1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
1R
$JULFXOWXUH SURSRVHG D PRGLILFDWLRQ WR WKH IRUHVW SODQ
GHYHORSPHQWSURFHVV6HH1DWLRQDO)RUHVW6\VWHP/DQGDQG
5HVRXUFH 0DQDJHPHQW 3ODQQLQJ )HG 5HJ
SURSRVHG'HF WREHFRGLILHGDW&)5SW
7KH)RUHVW6HUYLFHREVHUYHGWKDWLWKDVVHOGRPEHHQDEOHWR
UHYLVHSODQVSULRUWRWKH)RUHVW$FW¶V\HDUGHDGOLQH7KH
SULPDU\UHDVRQIRUWKHGHOD\LVWKHH[FHVVLYHOHQJWKRIWLPH
QHHGHGWRSUHSDUHDSODQXQGHUWKHFXUUHQWUXOHV7RVSHHGWKH
SURFHVV WKH )RUHVW 6HUYLFH LQWHQGV WR UHFRJQL]H WKDW SODQV
WKHPVHOYHVGRQRWGLFWDWHVLWHVSHFLILFDFWLRQVWKHUHIRUHWKH\
DUH QRW DFWLRQV WKDW VLJQLILFDQWO\ DIIHFW WKH TXDOLW\ RI WKH
KXPDQ HQYLURQPHQW $V VXFK IRUHVW SODQV ZRXOG QRW EH
UHTXLUHG WR LQFOXGH (QYLURQPHQWDO ,PSDFW 6WDWHPHQWV
SUHSDUHG LQ DFFRUGDQFH ZLWK WKH 1DWLRQDO (QYLURQPHQWDO
3ROLF\ $FW 7KH VXEVHTXHQW VLWHVSHFLILF SURMHFWV PXVW EH
SURSRVHGDQGGHYHORSHGZLWKLQWKHFRQVWUDLQWVRIWKH3ODQ
DQGZRXOGEHVXEMHFWWRWKH3ROLF\$FWDQGRWKHUDSSOLFDEOH
ODZVDQGUHJXODWLRQV
,,,&RQFOXVLRQ
)RUSURMHFWVWREHSURSHUO\DSSURYHGXQGHUWKH1DWLRQDO
(QYLURQPHQWDO 3ROLF\ $FW WKH\ PXVW EH SUHFHGHG E\ RU
DFFRPSDQLHG E\ DQ (QYLURQPHQWDO ,PSDFW 6WDWHPHQW WKDW
DQDO\]HVWKHLPSDFWVRIWKHDFWLRQRQYDULRXVUHVRXUFHVZLWKLQ
WKH IRUHVW ,Q WKLV FDVH WKHUH ZDV QR VFLHQWLILF RU RWKHU
DVVHVVPHQWXQGHUHLWKHUWKH1DWLRQDO)RUHVW0DQDJHPHQW$FW
RU WKH 1DWLRQDO (QYLURQPHQWDO 3ROLF\ $FW RI SHUPLWWLQJ
VHOHFWLRQ ORJJLQJ DW WKH FXUUHQW OHYHOV PXFK OHVV WKH
DGGLWLRQDODFUHDJHDSSURYHGLQWKH5ROOLQJ7KXQGHUSURMHFW
,Q WKH DEVHQFH RI WKH DSSURSULDWH VWDWXWRULO\PDQGDWHG
DQDO\VLV WKH DSSURYDO RI WKH 5ROOLQJ 7KXQGHU SURMHFW ZDV
DUELWUDU\DQGFDSULFLRXV7KHGHFLVLRQRIWKHGLVWULFWFRXUWLV
5(9(56('DQGWKHFDVHLV5(0$1'('ZLWKGLUHFWLRQVWR
HQWHUVXPPDU\MXGJPHQWIRUWKHSODLQWLIIV
7KH +RQRUDEOH 7KRPDV % 5XVVHOO 8QLWHG 6WDWHV 'LVWULFW -XGJH IRU
WKH :HVWHUQ 'LVWULFW RI .HQWXFN\ VLWWLQJ E\ GHVLJQDWLRQ
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
1257+:22'6 :,/'(51(66
5(&29(5< ,1& '28*/$6 5
&251(77DQG)5$1. -
9(5,72
3ODLQWLIIV$SSHOODQWV
Y
81,7(' 67$7(6 )25(67
6(59,&(HWDO
'HIHQGDQWV$SSHOOHHV
;!
