWDWLRQ $FW DQG
GLVFULPLQDWLRQRQWKHEDVLVRIGLVDELOLW\LQYLRODWLRQRIWKH
$PHULFDQV ZLWK 'LVDELOLWLHV $FW 8SRQ WKH GHIHQGDQWV¶
PRWLRQ WR GLVPLVV WKH GLVWULFW FRXUW IRXQG WKDW ZLWK WKH
H[FHSWLRQ RI WKH GLVFULPLQDWLRQ FODLP EURXJKW XQGHU WKH
$'$WKHSODLQWLIIVVWDWHGFODLPVXSRQZKLFKUHOLHIFRXOGEH
JUDQWHGDQGWKDWQHLWKHUVRYHUHLJQQRUTXDOLILHGLPPXQLW\
SURWHFWHG WKH GHIHQGDQWV IURP VXLW LQ WKLV LQVWDQFH 7KH
GHIHQGDQWV WLPHO\ EURXJKW DQ LQWHUORFXWRU\ DSSHDO XSRQ
ZKLFKZHUXOHWRGD\
*HDQHWDOY+DWWDZD\HWDO 1R
,,
,QGLVFXVVLQJWKHFODLPVEHIRUHXVLWZLOOEHHVVHQWLDOWR
DGGUHVVWKHGLIIHUHQFHEHWZHHQVXLWVDJDLQVWVWDWHDFWRUVLQ
WKHLU RIILFLDO FDSDFLWLHV DQG VXLWV DJDLQVW WKHP LQ WKHLU
LQGLYLGXDOFDSDFLWLHVWKHGLIIHUHQFHEHWZHHQFODLPVEURXJKW
XQGHU86&†DQGFODLPVEURXJKWDVGLUHFWFDXVHV
RI DFWLRQ XQGHU DSSOLFDEOH IHGHUDO VWDWXWHV DQG KRZ WKRVH
GLIIHUHQFHVDIIHFWWKHDQDO\VLVDQGRXWFRPHRIWKHPRWLRQWR
GLVPLVVWKDWLVEHIRUHWKLVFRXUW7ZRRIWKHVHFODLPV²GHQLDO
RIGXHSURFHVVULJKWVXQGHUWKH,'($DQGGLVFULPLQDWLRQRQ
WKHEDVLVRIGLVDELOLW\XQGHUWKH5HKDELOLWDWLRQ$FW²FDQEH
EURXJKWGLUHFWO\XQGHUWKHQDPHGIHGHUDOVWDWXWHVDOWKRXJK
WKHSODLQWLIIVVW\OHWKHLUFODLPVH[FOXVLYHO\DV†DFWLRQV
%HFDXVH³>W@KHIRUPRIWKHFRPSODLQWLVQRWVLJQLILFDQWLILW
DOOHJHVIDFWVXSRQZKLFKUHOLHIFDQEHJUDQWHGHYHQLILWIDLOV
WR FDWHJRUL]H FRUUHFWO\ WKH OHJDO WKHRU\ JLYLQJ ULVH WR WKH
FODLP´'XVVRX\Y*XOI&RDVW,QY&RUS)G
WK&LU ZHZLOOH[DPLQHWKHSODLQWLIIV¶FODLPVXQGHU
†DQGZKHUHSHUWLQHQWGLUHFWO\XQGHUWKHIHGHUDOVWDWXWH
LQTXHVWLRQDVZHOO
:HUHYLHZGHQRYRWKHGLVWULFWFRXUW¶VUXOLQJRQDPRWLRQ
WR GLVPLVV 7DKIV Y 3URFWRU )G WK &LU
DQGYLHZDOOHYLGHQFHDQGDOOHJDWLRQVSUHVHQWHGWKXV
IDU LQ D OLJKW PRVW IDYRUDEOH WR WKH SODLQWLIIV 3IHQQLJ Y
+RXVHKROG&UHGLW6HUYV,QF)G WK&LU
+RZHYHULWLVLPSRUWDQWWRUHPHPEHUWKDWZHDFFHSW
DVWUXHRQO\WKHIDFWXDODOOHJDWLRQVRIWKHQRQPRYLQJSDUWLHV
DQG³QHHGQRWDFFHSWDVWUXHOHJDOFRQFOXVLRQVRUXQZDUUDQWHG
IDFWXDOLQIHUHQFHV´VHWIRUWKLQWKHFRPSODLQWV*ULQGVWDIIY
*UHHQ)G WK&LU 7KHLVVXHVLQWKLV
FDVH DUH FRPSOLFDWHG DQG ZH PXVW EH ZDU\ RI DFFHSWLQJ
XQFULWLFDOO\WKHSODLQWLIIV¶WKHRULHVRIKRZIHGHUDOODZDSSOLHV
WRWKHDVVHUWHGIDFWV
%HIRUH PRYLQJ WR WKH LQGLYLGXDO FODLPV EURXJKW E\ WKH
SODLQWLIIV LW LV KHOSIXO WR UHYLHZ WKH GLIIHUHQFH EHWZHHQ
RIILFLDOFDSDFLW\ VXLWV DQG LQGLYLGXDOFDSDFLW\ VXLWV DJDLQVW
VWDWH RIILFLDOV DQG WKH LPSOLFDWLRQV RI HDFK ³>'@DPDJHV

-- 3 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
DFWLRQVDJDLQVWSXEOLFRIILFLDOVUHTXLUH>D@FDUHIXODGKHUHQFH
WR WKH GLVWLQFWLRQ EHWZHHQ SHUVRQDO DQG RIILFLDOFDSDFLW\
VXLWV´.HQWXFN\Y*UDKDP86
86&†LPSRVHVOLDELOLW\XSRQ³>H@YHU\SHUVRQZKR
XQGHUFRORURI>ODZ@RIDQ\6WDWHVXEMHFWVRUFDXVHVWREH
VXEMHFWHGDQ\FLWL]HQRIWKH8QLWHG6WDWHVRU RWKHUSHUVRQ
ZLWKLQWKHMXULVGLFWLRQWKHUHRIWRWKHGHSULYDWLRQRIDQ\ULJKWV
SULYLOHJHV RU LPPXQLWLHV VHFXUHG E\ WKH &RQVWLWXWLRQ DQG
ODZV>RIWKH8QLWHG6WDWHV@´,Q:LOOY0LFKLJDQ'HS¶W
RI6WDWH3ROLFH86 WKH6XSUHPH&RXUW
FRQIURQWHGWKHLVVXHRIZKHWKHUVWDWHDJHQWVFRXOGEHVXHG
XQGHU†DQGKHOG³WKDWQHLWKHUD6WDWHQRULWVRIILFLDOV
DFWLQJLQWKHLURIILFLDOFDSDFLWLHVDUHμSHUVRQV¶XQGHU†´
7KH&RXUWEDVHGWKLVFRQFOXVLRQXSRQWKHIDFW WKDW³DVXLW
DJDLQVWDVWDWHRIILFLDOLQKLVRUKHURIILFLDOFDSDFLW\LVQRWD
VXLWDJDLQVWWKHRIILFLDOEXWUDWKHULVDVXLWDJDLQVWWKHRIILFLDO¶V
RIILFH´DQG³>D@VVXFKLWLVQRGLIIHUHQWIURPDVXLWDJDLQVW
WKH6WDWHLWVHOI´,G
7KH&RXUWLQ:LOOGRHVQRWUHPRYHDOOJRYHUQPHQWDFWRUVLQ
WKHLURIILFLDOFDSDFLWLHVIURPWKHVFRSHRI†EXWRQO\
WKRVHRIILFLDOVZKRVHRIILFHVDUHFRQVLGHUHG³WKH6WDWH´IRUWKH
SXUSRVHVRIDQLPPXQLW\DQDO\VLV6HHLG)RUWKHSXUSRVHV
RIDQDO\VLVLQWKLVFDVHERWKWKH7HQQHVVHH'HSDUWPHQWRI
&KLOGUHQ¶V6HUYLFHVDQGWKH'HSDUWPHQWRI)LQDQFHDUH³WKH
6WDWH´6HH7HQQ&RGH$QQ†† GHVLJQDWLQJ'&6
DQG WKH 'HSDUWPHQW RI )LQDQFH $GPLQLVWUDWLRQ DPRQJ
RWKHUVDV³DGPLQLVWUDWLYHGHSDUWPHQWVRIVWDWHJRYHUQPHQW´
FUHDWLQJ WKH 'HSDUWPHQW RI )LQDQFH
$GPLQLVWUDWLRQ JLYLQJ WKH &RPPLVVLRQHU RI
)LQDQFH $GPLQLVWUDWLRQ³FKDUJHDQGJHQHUDOVXSHUYLVLRQ´
RYHUWKDWGHSDUWPHQW FUHDWLQJWKH'HSDUWPHQWRI
&KLOGUHQ¶V6HUYLFHV GLVFXVVLQJKRZWKH6WDWHRI
7HQQHVVHHZLOODFFRPSOLVKFHUWDLQSXUSRVHVWKURXJK'&6
7R WKH H[WHQW WKHQ WKDW WKH SODLQWLIIV¶ FODLPV DJDLQVW WKH
GHIHQGDQWV LQ WKLV FDVH DUH † FODLPV DJDLQVW WKRVH
SHUVRQV LQ WKHLU RIILFLDO FDSDFLWLHV DV DJHQWV RI VWDWH
*HDQHWDOY+DWWDZD\HWDO 1R
7KH UHVROXWLRQ RI WKLV LVVXH DOWKRXJK LQFRUUHFWO\ FDVW E\ WKH
GHIHQGDQWV VROHO\ DV DQ (OHYHQWK $PHQGPHQW LVVXH LV QHFHVVDU\ WR RXU
VRYHUHLJQ DQG TXDOLILHG LPPXQLW\ DQDO\VHV LW LV ³WRR LPSRUWDQW WR EH
GHQLHG UHYLHZ DQG WRR LQGHSHQGHQW RI WKH FDXVH LWVHOI WR UHTXLUH WKDW
DSSHOODWH FRQVLGHUDWLRQ EH GHIHUUHG XQWLO WKH ZKROH FDVH LV DGMXGLFDWHG´
&RKHQ Y %HQHILFLDO ,QGXV /RDQ &RUS 86 :H
PD\ WKHUHIRUH UHYLHZ LW DW WKLV WLPH
DGPLQLVWUDWLYH GHSDUWPHQWV WKH\ DUH QRQFRJQL]DEOH 7KH
UHDOSDUW\LQLQWHUHVWLVQRWWKHRIILFLDOEXWWKHJRYHUQPHQW
HQWLW\ ZKRVH ³SROLF\ RU FXVWRP SOD\HG D SDUW LQ WKH
>DOOHJHG@YLRODWLRQRIIHGHUDOODZ´+DIHUY0HOR86
LQWHUQDOTXRWDWLRQVRPLWWHG 7KHUHIRUHWKH
QHHGIRUWKLVFRXUWWRXQGHUWDNHDEURDGVRYHUHLJQLPPXQLW\
DQDO\VLVZLWKUHVSHFWWRWKH†FODLPVLVREYLDWHGE\WKH
IDFW WKDW WKH GHIHQGDQWV LQ WKHLU RIILFLDO FDSDFLWLHV DUH QRW
UHFRJQL]HGDV³SHUVRQV´XQGHU†(YHQLI7HQQHVVHH¶V
VRYHUHLJQLPPXQLW\KDVEHHQSURSHUO\ZDLYHGRUDEURJDWHG
