Investment Management Alert
March 2008
Authors:
Michael S. Caccese
617.261.3133
michael.caccese@klgates.com
www.klgates.com
SEC Reproposes Amendments To Form
ADV Part 2: Electronic Filing and Narrative
Disclosures
Mark D. Perlow
415.249.1070
mark.perlow@klgates.com
Douglas Y. Charton
On March 3, 2008, the SEC reproposed a series of significant amendments to the current
version of Form ADV Part 2, the two most notable being the change to narrative disclosures
from the current “check-the-box” form and electronic filing.
617.951.9192
douglas.charton@klgates.com
Introduction
K&L Gates comprises approximately 1,500
lawyers in 24 offices located in North
America, Europe and Asia, and represents
capital markets participants, entrepreneurs,
growth and middle market companies,
leading FORTUNE 100 and FTSE 100
global corporations and public sector
entities. For more information, please visit
www.klgates.com.
In April 2000 the SEC proposed similar amendments to Form ADV Part 2 and related rules,
which in large part it is reproposing. Currently, Form ADV Part 2 requires advisers to
check appropriate boxes in response to a number of questions, with supplemental narrative
disclosures. The proposed rule would transform Part 2 from its current “check-the-box”
form into a publicly viewable, two-part, prospectus-like brochure with narrative disclosures
provided in response to specific items or areas. Proposed Part 2A, the firm brochure, contains
nineteen items which the adviser must address. Proposed Part 2B, the brochure supplement,
contains six items. The effect of the items, taken as a whole, is to compel the investment
adviser to make comprehensive disclosures regarding the conflicts of interests it faces.
In short, the proposal, if adopted, will require advisers to conduct a complete overhaul of
their Form ADV Part 2 and to carefully craft narrative responses to each item. Although the
level of disclosure would increase markedly under the new rule, the SEC cautions advisers
that making the required disclosures will not guarantee compliance with the anti-fraud
provisions of the Investment Advisers Act of 1940—rather, an adviser would still have
an obligation to disclose material conflicts of interest to the extent such information is not
specifically required by an item on Form ADV Part 2.
Overview
The rule amendments would require advisers to file their Form ADV Part 2 electronically
in PDF format, where it would be publicly accessible on the SEC’s IARD website. The
adviser would also have to deliver the brochure initially and thereafter annually to clients
within 120 days of the end of the adviser’s fiscal year. The adviser would have to deliver
an interim brochure only when it amends the brochure to reflect a disciplinary event or to
materially change information already disclosed in a previous brochure. The adviser would
also have to prepare and deliver brochure supplements with disclosures regarding certain key
investment professionals of the adviser, such as its portfolio managers. The proposed new
form directly addresses the increasing use of side-by-side management of accounts with and
without performance fees, an issue not addressed in the 2000 proposal, requiring the adviser
to disclose and describe how the adviser addresses the relevant conflicts of interest.
Part 2A: The Firm Brochure
In many respects, the SEC has scaled back this 2008 proposal from the much broader
disclosure requirements in the 2000 proposal. The new form would require that the
adviser disclose the ways in which it addresses its material conflicts rather than the much
more cumbersome disclosure of its relevant policies and procedures. In addition, the SEC
Investment Management Alert
rejected a uniform table of contents for each adviser’s
brochure, giving the adviser the discretion to tailor
its overall narrative to its own operations. Set forth
below are highlights of the 2008 reproposal and in
certain cases noted differences with the originally
proposed version in 2000. Attached hereto is a chart
that summarizes and compares the items included in
the 2008 amendments to those originally proposed in
the 2000 release.
General: Conflicts. The proposed form calls for a
succinct, easily understandable narrative, in plain
English, of the conflicts of interest that may arise in the
course of the adviser’s business and how the adviser
addresses such conflicts.
Item 4: Separately Managed Accounts/Wrap Fees.
The adviser would not be required to list every SMA/
wrap fee program in which the adviser participates,
as it would have been required to do under the 2000
proposal.1
Item 4: Adviser Publications. The adviser would not
be required to disclose the names of all periodicals,
publications or reports that the adviser publishes.
Item 5: Fees and Compensation. The adviser would
be required to disclose compensation attributable to
the sale of a security or other investment product (e.g.,
brokerage commissions), but would not be required to
disclose the amount or range of mutual fund fees its
clients pay.
Item 6: Side-by-Side Management. An adviser that
charges (or has a supervised person who charges)
performance fees would have to disclose that fact.
If the adviser (or a supervised person) also manages
accounts that are not charged a performance fee (i.e.
mutual funds) the adviser would have to describe the
conflicts of interest implicated by managing the two
accounts with disparate fee structures.2 The proposing
1 H
owever, an adviser that sponsors a SMA/wrap fee program
would be required to create a separate SMA/wrap fee brochure, to
be presented to clients of its SMA/wrap fee programs, containing
information similar to that required by Schedule H with additional
disclosures if affiliated persons of the adviser serve as portfolio
managers to the SMA/wrap fee programs.
2 The SEC references specific issues such as the timing of trades
(“front running”), contrasts in strategies (a hedge fund short
selling a stock in which a mutual fund holds a long position), and
trade allocation (“cherry picking”).
release makes clear that these include conflicts in the
allocation of trades and investment opportunities.3
Item 9: Disciplinary Actions. The disciplinary
disclosures under the proposed form would mirror
those currently contained in rule 206(4)-4 of the
Advisers Act, and the SEC will rescind rule 206(4)-4 if
and when the proposed form is adopted.4 Disciplinary
events relating to an adviser’s integrity would be
presumptively material and have to be disclosed
unless the adviser rebuts such a presumption, for which
documentation would have to be maintained by the
adviser.