1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW0DUTXHWWH
1R²'DYLG:0F.HDJXH'LVWULFW-XGJH
$UJXHG'HFHPEHU
'HFLGHGDQG)LOHG0DUFK
%HIRUH0(55,77DQG'$8*+75(<&LUFXLW-XGJHV
5866(//'LVWULFW-XGJH
-- 1 of 6 --
1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
1R
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' /HLJK $QQ +D\QLH &DUHQFUR /RXLVLDQD IRU
$SSHOODQWV &KDUOHV 5 *URVV $66,67$17 81,7('
67$7(6 $77251(< *UDQG 5DSLGV 0LFKLJDQ IRU
$SSHOOHHV 21 %5,() /HLJK $QQ +D\QLH &DUHQFUR
/RXLVLDQDIRU$SSHOODQWV*OHQGD**RUGRQ$66,67$17
81,7('67$7(6$77251(<0DUTXHWWH0LFKLJDQIRU
$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
0(55,77&LUFXLW-XGJH7KLVFDVHFRQFHUQVDGHFLVLRQE\
WKH 8QLWHG 6WDWHV )RUHVW 6HUYLFH WR DSSURYH WKH 5ROOLQJ
7KXQGHU WLPEHU SURMHFW LQ WKH 2WWDZD 1DWLRQDO )RUHVW RQ
0LFKLJDQ¶V 8SSHU 3HQLQVXOD 3ODLQWLIIV 1RUWKZRRGV
:LOGHUQHVV5HFRYHU\,QF'RXJODV5&RUQHWWDQG)UDQN-
9HULWRDUJXHWKDWWKHDSSURYDORIWKHWLPEHUSURMHFWZDVLQ
YLRODWLRQ RI WKH 1DWLRQDO (QYLURQPHQWDO 3ROLF\ $FW WKH
1DWLRQDO )RUHVW 0DQDJHPHQW $FW DQG WKH $GPLQLVWUDWLYH
3URFHGXUH$FW7KHEDVLFTXHVWLRQEHIRUHXVLVZKHWKHUWKH
)RUHVW6HUYLFHDFWHGDUELWUDULO\ZKHQLWDSSURYHGVHOHFWLRQ
FXWWLQJ RI KDUGZRRG WLPEHU DFUHDJH JUHDWO\ H[FHHGLQJ WKH
DFUHDJH SURMHFWHG LQ LWV )RUHVW 3ODQ DQG LWV (QYLURQPHQWDO
,PSDFW6WDWHPHQW2QFURVVPRWLRQVIRUVXPPDU\MXGJPHQW
WKHGLVWULFWFRXUWUXOHGLQIDYRURIWKH)RUHVW6HUYLFHRQDOO
FRXQWV%HFDXVHZHFRQFOXGHWKDWDSSURYDORIWKH5ROOLQJ
7KXQGHU SURMHFW ZLWKRXW DGKHUHQFH WR WKH VWDWXWRULO\
PDQGDWHG HQYLURQPHQWDO DQDO\VLV ZDV DUELWUDU\ DQG
FDSULFLRXVZH5(9(56(WKHMXGJPHQWRIWKHGLVWULFWFRXUW
DQG5(0$1'ZLWKLQVWUXFWLRQVWRHQWHUVXPPDU\MXGJPHQW
IRUWKHSODLQWLIIV
1R 1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
:H QHHG QRW UHDFK WKH LVVXH ZKHWKHU WKH 3ODQ ZDV SURSHUO\ DGRSWHG
EHFDXVH ZH FRQFOXGH WKDW WKH LQDGHTXDWH HQYLURQPHQWDO DQDO\VLV XQGHU WKH
1DWLRQDO (QYLURQPHQWDO 3ROLF\ $FW GLFWDWHV WKH RXWFRPH LQ WKLV FDVH
7KH )RUHVW 6HUYLFH FRXQWHUV WKDW WKH 3ROLF\ $FWEDVHG
DUJXPHQWVIDLOEHFDXVHWKHVXJDUPDSOHVHQWHQFHZDVLQFOXGHG
LQ WKH )RUHVW 3ODQ ZKLFK ZDV WKH SURGXFW RI WKH
DGPLQLVWUDWLYHSURFHVV:HDJUHHWKDWLIWKLVDVSHFWRIWKH
3ODQZDVSURSHUO\DGRSWHGWKHQWKH)RUHVW6HUYLFHPD\UHO\
RQWKH3ODQWRRYHUFRPHDQ\FKDOOHQJHEDVHGRQWKH)RUHVW
$FW+RZHYHUWKHPHUHIDFWRIWKHLQFOXVLRQRIWKHVXJDU
PDSOH SURYLVLRQGRHVQRWVKLHOGWKH)RUHVW6HUYLFHIURPD
FKDOOHQJH EDVHG XSRQ WKH 3ROLF\ $FW 7KH )RUHVW 6HUYLFH
QHYHU GHPRQVWUDWHG E\ FLWLQJ WR HLWKHU WKH 3ODQ RU WKH
(QYLURQPHQWDO ,PSDFW 6WDWHPHQW WKDW WKH HQYLURQPHQWDO
LPSDFWV RI WKH FXUUHQW OHYHO RI VHOHFWLRQ ORJJLQJ HYHU ZDV
DQDO\]HG PXFK OHVV XQOLPLWHG VHOHFWLRQ FXWWLQJ RI VXJDU
