Armanino McKenna LLP Welcomes You To Today s Webinar:

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1 Armanin McKenna LLP Welcmes Yu T Tday s Webinar: Business Valuatins: Best Practices and Recent Develpments The presentatin will begin in a few mments Participants will receive an within 3 business days with access t their certificate f cmpletin.

2 Abut the Presenters Dirk Van Dyke, Managing Directr, Valuatins Dirk Van Dyke is a Managing Directr in Valuatin Services Grup at Armanin Cnsulting and hlds an ASA in Business Valuatin. He earned his undergraduate degree in Ecnmics at the Jhns Hpkins University and his Master f Science in Business Administratin frm UC Berkeley. Dirk fcuses slely n Valuatins and has ver 17 years experience wrking in Silicn Valley valuing technlgy cmpanies. His majr practice areas include Tech Cmpany Cmmn Stck Valuatins fr Optin Pricing fr IRS Cde Sectin 409(A) and FASB ASC 718 (frmerly 123r); Purchase Price Allcatin Valuatins FASB ASC 805 (frmerly 141r) and Gdwill Impairment testing fr FASB 142; and valuatins fr M&A purpses, including sharehlder buy-uts. AMLLP All Rights Reserved 2

3 Abut the Presenters Jeff Stegner - CPA-ABV, CVA, Partner, Practice Leader Valuatin & Litigatin Services Grup Jeff graduated in 1988 frm San Francisc State University with a degree in Accunting and jined KPMG's San Francisc ffice. Jeff btained his CPA license in 1991 and jined Armanin McKenna in He has ver 20 years experience in public accunting, the last 10 f which have been fcused n valuatin and litigatin services. He currently hlds tw valuatin certificatins and has qualified as an expert in mst curts in the San Francisc Bay Area. Jeff has been retained as an expert in ver 500 litigatin matters in his career. AMLLP All Rights Reserved 3

and activities in recent quarters Discuss the use f the Mnte Carl simulatin in valuatins

4 Learning Objectives During tday s webinar, participants will: Recgnize the issues that auditrs raise when reviewing valuatins Highlight sme statistics n venture capital market and activities in recent quarters Discuss the use f the Mnte Carl simulatin in valuatins Identity the 2012 deadline f $5 millin gift tax exemptin AMLLP All Rights Reserved 4

Presentatin Overview Tpic 1: Issues Frm Auditrs On Valuatin Reviews Management Frecasts Cmpany Discunt Rate Cmmn Stck Transactins at Time f Financing Tpic 2: Venture Capital Market and Activities

5 Presentatin Overview Tpic 1: Issues Frm Auditrs On Valuatin Reviews Management Frecasts Cmpany Discunt Rate Cmmn Stck Transactins at Time f Financing Tpic 2: Venture Capital Market and Activities Fiscal Year 2011 & Q IPO and M&A Activity By Industry Tpic 3: Mnte Carl Simulatin in Valuatins Backgrund Use in Business Valuatin and Finance Situatins Tpic 4: Gift Tax Exemptin AMLLP All Rights Reserved 5

6 Issues Frm Auditrs n Valuatin Reviews

8 Reliable Management Frecasts Management frecasts cming under greater scrutiny by reviewers Unreliable frecasts may include any f the fllwing: Cnsistently different than past results Nt prepared in the nrmal curse f business Different than frecast prvided t Investrs Prduce a DCF value incnsistent with values under alternative appraches Nt cnsistent with analyst expectatins fr cmparable public cmpany Omit critical inputs frm ther financials Failure t include assumptins, r hinges n extrardinary assumptins AMLLP All Rights Reserved 8

9 Reliable Management Frecasts Reliable prjectins demnstrate the fllwing: Revenues Grwth rates cnsistent with histry New revenue streams are accurately timed Changes in revenues are cnsistent with ther infrmatin Expenses Frecasts based n nrmalized peratins (Out Years) Defined fixed vs. variable csts Cnsistent variables with histry Research and develpment csts issues AMLLP All Rights Reserved 9

10 Cmpany Discunt Rate Cmpanies that reached stable stage Weighted average cst f capital Cst f equity: Capital asset pricing mdel Startup cmpanies Studies as general guideline Qualitative supprt fr high r lw discunt rates AMLLP All Rights Reserved 10

