03a0141p.06

7KH +RQRUDEOH 0\URQ + %ULJKW 6HQLRU &LUFXLW -XGJH RI WKH 8QLWHG
6WDWHV &RXUW RI $SSHDOV IRU WKH (LJKWK &LUFXLW 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
081&,( 32:(5 352'8&76
,1&
3ODLQWLII$SSHOODQW
Y
81,7(' 7(&+12/2*,(6
$872027,9( ,1&
'HIHQGDQW$SSHOOHH
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL
1R²+HUPDQ-:HEHU'LVWULFW-XGJH
$UJXHG0DUFK
'HFLGHGDQG)LOHG0D\
%HIRUH&2/(*,/0$1DQG%5,*+7&LUFXLW-XGJHV
0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH
1R
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(''DYLG3.DPS:+,7(*(7*(< 0(<(5
&LQFLQQDWL 2KLR IRU $SSHOODQW 'RQDOG - 0RRQH\ -U
8/0(5 %(51( &LQFLQQDWL 2KLR IRU $SSHOOHH
21 %5,() 'DYLG 3 .DPS :+,7( *(7*(<
0(<(5&LQFLQQDWL2KLRIRU$SSHOODQW-RVHSK37KRPDV
8/0(5 %(51(&LQFLQQDWL2KLRIRU$SSHOOHH
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
5 *8< &2/( -5 &LUFXLW -XGJH 3ODLQWLII$SSHOODQW
0XQFLH3RZHU3URGXFWV,QF ³0XQFLH´ DSSHDOVVXPPDU\
MXGJPHQW JUDQWHG IRU 'HIHQGDQW$SSHOOHH 8QLWHG
7HFKQRORJLHV$XWRPRWLYH,QF ³87$´ LQWKLVGLYHUVLW\VXLW
IRU FRQWULEXWLRQ 8VLQJ 2KLR¶V FKRLFHRIODZ UXOHV WKH
8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH6RXWKHUQ'LVWULFWRI2KLR
FRQFOXGHG WKDW ,QGLDQD ODZ DSSOLHG WR 0XQFLH¶V FODLP
%HFDXVH,QGLDQDGRHVQRWSHUPLWDFWLRQVIRUFRQWULEXWLRQWKH
GLVWULFW FRXUW WKHQ JUDQWHG 87$¶V PRWLRQ IRU VXPPDU\
MXGJPHQWRQ0XQFLH¶VFRQWULEXWLRQFODLP0XQFLHDUJXHV
WKDWHYHQXQGHU2KLRFKRLFHRIODZUXOHV2KLRODZZKLFK
UHFRJQL]HVFODLPVIRUFRQWULEXWLRQVKRXOGDSSO\LQVWHDGRI
,QGLDQDODZ)RUWKHUHDVRQVVWDWHGEHORZZH$)),50WKH
GHFLVLRQRIWKHGLVWULFWFRXUW
,%$&.*5281'
$)DFWXDO%DFNJURXQG
0XQFLHVHOOVVSHFLDOL]HGSDUWVWRWKHWUXFNLQJLQGXVWU\,Q
LQFRQVXOWDWLRQZLWK$PRV3ODVWLFV ³$PRV´ 0XQFLH
GHVLJQHG D SRO\HWK\OHQH K\GUDXOLF WDQN )URP XQWLO
WKH WDQN ZDV PDQXIDFWXUHG E\ $PRV DW LWV 5RWRFDVW
3ODQWLQ,QGLDQDDQGVHQWWR0XQFLH¶VIDFLOLWLHVLQ,QGLDQDIRU

