5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH   3HUU\HWDOY$P7REDFFR&RHWDO 1R (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU )LOH 1DPH DS $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW:LQFKHVWHU 81,7('67$7(6&28572)$33($/6 1R nsDPHV+sDUYLV'LVWULFWsXGJH )257+(6,;7+&,5&8,7 $UJXHG )HEUXDU\ BBBBBBBBBBBBBBBBB 'HFLGHGDQG)LOHG $SULO

*5(*25< %(11(77 3(55< ; %HIRUH 6,/(5'$8*+75(<DQG&2/(&LUFXLW DQG67(9( //2<' &+$03,21  sXGJHV RQEHKDOIRIWKHPVHOYHVDQG   1R BBBBBBBBBBBBBBBBB DOORWKHUVVLPLODUO\VLWXDWHGLQ  WKH6WDWHRI7HQQHVVHH ! &2816(/  3ODLQWLIIV$SSHOODQWV  $5*8('   *RUGRQ %DOO .QR[YLOOH 7HQQHVVHH IRU  $SSHOODQW  0XUUD\ 5 *DUQLFN $512/'  3257(5 Y  :DVKLQJWRQ'&IRU$SSHOOHH21%5,() *RUGRQ%DOO  .QR[YLOOH 7HQQHVVHH IRU $SSHOODQW  0XUUD\ 5 *DUQLFN 7+( $0(5,&$1 72%$&&2  $512/'  3257(5 :DVKLQJWRQ '& 5REHUW *  0F'RZHOO %$.(5 '21(/621 %($50$1 &203$1< ,1& %52:1  &$/':(// 1DVKYLOOH 7HQQHVVHH sRKQ $ /XFDV :,//,$0621 72%$&&2  +81721 :,//,$06.QR[YLOOH7HQQHVVHH'DYLG6 &25325$7,21 /25,//$5'  (JJHUW +HDWKHU $ 3LJPDQ $512/'  3257(5 72%$&&2 &203$1< ,1&  :DVKLQJWRQ'&0DUFLD0(DVRQ0,//(5 0$57,1 3+,/,3 0255,6 86$ ,1& 5s  &KDWWDQRRJD7HQQHVVHH7KRPDV+3HHEOHV,,,0,//(5 5(<12/'6 72%$&&2  0$57,1 1DVKYLOOH 7HQQHVVHH :LOOLDP 6 /RFNHWW sU  5HEHFFD % 0XUUD\ .(11(5/< 0217*20(5< &203$1< %$7 ,1'8675,(6  ),1/(< .QR[YLOOH 7HQQHVVHH :LOOLDP ( *RGEROG ,,, 3/& +,// .12:/721  /(,71(5 :,//,$06 '22/(<  1$32/,7$1 ,1& 7+( &281&,/ )25  &KDWWDQRRJD 7HQQHVVHH %DUU\ *RKHHQ .,1* 72%$&&2 5(6($5&+86$  63$/',1*$WODQWD*HRUJLDsRKQ::KHHOHU+2'*(6 ,1& 72%$&&2 ,167,787(  '28*+7< &$5621.QR[YLOOH7HQQHVVHHsHURPH5 ,1& 86 602.(/(66  'RDNs21(6'$<5($9,6 32*8('DOODV7H[DVIRU  $SSHOOHH 72%$&&2 &203$1<  IRUPHUO\NQRZQDV8QLWHG  6WDWHV7REDFFR&RPSDQ\  'HIHQGDQWV$SSHOOHHV 1

 1R 3HUU\HWDOY$P7REDFFR&RHWDO   3HUU\HWDOY$P7REDFFR&RHWDO 1R

