3. araullo v. aquino iii

*51R6HSDUDWH2SLQLRQV

KWWSZZZODZSKLOQHWMXGMXULVMXULMXOJUBBVRBKWPOSHUODVEHUQDEH

7RGD\LV7KXUVGD\$XJXVW

0DULD&DUROLQD3$UDXOORY%HQLJQR6LPHRQ&$TXLQR,,,*51R-XO\'HFLVLRQ%HUVDPLQ>-@6HSDUDWH2SLQLRQ&DUSLR>-@6HSDUDWH2SLQLRQ%ULRQ>-@&RQFXUULQJDQG'LVVHQWLQJ2SLQLRQ'HO&DVWLOOR>-@6HSDUDWH&RQFXUULQJ2SLQLRQ3HUODV%HUQDEH>-@&RQFXUULQJ2SLQLRQ/HRQHQ>-@

5HSXEOLFRIWKH3KLOLSSLQHV6835(0(&2857

0DQLOD

(1%$1&

*51R-XO\

0$5,$&$52/,1$3$5$8//2&+$,53(5621%$*21*$/



YV6(&5(7$5



2FW

'HF

-XQ

6HS

'HF

-XQ

6HS

727$/

8QGHU1%&WKHVRXUFHVRI'$3IXQGVDUHDVIROORZV

7KHVHJXLGHOLQHV VKDOO FRYHU WKHZLWKGUDZDORI XQREOLJDWHGDOORWPHQWVDVRI -XQHRI DOO QDWLRQDOJRYHUQPHQWDJHQFLHV1*$VFKDUJHGDJDLQVW)



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

,Q 6DQFKH] Y &RPPLVVLRQ RQ $XGLW WKLV &RXUW VWUHVVHG WKH WZLQ UHTXLVLWHV IRU D YDOLG WUDQVIHU RI DSSURSULDWLRQQDPHO\WKHH[LVWHQFHRIVDYLQJVDQGWKHH[LVWHQFHLQWKHDSSURSULDWLRQVODZRIWKHLWHPSURMHFWRUDFWLYLW\WREHDXJPHQWHGIURPVDYLQJVWKXV

&OHDUO\ WKHUHDUHWZRHVVHQWLDO UHTXLVLWHV LQRUGHU WKDWD WUDQVIHURIDSSURSULDWLRQZLWK WKHFRUUHVSRQGLQJIXQGVPD\OHJDOO\EHHIIHFWHG)LUVWWKHUHPXVWEHVDYLQJVLQWKHSURJUDPPHGDSSURSULDWLRQRIWKHWUDQVIHUULQJDJHQF\6HFRQGWKHUHPXVWEHDQH[LVWLQJLWHPSURMHFWRUDFWLYLW\ZLWKDQDSSURSULDWLRQLQWKHUHFHLYLQJDJHQF\WRZKLFKWKHVDYLQJVZLOOEHWUDQVIHUUHG

$FWXDO VDYLQJV LV D VLQH TXD QRQ WR D YDOLG WUDQVIHU RI IXQGV IURP RQH JRYHUQPHQW DJHQF\ WR DQRWKHU 7KH ZRUGDFWXDO GHQRWHV WKDW VRPHWKLQJ LV UHDO RU VXEVWDQWLDO RU H[LVWV SUHVHQWO\ LQ IDFW DV RSSRVHG WR VRPHWKLQJZKLFK LVPHUHO\WKHRUHWLFDOSRVVLEOHSRWHQWLDORUK\SRWKHWLFDO%ROGIDFLQJVXSSOLHG

,Q1D]DUHWKY9LOODUWKLV&RXUWUHLWHUDWHGWKHUHTXLVLWHVIRUDYDOLGWUDQVIHURIDSSURSULDWLRQDVPDQGDWHGLQ6HFWLRQ$UWLFOH9,RIWKH&RQVWLWXWLRQWKXV

8QGHUWKHVHSURYLVLRQV WKHDXWKRULW\JUDQWHGWRWKH3UHVLGHQWZDVVXEMHFW WR WZRHVVHQWLDOUHTXLVLWHV LQRUGHU WKDWDWUDQVIHU RI DSSURSULDWLRQ IURP WKHDJHQF\V VDYLQJVZRXOG EH YDOLGO\ HIIHFWHG 7KH ILUVW UHTXLUHG WKDW WKHUHPXVW EHVDYLQJVIURPWKHDXWKRUL]HGDSSURSULDWLRQRIWKHDJHQF\7KHVHFRQGGHPDQGHGWKDWWKHUHPXVWEHDQH[LVWLQJLWHPSURMHFWDFWLYLW\SXUSRVHRUREMHFWRIH[SHQGLWXUHZLWKDQDSSURSULDWLRQWRZKLFKWKHVDYLQJVZRXOGEHWUDQVIHUUHGIRUDXJPHQWDWLRQSXUSRVHVRQO\%ROGIDFLQJVXSSOLHG

6HFWLRQ$UWLFOH9,RIWKH&RQVWLWXWLRQOLNHZLVHPDQGDWHVWKDWVDYLQJVIURPRQHEUDQFKOLNHWKH([HFXWLYHFDQQRWEHWUDQVIHUUHGWRDQRWKHUEUDQFKOLNHWKH/HJLVODWXUHRU-XGLFLDU\RUWRDFRQVWLWXWLRQDOERG\DQGYLFHYHUVD,QIDFWIXQGV DSSURSULDWHG IRU WKH ([HFXWLYH EUDQFK ZKHWKHU VDYLQJV RU QRW FDQQRW EH WUDQVIHUUHG WR WKH /HJLVODWXUH RU-XGLFLDU\RUWRWKHFRQVWLWXWLRQDOERGLHVDQGYLFHYHUVD+HQFHIXQGVIURPWKH([HFXWLYHEUDQFKZKHWKHUVDYLQJVRUQRW FDQQRW EH WUDQVIHUUHG WR WKH &RPPLVVLRQ RQ (OHFWLRQV WKH +RXVH RI 5HSUHVHQWDWLYHV RU WKH &RPPLVVLRQ RQ$XGLW

,Q 3LFKD\ Y 2IILFH RI WKH 'HSXW\ ([HFXWLYH 6HFUHWDU\ WKLV &RXUW GHFODUHG WKDW WKH 3UHVLGHQW LV FRQVWLWXWLRQDOO\DXWKRUL]HGWRDXJPHQWDQ\LWHPLQWKH*$$DSSURSULDWHGIRUWKH([HFXWLYHEUDQFKXVLQJVDYLQJVIURPRWKHU LWHPVRIDSSURSULDWLRQVIRUWKH([HFXWLYHEUDQFKWKXV

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

,Q3+,/&216$Y(QULTXH]WKLV&RXUWHPSKDVL]HGWKDWRQO\WKH3UHVLGHQWLVDXWKRUL]HGWRXVHVDYLQJVWRDXJPHQWLWHPVIRUWKH([HFXWLYHEUDQFKWKXV

8QGHU6HFWLRQQR ODZVKDOOEHSDVVHGDXWKRUL]LQJDQ\ WUDQVIHURIDSSURSULDWLRQVDQGXQGHU6HFWLRQQRPRQH\VKDOOEHSDLGRXWRI WKH7UHDVXU\H[FHSW LQSXUVXDQFHRIDQDSSURSULDWLRQPDGHE\ ODZ:KLOH6HFWLRQDOORZVDVDQH[FHSWLRQWKHUHDOLJQPHQWRIVDYLQJVWRDXJPHQWLWHPVLQWKHJHQHUDODSSURSULDWLRQVODZIRUWKHH[HFXWLYHEUDQFKVXFKULJKWPXVWDQGFDQEHH[HUFLVHGRQO\E\WKH3UHVLGHQWSXUVXDQWWRDVSHFLILFODZ%ROGIDFLQJVXSSOLHG

,,'HILQLWLRQDQG6RXUFHVRI6DYLQJV

2QHRI WKH UHTXLVLWHV IRUD YDOLG WUDQVIHURI DSSURSULDWLRQVXQGHU6HFWLRQ$UWLFOH9,RI WKH&RQVWLWXWLRQ LV WKDWWKHUHPXVWEHVDYLQJVIURPWKHDSSURSULDWLRQVRIWKHVDPHEUDQFKRUFRQVWLWXWLRQDOERG\)RUWKH3UHVLGHQWWRH[HUFLVHKLV UHDOLJQPHQW SRZHU WKHUH PXVW ILUVW EH VDYLQJV IURP RWKHU LWHPV LQ WKH *$$ DSSURSULDWHG WR WKH GHSDUWPHQWVEXUHDXV DQG RIILFHV RI WKH ([HFXWLYH EUDQFK DQG VXFK VDYLQJV FDQ EH UHDOLJQHG RQO\ WR H[LVWLQJ LWHPV RIDSSURSULDWLRQVZLWKLQWKH([HFXWLYHEUDQFK

:KHQGRIXQGVIRUDQLWHPLQWKH*$$EHFRPHVDYLQJV"6HFWLRQ6HFWLRQDQG6HFWLRQRIWKHDQG*$$VUHVSHFWLYHO\XQLIRUPO\GHILQHWKHWHUPVDYLQJVDVIROORZV

6DYLQJV UHIHU WR SRUWLRQV RU EDODQFHV RI DQ\ SURJUDPPHG DSSURSULDWLRQ LQ WKLV $FW IUHH IURP DQ\ REOLJDWLRQ RUHQFXPEUDQFHZKLFKDUH

LVWLOODYDLODEOHDIWHUWKHFRPSOHWLRQRUILQDOGLVFRQWLQXDQFHRUDEDQGRQPHQWRIWKHZRUNDFWLYLW\RUSXUSRVHIRUZKLFKWKHDSSURSULDWLRQLVDXWKRUL]HG

LL IURP DSSURSULDWLRQV EDODQFHV DULVLQJ IURP XQSDLG FRPSHQVDWLRQ DQG UHODWHG FRVWV SHUWDLQLQJ WR YDFDQW



SRVLWLRQVDQGOHDYHVRIDEVHQFHZLWKRXWSD\DQG

LLL IURPDSSURSULDWLRQVEDODQFHVUHDOL]HGIURPWKHLPSOHPHQWDWLRQRIPHDVXUHVUHVXOWLQJLQ LPSURYHGV\VWHPVDQGHIILFLHQFLHVDQGWKXVHQDEOHGDJHQFLHVWRPHHWDQGGHOLYHUWKHUHTXLUHGRUSODQQHGWDUJHWVSURJUDPVDQGVHUYLFHVDSSURYHGLQWKLV$FWDWDOHVVHUFRVW%ROGIDFLQJVXSSOLHG

7KHVDPHGHILQLWLRQRIVDYLQJVLVDOVRIRXQGLQWKH*$$VIURPWR3ULRUWRWKHGHILQLWLRQRIVDYLQJVLQWKH*$$VGLGQRWFRQWDLQLWHPLLLDERYH

$VFOHDUO\GHILQHG LQ WKHDQG*$$VVDYLQJVPXVWEHSRUWLRQVRUEDODQFHV IURPDQ\SURJUDPPHGDSSURSULDWLRQIUHHIURPDQ\REOLJDWLRQRUHQFXPEUDQFHZKLFKPHDQVWKHUHLVQRFRQWUDFWREOLJDWLQJSD\PHQWRXWRIVXFKSRUWLRQVRUEDODQFHVRIWKHDSSURSULDWLRQ2WKHUZLVHLIWKHUHLVDOUHDG\DFRQWUDFWREOLJDWLQJSD\PHQWRXWRIVXFKSRUWLRQVRUEDODQFHVWKHIXQGVDUHQRWIUHHIURPDQ\REOLJDWLRQDQGWKXVFDQQRWFRQVWLWXWHVDYLQJV

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

6HFRQG WKHUHFDQEHVDYLQJVZKHQ WKHUH LVXQSDLGFRPSHQVDWLRQDQG UHODWHGFRVWVSHUWDLQLQJ WRYDFDQWSRVLWLRQV7KLUGWKHUHFDQEHVDYLQJVIURPFRVWFXWWLQJPHDVXUHVDGRSWHGE\JRYHUQPHQWDJHQFLHV

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

7RUHSHDWIXQGVSHUWDLQLQJWRZRUNDFWLYLW\RUSURMHFWPHUHO\VXVSHQGHGRUWHPSRUDULO\GLVFRQWLQXHGE\WKH3UHVLGHQWDUHQRWVDYLQJV2QO\IXQGVUHPDLQLQJDIWHUWKHZRUNDFWLYLW\RUSURMHFWKDVEHHQILQDOO\GLVFRQWLQXHGRUDEDQGRQHGZLOOFRQVWLWXWH VDYLQJV WKDW FDQ EH UHDOLJQHG E\ WKH 3UHVLGHQW WR DXJPHQW H[LVWLQJ LWHPV LQ WKH DSSURSULDWLRQV IRU WKH([HFXWLYHEUDQFK

,,,7KH'$31%&DQG2WKHU([HFXWLYH,VVXDQFHV5HODWHGWR'$3

$8QREOLJDWHG$OORWPHQWVDUHQRW6DYLQJV

,Q WKHSUHVHQWFDVHV WKH'$3DQG1%&GLUHFWHGWKHZLWKGUDZDORIXQREOLJDWHGDOORWPHQWVRIDJHQFLHVZLWK ORZOHYHORIREOLJDWLRQVDVRI-XQH7KHIXQGVZLWKGUDZQDUHWKHQXVHGWRDXJPHQWRUIXQGSULRULW\DQGRUIDVWPRYLQJSURJUDPVSURMHFWVRIWKHQDWLRQDOJRYHUQPHQW

1%&VWDWHV

)RU WKH ILUVW ILYHPRQWKVRI WKH1DWLRQDO*RYHUQPHQWKDVQRWPHW LWVVSHQGLQJ WDUJHWV ,QRUGHU WRDFFHOHUDWHVSHQGLQJDQGVXVWDLQWKHILVFDOWDUJHWVGXULQJWKH\HDUH[SHQGLWXUHPHDVXUHVKDYHWREHLPSOHPHQWHGWRRSWLPL]HWKHXWLOL]DWLRQRIDYDLODEOHUHVRXUFHV

[[[[

,QOLQHZLWKWKLVWKH3UHVLGHQWSHUGLUHFWLYHGDWHG-XQHDXWKRUL]HGWKHZLWKGUDZDORIXQREOLJDWHGDOORWPHQWVRI DJHQFLHV ZLWK ORZ OHYHOV RI REOLJDWLRQV DV RI -XQH ERWK IRU FRQWLQXLQJ DQG FXUUHQW DOORWPHQWV 7KLVPHDVXUHZLOODOORZWKHPD[LPXPXWLOL]DWLRQRIDYDLODEOHDOORWPHQWVWRIXQGDQGXQGHUWDNHRWKHUSULRULW\H[SHQGLWXUHVRIWKHQDWLRQDOJRYHUQPHQW%ROGIDFLQJVXSSOLHG

([FHSW IRU 022( IRU SUHYLRXV PRQWKV XQREOLJDWHG DOORWPHQWV RI DJHQFLHV ZLWK ORZ OHYHOV RI REOLJDWLRQV DUH QRW



VDYLQJVWKDWFDQEHUHDOLJQHGE\WKH3UHVLGHQWWRIXQGSULRULW\SURMHFWVRIWKHJRYHUQPHQW,QWKHPLGGOHRIWKHILVFDO\HDUXQREOLJDWHGDSSURSULDWLRQVRWKHUWKDQ022(IRUSUHYLRXVPRQWKVGRQRWDXWRPDWLFDOO\EHFRPHVDYLQJVIRUWKHUHDVRQDORQHWKDWWKHDJHQF\KDVDORZOHYHORIREOLJDWLRQV$VRI-XQHRIDILVFDO\HDUWKHUHDUHVWLOOVL[PRQWKVOHIWWRREOLJDWHWKHIXQGV6L[PRQWKVDUHPRUHWKDQHQRXJKWLPHWRFRQGXFWSXEOLFELGGLQJWRREOLJDWHWKHIXQGV$VRI-XQHWKHUHFRXOGKDYHEHHQQRILQDODEDQGRQPHQWRIDQ\ZRUNDFWLYLW\RUSURMHFWEHFDXVHWKHUHZDVVWLOODPSOHWLPHWRREOLJDWHWKHIXQGV