-- 1 of 7 --

1R 0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH

LQVWDOODWLRQRIGLIIXVHUVDQGVXSSO\SRUWV,Q0XQFLH
ZRUNLQJZLWKHQJLQHHUVDWWKH5RWRFDVW3ODQWUHGHVLJQHGWKH
WDQNDQGWKHUHE\HOLPLQDWHGWKHQHHGWRLQVWDOOWKHGLIIXVHUV
DQGVXSSO\SRUWV,Q$OPD3ODVWLFV&RPSDQ\SXUFKDVHG
WKH5RWRFDVW3ODQWDQGLQ87$DFTXLUHGDOOWKHVWRFNRI
$OPD3ODVWLFV$FFRUGLQJWRWKHWHUPVRIWKH6WRFN3XUFKDVH
$JUHHPHQW87$ZDVOLDEOHIRUDQ\SURGXFWVOLDELOLW\FODLPV
DIWHU
,Q:LOOLDP%RZOLQJZDVVHYHUHO\DQGSHUPDQHQWO\
LQMXUHGLQ&LQFLQQDWL2KLRZKLOHGULYLQJEHKLQGDWUXFNRQ
ZKLFKRQHRI0XQFLH¶VK\GUDXOLFWDQNVZDVPRXQWHG7KH
WDQNPDQXIDFWXUHGDWWKH5RWRFDVW3ODQWVRPHWLPHEHWZHHQ
DQGVSLOOHGK\GUDXOLFIOXLGRQWRWKHKLJKZD\7KH
ZHW KLJKZD\ VXUIDFH FDXVHG %RZOLQJ¶V FDU WR VNLG RXW RI
FRQWURODQGFUDVK,Q%RZOLQJILOHGDFRPSODLQWLQ2KLR
VWDWHFRXUWDJDLQVWWKHGULYHURIWKHWUXFNWKHRZQHURIWKH
WUXFN DQG 0XQFLH DVVHUWLQJ FODLPV IRU GHVLJQ GHIHFW
PDQXIDFWXULQJGHIHFWDQGIDLOXUHWRZDUQ%RZOLQJVRXJKW
ERWKFRPSHQVDWRU\DQGSXQLWLYHGDPDJHVDQGWKHWULDOZDV
ELIXUFDWHG WR FRQVLGHU ILUVW WKH LVVXHV RI OLDELOLW\ DQG
FRPSHQVDWRU\ GDPDJHV DQG VHFRQG WKH LVVXH RI SXQLWLYH
GDPDJHV 2Q 0D\ D MXU\ UHWXUQHG D YHUGLFW IRU
%RZOLQJ LQ WKH DPRXQW RI IRU FRPSHQVDWRU\
GDPDJHVILQGLQJWKHGULYHURZQHUDQG0XQFLHMRLQWO\DQG
VHYHUDOO\OLDEOHDQGDSSRUWLRQLQJVHYHQW\ILYHSHUFHQWRIWKH
GDPDJHVWR0XQFLHDQGWZHQW\ILYHSHUFHQWWRWKHGULYHUDQG
RZQHURIWKHWUXFN$SDUWLDOMXGJPHQWZDVHQWHUHGE\WKH
GLVWULFWFRXUWRQ0D\,QDQHIIRUWWRDYRLGWKHQH[W
VWDJH RI WKH WULDO UHJDUGLQJ %RZOLQJ¶V FODLP IRU SXQLWLYH
GDPDJHVWKHSDUWLHVVHWWOHGWKHFDVHIRUDWRWDORI³
LQFRPSHQVDWRU\GDPDJHV´0XQFLHLQGLYLGXDOO\DQGWKURXJK
LWVLQVXUHUVDJUHHGWRSD\DQGWKHUHVW
ZDVSDLGE\WKHGULYHUDQGRZQHURIWKHWUXFN,QFRQQHFWLRQ
ZLWKWKHVHWWOHPHQW%RZOLQJVLJQHGD³)XOO5HOHDVHRI$OO
&ODLPVDQG'HPDQGV´RQ-XQHUHOHDVLQJ0XQFLHDQG
LWVLQVXUHUIURPDQ\IXWXUHOLDELOLW\
0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH
1R
%3URFHGXUDO+LVWRU\
2Q 'HFHPEHU DIWHU %RZOLQJ ILOHG KLV ODZVXLW
0XQFLHDVVHUWHGWKLUGSDUW\FODLPVDJDLQVW87$+RZHYHU
RQ 'HFHPEHU 0XQFLH YROXQWDULO\ GLVPLVVHG LWV
FODLPV DJDLQVW 87$ DV D WKLUGSDUW\ GHIHQGDQW 2Q
)HEUXDU\DIWHUWKHWULDODQGVHWWOHPHQW0XQFLHILOHG
D FRPSODLQW DJDLQVW 87$ LQ 2KLR VWDWH FRXUW VHHNLQJ
FRQWULEXWLRQDQGRULQGHPQLILFDWLRQ87$UHPRYHGWKHFDVH
WR IHGHUDO GLVWULFW FRXUW RQ 0DUFK EDVHG RQ WKH
GLYHUVLW\RIWKHSDUWLHV2Q-XO\87$ILOHGWZR
PRWLRQV DPRWLRQWRELIXUFDWHWKHLVVXHRI0XQFLH¶VULJKW
WRFRQWULEXWLRQIURPWKHXQGHUO\LQJSURGXFWOLDELOLW\LVVXHV
DQG D PRWLRQ WR VWD\ GLVFRYHU\ UHJDUGLQJ WKH LVVXH RI
SURGXFWOLDELOLW\%RWKPRWLRQVZHUHJUDQWHGRQ2FWREHU

2Q 0DUFK 87$ ILOHG D PRWLRQ IRU VXPPDU\
MXGJPHQW RQ 0XQFLH¶V FRQWULEXWLRQ DQG LQGHPQLILFDWLRQ
FODLPV,QKROGLQJWKDW,QGLDQDUDWKHUWKDQ2KLRODZDSSOLHG
WR WKH FDVH WKH GLVWULFW FRXUW IRXQG WKDW ,QGLDQD GRHV QRW
UHFRJQL]HFODLPVIRUFRQWULEXWLRQDPRQJMRLQWWRUWIHDVRUVDQG
JUDQWHG LQ SDUW 87$¶V PRWLRQ IRU VXPPDU\ MXGJPHQW
+RZHYHU WKH GLVWULFW FRXUW GHQLHG 87$¶V PRWLRQ IRU
VXPPDU\MXGJPHQWRQ0XQFLH¶VLQGHPQLILFDWLRQFODLPDQG
OLIWHG WKH SUHYLRXVO\ JUDQWHG VWD\ RI GLVFRYHU\ 'LVFRYHU\
WKHQ UHYHDOHG WKDW 0XQFLH GLG QRW KDYH D YDOLG FODLP IRU
LQGHPQLILFDWLRQ DQG 0XQFLH YROXQWDULO\ GLVPLVVHG LWV
LQGHPQLILFDWLRQFODLPRQ2FWREHU0XQFLHILOHGWKLV
WLPHO\QRWLFHRIDSSHDOIURPWKHJUDQWRIVXPPDU\MXGJPHQW
RQLWVFRQWULEXWLRQFODLPRQ2FWREHU
,,',6&866,21
$6WDQGDUGRIUHYLHZ
7KLV&RXUWUHYLHZVWKHGLVWULFWFRXUW¶VVXPPDU\MXGJPHQW
GHFLVLRQGHQRYR6HH:DWNLQVY%DWWOH&UHHN)G
WK&LU 6XPPDU\MXGJPHQWVKRXOGEHJUDQWHG
ZKHQ³WKHSOHDGLQJVGHSRVLWLRQVDQVZHUVWRLQWHUURJDWRULHV

