                                                                                   5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
    +HOZLJHWDOY9HQFRU,QFHWDO             1R                    3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

                                                                               (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU

   $V DQ LQLWLDO PDWWHU , GR QRW EHOLHYH WKH PDMRULW\jV                          )LOH 1DPH DS

VWDWHPHQW RI WKH RFFDVLRQ DW ZKLFK %DUU VSRNH DFFXUDWHO\
FRQYH\V ZKDW WKH FRPSODLQW DOOHJHV  $FFRUGLQJ WR WKH
FRPSODLQW %DUU PHW ZLWK HPSOR\HHV RI 7UDQVLWLRQDO D                81,7('67$7(6&28572)$33($/6
FRPSDQ\UHFHQWO\DFTXLUHGE\9HQFRUZKRZHUHEHLQJODLG                                  )257+(6,;7+&,5&8,7
RIIIRUUHDVRQVXQUHODWHGWRWKH%XGJHW$FWm%DUUWROG>WKH                               BBBBBBBBBBBBBBBBB
HPSOR\HHV@ WKDW WKH\ SUREDEO\ ZRXOG KDYH EHHQ ODLG RII
DQ\ZD\ EHFDXVH WKH SURSRVHG 0HGLFDUH UHJXODWLRQV ZHUH
JRLQJWRPDNHLWGLIILFXOWIRU9HQFRUWRPDNHPRQH\DQGVWD\
SURILWDEOHl  s$ DW   +DYLQJ FOHDUHG WKDW XS , GR QRW    $ &$5/ +(/:,*RQ%HKDOI         ;
WKLQNWKDWVWDWHPHQWFDQEHUHDVRQDEO\VDLGWRJLYHULVHWRD               RI+LPVHOIDQG$OO2WKHUV          
VWURQJ LQIHUHQFH  7KH VWDWHPHQW LV QRW WKH SURGXFW RI D          6LPLODUO\6LWXDWHG*$5<           
UHDVRQHGUHSRUWRUDQDO\VLV5DWKHUWKHVWDWHPHQWLVIURPDQ                                                    1R
H[HFXWLYHDWWHPSWLQJWROHWXQKDSS\HPSOR\HHVGRZQHDV\                    %$51(6 0(5(',7+ :,/621            
6LPLODUO\ WKDW WKH SUHVLGHQW RI DQ RUJDQL]DWLRQ WR ZKLFK           %52:1 52%(57 %52:1 6             !
                                                                                                               
9HQFRUEHORQJHGWHVWLILHGLQ$SULORIWKDWLWVPHPEHUV                 .$< /87(6 6<%,/ 5                
ZHUHFRQFHUQHGDERXWVRPHRIWKHSURSRVDOVLQWKH%LOOLVRI                0(,6(/ %$5%$5$ (                 
OLWWOHVLJQLILFDQFH$WWKDWWLPHWKHILQDOIRUPRIWKH$FWZDV            6+867(5                           
QRW\HWFHUWDLQDV,QRWHGHDUOLHUWKH%LOOKDGJRQHWKURXJK                      3ODLQWLIIV$SSHOODQWV     
VHYHUDOFKDQJHVDQGLWVSDVVDJHZDVDOVR XQFHUWDLQ+RZ                                                     
WKHQFRXOG9HQFRUSUHGLFWZKDWWKHILQDOYHUVLRQRIWKH$FW                                                   
ZRXOGORRNOLNHRUKRZWKDWYHUVLRQZRXOGDIIHFWLWVUHYHQXH"                            Y                    
)LQDOO\,ILQGXQFRQYLQFLQJWKHDUJXPHQWWKDWGHIHQGDQWVKDG                                                  
DFWXDONQRZOHGJHRIWKHIDOVHRUPLVOHDGLQJQDWXUHRIWKHLU                 9(1&25 ,1& : %58&(             
VWDWHPHQWV EHFDXVH RI WKHLU VDOH RI VWRFN  &RPELQHG WKH          /816)25' : ($5/ 5(('            
GHIHQGDQWVj RZQHUVKLS RI VWRFN GXULQJ WKH FODVV SHULRG               ,,, 0,&+$(/ 5 %$55              
GHFUHDVHG E\ OHVV WKDQ ILYH SHUFHQW  6HH s$ DW                                                
0RUHRYHUGXULQJWKHFODVVSHULRGWKH\SXUFKDVHGVWRFNDV                  7+20$6 7 /$'7 s,// /
                                                                                                               
ZHOO  6DOH RI VWRFN LV QRW HYLGHQFH RI VFLHQWHU XQOHVV LW LV   )25&( s$0(6 +                    
mXQXVXDOLQVFRSHRUWLPLQJl2UDQY6WDIIRUG)G              *,//(1:$7(5 s5                  
G&LUVHHDOVR,QUH&RPVKDUH,QF6HFXULWLHV                         'HIHQGDQWV$SSHOOHHV 1
/LWJ)GWK&LU+HUHSODLQWLIIVKDYH
PDGHQRDOOHJDWLRQWKDWWKHDPRXQWVROGE\GHIHQGDQWVZDV                           $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
QRWLQOLQHZLWKSULRUSUDFWLFHV&RQVHTXHQWO\WKHDOOHJDWLRQV                 IRUWKH:HVWHUQ'LVWULFWRI.HQWXFN\DW/RXLVYLOOH
RIH[HFXWLYHVDOHVGRQRWJLYHULVHWRDVWURQJLQIHUHQFHRI                 1Rn&KDUOHV56LPSVRQ,,,&KLHI'LVWULFW
DFWXDONQRZOHGJH6HH2UDQ)GDW                                                          sXGJH

  )RUDOORIWKHIRUHJRLQJUHDVRQV,GLVVHQW,FRQFXULQWKH                           $UJXHG'HFHPEHU
GLVPLVVDORIWKHUHPDLQLQJFODLPV
                                                                                       'HFLGHGDQG)LOHG0D\

                                                                                                        
    +HOZLJHWDOY9HQFRU,QFHWDO     1R     1R              +HOZLJHWDOY9HQFRU,QFHWDO             

 %HIRUH0$57,1&KLHIsXGJH0(55,77.(11('<                ODZ RQ $XJXVW    7KH FRQFOXVLRQ E\ DQDO\VWV
      %2**61255,668+5+(,15,&+6,/(5                       UHJDUGLQJPDQDJHPHQWjVIHHOLQJVZKLFKWKH\GLGQRWDWWULEXWH
%$7&+(/'(5'$8*+75(<0225(&2/(&/$<                       WRDQ\SDUWLFXODUH[HFXWLYHZDVPDGHRQ6HSWHPEHU
             DQG*,/0$1&LUFXLWsXGJHV                        (YHQKDGWKH\RFFXUUHGDWWKHVDPHWLPH,KDUGO\WKLQNWKDW
                                                                DQ DSSURSULDWH UHDGLQJ RI WKHP LV WKDW 9HQFRU ZDV
                   BBBBBBBBBBBBBBBBB                            UHSUHVHQWLQJLWNQHZRIQRZD\WKH%XGJHW$FWFRXOGDGYHUVHO\
                                                                DIIHFWLWVRSHUDWLRQV7KHRQO\UHDVRQDEOHUHDGLQJZRXOGEH
                        &2816(/                                 WKDW MXVW DV LW VDLG 9HQFRU ZDV QRW FHUWDLQ RI WKH HIIHFW
                                                                SRVLWLYH RU QHJDWLYHRI WKH $FW DQG WKHUHIRUH KDG QRW
$5*8('  .HQQHWK s 9LDQDOH 0,/%(5* :(,66              LQFOXGHGWKH$FWLQLWVSURMHFWLRQV
%(56+$'+<1(6	/(5$&+%RFD5DWRQ)ORULGDIRU
$SSHOODQWV*UHJRU\3sRVHSK)5,(')5$1.+$55,6              3URFHHGLQJ IURP WKLV PRUH UHDVRQDEOH UHDGLQJ RI WKH
6+5,9(5 	 s$&2%621 1HZ <RUN 1HZ <RUN IRU              VWDWHPHQWV , GR QRW WKLQN WKH DOOHJDWLRQV WR ZKLFK WKH
$SSHOOHHV 21 %5,()  .HQQHWK s 9LDQDOH 0,/%(5*      PDMRULW\ SRLQWV JLYH ULVH WR D VWURQJ LQIHUHQFH WKDW
:(,66 %(56+$' +<1(6 	 /(5$&+ %RFD 5DWRQ               PDQDJHPHQW DFWXDOO\ NQHZ LWV VWDWHPHQWV ZHUH IDOVH RU
)ORULGD sDPHV ) 0LOOLPDQ &KDUOHV * 0LGGOHWRQ ,,,   PLVOHDGLQJ7KHPDMRULW\SRLQWVWRWKUHHDOOHJDWLRQVLQWKH
0,''/(721 	 5(87/,1*(5 /RXLVYLOOH .HQWXFN\               FRPSODLQW  WKDW LQ $SULO RI  WKH SUHVLGHQW RI WKH
'DYLG.HVVOHU6&+,))5,1	%$552:$<%DOD&\QZ\G               )HGHUDWLRQ RI $PHULFDQ +HDOWK 6\VWHPV WHVWLILHG WKDW WKH
3HQQV\OYDQLD$UWKXU50LOOHU+$59$5'/$:6&+22/             PHPEHUVRIKLVRUJDQL]DWLRQZKLFKLQFOXGHG9HQFRUZHUH
&DPEULGJH 0DVVDFKXVHWWV IRU $SSHOODQWV  *UHJRU\ 3     FRQFHUQHG DERXW WKH HIIHFWV WKH OHJLVODWLRQ PLJKW KDYH 
sRVHSK'DYLG%+HQQHV.LUVD3KLOOLSV)5,(')5$1.          m%DUUWROGHPSOR\HHVLQsXQHRIWKDWWKH\ZRXOGEHODLG
+$55,66+5,9(5	s$&2%6211HZ<RUN1HZ<RUN                 RIIEHFDXVHRIWKHLPSDFWRIWKH%XGJHW$FWDQGWKHµWRXJK
'DYLG % 7DFKDX 7$&+$8 0$''2; +29,286 	                WLPHVFRPLQJjWKDWµZHUHJRLQJWRPDNHLWGLIILFXOWIRU9HQFRU
',&.(16/RXLVYLOOH.HQWXFN\IRU$SSHOOHHVsDFRE+         WRPDNHPRQH\DQGVWD\SURILWDEOHjl0DM2SDWDQG
6WLOOPDQ /XLV 'H/D7RUUH (ULF 6XPPHUJUDG 86            WKDW5HHGVROGWKUHHPLOOLRQGROODUVZRUWKRIVWRFN
6(&85,7,(6 $1' (;&+$1*( :DVKLQJWRQ '& IRU
$PLFXV&XULDH
  0(55,77sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK         
                                                                     7KH   4   ZDUQHG   m&RQJUHVV    LV   FXUUHQWO\   FRQVLGHULQJ   YDULRXV
0$57,1&s'$8*+75(<0225(&2/(&/$<                    SURSRVDOV ZKLFK FRXOG UHGXFH H[SHQGLWXUHV XQGHU FHUWDLQ JRYHUQPHQW

DQG *,/0$1 ss MRLQHG  .(11('< s SS       KHDOWK   DQG   ZHOIDUH   SURJUDPV   LQFOXGLQJ   0HGLFDUH     DQG    0HGLFDLG

GHOLYHUHG D VHSDUDWH GLVVHQWLQJ RSLQLRQ ZLWK %2**6      0DQDJHPHQW FDQQRW SUHGLFW ZKHWKHU VXFK SURSRVDOV ZLOO EH DGRSWHG RU LI


1255,668+5+(,15,&+6,/(5DQG%$7&+(/'(5                    DGRSWHG ZKDW HIIHFW LI DQ\ VXFK SURSRVDOV ZRXOG KDYH RQ LWV EXVLQHVVl
                                                                s$ DW    $V LQGLFDWHG WKH ILOLQJ LV IRU WKH TXDUWHU HQGLQJ sXQH RI
ssMRLQLQJLQsXGJH.(11('<jVGLVVHQW                        WKH VLJQDWXUH VKHHW KRZHYHU LV GDWHG sXO\            7KXV WKH
                                                                ILOLQJ ZDV IRU D SHULRG HQGHG DOPRVW WZR PRQWKV EHIRUH WKH FRQIHUHQFH
                                                                UHSRUW ZDV SULQWHG DQG ZDV VLJQHG IRXU GD\V SULRU WR WKH UHSRUW
                                                                    ,W VHHPV WR PH WKDW ZH KDYH WR ORRN DW WKH VWDWHPHQW LQ WHUPV RI WKH
                                                                TXDUWHU IRU ZKLFK LW ZDV LQWHQGHGWKH TXDUWHU HQGLQJ sXQH RI UDWKHU
                                                                WKDQ WKH GDWH RQ ZKLFK LW ZDV VLJQHG         $Q\RQH UHDGLQJ WKH VWDWHPHQW
                                                                VKRXOG NQRZ WKDW WKH DQDO\VLV ZDV PDGH SULRU WR WKH HQG RI WKDW TXDUWHU
                                                                7KH PDMRULW\ FRPSOHWHO\ GLVUHJDUGV WKH IDFW WKDW WKH VWDWHPHQW LQ WKH 4
                                                                ZDV PDGH LQ UHODWLRQ WR D TXDUWHU WKDW HQGHG LQ sXQH RI 
    +HOZLJHWDOY9HQFRU,QFHWDO        1R       1R          +HOZLJHWDOY9HQFRU,QFHWDO       

6HFRQG &LUFXLW DOORZV OLDELOLW\ WR DWWDFK ZKHQ                                   BBBBBBBBBBBBBBBBB
PDQDJHPHQW LQWHQWLRQDOO\ IRVWHUHG D PLVWDNHQ EHOLHI
FRQFHUQLQJDPDWHULDOIDFWWKDWZDVLQFRUSRUDWHGLQWRDUHSRUW                                 23,1,21
RUPDQDJHPHQWDGRSWHGWKHUHSRUW,GRQRWTXDUUHOZLWK                               BBBBBBBBBBBBBBBBB
WKDW VWDWHPHQW RI 6HFRQG &LUFXLW ODZ QRU GR , WKLQN LW
LQFRQVLVWHQWZLWKZKDWZHRULJLQDOO\VDLG7KHFRPSODLQWVD\V           0(55,77&LUFXLWsXGJH7KHFRPSODLQWLQWKLVVHFXULWLHV
WKDWWKHDQDO\VWVjUHSRUWDWWULEXWHVVWDWHPHQWVWRLQGLYLGXDOV       FODVVDFWLRQIHDWXUHVDOOHJDWLRQVRILQVLGHUWUDGLQJIUDXGXOHQW
KRZHYHUWKHWH[WRIWKHUHSRUWPDNHVFOHDUWKDWLWGRHVQRW         RPLVVLRQVDQGLQIODWHGVWRFNSULFHVSXQFWXUHGE\EDGQHZVLQ
1RU GRHV WKH UHSRUW VD\ WKDW PDQDJHPHQW HYHQ VDLG LW ZDV    WKHKHDOWKFDUHLQGXVWU\7KHSULQFLSDOLVVXHVRQDSSHDODULVH
FRPIRUWDEOH ZLWK WKH SURMHFWLRQV  5DWKHU WKH UHSRUW VD\V   XQGHU WKH QHZ SOHDGLQJV VWDQGDUG FUHDWHG E\ WKH 3ULYDWH
m0DQDJHPHQWFRPIRUWDEOHZLWK(36>HVWLPDWHV@:H              6HFXULWLHV /LWLJDWLRQ 5HIRUP $FW RI   $V RIWHQ LV WKH
KDYHEHHQLQFRQWDFWZLWKWKHFRPSDQ\WKLVZHHNWRUHYLHZ             FDVH LQ VXLWV IRU VHFXULWLHV IUDXG ZH PXVW GHDO ZLWK
RXU PRGHOVl  s$ DW   %HFDXVH WKH UHSRUW GRHV QRW    FRQWURYHUWHGLQIHUHQFHVRINQRZOHGJHDQGLQWHQWWRGHIUDXG
LQGLFDWHZLWKZKRPWKHDQDO\VWVVSRNHDQGGRHVQRWDWWULEXWH          IURPIDFWVWKDWJLYHULVHWRPRUHWKDQRQHLQWHUSUHWDWLRQ+RZ
WKH VWDWHPHQW WR PDQDJHPHQW , GR QRW WKLQN WKDW WKH         WRVWHHUDFRXUVHEHWZHHQLQGXOJLQJVWULNHVXLWVDQGSUHGDWRU\
FRPSODLQWPHHWVWKHSOHDGLQJUHTXLUHPHQWXQGHUWKH6HFRQG             DOOHJDWLRQVRQWKHRQHKDQGDQGGHWHUULQJPHULWRULRXVFODLPV
&LUFXLWFDVHODZ6HH1RYDNY.DVDNV)GG         RQ WKH RWKHU  7KLV KDV EHHQ WKH ZRUN RI &RQJUHVV DQG D
&LU$VZHVDLGLQWKHRULJLQDOSDQHORSLQLRQDQDO\VWV       QXPEHURIRXUVLVWHUFLUFXLWV7KHIUXLWRIWKHLUHIIRUWVKDV
GRQRWMXVWUHJXUJLWDWHZKDWPDQDJHPHQWWHOOVWKHPUDWKHU            EHHQDVWDWXWHFRQWDLQLQJJHQHUDOODQJXDJHDWDKLJKOHYHORI
WKH\GRMXVWZKDWWKHLUWLWOHVXJJHVWVWKH\DQDO\]H                 DEVWUDFWLRQDQDPELJXRXVOHJLVODWLYHKLVWRU\DQGDWULSDUWHG
                                                                      VSOLWDPRQJWKHFLUFXLWFRXUWV:HFRQFOXGHWKDWSODLQWLIIV
                     %6WURQJ,QIHUHQFH                            KHUHKDYHVWDWHGDFODLPIRUVHFXULWLHVIUDXGE\FUHDWLQJnLQ
                                                                      WKHZRUGVRIWKHVWDWXWHnDmVWURQJLQIHUHQFHlWKDWGHIHQGDQWV
   $GRSWLRQ RI WKH UHSRUWV DQG WKH PDWHULDOLW\ RI WKH         SURMHFWHGILQDQFLDOZHOOEHLQJDWDWLPHZKHQWKH\KDGDFWXDO
VWDWHPHQWV DQG RPLVVLRQV DVLGH WKH PDMRULW\ KDV QRW           NQRZOHGJH WKDW WKHLU VWDWHPHQWV ZHUH IDOVH RU PLVOHDGLQJ
FRQYLQFHGPHWKDWSODLQWLIIVKDYHDOOHJHGIDFWVJLYLQJULVHWR        ZKLOH NQRZLQJO\ RPLWWLQJ PDWHULDO IDFWV WKDW ZRXOG KDYH
DVWURQJLQIHUHQFHWKDWPDQDJHPHQWNQHZWKHVWDWHPHQWVZHUH           WHPSHUHGWKHLURSWLPLVP$FFRUGLQJO\WKHMXGJPHQWRIWKH
IDOVH RU PLVOHDGLQJ  $FFRUGLQJ WR WKH PDMRULW\ 9HQFRUjV     GLVWULFWFRXUWZLOOEH5(9(56('DQGWKHFDVH5(0$1'('
VWDWHPHQWV ZHUH IDOVH RU PLVOHDGLQJ EHFDXVH m>Z@KHQ            IRUIXUWKHUSURFHHGLQJV
GHIHQGDQWV GLVFODLPHG DQ\ DELOLW\ WR SUHGLFW KHDOWK FDUH
OHJLVODWLRQZKLOHSHUVLVWLQJLQIDYRUDEOHHDUQLQJVHVWLPDWHV           $QRXWOLQHRIRXUGLVFXVVLRQRIWKHLVVXHVLVDVIROORZV
VHYHQZHHNVDIWHUWKHHQDFWPHQWRIWKH%XGJHW$FW9HQFRU
ZDVUHSUHVHQWLQJWKDWLWNQHZRIQRZD\WKH%XGJHW$FWFRXOG            , )DFWV
DGYHUVHO\DIIHFWLWVRSHUDWLRQVl0DM2SDW                    ,, 7KH3ULYDWH6HFXULWLHV/LWLJDWLRQ5HIRUP$FW
                                                                             $ 7KH6DIH+DUERU
  ,GRQRWWKLQNWKDWLVDSUHFLVHVWDWHPHQWRIWKHIDFWVDQG               % 7KH3OHDGLQJ6WDQGDUG
PRUHRYHU , ILQG WKDW FRQFOXVLRQ WR EH TXLWH D OHDS           ,,, 3ODLQWLIIVj $OOHJDWLRQV &RQFHUQLQJ WKH (IIHFW RI WKH
0DQDJHPHQWVWDWHPHQWVFRQFHUQLQJWKHOHJLVODWLRQZHUHPDGH                   %DODQFHG%XGJHW$FW
RQsXO\EHIRUHWKHFRQIHUHQFHFRPPLWWHHUHSRUWZDV                 $ 9HQFRUjV)RUZDUG/RRNLQJ6WDWHPHQWV
UHOHDVHGRQsXO\DQGEHIRUHWKHOHJLVODWLRQZDVVLJQHGLQWR                    0DWHULDOLW\
      +HOZLJHWDOY9HQFRU,QFHWDO          1R        1R             +HOZLJHWDOY9HQFRU,QFHWDO         

              $FWXDO .QRZOHGJH RI 0LVOHDGLQJ RU )DOVH                                                 ,,
                1DWXUH
             1RW,GHQWLILHGDV)RUZDUG/RRNLQJ$EVHQFH                  :KLOHWKHDERYHDQDO\VLVLVVXIILFLHQWWRGHPRQVWUDWHWKDW
                RI0HDQLQJIXO&DXWLRQDU\6WDWHPHQWV                       WKHRXWFRPHWKHPDMRULW\UHDFKHVWRGD\LVLQFRUUHFW,IHHOLW
        % 6XIILFLHQF\RI3ODLQWLIIVj&RPSODLQW                           QHFHVVDU\ WR SRLQW RXW D IHZ RWKHU WURXEOLQJ SULQFLSOHV WKH
        & 5HVSRQVHWRWKH'LVVHQW                                        PDMRULW\HVWDEOLVKHV
    ,9 2WKHU&ODLPV
        $ 9HQFRUjV$FTXLVLWLRQRI7KHUD7[                                                      $$QDO\VWVj6WDWHPHQWV
        % 9HQFRUjV $FTXLVLWLRQ RI 7UDQVLWLRQDO +RVSLWDOV
            &RUSRUDWLRQ                                                      7KH ILUVW RI WKHVH SULQFLSOHV LV WKH PDMRULW\jV LPSOLFLW
        & 9HQFRUjV3URSRVHG6DOHRI%HKDYLRUDO+HDOWKFDUH                KROGLQJLWGRHVQRWGLVFXVVWKHTXHVWLRQLQDQ\GHWDLOEXWVXFK
            &RUSRUDWLRQ                                                   DFRQFOXVLRQLVQHFHVVDU\WRLWVGHFLVLRQWKDW9HQFRUPD\EH
    9 &RQFOXVLRQ                                                        OLDEOHIRUVWDWHPHQWVPDGHE\DQDO\VWV6SHFLILFDOO\DQDO\VWVj
                                                                          VWDWHPHQWV WKDW PDQDJHPHQW ZDV FRPIRUWDEOH ZLWK WKHLU
                            ,)$&76                                     SURMHFWLRQV  2XU &LUFXLW KDV QRW DGGUHVVHG WKH LVVXH RI
                                                                          ZKHWKHUDFRPSDQ\jVH[HFXWLYHVFDQEHOLDEOHIRUVWDWHPHQWV
   7KHIDFWXDODOOHJDWLRQVRIWKLVFDVHDUHPRUHIXOO\GHVFULEHG          RIDQDO\VWVDQGZKLOHWKHPDMRULW\RSLQLRQPDNHVFOHDUWKH\
LQVHFWLRQ,,,RIWKHRSLQLRQDIWHUDGLVFXVVLRQRIWKHSOHDGLQJ          FDQLWGRHVOLWWOHWRH[SODLQZK\DQGKRZ$VWKHPDMRULW\
VWDQGDUGWREHDSSOLHGXQGHUWKHQHZ$FW:HZLOOUHFLWHRQO\            JLYHV QR H[SODQDWLRQ , VXJJHVW WKDW WKH 6HFRQG &LUFXLWjV
WKHPRVWVDOLHQWGHWDLOVKHUH$WWKHWLPHRIWKHHYHQWVLQVXLW        SRVLWLRQRQWKHPDWWHULVSHUVXDVLYH
GHIHQGDQW9HQFRUDFRPSDQ\WKHQWUDGHGRQWKH1HZ<RUN
6WRFN([FKDQJHZDVVDLGWREHWKHODUJHVWIXOOVHUYLFHORQJ               ,Q RXU RULJLQDO SDQHO GHFLVLRQ UHO\LQJ RQ ,Q UH 7LPH
WHUPKHDOWKFDUHSURYLGHULQWKH8QLWHG6WDWHVIRFXVLQJRQ               :DUQHU,QF6HFXULWLHV/LWLJ)GG&LU
KRVSLWDO DQG QXUVLQJ VHUYLFHV  6L[ RI LWV GLUHFWRUV DUH DOVR   ZH KHOG mD FRUSRUDWLRQ FDQQRW EH KHOG UHVSRQVLEOH IRU
QDPHGDVGHIHQGDQWV3ODLQWLIIVDUHDFODVVRILQYHVWRUVLQ              DQDO\VWVjVWDWHPHQWVDERXWWKHFRUSRUDWLRQjVILQDQFLDOKHDOWK
9HQFRU7KH\DOOHJHDQXPEHURIPLVVWDWHPHQWVDQGPDWHULDO               XQOHVV WKH FRUSRUDWLRQ WDNHV PRUH DIILUPDWLYH DFWLRQ WKDQ
RPLVVLRQVE\9HQFRUFDOFXODWHGWRDUWLILFLDOO\EDOORRQVWRFN              VLPSO\SURYLGLQJLQIRUPDWLRQWRDQDO\VWVl+HOZLJY9HQFRU
SULFHVDQGGHIUDXGSXUFKDVHUV$GLYLGHGSDQHORIWKLVFRXUW             )GWK&LU3ODLQWLIIVLQWKHLUEULHIV
FRQFOXGHGWKDWSODLQWLIIVIDLOHGWRVWDWHDFODLP+HOZLJY             EHIRUHWKLVHQEDQFSDQHODUJXHWKDWKROGLQJRYHUVLPSOLILHG
9HQFRU ,QF  )G  WK &LU   :H JUDQWHG         WKH 6HFRQG &LUFXLWjV SRVLWLRQ  $FFRUGLQJ WR SODLQWLIIV WKH
SODLQWLIIVjSHWLWLRQIRUDUHKHDULQJHQEDQF+HOZLJY9HQFRU
,QF)GWK&LU%HFDXVHWKLVFDVHLVDW
URRWDERXWVXIILFLHQF\RISOHDGLQJZHZLOOH[DPLQHHDFKRI              &LUFXLW DIWHU %DVLF
SODLQWLIIVjFRQWHQWLRQVLQWXUQ                                             7R WKH H[WHQW WKH PDMRULW\ LV VXJJHVWLQJ WKDW WKH 6XSUHPH &RXUWjV
                                                                          DSSOLFDWLRQ RI WKH PDWHULDOLW\ VWDQGDUG LQ %DVLF FRQWUROV RXU DQDO\VLV KHUH
    7KH ,PSDFW RI WKH %DODQFHG %XGJHW $FWn2Q                    DQG GRHV QRW SHUPLW XV WR KROG DV D PDWWHU RI ODZ WKDW VRIW LQIRUPDWLRQ LV
)HEUXDU\3UHVLGHQW&OLQWRQSURSRVHGWKH%DODQFHG                LPPDWHULDO , GUDZ WKH UHDGHUjV DWWHQWLRQ WR IRRWQRWH QLQH RI WKH &RXUWjV

