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
WĂŐĞϭ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
2Q6LWH:DWHU5HTXLUHPHQWV &RVWLQJ 4XDOLW\&KHFNVRQ%ORFNV 3UREOHPV&DXVHV 5HPHGLHV ([FHVVLYH)HDWKHULQJRI%ORFN(GJHV /RZ%ORFN3URGXFWLRQ 1RQ6TXDUH%ORFNV 5RXQGHG(GJHV 5HGXFHG,QWHUORFNV 6LWH0DQDJHPHQW &DULQJIRU
WĂŐĞϮ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
6XSSRUWLQJ&ROXPQVIRU%XLOGLQJV 6XSSRUWLQJ&ROXPQVIRU%RXQGDU\:DOOV %RQGLQJ&ROXPQVWR:DOOV ,QWHUQDO:DOOV %RXQGDU\:DOOV %XLOGLQJ&LUFXODU:DOOVZLWK+\GUDIRUP %ORFN :DOO6WDWLVWLFV (OHPHQWDU\5RRILQJ &RUUXJDWHG,URQ6KHHWLQJ 5RRI7UXVVHV %XLOGLQJ)LQLVKHV 3ODVWHULQJ*DEOH:DOOV5LQJ%HDPV 6XE6WUXFWXUH 3ODVWHULQJ 'DPS 3RLQWLQJ 2WKHU6HUYLFHVDQG)LQLVKHV $JUpPHQWVSHFLILFDWLRQVIRUILQLVKHV 7URXEOH6KRRWLQJ&RQVWUXFWLRQ &RQFUHWH &RPSRQHQWV 6WUHQJWK &RQFUHWH0L[5DWLRV 3RUWODQG&HPHQW &HPHQW6WRUDJH &RQFUHWH6DQG)LQH$JJUHJDWH 6WRQH&RDUVH$JJUHJDWH :DWHU +DQG0L[HG%DWFKHV 0DFKLQH0L[HG%DWFKHV +\GUDIRUP'LHVHO6HUYLFLQJ$QWRU±/RPEDUGLQL 5HSODFLQJ(QJLQH2LO 7R5HSODFH)XHO)LOWHU 5HSODFLQJ2LO)LOWHU(OHPHQW 6HUYLFLQJWKH$LU)LOWHU2LO%DWK 6WDUWLQJDQG6WRSSLQJWKH(QJLQH $QQH[XUH$$JUpPHQW&HUWLILFDWH $QQH[XUH%%ORFN0DNLQJ/RJERRN([DPSOH $QQH[XUH&0DLQWHQDQFH/RJERRN([DPSOH $QQH[XUH'7HUPVDQG&RQGLWLRQV
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
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¶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
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϰ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
'LVFODLPHU
0DFKLQH7UDLQLQJDQG%XLOGLQJ0DQXDO +\GUDIRUP¶V PDQXDO KDV EHHQ SUHSDUHG IRU WKH FOLHQWV XVH WR DGYLVH RQ WKH EHVW SRVVLEOHXVHRIWKHPDFKLQHEORFNPDNLQJDQGEXLOGLQJV\VWHPLQFRUSRUDWLQJ\HDUVRI H[SHULHQFHLQWKHILHOG
³2WKHU)DFWRUV´WREHFRQVLGHUHG 6RLOVFHPHQWVPL[SUHSDUDWLRQVPDWHULDOFRGHVEXLOGLQJPDWHULDOVEXLOGLQJFRGHV ORFDOUHJXODWLRQVH[WHUQDOFRQGLWLRQVDQGPRUHDUHDOOLPSRUWDQWWRSURGXFHDTXDOLW\ EORFNDQGDFKLHYHDFFHSWDEOHEXLOGLQJVWDQGDUGV
'LVFODLPHU +\GUDIRUPFDQQRWEHKHOGUHVSRQVLEOHIRUWKHFOLHQWVQRWDFKLHYLQJDFFHSWDEOHTXDOLW\ OHYHOVLQEORFNSURGXFWLRQDQGEXLOGLQJDVWKH³2WKHU)DFWRUV´DUHRXWRIRXUFRQWURO 5HFHLYHG0DQXIDFWXUHV /LNHDQ\RWKHUPDFKLQHU\RUILQLVKHGEXLOGLQJSURGXFWEORFNRUILQLVKHGEXLOGLQJ WKH QHFHVVDU\PDLQWHQDQFHFDUHDQGSUHYHQWDWLYHVHUYLFLQJQHHGVWREHFDUULHGRXWE\ WKHFOLHQW :DWHU3HQHWUDWLRQ $V WKH FDVH ZRXOG EH ZLWK DQ\ RWKHU EXLOGLQJ V\VWHP EULFN EORFN FHPHQW RU FRQFUHWH ZDWHU SHQHWUDWLRQ LV WKH ELJJHVW QHPHVLV RI WKH ILQLVKHG SURGXFW :DWHU SHQHWUDWLRQ FDXVHV HURVLRQ DQG GHWHULRUDWLRQ RI WKH ILQDO FRQVWUXFWHG SURGXFW RU SURMHFW 3URSHU ZDWHU SURRILQJ DQG ZDWHU SHQHWUDWLRQ SULQFLSDOV DQG SURFHGXUHV QHHGVWREHIROORZHGLQ DQ\FRQVWUXFWLRQRUPDQXIDFWXULQJRIDSURGXFW+\GUDIRUP FDQQRW EH KHOG UHVSRQVLEOH IRU QRW DFKLHYLQJ DFFHSWDEOH TXDOLW\ OHYHOV LQ EORFN SURGXFWLRQDQGFRQVWUXFWLRQLIWKHSURSHUUXOHVDVLQGLFDWHGLQWKLVPDQXDOEXLOGLQJ FRGHVDQGEXLOGLQJUHJXODWLRQVZLWKUHJDUGVWRVHDOLQJIURPZDWHUDQGPRLVWXUHDQG WKHSHQHWUDWLRQWKHUHRIDUHQRWDGKHUHGWR
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϱ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
+\GUDIRUP6DIHW\,QVWUXFWLRQVDQG:DUUDQW\,QIRUPDWLRQ
6DIHW\,QVWUXFWLRQV
,QMXULHVFDQEHFRVWO\ 5HDGWKHVHIHZSRLQWVWKRURXJKO\ :KHQWRZLQJRUPRYLQJWKH+\GUDIRUPPDFKLQH x 'RQRWVSHHG x 0DNHVXUHPRELOHPDFKLQHVDUHKLWFKHGWRWKHWRZLQJYHKLFOHFRUUHFWO\ x 6HFXUHDOOPDFKLQHVRQWKHSLFNXSRUWUDLOHU :KHQRSHUDWLQJ±SURGXFLQJEORFNV x 'R QRW KLW WRS UDP DQG ERWWRP UDP WRJHWKHU GXULQJ DQ HPSW\ FKDPEHU F\FOH x 'RQRWRSHUDWHWKHFRPSUHVVLRQFKDPEHUZLWKRXWVRLOLQWKHPDFKLQH x 1HYHUSURGXFHEORFNVVKRUWHUWKDQPP
&OHDQLQJWKH+\GUDIRUPPDFKLQH x
'R QRW FOHDQ WKH PDFKLQHU\ LI WKH GLHVHO PRWRU LV LGOLQJ RU WKH HOHFWULFDO SRZHULVRQ
'$1*(5 x %HZDUH RI 723 5$0 RSHQLQJ DQG FORVLQJ GXULQJ EORFNPDNLQJ ,W FDQ FDXVHGDPDJHWR\RXUKDQGVILQJHUVDQGERG\ x 2QO\DWUDLQHGRSHUDWRUPXVWRSHUDWHWKHPDFKLQH
