5(&200(1'(' )25 )8//7(;7 38%/,&$7,21  $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

3K\VLFLDQVY$P%GRI3RGLDWULF (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU 6XUJHU\ )LOH 1DPH DS

WRKDYHKDGDVROHO\PDOLFLRXVSXUSRVH$VWKHVHOHWWHUVZHUH 81,7('67$7(6&28572)$33($/6 LQWHQGHG IRU VRSKLVWLFDWHG SDUWLHV HDVLO\ FRXQWHUHG E\ SODLQWLIIDQGYLRODWHGQRIHGHUDOODZZHKROGWKDWWKH\GLG )257+(6,;7+&,5&8,7 QRWFRQVWLWXWHXQHWKLFDOFRQGXFWRUDmSHUVHZURQJIXODFWRU BBBBBBBBBBBBBBBBB WKH LQWHQWLRQDO GRLQJ RI D ODZIXO DFW ZLWK PDOLFH DQG XQMXVWLILHGLQODZl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n%HUQDUG$)ULHGPDQ'LVWULFWsXGJH $UJXHG 'HFHPEHU 'HFLGHGDQG)LOHG 0DUFK

  $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 1R $P&RXQFLORI&HUWLILHG3RGLDWULF  3K\VLFLDQVY$P%GRI3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 6XUJHU\ 6XUJHU\

%HIRUH 1255,6DQG*,/0$1&LUFXLWsXGJHV LOOHJDO FRQGXFW  LV VXIILFLHQW WR PDNH RXW D WRUWLRXV 0F.($*8('LVWULFWsXGJH LQWHUIHUHQFH FODLP  7KH FDVH UHOLHG RQ PRVW KHDYLO\ E\ SODLQWLIILV7UHSHOY3RQWLDF2VWHRSDWKLF+RVSLWDO0LFK BBBBBBBBBBBBBBBBB $SS1:G   ,Q7UHSHOWKHFRXUWKHOG WKDW VHQGLQJ OHWWHUV mNQRZLQJ WKHP WR FRQWDLQ IDOVH &2816(/ DOOHJDWLRQVlFRQVWLWXWHVXQHWKLFDOFRQGXFWIRUWKHSXUSRVHRI D WRUWLRXV LQWHUIHUHQFH FODLP   0LFK $SS DW   $5*8('   + /DGGLH 0RQWDJXH sU %(5*(5 1:GDW%HFDXVHWKLVFRXUWSUHYLRXVO\KHOGWKDWQRQH 0217$*8( 3KLODGHOSKLD 3HQQV\OYDQLD IRU $SSHOODQW RI WKH FKDOOHQJHG VWDWHPHQWV DUH IDOVH 7UHSHO LV HDVLO\ 3KLOLS s .HVVOHU %87=(/ /21* 'HWURLW 0LFKLJDQ IRU GLVWLQJXLVKDEOH $SSHOOHH21%5,() +/DGGLH0RQWDJXHsU%(5*(5  0217$*8( 3KLODGHOSKLD 3HQQV\OYDQLD $ODQ 0 3ODLQWLIIDOVRFLWHVWR:LONLQVRQY3RZH0LFK 6DQGDOV 6$1'$/6  /$1*(5 3KLODGHOSKLD 1:G      DV KROGLQJ WKDW WKH VHQGLQJ RI 3HQQV\OYDQLD IRU $SSHOODQW  3KLOLS s .HVVOHU /DXULH s GLVSDUDJLQJZULWWHQPDWHULDOVFDQVXSSRUWDFODLPRIWRUWLRXV 0LFKHOVRQ%87=(//21*'HWURLW0LFKLJDQ*RUGRQs LQWHUIHUHQFH  ,Q WKDW FDVH WKH GHIHQGDQW RSHUDWHG LWV RZQ :DONHU%87=(//21*%ORRPILHOG+LOOV0LFKLJDQIRU WUXFNV WR SLFN XS PLON IURP IDUPHUV DQG DOVR HPSOR\HG $SSHOOHH LQGHSHQGHQWWUXFNGULYHUVWRGRVR:KHQLWGHFLGHGWRQR ORQJHU XVH SODLQWLIIjV WUXFN WKH GHIHQGDQW LQIRUPHG GDLU\ BBBBBBBBBBBBBBBBB IDUPHUVRIWKDWIDFW:LONLQVRQ0LFKDW 1:G DW   7KH 0LFKLJDQ 6XSUHPH &RXUW KHOG WKDW LI WKH 23,1,21 GHIHQGDQWKDGPHUHO\VWRSSHGLWVEXVLQHVVUHODWLRQVKLSZLWK BBBBBBBBBBBBBBBBB WKH SODLQWLII QR OLDELOLW\ ZRXOG IROORZ EXW WKH VHQGLQJ RI $/$1 ( 1255,6 &LUFXLW sXGJH  7KH SODLQWLII DQG OHWWHUV WR SODLQWLIIjV FXVWRPHUV WR WKLV HIIHFW FRQVWLWXWHG GHIHQGDQWLQWKLVDQWLWUXVWDQGWRUWLRXVLQWHUIHUHQFHDFWLRQDUH WRULWLRXV LQWHUIHUHQFH  :LONLQVRQ  0LFK DW   ERWK SURIHVVLRQDO DVVRFLDWLRQV RI SRGLDWULVWV WKDW SURYLGH 1:GDW FHUWLILFDWLRQ VHUYLFHV  7KH $PHULFDQ &RXQFLO RI &HUWLILHG  :HEHOLHYHWKDW0LFKLJDQFRXUWVZRXOGGHFOLQHWRH[WHQG 3RGLDWULF3K\VLFLDQVDQG6XUJHRQV m$&&336l WKHSODLQWLII :LONLQVRQWRDFDVHLQZKLFKDEXVLQHVVPDLOHGPDWHULDOVWKDW ZDVIRUPHGE\GLVVDWLVILHGSRGLDWULVWVDVDQDOWHUQDWLYHWRWKH DUH EHVW FKDUDFWHUL]HG DV DGYHUWLVHPHQWV IRU LWV VHUYLFHV $PHULFDQ %RDUG RI 3RGLDWULF 6XUJHU\ m$%36l  WKH 6RPHVWDWHPHQWVFRQWDLQHGLQWKHOHWWHUVZHUHDWZRUVWWUXH GHIHQGDQW DQG EHJDQ FHUWLILFDWLRQ RI SRGLDWULVWV LQ EXW PLVOHDGLQJ  7KHVH OHWWHUV KRZHYHU ZHUH DWWHPSWV WR FRPSHWLWLRQZLWKWKH$%36LQ ,QDSUHYLRXVDSSHDO VROLFLWEXVLQHVVZKHUHDVWKHGHIHQGDQWLQ:LONLQVRQDSSHDUV WKLV FRXUW DIILUPHG LQ SDUW DQG UHYHUVHG LQ SDUW WKH GLVWULFW FRXUWjVJUDQWRIVXPPDU\MXGJPHQWLQIDYRURI$%36$P &RXQFLORI&HUWLILHG3RGLDWULF3K\VLFLDQV 6XUJHRQVY$P  $QRWKHU FDVH FLWHG E\ SODLQWLII 0RQHWWH Y $0 %DNLQJ &R /WG  )G  WK &LU    LQYROYHV FRQGXFW QRW DW LVVXH KHUH 6HH LG DW  DSSO\LQJ 0LFKLJDQ ODZ DQG KROGLQJ WKDW GHIHQGDQWjV

