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

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




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


       1R               ;
81,7(' 67$7(6 2) $0(5,&$         
         3ODLQWLII$SSHOODQW     
                                    1RV
                                    
           Y                      !
                                  
                                  
s$0(6 (/.,16 &$52/               
(/.,16                           
        'HIHQGDQWV$SSHOOHHV 
                                  
                                  
     1RV            
81,7(' 67$7(6 2) $0(5,&$ 
            3ODLQWLII$SSHOOHH 
                                  
           Y                     
                                  
                                  
&$52/ (/.,16            
s$0(6 (/.,16            
       'HIHQGDQWV$SSHOODQWV 
                                  
                                 1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
   IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV
   1Rn%HUQLFH%'RQDOG'LVWULFWsXGJH
             $UJXHG6HSWHPEHU


                           
         8QLWHG6WDWHVY                   1RV                      1RV                   8QLWHG6WDWHVY     
          (ONLQVHWDO                                                                                                            (ONLQVHWDO

                  'HFLGHGDQG)LOHG$XJXVW                                                                  9,,,
    %HIRUH6,/(5&/$<DQG*,%621&LUFXLWsXGJHV                                      ,QVXPPDU\ZHDIILUPWKHGLVWULFWFRXUWjVVXSSUHVVLRQRUGHU
                                                                                         LQVRIDUDVLWKHOGWKDWWKHZDUUDQWOHVVVHDUFKRI6FRWW
                          BBBBBBBBBBBBBBBBB                                              ZDVMXVWLILHGE\sDPHV(ONLQVjVFRQVHQWDQGWKDWWKHUHGDFWHG
                                                                                         VHDUFK ZDUUDQW DIILGDYLW IRU  1HLO HVWDEOLVKHG SUREDEOH
                                &2816(/                                                  FDXVH:HUHYHUVHWKHRUGHULQVRIDUDVLWKHOGWKDWH[LJHQW
                                                                                         FLUFXPVWDQFHVGLGQRWH[LVWIRUWKHZDUUDQWOHVVVHDUFKRI
$5*8('  7KRPDV $ &ROWKXUVW $66,67$17 81,7('                                     :DOQXW*URYHDQGWKDWWKHUHGDFWHGVHDUFKZDUUDQWVIRU
67$7(6$77251(<0HPSKLV7HQQHVVHHIRU3ODLQWLII                                      :DOQXW*URYHDQGWKH(ONLQVHVjKRPHDW7XWZLOHUZHUH
0LFKDHOs6WHQJHO0HPSKLV7HQQHVVHH$&:KDUWRQsU                              LQYDOLG:HDOVRDIILUPWKHGLVWULFWFRXUWjVRUGHUDXWKRUL]LQJ
:+$5721 :+$5721 	 $662&,$7(6 0HPSKLV                                              WKHUHOHDVHRIVHL]HGIXQGVWRSD\FRXQVHO
7HQQHVVHH IRU 'HIHQGDQWV  21 %5,()  7KRPDV $
&ROWKXUVW $66,67$17 81,7(' 67$7(6 $77251(<                                           :HUHPDQGIRUIXUWKHUSURFHHGLQJVLQFRQIRUPLW\ZLWKWKLV
0HPSKLV 7HQQHVVHH IRU 3ODLQWLII  0LFKDHO s 6WHQJHO                           RSLQLRQ
0HPSKLV 7HQQHVVHH $ & :KDUWRQ sU :+$5721
:+$5721 	 $662&,$7(6 0HPSKLV 7HQQHVVHH IRU
'HIHQGDQWV
                          BBBBBBBBBBBBBBBBB
                              23,1,21
                          BBBBBBBBBBBBBBBBB
  s2+1 5 *,%621 &LUFXLW sXGJH  7KH 8QLWHG 6WDWHV
DSSHDOVSXUVXDQWWR86&IURPDQRUGHU
RI WKH GLVWULFW FRXUW VXSSUHVVLQJ HYLGHQFH RI D PDULMXDQD
JURZLQJRSHUDWLRQIRXQGLQEXLOGLQJVFRQWUROOHGE\sDPHVDQG
&DURO(ONLQV7KH(ONLQVHVKXVEDQGDQGZLIHKDYHHQWHUHG
FRQGLWLRQDOJXLOW\SOHDVWRVHYHUDOFKDUJHVDQGDSSHDOIURP

     
         7KH +RQRUDEOH sRKQ 5 *LEVRQ &LUFXLW sXGJH RI WKH 8QLWHG 6WDWHV

&RXUW RI $SSHDOV IRU WKH (LJKWK &LUFXLW VLWWLQJ E\ GHVLJQDWLRQ




     
         sDPHV (ONLQV SOHDGHG JXLOW\ WR WKH 6XSHUVHGLQJ ,QGLFWPHQW
V &RXQW 

SRVVHVVLQJ    DQG   PDQXIDFWXULQJ   PDULMXDQD   ZLWK   LQWHQW   WR   GLVWULEXWH   LQ

YLRODWLRQ RI  86&  D DQG  86&   &RXQW  PRQH\

ODXQGHULQJ LQ YLRODWLRQ RI  86&  D$L DQG  86&

  DQG &RXQW  SRVVHVVLRQ E\ FRQYLFWHG IHORQ RI ILUHDUPV VKLSSHG LQ

LQWHUVWDWH FRPPHUFH LQ YLRODWLRQ RI  86&  J             &DURO (ONLQV
    8QLWHG6WDWHVY                1RV         1RV                              8QLWHG6WDWHVY        
      (ONLQVHWDO                                                                                                       (ONLQVHWDO

                              9,,                                   UXOLQJVLQWKHVDPHRUGHUKROGLQJFHUWDLQHYLGHQFHIURPWKHLU
                                                                     EXLOGLQJVWREHDGPLVVLEOH:HDIILUPWKHRUGHULQSDUWDQG
   (DUO\ LQ WKH SURVHFXWLRQ WKH JRYHUQPHQW VHL]HG DVVHWV     UHYHUVHLQSDUW&DURO(ONLQVDOVRDSSHDOVIURPDQRUGHURIWKH
FRQWUROOHG E\ WKH (ONLQVHV DQG EHJDQ FLYLO IRUIHLWXUH         GLVWULFW FRXUW UHOHDVLQJ VHL]HG IXQGV WR SD\ WKH (ONLQVHVj
SURFHHGLQJV7KH(ONLQVHVYROXQWDULO\ZDLYHGDQDGYHUVDU\           DWWRUQH\Vj IHHV  6KH FODLPV WKH DPRXQW UHOHDVHG ZDV
GXH SURFHVV KHDULQJ RQ WKHVH VHL]XUHV LQ UHWXUQ IRU WKH     XQUHDVRQDEO\VPDOO:HDIILUPWKHRUGHU
JRYHUQPHQWjVSURPLVHWRUHOHDVHVHL]HGIXQGVLQDQDPRXQW
MXGLFLDOO\GHWHUPLQHGWREHQHFHVVDU\IRUUHDVRQDEOHDWWRUQH\Vj                                             ,
IHHV  7KH (ONLQVHV UHTXHVWHG  VWDWLQJ WKDW WKH\
QHHGHG WKLV DPRXQW WR KLUH WKHLU FRXQVHO RI FKRLFH  $       ,Q WKH PLGGOH RI  0HPSKLV SROLFH UHFHLYHG
PDJLVWUDWHMXGJHH[WHQVLYHO\DQDO\]HGWKHOLNHO\FRXUVHRIWKH       DQRQ\PRXVLQIRUPDWLRQWKDWWKHUHZDVDPDULMXDQDJURZLQJ
OLWLJDWLRQDQGUHFRPPHQGHGUHOHDVLQJZLWKDULJKW          RSHUDWLRQDW6FRWW6WUHHWDWWKHEXLOGLQJEHKLQG6FRWW
WR UHYLHZ WKH DPRXQW IRU JRRG FDXVH  7KH GLVWULFW FRXUW   DQGDW7XWZLOHU$YHQXHsDPHV(ONLQVjVKRPH
DIILUPHGWKHPDJLVWUDWHjVRUGHUEXWLQFUHDVHGWKHDPRXQWWR
                                                              7KHSROLFHEHJDQVXUYHLOODQFHRIWKH6FRWW6WUHHWSURSHUW\
                                                                     QDPHGLQWKHWLS7KLVEXLOGLQJZDVGLYLGHGLQWRWZRSDUWV
   &DURO (ONLQV DUJXHV WKDW WKH GLVWULFW FRXUW FRPPLWWHG      ZLWKVHSDUDWHGRRUVDQGDGGUHVVHV6FRWWRQRQHVLGHDQG
UHYHUVLEOHHUURUE\QRWUHOHDVLQJWKH(ONLQVHVjDVVHWVLQWKHIXOO    6FRWW RQ WKH RWKHU ,Q LQWHUPLWWHQW VXUYHLOODQFH RI WKH
DPRXQWVRXJKW:HKDYHUHFRJQL]HGLQWKHVLPLODUFRQWH[W           EXLOGLQJRYHUDSHULRGRIWZRPRQWKVWKHSROLFHVDZsDPHV
RIUHYLHZLQJUDWHVIRUIHHDZDUGVWRFLYLOULJKWVSODLQWLIIVWKDW   DQG&DURO(ONLQVFRPHDQGJRIURPLW7KH\DOVRVDZVHYHUDO
LQGHFLGLQJDQDSSURSULDWHOHYHORIIHHVIRUDJLYHQOLWLJDWLRQ      PHQ ZKRP WKH\ UHFRJQL]HG DV RIIGXW\ 0HPSKLV SROLFH
WKHGLVWULFWFRXUWmLVHQWLWOHGWRVXEVWDQWLDOGHIHUHQFHl5HHG     RIILFHUV  2Q RQH RFFDVLRQ GXULQJ WKH VXUYHLOODQFH WKH
Y 5KRGHV  )G   Q WK &LU   7KH    LQYHVWLJDWRUVDSSURDFKHGsDPHV(ONLQVDQGVSRNHZLWKKLP
(ONLQVHVKRZHYHUDUJXHWKDWWKHFKRLFHRIDUHDVRQDEOHOHYHO       (ONLQV WROG WKHP KH ZDV HPSOR\LQJ RIIGXW\ SROLFHPHQ WR
RIDWWRUQH\VjIHHVWRH[HPSWIURPFLYLOIRUIHLWXUHLPSOLFDWHV        VDIHJXDUGKLVEXVLQHVVHVDJDLQVWEXUJODULHV(ONLQVVDLGWKDW
WKHLUTXDOLILHG6L[WK$PHQGPHQWULJKWWRFULPLQDOFRXQVHORI         KH KDG EXVLQHVVHV LQ WKH 6FRWW 6WUHHW EXLOGLQJ DQG LQ D
FKRLFHVHHHJ8QLWHG6WDWHVY0LFKHOOHjV/RXQJH)G       EXLOGLQJFORVHE\RQ1HLO6WUHHW7KHSROLFHWKHQWXUQHGWKHLU
WK&LU:HQHHGQRWGHFLGHWKLVLVVXH         DWWHQWLRQWR1HLO6WUHHWDQHDUE\EXLOGLQJZKHUHWKH\KDG
5HYLHZHG GH QRYR WKH GLVWULFW FRXUWjV DZDUG RI IHHV ZDV    HDUOLHUVHHQVHYHUDOFDUVVWRSSLQJDWQLJKW7KH\REVHUYHGD
UHDVRQDEOHLQOLJKWRIWKHLVVXHVLQWKHFDVHSUHWULDOVWDQGLQJ     SDOOHW QHDU  1HLO VWDFNHG ZLWK EDJV RI VKHHS PDQXUH
DQG VXSSUHVVLRQ KHDULQJV IRU VHDUFKHV DW VHYHUDO ORFDWLRQV   IHUWLOL]HU'XULQJ WKHFRXUVHRIWKHVXUYHLOODQFHWKHSROLFH
ZLWKVRPHLVVXHVUHTXLULQJH[SHUWWHVWLPRQ\:HWKHUHIRUH           DOVROHDUQHGWKDWsDPHV(ONLQVKDGDWOHDVWRQHIRUPHUIHORQ\
DIILUPWKHGLVWULFWFRXUWjVRUGHUZKLFKLQFOXGHGWKHULJKWRI       FRQYLFWLRQ
UHYLHZIRUJRRGFDXVHVKRZQVKRXOGLWEHGHHPHGQHFHVVDU\
                                                                       7KH RIILFHUV EHJDQ D PRUH LQWHQVLYH VXUYHLOODQFH RI WKH
                                                                     6FRWWDQG1HLO6WUHHWSURSHUWLHVDQGWKH(ONLQVHVjKRPHRQWKH


                                                                     SOHDGHG   JXLOW\   WR   WKH   6XSHUVHGLQJ   ,QGLFWPHQW
V   &RXQW      PRQH\

                                                                     ODXQGHULQJ   0RVW RI WKH RWKHU FKDUJHV DJDLQVW WKH (ONLQVHV ZHUH VHYHUHG
       8QLWHG6WDWHVY                    1RV                 1RV                     8QLWHG6WDWHVY      
        (ONLQVHWDO                                                                                                          (ONLQVHWDO

HYHQLQJ RI $XJXVW   DLGHG E\ HTXLSPHQW DQG                         JRHV D FRQVLGHUDEOH ZD\ WRZDUG HVWDEOLVKLQJ WKH ZDUUDQWjV
SHUVRQQHOIURPWKH7HQQHVVHH1DWLRQDO*XDUG7KH\XVHGD                          YDOLGLW\7KLVFRXUWKDVKHOGWKDWDQRIILFHUjVGHWHFWLRQRIWKH
WKHUPDOLPDJLQJGHYLFHWRVFDQKHDWHPDQDWLQJIURP                         VPHOORIPDULMXDQDLQDQDXWRPRELOHFDQE\LWVHOIHVWDEOLVK
6FRWW DQG  1HLO DQG GHWHFWHG DQ XQXVXDOO\ KLJK KHDW                   SUREDEOHFDXVHIRUDVHDUFK8QLWHG6WDWHVY*DU]D)G
RXWSXWDW1HLO2QWKDWQLJKWSROLFHDOVRHQFRXQWHUHGDQ                       WK &LU   7KH VDPH PD\ EH WUXH ZKHQ
RIIGXW\ RIILFHU QDPHG 6PLWK JXDUGLQJ WKH 6FRWW 6WUHHW                      PDULMXDQD LV VPHOOHG ZLWKLQ D KRPH  6HH 8QLWHG 6WDWHV Y
EXLOGLQJ  6PLWK VWDWHG WKDW KH ZRUNHG IRU sDPHV (ONLQV                  7RELQ)G	QWK&LU/D)DYH
JXDUGLQJERWKWKH6FRWW6WUHHWEXLOGLQJDQGDQRWKHU(ONLQV                         6HDUFKDQG6HL]XUHEDWSSVHHDOVR8QLWHG
EXLOGLQJ RQ :DOQXW *URYH LQ 0HPSKLV  6PLWK OHG WKH                       6WDWHVY*RQ]DOH]1R:/DWWK
LQYHVWLJDWLQJ RIILFHUV WR WKLV EXLOGLQJ ZKLFK ZDV                      &LU 2FW   XQSXEOLVKHG RSLQLRQ SHU FXULDP
:DOQXW*URYH$WRQHSRLQWKHRIIHUHGWROHWWKHPLQEXWWKH                     KROGLQJWKDWVPHOORIPDULMXDQDDORQHFUHDWHGSUREDEOHFDXVH
SROLFHGHFOLQHGWRHQWHU$SROLFHKHOLFRSWHUODWHUIOHZRYHU                     IRUURDGVLGHVHDUFKRIDPRWRUKRPH2XUSUREDEOHFDXVH
:DOQXW*URYHDQGVFDQQHGLWZLWKDQDLUERUQHWKHUPDO                          LQTXLU\ LV VRPHZKDW HDVLHU DV QRWHG DERYH WKH VPHOO RI
LPDJHU7KLVEXLOGLQJDOVRKDGDKLJKKHDWVLJQDWXUH                             PDULMXDQDKHUHGRHVQRWVWDQGDORQHLQWKHZDUUDQWDIILGDYLW
                                                                                   EXWLVDFFRPSDQLHGE\DQDQRQ\PRXVWLSWKDWWKH(ONLQVHV
  /DWHU WKDW QLJKW 2IILFHU )UDQN %HOO DFFRPSDQLHG E\                       ZHUHJURZLQJPDULMXDQDLQWKHLUKRPHDWLSWKDWWKHVPHOORI
&DSWDLQ7HUU\/LYLQJVWRQRIWKH1DWLRQDO*XDUGZHQWWR                       PDULMXDQDVWURQJO\FRUURERUDWHG$VXIILFLHQWO\FRUURERUDWHG
:DOQXW*URYHWRLQVSHFWLWVH[WHULRU$m1R7UHVSDVVLQJl                          WLSRIGUXJDFWLYLW\FDQVXSSRUWDZDUUDQWWRVHDUFKDKRPH
VLJQKXQJRQWKHEXLOGLQJ2QLWVHDVWVLGHZDVDQXQSDYHG                        8QLWHG6WDWHVY/HDNH)GWK&LU
SDWKXVHGWRUHDFKDQDSDUWPHQWEXLOGLQJEHKLQGWKH(ONLQVHVj                      7KLVFRXUWKHOGLQ8QLWHG6WDWHVY6PLWK)GWK
SURSHUW\  6WHSSLQJ RQWR WKDW SDWK %HOO VDZ D 39& SLSH                  &LUWKDWDUHOLDEOHLQIRUPDQWjVXQDGRUQHGWLSWKDWDQ
SURWUXGLQJ IURP WKH HDVW ZDOO RI  :DOQXW *URYH DW D                  LQGLYLGXDO ZDV SURGXFLQJ PDULMXDQD DW KLV KRXVH FRXSOHG
KHLJKW RI WZR RU WKUHH IHHW  7KHUH ZDV DQ RSHQ JDS RI                 ZLWKWKHSROLFHjVREVHUYDWLRQRIDPDULMXDQDSODQWRXWVLGHWKH
VRPHZKDWOHVVWKDQDQLQFKLQZLGWKDURXQGWKHH[SRVHGSLSH                       KRXVHVXSSRUWHGDZDUUDQWWRVHDUFKWKHLQWHULRU,GDW
%ULJKWOLJKWHPLWWHGIURPWKHJDS%HOODQG/LYLQJVWRQEHQW                       +HUHWKRXJKZHGHDOZLWKDQDQRQ\PRXVLQIRUPDQWjVWLS
GRZQDQGSHHUHGWKURXJKLW%HOOREVHUYHGPDULMXDQDOHDYHV                        ZH VLPLODUO\ KROG WKDW WKH WKUHH RIILFHUVj GHWHFWLRQ RI WKH
LQVLGHWKHEXLOGLQJ/LYLQJVWRQREVHUYHGJUHHQOHDYHVEXWGLG                      PDULMXDQDVPHOOLQVLGHWKHKRXVHFRUURERUDWHGWKHWLSHQRXJK
QRWLGHQWLI\WKHPPRUHSUHFLVHO\%HOOWKHQFDOOHG2IILFHUsRH                    WRHVWDEOLVKSUREDEOHFDXVHIRUDZDUUDQW7KHGUXJVDQGRWKHU
+RLQJWRWKHVFHQHDQG+RLQJDOVRVDZLGHQWLILDEOHPDULMXDQD                       HYLGHQFH REVHUYHG DQG VHL]HG IURP  7XWZLOHU RQ
OHDYHVWKURXJKWKHJDS:KLOHEHQGLQJGRZQWRORRN%HOO                          $XJXVWDUHDGPLVVLEOH
                                                                                     %HFDXVHWKHVHFRQGDIILGDYLWWRVHDUFK7XWZLOHUGDWHG
                                                                                   $XJXVWIROORZHGTXLFNO\RQWKHILUVWZDUUDQWDQG
                                                                                   SURSHUO\ UHFRXQWHG WKH DUUD\ RI LOOHJDO FRQWUDEDQG WKDW WKH
                                                                                   SROLFHIRXQGWKHUHZKHQH[HFXWLQJWKHILUVWZDUUDQWZHKROG
                                                                                   WKDWWKHVHFRQGZDUUDQWZDVDOVRVXSSRUWHGE\SUREDEOHFDXVH
    