Item 11: Code of Ethics. The adviser would have to
include a brief description of its Code of Ethics and
offer to provide a copy upon request.
Item 12: Brokerage. The amended form would require
an adviser to describe how it selects brokers, determines
the reasonableness of brokerage fees, and addresses
the conflicts arising from the use of “soft dollars.” In
particular, for the first time the SEC would require
advisers to explain whether they use soft dollars to
benefit all accounts proportionately. The adviser need
not, however, disclose whether it negotiates brokerage
commissions or participates in commission recapture
programs.5
Item 16: Investment Discretion. An adviser that has
discretionary authority over client accounts would
have to disclose these arrangements and describe
any limitations clients may place on the adviser’s
authority.
Item 17: Proxy Voting. The form would require
an adviser to describe its proxy voting policies. An
adviser that uses third party proxy voting services
would be required to describe how the providers
3 H
owever, the SEC did not propose a general requirement to discuss
how the adviser addresses trade and investment allocations.
4 The proposal in 2000 contained a blanket provision requiring
an adviser to provide its clients with a copy of any SEC order to
which it was subject. The SEC removed this blanket provision,
reasoning that not all orders are relevant or material to investors
and that the SEC has the ability and discretion to require the
adviser, in the order itself, to provide a copy of the order to its
clients.
5 In response to the original proposal, commentators emphasized,
and the SEC agreed, that because very few advisers negotiate
brokerage commissions and that typically it is the clients who
direct an adviser’s participation in recapture programs, such
disclosures may be misleading to investors.
March 2008 | 2
Investment Management Alert
are selected, whether clients may direct the use of
a particular provider, and how payment is made for
such services.
Item 18: Financial Information: An adviser must
disclose any financial condition reasonably likely to
affect client funds in its custody, including if an adviser
requires its clients to prepay fees or has been subject
to a bankruptcy petition.
The SEC notes that to the extent that disclosures
required by one item are also required by a different
item, the adviser need not repeat the information.
Additionally, an adviser does not need to provide a
firm brochure to advisory clients to whom it provides
only impersonal advice, nor must the adviser provide
a brochure to investment company clients registered
under the Investment Company Act of 1940.
Furthermore, if an adviser does not have any clients
to whom it must deliver a firm brochure, it need not
prepare a brochure at all.
Part 2B: Brochure Supplement
One of the more significant aspects of the new proposal
is the requirement to prepare and deliver brochure
supplements that would contain disclosures about
certain key investment professionals of the investment
adviser. The SEC would leave to the discretion of the
investment adviser how to group disclosures about its
professionals into separate supplements. Despite the
fact that the newly proposed Part 2B has also been
scaled back from its original 2000 form, it will likely
be the focus of many comments submitted to the
SEC in the coming weeks. Highlights of the Part 2B
proposal are set forth below.
Delivery: The adviser would not be required to deliver
a brochure supplement to a client to whom delivery of
Part 2A is not required – those receiving impersonal
advice, registered investment companies, clients who
are “qualified purchasers,” and certain adviser-affiliated
clients.6
Creation: Similar to Part 2A, to the extent an adviser
has no clients to whom delivery of the Part 2B brochure
supplement would be required, it need not prepare the
supplement.
6 T
he SEC is requesting comments on whether “qualified purchaser”
is the correct standard for exclusion of the supplement (as opposed
to “qualified institutional buyer,” “accredited investor,” etc.).
Application: Each item of Part 2B would have to be
answered for every employee of the adviser that either:
(1) formulates investment advice for client assets and
has direct client contact; or (2) makes discretionary
investment decisions for client assets.7
Updating: The adviser would have to amend a
brochure supplement to reflect any changes which
render it materially inaccurate and deliver the updated
supplement to any new clients. The adviser would have
to only make an interim delivery to existing clients if
the change in circumstances is of a disciplinary nature.8
Otherwise, the adviser may simply make its required
annual delivery of the amended brochure supplement
to its existing clients along with its Part 2A brochure
within 120 days of the end of its fiscal year.
Bankruptcy: The new proposal, backing off slightly
from its original version, would not require an adviser
to disclose if a portfolio manager has been subject to a
bankruptcy petition.9
Professional Designations: The adviser would be
given the option to list its employees’ professional
designations or attainments;10 however, in the event
that a portfolio manager has resigned or relinquished
a professional designation in anticipation of its
suspension or revocation, Part 2B would require the
adviser to disclose that fact.
As should be apparent, the proposed amendments, if
adopted, would greatly expand the scope of required
disclosures in investment advisers’ client brochures.
Please do not hesitate to contact a K&L Gates lawyer
if you have questions about the scope of the proposal
or if you are interested in submitting a comment letter
to the SEC. All comments must be submitted to the
SEC by May 16, 2008.
7 T
he items need not be answered for a person who merely
communicates investment advice to a client (i.e., service
employees), as was contemplated under the original proposal.
8 The 2000 proposal would have required delivery of the updated
supplement to existing clients regardless of the nature of the
change in circumstances.
9 The SEC again agreed with commentators that being subject to
a bankruptcy petition is not necessarily indicative of a person’s
integrity or investment advisory skills.
10 The SEC did not want to confuse investors by requiring the
adviser to issue a laundry list of titles nor to encourage the use
of meaningless or even fictitious designations.