+RZHYHULIWKHIXQGVDUHQRW\HWREOLJDWHGE\WKHHQGRI1RYHPEHUDQGWKHLWHPLQYROYHVDFRQVWUXFWLRQSURMHFWWKHQLWPD\EHSK\VLFDOO\ LPSRVVLEOH WRREOLJDWH WKH IXQGVEHFDXVHDSXEOLFELGGLQJZLOO WDNHDW OHDVWDPRQWK ,Q VXFKDFDVHWKHUHFDQEHDILQDODEDQGRQPHQWRIWKHZRUNDFWLYLW\RUSURMHFW

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

7KH26*VFRQWHQWLRQWKDWWKH3UHVLGHQWPD\GLVFRQWLQXHRUDEDQGRQDSURMHFWDVHDUO\DVWKHWKLUGPRQWKRIWKHILVFDO\HDUXQGHU6HFWLRQ&KDSWHU%RRN9,RI WKH$GPLQLVWUDWLYH&RGHLVFOHDUO\PLVSODFHG6HFWLRQUHIHUVRQO\WRVXVSHQVLRQRUVWRSSDJHRIH[SHQGLWXUHRIREOLJDWHG IXQGVDQGQRW WR ILQDOGLVFRQWLQXDQFHRUDEDQGRQPHQWRIZRUNDFWLYLW\RUSURMHFW

8QGHU1%&DSSURSULDWLRQVIRU&DSLWDO2XWOD\VDUHVRXUFHVRI'$3IXQGV+RZHYHUWKHZLWKGUDZDORIXQREOLJDWHGDOORWPHQWVIRU&DSLWDO2XWOD\VDVRI-XQHYLRODWHVWKH*HQHUDO3URYLVLRQVRIWKHDQG*$$V

6HFWLRQRIWKH*HQHUDO3URYLVLRQVRIWKH*$$SURYLGHV

6HF $YDLODELOLW\ RI $SSURSULDWLRQV $SSURSULDWLRQV IRU022( DQG FDSLWDO RXWOD\V DXWKRUL]HG LQ WKLV $FW VKDOO EHDYDLODEOH IRU UHOHDVH DQG REOLJDWLRQ IRU WKH SXUSRVH VSHFLILHG DQG XQGHU WKH VDPH VSHFLDO SURYLVLRQV DSSOLFDEOHWKHUHWR IRU D SHULRG H[WHQGLQJ WR RQH ILVFDO \HDU DIWHU WKH HQGRI WKH \HDU LQZKLFK VXFK LWHPVZHUH DSSURSULDWHG3529,'('7KDWDSSURSULDWLRQVIRU022(DQGFDSLWDORXWOD\VXQGHU5$1RVKDOOEHPDGHDYDLODEOHXSWRWKHHQGRI)



%8QODZIXOUHOHDVHRIWKH8QSURJUDPPHG)XQG

2QHRI WKHVRXUFHVRI WKH'$3 LV WKH8QSURJUDPPHG)XQGXQGHU WKH*$$7KHSURYLVLRQVRQ WKH8QSURJUDPPHG)XQGXQGHUWKHDQG*$$VVWDWH

*$$$UWLFOH;/9

6SHFLDO3URYLVLRQV

5HOHDVHRI)XQG7KHDPRXQWVDXWKRUL]HGKHUHLQVKDOOEHUHOHDVHGRQO\ZKHQWKHUHYHQXHFROOHFWLRQVH[FHHGWKHRULJLQDOUHYHQXHWDUJHWVVXEPLWWHGE\WKH3UHVLGHQWRIWKH3KLOLSSLQHVWR&RQJUHVVSXUVXDQWWR6HFWLRQ$UWLFOH9,,RIWKH&RQVWLWXWLRQLQFOXGLQJVDYLQJVJHQHUDWHGIURPSURJUDPPHGDSSURSULDWLRQVIRUWKH\HDU[[[%ROGIDFLQJVXSSOLHG

*$$$UWLFOH;/9,

5HOHDVHRI)XQG7KHDPRXQWVDXWKRUL]HGKHUHLQVKDOOEHUHOHDVHGRQO\ZKHQWKHUHYHQXHFROOHFWLRQVH[FHHGWKHRULJLQDOUHYHQXHWDUJHWVVXEPLWWHGE\WKH3UHVLGHQWRIWKH3KLOLSSLQHVWR&RQJUHVVSXUVXDQWWR6HFWLRQ$UWLFOH9,,RIWKH&RQVWLWXWLRQ[[[%ROGIDFLQJVXSSOLHG

*$$$UWLFOH;/9

5HOHDVHRI)XQG7KHDPRXQWVDXWKRUL]HGKHUHLQVKDOOEHUHOHDVHGRQO\ZKHQWKHUHYHQXHFROOHFWLRQVH[FHHGWKHRULJLQDOUHYHQXHWDUJHWVVXEPLWWHGE\WKH3UHVLGHQWRIWKH3KLOLSSLQHVWR&RQJUHVVSXUVXDQWWR6HFWLRQ$UWLFOH9,,RIWKH&RQVWLWXWLRQLQFOXGLQJFROOHFWLRQVDULVLQJIURPVRXUFHVQRWFRQVLGHUHGLQWKHDIRUHVDLGRULJLQDOUHYHQXHWDUJHWVDVFHUWLILHGE\WKH%WU[[[%ROGIDFLQJVXSSOLHG

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

-867,&(&$53,2

&RXQVHO\RXVWDWHGLQ\RXUFRPPHQWWKDWRQHRIWKHVRXUFHVRI'$3LVWKH8QSURJUDPPHG)XQGLVWKDWFRUUHFW"

62/*(1-$5'(/(=$



,Q D 5HVROXWLRQ GDWHG -DQXDU\ WKH &RXUW GLUHFWHG WKH 26* WR VXEPLW WKH FHUWLILFDWLRQV E\ WKH %XUHDX RI7UHDVXU\LQDFFRUGDQFHZLWKWKHXQGHUWDNLQJRIWKH6ROLFLWRU*HQHUDOGXULQJWKH2UDO$UJXPHQWV

2Q)HEUXDU\WKH26*VXEPLWWHGLWV&RPSOLDQFHDWWDFKLQJWKHIROORZLQJFHUWLILFDWLRQV

&HUWLILFDWLRQGDWHG)HEUXDU\VLJQHGE\5RVDOLD9'H/HRQ7UHDVXUHURIWKH3KLOLSSLQHV,WVWDWHV

7KLV LV WR FHUWLI\ WKDW EDVHG RQ WKH UHFRUGV RI WKH %XUHDX RI 7UHDVXU\ WKH DPRXQWV LQGLFDWHG LQ WKH DWWDFKHG&HUWLILFDWLRQRIWKH'HSDUWPHQWRI)LQDQFHGDWHG0DUFKSHUWDLQLQJWRWKHSURJUDPPHGGLYLGHQGLQFRPHIURPVKDUHVRIVWRFNVLQJRYHUQPHQWRZQHGRUFRQWUROOHGFRUSRUDWLRQVIRUDQGWRWKHUHFRUGHGGLYLGHQGLQFRPHDVRI-DQXDU\DUHDFFXUDWH

7KLV&HUWLILFDWLRQLVLVVXHGWKLVWKGD\RI)HEUXDU\

7KLVLVWRFHUWLI\WKDWXQGHUWKH%XGJHWIRU([SHQGLWXUHVDQG6RXUFHVRI)LQDQFLQJIRUWKHSURJUDPPHGLQFRPHIURPGLYLGHQGVIURPVKDUHVRIVWRFNLQJRYHUQPHQWRZQHGDQGFRQWUROOHGFRUSRUDWLRQVLV3ELOOLRQ

7KLVLVWRFHUWLI\IXUWKHUWKDWEDVHGRQWKHUHFRUGVRIWKH%XUHDXRI7UHDVXU\WKH1DWLRQDO*RYHUQPHQWKDVUHFRUGHGGLYLGHQGLQFRPHDPRXQWLQJRI3ELOOLRQDVRI-DQXDU\

&HUWLILFDWLRQGDWHG$SULOVLJQHGE\5REHUWR%7DQ7UHDVXUHURIWKH3KLOLSSLQHV,WVWDWHV

7KLV LV WR FHUWLI\ WKDW WKH DFWXDO GLYLGHQG FROOHFWLRQV UHPLWWHG WR WKH1DWLRQDO*RYHUQPHQW IRU WKH SHULRG -DQXDU\ WR0DUFKDPRXQWHGWR3ELOOLRQFRPSDUHGWRWKHIXOO\HDUSURJUDPRI3ELOOLRQIRU

&HUWLILFDWLRQGDWHG-XO\VLJQHGE\5RVDOLD9'H/HRQ7UHDVXUHURIWKH3KLOLSSLQHVZKLFKVWDWHV

7KLVLVWRFHUWLI\WKDWWKHDFWXDOGLYLGHQGFROOHFWLRQVUHPLWWHGWRWKH1DWLRQDO*RYHUQPHQWIRUWKHSHULRG-DQXDU\WR0D\DPRXQWHGWR3ELOOLRQFRPSDUHGWRWKHIXOO\HDUSURJUDPRI3ELOOLRQIRU

0RUHRYHU WKH 1DWLRQDO *RYHUQPHQW DFFRXQWHG IRU WKH VDOH RI ULJKW WR EXLOG DQG RSHUDWH WKH 1$,$ H[SUHVVZD\DPRXQWLQJWR3ELOOLRQLQ-XQH

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

&OHDUO\ WKH'%0KDVIDLOHGWRVKRZWKDW WKHH[SUHVVFRQGLWLRQ LQ WKHDQG*$$VIRU WKHXVHRI WKH8QSURJUDPPHG)XQGKDVEHHQPHW7KXVGLVEXUVHPHQWV IURP WKH8QSURJUDPPHG)XQG LQDQGXQGHUWKH'$3DQG1%&ZHUHLQYLRODWLRQRIWKHODZ

$W DQ\ UDWH GLYLGHQGV IURP JRYHUQPHQWRZQHG RU FRQWUROOHG FRUSRUDWLRQV DUH QRW VDYLQJV EXW UHYHQXHV OLNH WD[FROOHFWLRQV WKDW JR GLUHFWO\ WR WKH 1DWLRQDO 7UHDVXU\ LQ DFFRUGDQFH ZLWK 6HFWLRQ &KDSWHU %RRN 9, RI WKH$GPLQLVWUDWLYH&RGHRIZKLFKVWDWHV

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

'LYLGHQGVIRUPSDUWRIWKHXQDSSURSULDWHGVXUSOXVRIWKH*HQHUDO)XQGRIWKH*RYHUQPHQWDQGWKH\FDQQRWEHVSHQWXQOHVVWKHUHLVDQDSSURSULDWLRQVODZ7KHVDPHUXOHDSSOLHVWRZLQGIDOOUHYHQXHFROOHFWLRQVZKLFKDOVRIRUPSDUWRIWKHXQDSSURSULDWHG*HQHUDO)XQG3URFHHGVIURPVDOHVRIJRYHUQPHQWDVVHWVDUHQRWVDYLQJVEXWUHYHQXHVWKDWDOVRJRGLUHFWO\ WR WKH1DWLRQDO 7UHDVXU\6DYLQJV FDQRQO\ FRPH IURP WKH WKUHH VRXUFHV H[SUHVVO\ VSHFLILHG LQ6HFWLRQ 6HFWLRQDQG6HFWLRQRIWKH*HQHUDO3URYLVLRQVRIWKHDQG*$$VUHVSHFWLYHO\

%HVLGHV E\ GHILQLWLRQ VDYLQJV FDQ QHYHU FRPH IURP WKH 8QSURJUDPPHG )XQG VLQFH WKH WHUP VDYLQJV LV GHILQHGXQGHUWKH*$$VDVSRUWLRQVRUEDODQFHVRIDQ\SURJUDPPHGDSSURSULDWLRQ7KH8QSURJUDPPHG)XQGFDQRQO\EHXVHGIRUWKHVSHFLILFSXUSRVHSUHVFULEHGLQWKH*$$VDQGRQO\LIWKHUHYHQXHFROOHFWLRQVH[FHHGWKHRULJLQDOUHYHQXHWDUJHWVIRUWKHILVFDO\HDU

6HFWLRQ RI WKH *HQHUDO 3URYLVLRQV RI WKH DQG *$$V XQLIRUPO\ SURYLGH WKDW DOO IHHV FKDUJHVDVVHVVPHQWVDQGRWKHUUHFHLSWVRUUHYHQXHVFROOHFWHGE\GHSDUWPHQWVEXUHDXVRIILFHVRUDJHQFLHVLQWKHH[HUFLVHRI



WKHLU IXQFWLRQVVKDOOEHGHSRVLWHGZLWK WKH1DWLRQDO7UHDVXU\DV LQFRPHRI WKH*HQHUDO)XQG LQDFFRUGDQFHZLWK WKHSURYLVLRQVRIWKH$GPLQLVWUDWLYH&RGHDQG6HFWLRQRI3UHVLGHQWLDO'HFUHH1R6XFKLQFRPHDUHQRWVDYLQJVDVXQGHUVWRRGDQGGHILQHGLQWKH*$$V

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

&'$3YLRODWHVWKHFRQVWLWXWLRQDOSURKLELWLRQRQFURVVERUGHUWUDQVIHUV

6HFWLRQ$UWLFOH9,RIWKH&RQVWLWXWLRQPDQGDWHVWKDWVDYLQJVIURPRQHJRYHUQPHQWEUDQFKFDQQRWEHWUDQVIHUUHGWRDQRWKHUEUDQFKDQGYLFHYHUVD7KLVFRQVWLWXWLRQDOSURKLELWLRQRQFURVVERUGHUWUDQVIHUVLVFOHDUWKH3UHVLGHQWWKH6HQDWH3UHVLGHQW WKH6SHDNHU RI WKH+RXVH RI5HSUHVHQWDWLYHV WKH&KLHI -XVWLFH DQG WKH+HDGV RI FRQVWLWXWLRQDOERGLHV DUH RQO\ DXWKRUL]HG WR DXJPHQW DQ\ LWHP LQ WKH JHQHUDO DSSURSULDWLRQV ODZ IRU WKHLU UHVSHFWLYH RIILFHV IURPVDYLQJVLQRWKHULWHPVRIWKHLUUHVSHFWLYHDSSURSULDWLRQV

&RQWUDU\WR6HFWLRQ$UWLFOH9,RIWKH&RQVWLWXWLRQWKHUHZHUHLQVWDQFHVRIFURVVERUGHUWUDQVIHUVXQGHUWKH'$3,Q WKH LQWHUSHOODWLRQ E\ -XVWLFH %HUVDPLQ GXULQJ WKH 2UDO $UJXPHQWV %XGJHW 6HFUHWDU\ )ORUHQFLR $EDG H[SUHVVO\DGPLWWHGWKHH[LVWHQFHRIFURVVERUGHUWUDQVIHUVRIIXQGVWKXV

-867,&(%(56$0,1

$OULJKW WKHZKROH WLPH WKDW\RXKDYHEHHQ6HFUHWDU\RI'HSDUWPHQWRI%XGJHWDQG0DQDJHPHQWGLG WKH([HFXWLYH'HSDUWPHQWHYHUUHGLUHFWDQ\SDUWRIVDYLQJVRIWKH1DWLRQDO*RYHUQPHQWXQGHU\RXUFRQWUROFURVVERUGHUWRDQRWKHUGHSDUWPHQW"

6(&5(7$5



7KH6SHFLDO3URYLVLRQVRQWKH3'$)LQWKH*$$DOORZHGWKH,QGLYLGXDO+RXVHPHPEHUDQGLQGLYLGXDO6HQDWRUWRLGHQWLI\ WKH SURMHFW WR EH IXQGHG DQG LPSOHPHQWHGZKLFK LGHQWLILFDWLRQ LVPDGH DIWHU WKH HQDFWPHQW LQWR ODZRI WKH*$$ ,Q DGGLWLRQ 6SHFLDO 3URYLVLRQ1R DOORZHG WKH UHDOLJQPHQW RI IXQGV DQG QRW VDYLQJV FRQGLWLRQHG RQ WKHFRQFXUUHQFHRI WKH LQGLYLGXDO OHJLVODWRU WR WKH UHTXHVW IRU UHDOLJQPHQW ,Q WKH ODQGPDUNFDVHRI%HOJLFDY([HFXWLYH6HFUHWDU\ WKH &RXUW VWUXFN GRZQ WKHVH 6SHFLDO 3URYLVLRQV RQ WKH 3'$) SULPDULO\ IRU YLRODWLQJ WKH SULQFLSOH RIVHSDUDWLRQRISRZHUV