11 Startup Cmpanies - Stages f Startup Stages f Develpment Characteristics Plummer [1] Scherlis and HVA Study Sahlman Study Actual Returns [2] [3] Babsn Cllege Mass [4] Frei & Leleux [5] Seiffer Sftware [6] Start-up Pre-prttype 50% - 70% 50% - 70% 100% - 125% 60% - 80% 70% - 100% 60% - 80% Early Develpment Pre-cmmercializatin 40% - 60% 40% - 60% 60% 50% 50% - 70% 50% - 60% First Stage Cmmercializatin [40% - 60%] [40% - 60%] [60%] [50%] 40% - 60% 40% - 50% Expansin Shipping Prduct 35% - 50% 30% - 50% 50% 40% 35% - 50% 30% - 40% Mezzanine/IPO Prfitable 25% - 35% 20% - 35% 30% - 40% 25% - 30% 25% - 40% 25% - 30% AMLLP All Rights Reserved 11

12 Startup Cmpanies Ranges f Return frm VC Studies Stages f Develpment Characteristics Range Start-up Pre-prttype 50% - 125% Early Develpment Pre-cmmercializatin 40% - 70% First Stage Cmmercializatin 40% - 60% Expansin Shipping Prduct 30% - 50% Mezzanine/IPO Prfitable 25% - 40% AMLLP All Rights Reserved 12

13 Cmmn Stck Transactins at time f Financing When d they have an Impact n value f Cmmn Stck? Depends n Buyers and Sellers f Stck Access t Financials and Business Plan Hw big an impact d cmmn stck transactins have? AMLLP All Rights Reserved 13

14 Venture Capital Market and Activities

15 Venture Capital Market and Activities Fiscal Year 2011 Venture Capital Investments in 2011 increased 22% frm 2010 $28.4 billin invested in 2011 Third highest annual investment in past 10 years. 1 st time financings cmprised $5 billin in 2011 AMLLP All Rights Reserved 15

17 Venture Capital IPO and M&A Envirnment Q Venture-backed IPO activity had strngest pening quarter since Q VC-backed cmpanies went public in the U.S. raising $1.5 Billin 10% increase frm Q VC-backed M&A deals were reprted Venture firms are ptimistic abut 2012 after successful exit envirnment AMLLP All Rights Reserved 17

18 Venture Capital Investments by Industry Sftware industry was single largest investment sectr in 2011 Internet-specific industry was largest sectr fr VC-backed IPOs in Q VC funding in the Slar Industry shwed mixed results in Q Technlgy Sectr dminated Q VC investments AMLLP All Rights Reserved 18

19 Mnte Carl Simulatin in Valuatins

23 Mnte Carl Simulatin in Valuatins -- Other Situatins in business valuatin that wuld call fr use f Mnte Carl simulatin: Develpment stage cmpany Path-dependent ptin IPR&D prject Other cmplex ptins and derivatives AMLLP All Rights Reserved 23

25 Gift Tax

26 Gift Tax Exemptin Tax-free annual gifts $13,000 per persn, per recipient Lifetime gift tax exemptin had been $1 millin per persn Temprary increase $5 millin per persn fr 2011 and 2012 $10 millin fr married cuples Set t expire at end f 2012 Extensin highly speculative Tax rate n gifts beynd $1 millin will rise t 55% AMLLP All Rights Reserved 26

28 In Cnclusin During this webinar, we ve cvered: Issues that auditrs raise when reviewing valuatins Statistics n venture capital market and activities in recent quarters Use f the Mnte Carl simulatin in valuatins The 2012 deadline f $5 millin gift tax exemptin AMLLP All Rights Reserved 28

Cntact Us Armanin McKenna LLP Certified Public Accuntants & Cnsultants Dirk Van Dyke phne: 408.646.6404 email: DirkV@amllp.

30 Cntact Us Armanin McKenna LLP Certified Public Accuntants & Cnsultants Dirk Van Dyke phne: Jeff Stegner phne: Participants will receive an within 3 business days with access t their certificate f cmpletin.

In connection with the SEC's Money Market Reform proposal, DST Systems, Inc. respectfully submits our comments for your consideration.

In connection with the SEC's Money Market Reform proposal, DST Systems, Inc. respectfully submits our comments for your consideration. DST September 18, 2013 Ms. Elizabeth M. Murphy Secretary Securities and Exchange Cmmissin 100 F. Street, NE Washingtn, DC 20549-1090 Subject: Mney Market Fund Refrm, File# 57-03-13 Dear Ms. Murphy: In