BBBBBBBBBBBBBBBBB WKDWSUR[LPDWHFDXVDWLRQZDVDWKUHVKROGLVVXHZLWKUHVSHFWWR DOO RI 3ODLQWLIIVj FODLPV DQG WKDW 3ODLQWLIIV KDG IDLOHG WR 23,1,21 GHPRQVWUDWHSUR[LPDWHFDXVDWLRQEHFDXVHWKHLUDOOHJHGLQMXU\ BBBBBBBBBBBBBBBBB ZDV WRR UHPRWH  3ODLQWLIIV QRZ DSSHDO WKH GLVWULFW FRXUWjV GLVPLVVDORIWKHLUFODLPV%HFDXVHZHDJUHHZLWKWKHGLVWULFW 5 *8< &2/( s5 &LUFXLW sXGJH  3ODLQWLIIV *UHJRU\ FRXUWWKDW3ODLQWLIIVjFODLPHGLQMXULHVZHUHQRWSUR[LPDWHO\ 3HUU\ DQG 6WHYH &KDPSLRQ DUH FLWL]HQV RI &RIIHH &RXQW\ FDXVHGE\'HIHQGDQWVjFRQGXFWZH$)),50WKHGLVWULFWjV 7HQQHVVHHZKRDUHLQGLYLGXDOVXEVFULEHUVRI%OXH&URVV%OXH FRXUWGLVPLVVDORIWKHLUFODLPV 6KLHOGKHDOWKLQVXUDQFH m%&%6l 7KH\VHHNWRUHSUHVHQWWKH SXWDWLYH FODVV RI VXEVFULEHUV RI %&%6 LQ WKH 6WDWH RI 7KHGLVWULFWFRXUWj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mXQGRXEWHGO\FDQSURYHQRVHWRIIDFWVLQVXSSRUWRI UHODWHGLOOQHVVHV3ODLQWLIIVFRQWHQGWKDWWKHVPRNLQJUHODWHG >WKHLU@FODLPVWKDWZRXOGHQWLWOH>WKHP@WRUHOLHIl%LEERY LOOQHVVHVZHUHFDXVHGE\WKHFRQGXFWRIWKHGHIHQGDQWWREDFFR 'HDQ :LWWHU 5H\QROGV ,QF  )G    WK &LU PDQXIDFWXUHUV DQG WUDGH RUJDQL]DWLRQV m'HIHQGDQWVl      :H QHHG QRW DFFHSW DV WUXH mOHJDO FRQFOXVLRQV RU 3ODLQWLIIVEURXJKWWKHFXUUHQWDFWLRQLQWKH(DVWHUQ'LVWULFWRI XQZDUUDQWHGIDFWXDOLQIHUHQFHVl0RUJDQY&KXUFKjV)ULHG 7HQQHVVHH DVVHUWLQJ FDXVHV RI DFWLRQ DJDLQVW 'HIHQGDQWV &KLFNHQ )G WK&LU   XQGHU WKH 5DFNHWHHU ,QIOXHQFHG DQG &RUUXSW 2UJDQL]DWLRQV $FW m5,&2l   86& ††   HW VHT   WKH ,Q RUGHU WR KDYH VWDQGLQJ WR EULQJ VXLW XQGHU 5,&2 D 7HQQHVVHH&RQVXPHU3URWHFWLRQ$FWRI 7(11 &2'( SODLQWLII PXVW GHPRQVWUDWH SUR[LPDWH FDXVH EHWZHHQ WKH $11 †  HW VHT   m7&3$l  DQG WKH DOOHJHG LQMXU\ DQG WKH GHIHQGDQWjV LQMXULRXV FRQGXFW  6HH 7HQQHVVHH7UDGH3UDFWLFHV$FW7(11 &2'( $11† +ROPHV Y 6HF ,QYHVWRU 3URW &RUS  86   HWVHT   m773$l DQGDVVHUWLQJVWDWHODZFODLPV   3LN&RDO&RY%LJ5LYHUV(OHF&RUS)G