1HJOLJHQFH(OHPHQWV

,QMXU\
1HJOLJHQFH3ULPD)DFLH&DVHSJ
3KDVVXIIHUHGDQ,1-85<
'RZHGD'87<WRDFODVVRISHUVRQVLQFOXGLQJ3WRWDNHFDUHQRWWRFDXVHDQLQMXU\RI
WKHNLQGVXIIHUHGE\3
'%5($&+('WKDWGXW\RIFDUH
'¶VEUHDFKZDVDQ$&78$/DQG352;,0$7(&$86(RI3¶VLQMXU\

3ODLQWLIIKDVWZREXUGHQV
%XUGHQRI3URGXFWLRQ
%XUGHQRI3HUVXDVLRQ

7\SHVRI,QMXU\
3K\VLFDO+DUP%RGLO\KDUPGDPDJHRISURSHUW\
/RVVRI:HDOWK
(PRWLRQDO'LVWUHVV

1HJOLJHQFH'XW\
'XW\(OHPHQW5HTXLUHV
3WRHVWDEOLVKWKDW'RZHGKHURUDFODVVRISHUVRQVOLNHKHUDQREOLJDWLRQWRWDNH
FDUHQRWWRFDXVHWKHW\SHRILQMXU\VKHKDVVXIIHUHG

8QTXDOLILHG'XW\
8QTXDOLILHG*HQHUDOGXW\LPSRVHGRQDOOSHUVRQVQRWWRSODFHRWKHUVDWIRUHVHHDEOHULVNRIKDUP
WKURXJKFRQGXFW

*HQHUDO'XW\&DVHV

+HDYHQY3HQGHU(QJSJ

58/(VLWXDWLRQVJLYHULVHWRXQTXDOLILHGGXW\WRWDNHUHDVRQDEOHFDUHDJDLQVW
FDXVLQJSK\VLFDOKDUPWRRWKHUV
7(67)25)25(6(($%,/,7<:RXOGDSHUVRQRIRUGLQDU\VHQVHUHFRJQL]HWKDWLI
VKHSXUVXHGWKHFRQGXFWDWLVVXHZLWKRXWYLJLODQFHIRUWKHSK\VLFDOZHOOEHLQJRIRWKHUVKHU
FRQGXFWZRXOGSRVHDPHDQLQJIXOULVNRISK\VLFDOLQMXU\WRSHUVRQVLQWKHSRVLWLRQRIWKH3"

:LQWHUERWWRPY:ULJKW(QJSJ

)$&76:ULJKWEXLOWPDLQWDLQHGFRDFKHVj&RQWUDFWZLWK3¶VHPSOR\HU3RVWPDVWHU
*HQHUDO3LQMXUHGWROHJZKHQZKHHORQFRDFKGULYLQJFROODSVHGDQGFDXVHGFRDFKWR
FUDVK
58/(35,9,7<58/(DSODLQWLIIFDQQRWEULQJWRUWFODLPVDJDLQVWDGHIHQGDQWIRU
QRQIHDVDQFHIDLOXUHWRSHUIRUPDQDFWUHTXLUHGE\ODZWKDWUHVXOWHGIURPDFRQWUDFWZKLFK
SODLQWLIIZDVQRWSULY\WR

7KRPDVY:LQFKHVWHU1<SJ

)$&763SXUFKDVHGSRLVRQLQFRUUHFWO\ODEHOHGE\'DVPHGLFLQH
58/((VWDEOLVKHVLPPLQHQWGDQJHUDVDQH[FHSWLRQWRWKHSULYLW\UXOH'¶VGXW\DURVH
RXWRIWKHQDWXUHRIEXVLQHVVDQGWKHGDQJHUWRRWKHUV
D([FHSWLRQWR:LQWHUERWWRP

0DF3KHUVRQY%XLFN0RWRU&R1<SJ

)$&763SXUFKDVHGDFDUIURP'DQGLQMXUHGZKHQFDUZKHHOFROODSVHGEHFDXVH
PDGHRIGHIHFWLYHZRRG
58/(3ULYLW\RIFRQWUDFWLVQRWUHTXLUHGIRUDVHOOHUWRRZHDGXW\RIFDUHZKHQLWLVIRUHVHHDEOH
WKDWWKHRULJLQDOSXUFKDVHULVQRWWKHILQDOEX\HU
D,JQRUHV:LQWHUERWWRP
E([SDQGV7KRPDVE\UHGHILQLQJGXW\RIPDQXIDFWXUHU
F(VWDEOLVKHVTXDOLILHGGXW\RIPDQXIDFWXUHUjSUHFHGHQWIRUVWULFWOLDELOLW\

0XVVLYDQGY'DYLG2KLRSJ

)$&763FRQWUDFWHGDQ67,IURPZLIHZKRZDVLQIHFWHGE\KHUORYHU'RZHV3D
GXW\RIFDUH
58/('XW\RIUHDVRQDEOHFDUHLVRZHGWRDIRUHVHHDEOHWKLUGSDUW\

4XDOLILHG'XWLHVRI&DUHSJ
4XDOLILHG'XW\*HQHUDOO\\RXDUHQRWUHTXLUHGWRSUHYHQWDQRWKHUSHUVRQIURPEHLQJKDUPHG
1RGXW\WRZDUQUHVFXHH[FHSWLQVSHFLILFFLUFXPVWDQFHV
([LVWVZKHQ'DFWHGFDUHOHVVO\VRDVWRLQIOLFWSK\VLFDOKDUPRQDQRWKHU
7KUHHFDWHJRULHV
D$IILUPDWLYH'XW\RUGXW\WRUHVFXH
E3UHPLVHV/LDELOLW\
F3XUH(FRQRPLF/RVV

$IILUPDWLYH'XW\RU'XW\WR5HVFXHSJ
'XQUHDVRQDEO\IDLOHGWRSURYLGHDVVLVWDQFHRUSURWHFWWR3*HQHUDOO\QRGXW\WR
SURWHFWRUUHVFXHXQGHUFRPPRQODZH[FHSWXQGHUFHUWDLQFLUFXPVWDQFHV

1RQIHDVDQFH 0LVIHDVDQFH
1RQIHDVDQFHGRLQJQRWKLQJ
D'(),1(DIDLOXUHWRDFWWKDWUHVXOWVLQKDUPWRDQRWKHUSDUW\±)DLOXUHWRDFW
E$33/,&$7,21'IDLOHGWRUHQGHUDVVLVWDQFHWR3LQVLWXDWLRQLQZKLFKDVVLVWDQFH
FRXOGKDYHSUHYHQWHG3¶VLQMXU\
F(;&(37,216SHFLDOFLUFXPVWDQFHV
0LVIHDVDQFHZURQJIXODFW
D'(),1($QDFWWKDWLVOHJDOEXWSHUIRUPHGLPSURSHUO\±$FWLQJFDUHOHVVO\
E$33/,&$7,21*HQHUDOGXW\WRWDNHFDUHQRWWRFDXVHIRUHVHHDEOHSK\VLFDOLQMXU\RU
SURSHUW\GDPDJH

([FHSWLRQVWR1R'XW\5XOH
&UHDWRURI5LVN
D:KHQDFWRUNQRZVRUVKRXOGNQRZKHKDVE\KLVRZQFRQGXFWFDXVHG3WREH
SK\VLFDOO\LQMXUHGDQGDWLPPLQHQWULVNRIIXUWKHULQMXU\
E$FWRUKDVGXW\WRPDNHUHDVRQDEOHHIIRUWVWRSUHYHQWYLFWLPIURPVXIIHULQJKDUP25
SUHYHQWULVNRIKDUPIURPEHLQJUHDOL]HG
F&$6(62VWHUOLQGY+LOO

9ROXQWDU\5HVFXH
D'KDVYROXQWHHUHGWRSURWHFWDQRWKHUIURPSK\VLFDOLQMXU\RUSURSHUW\GDPDJHRUWR
UHVFXHIURPDQRWKHUSK\VLFDOSHULO
E7KHGXW\DULVHVLIRQHYROXQWHHUVWRSURWHFWRUUHVFXHVRPHRQHDQGPD\DULVHIURPD
FRQWUDFWXDOREOLJDWLRQRULQIRUPDODFWLRQV
F2QFHWKHUHVFXHLVXQGHUWDNHQWKHUHLVDGXW\XQGHUFRPPRQODZWRSHUIRUPWKH
UHVFXHZLWKUHDVRQDEOHFDUH

6SHFLDO5HODWLRQVKLS
D,IWKHUHLVDVSHFLDOUHODWLRQVKLSEHWZHHQ3DQG'
E,QFOXGHVVFKRRO±VWXGHQWHPSOR\HU±HPSOR\HHKRVSLWDO±SDWLHQWSULVRQ±SULVRQHU
FRPPRQFDUULHU±SDVVHQJHUEXVLQHVV±FXVWRPHU
F&$6(6%DNHUY)HQQHPDQ %URZQ3URSHUWLHV//&

$IILUPDWLYH'XW\&DVHV

2VWHUOLQGY+LOO0DVVSJ

)$&767ZRGUXQNPHQUHQWFDQRHIURP'&DQRHWLSVRYHUDQGGUXQNPDQGLHV'
IDLOVWRUHVSRQGWR3¶VFULHVIRUKHOS
58/(,I'GLGQRWFDXVHWKHVLWXDWLRQKHKDVQRGXW\WRUHVFXHUHDOPRIRPLVVLRQ
%DNHUY)HQQHPDQ %URZQ3URSHUWLHV//&,QGSJ
)$&763NQRFNHGXQFRQVFLRXVORVHVWHHWKDQGLQMXUHVQHFNZKLOHDW7DFR%HOODQG
'IDLOHGWRSURYLGHDVVLVWDQFH
58/($VSHFLDOUHODWLRQVKLSVXFKDVDEXVLQHVVRZQHUDQGSDWURQFUHDWHVDGXW\WRUHVFXH
HYHQZKHQWKH'GLGQRWFDXVHWKHKDUPDQG'ZLOOEHOLDEOHIRUDJJUDYDWLRQRIWKHLULQMXU\&RXUWVORRN
WR3XEOLF3ROLF\)RUHVHHDELOLW\RIKDUPDQG5HODWLRQVKLSRIWKHSDUWLHV

3UHPLVH/LDELOLW\SJ
)LYH.H\,GHDV
),5677KLQJWR'HWHUPLQH
D&ODLPIRUFDUHOHVVQHVVLQYROYHVDQXQVDIHSUHPLVHWKDWUHVXOWVLQSK\VLFDOKDUPVWRD
SDUWLFXODUFODVV
6(&21',GHQWLW\RI&ODVV
D,QYLWHH(QWHUVZLWKH[SUHVVHGRULPSOLHGLQYLWDWLRQE\RZQHUIRUPXWXDODGYDQWDJH
E/LFHQVHH(QWHUVIRURZQFRQYHQLHQFHSOHDVXUHRIEHQHILWSXUVXDQWWROLFHQVHRU
LPSOLHGSHUPLVVLRQRIRZQHU
F7UHVSDVVHU(QWHUVZLWKRXWOLFHQVHRUULJKW
7+,5',GHQWLI\'XW\
D,QYLWHH'XW\WRSURYLGHUHDVRQDEO\VDIHSUHPLVHIRURUGLQDU\XVH$1'ZKHQQRW
UHDVRQDEO\VDIHWRZDUQRUGLVFORVHQRQREYLRXVGDQJHUVZKHQSRVVHVVRUNQRZVVKRXOG
NQRZRISUHVHQFH
E/LFHQVHH'XW\WRZDUQRUGLVFORVHQRQREYLRXVGDQJHUVZKHQSRVVHVVRU
NQRZVVKRXOGNQRZRISUHVHQFH
F7UHVSDVVHU1RGXW\RIFDUHH[FHSWLRQPLQRUV
)2857+0DQ\MXULVGLFWLRQVDEDQGRQGLVWLQFWLRQEHWZHHQ,QYLWHHDQG
/LFHQVHH
),)7+:+$7:$67+(),)7+.(<32,17"

3UHPLVH/LDELOLW\&DVHV

/HIIOHUY6KDUS0LVVSJ

 )$&760DQZKRLVWUHVSDVVLQJIDOOVWKURXJKURRI
 58/(1RGXW\WRSURWHFWWUHVSDVVHUVIURPKDUPH[FHSWWKDWLVLQWHQWLRQDORU
UHFNOHVV

3XUH(FRQRPLF/RVVSJ
7KUHH.H\3RLQWV
 ),567(FRQRPLFORVVFDQEHUHFRYHUHGLISDUDVLWLFRQSHUVRQDOLQMXU\
 6(&21'3XUHHFRQRPLFORVVDULVHVZKHQWKHUHLVQRLQMXU\WRSHUVRQDOSURSHUW\
 7+,5'*HQHUDOO\QRGXW\WRWDNHFDUHWRDYRLGFDXVLQJHFRQRPLFORVV0DMRULW\
5XOH

([FHSWLRQVWR5XOH0LQRULW\5XOH
 6SHFLDO5HODWLRQVKLSVHJ$FFRXQWDQWV¶OLDELOLW\
 3DUDVLWLFWRERGLO\LQMXU\
 3DUDVLWLFWRSURSHUW\LQMXU\
 +LJKIRUHVHHDELOLW\

3XUH(FRQRPLF/RVV1R5HFRYHU\
 3XEOLF3ROLF\7RRPXFKOLDELOLW\jWRRPDQ\SRWHQWLDOSODLQWLIIV
 )RUHVHHDELOLW\58/(0RUHIRUHVHHDEOHHFRQRPLFORVVjPRUHOLDELOLW\LPSRVHG
DQGUHFRYHU\DOORZHG
 6SHFLDO5HODWLRQVKLS([FHSWLRQ3FDQUHFRYHULIWKHUHLVDVSHFLDOUHODWLRQVKLSZLWK
'HYHQLI3DQG'DUHQRWLQFRQWUDFWXDOSULYLW\

3XUH(FRQRPLF/RVV&DVHV

$LNHQVY'HERZ:9DSJ

)$&76WUXFNGULYHUFDXVHGDFFLGHQWRQEULGJHWKDWLPSDFWHGEXVLQHVVDWDQ
(FRQRORGJH
58/($3ODLQWLIIZKRLQFXUVSXUHHFRQRPLFORVVIURPDQLQWHUUXSWLRQLQ
FRPPHUFHFDXVHGE\DQRWKHU¶VQHJOLJHQFHPD\QRWUHFRYHUGDPDJHVDEVHQWVRPH
RWKHUH[FHSWLRQSK\VLFDOKDUPSURSHUW\GHVWUXFWLRQFRQWUDFWVSHFLDO
UHODWLRQVKLSVIRUHVHHDELOLW\GXW\

1HJOLJHQFH%UHDFK
0DLQ3RLQWVRI%UHDFK
'LG'FRPSO\ZLWKWKHVWDQGDUGOHJDOO\RZHGWRWKH3
*HQHUDOO\UHDVRQDEOHSHUVRQVWDQGDUGXQOHVVH[FHSWLRQDOFRQGLWLRQ
%UHDFKLVDTXHVWLRQRIIDFWIRUWKHMXU\0DUWLQ
6WDWXWHVFDQUDLVHVWDQGDUGRIFDUH3LQJDUR
%UHDFKLVFRQWLQJHQWXSRQEHLQJKHOGWRWKHSURSHUVWDQGDUGRIFDUH0DUWLQ
5HDVRQDEOHSHUVRQVWDQGDUGPD\EHDGMXVWHGWRUHSUHVHQWFHUWDLQSHUVRQV¶FDSDFLW\
D&KLOGUHQSK\VLFDOO\GLVDEOHGSURIHVVLRQDOV

6WDQGDUGRI&DUH
$GXOWV
 D5HDVRQDEOHSHUVRQXQGHUVDPHFLUFXPVWDQFHVDV'2EMHFWLYH0\HUV
0HQORYH&DPSEHOO
&KLOGUHQ
D5HDVRQDEOHVWDQGDUGRIFDUHIRUFKLOGUHQRIOLNHDJHH[SHULHQFHDQG
LQWHOOLJHQFH$SSHOKDQV
E(;&(37,210LQRUVZKRHQJDJHLQDGXOWDFWLYLWLHV
F67$78(7HQGHU<HDUV'RFWULQH&KLOGXQGHU\HDUVROGQRWOLDEOHIRU
DFWLRQV
3DUHQWV
D1RYLFDULRXVO\OLDELOLW\
E'LUHFW1HJOLJHQFH$SSHOKDQV
L$ZDUHRIVSHFLILFLQVWDQFHVRISULRUFRQGXFWVXIILFLHQWWR
SXWWKHPRQQRWLFHWKDWDFWFRPSODLQHGRIZDVOLNHO\WRRFFXU$1'
LL3DUHQWVKDGRSSRUWXQLW\WRFRQWUROWKHFKLOG
F1HJOLJHQWHQWUXVWPHQW
L3DUHQWVFDUHOHVVO\JLYHFKLOGDFFHVVWRGDQJHURXV
LQVWUXPHQWDOLW\DQGFKLOGQRWHTXLSSHGWRKDQGOHHJJXQFDU
3K\VLFDOO\'LVDEOHG
D5HDVRQDEOHSHUVRQZLWKVDPHDELOLWLHV
0HQWDOO\'LVDEOHG
D&RXUWVUDUHO\DGMXVWWKHVWDQGDUGIRUPHQWDOGLVDELOLW\
3URIHVVLRQDOV
D6WDQGDUGLVVRPHWLPHVDGMXVWHGWRUHIOHFWWKHFRPSHWHQFHRIFHUWDLQ
SURIHVVLRQDOVDFWLQJZLWKLQWKHUHDOPRIWKHLUSURIHVVLRQDOFRPSHWHQFH
0H\HUV
L0HGLFDO0DOSUDFWLFH
0HGLFDO,QGXVWU\VWDQGDUGLVWKHOHJDOO\UHFRJQL]HG
VWDQGDUG-RKQVRQ
0XVWSURYLGHLQIRUPHGFRQVHQWE\GLVFORVLQJDOOPDWHULDO
ULVNVRIWUHDWPHQW/DUJH\
&RPPRQ&DUULHUV
D+LJKHUGHJUHHRIFDUHEHFDXVHWKH\PXVWHQVXUHWKHVDIHW\RI
SDVVHQJHUVDQGFDUJR-RQHV
(PSOR\HUV
D9LFDULRXVO\OLDEOHIRUQHJOLJHQFHRIWKHLUHPSOR\HHV,QGLUHFWOLDELOLW\
WKDWGRHVQRWUHTXLUHQHJOLJHQFHE\WKHHPSOR\HU:DOWHU