IRUWKHSXUSRVHVRIWKHIHGHUDOVWDWXWHWKHGHIHQGDQWVDOOHJHGO\
YLRODWHG D † FODLP DJDLQVW WKH GHIHQGDQWV LQ WKHLU
RIILFLDO FDSDFLWLHV FDQQRW SURFHHG EHFDXVH E\ GHILQLWLRQ
WKRVHRIILFLDOVDUHQRWSHUVRQVXQGHUWKHWHUPVRI†
,WLVLPSRUWDQWWRXQGHUVWDQGWKHVFRSHRI:LOOLQWKHFRQWH[W
RI VXLWV DJDLQVW JRYHUQPHQW RIILFLDOV )LUVW :LOO GRHV QRW
VKLHOG IURP OLDELOLW\ SXEOLF RIILFLDOV LQ WKHLU LQGLYLGXDO
FDSDFLWLHVZKRDUHFRQVLGHUHG³SHUVRQV´IRUWKHSXUSRVHVRI
VXLWVEURXJKWXQGHU†HYHQZKHQWKH\DUHFDUU\LQJRXW
JRYHUQPHQWIXQFWLRQV6HH+DIHU86DW3HUVRQDO
OLDELOLW\ DJDLQVW D VWDWH RIILFLDO FDQ EH HVWDEOLVKHG XQGHU
†E\VKRZLQJ³WKDWWKHRIILFLDODFWLQJXQGHUFRORURI
VWDWHODZFDXVHGWKHGHSULYDWLRQRIDIHGHUDOULJKW´*UDKDP
86DW6HFRQGZKLOH:LOOUHPRYHVSHUVRQVDFWLQJ
LQ WKHLU RIILFLDO FDSDFLWLHV RQ EHKDOI RI WKH 6WDWH IURP WKH
VFRSHRI†DOWRJHWKHUWKHUHE\HOLPLQDWLQJWKHQHHGIRU
D FRXUW WR XQGHUWDNH DQ\ VRUW RI LPPXQLW\ DQDO\VLV ZLWK
UHVSHFWWRVXFKDFODLPVWDWHDFWRUVLQWKHLURIILFLDOFDSDFLWLHV
FDQEHVXHGXQGHURWKHUVWDWXWHV,QGHIHQGLQJWKHPVHOYHVDV
RIILFLDO VWDWH DFWRUV WKH VXHG RIILFLDOV FDQ FODLP DQ\
LPPXQLWLHVRUGHIHQVHVWKDWZRXOGEHDYDLODEOHWRWKHHQWLW\

-- 4 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
WKH\UHSUHVHQW,GDW7KLUGWKHKROGLQJLQ:LOOGRHVQRW
DEURJDWHWKHGRFWULQHRI([3DUWH<RXQJ86
ZKLFK DOORZV VXLWV DJDLQVW VWDWH DFWRUV LQ WKHLU
RIILFLDOFDSDFLWLHVIRULQMXQFWLYHUHOLHIEHFDXVHVXFKDFWLRQV
DUHQRWGHHPHGWREHDJDLQVWWKH6WDWH:LOO86DW
Q
%HFDXVHWKH†FODLPVLQWKLVODZVXLWUHPDLQDJDLQVW
WKH GHIHQGDQWV RQO\ LQ WKHLU LQGLYLGXDO FDSDFLWLHV LW LV
QHFHVVDU\IRUWKHSXUSRVHVRIWKLVDSSHDOWRORRNDWWKHSUHFLVH
FRQWRXUV RI WKH GRFWULQH RI TXDOLILHG LPPXQLW\ 4XDOLILHG
LPPXQLW\²GHVFULEHG E\ WKH 6XSUHPH &RXUW DV ³WKH EHVW
DWWDLQDEOH DFFRPPRGDWLRQ RI >WKH@ FRPSHWLQJ YDOXHV´ RI
GHWHUULQJ DEXVH RI SRZHU E\ JRYHUQPHQW RIILFLDOV DQG
YLQGLFDWLQJ FRQVWLWXWLRQDO JXDUDQWHHV RQ WKH RQH KDQG DQG
SUHYHQWLQJIULYRORXVVXLWVDJDLQVWJRYHUQPHQWRIILFLDOVZKLFK
PD\GDPSHQWKHDUGRUZLWKZKLFKWKH\FDUU\RXWWKHLUMREVRQ
WKH RWKHU +DUORZ Y )LW]JHUDOG 86
²LV DQ DIILUPDWLYH GHIHQVH WKDW VKLHOGV JRYHUQPHQW
RIILFLDOV ³IURP OLDELOLW\ IRU FLYLO GDPDJHV LQVRIDU DV WKHLU
FRQGXFW GRHV QRW YLRODWH FOHDUO\ HVWDEOLVKHG VWDWXWRU\ RU
FRQVWLWXWLRQDOULJKWVRIZKLFKDUHDVRQDEOHSHUVRQZRXOGKDYH
NQRZQ´,GDW
$ FRXUW LQ WKLV FLUFXLW XQGHUWDNLQJ D TXDOLILHG LPPXQLW\
DQDO\VLVPXVWILUVWGHWHUPLQHZKHWKHUWKHSODLQWLIIKDVVKRZQ
DYLRODWLRQRIDULJKWSURWHFWHGE\WKH&RQVWLWXWLRQRUODZVRI
WKH8QLWHG6WDWHVLIVRWKHFRXUWPXVWH[DPLQHZKHWKHUWKH
ULJKW ZDV FOHDUO\ HVWDEOLVKHG %UHQQDQ Y 7RZQVKLS RI
1RUWKYLOOH)G WK&LU 7KHULJKW
DOOHJHGO\ YLRODWHG FDQQRW EH DVVHUWHG DW D KLJK OHYHO RI
JHQHUDOLW\EXWLQVWHDG³PXVWKDYHEHHQμFOHDUO\HVWDEOLVKHG¶
LQDPRUHSDUWLFXODUL]HGDQGKHQFHPRUHUHOHYDQWVHQVH7KH
FRQWRXUV RI WKH ULJKW PXVW EH VXIILFLHQWO\ FOHDU WKDW D
UHDVRQDEOHRIILFLDOZRXOGXQGHUVWDQGWKDWZKDWKHLVGRLQJ
YLRODWHVWKDWULJKW´$QGHUVRQY&UHLJKWRQ86
$V WKH &RXUW LQ +DUORZ H[SODLQHG WKH
³UHDVRQDEOH SHUVRQ´ LQ WKLV LQVWDQFH LV D ³UHDVRQDEO\
FRPSHWHQW SXEOLF RIILFLDO >ZKR@ VKRXOG NQRZ WKH ODZ
JRYHUQLQJKLVFRQGXFW´+DUORZ86DW7KH
*HDQHWDOY+DWWDZD\HWDO 1R
RIILFLDO LV HQWLWOHG WR TXDOLILHG LPPXQLW\ XQOHVV WKH ULJKW
DOOHJHGO\YLRODWHGZDVDWWKHWLPHRIWKHDOOHJHGYLRODWLRQVR
FOHDUWKDWDQ\UHDVRQDEOH SXEOLFRIILFLDOLQWKHGHIHQGDQW¶V
SRVLWLRQZRXOGXQGHUVWDQGWKDWKLVFRQGXFWYLRODWHGWKHULJKW
³>,@IRIILFHUVRIUHDVRQDEOHFRPSHWHQFHFRXOGGLVDJUHHRQWKLV
LVVXHLPPXQLW\VKRXOGEHUHFRJQL]HG´0DOOH\Y%ULJJV
86
:HKDYHHVWDEOLVKHGWKDWWKHUHDUHWZRZD\VLQZKLFKD
SODLQWLIIVHHNLQJWRRYHUFRPHWKHEDURITXDOLILHGLPPXQLW\
FDQVKRZWKDWDULJKWZDVFOHDUO\HVWDEOLVKHGLQWKHODZDWWKH
WLPHWKHDOOHJHGYLRODWLRQRFFXUUHG³>$@GLVWULFWFRXUWZLWKLQ
WKLVFLUFXLWPXVWEHDEOHWRμILQGELQGLQJSUHFHGHQWIURPWKH
6XSUHPH&RXUWWKH6L[WK&LUFXLWRULWVHOI¶´WKDWGLUHFWO\
HVWDEOLVKHV WKH FRQGXFW LQ TXHVWLRQ DV D YLRODWLRQ RI WKH
SODLQWLII¶VULJKWV6XPPDUH[UHO6XPPDUY%HQQHWW
)G WK&LU ,IQRELQGLQJSUHFHGHQWLV
³GLUHFWO\ RQ SRLQW´ WKH FRXUW PD\ VWLOO ILQG D FOHDUO\
HVWDEOLVKHG ULJKW LI LW FDQ GLVFHUQ D JHQHUDOO\ DSSOLFDEOH
SULQFLSOHIURPHLWKHUELQGLQJRUSHUVXDVLYHDXWKRULWLHVZKRVH
³VSHFLILF DSSOLFDWLRQ WR WKH UHOHYDQW FRQWURYHUV\´ LV ³VR
FOHDUO\IRUHVKDGRZHGE\DSSOLFDEOHGLUHFWDXWKRULW\DVWROHDYH
QRGRXEWLQWKHPLQGRIDUHDVRQDEOHRIILFHUWKDWKLVFRQGXFW
ZDVXQFRQVWLWXWLRQDO´,GDFFRUG&DJOHY*LOOH\)G
WK&LU
:LWK WKHVH SULQFLSOHV LQ PLQG ZH WXUQ WR WKH VSHFLILF
FODLPVUDLVHGE\SODLQWLIIV
,,,
$ $OLHQDWLRQRI6RFLDO6HFXULW\%HQHILWV
3ODLQWLIIVDOOHJHWKDWWKHGHIHQGDQWVYLRODWHGIHGHUDOODZE\
REWDLQLQJWKH6RFLDO6HFXULW\$GPLQLVWUDWLRQ¶VDSSURYDORI
'&6 DV D UHSUHVHQWDWLYH SD\HH DQG WKHQ XVLQJ WKH 6RFLDO
6HFXULW\EHQHILWV'&6UHFHLYHGWRPHHWH[SHQVHVWKDWZHUH
DOUHDG\FRYHUHGE\RWKHUSURJUDPV6RFLDO6HFXULW\EHQHILWV
DUHSDUWO\SURWHFWHGIURPFUHGLWRUVDQGRWKHUQRQUHFLSLHQWVE\
86&† D ZKLFKSURKLELWVDQ\SHUVRQLQFOXGLQJD
VWDWHDFWLQJSXUVXDQWWRLWVRZQODZVDQGSURFHGXUHVIURP

-- 5 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
XVLQJ³OHY\DWWDFKPHQWJDUQLVKPHQWRURWKHUOHJDOSURFHVV´
WRUHDFKWKHPRQLHVSDLGRXWWRD6RFLDO6HFXULW\EHQHILFLDU\
6HH%HQQHWWY$UNDQVDV86 3KLOSRWW
Y(VVH[&RXQW\:HOIDUH%G86
3ODLQWLIIVKDYHEURXJKWWKHLU† D FODLPVYLD86&
