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

,QUH *(25*( ' 1(:32:(5 ; s5  'HEWRU   1RV   BBBBBBBBBBBBBBBBBBBBBBBB !   52%(57 .,7&+(1 +$55,(7  .,7&+(1 1(: 3523(57,(6  ,1&  0RYDQWV$SSHOOHHV   &URVV$SSHOODQWV   Y   s$0(6 : %2<'&KDSWHU  7UXVWHH   5HVSRQGHQW$SSHOODQW  &URVV$SSHOOHH  1

$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW*UDQG5DSLGV 1R n'RXJODV:+LOOPDQ'LVWULFWsXGJH $UJXHG sXQH 'HFLGHGDQG)LOHG 'HFHPEHU

  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

%HIRUH .(11('<%2**6DQG%$7&+(/'(5 HDFK RI WKRVH XQVHFXUHG FUHGLWRUV ZRXOG UXVK WR WKH &LUFXLWsXGJHV EDQNUXSWF\FRXUWWRDUJXHWKDWGHEWRUjVGHDOLQJVZLWKLWZHUH PRUH HJUHJLRXV WKDQ KLV GHDOLQJV ZLWK WKH RWKHUV DQG WKH BBBBBBBBBBBBBBBBB GHEWRUjV EDG FRQGXFW MXVWLILHG VSHFLDO WUHDWPHQW LH WKH LPSRVLWLRQRIDFRQVWUXFWLYHWUXVWE\WKHEDQNUXSWF\FRXUW,Q &2816(/ UH 2PHJDV VSRNH GHILQLWLYHO\ WR TXDVK VXFK SRVWSHWLWLRQ VFUDPEOLQJE\FUHGLWRUVSXVKLQJWRDSODFHDWWKHKHDGRIWKH $5*8('   5RQDOG $ 6FKXNQHFKW /(:,6 OLQH 6&+8.1(&+7 7UDYHUVH &LW\ 0LFKLJDQ IRU $SSHOODQW sRQDWKDQ 5 0RRWKDUW %2:(50$1 %2:'(1 :HUHFRJQL]HWKDW,QUH2PHJDVVSHDNVQHJDWLYHO\RIWKH 0227+$57 7UDYHUVH &LW\ 0LFKLJDQ IRU $SSHOOHHV UROH RI FRQVWUXFWLYH WUXVWV LQ EDQNUXSWF\ SURFHHGLQJV LQ 21 %5,()   5RQDOG $ 6FKXNQHFKW /(:,6 JHQHUDO+RZHYHUWKHFDVHEHIRUHXVWRGD\UDLVHVWZRGLVWLQFW 6&+8.1(&+7 7UDYHUVH &LW\ 0LFKLJDQ IRU $SSHOODQW LVVXHVQHLWKHURIZKLFKZDVEHIRUHWKH2PHJDVFRXUW ILUVW sRQDWKDQ 5 0RRWKDUW %2:(50$1 %2:'(1 ZKHWKHUWKHDXWRPDWLFVWD\PD\EHOLIWHGWRSHUPLWWKHYLFWLP 0227+$577UDYHUVH&LW\0LFKLJDQIRU$SSHOOHHV RIWKHGHEWRUjVWKHIWWRSXUVXHDVWDWHFRXUWDFWLRQLQLWLDWHG SUHSHWLWLRQWRWUDFHWKHVWROHQIXQGVDQGREWDLQDMXGJPHQW .(11('<sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK RI FRQVWUXFWLYH WUXVW  DQG VHFRQG ZKHWKHU LQ VXFK D %2**6 DQG %$7&+(/'(5 ss FRQFXUUHG H[FHSW DV WR FLUFXPVWDQFHWKHEDQNUXSWF\FRXUWPD\JLYHHIIHFWWRDVWDWH SDUW ,,,%  %$7&+(/'(5 s SS    GHOLYHUHG D FRXUWMXGJPHQWLPSRVLQJDFRQVWUXFWLYHWUXVW:HH[SUHVVQR VHSDUDWH RSLQLRQ LQ ZKLFK %2**6 s FRQFXUUHG ZKLFK RSLQLRQRQZKHWKHULQWKHHYHQWWKH.LWFKHQVZHUHVXFFHVVIXO FRQVWLWXWHVWKHRSLQLRQRIWKHFRXUWZLWKUHVSHFWWRWKHLVVXH LQREWDLQLQJVXFKDMXGJPHQWLWZRXOGKDYHDQHIIHFWLYHGDWH DGGUHVVHGLQSDUW,,,% SULRUWRWKHILOLQJRIWKHEDQNUXSWF\SHWLWLRQnDPDWWHUWKDWLV JRYHUQHGE\VWDWHODZ:HVLPSO\KROGWKDWWKH.LWFKHQVDUH BBBBBBBBBBBBBBBBB HQWLWOHGWRDOLIWLQJRIWKHVWD\LQRUGHUWKDWWKH\PD\SXUVXH 23,1,21 WKHLUVWDWHFRXUWDFWLRQDQGWKDWLQWKHHYHQWWKH\DUHDEOHWR BBBBBBBBBBBBBBBBB SUHYDLO LQ WKDW DFWLRQ ,Q UH 2PHJDV GRHV QRW EDU WKH HQIRUFHPHQW RI VXFK D MXGJPHQW E\ WKH EDQNUXSWF\ FRXUW .(11('<&LUFXLWsXGJH5REHUW.LWFKHQ m.LWFKHQl 7KHUHIRUH DV WR WKLV VSHFLILF SURSHUW\ ZH UHYHUVH WKH DQG1HZ3URSHUWLHV,QF m13,l  FROOHFWLYHO\UHIHUUHGWRDV EDQNUXSWF\FRXUWGHFLVLRQDQGRUGHUWKHVWD\WREHOLIWHGWR mPRYDQWVl PRYHGWKHEDQNUXSWF\FRXUWWROLIWWKH86& DOORZ WKH .LWFKHQV WR FRQWLQXH WKHLU VWDWH FRXUW DFWLRQ DQG †DXWRPDWLFVWD\LQEDQNUXSWF\ZLWKUHVSHFWWRPRQH\WKDW VHHN ZKDWHYHU UHPHG\ LV DYDLODEOH WR WKHP LQFOXGLQJ WKH GHEWRU*HRUJH'1HZSRZHUsU m1HZSRZHUlRUmGHEWRUl UHPHG\RIDFRQVWUXFWLYHWUXVW HPEH]]OHG0RYDQWVDUJXHGWKDWWKHHPEH]]OHGIXQGVZHUH QRWSURSHUW\RI1HZSRZHUjVEDQNUXSWF\HVWDWHEHFDXVH DVD WKLHI1HZSRZHUGLGQRWWDNHWLWOHWRWKHIXQGVKHHPEH]]OHG 1HZSRZHUZDVDFWLQJDVDQDJHQWDQGWKXVQHYHUKDGWLWOHWR PRQH\ ORDQHG WR 13,  PRQH\ ZDV KHOG E\ 1HZSRZHU SXUVXDQWWRDQH[SUHVVWUXVW7KHEDQNUXSWF\FRXUWKHOGWKDW WKHWKDW1HZSRZHUWUDQVIHUUHGGLUHFWO\WRWKLUG SDUWLHVIURP13,ZDVQRWSURSHUW\RI1HZSRZHUjVHVWDWHEXW  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