-- 2 of 7 --

1R 0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH

DQGDGPLVVLRQVRQILOHWRJHWKHUZLWKWKHDIILGDYLWVLIDQ\
VKRZWKDWWKHUHLVQRJHQXLQHLVVXHDVWRDQ\PDWHULDOIDFWDQG
WKDWWKHPRYLQJSDUW\LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURI
ODZ´ )(' 5 &,9 3 F 6XPPDU\ MXGJPHQW LV
DSSURSULDWHLIDSDUW\ZKRKDVWKHEXUGHQRISURRIDWWULDOIDLOV
WRPDNHDVKRZLQJVXIILFLHQWWRHVWDEOLVKWKHH[LVWHQFHRIDQ
HOHPHQW WKDW LV HVVHQWLDO WR WKDW SDUW\¶V FDVH 6HH &HORWH[
&RUSY&DWUHWW86 ,QGHFLGLQJD
PRWLRQ IRU VXPPDU\ MXGJPHQW WKH FRXUW PXVW YLHZ WKH
IDFWXDOHYLGHQFHDQGGUDZDOOUHDVRQDEOHLQIHUHQFHVLQIDYRU
RI WKH QRQPRYLQJ SDUW\ 0DWVXVKLWD (OHF ,QGXV &R Y
=HQLWK 5DGLR &RUS 86 7KH
QRQPRYLQJSDUW\PXVWVHWIRUWKVSHFLILFIDFWVVKRZLQJWKDW
WKHUHLVDJHQXLQHLVVXHIRUWULDO$JHQXLQHLVVXHIRUWULDO
H[LVWV³LIWKHHYLGHQFHLVVXFKWKDWDUHDVRQDEOHMXU\FRXOG
UHWXUQ D YHUGLFW IRU WKH QRQPRYLQJ SDUW\´ $QGHUVRQ Y
/LEHUW\/REE\,QF86
%&KRLFHRIODZ
)HGHUDOFRXUWVVLWWLQJLQGLYHUVLW\PXVWDSSO\WKHFKRLFHRI
ODZUXOHVRIWKHIRUXPVWDWH.OD[RQ&RY6WHQWRU(OHF0IJ
&R 86 7HOH6DYH 0HUFK &R Y
&RQVXPHUV'LVWULE&R)G WK&LU
7KHUHIRUH WKH GLVWULFW FRXUW ZDV UHTXLUHG WR DSSO\ 2KLR
FKRLFHRIODZUXOHV,QWRUWDFWLRQV2KLRWUDGLWLRQDOO\UHOLHG
XSRQ OH[ ORFL GHOLFWL WKH SODFH ZKHUH WKH WRUW RFFXUV LQ
GHWHUPLQLQJ WKH ODZ WR EH DSSOLHG LQ DFWLRQV UHTXLULQJ WKH
FRXUW WR GHFLGH RQ WKH FKRLFH RI ODZ +RZHYHU WKH 2KLR
6XSUHPH&RXUWKHOGLQ0RUJDQY%LUR0DQXIDFWXULQJ
2KLR6WG WKDWOH[ORFLGHOLFWLZRXOGQR
ORQJHUEHSUHVXPHGWRDSSO\ZKHQD FKRLFH RIODZZDVDW
LVVXH7KHFRXUWKHOGWKDW2KLRFRXUWVPXVWORRNLQVWHDGWR
WKHEDODQFLQJWHVWVHWIRUWKLQWKH5(67$7(0(17 6(&21' 2)
&21)/,&7 2) /$:6 EHJLQQLQJ ZLWK VHFWLRQ LQ
GHWHUPLQLQJZKLFKVWDWH¶VODZWRDSSO\0RUJDQ2KLR6W
GDW ³>,@WLVDSSDUHQWWKDWWKHWUDGLWLRQDOUXOHRIOH[
ORFLGHOLFWL LV VWLOOYLDEOHLQ2KLREXWLVQRORQJHUXVHGWR
DXWRPDWLFDOO\ GHWHUPLQH WKH SUHYDLOLQJ VWDWH ODZ 2WKHU
0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH
1R
LQWHUHVWVRIWKHVWDWHVLQYROYHGZLWKLQWKHFRQWURYHUV\PXVWEH
WKRURXJKO\DQDO\]HG:HKHUHE\DGRSWWKHWKHRU\VWDWHGLQ
WKH5HVWDWHPHQWRIWKH/DZRI&RQIOLFWV´ VHHDOVR&KDUDVK
Y2EHUOLQ&ROO)G WK&LU H[SODLQLQJ
WKDW2KLRQRZDSSOLHVWKH5HVWDWHPHQWDQDO\VLVUDWKHUWKDQOH[
ORFLGHOLFWL /DZVRQY9DOYH7URO&R2KLR$SSG
2KLR $SS VDPH %DULOH Y 8QLY RI 9D 2KLR
$SSG 2KLR$SS VDPH 7KHUHIRUHLQ
2KLRDSDUW\PD\RYHUFRPHWKHSUHVXPSWLRQWKDWWKHODZRI
WKH SODFH ZKHUH WKH LQMXU\ RFFXUV ZLOO EH DSSOLHG WR D WRUW
DFWLRQ LI LW FDQ GHPRQVWUDWH WKDW DQRWKHU VWDWH KDV D PRUH
VLJQLILFDQWUHODWLRQVKLSWRWKHDFWLRQ
5(67$7(0(17 6(&21' 2) &21)/,&7 2) /$:6 †
JRYHUQVSHUVRQDOLQMXULHVDQGVWDWHVWKDW
,QDQDFWLRQIRUDSHUVRQDOLQMXU\WKHORFDOODZRIWKH
VWDWHZKHUHWKHLQMXU\RFFXUUHGGHWHUPLQHVWKHULJKWVDQG
OLDELOLWLHV RI WKH SDUWLHV XQOHVV ZLWK UHVSHFW WR WKH
SDUWLFXODULVVXHVRPHRWKHUVWDWHKDVDPRUHVLJQLILFDQW
UHODWLRQVKLS XQGHU WKH SULQFLSOHV VWDWHG LQ † WR WKH
RFFXUUHQFHDQGWKHSDUWLHVLQZKLFKHYHQWWKHORFDOODZ
RIWKHRWKHUVWDWHZLOOEHDSSOLHG
7KRXJKVHFWLRQLQVWUXFWVFRXUWVWRDSSO\WKHUXOHRIOH[
ORFLGHOLFWLLWUHTXLUHVWKHDSSOLFDWLRQRIWKHODZRIDQRWKHU
VWDWHLIWKDWVWDWHKDVD³PRUHVLJQLILFDQWUHODWLRQVKLS´WRWKH
LQMXU\
6HFWLRQ RI WKH 5HVWDWHPHQW ZKLFK JRYHUQV WRUWV
JHQHUDOO\VHWVIRUWKWKHDQDO\VLVWREHXQGHUWDNHQE\FRXUWVLQ
DWRUWDFWLRQLQGHWHUPLQLQJZKHWKHUDQRWKHUVWDWHKDVD³PRUH
VLJQLILFDQW UHODWLRQVKLS´ 7KLV VHFWLRQ GLUHFWV FRXUWV WR
FRQVLGHUIRXUIDFWRUVDQGVWDWHVLQUHOHYDQWSDUW
7KHULJKWVDQGOLDELOLWLHVRIWKHSDUWLHVZLWKUHVSHFWWR
DQLVVXHLQWRUWDUHGHWHUPLQHGE\WKHORFDOODZRIWKH
VWDWH ZKLFK ZLWK UHVSHFW WR WKDW LVVXH KDV WKH PRVW
VLJQLILFDQWUHODWLRQVKLSWRWKHRFFXUUHQFHDQGWKHSDUWLHV
XQGHUWKHSULQFLSOHVVWDWHGLQ†

