Court Opinion

ID: 2969774
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:56:55.153862+00
Date Added: 2024-06-11T11:40:27.847072
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
             3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

     (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                 )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6
               )257+(6,;7+&,5&8,7
                 BBBBBBBBBBBBBBBBB

 2+,2 &$67 352'8&76 ,1&     ;
                3HWLWLRQHU     
                                
                                  1RV
          Y                    
                                 !
                                
 7+( 2&&83$7,21$/ 6$)(7<        
 	 +($/7+ 5(9,(:                
 &200,66,21DQG$/(;,6 0       
 +(50$1 6HFUHWDU\RI/DERU 
               5HVSRQGHQWV 
                                
                                
                               1
         $SSHDOIURPWKH2FFXSDWLRQDO6DIHW\
           DQG+HDOWK5HYLHZ&RPPLVVLRQ
                     1R
               $UJXHG1RYHPEHU
            'HFLGHGDQG)LOHG$SULO
   %HIRUH:(//)25'6,/(5DQG%$7&+(/'(5
                  &LUFXLWsXGJHV
                   BBBBBBBBBBBBBBBBB
                        &2816(/
$5*8('  .HLWK $ $VKPXV )5$17= 	 :$5'
&OHYHODQG2KLRIRU3HWLWLRQHUsRKQ6KRUWDOO2)),&(2)

                             
     2KLR&DVW3URGXFWV,QFY             1RV         1RV          2KLR&DVW3URGXFWV,QFY   
      26+5&HWDO                                                                                            26+5&HWDO

7+( 62/,&,725 :DVKLQJWRQ '& IRU 5HVSRQGHQWV                  UHVSLUDEOHlVWDQGDUGFRQWDLQHGLQ&)5F
21 %5,()  .HLWK $ $VKPXV )5$17= 	 :$5'                      ZHUHSURSHU
&OHYHODQG2KLRIRU3HWLWLRQHUsRKQ6KRUWDOO%UXFHsXVWK
2)),&( 2) 7+( 62/,&,725 :DVKLQJWRQ '& IRU                      $)),50('
5HVSRQGHQWV
                      BBBBBBBBBBBBBBBBB
                          23,1,21
                      BBBBBBBBBBBBBBBBB
   6,/(5&LUFXLWsXGJH3HWLWLRQHU2KLR&DVW3URGXFWV,QF
m2KLR&DVWlFRQWHVWVFLWDWLRQVLVVXHGWRLWE\WKH6HFUHWDU\
RI /DERU m6HFUHWDU\l IRU IDLOXUH WR SURWHFW LWV ZRUNHUV
DJDLQVW UHVSLUDEOH GXVW FRQWDLQLQJ FU\VWDOOLQH TXDUW] VLOLFD
SXUVXDQWWR&)5F2KLR&DVWFRQWHQGV
WKDWWKH6HFUHWDU\jVPHWKRGRIFDOFXODWLQJDFWXDOFU\VWDOOLQH
TXDUW]VLOLFDH[SRVXUHZDVDQXQUHDVRQDEOHLQWHUSUHWDWLRQRI
 F DQG WKDW LW GLG QRW KDYH IDLU QRWLFH RI WKH
6HFUHWDU\jVFDOFXODWLRQPHWKRG7KH2FFXSDWLRQDO6DIHW\DQG
+HDOWK 5HYLHZ &RPPLVVLRQ m26+5&l DIILUPHG WKH
FLWDWLRQVKROGLQJWKDWWKH6HFUHWDU\jVPHWKRGRIFDOFXODWLQJ
DFWXDO FU\VWDOOLQH VLOLFD H[SRVXUH ZDV UHDVRQDEOH DQG WKDW
2KLR&DVWGLGKDYHIDLUQRWLFHRIWKDWPHWKRG:HDIILUP
                         ,%DFNJURXQG
  2KLR&DVWLVDPDQXIDFWXUHURILURQDXWRPRWLYHSURGXFWVLQ
&DQWRQ 2KLR  $V DQ HPSOR\HU HQJDJHG LQ D EXVLQHVV
DIIHFWLQJFRPPHUFH2KLR&DVWLVVXEMHFWWRWKHUHTXLUHPHQWV
RIWKH2FFXSDWLRQDO6DIHW\DQG+HDOWK$FWRI86&
m26+$FWl
   ,Q 0D\  WKH 6HFUHWDU\ FLWHG 2KLR &DVW IRU VHYHUDO
DOOHJHGYLRODWLRQVXQGHUWKH26+$FW7KHVHYLRODWLRQVZHUH
GHWHFWHGGXULQJD0DUFK$SULOLQVSHFWLRQRILWVIDFLOLW\
E\0DUF6QLW]HUDFRPSOLDQFHRIILFHUZLWKWKH2FFXSDWLRQDO
6DIHW\DQG+HDOWK$GPLQLVWUDWLRQm26+$l2KLR&DVWDQG
26+$VXEVHTXHQWO\HQWHUHGLQWRDVHWWOHPHQWDJUHHPHQWRQ
DOOPDWWHUVH[FHSWRQH7KH\FRQWLQXHGWRGLVDJUHHDERXWWKH
    2KLR&DVW3URGXFWV,QFY             1RV        1RV              2KLR&DVW3URGXFWV,QFY          
      26+5&HWDO                                                                                               26+5&HWDO

