5(&200(1'(' )25 )8//7(;7 38%/,&$7,21  6LQJOHWRQY6PLWKHWDO 1R  3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

(/(&7521,& &,7$7,21  )(' $SS 3 WK &LU

2QUHPDQGWKHPDJLVWUDWHMXGJHPXVWILUVWGHWHUPLQHLQ )LOH 1DPH DS

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n(GPXQG$6DUJXVsU'LVWULFWsXGJH $UJXHG 1RYHPEHU 'HFLGHGDQG)LOHG 0DUFK %HIRUH .(,7+%2**6DQG&2/(&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('   'DYLG $ *ROGEHUJHU $&/8 2) 2+,2 )281'$7,21,1&&ROXPEXV2KLRIRU$SSHOODQWs (ULF+ROORZD\2)),&(2)7+($77251(<*(1(5$/ &255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR IRU$SSHOOHHV21%5,() 'DYLG$*ROGEHUJHU$&/8 2)2+,2)281'$7,21,1&&ROXPEXV2KLR$QQH0

  6LQJOHWRQY6PLWKHWDO 1R  1R  6LQJOHWRQY6PLWKHWDO 

'R\OH2+,267$7(81,9(56,7<&2//(*(2)/$: 7KH 3/5$ ZDV PHDQW WR UHJXODWH 6LQJOHWRQjV OLWLJDWLRQ &/,1,&$/352*5$06&ROXPEXV2KLRIRU$SSHOODQW EHKDYLRU,QSDUWLFXODUWKHSURYLVLRQVRQFRVWVDQGIHHVZHUH s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mHYHQWVFRPSOHWHGlSULRUWR0DUFK  %2**6&LUFXLWsXGJH)ROORZLQJDQHJDWLYHMXU\YHUGLFW LQ KLV FLYLO WULDO FRVWV ZHUH LPSRVHG DJDLQVW DSSHOODQW 7KHUHPDLQLQJDPELJXLW\KDVWRGRZLWKZKHQmHYHQWVZHUH 6LQJOHWRQ SXUVXDQW WR WKH 3ULVRQHU /LWLJDWLRQ 5HIRUP $FW FRPSOHWHGlRUmH[SHFWDWLRQVEHFDPHVHWWOHGlZLWKUHJDUGWR m3/5$l 86&†  I 6LQJOHWRQDSSHDOVDQRUGHU RQH RU DOO RI WKH FRVWV LQ WKLV FDVH  8QOLNH ZLWK WKH IHH WKDWGHQLHGKLPUHOLHIIURPFRVWVRIDUJXLQJWKDW VHHNLQJDWWRUQH\VLQ0DUWLQWKHFUHDWLRQRIWKHFRVWVKHUHZDV LPSRVLWLRQRIWKHFRVWVZDVDPLVDSSOLFDWLRQRIWKH3/5$DQG QRWXQGHUFRPSOHWHFRQWURORIWKHLQGLYLGXDOEHLQJUHJXODWHG LQWHUSUHWLYHFDVHODZ,QWKHDOWHUQDWLYHKHDUJXHVWKDWVXFK E\WKHQHZUXOH/RJLFDOO\IRUWKHSXUSRVHVRIUHWURDFWLYH DQ DSSOLFDWLRQ ZRXOG EH DQ XQFRQVWLWXWLRQDO EXUGHQ RQ KLV DSSOLFDWLRQDQHYHQWZRXOGEHmFRPSOHWHGlZKHQ6LQJOHWRQ DFFHVVWRWKHFRXUWV,QWKHVHFRQGDOWHUQDWLYHKHFODLPVWKDW WRRNDQDFWLRQWKDWPDGHWKHRWKHUSDUW\j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jVUHWURDFWLYLW\FODLPWRKDYHPHULWDQGUHPDQG WKH3/5$7KHSURYLVLRQVRIWKH3/5$FRPSHOOLQJSD\PHQW IRUIXUWKHUSURFHHGLQJV LQ IXOO PD\ RQO\ EH SHUPLVVLEO\ DSSOLHG WR WKH FRVWV LQ WKH WKLUG FDWHJRU\  $SSHOODQW LV IXOO\ UHVSRQVLEOH IRU FRVWV , GHWHUPLQHG WR EH LQ WKH WKLUG FDWHJRU\  6LQJOHWRQ PD\ FKDOOHQJHXQGHU:HDYHUWKRVHFRVWVGHWHUPLQHGWREHLQWKH 7KHPHULWVRI6LQJOHWRQjVFRPSODLQWDUHQRWDWLVVXHKHUH ILUVWRUVHFRQGFDWHJRU\:HDYHUGLUHFWHGWKDWSRVWWD[DWLRQ EXWPD\EHXVHIXOIRUFRQWH[W6LQJOHWRQDQ2KLRSULVRQHULV FKDOOHQJHVEHKHDUGEHIRUHWKHMXGLFLDORIILFHUZKRRULJLQDOO\ D GLDJQRVHG DVWKPDWLF ZKR ZDV LQFDUFHUDWHG LQ WKH DOORZHGWKHSODLQWLIIWRSURFHHGLQIRUPDSDXSHULV )G &RUUHFWLRQDO5HFHSWLRQ&HQWHULQ2ULHQW2KLRLQ +H DW6LQJOHWRQZDVJUDQWHG,)3VWDWXVRQ6HSWHPEHU FODLPHG WR KDYH UHTXHVWHG D QRQVPRNLQJ HQYLURQPHQW DQG  E\RUGHURI0DJLVWUDWHsXGJH0DUN$EHOZKRLVQRZWKH EHHQ GHQLHG LW  ,QGHHG KH VDLG WKH GHIHQGDQWV ZKR DUH SURSHURIILFHUWRDGMXGLFDWH6LQJOHWRQjVFKDOOHQJH FRUUHFWLRQVVHUJHDQWVWROGRWKHULQPDWHVWRmVPRNHKLPRXWl  6LQJOHWRQY6PLWKHWDO 1R  1R  6LQJOHWRQY6PLWKHWDO 

