5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH  (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU )LOH 1DPH DS

81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB

2+,2 &$67 352'8&76 ,1& ; 3HWLWLRQHU    1RV   Y  !  7+( 2&&83$7,21$/ 6$)(7<  +($/7+ 5(9,(:  &200,66,21DQG$/(;,6 0  +(50$1 6HFUHWDU\RI/DERU  5HVSRQGHQWV    $SSHDOIURPWKH2FFXSDWLRQDO6DIHW\ DQG+HDOWK5HYLHZ&RPPLVVLRQ 1R  $UJXHG 1RYHPEHU 'HFLGHGDQG)LOHG $SULO %HIRUH :(//)25'6,/(5DQG%$7&+(/'(5 &LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8('   .HLWK $ $VKPXV )5$17=  :$5' &OHYHODQG2KLRIRU3HWLWLRQHUsRKQ6KRUWDOO2)),&(2)   2KLR&DVW3URGXFWV,QFY 1RV   1RV   2KLR&DVW3URGXFWV,QFY  26+5&HWDO 26+5&HWDO 7+( 62/,&,725 :DVKLQJWRQ '& IRU 5HVSRQGHQWV UHVSLUDEOH lVWDQGDUGFRQWDLQHGLQ &)5†  F 21 %5,()   .HLWK $ $VKPXV )5$17=  :$5' ZHUHSURSHU &OHYHODQG2KLRIRU3HWLWLRQHUsRKQ6KRUWDOO%UXFHsXVWK 2)),&( 2) 7+( 62/,&,725 :DVKLQJWRQ '& IRU $)),50(' 5HVSRQGHQWV BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB 6,/(5&LUFXLWsXGJH3HWLWLRQHU2KLR&DVW3URGXFWV,QF m2KLR&DVWl FRQWHVWVFLWDWLRQVLVVXHGWRLWE\WKH6HFUHWDU\ RI /DERU m6HFUHWDU\l  IRU IDLOXUH WR SURWHFW LWV ZRUNHUV DJDLQVW UHVSLUDEOH GXVW FRQWDLQLQJ FU\VWDOOLQH TXDUW] VLOLFD SXUVXDQWWR &)5†  F 2KLR&DVWFRQWHQGV WKDWWKH6HFUHWDU\jVPHWKRGRIFDOFXODWLQJDFWXDOFU\VWDOOLQH TXDUW]VLOLFDH[SRVXUHZDVDQXQUHDVRQDEOHLQWHUSUHWDWLRQRI †   F  DQG WKDW LW GLG QRW KDYH IDLU QRWLFH RI WKH 6HFUHWDU\jVFDOFXODWLRQPHWKRG7KH2FFXSDWLRQDO6DIHW\DQG +HDOWK 5HYLHZ &RPPLVVLRQ m26+5&l  DIILUPHG WKH FLWDWLRQVKROGLQJWKDWWKH6HFUHWDU\jVPHWKRGRIFDOFXODWLQJ DFWXDO FU\VWDOOLQH VLOLFD H[SRVXUH ZDV UHDVRQDEOH DQG WKDW 2KLR&DVWGLGKDYHIDLUQRWLFHRIWKDWPHWKRG:HDIILUP ,%DFNJURXQG 2KLR&DVWLVDPDQXIDFWXUHURILURQDXWRPRWLYHSURGXFWVLQ &DQWRQ 2KLR  $V DQ HPSOR\HU HQJDJHG LQ D EXVLQHVV DIIHFWLQJFRPPHUFH2KLR&DVWLVVXEMHFWWRWKHUHTXLUHPHQWV RIWKH2FFXSDWLRQDO6DIHW\DQG+HDOWK$FWRI  86& †† m26+$FWl  ,Q 0D\   WKH 6HFUHWDU\ FLWHG 2KLR &DVW IRU VHYHUDO DOOHJHGYLRODWLRQVXQGHUWKH26+$FW7KHVHYLRODWLRQVZHUH GHWHFWHGGXULQJD0DUFK$SULO LQVSHFWLRQRILWVIDFLOLW\ E\0DUF6QLW]HUDFRPSOLDQFHRIILFHUZLWKWKH2FFXSDWLRQDO 6DIHW\DQG+HDOWK$GPLQLVWUDWLRQ m26+$l 2KLR&DVWDQG 26+$VXEVHTXHQWO\HQWHUHGLQWRDVHWWOHPHQWDJUHHPHQWRQ DOOPDWWHUVH[FHSWRQH7KH\FRQWLQXHGWRGLVDJUHHDERXWWKH  2KLR&DVW3URGXFWV,QFY 1RV   1RV   2KLR&DVW3URGXFWV,QFY  26+5&HWDO 26+5&HWDO $VDPDQXIDFWXUHUDGPLWWHGO\DZDUHRIWKHVLOLFDVWDQGDUGV FRUUHFW PHWKRGRIFDOFXODWLQJDFWXDOHPSOR\HHH[SRVXUHWR FRQWDLQHG LQ †   F  2KLR &DVW EHFDXVH RI WKH mFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH lSXUVXDQWWR &)5 PDWKHPDWLFDOJXLGDQFHRIWKH3(/IRUPXODFRQVLVWHQW26+$ †  F DQGDVDUHVXOW2KLR&DVWFRQWHVWHGFLWDWLRQV HQIRUFHPHQWRIWKHVLOLFDVWDQGDUGDQGVWDWHPHQWVPDGHLQ UHFHLYHGIRUFU\VWDOOLQHTXDUW]VLOLFDRYHUH[SRVXUH