2UGLQDU\6WDQGDUGRI&DUH&DVHV
0\HUVY+HULWDJH(QWHUV,QF,OO$SSSJ
)$&76HOGHUO\ZRPDQGURSSHGZKLOHEHLQJPRYHGIURPZKHHOFKDLUWREHGLQQXUVLQJ
KRPH
58/(
D7KHVWDQGDUGRIFDUHRZHGWR3ZLOOGHWHUPLQHLI'KDVEUHDFKHG
E6WDQGDUGRIFDUHGHWHUPLQHGE\MXU\¶VMXGJPHQWDQGDQDO\VLVRIHYLGHQFH
F2UGLQDU\6WDQGDUGRI&DUHUHDVRQDEOHFDUHIXO SUXGHQWSHUVRQZRXOGGR
G3URIHVVLRQDO6WDQGDUGRI&DUHDSSOLHVRQO\WR'¶VZKRFDQEHUHJDUGHGDV
SURIHVVLRQDOVLHKDYHUHFHLYHGSURIHVVLRQDOWUDLQLQJ

0DUWLQY(YDQV3DSJ

)$&760DQSLQQHGEHWZHHQFDUDQGWUXFN
58/(%UHDFKLVDTXHVWLRQRIIDFWIRUWKHMXU\

+HLJKWHQHG/HYHORI&DUH&DVHV

3LQJDURY5RVVL1-6XSHU$SS'LYSJ

)$&760HWHUUHDGHUELWE\GRJLQMXULVGLFWLRQZLWKVWULFWOLDELOLW\GRJELWHVWDWXWH
58/(6WULFWOLDELOLW\VWDWXWHFDQUDLVHOHYHORIFDUHEH\RQGWKHUHDVRQDEOHSHUVRQ
VWDQGDUG

-RQHVY3RUW$XWKRULW\RI$OOHJKHQ\&RXQW\3D&RPPSJ

)$&760DQLQMXUHVDUPZKHQEXVPRYHVZKLOHKHLVERDUGLQJ
58/(&RPPRQFDUULHUVDUHKHOGWRDKHLJKWHQHGVWDQGDUGRIFDUHWRWKHLU
SDVVHQJHUVGXHWRWKHLUVSHFLDOUHODWLRQVKLS

-XGJHV'HFLGHWKH%UHDFK

&DPSEHOOY.RYLFK0LFK$SSSJ

)$&76:RPDQVWUXFNLQH\HE\XQLGHQWLILDEOHREMHFWHMHFWHGIURPODZQPRZHU
58/(
D-XGJHGHWHUPLQHVEUHDFKZKHQDQ\UHDVRQDEOHMXU\ZRXOGFRPHWRVDPHFRQFOXVLRQ
DQGWKHQDWXUHRIWKHDFWLYLW\LVQRWGHSHQGHQWRQH[SHUWV
E2UGLQDU\SHRSOHRQO\QHHGWRVKRZDQRUGLQDU\VWDQGDUGRIFDUHZKHQGRLQJRUGLQDU\
WKLQJVOLNHPRZLQJDODZQ

$GDPVY%XOORFN1<SJ

)$&76%R\VZLQJLQJDZLUHZDVVKRFNHGDQGEXUQHGZKHQZLUHFDPHLQFRQWDFW
ZLWKDERYHJURXQGWUROOH\ZLUH
58/(
D:KHQUHDVRQDEOHFDUHLQGXVWU\FXVWRPPHWDQGSUHFDXWLRQVDUHXVHGFRPSDQLHV
FDQQRWEHIRXQGQHJOLJHQWIRUDFFLGHQWVWKDWRFFXULQZKLFKRUGLQDU\FDXWLRQFRXOGKDYHQR
ZD\SUHGLFWHG
E:KHQMXU\FRXOGILQGQRRWKHUZD\MXGJHFDQGHFLGHEUHDFKRQVXPPDU\MXGJPHQW
DEVHQWDQLVVXHRIPDWHULDOIDFW

5HDVRQDEOH3HUVRQ
6WDQGDUGLVREMHFWLYHUDWKHUWKDQVXEMHFWLYH
2EMHFWLYH:KDWZRXOGDQRUGLQDU\SUXGHQWSHUVRQGR"*HQHUDOVWDQGDUGRIFDUHWKDW
LVFRQGXFWEDVHGDQGJHQHUDOL]HGZLWKQRQLQGLYLGXDOL]HGQRUPWRVHWWKHVWDQGDUG
6XEMHFWLYH'LGWKHLQGLYLGXDOSHUIRUPWRWKHEHVWRIKLVDELOLWLHV"*RRGIDLWKVWDQGDUG
YDULDEOHE\SHUVRQZRXOGEHLQFRQVLVWHQW

5HDVRQDEOH3HUVRQ2EMHFWLYH6WDQGDUG&DVHV

9DXJKDQY0HQORYH&3SJ

)$&760DQIDLOVWRUHORFDWHKD\DQGILUHVWDUWV
58/(7KHVWDQGDUGRIFDUHLVDQREMHFWLYHRQH2QHKDVEHKDYHGQHJOLJHQWO\LIKH
KDVDFWHGLQDZD\FRQWUDU\WRKRZDUHDVRQDEO\SUXGHQWSHUVRQZRXOGKDYHDFWHGXQGHU
VLPLODUFLUFXPVWDQFHV

$SSHOKDQVY0F)DOO,OO$SSSJ

)$&76ILYH\HDUROGKLWV\RZRPDQZLWKKLVELNH
58/(
D&KLOGUHQDUHKHOGWRDVWDQGDUGRIDUHDVRQDEOHSHUVRQRIOLNHDJHRU7HQGHU<HDUV
'RFWULQHDQ\FKLOGXQGHU\HDUVROGQRWOLDEOHIRUDFWLRQV
E3DUHQWVFDQEHOLDEOHIRUQHJOLJHQWVXSHUYLVLRQ
L 1RWLFHRIGDQJHURXVFRQGXFW
LL +DYHRSSRUWXQLW\WRSUHYHQW

,QGXVWU\DQG3URIHVVLRQDO&XVWRP
0DLQ3RLQWV
&RXUWVZLOOFRQVLGHUFXVWRPEXWLWLVQRWUHTXLUHGWRWDNHLWLQWRFRQVLGHUDWLRQZKHQ
GHWHUPLQLQJGXW\7-+RRSHU
7-+RRSHU58/(&XVWRPRULQGXVWU\VWDQGDUGQRWRUGLQDU\FDUHjFDQEHKHOGWRD
KLJKHUVWDQGDUG7-+RRSHU
6WDQGDUGRI&DUHIRUPHGLFDOSURFHGXUHVLVWKHVDPHDVWKHLQGXVWU\VWDQGDUGDV
HVWDEOLVKHGE\H[SHUWWHVWLPRQ\jZKDWLVFXVWRPDU\LVUHDVRQDEOH-RKQVRQ
D(;&(37,21VWDQGDUGIRULQIRUPHGFRQVHQWLVWKDWRIDUHDVRQDEOHSDWLHQW'RFWRUV
PXVWGLVFORVHDOOPDWHULDOULVNVRIWKHWUHDWPHQW/DUJH\
,QGXVWU\DQG3URIHVVLRQDO&XVWRP&DVHV

7KH7-+RRSHU86SJ

)$&767ZRWXJERDWVJRWORVWLQDVWRUPVKLSVDQNEHFDXVHZLWKRXWUDGLRDQGORVW
FDUJR
58/(&RXUWVPD\ILQGWKDWLQGXVWU\FXVWRPLVQRWDKLJKHQRXJKVWDQGDUGDQG
LPSRVHDKLJKHUVWDQGDUGWKDQWKHLQGXVWU\

-RKQVRQY5LYHUGDOH$QHVWKHVLD$VVRFLDWHV*DSJ

)$&76'RFWRUIDLOHGWRSUHR[\JHQDWH3DQG3VXIIHUHGDUHDFWLRQWRWKHDQHVWKHVLD
ZKLFKUHVXOWHGLQPDVVLYHEUDLQWUDXPDDQGGHDWK
58/((;&(37,21727-+223(558/(
D,QPHGLFDOPDOSUDFWLFHWKHVWDQGDUGLVGHWHUPLQHGE\WKHLQGXVWU\RUFXVWRPDV
HVWDEOLVKHGE\H[SHUWWHVWLPRQ\

&RQGUDY$WODQWD2UWKRSDHGLF*URXS*DSJ

)$&76:RPDQGLDJQRVHGZLWKERQHPDUURZGLVHDVHDIWHUDGYHUVHUHDFWLRQWR
DQWLFRQYXOVLYHGUXJSURVFULEHGE\GRFWRU
58/(83+2/'6-2+1621
D'RFWRUVVWDQGDUGRIFDUHGHWHUPLQHGE\LQGXVWU\VWDQGDUG
E([SHUWZLWQHVVHVSHUVRQDOSUDFWLFHVDUHDGPLVVLEOHDVHYLGHQFHDQGWRLPSHDFK
H[SHUW¶VRSLQLRQVUHJDUGLQJDSSOLFDEOHVWDQGDUGRIFDUH

/DUJH\Y5RWKPDQ1-SJ

)$&76'SHUIRUPHGDELRSV\DQGUHPRYHG3¶VO\PSKQRGHVZKLFKVKHKDGQR
FRQVHQWHGWR'GLGQRWSURYLGH3ZLWKDOOSRVVLEOHHIIHFWVRIVXUJHU\
58/(
D,QIRUPHGFRQVHQWFDQEHKHOGWRDKLJKHUVWDQGDUGWKDQLQGXVWU\WRWKDWRIDQ³RUGLQDU\
SUXGHQWSDWLHQW´
E&$17(5%85<7(67
L 'XW\RISK\VLFLDQWRLQIRUPSDWLHQWRIDOOPDWHULDOULVNVRI
DSDUWLFXODUPHGLFDOWUHDWPHQW
LL 0DWHULDO5LVNVZKHQD³UHDVRQDEOHSDWLHQW´ZRXOGOLNHO\
DWWDFKVLJQLILFDQFHWRWKHULVNRUFOXVWHURIULVNV

5HDVRQDEOHQHVV%DODQFLQJDQG&RVW%HQHILW$QDO\VLV
0DLQ3RLQWV
6RPHWLPHVDQHFRQRPLFDQDO\VLVLVQHFHVVDU\WRGHWHUPLQHWKHUHDVRQDEOHQHVVRI
'¶VDFWLRQVRUDSSURSULDWHGXW\RZHG
*RRGIRUHFRQRPLFORVVEXWQRWQHFHVVDU\IRURWKHUGDPDJHVHJSHRSOH¶VOLYHV
+DQG)RUPXOD
D,I%EXUGHQLVOHVVWKDQWKH3SUREDELOLW\WLPHV/ORVVWKHUHLVOLDELOLW\
E,I%EXUGHQLVPRUHWKDQ3SUREDELOLW\WLPHV/ORVVWKHUHLVQROLDELOLW\
F%3[/ /LDELOLW\EXW%!3[/ 1R/LDELOLW\

5HDVRQDEOHQHVV%DODQFLQJDQG&RVW%HQHILW$QDO\VLV&DVHV

8QLWHG6WDWHVY&DUUROO7RZLQJ&RG&LUSJ

)$&76%DUJHVGHWDFKIURPSLHUDQG$QQD&KLWVDWDQNHUDQGVLQNVZLWK86FDUJR
DERDUG7KH$QQD&¶VEDUJHHZDVQRWRQERDUG&RXUWPXVWGHFLGHLI$QQD&ZDV
FRPSDUDWLYHO\DWIDXOWj&RPSDUDWLYH1HJOLJHQFHDQG+DQG)RUPXOD
58/(
D:KHUHWKHFRVWGRHVQRWRXWZHLJKWKHEHQHILWVRIDSUHFDXWLRQWKHSDUW\ZLOOEHKHOG
OLDEOH+DQG)RUPXODIRUFRVWEHQHILWDQDO\VLVRIDQGGLVWULEXWLRQRIOLDELOLW\
E2ZQHU¶VGXW\WRSUHYHQWDJDLQVWUHVXOWLQJLQMXULHVLVIXQFWLRQRIWKUHHYDULDEOHV
L 7KHSUREDELOLW\RIWKHLQFLGHQWLQTXHVWLRQ
LL *UDYLW\RIWKHUHVXOWLQJLQMXU\
LLL %XUGHQRIDGHTXDWHSUHFDXWLRQV

5KRGH,VODQG+RVS7UXVW1DW¶O%DQNY=DSDWD&RUSVW&LUSJ

)$&76(PSOR\HHVWROHDQGIRUJHGFKHFNV'IROORZVSROLF\RIFDVKLQJFKHFNVEHORZ
ZLWKRXWDVLJQDWXUHFRPSDULVRQ%XONILOLQJPHWKRGLQGXVWU\VWDQGDUG3IDLOHGWR
FKHFNWKHLUEDQNVWDWHPHQWVj3XUHHFRQRPLFORVV6SHFLDOUHODWLRQVKLS6WDWXWRU\
LQWHUSUHWDWLRQ+DQG)RUPXOD
58/(:KHQDGLIIHUHQWPHWKRGZRXOGQRWSUHYHQWPRUHGDPDJHDQGWKHPHWKRG
XVHGLVPRUHFRVWHIIHFWLYHWKHFRXUWZLOOEDODQFHWKHULVNDJDLQVWWKHXWLOLW\WRGHWHUPLQHLI
WKHUHLVDEUHDFK

5HV,SVD/RTXLWXUSJ%XUGHQ6KLIWLQJ

'(),1,7,21$OORZVWKHFRXUWWRSUHVXPHQHJOLJHQFHDQGVKLIWVWKHEXUGHQRISURRI
WRWKH'WRSURYHWKDWKHZDVQRWQHJOLJHQW%U\QH
(/(0(176.RPEDW
D(YHQWGRHVQRWRFFXUZLWKRXWQHJOLJHQFH
E&DXVHE\DQDJHQF\RULQVWUXPHQWDOLW\ZLWKLQWKHH[FOXVLYHFRQWURORI'
F(YHQWLVQRWWKHIDXOWRI3LQDQ\ZD\
38%/,&32/,&<
D6RPHWKLQJVMXVWGRQ¶WKDSSHQZLWKRXWQHJOLJHQFHDQGLWZRXOGEHXQMXVWWRGHQ\3
UHOLHI
E$OORZVIRUMXVWLFHZKHQWKHUHLVDODFNRIHYLGHQFH
F3URFHGXUDOO\DOORZVIRUFLUFXPVWDQWLDOHYLGHQFHZKHUHWKHUHLVQRWSK\VLFDOHYLGHQFH
G&RVWHIIHFWLYH±SUHYHQWVWKHQHHGIRUH[WHQVLYHGLVFRYHU\ZKHQQHJOLJHQFHLVREYLRXV
H'LVVXDGHV'IURPKLGLQJHYLGHQFHE\DOORZLQJIRUQHJOLJHQFHWREHSUHVXPHG

5HV,SVD/RTXLWXU&DVHV

%U\QHY%RDGOH([FKSJ

)$&76%DUUHORIIORXUIHOOIURPZLQGRZRI'¶VVKRSDQGKLW3RQKHDGj5HV,SVD
'RFWULQH&RQGLWLRQV
58/($SODLQWLIIPXVWSHUVXDGHDMXU\WKDWPRUHOLNHO\WKDQQRWWKHKDUPFDXVLQJ
HYHQWGRHVQRWRFFXULQWKHDEVHQFHRIQHJOLJHQFH7KHSODLQWLIIGRHVQRWKDYHWRHOLPLQDWH
DOORWKHUSRVVLEOHFDXVHVIRUWKHKDUPQRUGRHVWKHIDFWWKDWWKHGHIHQGDQWUDLVHVSRVVLEOH
QRQQHJOLJHQWFDXVHVIRUWKHKDUPGHIHDWSODLQWLII¶VHIIRUWWRLQYRNHUHVLSVDORTXLWXU/DWLQ
IRU³WKHWKLQJVSHDNVIRULWVHOI7KHNH\LVWKDWDUHDVRQDEOHMXU\PXVWEHDEOHWRILQGWKDW
WKHOLNHO\FDXVHZDVQHJOLJHQFH