%HFDXVH WKH EDQNUXSWF\ FRGH LV FOHDU WKDW SURSHUW\ LV GHFOLQHG WR OLIW WKH VWD\ RQ WKH UHPDLQLQJ   7KH LQFOXGDEOHRQO\WRWKHH[WHQWRIWKHGHEWRUjVOHJDOWLWOHDQGQRW .LWFKHQVDQG13,DSSHDOHGWKHEDQNUXSWF\FRXUWjVUXOLQJWR WRWKHH[WHQWRIDQ\HTXLWDEOHLQWHUHVWWKDWWKHGHEWRUGRHVQRW WKH GLVWULFW FRXUW ZKLFK KHOG WKDW QRQH RI WKH HPEH]]OHG KDYHVHH86&† G WKLVTXHVWLRQPXVWEHDQVZHUHG IXQGVZHUHSURSHUW\RI1HZSRZHUjVEDQNUXSWF\HVWDWHDQG LQRUGHUWRGHWHUPLQHWRZKDWH[WHQWWKHJRRGVSXUFKDVHGZLWK WKXVZHUHQRWVXEMHFWWRWKHDXWRPDWLFVWD\LQEDQNUXSWF\ VWROHQPRQH\DUHLQFOXGDEOHLQWKHGHEWRUjVEDQNUXSWF\HVWDWH )RUWKHUHDVRQVWKDWIROORZZHVKDOODIILUPLQSDUWDQGUHYHUVH ,QUH2PHJDVSUHFOXGHVWKHEDQNUXSWF\FRXUWIURPLPSRVLQJ LQSDUW D FRQVWUXFWLYH WUXVW RQ WKH SURSHUW\ SRVWSHWLWLRQ EXW RZQHUVKLS RI WKH HTXLWDEOH WLWOH LQ WKH SURSHUW\ PXVW , QRQHWKHOHVVEHDVVLJQHG7RKROGDVs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sDQXDU\ RI   .LWFKHQ DQG 1HZSRZHU D OLFHQVHG 86&† G )XUWKHUPRUHWRSUHFOXGHWKH.LWFKHQVIURP 0LFKLJDQ UHDO HVWDWH EURNHU HQWHUHG DQ DJUHHPHQW WR IRUP FRQWLQXLQJWKHLUVWDWHFRXUWDFWLRQWRGHWHUPLQHWKHLUHTXLWDEOH 13,7KHFRUSRUDWLRQjVSXUSRVHZDVWRSXUFKDVHDQGGHYHORS LQWHUHVW LQ WKH SURSHUW\ ZRXOG DOORZ D WKLHI VXFK DV UHDO HVWDWH LQ QRUWKHUQ 0LFKLJDQ  .LWFKHQ DQG 1HZSRZHU 1HZSRZHUXQLODWHUDOO\WRFRQYHUWVWROHQIXQGVLQZKLFKWKH ZHUHWKHVROHVKDUHKROGHUVDQGGLUHFWRUVRIWKHFRUSRUDWLRQ GHEWRU KDV QR WLWOH LQWR SURSHUW\ RI WKH EDQNUXSWF\ HVWDWH .LWFKHQ ZDV QDPHG YLFH SUHVLGHQW DQG VHFUHWDU\ DQG VLPSO\E\SXUFKDVLQJJRRGVIURPDQXQNQRZLQJVHOOHU 1HZSRZHUZDVQDPHGSUHVLGHQWDQGWUHDVXUHU

:HGLVDJUHHZLWKsXGJH.HQQHG\jVFRQWHQWLRQWKDW,QUH .LWFKHQ DQG 1HZSRZHU DJUHHG WKDW 1HZSRZHU ZRXOG 2PHJDV EDUV WKH EDQNUXSWF\ FRXUWj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m.LWFKHQVl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sXGJH .HQQHG\ DUJXHV LQ VHFWLRQ ,,,% WKDW WKHUH LV QR ZKLFK 1HZSRZHU ZDV WKH VROH DXWKRUL]HG VLJQDWRU\ SXUSRVHLQOLIWLQJWKHVWD\EHFDXVHHYHQLIWKH.LWFKHQVZHUH 1HZSRZHU FRQWLQXHG KLV SUDFWLFH RI PLVDSSURSULDWLQJ WKH DEOHWRREWDLQDVWDWHFRXUWMXGJPHQWLPSUHVVLQJWKHSURSHUW\ IXQGVIRUKLVRZQXVHZLWKUHVSHFWWRWKHVHWUDQVIHUVDVZHOO ZLWK D FRQVWUXFWLYH WUXVW XQGHU ,Q UH 2PHJDV mWKHUH LV QR $W WKH VDPH WLPH 1HZSRZHU UHSRUWHG WR .LWFKHQ WKDW DFWLRQ WKDW WKH VWDWH FRXUW FRXOG WDNH ZKLFK ZRXOG DIIHFW HYHU\WKLQJZDVSURJUHVVLQJDVSODQQHGDQGHYHQZHQWVRIDU GLVSRVLWLRQ>RIWKHVHSURFHHGV@l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j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mORDQUHSD\PHQWVlWRFXVWRPHUWUXVW QRWIDFHGZLWKWKHTXHVWLRQRIHLWKHUREWDLQLQJRUHQIRUFLQJD DFFRXQWV IRU 1HZSRZHUjV UHDO HVWDWH EXVLQHVV  DQG PDGH VWDWH FRXUW MXGJPHQW KROGLQJ WKDW WKH HTXLWDEOH LQWHUHVW WKRXVDQGV RI GROODUV RI FDVK GLVWULEXWLRQV WR KLPVHOI IRU EHORQJHG WR VRPHRQH RWKHU WKDQ WKH GHEWRU  6HH ,Q UH mZDONLQJDURXQGPRQH\l 2PHJDV)GDW 7KH .LWFKHQV DOVR ILOHG D FRPSODLQW ZLWK WKH 0LFKLJDQ 7KH VLWXDWLRQ SUHVHQWHG E\ WKLV FDVH LV VLJQLILFDQWO\ $WWRUQH\ *HQHUDOj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j ZKLOH 1HZSRZHU REWDLQHG EDUH OHJDO WLWOH LQ WKH JRRGV KH ODZVXLWDJDLQVWWKHWUDQVIHUHHVRIWKHHPEH]]OHGIXQGVZDV SXUFKDVHG ZLWK WKH VWROHQ IXQGV KH FOHDUO\ GLG QRW REWDLQ DXWRPDWLFDOO\VWD\HGE\WKHEDQNUXSWF\FRXUWRQ1RYHPEHU HTXLWDEOHWLWOHLQWKHJRRGV 7KHTXHVWLRQWKHUHIRUHUHPDLQV  SXUVXDQWWRWKHDXWRPDWLFVWD\SURYLVLRQVRI86& LQ ZKRP GRHV WKH HTXLWDEOH LQWHUHVW LQ WKHVH JRRGV OLH"  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

7KHDXWRPDWLFVWD\LPSRVHGE\WKHILOLQJRIDEDQNUXSWF\ †7KH.LWFKHQVDQG13,PRYHGWROLIWWKHVWD\RURUGHU SHWLWLRQVKDOOEHOLIWHGXSRQPRWLRQE\DSDUW\LQLQWHUHVWLQ DQDEDQGRQPHQWVRWKDWWKH\FRXOGSURFHHGZLWKWKHLUVWDWH FDVHVZKHUH  WKHSDUW\FDQVKRZFDXVHLQFOXGLQJWKHODFN FRXUWDFWLRQ RIDGHTXDWHSURWHFWLRQRIDQLQWHUHVWLQSURSHUW\RIVXFKSDUW\ LQLQWHUHVWRU  ZKHUHWKHGHEWRUGRHVQRWKDYHDQHTXLW\ )ROORZLQJ D KHDULQJ RQ PRYDQWVj PRWLRQ WR OLIW WKH LQWHUHVWLQWKHSURSHUW\DQGWKHSURSHUW\LVQRWQHFHVVDU\WRDQ DXWRPDWLFVWD\WKHEDQNUXSWF\FRXUWJUDQWHGPRYDQWVjPRWLRQ HIIHFWLYH UHRUJDQL]DWLRQ  6HH  86& † G   7KH LQSDUWDQGGHQLHGLWLQSDUW7KHEDQNUXSWF\FRXUWFRQFOXGHG .LWFKHQV TXDOLI\ XQGHU WKH VHFRQG FRQGLWLRQ VHW IRUWK LQ WKDWWKHIXQGVZKLFKZHUHWUDQVIHUUHGE\1HZSRZHUGLUHFWO\ † G $VZHKDYHDOUHDG\KHOGWKHGHEWRUGLGQRWREWDLQ IURPWKH13,DFFRXQWWRDWKLUGSDUW\ZLWKRXWSDVVLQJWKURXJK HTXLWDEOH WLWOH WR WKHVH SURFHHGV DQG WKLV FDVH GRHV QRW 1HZSRZHUjV SHUVRQDO DFFRXQW ZHUH QRW SURSHUW\ RI WKH LQYROYHDUHRUJDQL]DWLRQEHFDXVHWKHGHEWRULVOLTXLGDWLQJKLV HVWDWH$FFRUGLQJO\WKHFRXUWFRQFOXGHGWKDWWKH.LWFKHQV DVVHWVXQGHU&KDSWHU6HHDOVR,QUH/HLWQHU%5 ZHUHHQWLWOHGWRSURFHHGRQWKHLUDFWLRQVWRUHFRYHUVXFKIXQGV  '.DQ   KROGLQJ LW HQWLUHO\ SURSHU WR OLIW WKH IURP WKH UHFLSLHQWV  +RZHYHU DV WR PRQH\ WKDW SDVVHG DXWRPDWLFVWD\WRDOORZYLFWLPRIHPEH]]OHPHQWWRSURFHHG WKURXJK1HZSRZHUjVKDQGVLQDQ\ZD\RUWKDWZDVXVHGWR ZLWK VWDWH FRXUW DFWLRQ LQLWLDWHG EHIRUH WKH ILOLQJ RI WKH SXUFKDVH DVVHWV WLWOHG LQ 1HZSRZHUj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jVUXOLQJWR D FRQVWUXFWLYH WUXVW LV D UHPHG\ WKDW GRHV QRW FRPH LQWR WKHGLVWULFWFRXUW7KHGLVWULFWFRXUWKHOGWKDWWKHEDQNUXSWF\ H[LVWHQFH XQWLO LW LV MXGLFLDOO\ GHFODUHG D FUHGLWRU FODLPLQJ FRXUW HUUHG LQ FRQFOXGLQJ WKDW SURSHUW\ WUDFHDEOH WR WKH WKDW D FRQVWUXFWLYH WUXVW VKRXOG EH LPSUHVVHG RQ SDUWLFXODU .LWFKHQVj HPEH]]OHG IXQGV ZHUH SURSHUW\ RI 1HZSRZHUjV SURSHUW\GRHVQRWKDYHDQHTXLWDEOHLQWHUHVWLQWKDWSURSHUW\ HVWDWH  &RQVHTXHQWO\ WKH GLVWULFW FRXUW UHYHUVHG WKH DQG86&† G GRHVQRWSHUPLWWKHEDQNUXSWF\FRXUW EDQNUXSWF\FRXUWjVGHFLVLRQWRWKHH[WHQWWKDWLWGHFOLQHGWROLIW WRH[FOXGHWKRVHDVVHWVIURPWKHHVWDWHE\LPSUHVVLQJWKHP WKHDXWRPDWLFVWD\XQGHU86&†ZLWKUHVSHFWWRWKH ZLWKDFRQVWUXFWLYHWUXVWSRVWSHWLWLRQ7KLVLVQRWWKHVLWXDWLRQ UHPDLQLQJRISURSHUW\WUDFHDEOHWRPRYDQWVjIXQGV SUHVHQWHGE\WKH.LWFKHQVjDSSHDO,QWKLVFDVHWKH.LWFKHQV LQLWLDWHG D VWDWH FRXUW DFWLRQ WR UHFRYHU WKH VWROHQ SURSHUW\ EHIRUHWKHGHEWRUILOHGKLVEDQNUXSWF\SHWLWLRQDQGWKHVROH

