Beyond the Fifth Century: Interactions with Greek Tragedy from the Fourth Century BCE to the Middle Ages 9783110223781, 9783110223774, 9783110482348

Table of contents :
Frontmatter
Table of Contents
Introduction
A. Getting the Show on the Road
The Classical Tragedians, from Athenian Idols to Wandering Poets
Situating the Gaze of the Recipient(s): Theatre-Related Vase Paintings and their Contexts of Reception
Changing Contexts: Tragedy in the Civic and Cultural Life of Hellenistic City-States
B. From Greece to Rome
Buskins & SPQR: Roman Receptions of Greek Tragedy
Dionysiac Theme and Dramatic Allusion in Ovid’s Metamorphoses 4
“I’m A Celebrity, Get Me Out of Here”: The Reception of Euripides’ Iphigenia among the Taurians in Ovids’s Exile Poetry
C. The Roman Empire
Drama and Epic Narrative: The Test Case of Messenger Speech in Seneca’s Agamemnon
Seneca and Pantomime
A Sophist’s Drama: Lucian and Classical Tragedy
D. Late Antiquity and the Middle Ages
Christians and the Theater
The Tragedy of the Middle Ages
Adventures in Recording Technology: The Drama-as-Performance in the Greek East
Whipping Jesus Devoutly: The Dramaturgy of Catharsis and the Christian Idea of Tragic Form
Backmatter

Citation preview

%H\RQGWKH)LIWK&HQWXU\

%H\RQGWKH)LIWK&HQWXU\ ,QWHUDFWLRQVZLWK*UHHN7UDJHG\IURP WKH)RXUWK&HQWXU\%&(WRWKH0LGGOH$JHV

(GLWHGE\ ,QJR*LOGHQKDUGDQG0DUWLQ5HYHUPDQQ

De Gruyter

,6%1 H,6%1 /LEUDU\RI&RQJUHVV&DWDORJLQJLQ3XEOLFDWLRQ'DWD %H\RQGWKH¿IWKFHQWXU\LQWHUDFWLRQVZLWK*UHHNWUDJHG\IURP WKHIRXUWKFHQWXU\%&(WRWKH0LGGOH$JHV HGLWHGE\,QJR*LOGHQKDUGDQG0DUWLQ5HYHUPDQQ SFP ,QFOXGHVELEOLRJUDSKLFDOUHIHUHQFHVDQGLQGH[ ,6%1KDUGFRYHUDONSDSHU ,6%1 HEN *UHHNGUDPD7UDJHG\ +LVWRU\ DQGFULWLFLVP*UHHNGUDPD7UDJHG\ $SSUHFLDWLRQ+LV WRU\&ODVVLFDOOLWHUDWXUH*UHHNLQÀXHQFHV/LWHUDWXUH 0HGLHYDO*UHHNLQÀXHQFHV,QWHUWH[WXDOLW\,*LOGHQKDUG ,QJR,,5HYHUPDQQ0DUWLQ,,,7LWOH%H\RQG WKHWKFHQWXU\ 3$%  GF 

%LEOLRJUDSKLFLQIRUPDWLRQSXEOLVKHGE\WKH'HXWVFKH1DWLRQDOELEOLRWKHN 7KH'HXWVFKH1DWLRQDOELEOLRWKHNOLVWVWKLVSXEOLFDWLRQLQWKH'HXWVFKH 1DWLRQDOELEOLRJUD¿HGHWDLOHGELEOLRJUDSKLFGDWDDUHDYDLODEOHLQWKH,QWHUQHW DWKWWSGQEGQEGH ‹:DOWHUGH*UX\WHU*PE+ &R.*%HUOLQ1HZDQGZHPLJKWDGGUHFHS WLRQ@«:KHQWKHFKDUDFWHUVRI¿FWLRQDUHVHWLQDQRWKHUSODFHDQGRWKHUWLPH LWLVHVSHFLDOO\KDUGWRDUWLFXODWHVHFXUHO\WKHVHGLIIHUHQFHVDQGVLPLODULWLHV´ 7KLUGO\ WKHUH LV D VHQVH LQ ZKLFK UHFHSWLYLW\ WR GUDPD RI DQ\ NLQG  PXVWKDYHEHHQHVSHFLDOO\KLJKLQ5RPDQVRFLHW\RIDOOSHULRGV7KHQRWLRQ RI D ³WKHDWUH VWDWH´ VHHPV SDUWLFXODUO\ DSSOLFDEOH LQ WKH 5RPDQ FRQWH[W ZKHUH WKHUH ZHUH DPSOH RSSRUWXQLWLHV IRU KLJKO\ WKHDWULFDO LQWHUDFWLRQV DW YDULRXVOHYHOV,QWULJXLQJO\WKH/DWLQSHUVRQDGHQRWHVERWK³VRFLDOUROH´DQG ³WKHDWULFDOPDVNV´DQGLWLVQRWDOOWKDWIDUIHWFKHGWRFDOO5RPHD³PDVN WRPDVN´VRFLHW\LQZKLFKVRFLDOLQWHUDFWLRQVRIWHQLPSOLHGWKHDFWLQJRXWRI VSHFL¿FUROHVVXFKDVSDWURQXVRUFOLHQVSDWHUIDPLOLDVSDWUXXVRUDYXQFX OXVFRQVXORUWULEXQHRIWKHSHRSOH7KHDI¿QLWLHVEHWZHHQRUDWRUDQGDFWRU

   

0DOLQRZVNLTXRWHGE\%XUNH *ROGKLOO± $QH[SUHVVLRQFRLQHGE\WKHDQWKURSRORJLVW&OLIIRUG*HHUW] 6HH%HWWLQL)RUWKHVHPDQWLFVRISHUVRQDVHHHJWKHVXFFLQFWGLVFXVVLRQE\ %HUU\³7KHSULPDU\PHDQLQJRISHUVRQDLVDQDFWRU¶VPDVNUHSUHVHQWLQJ DSDUWLFXODUW\SHRIFKDUDFWHUE\H[WHQVLRQWKHZRUGFRPHVWRPHDQDFKDUDFWHULQ DSOD\DQGWKHQDPDQ¶VFKDUDFWHURUSHUVRQDOLW\«/DWHULWLQGLFDWHGLQOHJDOFRQ WH[WVWKHSHUVRQLQYROYHGLQDFDVHDQG¿QDOO\DQLQGLYLGXDOSHUVRQLQWKHPRGHUQ VHQVH´ZLWKVRPHIXUWKHUELEOLRJUDSK\

,QWURGXFWLRQ



ZHUHDVRXUFHRIFRQVLGHUDEOHDQ[LHW\GXULQJWKHUHSXEOLF0RUHJHQHUDOO\ SXEOLFOLIHRIWHQKDGDKLJKO\GUDPDWLFTXDOLW\DVGXULQJWKHYDULRXVSUR FHVVLRQVWKDWFULVVFURVVHGWKHFLW\VFDSHRQDUHJXODUEDVLV7KHLUWKHDWULFDO QDWXUH LV SDUWLFXODUO\ DSSDUHQW LQ WKH IXQHUDO SURFHVVLRQ SRPSD IXQHEULV  RIIRUPHURI¿FHKROGHUVZKLFKIHDWXUHGDFWRUVZHDULQJPDVNVLPDJLQHV  ZKRLPSHUVRQDWHGWKRVHIRUHEHDUVRIWKHGHFHDVHGZKRKDGDOVRUHDFKHGD FXUXOHRI¿FH2QFHWKHSURFHVVLRQUHDFKHGWKHIRUXPWKH\ZRXOGWDNHDVHDW RQWKHLUFXUXOHFKDLUVDQGIRUPWKHLPDJLQDU\DXGLHQFHRIWKHIXQHUDORUD WLRQGHOLYHUHGE\DFORVHNLQRIWKHGHFHDVHG7KHVHDQGRWKHUIHDWXUHVRI 5RPDQFXOWXUHIRUPHGWKHFRPSOH[PDWUL[IRUWUDJHG\¶V³WUDQVFXOWXUDWLRQ´ RU³LQGLJHQL]DWLRQ´DW5RPHUHVXOWLQJLQDWUDQVIRUPDWLRQDQGHYROXWLRQRI ERWKWKHJHQUHDQG5RPH¶VFXOWXUDOLPDJLQDU\ )RXUWKO\WUDJHG\SOD\HGDQLPSRUWDQWUROHLQWKHHYROXWLRQRID/DWLQ OLWHUDWXUHRQWKHEDVLVRI*UHHNPRGHOV³DQXQGHUWDNLQJ´DV'HQLV)HHQH\ SXWVLW³ZKLFKQRRQHLQWKH0HGLWHUUDQHDQKDGHYHUFRQWHPSODWHGEHIRUH EXWZKLFKEHFDPHDSDUDGLJPIRUODWHUOLWHUDU\KLVWRU\´,WZDV/LYLXVZKR ZDV UHVSRQVLEOH IRU WKH µELJ EDQJ¶ WKDW LQLWLDWHG WKLV IDVFLQDWLQJ YLUWXDOO\ XQLTXH DQG FHUWDLQO\ XQLTXHO\ LQÀXHQWLDO SURFHVV SXWWLQJ LQWR PRWLRQ D FURVVFXOWXUDODQGWUDQVOLQJXLVWLFG\QDPLFWKDWZRXOGFRPHWRFKDUDFWHUL]H DOOVXEVHTXHQWOLWHUDU\HIIRUWVLQ/DWLQDQGFHQWXULHVODWHUWKHHPHUJLQJ(X URSHDQYHUQDFXODUV,QKHOSLQJWRLQLWLDWHDQGGH¿QHDK\EULGOLWHUDWXUHSDUW O\*UHHNDQGSDUWO\5RPDQWUDJHG\FRQWULEXWHGWRWKHODUJHUFXOWXUDOFRQ ¿JXUDWLRQWKDWJRHVE\WKHQDPHRI³*UHFR5RPDQFLYLOL]DWLRQ´ZKLFKKDV SOD\HGDPDMRUUROHLQGHEDWHVRYHUWKHFXOWXUDOLGHQWLW\RI(XURSH7RFLWH VXPPDULO\RQHVXFKSORWFRQVWUXFWLRQ³/HR>VF)ULHGULFK±@KDG LQSUDFWLFHIRXQGHG/DWLQVWXGLHVDVZHNQRZWKHPZKHQKHGH¿QHG/LYLXV $QGURQLFXVDVWKH¿UVWWUDQVODWRURI:HVWHUQOLWHUDWXUH+LVLQÀXHQWLDOVHQ WHQFHDERXW$QGURQLFXVµ+HLVWKHEHJLQQHURIWKH¿UVWGHULYDWLYHOLWHUDWXUH RIRXUFXOWXUDOXQLYHUVH¶S KDUNVEDFNWRSµ5RPDQOLWHUDWXUHLVWKH ¿UVWOLWHUDWXUHGHSHQGHQWRQWKH*UHHNVWKH¿UVWVHFRQGDU\QRQKRPHJURZQ OLWHUDWXUH¶DQGWKLVLQWXUQSUHVXSSRVHVSµ:HVWHUQFLYLOL]DWLRQGHSHQGV RQ*UDHFR5RPDQFXOWXUHDQGVRGRHVWKHVSUHDGRI&KULVWLDQLW\WKURXJK 5RPDQDQG*HUPDQSHRSOHV…5RPDQFXOWXUHLVWKHVSLULWXDOOLQNEHWZHHQ

 6HHHJ(GZDUGV±DQG)DQWKDP7KHLQWHUFKDQJHEHWZHHQVWDJH DQGSROLWLFVRULQGHHGWKHLUFRQÀDWLRQEHFDPHRQO\PRUHFRPSOH[GXULQJWKHHP SLUHVHHLQWURGXFWLRQWR6HFWLRQ'  )ORZHU$QRWKHUREYLRXVH[DPSOHRIWKHµWKHDWULFDO¶HOHPHQWLQ5RPDQSXEOLF OLIHZDVWKHWULXPSK$IWHUWKHFODVVLFVWXG\RI9HUVQHOVHHQRZWKHJURXQG EUHDNLQJZRUNRI)ODLJ5SNHDQG%HDUG  7KHWHUPVLQTXRWDWLRQPDUNVDUHWKRVHRI+XWFKHRQ[YL  )HHQH\FI)DQWKDP