March 2008 | 3
Investment Management Alert
!"##$%&ÿ'(ÿ)**+ÿ,'%#ÿ-./ÿ0$%1ÿ22ÿ
213#
)**+ÿ0%'4'5$6
2(ÿ$78ÿ9':ÿ0%'4'5$6ÿ
.;((3%5ÿ(%'# )***
!43<;(;<$66&
=3>";%38ÿ;7ÿ
?"%%371ÿ
,'%# -./ÿ
0$%1ÿ22
6AÿC1;,-ÿDEF,
Gÿÿ$EH,ÿ1Iÿ.J,ÿI>-HKÿLM/>=,//ÿE22-,//ÿ
E=2ÿ.,+,<J1=,ÿ=MHL,-KÿE=2ÿ.J,ÿ2E.,ÿ1Iÿ
.J,ÿL-1NJM-,Aÿ
$1
O,/
Gÿÿ&.E.,H,=.ÿ.JE.ÿ.J,ÿL-1NJM-,ÿJE/ÿ=1.ÿ
L,,=ÿE<<-1;,2ÿLPÿ.J,ÿC1HH>//>1=ÿ1-ÿ
E=Pÿ/.E.,ÿ/,NM->.>,/ÿEM.J1->.P
$1
O,/
Gÿÿ$EH,ÿE=2ÿ.,+,<J1=,ÿ=MHL,-ÿ1IÿEÿ
<,-/1=ÿ!" /,-;>N,ÿN,=.,-ÿ.1ÿN1=.EN.ÿI1-ÿ
IM-.J,-ÿ>=I1-HE.>1=
O,/ÿ0 E++1Q,2ÿ.1ÿM/,ÿ
NE++ÿN,=.,-RÿS)'
-,TM>-,H,=.ÿ=,Q
$1
GÿÿB>/N+1/,ÿEÿ%,Lÿ/>.,ÿE22-,//ÿ1=+Pÿ>Iÿ
JE;,ÿ1=,
$1
$1
9A UE.,->E+ÿCJE=F,/
Gÿÿ&MHHE-Pÿ1IÿE=PÿHE.,->E+ÿNJE=F,/ÿ.1ÿ
L-1NJM-,/ÿ/>=N,ÿ.J,ÿ+E/.ÿE==ME+ÿM<2E.,
$1
$1
:Aÿ (EL+,ÿ1IÿC1=.,=./
GÿV=N+M2,ÿEÿ.EL+,ÿ1IÿN1=.,=./ÿ2,.E>+,2ÿ
,=1MFJÿ.1ÿ,E/>+Pÿ+1NE.,ÿ.1<>N/A
$1
$1
WAÿÿ *2;>/1-Pÿ3M/>=,//
GÿB,/N->L,ÿE2;>/1-PÿLM/>=,//Kÿ
>=N+M2>=FÿE=Pÿ/<,N>E+>X,2ÿ/,-;>N,/ÿ>Iÿ
E2;,-.>/,2ÿE/ÿ/MNJÿE=2ÿ2>/N+1/,ÿ*SU
$1
O,/ÿY LM.ÿ
<-1<1/,2ÿ-M+,ÿ
-,TM>-,/ÿH1-,ÿ
2,.E>+ÿ1=ÿ
/<,N>E+>XE.>1=
ÿ GÿB,/N->L,ÿJ1QÿE2;>/,-ÿ>/ÿ
N1H<,=/E.,2ÿE=2ÿ1.J,-ÿ-,+E.,2ÿN1/./ÿ
I1-ÿN+>,=./Kÿ>=N+M2>=FÿQJ,.J,-ÿ>./ÿI,,/ÿ
E-,ÿ=,F1.>EL+,
$1
O,/
GÿB>/N+1/,ÿE2;>/,-ÿN1H<,=/E.>1=ÿ
E..->LM.EL+,ÿ.1ÿ/E+,ÿ1IÿEÿ/,NM->.Pÿ1-ÿ
1.J,-ÿ>=;,/.H,=.ÿ<-12MN./ÿE=2ÿ2,/N->L,ÿ
J1Q E2;>/,-ÿE22-,//,/ÿE=PÿN1=I+>N./ÿ1Iÿ
>=.,-,/.
$1
O,/ÿY LM.ÿ
<-1<1/,2ÿ-M+,ÿ
-,TM>-,/ÿH1-,ÿ
2,.E>+ÿ1=ÿ
N1=I+>N./ÿ1Iÿ
>=.,-,/.
GÿB>/N+1/,ÿ>IÿE2;>/,-ÿNJE-F,/ÿ
<,-I1-HE=N,ÿI,,/
O,/ÿY =1.ÿ>=N+M2,2ÿ>=ÿ
9\\\ÿ<-1<1/E+
O,/
GÿÿVIÿE2;>/,-ÿHE=EF,/ÿENN1M=./ÿ=1.ÿ
NJE-F,2ÿ<,-I1-HE=N,ÿI,,/ÿE/ÿQ,++Kÿ
2,/N->L,ÿN1=I+>N./ÿ1Iÿ>=.,-,/.ÿE=2ÿJ1Qÿ
.J,PÿE-,ÿE22-,//,2
O,/ÿY =1.ÿ>=N+M2,2ÿ>=ÿ
9\\\ÿ<-1<1/E+
$1
GÿÿB,/N->L,ÿ.P<,/ÿ1IÿE2;>/1-PÿN+>,=./ÿ
E=2ÿF,=,-E+ÿ-,TM>-,H,=./ÿI1-ÿ1<,=>=Fÿ
1-ÿHE>=.E>=>=FÿENN1M=./
$1
O,/
8Aÿÿ Z,,/ÿE=2 ÿ ÿ
C1H<,=/E.>1=
[A D,-I1-HE=N,ÿZ,,/ÿE=2ÿ
&>2,ÿLPÿ&>2,ÿ
UE=EF,H,=.