SURIHVVLRQDOOLWHUDWXUHSULRUWR26+$jV LQVSHFWLRQKDG IDLU QRWLFH WKDW DFWXDO UHVSLUDEOH VLOLFD GXVW ZDV WR EH 'XULQJWKH26+$LQVSHFWLRQ6QLW]HUDQG:LOOLDP1L[RQ FDOFXODWHGLQUHODWLRQWRWKHWRWDODPRXQWRIUHVSLUDEOHGXVW 2KLR&DVWjVLQGXVWULDOK\JLHQHFRQVXOWDQWDQGDIRUPHU26+$ 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 PHWKRGRIFDOFXODWLQJDFWXDOH[SRVXUH2KLR&DVWjVSULYDWH SURYLGHGKLPZLWKQRUHVSLUDWRU\SURWHFWLRQ6QLW]HU 26+$ FRQVXOWDQWDQGH[SHUW:LOOLDP1L[RQSUHYLRXVO\ZRUNHGDV GHWHUPLQHGWKDW+LOOZDVRYHUH[SRVHGWRFU\VWDOOLQHTXDUW] DQ 26+$ LQVSHFWRU DQG LQ WKDW FDSDFLW\ KH FDOFXODWHG VLOLFDZKLOH1L[RQ 2KLR&DVW GHWHUPLQHGWKDWKHZDVQRW UHVSLUDEOH mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOH l H[SRVXUH RYHUH[SRVHG$LUVDPSOHVFROOHFWHGE\26+$DQG2KLR&DVW 7KHUHFRUGFRQWDLQVFRSLHVRIFLWDWLRQVLVVXHGE\WKHQ26+$ GLIIHUHG VOLJKWO\ EXW WKDW GLIIHUHQFH GLG QRW H[SODLQ WKHLU LQVSHFWRU 1L[RQ IRU UHVSLUDEOH VLOLFD RYHUH[SRVXUH  7KH GLVDJUHHPHQWDERXWZKHWKHU2KLR&DVWRYHUH[SRVHG+LOOWR IRUPXODWKDW1L[RQXVHGWRGHWHUPLQHDFWXDOVLOLFDH[SRVXUH VLOLFDSXUVXDQWWR†  F 7KHLUGLIIHUHQFHRIRSLQLRQ ZDVWKHVDPHPHWKRGDGRSWHGE\WKH6HFUHWDU\LQWKLVFDVH DERXWVLOLFDRYHUH[SRVXUHUHVXOWHGIURPGLIIHUHQWPHWKRGVRI 1L[RQZRUNVDVDQLQGXVWULDOK\JLHQHFRQVXOWDQWIRU2KLR&DVW FDOFXODWLQJ+LOOjVDFWXDOH[SRVXUHWRVLOLFD DQG LQ WKDW FDSDFLW\ KH QRZ SOHDGV LJQRUDQW WR NQRZLQJ DERXW26+$jVPHWKRGRIFDOFXODWLQJmFU\VWDOOLQHTXDUW]VLOLFD $UJXLQJ WKDW LWV PHWKRG RI FDOFXODWLQJ DFWXDO ZRUNHU UHVSLUDEOH l H[SRVXUH  %HFDXVH RI 1L[RQjV ILUVWKDQG H[SRVXUHWRFU\VWDOOLQHTXDUW]VLOLFDZDVWKHRQO\UHDVRQDEOH NQRZOHGJHRI26+$jVFDOFXODWLRQPHWKRGKLVKLUHGUROHDV RQH2KLR&DVWDQGWKH6HFUHWDU\HDFKUHVSHFWLYHO\ILOHGIRU D PRQLWRU GXULQJ 26+$jV LQVSHFWLRQ DQG KLV UROH DV DQ VXPPDU\ MXGJPHQW EHIRUH DQ $GPLQLVWUDWLYH /DZ sXGJH H[SHUWLQWKLVFDVHKLVNQRZOHGJHRI26+$jVPHWKRGRORJ\LV m$/sl   7KH $/s DQG WKHQ 26+5& RQ UHYLHZ JUDQWHG LPSXWHGWR2KLR&DVW VXPPDU\MXGJPHQWIRUWKH6HFUHWDU\2KLR&DVWZDVILQHG IRUIDLOLQJWRSURWHFWLWVZRUNHUVDJDLQVWRYHUH[SRVXUH LY &LWDWLRQV WRUHVSLUDEOHGXVWFRQWDLQLQJFU\VWDOOLQHTXDUW]VLOLFD )LQDOO\ 2KLR &DVW DUJXHV WKDW EHFDXVH WKH 6HFUHWDU\jV ,,'LVFXVVLRQ LQWHUSUHWDWLRQ RI WKH mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOH l VWDQGDUGZDVXQUHDVRQDEOHDQGWKDWLWGLGQRWKDYHIDLUQRWLFH 2KLRFDVWDUJXHVWKDWWKH6HFUHWDU\jVLQWHUSUHWDWLRQRIKRZ RIWKHVWDQGDUGjVHQIRUFHPHQWWKLVFRXUWVKRXOGUHYHUVHWKH DFWXDOZRUNSODFHH[SRVXUHWRUHVSLUDEOHVLOLFDLVFDOFXODWHG GHFLVLRQRI26+5&YDFDWLQJVLOLFDFLWDWLRQV UHFHLYHGDVD XQGHU   &)5 †   F  LV FRQWUDU\ WR WKH SODLQ UHVXOWRIWKH+LOOVDPSOLQJ+DYLQJKHOGKRZHYHUWKDWWKH ODQJXDJH RI WKDW  UHJXODWLRQ DQG WKDW HQIRUFHPHQW RI WKDW 6HFUHWDU\jVLQWHUSUHWDWLRQZDVUHDVRQDEOHDQGWKDW2KLR&DVW LQWHUSUHWDWLRQFRQVWLWXWHVDGHQLDORIGXHSURFHVVEHFDXVHLW KDGDPSOHQRWLFHRIWKH6HFUHWDU\jVPHWKRGRIHQIRUFLQJWKH KDG QR QRWLFH WKDW 26+$ 