&OHDUO\ WKH WUDQVIHU RI '$3 IXQGV LQ WKH DPRXQW RI 3 ELOOLRQ WR DXJPHQW WKH XQFRQVWLWXWLRQDO 3'$) LV DOVRXQFRQVWLWXWLRQDOEHFDXVHLWLVDQDXJPHQWDWLRQRIDQXQFRQVWLWXWLRQDODSSURSULDWLRQ

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

,91R3UHVLGHQWLDOSRZHURILPSRXQGPHQW

7KH*$$LVDODZDQGWKH3UHVLGHQWLVVZRUQWRXSKROGDQGIDLWKIXOO\LPSOHPHQWWKHODZ,I&RQJUHVVLQWKH*$$GLUHFWVWKHH[SHQGLWXUHRISXEOLFIXQGVIRUDVSHFLILFSXUSRVHWKH3UHVLGHQWKDVQRSRZHUWRFDQFHOSUHYHQWRUSHUPDQHQWO\VWRSVXFKH[SHQGLWXUHRQFH WKH*$$EHFRPHVD ODZ:KDW WKH3UHVLGHQWFDQGR LV WRYHWR WKDWVSHFLILF LWHP LQ WKH*$$%XW RQFH WKH3UHVLGHQW DSSURYHV WKH*$$RU DOORZV LW WR ODSVH LQWR ODZ WKH3UHVLGHQW FDQ QR ORQJHU YHWR RUFDQFHODQ\LWHPLQWKH*$$RULPSRXQGWKHGLVEXUVHPHQWRIIXQGVDXWKRUL]HGWREHVSHQWLQWKH*$$

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

8QGHU WKHSUHVHQW&RQVWLWXWLRQ LI WKH3UHVLGHQWYHWRHVDQ LWHPRIDSSURSULDWLRQ LQ WKH*$$&RQJUHVVPD\RYHUULGHVXFK YHWR E\ DQ H[WUDRUGLQDU\ WZRWKLUGV YRWH RI HDFK FKDPEHU RI &RQJUHVV +RZHYHU LI WKLV &RXUW DOORZV WKH3UHVLGHQWWRLPSRXQGWKHIXQGVDSSURSULDWHGE\&RQJUHVVXQGHUDODZWKHQWKHFRQVWLWXWLRQDOSRZHURI&RQJUHVVWRRYHUULGH WKH 3UHVLGHQWV YHWR EHFRPHV LQXWLOH DQG PHDQLQJOHVV 7KLV LV D VXEVWDQWLDO DQG GUDVWLF UHYLVLRQ RI WKHFRQVWLWXWLRQDOFKHFNDQGEDODQFHILQHO\FUDIWHGLQWKH&RQVWLWXWLRQ

3URIHVVRU /DXUHQFH + 7ULEH LQ KLV FODVVLF WH[WERRN $PHULFDQ &RQVWLWXWLRQDO /DZ H[SODLQV ZK\ WKHUH LV QR



FRQVWLWXWLRQDOSRZHURILPSRXQGPHQWE\WKH3UHVLGHQWXQGHUWKH86)HGHUDO&RQVWLWXWLRQ

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



6RWKHUHLVQRLPSRXQGPHQW



WKH1DWLRQDO%XGJHW&LUFXODU1RGDWHG-XO\81&2167,787,21$/IRUYLRODWLQJ6HFWLRQ$UWLFOH9,RIWKH&RQVWLWXWLRQ

7UDQVIHUV RI DSSURSULDWLRQV IURP WKH ([HFXWLYH WR WKH /HJLVODWXUH WKH &RPPLVVLRQ RQ (OHFWLRQV DQG WKH&RPPLVVLRQRQ$XGLW

'LVEXUVHPHQWVRI XQREOLJDWHGDOORWPHQWV IRU022(DVVDYLQJVDQG WKHLU UHDOLJQPHQW WRRWKHU LWHPV LQ WKH*$$VZKHUHWKH022(WKDWDUHWKHVRXUFHVRIVDYLQJVDUHDSSURSULDWLRQVIRUPRQWKVVWLOOWRODSVH

'LVEXUVHPHQWVRIXQREOLJDWHGDOORWPHQWVIRU&DSLWDO2XWOD\DVVDYLQJVDQGWKHLUUHDOLJQPHQWWRRWKHULWHPVLQWKH*$$SULRUWRWKHODVWWZRPRQWKVRIWKHILVFDO\HDULIWKHSHULRGWRREOLJDWHLVRQH\HDURUSULRUWRWKHODVWWZRPRQWKVRIWKHVHFRQG\HDULIWKHSHULRGWRREOLJDWHLVWZR\HDUVDQG

'LVEXUVHPHQWVRIXQREOLJDWHGDOORWPHQWVDVVDYLQJVDQG WKHLU UHDOLJQPHQW WR LWHPVRUSURMHFWVQRW IRXQG LQWKH*$$

,QDGGLWLRQ WKHXVHRI WKH8QSURJUDPPHG)XQGZLWKRXW WKHFHUWLILFDWLRQE\ WKH1DWLRQDO7UHDVXUHU WKDW WKH UHYHQXHFROOHFWLRQV IRU WKH ILVFDO \HDU H[FHHGHG WKH UHYHQXH WDUJHW IRU WKDW \HDU LV GHFODUHG92,' IRU EHLQJ FRQWUDU\ WR WKHH[SUHVVFRQGLWLRQIRUWKHXVHRIWKH8QSURJUDPPHG)XQGXQGHUWKH*$$V

$1721,27&$53,2$VVRFLDWH-XVWLFH

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

62/,&,725*(1(5$/-$5'(/(=$

[[[[

3UHVLGHQWLDO DSSURYDO DJDLQ GLG WKH3UHVLGHQW DXWKRUL]H WKHGLVEXUVHPHQWV XQGHU WKH'$3"



*$$

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

[[[[

*$$

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

[[[[ 6(&7,216XVSHQVLRQ RI ([SHQGLWXUH RI $SSURSULDWLRQV([FHSW DV RWKHUZLVH SURYLGHG LQ WKH*HQHUDO$SSURSULDWLRQV$FWDQGZKHQHYHU LQKLV MXGJPHQWWKHSXEOLF LQWHUHVWVRUHTXLUHV WKH3UHVLGHQWXSRQQRWLFHWRWKHKHDGRIRIILFHFRQFHUQHGLVDXWKRUL]HGWRVXVSHQGRURWKHUZLVHVWRSIXUWKHUH[SHQGLWXUHRIIXQGVDOORWWHGIRUDQ\DJHQF\RUDQ\RWKHUH[SHQGLWXUHDXWKRUL]HGLQWKH*HQHUDO$SSURSULDWLRQV$FWH[FHSWIRUSHUVRQDOVHUYLFHVDSSURSULDWLRQVXVHGIRUSHUPDQHQWRIILFLDOVDQGHPSOR\HHV6HFWLRQRIWKH*$$SURYLGHV

6HF0DQGDWRU\([SHQGLWXUHV7KHDPRXQWVSURJUDPPHGIRUSHWUROHXPRLODQGOXEULFDQWVDVZHOODVIRU ZDWHU LOOXPLQDWLRQ DQG SRZHU VHUYLFHV WHOHSKRQH DQG RWKHU FRPPXQLFDWLRQ VHUYLFHV DQG UHQWUHTXLUHPHQWV VKDOO EH GLVEXUVHG VROHO\ IRU VXFK LWHPV RI H[SHQGLWXUHV 3529,'(' 7KDW DQ\ VDYLQJVJHQHUDWHG IURP WKHVH LWHPVDIWHU WDNLQJ LQWR FRQVLGHUDWLRQ WKH DJHQF\V IXOO \HDU UHTXLUHPHQWVPD\ EHUHDOLJQHG RQO\ LQ WKH ODVW TXDUWHU DQG VXEMHFW WR WKH UXOHV RQ WKH UHDOLJQPHQW RI VDYLQJV SURYLGHG LQ6HFWLRQKHUHRI

8VHRIIXQGVLQYLRODWLRQRIWKLVVHFWLRQVKDOOEHYRLGDQGVKDOOVXEMHFWWKHHUULQJRIILFLDOVDQGHPSOR\HHVWRGLVFLSOLQDU\DFWLRQV LQDFFRUGDQFHZLWK6HFWLRQ&KDSWHUDQG6HFWLRQ&KDSWHU%RRN9,RI(21RDQGWRDSSURSULDWHFULPLQDODFWLRQXQGHUH[LVWLQJSHQDO ODZV6HFWLRQRI WKH*$$SURYLGHV

6HF ([SHQGLWXUHV IRU%XVLQHVV7\SH$FWLYLWLHV$SSURSULDWLRQV IRU WKH SURFXUHPHQW RI VXSSOLHV DQGPDWHULDOV LQWHQGHG WR EH XWLOL]HG LQ WKH FRQGXFW RI EXVLQHVVW\SH DFWLYLWLHV VKDOO EH GLVEXUVHG VROHO\ IRUVXFKEXVLQHVVW\SHDFWLYLW\DQGVKDOOQRWEHUHDOLJQHGWRDQ\RWKHUH[SHQGLWXUHLWHP

8VHRIIXQGVLQYLRODWLRQRIWKLVVHFWLRQVKDOOEHYRLGDQGVKDOOVXEMHFWWKHHUULQJRIILFLDOVDQGHPSOR\HHVWRGLVFLSOLQDU\DFWLRQV LQDFFRUGDQFHZLWK6HFWLRQ&KDSWHUDQG6HFWLRQ&KDSWHU%RRN9,RI(21RDQGWRDSSURSULDWHFULPLQDODFWLRQXQGHUH[LVWLQJSHQDOODZV

761-DQXDU\S6HH7DEOH&5HYHQXH3URJUDP%\6RXUFHRI%XGJHWRI([SHQGLWXUHVDQG6RXUFHVRI)LQDQFLQJKWWSZZZGEPJRYSKZSFRQWHQWXSORDGV%(6)%(6)&SGI,G6HFWLRQ3'1RVWDWHV

6(&7,21$FFUXDORI,QFRPHWR8QDSSURSULDWHG6XUSOXVRIWKH*HQHUDO)XQG8QOHVVRWKHUZLVHVSHFLILFDOO\SURYLGHGE\ODZDOO LQFRPHDFFUXLQJWRWKHDJHQFLHVE\YLUWXHRIWKHSURYLVLRQVRIODZRUGHUVDQG UHJXODWLRQV VKDOO EH GHSRVLWHG LQ WKH 1DWLRQDO 7UHDVXU\ RU LQ DQ\ GXO\ DXWKRUL]HG JRYHUQPHQWGHSRVLWRU\DQGVKDOODFFUXHWRWKHXQDSSURSULDWHGVXUSOXVRIWKH*HQHUDO)XQGRIWKH*RYHUQPHQW

$UWLFOHRIWKH&LYLO&RGHVWDWHV

$FWVH[HFXWHGDJDLQVWWKHSURYLVLRQVRIPDQGDWRU\RUSURKLELWRU\ODZVVKDOOEHYRLGH[FHSWZKHQWKHODZLWVHOIDXWKRUL]HVWKHLUYDOLGLW\

761-DQXDU\SS5ROOR*51RS 5ROOR *5 1R S 7KH UHOHYDQW SRUWLRQV RI WKH 0HPRUDQGXP IRU WKH 3UHVLGHQW GDWHG



'HFHPEHUVWDWH

[[[[

%$&.*5281'

7KH '%0 GXULQJ WKH FRXUVH RI SHUIRUPDQFH UHYLHZV FRQGXFWHG RQ WKH DJHQFLHV RSHUDWLRQVSDUWLFXODUO\RQ WKH LPSOHPHQWDWLRQRI WKHLUSURMHFWVDFWLYLWLHV LQFOXGLQJH[SHQVHV LQFXUUHG LQXQGHUWDNLQJWKH VDPH KDYH VLF LGHQWLILHG VDYLQJV RXW RI WKH *HQHUDO $SSURSULDWLRQV $FW 6DLG VDYLQJVFRUUHVSRQG WR FRPSOHWHG RU GLVFRQWLQXHG SURMHFWV XQGHU FHUWDLQ GHSDUWPHQWVDJHQFLHV ZKLFK PD\ EHSRROHGIRUWKHIROORZLQJ

[[[[

WRSURYLGHIRUGHILFLHQFLHVXQGHUWKH6SHFLDO3XUSRVH)XQGVHJ3'$)&DODPLW\)XQG&RQWLQJHQW)XQG

[[[[5ROOR*51RS&DUSLR -&RQFXUULQJ2SLQLRQ%HOJLFDY([HFXWLYH6HFUHWDU\*51RVDQG1RYHPEHU*51RVDQG1RYHPEHU5ROOR*51RS0HPRUDQGXPIRUWKH5HVSRQGHQWVS3DGLOOD -'LVVHQWLQJ2SLQLRQ*RQ]DOHVY0DFDUDLJ -U*51R1RYHPEHU6&5$ $PHULFDQ&RQVWLWXWLRQDO /DZ UG (GLWLRQ 9ROXPH SS .HQGDOO Y 8QLWHG 6WDWHV H[5HO6WRNHV86866XSUDQRWH1RWHV3UHVLGHQWLDO,PSRXQGPHQW&RQVWLWXWLRQDO7KHRULHVDQG3ROLWLFDO5HDOLWLHV*HRUJHWRZQ/DZ-RXUQDO1RWHV3URWHFWLQJ)LVF([HFXWLYH,PSRXQGPHQWDQG&RQJUHVVLRQDO3RZHU



H[SUHVVLQJWKHLUYLHZVWKURXJKWKHLUVHSDUDWHRSLQLRQV7ZRUHDVRQVKRZHYHUFRPSHOOHGPHWRDFWDV,GLG

)LUVWWKH&RXUWIDLOHGWRPHDQLQJIXOO\FRQVLGHUWKHSHWLWLRQHUVSUD\HUIRUDWHPSRUDU\UHVWUDLQLQJRUGHU752GHOD\LQWHUYHQHGXQWLO LWZDVWRR ODWHWRFRQVLGHUZKHWKHUZHZRXOGRUZRXOGQRW LVVXHD752%DVHGRQWKLVH[SHULHQFH ,ZDQWHGWRDYRLGDQ\IXUWKHUGHIHUPHQWLQUHVROYLQJWKLVFDVHRQWKHPHULWVDVWKH&RXUWXQGHUWKHFLUFXPVWDQFHVKDGDOUHDG\EHHQLQGHOD\,VXUPLVHWKDW-&DUSLRZDVLQDVLPLODUIUDPHRIPLQGZKHQKHLVVXHGKLVRZQRULJLQDO2SLQLRQ

6HFRQG,IHOWWKDWZHVKRXOGQRORQJHUGLOO\GDOO\DVWRJHWKHUZLWKWKHFORVHO\UHODWHG3ULRULW\'HYHORSPHQW$VVLVWDQFH)XQG3'$)FDVHWKHSUHVHQW'$3FDVHLVDSDUWRIWKHFRXQWU\VELJJHVWVFDQGDODQGRQLWVRZQLVDSUHFHGHQWVHWWLQJFDVHZLWKSURIRXQGLPSDFWRQWKHQDWLRQ

%HFDXVHRIZKDWWKH3'$)LQYROYHGQDPHO\WKHDPRXQWDSSUR[LPDWHO\3%LOOLRQWKHSHUVRQDOLWLHVWKHPHPEHUVRI&RQJUHVV DW WKH KLJKHVW OHYHOV DQG WKH FLUFXPVWDQFHVSHUFHLYHG EHWUD\DO RI SXEOLF WUXVW LQ D QDWLRQDO VLWXDWLRQ RIXQFKHFNHGSRYHUW\DQGQDWXUDOFDODPLW\LWFDXVHGSXEOLFRXWUDJHDQGHPHUJHQWSXEOLFGLVWUXVWWRXVHWKHZRUGVRI-0DULDQRGHO&DVWLOORLQKLV6HSDUDWH2SLQLRQ