7RSUDP
7RSDUP
%RWWRPUDP
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϲ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
+\GUDIRUP DQG 9LEUDIRUP PDFKLQHV DUH HTXLSSHG ZLWK VDIHW\ VLJQV ZKLFK DUH WKHUH IRU\RXURZQSURWHFWLRQDQGWKHVHVLJQVPXVWQRWEHUHPRYHGUHSODFHGRUWDPSHUHG ZLWK ,W LV LPSRUWDQW WR JLYH DWWHQWLRQ WR \RXU RZQ VDIHW\ DQG WKH VDIHW\ RI RWKHUV DURXQG \RX 3OHDVH GRQ¶W GLVUHJDUG WKHVH VLJQV 7KH\ DUH DSSOLHG WR WKH PDFKLQH IRU \RXU RZQVDIHW\ 1RKDQGVWKLVVLJQVKRZV\RXWKDWQRKDQGVPXVWEHLQWKH DUHDHVSHFLDOO\ZKHQWKHPDFKLQHLVLQRSHUDWLRQ 7KHVH VLJQV LQGLFDWH WKH PRYLQJ SDUWV RQ WKH VSHFLILHG PDFKLQH DQG PXVW QRW EH WDPSHUHGZLWKGXULQJRSHUDWLRQ7KHVHSDUWVFRXOGFDXVHVHULRXVGDPDJHLQMXU\RU GHDWK
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϳ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
6HW8SRI0DFKLQHRQ6LWH 7KH+\GUDIRUPPDFKLQHPXVWEHLQDOHYHOSRVLWLRQUHVWLQJRQWKHIRXUFRUQHU VWDQGVRUOHJV ,03257$17$ KRXU UXQ LQ VHUYLFH PXVW EH GRQH RQ \RXU QHZ GLHVHO HQJLQH3OHDVHVHHVHFWLRQ &KHFNOLVWEHIRUHEORFNSURGXFWLRQRUVWDUWLQJWKHPDFKLQH x &KHFNK\GUDXOLFRLOOHYHOJDXJHRQWDQNDOOPDFKLQHV x &KHFNDLUILOWHUIRUFOHDQQHVVGLHVHOPDFKLQHVRQO\ x &KHFNHQJLQHRLOGLHVHOPDFKLQHVRQO\ x &KHFNHOHFWULFFRQQHFWLRQVHOHFWULFPDFKLQHVRQO\ x &KHFNPL[HUIRUIUHHPRYHPHQW0([0RUPL[HUPDFKLQHVRQO\
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϴ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
+\GUDIRUP:DUUDQW\
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
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϵ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϬ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
7KH/D\RXWDQG3DUWVRIWKH+\GUDIRUP0DFKLQH
+\GUDIRUP%ORFNPDNLQJ0DFKLQHV
7RS DUP
'LHVHOHQJLQH
&RPSUHVVLRQ FKDPEHU ZHDUSODWHV LQVLGH±
7RS5DP
6RLOKRSSHU &RQWURO 7RZKLWFK 3UHVVXUH JDXJH %RWWRP &\OLQGHU 5DP KLGGHQ
+\GUDXOLFRLO WDQN
/HJVVWDQGV [
6RLOKRSSHU
7RSDUP
'LHVHO(QJLQH
&RPSUHVVLRQFKDPEHUZHDU SODWHVLQVLGH±3LHFHV VHW
3DQ0L[HU 6WDQGDUG Ɛ 6XSHU Ɛ
3UHVVXUH JDXJH
%RWWRPF\OLQGHU
&RQWUROOHYHUV 7RZ+LWFK
/HJV6WDQGV
+\GUDXOLFRLOWDQN
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϭ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
3DUWV/LVW 'UDZLQJ&RUQHUDQG6LGH9LHZRI0&KDPEHU
12
'(6&5,37,21 62,/+233(5 62,/+233(56833257 9$/9(%$1. 723$50&,1'(5/(9(57235$0 %27720&,1'(5/(9(5%277205$0 &+$0%(5 :($53/$7(63(56(7 723+($' 723$50 5($53,1$1'%($5,1*6 0$,1&,1'(5 )5$0(),;('2502%,/( &/(9,63,1 %277205$0+($' 723$50&,1'(5 7235$0(;7(16,21 &/(9,6
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϮ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
2SHUDWLQJDQG0DLQWHQDQFHRIWKH+\GUDIRUP0DFKLQH
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
+RZWR&KDQJH+\GUDXOLF6\VWHP3UHVVXUH
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϯ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
,I \RX DUH ZRUNLQJ ZLWK KLJK VDQGFRQWHQW VRLOVWKHQ \RX PD\ QHHG WR LQFUHDVHWKH V\VWHPSUHVVXUHWR±%$503D DQGWR±%$503D IRUWKH6XSHUPDFKLQHPRGHOV ,I \RX DUH ZRUNLQJ ZLWK KLJK FOD\ FRQWHQW VRLOV GR QRW DGMXVW WKH V\VWHP SUHVVXUHEXWUDWKHUDGMXVWWKHPL[GHVLJQ ,IDGMXVWPHQWLVUHTXLUHGLWVKRXOGEHGRQHDVIROORZ /RRVHQORFNQXW1U /RRVHQDGMXVWPHQWEROW1U IRUORZHUSUHVVXUH 7LJKWHQDGMXVWPHQWEROW1U IRUKLJKHUSUHVVXUH 7RWDNHWKHUHDGLQJRQWKHSUHVVXUHJDXJHRSHQWKHWRSUDPDQGKROGWKHERWWRP UDPLQWKHGRZQRUXSSRVLWLRQ 1% 0DNH VXUH WKH WRS UDP LV LQ WKH RSHQ SRVLWLRQ ZKHQ FKDQJLQJ WKH SUHVVXUH
+RZWR3URGXFH2QH+\GUDIRUP%ORFN 67(3%<67(3,16758&7,216 %RWWRPUDPLQGRZQSRVLWLRQ 7RSUDPRSHQ )LOOPL[LQWRKRSSHU 3XVKKRSSHUDFURVVFKDPEHUDQGUHWXUQWRRULJLQDOSRVLWLRQ &ORVHWRSUDP