  $VDPDQXIDFWXUHUDGPLWWHGO\DZDUHRIWKHVLOLFDVWDQGDUGV           FRUUHFW PHWKRGRIFDOFXODWLQJDFWXDOHPSOR\HHH[SRVXUHWR
FRQWDLQHG LQ  F 2KLR &DVW EHFDXVH RI WKH         mFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHlSXUVXDQWWR&)5
PDWKHPDWLFDOJXLGDQFHRIWKH3(/IRUPXODFRQVLVWHQW26+$              FDQGDVDUHVXOW2KLR&DVWFRQWHVWHGFLWDWLRQV
HQIRUFHPHQWRIWKHVLOLFDVWDQGDUGDQGVWDWHPHQWVPDGHLQ             UHFHLYHGIRUFU\VWDOOLQHTXDUW]VLOLFDRYHUH[SRVXUH
SURIHVVLRQDOOLWHUDWXUHSULRUWR26+$jVLQVSHFWLRQKDG
IDLU QRWLFH WKDW DFWXDO UHVSLUDEOH VLOLFD GXVW ZDV WR EH         'XULQJWKH26+$LQVSHFWLRQ6QLW]HUDQG:LOOLDP1L[RQ
FDOFXODWHGLQUHODWLRQWRWKHWRWDODPRXQWRIUHVSLUDEOHGXVW          2KLR&DVWjVLQGXVWULDOK\JLHQHFRQVXOWDQWDQGDIRUPHU26+$
FROOHFWHG                                                             FRPSOLDQFH RIILFHU VDPSOHG WKH UHVSLUDEOH GXVW DURXQG
                                                                       HPSOR\HH 5LFN +LOO  2KLR &DVW NQHZ WKDW +LOOjV ZRUN
   $GGLWLRQDOO\ 2KLR FDVW KDG DFWXDO QRWLFH RI 26+$jV          DFWLYLWLHV LQYROYHG WKH XVH RI VDQG FRQWDLQLQJ VLOLFD EXW LW
PHWKRGRIFDOFXODWLQJDFWXDOH[SRVXUH2KLR&DVWjVSULYDWH            SURYLGHGKLPZLWKQRUHVSLUDWRU\SURWHFWLRQ6QLW]HU26+$
FRQVXOWDQWDQGH[SHUW:LOOLDP1L[RQSUHYLRXVO\ZRUNHGDV             GHWHUPLQHGWKDW+LOOZDVRYHUH[SRVHGWRFU\VWDOOLQHTXDUW]
DQ 26+$ LQVSHFWRU DQG LQ WKDW FDSDFLW\ KH FDOFXODWHG         VLOLFDZKLOH1L[RQ2KLR&DVWGHWHUPLQHGWKDWKHZDVQRW
UHVSLUDEOH mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOHl H[SRVXUH     RYHUH[SRVHG$LUVDPSOHVFROOHFWHGE\26+$DQG2KLR&DVW
7KHUHFRUGFRQWDLQVFRSLHVRIFLWDWLRQVLVVXHGE\WKHQ26+$           GLIIHUHG VOLJKWO\ EXW WKDW GLIIHUHQFH GLG QRW H[SODLQ WKHLU
LQVSHFWRU 1L[RQ IRU UHVSLUDEOH VLOLFD RYHUH[SRVXUH  7KH        GLVDJUHHPHQWDERXWZKHWKHU2KLR&DVWRYHUH[SRVHG+LOOWR
IRUPXODWKDW1L[RQXVHGWRGHWHUPLQHDFWXDOVLOLFDH[SRVXUH            VLOLFDSXUVXDQWWRF7KHLUGLIIHUHQFHRIRSLQLRQ
ZDVWKHVDPHPHWKRGDGRSWHGE\WKH6HFUHWDU\LQWKLVFDVH             DERXWVLOLFDRYHUH[SRVXUHUHVXOWHGIURPGLIIHUHQWPHWKRGVRI
1L[RQZRUNVDVDQLQGXVWULDOK\JLHQHFRQVXOWDQWIRU2KLR&DVW          FDOFXODWLQJ+LOOjVDFWXDOH[SRVXUHWRVLOLFD
DQG LQ WKDW FDSDFLW\ KH QRZ SOHDGV LJQRUDQW WR NQRZLQJ
DERXW26+$jVPHWKRGRIFDOFXODWLQJmFU\VWDOOLQHTXDUW]VLOLFD            $UJXLQJ WKDW LWV PHWKRG RI FDOFXODWLQJ DFWXDO ZRUNHU
UHVSLUDEOHl H[SRVXUH  %HFDXVH RI 1L[RQjV ILUVWKDQG           H[SRVXUHWRFU\VWDOOLQHTXDUW]VLOLFDZDVWKHRQO\UHDVRQDEOH
NQRZOHGJHRI26+$jVFDOFXODWLRQPHWKRGKLVKLUHGUROHDV              RQH2KLR&DVWDQGWKH6HFUHWDU\HDFKUHVSHFWLYHO\ILOHGIRU
D PRQLWRU GXULQJ 26+$jV LQVSHFWLRQ DQG KLV UROH DV DQ        VXPPDU\ MXGJPHQW EHIRUH DQ $GPLQLVWUDWLYH /DZ sXGJH
H[SHUWLQWKLVFDVHKLVNQRZOHGJHRI26+$jVPHWKRGRORJ\LV            m$/sl  7KH $/s DQG WKHQ 26+5& RQ UHYLHZ JUDQWHG
LPSXWHGWR2KLR&DVW                                                VXPPDU\MXGJPHQWIRUWKH6HFUHWDU\2KLR&DVWZDVILQHG
                                                                       IRUIDLOLQJWRSURWHFWLWVZRUNHUVDJDLQVWRYHUH[SRVXUH
                          LY&LWDWLRQV                               WRUHVSLUDEOHGXVWFRQWDLQLQJFU\VWDOOLQHTXDUW]VLOLFD
   )LQDOO\ 2KLR &DVW DUJXHV WKDW EHFDXVH WKH 6HFUHWDU\jV                                 ,,'LVFXVVLRQ
LQWHUSUHWDWLRQ RI WKH mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOHl
VWDQGDUGZDVXQUHDVRQDEOHDQGWKDWLWGLGQRWKDYHIDLUQRWLFH           2KLRFDVWDUJXHVWKDWWKH6HFUHWDU\jVLQWHUSUHWDWLRQRIKRZ
RIWKHVWDQGDUGjVHQIRUFHPHQWWKLVFRXUWVKRXOGUHYHUVHWKH           DFWXDOZRUNSODFHH[SRVXUHWRUHVSLUDEOHVLOLFDLVFDOFXODWHG
GHFLVLRQRI26+5&YDFDWLQJVLOLFDFLWDWLRQV UHFHLYHGDVD            XQGHU  &)5  F LV FRQWUDU\ WR WKH SODLQ
UHVXOWRIWKH+LOOVDPSOLQJ+DYLQJKHOGKRZHYHUWKDWWKH           ODQJXDJH RI WKDW  UHJXODWLRQ DQG WKDW HQIRUFHPHQW RI WKDW
6HFUHWDU\jVLQWHUSUHWDWLRQZDVUHDVRQDEOHDQGWKDW2KLR&DVW           LQWHUSUHWDWLRQFRQVWLWXWHVDGHQLDORIGXHSURFHVVEHFDXVHLW
KDGDPSOHQRWLFHRIWKH6HFUHWDU\jVPHWKRGRIHQIRUFLQJWKH            KDG QR QRWLFH WKDW 26+$ ZRXOG FDOFXODWH VLOLFD H[SRVXUH
VLOLFD VWDQGDUG ZH GHWHUPLQH WKDW WKH ILQHV OHYLHG DJDLQVW    DFFRUGLQJ WR WKDW LQWHUSUHWDWLRQ  7KHUHIRUH LW DUJXHV WKDW
2KLR &DVW IRU YLRODWLRQ RI WKH mFU\VWDOOLQH TXDUW] VLOLFD
     2KLR&DVW3URGXFWV,QFY               1RV         1RV               2KLR&DVW3URGXFWV,QFY         
      26+5&HWDO                                                                                                   26+5&HWDO