     +LJK KHDW RXWSXWV PD\ EH D VLJQ WKDW D EXLOGLQJ KRXVHV D PDULMXDQD

JURZLQJ RSHUDWLRQ VLQFH WKH LQGRRU FXOWLYDWLRQ RI PDULMXDQD FRPPRQO\

HPSOR\V   KLJKHQHUJ\   ODPSV   .\OOR Y 8QLWHG 6WDWHV      86      


    8QLWHG6WDWHVY                   1RV            1RV                         8QLWHG6WDWHVY          
      (ONLQVHWDO                                                                                                        (ONLQVHWDO

  7KH(ONLQVHVGLGQRWGLVSXWHEHORZWKHDIILGDYLWjVVWDWHPHQW             KHDUG D VRXQG IURP ZLWKLQ WKH (ONLQVHVj EXLOGLQJ WKDW KH
WKDW WKH RIILFHUVj H[SHULHQFH SHUPLWWHG WKHP DFFXUDWHO\ WR          EHOLHYHGFDPHIURPEDOODVWVRSHUDWLQJLQVLGH
LGHQWLI\WKHVPHOORIPDULMXDQD7KHGLVWULFWFRXUWjVDQDO\VLV
FDVWQRGRXEWRQWKHDVVHUWLRQ+HQFHLWDOVRUHPDLQV                      $IWHU PDNLQJ WKHVH REVHUYDWLRQV %HOO DQG /LYLQJVWRQ
                                                                           UHPDLQHGQHDU:DOQXW*URYHWRFRQWLQXHVXUYHLOOLQJLW
   7KHDIILGDYLWDOVRVWDWHGWKDWSROLFHGHWHFWHGDVWURQJRGRU            ZKLOH RWKHU RIILFHUV SUHSDUHG D ZDUUDQW DSSOLFDWLRQ IRU WKH
RIPDULMXDQDLQWKHKRXVH7KHGLVWULFWFRXUWjVVXSSUHVVLRQ               EXLOGLQJ  +RLQJ OHIW WR MRLQ D VHFRQG JURXS RI RIILFHUV
RUGHUGLVFXVVHGWKLVLQVHYHUDOSODFHVDVDIDFWXDOGLVSXWH6HH          LQYHVWLJDWLQJWKH(ONLQVHV
)6XSSGDWQ	Q7KHFRXUWIRXQG
D mVLJQLILFDQW FUHGLELOLW\ LVVXHl UDLVHG E\ WKH IDFW WKDW WKH       7KHQH[WPRUQLQJ2IILFHUV+RLQJ'XDQH*DU\DQG'LRQ
RIILFHUVOHIW7XWZLOHUZLWKsDPHV(ONLQVDIWHUDOOHJHGO\              &LFLQHOOLZHQWWRWKH(ONLQVHVjKRPHDW7XWZLOHU7KH\
VPHOOLQJPDULMXDQDLQVLGHOHDYLQJ&DURO(ONLQVEHKLQGLQWKH              WROG WKH (ONLQVHV WKH\ KDG UHFHLYHG D FRPSODLQW DERXW D
KRXVHGHVSLWHWKHULVNWKDWVKHPLJKWGHVWUR\HYLGHQFH,GDW            PDULMXDQDJURZDW6FRWW6WUHHWEXWsDPHV(ONLQVGHQLHGDQ\
 Q  %XW LW ZHQW QR IXUWKHU  7KH IDFW WKDW WKH FRXUW   LQYROYHPHQW ZLWK D PDULMXDQD JURZ  +H JDYH WKH RIILFHUV
UHFRJQL]HGGRXEWVDERXWWKHFUHGLELOLW\RIDVWDWHPHQWGRHV                SHUPLVVLRQ WR VHDUFK KLV KRPH DQG &DURO (ONLQV HVFRUWHG
QRWDXWKRUL]HXVWRLQIHUWKDWLWGHHPHGWKHVWDWHPHQWWREH               WKHPWKURXJKSDUWVRILW7KHRIILFHUVVDZQRFRQWUDEDQGEXW
UHFNOHVVO\ IDOVH  $V ZH KDYH VDLG WKH FRXUW GLG QRW            HDFKODWHUWHVWLILHGWKDWWKHUHZDVDVWURQJLGHQWLILDEOHRGRURI
VXPPDUL]HLWV)UDQNVKROGLQJVLQUHVSHFWWRWKH7XWZLOHU              PDULMXDQDLQWKH(ONLQVKRPH7KHRIILFHUVWKHQUHTXHVWHG
DIILGDYLWV+RZHYHUDIWHUUHYLHZLQJWKHUHOHYDQWSDUWVRIWKH            SHUPLVVLRQWRVHDUFK6FRWWsDPHV(ONLQVDJUHHGVD\LQJ
GLVWULFWFRXUWjVGLVFXVVLRQZHFRQFOXGHWKDWWKHFRXUWGLGQRW            WKDWWKHSROLFHFRXOGORRNDQ\ZKHUHWKH\ZDQWHGWR
ILQGWKHVWDWHPHQWLQWKHILUVW7XWZLOHUDIILGDYLWWKDWWKH
SROLFHVPHOOHGPDULMXDQDWREHUHFNOHVVO\DQGPDWHULDOO\IDOVH              (ONLQV WKHQ GURYH *DU\ WR 6FRWW 6WUHHW LQ KLV RZQ FDU
0RUHRYHUWKHGLVWULFWFRXUW
VXOWLPDWHOHJDOFRQFOXVLRQWKDW              FKRRVLQJ DQ LQGLUHFW FLUFXLWRXV URXWH  7KH RWKHU RIILFHUV
WKHUHGDFWHGDIILGDYLWZDVGHIHFWLYHGRHVQRWLPSO\DILQGLQJ              IROORZHGEXW&DURO(ONLQVGLGQRWDFFRPSDQ\WKHP$WRQH
WKDW WKH SROLFH OLHG DERXW VPHOOLQJ PDULMXDQD  4XLWH WKH         SRLQWGXULQJWKHGULYH(ONLQVPDGHDFHOOXODUSKRQHFDOOWRDQ
FRQWUDU\WKHGLVWULFWFRXUWPDGHDSRLQWRILQGLFDWLQJWKDWLQ            XQLGHQWLILHGLQGLYLGXDO2IILFHU*DU\WHVWLILHGWKDWKHFRXOG
LWVYLHZWKHVPHOORIPDULMXDQDQHHGQRWVDYHWKHZDUUDQW6HH
)6XSS GDW7KHFRXUWDJUHHV>ZLWKWKH8QLWHG
6WDWHV@WKDWWKHVPHOORIPDULMXDQDDORQHFRXOGEHVXIILFLHQW
                                                                               
WRVXSSO\SUREDEOHFDXVHIRUWKHLVVXDQFHRIWKHZDUUDQW               %DOODVWV DUH HOHFWULFDO GHYLFHV FRPPRQO\ XVHG WR UHJXODWH FXUUHQW

HPSKDVLVLQRULJLQDO,QD)UDQNVKHDULQJVWDWHPHQWVZLWK               IORZ WR KLJKZDWWDJH ODPSV DQG RWKHU LWHPV

HYLGHQWLDU\ VXSSRUW UHPDLQ LQ WKH DIILGDYLW LI QRW VWUXFN DV          
UHFNOHVVO\DQGPDWHULDOO\IDOVH7KHVWDWHPHQWWKDWDVWURQJ                   7HVWLPRQ\ ZDV LQFRQVLVWHQW RQ ZKHWKHU WKH RIILFHUVj LQLWLDO UHTXHVW

VPHOORIPDULMXDQDZDVGHWHFWHGLQWKH(ONLQVHVjKRPHZDV                  WR VHDUFK DOVR PHQWLRQHG WKH  6FRWW DGGUHVV (ONLQV WHVWLILHG WKDW WKH

VXSSRUWHGE\WKHWKUHHRIILFHUVjWHVWLPRQ\,WUHPDLQVLQWKH             RIILFHUV DVNHG RQO\ DERXW WKH  6FRWW DGGUHVV    +RLQJ WHVWLILHG WKDW


UHGDFWHGDIILGDYLW
                                                                           (ONLQV VSHFLILFDOO\ FRQVHQWHG WR D VHDUFK RI  6FRWW   &LFLQHOOL VDLG KH
                                                                           WKRXJKW +RLQJ UHIHUUHG WR  6FRWW LQ WKH FRQYHUVDWLRQ      7KH GLVWULFW
                                                                           FRXUW IRXQG WKDW mVSHFLILF SHUPLVVLRQ ZDV RQO\ JLYHQ WR VHDUFK  6FRWW
  7KDWFRQFOXVLRQFRXSOHGZLWKWKHXQFRQWHVWHGVWDWHPHQW                  6WUHHW DW WKDW WLPHl   8QLWHG 6WDWHV Y (ONLQV  ) 6XSS G  

WKDWWKHRIILFHUVZHUHH[SHULHQFHGDWUHFRJQL]LQJWKHVPHOO               :' 7HQQ  7KH WHVWLPRQ\ FRXOG EH WDNHQ WR VXSSRUW WKLV YLHZ
                                                                           VR WKH GLVWULFW FRXUWjV ILQGLQJ LV QRW FOHDUO\ HUURQHRXV
     8QLWHG6WDWHVY                 1RV          1RV                      8QLWHG6WDWHVY      
      (ONLQVHWDO                                                                                                 (ONLQVHWDO

