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

(/(&7521,& &,7$7,21  )(' $SS 3 WK &LU )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB

&(175$/ 67$7(6 ; 6287+($67 6287+:(67  $5($6 3(16,21 )81'DQ   1RV  HPSOR\HHZHOIDUHEHQHILW  SODQHWDO !  3ODLQWLIIV   Y   s2$11 0 +2:(//   'HIHQGDQW$SSHOOHH  &URVV$SSHOODQW   6+(5</ / 785&2:  .(11(7+ 1 +2:(// '$9,'  % +2:(//   'HIHQGDQWV$SSHOODQWV  &URVV$SSHOOHHV  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW7ROHGR 1R n'DYLG$.DW]'LVWULFWsXGJH $UJXHG 0DUFK 'HFLGHGDQG)LOHG 6HSWHPEHU

  &HQWUDO6WDWHV3HQVLRQ 1RV  )XQGY+RZHOOHWDO

%HIRUH s21(6%$7&+(/'(5DQG&/$<&LUFXLW sXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8(' 'HQQLV36WURQJ6\OYDQLD2KLRIRU$SSHOODQWV sRKQ%)LVKHU02//(1.$03 ),6+(57ROHGR2KLR IRU$SSHOOHH21%5,() 'HQQLV36WURQJ6\OYDQLD2KLR IRU$SSHOODQWVsRKQ%)LVKHU02//(1.$03 ),6+(5 7ROHGR2KLRIRU$SSHOOHH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB $/,&( 0 %$7&+(/'(5 &LUFXLW sXGJH  sR$QQ DQG .HQQHWK+RZHOOZHUHPDUULHGRQ$SULO .HQQHWK KDG WKUHH FKLOGUHQ E\ D SULRU PDUULDJH o 6KHU\O 1HLO DQG 'DYLG  $W WKH WLPH RI KLV GHDWK .HQQHWK ZDV FRYHUHG E\ WKUHHOLIHLQVXUDQFHSROLFLHV7ZRRIWKHSROLFLHVLVVXHGE\ SULYDWHLQVXUHUVDUHQRWJRYHUQHGE\(5,6$7KHUHPDLQLQJ SROLF\oWKH&HQWUDO6WDWHV6RXWKHDVWDQG6RXWKZHVW$UHDV +HDOWK :HOIDUH)XQG m&HQWUDO6WDWHVl SROLF\oLVSDUWRI DQHPSOR\HHEHQHILWZHOIDUHSODQJRYHUQHGE\(5,6$ 2Q'HFHPEHU sR$QQILOHGIRUGLYRUFHLQ0RQURH 0LFKLJDQ7KHGRPHVWLFUHODWLRQVFRXUWLQ0LFKLJDQHQWHUHG DQRUGHURQsDQXDU\ SURKLELWLQJERWKsR$QQDQG .HQQHWKIURPmDFWLQJWRGLVSRVHRIWRGHVWUR\VHOOWUDQVIHU RUFRQFHDODQ\RIWKHPDULWDODVVHWVRIWKHSDUWLHVlGXULQJWKH

 1DPHG SDUW\ .HQQHWK 1 +RZHOO UHIHUV WR KLPVHOI DV 1HLO 7R DYRLG FRQIXVLRQ EHWZHHQ WKH GHFHDVHG .HQQHWK +RZHOO DQG WKH .HQQHWK 1 +RZHOO ZKR LV D SDUW\ WR WKLV DSSHDO .HQQHWK +RZHOO WKH IDWKHU ZLOO EH UHIHUUHG WR DV .HQQHWK DQG .HQQHWK +RZHOO WKH VRQ ZLOO EH UHIHUUHG WR DV 1HLO  &HQWUDO6WDWHV3HQVLRQ 1RV  1RV  &HQWUDO6WDWHV3HQVLRQ  )XQGY+RZHOOHWDO )XQGY+RZHOOHWDO