,QJR*LOGHQKDUGDQG0DUWLQ5HYHUPDQQ

WKHDQFLHQWDQGWKHPRGHUQZRUOGV«7KHG\QDPLFVRIFLYLOL]DWLRQZDVIURP (DVWWR:HVW«¶´ )LQDOO\LQWKHODWHUHSXEOLFDQDQG$XJXVWDQSHULRGWUDJHG\PRUHLQVLV WHQWO\ DQG WKRURXJKO\ WKDQ LQ *UHHFH HQWHUHG LQWR DOOXVLYH GLDORJXH ZLWK RWKHUJHQUHV)URP3ODXWXVWR9LUJLOIURP&DWXOOXVWR2YLG/DWLQDXWKRUV GHFLGHGWRHQULFKWKHLUWH[WVE\HQJDJLQJZLWKWUDJLFVFULSWVLQ*UHHNDQG /DWLQ 7KLVLQWXUQKDVKHOSHGWUDJHG\WRVXUYLYHDQGHYROYHLQDSURFHVV IRUZKLFK2YLG¶V0HWDPRUSKRVHVSURYHGSLYRWDO/LNHQRDXWKRUEHIRUHRU DIWHU2YLGPDQDJHGWRRXW¿WDFRPSUHKHQVLYHFRPSHQGLXPRIP\WKZLWKD OLWHUDU\IRUPDWRIWKHKLJKHVWVRSKLVWLFDWLRQWKDWZRXOGFRQWLQXHWRUHVRQDWH ZLWKHYHUFKDQJLQJDXGLHQFHV7KH5RPDQUHFHSWLRQRI*UHHNWUDJHG\WKHQ RIIHUVULFKWHUULWRU\IRUH[SORULQJFURVVFXOWXUDODQGFURVVJHQHULFG\QDPLFV DQGWKHWKUHHFKDSWHUVLQWKLVVHFWLRQGRSUHFLVHO\WKDW *LOGHQKDUG¶V FKDSWHU ³%XVNLQV  6345 5RPDQ UHFHSWLRQV RI *UHHN WUDJHG\´VXUYH\VWKHFXOWXUDOVWDQGLQJRIWUDJHG\LQUHSXEOLFDQ5RPHZLWK DVSHFLDOHPSKDVLVRQZKDWSOD\VDERXW*UHHNP\WKLFFKDUDFWHUVPD\KDYH PHDQWWRD5RPDQDXGLHQFHDQGWKHVWUDWHJLHVRIWUDQVODWLRQHPSOR\HGE\WKH 5RPDQSOD\ZULJKWVWRUHQGHUWKHWUDJLFZRUOGVRI*UHHFHLQWHOOLJLEOHWRQHZ DXGLHQFHV+HDOVRPDSVWKHGLIIXVLRQRIWUDJLFWKRXJKWLQ5RPDQVRFLHW\ EH\RQGWKHFRQWH[WRIWKHWKHDWUHDQGH[SORUHVSRVVLEOHFRUUHODWLRQVEHWZHHQ WKHVHPDQWLFVRIWUDJHG\DQGWKHODUJHUSROLWLFDOFXOWXUH ,Q.HLWK¶VSDSHUHQWLWOHG³'LRQ\VLDFWKHPHDQGGUDPDWLFDOOXVLRQLQ2Y LG¶V0HWDPRUSKRVHV´ZKLFKIRFXVHVRQWKHSUHVHQFHRIWUDJLFHOHPHQWVLQ WKH0HWDPRUSKRVHVWKLVOLQJXLVWLFFURVVLQJLVH[SORUHGDORQJVLGHDJHQHULF FURVVLQJ$ZDUHQHVVRIWUDJLFHOHPHQWVLQLQWHUJHQHULFGLDORJXHLVDIDLUO\ UHFHQWFULWLFDOGHYHORSPHQW,QVWXGLHVRI/DWLQLQWHUWH[WXDOLW\WKHLQWHUIDFH EHWZHHQHSLFDQGHOHJLDFPRGHVKDVDOZD\VDWWUDFWHGWKHOLRQ¶VVKDUHRIFULWL FDO DWWHQWLRQ7KHUH DUH KRZHYHU SURPLVLQJ VLJQV LQ WKH UHFHQW VFKRODUO\ OLWHUDWXUHHVSHFLDOO\RQ9LUJLODQG2YLG WKDWWUDJHG\LVSRLVHGWRWDNHFHQWHU VWDJHLQWKHQH[WZDYHRILQWHUWH[WXDOVWXGLHVRQ/DWLQOLWHUDWXUH.HLWKRI IHUVDGHWDLOHGUHDGLQJRIWUDJLFDOOXVLRQVLQERRNVDQGRI2YLG¶V0HWD PRUSKRVHVZLWKDSDUWLFXODUHPSKDVLVRQWKHHSLVRGHRIWKHGDXJKWHUVRI 0LQ\DVWKDWRSHQVWKHIRXUWKERRNRIWKHSRHP6KHVKRZVKRZ%DFFKXVWKH SDWURQGHLW\RIWKHWUDJLFWKHDWUHHVWDEOLVKHVDSRZHUIXODQGRPLQRXVSUHV HQFHLQWKH0HWDPRUSKRVHVWKDWGRHVQRWRQO\PDQLIHVWLWVHOILQWKHWUDQVIRU PDWLRQLQWREDWVRIWKHVLVWHUVZKRGHI\KLVGLYLQLW\EXWDOVRLQWKHWKHPDWLF GHVLJQRIWKHWDOHVWKH\WHOO.HLWKGHPRQVWUDWHVKRZWKHLUVWRULHVWROGLQOLHX

 %DUFKLHVLTXRWLQJIURP)/HR¶V*HVFKLFKWHGHUU|PLVFKHQ/LWHUDWXU(UVWHU %DQGGLHDUFKDLVFKH/LWHUDWXU%HUOLQ  )RUWKHQRWLRQRIJHQHULFHQULFKPHQWVHH+DUULVRQ  6HHLQSDUWLFXODU+DUGLHDQGIXUWKHU*LOGHQKDUGDQG=LVVRV

,QWURGXFWLRQ



RISDUWLFLSDWLRQLQWKH'LRQ\VLDFULWXDOVUHYHUEHUDWHZLWKWUDJLFWKHPHVVXFK DVWKHFRQWUDVWEHWZHHQFLW\DQGFRXQWU\PDQDQGEHDVWWKHUHODWHGWKHPHV RIH[LOHDQGZDQGHULQJLQWKHZLOGVWKHUHSHDWHGLQWHUYHQWLRQRIDYHQJH IXO GLYLQLW\ DQG VSHFWDFOH UHFRJQLWLRQ DQG UHYHUVDO +HU VWXG\ LOOXVWUDWHV SDUDGLJPDWLFDOO\KRZ2YLGLQDQGWKURXJKWKH0HWDPRUSKRVHVFRGL¿HGDQG SUHVHUYHGPXFKRI$WKHQV¶WUDJLFOHJDF\PDNLQJLWDFFHVVLEOHWRODWHUDJHV LQZKDWVKRXOGEHFRPHWKH³ELEOHRIDUWLVWVDQGSDLQWHUV´ )LQDOO\,QJOHKHDUWLQ³¶,¶PDFHOHEULW\JHWPHRXWRIKHUH¶WKHUHFHS WLRQ RI (XULSLGHV¶ ,SKLJHQLD LQ7DXULV LQ 2YLG¶V H[LOH SRHWU\´ VKRZV KRZ 2YLG¶VHQJDJHPHQWZLWKWUDJHG\FRQWLQXHVLQKLV7ULVWLDDQG(SLVWXODHH[ 3RQWRLQDVDGO\DXWRELRJUDSKLFYHLQDVWKHSRHWPRGHOVKLVH[SHULHQFHVLQ 7RPLRQWUDJLFDQGJHRJUDSKLFDOO\DSSRVLWH SUHFHGHQWV &7KH5RPDQ(PSLUH $SDUWIURP¿IWKFHQWXU\$WKHQV5RPHRIWKH¿UVWFHQWXU\&(LVWKHRQO\ SODFHIURPZKLFKWUDJLFVFULSWVKDYHVXUYLYHGE\DQGODUJHLQWDFW6HQHFD ZURWHWUDJHG\LQDSHFXOLDUO\5RPDQNH\DQGRYHUDOOKLVWUDJLFLGLRPKDV UHPDLQHGDVLQÀXHQWLDODVWKDWRIKLV*UHHNSUHGHFHVVRUVHVSHFLDOO\GXULQJ HDUO\PRGHUQWLPHV$V0LRODSXWVLW 7RLPDJLQHWKHXQWKLQNDEOHVSHDNRIWKHXQVSHDNDEOHDQGSRUWUD\WKHLPSRVVLEOH (XURSHDQZULWHUVRIWUDJHG\ORRNHGWRWKHWHQSOD\VRI/XFLXV$QQDHXV6HQHFD7KHUH WKH\ DGPLUHG D VZHOOLQJ VXSHUKHDWHG UKHWRULF IRU RXWVL]HG UDJH DQG JULHI DV ZHOO DVUKHWRULFDOIRUPV±WKHVROLORTX\VWLFKRP\WKLDOLQHE\OLQHH[FKDQJH VHQWHQWLD ZLVHVD\LQJ DQGFKRUDOUHÀHFWLRQ7KHUHWKH\DOVRIRXQGXVHIXOVWRFNFKDUDFWHUV± QXUVHW\UDQWJKRVWDQGPHVVHQJHU±DVZHOODVWKULOOLQJSURWDJRQLVWVOLNH3KDHGUD +HUFXOHV0HGHDDQG$WUHXVZKRDFWHGRXWIRUELGGHQGHVLUHVDQGLPSXOVHV6HQHFD HVSHFLDOO\LQVSLUHGRQHSRSXODUDQGOXULGNLQGRI5HQDLVVDQFHWUDJHG\WKHWUDJHG\ RIUHYHQJH

7KHDVVRFLDWLRQZLWKWKHGHSLFWLRQRIDWURFLW\KDVQRWVHUYHG6HQHFD¶VUHSX WDWLRQ ZHOO LQ PRUH UHFHQW WLPHV WKH QRWDEOH H[FHSWLRQ EHLQJ$QWRQLQ$U WDXG ZKR FRQVLGHUHG 6HQHFD WKH FORVHVW SUHFXUVRU WR KLV RZQ ³7KHDWUH RI &UXHOW\´ 1RWWRRORQJDJRWKHHTXLYDOHQWWR0LROD¶VQHZKLVWRULFLVWPRYH

 (DUOLHUVFKRODUVKLSLQFOXGHV5HJHQERJHQ&KDUOWRQ%DUQHU/HIqYUH 6FKPLGWZKRFDOOV6HQHFDWKH³9DWHUGHUQHX]HLWOLFKHQHXURSlLVFKHQ LQVEHVRQGHUHGHUP\WKRORJLVFKHQ7UDJ|GLH´ 6HHQRZDOVR6WDOH\  0LROD  $UWDXGLQDOHWWHUWRKLVIULHQG-HDQ3DXOKDP'HFHPEHU ³« KH>6HQHFD@ VHHPVWRPHWREHWKHJUHDWHVWWUDJLFDXWKRULQKLVWRU\«  .$IU@LVVSRNHQE\(XULSLGHV>«@WKHQLW LVWHPSWLQJWRLPDJLQHDVFHQDULRLQZKLFKKHFDPHEDFNIURP+DGHVWRSURWHVWWKDW

7KH&ODVVLFDO7UDJHGLDQVIURP$WKHQLDQ,GROVWR:DQGHULQJ3RHWV



FHQWXU\$' SUHVHUYHVDQDQHFGRWHWKDWVLPLODUO\WR+HUPLSSXV¶GHSLFWV 'LRQ\VLXVDVGHVSHUDWHWRDFTXLUHWKH$WKHQLDQWUDJHGLDQV¶SRVVHVVLRQV /XFLDQVXJJHVWVWKDWWKLV]HDOZDVPRWLYDWHGE\WKHW\UDQW¶VRZQSRHWLF IDLOXUHV :KHQ'LRQ\VLXV¿QDOO\¿JXUHGRXWWKDWHYHU\RQHZDVODXJKLQJDWKLP>EHFDXVHRI KLVWHUULEOHWUDJHGLHV@KHZHQWWRJUHDWOHQJWKVWRJHWKLVKDQGVRQ$HVFK\OXV¶ZD[ WDEOHWVWKLQNLQJWKDWWKURXJKWKHWDEOHWVKHWRRZRXOGEHGLYLQHO\LQVSLUHG>਩ȞșİȠȢ@ 1HYHUWKHOHVVZKHQKHZURWHXSRQLWKHFRPSRVHGWKLQJVIDUPRUHULGLFXORXV>ȝĮțȡ૶ ȖİȜȠȚȩIJİȡĮ@«$GYHUVXV,QGRFWXP 

'LRQ\VLXVWKHQZDVDSSDUHQWO\UHPHPEHUHGLQDQWLTXLW\QRWRQO\IRUKLVDW WHPSWVWROLQNKLVQDPHZLWKWKDWRI(XULSLGHVDVLQ+HUPLSSXV¶DFFRXQW EXW IRUDSSHDOLQJWRZKDWKHFRQVLGHUHGWKHWDOLVPDQLFSRZHUVRIWKHSK\VLFDODU WLIDFWVVXUYLYLQJIURPWKHFUHDWLYHSURFHVVHVRIWKHFODVVLFDOWUDJHGLDQV7DNHQ WRJHWKHU+HUPLSSXVDQG/XFLDQ¶VVWRULHVSRUWUD\D'LRQ\VLXVZKREHOLHYHG WKDWRZQHUVKLSRIWKHSRHWV¶ZULWLQJPDWHULDOVFRXOGPDNHKLPKHLUWRWKHSR HWLFJHQLXVHVDQGOHJDFLHVRIWKHLUIRUPHURZQHUV7KLVQRWLRQWKDW'LRQ\VLXV KRSHGE\XVLQJ$HVFK\OXV¶WDEOHWVWREHFRPHVLPLODUO\਩ȞșİȠȢDOVRQRGVWRDQ DQFLHQWWUDGLWLRQWKDWFRQVLGHUHGWKHZRUNVRIWKHFODVVLFDOWUDJHGLDQVDVKDY LQJEHHQGLYLQHO\LQVSLUHG%XWZKLOH$HVFK\OXV6RSKRFOHVDQG(XULSLGHV PD\KDYHKDGWKH0XVHVWRDLGWKHLUDUWLQ/XFLDQ¶VDFFRXQWZHVHHWKHHSL JRQDODQGXQWDOHQWHG'LRQ\VLXVORRNLQJWRWKHHDUOLHUSRHWVWKHPVHOYHV±DQG VSHFL¿FDOO\WRWKHLUUHOLFV±IRUKLVRZQVRXUFHRIHQWKRXVLDVPRV 7KHQDUUDWHGWUDJLFUHOLFFROOHFWLQJRI'LRQ\VLXVWKXVUHYHDOVFHUWDLQEH OLHIVZKHWKHUKHOGE\'LRQ\VLXVKLPVHOIRUH[DJJHUDWHGE\WKHPDQ\DXWKRUV

   



