5(&200(1'(' )25 )8//7(;7 38%/,&$7,21  $EHUFURPELH )LWFK6WRUHV 1R  3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

Y$P(DJOH2XWILWWHUV (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU )LOH 1DPH DS

WKH SODLQWLII  6HH 7RROV 86$  (TXLS  )G DW  8QOLNHWKH)RXUWK&LUFXLWjVUHYLHZRIWKHUHFRUGLQ7RROV86$ 81,7('67$7(6&28572)$33($/6 (TXLSPHQWYLVXDOLQVSHFWLRQRIWKHWZRFDWDORJGHVLJQVLQ WKLVFDVHmOHDG>V@WRWKHLQHVFDSDEOHFRQFOXVLRQlLGDW )257+(6,;7+&,5&8,7 WKDWWKHUHVSHFWLYHWUDGHGUHVVHVDUHQRWVLPLODU BBBBBBBBBBBBBBBBB :KHQWKHWUDGHGUHVVHVDUHVRmFOHDUO\GLVWLQJXLVKDEOHDQG ZRXOG DSSHDU VR WR DOO EXW WKH PRVW REWXVH FRQVXPHUl +DDJHQ'D]V )6XSSDWWKDWDFRXUWPD\UHVROYHWKH $%(5&520%,( ),7&+ ; LVVXH RI WKH GUHVVHVj VLPLODULW\ DV D PDWWHU RI ODZ WKH 6725(6 ,1&  GHIHQGDQWjV UHVRXQGLQJ VXFFHVV RQ WKLV IDFWRU PDNHV WKH 3ODLQWLII$SSHOODQW  SODLQWLIIjVEXUGHQRISUHYDLOLQJRQWKHVHYHQRWKHU)ULVFKjV  1R  IDFWRUV HIIHFWLYHO\ LQVXUPRXQWDEOH  $ VWURQJ YLVXDO  LPSUHVVLRQRIGLVVLPLODULW\RUGLQDULO\mUHFHLYHVJUHDWZHLJKW Y !  LQ GHWHUPLQLQJ WKH OLNHOLKRRG RI FRQIXVLRQl  7UDI)L[   )GDW  FLWLQJ.DQJRO/WGY.DQJDURRV86$,QF $0(5,&$1 ($*/(  )G )HG&LU  UHYjGRQRWKHUJURXQGV 287),77(56 ,1&   6 &W   0RUHRYHU m>Z@KDW LV LPSRUWDQW LV QRW 'HIHQGDQW$SSHOOHH  ZKHWKHU SHRSOH ZLOO QHFHVVDULO\ FRQIXVH WKH PDUNV EXW  ZKHWKHU WKH PDUNV ZLOO EH OLNHO\ WR FRQIXVH SHRSOH LQWR 1 EHOLHYLQJWKDWWKHJRRGVHPDQDWHIURPWKHVDPHVRXUFHl .DQJRO  )G DW   7KHUH LV VR OLWWOH GDQJHU RI D $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW FRQVXPHU SLFNLQJ XS WKH WZR FDWDORJV DQG QRW TXLFNO\ IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&ROXPEXV UHDOL]LQJ WKDW WKH\ HPDQDWH IURP GLIIHUHQW VRXUFHV WKDW 1R  nsRKQ'+ROVFKXK'LVWULFWsXGJH MXGJPHQW DV D PDWWHU RI ODZ IRU $PHULFDQ (DJOH LV DSSURSULDWH $UJXHG 'HFHPEHU

,9 'HFLGHGDQG)LOHG )HEUXDU\

)RUWKHIRUHJRLQJUHDVRQVZHFRQFOXGHWKDW$EHUFURPELHjV %HIRUH s21(6%2**6DQG6,/(5&LUFXLWsXGJHV FORWKLQJ GHVLJQV DQG LQVWRUH SUHVHQWDWLRQV DUH OHJDOO\ IXQFWLRQDOQRQSURWHFWDEOHWUDGHGUHVVDQGWKDW$EHUFURPELH BBBBBBBBBBBBBBBBB FRXOG QRW SRVVLEO\ KDYH FDUULHG LWV EXUGHQ RI SURYLQJ WKDW $PHULFDQjVFDWDORJZDVFRQIXVLQJO\VLPLODUWRZKDWZHKDYH &2816(/ SUHVXPHG LV WKH SURWHFWDEOH WUDGH GUHVV RI $EHUFURPELHjV 4XDUWHUO\2QWKLVEDVLVZH$)),50WKHMXGJPHQWRIWKH $5*8(' )UDQNs&ROXFFL&2/8&&, 80$161HZ GLVWULFWFRXUWLQIDYRURIGHIHQGDQW$PHULFDQ(DJOH2XWILWWHUV <RUN1HZ<RUNIRU$SSHOODQW5REHUW*6XJDUPDQ:(,/ ,QF *276+$/  0$1*(6 1HZ <RUN 1HZ <RUN IRU $SSHOOHH  21 %5,()   )UDQN s &ROXFFL &2/8&&, 80$16 1HZ <RUN 1HZ <RUN 0HOYLQ ' :HLQVWHLQ

  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

.(*/(5%52:1+,// 5,77(5&ROXPEXV2KLRIRU RWKHU PHGLD  DUH QHYHUWKHOHVV RIWHQ UDGLFDOO\ GLIIHUHQW $SSHOODQW  5REHUW * 6XJDUPDQ /\QGD 0 %UDXQ :(,/ FRPSDUH s$ DW  $( RQ m$IWHU DOO WKH JLIWV DUH RSHQHG *276+$/  0$1*(6 1HZ <RUN 1HZ <RUN IRU DQGWKHGHFRUDWLRQVDUHSDFNHGDZD\WKHUHLVUHDOO\RQH $SSHOOHH WKLQJWKDWODVWVWKURXJKWKHKROLGD\VWKHVSLULWRIJLYLQJl ZLWK s$ DW     $ ) RQ m0XVW KDYH BBBBBBBBBBBBBBBBB PRQJUHOVlm1RWKLQJEHDWVDJRRGWUXFNlm,jOOKDYHDEUHZ &KULVWPDVlmZD\VWRVXUYLYHDKROLGD\JDWKHULQJZLWK\RXU 23,1,21 UHODWLYHVl  VHH DOVR s$ DW  &DUO 4XLQWDQLOOD 'XXGH BBBBBBBBBBBBBBBBB &ORWKLHUjV &DWDORJ 6HOOV 6WXGHQWV RQ 'ULQNLQJ 7+( :$// 675((7 s2851$/ sXO\     FRYHULQJ D 4XDUWHUO\ %2**6 &LUFXLW sXGJH  7KLV FDVH SLWV DQ ROG KDQG DW IHDWXUHFDOOHGm'ULQNLQJlZKLFKLQFOXGHGUHFLSHVDQGD WUDGHPDUNODZDJDLQVWWKHQHZNLGRQWKHEORFN $EHUFURPELH GHYLFHIRUSOD\LQJGULQNLQJJDPHVDQGWKHXSURDULWJHQHUDWHG  )LWFK VXHG $PHULFDQ (DJOH 2XWILWWHUV WR VWRS $PHULFDQ ZLWKDPRQJRWKHUV0RWKHUV$JDLQVW'UXQN'ULYLQJ 0RVW (DJOHIURPLQIULQJLQJZKDW$ )GHVFULEHVDVLWVXQUHJLVWHUHG QRWDEO\$EHUFURPELHGLVSOD\VLWVWUDGHPDUNVDQGYDULDWLRQV mWUDGH GUHVVl PDGH SURWHFWDEOH E\ 6HFWLRQ  D  RI WKH RIWKHPWKURXJKRXWWKH4XDUWHUO\2QQHDUO\HYHU\SDJHRI /DQKDP$FW$ )FODLPHGWKDW$(LPSHUPLVVLEO\FRSLHGWKH WKH4XDUWHUO\LQWKHUHFRUGWKH$EHUFURPELHQDPHDQGPDUNV GHVLJQV RI FHUWDLQ DUWLFOHV RI FORWKLQJ LQVWRUH DGYHUWLVLQJ DUHYLVLEOH7KH$PHULFDQFDWDORJGRHVQRWVK\DZD\IURPWKH GLVSOD\VDQGDFDWDORJ7KHGLVWULFWFRXUWJUDQWHGVXPPDU\ $PHULFDQPDUNV WKH\DOVRDSSHDUWKURXJKRXW:KLOHERWK MXGJPHQW LQ IDYRU RI $PHULFDQ (DJOH UHDVRQLQJ WKDW FRPSDQLHVOLEHUDOO\XVLQJWKHLUWUDGHPDUNVWKURXJKRXWWKHLU $EHUFURPELH  )LWFK KDG VRXJKW SURWHFWLRQ IRU VRPHWKLQJ FDWDORJVLVDVLPLODULW\LWLVDOVRDGLIIHUHQFHEHFDXVHHDFK WKDWGLGQRWFRQVWLWXWHWUDGHGUHVVDWDOO$EHUFURPELHWLPHO\ XVHV LWV RZQ WUDGHPDUN DQG WUDGHPDUNV DUH GHVLJQHGO\ DQ DSSHDOHG7RGD\mZHUHOLHYH$ )RIVRPHRILWVXQKDSSLQHVV LQGLFDWLRQRIDSURGXFWjVRULJLQ EXWQRWRIDOOl$EHUFURPELH )LWFK&RY+XQWLQJ:RUOG ,QF)G G&LU  :HDIILUPWKHMXGJPHQWRI 2QWKHVHXQGLVSXWHGIDFWVZHFRQFOXGHWKDWWKHWUDGHGUHVV WKH GLVWULFW FRXUW DOEHLW IRU GLIIHUHQW UHDVRQV  WKH FORWKLQJ RI$PHULFDQj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j , UHVSHFWLYHWUDGHPDUNVFRQVWDQWO\LQGLFDWLQJnRQSUDFWLFDOO\ HYHU\ SDJHn WKH FDWDORJjV RULJLQ WR FRQFOXGH RWKHUZLVH $EHUFURPELH  )LWFK 6WRUHV ,QF m$EHUFURPELHl RU 7KLVFDVHLVZKROO\XQOLNH7RROV86$ (TXLSPHQWZKHUH m$ )l GHVFULEHVLWVHOIDVDmUHWDLOHURIPHQjVDQGZRPHQjV WKHGHIHQGDQWUHSURGXFHGDmVWDUVDQGVWULSHVlORJRDURXQGWKH FDVXDO FORWKLQJ VXFK DV WVKLUWV RXWHUZHDU VZHDWVKLUWV FDWDORJ QDPH DQ RUGHULQJ LQIRUPDWLRQ ER[ DQG WKH SKUDVH ZRYHQVKLUWVVZHDWHUVMHDQVNKDNLVVKRUWVEDVHEDOOFDSV m$WWHQWLRQ  %RG\ 6KRS 0DQDJHUVl LQ FDSLWDO OHWWHUV DW WKH EHOWVVRFNVDQGRWKHUDFFHVVRULHVGHVLJQHGSULPDULO\WR ERWWRPRIWKHFRYHUSDJHDQGDEDQQHUFRQWDLQLQJRUGHULQJ DSSHDOWR\RXQJPHQDQGZRPHQRIFROOHJHDJHl,WVHOOVLWV LQVWUXFWLRQVDFURVVHDFKSDJHDPRQJRWKHUGHYLFHVXVHGE\ SURGXFWV QDWLRQZLGH WKURXJK  UHWDLO VWRUHV DQG D PDLO  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

ORJRVGLVSOD\HGPRUHRUOHVVSURPLQHQWO\$ )ZRUNVZLWK RUGHU FDWDORJ XQGHU WKH UHJLVWHUHG WUDGHPDUNV DQG VHUYLFH QRWHGIDVKLRQSKRWRJUDSKHU%UXFH:HEHUZKRVHVW\OHLVZHOO PDUNV$%(5&520%,( ),7&+$ )&2$ )DQG NQRZQ LQ WKH LQGXVWU\ DQG UHFRJQL]DEOH E\ HYHQ WKH YDULDWLRQV WKHUHRI  )RXQGHG LQ   $EHUFURPELH ZDV XQLQLWLDWHG $PHULFDQjVSKRWRJUDSKVLQFRQWUDVWSUHVHQWD DFTXLUHGE\7KH/LPLWHG,QFLQ 6LQFHWKHQLWKDV GHFLGHGO\ZKROHVRPHLPDJHZLWKSHRSOHRIYDULRXVDJHVLQ HQMR\HG D UHPDUNDEOH UHMXYHQDWLRQ RI LWV EUDQG VHOOLQJ LQ QRQVXJJHVWLYH RIWHQ IDPLO\RULHQWHG VLWXDWLRQV  QXGLW\ LV H[FHVVRIELOOLRQLQPHUFKDQGLVH WKURXJKsXQH  DQG DEVHQW7KHSLFWXUHVWKHPVHOYHVDUHPXFKOHVVJUDLQ\WKDQ H[SHQGLQJ PRUH WKDQ  PLOOLRQ RQ PDUNHWLQJ LWV EUDQG $EHUFURPELHjV DQG WKHUH DUH IDU IHZHU RI WKHP  7RWDOO\ LQFOXGLQJDGYHUWLVHPHQWVLQQDWLRQDODQGIDVKLRQPDJD]LQHV DEVHQW IURP $PHULFDQjV FDWDORJ LV WKH VRUW RI FDPS\ VNHWFKZRUNWKDWGRPLQDWHVPXFKRI$ )jVHGLWRULDOFRQWHQW $ )LGHQWLILHVDQm$EHUFURPELHEUDQGlDVKDYLQJmXQLTXH 6HHs$DW GHSLFWLQJmVNLQQ\VQRZERDUGLQJlDQGmQXGH DQGLQKHUHQWO\GLVWLQFWLYHIHDWXUHVlDQGUHIHUVWRVXFKDVLWV ZDWHU SRORl   $PHULFDQ PDNHV VSDULQJ XVH RI OLIHVW\OH WUDGHGUHVV7KLVWUDGHGUHVV$EHUFURPELHFODLPVFRPSULVHV HGLWRULDOFRQWHQWDQGWKHVXEMHFWVZKLOHRFFDVLRQDOO\VLPLODU QLQHIHDWXUHV FRPSDUH s$ DW  $(jV PHQWLRQ RI D IHZ ERRNV DQG PDJD]LQHV  ZLWK s$ DW  $ ) UHYLHZLQJ ERRNV DQG  8VHRIWKH$EHUFURPELHPDUNVLQSDUWLFXODUWKH$ ) WUDGHPDUNLQ8QLYHUVH%ROG&RQGHQVHGW\SHIDFH

  8VHRIWKHZRUGSHUIRUPDQFHRQODEHOVDQGDGYHUWLVLQJ ,Q WKH ZRUOG RI IDVKLRQ DV LQ WKH ZRUOG RI WHFKQRORJ\ LW DSSHDUV DQGSURPRWLRQDOPDWHULDOWRFRQYH\WKHLPDJHRIDQDFWLYH WKDW WKH MXGLFLDO V\VWHP PD\ EH LOOHTXLSSHG WR NHHS SDFH ZLWK UDSLGO\ OLQHRIFDVXDOFORWKLQJ )G   '& &LU  QRWLQJ WKH mHQRUPRXV SUDFWLFDO HYROYLQJ WUHQGV DQG LQQRYDWLRQV 6HH 8QLWHG 6WDWHV Y 0LFURVRIW &RUS

GLIILFXOWLHV IRU FRXUWV FRQVLGHULQJ WKH DSSURSULDWH PHDVXUH RI UHOLHI LQ   8VH RI VXFK ZRUGV DQG SKUDVHV DVDXWKHQWLF JHQXLQH 

HTXLWDEOHHQIRUFHPHQWDFWLRQV>LQYROYLQJWKHFRPSXWHUVRIWZDUHLQGXVWU\@ EUDQGWUDGHPDUNDQGVLQFH RQODEHOVDQGDGYHUWLVLQJ ERWK LQ FUDIWLQJ LQMXQFWLYH UHPHGLHV LQ WKH ILUVW LQVWDQFH DQG UHYLHZLQJ DQG SURPRWLRQDO PDWHULDO WR FRQYH\ WKH UHOLDELOLW\ RI WKH WKRVH UHPHGLHV LQ WKH VHFRQG  7KH UHFRUG LQ WKLV FDVH FRQWDLQV $ ) $EHUFURPELHEUDQG 4XDUWHUOLHV PRUH WKDQ IRXU \HDUV ROG )DVKLRQ WUHQGV KDYH FRPH DQG JRQH LQ WKDW VSDQ RI WLPH 5HFHQW QRQUHFRUG HYLGHQFH LQGLFDWHV WKDW $ )jV  8VHRIWKHZRUGRXWGRRURQODEHOVDQGDGYHUWLVLQJDQG 4XDUWHUO\ WRR KDV XQGHUJRQH VRPH FKDQJHV RYHU WKH \HDUV $ ) HDUO\ SURPRWLRQDO PDWHULDOV WR FRQYH\ WKH LPDJH RI D UXJJHG FDSWXUHG KHDGOLQHV IRU WKH EDFFKDQDOLDQ FRQWHQW RI LWV FDWDORJ VHH LQIUD SDJHV  $FFRUGLQJ WR ZLGHVSUHDG UHSRUWV LQ WKH SRSXODU PHGLD LW GLG RXWGRRUOLQHRIFDVXDOFORWKLQJ VR DJDLQ ZLWK LWV 6SULQJ %UHDN  LVVXH FDOOHG m;;;l ZKLFK $ ) VWRUHV VROG XQGHU ZUDSV RQO\ WR WKRVH RYHU DJH  EHFDXVH LW FRQWDLQV   8VH RI GHVLJQ ORJRV VXFK DV WKH VNL SDWURO FURVV DQG PRUH EDUH VNLQ WKDQ HYHU 6HH 0DUWD 0XUYRVK &ORWKLHU 'HHPV LWV +LW ODFURVVHVWLFNVDQGSURGXFWQDPHVIRUWKHW\SHVRIFORWKLQJ &DWDORJ 7RR 6H[\ IRU 8WDK 6$/7 /$.( 75,% $SU   DW $ VXFKDVmILHOGMHUVH\lWRFRQYH\WKHLPDJHRIDQDWKOHWLFOLQH UHSRUWLQJ RQ $ )jV GHFLVLRQ QRW WR VHOO WKH 6SULQJ %UHDN LVVXH LQ 8WDK RIFDVXDOFORWKLQJ mEHFDXVH RI WKH FRPSDQ\jV LQWHUSUHWDWLRQ RI D µVRIW SRUQ ODZj WKDW EDQV GLVSOD\V RI SXEOLFDWLRQV ZLWK VH[XDOO\ FKDUJHG QXGLW\ DW VWRUHV IUHTXHQWHG E\ SHRSOH XQGHU DJH l  6WLOO VXFK FKDQJHV DUH FRQVLVWHQW ZLWK RXU  8VHRISULPDU\FRORUFRPELQDWLRQVVXFKDVUHGEOXH GHWHUPLQDWLRQ WKDW DV D PDWWHU RI ODZ $PHULFDQ (DJOHjV FDWDORJ LV QRW JUH\WDQDQGJUHHQLQFRQQHFWLRQZLWKVROLGSODLGDQGVWULSH FRQIXVLQJO\ VLPLODU WR WKH 4XDUWHUO\jV XQPLVWDNDEOH LPDJH $OWKRXJK GHVLJQVWRFUHDWHDFRQVLVWHQWGHVLJQDQGFRORUSDOHWWH $ ) QRZ SURXGO\ GLVSOD\V PRGHOV ZHDULQJ QR FORWKLQJ DW DOO WKH mRYHUDOO LPDJHl RI WKH 4XDUWHUO\ DQG LWV FRQQHFWLRQ WR WKH $EHUFURPELH EUDQG DSSDUHQWO\ UHPDLQV XQFKDQJHG  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