-- 3 of 7 --

1R 0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH

&RQWDFWV WR EH WDNHQ LQWR DFFRXQW LQ DSSO\LQJ WKH
SULQFLSOHVRI†WRGHWHUPLQHWKHODZDSSOLFDEOHWRDQ
LVVXHLQFOXGH
D WKHSODFHZKHUHWKHLQMXU\RFFXUUHG
E WKH SODFH ZKHUH WKH FRQGXFW FDXVLQJ WKH LQMXU\
RFFXUUHG
F WKH GRPLFLO UHVLGHQFH QDWLRQDOLW\ SODFH RI
LQFRUSRUDWLRQDQGSODFHRIEXVLQHVVRIWKHSDUWLHVDQG
G WKHSODFHZKHUHWKHUHODWLRQVKLSLIDQ\EHWZHHQWKH
SDUWLHVLVFHQWHUHG
7KHVH FRQWDFWV DUH WR EH HYDOXDWHG DFFRUGLQJ WR WKHLU
UHODWLYHLPSRUWDQFHZLWKUHVSHFWWRWKHSDUWLFXODULVVXH
5(67$7(0(17 6(&21' 2) &21)/,&7 2) /$:6 †

6HFWLRQSURYLGHVIXUWKHUJXLGDQFHIRUDQDO\VLVXQGHUWKH
5HVWDWHPHQWDQG GHVFULEHVVHYHUDOJHQHUDOSULQFLSOHVWREH
FRQVLGHUHGZKHQFRQGXFWLQJDFKRLFHRIODZDQDO\VLV7KHVH
SULQFLSOHVLQFOXGHWKHLQWHUHVWVRIHDFKVWDWHLQKDYLQJLWVODZ
DSSOLHG WKH UHOHYDQW SROLFLHV RI WKH IRUXP FHUWDLQW\
SUHGLFWDELOLW\ DQG XQLIRUPLW\ RI UHVXOW HDVH LQ WKH
GHWHUPLQDWLRQDQGDSSOLFDWLRQRIWKHODZWREHDSSOLHGWKH
SURPRWLRQ RI LQWHUVWDWH RUGHU DQG WKH EDVLF SROLFLHV
XQGHUO\LQJ WKH ILHOG RI ODZ 5(67$7(0(17 6(&21' 2)
&21)/,&7 2) /$:6†
)XUWKHUPRUH VHFWLRQ RI WKH 5HVWDWHPHQW ZKLFK
JRYHUQV FRQWULEXWLRQ DQG LQGHPQLW\ DPRQJ WRUWIHDVRUV
SURYLGHVWKDW³>W@KHODZVHOHFWHGE\DSSOLFDWLRQRIWKHUXOHRI
† GHWHUPLQHV ZKHWKHU RQH WRUWIHDVRU KDV D ULJKW WR
FRQWULEXWLRQ RU LQGHPQLW\ DJDLQVW DQRWKHU WRUWIHDVRU´
5(67$7(0(17 6(&21' &21)/,&7 2) /$:6†

0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH
1R
&$SSOLFDWLRQRI2KLR¶V&KRLFHRI/DZ5XOHWR
0XQFLH¶V&ODLP
7KHDSSOLFDEOHODZLQWKLVFDVHGHWHUPLQHVZKHWKHU0XQFLH
LVDEOHWRDVVHUWDFODLPDJDLQVW87$,Q2KLRMRLQWIHDVRUV
PD\EULQJDFWLRQVIRUFRQWULEXWLRQ 2+,2 5(9 &2'( $11
†† :HVW ,QGLDQDLQFRQWUDVWGRHV
QRWUHFRJQL]HFODLPVIRUFRQWULEXWLRQDPRQJMRLQWWRUWIHDVRUV
6HH&RQVRO5DLO&RUSY$OOLHG&RUS)G
WK&LU ³>7@KHUHLVQRGLVSXWHWKDW,QGLDQDGRHVQRW
UHFRJQL]HDFWLRQVIRUFRQWULEXWLRQDPRQJMRLQWWRUWIHDVRUV´
FLWLQJ -DFNVRQ Y 5HFRUG 1(G VHH DOVR
(OFRQD+RPHV&RUSY0DSFR*DV0F0LOODQ%ORHGHOO/WG
1(G ,QG&W$SS ³,QGLDQDDGKHUHV
WRWKHORQJVWDQGLQJUXOHSURKLELWLQJFRQWULEXWLRQDPRQJMRLQW
WRUWIHDVRUV´ FLWDWLRQVRPLWWHG
%HFDXVHRIWKHGHDUWKRIFDVHODZLQWKLVDUHDERWKSDUWLHV
KDGGLIILFXOWLHVILQGLQJFDVHVXSSRUWIRUWKHLUSRVLWLRQV,Q
DUJXLQJWKDW2KLR ODZVKRXOGDSSO\WRWKLVDFWLRQ0XQFLH
UHOLHV SULQFLSDOO\ RQ &DOLIRUQLD 8QLRQ ,QVXUDQFH &R Y
7KHUP2'LVF,QF2KLR$SS/(;,6 2KLR$SS
-DQ XQUHSRUWHG ,Q7KHUP2'LVFIRXUSHRSOH
ZHUHNLOOHGLQ0LFKLJDQZKHQDFRIIHHPDNHUFDXVHGDILUHWKDW
GHVWUR\HGWKHFDELQLQZKLFKWKH\ZHUHVWD\LQJ2KLR
$SS/(;,6DW 7KH0LFKLJDQMXU\IRXQG0U
&RIIHHWKHPDNHURIWKHGHIHFWLYHDSSOLDQFHJXLOW\RI
ZLOOIXODQGZDQWRQPLVFRQGXFW QHJOLJHQFHLQWKHGHVLJQ
DQGPDQXIDFWXUHRIWKHFRIIHHPDNHUDQG EUHDFKRIDQ
LPSOLHGZDUUDQW\RIILWQHVV,GDW $IWHUDMXU\DZDUGHG
SODLQWLIIVPLOOLRQFRQVHQWMXGJPHQWVZHUHHQWHUHGDQGD
VHWWOHPHQWZDVUHDFKHGIRURYHUPLOOLRQ,GDW
7KHQH[W\HDU0U&RIIHHDQG&DOLIRUQLD8QLRQ,QVXUDQFH
ILOHGDFRPSODLQWIRUFRQWULEXWLRQLQ2KLRVWDWHFRXUWDJDLQVW
7KHUP2'LVF WKH VXSSOLHU RI DOOHJHGO\ GHIHFWLYH
FRPSRQHQWVIRUWKHFRIIHHPDNHU,GDW 2QDSSHDOWKH
FRXUWGHWHUPLQHGWKDWXQGHUWKHVLJQLILFDQWUHODWLRQVKLSWHVWRI
VHFWLRQVDQGRIWKH5HVWDWHPHQWWKHODZRI0LFKLJDQ