7KHSUHVHQW'$3FDVH IRU LWVSDUW LQYROYHVFLUFXPVWDQFHV WKDWDUHVLPLODU WR WKH3'$)DQGPXFKPRUH LW LQYROYHVIXQGVDPRXQWLQJ WRDOPRVW3%LOOLRQRUDOPRVW WLPHV WKH3'$)FDVH HQWDQJOHPHQWZLWK WKHXQFRQVWLWXWLRQDO3'$)SHUVRQDOLWLHVDW WKHYHU\KLJKHVW OHYHO LQERWK WKH([HFXWLYHDQG WKH/HJLVODWLYH'HSDUWPHQWVRIJRYHUQPHQWDQG GHPRQVWUDWHG ODFN RI UHVSHFW IRU SXEOLF IXQGV LQVWLWXWLRQV DQG WKH &RQVWLWXWLRQ 7KLV FDVH LQP\ YLHZ LV WKHELJJHVWVLQFH,FDPHWRWKH&RXUWLQWHUPVRIWKHVHIDFWRUVDORQH

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

8QGHUWKHVHFLUFXPVWDQFHV,IHOWWKDWEHIRUHDQ\PDVVLYHGLVVDWLVIDFWLRQDQGXQUHVWDPRQJWKHSRSXODFHFRXOGVHWLQWKH&RXUWVKRXOGDFWOHVWLWVQDPHDOVREHGUDJJHGLQWRWKHVFDQGDO7RVWDWHWKHREYLRXVWKH-XGLFLDU\VFRPSOLFLW\ZKHWKHUE\GHOD\RUSHUFHSWLRQVRIPLVKDQGOLQJFRYHUXSZKLWHZDVKRUXQDFFHSWDEOHUXOLQJFRXOGDOUHDG\HQWDLODSHUFHSWLRQRI IDLOXUHRIJRYHUQPHQWFRQVWLWXWLRQDOLVPDQGGHPRFUDF\EHFDXVHRI WKH LQYROYHPHQWRI WKH WKUHHJUHDWEUDQFKHVRIJRYHUQPHQW7KHSHRSOHVLQHYLWDEOHTXHVWLRQFRXOGWKHQEHZKRHOVHLVWKHUHWRWUXVW"

7KXV WKLV&RXUWVKRXOGEHDV WKRURXJKDVSRVVLEOH LQ WKHKDQGOLQJRI WKLVFDVHPDNLQJVXUH WKDWDW WKHYHU\ OHDVWERWK WKH UHDOLW\ DQGSHUFHSWLRQRI LWV LQWHJULW\ZRXOGEH LQWDFW7RZDUGV WKLVHQGZHVKRXOG WKRURXJKO\H[KDXVW WKHGLVFXVVLRQRIDOO WKH LVVXHVEHIRUHXVERWKH[SUHVVDQG LPSOLHG WRHQVXUHWKHPD[LPXPLQ WUDQVSDUHQF\ OXFLGLW\DQGORJLF

7KLVVSLULWZDVDSSDUHQWO\WKHUHDVRQZK\WKHPHPEHULQFKDUJH-/XFDV%HUVDPLQVXIIHUHGGHOD\LQWKHLVVXDQFHRIKLVSRQHQFLD7RKLVFUHGLWKLV2SLQLRQZKHQLWZDVLVVXHGWXUQHGRXWWREHWKRURXJKDQGFRPSUHKHQVLYHDOWKRXJK,GLVDJUHHZLWKVRPHRIWKHSRLQWVKHPDGH

$VGHILQHGE\-%HUVDPLQEDVHGRQWKHSOHDGLQJVDQGZLWKRXWREMHFWLRQIURPWKHSDUWLHVWKHLVVXHVEHIRUHWKH&RXUWDUHTXRWHGEHORZ

,VVXHV

8QGHUWKH$GYLVRU\LVVXHGRQ1RYHPEHUWKHSUHVHQWDWLRQVRIWKHSDUWLHVGXULQJWKHRUDODUJXPHQWVZHUHWREHOLPLWHGWRWKHIROORZLQJLVVXHVWRZLW

3URFHGXUDO,VVXH

$:KHWKHURUQRWFHUWLRUDULSURKLELWLRQDQGPDQGDPXVDUHSURSHUUHPHGLHVWRDVVDLOWKHFRQVWLWXWLRQDOLW\DQGYDOLGLW\RIWKH'LVEXUVHPHQW$FFHOHUDWLRQ3URJUDP'$31DWLRQDO%XGJHW&LUFXODU1%&1RDQGDOORWKHUH[HFXWLYHLVVXDQFHVDOOHJHGO\LPSOHPHQWLQJWKH'$36XEVXPHGLQWKLVLVVXHDUHZKHWKHUWKHUHLVDFRQWURYHUV\ULSHIRUMXGLFLDOGHWHUPLQDWLRQDQGWKHVWDQGLQJRISHWLWLRQHUV

6XEVWDQWLYH,VVXHV

%:KHWKHURUQRWWKH'$3YLRODWHV6HF$UW9,RIWKH&RQVWLWXWLRQZKLFKSURYLGHV1RPRQH\VKDOOEHSDLGRXWRIWKH7UHDVXU\H[FHSWLQSXUVXDQFHRIDQDSSURSULDWLRQPDGHE\ODZ

&:KHWKHURUQRW WKH'$31%&1RDQGDOORWKHUH[HFXWLYH LVVXDQFHVDOOHJHGO\ LPSOHPHQWLQJ WKH'$3YLRODWH6HF$UW9,RIWKH&RQVWLWXWLRQLQVRIDUDV

D 7KH\ WUHDW WKH XQUHOHDVHG DSSURSULDWLRQV DQG XQREOLJDWHG DOORWPHQWV ZLWKGUDZQ IURP JRYHUQPHQWDJHQFLHV DV VDYLQJV DV WKH WHUP LV LVVXHG LQ6HF LQ UHODWLRQ WR WKH SURYLVLRQV RI WKH*$$V RIDQG

E7KH\DXWKRUL]HWKHGLVEXUVHPHQWRI IXQGVIRUSURMHFWVRUSURJUDPVQRWSURYLGHGLQWKH*$$VIRUWKH([HFXWLYH'HSDUWPHQWDQG

F7KH\DXJPHQWGLVFUHWLRQDU\OXPSVXPDSSURSULDWLRQVLQWKH*$$V

':KHWKHURUQRWWKH'$3YLRODWHVWKH(TXDO3URWHFWLRQ&ODXVHWKHV\VWHPRIFKHFNVDQGEDODQFHVDQG WKH SULQFLSOH RI SXEOLF DFFRXQWDELOLW\ HQVKULQHG LQ WKH &RQVWLWXWLRQ FRQVLGHULQJ WKDW LW DXWKRUL]HV WKH



UHOHDVHRIIXQGVXSRQWKHUHTXHVWRIOHJLVODWRUV

(:KHWKHU RU QRW IDFWXDO DQG OHJDO MXVWLILFDWLRQ H[LVWV WR LVVXH D WHPSRUDU\ UHVWUDLQLQJ RUGHU WR UHVWUDLQ WKHLPSOHPHQWDWLRQRIWKH'$31%&1RDQGDOORWKHUH[HFXWLYHLVVXDQFHVDOOHJHGO\LPSOHPHQWLQJWKH'$3

,Q LWV &RQVROLGDWHG &RPPHQW WKH 26* UDLVHG WKH PDWWHU RI XQSURJUDPPHG IXQGV LQ RUGHU WR VXSSRUW LWVDUJXPHQW UHJDUGLQJ WKH 3UHVLGHQWV SRZHU WR VSHQG 'XULQJ WKH RUDO DUJXPHQWV WKH SURSULHW\ RI UHOHDVLQJXQSURJUDPPHG IXQGV WRVXSSRUWSURMHFWVXQGHU WKH'$3ZDVFRQVLGHUDEO\GLVFXVVHG7KHSHWLWLRQHUV LQ*51R %HOJLFD GZHOOHG RQ XQSURJUDPPHG IXQGV LQ WKHLU UHVSHFWLYHPHPRUDQGD +HQFH DQ DGGLWLRQDOLVVXHIRUWKHRUDODUJXPHQWVLVVWDWHGDVIROORZV

):KHWKHURUQRWWKHUHOHDVHRIXQSURJUDPPHGIXQGVXQGHUWKH'$3ZDVLQDFFRUGZLWKWKH&RQVWLWXWLRQ

6HSDUDWHO\IURPWKHVH-%HUVDPLQGZHOWRQDQGGLVFXVVHGLQKLVSRQHQFLDWKHDSSOLFDELOLW\RIWKHGRFWULQHRIRSHUDWLYHIDFWDIWHUUHFRJQL]LQJWKDWWKHSDUWLHVKDGEHHQIXOO\KHDUGRQWKLVSRLQW7KHLQFOXVLRQRIWKLVLVVXHLQP\YLHZZDVDYHU\JRRGFDOO RQ -%HUVDPLQVSDUW DVDGLVFXVVLRQRI WKHSRWHQWLDO FRQVHTXHQFHVRI RXU UXOLQJ FDQQRWEH OHIW RXWZLWKRXWULVNLQJWKHFKDUJHWKDWZHKDYHEHHQOHVVWKDQWKRURXJKDQGKDYHPDGHDQLQFRPSOHWHGHFLVLRQ

0\3RVLWLRQV

,Q WKLV&RQFXUULQJ DQG'LVVHQWLQJ2SLQLRQ ,&21&85ZLWK WKH FRQFOXVLRQV RI - %HUVDPLQ WR WKH H[WHQW GLVFXVVHGEHORZDQGDGGP\YRLFHWRWKH6HSDUDWH&RQFXUULQJ2SLQLRQRI-&DUSLRWKDWWKH'$3LVXQFRQVWLWXWLRQDO

6SHFLILFDOO\,KROGWKDW

D WKH&RXUW KDV MXULVGLFWLRQ WRKHDUDQGGHFLGH WKHSHWLWLRQVXQGHU LWV H[SDQGHGSRZHURI MXGLFLDO UHYLHZDVSURYLGHGXQGHU6HFWLRQ$UWLFOH9,,,RIWKH&RQVWLWXWLRQDQGDVH[SODLQHGEHORZ

E WKH '$3 YLRODWHV WKH SULQFLSOHV RI FKHFNV DQG EDODQFHV DQG WKH VHSDUDWLRQ RI SRZHUV WKDW WKH &RQVWLWXWLRQLQWHJUDWHVLQWRWKHEXGJHWDU\SURFHVV

FWKH'$3YLRODWHVWKHFRQVWLWXWLRQDOSURKLELWLRQVDJDLQVWWKHWUDQVIHURIDSSURSULDWLRQVDQGDJDLQVWWKHWUDQVIHURI IXQGV IURP RQH EUDQFK RI WKH JRYHUQPHQW WR DQRWKHU ERWK XQGHU 6HFWLRQ RI $UWLFOH 9, RI WKH&RQVWLWXWLRQDQG

GWKH'$3YLRODWHVWKHVSHFLDOFRQGLWLRQVIRUWKHUHOHDVHRIWKH8QSURJUDPPHG)XQG

7KXVWRPHWKH'$3LVXQFRQVWLWXWLRQDOLQPRUHZD\VWKDQRQH

)XUWKHU , JHQHUDOO\ DJUHH ZLWK WKH SRQHQWHV FRQFOXVLRQ UHJDUGLQJ WKH DSSOLFDELOLW\ RI WKH RSHUDWLYH IDFW GRFWULQHVXEMHFWWRWKHGHWDLOVGLVFXVVHGEHORZLQWKLV2SLQLRQ

$%ULHI%DFNJURXQG

7KH &RXUW DV KDV EHHQ PHQWLRQHG UXOHG RQ WKH FRQVWLWXWLRQDOLW\ RI WKH 3'$) DQG IRXQG WKH V\VWHP WR EHXQFRQVWLWXWLRQDO IRU LWVGLVUHJDUGDQGYLRODWLRQRI WKHFRQVWLWXWLRQDOVHSDUDWLRQRISRZHUVDQG WKHFKHFNDQGEDODQFHSULQFLSOHV7KHVHFRQVWLWXWLRQDOWUDQVJUHVVLRQVUHVXOWHGIURPWKHLUUHJXODULWLHVDQGDQRPDOLHVWKDWDWWHQGHGWKH3'$)LPSOHPHQWDWLRQ

%XWHYHQEHIRUHWKH&RXUWFRXOGUXOHRQWKHFRQVWLWXWLRQDOLW\RIWKH3'$)WKHFRQWURYHUV\WKDWLWJHQHUDWHGKDGVSLOOHGLQWR DQGKDG FUHDWHG UHQHZHGGHPDQGV IRU DFFRXQWDELOLW\ LQ \HW DQRWKHU JRYHUQPHQWDO DFWLRQ WKH'$3 WKDW XQWLOWKHQKDGEHHQXQNQRZQ7KH'$3VH[LVWHQFHZDVXQZLWWLQJO\GLVFORVHGWRWKHSXEOLFZKHQDVHQDWRUFKDUJHGZLWKDQRPDOLHVUHJDUGLQJKLV3'$)DWWHPSWHGWRFOHDUKLVQDPHWKURXJKDSULYLOHJHVSHHFK

,Q UHVSRQVH WKH JRYHUQPHQW WKURXJK WKH 'HSDUWPHQW RI %XGJHW DQG0DQDJHPHQW >'%0@ UHVSRQGHG E\ LVVXLQJSUHVVUHOHDVHVDQGRWKHUSXEOLFFRPPXQLFDWLRQVH[SODLQLQJKRZWKH'$3ZRUNHGDQGKRZLWKDGEHHQEHQHILFLDOWRWKH)LOLSLQRQDWLRQ1R OHVV WKDQ3UHVLGHQW$TXLQR-UKLPVHOIZHQWRQ WHOHYLVLRQ WRGHIHQG WKH'$3 7KHVH HIIRUWVKRZHYHU SURYHG LQVXIILFLHQW DQG GLG QRW SUHYHQW WKH SXEOLFV GLVWUXVW KHUHWRIRUH GLUHFWHG DJDLQVW WKH 3'$) IURPFUHHSLQJLQWRWKH'$3

7KH'$3OLNHWKH3'$)LQYROYHGWKHLPSOHPHQWDWLRQRIWKHQDWLRQDOEXGJHWEXWIRFXVHGODUJHO\RQKRZWKH([HFXWLYHLPSOHPHQWHG WKH *HQHUDO $SSURSULDWLRQV $FW *$$ $V LQ WKH 3'$) WKH FKDUJHV LQYROYHG WKH XQFRQVWLWXWLRQDOLQWUXVLRQE\RQHEUDQFKRIJRYHUQPHQWWKH([HFXWLYH LQWR WKHH[FOXVLYHSUHURJDWLYHVRIDQRWKHUWKH/HJLVODWLYH LQWKHEXGJHWDU\SURFHVV

7KH SUHVHQW SHWLWLRQHUV FKDUJH WKDW WKH '$3 ZDV XVHG DV WKH PHDQV WR DOORZ WKH ([HFXWLYH WR LQWUXGH LQWR WKHOHJLVODWLYHEXGJHWDU\SURFHVVWKHUHE\VXEYHUWLQJDQGUHQGHULQJXVHOHVVWKHDSSURSULDWLRQV&RQJUHVVPDGHXQGHUWKH*$$,QVKRUWWKURXJKWKH'$3WKH([HFXWLYHHIIHFWLYHO\H[HUFLVHGWKHSRZHURIDSSURSULDWLRQH[FOXVLYHO\UHVHUYHGE\WKH&RQVWLWXWLRQWR&RQJUHVV

, UHFDOO DW WKLV SRLQW WKDW ZH UXOHG LQ %HOJLFD Y ([HFXWLYH 6HFUHWDU\ WKDW WKH 3'$) V\VWHP ZDV XQFRQVWLWXWLRQDOEHFDXVHRI WKH OHJLVODWLYH LQWUXVLRQ LQWR WKH([HFXWLYHV LPSOHPHQWDWLRQRI WKH3'$)DYLRODWLRQRI WKHSULQFLSOHVRIVHSDUDWLRQRISRZHUVDQGFKHFNVDQGEDODQFHV

7KH'$3LQSDUDOOHOZLWKWKH3'$)EXWJRLQJWKHRWKHUZD\DOOHJHGO\DOORZHGWKH([HFXWLYHWRGLVUHJDUGWKH*$$VRWKDWWKHODWWHUFRXOGGHWHUPLQHWKHSURMHFWVDFWLYLWLHVDQGSODQV3$3VZKHUHQDWLRQDOIXQGVZRXOGEHGHSOR\HGDQGVSHQW FUHDWLQJ WKHUHE\ D EXGJHW LQGHSHQGHQWO\ GHWHUPLQHG E\ WKH([HFXWLYHZLWKLQ WKH FRQJUHVVLRQDOO\ GHWHUPLQHGEXGJHW