 ,Q UH /HLWQHU XOWLPDWHO\ FRQFOXGHV WKDW D VWDWH FRXUW FRQVWUXFWLYH WUXVW XQGHU .DQVDV ODZ ZRXOG UHODWH EDFN WR WKH GDWH RI WKH ZURQJGRLQJ  WKXV UHPRYLQJ WKH SURSHUW\ IURP WKH GHEWRUjV HVWDWH DOWRJHWKHU 6HH  7KH .LWFKHQV KDYH \HW WR UHFRYHU D WRWDO RI   WKDW WKH\ %5 DW  +RZHYHU WKH DSSHDO EHIRUH XV GRHV QRW SUHVHQW WKH TXHVWLRQ ORDQHG WR 13, 7KH EDQNUXSWF\ FRXUW RQO\ DGGUHVVHG ZKHWKHU WKH RI WKH HIIHFW RI D VWDWH FRXUW MXGJPHQW LPSUHVVLQJ D FRQVWUXFWLYH WUXVW XSRQ DXWRPDWLF VWD\ ZDV DSSURSULDWH IRU    KRZHYHU DSSHOOHHV GR FHUWDLQ SURSHUW\ LQ WKH GHEWRUjV SRVVHVVLRQ EHFDXVH WKH .LWFKHQV KDYH QRW QRW GLVSXWH WKH GLIIHUHQFH DV WKH\ FRQFHGHG GXULQJ RUDO DUJXPHQW WKDW LW \HW REWDLQHG VXFK D MXGJPHQW UHSUHVHQWHG WKH RQO\ YDOLG WUDQVDFWLRQV WKDW GHEWRU PDGH RQ EHKDOI RI 13,  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

,, BBBBBBBBBBBBBBBBB ,Q FRQVLGHULQJ DQ DSSHDO IURP D GHFLVLRQ RI WKH GLVWULFW &21&855(1&( FRXUWZKLFKUHYLHZHGDGHFLVLRQRIWKHEDQNUXSWF\FRXUWWKLV BBBBBBBBBBBBBBBBB FRXUWLQGHSHQGHQWO\UHYLHZVWKHEDQNUXSWF\FRXUWjVGHFLVLRQ ,QUH.RHQLJ6SRUWLQJ*RRGV,QF)G   WK $/,&(0%$7&+(/'(5&LUFXLWsXGJHZULWLQJIRUWKH &LU ,QGRLQJVRZHZLOOUHYLHZWKHEDQNUXSWF\FRXUW V FRXUWDVWRSDUW,,,%DQGFRQFXUULQJLQWKHUHPDLQGHURIWKH ILQGLQJVRIIDFWIRUFOHDUHUURUDQGLWVFRQFOXVLRQVRIODZGH PDMRULW\RSLQLRQ:HKHOGLQSDUW,,,$WKDWDVWRWKHDVVHWV QRYR  ,Q UH &HQWXU\ %RDW &R  )G   WK SXUFKDVHGZLWKWKHVWROHQIXQGVWKHGHEWRUREWDLQHGRQO\EDUH &LU  %HFDXVHWKHRQO\TXHVWLRQSUHVHQWHGnZKHWKHU OHJDOWLWOHWKDWWKRVHDVVHWVDUHLQFOXGDEOHLQWKHEDQNUXSWF\ WKHHPEH]]OHGIXQGVDWLVVXHDQGSURFHHGVWKHUHRIDUHSDUWRI HVWDWHDQGWKDWWKHDVVHWVDUHWKXVVXEMHFWWRDQDXWRPDWLFVWD\ GHEWRUjVEDQNUXSWF\HVWDWHSXUVXDQWWR86&†nLVD LQ EDQNUXSWF\ XQGHU  86& †  :H DJUHH ZLWK WKLV OHJDORQHZHUHYLHZWKHEDQNUXSWF\FRXUWjVGHFLVLRQGHQRYR KROGLQJ DV IDU DV LW JRHV EXW LW GRHVQjW JR IDU HQRXJK $OWKRXJKSURSHUW\LQZKLFKDGHEWRUKROGVRQO\EDUHOHJDO ,,, WLWOHPD\LQVRPHFDVHVEHSURWHFWHGE\WKHDXWRPDWLFVWD\ LQWKLVFDVHWKHDSSHOOHHVjHTXLWDEOHLQWHUHVWLQWKHSURSHUW\ $ 1HZSRZHU ERXJKW ZLWK HPEH]]OHG IXQGV SUHFOXGHV VXFK SURWHFWLRQ 7KLV DSSHDO UDLVHV WKH TXHVWLRQ RI ZKHWKHU WKH PRQH\ PLVDSSURSULDWHGE\GHEWRUPRQH\DQGSURSHUW\WUDFHDEOHWR 7KH EDQNUXSWF\ HVWDWH FRPSULVHV DOO OHJDO RU HTXLWDEOH WKHPLVDSSURSULDWHGIXQGVDQGFODLPVRUFDXVHVRIDFWLRQWR LQWHUHVWV RI WKH GHEWRU XQOHVV VSHFLILFDOO\ H[FHSWHG E\ WKH UHFRYHUPRQH\DQGSURSHUW\WUDFHDEOHWRWKHPLVDSSURSULDWHG &RGHDVRIWKHFRPPHQFHPHQWRIWKHEDQNUXSWF\FDVH6HH IXQGV DUH SURSHUW\ RI GHEWRUjV EDQNUXSWF\ HVWDWH  ,I WKH 86&† D +RZHYHUm>S@URSHUW\LQZKLFKWKHGHEWRU RIDVVHWVWUDFHDEOHWRWKHPRQH\WKH.LWFKHQVOHQW KROGVDVRIWKHFRPPHQFHPHQWRIWKHFDVHRQO\OHJDOWLWOH 13,LVHVWDWHSURSHUW\WKHQSXUVXDQWWR86&†WKH DQG QRW DQ HTXLWDEOH LQWHUHVW    EHFRPHV SURSHUW\ RI WKH WUXVWHHPXVWFROOHFWDQGGLVWULEXWHWKHPRQH\LQSURSRUWLRQDO HVWDWHRQO\WRWKHH[WHQWRIWKHGHEWRUjVOHJDOWLWOHWRVXFK VKDUHVWRDOOFUHGLWRUVRIWKHEDQNUXSWF\HVWDWH SURSHUW\EXWQRWWRWKHH[WHQWRIDQ\HTXLWDEOHLQWHUHVWLQVXFK SURSHUW\WKDWWKHGHEWRUGRHVQRWKROGl86&† G 6HFWLRQSURYLGHV m D 7KHFRPPHQFHPHQWRIDFDVH HPSKDVLVDGGHG $QGWKHGHWHUPLQDWLRQRIRZQHUVKLSRI XQGHUVHFWLRQRURIWKLVWLWOHFUHDWHVDQHVWDWH WKHHTXLWDEOHLQWHUHVWLQWKHJRRGVSXUFKDVHGE\WKHGHEWRU 6XFK HVWDWH LV FRPSULVHG RI DOO WKH IROORZLQJ SURSHUW\ ZLWK WKH HPEH]]OHG IXQGV LV D TXHVWLRQ RI VWDWH ODZ  6HH ZKHUHYHU ORFDWHG DQG E\ ZKRPHYHU KHOG    ([FHSW DV %XWQHU Y 8QLWHG 6WDWHV  86       7KH SURYLGHGLQVXEVHFWLRQV E DQG F  RIWKLVVHFWLRQDOOOHJDO .LWFKHQV DQG 1HZ 3URSHUWLHV ,QF FROOHFWLYHO\ mWKH RU HTXLWDEOH LQWHUHVWV RI WKH GHEWRU LQ SURSHUW\ DV RI WKH .LWFKHQVl PRYHGWKHEDQNUXSWF\FRXUWIRUDQRUGHUOLIWLQJWKH FRPPHQFHPHQW RI WKH FDVHl   86& †  D   :KDW DXWRPDWLFVWD\VRWKH\FRXOGSURFHHGZLWKWKHLUDFWLRQLQVWDWH TXDOLILHVDVDSURSHUW\LQWHUHVWLVGHWHUPLQHGE\UHIHUHQFHWR FRXUWoILOHGSULRUWR1HZSRZHUjVSHWLWLRQLQEDQNUXSWF\o VWDWH ODZ XQOHVV VRPH IHGHUDO LQWHUHVW UHTXLUHV D GLIIHUHQW FODLPLQJLQWHUDOLD1HZSRZHUjVFRQYHUVLRQRIWKHLUIXQGV UHVXOW%XWQHUY8QLWHG6WDWHV86o    DQG VHHNLQJ WKH UHFRYHU\ RI WKRVH IXQGV IURP 1HZSRZHU DQGRUWKLUGSDUWLHVDQGWKHLPSRVLWLRQRIDFRQVWUXFWLYHWUXVW 7KH GLVWULFW FRXUW FRQFOXGHG WKDW QRQH RI WKH IXQGV DQG RQWKHSURSHUW\1HZSRZHUSXUFKDVHGZLWKWKHVWROHQIXQGV SURSHUW\ DW LVVXH ZHUH SDUW RI GHEWRUjV EDQNUXSWF\ HVWDWH  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