FRQWLQXLQJDELOLW\WRZLWKGUDZLIWKH\WKRXJKWWKH\ZRXOGQRW EHFDXVH KH ZDV mDQ DVVKROHl  6LQJOHWRQ FODLPHG WKDW KLV EHSDLGHQRXJKXQGHUWKHQHZUXOHV6HH86DW DVWKPDZDVZRUVHQHGDVDUHVXOWRIWKHFLJDUHWWH VPRNHWR ZKLFK KH ZDV H[SRVHG E\ GHIHQGDQWVj DOOHJHG DFWV RI 0DUWLQ SURWHFWHG WKH VHWWOHG H[SHFWDWLRQV RI DWWRUQH\V FRPPLVVLRQDQGRPLVVLRQ,Q 6LQJOHWRQILOHGDFLYLO UHJDUGLQJ WKH EHQHILWV RI ILOLQJ D SULVRQHU VXLW DQG WKHUH ULJKWV FODLP XQGHU  86& †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j UXOHG DJDLQVW 6LQJOHWRQ  6PLWK DQG 5RVV WKHQ PRYHG WR GHSRVLWLRQRIKLPPRQWKVEHIRUHWKH3/5$EHFDPHHIIHFWLYH UHFRYHUIURPWKHDSSHOODQWWKHFRVWVWKH\KDGLQFXUUHGIRUWKH GHSRVLWLRQVWDNHQIURP6LQJOHWRQDQGKLVZLWQHVVHVDQGIRU 3HUVXDVLYHDXWKRULW\YDULHVRQUHWURDFWLYHDSSOLFDWLRQVRI WKHGHSRVLWLRQVWDNHQIURPWKHGHIHQGDQWVDQGWKHLUPHGLFDO WKH 3/5$jV SUHYDLOLQJSDUW\ FRVW SURYLVLRQV  ,Q DQ H[SHUW7KH3/5$ZDVKHOGWRJRYHUQWKHLPSRVLWLRQRIWKH XQSXEOLVKHGGHFLVLRQDSDQHORIWKLVFRXUWKHOGWKDWWKHQHZ FRVWVZKLFKZHUHWD[HGDJDLQVW6LQJOHWRQ7KH6WDWHRI2KLR PHWKRG IRU SD\LQJ FRVWV LPSRVHG E\ WKH FRXUW mPHUHO\ ZKLFKGHIHQGHGWKHDFWLRQDJDLQVWWKHFRUUHFWLRQVVHUJHDQWV HVWDEOLVKHVDSURFHGXUHlDQGLWWKHUHE\XSKHOG LQFRVWV VWDQGVWRUHFHLYHWKHDZDUG GHVSLWHWKHIDFWWKDWWKHFRPSODLQWKDGEHHQILOHGIRXU\HDUV SULRUWRWKH3/5$  6HH 6DQGHUVY6HDEROG1R  6SHFLILFDOO\FRVWVZHUHDVVHVVHGIRU   WKHGHIHQGDQWVj   :/  WK &LU $XJ    XQSXEOLVKHG  GHSRVLWLRQ RI WKH SODLQWLIIDSSHOODQW RQ sDQXDU\    +RZHYHURQHRIRXUGLVWULFWFRXUWGHFLVLRQVSULRUWR6DQGHUV  WKHGHIHQGDQWVjGHSRVLWLRQVRIWKHGHIHQGDQWVDSSHOOHHVRQ KHOG WR WKH RSSRVLWH HIIHFW o mWKH 6L[WK &LUFXLWjV UHFHQW 1RYHPEHU    WKHGHIHQGDQWVjGHSRVLWLRQVRIIRXU DGPLQLVWUDWLYHRUGHUGRHVFRQWDLQLQGLFDWLRQVWKDWWKH6L[WK LQPDWHVRQsDQXDU\    WKHGHIHQGDQWVjGHSRVLWLRQV &LUFXLWZRXOGKROGWKDWLQFDVHVILOHGSULRUWRWKHHQDFWPHQW RI WZR RWKHU LQPDWHV RQ )HEUXDU\       WKH RI WKH 3/5$ SUH3/5$ VWDQGDUGV VKRXOG EH DSSOLHG LQ GHIHQGDQWVj GHSRVLWLRQ RI 6LQJOHWRQjV PHGLFDO H[SHUW RQ GHWHUPLQLQJZKHWKHUWRUHOLHYHDSULVRQHUOLWLJDQWRIRWKHUZLVH )HEUXDU\   DQG  GHIHQGDQWVjWZRGHSRVLWLRQV RQH WD[DEOHFRVWVRQWKHEDVLVRILQGLJHQF\l:LOFR[Y6WUDXE DYLGHRGHSRVLWLRQ RIWKHLURZQPHGLFDOH[SHUWRQ0DUFK 1R  86'LVW/H[LV  :'0LFK    6LQJOHWRQ GRHV QRW FKDOOHQJH WKH QHFHVVLW\ RI WKHVH sXQ     UHIHUULQJ WR ,Q UH 3/5$   7KH 6DQGHUV FRVWVRUSUHVHQWOHJDOFKDOOHQJHVWRDQ\RIWKHPLQGLYLGXDOO\ RSLQLRQ ZDV KDQGHG GRZQ RQO\ VKRUWO\ DIWHU WKH 6XSUHPH &RXUWjVRSLQLRQLQ0DUWLQDQGPDNHVQRUHIHUHQFHWRLWRUWR 7KHVH GHSRVLWLRQV EHJDQ DIWHU sXGJH %HFNZLWK WKHQ LWVUHQHZHGHPSKDVLVWKDWSURFHGXUDOODEHOLVQRWHQRXJKWR KDQGOLQJWKHFDVH GHQLHGDGHIHQVHPRWLRQWRUHFRQVLGHUWKH LQVXODWH QHZ UXOHV  