VXFK D ȜȦȕȘIJ੽Ȣ IJȑȤȞȘȢ DV 'LRQ\VLXV KDG HQMR\HG WKH GUDPDWLF VXFFHVV ZKLFK KH KLPVHOIKDGQRWRULRXVO\IDLOHGWRZLQ´ 7KHWZRDQHFGRWHVPD\UHSUHVHQWYDULDQWYHUVLRQVRIWKHVDPHVWRU\ %LQJFLWHVWKH$HVFK\OHDQVWRU\DWQ2Q'LRQ\VLXV¶UHSXWDWLRQIRULQFRPSH WHQFHDVDSRHWVHHHVS&LFHUR7XVFXODQ'LVSXWDWLRQV 6QHOO7U*)'LRQ\ VLXV7  &I.DUDYDV &IHJ$WKHQDHXVHZKHUHZHKHDUWKDWWKH$WKHQLDQVDOORZHGWKHPDULRQHW WHHU3RWKHLQXVWRXVHWKHVDPHVWDJHDVWKDWZKLFKKDGEHHQXVHGE\(XULSLGHVDQG KLV FRQWHPSRUDULHV IRU WKHLU ³GLYLQHO\LQVSLUHG SOD\V´ ਕij¶ ਸȢ ਥȞșȠȣıȓȦȞ Ƞੂ ʌİȡ੿ Ǽ੝ȡȚʌȓįȘȞ  .DQQLFKW7U*)7  7KH LGHD WKDW SRHWV SHUIRUPHG XQGHU WKH LQÀXHQFH RI WKH JRG LV DUWLFXODWHG E\ 6RFUDWHVLQ3ODWR¶V,RQIRUWKH³SUHVXSSRVWLFXOWXUDOL´RI6RFUDWHV¶DUJXPHQWVVHH 9HODUGL±FIDOVR3ODWR$SRORJ\E±ZKLFKLVHYHQFLWHGLQWKHVFKR OLDWR$HVFK\OXV¶6HYHQ$JDLQVW7KHEHVDG± 2Q$HVFK\OXVDQG6RSKRFOHV¶ GLYLQH³LQLWLDWLRQV´VHH3DORPDU3pUH]±)RUDQRWKHUZD\LQZKLFKWKH WUDJHGLDQVZHUH0XVHOLNHVHH/DGD5LFKDUGVZKRDUJXHVWKDWLQGUDPDWLF SHUIRUPDQFHVWKH0XVH¶V³SLYRWDOPHGLDWLQJIXQFWLRQKDVQRZEHFRPHDPDOJDPDW HG ZLWK WKH UROH RI WKH SRHWD FUHDWRU KLPVHOI WKH GUDPDWLVW µSOD\V 0XVH¶ WR WKLV VWDJHDFWRUWKHSURIHVVLRQDOSHUIRUPHUZKRZLOOEULQJKLVFUHDWLRQVLQWREHLQJ´



-RKDQQD+DQLQN

ZKRODPSRRQHGKLP DERXWZKDWPHDQVZHUHDYDLODEOHIRUWKHWUDQVPLVVLRQ DQG DSSURSULDWLRQ RI OLWHUDU\ KHULWDJH ,Q IHUYHQWO\ DFTXLULQJ WKH SHUVRQDO HIIHFWVRIWUDJHGLDQV'LRQ\VLXVLVUHSUHVHQWHGDVVHHNLQJWRFRPHLQWRSRV VHVVLRQRQWKHRQHKDQGRIWKHLUDUWLVWLFWDOHQWRUGLYLQHLQVSLUDWLRQ EXWRQ WKHRWKHURIWKHSDWULPRQ\IRUZKLFKWKHVHSK\VLFDOREMHFWVVWRRGDQGZKLFK LWVHOIKHOGWKHSRZHUWROHJLWLPL]HKLVRZQDWWHPSWVDWWUDJLFFRPSRVLWLRQ +LV FDVH WKXVUHSUHVHQWVDQRWKHULQVWDQFHLOOXVWUDWLQJWKH FRPPRGL¿FDWLRQ RIWKHOHJDFLHVRIWKHWUDJHGLDQVWKHPVHOYHVDJDLQDQLPSRUWDQWHOHPHQWLQ SURFHVVHVRIWUDJHG\¶V UHFHSWLRQ ZKLOH LQ /\FXUJXV¶$WKHQV WKH FLW\¶V ELG IRU WKLV LQKHULWDQFH PDQLIHVWHG LWVHOI LQ SDUW WKURXJK WKH SXEOLF GLVSOD\ RI SRUWUDLWVWDWXHVLQ6LFLO\ZHVHH'LRQ\VLXVKRSHIXOO\FRQVLGHULQJKLVSULYDWH RZQHUVKLSRI$HVFK\OXVDQG(XULSLGHV¶SHQVWDEOHWVDQGO\UHVDVWKHNH\WR IROORZLQJLQWKHLUSRHWLFIRRWVWHSV

 ,QWKHVHFRQGSDUWRIWKHIRXUWKFHQWXU\FHUWDLQUKHWRULFLDQVSUDLVHGWKHWUD JHGLDQV IRU KDYLQJ XVHG WKHLU DUW WR VWDJH$WKHQLDQ SDWULRWLVP ,Q WKH ¿UVW KDOI RI WKH FHQWXU\ KRZHYHU 3ODWR DSSHDUV WR KDYH WDNHQ D OHVV LGHDOLVWLF YLHZRIWKHVDPHSRHWV¶FLYLFYLUWXHVDQGYDOXHZKHQKHSRUWUD\HG6RFUDWHV DVFRQGHPQLQJWKHWUDJHGLDQVDQGH[SOLFLWO\(XULSLGHV IRUWKHLUWHQGHQF\ WRJORULI\W\UDQWV,Q5HSXEOLFIRUH[DPSOH*ODXFRQDQROGHUEURWKHURI 3ODWR¶V  DJUHHV ZLWK 6RFUDWHV WKDW WUDJHG\ LV D ZLVH WKLQJ DQG WKDW W\UDQWV DUHZLVHIRUNHHSLQJFRPSDQ\ZLWKWUDJHGLDQVDE +HREVHUYHVWKDW (XULSLGHV VLQJVWKHSUDLVHV>ਥȖțȦȝȚȐȗİȚ@RIW\UDQQ\DVVRPHWKLQJJRGOLNHDQGVD\VPDQ\RWKHU VXFKWKLQJV±ERWK(XULSLGHVDQGWKHRWKHUSRHWVGRWKLV

6RFUDWHVLVRIWKHVDPHPLQGDQGUHVSRQGVWR*ODXFRQZLWKDFRQFOXVLRQ DERXW WKH UHODWLRQVKLS EHWZHHQ WUDJHGLDQV DQG WKH LGHDO VRFLHW\ WKDW ORRNV ZKROO\FRQWUDGLFWRU\WR/\FXUJXV¶DSSUDLVDORIWUDJHG\¶VYDOXHODWHULQWKH FHQWXU\ 6LQFHWKHQWKH\DUHZLVH>ıȠijȠ੿੕ȞIJİȢ@WKHSRHWVRIWUDJHG\ZLOOIRUJLYHXVDQG WKRVHZKRKDYHJRYHUQPHQWVVLPLODUWRRXUVIRUQRWZHOFRPLQJWKHPLQWRRXUVWDWH >ʌȠȜȚIJİȓĮȞ@ODXGLQJ>ਫ਼ȝȞȘIJȐȢ@W\UDQQ\DVWKH\GRE

$IWHUDOOIRUWKH6RFUDWHVRIWKH5HSXEOLFPLPHWLFSRHWU\LQJHQHUDOLVFDSDEOH RIHIIHFWLQJGHJUDGDWLRQIURPWKHSKLORVRSKLFDOWRWKHW\UDQQLFDOVRXODQGLWV SRHWVKRXOGEHEDUUHGIURPWKHZHOORUGHUHGİ੝ȞȠȝİ૙ıșĮȚ FLW\VLQFHKHIRVWHUV IJȡ੼ijİȚ DSDUWRIWKHVRXORWKHUWKDQWKDWZKLFKLVWKHEHVWȕ੼ȜIJȚıIJȠȞE 

 )HUUDULFRPSDULQJLQSDUWLFXODU5HSXEOLFGDQGE

7KH&ODVVLFDO7UDJHGLDQVIURP$WKHQLDQ,GROVWR:DQGHULQJ3RHWV



$WWKLVSRLQWKRZHYHU,ZLVKWRSXUVXHDWKLUGLQWHUSUHWDWLRQRIWUDJ HG\¶VRUUHDOO\WKHWUDJHGLDQV¶ SROLWLFVWKHHYLGHQFHIRUZKLFKFRPHVIURP WZRRIWKHDQFLHQWELRJUDSKLHV7KH9LWDHRI$HVFK\OXVDQG(XULSLGHVIRUH JURXQGQDUUDWLYHVRIHDFKSRHW¶VYLVLWWRSODFHVIDUIURP$WKHQVERWKSRHWV DUHVDLGWRKDYHZRUNHGDQGGLHGDWWKHFRXUWRIDPDJQDQLPRXVIRUHLJQNLQJ ±$HVFK\OXVLQ6LFLO\DWWKHFRXUWRI.LQJ+LHURQRI6\UDFXVHUHLJQHG± %& DQG(XULSLGHVLQ3HOODDWWKHFRXUWRI.LQJ$UFKHODXVRI0DFHGRQ UHLJQHG±%& ,QWKHVH9LWDHWKHUHODWLRQVKLSEHWZHHQ³W\UDQQ\´ DQGWKHWUDJHGLDQLVDVLWLVIRU3ODWR¶V6RFUDWHVFHUWDLQO\H[SOLFLWEXWKHUH WKHUHODWLRQVKLSLVFDVWDVDSRVLWLYHDQGSURGXFWLYHRQH)URPWKHVHWH[WV ZHKHDURIKRZWKHWZRWUDJHGLDQVZHUHUHFHLYHGIDUPRUHZDUPO\E\WKH PRQDUFKV ZKR KRVWHG WKHP WKDQ E\ WKHLU IHOORZ FRXQWU\PHQ ,Q IDFW WKH ³H[LOHV´RIERWKSRHWVIURPWKHLUFRPPRQQDWLYHFLW\DUHH[SODLQHGLQERWK 9LWDH E\ VRPH LQMXVWLFH RU FDODPLW\ WKDW WKH\ VXIIHUHG DW WKH KDQGVRI WKH $WKHQLDQV,PSRUWDQWO\PRUHRYHUVHHIXUWKHUEHORZ WKHWZRELRJUDSKLHV HDFKQDPHRQHGUDPDZKLFKWKHSRHWFRPSRVHGLQKRQRURIKLVUR\DOSD WURQZKHQ+LHURQZDVIRXQGLQJWKHFRORQ\RI$HWQD$HVFK\OXV±ZKRP 0DFURELXVZRXOGODWHUFDOOYLUXWLTXH6LFXOXV±SURGXFHGWKH$HWQDHDHWR DXJXUDJRRGOLIHIRUWKHFLW\¶VV\QRHFLVWVKDOIDFHQWXU\ODWHU(XULSLGHVLV VXSSRVHGWRKDYHZULWWHQKLV$UFKHODXVDERXWWKHP\WKLFDO$UFKHODXV¿UVW NLQJ RI 0DFHGRQ  IRU KLV SDWURQ DQG IULHQG WKH 0DFHGRQLDQ NLQJ %RWK QDUUDWLYHVWKXVVHHPWRUHÀHFWWUDGLWLRQVDERXWWUDJHG\FKDUDFWHUL]HGE\DGH  2QSDWURQDJHDQGWKHWUDJHGLDQVVHH%UHPHU)RU$HVFK\OXVLQ6LFLO\VHHHVS &DWDXGHOOD+HULQJWRQDQG*ULI¿WKRQ(XULSLGHVLQ0DFHGRQVHH HVS 5HYHUPDQQ ± DQG 6FXOOLRQ  IURP ZKRVH YLHZ , GHSDUW VHH +DQLQN   $HVFK\OXV¶9LWDFLWHVWKUHHH[SODQDWLRQVIRUKLVGHSDUWXUH KLVGHIHDWE\D\RXQJ 6RSKRFOHVFI3OXWDUFK9LWD&LPRQLVI RU 6LPRQLGHVDQG WKHWHUULI\ LQJDSSHDUDQFHRIWKHFKRUXVLQWKH(XPHQLGHVLQIDQWVGLHGDQGSUHJQDQWZRPHQ PLVFDUULHG  † ±  (XULSLGHV¶ 9LWD H[SODLQV WKDW ZKHQ WKH FRPLF SRHWV ULGLFXOHG KLPEHFDXVHRIWKHLUMHDORXV\ijșંȞȠȢVHHHVS6WHYHQV KHGLVGDLQHGWKHLU DEXVHਫ਼ʌİȡȚįઅȞį੻ʌ੺ȞIJĮ DQGOHIWWROLYHLQ0DFHGRQXQWLOKLVGHDWK9(†  6HH&RPSWRQIRUDUHDGLQJRI(XULSLGHVDVDSKDUPDNRVIRUFHGWROHDYH KLVFLW\:HDOVRKHDUWKDW3ODWRHJZDVUHOHQWOHVVO\PRFNHGLQFRPHG\'LRJHQHV /DHUWLXV   6DWXUQDOLD 5DGW7U*)77KHSKUDVHLVXVXDOO\FLWHGLQGLVFXVVLRQV RI$HVFK\OXV¶³6LFLOLDQLVPV´FI$WKHQDHXVF 5DGW7U*)7D+HULQJWRQ ±*ULI¿WK   9$ †  ਥʌİįİ઀ȟĮIJȠ IJ੹Ȣǹ੅IJȞĮȢ ȠੁȦȞȚȗંȝİȞȠȢ ȕ઀ȠȞ ਕȖĮșઁȞ IJȠ૙Ȣ ıȣȞȠȚț઀ȗȠȣıȚ IJ੽Ȟ ʌંȜȚȞ'RXJKHUW\GLVFXVVHVWKHSRHWU\FUHDWHGIRUWKHIRXQGLQJRI$HWQDZKHUH³$H VFK\OXV6LPRQLGHV>30*)@DQG3LQGDU>3\WKLDQ@DOOFHOHEUDWHGWKHFRORQLDO PRPHQWLQFKRUDOVRQJ´   9(†ȤĮȡȚȗંȝİȞȠȢĮ੝IJ૶įȡ઼ȝĮ੒ȝȠȞ઄ȝȦȢ਩ȖȡĮȥİ2QWKHSOD\VHHHVSWKHHGL WLRQ DQG FRPPHQWDU\ RI +DUGHU  %UHPHU  ± VXPPDUL]HV WKH $HW QDHDHDQG$UFKHODXVZLWKVKRUWMX[WDSRVHGDQDO\VHVVHHDOVR7DSOLQ±