7KH +RQRUDEOH 'DYLG : 0F.HDJXH 8QLWHG 6WDWHV 'LVWULFW sXGJH GHFHLWIXO WDFWLFV LQ REWDLQLQJ SODLQWLIIjV FXVWRPHU OLVW FRXOG VXVWDLQ D IRU WKH :HVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ WRUWLRXV LQWHUIHUHQFH FODLP   $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 1R $P&RXQFLORI&HUWLILHG3RGLDWULF  3K\VLFLDQVY$P%GRI3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 6XUJHU\ 6XUJHU\

,,, %GRI3RGLDWULF6XUJHU\,QF)G WK&LU  7KHFDVHLVEHIRUHWKLVFRXUWDJDLQDIWHUWKHGLVWULFWFRXUWRQ ,QRUGHUWRHVWDEOLVKWRUWLRXVLQWHUIHUHQFHZLWKDEXVLQHVV UHPDQGJUDQWHGVXPPDU\MXGJPHQWRQDOOUHPDLQLQJFODLPV UHODWLRQVKLS D SODLQWLII PXVW VKRZ LQWHU DOLD WKDW WKH 7KHUHPDLQLQJLVVXHRQUHPDQGLQYROYHGZKHWKHUWKH$%36 GHIHQGDQWSHUIRUPHGDQmLOOHJDOXQHWKLFDORUIUDXGXOHQWlDFW E\ VHQGLQJ RXW PDVV PDLOLQJV H[WROOLQJ LWV YLUWXHV DQG :HLWWLQJY0F)HHWHUV0LFK$SS 1:G FULWLFL]LQJLWVULYDOVYLRODWHGVHFWLRQRIWKH6KHUPDQ$QWL    $QRWKHU0LFKLJDQFRXUWKDVH[SODLQHGWKDW 7UXVW $FW m6KHUPDQ $FWl  FRUUHVSRQGLQJ VHFWLRQV RI WKH WKH SODLQWLII PXVW DOOHJH mWKH LQWHQWLRQDO GRLQJ RI D SHU VH 0LFKLJDQ$QWLWUXVW5HIRUP$FWDQG0LFKLJDQFRPPRQODZ ZURQJIXO DFW RU WKH LQWHQWLRQDO GRLQJ RI D ODZIXO DFW ZLWK PDOLFH DQG XQMXVWLILHG LQ ODZ IRU WKH SXUSRVH RI LQYDGLQJ , SODLQWLII V FRQWUDFWXDO ULJKWV RU EXVLQHVV UHODWLRQVKLSl )HOGPDQY*UHHQ0LFK$SS 1:G 7KLVDFWLRQKDVDOHQJWK\KLVWRU\,Q SODLQWLIIILOHG    VXLWDJDLQVWGHIHQGDQWDQGWKH$PHULFDQ3RGLDWULF0HGLFDO $VVRFLDWLRQDQRUJDQL]DWLRQFORVHO\UHODWHGWRGHIHQGDQW7KH 7KHGLVWULFWFRXUWJUDQWHGVXPPDU\MXGJPHQWRQWKHWKHRU\ IDFWXDOEDVLVRIWKHFRPSODLQWUHOLHGSULPDULO\RQWKUHHPDVV WKDW GHIHQGDQWjV PDLOLQJV ZHUH FRQVWLWXWLRQDOO\ SURWHFWHG PDLOLQJVVHQWRXWE\GHIHQGDQWRYHUVHYHUDO\HDUVWREHWZHHQ VSHHFKXQGHUWKHFRPPHUFLDOVSHHFKGRFWULQH0HPRUDQGXP DQGKRVSLWDOVDQGLQVXUDQFHFRPSDQLHV3ODLQWLII 2SLQLRQ 0DU   DW   :H QHHG QRW UHDFK WKH FODLPHG WKDW WKHVH PDLOLQJV ZHUH IDOVH DQG PLVOHDGLQJ LQ FRQVWLWXWLRQDOLVVXHKRZHYHUEHFDXVHZHFRQFOXGHWKDWWKH