0RYHERWWRPUDPXSZDUGVWRFRPSDFWWKHVRLOFHPHQWPL[WXUH 2SHQWRSUDP 0RYHERWWRPUDPXSZDUGVXQWLOWKHSURGXFHGEORFNLVFRPSOHWHO\HMHFWHGRXWRI WKHFKDPEHU 5HPRYHWKHEORFNDQGWDNHLWDZD\WREHFXUHG 0RYHWKHERWWRPUDPGRZQZDUGXQWLOWKHHQG 6WRS 5HSHDW6WHS7RIRU)XUWKHU%ORFNV
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϰ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
0DLQWHQDQFHRI0DFKLQH
0DLQWHQDQFHWREH'RQH(YHU\'D\ x 0DFKLQHPXVWEHFOHDQHGRYHUDOO x
,I SURGXFWLRQ LV VWRSSHG PDNH VXUH ERWWRP UDP LV GRZQ DQG WKH WRS UDP LV FORVHG
x
$IWHUVWRSSLQJWKHHQJLQHUHOHDVHWKHSUHVVXUHLQWKHK\GUDXOLFKRVHVE\PRYLQJ WKHK\GUDXOLFOHYHUVLQWKHUHVSHFWLYHGLUHFWLRQV
x
7KHDLUILOWHURLOWREHFKDQJHGHYHU\GD\GXULQJQRUPDORSHUDWLRQ
x
6HHVHFWLRQDQG
:HHNO\0DLQWHQDQFH x 2QFH D ZHHN FKHFN PDFKLQH IRU ZHDU DQG WHDU OHDNV DQG ORRVH EROWV &OHDQ PDFKLQHWKRURXJKO\FKHFNHQJLQHDQGK\GUDXOLFV\VWHP x
$LUILOWHUWREHZDVKHGLQNHURVHQHZHHNO\RUPRUHRIWHQLQGXVW\FRQGLWLRQV
:HDUSODWHV0DLQWHQDQFH x :HDUSODWHVPD\QHHGFKDQJLQJDQ\ZKHUHEHWZHHQ±EORFNV7KH ZHDUSODWHVQHHGWREHFKDQJHGZKHQWKHEORFNKHLJKWUHDFKHVPP 6HHVHFWLRQDQGVHFWLRQ
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϱ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
'LHVHO(QJLQH0DLQWHQDQFH$QWRU/RPEDUGLQL )RUGLHVHOHQJLQHPDLQWHQDQFHUHIHUWRHQJLQHPDQXDOZKLFKLVVXSSOLHGZLWK DOOQHZPDFKLQHV ,03257$17)RU1HZ(QJLQHV$KRXUUXQLQVHUYLFHPXVWEHGRQHWRHQVXUH FRQWDPLQDQWVDUHUHPRYHGIURPWKHRLODIWHUWKHLQLWLDOKRXUUXQLQSHULRG )RUWKHKRXUUXQLQVHUYLFHVHHWKHEORFNVPDUNHGLQWKHPDLQWHQDQFHVFKHGXOH EHORZ 0DLQWHQDQFH6FKHGXOHIRU$QWRU'LHVHO(QJLQHV 2SHUDWLRQ
3DUW
7,0(+2856
&OHDQLQJ
&RQWUROOLQJ
&KDQJLQJ
2YHUKDXO DQGUHSDLU
$LUILOWHUZLWKRLOEDWK +HDGDQGKHDGF\OLQGHUILQV )XHOWDQN ,QMHFWRU 2LOOHYHO &UDQNFDVHRLOOHYHO )XHOSLSHVFRQQHFWLRQV 9DOYHURFNHUFOHDUDQFHV ,QMHFWRURSHQLQJSUHVVXUH $LU)LOWHURLO
&UDQNFDVHRLO
2LOILOWHUFDUWULGJH )XHOILOWHUFDUWULGJH 3DUWLDO
*HQHUDO
)RUQHZHQJLQHVRQO\ 1RUPDOPDLQWHQDQFHVFKHGXOHUHTXLUHPHQWV 7KHFOHDQLQJRSHUDWLRQIRUWKHHQJLQHVWKDWDUHZRUNLQJLQKDQGFRQGLWLRQVZLOOEHGRQH HYHU\GD\ 7KH DLU ILOWHU RLO PXVW EH FKDQJHG HYHU\ KRXUV IRU WKH HQJLQHV WKDW DUH ZRUNLQJ LQ GXVW\FRQGLWLRQVHVSHFLDOO\FRQVWUXFWLRQPDFKLQH 6HHLQVWUXFWLRQVIRUUHFRPPHQGHGRLO &RQWURORIF\OLQGHUVSLVWRQULQJVYDOYHJXLGHVDQGVSULQJV
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϲ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
'LHVHO0RWRU'LHVHOSRZHUHGPDFKLQHVRQO\ +\GUDIRUP EDFNV RXU FXVWRPHUV ZLWK WHFKQLFDO DGYLFH RQ DOO NLQGV RI VHUYLFH TXHVWLRQVVSDUHSDUWVDQGHQJLQHUHSDLUV &RQWDFW+\GUDIRUP -RKDQQHVEXUJ6RXWK$IULFD 5RQGHEXOW5RDG /LEUDGHQH %RNVEXUJ 32%R[ 6XQZDUG3DUN 7HO )D[ (PDLO VDOHV#K\GUDIRUPFRP ,QWHUQHWZZZK\GUDIRUPFRP 6SDUHVDIWHUVDOHV#K\GUDIRUPFRP
+\GUDXOLF0DLQWHQDQFH
6HUYLFHLQVWUXFWLRQV 0DLQSRLQWVWRFKHFNDUHDVIROORZV 9LVXDOO\FKHFNLQJFRUUHFWRLOOHYHORIK\GUDXOLFWDQNK\GUDXOLFRLOPXVWDOZD\VEH YLVLEOHLQVLJKWJODVV 7RSXSK\GUDXOLFRLOZLWKRLOJUDGHLIUHTXLUHG 9LVXDOO\ FKHFNLQJ DOO K\GUDXOLF KRVH FRQQHFWLRQ SRLQWV IRU OHDNV ± WLJKWHQ LI QHFHVVDU\ (YHU\KRXUVPRQWKVRIRSHUDWLRQ WKHUHWXUQOLQHILOWHUPXVWEHUHSODFHG 7RGRWKLVUHPRYHWKHWKUHHEROWVRQWKHDOXPLQXPKRXVLQJDQGUHPRYHWKHILOWHU 5HSODFHLWZLWKDQHZILOWHUUHILWWKHVSULQJDQGWLJKWHQWKHKRXVLQJ 7KHDERYHFKHFNVVKRXOGEHGRQHRQDUHJXODUEDVLVWRHQVXUHVDIHRSHUDWLRQ RIWKHPDFKLQH
+\GUDXOLF0DLQWHQDQFH6FKHGXOH ,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϳ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
'$,/<
&KHFNK\GUDXOLFRLOOHYHOLQWDQN&KHFNIRUH[WHUQDOOHDNVDQGZRUQ KRVHV
(9(5<0217+6 &KDQJHUHWXUQOLQHILOWHUHOHPHQW 5HFRPPHQGDWLRQ 7REHGRQHE\D+\GUDXOLFFRPSDQ\RUVSHFLDOLVW
&KDQJLQJRI:HDUSODWHVRQDOO0DFKLQHV
:HDUSODWHV 7KHUHDUHIRXUZHDUSODWHVLQWKHPDFKLQHZKLFKJLYHWKHVKDSHRIWKHEORFN7KHVH DUH RI VSHFLDO PDWHULDO WR DFKLHYH ZHDU UHVLVWDQFH +RZHYHU GHSHQGLQJ RQ WKH ZRUNLQJ FRQGLWLRQV DQG WKH VRLO DEUDVLRQ ZHDUSODWHV PXVW EH FKDQJHG ZKHQ QHFHVVDU\ :KHQ WKH EORFN KHLJKW UHDFKHV PP WKH ZHDUSODWHV PXVW EH FKDQJHG 7KH EORFNVZLOOVKRZVLJQVRIFUDFNLQJDQGQRORQJHUILWWRJHWKHUSURSHUO\6HHVHFWLRQ