PDSOHV1RPHDQLQJIXOFRQVLGHUDWLRQZDVJLYHQWRXQOLPLWHG
FXWWLQJRIWKLVVSHFLHVRIKDUGZRRGDQGLWLVXQFOHDUKRZE\
ZKRPRUIRUZKDWUHDVRQWKHVHQWHQFHZDVLQVHUWHG
%HFDXVHWKH3ROLF\$FWSURPRWHVLWVVZHHSLQJFRPPLWPHQW
WR ³SUHYHQW RU HOLPLQDWH GDPDJH WR WKH HQYLURQPHQW DQG
ELRVSKHUH´E\IRFXVLQJ*RYHUQPHQWDQGSXEOLFDWWHQWLRQRQ
WKH HQYLURQPHQWDO HIIHFWV RI SURSRVHG DJHQF\ DFWLRQ
86&0DUVKY2UHJRQ1DWXUDO5HVRXUFHV&RXQFLO
86 PHDQLQJIXO DQDO\VLV DQG SXEOLF
FRPPHQWZHUHUHTXLUHGSULRUWRWKHDSSURYDORIDGGLWLRQDO
VHOHFWLRQORJJLQJ:HFRQFOXGHWKDWDSSURYDORIWKH5ROOLQJ
7KXQGHU SURMHFW ZLWKRXW DGKHUHQFH WR WKH VWDWXWRULO\
PDQGDWHG HQYLURQPHQWDO DQDO\VLV ZDV DUELWUDU\ DQG
FDSULFLRXV
+DYLQJFRQFOXGHGWKDWWKHH[FHVVLYHFXWWLQJRIKDUGZRRG
WLPEHUDFUHDJHYLRODWHVWKH1DWLRQDO(QYLURQPHQWDO3ROLF\
$FW ZH QHHG QRW H[DPLQH WKH FRQVHTXHQFHV RI WKH )RUHVW
6HUYLFH¶V IDLOXUH WR UHYLVH WKH )RUHVW 3ODQ DW LVVXH ZLWKLQ
ILIWHHQ\HDUVDVUHTXLUHGE\86& I :HQRWH
KRZHYHU WKDW RQ 'HFHPEHU WKH 'HSDUWPHQW RI
-- 2 of 6 --
1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
1R
UHGXFLQJ UHOLDQFH RQ WKDW PHWKRG RI KDUYHVW 7KH 6HUYLFH KDV WKHUHIRUH
UHYLVHG D NH\ DVVXPSWLRQ XQGHUO\LQJ WKH 3ODQ 7KH UHJXODWLRQV VXJJHVW
WKDW WKH 6HUYLFH VKRXOG DW D PLQLPXP FRQVLGHU ZKHWKHU WKH 3ODQ RU LWV
VLWHVSHFLILF GHFLVLRQV QHHG WR EH PRGLILHG 6HH LG
7KLV RYHUVWDWHV WKH VLWXDWLRQ EHFDXVH DV WKH )RUHVW 6HUYLFH SRLQWV
RXW WKH WRWDO WLPEHU KDUYHVW PXVW UHPDLQ ZLWKLQ WKH FHLOLQJ RI WKH
$OORZDEOH 6DOH 4XDQWLW\
WLPEHUVDOHVPXVWSURPRWHWKHGHVLUHGIXWXUHFRQGLWLRQRIWKH
ODQGDQGEHFRQVLVWHQWZLWKWKHREMHFWLYHVRIWKHPDQDJHPHQW
DUHDV WKH DSSURYDO RI WKH KDUYHVW RI WKH DGGLWLRQDO DFUHV
LQFOXGHGLQWKH5ROOLQJ7KXQGHUSURMHFWLVQRWFRQVLVWHQWZLWK
WKHDFUHDJHSURMHFWLRQVLQWKH3ODQ
+DYLQJFRQFOXGHGWKDWWKHDSSURYDORIWKH5ROOLQJ7KXQGHU
SURMHFWLVLQFRQVLVWHQWZLWKWKHDFUHDJHHVWLPDWHVLQWKH3ODQ
ZH WXUQ QRZ WR WKH )RUHVW 6HUYLFH¶V FRQWHQWLRQ WKH VXJDU
PDSOH VHQWHQFH H[HPSWV VHOHFWLRQ FXWWLQJ RI VXJDU PDSOHV
IURPDQ\VXFKDFUHDJHOLPLWDWLRQ7KH)RUHVW6HUYLFHDUJXHV
WKDWWKHVXJDUPDSOHVHQWHQFHWUXPSVDQ\OLPLWV SODFHGRQ
VHOHFWLRQ ORJJLQJ FRQWDLQHG ZLWKLQ WKH PDQDJHPHQW DUHD
SUHVFULSWLRQV$VQRWHGHDUOLHULQWKHJHQHUDOGLVFXVVLRQRI
XQHYHQDJHG PDQDJHPHQW RI VXJDU PDSOH VWDQGV WKH 3ODQ
SURYLGHVWKDW³>I@RUVWDQGVPDQDJHGXQHYHQDJHGWKHUHLVQR
UHVWULFWLRQRQDFUHDJHRIVHOHFWLRQFXWVZLWKLQDQ\RQH\HDU
SHULRG´
7KH SODLQWLIIV DVVHUW WKDW WKH )RUHVW 6HUYLFH KDV QHYHU
FRQGXFWHG3ROLF\$FWDQDO\VLVRQWKHXQOLPLWHGDFUHDJHRI
VHOHFWLRQ KDUYHVW RI VXJDU PDSOHV 7KH\ FRQWHQG WKDW WKH
(QYLURQPHQWDO ,PSDFW 6WDWHPHQW RQO\ FRQVLGHUHG WKH
HQYLURQPHQWDOHIIHFWVRIHDFKRIWKHHLJKWDOWHUQDWLYHVQRQH
RIZKLFKSURSRVHGXQOLPLWHGVXJDUPDSOHVHOHFWLRQKDUYHVW