IRUEUHDFKRIVSHFLDOGXW\FRQVSLUDF\QHJOLJHQFHIUDXGXOHQW   WK&LU 7KH6XSUHPH&RXUWKDVH[SODLQHGWKDW FRQFHDOPHQWDQGXQMXVWHQULFKPHQWUHVWLWXWLRQ FRPPRQ ODZ SULQFLSOHV RI SUR[LPDWH FDXVDWLRQ DUH LQFRUSRUDWHGLQWRWKH5,&2VWDWXWH+ROPHV86DW 'HIHQGDQWV VRXJKW GLVPLVVDO IRU IDLOXUH WR VWDWH D FODLP  VHHDOVR$VVRFLDWHG*HQ&RQWUDFWRUVRI&DO,QFY&DO SXUVXDQWWR)HGHUDO5XOHRI&LYLO3URFHGXUH E  7KH 6WDWH&RXQFLO RI&DUSHQWHUV 86    GLVWULFWFRXUWJUDQWHG'HIHQGDQWVjPRWLRQDIWHUGHWHUPLQLQJ JHQHUDO FRPPRQ ODZ SULQFLSOHV RI SUR[LPDWH FDXVH DUH LQFRUSRUDWHG LQWR IHGHUDO DQWLWUXVW SURYLVLRQV   $ FHQWUDO HOHPHQW RI SUR[LPDWH FDXVH LV WKH UHTXLUHPHQW RI D GLUHFW LQMXU\  +ROPHV  86 DW   $VVRFLDWHG *HQ  'HIHQGDQWV DUH 7KH $PHULFDQ 7REDFFR &RPSDQ\ ,QF %URZQ &RQWUDFWRUV 86DW Q$WFRPPRQODZmD :LOOLDPVRQ 7REDFFR &RUSRUDWLRQ /RULOODUG 7REDFFR &RPSDQ\ 3KLOLS SODLQWLIIZKRFRPSODLQHGRIKDUPIORZLQJPHUHO\IURPWKH 0RUULV 86$ ,QF 5s 5H\QROGV 7REDFFR &RPSDQ\ %$7 ,QGXVWULHV SOF +LOO .QRZOWRQ ,QF 7KH &RXQFLO IRU 7REDFFR 5HVHDUFK86$ PLVIRUWXQHVYLVLWHG XSRQDWKLUGSHUVRQE\WKHGHIHQGDQWjV ,QF 7KH7REDFFR,QVWLWXWH ,QF DQG 86 6PRNHOHVV 7REDFFR &RPSDQ\ DFWVZDVJHQHUDOO\VDLGWRVWDQGDWWRRUHPRWHDGLVWDQFHWR IRUPHUO\ 8QLWHG 6WDWHV 7REDFFR &RPSDQ\ 1R 3HUU\HWDOY$P7REDFFR&RHWDO   3HUU\HWDOY$P7REDFFR&RHWDO 1R

UHFRYHUl+ROPHV86DW VHHDOVR3LN&RDO&R  ILQGLQJGLVPLVVDOSURSHUEHFDXVHWKHSODLQWLIIVjFODLPV )GDW  ZHUH mWRR UHPRWH FRQWLQJHQW GHULYDWLYH DQG LQGLUHFW WR VXUYLYHl  FLWDWLRQVRPLWWHG  7KHGLVWULFWFRXUWGLVPLVVHG3ODLQWLIIVjFODLPVEHFDXVHWKH\ IDLOHGWRVDWLVI\WKLVSUR[LPDWHFDXVHUHTXLUHPHQW$FFRUGLQJ 8UJLQJ WKLV &RXUW WR mEHFRPH WKH ILUVW IHGHUDO FLUFXLW WR WRWKHGLVWULFWFRXUWEHFDXVH3ODLQWLIIVjLQMXULHVmDUHSXUHO\ SURSHUO\ DQDO\]H WKH LVVXH RI SUR[LPDWH FDXVDWLRQ LQ WKH FRQWLQJHQWRQKDUPWRWKHWKLUGSDUW\VPRNHUVWKHVHLQMXULHV FRQWH[WRIWREDFFROLWLJDWLRQl3ODLQWLIIVQRZDVNXVWRUHYHUVH