FLWDWLRQVLVVXHGIRU+LOOjVRYHUH[SRVXUHWRVLOLFDVKRXOGEH              WK&LUm:KLOHDQHPSOR\HULVHQWLWOHGWR
YDFDWHG                                                                 IDLU ZDUQLQJ RI FRQGXFW ZKLFK DQ RFFXSDWLRQDO KHDOWK DQG
                                                                          VDIHW\ VWDQGDUG SURKLELWV RU UHTXLUHV WKLV GHWHUPLQDWLRQ LV
   1R IHGHUDO FRXUW KDV SUHYLRXVO\ DGGUHVVHG ZKHWKHU WKH           PDGHZLWKUHIHUHQFHWRZKDWDQHPSOR\HUIDPLOLDUZLWKWKH
6HFUHWDU\jVPHWKRGRIFDOFXODWLQJDFWXDOZRUNSODFHH[SRVXUH               LQGXVWU\FRXOGUHDVRQDEO\EHH[SHFWHGWRNQRZl0DUWLQY
WR mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOHl VHH  &)5         $PHULFDQ&\DQDPLG&R)GWK&LU
 F  7DEOH = LV UHDVRQDEOH  ,Q IDFW       )DFWRUVWKDWWKHFRXUWZHLJKVLQHYDOXDWLQJDGHTXDWHQRWLFH
WKHUHLVQRSUHFHGHQWUHJDUGLQJFDOFXODWLRQRIDFWXDOH[SRVXUH            LQFOXGH   DUWIXO YV LQDUWIXO GUDIWLQJ RI D UHJXODWLRQ 
IRUDQ\RIWKHUHJXODWHGVXEVWDQFHVOLVWHGLQ7DEOH=:H              FRPPRQ XQGHUVWDQGLQJ DQG FRPPHUFLDO SUDFWLFH DQG 
KROG WKDW WKH 6HFUHWDU\jV PHWKRG RI FDOFXODWLQJ DFWXDO             FRQILUPDWLRQ RI LQGXVWU\ SUDFWLFH E\ D SDWWHUQ RI
ZRUNSODFHH[SRVXUHWRVLOLFDXQGHUF7DEOH=              DGPLQLVWUDWLYHHQIRUFHPHQW6HH'LHEROG,QFY0DUVKDOO
GHULYHV IURP D UHDVRQDEOH LQWHUSUHWDWLRQ RI WKDW UHJXODWLRQ       )GWK&LU
WKDW2KLR&DVWKDGIDLUQRWLFHRIKRZWKH6HFUHWDU\HQIRUFHG
WKDW LQWHUSUHWDWLRQ DQG WKDW WKH FLWDWLRQV UHFHLYHG E\ LW IRU      6LQFH 2KLR &DVW ZDV H[SRVHG WR PRQHWDU\ SHQDOWLHV IRU
VLOLFDRYHUH[SRVXUHZHUHYDOLG                                         RYHUH[SRVLQJLWVHPSOR\HHVWRVLOLFDLWZDVHQWLWOHGWRIDLU
                                                                          QRWLFH RI 26+$jV PHWKRG RI FDOFXODWLQJ DFWXDO UHVSLUDEOH
                      L6WDQGDUGRI5HYLHZ                              VLOLFDH[SRVXUH7KHTXHVWLRQLVZKHWKHU2KLR&DVWKDGIDLU
                                                                          QRWLFHWKDWRYHUH[SRVXUHZRXOGEHFDOFXODWHGDFFRUGLQJWRWKH
   7KLV FRXUW VHWV DVLGH DJHQF\ DFWLRQ WKDW LV mDUELWUDU\        6HFUHWDU\jVIRUPXOD2KLR&DVWFODLPVWKDWLWGLGQRW:H
FDSULFLRXV DQ DEXVH RI GLVFUHWLRQ RU RWKHUZLVH QRW LQ           KRZHYHUILQGWKDW2KLR&DVWGLGKDYHIDLUQRWLFH
DFFRUGDQFH ZLWK ODZl   86&  $ 5HLFK Y
*HQHUDO0RWRUV&RUS)GWK&LU$Q                  $VSUHYLRXVO\GLVFXVVHGWKHVLOLFDVWDQGDUGjV3(/IRUPXOD
DGPLQLVWUDWLYHDJHQF\jVLQWHUSUHWDWLRQRILWVRZQUHJXODWLRQV             UHJXODWHV VLOLFD H[SRVXUH LQ RQO\ RQH PDQQHU  7KH 3(/
LVHQWLWOHGWRVXEVWDQWLDOGHIHUHQFH6HH8GDOOY7DOOPDQ          IRUPXOD SURYLGHG LQ 7DEOH = FDOFXODWHV 3(/ EDVHG RQ D
867KLVFRXUWDFFRUGVVXEVWDQWLDOGHIHUHQFHWR           PHDVXUHPHQWRIDOOUHVSLUDEOHGXVWDQGWKH3(/DQGDFWXDO
WKH 6HFUHWDU\jV FRQVWUXFWLRQ RI DQ 26+$ VWDQGDUG LI LW LV        H[SRVXUH ILJXUHV PXVW EH IXQFWLRQDOO\ WKH VDPH WR EH
DPELJXRXV DQG WKH 6HFUHWDU\jV LQWHUSUHWDWLRQ RI LW LV              FRPSDUHG  $FWXDO H[SRVXUH PXVW EH FDOFXODWHG DV D
UHDVRQDEOH6HH0DUWLQY26+5&86               PHDVXUHPHQWRIDOOUHVSLUDEOHGXVW)XUWKHUPRUHXQUHEXWWHG
7KH6HFUHWDU\jVLQWHUSUHWDWLRQQHHGQRWEHWKHRQO\UHDVRQDEOH            HYLGHQFHGHPRQVWUDWHGWKDWWKH6HFUHWDU\HQIRUFHGWKHVLOLFD
LQWHUSUHWDWLRQIRULWWREHVXVWDLQHG6HH)OXRU&RQVWUXFWRUV           VWDQGDUGLQDFRQVLVWHQWPDQQHUVLQFHLWVDGRSWLRQLQ
,QFY26+5&)GWK&LU                        $QGDMRXUQDODUWLFOHFXULRXVO\FLWHGE\2KLR&DVWLQLWV
                                                                          EULHI DV HYLGHQFH LQ LWV IDYRU VWDWHG WKDW WKH mLQGXVWULDO
  %XW ZKHUH mDQ DOWHUQDWLYH UHDGLQJ LV FRPSHOOHG E\ WKH          K\JLHQHFRPPXQLW\UHFRJQL]HVWKHHQIRUFHPHQWXVHRI
UHJXODWLRQjV SODLQ ODQJXDJH RU E\ RWKHU LQGLFDWLRQV RI WKH        WKH26+$3(/l3KLOOLS:LOOLDPV0DWWKHZ3DUNHU	
6HFUHWDU\jV LQWHQW DW WKH WLPH RI WKH UHJXODWLRQjV                 3DXO0LGGHQGRUI5HVSLUDEOH)UHH6LOLFD$&RPSDULVRQRI
SURPXOJDWLRQlWKLVFRXUWQHHGQRW GHIHUWRWKH6HFUHWDU\jV              WKH2FFXSDWLRQDO([SRVXUH/LPLWV$P,QGXV+\JLHQH
LQWHUSUHWDWLRQ6HH*DUGHEULQJYsHQNLQV86             $VVjQs
:KHQDQDJHQF\SURPXOJDWHVUHJXODWLRQVLWLVERXQG
E\WKRVHUHJXODWLRQVDQGLWPD\QRWDWWHPSWWRVXEYHUWWKH
    2KLR&DVW3URGXFWV,QFY             1RV       1RV              2KLR&DVW3URGXFWV,QFY        
      26+5&HWDO                                                                                              26+5&HWDO