%XGJHW $FW WKH m%XGJHW $FWl ZKLFK IHDWXUHG VHYHUDO              RSLQLRQ ZKLFK PDGH FOHDU WKH &RXUW GLG mQRW DGGUHVV    DQ\ RWKHU NLQGV
                                                                          RI FRQWLQJHQW RU VSHFXODWLYH LQIRUPDWLRQ VXFK DV HDUQLQJV RU IRUHFDVWVl
0HGLFDUHSURYLVLRQVWKDWZRXOGVXEVWDQWLDOO\DIIHFWWKHKHDOWK            %DVLF  86 DW  Q HPSKDVLV DGGHG 7KLV &LUFXLW KDV FRQWLQXHG
FDUHLQGXVWU\6HSDUDWHELOOVSDVVHGWKH+RXVHDQG6HQDWHRQ             WR XVH WKH VWDQGDUG , UHO\ RQ WRGD\ ZHOO DIWHU WKH 6XSUHPH &RXUWjV GHFLVLRQ
                                                                          LQ %DVLF 6HH ,Q UH 6RIDPRU 'DQHN *URXS ,QF  )G DW 
       +HOZLJHWDOY9HQFRU,QFHWDO             1R        1R          +HOZLJHWDOY9HQFRU,QFHWDO        

     0DUDWKRQ2LORULWVVKDUHKROGHUV,WGRHVQjWUHIOHFW                     sXQH7KLVQHFHVVLWDWHGDFRQIHUHQFHUHSRUWZKLFK
     FXUUHQWDVVHWYDOXHVDQGLWGRHVQjWSHUPLWWKHORQJ                      ZDVILOHG RQ sXO\3UHVLGHQW&OLQWRQVLJQHGWKHELOORQ
     WHUP LQYHVWRU WKH RSSRUWXQLW\ WR SDUWLFLSDWH LQ WKH                $XJXVW6HH%DODQFHG%XGJHW $FWRI3XE/1R
     SRWHQWLDOYDOXHVWKDWKDYHEHHQGHYHORSHG                                
                                                                          'XULQJ WKLV KDOI\HDU RI OHJLVODWLYH GHOLEHUDWLRQ WKH
                                                                               SURSRVHG DFW DODUPHG VHFWRUV RI WKH KHDOWK FDUH LQGXVWU\
 6WDUNPDQ DUJXHV WKDW WKH IDLOXUH RI DQ\ RIWKHVH                      EHFDXVH LW FKDQJHG 0HGLFDUH UHLPEXUVHPHQW DQG UHGXFHG
  FRPPXQLFDWLRQVWRGLVFORVHWKH6WURQJDQG)LUVW%RVWRQ                       LQFHQWLYHSD\PHQWVIRUKRVSLWDOVWKDWNHSWDFWXDOFRVWVEHORZ
  DQG WKH ILYH\HDU HDUQLQJV DQG FDVK IORZ SURMHFWLRQV                  IHGHUDOWDUJHWV%HFDXVH9HQFRUGHULYHGVLJQLILFDQWUHYHQXH
  FRQVWLWXWHGDQRPLVVLRQRIPDWHULDOIDFWV                            IURP0HGLFDUHLWWRRZDVFRQFHUQHGDERXWVHYHUDODVSHFWVRI
                                                                               WKH SURSRVHG DFW DQG UHFHLYHG UHJXODU XSGDWHV IURP LWV
6WDUNPDQ)GDW,QKLVRSLQLRQKHUHsXGJH0HUULWW                 OREE\LVWV LQ :DVKLQJWRQ '&  3ODLQWLIIV FODLP WKDW WKH
EHJLQV E\ LGHQWLI\LQJ WKH VWDWHPHQWV PDGH E\ 9HQFRUjV                   FRPSDQ\XQGHUWRRNDQDQDO\VLVRIWKHSURSRVHGDFWDVHDUO\DV
H[HFXWLYHV  m'XULQJ >WKH FODVV SHULRG@ GHIHQGDQWV PDGH                $SULO   $FFRUGLQJ WR SODLQWLIIV WKHVH FRVW DQDO\VHV
QXPHURXV VWDWHPHQWV FRQFHUQLQJ WKH %DODQFHG %XGJHW $FW                   FXOPLQDWHG LQ sXO\  ZKHQ 7KRPDV 6FKXPDQQ YLFH
DQGLWVHIIHFWRQ9HQFRUjVEXVLQHVVl0DM2SDW+HWKHQ                SUHVLGHQWDQGGLUHFWRURI9HQFRUjVUHLPEXUVHPHQWGHSDUWPHQW
FRQFOXGHV WKDW WKHVH VWDWHPHQWV ZHUH PLVOHDGLQJ EHFDXVH                  FLUFXODWHG DQ LQWHUQDO PHPRUDQGXP GHWDLOLQJ WKH SRWHQWLDO
9HQFRU GLG QRW mFRPSOHWH WKH LQIRUPDWLRQ DOUHDG\ JLYHQ                  LPSDFWRIWKHOHJLVODWLRQ
FRQFHUQLQJWKH%XGJHW$FWDQGHDUQLQJVHVWLPDWHVl0DM2S
DW,QP\RSLQLRQWKHLVVXHLQ6WDUNPDQLVWKHVDPHDVWKH                   ,QWKHPHDQWLPHnIURPDWOHDVW)HEUXDU\XQWLO
LVVXHKHUH,WLVQRWDTXHVWLRQRIZKHWKHU D FRPSDQ\FDQ                   2FWREHU  nGHIHQGDQWV PDLQWDLQHG WKDW WKH\ ZHUH
VHOHFWLYHO\GLVFORVHPDWHULDOLQIRUPDWLRQLWFDQQRW5DWKHULW               mFRPIRUWDEOHlZLWKSURMHFWLRQVRIIRXUWKTXDUWHUHDUQLQJVRI
LVDTXHVWLRQRIZKHWKHUDFRPSDQ\WKDWPDNHVVWDWHPHQWVRQ                    WRSHUVKDUHDQG\HDUO\UHWXUQVEHWZHHQWR
DPDWWHULVUHTXLUHGWRGLVFORVHLPPDWHULDOLQIRUPDWLRQ2XU                  IRUDQGWRIRU6XFKVDQJXLQH
SUHFHGHQWVD\VQR,GRQRWXQGHUVWDQGZK\WKHPDMRULW\QRZ                   VWDWHPHQWVOHGPDUNHWDQDO\VWVWRUHFRPPHQG9HQFRUjVVWRFN
VD\V\HV                                                                     DVDmEX\l,QLWV)RUP.ILOHG0DUFKWKH
                                                                               FRPSDQ\GLGDFNQRZOHGJHWKHORRPLQJ%XGJHW$FW
     
      /HVW WKHUH EH DQ\ GRXEW WKDW WKH PDMRULW\ LV UHMHFWLQJ WKH ORQJ           >7@KH &RPSDQ\ FDQQRW SUHGLFW WKH FRQWHQW RI DQ\
VWDQGLQJ SULQFLSOH WKDW VRIW LQIRUPDWLRQ LV LPPDWHULDO LW VD\V LQ UHVSRQVH      KHDOWKFDUH RU EXGJHW UHIRUP OHJLVODWLRQ ZKLFK PD\ EH
WR P\ GLVVHQW WKDW %DVLF ,QF Y /HYLQVRQ  86   mKDV             SURSRVHGLQ&RQJUHVVRULQVWDWHOHJLVODWXUHVLQWKHIXWXUH
GUDZQ WKH WHVW >RI PDWHULDOLW\@ PRUH EURDGO\l WKDQ ZKDW WKH PDMRULW\
                                                                                 DQG ZKHWKHU VXFK OHJLVODWLRQ LI DQ\ ZLOO EH DGRSWHG
                                                                                 $FFRUGLQJO\WKH&RPSDQ\LVXQDEOHWRDVVHVVWKHHIIHFW
FKDUDFWHUL]HV DV P\ WHVW RI mQXPEHUV DORQHl         , WKLQN WKH   PDMRULW\
PLVXQGHUVWDQGV WKH EDVLV IRUDW OHDVW ZKDW ZDVWKLV &LUFXLWjV WHVW IRU
PDWHULDOLW\   , DJUHH ZLWK WKH SURSRVLWLRQ WKDW ZKHWKHU LQIRUPDWLRQ LV          RIDQ\VXFKOHJLVODWLRQRQLWVEXVLQHVV7KHUHFDQEHQR
PDWHULDO GHSHQGV RQ ZKHWKHU LW LV GHWHUPLQHG WKDW D UHDVRQDEOH LQYHVWRU          DVVXUDQFH WKDW DQ\ VXFK OHJLVODWLRQ ZLOO QRW KDYH D
ZRXOG ILQG WKH LQIRUPDWLRQ LPSRUWDQW :H PDNH WKDW GHWHUPLQDWLRQ LQ WKH          PDWHULDODGYHUVHLPSDFWRQWKH&RPSDQ\
VIXWXUHJURZWK
FRQWH[W RI SURMHFWLRQV E\ DVFHUWDLQLQJ ZKHWKHU WKH SURMHFWLRQV DUH DEOH WR
EH FDOFXODWHG ZLWK VXEVWDQWLDO FHUWDLQW\ ,I WKH\ DUH QRW WKHQ ZH KDYH KHOG
                                                                                 UHYHQXHVDQGLQFRPH
WKDW DV D PDWWHU RI ODZ QR UHDVRQDEOH LQYHVWRU FRXOG ILQG WKH LQIRUPDWLRQ
LPSRUWDQW 6HH ,Q UH 6RIDPRU 'DQHN *URXS ,QF  )G DW  7KDW
ZDV WKH WHVW LQ WKLV &LUFXLW SULRU WR %DVLF DQG LW UHPDLQHG WKH WHVW LQ WKLV
     +HOZLJHWDOY9HQFRU,QFHWDO        1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO     

2WKHUPRUHFXUVRU\ZDUQLQJVODWHUDSSHDUHGLQ9HQFRUjVILUVW         HVWDEOLVKHG WKDW DQ H[HFXWLYH mDVVXPHV D GXW\ WR SURYLGH
DQGVHFRQGTXDUWHU4IRUPVILOHG$SULODQGsXO\             FRPSOHWH DQG QRQPLVOHDGLQJ LQIRUPDWLRQ ZLWK UHVSHFW WR
UHVSHFWLYHO\                                                       VXEMHFWVRQZKLFKKHXQGHUWDNHVWRVSHDNl0DM2SDW
                                                                      7KDWFKDUDFWHUL]DWLRQRPLWVWKHLPSRUWDQWUHVWULFWLRQRQWKH
  2Q 2FWREHU   9HQFRU ORZHUHG LWV HVWLPDWHV RI        GLVFORVXUH UHTXLUHPHQW  ,I WKH PDMRULW\ KDG JRQH RQH OLQH
IRXUWKTXDUWHU HDUQLQJV GXH WR mPDQDJHPHQWjV UHFHQWO\            IXUWKHULQWKH5XELQRSLQLRQLWZRXOGKDYHUHDOL]HGWKDWGXW\
FRPSOHWHG DQDO\VLV RI WKH %DODQFHG %XGJHW $FW RI l       DSSOLHVRQO\WRPDWHULDOLQIRUPDWLRQm+DYLQJFRQFOXGHGWKDW
7KHVWRFNSULFHGURSSHGIURPSHUVKDUHWRSHU             >WKH GHIHQGDQWV@ ZHUH XQGHU D GXW\ QRW WR PLVUHSUHVHQW RU
VKDUHDQHDUO\WKLUW\SHUFHQWGHFOLQH6RRQDIWHUWKHFRPSDQ\      RPLW PDWHULDO IDFWV LQ FRQQHFWLRQ ZLWK WKH SURSRVHG
DQQRXQFHG WKDW DQ DQWLFLSDWHG VDOH RI RQH RI LWV GLYLVLRQV   LQYHVWPHQWl5XELQ)GDWHPSKDVLVDGGHG
ZRXOGQRWEHFRPSOHWHG7KHVWRFNSULFHIHOOIXUWKHUWR          7KH IDFWV RPLWWHG LQ 5XELQ ZHUH KDUG IDFWV UHODWLQJ WR WKH
SHUVKDUH3ODLQWLIIVDOOHJHWKDW9HQFRUNQHZDERXWWKHOLNHO\       WUDQVDFWLRQE\GHILQLWLRQPDWHULDO+HQFHWKH\ZHUHUHTXLUHG
DGYHUVH LPSDFW RI WKH %XGJHW $FW EHIRUH LWV 2FWREHU           WR EH GLVFORVHG  +HUH WKH LQIRUPDWLRQ DW LVVXH LV VRIW
DQQRXQFHPHQW EXW QRQHWKHOHVV PDGH IDOVH DQG PLVOHDGLQJ          LQIRUPDWLRQE\ GHILQLWLRQ LPPDWHULDODQG WKHUHIRUH
HDUQLQJVVWDWHPHQWVWRERRVWVWRFNSULFHV                            PDQDJHPHQWZDVQRWUHTXLUHGWRGLVFORVHLW2XUSUHFHGHQW
                                                                      DQGXF$LLPDNHWKLVFOHDU
  'HIHQGDQWVj.QRZOHGJHRIWKH(IIHFWRIWKH%XGJHW
$FWn,QODWHsXQHIRXUPRQWKVEHIRUH9HQFRUSXEOLFO\                7KH SULQFLSOH HVSRXVHG E\ WKH PDMRULW\ FRQWUDGLFWV RXU
UHYHDOHG KRZ WKH %XGJHW $FW ZRXOG DIIHFW LWV HDUQLQJV        SRVLWLRQ SUHYLRXV WR WRGD\jV UXOLQJ  )RU DV sXGJH 0HUULWW
GHIHQGDQWV0LFKDHO%DUUH[HFXWLYHYLFHSUHVLGHQWDQGFKLHI           VWDWHVLQ6WDUNPDQmZHEHJLQZLWKWKHEDVLFSURSRVLWLRQ
RSHUDWLQJRIILFHURI9HQFRUDQGsDPHV*LOOHQZDWHUVHQLRU            WKDWRQO\PDWHULDOIDFWVWKRVHVXEVWDQWLDOO\OLNHO\WRDIIHFWWKH
YLFH SUHVLGHQW PHW ZLWK HPSOR\HHV RI WKH QHZO\ DFTXLUHG      GHOLEHUDWLRQV RI WKH UHDVRQDEOH VKDUHKROGHUPXVW EH
7UDQVLWLRQDO+RVSLWDOV&RUSRUDWLRQ'XULQJWKLVSUHVHQWDWLRQ        GLVFORVHGDQGWKHQRQO\LIWKHQRQGLVFORVXUHRIWKHSDUWLFXODU
%DUUJDYHWKHHPSOR\HHVQRWLFHWKDWWKH\ZRXOGEHODLGRIILQ         PDWHULDO IDFWV ZRXOG PDNH PLVOHDGLQJ WKH DIILUPDWLYH
VL[W\GD\V%DUUjVH[SODQDWLRQDFFRUGLQJWRSODLQWLIIVZDV         VWDWHPHQWVRWKHUZLVHUHTXLUHGE\WKHIHGHUDOVHFXULWLHVODZV
WKDWmWKHUHZHUHWRXJKWLPHVFRPLQJLQWKHLQGXVWU\EHFDXVH           DQG 6(& UHJXODWLRQVl  6WDUNPDQ  )G DW   7KH
RIWKHOLNHO\FXWEDFNVLQ0HGLFDUHlDQGWKDWWKH\mZRXOGKDYH         PDMRULW\jVDWWHPSWWRGLVWLQJXLVK6WDUNPDQDVDmFDVHDERXW
EHHQ ODLG RII DQ\ZD\ EHFDXVH WKH SURSRVHG 0HGLFDUH             QRQGLVFORVXUHl0DM2SDWIURPWKLVFDVHZKLFKLWVD\V
UHJXODWLRQVZHUHJRLQJWRPDNHLWGLIILFXOWIRU9HQFRUWRPDNH        LVDERXWVHOHFWLYHGLVFORVXUHLVQRWVXSSRUWHGE\WKHIDFWVRI
PRQH\DQGVWD\SURILWDEOHl6HH$P&RPSOs$           6WDUNPDQ  ,Q EHJLQQLQJ KLV RSLQLRQ LQ 6WDUNPDQ sXGJH
                                                                      0HUULWWZULWHV
  7KLVZDVQHDUO\DPRQWKEHIRUH9HQFRUILOHGLWVVHFRQG
TXDUWHU 4 LQ ZKLFK GHIHQGDQWV VWDWHG WKH\ FRXOG QRW         7KHUH DUH WKUHH SXEOLF VWDWHPHQWV E\ 0DUDWKRQ
SUHGLFWZKHWKHU0HGLFDUHUHIRUPSURSRVDOVZRXOGEHDGRSWHG              PDQDJHPHQWDWLVVXHKHUH)LUVW0DUDWKRQjV1RYHPEHU
E\&RQJUHVVmRULIDGRSWHGZKDWHIIHFWLIDQ\VXFKSURSRVDOV           SUHVV UHOHDVH ZKLFK VWDWHV LQ SHUWLQHQW SDUW
ZRXOGKDYHRQLWVEXVLQHVVl$OVRGXULQJWKLVWLPHIURPsXO\          WKDW
WR 6HSWHPEHU  GHIHQGDQW H[HFXWLYHV VROG QHDUO\ 
PLOOLRQLQVWRFNKROGLQJV'HIHQGDQW(DUO5HHGH[HFXWLYH                 2XU%RDUGRI'LUHFWRUVKDVGHWHUPLQHGWKDW0RELO
YLFH SUHVLGHQW DQG FKLHI ILQDQFLDO RIILFHU RI 9HQFRU DORQH        &RUSRUDWLRQjV XQVROLFLWHG WHQGHU RIIHU LV JURVVO\
                                                                           LQDGHTXDWH7KHRIIHULVQRWLQWKHEHVWLQWHUHVWVRI
    +HOZLJHWDOY9HQFRU,QFHWDO           1R       1R          +HOZLJHWDOY9HQFRU,QFHWDO       

                    %,QIRUPDWLRQ2PLWWHG                              UHDOL]HGPRUHWKDQPLOOLRQLQVWRFNVDOHVLQ6HSWHPEHUD
                                                                         VXPODUJHHQRXJKWRHOLFLWLQTXLULHVIURPWKHILQDQFLDOPHGLD
  0RUH LPSRUWDQWO\ , WKLQN WKH LQIRUPDWLRQ WKH PDMRULW\
FODLPV VKRXOG KDYH EHHQ GLVFORVHGLQWHUQDO DQDO\VHV E\              9HQFRUjV$FTXLVLWLRQRI7KHUD7[n2Q)HEUXDU\
PDQDJHPHQWRIWKH$FWjVHIIHFWLVLPPDWHULDO2XUFDVHODZ              9HQFRU DQQRXQFHG D mGHILQLWLYH PHUJHU DJUHHPHQWl
FOHDUO\ HVWDEOLVKHV WKDW VXFK LQIRUPDWLRQ QHHG QRW EH             ZLWK7KHUD7[DQRWKHUSURYLGHUVSHFLDOL]LQJLQUHKDELOLWDWLRQ
GLVFORVHG,Q,QUH6RIDPRU'DQHN*URXS,QF)G            FDUH DQG RFFXSDWLRQDO KHDOWK  ,Q D SUHVV UHOHDVH 9HQFRUjV
WK&LUZHKHOGWKDWDFRPSDQ\GRHVQRWKDYHD              FKLHIH[HFXWLYHRIILFHU%UXFH/XQVIRUGH[SODLQHG WKDWWKH
GXW\ WR GLVFORVH VRIW LQIRUPDWLRQ  m>2@XU FDVHV ILUPO\          DFTXLVLWLRQ ZRXOG mEH DFFUHWLYH WR HDUQLQJV EDVHG RQ
HVWDEOLVKWKHUXOHWKDWVRIWLQIRUPDWLRQPXVWEHGLVFORVHG         SURMHFWHGV\QHUJLHVl$VSDUWRIWKHVWRFNSXUFKDVHKRZHYHU
RQO\LIYLUWXDOO\DVFHUWDLQDVKDUGIDFWVl,GTXRWLQJ         SODLQWLIIVDOOHJHWKDW9HQFRUDOVRDFTXLUHGPLOOLRQLQEDG
6WDUNPDQY0DUDWKRQ2LO&R)GWK&LU                GHEW DQG  SRRUO\ SHUIRUPLQJ QXUVLQJ KRPHV  7KRXJK
+DUGLQIRUPDWLRQLVmW\SLFDOO\KLVWRULFDOLQIRUPDWLRQ           /XQVIRUG VWDWHG WKDW E\ sXO\   mZH VXFFHVVIXOO\
RUIDFWXDOLQIRUPDWLRQWKDWLVREMHFWLYHO\YHULILDEOHl,G7KH        LQWHJUDWHG WKH RSHUDWLRQV RI 7KHUD7[l FRPSXWLQJ
UHDVRQ IRU WKLV GLVWLQFWLRQ LV WKDW VRIW LQIRUPDWLRQ LV          LQFRPSDWLELOLWLHV SUHYHQWHG IXOO FRQVROLGDWLRQ XQWLO 0DUFK
LPPDWHULDO6HH6WDUNPDQ)GDW                         3ODLQWLIIVFODLPWKDWWKHVHVWDWHPHQWVZHUHIDOVHDQG
                                                                         PLVOHDGLQJ
   7KHHIIHFWRIWKH$FWRQ9HQFRUjVUHYHQXHLVXQGHQLDEO\
VRIWLQIRUPDWLRQ7KHUHLVDEVROXWHO\QRLQGLFDWLRQWKDWWKH                 9HQFRUjV $FTXLVLWLRQ RI 7UDQVLWLRQDO +RVSLWDOV
IRUPRUWKHHIIHFWRIWKH$FWZDVREMHFWLYHO\YHULILDEOHZKHQ            &RUSRUDWLRQn2Q0D\9HQFRUDQQRXQFHGDQRWKHU
9HQFRU PDGH LWV SURMHFWLRQV ZKLFK WKH PDMRULW\ VHHPV WR         DFTXLVLWLRQ7KURXJKDPLOOLRQVHQLRUVXERUGLQDWHGGHEW
DGPLWm2QDQ\VXEMHFWIDOOLQJVKRUWRIUHDVRQDEOHFHUWDLQW\           SULYDWH SODFHPHQW WKH FRPSDQ\ SODQQHG WR SXUFKDVH
WKHQ D FRPSDQ\ FRXOG RIIHU D SDWFKZRUN RI KRQHVW\ DQG          7UDQVLWLRQDO+RVSLWDOV&RUSRUDWLRQDQGLWVORQJWHUPDFXWH
RPLVVLRQVl  0DM 2S DW   %XW WKH PDMRULW\ ILQGV           FDUHKRVSLWDOV1HDUO\DPRQWKODWHU9HQFRUDQQRXQFHGWKDW
mXQWHQDEOHERWKDVDPDWWHURISROLF\DQGSUHFHGHQWl0DM         LWKDGVROGPLOOLRQRIVHQLRUQRWHVVFKHGXOHGWRPDWXUH
2SDWWKDWLQIRUPDWLRQWKDWLVQRWUHDVRQDEO\FHUWDLQWKDW         LQ   7KH VHQLRU QRWHV UHTXLUHG WKDW 9HQFRU H[FKDQJH
LVLQIRUPDWLRQWKDWLVE\GHILQLWLRQLPPDWHULDOQHHGQRWEH            WKHPIRUSXEOLFO\WUDGHGQRWHVDQGILOHDUHJLVWUDWLRQVWDWHPHQW
GLVFORVHG,QLWVPLQGmWKHSURWHFWLRQVIRUVRIWLQIRUPDWLRQ           HIIHFWLYH1RYHPEHURUIDFHDGGLWLRQDOLQWHUHVW2Q
HQGZKHUHVSHHFKEHJLQVl0DM2SDW,QGHHGDFFRUGLQJ             2FWREHU9HQFRULQLWLDWHGWKLVH[FKDQJH$FFRUGLQJ
WRWKHPDMRULW\WKHDUJXPHQWmGHILHVDSSOLFDWLRQKRZFDQD             WR SODLQWLIIV WKH FRPSDQ\ ZRXOG QRW KDYH EHHQ DEOH WR
UXOH RI QRQGLVFORVXUH DSSO\ WR D FRPSDQ\jV GLVFORVXUH"l          FRPSOHWH WKH ERQG RIIHULQJ KDG LQYHVWRUV NQRZQ WKH WUXWK
0DM 2S DW   7KH DQVZHU LV VLPSOH H[DFWO\ DV   X   DERXWKRZWKH%DODQFHG%XGJHW$FWZRXOGDIIHFW9HQFRU
F$LL VD\V LW GRHV  8QGHU WKDW VHFWLRQ  D IRUZDUG
ORRNLQJ VWDWHPHQW LV QRW DFWLRQDEOH WR WKH H[WHQW WKDW LW LV        9HQFRUjV 3URSRVHG 6DOH RI %HKDYLRUDO +HDOWKFDUH
LPPDWHULDO86&XF$LL,IDVWDWHPHQWLVQRW         &RUSRUDWLRQn2Q6HSWHPEHU9HQFRUDQQRXQFHG
DFWLRQDEOH ZKDW SULQFLSOHG UHDVRQ LV WKHUH IRU UHTXLULQJ         D mGHILQLWLYH DJUHHPHQWl WR VHOO %HKDYLRUDO +HDOWKFDUH
GLVFORVXUH"                                                            &RUSRUDWLRQWR&KDUWHU%HKDYLRUDO+HDOWK6\VWHPV7KHSUHVV
                                                                         UHOHDVH GHWDLOLQJ WKH VDOH H[SODLQHG WKDW WKH mWUDQVDFWLRQ
  7KHPDMRULW\jVUHOLDQFHRQ5XELQWRDQVZHUWKLVTXHVWLRQLV            ZKLFKLVVXEMHFWWRDFFHSWDEOHILQDQFLQJGXHGLOLJHQFH
XQIRXQGHG  $FFRUGLQJ WR WKH PDMRULW\ LQ 5XELQ ZH               DQGFHUWDLQUHJXODWRU\DSSURYDOVLVH[SHFWHGWRFORVHGXULQJ
     +HOZLJHWDOY9HQFRU,QFHWDO         1R       1R          +HOZLJHWDOY9HQFRU,QFHWDO     