QRWKHDUZKDW(ONLQVVDLGEXWEHOLHYHGKHZDVVSHDNLQJWRKLV          LQIRUPDQWVWDWLQJWKDW(ONLQVZDVJURZLQJPDULMXDQDDWKLV
ZLIH                                                                  KRPH DW  7XWZLOHU DQG LQ DQ DGMDFHQW EXLOGLQJ  6HH
                                                                       (ONLQV)6XSSGDWQVHWWLQJRXWWKHDIILGDYLWjV
   2QFH(ONLQVDUULYHGKHOHGWKHRIILFHUVWKURXJK6FRWW         WH[W
ZKHUHWKH\IRXQGQRWKLQJLQFULPLQDWLQJ7KHRIILFHUVDVNHG
LIWKH\FRXOGDOVRVHDUFK6FRWWWKHRWKHUSRUWLRQRIWKH            :LWKUHVSHFWWRWKHODVWVWDWHPHQWDERYHWKHGLVWULFWFRXUW
EXLOGLQJ(ONLQVYHUEDOO\DJUHHGWRWKLVVHDUFKWKHRIILFHUV         IRXQG WKDW WKHSROLFHKDGDWLSDERXW7XWZLOHUEXWLW
WHVWLILHGWKDWKHVDLGmVXUHl                                        FDPHIURPDQDQRQ\PRXVLQIRUPDQW$VZLWKWKH1HLO
                                                                       ZDUUDQWDIILGDYLWLWKHOGWKDWWKLVZDVDPDWHULDOGLVFUHSDQF\
  :KHQ WKH RIILFHUV HPHUJHG IURP  6FRWW ZLWK sDPHV          VXJJHVWLQJUHFNOHVVIDOVLW\6HH3DUW,9VXSUD7KHFRXUW
(ONLQVWKH\VDZDQXQRFFXSLHG&DGLOODFQHZO\SDUNHGQH[W              UXOHGWKDWmWKHVWDWHPHQWFKDUDFWHUL]LQJWKHDQRQ\PRXV
WRWKHEXLOGLQJ7KHRIILFHUVUHFRJQL]HGLWDV&DURO(ONLQVjV         FDOOHUDVDFRQILGHQWLDOLQIRUPDQWlZRXOGmQRWEHFRQVLGHUHGl
FDUZKLFKKDGEHHQSDUNHGDWWKH(ONLQVKRPHWKDWPRUQLQJ            LQGHFLGLQJZKHWKHUWKHZDUUDQWZDVVXSSRUWHGE\SUREDEOH
sDPHV(ONLQVDWWHPSWHGWRXQORFNWKHGRRUWR6FRWWEXW            FDXVH,GDW:HKROGDVZHGLGLQFRQVLGHULQJWKH
FRXOGQRWILQGDPDWFKLQJNH\+HFDOOHGWRKLVZLIHZKR             1HLODIILGDYLWWKDWWKLVUXOLQJZDVFRUUHFWDVWRPDWHULDOLW\DQG
ZDVQRZLQVLGHWKHEXLOGLQJWRRSHQWKHGRRU&DURO(ONLQV           QRWFOHDUO\HUURQHRXVDVWRUHFNOHVVIDOVHKRRG
HYHQWXDOO\RSHQHGWKHVLGHGRRUDQGDGPLWWHGsDPHV(ONLQV
DQGWKHRIILFHUV                                                       7KHUHLVDTXHVWLRQWKRXJKDERXWKRZPXFKRIWKHZDUUDQW
                                                                       WH[WVKRXOGEHH[FLVHGDVDUHVXOWRIWKLVPLVUHSUHVHQWDWLRQ
  7KH RIILFHUV VHDUFKHG  6FRWW DFFRPSDQLHG E\ WKH           6LQFHWKHGLVWULFWFRXUWVSHFLILFDOO\IRXQGWKDWWKHSROLFHGLG
(ONLQVHV  7KH\ HYHQWXDOO\ IRXQG D FDELQHW ZKLFK ZKHQ         UHFHLYHDWLSZLWKWKHFRQWHQWFODLPHGLQWKHDIILGDYLWDOEHLW
RSHQHGFRQWDLQHGPHWDOWUD\VRIPDULMXDQD7KH\DOVRIRXQG           DQDQRQ\PRXVRQHLWZRXOGQRWEHDSSURSULDWHWRVWULNHDOO
SODQW FKHPLFDOV IHUWLOL]HU VFDOHV OHGJHU VKHHWV DQG RWKHU   UHIHUHQFHV WR WKH WLS IURP WKH DIILGDYLW o RQO\ WKH IDOVH
SDUDSKHUQDOLDSRVVLEO\OLQNHGWRPDULMXDQDJURZLQJ$WRQH            UHIHUHQFHWRWKHLQIRUPDQWjVmFRQILGHQWLDOlFKDUDFWHUVKRXOG
SRLQWWKHRIILFHUVWXUQHGWKHLUDWWHQWLRQWR6FRWWjVDWWLF        EHVWUXFN,WLVQRWHQWLUHO\FOHDUWRXVWKDWWKHGLVWULFWFRXUW
DQGsDPHV(ONLQVSRLQWHGRXWDODGGHUWKDWWKHSROLFHFRXOG            SURFHHGHGLQWKLVZD\VLQFHLWGLGQRWVXPPDUL]HWKHFRQWHQWV
XVHWRDFFHVVWKDWDUHD,QWKHDWWLFWKHRIILFHUVIRXQGVHYHUDO      RI WKH UHGDFWHG  7XWZLOHU DIILGDYLW DIWHU ILQLVKLQJ LWV
HOHFWULFOLJKWV                                                     DQDO\VLV  +RZHYHU ZH EHOLHYH WKDW WKLV DSSURDFK LV
                                                                       SUHVFULEHG E\ )UDQNV Y 'HODZDUH  ,Q WKDW GHFLVLRQ WKH
  'XULQJWKHVHDUFKWKHRIILFHUVFDPHWRVXVSHFWWKDWWKHUH            6XSUHPH &RXUW PDGH FOHDU WKDW D VKRZLQJ RI D )UDQNV
ZDVDKLGGHQVSDFHEHWZHHQWKHZDOOVRIDQG6FRWW             YLRODWLRQUHTXLUHVQRPRUHRUOHVVWKDQWKDWmWKHDIILGDYLWjV
(ONLQVDGPLWWHGWKDWWKHUHZDVVXFKDVSDFH:KHQLWEHFDPH           IDOVH PDWHULDO >EH@ VHW WR RQH VLGHl ZKLOH mWKH DIILGDYLWjV
FOHDUWKDWWKHRIILFHUVLQWHQGHGWRRSHQDKROHLQWKHZDOOWR         UHPDLQLQJ FRQWHQWl LV DQDO\]HG WR VHH ZKHWKHU LW FUHDWHV
DFFHVVLW(ONLQVSRLQWHGRXWDVSRWZKHUHWKHKROHFRXOGEH           SUREDEOHFDXVH86DWVHH/D)DYH6HDUFKDQG
PDGH ZLWK WKH OHDVW GDPDJH WR WKH EXLOGLQJ  7KH RIILFHUV    6HL]XUHFDWSQm,WZRXOGVHHPWKDW>XQGHU
IRXQGDKLGGHQURRPFRQWDLQLQJDJUHDWGHDORIHTXLSPHQW               )UDQNV@ HYHQ LI IDOVH DQG WUXH VWDWHPHQWV DUH FRPPLQJOHG
XVHGLQJURZLQJPDULMXDQD5HPQDQWVRIPDULMXDQDJURZLQJ              RQO\ WKH IDOVH SDUW QHHG EH GLVUHJDUGHGl  7KHUHIRUH WKH
ZHUHYLVLEOHRQWKHIORRU                                           SURSHUO\UHGDFWHGDIILGDYLWLQFOXGHVDUHIHUHQFHWRDPHUHO\
                                                                       DQRQ\PRXVWLSDERXWPDULMXDQDJURZLQJDW7XWZLOHU
    8QLWHG6WDWHVY                    1RV            1RV                     8QLWHG6WDWHVY       
      (ONLQVHWDO                                                                                                     (ONLQVHWDO

FLUFXPVWDQFHVH[LVWHGWRVXSSRUWDZDUUDQWOHVVHQWU\LQWRWKH                 7KHRIILFHUVWKHQDVNHG(ONLQVIRUSHUPLVVLRQWRVHDUFK
EXLOGLQJIRUWKHSXUSRVHRIVHFXULQJLW                                1HLO(ONLQVDWILUVWDJUHHGWRWKHVHDUFKEXWWKHQYHUEDOO\
                                                                            GHFOLQHGDQGDVNHGWRVSHDNZLWKKLVDWWRUQH\7KHRIILFHUV
   ,W IROORZV WKDW HYLGHQFH WKDW WKH SROLFH REVHUYHG ZKLOH          WHVWLILHGWKDW(ONLQVVDLGWKDWDVHDUFKRI1HLOZRXOGRQO\
VHFXULQJWKHSUHPLVHVLVDGPLVVLEOHDQGZDVSURSHUO\LQFOXGHG               PDNH WKLQJV KDUGHU IRU KLPVHOI  7KH (ONLQVHV QRZ
LQWKHZDUUDQWDIILGDYLWWRVHDUFK:DOQXW*URYH6HH                  KDQGFXIIHG ZHUH WDNHQ WR WKH SROLFH VWDWLRQ DURXQG 
$UL]RQDY+LFNV86VWDWLQJWKDW                 DP  2IILFHUV +RLQJ *DU\ DQG &LFLQHOOL EHJDQ SUHSDULQJ
YLVXDOLQVSHFWLRQRILWHPVZKLFKFRPHLQWRDQRIILFHUjVYLHZ                DIILGDYLWV IRU ZDUUDQWV WR VHDUFK  1HLO  :DOQXW
ZKLOHKHLVYDOLGO\VHDUFKLQJDKRXVHjVLQWHULRUIRUDVXVSHFW              *URYHDQGWKH(ONLQVHVjKRPHDW7XWZLOHU
SXUVXDQW WR H[LJHQW FLUFXPVWDQFHV GRHV QRW FRQVWLWXWH DQ
LOOHJDOVHDUFK+HUHWKHSROLFHREVHUYHGDODUJHQXPEHURI                 :KLOHWKHDIILGDYLWVZHUHEHLQJSUHSDUHG2IILFHU%HOODQG
PDULMXDQD SODQWV ZKLOH LQVLGH WKH EXLOGLQJ  7KLV SODLQO\           &DSWDLQ/LYLQJVWRQZHUHDW:DOQXW*URYHZDWFKLQJWKH
HVWDEOLVKHGSUREDEOHFDXVHWRVHDUFK:DOQXW*URYHIRU                  ORFDWLRQIURPWKHLUFDU$WDURXQGQRRQDFDUFRQWDLQLQJWZR
PDULMXDQDDQGGUXJSDUDSKHUQDOLD+HQFHWKHZDUUDQWZDV                    +LVSDQLFPDOHVGURYHXSWRWKHEXLOGLQJ7KHFDUVWRSSHG
YDOLG  :H QHHG QRW FRQVLGHU WKH GLVWULFW FRXUWjV RWKHU            FORVH WR WKH EXLOGLQJjV HQWUDQFH  %\ WKLV WLPH %HOO DQG
FRQWHVWHG )UDQNV UXOLQJV ZLWK UHVSHFW WR WKH  :DOQXW            /LYLQJVWRQKDGOHDUQHGRIWKHDUUHVWVRIWKH(ONLQVHV7KH\
*URYHDIILGDYLW                                                            EHJDQWRGULYHWRZDUGWKHVWRSSHGFDULQWHQGLQJWRNHHSWKH
                                                                            RFFXSDQWV IURP HQWHULQJ  :DOQXW *URYH  2QH RI WKH
                                  9,                                       RFFXSDQWVODWHULGHQWLILHGDVsHVXV0RUDOHVJRWRXWRIWKHFDU
                                                                            DQGHQWHUHGWKHEXLOGLQJ7KHRIILFHUVSXOOHGXSQH[WWRWKH
  7KHJRYHUQPHQWQH[WDUJXHVWKDWWKHGLVWULFWFRXUWHUUHGE\               FDUDQGGHWDLQHGWKHUHPDLQLQJRFFXSDQW5DXO6DQGRYDO$V
KROGLQJ LQDGHTXDWH WKH WZR DIILGDYLWV XVHG WR SURFXUH                WKH\GHWDLQHG6DQGRYDO0RUDOHVH[LWHG:DOQXW*URYH
ZDUUDQWVWRVHDUFKWKH(ONLQVHVjKRPHDW7XWZLOHU                     VDZWKHRIILFHUVGHWDLQLQJKLVFROOHDJXHDQGZHQWEDFNLQVLGH
                                                                            ORFNLQJWKHGRRU/LYLQJVWRQZDVZHDULQJDSROLFHVKLUWDQG
  7KH ILUVW DIILGDYLW GDWHG $XJXVW   VWDWHG                FDPRXIODJHSDQWVZKHQ0RUDOHVVDZKLP
RIILFHUVYLVLWHGsDPHV(ONLQVjVKRPHDW7XWZLOHUWR
VSHDNZLWKKLPDERXWDFRPSODLQWWKDW(ONLQVZDVJURZLQJ                      %HOOWKHQUDGLRHG2IILFHU+RLQJWRVHHNDGYLFHDERXWKRZ
PDULMXDQD DW  6FRWW 6WUHHW  (ONLQV WKHQ LQYLWHG WKH         WR VHFXUH WKH EXLOGLQJ  +RLQJ HYHQWXDOO\ FRQWDFWHG D VWDWH
RIILFHUVLQVLGHWKHRIILFHUVFRXOGVPHOODVWURQJRGRURI              SURVHFXWRU7KHSURVHFXWRUDGYLVHGWKHRIILFHUVWRHQWHU
PDULMXDQD LQ WKH KRXVH  WKH RIILFHUV KDG VXEVWDQWLDO            :DOQXW *URYH UHPRYH WKH PDQ LQVLGH LW DQG ZDLW IRU D
H[SHULHQFH LGHQWLI\LQJ WKH VPHOO RI PDULMXDQD DQG  WKH          ZDUUDQW
RIILFHUV KDG UHFHLYHG D WLS IURP D m&,l FRQILGHQWLDO
                                                                              7KH RIILFHUV HQWHUHG  :DOQXW *URYH E\ IRUFLQJ WKH
                                                                            ORFNHG GRRU  ,QVLGH  WKH EXLOGLQJ WKH\ IRXQG IRXU PHQ
                                                                          LQFOXGLQJ0RUDOHV7KH\DOVRREVHUYHGDQH[WHQVLYHDUUD\RI
       $V D ILQDO FRQVLGHUDWLRQ VXSSRUWLQJ WKH ZDUUDQWOHVV HQWU\ KHUH ZH
                                                                            PDULMXDQDSODQWVDVZHOODVWZRVKRWJXQV7KHSROLFHWKHQOHIW
QRWH WKDW WKH SROLFH KDG DOUHDG\ DSSOLHG IRU D ZDUUDQW ZKHQ WKH FDU GURYH
XS WR  :DOQXW *URYH 7KXV WKLV ZDV QRW D FDVH ZKHUH WKH SROLFH
                                                                            WKHEXLOGLQJEXWRQHRIWKHPHQWKH\KDGVHL]HGWROGWKHP
FKRVH WR IRUHJR VHHNLQJ D ZDUUDQW mLQ WKH KRSH WKDW H[LJHQW FLUFXPVWDQFHV   WKDWWZRPRUHPHQZHUHLQVLGH7KHSROLFHUHHQWHUHGWKH
ZRXOG DULVHl 6DQJLQHWR0LUDQGD  )G DW  TXRWLQJ 8QLWHG           EXLOGLQJWZLFHWRVHDUFKIRURWKHUSHUVRQV8VLQJDSROLFH
6WDWHV Y 6RFH\  )G   '& &LU 
     8QLWHG6WDWHVY                1RV         1RV                     8QLWHG6WDWHVY      
      (ONLQVHWDO                                                                                              (ONLQVHWDO

GRJWKH\HYHQWXDOO\XQFRYHUHGDVSDFHLQWKHFHLOLQJZKHUH            6LPLODUO\LQ8QLWHG6WDWHVY8NRPDGX)GWK
WZRDGGLWLRQDOPHQZHUHKLGLQJ7KHRIILFHUVDUUHVWHGDOOVL[       &LUWKHFRXUWKHOGWKDWSROLFHKDGDUHDVRQDEOHEHOLHI
PHQ                                                                WKDW HYLGHQFH ZDV OLNHO\ WR EH GHVWUR\HG ZKHQ VXVSHFWV
                                                                     RSHQHGXSDVKLSPHQW RI GUXJVIURPZKLFKWKHSROLFHKDG
   7KH RIILFHUV REWDLQHG WKH WKUHH VHDUFK ZDUUDQWV WKDW       UHPRYHGPRVWRIWKHGUXJVDQGLQZKLFKWKH\KDGSODQWHGD
DIWHUQRRQ DQG H[HFXWHG WKHP ODWHU RQ $XJXVW   7KHLU     EHHSHU  7KH YLVLEO\ DOWHUHG VKLSPHQW WKH FRXUW UHDVRQHG
VHDUFK RI  :DOQXW *URYH XQFRYHUHG DQ H[WHQVLYH            ZRXOGFDXVHWKHVXVSHFWVWRUHDOL]HSROLFHZHUHRQWKHLUWUDLO
PDULMXDQDJURZLQJRSHUDWLRQLQFOXGLQJDSSUR[LPDWHO\            DQGWRWU\WRGHVWUR\HYLGHQFH,GDW7KHFRXUWZHQW
PDULMXDQDSODQWVDQGGR]HQVRIKLJKLQWHQVLW\JURZLQJOLJKWV        RQ WR KROG WKDW H[LJHQW FLUFXPVWDQFHV H[LVWHG WR VXSSRUW D
$W1HLOWKHRIILFHUVIRXQGOLYHPDULMXDQDSODQWVDQG         ZDUUDQWOHVVHQWU\WRSUHVHUYHWKDWHYLGHQFH,GDW
KDUYHVWHGSODQWV7KH\DOVRDUUHVWHGWZRPHQIRXQGLQ
WKH EXLOGLQJ DQG VHL]HG VRPH ZHDSRQV  $W WKH (ONLQVHVj        &RQYHUVHO\LQ8QLWHG6WDWHVY5DGND)GWK
KRPHDW7XWZLOHUWKHSROLFHDJDLQGLVFRYHUHGDQDUUD\          &LUWKLVFRXUWKHOGWKDWQRH[LJHQWFLUFXPVWDQFHVDURVH
RIFRQWUDEDQG7KH\IRXQGHYLGHQFHRIDGRUPDQWPDULMXDQD           WRSHUPLWDZDUUDQWOHVVVHDUFKRIDVXVSHFWHGGUXJKRXVHZKHQ
JURZLQJ RSHUDWLRQ LQ WKH (ONLQVHVj DWWLF IRXU SRXQGV RI     SROLFH DUUHVWHG D FRQIHGHUDWH RI WKH KRXVHjV RFFXSDQWV DQ
PDULMXDQDLQDEDJLQVLGHDZDOODQGDTXDQWLW\RIFRFDLQHRQ       HLJKWKRIDPLOHIURPWKHKRXVH7KHFRXUWVWDWHGWKDWWKH
DVWDLUZD\OHDGLQJWRWKHDWWLF7KHIROORZLQJGD\DGLIIHUHQW    LQWHUYHQLQJJURXQG ZDVKHDYLO\ZRRGHGDQGWKHUHZDVQR
WHDP RI RIILFHUV REWDLQHG D VHFRQG ZDUUDQW WR VHDUFK    VLJQmWKDWWKHHQIRUFHPHQWDFWLYLW\RXWVLGHWKHSUHPLVHVZRXOG
7XWZLOHUIRUKLGGHQFRPSDUWPHQWVEXWIRXQGQRWKLQJ,QWKH         KDYHFRPHWRWKHDWWHQWLRQRIDQ\RQHZKRPLJKWEHRQWKH
GD\VWKDWIROORZHGWKHSROLFHREWDLQHGVHYHUDORWKHUZDUUDQWV        SURSHUW\l,GDW7KLVmPHUHSRVVLELOLW\lRIGHVWUXFWLRQ
WR VHDUFK SURSHUWLHV FRQWUROOHG E\ WKH (ONLQVHV EXW WKRVH   RIGUXJHYLGHQFHLWREVHUYHGZDVQRWDVXIILFLHQWEDVLVIRUD
VHDUFKHVDUHQRWUHOHYDQWKHUH                                     ZDUUDQWOHVVHQWU\,GVHHDOVR8QLWHG6WDWHVY+DGGL[
                                                                     )G   WK &LU  KROGLQJ QR H[LJHQW
  sDPHVDQG&DURO(ONLQVZHUHLQGLFWHGWKHQUHLQGLFWHGIRU        FLUFXPVWDQFHV DURVH ZKHQ SROLFH VDZ PDULMXDQD SODQWV
D UDQJH RI GUXJ RIIHQVHV LQYROYLQJ WKH SRVVHVVLRQ            VXUURXQGLQJ GHIHQGDQWjV KRXVH WKHQ NQRFNHG RQ KLV GRRU
PDQXIDFWXUHDQGGLVWULEXWLRQRIPDULMXDQDDVZHOODVPRQH\         SROLFHGLGQRWNQRZZKHWKHUGHIHQGDQWZDVKRPHZKHQWKH\
ODXQGHULQJDQGILUHDUPVSRVVHVVLRQ                                 HQWHUHGZLWKRXWZDUUDQWDQGWKHPHUHIDFWWKDWGUXJVZHUH
                                                                     LQYROYHGGLGQRWSURYLGHmDQREMHFWLYHO\UHDVRQDEOHEDVLVlIRU
  7KH(ONLQVHVPRYHGWRVXSSUHVVWKHHYLGHQFHVHL]HGIURP            EHOLHYLQJWKDWHYLGHQFHZRXOGEHGHVWUR\HGTXRWLQJ5DGND
WKHLU EXLOGLQJV DQG UHTXHVWHG DQ HYLGHQWLDU\ KHDULQJ XQGHU    )GDW
)UDQNVY'HODZDUH86WRFKDOOHQJHWKH
VHDUFKZDUUDQWDIILGDYLWV$IWHUFRQGXFWLQJDQLQLWLDOKHDULQJ        +HUHLWZDVFOHDUWKDWWKHPDQZKRHQWHUHG:DOQXW
RQ)RXUWK$PHQGPHQWVWDQGLQJWKHGLVWULFWFRXUWKHOGWKH            *URYH ZDV DZDUH RI WKH FORVH SUHVHQFH RI SROLFH ZKHQ KH
UHTXHVWHG )UDQNV KHDULQJ  ,W KHDUG WHVWLPRQ\ DERXW WKH      VSRWWHGWKHPRXWVLGHGHWDLQLQJKLVFROOHDJXH+LVREVHUYDWLRQ
LQYHVWLJDWLRQDQGVHDUFKHVRYHUVHYHUDOGD\V                       RIWKHSROLFHDQGUHHQWU\LQWRWKHEXLOGLQJmKLJKWDLO>LQJ@LW
                                                                     LQVLGHl LQ WKH ZRUGV RI RQH RI WKH RIILFHUV SURYLGHG DQ
  ,QDSXEOLVKHGVXSSUHVVLRQRUGHUWKHGLVWULFWFRXUWXSKHOG        REMHFWLYH EDVLV IRU IHDULQJ WKH GHVWUXFWLRQ RI UHOHYDQW
VRPHRIWKHVHDUFKHVEXWLQYDOLGDWHGRWKHUV)LUVWWKHFRXUW        HYLGHQFH QDPHO\ WKH LOOHJDO PDULMXDQD WKDW WKH SROLFH KDG
FRQVLGHUHGDWOHQJWKWKHDGPLVVLELOLW\RIWKHWKHUPDOLPDJLQJ        REVHUYHG LQVLGH WKH EXLOGLQJ  :H KROG WKDW H[LJHQW
    8QLWHG6WDWHVY                  1RV           1RV                        8QLWHG6WDWHVY         
      (ONLQVHWDO                                                                                                     (ONLQVHWDO

