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

            %$1.5837&<$33(//$7(3$1(/2)7+(6,;7+&,5&8,7

,QUH 25/$1'2:($7+,1*721          
                                      
                'HEWRU               
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 
                                      
75,$'),1$1&,$/&253                
                                      
                $SSHOODQW            
                                      
     Y                                                1R
                                      
25/$1'2:($7+,1*721                  
                                      
                $SSHOOHH             
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 

                     $SSHDOIURPWKH8QLWHG6WDWHV%DQNUXSWF\&RXUW
            IRUWKH6RXWKHUQ'LVWULFWRI2KLR:HVWHUQ'LYLVLRQDW&LQFLQQDWL
                                      1R

                                $UJXHG2FWREHU

                        'HFLGHGDQG)LOHG1RYHPEHU

            %HIRUH%52:1025*(167(51&/$55(1DQG5+2'(6
                       %DQNUXSWF\$SSHOODWH3DQHOsXGJHV

                                BBBBBBBBBBBBBBBBBBBB

                                       &2816(/

$5*8(''HDQ53UREHU32/.6&+((5	352%(5:RRGODQG+LOOV&DOLIRUQLDIRU
$SSHOODQW7KRPDV)=LHJOHU&LQFLQQDWL2KLRIRU$SSHOOHH21%5,()'HDQ53UREHU
0LFKDHO 6 3RON 0DUN 7 'RPH\HU 32/. 6&+((5 	 352%(5 :RRGODQG +LOOV
&DOLIRUQLD 0LFKDHO 0RVNRZLW] /$: 2)),&(6 2) 026.2:,7= $1' 026.2:,7=
&LQFLQQDWL2KLRIRU$SSHOODQW7KRPDV)=LHJOHU&LQFLQQDWL2KLRIRU$SSHOOHH
                                  BBBBBBBBBBBBBBBBBBBB

                                        23,1,21
                                  BBBBBBBBBBBBBBBBBBBB

       67(9(1:5+2'(6&KLHI%DQNUXSWF\$SSHOODWH3DQHOsXGJH,QWKLVFDVHD
VHFXUHGFUHGLWRUDSSHDOVWKHEDQNUXSWF\FRXUWjVGHWHUPLQDWLRQWKDWWKHDSSURSULDWHYDOXH
RIDYHKLFOHIRUSXUSRVHVRIUHGHPSWLRQSXUVXDQWWR86&LVWKHOLTXLGDWLRQ
YDOXH7KH&UHGLWRUDUJXHVWKDWWKHDSSURSULDWHYDOXHVKRXOGEHWKHUHSODFHPHQWYDOXH
DVGHILQHGE\WKH6XSUHPH&RXUWLQ$VVRFLDWHV&RPPHUFLDO&RUSY5DVK86
6&W7KH3DQHOFRQFOXGHVWKDW5DVKLVGLVWLQJXLVKDEOHEHFDXVHWKDW
FDVHLQYROYHGWKHSURSHUYDOXDWLRQLQWKHFRQWH[WRID&KDSWHUSODQFRQILUPDWLRQ7KH
XVHRIWKHOLTXLGDWLRQYDOXHLQWKHUHGHPSWLRQFRQWH[WLVIXOO\FRQVLVWHQWZLWKWKH6XSUHPH
&RXUWjVDQDO\VLVLQ5DVKDVZHOODVWKHOHJLVODWLYHKLVWRU\RI)XUWKHUWKHEDQNUXSWF\
FRXUWSURSHUO\GHWHUPLQHGWKHOLTXLGDWLRQYDOXHRIWKH'HEWRUjVYHKLFOHEDVHGRQWKHSDUWLHVj
VWLSXODWLRQ  $FFRUGLQJO\ WKH EDQNUXSWF\ FRXUWjV 2UGHU *UDQWLQJ 'HEWRUjV 0RWLRQ )RU
5HGHPSWLRQLV$)),50('


                                   , ,668( 21 $33($/
       7KHVROHLVVXHRQDSSHDOLVZKHWKHUDGHEWRULQD&KDSWHUFDVHPD\UHGHHPD
YHKLFOHSXUVXDQWWR86&E\SD\LQJWKHVHFXUHGFUHGLWRUWKHOLTXLGDWLRQYDOXHRI
WKHYHKLFOH