YLRODWLRQRIWKH/DQKDP$FW86&†,QDGGLWLRQ DFWLYLW\DOOHJHGFDQQRWULVHWRWKHOHYHORIWRUWLRXVLQWHUIHUHQFH SODLQWLIIDOOHJHGWKDWWKHPDLOLQJVZHUHSDUWRIDFRQVSLUDF\WR XQGHU0LFKLJDQODZ SUHVHUYH DQG H[WHQG WKH PRQRSRO\ SRZHU RI GHIHQGDQW LQ YLRODWLRQRIVHFWLRQVDQGRIWKH6KHUPDQ$FW86& %HFDXVH ZH DIILUP VXPPDU\ MXGJPHQW RQ WKH DQWLWUXVW ††  FRUUHVSRQGLQJ VHFWLRQV RI WKH 0LFKLJDQ $QWLWUXVW FODLP SODLQWLII PXVW UHO\ RQ D QXPEHU RI FDVHV LQ ZKLFK 5HIRUP $FW 0&/ †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

PLVOHDGLQJ VWDWHPHQWV ,Q DGGLWLRQ WKH FRXUW LQ UHFRJQL]HG WKH SRWHQWLDO IRU VDOHV PDQDJHUV LQ VWRUHV WR EH GXSHG E\ WKH PLVOHDGLQJ &RQZRRG

FODLPV LQ SDUW EHFDXVH VQXII VDOHV ZHUH DQ LQVLJQLILFDQW SDUW RI WKH UHWDLO  %HFDXVH WKH 0LFKLJDQ $QWL7UXVW VWDWXWH DQG WKH 6KHUPDQ $QWL VDOHV RI WKH VWRUHV DW  $OVR WKH VWDWHPHQWV PDGH E\ WKH 867& 7UXVW $FW PLUURU HDFK RWKHU ZH DSSO\ WKH VDPH DQDO\VLV WR ERWK WKH ZHUH FKDUDFWHUL]HG DV IDOVH LQVWHDG RI WUXH EXW PLVOHDGLQJ )RU H[DPSOH IHGHUDO DQG VWDWH DQWLWUXVW FODLPV ,G

WKH VDOHV GDWD SURYLGHG E\ WKH 867& WR UHWDLOHUV ZDV LQDFFXUDWH   )G   Q WK &LU   ,Q DQ\ HYHQW 3HUFHSWURQ ,QF Y 6HQVRU $GDSWLYH

SODLQWLII KDV QRW SURYLGHG D VHSDUDWH DQDO\VLV XQGHU 0LFKLJDQjV VWDWXWH ,G 0DFKV ,QF  $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 1R $P&RXQFLORI&HUWLILHG3RGLDWULF  3K\VLFLDQVY$P%GRI3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 6XUJHU\ 6XUJHU\

MXGJPHQW RQ 6KHUPDQ $FW VHFWLRQ  FODLPV EXW UHYHUVHG WRPDNHDGHFLVLRQl7KHGHIHQGDQWGRHVQRWKDYHWKHVDPH VXPPDU\MXGJPHQWRQ6KHUPDQ$FWVHFWLRQDQG0LFKLJDQ DXWKRULW\RUSRZHUDVWKH$PHULFDQ6RFLHW\RI0HFKDQLFDO FRPPRQ ODZ FODLPV  6HFWLRQ  FODLPV ZHUH GLVPLVVHG (QJLQHHUV GLG LQ +\GUROHYHO  7KH &RXUWj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mFDOO WR DUPVl DQG WKH FRPSDQLHV DQG PDQDJHG FDUH RUJDQL]DWLRQV D SURPRWLRQDODFWLYLWLHVRIGHIHQGDQWj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