WKDWWKH3(/IRUPXODZRXOGVHUYHQRSXUSRVH,IDIL[HG3(/          UXOHPDNLQJSURFHVVWKURXJKLQWHUSUHWDWLRQXQVXSSRUWHGE\WKH
ZDVLQWHQGHGWREHDSSOLHGWRDOOHPSOR\HUVLQDOOVLWXDWLRQV        UHJXODWLRQjVODQJXDJH6HH)OXRU)GDW
WKHmFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHl3(/IRUPXODZRXOG
QRW KDYH EHHQ PDWKHPDWLFDOO\ FUHDWHG WR \LHOG YDU\LQJ                                 LL6LOLFD6WDQGDUG
H[SRVXUHOLPLWV,WZRXOGVLPSO\KDYHOLVWHGPJP DV    

WKHIL[HG3(/,QVWHDGWKH3(/IRUPXODLVPDWKHPDWLFDOO\               %HFDXVH RYHUH[SRVXUH WR VLOLFD FDQ FDXVH VLOLFRVLV ZLWK
FUDIWHG WR \LHOG D VOLGLQJ VFDOH RI 3(/V EDVHG RQ VLOLFD    SHUPDQHQWOXQJGDPDJHDQGGLVDELOLW\VHH8ULHY7KRPSVRQ
FRPSRVLWLRQZLWKLQDWRWDOUHVSLUDEOHGXVWVDPSOH                   86ZRUNSODFHH[SRVXUHWRUHVSLUDEOH
                                                                      VLOLFDLVUHJXODWHG6HH&)5F,Q
  *LYHQ WKH FOHDU PDWKHPDWLFDO PHDQLQJ DQG HIIHFW RI WKH      WKH6HFUHWDU\DGRSWHGDZRUNSODFHVLOLFDH[SRVXUHVWDQGDUGDV
3(/ IRUPXOD WKH 6HFUHWDU\jV PHWKRG RI FDOFXODWLQJ DFWXDO      DQmHVWDEOLVKHG)HGHUDOVWDQGDUGlXQGHU6HFWLRQDRIWKH
ZRUNHUH[SRVXUHWRmFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHlLV        26+ $FW  86&  D  6HFWLRQ D H[HPSWHG WKH
UHDVRQDEOH                                                           6HFUHWDU\ IURP PDNLQJ GHWDLOHG IDFWXDO ILQGLQJV DQG
                                                                      UHJXODWRU\ DQQRXQFHPHQWV VXSSRUWLQJ DQG H[SODLQLQJ WKH
               F3(/YHUVXV$FWXDO([SRVXUH                         VLOLFDVWDQGDUG6HH$)/&,2Y26+$)G
                                                                      WK&LU7KHVLOLFDH[SRVXUHOLPLWDGRSWHGE\WKH
  1H[W ZH FRPSDUH WKH FRPSXWHG 3(/ IRU VLOLFD DW 2KLR       6HFUHWDU\GHULYHGIURPWKH:DOVK+HDOH\3XEOLF&RQWUDFWV
&DVWjVIDFLOLW\ZLWKDFWXDOH[SRVXUHFDOFXODWHGDWWKDWIDFLOLW\     $FW  86&   ZKLFK UHTXLUHG FRPSOLDQFH ZLWK
7KHFRPSDULVRQGHPRQVWUDWHVWKDWDFWXDOH[SRVXUHH[FHHGHG             H[SRVXUHOHYHOVGHYHORSHGE\WKH $PHULFDQ&RQIHUHQFHRI
3(/ UHJDUGOHVV RI ZKLFK SDUW\jV VDPSOLQJ GDWD LV XWLOL]HG    *RYHUQPHQWDO ,QGXVWULDO +\JLHQLVWV  1RZ FRGLILHG DW
26+$FRPSXWHGWKH3(/WREHPJP DQG2KLR&DVW
                                                
                                                                       &)5  F WKH mFU\VWDOOLQH TXDUW] VLOLFD
FDOFXODWHGLWWREHPJP $FWXDOH[SRVXUHXVLQJWKH
                                 
                                                                      UHVSLUDEOHlVWDQGDUGSURYLGHVWKDWmDQHPSOR\HHjVH[SRVXUH
6HFUHWDU\jV 3(/JXLGHG PHWKRG RI FDOFXODWLQJ DFWXDO              WR>UHVSLUDEOHFU\VWDOOLQHTXDUW]VLOLFD@>DV@OLVWHGLQ7DEOH=
H[SRVXUHZRXOGEHHLWKHUPJP RUPJP ILJXUHV
                                                        