RU QRW VKH UHFHLYHV WKH SURFHHGV IURP KLV OLIH LQVXUDQFH SHQGHQF\RIWKHGLYRUFHSURFHHGLQJV1RWZLWKVWDQGLQJWKLV SROLF\6HH6HDUVY*LGGD\1:  0LFK  RUGHU .HQQHWK FKDQJHG WKH EHQHILFLDU\ GHVLJQDWLRQ RQ DOO WKUHH OLIH LQVXUDQFH SROLFLHV IURP sR$QQ WR KLV FKLOGUHQ &21&/86,21 .HQQHWKGLHGRQ)HEUXDU\ ZKLOHWKHGLYRUFHZDV VWLOO SHQGLQJ LQ 0LFKLJDQ  +LV GHDWK PRRWHG WKH SHQGLQJ )RUWKHIRUHJRLQJUHDVRQVZH$)),50WKHMXGJPHQWRIWKH GLYRUFH SURFHHGLQJ OHDYLQJ .HQQHWKjV PDULWDO VWDWXV GLVWULFW FRXUW DZDUGLQJ WKH SURFHHGV RI WKH QRQ(5,6$ XQFKDQJHG SROLFLHVWRsR$QQ+RZHOODQGDVVHVVLQJWKHEXULDOFRVWVWR sR$QQ+RZHOO+RZHYHUZH5(0$1'WKHFDVHIRUIXUWKHU $IWHU .HQQHWKjV GHDWK LW ZDV GLVFRYHUHG WKDW WKH GHDWK FRQVLGHUDWLRQRIZKHWKHUWKHHTXLWLHVDUHVXFKWKDWWKHGLVWULFW FHUWLILFDWH HUURQHRXVO\ LQGLFDWHG KLV PDULWDO VWDWXV DV FRXUWVKRXOGLPSRVHDFRQVWUXFWLYHWUXVWRQWKH(5,6$SODQ mGLYRUFHGl7KHPLVWDNHZDVXOWLPDWHO\FRUUHFWHGEXWQRW SURFHHGVIRUWKHEHQHILWRIsR$QQ+RZHOO EHIRUH .HQQHWKj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jSD\PHQWRI WKHDPRXQWRI WKH LQVXUDQFH EHQHILWV DW LVVXH XQGHU WKH (5,6$ SODQ  DQG GLVPLVVHG&HQWUDO6WDWHVDVDSDUW\8SRQWKHGLVPLVVDORI &HQWUDO 6WDWHV WKH FDVH ZDV WUDQVIHUUHG WR WKH 1RUWKHUQ 'LVWULFWRI2KLR:HVWHUQ'LYLVLRQSXUVXDQWWRWKHDJUHHPHQW

 :H KDYH H[SOLFLWO\ KHOG WKDW WKH IHGHUDO FRXUWV KDYH MXULVGLFWLRQ RYHU DQ DFWLRQ IRU LQWHUSOHDGHU WR GHWHUPLQH WKH SURSHU EHQHILFLDU\ RI EHQHILWV SD\DEOH IURP DQ (5,6$ HPSOR\HH ZHOIDUH SODQ 6HH 0HWURSROLWDQ /LIH ,QV &R Y 0DUVK  )G   WK &LU   m,Q VXP 0HW /LIH KDV SURSHUO\ DVVHUWHG D FDXVH RI DFWLRQ SXUVXDQW WR  86& † D  % LL  DQG WKLV DFWLRQ DULVHV XQGHU IHGHUDO ODZ 7KHUHIRUH LW GRHV QRW PDWWHU ZKHWKHU DSSHOODQWV KDYH VWDQGLQJ WR DVVHUW DQ (5,6$ FDXVH RI DFWLRQl  &HQWUDO6WDWHV3HQVLRQ 1RV  1RV  &HQWUDO6WDWHV3HQVLRQ  )XQGY+RZHOOHWDO )XQGY+RZHOOHWDO

RI WKH UHPDLQLQJ SDUWLHV sR$QQ +RZHOO DQG .HQQHWK ,Q WKLV FDVH WKH sR$QQ +RZHOO VHHNV WR LPSRVH D +RZHOOjVFKLOGUHQ FRQVWUXFWLYH WUXVW RQ .HQQHWK +RZHOOjV (5,6$ ZHOIDUH EHQHILW SODQ EHQHILWV  .HQQHWK +RZHOO FKDQJHG WKH $IWHUWKHFDVHZDVWUDQVIHUUHGWR2KLRsR$QQILOHGDFURVV EHQHILFLDU\ GHVLJQDWLRQ LQ DFFRUGDQFH ZLWK WKH SODQ FODLPDJDLQVWWKHFKLOGUHQDVVHUWLQJWKDWWKHSURFHHGVIURPWKH GRFXPHQWV  2Q WKLV LVVXH RXU SUHFHGHQWV DUH FOHDU o WKH WZRQRQ(5,6$OLIHLQVXUDQFHSROLFLHVKDGEHHQLPSURSHUO\ EHQHILFLDU\ FDUG FRQWUROV WKH SHUVRQ WR ZKRP WKH SODQ SDLGWRWKHFKLOGUHQ2Q$XJXVW  s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jVRSLQLRQGLGQRWIXOO\GLVFXVVWKHHTXLWLHVDPRQJWKH HQWLWOHGWRWKHSURFHHGVIURPWKH(5,6$SROLF\%HFDXVHWKH SDUWLHVEHFDXVHLWDSSDUHQWO\EHOLHYHGWKDW(5,6$SUHFOXGHG FKLOGUHQ KDG DOUHDG\ UHFHLYHG WKH SURFHHGV IURP WKH QRQ LW IURP LPSRVLQJ D FRQVWUXFWLYH WUXVW  :H WKHUHIRUH (5,6$ SROLFLHV DQG EHFDXVH WKDW DPRXQW H[FHHGHG WKH 5(0$1'WKLVFDVHIRUWKHGLVWULFWFRXUWjVFRQVLGHUDWLRQRI WKHFKLOGUHQZHUHHQWLWOHGWRUHFHLYHIURPWKH(5,6$ WKHHTXLWLHVXQGHUDSSOLFDEOH0LFKLJDQVWDWHODZ+RZHYHU SROLF\WKHGLVWULFWFRXUWRUGHUHGWKDW   WKHFOHUNRIFRXUWV LQ VR GRLQJ ZH H[SUHVV QR RSLQLRQ ZKDWVRHYHU DV WR KRZ SD\ sR$QQ +RZHOO WKH  WKDW KDG EHHQ SUHYLRXVO\ WKRVHHTXLWLHVOLH GHSRVLWHGE\&HQWUDO6WDWHVDQG  WKHFKLOGUHQSD\sR$QQ WKHGLIIHUHQFHHDFKFKLOGEHLQJUHVSRQVLEOHIRUKLVRUKHU ,,, 7KH%XULDO&RVWV VKDUH sR$QQ+RZHOOFRQWHQGVWKDWVKHZDVZURQJO\DVVHVVHGWKH %RWKsR$QQDQGWKHFKLOGUHQVRXJKWUHFRQVLGHUDWLRQRIWKH EXULDODQGIXQHUDOFRVWVWKDWWKHFKLOGUHQSDLGRQWKHLUIDWKHUjV GLVWULFW FRXUWjV GHFLVLRQ DV WR WKHLU UHVSHFWLYH ULJKWV WR WKH EHKDOIsR$QQDUJXHVWKDWVKHVKRXOGEHDVVHVVHGWKHIXQHUDO LQVXUDQFHSURFHHGV,QDGGLWLRQWKHFKLOGUHQVRXJKWWRKDYH FRVWV RQO\ LI VKH LV DZDUGHG WKH SURFHHGV IURP DOO WKUHH WKH GLVWULFW FRXUW FUHGLW WKHP ZLWK KDYLQJ SDLG IRU WKH SROLFLHV  7KLV DUJXPHQW LV ZKROO\ ZLWKRXW PHULW  sR$QQ GHFHGHQWjVEXULDOH[SHQVHVDQGWRUHGXFHWKHVXPSD\DEOHWR YLJRURXVO\DVVHUWVKHUVWDWXVDV.HQQHWKjVZLIHWRFODLPWKH sR$QQ E\ WKDW DPRXQW  7KH GLVWULFW FRXUW DJUHHG ZLWK WKH PDULWDOSURSHUW\DVDUHVXOWRIKLVGHDWK$V.HQQHWKjVZLIH FKLOGUHQDQGDGMXVWHGLWVRUGHURQsXO\ $OORWKHU s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jV UXOH EXULDO H[SHQVHV SDLG E\ WKH FKLOGUHQ IRU .HQQHWKjV EXULDO WRWDOHG UXQV DIRXO RI RXU EULJKW OLQH UXOH WKDW WKH QDPH RQ WKH EHQHILFLDU\ FDUG  8SRQ DVVLJQLQJ WKH EXULDO H[SHQVHV WR sR$QQ WKH GLVWULFW FRQWUROV WKH SD\PHQW RI EHQHILWV DQG ZH H[SUHVVO\ UHMHFW DQ\ UHDGLQJ RI FRXUW RUGHUHG HDFK RI WKH FKLOGUHQ WR SD\ sR$QQ WKH IROORZLQJ DPRXQWV o WKLV RSLQLRQ WKDW ZRXOG HURGH WKH UXOH ZH VHW IRUWK LQ 0F0LOODQ Y 3DUURWW 6KHU\O   1HLO   DQG 'DYLG    )G  WK &LU   DQG LWV SURJHQ\  &HQWUDO6WDWHV3HQVLRQ 1RV  1RV  &HQWUDO6WDWHV3HQVLRQ  )XQGY+RZHOOHWDO )XQGY+RZHOOHWDO