HYLGHQFH DQG VR VWLOO IDLOHG WKH VHFRQG SDUW RI WKH H[LJHQW   GDWD,WKHOGWKDWWKHSROLFHXVHRIWKHUPDOLPDJHUVWRVFDQWKH
FLUFXPVWDQFHVWHVW                                                    (ONLQVHVjEXLOGLQJVZLWKRXWDZDUUDQWZDVDYLRODWLRQRIWKH
                                                                         )RXUWK $PHQGPHQW DQG H[FOXGHG DOO WKHUPDO LPDJLQJ
  :H GLVDJUHH ZLWK WKLV FRQFOXVLRQ DV ZHOO  +HUH QR            HYLGHQFH8QLWHG6WDWHVY(ONLQV)6XSSG
DGGLWLRQDOHYLGHQFHRIOLNHO\GHVWUXFWLRQZDVQHHGHG7KLV              :' 7HQQ   +RZHYHU WKH FRXUW KHOG WKDW sDPHV
FRXUW KDV VHYHUDO WLPHV DSSOLHG WKH H[LJHQW FLUFXPVWDQFHV         (ONLQVYDOLGO\FRQVHQWHGWRWKHVHDUFKHVRIDQG6FRWW
GRFWULQH LQ VLWXDWLRQV ZKHUH VXVSHFWV KDG UHDG\ DFFHVV WR        UHQGHULQJWKHHYLGHQFHVHL]HGWKHUHDGPLVVLEOH,GDW
HYLGHQFH RI GUXJ FULPHV  7KH GHFLVLRQV HPSKDVL]H WKH            1H[WWKHFRXUWKHOGWKDWWKHSROLFHjVZDUUDQWOHVVHQWU\LQWR
TXHVWLRQZKHWKHULPPHGLDWHO\SULRUWRWKHZDUUDQWOHVVVHDUFK           :DOQXW*URYHRQ$XJXVWZDVQRWMXVWLILHGE\
SROLFH KDG REMHFWLYH JURXQGV WR EHOLHYH WKDW VXVSHFWV ZHUH       H[LJHQW FLUFXPVWDQFHV  ,G DW   )LQDOO\ SXUVXDQW WR
DZDUHWKDWSROLFHZHUHFORVHRQWKHLUWUDLO:KHQWKHDQVZHU            )UDQNV WKH GLVWULFW FRXUW HYDOXDWHG WKH YDULRXV ZDUUDQW
WR WKLV TXHVWLRQ LV \HV WKLV FRXUW KDV UHJXODUO\ KHOG WKDW    DIILGDYLWV  ,W KHOG VRPH VWDWHPHQWV LQ HDFK DIILGDYLW WR EH
H[LJHQWFLUFXPVWDQFHVH[LVWHGWRVXSSRUWDZDUUDQWOHVVVHDUFK            PDWHULDO PLVUHSUHVHQWDWLRQV DQG H[FOXGHG WKHP IURP
RIWKHORFDWLRQLQTXHVWLRQ                                             FRQVLGHUDWLRQ$IWHUUHGDFWLQJWKHDIILGDYLWVWKHFRXUWKHOG
                                                                         WKDWWKHDIILGDYLWIRU1HLOVWLOOHVWDEOLVKHGSUREDEOHFDXVH
   7KXV LQ 6DQJLQHWR0LUDQGD WKH FRXUW KHOG WKDW H[LJHQW         ,GDW+RZHYHULWKHOGWKDWWKHUHGDFWHGDIILGDYLWVIRU
FLUFXPVWDQFHV ZHUH SUHVHQW ZKHQ SROLFH ZKR KDG VWURQJ            :DOQXW*URYHDQG7XWZLOHUZHUHLQVXIILFLHQWWR
UHDVRQWRWKLQNDVXVSHFWKDGGUXJVLQDQDSDUWPHQWODZIXOO\            HVWDEOLVKSUREDEOHFDXVHDQGH[FOXGHGWKHHYLGHQFHVHL]HG
DUUHVWHGWKHVXVSHFWjVFROOHDJXHZKRKDGOHIWWKHDSDUWPHQW             IURPWKRVHSODFHV,GDW
RQDEULHIHUUDQGGXULQJWKHQHJRWLDWLRQRIDGUXJGHDO
)G DW   '($ DJHQWV KDG TXHVWLRQHG WKH VXVSHFW           7KH (ONLQVHV HQWHUHG FRQGLWLRQDO JXLOW\ SOHDV WR FKDUJHV
HDUOLHU WKDW GD\  7KH FRXUW FRQFOXGHG WKDW XQGHU WKHVH         LQYROYLQJWKHGUXJVVHL]HGDW6FRWWDQG1HLOFUHDWLQJ
FLUFXPVWDQFHVSROLFHFRXOGUHDVRQDEO\EHOLHYHWKHFRQWLQXHG             DV WR WKHP DQ DSSHDODEOH ILQDO GHFLVLRQ  (DFK SDUW\ WKHQ
DEVHQFHRIWKHVXVSHFWjVFROOHDJXHZRXOGDOHUWWKHVXVSHFWWKDW          DSSHDOHGWKHGLVWULFWFRXUWjVDGYHUVHUXOLQJVWRWKLVFRXUW
SROLFHZHUHRQWKHLUWUDLOWKHUHE\SURPSWLQJKLPWRGHVWUR\
QDUFRWLFV EHIRUH WKH SROLFH FRXOG REWDLQ D ZDUUDQW  ,G DW                                       ,,

                                                                           7KHJRYHUQPHQWFKDOOHQJHVWKHGLVWULFWFRXUWjVKROGLQJWKDW
  ,Q 8QLWHG 6WDWHV Y 6WUDXJKWHU  )G  WK &LU       WKHXVHRIWKHUPDOLPDJHUVWRVFDQWKH(ONLQVHVjSURSHUWLHV
WKHFRXUWKHOGWKDWH[LJHQWFLUFXPVWDQFHVZHUHSUHVHQW            ZDVD)RXUWK$PHQGPHQWVHDUFKUHTXLULQJDZDUUDQW6HH
ZKHQSROLFHNQHZWKDWVHYHUDOVXVSHFWVZHUHLQVLGHDKRXVH              )6XSSGDW
NQHZWKDWVHYHUDORIWKHLUFRFRQVSLUDWRUVKDGUHFHQWO\EHHQ
DUUHVWHG NQHZ WKDW WKH VXVSHFWV FRPPXQLFDWHG E\ FHOOXODU           $W WKH WLPH WKH EULHIV ZHUH VXEPLWWHG PRVW FLUFXLWV KDG
SKRQHDQGUHDVRQDEO\EHOLHYHGWKDWWKHVXVSHFWVLQWKHKRXVH            KHOGWKDWXVLQJDWKHUPDOLPDJHUZDVQRWDVHDUFKHYHQZKHQ
KDG D ODUJH VXSSO\ RI FRFDLQH  ,G DW   7KH FRXUW      WKHGHYLFHZDVXVHGWRVFDQWKHKRPHZKLFKUHFHLYHVWKH
HPSKDVL]HGWKDWQRPRUHWKDQWKHVHIDFWVZDVQHFHVVDU\WR
FUHDWHDUHDVRQDEOHEHOLHIWKDWWKHVXVSHFWVLQWKHKRXVHZRXOG
OHDUQRIWKHLUFRPUDGHVjDUUHVWDQGWU\WRGHVWUR\HYLGHQFH,G            
                                                                              6HH HJ 8QLWHG 6WDWHV Y .\OOR   )G  WK &LU 
                                                                         UHYjG  86   8QLWHG 6WDWHV Y 5RELQVRQ  )G  WK
                                                                         &LU  8QLWHG 6WDWHV Y ,VKPDHO  )G  WK &LU  8QLWHG
       8QLWHG6WDWHVY                 1RV                1RV                   8QLWHG6WDWHVY     
         (ONLQVHWDO                                                                                                    (ONLQVHWDO

JUHDWHVWSURWHFWLRQXQGHUWKH)RXUWK$PHQGPHQW7KH7HQWK                      EXLOGLQJ  7KH GRFWULQH RI mPDQXIDFWXUHGl H[LJHQW
&LUFXLWKDGKHOGWKDWZDUUDQWOHVVWKHUPDOLPDJLQJRIDKRPH                     FLUFXPVWDQFHVGRHVQRWDSSO\
GLGYLRODWHWKH)RXUWK$PHQGPHQWEXWWKHFRXUWHQEDQFODWHU
YDFDWHG WKDW RSLQLRQ OHDYLQJ WKH LVVXH XQUHVROYHG  6HH                  7RHVWDEOLVKWKDWWKHHYHQWVREVHUYHGDW:DOQXW*URYH
8QLWHG6WDWHVY&XVXPDQR)GWK&LU                       JDYHULVHWRH[LJHQWFLUFXPVWDQFHVWKHQWKHJRYHUQPHQWPXVW
YDFDWHG)GWK&LUHQEDQF                               VDWLVI\DWZRSDUWWHVWGHPRQVWUDWLQJDUHDVRQDEOHEHOLHI
                                                                                WKDWRWKHUSHUVRQVDUHLQVLGHWKHEXLOGLQJDQGDUHDVRQDEOH
   7KHODQGVFDSHFKDQJHGVKDUSO\RQsXQHZKHQWKH                     EHOLHIWKDWWKHVHSHUVRQVDUHOLNHO\WRGHVWUR\HYLGHQFHRID
6XSUHPH&RXUWKDQGHGGRZQ.\OORY8QLWHG6WDWHV86                      FULPH6HH8QLWHG6WDWHVY%DWHV)GWK&LU
ZKLFKUHFRJQL]HGVLJQLILFDQW)RXUWK$PHQGPHQW                        6DQJLQHWR0LUDQGD)GDW
OLPLWDWLRQVRQWKHXVHRIWKHUPDOLPDJHUV.\OORDQQRXQFHG
WKH FRQVWLWXWLRQDO UXOH WKDW mREWDLQLQJ E\ VHQVHHQKDQFLQJ                   $VWKHGLVWULFWFRXUWDFNQRZOHGJHGWKHFLUFXPVWDQFHVKHUH
WHFKQRORJ\DQ\LQIRUPDWLRQUHJDUGLQJWKHLQWHULRURIWKHKRPH                   VDWLVILHGWKHILUVWSDUWRIWKHWHVW3ROLFHZDWFKHGRQHRIWKH
WKDWFRXOGQRWRWKHUZLVHKDYHEHHQREWDLQHGZLWKRXWSK\VLFDO                    WZRPHQIURPWKHFDUHQWHU:DOQXW*URYHHPHUJHIURP
µLQWUXVLRQ LQWR D FRQVWLWXWLRQDOO\ SURWHFWHG DUHDj                   LWVHHWKHSROLFHGHWDLQLQJKLVFRPSDQLRQDQGWKHQUHHQWHU
FRQVWLWXWHVDVHDUFKoDWOHDVW ZKHUHWKHWHFKQRORJ\LQ                  WKHEXLOGLQJ
TXHVWLRQ LV QRW LQ JHQHUDO SXEOLF XVHl  ,G DW  TXRWLQJ
6LOYHUPDQ Y 8QLWHG 6WDWHV  86                       :KHWKHUSROLFHKDGDUHDVRQDEOHEHOLHIWKDWGHVWUXFWLRQRI
$SSO\LQJ WKLV UXOH WKH &RXUW KHOG WKDW ZKHQ SROLFH LQ WKH            PDWHULDO HYLGHQFH ZDV OLNHO\ LV DQ LVVXH UHTXLULQJ PRUH
VWUHHWXVHGDWKHUPDOLPDJHUWRGHWHFWKHDWJHQHUDWLQJDFWLYLW\                 GHWDLOHGFRQVLGHUDWLRQ&HUWDLQO\WKHSROLFHKDGDPSOHUHDVRQ
LQDGHIHQGDQWjVKRXVHWKH\HQJDJHGLQDVHDUFKUHTXLULQJD                    WR VXVSHFW WKDW  :DOQXW *URYH FRQWDLQHG PDWHULDO
ZDUUDQW,GDW                                                         HYLGHQFHRIDQLOOHJDOGUXJRSHUDWLRQ$VGLVFXVVHGLQ3DUW
                                                                                9$ VXSUD WKH\ KDG GLUHFWO\ REVHUYHG PDULMXDQD OHDYHV
  :KLOH .\OOR EURDGO\ SURWHFWV KRPHV DJDLQVW ZDUUDQWOHVV                  LQVLGH WKH EXLOGLQJ E\ SHHULQJ WKURXJK WKH H[SRVHG JDS
WKHUPDO LPDJLQJ WKH FDVH EHIRUH XV LQYROYHV WKH XVH RI D             DURXQGWKH39&SLSH7KH\NQHZWKDW:DOQXW*URYH
WKHUPDOLPDJHUWRVFDQWKH(ONLQVHVjFRPPHUFLDOEXLOGLQJV                      ZDVFRQWUROOHGE\sDPHV(ONLQVDQGWKDWPDULMXDQDKDGMXVW
7KHUH LV D UHDVRQDEOH H[SHFWDWLRQ RI SULYDF\ LQ EXVLQHVV                EHHQIRXQGLQRQHRI(ONLQVjVRWKHUEXLOGLQJV7KH\KDGDOVR
SUHPLVHV \HW LW LV OHVV WKDQ WKH UHDVRQDEOH H[SHFWDWLRQ RI            UHFHLYHG DQ DQRQ\PRXV WLS WKDW (ONLQV ZDV JURZLQJ
SULYDF\HQMR\HGE\WKHKRPH1HZ<RUNY%XUJHU86                      PDULMXDQD7KHGLVWULFWFRXUWKHOGWKDWSROLFHGLGQRWKDYHD
7KHUHLVOLWWOHIHGHUDOSUHFHGHQWRQWKH                  UHDVRQDEOHEHOLHIWKDWGUXJVZHUHSUHVHQWEXWLWVFRQFOXVLRQ
WKHUPDO LPDJLQJ RI FRPPHUFLDO SURSHUW\ DQG QRQH VLQFH                   UHVWHGRQLWVHUURQHRXVH[FOXVLRQRIWKHRIILFHUVjREVHUYDWLRQV
.\OOR                                                                         WKURXJKWKHJDS:HKDYHUHYHUVHGWKLVKROGLQJRIWKHGLVWULFW
                                                                                FRXUW DQG DOVR UHMHFW LWV FRQFOXVLRQ WKDW SROLFH KDG QR
                                                                                UHDVRQDEOHEHOLHIWKDWGUXJVZHUHSUHVHQW
6WDWHV Y 0\HUV  )G  WK &LU    8QLWHG 6WDWHV Y 3LQVRQ   
)G  WK &LU                                                         7KHGLVWULFWFRXUWKRZHYHUZHQWRQWRUXOHWKDWHYHQLIWKH
                                                                                RIILFHUVGLGKDYHDUHDVRQDEOHEHOLHIWKDWHYLGHQFHZDVLQVLGH
     