KDYH DXWKRULW\ WR GR ZLWK WKH IXQGV DV KH ZLVKHG DV DOO EHFDXVH DV D WKLHI GHEWRU WRRN QR WLWOH WR WKH IXQGV DQ HYLGHQFHLQGLFDWHGWKDWWKH.LWFKHQVVHQWWKHPRQH\WRKLP H[SUHVVWUXVWH[LVWHGXQGHUWKHFLUFXPVWDQFHVDQGGHEWRUKHOG IRU WKH VROH DQG H[SUHVV SXUSRVH RI GHSRVLWLQJ LW ZLWK WKH WKHHPEH]]OHGIXQGVDVDQDJHQW%DVHGRQLWVFRQFOXVLRQV &RUSRUDWLRQ RQFH LW IRUPDOO\ FDPH LQWR EHLQJ  8QGHU WKH WKHGLVWULFWFRXUWUHYHUVHGWKHEDQNUXSWF\FRXUWjVRUGHUDQG FLUFXPVWDQFHVZHDJUHHZLWKWKHGLVWULFWFRXUWjVFRQFOXVLRQ UHPDQGHGIRUHQWU\RIDQRUGHUJUDQWLQJUHOLHIIURPVWD\DVWR WKDW DQ DJHQF\ UHODWLRQVKLS H[LVWHG ZLWK UHVSHFW WR WKH WKHDQGFDXVHVRIDFWLRQWRUHFRYHUWKDWVXP  WKDW WKH .LWFKHQV LQLWLDOO\ VHQW WKH GHEWRU &RQVHTXHQWO\WKHEDQNUXSWF\FRXUWHUUHGLQFRQFOXGLQJWKDW 8QOHVV D FRXQWHUYDLOLQJ IHGHUDO LQWHUHVW H[LVWV VWDWH ODZ WKHVH IXQGV ZHUH SDUW RI GHEWRUjV EDQNUXSWF\ HVWDWH GHWHUPLQHV ZKHWKHU D GHEWRU KDV D SURSHUW\ LQWHUHVW IRU +RZHYHUDVGLVFXVVHGDERYHGHEWRUZRXOGKDYHOHJDOWLWOHWR SXUSRVHVRI† D  %XWQHUY8QLWHG6WDWHV86 DQ\SURFHHGVREWDLQHGZLWKWKHVHHPEH]]OHGIXQGVUHQGHULQJ    ,Q UH 9DQ 'UHVVHU &RUS  )G  WK &LU VXFKSURFHHGVSDUWRIGHEWRUjVEDQNUXSWF\HVWDWH   6XFKSURSHUW\PD\WDNHWKHIRUPRIOHJDORUHTXLWDEOH LQWHUHVW LQ SURSHUW\ KHOG E\ WKH GHEWRU DV RI WKH ' FRPPHQFHPHQWRIWKHFDVH,QUH9DQ'UHVVHU&RUS )GDW ,IGHEWRUjVHVWDWHKDGDSURSHUW\LQWHUHVWLQWKH ,W LV XQQHFHVVDU\ WR DGGUHVV DSSHOOHHjV FRQWHQWLRQ WKDW IXQGVDWLVVXHWKHQDVDIXQGDPHQWDOSULQFLSOHRIEDQNUXSWF\ GHEWRUZDVDQDJHQWRI13,RUWKDWGHEWRUKHOGIXQGVLQDQ ODZWKHIXQGVVKRXOGEHUDWDEO\GLVWULEXWHGWRWKHFUHGLWRUVRI H[SUHVVWUXVWIRUERWK13,DQGWKH.LWFKHQVZLWKUHVSHFWWR WKHEDQNUXSWHVWDWH,QUH2PHJDV*URXS,QF)G LWHPVWRZKLFKKHKDGOHJDOWLWOHVLQFHOHJDOWLWOHSODFHVWKRVH  WK&LU   LWHPVLQWKHGHEWRUjVHVWDWH 0RYDQWVDUJXHGWKDWGHEWRUVWROHWKHIXQGVHPEH]]OHGIURP ,9 13,DQGIXUWKHUDVVHUWWKDWEHFDXVHDWKLHIWDNHVQRWLWOHXQGHU 0LFKLJDQODZHPEH]]OHGIXQGVRUSURFHHGVWKHUHRIDUHQRW ,Q VXP ZH $)),50 WKH GLVWULFW FRXUWjV FRQFOXVLRQ WKDW SURSHUW\RIGHEWRUjVEDQNUXSWF\HVWDWH:KLOHWKHEDQNUXSWF\ QRQHRIWKHPRQH\PLVDSSURSULDWHGE\GHEWRUZDVSURSHUW\RI FRXUWUHFRJQL]HGWKDWVWDWHODZZRXOGGHWHUPLQHWKHH[WHQWRI WKHGHEWRUjVEDQNUXSWF\HVWDWHDOWKRXJKVRPHRIWKHSURFHHGV GHEWRUjVSURSHUW\LQWHUHVWLQWKHPRQH\KHHPEH]]OHGLWGLG DUH  :H 5(9(56( WKH GLVWULFW FRXUW WR WKH H[WHQW LW QRWVSHFLILFDOO\UHYLHZ0LFKLJDQODZPHUHO\FRQFOXGLQJWKDW FRQFOXGHGWKDWGHEWRUjVEDQNUXSWF\HVWDWHGLGQRWKDYHOHJDO mWKLV ZDV QRW D WUXH WKHIWl  2Q DSSHDO PRYDQWV UHO\ RQ WLWOHWRWKHSURSHUW\WKDWGHEWRUERXJKWZLWKVXFKIXQGVDQG 0RUJDQY+RGJHV1: 0LFK  LQVXSSRUWRI WKDW KH VWLOO SRVVHVVHG DW WKH WLPH KH ILOHG KLV EDQNUXSWF\ WKHLUSRVLWLRQWKDWXQGHU0LFKLJDQODZGHEWRUjVEDQNUXSWF\ SHWLWLRQ)XUWKHUZH$)),50WKHGLVWULFWFRXUWjVGHFLVLRQWR HVWDWH GLG QRW KDYH D SURSHUW\ LQWHUHVW LQ WKH IXQGV KH OLIW WKH86&†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jSRVVHVVLRQ  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