                                                                       LQ DQ\ KRXU ZRUN VKLIW RI D KRXU ZHHN VKDOO QRW
WKDWH[FHHGERWKSRWHQWLDO3(/V2KLR&DVWFRQFHGHVWKDW            H[FHHGWKHKRXUWLPHZHLJKWHGDYHUDJHOLPLWJLYHQIRUWKDW
XVLQJWKH6HFUHWDU\jVPHWKRGRORJ\LWVHPSOR\HHjVH[SRVXUH            VXEVWDQFHLQWKHWDEOHl7DEOH=FRQWDLQVDPDWKHPDWLFDO
WRUHVSLUDEOHVLOLFDH[FHHGHGWKHOHJDOOLPLW                        IRUPXOD IRU FDOFXODWLQJ WKH SHUPLVVLEOH H[SRVXUH OLPLW
                                                                      m3(/lIRUYDULRXVm0LQHUDO'XVWVlLQFOXGLQJmFU\VWDOOLQH
                           LLL1RWLFH                               TXDUW]VLOLFDUHVSLUDEOHl3(/UHIOHFWVWKHPD[LPXPDPRXQW
                                                                      RIDFRQWDPLQDQWLQWKHDLUWRZKLFKZRUNHUVPD\EHH[SRVHG
  2KLR &DVW DOVR DUJXHV WKDW HYHQ LI WKH 6HFUHWDU\jV         RYHUDJLYHQWLPHSHULRG
LQWHUSUHWDWLRQRIWKHVLOLFDVWDQGDUGZDVUHDVRQDEOHLWGLGQRW
KDYH IDLU QRWLFH RI WKH 6HFUHWDU\jV IRUPXOD IRU FDOFXODWLQJ      %HFDXVHRILWVPDQXIDFWXULQJDFWLYLWLHV2KLR&DVWLVFOHDUO\
DFWXDOUHVSLUDEOHVLOLFDH[SRVXUH                                    UHJXODWHGXQGHUF7KUHHFDOFXODWLRQVEDVHGRQ
                                                                      D VLQJOH VDPSOLQJ RI UHVSLUDEOH GXVW GHWHUPLQH ZKHWKHU D
   mµ/LNHRWKHUVWDWXWHVDQGUHJXODWLRQVZKLFKDOORZPRQHWDU\         ZRUNHULVRYHUH[SRVHGWRVLOLFDSXUVXDQWWRF
SHQDOWLHV DJDLQVW WKRVH ZKR YLRODWH WKHP DQ RFFXSDWLRQDO      )LUVW WKH 3(/ IRUPXOD IRU mFU\VWDOOLQH TXDUW] VLOLFD
VDIHW\DQGKHDOWKVWDQGDUGPXVWJLYHDQHPSOR\HUIDLUZDUQLQJ         UHVSLUDEOHlmPJP i6L2 lLVHPSOR\HGWR
                                                                                                 

RIWKHFRQGXFWLWSURKLELWVRUUHTXLUHVjl)OXRU)G                                             
                                                                      FDOFXODWHD3(/6HH&)5F7DEOH=
DWTXRWLQJ'LDPRQG5RRILQJ&RY26+5&)G
      2KLR&DVW3URGXFWV,QFY            1RV      1RV             2KLR&DVW3URGXFWV,QFY       
       26+5&HWDO                                                                                           26+5&HWDO

6HFRQGDFWXDOH[SRVXUHLVFDOFXODWHG$QGWKLUG3(/DQG          UHVSLUDEOH GXVW FROOHFWHG QRW MXVW VLOLFD GXVW  7KH 3(/
DFWXDO H[SRVXUH FDOFXODWLRQV DUH FRPSDUHG  :KHQ DFWXDO       IRUPXOD  PJP  i  6L2    KDV D QXPHUDWRU
                                                                                           
                                                                                                          
H[SRVXUH H[FHHGV 3(/ DQ HPSOR\HU LV LQ YLRODWLRQ RI         UHSUHVHQWLQJWKHWRWDOZHLJKWRIWKHUHVSLUDEOHGXVWVDPSOH
F                                                     ZKLOH WKH GHQRPLQDWRU UHSUHVHQWV WKH SHUFHQWDJH RI VLOLFD
                                                                     WKHUHLQ$FDOFXODWHG3(/UHSUHVHQWVWRWDOUHVSLUDEOHGXVWSHU
                           D3(/)RUPXOD                           PHWHU FXEHG  7KXV DQ\ IRUPXOD XVHG WR GHWHUPLQH DFWXDO
                                                                     H[SRVXUHZRXOGDOVRQHHGWR\LHOGDUHVXOWUHSUHVHQWLQJWRWDO
   $VH[SUHVVHGLQ7DEOH=WKH3(/VIRUFU\VWDOOLQHTXDUW]       UHVSLUDEOH GXVW SHU PHWHU FXEHG  2WKHUZLVH WKDW DFWXDO
VLOLFDDQGIRULQHUWRUQXLVDQFHGXVWDUHLQWHUUHODWHG7KH       H[SRVXUHILJXUHZRXOGEHPDWKHPDWLFDOO\LQFRPSDWLEOHZLWK
3(/ IRUPXOD RSHUDWHV WR UHJXODWH VLOLFD H[SRVXUH E\           LWVEHQFKPDUN3(/DQGDQ\FRPSDULVRQEHWZHHQWKRVHDFWXDO
GHWHUPLQLQJLWVFRQFHQWUDWLRQLQUHVSLUDEOHGXVWDQGVHWWLQJ         H[SRVXUHDQG3(/ILJXUHVZRXOGEHPHDQLQJOHVV
YDULDEOHOLPLWVRQH[SRVXUHWRWKHUHVSLUDEOHGXVWGHSHQGLQJ
RQLWVVLOLFDFRQFHQWUDWLRQ7KHQXPHUDWRULQWKHVLOLFD3(/           &RPSDUDELOLW\EHWZHHQDQDFWXDOH[SRVXUHFDOFXODWLRQDQG
IRUPXOD mPJP l UHSUHVHQWV WKH ZHLJKW RI WKH WRWDO
                       
                                                                     LWVEHQFKPDUN3(/LVDGYDQFHGE\WKHGDWDFROOHFWLRQSURFHVV
UHVSLUDEOHGXVWVDPSOHDQGLWVGHQRPLQDWRUm6L2 l           'DWDFROOHFWHGWRGHWHUPLQHDFWXDOH[SRVXUHFRPHVIURPWKH
UHSUHVHQWVWKHSHUFHQWDJHRIVLOLFDWKHUHLQ:KHUHm6L2 l       VDPHDLUVDPSOLQJDVGDWDFROOHFWHGWRFDOFXODWHWKH3(/WR
HTXDOVmlUHSUHVHQWLQJGXVWZLWKQRTXDUW]VLOLFDLQLWWKH       ZKLFKLWLVWREHFRPSDUHG)RULQVWDQFHZKHQ6QLW]HUSODFHG
3(/IRUPXOD\LHOGVD3(/RIPJP >PJP i@
                                                      
                                                                     DQDLUFROOHFWLRQGHYLFHRQZRUNHU+LOOjVVKRXOGHUWKHDLUWKDW
$PJP 3(/LVWKHIL[HG3(/OLVWHGLQ7DEOH=IRUmLQHUW
            
                                                                     ZDVFROOHFWHGIURPWKDWGHYLFHZDVXVHGWRFRPSXWHERWKWKH
RUQXLVDQFHGXVWlZKLFKGHPRQVWUDWHVWKDWWKH3(/IRUVLOLFD        3(/DQGDFWXDOVLOLFDH[SRVXUHOHYHOVIRU+LOOjVZRUNVSDFH
ZRUNVLQKDUPRQ\ZLWKWKH3(/IRULQHUWGXVW6HHLG:KHUH        7KLV SURFHVV HQVXUHG WKDW WKH WRWDO UHVSLUDEOH GXVW LQ WKH
WKHUHLVQRVLOLFDGHWHFWHGLQWKHDLUWKH3(/\LHOGHGVKRXOG       SK\VLFDODUHDEHLQJWHVWHGIRUDFWXDOH[SRVXUHZDVFRPSULVHG
ORJLFDOO\EHDQGLVHTXDOWRWKDWDOORZHGIRULQHUWGXVW       RIWKHH[DFWSURSRUWLRQRIUHVSLUDEOHVLOLFDDFFRXQWHGIRULQ
$QGZKHUHm6L2 lHTXDOVmlUHSUHVHQWLQJGXVWWKDWLV
                                                                    WKH3(/7KXVWKHVDPHDLUZDVWHVWHGIRU26+$jV3(/DQG
SXUH TXDUW] VLOLFD WKH 3(/ IRUPXOD \LHOGV D 3(/ RI    DFWXDOH[SRVXUHFDOFXODWLRQV
PJP >PJPi@7KHRQO\YDULDEOHLQWKH3(/
       