                    ,, s85,6',&7,21 $1' 67$1'$5' 2) 5(9,(:
       7KH%DQNUXSWF\$SSHOODWH3DQHORIWKH6L[WK&LUFXLWKDVMXULVGLFWLRQWRGHFLGHWKLV
DSSHDO7KH8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH6RXWKHUQ'LVWULFWRI2KLRKDVDXWKRUL]HG
DSSHDOVWRWKH%$3$ILQDORUGHURIDEDQNUXSWF\FRXUWPD\EHDSSHDOHGE\ULJKWXQGHU
86&D)RUSXUSRVHVRIDSSHDODQRUGHULVILQDOLILWmµHQGVWKHOLWLJDWLRQRQ
WKHPHULWVDQGOHDYHVQRWKLQJIRUWKHFRXUWWRGREXWH[HFXWHWKHMXGJPHQWjl0LGODQG
$VSKDOW&RUSY8QLWHG6WDWHV866&WFLWDWLRQV
RPLWWHG
       &RQFOXVLRQV RI ODZ DUH UHYLHZHG GH QRYR  6HH 1LFKROVRQ Y ,VDDFPDQ ,Q UH
,VDDFPDQ)GWK&LUm'HQRYRUHYLHZUHTXLUHVWKH3DQHOWRUHYLHZ

                                              
TXHVWLRQV RI ODZ LQGHSHQGHQW RI WKH EDQNUXSWF\ FRXUWjV GHWHUPLQDWLRQl  )LUVW 8QLRQ
0RUWJDJH&RUSY(XEDQNV,QUH(XEDQNV%5%$3WK&LU
FLWDWLRQRPLWWHG7KHGHWHUPLQDWLRQUHJDUGLQJWKHPHWKRGIRUFDOFXODWLQJWKHYDOXHRID
YHKLFOHLVDFRQFOXVLRQRIODZUHYLHZHGGHQRYR6HH)LUVW0HULW1$&LWL]HQV1DWjO%DQN
Y*HW],QUH*HW]%5%$3WK&LU
       7KHGHWHUPLQDWLRQRIDYHKLFOHjVYDOXHLVDIDFWXDOILQGLQJ6HH*HW]%5DW
  m7KH EDQNUXSWF\ FRXUWjV IDFWXDO GHWHUPLQDWLRQV DUH UHYLHZHG XQGHU WKH FOHDUO\
HUURQHRXVVWDQGDUG$ILQGLQJRIIDFWLVFOHDUO\HUURQHRXVZKHQDOWKRXJKWKHUHLVHYLGHQFH
WRVXSSRUWLWWKHUHYLHZLQJFRXUWRQWKHHQWLUHHYLGHQFHLVOHIWZLWKWKHGHILQLWHDQGILUP
FRQYLFWLRQWKDWDPLVWDNHKDVEHHQFRPPLWWHGl,GDWFLWDWLRQVRPLWWHG


                                          ,,, )$&76
       7KLVDSSHDODULVHVIURPDQRUGHUJUDQWLQJWKH'HEWRUjVPRWLRQIRUUHGHPSWLRQRID
&KU\VOHU&RQFRUGHSXUVXDQWWR7KHSDUWLHVVWLSXODWHGWRWKHIDFWVDVIROORZV

              7KHSDUWLFXODUFKDUDFWHULVWLFVRIWKHPRWRUYHKLFOHZKLFKLV
              WKHVXEMHFWRIWKHPRWLRQIRUUHGHPSWLRQE\WKH'HEWRUVDUH
              VXFKWKDWWKHYDULRXVERRNYDOXHVRIWKHPRWRUYHKLFOHRIWKH
              DSSOLFDEOH UHJLRQDO HGLWLRQ RI WKH 1$'$ JXLGH IDLUO\
              UHSUHVHQWV>VLF@WKHYDOXHRIVXEMHFWPRWRUYHKLFOHDVYDOXHG
              IURPVXFKSHUVSHFWLYHVVROLVWHG

                7KH DSSOLFDEOH UHJLRQDO HGLWLRQ RI WKH 1$'$ IRU WKH
              PRQWK RI $XJXVW  VXFK PRQWK EHLQJ DJUHHG E\ WKH
              SDUWLHVDVWKHDSSURSULDWHPRQWKRIVXFKYDOXDWLRQUHIOHFWVWKDW
              WKH PRWRU YHKLFOH KDV D m7UDGH,Ql ZKROHVDOH YDOXH RI
              DQGKDVDm5HWDLOlUHSODFHPHQWYDOXHRI
              DV UHIOHFWHG E\ WKH FRS\ RI WKH SDJH RI VXFK SXEOLFDWLRQ
              DWWDFKHGKHUHWR