 8VHRIDOOQDWXUDOFRWWRQZRRODQGWZLOOIDEULFVWRFUHDWH 7KH6L[WK&LUFXLWKDVLGHQWLILHGHLJKWIDFWRUVDVLQIRUPLQJ DFRQVLVWHQWWH[WXUHSDOHWWH WKH OLNHOLKRRG RI FRQIXVLRQ LQTXLU\    VWUHQJWK RI WKH SODLQWLIIjVPDUN UHODWHGQHVVRIWKHJRRGV VLPLODULW\RI   7KH FUHDWLRQ RI D FXWWLQJ HGJH mFRROl LPDJH WKURXJK WKH PDUNV   HYLGHQFH RI DFWXDO FRQIXVLRQ   PDUNHWLQJ SKRWRJUDSKVDQGDGYHUWLVLQJDQGSURPRWLRQDOPDWHULDOVXFK FKDQQHOV XVHG   OLNHO\ GHJUHH RI SXUFKDVHU FDUH DV WKH $ ) 4XDUWHUO\ WKH mFDWDORJl RU m4XDUWHUO\l   7KH  GHIHQGDQWjVLQWHQWLQVHOHFWLQJWKHPDUNDQG OLNHOLKRRG 4XDUWHUO\SUHVHQWVWKH$EHUFURPELHEUDQGDQGWUDGHGUHVVLQ RIH[SDQVLRQRIWKHSURGXFWOLQHV6HH)ULVFKjV5HVWV DXQLTXHPDQQHU QDPHO\LWIHDWXUHVWKH$EHUFURPELHEUDQG )GDW TXRWLQJ$0),QFY6OHHNFUDIW%RDWV )G DQGWUDGHGUHVVLQDmFXWRXWlRUmFORWKHVOLQHlVW\OHDQGXVHV  WK&LU  7RUHVLVWVXPPDU\MXGJPHQWLQD FRORUEDUVWRLOOXVWUDWHWKHDYDLODEOHFRORUVRIWKHLWHPZKLOH FDVHZKHUHWKHOLNHOLKRRGRIFRQIXVLRQLVWKHGLVSRVLWLYHLVVXH FRPELQLQJ D FRQVLVWHQW FRQFHSWXDO WKHPH ZLWK D OLIHVW\OH DQRQPRYLQJSDUW\PXVWUDLVHDJHQXLQHLVVXHRIPDWHULDOIDFW HGLWRULDOFRQWHQWRIPXVLFHOHFWURQLFVERRNVDQGPDJD]LQH mFRQFHUQLQJ WKRVH RI WKH )ULVFKjV IDFWRUV ZKLFK PD\ EH IHDWXUHV  7KH FDWDORJ LV SULQWHG RQ FRXJDU YHOOXP SDSHU PDWHULDO LQ WKH FRQWH[W RI D VSHFLILF FDVHl  +RPHRZQHUV ZKLFKLVXQLTXHIRUDFDWDORJ *URXS,QFY+RPH0NWJ6SHFLDOLVWV,QF )G  WK &LU     7KLV PHDQV mWKDW WKH QRQPRYLQJ 7KHFUHDWLRQRIDFRQVLVWHQWPHUFKDQGLVHORRNLQ$ ) SDUW\jVEXUGHQLVWRLGHQWLI\DGLVSXWHGIDFWRURUVHWRIIDFWRUV VWRUHVWKURXJKWKHXVHRILQVWRUHVLJQDJHDQGGLVSOD\VHWXSV ZKRVH UHVROXWLRQ ZRXOG QHFHVVDULO\ EH GLVSRVLWLYH RQ WKH DQG WKURXJK WKH XVH RI WKH m$EHUFURPELH VDOHV DVVRFLDWH OLNHOLKRRG RI FRQIXVLRQ LVVXHl  7UDI)L[  )G DW  WHDPlZKLFKLVFRPSULVHGSULPDULO\RIFROOHJHVWXGHQWV6HH UHYjGRQRWKHUJURXQGV6&W,IZHGHWHUPLQH &RPSOˆ IURPWKHUHFRUGWKDWWKHXQGLVSXWHGIDFWRUVIDYRUWKHPRYDQW DQGUHJDUG DVZHPXVW WKHGLVSXWHGIDFWRUVDVIDYRULQJWKH $PHULFDQ (DJOH 2XWILWWHUV ,QF m$PHULFDQ (DJOHl RU QRQPRYDQW\HWVWLOOFRQFOXGHWKDWWKHPRYDQWSUHYDLOVRQWKH m$PHULFDQl VHOOVHVVHQWLDOO\WKHVDPHYDULHW\RIFORWKLQJDQG OHJDOTXHVWLRQRIFRQIXVLQJVLPLODULW\VXPPDU\MXGJPHQWIRU SURGXFWVLQLWVVWRUHVQDWLRQZLGHXQGHUWKHWUDGHPDUNV $PHULFDQ PD\ EH DIILUPHG  7KH UHFRUG EHIRUH WKLV FRXUW DQGVHUYLFHPDUNV$0(5,&$1($*/(287),77(56DQG YROXPLQRXVDVLWLVSHUPLWVFRQVLGHUDWLRQRIRQO\RQHRIWKH $( DQG JHQHUDWHV DSSUR[LPDWHO\  PLOOLRQ LQ DQQXDO HLJKWIDFWRUV WKHVLPLODULW\RIWKHWUDGHGUHVV VDOHV  $PHULFDQ KDV EHHQ D UHWDLOHU VLQFH DW OHDVW   DOWKRXJKPDQ\RILWVSURGXFWVGHVFULEHWKHFRPSDQ\jVYLQWDJH $ )jV 4XDUWHUO\ LV GHVFULEHG DERYH  $( DOVR XVHV WKH DV $EHUFURPELHDFFXVHV$PHULFDQRIFDSLWDOL]LQJRQ FORWKHVOLQH IRUPDW WR GLVSOD\ LWV JRRGV DOWKRXJK LW SXWV WKH IRUPHUjV VXFFHVV LQ WKH PDUNHW E\ VHOOLQJ FRQIXVLQJO\ VLJQLILFDQWO\IHZHUJDUPHQWVRQHDFKSDJHWKDQ$ )GRHVDQG VLPLODUSURGXFWVDQG PDUNHWLQJWKHPLQDZD\FRQIXVLQJO\ SUHVHQWVLWVFORWKHVLQDVSDUHDVRSSRVHGWRGHQVHIDVKLRQ VLPLODU WR $EHUFURPELHjV LPDJH  $ ) DVVHUWV WKDW LWV $(XVHVFRORUEDUVDQGGHVLJQEDUVXQGHUQHDWKDOPRVWDOOLWV SUHPLHUH LVVXH RI WKH 4XDUWHUO\ WKH )DOO   LVVXH ZDV JDUPHQWV ZKLOH $ ) GRHV VR RFFDVLRQDOO\ VRPHWLPHV FRSLHGE\$PHULFDQ(DJOHZKRVHRZQFDWDORJIHDWXUHGWKH GLVSOD\LQJVHYHUDOIXOOVL]HLPDJHVLQVWHDG7KHPRVWVWULNLQJ VDPHSURGXFWV VXFKDVVKLUWVMHDQVVZHDWVKLUWVER[HUVKRUWV YLVXDOGLIIHUHQFHEHWZHHQWKHFDWDORJVOLHVLQWKHSKRWRJUDSKV VZHDWHU YHVWV MDFNHWV DQG SDMDPDV  FRQWDLQLQJ WKH VDPH ZKLFKGRPLQDWHWKHFDWDORJVjRYHUDOOFRQWHQW7KURXJKRXWWKH FRORUVKDYLQJWKHVDPHGHVLJQVEHLQJPDGHIURPWKHVDPH 4XDUWHUO\ $ ) PDNHV H[WHQVLYH XVH RI SKRWRJUDSKV IDEULFVDQGEHDULQJWKHVDPHSURGXFWQDPHV HJmYLQWDJHl GHSLFWLQJ DSSDUHQWO\ FROOHJHDJHG SHRSOH LQ RIWHQ HURWLF RU VZHDWVKLUWVDQGmILHOGMHUVH\Vl $ )DOVR FODLPVWKDWWKH KRPRHURWLF SRVHV RU VLWXDWLRQV ZHDULQJ FORWKHV ZLWK $ )  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

$EHUFURPELH FRXOG SUHYDLO RQ LWV WUDGH GUHVV LQIULQJHPHQW SDSHU SDJH OD\RXWV OLIHVW\OH HGLWRULDO FRQWHQW PDQQHU RI FODLP GLVSOD\LQJPHUFKDQGLVHDQGW\SHIDFHLQ$PHULFDQjVFDWDORJ DUH LGHQWLFDO RU FRQIXVLQJO\ VLPLODU WR WKH 4XDUWHUO\ ( $EHUFURPELH LQWURGXFHG D PHPRUDQGXP IURP $PHULFDQ PDUNHWLQJH[HFXWLYHVGLUHFWLQJ$PHULFDQVWRUHPDQDJHUVWR ,Q RUGHU WR SUHYDLO RQ D †  D  FODLP D SODLQWLII PXVW LQVSHFW WKH ZLQGRZV OHDG WDEOH DQG OHDVHOLQH VLJQV RI HVWDEOLVKWKHH[LVWHQFHRIDOLNHOLKRRGRIFRQIXVLRQDVWRWKH $EHUFURPELH VWRUHV HYHU\ ZHHN DQG UHSRUW RQ $ )jV VRXUFHRURULJLQRIWKHSODLQWLIIjVDQGGHIHQGDQWjVSURGXFWV SUHVHQWDWLRQ m$WWHQWLRQVWRUHPDQDJHUo:HQHHG\RXWRWHOO 7KLVFRXUWKDVKHOGWKDWm>W@KHJHQHUDOFRQFHSWXQGHUO\LQJWKH XV ZKDW $EHUFURPELH  )LWFK LV PDUNHWLQJl   'XULQJ OLNHOLKRRG RI FRQIXVLRQ LV WKDW WKH SXEOLF EHOLHYH WKDW WKH OLWLJDWLRQLQWKHGLVWULFWFRXUW$PHULFDQGHFOLQHGWRFRQWHVW >PDUNRUGUHVV@RZQHUVSRQVRUHGRURWKHUZLVHDSSURYHGWKH WKHDOOHJDWLRQWKDWLWLQWHQWLRQDOO\FRSLHGWKHYDULRXVDVSHFWV XVH RI WKH WUDGHPDUNl RU WUDGH GUHVV  &DUVRQ Y +HUHjV RI $EHUFURPELHjV FODLPHG WUDGH GUHVV HQXPHUDWHG LQ WKH sRKQQ\ 3RUWDEOH 7RLOHWV ,QF   )G   WK &LU FRPSODLQW    VHH DOVR $VKOH\ )XUQLWXUH ,QGXV  )G DW  H[SODLQLQJ WKDW †  D  IRUELGV RQO\ SDVVLQJ RII   ,Q WKH 2QsXQH $EHUFURPELHILOHGVXLWLQWKHGLVWULFWFRXUW GLVWULFW FRXUW $EHUFURPELH SRLQWHG WR FHUWDLQ HPDLOV DV FODLPLQJWKDW$PHULFDQLQIULQJHGXSRQLWVXQUHJLVWHUHGWUDGH HYLGHQFHRIDFWXDOFRQIXVLRQDVWRWKHVRXUFHRUVSRQVRUVKLS GUHVVLQYLRODWLRQRI† D RIWKH/DQKDP$FW86& RI$PHULFDQjVSURGXFWVEXWQRQHRIWKHVHPDGHUHIHUHQFHWR † D WKH2KLRFRPPRQODZRIWUDGHGUHVVSURWHFWLRQDQG WKHSDUWLHVjFDWDORJV$WWKLVSRLQW$EHUFURPELHKDVKDGOLWWOH XQIDLUFRPSHWLWLRQDQGWKH2KLR'HFHSWLYH7UDGH3UDFWLFHV RSSRUWXQLW\WRGHYHORSHYLGHQFHRIDFWXDOFRQIXVLRQRURWKHU $FW25&†HWVHT$PHULFDQVHUYHGLWV$QVZHU HYLGHQFH WKDW ZRXOG FDUU\ LWV EXUGHQ RI SURYLQJ FRQIXVLQJ RQ$XJXVW DQGVLPXOWDQHRXVO\ILOHGLWVPRWLRQIRU VLPLODULW\  1HYHUWKHOHVV m>W@KLV FRXUW KDV PDGH FOHDU WKDW VXPPDU\ MXGJPHQW  2Q 1RYHPEHU    WKH GLVWULFW OLNHOLKRRG RI FRQIXVLRQ LV D TXHVWLRQ RI ODZ DQG WKXV DQ FRXUWJUDQWHGLQSDUW$PHULFDQjVPRWLRQWRVWD\GLVFRYHU\ WKH DSSURSULDWH LVVXH IRU VXPPDU\ MXGJPHQW  7KH OHJDO FRXUW UXOHG WKDW GLVFRYHU\ RQ WKH LVVXH RI $PHULFDQjV FRQFOXVLRQWKDWFRQIXVLRQLVOLNHO\PXVWUHVWRQWKHSDUWLFXODU LQWHQWLRQDOFRS\LQJZDVLQDSSURSULDWHGXULQJWKHSHQGHQF\RI IDFWVRIWKHFDVHEXWZKHQDOORIWKHPDWHULDOIDFWVKDYHEHHQ $PHULFDQjV VXPPDU\ MXGJPHQW PRWLRQ EHFDXVH $PHULFDQ GHWHUPLQHG WKH XOWLPDWH GHWHUPLQDWLRQ RI OLNHOLKRRG RI FRQIXVLRQOLHVZLWKLQWKHH[FOXVLYHMXULVGLFWLRQRIWKHFRXUWl :60,QF )GDW FLWLQJ)ULVFKjV5HVWV,QFY (OE\jV %LJ %R\  )G  WK &LU    DQG $OSKD  7KH GLVWULFW FRXUWjV RSLQLRQ RQ $PHULFDQjV PRWLRQ IRU VXPPDU\ ,QGXVWULHV,QFY$OSKD6WHHO7XEH 6KDSHV,QF)G MXGJPHQW RYHUORRNHG RU GLVFRXQWHG WKLV HYLGHQFH UHPDUNLQJ RQ mWKH  WK&LU  (YHQVRZHPD\UHVROYHWKLV DEVHQFH RI DQ\ DOOHJDWLRQ WKDW WKURXJK LQVWRUH GLVSOD\V    $PHULFDQ FDVHRQWKHHYLGHQFHEHIRUHXVLI$ )LVZKROO\LQFDSDEOHRI (DJOH KDV UHFUHDWHG WKH $ ) ORRN ZLWKLQ LWV VWRUHVl SURGXFLQJ HYLGHQFH WKDW WKH GHVLJQ RI WKH WZR FDWDORJV LV mOLNHO\WRFDXVHFRQIXVLRQlLQSURVSHFWLYHSXUFKDVHUVjPLQGV  %RWK 2KLR DQG IHGHUDO FRXUWV KDYH UHFRJQL]HG WKDW WKH VDPH DQDO\VLV DVWRWKHVRXUFHRUVSRQVRUVKLSRIWKHFDWDORJRUWKHJRRGVLW DSSOLHV WR FODLPV XQGHU 2KLRjV VWDWXWRU\ DQG FRPPRQ ODZ RI XQIDLU FRPSHWLWLRQ DQG WKH /DQKDP $FW $00 /HYHQWKDO $VVRFV ,QF Y FRQWDLQV  6HH 7UDI)L[  )G DW  UHYjG RQ RWKHU 7KRPVRQ &HQW 2KLR  1(G   2KLR &W $SS   %DUULRV JURXQGV6&W Y $PHULFDQ 7KHUPDO ,QVWUXPHQWV ,QF  ) 6XSS   6' 2KLR  6LQFH WKH VDPH ODZ DSSOLHV WR DOO FODLPV WKLV RSLQLRQ DGGUHVVHV RQO\ MXGLFLDO LQWHUSUHWDWLRQ RI WKH /DQKDP $FW  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

KDGDGPLWWHGLQWHQWLRQDOFRS\LQJIRUSXUSRVHVRIWKHPRWLRQ LQFOXGHGVRFDOOHGOLIHVW\OHHGLWRULDOFRQWHQWIRUVRPHWLPH EXWWKHFRXUWSHUPLWWHGGLVFRYHU\RQWKHTXHVWLRQRIXVHRI %XWPDLORUGHUUHWDLOHUVFDQVWLOOVHOOWKHLUFORWKHVDQGFUHDWH VLPLODU GHVLJQV DQG PDUNHWLQJ DSSURDFKHV E\ WKLUGSDUW\ DQDXUDDERXWWKHLUSURGXFWVZLWKRXWLQFOXGLQJVXFKFRQWHQW UHWDLOHUVZKLFKLVVXH$PHULFDQUDLVHGLQLWVPRWLRQ DOWKRXJK WKLV PHWKRG VHHPV WR KDYH UHFHQWO\ EHFRPH D SDUWLFXODUO\HIIHFWLYHZD\RIFUHDWLQJGHPDQG$WWKHYHU\ 2Q sXO\    WKH GLVWULFW FRXUW JUDQWHG $PHULFDQjV OHDVWWKH HYLGHQFHLQWKHUHFRUGFUHDWHVDJHQXLQHLVVXHRI PRWLRQ IRU VXPPDU\ MXGJPHQW LQ LWV HQWLUHW\  7KH FRXUW PDWHULDOIDFWDVWRZKHWKHUSURWHFWLRQRIWKHGHVLJQIHDWXUHV UHFRJQL]HGWKDWXQUHJLVWHUHGWUDGHGUHVVSURWHFWLRQFDQH[WHQG FKRVHQE\$EHUFURPELHIRULWVFDWDORJOHDYHVRSHQVXIILFLHQW WRmWKHLPDJHDQGRYHUDOODSSHDUDQFHRIWKH SURGXFWl7KH FRPSDUDEOHDOWHUQDWHPHWKRGVRIPDUNHWLQJFORWKLQJWR\RXQJ FRXUWGHVFULEHGWUDGHGUHVVDV HLWKHUDVLQJXODUIHDWXUHRU SHRSOHE\PDLOVXFKWKDWJUDQWLQJ$ )DPRQRSRO\RQLWV FRPELQDWLRQRIIHDWXUHVWKDWWDNHVRQDGLVWLQFWDUUDQJHPHQW GLVWLQFWLYH FRQILJXUDWLRQ ZRXOG QRW KLQGHU WKH DELOLW\ RI  LQWHQGHGE\WKHPDNHUWRSHUPLWWKHSXEOLFWRLGHQWLI\LWDV DQRWKHUPDQXIDFWXUHUWRFRPSHWHHIIHFWLYHO\LQWKHPDUNHW FRPLQJIURPDSDUWLFXODUVRXUFHDQG KDYLQJDWHQGHQF\WR +HUHWKH6HYHQWK&LUFXLWjVYHUEDOIRUPXODWLRQRIWKHLVVXH GRVR7KHFRXUWQRWHGWKDWWUDGHGUHVVLVSURWHFWDEOHXQGHU VHHPV SDUWLFXODUO\ DSW  mZKHWKHU WKH >FRPELQDWLRQ RI@ HLWKHURIWZRFLUFXPVWDQFHV WKHGUHVVLVLQKHUHQWO\GLVWLQFWLYH IHDWXUH>V@LVVRPHWKLQJWKDWRWKHUSURGXFHUVRIWKHSURGXFW RU KDV DFTXLUHG VHFRQGDU\ PHDQLQJ  7KH GLVWULFW FRXUW LQTXHVWLRQZRXOGKDYHWRKDYHDVSDUWRI>WKHLUFDWDORJ@LQ DVVXPHG IRU SXUSRVHV RI WKH PRWLRQ WKDW $EHUFURPELHjV RUGHUWREHDEOHWRFRPSHWHHIIHFWLYHO\LQWKHPDUNHWRU DUUDQJHPHQW RI ZRUGV FRORUV DQG IRUPDW KDG DFTXLUHG ZKHWKHU LW LV WKH NLQG RI PHUHO\ LQFLGHQWDO >FRQILJXUDWLRQ@ VHFRQGDU\PHDQLQJEXWUHDVRQHGWKDWWKHPRWLRQWXUQHGRQ ZKLFKJLYHVWKHEUDQGVRPHLQGLYLGXDOGLVWLQFWLRQEXWZKLFK WKH TXHVWLRQ RI ZKHWKHU WKH HOHPHQWV GHVFULEHG LQ SURGXFHUVRIFRPSHWLQJEUDQGVFDQUHDGLO\GRZLWKRXWl:7 $EHUFURPELHjV FRPSODLQW FRQVWLWXWHG WUDGH GUHVV DW DOO 5RJHUV&R)GDW $FFRUGLQJWRWKHGLVWULFWFRXUWWUDGHGUHVVSURWHFWLRQLVQRW DYDLODEOH ZKHQ D  WKH PHDQV RI GUHVVLQJ WKH SURGXFW LV $EHUFURPELHFODLPHGWKUHHmWKLQJVlDVLWVWUDGHGUHVV,WV IXQFWLRQDO RU GHVFULSWLYH RU E  WKH FODLPHG WUDGH GUHVV FORWKLQJ GHVLJQV DQG LWV LQVWRUH SUHVHQWDWLRQ DUH QRW DPRXQWVWRDQDEVWUDFWLPDJHRUPDUNHWLQJDSSURDFK SURWHFWDEOH EHFDXVH WKH\ DUH IXQFWLRQDO GHVSLWH WKHLU GLVWLQFWLYHQHVV  $V WR WKH RYHUDOO GHVLJQ RI WKH $ ) 7KH FRXUW FRQFOXGHG WKDW UHJDUGOHVV RI DQ\ SXEOLF 4XDUWHUO\ KRZHYHU ZH ZLOO DVVXPH WKDW LW VDWLVILHV WKH LGHQWLILFDWLRQRIWKHFODLPHGWUDGHGUHVVZLWK$EHUFURPELHmLW GLVWLQFWLYHQHVV DQG QRQIXQFWLRQDOLW\ FRQGLWLRQV IRU LVVLPSO\WRRGHVFULSWLYHDQGJHQHULFWRTXDOLI\IRU/DQKDP SURWHFWDELOLW\ EHFDXVH IRU SXUSRVHV RI WKH LQVWDQW DSSHDO $FWSURWHFWLRQl7KHFRXUWUHPDUNHGmUHWDLOHUVPXVWEHIUHH $PHULFDQ FRQFHGHG VHFRQGDU\ PHDQLQJ DQG WKH UHFRUG WRXVHFRPPRQYHUEDORUSLFWRULDOGHVFULSWLRQVRIWKHLUJRRGV HYLGHQFHUDLVHVJHQXLQHLVVXHVDVWRWKHPDWHULDOIDFWRIQRQ    >LQFOXGLQJ@ VXFK PDWWHUV DV VKRZLQJ WKH FORWKLQJ LQ IXQFWLRQDOLW\  :H WKHUHIRUH SURFHHG WR DVVHVV ZKHWKHU µFXWRXWjIDVKLRQXVLQJFRPELQDWLRQVRIVWDQGDUGFRORUV XQLYHUVDOO\UHFRJQL]HGSDWWHUQVDQGFRPPRQIDEULFV LQFORWKLQJGHVLJQDQGPDQXIDFWXUH$OORIWKHVH IDFWRUVDUHERWKJHQHULFDQGGHVFULSWLYHl  /DXUD %LUG  7+( :$// 675((7 s2851$/ sXO\     mµ$ ) 6HH $GYHUWLVLQJ %H\RQG 0DLO 2UGHU &DWDORJV 1RZ