†SUHVXPDEO\XQGHUWKHDXWKRULW\RI0DLQHY7KLERXWRW
86 LQZKLFKWKH6XSUHPH&RXUWSHUPLWWHG
SODLQWLIIVWRXVH†DVDPHDQVRIHQIRUFLQJWKHLUULJKWV
XQGHUWKH6RFLDO6HFXULW\$FW6LQFHDVGLVFXVVHGDERYHWKH
SODLQWLIIV¶ † FODLPV DUH RQO\ YLDEOH DJDLQVW WKH
GHIHQGDQWVLQWKHLULQGLYLGXDOFDSDFLWLHVWKHLVVXHEHIRUHXV
LVZKHWKHUWKHSODLQWLIIVKDYHDOOHJHGIDFWVWKDWLIWUXHVKRZ
WKDW WKH GHIHQGDQWV YLRODWHG D FOHDUO\ HVWDEOLVKHG ULJKW ,I
SODLQWLIIV FDQQRW PDNH WKDW VKRZLQJ WKH GHIHQGDQWV DUH
HQWLWOHGWRTXDOLILHGLPPXQLW\RQWKRVHFODLPV
7KH FUX[ RI WKLV LVVXH LV ZKHWKHU WKH GHIHQGDQWV ZKLOH
VHUYLQJDVUHSUHVHQWDWLYHSD\HHVDQGLQXVLQJWKHSODLQWLIIV¶
6RFLDO 6HFXULW\ EHQHILWV WR FRQWULEXWH WRZDUGV WKH FRVW RI
SODLQWLIIV¶ PDLQWHQDQFH GXULQJ WKHLU WLPH LQ VWDWH FXVWRG\
DFWHG LQ FOHDU YLRODWLRQ RI † D DQG LWV DWWHQGDQW
UHJXODWLRQV:KLOHWKHGLVWULFWFRXUWUHIHUVWRVHYHUDO6XSUHPH
&RXUWFDVHVWKDWEHDULQGLUHFWO\RQWKHOHJDOTXHVWLRQDWKDQG
QHLWKHUSDUW\WRWKLVODZVXLWSUHVHQWHGDQ\GLUHFWDQGELQGLQJ
DXWKRULW\ VKRZLQJ WKDW WKH GHIHQGDQWV EUHDFKHG FOHDUO\
HVWDEOLVKHG† D ULJKWV
$IWHUZHKHDUGRUDODUJXPHQWVLQWKLVFDVHWKH6XSUHPH
&RXUW DGGUHVVHG WKH LVVXH RI ³ZKHWKHU WKH 6WDWH¶V XVH RI
6RFLDO6HFXULW\EHQHILWVWRUHLPEXUVHLWVHOIIRUVRPHRILWV
LQLWLDOH[SHQGLWXUHVYLRODWHV>† D @RIWKH6RFLDO6HFXULW\
$FW´:DVKLQJWRQ6WDWH'HS¶WRI6RF +HDOWK6HUYVY
*XDUGLDQVKLS(VWDWHRI.HIIHOHU86BBBB6&W
/(GG 2QIDFWVVLPLODUWR
WKRVH EHIRUH XV WRGD\ WKH 6WDWH RI :DVKLQJWRQ VRXJKW
DSSRLQWPHQW WR VHUYH DV WKH UHSUHVHQWDWLYH SD\HH IRU WKRVH
IRVWHUFKLOGUHQLQLWVFXVWRG\ZKRUHFHLYHG6RFLDO6HFXULW\
EHQHILWV.HIIHOHU6&WDW7KH6WDWHWKURXJKLWV
'HSDUWPHQWRI6RFLDODQG+HDOWK6HUYLFHVWKHQSODFHGWKH
PRQLHV LW UHFHLYHG DV UHSUHVHQWDWLYH SD\HH LQWR ³D VSHFLDO
*HDQHWDOY+DWWDZD\HWDO 1R
)RVWHU&DUH7UXVW)XQG$FFRXQWNHSWE\WKHVWDWHWUHDVXUHU
ZKLFK LQFOXGH>G@ VXEVLGLDU\ DFFRXQWV IRU HDFK FKLOG
EHQHILFLDU\´IURPZKLFKLWUHLPEXUVHGYHQGRUVZKRSURYLGHG
QHFHVVDU\ JRRGV DQG VHUYLFHV IRU WKH FKLOGUHQ ,G 7KH
6XSUHPH&RXUWXQDQLPRXVO\KHOGWKDW:DVKLQJWRQ¶VSROLFLHV
DQGSURFHGXUHVDUHQRWSURKLELWHGE\† D ,GDW
,WWKHQGLVFXVVHGKRZWKRVHSROLFLHVDUHLQIDFWLQWKHEHVW
LQWHUHVWVRIWKHIRVWHUFKLOGUHQZKRVH6RFLDO6HFXULW\EHQHILWV
DUHXVHGE\WKH6WDWHWRUHLPEXUVHLWVHOIHYHQWKRXJKWKH6WDWH
ZLOOEHDUWKHHQWLUHFRVWRIWKHFKLOGUHQ¶VPDLQWHQDQFHLIWKH
FKLOGUHQKDYHQRVRXUFHRILQFRPH,GDW
7ZR IHGHUDO FRXUWV RI DSSHDOV FDVHV IURP RXWVLGH WKLV
FLUFXLW0DVRQY6\ELQVNL)G WK&LU DQG
.LQJY6FKDIHU)G WK&LU ERWKGHFLGHG
EHIRUH .HIIHOHU UHDFK FRQFOXVLRQV VLPLODU WR WKRVH ODWHU
UHDFKHG E\ WKH 6XSUHPH &RXUW ,Q HDFK RI WKRVH FDVHV
SDWLHQWV UHFHLYLQJ 6RFLDO 6HFXULW\ EHQHILWV DQG UHVLGLQJ LQ
VWDWHPHQWDOKRVSLWDOVEURXJKWVXLW DOOHJLQJWKDWWKHVWDWH¶V
SUDFWLFH RI EHFRPLQJ WKH UHSUHVHQWDWLYH SD\HH DQG WKHQ
DSSO\LQJWKHSDWLHQWV¶EHQHILWSD\PHQWVWRZDUGVWKHFRVWRI
WKHLU FXUUHQW PDLQWHQDQFH YLRODWHG † D 7KH FRXUW LQ
.LQJ FRQFOXGHG WKDW ³WKH 'HSDUWPHQW¶V DSSRLQWPHQW DV
UHSUHVHQWDWLYHSD\HHLVQRWWKHUHVXOWRIμRWKHUOHJDOSURFHVV¶
>DQG WKHUHIRUH LW@ UHMHFW>HG@ SODLQWLIIV¶ FODLP WKDW WKH
'HSDUWPHQW¶VDFWLRQVDUHLPSHUPLVVLEOHXQGHU6XSUHPH&RXUW
SUHFHGHQW´.LQJ)GDW6LQFHWKH'HSDUWPHQW
FRXOG DFW DV UHSUHVHQWDWLYH SD\HH LW FRXOG ³UHDFK WKH
SODLQWLIIV¶IXQGV´LQDZD\WKDWGLGQRWYLRODWH† D ,G
6LPLODUO\WKHFRXUWLQ0DVRQIRXQGWKDWWKHVWDWH¶VDFWLRQRI
DSSO\LQJ WKH EHQHILWV LW UHFHLYHG DV UHSUHVHQWDWLYH SD\HH
WRZDUGVWKHEHQHILFLDU\¶VFDUHIDOOV³RXWVLGHWKHDPELWRIWKH
DQWLDWWDFKPHQWSURYLVLRQ´RI† D 0DVRQ)GDW
6HHDOVR&*$Y$ODVND3G $ODVND
³>6@RORQJDVWKHVWDWHDJHQF\SHUIRUPVLWVGXWLHVDV
UHSUHVHQWDWLYHSD\HHDQGVSHQGVWKHIXQGVRQO\RQDXWKRUL]HG
H[SHQVHVLWZRXOGQRWYLRODWHWKHSURKLELWLRQRQDWWDFKPHQW
IRXQGLQVHFWLRQ D ¶VEDQRQDWWDFKPHQW´

-- 6 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
1RWRQO\GLGWKHSODLQWLIIVODFNDFOHDUO\HVWDEOLVKHGULJKW
SULRU WR .HIIHOHU WR KDYH 7HQQHVVHH FRQVHUYH WKHLU 6RFLDO
6HFXULW\EHQHILWVZLWKRXWXVLQJDQ\RIWKRVHPRQLHVIRUWKHLU
FXUUHQWPDLQWHQDQFHWKH\KDYHQRVXFKULJKWDWDOOQRZWKDW
WKH 6XSUHPH &RXUW KDV LVVXHG LWV GHFLVLRQ RQ WKH PDWWHU
7KHUHIRUHWKHGHIHQGDQWVDUHHQWLWOHGWRTXDOLILHGLPPXQLW\
RQSODLQWLIIV¶FODLPWKDWWKH\YLRODWHG† D
% 7DNLQJ LQ 9LRODWLRQ RI WKH )LIWK DQG )RXUWHHQWK
$PHQGPHQWV
3ODLQWLIIVDOOHJHWKDWWKHLUSURSHUW\ZDVWDNHQIRUSXEOLFXVH
ZLWKRXWMXVWFRPSHQVDWLRQDQGWKDWWKH\ZHUHGHSULYHGRI
SURSHUW\ WKDW ULJKWIXOO\ EHORQJHG WR WKHP LQ D PDQQHU
³FRQWUDU\ WR VHWWOHG XVDJHV DQG PRGHV RI SURFHGXUH DQG
ZLWKRXW QRWLFH RU DQ RSSRUWXQLW\ IRU D KHDULQJ´ 2FKRD Y
+HUQDQGH]\0RUDOHV86 LQYLRODWLRQ
RIWKHLU)LIWKDQG)RXUWHHQWK$PHQGPHQWVGXHSURFHVVULJKWV
,QVXSSRUWRIWKHLUFODLPWKH\LQYRNHEURDGSULQFLSOHVRIODZ
DQG QRWH WKDW ³FRQVHUYHG IXQGV´ QRW XVHG IRU FXUUHQW
PDLQWHQDQFHRIWKHEHQHILFLDU\DUHFRQVLGHUHGSURSHUW\RIWKH
EHQHILFLDU\WREHKHOGLQWUXVWE\WKHUHSUHVHQWDWLYHSD\HH
&)5 † 7KH UHFRUG LQGLFDWHV WKDW WKH FRVWV
LQFXUUHG E\ WKH 6WDWH RI 7HQQHVVHH IRU WKH FXUUHQW
PDLQWHQDQFHRIWKHGHIHQGDQWVJUHDWO\H[FHHGHGWKHDPRXQW
RI 6RFLDO 6HFXULW\ EHQHILWV WKDW '&6 DV WKH GHIHQGDQWV¶
UHSUHVHQWDWLYH SD\HH WHQGHUHG WR WKH 6WDWH DV D SDUWLDO
UHLPEXUVHPHQW IRU WKRVH FRVWV ,Q RWKHU ZRUGV DOO RI WKH
6RFLDO6HFXULW\EHQHILWVUHFHLYHGE\'&6ZHUHSXWWRZDUGV
GHIHQGDQWV¶FXUUHQWPDLQWHQDQFHDQGQRQHZDV³FRQVHUYHG´