-- 4 of 7 --

1R 0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH

LQVWHDG RI 2KLR VKRXOG EH DSSOLHG ,G DW ,Q
SDUWLFXODU WKH DSSHOODWH FRXUW WRRN LQWR DFFRXQW IRXUWHHQ
IDFWRUVUHODWHGWRWKHXQGHUO\LQJWRUWFODLPLQLWVFKRLFHRIODZ
DQDO\VLV ,G DW %HFDXVH WZHOYH RI WKH IDFWRUV
UHODWHG WR WKH VWDWH RI 0LFKLJDQ WKH FRXUW IRXQG WKDW
³EDODQFLQJWKHVHIRXUWHHQIDFWRUVFOHDUO\HVWDEOLVKHVWKDWWKH
VWDWHRI0LFKLJDQSRVVHVVHGWKHPRVWVLJQLILFDQWUHODWLRQVKLS
WRWKHSDUWLHVDQGHYHQWV´,GDW
:HILQGWKLVFDVHLQDSSOLFDEOHWRWKHSUHVHQWFDVHIRUWKUHH
UHDVRQV LW ZDV XQUHSRUWHG DQG WKHUHIRUH KDV QR
SUHFHGHQWLDOYDOXH WKHFRXUWFRQVLGHUHGVHYHUDOIDFWRUVQRW
RXWOLQHGLQWKH5HVWDWHPHQWIRUH[DPSOHWKHSODFHZKHUHWKH
HVWDWHVRIWKHGHFHGHQWVZHUH RSHQHGWKHUHVLGHQF\RIWKH
HVWDWHDGPLQLVWUDWRUVDQGWKHSODFHZKHUHWKHZURQJIXOGHDWK
DFWLRQ ZDV ILOHG DQG WKH DSSHOODWH FRXUW FRQVLGHUHG
VHYHUDO IDFWRUV WKDW UHOLHG H[SOLFLWO\ RQ WKH UXOH RI OH[ ORFL
GHOLFWLDQGWKHIDFWWKDWWKHWRUWDFWLRQZDVILOHGLQ0LFKLJDQ
LQFOXGLQJIRUH[DPSOHWKHSODFHZKHUHWKHMXU\YHUGLFWZDV
UHQGHUHGWKHSODFHZKHUHWKHYHUGLFWZDVDSSHDOHGDQGWKH
SODFHZKHUHWKHVHWWOHPHQWRFFXUUHG,GDW
87$SULQFLSDOO\UHOLHVRQ5HLNHY)DLUPRQW+RPHV,QF
1R& 6'2KLR1RY XQUHSRUWHG ,Q
5HLNHDPRELOHKRPHWKDWZDVPDQXIDFWXUHGLQ,QGLDQDDQG
ORFDWHGLQ2KLRFDXJKWILUHNLOOLQJWZRFKLOGUHQ1R&
DW 7KHDGPLQLVWUDWRUVRIWKHFKLOGUHQ¶VHVWDWHILOHGVXLW
DJDLQVWWKHVXFFHVVRULQLQWHUHVWRIWKHPDQXIDFWXUHURIWKH
PRELOHKRPH)DLUPRQW+RPHV,QF ³)DLUPRQW´ LQ2KLR
VWDWHFRXUW,G)DLUPRQWWKHQILOHGDWKLUGSDUW\FRPSODLQW
IRU LQGHPQLILFDWLRQ DQG FRQWULEXWLRQ DJDLQVW &KDPSLRQ
,QWHUQDWLRQDO &RUS ³&KDPSLRQ´ DQG $UPVWURQJ &RUN
&RPSDQ\WZRRIWKHPDQXIDFWXUHUVRIPDWHULDOVXVHGWREXLOG
WKHKRPH,G&KDPSLRQPRYHGIRUVXPPDU\MXGJPHQWRQ
WKHFRQWULEXWLRQFODLPDUJXLQJWKDWXQGHU2KLR¶VFKRLFHRI
ODZ UXOHV ,QGLDQD ODZ VKRXOG DSSO\ DQG ,QGLDQD GRHV QRW
UHFRJQL]HFODLPVIRUFRQWULEXWLRQ,GDW 7KHGLVWULFW
FRXUW SHUIRUPHG D FKRLFHRIODZ DQDO\VLV XQGHU WKH
5HVWDWHPHQWDQGFRQFOXGHGWKDW,QGLDQDDQGQRW2KLRODZ