4XDUWHUO\j LV MXVW WKH ODWHVW UHWDLO FDWDORJ WR EOXU WKH GLVWLQFWLRQ EHWZHHQ 6HOO ,PDJH $GYLFH

7KH&RXUWUHFRJQL]H>G@WKDWDFRPELQDWLRQRIJHQHULFRU PDLORUGHU DQG PDJD]LQH     8QOLNH WUDGLWLRQDO PDLO RUGHU ERRNV WKHVH GHVFULSWLYHHOHPHQWVFDQVRPHWLPHVFUHDWHDXQLTXHORRN WKLFN JORVV\ µPDJDORJVj DUH GHVLJQHG SULPDULO\ DV DGYHUWLVLQJ YHKLFOHV WR VHOO D FHUWDLQ LPDJH DQG EULQJ VKRSSHUV LQWR VWRUHVl   $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

SUHVXPDEO\ VHOOLQJ FORWKHV  %XW WKDW GRHV QRW PDNH WKH WKDW LV SURWHFWDEOH EXW WKHUH LV QRWKLQJ DUELWUDU\ RU FDWDORJjVRYHUDOOGHVLJQIXQFWLRQDO1RUGRHVWKHSUHVHQFHRI IDQFLIXORULQDQ\ZD\GLVWLQFWLYHDERXWWKHFRPELQDWLRQ PDQ\IXQFWLRQDOHOHPHQWVLQWKH4XDUWHUO\jVGHVLJQ(YHQLI RIWKHVHHOHPHQWVLQDFORWKLQJFDWDORJWKDWZRXOGPDNH WKH HOHPHQWV $EHUFURPELH LGHQWLILHV ZHUH DOO VHSDUDWHO\ WKH ZKROH RI WKH m$EHUFURPELH %UDQGl DW OHDVW DV LW IXQFWLRQDODV$PHULFDQDUJXHGDQGWKHGLVWULFWFRXUWKHOG UHODWHVWRWKHGHVFULSWLYHODQJXDJHFRORUFRPELQDWLRQV $ )jVDUUDQJHPHQWRIWKHVHIHDWXUHVFDQFRQVWLWXWHPRUHWKDQ DQGFXWRXWVW\OHVRPHWKLQJPRUHWKDQWKHVXPRILWVQRQ WKHVXPRILWVQRQSURWHFWDEOHSDUWV6HH3XEOLFDWLRQV,QWjO SURWHFWDEOHSDUWV7KDWREVHUYDWLRQDSSOLHVHTXDOO\WRWKH /WGY/DQGROO,QF)G WK&LU  XVHRIZRUGVFODLPLQJWKDWWKHFORWKLQJLVmDXWKHQWLFlDQG KROGLQJYDULRXVHOHPHQWVRIDFRRNERRNjVGHVLJQIXQFWLRQDO WKHXVHRI$ )jVRZQWUDGHPDUN EXWUHFRJQL]LQJWKDWWKHLUDSSHDUDQFHLQFRQFHUWFRXOGJDUQHU OHJDOSURWHFWLRQmXQOHVVLWZDVWKHRQO\ZD\WKHSURGXFWFRXOG 7KHFRXUWODVWO\FRQVLGHUHGWKHmHOHPHQWRIWKH$EHUFURPELH ORRN FRQVLVWHQW ZLWK LWV SHUIRUPLQJ HDFK RI WKH SURGXFWjV %UDQGlFRPSULVLQJLWVPHWKRGRIDSSHDOLQJWRWKHmFRROlRU IXQFWLRQVRSWLPDOO\l 7RROV86$ (TXLS)GDW mFXWWLQJ HGJHl FRQVXPHU E\ DGGLQJ OLIHVW\OH FRQWHQW WR LWV WUHDWLQJ FHUWDLQ DVSHFWV RI D FDWDORJ DV IXQFWLRQDO EXW FDWDORJDQGKHOGWKDWmWKHFRQFHSWRIPDUNHWLQJSURGXFWVWR DOORZLQJWUDGHGUHVVSURWHFWLRQRIWKHFDWDORJjVGHVLJQDVD µFRROj RU µFXWWLQJ HGJHj FRQVXPHUV E\ DSSHDOLQJ WR RWKHU ZKROH VHHDOVR)XGGUXFNHUV,QFY'RFjV%52WKHUV,QF DVSHFWV RI WKHLU OLIHVW\OH >LV QRW@ SURWHFWDEOHl  7KH FRXUW )G WK&LU   HQWHUHG MXGJPHQW IRU $PHULFDQ  $ ) PRYHG IRU UHFRQVLGHUDWLRQSXUVXDQWWR)HG5&LY3 H LQWURGXFLQJ $ )KDVFKRVHQWRSULQWLWVFDWDORJRQDQXQXVXDONLQGRI FHUWDLQHPDLOPHVVDJHVDVHYLGHQFHRIFRQVXPHUFRQIXVLRQ SDSHUOHDYLQJFRPSHWLWRUVDYDULHW\RIRWKHUSDSHURSWLRQV 7KH FRXUW GRXEWHG ZKHWKHU WKH HYLGHQFH ZDV QHZO\ 7KH FORWKHV RIIHUHG IRU VDOH DSSHDU LQ mFORWKHVOLQHl RU GLVFRYHUHGEXWH[DPLQHGDQGUHMHFWHGLWDVLUUHOHYDQWWRWKH mFXWRXWlIRUP WKHJDUPHQWVDSSHDURQWKHSDJHDVLIKDQJLQJ GLVWULFW FRXUWjV MXGJPHQW ZKLFK WXUQHG QRW RQ VHFRQGDU\ IURPDFORWKHVOLQHLHQRWRQDPRGHO ZKLOHPDQ\FDWDORJV PHDQLQJ RU FRQIXVLRQ EXW RQ WKH XQSURWHFWDEOH QDWXUH RI VKRZ JDUPHQWV RQ D PRGHO RU GLVSOD\ WKHP LQ RWKHU ZD\V $EHUFURPELHjV FODLPHG WUDGH GUHVV  $EHUFURPELH WLPHO\ &RORUEDUV DUH D XVHIXO PHFKDQLVP IRU FRPPXQLFDWLQJ WKH DSSHDOHG DYDLODEOHVHOHFWLRQRIFRORUVEXWWKHVDPHLQIRUPDWLRQFDQEH SURYLGHG LQ D KDQGIXO RI RWKHU ZD\V  $EHUFURPELH XVHV ,, JUDLQ\LPDJHVRIH[FHSWLRQDOO\ILWDQGDWWUDFWLYH\RXQJSHRSOH LQ RXWGRRU RIWHQ FROOHJLDWH  VHWWLQJV DORQH DQG LQ JURXSV :HWXUQILUVWWRDWKUHVKROGLVVXH WKHWLPLQJRIVXPPDU\ ZHDULQJPRUHRUOHVV$ )FORWKLQJLQZD\VWKDWFRQYH\WKHLU MXGJPHQW  m>6@XPPDU\ MXGJPHQW LV LPSURSHU LI WKH DOOHJLDQFHWRWKHEUDQGZKLOHDOVRVHHPLQJO\DWWHPSWLQJWR QRQPRYDQW LV QRW DIIRUGHG D VXIILFLHQW RSSRUWXQLW\ IRU FUHDWHDVH[XDOP\VWLTXHDERXWWKHZHDUHU7KH4XDUWHUOLHVLQ GLVFRYHU\l9DQFHY8QLWHG6WDWHV )G WK WKH UHFRUG UDUHO\ GHYLDWH IURP WKLV SDWWHUQ EXW FORWKLQJ &LU    FLWLQJ :KLWHj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

VXPPDU\ MXGJPHQW ZDV SUHPDWXUHO\ HQWHUHG EHFDXVH WUDGHPDUNV RQ FORWKLQJ EHDULQJ FHUWDLQ JHQHULF GHVLJQV DGGLWLRQDO GLVFRYHU\ ZDV QHHGHG DQG WKH DUJXPHQW LV QRW XQVSHFLILHGmVROLGSODLGDQGVWULSHGHVLJQVlZLWKRXWPRUH SUHVHUYHGIRUDSSHDOXQOHVVLWLVILUVWDGYDQFHGLQWKHGLVWULFW DUHLQGLVSXWDEO\JHQHULF PDGHIURPJHQHULFIDEULFVZRXOG FRXUW6HH9DQFH )GDW  FLWLQJ3ORWW)GDW XQGRXEWHGO\ IRUFH WKHVH FRPSHWLWRUV WR VSHQG PRQH\ WR   7KXVEHIRUHDVXPPDU\MXGJPHQWPRWLRQLVGHFLGHG GHVLJQ DURXQG $EHUFURPELHjV FUHDWLRQV  7KHUH FDQ EH QR WKHQRQPRYDQWPXVWILOHDQDIILGDYLWSXUVXDQWWR)HG5&LY GLVSXWHWKDWSUHYHQWLQJRWKHUSURGXFHUVIURPFRPELQLQJWKHVH 3 I WKDWGHWDLOVWKHGLVFRYHU\QHHGHGRUILOHDPRWLRQIRU GHVLJQHOHPHQWVLQWKHZD\$EHUFURPELHGRHVZRXOGSUHYHQW DGGLWLRQDOGLVFRYHU\,IKHGRHVQHLWKHUmWKLVFRXUWZLOOQRW WKHP IURP FRPSHWLQJ HIIHFWLYHO\ LQ WKH PDUNHW IRU FDVXDO QRUPDOO\ DGGUHVV ZKHWKHU WKHUH ZDV DGHTXDWH WLPH IRU FORWKLQJDLPHGDW\RXQJSHRSOH1RUHDVRQDEOHMXU\FRXOG GLVFRYHU\l3ORWW)GDW ,IWKHQRQPRYDQWPDNHV ILQGWRWKHFRQWUDU\5HPDQGIRUIXUWKHUSURFHHGLQJVLQWKH D SURSHU DQG WLPHO\ VKRZLQJ RI D QHHG IRU GLVFRYHU\ WKH GLVWULFWFRXUWRQWKLVTXHVWLRQZRXOGEHDZDVWHRIMXGLFLDO GLVWULFWFRXUWjVHQWU\RIVXPPDU\MXGJPHQWZLWKRXWSHUPLWWLQJ UHVRXUFHVQRWWRPHQWLRQWKHSDUWLHVjWLPHDQGPRQH\ KLPWRFRQGXFWDQ\GLVFRYHU\DWDOOZLOOFRQVWLWXWHDQDEXVHRI GLVFUHWLRQ6HH:KLWHjV/DQGLQJ)LVKHULHV )GDW :H UHDFK WKH VDPH FRQFOXVLRQ ZLWK UHVSHFW WR $EHUFURPELHj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jVFDWDORJLVDGLIIHUHQWPDWWHUHQWLUHO\2I H[SODLQHGLWVQHHGIRUGLVFRYHU\DQGFLWHG:KLWHjV/DQGLQJ FRXUVH WKH 4XDUWHUO\ KDV FHUWDLQ IXQFWLRQV LQFOXGLQJ mWKH )LVKHULHV )GDWLQVXSSRUWRILWVSRVLWLRQWKDW FUHDWLRQRIDFXWWLQJHGJHµFRROj$EHUFURPELHLPDJHlDQG VWD\LQJ GLVFRYHU\ ZRXOG SUHMXGLFH LWV DELOLW\ WR UHVSRQG WR $PHULFDQjV VXPPDU\ MXGJPHQW PRWLRQ  $EHUFURPELH KDV SUHVHUYHG WKH LVVXH RI DGHTXDWH GLVFRYHU\ IRU RXU UHYLHZ  $EHUFURPELHjV IDLOXUH WR GHVFULEH WKHVH VHWXSV LQ LWV FRPSODLQW DQG EHFDXVHUHTXLULQJDVDSDUWRILWVUHVSRQVHWRWKHVXPPDU\ LWV EULHI RU LQFOXGH D GHSLFWLRQ RI RQH LQ WKH UHFRUG LQGLFDWHV WKDW LWV FODLP MXGJPHQWPRWLRQD5XOH I DIILGDYLWDIUHVKPRWLRQIRU RI WUDGH GUHVV LQ LWV LQVWRUH SUHVHQWDWLRQ ODFNV VXIILFLHQW SDUWLFXODULW\ $00 QHZ GLVFRYHU\ RU UHFLWDWLRQ RI DUJXPHQWV UHMHFWHG E\ WKH 8:57, 3DUW ,,,% GLVWULFWFRXUWLQWKHRUGHUVWD\LQJGLVFRYHU\VLPSO\WRSUHVHUYH WKH PDWWHU ZRXOG LJQRUH $EHUFURPELHjV DUJXPHQWV LQ  $JDLQ IRU HDVH RI UHIHUHQFH $ ) GHVFULEHV LWV FDWDORJjV WUDGH RSSRVLWLRQ WR WKH VLPXOWDQHRXVO\ ILOHG PRWLRQ IRU VWD\ DQG GUHVV WKXV mWKH FUHDWLRQ RI D FXWWLQJ HGJH µFRROj $EHUFURPELH LPDJH WKURXJK SKRWRJUDSKV DQG DGYHUWLVLQJ DQG SURPRWLRQDO PDWHULDO    ZKLFK SUHVHQWV WKH $EHUFURPELH %UDQG DQG 7UDGH 'UHVV LQ D XQLTXH PDQQHU QDPHO\ LW IHDWXUHV WKH $EHUFURPELH %UDQG DQG 7UDGH 'UHVV LQ D µFXWRXWj RU µFORWKHVOLQHj VW\OH DQG XVHV FRORU EDUV WR LOOXVWUDWH WKH DYDLODEOH FRORUV RI JRRGV ZKLOH FRPELQLQJ D FRQVLVWHQW FRQFHSWXDO WKHPH ZLWK D OLIHVW\OH HGLWRULDO FRQWHQW RI PXVLF HOHFWURQLFV ERRNV DQG PDJD]LQH IHDWXUHV DQG LV SULQWHG RQ FRXJDU YHOOXP SDSHU ZKLFK LV XQLTXH IRU D FDWDORJl &RPSO ˆ  K   $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

*LYLQJ$EHUFURPELHDPRQRSRO\RQWKHZRUGVLWVFODLPV XQGXO\ H[DOW IRUP RYHU VXEVWDQFH  0DNLQJ WKH DUJXPHQWV IRUPSDUWRILWVWUDGHGUHVVZRXOGKDPVWULQJDQ\FRPSHWLWRUjV RQFHLVHQRXJK DELOLW\WRFRQYH\WKHUHOLDELOLW\RILWVRZQEUDQG7KH(QJOLVK ODQJXDJH FXUUHQWO\ FRQWDLQV D OLPLWHG OLVW RI V\QRQ\PV IRU 7KH GLVWULFW FRXUWjV 1RYHPEHU    RUGHU JUDQWLQJ UHOLDEOH DQG RWKHU ZRUGV WKDW FRQYH\ D SURGXFWjV LQWHJULW\ $PHULFDQjVPRWLRQWRVWD\GLVFRYHU\UHFLWHG :KLOH $EHUFURPELH GHVLJQHUV GHVHUYH FUHGLW IRU XVLQJ WKH FRPSDQ\jV DJH DV D FUHDWLYH LQGLFDWRU RI WKHLU SURGXFWVj WKH&RXUWjVYLHZWKDWDGGLWLRQDOHYLGHQFHRILQWHQWLRQDO UHOLDELOLW\ IHZ RWKHU YHUEDO IRUPXODWLRQV DGHTXDWHO\ RU FRS\LQJ DW WKLV VWDJH >EH\RQG $PHULFDQjV OLPLWHG HIILFLHQWO\FRQYH\WKLVFRQFHSW7KH VDPH LVWUXHRIXVLQJ DGPLVVLRQ@ ZRXOG QRW DGG PDWHULDOO\ WR WKH &RXUWjV VXJJHVWLYH V\PEROV OLNH ODFURVVH VWLFNV DQG WKH VNL SDWURO DQDO\VLV RI WKH SURWHFWDELOLW\ RI $ )jV WUDGH GUHVV DV FURVVRQFORWKLQJWRFRQYH\WKHSURGXFWjVDWKOHWLFQDWXUHRU SODFHGLQLVVXHE\$PHULFDQ(DJOHj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mFRPSHWLWRUVZRXOGKDYHWRVSHQGPRQH\QRWWRFRS\EXWWR $EHUFURPELHDUJXHVWKDWEH\RQGHYLGHQFHRILQWHQWLRQDO GHVLJQDURXQGl:75RJHUV&R)GDW7KHODFN FRS\LQJLWVRXJKWmGLVFRYHU\FRQFHUQLQJWKHXQLTXHQHVVRI RIFRPSDUDEOHDOWHUQDWLYHVWRSOHDVLQJGHVLJQIHDWXUHVPHDQV WKH$EHUFURPELH7UDGH'UHVVZKLFKKDGDFTXLUHGVHFRQGDU\ WKDWJUDQWLQJDQLQMXQFWLRQZRXOGGHQ\FRQVXPHUVWKHEHQHILWV PHDQLQJDPRQJFRQVXPHUVDQGFRQFHUQLQJWKHOLNHOLKRRGRI RIDFRPSHWLWLYHPDUNHW,QVKRUWWKHVHGHVLJQIHDWXUHVDUH FRQIXVLRQZLWKWKH$PHULFDQ7UDGH'UHVVl$SSHOODQWjV%U m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l,GDW F $PHULFDQjVFRQVXPHUVDUHDFWXDOO\FRQIXVHGDVWRZKHWKHU WKHUH LV DQ DVVRFLDWLRQ EHWZHHQ WKH WZR FRPSDQLHV  6HH )LQDOO\$EHUFURPELHLVQRWVDYHGE\LWVFKDUDFWHUL]DWLRQRI $SSHOODQWj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