                7KH SDUWLHV GLVDJUHH WKHUH >VLF@ DV WR WKH DSSURSULDWH
              YDOXDWLRQVWDQGDUGIRU GHWHUPLQDWLRQRIWKHDOORZHGVHFXUHG
              FODLPXQGHU86&>@IRUSXUSRVHVRIDUHGHPSWLRQ
              XQGHU86&>@EXWDOORWKHULVVXHVFRQFHUQLQJWKH
              ULJKWRIWKHGHEWRUWRUHGHPSWLRQRIWKHVXEMHFWPRWRUYHKLFOH
              DUHQRWLQFRQWURYHUV\

              ,QWKHHYHQWWKH&RXUWGHWHUPLQHVWKHDSSURSULDWHVWDQGDUG
              IRU YDOXDWLRQ RI WKH VXEMHFW PRWRU YHKLFOH LQ WKLV FRQWHVWHG


                                               
              PDWWHU LV D m5HSODFHPHQW 9DOXHl VWDQGDUG VXFK DPRXQW
              VKRXOGEHHTXDOWRWKHUHWDLOERRNYDOXHVSHFLILHGDERYH

              ,QWKHHYHQWWKH&RXUWGHWHUPLQHVWKHDSSURSULDWHVWDQGDUG
              IRU YDOXDWLRQ RI WKH VXEMHFW PRWRU YHKLFOH LQ WKLV FRQWHVWHG
              PDWWHULVDm/LTXLGDWLRQ9DOXHlRUm:KROHVDOH9DOXHlVWDQGDUG
              VXFK DPRXQW ZRXOG EH HTXDO WR WKH ZKROHVDOH ERRN YDOXH
              VSHFLILHGDERYH

$SSHOODQW
V$SSHQGL[([
       7KHSDUWLHVSUHVHQWHGQRHYLGHQFHWRWKHEDQNUXSWF\FRXUWUHJDUGLQJWKHSDUWLFXODU
FKDUDFWHULVWLFVRUFRQGLWLRQRIWKHYHKLFOHDWLVVXHRUUHJDUGLQJWKHSULFHWKDWWKH'HEWRU
ZRXOGEHUHTXLUHGWRSD\WRREWDLQDUHSODFHPHQWYHKLFOHRUWKHDPRXQWWKDW7ULDG)LQDQFLDO
FRXOGREWDLQLQDFRPPHUFLDOO\UHDVRQDEOHVDOH
       7KHEDQNUXSWF\FRXUWDGRSWHGWKHUHDVRQLQJRI,QUH'RQOH\%5%DQNU
6'2KLRZKLFKKHOGWKDWLQWKHUHGHPSWLRQFRQWH[WWKHOLTXLGDWLRQYDOXHLVWKH
DSSURSULDWH YDOXH  7KH FRXUW WKHQ DSSOLHG WKH VWLSXODWHG IDFWV WR FRQFOXGH WKDW WKH
UHGHPSWLRQDPRXQWLQWKLVFDVHZDV


                                      ,9',6&866,21
       6HFWLRQRIWKH%DQNUXSWF\&RGHSURYLGHV

              $QLQGLYLGXDOGHEWRUPD\ZKHWKHURUQRWWKHGHEWRUKDVZDLYHG
              WKH ULJKW WR UHGHHP XQGHU WKLV VHFWLRQ UHGHHP WDQJLEOH
              SHUVRQDO SURSHUW\ LQWHQGHG SULPDULO\ IRU SHUVRQDO IDPLO\ RU
              KRXVHKROGXVHIURPDOLHQVHFXULQJDGLVFKDUJHDEOHFRQVXPHU
              GHEWLIVXFKSURSHUW\LVH[HPSWHGXQGHUVHFWLRQRIWKLV
              WLWOHRUKDVEHHQDEDQGRQHGXQGHUVHFWLRQRIWKLVWLWOHE\
              SD\LQJ WKH KROGHU RI VXFK OLHQ WKH DPRXQW RI WKH DOORZHG
              VHFXUHGFODLPRIVXFKKROGHUWKDWLVVHFXUHGE\VXFKOLHQ