0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH
1R
DSSOLHG WR WKH WKLUGSDUW\ FODLPV IRU FRQWULEXWLRQ DQG
LQGHPQLILFDWLRQ 7KH GLVWULFW FRXUW KHOG WKDW EHFDXVH WKH
UHODWLRQVKLSEHWZHHQ)DLUPRQWDQG&KDPSLRQZDVFHQWHUHG
HQWLUHO\LQ,QGLDQD,QGLDQDKDGDPRUHVLJQLILFDQWUHODWLRQVKLS
WRWKHFRQWULEXWLRQDQGLQGHPQLILFDWLRQFODLPVWKDQ2KLR
:H GR QRW SODFH VXEVWDQWLDO ZHLJKW RQ WKH GHFLVLRQ LQ
5HLNH$SDUWIURPEHLQJXQUHSRUWHG5HLNHZDVGHFLGHGE\
WKHVDPHGLVWULFWMXGJHDVLQWKLVFDVHDQGWKHFKRLFHRIODZ
DQDO\VLVDQGUHODWHGGLVFXVVLRQ LQ WKDWFDVHLVWDNHQQHDUO\
YHUEDWLPIURPWKH0HPRUDQGXPDQG2SLQLRQLQWKLVFDVH
7KHUHIRUHWKRXJKZHILQGWKHGLVWULFWFRXUWWREHFRQVLVWHQWLQ
LWV DSSURDFK WR FKRLFHRIODZ LVVXHV 5HLNH DGGV OLWWOH
DGGLWLRQDOVXSSRUWWR87$¶VDUJXPHQWLQWKLVFDVH
:KLOHZHDFNQRZOHGJHWKDWWKHUHLVDODFNRIUHOHYDQWFDVH
ODZWRJXLGHRXUGHFLVLRQDSURSHUDQDO\VLVRI2KLR¶VFKRLFH
RI ODZ XQGHU 0RUJDQ UHTXLUHV DSSOLFDWLRQ RI WKH
5(67$7(0(17 6(&21' 2) &21)/,&7 2) /$:67KHGLVWULFW
FRXUW GLG QRW SHUIRUP D GHWDLOHG DQDO\VLV XVLQJ WKH IDFWRUV
RXWOLQHG LQ WKH 5HVWDWHPHQW ,QVWHDG WKH FRXUW IRFXVHG
JHQHUDOO\ RQ ZKHWKHU ,QGLDQD KDG D PRUH VLJQLILFDQW
UHODWLRQVKLSWR0XQFLH¶VFODLPWKDQ2KLR,QLWVGHFLVLRQWKH
GLVWULFWFRXUWFRQFOXGHGWKDW2KLR¶VLQWHUHVWLQFRPSHQVDWLQJ
%RZOLQJ ZDV VDWLVILHG DQG WKDW WKH UHODWLRQVKLS EHWZHHQ
0XQFLHDQG87$ZDVFHQWHUHGSULQFLSDOO\LQ,QGLDQD
7KRXJK ZH DJUHH ZLWK WKH UHVXOW UHDFKHG E\ WKH GLVWULFW
FRXUWZHGRVREDVHGRQDQDQDO\VLVRIWKHIDFWRUVRXWOLQHGLQ
WKH 5HVWDWHPHQW ,Q DSSO\LQJ WKH IRXU IDFWRUV VHW IRUWK LQ
VHFWLRQDQGWKHJHQHUDOSULQFLSOHVJRYHUQLQJFKRLFHRI
ODZ FRQVLGHUDWLRQV DV VHW IRUWK LQ VHFWLRQ ZH ILQG WKDW
,QGLDQD KDV WKH PRVW VLJQLILFDQW UHODWLRQVKLS WR WKLV
FRQWULEXWLRQDFWLRQDQGLWVODZVKRXOGDSSO\
7KHSODFHZKHUHWKHLQMXU\RFFXUUHG
2KLRLVWKHSODFHZKHUHWKHLQMXU\JLYLQJULVHWR0XQFLH¶V
FODLPV DJDLQVW 87$ RFFXUUHG +RZHYHU XQGHU WKH
5HVWDWHPHQW DQDO\VLV WKLV IDFWRU LV WR EH FRQVLGHUHG LQ