.DPEDWY6W)UDQFLV+RVS1<SJ

)$&763KDGK\VWHUHFWRP\SHUIRUPHGDQGODWHUIRXQGDODSDURWRP\SDGLQVLGHRI
KHUERZOFDXVHGGHDWKj5HV,SVD
58/(
D5HV,SVDFDQEHDSSOLHGWRPHGLFDOPDOSUDFWLFHFDVHVDQGGRHVQRWUHTXLUHWKH3WR
GLVSURYHDOORWKHUSRVVLEOHFDXVHVRILQMXU\
E7+5((&21',7,216
L (YHQWQRWRUGLQDU\RFFXUUHQFHDEVHQWRIQHJOLJHQFH
LL &DXVHGE\DJHQF\ZLWKLQH[FOXVLYHFRQWURORISHUVRQ
LLL 1RWGXHWRYROXQWDU\DFWLRQFRQWULEXWLRQRISHUVRQ
3PXVWSURYHPRUHOLNHO\WKDQQRWLQMXU\FDXVHGE\'¶VQHJOLJHQFH

1HJOLJHQFH&DXVDWLRQ

/LDELOLW\IRU1HJOLJHQFH
 5HTXLUHVWKDWFHUWDLQDFWVKDYHUHVXOWHGLQLQMXULRXVFRQVHTXHQFHVjQRWOLDEOHLI
LQMXU\LVKDSKD]DUG

$FWXDO&DXVH
 *HQHUDOO\$VNVZKHWKHUWKHEUHDFKDFWXDOO\FDXVHGWKHLQMXU\'LGWKHEUHDFK
SK\VLFDOO\FDXVHWKH3¶VLQMXU\"
 4XHVWLRQIRUWKHMXU\
 (YHQLIWKHUHLVDFOHDUEUHDFKRIGXW\LI\RXFDQQRWFRQQHFWWKHEUHDFKWRWKHLQMXU\
WKHUHLVQRDFWXDOFDXVDWLRQ6NLQQHU
 6WDQGDUGRI3URRISUHSRQGHUDQFHRIWKHHYLGHQFH6NLQQHU

7HVWV
%XW)RU7HVW
D,QMXU\ZRXOGQRWKDYHRFFXUUHG³EXWIRU´WKHEUHDFK6NLQQHU
E$FWRU¶VEUHDFKRIGXW\FRXQWVDVFDXVHRILQMXU\RQO\LILQMXU\QRWKDYHRFFXUUHGEXWIRU
WKHEUHDFK
6XEVWDQWLDO)DFWRU7HVW
D:DVWKHUHOHYDQWDFWRU¶VFDUHOHVVQHVVD³VXEVWDQWLDOIDFWRU´LQEULQJLQJDERXWWKH
YLFWLP¶VLQMXU\"
E1RWGHSHQGHQWRQVWDQGDUG
F7ZRJRDOV
L ([SODLQWKHUHVXOWLQDQXQXVXDOVHWRIFDVHVLQYROYLQJ
PXOWLSOHVXIILFLHQWFDXVHV
LL *UDIWLQWRWKHEXWIRUWHVWIRUDFWXDOFDXVDWLRQD
SUR[LPDWHFDXVHUHVWULFWLRQWKDWZRXOGEDUWKHDVVLJQPHQWRIUHVSRQVLELOLW\WRDGHIHQGDQW
ZKRVHFDUHOHVVQHVVIXQFWLRQVDVDWULYLDOLHQRQVXEVWDQWLDOEXWIRUFDXVHRIWKHSODLQWLII¶V
LQMXU\
G0HDQWWRQDUURZWKHFODVVRIEXWIRUFDXVHVWKDWRXJKWWREHUHFRJQL]HGDVEDVLVIRU
OLDELOLW\E\H[FOXGLQJLQVXEVWDQWLDORUWULYLDOFDXVHV
/RVVRI&KDQFH
D8VHGZKHQ³EXWIRU´WHVWIDLOVWRSURYHXOWLPDWHLQMXU\HJGHDWK
E'DPDJHVUHFRYHUDEOHIRUORVVRIRSSRUWXQLW\HYHQLIRSSRUWXQLW\ZDVQRWPRUH
SUREDEOHWKDQXQIDYRUDEOHUHVXOW
F'HQLDORIRSSRUWXQLW\IRUOLYLQJZDVWKHFDXVHRIDFWLRQDQGFODLPVXUYLYHVGHDWK
)DOFRQ
G,QMXU\jORVWFKDQFHWRVXUYLYH

$FWXDO&DXVH&DVHV

6NLQQHUY6TXDUH'&R0LFKSJ

)$&760DQHOHFWURFXWHGE\KRPHPDGHWXPEOLQJPDFKLQH
58/(3¶VFLUFXPVWDQWLDOHYLGHQFHPXVWSURYLGHDUHDVRQDEOHEDVLVIURPZKLFKWR
LQIHUWKH'³SUREDEO\´QRWSRVVLEO\FDXVHGWKH3¶VLQMXU\j%XW)RU7HVW
)DOFRQY0HPRULDO+RVSLWDO0LFKSJ
)$&76:RPDQGLHVRIHPEROLVPDIWHUJLYLQJELUWK'RFWRUIDLOHGWRSURYLGH,9ZKLFK
ZRXOGKDYHLQFUHDVHGFKDQFHRIVXUYLYDOE\jVSHFLDOUHODWLRQVKLS/RVVRIFKDQFH
GRFWULQHFLUFXPVWDQWLDODQGIDFWXDOHYLGHQFH
58/(3GRHVQRWQHHGWRVKRZWKDWULVNRIKDUPZDVOHVVWKDQEXWPXVWLQVWHDG
SURYHWKDWLWLVPRUHSUREDEOHWKDQQRWKDW'¶VQHJOLJHQFHUHVXOWHGLQWKHORVVRIFKDQFHWR
DYRLGKDUP

0XOWLSOH1HFHVVDU\&DXVHV
1HJOLJHQFHRIPXOWLSOH'VLVQHFHVVDU\WRFDXVH3¶VLQMXU\KDUPLVLQGLYLVLEOH
0F'RQDOG
7(67FRXOGWKHDFFLGHQWKDYHKDSSHQHGZLWKRXWWKHLUFRRSHUDWLRQ0F'RQDOG
35,0$5<j%XW)RU7HVWDSSOLHG

0XOWLSOH6XIILFLHQW&DXVHV
1HJOLJHQFHRIDQ\RQHRI'VZRXOGKDYHEHHQVXIILFLHQWWRFDXVH3¶VLQMXU\ZLWKRXWWKH
RWKHUEXWLVQRWQHFHVVDULO\WKHFDXVH$OGULGJH
(DFKFDUHOHVVDFWFRXOGEHDFDXVHRIWKHLQMXU\
,IWZRFDXVHVFRQFXUWREULQJDERXWDQHYHQWDQGHLWKHURIWKHPRSHUDWLQJDORQH
ZRXOGKDYHEHHQVXIILFLHQWWRFDXVHWKHLGHQWLFDOUHVXOWDGLIIHUHQWWHVWWKDQWKH³EXWIRU´WHVW
PXVWEHXVHG7HVWIRUHDFKHYHQWLVWKH³VXEVWDQWLDOIDFWRU´WHVW1HJOLJHQFHPXVWDOVREH
WKHVXEVWDQWLDOIDFWRUDVZHOODVDQDFWXDOIDFWRULQEULQLQJDERXWKDUP
6WHS3URFHVV
D,VWKH'DQLQGHSHQGHQWVXIILFLHQWFDXVH",I\HVWKHQ
E:DVWKH'DVXEVWDQWLDOIDFWRULQEULQJLQJDERXWWKHKDUP$OGULGJH
-RLQWO\DQGVHYHUDOO\OLDEOH0F'RQDOG
D(DFKOLDEOHIRUSRUWLRQRIGDPDJHV
6(&21'$5<j6WLOOOLDEOHGHVSLWHEHLQJXQDEOHWRVDWLVI\%XW)RUWHVW

)DFWXDO+DUP 0XOWLSOH6XIILFLHQW&DXVHV
)DFWXDO+DUP6HFWLRQ5HVWDWHPHQWSJ
D7RUWLRXVFRQGXFWPXVWEHDIDFWXDOFDXVHRISK\VLFDOKDUPIRUOLDELOLW\WREHLPSRVHG
&RQGXFWLVIDFWXDOFDXVHRIKDUPZKHQWKHKDUPZRXOGQRWKDYHRFFXUUHGDEVHQWWKH
FRQGXFW%XW)RU7HVW0XOWLSOH1HFHVVDU\&DXVHV0F'RQDOG
0XOWLSOH6XIILFLHQW&DXVHV±6HFWLRQ5HVWDWHPHQWSJ
D,IPXOWLSOHDFWVRFFXUHDFKRIZKLFKXQGHUVHFWLRQDORQHZRXOGKDYHEHHQDIDFWXDO
FDXVHRIWKHSK\VLFDOKDUPDWWKHWLPHLQWKHDEVHQFHRIWKHRWKHUDFWVHDFKDFWLV
UHJDUGHGDVDIDFWXDOFDXVHRIWKHKDUP0XOWLSOH6XIILFLHQW&DXVHV$QGHUVRQ
:RUNHU¶V&RPSHQVDWLRQ
0DLQ3RLQWV
%DUFRPPRQODZQHJOLJHQFHODZIRUHPSOR\HHVDJDLQVWHPSOR\HUV
(PSOR\HHVFRPSODLQVOLPLWHGEHQHILWVDUHLQDGHTXDWH
(PSOR\HHVFDQVWLOOVXHWKLUGSDUW\$OGULGJH
/LWLJDWLRQRIHPSOR\HHVFDQLQYROYHVWUDWHJLFSODQQLQJUHJDUGLQJZKRHPSOR\HHVVXH
$OGULGJH

0XOWLSOH1HFHVVDU\DQG0XOWLSOH6XIILFLHQW&DXVHV&DVHV

0F'RQDOGY5RELQVRQ,RZDSJ

)$&761HJOLJHQWGULYLQJRIMRLQWWRUWIHDVRUVFDXVHVLQMXU\WR3j0XOWLSOH6XIILFLHQW
&DXVHV
58/(
D:KHQDQDFFLGHQWZDVFDXVHGVROHO\E\UHDVRQRIWKHFRPELQHGDQGFRQFXUUHQW
QHJOLJHQFHRIPXOWLSOH'VDQGWKDWEXWIRUVXFKFRPELQHGDQGFRQFXUUHQWQHJOLJHQWDFWVWKH
LQMXU\ZRXOGQRWKDYHKDSSHQHGWKH'VDUHPXOWLSOHQHFHVVDU\FDXVHVDQGDUHMRLQWO\DQG
VHYHUDOO\OLDEOH
E'QRWQHHGWRFDXVHDFWXDOLQMXU\WREHKHOGOLDEOH
F0XOWLSOHEXWIRUDFWRUVEXWQRWDOOQHFHVVDULO\KHOGOLDEOH
G-RLQW 6HYHUDO/LDELOLW\
L ,IPRUHWKDQRQHSHUVRQLVWKHFDXVHRI3¶VLQMXU\DQG
KDUPLV³LQGLYLGLVEOH´HDFK'LVOLDEOHIRUWKHHQWLUHKDUP

$OGULGJHY*RRG\HDU7LUH 5XEEHU&R'0GSJ

)$&763VVXIIHUHGPDQ\GLVHDVHVZKLFKWKH\DWWULEXWHWRWKHFKHPLFDOVXSSOLHGE\
*RRG\HDU
58/('¶VQHJOLJHQFHPXVWEHDQLQGHSHQGHQWO\VXIILFLHQWFDXVHRIKDUPEHIRUHLW
FDQEHDVXEVWDQWLDOFRQWULEXWLQJIDFWRULH\RXFDQQRWXVHWKHVXEVWDQWLDOIDFWRUWHVW
XQOHVV'¶VQHJOLJHQFHLVDOUHDG\LQGHSHQGHQWO\VXIILFLHQWWRFDXVHWKHVDPHKDUP

$QGHUVRQY0LQQHDSROLV0LQQSJ

)$&763DOOHJHGWKDW'VWDUWHGILUHWKDWGHVWUR\HG3¶VSURSHUW\'FODLPVWKDWKLVILUH
ZDVFRQVXPHGE\DODUJHUILUHWKDWZDVUHVSRQVLEOHIRUWKHGHVWUXFWLRQ-XU\IRXQGERWK
ILUHVKDGPHUJHGDQGHDFKILUHZDVLWVHOIRIVXIILFLHQWPDJQLWXGHWRFDXVHGDPDJHDQG
QHLWKHUILUHZDVQHFHVVDU\
58/(
D:KHQWKH³EXWIRU´WHVWVHHPVWRSURGXFHFOHDUO\ZURQJUHVXOWVDVLQWKHGXSOLFDWLYH
FDXVHFDVHVWKH³VXEVWDQWLDOIDFWRU´WHVWKDVEHHQZLGHO\DFFHSWHG,IWZRRUPRUHFDXVHV
FRQFXUWREULQJDERXWDQHYHQWWKHQWKHFDXVHLQIDFWLVHVWDEOLVKHGE\WKH³VXEVWDQWLDO
IDFWRU´WHVW:KHQHLWKHUWKH³EXWIRU´RU³VXEVWDQWLDOIDFWRU´WHVWLVVDWLVILHGDSDUW\KDV
HVWDEOLVKHGWKDWWKHRWKHUSDUW\¶VFRQGXFWZDVWKHFDXVHLQIDFWRIDQLQMXU\
E,IWZRRUPRUHFDXVHVFRQFXUWREULQJDERXWDQHYHQWWKHQWKHFDXVHLQIDFWRIDQLQMXU\
LVHVWDEOLVKHGE\WKH³VXEVWDQWLDOIDFWRU´WHVW

1HJOLJHQFH%XUGHQ6KLIWLQJLQ$FWXDO&DXVH$OWHUQDWLYH
/LDELOLW\
$OWHUQDWLYH/LDELOLW\ %XUGHQ6KLIWLQJLQ$FWXDO&DXVH
:KHQRQO\RQHDFWRU¶VFDUHOHVVQHVVLVD³EXWIRU´FDXVHRIWKH3¶VLQMXU\EXWLWFDQQRW
EHGHWHUPLQHGZKLFKQHJOLJHQWDFWRULVWKH³EXWIRU´FDXVHERWKDUHMRLQWDQGVHYHUDOO\
OLDEOH'VPXVWSURYHWKH\DUHQRWWKH³EXWIRU´FDXVH

$OWHUQDWLYH/LDELOLW\&DVHV

6XPPHUVY7LFH&DOSJ

)$&76'VQHJOLJHQWO\VKRWLQ3¶VGLUHFWLRQ3VXIIHUHGSK\VLFDOLQMXU\
58/(
D:KHQWZRRUPRUHDUHQHJOLJHQWDQGLWFDQQRWEHGHWHUPLQHGZKLFKDFWXDOO\FDXVHG
WKHLQMXULHVERWKDUHOLDEOH
E5HDVRQSUDFWLFDOXQIDLUQHVVRIGHQ\LQJ3UHGUHVVEHFDXVH3FDQQRWSURYHKRZPXFK
GDPDJHHDFKFDXVHG
F5XOHDSSOLHGZKHQHYHUKDUPKDVSOXUDOFDXVHVDQG12721/<ZKHQDFWLQJLQ
FRQVFLRXVFRQFHUW
G6XPPHU¶V7KHRU\
L :KHQWKHUHDUHWZRRUPRUHLGHQWLILDEOH'V
LL (DFKFRXOGEHWKHVROHKDUPEHFDXVHWKH\HDFKDFWHG
LQDQLGHQWLFDOO\FDUOHVVPDQQHU
LLL &DUHOHVVQHVVRIRQHEXWQRWWKHRWKHUIXQFWLRQHGDVWKH
DFWXDOFDXVHEXWFDQQRWLGHQWLI\ZKLFKRQH
LY 1RVXJJHVWLRQWKDWDQ\RWKHUWRUWIHDVRUFDXVHGWKH
DFWLRQ
Y 1RFRPSDUDWLYHIDXOW
YL ,IWKHEXUGHQRISURYLQJFDXVDWLRQLVQRWVKLIWHGWRWKH'V
WKHQ3ZLOOEHGHQLHGUHOLHIZKHQUHOLHILVMXVWLILHG
0DUNHW6KDUH/LDELOLW\
0DUNHWVKDUHOLDELOLW\LVDPDQQHURIDZDUGLQJGDPDJHVWRDSODLQWLIIZKHQWKHUHLVQRZD\
WRILJXUHRXWZKLFKGHIHQGDQWLVUHVSRQVLEOHIRUKRZPXFKRIWKHSODLQWLII¶VLQMXULHV,QVWHDG
WKHFRXUWXVHVPDUNHWVKDUHOLDELOLW\WRPDNHHDFKGHIHQGDQWUHVSRQVLEOHIRUWKHVDPH
SHUFHQWDJHRIWKHGDPDJHVDVWKHSHUFHQWDJHRIPDUNHWVKDUHWKDWGHIHQGDQWKDV

0DUNHW6KDUH/LDELOLW\&DVHV

6LQGHOOY$EERWW/DEVSJ

)$&763¶VPRWKHUWRRNV\QWKHWLFHVWURJHQZKLOHSUHJQDQWDQGDVDUHVXOW3
GHYHORSHGFDQFHUDVDQDGXOW'(6SURGXFHGE\PXOWLSOHFRPSDQLHV
58/(,QFHUWDLQFLUFXPVWDQFHVZKHUHWKHSODLQWLIILVXQDEOHWRLGHQWLW\WKHDFWXDO
WRUWIHDVRUDQGLWLVXQMXVWWRSUHFOXGHWKHPIURPUHFRYHU\WKHQWKHJURXSUHVSRQVLEOHIRUWKH
RYHUDOOKDUPFDQEHKHOGOLDEOHIRUWKHLUPDUNHWVKDUHFRQWULEXWLRQ