,PSRUWDQWQRWH :HDUSODWHVPXVWDOZD\VEHUHSODFHGDVDVHW (YHU\ WLPH ZHDUSODWHV DUH FKDQJHG QHZ EROWV ZDVKHUV DQG VSULQJ ZDVKHUV PXVWEHXVHG $OOEROWVDUHKLJKWHQVLOH $IWHU ZHDUSODWHV KDYH EHHQ ILWWHG FKHFN ERWWRP UDP DQG WRS UDP IRU IUHH PRYHPHQWWRSUDPLVGHVLJQHGWRKDYHIUHHSOD\
7DNLQJRXWZHDUSODWHV 2SHQWKHWRSUDPDQGPRYHERWWRPUDPGRZQWRLWVORZHVWSRVLWLRQ 6ZLWFKRII'LHVHOHQJLQHRU(OHFWULFPRWRU )URQWDQGEDFNZHDUSODWHVDUHEROWHGLQWRWKHFRPSUHVVLRQFKDPEHUZLWKVL[ EROWV5HPRYHWKHP 6LGHZHDUSODWHVDUHEROWHGLQWRWKHFRPSUHVVLRQFKDPEHUZLWKIRXUEROWV 5HPRYHWKHP 7DNHRXWIURQWDQGUHDUZHDUSODWHVLI\RXKDYHGLIILFXOW\LQWDNLQJWKHPRXWXVHD EORFNRIZRRGDQGDKDPPHUWRORRVHQWKHSODWHV 7DNHRXWOHIWDQGULJKWVLGHZHDUSODWHVEROWV 7DNHRXWVLGHZHDUSODWHV
)LWWLQJWKHQHZZHDUSODWHV $OZD\VXVHQHZEROWVDQGVSULQJZDVKHUV 7KHZHDUSODWHFRPSUHVVLRQFKDPEHUIRUPPXVWEHFOHDQHGDQGOLJKWO\RLOHG
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϴ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
)LWVLGHSODWHVILUVWHQVXULQJWKDWWKHWRSRIWKHSODWHLVOHYHOZLWKWKHWRSRIWKH FRPSUHVVLRQFKDPEHUWLJKWHQEROWV )LWIURQWDQGUHDUSODWHVHQVXULQJWKDWWKH\DUHOHYHOZLWKWKHFKDPEHU 7LJKWHQEROWV 6WDUWPDFKLQHDQGPRYHWRSUDPXSDQGGRZQVORZO\WRHQVXUHIUHHPRYHPHQW LQWRWKHEORFNFKDPEHU 0RYHERWWRPUDPXSDQGGRZQWRHQVXUHIUHHPRYHPHQWWLJKWHQDOOEROWVDJDLQ 3URFHHGZLWKEORFNPDNLQJ
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϭϵ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
6RLO6HOHFWLRQ
,QWURGXFWLRQ $ +\GUDIRUP EORFN LV SURGXFHG IURP D VRLO DQG FHPHQW PL[WXUH 7KH VRLO W\SH LV FODVVLILHG DV D VDQG\ ±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³VWDELOLVHG VRLO EORFNVெ 7KH UHTXLUHG ³VWDELOLVHUெ LV &HPHQWWKLVLVPL[HGZLWKVXEVRLODQGDERXWZDWHUWRSURGXFHDPL[ZKLFK IHHOVVOLJKWO\PRLVW7KHPL[LVPRXOGHGXQGHUKLJKSUHVVXUHWRSURGXFHLQWHUORFNLQJ EORFNV
)LQGLQJFRUUHFW6RLO 6RLOFDQYDU\PDUNHGO\DURXQGDEORFNPDNLQJVLWH7U\WRILQGVRLOZKLFK LVZHOOJUDGHGWKHPRUHFRDUVHPDWHULDO\RXKDYHWKHOHVVEOHQGLQJLVUHTXLUHG KDV D FOD\ FRQWHQW RI EHWZHHQ DQG ZKHQ YHU\ KLJKFOD\ VRLOV DUH XVHG WKH RXWHU VXUIDFHV RI WKH EORFNV ³UHOD[ெ ZKHQ WKH SUHVVXUH LV UHPRYHG FDXVLQJVXUIDFHFUDFNLQJWKLVLVGXHWR D D FRPELQDWLRQ RI WKH ³SODVWLFLW\ெ RU FRPSUHVVLELOLW\ RI WKH FOD\ ZKLFK H[SDQGV ZKHQ WKH SUHVVXUH LV UHOHDVHG EXW VKRXOG QRW EH FRQIXVHG ZLWK FUDFNLQJDQG E WKHZDWHUFRQWHQWRIWKHPL[ LV IUHH RI URRWV OHDYHV DQG JUDVV RUJDQLF PDWWHU LQKLELWV WKH K\GUDWLRQ RI FHPHQW
3ODVWLFLW\,QGH[ 7KHSODVWLFLW\LQGH[3, LVDPHDVXUHRIWKHSODVWLFLW\RIDVRLO7KHSODVWLFLW\LQGH[LV WKHVL]HRIWKHUDQJHRIZDWHUFRQWHQWVZKHUHWKHVRLOH[KLELWVSODVWLFSURSHUWLHV7KH 3, LV WKH GLIIHUHQFH EHWZHHQ WKH OLTXLG OLPLW DQG WKH SODVWLF OLPLW 3, //3/ 6RLOV ZLWKDKLJK3,WHQGWREHFOD\WKRVHZLWKDORZHU3,WHQGWREHVLOWDQGWKRVHZLWKD 3,RIQRQSODVWLF WHQGWRKDYHOLWWOHRUQRVLOWRUFOD\
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϮϬ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
3,DQGWKHLUPHDQLQJV x x x x x x
1RQSODVWLF 6OLJKWO\SODVWLF /RZSODVWLFLW\ 0HGLXPSODVWLFLW\ +LJKSODVWLFLW\ !9HU\KLJKSODVWLFLW\
7KLV WHVW LV JHQHUDOO\ FDUULHG RXW LQ DQ DFFUHGLWHG ODERUDWRU\ +\GUDIRUP KDV D ODERUDWRU\IDFLOLW\WREHDEOHWRHYDOXDWHDQGWHVWVRLOIRUWKHSXUSRVHRIEORFNRUEULFN SURGXFWLRQXVLQJ+\GUDIRUPRU9LEUDIRUPPDFKLQHV 6RLOUDQJH³$´ZLWKDSODVWLFLW\LQGH[RIZLOOQRWSURGXFHEORFNVDVVWURQJDVVRLO UDQJH³%´6RLOVZLWKDSODVWLFLW\LQGH[!UHTXLUHWUHDWPHQWZLWKOLPHWRVWDELOLVHWKH FOD\ RUWKHDGGLWLRQRIVDQG
)LHOG6RLO7HVWV 7KHYLVXDOWHVW
x 'LJDKROHPGHHS x /RRNDWWKHGLIIHUHQWVRLOOD\HUV x 'RHVWKHVRLOORRNVDQG\RUGRHVLW KDYHOXPSV" D ,ILWLVKDVOXPSVDQGFUDFNVLQWKH VRLOWKHQWKHUHLVFOD\ E ,I LW LV YHU\ VDQG\ WKHQ GLJ GHHSHU WRILQGDPRUHFOD\H\VRLO
x '212786(72362,/
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϮϭ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