WKH$%36 VUHQHZHGPRWLRQIRUMXGJPHQWDVDPDWWHURI SUDFWLFHV DOOHJHG ZHUH VXIILFLHQW DV D PDWWHU RI ODZ WR VXVWDLQ D MXU\ ODZDQGFROOHFWGDPDJHV>XQGHUWKH/DQKDP$FW@ YHUGLFW LQ IDYRU RI &RQZRRG WKLV FLUFXLW UHDVRQHG DV IROORZV ,G DW    7KLV FRXUW WKHQ DIILUPHG WKH GLVWULFW FRXUWj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j SURGXFWV E\ QXPHURXV DYHQXHV &RQZRRG FODLP+RZHYHUZHVSHFLILFDOO\GHFOLQHGWRUHDFKWKHLVVXH SULQFLSDOO\ FRPSODLQV WKDW 867&  UHPRYHG UDFNV IURP VWRUHV ZLWKRXW WKH SHUPLVVLRQ RI VWRUH PDQDJHPHQW DQG GLVFDUGHG DQGRU GHVWUR\HG WKHVH UDFNV ZKLOH SODFLQJ &RQZRRG SURGXFWV LQ 867& UDFNV LQ DQ HIIRUW WR EXU\ &RQZRRGjV SURGXFWV DQG  $V D FRQVHTXHQFH QR FODLPV LQYROYLQJ WKH $PHULFDQ 3RGLDWULF UHGXFH WKHLU IDFLQJV  WUDLQHG WKHLU mRSHUDWLYHV WR WDNH

0HGLFDO $VVRFLDWLRQ UHPDLQ DGYDQWDJH RI LQDWWHQWLYH VWRUH FOHUNV ZLWK YDULRXV µUXVHVj VXFK DV REWDLQLQJ QRPLQDO SHUPLVVLRQ WR UHRUJDQL]H RU QHDWHQ WKH PRLVW VQXII VHFWLRQl LQ DQ HIIRUW WR GHVWUR\ &RQZRRG UDFNV  ,Q DGGLWLRQ WR GHIHQGDQWj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mUHSXWDWLRQDOl EDUULHU WR HQWU\ ,G H[FOXVLYH DJUHHPHQWV ZLWK UHWDLOHUV LQ DQ HIIRUW WR H[FOXGH ULYDOVj  $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 1R $P&RXQFLORI&HUWLILHG3RGLDWULF  3K\VLFLDQVY$P%GRI3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 6XUJHU\ 6XUJHU\

GLVWLQJXLVKHG WKH VLWXDWLRQ LQ 6FKDFKDU IURP RWKHU RIZKHWKHUWKHFKDOOHQJHGVWDWHPHQWVFRXOGDVDPDWWHURI SURIHVVLRQDODVVRFLDWLRQFDVHVLQFOXGLQJ+\GUROHYHOEHFDXVH ODZHVWDEOLVKWKDWGHIHQGDQWXVHGLOOHJDOPHDQVWRPDLQWDLQ WKH\ LQYROYHG GH IDFWR HQIRUFHPHQW GHYLFHV   ,G DW   RUDFTXLUHLWVPRQRSRO\SRZHU,GDW5HDVRQLQJWKDWD 7KHFRXUWDOVRGLVWLQJXLVKHGEHWZHHQDGYRFDF\DQGWKHDELOLW\ VHFWLRQYLRODWLRQFRXOGFRQVWLWXWHWKHmLOOHJDORUXQHWKLFDO WRHQIRUFHVWDQGDUGV FRQGXFWl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jV WRZHULQJ VHFWLRQ  YLRODWLRQ EXW GHFOLQHG WR GLVPLVV WKH WRUWLRXV UHSXWDWLRQ GRHV QRW UHGXFH LWV IUHHGRP WR VSHDN RXW LQWHUIHUHQFH FODLPV  $UJXLQJ WKDW LWV VWDWHPHQWV ZHUH 6SHHFK LQIRUPHG KHQFH DIIHFWHG GHPDQG IRU UDGLDO SURWHFWHG FRPPHUFLDO VSHHFK XQGHU WKH )LUVW $PHQGPHQW NHUDWRWRP\ EXW WKH SODLQWLIIV KDG QR HQWLWOHPHQW WR GHIHQGDQWPRYHGIRUUHFRQVLGHUDWLRQDQGWKHGLVWULFWFRXUW FRQVXPHUVjIDYRU JUDQWHGVXPPDU\MXGJPHQW7KHGLVWULFWFRXUWUHDVRQHGWKDW WKH)LUVW$PHQGPHQWDIIRUGVSURWHFWLRQWRFRPPHUFLDOVSHHFK ,GDW  FLWDWLRQRPLWWHG  WKDWGRHVQRWFRQFHUQXQODZIXODFWLYLW\DQGLVQRWLQKHUHQWO\ PLVOHDGLQJ 'HIHQGDQWFLWHVWRWHVWLPRQ\LQDGHSRVLWLRQE\SODLQWLIIjV GLUHFWRULQZKLFKKHDGPLWWHGWKDWGHIHQGDQWGLGQRWKDYHWKH ,, SRZHU WR FRQWURO D PHGLFDO ERDUG DQG GLG QRW m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m>W@KH &R 86     EDVLF SUXGHQWLDO FRQFHUQV UHOHYDQW WR ††  DQG  DUH DGPLWWHGO\ WKH VDPHl ZKLOH GLVFXVVLQJ DQ H[FOXVLYH FRQWUDFW FODLP EURXJKW XQGHU ERWK VHFWLRQV 6HFWLRQ  RI WKH 6KHUPDQ $FW PDNHV LW XQODZIXO WR 0XOWLVWDWH /HJDO 6WXGLHV ,QF Y +DUFRXUW %UDFH sRYDQRYLFK /HJDO mPRQRSROL]H RU DWWHPSW WR PRQRSROL]H RU FRPELQH RU 3URIjO 3XEOjQ ,QF  )G   WK &LU   KROGLQJ WKDW FRQVSLUHZLWKDQ\RWKHUSHUVRQRUSHUVRQVWRPRQRSROL]HDQ\ W\LQJ PD\ YLRODWH ERWK VHFWLRQV  DQG   :H EHOLHYH WKDW ERWK 6FKDFKDU DQG +\GUROHYHO DUH UHOHYDQW WR RXU DQDO\VLV EHFDXVH WKH\ ERWK GHDO ZLWK SDUWRIWKHWUDGHRUFRPPHUFHDPRQJWKHVHYHUDO6WDWHVl WKH SRWHQWLDO WR H[FOXGH FRPSHWLWLRQ DQG KDUP ULYDOV DQG WKDW LV SUHFLVHO\ 86&†$VHFWLRQPRQRSROL]DWLRQFODLPKDVWZR ZKDW LV EHLQJ DOOHJHG KHUH $V QRWHG EHIRUH PRQRSRO\ SRZHU LV LQ SDUW FRPSRQHQWV m  WKHSRVVHVVLRQRIPRQRSRO\SRZHULQWKH WKH SRZHU WR H[FOXGH  $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 1R $P&RXQFLORI&HUWLILHG3RGLDWULF  3K\VLFLDQVY$P%GRI3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 6XUJHU\ 6XUJHU\