DOUHDG\ FRQWDLQHG H[WHQVLYH XQFRQWHVWHG HYLGHQFH RI :H WXUQ ILUVW WR $EHUFURPELHjV FORWKLQJ GHVLJQV VHFRQGDU\PHDQLQJVXFKGLVFRYHU\SULRUWRWKHGLVWULFWFRXUWjV $EHUFURPELHjVFRPSODLQWLWVHOILGHQWLILHVWKHIXQFWLRQVRIWKH UHVROXWLRQ RI $PHULFDQjV PRWLRQ ZRXOG KDYH EHHQ GHVLJQ HOHPHQWV LW VHOHFWHG  XVH RI WKH ZRUG SHUIRUPDQFH XQQHFHVVDULO\ GXSOLFDWLYH  $EHUFURPELH QHHGHG QR IXUWKHU mFRQYH\>V@WKHLPDJHRIDQDFWLYHOLQHRIFORWKLQJl XVHRI GLVFRYHU\WRRSSRVH$PHULFDQjVPRWLRQDQGWKHPRWLRQZDV WKH ZRUGV DXWKHQWLF JHQXLQH EUDQG WUDGHPDUN DQG VLQFH ULSHIRUUHVROXWLRQDWWKHWLPHWKHGLVWULFWFRXUWFRQVLGHUHGLW  mFRQYH\WKHUHOLDELOLW\RIWKHEUDQG lDQGVRRQ8VH %HFDXVH WKLV RSLQLRQ UHVROYHV WKH FDVH LQ FHUWDLQ ZD\V QRW RIWKHVHHOHPHQWVLQFRPELQDWLRQZLWKRQHDQRWKHUDQGZLWK H[SUHVVO\DGGUHVVHGE\WKHGLVWULFWFRXUWZHQRWHWKDWQRQHRI $EHUFURPELHjVWUDGHPDUNVRQFORWKLQJEHDULQJmSULPDU\FRORU WKH IDFWV $ ) ZLVKHG WR GLVFRYHU JRHV WR WKH TXHVWLRQ RI FRPELQDWLRQVLQFRQQHFWLRQZLWKVROLGSODLGDQGVWULSH IXQFWLRQDOLW\DQGDVGLVFXVVHGLQIUDSDJHVWKHIDFWRI GHVLJQVlDQGPDGHIURPmDOOQDWXUDOFRWWRQZRRODQGWZLOO DFWXDOFRQVXPHUFRQIXVLRQKHUHZRXOGQRWFUHDWHDJHQXLQH IDEULFVlFUHDWHVUHOLDEOHUXJJHGDQGRUDWKOHWLFFDVXDOFORWKLQJ LVVXHRIPDWHULDOIDFWRQWKHTXHVWLRQRIFRQIXVLQJVLPLODULW\ GUDZQ IURP D FRQVLVWHQW WH[WXUH GHVLJQ DQG FRORU SDOHWWH RIWKHSDUWLHVjFDWDORJVEHFDXVHZHSUHVHQWO\UHVROYHDOHJDO :HUH WKH ODZ WR JUDQW $EHUFURPELH SURWHFWLRQ RI WKHVH TXHVWLRQDQGKROGWKHPQRWFRQIXVLQJO\VLPLODUDVDPDWWHURI IHDWXUHVWKHSDXFLW\RIFRPSDUDEOHDOWHUQDWLYHIHDWXUHVWKDW ODZ FRPSHWLWRUV FRXOG XVH WR FRPSHWH LQ WKH PDUNHW IRU FDVXDO FORWKLQJ ZRXOG OHDYH FRPSHWLWRUV DW D VLJQLILFDQW QRQ ,,, UHSXWDWLRQDOFRPSHWLWLYHGLVDGYDQWDJHDQGZRXOGWKHUHIRUH SUHYHQWHIIHFWLYHFRPSHWLWLRQLQWKHPDUNHW $ 7KLV FRXUW UHYLHZV D GLVWULFW FRXUWjV JUDQW RI VXPPDU\ MXGJPHQWGHQRYR6HH'DGG\jVsXQN\0XVLF6WRUHV,QFY  )RU HDVH RI UHIHUHQFH ZH KHUH UHSULQW WKH IHDWXUHV $EHUFURPELH %LJ'DGG\jV)DPLO\0XVLF&WU )G  WK FODLPV FRPSULVH WKH WUDGH GUHVV RI LWV JDUPHQW GHVLJQV mD XVH RI WKH &LU     6XPPDU\ MXGJPHQW LV DSSURSULDWH m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l SURPRWLRQDO PDWHULDO WR FRQYH\ WKH UHOLDELOLW\ RI WKH $EHUFURPELH %UDQG )HG5&LY3 F 7KHFRXUWZLOOYLHZWKHIDFWVDQGDOO G XVH RI WKH ZRUG RXWGRRU RQ ODEHOV DQG DGYHUWLVLQJ DQG SURPRWLRQDO LQIHUHQFHVWREHGUDZQIURPWKHPLQWKHOLJKWPRVWIDYRUDEOH PDWHULDOV WR FRQYH\ WKH LPDJH RI D UXJJHG RXWGRRU OLQH RI FDVXDO FORWKLQJ

WRWKHQRQPRYLQJSDUW\6HH0DWVXVKLWD(OHF,QGXV&RY H XVH RI GHVLJQ ORJRV VXFK DV WKH VNL SDWURO FURVV DQG ODFURVVH VWLFNV DQG SURGXFW QDPHV IRU WKH W\SHV RI FORWKLQJ VXFK DV mILHOG MHUVH\l WR FRQYH\ =HQLWK5DGLR&RUS866&W WKH LPDJH RI DQ DWKOHWLF OLQH RI FDVXDO FORWKLQJ I XVH RI SULPDU\ FRORU /(GG   7KHQRQPRYLQJSDUW\LQDQVZHULQJD FRPELQDWLRQV VXFK DV UHG EOXH JUH\ WDQ DQG JUHHQ LQ FRQQHFWLRQ ZLWK SURSHUO\VXSSRUWHGPRWLRQIRUVXPPDU\MXGJPHQWPXVWVKRZ VROLG SODLG DQG VWULSH GHVLJQV WR FUHDWH D FRQVLVWHQW GHVLJQ DQG FRORU DJHQXLQHLVVXHQHFHVVLWDWLQJWULDO6HH)R[Y9DQ2RVWHUXP SDOHWWH J XVH RI DOO QDWXUDO FRWWRQ ZRRO DQG WZLOO IDEULFV WR FUHDWH D

)G WK&LU 6XFKDQLVVXHH[LVWVmLIWKH FRQVLVWHQW WH[WXUH SDOHWWH    l &RPSO ˆ  7KH ODVW WZR IHDWXUHV DUH REYLRXVO\ IXQFWLRQDO VWDQGLQJ DORQH $QG $PHULFDQ KDV QRW GLUHFWO\ HYLGHQFHLVVXFKWKDWDUHDVRQDEOHMXU\FRXOGUHWXUQDYHUGLFW FRSLHG WKH ILUVW IHDWXUH WKH XVH RI $EHUFURPELHjV WUDGHPDUNV LW KDV XVHG IRUWKHQRQPRYLQJSDUW\l$QGHUVRQY/LEHUW\/REE\ LWV RZQ ,W VHHPV WKHQ WKDW $EHUFURPELH PHDQW WR GHILQH LWV WUDGH GUHVV 86DW%HFDXVHWKLVFRXUWjVGHQRYRUHYLHZLQYROYHV DV LQFOXGLQJ VRPH RU PDQ\ RI WKH IHDWXUHV ODEHOHG E WKURXJK H LQ FRPELQDWLRQ ZLWK WKH ODVW WZR IHDWXUHV DQG WKH SURGXFHUjV RZQ WUDGHPDUN  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

WUDGHGUHVVSURWHFWLRQIRUDSURGXFWj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l  ,G DW   IRRWQRWHV RPLWWHG   7KH VDPH )G WK&LU  5XVVj.ZLN&DU:DVK,QF SULQFLSOHDSSOLHVWRWUDGHGUHVVODZ6HH7ZR3HVRV86 Y 0DUDWKRQ 3HWUROHXP &R  )G   WK &LU DW   6HHDOVR:60,QFY7HQQHVVHH6DOHV&R )G   WK &LU    KROGLQJ WKDW WKH OLNHOLKRRG RI WUDGHPDUNFRQIXVLRQFDQEHDTXHVWLRQRIODZDSSURSULDWHIRU GHWHUPLQDWLRQRQDPRWLRQIRUVXPPDU\MXGJPHQW  % 6HFWLRQ  D  RI WKH /DQKDP $FW  86& †  D  SURWHFWVIURPLQIULQJHPHQWWKHXQUHJLVWHUHGmWUDGHGUHVVlRI D SURGXFW  $V H[SODLQHG PRUH IXOO\ EHORZ WR UHFRYHU IRU WUDGHGUHVVLQIULQJHPHQWXQGHU†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m>,@W ZRXOG    EH XQUHDVRQDEOH WR OHW D PDQXIDFWXUHU XVH WUDGHPDUN ODZ WR SUHYHQW FRPSHWLWRUV IURP SUHFHGHQWTXHVWLRQ :KDWW\SHRImWKLQJlFDQLILWVDWLVILHVWKH PDNLQJ SOHDVLQJ VXEVWLWXWHV IRU KLV RZQ EUDQG \HW WKDW ZRXOG EH WKH HIIHFW WZR SURWHFWDELOLW\ FULWHULD TXDOLI\ DV WUDGH GUHVV"  ,Q WKH RI DOORZLQJ KLP WR DSSURSULDWH WKH PRVW SOHDVLQJ ZD\ RI FRQILJXULQJ WKH ZRUGV RI WKH GLVWULFW FRXUW LV ZKDW $ ) GHVFULEHG LQ LWV SURGXFWl :7 5RJHUV &R  )G DW  ,Q WKLV VHQVH IXQFWLRQDOLW\ FRPSODLQWmµWUDGHGUHVVjDWDOOl" GHSHQGV RQ mZKHWKHU WKH IHDWXUH    LV VRPHWKLQJ WKDW RWKHU SURGXFHUV RI WKH SURGXFW LQ TXHVWLRQ ZRXOG KDYH WR KDYH DV SDUW RI WKH SURGXFW LQ RUGHU mµ7UDGHGUHVVjUHIHUVWRµWKHLPDJHDQGRYHUDOODSSHDUDQFH WR EH DEOH WR FRPSHWH HIIHFWLYHO\ LQ WKH PDUNHWn LQ RWKHU ZRUGV LQ RUGHU WR JLYH FRQVXPHUV WKH EHQHILWV RI D FRPSHWLWLYH PDUNHWn RU ZKHWKHU LW LV RIDSURGXFWj,WHPERGLHVµWKDWDUUDQJHPHQWRILGHQWLI\LQJ WKH NLQG RI PHUHO\ LQFLGHQWDO IHDWXUH ZKLFK JLYHV WKH EUDQG VRPH FKDUDFWHULVWLFV RU GHFRUDWLRQV FRQQHFWHG ZLWK D SURGXFW LQGLYLGXDO GLVWLQFWLRQ EXW ZKLFK SURGXFHUV RI FRPSHWLQJ EUDQGV FDQ ZKHWKHUE\SDFNDJLQJRURWKHUZLVH>WKDW@PDNH>V@WKHVRXUFH UHDGLO\ GR ZLWKRXWl ,G DW   $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

RI WKH SURGXFW GLVWLQJXLVKDEOH IURP DQRWKHU DQG    7KH WZR PRVW FRPPRQ mWHVWVl RI DHVWKHWLF IXQFWLRQDOLW\ SURPRWH>V@LWVVDOHjl)HUUDUL )GDW  TXRWLQJ XQGHUWKHFRPSHWLWLRQWKHRU\SURYHXVHIXOLQWKLVFDVHm7KH $OOLHG0NWJ*URXS,QFY&'/0NWJ,QF)G WHVW IRU µFRPSDUDEOH DOWHUQDWLYHVj DVNV ZKHWKHU WUDGHGUHVV  WK&LU  DQG0U*DVNHW&RY7UDYLV 1(G SURWHFWLRQ RI FHUWDLQ IHDWXUHV ZRXOG QHYHUWKHOHVV OHDYH D  Q 2KLR&W$SS  7UDGHGUHVVmµLQYROYHV YDULHW\ RI FRPSDUDEOH DOWHUQDWLYH IHDWXUHV WKDW FRPSHWLWRUV WKHWRWDOLPDJHRIDSURGXFWDQGPD\LQFOXGHIHDWXUHVVXFKDV PD\XVHWRFRPSHWHLQWKHPDUNHW,IVXFKDOWHUQDWLYHVGRQRW VL]HVKDSHFRORURUFRORUFRPELQDWLRQVWH[WXUHJUDSKLFVRU H[LVW WKH IHDWXUH LV IXQFWLRQDO  EXW LI VXFK DOWHUQDWLYHV GR HYHQSDUWLFXODUVDOHVWHFKQLTXHVjl7ZR3HVRV,QFY7DFR H[LVWWKHQWKHIHDWXUHLVQRWIXQFWLRQDOl:RQJ&251(// &DEDQD,QF86Q    TXRWLQJsRKQ+ / 5 'DW QRWLQJWKDWm>W@KHFRPSDUDEOHDOWHUQDWLYHV +DUODQG&RY&ODUNH&KHFNV,QF)G   WK UHTXLUHPHQWPD\QHFHVVLWDWHPRUHWKDQWKHPHUHH[LVWHQFHRI &LU   FLWLQJ2ULJLQDO$SSDODFKLDQ$UWZRUNV,QFY7R\ RQH DOWHUQDWLYH DQG PD\ LQVWHDG UHTXLUH D QXPEHU RI /RIW ,QF  )G   WK &LU    mDGRSWLRQ DOWHUQDWLYHVIURPZKLFKFRPSHWLWRUVPD\FKRRVHl  IRRWQRWHV SURFHGXUHVXVHGE\>SODLQWLII@LQWKHVDOHRILWVGROOVTXDOLI\DV RPLWWHG m7KHµHIIHFWLYHFRPSHWLWLRQjWHVWDVNVZKHWKHU SURWHFWDEOHWUDGHGUHVVl DQG6. )&RY3UHPR3KDUP /DEV,QF)6XSS '1s   VWDWLQJ WKDW m>W@UDGH GUHVV LV D FRPSOH[ FRPSRVLWH RI IHDWXUHVl LQFOXGLQJLQWHUDOLDVL]HFRORUWH[WXUHDQGJUDSKLFVZKLFK PDQXIDFWXUHU LW ZRXOG EH IXQFWLRQDO DQG FRXOG WUDGHPDUNHG %XW D WUDGHPDUN HVSHFLDOO\ ZKHQ LW LV SDUW RI WKH QRW EH

PXVWmEHFRQVLGHUHGWRJHWKHUQRWVHSDUDWHO\l DIIjG)G SURGXFW UDWKHU WKDQ EHLQJ MXVW WKH EUDQG QDPH LV ERXQG WR EH  G&LU   VHOHFWHG LQ SDUW WR EH SOHDVLQJ VR WKLV GHILQLWLRQ RI IXQFWLRQDOLW\ FRXOG UXOH RXW WUDGHPDUN SURWHFWLRQ IRU GHVLJQ IHDWXUHV >,W LV

$VWKH6HFRQG&LUFXLWREVHUYHGUHFHQWO\mµWUDGHGUHVVjKDV DOVR HUURU WR FRQVLGHU D IHDWXUH IXQFWLRQDO@ µZKHQ LW VHUYHV WR

WDNHQRQDPRUHH[SDQVLYHPHDQLQJDQGLQFOXGHVWKHGHVLJQ SURYLGH D UHDVRQ IRU SXUFKDVH ZKLFK LV XQUHODWHG WR WKH IDFW WKDW

DQGDSSHDUDQFHRIWKHSURGXFWDVZHOODVWKDWRIWKHFRQWDLQHU WKH VRXUFH RI WKH SURGXFW LV D SDUWLFXODU PDQXIDFWXUHUj UHDVRQn QRW WKH PRVW LPSRUWDQW RU HYHQ HTXDOO\ LPSRUWDQW $

DQGDOOHOHPHQWVPDNLQJXSWKHWRWDOYLVXDOLPDJHE\ZKLFK UHDVRQ KHQFH >XQGHU WKLV UHDVRQLQJ@ D SOHDVLQJ WUDGH QDPH WKHSURGXFWLVSUHVHQWHGWRFXVWRPHUVlsHIIUH\0LOVWHLQ,QF V\PERO RU GHVLJQ IHDWXUH FDQQRW EH WUDGHPDUNHG    >7@KH IDFW

Y*UHJRU/DZORU5RWK,QF)G G&LU   WKDW D GHVLJQ IHDWXUH LV DWWUDFWLYH GRHV QRW    SUHFOXGH LWV EHLQJ

)HUUDUL VLPLODUO\ HQGRUVHG D YHU\ EURDG FRQFHSW RI WUDGH WUDGHPDUNHG ,I HIIHFWLYH FRPSHWLWLRQ LV SRVVLEOH ZLWKRXW

GUHVV RQH WKDW ZHQW EH\RQG WKH SURGXFWVj SDFNDJHV DQG FRS\LQJ WKDW IHDWXUH WKHQ    LW LV QRW D IXQFWLRQDO IHDWXUH

GHVLJQV6HH)HUUDUL )GDW $FFRUGLQJWR :7 5RJHUV &R Y .HHQH  )G   WK &LU    %HFDXVH WKH 6XSUHPH &RXUW KDV QHYHU LQWLPDWHG WKDW DHVWKHWLF 0&&$57+<21 75$'(0$5.6† WUDGHGUHVVKDVEHHQKHOG IXQFWLRQDOLW\ VKRXOG EH HYDOXDWHG LQ D PDQQHU FRQVLVWHQW ZLWK WKH WRLQFOXGHVXFKWKLQJVDV WKHFRYHURIDERRNDPDJD]LQH LGHQWLILFDWLRQ WKHRU\ DQG KDV UHSHDWHGO\ IROORZHG WKH FRPSHWLWLRQ WKHRU\jV FRYHUGHVLJQWKHXVHRIDOLJKWKRXVHDVSDUWRIWKHGHVLJQRI DSSURDFK LQ DGGUHVVLQJ WKH VHFRQG IRUP RI IXQFWLRQDOLW\ VHH 7UDI)L[ 

DJROIKROHWKHm*lVKDSHRID*XFFLZDWFKDFRPELQDWLRQRI 6 &W DW  H[SODLQLQJ 4XDOLWH[  ZH H[SUHVVO\ DGRSW WKH FRPSHWLWLRQ WKHRU\ RI IXQFWLRQDOLW\ IHDWXUHV RI D IROGLQJ WDEOH D ILVKVKDSHG FUDFNHU WKH m0DUOERUR0DQlZHVWHUQFRZER\PRWLIDQGPRVWQRWDEO\IRU  7KH 6HYHQWK &LUFXLW GHVFULEHG WKH FRPSDUDEOH DOWHUQDWLYHV SUREOHP WKXV mD IXQFWLRQDO IHDWXUH LV RQH ZKLFK FRPSHWLWRUV ZRXOG KDYH WR VSHQG PRQH\ QRW WR FRS\ EXW WR GHVLJQ DURXQG DV WKH\ ZRXOG KDYH WR GR LI WKH\ ZDQWHG WR FRPH XS ZLWK D QRQRYDO VXEVWLWXWH IRU D IRRWEDOO ,W LV  m3URGXFW FRQILJXUDWLRQl VHHPV WR KDYH EHFRPH WKH YRJXH WHUP VRPHWKLQJ FRVWO\ WR GR ZLWKRXW OLNH WKH KRRG >RI D FDU@ LWVHOI  UDWKHU WKDQ UHSODFLQJ mSURGXFW GHVLJQl FRVWO\ WR KDYH OLNH WKH VWDWXH RI 0HUFXU\ >GHFRUDWLQJ WKH KRRG@ l :7  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