VSHFLILFDOO\ 3/5$ UXOHV  IURP D PDJLVWUDWH MXGJHjV UHSRUW DQG UHFRPPHQGDWLRQ GHQ\LQJ UHWURDFWLYLW\LQTXLU\6HH86DW 1RUGLG6DQGHUV VXPPDU\MXGJPHQW7KLVRFFXUUHGRQsDQXDU\ DQG XQOLNH:LOFR[DQDO\]HRXULQVWUXFWLRQVLQ,QUH3/5$ZKLFK ZDV IROORZHG E\ DQ RUGHU WR ILOH D ZULWWHQ VWDWHPHQW RQ PDUNHG WKH DFWXDO GHPLVH RI WKH :HDYHU SURFHGXUH UHDGLQHVVWRSURFHHGWRWULDO sDQXDU\  6LQJOHWRQjV 0RUHRYHU EHFDXVH WKH FRPSODLQW LQ 6DQGHUV ZDV GHHPHG GHSRVLWLRQZDVQRWLFHGWRWKHFRXUWWKHQH[WGD\DQGWDNHQWZR IULYRORXVWKHUHZHUHPXOWLSOHJURXQGVRQZKLFKWRLPSRVH ZHHNVODWHU7KHGHSRVLWLRQVRIWKHFRUUHFWLRQVRIILFHUVZHUH FRVWVRQWKHSODLQWLII QRWQRWLFHG  6LQJOHWRQY6PLWKHWDO 1R  1R  6LQJOHWRQY6PLWKHWDO 

:KHQ6LQJOHWRQLGHQWLILHGKLVZLWQHVVHVLVQRWDSSDUHQWLQ RIWKHSULVRQHUjVFDSDFLW\WRSD\WKHFRVWVDVVHVVHG+RZHYHU DOO FDVHV IURP WKH UHFRUG EHIRUH XV  ,Q D QRWLFH ILOHG WKHVWDWXWHKDVVXSHUVHGHG:HDYHUl,QUH3/5$)GDW sDQXDU\ KHLGHQWLILHG7LPRWK\6ORQH GHSRVHGRQ  FLWDWLRQRPLWWHG   ,Q WKLVRUGHUZHFOHDUO\VDZWKH    DQG DOVR PHQWLRQHG KLV ZULW ZULWHU 'DUU\O :HDYHUSURFHGXUHDVFRQVLVWLQJRIWZRSKDVHV DVVHVVPHQW %ODQNHQVKLS GHSRVHG  ,QDQRWLFHILOHGRQsXQH DQGWKHQIXUWKHUmGHWHUPLQDWLRQl,QUH3/5$GLGQRWKLQJWR  6LQJOHWRQLGHQWLILHG7UR\+DUVKH\ GHSRVHG   FKDOOHQJH RU WR FKDQJH  GLVFUHWLRQDU\ DVVHVVPHQW EXW LW 6ORQH DJDLQ DQG KLV ROG FHOO PDWH +RZDUG %RGGLH sU HOLPLQDWHGWKH:HDYHUSURFHGXUHIRUmGHWHUPLQDWLRQl+HQFH GHSRVHG   RXUODWHUVWDWHPHQWLQ7DOOH\%H\Y.QHEO)G WK&LU WKDWWKHmSULVRQHUjVDELOLW\WRSD\WKHFRVWVLV $WWKHFRQFOXVLRQRIWKHWULDOWKHGHIHQGDQWSUHVHQWHGD%LOO QRORQJHUDQLVVXHlSURSHUO\UHIHUVWRHOLPLQDWLRQRIWKLVSRVW RI &RVWV IRU    7KH FOHUN RI WKH FRXUW GLVDOORZHG DVVHVVPHQWFKDOOHQJHoLQGLJHQF\VWLOOFRXOGEH DQGZDVIRU VRPHFRVWVDQGDVVHVVHG6LQJOHWRQ 2QSODLQWLIIjV 6LQJOHWRQ mDQLVVXHlIRUWKHH[HUFLVHRIWULDOFRXUWGLVFUHWLRQ PRWLRQWRUHWD[FRVWVWKHWULDOMXGJHDSSDUHQWO\ZDVZLOOLQJ WRFRQVLGHULQGLJHQF\DVDIDFWRUIDYRULQJGHQLDORIFRVWV7KH $OVRLQRXUDGPLQLVWUDWLYHRUGHUZHUHTXLUHGSODLQWLIIVDV MXGJHQRWHGKRZHYHUWKDWSXUVXDQWWRKLVLQWHUSUHWDWLRQRI RI0DUFK WRILOHDIRUPWKDWZRXOGZDLYHREMHFWLRQWR RXUUXOHLQ7DOOH\%H\Y.QHEO)G WK&LU mIHHDVVHVVPHQWlE\WKHWULDOFRXUWDQGZDLYHREMHFWLRQWR  DQ\DZDUGZRXOGQRWEHVXEVHTXHQWO\FKDOOHQJHDEOHRQ mWKH ZLWKGUDZDO RI IXQGV IURP WKH WUXVW DFFRXQW E\ SULVRQ WKHEDVLVRILQDELOLW\WRSD\$IWHUFRQVLGHULQJVHYHUDOIDFWRUV RIILFLDOV WR SD\ WKH SULVRQHUjV FRXUW IHHV DQG FRVWVl ,Q UH DQG GLVDOORZLQJ RQH RI WKH FOHUNjV DVVHVVPHQWV DV 3/5$)GDW7DNHQZLWKWKHIRUHJRLQJWKHQLW XQDXWKRUL]HG KH DZDUGHG  WR WKH GHIHQGDQWV ZRXOGVHHPWKDWLWLVWKLVRUGHUWKDWUHSUHVHQWVWKHmQHZUXOHl 6LQJOHWRQjV FRPSODLQWV DUH QRW GLUHFWHG DW WKH SDUWLFXODU WKDWVKRXOGEHDVVHVVHGIRUUHWURDFWLYHHIIHFWQDPHO\ZKHWKHU FDOFXODWLRQVWKDWOHGWR WKLVILJXUHEXWDWWDFNWKHHTXLWDEOH WKHHOLPLQDWLRQRIWKHSRVWDVVHVVPHQWFKDOOHQJHWRWD[DWLRQ VWDWXWRU\DQGFRQVWLWXWLRQDOJURXQGVIRUWD[LQJKLPZLWKVR