7Aÿÿÿ(P<,/ÿ1I C+>,=./
!"#$%&'()&#*+,-./0.1 21#34&05667899:0;:0*<<,=2>?@*@-,;>/,2AB4C
March 2008 | 4
Investment Management Alert
213#
)**+ÿ0%'4'5$6
2(ÿ$78ÿ9':ÿ0%'4'5$6ÿ
.;((3%5ÿ(%'# )***
!43<;(;<$66&
=3>";%38ÿ;7ÿ
?"%%371ÿ
,'%# -./ÿ
0$%1ÿ22
]AÿÿÿU,.J12/ÿ1Iÿ*=E+P/>/Kÿ
V=;,/.H,=.ÿ&.-E.,F>,/ÿ
E=2ÿ)>/^ÿ1Iÿ'1//
GÿB,/N->L,ÿH,.J12/ÿ1IÿE=E+P/>/ÿE=2ÿ
>=;,/.H,=.ÿ/.-E.,F>,/ÿE=2ÿF,=,-E++Pÿ
-,+,;E=.ÿ->/^/ÿ.1ÿN+>,=./
$1
O,/ÿY LM.ÿ
2>/NM//>1=ÿ1Iÿ
->/^/ÿ>/ÿ=,Q
Gÿÿ&<,N>I>Nÿ2>/N+1/M-,ÿ1IÿJ1QÿI-,TM,=.ÿ
.-E2>=Fÿ/.-E.,F>,/ÿNE=ÿEII,N.ÿ
<,-I1-HE=N,
$1
$1
Gÿ3->,I+Pÿ2>/NM//ÿ<-EN.>N,/ÿ-,FE-2>=Fÿ
NE/JÿLE+E=N,/
$1
$1
_AÿÿB>/N><+>=E-Pÿ
V=I1-HE.>1=
GÿB>/N+1/,ÿHE.,->E+ÿIEN./ÿEL1M.ÿE=Pÿ
+,FE+ÿ1-ÿ2>/N><+>=E-Pÿ,;,=.ÿ-,+E.>=Fÿ.1ÿ
E2;>/,-`/ÿ>=.,F->.P
O,/ÿY =1ÿL+E=^,.ÿ
-,TM>-,H,=.ÿ.1ÿ<-1;>2,ÿ
N+>,=./ÿQ>.JÿEÿN1<Pÿ1Iÿ
,;,-Pÿ1-2,-ÿ.1ÿQJ>NJÿ
E2;>/,-ÿ>/ÿ/MLa,N.
$1ÿY -,TM>-,2ÿ
LPÿ-M+,ÿ
9\[bWc0Wÿ1Iÿ
*2;>/,-/ÿ*N.
6\Aÿÿ4.J,-ÿZ>=E=N>E+ÿ
V=2M/.-Pÿ*N.>;>.>,/ÿ
E=2ÿ*II>+>E.>1=/
GÿB,/N->L,ÿHE.,->E+ÿ-,+E.>1=/J></ÿ1-ÿ
E--E=F,H,=./ÿQ>.Jÿ1.J,-ÿI>=E=N>E+ÿ
>=2M/.-Pÿ<E-.>N><E=./ÿE=2ÿ2>/NM//ÿE=Pÿ
N1=I+>N./ÿ1Iÿ>=.,-,/.
$1
O,/ÿY LM.ÿ
2>/NM//>1=ÿ1Iÿ
N1=I+>N./ÿ1Iÿ
>=.,-,/.ÿ>/ÿ
=,Q
66AÿÿC12,ÿ1Iÿd.J>N/
Gÿ3->,I+Pÿ2,/N->L,ÿN12,ÿ1Iÿ,.J>N/ÿE=2ÿ
/.E.,ÿ.JE.ÿEÿN1<Pÿ>/ÿE;E>+EL+,ÿM<1=ÿ
-,TM,/.
O,/ÿY >.,Hÿ=1.ÿ
>=N+M2,2Rÿ-M+,ÿ9\W*06ÿ
-,TM>->=Fÿ.J,ÿN12,ÿ1Iÿ
,.J>N/ÿQE/ÿE21<.,2ÿ>=ÿ
9\\Wÿ
O,/
GÿB>/N+1/,ÿ>Iÿ.J,ÿE2;>/,-ÿ1-ÿ-,+E.,2ÿ
<,-/1=ÿ-,N1HH,=2/KÿLMP/ÿ1-ÿ/,++/ÿI1-ÿ
N+>,=./ÿ/,NM->.>,/ÿ>=ÿQJ>NJÿ.J,ÿE2;>/1-ÿ
1-ÿ-,+E.,2ÿ<,-/1=ÿJE/ÿEÿHE.,->E+ÿ
I>=E=N>E+ÿ>=.,-,/.Rÿ2,/N->L,ÿ-,+,;E=.ÿ
N1=I+>N./ÿ1Iÿ>=.,-,/.ÿE=2ÿJ1Qÿ.J,PÿE-,ÿ
E22-,//,2
$1
O,/
GÿB>/N+1/,ÿ<,-/1=E+ÿ.-E2>=Fÿ<-EN.>N,/ÿ
1Iÿ.J,ÿE2;>/1-ÿE=2ÿ>./ÿ<,-/1==,+Rÿ
2>/NM//ÿN1=I+>N./ÿE=2ÿJ1Qÿ.J,PÿE-,ÿ
E22-,//,2
$1
O,/
090
March 2008 | 5