FRPPHQW GLG QRW GLVSODFH WKH WUDGLWLRQDO IXQFWLRQDOLW\ RXU SXUSRVHV WKH OD\RXW DQG DSSHDUDQFH RI D PDLORUGHU VWDQGDUGIURP,QZRRG/DERUDWRULHV,QVWHDGLWH[SODLQHGWKH FDWDORJ VHH 7RROV 86$  (TXLS &R Y &KDPS )UDPH SROLF\XQGHUO\LQJWKHIXQFWLRQDOLW\GRFWULQHLQDZD\UHDGLO\ 6WUDLJKWHQLQJ(TXLS)G WK&LU  %HFDXVH DGDSWDEOHWRWKHSUREOHPRIDHVWKHWLFIXQFWLRQDOLW\WKHLVVXH ZH FDQ FRQFHLYH RI QR mWKLQJl LQKHUHQWO\ LQFDSDEOH RI SUHVHQWHGLQ4XDOLWH[6HH7UDI)L[6&WDW FDUU\LQJPHDQLQJDQ\mWKLQJlFDQFRPHWRGLVWLQJXLVKJRRGV 7KXVWKHmVLJQLILFDQWQRQUHSXWDWLRQUHODWHGGLVDGYDQWDJHlWR LQFRPPHUFHDQGWKXVFRQVWLWXWHDPDUNZLWKLQWKHPHDQLQJ FRPSHWLWRUV DSSURDFK LV WKH VHFRQG IRUP RI WUDGH GUHVV RIWKH/DQKDP$FW6HH4XDOLWH[&RYsDFREVRQ3URGV&R IXQFWLRQDOLW\ 86    ,QVKRUW DQ\mWKLQJlWKDWGUHVVHV DJRRGFDQFRQVWLWXWHWUDGHGUHVV3URWHFWDELOLW\LVDQRWKHU 1RQHRIWKHGHVLJQIHDWXUHVWKDW$EHUFURPELHFODLPVDVLWV PDWWHUHQWLUHO\ WUDGHGUHVVLVHVVHQWLDOWRWKHXVHRUSXUSRVHRIWKHJDUPHQWV FDWDORJ DQG VWRUHV WKH\ DGRUQ  7KH GHVLJQ IHDWXUHV VXUHO\ 6WLOOWKHQRWLRQWKDWDQ\mWKLQJl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mVLJQLILFDQW QRQUHSXWDWLRQUHODWHG SURGXFWFRQILJXUDWLRQVWKHUHFRJQLWLRQWKDWWUDGHGUHVVFDQ GLVDGYDQWDJHl WKDW ZRXOG EH LPSRVHG RQ FRPSHWLWRUV E\ FRPSULVHmDQ\WKLQJlmµHYHQSDUWLFXODUVDOHVWHFKQLTXHVjl SURWHFWLQJ$EHUFURPELHjVFODLPHGWUDGHGUHVV7KDWIRUPRI 7ZR 3HVRV ,QF  86 DW  Q TXRWLQJ sRKQ + IXQFWLRQDOLW\JRYHUQVWKHDQDO\VLVRIWKLVFDVH +DUODQG&R)GDW  VKRXOGQRWEHWDNHQWRPHDQ WKDWDFRPSDQ\FDQSURWHFWDSURGXFWjVPDUNHWLQJWKHPHRU DQ\RWKHULQFRUSRUHDODVSHFWVRIWKHJRRGLQFDSDEOHRIEHLQJ  SHUFHLYHGE\WKHVHQVHV7KHDXUDDERXWDSURGXFWWKHFDFKHW )RU TXLWH VRPH WLPH WKH FLUFXLWV KDYH GLVDJUHHG DERXW WKH PRVW DSSURSULDWH WKHRU\ RI IXQFWLRQDOLW\ WR XVH LQ DHVWKHWLF IXQFWLRQDOLW\ FDVHV WKDWRZQHUVKLSRUGLVSOD\RILWFUHDWHVDQGWKHNLQGRIDSSHDO &RXUWV KDYH GLYLGHG EHWZHHQ WKRVH UHFRJQL]LQJ WKH LGHQWLILFDWLRQ WKHRU\ ZKLFK DW WLPHV HPSOR\HG WKH mLQGLFLD RI VRXUFHl mDFWXDO EHQHILWl mFRQVXPHU PRWLYDWLRQl DQG mFRPPHUFLDO VXFFHVVl WHVWV RI D IHDWXUHjV  7KH &RXUW ZURWH FDSDFLW\ WR LGHQWLI\ WKH PDQXIDFWXUHU WR FRQVXPHUV DQG WKH FRPSHWLWLRQ 7KH ODQJXDJH RI WKH /DQKDP $FW GHVFULEHV >WKH XQLYHUVH RI WKHRU\ ZKLFK DW WLPHV HPSOR\HG WKH mFRPSDUDEOH DOWHUQDWLYHVl mHVVHQWLDO WKLQJV WKDW FDQ TXDOLI\ DV D WUDGHPDUN@ LQ WKH EURDGHVW RI WHUPV WR XVDJHl mUHODWLRQ WR XVDJHl mHDVH RI PDQXIDFWXUHl DQG mHIIHFWLYH ,W VD\V WKDW WUDGHPDUNV µLQFOXG>H@ DQ\ ZRUG QDPH V\PERO RU FRPSHWLWLRQl WHVWV RI ZKHWKHU JUDQWLQJ D PRQRSRO\ RQ D IHDWXUH ZRXOG GHYLFH RU DQ\ FRPELQDWLRQ WKHUHRIl > 86&@ †  6LQFH SUHYHQW RWKHU VXSSOLHUV IURP FRPSHWLQJ LQ WKH PDUNHW IRU WKH SURGXFW  6HH 0LWFKHOO 0 :RQJ 7KH $HVWKHWLF )XQFWLRQDOLW\ 'RFWULQH DQG WKH /DZ KXPDQ EHLQJV PLJKW XVH DV D mV\PEROl RU mGHYLFHl DOPRVW

RI 7UDGH 'UHVV 3URWHFWLRQ   &251(// / 5(9      DQ\WKLQJ DW DOO WKDW LV FDSDEOH RI FDUU\LQJ PHDQLQJ WKLV ODQJXDJH UHDG OLWHUDOO\ LV QRW UHVWULFWLYH 7KH 6HYHQWK &LUFXLW H[SODLQHG LWV DGRSWLRQ RI WKH FRPSHWLWLRQ WKHRU\ E\ 4XDOLWH[  86 DW  LGHQWLI\LQJ SUREOHPV ZLWK WKH LGHQWLILFDWLRQ WKHRU\ LW KHOG WKDW LW LV HUURU WR  GHILQH QRQIXQFWLRQDO DV VHUYLQJ SULPDULO\ WR LGHQWLI\ WKH $V WKH 6XSUHPH &RXUW REVHUYHG †  D mSURYLGHV OLWWOH JXLGDQFH PDQXIDFWXUHU 8QGHUVWRRG OLWHUDOO\ WKLV ZRXOG PHDQ WKDW LI D DV WR WKH FLUFXPVWDQFHV XQGHU ZKLFK XQUHJLVWHUHG WUDGH GUHVV PD\ EH SDUWLFXODU GHVLJQ IHDWXUH KDG WZR HTXDOO\ LPSRUWDQW SXUSRVHV SURWHFWHGl EXW FRXUWV KDYH VXFFHVVIXOO\ UHDVRQHG E\ DQDORJ\ WR WKH RQH WR SOHDVH FRQVXPHUV DQG WKH RWKHU WR LGHQWLI\ WKH FRQGLWLRQV IRU WUDGHPDUN SURWHFWLRQ 6DPDUD %URV  86 DW   $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

LW KDV WR FHUWDLQ FRQVXPHUV GR QRW GUHVV D JRRG LQ WUDGH 3URWHFWLRQRIIXQFWLRQDOSURGXFWIHDWXUHVLVWKHSURYLQFHRI 5DWKHUWKRVHLQWDQJLEOHmWKLQJVlHPDQDWHIURPWKHJRRGLWV SDWHQW ODZ ZKLFK FRQIHUV D PRQRSRO\ RYHU QHZ SURGXFW GUHVVDQGWKHPDUNHWLQJFDPSDLJQWKDWSURPRWHVWKHGUHVVHG GHVLJQVIRUDOLPLWHGWLPHRQO\DIWHUZKLFKFRPSHWLWRUVDUH JRRG  7UDGH GUHVV LV WDQJLEOH RU RWKHUZLVH REMHFWLYHO\ IUHHWRFRS\DWZLOO6HHLG$VWKH6XSUHPH&RXUWDGYLVHG REVHUYDEOH E\ WKH VHQVHV  LWV FRQVWLWXWLRQ LV D PDWWHU RI m>W@UDGHGUHVVSURWHFWLRQPXVWVXEVLVWZLWKWKHUHFRJQLWLRQWKDW VXEMHFWLYHLQWHUSUHWDWLRQ/HVWZHORVHVLJKWRIWKHERG\RI LQ PDQ\ LQVWDQFHV WKHUH LV QR SURKLELWLRQ DJDLQVW FRS\LQJ ODZKHUHLQTXHVWLRQWKDWRIWUDGHGUHVVZHDUHUHPLQGHGWKDW JRRGV DQG SURGXFWV  ,Q JHQHUDO XQOHVV DQ LQWHOOHFWXDO FHUWDLQmWKLQJVlKHOGRXWDVmGUHVVlDUHQRWGUHVVDWDOO+$16 SURSHUW\ULJKWVXFKDVDSDWHQWRUFRS\ULJKWSURWHFWVDQLWHP &+5,67,$1 $1'(56(1 7+( (03(525j6 1(: &/27+(6 LWZLOOEHVXEMHFWWRFRS\LQJl7UDI)L[6&WDW 1DRPL/HZLVWUDQV&DQGOHZLFN3UHVV    :LWK $IWHU DOO FRS\LQJ SUHVHUYHV FRPSHWLWLRQ ZKLFK NHHSV WKLVLQPLQGZHWXUQWR$PHULFDQjVDUJXPHQWDQGWKHGLVWULFW GRZQZDUGSUHVVXUHRQSULFHVDQGHQFRXUDJHVLQQRYDWLRQ FRXUWjV KROGLQJ WKDW $EHUFURPELH VHHNV WR SURWHFW LWV PDUNHWLQJWKHPH &RQJUHVVUHVROYHGDFLUFXLWVSOLWUHJDUGLQJWKHmGHIHQVHRI IXQFWLRQDOLW\lE\GHFODULQJWKDWWKHEXUGHQRISURRIUHVWVRQ $PHULFDQOLNHWKHGLVWULFWFRXUWGUDZVDFRQWUDVWEHWZHHQ WKH SODLQWLII WR SURYH QRQIXQFWLRQDOLW\  6HH  86& WUDGH GUHVV DQG D mPDUNHWLQJ DSSURDFKl  6HH JHQHUDOO\ † D  *LYHQWKHHYLGHQFHLQWKHUHFRUGZHVHHQR +DDJHQ'D]V Y )UXVHQ *ODGMH /WG   ) 6XSS   SRVVLELOLW\ WKDW $EHUFURPELH FDQ FDUU\ LWV EXUGHQ RI SURRI 6'1<     +DDJHQ'D]V DQG WKH (LJKWK &LUFXLWjV ZLWKUHVSHFWWRWKHQRQIXQFWLRQDOLW\RILWVFORWKLQJGHVLJQV 3UXIURFN DUH WKH OHDGLQJ FDVHV GLVWLQJXLVKLQJ EHWZHHQ SURWHFWDEOHWUDGHGUHVVDQGDmPHUHPHWKRGRUVW\OHRIGRLQJ &RXUWVKDYHUHFRJQL]HGWKDWmWKHIXQFWLRQDOLW\GRFWULQHPD\ EXVLQHVVl3UXIURFN/WGY/DVDWHU)G  DSSO\ HYHQ WR IHDWXUHV RI D SURGXFW WKDW DUH SXUHO\ WK&LU  DEURJDWHGLQSDUWE\7ZR3HVRV86 RUQDPHQWDOl  .QLWZDYHV  )G DW  FLWLQJ :DOODFH ,Q3UXIURFNWKHGLVWULFWFRXUWKDGGHILQHGWKHSODLQWLIIjV ,QWjO6LOYHUVPLWKV,QFY*RGLQJHU6LOYHU$UW&R )G WUDGHGUHVVDVmDIXOOVHUYLFHUHVWDXUDQWVHUYLQJGRZQKRPH   G&LU  $QGWKH6XSUHPH&RXUWZKLOH FRXQWU\FRRNLQJLQDUHOD[HGDQGLQIRUPDODWPRVSKHUHZLWK mFDXWLRQ>LQJ@DJDLQVWPLVXVHRURYHUH[WHQVLRQRIWUDGHGUHVV D IXOOVHUYLFH EDU DQG ZKLFK HPSOR\V DOO RU DQ\ RI >HLJKW    QRWHG WKDW µSURGXFW GHVLJQ DOPRVW LQYDULDEO\ VHUYHV VSHFLILFDOO\GHVFULEHG@LWHPVl,GDW7KH(LJKWK&LUFXLW SXUSRVHVRWKHUWKDQVRXUFHLGHQWLILFDWLRQjl7UDI)L[6 KHOG WKDW LQFOXVLRQ RI WKH mµFRUH FRQFHSWj RI 3UXIURFNjV &WDW H[SODLQLQJDQGTXRWLQJ6DPDUD%URV 86 UHVWDXUDQWlLQDQLQMXQFWLRQGHILQHGLWVWUDGHGUHVVWRREURDGO\ DW    ,Q 7UDI)L[ WKH &RXUW LGHQWLILHG WZR IRUPV RI EHFDXVHm>W@KHFRQFHSWRILQIRUPDOFRXQWU\GLQLQJLVPHUHO\ IXQFWLRQDOLW\  7KH ILUVW WUDGLWLRQDO IXQFWLRQDOLW\ GHHPV D WKH PHWKRG 3UXIURFN KDV FKRVHQ WR PDUNHW LWV UHVWDXUDQW IHDWXUHIXQFWLRQDOZKHQmµLWLVHVVHQWLDOWRWKHXVHRUSXUSRVH VHUYLFHVl  ,G DW   5HJDUGOHVV RI ZKHWKHU WKH RI WKH GHYLFH RU ZKHQ LW DIIHFWV WKH FRVW RU TXDOLW\ RI WKH VSHFLILFDOO\GHVFULEHGHOHPHQWVZHUHHQWLWOHGWRWUDGHGUHVV GHYLFHjl4XDOLWH[86DW TXRWLQJ,QZRRG/DEV SURWHFWLRQWKURXJKLQKHUHQWRUDFTXLUHGGLVWLQFWLYHQHVVWKH  86 DW  Q   4XDOLWH[ m>H@[SDQG>HG@ XSRQ WKH PHDQLQJ RI WKLV SKUDVH >E\@ REVHUY>LQJ@ WKDW D IXQFWLRQDO IHDWXUH LV RQH WKH µH[FOXVLYH XVH RI ZKLFK ZRXOG SXW FRPSHWLWRUV DW D VLJQLILFDQW QRQUHSXWDWLRQUHODWHG GLVDGYDQWDJHjl  7UDI)L[  6 &W DW  TXRWLQJ 4XDOLWH[86DW %XWWKHFRPSHWLWLYHGLVDGYDQWDJH  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

LVIRUSXUSRVHVRIWKLVRSLQLRQDQHVWDEOLVKHGIDFW7KXV UHVWDXUDQWjVRYHUDOOWKHPHLQIRUPDOFRXQWU\GLQLQJFRXOGQRW $ ) VXFFHVVIXOO\ FOHDUHG WKH GLVWLQFWLYHQHVV KXUGOH  7KH DFTXLUHVXFKSURWHFWLRQ GLVWULFW FRXUW HUUHG LQ JUDQWLQJ VXPPDU\ MXGJPHQW WR $PHULFDQ RQ WKH JURXQGV WKDW $EHUFURPELHjV WUDGH GUHVV 6LPLODUO\WKH+DDJHQ'D]VFRXUWFRQFOXGHGWKDWGHVSLWH ODFNHGGLVWLQFWLYHQHVV WKHSODLQWLIIVjLGHQWLILFDWLRQRIILYHFRPPRQIHDWXUHVRQWZR LFHFUHDPSDFNDJHVmWKHFRQWDLQHUVLQLVVXHDVZHOODVWKHLU 0XFKRIWKHGLVWULFWFRXUWjVRSLQLRQUHYHDOVDFRQFHUQIRU GUHVV>ZHUH@FOHDUO\GLVWLQJXLVKDEOHDQGZRXOGDSSHDUVRWR WKH DQWLFRPSHWLWLYH HIIHFW RI D MXGJPHQW IRU $EHUFURPELH DOOEXWWKHPRVWREWXVHFRQVXPHUl+DDJHQ'D]V,QF  LQVRIDUDVFRPSHWLWRUVOLNH$PHULFDQFRXOGEHOHIWXQDEOHWR )6XSSDW:LWKQROLNHOLKRRGRIDFWXDOFRQIXVLRQWKH PDUNHW WKHLU JRRGV HIILFLHQWO\ DQG HIIHFWLYHO\ RU WR GHVLJQ SODLQWLII FRXOG QRW SUHYDLO RQ DQ HOHPHQWDO RU mRYHUDOO FORWKHV WKDW ZRXOG FRPSHWH ZLWK $ )jV  &RQFHUQ IRU DSSHDUDQFHlWUDGHGUHVVFODLPVRLWWULHGWRFRQYHUWHYLGHQFH UHDOLVWLFFRPSHWLWLRQLQDJLYHQLQGXVWU\KDVDSODFHLQWUDGH WKDW )UXVHQ*ODGMH KDG FRSLHG FHUWDLQ XQSURWHFWDEOH WUDGH GUHVVODZ WKHIXQFWLRQDOLW\GRFWULQH%HFDXVHWKHUHFRUGQRZ GUHVVLQWRDPXFKEURDGHUFODLPWKDW+DDJHQ'D]VKDGDULJKW EHIRUH WKLV FRXUW GRFXPHQWV WKH IXQFWLRQDOLW\ RI FHUWDLQ WR H[FOXVLYH XVH RI LWV 6FDQGLQDYLDQ FRQFHSW  7KH FRXUW GHVLJQV WKDW $EHUFURPELH FODLPV DV LWV WUDGH GUHVV RXU GH FRQFOXGHGWKDWWKHSODLQWLIIIDLOHGmWRDSSUHFLDWHWKHGLIIHUHQFH QRYRUHYLHZOHDGVXVWRWKHFRQFOXVLRQWKDWWKHGLVWULFWFRXUWjV EHWZHHQDQDWWHPSWWRWUDGHRIIWKHJRRGZLOORIDQRWKHUDQG MXGJPHQWIRU$PHULFDQLVVXSSRUWHGE\DOHJDOGHWHUPLQDWLRQ WKHOHJLWLPDWHLPLWDWLRQRIDQDGPLWWHGO\HIIHFWLYHPDUNHWLQJ QRWH[SUHVVO\UHDFKHGEHORZ WHFKQLTXH  ,Q IDFW SODLQWLII DWWHPSW>HG@ WR VLJQLILFDQWO\ EURDGHQ LWV SURWHFWHG µWUDGHPDUNj WR LQFOXGH LWV VRFDOOHG ' µXQLTXH6FDQGLQDYLDQPDUNHWLQJWKHPHjl,ELG%HFDXVHD PDUNHWLQJ WKHPH FDQQRW FRQVWLWXWH WUDGH GUHVV WKH FRXUW 7KH 6XSUHPH &RXUW UHFHQWO\ UHDIILUPHG WKH SROLF\ WKDW UHIXVHG WR HQMRLQ )UXVHQ *ODGMH IURP WUDGLQJ RQ 1RUGLF IXQFWLRQDOSURGXFWGHVLJQVFDQQRWEHSURWHFWHGDVWUDGHGUHVV LPDJHU\ 6HH7UDI)L[6&WDW 7KHIXQFWLRQDOLW\GRFWULQH mSUHYHQWVWUDGHPDUNODZZKLFKVHHNVWRSURPRWHFRPSHWLWLRQ $EHUFURPELHGHVFULEHVLWVWUDGHGUHVVDVFUHDWLQJDYDULHW\ E\ SURWHFWLQJ D ILUPjV UHSXWDWLRQ IURP LQVWHDG LQKLELWLQJ RI GLIIHUHQW LPDJHV  mDQ DFWLYH OLQH RI FDVXDO FORWKLQJl mD OHJLWLPDWHFRPSHWLWLRQE\DOORZLQJDSURGXFHUWRFRQWUROD UXJJHG OLQH RI FDVXDO FORWKLQJl mDQ DWKOHWLF OLQH RI FDVXDO XVHIXO SURGXFW IHDWXUHl  4XDOLWH[  86 DW  FORWKLQJlDQGmDFXWWLQJHGJHµFRROj$EHUFURPELHLPDJHl %XW $EHUFURPELH GRHV QRW FODLP D PRQRSRO\ RQ D FXWWLQJ  $GGUHVVLQJ LWV FRPPHQWV SULPDULO\ WR $EHUFURPELHjV DWWHPSW WR SURWHFW WKH GHVLJQ RI WKH 4XDUWHUO\ WKH GLVWULFW FRXUW RSLQHG WKDW SURWHFWLQJ  D PDUNHWLQJ VW\OH RU PHWKRG ZRXOG XQGXO\ LQWHUIHUH ZLWK FRPSHWLWRUVj $IWHU FRQFOXGLQJ WKDW WKH HLJKW LGHQWLILHG HOHPHQWV RI SXUSRUWHG ULJKW WR GHSLFW WKHLU SURGXFWV IDLUO\ 7KH FRXUW REVHUYHG m:LWKLQ WKH WUDGH GUHVV ZHUH QRW LQKHUHQWO\ GLVWLQFWLYH DQG KDG QRW DFTXLUHG VHFRQGDU\ VFRSH RI DGYHUWLVLQJ FHUWDLQ W\SHV RI FORWKLQJ UHWDLOHUV PXVW EH IUHH WR XVH PHDQLQJ WKH (LJKWK &LUFXLW RSLQHG LQ GLFWD WKDW WKH HLJKW HOHPHQWV ZHUH FRPPRQ YHUEDO RU SLFWRULDO GHVFULSWLRQV RI WKHLU JRRGV ZLWKRXW IHDU WKDW IXQFWLRQDO EHFDXVH WKH\ ZHUH FKRVHQ WR UHVSRQG WR FRQVXPHU GHPDQG IRU WKH\ FDQ EH KHOG OLDEOH IRU LQIULQJHPHQW $W D PLQLPXP WKRVH ZRXOG WKH FRUH FRQFHSW RI LQIRUPDO FRXQWU\ GLQLQJ $003UXIURFN   )G DW LQFOXGH VXFK PDWWHUV DV VKRZLQJ WKH FORWKLQJ LQ mFXWRXWl IDVKLRQ     XVLQJ DQ XQGHUVWDQGLQJ RI IXQFWLRQDO WKDW FRQIOLFWV ZLWK WKLV FRXUWjV XVLQJ FRPELQDWLRQV RI VWDQGDUG FRORUV    XQLYHUVDOO\UHFRJQL]HG SDWWHUQV DSSURDFK WR IXQFWLRQDOLW\VHH LQIUD 3DUW ,,,' DQG KDV EHHQ FDOOHG LQWR    DQG FRPPRQ IDEULFV    LQ FORWKLQJ GHVLJQ DQG PDQXIDFWXUH    $OO TXHVWLRQ E\ WKH UHVXOW LQ7ZR 3HVRV VHH +RPH %XLOGHUV $VVRF Y / /  RI WKHVH IDFWRUV DUH ERWK JHQHULF DQG GHVFULSWLYH    l ([KLELWLRQ 0JPW ,QF   )G   WK &LU    $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