IRUPXODLVm6L2 lWKHSHUFHQWDJHRIWKHWRWDOUHVSLUDEOH
                      
                                                                        %\ DFFHSWLQJ WKH 3(/ IRUPXODjV PHDQLQJ 2KLR &DVW
GXVWVDPSOHWKDWLVVLOLFD                                        LPSOLFLWO\DFFHSWVWKH6HFUHWDU\jVPHWKRGRORJ\IRUFDOFXODWLQJ
                                                                     DFWXDO FU\VWDOOLQH TXDUW] VLOLFD H[SRVXUH  7R UHWDLQ
    7KXVWKH3(/IRUPXOD                                          FRPSDUDELOLW\EHWZHHQDFWXDOH[SRVXUHDQG3(/ILJXUHVXQGHU
                                                                     2KLR &DVWjV SURSRVHG IRUPXOD IRU GHWHUPLQLQJ DFWXDO
    RSHUDWH>V@LQVXFKDZD\DVWRFUHDWHDVOLGLQJVFDOHRI         H[SRVXUHGLYLGLQJRQO\UHVSLUDEOHVLOLFDGXVWZHLJKWE\WRWDO
    3(/jV GHSHQGLQJ RQ WKH SHUFHQWDJH RI WKH    WRWDO   DLUYROXPHRIWKHFRPSOHWHGXVWVDPSOHKRZHYHUWKH3(/
    UHVSLUDEOHIUDFWLRQRIWKHGXVWWKDWLVFU\VWDOOLQHTXDUW]       IRUPXODZRXOGDOVRKDYHWREHFDOFXODWHGWRUHIOHFWSXUHVLOLFD
    VLOLFD  ,Q WKLV ZD\ WKH 3(/jV DUH ORZHUHG DV WKH     DLU  %XW JLYHQ WKH 3(/ IRUPXOD D SXUH VLOLFDEDVHG 3(/
    SHUFHQWDJH RI VLOLFD LQ WKH GXVW EHFRPHV KLJKHU  7KH   ZRXOGUHPRYHWKHYHU\QHHGIRUWKH3(/IRUPXOD$SXUH
    XSSHUOLPLW RI WKHVOLGLQJVFDOHLVWKH3(/IRULQHUWRU       VLOLFDEDVHG3(/ZRXOGEHFDOFXODWHGE\LQVHUWLQJLQ
    QXLVDQFHGXVWFRQWDLQLQJQRTXDUW]WKHORZHUOLPLWLV         WKHGHQRPLQDWRURIWKH3(/IRUPXOD7KLVZRXOGUHVXOWLQD
    WKH3(/IRUSXUHTXDUW]GXVW                                    FRQVWDQW3(/RIPJP >PJP i@PHDQLQJ
                                                                                                              
    2KLR&DVW3URGXFWV,QFY             1RV         1RV             2KLR&DVW3URGXFWV,QFY        
      26+5&HWDO                                                                                               26+5&HWDO

HPSOR\HUVDFFRUGLQJWRSXUHVLOLFDH[SRVXUH,WUHJXODWHVDQ          6HFUHWDU\RI/DERUY%XQJH&RUS26+&DV%1$
HPSOR\HUIRUQRQVLOLFDLQHUWGXVWH[SRVXUHRQO\WRWKHH[WHQW         5HY&RPPjQ
WKDWWKHHPSOR\HULVDOUHDG\UHJXODWHGXQGHU7DEOH=$Q
DLU VDPSOH FRQWDLQLQJ  UHVSLUDEOH VLOLFD DOZD\V \LHOGV D        7KH3(/IRUPXODDVH[SODLQHGDERYHLVHPEUDFHGE\DOO
3(/RIPJP WKHIL[HG3(/IRULQHUWGXVWLQ7DEOH=
                  
                                                                        SDUWLHVPDNLQJLWDUHOLDEOHLQGLFDWRURIKRZWKHmFU\VWDOOLQH
$QDLUVDPSOHFRQWDLQLQJVLOLFDDOZD\V\LHOGVD3(/RI             TXDUW] VLOLFD UHVSLUDEOHl VWDQGDUG VKRXOG EH HQIRUFHG
PJP 7KHSHUFHQWDJHRIUHVSLUDEOHVLOLFDGXVWDORQH
            
                                                                        $SSO\LQJ WKH IRUPXOD WR WKH DLU VDPSOH FROOHFWHG IURP
GHWHUPLQHVDVVLJQPHQWRID3(/RQDVOLGLQJVFDOHEHWZHHQ             HPSOR\HH +LOO 26+$ FDOFXODWHG +LOOjV 3(/ WR EH 
PJP DQGPJP WKHVLOLFDGHWHUPLQHG3(/WRZKLFK
                        