WKHIRXUWKTXDUWHURIl7KHGHDOFROODSVHGKRZHYHU             LPSDFW RQ 9HQFRUjV UHYHQXHV PDNHV HVWLPDWHV PRUH
VDJJLQJ9HQFRUVWRFNIXUWKHU2Q1RYHPEHU9HQFRU             XQFHUWDLQ  $QG 9HQFRU PDGH LQYHVWRUV DZDUH RI WKLV E\
H[SODLQHGWKDWWKHVDOHZRXOGQRWEHFRQVXPPDWHGGXHWRD              LQIRUPLQJ WKHP WKDW PDQDJHPHQWjV SURMHFWLRQV GLG QRW
GLVSXWHRYHUILQDOSD\PHQWWHUPV3ODLQWLIIVFODLPWKDWWKH\          LQFOXGHWKHHIIHFWRIWKH$FWZLWKLWVVWDWHPHQWWKDWLWFRXOG
ZHUHPLVOHGDVWRWKHFHUWDLQW\RIWKLVWUDQVDFWLRQ                   QRWSUHGLFWWKHHIIHFWRIWKH$FW7KHPDMRULW\QHYHUDQVZHUV
                                                                       WKHTXHVWLRQRIZKHWKHULQIRUPDWLRQH[LVWHGWRFDOFXODWHIXWXUH
    ,,7+(35,9$7(6(&85,7,(6/,7,*$7,21                             HDUQLQJVZLWKVXEVWDQWLDOFHUWDLQW\1RUGRHVLWVXJJHVWKRZ
                  5()250$&7                                           DVWDWHPHQWWKDWWKHSURMHFWLRQGRHVQRWSXUSRUWWRWDNHLQWR
                                                                       DFFRXQWSURSRVHGOHJLVODWLRQLVIDOVHEHFDXVHLWGRHVQRWWDNH
  3ODLQWLIIVFODLPWKDW9HQFRUPDGHPLVOHDGLQJVWDWHPHQWV              WKDWOHJLVODWLRQLQWRDFFRXQW
DQGRPLVVLRQVLQYLRODWLRQRI6HFWLRQVEDQGDRIWKH
6HFXULWLHV([FKDQJH$FWRI86&MEDQG                  (YHQ LI WKHUH ZDV VXFK LQIRUPDWLRQ LW ZRXOG QRW PDNH
WDUHVSHFWLYHO\DQG5XOHESURPXOJDWHGWKHUHXQGHU             PDWHULDODOOWKHVWDWHPHQWVWKHPDMRULW\LGHQWLILHV7ZRRIWKH
E\ WKH 6HFXULWLHV ([FKDQJH &RPPLVVLRQ  &)5                 VWDWHPHQWVWKH VWDWHPHQW RI FRPIRUW DQG WKH VWDWHPHQW
 E  3ODLQWLIIVj FDVH WXUQV RQ WKH GLVFUHSDQF\        UHJDUGLQJ WKH $FWDUH QRW HDUQLQJV HVWLPDWHV PDGH E\
EHWZHHQZKDWGHIHQGDQWVVDLGDQGZKDWWKH\NQHZSULRUWR               9HQFRUjV H[HFXWLYHV  7KH PDMRULW\ GRHV QRW H[SODLQ ZK\
WKHLUDQQRXQFHPHQWRIUHYLVHGHDUQLQJVSURMHFWLRQV7KHLU             WKHVHVWDWHPHQWVDUHPDWHULDO1RUFDQ,DV,EHOLHYHWKH\DUH
FRPSODLQW UHIOHFWV WKH WHQVLRQ EHWZHHQ WKH OLEHUDO               QRW,DPDWDORVVIRUKRZDQH[HFXWLYHjVVWDWHPHQWWKDWKHLV
UHTXLUHPHQWV RI QRWLFH SOHDGLQJ VHH 0LOOHU Y $PHULFDQ         FRPIRUWDEOHZLWKDQRWKHUjVSURMHFWLRQVLVPDWHULDO$VWKH
+HDY\/LIW6KLSSLQJ)GWK&LUm7KLV          )RXUWK &LUFXLW REVHUYHG VXFK VWDWHPHQWV DUH LQFDSDEOH RI
IXQGDPHQWDOWHQRURIWKH5XOHVLVRQHRIOLEHUDOLW\UDWKHUWKDQ        EHLQJ SURYHQ IDOVH DQG FRQVHTXHQWO\ LQFDSDEOH RI EHLQJ
WHFKQLFDOLW\DQGLWFUHDWHVDQLPSRUWDQWFRQWH[WZLWKLQZKLFK         PDWHULDO  6HH /RQJPDQ  )G DW   7KH WHUP
ZH GHFLGH FDVHV XQGHU WKH PRGHUQ )HGHUDO 5XOHV RI &LYLO       FRPIRUWDEOHLQWKDWFRQWH[WLVYDJXHDUHDVRQDEOHLQYHVWRU
3URFHGXUHl DQG FRQFHUQ DERXW mVWULNH VXLWVl DLPHG DW         ZRXOGQRWUHO\RQLW7KHUHSRUWSODLQWLIIVUHO\RQPRUHRYHU
MDFNSRW GLVFRYHU\ DQG SUHGDWRU\ VHWWOHPHQW VHH %OXH &KLS       GRHVQRWVD\WKDWPDQDJHPHQWVDLGLWZDVFRPIRUWDEOHZLWK
6WDPSV Y 0DQRU 'UXJ 6WRUHV  86            WKH UHSRUW  $FFRUGLQJO\ LW LV QRW PDWHULDO  /LNHZLVH
QRWLQJ WKDW WKH GLVFRYHU\ SURFHVV LQ VHFXULWLHV OLWLJDWLRQ     PDQDJHPHQWjVVWDWHPHQWLQLWVVHFRQGTXDUWHU4ILOLQJIRU
mSHUPLWVDSODLQWLIIZLWKDODUJHO\JURXQGOHVVFODLPWRVLPSO\          WKDW LW FRXOG QRW SUHGLFW WKH IRUP RU HIIHFW RI WKH
WDNHXSWKHWLPHRIDQXPEHURIRWKHUSHRSOHZLWKWKHULJKWWR        %DODQFHG%XGJHW$FWLVQRWPDWHULDO/LNHHDUQLQJVHVWLPDWHV
GRVRUHSUHVHQWLQJDQLQWHUURUHPLQFUHPHQWRIWKHVHWWOHPHQW          VXFKVWDWHPHQWVFRQFHUQSUHGLFWLRQVRIIXWXUHHYHQWVDQGWKXV
YDOXHUDWKHUWKDQDUHDVRQDEO\IRXQGHGKRSHWKDWWKHSURFHVV          DUHHYDOXDWHGXQGHUWKHVDPHVWDQGDUG,WVKRXOGEHNHSWLQ
ZLOOUHYHDOUHOHYDQWHYLGHQFHl,Q&RQJUHVVDWWHPSWHG          PLQGWKDWWZRRIWKHIRXUSURSRVDOVWKDWSODLQWLIIVEHOLHYHG
WR UHVROYH WKLV WHQVLRQ E\ LPSOHPHQWLQJ mSURFHGXUDO              ZRXOG DGYHUVHO\ DIIHFW 9HQFRU ZHUH QRW SDVVHG  7KH
SURWHFWLRQVWRGLVFRXUDJHIULYRORXVOLWLJDWLRQl+5&RQI           3UHVLGHQWKDGLQLWLDWHGDQXPEHURIXQVXFFHVVIXODWWHPSWVWR
5HS 1R  DW    7KH UHVXOWLQJ ODZ WKH      LQVWLWXWH0HGLFDUHUHIRUPPRUHRYHU$OOWKHVHIDFWRUVDGGHG
3ULYDWH 6HFXULWLHV /LWLJDWLRQ 5HIRUP $FW RI  WKH           WR WKH XQFHUWDLQW\ RI WKH $FWjV IRUP RU SDVVDJH WKLV WLPH
m36/5$lRUWKHm5HIRUP$FWlLQVXODWHVGHIHQGDQWVIURP                DURXQG7KHGLVWULFWFRXUWZDVHQWLWOHGWRWDNHMXGLFLDOQRWLFH
DEXVLYH VXLWV LQ WZR ZD\V UHOHYDQW WR WKLV FDVH  6HH 7KH   RIWKHVHIDFWVZKHQGHFLGLQJWKHLVVXH
3ULYDWH6HFXULWLHV/LWLJDWLRQ5HIRUP$FWRI3XE/1R
FRGLILHGDW86&X	
    +HOZLJHWDOY9HQFRU,QFHWDO           1R        1R              +HOZLJHWDOY9HQFRU,QFHWDO            

H[WUDSRODWLRQVVXFKDVRSLQLRQVPRWLYHVDQGLQVWUXFWLRQVRU                                     $7KH6DIH+DUERU
JHQHUDOVWDWHPHQWVRIRSWLPLVPZKLFKµFRQVWLWXWHQRPRUH
WKDQSXIIHU\DQGDUHXQGHUVWRRGE\UHDVRQDEOHLQYHVWRUVDV                   )LUVW &RQJUHVV FUHDWHG D mVDIH KDUERUl IRU mIRUZDUG
VXFKjl(30HGV\VWHPV,QFY(FKRFDWK,QF)G             ORRNLQJVWDWHPHQWVl86&XF%DVHGRQWKH
G&LUTXRWLQJ,QUH$GYDQWD&RUS6HFXULWLHV                MXGLFLDOmEHVSHDNVFDXWLRQlGRFWULQHWKLVSURYLVLRQH[FXVHV
/LWLJ  )G   G &LU   m>$@ &(2jV          OLDELOLW\IRUGHIHQGDQWVjSURMHFWLRQVVWDWHPHQWVRISODQVDQG
H[SUHVVLRQRIµFRPIRUWjZLWKDILQDQFLDODQDO\VWjVSUHGLFWLRQV            REMHFWLYHV DQG HVWLPDWHV RI IXWXUH HFRQRPLF SHUIRUPDQFH
RIKLVFRPSDQ\jVIXWXUHHDUQLQJV>LV@QRWIDFWXDOLQWKDWDV        86&  XL  $ SODLQWLII PD\ RYHUFRPH WKLV
DIXWXUHSURMHFWLRQLW>LV@QRWFDSDEOHRIEHLQJSURYHGIDOVHl          SURWHFWLRQRQO\LIWKHVWDWHPHQWZDVPDWHULDOLIGHIHQGDQWV
/RQJPDQ Y )RRG /LRQ ,QF  )G   WK &LU         KDGDFWXDONQRZOHGJHWKDWLWZDVIDOVHRUPLVOHDGLQJDQGLI
FLWLQJ0DORQHY0LFURG\QH&RUS)G                WKH VWDWHPHQW ZDV QRW LGHQWLILHG DV mIRUZDUGORRNLQJlRU
 WK &LU   m>6@WDWHPHQWV FRQWDLQLQJ VLPSOH              ODFNHGPHDQLQJIXOFDXWLRQDU\VWDWHPHQWV86&X
HFRQRPLF SURMHFWLRQV H[SUHVVLRQV RI RSWLPLVP DQG RWKHU            F
SXIIHU\DUHLQVXIILFLHQWlWRDWWDFKOLDELOLW\1RYDNY.DVDNV
 )G   G &LU  VHH DOVR )ULHGPDQ Y                               %7KH3OHDGLQJ6WDQGDUG
0RKDVFR&RUS)GG&LU/LNHWKHVH
FLUFXLWVZHKDYHKHOGWKDWmVDOHVILJXUHVIRUHFDVWVDQGWKH                6HFRQG &RQJUHVV KHLJKWHQHG WKH SOHDGLQJ VWDQGDUG IRU
OLNH RQO\ ULVH WR WKH OHYHO RI PDWHULDOLW\ ZKHQ WKH\ FDQ EH    VHFXULWLHVIUDXG%HIRUHDSODLQWLIIKDGWRDOOHJHIUDXG
FDOFXODWHGZLWKVXEVWDQWLDOFHUWDLQW\lsDPHVY*HUEHU3URG            mZLWKSDUWLFXODULW\l)HG5&LY3E8QGHUWKH36/5$
&R)GWK&LU                                  DSODLQWLIIPXVWQRZmVWDWHZLWKSDUWLFXODULW\IDFWVJLYLQJULVH
                                                                          WR D VWURQJ LQIHUHQFH WKDW WKH GHIHQGDQW DFWHG ZLWK WKH
   7KDWPDQDJHPHQWjVVWDWHPHQWVKDYHWREHPDWHULDOWREH                 UHTXLUHGVWDWHRIPLQGl86&XEHPSKDVLV
DFWLRQDEOH LV RQO\ WDQJHQWLDOO\ DGGUHVVHG E\ WKH PDMRULW\         DGGHG,QSDVVLQJWKH5HIRUP$FW&RQJUHVVQHYHUGHILQHG
$FFRUGLQJWRWKHPDMRULW\LWGRHVQRWEHOLHYHWKDWm9HQFRUjV             mVWDWHRIPLQGl+RIIPDQY&RPVKDUH)G
VWURQJ HVWLPDWHV RI VWURQJHU HDUQLQJV ZHUH VR XQFHUWDLQ RU        WK&LU,WLVFOHDUWKDWVRPHIRUPRIIUDXGXOHQWLQWHQW
FDVXDOO\ GLVUHJDUGHG E\ WKH PDUNHWSODFHl DV WR PDNH WKH           LV UHTXLUHG  7KH 6XSUHPH &RXUW KDV KHOG WKDW VFLHQWHU mD
SURMHFWLRQV LPPDWHULDO  0DM 2S DW   2I FRXUVH WKH        PHQWDO VWDWH HPEUDFLQJ LQWHQW WR GHFHLYH PDQLSXODWH RU
TXHVWLRQLVQRWZKHWKHUWKHSURMHFWLRQVZHUHmVRXQFHUWDLQl              GHIUDXGl LV DQ HVVHQWLDO HOHPHQW RI D E  5XOH E
EXWUDWKHUZKHWKHUWKH\ZHUHFDSDEOHRIEHLQJFDOFXODWHGZLWK            FODLP(UQVW	(UQVWY+RFKIHOGHU86Q
VXEVWDQWLDOFHUWDLQW\,GRQRWEHOLHYHWKHUHLVDQ\LQGLFDWLRQ          7KRXJKWKH&RXUWKDVQHYHUGHILQHGWKHPHQWDOVWDWH
WKDWWKH\ZHUHVXEVWDQWLDOO\FHUWDLQDQGWKHPDMRULW\SRLQWVWR           UHTXLUHGIRUVHFXULWLHVIUDXGnDQGLQIDFWH[SUHVVO\UHVHUYHG
QRLQIRUPDWLRQWRSHUVXDGHPHRWKHUZLVH,QVWHDGLWQLPEO\              WKHTXHVWLRQVHHLGnZHKDYHORQJSUHPLVHGOLDELOLW\RQDW
WXUQVWKHTXHVWLRQIURPZKHWKHUHVWLPDWHVZHUHFDSDEOHRI                 OHDVW mUHFNOHVVl EHKDYLRU  0DQVEDFK Y 3UHVFRWW %DOO 	
EHLQJFDOFXODWHGZLWKVXEVWDQWLDOFHUWDLQW\WRZKHWKHUWKHUH              7XUEHQ)GWK&LU:KHQZHILUVW
ZDVDVXEVWDQWLDOFHUWDLQW\WKDWWKH$FWLIHQDFWHGZRXOGKDYH          LQWHUSUHWHGKRZWKH36/5$PRGLILHGVHFXULWLHVOLWLJDWLRQZH
DQ\ DGYHUVH HIIHFW RQ 9HQFRUjV EXVLQHVV  7KLV LV                 H[SODLQHGWKDW&RQJUHVVmGLGQRWFKDQJHWKHVFLHQWHUWKDWD
GLVLQJHQXRXV7KDWWKH$FWPD\KDYHDQDGYHUVHHIIHFWGRHV               SODLQWLIIPXVWSURYHWRSUHYDLOLQDVHFXULWLHVIUDXGFDVHEXW
QRWPHDQWKDWHVWLPDWHVZHUHFDSDEOHRIEHLQJFDOFXODWHGZLWK
VXEVWDQWLDO FHUWDLQW\  ,I DQ\WKLQJ WKH IDFW WKDW D ELOO ZDV       
EHIRUH&RQJUHVVZKLFKLIHQDFWHGZRXOGSRWHQWLDOO\KDYHDQ                       )RU WKH ODQJXDJH RI WKLV SURYLVLRQ LQ WKH 5HIRUP $FW   VHH   QRWH 
                                                                          LQIUD
    +HOZLJHWDOY9HQFRU,QFHWDO         1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO      

LQVWHDGFKDQJHGZKDWDSODLQWLIIPXVWSOHDGLQKLVFRPSODLQW           EHOLHYH WKDW WKH PDMRULW\jV UHDGLQJ RI RXU FDVH ODZ LV QRW
LQRUGHUWRVXUYLYHDPRWLRQWRGLVPLVVl&RPVKDUH)G          VXSSRUWHG E\ WKH RSLQLRQV WKH\ UHO\ RQ EXW LQVWHDG LW
DW,QWKLVFDVHWKHQZHFRQIURQWQRWZKDWFRQVWLWXWHV       HVWDEOLVKHVDQHZSULQFLSOHZKLFKFRQWUDGLFWVSULRUFDVHVLQ
VFLHQWHUEXWUDWKHUZKDWSURGXFHVDmVWURQJLQIHUHQFHWKDWWKH         WKLV&LUFXLW
GHIHQGDQWDFWHGZLWKWKHUHTXLUHGVWDWHRIPLQGl86&
XE                                                           ,GRQRWEHOLHYHWKHVWDWHPHQWVWKHPDMRULW\LGHQWLILHVDV
                                                                       PLVOHDGLQJ DUH PDWHULDO QRU GR , EHOLHYH WKH LQIRUPDWLRQ
   &RQJUHVV GHOLEHUDWHO\ OHIW WKLV TXHVWLRQ XQDQVZHUHG           9HQFRURPLWWHGLVPDWHULDOXQGHUHVWDEOLVKHGVHFXULWLHVODZ
7KRXJKWKH5HIRUP$FWGUHZKHDYLO\RQ6HFRQG&LUFXLWFDVH              ,Q UHYLHZLQJ9HQFRUjVPRWLRQZHDUHHQWLWOHGWRWDNHLQWR
ODZLQIDVKLRQLQJWKHmVWURQJLQIHUHQFHlVWDQGDUG&RQJUHVV            DFFRXQWGRFXPHQWVUHIHUUHGWRLQWKHSOHDGLQJVVRPHWKLQJWKH
VWDWHGLWGLGQRWLQWHQGWRFRGLI\KRZWKDWVWDQGDUGVKRXOGEH         PDMRULW\ GLG QRW GR  6HH  s$0(6 :0 0225( (7 $/
PHW6HH+5&RQI5HS1RDW3ULRU            0225(j6 )('(5$/ 35$&7,&( >@GHG
WR SDVVDJH RI WKH 36/5$ WKH 6HFRQG &LUFXLW UHTXLUHG WKH
VHFXULWLHVIUDXGSODLQWLIIWRSOHDGIDFWVJLYLQJULVHWRDmVWURQJ        7KHPDMRULW\LGHQWLILHVWKUHHVWDWHPHQWV9HQFRUPDGHWKDW
LQIHUHQFHRIIUDXGXOHQWLQWHQWl6KLHOGVY&LW\WUXVW%DQFRUS        LWEHOLHYHV9HQFRUNQHZZHUHIDOVHRUPLVOHDGLQJ2QHLQ
,QF)GG&LU7KLVFRXOGEHPHWE\         9HQFRUjVILQDQFLDOILOLQJVVSHFLILFDOO\LWVVHFRQGTXDUWHU
VKRZLQJ WKDW GHIHQGDQWV HLWKHU DFWHG UHFNOHVVO\ RU KDG WKH     4ILOLQJIRUWKHSHULRGRI$SULOWRsXQH
PRWLYH DQG RSSRUWXQLW\ WR FRPPLW IUDXG  6HH $FLWR Y         LWVWDWHGLWFRXOGQRWSUHGLFWZKHWKHUWKH%DODQFHG%XGJHW$FW
,0&(5$ *URXS ,QF  )G   G &LU             ZRXOGEHHQDFWHGDQGZKDWHIIHFWVXFKSURSRVDOVLIHQDFWHG
$FFRUGLQJ WR WKH 6HFRQG &LUFXLW WKH PRWLYH SURQJ ZDV          ZRXOGKDYH7ZRWKHFRPSODLQWDOOHJHVWKDW9HQFRUVSRNH
VDWLVILHGZKHQLWZDVDOOHJHGWKDWGHIHQGDQWVmEHQHILWWHGLQ           ZLWKDQDO\VWVDQGSURMHFWHGIRXUWKTXDUWHUHDUQLQJVIRU
VRPHFRQFUHWHDQGSHUVRQDOZD\IURPWKHSXUSRUWHGIUDXG               DQG HDUQLQJV IRU DOO RI   $QG WKUHH DFFRUGLQJ WR WKH
7KLVUHTXLUHPHQWZDVJHQHUDOO\PHWZKHQFRUSRUDWHLQVLGHUV             FRPSODLQW 9HQFRUjV PDQDJHPHQW LQIRUPHG DQDO\VWV LQ
ZHUHDOOHJHGWRKDYH PLVUHSUHVHQWHGWRWKHSXEOLFPDWHULDO            6HSWHPEHU RI  WKDW LW ZDV mFRPIRUWDEOHl ZLWK WKH
IDFWV DERXW WKH FRUSRUDWLRQjV SHUIRUPDQFH RU SURVSHFWV LQ       HDUQLQJVSURMHFWLRQVPDGHE\DQDO\VWVSULRUWRWKHHQDFWPHQW
RUGHUWRNHHSWKHVWRFNSULFHDUWLILFLDOO\KLJKZKLOHWKH\VROG        RIWKH%XGJHW$FW6HH0DM2SDW,WEHDUVHPSKDVLVWKDW
WKHLURZQVKDUHVDWDSURILWl1RYDNY.DVDNV)G         WKHDQDO\VWVjUHSRUWLQFOXGHGLQWKHMRLQWDSSHQGL[GRHVQRW
 G &LUFHUW GHQLHG  6&W    7KH    VD\PDQDJHPHQWVDLGLWZDVFRPIRUWDEOHZLWKWKHSURMHFWLRQV
RSSRUWXQLW\SURQJFRQFHUQHGmWKHPHDQVDQGOLNHO\SURVSHFW             UDWKHULWVD\VmPDQDJHPHQWFRPIRUWDEOHls$DWZLWK
RIDFKLHYLQJFRQFUHWHEHQHILWVE\WKHPHDQVDOOHJHGl,GDW          WKH HVWLPDWHV ZKLFK FRXOG YHU\ ZHOO EH WKH DQDO\VWVj
TXRWLQJ6KLHOGV)GDW                              XQGHUVWDQGLQJVRIPDQDJHPHQWjVVWDWHPHQWV1HYHUWKHOHVV
                                                                       WKHVHZHUHDOOPLVOHDGLQJDFFRUGLQJWRWKHPDMRULW\EHFDXVH
   ,QLWVYHUVLRQRIWKH5HIRUP$FWWKH6HQDWHDSSURYHGDQ            PDQDJHPHQWIDLOHGWRGLVFORVHSUHGLFWLRQVDERXWWKHLPSDFWRI
DPHQGPHQWUHFRJQL]LQJPRWLYHDQGRSSRUWXQLW\DVDEDVLVIRU            WKH%DODQFHG%XGJHW$FWRQ9HQFRUjVUHYHQXH
OLDELOLW\  6HQDWRU 6SHFWHU SURSRVHG WKLV SURYLVLRQ mVR WKDW
SHRSOHZRXOGNQRZZKDWWKH\DUHWRGRRQWKHSOHDGLQJl                                 $6WDWHPHQWV0DGH
&RQJ5HF6GDLO\HGsXQHVWDWHPHQWRI6HQ
6SHFWHU7KH&RQIHUHQFH&RPPLWWHHGURSSHGWKH6SHFWHU                   $VWKHPDMRULW\SRLQWVRXWLIDVWDWHPHQWLVLPPDWHULDOLW
DPHQGPHQW KRZHYHU OHDYLQJ WKH SOHDGLQJ UHTXLUHPHQW              LVQRWDFWLRQDEOH6HH86&XF$LLVHH
XQGHILQHG  6HH +5 &RQI 5HS 1R  DW  Q      DOVR  &)5  EE  m0DWHULDO UHSUHVHQWDWLRQV
                                                                       PXVWEHFRQWUDVWHGZLWKVWDWHPHQWVRIVXEMHFWLYHDQDO\VLVRU
    +HOZLJHWDOY9HQFRU,QFHWDO            1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO      