Investment Management Alert
213#
213#
)**+ÿ0%'4'5$6
)**+ÿ0%'4'5$6
2(ÿ$78ÿ9':ÿ0%'4'5$6ÿ
2(ÿ$78ÿ9':ÿ0%'4'5$6ÿ
.;((3%5ÿ(%'#
)***
.;((3%5ÿ(%'# )***
!43<;(;<$66&
!43<;(;<$66&
=3>";%38ÿ;7ÿ
=3>";%38ÿ;7ÿ
?"%%371ÿ
?"%%371ÿ
,'%#
-./ÿ
,'%# -./ÿ
0$%1ÿ22
0$%1ÿ22
69Aÿÿ3-1^,-EF,ÿD-EN.>N,/
69Aÿÿ3-1^,-EF,ÿD-EN.>N,/
GÿB,/N->L,ÿJ1QÿL-1^,-/ÿE-,ÿ/,+,N.,2ÿ
GÿB,/N->L,ÿJ1QÿL-1^,-/ÿE-,ÿ/,+,N.,2ÿ
E=2ÿJ1QÿE2;>/,-ÿ2,.,-H>=,/ÿ
E=2ÿJ1QÿE2;>/,-ÿ2,.,-H>=,/ÿ
-,E/1=EL+,=,//ÿ1IÿL-1^,-ÿ
-,E/1=EL+,=,//ÿ1IÿL-1^,-ÿ
N1H<,=/E.>1=
N1H<,=/E.>1=
O,/ÿY 21,/ÿ=1.ÿ-,TM>-,ÿ
O,/ÿY 21,/ÿ=1.ÿ-,TM>-,ÿ
2>/N+1/M-,ÿ1IÿQJ,.J,-ÿ
2>/N+1/M-,ÿ1IÿQJ,.J,-ÿ
E2;>/,-ÿ=,F1.>E.,/ÿ
E2;>/,-ÿ=,F1.>E.,/ÿ
N1HH>//>1=/ÿ1-ÿ
N1HH>//>1=/ÿ1-ÿ
<E-.>N><E.,ÿ>=ÿ
<E-.>N><E.,ÿ>=ÿ
N1HH>//>1=ÿ-,NE<.M-,ÿ
N1HH>//>1=ÿ-,NE<.M-,ÿ
<-1F-EH/
<-1F-EH/
$1
$1
O,/
O,/
$1
$1
O,/ÿY LM.ÿ
O,/ÿY LM.ÿ
2>/NM//>1=ÿ
2>/NM//>1=ÿ
1IÿN1=I+>N./ÿ
1IÿN1=I+>N./ÿ
1Iÿ>=.,-,/.ÿ
1Iÿ>=.,-,/.ÿ
>/ÿEÿ=,Qÿ
>/ÿEÿ=,Qÿ
-,TM>-,H,=.
-,TM>-,H,=.
$1
$1
$1
$1
$1
$1
$1
$1
$1
$1
O,/
O,/
$1
$1
O,/
O,/
$1
$1
O,/
O,/
$1
$1
O,/
O,/
GÿB,/N->L,ÿ/1I.ÿ21++E-ÿ<-EN.>N,/Kÿ
GÿB,/N->L,ÿ/1I.ÿ21++E-ÿ<-EN.>N,/Kÿ
-,+,;E=.ÿN1=I+>N./ÿE=2ÿJ1Qÿ.J,PÿE-,ÿ
-,+,;E=.ÿN1=I+>N./ÿE=2ÿJ1Qÿ.J,PÿE-,ÿ
E22-,//,2
E22-,//,2
GÿB>/N+1/,ÿ<-EN.>N,/Kÿ>IÿE=PKÿ1Iÿ
GÿB>/N+1/,ÿ<-EN.>N,/Kÿ>IÿE=PKÿ1Iÿ
-,QE-2>=FÿN+>,=.ÿ-,I,--E+/ÿQ>.Jÿ
-,QE-2>=FÿN+>,=.ÿ-,I,--E+/ÿQ>.Jÿ
L-1^,-EF,Kÿ2,/N->L,ÿ-,+,;E=.ÿN1=I+>N./ÿ
L-1^,-EF,Kÿ2,/N->L,ÿ-,+,;E=.ÿN1=I+>N./ÿ
E=2ÿJ1Qÿ.J,PÿE-,ÿE22-,//,2
E=2ÿJ1Qÿ.J,PÿE-,ÿE22-,//,2
6:Aÿÿ),;>,Q 1I *NN1M=./
6:Aÿÿ),;>,Q 1I *NN1M=./
6WAÿÿDEPH,=.ÿI1-ÿC+>,=.ÿ
6WAÿÿDEPH,=.ÿI1-ÿC+>,=.ÿ
),I,--E+/
),I,--E+/
GÿB,/N->L,ÿ.J,ÿN1=2>.>1=/ÿM=2,-ÿQJ>NJÿ
GÿB,/N->L,ÿ.J,ÿN1=2>.>1=/ÿM=2,-ÿQJ>NJÿ
.J,ÿE2;>/,-ÿEFF-,FE.,/ÿ.-E2,/ÿ.1ÿ1L.E>=ÿ
.J,ÿE2;>/,-ÿEFF-,FE.,/ÿ.-E2,/ÿ.1ÿ1L.E>=ÿ
;1+MH,ÿ2>/N1M=./
;1+MH,ÿ2>/N1M=./