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&DVW3URGXFWV,QFY 1RV   1RV   2KLR&DVW3URGXFWV,QFY  26+5&HWDO 26+5&HWDO FLWDWLRQVLVVXHGIRU+LOOjVRYHUH[SRVXUHWRVLOLFDVKRXOGEH   WK&LU  m:KLOHDQHPSOR\HULVHQWLWOHGWR 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 PDGHZLWKUHIHUHQFHWRZKDWDQHPSOR\HUIDPLOLDUZLWKWKH 6HFUHWDU\jVPHWKRGRIFDOFXODWLQJDFWXDOZRUNSODFHH[SRVXUH LQGXVWU\FRXOGUHDVRQDEO\EHH[SHFWHGWRNQRZl0DUWLQY WR mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOH l VHH   &)5 $PHULFDQ&\DQDPLG&R)G WK&LU   †   F    7DEOH = LV UHDVRQDEOH  ,Q IDFW )DFWRUVWKDWWKHFRXUWZHLJKVLQHYDOXDWLQJDGHTXDWHQRWLFH WKHUHLVQRSUHFHGHQWUHJDUGLQJFDOFXODWLRQRIDFWXDOH[SRVXUH LQFOXGH     DUWIXO YV LQDUWIXO GUDIWLQJ RI D UHJXODWLRQ   IRUDQ\RIWKHUHJXODWHGVXEVWDQFHVOLVWHGLQ7DEOH=:H FRPPRQ XQGHUVWDQGLQJ DQG FRPPHUFLDO SUDFWLFH  DQG  KROG WKDW WKH 6HFUHWDU\jV PHWKRG RI FDOFXODWLQJ DFWXDO FRQILUPDWLRQ RI LQGXVWU\ SUDFWLFH E\ D SDWWHUQ RI ZRUNSODFHH[SRVXUHWRVLOLFDXQGHU†  F 7DEOH= DGPLQLVWUDWLYHHQIRUFHPHQW6HH'LHEROG,QFY0DUVKDOO GHULYHV IURP D UHDVRQDEOH LQWHUSUHWDWLRQ RI WKDW UHJXODWLRQ )G WK&LU   WKDW2KLR&DVWKDGIDLUQRWLFHRIKRZWKH6HFUHWDU\HQIRUFHG WKDW LQWHUSUHWDWLRQ DQG WKDW WKH FLWDWLRQV UHFHLYHG E\ LW IRU 6LQFH 2KLR &DVW ZDV H[SRVHG WR PRQHWDU\ SHQDOWLHV IRU VLOLFDRYHUH[SRVXUHZHUHYDOLG RYHUH[SRVLQJLWVHPSOR\HHVWRVLOLFDLWZDVHQWLWOHGWRIDLU QRWLFH RI 26+$jV PHWKRG RI FDOFXODWLQJ DFWXDO UHVSLUDEOH L 6WDQGDUGRI5HYLHZ VLOLFDH[SRVXUH7KHTXHVWLRQLVZKHWKHU2KLR&DVWKDGIDLU QRWLFHWKDWRYHUH[SRVXUHZRXOGEHFDOFXODWHGDFFRUGLQJWRWKH 7KLV FRXUW VHWV DVLGH DJHQF\ DFWLRQ WKDW LV mDUELWUDU\ 6HFUHWDU\jVIRUPXOD2KLR&DVWFODLPVWKDWLWGLGQRW:H FDSULFLRXV DQ DEXVH RI GLVFUHWLRQ RU RWKHUZLVH QRW LQ KRZHYHUILQGWKDW2KLR&DVWGLGKDYHIDLUQRWLFH DFFRUGDQFH ZLWK ODZl   86& †   $  5HLFK Y *HQHUDO0RWRUV&RUS )G WK&LU  $Q $VSUHYLRXVO\GLVFXVVHGWKHVLOLFDVWDQGDUGjV3(/IRUPXOD DGPLQLVWUDWLYHDJHQF\jVLQWHUSUHWDWLRQRILWVRZQUHJXODWLRQV UHJXODWHV VLOLFD H[SRVXUH LQ RQO\ RQH PDQQHU  7KH 3(/ LVHQWLWOHGWRVXEVWDQWLDOGHIHUHQFH6HH8GDOOY7DOOPDQ IRUPXOD SURYLGHG LQ 7DEOH = FDOFXODWHV 3(/ EDVHG RQ D 86   7KLVFRXUWDFFRUGVVXEVWDQWLDOGHIHUHQFHWR PHDVXUHPHQWRIDOOUHVSLUDEOHGXVWDQGWKH3(/DQGDFWXDO WKH 6HFUHWDU\jV FRQVWUXFWLRQ RI DQ 26+$ 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 UHDVRQDEOH6HH0DUWLQY26+5& 86    PHDVXUHPHQWRIDOOUHVSLUDEOHGXVW)XUWKHUPRUHXQUHEXWWHG 7KH6HFUHWDU\jVLQWHUSUHWDWLRQQHHGQRWEHWKHRQO\UHDVRQDEOH HYLGHQFHGHPRQVWUDWHGWKDWWKH6HFUHWDU\HQIRUFHGWKHVLOLFD LQWHUSUHWDWLRQIRULWWREHVXVWDLQHG6HH)OXRU&RQVWUXFWRUV VWDQGDUGLQDFRQVLVWHQWPDQQHUVLQFHLWVDGRSWLRQLQ  ,QFY26+5&)G   WK&LU   $QGD MRXUQDODUWLFOHFXULRXVO\FLWHGE\2KLR&DVWLQLWV EULHI DV HYLGHQFH LQ LWV IDYRU VWDWHG WKDW WKH mLQGXVWULDO %XW ZKHUH mDQ DOWHUQDWLYH UHDGLQJ LV FRPSHOOHG E\ WKH K\JLHQHFRPPXQLW\UHFRJQL]HVWKHHQIRUFHPHQWXVHRI