RI FRVWV EDVHG RQ DELOLW\ WR SD\ DWWDFKHG QHZ OHJDO ODUJHDVXP FRQVHTXHQFHVWRHYHQWVWKDWKDGDOUHDG\RFFXUUHGE\0DUFK  LQ6LQJOHWRQjVFDVH 6LQJOHWRQLVDQLQGLJHQW DIDFWQRWGLVSXWHGE\GHIHQGDQWV ZKRZDVJUDQWHGLQIRUPDSDXSHULVVWDWXVWRILOHKLVVXLW+LV 7KH6XSUHPH&RXUWjVDQDO\VLVLQ0DUWLQLVLQVWUXFWLYHLQ DYHUDJHPRQWKO\EDODQFHLQKLVSULVRQDFFRXQWLQWKHPRQWKV UHVROYLQJ WKLV FDVH  7KHUH VXFFHVVIXO SODLQWLIIV VRXJKW WR XSWRKLVILOLQJZDV6LQJOHWRQLVVHUYLQJDWR DYRLG WKH 3/5$jV OLPLWV RQ DWWRUQH\ IHHV LQ D VLWXDWLRQ LQ \HDUVHQWHQFH ZKLFKVRPHRIWKHZRUNKDGRFFXUUHGSULRUWRWKH3/5$DQG VRPHDIWHU WKHFDVHKDGEHHQILOHGPDQ\\HDUVSULRUWRWKH ,, 3/5$ EXW WKH ELOO RI FRVWV KDG EHHQ VXEPLWWHG DIWHU WKH 3/5$ 7KH&RXUWUXOHGWKDWWKH3/5$OLPLWVGLGQRWDSSO\ 6WDQGDUGRI5HYLHZ WRZRUNGRQH mHYHQWVFRPSOHWHGl SULRUWRWKH3/5$EXWGLG DSSO\WRZRUNGRQHDIWHUWKH3/5$VLQFHWKHDWWRUQH\VKDGD :HUHYLHZDGLVWULFWFRXUW VDZDUGRIFRVWVIRUDQDEXVHRI GLVFUHWLRQsRQHVY&RQWLQHQWDO&RUS )G WK&LU  $EXVHRIGLVFUHWLRQLVGHILQHGDVDGHILQLWH DQGILUPFRQYLFWLRQWKDWWKHWULDOFRXUWFRPPLWWHGDFOHDUHUURU  RIMXGJPHQW%RZOLQJY3IL]HU,QF)G WK $UJXDEO\ OLWLJDQWV VKRXOG KDYH EHHQ RQ QRWLFH IURP WKH GDWH RI WKLV RUGHU )HEUXDU\  +RZHYHU VLQFH WKH RUGHU KDV DQRWKHU GDWH 0DUFK  &LU    XSKROGLQJ WKH DZDUG RI DWWRUQH\jV IHHV  RQ ZKLFK LW ZDV LQWHQGHG WR EH HIIHFWLYH WKLV JRYHUQV  6LQJOHWRQY6PLWKHWDO 1R  1R  6LQJOHWRQY6PLWKHWDO 

RIIDLUQRWLFHUHDVRQDEOHUHOLDQFHDQGVHWWOHGH[SHFWDWLRQVjl 6LQJOHWRQjVVHFRQGDUJXPHQWDGGUHVVHVWKHFRQVWLWXWLRQDOLW\ ,GDW TXRWLQJ/DQGJUDI86DW  RI WKH 3/5$  :H UHYLHZ GH QRYR D FKDOOHQJH WR WKH FRQVWLWXWLRQDOLW\ RI D IHGHUDO VWDWXWH  6HH 8QLWHG 6WDWHV Y ,I WKHUH KDG EHHQ QR 3/5$ RU LI 6LQJOHWRQjV FDVH KDG %URZQ)G  WK&LU  :KHWKHUWKH SURFHHGHGDVRULJLQDOO\VFKHGXOHGLQ2FWREHU KLVDFWLRQ 3/5$E\LWVWHUPVPD\EHUHWURDFWLYHO\DSSOLHGLQWKLVFDVH ZRXOGKDYHEHHQFRYHUHGE\WKHSURFHGXUHVLQ:HDYHU  WR JRYHUQ WKH WD[DWLRQ RI FRVWV LV D TXHVWLRQ RI VWDWXWRU\ )GDWZKLFKZDVDOVRWKHVWDWHRIWKHODZZKHQKH FRQVWUXFWLRQ VXEMHFW WR GH QRYR UHYLHZ   6HH *ORYHU Y ILOHGKLVDFWLRQ3UHVXPLQJWKDW6LQJOHWRQZRXOGKDYHORVWDW sRKQVRQ)G   WK&LU   WKHMXU\OHYHOWKHWULDOFRXUWZRXOGKDYHEHHQLQDQHTXLYDOHQW SRVLWLRQDIWHUZDUGVWRDVVHVVFRVWVDJDLQVWKLPGHVSLWHKLV 7KH HIIHFWLYH GDWH RI WKH 3/5$ LV $SULO     2XU LQGLJHQF\ DQG LQ IRUPD SDXSHULV VWDWXV  ,ELG   +RZHYHU RUGHUVSXUVXDQWWRWKH3/5$EHFDPHHIIHFWLYHRQ0DUFK :HDYHUWKHQVWDWHGWKDWVXFKDVVHVVPHQWVZRXOGEHmVXEMHFW  6HH,QUH3ULVRQ/LWLJDWLRQ5HIRUP$FW)G WRDSURPSWFKDOOHQJHDQGVKRZLQJE\VXFKSULVRQHUSODLQWLIIV   WK&LU   WKDWWKH\DUHLQFDSDEOHDVDSUDFWLFDOPDWWHUDQGDVDPDWWHURI HTXLW\RISD\LQJVXFKFRVWVl,ELG,IVXFKDVKRZLQJZDV 7KH)DFLDO&RQVWLWXWLRQDOLW\RI86& PDGHWKHSODLQWLIIVFRXOGmJDLQUHOLHIRUSDUWLDOUHOLHIIURP ††  I    I  $ VXFKDVVHVVPHQWDQGVXEVHTXHQWHIIRUWVWRFROOHFWVXFKFRVWV DZDUGHGWRVXFFHVVIXOGHIHQGDQWVl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sRQHV