86&
       7KHSKUDVHmDOORZHGVHFXUHGFODLPlLVGHILQHGLQDDVIROORZV

              $QDOORZHGFODLPRIDFUHGLWRUVHFXUHGE\DOLHQRQSURSHUW\LQ
              ZKLFKWKHHVWDWHKDVDQLQWHUHVWLVDVHFXUHGFODLPWRWKH
              H[WHQWRIWKHYDOXHRIVXFKFUHGLWRUjVLQWHUHVWLQWKHHVWDWHjV
              LQWHUHVWLQVXFKSURSHUW\DQGLVDQXQVHFXUHGFODLPWRWKH
              H[WHQWWKDWWKHYDOXHRIVXFKFUHGLWRUjVLQWHUHVWLVOHVVWKDQ
              WKH DPRXQW RI VXFK DOORZHG FODLP  6XFK YDOXH VKDOO EH

                                               
               GHWHUPLQHGLQOLJKWRIWKHSXUSRVHRIWKHYDOXDWLRQDQGRIWKH
               SURSRVHG GLVSRVLWLRQ RU XVH RI VXFK SURSHUW\ DQG LQ
               FRQMXQFWLRQZLWKDQ\KHDULQJRQVXFKGLVSRVLWLRQRUXVHRURQ
               DSODQDIIHFWLQJVXFKFUHGLWRUjVLQWHUHVW

86&D
       7ULDG)LQDQFLDODVVHUWVWKDWWKHYDOXDWLRQVWDQGDUGIRUUHGHPSWLRQLQ&KDSWHULV
FRQWUROOHGE\WKHUHFHQW6XSUHPH&RXUWGHFLVLRQLQ5DVK7KHLVVXHLQWKH5DVKFDVHZDV
WKHDSSURSULDWHYDOXDWLRQRIDVHFXUHGFUHGLWRUjVFODLPXQGHUDZKHQD&KDSWHU
GHEWRUXWLOL]HVWKHmFUDPGRZQlSURYLVLRQRID%LQRUGHUWRUHWDLQDYHKLFOH7KH
VHFXUHGFUHGLWRULQ5DVKDUJXHGWKDWWKHDSSURSULDWHYDOXDWLRQZDVWKHUHSODFHPHQWYDOXH
WKHSULFHWKDWWKHGHEWRUZRXOGKDYHWRSD\WRSXUFKDVHDVLPLODUYHKLFOH7KHGHEWRU
KRZHYHUDVVHUWHGWKDWWKHSURSHUYDOXDWLRQZDVWKHQHWDPRXQWWKDWZRXOGEHUHDOL]HG
XSRQUHSRVVHVVLRQDQGVDOHRIWKHFROODWHUDO
       $QDO\]LQJWKHHOHPHQWVRIDWKH6XSUHPH&RXUWVWDWHGm7KHILUVWVHQWHQFH
>RID@WHOOVXVWKDWDVHFXUHGFUHGLWRUjVFODLPLVWREHGLYLGHGLQWRVHFXUHGDQG
XQVHFXUHG SRUWLRQV ZLWK WKH VHFXUHG SRUWLRQ RI WKH FODLP OLPLWHG WR WKH YDOXH RI WKH
FROODWHUDOl5DVK86DW7KLVVHQWHQFHKRZHYHUmLVQRWHQOLJKWHQLQJRQKRZ
WRYDOXHFROODWHUDOl,G7KH6XSUHPH&RXUWZHQWRQWRQRWHWKDWWKHVHFRQGVHQWHQFHRI
DUHJDUGLQJWKHmµSURSRVHGGLVSRVLWLRQRUXVHjRIWKHFROODWHUDOLVRISDUDPRXQW
LPSRUWDQFHWRWKHYDOXDWLRQTXHVWLRQl,GDWFLWLQJ86&D
       7KH 6XSUHPH &RXUW FRQFOXGHG WKDW SXUVXDQW WR  D WKH YDOXH RI SURSHUW\
UHWDLQHGZKHQWKHGHEWRUXWLOL]HVWKHFUDPGRZQSURYLVLRQRID%LVmWKHFRVW
WKDWWKHGHEWRUZRXOGLQFXUWRREWDLQDOLNHDVVHWIRUWKHVDPHµSURSRVHGXVHjl,GDW
TXRWLQJ86&D,QUHDFKLQJLWVGHFLVLRQWKH6XSUHPH&RXUWUHDVRQHG
DVIROORZV