                      BBBBBBBBBBBBBBBBB                                   2Q'HFHPEHU3UHVLGHQW&OLQWRQYHWRHGWKH
                                                                          ELOO H[SODLQLQJ WKDW KH KDG DSSURYHG RI WKH 6SHFWHU
                          ',66(17                                         DPHQGPHQW DQG WKDW KH GLVDJUHHG ZLWK WKH LQWHQW RI WKH
                      BBBBBBBBBBBBBBBBB                                   &RQIHUHQFH &RPPLWWHH LQ mHUHFW>LQJ@ D KLJKHU EDUULHU WR
                                                                          EULQJLQJVXLWWKDQDQ\QRZH[LVWLQJnRQHVRKLJKWKDWHYHQ
  .(11('<&LUFXLWsXGJHGLVVHQWLQJ$FFRUGLQJWRWKH                   WKHPRVWDJJULHYHGLQYHVWRUVZLWKWKHPRVWSDLQIXOORVVHVPD\
PDMRULW\SODLQWLIIVKDYHDOOHJHGVXIILFLHQWIDFWVWKDW9HQFRU            JHWWRVVHGRXWRIFRXUWEHIRUHWKH\KDYHDFKDQFH WRSURYH
NQRZLQJO\PDGHIDOVHRUPLVOHDGLQJVWDWHPHQWVWRRYHUFRPH                 WKHLUFDVHl&RQJ5HF6GDLO\HG'HF
WKH 3ULYDWH 6HFXULWLHV /LWLJDWLRQ 5HIRUP $FWjV KHLJKWHQHG           YHWRPHVVDJHRI3UHVLGHQW&OLQWRQ&RQJUHVVWKHQRYHUURGH
SOHDGLQJVWDQGDUGV%HFDXVHWKHPDMRULW\IDLOVWRLGHQWLI\DQ\            WKHYHWRVXJJHVWLQJWKDWLWUHDIILUPHGZKDWWKH3UHVLGHQWKDG
PDWHULDO VWDWHPHQWV WKDW GHIHQGDQWV NQHZ ZHUH IDOVH RU             IRXQGREMHFWLRQDEOH
PLVOHDGLQJDQGDGRSWVDQH[FHVVLYHO\H[SDQVLYHYLHZRIWKH
SKUDVHmVWURQJLQIHUHQFHl,PXVWUHVSHFWIXOO\GLVVHQW                  7KHGHEDWHRYHUSOHDGLQJGLGQRWHQGZLWKSDVVDJHRIWKH
                                                                          $FWKRZHYHU7KUHH\HDUVODWHU&RQJUHVVUHYLVLWHGWKHLVVXH
   ,WLVQRWHQWLUHO\FOHDUWRPHZKDWWKHPDMRULW\KDVKHOG$W         RI SOHDGLQJ UHTXLUHPHQWV ZKLOH GHEDWLQJ WKH 6HFXULWLHV
VRPH SRLQWV LW DSSHDUV LW LV KROGLQJ WKDW PDQDJHPHQWjV           /LWLJDWLRQ8QLIRUP6WDQGDUGV$FWRI7KRXJKWKH
VWDWHPHQWVWKDWLWFRXOGQRWSUHGLFWWKHHIIHFWRIWKH%DODQFHG           ODZFRQFHUQHGGXDOIHGHUDOVWDWHUHJXODWLRQRIWKHVHFXULWLHV
%XGJHW $FW ZHUH IDOVH  $W RWKHUV LW DSSHDUV WKH PDMRULW\      PDUNHW&RQJUHVVWRRNWKHRSSRUWXQLW\WRXQGHUVFRUHLWVLQWHQW
FRQFOXGHV WKDW PDQDJHPHQWjV SURMHFWLRQV ZHUH PLVOHDGLQJ              LQSDVVLQJWKH5HIRUP$FW,QGHVLJQDWLQJIHGHUDOFRXUWDVWKH
EHFDXVHWKH\GLGQRWLQFOXGHDGGLWLRQDOLQIRUPDWLRQDERXWWKH             H[FOXVLYHYHQXHIRUPRVWVHFXULWLHVFODVVDFWLRQVWKH6HQDWH
HIIHFWWKH$FWPLJKWKDYHRQ9HQFRUjVUHYHQXH:KHWKHUWKH               &RPPLWWHH RQ %DQNLQJ +RXVLQJ DQG 8UEDQ $IIDLUV DOVR
PDMRULW\jVKROGLQJLQFOXGHVRQHRUERWKRIWKHVHFRQFOXVLRQV             QRWHGm,WZDVWKHLQWHQWRI&RQJUHVVDVZDVH[SUHVVO\VWDWHG
,WKLQNLWLQFRUUHFW                                                     GXULQJWKHOHJLVODWLYHGHEDWHRQWKH36/5$DQGSDUWLFXODUO\
                                                                          GXULQJWKHGHEDWHRQRYHUULGLQJWKH3UHVLGHQWjVYHWRWKDWWKH
                          ,0DWHULDOLW\                                 36/5$ HVWDEOLVK D XQLIRUP IHGHUDO VWDQGDUG RQ SOHDGLQJ
                                                                          UHTXLUHPHQWVE\DGRSWLQJWKHSOHDGLQJVWDQGDUGDSSOLHGE\WKH
  $FFRUGLQJWRWKHPDMRULW\WKLVLVQRWDFDVHDERXWIDLOXUHWR          6HFRQG&LUFXLW&RXUWRI$SSHDOVl65HS1RDW
GLVFORVH  5DWKHU LW DVVHUWV WKLV LV D FDVH DERXW VHOHFWLYH     +RZHYHU WKH DIWHUPDWK RI WKH 36/5$ KDV EHHQ
GLVFORVXUH8QGHUWKLV&LUFXLWjVSUHFHGHQWLWFRQFOXGHVRQFH           DQ\WKLQJEXWXQLIRUPDVFRXUWVDWWHPSWWRGLYLQHKRZPXFKRI
DFRUSRUDWLRQEHJLQVWRVSHDNWKHFRUSRUDWLRQPXVWGLVFORVH              WKH6HFRQG&LUFXLWVWDQGDUG&RQJUHVVLQWHQGHGWRLQFRUSRUDWH
LQIRUPDWLRQVXFKDVWKHHIIHFWRI\HWWREHHQDFWHGOHJLVODWLRQ          7KH PXGGOHG OHJLVODWLYH KLVWRU\ KDV SURGXFHG FRQIOLFWLQJ
RQLWVUHYHQXH6SHFLILFDOO\WKHPDMRULW\SRLQWVWR5XELQY            LQWHUSUHWDWLRQVRIWKH5HIRUP$FW6HHHJ&RPVKDUH
6FKRWWHQVWHLQ)GWK&LUHQEDQFDV            )G DW  Q m9LHZHG LQ LWV HQWLUHW\ WKH OHJLVODWLYH
HVWDEOLVKLQJ WKDW mD SDUW\ ZKR GLVFORVHV PDWHULDO IDFWV LQ        KLVWRU\ LV DPELJXRXV DQG GRHV OLWWOH WR DFFXUDWHO\ UHYHDO
FRQQHFWLRQZLWKVHFXULWLHVWUDQVDFWLRQVµDVVXPH>V@DGXW\WR              &RQJUHVVjLQWHQWKHUHl,QUH$GYDQWD&RUS6HF/LWLJ
VSHDN IXOO\ DQG WUXWKIXOO\ RQ WKRVH VXEMHFWVjl HPSKDVLV          )GG&LUm8OWLPDWHO\ZHEHOLHYHWKHUH
DGGHG0DM2SDW7KHUHIRUHLWFRQFOXGHV9HQFRUZDV             LV OLWWOH WR JDLQ LQ DWWHPSWLQJ WR UHFRQFLOH WKH FRQIOLFWLQJ
UHTXLUHG WR GLVFORVH DQ\ LQWHUQDO UHSRUWV UHODWLQJ WR WKH         H[SUHVVLRQV RI OHJLVODWLYH LQWHQW LQFOXGLQJ WKH 3UHVLGHQWjV
SRWHQWLDOHIIHFWRIWKH%DODQFHG%XGJHW$FW7REHJLQ,GR              YHWR VWDWHPHQW  7KH OHJLVODWLYH KLVWRU\ RQ WKLV SRLQW LV
QRWEHOLHYHWKHPDMRULW\KDVSURYLGHGDSHUVXDVLYHDUJXPHQW
XQGHU LWV UHDGLQJ RI RXU FDVHV  %XW PRUH LPSRUWDQWO\ ,
    +HOZLJHWDOY9HQFRU,QFHWDO          1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO        

FRQWUDGLFWRU\DQGLQFRQFOXVLYHDQGZHDUHUHOXFWDQWWRDFFRUG          +DUROG6%ORRPHQWKDO 6(&85,7,(6 /$: +$1'%22.
LWPXFKZHLJKWl                                                      HG  &RQJUHVV KDV LQVWHDG LQVWUXFWHG XV WR GLVPLVV
                                                                        FRPSODLQWV IRUVHFXULWLHVIUDXGXQOHVVSODLQWLIIVmVWDWHZLWK
   7KH 1LQWK &LUFXLW KDV UHDG WKH 36/5$ WR DIIHFW WKH          SDUWLFXODULW\ IDFWV JLYLQJ ULVH WR D VWURQJ LQIHUHQFH WKDW WKH
VXEVWDQFH RI VHFXULWLHV IUDXG OLWLJDWLRQ UDLVLQJ WKH VFLHQWHU   GHIHQGDQWDFWHGZLWKWKHUHTXLUHGVWDWHRIPLQGl86&
HOHPHQWWRUHTXLUHmVWURQJHYLGHQFHRIGHOLEHUDWHO\UHFNOHVVRU          XE  :LWK UHJDUG WR GHIHQGDQWVj HDUQLQJV
FRQVFLRXVPLVFRQGXFWlsDQDVY0F&UDFNHQ,QUH6LOLFRQ               SURMHFWLRQVDQGGLVFODLPHUVRINQRZOHGJHDERXWWKH%DODQFHG
*UDSKLFV6HF/LWLJ)GWK&LU,W           %XGJHW$FWSODLQWLIIVKDYHGRQHVRKHUH:HZRXOGQRWHWKDW
FLWHVDVVXSSRUWWKH&RQIHUHQFH&RPPLWWHHjVUHMHFWLRQRIWKH            WKHGLVWULFWFRXUWEHIRUHJUDQWLQJVXPPDU\MXGJPHQWLQHUURU
6SHFWHUDPHQGPHQWUHODWLQJWRPRWLYHDQGRSSRUWXQLW\DQG                DUULYHGDWWKHVDPHFRQFOXVLRQFRQFHUQLQJWKHVXIILFLHQF\RI
WKHVXEVHTXHQWRYHUULGHRIWKH3UHVLGHQWjVYHWR,GDW           WKHSOHDGLQJV$FFRUGLQJO\ZH5(9(56(WKHGLVPLVVDOIRU
m7KH6HFRQG&LUFXLWFDVHODZVHWWLQJIRUWKLWVWZRSURQJWHVW           IDLOXUHWRVWDWHDFODLPRIVHFXULWLHVIUDXGH[FHSWZLWKUHVSHFW
H[LVWHGDWWKHWLPHWKH36/5$ZDVSDVVHG&OHDUO\&RQJUHVV            WRWKHFODLPVUHIHUUHGWRLQVHFWLRQ,9DERYHDQG5(0$1'
VRXJKWWRUDLVHWKHVWDQGDUGDERYHDOOH[LVWLQJUHTXLUHPHQWV           WKHFDVHIRUIXUWKHUGLVFRYHU\DQGSURFHHGLQJVRQSODLQWLIIVj
&RQJUHVV FRXOG KDYH DGRSWHG RXWULJKW WKH 6HFRQG &LUFXLW          FODLPV XQGHU VHFWLRQV E DQG D RI WKH 6HFXULWLHV
VWDQGDUG,WGLGQRWGRVR,WIROORZVWKDW&RQJUHVVVRXJKWWR        ([FKDQJH$FWRI
UDLVHWKHVWDQGDUGDERYHWKDWLQWKH6HFRQG&LUFXLWl,G
   7KH6HFRQGDQG7KLUG&LUFXLWVLQFRQWUDVWKDYHFRQFOXGHG
WKDW&RQJUHVVLQWHQGHGWRPDNHRQO\DSURFHGXUDOFKDQJHLQ
SDVVLQJWKH36/5$6HHHJ1RYDN)GDW,QUH
$GYDQWD)GDW%\WKLVYLHZ&RQJUHVVUDLVHGWKH
SOHDGLQJVWDQGDUGWRWKDWRIWKH6HFRQG&LUFXLWEXWQRKLJKHU
$FFRUGLQJO\LQWKH7KLUG&LUFXLWmLWUHPDLQVVXIILFLHQWIRU
SODLQWLIIV>WR@SOHDGVFLHQWHUE\DOOHJLQJIDFWVHVWDEOLVKLQJD
PRWLYHDQGDQRSSRUWXQLW\WRFRPPLWIUDXGRUE\VHWWLQJIRUWK
IDFWVWKDWFRQVWLWXWHFLUFXPVWDQWLDOHYLGHQFHRIHLWKHUUHFNOHVV
RUFRQVFLRXVEHKDYLRUl$GYDQWD)GLQWHUQDO
FLWDWLRQDQGTXRWDWLRQRPLWWHG$FFRUG3UHVVY&KHP,QY
6HUYLFHV&RUS)GG&LU
  7KH(OHYHQWK&LUFXLWKDVWDNHQWKHPLGGOHURDGEHWZHHQ
WKHVHSRVLWLRQV:KLOHLWKHOGWKDWWKH36/5$GLGQRWDOWHULWV
VFLHQWHUUHTXLUHPHQWRImVHYHUHUHFNOHVVQHVVlLWQRWHGWKDWD
VKRZLQJRIPRWLYHDQGRSSRUWXQLW\DORQHFRXOGQRWVXVWDLQD
FRPSODLQWIRUIUDXG%U\DQWY$YDGR%UDQGV,QF)G
WK&LU,QDUULYLQJDWWKLVFRQFOXVLRQ
WKH (OHYHQWK &LUFXLW H[SODLQHG WKDW LW ZDV LQ mEDVLF
DJUHHPHQWl ZLWK WKH SRVLWLRQ RI WKH 6L[WK &LUFXLW LQ
&RPVKDUH,GDW%HFDXVHWKLVUHDGLQJRI&RPVKDUHLV
    +HOZLJHWDOY9HQFRU,QFHWDO          1R       1R          +HOZLJHWDOY9HQFRU,QFHWDO     

         &9HQFRUjV3URSRVHG6DOHRI%HKDYLRUDO                       XQGXO\ ULJLGnDQG LW LV RQH OLNHZLVH DGYDQFHG E\
                 +HDOWKFDUH&RUSRUDWLRQ                                 GHIHQGDQWVnZHQRZH[SOLFDWHRXUDSSURDFKWRSOHDGLQJLQ
                                                                        VHFXULWLHVIUDXGOLWLJDWLRQ
   2Q6HSWHPEHU9HQFRUDQQRXQFHGWKHVDOHRILWV
VXEVLGLDU\ %HKDYLRUDO +HDOWKFDUH &RUSRUDWLRQ  ,Q HDUO\             ,QWKLV&LUFXLWDGHIHQGDQWLQDQDFWLRQIRUVHFXULWLHVIUDXG
1RYHPEHU KRZHYHU WKH WUDQVDFWLRQ IHOO WKURXJK GXH WR D        PD\EHOLDEOHIRUUHFNOHVVQHVVWKDWLVmKLJKO\XQUHDVRQDEOH
GLVSXWHRYHUSD\PHQWWHUPV3ODLQWLIIVDOOHJHWKDW9HQFRUjV            FRQGXFWZKLFKLVDQH[WUHPHGHSDUWXUHIURPWKHVWDQGDUGVRI
DQQRXQFHPHQWRIDmGHILQLWLYHlGHDOZDVPLVOHDGLQJLQWHQGHG            RUGLQDU\ FDUHl  0DQVEDFK  )G DW   $V ZH
WRUHDVVXUHLQYHVWRUVRIWKHFRPSDQ\jVVROYHQF\IROORZLQJLWV           H[SODLQHGLQ&RPVKDUHWKH5HIRUP$FWGLGQRWFKDQJHWKLV
DFTXLVLWLRQRI7UDQVLWLRQDO:HILQGWKLVDOOHJDWLRQRIIUDXG          VFLHQWHUUHTXLUHPHQW&RPVKDUH)GDW:HIRXQG
XQFRQYLQFLQJ7KHSUHVVUHOHDVHGHWDLOLQJWKHVDOHH[SODLQHG           WKDW&RQJUHVVKDGLQVWHDGVWUHQJWKHQHGWKHPLQLPXPVKRZLQJ
WKDWWKHmWUDQVDFWLRQZKLFKLVVXEMHFWWRDFFHSWDEOHILQDQFLQJ        QHFHVVDU\WRVXUYLYHDPRWLRQWRGLVPLVV,QWKLV&RPVKDUH
GXHGLOLJHQFHDQGFHUWDLQUHJXODWRU\DSSURYDOVLVH[SHFWHG       GLVDJUHHGZLWKWKHDSSURDFKRIWKH7KLUG&LUFXLWUHMHFWLQJWKH
WR FORVH GXULQJ WKH IRXUWK TXDUWHU RI l  &OHDUO\ WKLV   LGHDWKDWSOHDGLQJPRWLYHDQGRSSRUWXQLW\DORQHFRXOGSURYLGH
ODQJXDJH VXJJHVWHG WKDW WKH VDOH ZDV FRQGLWLRQDO DQG DQ\        D EDVLV IRU OLDELOLW\  m:H KROG WKDW SODLQWLIIV PD\ PHHW
DJUHHPHQWZDVWHQWDWLYH9HQFRUjVDQQRXQFHPHQWZDVQRW                 36/5$SOHDGLQJUHTXLUHPHQWVE\DOOHJLQJIDFWVWKDWJLYHULVH
IDOVHDQGLVWKHUHIRUHQRWDFWLRQDEOH                                  WRDVWURQJLQIHUHQFHRIUHFNOHVVEHKDYLRUEXWQRWE\DOOHJLQJ
                                                                        IDFWVWKDWLOOXVWUDWHQRWKLQJPRUHWKDQDGHIHQGDQW
VPRWLYH
                      9&21&/86,21                                    DQGRSSRUWXQLW\WRFRPPLWIUDXGl,GDW+RZHYHUWKH
                                                                        EUHDGWK RI WKDW ODQJXDJH LV TXDOLILHG E\ WKH LPPHGLDWHO\
   $VHYLGHQFHGE\WKHDPELJXRXVOHJLVODWLYHKLVWRU\DQGWKH            SUHFHGLQJ VHQWHQFH  m:KLOH IDFWV UHJDUGLQJ PRWLYH DQG
VSOLWDPRQJWKHIHGHUDOFLUFXLWVWKHLPSRUWDQGDSSOLFDWLRQRI         RSSRUWXQLW\PD\EHUHOHYDQWWRSOHDGLQJFLUFXPVWDQFHVIURP
WKH3ULYDWH6HFXULWLHV/LWLJDWLRQ5HIRUP$FWLVDQHYROYLQJ             ZKLFK D VWURQJ LQIHUHQFH RI IUDXGXOHQW VFLHQWHU PD\ EH
LVVXH  3HUKDSV WKH TXHVWLRQ ZRXOG KDYH EHHQ VLPSOHU KDG       LQIHUUHGDQGPD\RQRFFDVLRQULVHWRWKHOHYHORIFUHDWLQJD
&RQJUHVV GUDIWHG VWDWXWRU\ ODQJXDJH WR UHIOHFW LWV DSSDUHQW      VWURQJ LQIHUHQFH RI UHFNOHVV RU NQRZLQJ FRQGXFW WKH EDUH
LQWHQWLRQVXFKDVWKHWUDQVODWLRQRIIHUHGE\RQHFRPPHQWDWRU          SOHDGLQJRIPRWLYHDQGRSSRUWXQLW\GRHVQRWVWDQGLQJDORQH
                                                                        FRQVWLWXWHWKHSOHDGLQJRIDVWURQJLQIHUHQFHRIVFLHQWHUl,G
  7KHUH DUH WRR PDQ\ IULYRORXV VHFXULWLHV IUDXG FODVV            HPSKDVLVDGGHG
  DFWLRQVEHLQJILOHG6XFKDFWLRQVLPSRVHKHDY\FRVWVRQ
  GHIHQGDQWVDVDUHVXOWRIWKHH[WHQVLYHGLVFRYHU\WKDWLV                7KH SURSHU UHDGLQJ RI &RPVKDUH LV OHVV FDWHJRULFDO DQG
  OLNHO\WRHQVXHDQGRIWHQUHVXOWLQWKHGHIHQGDQWVEHLQJ              PRUHIDFWVHQVLWLYHWKDQWKDWXUJHGE\GHIHQGDQWV:KLOHLWLV
  IRUFHGWRVHWWOH7KHUHLVQROLDELOLW\XQGHU5XOHE             WUXH WKDW PRWLYH DQG RSSRUWXQLW\ DUH QRW VXEVWLWXWHV IRU D
  XQOHVVWKHGHIHQGDQWNQHZRUUHFNOHVVO\GLVUHJDUGHGWKDW              VKRZLQJRIUHFNOHVVQHVVWKH\FDQEHFDWDO\VWVWRIUDXGDQGVR
  WKH UHSUHVHQWDWLRQV ZHUH IDOVH RU PLVOHDGLQJ  $ FRXUW        VHUYH DV H[WHUQDO PDUNHUV WR WKH UHTXLUHG VWDWH RI PLQG
  VKRXOGQRWDOORZGLVFRYHU\XQOHVVLWGHWHUPLQHVWKHEHVW              &RPVKDUHPDGHWKLVGLVWLQFWLRQE\UHIXVLQJWRHTXDWHPRWLYH
  LWFDQIURPWKHSOHDGLQJVZKHWKHUWKHFDVHLVOLNHO\ WR              DQGRSSRUWXQLW\ZLWKVFLHQWHUEXW\HWUHFRJQL]LQJWKDWIDFWV
  KDYHPHULWGHIHQGDQWVPDGHIDOVHUHSUHVHQWDWLRQVDQG               VKRZLQJHDFKPD\VXSSRUWDVWURQJLQIHUHQFHRIUHFNOHVVQHVV
  NQHZWKH\ZHUHIDOVHLIGLVFRYHU\LVDOORZHGRUZKHWKHU              :HUHDIILUPWKDWSODLQWLIIVFDQQRWVLPSO\SOHDGmPRWLYHDQG
  LWDSSHDUVIULYRORXVsXGJHVNHHSLQJDOORIWKLVLQPLQG             RSSRUWXQLW\lDVDPDQWUDIRUUHFRYHU\XQGHUWKH5HIRUP$FW
  VKRXOGH[HUFLVHWKHLUGLVFUHWLRQLQGHWHUPLQLQJZKHWKHU               7KH$FWUHTXLUHVSODLQWLIIVWRmVSHFLI\HDFKVWDWHPHQWDOOHJHG
  WKHFDVHVKRXOGEHDOORZHGWRSURFHHGRUEHGLVPLVVHG
    +HOZLJHWDOY9HQFRU,QFHWDO        1R      1R           +HOZLJHWDOY9HQFRU,QFHWDO      