                                                                        PJP  DQG 2KLR &DVW FDOFXODWHG LW WR EH  PJP 
                                                                                                                                        

DFWXDOH[SRVXUHZLOOEHFRPSDUHG$V26+5&H[SODLQHG                  'LIIHUHQWDLUVDPSOHVOHGWRWKHVOLJKWGLIIHUHQFHLQWKH3(/
mWKH>FU\VWDOOLQHTXDUW]VLOLFD@VWDQGDUGWKHUHIRUHUHJXODWHV         FDOFXODWLRQV
SXUH UHVSLUDEOH VLOLFD WKH OLVWHG µVXEVWDQFHj EHFDXVH LWV
FRQFHQWUDWLRQ LQ WKH GXVW LV WKH GHWHUPLQDWLYH IDFWRU LQ                      E$FWXDO([SRVXUH&DOFXODWLRQ
FDOFXODWLQJWKH3(/l
                                                                           1R PHWKRG RI FDOFXODWLQJ DFWXDO FU\VWDOOLQH TXDUW] VLOLFD
   $GGLWLRQDOO\7DEOH=FRQWDLQVWKHPDWKHPDWLFDOIRUPXOD            H[SRVXUH LV FRQWDLQHG LQ  F  6LQFH WKH VLOLFD
XVHG WR FDOFXODWH D 3(/ IRU mFU\VWDOOLQH TXDUW] VLOLFD          VWDQGDUGZDVDGRSWHGLQWKH6HFUHWDU\KDVFRQVLVWHQWO\
UHVSLUDEOHlH[SRVXUHDIRUPXODHQGRUVHGE\DOOSDUWLHVWKDW          FDOFXODWHGDFWXDOVLOLFDH[SRVXUHE\GLYLGLQJWKHWRWDOZHLJKW
DFFRXQWVIRUWRWDOUHVSLUDEOHGXVW7DEOH=
VWH[WPXVWEH           LQPLFURJUDPVRIWKHHQWLUHUHVSLUDEOHGXVWVDPSOH>VLOLFDDQG
UHDGLQFRPELQDWLRQZLWKWKHWDEOHjV3(/IRUPXODVLQFHWKDW            QRQVLOLFD@E\WKHQXPEHURIFXELFPHWHUVRIDLUZKLFKIORZHG
IRUPXODSURYLGHVVSHFLILFPDWKHPDWLFDOJXLGDQFHIRUILJXULQJ            DFURVVWKHVDPSOLQJGHYLFHGXULQJWKHVDPSOLQJSHULRG7KH
RXWKRZWKHmFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHlVWDQGDUGLV        6HFUHWDU\ FODLPV WKDW WKLV PHWKRG LV GLFWDWHG E\ WKH
WREHHQIRUFHG$V26+5&VWDWHGEHORZ                                 mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOHl VWDQGDUGjV 3(/
                                                                        IRUPXOD7KHPHWKRGLVXVHGLQWKH26+$7HFKQLFDO0DQXDO
  2KLR&DVWjVUHDGLQJRIWKHVWDQGDUGIDLOVWRFRQVWUXHWKH             DQG LV RXWOLQHG LQ WKH 7DEOH , 6DPSOH &DOFXODWLRQ IRU
  VXEVWDQFHOLVWLQWKHFRQWH[WRIWKHVWDQGDUGDVDZKROH             6LOLFD([SRVXUH2KLR&DVWRQWKHRWKHUKDQGFODLPVWKDW
  DQGLJQRUHVWKHPDWKHPDWLFDORSHUDWLRQRIWKHIRUPXOD             RQO\UHVSLUDEOHVLOLFDGXVWZHLJKWUDWKHUWKDQWRWDOUHVSLUDEOH
  :KLOH WKH  F UHIHUHQFH WR WKH UHJXODWHG            GXVWZHLJKWVKRXOGEHGLYLGHGE\WKHQXPEHURIFXELFPHWHUV
  mVXEVWDQFHlDVDSSOLHGWRWKHVLOLFDPD\EHVOLJKWO\OHVV           RIDLUZKLFKIORZHGDFURVV WKH VDPSOLQJGHYLFHGXULQJWKH
  WKDQGLUHFWZKHQUHDGLQFRQMXQFWLRQZLWKWKH3(/LWVHOI            VDPSOLQJSHULRGWRFDOFXODWHDFWXDOH[SRVXUH$SSO\LQJLWV
  WKH VWDQGDUG LV QRW DPELJXRXV DQG WKH 6HFUHWDU\jV              DFWXDO H[SRVXUH IRUPXOD 26+$ FDOFXODWHG +LOOjV DFWXDO
  DSSOLFDWLRQILWVWKHVWDQGDUGjVSODLQPHDQLQJ                        H[SRVXUHWRmFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHlWREH
                                                                        PJP 7KHDSSOLFDWLRQRI26+$jVIRUPXODWR2KLR&DVWjV
                                                                              

  7KH 3(/ IRUPXOD RSHUDWHV E\ GHWHUPLQLQJ VLOLFD                  VDPSOLQJUHVXOWVZKLFKOHGWRGLIIHUHQW3(/ILJXUHVZRXOG
FRQFHQWUDWLRQLQUHVSLUDEOHGXVWDQGVHWWLQJYDULDEOHOLPLWVRQ         \LHOGDQH[SRVXUHRIPJP $SSO\LQJLWVIRUPXODWR
                                                                                                            

H[SRVXUH WR WKH UHVSLUDEOH GXVW GHSHQGLQJ RQ WKDW                ERWK GDWD FROOHFWLRQV 26+$jV DQG LWV RZQ 2KLR &DVWjV
FRQFHQWUDWLRQ  7KH FRPSXWHG 3(/ PXVW EH FRPSDUHG WR            FDOFXODWLRQ\LHOGHGDFWXDOH[SRVXUHRIPJP RU
                                                                                                                                

HPSOR\HHH[SRVXUHWRWKHVDPHVXEVWDQFHIURPZKLFKLWZDV               PJP  ILJXUHV VLJQLILFDQWO\ OHVV WKDQ WKRVH \LHOGHG XVLQJ
                                                                              

FDOFXODWHG  7KH 3(/ FDOFXODWLRQ LV D IXQFWLRQ RI WKH WRWDO   26+$jVIRUPXOD
     2KLR&DVW3URGXFWV,QFY             1RV         1RV               2KLR&DVW3URGXFWV,QFY           
      26+5&HWDO                                                                                                 26+5&HWDO