-- 5 of 7 --

1R 0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH

FRQMXQFWLRQ ZLWK WKH RWKHU IDFWRUV DQG DVVLJQHG WKH
DSSURSULDWHZHLJKW
7KHSODFHZKHUHWKHFRQGXFWFDXVLQJWKHLQMXU\RFFXUUHG
7KHFRQGXFWFDXVLQJWKHLQMXU\RFFXUUHGERWKLQ2KLRDQG
,QGLDQD 7KH MXU\ YHUGLFW IRXQG DOO WKUHH GHIHQGDQWV WKH
GULYHURIWKHWUXFNWKHRZQHURIWKHWUXFNDQG0XQFLHJXLOW\
RIFDXVLQJ%RZOLQJ¶VLQMXULHV%HFDXVHWKHMXU\IRXQGWKH
GULYHU DQG RZQHU WZHQW\ILYH SHUFHQW UHVSRQVLEOH IRU
%RZOLQJ¶VLQMXULHVLWFDQEHVDLGWKDWVRPHRIWKHFRQGXFW
FDXVLQJWKHLQMXU\RFFXUUHGLQ2KLR+RZHYHUWKHMXU\IRXQG
0XQFLH VHYHQW\ILYH SHUFHQW UHVSRQVLEOH IRU WKH LQMXULHV
FDXVHGE\WKHGHIHFWLYHGHVLJQDQGPDQXIDFWXUHRIWKHWDQN
DQGWKHODFNRIDGHTXDWHZDUQLQJV,I0XQFLH¶VFRQWULEXWLRQ
FODLP LV FRUUHFW DQG 87$ LV DOVR GLUHFWO\ UHVSRQVLEOH IRU
%RZOLQJ¶VLQMXULHVWKHFRQGXFWJLYLQJULVHWR0XQFLH¶VFODLPV
DJDLQVW87$RFFXUUHGLQ,QGLDQD7KHWDQNZDVGHVLJQHGDQG
PDQXIDFWXUHG E\ 0XQFLH DQG 87$ LQ ,QGLDQD DQG DQ\
DSSURSULDWH ZDUQLQJV ZRXOG KDYH EHHQ GLVFXVVHG DQG
LPSOHPHQWHGE\WKHWZRFRPSDQLHVLQ,QGLDQD$FFRUGLQJO\
DV WKH MXU\ YHUGLFW VXSSRUWV WKH PDMRULW\ RI WKH FRQGXFW
FDXVLQJLQMXU\WR%RZOLQJRFFXUUHGLQ,QGLDQD
7KHSODFHRILQFRUSRUDWLRQDQGSODFHRIEXVLQHVVRIWKH
SDUWLHV
0XQFLHLVLQFRUSRUDWHGLQ,QGLDQDDQGLWVSULQFLSDOSODFHRI
EXVLQHVVLV,QGLDQD87$LVLQFRUSRUDWHGLQ'HODZDUHDQGLWV
SULQFLSDOSODFHRIEXVLQHVVLV0LFKLJDQ7KLVIDFWRUZHLJKV
LQSDUWLQIDYRURI,QGLDQDWKRXJKLWLVRIOHVVHUVLJQLILFDQFH
WKDQWKHRWKHUIDFWRUV
7KH SODFH ZKHUH WKH UHODWLRQVKLS LI DQ\ EHWZHHQ WKH
SDUWLHVLVFHQWHUHG
,W LV WKLV IDFWRU WKDW ZHLJKV PRVW KHDYLO\ LQ IDYRU RI
DSSO\LQJ,QGLDQDODZ7KRXJK$SSHOODQWVXUJHXVLQVWHDGWR
FRQVLGHU 2KLRODZEHFDXVHWKHDFWXDODFFLGHQWRFFXUUHGLQ
2KLR WKH UHODWLRQVKLS EHWZHHQ 0XQFLH DQG 87$ ZDV
0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH
1R
FHQWHUHGSULQFLSDOO\LQ,QGLDQD6HH&KHDWKDPY7KXUVWRQ
0RWRU /LQHV ) 6XSS 6' 2KLR
H[SODLQLQJ WKDW IRU WKLUGSDUW\ FODLPV LQ SURGXFW OLDELOLW\
DFWLRQVFRXUWVVKRXOGORRNWRZKHUHWKHSURGXFWZDVVROG
PDQXIDFWXUHGDQGPRGLILHGQRWVROHO\WRWKHSODFHZKHUHWKH
SURGXFWFDXVHGLQMXU\
6LQFH 0XQFLH KDV ZRUNHG ZLWK 87$ DQG LWV
SUHGHFHVVRUVLQGHYHORSLQJGHVLJQVIRUWKHK\GUDXOLFWDQNVLQ
,QGLDQD,Q0XQFLHDSSURYHGWKHQHZGHVLJQIRUWKH
WDQNLQYROYHGLQWKHDFFLGHQWDWLVVXHKHUHDQGWKDWWDQNZDV
PDQXIDFWXUHG E\ 87$¶V SUHGHFHVVRU $OPD 3ODVWLFV LQ
,QGLDQD $W DOO WLPHV UHOHYDQW WR WKLV DFWLRQ 0XQFLH WRRN
GHOLYHU\ RI WKH WDQNV LQ ,QGLDQD DW LWV IDFLOLW\ LQ WKDW VWDWH
0XQFLH¶V DFWLRQ DJDLQVW 87$ DOOHJHV WKDW 87$ LV MRLQWO\
UHVSRQVLEOH IRU WKH GHIHFWLYHO\ GHVLJQHG DQG PDQXIDFWXUHG
WDQN DQG WKH ODFN RI DGHTXDWH ZDUQLQJV 7KHUHIRUH DQ\
GHVLJQRUPDQXIDFWXULQJGHIHFWVRUIDLOXUHWRSURYLGHSURSHU
ZDUQLQJVZHUHWKHUHVXOWRIWKHEXVLQHVVUHODWLRQVKLSEHWZHHQ
0XQFLHDQG87$RFFXUULQJZKROO\LQ,QGLDQD
7KRXJKWKHILUVWIDFWRUZHLJKVLQIDYRURIDSSO\LQJ2KLR
ODZWKH5HVWDWHPHQWVWDWHVH[SOLFLWO\WKDWWKHORFDWLRQRIWKH
LQMXU\LVQRW GLVSRVLWLYH 6HH5(67$7(0(17†FPWD
³7KHVWDWHZKHUHFRQGXFWDQGLQMXU\RFFXUUHG ZLOOQRWE\
UHDVRQRIWKHVHFRQWDFWVDORQHEHWKHVWDWHWKDWLVSULPDULO\
FRQFHUQHG ZLWK WKH TXHVWLRQ ZKHWKHU RQH WRUWIHDVRU PD\
REWDLQ FRQWULEXWLRQ DJDLQVW DQRWKHU´ 7KH EDODQFH RI WKH
IDFWRUV FOHDUO\ VXSSRUWV WKH DSSOLFDWLRQ RI ,QGLDQD ODZ ,Q
SDUWLFXODU WKH VHFRQG DQG IRXUWK IDFWRUV ZHLJK KHDYLO\ LQ
IDYRURIDSSO\LQJ,QGLDQDODZ$VVHFWLRQLQVWUXFWVWKH
IDFWRUV ³DUH WR EH HYDOXDWHG DFFRUGLQJ WR WKHLU UHODWLYH
LPSRUWDQFH ZLWK UHVSHFW WR WKH SDUWLFXODU LVVXH´
5(67$7(0(17†VHHDOVR0LOOHUY/RQJ$LUGR[&R
)G WK&LU ³*HQHUDOO\LQDWRUWFDVHWKH
WZRPRVWLPSRUWDQWFRQWDFWVDUHWKHSODFHZKHUHWKHLQMXU\
RFFXUUHGDQGWKHSODFHZKHUHWKHFRQGXFWFDXVLQJWKHLQMXU\
RFFXUUHG´ )DFWRUV WZR DQG IRXU DUH FOHDUO\ WKH PRVW
LPSRUWDQW IDFWRUV LQ WKLV DFWLRQ EHFDXVH LW LV D FODLP IRU