      6HH 8QLWHG 6WDWHV Y ,VKPDHO  ) 6XSS   (' 7H[
                                                                                WKHEXLOGLQJWKH\GLGQRWKDYHDUHDVRQDEOHEHOLHIWKDWWKH
 KROGLQJ WKDW ZDUUDQWOHVV WKHUPDO LPDJLQJ RI D FRPPHUFLDO EXLOGLQJ        SHUVRQ RU SHUVRQV LQVLGH ZRXOG EH OLNHO\ WR GHVWUR\ WKDW
YLRODWHG WKH )RXUWK $PHQGPHQW UHYjG  )G   WK &LU 
    8QLWHG6WDWHVY                 1RV         1RV                                8QLWHG6WDWHVY            
      (ONLQVHWDO                                                                                                          (ONLQVHWDO

VHHQPDULMXDQDLQ:DOQXW*URYHNQHZWKDWWKHEXLOGLQJ             &RXUWVVKRXOGDYRLGXQQHFHVVDU\FRQVWLWXWLRQDOTXHVWLRQV
ZDV FRQWUROOHG E\ WKH (ONLQVHV DQG KDG GLVFRYHUHG D          6SHFWRU0RWRU6HUY,QFY0F/DXJKOLQ86
PDULMXDQD JURZLQJ RSHUDWLRQ LQ DQRWKHU (ONLQVFRQWUROOHG         %RZPDQY7HQQ9DOOH\$XWK)G
EXLOGLQJ6FRWWHDUOLHUWKDWGD\0RUHRYHUHDUOLHULQWKH      WK&LU:HDUHFRQYLQFHGWKDWWKHUHVROXWLRQRIWKH
GD\ZKLOHGULYLQJZLWK2IILFHU*DU\IURPKLVKRPHWRWKH             (ONLQVHVjFDVHGRHVQRWGHSHQGRQZKHWKHU.\OORjVKROGLQJ
6FRWW6WUHHWEXLOGLQJsDPHV(ONLQVKDGPDGHDFHOOXODUSKRQH         H[WHQGVWREXVLQHVVHV7KHUHIRUHZHGRQRWUHDFKWKDWLVVXH
FDOO WR DQ XQLGHQWLILHG SHUVRQ  7KLV VXJJHVWHG WKDW          :H ZLOO VLPSO\ DVVXPH IRU WKH VDNH RI DUJXPHQW WKDW WKH
FRQIHGHUDWHV RI WKH (ONLQVHV PLJKW NQRZ WKDW SROLFH ZHUH      GLVWULFW FRXUWjV UXOLQJ ZDV FRUUHFW  (YHQ LI WKH )RXUWK
LQYHVWLJDWLQJWKHP:KHQWKHRIILFHUVVDZDFDUSXOOXSQH[W         $PHQGPHQWUHTXLUHVH[FOXGLQJWKHHYLGHQFHJDLQHGKHUHIURP
WR  :DOQXW *URYH DQG RQH RI LWV SDVVHQJHUV HQWHU WKH    WKHUPDOLPDJLQJZKLFKZHGRQRWGHFLGHWKHRIILFHUVjODWHU
EXLOGLQJWKH\KDGDVXIILFLHQWO\mSDUWLFXODUL]HGDQGREMHFWLYH       LQSHUVRQVHDUFKHVRIWKHLQWHULRUVRI6FRWW6WUHHW
EDVLVl RI VXVSLFLRQ WR GHWDLQ 6DQGRYDO WKH UHPDLQLQJ          :DOQXW*URYHDQG1HLO6WUHHWZHUHVWLOOSURSHUDV
SDVVHQJHU  8QLWHG 6WDWHV Y &RUWH]  86      ZH H[SODLQ EHORZ PDNLQJ WKH HYLGHQFH VHL]HG IURP WKRVH
7KXVWKHGHWHQWLRQZDVODZIXO                               ORFDWLRQVDGPLVVLEOHDWWULDO7KHUHIRUHWKHWKHUPDOLPDJLQJ
                                                                      HYLGHQFHLVLPPDWHULDOWRWKHXOWLPDWHLVVXHVLQWKHFDVHDQG
   7KH IDFW WKDW WKH GHWHQWLRQ RI 6DQGRYDO DSSHDUV WR KDYH   QHHGQRWEHDGGUHVVHG
DOHUWHG0RUDOHVWRWKHSUHVHQFHRISROLFHGRHVQRWUHQGHUWKH
H[LJHQW FLUFXPVWDQFHV GRFWULQH LQDSSOLFDEOH  $V ORQJ DV                                             ,,,
SROLFHUHIUDLQIURPXQUHDVRQDEO\WLSSLQJRIIVXVSHFWVWKH\
PD\XVHQRUPDOLQYHVWLJDWLYHDQGODZHQIRUFHPHQWPHDVXUHV               sDPHV(ONLQVFKDOOHQJHVWKHGLVWULFWFRXUWjVKROGLQJWKDWKH
LQWKHYLFLQLW\RIDVXVSHFWHGFULPHORFDWLRQZLWKRXWIRUIHLWLQJ      YDOLGO\ FRQVHQWHG WR WKH SROLFH VHDUFK RI  6FRWW 6WUHHW
WKHLU DELOLW\ WR SHUIRUP D ZDUUDQWOHVV VHDUFK WR VHFXUH       (ONLQV DUJXHV WKDW KLV RULJLQDO FRQVHQW WR VHDUFK GLG QRW
HYLGHQFHLIH[LJHQWFLUFXPVWDQFHVDULVH6HH(ZROVNLY&LW\        LQFOXGH6FRWWDQGWKDWDQ\DSSDUHQWFRQVHQWKHJDYHODWHU
RI %UXQVZLFN  )G   WK &LU  m>7@KH      WRVHDUFKWKDWORFDWLRQZDVFRHUFHGDQGLQYDOLG
FUHDWHGH[LJHQF\FDVHVKDYHW\SLFDOO\UHTXLUHGVRPHVKRZLQJ
RIGHOLEHUDWHFRQGXFWRQWKHSDUW RI WKHSROLFHHYLQFLQJDQ           7KH UHOHYDQW OHJDO SULQFLSOHV DUH VXPPDUL]HG LQ 8QLWHG
HIIRUWLQWHQWLRQDOO\WRHYDGHWKHZDUUDQWUHTXLUHPHQWl)RU        6WDWHVY5LDVFRV6XDUH])GWK&LU
H[DPSOHLQ6DQJLQHWR0LUDQGDWKHFRXUWKHOGWKDWH[LJHQW
FLUFXPVWDQFHV DURVH SHUPLWWLQJ D ZDUUDQWOHVV VHDUFK RI DQ       $VHDUFKPD\EHFRQGXFWHGZLWKRXWDZDUUDQWLIDSHUVRQ
DSDUWPHQWWRVHFXUHHYLGHQFHZKHQSROLFHODZIXOO\DUUHVWHG             ZLWKDSULYDF\LQWHUHVWLQWKH>SODFH@WREHVHDUFKHGJLYHV
DGDQJHURXVVXVSHFWZKRWHPSRUDULO\OHIWDGUXJWUDQVDFWLRQ             IUHH DQG YROXQWDU\ FRQVHQW  $ FRXUW ZLOO GHWHUPLQH
EHLQJFDUULHGRXWLQWKHDSDUWPHQW7KRXJKLWZDVFOHDUWKDW           ZKHWKHUFRQVHQWLVIUHHDQGYROXQWDU\E\H[DPLQLQJWKH
WKH RIILFHUV UHDVRQDEO\ NQHZ ZKHQ WKH\ DUUHVWHG WKH ILUVW       WRWDOLW\ RI WKH FLUFXPVWDQFHV  ,W LV WKH *RYHUQPHQWjV
VXVSHFWWKDWRWKHUVXVSHFWVLQWKHDSDUWPHQWZRXOGH[SHFWKLP           EXUGHQ E\ D SUHSRQGHUDQFH RI WKH HYLGHQFH WR VKRZ
WR UHWXUQ WKH FRXUW IRXQG WKDW YDOLG H[LJHQW FLUFXPVWDQFHV
ZHUHSUHVHQW)GDW+HUHWKHGHWHQWLRQ
RI6DQGRYDOUHDVRQDEO\IXUWKHUHGWKHSROLFHjVQHHGVWRLQTXLUH        UHMHFWLQJ WKH GLVWULFW FRXUWjV KROGLQJ YLHZLQJ WKH WKHUPDO LPDJHU DV D
LQWRWKHJRLQJVRQDW:DOQXW*URYHDQGWRVHFXUHWKH             mSDVVLYH   DQG   QRQLQWUXVLYHl   GHYLFH   WKDW   ZRXOG   QRW   LQIULQJH   UHDVRQDEOH

                                                                      SULYDF\ H[SHFWDWLRQV LQ HLWKHU D EXVLQHVV RU D KRPH FRXUW RI DSSHDOVj

                                                                      DQDO\VLV DV DSSOLHG WR KRPHV LQFRQVLVWHQW ZLWK          .\OOR
    8QLWHG6WDWHVY                  1RV          1RV                     8QLWHG6WDWHVY     
      (ONLQVHWDO                                                                                                 (ONLQVHWDO

  WKURXJKmFOHDUDQGSRVLWLYHWHVWLPRQ\lWKDWYDOLGFRQVHQW             6HH 'XQQ  86 DW   7KH IDFW WKDW %HOO VDZ
  ZDV REWDLQHG  6HYHUDO IDFWRUV VKRXOG EH H[DPLQHG WR          PDULMXDQDZLWKLQWKHEXLOGLQJPD\WKHUHIRUHEHFRQVLGHUHGLQ
  GHWHUPLQHZKHWKHUFRQVHQWLVYDOLGLQFOXGLQJWKHDJH                GHWHUPLQLQJ ZKHWKHU H[LJHQW FLUFXPVWDQFHV ODWHU DURVH
  LQWHOOLJHQFHDQGHGXFDWLRQRIWKHLQGLYLGXDOZKHWKHUWKH            SHUPLWWLQJDZDUUDQWOHVVVHDUFKRI:DOQXW*URYH
  LQGLYLGXDO XQGHUVWDQGV WKH ULJKW WR UHIXVH WR FRQVHQW
  ZKHWKHU WKH LQGLYLGXDO XQGHUVWDQGV KLV RU KHU                                                   %
  FRQVWLWXWLRQDOULJKWVWKHOHQJWKDQGQDWXUHRIGHWHQWLRQ
  DQG WKH XVH RI FRHUFLYH RU SXQLVKLQJ FRQGXFW E\ WKH            ([LJHQWFLUFXPVWDQFHVSHUPLWWLQJSROLFHWRHQWHUDVWUXFWXUH
  SROLFH                                                               ZLWKRXWDZDUUDQWPD\DULVHZKHQHYLGHQFHRIGUXJFULPHVLV
                                                                        LQ GDQJHU RI GHVWUXFWLRQ  6HH 8QLWHG 6WDWHV Y 6DQJLQHWR
,GDWFLWDWLRQVRPLWWHG:HFDQRQO\UHYHUVHWKHGLVWULFW       0LUDQGD)GWK&LU:HUHYLHZ
FRXUWjV IDFWXDO ILQGLQJ WKDW sDPHV (ONLQV YROXQWDULO\             IRUFOHDUHUURUWKHGLVWULFWFRXUWjVIDFWXDOILQGLQJVUHODWLQJWR
FRQVHQWHGLILWLVFOHDUO\HUURQHRXV8QLWHG6WDWHVY(UZLQ          WKH H[LVWHQFH RI H[LJHQW FLUFXPVWDQFHV  8QLWHG 6WDWHV Y
)GWK&LU                                     *DLWDQ$FHYHGR  )G   WK &LU   :H
                                                                        UHYLHZLWVOHJDOFRQFOXVLRQVGHQRYR,G
   7KHGLVWULFWFRXUWGLGQRWHUULQKROGLQJWKDWsDPHV(ONLQV
ZDV FDSDEOH RI YDOLGO\ FRQVHQWLQJ WR WKH VHDUFK  9DOLG           +HUHVHYHUDORIWKHHYHQWVWKDWFRQWULEXWHGWRWKHSRVVLEOH
FRQVHQW PD\ EH JLYHQ E\ VRPHRQH ZLWK DQ DFWXDO SULYDF\         H[LVWHQFH RI H[LJHQW FLUFXPVWDQFHV ZHUH SURPSWHG E\
LQWHUHVWLQWKHSODFHWREHVHDUFKHG5LDVFRV6XDUH])G           0RUDOHVjVREVHUYDWLRQRIWKHSROLFHGHWDLQLQJKLVFRPSDQLRQ
DWRUZLWKDSSDUHQWDXWKRULW\RYHUWKDWSODFH,OOLQRLVY         6DQGRYDORXWVLGHWKHEXLOGLQJ7KHUHIRUHZHILUVWDVNZKHWKHU
5RGULJXH]  86     +HUH ZH QHHG QRW        WKHRIILFHUVjLQLWLDOGHWHQWLRQRI6DQGRYDOZDVODZIXO3ROLFH
FRQGXFWDQDSSDUHQWDXWKRULW\DQDO\VLVEHFDXVH(ONLQVSODLQO\           FDQQRW mPDQXIDFWXUHl H[LJHQW FLUFXPVWDQFHV WKURXJK
KDGDFWXDOVWDQGLQJWRFRQVHQW+HZDVWKHFKLHIFRPPHUFLDO            XQODZIXO RU XQUHDVRQDEOH DFWLRQV WKHQ LQYRNH WKRVH
WHQDQWRIWKH6FRWW6WUHHWEXLOGLQJKLVZLIHZDVWKH           FLUFXPVWDQFHVWRMXVWLI\DZDUUDQWOHVVHQWU\LQWRDEXLOGLQJ
RWKHU+HWHVWLILHGWKDWKHFDUULHGNH\VWRWKHEXLOGLQJORFNHG       6HHHJ8QLWHG6WDWHVY%XFKDQDQ)GWK
LWNHSWDJRRGGHDORIEXVLQHVVDQGSHUVRQDOSURSHUW\WKHUH           &LUKROGLQJWKDWSROLFHZLWKQRZDUUDQWLPSURSHUO\
DQG YLVLWHG LW  (ONLQV PDGH VXIILFLHQW XVH RI WKHVH OHDVHG   PDQXIDFWXUHG H[LJHQW FLUFXPVWDQFHV WR VHDUFK GHIHQGDQWjV
FRPPHUFLDOSUHPLVHVDQGVHFXUHGWKHPVXIILFLHQWO\WRHQMR\            KRXVHIRUGUXJVE\ZDONLQJXSWRKHUGRRUZLWKKHUKXVEDQG
D OHJLWLPDWH SHUVRQDO H[SHFWDWLRQ RI SULYDF\ LQ WKHP  6HH     LQKDQGFXIIVNQRFNLQJDQGRUGHULQJKHUWRRSHQGRRU
8QLWHG6WDWHV Y0DQFLQL)GVW&LU
8QLWHG 6WDWHV Y 0RVFDWLHOOR  )G   VW &LU        7KHGLVWULFWFRXUWKHOGWKDWWKHSROLFHLPSURSHUO\WLSSHGRII
YDFDWHGRQRWKHUJURXQGVE\&DUWHUY8QLWHG6WDWHV             0RUDOHVWKDWSROLFHZHUHRQKLVWUDLOE\GHWDLQLQJ6DQGRYDO
86                                                  mZLWKRXWSUREDEOHFDXVHlDQGWKDWWKHH[LJHQWFLUFXPVWDQFHV
                                                                        GRFWULQHWKHUHIRUHGLGQRWDSSO\)6XSSGDW	
   7KHJRYHUQPHQWDUJXHVWKDW(ONLQVYROXQWDULO\FRQVHQWHGWR           Q:HFRQFOXGHWKHGLVWULFWFRXUWHUUHG3ROLFHQHHGHG
D VHDUFK RI  6FRWW DW WZR GLIIHUHQW WLPHV GXULQJ WKH      UHDVRQDEOHVXVSLFLRQQRWSUREDEOHFDXVHWRGHWDLQ6DQGRYDO
RIILFHUVjLQLWLDOFRQYHUVDWLRQZLWKsDPHV(ONLQVDWKLVKRXVH           SULRUWRWKHLUVHDUFKRIWKHEXLOGLQJ6HH+RXVWRQY&ODUN
DW7XWZLOHUDQGGXULQJWKHLUODWHULQWHUDFWLRQVZLWKKLP          &RXQW\6KHULII'HSXW\)GWK&LU
DW6FRWW                                                         6XFK UHDVRQDEOH VXVSLFLRQ ZDV SUHVHQW  7KH SROLFH KDG
    8QLWHG6WDWHVY                  1RV           1RV                      8QLWHG6WDWHVY      
      (ONLQVHWDO                                                                                                   (ONLQVHWDO