UHJXODWLRQjV SODLQ ODQJXDJH RU E\ RWKHU LQGLFDWLRQV RI WKH WKH26+$3(/l3KLOOLS:LOOLDPV0DWWKHZ3DUNHU 6HFUHWDU\jV LQWHQW DW WKH WLPH RI WKH UHJXODWLRQjV 3DXO0LGGHQGRUI5HVSLUDEOH)UHH6LOLFD $&RPSDULVRQRI SURPXOJDWLRQlWKLVFRXUWQHHGQRW GHIHUWRWKH6HFUHWDU\jV WKH2FFXSDWLRQDO([SRVXUH/LPLWV$P,QGXV+\JLHQH LQWHUSUHWDWLRQ6HH*DUGHEULQJYsHQNLQV86 $VVjQs        :KHQDQDJHQF\SURPXOJDWHVUHJXODWLRQVLWLVERXQG E\WKRVHUHJXODWLRQVDQGLWPD\QRWDWWHPSWWRVXEYHUWWKH  2KLR&DVW3URGXFWV,QFY 1RV   1RV   2KLR&DVW3URGXFWV,QFY  26+5&HWDO 26+5&HWDO WKDWWKH3(/IRUPXODZRXOGVHUYHQRSXUSRVH,IDIL[HG3(/ UXOHPDNLQJSURFHVVWKURXJKLQWHUSUHWDWLRQXQVXSSRUWHGE\WKH ZDVLQWHQGHGWREHDSSOLHGWRDOOHPSOR\HUVLQDOOVLWXDWLRQV UHJXODWLRQjVODQJXDJH6HH)OXRU)GDW   WKHmFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH l3(/IRUPXODZRXOG QRW KDYH EHHQ PDWKHPDWLFDOO\ FUHDWHG WR \LHOG YDU\LQJ LL 6LOLFD6WDQGDUG H[SRVXUHOLPLWV,WZRXOGVLPSO\KDYHOLVWHG PJP DV 

WKHIL[HG3(/,QVWHDGWKH3(/IRUPXODLVPDWKHPDWLFDOO\ %HFDXVH RYHUH[SRVXUH WR VLOLFD FDQ FDXVH VLOLFRVLV ZLWK FUDIWHG WR \LHOG D VOLGLQJ VFDOH RI 3(/V EDVHG RQ VLOLFD SHUPDQHQWOXQJGDPDJHDQGGLVDELOLW\VHH8ULHY7KRPSVRQ FRPSRVLWLRQZLWKLQDWRWDOUHVSLUDEOHGXVWVDPSOH 86   ZRUNSODFHH[SRVXUHWRUHVSLUDEOH VLOLFDLVUHJXODWHG6HH &)5†  F ,Q  *LYHQ WKH FOHDU PDWKHPDWLFDO PHDQLQJ DQG HIIHFW RI WKH WKH6HFUHWDU\DGRSWHGDZRUNSODFHVLOLFDH[SRVXUHVWDQGDUGDV 3(/ IRUPXOD WKH 6HFUHWDU\jV PHWKRG RI FDOFXODWLQJ DFWXDO DQmHVWDEOLVKHG)HGHUDOVWDQGDUGlXQGHU6HFWLRQ D RIWKH ZRUNHUH[SRVXUHWRmFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH lLV 26+ $FW   86& †  D   6HFWLRQ  D  H[HPSWHG WKH UHDVRQDEOH 6HFUHWDU\ IURP PDNLQJ GHWDLOHG IDFWXDO ILQGLQJV DQG UHJXODWRU\ DQQRXQFHPHQWV VXSSRUWLQJ DQG H[SODLQLQJ WKH F 3(/YHUVXV$FWXDO([SRVXUH VLOLFDVWDQGDUG6HH$)/&,2Y26+$ )G   WK&LU  7KHVLOLFDH[SRVXUHOLPLWDGRSWHGE\WKH 1H[W ZH FRPSDUH WKH FRPSXWHG 3(/ IRU VLOLFD DW 2KLR 6HFUHWDU\GHULYHGIURPWKH:DOVK+HDOH\3XEOLF&RQWUDFWV &DVWjVIDFLOLW\ZLWKDFWXDOH[SRVXUHFDOFXODWHGDWWKDWIDFLOLW\ $FW  86& ††  ZKLFK UHTXLUHG FRPSOLDQFH ZLWK 7KHFRPSDULVRQGHPRQVWUDWHVWKDWDFWXDOH[SRVXUHH[FHHGHG H[SRVXUHOHYHOVGHYHORSHGE\WKH $PHULFDQ&RQIHUHQFHRI 3(/ UHJDUGOHVV RI ZKLFK SDUW\jV VDPSOLQJ GDWD LV XWLOL]HG *RYHUQPHQWDO ,QGXVWULDO +\JLHQLVWV  1RZ FRGLILHG DW 26+$FRPSXWHGWKH3(/WREHPJP DQG2KLR&DVW    &)5 †   F  WKH mFU\VWDOOLQH TXDUW] VLOLFD FDOFXODWHGLWWREHPJP $FWXDOH[SRVXUHXVLQJWKH  UHVSLUDEOH lVWDQGDUGSURYLGHVWKDWmDQHPSOR\HHjVH[SRVXUH 6HFUHWDU\jV 3(/JXLGHG PHWKRG RI FDOFXODWLQJ DFWXDO WR>UHVSLUDEOHFU\VWDOOLQHTXDUW]VLOLFD@>DV@OLVWHGLQ7DEOH= H[SRVXUHZRXOGEHHLWKHUPJP RUPJP ILJXUHV    LQ DQ\ KRXU ZRUN VKLIW RI D KRXU ZHHN VKDOO QRW WKDWH[FHHGERWKSRWHQWLDO3(/V2KLR&DVWFRQFHGHVWKDW H[FHHGWKHKRXUWLPHZHLJKWHGDYHUDJHOLPLWJLYHQIRUWKDW XVLQJWKH6HFUHWDU\jVPHWKRGRORJ\LWVHPSOR\HHjVH[SRVXUH VXEVWDQFHLQWKHWDEOHl7DEOH=FRQWDLQVDPDWKHPDWLFDO WRUHVSLUDEOHVLOLFDH[FHHGHGWKHOHJDOOLPLW IRUPXOD IRU FDOFXODWLQJ WKH SHUPLVVLEOH H[SRVXUH OLPLW m3(/l IRUYDULRXVm0LQHUDO'XVWVlLQFOXGLQJmFU\VWDOOLQH LLL 1RWLFH TXDUW]VLOLFD UHVSLUDEOH l3(/UHIOHFWVWKHPD[LPXPDPRXQW RIDFRQWDPLQDQWLQWKHDLUWRZKLFKZRUNHUVPD\EHH[SRVHG 2KLR &DVW DOVR DUJXHV WKDW HYHQ LI WKH 6HFUHWDU\jV RYHUDJLYHQWLPHSHULRG LQWHUSUHWDWLRQRIWKHVLOLFDVWDQGDUGZDVUHDVRQDEOHLWGLGQRW KDYH IDLU QRWLFH RI WKH 6HFUHWDU\jV IRUPXOD IRU FDOFXODWLQJ %HFDXVHRILWVPDQXIDFWXULQJDFWLYLWLHV2KLR&DVWLVFOHDUO\ DFWXDOUHVSLUDEOHVLOLFDH[SRVXUH UHJXODWHGXQGHU†  F 7KUHHFDOFXODWLRQVEDVHGRQ D VLQJOH VDPSOLQJ RI UHVSLUDEOH GXVW GHWHUPLQH ZKHWKHU D mµ/LNHRWKHUVWDWXWHVDQGUHJXODWLRQVZKLFKDOORZPRQHWDU\ ZRUNHULVRYHUH[SRVHGWRVLOLFDSXUVXDQWWR†  F  SHQDOWLHV DJDLQVW WKRVH ZKR YLRODWH WKHP DQ RFFXSDWLRQDO )LUVW WKH 3(/ IRUPXOD IRU mFU\VWDOOLQH TXDUW] VLOLFD VDIHW\DQGKHDOWKVWDQGDUGPXVWJLYHDQHPSOR\HUIDLUZDUQLQJ UHVSLUDEOH lm PJP i 6L2  lLVHPSOR\HGWR  RIWKHFRQGXFWLWSURKLELWVRUUHTXLUHVjl)OXRU)G  FDOFXODWHD3(/6HH &)5†  F 7DEOH= DW  TXRWLQJ'LDPRQG5RRILQJ&RY26+5&)G  2KLR&DVW3URGXFWV,QFY 1RV   1RV   2KLR&DVW3URGXFWV,QFY  26+5&HWDO 26+5&HWDO 6HFRQGDFWXDOH[SRVXUHLVFDOFXODWHG$QGWKLUG3(/DQG UHVSLUDEOH GXVW FROOHFWHG QRW MXVW VLOLFD GXVW  7KH 3(/ DFWXDO H[SRVXUH FDOFXODWLRQV DUH FRPSDUHG  :KHQ DFWXDO IRUPXOD  PJP  i  6L2     KDV D QXPHUDWRU   H[SRVXUH H[FHHGV 3(/ DQ HPSOR\HU LV LQ YLRODWLRQ RI UHSUHVHQWLQJWKHWRWDOZHLJKWRIWKHUHVSLUDEOHGXVWVDPSOH †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mPJP l UHSUHVHQWV WKH ZHLJKW RI WKH WRWDO  LWVEHQFKPDUN3(/LVDGYDQFHGE\WKHGDWDFROOHFWLRQSURFHVV UHVSLUDEOHGXVWVDPSOHDQGLWVGHQRPLQDWRUm6L2 l  'DWDFROOHFWHGWRGHWHUPLQHDFWXDOH[SRVXUHFRPHVIURPWKH UHSUHVHQWVWKHSHUFHQWDJHRIVLOLFDWKHUHLQ:KHUHm6L2 l  VDPHDLUVDPSOLQJDVGDWDFROOHFWHGWRFDOFXODWHWKH3(/WR HTXDOVmlUHSUHVHQWLQJGXVWZLWKQRTXDUW]VLOLFDLQLWWKH ZKLFKLWLVWREHFRPSDUHG)RULQVWDQFHZKHQ6QLW]HUSODFHG 3(/IRUPXOD\LHOGVD3(/RIPJP > PJP i  @   DQDLUFROOHFWLRQGHYLFHRQZRUNHU+LOOjVVKRXOGHUWKHDLUWKDW $PJP 3(/LVWKHIL[HG3(/OLVWHGLQ7DEOH=IRUmLQHUW  ZDVFROOHFWHGIURPWKDWGHYLFHZDVXVHGWRFRPSXWHERWKWKH RUQXLVDQFHGXVWlZKLFKGHPRQVWUDWHVWKDWWKH3(/IRUVLOLFD 3(/DQGDFWXDOVLOLFDH[SRVXUHOHYHOVIRU+LOOjVZRUNVSDFH ZRUNVLQKDUPRQ\ZLWKWKH3(/IRULQHUWGXVW6HHLG:KHUH 7KLV SURFHVV HQVXUHG WKDW WKH WRWDO UHVSLUDEOH GXVW LQ WKH WKHUHLVQRVLOLFDGHWHFWHGLQWKHDLUWKH3(/\LHOGHGVKRXOG SK\VLFDODUHDEHLQJWHVWHGIRUDFWXDOH[SRVXUHZDVFRPSULVHG ORJLFDOO\EHDQGLVHTXDOWRWKDWDOORZHGIRULQHUWGXVW RIWKHH[DFWSURSRUWLRQRIUHVSLUDEOHVLOLFDDFFRXQWHGIRULQ $QGZKHUHm6L2 lHTXDOVmlUHSUHVHQWLQJGXVWWKDWLV  WKH3(/7KXVWKHVDPHDLUZDVWHVWHGIRU26+$jV3(/DQG SXUH TXDUW] VLOLFD WKH 3(/ IRUPXOD \LHOGV D 3(/ RI   DFWXDOH[SRVXUHFDOFXODWLRQV PJP > PJP i  @7KHRQO\YDULDEOHLQWKH3(/ 

IRUPXODLVm6L2 lWKHSHUFHQWDJHRIWKHWRWDOUHVSLUDEOH  %\ DFFHSWLQJ WKH 3(/ IRUPXODjV PHDQLQJ 2KLR &DVW GXVWVDPSOHWKDWLVVLOLFD LPSOLFLWO\DFFHSWVWKH6HFUHWDU\jVPHWKRGRORJ\IRUFDOFXODWLQJ DFWXDO FU\VWDOOLQH TXDUW] VLOLFD H[SRVXUH  7R UHWDLQ 7KXVWKH3(/IRUPXOD FRPSDUDELOLW\EHWZHHQDFWXDOH[SRVXUHDQG3(/ILJXUHVXQGHU 2KLR &DVWjV SURSRVHG IRUPXOD IRU GHWHUPLQLQJ DFWXDO RSHUDWH>V@LQVXFKDZD\DVWRFUHDWHDVOLGLQJVFDOHRI H[SRVXUH GLYLGLQJRQO\UHVSLUDEOHVLOLFDGXVWZHLJKWE\WRWDO 3(/jV GHSHQGLQJ RQ WKH SHUFHQWDJH RI WKH    WRWDO DLUYROXPHRIWKHFRPSOHWHGXVWVDPSOH KRZHYHUWKH3(/ UHVSLUDEOHIUDFWLRQRIWKHGXVWWKDWLVFU\VWDOOLQHTXDUW] IRUPXODZRXOGDOVRKDYHWREHFDOFXODWHGWRUHIOHFWSXUHVLOLFD VLOLFD  ,Q WKLV ZD\ WKH 3(/jV DUH ORZHUHG DV WKH DLU  %XW JLYHQ WKH 3(/ IRUPXOD D SXUH VLOLFDEDVHG 3(/ SHUFHQWDJH RI VLOLFD LQ WKH GXVW EHFRPHV KLJKHU  7KH ZRXOGUHPRYHWKHYHU\QHHGIRUWKH3(/IRUPXOD$SXUH XSSHUOLPLW RI WKHVOLGLQJVFDOHLVWKH3(/IRULQHUWRU VLOLFDEDVHG3(/ZRXOGEHFDOFXODWHGE\LQVHUWLQJLQ QXLVDQFHGXVW FRQWDLQLQJQRTXDUW] WKHORZHUOLPLWLV WKHGHQRPLQDWRURIWKH3(/IRUPXOD7KLVZRXOGUHVXOWLQD WKH3(/IRUSXUHTXDUW]GXVW FRQVWDQW3(/RI PJP > PJP i  @PHDQLQJ    2KLR&DVW3URGXFWV,QFY 1RV   1RV   2KLR&DVW3URGXFWV,QFY  26+5&HWDO 26+5&HWDO HPSOR\HUVDFFRUGLQJWRSXUHVLOLFDH[SRVXUH,WUHJXODWHVDQ 6HFUHWDU\RI/DERUY%XQJH&RUS26+&DV %1$ HPSOR\HUIRUQRQVLOLFDLQHUWGXVWH[SRVXUHRQO\WRWKHH[WHQW   5HY&RPPjQ   WKDWWKHHPSOR\HULVDOUHDG\UHJXODWHGXQGHU7DEOH=$Q DLU VDPSOH FRQWDLQLQJ  UHVSLUDEOH VLOLFD DOZD\V \LHOGV D 7KH3(/IRUPXODDVH[SODLQHGDERYHLVHPEUDFHGE\DOO 3(/RIPJP WKHIL[HG3(/IRULQHUWGXVWLQ7DEOH=  SDUWLHVPDNLQJLWDUHOLDEOHLQGLFDWRURIKRZWKHmFU\VWDOOLQH $QDLUVDPSOHFRQWDLQLQJVLOLFDDOZD\V\LHOGVD3(/RI TXDUW] VLOLFD UHVSLUDEOH l VWDQGDUG VKRXOG EH HQIRUFHG  PJP 7KHSHUFHQWDJHRIUHVSLUDEOHVLOLFDGXVWDORQH  $SSO\LQJ WKH IRUPXOD WR WKH DLU VDPSOH FROOHFWHG IURP GHWHUPLQHVDVVLJQPHQWRID3(/RQDVOLGLQJVFDOHEHWZHHQ HPSOR\HH +LOO 26+$ FDOFXODWHG +LOOjV 3(/ WR EH  PJP DQG PJP WKHVLOLFDGHWHUPLQHG3(/WRZKLFK   PJP  DQG 2KLR &DVW FDOFXODWHG LW WR EH  PJP   

DFWXDOH[SRVXUHZLOOEHFRPSDUHG$V26+5&H[SODLQHG 'LIIHUHQWDLUVDPSOHVOHGWRWKHVOLJKWGLIIHUHQFHLQWKH3(/ mWKH>FU\VWDOOLQHTXDUW]VLOLFD@VWDQGDUGWKHUHIRUHUHJXODWHV FDOFXODWLRQV SXUH UHVSLUDEOH VLOLFD WKH OLVWHG µVXEVWDQFHj  EHFDXVH LWV FRQFHQWUDWLRQ LQ WKH GXVW LV WKH GHWHUPLQDWLYH IDFWRU LQ E $FWXDO([SRVXUH&DOFXODWLRQ FDOFXODWLQJWKH3(/l 1R PHWKRG RI FDOFXODWLQJ DFWXDO FU\VWDOOLQH TXDUW] VLOLFD $GGLWLRQDOO\7DEOH=FRQWDLQVWKHPDWKHPDWLFDOIRUPXOD H[SRVXUH LV FRQWDLQHG LQ †   F   6LQFH WKH VLOLFD XVHG WR FDOFXODWH D 3(/ IRU mFU\VWDOOLQH TXDUW] VLOLFD VWDQGDUGZDVDGRSWHGLQ WKH6HFUHWDU\KDVFRQVLVWHQWO\ UHVSLUDEOH lH[SRVXUHDIRUPXODHQGRUVHGE\DOOSDUWLHVWKDW FDOFXODWHGDFWXDOVLOLFDH[SRVXUHE\GLYLGLQJWKHWRWDOZHLJKW DFFRXQWVIRUWRWDOUHVSLUDEOHGXVW7DEOH= VWH[WPXVWEH