JDUQLVKPHQWSURFHHGLQJV6HH0DFNH\Y/DQLHU&ROOHFWLRQ $1$/<6,6 $JHQF\ DQG 6HUY ,QF  86     m   &RQJUHVV GLG QRW LQWHQG WR IRUELG WKH XVH RI VWDWHODZ :HUHYLHZDGLVWULFWFRXUWjVJUDQWRIVXPPDU\MXGJPHQWGH PHFKDQLVPVRIH[HFXWLQJMXGJPHQWVDJDLQVW(5,6$ZHOIDUH QRYR6HH$OOHQY0LFKLJDQ'HSjWRI&RUUHFWLRQV)G EHQHILW SODQV HYHQ ZKHQ WKRVH PHFKDQLVPV SUHYHQW SODQ   WK&LU 6XPPDU\MXGJPHQWLVSURSHULImWKH SDUWLFLSDQWV IURP UHFHLYLQJ WKHLU EHQHILWVl   :KHQ WKH SOHDGLQJV GHSRVLWLRQV DQVZHUV WR LQWHUURJDWRULHV DQG 6XSUHPH&RXUWFRQVLGHUHGWKHSURSULHW\RIDOORZLQJDVWDWHWR DGPLVVLRQVRQILOHWRJHWKHUZLWKWKHDIILGDYLWVLIDQ\VKRZ LPSRVH D FRQVWUXFWLYH WUXVW XSRQ (5,6$SODQ EHQHILWV WKH WKDWWKHUHLVQRJHQXLQHLVVXHDVWRDQ\PDWHULDOIDFWDQGWKDW &RXUWVWDWHGm:HVHHQRPHDQLQJIXOGLVWLQFWLRQEHWZHHQD WKHPRYLQJSDUW\LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURIODZl ZULW RI JDUQLVKPHQW DQG WKH FRQVWUXFWLYH WUXVW UHPHG\ )(' 5 &,9 3  F :KHQUHYLHZLQJDPRWLRQIRUVXPPDU\ LPSRVHGLQWKLVFDVHl6HH*XLGU\Y6KHHW0HWDO:RUNHUV MXGJPHQWWKHHYLGHQFHDOOIDFWVDQGDQ\LQIHUHQFHVWKDWPD\ 1DWjO3HQVLRQ)XQG 86   +RZHYHUWKH EH GUDZQ IURP WKH IDFWV PXVW EH YLHZHG LQ WKH OLJKW PRVW +LJK&RXUWGLVWLQJXLVKHGEHWZHHQ(5,6$j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jO3HQVLRQ)XQG )G WK .HQQHWKjVFKDQJHLQEHQHILFLDU\RQWKRVHQRQ(5,6$SROLFLHV &LU    HQ EDQF GHFLVLRQ DIWHU UHPDQG IURP WKH 86 YLRODWHGVWDWHODZDQGZKDWHIIHFWVXFKYLRODWLRQZRXOGKDYH 6XSUHPH&RXUW*XLGU\ 86DW 7KH7HQWK&LUFXLW XQGHUDSSOLFDEOHVWDWHODZ7KH+RZHOOjVGLYRUFHZDVEHLQJ UHFRJQL]HG WKDW WKH DQWLDOLHQDWLRQ SURYLVLRQ RI (5,6$ DGMXGLFDWHGLQWKH0LFKLJDQVWDWHFRXUWV7KXVWKHHIIHFWRI SUHFOXGHG WKH LPSRVLWLRQ RI D FRQVWUXFWLYH WUXVW EHIRUH .HQQHWKjVIDLOXUHWRFRPSO\ZLWKWKHVWDWHFRXUWLQMXQFWLRQ GLVWULEXWLRQ RI EHQHILWV WR WKH EHQHILFLDU\ EXW LW KHOG WKDW PXVWEHDQDO\]HGXQGHU0LFKLJDQODZ QRWKLQJLQWKHOHJLVODWLYHVFKHPHSUHYHQWHGWKHLPSRVLWLRQRI D FRQVWUXFWLYH WUXVW DIWHU WKH EHQHILWV ZHUH SDLG WR WKH :H KDYH SUHYLRXVO\ FRQVLGHUHG WKLV SUHFLVH LVVXH XQGHU EHQHILFLDU\RIWKHSHQVLRQEHQHILWV6HHLGDW:HILQG 0LFKLJDQODZ6HH&DQGOHUY'RQDOGVRQ)G WK WKH7HQWK&LUFXLWjVUHDVRQLQJSHUVXDVLYH7RGD\ZHKROGWKDW &LU  ,Q&DQGOHUDQLQWHUSOHDGHUDFWLRQZDVEURXJKWWR RQFHWKHEHQHILWVRIDQ(5,6$HPSOR\HHZHOIDUHEHQHILWSODQ GHWHUPLQHZKHWKHUWKHSURFHHGVRIDQRQ(5,6$LQVXUDQFH KDYH EHHQ GLVWULEXWHG DFFRUGLQJ WR WKH SODQ GRFXPHQWV SROLF\VKRXOGEHSDLGWRWKHLQVXUHGjVZLIHRUPRWKHU7KH (5,6$GRHVQRWSUHHPSWWKHLPSRVLWLRQRIDFRQVWUXFWLYH LQVXUHGjVZLIHKDGSUHYLRXVO\EHHQWKHQDPHGEHQHILFLDU\RQ WUXVWRQWKRVHEHQHILWV WKHLQVXUDQFHSROLF\DWLVVXH7KHLQVXUHGILOHGIRUGLYRUFHRQ LQ 2DNODQG &RXQW\ 0LFKLJDQ DQG WKUHH PRQWKV ODWHU WKH  &HQWUDO6WDWHV3HQVLRQ 1RV  1RV  &HQWUDO6WDWHV3HQVLRQ  )XQGY+RZHOOHWDO )XQGY+RZHOOHWDO