-RKDQQD+DQLQN

JUHHRI³GH$WKHQLDQL]DWLRQ´HIIHFWLYHO\H[WUDFWLQJWZRRIWKHJHQUH¶VPRVW LPSRUWDQWDXWKRUVIURPWKHLUDQGWUDJHG\¶V QDWLYHFLW\WKHVWRULHVGHSLFWWKH IRUHLJQNLQJVDQGFRPPXQLWLHVZKRZHOFRPHGWKHPDVIDUEHWWHUMXGJHVRI WKHLUSRHWU\¶VZRUWK ,IIRXUWKFHQWXU\$WKHQLDQRUDWRUVFRQQHFWHGWUDJHG\DQGWKHWUDJHGLDQV FORVHO\ ZLWK$WKHQV DQG SDUWLFXODUO\ ZLWK FHUWDLQ LGHDOV RI$WKHQLDQ FLWL ]HQVKLSLWLVWKHQSHUKDSVVXUSULVLQJWKDWWZRPHPEHUVRI/\FXUJXV¶WUDJLF FDQRQVKRXOGLQWKHLU9LWDHEHVRGLUHFWO\DQGVXFFHVVIXOO\DVVRFLDWHGZLWK IRUHLJQPRQDUFKV,QSRVWFODVVLFDODQWLTXLW\KRZHYHUERWK$HVFK\OXVDQG (XULSLGHVZHUHFRQVLGHUHGWRKDYHEHHQSDUDGLJPDWLFSDUWLFLSDQWVLQZKDW ZHUHSHUFHLYHGDVWKH³DQFLHQW´V\VWHPVRIOLWHUDU\SDWURQDJH)RUH[DP SOHLQWKHVHFRQGFHQWXU\&(3DXVDQLDVWHOOVRIVHHLQJWKHFHQRWDSKRI(X ULSLGHVDQGWRPERI0HQDQGHUDPRQJWKHPRQXPHQWVOLQLQJWKHURDGWKDWOHG IURP$WKHQVWRWKH3HLUDHXV:KHQ3DXVDQLDVH[SODLQVWKDWWKHDFWXDOWRPE RI(XULSLGHVLVLQ0DFHGRQEHFDXVHKHGLHGWKHUHZKLOHDJXHVWRI$UFKHODXV KHUHÀHFWVRQKRZ³HYHQEDFNWKHQ´țĮ੿IJંIJİ NLQJVSOD\HGKRVWVWRSRHWV ,QDVKRUWOLVWRIRWKHUHDUOLHUH[DPSOHVRISRHWVDQGSDWURQVKHWKHQDOVR PHQWLRQVWKHQDPHVRI$HVFK\OXVDQG+LHURQ (YHQWKHQSRHWVZHQWWRWKHFRXUWVRINLQJVDQGVWLOOHDUOLHU$QDFUHRQZHQWWRWKH FRXUWRI3RO\FUDWHVW\UDQWRI6DPRVDQG$HVFK\OXVDQG6LPRQLGHVWUDYHOHGWR+L HURQLQ6\UDFXVH3HULHJHVLV

/LNHZLVH3OXWDUFKLQKLV'H([LOLRDQHDUO\VHFRQGFHQWXU\HVVD\RIFRQVR ODWLRQWRDQH[LOHGIULHQG PHQWLRQVWKHWUDYHOVDQGSDWURQDJHRI$HVFK\OXV DQG(XULSLGHVLQWKHVDPHEUHDWKDOWKRXJKKHJORVVHVRYHUDQ\VXJJHVWLRQ WKDW SUREOHPV LQ$WKHQV ZHUH ZKDW OD\ EHKLQG WKHLU GHSDUWXUH +H DOVR FODLPVWKDWIHZRIWKHZLVHVWDQGPRVWVHQVLEOHPHQDUHEXULHGLQWKHLUQD WLYHFRXQWULHVDQGWKDWPRVWRIWKRVHZKRGLHGDEURDGOHIWWKHLUKRPHODQGV ³IRUFHGE\QRRQH´ȝȘįİȞઁȢਕȞĮȖțȐȗȠȞIJȠȢG 4XRWLQJQLQHYHUVHVE\ (XULSLGHV LQ SUDLVH RI$WKHQV IURP WZR GLIIHUHQW SDVVDJHV RQH RI ZKLFK LV IURP WKH (UHFKWKHXV DQG FRQWDLQV OLQHV DOVR TXRWHG E\ /\FXUJXV  KH DVNVZKRHOVHKDVHYHUSURGXFHGVXFKDQHQFRPLXPRIKLVQDWLYHODQGIJોȢ ਦĮȣIJȠ૨ʌĮIJȡȓįȠȢਥȖțȫȝȚȠȞ \HWUHPLQGVXVWKDW(XULSLGHVOHIWWKDWODQGWR OLYH DW WKH FRXUW RI$UFKHODXV /LNH 3DXVDQLDV 3OXWDUFK SUHVVHV RQ ZLWK

 )RUDQRYHUYLHZRIWKHVHVHH+XQWHU5XWKHUIRUG±DQG%UHPHU  )RUDVXUYH\RIUR\DOSDWURQDJHRISRHWVIURPDUFKDLFWR+HOOHQLVWLFWLPHVVHH+XQWHU ±RQSDWURQDJHDQGWKHSRHWLFVRISUDLVHLQWKHDUFKDLFSHULRGVHHHVS *ROGKLOO±   7KLVLGHDFRQWUDGLFWV3OXWDUFK¶VDFFRXQWLQWKH/LIHRI&LPRQRIKRZ$HVFK\OXVOHIW IRU6LFLO\RXWRIDQJHUįȚ¶ੑȡȖȒȞ DIWHUEHLQJGHIHDWHGE\6RSKRFOHVI   .DQQLFKW7U*)±(UHFKWKHXV DQGDGHVSRWRQ   H

7KH&ODVVLFDO7UDJHGLDQVIURP$WKHQLDQ,GROVWR:DQGHULQJ3RHWV



RWKHUH[DPSOHVRISRHWVZKRGLGWKHVDPH$HVFK\OXV6LPRQLGHV+HURGR WXVDQG+RPHU :KDWPD\WKHQEHHYHQPRUHVXUSULVLQJDERXWWKHELRJUDSKLHVWKDQWKH YHU\SURPLQHQFHRIWKHIRUHLJQQDUUDWLYHVLVKRZIDYRUDEO\WKHUR\DOSDWURQV DUHFKDUDFWHUL]HGZLWKLQWKRVHQDUUDWLYHV±KHUHIRUH[DPSOHZH¿QGQRWUDFH RI WKH W\UDQQLFDO UXOHU ZLWK D SHQFKDQW DV 'LRQ\VLXV , QRWRULRXVO\ KDG IRU EDQLVKLQJ FRXUW SRHWV WR WKH TXDUULHV 5DWKHU ZH KHDU WKDW$HVFK\OXV ZDV ³H[FHHGLQJO\KRQRUHG´E\+LHURQDQGWKH*HORDQVDQGWKDW(XULSLGHVZDV OLNHZLVH³YHU\VXFFHVVIXO´DW$UFKHODXV¶FRXUWVRPXFKVRWKDWKHZDVSXW LQ FKDUJH RI WKH UR\DO ¿QDQFHV $QG \HW LW VHHPV XQOLNHO\ WKDW WKH$WKH QLDQV±DWOHDVW$WKHQLDQVRI/\FXUJXV¶DQG'HPRVWKHQHV¶ SROLWLFDOOHDQLQJV ±ZRXOGKDYHEHHQZHOOGLVSRVHGWRZDUGVHHLQJDQ\0DFHGRQLDQNLQJLQWKH ÀDWWHULQJOLJKWFDVWRQ$UFKHODXVQRWMXVWLQ(XULSLGHV¶9LWDEXWWKURXJKRXW KLVELRJUDSKLFDOWUDGLWLRQ,WKDGEHHQWKH0DFHGRQLDQVOHGE\.LQJ3KLOLS ZKRVODXJKWHUHGWKH$WKHQLDQDQG7KHEDQIRUFHVDW&KDHURQHDLQDQG WKXVLWZDVWKHWKUHDWRI0DFHGRQLDQLQYDVLRQWKDWWULJJHUHGWKHHPHUJHQF\ PHDVXUHV/\FXUJXVVRXJKWWRXSKROGLQKLV$JDLQVW/HRFUDWHVLQSDUWE\LQ YRNLQJ(XULSLGHV¶QDPHDQGSRHWU\7KHWZR\HDUVIROORZLQJ3KLOLS¶VGHDWK LQKDGWKHQVHHQWZR$WKHQLDQUHEHOOLRQVDJDLQVWH[SDQGLQJ0DFHGRQLDQ SRZHU DQG WKH GHFDGH FDPH WR D FORVH ZLWK 'HPRVWKHQHV LPSDVVLRQHGO\ UHSULVLQJLQKLVVSHHFK2QWKH&URZQWKHUKHWRULFDOEDUUDJHDJDLQVW0DFHGRQ WKDWKDGPDUNHGKLV2O\QWKLDFVDQG3KLOLSSLFVLQPRUHRUOHVVWKHSUHYLRXV GHFDGH7KHH[LVWHQFHRIDYLJRURXVDQWL0DFHGRQLDQGLVFRXUVHLQWKHPLG

 2QWKLVSDVVDJHVHH+HULQJWRQ±+HPDLQWDLQVWKDW3DXVDQLDVDQG3OX WDUFKKDGWKHVDPHVRXUFH³2QHPLJKWVXUPLVHWKDWDKDQGERRNRIH[HPSODFRQWDLQ LQJDFKDSWHURQµ)DPRXV/LWHUDU\([LOHV¶XQGHUOLHVERWKOLVWV´SQ   $SRSXODUDQFLHQWVWRU\WROGRIKRZ'LRQ\VLXVVHQWWKHGLWK\UDPELFSRHW3KLOR[HQXV RI &\WKHUD WR WKH 6\UDFXVDQ TXDUULHV DIWHU KH H[SUHVVHG D QHJDWLYH RSLQLRQ DERXW VRPHRI'LRQ\VLXV¶SRHWU\&LFHUR$G$WWLFXP3OX'HWUDQDQHG/X FLDQ,QG$HOLDQ9+ +LHURQKLPVHOILVVDLGE\'LRGRUXVWRKDYHEHHQ H[FHHGLQJO\FUXHOHVSHFLDOO\LQUHODWLRQWRKLVZHOOOLNHGEURWKHU*HORQZKRPKH VXFFHHGHG ±   9$†FI† ıijȩįȡĮ«IJȚȝȘșİȓȢ  9(†ȝȐȜĮİ੣!਩ʌȡĮIJIJİʌĮȡ¶Į੝IJ૶>LH$UFKHODXV@੮ıIJİțĮ੿ਥʌ੿IJ૵ȞįȚȠȚțȒıİȦȞ ਥȖȑȞİIJȠ2QGHWDLOVRI$UFKHODXV¶VXSSRVHGJHQHURVLW\VHH>(XULSLGHV@(SLVWOH  7KHSHUFHSWLRQRIDJRRGFORVHUHODWLRQVKLSEHWZHHQ(XULSLGHVDQG$UFKHODXVUH ÀHFWHGLQ6DW\UXV)UIU;9,,,$XOXV*HOOLXV1$,V>VF(XULSLGHV@ FXPLQ0DFHGRQLDDSXG$UFKHODXPUHJHPHVVHWXWHUHWXUTXHHRUH[IDPLOLDULWHU«  3OXWDUFK5HJXPHWLPSHU$SRWKHJPD>(XULSLGHV@(SLVWOHV  ,Q  ZKHQ WKH 0DFHGRQLDQ DUP\ SURFODLPHG $OH[DQGHU .LQJ VHH %RVZRUWK  ±$OH[DQGHUKDGSURPLVHGWRFRQWLQXHKLVIDWKHU¶VSROLFLHV'LRG6LF  -XVWLQ ± ± DQG LQ  %& ZKHQ IDOVH UHSRUWV RI$OH[DQGHU¶V GHDWK UHDFKHG$WKHQVDQG7KHEHVVHH+DELFKW±   ³7KHRXWFRPHRIWKHWULDOUHSUHVHQWHGDSROLWLFDOWULXPSKIRU'HPRVWKHQHVLWDOVR