               7\LQJYDOXDWLRQWRWKHDFWXDOmGLVSRVLWLRQRUXVHlRIWKHSURSHUW\
               SRLQWVDZD\IURPDIRUHFORVXUHYDOXHVWDQGDUGZKHQD&KDSWHU
               GHEWRULQYRNLQJFUDPGRZQSRZHUUHWDLQVDQGXVHVWKH
               SURSHUW\,IDGHEWRUNHHSVWKHSURSHUW\DQGFRQWLQXHVWR
               XVHLWWKHFUHGLWRUREWDLQVDWRQFHQHLWKHUWKHSURSHUW\QRULWV
               YDOXHDQGLVH[SRVHGWRGRXEOHULVNV7KHGHEWRUPD\DJDLQ
               GHIDXOWDQGWKHSURSHUW\PD\GHWHULRUDWHIURPH[WHQGHGXVH
               $GMXVWPHQWVLQWKHLQWHUHVWUDWHDQGVHFXUHGFUHGLWRUGHPDQGV
               IRU PRUH mDGHTXDWH SURWHFWLRQl    GR QRW IXOO\ RIIVHW WKHVH


                                                  
              ULVNV     2I SULPH VLJQLILFDQFH WKH UHSODFHPHQWYDOXH
              VWDQGDUGDFFXUDWHO\JDXJHVWKHGHEWRUjVmXVHlRIWKHSURSHUW\

,GDWFLWDWLRQVRPLWWHG
       7KH5DVKDQDO\VLVRIYDOXDWLRQLVXVHIXOLQWKHSUHVHQWFDVH+RZHYHUEHFDXVHWKH
GHFLVLRQLQ5DVKRQO\GHDOWZLWKWKHLVVXHRIYDOXDWLRQLQD&KDSWHUFUDPGRZQLWLVQRW
ELQGLQJLQWKLV&KDSWHUFDVH$IWHU5DVKWKHEDQNUXSWF\FRXUWGHFLVLRQVDGGUHVVLQJWKH
YDOXDWLRQRIFROODWHUDOLQWKHFRQWH[WRID&KDSWHUUHGHPSWLRQKDYHUHFRJQL]HGWKDWWKH
XVHDQGGLVSRVLWLRQRIFROODWHUDOLQWKH&KDSWHUUHGHPSWLRQFRQWH[WLVTXLWHGLIIHUHQWIURP
WKH &KDSWHU  FUDPGRZQ FRQWH[W  7KHVH GHFLVLRQV KDYH WKXV GHWHUPLQHG WKDW WKH
UHSODFHPHQWYDOXHLVQRWDQDSSURSULDWHYDOXDWLRQVWDQGDUG5DWKHUWKHVHFDVHVFRQFOXGH
WKDWWKHFUHGLWRUjVDOORZHGVHFXUHGFODLPLQWKHVHFLUFXPVWDQFHVVKRXOGEHGHWHUPLQHGE\
WKHOLTXLGDWLRQYDOXHWKHDPRXQWWKDWWKHFUHGLWRUZRXOGUHFHLYHLIWKHFUHGLWRUUHSRVVHVVHG
DQGVROGWKHFROODWHUDOLQWKHPDQQHUPRVWEHQHILFLDOWRWKHFUHGLWRU6HH,QUH+HQGHUVRQ
%5%DQNU&',OO,QUH'XQEDU%5%DQNU('7HQQ
,QUH:LOOLDPV%5%DQNU6'2KLRDQG,QUH'RQOH\%5
,QGHHG7ULDG)LQDQFLDOKDVFLWHGQRFDVHVGHFLGHGDIWHU5DVKLQVXSSRUWRILWVSRVLWLRQDQG
WKH3DQHOKDVQRWEHHQDEOHWRORFDWHDQ\
       7KH'RQOH\GHFLVLRQRQZKLFKWKHEDQNUXSWF\FRXUWUHOLHGLQWKLVFDVHVHWIRUWKWZR
SULPDU\UHDVRQVIRULWVFRQFOXVLRQWKDWWKHOLTXLGDWLRQYDOXHZDVWKHDSSURSULDWHYDOXHLQ
WKHUHGHPSWLRQFRQWH[W)LUVWWKHFRXUWUHOLHGRQWKHOHJLVODWLYHKLVWRU\RI