VWDWHFRXUWLVVXHGDQLQMXQFWLRQDJDLQVWWKHLQVXUHGRUGHULQJ QDPLQJWKHSDUWLHVWKH0LFKLJDQFRXUWRUGHUGLGQRWSURYLGH KLP WR GHVLVW DQG UHIUDLQ IURP mVHOOLQJ DVVLJQLQJ DQ\RIWKHUHTXLUHGLQIRUPDWLRQHJ.HQQHWKjVDGGUHVVWKH HQFXPEHULQJK\SRWKHFDWLQJPRUWJDJLQJFRQFHDOLQJJLYLQJ DPRXQWRUSHUFHQWDJHRIWKHSDUWLFLSDQWjVEHQHILWVWREHSDLG DZD\RULQDQ\PDQQHUGLVSRVLQJRIDQ\RIWKHSURSHUWLHVDQG E\WKHSODQWKHQXPEHURISD\PHQWVRUGXUDWLRQDOSHULRGRI DVVHWVRIHLWKHURUERWKRIWKHSDUWLHVKHUHWRl,GDW,Q WKHRUGHURUWKHQDPHRIWKHSODQ7KLVLQMXQFWLRQQHLWKHU FRQWHPSW RI WKH LQMXQFWLRQ WKH LQVXUHG FKDQJHG WKH OLWHUDOO\QRUVXEVWDQWLDOO\FRPSOLHGZLWKWKHUHTXLUHPHQWVVHW EHQHILFLDU\ GHVLJQDWLRQ RQ WKH SROLF\ IURP KLV ZLIH WR KLV IRUWKLQ6HFWLRQ PRWKHU%HIRUHWKHFRQFOXVLRQRIGLYRUFHSURFHHGLQJVWKH LQVXUHGGLHG 7KHUHIRUH WKH GLVWULFW FRXUW FRUUHFWO\ FRQFOXGHG WKDW WKH GRPHVWLFUHODWLRQVFRXUWjVRUGHUZDVSUHHPSWHGE\(5,6$ 7KHGLVWULFWFRXUWKHOGWKDWWKHFKDQJHLQEHQHILFLDU\ZDV %HFDXVH.HQQHWKjVEHQHILFLDU\GHVLJQDWLRQFRPSOLHGZLWKWKH YDOLG DQG DZDUGHG WKH EHQHILWV WR WKH GHFHGHQWjV PRWKHU UHTXLUHPHQWVLQWKH&HQWUDO6WDWHVjSODQGRFXPHQWV&HQWUDO EHFDXVH WKH ZLIH KDG RQO\ D FRQWLQJHQW LQWHUHVW LQ WKH 6WDWHVj DGPLQLVWUDWRU ZDV REOLJDWHG WR SD\ WKH LQVXUDQFH SURFHHGV  6HH LG DW   :H UHYHUVHG DQG UHPDQGHG WKH SURFHHGVWRWKHQDPHGEHQHILFLDULHVo.HQQHWKjVFKLOGUHQ FDVHILQGLQJWKDWm>X@QGHUWKH0LFKLJDQVWDWXWHV>@WKHSROLF\ KHUHLQLQYROYHGZDVSDUWRIWKHSURSHUW\RIWKHKXVEDQGWKDW 5HVROYLQJ&HQWUDO6WDWHVjFODLPGRHVQRWHQGRXULQTXLU\ ZDV WR EH FRQVLGHUHG E\ WKH &RXUW LQ PDNLQJ VXFK ILQDO KRZHYHU  sR$QQ +RZHOO DUJXHV WKDW EHFDXVH .HQQHWK RUGHUl,GDW%HFDXVHWKHDSSDUHQWSXUSRVHRIWKHVWDWH YLRODWHG WKH 0LFKLJDQ GRPHVWLF UHODWLRQV FRXUW RUGHU KLV FRXUWRUGHUZDVWRPDLQWDLQWKHVWDWXVTXREHWZHHQWKHSDUWLHV ZURQJGRLQJ HQWLWOHV KHU WR WKH HTXLWDEOH UHPHG\ RI D XQWLO D ILQDO DGMXGLFDWLRQ RI WKH SURSHUW\ GLYLVLRQ FRXOG EH FRQVWUXFWLYH WUXVW LPSRVHG XSRQ WKH  (5,6$ SODQ FRPSOHWHGZHFRQFOXGHGm,IWKHFKDQJHLQEHQHILFLDULHVKDG SURFHHGV QRW EHHQ PDGH WKH ZLIH ZRXOG KDYH EHHQ HQWLWOHG WR WKH SURFHHGVRIWKHSROLF\XSRQWKHGHDWKRIWKHLQVXUHG(TXLW\ ,WLVFOHDUWKDWWKHODZRIWKLV&LUFXLWUHTXLUHVWKH(5,6$ FRQVLGHUVWKDWDVGRQHZKLFKRXJKWWREHGRQHl,G&DQGOHU SODQ DGPLQLVWUDWRU WR SD\ RXW SODQ SURFHHGV LQ DFFRUGDQFH