,IWKHGLVWULFWFRXUWRSLQLRQLVDOORZHGWRVWDQGWKHSODLQWLIIV
DUJXHWKHQWKH)RUHVW6HUYLFHFDQSHUPLWHYHU\VXJDUPDSOH
WREHFXWUHJDUGOHVVRIWKHPDQDJHPHQWDUHDRUWKHLPSDFWWR
ZLOGOLIHVRLOVYHJHWDWLRQRUZDWHUUHVRXUFHV
1R 1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
,%DFNJURXQG
7KH1DWLRQDO)RUHVW0DQDJHPHQW$FWRIPDQGDWHV
WKDW HYHU\ QDWLRQDO IRUHVW KDYH D SURJUDPPDWLF GRFXPHQW
FDOOHGDIRUHVWSODQWR³JXLGHDOOQDWXUDOUHVRXUFHPDQDJHPHQW
DFWLYLWLHV´LQFOXGLQJXVHRIWKHODQGIRU³RXWGRRUUHFUHDWLRQ
UDQJHWLPEHUZDWHUVKHGZLOGOLIHDQGILVKDQGZLOGHUQHVV´
86& H 7KH IRUHVW SODQ LGHQWLILHV WKH
UHVRXUFH PDQDJHPHQW SUDFWLFHV WKH SURMHFWHG OHYHOV RI
SURGXFWLRQ RI JRRGV DQG VHUYLFHV DQG WKH ORFDWLRQ ZKHUH
YDULRXV W\SHV RI UHVRXUFH PDQDJHPHQW PD\ RFFXU
,PSOHPHQWDWLRQ RI WKH IRUHVW SODQ LV DFKLHYHG WKURXJK
LQGLYLGXDO VLWHVSHFLILF SURMHFWV DQG DOO SURMHFWV PXVW EH
FRQVLVWHQWZLWKWKHIRUHVWSODQ6HH86& L
&)5 7R HQVXUH WKDW IRUHVW SODQV UHPDLQ LQ
FRPSOLDQFH ZLWK WKH )RUHVW $FW WKH )RUHVW 6HUYLFH PXVW
HVWDEOLVK D PRQLWRULQJ VWUDWHJ\ 6HH &)5
)XUWKHUPRUH WKH VWDWXWH UHTXLUHV WKH )RUHVW 6HUYLFH WR
³UHYLVH´WKHSODQ³ZKHQWKH6HFUHWDU\ILQGVFRQGLWLRQVLQD
>)RUHVW@KDYHVLJQLILFDQWO\FKDQJHG´86& I
)RUHVW SODQV DV ZHOO DV VLWHVSHFLILF SURSRVDOV PXVW EH
SUHSDUHGLQFRPSOLDQFHZLWK1DWLRQDO(QYLURQPHQWDO3ROLF\
$FW86&DQGWKHUHJXODWLRQVFRQWHPSODWHWKH
SUHSDUDWLRQ RI DQ DSSURSULDWH (QYLURQPHQWDO ,PSDFW
6WDWHPHQW DV GLUHFWHG E\ WKH 3ROLF\ $FW DV SDUW RI DQ
LQWHJUDWHG SURFHVV 86& J &)5
E )HGHUDO UHJXODWLRQV SHUPLW DQ DJHQF\ WKDW LV
SODQQLQJDPDMRUIHGHUDODFWLRQWRFRQGXFWDOHVVH[KDXVWLYH
(QYLURQPHQWDO $VVHVVPHQW WR GHWHUPLQH ZKHWKHU WKH
SURSRVHGDFWLRQZLOO³VLJQLILFDQWO\DIIHFW´WKHHQYLURQPHQW
DQG WKXV ZKHWKHU DQ (QYLURQPHQWDO ,PSDFW 6WDWHPHQW LV
UHTXLUHG &)5 E ,I WKH
(QYLURQPHQWDO$VVHVVPHQWUHYHDOVWKDWWKHSURSRVHGDFWLRQ
ZLOO VLJQLILFDQWO\ DIIHFW WKH HQYLURQPHQW WKH DJHQF\ PXVW
SUHSDUH DQ (QYLURQPHQWDO ,PSDFW 6WDWHPHQW 6HH LG
&RQYHUVHO\LIWKHDJHQF\PDNHVD)LQGLQJRI1R6LJQLILFDQW
,PSDFW &)5 H WKHQ LW LV QRW UHTXLUHG WR
SUHSDUHDQ(QYLURQPHQWDO,PSDFW6WDWHPHQW
-- 3 of 6 --
1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
1R
8QHYHQDJHG PDQDJHPHQW HQFRPSDVVHV ERWK VLQJOH WUHH VHOHFWLRQ
DQG JURXS VHOHFWLRQ DQG UHVXOWV LQ VWDQGV FRQWDLQLQJ WUHHV RI GLIIHUHQW
DJHV *URXS VHOHFWLRQ LQYROYHV FXWWLQJ VPDOO SDWFKHV RI WUHHV ZKLOH VLQJOH
WUHH VHOHFWLRQ LQYROYHV VHOHFWLQJ SDUWLFXODU WUHHV IRU FXWWLQJ 6HH 6LHUUD
&OXE Y 3HWHUVRQ )G WK &LU FLWLQJ &)5
7KH2WWDZD1DWLRQDO)RUHVWLVORFDWHGRQ0LFKLJDQ¶V8SSHU
3HQLQVXOD,QWKH)RUHVW6HUYLFHLVVXHGLWV)RUHVW3ODQ
DQGDFFRPSDQ\LQJ(QYLURQPHQWDO,PSDFW6WDWHPHQWIRUWKH
2WWDZD 1DWLRQDO )RUHVW 7KH 3ODQ GLYLGHV WKH )RUHVW LQWR