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

:KDW LV WUXO\ IULJKWHQLQJ LQDOO WKHVHVHULHVRIHYHQWV LV WKDW WKH LOOHJDOLWLHVEDVHGRQFRQJUHVVLRQDO LQYHVWLJDWLRQVDQG WKH LQLWLDOFKDUJHV UHFHQWO\EURXJKWE\ WKH2PEXGVPDQDSSHDUHG WRKDYHEHHQSHUYDVLYHO\SUDFWLFHG WKXVWKH\ FDXJKW LQ WKHLU ZHEV D VLJQLILFDQW QXPEHU RI VHQDWRUV DQG FRQJUHVVPHQ $OO WKHVH DSSHDUHG EDVHG RQ WKHHYLGHQFH SUHVHQWHG EHIRUH WKLV&RXUW WR KDYH EHHQPDGH SRVVLEOH WKURXJK WKH DFWLRQ RI QR OHVV WKDQ WKH KLJKHVWOHYHOVRIWKH([HFXWLYH

7KXV ZKDW DSSHDUV WR EH LQYROYHG LV QRW D RQHWLPH DQG RQHVKRW DFW RI FRUUXSWLRQ E\ RQH RU D IHZ JRYHUQPHQWRIILFLDOVEXWE\DKRVWRISXEOLFRIILFLDOVZKRVHIXQFWLRQVDQGLQWHUGHSHQGHQWPRYHVVXSSRUWHGWKHLUUHVSHFWLYHSULYDWHDQGLQGLYLGXDOQHIDULRXVREMHFWLYHV

,QWKHVHOLJKWVDQGLIRQO\WRFOHDUWKHDLUDQGHQVXUHWKDWWKHJRYHUQPHQWPDLQWDLQVWKHSHRSOHVWUXVWWKH&RXUWPXVWQRZGHFLVLYHO\H[HUFLVHLWVGXW\WRSURWHFWDQGGHIHQGWKH&RQVWLWXWLRQLIQHHGEHWRGHFODUHWKHXQFRQVWLWXWLRQDOLW\RIWKH'$3LQWKHVDPHGHFLVLYHPDQQHUZHGHFODUHGWKH3'$)V\VWHPXQFRQVWLWXWLRQDO7RVKLUNIURPWKLVUHVSRQVLELOLW\LVWRFRQVHQWWRWKHSHUYHUVLRQRIRXUUHSXEOLFDQZD\RIOLIH

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

:KLOHZHKDYH WKHGXW\ WR SDVVXSRQ WKH YDOLGLW\ RI WKH'$3ZHPXVW DW WKH VDPH WLPH GR VR IXOO\ DZDUHRI WKHFRQVHTXHQFHVRIRXUGHFLVLRQ$V,KDYHVDLGWKHKLJKHVWVWDNHVDUHLQYROYHGIRUWKHFRXQWU\

,ILQGHHGWKH'$3LVFRQVWLWXWLRQDODVWKHJRYHUQPHQWFODLPVZHPXVWLPPHGLDWHO\DQGGHFLVLYHO\VD\VRWRFOHDUWKHSUHVHQWO\PXGGOHGFRQVWLWXWLRQDODLUWRIRVWHUWKHVWDELOLW\RIRXUJRYHUQPHQWDQGWRVLJQLILFDQWO\FRQWULEXWHWRVKRULQJXS RXU SHRSOHV WUXVW DQG WKH QDWLRQVPRUDO YDOXHV2XU UXOLQJ LI LW LV IDLU DQG DUULYHG DW ZLWK LQWHJULW\ ZRXOG KHOSDFKLHYHWKHVHREMHFWLYHV

2QWKHRWKHUKDQGLIWKH'$3LVXQFRQVWLWXWLRQDOWKHQZHVKRXOGXQHTXLYRFDOO\VRGHFODUHDVZHGLGLQWKH3'$)FDVHEXWZHVKRXOGGRWKLVZLWKDQH\HRQFRQVFLRXVO\SURWHFWLQJRXULQVWLWXWLRQVZKHWKHUWKH\EHH[HFXWLYH OHJLVODWLYHRUMXGLFLDOZHFDQQRWDLPWRGHVWUR\RUZHDNHQRULPSRVHWKHVXSHULRULW\WKDWWKH&RQVWLWXWLRQGLGQRWJUDQWXV2XUDLPVKRXOG EH WRPDLQWDLQ WKH EDODQFH LQWHQGHGE\ RXU&RQVWLWXWLRQ WKH JXLGLQJ LQVWUXPHQW WKDWPXVW DW DOO WLPHV UHLJQVXSUHPH

7KHVHEDODQFLQJDQGVWUHQJWKHQLQJDFWVRIFRXUVHFDQQRWFRPHDWWKHVDFULILFHRIWKHSXEOLFDFFRXQWDELOLW\WKDWRXU&RQVWLWXWLRQ KDV HQVKULQHG LQVWLWXWLRQV DUH LUUHSODFHDEOH EXW SXEOLF RIILFLDOV DUH QRW DQG VKRXOG JR DQG IDOO LI WKH\PXVW7KLV LV WKHW\SHRIDFWLRQWKDWZLOOHQKDQFHWUDQVSDUHQF\DQGSXEOLFDFFRXQWDELOLW\7KDW WKRVHZKRHUUHGPXVWVXIIHU LV D FRQVHTXHQFH WKDW HYLOGRHUV VKRXOG KDYH IRUHVHHQ HYHQ EHIRUH WKH\ XQGHUWRRN WKHLU LOOHJDO DQGXQFRQVWLWXWLRQDODFW

)RUHDVHRISUHVHQWDWLRQWKLV&RQFXUULQJDQG'LVVHQWLQJ2SLQLRQVKDOOSURFHHGXQGHUWKHIROORZLQJVWUXFWXUH

$)DFWXDO$QWHFHGHQWV

7KH'$3DQGLWVRULJLQV

D7KH0HPRUDQGDIURP'%06HFUHWDU\)ORUHQFLR$EDGWRWKH3UHVLGHQW

%3UHOLPLQDU\0DWWHUV

7KH&RXUWVH[SDQGHGSRZHURIMXGLFLDOUHYLHZ

3ULPDIDFLHVKRZLQJRIJUDYHDEXVHRIGLVFUHWLRQ

D7KHODFNRIDXGLWILQGLQJVGRHVQRWQHJDWHJUDYHDEXVHRIGLVFUHWLRQ

7UDQVFHQGHQWDOLPSRUWDQFHRIWKHLVVXHVSUHVHQWHGE\WKHSHWLWLRQV



-XVWLFLDELOLW\DQG3ROLWLFDO4XHVWLRQV

7KH&RXUWVERXQGDU\NHHSLQJUROHLQWLPHVRISROLWLFDOXSKHDYDO

&6XEVWDQWLYH0DWWHUV

7KH'$3YLRODWHV WKHSULQFLSOHVRIFKHFNVDQGEDODQFHVDQG WKHVHSDUDWLRQRISRZHUV WKDW WKH&RQVWLWXWLRQLQWHJUDWHGLQWKHEXGJHWDU\SURFHVV

D7KHSULQFLSOHRIVHSDUDWLRQRISRZHUVDQGFKHFNVDQGEDODQFHVLQWKHEXGJHWDU\SURFHVV

E+RZWKH'$3YLRODWHVWKHVHSULQFLSOHV

7KH'$3YLRODWHVWKHSURKLELWLRQDJDLQVWWKHWUDQVIHURIDSSURSULDWLRQV

DWKHSRZHUWRDXJPHQWLVDYHU\QDUURZH[FHSWLRQWRWKHJHQHUDOSURKLELWLRQDJDLQVWWKHWUDQVIHURIDSSURSULDWLRQV

EWKHQHHGIRUDFWXDOVDYLQJVEHIRUHWKHSRZHUWRDXJPHQWPD\EHH[HUFLVHG

FVDYLQJVFDQQRWEHXVHGWRIXQGSURJUDPVDQGSURMHFWVQRWDSSURSULDWHGE\&RQJUHVV

GDGGLWLRQDOOLPLWDWLRQVLPSRVHGE\&RQJUHVVXQGHUWKH*$$

LGHILQLWLRQRIVDYLQJV

LLWZR\HDUSHULRGZLWKLQZKLFKDSSURSULDWLRQVIRU&DSLWDO2XWOD\DQG0DLQWHQDQFHDQGRWKHU2SHUDWLQJ([SHQVH022(PD\EHVSHQW

LLLJHQHUDOSURKLELWLRQDJDLQVWLPSRXQGPHQWRIUHOHDVHV

HWKHVRXUFHVRI'$3IXQGVFDQQRWTXDOLI\DVVDYLQJV

LXQREOLJDWHGDOORWPHQWV

LILQDOGLVFRQWLQXDQFHRUDEDQGRQPHQW

LXVHRIVHFWLRQDVMXVWLILFDWLRQ

IWKH'$3YLRODWHVWKHSURKLELWLRQDJDLQVWLPSRXQGPHQW

JTXDOLILFDWLRQVWRWKH3UHVLGHQWVIOH[LELOLWLHVLQEXGJHWH[HFXWLRQ

KWKH'$3LQIXQGLQJLWHPVQRWIRXQGLQWKH*$$YLRODWHGWKH&RQVWLWXWLRQ

7KH'$3YLRODWHVWKHVSHFLDOFRQGLWLRQVIRUWKHUHOHDVHRIWKH8QSURJUDPPHG)XQGLQWKHDQG*$$V

7KHRSHUDWLYHIDFWGRFWULQHFRQFHSWOLPLWVDQGDSSOLFDWLRQWRWKH'$3VXQFRQVWLWXWLRQDOLW\

$)DFWXDO$QWHFHGHQWV

7KH'$3DQGLWVRULJLQV

2Q6HSWHPEHU6HFUHWDU\$EDGUHOHDVHGDQRIILFLDOVWDWHPHQWWKURXJKWKH'%0ZHEVLWHH[SODLQLQJWKDWWKHDPRXQWVUHOHDVHGWR6HQDWRUVRQWRSRIWKHLUUHJXODU3'$)DOORFDWLRQVWRZDUGVWKHHQGRIZHUHSDUWRIDIXQGKHFDOOHGWKH'$3+HFODLPHGWKDWWKHVHUHOHDVHVZHUHLQIDFWQRWWKHILUVWWLPHWKDWUHOHDVHVIURP'$3ZHUHPDGHWRIXQGSURMHFWUHTXHVWVIURPOHJLVODWRUVEHFDXVHWKH'$3KDGEHHQLQH[LVWHQFHVLQFHWKHODWWHUSDUWRI

,QWKHFRXUVHRIKHDULQJWKHVHSHWLWLRQVWKHUHVSRQGHQWVVXEPLWWHGHYLGHQFHSDFNHWVH[SODLQLQJKRZWKH'$3FDPHLQWRH[LVWHQFHDQGKRZLWRSHUDWHG:HFDQWKXVDXWKRULWDWLYHO\DQGZLWKVXIILFLHQWIDFWXDOEDVHVGLVFXVVWKHVHSRLQWV

D7KH0HPRUDQGDIURP6HFUHWDU\$EDGWRWKH3UHVLGHQW

,Q D 0HPRUDQGXP GDWHG 2FWREHU 6HFUHWDU\ $EDG VRXJKW DQG VHFXUHG D IRUPDO FRQILUPDWLRQ RI WKH3UHVLGHQWV DSSURYDO RI WKH '$3 IRU D WRWDO RI 3 %LOOLRQ +H LGHQWLILHG WKH '$3V IXQG VRXUFHV DQG WKHLUGHVFULSWLRQDV

)36@DSSURSULDWLRQVZKLFKZLOOODSVHDWWKHHQGRI)



)



$GRSWLRQRI2SHUDWLRQDO(IILFLHQF\0HDVXUH:LWKGUDZDORI$JHQFLHV8QREOLJDWHG$OORWPHQWVDVRI-XQH

3HU WKH 3UHVLGHQWV GLUHFWLYH GDWHG -XQH 1%& 1R DXWKRUL]HG 6HFUHWDU\ $EDG WR ZLWKGUDZ WKHXQREOLJDWHGDOORWPHQWVRIDJHQFLHVWKDWKDGORZOHYHORIREOLJDWLRQVDVRI-XQH7KHVHXQREOLJDWHGDOORWPHQWVXQGHU1%&1RUHIHUUHGWRWZRNLQGVRIDOORWPHQWVRQHLVWKHFRQWLQXLQJDOORWPHQWWKDWLVFKDUJHGDJDLQVWWKH*$$IRU)



,QFRQWUDVWZLWKSUHYLRXVFRQVWLWXWLRQVWKH&RQVWLWXWLRQVXEVWDQWLDOO\IOHVKHGRXWWKHPHDQLQJRIMXGLFLDOSRZHUQRWRQO\E\FRQILUPLQJWKHPHDQLQJRIWKHWHUPDVXQGHUVWRRGE\MXULVSUXGHQFHXSWRWKDWWLPHEXWE\JRLQJEH\RQGWKHDFFHSWHGMXULVSUXGHQWLDOPHDQLQJRIWKHWHUP

6HFWLRQ$UWLFOH9,,,RIWKH&RQVWLWXWLRQUHDGV

6HFWLRQ7KHMXGLFLDOSRZHUVKDOOEHYHVWHGLQRQH6XSUHPH&RXUWDQGLQVXFKORZHUFRXUWVDVPD\EHHVWDEOLVKHGE\ODZ

-XGLFLDOSRZHULQFOXGHVWKHGXW\RIWKHFRXUWVRIMXVWLFHWRVHWWOHDFWXDOFRQWURYHUVLHVLQYROYLQJULJKWVZKLFKDUHOHJDOO\GHPDQGDEOHDQGHQIRUFHDEOH$1'WRGHWHUPLQHZKHWKHURUQRWWKHUHKDVEHHQDJUDYHDEXVHRIGLVFUHWLRQDPRXQWLQJWRODFNRUH[FHVVRIMXULVGLFWLRQRQWKHSDUWRIDQ\EUDQFKRULQVWUXPHQWDOLW\RIWKH*RYHUQPHQWLWDOLFVHPSKDVHVDQGXQGHUVFRUHVXSSOLHG

8QGHU WKHVH WHUPV WKH SUHVHQW &RQVWLWXWLRQ QRW RQO\ LQWHJUDWHV WKH WUDGLWLRQDO GHILQLWLRQ RI MXGLFLDO SRZHU EXWLQWURGXFHVDVZHOODFRPSOHWHO\QHZSRZHUDQGGXW\WRWKH-XGLFLDU\XQGHUWKHODVWSKUDVHWRGHWHUPLQHZKHWKHURUQRWWKHUHKDVEHHQDJUDYHDEXVHRIGLVFUHWLRQDPRXQWLQJWRODFNRUH[FHVVRIMXULVGLFWLRQRQWKHSDUWRIDQ\EUDQFKRULQVWUXPHQWDOLW\RIWKH*RYHUQPHQW

7KLVDGGLWLRQZDVDSSDUHQWO\LQUHVSRQVHWRWKH-XGLFLDU\VSDVWH[SHULHQFHRILQYRNLQJWKHSROLWLFDOTXHVWLRQGRFWULQHWRDYRLGFDVHVWKDWKDGSROLWLFDOGLPHQVLRQVEXWZHUHRWKHUZLVHMXVWLFLDEOH7KHDGGLWLRQUHVSRQGHGDVZHOOWRWKHVRFLHWDOGLVTXLHWWKDWUHVXOWHGIURPWKHVHSDVWMXGLFLDOUXOLQJV

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

1HFHVVDULO\DPDWWHULVULSHIRUDGMXGLFDWLRQXQGHUWKHH[SDQGHGMXGLFLDOSRZHULIWKHDVVDLOHGODZRUUXOHLVDOUHDG\LQHIIHFW ,I VRPHWKLQJ KDG DOUHDG\ EHHQ DFFRPSOLVKHG RU SHUIRUPHG E\ WKH /HJLVODWLYH DQGRU WKH([HFXWLYH DQG WKHSHWLWLRQHUVXIILFLHQWO\DOOHJHVWKHH[LVWHQFHRIDQLPPHGLDWHRUWKUHDWHQHGLQMXU\WRLWVHOIDVDUHVXOWRIWKHFKDOOHQJHGDFWLRQWKHQWKHFRQWURYHUV\FDQQRWEXWDOUHDG\EHULSHIRUDGMXGLFDWLRQ