   2KLR&DVWFODLPVWKDWWKH6HFUHWDU\jVPHWKRGRIPHDVXULQJ            VL]HVHOHFWRUl6HH&)5F7DEOH=
FU\VWDOOLQHTXDUW]VLOLFDH[SRVXUHmLVSODLQO\DWRGGVZLWKWKH         1RWHmHl7DEOH=FOHDUO\DQWLFLSDWHVWKDWSXUHVLOLFDZLOOEH
ODQJXDJHRIWKHVWDQGDUGLWVHOIl,WDFFXUDWHO\GHPRQVWUDWHV           D FRPSRQHQW RI WKH GXVW FRXQWLQJ DV H[SRVXUH XQGHU WKH
WKDW 7DEOH = UHJXODWHV RQO\ VSHFLILF OLVWHG PLQHUDO           mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOHl VWDQGDUG  6LOLFD
VXEVWDQFHVDQGWKDWLWZDVFLWHGIRUYLRODWLRQVXQGHURQO\WKH         H[SRVXUHZLOOEHFDOFXODWHGLQUHODWLRQWRWKHWRWDODPRXQWRI
mFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHlSURYLVLRQRIWKHWDEOH        UHVSLUDEOHGXVWFROOHFWHGIURPWKHDLU(YDOXDWLQJVLOLFDDVD
,W DUJXHV WKDW WKH 6HFUHWDU\ E\ XVLQJ WRWDO ZHLJKW RI WKH    FRPSRQHQW RI WRWDO GXVW LV UHDVRQDEOH JLYHQ WKH UHDOLW\ RI
UHVSLUDEOHGXVWVDPSOHDVWKHQXPHUDWRULQLWVDFWXDOH[SRVXUH          ZRUNSODFHH[SRVXUHWRFRQWDPLQDQWV
IRUPXODLQVWHDGRIRQO\WKHZHLJKWRIUHVSLUDEOHVLOLFDLQWKDW
VDPSOHSHQDOL]HGLWIRU+LOOjVH[SRVXUHWRQRWMXVWmFU\VWDOOLQH          $VDFRQFHSWXDOPDWWHULWVHHPVXQIDLUWKDWQRQVLOLFDGXVW
TXDUW]VLOLFDUHVSLUDEOHlEXWWRDOOUHVSLUDEOHGXVWFROOHFWHG       LVFRXQWHGDJDLQVWDQHPSOR\HUXQGHUDVLOLFDGXVWVWDQGDUG
VLOLFD DQG QRQVLOLFD FRPELQHG  )XUWKHUPRUH 2KLR &DVW          ,IDVNHGWRFUHDWHDUHJXODWRU\VFKHPHIRUFU\VWDOOLQHTXDUW]
UHIHUHQFHV D VHSDUDWH mLQHUW RU QXLVDQFH GXVWl SURYLVLRQ LQ     VLOLFD WKLV FRXUW PLJKW FUHDWH RQH WKDW VHW D 3(/ IRU VLOLFD
7DEOH=WRVXSSRUWLWVFRQWHQWLRQWKDWLQHUWQRQVLOLFDGXVW         H[SRVXUHWKDWZDVDIXQFWLRQRIVROHO\VLOLFDGXVW%XWWKLV
VKRXOGQRWEHDFRPSRQHQWRIDQ\DFWXDOmFU\VWDOOLQHTXDUW]             FRXUWKDVQRSRZHUWRVHFRQGJXHVVWKH6HFUHWDU\2XUUHYLHZ
VLOLFDUHVSLUDEOHlH[SRVXUHIRUPXOD                                  LV OLPLWHG WR ZKHWKHU WKH 6HFUHWDU\jV LQWHUSUHWDWLRQ RI WKH
                                                                        UHJXODWLRQ DV LW H[LVWV LV UHDVRQDEOH  $QG JLYHQ WKH
   2Q WKH VXUIDFH 2KLR &DVWjV FRQWHQWLRQ WKDW WKH SODLQ        XQGLVSXWHGPHDQLQJRIWKH3(/DQGLWVPHDQLQJZLWKLQWKH
PHDQLQJRIWKHmFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHlVWDQGDUG        IUDPHZRUN RI 7DEOH = DV D ZKROH WKDW LQWHUSUHWDWLRQ LV
FRQWDLQHGLQ7DEOH=SUHFOXGHVFRQVLGHUDWLRQRIQRQVLOLFD            UHDVRQDEOH
GXVWLQGHWHUPLQLQJDFWXDOVLOLFDH[SRVXUHLVSHUVXDVLYH7KH
OLVWHG VXEVWDQFH LV XQDUJXDEO\ mFU\VWDOOLQH TXDUW] VLOLFD            7KH mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOHl DQG mLQHUW RU
UHVSLUDEOHl$QGWKHH[LVWHQFHRIDVHSDUDWHSURYLVLRQIRU           QXLVDQFH GXVWl VWDQGDUGV DUH LQWHUUHODWHG  6HH VXSUD 3DUW
mLQHUW RU QXLVDQFH GXVWl VXJJHVWV WKDW UHVSLUDEOH QRQVLOLFD     ,,LLD :RUNHUVH[SRVHGWRVLOLFDDUHXVXDOO\H[SRVHGWRD
GXVWVKRXOGEHWUHDWHGVHSDUDWHO\IURPUHVSLUDEOHVLOLFDGXVW          PL[WXUHRIVLOLFDDQGQXLVDQFHGXVW7KHVLOLFD3(/DGGUHVVHV
7DEOH=QRWHmGlGHILQHVmLQHUWRUQXLVDQFHGXVWlDVm>D@OO          WKLV VLWXDWLRQ DQG VHWV WKH 3(/ IRU D PL[WXUH RI VLOLFD DQG
LQHUWRUQXLVDQFHGXVWVQRWOLVWHGVSHFLILFDOO\E\VXEVWDQFH      QXLVDQFHGXVWDWDSRLQWEHWZHHQWKH3(/IRUSXUHVLOLFDDQG
QDPHl%XWWKHWLWOHVmFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHl         WKDWIRUQXLVDQFHGXVW7KH3(/IRUVXFKDPL[WXUHUHIOHFWV
DQGmLQHUWRUQXLVDQFHGXVWlDUHQRWWKHRQO\FRPSRQHQWVRI             WKHSHUFHQWDJHRIVLOLFDLQWKHGXVW7KHLQWHUUHODWLRQRIWKH
7DEOH=                                                            VLOLFDDQGLQHUWGXVWVWDQGDUGVDUHQRWWKHRQO\RQHVDFFRXQWHG
                                                                        IRULQ7DEOH=3(/IRUPXODVIRUmFRDOlDQGmDPRUSKRXVl
   2WKHUFRPSRQHQWVRI7DEOH=VXJJHVWWKDWWKHVXEVWDQFH             GXVWDUHDOVRFDOFXODWHGDVDIXQFWLRQRIWRWDOGXVWVDPSOHG
OLVWHGDVmFU\VWDOOLQHTXDUW]VLOLFDUHVSLUDEOHlKDVUHJXODWRU\       6HHF7DEOH=
PHDQLQJEH\RQGLWVSODLQPHDQLQJ7KHVHRWKHUFRPSRQHQWV
KHOS GHILQH WKH PHDQLQJ RI mFU\VWDOOLQH TXDUW] VLOLFD              7KH RQO\ YDULDEOH LQ WKH 3(/ IRUPXOD LV m 6L2 l WKH
                                                                                                                                        

UHVSLUDEOHlZLWKLQWKHUHJXODWRU\VFKHPH)LUVWWKHWDEOH           SHUFHQWDJHRIWKHWRWDOUHVSLUDEOHGXVWVDPSOHWKDWLVVLOLFD
FRQWDLQVDQH[SODQDWRU\QRWHH[SODLQLQJWKLVVLOLFDVWDQGDUG           %HFDXVHVLOLFDFRQFHQWUDWLRQZLWKLQWKHWRWDOGXVWVDPSOHGLV
m%RWKFRQFHQWUDWLRQDQGSHUFHQWTXDUW]IRUWKHDSSOLFDWLRQRI           WKH GHWHUPLQDWLYH IDFWRU LQ FDOFXODWLQJ WKH 3(/ WKH
WKLV OLPLW DUH WR EH GHWHUPLQHG IURP WKH IUDFWLRQ SDVVLQJ D   mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOHl VWDQGDUG  UHJXODWHV