VL[WHHQPDQDJHPHQWDUHDV7KH5ROOLQJ7KXQGHUSURMHFWWKH
VXEMHFWRIWKLVOLWLJDWLRQLVORFDWHGZLWKLQ$UHD7KH3ODQ
VWDWHVWKDWWKHGHVLUHGIXWXUHFRQGLWLRQRIWKHODQGLQ$UHD
LVDFRQWLQXRXVFDQRS\RIQRUWKHUQKDUGZRRGVZLWKRFFDVLRQDO
SHUPDQHQW XSODQG RSHQLQJV DQG WKH 3ODQ FRQWHPSODWHV
ORJJLQJ LQ $UHD ZLWK DQ HPSKDVLV RQ ³XQHYHQDJHG
PDQDJHPHQW´7KH3ODQHQYLVLRQVDQDYHUDJHDQQXDOKDUYHVW
ZLWKLQ $UHD RI DFUHV E\ FOHDUFXWWLQJ DQG
DFUHV E\ VHOHFWLRQ FXWWLQJ 6HOHFWLRQ FXWWLQJ LQYROYHV
UHPRYLQJLQGLYLGXDOWUHHVLQDVFDWWHUHGSDWWHUQIURPDODUJH
DUHDZKLOHPDLQWDLQLQJWKHIRUHVW¶VFDQRS\6HOHFWLRQFXWWLQJ
IRVWHUVDIRUHVWRIWUHHVWKDWGLIIHUPDUNHGO\LQDJHDQGRUVL]H
%\FRQWUDVWFOHDUFXWWLQJLQYROYHVUHPRYLQJDOOFRPPHUFLDO
VL]HGWUHHVIURPDQDUHDLQRQHKDUYHVW
2Q'HFHPEHUWKH)RUHVW6HUYLFHLVVXHGD6FRSLQJ
/HWWHUZKHUHLQLWSURSRVHGWKH5ROOLQJ7KXQGHUWLPEHUVDOH
7KHOHWWHUSURSRVHGDGGLWLRQDOFOHDUFXWWLQJRQDFUHVRI
DVSHQVWDQGVDQGVHOHFWLRQFXWWLQJRQDFUHVRIPL[HG
QRUWKHUQKDUGZRRGVLQ$UHD
7KH )RUHVW 6HUYLFH WKHQ XQGHUWRRN DQ (QYLURQPHQWDO
$VVHVVPHQW WKDW HYDOXDWHG WKH HIIHFWV RI WKH SURSRVHG
DOWHUQDWLYHVRQQXPHURXVUHVRXUFHV,Q0D\WKH)RUHVW
6HUYLFH LVVXHG WKH GUDIW (QYLURQPHQWDO $VVHVVPHQW WR WKH
SXEOLF IRU FRPPHQW 3ODLQWLIIV REMHFWHG WR WKH SURSRVHG
SURMHFWEHFDXVHWKHVHOHFWLRQFXWWLQJZLWKLQ$UHDDOUHDG\
DYHUDJHG PRUH WKDQ DFUHV DQQXDOO\ ZKLOH WKH 3ODQ
1R 1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
7KH UHJXODWLRQV VSHFLI\ WKDW PRQLWRULQJ LQIRUPDWLRQ LV WR EH XVHG WR
GHWHUPLQH DPRQJ RWKHU WKLQJV LI NH\ DVVXPSWLRQV LGHQWLILHG IRU
PRQLWRULQJ LQ WKH 3ODQ UHPDLQ YDOLG DQG WKH 3ODQ RU VLWHVSHFLILF GHFLVLRQV
QHHG WR EH PRGLILHG 6HH &)5 G %\ WKH )RUHVW 6HUYLFH¶V
DGPLVVLRQ LW KDV UHVSRQGHG WR SXEOLF FRQFHUQ DERXW FOHDUFXWWLQJ E\
PHLVWKDWWKLVSODQGRHVQRWKDYHDVLWVREMHFWLYHVLPSO\
SURGXFLQJDQXPEHURIERDUGIHHWRIZRRGIRUVDZPLOOV
,WDOVRKDVDVLWVREMHFWLYHSURWHFWLQJWKHZDWHUTXDOLW\
WKH VRLO TXDOLW\ WKH YHJHWDWLRQ WKH ELUGV WKH ILVK WKH
GHHUZKDWHYHUHOVHLVLQWKHUHVRWRVLPSO\VD\ZHFDQJR
LQDQGGRZKDWHYHUZHZDQWDVORQJDVZHGRQ¶WH[FHHG
DFHUWDLQQXPEHURIERDUGIHHWZRXOGVHHPWRPHWRPDNH
SHUFHQWRIDOORIWKHDQDO\VLVLQWKHYHUELDJHLQWKH
SODQXQQHFHVVDU\VXUSOXVDJH
,Q LWV 5HFRUG RI 'HFLVLRQ WKH )RUHVW 6HUYLFH QRWHG WKDW
³>W@KHPL[RIXQHYHQDJHGDQGHYHQDJHGPDQDJHPHQWLQWKH
)RUHVW3ODQZLOOUHVXOWLQPXOWLSOHXVHEHQHILWVLQFOXGLQJD
YDULHW\ RI ZLOGOLIH KDELWDWV DQG YLVXDO UHVRXUFHV DQG ZLOO
FUHDWH D PRUH GLYHUVH IRUHVW ZKLOH SURYLGLQJ IRU KLJKHU
TXDQWLW\ DQG TXDOLW\ RI KDUGZRRG WLPEHU LQ WKH IXWXUH´
%HFDXVHWKH3ODQDQGWKH(QYLURQPHQWDO,PSDFW6WDWHPHQW
FRQVLGHUHG QRW RQO\ WKH WRWDO DPRXQW RI WLPEHU WR EH
KDUYHVWHG EXW WKH ORFDWLRQV DQG PHWKRGV RI WKDW KDUYHVW
FKDQJLQJWKHPL[RIKDUYHVWPHWKRGVHQWDLOVDGHYLDWLRQIURP
WKH3ODQ