,Q WKH H[SDQGHG MXGLFLDO SRZHU DQ\ FLWL]HQ RI WKH 3KLOLSSLQHV WR ZKRP WKH DVVDLOHG ODZ RU UXOH LV VKRZQ WR DSSO\QHFHVVDULO\KDVORFXVVWDQGLVLQFHDFRQVWLWXWLRQDOYLRODWLRQFRQVWLWXWHVDQDIIURQWRULQMXU\WRWKHDIIHFWHGFLWL]HQVRIWKHFRXQWU\,IDWDOODOHVVVWULQJHQWUHTXLUHPHQWRIORFXVVWDQGLRQO\QHHGVWREHVKRZQWRGLIIHUHQWLDWHDMXVWLFLDEOHFDVHRIWKLVW\SHIURPWKHSXUHRUPHUHRSLQLRQWKDWFRXUWVFDQQRWUHQGHU

7KHWUDGLWLRQDOUXOHVRQKLHUDUFK\RIFRXUWVDQGWUDQVFHQGHQWDOLPSRUWDQFHIDUIURPEHLQJJURXQGVIRUWKHGLVPLVVDORIWKHSHWLWLRQUDLVLQJWKHTXHVWLRQRIXQFRQVWLWXWLRQDOLW\DUHQHFHVVDULO\UHGXFHGWRUXOHVUHODWLQJWRWKHOHYHORIFRXUWWKDWVKRXOGKDQGOHWKHFRQWURYHUV\DVGLUHFWHGE\WKH6XSUHPH&RXUW

7KXV DOO FRXUWV KDYH WKH SRZHU RI H[SDQGHG MXGLFLDO UHYLHZ EXW RQO\ ZKHQ D SHWLWLRQ LQYROYHV D PDWWHU RIWUDQVFHQGHQWDO LPSRUWDQFH VKRXOG LW EH GLUHFWO\ ILOHG EHIRUH WKLV&RXUW2WKHUZLVH WKH&RXUWPD\HLWKHU GLVPLVV WKHSHWLWLRQ RU UHPDQG LW WR WKH DSSURSULDWH ORZHU FRXUW EDVHG RQ LWV FRQVLGHUDWLRQ RI WKH XUJHQF\ LPSRUWDQFH RU WKHHYLGHQWLDU\UHTXLUHPHQWVRIWKHFDVH

,QRWKHUZRUGVSHWLWLRQVLQRUGHUWRVXFFHVVIXOO\LQYRNHWKH&RXUWVSRZHURIH[SDQGHGMXGLFLDOUHYLHZPXVWVDWLVI\WZRHVVHQWLDOUHTXLVLWHVILUVWWKH\PXVWGHPRQVWUDWHDSULPDIDFLHVKRZLQJRIJUDYHDEXVHRIGLVFUHWLRQRQWKHSDUWRIWKH JRYHUQPHQWDO ERG\V DFWLRQV DQG VHFRQG WKH\ PXVW SURYH WKDW WKH\ UHODWH WR PDWWHUV RI WUDQVFHQGHQWDOLPSRUWDQFHWRWKHQDWLRQ

7KH ILUVW UHTXLUHPHQWHVWDEOLVKHV WKHQHHG IRU WKH&RXUWVH[HUFLVHRI H[SDQGHG MXGLFLDO UHYLHZSRZHUV WKH VHFRQGUHTXLUHPHQWMXVWLILHVGLUHFWUHFRXUVHWRWKH&RXUWDQGDUHOD[DWLRQRIVWDQGLQJUHTXLUHPHQWV

7KHSUHVHQWSHWLWLRQVFOHDUO\VDWLVI\WKHVHUHTXLVLWHVDVH[SODLQHGEHORZ

3ULPDIDFLHVKRZLQJRIJUDYHDEXVHRIGLVFUHWLRQ

7KH UHVSRQGHQWVSRVLW WKDW WKHSHWLWLRQHUVDOOHJDWLRQVPLVHUDEO\ IDLOHG WRPDNHDFDVHRIJUDYHDEXVHRIGLVFUHWLRQFRQVLGHULQJWKHLQVXIILFLHQF\DQGXQFHUWDLQW\RI WKHIDFWVDOOHJHGDVWKH\DUHPRVWO\EDVHGRQQHZVSDSHUFOLSSLQJVDQG PHGLD UHSRUWV *LYHQ WKH LQQXPHUDEOH DOORWPHQWV DQG GLVEXUVHPHQWV WKH\ DUJXH WKDW WKH SHWLWLRQHUV DUHUHTXLUHGWRHVWDEOLVKZLWKVXIILFLHQWFODULW\WKHNLQGVRIDOORWPHQWVDQGGLVEXUVHPHQWVFRPSODLQHGRILQWKHSHWLWLRQV2QWKLVEDVLVWKHUHVSRQGHQWVTXHVWLRQWKHSUHVHQFHRIDQDFWXDOFDVHRUFRQWURYHUV\LQWKHSHWLWLRQV

,FDQQRWDJUHHZLWKWKHUHVSRQGHQWVSRVLWLRQV

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

$GGLWLRQDOO\ WKH UHVSRQGHQWV LQ WKHFRXUVHRI WKHRUDODUJXPHQWVVXEPLWWHGGHWDLOVRI WKHSURJUDPV IXQGHGE\ WKH



'$3DQGDGPLWWHG LQ&RXUW WKDW WKH IXQGLQJRI&RQJUHVVHOLEUDU\DQGFHUWDLQSURMHFWV LQ WKH&2$FDPHIURPWKH'$37KH\OLNHZLVHVWDWHGLQWKHLUVXEPLWWHGPHPRUDQGXPWKDWWKH3UHVLGHQWPDGHDYDLODEOHWRWKH&RPPLVVLRQRQ(OHFWLRQV&20(/(&WKHVDYLQJVRIKLVGHSDUWPHQWXSRQUHTXHVWIRUIXQGV

7KHPHFKDQLFVE\ZKLFKIXQGVZHUHSRROHGWRJHWKHUWRFUHDWHDQGIXQGWKH'$3DUHDOVRHYLGHQWIURPWKHVWDWHPHQWVSXEOLVKHG LQ WKH'%0ZHEVLWHDVZHOODV LQQDWLRQDOEXGJHWFLUFXODUVDQGDSSURYHGPHPRUDQGD LPSOHPHQWLQJ WKH'$37KHUHVSRQGHQWVDOVRVXEPLWWHGDPHPRVKRZLQJWKH3UHVLGHQWVDSSURYDORIWKH'$3VFUHDWLRQ

$OORIWKHVHFXPXODWLYHO\DQGVXIILFLHQWO\OHDGWRDSULPDIDFLHFDVHRIJUDYHDEXVHRIGLVFUHWLRQE\WKH([HFXWLYHLQWKHKDQGOLQJRISXEOLF IXQGV ,QRWKHUZRUGV WKHVHDGPLWWHGSLHFHVRIHYLGHQFH WDNHQ WRJHWKHUVXSSRUW WKHSHWLWLRQHUVDOOHJDWLRQVDQGHVWDEOLVKVXIILFLHQWEDVLFSUHPLVHVIRUWKH&RXUWVDFWLRQRQWKHPHULWV:KLOHWKH&RXUWXQOLNHWKHWULDOFRXUWV GRHV QRW FRQGXFW SURFHHGLQJV WR UHFHLYH HYLGHQFH LW PXVW UHFRJQL]H DV HVWDEOLVKHG WKH IDFWV DGPLWWHG RUXQGLVSXWHGO\UHSUHVHQWHGE\WKHSDUWLHVWKHPVHOYHV

)LUVW WKH H[LVWHQFH RI WKH'$3 LWVHOI WKH MXVWLILFDWLRQ IRU LWV FUHDWLRQ WKH UHVSRQGHQWV OHJDO FKDUDFWHUL]DWLRQ RI WKHVRXUFH RI'$3 IXQGV LH XQREOLJDWHG DOORWPHQWV DQG XQUHOHDVHG DSSURSULDWLRQV IRU VORZPRYLQJ SURMHFWV DQG WKHYDULRXVSXUSRVHVIRUZKLFKWKH'$3IXQGVZRXOGEHXVHGLHIRU3'$)DXJPHQWDWLRQDQGIRUDLGLQJRWKHUEUDQFKHVRIJRYHUQPHQWDQGRWKHUFRQVWLWXWLRQDOERGLHVDUHFOHDUO\DQGLQGLVSXWDEO\VKRZQ

6HFRQGWKHUHVSRQGHQWVXQGLVSXWHGUHDOLJQPHQWRIIXQGVIURPRQHSRLQWWRDQRWKHULQHYLWDEO\UDLVHGTXHVWLRQVWKDWDVGLVFXVVHGDERYHDUHULSHIRUFRQVWLWXWLRQDOVFUXWLQ\

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

D7KHODFNRIDXGLWILQGLQJVGRHVQRWQHJDWHJUDYHDEXVHRIGLVFUHWLRQ

7KH UHVSRQGHQWV DGGLWLRQDOO\ GHQ\ WKH H[LVWHQFH RI DQ DFWXDO FDVH EHFDXVH WKH &2$ KDV \HW WR UHQGHU LWV DXGLWILQGLQJVWRGHWHUPLQHZKHWKHU WKH'$3IXQGHGSURMHFWV LGHQWLILHG LQ WKHSHWLWLRQVDUH ODZIXORUQRW WKXVVKRZLQJWKDWWKHSHWLWLRQVPD\EHSUHPDWXUH

,GRQRWILQGWKLVFRQWHQWLRQSHUVXDVLYH

7KH LVVXHRI FULPLQDO FLYLO RU DGPLQLVWUDWLYH OLDELOLW\ GHWHUPLQHGRQ WKHEDVLV DPRQJRWKHUV RI WKH&2$V ILQGLQJVGRHVQRWDQGFDQQRWSUHHPSWWKH LVVXHRIFRQVWLWXWLRQDOLW\ ,QIDFW WKH&RXUWV ILQGLQJRIXQFRQVWLWXWLRQDOLW\ LQHYLWDEO\OHDGVWRWKHGHWHUPLQDWLRQRIWKHSRVVLELOLW\RIWKHFRPPLVVLRQRILQIUDFWLRQVWKDWFDQJLYHULVHWRGLIIHUHQWOLDELOLWLHV7KH&RXUWV ILQGLQJV WRR VKRXOG EH PDWHULDO LQ WKH DSSURSULDWH SURFHHGLQJV ZKHUH WKH OLDELOLWLHV DULVLQJ IURP JUDYHFRQVWLWXWLRQDOYLRODWLRQVDUHSURSHUO\GHWHUPLQHG

7KHSULPDIDFLHFDVHDVHVWDEOLVKHGDQGVKRZQLQWKHVHSURFHHGLQJVLVVXIILFLHQWWRUHVROYHWKHLVVXHRIZKHWKHUWKH([HFXWLYHFRPPLWWHGJUDYHDEXVHRIGLVFUHWLRQLQFUHDWLQJDQGLPSOHPHQWLQJWKH'$3,QRWKHUZRUGVWKHDEVHQFHRIDQ\&2$ILQGLQJRQWKHYDOLGLW\RIWKHGLVEXUVHPHQWVXQGHUWKH'$3FDQQRWUHQGHUWKHSUHVHQWSHWLWLRQVSUHPDWXUH

7RDYRLGDQ\FRQIXVLRQOHWPHUHVWDWHDQGFODULI\P\YLHZWKDWZKLOHWKH&2$FDQUXOHRQWKHOHJDOLW\RUUHJXODULW\RIDQ LWHPRI H[SHQVH LW FDQQRW UXOHRQ WKH FRQVWLWXWLRQDOLW\ RI WKHPHDVXUH WKDWPDGH WKHH[SHQGLWXUHSRVVLEOH7KLVLVVXHUHPDLQVIRUWKHFRXUWVQRWIRUWKH&2$WRGHFLGHXSRQ

2Q WKH VDPH UHDVRQLQJ WKH LQYRFDWLRQ RI WKH SUHVXPSWLRQ RI FRQVWLWXWLRQDOLW\ RI OHJLVODWLYH DQG H[HFXWLYH DFWVLPPHGLDWHO\ORVHVLWVDSSHDOZKHQLWLVFRQVLGHUHGWKDWWKHSUHVXPSWLRQLVQHYHUPHDQWWRVKLHOGJRYHUQPHQWRIILFLDOVIURPFKDOOHQJHVDJDLQVWWKHLURIILFLDODFWLRQVRUIURPOLDELOLW\ZKHUHWKHYLRODWLRQRIWKH&RQVWLWXWLRQLVRWKHUZLVHFOHDUDQGXQHTXLYRFDO

7UDQVFHQGHQWDOLPSRUWDQFHRIWKHLVVXHVSUHVHQWHGE\WKHSHWLWLRQV

7KHSHWLWLRQVOLNHZLVHHVWDEOLVKWKHVHFRQGUHTXLUHPHQWRIWUDQVFHQGHQWDOLPSRUWDQFH

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

,VXEPLWWKDWWKHVHGHWHUPLQDQWVDUHDOOSUHVHQWLQWKHFDVHVEHIRUHXV

)RU RQH WKH ([HFXWLYHV XQGLVSXWHG FUHDWLRQ DQG LPSOHPHQWDWLRQ RI WKH '$3 ZKLFK LQYROYHV ELOOLRQV RI WD[SD\HUVPRQH\DQGZKLFKSRWHQWLDOO\LQYROYHVELOOLRQVPRUHXQOHVVKDOWHGVDWLVI\WKHILUVWGHWHUPLQDQW7RSRLQWRXWDSUHVHQWREYLRXVUHDOLW\WKH([HFXWLYHLVHYHQQRZHQJDJHGLQDVKDPHFDPSDLJQWRSURGSHRSOHWRSD\WKHLUWD[HV,IWD[HVZLOOFRQWLQXHWREHIDLWKIXOO\SDLGQRZDQGLQWKHIXWXUHLWLVRIWUDQVFHQGHQWDOLPSRUWDQFHIRUWKHSHRSOHWRNQRZKRZWKHLUWD[PRQH\LVVSHQWRUPLVVSHQWDQGWREHLQIRUPHGDVZHOOWKDWWKH\KDYHWKLVULJKW

)RU DQRWKHU WKH SHWLWLRQHUV VHULRXV DOOHJDWLRQV RI FRQVWLWXWLRQDO YLRODWLRQ E\ WKH ([HFXWLYH LQ WUDQVIHUULQJDSSURSULDWLRQVGHVSLWHWKHQRQH[LVWHQFHRIVDYLQJVDQGWKHUHVSRQGHQWVFRPPLVVLRQRIJUDYHDEXVHRIGLVFUHWLRQLQGLVUHJDUGLQJWKHOLPLWDWLRQVRIDOORZDEOHWUDQVIHURIDSSURSULDWLRQVXQGHU6HFWLRQ$UWLFOH9,RIWKH&RQVWLWXWLRQDV



DGPLWWHGE\WKHUHVSRQGHQWVWKHPVHOYHVVDWLVI\WKHVHFRQGGHWHUPLQDQW%DVHGRQWKHDGPLVVLRQVPDGHDORQHWKHLQFLGHQWV RI FRQVWLWXWLRQDO YLRODWLRQV DUH FOHDU SDWHQW DQG RI XWPRVW JUDYLW\ WKH\ DIIHFW WKH YHU\ QDWXUH RI RXUUHSXEOLFDQV\VWHPRIJRYHUQPHQW

/DVWO\JLYHQWKHLQWULQVLFQDWXUHRIWKHSHWLWLRQVDVWD[SD\HUVVXLWVWRSUHYHQWZDVWDJHDQGPLVDSSOLFDWLRQRIIXQGVE\DQXQFRQVWLWXWLRQDOH[HFXWLYHDFWWKHUHFDQUHDOO\EHQRRWKHUSDUW\ZLWKDPRUHGLUHFWDQGVSHFLILFLQWHUHVWLQUDLVLQJWKHLVVXHRIFRQVWLWXWLRQDOLW\WKDQWKHSHWLWLRQHUVVXLQJDVWD[SD\HUVDQGLQYRNLQJDSXEOLFULJKW