WR KDYH EHHQ PLVOHDGLQJ WKH UHDVRQ RU UHDVRQV ZK\ WKH      WKHVXFFHVVIXOLQWHJUDWLRQRIWKHFRPSDQLHV7KHDOOHJDWLRQV
VWDWHPHQWLVPLVOHDGLQJDQGLIDQDOOHJDWLRQUHJDUGLQJWKH         GRQRWUHYHDO/XQVIRUGjVVWDWHPHQWWREHIDOVHRUPLVOHDGLQJ
VWDWHPHQWRURPLVVLRQLVPDGHRQLQIRUPDWLRQDQGEHOLHIWKH
FRPSODLQWVKDOOVWDWHZLWKSDUWLFXODULW\DOOIDFWVRQZKLFKWKH        3ODLQWLIIV KDYH QRW VWDWHG D FODLP IRU VHFXULWLHV IUDXG LQ
EHOLHILVIRUPHGl86&XE,QWKLVZDVKRI        FRQQHFWLRQZLWK9HQFRUjVDFTXLVLWLRQRI7KHUD7[
DOOHJDWLRQVmPRWLYHlDQGmRSSRUWXQLW\lDUHVLPSO\UHFXUULQJ
SDWWHUQVRIHYLGHQFH:HGHFLGHFDVHVRQIDFWVQRWODEHOV                   %9HQFRUjV$FTXLVLWLRQRI7UDQVLWLRQDO
6HH 0LQJHU Y *UHHQ  )G   WK &LU                        +RVSLWDOV&RUSRUDWLRQ
m>7@KH5XOHVUHTXLUHWKDWZHQRWUHO\VROHO\RQODEHOVLQD
FRPSODLQW EXW WKDW ZH SUREH GHHSHU DQG H[DPLQH WKH             2Q 0D\   9HQFRU DQQRXQFHG SODQV WR SXUFKDVH
VXEVWDQFHRIWKHFRPSODLQW,QGHHGWKLVFRXUWKDVPDGHFOHDU       7UDQVLWLRQDO +RVSLWDOV &RUSRUDWLRQ  7R ILQDQFH WKH
WKDWµWKHODEHOZKLFKDSODLQWLIIDSSOLHVWRDSOHDGLQJGRHVQRW     DFTXLVLWLRQ GHIHQGDQWV VROG  PLOOLRQ RI VHQLRU QRWHV
GHWHUPLQHWKHQDWXUHRIWKHFDXVHRIDFWLRQZKLFKKHVWDWHVjl      ZKLFKWKH\H[FKDQJHGLQ2FWREHUIRUSXEOLFO\WUDGHGQRWHV
TXRWLQJ8QLWHG6WDWHVY/RXLVYLOOH	1DVKYLOOH55&R       $FFRUGLQJWRSODLQWLIIVWKHFRPSDQ\ ZRXOGQRWKDYHEHHQ
)GWK&LU:KHWKHUWKHIDFWVFDQEHVDLG       DEOHWRFRPSOHWHWKHERQGRIIHULQJKDGLQYHVWRUVNQRZQWKH
WRHVWDEOLVKPRWLYHRSSRUWXQLW\RUQHLWKHUZHDUHGLUHFWHG        WUXWK DERXW KRZ WKH %DODQFHG %XGJHW $FWnHQDFWHG WZR
RQO\WRFRQVLGHUZKHWKHUWKH\SURGXFHDVWURQJLQIHUHQFHWKDW        PRQWKVHDUOLHUnZRXOGDIIHFW9HQFRU
WKH GHIHQGDQW DFWHG DW OHDVW UHFNOHVVO\  7KLV QHFHVVDULO\
LQYROYHVDVLIWLQJRIDOOHJDWLRQVLQWKHFRPSODLQW$VZHKDYH        7KLVFODLPDSSHDUVWREHDQRIIVKRRWRISODLQWLIIVjFKDUJH
QRWHGUHFNOHVVQHVVLQVHFXULWLHVIUDXGLVDQXQWLG\FDVHE\       WKDW 9HQFRU SURILWHG IURP IDLOLQJ WR VSHDN IXOO\ DERXW WKH
FDVHFRQFHSW0DQVEDFK)GDW$FFRUGLQJO\             DGYHUVH LPSDFW RI WKH %XGJHW $FW  :H KDYH DOUHDG\
IDFWVSUHVHQWLQJPRWLYHDQGRSSRUWXQLW\PD\EHRIHQRXJK             FRQFOXGHG WKDW WKHUH LV D VWURQJ LQIHUHQFH WKDW GHIHQGDQWV
ZHLJKWWRVWDWHDFODLPXQGHUWKH36/5$ZKHUHDVSOHDGLQJ            NQHZ PRUH WKDQ WKH\ GLVFORVHG DERXW WKH ILQDQFLDO
FRQFOXVRU\ODEHOVRIPRWLYHDQGRSSRUWXQLW\ZLOOQRWVXIILFH        FRQVHTXHQFHV RI KHDOWK FDUH UHIRUP  ,Q WKHLU DOOHJDWLRQV
&RPVKDUH)GDW                                         FRQFHUQLQJVWRFNSULFHVSODLQWLIIVKDYHVKRZQWKDWGHIHQGDQWV
                                                                     KDG QR UHDVRQDEOH EDVLV IRU PDNLQJ HDUQLQJV SURMHFWLRQV
  7KH)LUVW&LUFXLWKDVDGRSWHGDIDFWVSHFLILFDSSURDFKWRWKH      ZLWKRXW GLVFXVVLQJ WKH SRWHQWLDO HIIHFW RI WKH %XGJHW $FW
36/5$KROGLQJWKDWmZKDWHYHUWKHFKDUDFWHULVWLFSDWWHUQVRI         8QOLNH WKH DOOHJDWLRQV FRQFHUQLQJ WKH HDUQLQJV HVWLPDWHV
WKH IDFWV DOOHJHG WKRVH IDFWV PXVW QRZ SUHVHQW D VWURQJ    WKRXJKWKHFRPSODLQWGRHVQRWVXSSRUWLWVFODLPIRUIUDXGLQ
LQIHUHQFHRIVFLHQWHUl*UHHEHOY)736RIWZDUH,QF          WKH7UDQVLWLRQDODFTXLVLWLRQ$VZDVWKHFDVHLQ&RPVKDUH
)GVW&LU$VLWH[SODLQHG                    SODLQWLIIVKHUHDOOHJHRQO\PRWLYHDQGRSSRUWXQLW\WRPLVOHDG
                                                                     ZLWKRXWWKHIDFWXDOEDVLVIRUHLWKHU&RPVKDUH)GDW
  )URPWKHZRUGVRIWKH$FWFHUWDLQFRQFOXVLRQVFDQEH              9HQFRUPDGHQRVWDWHPHQWVFRQFHUQLQJWKHDFTXLVLWLRQ
  GUDZQ)LUVW&RQJUHVVSODLQO\FRQWHPSODWHGWKDWVFLHQWHU         RI7UDQVLWLRQDOWKDWFDQEHUHJDUGHGDVPLVOHDGLQJRUIDOVH
  FRXOGEHSURYHQE\LQIHUHQFHWKXVDFNQRZOHGJLQJWKH
  UROHRILQGLUHFWDQGFLUFXPVWDQWLDOHYLGHQFH6HFRQGWKH
  ZRUGVRIWKH$FWQHLWKHUPDQGDWHQRUSURKLELWWKHXVHRI
  DQ\ SDUWLFXODU PHWKRG WR HVWDEOLVK DQ LQIHUHQFH RI
  VFLHQWHU  7KLUG &RQJUHVV KDV HIIHFWLYHO\ PDQGDWHG D
  VSHFLDO VWDQGDUG IRU PHDVXULQJ ZKHWKHU DOOHJDWLRQV RI
    +HOZLJHWDOY9HQFRU,QFHWDO           1R        1R           +HOZLJHWDOY9HQFRU,QFHWDO       

DQDO\VLV:HWKLQNDIDFWILQGHUPLJKWUHJDUGWKLVDVPRUH                 VFLHQWHUVXUYLYHDPRWLRQWRGLVPLVV:KLOHXQGHU5XOH
WKDQDQRGGO\GHWDLOHGSUHVFLHQWH[SUHVVLRQRIV\PSDWK\$V               EDOOLQIHUHQFHVPXVWEHGUDZQLQSODLQWLIIVjIDYRU
IRU DOOHJDWLRQV RI LQVLGHU VWRFN VDOHV WKH GLVVHQW ILQGV WKDW     LQIHUHQFHVRIVFLHQWHUGRQRWVXUYLYHLIWKH\DUHPHUHO\
mSODLQWLIIVKDYHPDGHQRDOOHJDWLRQWKDWWKHDPRXQWVROGE\                 UHDVRQDEOHDVLVWUXHZKHQSOHDGLQJVIRURWKHUFDXVHVRI
GHIHQGDQWV ZDV QRW LQ OLQH ZLWK SULRU SUDFWLFHVl  'LVVHQW         DFWLRQ DUH WHVWHG E\ PRWLRQ WR GLVPLVV XQGHU 5XOH
DW:HZRXOGQRWHWKDWWKHDPHQGHGFRPSODLQWFOHDUO\                    E5DWKHULQIHUHQFHVRIVFLHQWHUVXUYLYHDPRWLRQ
DOOHJHV RWKHUZLVH ZLWK DFFRPSDQ\LQJ FKDUWV  6HH $P                WRGLVPLVVRQO\LIWKH\DUHERWKUHDVRQDEOHDQGmVWURQJl
&RPSOs$7KHSRLQWLVQRWWKDWRQHDFFRXQWRI                 LQIHUHQFHV
HYHQWVLVULJKWDQGRQHLVZURQJnWKDWGHWHUPLQDWLRQDZDLWV
IXUWKHUILQGLQJV7KHSRLQWLVWKDWSODLQWLIIVDUHHQWLWOHGWR           ,GDWLQWHUQDOFLWDWLRQVRPLWWHG
SURYHWKHLUFDVHKDYLQJDWOHDVWSURGXFHGDVWURQJLQIHUHQFH
RI VHFXULWLHV IUDXG  )DFWVSOLWWLQJ LV KDUGO\ SHUVXDVLYH RU         :H EHOLHYH WKLV DSSURDFK EHVW UHIOHFWV WKH LQWHQW RI
DSSURSULDWHFRQVLGHULQJWKH5XOHESRVWXUHRIWKLVFDVH           &RQJUHVV,QHQDFWLQJWKH36/5$&RQJUHVVZDVFRQFHUQHG
                                                                          ZLWKWKHTXDQWXPQRWW\SHRISURRI6HH+5&RQI5HS
                     ,927+(5&/$,06                                    1R  DW  Q  m)RU WKLV UHDVRQ WKH
                                                                          &RQIHUHQFH 5HSRUW FKRVH QRW WR LQFOXGH LQ WKH SOHDGLQJ
            $9HQFRUjV$FTXLVLWLRQRI7KHUD7[                           VWDQGDUGFHUWDLQODQJXDJHUHODWLQJWRPRWLYHRSSRUWXQLW\RU
                                                                          UHFNOHVVQHVVl,WLVWUXHWKDWWKH5HIRUP$FWQHYHUUHIHUVWR
   :KHQ 9HQFRU DQQRXQFHG SODQV WR PHUJH ZLWK 7KHUD7[              PRWLYHDQGRSSRUWXQLW\nQRWEHFDXVHWKHVHDUHLQVXIILFLHQW
DQRWKHU SURYLGHU VSHFLDOL]LQJ LQ UHKDELOLWDWLRQ FDUH DQG            LQGLFLDRIIUDXGEXWEHFDXVH&RQJUHVVVRXJKWDIDFWVHQVLWLYH
RFFXSDWLRQDOKHDOWK9HQFRUjVFKLHIH[HFXWLYHRIILFHU%UXFH              DSSURDFKWRSOHDGLQJ$FFRUGLQJWR6HQDWRU'j$PDWRZKR
/XQVIRUGH[SODLQHGWKDWWKHDFTXLVLWLRQZRXOGmEHDFFUHWLYH              PDQDJHGWKH5HIRUP$FWRQWKHIORRURIWKH6HQDWH
WRHDUQLQJVEDVHGRQSURMHFWHGV\QHUJLHVl3ODLQWLIIVPDLQWDLQ
WKDWWKLVVWDWHPHQWZDVIDOVHEHFDXVH9HQFRUDOVRZRXOGEH                  >WKH6SHFWHU@DPHQGPHQWJRHVIXUWKHU>WKDQWKH6HQDWH
DFTXLULQJPLOOLRQLQEDGGHEWDQGSRRUO\SHUIRUPLQJ                  ELOO@WRVD\SUHFLVHO\ZKDWHYLGHQFHDSDUW\PD\SUHVHQW
QXUVLQJ KRPHV IURP 7KHUD7[  $V D IRUZDUGORRNLQJ                    WRVKRZDVWURQJLQIHUHQFHRIIUDXGXOHQWLQWHQW,WKLQN
VWDWHPHQW/XQVIRUGjVSUHGLFWLRQIDOOVZLWKLQWKHVDIHKDUERU               WKLV VWUDLWMDFNHWV WKH FRXUW  +DYLQJ VDLG WKDW , FRXOG
SURYLVLRQVRIWKH36/5$3ODLQWLIIVPXVWSOHDGIDFWVJLYLQJ                DFFHSWGHIHUULQJWRWKHFRXUWV>VLF@LQWHUSUHWDWLRQEXW,
ULVHWRDVWURQJLQIHUHQFHWKDW9HQFRUKDGDFWXDONQRZOHGJHRI              WKLQNZHDUHJRLQJWRRIDULIZHDGRSWWKHODQJXDJHWKDW
WKHIDOVHRUPLVOHDGLQJQDWXUHRIWKHVWDWHPHQW86&                 WKHFRXUWUHIHUUHGWREHFDXVHLWZRXOGWLHWKHFRXUWV>VLF@
 XF%  7KH FRPSODLQW LV WRR FRQFOXVRU\ LQ WKLV         KDQGE\IRUFLQJLWWRDVNWKDWSODLQWLIIVSURYHH[DFWO\WKH
UHJDUG WR VDWLVI\ WKDW VWDQGDUG  1DWXUDOO\ 9HQFRUjV                GHOLQHDWHG IDFWV >VLF@ DOOHJLQJ IDFWV WR VKRZ WKH
PDQDJHPHQWZRXOGH[SHFWDQGSXEOLFO\DQWLFLSDWHIDYRUDEOH                   GHIHQGDQW KDG ERWK WKH PRWLYH DQG RSSRUWXQLW\ WR
UHVXOWVIURPLWVPHUJHU:HGRXEWWKDWGHIHQGDQWVZRXOGKDYH               FRPPLWIUDXGDQGE\DOOHJLQJIDFWVWKDWFRQVWLWXWHVWURQJ
FRPSOHWHGWKHPHUJHUNQRZLQJWKDWWKHGHDOZRXOGQRWmEH                    FLUFXPVWDQWLDOHYLGHQFH
DFFUHWLYHWRHDUQLQJVl
                                                                          &RQJ5HF6GDLO\HGsXQHVWDWHPHQWRI
  3ODLQWLIIV DOVR SRLQW WR /XQVIRUGjV VWDWHPHQW WKDW mZH           6HQ 'j$PDWR  %HFDXVH &RQJUHVV GLG QRW HQGRUVH RU
VXFFHVVIXOO\LQWHJUDWHGWKHRSHUDWLRQVRI7KHUD7[lDVIDOVH               SURKLELWDSDUWLFXODUPDQQHURISOHDGLQJZHFDQQRWGLVUHJDUG
EHFDXVHFRPSXWLQJLQFRPSDWLELOLWLHV\HWUHPDLQHG+RZHYHU               DQ\VHWRIIDFWVDVLQVXIILFLHQWDVDPDWWHURIODZ:HLQTXLUH
SODLQWLIIVIDLOWRH[SODLQKRZFRPSXWHUSUREOHPVSUHFOXGHG                LQVWHDG ZKHWKHU WKRVH IDFWV SURGXFH D VWURQJ LQIHUHQFH RI
    +HOZLJHWDOY9HQFRU,QFHWDO         1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO      

VFLHQWHU LQ VHFXULWLHV IUDXG ZKLFK LQ WKLV &LUFXLW LV         SODLQWLIIVj FDVH  WKDW 9HQFRU KDG UHOLDEOH LQIRUPDWLRQ
UHFNOHVVQHVVIRUVWDWHPHQWVRISUHVHQWRUKLVWRULFDOIDFWDQG          FRQFHUQLQJ WKH DGYHUVH HIIHFW RI KHDOWK FDUH OHJLVODWLRQ DV
DFWXDONQRZOHGJHLQWKHFDVHRIIRUZDUGORRNLQJVWDWHPHQWV            SURSRVHGDQGODWHUSDVVHGEHIRUHWKHFRPSDQ\DQQRXQFHPHQW
,Q&RPVKDUHWKDWWHVWZDVQRWPHW&RPVKDUH)GDW             RIORZHUHDUQLQJVLQ2FWREHUDQGWKDWLWVILULQJRIHPSOR\HHV
  2WKHU FDVHV ZLOO DOOHJH GLIIHUHQW IDFWV ZLWK SRVVLEO\   LQDQWLFLSDWLRQRIWKH%XGJHW$FWEHOLHGLWVURV\SURMHFWLRQVWR
GLIIHUHQWUHVXOWV/HVWSDUWLHVEHDGULIWLQDVHDRIDOOHJDWLRQV    WKHSXEOLF
ZH ZRXOG SRLQW WR IL[HG FRQVWHOODWLRQV RI IDFWV WKDW FRXUWV
KDYHIRXQGSUREDWLYHRIVHFXULWLHVIUDXG,Q*UHHEHOWKH)LUVW          )LQDOO\ WKH GLVVHQW FODLPV LW LV XQVXUH RI ZKDW ZH KDYH
&LUFXLWLQGLFDWHGVHYHUDOIDFWRUVXVXDOO\UHOHYDQWWRVFLHQWHU        KHOG:HWKLQNWRGD\jVUXOLQJLVIDLUO\FOHDUDFRPSDQ\PD\
7KHVHKDYHEHHQHQXPHUDWHGDVIROORZV                                 UHPDLQ VLOHQW DERXW HVWLPDWHV SURMHFWLRQV DQG SUHOLPLQDU\
                                                                       GDWD XQWLO WKH IXOOQHVV RI WLPH DQG DGGLWLRQDO GHWDLO SHUPLW
   LQVLGHUWUDGLQJDWDVXVSLFLRXVWLPHRULQDQXQXVXDO           FRQILGHQWGLVFORVXUH,IKRZHYHUWKHFRPSDQ\FKRRVHVWR
       DPRXQW                                                        PDNHSURMHFWLRQVDQGLVVXHHVWLPDWHVGHVSLWHWKHXQFHUWDLQW\
                                                                       RIWKDWLQIRUPDWLRQWKH5HIRUP$FWWKHQFRQWUROVWKHHOHFWLYH
   GLYHUJHQFH EHWZHHQ LQWHUQDO UHSRUWV DQGH[WHUQDO            GLVFORVXUH$WWKDWSRLQWWKHFRPSDQ\mFDQQRWGXFNOLDELOLW\
       VWDWHPHQWVRQWKHVDPHVXEMHFW                                E\ SRLQWLQJ WR WKH µVRIWj QDWXUH RI WKH LQIRUPDWLRQ LW
                                                                       YROXQWHHUHG,WPD\KRZHYHUILQGUHIXJHLQWKHVDIHKDUERU
   FORVHQHVV LQ WLPH RI DQ DOOHJHGO\IUDXGXOHQW               RIWKH5HIRUP$FWSURYLGHGWKDWWKHVWDWXWRU\UHTXLUHPHQWV
       VWDWHPHQW RU RPLVVLRQ DQG WKH ODWHU GLVFORVXUH RI        DUH PHWl  6XSUD S   $PRQJ WKRVH UHTXLUHPHQWV LV WKH
       LQFRQVLVWHQWLQIRUPDWLRQ                                      LQFOXVLRQRImPHDQLQJIXOFDXWLRQDU\VWDWHPHQWVl86&
                                                                        XF$L  7KLV LV HQWLUHO\ FRQVLVWHQW ZLWK RXU
   HYLGHQFHRIEULEHU\E\DWRSFRPSDQ\RIILFLDO                 UHTXLUHPHQW WKDW DQ DFWRU VSHDN IXOO\ DQG WUXWKIXOO\ ZKHQ
                                                                       PDNLQJDYROXQWDU\GLVFORVXUH5XELQ)GDW6HH
   H[LVWHQFHRIDQDQFLOODU\ODZVXLWFKDUJLQJIUDXGE\D           DOVR .RZDO Y 0&, &RPPXQLFDWLRQV &RUS  )G 
       FRPSDQ\DQGWKHFRPSDQ\jVTXLFNVHWWOHPHQWRIWKDW              '&&LUm6WDWHPHQWVRIRSLQLRQRUIRUZDUG
       VXLW                                                          ORRNLQJVWDWHPHQWVVXFKDVSURMHFWLRQVHVWLPDWHVRUIRUHFDVWV
   GLVUHJDUG RI WKH PRVW FXUUHQW IDFWXDOLQIRUPDWLRQ          DUH FRQVLGHUHG µVWDWHPHQWV RI IDFWj IRU WKH SXUSRVHV RI WKH
       EHIRUHPDNLQJVWDWHPHQWV                                      VHFXULWLHVODZV$VVXFKZKLOHDFRPSDQ\LVJHQHUDOO\XQGHU
                                                                       QRREOLJDWLRQWRGLVFORVHLWVH[SHFWDWLRQVIRUWKHIXWXUHWRWKH
   GLVFORVXUHRIDFFRXQWLQJLQIRUPDWLRQLQVXFKDZD\              LQYHVWLQJSXEOLFLIWKHFRPSDQ\FKRRVHVWRYROXQWHHUVXFK
       WKDW LWV QHJDWLYH LPSOLFDWLRQV FRXOG RQO\ EH              LQIRUPDWLRQLWVGLVFORVXUHPXVWEHIXOODQGIDLUDQGFRXUWV
       XQGHUVWRRG E\ VRPHRQH ZLWK D KLJK GHJUHH RI              PD\ FRQFOXGH WKDW WKH FRPSDQ\ ZDV REOLJHG µWR GLVFORVH
       VRSKLVWLFDWLRQ                                                 DGGLWLRQDOPDWHULDOIDFWVWRWKHH[WHQWWKDWWKHYROXQWHHUHG
                                                                       GLVFORVXUHZDVPLVOHDGLQJjlFLWDWLRQVRPLWWHG
   WKH SHUVRQDO LQWHUHVW RI FHUWDLQ GLUHFWRUV LQQRW
       LQIRUPLQJ GLVLQWHUHVWHG GLUHFWRUV RI DQ LPSHQGLQJ            5DWKHU WKDQ FRQIURQW SODLQWLIIVj DOOHJDWLRQV WKDW 9HQFRU
       VDOHRIVWRFNDQG                                              VSRNHSDUWLDOO\DQGPLVOHDGLQJO\WKHGLVVHQWDWWHPSWVWRUH
                                                                       FKDUDFWHUL]HWKHIDFWV$FFRUGLQJWRWKHGLVVHQWGHIHQGDQW
   WKHVHOILQWHUHVWHGPRWLYDWLRQRIGHIHQGDQWVLQWKH              %DUUjV DOOHJHG VWDWHPHQW WR RXWJRLQJ HPSOR\HHV RI mWRXJK
      IRUPRIVDYLQJWKHLUVDODULHVRUMREV                           WLPHVl DKHDG LQ WKH LQGXVWU\ ZDV RQO\ FRPPLVHUDWLRQ QRW
    +HOZLJHWDOY9HQFRU,QFHWDO        1R      1R           +HOZLJHWDOY9HQFRU,QFHWDO       

   ,Q%DVLFY/HYLQVRQWKH6XSUHPH&RXUWVWDWHGWKHFRPPRQ         6HH*UHHEHO)GDWFRPSLOLQJFDVHV:HILQGWKLV
VHQVHSULQFLSOHWKDWmPDWHULDOLW\GHSHQGVRQWKHVLJQLILFDQFH        OLVWZKLOHQRWH[KDXVWLYHDWOHDVWKHOSIXOLQJXLGLQJVHFXULWLHV
WKH UHDVRQDEOH LQYHVWRU ZRXOG SODFH RQ WKH ZLWKKHOG RU       IUDXGSOHDGLQJ
PLVUHSUHVHQWHGLQIRUPDWLRQl%DVLF86DW7REH
VXUH WKH IDLWK DQ LQYHVWRU ZRXOG SODFH LQ D FRPSDQ\jV       ,,,3/$,17,))6j$//(*$7,216&21&(51,1*
VWDWHPHQWnDQG KHQFH LWV PDWHULDOLW\nGHSHQGV LQ SDUW RQ         7+(())(&72)7+(%$/$1&('%8'*(7$&7
ZKHWKHU JLYHQ ILJXUHV FDQ EH FDOFXODWHG ZLWK UHDVRQDEOH
FHUWDLQW\6WDUNPDQ)GDWsDPHVY*HUEHU3URG          ,QWKLVFDVHWKHGLVWULFWFRXUWVWDWHGWKDWSODLQWLIIVKDGPHW
)GWK&LU%XWWKH6XSUHPH&RXUW            WKHSOHDGLQJUHTXLUHPHQWVRIWKH36/5$%HFDXVHWKHFDVH
KDV GUDZQ WKH WHVW PRUH EURDGO\ WKDQ WKH QXPEHUV DORQH     ZDVEHIRUHWKHFRXUWRQDPRWLRQWRGLVPLVVWKLVFRQFOXVLRQ
KROGLQJ WKDW PDWHULDOLW\ LV HYLGHQFHG E\ D mVXEVWDQWLDO       VKRXOGKDYHFOHDUHGSODLQWLIIVRYHUWKH5XOHEKXUGOH
OLNHOLKRRGWKDWWKHGLVFORVXUHRIWKHRPLWWHGIDFWZRXOGKDYH        <HWWKHFRXUWVXDVSRQWHZLWKRXWQRWLFHWRHLWKHUSDUW\DQG
EHHQYLHZHGE\WKHUHDVRQDEOHLQYHVWRUDVKDYLQJVLJQLILFDQWO\       ZLWKRXWIXUWKHUGLVFRYHU\FRQYHUWHGWKHPRWLRQWRGLVPLVV
DOWHUHGWKHµWRWDOPL[jRILQIRUPDWLRQPDGHDYDLODEOHl%DVLF      LQWR D PRWLRQ IRU VXPPDU\ MXGJPHQW DQG UXOHG IRU WKH
 86 DW  FLWDWLRQ RPLWWHG  7KH LQVWDQW FDVH    GHIHQGDQWV7KLVZDVDVHULRXVHUURU5XOHDXWKRUL]HVVXFK
LQYROYHVIDYRUDEOHHVWLPDWHVLVVXHGGHVSLWHLPPLQHQWKHDOWK          D FRQYHUVLRQ EXW PDQGDWHV WKDW SDUWLHV EH JLYHQ DQ
FDUHUHIRUPZKRVHDGYHUVHLPSDFWGHIHQGDQWVORQJGHQLHG             RSSRUWXQLW\ WR VXEPLW PDWHULDOV WR VXSSRUW RU RSSRVH
NQRZLQJ  (YHQ 6WDUNPDQnWKH FDVH WKH GLVVHQW UHOLHV VR       VXPPDU\MXGJPHQW:HKDYHXQGHUVFRUHGWKLVUHTXLUHPHQW
KHDYLO\ XSRQnUHTXLUHV GLVFORVXUH RI DQ\ LQIRUPDWLRQ WKDW       RImXQHTXLYRFDOQRWLFHlRQQXPHURXVRFFDVLRQV6HHHJ
ZRXOGTXDOLI\VXFKXQFHUWDLQHVWLPDWHVDQGSURMHFWLRQV&I         6DOHKSRXU Y 8QLY RI 7HQQ  )G   WK &LU
6WDUNPDQ)GDWm,IDWDUJHWFKRRVHVWRGLVFORVH          %ULJJVY2KLR(OHFWLRQV&RPPjQ)G
SURMHFWLRQVDQGDSSUDLVDOVZKLFKGRQRWULVHWRWKLVOHYHORI        WK&LU<DVKRQY*UHJRU\)GWK
FHUWDLQW\WKHQLWPXVWDOVRLQIRUPWKHVKDUHKROGHUVDVWRWKH       &LU   ,Q IDFW WKH IHGHUDO UXOHV TXDQWLI\ WKLV QRWLFH
EDVLVIRUDQGOLPLWDWLRQVRQWKHSURMHFWHGUHDOL]DEOHYDOXHVl     SHULRGUHTXLULQJDWOHDVWGD\VEHWZHHQVHUYLFHDQGKHDULQJ
7KH GLVVHQWjV FRQFOXVRU\ REVHUYDWLRQ WKDW GHIHQGDQWVj           RI D VXPPDU\ MXGJPHQW PRWLRQ  )HG 5 &LY 3 F
VWDWHPHQWVZHUHVRPHKRZLPPDWHULDOVLPSO\RYHUORRNVZKDW             m1RQFRPSOLDQFHZLWKWKHWLPHSURYLVLRQRIWKHUXOHGHSULYHV
DSRWHQWLDOLQYHVWRULQ9HQFRUZRXOGKDYHZDQWHGWRNQRZ            WKHFRXUWRIDXWKRULW\WRJUDQWVXPPDU\MXGJPHQWXQOHVVWKH
                                                                     RSSRVLQJSDUW\KDVZDLYHGWKLVUHTXLUHPHQWRUWKHUHKDVEHHQ
  7KH GLVVHQW LQVLVWV WKDW DQ\ GDWD 9HQFRU SRVVHVVHG          QRSUHMXGLFHWRWKHRSSRVLQJSDUW\E\WKHFRXUWjVIDLOXUHWR
FRQFHUQLQJ WKH %XGJHW $FW ZDV OLNHZLVH LPPDWHULDO  ,Q       FRPSO\ZLWKWKLVSURYLVLRQRIWKHUXOHl.LVWQHUY&DOLIDQR
HVVHQFHWKHGLVVHQWRIIHUVDV\OORJLVPWKDWDQ\VWXG\RIWKH        )GWK&LUSHUFXULDPLQWHUQDO
%XGJHW$FWZDVWHQWDWLYHWKDWWHQWDWLYHLQIRUPDWLRQLVmVRIWl      FLWDWLRQVRPLWWHG
WKDW VRIW LQIRUPDWLRQ LV LPPDWHULDO DQG WKDW LPPDWHULDO
LQIRUPDWLRQQHHGQRWEHGLVFORVHGnWKXV9HQFRUjVVWXG\QHHG            7KHGLVWULFWFRXUWFRQFOXGHGWKDWSODLQWLIIVKDGmIDLOHGWR
QRWEHGLVFORVHG%XWWKLVDVVXPHVWKHYHU\FRQFOXVLRQE\           SURYHlWKHLUFODLPVSRLQWLQJRXWWKDWWKH\FRXOGQRWmVLPSO\
SRVLWLQJ WKDW 9HQFRUjV NQRZOHGJH RI WKH %XGJHW $FW ZDV       UHVW RQ WKHLU SOHDGLQJVl  %HFDXVH SODLQWLIIV QHYHU KDG DQ
VRPHKRZ WHQWDWLYH RU SUHOLPLQDU\  7KH GLVVHQW VWDWHV WKDW   RSSRUWXQLW\WRLQWURGXFHVXSSRUWIRUWKHLUFODLPVZHILQGWKH
m>W@KHUHLVDEVROXWHO\QRLQGLFDWLRQWKDWWKHIRUPRUWKHHIIHFW     FRXUWjV FRQYHUVLRQ WR VXPPDU\ MXGJPHQW D SUHMXGLFLDO
RIWKH$FWZDVREMHFWLYHO\YHULILDEOHZKHQ9HQFRUPDGHLWV           VXUSULVH'HIHQGDQWVKDYHDVNHGWKHFRXUWWRRYHUORRNWKLV
SURMHFWLRQVl'LVVHQWDW<HWWKDWLVWKHZKROHWKUXVWRI        SURFHGXUDOIODZVXJJHVWLQJWKDWQRDPRXQWRIQRWLFHFRXOG
    +HOZLJHWDOY9HQFRU,QFHWDO         1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO      