DUHFOHDUO\LQGLUHFWl3HUU\Y$PHU7REDFFR&R,QF1R WKHGLVWULFWFRXUWj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j VLPLODUFRVWUHFRYHU\FODLPVDJDLQVWWKHWREDFFRLQGXVWU\E\ DOOHJHGLQMXULHVDQG'HIHQGDQWVjDOOHJHGPLVFRQGXFWLVHYHQ ZKLFKSODLQWLIIVKDYHVRXJKWWRUHFRYHUWKHLQFUHDVHGFRVWVRI PRUH UHPRYHG WKDQ LQ RWKHU FRVWUHFRYHU\ FDVHV EURXJKW KHDOWKUHODWHG H[SHQVHV GXH WR VPRNLQJ  7KHVH FRXUWV DJDLQVWWREDFFRFRPSDQLHV,QSUHYLRXVFDVHVWKHSODLQWLIIV XQLIRUPO\KDYHFRQFOXGHGWKDWVXFKFODLPVPXVWIDLOEHFDXVH KDG DFWXDOO\ SDLG IRU WKH PHGLFDO VHUYLFHV DW LVVXH  )RU WKHDOOHJHGLQMXULHVDUHWRRUHPRWH6HH6HUY(PSOR\HHV,QWj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jO %KG RI 7HDPVWHUV /RFDO  +HDOWK 3ODLQWLIIVjFODLPVWKHUHIRUHQRWRQO\DUHFRQWLQJHQWRQKDUP :HOIDUH7UXVW)XQGY3KLOLS0RUULV,QF )G WK WRDWKLUGSDUW\EXWDOVRRQ%&%6jVLQFUHDVLQJWKHLUSUHPLXP &LU 2U/DERUHUV(PSOR\HUV+HDOWK :HOIDUH7UXVW DPRXQWVGXHWRVPRNLQJUHODWHGPHGLFDOFRVWV$VWKHGLVWULFW )XQG Y 3KLOLS 0RUULV ,QF  )G  WK &LU  FRXUWSURSHUO\UHFRJQL]HG3ODLQWLIIVGRQRWKDYHVWDQGLQJWR /DERUHUV/RFDO+HDOWK %HQHILW)XQGY3KLOLS0RUULV EULQJWKLVDFWLRQ ,QF   )G   G &LU    7KHVH GHFLVLRQV KDYH UHFRJQL]HGWKDWWKHSODLQWLIIVjFODLPVDUHLQKHUHQWO\FRQWLQJHQW :HUHMHFW3ODLQWLIIVjFODLPWKDWVWDQGLQJWREULQJD5,&2 RQLQMXU\WRWKLUGSDUW\VPRNHUV6HHHJ/DERUHUV/RFDO FODLPLVQRWDOZD\VOLPLWHGWRSDUWLHVZKRDUHGLUHFWO\LQMXUHG   )G DW   ILQGLQJ WUXVW IXQGVj GDPDJHV HQWLUHO\ 3ODLQWLIIV DUJXH WKDW WKH GLVWULFW FRXUW IDLOHG WR FRQVLGHU GHULYDWLYHRIWKHKDUPWRVPRNHUVDQGQRWLQJWKDWEHFDXVH 1DWLRQDO2UJDQL]DWLRQIRU:RPHQ,QFY6FKHLGOHU86 WKH\ZHUHmSXUHO\FRQWLQJHQWRQKDUPWRWKLUGSDUWLHVWKHVH     LQZKLFKWKH6XSUHPH&RXUWKHOGWKDWDERUWLRQ LQMXULHVDUHLQGLUHFWl VHHDOVR6HUY(PSOR\HHV )GDW FOLQLFV KDG VWDQGLQJ WR EULQJ D 5,&2 FODLP  6FKHLGOHU LV 1R 3HUU\HWDOY$P7REDFFR&RHWDO   3HUU\HWDOY$P7REDFFR&RHWDO 1R