LVXQGLVWLQJXLVKDEOHRQLWVIDFWVIURPWKHFDVHDWEDU7KXV ZLWK WKH (5,6$ SODQ GRFXPHQWV  +RZHYHU WKHUH LV QR XQOHVV0LFKLJDQODZKDVFKDQJHGVLQFH  &DQGOHUZRXOG SUHFHGHQWELQGLQJRQWKLV&RXUWRQWKHLVVXHRIZKHWKHURQFH LQGLFDWH WKDW .HQQHWKj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jVGHFLVLRQ,Q WKH6XSUHPH 0HWURSROLWDQ/LIH,QV&R )6XSS ('0LFK &RXUWRI0LFKLJDQFRQVLGHUHGWKHLVVXH6HH:HEEY:HEE    GLVWULFWFRXUWGHFLVLRQKROGLQJWKDWmVWDWHODZFODLP  1:G  0LFK     8QGHU IDFWV VXEVWDQWLDOO\ EDVHG XSRQ DQ DOOHJHG FRQVWUXFWLYH WUXVW LV SUHHPSWHG E\ VLPLODUWRWKRVHSUHVHQWHGLQWKLVDSSHDOWKHWULDOFRXUWIRXQG (5,6$l  WKDW WKH KXVEDQG ZKR KDG FKDQJHG KLV OLIH LQVXUDQFH EHQHILFLDU\ DQG WKHQ GLHG EHIRUH WKH GLYRUFH KDG EHFRPH 7KH866XSUHPH&RXUWKHOGWKDWWKHEHQHILWVLQDQ(5,6$ ILQDO KDG YLRODWHG WKH LQMXQFWLRQ WKDW UHVWUDLQHG KLP IURP HPSOR\HH ZHOIDUH EHQHILW SODQ FDQ EH VXEMHFW WR VWDWH  &HQWUDO6WDWHV3HQVLRQ 1RV  1RV  &HQWUDO6WDWHV3HQVLRQ  )XQGY+RZHOOHWDO )XQGY+RZHOOHWDO

,Q   ZH UHFRJQL]HG DQ H[FHSWLRQ WR (5,6$jV GLVSRVLQJRISURSHUW\7KHWULDOFRXUWRUGHUHGDUHWXUQWRWKH SUHHPSWLRQRIVWDWHGLYRUFHGHFUHHVZKHQZHKHOGWKDWm VWDWXVTXRDQGWKH6XSUHPH&RXUWRI0LFKLJDQDIILUPHG6HH 86& † E   H[FHSWV 4'52V >TXDOLILHG GRPHVWLF LGDW UHODWLRQV RUGHUV@ IURP (5,6$ SUHHPSWLRQ ZLWK UHVSHFW WR ZHOIDUHSODQVDVZHOODVSHQVLRQSODQVl0HWURSROLWDQ/LIH ,Q  D0LFKLJDQDSSHOODWHFRXUWFRQVLGHUHGWKHLVVXH ,QV&RY0DUVK )G WK&LU  VHHDOVR DJDLQ6HH,UYLQY,UYLQ1:G  0LFK&W$SS 0HWURSROLWDQ/LIH,QV&RY3X]MDN1R  :/   $JDLQXQGHUIDFWVVXEVWDQWLDOO\VLPLODUWRWKRVHEHIRUH  WK&LU$SU    IROORZLQJ0DUVK 7KHUHIRUH XVLQWKLVDSSHDOWKHKXVEDQGFKDQJHGWKHEHQHILFLDU\RQKLV EHIRUHFRQFOXGLQJWKDWWKH0LFKLJDQFRXUWjVUHVWUDLQLQJRUGHU OLIHLQVXUDQFHSROLF\LQYLRODWLRQRIDUHVWUDLQLQJRUGHUDQG ZDVSUHHPSWHGZHPXVWFRQVLGHUZKHWKHUWKHRUGHUVDWLVILHV GLHG EHIRUH WKH GLYRUFH KDG EHFRPH ILQDO  ,Q WKLV FDVH WKHUHTXLUHPHQWVRID4'52 KRZHYHU WKH WULDO FRXUW GHFOLQHG WR LPSRVH D FRQVWUXFWLYH WUXVW LQ IDYRU RI WKH HVWUDQJHG ZLIH  6HH LG DW   7KH 7KHUHTXLUHPHQWVIRUDVWDWHFRXUWRUGHUWREHWUHDWHGDVD UHYLHZLQJFRXUWFRQILUPHGWKDWXQGHU:HEEWKHWULDOFRXUW 4'52DUHVHWIRUWKLQ 86&† G  KDG WKH SRZHU WR RUGHU D UHWXUQ WR WKH VWDWXV TXR 6HH LG +RZHYHU WKH UHYLHZLQJ FRXUW IRXQG QR HUURU LQ WKH WULDO % LL  WKH WHUP GRPHVWLF UHODWLRQV RUGHU PHDQV DQ\ FRXUWjVHOHFWLRQQRWWRRUGHUDFRQVWUXFWLYHWUXVWVWDWLQJm,Q MXGJPHQW GHFUHH RU