UHOHYDQWPDUNHWDQG  WKHZLOOIXODFTXLVLWLRQRUPDLQWHQDQFH RIGHIHQGDQWKDGWKHDXWKRULW\WRH[FOXGHFRPSHWLWLRQDWWKHLU RIWKDWSRZHUDVGLVWLQJXLVKHGIURPJURZWKRUGHYHORSPHQWDV UHVSHFWLYHKRVSLWDOV$VVXFKWKH\PHUHO\DFWHGDVDGYRFDWHV D FRQVHTXHQFH RI D VXSHULRU SURGXFW EXVLQHVV DFXPHQ RU RIDQRUJDQL]DWLRQLQZKLFKWKH\KHOGPHPEHUVKLSZKLFKLV KLVWRULFDFFLGHQWl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jVRIILFLDOVDUHDVVRFLDWHGZLWKPHPEHUV KROGLQJZHMRLQWKHWZRRWKHUFLUFXLWVWKDWKDYHDGRSWHGWKLV RIWKHLQGXVWULHVUHJXODWHGE\$60(jVFRGHV$OWKRXJK GH PLQLPLV SUHVXPSWLRQ  ,Q 1DWLRQDO $VVRFLDWLRQ RI XQGRXEWHGO\PRVWVHUYH$60(ZLWKRXWFRQFHUQIRUWKH 3KDUPDFHXWLFDO0DQXIDFWXUHUVY$\HUVW/DERUDWRULHV LQWHUHVWV RI WKHLU FRUSRUDWH HPSOR\HUV VRPH PD\ ZHOO YLHZWKHLUSRVLWLRQVZLWK$60(DWOHDVWLQSDUWDVDQ RSSRUWXQLW\WREHQHILWWKHLUHPSOR\HUV:KHQWKHJUHDW  ,Q RSSRVLWLRQ SODLQWLII UHOLHV KHDYLO\ RQ ,QWHUQDWLRQDO 7UDYHO LQIOXHQFH RI $60(jV UHSXWDWLRQ LV SODFHG DW WKHLU $UUDQJHUV ,QF Y :HVWHUQ $LUOLQHV ,QF  )G  WK &LU    GLVSRVDOWKHOHVVDOWUXLVWLF RI $60(jVDJHQWVKDYHDQ ,Q WKDW FDVH WKH HLJKWK FLUFXLW KHOG WKDW ZKHQ DQ DLUOLQH XVHG IDOVH RSSRUWXQLW\ WR KDUP WKHLU HPSOR\HUVj FRPSHWLWRUV PLVOHDGLQJ DQG GHFHSWLYH DGYHUWLVLQJ WR FRXQWHU D FRPSHWLWLYH WKUHDW LW WKURXJKPDQLSXODWLRQRI$60(j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mIDOVH PLVOHDGLQJ DQG GHFHSWLYHl ,G DW  7KH FKDOOHQJHG 2SKWKDOPRORJ\GLGQRWYLRODWHDQWLWUXVWODZVE\GHVFULELQJ VWDWHPHQWV DW LVVXH KHUH FDQ KDUGO\ EH FKDUDFWHUL]HG DV mIDOVH PLVOHDGLQJ DQG GHFHSWLYHl LQ OLJKW RI RXU SUHYLRXV KROGLQJ 6HFRQG WKHUH ZDV D UDGLDONHUDWRWRP\DVmH[SHULPHQWDOl,GDW 7KHFRXUW PXFK JUHDWHU SDWWHUQ RI SUDFWLFH LQ ,QWHUQDWLRQDO 7UDYHO $UUDQJHUV 7KHUH QRWHGWKDWWKHFDVHVKRXOGQRWHYHQKDYHUHDFKHGDMXU\LQ ZDV HYLGHQFH WKDW WKH GHIHQGDQW DLUOLQH LQ ,QWHUQDWLRQDO 7UDYHO $UUDQJHUV SDUW EHFDXVH WKH GHIHQGDQW FRXOG QRW UHTXLUH KRVSLWDOV WR WULHG WR SHUVXDGH WUDYHO DJHQWV WR VWRS GHDOLQJ ZLWK D ULYDO DQG WKUHDWHQHG ZLWKKROGSHUPLVVLRQIRUWKHSURFHGXUH,G7KXVWKHFRXUW WR UHWDOLDWH DJDLQVW WKHP ,G DW   $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 1R $P&RXQFLORI&HUWLILHG3RGLDWULF  3K\VLFLDQVY$P%GRI3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 6XUJHU\ 6XUJHU\