7KHZDVKWHVW x x
x x
7DNH VRPH VRLO LQ WKH KDQG SRXU ZDWHU RQ LW DQG UXE DQG VTXHH]H LW 'RHVLWIHHOJULWW\RUVRDS\" D ,ILWLVJULWW\WKHUHLVDORWRIFRDUVHVDQG E ,ILWLVVRDS\WKHQWKHUHLVFOD\ :DVKWKHKDQGZLWKZDWHU,IVRLOZDVKHVRIIHDVLO\WKHQLWLVPRVWO\VDQGRUVLOW 7KHLGHDOUHVXOWLVLILWLVGLIILFXOWWRZDVKRIIDQGOHDYHVFRORXURQ\RXUKDQGWKHQ WKHUHLVDORWRIFOD\
7KHMDUWHVW x x x
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
)LOODVWUDLJKWVLGHGIODWERWWRPHGMDUïñZLWKVRLO )LOOWRZLWKZDWHU
6KDNHZHOOPLQXWH
WĂŐĞϮϮ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
x x
/HDYHWRVWDQGIRUKRXUV 0HDVXUH WKH WKLFNQHVV RI WKH OD\HUV RI FOD\ DQG VDQG
1RWH ,GHDOO\WKHUHPXVWEHVLOWDQGFOD\LI WKH FOD\ VLOW FRQWHQW LV KLJKHU WKDQ VDQG VKRXOGEHEOHQGHGZLWKVRLO &OD\DQGVLOW±XSSHUOD\HU 6DQGDQGJUDYHO±ORZHUOD\HU
6KULQNDJHWHVW
x
)LOODVKULQNDJHWURXJKFPORQJ[ FPGHHS[FPZLGHZLWKZHWVRLO
x
6FUDSH LW OHYHO DQG OHDYH WR GU\ LQ WKHVXQIRUGD\V
x x
x
x
$IWHU GD\V LQ WKH VXQ PHDVXUH WKH VKULQNDJH ,I VKULQNDJH LV QR PRUH WKDQ PP WKHQ WKH VRLO LV VDQG\ ,W PLJKW EH GLIILFXOW WR KDQGOH WKH EORFN GXULQJ EORFNPDNLQJ ,IVKULQNDJHLVPRUHWKDQPPWKHQ WKH VRLO KDV WRR PXFK FOD\ 6DQG PXVWEHDGGHGRUILQGDQRWKHUVRLO $QLGHDOVRLOVKRXOGVKULQNDURXQG PP±PP
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϮϯ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
0L['HVLJQ 6HOHFWLRQ
%ORFN
;
;
;
;
1HYHUH[FHHGPRUHWKDQEORFNVIURPRQHEDJRIFHPHQWWKHEORFNVWUHQJWK ZLOOEHWRRORZ
03D0HJD3DVFDO NJFPð N3D SVL 1RWH x %ORFN VWUHQJWK DQG TXDOLW\ LV DIIHFWHG E\ FHPHQW FRQWHQW DQG FXULQJ GXUDWLRQ GD\V PLQLPXP *XLGHOLQHV DUH EDVHG RQ IUHVK 1 23& FHPHQW DW GD\V DQG DUH DSSUR[LPDWLRQV RQO\ ³2WKHU IDFWRUV´ FDQ LQIOXHQFHEORFNVWUHQJWK x &RQVXOW D TXDOLILHG ORFDO HQJLQHHU DERXW OHJLVODWLRQV DQG VWDQGDUGV IRU EORFNVEHIRUHEXLOGLQJ
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϮϰ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
%ORFN0L[HV 6WUHQJWK0HDVXUHPHQWV %ORFN6WUHQJWK0HDVXUHPHQW 7KLV LV GRQH E\ FRPSUHVVLQJ D EORFN ZLWK D +\GUDIRUP EORFN WHVWHU RU D VWDQGDUG FRPSUHVVLYHWHVWLQJ PDFKLQH XQWLO LW EUHDNV DQG LV GHILQHG DV WKH EORFN¶V ³FRPSUHVVLYH VWUHQJWK´ &RPSUHVVLYH VWUHQJWK VKRXOG QRW EH FRQIXVHG ZLWK PDFKLQH PRXOGLQJ SUHVVXUH WKH SUHVVXUH DW ZKLFK D EORFN LV PRXOGHG &RPSUHVVLYHVWUHQJWKLVPHDVXUHGLQXQLWVRISUHVVXUHFRPPRQO\
NJFP NLORJUDPV FHQWLPHWUH
SHU
03D EDUV 1PP SVL NJFP 1PP 03D EDUV SVL NJFP %DU PLOOLEDUV SVL 03D NJFP SVL EDU 03D 1PP NJFP VTXDUH NJFP 03D 1PP EDU SVL
03DPHJDRUPLOOLRQ3DVFDOV 1PP 1HZWRQVVTXDUHPLOOLPHWUH EDU EDU LV DSSUR[LPDWH VHDOHYHO DLUSUHVVXUH SVLSRXQGVSHUVTXDUHLQFK
%ORFN&RORXU 7KLVLVGHULYHGIURPWKHVRLO\RXDUHXVLQJ:HDUHRIWHQDVNHGLIEORFNFRORXUFDQEH PRGLILHGE\XVLQJFHPHQWG\HVWKLVLVSRVVLEOHEXWLWLVH[SHQVLYHEHFDXVHPRVWRI WKH G\H LV FRQWDLQHG ZLWKLQ WKH EORFN 2XU H[SHULHQFH LV WKDW WKH QDWXUDO FRORXUV RI VRLOVDUHE\IDUWKHPRVWDWWUDFWLYH %ORFN6WUHQJWK5HTXLUHPHQWV 7KHUHFRPPHQGHGPLQLPDOVWUHQJWKIRUDOOEORFNVLV03D 1%0HDVXULQJ0L[HV 7KHPRUHFHPHQWLQDPL[WKHVWURQJHUWKHEORFNVZLOOEH:KHHOEDUURZVDUHXVHGWR PHDVXUHVRLODQGFHPHQWLVXVXDOO\SDFNHGLQNJEDJVRUSRFNHWV x DVWDQGDUGEXLOGHU¶VZKHHOEDUURZOHYHOOHGDWWKHULPFRQWDLQVOLWUHVDQG x DNJSRFNHWRIFHPHQWFRQWDLQVOLWUHVVR x OHYHOZKHHOEDUURZKROGVSRFNHWVRIFHPHQWVRIRUH[DPSOH x SRFNHWRIFHPHQWPL[HGZLWKOHYHOZKHHOEDUURZVRIVRLOLVDPL[UDWLRRI ,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϮϱ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
:KHHOEDUURZ&DSDFLW\ 7KHZKHHOEDUURZVFRPPRQO\XVHGYDU\IURPFRXQWU\WRFRXQWU\&KHFNWKHFDSDFLW\ RI\RXUZKHHOEDUURZVE\ILOOLQJWKHPZLWKVRLOXVLQJDJUDGXDWHGFRQWDLQHU2QFHWKH ZKHHOEDUURZ YROXPH KDV EHHQ GHWHUPLQHG WKH PL[ UDWLRV PXVW EH DGMXVWHG LI QHFHVVDU\ :KLOVW D VWDQGDUG EXLOGHU¶V ZKHHOEDUURZ OHYHOHG DW WKH ULP FRQWDLQV OLWHUVWKHVDPHZKHHOEDUURZKHDSHGWRPD[LPXPFDSDFLW\ZLOOKROGOLWHUV