-RKDQQD+DQLQN

IRXUWKFHQWXU\FRXSOHGZLWKWKHRUDWRUV¶KDELWRILQYRNLQJFODVVLFDOWUDJHG\WR LOOXVWUDWH$WKHQLDQGHPRFUDWLFLGHDOVPDNHVLWGLI¿FXOWWRDFFHSWWKDWDYLVLRQ RI$UFKHODXV¶FXOWXUHGPDJQDQLPLW\EHORQJHGWRFRQWHPSRUDU\$WKHQLDQORUH /LNHZLVHLWLVGRXEWIXOWKDWWKHUHSUHVHQWDWLRQRI$HVFK\OXV¶ZDUP6LFLOLDQ ZHOFRPHDWWKHFRXUWRI+LHURQFRQWUDVWHGZLWKWKHPDOWUHDWPHQWE\KLVFRXQ WU\PHQ UHSUHVHQWHGDSRSXODU$WKHQLDQYHUVLRQRIHYHQWVLQERWK$HVFK\OXV¶ DQG(XULSLGHV¶FDVHVZHVKRXOGEHKLJKO\ZDU\RIDVVXPLQJWKDWWKHVHQDUUD WLYHVWRRNWKHLUHVVHQWLDO¿QDOVKDSHLQGHPRFUDWLF$WKHQV ,QVWHDGLWLVPRUHSODXVLEOHWKDWWKHVWRULHVVXUURXQGLQJ$HVFK\OXVDQG (XULSLGHV¶SDWURQDJHUHÀHFWRQHRIWKHPHFKDQLVPVE\ZKLFKWUDJHG\¶VVSUHDG WKURXJKWKH*UHHNZRUOGDFKLHYHGDFHUWDLQGLVFXUVLYHMXVWL¿FDWLRQQDPHO\ WKURXJKWKHPROGLQJRIWKHWUDJHGLDQV¶ELRJUDSKLHV(OVHZKHUH,KDYHDUJXHG WKDWUHJDUGOHVVRIWKHUHDOWUXWKRIWKHVWRU\(XULSLGHV¶VWD\LQ0DFHGRQEH FDPHVRHPSKDVL]HGLQKLVELRJUDSK\EHFDXVHWKHWUDGLWLRQIRULWZDVODUJHO\ DSURGXFWRIDWLPHDQGSODFHWKLUGFHQWXU\%&$OH[DQGULD ZKRVHUXOHUVWKH 3WROHPLHV ZDQWHGWRSUHVHQWWKHPVHOYHVDVWKHOHJLWLPDWHKHLUVWRWKHOHJD F\RI(XULSLGHV¶±DQGE\H[WHQVLRQWUDJHG\¶V±SDWURQDJH$QGZKLOHLWLV LPSRVVLEOHWRSLQSRLQWWKHFKURQRORJLFDORUJHRJUDSKLFDOSURYHQDQFHVRIWKH WHVWLPRQLDIRUWKHVHELRJUDSKLFDOWUDGLWLRQVWKHLURYHUULGLQJGLVVRQDQFHZLWK RXULGHDRI$WKHQV¶RZQVHQVHRILWVFXOWXUDOSULPDF\DQGSDWULPRQ\DWOHDVW LQWKHIRXUWKFHQWXU\%&PDNHVLWUHDVRQDEOHWRVXVSHFWWKDWWKH\DUHSURGXFWV RIDGLIIHUHQWFRQWH[W,WLVDOVRZRUWKQRWLQJWKDW$HVFK\OXV¶DQG(XULSLGHV¶ SDWURQDJHQDUUDWLYHVDUHHIIHFWLYHO\GLVWULEXWHGEHWZHHQWKHWZRSODFHVLQWKH *UHHNZRUOGRXWVLGHRI$WKHQVQDPHO\0DJQD*UDHFLDDQG0DFHGRQZKHUH HYLGHQFHIRUWUDJHG\¶VHDUO\SRSXODULW\LVPRVWDEXQGDQW7KHSULPDU\VSHDNHU LQ6DW\UXV¶ELRJUDSK\RI(XULSLGHVODWHWKLUGRUHDUO\VHFRQGFHQWXU\%&  HYHQUHPDUNVWKDWWKH$WKHQLDQVRQO\HYHUOHDUQHGWRORYH(XULSLGHVEHFDXVH RIWKHH[DPSOHVHWIRUWKHPE\SUHFLVHO\WKHVHWZRJURXSVRIIRUHLJQHUV ,WLVQRWZRUWKZKLOHWRPHQWLRQ>WKHWDVWH@RIWKH$WKHQLDQVVLQFHWKH\DWDQ\UDWH OHDUQHGODWHUZKDWDJUHDWSRHW>(XULSLGHV@ZDVIURPWKH0DFHGRQLDQVDQG6LFLO LDQV)UIU;,;6FKRUQ

  



LQGLFDWHGFOHDUO\WKDWSRSXODURSSRVLWLRQWR0DFHGRQLDZDVVWLOOZLGHVSUHDGDQGWKDW 0DFHGRQLDZDVLQGHHGWKHSULPHWDUJHWRI$WKHQLDQQDWLRQDOVHQWLPHQW´+DELFKW   7KHVWXG\RI.RZDO]LJKRZHYHUKLVWRULFL]HVWKHHYLGHQFHIRU$HVFK\OXV¶WLPH LQ6LFLO\DQGPDNHVDQLPSRUWDQWFDVHIRUWKHSROLWLFDODQGHFRQRPLFLPSRUWDQFHDQG LPSOLFDWLRQVRIWUDJHG\¶VHDUO\DUULYDORQWKHLVODQG +DQLQN 7KHVWDQGDUGHGLWLRQRI6DW\UXVLV6FKRUQWKRXJK$UULJKHWWLDQHGLWLRQ RQO\RIWKHȕȓȠȢRI(XULSLGHVUHPDLQVXVHIXOIRULWVLQWURGXFWLRQDQGQRWHV2QWKH GDWHVRI6DW\UXVVHH:HVWZKRDUJXHVKHZDVDSHULSDWHWLFRI$ULVWRWOH¶VVFKRRO LQ$WKHQV±QRWDQ$OH[DQGULDQVFKRODU (XULSLGHVVHHPVWRKDYHEHHQV\PSDWKHWLFWRRWKHUVLQWKHVDPHVLWXDWLRQKHVXSSRV

7KH&ODVVLFDO7UDJHGLDQVIURP$WKHQLDQ,GROVWR:DQGHULQJ3RHWV



$VZHVKDOOVHHWKHVSHDNHULQ6DW\UXV¶GLDORJXHLVLQIDFWSDUWLFLSDWLQJLQD ODUJHUGLVFXVVLRQDERXWZKHUHPHPRU\RI$HVFK\OXVDQG(XULSLGHVZDVPRVW OHJLWLPDWHO\ORFDWHGZKHWKHULQWKHLUQDWLYH$WKHQVRULQWKHIRUHLJQODQGV ZKHUHWKH\ZHUHEXULHGDQGZKRVHSHRSOHKDGEHWWHUDSSUHFLDWHGWKHP

 ,QWKHOLJKWRIWKHVWRULHVRIWKHWUDJHGLDQV¶GHDWKVDEURDGLWLVQRWSDUWLFXODUO\ VXUSULVLQJWKDWWKUHDGVRIWKHGHEDWHRYHU³RZQHUVKLS´RIWKHLUOHJDFLHVUXQ VWURQJLQVHSXOFKUDOHSLJUDPZKHUHDSHUVLVWHQWWKHPHLQWKHHSLWDSKVIRUERWK $HVFK\OXVDQG(XULSLGHVLVWKHIDFWRIWKHIRUHLJQJUDYHVLWH$QHSLWDSKE\ $QWLSDWHURI7KHVVDORQLFDIRUH[DPSOHGHVFULEHV$HVFK\OXVDV³GRLQJKRQRU WR7ULQDFULD>LH6LFLO\@ZLWKKLVWRPE´ ±HYHQWKRXJK$HVFK\OXV¶9LWD VXJJHVWV WKDW WKH KRQRU ÀRZHG SULPDULO\ LQ WKH RSSRVLWH GLUHFWLRQ VLQFH LW ZDVWKH*HORDQVZKRKRQRUHGKLPZLWKEXULDOLQWKHLUFLW\FHPHWHU\†  ,Q DQRWKHU HSLJUDP DVFULEHG WR 'LRGRUXV RI 6DUGLV WKH WRPEVWRQH LQIRUPV SDVVHUVE\WKDW$HVFK\OXVOLHV³E\WKHZKLWHZDWHUVRI*HODLQ6LFLO\IDUIURP WKH&HFURSLDQ>LH$WKHQLDQ@ODQG´$QHSLWDSKDVFULEHGWR,RQRI&KLRVFDOOV (XULSLGHVWKH³JORU\RI$WKHQV´țંıȝȠȞਝșȘȞ૵Ȟ DQGUDWLRQDOL]HVWKDWKLV WRPE LV LQ 3HOOD VLQFH DV D VHUYDQW RI WKH 0XVHV KH GHVLUHG WR GZHOO QHDU 3LHULD 2WKHUHSLWDSKVIRU(XULSLGHVQRWRQO\XQGHUVFRUHWKHVWUDQJHQHVVRIKLV ¿QDOUHVWLQJSODFHEXWDFFRXQWIRULWE\HQJDJLQJWKHLUSRHWLFVLQORQJVWDQG LQJGLVFRXUVHVDERXWPHPRU\¶VORFDOL]DWLRQ7KHSRHPVXSSRVHGO\LQVFULEHG RQ(XULSLGHV¶FHQRWDSKWKHVDPHPRQXPHQWPHQWLRQHGE\3DXVDQLDV DW WULEXWHGLQ(XULSLGHV¶9LWDWRHLWKHU7KXF\GLGHVRU7LPRWKHXVGHFODUHVWKDWLQ UHDOLW\LWLV³DOO+HOODV´WKDWVHUYHVDV(XULSLGHV¶IXQHUDOPRQXPHQWȝȞોȝĮ  ȂȞોȝĮȝ੻ȞਬȜȜ੹ȢਚʌĮı¶Ǽ੝ȡȚʌ઀įȠȣǜੑıIJ੼Įį¶੅ıȤİȚ ȖોȂĮțİįઆȞIJૌȖ੹ȡį੼ȟĮIJȠIJ੼ȡȝĮȕ઀Ƞȣ

  



HGO\FRQVROHGDQGHQFRXUDJHG7LPRWKHXVZKHQKHZDVFULWLFL]HGE\WKH*UHHNVIRU KLVPXVLFDOLQQRYDWLRQțĮȚȞȠIJȠȝȓĮ 6DW\UXV)UIU;;,,6FKRUQ3OXWDUFK$Q VHQLG $QWLSDWHU;,,,*RZ3DJH $3 6HH:LOVRQHVS± 'LRGRUXV;,,,*RZ3DJH $37KHHSLJUDPJRHVRQWREHZDLOWKHijșȩȞȠȢWKDW SODJXHVWKH³GHVFHQGHQWVRI7KHVHXV´2QWKHHSLWDSK$HVFK\OXVVXSSRVHGO\FRP SRVHGIRUKLPVHOI$WKHQDHXVF3DXVDQLDVFI9LWD$HVFK\OL† VHH 6RPPHUVWHLQ± ,RQRI&KLRV'LHKO $3੪ȢਗȞ੒Ȝ੺IJȡȚȢ_ȆȚİȡ઀įȦȞȞĮ઀ૉȢਕȖȤંșȚȆȚİȡ઀ȘȢ OLQHV±FI$3±DOVRDVFULEHGWR,RQRI&KLRV±OLQHV± 7KHDWWULEXWLRQ RIWKHHSLJUDPVWR,RQLVFRQVLGHUHGVSXULRXVVHHPRVWUHFHQWO\/HXULQL 



-RKDQQD+DQLQN

ʌĮIJȡ੿Ȣį¶ਬȜȜ੺įȠȢਬȜȜĮȢਝșોȞĮȚʌȠȜȜ੹į੻ȝȠ઄ıĮȚȢ IJ੼ȡȥĮȢਥțʌȠȜȜ૵ȞțĮ੿IJઁȞ਩ʌĮȚȞȠȞ਩ȤİȚ9(† $3 $OO+HOODVLVWKHIXQHUDOPRQXPHQWRI(XULSLGHV\HWWKH0DFHGRQLDQJURXQGKROGV KLV ERQHV VLQFH WKHUH KH PHW ZLWK WKH HQG RI KLV OLIH %XW KLV IDWKHUODQG ZDV WKH +HOODVRI+HOODV$WKHQV6LQFHKHRIWHQGHOLJKWHGRWKHUVZLWKWKH0XVHVKHKDVWKH SUDLVHRIPDQ\

7KHSKUDVH³DOO+HOODV´ਚʌĮıĮਬȜȜȐȢ DOVRDSSHDUVLQ7KXF\GLGHV¶+LVWRULHV DQGLQRWKHUUHVSHFWVWKHHSLJUDPHFKRHVLGHRORJ\H[SUHVVHGLQWKH7KXF\ GLGHDQDFFRXQWRI3HULFOHV¶IXQHUDORUDWLRQ±UHJDUGOHVVRIWKHWUXWKRIWKHDW WULEXWLRQWR7KXF\GLGHVWKHHSLJUDPZRXOGVHHPWRHQJDJHZLWKKLVZRUN)RU H[DPSOHZKLOHWKHDXWKRURIWKHHSLWDSKFDOOV$WKHQVWKH³+HOODVRI+HOODV´ LQWKHVHFRQGERRNRIWKH+LVWRULHV3HULFOHVFODLPVWKDWWKHZKROHRI$WKHQVLV ³WKHVFKRRORI+HOODV´ȜȑȖȦIJȒȞIJİʌ઼ıĮȞʌȩȜȚȞIJોȢਬȜȜȐįȠȢʌĮȓįİȣıȚȞİੇȞĮȚ  (YHQPRUHVWULNLQJDUHWKHLGHRORJLFDOSRLQWVRIFRQWDFWZLWK3HUL FOHV¶LGHQWL¿FDWLRQRIWKHHSLWDSKLRVORJRVLWVHOIDVDNLQGRIVHSXOFKHUIJȐijȠȢ  7KH$WKHQLDQGHDGKHVD\VKDYHZRQXQDJLQJSUDLVHਕȖȒȡȦȞ਩ʌĮȚȞȠȞFI OLQHRI$3DERYH DQGWKHPRVWGLVWLQJXLVKHGRIDOOWRPEVIJઁȞIJȐijȠȞ ਥʌȚıȘȝȩIJĮIJȠȞ ZKLFKLV QRWWKHRQHLQZKLFKWKH\OLHEXWWKHRQHLQZKLFKWKHLUJORU\VXUYLYHVLQHYHUODVWLQJ UHPHPEUDQFHFHOHEUDWHGRQHYHU\RFFDVLRQZKLFKJLYHVULVHWRZRUGRIHXORJ\RU GHHGRIHPXODWLRQWUDQVO6PLWK

7KXF\GLGHV¶3HULFOHVJRHVRQWRH[SODLQ )RUWKHZKROHZRUOGLVWKHVHSXOFKHU>IJȐijȠȢ@RIIDPRXVPHQDQGLWLVQRWWKHHSLWDSK XSRQPRQXPHQWVVHWXSLQWKHLURZQODQGWKDWDORQHFRPPHPRUDWHVWKHPEXWDOVR LQODQGVQRWWKHLURZQWKHUHDELGHVLQHDFKEUHDVWDQXQZULWWHQPHPRULDO>ਙȖȡĮijȠȢ ȝȞȒȝȘ@ RI WKHP SODQWHG LQ WKH KHDUW UDWKHU WKDQ JUDYHQ RQ VWRQH  WUDQVO 6PLWK