WKDW WKH VWDWHPHQWV ZHUH QRW mFOHDUO\ IDOVHl  7KLV FRXUW )G  G &LU    WKH VHFRQG FLUFXLW KHOG WKDW D SUHYLRXVO\KHOGWKDWWKHVWDWHPHQWVZHUHDWZRUVWWUXHEXW mSODLQWLII DVVHUWLQJ D PRQRSROL]DWLRQ FODLP EDVHG RQ PLVOHDGLQJIRUWKHSXUSRVHVRIWKH/DQKDP$FW)GDW PLVOHDGLQJDGYHUWLVLQJµPXVWRYHUFRPHDSUHVXPSWLRQWKDWWKH 6HFRQGWKHUHFRUGFOHDUO\HVWDEOLVKHVWKDWDQ\QHJDWLYH HIIHFWRQFRPSHWLWLRQRIVXFKDSUDFWLFHZDVGHPLQLPLVjl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jVVWUHQJWKVDQGPLQLPL]HVLWVZHDNQHVVHVGRHV PHGLDFDPSDLJQV QRW DW OHDVW XQOHVV LW DPRXQWV WR GHFHSWLRQ FRQVWLWXWH DQWLFRPSHWLWLYHFRQGXFWYLRODWLYHRI† %2WKHU&RQGXFW ,GDW IRRWQRWHVRPLWWHG  3ODLQWLII UHOLHV KHDYLO\ RQ ZKDW LW FDOOV mGHIHQGDQWjV PXOWLIDFHWHGFRQGXFWlLQDUJXLQJWKDWWKHGLVWULFWFRXUWHUUHG 7KHQLQWKFLUFXLWLQ$PHULFDQ3URIHVVLRQDO7HVWLQJ6HUYLFH LQ JUDQWLQJ VXPPDU\ MXGJPHQW  7KH FRQGXFW DOOHJHG LQ ,QF Y +DUFRXUW %UDFH sRYDQRYLFK /HJDO  3URIHVVLRQDO DGGLWLRQWRWKHPDLOLQJVIRFXVHGSULPDULO\RQDmFDOOWRDUPVl 3XEOLFDWLRQV ,QF  )G  WK &LU    DOVR LVVXHG E\ GHIHQGDQW WR LWV PHPEHUV WR SURPRWH YLJRURXVO\ DGRSWHGDGHPLQLPXVSUHVXPSWLRQDQGODLGRXWDVL[SDUWWHVW GHIHQGDQWj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m>D@GYHUWLVLQJ WKDW FUHDWHV EDUULHUV  WR HQWU\ LQ D PDUNHW FRQVWLWXWHV SUHGDWRU\ EHKDYLRU WKDW WKH DQWLWUXVW ODZV ,Q GHFLGLQJ WKDW WKH FKDOOHQJHG VWDWHPHQWV ZHUH QRW GHFHSWLYH ZH DUH GHVLJQHG WR SUHYHQWl ,G DW  7KH FRVW WR HQWU\ WKDW FRQFHUQHG WKH SUHYLRXVO\ FRQVLGHUHG WKH VRSKLVWLFDWLRQ RI WKH WDUJHWHG SDUWLHV &HUWLILHG FRXUW LQ 3KRWRWURQ KRZHYHU LQYROYHG WKH KLJK FRVWV RI SXUFKDVLQJ 3RGLDWULF 3K\VLFLDQV  )G DW  7KXV ZH FRQVLGHUHG WKH IRXUWK DGYHUWLVLQJ WR FRXQWHU D FODLP RU HVWDEOLVK RQHjV SURGXFW LQ WKH IDFH RI HOHPHQW RI WKH $PHULFDQ 3URIHVVLRQDO 7HVWLQJ WHVW WKH VRSKLVWLFDWLRQ RI DGYHUWLVLQJ E\ WKH PRQRSROLVW LQ D WUDGLWLRQDO FRQVXPHU PDUNHW ,G DW WKH SDUWLHV LQ GHFLGLQJ WKH LQIRUPDWLRQ ZDV QRW FOHDUO\ IDOVH WKH ILUVW  ,Q WKH LQVWDQW FDVH WKH WDUJHWV RI WKH PDLOLQJV ZHUH VRSKLVWLFDWHG HOHPHQW  SDUWLHV ,Q DGGLWLRQ WKH SODLQWLII FDQ UHVSRQG UHODWLYHO\ FKHDSO\ WKURXJK LWV RZQ PDLOLQJV DQG LW SUHVXPDEO\ FDQ GLUHFWO\ FRQWDFW WKH LQGLYLGXDOV

