Filed: Jan. 18, 2002
Latest Update: Mar. 02, 2020
Summary: 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 :,//,$0 '81/$3 ; &$1121 ,,, 'HEWRU 1RV BBBBBBBBBBBBBBBBBBBBBBBB ! *(25*( : 67(9(1621 7UXVWHHIRU:LOOLDP'XQODS &DQQRQ,,, 3ODLQWLII$SSHOODQW Y s& %5$')25' &203$1 W@KH GHOD\ LQ ,QWKHQRQFRUHSURFHHGLQJ 1R ZHKR
Summary: 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 :,//,$0 '81/$3 ; &$1121 ,,, 'HEWRU 1RV BBBBBBBBBBBBBBBBBBBBBBBB ! *(25*( : 67(9(1621 7UXVWHHIRU:LOOLDP'XQODS &DQQRQ,,, 3ODLQWLII$SSHOODQW Y s& %5$')25' &203$1 W@KH GHOD\ LQ ,QWKHQRQFRUHSURFHHGLQJ 1R ZHKRO..
More
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 :,//,$0 '81/$3 ; &$1121 ,,, 'HEWRU 1RV BBBBBBBBBBBBBBBBBBBBBBBB ! *(25*( : 67(9(1621 7UXVWHHIRU:LOOLDP'XQODS &DQQRQ,,, 3ODLQWLII$SSHOODQW Y s& %5$')25' &203$1 W@KH GHOD\ LQ ,QWKHQRQFRUHSURFHHGLQJ 1R ZHKROGWKDWWKH SURFHVVLQJ WUDQVDFWLRQV E\ EDQNV DQG RWKHUV ZKLFK PD\ SHUPLW WKH WUXVWHH ODFNV VWDQGLQJ WR EULQJ VXLW DJDLQVW 'HIHQGDQWV LQWHUHVWIUHH XVH RI IXQGV IRU EULHI SHULRGVl ,QUH&DQQRQ 1RV 1RV ,QUH&DQQRQ +DUULV 7UXVW 6DY %DQN 86 DW TXRWLQJ WKHFKHFNVWKDW&DQQRQGHSRVLWHGLQWRKLVEURNHUDJHDFFRXQW 5 $%% % 6 7#&$%$ FPWF 6HHDOVR ZLWK%UDGIRUGFDPHIURPRQHRIKLVHVFURZDFFRXQWVZLWK 7HUUHOO Y 7HUUHOO 6:G 7HQQ m$ 8$%RU)LUVW7HQQHVVHH SHUVRQPD\QRWSUHGLFDWHDQHVWRSSHOLQKLVIDYRURQRUDVVHUW VXFKHVWRSSHOIRUWKHSXUSRVHRIPDNLQJHIIHFWLYHREWDLQLQJ %\HDUO\ &DQQRQjVDFFRXQWKDGORVWRYHURIWKH WKHEHQHILWRIRUVKLHOGLQJKLPVHOIIURPWKHUHVXOWVRIKLVRZQ IXQGV LQYHVWHG $IWHU LQFUHDVLQJ WKH VL]H RI KLV SRVLWLRQV IUDXG>@l TXRWLQJ&s6(VWRSSHO &DQQRQUHFRYHUHGWKHVHORVVHVRYHUWKHQH[WWZR\HDUV,Q 6HSWHPEHU &DQQRQ FHDVHG WUDGLQJ LQ KLV %UDGIRUG $OWKRXJKXQGHUWKLVUXOHWKHEDQNUXSWF\WUXVWHHZRXOGKDYH FRPPRGLW\ DFFRXQW %\ WKLV SRLQW LQ WLPH &DQQRQ KDG VWDQGLQJWRSXUVXHWKHFDXVHVRIDFWLRQDVVHUWHGLQWKHQRQ UHDOL]HGDSURILWRIUHSUHVHQWLQJDQDQQXDOUDWHRI FRUH SURFHHGLQJ EHFDXVH &DQQRQ KDG KH QRW ILOHG IRU UHWXUQRIDSSUR[LPDWHO\ EDQNUXSWF\ FRXOG KDYH EURXJKW WKHP QRWZLWKVWDQGLQJ &DQQRQjVPLVDSSURSULDWLRQRIWUXVWSURSHUW\WKHSUHVHQFHRI $V ORVVHV IURP &DQQRQjV EXVLQHVV YHQWXUHV DQG RWKHU WKH H[SUHVV WUXVW LQ WKLV FDVH FRPSOLFDWHV PDWWHUV 6LQFH LQYHVWPHQWVPRXQWHGWKHGHILFLHQF\LQWKHHVFURZDFFRXQWV %UDGIRUG GLG QRW DFFHSW WKH WUXVW IXQGV DV D ERQD ILGH UHDFKHGDSSUR[LPDWHO\PLOOLRQE\WKH6SULQJRI SXUFKDVHUIRUYDOXHDQGZLWKRXWQRWLFHRI&DQQRQjVEUHDFKRI &DQQRQFRXOGQRORQJHUUHO\RQIORDWWRFRQFHDOWKHVKRUWIDOO WUXVWXQGHUJHQHUDOFRPPRQODZSULQFLSOHVWKHIXQGV&DQQRQ LQWKHHVFURZDFFRXQWVVRKHEHJDQWRWDNHPRUHDJJUHVVLYH PLVDSSURSULDWHGUHPDLQVXEMHFWWRWKHH[SUHVVWUXVW6HHHJ PHDVXUHV )LUVW &DQQRQ KHOG FORVLQJ FKHFNV WR JHQHUDWH +DUULV7UXVW 6DY%DQN86DW m>:@KDWHYHU>WKH IORDW $V WKH GHILFLHQF\ LQFUHDVHG DQG &DQQRQ EHFDPH WUXVWHH@ UHFRYHUV KH ZLOO KROG VXEMHFW WR WKH WUXVWl LQFUHDVLQJO\ GHSHQGHQW RQ QHZ IXQGV WR FRYHU WKH FKHFNV &RQVHTXHQWO\WKHWUXVWHHjVUHFRYHU\LIDQ\LQWKLVFDVHZLOO EHLQJKHOGRQSULRUFORVLQJV&DQQRQEHJDQNLWLQJFKHFNVWR EHQHILW &DQQRQjV FOLHQWVnQRW WKH JHQHUDO FUHGLWRUV RI WKH LQFUHDVHWKHEDODQFHLQWKHHVFURZDFFRXQWV,QDGGLWLRQWR HVWDWH $V ZH SUHYLRXVO\ GLVFXVVHG VHFWLRQ H[FOXGHV IURPWKHGHEWRUjVHVWDWHSURSHUW\KHOGLQDQH[SUHVVWUXVWIRU DQRWKHU %HJLHU 86 DW 7KHUHIRUH DQ\ DFWLRQ 3DUW RI &DQQRQjV UHDO HVWDWH FORVLQJ SUDFWLFH LQYROYHG IRUZDUGLQJ EURXJKW E\ WKH WUXVWHH DJDLQVW 'HIHQGDQWV ZRXOG QRW EULQJ FKHFNV GHSRVLWHG LQ HVFURZ WR SD\ RII PRUWJDJH ORDQV RI SURSHUW\ EHLQJ SURSHUW\ LQWR WKH HVWDWH IRU WKH EHQHILW RI WKH FUHGLWRUV VROG %\ GHOD\LQJ LQ IRUZDUGLQJ D FKHFN WR WKH KROGHU RI WKH PRUWJDJH ,QVWHDG VXFK D VXLW ZRXOG UHFRYHU PLVDSSURSULDWHG WUXVW EHLQJ UHWLUHG &DQQRQ FUHDWHG IORDW LQ WKH HVFURZ DFFRXQWV ZKLFK KH SURSHUW\IRU&DQQRQj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s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l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jV EUHDFK RI KLV ILGXFLDU\ GXWLHV LPSURSULHW\DQGLOOHJDOLW\RIXVLQJWKHHVFURZDFFRXQWVLQWKLV 6WHYHQVRQ%5DW VXPPDUL]LQJWKHHYLGHQFHWKDW ZD\DQGKHGHSHQGHGXSRQGHSRVLWVIURPQHZFORVLQJVWRSD\ %UDGIRUGNQHZRUUHFNOHVVO\GLGQRWNQRZWKDW&DQQRQKDG RIIWKHSDUWLHVWRHDUOLHUWUDQVDFWLRQV$WYDULRXVSRLQWVZKHQ DSSURSULDWHG IXQGV IURP WKH HVFURZ DFFRXQWV WR WUDGH &DQQRQH[SHULHQFHGODUJHORVVHV5RVVDQGRWKHUPDQDJHUV FRPPRGLWLHV ZLWK %UDGIRUG VRXJKW H[SODQDWLRQV IRU &DQQRQjV XVH RI FKHFNVGUDZQRQWKHHVFURZDFFRXQWVEXWQHYHUFRQILUPHG :KHWKHU D WKLUG SDUW\ FRPPLWV DQ LQGHSHQGHQW ZURQJ &DQQRQjVYHUEDODVVXUDQFHVWKDWWKHDFFRXQWVFRQWDLQHGKLV DJDLQVW WKH WUXVW RU SDUWLFLSDWHV LQ WKH WUXVWHHjV EUHDFK RI RZQPRQH\HYHQWKRXJK&DQQRQKDGSUHYLRXVO\LQGLFDWHGWR ILGXFLDU\GXW\DWUXVWHHZKRKDVFRPPLWWHGDEUHDFKRIWUXVW 5RVVWKDWKHZDVWUDGLQJZLWKERUURZHGIXQGV%\)HEUXDU\ FDQ QRQHWKHOHVV SXUVXH D FDXVH RI DFWLRQ DJDLQVW WKH WKLUG &DQQRQ KDG VXVWDLQHG JURVV WUDGLQJ ORVVHV RI SDUW\DOWKRXJKLQWKLVFLUFXPVWDQFHWKHEHQHILFLDU\PD\DV PLOOLRQDQGQHWWUDGLQJORVVHVRIPRUHWKDQPLOOLRQ,Q ZHOO+DUULV7UXVW 6DY%DQN86DW6HHDOVR WXUQWKHORVVHVLQFUHDVHGWKHSUHVVXUHRQ&DQQRQjVSUDFWLFHWR 5(67$7(0(17 6(&21' 2) 758676 %2*(57 PDNH XS WKH GHILFLW LQ WKH HVFURZ DFFRXQWV E\ GHOD\LQJ SD\PHQWV RQ FORVLQJV DQG NLWLQJ FKHFNV &DQQRQjV WUDGHV JHQHUDWHGEURNHUDJHFRPPLVVLRQVRIIRU%UDGIRUG $OWKRXJKWKHWUXVWHHEDVHVKLVFDXVHRIDFWLRQXSRQKLV RZQ YROXQWDU\ DFW DQG HYHQ WKRXJK WKH DFW ZDV &DQQRQj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jVDFFRXQWVDQGWHUPLQDWHG &DQQRQj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l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jO%DQNRI )LOHGIRU%DQNUXSWF\ &KDWWDQRRJD7HQQ)G WK&LU &I1HZ+DPSVKLUH,QV&RYsRQHV ,QUHs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jO&RY RI]HUR$WDOOWLPHV&DQQRQFRPPLQJOHGWKHIXQGVRIFOLHQWV &RPPHUFH8QLRQ%DQN6:G 7HQQ LQWKHHVFURZDFFRXQWV,QDGGLWLRQ&DQQRQGHSRVLWHGVRPH /RXLVYLOOH 1DVKYLOOH7HUPLQDO&RY/HOO\HWW6: OHJDOIHHVLQWRWKHHVFURZDFFRXQWVLQDYDLQDWWHPSWWRUHSD\ 7HQQ &ROHVRQY%ODQWRQ7HQQ +D\Z WKHGHILFLHQF\DQGWKHEDODQFHLQWKHHVFURZDFFRXQWVDOVR SHUFXULDP 6HHDOVR5(67$7(0(17 6(&21' LQFUHDVHGGXHWR&DQQRQjVFKHFNNLWLQJ 2) 758676 %2*(57 :KHQ D WUXVWHH FRPPLWVDEUHDFKRIWUXVWWKHWUXVWHHLVSHUVRQDOO\OLDEOHWR 'XULQJ WKH \HDU SULRU WR ILOLQJ IRU EDQNUXSWF\ &DQQRQ WKHWUXVWjVEHQHILFLDULHV0RUJDQY(ODP7HQQ ,@WKDVORQJEHHQVHWWOHGWKDWZKHQDWUXVWHHLQEUHDFKRI KLV ILGXFLDU\ GXW\ WR WKH EHQHILFLDULHV WUDQVIHUV WUXVW SURSHUW\ WR D WKLUG SHUVRQ WKH WKLUG SHUVRQ WDNHV WKH ,Q DGGLWLRQ WR WKH FDVHV RQ DSSHDO EHIRUH WKLV FRXUW &DQQRQjV SURSHUW\VXEMHFWWRWKHWUXVWXQOHVVKHKDVSXUFKDVHGWKH EDQNUXSWF\ KDV JHQHUDWHG FRQVLGHUDEOH OLWLJDWLRQ ,Q /DZ\HUV 7LWOH SURSHUW\IRUYDOXHDQGZLWKRXWQRWLFHRIWKHILGXFLDU\ V ,QVXUDQFH &RUS Y 8QLWHG $PHULFDQ %DQN RI 0HPSKLV ) 6XSS G EUHDFKRIGXW\ :' 7HQQ WKH GLVWULFW FRXUW GLVPLVVHG LQ SDUW D VXLW EURXJKW DJDLQVW 8$% E\ WKH WLWOH LQVXUDQFH FRPSDQLHV WKDW ZHUH