HGJHmFRROlLPDJH,QVWHDG$EHUFURPELHVHHNVSURWHFWLRQRI UHJLVWUDWLRQRIDPDUNXVHGE\WKHDSSOLFDQWZKLFKKDVEHFRPH WKHGHVLJQIHDWXUHVWKDWLWFODLPVKDYHFRPELQHGWREHFRPH GLVWLQFWLYHRIWKHDSSOLFDQWjVJRRGVLQFRPPHUFHjnWKDWLV GLVWLQFWLYH RI LWV JRRGV LQ FRPPHUFH  )RU H[DPSOH LQ ZKLFKLVQRWLQKHUHQWO\GLVWLQFWLYHEXWKDVEHFRPHVRRQO\ GHVFULELQJRQHHOHPHQWLQFOXGHGDVSDUWRILWVRYHUDOOWUDGH WKURXJKVHFRQGDU\PHDQLQJl 7KLVFRXUWKDVORQJKHOGWKDW GUHVV$EHUFURPELHOLVWVmXVHRIWKHZRUGRXWGRRURQODEHOV mHYLGHQFHRILQWHQWLRQDOFRS\LQJVKRZVWKHVWURQJVHFRQGDU\ DQGDGYHUWLVLQJDQGSURPRWLRQDOPDWHULDOWRFRQYH\WKHLPDJH PHDQLQJRI>DSURGXFW@EHFDXVHµ>W@KHUHLVQRORJLFDOUHDVRQ RIDUXJJHGRXWGRRUOLQHRIFDVXDOFORWKLQJl&RPSOˆ G  IRU WKH SUHFLVH FRS\LQJ VDYH DQ DWWHPSW WR UHDOL]H XSRQ D )DLUO\ XQGHUVWRRG $EHUFURPELH GRHV QRW VHHN WR IRUELG VHFRQGDU\PHDQLQJWKDWLVLQH[LVWHQFHjl)HUUDUL )G $PHULFDQIURPPDUNHWLQJFORWKHVWKDWFRQYH\WKHLPDJHRID DW   TXRWLQJ $XGLR )LGHOLW\ ,QF Y +LJK )LGHOLW\ UXJJHGRXWGRRUOLQHRIFDVXDOFORWKLQJEXWLQVWHDGVHHNVWR 5HFRUGLQJV ,QF  )G   WK &LU    SUHYHQW$PHULFDQIURPGRLQJVRE\XVLQJWKHZRUGRXWGRRU $PHULFDQjV OLPLWHG DGPLVVLRQ RI LQWHQWLRQDO FRS\LQJ LQ FRPELQDWLRQ ZLWK RWKHU DVSHFWV RI $EHUFURPELHjV WUDGH FRQVWLWXWHVHYLGHQFHWKDW$EHUFURPELHjVGUHVVKDVDFTXLUHG GUHVVWKDWKDYHVXSSRVHGO\FRPHWRVLJQLI\$EHUFURPELHDV VWURQJVHFRQGDU\PHDQLQJ$ )LQWURGXFHGRWKHUHYLGHQFH WKHVRXUFHRIWKHJRRGV FRQILUPLQJWKHH[LVWHQFHRIVHFRQGDU\PHDQLQJLQLWVWUDGH GUHVV LQFOXGLQJ DQ DIILGDYLW IURP $EHUFURPELHjV &)2 $EHUFURPELHjVFRPSODLQWLVDELWSHUSOH[LQJ LWGHVFULEHVLWV DFFRPSDQLHGE\H[KLELWVLQWKHIRUPRIHPDLOVSXUSRUWHGO\ mWUDGHGUHVVl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jV WUDGH GUHVV KDG DFTXLUHG &RQYHUVHO\ XQGHU VXFK D EURDG WKHRU\ RI WKH FDVH VHFRQGDU\PHDQLQJ*LYHQ$PHULFDQjVOLPLWHGDGPLVVLRQRI $EHUFURPELHjV LQWURGXFWLRQ RI D QHZ GHVLJQ HJ XVLQJ FRS\LQJ DQG IDLOXUH WR LQWURGXFH HYLGHQFH FRQWHVWLQJ IHQFLQJIRLOVRQWVKLUWVZRXOGDOWHUWKHIRUPRILWVWUDGHGUHVV $EHUFURPELHjVFODLPRIVHFRQGDU\PHDQLQJWKHH[LVWHQFHRI DQGSRWHQWLDOO\SHUPLWLQIULQJHPHQWRIWKHQHZO\FRQFHLYHG VHFRQGDU\PHDQLQJDVVRFLDWHGZLWK$EHUFURPELHjVWUDGHGUHVV WUDGHGUHVVLQWKHDEVHQFHRIDQH[SDQGHGLQMXQFWLRQ$OVR $EHUFURPELHjVGHVFULSWLRQRILWVWUDGHGUHVVVHHPVDWWLPHV LQWHUQDOO\LQFRQVLVWHQW TXHU\ZKHWKHUFORWKLQJFDQ DWRQFH FRQYH\DQmDFWLYHlDmUXJJHGlDQmDWKOHWLFlDQGDmFRROl  7KLV FRXUW KDV DSSOLHG D VHYHQIDFWRU WHVW IRU GHWHUPLQLQJ WKH

LPDJH0RUHRYHUVRPHRI$EHUFURPELHjVGHVFULSWLRQVDUH H[LVWHQFH RI VHFRQGDU\ PHDQLQJ LQ WUDGH GUHVV 6HH 0DUNHWLQJ 'LVSOD\V

UDWKHUEURDG FRQVLGHUmXVHRIDOOQDWXUDOFRWWRQZRRODQG ,QF Y 7UDI)L[ 'HYLFHV ,QF  )G    WK &LU   UHYjG RQ

WZLOOIDEULFVWRFUHDWHDFRQVLVWHQWWH[WXUHSDOHWWHl &RPSO RWKHU JURXQGV VXE QRP 7UDI)L[ 'HYLFHV ,QF Y 0DUNHWLQJ 'LVSOD\V ,QF  6 &W    7KDW WHVW ORRNV WR D GLUHFW FRQVXPHU WHVWLPRQ\ ˆ J $QGLWVLQFOXVLRQRIWKHFDWDORJDQGWKHVDOHVDVVRFLDWH E FRQVXPHU VXUYH\V F H[FOXVLYLW\ OHQJWK DQG PDQQHU RI XVH WHDPVDVWUDGHGUHVVRILWVFORWKLQJVWUHWFKHVWKHERXQGDULHVRI G DPRXQW DQG PDQQHU RI DGYHUWLVLQJ H DPRXQW RI VDOHV DQG QXPEHU RI WUDGHGUHVVODZ FXVWRPHUV I HVWDEOLVKHG SODFH LQ WKH PDUNHW DQG J SURRI RI LQWHQWLRQDO FRS\LQJ 6HH (FKR 7UDYHO ,QF Y 7UDYHO $VVRF ,QF  )G   WK &LU     $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

GHVLJQIDOOVKRUWRIWKHGLVWLQFWLYHQHVVUHTXLUHPHQWEHFDXVH 5HDGLQJWKHFRPSODLQWLQLWVPRVWUHDVRQDEOHIRUPWKLV WKH\DUHJHQHULF FDVH LQYROYHV JDUPHQWV PDGH RI FHUWDLQ IDEULFV FRQWDLQLQJ FHUWDLQGHVLJQPRWLIVGUDZQIURPFHUWDLQFRORUSDOHWWHVDQG 7KHFRXUWHUUHG1RQHRIWKHWKUHHLWHPVRI$ )jVWUDGH GLVSOD\LQJ FHUWDLQ UHJLVWHUHG WUDGHPDUNV DQG RWKHU GHVLJQ GUHVVDWLVVXHLQWKLVFDVHLVJHQHULF7KHODEHORImJHQHULFlLV HOHPHQWVLQDFHUWDLQZD\,QDGGLWLRQWKH4XDUWHUO\LVDQ D VHYHUH FRQGHPQDWLRQ DQG ZH VXVSHFW RQH WKDW VWLQJV D LWHPFRQWDLQLQJDVSHFLILFPHWKRGRISUHVHQWLQJSURGXFWVLQ FORWKLQJ GHVLJQHU UDWKHU KDUVKO\  +HUH WKH ODEHO LV QRW FRQMXQFWLRQ ZLWK DQ LGHQWLILDEOH SKRWRJUDSKLF PRWLI DQG MXVWLILHG  ,Q ODQJXDJH UHSHDWHGO\ TXRWHG E\ WKH 6XSUHPH HGLWRULDO FRQWHQW DGGUHVVLQJ D OLIHVW\OH FRQVLVWHQW ZLWKn &RXUWsXGJH)ULHQGO\GHVFULEHGJHQHULFWHUPVDVWKHJHQXVRI SHUKDSV VSDZQLQJ D OLIHVW\OH HPXODWLYH RIn WKH LPDJH ZKLFK D SURGXFW LV D VSHFLHV HJ mVRDSl RU mVKLUWVl RU $EHUFURPELHLQWHQWLRQDOO\DVVRFLDWHVZLWKLWVFORWKLQJ :H mEDVHEDOOFDSVl7KHHTXLYDOHQWLQGHVLJQVEHDULQJLQPLQG UHJDUGWKHFRQILJXUDWLRQRIWKHFDWDORJDVWUDGHGUHVVEHFDXVH WKHZRUGPDUNSROLF\WKDWDPDQXIDFWXUHUKDVWKHULJKWWRFDOO WKH4XDUWHUO\LVDIUHHVWDQGLQJSURGXFWWKDWKDVLWVRZQWUDGH DSURGXFWE\LWVQDPHZRXOGEHWKHPRVWEDVLFLQFDUQDWLRQRI DJLYHQJHQXVRISURGXFWVLHWKHLPDJHWKDWDSSHDUVLQD SHUVRQjVKHDGZKHQKHKHDUVWKHZRUGmVKLUWlRUmEDVHEDOO  FDSl&ORWKLQJEHDULQJLPDJHVRIDWKOHWLFSDUDSKHUQDOLDDUH )HGHUDO 5XOH RI &LYLO 3URFHGXUH  I VWDWHV WKDW m$OO SOHDGLQJV VKDOO

QRWDEDVLFLQFDUQDWLRQRIFHUWDLQW\SHVRIDSSDUHO7KHJHQXV EH VR FRQVWUXHG DV WR GR MXVWLFHl m$V WKLV FRXUW KDV VWDWHG µWKH IXQGDPHQWDO WHQRU RI WKH 5XOHV LV RQH RI OLEHUDOLW\ UDWKHU WKDQ WHFKQLFDOLW\ LV DWKOHWLF RU VXJJHVWLYHO\ DWKOHWLF  DSSDUHO  WKH VSHFLHV LV    jl 0LQJHU Y *UHHQ  )G    WK &LU  FLWLQJ 0LOOHU VKLUWVEHDULQJODFURVVHVWLFNV:LWKUHVSHFWWRWKH4XDUWHUO\ Y $PHULFDQ +HDY\ /LIW 6KLSSLQJ  )G   WK &LU   WKHJHQXVLVmPDLORUGHUFORWKLQJFDWDORJVl WKHVSHFLHVLVPDLO :KHQ GRLQJ VR UHVXOWV LQ QR SUHMXGLFH WR WKH RSSRVLQJ SDUW\ GLVFDUGLQJ RUGHUFORWKLQJFDWDORJVFRQWDLQLQJOLIHVW\OHHGLWRULDOFRQWHQW ODEHOV LQ DQ LQDUWIXOO\ GUDIWHG FRPSODLQW LQ IDYRU RI WKH FRPSODLQWjV

DQGGHSLFWLQJWKHJRRGVLQWKHmFORWKHVOLQHlVW\OHZLWKFRORU UHDVRQDEOH PHDQLQJ m>H@YHQ ZKHUH VXFK D ODEHO UHIOHFWV D IODW PLVDSSUHKHQVLRQ E\ FRXQVHO UHVSHFWLQJ D FODLPjV OHJDO EDVLVl /DEUDP Y EDUVWRSUHVHQWFRORURSWLRQVsXVWDVDPDQXIDFWXUHUKDVD +DYHO  )G   WK &LU    FRPSRUWV ZLWK WKH )HGHUDO 5XOHVj ULJKWWRFDOODSURGXFWE\LWVQDPHLWFDQVHOOLWVFORWKHVE\ LQWHQW DQG VHUYHV WKH HQGV RI MXVWLFH 6HH 0LQJHU  )G DW   PDLOE\SODFLQJLPDJHVRIWKHPLQDFDWDORJEXWLWQHHGQRWGR VRLQWKHPDQQHURIDQRWKHUSURGXFHU:KLOHSURGXFHUVKDYH ,Q GLVFXVVLQJ WKH SURWHFWDELOLW\ RI WKH 4XDUWHUO\ ZH PXVW EH FDUHIXO OLWWOHFKRLFHEXWWRFDOODVKLUWDVKLUWWKH\FDQSODFHXSRQD QRW WR RYHUUHDG ODQJXDJH LQ SUHYLRXV FDVHV GHVFULELQJ WUDGH GUHVV DV D VKLUW DQ LQILQLWH YDULHW\ RI LPDJHV DQG GHSLFW WKDW VKLUW RQ SURGXFWjV mLPDJHl 6HH HJ $VKOH\ )XUQLWXUH ,QGXV ,QF  )G DW SDSHU LQ DQ LQILQLWH YDULHW\ RI ZD\V  7KDW FHUWDLQ RI WKHVH  GHVFULELQJ WUDGH GUHVV DV WKH mWRWDO LPDJHl RI D SURGXFW )HUUDUL

ZD\VDUHSDUWLFXODUO\HIIHFWLYHDWJHQHUDWLQJVDOHVGRHVQRW  )G DW  VWDWLQJ WKDW WUDGH GUHVV UHIHUV WR mWKH LPDJH DQG RYHUDOO DSSHDUDQFH RI D SURGXFWl  :KLOH WKH $EHUFURPELH )LWFK PDNHWKHPJHQHULF 4XDUWHUO\ XQGRXEWHGO\ FRQYH\V DQ mLPDJHl RI KHDOWK\ DWWUDFWLYH DFWLYH \RXQJ SHRSOH HQJDJHG LQ D YDULHW\ RI UHFUHDWLRQDO DFWLYLWLHV ZKLOH ZHDULQJ 6LQFH QRQH RI WKH WUDGH GUHVV DW LVVXH KHUH LV JHQHULF RU RIWHQ QRW ZHDULQJ $EHUFURPELH FORWKHV ZH PXVW QRW ORVH VLJKW RI WKLV $EHUFURPELH FDQ PHHW WKH GLVWLQFWLYHQHVV UHTXLUHPHQW E\ FDVH DV D WUDGH GUHVV DFWLRQ DQG WKHUHIRUH GR QRW PHDQ WR VXJJHVW WKDW VKRZLQJDWWDFKPHQWRIVHFRQGDU\PHDQLQJWRLWVGHVLJQV6HH $EHUFURPELH FDQ DFTXLUH D PRQRSRO\ RQ EHLQJ mFRROl RU mKLSl LQ D 6DPDUD %URV   86 DW  GHVFULELQJ FDVHODZ RQ FHUWDLQ PDQQHU 7KH mLPDJHl UHIHUUHG WR E\ SUHYLRXV FDVHV LV YLVXDO  WKH VKDSH RI D )HUUDUL 'D\WRQD UDWKHU WKDQ FRQFHSWXDO  D RI HJ

XQLPSHGHG VZLIWQHVV DVVRFLDWHG ZLWK DQ DHURG\QDPLF DXWR ERG\ GHVLJQ RU HJ QRWLRQ VHFRQGDU\ PHDQLQJ DQG FLWLQJ WKH SDUDOOHO SULQFLSOH RI /DQKDP $FW VHFWLRQ  I   86& †  I  WKDW ZLWK D RI mFRROQHVVl WUHQGLQHVV RU mKLSQHVVl SUHGRPLQDQW LQ WKH  $JDLQ WR FRQVWLWXWH WUDGH GUHVV D mWKLQJl PXVW EH REMHFWLYHO\ QRWLRQ