:H QRWH WKDW SODLQWLII KDV PDGH QR DOOHJDWLRQ WKDW H[FOXVLYH WDUJHWHG E\ GHIHQGDQW DQG QHHG QRW HQJDJH LQ D VHULHV RI H[SHQVLYH PHGLD UHFRJQLWLRQ DJUHHPHQWV KDYH H[FOXGHG LW IURP D VLJQLILFDQW SRUWLRQ RI WKH FDPSDLJQV 'HIHQGDQW SRLQWV WR XQFRQWHVWHG HYLGHQFH WKDW SODLQWLII GLG PDUNHW SUHFLVHO\ WKDW  $P&RXQFLORI&HUWLILHG3RGLDWULF 1R 1R $P&RXQFLORI&HUWLILHG3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 3K\VLFLDQVY$P%GRI3RGLDWULF 6XUJHU\ 6XUJHU\

PDWHULDO   FOHDUO\OLNHO\WRLQGXFHXQUHDVRQDEOHUHOLDQFH VHFRQG HOHPHQW LV UHTXLUHG EHFDXVH HYHQ IDOVH DGYHUWLVLQJ  PDGHWRXQVRSKLVWLFDWHGSDUWLHV   FRQWLQXHGIRUORQJ ZRXOGQRWGDPDJHFRPSHWLWLRQDQGKHQFHEHDYLRODWLRQRIWKH SHULRGV  DQG   QRW UHDGLO\ FXUHG E\ ULYDOV  $PHULFDQ 6KHUPDQ $FW XQOHVV LW ZDV VR GLIILFXOW IRU WKH SODLQWLII WR 3URIHVVLRQDO7HVWLQJ)GDW6HHDOVR,QUH,QGHS FRXQWHU WKDW LW FRXOG SRWHQWLDOO\ H[FOXGH FRPSHWLWLRQ 6HUY2UJ$QWLWUXVW/LWLJ)6XSSG  ' 0RQRSRO\ SRZHU LV WKH SRZHU WR H[FOXGH FRPSHWLWLRQ RU .DQ  FLWLQJ$PHULFDQ3URIHVVLRQDO7HVWLQJDQG$\HUVW FRQWUROSULFHV86Y(,GX3RQWGH1HPRXUV &R /DEV LQ VXSSRUW RI WKH GH PLQLPLV SUHVXPSWLRQ IRU 86    ,VRODWHGEXVLQHVVWRUWVVXFKDVIDOVHO\ mGLVSDUDJLQJFRPPHQWVl 7KHQLQWKFLUFXLWDOVRPDGHFOHDU GLVSDUDJLQJ DQRWKHUjV SURGXFW GR QRW W\SLFDOO\ ULVH WR WKH WKDWDOORIWKHVHIDFWRUVPXVWEHPHWIRUWKHFDVHWRVXUYLYH OHYHO RI D VHFWLRQ  YLRODWLRQ XQOHVV WKHUH LV D KDUP WR VXPPDU\MXGJPHQW,G7KHGLVWULFWFRXUWUHOLHGKHDYLO\RQ FRPSHWLWLRQLWVHOI&RQZRRG&RY8QLWHG6WDWHV7REDFFR WKH WHVW LQ $PHULFDQ 3URIHVVLRQDO 7HVWLQJ ZKHQ LW JUDQWHG &R )G WK&LU 7KHUHFDQEHQRKDUP VXPPDU\MXGJPHQW WRFRPSHWLWLRQVXFKDVWKHH[FOXVLRQRIFRPSHWLWRUVZKHQ WKHYLFWLPVRIIDOVHDGYHUWLVLQJDUHHDVLO\DEOHWRFRXQWHULW :H EHOLHYH WKDW DOO RI WKH IDFWRUV OLVWHG LQ $PHULFDQ $V WKH 6XSUHPH &RXUW KDV HPSKDVL]HG WKH 6KHUPDQ $FW 3URIHVVLRQDO7HVWLQJDUHUHOHYDQWEXWJLYHQWKHIDFWVEHIRUH SURWHFWVFRPSHWLWLRQQRWFRPSHWLWRUV6SHFWUXP6SRUWV,QF XV RQ VXPPDU\ MXGJPHQW ZH GHFOLQH WR FRQVLGHU HDFK Y0F4XLOODQ86    m7KH ODZGLUHFWV HOHPHQWRUKROGWKDWDOOHOHPHQWVPXVWEHVDWLVILHGWRUHEXWWKH LWVHOIQRWDJDLQVWFRQGXFWZKLFKLVFRPSHWLWLYHHYHQVHYHUHO\ GHPLQLPLVSUHVXPSWLRQ:HGRKROGKRZHYHUWKDWDSODLQWLII VR EXW DJDLQVW FRQGXFW ZKLFK XQIDLUO\ WHQGV WR GHVWUR\ PXVWVKRZDJHQXLQHLVVXHRIPDWHULDOIDFWUHJDUGLQJDWOHDVW FRPSHWLWLRQLWVHOIl FI+RXVHUY)R[7KHDWUHV0JPW&RUS WKH IROORZLQJ WZR HOHPHQWV WR UHEXW WKH GH PLQLPXV )G G&LU   UHMHFWLQJVHFWLRQ SUHVXPSWLRQ   WKHDGYHUWLVLQJZDVFOHDUO\IDOVHDQG  LW FODLPUHJDUGLQJGHIHQGDQWjVGLVSDUDJHPHQWRISODLQWLIIjVER[ ZRXOG EH GLIILFXOW RU FRVWO\ IRU WKH SODLQWLII WR FRXQWHU WKH RIILFHSRWHQWLDOEHFDXVHGHIHQGDQWjVFRQGXFWZDVmFRQVLVWHQW IDOVHDGYHUWLVLQJ ZLWKOHJLWLPDWHFRPSHWLWLYHFRQGXFWl  )DOVHDGYHUWLVLQJFDQQRWKHOSFRQVXPHUVDQGKHQFHFDQQRW ,W LV FOHDU WKDW QHLWKHU RI WKHVH QHFHVVDU\ HOHPHQWV DUH EHGHIHQGHGDVEHQHILFLDOWRFRPSHWLWLRQ(YLGHQFHRQWKH SUHVHQWLQWKLVFDVH)LUVWWKHODZRIWKHFDVHKDVHVWDEOLVKHG