LQDQDFFRXQWWKDWFRXOGEHFRQVLGHUHGSURSHUW\KHOGLQWUXVW
IRUWKHEHQHILFLDULHV¶ODWHUXVH
:KLOH WKH 6XSUHPH &RXUW LQ .HIIHOHU GLG QRW GLUHFWO\
FRQVLGHU D GXH SURFHVV WDNLQJV FKDOOHQJH WR WKH 6WDWH RI
:DVKLQJWRQ¶VXVHRIWKH6RFLDO6HFXULW\PRQLHVLWUHFHLYHGRQ
EHKDOIRIWKHIRVWHUFKLOGUHQLQLWVFDUHWKH&RXUWGLGDOORZWKH
6WDWH RI :DVKLQJWRQ WR DFW DV UHSUHVHQWDWLYH SD\HH DQG
UHLPEXUVHLWVHOIIRUWKHFDUHRIWKRVHFKLOGUHQDVGHVFULEHG
DERYH .HIIHOHU 6 &W 0RUHRYHU WKH 6RFLDO
*HDQHWDOY+DWWDZD\HWDO 1R
6HFXULW\$GPLQLVWUDWLRQ¶VUHJXODWLRQVDSSHDUWRFRQWHPSODWH
WKH SD\PHQW E\ D VWDWH DJHQF\ DV UHSUHVHQWDWLYH SD\HH WR
VWDWHUXQ IDFLOLWLHV IRU WKH FXUUHQW PDLQWHQDQFH DQG FDUH RI
EHQHILFLDULHV HYHQ ZKHQ WKHLU FDUH FRXOG EH SDLG IRU E\
DQRWKHU VRXUFH RI SXEOLF IXQGV 7KH ³H[DPSOH´ IROORZLQJ
† D H[SODLQVDVLWXDWLRQLQZKLFKEHQHILWVFRXOGEH
FRQVHUYHGE\DQLQVWLWXWLRQDOUHSUHVHQWDWLYHSD\HHIRUIXWXUH
QHHGVRIWKHEHQHILFLDU\,WEHJLQVDVIROORZV
$6WDWHLQVWLWXWLRQIRUPHQWDOO\UHWDUGHGFKLOGUHQZKLFK
LVUHFHLYLQJ0HGLFDLGIXQGVLVUHSUHVHQWDWLYHSD\HHIRU
VHYHUDO 6RFLDO 6HFXULW\ EHQHILFLDULHV 7KH FKHFNV WKH
SD\HH UHFHLYHV DUH GHSRVLWHG LQWR RQH DFFRXQW ZKLFK
VKRZV WKDW WKH EHQHILWV DUH KHOG LQ WUXVW IRU WKH
EHQHILFLDULHV 7KH LQVWLWXWLRQ KDV VXSSRUWLQJ UHFRUGV
ZKLFKVKRZWKHVKDUHHDFKLQGLYLGXDOKDVLQWKHDFFRXQW
)XQGVIURPWKLVDFFRXQWDUHGLVEXUVHGIDLUO\TXLFNO\DIWHU
UHFHLSWIRUWKHFXUUHQWVXSSRUWDQGPDLQWHQDQFHRIWKH
EHQHILFLDULHV DV ZHOO DV IRU PLVFHOODQHRXV QHHGV WKH
EHQHILFLDULHVPD\KDYH
&)5†H[DPSOH
7KH$GPLQLVWUDWLRQ¶VUHJXODWLRQVSHUPLWVWDWHLQVWLWXWLRQV
WR DFW DV UHSUHVHQWDWLYH SD\HHV DQG DSSHDU WR HQGRUVH D
VLWXDWLRQLQZKLFKWKHLQVWLWXWLRQUHLPEXUVHVLWVHOIIRUWKHFRVW
RIFDULQJIRUWKHEHQHILFLDULHV7KH6XSUHPH&RXUW¶VGHFLVLRQ
LQ .HIIHOHU FRQVLGHUHG LQ FRQMXQFWLRQ ZLWK WKH
$GPLQLVWUDWLRQ¶V UHJXODWLRQV PDNHV LW FOHDU WKDW WKH
GHIHQGDQWV KDYH QRW EUHDFKHG DQ\ HVWDEOLVKHG )LIWK RU
)RXUWHHQWK$PHQGPHQWULJKWLQWKLVLQVWDQFH
& %UHDFKRI)LGXFLDU\'XW\
3ODLQWLIIV DOOHJH WKDW VLQFH GHIHQGDQW 'RUVH DV
UHSUHVHQWDWLYH SD\HH ZDV QRW UHTXLUHG WR SD\ IRU WKHLU
PDLQWHQDQFHDQGXSNHHSZLWK6RFLDO6HFXULW\IXQGVEHFDXVH
RWKHUIHGHUDODQGVWDWHIXQGHGSURJUDPVZRXOGSD\IRUWKHLU
FDUHWRGRVRZDVDEUHDFKRIILGXFLDU\GXW\'&6YLD'RUVH
KDG D GXW\ DV D ILGXFLDU\ WR XVH WKH IXQGV UHFHLYHG DV D
UHSUHVHQWDWLYH SD\HH IRU WKH JRRG RI WKH LQGLYLGXDO

-- 7 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
EHQHILFLDULHV ³LQ D PDQQHU DQG IRU WKH SXUSRVHV KH RU VKH
GHWHUPLQHVWREHLQWKHEHVWLQWHUHVWVRIWKHEHQHILFLDU\´
&)5 † D 7KH TXHVWLRQ EHIRUH WKLV FRXUW
WKHQ LV ZKHWKHU 'RUVH EUHDFKHG D ILGXFLDU\ GXW\ FOHDUO\
HVWDEOLVKHG XQGHU IHGHUDO ODZ E\ SD\LQJ 6RFLDO 6HFXULW\
PRQLHVWRVWDWHVHUYLFHSURYLGHUVZKHQKDGDQ\RQHRWKHUWKDQ
D 7HQQHVVHH VWDWH DFWRU EHHQ WKH UHSUHVHQWDWLYH SD\HH WKH
VWDWHZRXOGQRWKDYHEHHQDEOHWRUHDFKWKH6RFLDO6HFXULW\
EHQHILWVDQGXVHWKHPWRSD\IRUWKHSODLQWLIIV¶PDLQWHQDQFH
:HILQGWKDWVKHGLGQRW
7KH 6XSUHPH &RXUW VRXQGO\ UHMHFWHG WKH SODLQWLIIV¶
DUJXPHQWVRQWKLVLVVXHFKDUDFWHUL]LQJWKH³SRVLWLRQWKDW
DOORZLQJDVWDWHDJHQF\WRUHLPEXUVHLWVHOIIRUWKHFRVWVRI
IRVWHUFDUHLVDQWLWKHWLFDOWRWKHEHVWLQWHUHVWRIWKHEHQHILFLDU\
IRVWHUFKLOG´DVD³SRRUILW´ZLWK† D DQGLQFRQVLVWHQW
ZLWK WKH &RPPLVVLRQHU¶V LQWHUSUHWDWLRQ RI WKH
$GPLQLVWUDWLRQ¶VUHJXODWLRQV.HIIHOHU6&WDW
7KH &RXUW IRXQG UHDVRQDEOH WKH &RPPLVVLRQHU¶V GHFLVLRQ
³WKDWDUHSUHVHQWDWLYHSD\HHVHUYHVWKHEHQHILFLDU\¶VLQWHUHVW
E\VHHLQJWKDWEDVLFQHHGVDUHPHWQRWE\PD[LPL]LQJDWUXVW
IXQGDWWULEXWDEOHWRIRUWXLWRXVO\RYHUODSSLQJVWDWHDQGIHGHUDO
JUDQWV´,GDW&OHDUO\GHIHQGDQW'RUVHGLGQRWEUHDFK
KHUILGXFLDU\GXWLHVLQWKLVLQVWDQFH
' 9LRODWLRQ RI WKH (TXDO 3URWHFWLRQ &ODXVH RI WKH
)RXUWHHQWK$PHQGPHQW
3ODLQWLIIV DOOHJH WKDW GHIHQGDQWV YLRODWHG WKHLU HTXDO
SURWHFWLRQ ULJKWV E\ UHTXLULQJ WKHP EHFDXVH WKH\ UHFHLYHG
6RFLDO 6HFXULW\ EHQHILWV WR FRQWULEXWH WR WKHLU FXUUHQW
PDLQWHQDQFHFRVWVZKHQRWKHUMXYHQLOHVLQVWDWHFXVWRG\ZKR
GLGQRWUHFHLYH6RFLDO6HFXULW\EHQHILWVZHUHQRWUHTXLUHGWR
PDNHVXFKSD\PHQWV DOWKRXJKWKHLUSDUHQWVPLJKWKDYHEHHQ
UHTXLUHG WR PDNH FRQWULEXWLRQV RQ WKHLU EHKDOI %RWK WKH
SODLQWLIIV DQG WKH GLVWULFW FRXUW DJUHH WKDW WKLV GLVWLQFWLRQ
LPSOLFDWHV ³QR VXVSHFW FODVV RU IXQGDPHQWDO ULJKW´ DQG
SODLQWLIIV¶HTXDOSURWHFWLRQFODLPWKHUHIRUHUHFHLYHVUDWLRQDO
EDVLVUHYLHZ³7KHJHQHUDOUXOHLVWKDWOHJLVODWLRQLVSUHVXPHG
WREHYDOLGDQGZLOOEHVXVWDLQHGLIWKHFODVVLILFDWLRQGUDZQE\
*HDQHWDOY+DWWDZD\HWDO 1R
WKHVWDWXWHLVUDWLRQDOO\UHODWHGWRDOHJLWLPDWHVWDWHLQWHUHVW´
&LW\RI&OHEXUQHY&OHEXUQH/LYLQJ&WU86
7KHSODLQWLIIVKDYHWKHEXUGHQWRQHJDWHDOOSRVVLEOH
UDWLRQDOMXVWLILFDWLRQVIRUWKHGLVWLQFWLRQ%GRI7UVRIWKH
8QLYRI$ODY*DUUHWW86
$VZLWKWKHSODLQWLIIV¶)RXUWHHQWKDQG)LIWK$PHQGPHQW
WDNLQJVFODLPWKH6XSUHPH&RXUWGLGQRWDGGUHVVDQHTXDO
SURWHFWLRQFODLPLQLWV.HIIHOHURSLQLRQQRQHWKHOHVVLWJDYH
QR LQGLFDWLRQ WKDW :DVKLQJWRQ¶V UHLPEXUVHPHQW SUDFWLFHV
YLRODWHGWKHEHQHILFLDULHV¶FRQVWLWXWLRQDOULJKWV.HIIHOHU
6&WDW,QWKLVFDVHWKH6WDWHRI7HQQHVVHHKDVDQ
LQWHUHVWLQVDYLQJPRQH\DQGREWDLQLQJIXQGVZKHUHOHJDOO\
SRVVLEOH WR SD\ IRU WKH ODUJH QXPEHU RI VRFLDO VHUYLFHV LW
SURYLGHV LWV UHVLGHQWV 7KH SODLQWLIIV FLWH WR 6KDSLUR Y
7KRPSVRQ86 DQGDVWDWHPHQWLQ6DHQ]Y
5RH 86 IRU WKH SURSRVLWLRQ WKDW
7HQQHVVHH¶VLQWHUHVWLVLQVXIILFLHQWWRMXVWLI\WKHGLVWLQFWLRQ