GHIHQGDQWVKDGVROGWKHKRUVHVEXWVWLOOUHWDLQHGWKHUHVWRI &ROOLHURQ%DQNUXSWF\ˆ>@>D@ WKHG 7KXV SODLQWLIIjVSURSHUW\3ODLQWLIILQIRUPHGGHIHQGDQWVWKDWWKH\ LIDSSHOOHHVDUHFRUUHFWLQDUJXLQJWKDWGHEWRUZDVWKHLUDJHQW KDGKLVVWROHQSURSHUW\DQGSURSRVHGWKDWLIWKHEXJJ\UREH ZLWKUHVSHFWWRWKHWKH\LQLWLDOO\WUDQVIHUUHGWRKLP DQGKDUQHVVZHUHUHWXUQHGKHZRXOGQRWSXUVXHDFODLPIRU WKHQWKHPRQH\ZRXOGQRWEHSURSHUW\RIGHEWRUjVEDQNUXSWF\ WKHYDOXHRIWKHKRUVHVDVGHIHQGDQWVKDGSXUFKDVHGWKHPLQ HVWDWH JRRG IDLWK  'HIHQGDQWV DJUHHG DQG UHWXUQHG SODLQWLIIjV SURSHUW\WRKLP3ODLQWLIIWKHQVXHGGHIHQGDQWVIRUWKHYDOXH ,QGHWHUPLQLQJZKHWKHUDQDJHQF\KDVEHHQFUHDWHGXQGHU RIWKHKRUVHV,QUHVSRQVHGHIHQGDQWVDUJXHGWKDWWKH\KDG 0LFKLJDQODZWKH0LFKLJDQ6XSUHPH&RXUWKDVVWDWHGWKDWLW HQWHUHG LQWR D FRQWUDFW ZLWK SODLQWLII E\ DJUHHLQJ WR JLYH ZLOOFRQVLGHUmWKHUHODWLRQVRIWKHSDUWLHVDVWKH\LQIDFWH[LVW SODLQWLIIWKHKRUVHDQGEXJJ\LQH[FKDQJHIRUKLVSURPLVHQRW XQGHU WKHLU DJUHHPHQWV RU DFWVl  6DLQW &ODLU ,QWHUPHGLDWH WR VXH  +RZHYHU WKH 0LFKLJDQ 6XSUHPH &RXUW KHOG WKDW 6FKRRO'LVWY,QWHUPHGLDWH(GXF$VVjQ1:G SODLQWLIIZDVHQWLWOHGWRSXUVXHWKHLUFODLPIRUWKHYDOXHRIWKH  0LFK   LQWHUQDOTXRWDWLRQVRPLWWHG 7KHFRXUW KRUVHVVWDWLQJWKDWGHIHQGDQWVmRQO\GLGWKDWLQVXUUHQGHULQJ IXUWKHUSURYLGHG  WKHSURSHUW\ZKLFKLQODZWKH\ZHUHFRPSHOOHGWRGRDQG WKHUHIRUHWKHUHZDVQRFRQVLGHUDWLRQIRUWKHSURPLVHRQWKH >,@QLWVEURDGHVWVHQVHDJHQF\mLQFOXGHVHYHU\UHODWLRQLQ SDUWRIWKHSODLQWLIIQRWWRUHFODLPWKHKRUVH>V@l0RUJDQ ZKLFKRQHSHUVRQDFWVIRURUUHSUHVHQWVDQRWKHUE\KLV 1: DW  :KLOH WKH RSLQLRQ LV VKRUW LQ UHYHUVLQJ WKH DXWKRULW\l6DXPVY3DUIHW0LFK ORZHU FRXUW DQG FRQFOXGLQJ WKDW GHIHQGDQWV JDYH QR 1:   :HIXUWKHUUHFRJQL]HGLQ6DXPVWKDW FRQVLGHUDWLRQ LQ H[FKDQJH IRU SODLQWLIIjV SURPLVH QRW VHHN m>W@KHFKDUDFWHULVWLFRIWKHDJHQWLVWKDWKHLVDEXVLQHVV UHPXQHUDWLRQ IRU WKH YDOXH RI KLV KRUVHV WKH 0LFKLJDQ UHSUHVHQWDWLYH+LVIXQFWLRQLVWREULQJDERXWPRGLI\ 6XSUHPH&RXUWDSSDUHQWO\FRQFOXGHGWKDW6HDPHQDVDWKLHI DIIHFWDFFHSWSHUIRUPDQFHRIRUWHUPLQDWHFRQWUDFWXDO QHYHU KDG WLWOH WR WKH KRUVHV DQG WKXV FRXOG QRW KDYH REOLJDWLRQVEHWZHHQKLVSULQFLSDODQGWKLUGSHUVRQVl,G FRQYH\HGWLWOHWRGHIHQGDQWV7KLVDSSHDUVWREHWKH RQO\ DW1:$OVRIXQGDPHQWDOWRWKHH[LVWHQFH H[SODQDWLRQ IRU WKH FRXUWjV VWDWHPHQW LQGLFDWLQJ WKDW DV RI DQ DJHQF\ UHODWLRQVKLS LV WKH ULJKW WR FRQWURO WKH DJDLQVWSODLQWLIIWKHWUXHRZQHUGHIHQGDQWVKDGQRLQWHUHVWLQ FRQGXFWRIWKHDJHQW&DSLWRO&LW\/RGJH1R)23 WKHEXJJ\DQGHTXLSPHQWWRH[FKDQJHIRUSODLQWLIIjVSURPLVH Y0HULGLDQ7ZS 0LFK$SS1:G QRWWRVHHNWRUHFRYHUWKHYDOXHRIWKHKRUVHV    ZLWKUHVSHFWWRWKHPDWWHUVHQWUXVWHGWRKLP

:KLOH 0RUJDQ LV DQ ROG FDVH DV IDU DV ZH ZHUH DEOH WR 6DLQW&ODLU,QWHUPHGLDWH6FKRRO'LVW1:GDW GHWHUPLQH LW UHPDLQV JRRG ODZ LQ WKH VWDWH RI 0LFKLJDQ 0RUJDQ VWDQGV IRU WKH SURSRVLWLRQ ORQJ HVWDEOLVKHG DW :KLOHWKHEDQNUXSWF\FRXUWFRQFOXGHGWKDWGHEWRUZDVQRW FRPPRQODZWKDWDWKLHIKDVQRWLWOHLQWKHSURSHUW\WKDWKH DQ DJHQW RI 13, LW QHYHU DGGUHVVHG WKH LVVXH RI ZKHWKHU VWHDOV  6HH 5HVWDWHPHQW 6HFRQG  RI 7RUWV †   FPW G GHEWRUZDVDQDJHQWRIWKH.LWFKHQVZLWKUHVSHFWWRWKHIXQGV    %RJHUW 7UXVW  7UXVWHHV †  G HG    WKH\VHQWGLUHFWO\WRGHEWRUSULRUWR13,jVIRUPDWLRQ$VWKH %RJHUW7UXVW 7UXVWHHVGLVFXVVHVWKLVUXOHDVLWDSSOLHVWR EDQNUXSWF\ FRXUW REVHUYHG WKH PLQXWHV UHIOHFWHG WKDW WKH SURFHHGV IURP ODUFHQ\ HPEH]]OHPHQW RU FRQYHUVLRQ LQLWLDOVHQWWR1HZSRZHUE\WKH.LWFKHQVZDVDORDQ SURYLGLQJ WR13,7KHSDUWLHVDOVRFRQVLVWHQWO\UHIHUUHGWRWKLVPRQH\DV DORDQWRWKHFRUSRUDWLRQDQGWKHPHPRVHFWLRQRIWKHFKHFN $ WKLHI GRHV QRW RUGLQDULO\ EHFRPH WKH RZQHU RI VWDWHGWKDWWKHPRQH\ZDVIRU13,)XUWKHUGXULQJVHQWHQFLQJ SURSHUW\KHVWHDOV KHKDVPHUHSRVVHVVLRQ,IWKHVWROHQ IRUWKHFULPLQDOFKDUJHRIHPEH]]OHPHQWGHEWRUDGPLWWHGWKDW KHRSHUDWHGDVWKH.LWFKHQjVDJHQW'HEWRUFOHDUO\GLGQRW  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU

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†DW  GHG  6XSS WKH PRQH\ ZDV SURSHUW\ RI GHEWRUjV EDQNUXSWF\ HVWDWH   FLWLQJFDVHVUHFRJQL]LQJWKLVSULQFLSOH  EHFDXVHGHEWRUGHSRVLWHGWKHPRQH\LQKLVSHUVRQDODFFRXQW $SSHOOHHVDUJXHKRZHYHUWKDWXQGHU0LFKLJDQODZZKHQ $SSHOOHHVGLVDJUHHDUJXLQJWKDWGHEWRUZDVDFWLQJDVWKHLU WLWOHWRSURSHUW\LVREWDLQHGE\IUDXGWKHWLWOHLVYRLGDEOHQRW DJHQW ZLWK UHVSHFW WR WKH PRQH\ WKH\ ORDQHG WR WKH YRLG,QVXSSRUWDSSHOOHHVFLWHsRQHVY+LFNV1:G FRUSRUDWLRQ$VDUHVXOWDSSHOOHHVFRQWHQGWKDWWKHIXQGVDW  0LFK    DQG &RFKUDQ 7LPEHU &R Y )LVKHU  LVVXHUHPDLQHGWKHLUSURSHUW\ZKLOHLQWKHKDQGVRIGHEWRU 1: 0LFK  ZKLFKGRFRQWDLQVWDWHPHQWVWRWKLV DQGWKXVFRXOGQRWEHLQFOXGHGLQGHEWRUjVEDQNUXSWF\HVWDWH HIIHFW  $SSHOOHHV DUJXH WKDW WKLV LV VLJQLILFDQW EHFDXVH ,Q VXSSRUW DSSHOOHHV FLWH VHYHUDO FDVHV LQFOXGLQJ ,Q UH 1HZSRZHU SOHG JXLOW\ WR HPEH]]OHPHQW ZKLFK LQFOXGHV =ZDJHUPDQ%5 %DQNU:'0LFK  ,Q LQWHQWWRGHIUDXGDVDQHFHVVDU\HOHPHQW6HH0LFK&RPS UH&URXWKDPHO3RWDWR&KLS&R%5 ('3HQQ /DZV†$VDFRQVHTXHQFHDSSHOOHHVFRQFOXGHWKDW   DQG,QUH*UHHQILHOG'LUHFW5HVSRQVH,QF%5 1HZSRZHU REWDLQHG YRLGDEOH WLWOH WR WKH PRQH\ KH   1' ,OO    ZKLFK VXSSRUW WKLV SURSRVLWLRQ HPEH]]OHG,QVXSSRUWE\ZD\RIDQDORJ\DSSHOOHHVSRLQW $SSHOOHHV DUH FRUUHFW LQ SRLQWLQJ RXW WKDW LW LV JHQHUDOO\ RXWWKDWXQGHU0LFKLJDQjVFULPHRIIDOVHSUHWHQVHVZLWKLQWHQW UHFRJQL]HG WKDW DQ DJHQW GRHV QRW WDNH WLWOH WR IXQGV RU WRGHIUDXGnZKLFKDOVRFRQWDLQVIUDXGDVDQHOHPHQWRIWKH SURSHUW\ HQWUXVWHG WR KLP E\ KLV SULQFLSDO  &ROOLHU RQ RIIHQVHnWLWOHWRWKHVWROHQSURSHUW\LVYLHZHGDVSDVVLQJWR %DQNUXSWF\DGGUHVVHVWKHLQWHUDFWLRQRIWKLVSULQFLSOHZLWKWKH WKH GHEWRU  7KXV DSSHOOHHV UHDVRQ E\ GHIUDXGLQJ WKH EDQNUXSF\FRGHLQVRPHGHWDLOREVHUYLQJ  .LWFKHQVDQG13,GHEWRUREWDLQHGDWOHDVWYRLGDEOHWLWOHWRWKH IXQGVKHVWROH >$@QDJHQF\LVDUHODWLRQVKLSDULVLQJIURPDFRQWUDFW H[SUHVVRULPSOLHGE\ZKLFKRQHRIWKHSDUWLHVFRQILGHV $SSHOOHHVFRUUHFWO\REVHUYHWKDWXQGHU0LFKLJDQODZWKH WR WKH RWKHU WKH WUDQVDFWLRQ RU PDQDJHPHQW RI VRPH FULWLFDOGLIIHUHQFHEHWZHHQODUFHQ\FULPHVDQGIDOVHSUHWHQVH EXVLQHVVRURWKHUDFWLYLW\LQWKHSULQFLSDOjVQDPHRURQ FULPHVLVWKHSDVVDJHRIWLWOH6HHHJ3HRSOHY0DODFK WKHSULQFLSDOjVEHKDOIDQGZKHUHE\WKHDJHQWSHUIRUPV 1:G 0LFK&W$SS   GLVFXVVLQJSULRU WKHDQWLFLSDWHGDFWDQGUHQGHUVDQDFFRXQWWKHUHRI>7@KH FDVHODZDQGREVHUYLQJWKDWm>W@KHGLVWLQFWLRQEHWZHHQWKHWZR WLWOHWRWKHSURSHUW\UHPDLQVLQWKHSULQFLSDODQGWKH RIIHQVHVGHSHQGVHQWLUHO\XSRQWKHLQWHQWRIWKHYLFWLP LI DJHQWKROGVWKHSURSHUW\IRUWKHRZQHUjVEHQHILW WKH RZQHU RI WKH JRRGV LQWHQGV WR NHHS WLWOH EXW SDUW ZLWK &RQVHTXHQWO\ LW KDV EHHQ VHWWOHG XQGHU WKH &RGH DQG SRVVHVVLRQWKHFULPHLVODUFHQ\ LIWKHRZQHULQWHQGVWRSDUW SULRU ODZ WKDW DEVHQW VWDWH VWDWXWRU\ HQDFWPHQW WR WKH ZLWKERWKWLWOHDQGSRVVHVVLRQDOEHLWIRUWKHZURQJUHDVRQV FRQWUDU\LISURSHUW\ZDVLQDGHEWRUjVKDQGVDVEDLOHHRU WKHFULPHLVIDOVHSUHWHQVHV +RZHYHUDSSHOOHHVjDWWHPSWWR DJHQWWKHGHEWRUjVHVWDWHKROGVRQO\WKHVDPHLQWHUHVW DQDORJL]HWKHRIIHQVHRIHPEH]]OHPHQWWRIDOVHSUHWHQVHVIDLOV DQGWKHEDLORURUSULQFLSDOFRXOGUHFRYHUWKHSURSHUW\RU $V WKH 0DODFK FRXUW REVHUYHG DQ LQGLYLGXDO FRPPLWV WKH LWVSURFHHGV FULPH RI IDOVH SUHWHQVHV ZKHQ KH IUDXGXOHQWO\ FRQYLQFHV  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