)LQDOO\ WKH LQFOXVLRQ RI WKH VXJDU PDSOH VHQWHQFH LWVHOI
LQGLFDWHVWKDWWKHDFUHDJHSURMHFWLRQVVKRXOGEHFRQVWUXHGDV
OLPLWDWLRQV ,I WKH DFUHDJH ILJXUH GRHV QRW VHUYH DV D
OLPLWDWLRQWKHQWKHUHZRXOGEHQRQHHGWRLQFOXGHDVWDWHPHQW
WKDWWKHUHLVQRUHVWULFWLRQRQDFUHDJHIRUVHOHFWLRQFXWWLQJRI
VXJDUPDSOHV
$VHYLGHQFHGE\WKHPRQLWRULQJDQGHYDOXDWLRQUHSRUWWKH
QXPEHU RI DFUHV KDUYHVWHG E\ VHOHFWLRQ FXWWLQJ KDV JUHDWO\
H[FHHGHG WKDW DPRXQW HQYLVLRQHG LQ WKH 3ODQ DQG LWV
(QYLURQPHQWDO ,PSDFW 6WDWHPHQW %HFDXVH VLWHVSHFLILF
-- 4 of 6 --
1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
1R
SURGXFWLRQ LQ WKH )RUHVW EXW LQFRUUHFWO\ UHOLHV RQ WKH
$OORZDEOH 6DOH 4XDQWLW\ DV WKH RQO\ OLPLW 3ODLQWLIIV
HPSKDVL]HWKHGLVWLQFWLRQEHWZHHQWLPEHUSURGXFWLRQDQGWKH
DFWRIORJJLQJ7LPEHUSURGXFWLRQLVRQHRIWKHPXOWLSOHXVHV
SURYLGHGE\DQDWLRQDOIRUHVWZKHUHDVORJJLQJLVWKHPHWKRG
RIDFKLHYLQJWKDWXVH:KLOH$OORZDEOH6DOH4XDQWLW\LVD
OLPLW RQ WLPEHU SURGXFWLRQ WKH DFUHDJH ILJXUHV SURYLGH
SURWHFWLRQ IURP ORJJLQJ DFWLYLW\ IRU UHVRXUFHV RWKHU WKDQ
WLPEHU
,QRXUYLHZWKH$OORZDEOH6DOH4XDQWLW\ZDVQRWPHDQWWR
EH WKH RQO\ OLPLWDWLRQ RQ WLPEHU SURGXFWLRQ LQ WKH )RUHVW
$OORZDEOH 6DOH 4XDQWLW\ GRHV QRW PHDVXUH WKH LPSDFWV RI
ORJJLQJRQZLOGOLIHYHJHWDWLRQVRLOVDQGZDWHUTXDOLW\DV
UHTXLUHG E\ WKH )RUHVW $FW 6HH 86& H
%HIRUHDGRSWLQJWKH3ODQWKH)RUHVW6HUYLFHFRQVLGHUHGHLJKW
DOWHUQDWLYHVDORQJZLWKWKHHQYLURQPHQWDOLPSDFWVRIHDFK
DOWHUQDWLYH 7KH DOWHUQDWLYHV UDQJHG IURP OHVVHU WR JUHDWHU
TXDQWLWLHV RI WLPEHU SURGXFWLRQ ZKLOH XWLOL]LQJ GLIIHUHQW
PHWKRGV RI ORJJLQJ 7KH )RUHVW 6HUYLFH VHOHFWHG RQH
DOWHUQDWLYH WR LPSOHPHQW EHFDXVH LW FRQFOXGHG WKDW WKH
DOWHUQDWLYHSURYLGHGWKHDSSURSULDWHFRPELQDWLRQRILPSURYHG
ZLOGOLIH KDELWDW YHJHWDWLYH FRQGLWLRQV DQG UHFUHDWLRQ
RSSRUWXQLWLHV DV ZHOO DV WKH SUHIHUUHG PL[ RI HYHQ DQG
XQHYHQDJHGORJJLQJ
7KH)RUHVW6HUYLFH¶V FXUUHQWSRVLWLRQWKDWWKHERDUGIHHW
PD[LPXP LV WKH RQO\ OLPLWDWLRQ RQ WKH WLPEHU KDUYHVW
FRQWUDGLFWVVWDWHPHQWVLQFOXGHGLQWKH(QYLURQPHQWDO,PSDFW
6WDWHPHQW)RUH[DPSOHWKH)RUHVW6HUYLFHQRWHGWKDW³>W@KH
PL[ RI HYHQDJHG DQG XQHYHQDJHG PDQDJHPHQW ZLOO DOVR
KDYHDQLPSDFWRQRWKHURXWSXWVDQGHIIHFWVVXFKDVYHJHWDWLYH
GLYHUVLW\ ZLOGOLIH KDELWDW UHFUHDWLRQ RSSRUWXQLWLHV YLVXDO
TXDOLW\YLDEOHSRSXODWLRQVRIZLOGOLIHKDUGZRRGVDZWLPEHU
SURGXFWLRQDQGKDUGZRRGSXOSZRRGSURGXFWLRQ´$VWKH
GLVWULFWMXGJHUHFRJQL]HGDWWKHKHDULQJEHORZ
7KHUHDVRQWKDW>WKH$OORZDEOH6DOH4XDQWLW\DVWKHOLPLW
RQORJJLQJ@GRHVQ¶WPDNHYHU\PXFKLQWXLWLYHVHQVHWR
1R 1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
$FFRUGLQJ WR WKH )RUHVW 6HUYLFH WKH SURMHFW ZLOO LQYROYH RQO\ WKH
FOHDUFXWWLQJ RI DFUHV DQG VHOHFWLRQ FXWWLQJ RI DSSUR[LPDWHO\ DFUHV
7KH SDUWLHV ERWK UHIHU WR WKLV VHQWHQFH DV WKH ³VXJDU PDSOH