UHTXLUHG WR LQGHPQLI\ LQVXUHGV ZKR VXVWDLQHG ORVVHV ZKHQ &DQQRQjV VFKHPH +DUULV7UXVW 6DY%DQNY6DORPRQ6PLWK%DUQH\,QF FROODSVHG $OWKRXJK WKH GLVWULFW FRXUW GHFLGHG WKDW FHUWDLQ FODLPV EURXJKW 86 DSSO\LQJFRPPRQODZSULQFLSOHVLQWKH E\ WKH WLWOH LQVXUDQFH FRPSDQLHV FRXOG QRW SURFHHG JHQXLQH LVVXHV RI IDFW LQWHUSUHWDWLRQRIWKH(PSOR\HH5HWLUHPHQW,QFRPH6HFXULW\ UHPDLQHG IRU WULDO UHJDUGLQJ 8$%jV GHJUHH RI NQRZOHGJH DQG SDUWLFLSDWLRQ $FWRI FLWDWLRQVRPLWWHG 6HHDOVRHJ&DUGZHOOY LQ &DQQRQj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jVSRZHUVXQGHUWKH HVFURZ DFFRXQWV WR GHWHUPLQH WKH VRXUFH RI IXQGV &DQQRQ EDQNUXSWF\FRGHDUHFRH[WHQVLYH XVHG WR SD\ %UDGIRUG $FFRUGLQJ WR *UDKDPjV UHSRUW WKH HVFURZFKHFNVFDPHIURPDQDSSUR[LPDWHO\PLOOLRQSRRO >7@KHmFDVHRUFRQWURYHUV\lUHTXLUHPHQWFRLQFLGHVZLWK RIGHSRVLWVPDGHDWRUQHDUWKHWLPHRIFKHFNVZULWWHQWR WKH VFRSH RI WKH SRZHUV WKH %DQNUXSWF\ &RGH JLYHV D %UDGIRUG2IWKLVDPRXQW*UDKDPWUDFHGDSSUR[LPDWHO\ WUXVWHHWKDWLVLIDWUXVWHHKDVQRSRZHUWRDVVHUWDFODLP PLOOLRQ RU WR IXQGV IURP UHDO HVWDWH FORVLQJV EHFDXVHLWLVQRWRQHEHORQJLQJWRWKHEDQNUXSWHVWDWH DSSUR[LPDWHO\PLOOLRQRUWRNLWHV DQG WKHQKHDOVRIDLOVWRPHHWWKHSUXGHQWLDOOLPLWDWLRQWKDW WR&DQQRQjVSHUVRQDOIXQGVZLWKWKHEDODQFHDWWULEXWDEOHWR WKHOHJDOULJKWVDVVHUWHGPXVWEHKLVRZQ XQGHWHUPLQHGVRXUFHV 6KHDUVRQ/HKPDQ+XWWRQ,QFY:DJRQHU )G %&RPPHQFHPHQWRIWKH$GYHUVDU\3URFHHGLQJLQ G&LU %DQNUXSWF\&RXUW 8QGHU86& D&KDSWHUWUXVWHHmVKDOOFROOHFW 2Q )HEUXDU\ 6WHYHQVRQ ILOHG VXLW DJDLQVW s& DQGUHGXFHWRPRQH\WKHSURSHUW\RIWKHHVWDWHl$PRQJ %UDGIRUG &R s& %UDGIRUG )XWXUHV ,QF DQG &KDUOHV WKH mOHJDO DQG HTXLWDEOH LQWHUHVWV RI WKH GHEWRUl LQFOXGHG 5RVV &RXQWV , WKURXJK 9,, RI WKH FRPSODLQW DOOHJHG ZLWKLQ WKH mSURSHUW\ RI WKH HVWDWHl XQGHU VHFWLRQ DUH YLRODWLRQVRIIHGHUDOFRPPRGLWLHVODZVEUHDFKRIILGXFLDU\ FDXVHVRIDFWLRQEHORQJLQJWRWKHGHEWRU 6SDUWDQ7XEH GXWLHVIUDXGYLRODWLRQVRIVWDWHFRQVXPHUSURWHFWLRQODZV 6WHHO,QFY+LPPHOVSDFK ,QUH5&6(QJLQHHUHG3URGV DQGIDLOXUHWRVXSHUYLVHnDOOQRQFRUHSURFHHGLQJVXQGHU )G WK&LU FLWDWLRQRPLWWHG %HFDXVH 86& E ,Q &RXQW 9,,, WKH WUXVWHH VRXJKW WR FDXVHVRIDFWLRQEHORQJWRWKHHVWDWHVHFWLRQ JUDQWVWKH UHFRYHU XQGHU 86& WKH &DQQRQ WUXVWHH WKH H[FOXVLYH ULJKW WR DVVHUW WKH GHEWRUjV FODLPV WUDQVIHUUHG WR %UDGIRUG IURP WKH HVFURZ DFFRXQWV D FRUH +RQLJPDQY&RPHULFD%DQN ,QUH9DQ'UHVVHU&RUS SURFHHGLQJ XQGHU 86& E + $Q DPHQGHG )G WK &LU FLWLQJ 6FKHUW]&LEROR FRPSODLQW FRQWDLQHG D SUD\HU IRU UHOLHI UHTXHVWLQJ 8QLYHUVDO&LW\,QGHS6FK'LVWY:ULJKW ,QUH(GXFDWRUV UHVFLVVLRQDU\ DQG FRPSHQVDWRU\ GDPDJHV DJDLQVW DOO *URXS+HDOWK7UXVW )G WK&LU ,I GHIHQGDQWVMRLQWO\DQGVHYHUDOO\LQWKHDPRXQWRIPLOOLRQ D FDXVH RI DFWLRQ EHORQJV VROHO\ WR WKH HVWDWHjV FUHGLWRUV SOXVPLOOLRQLQSXQLWLYHGDPDJHVDQGUHDVRQDEOHFRVWVDQG KRZHYHUWKHQWKHWUXVWHHKDVQRVWDQGLQJWRSXUVXHWKHFODLP DWWRUQH\VjIHHVRQ&RXQWV,WKURXJK9,,2Q&RXQW9,,,WKH ,G WUXVWHHVRXJKWSUHMXGJPHQWLQWHUHVWDQGFRVWV :KHWKHUDSDUWLFXODUFDXVHRIDFWLRQEHORQJVWRWKHGHEWRU ,Q DQ DPHQGHG DQVZHU WR WKH DPHQGHG FRPSODLQW VRWKDWLWFRQVWLWXWHVmSURSHUW\RIWKHHVWDWHlGHSHQGVXSRQ 'HIHQGDQWV DVVHUWHG VHYHUDO DIILUPDWLYH GHIHQVHV 2I VWDWH ODZ ,Q UH 5&6 (QJLQHHUHG 3URGV )G DW SDUWLFXODU UHOHYDQFH WR WKLV DSSHDO 'HIHQGDQWV DUJXHG WKDW FLWLQJ%XWQHU86DW m+RZHYHULIWKHGHEWRUFRXOG WKH IXQGV WUDQVIHUUHG WR %UDGIRUG IURP WKH HVFURZ KDYH UDLVHG D VWDWH FODLP DW WKH FRPPHQFHPHQW RI WKH DFFRXQWV GLG QRW FRQVWLWXWH mDQ LQWHUHVW RI WKH GHEWRU LQ EDQNUXSWF\FDVHWKHQWKDWFODLPLVWKHH[FOXVLYHSURSHUW\RI SURSHUW\l %UDGIRUG DFFHSWHG WKH FKHFNV GUDZQ RQ WKH WKHEDQNUXSWF\HVWDWHDQGFDQQRWEHDVVHUWHGE\DFUHGLWRUl HVFURZ DFFRXQWV IRU YDOXH DQG LQ JRRG IDLWK DQG WKH ,Q UH 9DQ 'UHVVHU &RUS )G DW FLWLQJ ,Q UH WUXVWHH ODFNHG VWDQGLQJ WR DVVHUW WKH FODLPV UDLVHG LQ WKH (GXFDWRUV *URXS +HDOWK 7UXVW )G DW DPHQGHG FRPSODLQW EHFDXVH WKH YLFWLPV RI &DQQRQjV m&RQYHUVHO\ LI WKH FDXVH RI DFWLRQ GRHV QRW H[SOLFLWO\ RU LPSOLFLWO\DOOHJHKDUPWRWKHGHEWRUWKHQWKHFDXVHRIDFWLRQ ,QUH&DQQRQ 1RV 1RV ,QUH&DQQRQ FLWDWLRQVRPLWWHG :KHQDSODLQWLIIDVVHUWVVWDQGLQJ PLVDSSURSULDWLRQV DUH QRW FUHGLWRUV RI WKH HVWDWH DQG KDG EDVHGRQDWKUHDWHQHGLQMXU\KHPXVWVKRZWKDWWKHWKUHDWHQHG UHFHLYHGFRPSHQVDWLRQWKURXJKWKHLULQVXUDQFHFRPSDQLHVRU LQMXU\ LV VR LPPLQHQW DV WR EH mFHUWDLQO\ LPSHQGLQJl EURXJKWVHSDUDWHDFWLRQVWRUHFRYHUWKHLUORVVHV :KLWPRUH Y $UNDQVDV 86 7KHUHIRUH WKH DOOHJHG LQMXU\ FDQQRW EH mFRQMHFWXUDOl RU ,Q D PRWLRQ WR GLVPLVV &RXQW 9,,, WKH FRUH SURFHHGLQJ mK\SRWKHWLFDOl,GDW 'HIHQGDQWVDUJXHGWKDWWKHIXQGVWUDQVIHUUHGIURPWKHHVFURZ DFFRXQWV GLG QRW FRQVWLWXWH mDQ LQWHUHVW RI WKH GHEWRU LQ (YHQZKHQDFDVHIDOOVZLWKLQWKHSDUDPHWHUVRI$UWLFOH,,, SURSHUW\lZLWKLQWKHPHDQLQJRIVHFWLRQDQGVRGLGQRW MXULVGLFWLRQDSDUW\FODLPLQJVWDQGLQJPXVWDOVRGHPRQVWUDWH FRPHZLWKLQWKHWUXVWHHjVDYRLGDQFHSRZHU$IWHUDKHDULQJ WKDWSUXGHQWLDOFRQVLGHUDWLRQVGRQRWIXUWKHUOLPLWWKHH[HUFLVH RQWKHSDUWLDOPRWLRQWRGLVPLVVWKHEDQNUXSWF\FRXUWUHMHFWHG RIDFRXUWjVSRZHUWRKHDUDFDVH6HHHJ:DUWK86 'HIHQGDQWVj DUJXPHQWV DQG GHQLHG WKH PRWLRQ 6WHYHQVRQ DW m>$@Q\ LQTXLU\ LQWR D OLWLJDQW V VWDQGLQJ WR VXH DQG'HIHQGDQWVILOHGFURVVPRWLRQVIRUVXPPDU\MXGJPHQW LQYROYHVH[DPLQDWLRQRIERWKFRQVWLWXWLRQDOOLPLWDWLRQVDQG $IWHUGHQ\LQJ'HIHQGDQWVjPRWLRQDQGJUDQWLQJLQSDUWDQG SUXGHQWLDOUHVWULFWLRQVl$OOVWDWH,QV&RY7KULIW\5HQW$ GHQ\LQJLQSDUWWKHPRWLRQRIWKHWUXVWHHWKHHIIHFWRIZKLFK &DU6\V,QF )G WK&LU FLWDWLRQ ZDV WR ILQG WKDW WKH IXQGV LQ WKH HVFURZ DFFRXQWV ZHUH RPLWWHG %URDGO\VSHDNLQJWKHUHDUHWKUHHSUXGHQWLDOOLPLWV SURSHUW\RIWKHHVWDWHXQGHUVHFWLRQWKHEDQNUXSWF\FRXUW RQ VWDQGLQJ RUGLQDULO\ FRXQVHOLQJ DJDLQVW WKH H[HUFLVH RI VHWWKHFDVHIRUWULDO6WHYHQVRQ%5DW MXULVGLFWLRQ DOOHJLQJ D JHQHUDOL]HG JULHYDQFH QRW SDUWLFXODUWRWKHSODLQWLII DVVHUWLQJWKHOHJDOULJKWV DQG &7KH%DQNUXSWF\&RXUWjV2UGHU 1R DQG LQWHUHVWVRIDWKLUGSDUW\ DQG FODLPLQJDQLQMXU\RXWVLGH 3URSRVHG)LQGLQJV 1R WKH ]RQH RI LQWHUHVWV RI WKH VWDWXWH SURYLGLQJ WKH FDXVH RI DFWLRQ6HHHJ9DOOH\)RUJH&KULVWLDQ&ROOY$PHULFDQV 8SRQ WKH FRQFOXVLRQ RI D QLQHGD\ EHQFK WULDO WKH 8QLWHGIRU6HSDUDWLRQRI&KXUFK 6WDWH,QF86 EDQNUXSWF\FRXUWLVVXHGOHQJWK\SURSRVHGILQGLQJVRIIDFWDQG FRQFOXVLRQVRIODZZLWKUHVSHFWWRWKHFRXQWVDOOHJHGLQWKH QRQFRUHSURFHHGLQJDQGDQRSLQLRQDQGRUGHUZLWKUHVSHFW %6WDQGLQJRIWKH7UXVWHH WR WKH WUXVWHHjV FRUH SURFHHGLQJ WR DYRLG WKH IUDXGXOHQW WUDQVIHU6HHJHQHUDOO\6WHYHQVRQYs&%UDGIRUG &R ,Q m$VDFUHDWXUHRIVWDWXWHWKHWUXVWHHLQEDQNUXSWF\KDVRQO\ UH&DQQRQ %5 %DQNU:'7HQQ ,QWKH WKRVHSRZHUVFRQIHUUHGXSRQKLPE\WKH%DQNUXSWF\>&RGH@l QRQFRUHSURFHHGLQJWKHEDQNUXSWF\FRXUWSURSRVHGWKDWWKH &LVVHOOY$PHULFDQ+RPH$VVXUDQFH&R)G GLVWULFWFRXUWILQG'HIHQGDQWVOLDEOHIRUFRPPRGLWLHVIUDXG WK&LU FLWDWLRQVRPLWWHG 7KHWUXVWHHVWDQGVLQWKH IUDXGYLRODWLRQVRI7HQQHVVHHjVFRQVXPHUSURWHFWLRQODZV VKRHVRIWKHGHEWRUDQGKDVVWDQGLQJWREULQJDQ\DFWLRQWKDW EUHDFKRIILGXFLDU\GXWLHVDQGIDLOXUHWRVXSHUYLVH,GDW WKHEDQNUXSWFRXOGKDYHEURXJKWKDGKHQRWILOHGDSHWLWLRQIRU 