FXUHWKHSOHDGLQJGHILFLHQFLHVLQWKHFRPSODLQW$SDQHORI           WKH FRPSDQ\  3ODLQWLIIV KDYH DOOHJHG WKDW WKH FRPSDQ\
WKLVFRXUWDFFHSWHGWKDWDUJXPHQWQRWLQJWKDWmDQDSSHOODWH           XQYHLOHGDEOHDNSLFWXUHIRUFHUWDLQHPSOR\HHVZKLOHSDLQWLQJ
FRXUW PD\ DIILUP RQ DQ\ JURXQG VXSSRUWHG E\ WKH UHFRUGl      D URV\ SLFWXUH IRU WKH SXEOLF  $V ZLWK WKH RWKHU HOHPHQWV
+HOZLJY9HQFRU)GWK&LUTXRWLQJ           UHTXLUHGIRUVHFXULWLHVIUDXGSODLQWLIIVDUHHQWLWOHGWRSURYH
:DUGD Y &RPPLVVLRQHU  )G   Q WK &LU         WKHVHDOOHJHGVWDWHPHQWVDQGRPLVVLRQVXSRQUHPDQG
7KHSDQHOWKHQDIILUPHGGLVPLVVDORQWKHJURXQGVWKDW
SODLQWLIIVGLGQRWVWDWHDFODLPXQGHUWKH36/5$:HDFFHSW              7KHGLVVHQWKDVDVHFRQGOLQHRIDWWDFNVLPSO\EUXVKDVLGH
WKHSUHPLVHRIWKDWUXOLQJDQGOLNHZLVHORRNWRWKHDOOHJDWLRQV        SODLQWLIIVjDOOHJDWLRQVDVLPPDWHULDO7KLVVWUDWHJ\LVHTXDOO\
RIWKHFRPSODLQWWKRXJKZHQRZUHDFKDGLIIHUHQWFRQFOXVLRQ          XQFRQYLQFLQJ$VWKH6XSUHPH&RXUWKDVQRWHGWKHLVVXHRI
                                                                       PDWHULDOLW\LVDPL[HGTXHVWLRQRIODZDQGIDFW76&,QGXV
   5DWKHUWKDQUHYHUVHRQWKHEDVLVRIWKHSURFHGXUDOHUURUZH        ,QFY1RUWKZD\,QF86GHILQLQJ
KDYH XQGHUWDNHQ D GH QRYR UHYLHZ RI WKH SURFHHGLQJV            PDWHULDOLW\XQGHUWKHSUR[\UXOHVRIWKH6HFXULWLHV([FKDQJH
FRQVLVWHQWZLWKWKHSURSHU5XOHESRVWXUHRIWKHFDVH          $FWRI&RXUWVJHQHUDOO\UHVHUYHVXFKTXHVWLRQVIRUWKH
$FFRUGLQJO\ZHmPXVWFRQVWUXHWKHFRPSODLQWLQDOLJKWPRVW           WULHURIIDFW6HHHJ(30HGV\VWHPV,QFY(FKRFDWK,QF
IDYRUDEOH WR WKH SODLQWLII DQG DFFHSW DOO RI >WKH@ IDFWXDO   )GG&LU6LPRQ'H%DUWROR*URXS
DOOHJDWLRQVDVWUXH:KHQDQDOOHJDWLRQLVFDSDEOHRIPRUH            Y5LFKDUG(sDFREV*URXS,QF)GG&LU
WKDQ RQH LQIHUHQFH LW PXVW EH FRQVWUXHG LQ WKH SODLQWLIIjV   $WWKLVVWDJHLQWKHSURFHHGLQJVmDFRPSODLQWPD\QRW
IDYRUl%ORFKY5LEDU)GWK&LU             SURSHUO\ EH GLVPLVVHG    RQ WKH JURXQG WKDW WKH DOOHJHG
LQWHUQDO FLWDWLRQ RPLWWHG  2XU ZLOOLQJQHVV WR GUDZ           PLVVWDWHPHQWVRURPLVVLRQVDUHQRWPDWHULDOXQOHVVWKH\DUH
LQIHUHQFHVLQIDYRURIWKHSODLQWLIIUHPDLQVXQFKDQJHGE\WKH          VR REYLRXVO\ XQLPSRUWDQW WR D UHDVRQDEOH LQYHVWRU WKDW
36/5$  :KLOH &RQJUHVV XQTXHVWLRQDEO\ VWUHQJWKHQHG WKH           UHDVRQDEOH PLQGV FRXOG QRW GLIIHU RQ WKH TXHVWLRQ RI WKHLU
SOHDGLQJVWDQGDUGIRUVHFXULWLHVIUDXGWKH5HIRUP$FWZRXOG           XQLPSRUWDQFHl*DQLQRY&LWL]HQV8WLO&R)G
KDUGO\VHUYHLWVSXUSRVHmWRSURWHFWLQYHVWRUVDQGWRPDLQWDLQ         G&LUHPSKDVLVDGGHGTXRWLQJ*ROGPDQY
FRQILGHQFHLQWKHVHFXULWLHVPDUNHWVlVHH+5&RQI5HS             %HOGHQ)GG&LUVHHDOVR(3
1RDWZHUHLWWREHFRPHDFKRNHSRLQW             0HGV\VWHPV)GDW
IRUPHULWRULRXVFODLPV7KHGDQJHURIPX]]OLQJSODLQWLIIVLV
HQKDQFHG E\ WKH VWD\ SURYLVLRQV RI WKH 36/5$ ZKLFK               $FFXVLQJXVRIVOHLJKWRIKDQGWKHGLVVHQWVWDWHVWKDWZH
DXWKRUL]H VXVSHQVLRQ RI DOO GLVFRYHU\ SHQGLQJ D PRWLRQ WR      KDYH mWXUQ>HG@ WKH TXHVWLRQ IURP ZKHWKHU IXWXUH HDUQLQJV
GLVPLVV86&XE%                                ZHUHFDSDEOHRIEHLQJFDOFXODWHGZLWKVXEVWDQWLDOFHUWDLQW\WR
                                                                       ZKHWKHU WKHUH ZDV D VXEVWDQWLDO FHUWDLQW\ WKDW WKH >%XGJHW@
   &RQWUDU\WRGHIHQGDQWVjFRQWHQWLRQWKH5HIRUP$FWGLGQRW          $FWLIHQDFWHGZRXOGKDYHDQ\DGYHUVHHIIHFWRQ9HQFRUjV
UHYHUVHWKHSRODULW\RIVHFXULWLHVSOHDGLQJ$VDOZD\VXQGHU          EXVLQHVVl'LVVHQWDW<HWLWLVWKHGLVVHQWWKDWFORXGVWKH
5XOH E ZH ZLOO LQGXOJH SODLQWLIIVj LQIHUHQFHV RI        LVVXHE\SXUVXLQJDVHFRQGDU\OLQHRILQTXLU\0DWHULDOLW\LV
IUDXGnSURYLGHGRIFRXUVHWKRVHLQIHUHQFHVOHDYHOLWWOHURRP          DERXW PDUNHWSODFH HIIHFWV QRW MXVW PDWKHPDWLFV  7KH
IRU GRXEW DV WR PLVFRQGXFW  6HH  86&  XE     TXHVWLRQ LV QRW ZKHWKHU WKH HDUQLQJV ZHUH SUHFLVHO\
UHTXLULQJWKHSODLQWLIIWRmVWDWHZLWKSDUWLFXODULW\IDFWVJLYLQJ     FDOFXODEOHnUDWKHUWKHTXHVWLRQLVZKHWKHUWKRVHSURMHFWLRQV
ULVHWRDVWURQJLQIHUHQFHRIVFLHQWHUl,QIHUHQFHVPXVWEH          ZKHQYLHZHGDJDLQVWWKHEDFNGURSRIWKH%XGJHW$FWZHUH
UHDVRQDEOH DQG VWURQJnEXW QRW LUUHIXWDEOH  m6WURQJ              VLJQLILFDQWWRWKHUHDVRQDEOHLQYHVWRU
LQIHUHQFHVl QRQHWKHOHVV LQYROYH GHGXFWLYH UHDVRQLQJ WKHLU
VWUHQJWKGHSHQGVRQKRZFORVHO\DFRQFOXVLRQRIPLVFRQGXFW
    +HOZLJHWDOY9HQFRU,QFHWDO           1R       1R          +HOZLJHWDOY9HQFRU,QFHWDO     

VWDWHDFDXVHRIDFWLRQIRUVHFXULWLHVIUDXG%HFDXVHZHILQG           IROORZVIURPDSODLQWLIIjVSURSRVLWLRQRIIDFW3ODLQWLIIVQHHG
SODLQWLIIVWRKDYHSURGXFHGDVWURQJLQIHUHQFHWKDWGHIHQGDQWV           QRWIRUHFORVHDOORWKHUFKDUDFWHUL]DWLRQVRIIDFWDVWKHWDVNRI
PDGHSURMHFWLRQVDQGGLVDYRZHGWKHLPSDFWRIWKH%DODQFHG                ZHLJKLQJ FRQWUDU\ DFFRXQWV LV UHVHUYHG IRU WKH IDFW ILQGHU
%XGJHW$FWZLWKDFWXDONQRZOHGJHWKDWWKHLUVWDWHPHQWVZHUH              5DWKHU WKH mVWURQJ LQIHUHQFHl UHTXLUHPHQW PHDQV WKDW
PLVOHDGLQJ D IRUWLRUL SODLQWLIIV KDYH SURGXFHG D VWURQJ          SODLQWLIIVDUHHQWLWOHGRQO\WRWKHPRVWSODXVLEOHRIFRPSHWLQJ
LQIHUHQFHWKDWGHIHQGDQWVDFWHGUHFNOHVVO\LQWKHLUVWDWHPHQWV           LQIHUHQFHV6HH%ODFNjV/DZ'LFWLRQDU\WKHG
DQGRPLVVLRQVFRQFHUQLQJHDUQLQJVHVWLPDWHVDQGWKH%XGJHW               GHILQLQJmVWURQJlDVmFRJHQWSRZHUIXOIRUFLEOHIRUFHIXOl
$FW  $V WR WKHVH DOOHJDWLRQV WKHQ SODLQWLIIV KDYH PHW WKH   7KLVUHSUHVHQWVDVLJQLILFDQWVWUHQJWKHQLQJRIWKHSUH36/5$
SOHDGLQJV VWDQGDUGV RI WKH 5HIRUP $FW   86&  X       VWDQGDUGXQGHU5XOHEZKLFKJDYHWKHSODLQWLIImWKH
E                                                            EHQHILW RI DOO UHDVRQDEOH LQIHUHQFHVl &DPHURQ Y 6HLW]
                                                                          )G   WK &LU  HPSKDVLV DGGHG DQG
                  &5HVSRQVHWRWKH'LVVHQW                            FRQWHPSODWHGGLVPLVVDOmRQO\LILWLVFOHDUWKDWQRUHOLHIFRXOG
                                                                         EH JUDQWHG XQGHU DQ\ VHW RI IDFWV WKDW FRXOG EH SURYHG
   7KHGLVVHQWLVRXWRIERXQGVLQUHO\LQJXSRQWKLV&LUFXLWjV           FRQVLVWHQW ZLWK WKH DOOHJDWLRQVl  %ORFK  )G DW 
mVRIW LQIRUPDWLRQl FDVHV  7KH GLVVHQW KDV FKDOOHQJHG WKH        HPSKDVLVDGGHGTXRWLQJ+LVKRQY.LQJ	6SDOGLQJ
ZULWHU RI WKLV RSLQLRQ FODLPLQJ DQ LQFRQVLVWHQF\ EHWZHHQ         86
ZKDWLVVDLGKHUHDQGZKDWKHZURWHLQ6WDUNPDQY0DUDWKRQ
2LO &R D FDVH GHFLGHG WHQ \HDUV EHIRUH WKH 36/5$ ZDV            :LWKWKHDLGRIDGGLWLRQDOEULHILQJDQGRUDODUJXPHQWWKH
SDVVHG7KRXJKZHILQGWKHUHVXOWKHUHWREHFRQVLVWHQWZLWK            FRXUW KDV H[DPLQHG SODLQWLIIVj DOOHJDWLRQV LQ OLJKW RI WKH
6WDUNPDQZHGRQRWYLHZWKDWFDVHDVFRQWUROOLQJRUHYHQ                SOHDGLQJVWDQGDUGVIRUSULYDWHVHFXULWLHVOLWLJDWLRQ:KHWKHU
HVSHFLDOO\UHOHYDQWWRWKHPDWWHUDWKDQG6WDUNPDQZDVDQ              FHUWDLQ RI WKHVH VWDWHPHQWV ZKLFK DUH FOHDUO\ mIRUZDUG
DWWHPSWE\WKLVFRXUWEHIRUHWKH36/5$WRVWULNHDEDODQFH               ORRNLQJlZLWKLQWKHPHDQLQJRIWKH5HIRUP$FWHQMR\VDIH
EHWZHHQ RSWLPDO GLVFORVXUH RI IDFWV DQG SHUPLVVLYH                 KDUERULPPXQLW\LVDFORVHTXHVWLRQ,QIDFWDVDQH[HPSWLRQ
ZLWKKROGLQJRIFRUSRUDWHSURVSHFWV,Q&RQJUHVVUH               IURP OLDELOLW\ WKLV SURYLVLRQ ZRXOG VHHP WR SURGXFH D
FDOLEUDWHGWKDWEDODQFHE\SDVVLQJWKH5HIRUP$FW,WLVWKDW           IDFWXDOO\ FRPSOH[ TXHVWLRQ PRUH DSSURSULDWH IRU VXPPDU\
$FWQRW6WDUNPDQWKDWZHPXVWDSSO\QRZ                             MXGJPHQW7KLVLVHVSHFLDOO\VRFRQVLGHULQJWKDWWKHSODLQWLII
                                                                         PXVWmSURYHWKDWWKHIRUZDUGORRNLQJVWDWHPHQWZDVPDGH
  $SSO\LQJWKH36/5$LWLVFOHDUWKDWWKHHDUQLQJVHVWLPDWHV            ZLWKDFWXDONQRZOHGJHlWRSUHYDLODIRUPLGDEOHEXUGHQDWWKH
DUHmIRUZDUGORRNLQJVWDWHPHQWVlZLWKLQWKHGHILQLWLRQRI             SOHDGLQJVWDJH86&XF%1HYHUWKHOHVV
86&  XL  7KH GLVVHQW ZRXOG FKDUDFWHUL]H WKH        &RQJUHVV DSSDUHQWO\ LQWHQGHG WKH DSSOLFDELOLW\ RI WKH VDIH
XQLGHQWLILHGFRQWLQJHQFLHVDIIHFWLQJWKHVHSURMHFWLRQVnVXFK              KDUERUWREHDGGUHVVHGHYHQRQDPRWLRQWRGLVPLVV6HH
DV WKH FRPSDQ\jV DZDUHQHVV RI WKH %XGJHW $FWnDV mVRIW            86&  XH LQVWUXFWLQJ FRXUWV WR FRQVLGHU mDQ\
LQIRUPDWLRQl WKDW QHHG QRW EH GLVFORVHG  <HW WKLV mVRIW        FDXWLRQDU\ VWDWHPHQW DFFRPSDQ\LQJ WKH IRUZDUGORRNLQJ
LQIRUPDWLRQlGHVLJQDWLRQDSSHDUVQRZKHUHLQWKH5HIRUP$FW              VWDWHPHQWlXSRQDPRWLRQWRGLVPLVVEDVHGRQWKHVDIHKDUERU
2Q WKH FRQWUDU\ WKH 36/5$ FRPSHOV GLVFORVXUH RI VXFK            SURYLVLRQV
OLPLWLQJ DVVXPSWLRQV E\ FRQGLWLRQLQJ DYDLODELOLW\ RI WKH
VWDWXWRU\ VDIH KDUERU XSRQ LQFOXVLRQ RI mPHDQLQJIXO                  $FFRUGLQJO\ZHPXVWGHFLGHZKHWKHUGHIHQGDQWVFDQFODLP
FDXWLRQDU\ VWDWHPHQWVl  +HUH DFFRUGLQJ WR WKH FRPSODLQW        VDIHKDUERUSURWHFWLRQIRUWKHLUIRUZDUGORRNLQJVWDWHPHQWV
9HQFRULVVXHGVWURQJRSWLPLVWLFSURMHFWLRQVEXWVXSSUHVVHG              )RUWKRVHVWDWHPHQWVWKDWDUHQRWIRUZDUGORRNLQJRUGRQRWILW
DGGLWLRQDOGDWDWKDWLWEHOLHYHGZRXOGPHDQmWRXJKWLPHVlIRU            ZLWKLQ WKH VWDWXWRU\ VKHOWHU ZH PXVW GHWHUPLQH ZKHWKHU
    +HOZLJHWDOY9HQFRU,QFHWDO         1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO      

SODLQWLIIVKDYHVWDWHGDFODLPXQGHUWKH36/5$$VZHDSSO\           FKRRVHVLOHQFHRUVSHHFKHODERUDWHGE\WKHIDFWXDOEDVLVDV
WKHSOHDGLQJVWDQGDUGVRIWKH5HIRUP$FWZHNHHSLQPLQG              WKHQNQRZQnEXWLWPD\QRWFKRRVHKDOIWUXWKV
WKHVXEVWDQWLYHHOHPHQWVRIDFODLPIRUVHFXULWLHVIUDXG7R
SUHYDLORQDE5XOHEFODLPDSODLQWLIIPXVW              9HQFRU SRLQWV WR SROLF\ UHDVRQV DJDLQVW GLVFORVXUH RI
HVWDEOLVKDPLVUHSUHVHQWDWLRQRURPLVVLRQRIDPDWHULDO       LQIRUPDWLRQWKDWKDVQRWDFKLHYHGUHDVRQDEOHFHUWDLQW\6HH
IDFW  PDGH ZLWK VFLHQWHU  MXVWLILDEO\ UHOLHG RQ E\    HJ6HDUOVY*ODVVHU)GWK&LU
SODLQWLIIV DQG  SUR[LPDWHO\ FDXVLQJ WKHP LQMXU\  6HH      m%HIRUHPDQDJHPHQWUHOHDVHVHVWLPDWHVWRWKHSXEOLFLWPXVW
$VFKLQJHUY&ROXPEXV6KRZFDVH&R)G                HQVXUH WKDW WKH LQIRUPDWLRQ LV UHDVRQDEO\ FHUWDLQ  ,I LW
WK &LU   :H FRQFOXGH WKDW WKH SOHDGLQJV SHUPLW D    GLVFORVHV WKH LQIRUPDWLRQ EHIRUH LW LV FRQYLQFHG RI LWV
VWURQJLQIHUHQFHWKDWGHIHQGDQWVHQJDJHGLQVHFXULWLHVIUDXG           FHUWDLQW\ PDQDJHPHQW IDFHV WKH SURVSHFW RI OLDELOLW\l
FRQFHUQLQJWKHLUVWDWHPHQWVDERXWWKH%DODQFHG%XGJHW$FW              LQWHUQDO FLWDWLRQV RPLWWHG  7KLV SRLQW LV ZHOOWDNHQ  ,W
DQGLWVDGYHUVHLPSDFWRQ9HQFRUjVEXVLQHVV %HFDXVHZH              ZRXOG VHHP WKDW H[WHQGLQJ 5XELQ WR VLWXDWLRQV LQYROYLQJ
DOVRILQGWKDWWKHVHVWDWHPHQWVFDQQRWILWZLWKLQWKHVWDWXWRU\        FRQWLQJHQWHYHQWVVXFKDVSUHGLFWLQJWKHHIIHFWRIOHJLVODWLRQ
VDIHKDUERUZH5(9(56(LQSDUWWKHMXGJPHQWRIWKHGLVWULFW           RQDEXVLQHVVPD\VXEMHFWFRUSRUDWLRQVWROLDELOLW\RUGHWHU
FRXUWDQG5(0$1'IRUIXUWKHUSURFHHGLQJV                              WKHPIURPDOHUWLQJLQYHVWRUV+RZHYHUDFRPSDQ\VKRXOG
                                                                       QRWEHDOORZHGWREROVWHULWVVWRFNSULFHE\SUHGLFWLQJURV\
        $9HQFRUjV)RUZDUG/RRNLQJ6WDWHPHQWV                        HDUQLQJV ZKLOH NQRZLQJ DV SODLQWLIIV DOOHJH KHUH WKDW
                                                                       OHJLVODWLRQLVQHDULQJLWVILQDOVVWDJHVWKDWFRXOGFDSVL]HWKRVH
   3ODLQWLIIVKDYHDOOHJHGDFODVVSHULRGRI)HEUXDU\        SURMHFWLRQV  $V ZH KDYH UHFRJQL]HG SUHYLRXVO\ m0DWHULDO
XQWLO2FWREHU'XULQJWKLVWLPHGHIHQGDQWVPDGH             VWDWHPHQWVZKLFKFRQWDLQWKHVSHDNHUjVRSLQLRQDUHDFWLRQDEOH
QXPHURXV VWDWHPHQWV FRQFHUQLQJ WKH %DODQFHG %XGJHW $FW           XQGHU 6HFWLRQ E RI WKH 6HFXULWLHV ([FKDQJH $FW LI WKH
DQG LWV HIIHFW RQ 9HQFRUjV EXVLQHVV  ,Q LWV TXDUWHUO\ DQG   VSHDNHUGRHVQRWEHOLHYHWKHRSLQLRQDQGWKHRSLQLRQLVQRW
DQQXDO UHSRUWV ILOHG ZLWK WKH 6HFXULWLHV DQG ([FKDQJH           IDFWXDOO\ZHOOJURXQGHGl0D\HU)GDW
&RPPLVVLRQ9HQFRUVWDWHGWKDWLWFRXOGQRWJDXJHWKHLPSDFW
RIWKHOHJLVODWLRQDVLWSURJUHVVHGWKURXJK&RQJUHVV$WWKH             7KXVLWDSSHDUVWKDWWKHQHHGIRULQIRUPDWLRQLQWKHQDPH
VDPHWLPHWKHFRPSDQ\SURMHFWHGIRXUWKTXDUWHUHDUQLQJVRI            RI FRPSOHWHQHVV FDQ FRQIOLFW ZLWK WKH QHHG WR LQFXEDWH
WRSHUVKDUHDQG\HDUO\UHWXUQVEHWZHHQWR           XQFHUWDLQGDWDDQGDYRLGOLDELOLW\7KHVHFRPSHWLQJLQWHUHVWV
IRUDQGWRIRU$FFRUGLQJWR              DUHUHFRQFLOHGLQWKH5HIRUP$FW,IDFRPSDQ\FKRRVHVWR
SODLQWLIIV9HQFRUWROGDQDO\VWVWKDWLWZDVmFRPIRUWDEOHlZLWK        VSHDNRQDQXQFHUWDLQVXEMHFWnDVKHUHZKHQ9HQFRUFODLPHG
WKHVH ILJXUHV DV ODWH DV 6HSWHPEHU   QHDUO\ VHYHQ     DQLQDELOLW\WRDVVHVVWKH%XGJHW$FWZKLOHVLPXOWDQHRXVO\
ZHHNVDIWHUWKH%DODQFHG%XGJHW$FWZDVVLJQHGLQWRODZ               LVVXLQJIOXVKHDUQLQJVHVWLPDWHVnLWFDQQRWGXFNOLDELOLW\E\
7KHVHVWDWHPHQWVZHUHmIRUZDUGORRNLQJlZLWKLQWKHPHDQLQJ             SRLQWLQJWRWKHmVRIWlQDWXUHRIWKHLQIRUPDWLRQLWYROXQWHHUHG
RI WKH 36/5$ LQ WKDW WKH\ UHIOHFWHG SUHGLFWLRQV DERXW          ,WPD\KRZHYHUILQGUHIXJHLQWKHVDIHKDUERURIWKH5HIRUP
HDUQLQJVUHYHQXHDQGIXWXUHHFRQRPLFSHUIRUPDQFH6HH            $FWSURYLGHGWKDWWKHVWDWXWRU\UHTXLUHPHQWVDUHPHW+HUH
86&XL3ODLQWLIIVXUJHWKDW9HQFRUjVSURIHVVHG         ZHILQGWKH\ZHUHQRW
LQDELOLW\ WR DVVHVV WKH LPSDFW RI WKH %XGJHW $FW ZDV D
VWDWHPHQW RI WKHQSUHVHQW IDFW  (YHQ DV D VWDWHPHQW RI                 %6XIILFLHQF\RI3ODLQWLIIVj&RPSODLQW
H[LVWLQJFRQGLWLRQKRZHYHUWKHVHVWDWHPHQWVZHUHIRUZDUG
ORRNLQJLQWKDWWKH\FRQFHUQHGmDVVXPSWLRQVXQGHUO\LQJRU               +DYLQJFRQFOXGHGWKDWGHIHQGDQWVjVWDWHPHQWVFRQFHUQLQJ
UHODWLQJWRlHFRQRPLFSUHGLFWLRQV86&L'         WKH%DODQFHG%XGJHW$FWDUHRXWVLGHWKHVWDWXWRU\VDIHKDUERU
                                                                       ZHQRZDVNZKHWKHUSODLQWLIIVKDYHDOOHJHGVXIILFLHQWIDFWVWR
        +HOZLJHWDOY9HQFRU,QFHWDO           1R        1R              +HOZLJHWDOY9HQFRU,QFHWDO             