WKHGHIHQGDQWVKDYHPDGHLQWKLVFDVH³WKH6WDWH¶VOHJLWLPDWH
LQWHUHVW LQ VDYLQJ PRQH\ SURYLGHV QR MXVWLILFDWLRQ IRU LWV
GHFLVLRQ WR GLVFULPLQDWH DPRQJ HTXDOO\ HOLJLEOH FLWL]HQV´
6DHQ]86DW:HPXVWH[DPLQHWKHQZKHWKHU
LQGLYLGXDOV VXFK DV SODLQWLIIV ZKR UHFHLYH 6RFLDO 6HFXULW\
EHQHILWVDQGLQGLYLGXDOVZKRKDYHQRVRXUFHRILQFRPHDUH
³HTXDOO\HOLJLEOH´WRUHFHLYHWKHLUVWDWHSURYLGHGFDUHIUHHRI
FKDUJH
,QERWK6KDSLURDQG6DHQ]WKH6XSUHPH&RXUWHYDOXDWLQJ
WKH VWDWH¶V MXVWLILFDWLRQV XQGHU D VWDQGDUG VWULFWHU WKDQ
³UDWLRQDOEDVLVUHYLHZ´VWUXFNGRZQVWDWHZHOIDUHSURJUDPV
WKDW GLVFULPLQDWHG DJDLQVW QHZO\DUULYHG VWDWH UHVLGHQWV
6DHQ] 86 DW 6KDSLUR 86 DW 7KH
LQGLJHQWFLWL]HQVZKRKDGUHFHQWO\PRYHGLQWRWKHVWDWHWKH
&RXUWKHOGZHUHDVHOLJLEOHWRUHFHLYHZHOIDUHEHQHILWVDVOHVV
WUDQVLHQWLQGLJHQWFLWL]HQVWRKROGRWKHUZLVHZRXOGUHVWULFW
WKHFRQVWLWXWLRQDOULJKWWRPRYHIURPVWDWHWRVWDWH6DHQ]
86DW6KDSLUR86DW7KH &RXUW
EDVHGLWVUXOLQJVXSRQLWVFRQFOXVLRQWKDWWKHVWDWHSROLFLHVDW
LVVXHLPSHUPLVVLEO\LQWHUIHUHGZLWKDFLWL]HQ¶VULJKWWRWUDYHO
XQGHUWKH3ULYLOHJHVDQG,PPXQLWLHV&ODXVH

-- 8 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
,QRUGHUWRDYRLGUHDFKLQJDQDEVXUGFRQFOXVLRQZHUHIXVH
WKHSODLQWLIIV¶WDFLWLQYLWDWLRQWRLQWHUSUHWWKH&RXUW¶VVWDWHPHQW
LQ 6DHQ] DV D SURKLELWLRQ ZULW ODUJH DJDLQVW PDNLQJ
GLVWLQFWLRQVDPRQJ³HTXDOO\HOLJLEOHFLWL]HQV´IRUWKHSXUSRVH
RI FRQVHUYLQJ VWDWH UHVRXUFHV SDUWLFXODUO\ ZKHQ WKH
GLVWLQFWLRQGUDZQE\WKHVWDWHGRHVQRWDIIHFWDQHVWDEOLVKHG
FRQVWLWXWLRQDOULJKW)RULQVWDQFHVWDWHVZLWKDSURJUHVVLYH
LQFRPHWD[VFKHPHJHQHUDOO\UHTXLUHDFLWL]HQDVKHULQFRPH
LQFUHDVHVWRFRQWULEXWHDKLJKHUSHUFHQWDJHRIKHUHDUQLQJVWR
WKHVWDWHILVF6XFKDWD[V\VWHPGLVWLQJXLVKHVDPRQJFLWL]HQV
DOORIZKRPDUH²LQWKHRU\²HTXDOO\HOLJLEOHWRVXSSRUWWKH
VWDWHJRYHUQPHQWLQRUGHUWRLPSURYHWKH VWDWH¶VILQDQFHV
$OVRLQPDQDJLQJVRFLDOZHOIDUHSURJUDPVWKHVWDWHPDNHV
GLVWLQFWLRQVDPRQJLWVFLWL]HQVEDVHGXSRQDVRUWRI³DELOLW\WR
SD\´7KRXJKDVWDWHFDQQRWGLVFULPLQDWHDJDLQVWDSRWHQWLDO
ZHOIDUH UHFLSLHQW EDVHG XSRQ KRZ ORQJ WKDW LQGLYLGXDO KDV
EHHQLQWKHVWDWHLWFDQ²DQGGRHV²GLVFULPLQDWHDJDLQVWWKDW
LQGLYLGXDO EDVHG XSRQ KLV DELOLW\ WR SURYLGH IRU KLPVHOI
ZLWKRXW VWDWH DVVLVWDQFH ,Q ZULWLQJ WKDW WKH ³6WDWH¶V
OHJLWLPDWHLQWHUHVWLQVDYLQJPRQH\SURYLGHVQRMXVWLILFDWLRQ
IRU LWV GHFLVLRQ WR GLVFULPLQDWH DPRQJ HTXDOO\ HOLJLEOH
FLWL]HQV´6DHQ]86DWWKH6XSUHPH&RXUWSODLQO\
GLGQRWPHDQWKDWDQLQGLYLGXDOZLWKWKHDELOLW\WR SD\ IRU
FHUWDLQVWDWHVHUYLFHVDQGDQLQGLJHQWLQGLYLGXDODUH³HTXDOO\
HOLJLEOH´ WR UHFHLYH DOO VWDWH VHUYLFHV DQG EHQHILWV IUHH ,Q
OHY\LQJWD[HVDQGSURYLGLQJDEURDGUDQJHRIVRFLDOVHUYLFHV
D VWDWH UHJXODUO\ PDNHV FRQVWLWXWLRQDOO\ SHUPLVVLEOH
GLVWLQFWLRQVEHWZHHQLWVFLWL]HQVEDVHGXSRQWKHLUGLIIHULQJ
DELOLWLHVWRSD\
+HUH7HQQHVVHHKDVDOHJLWLPDWHLQWHUHVWLQSUHVHUYLQJLWV
IXQGVDQGUHTXLULQJWKRVHSHUVRQVZLWKWKHDELOLW\WRSD\WR
FRQWULEXWHWRZDUGVWKHFRVWRIWKHLUFDUHLVDUHDVRQDEOHPHDQV
WRDFKLHYHWKDWLQWHUHVW,Q)HWWHUXVVRY1HZ<RUN)G
G&LU WKH6HFRQG&LUFXLWVWUXFNGRZQDQ
HTXDOSURWHFWLRQFKDOOHQJHDQGXSKHOGDVWDWXWHWKDWUHTXLUHG
QRQFULPLQDOO\FRPPLWWHGLQGLYLGXDOVLQVWDWHFXVWRG\WRSD\
IRU SDUW RI WKHLU FDUH ZKLOH QRW UHTXLULQJ WKH VDPH RI
LQFDUFHUDWHGFULPLQDOV7KHFRXUWFRQFOXGHGWKDWWKHVWDWHKDG
DOHJLWLPDWHSXUSRVH²SUHVHUYLQJVWDWHILQDQFHV²DQGWKDWWKH
*HDQHWDOY+DWWDZD\HWDO 1R
GLVWLQFWLRQDWLVVXHZDVUDWLRQDOO\UHODWHGWRWKDWJRDO,GDW
7KHFRXUWDOVRIRXQGQRYLRODWLRQRIWKH6RFLDO
6HFXULW\$FWZKHQ6RFLDO6HFXULW\EHQHILWVUHFHLYHGE\WKH
SODLQWLIIVLQWKDWFDVHZHUHSXWWRZDUGVWKHFRVWRIWKHLUFDUH
LQ RQH LQVWDQFH E\ D VWDWH KRVSLWDO DFWLQJ DV UHSUHVHQWDWLYH
SD\HH,GDW
$V ZLWK WKH RWKHU FODLPV EURXJKW SXUVXDQW WR 86&
†DJDLQVWGHIHQGDQWVLQWKHLULQGLYLGXDOFDSDFLWLHVWKH
SODLQWLIIVLQWKLVHTXDOSURWHFWLRQFODLPKDYHQRWDOOHJHGZLWK
VSHFLILFLW\DYLRODWLRQRIFOHDUO\HVWDEOLVKHGODZVXFKWKDWWKH
GHIHQGDQWVZRXOGORVHWKHLUVKLHOGRITXDOLILHGLPPXQLW\,Q
IDFWZHQRWHWKDWQRWRQO\KDYHWKHSODLQWLIIVIDLOHGWRVKRZ
WKDW WKH GHIHQGDQWV YLRODWHG D FOHDUO\ HVWDEOLVKHG ULJKW ZH
WKLQNLWKLJKO\XQOLNHO\WKDWWKH\FRXOGHYHQPDNHDSODXVLEOH
HTXDOSURWHFWLRQDUJXPHQWLQWKLVFDVH
( 'HQLDORI'XH3URFHVV5LJKWVXQGHUWKH0HGLFDLG$FW
:KLOHLQVWDWHFXVWRG\SODLQWLIIVZHUHHQWLWOHGWRPHGLFDO
FDUHXQGHUWKH0HGLFDLG$FWDQGWRD³IDLUKHDULQJEHIRUHWKH
6WDWH DJHQF\´ LQ WKH HYHQW WKDW WKHLU ³FODLP IRU PHGLFDO
DVVLVWDQFHXQGHUWKHSODQLVGHQLHGRULVQRWDFWHGXSRQZLWK
UHDVRQDEOH SURPSWQHVV´ 86& † D D :KHQ
WKH0HGLFDLG$FWLPSRVHVD³ELQGLQJREOLJDWLRQ´/LYDGDV
Y%UDGVKDZ86 RQDSURYLGHU
WKHELQGLQJREOLJDWLRQLV³LQWHQGHGWREHQHILW>D@SXWDWLYH
SODLQWLII´ :LOGHU Y 9D +RVS $VV¶Q 86
DQG WKHREOLJDWLRQLVQHLWKHUDPHUHVWDWHPHQWRI
³FRQJUHVVLRQDOSUHIHUHQFH´IRUFHUWDLQFRQGXFWQRUDQLQWHUHVW
³WRRYDJXHDQGDPRUSKRXV´WREHHQIRUFHGE\DFRPSHWHQW
MXGLFLDU\ LG WKHQ LW LV SURSHU IRU WKRVH DIIHFWHG E\ WKDW
REOLJDWLRQWREULQJDVXLWIRULWVEUHDFKXQGHU†'RHH[
UHO 'RH Y &KLOHV )G WK &LU
DOORZLQJ SODLQWLII WR EULQJ D † FODLP WR HQIRUFH
†D D VHHDOVR&RQFRXUVH5HKDE 1XUVLQJ&WU
,QFY:KDOHQ)G G&LU DOORZLQJ
SODLQWLIIWREULQJD†FODLPWRHQIRUFHDSULRUYHUVLRQRI
†D D 7KHULJKWWRD³IDLUKHDULQJ´SURYLGHGWR
EHQHILFLDULHVE\†D D FUHDWHVDQREOLJDWLRQRQWKH

-- 9 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
SDUW RI WKH 6WDWH DQG LV SKUDVHG LQ WHUPV RI EHQHILWWLQJ