VHQWHQFH´
HQYLVLRQHG RQO\ DFUHV $IWHU FRQVLGHULQJ DQG
UHVSRQGLQJ WR WKH SXEOLF FRPPHQWV 'LVWULFW 5DQJHU -HII
/DUVHQ LVVXHG D 'HFLVLRQ 1RWLFH DQG D )LQGLQJ RI 1R
6LJQLILFDQW,PSDFW$PRQJRWKHUWKLQJVWKH'HFLVLRQ1RWLFH
VSHFLILFDOO\DXWKRUL]HGDFUHVRILQGLYLGXDOWUHHVHOHFWLRQ
FXWWLQJ RI QRUWKHUQ KDUGZRRG WUHHV DV ZHOO DV DFUHV RI
FOHDUFXWWLQJWRUHJHQHUDWHVRRQWREHRYHUPDWXUHDVSHQWUHHV
ZKLFKZHUHEHFRPLQJVXVFHSWLEOHWRLQVHFWVDQGGLVHDVH
3ODLQWLIIVILOHGDWLPHO\DGPLQLVWUDWLYHDSSHDORIWKH5ROOLQJ
7KXQGHUGHFLVLRQSXUVXDQWWR&)52Q0D\
WKH$SSHDO'HFLGLQJ2IILFHUXSKHOG/DUVHQ¶VGHFLVLRQ
RQ5ROOLQJ7KXQGHU
2Q -DQXDU\ WKH SODLQWLIIV ILOHG D FRPSODLQW LQ
IHGHUDO FRXUW FKDOOHQJLQJ WKH )RUHVW 6HUYLFH¶V GHFLVLRQ WR
SHUPLWWKH5ROOLQJ7KXQGHUSURMHFW7KHUHDIWHUWKH)RUHVW
6HUYLFHZLWKGUHZWZRRIWKHWLPEHUVDOHVRULJLQDOO\LQYROYHG
LQ WKH SURMHFW 2Q 0D\ WKH SODLQWLIIV ILOHG DQ
DPHQGHG FRPSODLQW FKDOOHQJLQJ WKH UHPDLQLQJ WZR WLPEHU
VDOHV,QWKHDPHQGHGFRPSODLQWWKHSODLQWLIIVDOOHJHGWKDW
WKH5ROOLQJ7KXQGHU'HFLVLRQ1RWLFHDQGWKH)LQGLQJRI1R
6LJQLILFDQW ,PSDFW DUH LQFRQVLVWHQW ZLWK WKH 3ODQ DQG
WKHUHIRUHLQYLRODWLRQRIWKH)RUHVW$FWDQGWKH3ROLF\$FW
2QFURVVPRWLRQVIRUVXPPDU\MXGJPHQWWKHGLVWULFWFRXUW
UXOHGLQIDYRURIWKH)RUHVW6HUYLFHRQDOOFRXQWV7KHGLVWULFW
FRXUWJDYHDEURDGLQWHUSUHWDWLRQWRODQJXDJHLQWKHJHQHUDO
VHFWLRQ RI WKH 3ODQ RQ YHJHWDWLRQ PDQDJHPHQW )RU VXJDU
PDSOHV WKH ODQJXDJH SURYLGHV WKDW ³>I@RU VWDQGV PDQDJHG
XQHYHQDJHGWKHUHLVQRUHVWULFWLRQRQDFUHDJHRIVHOHFWLRQ
FXWV ZLWKLQ DQ\ RQH \HDU SHULRG´ 7KH GLVWULFW FRXUW
LQWHUSUHWHGWKLVODQJXDJHDVH[HPSWLQJVHOHFWLRQFXWWLQJRI
-- 5 of 6 --
1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
1R
VXJDU PDSOHV IURP DQ\ DFUHDJH OLPLWDWLRQ 7KHUHIRUH WKH
FRXUWFRQFOXGHGWKDWLWQHHGQRWGHFLGHZKHWKHUWKHDFUHDJH
SURMHFWLRQVLQWKH3ODQVHWOLPLWVRQWKHDQQXDOKDUYHVWLQJE\
VHOHFWLRQFXWWLQJ5HO\LQJRQWKHPD[LPRILQWHUSUHWDWLRQWKDW
VSHFLILF ODQJXDJH ZLWKLQ D GRFXPHQW VKRXOG FRQWURO RYHU
JHQHUDO ODQJXDJH WKH FRXUW FRQFOXGHG WKDW WKH DFUHDJH
DYHUDJHIRUVHOHFWLRQFXWWLQJLQ$UHDZDVJHQHUDOODQJXDJH
DERXW WKH KDUYHVWLQJ RI DOO WUHHV DQG WKH 3ODQ¶V VWDWHPHQW
DERXWXQHYHQDJHGPDQDJHPHQWRIVXJDUPDSOHVLVVSHFLILF
ODQJXDJHDERXWDSDUWLFXODUNLQGRIWUHH7KHGLVWULFWFRXUW
FRQFOXGHG ³>L@I WKH DFUH DYHUDJH FRQWUROOHG WKHQ LW
ZRXOGPDNHQRVHQVHWRVWDWHWKDWXQOLPLWHGVHOHFWLRQFXWWLQJ
RI VXJDU PDSOHV FRXOG RFFXU´ 7R DYRLG VXFK DQ
LQFRQVLVWHQF\ WKH GLVWULFW FRXUW UHDVRQHG WKDW WKH 3ODQ¶V
ODQJXDJH DERXW XQHYHQDJHG PDQDJHPHQW RI VXJDU PDSOHV
ZDV DQ H[FHSWLRQ WR DQ\ DFUHDJH OLPLWDWLRQ LQ $UHD
%HFDXVH WKH FRXUW IRXQG WKDW WKH SODLQWLIIV KDG QRW
GHPRQVWUDWHGWKDWWKHDGGLWLRQDOVHOHFWLRQFXWWLQJLQ$UHD
LQYROYHGWUHHVRWKHUWKDQVXJDUPDSOHVWKHFRXUWFRQFOXGHG