s  WK&LU  7KHUHLQHYDOXDWLQJWKHIHHSURYLVLRQVRI GLVVHQWLQJ  m>W@KHPDMRULW\VHHNVWRPDNHLWVKROGLQJPRUH WKH3/5$ZHIRXQGWKDWmSULVRQHUVDVVHUWLQJFLYLOFODLPVLQ SDODWDEOH E\ REVFXULQJWKHOLQHEHWZHHQLQIRUPDSDXSHULV IHGHUDOFRXUWKDYHQHYHUEHHQJXDUDQWHHGDµIUHHULGHjl,GDW SODLQWLIIV ZKR DUH SULVRQHUV DQG RWKHU LQ IRUPD SDXSHULV $VGLVFXVVHGDERYHWKH3/5$LWVHOIKDVSURYLVLRQV SODLQWLIIVl  WKDWSUHYHQWDVVHVVPHQWVIURPEHLQJVREXUGHQVRPHWKDWWKH\ ZRXOGVWRSDSULVRQHUIURPEHLQJDEOHWREULQJVXLW86& 7KH :HDYHU FKDOOHQJH DYDLODEOH WR LQ IRUPD SDXSHULV †  E   SULVRQHUFDQILOHVXLWHYHQLIKHKDVQRDVVHWVDW SODLQWLIIVLQZKLFKWKH\KDGDPHWKRGWRDYRLGVRPHRUDOORI DOO $OWKRXJKWKHLVVXHKHUHLQYROYHVFRVWVUDWKHUWKDQIHHV D GLVWULFW FRXUWjV RUGHUHG FRVWV ZDV FRQVLGHUHG WR EH DQG WKH FRVWV DUH VXEVWDQWLDO DQ\ OLWLJDQW ZRXOG EH LQFRPSDWLEOH DVWRSULVRQHUV ZLWKWKH3/5$jVFRPPDQGWKDW SUHVXPSWLYHO\OLDEOHIRUWKHVHFRVWV7KHSDUWLDOOLIWLQJRIWKH m>L@IWKHMXGJPHQWDJDLQVWDSULVRQHULQFOXGHVWKHSD\PHQWRI VXEVLG\SUHYLRXVO\HQMR\HGE\SULVRQHUOLWLJDQWVGRHVQRWGHQ\ FRVWVWKHSULVRQHUVKDOOEHUHTXLUHGWRSD\WKHIXOODPRXQW WKHPDFFHVVWRWKHFRXUWVH[FHSWWKDWOLNHDOOSRRUSHUVRQV RIWKHFRVWVRUGHUHGl86&†  I  $ :HVR WKHLUDFFHVVLVUHVWULFWHGEHFDXVHWKH\PXVWZHLJKWKHULVNV KHOGGLUHFWO\LQRXUDGPLQLVWUDWLYHRUGHURQ)HEUXDU\  DQGUHZDUGVRIWU\LQJWKHLUFODLPVLQFRXUW6HH:HDYHU  VD\LQJmZHKHOG>LQ:HDYHU@WKDWFRXUWVKDYHGLVFUHWLRQLQ )GDW +DPSWRQ)GDW QRWLQJWKDW3/5$ DVVHVVLQJ FRVWV DJDLQVW DQ XQVXFFHVVIXO SULVRQHU ZKR IRUFHVSULVRQHUWRFRQIURQWWKHVDPHFRQVLGHUDWLRQVDVRWKHU SURVHFXWHG KLV RU KHU FDVH LQ IRUPD SDXSHULV  )XUWKHU ZH FLYLOOLWLJDQWV VHHDOVR5ROOHUY*XQQ)G QRWHGWKDWWKHFRXUWVZHUHUHTXLUHGWRPDNHDGHWHUPLQDWLRQ WK &LU    XSKROGLQJ FRVW SURYLVLRQV RI WKH 3/5$  6LQJOHWRQY6PLWKHWDO 1R  1R  6LQJOHWRQY6PLWKHWDO 

0F*LOOY)DXONQHU)G WK&LU   VWDWLQJ 5HWURDFWLYH([FOXVLRQE\WKH3/5$RI3RVW$ZDUG WKDW LPSRVLQJ FRVWV DJDLQVW LQGLJHQW SULVRQHU PDNHV WKHP &KDOOHQJHV mOLNHDQ\ERG\HOVHl  3ULRUWRWKHHQDFWPHQWRIWKH3/5$LWZDVSRVVLEOHIRUDQ 6LQJOHWRQjV GLVFXVVLRQ RI WKH FDVHODZ RQ WKHVH SRLQWV LV XQVXFFHVVIXOLQGLJHQWSODLQWLIIWRKDYHDVXEVHTXHQWFKDOOHQJH LQDSSRVLWH GHDOLQJ ZLWK FDVHV VXFK DV 0XUGRFN Y WRDQDZDUGRIFRVWVWKURXJKSURRIRILQDELOLW\WRSD\6HH 3HQQV\OYDQLD 86   ZKLFKLQYDOLGDWHGRQ :HDYHU )GDW$VWKHGLVWULFWFRXUWLQWKLVFDVH )LUVW $PHQGPHQW JURXQGV VSHFLDO EXUGHQV RQ sHKRYDKjV QRWHG WKH 3/5$ HOLPLQDWHG VXFK FKDOOHQJHV WKURXJK LWV :LWQHVVHVjGLVWULEXWLRQRIUHOLJLRXVOLWHUDWXUH7KHIXQFWLRQ SURYLVLRQV UHTXLULQJ SD\PHQW LQ IXOO  +DYLQJ XSKHOG WKH RI WKH FKDOOHQJHG SURYLVLRQV RI WKH 3/5$ LV QRW WR SODFH DZDUG RI FRVWV DQG WKH FRQVWLWXWLRQDOLW\ RI WKH UHOHYDQW VSHFLDOEXUGHQVRQWKHSULVRQHUVEXWWRSXWWKHPLQWKHVDPH SURYLVLRQVRI3/5$RXULQTXLU\LVQRWDWDQHQGKRZHYHU SRVLWLRQDVRWKHU OLWLJDQWVQRUGRHVLWLQIDFWSUHYHQWWKHP EHFDXVHZHPXVWGHWHUPLQHWRZKDWH[WHQWWKH3/5$DIIHFWV IURP