RUGHU LQFOXGLQJ DSSURYDO RI D DOO OLNHOLKRRG VKH >WKH HVWUDQJHG ZLIH@ ZDV SXW LQ D EHWWHU SURSHUW\VHWWOHPHQWDJUHHPHQW ZKLFKn , UHODWHVWRWKH SRVLWLRQ WKDQ VKH ZRXOG KDYH HQMR\HG KDG >WKH KXVEDQG@ SURYLVLRQRIFKLOGVXSSRUWDOLPRQ\SD\PHQWVRUPDULWDO REH\HG WKH LQMXQFWLYH RUGHU DQG KDG WKH GLYRUFH DFWLRQ SURSHUW\ULJKWVWRDVSRXVHIRUPHUVSRXVHFKLOGRURWKHU SURFHHGHGWRMXGJPHQWl,GDW  GHSHQGHQWRIDSDUWLFLSDQWDQG ,, LVPDGHSXUVXDQWWRD 6WDWH GRPHVWLF UHODWLRQV ODZ LQFOXGLQJ D FRPPXQLW\ 7KHFKLOGUHQLQWKLVDSSHDODUJXHVWUHQXRXVO\WKDWEHFDXVH SURSHUW\ODZ  sR$QQDJUHHVWKDWVKHUHFHLYHG RIWKHPDULWDOSURSHUW\DV DUHVXOWRI.HQQHWKjVGHDWKWKHGLVWULFWFRXUWZDVIRUHFORVHG & $GRPHVWLFUHODWLRQVRUGHUPHHWVWKHUHTXLUHPHQWVRI E\,UYLQIURPLPSRVLQJDFRQVWUXFWLYHWUXVWLQsR$QQjVIDYRU WKLVVXESDUDJUDSKRQO\LIVXFKRUGHUFOHDUO\VSHFLILHVn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m$ FRQVWUXFWLYH WUXVW LV D UHPHGLDO QXPEHU RI SD\PHQWV RU SHULRG WR ZKLFK VXFK RUGHU HTXLWDEOHGHYLFHHPSOR\HGWRSUHYHQWLQMXVWLFHLQDSDUWLFXODU DSSOLHVDQG LY HDFKSODQWRZKLFKVXFKRUGHUDSSOLHV FDVH$FRXUWRIHTXLW\ZLOOLPSRVHDFRQVWUXFWLYHWUXVWRQO\ LI FRQVFLHQFH GHPDQGV LWl FLWDWLRQV RPLWWHG   7KXV WKH  86&† G   FKLOGUHQjV UHOLDQFH XSRQ RQH IDFWRU o WKDW sR$QQ UHFHLYHG RIWKHPDULWDOHVWDWHoLVQRWGLVSRVLWLYHRIWKHPDWWHU $V WKH GLVWULFW FRXUW SURSHUO\ FRQFOXGHG WKH LQMXQFWLRQ +HUHWKHGLVWULFWFRXUWFRQVLGHUHGWKHHQWLUHHTXLWLHVRIWKH HQWHUHGE\WKHGRPHVWLFUHODWLRQVFRXUWGLGQRWFRPSO\ZLWK FDVHDQGFRQFOXGHGLWZDVDSSURSULDWHWRDZDUGsR$QQWKH WKH UHTXLUHPHQWV RI 6HFWLRQ  G  &   2WKHU WKDQ  &HQWUDO6WDWHV3HQVLRQ 1RV  1RV  &HQWUDO6WDWHV3HQVLRQ )XQGY+RZHOOHWDO )XQGY+RZHOOHWDO

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jVHPSOR\HU7RDQVZHUWKLV EHQHILFLDU\FDUG,QHDFKFDVHZHKHOGWKDWWKH(5,6$SODQ TXHVWLRQZHPXVWFRQVLGHUWKHSUHHPSWLYHUHDFKRI(5,6$ DGPLQLVWUDWRUPXVWSD\WKHH[VSRXVHWKHLQVXUDQFHSURFHHGV GHVSLWH WKH ZDLYHU LQ WKH GLYRUFH VHWWOHPHQW  8QGHU WKHVH 7KH(PSOR\HH5HWLUHPHQW,QFRPH6HFXULW\$FWRI LV FLUFXPVWDQFHVWKHODZRIWKLV&LUFXLWLVFOHDUoWKHEHQHILFLDU\ WKH SULQFLSDO IHGHUDO VWDWXWH WKDW JRYHUQV HPSOR\HH EHQHILW FDUG FRQWUROV ZKRP WKH SODQ DGPLQLVWUDWRU PXVW SD\ 6HH SODQV  (5,6$ SODQV IDOO JHQHUDOO\ LQWR WZR FDWHJRULHV  0F0LOODQ  )G DW  m7KLV FOHDU VWDWXWRU\ mHPSOR\HH SHQVLRQ EHQHILW SODQVl DQG mHPSOR\HH ZHOIDUH FRPPDQG WRJHWKHU ZLWK WKH