7KHEDQNUXSWF\FRXUWUHFRPPHQGHGWKDWWKHGLVWULFWFRXUW EDQNUXSWF\0HODPHGY/DNH&RXQW\1DWj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l TXRWLQJ0LWFKHOOY0DXUHU 86 WKHIXQGVLQWKHHVFURZDFFRXQWVZHUHSURSHUW\RIWKHHVWDWH 'RXJODVY(*%DOGZLQ $VVRFV,QF WKH EDQNUXSWF\ FRXUW IRXQG WKDW &DQQRQ WUDQVIHUUHG IXQGV )G WK &LU m>)@HGHUDO FRXUWV KDYH DQ IURP WKH HVFURZ DFFRXQWV WR %UDGIRUG ZLWK WKH LQWHQW WR LQGHSHQGHQW REOLJDWLRQ WR LQYHVWLJDWH DQG SROLFH WKH KLQGHUGHOD\DQGGHIUDXGKLVFUHGLWRUVLG DQGWKDW ERXQGDULHV RI WKHLU RZQ MXULVGLFWLRQl %HFDXVH %UDGIRUGGLGQRWUHFHLYHWKHIXQGVLQJRRGIDLWK,GDW FRQVWLWXWLRQDOVWDQGLQJmLVDOZD\VDWKUHVKROGLQTXLU\lWKDWD 7KHUHIRUHWKHEDQNUXSWF\FRXUWFRQFOXGHGWKDW&DQQRQjV FRXUWPXVWFRQVLGHUEHIRUHH[HUFLVLQJMXULVGLFWLRQ1HZVRPH GLVEXUVHPHQWRIIXQGVIURPWKHHVFURZDFFRXQWVWR%UDGIRUG Y%DWDYLD/RFDO6FK'LVW)G WK&LU FRQVWLWXWHGIUDXGXOHQWWUDQVIHUVXQGHUVHFWLRQ,GDW LQWHUQDOTXRWDWLRQDQGDOWHUDWLRQRPLWWHG WKHGLVWULFWFRXUW 2QWKLVEDVLVWKHEDQNUXSWF\FRXUWUXOHGWKDWWKHWUXVWHH FDQQRWKDYHFRPPLWWHGHUURUnDVWKHWUXVWHHFRQWHQGVnE\ ZDV HQWLWOHG WR UHFRYHU WKH SOXV SUHMXGJPHQW DGGUHVVLQJ WKH WUXVWHHjV VWDQGLQJ WR EULQJ WKH QRQFRUH LQWHUHVW WUDQVIHUUHG WR %UDGIRUG LQ WKH \HDU EHIRUH &DQQRQ SURFHHGLQJHYHQLI'HIHQGDQWVGLGQRWUDLVHVXFKDFKDOOHQJH ILOHGIRUEDQNUXSWF\,GDW EHIRUHWKHEDQNUXSWF\FRXUW:HUHYLHZTXHVWLRQVRIVWDQGLQJ GHQRYRsRKQVRQY(FRQRPLF'HY&RUSRIWKH&RXQW\RI 'HIHQGDQWV WLPHO\ ILOHG ZLWK WKH EDQNUXSWF\ FRXUW 2DNODQG)G WK&LU FLWLQJ:DUWKY REMHFWLRQVWRWKHSURSRVHGILQGLQJVRIIDFWDQGFRQFOXVLRQVRI 6HOGLQ86 ODZLQWKHQRQFRUHSURFHHGLQJDQGDPRWLRQWRDOWHURUDPHQG WKH MXGJPHQW XQGHU 5XOH RI WKH )HGHUDO 5XOHV RI $&RQVWLWXWLRQDODQG3UXGHQWLDO3ULQFLSOHVRI6WDQGLQJ %DQNUXSWF\3URFHGXUHLQWKHFRUHSURFHHGLQJ$PRQJWKH REMHFWLRQVUDLVHGZDV'HIHQGDQWVjUHQHZDORIWKHDUJXPHQW 7R HVWDEOLVK VWDQGLQJ XQGHU WKH mFDVH RU FRQWURYHUV\l SUHYLRXVO\ PDGH LQ WKH DPHQGHG DQVZHU WR WKH DPHQGHG UHTXLUHPHQWRI$UWLFOH,,,RIWKH8QLWHG6WDWHV&RQVWLWXWLRQD FRPSODLQW WKDW WKH WUXVWHH ODFNHG VWDQGLQJ WR DVVHUW FODLPV SODLQWLII UHODWHG WR &DQQRQj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jV LQMXU\ WKH 6WHYHQVRQYs&%UDGIRUG &R ,QUH&DQQRQ %5 UHGUHVVDELOLW\HOHPHQW %DQNU:'7HQQ )RUSXUSRVHVRIWKLVDSSHDO WKHVH DPHQGPHQWV PDGH QR PDWHULDO FKDQJHV WR WKH *UHQGHOOY2KLR6XSUHPH&RXUW)G WK&LU EDQNUXSWF\FRXUWjVLQLWLDOMXGJPHQW FHUWGHQLHG6&W 862FW 1R TXRWLQJ&R\QHY$PHULFDQ7REDFFR&R)G WK &LU $V D UXOH D SDUW\ PXVW KDYH D mSHUVRQDOVWDNHLQWKHRXWFRPHRIWKHFRQWURYHUV\lWRVDWLVI\ $UWLFOH,,,:DUWK86DW TXRWLQJ%DNHUY&DUU 86 $mSODLQWLIIPXVWVKRZWKDWKH SHUVRQDOO\KDVVXIIHUHGVRPHDFWXDORUWKUHDWHQHGLQMXU\DVD UHVXOW RI WKH SXWDWLYHO\ LOOHJDO FRQGXFW RI WKH GHIHQGDQWl *ODGVWRQH5HDOWRUVY9LOODJHRI%HOOZRRG86 ,QUH&DQQRQ 1RV 1RV ,QUH&DQQRQ %UDNH6\V,QFY$PHULFDQ(QYWO3URW,QF 6:G '7KH'LVWULFW&RXUWjVsXGJPHQWV 7HQQ &W $SS m$V D FRQYHUWHU >WKH GHIHQGDQW@REWDLQHGQRWLWOHWRWKH>SURSHUW\@DQGFRXOGQRW 2Q DSSHDO WR WKH GLVWULFW FRXUW LQ WKH FRUH SURFHHGLQJ KDYHWUDQVIHUUHGDQ\WLWOH>@l 2QWKHXQGLVSXWHGIDFWVFOLHQWV 'HIHQGDQWVDUJXHGWKDWWKHEDQNUXSWF\FRXUWHUUHGLQILQGLQJ GHSRVLWHGIXQGVLQWR&DQQRQjVHVFURZDFFRXQWVZKLFKWKH\ WKDWWKHIXQGVLQHVFURZZHUHSURSHUW\RIWKHGHEWRUDQGWKDW XQGHUVWRRGWREHH[SUHVVWUXVWV8QGHU7HQQHVVHHODZZKHQ WKHWUXVWHHODFNHGVWDQGLQJWRUHFRYHUDQ\IXQGVIUDXGXOHQWO\ &DQQRQFRQYHUWHGWKHVHIXQGVKHDFTXLUHGQRWLWOHWRWKHP WUDQVIHUUHG WR %UDGIRUG IURP WKH HVFURZ DFFRXQWV EHFDXVH 7KHUHIRUH KLV HVWDWH LQ EDQNUXSWF\ KDV QR