SHUIRUPLQJ WKH SURWHFWHG DFWLYLW\ KHUH OLWLJDWLQJ 6LQJOHWRQjVOLWLJDWLRQZKLFKLQSDUWSUHGDWHVLW FODLPV  DV WKH LQYDOLGDWHG IHHV HIIHFWLYHO\ GLG WR WKH sHKRYDKjV:LWQHVVHV 7KHUHLVDmWUDGLWLRQDOSUHVXPSWLRQlDJDLQVWUHWURDFWLYLW\ /DQGJUDIY86,)LOP3URGXFWV86   ,Q 6LQJOHWRQ DOVR SRLQWV RXW WKDW D VLGH HIIHFW RI WKH FRVW RUGHUWRDVVHVVZKHWKHUWRDSSO\DFKDQJHLQODZWRSHQGLQJ SURYLVLRQV LV WKDW WKH\ ZLOO DIIHFW PRUH KHDYLO\ WKRVH ZLWK FDVHV/DQGJUDIHVWDEOLVKHVDWZRSDUWWHVW)LUVWZHDUHWR VWURQJEXWXOWLPDWHO\XQVXFFHVVIXOFODLPV)ULYRORXVOLWLJDQWV ORRNDWZKHWKHUWKHQHZVWDWXWHVKRZVmFOHDUFRQJUHVVLRQDO ZKRVH FODLPV DUH GLVPLVVHG HDUO\ RQ ZLOO LPSRVH IHZHU LQWHQWlGHILQLQJLWVWHPSRUDOUHDFKDQGIDYRULQJUHWURDFWLYH GLVFRYHU\FRVWVVXFKDVGHSRVLWLRQVRQWKHRWKHUVLGHDQGZLOO DSSOLFDWLRQ,ELG6HFRQGLIFRQJUHVVLRQDOLQWHQWLVDEVHQW WKHUHIRUH EH OLDEOH IRU IHZHU FRVWV ZKHQ WKH RWKHU VLGH WKHLQTXLU\EHFRPHVZKHWKHUmWKHQHZSURYLVLRQDWWDFKHVQHZ SUHYDLOV  6LQJOHWRQ DUJXHVWKDW WKLV RSHUDWHV DV D JUHDWHU OHJDOFRQVHTXHQFHVWRHYHQWVFRPSOHWHGEHIRUHLWVHQDFWPHQWl GHWHUUHQWWRWKHEHWWHUFODLPV DQGWKDWFRVWSURYLVLRQVWKDWGR ,G DW   1HZ SURFHGXUDO UXOHV DUH OHVV OLNHO\ WR FUHDWH WKLVHIIHFWLYHO\GHQ\DFFHVVWRWKHFRXUWV+RZHYHUWKLVFRVW UHWURDFWLYLW\ SUREOHPV  ,G DW   +RZHYHU UHWURDFWLYLW\ VWUHQJWKUHODWLRQVKLSLVDJDLQWUXHRIDOOOLWLJDQWVDQGSRLQWV FRQFHUQV DQG DQDO\VLV DUH DOVR OHJLWLPDWHO\ DSSOLHG WR RXWWKHIXQGDPHQWDOZHDNQHVVRI6LQJOHWRQjVEURDGHUDWWDFNV SURFHGXUDOUXOHVomWKHPHUHIDFWWKDWDQHZUXOHLVSURFHGXUDO RQFRVWWD[DWLRQ&RVWVRIWKHVRUWFRQVLGHUHGKHUHDUHQRW GRHVQRWPHDQWKDWLWDSSOLHVWRHYHU\FDVHl,GDWQ  LQWHQGHG DV SXQLWLYH WKHUHIRUH DSSURSULDWHO\ VFDOLQJ DV 6LQJOHWRQVXJJHVWVZLWKWKHIULYROLW\RIDQDFWLRQ VXFKFRVWV 7KH6XSUHPH&RXUWjVVXEVHTXHQWDQDO\VLVRIWKH3/5$LQ DUHSULPDULO\FRPSHQVDWRU\&RVWWD[DWLRQLVDFRPPRQODZ 0DUWLQ Y +DGL[ FRQFOXGHG WKDW WKH m3/5$ FRQWDLQV QR H[SUHVVFRPPDQGDERXWLWVWHPSRUDOVFRSHl86   7KH&RXUWWKHUHIRUHDQDO\]HGWKHSURYLVLRQVLQ TXHVWLRQWKHUH RQDWWRUQH\jVIHHV XQGHUWKHVHFRQG/DQGJUDI  WHVWDVDOVRVHHPVDSSURSULDWHKHUH7KHUHOHYDQWTXHVWLRQ 2I FRXUVH WKLV UHODWLRQVKLS KROGV RQO\ DORQJ WKDW SDUW RI WKH FRQWLQXXP ZKLFK FRYHUV XQVXFFHVVIXO FODLPV UDQJLQJ IURP WKH PRVW WR EHFRPHV ZKHWKHU WKH FKDQJH LQ ODZ LQ WKH 6L[WK &LUFXLW OHDVW LQYDOLG RQHV o D YDOLG FODLP ZRXOG FROOHFW FRVWV DQG EHFDXVH WKH XOWLPDWHO\WUDFHDEOHWRWKHSDVVDJHRIWKH3/5$DWWDFKHGQHZ PRVW YDOLG FODLP ZLOO EH UHVROYHG VRRQHVW LW ZRXOG XVXDOO\ FROOHFW WKH IHZHVW FRVWV 6LQJOHWRQjV FODLPHG mLQMXVWLFHl LV VLPSO\ D FRQVHTXHQFH RI OHJDOFRQVHTXHQFHVWRHYHQWVFRPSOHWHGE\6LQJOHWRQLQKLV DQ LQKHUHQW IHDWXUH RI WKH DGYHUVDU\ V\VWHP WKDW PRUH GLIILFXOW FDVHV DUH FDVHSULRUWRWKHFKDQJHLQODZ,QDQVZHULQJWKLVTXHVWLRQ FHWHULV SDULEXV PRUH FRVWO\ IRU HYHU\RQH LQYROYHG SODLQWLII GHIHQGDQW ZHDUHWREHmLQIRUPHGDQGJXLGHGE\µIDPLOLDUFRQVLGHUDWLRQV DQG WKH FRXUWV   6LQJOHWRQY6PLWKHWDO 1R  1R  6LQJOHWRQY6PLWKHWDO 