ERXQGDU\ZDOO
0RLVWXUH&RQWHQW 7KLVGHWHUPLQHVEORFNOHQJWKWKHGULHUWKHPL[WKHORQJHUWKHEORFNDQGFRQYHUVHO\ WKHZHWWHUWKHPL[WKHVKRUWHUWKHEORFN
4XLFN5DWLR*XLGHIRU3DQ0L[LQJ 0L[JXLGHIRUDPL[UDWLR x Ɛ3DQ0L[HU[ƐEXFNHWVVRLOZLWK[ƐEXFNHWFHPHQW x Ɛ3DQ0L[HU[ƐZKHHOEDUURZVRLOZLWKò[ƐEXFNHWFHPHQW x Ɛ3DQ0L[HU[ƐZKHHOEDUURZVRLOZLWK[EDJRIFHPHQWRU[ ƐEXFNHWVFHPHQW
0L[JXLGHIRUDPL[UDWLR x Ɛ3DQ0L[HU[ƐEXFNHWVVRLOZLWKô[ƐEXFNHWFHPHQW x Ɛ3DQ0L[HU[ƐEXFNHWVVRLOZLWK[ƐEXFNHWFHPHQW x Ɛ3DQ0L[HU[ƐZKHHOEDUURZVRLOZLWKò[ƐEXFNHWVFHPHQW
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϮϲ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
%ORFN3URGXFWLRQ
0DQXIDFWXULQJD6LPSOH6RLO6LHYH
0DWHULDOUHTXLUHPHQWV WRPPH[SDQGHGPHWDORUZHOGHGPHVKVL]H[PP PVL]H[[PPDQJOHLURQVROGLQPOHQJWKV PVL]H[PPIODWEDUVROGLQPOHQJWKV PVL]H[PPIODWEDUVROGLQPOHQJWKV 1XWV EROWVIRUVHFXULQJPHVKWRIUDPH PVL]H[PPVRIWZRRGIRUVXSSRUWV
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϮϳ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
6LHYLQJ
&\OLQGULFDO6RLOV6LHYH 7KLV VRLO VLHYH LV D OLWWOH PRUH FRPSOLFDWHG WR FRQVWUXFW WKDQ WKH SUHYLRXVRQHVKRZQEXWLVPXFKPRUH SURGXFWLYH 7KHVLHYHPHVKVKRXOGEHWRPP H[SDQGHGPHWDORUZHOGPHVKVL]H 7KH F\OLQGHU LV HLWKHU PDGH VOLJKWO\ FRQLFDO RU FDQ EH PRXQWHG DW D VOLJKW DQJOH WR PRYH WKH ZDVWH WRZDUGV WKH RSHQHQG
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
6WURQJVWHHOIUDPHPORQJ ;PZLGH
6WDQG
PPVWHHOPHVK
WĂŐĞϮϴ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
1RWH
0L[LQJE\+DQG1RW5HFRPPHQGHG 7KHVRLOFHPHQWPL[PXVWEHXVHGZLWKLQRQHKRXURIPL[LQJQHYHUOHDYHD PL[XQXVHGIRUPRUHWKDQRQHKRXU
%DWFKWKHVRLODQGFHPHQW 0L[ WKUHH WLPHV XQWLOWKHFHPHQW VRLODUHPL[HG WKRURXJKO\
$GGZDWHUZLWKZDWHULQJFDQ x 'R QRW SRXU WKH ZDWHU RQWR D VLQJOH VSRW FUHDWLQJ D SRRORIZDWHU x :DWHU PXVW EH VSULQNOHG RQWR WKH PL[ VORZO\ ZKLOH PL[LQJ
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
0L[ WKUHH WLPHV XQWLOWKHZDWHULV VSUHDG HYHQO\ WKURXJKRXW WKH PL[
WĂŐĞϮϵ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
+\GUDIRUP3DQ0L[HU5HFRPPHQGHG 1RWH'RQRWDOORZEODGHVWRWRXFKGUXP
+\GUDXOLFPRWRU :KLWH+\GUDXOLFV 86$ %HDULQJKRXVLQJ DQGPRWRUVXSSRUW
'UXP
µ8¶EROWV ,QQHUEODGH &HQWUHEODGH
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
2XWHUEODGH
WĂŐĞϯϬ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
0L[LQJE\3DQ0L[HU 1RWH 7KH VRLOFHPHQW PL[ PXVW EH XVHG ZLWKLQ RQH KRXU RI PL[LQJ 1HYHU OHDYHDPL[XQXVHGIRUPRUHWKDQRQHKRXU1HYHUILOOPRUHWKDQƐLQ DVWDQGDUGPDFKLQHDQGƐLQD6XSHUPDFKLQH
x 6ZLWFK PL[HU RQ EHIRUH ORDGLQJPDWHULDO x (PSW\ WKH ZKHHOEDUURZ LQWR WKHPL[HUIURPWKHUDPS x $GGWKHFHPHQWVHFRQG x 'U\PL[IRUPLQXWH x $GGZDWHUVORZO\DQGPL[IRU PLQXWH 1RWHZDWHUPXVWEH635,1./('LQVORZO\ x (PSW\PL[HUE\SXOOLQJOHYHU DIWHU VRLOFHPHQW LV ZHOO PL[HG 1RWH ,I WKH PL[HU VWUXJJOHV WR PL[ WKH VRLO PD\ FRQWDLQ WRR PXFK FOD\ DGG VDQGRUUHGXFHWKHPL[LQJYROXPH
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϭ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
&KHFNLQJWKH0RLVWXUHLQWKH0L[ 7KH'URS7HVW
7RR'U\
*RRG
7RR:HW
6TXHH]HWKHVRLOFHPHQWPL[LQWRDEDOO 'URSEDOOIURPZDLVWKHLJKW ,IEDOOVKDWWHUVLQWRPDQ\VPDOOSLHFHVLWLVWRRGU\ ,IEDOOEUHDNVLQWROXPSVWKHQWKHZDWHUFRQWHQWLVFRUUHFW ,IEDOOGRHVQRWEUHDNRURQO\EUHDNVLQWRDIHZOXPSVLWLVWRRZHW 127($GU\PL[ZLOOSURGXFHDSRRUTXDOLW\EORFN7KHPL[VKRXOGEHFORVHWR WKH2SWLPXP:DWHU&RQWHQWRIWKHVRLO7KHZDWHUFRQWHQWZLOOYDU\EORFN OHQJWK :KHQ WKH VRLO FHPHQW PL[ LV WRR GU\ WKH EORFN OHQJWK ZLOO EH ORQJHUWKDQZKHQWKHZDWHUFRQWHQWLVFRUUHFW
&KHFNLQJWKH:DWHU&RQWHQWLQWKHPL[EORFNOHQJWK
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϮ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
7RRZHWEORFNLVVKRUWDQGKDVFUDFNV
7RRGU\EORFNLVORQJDQGGLIILFXOWWRKDQGOH
2SHUDWRUPXVWPDLQWDLQEORFNOHQJWKE\PDLQWDLQLQJFRQVLVWHQWZDWHUFRQWHQWLQWKHPL[