              $FFRUGLQJWRWKH+RXVHUHSRUWUHGHPSWLRQmDPRXQWVWRD
              ULJKW RI ILUVW UHIXVDO RQ D IRUHFORVXUH VDOH RI WKH SURSHUW\
              LQYROYHG,WDOORZVWKHGHEWRUWRUHWDLQKLVQHFHVVDU\SURSHUW\
              DQGDYRLGKLJKUHSODFHPHQWFRVWVDQGGRHVQRWSUHYHQWWKH
              FUHGLWRUIURPREWDLQLQJZKDWKHLVHQWLWOHGWRXQGHUWKHWHUPV
              RIKLVFRQWUDFWl+ 5(31RDWUHSULQWHG
              LQ86&&$17KHVHFRPPHQWVVWURQJO\
              VXJJHVW WKDW &RQJUHVV LQ HQDFWLQJ   DV SDUW RI WKH
              %DQNUXSWF\5HIRUP$FWRILQWHQGHGWRSODFHWKHFUHGLWRU



       :HXVHWKHWHUPVmOLTXLGDWLRQlDQGmZKROHVDOHlYDOXDWLRQLQWHUFKDQJHDEO\DVGLG
WKHSDUWLHVLQWKLVFDVH:HUHFRJQL]HWKDWVRPHFRXUWVKDYHPDGHDGLVWLQFWLRQLQWKH
WHUPV6HHHJ,QUH'XQEDU%5%DQNU('7HQQ)RURXU
SXUSRVHVERWKWHUPVUHIHUWRWKHVHFXUHGFUHGLWRUjVH[SHFWHGUHFRYHU\XSRQUHSRVVHVVLRQ
DQGVDOHE\DXFWLRQRURWKHUZKROHVDOHPHDQV

                                               
               LQWKHVDPHSRVLWLRQLWZRXOGKDYHEHHQLQKDGWKHSURSHUW\QRW
               EHHQUHGHHPHGDQGWKHFUHGLWRUKDGUHSRVVHVVHGDQGFDXVHG
               D VDOH RI VXFK SURSHUW\  6HH &DUOVRQ m5HGHPSWLRQ DQG
               5HLQVWDWHPHQWLQ&KDSWHU&DVHVl$0 %$1.5 ,167 / 5(9
               :LQWHU

,QUH'RQOH\%5DW
       7KH'RQOH\GHFLVLRQDOVRUHOLHGRQODQJXDJHLQ*HQHUDO0RWRUV$FFHSWDQFH&RUS
Y%HOO,QUH%HOO)GWK&LU,QDIRRWQRWHWKHFRXUWLQ%HOOUHFRJQL]HG
WKDWLQWKHFRQWH[WRIUHGHPSWLRQXQGHUmWKHPRVWOLNHO\XVHLQPRVWFDVHVLVVDOHIRU
EHQHILWRIWKHFUHGLWRUl,GDWQ$FFRUGLQJO\WKHFRXUWQRWHGWKDWWKHYDOXH
WREHSDLGXSRQUHGHPSWLRQZRXOGJHQHUDOO\DSSUR[LPDWHWKHWKHQmPDUNHWYDOXHRIWKH
SURSHUW\lUHIHUULQJWRWKHZKROHVDOHPDUNHWLQZKLFKWKHFUHGLWRUZRXOGPRVWOLNHO\GLVSRVH
RI WKH SURSHUW\  ,G  'RQOH\ WKHQ UHDVRQHG WKDW m5DVK QHHG QRW FKDQJH WKLV
XQGHUVWDQGLQJlH[SODLQLQJ

               $VWKH6XSUHPH&RXUWQRWHG>LQ5DVK@UHWHQWLRQDQGXVHRI
               FROODWHUDOE\WKHGHEWRULQDFKDSWHUFUDPGRZQH[SRVHVWKH
               VHFXUHGFUHGLWRUWRDGRXEOHULVNRIIXWXUHGHIDXOWE\WKHGHEWRU
               DQGWKHGHWHULRUDWLRQRIWKHSURSHUW\IURPH[WHQGHGXVH
               ,Q FRQWUDVW UHGHPSWLRQ LQYROYHV QHLWKHU RI WKHVH ULVNV
               7KHUHIRUH LPSRVLWLRQ RI WKH UHSODFHPHQW YDOXH VWDQGDUG LV
               SUREDEO\LQDSSURSULDWHLQUHGHPSWLRQFDVHV