6LQJOHWRQ DOVR FODLPV WKDW HYHQ LI VRPH FRVWV ZHUH WUDGLWLRQEDVHGRQPDNLQJDSUHYDLOLQJSDUW\JHQXLQHO\ZKROH DSSURSULDWH WKH WRWDO DZDUG RI FRVWV ZDV QRW  +H DOVR RU DW OHDVW FORVHU WR WKDW LGHDO LQ WKH $PHULFDQ UXOH  FRQWHQGVWKDWWKHGLVWULFWFRXUWIHOWLWFRXOGQRWJHQHUDWHDQ 0RUHRYHU DV PHQWLRQHG DERYH WKH GLVWULFW FRXUW KDV HTXLWDEOHLQWHUPHGLDWH ILJXUHEHFDXVHLWVRPHKRZWRRNWKH GLVFUHWLRQWRGHQ\ RUSHUKDSVUHGXFH FRVWVLIWKHORVLQJSDUW\ 3/5$DVFUHDWLQJDQmDOORUQRQHlUXOH 6LQJOHWRQ%UDW  KDGDSDUWLFXODUO\VWURQJFDVH7KXVWKHOHJDOV\VWHPDOUHDG\ $OWKRXJK QRW FLWHG E\ 6LQJOHWRQ GLVWULFW FRXUWV GR KDVDPHWKRGWRGHDOZLWKWKLVDOOHJHGLQHTXLW\:HWKHUHIRUH RFFDVLRQDOO\ UHPLW SDUW RI RWKHUZLVH DOORZDEOH FRVWV RQ KROG 6LQJOHWRQjV FKDOOHQJH WR WKH FRVW SURYLVLRQV RI WKH HTXLWDEOH JURXQGV LQFOXGLQJ WKH ORVLQJ SDUW\jV ILQDQFLDO 3/5$86&††  I    I  $ WREHZLWKRXW FLUFXPVWDQFHV6HHsDQVHQY3DFNDJLQJ&RUSRI$PHULFD PHULW  )6XSS 1',OO  &RXOWHUY1HZPRQW *ROG&R)6XSS   '1HY  (]ROGY $EXVHRI'LVFUHWLRQLQ7D[DWLRQRI&RVWV :ROI%ORFN6FKRUU 6ROLV&RKHQ)5' (' 3D  ,QHYDOXDWLQJDVLPLODUPRWLRQIRUFRVWVDJDLQVWD )HG 5 &LY 3  G  SURYLGHV WKDW mFRVWV RWKHU WKDQ SULVRQHUXQGHU86&†  I  $ WKH6HFRQG&LUFXLW DWWRUQH\jVIHHVVKDOOEHDOORZHGDVRIFRXUVHWRWKHSUHYDLOLQJ KDVSRLQWHGRXWWKHGLVFUHWLRQRIDFRXUWWRUHTXLUHLQGLJHQW SDUW\XQOHVVWKHFRXUWRWKHUZLVHGLUHFWVl:HKDYHKHOGWKDW SULVRQHUVWRSD\FRVWVmRUVRPHSDUWRIWKHPlLQLWVLQLWLDO mWKLV ODQJXDJH FUHDWHV D SUHVXPSWLRQ LQ IDYRU RI DZDUGLQJ FKRLFHRIDQDZDUG)HOLFLDQRY6HOVN\)G FRVWVEXWDOORZVGHQLDORIFRVWVDWWKHGLVFUHWLRQRIWKHWULDO G&LU :HGRQRWDSSHDUWRKDYHIRUELGGHQSDUWLDO FRXUWl:KLWH :KLWH,QFY$PHULFDQ+RVS6XSSO\&RUS UHPLWWDQFH RI FRVWV DV SDUW RI D GLVWULFW FRXUWjV GLVFUHWLRQ  )G   WK &LU     :H KDYH LGHQWLILHG GHVSLWHDSUHVXPSWLRQIRUWD[DWLRQRIIXOOFRVWV VHYHUDOIDFWRUVDORVLQJSDUW\PD\SXWIRUZDUGWKDWPD\EH VXIILFLHQW WR MXVWLI\ D GLVWULFW FRXUW LQ RYHUFRPLQJ WKH 6LQJOHWRQDVVHUWVWKDWWKHGLVWULFWFRXUWPLVXQGHUVWRRGWKH SUHVXPSWLRQLQIDYRURIDFRVWDZDUGLQFOXGLQJ WKHORVLQJ 3/5$jVUHTXLUHPHQWWKDWDIWHUDFRXUWFKRRVHVWRWD[FRVWV SDUW\jV JRRG IDLWK WKH GLIILFXOW\ RI WKH FDVH WKH ZLQQLQJ WKHSULVRQHUPXVWSD\LQIXOO6LQJOHWRQFODLPVWKHGLVWULFW SDUW\jVEHKDYLRUDQGWKHQHFHVVLW\RIWKHFRVWV6HHHJLG MXGJHIHOWKLVGLVFUHWLRQZDVFRQILQHGIURPHYHQFRQVLGHULQJ DW$OWKRXJKWKHDELOLW\RIWKHZLQQLQJSDUW\WRSD\ DSDUWLDODZDUG$VVXPLQJWKLVZRXOGKDYHEHHQDPLVWDNH KLVRZQFRVWVLVLUUHOHYDQWLGDWDQRWKHUIDFWRUZHLJKLQJ WKHUHLVQRHYLGHQFHWKHGLVWULFWFRXUWPDGHLW7KHGLVWULFW LQIDYRURIGHQ\LQJFRVWVLVWKHLQGLJHQF\RIWKHORVLQJSDUW\ FRXUWVLPSO\SRLQWHGRXWWKDWLWVDVVHVVPHQWVZRXOGQRWEH sRQHV )GDW$OWKRXJKFHUWDLQDVSHFWVRI:HDYHU VXEMHFWWRFKDOOHQJHRUUHGXFWLRQRQWKHEDVLVRILQDELOLW\WR Y7RRPEV )G WK&LU  KDYHEHHQ SD\,WGLGQRWDV6LQJOHWRQFODLPVDGRSWDQmDOORUQRQHl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mFORVHDQGGLIILFXOW RQHl7KHMXGJHIRXQG6LQJOHWRQjVFODLPDOWKRXJKUHDFKLQJ WKH MXU\ VWDJH ZDV QRW D GLIILFXOW RU FORVH FDVH  2Q WKH  6LQJOHWRQY6PLWKHWDO 1R  1R  6LQJOHWRQY6PLWKHWDO