DQRWKHUWRSDUWZLWKERWKSRVVHVVLRQRIDQGWLWOHWRSURSHUW\ VXEVHTXHQWO\ LPSRVHG FRQVWUXFWLYH WUXVW GRHV QRW UHPRYH ,QVXFKDVLWXDWLRQWKHRIIHQGHUREWDLQVYRLGDEOHWLWOHWRWKH SURSHUW\IURPWKHEDQNUXSWF\HVWDWH SURSHUW\&I5HVWDWHPHQW 6HFRQG RI7RUWV† FPWG    REVHUYLQJWKDWZKLOHDSXUFKDVHUIURPRUGRQHHRID sXGJH %DWFKHOGHU DWWHPSWV WR GUDZ D IDFWXDO GLVWLQFWLRQ WKLHIQRUPDOO\WDNHVQRWLWOHWRWKHJRRGVVWROHQJRRGIDLWK EHWZHHQWKLVFDVHDQG,QUH2PHJDVLQWKDWm,QUH2PHJDV SXUFKDVHUV PD\ DFTXLUH D OHJDO LQWHUHVW IURP D WKLHI WKDW GHDOWZLWKDVLWXDWLRQZKHUHLQWKHGHEWRUREWDLQHGSURSHUW\ IUDXGXOHQWO\SXUFKDVHGDFKDWWHO  IURPDFUHGLWRULQWKHRUGLQDU\FRXUVHRIEXVLQHVVlZKHUHDV KHUH WKH GHEWRU ZDV D WKLHI DQG QHYHU KDG DQ\ FODLP WR DQ ,Q FRQWUDVW WKH RIIHQVH RI HPEH]]OHPHQW LQYROYHV WKH HTXLWDEOH LQWHUHVW  %XW WKH GHEWRU LQ ,Q UH 2PHJDV ZDV IUDXGXOHQWDSSURSULDWLRQRISURSHUW\RIZKLFKWKHHPEH]]OHU DOOHJHGWREHJXLOW\RIIUDXGDJDLQVWWKHFUHGLWRUDQGDOVRGLG LVULJKWIXOO\LQSRVVHVVLRQ WKHRZQHURIWKHSURSHUW\UHWDLQV QRWKDYHHTXLWDEOHWLWOH7KXVWKHUHGRHVQRWDSSHDUWREHD WLWOHWRWKHIXQGVEHFDXVHKHQHYHULQWHQGVIRULWWRSDVVWRWKH UHOHYDQWGLVWLQFWLRQKHUH HPEH]]OHU6HH0DODFK1:GDW VHHDOVRs$ %U\DQWsU$QQRWDWLRQ,PSRVLWLRQRI&RQVWUXFWLYH7UXVWLQ sXGJH %DWFKHOGHU DOVR DSSHDUV WR GUDZ D GLVWLQFWLRQ 3URSHUW\%RXJKWZLWK6WROHQRU(PEH]]OHG)XQGV$/5 EHWZHHQZKHWKHURUQRWWKHEDQNUXSWF\FRXUWFDQLPSRVHD     REVHUYLQJWKDWDWKLHIWDNHVQRWLWOHWRVWROHQRU FRQVWUXFWLYH WUXVW DQG ZKHWKHU WKH EDQNUXSWF\ FRXUW FDQ HPEH]]OHGIXQGV 7KXVIRUSXUSRVHVRIRXUDQDO\VLVLWLV HQIRUFH D VWDWH FRXUW MXGJPHQW  6KH VD\V LQ KHU RSLQLRQ LUUHOHYDQW ZKHWKHU D WKLHI REWDLQV JRRGV WKURXJK UHIHUULQJ WR ,Q UH 2PHJDV m>Z@H KHOG WKDW LW ZDV QRW WKH HPEH]]OHPHQW RU ODUFHQ\ DV QHLWKHU FULPH LQYROYHV WKH SURYLQFH RI WKH EDQNUXSWF\ FRXUW WR LPSRVH D FRQVWUXFWLYH YROXQWDU\SDVVDJHRIWLWOHWRWKHWKLHI6HH$&s6/DUFHQ\ WUXVW EXW ZH ZHUH QRW IDFHG ZLWK WKH TXHVWLRQ RI HLWKHU †    $&s6(PEH]]OHPHQW†   )XUWKHU REWDLQLQJRUHQIRUFLQJDVWDWHFRXUWMXGJPHQWKROGLQJWKDWWKH ERWK TXDOLI\ DV WKHIW FULPHV XQGHU WKH FRPPRQ ODZ  6HH HTXLWDEOHLQWHUHVWEHORQJHGWRVRPHRQHRWKHUWKDQWKHGHEWRUl %ODFNjV /DZ 'LFWLRQDU\  WK HG    GHILQLQJ 7KLVVXSSRVHGGLVWLQFWLRQFDQQRWPDWWHUKRZHYHUEHFDXVH FRPPRQODZWKHIWWRLQFOXGHVZLQGOLQJDQGHPEH]]OLQJDQG WKH,QUH2PHJDVFRXUWVSHFLILFDOO\KHOGWKDWm>X@QOHVVDFRXUW REVHUYLQJWKDWmRQHZKRREWDLQVSURSHUW\E\ODZIXOPHDQV KDVDOUHDG\LPSUHVVHGDFRQVWUXFWLYHWUXVWXSRQFHUWDLQDVVHWV DQGWKHUHDIWHUDSSURSULDWHVWKHSURSHUW\WRWKHWDNHUjVRZQXVH WKHFODLPDQWFDQQRWSURSHUO\UHSUHVHQWWRWKHEDQNUXSWF\ LVJXLOW\RIDµWKHIWjl %RJHUW7UXVW 7UXVWHHV†DW FRXUWWKDWKHZDVDWWKHWLPHRIWKHFRPPHQFHPHQWRIWKH GHG  6XSS  WUHDWLQJODUFHQ\HPEH]]OHPHQW FDVHDEHQHILFLDU\RIDFRQVWUXFWLYHWUXVWKHOGE\WKHGHEWRUl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

SURFHHGLQJ  ,Q UH 2PHJDV  )G DW o  ,Q ,Q UH HPEH]]OHGGLUHFWO\IURP13,ZDVQHYHUSURSHUW\RIGHEWRUjV 2PHJDVWKHFRXUWH[SODLQHGWKDW  HVWDWH&I0DODFK1:GDW 'HQQLVY8QLWHG 6WDWHV)6XSS ('9D   REVHUYLQJWKDW %HFDXVHDFRQVWUXFWLYHWUXVWXQOLNHDQH[SUHVVWUXVWLVD m>D@WFRPPRQODZWKHSDVVLQJRIWLWOHWXUQVDVDJHQHUDOUXOH UHPHG\ LW GRHV QRW H[LVW XQWLO D SODLQWLII REWDLQV D RQ WKH LQWHQW RI WKH RULJLQDO RZQHUl   +RZHYHU WKH VDPH MXGLFLDOGHFLVLRQILQGLQJKLPWREHHQWLWOHGWRDMXGJPHQW FDQQRWEHVDLGRISURSHUW\WKDWGHEWRUSXUFKDVHGIRUKLPVHOI mLPSUHVVLQJl GHIHQGDQWjV SURSHUW\ RU DVVHWV ZLWK D ZLWKWKHVWROHQPRQH\7KHJRRGIDLWKVHOOHUIURPZKLFKWKH FRQVWUXFWLYH WUXVW  7KHUHIRUH D FUHGLWRUjV FODLP RI WKLHI SXUFKDVHV SURSHUW\ LQWHQGV WR SDVV ERWK WLWOH DQG HQWLWOHPHQW WR D FRQVWUXFWLYH WUXVW LV QRW DQ mHTXLWDEOH SRVVHVVLRQRIWKHSURSHUW\VROGWRWKHWKLHIDQGREWDLQVJRRG LQWHUHVWl LQ WKH GHEWRUjV HVWDWH H[LVWLQJ SUHSHWLWLRQ WLWOHWRWKHPRQH\WKHWKLHISURYLGHV6HHHJ$$PsXU H[FOXGHGIURPWKHHVWDWHXQGHU† G  G6WROHQ0RQH\†   $FFRUGLQJO\WKHWKLHIREWDLQV OHJDOWLWOHWRWKHJRRGVSXUFKDVHGZKLFKWKHUHE\EHFRPHSDUW ,GDW7KLVDSSDUHQWO\UHPDLQVWKHFDVHHYHQLIWKHVWDWH RIKLVHVWDWH6HH0LFK&RPS/DZV† SURYLGLQJ ZRXOGYLHZWKHFRQVWUXFWLYHWUXVWDVFRPLQJLQWRH[LVWHQFHRQ WKDW m>D@ SXUFKDVHU RI JRRGV DFTXLUHV DOO WLWOH ZKLFK KLV WKHGDWHWKHZURQJIXODFWVZKLFKJDYHULVHWRLWWRRNSODFH,G WUDQVIHURU KDGl   7KRPDV 0 4XLQQ 4XLQQjV 8QLIRUP DW  VWDWLQJWKDWm>X@QOHVVDFRXUWKDVDOUHDG\LPSUHVVHG &RPPHUFLDO &RGH &RPPHQWDU\ DQG /DZ 'LJHVW ˆ DFRQVWUXFWLYHWUXVWXSRQFHUWDLQDVVHWVRUDOHJLVODWXUHKDV >$@>@ GHG   m7KLVLVWKHEDVLFUXOHDQGVLPSO\ FUHDWHGDVSHFLILFVWDWXWRU\ULJKWWRKDYHSDUWLFXODUNLQGVRI SXWLWSURYLGHVWKDWWKHSXUFKDVHUJHWVZKDWHYHUKLVVHOOHUKDG IXQGV KHOG DV LI LQ WUXVW WKH FODLPDQW FDQQRW SURSHUO\ WR JLYHl  s$ %U\DQW sU $QQRWDWLRQ ,PSRVLWLRQ RI UHSUHVHQWWRWKHEDQNUXSWF\FRXUWWKDWKHZDVDWWKHWLPHRI &RQVWUXFWLYH 7UXVW LQ 3URSHUW\ %RXJKW ZLWK 6WROHQ RU WKHFRPPHQFHPHQWRIWKHFDVHDEHQHILFLDU\RIDFRQVWUXFWLYH (PEH]]OHG)XQGV$/5    VWDWLQJWKDWmLID WUXVWKHOGE\WKHGHEWRUl  WKLHIVWHDOVIXQGVDQGXVHVWKHPWRSXUFKDVHRWKHUSURSHUW\WKH RZQHUFDQQRWIROORZWKHIXQGVDQGKHLVOHIWWRKLVUHPHG\ %HFDXVHWKH.LWFKHQVFOHDUO\KDYHQRWKDGDFRXUWGHFODUH DJDLQVWWKHWKLHIZKRDOWKRXJKKHKDGQRWLWOHWRWKHVWROHQ DFRQVWUXFWLYHWUXVWDVWRWKHVHSURFHHGVSUHSHWLWLRQWKHUHLV IXQGVGRHVKDYHWLWOHWRWKHSURSHUW\SXUFKDVHGWKHUHZLWKl QRDFWLRQWKDWWKHVWDWHFRXUWFRXOGWDNHZKLFKZRXOGDIIHFW 8QLWHG6WDWHVY%ULPEHUU\ )G o  WK&LU WKHLUGLVSRVLWLRQ(YHQLIDVWDWHFRXUWZHUHWRILQGWKDWWKH    REVHUYLQJWKDWmZKHQDQHPEH]]OHUSXUFKDVHVSURSHUW\ FRQVWUXFWLYHWUXVWDURVHDWWKHWLPHRIWKHWKHIW,QUH2PHJDV ZLWK VWROHQ IXQGV WKH SURSHUW\ PD\ EH VXEMHFWHG WR D VWDWHVWKDWWKLVLVLUUHOHYDQWDVEDQNUXSWF\ODZFRQWUROV6HH FRQVWUXFWLYHWUXVWLQIDYRURIWKHYLFWLPlEXWFRQFOXGLQJWKDW LG DW o FRQFOXGLQJ WKDW IRU WKH SXUSRVHV RI XQWLO WKLV RFFXUV WKH YLFWLP PHUHO\ KDV D FODLP WRnUDWKHU %DQNUXSWF\ ODZ D FRQVWUXFWLYH WUXVW GRHV QRW H[LVW XQWLO WKDQDQLQWHUHVWLQnVXFKSURSHUW\ &RVWHOOY)LUVW1DWLRQDO MXGLFLDOO\ GHFUHHG  VHH DOVR LG DW o *X\ s %DQNRI0RELOH6RG $OD   QRWLQJWKDW &RQFXUULQJ  GLVDJUHHLQJZLWKWKHPDMRULW\jVDSSURDFKDQG ZKLOHDWKLHIFRXOGQRWDFTXLUHWLWOHWRVWROHQPRQH\WKHWKLHI LQVWHDG UHO\LQJ RQ KLV EHOLHI WKDW XQGHU .HQWXFN\ ODZ FRXOGDFTXLUHWLWOHWRODQGSXUFKDVHGZLWKWKHVWROHQPRQH\ FRQVWUXFWLYHWUXVWVGRQRWFRPHLQWRH[LVWHQFHXQWLOLPSUHVVHG 7KH5HVWDWHPHQW )LUVW RI5HVWLWXWLRQ &RQVFLRXV:URQJGRHU E\DFRXUW &RQVHTXHQWO\,PXVWGLVDJUHHZLWKWKHPDMRULW\ †     SURYLGLQJ WKDW ZKHQ mD SHUVRQ ZURQJIXOO\ RSLQLRQRQWKLVLVVXH,ZRXOGUHWDLQWKHVWD\LQEDQNUXSWF\DV WRWKHVHSURFHHGV7RGRRWKHUZLVHLVWRLJQRUH,QUH2PHJDV 7KH GHEWRU KDG OHJDO WLWOH  WKDW LV HQRXJK WR LQFOXGH VXFK SURFHHGVLQWKHEDQNUXSWF\HVWDWH8QGHU,QUH2PHJDVD LQFRUSRUDWLRQ 7KH SURSHU GLVSRVLWLRQ RI WKH  ZLOO EH GLVFXVVHG IXUWKHU EHORZ  ,QUH1HZSRZHU 1RV  1RV  ,QUH1HZSRZHU 