0HGLFDLG UHFLSLHQWV 0RUHRYHU JLYHQ WKDW WKH MXGLFLDU\
UHJXODUO\GHWHUPLQHVZKHWKHUDQLQGLYLGXDOKDVEHHQDIIRUGHG
SURFHGXUDOGXHSURFHVVULJKWVDULJKWWRDIDLUKHDULQJLVQRW
VRYDJXHDQGDPRUSKRXVWKDWLWVHQIRUFHPHQWLVEH\RQGWKH
DELOLWLHVRIDFRPSHWHQWMXGLFLDU\7KHUHIRUHLWLVSURSHUIRU
SODLQWLIIV WR EULQJ WKHLU FODLP IRU HQIRUFHPHQW RI WKHLU
0HGLFDLGULJKWVXQGHU†
3ODLQWLIIV GR QRW DOOHJH WKDW 7HQQHVVHH IDLOHG WR SURYLGH
WKHPZLWKFRPSOHWHDQGDGHTXDWHPHGLFDOEHQHILWVZKLOHLQ
VWDWHFDUH,QIDFWWKHUHLVQRUHFRUGWKDWWKH\HYHQPDGHD
³FODLPIRUPHGLFDODVVLVWDQFH´IRUZKLFKWKH\FRXOGKDYHEHHQ
DIIRUGHG D IDLU KHDULQJ ,QVWHDG DV ZH XQGHUVWDQG WKHLU
FRPSODLQW WKH\ FODLP WKDW WKH PHGLFDO EHQHILWV WKH\ ZHUH
HQWLWOHGWRUHFHLYHDWQRFRVWXQGHUWKH0HGLFDLG$FWZHUH
³VXVSHQGHG WHUPLQDWHG RU UHGXFHG´ ZKHQ WKHLU 6RFLDO
6HFXULW\EHQHILWVZHUHXVHGWRFRQWULEXWHWRZDUGVWKHFRVWRI
WKHLU PHGLFDO FDUH DQG WKH\ QHYHU UHFHLYHG QRWLFH RI WKDW
HYHQW %HFDXVH WKH SODLQWLIIV KDYH QRW VKRZQ WKDW WKHLU
PHGLFDOFDUHZDVLQDQ\ZD\GLPLQLVKHGDQGEHFDXVHWKH\
KDYH QR FODLP WR 0HGLFDLG EHQHILWV H[FHSW WR FRYHU WKHLU
QHFHVVDU\PHGLFDOFDUHWKH\FDQVKRZQRYLRODWLRQRIFOHDUO\
HVWDEOLVKHGODZ0RUHRYHUWRWKHH[WHQWWKDWWKHSODLQWLIIV
LQWHQGWKHLU0HGLFDLGFODLPWRDOOHJHDEUHDFKRIILGXFLDU\
GXW\²WKDW LI WKH GHIHQGDQWV KDG XWLOL]HG WKH SODLQWLIIV¶
0HGLFDLGEHQHILWVWRSD\IRUPHGLFDOFDUHLQVWHDGRIXVLQJ
6RFLDO6HFXULW\PRQLHVWKHQWKH6RFLDO6HFXULW\IXQGVZRXOG
KDYHEHHQSUHVHUYHGIRUWKHSODLQWLIIV¶EHQHILW²ZHUHMHFWLW
6HH.HIIHOHU6&WDW KROGLQJ³WKDWDUHSUHVHQWDWLYH
SD\HHVHUYHVWKHEHQHILFLDU\¶VLQWHUHVWE\VHHLQJWKDWEDVLF
QHHGVDUHPHWQRWE\PD[LPL]LQJDWUXVWIXQGDWWULEXWDEOHWR
IRUWXLWRXVO\ RYHUODSSLQJ VWDWH DQG IHGHUDO JUDQWV´ 7KH
0HGLFDLG$FWLVVLPSO\QRWFRQFHUQHGZLWKWKHW\SHRIKDUP
WKHSODLQWLIIVDOOHJHKHUH6HHHJ'DQLHOVY:DGOH\)
6XSS 0'7HQQ KROGLQJWKDW³7HQQ&DUH
HQUROOHHV QHHG VWURQJ GXH SURFHVV SURWHFWLRQV WR SURWHFW
WKHPVHOYHV IURP LQDSSURSULDWH GHQLDOV RI KHDOWK FDUH´
HPSKDVLVDGGHG 3ODLQWLIIVZHUHQRWGHQLHGWKHKHDOWKFDUH
WRZKLFKWKH\ZHUHHQWLWOHGDQGWKH\RIIHUQROHJDODXWKRULW\
*HDQHWDOY+DWWDZD\HWDO 1R
WKDWZRXOGSHUPLWWKLVFRXUWWRGHQ\WKHGHIHQGDQWVTXDOLILHG
LPPXQLW\
) 5LJKW WR D )UHH $SSURSULDWH (GXFDWLRQ XQGHU WKH
,'($
7KHJUDYDPHQRIWKHSODLQWLIIV¶FODLPXQGHUWKH,'($LV
WKDW WKH GHIHQGDQWV DEULGJHG WKHLU ULJKW WR UHFHLYH IUHH
HGXFDWLRQDO DQG UHODWHG HJ URRP DQG ERDUG VHUYLFHV E\
XVLQJWKHSODLQWLIIV¶6RFLDO6HFXULW\SD\PHQWVWRFRQWULEXWH
WRZDUGV WKH FRVW RI WKRVH VHUYLFHV 7KH SODLQWLIIV¶ ,'($
FODLPVPD\EHEURXJKWHLWKHUGLUHFWO\XQGHUWKH,'($¶VRZQ
SURYLVLRQVIRUGLVSXWHUHVROXWLRQRULQVRPHFLUFXPVWDQFHV
XQGHU86&†6HH&RYLQJWRQY.QR[&RXQW\6FK
6\V)G WK&LU 1RQHWKHOHVVHYHQLIZH
UHDGWKHSODLQWLIIV¶FRPSODLQWVOLEHUDOO\DQGWUHDWWKHLU,'($
FODLPVDVLIWKH\ZHUHEURXJKWERWKXQGHU†DQGDVD
GLUHFWFDXVHRIDFWLRQXQGHUWKH,'($ZHPXVWGHWHUPLQH
ILUVWZKHWKHUZHFDQHQWHUWDLQWKRVHFODLPVEHIRUHZHPD\
H[DPLQHWKHLUVXEVWDQFH
$V ZH QRWHG LQ &RYLQJWRQ )G DW 86&
³† L FOHDUO\FRQWHPSODWHVWKDWSODLQWLIIVZLOOH[KDXVW
WKHLUDGPLQLVWUDWLYHUHPHGLHVEHIRUHEULQJLQJDFLYLODFWLRQWR
HQIRUFH WKHLU ULJKWV XQGHU WKH ,'($´ ,Q VSHFLDO
FLUFXPVWDQFHVLQZKLFKWKHUHPHGLHVXQGHUWKHDGPLQLVWUDWLYH
SURFHVV ZRXOG QRW EH VXIILFLHQW WR PDNH KLP ZKROH WKH
SODLQWLIIPD\E\SDVVWKH,'($¶VUHTXLUHPHQWRIH[KDXVWLRQ
,GDW³7KHEXUGHQLQVXFKFDVHVRIFRXUVHUHVWVZLWK
WKH >SODLQWLII@ WR GHPRQVWUDWH WKH IXWLOLW\ RU LQDGHTXDF\ RI
DGPLQLVWUDWLYHUHYLHZ´+RQLJY'RH86
,Q &RYLQJWRQ ZH KHOG WKDW WKH SODLQWLII PHW KHU
EXUGHQ EHFDXVH WKH VXLW ZDV QRW VLPSO\ IRU UHVWLWXWLRQ RI
SD\PHQWVWKDWZRXOGEHDYDLODEOHXQGHUWKH,'($EXWLQVWHDG
ZDVDFODLPIRUGDPDJHVDULVLQJIURP³LQIOLFWLRQRIHPRWLRQDO
GLVWUHVV DQG IDOVH LPSULVRQPHQW´ E\ VFKRRO RIILFLDOV
)GDW:HH[SUHVVHGQRRSLQLRQUHJDUGLQJZKHWKHU
WKHSODLQWLII¶VFODLPVLQWKDWFDVHIHOO³ZLWKLQWKHDPELWRIWKH
,'($´,GDW2XUKROGLQJZDVEDVHGQRWXSRQWKHIDFW
WKDWWKHSODLQWLIIVRXJKWPRQHWDU\GDPDJHVEXWRQWKHIDFW

-- 10 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
WKDWWKH,'($GLGQRWSURYLGHDUHPHG\IRUWKHW\SHRIKDUP
DOOHJHGO\VXIIHUHGE\SODLQWLIIZKLFKZDVPRUHLQWKHQDWXUH
RIDWRUWWKDQDYLRODWLRQRIDIHGHUDOHQWLWOHPHQWVFKHPH,G
DW
2QFHDSODLQWLIIEULQJLQJDQ,'($FODLPKDVH[KDXVWHGKHU
DGPLQLVWUDWLYHUHPHGLHVDQGILOHGKHUFODLPLQHLWKHUIHGHUDO
RUVWDWHFRXUWWKHFRXUWFDQ³EURDGO\GHWHUPLQH>@´ZKDWUHOLHI
LV DSSURSULDWH 86& L % LLL +RZHYHU LWV
GLVFUHWLRQ WR DZDUG PRQHWDU\ GDPDJHV XQGHU WKLV VWDWXWH
H[WHQGVRQO\WRUHVWLWXWLRQIRUPRQH\WKDWVKRXOGKDYHEHHQ
SDLGE\WKHVWDWHIRUHGXFDWLRQDOVHUYLFHV±QRWWR³JHQHUDO
GDPDJHV´6HH6FK&RPPRI%XUOLQJWRQY'HS¶WRI(GXF
86 &URFNHUY7HQQ6HFRQGDU\
6FK$WKOHWLF$VV¶Q)G WK&LU ,WLV
ZKHQDSODLQWLIIKDVDOHJLWLPDWHFODLPIRU³JHQHUDOGDPDJHV´
QRWDYDLODEOHXQGHUWKH,'($WKDWZHKDYHEHHQZLOOLQJWR
DOORZKHUWRE\SDVVWKHDGPLQLVWUDWLYHSURFHVVGHWDLOHGLQWKDW
VWDWXWH³DPHUHFODLPIRUPRQH\GDPDJHVLVQRWVXIILFLHQWWR
UHQGHU H[KDXVWLRQ RI DGPLQLVWUDWLYH UHPHGLHV XQQHFHVVDU\
´&RYLQJWRQ)GDW
:KLOH SODLQWLIIV LQ WKLV FDVH KDYH VW\OHG WKHLU FODLPV DV
†DFWLRQVIRUGHQLDORI³GXHSURFHVV´XQGHUWKH,'($
WKHLU FRPSODLQW UHVWV RQ WKH FRQWHQWLRQ WKDW WKHLU ULJKW WR
UHFHLYHDIUHHHGXFDWLRQZDVYLRODWHGZKHQVRPHSDUWRIWKHLU
6RFLDO6HFXULW\ EHQHILWVZDVXVHGWRSD\IRUWKHHGXFDWLRQ
WKH\ UHFHLYHG 7KH PRVW DSSURSULDWH W\SH RI UHOLHI