  ILQDQFLDO FRQGLWLRQ RI KLV FOLHQW KH DVVXPHV D GXW\ WR            7KHUHIRUH DOO RI GHIHQGDQWVj HDUQLQJV SURMHFWLRQV DQG
  SURYLGHFRPSOHWHDQGQRQPLVOHDGLQJLQIRUPDWLRQZLWK                        VWDWHPHQWV DERXW WKH %DODQFHG %XGJHW $FW TXDOLI\ DV
  UHVSHFWWRVXEMHFWVRQZKLFKKHXQGHUWDNHVWRVSHDN                        mIRUZDUGORRNLQJl$VVXFKGHIHQGDQWVDUHOLDEOHRQO\LIWKH
                                                                              VWDWHPHQWVZHUHPDWHULDOLIGHIHQGDQWVKDGDFWXDONQRZOHGJH
,G                                                                           WKDW WKH VWDWHPHQWV ZHUH IDOVH RU PLVOHDGLQJ DQG LI WKH
                                                                              VWDWHPHQWVZHUHQRWLGHQWLILHGDVmIRUZDUGORRNLQJlRUODFNHG
   &RQWUDU\WRWKHZD\LQZKLFKWKHGLVWULFWFRXUWDQGSDQHO                  PHDQLQJIXO    FDXWLRQDU\ ODQJXDJH  6HH  86&  X
PDMRULW\ IUDPHG WKH LVVXH WKH TXHVWLRQ LQ WKLV FDVH LV QRW         F
ZKHWKHU9HQFRUKDGDGXW\WRGLYXOJHLWVLQWHUQDODVVHVVPHQWV
RIWKH%DODQFHG%XGJHW$FW5DWKHUWKHTXHVWLRQLVZKHWKHU                     0DWHULDOLW\n'HIHQGDQWVZRXOGGLVPLVVWKHLURSWLPLVWLF
WKHFRPSDQ\KDGDGXW\WRFRPSOHWHWKHLQIRUPDWLRQDOUHDG\                    SURMHFWLRQV DQG LQWHUQDO HVWLPDWHV DV mVRIW SXIILQJ
JLYHQ FRQFHUQLQJ WKH %XGJHW $FW DQG HDUQLQJV HVWLPDWHV                VWDWHPHQWVlWKDWDUHLPPDWHULDODVDPDWWHURIODZ7KHUHLV
7KRXJKWKH5HIRUP$FWGRHVQRWLPSRVHDmGXW\WRXSGDWHl                     VXSSRUWIRUWKHSURSRVLWLRQWKDWmVDOHVILJXUHVIRUHFDVWVDQG
VHH86&XGDQGZHGRQRWGHFLGHWRGD\ZKHWKHU                  WKHOLNHRQO\ULVHWRWKHOHYHORIPDWHULDOLW\ZKHQWKH\FDQEH
VXFK DQ REOLJDWLRQ H[LVWV ZH DW OHDVW UHTXLUH DQ DFWRU WR         FDOFXODWHGZLWKVXEVWDQWLDOFHUWDLQW\lsDPHVY*HUEHU3URG
mSURYLGH FRPSOHWH DQG QRQPLVOHDGLQJ LQIRUPDWLRQ ZLWK
UHVSHFW WR WKH VXEMHFWV RQ ZKLFK KH XQGHUWDNHV WR VSHDNl
5XELQ)GDW7KHFKDUDFWHUL]DWLRQRIRSLQLRQVDQG                      
                                                                                     7KLV IRUPXODWLRQ LV GUDZQ IURP WKH VWDWXWRU\ WH[W ZKLFK LV ZULWWHQ
SURMHFWLRQVDVmVRIWlLVEHVLGHWKHSRLQWLQWKLVFDVH$JDLQ               LQ WKH QHJDWLYH GLVMXQFWLYH
WKHTXHVWLRQKHUHLVQRWWKHGXW\WRVSHDNEXWOLDELOLW\IRUQRW                   ([FHSW DV SURYLGHG LQ VXEVHFWLRQ E LQ DQ\ SULYDWH DFWLRQ DULVLQJ
KDYLQJ VSRNHQ HQRXJK  ,Q 5XELQ ZH TXRWHG WKH SLWK\                      XQGHU WKLV WLWOH    WKDW LV EDVHG RQ DQ XQWUXH VWDWHPHQW RI D PDWHULDO

REVHUYDWLRQRIWKH6HYHQWK&LUFXLWWKDWmXQGHU5XOHE                    IDFW RU RPLVVLRQ RI D PDWHULDO IDFW QHFHVVDU\ WR PDNH WKH VWDWHPHQW
                                                                                   QRW PLVOHDGLQJ D SHUVRQ UHIHUUHG WR LQ VXEVHFWLRQ D VKDOO QRW EH
WKHODFNRIDQLQGHSHQGHQWGXW\GRHVQRWH[FXVHDPDWHULDO                         OLDEOH ZLWK UHVSHFW WR DQ\ IRUZDUGORRNLQJ VWDWHPHQW ZKHWKHU ZULWWHQ
OLHl,GTXRWLQJ$FNHUPDQY6FKZDUW])G                        RU RUDO LI DQG WR WKH H[WHQW WKDWn
WK &LU   :LWK UHJDUG WR IXWXUH HYHQWV XQFHUWDLQ                     $       WKH IRUZDUGORRNLQJ VWDWHPHQW LVn
ILJXUHVDQGRWKHUVRFDOOHGVRIWLQIRUPDWLRQDFRPSDQ\PD\                                      L LGHQWLILHG DV D IRUZDUGORRNLQJ VWDWHPHQW DQG LV
                                                                                                         DFFRPSDQLHG E\ PHDQLQJIXO FDXWLRQDU\ VWDWHPHQWV
                                                                                                         LGHQWLI\LQJ LPSRUWDQW IDFWRUV WKDW FRXOG FDXVH
                                                                                                         DFWXDO UHVXOWV WR GLIIHU PDWHULDOO\ IURP WKRVH LQ WKH
                                                                                                         IRUZDUGORRNLQJ VWDWHPHQW RU
                                                                                                  LL LPPDWHULDO RU
      
       7KH GXW\ WR XSGDWH mFRQFHUQV VWDWHPHQWV WKDW DOWKRXJK UHDVRQDEOH                %       WKH SODLQWLII IDLOV WR SURYH WKDW WKH IRUZDUGORRNLQJ
DW WKH WLPH PDGH EHFRPH PLVOHDGLQJ ZKHQ YLHZHG LQ WKH FRQWH[W RI                                 VWDWHPHQWn
VXEVHTXHQW HYHQWVl ,Q UH %XUOLQJWRQ &RDW )DFWRULHV 6HF /LWLJ  )G                         L LI PDGH E\ D QDWXUDO SHUVRQ ZDV PDGH ZLWK DFWXDO
  G &LU  $V WKH 7KLUG &LUFXLW SRLQWHG RXW m)RU D                                      NQRZOHGJH E\ WKDW SHUVRQ WKDW WKH VWDWHPHQW ZDV
SODLQWLII WR DOOHJH WKDW D GXW\ WR XSGDWH D IRUZDUGORRNLQJ VWDWHPHQW DURVH                              IDOVH RU PLVOHDGLQJ RU
RQ DFFRXQW RI DQ HDUOLHUPDGH SURMHFWLRQ WKH DUJXPHQW KDV WR EH PDGH                             LL LI PDGH E\ D EXVLQHVV HQWLW\>VLF@ ZDVn
WKDW WKH SURMHFWLRQ FRQWDLQHG DQ LPSOLFLW IDFWXDO UHSUHVHQWDWLRQ WKDW                                    , PDGH E\ RU ZLWK WKH DSSURYDO RI DQ H[HFXWLYH
UHPDLQHG µDOLYHj LQ WKH PLQGV RI LQYHVWRUV DV D FRQWLQXLQJ UHSUHVHQWDWLRQl                                   RIILFHU RI WKDW HQWLW\ DQG
,G DW  +RZHYHU ZH UHJDUG FHUWDLQ RI GHIHQGDQWVj VWDWHPHQWVnVXFK                                   ,, PDGH RU DSSURYHG E\ VXFK RIILFHU ZLWK DFWXDO
DV WKH FODLPHG LQDELOLW\ WR IRUHVHH WKH OHJLVODWLRQ LQ ODWH sXO\ DQG WKH                                      NQRZOHGJH E\ WKDW RIILFHU WKDW WKH VWDWHPHQW
mFRPIRUWl VWDWHPHQWV LQ 6HSWHPEHUnDV PLVOHDGLQJ QRW RQO\ LQ OLJKW RI                                          ZDV IDOVH RU PLVOHDGLQJ
ODWHU HYHQWV EXW DOVR DW WKH WLPH WKH\ ZHUH PDGH :H WKHUHIRUH QHHG QRW
UHDFK WKH TXHVWLRQ RI ZKHWKHU ZH UHFRJQL]H D GXW\ WR XSGDWH                   86&  XF HPSKDVLV DGGHG
   +HOZLJHWDOY9HQFRU,QFHWDO        1R    1R          +HOZLJHWDOY9HQFRU,QFHWDO     

&R)GWK&LU<HWZHGRQRWDJUHH         8QGHU 6WDUNPDQ DQG 6RIDPRU 'DQHN LW LV WUXH WKDW
WKDW9HQFRUjVHVWLPDWHVRIVWURQJHDUQLQJVZHUHVRXQFHUWDLQ      GHIHQGDQWVKDGQRLQGHSHQGHQWGXW\WRGLYXOJHWKHLULQWHUQDO
RUFDVXDOO\GLVUHJDUGHGE\WKHPDUNHWSODFH,QWKHFRQWH[WRI    DSSUDLVDOV RI WKH %XGJHW $FW D FRPSUHKHQVLYH VWXG\ WKDW
WKH%XGJHW$FWnZKRVHIRUPDQGHIIHFWWKHFRPSDQ\GHQLHG           SODLQWLIIVDOOHJHEHJDQLQ$SULODQGZDVFRPSOHWHGE\sXO\
NQRZLQJXQWLOVHYHQZHHNVDIWHULWVSDVVDJHnWKHSURMHFWLRQV       1RUGRZHGLVDJUHHWKDWWKHQRQGLVFORVXUHFDVHVVXUYLYHWKH
ZHUH IUDPHG DV PDWHULDO UHDVVXUDQFHV RI FRQWLQXHG JRRG     5HIRUP $FW  %XW WKH SURWHFWLRQV IRU VRIW LQIRUPDWLRQ HQG
IRUWXQH$VRQHVHFXULWLHVFRPPHQWDWRUSXWVWKHSRLQW          ZKHUH VSHHFK EHJLQV  7KRXJK IRUZDUGORRNLQJ VWDWHPHQWV
                                                                  PD\ FRQWDLQ VRIW LQIRUPDWLRQ WKH\ GR QRW WKHPVHOYHV
  $UJXDEO\PDWWHUVWKDWDUHQRWPDWHULDOEHFDXVHWKH\DUH        FRQVWLWXWH VRIW LQIRUPDWLRQ WKXV SXEOLF UHYHODWLRQ FDQQRW
  QRW VR SUREDEOH RU UHOHYDQW DV WR EH UHTXLUHG WR EH   SDUWDNHRIWKHVKHOWHUXQGHU6WDUNPDQ,QIDFWWKHDUJXPHQW
  GLVFORVHG LQ D SDUWLFXODU FRQWH[W PD\ EH PDWHULDO LI    GHILHVDSSOLFDWLRQKRZFDQDUXOHRIQRQGLVFORVXUHDSSO\WR
  LQIRUPDWLRQDERXWWKHPLVVWDWHGIDOVHO\RUPLVOHDGLQJO\        D FRPSDQ\jV GLVFORVXUH"  ,InDV GHIHQGDQWV FRQWHQGnWKH
  LQFRPPXQLFDWLRQVWKDWDUHQRWRWKHUZLVHUHTXLUHGWREH         SURWHFWLRQ IRU VRIW LQIRUPDWLRQ UHPDLQV LQWDFW HYHQ DIWHU D
  PDGH,IE\DVVXPSWLRQWKHUHLVQRQHHGWRPDNHWKH          FRPSDQ\ VSHDNV RQ DQ HPHUJLQJ LVVXH WKH VSHDNHU FRXOG
  VWDWHPHQWDYROXQWHHUHGIDOVHVWDWHPHQWDERXWWKHIXWXUH       FKRRVHZKLFKFRQWLQJHQFLHVWRH[SRVHDQGZKLFKWRFRQFHDO
  LV PRUH OLNHO\ WR EH XWWHUHG WR VHUYH WKH VSHDNHUjV    2QDQ\VXEMHFWIDOOLQJVKRUWRIUHDVRQDEOHFHUWDLQW\WKHQD
  SXUSRVHDQGSURWDQWRPD\EHPLVOHDGLQJWKDQDIDLOXUH        FRPSDQ\FRXOGRIIHUDSDWFKZRUNRIKRQHVW\DQGRPLVVLRQ
  WRPDNHDQ\VWDWHPHQWDERXWWKHIXWXUH                         7KLVSURSRVLWLRQLVXQWHQDEOHKRZHYHUERWKDVDPDWWHURI
                                                                  SROLF\DQGSUHFHGHQW
9LFWRU%UXGQH\$1RWHRQ0DWHULDOLW\DQG6RIW,QIRUPDWLRQ
8QGHUWKH)HGHUDO6HFXULWLHV/DZV9 / 5'           2Q WKH IDFWV RI 6WDUNPDQ D FRUSRUDWLRQ WKDW FKRRVHV WR
                                                           GLYXOJH XQFHUWDLQ HVWLPDWHV mPXVW DOVR LQIRUP WKH
                                                                  VKDUHKROGHUV DV WR WKH EDVLV IRU DQG OLPLWDWLRQV RQ WKH
   7KH6XSUHPH&RXUWKDVHQGRUVHGDIDFWLQWHQVLYHWHVWRI        SURMHFWHGUHDOL]DEOHYDOXHVl6WDUNPDQ)GDW,Q
PDWHULDOLW\LQVHFXULWLHVIUDXGFDVHV%DVLF,QFY/HYLQVRQ   5XELQY6FKRWWHQVWHLQZHHODERUDWHGRQWKHLGHDWKDWHYHQ
866SHFLILFDOO\mPDWHULDOLW\GHSHQGV     DEVHQWDGXW\WRVSHDNDSDUW\ZKRGLVFORVHVPDWHULDOIDFWVLQ
RQWKHVLJQLILFDQFHWKHUHDVRQDEOHLQYHVWRUZRXOGSODFHRQWKH    FRQQHFWLRQZLWKVHFXULWLHVWUDQVDFWLRQVmDVVXPH>V@DGXW\WR
ZLWKKHOGRUPLVUHSUHVHQWHGLQIRUPDWLRQl,G%DVLFLQYROYHG     VSHDN IXOO\ DQG WUXWKIXOO\ RQ WKRVH VXEMHFWVl  5XELQ Y
D FRPSDQ\jV GHQLDOV RI SUHOLPLQDU\ PHUJHU QHJRWLDWLRQV     6FKRWWHQVWHLQ)GWK&LUHQEDQF
ZKLFKZHUHLQIDFWRQJRLQJ$SDQHORIRXUFRXUWUHYHUVHG       7KHUHDODZ\HUWRXWHGKLVFOLHQWjVVHFXULWLHVWRSURVSHFWLYH
VXPPDU\MXGJPHQWIRUWKHGHIHQGDQWFRPSDQ\KROGLQJWKDW          LQYHVWRUVIDLOLQJWRPHQWLRQWKHFRPSDQ\jVEDQNLQJGHIDXOW
mRQFH D VWDWHPHQW LV PDGH GHQ\LQJ WKH H[LVWHQFH RI DQ\   :KHQWKHFRPSDQ\ILOHGIRUEDQNUXSWF\WKHLQYHVWRUVVXHGLW
GLVFXVVLRQVHYHQGLVFXVVLRQVWKDWPLJKWQRWKDYHEHHQPDGH       DVZHOODVWKHODZ\HUIRUVHFXULWLHVIUDXG6LWWLQJHQEDQFZH
PDWHULDOLQDEVHQFHRIWKHGHQLDODUHPDWHULDOEHFDXVHWKH\       GLVDJUHHGZLWKWKHSDQHOPDMRULW\RSLQLRQWKDWKDGIRXQGQR
PDNHWKHVWDWHPHQWPDGHXQWUXHl/HYLQVRQY%DVLF,QF     GXW\ RI GLVFORVXUH XQGHU 5XOH E  &RQFOXGLQJ WKDW WKH
)GWK&LU2QDSSHDOWKH6XSUHPH&RXUW      ODZ\HUZDVXQGHUDGXW\QRWWRRPLWPDWHULDOIDFWVZHQRWHG
                                                                    ,Q VXP ZKLOH DQ DWWRUQH\ UHSUHVHQWLQJ WKH VHOOHU LQ D
                                                                    VHFXULWLHV WUDQVDFWLRQ PD\ QRW DOZD\V EH XQGHU DQ
                                                                    LQGHSHQGHQW GXW\ WR YROXQWHHU LQIRUPDWLRQ DERXW WKH
    +HOZLJHWDOY9HQFRU,QFHWDO        1R      1R             +HOZLJHWDOY9HQFRU,QFHWDO         

GHIHQGDQWjVSUDFWLFHVZDVDYDLODEOHWRDQDO\VWVDQGWKDWWKH         UHMHFWHGWKLVVWDQGDUGRIPDWHULDOLW\H[SODLQLQJWKDWmLQRUGHU
FRPSDQ\KDGVWDWHGSXEOLFO\LWVmSUHPLXPSULFHVlIRUKRVSLWDO        WRSUHYDLORQD5XOHEFODLPDSODLQWLIIPXVWVKRZWKDW
ORDQHUNLWV$FFRUGLQJWRWKHFRXUWWKHVLJQLILFDQFHRIWKLV       WKHVWDWHPHQWVZHUHPLVOHDGLQJDVWRDPDWHULDOIDFW,WLVQRW
DOUHDG\SXEOLFLQIRUPDWLRQnWKHZDUQLQJOHWWHUDQGWKHORDQHU         HQRXJK WKDW D VWDWHPHQW LV IDOVH RU LQFRPSOHWH LI WKH
NLWFKDUJHVnZDVDmPDWWHURIRSLQLRQlDQGGLGQRWUHTXLUH            PLVUHSUHVHQWHGIDFWLVRWKHUZLVHLQVLJQLILFDQWl%DVLF
IXUWKHUH[SODQDWLRQE\WKHFRPSDQ\,G                           86DW7KRXJK%DVLFGLGQRWDGGUHVVHDUQLQJVIRUHFDVWV
                                                                     RUSURMHFWLRQVVHHLGDWQZHILQGLWVDUWLFXODWLRQRIWKH
  6WDUNPDQ DOVR IHDWXUHG DOOHJDWLRQV RI VHFXULWLHV IUDXG      EDVLFSROLFLHVXQGHUO\LQJVHFXULWLHVUHJXODWLRQDSSOLFDEOHKHUH
7KHUHDVKDUHKROGHURI0DUDWKRQ2LOVXHGWKHFRPSDQ\IRU            DV ZHOO  m7KHUH FDQQRW EH KRQHVW PDUNHWV ZLWKRXW KRQHVW
QRW GLVFORVLQJ PHUJHU QHJRWLDWLRQV ZLWK 86 6WHHO            SXEOLFLW\0DQLSXODWLRQDQGGLVKRQHVWSUDFWLFHVRIWKHPDUNHW
$FFRUGLQJ WR WKH FRPSODLQW WKH GHIHQGDQW GLG QRW GLYXOJH    SODFHWKULYHXSRQP\VWHU\DQGVHFUHF\l,GDWTXRWLQJ
DVVHW DSSUDLVDOV DQG HDUQLQJV SURMHFWLRQV SUHSDUHG LQ          +55HS1RDW7KH&RXUWDGGHGWKDWLW
FRQQHFWLRQ ZLWK D IULHQGO\ WHQGHU RIIHU  7KHVH ILJXUHV     mUHSHDWHGO\KDVGHVFULEHGWKHIXQGDPHQWDOSXUSRVHRIWKH$FW
DFFRUGLQJWRWKHSODLQWLIIZRXOGKDYHLQIRUPHGKLVGHFLVLRQ         DVLPSOHPHQWLQJDSKLORVRSK\RIIXOOGLVFORVXUHl,GFLWDWLRQ
ZKHWKHUWRVHOOKLVVKDUHVRUDZDLWDKLJKHUSULFH$SDQHORI      DQGLQWHUQDOTXRWDWLRQVRPLWWHG
WKLV FRXUW DIILUPHG VXPPDU\ MXGJPHQW IRU WKH GHIHQGDQW
FRQFOXGLQJ WKDW mD WHQGHU RIIHU WDUJHW PXVW GLVFORVH             ,Q WKLV FDVH LW FDQQRW EH VDLG WKDW 9HQFRUjV SUHOLPLQDU\
SURMHFWLRQV DQG DVVHW DSSUDLVDOV EDVHG XSRQ SUHGLFWLRQV        DSSUDLVDOVDQGLQWHUQDODVVHVVPHQWVRIWKH%DODQFHG%XGJHW
UHJDUGLQJIXWXUHHFRQRPLFDQGFRUSRUDWHHYHQWVRQO\LIWKH           $FW ZHUH PDWHULDO VROHO\ E\ YLUWXH RI WKHLU RPLVVLRQ  $V
SUHGLFWLRQV XQGHUO\LQJ WKH DSSUDLVDO RU SURMHFWLRQ DUH         GLVFXVVHG LQIUD SODLQWLIIV KDYH DOOHJHG IDFWV WR SURGXFH D
VXEVWDQWLDOO\FHUWDLQWRKROGl6WDUNPDQ)GDW        VWURQJ LQIHUHQFH WKDW GHIHQGDQWV NQHZ WKDW WKH %XGJHW $FW
                                                                     FRXOG DGYHUVHO\ DIIHFW WKHLU RSHUDWLRQV  <HW GHIHQGDQWV
  'HIHQGDQWVPDLQWDLQWKDWWKHLUVWDWHPHQWVFRQFHUQLQJWKH           VLPSO\ UHVWHG RQ WKHLU GLVDYRZDOV RI NQRZOHGJH ZKLOH
%DODQFHG%XGJHW$FWDUHQRWDFWLRQDEOHEHFDXVHWKH\TXDOLI\          FRQWLQXLQJ WR PDNH IDYRUDEOH HDUQLQJV SUHGLFWLRQV  :H
DV mVRIW LQIRUPDWLRQl XQGHU WKH QRQGLVFORVXUH UXOHV RI       FRQFOXGH WKDW WKHUH LV D mVXEVWDQWLDO OLNHOLKRRG WKDW WKH
6WDUNPDQDQG6RIDPRU'DQHN7KLVFRQFOXVLRQLVPLVWDNHQ             GLVFORVXUHRIWKHRPLWWHGIDFWZRXOGKDYHEHHQYLHZHGE\WKH
EHFDXVHWKHVHFDVHVDUHLQDSSRVLWH,Q6RIDPRU'DQHNWKH           UHDVRQDEOHLQYHVWRUDVKDYLQJVLJQLILFDQWO\DOWHUHGWKHµWRWDO
LQIRUPDWLRQFODLPHGDVDGYHUVHWRWKHFRPSDQ\KDGDOUHDG\            PL[jRILQIRUPDWLRQPDGHDYDLODEOHl,GDWFLWDWLRQ
EHHQ GLVFORVHG DQG ZDV SXEOLFO\ DYDLODEOH WR SHUPLW DQ       RPLWWHG  7KXV WKLV LQIRUPDWLRQ FDQQRW EH GHHPHG
LQGHSHQGHQW DVVHVVPHQW E\ LQYHVWRUV DQG DQDO\VWV  $QG        mLPPDWHULDOlZLWKLQWKHPHDQLQJRIWKH36/5$86&
6WDUNPDQ ZDV D FDVH DERXW QRQGLVFORVXUH  7KLV FDVH LQ    XF$LL
FRQWUDVWLVDERXWVHOHFWLYHGLVFORVXUHRILQIRUPDWLRQNQRZQ
H[FOXVLYHO\WRGHIHQGDQWVDQGHVVHQWLDOWRFRPSOHWHDSLFWXUH
WKH\KDGRQO\SDUWLDOO\UHYHDOHG:KLOHLWLVWUXHWKDWmVLOHQFH
DEVHQWDGXW\WRGLVFORVHLVQRWPLVOHDGLQJXQGHU5XOHE
l%DVLF,QFY/HYLQVRQ86Q               
9HQFRUKHUHGLGQRWPDLQWDLQLWVVLOHQFH'HIHQGDQWVjVHJXH               %DVLF FRQFHUQHG WKH SURSHU VWDQGDUG RI PDWHULDOLW\       :H GR QRW
                                                                     XQGHUVWDQG WKH 6XSUHPH &RXUW WR KDYH GLVWXUEHG WKH SUHPLVH IRU OLDELOLW\
IURPQRQGLVFORVXUHWRQRQDFWLRQDELOLW\RYHUORRNVWKHIDFW          LQ WKDW FDVH YL] mFRUSRUDWH RIILFHUV DUH QRW UHTXLUHG WR VSHDN EXW RQFH
WKDWWKH\KDGDOUHDG\YROXQWHHUHGPXFKmVRIWlLQIRUPDWLRQ          WKH\ GR WKH\ PXVW EH WUXWKIXO LI WKHLU FRPPHQWV DUH PDWHULDO WR LQYHVWRUVj
                                                                     GHFLVLRQPDNLQJl 0D\HU Y 0\ORG  )G   WK &LU 
                                                                     FLWLQJ %DVLF  86 DW  Q
       +HOZLJHWDOY9HQFRU,QFHWDO            1R        1R           +HOZLJHWDOY9HQFRU,QFHWDO      