1HJOLJHQFH3UR[LPDWH&DXVH
3UR[LPDWH&DXVH
*HQHUDOO\3KDVWRSURYHWKDW'¶VFDUHOHVVQHVVDFWXDOO\FDXVHG3¶VLQMXU\DQGWKDWLW
GLGVRSUR[LPDWHO\QRQIRUWXLWRXVO\
D)DFWXDOFRQVHTXHQFHDQGPXVWEHIRUHVHHDEOH
E4XHVWLRQIRUWKHMXU\
3PXVWHVWDEOLVK
D'¶VFRQGXFWZDVFDUHOHVV
E'¶VFRQGXFWDFWXDOO\FDXVHG3¶VLQMXU\
F7KHWRUWLRXVDVSHFWRI'¶VFRQGXFWSOD\HGDSDUWLQEULQJLQJDERXW3¶VLQMXU\

3UR[LPDWH&DXVH)RXU7HVWV
1DWXUDODQG2UGLQDU\WK WK&HQWXU\
D'LGKDUPFRPHDERXWLQDQDWXUDODQGRUGLQDU\ZD\5\DQY1HZ<RUN&HQWUDO
'LUHFWQHVV
D:KHWKHUWKHUHFNOHVVDFWVFDQEHVHHQDVDGLUHFWFDXVHRIWKHLQMXU\3ROHPLV
RYHUUXOHGE\:DJRQ0RXQG1R
)RUHVHHDELOLW\
D:KHWKHUWKHLQMXU\ZDVRUVKRXOGKDYHEHHQIRUHVHHDEOHDWWKHSRLQWRIEUHDFK
:DJRQ0RXQG8QLRQ3XPS
E%DVHGRQZKDWUHDVRQDEOHGHIHQGDQWZRXOGXQGHUVWDQGDVIRUHVHHDEOH
5LVN5XOH
D:KDWDUHWKHW\SHVRIULVNVDSHUVRQWRRNZKHQXQGHUJRLQJDSDUWLFXODUDFWLYLW\DFWLRQ
E:KHWKHUWKHLQMXU\VXIIHUHGE\WKHYLFWLPLVRQHRIWKHKDUPVZKRVHULVNVUHQGHUHGWKH
DFWRU¶VFRQGXFWFDUHOHVV-ROOH\

3UR[LPDWH&DXVH&DVHV

8QLRQ3XPSY$OEULWWRQ7H[SJ

)$&76((VOLSVMXPSLQJRYHUDSLSHUDWKHUWKDQZDONLQJDURXQGLWDIWHUDSXPSILUH
+(/'5XOHGLQIDYRURI'±FLUFXPVWDQFHVVXUURXQGLQJ3¶VLQMXULHVDUHWRRUHPRWHO\
FRQQHFWHGZLWK'¶VFRQGXFWSLSHWRFRQVWLWXWHDOHJDOFDXVHQRWIRUHVHHDEOHEHFDXVHRI
VKRUWFXW±1RIRUHVHHDELOLW\
58/(&DXVDWLRQFDQQRWEHVDWLVILHGE\DFWXDOFDXVHDORQH3UR[LPDWHFDXVHPXVW
DOVREHVDWLVILHGWRHVWDEOLVKOLDELOLW\

:DJRQ0RXQG1RSJ'RFN2ZQHUY:DJRQ0RXQG2ZQHU

)$&76&UHZRI:0UHOHDVHGRLOLQWRKDUERUDQGQHDUE\FRQVWUXFWLRQVSDUNHGWKHRLO
FDXVHGDILUHWKDWGHVWUR\HGGRFNDQGVKLS
+(/'2LOVSLOOQRWWKHSUR[LPDWHFDXVHRIGRFNFDWFKLQJILUHEHFDXVHWKH'FRXOGQRW
IRUHVHHWKDWVSLOOLQJRLOZRXOGSRVVLEO\FDXVHILUH1RIRUHVHHDELOLW\
58/()RUHVHHDELOLW\LVWKHWHVWIRUSUR[LPDWHFDXVH

:DJRQ0RXQG1RSJ%RDWRZQHUY:DJRQ0RXQG2ZQHU

)$&76&UHZRI:0UHOHDVHGRLOLQWRKDUERUDQGQHDUE\FRQVWUXFWLRQVSDUNHGWKHRLO
FDXVHGDILUHWKDWGHVWUR\HGGRFNDQGVKLS
+(/')LUHZDVIRUHVHHDEOHFRQVHTXHQFHRIWKHRLOVSLOODQGVSLOOLVSUR[LPDWHFDXVH
RIGDPDJH
58/(,IDSDUW\GLGQRWKLQJWRSUHYHQWWKHLQMXU\KHLVOLDEOHIRUWKHIRUHVHHDEOH
FRQVHTXHQFHVRIKLVDFWLRQVHYHQLIWKHFRQVHTXHQFHVDUHUHPRWH

-ROOH\Y6XWWRQ/RQGRQ%RURXJK&RXQFLOSJ

)$&76%RDWOHIWRQJUDVV\DUHDZKHUHNLGVNQRZQWRSOD\IHOORQD\RDWWHPSWLQJ
WRIL[LWFDXVLQJVSLQDOLQMXULHV
+(/'5XOHGLQIDYRURI3±'RZHG3DFRPPRQGXW\RIFDUHWKDWUHTXLUHG'WRWDNH
UHDVRQDEOHVWHSVWRUHPRYHWKHWUDSRUDOOXUHPHQWLQSUHVHQFHRIFKLOGUHQ
58/($OOWKDWLVUHTXLUHGIRUDQLQMXU\WREHZLWKLQWKHVFRSHRIULVNLVIRUHVHHDELOLW\RI
DQLQMXU\QRWQHFHVVDULO\WKHPDQQHURUH[WHQWRIWKHLQMXU\
D5,6.)$&7257(67
L %DVHGRQGHIHQGDQW¶VVWDWHRIPLQG
LL :KDWDUHWKHW\SHVRIULVNVDSHUVRQWRRNZKHQ
XQGHUJRLQJDSDUWLFXODUDFWLYLW\DFWLRQ

5HODWLRQDO$VSHFWRI%UHDFKRI'XW\±$OLJQPHQW3ULQFLSOH
*HQHUDOO\$EUHDFKRIGXW\LVEUHDFKRZHGWRDSDUWLFXODUSHUVRQUDWKHUWKDQDGXW\
RZHGWRSHUVRQVGLIIHUHQWO\VLWXDWHGIURPWKDWSDUWLFXODUSHUVRQ

$OLJQPHQW3ULQFLSOH&DVHV

3DOVJUDIY/RQJ,VODQG5DLOURDG&R1<SJ

)$&760DQLVSXVKHGRQWRDWUDLQE\FRQGXFWRUZKHQKLVSDFNDJHILUHZRUNVIDOOV
DQGFDXVHVDQH[SORVLRQZKLFKNQRFNVVFDOHVORVHIURPFHLOLQJLQMXULQJDZRPDQ
+(/'&RXUWGLVPLVVHGWKHFRPSODLQW
58/(
D7KHGXW\DQGEUHDFKPXVWEHDOLJQHGEHIRUHFDXVDWLRQDQDO\VLVFDQEHGRQH$
EUHDFKRIGXW\WRZDUGRQHSHUVRQLVQRWDEUHDFKWRZDUGVDQRWKHUSHUVRQ
E$GHIHQGDQWRZHVDGXW\RIFDUHRQO\WRWKRVHZKRDUHLQWKHUHDVRQDEO\IRUHVHHDEOH
]RQHRIGDQJHU
F$GXW\WKDWLVRZHGPXVWEHGHWHUPLQHGIURPWKHULVNWKDWFDQUHDVRQDEO\EHIRUHVHHQ
XQGHUWKHFLUFXPVWDQFHV

.LQVPDQ7UDQVLW&RSJ

)$&766KLSEUHDNVPRRULQJDQGIORDWVEDFNZDUGVGRZQDQLFHILOOHGULYHU&DXVHV
GDPDJHWRWZRRWKHUVKLSVEHIRUHFUDVKLQJLQWRWKHEULGJHDQGGDPPLQJWKHULYHU
+(/'&LW\.LQVPDQDQG&RQWLQHQWDOMRLQWO\OLDEOHjLPSURSHUO\PRRUHGVKLSNQRZQ
GDQJHUDQGLIFDPHORRVHIRUHVHHDEOHWKDWLWZRXOGGDPWKHULYHU
58/(
D:KHUHGDPDJHVUHVXOWIURPWKHVDPHQHJOLJHQWDFWDQGZHUHRIWKHVDPHJHQHUDO
W\SHH[SHFWDEOHIRUHVHHDELOLW\RIWKHH[DFWGHYHORSPHQWVDQGH[WHQWRIORVVQRWOLPLW
OLDELOLW\
E'LUHFWKDUPLVVXIILFLHQWIRUSUR[LPDWHFDXVH
F/LPLWDWLRQRIGDPDJHVWRRQO\IRUHVHHDEOHFRQVHTXHQFHVLVUHMHFWHGZKHQWKH
FRQVHTXHQFHVDUHGLUHFWDQGWKHGDPDJHDOWKRXJKGLIIHUHQWDQGJUHDWHUWKDQH[SHFWHGLV
RIWKHVDPHJHQHUDOVRUWWKDWLVULVNHG

6XSHUVHGLQJ&DXVHV
*HQHUDOO\
D:LWKLQSUR[LPDWHFDXVHGRFWULQH
E:KHQLQWHUYHQLQJZURQJGRLQJE\DQLQGHSHQGHQWDFWRUVHUYHVWRGHIHDWLPSRVLWLRQRI
OLDELOLW\XSRQUHPRWHZURQJGRHUHYHQWWKRXJKZURQJGRHU¶VDFWZDVDOVRDQHFHVVDU\
FRQGLWLRQRIYLFWLP¶VLQMXU\
F$FWXDOFDXVHQRUPDOO\VDWLVILHGSURYLGHGPDWHULDOEXWVXSHUVHGLQJFDXVHTXHVWLRQ
RISURSHUFDXVH
G5HPRWH'LVVSDUUHGOLDELOLW\LIVXSHUVHGLQJFDXVHLVDSSOLHG
+RZWR'HWHUPLQH6XSHUVHGLQJ&DXVH
D'HWHUPLQHDFWLRQVRILQWHUYHQLQJDFWRUFDUHOHVVRUFULPLQDO"
L &DUHOHVV'FDUHOHVVj'OLDEOH
LL &ULPLQDO'FULPLQDOj'127OLDEOH
E$VNZKDWFDQ'IRUHVHH"
F)RUHVHHDELOLW\WHVWFRXOGUHSODFHVXSHUVHGLQJFDXVH
7ZR%DVLF)HDWXUHV
D7ZRZURQJGRHUVDUHDFWLQJLQGHSHQGHQWO\RIRQHDQRWKHUQRFRQFHUWRIDFWLRQRU
FRPPRQSODQ
E7KHLUZURQJVDUHFRPPLWWHGLQVHTXHQFHjRQHDFWLVPRUHUHPRWHIURPLQWLPHVSDFH
IURP3¶VLQMXU\ZKHUHDVDQRWKHULVPRUHGLUHFWDQGLPPHGLDWH

6XSHUVHGLQJ&DXVHV&DVHV

3ROODUGY2NODKRPD&LW\5\&RSJ

)$&76\RER\GLVFRYHUHGDQGFROOHFWHGEODVWLQJSRZGHUIURP553DUHQWV
ZDUQHGER\QRWWRSOD\ZLWKSRZGHU%R\SOD\HGZLWKSRZGHUDQGIULHQG3ROODUGLQMXUHG
+(/''LVPLVVHGFODLP±55FDUHOHVVEXWER\¶VLQWHUYHQWLRQZDVDVXSHUVHGLQJ
FDXVHDQGSUHYHQWHG55IURPEHLQJKHOGOLDEOHIURPLQMXU\
58/($QLQWHUYHQLQJFDXVHFDQEUHDNWKHFKDLQRIIRUHVHHDELOLW\IURPWKHRULJLQDO
ZURQJGRHUVRDVWRUHQGHUWKHPQRORQJHUOLDEOH

3RUW$XWKRULW\1< 1-Y$UFDGLDQ&RUSSJ

)$&76%RPEH[SORGHGLQSDUNLQJORWRI:RUOG7UDGH&HQWHUDQGLQJUHGLHQWVXVHGWR
PDNHWKHERPEFRQWDLQHGLQIHUWLOL]HUPDQXIDFWXUHGPDUNHWHGE\$UFDGLDQ
+(/''LVPLVVHG3¶VFODLP%RPELQJQRWDSUR[LPDWHFDXVHE\'DQG'KDGQRGXW\
WRZDUQ7HUURULVWVDFWDVVXSHUVHGLQJFDXVHDQG'QRWIRUHVHHERPELQJ:7&
58/(7KLUGSDUW\¶VDFWLRQVWKDWIXQFWLRQDVDVXSHUVHGLQJFDXVHEUHDNWKHFKDLQRI
FDXVDWLRQDQGQROLDELOLW\WR'

)DVW(GGLH¶VY+DOOSJ

)$&76:RPDQPXUGHUHGDIWHUJHWWLQJWRRGUXQNDQGGULYHQKRPHODWHUSLFNHGXSE\
PDQDWEDUZLWKKLVWRU\RIYLROHQFH±$IILUPDWLYHGXW\DQG1HJOLJHQFH3HU6H
+(/',QIDYRURI'±FULPLQDODFWVQRWIRUHVHHDEOHQRGXW\WRJXDUDQWHHHDFK
SDWURQ¶VVDIHW\QRDIILUPDWLYHGXW\RXWVLGHRIWKHEDU
58/(0RGHUQWRUWODZUHFRJQL]HVFULPLQDODFWDVVXSHUVHGLQJFDXVHLIGHIHQGDQW
ZDVQRWH[SHFWLQJFULPLQDODFW

1HJOLJHQFH3HU6H
1HJOLJHQFH3HU6H
*HQHUDOO\UHPRYHVWKHUHVSRQVLELOLW\RIWKH3WRGHWHUPLQHLIWKHUHZDVDEUHDFKRI
GXW\E\GHVFULELQJWKHGXW\LQH[SUHVVODQJXDJH
D6WDWXWRU\VWDQGDUGRIFDUHWKDWGHWHUPLQHV'¶VFRQGXFW
E/HJLVODWLRQYLRODWHGWKHQEUHDFKHOHPHQWVDWLVILHG
F3ODLQWLIIVWLOOPXVWSURYHDOORYHUHOHPHQWVRIQHJOLJHQFH

(OHPHQWVRI1HJOLJHQFH3HU6H
9LRODWLRQRIFRQGXFWRULHQWDWHGVWDWXHRUDGPLQLVWUDWLYHUHJXODWLRQ'DODO±VWDWXWH
%D\QH±$GPLQVWUDWLYHUHJXODWLRQ
:LWKRXWMXVWLILFDWLRQ'DODO
7KDWZDVPHDQWWRSURWHFWDFODVVRISHUVRQVLQFOXGLQJ3%D\QH9LFWRU
$JDLQVWDW\SHRILQMXU\9LFWRU

1HJOLJHQFH3HU6HY1HJOLJHQFH3ULPD)DFLH
,QMXU\
'XW\
D3ULPD)DFLH±UHDVRQDEOHSUXGHQWSHUVRQ
E3HUVH±VWDQGDUGLVWKHVWDWXWH
%UHDFK
D3ULPD)DFLH±GLGWKHSHUVRQDFWDVDUHDVRQDEOHSUXGHQWSHUVRQZRXOG
E3HU6H±GLGWKHSHUVRQFRPSO\ZLWKWKHVWDWXWH
&DXVDWLRQ

1HJOLJHQFH3HU6H&DVHV

'DODOY&LW\RI1HZ<RUNSJ

)$&76:RPDQQRWZHDULQJJODVVHVDVUHTXLUHGE\OLFHQVHDQGKLWVDQRWKHUFDU
+(/'3HQWLWOHGWRPDNHFODLPEHFDXVH'QRWZHDUJODVVHV±QHZWULDORUGHUHG
58/($QH[FXVHGYLRODWLRQRIVWDWXWHLVQHJOLJHQFHSHUVHEHFDXVHWKHVWDWXWHVHWV
WKHVWDQGDUGRIFDUHDQG'DGPLWWHGEUHDFKRIWKDWVWDQGDUG
%D\QHY7RGG6KLS\DUGV&RUSSJ
)$&76ZRUNPDQLQMXUHGRQORDGLQJGRFNZLWKQRKDQGUDLOVDVVWLSXODWHGE\
DGPLQLVWUDWLYHUHJXODWLRQ
+(/'1HJOLJHQFHSHUVHFRXOGDSSO\jRUGHUHGQHZWULDO
58/(
D$YLRODWLRQRIDQDGPLQLVWUDWLYHUHJXODWLRQLVQHJOLJHQFHSHUVH
E([WHQGHGSURWHFWLRQWRQRQHPSOR\HHV±PXVWEHRIWKHSURWHFWHGFODVV

9LFWRUY+HGJHVSJ

)$&763LQMXUHGZKHQYDQMXPSVFXUEDQGKLWVKHUZKLOHVKH¶VORRNLQJDWFGSOD\HULQ
WKHWUXQNRI'¶VFDUZKLFKZDVSDUNHGRQWKHVLGHZDON
+(/'1RWQHJOLJHQFHSHUVHRURUGLQDU\QHJOLJHQFHj'HQWLWOHGWRVXPPDU\
MXGJPHQW
58/(
D,QMXU\PXVWKDYHEHHQRIWKHQDWXUHWKDWWKHVWDWXWHZDVGHVLJQHGWRSUHYHQWWRWKH
FODVVRISHUVRQVWKHVWDWXWHZDVGHVLJQHGWRSURWHFW
E7ZR5RXWHVRUGLQDU\QHJOLJHQFHDQGQHJOLJHQFHSHUVH