LQWHUHVW LQ WKH WKH\ EHORQJHG WR FOLHQWV QRW FUHGLWRUV ,Q DQ RUGHU GDWHG HVFURZ DFFRXQWV WKDW EULQJV WKHP ZLWKLQ WKH WUXVWHHjV 0DUFKWKHGLVWULFWFRXUWDJUHHGZLWK'HIHQGDQWVWKDW DYRLGDQFHSRZHUXQGHUVHFWLRQ WKHWUXVWHHODFNHGVWDQGLQJWRDVVHUWFODLPVDJDLQVW'HIHQGDQWV XQGHUVHFWLRQ%HFDXVHWKHWUXVWHHjVVWDQGLQJLPSOLFDWHG %HFDXVH&DQQRQKHOGWKHIXQGVGHSRVLWHGLQWRKLVHVFURZ WKH FRXUWjV MXULVGLFWLRQ XQGHU $UWLFOH ,,, WKH GLVWULFW FRXUW DFFRXQWVLQH[SUHVVWUXVWIRUKLVFOLHQWVZHKROGWKDWWKHVH GHWHUPLQHGWKDWLWFRXOGSURSHUO\HQWHUWDLQWKHLVVXHIRUWKH PRQLHV DUH QRW SDUW RI KLV HVWDWH LQ EDQNUXSWF\ DQG VR QRW ILUVWWLPHRQDSSHDO5HDVRQLQJWKDWXQGHU7HQQHVVHHODZWKH VXEMHFWWRWKHWUXVWHHjVDYRLGDQFHSRZHUXQGHUVHFWLRQ HVFURZ DFFRXQWV ZHUH H[SUHVV WUXVWV WKH GLVWULFW FRXUW ;/'DWDFRPS,QFY:LOVRQ ,QUH2PHJDV*URXS,QF FRQFOXGHGWKDW&DQQRQKDGQRHTXLWDEOHLQWHUHVWLQWKHIXQGV )G WK&LU m$GHEWRUWKDWVHUYHGSULRU WUDQVIHUUHGWR%UDGIRUGZLWKWKHUHVXOWWKDWWKHGHILQLWLRQRI WREDQNUXSWF\DVWUXVWHHRIDQH[SUHVVWUXVWJHQHUDOO\KDVQR mDQLQWHUHVWRIWKHGHEWRULQSURSHUW\lLQVHFWLRQH[FOXGHG ULJKWWRWKHDVVHWVNHSWLQWUXVWDQGWKHWUXVWHHLQEDQNUXSWF\ WKHPIURPWKHHVWDWHLQEDQNUXSWF\7KHUHIRUHWKHGLVWULFW PXVWIRUNWKHPRYHUWRWKHEHQHILFLDU\l 6HHDOVR8QLWHG FRXUWUHYHUVHGWKHMXGJPHQWRIWKHEDQNUXSWF\FRXUWLQWKH 6WDWHVY:KLWLQJ3RROV,QF86 Q FRUHSURFHHGLQJDQGHQWHUHGMXGJPHQWLQIDYRURI'HIHQGDQWV m&RQJUHVV SODLQO\ H[FOXGHG >IURP WKH EDQNUXSWF\ HVWDWH@ SURSHUW\RIRWKHUVKHOGE\WKHGHEWRULQWUXVWDWWKHWLPHRIWKH ,Q WKH QRQFRUH SURFHHGLQJ WKH GLVWULFW FRXUW HQWHUHG D ILOLQJ RI WKH SHWLWLRQl 6LQFH WKH IXQGV LQ WKH HVFURZ VHSDUDWHRUGHURQ0DUFKGLVPLVVLQJWKHWUXVWHHjV DFFRXQWVDUHQRWDSDUWRIWKHHVWDWHLQEDQNUXSWF\WKH\DUH FODLPVDJDLQVW'HIHQGDQWV%HFDXVHWKHPRQH\%UDGIRUGORVW QRW mDQ LQWHUHVW RI WKH GHEWRU LQ SURSHUW\l 7KHUHIRUH WKH LQFRPPRGLWLHVWUDGHVFDPHIURPHVFURZDFFRXQWV&DQQRQ WUXVWHH VLPSO\ KDV QR SRZHU WR DYRLG WKH WUDQVIHUV WR PDLQWDLQHG IRU WKH EHQHILW RI KLV FOLHQWV WKH GLVWULFW FRXUW %UDGIRUG FRQFOXGHGWKDW&DQQRQKLPVHOIVXIIHUHGQRGLVWLQFWLQMXU\DV DUHVXOWRIWKHFRQGXFWRI'HIHQGDQWVIUDXGXOHQWRURWKHUZLVH ,,,7KH1RQ&RUH3URFHHGLQJ 1R 7KHUHIRUH WKH FRXUW UHDVRQHG &DQQRQ ZRXOG QRW KDYH VWDQGLQJ WR VXH 'HIHQGDQWV DOWKRXJK KLV FOLHQWV ZKR ORVW :HQH[WWXUQWRWKHGLVWULFWFRXUWjVUXOLQJWKDWWKHWUXVWHH PRQH\ZRXOG ODFNVVWDQGLQJWRPDLQWDLQWKHFDXVHVRIDFWLRQDOOHJHGLQWKH QRQFRUHSURFHHGLQJ:HKDYHDQLQGHSHQGHQWREOLJDWLRQWR ,,7KH&RUH3URFHHGLQJ 1R HQVXUHRXUMXULVGLFWLRQRYHUDFDVHHYHQZKHQWKHSDUWLHVKDYH QRWGLVSXWHGWKHLVVXH6HHHJ%HQGHUY:LOOLDPVSRUW$UHD $VDWKUHVKROGPDWWHU'HIHQGDQWVDUJXHWKDWWKHWUXVWHHGLG 6FK 'LVW 86 m>(@YHU\ IHGHUDO QRWKDYHVWDQGLQJWRVHHNDYRLGDQFHRIWKHWUDQVIHUVRIIXQGV DSSHOODWHFRXUWKDVDVSHFLDOREOLJDWLRQWRµVDWLVI\LWVHOIQRW LQ WKH HVFURZ DFFRXQWV EHORQJLQJ WR &DQQRQjV FOLHQWV WR RQO\RILWVRZQMXULVGLFWLRQEXWDOVRWKDWRIWKHORZHUFRXUWV %UDGIRUG,QUHVSRQVHWKHWUXVWHHDVVDLOVWKHMXGJPHQWRIWKH LQDFDXVHXQGHUUHYLHZjHYHQWKRXJKWKHSDUWLHVDUHSUHSDUHG GLVWULFW FRXUW LQ WKH FRUH SURFHHGLQJ RQ WKH JURXQG WKDW 'HIHQGDQWV KDYH DVVHUWHG IRU WKH ILUVW WLPH RQ DSSHDO WKH ,QUH&DQQRQ 1RV 1RV ,QUH&DQQRQ TXHVWLRQ RI VWDQGLQJ DQG WKH DUJXPHQW WKDW IXQGV KHOG LQ IXQGVKHOGLQH[SUHVVWUXVWLQWKHHVFURZDFFRXQWVGRHVQRW H[SUHVVWUXVWIRU&DQQRQjVFOLHQWVIDOORXWVLGH WKHVFRSHRI DOWHUWKHLUFKDUDFWHUDQGWKHVHIXQGVUHPDLQRXWVLGHWKHHVWDWH VHFWLRQ XQGHUVHFWLRQ %HFDXVH86& D JUDQWVWKHWUXVWHHWKHSRZHU :KHQ&DQQRQGHSRVLWHGKLVRZQIXQGVVPDOODVWKH\ZHUH