GLVSRVHVRISURSHUW\RIDQRWKHUNQRZLQJWKDWWKHGLVSRVLWLRQ $VGLVFXVVHGGHEWRUQHYHUKDGDOHJDOLQWHUHVWLQVXFKIXQGV LV ZURQJIXO DQG DFTXLUHV LQ H[FKDQJH RWKHU SURSHUW\l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†DWQ GHG  6XSS  FROOHFWLQJ VXFKSURFHHGVDUHSDUWRIGHEWRUjVEDQNUXSWF\HVWDWHDQGDUH FDVHVVWDQGLQJIRUWKLVSURSRVLWLRQ +RZHYHUXQGHU,QUH WKXV VXEMHFW WR DQ DXWRPDWLF VWD\ LQ EDQNUXSWF\ XQGHU  2PHJDV D FRQVWUXFWLYH WUXVW LV DQ HTXLWDEOH LQWHUHVW WKDW 86&†6HH,QUH2PHJDV)GDWo H[HPSWVSURSHUW\IURPWKHEDQNUXSWjVHVWDWHXQGHU† G  RQO\LIWKHWUXVWLVGHFODUHGE\DFRXUWLQDVHSDUDWHSUHSHWLWLRQ % SURFHHGLQJRUDVWDWHVWDWXWHSURYLGHVWKDWWKHSURSHUW\LVWREH KHOGLQWUXVWIRUDSDUWLFXODUSXUSRVH,QUH2PHJDV)G , PXVW GLVDJUHH ZLWK P\ FROOHDJXHV KRZHYHU LQ WKHLU DWo DVVHUWLRQWKDWWKHDXWRPDWLFVWD\VKRXOGEHOLIWHGZLWKUHVSHFW WRSURSHUW\WKDWGHEWRUSXUFKDVHGZLWKVWROHQIXQGV,QKHU 7KXVZHKROGWKDWWKHEDQNUXSWF\FRXUWHUUHGLQFRQFOXGLQJ VHSDUDWHRSLQLRQ ZKLFKLVWKHRSLQLRQRIWKHFRXUWRQWKLV WKDWPRQH\ZKLFKGHEWRUHPEH]]OHGIURP13,ZDVSDUWRI LVVXH sXGJH %DWFKHOGHU REVHUYHV WKDW DQ DXWRPDWLF VWD\ LQ GHEWRUjVEDQNUXSWF\HVWDWH&RQVHTXHQWO\ZHDOVRKROGWKDW EDQNUXSWF\PD\EHOLIWHGmZKHUHWKHGHEWRUGRHVQRWKDYHDQ WKHGHEWRUjVEDQNUXSWF\HVWDWHKDVQRSURSHUW\LQWHUHVWLQVXFK HTXLW\ LQWHUHVW LQ WKH SURSHUW\ DQG WKH SURSHUW\ LV QRW HPEH]]OHGIXQGVZKLFKDUHQRZLQWKHKDQGVRIWKLUGSDUWLHV QHFHVVDU\ WR DQ HIIHFWLYH UHRUJDQL]DWLRQl  6HH  86& † G $VsXGJH%DWFKHOGHUjVQRWHVZHKDYHFRQFOXGHG WKDWWKHGHEWRUGLGQRWREWDLQHTXLWDEOHWLWOHWRWKHSURFHHGVDW  LVVXH DQG mWKHUH LV QR UHRUJDQL]DWLRQ SUHVHQW LQ WKLV FDVH :H QRWH WKDW 0RUJDQ Y +RGJHV GRHV QRW SURYLGH DXWKRULW\ WR WKH EHFDXVH GHEWRU LV OLTXLGDWLQJ KLV DVVHWV XQGHU &KDSWHU l FRQWUDU\ $V GLVFXVVHG DERYH LQ 0RUJDQ WKH RULJLQDO RZQHU ZDV VXLQJ +RZHYHUUHPRYLQJWKHDXWRPDWLFVWD\LQEDQNUXSWF\VHUYHV WKH SXUFKDVHUV WR UHFRYHU WKH YDOXH RI JRRGV WKDW WKH SXUFKDVHU ERXJKW IURP WKH WKLHI 7KH SXUFKDVHUV GHIHQGHG RQ WKH JURXQGV WKDW WKH RULJLQDO QRSXUSRVHZLWKUHVSHFWWRSURSHUW\GHEWRUSXUFKDVHGZLWK RZQHU KDG HQWHUHG LQWR D FRQWUDFW QRW WR VXH WKH SXUFKDVHUV IRU WKH YDOXH VWROHQIXQGV$VZHQRWHGDERYHGHEWRUFOHDUO\KDVOHJDOWLWOH RI WKH VWROHQ KRUVHV LI WKH\ KDQGHG RYHU WKH RULJLQDO RZQHUj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s$ %U\DQW sU $QQRWDWLRQ ,PSRVLWLRQ RI &RQVWUXFWLYH 7UXVW LQ 3URSHUW\ %RXJKW ZLWK 6WROHQ RU (PEH]]OHG )XQGV   $/5 G    m>$@ VDOH E\ D WKLHI RU E\ DQ\ SHUVRQ FODLPLQJ ,Q GUDZLQJ WKLV FRQFOXVLRQ ZH PHUHO\ KROG WKDW GHEWRUjV EDQNUXSWF\ XQGHU D WKLHI GRHV QRW YHVW DQ\ WLWOH LQ WKH SXUFKDVHU DV DJDLQVW WKH HVWDWH KDV QR SURSHUW\ LQWHUHVW LQ VXFK IXQGV DQG H[SUHVV QR RSLQLRQ DV WR RZQHUl HPSKDVLV DGGHG  7KH FDVH GRHV QRW VSHDN WR WKH LVVXH RI WKH PRYDQWVj ULJKW YLVDYLV WKLUG SDUWLHV WR VXFK IXQGV RU SURSHUW\ WUDFHDEOH WLWOH D WKLHI KDV LQ WKH SURFHHGV REWDLQHG ZLWK VWROHQ IXQGV WR WKHP