SDUWLFXODUO\JLYHQWKDWSODLQWLIIVDUHQRORQJHULQWKHVFKRRO
V\VWHPZRXOGEHUHVWLWXWLRQIRUSDVWSD\PHQWVPDGHRQWKHLU
EHKDOIWRWKHVFKRROVDQGUHODWHGLQVWLWXWLRQVZKRVKRXOGKDYH
SURYLGHGHGXFDWLRQDODQGUHODWHGVHUYLFHVZLWKRXWFKDUJHWR
WKHSODLQWLIIV7KLVLVQRWDFODLPIRU³JHQHUDOGDPDJHV´EXW
D FODLP IRU D W\SH RI UHOLHI DYDLODEOH XQGHU WKH ,'($
3ODLQWLIIVKDYHQRWPHWWKHLUEXUGHQRIVKRZLQJZK\LWZRXOG
EH IXWLOH WR SXUVXH WKHLU ,'($ FODLPV WKURXJK WKH
DGPLQLVWUDWLYHSURFHVVHVVHWRXWLQWKDWVWDWXWH$FFRUGLQJO\
WKH SODLQWLIIV PXVW H[KDXVW WKHLU ,'($ FODLPV WKURXJK WKH
VWDWXWRULO\SUHVFULEHGDGPLQLVWUDWLYHSURFHVVEHIRUHEULQJLQJ
WKHPEHIRUHDFRXUW
*HDQHWDOY+DWWDZD\HWDO 1R
,Q SHUWLQHQW SDUW † SURYLGHV WKDW ³>Q@R RWKHUZLVH TXDOLILHG
LQGLYLGXDO ZLWK D GLVDELOLW\ VKDOO VROHO\ E\ UHDVRQ RI KHU RU KLV
GLVDELOLW\ EH H[FOXGHG IURP WKH SDUWLFLSDWLRQ LQ EH GHQLHG WKH EHQHILWV RI
RU EH VXEMHFWHG WR GLVFULPLQDWLRQ XQGHU DQ\ SURJUDP RU DFWLYLW\ UHFHLYLQJ
)HGHUDO ILQDQFLDO DVVLVWDQFH ´
* 'LVFULPLQDWLRQRQWKH%DVLVRI'LVDELOLW\LQ9LRODWLRQ
RIWKH5HKDELOLWDWLRQ$FW
3ODLQWLIIVDOOHJHGLVFULPLQDWLRQRQWKHEDVLVRIGLVDELOLW\
FODLPLQJ WKDW WKH GHIHQGDQWV YLRODWHG 86& † E\
XVLQJ WKH SODLQWLIIV¶ 6RFLDO 6HFXULW\ EHQHILWV WR SD\ IRU
VHUYLFHVWKDWVKRXOGKDYHEHHQSURYLGHGWRWKHPIUHH$Q
LQGLYLGXDO FODLPLQJ WKDW D UHFLSLHQW RI IHGHUDO IXQGV KDV
YLRODWHG†KDVWKHULJKWVDQGUHPHGLHVVHWIRUWKLQ7LWOH9,
RI WKH &LYLO 5LJKWV $FW VHH 86& † D D
LQFOXGLQJ WKH ULJKW WR EULQJ D GLUHFW FDXVH RI DFWLRQ
$OH[DQGHUY6DQGRYDO86 6WDWHV
WKDW UHFHLYH IHGHUDO IXQGV ZDLYH WKHLU VRYHUHLJQ LPPXQLW\
GHIHQVH WR FODLPV EURXJKW DJDLQVW WKHP XQGHU WKH
5HKDELOLWDWLRQ$FWVHH86&†G1LKLVHUY2KLR
(3$)G WK&LU -LP&Y8QLWHG6WDWHV
)G WK &LU HQ EDQF FHUW GHQLHG VXE
QRP$UN'HS¶WRI(GXFY-LP&86 DQG
H[KDXVWLRQRIDGPLQLVWUDWLYHUHPHGLHV³LVQRWDSUHUHTXLVLWH
WRSULYDWHHQIRUFHPHQWRIVHFWLRQ>@´7XFNY+&$+HDOWK
6HUYVRI7HQQ,QF)G WK&LU :HZLOO
FRQVLGHUWKLVGLUHFWFDXVHRIDFWLRQILUVW
%HFDXVH 86& † G LV DQ HIIHFWLYH ZDLYHU RI
7HQQHVVHH¶V VRYHUHLJQ LPPXQLW\ IURP VXLW XQGHU WKH
5HKDELOLWDWLRQ$FWDQGEHFDXVHVWDWHRIILFLDOVVXHGLQWKHLU
RIILFLDO FDSDFLWLHV DUH HQWLWOHG WR WKH GHIHQVHV RI WKH HQWLW\
WKH\ UHSUHVHQW .HQWXFN\ Y *UDKDP 86 DW WKH
GHIHQGDQWVLQWKHLURIILFLDOFDSDFLWLHVDFWLQJDV³WKH6WDWH´
DUH QRW LPPXQH IURP VXLW 7KH 5HKDELOLWDWLRQ $FW FODLP
DJDLQVW WKHP LQ WKHLU RIILFLDO FDSDFLWLHV WKHUHIRUH PD\
SURFHHG7KHFODLPEURXJKWDJDLQVWWKHGHIHQGDQWVLQWKHLU
LQGLYLGXDO FDSDFLWLHV LV VXEMHFW WR WKH GHIHQVH RI TXDOLILHG
LPPXQLW\ZKLFKZHVKDOOH[SODLQEHORZ

-- 11 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
:HPXVWGHWHUPLQHDVZHOOZKHWKHULQDGGLWLRQWREULQJLQJ
WKHLUFODLPVGLUHFWO\XQGHUWKH5HKDELOLWDWLRQ$FWSODLQWLIIV
PD\DOVREULQJWKHLUFODLPVIRUYLRODWLRQRIWKDWVWDWXWHXQGHU
†)HGHUDOULJKWVPD\EHYLQGLFDWHGE\†0DLQH
Y 7KLERXWRW 86 ³WKH † UHPHG\
EURDGO\HQFRPSDVVHVYLRODWLRQVRIIHGHUDOVWDWXWRU\DVZHOODV
FRQVWLWXWLRQDO ODZ´ XQOHVV ³WKH VWDWXWH GRHV QRW FUHDWH
μHQIRUFHDEOH ULJKWV SULYLOHJHV RU LPPXQLWLHV ZLWKLQ WKH
PHDQLQJ RI † ¶ >RU XQOHVV@ μ&RQJUHVV KDV IRUHFORVHG
VXFK HQIRUFHPHQW RI WKH VWDWXWH LQ WKH HQDFWPHQW LWVHOI¶´
/RFKPDQY&RXQW\RI&KDUOHYRL[)G WK&LU
TXRWLQJ:LOGHUY9D+RVS$VV¶Q86
&RQJUHVVLVSUHVXPHG WRKDYHIRUHFORVHG†
HQIRUFHPHQW RI D JLYHQ VWDWXWH E\ FUHDWLQJ ³VXIILFLHQWO\
FRPSUHKHQVLYH´UHPHGLDOGHYLFHVLQWKH$FWLWVHOI0LGGOHVH[
&RXQW\6HZHUDJH$XWKY1DW¶O6HD&ODPPHUV$VV¶Q
86
7KHODZLQWKH6L[WK&LUFXLWLVQRWVHWWOHGUHJDUGLQJZKHWKHU
5HKDELOLWDWLRQ$FWFODLPVDUHSURSHUO\EURXJKWSXUVXDQWWR
†6HH3HQGOHWRQY-HIIHUVRQ/RFDO6FK'LVW%GRI
(GXF1R:/DW WK&LU0DUFK
KROGLQJWKDWWKH5HKDELOLWDWLRQ$FWDQG†DUH
QRWPXWXDOO\H[FOXVLYHUHPHGLHV %XWVHH7\XVY2KLR'HS¶W
RI<RXWK6HUYV)6XSS 6'2KLR
KROGLQJ WKDW † GRHV QRW DGG WR WKH ULJKWV D SODLQWLII
DOUHDG\KDVXQGHUWKH5HKDELOLWDWLRQ$FWDQGFDQQRWEHXVHG
WRFLUFXPYHQWWKHDGPLQLVWUDWLYHSURFHGXUHVVHWIRUWKLQWKDW
DFW 0RUHRYHUIHGHUDOFRXUWVRXWVLGHRIWKLVFLUFXLWDUHQRW
LQDJUHHPHQWDVWRZKHWKHU&RQJUHVVLQWHQGHGWKHUHPHGLHV
DYDLODEOH XQGHU WKH 5HKDELOLWDWLRQ $FW WR SUHFOXGH D VXLW
EURXJKW XQGHU † WR HQIRUFH ULJKWV FUHDWHG E\ WKH
5HKDELOLWDWLRQ$FW6HHHJ6PLWKY%DUWRQ)G
WK &LU QRWLQJ WKDW LW LV D ³PDWWHU RI VRPH
GLVDJUHHPHQW´EHWZHHQFRXUWVZKHWKHU&RQJUHVVLQWHQGHGWR
SUHFOXGH † FODLPV E\ WKH UHPHGLDO VFKHPH RI WKH
5HKDELOLWDWLRQ$FW $OH[DQGHUY&KLFDJR3DUN'LVW
)G WK&LU KROGLQJWKDWWKHFRPSUHKHQVLYH
HQIRUFHPHQWSURYLVLRQVRI7LWOH9,ZKLFKDOVRDSSO\WR†
SUHFOXGH DFWLRQ XQGHU † %HFNHU Y 2UHJRQ )
*HDQHWDOY+DWWDZD\HWDO 1R
6XSS G ' 2U DOORZLQJ †
FODLPV WR YLQGLFDWH 5HKDELOLWDWLRQ $FW ULJKWV 9HDO Y
0HPRULDO +RVS ) 6XSS 0' *D
KROGLQJWKDW&RQJUHVVLQWHQGHG†¶VUHPHGLHVWRSUHFOXGH
†DFWLRQVEXWRQO\WRWKHH[WHQWWKDWWKH†DFWLRQ
ZDV EURXJKW WR HQIRUFH ULJKWV DOUHDG\ SURWHFWHG E\ WKH
VWDWXWRU\VFKHPH 'RHY'LVWRI&ROXPELD)6XSS
''& DEVWDLQLQJ IURP H[DPLQLQJ
SODLQWLII¶V5HKDELOLWDWLRQ$FWFODLPVXQGHU†EHFDXVHWKH
UHPHGLHVXQGHU†DUHWKHVDPHDVWKRVHDYDLODEOHLQD
GLUHFWDFWLRQ 5RWKVFKLOGY*URWWHQWKDOHU)6XSS
6'1< FKDUDFWHUL]LQJWKH5HKDELOLWDWLRQ$FW¶V
UHPHGLDO VFKHPH DV QRW VR FRPSUHKHQVLYH WKDW LW ZRXOG
SUHFOXGHD†DFWLRQ 6KXWWOHZRUWKY%URZDUG&RXQW\
) 6XSS 6' )OD OLVWLQJ IXUWKHU
DXWKRULWLHV %HFDXVHDVZHH[SODLQEHORZD†FODLPWR
HQIRUFHWKHSODLQWLIIV¶ULJKWVXQGHUWKH5HKDELOLWDWLRQ$FWLV