WKDWWKHSODLQWLIIVKDGQRWVKRZQWKDWWKHVHOHFWLRQFXWWLQJLQ
WKH)RUHVWYLRODWHGWKHWHUPVRIWKH)RUHVW3ODQ
7KHSODLQWLIIVWKHQILOHGWKLVWLPHO\DSSHDO2QDSSHDOZH
PD\³VHWDVLGHWKHDJHQF\GHWHUPLQDWLRQRQO\LILWLVDUELWUDU\
FDSULFLRXV DQG DEXVH RI GLVFUHWLRQ RU RWKHUZLVH QRW LQ
DFFRUGDQFHZLWKWKHODZ´6LHUUD&OXEY6ODWHU)G
WK&LU FLWLQJ86&
,,'LVFXVVLRQ
3ODLQWLIIV¶DUJXPHQWVFDQEHVXPPDUL]HGDVIROORZV WKH
DFUHDJHSURMHFWLRQVFRQWDLQHGLQWKH)RUHVW3ODQVKRXOGEH
FRQVWUXHGDVDOLPLWDWLRQRQORJJLQJLQWKH)RUHVWDQG WKH
VHQWHQFH LQ WKH )RUHVW 3ODQ ZKLFK VWDWHV WKDW WKHUH LV QR
OLPLWDWLRQRQWKHDFUHVZKHUHVXJDUPDSOHVFDQEHKDUYHVWHG
ZKLFKZDVWKHEDVLVRIWKHGLVWULFWFRXUW¶VJUDQWRIVXPPDU\
MXGJPHQWWRWKHGHIHQGDQWVZDVLPSURSHUO\LQFOXGHGLQWKH
3ODQEHFDXVHLWZDVQHYHUVXEMHFWHGWR3ROLF\$FWDQDO\VLV
:HZLOODGGUHVVWKHSODLQWLIIV¶FRQWHQWLRQVLQWXUQ
1R 1RUWKZRRGVHWDOY8QLWHG
6WDWHV)RUHVW6HUYHWDO
$OORZDEOH 6DOH 4XDQWLW\ LV WKH ³FHLOLQJ RQ WKH WRWDO DPRXQW RI ZRRG
WKDW FDQ EH FXW´ 2KLR )RUHVWU\ $VV¶Q Y 6LHUUD &OXE 86
3ODLQWLIIVDVVHUWWKDWWKHDSSURYDORIWKH5ROOLQJ7KXQGHU
SURMHFWYLRODWHVWKH)RUHVW$FWEHFDXVHWKH)RUHVW6HUYLFHLV
DOUHDG\ SHUPLWWLQJ VHOHFWLRQ ORJJLQJ LQ $UHD DW D UDWH
DOPRVW WZLFH DV JUHDW DV DQG LQFRQVLVWHQW ZLWK WKH UDWH
SURMHFWHGLQWKH3ODQ$Q\DGGLWLRQDOKDUYHVWFDQVHUYHRQO\
WR H[DFHUEDWH WKH H[FHVVLYH QXPEHU RI DFUHV KDUYHVWHG E\
VHOHFWLRQFXWWLQJ
7KH)RUHVW6HUYLFHFRXQWHUVWKDWLWVDSSURYDORIWKH5ROOLQJ
7KXQGHUSURMHFWZDVSURSHUDQGWKDWWLPEHUKDUYHVWLQJZLWKLQ
WKH)RUHVWLVQRWH[FHHGLQJWKHDPRXQWIRUHVHHQLQWKH)RUHVW
3ODQ7KH)RUHVW3ODQVHWWKH$OORZDEOH6DOH4XDQWLW\IRU
WKH)RUHVWDWPLOOLRQERDUGIHHWSHUWHQ\HDUSHULRG7KH
SDUWLHVDJUHHWKDWWKHWLPEHUKDUYHVWZLWKLQWKH)RUHVWVWD\HG
ZHOO ZLWKLQ WKH $OORZDEOH 6DOH 4XDQWLW\ ZLWK DQ DYHUDJH
DQQXDOKDUYHVWYROXPHRIPLOOLRQERDUGIHHW
7KH)RUHVW6HUYLFHDFNQRZOHGJHVWKDWVLQFHWKHDGRSWLRQ
RI WKH 3ODQ LQ LQ UHVSRQVH WR SXEOLF FRQFHUQ LW KDV
UHGXFHGWKHQXPEHURIDFUHVKDUYHVWHGE\HYHQDJHGPHWKRGV
FOHDUFXWWLQJ LQ IDYRU RI H[SDQGHG XVH RI XQHYHQDJHG
PDQDJHPHQW VSHFLILFDOO\ VHOHFWLRQ FXWWLQJ 7KH )RUHVW
6HUYLFHDUJXHVWKDWWKHFRUUHVSRQGLQJLQFUHDVHLQWKHQXPEHU
RI KDUYHVWHG DFUHV RYHU WKH SURMHFWLRQV FRQWDLQHG LQ
7DEOHELVLUUHOHYDQWWRWKHGHWHUPLQDWLRQRIZKHWKHUWKH
5ROOLQJ7KXQGHUVDOHYLRODWHVWKH3ODQ,QVWHDG³7DEOHE
LV D SURMHFWLRQ RI WKH QXPEHU RI DFUHV OLNHO\ WR EH
WRXFKHG E\ ORJJLQJ LQ RUGHU WR JHQHUDWH WKH $64 IRU WKH
)RUHVW LW LV QRW D IL[HG OLPLW RQ DFUHDJH EXW UDWKHU D
SURMHFWLRQEDVHGXSRQPHWKRGV´,QWKH)RUHVW
6HUYLFH DVVHUWV WKH VKLIW DZD\ IURP FOHDUFXWWLQJ WRZDUG
VHOHFWLRQFXWWLQJZDVQRWDQWLFLSDWHG
3ODLQWLIIVUHSO\WKDWWKH)RUHVW6HUYLFHFRUUHFWO\LGHQWLILHV
WKH $OORZDEOH 6DOH 4XDQWLW\ DV WKH FHLOLQJ IRU WLPEHU
-- 6 of 6 --