LQDSSRVLWHKRZHYHUVLQFHWKH6XSUHPH&RXUWGLGQRWDGGUHVV QDWXUHRISODLQWLIIVjFODLPVDOWHUVWKHUHPRWHQHVVLQTXLU\6HH WKH GLUHFW LQMXU\ UHTXLUHPHQW WKDW LV DW LVVXH LQ WKH SUHVHQW 6HUY (PSOR\HHV   )G DW  QRWLQJ WKDW mVSHFLILF FDVH86DW VHHDOVR$VVjQRI:DVK3XEOLF LQWHQWWRKDUPWKHSODLQWLIIVE\VKLIWLQJVPRNLQJUHODWHGKHDOWK +RVS'LVWVY3KLOLS0RUULV,QF)G Q WK FDUHFRVWVWRWKHPLVDORQHLQVXIILFLHQWWRRYHUFRPHWKHEDURQ &LU   QRWLQJ WKDW 6FKHLGOHU FRQFHUQV FRQVWLWXWLRQDO UHPRWH FODLPVl  $OOHJKHQ\ *HQ +RVS  )G DW  UDWKHUWKDQ5,&2RUDQWLWUXVWVWDQGLQJ  QRWLQJWKDWmVSHFLILFLQWHQWWRKDUPGRHVQRWPDJLFDOO\FUHDWH VWDQGLQJRUFDXVHLQMXULHVWREHGLUHFWl /DERUHUV/RFDO :HDOVRUHMHFW3ODLQWLIIVjDUJXPHQWWKDWWKHGLVWULFWFRXUW  )GDW QRWLQJWKDWDQDOOHJDWLRQRIVSHFLILFLQWHQW HUUHG LQ IDLOLQJ WR FRQGXFW D FODLPVSHFLILF LQTXLU\ LQWR GRHV QRW RYHUFRPH GLUHFW LQMXU\ UHTXLUHPHQW   VHH DOVR ZKHWKHU 3ODLQWLIIVj FODLPV ZHUH WRR UHPRWH  %HFDXVH WKH 6WHDPILWWHUV/RFDO8QLRQ1R+HDOWK :HOIDUH)XQGY +ROPHV&RXUWHPSKDVL]HGWKDWWKH5,&2VWDWXWHLQFRUSRUDWHV 3KLOLS0RUULV,QF m7HQQHVVHH6WHDPILWWHUVl 1R:  JHQHUDOFRPPRQODZSULQFLSOHVRISUR[LPDWHFDXVDWLRQ &2$5 &9  :/   DW  7HQQ &W 86DW UHPRWHQHVVSULQFLSOHVDUHQRWOLPLWHGWRFDVHV $SS  XQSXEOLVKHG  LQYROYLQJWKH5,&2VWDWXWH6HH6HUY(PSOR\HHV )G DWQ m7KHIDLOXUHRIWKH>SODLQWLIIV@ WR GHPRQVWUDWH 1RU GR ZH DFFHSW 3ODLQWLIIVj DUJXPHQW WKDW WKH DQDO\VLV SUR[LPDWHFDXVHXQGHU+ROPHVZLWKUHVSHFWWRWKHLU5,&2DQG GLIIHUVXQGHUDQHJOLJHQFHVWDQGDUG3ODLQWLIIVjDUJXPHQWUHVWV IHGHUDO DQWLWUXVW FODLPV DOVR PHDQV WKDW WKHLU DQWLWUXVW DQG RQ WKH DVVHUWLRQ  WKDW WR VWDWH D QHJOLJHQFH FODLP LW LV FRPPRQODZFODLPVXQGHU'LVWULFWRI&ROXPELDODZIDLOIRU VXIILFLHQWWRHVWDEOLVKSUR[LPDWHFDXVHE\VKRZLQJWKDWWKH ODFN RI SUR[LPDWH FDXVHl   6WHDPILWWHUV /RFDO 8QLRQ 1R KDUPLVIRUHVHHDEOH7KRXJKIRUHVHHDELOLW\LVDQHOHPHQWRI )GDW  m7KHVDPHSULQFLSOHVWKDWOHDGXVWR