WKHSHUPLVVLELOLW\RIWKHREVHUYDWLRQ'RZPHUHO\VWDWHGLQ                7KH GLVWULFW FRXUW IRXQG WKDW DW ILUVW (ONLQV VSHFLILFDOO\
GLFWXP WKDW ORRNLQJ DW EXVLQHVV SUHPLVHV ZLWK mXQLTXH             FRQVHQWHGRQO\WRDVHDUFKRI6FRWW6WUHHW$FRQVHQVXDO
VHQVRU\ GHYLFH>V@l WKDW mFRXOG SHQHWUDWH WKH ZDOOV RI             VHDUFKLVQRUPDOO\OLPLWHGE\WKHVFRSHRIWKHFRQVHQWWKDW
EXLOGLQJVlPLJKWEHDVHDUFKUHTXLULQJDZDUUDQW86DW           VXSSRUWVLW:DOWHUY8QLWHG6WDWHV86
  2IILFHU %HOO XVHG QR mXQLTXH VHQVRU\ GHYLFHl WR           SOXUDOLW\RSLQLRQ7KHHIIHFWLYHVFRSHRI(ONLQVjV
mSHQHWUDWH WKH ZDOOVl RI  :DOQXW *URYH KH VLPSO\            FRQVHQWLVQRWZKROO\FOHDUVLQFHKHUHVSRQGHGWRWKHRIILFHUVj
ORRNHGWKURXJKDQH[SRVHGJDSLQWKHZDOOZLWKKLVXQDLGHG               TXHVWLRQZLWKDEURDGUHPDUNWKDWWKH\FRXOGORRNmDQ\ZKHUH
H\H                                                                    WKH\ZDQWHGWRl%XWLQOLJKWRIWKHGLVWULFWFRXUWjVILQGLQJLW
                                                                         LVGRXEWIXOWKDWWKHVHDUFKRI6FRWW6WUHHWFDQUHVWRQWKH
   7KH(ONLQVHVGRKDYHDUHDVRQDEOHH[SHFWDWLRQRISULYDF\              FRQVHQW JLYHQ DW (ONLQVjV KRPH  +RZHYHU ZH PXVW DOVR
LQ WKH LQWHULRUV RI WKHLU EXVLQHVVHV EXW WKDW IDFW GRHV QRW   FRQVLGHU WKH LQWHUDFWLRQV EHWZHHQ WKH RIILFHUV DQG sDPHV
LQVXODWHWKRVHVSDFHVDJDLQVWSODLQYLHZREVHUYDWLRQ,Q'XQQ           (ONLQVGXULQJWKHWULSWRWKH6FRWW6WUHHWSURSHUW\DQGRQWKH
WKH 6XSUHPH &RXUW DVVXPHG WKDW WKH EDUQ LQWR ZKLFK WKH          SUHPLVHV
SROLFH SHHUHG ZDV SURWHFWHG DJDLQVW ZDUUDQWOHVV SK\VLFDO
HQWU\EXWKHOGWKDWLWZDVQRWDVHDUFKIRUWKHSROLFHWRVKLQH            7KHUH ZDV VLJQLILFDQW HYLGHQFH WKDW (ONLQV YROXQWDULO\
DIODVKOLJKWWKURXJKDQHWFRYHUHGRSHQLQJDERYHWKHEDUQjV              FRQVHQWHGWRWKHVHDUFKRI6FRWWDWWKLVWLPH(ONLQVZDV
IURQWJDWHDQGVFUXWLQL]HLWVLQWHULRU86DW             DOORZHGWRGULYHWKHRIILFHUVWR6FRWW6WUHHWLQKLVRZQFDU
                                                                         +HVKRZHGWKHRIILFHUVWKURXJKWKHRIILFHURRPVLQ6FRWW
   $Q\FRQWRUWLRQV%HOOPDGHWRSHHUWKURXJKWKHRSHQLQJGLG             6WUHHW7KHRIILFHUVDVNHG(ONLQVLIWKH\FRXOGVHHWKH
QRWFKDQJHWKHmSODLQYLHZlFKDUDFWHURIKLVREVHUYDWLRQ7KH           6FRWWSDUWRIWKHEXLOGLQJDQGKHYHUEDOO\DVVHQWHG7KHLU
IDFWmWKDWWKHSROLFHPDQPD\KDYHWRFUDQHKLVQHFNRUEHQG             WHVWLPRQ\ZKLFK(ONLQVGLGQRWFKDOOHQJHEHORZZDVWKDWKH
RYHU RU VTXDW GRHV QRW UHQGHU WKH >SODLQ YLHZ@ GRFWULQH       UHSOLHGmVXUHl(ONLQVZDVQRWKDQGFXIIHGDWWKLVWLPH7KH
LQDSSOLFDEOHVRORQJDVZKDWKHVDZZRXOGKDYHEHHQYLVLEOH             RIILFHUV GLG QRW GUDZ WKHLU ZHDSRQV ZKLOH LQ (ONLQVjV
WRDQ\FXULRXVSDVVHUE\lsDPHVY8QLWHG6WDWHV)G              SUHVHQFH(ONLQVFDOOHGWRKLVZLIHWRDGPLWWKHRIILFHUVLQWR
Q'&&LU6HHDOVR7H[DVY%URZQ               6FRWWDQGVKHGLGVR,QVLGHWKHEXLOGLQJ(ONLQVVKRZHG
86SOXUDOLW\RSLQLRQFRQFOXGLQJWKDW            WKHRIILFHUVDODGGHUWKDWWKH\FRXOGXVHWRUHDFKDQDWWLFVSDFH
VLQFHm>W@KHJHQHUDOSXEOLFFRXOGSHHULQWRWKHLQWHULRURI>DQ@         WKH\ZLVKHGWRLQVSHFW,QDGGLWLRQ(ONLQVjVHDUOLHUUHPDUNDW
DXWRPRELOHIURPDQ\QXPEHURIDQJOHV>@WKHUHLVQRUHDVRQ                7XWZLOHU WKDW WKH SROLFH FRXOG VHDUFK DQ\ZKHUH WKH\
>DQRIILFHU@VKRXOGEHSUHFOXGHGIURPREVHUYLQJDVDQRIILFHU            ZDQWHGVKHGVOLJKWRQKLVODWHULQWHUDFWLRQVZLWKWKHRIILFHUV
ZKDWZRXOGEHHQWLUHO\YLVLEOHWRKLPDVDSULYDWHFLWL]HQl            VXJJHVWLQJZLOOLQJFRRSHUDWLRQRQ(ONLQVjVSDUW
8QLWHG6WDWHVY3DFH)GWK&LU
KROGLQJWKDWSHHULQJWKURXJKVPDOORSHQLQJLQWKHEDFNRI                  (ONLQVVWDWHGLQDQDIILGDYLWWKDWRQHRIWKHRIILFHUVWRRN
ORFNHGEDUQZDVQRWDVHDUFK8QLWHG6WDWHVY:ULJKW              KLP E\ WKH DUP DQG OHG KLP WR  6FRWW 6WUHHW  +H DOVR
)G'&&LUSHUFXULDPKROGLQJWKDWVKLQLQJ            VWDWHG WKDW WKH RIILFHUV EHFDPH DJLWDWHG ZKHQ WKH\ VSRWWHG
DIODVKOLJKWWKURXJKDJDSEHWZHHQGHIHQGDQWjVFORVHGJDUDJH             &DURO (ONLQVjV FDU LQ IURQW RI WKH EXLOGLQJ DQG GHPDQGHG
GRRUVZDVQRWDVHDUFK6LQFHZHHDUOLHUFRQFOXGHGWKDW%HOO           HQWU\LQWRWKHEXLOGLQJsDPHV(ONLQVFODLPVWKDWWKHRIILFHUVj
DOVRGLGQRWYLRODWHD)RXUWK$PHQGPHQWSULYDF\LQWHUHVWE\              EHKDYLRU DW WKLV SRLQW PDGH KLP IHDU IRU KLV ZLIHjV VDIHW\
VWDQGLQJZKHUHKHVWRRGZKHQKHPDGHWKHREVHUYDWLRQKLV                7KHGLVWULFWFRXUWYLHZHG(ONLQVjVWHVWLPRQ\DVJLYLQJmVRPH
ORRNWKURXJKWKHJDSZDVQRWDVHDUFKUHTXLULQJDZDUUDQW               LQGLFDWLRQRIFRHUFLRQlEXWIRXQGWKDWKLVFODLPWKDWKHIHDUHG
       8QLWHG6WDWHVY                          1RV                  1RV                       8QLWHG6WDWHVY       
         (ONLQVHWDO                                                                                                                   (ONLQVHWDO

IRUKLVZLIHjVVDIHW\ZDVQRWMXVWLILHGE\REMHFWLYHHYLGHQFHLQ                           $PHQGPHQWLVQRWYLRODWHGZKHQSROLFHZDONLQWRSDUWVRID
WKHUHFRUG)6XSSGDW:HZLOOQRWGLVWXUEWKLV                              EXVLQHVVWKDWDUHNQRZLQJO\H[SRVHGWRWKHSXEOLF8QLWHG
UXOLQJZKLFKWKHUHFRUGVXSSRUWV$GHIHQGDQWmPXVWVKRZ                                 6WDWHVY0RUWRQ)GWK&LU
PRUH WKDQ D VXEMHFWLYH EHOLHI RI FRHUFLRQ EXW DOVR VRPH
REMHFWLYHO\LPSURSHUDFWLRQRQWKHSDUWRIWKHSROLFHlLQRUGHU                               7KH DUHD QH[W WR WKH 39& SLSH DW LVVXH LQ WKLV FDVH ZDV
WRLQYDOLGDWHFRQVHQW8QLWHG6WDWHVY&URZGHU)G                             DFFHVVLEOH WR WKH SXEOLF  %HOO YHQWXUHG RQWR D mSDWK
WK&LU6XFKDFWLRQZDVQRWSUHVHQWKHUH                                    DSSDUHQWO\ XVHG WR JDLQ DFFHVV WR DQ DSDUWPHQW EXLOGLQJ
                                                                                           EHKLQGWKH(ONLQVSURSHUW\l(ONLQV)6XSSGDW
  1H[WDVWKHGLVWULFWFRXUWREVHUYHGWKHFLUFXPVWDQFHVRI                               1RJDWHVRUIHQFHVVKLHOGHGWKHDUHDZKHUH%HOOVWRRG7KH
WKLVFDVHFRQFOXVLYHO\GHPRQVWUDWHGWKDWsDPHV(ONLQVZDV                                  DUHDZDVYLVLEOHIURPWKHVWUHHW7KH(ONLQVHVDUJXHWKDWWKH
DZDUHRIKLVULJKWWRUHIXVHFRQVHQWWRDVHDUFK2QWKHVDPH                             SDWKVKRXOGEHWUHDWHGDVSURWHFWHGFXUWLODJHLQSDUWEHFDXVH
GD\ WKDW KH DJUHHG WR WKH VHDUFKHV RI  DQG  6FRWW                        WKHUHZDVDmQRWUHVSDVVLQJlVLJQRQWKH:DOQXW*URYH
(ONLQVUHIXVHGWRDOORZSROLFHWRVHDUFKKLVSURSHUW\DW                               EXLOGLQJ  +RZHYHU WKLV FRXUW KDV UHFRJQL]HG WKDW WKH
1HLO6WUHHW                                                                            SUHVHQFH RI D QRWUHVSDVVLQJ VLJQ FDQQRW FRQIHU FXUWLODJH
                                                                                           VWDWXV RQ DQ DUHD WKDW RWKHUZLVH ODFNV LW  8QLWHG 6WDWHV Y
  ,QOLJKWRIWKHVHFLUFXPVWDQFHVWKHGLVWULFWFRXUWGLGQRW                              5DSDQRV)GWK&LUFLWLQJ2OLYHUY
FOHDUO\HUULQILQGLQJWKDWWKHHYLGHQFHRIIUHHDQGYROXQWDU\                             8QLWHG6WDWHV86
FRQVHQWRXWZHLJKHGWKHVXJJHVWLRQRIFRHUFLRQWKDWLWWKRXJKW
sDPHV (ONLQVjV WHVWLPRQ\ PLJKW KDYH UDLVHG  (YHQ LI WKH                             7KHUHPD\EHFLUFXPVWDQFHVLQZKLFKWKHDUHDDGMRLQLQJD
FRQYHUVDWLRQ EHWZHHQ (ONLQV DQG WKH RIILFHUV DW WKH (ONLQV                         EXVLQHVVVWUXFWXUHLVVXIILFLHQWO\SULYDWHWRHQMR\DSURWHFWLRQ
KRPHGLGQRWHVWDEOLVKFRQVHQWWRVHDUFK6FRWWWKHODWHU                              DQDORJRXVWRDKRPHjVFXUWLODJH:HKROGKRZHYHUWKDWHYHQ
HYHQWVDW6FRWW6WUHHWGLG+HQFHWKHLOOHJDOGUXJVDQGRWKHU                             LImEXVLQHVVFXUWLODJHlLVDYLDEOHGRFWULQHLQWKLV&LUFXLWLW
HYLGHQFHGLVFRYHUHGLQWKHEXLOGLQJDUHDGPLVVLEOH                                        GRHVQRWDSSO\KHUH7KHSDWKQH[WWR:DOQXW*URYH
                                                                                           ZDVIRU)RXUWK$PHQGPHQWSXUSRVHVDSODFHZKLFKSROLFH
                                                                                           FRXOGHQWHUXQGHUWKHmRSHQILHOGVlGRFWULQH6HH2OLYHU
                                                                                           86DW7KHUHIRUH%HOOZDVODZIXOO\SUHVHQWQH[WWR
                                                                                           WKH39&SLSHDQGWKHRSHQLQJLQWKHHDVWVLGHRI:DOQXW
                                                                                           *URYH
                                                                                                                                
                                                                                             7KHQH[WLVVXHLVWKHSHUPLVVLELOLW\RIWKHORRNLWVHOI7KH
                                                                                           GLVWULFWFRXUWKHOGWKDWZKHQ%HOOORRNHGLQWRWKHJDSDURXQG
     
      $QRWKHU IDFWRU LQ HYDOXDWLQJ D SDUW\
V NQRZOHGJH RI KLV ULJKWV LV KLV                WKHSLSHKHYLRODWHGWKH(ONLQVHVjUHDVRQDEOHH[SHFWDWLRQRI
SDVW IDPLOLDULW\ ZLWK WKH OHJDO V\VWHP         &URZGHU    )G DW         +HUH    SULYDF\LQWKHLUEXLOGLQJjVLQWHULRU)6XSSGDW
sDPHV    (ONLQV   ZDV   IDPLOLDU   ZLWK   WKH   ZRUNLQJV   RI   WKH   FULPLQDO   MXVWLFH
                                                                                           ,WFLWHG'RZLQVXSSRUWEXW'RZLVODUJHO\LQDSSRVLWHWR
V\VWHP KDYLQJ EHHQ FRQYLFWHG IRU WKUHH SULRU IHORQLHV           ,QGHHG KLV HDUOLHU