2YHUDQGDERYHWKHVHGHWHUPLQDQWVWKHWUDQVFHQGHQWDOLPSRUWDQFHRIWKHVHSUHVHQWFDVHVOLHVLQWKHFRPSOHPHQWDU\UHODWLRQRIWKHLUSUHVHQWHGLVVXHVZLWKWKRVHUDLVHGLQWKH3'$)ZKLFKWKH&RXUWVTXDUHO\UXOHGXSRQLQWKHUHFHQWFDVHRI%HOJLFDY([HFXWLYH6HFUHWDU\

,Q%HOJLFD WKH&RXUWGHFODUHG WKHVWDWXWRULO\FUHDWHGSRUNEDUUHO V\VWHP WREHXQFRQVWLWXWLRQDO IRUYLRODWLQJ WKHFRUHGRFWULQH RI VHSDUDWLRQ RI SRZHUV 7KH&RXUW UXOHG WKDW WKH OHJLVODWRUV SRVWHQDFWPHQW SDUWLFLSDWLRQ LQ WKH DUHDV RISURMHFWLGHQWLILFDWLRQIXQGUHOHDVHDQGIXQGUHDOLJQPHQWRUUROHLQWKHLPSOHPHQWDWLRQRUHQIRUFHPHQWRIWKH*$$VDUHEH\RQG&RQJUHVVRYHUVLJKWIXQFWLRQDQGDUHWKHUHIRUHXQFRQVWLWXWLRQDO7KH&RXUWSHUWLQHQWO\UXOHG

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

,QWKLVOLJKWWKHVWDWHPHQWRIWKH&2$&KDLUSHUVRQGXULQJWKHRUDODUJXPHQWVLVSDUWLFXODUO\LOOXPLQDWLQJ

-XVWLFH%HUVDPLQ$OULJKW WKHQH[WTXHVWLRQ&KDLUSHUVRQ LV WKLVGR\RX UHPHPEHU LI\RXURIILFHKDV LQ >VLF@SDVVDQDXGLWDQ\DFWLYLW\RUDQ\WUDQVIHURIIXQGVXQGHUWKH'$3"&KDLUSHUVRQ3XOLGR7DQ8QGHUWKLVSDUWLFXODUDGPLQLVWUDWLRQLI,PD\VD\6LU

-XVWLFH%HUVDPLQ'$3RQO\LWVH[LVWHQFHFDPHRQO\LQWKHODVWTXDUWHURIZDVUHOHDVHGRQO\LQWKHPLGGOHRIVRLWLVDVUHFHQWDVWKDW,GRQRWWDONDERXWWKHSUHYLRXVDGPLQLVWUDWLRQ&KDLUSHUVRQ3XOLGR7DQ



-XVWLFLDELOLW\DQG3ROLWLFDO4XHVWLRQV

-XVWLFLDELOLW\ UHIHUV WR WKH ILWQHVV RU SURSULHW\ RI XQGHUWDNLQJ WKH MXGLFLDO UHYLHZ RI SDUWLFXODU PDWWHUV RU FDVHV LWGHVFULEHVWKHFKDUDFWHURILVVXHVWKDWDUHLQKHUHQWO\VXVFHSWLEOHRIEHLQJGHFLGHGRQJURXQGVUHFRJQL]HGE\ODZ

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

,QWKHVHFDVHVWKHSHWLWLRQHUVKDYHVWURQJO\VKRZQWKHWH[WXDOOLPLWVWRWKH([HFXWLYHVSRZHURYHUWKHLPSOHPHQWDWLRQRI WKH *$$ SDUWLFXODUO\ LQ WKH KDQGOLQJ DQG PDQDJHPHQW RI IXQGV )DU IURP ERUGHULQJ RQ SROLWLFDO TXHVWLRQV WKHFKDOOHQJHV UDLVHG LQ WKH SUHVHQW SHWLWLRQV DJDLQVW WKH FRQVWLWXWLRQDOLW\ RI WKH'$3DUH DFWXDOO\ DQFKRUHG RQ VSHFLILFFRQVWLWXWLRQDODQGVWDWXWRU\SURYLVLRQVJRYHUQLQJWKHUHDOLJQPHQWRUWUDQVIHURIIXQGV

7KH LQFUHDVH RI JRYHUQPHQW H[SHQGLWXUHV LV D PDFURHFRQRPLF WRRO WKDW LV DW WKH GLVSRVDO RI WKH FRXQWU\V SROLF\PDNHUV WR VWLPXODWH WKH FRXQWU\V HFRQRP\ DQG LPSURYH HFRQRPLF JURZWK )URP WKLV SHUVSHFWLYH FRQVWLWXWLRQDOSURYLVLRQVWRXFKLQJRQHFRQRPLFPDWWHUVDUHXQGHUVWDQGDEO\EURDGO\ZRUGHGWRDFFRPPRGDWHFRPSHWLQJQHHGVDQGWRJLYHSROLF\PDNHUVDQGHYHQWKH&RXUWWKHQHFHVVDU\IOH[LELOLW\WRGHFLGHSROLF\TXHVWLRQVRUGLVSXWHVRQDFDVHWRFDVHEDVLV

$EURDG IRUPXODWLRQDQG LQWHUSUHWDWLRQRI WKLVJXLGLQJSULQFLSOHKRZHYHUFDQQRWEHXVHG WRRYHUULGHSODLQDQGFOHDUSURYLVLRQVRIWKH&RQVWLWXWLRQDQGUHOHYDQWODZVWKDWDUHLQSODFHXQGHUWKHZLGHXPEUHOODRIWKHUXOHRIODZ:KLOHWKHWKUHH JRDOV RI WKH HFRQRP\ XQGHU 6HFWLRQ $UWLFOH ;,,, RI WKH &RQVWLWXWLRQ DV D OHJDO WUDQVODWLRQ RI WKH([HFXWLYHV HFRQRPLF MXVWLILFDWLRQ IRU WKH '$3 DUH DGGUHVVHG WR WKH SROLWLFDO EUDQFKHV RI WKH JRYHUQPHQW VROHUHOLDQFH RQ WKHVH REMHFWLYHVZRXOG LJQRUH WKH FRQVWLWXWLRQDO OLPLWDWLRQV DSSOLFDEOH WR WKHPHDQV IRU DFKLHYLQJ WKHP7KHVH OHJDO OLPLWDWLRQV DUH SUHFLVHO\ DW WKH FRUH RI WKH LVVXHV SUHVHQWHG WR XV LQ WKHVH FKDOOHQJHV WR WKHFRQVWLWXWLRQDOLW\ RI WKH '$3V FUHDWLRQ DQG LPSOHPHQWDWLRQ WKH LVVXHV EHIRUH XV DUH OHJDO RQHV QRW HFRQRPLF RUSROLWLFDO

)RUWKLVUHDVRQ,KDYHEUXVKHGDVLGHDVEH\RQGRXUDXWKRULW\WRFRQVLGHUDQGUXOHXSRQWKHYLHZVLQRWKHU2SLQLRQVMXVWLI\LQJWKHLVVXDQFHRIWKH'$3IRUODUJHO\HFRQRPLFSUDFWLFDOLW\UHDVRQV

7KH&RXUWVERXQGDU\NHHSLQJUROHLQWLPHVRISROLWLFDOXSKHDYDO

$VDILQDOQRWHRQWKHSURFHGXUDODVSHFWV,EHOLHYHWKDWWKHSUHVHQWFDVHSURYLGHVXVZLWKDQH[FHOOHQWRSSRUWXQLW\WRUHYLVLWRXUUROHDVERXQGDU\NHHSHUDUROHDVVLJQHGWRXVWRHQVXUHWKDWWKHOLPLWVVHWE\WKH&RQVWLWXWLRQEHWZHHQDQGDPRQJWKHGLIIHUHQWEUDQFKHVRIJRYHUQPHQWDUHREVHUYHG

$V HDUO\ DV $QJDUD Y (OHFWRUDO &RPPLVVLRQ WKLV &RXUW KDV LGHQWLILHG LWVHOI DV WKH PHGLDWRU LQ GHPDUFDWLQJ WKHFRQVWLWXWLRQDOOLPLWVLQWKHH[HUFLVHRISRZHUE\HDFKEUDQFKRIJRYHUQPHQW:HWKHQREVHUYHGWKDWWKHVHFRQVWLWXWLRQDOERXQGDULHVWHQGWREHIRUJRWWHQRUPDUUHGLQWLPHVRIVRFLHWDOGLVTXLHWRUSROLWLFDOH[FLWHPHQWDQGLWLVWKH&RXUWVUROHWR FODULI\ DQG UHLQIRUFH WKH SURSHU DOORFDWLRQ RI SRZHUV VR WKDW WKH GLIIHUHQW EUDQFKHV RI JRYHUQPHQWZRXOG QRW DFWRXWVLGHWKHLUUHVSHFWLYHVSKHUHVRILQIOXHQFH

:H FODULILHG WKDW DOWKRXJK ZHPD\ LQ HIIHFW QXOOLI\ JRYHUQPHQWDO DFWLRQV DEKRUUHQW WR WKH &RQVWLWXWLRQ ZH GR QRWXQGHUWDNHWKLVUROHEHFDXVHRIMXGLFLDOVXSUHPDF\EXWEHFDXVHWKLVGXW\KDVEHHQDVVLJQHGWRXVE\WKH&RQVWLWXWLRQ

7LPHDQGDJDLQZHKDYHORRNHGEDFNWRRXU$QJDUDUXOLQJZKHQFDVHVRIQDWLRQDOLQWHUHVWUHDFKWKH&RXUWDQGKDYHXVHGLWVJXLGLQJSULQFLSOHVWRGHWHUPLQHZKHWKHURUQRWWRDFWRQWKHFDVHVEHIRUHXV

6LQFH$QJDUDWKLQJVKDYHFKDQJHGEHFDXVHRIGHYHORSPHQWVLQRXUSROLWLFDOKLVWRU\6LQFHWKHQWKH&RXUWKDVEHHQJUDQWHGH[SDQGHGMXULVGLFWLRQWRGHWHUPLQHQRWRQO\WKHWUDGLWLRQDOMXVWLFLDEOHFRQWURYHUVLHVWKDWOHGWR$QJDUDEXWDOVRWKHH[LVWHQFHRIJUDYHDEXVHRIGLVFUHWLRQE\DQ\DJHQF\RULQVWUXPHQWDOLW\RIWKHJRYHUQPHQW7KXVRXUMXULVGLFWLRQKDVEHHQH[SDQGHG WR WKHH[WHQWRI WKHQHZJUDQW LQ WKHSURFHVVDIIHFWLQJ WKH WUDGLWLRQDO MXVWLFLDELOLW\ UHTXLUHPHQWVGHYHORSHGVLQFH$QJDUD

7KH SULQFLSOHV LQ $QJDUD WR EH VXUH VWLOO FDUU\ D ORW RI WUXWK DQG UHOHYDQFH EXW WKHVH SULQFLSOHV QRZ KDYH WR EHDGMXVWHGWRPDNHZD\IRUWKHH[SDQGHGMXULVGLFWLRQWKDWWKLVODQGPDUNUXOLQJGLGQRWFRQWHPSODWH

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



,WLVLQWKHVHOLJKWVWKDW,IDYRUDEO\YLHZWKH&RXUWVUHVROYHWRFODULI\WKHDSSOLFDWLRQRIWKHRSHUDWLYHIDFWGRFWULQHWRWKHLVVXHRI WKH'$3V FRQVWLWXWLRQDOLW\ DQG WKH SRWHQWLDO FRQVHTXHQFHVXQGHU D UXOLQJ RI XQFRQVWLWXWLRQDOLW\ ,W LV LQ WKLVVSLULWWKDW,GLVFXVVWKHVHWRSLFVEHORZ

&6XEVWDQWLYH0DWWHUV

7KH'$3YLRODWHVWKHSULQFLSOHVRIFKHFNVDQGEDODQFHVDQGWKHVHSDUDWLRQRISRZHUVWKDWWKH&RQVWLWXWLRQLQWHJUDWHGLQWKHEXGJHWDU\SURFHVV

D7KHSULQFLSOHVRIVHSDUDWLRQRISRZHUVDQGFKHFNVDQGEDODQFHVLQWKHEXGJHWDU\SURFHVV

7KH UHFHQW%HOJLFD UXOLQJJDYH WKLV&RXUW WKHRSSRUWXQLW\ WRGLVFXVVDQGGHOLEHUDWHRQ WKHSULQFLSOHRIVHSDUDWLRQRISRZHUVDVDSSOLHG LQ WKHEXGJHWDU\SURFHVV:HWKHUHKHOG WKDW WKHSRVWHQDFWPHQWPHDVXUHV LQ WKH3'$)DOORZHGVHQDWRUV DQG PHPEHUV RI WKH +RXVH RI 5HSUHVHQWDWLYHV WR ZLHOG DQG HQFURDFK RQ WKH LWHP YHWR SRZHU RI WKH3UHVLGHQW

,QVRGRLQJZHOLNHZLVHGLVFXVVHGWKHEXGJHWDU\SURFHVVHPERGLHGLQWKH&RQVWLWXWLRQDVZHOODVWKHGHOLQHDWLRQRIWKHUROHVHDFKEUDQFKRIJRYHUQPHQWSOD\VLQWKHIRUPXODWLRQHQDFWPHQWDQGLPSOHPHQWDWLRQRIWKHQDWLRQDOEXGJHWDQGLQWKHDFFRXQWDELOLW\IRULWVSURSHUKDQGOLQJ

$V,H[SODLQHGLQP\&RQFXUULQJDQG'LVVHQWLQJ2SLQLRQLQ%HOJLFDWKHEXGJHWDU\SURFHVVSDLQVWDNLQJO\GHWDLOHGLQWKH&RQVWLWXWLRQHPERGLHVWKHJHQHUDOSULQFLSOHRIVHSDUDWLRQRISRZHUVDQGFKHFNVDQGEDODQFHVXQGHUZKLFKWKH/HJLVODWLYHWKH([HFXWLYHDQGWKH-XGLFLDU\RSHUDWH,WDOVRSURYLGHVWKHVSHFLILFOLPLWDWLRQVRQZKDWWKH([HFXWLYHDQG/HJLVODWXUHFDQDQGFDQQRWGRWRHQVXUHWKDWQHLWKHUEUDQFKRIJRYHUQPHQWVWHSVEH\RQGLWVRZQDUHDDQGLQWRDQRWKHUV FRQVWLWXWLRQDOO\DVVLJQHG UROH DQ\ LQWUXVLYH VWHS YLRODWHV WKH VHSDUDWLRQ RI SRZHUV DQG WKH FKHFNV DQGEDODQFHVRQZKLFKRXUUHSXEOLFDQV\VWHPRIJRYHUQPHQWLVIRXQGHG

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

7KH&RQVWLWXWLRQUHFRJQL]LQJWKHLPSRUWDQFHRIWKHQDWLRQDOEXGJHWSURYLGHGQRWRQO\WKHJHQHUDOIUDPHZRUNIRULWV HQDFWPHQW LPSOHPHQWDWLRQ DQG DFFRXQWDELOLW\ LW DOVR VHW IRUWK VSHFLILF OLPLWV LQ WKH H[HUFLVH RI WKH UHVSHFWLYHSRZHUVE\WKH([HFXWLYHDQGWKH/HJLVODWLYHDOOWKHWLPHFOHDUO\VHSDUDWLQJWKHPVRWKDWWKH\ZRXOGQRWRYHUVWHSLQWRHDFKRWKHUVSUHDVVLJQHGGRPDLQ

7KXV&RQJUHVV LVJUDQWHG WKHSRZHURIDSSURSULDWLRQVXQGHU WKH IUDPHZRUNSURYLGHG LQ WKH&RQVWLWXWLRQZKLOH WKH([HFXWLYHLVJUDQWHGWKHSRZHUWR LPSOHPHQWWKHSURJUDPVIXQGHGE\WKHVHDSSURSULDWLRQVDOVREDVHGRQWKHVDPHFRQVWLWXWLRQDOIUDPHZRUN,WLVLQWKLVPDQQHUWKDWWKHVHSDUDWLRQRISRZHUVSULQFLSOHRSHUDWHVLQWKHEXGJHWDU\SURFHVV

8QGHUWKHFRPSOHPHQWDU\SULQFLSOHRIFKHFNVDQGEDODQFHVDVDSSOLHGWRWKHEXGJHWSURFHVVERWKWKH([HFXWLYHDQGWKH/HJLVODWLYHSOD\FRQVWLWXWLRQDOO\GHILQHGUROHV