WKH SUR[LPDWH FDXVH DQDO\VLV LW LV GLVWLQFW IURP WKH FRQFOXGH WKDW SODLQWLIIVj DQWLWUXVW DQG 5,&2 FODLPV ZHUH UHTXLUHPHQWRIDGLUHFWLQMXU\6HH+ROPHV86DW SURSHUO\GLVPLVVHGOHDGWRWKHLQHYLWDEOHFRQFOXVLRQWKDWWKHLU   QRWLQJ WKDW GLUHFWQHVV RI UHODWLRQVKLS LV QRW WKH VROH VWDWHODZFODLPVPXVWDOVRIDLOl VHH DOVR8QLWHG)RRG HOHPHQW RI SUR[LPDWH FDXVH  /DERUHUV /RFDO   )G DW &RPPHUFLDO:RUNHUV)GDWQ DGGUHVVLQJRQO\  QRWLQJ WKDW mRWKHU WUDGLWLRQDO UXOHV UHTXLULQJ WKDW VWDWH ODZ FODLPV WKH (OHYHQWK &LUFXLW IRXQG RWKHU FDVHV GHIHQGDQWjVDFWVZHUHDVXEVWDQWLDOFDXVHRIWKHLQMXU\DQG LQVWUXFWLYHDQGQRWHGWKDWmWKHSULQFLSOHVRISUR[LPDWHFDXVH WKDW SODLQWLIIjV LQMXU\ ZDV UHDVRQDEO\ IRUHVHHDEOH DUH LQIHGHUDO5,&2DQGDQWLWUXVWFDVHVDUHERUURZHGODUJHO\IURP DGGLWLRQDO HOHPHQWV QRW VXEVWLWXWHV IRU DOOHJLQJ DQG WKHJHQHUDOFRPPRQODZRISUR[LPDWHFDXVHl  XOWLPDWHO\VKRZLQJ DGLUHFWLQMXU\l 7HQQHVVHH6WHDPILWWHUV :/ DW Q m7KHSODLQWLIIjVGDPDJHVPD\ ,QDQ\HYHQWDFODLPE\FODLPDQDO\VLVZRXOGVWLOOUHVXOWLQ EHIRUHVHHDEOH\HWVWLOOµWRRUHPRWHWRSHUPLWUHFRYHU\jl  WKHGLVPLVVDORI3ODLQWLIIVjFODLPV)LUVW3ODLQWLIIVDUJXHWKDW 3ODLQWLIIV FDQQRW VKRZ WKDW WKH\ KDYH EHHQ SUR[LPDWHO\ DOHVVUHVWULFWLYHVWDQGDUGDSSOLHVEHFDXVHWKLVFDVHLQYROYHV LQMXUHGE\'HIHQGDQWVjFRQGXFW LQWHQWLRQDOPLVFRQGXFW:HGLVDJUHH7KHFODLPVLQ+ROPHV ZHUHEDVHGRQLQWHQWLRQDOPLVFRQGXFWoIUDXGoDQGWKH6XSUHPH 7KH VDPH SUR[LPDWH FDXVH VWDQGDUG JRYHUQV 3ODLQWLIIVj &RXUWQRQHWKHOHVVFRQFOXGHGWKH\ZHUHWRRUHPRWHWRVWDWHD VWDWXWRU\ FODLPV XQGHU WKH 7&3$ DQG WKH 773$  7KH FDXVHRIDFWLRQ+ROPHV86DW VHHDOVR$VVRFLDWHG 7HQQHVVHH &RXUW RI $SSHDOV LQ 7HQQHVVHH 6WHDPILWWHUV *HQ&RQWUDFWRUV 86DW QRWLQJWKDWmDQDOOHJDWLRQ DGGUHVVHG FRVWUHFRYHU\ FODLPV DJDLQVW WREDFFR FRPSDQLHV RILPSURSHUPRWLYHLVQRWDSDQDFHDWKDWZLOOHQDEOHDQ\ DQGFRQFOXGHGWKDWWKHSODLQWLIIVjLQMXULHVZHUHWRRUHPRWHDQG FRPSODLQWWRZLWKVWDQGDPRWLRQWRGLVPLVVl 2WKHUFLUFXLWV WKH FODLPV IDLOHG IRU ODFN RI SUR[LPDWH FDXVH   :/ KDYH VLPLODUO\ UHMHFWHG WKH DUJXPHQW WKDW WKH LQWHQWLRQDO  DW 7KHFRXUWDIILUPHGWKHWULDOFRXUWjVGLVPLVVDO 1R 3HUU\HWDOY$P7REDFFR&RHWDO