FRQYLFWLRQV \LHOGHG D VLJQLILFDQW VHDUFK DQG VHL]XUH OLWLJDWLRQ           6HH 8QLWHG
                 )G  WK &LU  DIILUPLQJ FRQYLFWLRQ LQ
6WDWHV Y (ONLQV
)RXUWK $PHQGPHQW FDVH LQYROYLQJ GUXJ DFWLYLW\ RQ sDPHV (ONLQVjV                            6HDUFK DQG 6HL]XUH $ 7UHDWLVH RQ WKH )RXUWK $PHQGPHQW  E DW 
SUHPLVHV 7KLV WRR VXSSRUWV ILQGLQJ YROXQWDU\ FRQVHQW                                    G HG 
     8QLWHG6WDWHVY                     1RV              1RV                           8QLWHG6WDWHVY        
       (ONLQVHWDO                                                                                                              (ONLQVHWDO

ZD\ZHDVNZKHWKHUWKH)RXUWK$PHQGPHQWSURKLELWHG%HOO                                                           ,9
IURP ZDONLQJ XS WR WKH SLSH  7KH (ONLQVHV DUJXH WKDW WKH
RIILFHUVFURVVHGLQWRD]RQHRISURWHFWHGmFXUWLODJHlLQRUGHU                    7KH (ONLQVHV DUJXH QH[W WKDW WKH GLVWULFW FRXUW HUUHG E\
WRSHHUWKURXJKWKHKROH7KHGLVWULFWFRXUWjVDQDO\VLVRIWKLV                KROGLQJ WKDW WKH ZDUUDQW DIILGDYLW IRU  1HLO 6WUHHW DV
LVVXHZDVVRPHZKDWRSDTXH,WGLGQRWVHSDUDWHWKHFXUWLODJH                   UHGDFWHGE\WKHFRXUWDIWHUWKHHYLGHQWLDU\KHDULQJHVWDEOLVKHG
TXHVWLRQIURPWKHTXHVWLRQZKHWKHU%HOOjVORRNWKURXJKWKH                      SUREDEOH FDXVH WR VHDUFK WKDW EXLOGLQJ  :H FRQFOXGH WKH
JDSRQFHKHZDVLQSODFHZDVLQLWVHOIDVHDUFK7KHFRXUWjV                 GLVWULFWFRXUWFRUUHFWO\XSKHOGWKHDIILGDYLWDQGVHDUFK
GLVFXVVLRQ GLG KRZHYHU FLWH 'RZ &KHP &R Y 8QLWHG
6WDWHV86'RZVWDWHGWKDWLWZDVDQRSHQ                      $W DQ HYLGHQWLDU\ KHDULQJ KHOG SXUVXDQW WR )UDQNV Y
TXHVWLRQZKHWKHUEXVLQHVVVWUXFWXUHVPD\KDYHDmFXUWLODJHl                     'HODZDUH86WKHKHDULQJFRXUWPXVWVWULNH
SURWHFWHGDJDLQVWZDUUDQWOHVVSK\VLFDOHQWU\WKHIDFWVRIWKH                  IURPWKHZDUUDQWDIILGDYLWVWDWHPHQWVWKDWWKHGHIHQGDQWFDQ
FDVH GLG QRW UHTXLUH WKH 6XSUHPH &RXUW WR GHFLGH WKDW                  SURYH E\ D SUHSRQGHUDQFH RI WKH HYLGHQFH WR EH ERWK
TXHVWLRQ,GDWQ                                                      DPDWHULDOO\IDOVHDQGEPDGHZLWKUHFNOHVVRULQWHQWLRQDO
                                                                                GLVUHJDUGIRUWKHLUIDOVLW\,IWKHUHGDFWHGDIILGDYLWSXUJHGRI
   1HLWKHU KDV WKLV FRXUW GHFLGHG ZKHWKHU WKHUH DUH                      UHFNOHVVO\ DQG PDWHULDOO\ IDOVH VWDWHPHQWV QR ORQJHU
FLUFXPVWDQFHVLQZKLFKWKHDUHDDGMRLQLQJDEXVLQHVVVWUXFWXUH                  HVWDEOLVKHV SUREDEOH FDXVH WKHQ WKH FRXUW PXVW KROG WKH
LV SURWHFWHG DJDLQVW SK\VLFDO HQWU\ OLNH WKH FXUWLODJH RI D            UHVXOWLQJVHDUFKZDUUDQWLQYDOLG,GDW
KRPH7KHUHLVSUHFHGHQWIRUVXFKDYLHZVHH8QLWHG6WDWHV
Y 6ZDUW  )G   WK &LU  DQG IRU WKH                :HUHYLHZIRUFOHDUHUURUWKHGLVWULFWFRXUWjVILQGLQJVDERXW
FRQWUDU\YLHZVHHHJ8QLWHG6WDWHVY:ROIH)6XSS                  WKHWUXWKRUIDOVLW\RIVWDWHPHQWVLQWKHDIILGDYLWDQGDERXWWKH
('3Dm>7@KHFRQFHSWRIFXUWLODJHGRHV                      UHFNOHVVFKDUDFWHURIDQ\IDOVHKRRGV6HH8QLWHG6WDWHVY
QRW DSSO\ WR EXLOGLQJV RWKHU WKDQ GZHOOLQJVl  3HRSOH Y             $\HQ)GWK&LU:HUHYLHZ
sDQLV1(G,OOVDPH                             PDWHULDOLW\GHQRYR8QLWHG6WDWHVY,SSROLWR)G
                                                                                 WK &LU   $W WKH VDPH WLPH ZH H[DPLQH WKH
   :KDWHYHU FXUWLODJH SURWHFWLRQ D EXVLQHVV PD\ UHFHLYH LQ               VWDWHPHQWVLQWKHDIILGDYLWLQOLJKWRIVHWWOHGFDQRQVIRUWKH
OLJKWRI'RZLVSUHVXPDEO\OLPLWHGE\WKH6XSUHPH&RXUWjV                       MXGLFLDOUHYLHZRIZDUUDQWDIILGDYLWODQJXDJH6XFKDIILGDYLWV
ODWHUGHFLVLRQLQ'XQQZKLFKKHOGWKDWSROLFHZHUHHQWLWOHGWR                 mDUHQRUPDOO\GUDIWHGE\QRQODZ\HUVLQWKHPLGVWRID
FURVVDEDUEHGZLUHIHQFHDQGDSSURDFKWRWKHYHU\HGJHRI                      FULPLQDO LQYHVWLJDWLRQl DQG VKRXOG EH LQWHUSUHWHG LQ mD
WKHGHIHQGDQWjVEDUQLQRUGHUWRSHHUZLWKLQXVLQJIODVKOLJKWV                 FRPPRQVHQVH PDQQHUl QRW E\ LPSRVLQJ m>W@HFKQLFDO
6HH86DWLGDWQRWLQJWKDWEDUQmZDVQRW                   UHTXLUHPHQWV RI HODERUDWH VSHFLILFLW\l  8QLWHG 6WDWHV Y
EHLQJXVHGIRULQWLPDWHDFWLYLWLHVRIWKHKRPHl0RUHRYHU                    3HOKDP)GWK&LUTXRWLQJ8QLWHG
LWLVFOHDUWKDWDUHDVWKDWDGMRLQDFRPPHUFLDOEXLOGLQJEXWDUH                6WDWHVY9HQWUHVFD860LQRU
DFFHVVLEOHWR WKH SXEOLF GR QRW UHFHLYH FXUWLODJHOLNH                  GLVFUHSDQFLHVLQWKHDIILGDYLWPD\UHIOHFWPHUHLQDGYHUWHQFH
SURWHFWLRQ   ,QGHHG HYHQ LQVLGH D EXLOGLQJ WKH )RXUWK
                                                                                    
                                                                                     7KH WH[W RI WKH DIILGDYLW LV UHSURGXFHG LQ WKH GLVWULFW FRXUWjV RSLQLRQ
                                                                               ) 6XSS G DW  Q
       7KH OHDGLQJ WUHDWLVH VWDWHV m,I SROLFH XVLQJ WKH QDNHG H\H RU HDU DUH
DEOH WR VHH RU KHDU >REMHFWV RU HYHQWV LQVLGH D EXVLQHVV@ ZKLOH ORFDWHG RQ
                                                                                    
DGMRLQLQJ SURSHUW\ RU HYHQ RQ SURSHUW\ RI WKH EXVLQHVV ZKLFK LV UHDGLO\              5HIHUHQFH WR mUHFNOHVVQHVVl KHUH DQG LQ WKH UHPDLQGHU RI WKLV
DFFHVVLEOH WR WKH JHQHUDO SXEOLF WKLV LV QRW D VHDUFKl  :D\QH 5 /D)DYH     RSLQLRQ VKRXOG EH XQGHUVWRRG WR HQFRPSDVV LQWHQWLRQDO GLVUHJDUG DV ZHOO
    8QLWHG6WDWHVY                  1RV          1RV                        8QLWHG6WDWHVY      
      (ONLQVHWDO                                                                                                    (ONLQVHWDO

RU QHJOLJHQFH UDWKHU WKDQ WKH UHFNOHVV IDOVHKRRG WKDW LV       MXVWLILHGDZDUUDQWOHVVHQWU\LQWRWKHEXLOGLQJWRSUHYHQWWKH
UHTXLUHGIRUH[FOXVLRQ6HH8QLWHG6WDWHVY6HDUF\)G          GHVWUXFWLRQRIHYLGHQFH:HDUHSHUVXDGHGE\WKHJRYHUQPHQW
WK&LU                                             LQERWKUHVSHFWVDQGUHYHUVHWKHGLVWULFWFRXUWjVKROGLQJWKDW
                                                                        WKHZDUUDQWZDVLQYDOLG
  :HFRQVLGHUWKHFKDOOHQJHGVWDWHPHQWVLQWKHDIILGDYLWIRU
1HLO6WUHHWLQGLYLGXDOO\:HEHJLQZLWKWKHVWDWHPHQWLQ                                             $
WKH DIILGDYLW WKDW SROLFH VHDUFKHG  6FRWW ZLWK sDPHV
(ONLQVjVFRQVHQWDQGIRXQGmDODUJHLQGRRUPDULMXDQDJURZ                  ,W LV VHWWOHG WKDW REVHUYDWLRQV RI mREMHFWV IDOOLQJ LQWR WKH
URRPDORQJZLWK>WZR@SRXQGVRIPDULMXDQDlZLWKLQLW,Q         SODLQYLHZRIDQRIILFHUZKRKDVDULJKWWREHLQWKHSRVLWLRQ
3DUW,,,RIWKLVRSLQLRQVXSUDZHXSKROGWKHGLVWULFWFRXUWjV         WRKDYHWKDWYLHZPD\EHLQWURGXFHGLQHYLGHQFHl+DUULV
FRQFOXVLRQ WKDW sDPHV (ONLQV YDOLGO\ FRQVHQWHG WR WKH            Y8QLWHG6WDWHV86SHUFXULDPVHH
RIILFHUVjVHDUFKRI6FRWW6WUHHW7KXVWKHGLVWULFWFRXUW         DOVR +RUWRQ Y &DOLIRUQLD  86   
SURSHUO\SHUPLWWHGWKHLQFULPLQDWLQJLWHPVGLVFRYHUHGLQWKH            KROGLQJWKDWVHL]XUHRISODLQYLHZLWHPVDOVRUHTXLUHV
6FRWWVHDUFKWREHLQFOXGHGLQWKHDIILGDYLWWRVHDUFK          RIILFHU WR KDYH ODZIXO DFFHVV WR WKH LWHPV  $SSO\LQJ WKLV
1HLO6WUHHW7KLVVWDWHPHQWZLOOUHPDLQ                               SULQFLSOHWKH6XSUHPH&RXUWKHOGLQ8QLWHG6WDWHVY'XQQ
                                                                        86WKDWSROLFHZKRXVHGDIODVKOLJKWWRORRN
  7KHDIILGDYLWIXUWKHUUHSRUWVWKDW1HLO6WUHHWLVmEHKLQGl        WKURXJK D QHWFRYHUHG RSHQLQJ LQ WKH GHIHQGDQWjV EDUQ
 6FRWW 6WUHHW ZKHUH GUXJV KDG EHHQ IRXQG  0RUH            UHYHDOLQJ HYLGHQFH RI GUXJ PDQXIDFWXULQJ ZLWKLQ GLG QRW
SUHFLVHO\ DV WKH GLVWULFW FRXUW IRXQG DQG DV WKH (ONLQVHV    WKHUHE\FRQGXFWDmVHDUFKl,GDW7KH&RXUWUHDFKHG
HPSKDVL]H  1HLO LV WR WKH UHDU DQG DW DQ DQJOH WR    WKLV FRQFOXVLRQ HYHQ WKRXJK SROLFH KDG WR HQWHU WKH
6FRWW  $QRWKHU EXLOGLQJ  1HLO LV GLUHFWO\ EHKLQG      GHIHQGDQWjV SURSHUW\ DQG FURVV VHYHUDO IHQFHV WR UHDFK WKH
6FRWW7KHGLVWULFWFRXUWGHHPHGWKLVGLVFUHSDQF\LPPDWHULDO          EDUQDQGHYHQWKRXJKWKH&RXUWDVVXPHGWKDWWKHLQWHULRURI
7KH PDWHULDOLW\ TXHVWLRQ LV FORVH EXW WKH ODQJXDJH LQ WKH     WKHEDUQZDVLWVHOISURWHFWHGDJDLQVWZDUUDQWOHVVHQWU\XQGHU
DIILGDYLWSURSHUO\FRQYH\VWKDW1HLOLVLQFORVHSUR[LPLW\          WKH)RXUWK$PHQGPHQW6HHLGDW7KH&RXUW
WRWKHGUXJORFDWLRQDW6FRWW0RUHRYHUWKHDIILGDYLW            GHWHUPLQHG WKDW ZKHQ WKH RIILFHUV ORRNHG LQWR WKH EDUQjV
DOVRVSHDNVRI1HLODVEHLQJmLQWKHUHDUlRI6FRWW            LQWHULRU WKH\ VWRRG LQ DQ DUHD WKDW IHOO XQGHU WKH VRFDOOHG
DQGWKLVLVDFFXUDWHWKH(ONLQVHV
RZQH[KLELWVVKRZWKDW          mRSHQILHOGVlGRFWULQHQRWLQWKHSURWHFWHGFXUWLODJHDERXWWKH
1HLOOLHVWRWKHEDFNRI6FRWW6WUHHW$VWDLUZD\DWWDFKHG         GHIHQGDQWjVKRPH,GDW,WIROORZHGWKDWmWKHIDFW
WR  6FRWW DSSDUHQWO\ RYHUORRNV WKH EDFN RI  1HLO        WKDWWKHREMHFWVREVHUYHGE\WKHRIILFHUVOD\ZLWKLQDQDUHD
:DUUDQW ODQJXDJH PD\ IDOO VKRUW RI WHFKQLFDO H[DFWLWXGH          WKDWZHKDYHDVVXPHGEXWQRWGHFLGHGZDVSURWHFWHGE\WKH
ZLWKRXW QHFHVVDULO\ YLRODWLQJ WKH PDWHULDOLW\ DQG VFLHQWHU        )RXUWK $PHQGPHQWl GLG QRW WUDQVIRUP WKH VFUXWLQ\ LQWR D
UHTXLUHPHQWVRI)UDQNV6HH3HOKDP)GDW,QWKLV          VHDUFK,GDW+DUULVDQG'XQQJXLGHRXUUHDVRQLQJ
FRQWH[WZHKROGWKDWWKHGLVFUHSDQF\GRHVQRWHVWDEOLVKWKH            KHUH
UHFNOHVVRULQWHQWLRQDOIDOVHKRRGUHTXLUHGE\)UDQNVHYHQLI
ZH DVVXPH WKDW WKH DIILGDYLW ODQJXDJH LV PDWHULDOO\ IDOVH                                        
ZKLFK LV QRW DW DOO REYLRXV  7KHUHIRUH WKH GLVWULFW FRXUW
SHUPLVVLEO\DOORZHGWKLVVWDWHPHQWWRUHPDLQ                           :HEHJLQE\DVNLQJZKHWKHU2IILFHU%HOOKDGmDULJKWWREH
                                                                        LQWKHSRVLWLRQlZKHUHKHZDVZKHQKHSHHUHGWKURXJKWKH
                                                                        RSHQLQJLQWKHHDVWVLGHRI:DOQXW*URYH3XWDQRWKHU
    8QLWHG6WDWHVY                  1RV          1RV                     8QLWHG6WDWHVY     
      (ONLQVHWDO                                                                                                 (ONLQVHWDO