,QUH'RQOH\%5DWFLWDWLRQVRPLWWHG
       7KH 3DQHO DJUHHV ZLWK WKH EDQNUXSWF\ FRXUW WKDW WKH UHDVRQLQJ RI 'RQOH\ LV
SHUVXDVLYH  $ GHWHUPLQDWLRQ RI YDOXH LV PDGH RQ WKH EDVLV RI WKH SURSRVHG XVH DQG
GLVSRVLWLRQRIWKHFROODWHUDODV5DVKKROGV$SSUHFLDWLQJWKHHFRQRPLFUHDOLWLHV'RQOH\
UHFRJQL]HGWKDWWKHGLVSRVLWLRQLVGLIIHUHQWZKHQDGHEWRUUHGHHPVSURSHUW\LQ&KDSWHU
E\SD\LQJRIIWKHFUHGLWRUDVRSSRVHGWRWKHGLVSRVLWLRQLQ&KDSWHULQZKLFKDGHEWRU
FRQWLQXHVPDNLQJSD\PHQWVWRWKHFUHGLWRURYHUWLPHDQGWKHFUHGLWRULQFXUVWKHGXDOULVNV
RI ERWK ORVV RI SD\PHQW DQG ORVV RI YDOXH DV WKH FROODWHUDO GHWHULRUDWHV RYHU WLPH  ,Q
FRQWUDVWWRWKH&KDSWHUFUDPGRZQVFHQDULRGHVFULEHGLQ5DVKWKHUHLVQRGLVWLQFWLRQ
LQ WKH HFRQRPLF FRQVHTXHQFHV WR WKH FUHGLWRU EHWZHHQ VXUUHQGHU DQG UHGHPSWLRQ LQ
&KDSWHU




                                                  
        0RUHRYHU EHFDXVH WKH VWDWXWRU\ SURYLVLRQV HVWDEOLVKLQJ WKH ULJKW WR UHGHHP
FROODWHUDOE\SD\LQJWKHFUHGLWRUjVVHFXUHGFODLPSXUVXDQWWRDQGDGRQRW
FOHDUO\DQGH[SOLFLWO\VHWIRUWKWKHSURSHUYDOXDWLRQPHWKRGLWLVIXOO\DSSURSULDWHWRUHO\RQ
WKH OHJLVODWLYH KLVWRU\ RI    7KDW OHJLVODWLYH KLVWRU\ FOHDUO\ GHPRQVWUDWHV WKH
&RQJUHVVLRQDOLQWHQWWKDWLQWKHUHGHPSWLRQFRQWH[WDFUHGLWRUVKRXOGEHSDLGWKHVDPH
DPRXQWWKDWLWZRXOGKDYHEHHQSDLGLIWKHSURSHUW\ZHUHUHSRVVHVVHGDQGVROG

               $QRWKHU SUREOHP LQ FRQQHFWLRQ ZLWK VHFXULW\ LQWHUHVWV LQ
               FRQVXPHU JRRGV LV VROYHG E\ WKH SURYLVLRQ LQ WKH ELOO RI D
               SRZHURIUHGHPSWLRQLQWKHGHEWRU,QFRQVXPHUFDVHVYHU\
               RIWHQ D VHFXUHG FUHGLWRU ZLWK D VHFXULW\ LQWHUHVW LQ DOO RI WKH
               GHEWRU
V SURSHUW\ LQFOXGLQJ KRXVHKROG DQG SHUVRQDO JRRGV
               XVHV WKH WKUHDW RI IRUHFORVXUH WR REWDLQ D UHDIILUPDWLRQ RI D
               GHEW  2WKHUZLVH WKH VHFXUHG FUHGLWRU LV DEOH WR GHSULYH D
               GHEWRU RI HYHQ WKH PRVW LQVLJQLILFDQW KRXVHKROG HIIHFWV
               LQFOXGLQJIXUQLWXUHFRRNLQJXWHQVLOVDQGFORWKLQJHYHQWKRXJK
               WKHLWHPVKDYHOLWWOHLIDQ\UHDOL]DEOHPDUNHWYDOXH+RZHYHU
               WKH JRRGV GR KDYH D KLJK UHSODFHPHQW FRVW DQG WKXV WKH
               FUHGLWRULVDEOHWRXVHWKHWKUHDWRIUHSRVVHVVLRQUDUHO\FDUULHG
               RXWWRH[WUDFWPRUHWKDQKHZRXOGEHDEOHWRLIKHGLGIRUHFORVH
               RUUHSRVVHVV
               8QGHUWKHELOOWKHGHEWRUPD\UHGHHPIURPDVHFXUHGFUHGLWRU
               SURSHUW\WKDWZRXOGEHH[HPSWLQWKHDEVHQFHRIWKHVHFXULW\
               LQWHUHVWRUSURSHUW\WKDWWKHWUXVWHHDEDQGRQVLIWKHGHEWRU
               SD\VWKHVHFXUHGFUHGLWRUWKHDOORZHGDPRXQWRIWKHFUHGLWRU
V
               VHFXUHGFODLP7KLVULJKWDPRXQWVWRDULJKWRIILUVWUHIXVDORQ
               DIRUHFORVXUHVDOHRIWKHSURSHUW\LQYROYHG,WDOORZVWKHGHEWRU
               WRUHWDLQKLVQHFHVVDU\SURSHUW\DQGDYRLGKLJKUHSODFHPHQW
               FRVWVDQGGRHVQRWSUHYHQWWKHFUHGLWRUIURPREWDLQLQJZKDW
               KHLVHQWLWOHGWRXQGHUWKHWHUPVRIKLVFRQWUDFW