'HIHQVHV

&RPSDUDWLYH)DXOWSDUWLDOGHIHQVH
*HQHUDOO\/LDELOLW\LVGLVWULEXWHGSURSRUWLRQDOO\LIWKH3LVMRLQWO\UHVSRQVLEOHIRUKHU
LQMXU\
3XUH&RPSDUDWLYH)DXOW3JHWVSURSRUWLRQDODPRXQWRIGDPDJHV5HOLDEOH
7UDQVIHU
0RGLILHG&RPSDUDWLYH)DXOW3JHWVSURSRUWLRQDODPRXQWRIGDPDJHVLI3LVOHVV
WKDQUHVSRQVLEOH+XQW
'LYLGHG'DPDJHV6SOLWVGDPDJHVHYHQO\DPRQJVWUHVSRQVLEOHSDUWLHV5HOLDEOH
7UDQVIHU

&RQWULEXWRU\1HJOLJHQFH
$Q\OHYHORIIDXOWDWWULEXWHGWRWKH3SUHFOXGHV3IURPDQ\UHFRYHU\DWDOOPRVWO\
RXWGDWHGH[FHSWIRUDIHZMXULVGLFWLRQV

&RPSDUDWLYH)DXOW&DVHV

8QLWHG6WDWHVY5HOLDEOH7UDQVIHU&RSJ

)$&767DQNHURZQHGE\3HQGHGXSRQVDQGEDUGXHWRSRRUQDYLJDWLRQDQG&RDVW
*XDUG¶VIDLOXUHWRPDLQWDLQDIODVKLQJOLJKW
+(/'&RPSDUDWLYHIDXOW±3FRQWULEXWHGWRIDXOWDQGOLDELOLW\DOORFDWHGDPRQJSDUWLHV
SURSRUWLRQDOO\
58/(:KHQWZRRUPRUHSDUWLHVKDYHFRQWULEXWHGWRLQMXU\XQGHUPDULWLPHODZ
OLDELOLW\IRUWKHGDPDJHLVDOORFDWHGSURSRUWLRQDOO\DFFRUGLQJWRWKHLUFRPSDUDWLYHGHJUHHRI
IDXOW
D6KRZWUDQVLWLRQLQUHDVRQLQJIURPFRQWULEXWRU\QHJOLJHQFH
E,OOXVWUDWHVIDLUQHVVDQDO\VLVDQGDSSOLFDWLRQ

+XQWY2KLR'HSWRI5HKDELOLWDWLRQ &RUUHFWLRQSJ

)$&76:RPDQLQPDWHXVLQJVQRZEORZHUQRWSURSHUO\WUDLQHGRUVXSHUYLVHGDQG
FKRSVRIIILQJHUVZKHQVKHWULHVWRUHPRYHFORJJHGVQRZ
+(/'&RPSDUDWLYHIDXOW3±DQG'±
58/(3XUH PRGLILHGFRPSDUDWLYHIDXOW6WDWXWHEDUVUHFRYHU\IRU3¶VPRUHWKDQ
UHVSRQVLEOHIRUWKHLURZQLQMXU\

$VVXPSWLRQRI5LVN&RPSOHWH'HIHQVH
*HQHUDOO\$QHJOLJHQWDFWRUFDQDUJXHWKDWDYLFWLPLVEDUUHGIURPUHFRYHU\EHFDXVH
VKHDJUHHGWRUHOLQTXLVKKHUULJKWWRUHFRYHU\RUVKHNQRZLQJO\DQGYROXQWDULO\WRRNRQWKH
ULVNRILQMXU\E\FDUHOHVVFRQGXFWRIWKH'6PROOHW
5HTXLUHV'WRSURYHWKDW3IRUIHLWHGDULJKWWRFRPSODLQDERXWFDUHOHVVQHVVE\YLUWXH
RIGHFLGLQJWRWDNHRQWKHULVN

([SUHVV$VVXPSWLRQRI5LVN)XOO'HIHQVH
3H[SUHVVO\ZDLYHVKHUULJKWWRUHFRYHUGDPDJHV-RQHV
([FHSWLRQV
D%DUJDLQLQJ3RZHUGLGWKHSHUVRQKDYHDQ\RWKHUUHDVRQDEOHRSWLRQ'DOXU\-RQHV
E,QWHQWLRQDOUHFNOHVVRUJURVVQHJOLJHQFHE\'
F$JDLQVWRYHUULGLQJSXEOLFLQWHUHVWV'DOXU\

,PSOLHG$VVXPSWLRQRI5LVN
3GRHVQRWH[SUHVVO\ZDLYHULJKWWRUHFRYHU\GDPDJHVEXWLWLVLPSOLHGWKURXJKKHU
DFWLRQV6PROOHW

$VVXPSWLRQRI5LVN&DVHV

-RQHVY'UHVVHOSJ([SUHVV$25

)$&766N\GLYHUPLQRUVLJQV.ZDYLQJULJKWWRVXHIRUQHJOLJHQFHDQGFRXOGKDYH
SDLGDGGLWLRQDOWRUHWDLQWKLVULJKW3LQMXUHGLQDLUSODQHFUDVK
+(/'*UDQWHG06-LQIDYRURI'
58/(
D:KHUHD3LVDZDUHRIWKHULVNEHLQJDVVXPHGKDVDQRSWLRQWRUHWDLQWKHULJKWWRVXH
SD\LQJDGGLWLRQDODQGLQVWHDGHQJDJHVLQDKLJKO\GDQJHURXVDFWLYLW\DQGVLJQVD.
DVVXPLQJWKHULVNRIGDPDJHVWKH.LVYDOLGjWKH3LVEDUUHGIURPUHFRYHU\
E781./7(67WRGHWHUPLQHLIH[FXOSDWRU\DJUHHPHQWLVYDOLG
L ([LVWHQFHRIGXW\WRSXEOLF
LL 1DWXUHRIVHUYLFHVSHUIRUPHG
LLL &RQWUDFWIDLUO\HQWHUHGLQWR
LY ,QWHQWLRQRISDUWLHVH[SUHVVHGLQFOHDUDQGXQDPELJXRXV
ODQJXDJH

'DOXU\Y6.,/WGSJ([SUHVV$25

)$&763UXQVLQWRDSROHDWDVNLUHVRUW3VLJQHG.DVVXPLQJWKHULVNRIVNLLQJRQ
IRUPDQGRQ,'FDUG
+(/'5XOHGLQIDYRURI3EHFDXVHRISXEOLFSROLF\FRQFHUQV
58/(3XEOLF,QWHUHVWFDQVXSHUVHGHH[SUHVVDVVXPSWLRQRIULVNHVSHFLDOO\ZKHQWKH
DFWLYLW\LVSXEOLFDQG3ODFNVDFKRLFHLQVLJQLQJWKH.QRH[WUDIRUH[WUDSURWHFWLRQ

6PROOHWWY6ND\WLQJ'HY&RUSSJ,PSOLHG$25

)$&766NDWLQJZRPDQ3IDOOVDQGLQMXULHVZULVWZKHQDWWHPSWLQJWRDYRLGDIDOOHQ
FKLOG6NDWHULQNGLGQRWKDYHJXDUGUDLOV
+(/'5XOHGLQIDYRURI'±3QRWFDUHOHVVDQG3DVVXPHGWKHULVNQRFRPSDUDWLYH
IDXOW
58/(:KHQD3LVDZDUHRIWKHULVNRIXQGHUWDNLQJDQDFWLRQDQGXQGHUWDNHVWKH
DFWLRQVGHVSLWHWKLVDZDUHQHVVVKHZLOOKDYHDVVXPHGWKHULVNRIWKDWDFWLYLW\DQGWKLVZLOO
VHYHUWREDUKHUIURPUHFRYHU\
D7(67
L /RRNDWWKHDFWLRQVRI3DQGVHHLIDFWVDUHFDUHOHVV,I
127FDUHOHVVWKHQWZRRSWLRQV
$VVXPSWLRQRIWKHULVN
1RUHFRYHU\
,PPXQLWLHV
*HQHUDOO\$FRPSOHWHGHIHQVHWROLDELOLW\JUDQWHGWRFHUWDLQHQWLWLHVDQGDFWRUVLQ
FHUWDLQUHODWLRQVKLSV
7\SHV
D,QWUD)DPLO\,PPXQLW\
E&KDULWDEOH,PPXQLW\
F6RYHUHLJQ,PPXQLW\

6RYHUHLJQ,PPXQLW\
)HGHUDO7RUWV&ODLPV$FW$SHUVRQFDQUHFRYHUDJDLQVWWKH86³IRULQMXU\RUORVVRI
SURSHUW\RUSHUVRQDOLQMXU\RUGHDWKFDXVHGE\WKHQHJOLJHQWRUZURQJIXODFWRURPLVVLRQRI
DQ\HPSOR\HHRIWKH*RYHUQPHQWZKLOHDFWLQJZLWKLQWKHVFRSHRIKLVRIILFHRUHPSOR\PHQW
([FHSWLRQV
D'LVFUHWLRQDU\)XQFWLRQV([FHSWLRQ³1ROLDELOLW\PD\EHEDVHGXSRQWKHH[HUFLVH
RUSHUIRUPDQFHRUWKHIDLOXUHWRH[HUFLVHRUSHUIRUPDGLVFUHWLRQDU\IXQFWLRQRUGXW\RQWKH
SDUW\RIWKHIHGHUDODJHQF\RUDQHPSOR\HHRUWKHJRYHUQPHQWZKHWKHURUQRWWKHGLVFUHWLRQ
LQYROYHGEHDEXVHG´
E7ZRSDUWWHVWWRGHWHUPLQHLI')(DSSOLHV
L :DVWKHFRQGXFWGLVFUHWLRQDU\LQYROYLQJDQ³HOHPHQWRI
MXGJPHQWRUFKRLFH´"
LL 7KHMXGJPHQWDWLVVXHLVRIWKHNLQGWKDWWKH
GLVFUHWLRQDU\IXQFWLRQH[FHSWLRQZDVGHVLJQHGWRVKLHG"

6RYHUHLJQ,PPXQLW\&DVHV

5LOH\Y8QLWHG6WDWHVSJ

)$&763RVWRIILFHSODFHGPDLOER[HVRQDFRUQHUWKDWEORFNHGYLHZRIRQFRPLQJ
WUDIILFDQGFDXVHGDQDFFLGHQW
+(/'3¶VFODLPGLVPLVVHG'KDVVRYHUHLJQLPPXQLW\
58/('LVFUHWLRQDU\IXQFWLRQVDUHH[HPSWIURPOLDELOLW\DFWLRQVDQGWRGHWHUPLQHLID
SDUWLFXODUGLVFUHWLRQDU\IXQFWLRQLVDWZRSDUWWHVW

'DPDJHV
&RPSHQVDWRU\'DPDJHV
*HQHUDOO\&RPSHQVDWH3IRUORVVHVFRQQHFWHGWRLQMXU\
0DLQ3ULQFLSOHV
D6XFFHVVIXO3LVHQWLWOHGWRIDLURUUHDVRQDEOHFRPSHQVDWLRQ.HQWRQ
L 7(67:KDWIDLUO\DQGUHDVRQDEO\FRPSHQVDWHV3IRU
WKHLQMXULHVVXVWDLQHGFRQVLGHULQJWKHIROORZLQJ
LL 'LPLQLVKHGHDUQLQJFDSDFLW\HFRQRPLFFRQGLWLRQV
DJHDQGDFRPSDULVRQRIWKHFRPSHQVDWLRQDZDUGHGDQGSHUPLWWHGLQFDVHVRI
FRPSDUDEOHLQMXULHV
E8VXDOO\GDPDJHVGHWHUPLQHGE\MXU\
(JJVKHOO6NXOO5XOH6PLWK9RVEHUJ0XVWDSKD
L 7RUWIHDVRUWDNHVKLVYLFWLPDVKHILQGVKLP
LL )DLUUHDVRQDEOHFRPSHQVDWRU\DZDUGFDQLQFOXGH
FRPSHQVDWLRQIRULQMXUHVWKDWUHVXOWRILQSDUWKLGGHQYXOQHUDELOLWLHVRI3
LLL 'QRWQHHGWREHDZDUHRI3¶VKLGGHQLQMXULHVWRDSSO\
7\SHVRI'DPDJHV
D(FRQRPLFRU³RXWRISRFNHW´ORVVHVPHGLDOELOOVORVWZDJHVHWF
E1RQHFRQRPLFORVVHVSDLQ VXIIHULQJHFW

'DPDJHV&DVHV

6PLWKY/HHFK%UDLQ &R/WGSJ

)$&763¶VGHFHGHQWLVLQMXUHGZKHQRSHUDWLQJDFUDQHRYHUDWDQNRIKRWPROWHQ
PHWDO'GLGQRWSURYLGHDGHTXDWHSURWHFWLRQIURPVSODVKRIKRWPHWDO%XUQHGOLSDQG
FDXVHGFDQFHU
+(/'5XOHGLQIDYRURI3±(JJVKHOO6NXOO5XOH
58/($33/,(6(JJVKHOO6NXOO5XOH±WKHWHVWLVZKHWKHUDUHDVRQDEOHSHUVRQFRXOG
DQWLFLSDWHDW\SHRILQMXU\127ZKHWKHUDUHDVRQDEOHSHUVRQFRXOGDQWLFLSDWHWKHH[WHQWRI
LQMXU\RIWKHW\SHWKDWLVIRUHVHHQ

9RVEXUJY3XWQH\SJ

)$&76.LGNLFNVDQRWKHUNLGLQVKLQZKLOHLQFODVV.LGKDVDGLVHDVHGOHJFDXVLQJ
JUHDWLQMXU\
+(/',QIDYRURI3
58/((67$%/,6+(6(65

0XWDSKDY&XOOLJDQRI&DQDGDSJ

)$&760DQH[SHULHQFHVHPRWLRQDOGLVWUHVVDIWHUILQGLQJIO\LQZDWHU
+(/'5XOHGLQIDYRURI'±3¶VFODLPIDLOHGWRHVWDEOLVKGXW\
58/((65DOVRDSSOLHVWRHPRWLRQDOGLVWUHVV

.HQWRQY+\DWW+RWHOV&RUSSJ

)$&766N\ZDONDW+\DWWIDOOVDQGLQMXULHVODZVWXGHQW
+(/'5XOHGLQIDYRURI3
58/(7KHWHVWIRUZKDWIDLUO\DQGUHDVRQDEO\FRPSHQVDWHV3IRUWKHLQMXULHV
VXVWDLQHGLQFOXGHVDFRQVLGHUDWLRQRIGLPLQLVKHGHDUQLQJFDSDFLW\HFRQRPLFFRQGLWLRQV
DJHSDLQDQGVXIIHULQJDQGDFRPSDULVRQRISHUPLWWHGDZDUGVLQFDVHVRIOLNHLQMXULHV
D([SHUWWHVWLPRQ\FDQEHXVHGWRPDNHLQIRUPHGFRQVLGHUDWLRQV
3XQLWLYH'DPDJHV
*HQHUDOO\
D*UDQWHGWRSXQLVKDQGGHWHU
E5DUHO\JUDQWHGLQQHJOLJHQFHDFWLRQV1DWLRQDO%\3URGXFWVDQGPXFKPRUHOLNHO\IRU
LQWHQWLRQDOWRUWVIUDXGEHFDXVHORRNPRUHOLNHFULPLQDODFWV
L ([FHSWLRQUHFNOHVVQHVVRULQGLIIHUHQFHWKDWZRXOG
DOORZDQLQIHUHQFHRIPDOLFHLQVXOWRSSUHVVLRQZDQWRQRUZLOOIXOYLROHQFH

3XQLWLYH'DPDJHV&DVHV

1DWLRQDO%\3URGXFWV,QFY6HDUF\+RXVH0RYLQJ&RSJ

)$&76'GULYLQJVSHHGLQJWUDFWRUWKDWVPDVKHGLQWRE\VWDQGHU¶VFDUZKLFKNQRFNHG
LWLQWRKRXVHRQWUDLOHUZKLFKKLWDQGNLOOHGWZRE\VWDQGHUV
+(/'5HYHUVHG7&KROGLQJIRUSXQLWLYHGDPDJHVIRU'±QRWSURYHLQWHQWTXHVWLRQV
DERXWEUDNHV
58/(,QDQHJOLJHQFHDFWLRQSXQLWLYHGDPDJHVMXVWLILHGRQO\ZKHUHWKHHYLGHQFH
LQGLFDWHVWKDWWKH'DFWHGZDQWRQO\LQFDXVLQJWKHLQMXU\RUZLWKFRQVFLRXVLQGLIIHUHQFHWR
WKHFRQVHTXHQFHWKDWPDOLFHPD\EHLQIHUUHG

1RPLQDO'DPDJHV
*HQHUDOO\DZDUGHGZKHQWKHUHLVQRDFWXDOGDPDJHEXWWKHFRXUWILQGVIRU3
D1RUPDOO\QRWDZDUGHGLQQHJOLJHQFHDFWLRQV
E0D\DFFRPSDQ\SXQLWLYHGDPDJHVLQLQWHQWLRQDOWRUWVZKHUHQRDFWXDOGDPDJHDURVH
IURPWKHWRUW