GÿVIÿE2;>/,-ÿ<,-H>./ÿ2>-,N.,2ÿ
GÿVIÿE2;>/,-ÿ<,-H>./ÿ2>-,N.,2ÿ
L-1^,-EF,Kÿ2,/N->L,ÿE2;>/,-`/ÿ
L-1^,-EF,Kÿ2,/N->L,ÿE2;>/,-`/ÿ
<-EN.>N,/Kÿ.J,ÿ,II,N./ÿ2>-,N.,2ÿ
<-EN.>N,/Kÿ.J,ÿ,II,N./ÿ2>-,N.,2ÿ
L-1^,-EF,ÿ1=ÿ1L.E>=>=FÿL,/.ÿ,?,NM.>1=Kÿ
L-1^,-EF,ÿ1=ÿ1L.E>=>=FÿL,/.ÿ,?,NM.>1=Kÿ
E=PÿN1=I+>N./ÿE->/>=FÿI-1HÿE2;>/,-`/ÿ
E=PÿN1=I+>N./ÿE->/>=FÿI-1HÿE2;>/,-`/ÿ
-,+E.>1=/J><ÿQ>.JÿL-1^,-/
-,+E.>1=/J><ÿQ>.JÿL-1^,-/
GÿVIÿE2;>/,-ÿ-1M.>=,+Pÿ-,N1HH,=2/Kÿ
GÿVIÿE2;>/,-ÿ-1M.>=,+Pÿ-,N1HH,=2/Kÿ
-,TM,/./ÿ1-ÿ-,TM>-,/ÿN+>,=./ÿ.1ÿ2>-,N.ÿ
-,TM,/./ÿ1-ÿ-,TM>-,/ÿN+>,=./ÿ.1ÿ2>-,N.ÿ
L-1^,-EF,Kÿ2,/N->L,ÿ/MNJÿ<-EN.>N,/Kÿ
L-1^,-EF,Kÿ2,/N->L,ÿ/MNJÿ<-EN.>N,/Kÿ
2>/N+1/,ÿ.JE.ÿ=1.ÿE++ÿE2;>/1-/ÿ-,TM>-,ÿ
2>/N+1/,ÿ.JE.ÿ=1.ÿE++ÿE2;>/1-/ÿ-,TM>-,ÿ
2>-,N.,2ÿL-1^,-EF,ÿE=2ÿ2>/NM//ÿ
2>-,N.,2ÿL-1^,-EF,ÿE=2ÿ2>/NM//ÿ
N1=I+>N./ÿE->/>=FÿI-1HÿL-1^,-ÿ
N1=I+>N./ÿE->/>=FÿI-1HÿL-1^,-ÿ
-,+E.>1=/J><
-,+E.>1=/J><
GÿB>/N+1/,ÿQJ,.J,-KÿJ1Qÿ1I.,=KÿE=2ÿ
GÿB>/N+1/,ÿQJ,.J,-KÿJ1Qÿ1I.,=KÿE=2ÿ
QJ1ÿN1=2MN./ÿE2;>/,-ÿ-,;>,Q/ÿ1IÿN+>,=.ÿ
QJ1ÿN1=2MN./ÿE2;>/,-ÿ-,;>,Q/ÿ1IÿN+>,=.ÿ
ENN1M=./ÿE=2ÿQJE.ÿN>-NMH/.E=N,/Kÿ>Iÿ
ENN1M=./ÿE=2ÿQJE.ÿN>-NMH/.E=N,/Kÿ>Iÿ
E=PKÿ.->FF,-ÿEÿ-,;>,Q
E=PKÿ.->FF,-ÿEÿ-,;>,Q
GÿB,/N->L,ÿE=PÿNE/Jÿ1-ÿ1.J,-ÿ<EPH,=.ÿ
GÿB,/N->L,ÿE=PÿNE/Jÿ1-ÿ1.J,-ÿ<EPH,=.ÿ
E2;>/,-ÿ1-ÿ-,+E.,2ÿ<,-/1=/ÿHE^,ÿI1-ÿ
E2;>/,-ÿ1-ÿ-,+E.,2ÿ<,-/1=/ÿHE^,ÿI1-ÿ
N+>,=.ÿ-,I,--E+/
N+>,=.ÿ-,I,--E+/
GÿB>/N+1/,ÿQJ,.J,-ÿE2;>/,-ÿ-,N,>;,/ÿ
GÿB>/N+1/,ÿQJ,.J,-ÿE2;>/,-ÿ-,N,>;,/ÿ
E=PÿL,=,I>./ÿI-1Hÿ=1=0N+>,=./ÿI1-ÿ
E=PÿL,=,I>./ÿI-1Hÿ=1=0N+>,=./ÿI1-ÿ
<-1;>2>=FÿE2;>/1-Pÿ/,-;>N,/
<-1;>2>=FÿE2;>/1-Pÿ/,-;>N,/
O,/
O,/
0:0
0:0
March 2008 | 6
Investment Management Alert
213#
)**+ÿ0%'4'5$6
213#
)**+ÿ0%'4'5$6
68AÿÿCM/.12P
68AÿÿCM/.12P
6[Aÿ V=;,/.H,=.ÿB>/N-,.>1=
6[Aÿ V=;,/.H,=.ÿB>/N-,.>1=
67Aÿÿg1.>=FÿC+>,=.
&,NM->.>,/
67Aÿÿg1.>=FÿC+>,=.