LQPLFURJUDPVRIWKHHQWLUHUHVSLUDEOHGXVWVDPSOH>VLOLFDDQG UHDGLQFRPELQDWLRQZLWKWKHWDEOHjV3(/IRUPXODVLQFHWKDW QRQVLOLFD@E\WKHQXPEHURIFXELFPHWHUVRIDLUZKLFKIORZHG IRUPXODSURYLGHVVSHFLILFPDWKHPDWLFDOJXLGDQFHIRUILJXULQJ DFURVVWKHVDPSOLQJGHYLFHGXULQJWKHVDPSOLQJSHULRG7KH RXWKRZWKHmFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH lVWDQGDUGLV 6HFUHWDU\ FODLPV WKDW WKLV PHWKRG LV GLFWDWHG E\ WKH WREHHQIRUFHG$V26+5&VWDWHGEHORZ mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOH l VWDQGDUGjV 3(/ IRUPXOD7KHPHWKRGLVXVHGLQWKH26+$7HFKQLFDO0DQXDO 2KLR&DVWjVUHDGLQJRIWKHVWDQGDUGIDLOVWRFRQVWUXHWKH DQG LV RXWOLQHG LQ WKH 7DEOH ,  6DPSOH &DOFXODWLRQ IRU VXEVWDQFHOLVWLQWKHFRQWH[WRIWKHVWDQGDUGDVDZKROH 6LOLFD([SRVXUH2KLR&DVWRQWKHRWKHUKDQGFODLPVWKDW DQGLJQRUHVWKHPDWKHPDWLFDORSHUDWLRQRIWKHIRUPXOD RQO\UHVSLUDEOHVLOLFDGXVWZHLJKWUDWKHUWKDQWRWDOUHVSLUDEOH :KLOH WKH †   F  UHIHUHQFH WR WKH UHJXODWHG GXVWZHLJKWVKRXOGEHGLYLGHGE\WKHQXPEHURIFXELFPHWHUV mVXEVWDQFHlDVDSSOLHGWRWKHVLOLFDPD\EHVOLJKWO\OHVV RIDLUZKLFKIORZHGDFURVV WKH VDPSOLQJGHYLFHGXULQJWKH WKDQGLUHFWZKHQUHDGLQFRQMXQFWLRQZLWKWKH3(/LWVHOI VDPSOLQJSHULRGWRFDOFXODWHDFWXDOH[SRVXUH$SSO\LQJLWV WKH VWDQGDUG LV QRW DPELJXRXV DQG WKH 6HFUHWDU\jV DFWXDO H[SRVXUH IRUPXOD 26+$ FDOFXODWHG +LOOjV DFWXDO DSSOLFDWLRQILWVWKHVWDQGDUGjVSODLQPHDQLQJ H[SRVXUHWRmFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH lWREH PJP 7KHDSSOLFDWLRQRI26+$jVIRUPXODWR2KLR&DVWjV 

7KH 3(/ IRUPXOD RSHUDWHV E\ GHWHUPLQLQJ VLOLFD VDPSOLQJUHVXOWV ZKLFKOHGWRGLIIHUHQW3(/ILJXUHV ZRXOG FRQFHQWUDWLRQLQUHVSLUDEOHGXVWDQGVHWWLQJYDULDEOHOLPLWVRQ \LHOGDQH[SRVXUHRIPJP $SSO\LQJLWVIRUPXODWR 

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\LHOGHGDFWXDOH[SRVXUHRIPJP RU 

HPSOR\HHH[SRVXUHWRWKHVDPHVXEVWDQFHIURPZKLFKLWZDV PJP  ILJXUHV VLJQLILFDQWO\ OHVV WKDQ WKRVH \LHOGHG XVLQJ 

FDOFXODWHG  7KH 3(/ FDOFXODWLRQ LV D IXQFWLRQ RI WKH WRWDO 26+$jVIRUPXOD  2KLR&DVW3URGXFWV,QFY 1RV   1RV   2KLR&DVW3URGXFWV,QFY 26+5&HWDO 26+5&HWDO 2KLR&DVWFODLPVWKDWWKH6HFUHWDU\jVPHWKRGRIPHDVXULQJ VL]HVHOHFWRUl6HH &)5†  F 7DEOH= FU\VWDOOLQHTXDUW]VLOLFDH[SRVXUHmLVSODLQO\DWRGGVZLWKWKH 1RWHmHl7DEOH=FOHDUO\DQWLFLSDWHVWKDWSXUHVLOLFDZLOOEH ODQJXDJHRIWKHVWDQGDUGLWVHOIl,WDFFXUDWHO\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 VXEVWDQFHVDQGWKDWLWZDVFLWHGIRUYLRODWLRQVXQGHURQO\WKH H[SRVXUHZLOOEHFDOFXODWHGLQUHODWLRQWRWKHWRWDODPRXQWRI mFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH lSURYLVLRQRIWKHWDEOH UHVSLUDEOHGXVWFROOHFWHGIURPWKHDLU(YDOXDWLQJVLOLFDDVD ,W DUJXHV WKDW WKH 6HFUHWDU\ E\ XVLQJ WRWDO ZHLJKW RI WKH FRPSRQHQW RI WRWDO GXVW LV UHDVRQDEOH JLYHQ WKH UHDOLW\ RI UHVSLUDEOHGXVWVDPSOHDVWKHQXPHUDWRULQLWVDFWXDOH[SRVXUH ZRUNSODFHH[SRVXUHWRFRQWDPLQDQWV IRUPXODLQVWHDGRIRQO\WKHZHLJKWRIUHVSLUDEOHVLOLFDLQWKDW VDPSOHSHQDOL]HGLWIRU+LOOjVH[SRVXUHWRQRWMXVWmFU\VWDOOLQH $VDFRQFHSWXDOPDWWHULWVHHPVXQIDLUWKDWQRQVLOLFDGXVW TXDUW]VLOLFD UHVSLUDEOH lEXWWRDOOUHVSLUDEOHGXVWFROOHFWHG LVFRXQWHGDJDLQVWDQHPSOR\HUXQGHUDVLOLFDGXVWVWDQGDUG VLOLFD DQG QRQVLOLFD FRPELQHG  )XUWKHUPRUH 2KLR &DVW ,IDVNHGWRFUHDWHDUHJXODWRU\VFKHPHIRUFU\VWDOOLQHTXDUW] UHIHUHQFHV D VHSDUDWH mLQHUW RU QXLVDQFH GXVWl SURYLVLRQ LQ VLOLFD WKLV FRXUW PLJKW FUHDWH RQH WKDW VHW D 3(/ IRU VLOLFD 7DEOH=WRVXSSRUWLWVFRQWHQWLRQWKDWLQHUWQRQVLOLFDGXVW H[SRVXUHWKDWZDVDIXQFWLRQRIVROHO\VLOLFDGXVW%XWWKLV VKRXOGQRWEHDFRPSRQHQWRIDQ\DFWXDOmFU\VWDOOLQHTXDUW] FRXUWKDVQRSRZHUWRVHFRQGJXHVVWKH6HFUHWDU\2XUUHYLHZ VLOLFD UHVSLUDEOH lH[SRVXUHIRUPXOD LV OLPLWHG WR ZKHWKHU WKH 6HFUHWDU\jV LQWHUSUHWDWLRQ RI WKH UHJXODWLRQ DV LW H[LVWV LV UHDVRQDEOH  $QG JLYHQ WKH 2Q WKH VXUIDFH 2KLR &DVWjV FRQWHQWLRQ WKDW WKH SODLQ XQGLVSXWHGPHDQLQJRIWKH3(/DQGLWVPHDQLQJZLWKLQWKH PHDQLQJRIWKHmFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH lVWDQGDUG IUDPHZRUN RI 7DEOH = DV D ZKROH WKDW LQWHUSUHWDWLRQ LV FRQWDLQHGLQ7DEOH=SUHFOXGHVFRQVLGHUDWLRQRIQRQVLOLFD UHDVRQDEOH GXVWLQGHWHUPLQLQJDFWXDOVLOLFDH[SRVXUHLVSHUVXDVLYH7KH OLVWHG VXEVWDQFH LV XQDUJXDEO\ mFU\VWDOOLQH TXDUW] VLOLFD 7KH mFU\VWDOOLQH TXDUW] VLOLFD UHVSLUDEOH l DQG mLQHUW RU UHVSLUDEOH l$QGWKHH[LVWHQFHRIDVHSDUDWHSURYLVLRQIRU QXLVDQFH GXVWl VWDQGDUGV DUH LQWHUUHODWHG  6HH VXSUD 3DUW mLQHUW RU QXLVDQFH GXVWl VXJJHVWV WKDW UHVSLUDEOH QRQVLOLFD ,,LLD :RUNHUVH[SRVHGWRVLOLFDDUHXVXDOO\H[SRVHGWRD GXVWVKRXOGEHWUHDWHGVHSDUDWHO\IURPUHVSLUDEOHVLOLFDGXVW PL[WXUHRIVLOLFDDQGQXLVDQFHGXVW7KHVLOLFD3(/DGGUHVVHV 7DEOH=QRWHmGlGHILQHVmLQHUWRUQXLVDQFHGXVWlDVm>D@OO WKLV VLWXDWLRQ DQG VHWV WKH 3(/ IRU D PL[WXUH RI VLOLFD DQG LQHUWRUQXLVDQFHGXVWVQRWOLVWHGVSHFLILFDOO\E\VXEVWDQFH QXLVDQFHGXVWDWDSRLQWEHWZHHQWKH3(/IRUSXUHVLOLFDDQG QDPHl%XWWKHWLWOHVmFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH l WKDWIRUQXLVDQFHGXVW7KH3(/IRUVXFKDPL[WXUHUHIOHFWV DQGmLQHUWRUQXLVDQFHGXVWlDUHQRWWKHRQO\FRPSRQHQWVRI WKHSHUFHQWDJHRIVLOLFDLQWKHGXVW7KHLQWHUUHODWLRQRIWKH 7DEOH= VLOLFDDQGLQHUWGXVWVWDQGDUGVDUHQRWWKHRQO\RQHVDFFRXQWHG IRULQ7DEOH=3(/IRUPXODVIRUmFRDOlDQGmDPRUSKRXVl 2WKHUFRPSRQHQWVRI7DEOH=VXJJHVWWKDWWKHVXEVWDQFH GXVWDUHDOVRFDOFXODWHGDVDIXQFWLRQRIWRWDOGXVWVDPSOHG OLVWHGDVmFU\VWDOOLQHTXDUW]VLOLFD UHVSLUDEOH lKDVUHJXODWRU\ 6HH†  F 7DEOH= PHDQLQJEH\RQGLWVSODLQPHDQLQJ7KHVHRWKHUFRPSRQHQWV KHOS GHILQH WKH PHDQLQJ RI mFU\VWDOOLQH TXDUW] VLOLFD 7KH RQO\ YDULDEOH LQ WKH 3(/ IRUPXOD LV m 6L2 l WKH  UHVSLUDEOH lZLWKLQWKHUHJXODWRU\VFKHPH)LUVWWKHWDEOH SHUFHQWDJHRIWKHWRWDOUHVSLUDEOHGXVWVDPSOHWKDWLVVLOLFD FRQWDLQVDQH[SODQDWRU\QRWHH[SODLQLQJWKLVVLOLFDVWDQGDUG %HFDXVHVLOLFDFRQFHQWUDWLRQZLWKLQWKHWRWDOGXVWVDPSOHGLV m%RWKFRQFHQWUDWLRQDQGSHUFHQWTXDUW]IRUWKHDSSOLFDWLRQRI 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