,QWHQWLRQDO7RUWV$VVDXOW %DWWHU\
%DWWHU\
*HQHUDOO\7KHLQWHQWLRQDOKDUPIXORURIIHQVLYHWRXFKLQJRIDQRWKHUSHUVRQ
:URQJIXOQHVVUHVLGHVLQWKHSXUSRVHIXOWRXFKLQJ±WKHLQWHQWLRQDOLQYDVLRQRI3¶V
SHUVRQDOVSDFH±QRWLQWKHFDXVLQJRISK\VLFDOKDUPSHUVH
5HTXLUHVDFWXDOWRXFKLQJRIWKHYLFWLPHLWKHUGLUHFWRULQGLUHFWE\WKHZURQJGRHU

(OHPHQWVRI%DWWHU\
$QDFWYROLWLRQDODFW
,QWHQWWRFDXVHFRQWDFWZLWK3WKDWLV
D+DUPIXO25
E2IIHQVLYH
$FWDFWXDOO\FDXVHVVXFKFRQWDFW

,QWHQW5XOHV
(OHPHQWRQO\UHTXLUHVLQWHQWWRFDXVHFRQWDFWWREHVDWLVILHGDQGGRHVQRWQHHGWREH
LQWHQWWRFDXVHKDUP:DJQHU&ROH
'RHVQ¶WQHHGWRLQWHQGDSDUWLFXODUFRQWDFW1HOVRQ:DJQHU&ROH
3URRIRILQWHQWGRHVQ¶WKDYHWREHGLUHFWPXVWEHHVWDEOLVKHGEDVHGRQVXUURXQGLQJ
FLUFXPVWDQFHV3DXO

&RQWDFW5XOHV
'LUHFW&RQWDFW&HFHUHOOL3DXO'LUHFWSK\VLFDOERGLO\FRQWDFWZLWKDQREMHFWRUERG\
SDUW
,QGLUHFW&RQWDFW)LVKHU3LFDUG/HLFKWPDQ
D([WHQGHG3HUVRQDOLW\FRQWDFWZLWKVRPHWKLQJDWWDFKHGWRRULQFRQWDFWZLWKWKH3
3LFDUG)LVKHU
E3¶VK\SHUVHQVLWLYHUHDFWLRQLVLQVXIILFLHQWXQOHVV'KDGNQRZOHGJHRIWKH
K\SHUVHQVLWLYLW\3DXO
F2IIHQVLYHFRQWDFWLVGHWHUPLQHGE\DQREMHFWLYHUHDVRQDEOHSHUVRQVWDQGDUG3DXO
G7LPHSODFHDQGFLUFXPVWDQFHVFRQWH[WZLOOQHFHVVDULO\DIIHFWLWVXQSHUPLWWHG
FKDUDFWHU3DXO9RVEXUJ

$VVDXOW %DWWHU\&DVHV

&HFDUHOOLY0DWKHUSJ

)$&76'VEHDWXS3DIWHU3DJUHHVWRGULYHZRPHQKRPHDIWHUDGDQFH
+(/'5XOHGLQIDYRURI3±2QH'FKDUJHGZLWKSXQLWLYHGDPDJHV
58/(3PD\EHDZDUGHGGDPDJHVIRUPHGLFDOWUHDWPHQWSDLQVXIIHULQJ
SHUPDQHQWLQMXU\IRUEDWWHU\E\GLUHFWFRQWDFW

3DXOY+ROEURRNSJ

)$&76&RZRUNHUUXEV3¶VVKRXOGHUVDQGPDNHVVH[XDOO\VXJJHVWLYHFRPPHQWV
+(/'5HYHUVH±XSWRWKHMXU\WRGHFLGHLI'OLDEOHIRUEDWWHU\
58/(
D:LWKEDWWHU\HVWDEOLVKFRQWDFW'HWHUPLQHFKDUDFWHUSURRIRILQWHQW
E2IIHQVLYHQHVVTXHVWLRQRUWKHMXU\
F3URRIRIFRQWDFWGRHVQRWKDYHWREHGLUHFW
G&RQWH[WPDWWHUVLQGHWHUPLQLQJLIFRQWDFWLVRIIHQVLYH
)LVKHUY&DUURXVHO0RWRU+RPHSJ
)$&76'VQDWFKHVSODWHDZD\IURP3EHFDXVHUHVWDXUDQWGLGQRWVHUYH$IULFDQ
$PHULFDQV
+(/'5XOHGLQIDYRURI3±FRPSHQVDWRU\DQGSXQLWLYHGDPDJHVIRUEDWWHU\EF'¶V
DFWLRQVDPRXQWHGWRRIIHQVLYHQHVV
58/(([WHQGHG3HUVRQDOLW\'RFWULQH
D%DWWHU\FDQEHHVWDEOLVKHGE\FRQWDFWZLWK³DQ\WKLQJVRFRQQHFWHGZLWKWKHERG\DVWR
EHFXVWRPDULO\UHJDUGHGDVSDUW\RIWKHRWKHU¶VSHUVRQDQGWKHUHIRUHDVSDUWDNLQJRILWV
LQYLRODELOLW\

/HLFKWPDQY:/:-DFRU&RPPXQLFDWLRQ,QFSJ

)$&763FODLPV'¶VDFWRIUHSHDWHGO\EORZLQJFLJDUVPRNHLQIDFHIRUSXUSRVHRI
3¶VGLVFRPIRUWDQGHPEDUUDVVPHQW
+(/'5HYHUVHG7&±-XU\WRGHWHUPLQHLI'¶VDFWVZHUHRIIHQVLYH
58/(
D2IIHQVLYHQHVVLVDTXHVWLRQIRUWKHMXU\
E3K\VLFDOWRXFKLQJSRVVLEO\LQFOXGHVEORZLQJVPRNHLQVRPHRQH¶VIDFH

9RVEXUJY3XWQH\SJ

)$&76.LGNLFNVDQRWKHUNLGLQVKLQZKLOHLQFODVV.LGKDVDGLVHDVHGOHJFDXVLQJ
JUHDWLQMXU\
+(/'&DVHUHPDQGHGIRUQHZWULDO
58/(,QDFWLRQVIRUDVVDXOWDQGEDWWHU\3PXVWVKRZHLWKHUWKDWWKHLQWHQWLRQZDV
XQODZIXORUWKDWWKH'LVDWIDXOW7KHZURQJGRHULVOLDEOHIRUDOOLQMXULHVUHVXOWLQJGLUHFWO\IURP
WKHZURQJIXODFWZKHWKHUWKH\FRXOGRUFRXOGQRWKDYHEHHQIRUHVHHQE\KLP(65

&ROHY+LEEHUGSJ

)$&76'GUXQNHQO\SOD\IXOO\NLFNHG3LQORZHUEDFNFDXVLQJVSLQDOLQMXU\
+(/'*UDQWHG06-IRU'±3¶VFRPSODLQWXQWLPHO\
58/(
D,QWHQWLRQLQ$ %LVLQWHQWLRQDOQDWXUHRIFRQWDFW127LQWHQWWRFDXVHKDUPRULQMXU\
E/LDELOLW\IRUKDUPFDXVHFDUHOHVVO\UDWKHUWKDQUHFNOHVVO\
F3FDQILOHVHYHUDOWRUWFODLPV
G62/YDULHV±LQWHQWLRQDOWRUWVVKRUWHUWLPHOLPLWVWKDQQHJOLJHQFH

:DJQHUY6WDWHSJ

)$&760HQWDOSDWLHQWLQFXVWRG\RIVWDWHHPSOR\HHVDWWDFNVDZRPDQLQFKHFNRXW
OLQHDW.0DUW
+(/'$IILUP7&DQG'¶V07'±6RYHUHLJQ,PPXQLW\
58/(
D'HUDQJHGSHUVRQZLWKDGLDJQRVHGVHYHUHPHQWDOLOOQHVVLVFDSDEOHRIIRUPLQJWKH
UHTXLVLWHLQWHQWWRFRPPLWEDWWHU\
E$IILUP&ROHjGRQRWQHHGWRLQWHQGWRFDXVHKDUPRQO\QHHGWRLQWHQGWRFDXVHWKH
FRQWDFW
F6RYHUHLJQLPPXQLW\FDQDSSO\WRSUHYHQWOLDELOLW\ZLWKLQWHQWLRQDOWRUWV

$VVDXOW
(OHPHQWV
DQDFW
LQWHQWWRFDXVHDQDSSUHKHQVLRQRILPPLQHQWKDUPIXORURIIHQVLYHFRQWDFW
DFWDFWXDOO\FDXVHV3VDSSUHKHQVLRQ
%DWWHU\DQGDVVDXOWRIWHQJRWRJHWKHUE\WKH\GRQ¶WKDYHWRFDQKDYHDSXUHEDWWHU\RUD
SXUHDVVDXOWRQH[DPGLVWLQJXLVKERWKRQHDWDWLPH

%HDFKY+DQFRFN
)DFWV3DQG'DUJXLQJLQDQRIILFH'SXOOVRXWJXQVQDSVLWWZLFHQRWORDGHG3VXHVIRU
DVVDXOW
+HOGDVVDXOWWKUHDWZDVLPPLQHQW3KDGQRZD\RINQRZLQJZKHWKHURUQRWWKHJXQZDV
ORDGHG
5XOH3KDVWRKDYHDSSUHKHQVLRQRILPPLQHQWKDUPGRQRWQHHGDFWXDOKDUP

)RUDVVDXOWWREHHVWDEOLVKHG\RXGRQ¶WQHHGWRKDYHIHDU6KDTK\SRDVORQJDV3LV

DZDUHWKHUHZLOOEHLPPLQHQWFRQWDFWMXVWKDYHWRIHHODSSUHKHQVLRQRILPPLQHQWKDUPIXORU
RIIHQVLYHFRQWDFW

%URRNHUY6LOYHUWKRUQH
)DFWV3WHOHSKRQHRSHUDWRUWULHVWRFRQQHFW'WRDOLQHEXWIDLOV3IHOWKHPD\FRPHDQG
KXUWKHU
'VD\VKHGLGQRWPHDQWRKDUPKHUVKHFRXOGQRWKDYHIHOWDQDSSUHKHQVLRQDQGKH
DSRORJL]HG
+HOGQRDVVDXOWKHFRXOGQ¶WJHWWRKHUSODFHRIEXVLQHVVKHLVIDUDZD\FRXOGQRWFDXVH
KDUPWKUHDWZDVDIXWXUHQRWLPPLQHQWWKUHDW
5XOHWKUHDWPXVWLPPLQHQWDQGWKHDSSUHKHQVLRQPXVWEHUHDVRQDEOH

'LVWLQJXLVKLQJ%HDFKIURP%URRNHU
ZKHUHDUHWKHDFWRUV"FORVHIDFHWRIDFHIDU"'RZHNQRZ"
UHDVRQDEOHQHVVUHDVRQDEOHDSSUHKHQVLRQDYJSHUVRQREMHFWLYHVWDQGDUGJXQ
UHDVRQDEOHDSSUHKHQVLRQSKRQHQRWDVUHDVRQDEOHIDUDZD\
VHOIGHIHQVHRSSRUWXQLW\WRSUHYHQWWKHDSSUHKHQVLRQEHIRUH%URRNHU"

JHQGHUPD\FRPHLQWRSOD\FRXUWWDNHVQRWLFHWKDWDPDQLVVSHDNLQJGRZQWRDZRPDQLI
RSHUDWRUZDVDPDQZRXOGLWEHGLIIHUHQW"

9HWWHUY0RUJDQ
)DFWV3LQFDU'SXOOVXSLQFDUQH[WWRKHUWKUHDWHQVWRSXOOKHURXWRIWKHFDU'FXWVKHU
RIIDQGFDXVHVKHUWRMXPSWKHFXUEDQGEHFRPHLQMXUHG
'VD\VKHGLGQ¶WPHDQWRFDXVHSK\VKDUPKHMXVWZDVODXJKLQJZKLVIULHQGV
+HOGDVVDXOWZKHWKHUWKHUHZDVLQWHQWWRKDUPRUQRWGRHVQ¶WPDWWHUWHVWLV
UHDVRQDEOHQHVVVKHLVDORQHLWLVDPLWLVGDUNWKHUHDUHDFDUIXOORIPDOHVVKHIHOW
VRPHWKLQJEDGZDVJRLQJWRKDSSHQDQGHYHQLIVKHGLGQ¶WJHWKXUWLWZRXOGVWLOOEHDVVDXOW
5XOH&RXUWIRFXVHVRQUHDVRQDEOHQHVVRI3VDSSUHKHQVLRQDQGLPPLQHQWRIKDUPGRHV
QRWIRFXVDVPXFKRQLQWHQW

$LGLQJDQG$EHWWLQJ
3KHOSVY%URVV
)DFWV3LVDEHHUJLUODWDJROIFRXUVHPHQRIIHUWRWDNHKHUKRPHEXWWDNHKHUWRRQHRI
WKHLUKRXVHVGUXJJHGKHUVKHEHFRPHVXQFRQVFLRXVDQGRQHRIWKHPVH[XDOO\DVVDXOWV
KHUVKHZDNHVXSDQGDGLIIHUHQWPDQLVVLWWLQJRQWKHEHGZKLOH3LVQDNHG
+HOGWKHPDQRQWKHEHGLVOLDEOHIRUDVVDXOWKHFRXOGKDYHFDXVHGKHUDSSUHKHQVLRQ
WKHSHUSHWUDWRUZDVQRWJXLOW\RIDVVDXOWEXWOLDEOHIRUEDWWHU\EFVKHZDVXQFRQVFLRXVZKLOH
LWKDSSHQHGDQGVRWKHUHZDVQRDSSUHKHQVLRQRIKDUPWKHUHZDVQRDLGLQJDQG
DEHWWLQJEFWKHUHZDVQRHYLGHQFHWKDWWKHKRPHRZQHUPDQRQEHGLQFLWHGHQFRXUDJHG
RUSDUWLFLSDWHGLQEDWWHU\

5XOH7KHUHLVDKLJKVWDQGDUGIRUFRWRUWIHDUVRUVWREHOLDEOHIRUDLGLQJDQGDEHWWLQJRI
SDUWLFLSDWLRQLQDEDWWHU\

7UDQVIHUUHG,QWHQW
D$SSOLHVWRERWKEDWWHU\ DVVDXOW,QWHQWVHHPVWREHWKHPDLQTXHVWLRQLQDVVDXOW
DQGEDWWHU\FDVHV
E7UDQVIHUUHG,QWHQWLVRIWHQWHVWHGRQH[DPVHVSWKHEDU
FXVHLQLQWHQWDQDO\VLVRQH[DPLIDSSOLFDEOH
GYLFWLPWRYLFWLP$JRHVWRKLW%EXWKLWV&LQVWHDGLQWHQWLVWUDQVIHUUHGWR&DV
ORQJDV\RXLQWHQWWRFRPPLWEDWWHU\LWGRHVQ¶WPDWWHUZKR\RXKLW
HPD\FURVVYLFWLPVDQGWRUWVLIWKHUHDUHGLIIHUHQWYLFWLPVDQGGLIIHUHQWWRUWV
LQYROYHGLHDVVDXOWDQGEDWWHU\
IPD\EHVDPHYLFWLPEXWFURVVWRUWVLIWKHUHDUHWKHVDPHYLFWLPVDQGGLIIHUHQW
WRUWVLHDVVDXOWDQGEDWWHU\
JPD\FURVVIURPWKLQJVWRSHUVRQVZKHQWKHUHLVLQWHQWWRFRPPLWDWRUW
DJDLQVWDQREMHFWRUQRQKXPDQVEXWHQGXSLQMXULQJDSHUVRQ

,Q5H:KLWH
)DFWV:KLWHJRHVWRVKRRW7LSWRQEXWPLVVHVDQGVKRRWV'DYLVLQWKHVWRPDFK:KLWH
ILOHGIRUEDQNUXSWF\DQGZDQWVGDPDJHVGLVFKDUJHGLIZLOOIXOGHEWWKHQQRWGLVFKDUJHDEOH
LIQHJOLJHQWGHEWWKHQGLVFKDUJHDEOH
'VDLGKHWULSSHGRYHUDURFNDQGJXQDFFLGHQWDOO\ZHQWRII
+HOGQRWGLVFKDUJHDEOHDFWZDVZLOOIXOLWGRHVQRWPDWWHUWKDWKHRQO\PHDQWWRKLW7LSWRQ
5XOHYLFWLPWRYLFWLPPD\FURVVWRUWVDOVRFRXUWGRHVQRWGHFLGHWKLVLIWKHUHLVD
PDOLFLRXVZLOOIXODQGUHFNOHVVGLVUHJDUGIRUDQRWKHU'LVOLDEOHHYHQLIKHGLGQRWLQWHQGWR
KLW3

1HOVRQY&DUURO
)DFWV'ZDLYHGJXQPHDQWWRKLW3ZLWKJXQDQGDFFLGHQWDOO\ZHQWRIIVKRRWLQJ3KH
LQWHQGHGWRDVVDXOW3EXWQRWKHFRPPLWWHGEDWWHU\
+HOGFDQWUDQVIHULQWHQWEHFDXVHKHPHDQWWRFRPPLWDQLQWHQWLRQDOWRUW
5XOHFURVVHVWRUWV
&RUQY6KHSDUG
)DFWV'LQWHQGHGWRVKRRWGRJVEXWVKRW3LQVWHDGFRXOGEHQHJOLJHQFHRUEDWWHU\
WUDQVIHUUHGLQWHQWIRUEDWWHU\LVVWURQJHU
+HOG7UDQVIHUUHGLQWHQW
5XOH7KLQJVWRSHUVRQV