7KHDXWKRURIWKHHSLWDSKRI(XULSLGHVKRZHYHUDGMXVWVWKH³3HULFOHDQ´PRG HORIPHPRU\WRGLVFRXQWWKHVLJQL¿FDQFHRIWKHSUHVHQFHRI(XULSLGHV¶JUDYH LQDIRUHLJQODQGMXVWDV3HULFOHVVXJJHVWVWKDWORJRVȝȞȒȝȘ KDVWKHSRZHU WRVXUPRXQWWKHJHRJUDSKLFDOUHVWULFWLRQRID¿[HGHUJRQWKHIJȐijȠȢLWVHOI  0DQ\SUDLVH(XULSLGHVMXVWDVPDQ\ZLOODOZD\VSUDLVHWKH$WKHQLDQGHDG  +LVW1RWHWKDWLQRQHRIWKH(SLVWOHVRI>(XULSLGHV@(XULSLGHV ZULWHVDOHWWHURIFRQGROHQFHWR6RSKRFOHVIRUDVKLSZUHFNRQWKHZD\WR&KLRV$S SDUHQWO\VRPHRI6RSKRFOHV¶SOD\VZHUHORVWDQGµ(XULSLGHV¶FDOOVWKLVPLVIRUWXQH DORVVSUHFLVHO\WRDOO*UHHFHµਚʌĮıĮਬȜȜȐȢ¶ਸ਼ȞIJȓȢȠ੝Ȥ੿țȠȚȞ੽ȞਖʌȐıȘȢਬȜȜȐįȠȢ ȞȠȝȓıİȚİȞਙȞ   $FRPSDULVRQUHFRJQL]HGDOVRE\*RPPHDGORFZKRSDUDSKUDVHV+LSSLDVRI (OLV¶FODLPLQ3URWDJRUDVG³DOOPHQRIVFLHQFHDQGOHDUQLQJDUHE\QDWXUHDNLQ DQGIHOORZFLWL]HQVDQGKHUHLQ$WKHQVWKH\ZHUHıȣȞİȜȘȜȣșȩIJĮȢIJોȢਬȜȜȐįȠȢİੁȢ Į੝IJઁIJઁʌȡȣIJĮȞİ૙ȠȞIJોȢıȠijȓĮȢ´2QWKHWRSRVRI$WKHQVDVWKH³VFKRRORI*UHHFH´ VHH0RVW  &I/RUDX[³DIWHUSURFODLPLQJWKHVXSHULRULW\RIHUJRQRYHUORJRV>3HUL

7KH&ODVVLFDO7UDJHGLDQVIURP$WKHQLDQ,GROVWR:DQGHULQJ3RHWV



7KLV FRQFHSWXDO VOLSSDJH EHWZHHQ IJȐijȠȢ DV ³WRPE´ DQG IJȐijȠȢ DVWKH ³UHSRVLWRU\RIPHPRU\´DOVRDSSHDUVLQDQRWKHUVHSXOFKUDOHSLJUDPIRU(X ULSLGHVVXSSRVHGO\E\$GDHXVRI0\WLOHQH$OWKRXJKFRQFHGLQJWKDW(X ULSLGHV¶ERG\OLHVLQ0DFHGRQZKHUHLWLV³KRQRUHGE\WKHFRPSDQLRQVKLSRI $UFKHODXV´ਦIJĮȚȡİ઀ૉIJ઀ȝȚȠȢਝȡȤ੼ȜİȦ $GDHXVUKHWRULFDOO\GLVSHOVWKHLGHD WKDWWKLVLVWKHVLWHRIKLVWUXHIJ੺ijȠȢ ıȠ੿į¶Ƞ੝IJȠ૨IJȠȞਥȖઅIJ઀șİȝĮȚIJ੺ijȠȞਕȜȜ੹IJ੹ȕ੺țȤȠȣ ȕ੾ȝĮIJĮțĮ੿ıțȘȞ੹Ȣਥȝȕ੺įȚıİȚȠȝ੼ȞĮȢ ±*3 $3± +RZHYHU,GRQRWFRQVLGHUWKLV\RXUWRPEEXWUDWKHUWKHVWDJHVRIDQGVFHQHSDLQW LQJVRI%DFFKXVWKDWTXDNHZLWKWKHVWHSRIEXVNLQV

Ƞ੡ʌȠIJİıઁȞ ȝȞોȝĮǼ੝ȡȚʌ઀įȘȢ੕ȜȠȚIJંʌȠȣ@EHFDXVHDQH[FHSWLRQDOSRHWKDGGLHGDQGZDVEXU LHGLQWKHLUODQG1$

+HUHWKHȝȞોȝĮWKDWWKH0DFHGRQLDQVGHFODUHZLOOQHYHUEHGHVWUR\HGGRHV WKHGRXEOHZRUNMXVWDVWKHZRUGIJ੺ijȠȢGRHVLQ7KXF\GLGHVDQG$GDHXV RIVLJQLI\LQJQRWRQO\WKHJUDYHPRQXPHQWLWVHOIEXWDOVRWKHFRPPXQLW\¶V PHPRU\RIWKHSRHWZKRZDVQRZDSSDUHQWO\KRQRUHGE\WKH0DFHGRQLDQV DVDGHIDFWR³ORFDO´RQH

 7KHPDQXVFULSWWUDQVPLWWHG9LWDHRI$HVFK\OXVDQG(XULSLGHVLQDGGLWLRQWR RWKHUWHVWLPRQLDIRXQGHOVHZKHUHHJLQ3DXVDQLDVDQG3OXWDUFK VHUYHWR QRUPDOL]HWKHWUDYHOVRIWKHWZRSRHWVDVZHOODVWRSRUWUD\WKHPDVKDYLQJ EHHQEHVWDSSUHFLDWHGRXWVLGHRI$WKHQVLQIRUHLJQODQGVIJ૵Țʌȡ੺IJȦȚ੔ȞıȣȞ@_>IJİȜ@İ૙IJĮȚ ੒į઼ȝȠȢIJ>૵ȚǻȚȠȞ઄ıȦȚ 1RWHKRZHYHUWKDW:|UUOHDVFLWHGE\WKH¿UVWHGLWRUV  VXJJHVWHGWRUHVWRUH>ਕȞĮȖȠȡİ૨ıĮȚਥȞIJ઼Țʌ@ંȜİȚਥȞIJ૵ȚਕȖ૵ȞȚIJ>૵ȚȤȠȡȚț૵Ț@



3DROD&HFFDUHOOL

SURFODLPKRQRXUVLWPLJKWKDYHEHHQOHVVFOHDUDVWRWKHPRVWSUHVWLJLRXV PRPHQWRUVLPSO\WKHSUHIHUUHGRQH LQDQRWKHUSROLV$VDUHVXOWWKHUHLV FRQVLGHUDEOHYDULDWLRQLQORFDOSUDFWLFHDFURVVWKH*UHHNZRUOG $UDQJHRISUDFWLFDOUHDVRQVPD\KDYHLQÀXHQFHGWKHFKRLFHRIYHQXH VXFKDVWKHQHFHVVLW\WRVSUHDGWKHDQQRXQFHPHQWVRYHUPRUHWKDQMXVWRQH GD\RUHYHQWGHSHQGLQJRQWKHLUQXPEHUWKHUHDUHDOVRLQVWDQFHVLQZKLFK WKHFKRLFHDSSHDUVWRKDYHEHHQLQÀXHQFHGE\WKHVSHFL¿FDFWLYLWLHVRIWKH SHUVRQWKHSROLVZDQWHGWRKRQRXU%XWDVDJHQHUDOUXOHZHPD\DVVXPHWKDW LQPRVWFDVHVWKHYHQXHFKRVHQIRUWKHSURFODPDWLRQZLOOKDYHEHHQWKHRQH FRQVLGHUHGWKHPRVWSUHVWLJLRXV7KHVLWHVVSHFL¿HGLQKRQRUL¿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³PRUWGHODFLWp´KDVUHSHDWHGO\ SRLQWHGWRWKHWHVWLPRQ\RIWKHSXEOLFSURFODPDWLRQVRIKRQRXUVIRUDVVHUW LQJWKHFRQWLQXHGLPSRUWDQFHRIWKHDWULFDOSHUIRUPDQFHV:KLOHKHUPDLQ SRLQWVVWDQGDQGZKLOHQHLWKHUWKHFLW\QRUWKHWKHDWUHGLHG,ZLOODUJXHWKDW LQTXLWHDIHZFDVHVWKHIRFXVRIWKHFLW\¶V LGHQWLW\LQUHOLJLRXVDQGFLYLF WHUPVRUDWDQ\UDWHWKHPRPHQWFRQVLGHUHGWKHPRVWDSSURSULDWHIRUSXEOLF SURFODPDWLRQVHLWKHUQHYHUZHUHGUDPDWLFIHVWLYDOVRUPRYHGIURPWKHGUD PDWLFWUDJLF SHUIRUPDQFHVWRFKRUDORUJ\PQLFFRPSHWLWLRQV:KLOHLWLV WKXVPRVWFHUWDLQO\ZURQJWRWDONRIDGHFOLQHLQGUDPDWLFDFWLYLW\WKHVWDWXV DQGIXQFWLRQRIWKLVDFWLYLW\ZLWKLQWKHFLYLFOLIHRIWKHSROLVVKRZVFRQVLGHU DEOHYDULDWLRQDQGPD\KDYHGHFOLQHGRYHUWLPH

 6R&KDQLRWLVZKRLQWHUSUHWVDOOYDULDWLRQVLQWKHFKRLFHRIYHQXHWKXV  /H*XHQ±DQGDQLQÀXHQWLDODUWLFOH7DSOLQ ±/H *XHQVHHVDUHPDUNDEOHFRQWLQXLW\EHWZHHQWKHUROHRIWKHWKHDWUHDQGLQSDUWLFXODU RIGUDPDLQ¿IWKFHQWXU\$WKHQVDQGLQODWHUSHULRGVRURWKHUSDUWVRIWKH*UHHN ZRUOG %XW KHU DQDO\VLV RI WKH SXEOLF SURFODPDWLRQ RI KRQRXUV LV UHVWULFWHG WR DQ H[FHVVLYHO\VPDOOVDPSOHDQGOHDYHVRXWDVGRHV:LOVRQ WKRVHLQVWDQFHVLQ ZKLFKKRQRXUVDUHDQQRXQFHGLQFRQWH[WVRWKHUWKDQWUDJHG\2QULWXDOVLQWKHWKH DWUHDVDWWHVWHGE\WKH³FURZQLQJIRUPXODH´LQKRQRUL¿FGHFUHHVVHHDOVR&KDQLRWLV   (DVWHUOLQJ  VWUHVVHV WKH GHYHORSPHQW RI WUDJHG\ WRZDUGV ³FRVPRSROLWDQLVP´ IRU+DOOWKHDEVHQFHRIWKHSROLVIURP$ULVWRWOH¶V3RHWLFVKDVWRGRZLWK WKHIDFWWKDW³WUDJHG\ZDVDERXWWRORGJHDSHWLWLRQIRUGLYRUFHIURPWKH$WKHQLDQ GHPRFUDWLFFLW\´7KHFULWLFLVPVPDGHE\/H*XHQDUHQRWFRQYLQFLQJEXWVHH QRZ+HDWKIRUDGLIIHUHQWH[SODQDWLRQRIWKHDEVHQFHRIWKHSROLV$WKHQV IURP WKH3RHWLFV

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



%HIRUHDSSURDFKLQJWKHSULPDU\HYLGHQFHKRZHYHUVRPHTXDOL¿FDWLRQV DUHLQRUGHU7REHJLQZLWKZKDWSUHFLVHO\LV³WUDJHG\´")RUXVLWLVH[FHHG LQJO\GLI¿FXOWWRDVFHUWDLQZKDWH[DFWO\WKHSHUIRUPDQFHRIDWUDJHG\RUWR XVHWKHLGLRPIUHTXHQWO\IRXQGLQRXUVRXUFHV³WUDJLFFKRUXVHV´HQWDLOHG DWDQ\JLYHQPRPHQWLQWLPHRUSODFHDIWHUWKH¿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±HYHQWKRXJKWKHODFNRISUHFLVLRQRIKRQRUL¿FGHFUHHVLQ WKLVUHVSHFWPHDQVWKDWLQPDQ\FDVHVZHPD\QRWEHDEOHWRUHDFKGH¿QLWLYH FRQFOXVLRQV 6HFRQGO\DZRUGLVQHHGHGDERXWWKHFRUSXVRIGRFXPHQWVWDNHQLQWRDF FRXQW$PRQJ*UHHNGHFUHHVWKRVHSUHVHUYLQJVRPHNLQGRIKRQRUL¿FDZDUG DUHWKHPRVWQXPHURXV,KDYHQRWDWWHPSWHGDFRPSUHKHQVLYHDQDO\VLVRI DOORIWKHPEXWKDYHFKRVHQDUHSUHVHQWDWLYHVDPSOHRIDUHDVDQGSROHLV (YHQVRLQDOPRVWQRFDVH±ZLWKWKHH[FHSWLRQRI$WKHQV±LVWKHUHHQRXJK PDWHULDOWRDOORZIRUDFRPSOHWHGLDFKURQLFSLFWXUHZKDWRQHJHWVLQOXFN\ LQVWDQFHVDUHDIHZUHOLDEOHV\QFKURQLFµVQDSVKRWV¶,WLVHYHQPRUHGLI¿FXOW WRPRYHIURPORFDOFRQWH[WVWRJHQHUDOV\QWKHVLVWKRXJKWKHVKDUHGYDOXHV WKDWXQGHUZURWHWKHJUDQWLQJRIKRQRXUVLQWKH*UHHNZRUOGPD\IDFLOLWDWH JHQHUDOL]DWLRQIURPVSHFL¿FLQVWDQFHV 6LQFHZKDWIROORZVZLOOLQYROYHWKHGHWDLOHGDQGDWWLPHVLQFRQFOXVLYH HQJDJHPHQW ZLWK D ZLGH UDQJH RI UDWKHU WKRUQ\ SLHFHV RI GDWD LW PD\ EH XVHIXOWRDQWLFLSDWHWKHUHVXOWVRIWKHLQYHVWLJDWLRQKHUHDOPRVWDVDVHWRI ZRUNLQJK\SRWKHVHVWREHWHVWHGDJDLQVWWKHHYLGHQFHL WKHWKHDWUHLVRQH RI WKH PRVW FRPPRQ YHQXHV IRU WKH SURFODPDWLRQ RI KRQRXUV LQ TXLWH D IHZGRFXPHQWVKRQRXUVDUHWREHSURFODLPHGVLPSO\³LQWKHWKHDWUH´ZLWK  7KHODWHVWVXUYH\RIWKHHYLGHQFHFRQFHUQLQJSOD\VLV/H*XHQ)RUWKHULVHRI SURIHVVLRQDODFWRUVVHH&VDSRE±  $ VWRU\ SHUFHSWLYHO\ VNHWFKHG LQ LWV PDLQ OLQHV E\ (DVWHUOLQJ  VHH DOVR +DOO 1HUYHJQDHYHQIRUODWHDQWLTXLW\DVVXPHVFRQWLQXLW\ZLWKWKHFODVVLFDO SHULRGLQWKHVWDJLQJRIFRPSOHWHSOD\VUDWKHUWKDQDVLVXVXDOO\DVVXPHGSDQWR PLPLFVRORSLHFHV/H*XHQVHQVLEO\RSWVIRUWHPSRUDODQGJHRJUDSKLFDOYDULD WLRQLQWKHW\SHRIVSHFWDFOH  , KHUH IROORZ +DELFKW  7KH OLVWV LQ /DUIHOG ±  ± IRU WKH *UHHNZRUOGLQJHQHUDO DQG±DQG±IRU$WKHQLDQVWDWHGHFUHHVDQG IRU GHFUHHV RI SK\ODL FOHUXFKV DQG RWKHU FRUSRUDWLRQV UHVSHFWLYHO\  DUH VWLOO YHU\ XVHIXOVHHDOVRKLVV\QWKHVLVDW±