TXHVWLRQRILQGLJHQF\KHVHHPVWRKDYHZHLJKHGWKHSRLQW EH IDFHG ZLWK VRPH VLJQLILFDQW SRUWLRQ RIWKH GHEW RQ WKH WKDW6LQJOHWRQjVQHHGVZLOOEHSURYLGHGIRUWKHVWDWHLQDQ\ RXWVLGHXQSURWHFWHGE\VWDWXVDVDQLQPDWH  HYHQWDQGIRXQGWKHLPSRVLWLRQRIFRVWVZRXOGQRWEHRYHUO\ EXUGHQVRPHRQ6LQJOHWRQjVOLIH6HH+DPSWRQ)GDW 7KHVL]HRIWKHDZDUGDQGWKHFLUFXPVWDQFHVLQZKLFKLWZLOO 7KHFRXUWIXUWKHUFRQVLGHUHGZKHWKHUWKHLPSRVLWLRQRI XOWLPDWHO\EHDSSOLHGVKRXOGEHHTXLWDEOHIDFWRUVLQHYDOXDWLQJ FRVWVZRXOGFKLOO6LQJOHWRQjVH[HUFLVHRIFRQVWLWXWLRQDOULJKWV WKH HIIHFW RI LQGLJHQF\  &I :HDYHU  )G DW  UHO\LQJRQRXU&LUFXLWSUHFHGHQWVLQ+DPSWRQDQG:HDYHUWR DJUHHLQJmDGLVWULFWFRXUWPD\ORRNWRVXFKIDFWRUVDVWKH ILQGWKDWWKHHIIHFWGLGQRWULVHWRWKHOHYHORIDFRQVWLWXWLRQDO µSXUSRVH RI WKH UXOHj µWKH OLWLJDWLRQ KLVWRU\j RI WKH SDUW\ YLRODWLRQ µJRRGIDLWKjDQGµWKHDFWXDO GROODUVLQYROYHGjl  HPSKDVLV VXSSOLHG  FLWDWLRQRPLWWHG $&+$5/(6 $/$1 :5,*+7 (7 6LQFHFRVWVDUHSUHVXPSWLYHO\DZDUGHGDQGWKHLVVXHLVLQ $/ )('(5$/ 35$&7,&( $1' 352&('85(† DWQ WKH GLVFUHWLRQ RI WKH WULDO FRXUW LW UHTXLUHV D VXEVWDQWLDO GHG  FLWLQJ:HDYHU 7KHORZHUFRXUWGLGQRWFOHDUO\ VKRZLQJ IRU XV WR UXOH WKDW WKLV GLVFUHWLRQ ZDV DEXVHG UHIXVHWRWDNHWKHDZDUGjVVL]HLQWRFRQVLGHUDWLRQoLWZDV *HQHUDOO\ WKLV ZRXOG UHTXLUH WKH ORZHU FRXUW LJQRULQJ WKH DZDUHRI6LQJOHWRQj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jV PLQLPDO LQFRPH6LQJOHWRQDOVRDVVHUWVWKDWWKH  )G   WK &LU    RQ DEXVH RI GLVFUHWLRQ GLVWULFWFRXUWLQFRUUHFWO\EHOLHYHGWKDWLWFRXOGQRWOHJDOO\JLYH VWDQGDUG XSKROGLQJ D  FRVW DZDUG DJDLQVW D SULVRQHU DSDUWLDODZDUGRIFRVWV LUUHVSHFWLYHRILQGLJHQF\DQGQRWLQJmZHDUHQRWFRQYLQFHG RQ WKH UHFRUG WKDW 0F*LOO ZLOO QRW HYHU EH DEOH WR SD\ WKH %HFDXVHWKHSD\PHQWSURYLVLRQVRIWKH3/5$86& RUGHU LPSRVLQJ FRVWVl   ,W LV LQ 2KLRjV LQWHUHVW WR VHH WKDW †   E    OHY\ D WZHQW\ SHUFHQW mWD[l RQ KLV PRQWKO\ 6LQJOHWRQDFTXLUHVVXIILFLHQWVNLOOVLIWKHVWDWHHYHUZDQWVWR DVVHWV DERYH  6LQJOHWRQ ZLOO EH QRW EH WKDW KHDYLO\ EH SDLG  6LQJOHWRQjV VLWXDWLRQ PD\ QRW EH JRRG EXW WKH DIIHFWHGRQDGD\WRGD\EDVLVE\WKHDZDUG7KLVHIIHFWRQ LPPHGLDWHHIIHFWRIWKHDZDUGLVPXWHG+HUHPDLQVEHWWHURII KLP LV ORQJHU LQ WLPH EXW WKH VDPH LQ VHYHULW\ DV WKH WKDQDQLPSRYHULVKHGIUHHOLWLJDQWZKRPD\EHPDGHXWWHUO\ LPSRVLWLRQXSKHOGLQ+DPSWRQ ZKLFKLQYROYHGRQO\D GHVWLWXWHE\WD[DWLRQRIFRVWVo6LQJOHWRQZLOOQRWEHGHSULYHG DZDUG ,QSULVRQRQWKH3/5$jVmH[WHQGHGSD\PHQWSODQl RIKLVKRPHRUKLVPHDQVRIOLYHOLKRRG DQGZLWKKLVQHFHVVLWLHVSURYLGHGIRU6LQJOHWRQj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mEDOORRQ SD\PHQWl RQ UHOHDVH IURP SULVRQ KDV WKH SRWHQWLDO WR FUHDWH SHUYHUVH LQFHQWLYHV GLVFRXUDJLQJ LQPDWHV IURP GRLQJ DOO WKH\ FDQ WR HDUQ DQ HDUO\ UHOHDVH GDWH