    $FWXDO .QRZOHGJH RI 0LVOHDGLQJ RU )DOVH                          &KDUDOY5R\DO$SSOLDQFH0IJ&R1R86
1DWXUHn'HIHQGDQWVFODLPWKDWWKH%DODQFHG%XGJHW$FWZDV                      $SS /(;,6  DW  WK &LU $XJ  
DmPRYLQJWDUJHWlXQWLOLWZDVVLJQHGVXEMHFWWRFRPPLWWHH                   XQSXEOLVKHG GLVSRVLWLRQ TXRWLQJ ,Q UH 'RQDOG s 7UXPS
FRPSURPLVH DQG QHJRWLDWLRQ DQG WKDW LWV FRPSOH[LW\ DQG                &DVLQR 6HF /LWLJ  )G   G &LU 
LPSDFW ZHUH LPSRVVLEOH WR DVVHVV XQWLO ORQJ DIWHU LW ZDV             9HQFRUjVEODQNHWVWDWHPHQWVFRQFHUQLQJSHQGLQJOHJLVODWLRQ
HQDFWHG$V9HQFRUPDLQWDLQVm'HIHQGDQWVGLGFRPHWRD                      RIIHUHG LQYHVWRUV QR JXLGDQFH DERXW WKH FRQVHTXHQFHV RI
UHDVRQDEO\FHUWDLQFRQFOXVLRQWKDWWKHLPSDFWRIWKH>%DODQFHG                KHDOWK FDUH UHIRUP XSRQ WKH FRPSDQ\jV EXVLQHVV  7KHVH
%XGJHW $FW@ ZRXOG EH QHJDWLYH  %XW WKHUH DUH QR IDFWV              VWDWHPHQWV ZHUH QRW PHDQLQJIXO DQG ZHUH KDUGO\ HYHQ
VXJJHVWLQJWKDWWKLVRFFXUUHGHYHQDGD\HDUOLHUWKDQ2FWREHU                 FDXWLRQDU\$FFRUGLQJO\WKH\DUHQRWVKHOWHUHGE\WKHVDIH
l7KHWKUXVWRIGHIHQGDQWVjDUJXPHQWLVQRWWKDWWKH\               KDUERUSURYLGHGE\WKH36/5$
ZHUHVXUSULVHGRUFDXJKWXQSUHSDUHGIRUWKH%XGJHW$FWRQ
2FWREHUWKHGD\9HQFRUDQQRXQFHGORZHUHDUQLQJV                        'HIHQGDQWVUHO\RQDOLQHRIFDVHVSUHFHGLQJWKH36/5$
DQG WULJJHUHG D QHDUO\ WKLUW\ SHUFHQW GHFOLQH LQ LWV VWRFN          WKDW KROGV WKDW D FRPSDQ\ QHHG QRW GLVFORVH mVRIW
5DWKHU9HQFRUDVVHUWVWKDWDQ\DVVHVVPHQWRIWKHDFWEHIRUH                  LQIRUPDWLRQlWRWKHLQYHVWLQJSXEOLF7KLVW\SHRILQIRUPDWLRQ
WKDWWLPHZDVWHQWDWLYHDQGGLGQRWUHTXLUHGLVFORVXUH                       LV GHILQHG RQO\ E\ LWV XQFHUWDLQW\  SUHGLFWLRQV PDWWHUV RI
                                                                              RSLQLRQDQGDVVHWDSSUDLVDOVKDYHDOOEHHQUHJDUGHGLQWKLV
   9HQFRUjVFODLPHGLQDELOLW\WRDVVHVVWKHDGYHUVHLPSDFWRI                 &LUFXLWDVmVRIWl6HH0XUSK\Y6RIDPRU'DQHN*URXS,QF
WKH %XGJHW $FW LV SODXVLEOHnEXW RQO\ WR D SRLQW  $V WKH           )GWK&LU6WDUNPDQY0DUDWKRQ2LO
OHJLVODWLRQSURJUHVVHGWKURXJK&RQJUHVVWKLVSURWHVWDWLRQRI                 &R)GWK&LUm+DUGLQIRUPDWLRQl
LJQRUDQFH EHFDPH LQFUHDVLQJO\ KROORZ  ,Q WKHLU VHFRQG                LQFRQWUDVWmLVW\SLFDOO\KLVWRULFDORURWKHUIDFWXDOLQIRUPDWLRQ
TXDUWHU4ILOLQJGHIHQGDQWVUHLWHUDWHGWKDWm>P@DQDJHPHQW                 WKDWLVREMHFWLYHO\YHULILDEOHl6RIDPRU'DQHN)GDW
FDQQRWSUHGLFWZKHWKHUVXFKSURSRVDOVZLOOEHDGRSWHGRULI                   TXRWLQJ*DUFLDY&RUGRYD)GWK&LU
DGRSWHGZKDWHIIHFWLIDQ\VXFKSURSRVDOVZRXOGKDYHRQLWV                ,Q6RIDPRU'DQHNWKLVFRXUWUHFRJQL]HGWKDWmRXU
EXVLQHVVl  7KLV ZDV ILOHG sXO\   RQH PRQWK DIWHU           FDVHVILUPO\HVWDEOLVKWKHUXOHWKDWVRIWLQIRUPDWLRQPXVW
EXGJHWELOOVKDGSDVVHGERWKWKH+RXVHRI5HSUHVHQWDWLYHVDQG                 EHGLVFORVHGRQO\LIYLUWXDOO\DVFHUWDLQDVKDUGIDFWl,G
WKH 6HQDWH ILIWHHQ GD\V DIWHU D FRPPLWWHH FRQIHUHQFH ZDV             DWTXRWLQJ6WDUNPDQ)GDW
KHOG DQG VL[ GD\V EHIRUH WKH ILQDO ELOO ZDV FOHDUHG IRU WKH
3UHVLGHQWjVVLJQDWXUH2QRUDERXW6HSWHPEHUSODLQWLIIV                     6RIDPRU 'DQHN LQYROYHG DOOHJHG PLVUHSUHVHQWDWLRQV DQG
DOOHJH WKDW (DUO 5HHG H[HFXWLYH YLFH SUHVLGHQW DQG FKLHI             RPLVVLRQV E\ D FRPSDQ\ WKDW PDQXIDFWXUHG DQG PDUNHWHG
ILQDQFLDORIILFHURI9HQFRUDQG%UXFH/XQVIRUGH[HFXWLYH                    VSLQDOLPSODQWGHYLFHV$FFRUGLQJWRWKHFRPSODLQWZKLFK
YLFHSUHVLGHQWDQGFKLHIH[HFXWLYHRIILFHULQIRUPHGDQDO\VWV                 ZDV GLVPLVVHG SULRU WR WKH HQDFWPHQW RI WKH 36/5$ WKH
WKDW9HQFRUZDVVWLOOmFRPIRUWDEOHlZLWKIDYRUDEOHHDUQLQJV                   GHIHQGDQWFRUSRUDWLRQIDLOHGWRGLVFORVHWKDWLWZDVSURPRWLQJ
SHUVKDUHILJXUHVPDGHEHIRUHWKH%XGJHW$FWZKLFKZDVE\                    LWV GHYLFHV IRU XQDXWKRUL]HG XVH DQG WKDW LW ZDV PDNLQJ
WKHQVHYHQZHHNVROG<HWE\$XJXVWLIQRWEHIRUHWKH                   LPSURSHUVDOHVRImORDQHUNLWVlWRKRVSLWDOV3ODLQWLIIVFODLPHG
                                                                              VHFXULWLHV IUDXG DOOHJLQJ WKDW WKHVH RPLVVLRQV DORQJ ZLWK
                                                                              UHODWHG PLVVWDWHPHQWV DUWLILFLDOO\ HOHYDWHG WKH FRPSDQ\jV
                                                                             VWRFN SULFH  $ SDQHO RI WKLV FRXUW DIILUPHG GLVPLVVDO
      7KH SDQHO PDMRULW\ IRXQG WKDW mWKH SOHDGLQJV VHW IRUWK QR VWDWHPHQWV
DIWHU $XJXVW   ZKLFK DUH GLUHFWO\ DWWULEXWDEOH WR DQ\ RI WKH
                                                                              H[SODLQLQJWKDWWKLVLQIRUPDWLRQGLGQRWJLYHULVHWRDGXW\WR
GHIHQGDQWVl 7KH GLVVHQW OLNHZLVH FKDOOHQJHV RXU GHFLVLRQ WRGD\ DV            GLVFORVH  7KH FRXUW QRWHG WKDW D ZDUQLQJ OHWWHU IURP WKH
SUHGLFDWLQJ OLDELOLW\ RQ DQDO\VWVj VWDWHPHQWV DORQH :H KROG QR VXFK WKLQJ   8QLWHG 6WDWHV )RRG DQG 'UXJ $GPLQLVWUDWLRQ FRQFHUQLQJ
3ODLQWLIIVj DOOHJDWLRQ RI WKH VWDWHPHQW PDGH E\ GHIHQGDQWV RQ
    +HOZLJHWDOY9HQFRU,QFHWDO           1R       1R             +HOZLJHWDOY9HQFRU,QFHWDO         

D FRPSDQ\ QHHG QRW OLVW DOO IDFWRUV WKH OHJLVODWLYH KLVWRU\    IRUP RI WKH OHJLVODWLRQ KDG EHFRPH IL[HG DQG LWV LPSDFW
PDNHVFOHDUWKDWmERLOHUSODWHZDUQLQJVZLOOQRWVXIILFH          PHDVXUDEOH
7KH FDXWLRQDU\ VWDWHPHQWV PXVW FRQYH\ VXEVWDQWLYH
LQIRUPDWLRQDERXWIDFWRUVWKDWUHDOLVWLFDOO\FRXOGFDXVHUHVXOWV            7KHVH SUHGLFWLRQV DQG RSLQLRQV FRQWDLQ mDW OHDVW WKUHH
WR GLIIHU PDWHULDOO\ IURP WKRVH SURMHFWHG LQ WKH IRUZDUG        LPSOLFLWIDFWXDODVVHUWLRQVWKDWWKHVWDWHPHQWLVJHQXLQHO\
ORRNLQJVWDWHPHQWVVXFKDVIRUH[DPSOHLQIRUPDWLRQDERXW              EHOLHYHGWKDWWKHUHLVDUHDVRQDEOHEDVLVIRUWKDWEHOLHI
WKHLVVXHUjVEXVLQHVVl+5&RQI5HS1RDW              DQGWKDWWKHVSHDNHULVQRWDZDUHRIDQ\XQGLVFORVHGIDFWV
                                                                WHQGLQJWRVHULRXVO\XQGHUPLQHWKHDFFXUDF\RIWKHVWDWHPHQWl
                                                                         6FKQHLGHUY9HQQDUG,QUH$SSOH&RPSXWHU6HF/LWLJ
   7KH VDIH KDUERU ZDV GHVLJQHG WR HQFRXUDJH FRPSDQ\              )G   WK &LU   :KHQ GHIHQGDQWV
GLVFORVXUH RI IXWXUH SODQV DQG REMHFWLYHV E\ UHPRYLQJ WKH        GLVFODLPHGDQ\DELOLW\WRSUHGLFWKHDOWKFDUHOHJLVODWLRQZKLOH
WKUHDWRIOLDELOLW\+5&RQI5HS1RDW         SHUVLVWLQJLQIDYRUDEOHHDUQLQJVHVWLPDWHVHYHQVHYHQZHHNV
,Q FUDIWLQJ LW &RQJUHVV GUHZ RQ WKH MXGLFLDOO\ FUHDWHG          DIWHUHQDFWPHQWRIWKH%XGJHW$FW9HQFRUZDVUHSUHVHQWLQJ
mEHVSHDNVFDXWLRQlGRFWULQHZKLFKVWDWHVWKDWmEHOLHIVDERXW            WKDWLWNQHZRIQRZD\WKH%XGJHW$FWFRXOGDGYHUVHO\DIIHFW
IXWXUH VWDWHPHQWV ZKLFK WXUQ RXW WR EH LQFRUUHFW DUH QRW        LWVRSHUDWLRQV+RZHYHUSODLQWLIIVSRLQWRXWQXPHURXVmUHG
DFWLRQDEOH XQGHU 6HFWLRQ E LI WKH VWDWHPHQWV FRQWDLQ          IODJVl WKDW ZDUQHG 9HQFRU RI LPSHQGLQJ SUREOHPV LQ WKH
VXIILFLHQWFDXWLRQDU\ODQJXDJHl0D\HU)GDW$V            LQGXVWU\$VHDUO\DV$SULO7KRPDV$6FXOO\SUHVLGHQW
WKH(OHYHQWK&LUFXLWREVHUYHGm,QVKRUWZKHQDQLQYHVWRUKDV           RI WKH )HGHUDWLRQ RI $PHULFDQ +HDOWK 6\VWHPV WHVWLILHG
EHHQZDUQHGRIULVNVRIDVLJQLILFDQFHVLPLODUWRWKDWDFWXDOO\          EHIRUHWKH6HQDWH)LQDQFH&RPPLWWHHRQWKH%XGJHW$FW,Q
UHDOL]HG VKH LV VXIILFLHQWO\ RQ QRWLFH RI WKH GDQJHU RI WKH   GHVFULELQJWKHHIIHFWRIWKHOHJLVODWLRQRQKLVRUJDQL]DWLRQjV
LQYHVWPHQWWRPDNHDQLQWHOOLJHQWGHFLVLRQDERXWLWDFFRUGLQJ            PHPEHUVZKLFKLQFOXGHG9HQFRUKHH[SODLQHGm>:@HDUH
WRKHURZQSUHIHUHQFHVIRUULVNDQGUHZDUGl+DUULVY,9$;
&RUS)GWK&LU
   $FFRUGLQJWRWKHSODLQWLIIVWKDWLVQRWZKDWKDSSHQHGKHUH          6HSWHPEHU   DWWULEXWHV WKH HDUQLQJV SURMHFWLRQV WR /XQVIRUG DQG
                                                                         5HHG 0RUHRYHU WKH FRPSODLQW LGHQWLILHV WKH DQDO\VWV WR ZKRP WKH
,Q LWV  . ILOLQJ GDWHG 0DUFK   9HQFRU           VWDWHPHQWV  ZHUH PDGHn0DXUHHQ 6XOOLYDQ RI &RZHQ 	 &RPSDQ\ DQG
GHVFULEHG SURSRVDOV IRU KHDOWKFDUH UHIRUP DQG VSHFLILFDOO\         6FRWW 0DFNHV\ RI 0RUJDQ 6WDQOH\nDV ZHOO DV WKH WLPLQJ DQG FRQWHQWV RI
ZDUQHGWKDWLWVSURMHFWLRQVFRXOGGLIIHUIURPDFWXDOUHVXOWVGXH         WKH GLVFXVVLRQ $P &RPSO   s$  7KHVH GHWDLOV PHHW WKH
WRSRVVLEOHOHJLVODWLRQFRVWFRQWDLQPHQWPHDVXUHVSUREOHPV             SDUWLFXODULW\ UHTXLUHPHQW IRU SOHDGLQJ IUDXG XQGHU ERWK )HG 5 &LY 3
LQ VWDWH OLFHQVXUH DQG GLIILFXOWLHV LQ LQWHJUDWLQJ DFTXLUHG      EVHH 0LFKDHOV %OGJ &R Y $PHULWUXVW &R    )G   WK
HQWLWLHV<HWDVWKH%XGJHW$FWQHDUHGHQDFWPHQWDQGDVWKH             &LU  DQG WKH 5HIRUP $FW         VHH 1RYDN      )G DW 
                                                                         m$FFRUGLQJO\ D FRPSODLQW FDQ PHHW WKH QHZ SOHDGLQJ UHTXLUHPHQW    E\
ZDUQLQJVLJQVIODUHG9HQFRUjVSUHFDXWLRQVJUHZPRUHFXUVRU\             SURYLGLQJ GRFXPHQWDU\ HYLGHQFH DQGRU D VXIILFLHQW JHQHUDO GHVFULSWLRQ
DQGDEVWUDFW,QLWVILUVWDQGVHFRQGTXDUWHUILOLQJVRI         RI WKH SHUVRQDO VRXUFHV RI WKH SODLQWLIIVj EHOLHIVl &RQWUDU\ WR WKH
WKHFRPSDQ\VWDWHGRQO\WKDWLWFRXOGQRWSUHGLFWWKHIRUP              GLVVHQWjV LQVLVWHQFH SODLQWLIIVj DOOHJDWLRQ FRQFHUQLQJ WKH 6HSWHPEHU 

HIIHFWRUOLNHOLKRRGRIDQ\SURSRVHGOHJLVODWLRQ6XEVWDQWLDOO\        VWDWHPHQW GRHV QRW UHO\ VROHO\ RQ WKLUGSDUW\ UHSRUWV DV LWV VRXUFH

VLPLODUODQJXDJHDOVRDSSHDUHGLQ9HQFRUjV.ILOLQJVIURP                 
  DQG   ,Q DSSO\LQJ WKH EHVSHDNV FDXWLRQ                $V GLVFXVVHG  LQIUD ZH GR QRW ILQG WKH FDXWLRQDU\ ODQJXDJH
                                                                         VXIILFLHQWO\ PHDQLQJIXO WR FRUUHFW WKLV PLVOHDGLQJ UHSUHVHQWDWLRQ $W DQ\
GRFWULQHZHKDYHQRWHGWKDWmFDXWLRQDU\VWDWHPHQWVPXVWEH              UDWH WKH &RQIHUHQFH 5HSRUW SRLQWHG RXW WKDW mWKH DSSOLFDELOLW\ RI WKH VDIH
VXEVWDQWLYH DQG WDLORUHG WR WKH VSHFLILF IXWXUH SURMHFWLRQV      KDUERU SURYLVLRQV XQGHU VXEVHFWLRQ > 86&  X@F% VKDOO EH
HVWLPDWHV RU RSLQLRQV    ZKLFK WKH SODLQWLIIV FKDOOHQJHl   EDVHG RQ WKH µDFWXDO NQRZOHGJHj RI WKH GHIHQGDQW DQG GRHV QRW GHSHQG RQ
                                                                         XVH RI FDXWLRQDU\ ODQJXDJHl +5 &RQI 5HS 1R  DW  
    +HOZLJHWDOY9HQFRU,QFHWDO        1R       1R           +HOZLJHWDOY9HQFRU,QFHWDO     

FRQFHUQHGDERXWERWKWKHOHYHORIFXWVDQGWKHGLUHFWLRQRI           HVWLPDWHVDQGSXUSRUWHGP\RSLDFRQFHUQLQJWKH%XGJHW$FW
PDQ\ RI WKH SROLFLHV LQFOXGHG LQ WKH 3UHVLGHQWjV %XGJHWl     ZKHQFRPSDUHGDJDLQVWWKHSURJUHVVRIWKHOHJLVODWLRQWKURXJK
$P&RPSOs$                                          &RQJUHVVLQGLFDWHVWKDWGHIHQGDQWVFRQVFLRXVO\GLVUHJDUGHG
                                                                      WKHZDUQLQJVLJQVRIKHDOWKFDUHFXWEDFNV&HUWDLQGHIHQGDQW
   $VSUHYLRXVO\QRWHGLQVHFWLRQ,DERYHSODLQWLIIV KDYH         H[HFXWLYHVHYHQDFNQRZOHGJHGWKDWmWRXJKWLPHVlZHUHDKHDG
DOOHJHGWKDW([HFXWLYH9LFH3UHVLGHQW%DUUWROG7UDQVLWLRQDO          IRUDWOHDVWSDUWRIWKHFRPSDQ\DQGVROGPLOOLRQVRIGROODUVLQ
+RVSLWDOVHPSOR\HHVLQsXQHWKDWWKH\ZRXOGEHODLGRII          VWRFNDIWHUWKHDFWZDVVLJQHGEXWEHIRUHSULFHVSOXPPHWHG
EHFDXVHRIWKHLPSDFWRIWKH%XGJHW$FWDQGWKHmWRXJKWLPHV          :HKDYHSUHYLRXVO\FRPSDUHGWKHFRPPRQODZUHTXLUHPHQWV
FRPLQJlWKDWmZHUHJRLQJWRPDNHLWGLIILFXOWIRU9HQFRUWR           IRU IUDXG WR D VKRZLQJ RI VFLHQWHU XQGHU IHGHUDO VHFXULWLHV
PDNHPRQH\DQGVWD\SURILWDEOHl9HQFRUQRZH[SODLQVWKDW            ODZV0DQVEDFK)GDW7KRXJKWKHFRPSDULVRQ
%DUUjV UHIHUHQFH WR 0HGLFDUH FXWEDFNV ZDV OLPLWHG WR           LVQRWH[DFWLWLVLQVWUXFWLYHDVWRWKHDOOHJDWLRQVLQWKLVFDVH
9HQFRUjV KRVSLWDO RSHUDWLRQV ZKLFK GHIHQGDQWV FODLP
FRPSULVHGRQO\SHUFHQWRIWKHFRPSDQ\jVUHYHQXHV:KDW              $GHIHQGDQWZKRDVVHUWVDIDFWDVRIKLVRZQNQRZOHGJH
%DUULQWHQGHGE\KLVZDUQLQJLVQRWDQLVVXHZHDUHSUHSDUHG            RUVRSRVLWLYHO\DVWRLPSO\WKDWKHKDVNQRZOHGJHXQGHU
WRUHVROYHDWWKLVVWDJH)RUQRZZHQRWHRQO\WKDW9HQFRU            WKHFLUFXPVWDQFHVZKHQKHLVDZDUHWKDWKHZLOOEHVR
NQHZ RI mWRXJK WLPHVl DKHDG IRU DW OHDVW VRPH RI LWV          XQGHUVWRRGZKHQKHNQRZVWKDWKHGRHVQRWLQIDFWNQRZ
RSHUDWLRQV                                                             ZKHWKHUZKDWKHVD\VLVWUXHLVIRXQGWRKDYHLQWHQWWR
                                                                        GHFHLYHQRWVRPXFKDVWRWKHIDFWLWVHOIEXWUDWKHUDVWR
   $OVRDVQRWHGDERYHSODLQWLIIVVWDWHWKDWGHIHQGDQWVVROG           WKHH[WHQWRIKLVLQIRUPDWLRQ
QHDUO\DTXDUWHUPLOOLRQVKDUHVIURPsXO\WR6HSWHPEHU
\LHOGLQJSURFHHGVRIPLOOLRQ'HIHQGDQW5HHGDORQHVROG         3# $$#  .%   7 #%$  WK HG 
PRUHWKDQPLOOLRQLQVWRFNLQPLG6HSWHPEHUDIWHUSDVVDJH         FLWDWLRQV RPLWWHG  2Q WKH EDVLV RI WKHVH DOOHJDWLRQV ZH
RI WKH %XGJHW $FW EXW EHIRUH 9HQFRU UHOHDVHG LWV UHYLVHG     FRQFOXGHWKDWSODLQWLIIVKDYHSURGXFHGDVWURQJLQIHUHQFHWKDW
HDUQLQJVHVWLPDWHV7KLVDPRXQWZDVVXEVWDQWLDOHQRXJKWR            GHIHQGDQWV SHUVLVWHG LQ PDNLQJ IDYRUDEOH SUHGLFWLRQV DQG
DWWUDFW WKH DWWHQWLRQ RI WKH ILQDQFLDO PHGLD  9HQFRU WROG   IHLJQLQJLJQRUDQFHRIWKH%XGJHW$FWZLWKDFWXDONQRZOHGJH
LQTXLULQJDQDO\VWVWKDW5HHGZDVVHOOLQJVWRFNVLPSO\WRUHWLUH       WKDWWKHLUVWDWHPHQWVZHUHPLVOHDGLQJ
DSHUVRQDOORDQ:KHWKHUWKLVH[SODQDWLRQLVDFFXUDWHLVQRW
DQLVVXHZHFDQGHFLGHRQWKHSOHDGLQJV6HH0D\HUY0\ORG             1RW ,GHQWLILHG DV )RUZDUG/RRNLQJ  $EVHQFH RI
)GWK&LUH[SODLQLQJLQUHYHUVLQJ           0HDQLQJIXO &DXWLRQDU\6WDWHPHQWVn7KRXJKGHIHQGDQWV
GLVPLVVDORIDVHFXULWLHVIUDXGFRPSODLQWDOOHJLQJGHFHSWLYH         GHVFULEHGWKHLUSUHGLFWLRQVDVmIRUZDUGORRNLQJlLQWKH
FRUSRUDWH VWDWHPHQWV m>Z@KHWKHU WKH VWDWHPHQWV KHUH ZHUH       .RWKHU6(&ILOLQJVDQGSUHVVUHOHDVHVGXULQJWKHFODVV
WUXH RU IDOVH LV QRW DQ LVVXH WR EH GHFLGHG XQGHU 5XOH     SHULRG ODFNHG WKLV GHVLJQDWLRQ  0RUHRYHU WKH ILUVW DQG
El  :H REVHUYH RQO\ WKDW WKLUG SDUW\ DQDO\VWV       VHFRQGTXDUWHU 4 ILOLQJV FRQWDLQHG RQO\ D JHQHULF
UHJDUGHG5HHGjVVDOHVDVGLVSURSRUWLRQDWH                            GLVFODLPHURINQRZOHGJHDERXWmZKHWKHUVXFKSURSRVDOVZLOO
                                                                      EHDGRSWHGRULIDGRSWHGZKDWHIIHFWLIDQ\VXFKSURSRVDOV
  7KHVH DOOHJDWLRQV VXJJHVW WKDW LW ZDV REYLRXV WKDW WKH      ZRXOGKDYHRQLWVEXVLQHVVl7KHVDIHKDUERUSURYLVLRQLQ
LPSDFW RI WKH %DODQFHG %XGJHW $FW ZRXOG EH DGYHUVH WR        FRQWUDVWUHTXLUHVWKDWGHIHQGDQWVLGHQWLI\mLPSRUWDQWIDFWRUV
9HQFRU EHIRUH 2FWREHU    $ KHDOWK FDUH H[HFXWLYH     WKDWFRXOGFDXVHDFWXDOUHVXOWVWRGLIIHUPDWHULDOO\IURPWKRVH
ZKRVH RUJDQL]DWLRQ UHSUHVHQWHG 9HQFRU WHVWLILHG EHIRUH           LQ WKH IRUZDUGORRNLQJ VWDWHPHQWVl   86&  X
&RQJUHVVDERXWKLVFRQFHUQVLQ$SULO7KHWLPLQJRI9HQFRUjV         F$L:KLOHWKH&RQIHUHQFH&RPPLWWHHH[SODLQHGWKDW