-- 6 of 7 --

1R 0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH

FRQWULEXWLRQ EDVHG RQ D SURGXFW OLDELOLW\ FODLP FRQFHUQLQJ
GHVLJQ DQG PDQXIDFWXULQJ GHIHFWV DOOHJHGO\ RFFXUULQJ LQ
,QGLDQD7KRXJKZHGRQRWLQWHQWLRQDOO\LJQRUHWKHIDFWWKDW
%RZOLQJ¶VODZVXLWDJDLQVW0XQFLHZDVILOHGDQGGHFLGHGLQ
2KLRZHILQGWKDWWKHSUHYLRXVODZVXLWGRHVQRWH[FOXVLYHO\
JXLGHWKHDQDO\VLVWKDWZHXQGHUWDNHKHUH
)XUWKHUPRUH LQ FRQVLGHULQJ WKH JHQHUDO SULQFLSOHV
JRYHUQLQJFKRLFHRIODZDQDO\VLVRXWOLQHGLQVHFWLRQWKH
ODZRI,QGLDQDLVPRVWDSSURSULDWH6HH0DF'RQDOGY*HQ
0RWRUV&RUS)G WK&LU H[SODLQLQJ
WKDWWKHJHQHUDOSULQFLSOHVJRYHUQLQJFKRLFHRIODZXQGHU†
VKRXOG EH XVHG WR JXLGH FKRLFHRIODZ DQDO\VLV VHH DOVR
5(67$7(0(17†FPWD QRWLQJWKDWWKHUHLVD³JURZLQJ
UHDOL]DWLRQWKDWDOOLVVXHVLQWRUWQHHGQRWEHJRYHUQHGE\WKH
VDPHODZ´ :HFRQFHGHWKDW2KLRLVLQWHUHVWHGLQSUHYHQWLQJ
WKH VDOH RI GHIHFWLYH SURGXFWV LQ LWV VWDWH 7KDW LQWHUHVW
KRZHYHUZDVVDWLVILHGE\WKHMXGJPHQWDJDLQVW0XQFLHDQG
WKHDZDUGRIGDPDJHVWR%RZOLQJLQWKHVWDWHFRXUWDFWLRQ
6HH &KHDWKDP ) 6XSS DW ³,Q SURGXFW OLDELOLW\
FODLPV WKH SULPDU\ LQWHUHVW RI D VWDWH LV WR GHWHU WKH VDOH
DQGRU PDQXIDFWXUH RI QHJOLJHQWO\ RU GHIHFWLYHO\
PDQXIDFWXUHG JRRGV WR WKDW VWDWH¶V FLWL]HQV´ VHH DOVR
'RUPDQY(PHUVRQ(OHF&R)G WK&LU
³>W@KH0LVVRXULODZRISURGXFWVOLDELOLW\LVHYHQ
PRUH FRQFHUQHG ZLWK FRPSHQVDWLQJ LQMXUHG YLFWLPV DQG
SURWHFWLQJWKHH[SHFWDWLRQLQWHUHVWVRIWKHYLFWLP´ FLWDWLRQV
RPLWWHG 0XQFLH¶VVXEVHTXHQWFODLPVDJDLQVWDWKLUGSDUW\WR
UHFRYHUSDUWRIWKHGDPDJHVUHVXOWLQJIURPWKHWRUWDFWLRQKDYH
OLWWOHHIIHFWRQ2KLR¶VLQWHUHVWLQWKHXQGHUO\LQJWRUWFODLP
%RZOLQJ¶VDZDUGZLOOQRWEHUHGXFHGRULQFUHDVHGDVDUHVXOW
RI0XQFLH¶VFRQWULEXWLRQDFWLRQDQG0XQFLH¶VOLDELOLW\IRU
%RZOLQJ¶V LQMXULHV VLPLODUO\ ZLOO UHPDLQ XQFKDQJHG 6HH
5(67$7(0(17 † FPW F VWDWLQJ WKDW μWKH LQWHUHVW RI D
VWDWH LQ KDYLQJ LWV WRUW UXOH DSSOLHG ZLOO GHSHQG RQ WKH
SXUSRVHVRXJKWWREHDFKLHYHGE\WKDWUXOH¶
)LQDOO\$SSHOODQWVUHO\RQWKHIDFWWKDWWKHWRUWRFFXUUHGLQ
2KLRDQGDUJXHWKDW2KLRKDVGHYHORSHGDQHQWLUHWRUWVFKHPH
0XQFLH3RZHU3URGXFWVY8QLWHG
7HFKQRORJLHV$XWRPRWLYH
1R
WKDW LQFOXGHV DFWLRQV IRU FRQWULEXWLRQ DQG LQGHPQLILFDWLRQ
7KRXJK 2KLR¶V SROLF\ LV WR UHFRJQL]H DFWLRQV E\ MRLQW
WRUWIHDVRUVIRUFRQWULEXWLRQ,QGLDQD¶VSROLF\QRWWRUHFRJQL]H
VXFKDFWLRQVLVPRUHLPSRUWDQWKHUHEHFDXVH,QGLDQDLVPRUH
LQWHUHVWHGLQGHWHUPLQLQJWKHULJKWVRISDUWLHVZKRVHFRQGXFW
ZDVFHQWHUHGLQLWVVWDWH7KHUHIRUH,QGLDQDODZDSSOLHVWR
WKLV FRQWULEXWLRQ FODLP DQG 0XQFLH¶V FODLP PXVW IDLO DV
,QGLDQDGRHVQRWUHFRJQL]HDFWLRQVIRUFRQWULEXWLRQ
,,,&21&/86,21
)RUWKHIRUHJRLQJUHDVRQVZH$)),50WKHGHFLVLRQRIWKH
GLVWULFWFRXUW

-- 7 of 7 --