WRmDYRLGDQ\WUDQVIHURIDQLQWHUHVWRIWKHGHEWRULQSURSHUW\l LQWR WKH HVFURZ DFFRXQWV KH REWDLQHG QR LQWHUHVW XQGHU PDGHZLWKLQRQH\HDUEHIRUHWKHGHEWRUILOHGDSHWLWLRQIRU 7HQQHVVHH ODZ LQ WKH WUXVW FRUSXV WKDW ZRXOG DOORZ WKH EDQNUXSWF\ZHKDYHGLIILFXOW\FRPSUHKHQGLQJ'HIHQGDQWVj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jO%DQNY&KDUIRRV ,QUH&KDUIRRV WUXVW RQ EHKDOI RI &DQQRQjV FOLHQWV 6HH %2*(57 )G WK&LU 3LQQH\'RFN 7UDQVSRUW H[SODLQLQJWKDWDWUXVWHHjVODWHUGHSRVLWVRIKLVRZQPRQH\ &RY3HQQ&HQW&RUS)G WK&LU LQWR D WUXVW DFFRXQW DUH SUHVXPHG WR EH UHVWLWXWLRQ IRU KLV :KHWKHUWRFRQVLGHUDQLVVXHRQZKLFKWKHWULDOFRXUWGLGQRW VWROHQ IXQGV ZKHQ WKH DFFRXQW LV H[SUHVVO\ ODEHOHG D WUXVW SDVV UHVWV ZLWKLQ WKH GLVFUHWLRQ RI WKH DSSHOODWH FRXUW DQG DFFRXQW 5(67$7(0(17 6(&21' 2) 758676 FPWP GHSHQGV XSRQ WKH IDFWV RI LQGLYLGXDO FDVHV 6LQJOHWRQ Y 5(67$7(0(17 2) 5(67,787,21FPWF $FFRUG :XOII 86 )DFWRUV JXLGLQJ WKH *ROGEHUJY1HZsHUVH\/DZ\HUVj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j ULJKW XQGHU RXU IUDXG6HHHJ7UHDGZHOOY0F.HRQ7HQQ MXGLFLDOV\VWHPWRKDYHWKHLVVXHVLQWKHLUVXLWFRQVLGHUHG $FFRUG/LEHUW\$VVRFVY3UHVFRWW)RUEHV5HDO(VWDWH E\ERWKDGLVWULFWMXGJHDQGDQDSSHOODWHFRXUW &RUS ,QUH/LEHUW\$VVRFV %5 %DQNU (' 3HQQ m$ EUHDFK RI WKH GXW\ WR GHOLYHU WKH )ULHQGO\)DUPVY5HOLDQFH,QV&R )G WK HVFURZHGSURSHUW\LQWKHPDQQHUGHVFULEHGLQWKHDJUHHPHQW &LU FLWLQJ7DIW%URDG&RY8QLWHG6WDWHV )G KDVEHHQWHUPHGDFRQYHUVLRQRIWKHSURSHUW\QRWGHOLYHUHGl WK&LU :HKDYHDOVRKHOGWKDWH[FHSWLRQDO FLWLQJ$0 s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l,QUH(OURG%5 %DQNU DW(YHQLI'HIHQGDQWVUDLVHGWKHLVVXHIRUWKHILUVWWLPH ('7HQQ 6HHDOVR(PHUVRQY0DUW\ ,QUH0DUN RQDSSHDOWRWKHGLVWULFWFRXUWZHZRXOGQRWFRQFOXGHWKDWWKH %HQVNLQ &R %5 %DQNU:'7HQQ GLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQE\FRQVLGHULQJIRUWKHILUVW m,IWKHLQWHQWLRQLVWKDWWKHPRQH\VKDOOEHNHSWRUXVHGDVD WLPHRQDSSHDODTXHVWLRQRIODZLQWLPDWHO\ERXQGXSZLWKWKH VHSDUDWHIXQGIRUWKHEHQHILWRIWKHSD\RURUDWKLUGSHUVRQD SRZHURIWKHWUXVWHHXQGHUWKHEDQNUXSWF\FRGH)XUWKHUWKH WUXVWLVFUHDWHGl TXRWLQJ,QUH3URSHUW\/HDVLQJ 0JPW UHFRUGUHIOHFWVWKDW'HIHQGDQWVLQIDFWUDLVHGWKHDUJXPHQWWKDW ,QF%5 %DQNU('7HQQ WKHIXQGVWUDQVIHUUHGIURPWKHHVFURZDFFRXQWVWR%UDGIRUG GLGQRWFRQVWLWXWHmDQLQWHUHVWRIWKHGHEWRULQSURSHUW\lLQDQ 7KH 7HQQHVVHH 6XSUHPH &RXUWjV UXOHV FRQILUP WKLV DPHQGHGDQVZHUWRWKHDPHQGHGFRPSODLQWDQGLQWKHPRWLRQ FRQFOXVLRQ m$WWRUQH\VZKRSUDFWLFHODZLQ7HQQHVVHHVKDOO WRGLVPLVV,QDVPXFKDV'HIHQGDQWVSUHVHQWHGWKHPDWWHUWR GHSRVLWDOOIXQGVKHOGLQWUXVWLQWKLVMXULVGLFWLRQLQDFFRXQWV WKH EDQNUXSWF\ FRXUW DQG WKH LVVXH FRQFHUQV DQ LPSRUWDQW FOHDUO\LGHQWLILHGDVµWUXVWjRUµHVFURZjDFFRXQWVUHIHUUHGWR TXHVWLRQRIODZUHJDUGLQJWKHVFRSHRIWKHWUXVWHHjVDYRLGDQFH KHUHLQ DV µWUXVW DFFRXQWV>@jl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jVUHYLHZRIWKHEDQNUXSWF\FRXUWjVGHFLVLRQ,Q LQWKLVVLWXDWLRQWKHFRPPLQJOHGFOLHQWIXQGVLQWKH UH0s:DWHUPDQ $VVRFV,QF)G WK&LU HVFURZDFFRXQWVUHWDLQWKHLUFKDUDFWHUDVSURSHUW\KHOGVXEMHFW %HFDXVH ZH ILQG RXUVHOYHV LQ HVVHQWLDOO\ WKH VDPH WRDQH[SUHVVWUXVW7KLVLVVREHFDXVHLQ7HQQHVVHHDODZ\HU SRVLWLRQ DV WKH GLVWULFW FRXUW LQ UHYLHZLQJ WKH EDQNUXSWF\ ZKRKROGVIXQGVEHORQJLQJWRDFOLHQWPXVWmPDLQWDLQDOOVXFK FRXUWjVGHFLVLRQZHDFFRUGQRGHIHUHQFHWRWKHGLVWULFWFRXUWjV IXQGVLQDSRROHGDFFRXQWIRUGHSRVLWRIFOLHQWIXQGVWKDW GHFLVLRQ,GDWm>,@QDSSHDOV IURP WKHGHFLVLRQRID DUHH[SHFWHGWREHKHOGIRUDVKRUWSHULRGl7(11 683 GLVWULFWFRXUWRQDSSHDOIURPWKHEDQNUXSWF\FRXUWWKHFRXUW &7 5'5 & 6HHDOVR)RUPDO(WKLFV2S1R RI DSSHDOV LQGHSHQGHQWO\ UHYLHZV WKH EDQNUXSWF\ FRXUWjV ) :/DW 7HQQ%G3URI5HVS0D\ GHFLVLRQDSSO\LQJWKHFOHDUO\HUURQHRXVVWDQGDUGWRILQGLQJV m%HFDXVHRIWKHLPSUDFWLFDOLW\RIHVWDEOLVKLQJD RI IDFW DQG GH QRYR UHYLHZ WR FRQFOXVLRQV RI ODZl ,Q UH VHSDUDWHDFFRXQWIRUHDFKFOLHQWDOOFOLHQWIXQGVJHQHUDOO\DUH 0DGDM )G WK&LU LQWHUQDOTXRWDWLRQV FRPPLQJOHGLQWKHODZ\HUjVWUXVWDFFRXQWl 5(67$7(0(17 DQGFLWDWLRQVRPLWWHG 6(&21' 2) 758676 FPWI m>2@UGLQDULO\DQ DWWRUQH\FDQSURSHUO\GHSRVLWLQDVLQJOHWUXVWDFFRXQWWKH %HFDXVH D JUDQW RI VXPPDU\ MXGJPHQW SUHVHQWV D SXUH IXQGVRIDOOKLVFOLHQWVl $FFRUGLQJO\WKHFRPPLQJOLQJRI TXHVWLRQ RI ODZ WKH GLVWULFW FRXUW UHYLHZV WKH EDQNUXSWF\ ,QUH&DQQRQ 1RV 1RV ,QUH&DQQRQ FRXUWjVJUDQWRIVXPPDU\MXGJPHQWGHQRYRDVGRZHLQWXUQ SURSHUW\j DUH FUHDWXUHV RI VWDWH ODZl FLWLQJ 0F.HQ]LH Y ,QUH%DWLH )G WK&LU /LNHZLVHWKH ,UYLQJ7UXVW&R86 DQG %XWQHU Y WUXVWHHj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mPD\DYRLGDQ\ WUDQVIHURIDQLQWHUHVWRIWKHGHEWRULQSURSHUW\lPDGHZLWKLQ .RSVRPEXW0\LQW%XGGKLVW&WUY6WDWH%GRI(TXDOL]DWLRQ RQH \HDU EHIRUH WKH GHEWRU ILOHV D SHWLWLRQ IRU EDQNUXSWF\ 6:G 7HQQ &W $SS FLWLQJ ** $OWKRXJKWKHEDQNUXSWF\FRGHGRHVQRWGHILQHmSURSHUW\RI %2*(57 *7 %2*(57 7+( /$: 2) 758676$1' 75867((6 WKHGHEWRUlVHFWLRQ D SURYLGHVWKDWWKHmSURSHUW\RI UHY G HG >KHUHLQDIWHU %2*(57@ DQG WKH HVWDWHl LQFOXGHV mDOO OHJDO RU HTXLWDEOH LQWHUHVWV RI WKH 5(67$7(0(17 6(&21' 2) 758676FPWK GHEWRU LQ SURSHUW\ DV RI WKH FRPPHQFHPHQW RI WKH FDVHl 6HFWLRQ G IXUWKHUSURYLGHV >$@WDPLQLPXPWKHUHPXVWEHDJUDQWRURUVHWWORUZKR LQWHQGVWRFUHDWHDWUXVW DFRUSXV WKHVXEMHFWSURSHUW\ 3URSHUW\ LQ ZKLFK WKH GHEWRU KROGV DV RI WKH DWUXVWHH DQGDEHQHILFLDU\7KHWUXVWHHKROGVOHJDOWLWOH FRPPHQFHPHQWRIWKHFDVHRQO\OHJDOWLWOHDQGQRWDQ DQGLQWKDWVHQVHRZQVWKHSURSHUW\KROGLQJLWIRUWKH HTXLWDEOHLQWHUHVWEHFRPHVSURSHUW\RIWKHHVWDWHXQGHU EHQHILWRIWKHEHQHILFLDU\ZKRRZQVWKHHTXLWDEOHWLWOH VXEVHFWLRQ D RI WKLV VHFWLRQ RQO\ WR WKH H[WHQW RI WKH :KLOHWKHJUDQWRUPD\UHWDLQHLWKHURIWKHVHLQWHUHVWVQR GHEWRUjVOHJDOWLWOHWRVXFKSURSHUW\EXWQRWWRWKHH[WHQW RQHPD\VROHO\KROGERWKDVWKHSXUSRVHRIVHSDUDWLQJWKH RIDQ\HTXLWDEOHLQWHUHVWLQVXFKSURSHUW\WKDWWKHGHEWRU WZRZRXOGEHGHIHDWHG GRHVQRWKROG 0\HUV Y 0\HUV 6:G 7HQQ &W $SS 7KH6XSUHPH&RXUWKDVLQWHUSUHWHGWKHVHVWDWXWHVDVLQFOXGLQJ FLWDWLRQVRPLWWHG LQDGHEWRUjVHVWDWHmWKDWSURSHUW\WKDWZRXOGKDYHEHHQSDUW RI WKH HVWDWH KDG LW QRW EHHQ WUDQVIHUUHG EHIRUH WKH 8QGHUWKHVHSULQFLSOHVRI7HQQHVVHHODZZHFRQFOXGHWKDW FRPPHQFHPHQWRIWKHEDQNUXSWF\SURFHHGLQJVl%HJLHUY WKHIXQGV&DQQRQKHOGLQHVFURZIRUKLVFOLHQWVZHUHZLWKRXW ,56 86 +RZHYHUm>E@HFDXVHWKHGHEWRU TXHVWLRQ PDLQWDLQHG LQ DQ H[SUHVV WUXVW ,Q WKLV FDVH GRHVQRWRZQDQHTXLWDEOHLQWHUHVWLQSURSHUW\KHKROGVLQWUXVW SXUFKDVHUVRIUHDOHVWDWHGHSRVLWHGIXQGVLQVHJUHJDWHGHVFURZ IRUDQRWKHUWKDWLQWHUHVWLVQRWµSURSHUW\RIWKHHVWDWHjl,GDW DFFRXQWV ZKLFK &DQQRQ PDLQWDLQHG VXEMHFW WR ILGXFLDU\ GXWLHVIRUWKHEHQHILWRISDUWLHVWRUHDOHVWDWHVDOHVZKRZRXOG UHFHLYHWKHPRQH\RUIRUZKRVHEHQHILWWKHPRQH\ZRXOGEH 6WDWH ODZ GHWHUPLQHV ZKHWKHU IXQGV KHOG LQ HVFURZ SDLG RXW XSRQ FORVLQJ $FFRUGLQJO\ DOO RI WKH FRQGLWLRQV FRQVWLWXWHDQH[SUHVVWUXVWH[FOXGHGIURPWKHGHEWRUjVHVWDWH QHFHVVDU\IRUFUHDWLRQRIDQH[SUHVVWUXVWDUHSUHVHQWLQWKLV %DUQKLOOYsRKQVRQ86 QRWLQJWKDW DUUDQJHPHQWm>:@KHUHDSHUVRQKDVRUDFFHSWVSRVVHVVLRQRI XQGHU WKH EDQNUXSWF\ FRGH mµSURSHUW\j DQG µLQWHUHVWV LQ SHUVRQDOSURSHUW\ZLWKWKHH[SUHVVRULPSOLHGXQGHUVWDQGLQJ