OLPLWHGH[FHSWLRQVmµQRWKLQJLQWKLVFKDSWHUVKDOOSUHYHQWWKH REVHUYDEOH E\ WKH VHQVHV ]HLWJHLVW  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

GUHVVDQREMHFWLYHO\REVHUYDEOHmSDUWLFXODUVDOHVWHFKQLTXHl SULQFLSOHVTXDOLI\LQJDPDUNIRUUHJLVWUDWLRQXQGHU†RIWKH XVHGWRVHOOFORWKLQJRUSDFNDJLQJRIWKHSURGXFWVLWGHSLFWV /DQKDP$FWDUHIRUWKHPRVWSDUWDSSOLFDEOHLQGHWHUPLQLQJl $EHUFURPELHjV XVH RI FHUWDLQ LQVWRUH GLVSOD\V DQG D VDOHV SURWHFWDELOLW\XQGHU† D DQGLWPDGHVSHFLILFUHIHUHQFHWR DVVRFLDWH WHDP FRPSULVHG PDLQO\ RI FROOHJH VWXGHQWV DOVR WKH $EHUFURPELH WHVW DQG WKH XQUHJLVWUDELOW\ RI JHQHULF FRQVWLWXWHDmSDUWLFXODUVDOHVWHFKQLTXHl PDUNV7KXV6DPDUD%URWKHUVOHDYHVLQSODFHWKHUXOHWKDW JHQHULF SURGXFW FRQILJXUDWLRQV DUH QRW SURWHFWDEOH DV WUDGH 7KXV LQ UHPDUNLQJ WKDW $EHUFURPELH VRXJKW SURWHFWLRQ GUHVVXQGHU† D 7RVXPPDUL]HWKHQRQO\QRQJHQHULF RQO\RILWVPDUNHWLQJWKHPHWKHGLVWULFWFRXUWPLVFRQVWUXHG SURGXFW FRQILJXUDWLRQV WKDW KDYH DFTXLUHG GLVWLQFWLYHQHVV WKHQDWXUHRIWKLVVXLW$EHUFURPELHVRXJKWSURWHFWLRQRILWV WKURXJK DWWDFKPHQW RI VHFRQGDU\ PHDQLQJ VDWLVI\ WKH WUDGHGUHVVZKLFKLQFOXGHVIHDWXUHVRInDQGLQWKHFDVHRI GLVWLQFWLYHQHVVUHTXLUHPHQWRIWKH/DQKDP$FW WKH 4XDUWHUO\ DOVR FRPSULVHV D PDMRU SDUW RIn $EHUFURPELHjV PDUNHWLQJ FDPSDLJQ  <HW $ )jV FODLPHG 7KHGLVWULFWFRXUWH[DPLQHGWKHIHDWXUHVRI$EHUFURPELHjV WUDGHGUHVVWUDQVFHQGVWKRVHDVSHFWVRILWVWUDGHGUHVVGLUHFWO\ FDWDORJ OLVWHG LQ WKH FRPSODLQW DQG GHFODUHG WKHP RGGO\ DVVRFLDWHG ZLWK LWV FDPSDLJQ WR DWWUDFW \RXQJ ILW DFWLYH mERWKJHQHULFDQGGHVFULSWLYHl7KHFRXUWWKHQYLHZHGWKH FRQVXPHUV$VZHUHDGWKHFRPSODLQWWKHWUDGHGUHVV$ ) FDWDORJ DV D ZKROH WR GHWHUPLQH LI LWV RYHUDOO DSSHDUDQFH FUHDWHG D mXQLTXH ORRN WKDW LV SURWHFWDEOHl DQG KHOG WKDW mWKHUH LV QRWKLQJ DUELWUDU\ RU IDQFLIXO RU LQ DQ\ ZD\ GLVWLQFWLYH DERXW WKH FRPELQDWLRQ RI WKHVH HOHPHQWV LQ D  $EHUFURPELH FDQ VHHN SURWHFWLRQ RI LWV 4XDUWHUO\ EHFDXVH FORWKLQJ FDWDORJ WKDW ZRXOG PDNH WKH ZKROH RI WKH $EHUFURPELH FORVHO\ DVVRFLDWHV LQ WLPH DQG VSDFHn DV LQGLFDWHG E\ WKH µ$EHUFURPELH%UDQGjDWOHDVWDVLWUHODWHVWRWKHGHVFULSWLYH 4XDUWHUO\jV VDOHVUHODWHG FRQWHQW DQG LWV GLVSOD\ LQ $EHUFURPELH VWRUHVn WKH YLVXDO LPDJHV FRQWDLQHG LQ WKH 4XDUWHUO\ ZLWK LWV SURGXFWV $V ODQJXDJH FRORU FRPELQDWLRQV DQG FXWRXW VW\OH VRPHWKLQJ SURPRWLRQDO PDWHULDO FORVHO\ DVVRFLDWHG ZLWK LWV SURGXFWV LQ WKH VDPH ZD\ PRUH WKDQ WKH VXP RI LWV QRQSURWHFWDEOH SDUWV  7KDW WKDW SURGXFW SDFNDJLQJ HLWKHU FRQWDLQLQJ YLVXDO LPDJHV RU FRQYH\LQJ DQ REVHUYDWLRQDSSOLHVHTXDOO\WRWKHXVHRIZRUGVFODLPLQJWKDW HSKHPHUDO LPDJH LV FORVHO\ DVVRFLDWHG ZLWK WKH SURGXFW LWV FRQWDLQV WKH WKH FORWKLQJ LV µDXWKHQWLFj DQG WKH XVH RI $ )jV RZQ GHVLJQ RI WKH 4XDUWHUO\ FDQ SURSHUO\ EH UHJDUGHG DV D FRPSRQHQW RI WKH WUDGHPDUNl,ELG HPSKDVLVDGGHG 7KLVDSSHDUVWREH WUDGH GUHVV RI $EHUFURPELHjV FORWKLQJ LQVRIDU DV LW FRQVWLWXWHV D SDUWLFXODU VDOHV WHFKQLTXH ULJLQDO $SSDODFKLDQ $UWZRUNV  )G DW  RU 2 DKROGLQJWKDW$EHUFURPELHjVFORWKLQJGHVLJQVDQGLWVFDWDORJ mVRPH WHUWLXP TXLG WKDW LV DNLQ WR SURGXFW SDFNDJLQJl WKDW ZRXOG QRUPDOO\ EH WDNHQ E\ FRQVXPHUV DV DQ LQGLFDWLRQ RI VRXUFH VHH 6DPDUD %URV  86 DW  $OWHUQDWLYHO\ $EHUFURPELH KDV LQWURGXFHG HYLGHQFH VKRZLQJ WKDW WKH 4XDUWHUO\ LWVHOI LV D SURGXFW WKDW $EHUFURPELH VHOOV DQG DV VXFK PD\ EH LQGHSHQGHQWO\ HQWLWOHG WR WUDGH GUHVV SURWHFWLRQ RI LWV GHVLJQ 6HH 5HDGHUjV 'LJHVW $VVRF,QF Y &RQVHUYDWLYH 'LJHVW ,QF   EH UHJDUGHG DV D VWDQGDUG PHQjV VKLUW DQG WKH SXEOLF ZRXOG KDYH QR RFFDVLRQ WR UHJDUG D JDUPHQW RI VXFK EDVLF GHVLJQ DV FRPLQJ IURP D )G   '& &LU   SURWHFWLQJ DV WUDGH GUHVV WKH FRYHU GHVLJQ LQ WHUPV RI VL]H VKDSH DQG JUDSKLF OD\RXW RI 5HDGHUjV 'LJHVW FHUWDLQ VKLUWPDNHU IRU WKH GHVLJQ LV D JHQHULF RQH DQG GRHV QRW GLVWLQJXLVK WKH JRRG PDJD]LQH  %HFDXVH WKH RQO\ WUDGHGUHVVODZ GLIIHUHQFH EHWZHHQ SURGXFW SDFNDJLQJ DQG SURGXFW FRQILJXUDWLRQ LV WKH DYDLODELOLW\ WR SURGXFW  SDFNDJLQJ RI WKH LQKHUHQW GLVWLQFWLYHQHVV URXWH WR OHJDO GLVWLQFWLYHQHVVVHH 6HH DOVR  86& †  F SURYLGLQJ IRU FDQFHOODWLRQ RI DQ\ LQIUD SDJHV  DQG WKLV FDVH LQYROYHV VHFRQGDU\ PHDQLQJ DOOHJHGO\ PDUN WKDW KDV EHFRPH mWKH FRPPRQ GHVFULSWLYH QDPH RI DQ DUWLFOH RU KDYLQJ DWWDFKHG WR WKH FDWDORJ ZH QHHG QRW GHFLGH ZKHWKHU WKH FDWDORJ LV VXEVWDQFHl LH D JHQHULF WHUP .HHEOHU &R Y 5RYLUD %LVFXLW &RUS  D SURGXFW D SDFNDJH RU VRPH WHUWLXP TXLG 6HH 7RROV 86$ (TXLS   )G   VW &LU   m1R DPRXQW RI SXUSRUWHG SURRI WKDW D )G DW  QRW DGGUHVVLQJ ZKHWKHU D WRROV FDWDORJ LV D SURGXFW RU D JHQHULF WHUP KDV DFTXLUHG D VHFRQGDU\ PHDQLQJ DVVRFLDWLQJ LW ZLWK D SDFNDJH EHFDXVH D MXU\ KDG IRXQG VHFRQGDU\ PHDQLQJ  SDUWLFXODU SURGXFHU FDQ WUDQVIRUP WKDW WHUP LQWR D UHJLVWUDEOH WUDGHPDUNl   $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

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sXGJH )ULHQGO\jV FODVVLILFDWLRQV RI ZRUGPDUNVSDUWLFXODUO\UHO\LQJRQWKHUDWLRQDOHVXQGHUO\LQJ WKH FODVVLILFDWLRQV  ,Q DGDSWLQJ WKRVH UDWLRQDOHV WR SURGXFW  $PHULFDQ FRPSODLQV WKDW m$EHUFURPELHjV SXUSRUWHG WUDGH GUHVV LV FRQILJXUDWLRQWUDGHGUHVVWKH&RXUWGHWHUPLQHGWKDWWKHPRUH DQ HYHU FKDQJLQJ PHODQJH RI ZRUGV ORJRV DQG FRORUV HOHPHQWV DUH DGGHG GLVWLQFWLYHFDWHJRULHVRIZRUGPDUNVKDGQRSDUDOOHOLQWKH DQG GURSSHG ZLWK HYHU\ VHDVRQ DQG HYHU\ FKDQJH LQ ZKDW LV FXUUHQWO\ ILHOGRIGHVLJQDQGUHTXLUHGDOOSXUSRUWHGO\GLVWLQFWLYHGHVLJQV µFRROj WR WKH FROOHJHDJH FRQVXPHUl $SSHOOHHjV %U DW  WRKDYHDFTXLUHGVHFRQGDU\PHDQLQJEHIRUHEHFRPLQJHOLJLEOH )XUWKHUPRUH $PHULFDQ SRLQWV RXW WKDW $EHUFURPELH GRHV QRW FRQVLVWHQWO\

IRU SURWHFWLRQ  7KH &RXUW GLG QRW DGGUHVV WKH DELOLW\ RI XVH LWV FODLPHG WUDGH GUHVV LQ DOO RI LWV SURGXFWV $PHULFDQ DUJXHV WKDW m>L@W LV WKHUHIRUH OXGLFURXV WR DVVHUW WKDW $EHUFURPELH WUDGH GUHVV ZKLFK JHQHULF GHVLJQV WR GLVWLQJXLVK JRRGV DV WKH SURGXFW RI D µUHSUHVHQW>V@ D NDOHLGRVFRSH RI FRORU FRPELQDWLRQV DQG GHVLJQ IRUPDWV SDUWLFXODU VXSSOLHU OHDYLQJ RSHQ WKH FRQFHSWXDO SRVVLELOLW\ ZKLFK IDLO WR FRQYH\ D FRQVLVWHQW RYHUDOO ORRNj WR FRQVXPHUV >LV DV SUHFLVH WKDW JHQHULF GHVLJQV EHDULQJ VHFRQGDU\ PHDQLQJ DUH DV 7DFR &DEDQD WUDGH GUHVV@l $SSHOOHHjV %U DW  TXRWLQJ 5RVH $UW SURWHFWDEOH  )RU SXUSRVHV RI FODVVLI\LQJ ZRUG PDUNV m>D@ ,QGXV ,QF Y 5D\PRQG *HGGHV &R   ) 6XSS G   '1s JHQHULFWHUPLVRQHWKDWUHIHUVRUKDVFRPHWREHXQGHUVWRRG    )LQDOO\ $PHULFDQ REVHUYHV WKDW $EHUFURPELHjV FRPSODLQW LGHQWLILHV DV WUDGH GUHVV RQO\ QLQH RI WKH PDQ\ HOHPHQWV LW XVHV LQ DVUHIHUULQJWRWKHJHQXVRIZKLFKWKHSDUWLFXODUSURGXFWLVD SDFNDJLQJ ODEHOLQJ DQG SUHVHQWLQJ IRU VDOH LWV SURGXFWV ZKLOH VSHFLHVl  $EHUFURPELH  )LWFK  )G DW   2Q WKH $EHUFURPELH VHOOV WKRXVDQGV RI LWHPV EHDULQJ GHVLJQV QRW PHQWLRQHG LQ XQSURWHFWDELOLW\RIJHQHULFPDUNVsXGJH)ULHQGO\H[SODLQHG LWV FRPSODLQW HJ  GHVLJQV LQFOXGLQJ WKH WHUPV mZDWHU UHVFXHl m1RPDWWHUKRZPXFKPRQH\DQGHIIRUWWKHXVHURIDJHQHULF mOLIHJXDUGl DQG mJXDUGl DQG LPDJHV RI EDVNHWEDOOV  DQG $PHULFDQ VHOOV WHUPKDVSRXUHGLQWRSURPRWLQJWKHVDOHRILWVPHUFKDQGLVH WKRXVDQGV RI LWHPV WKDW LQFOXGH GHVLJQ HOHPHQWV XQUHODWHG WR WKRVH

DQG ZKDW VXFFHVV LW KDV DFKLHYHG LQ VHFXULQJ SXEOLF FODLPHG WR EH $EHUFURPELHjV WUDGH GUHVV $PHULFDQjV DUJXPHQW SRVLWV WKDW WUDGH GUHVV HQFRPSDVVLQJ PXOWLSOH LGHQWLILFDWLRQLWFDQQRWGHSULYHFRPSHWLQJPDQXIDFWXUHUVRI SURGXFWV PXVW EH XQLIRUP DQG FRQVLVWHQW RYHU WLPH DQG DFURVV SURGXFWV WKHSURGXFWRIWKHULJKWWRFDOODQDUWLFOHE\LWVQDPHl,ELG 7KLV SRLQW FHUWDLQO\ DSSOLHV WR WKH WUDGH GUHVV RI D IDPLO\ RI SURGXFWV 6HH 5HJDO sHZHOU\ &R Y .LQJVEULGJH ,QWjO ,QF ) 6XSS  

7KLV UHDVRQLQJ DSSOLHV HTXDOO\ ZHOO WR JHQHULF SURGXFW 6'1<   VHH DOVR 5RVH $UW ,QGXV ,QF  ) 6XSS G DW  FRQILJXUDWLRQVIRUQRGHVLJQHUVKRXOGKDYHDPRQRSRO\RQ m>$@ SDUW\ PD\ KDYH WUDGH GUHVV ULJKWV HYHQ WKRXJK WKHUH DUH VOLJKW

GHVLJQV  UHJDUGHG E\ WKH SXEOLF DV WKH EDVLF IRUP RI D YDULDWLRQV LQ LWV SDFNDJH GHVLJQ VR ORQJ DV WKH FKDQJH GRHV QRW DOWHU WKH

SDUWLFXODULWHP7ZR3HVRVFRPPHQWHGWKDWWKHmJHQHUDO GLVWLQFWLYH FKDUDFWHULVWLFV DQG WKH WUDGH GUHVV FRQYH\V D VLQJOH DQG FRQWLQXLQJ FRPPHUFLDO H[SUHVVLRQl  <HW $EHUFURPELH GRHV QRW VHHN WUDGH GUHVV SURWHFWLRQ RI LWV GHVLJQV DQG DGYHUWLVLQJ PDWHULDOV XQGHU D mIDPLO\ RI PDUNVl RU D mIDPLO\ RI GUHVVHVl WKHRU\ ,QVWHDG $ )jV WKHRU\ SURFHHGV IURP LWV FODLP WKDW FRQVXPHUV UHFRJQL]H VHFRQGDU\ PHDQLQJ LQ  $Q DQDFKURQLVP GHPRQVWUDWHV WKH SRLQW DQ DQFLHQW 5RPDQ LWV YDULRXV GHVLJQV WKDW DUH VLPLODU LQ WHUPV RI WKHLU VW\OH EXW VR GLVVLPLODU GHVLJQHU ZKR FRQFHLYHG DQG PDUNHWHG D QHZ WXQLF E\ KDYLQJ LW ILW WKH LQ WHUPV RI WKHLU FRQWHQW WKDW WKH mIDPLO\ RI GUHVVHVl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†   m:KLOH WUDGH GUHVV LV PRVW RIWHQ GHILQHG DV D WRWDOLW\ SURGXFWV DV FRPLQJ IURP D VLQJOH VRXUFH EXW WKH VDPH GHVLJQ WRGD\ ZRXOG RI HOHPHQWV WKHUH LV QR UHDVRQ ZK\ WKH SODLQWLII FDQQRW GHILQH D OLVW RI  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