/\QQY%XUQHWWH
)DFWV'PHDQWWRVKRRWWLUHZKLOH3ZDVLQWKHFDUVKRW3LQVWHDG
+HOGEDWWHU\WUDQVIHUUHGLQWHQWPD\EHGLIIHUHQWEFKHPD\KDYHPHDQWWRDVVDXOWKHULQ
WKDWFDVHWKHUHZRXOGEHQRWUDQVIHUUHGLQWHQWLWZRXOGMXVWEHDVVDXOWDQGEDWWHU\
5XOHFRQWH[WRIDFWLYLW\PDWWHUV

'HIHQVHVRI$VVDXOW
&RPSDUDWLYHIDXOWGRHVQRWDSSO\IRULQWHQWLRQDOWRUWVRQO\LQQHJOLJHQFH
&RQVHQW
6HOI'HIHQVH

&RQVHQW
.RIIPDQY*DUUHWW
)DFWV3VVRQSOD\VIRRWEDOO'DVVWFRDFKGHPRQVWUDWHVWDFNOLQJWHFKQLTXHOLIWV3VVRQ
XSDQGVODPVKLPGRZQWRWKHJURXQG
'VD\VKHFRQVHQWHGWRFRQGXFWZKHQKHVLJQHGXSIRUIRRWEDOO
+HOGQRH[SOLFLWRULPSOLHGFRQVHQWWKHSOD\HUVLJQHGXSWRSOD\ZLWKSHHUVQRWDGXOWVRZQ
VL]HH[SHULHQFHWKHUHZDVQRSDVWWDFNOHVE\WKHFRDFKKHQHYHUVDZLWEHIRUH
LQVWUXFWLRQVZHUHWRMXVWVWDQGVWLOOQRZDUQLQJQRWLQRUGLQDU\FRXUVHRIIRRWEDOOSUDFWLFH
DOVRKHOGWKDWWKHUHZDVEDWWHU\DQGSRVVLEO\DVVDXOW
5XOH-XVWEHFDXVHKHVLJQHGXSWRSOD\IRRWEDOOGRHVQ¶WPHDQKHVLJQHGXSWRSOD\ZLWK
FRDFK

2¶%ULHQY&XQDUG
)DFWV3LPPLJUDQWJRWYDFFLQDWHGRQVKLSKDGDQDOOHUJLFUHDFWLRQVDLGVKHGLGQ¶W
FRQVHQW
+HOG'UUHDVRQDEO\LQIHUUHGFRQVHQWIURPKHUDFWLRQVVKHVWRRGLQOLQHDQGVWXFNRXWDUP
WREHYDFFLQDWHG
5XOHFRQVHQWFDQEHLPSOLHGIURPDSHUVRQ¶VDFWLRQVRUFRQGXFW

6HOI'HIHQVH
+DHXVVOHUY'H/RUHWWR
)DFWV3FRPHVRQ'VSURSHUW\DQGLVEHLQJDJJUHVVLYH'SXQFKHV3LQWKHIDFH
+HOGVHOIGHIHQVHRZQSURSHUW\SURSHUIRUFHDGYDQFHWRZDUGVKLPKLVWRU\RI
YLROHQFH
5XOHZKHQSURWHFWLQJRZQERG\KDVWRIDFWVSHFLILFDQGSURSHUIRUFH

.DWNRY%ULQH\
)DFWV'PDGHERRE\WUDSWRSURWHFWDSLHFHRISURSHUW\KHRZQHG3ZHQWLQWRKRPHDQG
JRWVKRW
+HOGQRWVHOIGHIHQVHEDWWHU\
5XOHFDQ¶WVHWXSERRE\WUDSVLIQRWUHVLGLQJRQSURSHUW\

,QWHQWLRQDO,QIOLFWLRQRI(PRWLRQDO'LVWUHVV,,('
([WUHPHDQGRXWUDJHRXVFRQGXFW
,QWHQGHGWRRUUHFNOHVVO\FDXVHHHGLQMXU\HOHPHQW
'RHVFDXVHHHGGLIIURPDVVDXOW EDWWHU\EF\RXGRQWQHHGDQLQMXU\PRUHOLNHQHJ
D'RHVQRWDOZD\VKDYHWRKDYHDSK\VLFDOPDQLIHVWDWLRQ
EJDSILOOHUWRUWILOOHGDJDSZKHUHDVVDXOWVRUEDWWHULHVKDYHQRWEHHQHVWDEOLVKHG
SV\FKRDQDO\VLVDGYDQFHVZRPHQ¶VULJKWVPRYHPHQW
FHPRWLRQDOGLVWUHVVLVOHVVEHOLHYDEOHHDVLHUWRIDNHVDQGKDUGHUWRSURYH
WKUHVKROGIRURXWUDJHRXVFRQGXFWLVKLJK
'LFNHQVY3XU\HDU*DSILOOHUFDVHUHPHPEHUWKLVIDFWSDWWHUQ 
3ZDVKDYLQJVH[DQGGRLQJGUXJV DOFRKROZ\HDUROGGDXJKWHU'VSDUHQWVZDQWWR
EHDWKLP'SXOOHGJXQRXWDFFRPSOLFHVEHDWKLPXS
FOHDUDVVDXOWDQGEDWWHU\,,('FRPHVLQEF62/H[SLUHGIRURWKHUFODLPVDVVDXOW
DQGEDWWHU\&WVD\V,,('
5XOH)XWXUHWKUHDWLVVXIILFLHQWIRU,,('QRWIRUDVVDXOWDQGEDWWHU\QHHGVWREHLPPLQHQW
WKUHDWDVVDXOWDQGEDWWHU\FDQDGGWRRXWUDJHRXVQHVVHOHPHQW

/LWWOHILHOGY0F*XIIH\
3VXHGEFVKHZDVGHQLHGKRXVLQJIRUKDYLQJDEIZKRZDVEODFNZKHQVKHZDV
ZKLWHUDFLDOGLVFULPLQDWLRQLQKRXVLQJFRQWH[W ,,(')+$&LYLO5LJKWV$FW&WVD\V,,('
5XOH1RQHHGIRUSK\VPDQLIHVWDWLRQVWRKDYH,,('GRQRWQHHGDSK\VLQMXU\WRKDYH,,('

,QWHQW
5HFNOHVVQHVVQHHGFLUFXPVWDQWLDOHYLGHQFHRILQWHQWHQRXJKWRKDYHUHFNOHVV
GLVUHJDUGIRUDQRWKHU

0XOEHUU\Y&ROXPELD8
*DSILOOHUVLQFHOLEHODQGOLEHOSHUVHFODLPVZHUHGLVPLVVHGOHIWZLWKHLWKHU,,('RU
PLVUHSUHVHQWDWLRQFDQRQO\UHFRYHURQRQH
2XWUDJHRXVIRRGZDVWKURZQRXWGHFHSWLRQOLYHOLKRRGLPSOLFDWHGPXOWLSOHEXVLQHVVHV
1<&FRPSHWLWLYHPDUNHW
,QWHQWQRLQWHQWEXWKHDFWHGUHFNOHVVO\OLNHOLKRRGWKLVZRXOGKDSSHQZDVKLJK
6HYHUH,,('SK\VPDQLIHVWDWLRQVSURSHUW\ORVVKDUPFDQQRWEHXQGRQHQRPDWWHUKRZ
PXFK'SD\V
5XOHUHFNOHVVQHVVFDQEHDVXEVWLWXWHIRULQWHQW'GRHVQ¶WKDYHEDGLQWHQWLRQVEXWLW
GRHVQ¶WPDWWHU

VW$PHQGPHQW
)UHHGRPRIVSHHFK FRQVWLWXWLRQSURWHFWLRQVULJKWWRH[SUHVVRSLQLRQ

6Q\GHUY3KHOSV
3VVRQGLHGDWZDUSURWHVWHUVRXWVLGH\HOOLQJDQWLJD\PDQLIHVWDWLRQV³'RQ¶WDVNGRQ¶W
WHOO´FRXOGQRWEHRXWLQWKHDUP\WUHDWPHQWRIJD\VFDXVHGGHDWKIDPLO\GLVWUHVVHGE\
FRQGXFWRISURWHVWHUVVH[RULHQWDWLRQGLVFULPLQDWLRQFWVD\VSURWHFWHGVSHHFKXQGHUVW
DPHQGPHQW
5XOHMXVWEHFDXVHDQRSLQLRQLVRIIHQVLYHGRHVQ¶WPHDQLWFDQ¶WEHVDLGSROLWLFDOVSHHFKLV
WKHPRVWSURWHFWHGVSHHFKXQGHUWKHFRQVWLWXWLRQ
1HJOLJHQW,QIOLFWLRQRI(PRWLRQDO'LVWUHVV1,('
DVRPHFRXUWVWUHDW1,('DVUHJQHJOLJHQFHWRUW
E5XOHV
1,('VWHPIURPFODLPVRIQHJEXWKDYHVRPHWKLQJVSHFLDODERXWWKHP
UHJDUGLQJGXW\GLIIHUHQWVHWRIGXWHV
1,('VLPLODUWRFODLPVRISXUHHFRQRPLFORVVZTXDOLILHGGXWLHV
7KHUHLVQRGXW\WRDYRLGFDXVLQJHPRWLRQDOGLVWUHVVEXWIRUFDYHDWV
DLI'VEHKDYLRUJRHVEH\RQGFDUHOHVVLQWHQWLRQDORUUHFNOHVVZH
WKLQNDERXWLQWHQWLRQDOWRUWVQRWQHJOLJHQFHGRPDLQ
EHPRWLRQDOKDUPLIFRQQHFWHGLQULJKWZD\WRSK\VKDUPFDQEH
EURXJKWXQGHUUHJQHJDFWLRQVDPHDVSXUHHFRQRPLFORVVLIHGLVSDUDVLWLFRQSK\V
KDUPLWLVDQHJFODLPVDPHDVSDLQ VXIIHULQJ
FH[FHSWLRQVWRWKHQRGXW\UXOH
VSHFLDOUHODWLRQVKLS LPSRVHVRQ'DGXW\WRQRWLQIOLFWHPRWLRQDOKDUPLH
PRUWLFLDQODZ\HUGUVKULQN
ZKHQ'DFWVFDUHOHVVO\ VXEMHFWV3WRLPPLQHQWERGLO\KDUP3NQRZV
GDQJHUEXWLVQRWDFWXDOO\KXUW ³]RQHRIGDQJHU´
E\VWDQGHUOLDELOLW\ 'FDUHOHVVO\FDXVHVWUDXPDWLFHYHQWWR3ZLWKIDPLO\
FORVHE\IDPLO\FDQUHFRYHUIRUHG

:\PDQQY/HDYLWW
'EODVWLQJURFNVURFNVWKURZQRQWKH3VSURSHUW\0UV:\PDQQ¶VFODLP VKHVXIIHUHG
DQ[LHW\DVDUHVXOWRIWKHEODVWLQJIHDUHGKHU KHUGDXJKWHU¶VVDIHW\FWVD\VQRUHFRYHU\
EFPHQWDOVXIIHULQJDORQHZRSK\VLQMXU\FDQQRWVXVWDLQDFDXVHRIDFWLRQWKHUHLVRQGXW\
RQ'WRQRWFDXVHDQ[LHW\WR3
5XOHQHHGSK\VLQMXU\DQGHGIRU1,('FODLP

5REEY3$55&R
3ZLWQHVVHGDVFDU\DFFLGHQWZKLFKVKHZDVVHFRQGVIURPEHLQJLQYROYHGLQEXWIOHGKHU
FDUVKHZDVVPRWKHUHGLQGLUWDQGVRRWIURPWKHWUDLQFWVD\VLWFDVHVKRXOGJRWRWULDODQG
WKH³]RQHRIGDQJHU´WHVWVKRXOGEHDSSOLHG
5XOHFWFUHDWHVDQHZUXOH=RQHRI'DQJHU
3KDVWREHZLDUHDRILPPHGLDWHGDQJHU
'VFDUHOHVVQHVVDFWXDOO\DQGSUR[LPDWHO\FDXVHGIULJKW
3VIULJKWSURGXFHGSK\VLFDOPDQLIHVWDWLRQVSK\VLQMXU\
6LPLODUWR:\PDQQ
SK\VLQMXU\HOHPHQWLVVWLOOSDUWRIWKHWHVW
'LVWLQJXLVKDEOHIURP:\PDQQ
SK\VLQMXU\FDQFRPHVHFRQGWKHHGGRHVQRWKDYHWREH³SDUDVLWLF´RQWKHSK\VLQMXU\
LWFDQFRPHILUVW

&RQVROLGDWHG5DLO&RUSY*RWWVKDOO
)HGVWDWXWH 55LVOLDEOHIRULQMXULHVWRHPSOR\HHVZKLOHWKH\DUHHPSOR\HGIRUQHJRI
RIILFHUVDJHQWVRUHPSOR\HHVRIVXFKFDUULHU(PSOR\HHVXHVXQGHU
VWDWXWH*RWWVKDOOVDZFRZRUNHUFROODSVHKHOSHGUHYLYHKLPKHFROODSVHGDJDLQXOWLPDWHO\
G\LQJDQGZDVRUGHUHGEDFNWRZRUNKHVXIIHUHGVHULRXVDQ[LHW\EFKHWKRXJKWKHFRXOG
GLHWKHVDPHZD\FWUHPDQGHGIRUUHFRQVLGHUDWLRQXQGHUWKH]RQHRIGDQJHU
WHVW&DUOLVOHZDVSURPRWHGDQGKDGPRUHUHVSRQVLELOLWLHVDWZRUNDQGZDVYHU\VWUHVVHG
RXWFWUHPDQGHGWRHQWHUMXGJHPHQWIRU'
5XOHWKH6&LVLQWHUSUHWLQJVWDWXWHDQG]RQHRIGDQJHUWHVWJLYHVPRUHHODERUDWLRQRQ
ZKDWW\SHRIV\PSWRPVZRXOGVXVWDLQDFDXVHRIDFWLRQPRUHPRGHUQFDVHFWGRHVQRW
JLYHEURDGLQWHUSUHWDWLRQWRLQMXU\IRUIHDURIIORRGLQJOLWLJDWLRQ

8QGHUWDNLQJV
D:KHQRQHKDVXQGHUWDNHQWREHYLJLODQWRIHPRWLRQDOZHOOEHLQJRIDSHUVRQLH
VKULQNPRUWLFLDQDWWQ\

%HXOY$66(,QW¶O,QF
\HDUROGDEURDGVWXGHQWKDVDIIDLUZKRVWIDWKHUIDOOVLQORYHZLWKKLPVHFUHWXQUDYHOV
DQGKHFRPPLWVVXLFLGHSDUHQWVVXHIRUQHJEFVKHVXIIHUHGHGGXULQJWKHZKROHVWD\FW
GRHVUHJQHJLQWHUSUHWDWLRQQRW1,('FWVD\DJHQF\KDGDGXW\WRSURWHFWKHUIURPSK\V
DQGHPRWLRQDOKDUP
5XOHWKHUHZDVDVSHFLDOUHODWLRQVKLSEWZWKHVWXGHQWDQGWKHDJHQF\IRUPLQJDGXW\WR
SURWHFWKHUIURPSK\VKDUPDQGHGWKHDJHQF\KDGXQGHUWDNHQWRFDUHIRUKHUHPRWLRQDO
DQGSK\VZHOOEHLQJLHXQOLNHLI3VVXHGDQHLJKERUIRUQRWSURWHFWLQJKHU

3URSHUW\7RUWV7UHVSDVV7UHVSDVVWR&KDWWHO
7UHVSDVV6WULFW/LDELOLW\WRUW
D3KDVDULJKWZLWKUHVSHFWWRSURSHUW\DQGWKDWULJKWDOORZVKLPWRH[FOXGHRWKHUV
IURPSURSHUW\
E'LQWHQWLRQDOO\LQYDGHVSURSHUW\FDQEHE\SHUVRQRUE\REMHFWLISXVKHGRQWR
ODQGE\DQRWKHUQRWUHVSDVVQHHGYROLWLRQ
FLWLVQRWLQWHQWWRFDXVHKDUPRUDQQR\LWLVMXVWLQWHQWWRJRRQSURSHUW\ZHRQO\
ORRNDWWKHDFW
GHYHQLI\RXKDYHJRRGLQWHQWLRQV\RXFDQVWLOOEHOLDEOHIRUWUHVSDVV

%XUQVY&DYDOHD
3SDLGWD[HVRQ'VODQGIRU\HDUVEFKHWKRXJKWWKHODQGZDVKLVKHHUHFWHGDIHQFHRQ
'VODQGDQGZDQWVUHVWLWXWLRQ'FRXQWHUFODLPHGZDQWLQJGDPDJHVIRUWUHVSDVVEFKHGLG
QRWJLYHFRQVHQWWR3WRHUHFWWKHIHQFHRQKLVODQGDQGKHFRXOGKDYHVWRUHGP\WUDLOHUVIRU
KLVEXVLQHVVPDNLQJKLPPRUHPRQH\3VDLGKHKDGLPSOLHGFRQVHQWWKHQWF QR
WUHVSDVVEF'GLGQRWJLYHQRWLFHWR3WKDWWKDWZDVKLVODQGDF QRQRWLFHUHTXLUHPHQW
KHUH3GLGQRWKDYHFRQVHQWNQRZOHGJHRIWKHIHQFH¶VH[LVWHQFHLVQRWLPSOLHGFRQVHQW
5XOHQRQRWLFHUHTXLUHPHQWEXWFRQVHQWLVUHFRJQL]HGDVDGHIHQVHGDPDJHLVQRWD
UHTXLUHPHQWIRUOLDELOLW\HYHQDFDUHIXOWUHVSDVVHUFDQEHOLDEOHIRUWUHVSDVV