 7KLV WHVW ZDV ILUVW VXJJHVWHG LQ  3+,//,3 $5(('$ '$9,' 7851(5 $17,75867 /$: ˆ D DW     7KH VHFRQG LQIHUHQFHV LQ >SUHGDWRU\SULFLQJ@ FDVHV VXFK DV WKLV RQH DUH HVSHFLDOO\

FLUFXLW LQ $\HUVW DOVR GLVFXVVHG WKLV WHVW IDYRUDEO\ EXW LW LV XQFOHDU FRVWO\ EHFDXVH WKH\ FKLOO WKH YHU\ FRQGXFW WKH DQWLWUXVW ODZV DUH GHVLJQHG

ZKHWKHU WKH\ WKRXJKW HDFK UHTXLUHPHQW ZDV PDQGDWRU\ 6HH $\HUVW  WR SURWHFWl 0RQVDQWR &R Y 6SUD\5LWH 6HUYLFH &RUS  86 

)G DW     m3HUPLWWLQJ DQ DJUHHPHQW >LQ YLRODWLRQ RI VHFWLRQ @ WR EH LQIHUUHG PHUHO\ IURP WKH H[LVWHQFH RI FRPSODLQWV    FRXOG GHWHU RU SHQDOL]H SHUIHFWO\ OHJLWLPDWH FRQGXFWl 3HUPLWWLQJ DQWLWUXVW OLDELOLW\ IRU  $GYHUWLVLQJ WKDW LV mWUXH EXW PLVOHDGLQJl FDQQRW EH VDLG WR EH VWULFWO\ PHUHO\ SRWHQWLDOO\ PLVOHDGLQJ RU mWUXH EXW PLVOHDGLQJ VWDWHPHQWVl ZRXOG SURFRPSHWLWLYH +RZHYHU WKH 6XSUHPH &RXUW KDV FDXWLRQHG WKDW ZH FKLOO SURFRPSHWLWLYH SURPRWLRQDO FRQGXFW 7KHUHIRUH D SODLQWLII LQ DQ VKRXOG EH PLQGIXO RI WKH FKLOOLQJ HIIHFW DQWLWUXVW OLDELOLW\ FDQ KDYH RQ DQWLWUXVW VXLW WR VXUYLYH VXPPDU\ MXGJPHQW PXVW SUHVHQW HYLGHQFH WKDW SHUPLVVLEOH FRPSHWLWLYH FRQGXFW 6HH 0DWVXVKLWD (OHF ,QGXV &R Y ZRXOG SHUPLW D MXU\ WR FRQFOXGH WKDW WKH VWDWHPHQWV DW LVVXH ZHUH FOHDUO\ =HQLWK 5DGLR &RUS  86       m>0@LVWDNHQ IDOVH