$WWKHEXGJHWSUHSDUDWLRQDQGSURSRVDOVWDJHWKH([HFXWLYHLVJLYHQWKHLQLWLDWLYH LWVWDUWVWKHEXGJHWDU\SURFHVVE\VXEPLWWLQJ WR&RQJUHVVZLWKLQ GD\V IURP WKH RSHQLQJ RI HYHU\ UHJXODU VHVVLRQ D EXGJHW RI H[SHQGLWXUHV DQGVRXUFHVRIILQDQFLQJWKDWEHFRPHVWKHEDVLVIRUWKHJHQHUDODSSURSULDWLRQVELOO7KLVEXGJHWFRQWDLQVWKHDSSURSULDWLRQVUHFRPPHQGHGE\WKH3UHVLGHQWIRUWKHRSHUDWLRQRIWKHJRYHUQPHQW

:KLOH WKH3UHVLGHQWXQGHUWDNHV WKHSODQQLQJDQG UHFRPPHQGDWLRQ WKH&RQVWLWXWLRQ UHTXLUHVKLP WRFRPSO\ZLWK WKHIRUP FRQWHQW DQG PDQQHU RI LWV SUHSDUDWLRQ DV SUHVFULEHG E\ ODZ 7KH &RQVWLWXWLRQ UHOHQWV WR WKH 3UHVLGHQWVMXGJPHQWLQSUHSDULQJWKHEXGJHWE\SURKLELWLQJ&RQJUHVVIURPLQFUHDVLQJWKHEXGJHWUHFRPPHQGHGE\WKH([HFXWLYHIRUWKHQH[WILVFDO\HDU

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

$VLGH IURP WKH SURKLELWLRQ RQ WKH WUDQVIHU RI DSSURSULDWLRQV WKH &RQVWLWXWLRQ DOVR UHTXLUHV WKDW WKH SURFHGXUH LQDSSURYLQJ DSSURSULDWLRQV IRU &RQJUHVV VKDOO VWULFWO\ IROORZ WKH SURFHGXUH IRU DSSURYLQJ DSSURSULDWLRQV IRU RWKHUGHSDUWPHQWVDQGDJHQFLHV6HFWLRQ$UWLFOH9,,RIWKH&RQVWLWXWLRQVHHNVWRHQVXUHWKDWZKLOH&RQJUHVVLVJLYHQWKHSRZHURIDSSURSULDWLRQLWPXVWXQGHUJRWKHVDPHSURFHVVEHIRUHLWVEXGJHWLVDSSURYHG

2QFH&RQJUHVVKDVVSRNHQWKURXJKWKHSDVVDJHRIWKHJHQHUDODSSURSULDWLRQVELOOEDVHGRQWKHEXGJHWVXEPLWWHGE\WKH 3UHVLGHQW WKH &RQVWLWXWLRQ DXWKRUL]HV WKH 3UHVLGHQW WR H[HUFLVH VRPH GHJUHH RI FRQWURO RYHU DQ DSSURSULDWLRQOHJLVODWLRQ E\ DOORZLQJ KLP WR H[HUFLVH DQ LWHPYHWR SRZHU $V D FRXQWHUEDODQFH &RQJUHVV PD\ RYHUULGH WKH3UHVLGHQWVYHWRE\DYRWHRIRIDOOLWVPHPEHUV



8SRQSDVVDJHRIWKHJHQHUDODSSURSULDWLRQVELOOLQWRODZHLWKHUE\SUHVLGHQWLDODSSURYDORULQDFWLRQDOORZLQJWKHELOOWRODSVH LQWRD ODZQRQHRI WKH WKUHHEUDQFKHVRIJRYHUQPHQWDQG WKHFRQVWLWXWLRQDOERGLHVFDQ WKZDUWFRQJUHVVLRQDOEXGJHWDU\ ZLOO E\ FURVVLQJ FRQVWLWXWLRQDO ERXQGDULHV WKURXJK WKH WUDQVIHU RI DSSURSULDWLRQV RU IXQGV DFURVVGHSDUWPHQWDOERUGHUV7KLVLVWKHDGGHGSUHFDXWLRQDU\PHDVXUHWKURZQLQWRVHFXUHWKHSDLQVWDNLQJO\GHVLJQHGFKHFNDQGEDODQFHPHFKDQLVPV

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

%H\RQG WKH LQWHUQDO IOH[LELOLW\ PHDVXUHV WKH &RQVWLWXWLRQ DOVR SURYLGHV IRU DQ H[WHUQDO PHDVXUH VSHFLILFDOO\ WKHDXWKRULW\RIWKH3UHVLGHQWWRFDOO&RQJUHVVWRVSHFLDOVHVVLRQDWDQ\WLPHDQGKLVDXWKRULW\WRFHUWLI\DELOOLQFOXGLQJDVSHFLDOEXGJHWELOOIRULPPHGLDWHHQDFWPHQWWRPHHWDSXEOLFFDODPLW\RUHPHUJHQF\

%\WKHVHPHDVXUHVWKH&RQVWLWXWLRQHQYLVLRQVJRYHUQDQFHWREHHIIHFWLYHDQGUHVSRQVLYHHYHQLQWLPHVRIFDODPLWLHVDQG HPHUJHQFLHV ZKLOH PDLQWDLQLQJ WKH FDUHIXOO\GHVLJQHG VHSDUDWLRQ DQG FKHFNLQJ SULQFLSOHV LQWHJUDWHG LQ WKHEXGJHWDU\SURFHVV7KHVHPHDVXUHVRIFRXUVHFDQQRWZKROO\DGGUHVVVWUHVVHVEURXJKWDERXWE\KXPDQIUDLOWLHVVXFKDVLQHIILFLHQFLHVDQGPDOLFLRXVGHVLJQVZKLFKDUHPDQDJHPHQWIXQFWLRQVIRUWKH([HFXWLYHWRKDQGOHZLWKLQWKHGHILQHGSDUDPHWHUVRIWKHFRQVWLWXWLRQDOVWUXFWXUH

E+RZWKH'$3YLRODWHVWKHVHSULQFLSOHV

8QGHUWKLVFDUHIXOO\ODLGRXWFRQVWLWXWLRQDOV\VWHPWKH'$3YLRODWHVWKHSULQFLSOHVRIVHSDUDWLRQRISRZHUVDQGFKHFNVDQGEDODQFHVRQWZRFRXQWVILUVWE\SRROLQJIXQGVWKDWFDQQRWDWDOOEHFODVVLILHGDVVDYLQJVDQGVHFRQGE\XVLQJWKHVH IXQGV WR ILQDQFHSURMHFWVRXWVLGH WKH([HFXWLYHRU IRUSURMHFWVZLWKQRDSSURSULDWLRQFRYHU7KHGHWDLOVEHKLQGWKHVHWUDQVJUHVVLRQVDQGWKHLUFRQVWLWXWLRQDOVWDWXVDUHIXUWKHUGLVFXVVHGEHORZ

7KHVHYLRODWLRQVLQGLUHFWYLRODWLRQRIWKHQRWUDQVIHUSURYLVRRI6HFWLRQRI$UWLFOH9,RIWKH&RQVWLWXWLRQKDGWKHHIIHFWRIDOORZLQJWKH([HFXWLYHWRHQFURDFKRQWKHGRPDLQRI&RQJUHVVLQWKHEXGJHWDU\SURFHVV%\IDFLOLWDWLQJWKHXVHRIIXQGVQRWFODVVLILHGDVVDYLQJVWRILQDQFHLWHPVRWKHUWKDQIRUZKLFKWKH\KDYHEHHQDSSURSULDWHGWKH'$3LQHIIHFWDOORZHGWKH3UHVLGHQWWRFLUFXPYHQWWKHFRQVWLWXWLRQDOEXGJHWDU\SURFHVVDQGWRYHWRLWHPVRIWKH*$$ZLWKRXWVXEMHFWLQJWKHPWRWKHRYHUULGLQJYHWRWKDW&RQJUHVVLVHPSRZHUHGWRH[HUFLVH

$GGLWLRQDOO\WKLVSUDFWLFHDOORZVWKHFUHDWLRQRIDEXGJHWZLWKLQDEXGJHWWKHXVHRIIXQGVQRWRWKHUZLVHFODVVLILDEOHDVVDYLQJVGLVUHJDUGV WKH LWHPV IRUZKLFK WKHVH IXQGVKDGEHHQDSSURSULDWHGDQGDOORZV WKHLUXVH IRU LWHPV IRUZKLFKWKH\KDGQRWEHHQDSSURSULDWHG

:RUVH WKH YLRODWLRQ EHFRPHV HYHQ JUDYHU ZKHQ DV WKH RUDO DUJXPHQWV DQG DGPLVVLRQV ODWHU VKRZHG WKH IXQGVSURYLGHG WR ILQDQFH DSSURSULDWLRQV LQ WKH ([HFXWLYH 'HSDUWPHQW KDG EHHQ XVHG IRU SURMHFWV LQ WKH /HJLVODWXUH DQGRWKHU FRQVWLWXWLRQDO ERGLHV ,Q VKRUW WKH YLRODWLRQ DOORZHG WKH FRQVWLWXWLRQDOO\SURKLELWHG WUDQVIHU RI IXQGV DFURVVFRQVWLWXWLRQDOERXQGDULHV

7KURXJK WKHVHYLRODWLRQVRI WKHH[SUHVV WHUPVRI6HFWLRQ$UWLFOH9,RI WKH&RQVWLWXWLRQ WKH'$3GLUHFWO\FRQWUDYHQHG WKH SULQFLSOHV RI VHSDUDWLRQ RI SRZHUV DQG FKHFNV DQG EDODQFHV WKDW WKH &RQVWLWXWLRQ EXLOW LQWR WKHEXGJHWDU\SURFHVV

7KH'$3YLRODWHVWKHSURKLELWLRQDJDLQVWWKHWUDQVIHURIDSSURSULDWLRQVDWKHSRZHUWRDXJPHQWLVDYHU\QDUURZH[FHSWLRQWRWKHJHQHUDOSURKLELWLRQDJDLQVWWKHWUDQVIHURIDSSURSULDWLRQV

6HFWLRQ $UWLFOH 9, RI WKH &RQVWLWXWLRQ SURKLELWV WKH HQDFWPHQW RI DQ\ ODZ DXWKRUL]LQJ WKH WUDQVIHU RIDSSURSULDWLRQV

1R ODZ VKDOO EH SDVVHG DXWKRUL]LQJ DQ\ WUDQVIHU RI DSSURSULDWLRQV KRZHYHU WKH 3UHVLGHQW WKH 3UHVLGHQW RI WKH6HQDWH WKH 6SHDNHU RI WKH +RXVH RI 5HSUHVHQWDWLYHV WKH &KLHI -XVWLFH RI WKH 6XSUHPH &RXUW DQG WKH KHDGV RI&RQVWLWXWLRQDO&RPPLVVLRQVPD\E\ODZEHDXWKRUL]HGWRDXJPHQWDQ\LWHPLQWKHJHQHUDODSSURSULDWLRQVODZIRUWKHLUUHVSHFWLYH RIILFHV IURP VDYLQJV LQ RWKHU LWHPV RI WKHLU UHVSHFWLYH DSSURSULDWLRQV >LWDOLFV HPSKDVLV DQG XQGHUVFRUHRXUV@

7KLVJHQHUDOSURKLELWLRQDJDLQVWWKHWUDQVIHURIIXQGVLVUHODWHGWRDQGVXSSRUWVWKHFRQVWLWXWLRQDOUXOHWKDW1RPRQH\VKDOOEHSDLGRXWRIWKH7UHDVXU\H[FHSWLQSXUVXDQFHRIDQDSSURSULDWLRQPDGHE\ODZ3XEOLFIXQGVFDQQRWEHXVHGIRUSURMHFWVDQGSURJUDPVRWKHUWKDQZKDWWKH\KDYHEHHQLQWHQGHGIRUDVH[SUHVVHGLQDSSURSULDWLRQVPDGHE\ODZ/LNHZLVHDSSURSULDWHGIXQGVFDQQRWWKURXJKWUDQVIHUVEHZLWKKHOGIURPWKHXVHIRUZKLFKWKH\KDYHEHHQLQWHQGHG

7KHVHWZRSURYLVLRQVLQWDQGHPVHHNWRHQVXUHWKDWWKHSRZHURIDSSURSULDWLRQUHPDLQVZLWKWKH/HJLVODWXUH8QGHUWKHGRFWULQHRI VHSDUDWLRQRI SRZHUV WKHSRZHU RI DSSURSULDWLRQ IDOOVZLWKLQ WKHGRPDLQRI WKH OHJLVODWLYHEUDQFKRIJRYHUQPHQWZKDWLWHPVRIH[SHQGLWXUHZLOOEHJLYHQSULRULW\LQDOLPLWHGEXGJHWDQGIRUZKDWDPRXQWVDQGWKHSXEOLFSXUSRVHVWKH\VHHNWRVHUYHDUHPDWWHUVZLWKLQWKHGLVFUHWLRQRIWKHUHSUHVHQWDWLYHVRIWKHSHRSOHWRGHWHUPLQH

%XWUHFRJQL]LQJWKDWXQIRUHVHHDEOHHYHQWVPD\WUDQVSLUHLQWKHDFWXDOLPSOHPHQWDWLRQRIWKHEXGJHWWKH&RQVWLWXWLRQDOORZHGDQDUURZH[FHSWLRQWR$UWLFOH9,6HFWLRQVJHQHUDOSURKLELWLRQLWDOORZHGDWUDQVIHURIIXQGVDOORFDWHGIRU



DSDUWLFXODUDSSURSULDWLRQRQFHWKHVHKDYHEHFRPHVDYLQJVWRDXJPHQWLWHPVLQRWKHUDSSURSULDWLRQVZLWKLQWKHVDPHEUDQFKRIJRYHUQPHQW

7RHQVXUHWKDWWKLVH[FHSWLRQGRHVQRWEHFRPHWKHUXOHWKH&RQVWLWXWLRQSURYLGHGDFDWFKDWUDQVIHURIDSSURSULDWLRQVPD\ RQO\ EH H[HUFLVHG LI &RQJUHVV DXWKRUL]HV LW E\ ODZ 7KH DXWKRULW\ WR OHJLVODWH DQ H[FHSWLRQ KRZHYHU LV QRW DSOHQDU\LWPXVWEHH[HUFLVHGZLWKLQWKHSDUDPHWHUVDQGFRQGLWLRQVVHWE\WKH&RQVWLWXWLRQLWVHOIDVIROORZV

)LUVWWKHWUDQVIHUPD\EHDOORZHGRQO\ZKHQDSSURSULDWLRQVKDYHEHFRPHVDYLQJV

6HFRQG WKH WUDQVIHUPD\ EH H[HUFLVHG RQO\ E\ VSHFLILF SXEOLF RIILFLDOV LH E\ WKH 3UHVLGHQW WKH 3UHVLGHQW RI WKH6HQDWH WKH 6SHDNHU RI WKH +RXVH RI 5HSUHVHQWDWLYHV WKH &KLHI -XVWLFH RI WKH 6XSUHPH &RXUW DQG WKH KHDGV RI&RQVWLWXWLRQDO&RPPLVVLRQV

7KLUGWKHVHVDYLQJVPD\RQO\EHXVHGWRDXJPHQWDQGRQO\H[LVWLQJLWHPVLQWKH*$$FDQEHDXJPHQWHGDQG

)RXUWKWKHVHLWHPVPXVWEHIRXQGZLWKLQHDFKEUDQFKRIJRYHUQPHQWVUHVSHFWLYHDSSURSULDWLRQV

9LHZHGLQWKLVPDQQHULWDWRQFHEHFRPHVFOHDUWKDWWKHDXWKRULW\WRWUDQVIHUIXQGVWKDW&RQJUHVVPD\JUDQWE\ODZFDQRQO\EHDYHU\QDUURZH[FHSWLRQWRWKHJHQHUDOSURKLELWLRQDJDLQVWWKHWUDQVIHURIIXQGVDOOWKHUHTXLVLWHVPXVWIDOOLQSODFHEHIRUHDQ\WUDQVIHURIIXQGVDOORWWHGLQWKH*$$PD\EHPDGH

6LJQLILFDQWO\WKLVUHDGLQJRIKRZWKHUHTXLVLWHVIRUWKHDSSOLFDWLRQRI6HFWLRQDQGWKHWUHDWPHQWRILWVH[FHSWLRQLVQRWDWDO

3. araullo v. aquino iii

Documents