3DROD&HFFDUHOOL

RXWIXUWKHUSUHFLVLRQ LL LQFODVVLFDO$WKHQVWKHPRPHQWSUHFHGLQJWUDJLF SHUIRUPDQFHVZDVFOHDUO\WKHSUHIHUUHGRQHIRUWKHSXEOLFDQQRXQFHPHQWRI KRQRXUV±DVSDUWRIWKHVRFDOOHG³SUHSOD\FHUHPRQLHV´LHUHOLJLRXVDQG FLYLFFHUHPRQLHVWKDWDOVRLQFOXGHGWKHOLEDWLRQVRIIHUHGE\WKHJHQHUDOVWKH SDUDGHRIWKHZDURUSKDQVDQGDWWKHWLPHRIWKH'HOLDQOHDJXHWKHSUHVHQ WDWLRQE\WKHDOOLHVRIWKHLUDQQXDOWULEXWHLLL EXWLQPDQ\RWKHUSDUWVRI WKH*UHHNZRUOGGUDPDWLFSHUIRUPDQFHVZHUHQRWWKHSUHIHUUHGPRPHQWIRU KRQRUL¿FDQQRXQFHPHQWVLY HYHQLQWKRVHORFDOLWLHVZKHUHWKLVVHHPVWR KDYHEHHQWKHFDVHDWVRPHSRLQWWKHHYLGHQFHWHVWL¿HVWRDWUHQGDZD\IURP GUDPDWLFSHUIRUPDQFHVDVWKHYHQXHIRUSUHVWLJLRXVSXEOLFDQQRXQFHPHQWVWR FKRUDORUJ\PQLFRQHVLQVWHDGZKLOHWKHUHDVRQVIRUWKLVPD\EHGLVFXVVHG WKHWUHQGLWVHOIVHHPVFOHDU

 &RQWH[WVIRUWKHDQQRXQFHPHQWRIKRQRXUVLQ$WKHQV $WKHQVRIIHUVWKHQDWXUDOSRLQWRIGHSDUWXUHIRURXUHQTXLU\LWLVWKHSROLV WKDWLQYHQWHGERWKWUDJHG\DQGWKHSUDFWLFHRIWKHKRQRUL¿FGHFUHHLWLVDOVR WKHFLW\IRUZKLFKZHKDYHWKHPRVWDPSOHGRFXPHQWDWLRQRIWKHSUDFWLFHRI SXEOLFO\DQQRXQFLQJKRQRXUV$SDVVDJHIURP$HVFKLQHV¶VSHHFK$JDLQVW  &RQYHUVHO\/DPEHUWVLQJOHVRXWWKHWKHDWUHWRJHWKHUZLWKWKHPDLQ WHQDQFHRIGLSORPDWLFUHODWLRQVZLWK0DFHGRQDQGWKHVHFXULQJRIJUDLQVXSSO\ DVRQHRIWKHWKUHHPDLQFRQFHUQVRI$WKHQLDQKRQRUL¿FGHFUHHV:LOVRQ PDNHVDVWURQJFDVHIRUWKHFRQQHFWLRQRIWKHDWUHZLWKSURFODPDWLRQRIKRQRXUV DQGXOWLPDWHO\GHPRFUDF\  &IHJ,VRFU'H3DFH3LFNDUG&DPEULGJH)RUWKHVLJQL¿FDQFH RIWKHLQFOXVLRQRIWKHVHFLYLFFHUHPRQLHVLQWKHWKHDWUHFRQWUDVW*ROGKLOO DQG*ULI¿QIXUWKHU*XHWWHO&ROHDQG5KRGHV&DUWHU DQG:LOVRQ+HQGHUVRQ±VHQVLEO\VWUHVVHVWKDWWKH'LR Q\VLDDIHVWLYDOFHOHEUDWHGLQODWHVSULQJZKHQFRPPXQLFDWLRQVEHWZHHQSROHLV ZKHUHJRRGDWWUDFWHGDXQLTXHO\ODUJHDQGLQWHUQDWLRQDODXGLHQFHWKLVVWLOOGRHV QRWH[SODLQWKHFKRLFHRIDVSHFL¿FPRPHQWZLWKLQWKHIHVWLYDO7LPHWDEOLQJPD\ KDYHEHHQDQLVVXHVRPHGD\VZHUHPRUHFKDUJHGWKDQRWKHUV LWVKRXOGDOVREH QRWHGWKDWWKHRUGHURIWKHHYHQWVDWWKH*UHDW'LRQ\VLDLVGLVSXWHGDQGWKDWWKLV LVWKHFDVHIRUPRVWRIWKHIHVWLYDOVZHVKDOOGLVFXVV2QWKHSUREDEOHRUGHURI HYHQWVDWWKH'LRQ\VLDVHHWKHSRVVLELOLWLHVVNHWFKHGLQ&VDSR6ODWHU± (ODSKHEROLRQHLVDJRJHUHOLJLRXVFHUHPRQLHV(ODSKHEROLRQEHJLQQLQJ RI WKH 'LRQ\VLD SURSHU ZLWK SRPSH DQG LQ WKH DIWHUQRRQ GLWK\UDPELF FRQWHVW DQGWKHQIRXURU¿YHGD\VGHYRWHGWRGUDPDWLFFRPSHWLWLRQVZKLFKRSHQHGZLWKD QXPEHURIFHUHPRQLHV DQGWKHDOWHUQDWLYHSURSRVDORI3LFNDUG&DPEULGJH ±  *XHWWHO&ROHVWDWHVWKDWWKH'LRQ\VLDDQGKRQRUL¿FGHFUHHVZHUHH[SRUWHG WRJHWKHUIURP$WKHQVDQGDGGVWKDW³LWLVE\WKHZLGHDSSHDUDQFHLQ*UHHNFLWLHVRI GHFUHHVRIIRUPDOSUDLVHWKDWWKHVSUHDGRIWKH'LRQ\VLDFDQEHPHDVXUHG´)RUWKH LQÀXHQFHRIWKH$WKHQLDQGHFUHHVRQWKRVHRIRWKHUSROHLVVHH/DUIHOG±

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



&WHVLSKRQLQFOXGHVDVSDUWRIDSROHPLFDJDLQVWWKHFURZQWKDWKLVDUFKULYDO 'HPRVWKHQHVKDGEHHQDZDUGHGE\WKHSHRSOHDPRUHJHQHUDOGHSLFWLRQRI KRZVXFKSURFODPDWLRQVWRRNSODFH )LUVW KRZHYHU , ZLOO WHOO WKH UHDVRQ ZK\ WKH ODZV JRYHUQLQJ WKH SURFODPDWLRQV LQ WKH WKHDWHU ZHUH HQDFWHG ਪȞİțĮ Ƞੂ ȞંȝȠȚ ਥIJ੼șȘıĮȞ Ƞੂ ʌİȡ੿ IJ૵Ȟ ਥȞ IJ૶ șİ੺IJȡ૳ țȘȡȣȖȝ੺IJȦȞ  ,W IUHTXHQWO\ KDSSHQHG WKDW DW WKH SHUIRUPDQFH RI WKH WUDJHGLHV LQ WKH FLW\ SURFODPDWLRQV ZHUH PDGH ZLWKRXW DXWKRUL]DWLRQ RI WKH SHRSOH QRZ WKDW WKLV RU WKDW PDQ ZDV FURZQHG E\ KLV WULEH QRZ WKDW RWKHUV ZHUH FURZQHG E\ WKH PHQ RI WKHLU GHPH ZKLOH RWKHU PHQ E\ WKH YRLFH RI WKH KHUDOG PDQXPLWWHG WKHLU KRXVHKROGVODYHVDQGPDGHDOO+HOODVWKHLUZLWQHVVȖȚȖȞȠȝ੼ȞȦȞȖ੹ȡIJ૵ȞਥȞਙıIJİȚ IJȡĮȖ૳į૵ȞਕȞİț੾ȡȣIJIJંȞIJȚȞİȢȠ੝ʌİ઀ıĮȞIJİȢIJઁȞįોȝȠȞȠੂȝ੻Ȟ੖IJȚıIJİijĮȞȠ૨ȞIJĮȚਫ਼ʌઁ IJ૵ȞijȣȜİIJ૵ȞਪIJİȡȠȚį¶੖IJȚਫ਼ʌઁIJ૵ȞįȘȝȠIJ૵ȞਙȜȜȠȚį੼IJȚȞİȢਫ਼ʌȠțȘȡȣȟ੺ȝİȞȠȚIJȠઃȢ Įਫ਼IJ૵Ȟ Ƞੁț੼IJĮȢ ਕij઀İıĮȞ ਥȜİȣș੼ȡȠȣȢ ȝ੺ȡIJȣȡĮȢ IJȠઃȢ ਰȜȜȘȞĮȢ ʌȠȚȠ઄ȝİȞȠȚ  >@ DQGPRVWLQYLGLRXVRIDOOFHUWDLQPHQZKRKDGVHFXUHGSRVLWLRQVDVDJHQWVRIIRU HLJQVWDWHVPDQDJHGWRKDYHSURFODLPHGWKDWWKH\ZHUHFURZQHG±LWPLJKWEHE\ WKHSHRSOHRI5KRGHVRURI&KLRVRURIVRPHRWKHUVWDWH±LQUHFRJQLWLRQRIWKHLU PHULWDQGXSULJKWQHVVįȚİʌȡ੺IJIJȠȞIJȠਕȞĮȖȠȡİ઄İıșĮȚ੖IJȚıIJİijĮȞȠ૙Į੝IJȠઃȢ੒įોȝȠȢ İੁȠ੢IJȦIJ઄ȤȠȚ੒IJ૵Ȟ૮Ƞį઀ȦȞਲ਼ȋ઀ȦȞਲ਼țĮ઀IJȚȞȠȢਙȜȜȘȢʌંȜİȦȢਕȡİIJોȢਪȞİțĮțĮ੿ ਕȞįȡĮȖĮș઀ĮȢ $QG WKLV WKH\ GLG QRW OLNH WKRVH ZKR ZHUH FURZQHG E\ \RXU VHQ DWHRUE\WKHSHRSOHE\¿UVWREWDLQLQJ\RXUFRQVHQWDQGE\\RXUGHFUHHDQGDIWHU HVWDEOLVKLQJODUJHFODLPVXSRQ\RXUJUDWLWXGHEXWWKHPVHOYHVUHDFKLQJRXWDIWHUWKH KRQRXUZLWKQRDXWKRUL]DWLRQIURP\RX>@7KHUHVXOWRIWKLVSUDFWLFHZDVWKDWWKH VSHFWDWRUVWKHFKRUHJLDQGWKHDFWRUVDOLNHZHUHGLVFRPPRGHGDQGWKDWWKRVHZKR ZHUHFURZQHGLQWKHWKHDWHUUHFHLYHGJUHDWHUKRQRXUVWKDQWKRVHZKRPWKHSHRSOH FURZQHGIJȠઃȢį੻ਕȞĮțȘȡȣIJIJȠȝ੼ȞȠȣȢਥȞIJ૶șİ੺IJȡ૳ȝİ઀ȗȠıȚIJȚȝĮ૙ȢIJȚȝ઼ıșĮȚIJ૵Ȟਫ਼ʌઁ IJȠ૨į੾ȝȠȣıIJİijĮȞȠȣȝ੼ȞȦȞ )RUWKHODWWHUKDGDSODFHSUHVFULEHGZKHUHWKH\PXVW UHFHLYHWKHLUFURZQWKHDVVHPEO\RIWKHSHRSOHDQGSURFODPDWLRQ³DQ\ZKHUHHOVH´ ZDVIRUELGGHQEXWWKHRWKHUVZHUHSURFODLPHGLQWKHSUHVHQFHRIDOOWKH+HOOHQHV WKHRQHFODVVZLWK\RXUFRQVHQWE\\RXUGHFUHHWKHRWKHUZLWKRXWGHFUHH$HVFKLQ ±WUDQVO&K'$GDPV&DPEULGJH/RQGRQ 