DFWLYLW\ LQ  1HLO VLQFH WKH WLS GHDOW ZLWK WKH EXLOGLQJ      7KDWFRQFOXVLRQLQWXUQWKURZVOLJKWRQDQRWKHUSRUWLRQRI
EHKLQG6FRWWDQG1HLOZDVVXIILFLHQWO\EHKLQG              WKH DIILGDYLW  7KH DIILGDYLW DOVR VWDWHV WKDW SROLFH ZHUH
6FRWW WR EH HQFRPSDVVHG E\ WKH WLS  WKH\ KDG IRXQG       LQYHVWLJDWLQJ mDQ LQGRRU PDULMXDQD JURZ FRPSODLQW DW 
PDULMXDQD DQG JURZLQJ HTXLSPHQW LQ QHDUE\  6FRWW             6FRWWDQG1HLOl7KH(ONLQVHVDUJXHWKDWWKHUHLVQR
 sDPHV (ONLQV RZQHG ERWK  6FRWW DQG  1HLO            HYLGHQFHLQWKHUHFRUGWKDWSROLFHUHFHLYHGDFRPSODLQWDERXW
(ONLQVFRQVHQWHGWRDSROLFHVHDUFKRI1HLOEXWWKHQ            1HLO6WUHHW7KHGLVWULFWFRXUWGLGQRWH[SOLFLWO\GLVFXVV
ZLWKGUHZKLVFRQVHQWVD\LQJWKDWDVHDUFKZRXOGPDNHWKLQJV            WKH(ONLQVHVjDUJXPHQWVEXWGLGQRWVWULNHWKHVWDWHPHQWIURP
KDUGHUIRUKLPDQGWKHUHZDVDSDOOHWRXWVLGH1HLO             WKHDIILGDYLW,WVGHFLVLRQQRWWRGRVRDSSHDUVWRIROORZIURP
FRQWDLQLQJVKHHSPDQXUHIHUWLOL]HUZKLFKLVFRPPRQO\XVHG              WZRFRQFOXVLRQVUHDFKHGLQLWVRSLQLRQ)LUVWWKHFRXUWIRXQG
WRIHUWLOL]HPDULMXDQD7KHGLVWULFWFRXUWGLGQRWHUULQKROGLQJ      DVDIDFWWKDWSROLFHUHFHLYHGDQDQRQ\PRXVFRPSODLQWDERXW
WKDWWKLVUHGDFWHGDIILGDYLWHVWDEOLVKHGSUREDEOHFDXVHIRUWKH         D PDULMXDQD JURZLQJ RSHUDWLRQ LQ  6FRWW WKH VDPH
SROLFHWRVHDUFK1HLO6WUHHW,WUDLVHGmDIDLUSUREDELOLW\        EXLOGLQJ DV  6FRWW DQG WKH EXLOGLQJ EHKLQG LW  7KLV
WKDW FRQWUDEDQG RU HYLGHQFH RI D FULPHl SRVVHVVLQJ RU          ILQGLQJLVVXSSRUWHGE\WKHWHVWLPRQ\RI2IILFHU&LFLQHOOLDQG
JURZLQJPDULMXDQDZRXOGEHIRXQGWKHUH8QLWHG6WDWHVY              LVQRWFOHDUO\HUURQHRXVLQOLJKWRIWKHRWKHUUHFRUGWHVWLPRQ\
*UDKDP  )G   WK &LU  TXRWLQJ           6HFRQGDVGLVFXVVHGDERYHWKHFRXUWFRQFOXGHGWKDWLWZDV
,OOLQRLVY*DWHV86                          QRWLPSURSHUIRU)UDQNVSXUSRVHVIRUWKHRIILFHUVWRVSHDNRI
                                                                        1HLODVEHLQJEHKLQG6FRWW+HQFHWKLVVWDWHPHQW
                                 9                                     WRRUHPDLQV
   7KH8QLWHG6WDWHVFKDOOHQJHVWKHGLVWULFWFRXUWjVGHFLVLRQWR          1H[WWKHDIILGDYLWVWDWHVWKDWWKHSROLFHDVNHGsDPHV(ONLQV
VXSSUHVVWKHHYLGHQFHWDNHQIURP:DOQXW*URYH7KH                IRUFRQVHQWWRVHDUFK1HLO6WUHHWWKDW(ONLQVFRQVHQWHG
GLVWULFW FRXUW KHOG WKDW 2IILFHU %HOO YLRODWHG WKH (ONLQVHVj    DQGWKDWKHWKHQmGHFLGHGQRWWRJLYHFRQVHQW>@DGYLVLQJWKDW
H[SHFWDWLRQRISULYDF\LQ:DOQXW*URYHE\ZDONLQJXS               >GRLQJ VR@ ZRXOG RQO\ PDNH WKLQJV KDUGHU IRU KLPVHOIl
WRWKHKROHDURXQGWKHH[SRVHG39&SLSHDQGSHHULQJLQWRLW             sDPHV (ONLQV FRQWHVWV ZKHWKHU KH PDGH WKH VWDWHPHQW WKDW
ZLWKRXW mVXIILFLHQW SUREDEOH FDXVH DQG H[LJHQW                     VHDUFKLQJ1HLOZRXOGPDNHWKLQJVKDUGHUIRUKLPVHOI,I
FLUFXPVWDQFHVl)6XSSGDW,WDOVRKHOGWKDWWKH          (ONLQVGLGQRWPDNHWKHVWDWHPHQWLQFOXGLQJLQWKHDIILGDYLW
SROLFHjVZDUUDQWOHVVHQWU\WRVHFXUHWKHEXLOGLQJZDVLOOHJDO          WKH FODLP WKDW KH GLG ZRXOG VXUHO\ YLRODWH )UDQNV  7KH
,GDW(YLGHQFHJDLQHGWKURXJKWKHVHWZRDFWLRQVIRUPHG           GLVWULFWFRXUWKRZHYHUUHWDLQHGWKLVSRUWLRQRIWKHDIILGDYLW
WKH EDFNERQH RI WKH ZDUUDQW DIILGDYLW WKH SROLFH ODWHU          7KHLQFOXVLRQRIWKLVLQFULPLQDWLQJVWDWHPHQWLVVXSSRUWHGE\
VXEPLWWHGWRVHDUFK:DOQXW*URYHVRWKHFRXUWZHQWRQ             WKH WHVWLPRQ\ RI 2IILFHUV *DU\ DQG +RLQJ  7KH GLVWULFW
WRKROGWKHUHVXOWLQJZDUUDQWLQYDOLGVWDWLQJWKDWWKHDIILGDYLW      FRXUWjVDSSDUHQWILQGLQJWKDW(ONLQVPDGHWKHVWDWHPHQWLVQRW
RQFHUHGDFWHGmVKRZ>HG@QROLQNEHWZHHQ(ONLQVDQG                FOHDUO\HUURQHRXV
:DOQXW*URYHl,GDW
                                                                          7KHDIILGDYLWIXUWKHUVWDWHVWKDW6FRWWDQG1HLODUH
   7KHJRYHUQPHQWDUJXHVIRUUHYHUVDORQDOOSRLQWV)LUVWLW         mRZQHGE\sDPHV(ONLQVl,QIDFWsDPHV(ONLQVZDVDWHQDQW
FODLPV WKDW WKH SROLFH ODZIXOO\ REVHUYHG PDULMXDQD SODQWV        RIERWKSURSHUWLHVOHDVLQJWKHPIURPFRUSRUDWLRQVFRQWUROOHG
LQVLGH:DOQXW*URYHE\SHHULQJWKURXJKDJDSDURXQG                E\ KLV ZLIH  7KH GLVWULFW FRXUW KRZHYHU IRXQG WKLV
D 39& SLSH WKDW SURMHFWHG IURP WKH ZDOO RI WKH EXLOGLQJ      GLVFUHSDQF\GLGQRWYLRODWH)UDQNV)6XSSGDW
6HFRQGLWFODLPVWKDWH[LJHQWFLUFXPVWDQFHVODWHUDURVHWKDW           sDPHV(ONLQVLWIRXQGKHOGKLPVHOIRXWWRWKHSROLFHDVRQH
    8QLWHG6WDWHVY                   1RV           1RV                               8QLWHG6WDWHVY          
      (ONLQVHWDO                                                                                                             (ONLQVHWDO

ZKRKDGFRQWURORYHUWKHSURSHUWLHVDQGKLUHGWKHVHFXULW\               SROLFH7KDWLVZKDWLVNHSWmFRQILGHQWLDOl7KHGLVWULFWFRXUW
JXDUGVZKRSDWUROOHGWKHSURSHUWLHV,G7KHFRXUWIRXQGWKDW           GLGQRWHUULQGHHPLQJWKLVGLVFUHSDQF\PDWHULDO7LSVIURP
WKHVWDWHPHQWLQWKHDIILGDYLWUHIOHFWHGWKHIDFWVDVWKHRIILFHUV        NQRZQLQIRUPDQWVKDYHPRUHYDOXHWKDQWKRVHIURPXQNQRZQ
XQGHUVWRRGWKHPWREHLGLPSO\LQJWKDWLWZDVQRWDUHFNOHVV           RQHV  &RPSDUH $GDPV Y :LOOLDPV  86  
IDOVHKRRG  7KLV ILQGLQJ ZDV QRW FOHDUO\ HUURQHRXV VR WKH       XSKROGLQJ 7HUU\ VWRS EDVHG VROHO\ RQ WLS IURP NQRZQ
VWDWHPHQWUHPDLQV                                                      LQIRUPDQWZLWK)ORULGDYs/86
                                                                          LQYDOLGDWLQJ7HUU\VWRSEDVHGVROHO\RQWLSIURPDQRQ\PRXV
  1H[WWKHDIILGDYLWVWDWHVWKDWWKHRIILFHUVVSRWWHGmEHKLQG           LQIRUPDQW QRWLQJ WKDW DQ DQRQ\PRXV LQIRUPDQW FDQQRW EH
1HLODQGQH[WWR6FRWW6WUHHWlDSDOOHWWKDWFRQWDLQHG           mKHOGUHVSRQVLEOHLIKHUDOOHJDWLRQVWXUQRXWWREHIDEULFDWHGl
VRPHmEDJVRIVKHHSPDQXUHZKLFKLVXVHGLQWKHJURZLQJ             7KH GLVWLQFWLRQ LV UHOHYDQW ZKHQHYHU WLSV DUH DW LVVXH LQ D
RI PDULMXDQDl  $W WKH )UDQNV KHDULQJ WKH JRYHUQPHQW             ZDUUDQWDSSOLFDWLRQ,WVKRXOGEHUHDGLO\IDPLOLDUWRSROLFH
SUHVHQWHG H[SHUW WHVWLPRQ\ VWDWLQJ WKDW VKHHS PDQXUH LV            RIILFHUVVRGLVUHJDUGLQJLWVXJJHVWVUHFNOHVVQHVV)RUWKHVH
LQGHHG VR XVHG  7KH GLVWULFW FRXUW UHWDLQHG WKH VWDWHPHQW      UHDVRQV WKH FRXUW GLG QRW FOHDUO\ HUU LQ H[FOXGLQJ IURP WKH
SDUDSKUDVLQJLWDVDVWDWHPHQWWKDWWKHSDOOHWZDVmRXWVLGHl              DIILGDYLW WKH UHIHUHQFH WR WKH H[LVWHQFH RI D FRQILGHQWLDO
 1HLO 6WUHHW  7KH (ONLQVHV FKDOOHQJH WKLV KROGLQJ RQ         LQIRUPDQW ZKLOH UHWDLQLQJ WKH SDUW RI WKH VWDWHPHQW WKDW
DSSHDOFODLPLQJWKDWWKHVKHHSPDQXUHIHUWLOL]HUZDVFORVHUWR           UHIHUUHGWRDQDQRQ\PRXVFRPSODLQWRIGUXJDFWLYLW\LQ
WKHQHDUE\EXLOGLQJDW6FRWW6WUHHWWKDQLWZDVWR1HLO          1HLO
%HFDXVH WKH (ONLQVHV GLG QRW SUHVHQW WKLV DUJXPHQW WR WKH
GLVWULFWFRXUWLWLVQRWSURSHUO\EHIRUHXVIRUFRQVLGHUDWLRQ              7KH TXHVWLRQ WKHQ FRPHV GRZQ WR ZKHWKHU WKH UHGDFWHG
6HH8QLWHG6WDWHVY(GJH)GWK&LU              DIILGDYLW HVWDEOLVKHG SUREDEOH FDXVH  :KLOH LQ QRUPDO
SHUFXULDP7KLVVWDWHPHQWDOVRUHPDLQV                               FLUFXPVWDQFHV D ZDUUDQW DIILGDYLWjV VXIILFLHQF\ LV DVVHVVHG
                                                                          ZLWKmJUHDWGHIHUHQFHE\UHYLHZLQJFRXUWVl3HOKDP
   )LQDOO\WKHDIILGDYLWLQFOXGHGDVWDWHPHQWWKDWSROLFHKDG            )GDWTXRWLQJ6SLQHOOLY8QLWHG6WDWHV86
UHFHLYHGmLQIRUPDWLRQIURPD&,>LHFRQILGHQWLDOLQIRUPDQW@           ZHZLOOUHYLHZGHQRYRWKHVXIILFLHQF\RIWKH
WKDW(ONLQV>ZDV@JURZLQJPDULMXDQDLQ1HLOl7KH              DIILGDYLWKHUHVLQFHDWOHDVWRQHSRUWLRQRILWKDVEHHQYDOLGO\
GLVWULFWFRXUWIRXQGWKDWWKHSROLFHKDGDFWXDOO\UHFHLYHGDQ             UHGDFWHGDVUHFNOHVVO\DQGPDWHULDOO\IDOVH6HH8QLWHG6WDWHV
DQRQ\PRXVWLSWKDWPDULMXDQDZDVEHLQJJURZQLQ6FRWW                 Y0RUHKHDG)GWK&LUVHHDOVR
6WUHHWDQGmWKHEXLOGLQJEHKLQG6FRWW6WUHHWl)6XSSG            8QLWHG6WDWHVY3DOODGLQR1R:/
DW7UHDWLQJWKHDIILGDYLWjVVSHFLILFUHIHUHQFHWR1HLO          DW  WK &LU sXO\  XQSXEOLVKHG RSLQLRQ  7KH
6WUHHW DV MXVWLILDEOH LQ OLJKW RI WKH WLSjV UHIHUHQFH WR mWKH   UHGDFWHG DIILGDYLW  LQFOXGHG DW OHDVW WKH IROORZLQJ
EXLOGLQJ EHKLQGl  6FRWW 6WUHHW WKH GLVWULFW FRXUW              LQIRUPDWLRQ VXSSRUWLQJ D ZDUUDQW WR VHDUFK  1HLO
QHYHUWKHOHVV KHOG WKDW WKH UHIHUHQFH WR D mFRQILGHQWLDO             SROLFH KDG UHFHLYHG DQ DQRQ\PRXV FRPSODLQW RI GUXJ
LQIRUPDQWl LQ WKH VWDWHPHQW ZDV UHFNOHVVO\ PLVOHDGLQJ DQG
VWUXFNLWVLQFHLQIDFWSROLFHKDGRQO\UHFHLYHGDWLSIURPDQ
DQRQ\PRXVFDOOHU)6XSSGDW:HXSKROGWKLV                     
                                                                                7KH   GLVWULFW   FRXUW   HQWHUHG   FRQWHVWHG   )UDQNV   UXOLQJV   RQ   RWKHU
UXOLQJ7KHGLVWULFWFRXUWSHUPLVVLEO\IRXQGWKDWWKHSROLFHGLG         VWDWHPHQWV LQ WKH DIILGDYLW EXW ZH QHHG QRW FRQVLGHU WKHP

QRWNQRZWKHLGHQWLW\RIWKHLQIRUPDQWZKRFRPSODLQHGDERXW
                                                                              
WKH(ONLQVHVjSURSHUW\7KHSKUDVHmFRQILGHQWLDOLQIRUPDQWl                   $V SUHYLRXVO\ QRWHG ZH LJQRUH WKH WKHUPDO LPDJLQJ HYLGHQFH WKDW

KRZHYHU LPSOLHV D WLSVWHU ZKRVH LGHQWLW\ LV NQRZQ WR WKH        WKH GLVWULFW FRXUW VWUXFN IURP WKH DIILGDYLW WKRXJK ZH GR QRW GHFLGH
                                                                          ZKHWKHU WKLV HYLGHQFH ZDV FRUUHFWO\ H[FOXGHG