EDUUHGE\TXDOLILHGLPPXQLW\LQWKLVFDVHDQGWKHUHIRUHKDVQR
FKDQFHRIVXFFHVVHYHQLILWLVQRWSUHFOXGHGE\WKHUHPHGLDO
VFKHPHRIWKH$FWZHQHHGQRWSLFNDVLGHLQWKDWGHEDWH
$VZHKDYHDOUHDG\H[SODLQHGVHFWLRQFODLPVDUHQRW
FRJQL]DEOHDJDLQVWDVWDWHRULWVDJHQWVDFWLQJLQWKHLURIILFLDO
FDSDFLWLHV:LOO86DW7KHVHGHIHQGDQWVLQWKHLU
LQGLYLGXDOFDSDFLWLHVKDYHDVVHUWHGWKHGHIHQVHRITXDOLILHG
LPPXQLW\ZKLFKSODLQWLIIVPD\RYHUFRPHRQO\E\VKRZLQJ
WKDW WKH ULJKWV WKH GHIHQGDQWV DOOHJHGO\ YLRODWHG ZHUH
VSHFLILFDOO\ DQG FOHDUO\ HVWDEOLVKHG LQ ODZ VXFK WKDW QR
UHDVRQDEO\FRPSHWHQWRIILFLDOLQWKHLUSRVLWLRQZRXOGKDYH
KDGDQ\GRXEWWKDWKHZDVEUHDNLQJWKHODZ0DOOH\Y%ULJJV
86 7KHSODLQWLIIVKRZHYHUIDLOWR
DOOHJHWKDWWKHGHIHQGDQWV¶XVHRISODLQWLIIV¶6RFLDO6HFXULW\
EHQHILWVWRSD\IRUSDUWRIWKHLUFXUUHQWPDLQWHQDQFH³H[FOXGHG
>WKHP@ IURP WKH SDUWLFLSDWLRQ LQ GHQLHG >WKHP@ WKH
EHQHILWVRIRUVXEMHFWHG>WKHP@WRGLVFULPLQDWLRQXQGHU
DQ\SURJUDPRUDFWLYLW\´RQWKHEDVLVRIWKHLUGLVDELOLW\
86& † D 5DWKHU DV ZLWK WKHLU FODLP XQGHU WKH
0HGLFDLG $FW WKHLU 5HKDELOLWDWLRQ $FW FODLP DOOHJHV
GLVFULPLQDWLRQ RQO\ LQ KLJKO\ JHQHUDO WHUPV ,Q RUGHU WR
RYHUFRPH WKHGHIHQVHRITXDOLILHGLPPXQLW\WKHSODLQWLIIV

-- 12 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
PXVW VKRZ WKDW WKH ULJKW DOOHJHGO\ YLRODWHG ZDV ³FOHDUO\
HVWDEOLVKHGLQDPRUHSDUWLFXODUL]HGVHQVH´$QGHUVRQY
&UHLJKWRQ86 ZKLFKWKH\KDYHZKROO\
IDLOHGWRGR
7KHUHIRUH WKH SODLQWLIIV PD\ SURFHHG GLUHFWO\ XQGHU WKH
5HKDELOLWDWLRQ $FW DJDLQVW WKH GHIHQGDQWV LQ WKHLU RIILFLDO
FDSDFLWLHVEXWSODLQWLIIV¶†FODLPDJDLQVWWKHGHIHQGDQWV
LQ WKHLU LQGLYLGXDO FDSDFLWLHV ZHUH WKDW FODLP DOORZHG WR
SURFHHGZRXOGEHEDUUHGE\TXDOLILHGLPPXQLW\
,9
)LQDOO\ LQ UXOLQJ RQ WKLV PRWLRQ WR GLVPLVV RXU RQO\
IXQFWLRQVDUHWRH[DPLQHZKHWKHUSODLQWLIIVKDYHDOOHJHGIDFWV
WKDW LI WUXH ZRXOG EH JURXQGV IRU UHOLHI DQG WR DVFHUWDLQ
ZKHWKHU WKH LPPXQLW\ GHIHQVHV DVVHUWHG E\ GHIHQGDQWV
SUHFOXGH WKH DGYDQFHPHQW RI DQ\ RI WKH SODLQWLIIV¶ OHJDO
FODLPV,QDQDWWHPSWWRDOORZXVWRUHDFKWKHPHULWVRIWKHLU
FODLPVSODLQWLIIVSOHDGWKHLUFDVHDVRQHIRULQMXQFWLYHUHOLHI
7KHLUFRPSODLQWLVKRZHYHUEDVHGHQWLUHO\XSRQSDVWDFWVDQG
QRW FRQWLQXLQJ FRQGXFW WKDW LI VWRSSHG ZRXOG SURYLGH D
UHPHG\ WR WKHP DQG LW WKHUHIRUH GRHV QRW FRPH XQGHU WKH
GRFWULQHRI([3DUWH<RXQJ86
6HH &RYLQJWRQ )G DW Q VWDWLQJ WKDW WKH FRXUW
ZRXOG UHDG SODLQWLII¶V FRPSODLQW DV RQH IRU GDPDJHV RQO\
GHVSLWHDUHTXHVWIRULQMXQFWLYHUHOLHIEHFDXVH³>SODLQWLII@KDV
QRWILOHGDFODVVDFWLRQQRUKDVVKHGHPRQVWUDWHGDQ\RWKHU
EDVLVXSRQZKLFKVKHVKRXOGEHHQWLWOHGWRDVVHUWWKHULJKWVRI
RWKHUSXEOLFVFKRROVWXGHQWVWRUHOLHIWKDWZRXOGQRWDIIHFW>WKH
LQMXUHGSDUW\@´
0RUHRYHU EHFDXVH '&6 XVHG DOO RI SODLQWLIIV¶ 6RFLDO
6HFXULW\SD\PHQWVIRUWKHLUFXUUHQWPDLQWHQDQFHQRPRQLHV
EHORQJLQJ WR WKH GHIHQGDQWV DUH EHLQJ KHOG LQ WUXVW E\ WKH
6WDWHRI7HQQHVVHH$Q\UHPHG\LQWKLVVXLWZRXOGKDYHWR
FRPHIURPWKH7HQQHVVHHWUHDVXU\DQGVXLWVDJDLQVWWKHVWDWH
ILVF VHHNLQJ UHVWLWXWLRQ IRU SDVW GDPDJHV DUH EDUUHG E\ WKH
(OHYHQWK$PHQGPHQW(GHOPDQY-RUGDQ86
2QO\ ZLWK UHVSHFW WR WKH SODLQWLIIV¶ FODLP EURXJKW
XQGHUWKH5HKDELOLWDWLRQ$FWDJDLQVWWKHGHIHQGDQWVLQWKHLU
*HDQHWDOY+DWWDZD\HWDO 1R
RIILFLDOFDSDFLWLHV²IRUZKLFKVRYHUHLJQLPPXQLW\KDVEHHQ
ZDLYHG²PD\ WKLV VXLW JR IRUZDUG :H ZLOO UHPDQG WKDW
FODLPWRWKHGLVWULFWFRXUWIRUGLVSRVLWLRQRQWKHPHULWVDQGWKH
GHWHUPLQDWLRQRIZKDWUHPHG\ LIDQ\ LVDSSURSULDWHLQOLJKW
RI HVWDEOLVKHG ODZ DQG WKH SULQFLSOHV ZH KDYH DUWLFXODWHG
DERYH
9
)RU WKH IRUHJRLQJ UHDVRQV ZH 5(0$1' WR WKH GLVWULFW
FRXUW WKH SODLQWLIIV¶ 5HKDELOLWDWLRQ $FW FODLP DJDLQVW WKH
GHIHQGDQWVLQWKHLURIILFLDOFDSDFLWLHV:HGLVPLVVDOORIWKH
RWKHUFODLPVDJDLQVWWKHGHIHQGDQWVLQERWKWKHLURIILFLDODQG
LQGLYLGXDOFDSDFLWLHV

-- 13 of 14 --

1R *HDQHWDOY+DWWDZD\HWDO
BBBBBBBBBBBBBBBBBB
&21&855(1&(
BBBBBBBBBBBBBBBBBB
&/$<&LUFXLW-XGJHFRQFXUULQJ,FRQFXULQWKHRXWFRPH
UHDFKHG E\ WKH PDMRULW\ RSLQLRQ EXW ZULWH VHSDUDWHO\ WR
HPSKDVL]HWKDWP\FRQFXUUHQFHLVFRPSHOOHGE\WKH6XSUHPH
&RXUW¶VKROGLQJLQ:DVKLQJWRQ6WDWH'HS¶WRI6RFLDO +HDOWK
6HUYLFHVY*XDUGLDQVKLS(VWDWHRI.HIIHOHU86BBB
6&W DVWR3ODLQWLIIV¶FODLPVEURXJKWXQGHU
WKH6RFLDO6HFXULW\$FW
,DOVRZULWHVHSDUDWHO\WRHPSKDVL]HWKDWZKLOH,DJUHHZLWK
WKH PDMRULW\ RSLQLRQ¶V RXWFRPH DV WR 3ODLQWLIIV¶ FODLPV
EURXJKWXQGHUWKH(TXDO3URWHFWLRQ&ODXVH,GLVDJUHHZLWKWKH
PDMRULW\¶V ODQJXDJH DQG GLVFXVVLRQ UHODWHG WR WKLV FODLP
6SHFLILFDOO\ , GR QRW FRQFXU LQ WKH PDMRULW\ RSLQLRQ¶V
GLVFXVVLRQRIWKH6XSUHPH&RXUW¶VVWDWHPHQWLQ6DHQ]Y5RH
86 DV WR ZKHWKHU ³WKH 6WDWH¶V
OHJLWLPDWHLQWHUHVWLQVDYLQJPRQH\SURYLGHVQRMXVWLILFDWLRQ
IRU LWV GHFLVLRQ WR GLVFULPLQDWH DPRQJ HTXDOO\ HOLJLEOH
FLWL]HQV´ 7KDW LV , GR QRW MRLQ WKH PDMRULW\ RSLQLRQ¶V
ODQJXDJHDQGUHODWHGGLVFXVVLRQWRWKHHIIHFWWKDW³>W@KRXJKD
VWDWHFDQQRWGLVFULPLQDWHDJDLQVWDSRWHQWLDOZHOIDUHUHFLSLHQW
EDVHGXSRQKRZORQJWKDWLQGLYLGXDOKDVEHHQLQWKHVWDWHLW
FDQ²DQGGRHV²GLVFULPLQDWHDJDLQVWWKDWLQGLYLGXDOEDVHG
XSRQ KLV DELOLW\ WR SURYLGH IRU KLPVHOI ZLWKRXW VWDWH
DVVLVWDQFH´ , GHFOLQH WR MRLQ WKDW SRUWLRQ RI WKH PDMRULW\
RSLQLRQ¶VODQJXDJHEHFDXVH,EHOLHYHLWWREHDWYDULDQFHZLWK
WKHLPSRUWDQGKROGLQJRI6KDSLURY7KRPSVRQ86
6DHQ]Y5RH86 DQGDSOHWKRUDRI
6XSUHPH &RXUW SURQRXQFHPHQWV LQ WKH DUHD RI HTXDO
SURWHFWLRQ

-- 14 of 14 --