+5 5(3 12DWHPSKDVLVDGGHGUHSULQWHGLQ86&&$1

        7KHOLTXLGDWLRQYDOXHEHVWUHIOHFWV&RQJUHVVLRQDOLQWHQWEHFDXVHWKHFRPPHUFLDO
UHDOLW\LVWKDWFUHGLWRUVWKDWUHSRVVHVVYHKLFOHVPRVWRIWHQVHOOWKHPZKROHVDOHDWDXFWLRQV
,QGHHG EHFDXVH WKH SURFHVV RI UHSRVVHVVLQJ DQG VHOOLQJ D YHKLFOH LQYROYHV VRPH
DGGLWLRQDOFRVWWRWKHFUHGLWRULWLVOLNHO\WKDWZKHQDGHEWRUSD\VWKHFUHGLWRUWKHOLTXLGDWLRQ
YDOXHRIDYHKLFOHWRUHGHHPLWWKHFUHGLWRUPD\DFWXDOO\UHFHLYHPRUHPRQH\WKDQLILWKDG
UHSRVVHVVHG WKH YHKLFOH  ,Q DQ\ HYHQW DV EHWZHHQ WKH OLTXLGDWLRQ YDOXH DQG WKH
UHSODFHPHQWYDOXHWKHOLTXLGDWLRQYDOXHEHWWHUDSSUR[LPDWHVWKHFUHGLWRUjVUHFRYHU\XSRQ

                                                  
H[HFXWLQJLWVFRQWUDFWULJKWVWKDQWKHUHSODFHPHQWYDOXHDQGWKDWLVWKH&RQJUHVVLRQDO
LQWHQWDVUHIOHFWHGLQWKHOHJLVODWLYHKLVWRU\
       $IWHU DGRSWLQJ WKH UHDVRQLQJ RI 'RQOH\ DQG GHWHUPLQLQJ WKDW WKH GHEWRU FRXOG
UHGHHPWKHYHKLFOHE\SD\LQJWKHOLTXLGDWLRQYDOXHWKHEDQNUXSWF\FRXUWWKHQDSSOLHGWKH
SDUWLHVjVWLSXODWHGZKROHVDOHYDOXHRI,QOLJKWRIWKHVWLSXODWLRQWKHEDQNUXSWF\
FRXUWjVIDFWXDOILQGLQJUHJDUGLQJWKHOLTXLGDWLRQYDOXHRIWKHYHKLFOHLVQRWFOHDUO\HUURQHRXV


                                      9 &21&/86,21
       7KH3DQHOKROGVWKDWWKHOLTXLGDWLRQYDOXHLVWKHDSSURSULDWHYDOXHIRUGHWHUPLQLQJ
WKH DPRXQW WKDW D &KDSWHU  GHEWRU PXVW SD\ WR UHGHHP FROODWHUDO SXUVXDQW WR  
%DVHGRQWKHSDUWLHV
VWLSXODWLRQWKHDSSURSULDWHOLTXLGDWLRQYDOXHRIWKH'HEWRU
VYHKLFOH
LV$FFRUGLQJO\WKHGHFLVLRQRIWKHEDQNUXSWF\FRXUWLV$)),50('




                                                  