&,NM->.>,/
6]AÿÿZ>=E=N>E+ÿ
V=I1-HE.>1=
6]AÿÿZ>=E=N>E+ÿ
V=I1-HE.>1=
2(ÿ$78ÿ9':ÿ0%'4'5$6ÿ
.;((3%5ÿ(%'# )***
2(ÿ$78ÿ9':ÿ0%'4'5$6ÿ
.;((3%5ÿ(%'# )***
!43<;(;<$66&
=3>";%38ÿ;7ÿ
!43<;(;<$66&
?"%%371ÿ
=3>";%38ÿ;7ÿ
,'%#
-./ÿ
?"%%371ÿ
0$%1ÿ22
,'%# -./ÿ
0$%1ÿ22
Gÿd?<+E>=ÿ.JE.ÿN+>,=./ÿQ>++ÿ-,N,>;,ÿE=2ÿ
/J1M+2ÿ-,;>,QÿNE-,IM++PÿENN1M=.ÿ
Gÿd?<+E>=ÿ.JE.ÿN+>,=./ÿQ>++ÿ-,N,>;,ÿE=2ÿ
/.E.,H,=./ÿI-1HÿTME+>I>,2ÿNM/.12>E=/ÿ
/J1M+2ÿ-,;>,QÿNE-,IM++PÿENN1M=.ÿ
GÿVIÿ=1=0TME+>I>,2ÿNM/.12>E=ÿ1-ÿE2;>/,-ÿ
/.E.,H,=./ÿI-1HÿTME+>I>,2ÿNM/.12>E=/ÿ
JE/ÿNM/.12PKÿ2>/N+1/,ÿ.J>/ÿIEN.ÿE=2ÿ
GÿVIÿ=1=0TME+>I>,2ÿNM/.12>E=ÿ1-ÿE2;>/,-ÿ
E//1N>E.,2ÿ->/^/ÿ.1ÿN+>,=.
JE/ÿNM/.12PKÿ2>/N+1/,ÿ.J>/ÿIEN.ÿE=2ÿ
GÿB>/N+1/,ÿQJ,.J,-ÿE2;>/,-ÿJE/ÿ
E//1N>E.,2ÿ->/^/ÿ.1ÿN+>,=.
2>/N-,.>1=E-PÿEM.J1->.PÿE=2ÿE=Pÿ
GÿB>/N+1/,ÿQJ,.J,-ÿE2;>/,-ÿJE/ÿ
+>H>.E.>1=/ÿN+>,=./ÿHEPÿ<+EN,ÿ1=ÿ/MNJÿ
2>/N-,.>1=E-PÿEM.J1->.PÿE=2ÿE=Pÿ
EM.J1->.P
+>H>.E.>1=/ÿN+>,=./ÿHEPÿ<+EN,ÿ1=ÿ/MNJÿ
EM.J1->.P
O,/ÿY -,I+,N./ÿ
EH,=2H,=./ÿ.1ÿ-M+,ÿ
O,/ÿY -,I+,N./ÿ
9\[bWc09
EH,=2H,=./ÿ.1ÿ-M+,ÿ
O,/ÿY
=1.ÿ>=N+M2,2ÿ>=ÿ
9\[bWc09
1->F>=E+ÿ<-1<1/E+
O,/ÿY =1.ÿ>=N+M2,2ÿ>=ÿ
1->F>=E+ÿ<-1<1/E+
$1
$1ÿY -,TM>-,2ÿ
LPÿ-M+,ÿ
$1ÿY -,TM>-,2ÿ
9\[bWc09
LPÿ-M+,ÿ
$1ÿ
9\[bWc09
GÿB>/N+1/,ÿ<-1?Pÿ;1.>=Fÿ<-EN.>N,/
O,/ÿY -,I+,N./ÿE21<.>1=ÿ
1Iÿ-M+,ÿ9\[bWc0[
O,/ÿY -,I+,N./ÿE21<.>1=ÿ
1Iÿ-M+,ÿ9\[bWc0[
O,/ÿY
-,I+,N./ÿ9\[bWc0[
$1
O,/ÿY -,I+,N./ÿ9\[bWc0[
$1
O,/ÿY =1.ÿ>=N+M2,2ÿ>=ÿ
1->F>=E+ÿ<-1<1/E+
O,/ÿY =1.ÿ>=N+M2,2ÿ>=ÿ
1->F>=E+ÿ<-1<1/E+
$1
O,/ÿY E2;>/,-ÿQ>.Jÿ
NM/.12Pÿ=,,2ÿ=1.ÿ
O,/ÿY E2;>/,-ÿQ>.Jÿ
<-1;>2,ÿEM2>.,2ÿ
NM/.12Pÿ=,,2ÿ=1.ÿ
LE+E=N,ÿ/J,,.ÿ>Iÿ.J,Pÿ
<-1;>2,ÿEM2>.,2ÿ
E-,ÿTME+>I>,2ÿ
LE+E=N,ÿ/J,,.ÿ>Iÿ.J,Pÿ
NM/.12>E=/ÿ1-ÿ>=/M-E=N,ÿ
E-,ÿTME+>I>,2ÿ
N1H<E=>,/
NM/.12>E=/ÿ1-ÿ>=/M-E=N,ÿ
N1H<E=>,/
$1
O,/ÿY
.J-,/J1+2ÿ>/ÿ
O,/ÿY
h8\\ÿ
.J-,/J1+2ÿ>/ÿ
h8\\ÿ
$1
$1
$1
$1
$1
$1
GÿB>/N+1/,ÿ<-1?Pÿ;1.>=Fÿ<-EN.>N,/
GÿB,/N->L,ÿQJ,.J,-ÿE2;>/,-ÿENN,<./ÿ
;1.>=FÿEM.J1->.Pÿ1;,-ÿN+>,=.ÿ/,NM->.>,/ÿ
GÿB,/N->L,ÿQJ,.J,-ÿE2;>/,-ÿENN,<./ÿ
E=2ÿ<1+>N>,/ÿE21<.,2ÿ<M-/ME=.ÿ.1ÿ-M+,ÿ
;1.>=FÿEM.J1->.Pÿ1;,-ÿN+>,=.ÿ/,NM->.>,/ÿ
9\[bWc0[Rÿ/.E.,ÿ.JE.ÿEÿN1<Pÿ1Iÿ/MNJÿ
E=2ÿ<1+>N>,/ÿE21<.,2ÿ<M-/ME=.ÿ.1ÿ-M+,ÿ
<-1N,2M-,/ÿE-,ÿE;E>+EL+,ÿM<1=ÿ-,TM,/.