7KLVFRXUWjVZLOOLQJQHVVWRUHDGDFRPSODLQWIDLUO\VKRXOG WKH'XUDFR3URGXFWVFRXUWWUHDWHGUHVWDXUDQWGHFRUDVDNLQWR QRWEHWDNHQDVDQLQYLWDWLRQWRVKRWJXQOLWLJDWLRQHVSHFLDOO\ SURGXFWSDFNDJLQJDQGDUJXLQJWKDWSURGXFWFRQILJXUDWLRQLV ZKHQ D SURGXFHU FODLPV WKDW D FRPELQDWLRQ RI HOHPHQWV D EHWWHU SDUDOOHO  XQGHU D XQLILHG DSSURDFK RI FRXUVH WKH FRPSULVHV LWV WUDGH GUHVV  $V 0F&DUWK\ FRPPHQWHG GLVWLQFWLRQZRXOGQRWPDNHDGLIIHUHQFH  m>Z@KDWHYHUPD\EHFODLPHGDVWKHFRPELQDWLRQRIHOHPHQWV PDNLQJXSWKHSURGXFWRULWVSDFNDJLQJDQGSUHVHQWDWLRQ 7KH6XSUHPH&RXUWDSSHDUVWRKDYHVHWWOHGWKHGLVSXWHE\ LWZLOOQRWGRWRVROHO\LGHQWLI\LQOLWLJDWLRQDFRPELQDWLRQDV DJUHHLQJ LQ ODUJH SDUW ZLWK WKH 7KLUG &LUFXLW  7KH &RXUW µWKHWUDGHGUHVVj5DWKHUWKHGLVFUHWHHOHPHQWVZKLFKPDNH UHJDUGHG 4XDOLWH[ DV IROORZLQJ WKH UDWLRQDOH EHKLQG WKH XSWKDWFRPELQDWLRQVKRXOGEHVHSDUDWHGRXWDQGLGHQWLILHGLQ $EHUFURPELHWHVWEXWQRWDGRSWLQJLWRXWULJKWEHFDXVHFRORU DOLVWl0&&$57+< 21 75$'(0$5.6† $VWKH6HFRQG OLNHDGHVFULSWLYHZRUGPDUNGRHVQRWmDOPRVWDXWRPDWLFDOO\ &LUFXLWREVHUYHG WHOO D FXVWRPHU WKDW >LW@ UHIHUV WR D EUDQGl DQG GRHV QRW mLPPHGLDWHO\VLJQDODEUDQGRUDSURGXFWVRXUFHlDOWKRXJKLW IRFXVRQWKHRYHUDOOORRNRIDSURGXFWGRHVQRWSHUPLWD PD\FRPHWRKDYHVXFKSRZHUVXSRQDFTXLVLWLRQRIVHFRQGDU\ SODLQWLIIWRGLVSHQVHZLWKDQDUWLFXODWLRQRIWKHVSHFLILF PHDQLQJ  6DPDUD %URV   86 DW  LQWHUQDO HOHPHQWVZKLFKFRPSULVHLWVGLVWLQFWGUHVV:LWKRXWVXFK FLWDWLRQV DQG TXRWDWLRQV RPLWWHG   7KH &RXUW KHOG WKDW D D SUHFLVH H[SUHVVLRQ RI WKH FKDUDFWHU DQG VFRSH RI WKH SURGXFWjVGHVLJQFDQQRWEHLQKHUHQWO\GLVWLQFWLYHEHFDXVHmDV FODLPHGWUDGHGUHVVOLWLJDWLRQZLOOEHGLIILFXOWDVFRXUWV LQWKHFDVHRIFRORUFRQVXPHUSUHGLVSRVLWLRQWRHTXDWHWKH ZLOOEHXQDEOHWRHYDOXDWHKRZXQLTXHDQGXQH[SHFWHG IHDWXUH ZLWK WKH VRXUFH GRHV QRW H[LVWl  ,ELG  7KH &RXUW WKHGHVLJQHOHPHQWVDUHLQWKHUHOHYDQWPDUNHW&RXUWV VSHFLILFDOO\ FRQGHPQHG DQ\ DWWHPSW WR FUDIW D mUHDVRQDEO\ ZLOODOVREHXQDEOHWRVKDSHQDUURZO\WDLORUHGUHOLHILI FOHDUWHVWlIRULQKHUHQWGLVWLQFWLYHQHVVRIDSURGXFWjVGHVLJQ WKH\ GR QRW NQRZ ZKDW GLVWLQFWLYH FRPELQDWLRQ RI ,GDW UHIXVLQJWRDGRSWWKH6HDEURRN)RRGVWHVWDQG LQJUHGLHQWVGHVHUYHVSURWHFWLRQ0RUHRYHUDSODLQWLIIjV LPSOLFLWO\ UHMHFWLQJ WKH 'XUDFR 3URGXFWV WHVW   7KH &RXUW LQDELOLW\WRH[SODLQWRDFRXUWH[DFWO\ZKLFKDVSHFWVRILWV H[SODLQHGWKDW7ZR3HVRVVWDQGVIRUWKHSURSRVLWLRQWKDWWUDGH SURGXFWGHVLJQ V PHULWSURWHFWLRQPD\LQGLFDWHWKDWLWV GUHVVFDQEHLQKHUHQWO\GLVWLQFWLYHmEXWLWGRHVQRWHVWDEOLVK FODLPLVSLWFKHGDWDQLPSURSHUOHYHORIJHQHUDOLW\LH WKDWSURGXFWGHVLJQWUDGHGUHVVFDQEHl$JDLQUHO\LQJRQWKH WKHFODLPDQWVHHNVSURWHFWLRQIRUDQXQSURWHFWDEOHVW\OH UDWLRQDOH XQGHUO\LQJ WKH $EHUFURPELH FODVVLILFDWLRQV WKH WKHPHRULGHD &RXUWGHWHUPLQHGWKDWWKHWUDGHGUHVVDWLVVXHLQ7ZR3HVRV ZDVHLWKHUSURGXFWSDFNDJLQJZKLFKmQRUPDOO\LVWDNHQE\ WKHFRQVXPHUWRLQGLFDWHRULJLQlRUVRPHmWHUWLXPTXLG DNLQWRSURGXFWSDFNLQJl,GDW7KH&RXUWjVUHDVRQLQJ WKXV UHOLHV RQ WKH QRWLRQ WKDW D SURGXFWjV FRQILJXUDWLRQn XQOLNH LWV SDFNDJLQJn LV LQH[WULFDEO\ WLHG WR WKH SURGXFW HOHPHQWV FRQVLVWLQJ RI OHVV WKDQ WKH WRWDOLW\ RI IHDWXUHVl  7KLV UHVXOW LWVHOIVXFKWKDWHYHQWKHPRVWXQXVXDOIHDWXUHVRIDSURGXFWjV UHIOHFWV WKH UHDOLW\ RI WKH FORWKLQJ LQGXVWU\ VLQFH LQFOXGLQJ mOLIHJXDUGl GHVLJQFDQQRWDXWRPDWLFDOO\LGHQWLI\ZKLFKSURGXFHUFUDIWHG DQG ODFURVVH VWLFNV LQ GHVLJQV RI FORWKLQJ VROG IRU VXPPHU DQG SXWWLQJ mVNL SDWUROl DQG WKH VNL SDWURO FURVV RQ FORWKLQJ VROG IRU ZLQWHU LV VLPSO\ D WKHSURGXFWEHFDXVHFRQVXPHUVDUHQRWSUHGLVSRVHGWRWUHDW UHDFWLRQ WR VHDVRQDO FKDQJHV QRW D UHMHFWLRQ RI RQH IRUP RI GHVLJQ WUDGH GHVLJQIHDWXUHVDVDQLQGLFDWLRQRIVRXUFH GUHVV LQ IDYRU RI DQRWKHU &I 6DPDUD %URV ,QF Y :DO0DUW 6WRUHV ,QF  )G   G &LU   m:H H[SHFW WKDW LQ D SURGXFW OLQH WKHUH $IWHU6DPDUD%URWKHUVQRSURGXFWFRQILJXUDWLRQFDQPHHW ZLOO EH LQHYLWDEOH YDULDWLRQ LQ WKH SURGXFWVl  UHYjG RQ RWKHU JURXQGV  WKH GLVWLQFWLYHQHVV UHTXLUHPHQW RI WKH /DQKDP $FW E\ D 86     $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

  G &LU    DQG mGRHV QRW TXLWH ILW WKH    /DQGVFDSH)RUPV,QFY&ROXPELD&DVFDGH&R)G FRQVLGHUDWLRQVDSSOLFDEOHWRSURGXFWFRQILJXUDWLRQVl'XUDFR  G&LU   3URGV,QFYsR\3ODVWLF(QWHUV)G G &LU  7KRVHFRXUWVUHJDUGHGWKHGHVLJQRIDSURGXFWDV 7KH /DQGVFDSH )RUPV FRXUW UHYHUVHG LVVXDQFH RI D LQH[WULFDEO\ WLHG WR WKH SURGXFWjV QDWXUH RU LWV DSSHDO WR SUHOLPLQDU\ LQMXQFWLRQ EHFDXVH m/DQGVFDSH KD>G@ QRW FRQVXPHUVPHDQLQJWKDWWKHGHVLJQRIDSURGXFWFDQQRWIRUP DUWLFXODWHGDQGVXSSRUWHGLWVFODLPHG>LQKHUHQWO\GLVWLQFWLYH@ RQHRIWKHGLDOHFWLFDOUHODWLRQVKLSVWRWKHSURGXFWLGHQWLILHGLQ WUDGHGUHVVZLWKVXIILFLHQWSDUWLFXODULW\l/DQGVFDSH)RUPV $EHUFURPELH  6HH HJ LG DW  mWKH SURGXFWjV  )G DW   :KLOH WKH ODQJXDJH RI $EHUFURPELHjV FRQILJXUDWLRQ FDQQRW EH VDLG WR EH µVXJJHVWLYHj RU FRPSODLQWULGHVWKHFXVSRIVXIILFLHQWSDUWLFXODULW\ZLWKLWV µGHVFULSWLYHj RI WKH SURGXFW RU µDUELWUDU\j RU µIDQFLIXOj LQ RFFDVLRQDO RYHUEUHDGWK OHDYLQJ VRPH FODLPV GHYRLG RI UHODWLRQ WR LWl   7KH 'XUDFR 3URGXFWV FRXUW SOXPEHG WKH PHDQLQJ $ ) DWWDFKHG WR LWV FRPSODLQW SKRWRJUDSKLF UDWLRQDOHVXQGHUO\LQJWKH$EHUFURPELHFODVVLILFDWLRQVDQG7ZR GHSLFWLRQVRIGHVLJQVLWFODLPHGFRQVWLWXWHGLWVWUDGHGUHVVDQG 3HVRVjV UHFRJQLWLRQ WKDW DW OHDVW VRPH WUDGH GUHVV FDQ EH WKH UHFRUG QRZ FRQWDLQV YROXPHV RI SKRWRJUDSKLF H[KLELWV LQKHUHQWO\ GLVWLQFWLYH LQ RUGHU WR FUDIW D WKUHHSDUW WHVW IRU GHSLFWLQJLWVJDUPHQWGHVLJQVDQGWKHGHVLJQRILWV4XDUWHUO\ LGHQWLI\LQJLQKHUHQWO\GLVWLQFWLYHSURGXFWFRQILJXUDWLRQV6HH $FRPSODLQWLVQHLWKHUDQLQMXQFWLRQQRUDMXGJPHQW LWPHUHO\ LGDW  UHTXLULQJWKHSURGXFWFRQILJXUDWLRQWREHL SXWVWKHGHIHQGDQWRQQRWLFHRIWKHSODLQWLIIjVFODLPV$WWKH XQXVXDODQGPHPRUDEOHLL FRQFHSWXDOO\VHSDUDEOHIURPWKH WLPHRI$PHULFDQjVVXPPDU\MXGJPHQWPRWLRQ$EHUFURPELH SURGXFWDQGLLL OLNHO\WRVHUYHSULPDULO\DVDGHVLJQDWRURI KDG QRW \HW VRXJKW WR HQMRLQ $PHULFDQ IURP XVLQJ DQ\ WKH SURGXFWjVRULJLQ VHHDOVR.QLWZDYHV)GDW GHVLJQV+DGWKHFDVHSURFHHGHGIXUWKHU$EHUFURPELHZRXOG DGRSWLQJ WKH mOLNHO\ WR VHUYH SULPDULO\ DV D GHVLJQDWRU RI KDYHEHHQH[SHFWHGWROLVWWKHHOHPHQWVRIWKHGHVLJQVDQGWKH RULJLQRIWKHSURGXFWlUHTXLUHPHQW  XQLTXHFRPELQDWLRQVLWVRXJKWWRSURWHFWZKLFKHQXPHUDWLRQ ZRXOGKDYHHQDEOHGWKHGLVWULFWFRXUWWRFUDIWDVXIILFLHQWO\ 7KH (LJKWK &LUFXLW GLVDJUHHG ZLWK WKH 'XUDFR 3URGXFWV VSHFLILFLQMXQFWLRQKDGVXFKSURYHGZDUUDQWHG6HH6DPDUD FRXUWjVIRFXVRQWKHFRQVXPHUjVSHUFHSWLRQRIWKHSURGXFW LQ %URV  )G DW   Q GLVWLQJXLVKLQJ /DQGVFDSH WHUPVRIWKHFRQILJXUDWLRQjVPHPRUDEOHQHVVDQGFDSDFLW\IRU )RUPVE\UHFRJQL]LQJWKHFRPSODLQWjVLQVXIILFLHQWGHVFULSWLRQ VRXUFHLGHQWLILFDWLRQ  DQG VWRRG E\ WKH $EHUFURPELH RIWKHGLVWLQFWLYHDVSHFWVRIWKHJDUPHQWGHVLJQVEXWUHIXVLQJ FODVVLILFDWLRQVDVDZRUNDEOHGHYLFHIRUGHWHUPLQLQJmZKHWKHU WRmORRNDWWKHFRPSODLQWLQDYDFXXPlDQGILQGLQJmWKDWWKH DQGWRZKDWGHJUHHWKDWIHDWXUHLVGLFWDWHGE\WKHQDWXUHRIWKH HYLGHQFH DGGXFHG DW WULDO VXIILFLHQWO\ GHSLFW>HG@ WKH SURGXFWl6WXDUW+DOO&RY$PSDG&RUS)G µGLVWLQFWLYH FRPELQDWLRQ RI LQJUHGLHQWVj LQ 6DPDUDjV WUDGH  WK&LU   UHDVRQLQJIURP)LIWK&LUFXLWFDVHVFLWHG GUHVVl UHYjGRQRWKHUJURXQGV 86   ZLWK DSSURYDO E\ 7ZR 3HVRV DQG WKH WHVW GHYHORSHG LQ 6HDEURRN)RRGV,QFY%DU:HOO)RRGV/WG)G 7KHGLVWULFWFRXUWHUUHGLQWUHDWLQJ$EHUFURPELHjVVXLWDVDQ  &&3$     7KH 6WXDUW +DOO FRXUW H[SUHVVHG DWWHPSW WR SURWHFW D mPDUNHWLQJ WKHPHl  $ ) VHHNV FRQFHUQ WKDW D VRXUFHLGHQWLILFDWLRQ RU PHPRUDEOHQHVV SURWHFWLRQRILWVGHVLJQVDQGLWFDQGRVRHYHQLIWKHGHVLJQV UHTXLUHPHQWWRRFORVHO\UHVHPEOHGWKHVWDQGDUGIRUVHFRQGDU\ DUH FRQVLVWHQW ZLWK FRQWDLQ DVSHFWV RI IRUP D SDUW RI RU PHDQLQJDQGHPSKDVL]HGWKDWFRXUWVVKRXOGQRWWUHDWSURGXFW FRQYH\ WR FRQVXPHUV WKH VDPH PHVVDJH DV LWV PDUNHWLQJ SDFNDJLQJDQGSURGXFWFRQILJXUDWLRQFDVHVGLIIHUHQWO\LQSDUW FDPSDLJQ,QVXPWKHWKUHHmWKLQJVl$EHUFURPELHVHHNVWR EHFDXVHGHWHUPLQLQJZKLFKFDWHJRU\FHUWDLQWUDGHGUHVVIDOOV SURWHFWFRQVWLWXWHWUDGHGUHVV LQWRFDQEHGLIILFXOW6HH)GDW H[SORULQJZK\  $EHUFURPELH )LWFK6WRUHV 1R  1R  $EHUFURPELH )LWFK6WRUHV  Y$P(DJOH2XWILWWHUV Y$P(DJOH2XWILWWHUV

& ZKLFKWKHSDUWLFXODUSURGXFWLVDVSHFLHVjnDUHQRWUHJLVWUDEOH DVWUDGHPDUNVl,GDW 7KHILUVWVWHSLQTXDOLI\LQJWUDGHGUHVVIRUSURWHFWLRQXQGHU † D LVSURYLQJGLVWLQFWLYHQHVVm>&@RXUWVKDYHXQLYHUVDOO\ 7KH6XSUHPH&RXUWUHPDUNHGWKDWmWKHJHQHUDOSULQFLSOHV LPSRVHGWK>LV@UHTXLUHPHQWVLQFHZLWKRXWGLVWLQFWLYHQHVVWKH TXDOLI\LQJDPDUNIRUUHJLVWUDWLRQXQGHU†RIWKH/DQKDP WUDGHGUHVVZRXOGQRWµFDXVHFRQIXVLRQDVWRWKHRULJLQ $FWDUHIRUWKHPRVWSDUWDSSOLFDEOHLQGHWHUPLQLQJZKHWKHUDQ VSRQVRUVKLSRUDSSURYDORI>WKH@JRRGVjDV>VHFWLRQ D @ XQUHJLVWHUHG PDUN LV HQWLWOHG WR SURWHFWLRQ XQGHU †  D l UHTXLUHVl6DPDUD%URV 86DW)RUSXUSRVHVRI 7ZR3HVRV86DW7ZR3HVRVUHVROYHGDFLUFXLW WKH/DQKDP$FWGLVWLQFWLYHQHVVFRPHVLQWZRIRUPVHLWKHU VSOLWE\EULQJLQJ† D WUDGHGUHVVMXULVSUXGHQFHLQWRDFFRUG RQH RI ZKLFK VDWLVILHV WKH GLVWLQFWLYHQHVV FRQGLWLRQ RI ZLWK WKH ODZ RI ZRUG PDUNV EHFDXVH †  D  FRQWDLQHG QR SURWHFWDELOLW\6HH7ZR3HVRV86DW $PDUNRU VWDWXWRU\ ODQJXDJH GLUHFWLQJ WKDW WUDGH GUHVV EH WUHDWHG GUHVV FDQ EH LQKHUHQWO\ GLVWLQFWLYH LI LWV mLQWULQVLF QDWXUH GLIIHUHQWO\ 7KH &RXUW VSHFLILFDOO\ DSSURYHG RI XVLQJ WKH VHUYHV WR LGHQWLI\ D SDUWLFXODU VRXUFHl  $ QRQLQKHUHQWO\ $EHUFURPELH FODVVLILFDWLRQV IRU GLVWLQJXLVKLQJ LQKHUHQWO\ GLVWLQFWLYHPDUNRUGUHVVFDQKDYHDFTXLUHGGLVWLQFWLYHQHVV GLVWLQFWLYHPDUNVIURPGHVFULSWLYHDQGJHQHULFPDUNV6HHLG WKURXJK DWWDFKPHQW RI VHFRQGDU\ PHDQLQJ ZKLFK RFFXUV DW  KROGLQJ WKDW D UHVWDXUDQW FRQILJXUDWLRQ FDQ EH ZKHQmLQWKHPLQGVRIWKHSXEOLFWKHSULPDU\VLJQLILFDQFHRI LQKHUHQWO\ GLVWLQFWLYH   7KUHH \HDUV ODWHU WKH &RXUW GUHZ D>PDUNRUGUHVV@LVWRLGHQWLI\WKHVRXUFHRIWKHSURGXFWUDWKHU PXFK WKH VDPH SDUDOOHO  LW WUHDWHG FRORU DV QRW IDQFLIXO WKDQWKHSURGXFWLWVHOIl,QZRRG/DEV,QFY,YHV/DEV,QF DUELWUDU\RUVXJJHVWLYHRIDSURGXFWEXWVWLOOVRPHWKLQJDNLQ 86Q   sXGJH)ULHQGO\IRUPXODWHGD WREHLQJGHVFULSWLYHRILWLQWKHVHQVHWKDWFRORUFDQFRPHWR mQRZFODVVLF WHVWl 6DPDUD %URV   86 DW  WR LGHQWLI\DQGGLVWLQJXLVKJRRGVMXVWDVGHVFULSWLYHZRUGVFDQ FRQFHSWXDOL]HGLVWLQFWLYHQHVV7KHVRFDOOHG$EHUFURPELH DFTXLUH GLVWLQFWLYHQHVV WKURXJK VHFRQGDU\ PHDQLQJ  6HH )LWFK WD[RQRP\ GHHPV ZRUG PDUNV LQKHUHQWO\ GLVWLQFWLYH 4XDOLWH[  86 DW  DOVR QRWLQJ WKDW DQ LQILQLWH ZKHQWKH\DUHDUELWUDU\ m/XFN\6WULNHlFLJDUHWWHV IDQFLIXO YDULHW\RIWKLQJVTXDOLI\DVDmV\PEROlRUmGHYLFHl86& m.RGDNlILOP RUVXJJHVWLYH m7LGHlODXQGU\GHWHUJHQW 6HH †LQFOXGLQJWKHVKDSHRID&RFD&RODERWWOHWKHVRXQG $EHUFURPELH )LWFK&R)GDW%\FRQWUDVW RI1%&jVWKUHHFKLPHVDQGWKHVFHQWRISOXPHULDEORVVRPV GHVFULSWLYH m6RIW6RDSl RUJHQHULF mVRDSl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m6RIW6RDSlDVDSURGXFWRIDFHUWDLQPDQXIDFWXUHU 6HH 7ZR 3HVRV  86 DW  H[SODLQLQJ  86& 7KH 6HFRQG DQG 7KLUG &LUFXLWV VXEPLWWHG WKDW WKH † m*HQHULFPDUNVnWKRVHWKDWµUHIH>U@WRWKHJHQXVRI $EHUFURPELHWD[RQRP\mPDNH>V@OLWWOHVHQVHZKHQDSSOLHGWR SURGXFWIHDWXUHVl.QLWZDYHV,QFY/ROO\WRJV/WG)G