-DFTXHY6WHHQEHUJ+RPHV
'SXUSRVHIXOO\FRPPLWWHGDQRQYLROHQWWUHVSDVVRQODQGQRGDPDJHJHWVQRPLQDO
GDPDJHVFWVD\VSURSHUW\LVVWUDLJKWIRUZDUGOLEHUW\DQGKDVKHDY\SURWHFWLRQV

.RSNDY%HOO7HO&R
'GLJVKROHRQ3VODQGZRSHUPLVVLRQ3IDOOVLQKROHDQGJHWVLQMXUHGFWVD\V
FRPSHQVDWRU\GDPDJHVFDQEHDZDUGHGIRUSK\VLQMXULHVXQGHUWUHVSDVVGRQRWKDYHWR
EULQJDVHSDUDWHFODLPRIQHJ
5XOHSK\VLQMXULHVFDXVHGE\WUHVSDVVDUHDFWLRQDEOHXQGHUWKHWUHVSDVVFODLPWUHVSDVV
KDVDGLIEXUGHQRISURRIKHUH\RXGRQRWKDYHWRSURYHFDUHOHVVQHVVWKHUHLVQR
FRPSDUDWLYHIDXOWGHIHQVHDYDLODEOHJRRGIRU3WREULQJSK\VLQMXU\XQGHUWUHVSDVV

7UHVSDVVE\1HFHVVLW\
D0RUDO4KXPDQVDIHW\LVPRUHLPSRUWDQWWKDQSURSHUW\
E/HJDO4VRPHRQHKDVWREHDUWKHFRVWRIGDPDJHZKRLVEHWWHUDEOHWREHDU
FRVWDOORFDWLRQ"
FQHHGWRWKLQNDERXWLQFHQWLYHVIRUWKHIXWXUH

9LQFHQWY/DNH(ULH7UDQVS&R
.EWZQSDUWLHVVD\V3FDQEHDWWKHGRFNIRUDFHUWDLQSHULRGRIWLPHWRXQORDGFDUJRRQFH
KHLVGRQHKHKDVWROHDYHEXWDVWRUPFRPHVPDNLQJLWXQVDIHIRUKLPWRWUDYHOKHVWD\V
WKHUHEXWWKHERDWFDXVHVGDPDJHWRGRFNFWVD\VLWZDVRXWRIQHFHVVLW\WKDWKHVWD\
WKHUHVRKHLVQRWOLDEOHIRUWUHVSDVV%87KHGRHVKDYHWRSD\IRUGDPDJHGRQHWRWKH
GRFN
5XOHQHFHVVLW\FDQEHXVHGDVDGHIHQVHWRWUHVSDVVEXWLIGDPDJHLVFDXVHG\RXKDYH
WRSD\WRFRPSHQVDWHIRULW

3ORRIY3XWQDP
3UHFHGHQWIRULIRZQHURIGRFNSXVKHGERDWRIIDQGLWUDQDVKRUHRUIORDWHGRQRZQHUZRXOG
EHOLDEOHDQGERDWRZQHUFRXOGUHFRYHU
&RQYHUVLRQDQG7UHVSDVVWR&KDWWHO
&RQYHUVLRQ
DSHUPDQHQWLHWDNLQJDZURQJXPEUHOODIURPWKHUHVWDXUDQWFDQEHGRQH
FDUHOHVVO\RUQHJOLHQWO\
7UHVSDVVWR&KDWWHO
DWHPSRUDU\WUHVSDVVEXWWRFKDWWHOLHNH\LQJVRPHRQH¶VFDU

7K\URIIY1DWLRQZLGH0XW,QV&R
3ZRUNIRU'DQGNHSWSHUVRQDOHPDLOVDQGLQIRRQZRUNFRPSXWHUKHZDVILUHGDQGZDV
QRWDEOHWRJHWKLVSHUVRQDOHPDLOVRIIWKHFRPSXWHUEF'IHDUHGKHZRXOGVWHDOEXVLQHVV
SUREOHP FRQYHUVLRQKDVRQO\EHHQXVHGIRUWDQJLEOHLWHPVRUZKHUHWKHWZRPHUJHLH
VWRFNVFW HOHFWURQLFPHGLDKDVVDPHYDOXHDVSULQWHGPHGLDORRNVDWKRZWLPHVKDYH
FKDQJHG
5XOHFRQYHUVLRQFDQDSSO\WRHOHFWURQLFPHGLD
&RQVHQWDVD'HIHQVHWR7UHVSDVVDQG7UHVSDVVWR&KDWWHO
D&RQVHQWLVDYDLODEOHDVDGHIHQVHWRWUHVSDVVDQGWUHVSDVVWRFKDWWHO

&RSHODQGY+XEEDUG%URDGFDVWLQJ,QF
6WXGHQWDQGYHWYLVLW3VKRXVHWRWUHDWFDWVWXGHQWVHFUHWO\ILOPVSDUWRIWKHYLVLWDQG
EURDGFDVWVLWRQWKHQHZV3VXHV'EFWKHVWXGHQWZRUNIRU'DQG'FODLPVVKHKDG
FRQVHQWFWVD\V3RQO\FRQVHQWHGWRVWXGHQWDFFRPSDQ\LQJWKHYHWWRWKHKRXVHDQGWKH
ILOPLQJH[FHHGHGWKHVFRSHRIFRQVHQW WUHVSDVV
5XOHVFRSHRIFRQVHQWFDQEHJHRJUDSKLFDOO\VSDWLDOO\RUDFWLYLW\EDVHGOLPLWHGLIWKH
VFRSHGLVH[FHHGHGLWLVWUHVSDVV

1XLVDQFH8OWUDKD]DUGRXV$FWLYLWLHV
1XLVDQFH
D'FRPPLWVDSULYDWHQXLVDQFHDJDLQVW3LIKHHQJDJHVLQDFRQGXFWWKDWFDXVHVD
FRQWLQXLQJ XQUHDVRQDEOHLQWHUIHUHQFHZ3VXVHDQGHQMR\PHQWRISURSHUW\LQZKLFK3
KDVSRVVHVVRU\LQWHUHVW
EQXLVDQFHFDQRYHUODSZLWKWUHVSDVVLQWHUIHUHQFHZLQWHUHVWLQODQG
F'GRHVQRWKDYHWRJRRQODQGWRFRPPLWQXLVDQFHXVXDOO\DQHLJKERUO\GLVSXWH
GORRNDW'VDFWLRQ
HFUX[ UHPHG\
6WXUJHVY%ULGJPDQ
3EXLOWFRQVXOWLQJURRPQHDU'VODQGZKHUH'XVHVPRUWDUVIRUKLVEXVLQHVV7KHPRUWDUV
DUHYHU\ORXGDQGLQWHUIHUHZLWK3VXVHDQGHQMR\PHQWRIWKHFRQVXOWLQJURRP&WVD\VLWLVD
QXLVDQFHHYHQWKRXJK3NQHZDFWLYLW\ZDVKDSSHQLQJEHIRUHWKHURRPZDVEXLOW
5XOH(YHQLI3ZDONVLQWRQXLVDQFHWKHUHFDQEHDQXLVDQFHFODLPEFLWVWLOOLQWHUIHUHVZLWK
HQMR\PHQWRISURSHUW\FRXUWVRPHWLPHVGRHVDQHFRQRPLFDQDO\VLVEXWQRWXVXDOO\

3HQODQGY5HGZRRG6DQLWDU\6HZHU
'RSHUDWHVDVHZDJHWUHDWPHQWSODQWQHDU3VKRXVH7KHVPHOOSUHYHQWVWKHPIURPXVLQJ
WKHRXWVLGHIRUEETLQJJDUGHQLQJVLWWLQJRQWKHSRUFK&WVD\VQXLVDQFHDQGJUDQW
SHUPDQHQWLQMXQFWLRQ'FDQPRYHSODQW
5XOH&WGRHVFRVWEHQHILWDQDO\VLVPRUHH[SHQVLYHEXWJRYWFDQVSUHDGFVWVRIUHORFDWLQJ

%RRPHUY$WODQWLF&HPHQW&R
'RSHUDWHVFHPHQWSODQWSURGXFHVGLUWVPRNHYLEUDWLRQ&WVD\VQXLVDQFH
5XOHWHPSRUDU\LQMXQFWLRQJUDQWHGXQWLO'SD\VSHUPDQHQWGDPDJHVWR3

8OWUDKD]DUGRXV$FWLYLWLHV
DPRVWDXWKHQWLFIRUPRIFRPPRQODZVWULFWOLDELOLW\VWULFWOLDELOLW\GHYHORSHGWKURXJK
FDVHODZ
E&DWHJRULHVDOUHDG\GHFLGHGE\FRXUW
NHHSLQJRIZLOGDQLPDOV
HQJDJLQJLQDFWLYLWLHVWKDWLQYROYHURXWLQHXVHRIH[SORVLYHV
VWRUDJHRIYDVWDPWVRISRWHQWLDOHQHUJ\LHPDNHDWRPLFERPEV
FVWULFWOLDELOLW\DFWLYLWLHVHYHQDSUXGHQW'LVVWLOOOLDEOHFDUHOHVVQHVVLVQRW
UHTXLUHG\RXGLGDFWLYLW\DQGVRPHRQHZDVLQMXUHG\RXDUHOLDEOHLHGRJELWHVWDWXWH
GZHORRNIRUVRPHWKLQJXQXVXDODQGORRNIRUULVNVRPHWKLQJLQKHUHQWO\GDQJHURXV
QRWQHFHVVLWLHVQRWVRFLDOO\DFFHSWDEOHGRQRWQHHGWKHVHWKLQJVIRURXUKDSSLQHVV

5HVWDWHPHQW6HFWLRQ)DFWRUVIRU'HWHUPLQLQJ$EQRUPDOO\'DQJHURXV
'HJUHHRIULVN
OLNHOLKRRGRIKDUP
LQDELOLW\WRHOLPLQDWHULVN
QRWFRPPRQXVDJH
LQDSSURSULDWHQHVVRIDFWLYLW\
YDOXHWRFRPPXQLW\PRUHWKDQGDQJHURXVDWWULEXWHV

5\ODQGVY)OHWFKHU
'PDNHVUHVHUYRLUIORRGV3VPLQH&WVD\VLWZDVDQXQQDWXUDOXVHRIWKHODQGVRLWZDVDQ
DEQRUPDODFWLYLW\KHLVFUHDWLQJDUHVHUYRLUXOWUDKD]DUGRXVDFWLYLW\KLJKULVN
5XOH&WFDQGHFLGHIDXOWHYHQLI\RXKDYHQRIDXOWEF\RX¶YHWDNHQDKLJKULVN
&RPSDUHGZLWK0HQORYHQHJOLJHQFHFODLP'KDGVWDFNVRIKD\WKDWFDXJKWILUHDQG
FDXVHGGDPDJHWRQHLJKERUVODQGKHUHZDVDVWULFWOLDELOLW\FDVH

.OHLQY3\URG\QH&RUS
)LUHZRUNVLQMXUH3QHJSURGXFWVOLDELOLW\&WVD\VVWULFWOLDELOLW\
5XOHFWXVHVIDFWRUVPHWFUX[ FRPPRQXVDJHRQO\DIHZSHRSOHVHWXSILUHZRUNV
VRQRWDFRPPRQXVDJHYDOXHWRFRPPXQLW\LWLVQRWDYDOXHHYHQLILWLV-XO\WK

3URGXFWV/LDELOLW\
D3ULPD)DFLH&DVH
3KDVDQLQMXU\
'VROGSURGXFW
'LVDFRPPHULFLDOVHOOHURIVXFKSURGXFW
$WWKHWLPHLWZDVVROGSURGXFWZDVLQDGHIHFWLYHFRQGLWLRQ
'HIHFWIXQFWLRQHGDVDFWXDO SUR[LPDWHFDXVHRILQMXU\
EVWULFWOLDELOLW\WRUWNQRFNVRXWGXW\DQGEUHDFKHOHPHQWVVWLOOKDYHWRVKRZLQMXU\
DQGFDXVDWLRQFDXVDWLRQDQDO\VLVLGHQWLFDOWRQHJ
FW\SHVRIGHIHFWV
PDQXIDFWXULQJGHIHFW
GHVLJQGHIHFW
IDLOXUHWRZDUQ
GJRWKURXJKHOHPHQWVDQVZHUZKDWNLQGRIGHIHFWLWLV
H0DQXIDFWXULQJ'HIHFWDOLQHRISURGXFWEXWVRPHWKLQJZHQWZURQJDQGRQHLV
PDGHGLIIHUHQWWKDQWKHUHVW
'HVLJQ'HIHFWZKROHOLQHKDVDFHUWDLQLVVXHWKDWFDXVHVKDUPLQWHQWLRQDO
GHVLJQ
)DLOXUHWR:DUQQRZDUQLQJODEHORUZDUQLQJV

(VFRODY&RFD&ROD
:DLWUHVVSXWVERWWOHVLQIULGJHRQHH[SORGHVDQGFXWVKDQGVXHVXQGHU5HV,SVDLQ
QHJEFQRSURGXFWVOLDELOLW\FDVHV\HWERWWOHZDVDPDQXIDFWXULQJGHIHFWFWVD\V'LV
OLDEOH
5XOHSUHFXUVRUWRSURGXFWVOLDELOLW\SUREOHPZLWKUHVLVSDFRQWUROHOHPHQWWLPHODSVHEWZ
ZKHQSURGXFWOHIW'VKDQGVDQGWKHGHOLYHU\WR3FRXUWQHHGVWRFRPHXSZDGLIFDXVHRI
DFWLRQ
&RQFXUUHQFH,WLVLQWKHSXEOLF¶VLQWHUHVWWRKROGFRPSDQ\¶VOLDEOHXQGHUVWULFWOLDELOLW\'
KDVGHHSHUSRFNHWVDQGKDUGHUIRUVPDOOHUSHUVRQWRVKRZZKDWZHQWZURQJZLWKSURGXFW
ULVNLQFHQWLYHSXEOLFSROLF\IRFXVHVRQVHOOHUUDWKHUWKDQEX\HU

5HVWDWHPHQWG6HF$
0DLQ3RLQWV
VHOOHU¶VWKHRQO\RQHUHVSRQVLEOHFDQLQFOXGHUHWDLOHU
WKHUHDUHW\SHVRIGHIHFWLYHFRQGLWLRQV
³XQUHDVRQDEO\GDQJHURXV´KDVEHHQOLWLJDWHG
SK\VKDUPUHTXLUHGQRWSXUHHFRQRPLFORVVRUHG
SURGOLDELOLW\NQRFNVRXWQHJGRHVQ¶WPDWWHULIVHOOHULVFDUHIXO
VHSDUDWHFDXVHRIDFWLRQIURP.GRHVQ¶WPDWWHUZKDW.VD\V

*UHHQPDQY<XED3RZHU3URGV,QF
3ZDVXVLQJ6KRSVPLWKWRPDNHFKDOLFHVFUHZVZHUHORRVHDQGWKHZRRGIOHZEDFNDQG
KLW3LQWKHKHDGFWVD\VVWULFWOLDELOLW\EFGHIHFWFDXVHGLQMXU\ZKLOHLWZDVEHLQJXVHGIRULWV
LQWHQGHGSXUSRVH
0DFSKHUVRQGHIHFWLYHWLUHZDVDQHJFDVHWXUQLQJRQGXW\KHUHZHGRQRWKDYHWR
HVWGXW\SURGXFWVOLDELOLW\LVVWULFWOLDELOLW\
5XOH,IDSHUVRQXVHVDSURGXFWIRULWVLQWHQGHGSXUSRVHDQGEHFRPHVLQMXUHGWKHVHOOHU
LVKHOGOLDEOH

%\VWDQGHU
(OPRUH5XOH$SHUVRQZKRGLGQRWE\SURGXFWFDQVXHLQSURGXFWVOLDELOLW\%\VWDQGHU
ZRXOGVWLOOKDYHWRSURYHDFWXDODQGSUR[LPDWHFDXVH

*RZHUY6DYDJH$UPV,QF
3LQDGYHUWHQWO\GLVFKDUJHGKLVJXQZKLOHZDONLQJEDFNIURPKXQWLQJDQGLWVKRWKLPLQWKH
IRRWKHFODLPHGPDQGHIHFWGHVLJQGHIHFWGHWHQWGHIHFWXQORDGLQJGHIHFWDQGIDLOXUHWR
ZDUQ'PRYHGIRUVMFWJUDQWHGVMRQXQORDGLQJGHIHFWDQGIDLOXUHWRZDUQDQGGHQLHG
GHVLJQGHIHFWDQGPDQXIDFWXULQJGHIHFW
5XOH*RRGUHYLHZFDVHRISURGOLDELOLW\
&RPSDULQJ*RZHUWR1HJ
SK\VDQGFDXVDWLRQKHDYLO\ZHLJKHGQRWORRNLQJDWFDUHOHVVQHVVGXW\JRQHVLQFH
0DFSKHUVRQRUIDXOWSURGXFWVROGLQGHIHFWLYHFRQGLWLRQLQWHQGHGSXUSRVHFRPSDUDWLYH
IDXOW3QHHGWRVKRZWKHUHLVDVDIHUGHVLJQZLWKVLPLODUH[SHQVHVDVVRFLDWHGZLWK
LW

'HIHQVHV
&RPSDUDWLYH)DXOWLVDYDLODEOHFDQUHGXFHOLDELOLW\WKHSURGXFWKDVWREHXVHGIRULWV
LQWHQGHGSXUSRVH