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
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϯ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
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x 0L[WKRURXJKO\DQGSURGXFHDEORFN VW
x 0HDVXUHWKH EORFN QG
x $GG ZDWHU WR WKH PL[ DQG PL[ WKRURXJKO\ DJDLQ SURGXFH WKH EORFN DQG
QRWH WKH OHQJWK 7KH EORFN OHQJWK ZLOO UHGXFH DV WKH ZDWHU FRQWHQW LV LQFUHDVHG x 5HSHDW WKH SURFHVV DGGLQJ PRUH ZDWHU WR HDFK PL[ DQG PDNH QHZ EORFNV
QRWLQJWKHOHQJWK x )LQDOO\ILQHFUDFNVZLOOEHJLQWRVKRZRQWKHERWWRPRIWKHEORFNWKLVLQGLFDWHV
WKHUHLVWRRPXFKZDWHUDQGWKHPL[LVWRRZHW1RWHWKHOHQJWKRIWKHEORFNIRU WKLVPL[ x 7KH EHVW DYHUDJH OHQJWK ZRXOG EH D OLWWOH ORQJHUWKDQ WKH EORFN OHQJWK ZKHQ
ILQHFUDFNVVWDUWWRVKRZ$VVXPLQJWKLVOHQJWKLVPPLQVWUXFWWKHPDFKLQH RSHUDWRU WR PDQXIDFWXUH EORFNV LQ WKH UDQJH RI PP ± PP *LYH WKH RSHUDWRUDVWHHOURGRIOHQJWKPPZLWKDPDUNLQJDWPP7KHDYHUDJH EORFNOHQJWKVKRXOGDOZD\VEHEHWZHHQWKHXSSHUPDUNLQJDQGORZHUPDUNLQJ x ,IWKHVRLOLVDOLWWOHGU\WKHEORFNZLOOEHORQJHUWKDQWKHDYHUDJHOHQJWK7KH
RSHUDWRU WKHQ VLPSO\ DGGV D OLWWOH ZDWHU WR WKH PL[ DQG FRQWLQXHV SURGXFLQJ EORFNV x 7KH VWHHO URG JLYHV D YLVXDO DQG HDV\ FKHFN IRU WKH RSHUDWRU WR FKHFN DQG
PDLQWDLQWKHZDWHUFRQWHQWRIDOOEORFNVEHLQJSURGXFHG
&RQVLVWHQF\LQPL[LQJDQGZDWHUFRQWHQWLQWKHPL[LVWKHNH\WRJRRG EORFNTXDOLW\
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϰ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
%ORFN0HDVXULQJ7RRO([DPSOH
0DLQWDLQLQJ%ORFN4XDOLW\ %ORFN4XDOLW\ 7KH PRUH FRQVLVWHQW \RXU EORFNV WKH HDVLHU DQG IDVWHU WKH\ DUH WR EXLOG LQWR DQ DWWUDFWLYH ZDOO 7KH PDFKLQH RSHUDWRU PXVW ORRN DW HYHU\ EORFN DQG GLVFDUG DQ\ EORFNZKLFKLVVXEVWDQGDUG 0HDVXULQJ%ORFNV ,QRUGHUWRDFKLHYHHYHQ³ERQGVெWKHYHUWLFDOMRLQWVEHWZHHQEORFNVLQDZDOO EORFN OHQJWK PXVW EH FRQWUROOHG 7KH 0DFKLQH 2SHUDWRU PXVW PHDVXUH DW OHDVW HYHU\ ILIWKEORFNDQGWKHILUVWEORFNVRIHYHU\QHZPL[XQWLOWKHOHQJWKLVFRUUHFW PP XVLQJ D EORFN PHDVXULQJ WRRO VHH VNHWFK 7KH\ VRRQ EHFRPH VNLOOHG DW EDODQFLQJ EORFN OHQJWK WR PRLVWXUH FRQWHQW 7KH )RUHPDQ PXVW FRQWLQXDOO\ PRQLWRU ERWK EORFN OHQJWK DQG TXDOLW\ 7KLV ZLOO JUHDWO\ DVVLVW WKH EORFN OD\HUV WR EXLOG DWWUDFWLYHZDOOVTXLFNO\
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϱ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
6WDFNLQJDQG&XULQJ 6WDFNLQJ x
6WDFN WKH EORFNV KLJK DQG ZLGH GHSHQGLQJ RQ WKH ZLGWK RI WKHSODVWLF
x
&RYHU WKH EORFNV DV WKH\ DUH VWDFNHG
x
1HYHUOHDYHWKHEORFNVLQWKHVXQ RUZLQGXQFRYHUHG
x
(YHQ ZKHQ SURGXFLQJ EORFNV LQ WKHVKDGHSODVWLFPXVWEHXVHG
&XULQJ
1RWH&XULQJJLYHVWKHEORFNLWVGXUDELOLW\DQGVWUHQJWK x 8QFRYHU WKH EORFNV DQG ZDWHU WKHEORFNVWZLFHDGD\±RQFHLQ WKH PRUQLQJ RQFH LQ WKH HYHQLQJ DQG FRYHU DJDLQ LPPHGLDWHO\7KLVLVFXULQJ x 7KH EORFNV DUH FXUHG IRU GD\V 7KH ORQJHU WKH FXULQJ SHULRGWKHVWURQJHUWKHEORFN
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϲ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
+\GUDWLRQ :KHUHYHU FHPHQW LV XVHG LW LV YLWDOO\ LPSRUWDQW WKDW LW EH SURSHUO\ FXUHG &HPHQW QHHGVZDWHUWR³K\GUDWHெRUJDLQVWUHQJWKDQGLWUHTXLUHVGD\VFXULQJWRDFKLHYH IXOOVWUHQJWK2UGLQDU\3RUWODQG&HPHQW23& DFKLHYHVRQO\DERXWVWUHQJWKLQ WKH ILUVW GD\V DQG DERXW LQ GD\V &XULQJ LV SDUWLFXODUO\ LPSRUWDQW ZLWK +\GUDIRUPEORFNVEHFDXVHWKHFHPHQWUHTXLUHPHQWLVORZ
2Q6LWH:DWHU5HTXLUHPHQWV :DWHU5HTXLUHGIRU%ORFNPDNLQJ 7KHDPRXQWRIZDWHUUHTXLUHGYDULHVZLWK WKH PRLVWXUH FRQWHQW RI WKH VRLO EXW LV XVXDOO\QRWPRUHWKDQOLWUHSHUEORFN :DWHU5HTXLUHGIRU&XULQJ $ W\SLFDO EORFN\DUG DW IXOO SURGXFWLRQ ZRXOG FRQVXPH DSSUR[LPDWHO\ OLWUHV RI ZDWHUSHUGD\IRUFXULQJ 7RWDO:DWHU5HTXLUHPHQW $VVXPLQJ WKDW \RXU EORFNPDNLQJ WHDP LV FRQVLVWHQWO\ SURGXFLQJ EORFNV SHU GD\ ZLWK Ɛ FXULQJ DQG DSSUR[LPDWHO\ Ɛ SHU EORFN WKLV ZLOO DPRXQW WR DSSUR[LPDWHO\ Ɛ GD\ IRU WKH WRWDO ZDWHU UHTXLUHPHQW IRU D VLQJOH FKDPEHU EORFN\DUGOD\RXW