RIWKHSODLQWLIIVjDQWLWUXVWFODLPVXQGHUWKH773$7KHWULDO FRXUWKDGGHQLHGWKHPRWLRQWRGLVPLVVZLWKUHVSHFWWRWKH 7&3$FODLPVKRZHYHUDQGWKH7HQQHVVHH&RXUWRI$SSHDOV UHYHUVHG$FFRUGLQJWRWKHFRXUWmLQRUGHUWRDVVHUWDFODLP XQGHUWKH7&3$LQWKLVFDVHWKH>SODLQWLIIV@PXVWVKRZWKDW WKH 7REDFFR &RPSDQLHVj ZURQJIXO FRQGXFW SUR[LPDWHO\ FDXVHGWKHLULQMXU\l,G7KHFRXUWKHOGWKDWWKH\KDGIDLOHGWR GRVRDQGWKDWWKHSODLQWLIIVjFODLPVZHUHmWRRUHPRWHDVD PDWWHURIODZl,G )LQDOO\GLVPLVVDOLVDSSURSULDWHDVWR3ODLQWLIIVjFODLPWKDW E\EHDULQJDSRUWLRQRIWKHLQFUHDVHGKHDOWKH[SHQVHVUHVXOWLQJ IURP'HIHQGDQWVjFRQGXFW3ODLQWLIIVDUHXQMXVWO\HQULFKLQJ 'HIHQGDQWVIRUFRVWVWKDW'HIHQGDQWVVKRXOGEHIRUFHGWREHDU :HDJUHHZLWKWKHRWKHUFLUFXLWFRXUWVWKDWKDYHUHDVRQHGWKDW VXFK XQMXVW HQULFKPHQW FODLPV VKRXOG EH GLVPLVVHG RQ UHPRWHQHVVJURXQGV6HHHJ6HUY(PSOR\HHV )GDW Q 6WHDPILWWHUV/RFDO8QLRQ1R)GDW  m:H FDQ ILQG QR MXVWLILFDWLRQ IRU SHUPLWWLQJ SODLQWLIIV WR SURFHHG RQ WKHLU XQMXVW HQULFKPHQW FODLP RQFH ZH KDYH GHWHUPLQHG WKDW WKH 'LVWULFW &RXUW SURSHUO\ GLVPLVVHG WKH WUDGLWLRQDOWRUWFODLPVEHFDXVHRIWKHUHPRWHQHVVRISODLQWLIIVj LQMXULHV IURP GHIHQGDQWVj ZURQJGRLQJl   0RUHRYHU 3ODLQWLIIVj XQMXVW HQULFKPHQW FODLP IDLOV EHFDXVH 3ODLQWLIIV KDYH QRW HQULFKHG 'HIHQGDQWV  8QGHU 7HQQHVVHH ODZ WR HVWDEOLVKDQXQMXVWHQULFKPHQWFODLPDSODLQWLIIPXVWKDYH FRQIHUUHGDEHQHILWXSRQWKHGHIHQGDQW6HH3DVFKDOOjV,QF Y'R]LHU6:G 7HQQ  3ODLQWLIIVKDYH QRWmHQULFKHGl'HIHQGDQWVEHFDXVH'HIHQGDQWVKDYHQROHJDO GXW\WRVPRNHUVWRSD\WKHLUPHGLFDOFRVWV7KXVWKHSD\PHQW RI VXFK PHGLFDO FRVWV E\ D WKLUG SDUW\ KDV QRW HQULFKHG 'HIHQGDQWV6HH2U/DERUHUV)GDW  )RUWKHIRUHJRLQJUHDVRQVZH$)),50WKHGLVWULFWFRXUWjV GLVPLVVDORI3ODLQWLIIVjFRPSODLQW