SODQ SURYLVLRQV DQVZHU WKH EHQHILW SODQVl  6HH   86& †  7KH &HQWUDO 6WDWHV TXHVWLRQ  WKH GRFXPHQWV FRQWURO DQG WKRVH QDPH >WKH H[ LQVXUDQFHSROLF\LVDQHPSOR\HHEHQHILWZHOIDUHSODQWKDWLV VSRXVH@l JRYHUQHGE\(5,6$ 7KH IDFWV LQ WKLV FDVH DUH VRPHZKDW GLIIHUHQW  +HUH 7KHODZRI(5,6$H[SUHVVO\SUHHPSWVDOOVWDWHODZVZKLFK .HQQHWKjVDELOLW\WRFKDQJHWKHEHQHILFLDU\ZDVGLFWDWHGQRW mUHODWHWRlDQ(5,6$SODQ6HH 86&† D 7KLV E\ D ILQDO GLYRUFH GHFUHH EXW UDWKHU E\ D SUHOLPLQDU\ SUHHPSWLRQ DSSOLHV WR DOO VWDWH ODZ ZKHWKHU OHJLVODWLYH RU LQMXQFWLRQHQWHUHGWRPDLQWDLQWKHILQDQFLDOVWDWXVTXRXQWLO MXGJHPDGH  :H PXVW WKHUHIRUH GHWHUPLQH ZKHWKHU WKH WKHGLYRUFHSURFHHGLQJVFRXOGEHILQDOL]HG0RUHRYHUWKH 0LFKLJDQVWDWHFRXUWRUGHUUHVWUDLQLQJ.HQQHWKIURPFKDQJLQJ LQMXQFWLRQLQWKLVFDVHVRXJKWWRLQVXUHWKDWsR$QQZRXOGQRW KLVEHQHILFLDU\GHVLJQDWLRQLVSUHHPSWHGE\(5,6$ EHUHPRYHGDVEHQHILFLDU\RIWKHSROLF\DVRSSRVHGWRWKH FDVHVDERYHLQZKLFKWKHGLYRUFHGHFUHHDWWHPSWHGWRLQVXUH :H KDYH H[SOLFLWO\ DQG UHSHDWHGO\ KHOG WKDW VWDWH FRXUW WKDWWKHH[VSRXVHZRXOGEHUHPRYHGDV EHQHILFLDU\RIWKH GLYRUFHGHFUHHVSXUSRUWLQJWRDIIHFWWKHEHQHILWVSD\DEOHIURP SROLF\  ,Q RXU YLHZ WKHVH DUH GLVWLQFWLRQV ZLWKRXW D DQ(5,6$SODQDUHSUHHPSWHG6HH0F0LOODQY3DUURWW  GLIIHUHQFH7KHSRZHURIWKHGRPHVWLFUHODWLRQVFRXUWjVRUGHU )G WK&LU  0HWURSROLWDQ/LIH,QV&RY LVQRWDIIHFWHGE\ZKHWKHUWKHFRXUWKDVDIILUPDWLYHO\RUGHUHG 3UHVVOH\  )G  WK &LU    GHFHGHQW $OYLQ WKHLQVXUHGWRFKDQJHKLVEHQHILFLDU\RUSUHFOXGHGWKHLQVXUHG 3UHVVOH\ &]DUVNLY%RQN1R  :/ IURPPDNLQJVXFKDFKDQJH6LPLODUO\ZKHWKHUWKHRUGHULV LQWKHIRUPRIDILQDOGHFUHHRUDSUHOLPLQDU\LQMXQFWLRQLWLV VWLOODGRPHVWLFUHODWLRQVRUGHULVVXHGXQGHUWKHDXWKRULW\RI  WKHVWDWHFRXUW6HH 86&† G  % LL  GHILQLQJ :H GR QRW DJUHH ZLWK WKH GLVWULFW FRXUWjV YLHZ WKDW VLQFH ,UYLQ KDV ,UYLQ LQ LWV mGRPHVWLFUHODWLRQVRUGHUlWRLQFOXGHDQ\MXGJPHQWGHFUHHRU RUGHUUHODWLQJWRLQWHUDOLDWKHGLYLVLRQRIPDULWDOSURSHUW\  QRW EHHQ IROORZHG E\ 0LFKLJDQjV FRXUWV LW QHHG QRW FRQVLGHU DQDO\VLV RI WKLV FDVH ,Q WKH DEVHQFH RI DQ\ LQGLFDWLRQ WKDW WKH 0LFKLJDQ 6XSUHPH &RXUW ZRXOG DGRSW D UXOH FRQWUDU\ WR WKDW HQXQFLDWHG LQ ,UYLQ D 7KHTXHVWLRQWKHQEHFRPHVZKHWKHUWKHUHLVVRPHEDVLVXSRQ IHGHUDO FRXUW LV QRW IUHH WR LJQRUH WKH SURQRXQFHPHQW RI D VWDWH DSSHOODWH ZKLFKWRH[HPSWWKHRUGHUIURP(5,6$jVSUHHPSWLYHUHDFK FRXUW RQ PDWWHUV RI VWDWH ODZ 6HH .XUF]L Y (OL /LOO\ &R  )G   WK &LU