&RVWLQJ %ORFN&RVWLQJ6SUHDGVKHHW +\GUDIRUP KDV FRPSLOHG D VSUHDGVKHHW ZKLFK ZLOO DOORZ +\GUDIRUP RZQHUV WR LQSXW WKHLU RZQ SDUDPHWHUV DQG FRVW WKHLU EORFNV ZLWK D KLJK GHJUHH RI DFFXUDF\ 7KLV VSUHDGVKHHW FRYHUV D FRPPHUFLDO EORFN \DUG RSHUDWLRQ VHOOLQJ VWDQGDUG PP +\GUDIRUPEORFNV,I\RXDUHQRWIDPLOLDUZLWKFRPSOH[VSUHDGVKHHWVZHZLOOHPDLOD TXHVWLRQQDLUHIRU\RXWRFRPSOHWHDQGVHQG\RXUGHWDLOHGFRPSDUDWLYHFRVWLQJEDFN WR \RX SURPSWO\ 7KH VSUHDGVKHHW LV DYDLODEOH IURP RXU +\GUDIRUP VDOHV UHSUHVHQWDWLYHV ,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϳ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
4XDOLW\&KHFNVRQ%ORFNV
3UREOHPV&DXVHV 5HPHGLHV 352%/(0 5RXJKVXUIDFHRQ EORFNV &UDFNVLQEORFNV +RUL]RQWDOFUDFNV VHHQDVEORFNHMHFWHG IURPFKDPEHU &UDFNVGHYHORSLQJ GXULQJGD\FXULQJ SHULRG
&$86(
5(0('<
0L[WRRGU\ 5RXJKZHDUSODWHV 6RLOEXLOGXSLQMRLQWVRURQ ZHDUSODWHV &RXUVHDJJUHJDWH 7RRPXFKZDWHULQPL[ +LJKFOD\FRQWHQW %ORFNVORVLQJWRRPXFK ZDWHUWRRIDVWGXULQJFXULQJ +LJKFOD\FRQWHQW ZHDUSODWHVZRUQRXW
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϴ
$GGPRUHZDWHUWRPL[ ,QVSHFWZHDUSODWHVDQG FKDQJHLIQHFHVVDU\ &OHDQH[FHVVVRLOIURP MRLQWVDQGSODWHV 8VHOHVVZDWHULQPL[ $GGFHPHQWWRPL[ DOUHDG\PDGHWRGU\RXW $GGFRDUVHVDQGWRWKH PL[ $GGPRUHFHPHQW VHHVHFWLRQ &RYHUEORFNVSURSHUO\ ZLWKSODVWLFDQGZDWHU WZLFHGDLO\DVSHU +\GUDIRUP UHFRPPHQGDWLRQV $GGFRDUVHVDQGWRPL[ $GGPRUHFHPHQW VHHVHFWLRQ VHHSRLQWEHORZ ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
%ORFNVEHLQJGDPDJHG DQGEURNHQGXULQJ VWDFNLQJDQGVWRUDJH %ORFNVVKRUWHUWKDQ FKRVHQOHQJWK %ORFNVORQJHUWKDQ FKRVHQOHQJWK %ORFNOHQJWKFKDQJLQJ FRQWLQXRXVO\ %ORFNKHLJKWLV GLIIHUHQW
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
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϯϵ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
([FHVVLYH)HDWKHULQJRI%ORFN(GJHV 7KHUHLVDOZD\VVRPH³IHDWKHULQJெ±FDXVHGE\WKHQHFHVVDU\ JDS EHWZHHQ WKH UDP KHDG DQG WKH ZHDU SODWHV DORQJ WKH HGJHVRIEORFNV7KLVLVPRUHSURQRXQFHGZKHQXVLQJILQH VRLOV6RPHRIWKLVZLOO FRPHRIIZLWKSURSHUEUXVKLQJRIWKH EORFNV ZKHQ WKH\ HPHUJH IURP WKH FRPSUHVVLRQ FKDPEHU EXWDQ\VXUSOXVLVHDVLO\UHPRYHGZLWKDEXLOGHU¶VWURZHOZKHQ WKHEORFNVDUHGU\DIWHUFXUULQJ
/RZ%ORFN3URGXFWLRQ ,I\RXRUJDQLVH\RXUVLWHLQVXFKDZD\WKDWWKHPDFKLQHPDNHVEORFNVFRQWLQXRXVO\ SURGXFWLRQZLOOEHH[FHOOHQW$ZHOOPRWLYDWHGWHDPFDQPDNHQHDUO\EORFNVLQ DQHLJKWKRXUGD\5HIHUWRWKHPHWKRGIRUSURGXFLQJEORFNVSHUGD\
1RQ6TXDUH%ORFNV ,IHLWKHUWKHSUHFRPSUHVVLRQWRS RUPDLQERWWRP UDPKHDGVDUHWLOWHGRIIVTXDUHLQ DQ\GLUHFWLRQWKHEORFNVZLOOQRWEHVTXDUH7KLVFDQFDXVHWKHIROORZLQJSUREOHPV (LWKHURIWKHUDPKHDGVWLOWLQJDORQJWKHORQJD[LVVHHDUURZ$ ZLOO UHVXOW LQ WKH EORFN FRXUVHV IRUPLQJ DZLGH FLUFOH LI WKH\ DUH EXWWHG XSDJDLQVWHDFKRWKHUFRUUHFWO\VHHH[DJJHUDWHGVNHWFKEHORZ
(QVXUH WKDW WKH ERWWRP UDP KHDG H[WHQVLRQ LV VHDWHG VTXDUH RQ WKH SLVWRQDQGWKDWWKHIURQWDQGUHDUJUXEVFUHZVDUHWLJKWLQVSHFWWKHWRS ULPRIWKHFRPSUHVVLRQFKDPEHULIWKHUHLVDEXLOGXSRIVRLORQWKHULP WKLV FDQ SUHYHQW WKH IUDPH RI WKH UDP IURP VHWWOLQJ SURSHUO\ RQ WKH FRPSUHVVLRQFKDPEHUULPGLVSODFLQJWKHSUHFRPSUHVVLRQUDPKHDG
(LWKHURIWKHUDPKHDGVWLOWLQJDORQJWKHVKRUWD[LVVHHDUURZ% ZLOO UHVXOWLQJDSVLQWKHµERQGV¶VHHH[DJJHUDWHGVNHWFKEHORZ
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϰϬ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ
,QVSHFWWKHERWWRPUDPKHDGIRUGLVSODFHPHQWDQGFRUUHFWLIQHFHVVDU\ FKHFNWKDWWKHUDLOVRIWKHVRLOKRSSHUDUHFOHDQDQGWKDWWKHKRSSHULV OHYHOOLQJWKHVRLOLQWKHFRPSUHVVLRQFKDPEHUZLWKRXWOHDYLQJKROORZV
5RXQGHG(GJHV 5HGXFHG,QWHUORFNV 7KHVHIDXOWV LQGLFDWHWKDWWKH ZHDU SODWHV QHHGWR EH UHSODFHG 0HDVXUH WKH EORFNV DQGLIWKHKLJKWKDVLQFUHDVHGIURPWRPPLWLVHVVHQWLDOWKDWWKHZHDU SODWHVDUHFKDQJHG6HHVHFWLRQ
,LJĚƌĂĨŽƌŵdƌĂŝŶŝŶŐDĂŶƵĂůΞŽƉLJƌŝŐŚƚϮϬϭϮ
WĂŐĞϰϭ
ZĞǀŝƐŝŽŶϬϭ͗&ĞďϮϬϭϯ