9\[bWc0[Rÿ/.E.,ÿ.JE.ÿEÿN1<Pÿ1Iÿ/MNJÿ
GÿB>/N+1/,ÿM/,ÿ1Iÿ.J>-2ÿ<E-.Pÿ<-1?Pÿ
<-1N,2M-,/ÿE-,ÿE;E>+EL+,ÿM<1=ÿ-,TM,/.
;1.>=Fÿ/,-;>N,/ÿE=2ÿ+>/.ÿ/,-;>N,/ÿM/,2Rÿ
GÿB>/N+1/,ÿM/,ÿ1Iÿ.J>-2ÿ<E-.Pÿ<-1?Pÿ
2,/N->L,ÿJ1Q
/,-;>N,/ÿE-,ÿ/,+,N.,2Kÿ
;1.>=Fÿ/,-;>N,/ÿE=2ÿ+>/.ÿ/,-;>N,/ÿM/,2Rÿ
QJ,.J,-ÿ.J,ÿN+>,=.ÿHEPÿ2>-,N.ÿ.J,ÿM/,ÿ
2,/N->L,ÿJ1Q /,-;>N,/ÿE-,ÿ/,+,N.,2Kÿ
1IÿEÿ<E-.>NM+E-ÿ/,-;>N,KÿE=2ÿJ1Qÿ
QJ,.J,-ÿ.J,ÿN+>,=.ÿHEPÿ2>-,N.ÿ.J,ÿM/,ÿ
E2;>/,-ÿ<EP/ÿI1-ÿ/MNJÿ/,-;>N,/
1IÿEÿ<E-.>NM+E-ÿ/,-;>N,KÿE=2ÿJ1Qÿ
GÿÿVIÿE2;>/,-ÿ-,TM>-,/ÿ<-,<EPH,=.ÿ1Iÿ
E2;>/,-ÿ<EP/ÿI1-ÿ/MNJÿ/,-;>N,/
I,,/ÿ1IÿH1-,ÿ.JE=ÿh6K9\\Kÿ<-1;>2,ÿ
GÿÿVIÿE2;>/,-ÿ-,TM>-,/ÿ<-,<EPH,=.ÿ1Iÿ
EM2>.,2ÿLE+E=N,ÿ/J,,.ÿ.1ÿN+>,=./
I,,/ÿ1IÿH1-,ÿ.JE=ÿh6K9\\Kÿ<-1;>2,ÿ
EM2>.,2ÿLE+E=N,ÿ/J,,.ÿ.1ÿN+>,=./
GÿÿB>/N+1/,ÿE=PÿI>=E=N>E+ÿN1=2>.>1=ÿ1Iÿ
E2;>/,-ÿ.JE.ÿ<1/,/ÿEÿ->/^ÿ.1ÿN+>,=.ÿE//,./
GÿÿB>/N+1/,ÿE=PÿI>=E=N>E+ÿN1=2>.>1=ÿ1Iÿ
E2;>/,-ÿ.JE.ÿ<1/,/ÿEÿ->/^ÿ.1ÿN+>,=.ÿE//,./
6_AÿÿV=2,?
6_AÿÿV=2,?
GÿV=2>NE.,ÿQJ,-,ÿ,ENJÿ>.,Hÿ>/ÿ
E22-,//,2ÿ>=ÿ.J,ÿL-1NJM-,Rÿ=,,2ÿ=1.ÿL,ÿ
GÿV=2>NE.,ÿQJ,-,ÿ,ENJÿ>.,Hÿ>/ÿ
<-1;>2,2ÿ.1ÿN+>,=./
E22-,//,2ÿ>=ÿ.J,ÿL-1NJM-,Rÿ=,,2ÿ=1.ÿL,ÿ
<-1;>2,2ÿ.1ÿN+>,=./
$1
$1ÿ
O,/ÿY LM.ÿ
N+E->I>,/ÿ
O,/ÿY LM.ÿ
2,I>=>.>1=ÿ1Iÿ
N+E->I>,/ÿ
e2>/N-,.>1=E-Pÿ
2,I>=>.>1=ÿ1Iÿ
EM.J1->.Pf
e2>/N-,.>1=E-Pÿ
EM.J1->.Pf
$1
$1
$1
$1
0W0
0W0
March 2008 | 7
Investment Management Alert
K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name Kirkpatrick & Lockhart Preston Gates Ellis LLP qualified
in Delaware and maintaining offices throughout the U.S., in Berlin, and in Beijing (Kirkpatrick & Lockhart Preston Gates Ellis LLP Beijing Representative
Office); a limited liability partnership (also named Kirkpatrick & Lockhart Preston Gates Ellis LLP) incorporated in England and maintaining our London
office; a Taiwan general partnership (Kirkpatrick & Lockhart Preston Gates Ellis) which practices from our Taipei office; and a Hong Kong general
partnership (Kirkpatrick & Lockhart Preston Gates Ellis, Solicitors) which practices from our Hong Kong office. K&L Gates maintains appropriate registrations
in the jurisdictions in which its offices are located. A list of the partners in each entity is available for inspection at any K&L Gates office.
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied
upon in regard to any particular facts or circumstances without first consulting a lawyer.
Data Protection Act 1998—We may contact you from time to time with information on Kirkpatrick & Lockhart Preston Gates Ellis LLP seminars and with our
regular newsletters, which may be of interest to you. We will not provide your details to any third parties. Please e-mail london@klgates.com if you would
prefer not to receive this information.
©1996-2008 Kirkpatrick & Lockhart Preston Gates Ellis LLP. All Rights Reserved.
March 2008 | 8