$HVFKLQHVFOHDUO\KDVKLVRZQFDVHWRSHGGOHEXWWKHSDVVDJHVKRZVZHOOWKH NH\LVVXHDWWKHURRWRIKRQRUL¿FGHFUHHVWKHSXEOLFFRQIHUPHQWRISUHVWLJH IRUERWKWKHSROLVDQGWKHLQGLYLGXDO)URPZKDWZHFDQSLHFHWRJHWKHURI WKHDUJXPHQWVEURXJKWE\$HVFKLQHVDJDLQVWWKHFURZQLQJRI'HPRVWKHQHV LQ WKH WKHDWUH LW ZRXOG DSSHDU WKDW LQ$WKHQV YDULRXV SRVVLELOLWLHV IRU WKH SURFODPDWLRQRIFURZQVH[LVWHG7KXVDFURZQFRQIHUUHGE\WKHERXOHKDG WREHDQQRXQFHGLQWKHERXOHXWHULRQZKLOHRQHJLYHQE\WKHGHPRVZRXOG QRUPDOO\KDYHEHHQDQQRXQFHGLQWKHHNNOHVLD³DQGQRZKHUHHOVH´2WKHU ±5KRGHVDQG/HZLV±2QO\VWDWHGHFUHHVZLOOEHWDNHQLQWR DFFRXQWKHUHIRUGHPHGHFUHHVVHH:KLWHKHDGDQGQDQG:LOVRQDQG +DUWZLJIRUGHFUHHVE\YDULRXVRWKHUJURXSVVHH/DUIHOG± ±/DZWRQ±/LGGHO±RIIHUVDQH[FHOOHQWGHVFULSWLRQRI WKHRYHUDOOZRUNLQJRI$WKHQLDQKRQRUL¿FGHFUHHV  $HVFKLQ±7KLVNLQGRISUHFLVLRQFRPSDUHVQHDWO\ZLWKWKHIUHTXHQWLQGLFD WLRQVRQWKHVDPHGRFXPHQWVRIZKHUHWRSXWDVWHOHRUDVWDWXH)RULFRQRJUDSKLFDO



3DROD&HFFDUHOOL

YHQXHVPLJKWDOVREHFKRVHQ,VRFUDWHVDWWHVWVWKHSURFODPDWLRQRIDFURZQ IRUDQ$WKHQLDQFLWL]HQLQWKHDJRUDFORVHE\WKHPRQXPHQWRIWKH(SRQ\ PRXV +HURHV SUREDEO\ IRU WKH \HDU  D IUDJPHQWDU\ LQVFULSWLRQ KRQ RXULQJDQ$ULVWRPHQHVDQGGDWHGWR%&VSHFL¿HVWKDWWKHFURZQLVWR EHDQQRXQFHG³ZKHQWKHGHPRVZLOOGHHPLWDSSURSULDWH´%XW$HVFKLQHV FRQFHGHVWKHH[LVWHQFHRIDODZFRQFHUQLQJWKH'LRQ\VLDWKDWDOORZVDFURZQ FRQIHUUHGE\WKHGHPRVWREHDQQRXQFHGLQWKHWKHDWUHDWWKHPRPHQWRIWKH WUDJHGLHVRQWKLV$HVFKLQHVDQWLFLSDWHV'HPRVWKHQHVZLOOWU\WREXLOGKLV GHIHQFH :KDWHYHUWKHYDOLGLW\RI$HVFKLQHV¶FDVHDJDLQVW'HPRVWKHQHVWKHHS LJUDSKLFDO HYLGHQFH VKRZV WKDW KRQRUL¿F GHFUHHV ZHUH XVXDOO\ FRQWHQW WR SUDLVHVRPHRQHHSDLQHVDL ±DQGLQVXFKFDVHVWKHSUDLVHZLOOKDYHUHVRQDW HGZKHUHYHUWKHGHFLVLRQWRSUDLVHZDVWDNHQLQWKHERXOHRULQWKHHNNOHVLD ȝȦȚįȠțો@_>ȚZKHUH:RRGKHDGQRWHV WKDWWKHIRUPXODLVRWKHUZLVHXQSDUDOOHOHGDQGWKXVWKHUHVWRUDWLRQRSHQWRGRXEW $HVFKLQਪIJİȡȠȞįૃİੇȞĮȚȞȩȝȠȞ«ਥȞĮȞIJȓȠȞIJȠȪIJ૳IJઁȞįİįȦțȩIJĮਥȟȠȣıȓĮȞ ʌȠȚİ૙ıșĮȚIJ੽ȞਕȞȐȡȡȘıȚȞIJȠ૨ıIJİijȐȞȠȣIJȡĮȖ૳įȠ૙ȢਥȞIJ૶șİȐIJȡ૳ਥ੹ȞȥȘijȓıȘIJĮȚ ੒ įોȝȠȢ 'HPRVWKHQHV GRHV EULHÀ\ UHIHU WR WKLV DW ± D FURZQ IRU KLP KDG EHHQ DQQRXQFHG LQ WKH WKHDWUH LQ  %& 'HP  ਕȞİȚʌİ૙ȞǻȚȠȞȣıȓȦȞIJ૵Ȟȝİ@_ȖȐȜ>ȦȞ@ҕIJDžȠ૙Ȣ>IJȡĮȖȦȚį૵ȞਕȖ૵ıȚȞ«@VHH :LOVRQDQG+DUWZLJQ,GRQRWFRQVLGHU,*,,6FKZHQN %& KRQRXULQJWKHSULHVWRI$VNOHSLRV$QGURNOHVDFDVHRISXEOLFSURFODPDWLRQWKH IRUPXODDWOO±ȠੂȜĮȤ_ંȞIJİȢਥʌȚȝİȜȘIJ>Į@੿IJોȢİ੝țȠıȝ઀ĮȢIJોȢʌİȡ>੿@_IJઁș੼ĮIJȡȠȞ ਕʌ੼ijȘ>ȞĮ@ȞĮ੝IJઁȞਥȞIJ૵Țį੾ȝȦ>ȚȤȡ@_੾ıȚȝȠȞȖİȖȠȞ੼ȞĮȚ>Į੝IJ@Ƞ૙Ȣʌİȡ੿IJ੽Ȟਥʌ>Țȝ੼Ȝ@_

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



ULHVRIWKHWUHDVXUHUVRI$WKHQDDQGWKH2WKHU*RGVPD\EHDGGHGEHVLGHV WKHYHU\IUDJPHQWDU\LQYHQWRU\RIWKH\HDU%&,*,,± PHQWLRQLQJFURZQVSUREDEO\SURFODLPHGDWWKHWUDJLFFRQWHVWVRIWKH'LRQ\ VLDWZR\HDUVHDUOLHU WKUHHPRUHLQYHQWRULHVUHIHUEDFNWRWKHSURFODPDWLRQ RIFURZQVDWWKH'LRQ\VLDGXULQJWKHFRQWHVWVRIWKHWUDJHGLDQVLQRU %&LQDQGLQ7KLVJURXSLVIROORZHGE\WZRWDQWD OLVLQJO\ IUDJPHQWDU\ LQVFULSWLRQV ZKLFK VHHP WR LPSO\ SURFODPDWLRQ RI D FURZQ ³DW WKH 'LRQ\VLD LQ WKH QHZ FRPSHWLWLRQ RI WUDJHGLHV´ ǻȚȠȞȣı઀ȦȞ IJȡĮȖȦȚį૵Ȟ IJ૵Ț țĮȚȞ૵Ț ਕȖ૵ȞȚ  WKLV LV FHUWDLQO\ ZKDW LV SUHVFULEHG LQ DQ RWKHUVOLJKWO\ODWHU LQVFULSWLRQWKHGHFUHHIRU.DOOLDVRI6SKHWWRV

İȚĮȞIJȠ૨șİ੺IJȡȠȣLVWRRYDJXHIRUWKLVGLIIHUHQWO\/LGGHO )RUDQQRXQFH PHQWVDWWKH'LRQ\VLDDQGRWKHUIHVWLYDOVVHHEHORZ6XPPDDVZHOODV :LOVRQDQG+DUWZLJUDWKHUPLVOHDGLQJO\OXPSWRJHWKHUERWKWKHGHFUHHVWKDW SUHVFULEHSURFODPDWLRQDWWKH'LRQ\VLDRQO\DQGWKRVHWKDWEHVLGHVWKH'LRQ\VLD LQFOXGHRWKHUIHVWLYDOV  5HVSHFWLYHO\,*,,±GDWHGWRFD%&KHDYLO\UHVWRUHGıIJȑijĮȞȠȢ ȤȡȣıȠ૨Ȣ ੒@ _ >ਕȞĮțȘȡȣȤ@șİ੿Ȣ ǻȚȠ>Ȟ@ȣı>ȓȦȞ IJ૵Ȟ ȝİȖȐȜȦȞ IJȡĮȖȦȚįȠ૙Ȣ@_ >ੰȚ ਥı@ IJİijȐȞȦıİȞ ੒ įોȝ>ȠȢ ੒ ਝșȘȞĮȓȦȞ IJȠઃȢ ੂʌʌȐȡȤȠȣȢ@_ >IJȠઃȢ ਥʌ੿@ ਝȡȤȓʌʌȠȣ ਙȡȤȠȞ>IJȠȢ DWO±RIWKLVVDPHGRFXPHQWDFURZQSURFODLPHGIRU.RQRQVRQRI 7LPRWKHXVDWWKHJ\PQLFDJRQRIWKH3DQDWKHQDLDLVDOVRPHQWLRQHG,*,,±  DQG 6(*   % FRO ± ıIJ>İ@ijҕ੺ҕ>Ȟ@Ƞȣ ҕ>Ȣ IJȠ@_ ઃȢ ਕȞĮțȘȡ>ȣȤș੼ȞIJĮȢ ǻȚȠ@_Ȟȣı઀ȦȞIJҕԙƬIJҕ>ȡĮȖȦȚį૵Ȟ@_IJ૵ȚਕȖ૵ȞȚȠ੠Ȣਕ>Ȟİț੾ȡȣȟİ@_Ȟĭ઀ȜȚʌʌȠȢȃȚț>઀Ƞȣ ਝȤĮȡ@_ȞİઃȢ੒ਥʌ੿IJҕ>ો@Ț>įȚȠȚț੾ıİ@_ȚțĮIJ੹IJઁȥ>੾@ij>ȚıȝĮIJȠ૨į੾@_ȝȠȣ੔਩Ȗ>ȡ@ Įȥİ>ĭ઀ȜȚʌʌȠȢ@_ȃȚț઀ȠȣਝȤĮȡȞ>İ઄ȢIJĮȝ઀ĮȚȢ@_IJȠ૙Ȣਥʌ੿ȁİȦı ҕ>IJ@ȡ੺ ҕ>IJȠȣਙȡȤȠȞIJȠȢ@_ YDF Ƞ੆įİਕȞİțȘȡ઄Ȥ>șȘıĮȞ@_ıIJ੼ijĮȞȠȚYDF _੒įોȝȠȢਝȞIJ઀ȖȠȞ>ȠȞ@ਕʌઁŇ>ȋ" @ _੒įોȝȠȢǻȘȝ੾IJ>ȡ@ȚȠ>Ȟ@ਕʌઁŇ>ȋ" @_੒įોȝȠȢ_ਝȞIJ઀ȖȠȞȠȞțĮ੿ǻȘȝ੾IJȡȚȠ>Ȟ@_YDF  7KHFURZQVWKDWIROORZWKHVHZHUHDZDUGHGLQSUHYLRXV\HDUVDQGZHGRQRWNQRZ ZKHWKHUWKHUHZDVDUHSHDWHGSURFODPDWLRQRUQRW&KDQLRWLV±VSHDNVRI SURFODPDWLRQRIWZHOYHFURZQVEXWVHHFRQWUD.RXPDQRXGHV0LOOHU± WKHFURZQVIURPOORQZDUGVDUHLQDGLIIHUHQWFDWHJRU\DVVKRZQE\WKHYDFDWV DQGE\UHFRXSPHQWVZLWKRWKHULQVFULSWLRQV$UJXDEO\WKHHODERUDWHPHQWLRQRIWKH SURFODPDWLRQ ZLWK WKH QDPH RI WKH SURSRQHQW LQ ZKDW LV DIWHU DOO DQ LQYHQWRU\ LVHYLGHQFHWKDWWKHVHSURFODPDWLRQVZHUHUHODWLYHO\H[FHSWLRQDO0RVWLQYHQWRULHV PHQWLRQFURZQVEXWQRWWKHLUSURFODPDWLRQIRULQVWDQFH,*,,DQG DOOUHIHUWRFURZQVDZDUGHGXQGHU$QD[LNUDWHVZLWKRXWVSHDNLQJRIDSURFODPDWLRQ DOWKRXJK,*,,ZKHQWKHVHFURZQVZHUH¿UVWDZDUGHGPHQWLRQVWKHSURFODPD WLRQ   ,* ,,ð  KRQRXUV IRU WKH VWUDWHJRL SRVW  %& DQG QRW ODWHU WKDQ  %& VHH7UDF\ZKRFRQVLGHUVWKLVWKHZRUNRIWKHFXWWHURI,*,,ZKRVH DFWLYLW\KHGDWHV± DQG,*,,ðKRQRXUVIRUWKHGHPRVRIWKH(U\WK UDLRLEHJLQQLQJRIWKHWKLUGFHQWXU\,QWKH¿UVWGRFXPHQWਕȞİȚʌİ૙ȞIJઁȞ>ıIJ੼ijĮȞȠȞ ǻȚȠȞȣı઀ȦȞIJȡĮȖȦȚį૵ȞIJ૵ȚțĮȚȞ૵ȚਕȖ૵@>ȞȚ@¿WVH[DFWO\WKHVWRLFKRLDWGLVSRVDODV IRU WKH VHFRQG ±QRQ VWRLFKHGRQ± WH[W WKH UHVWRUDWLRQSURSRVHG>țĮ੿ਕȞİȚʌİ૙Ȟ IJઁȞ ıIJȑijĮȞȠȞǻȚ@_ȠȞȣıȓȠȚȢIJȡĮȖȦȚį>૵ȞIJ૵ȚțĮȚȞ૵ȚਕȖ૵ȞȚ VHHPVLQWKHRYHUDOOFRQWH[W FRQYLQFLQJ



3DROD&HFFDUHOOL

ZKLFKUHTXLUHVWKHFURZQWREHSURFODLPHGDWWKHJUHDW'LRQ\VLD³LQWKHQHZ DJRQRIWKHWUDJHGLHV´ 7KH PHDQLQJ RI IJȡĮȖȦȚį૵Ȟ IJ૵Ț ਕȖ૵ȞȚ IJ૵Ț țĮȚȞ૵Ț LV XQFOHDU %HFDXVH VRPHODWHUGRFXPHQWVSUHVFULEHDQQRXQFHPHQWVIJȡĮȖȦȚįȠ૙ȢțĮȚȞȠ૙ȢZKLFK FHUWDLQO\ PHDQV ³DW WKH PRPHQW RI WKH SHUIRUPDQFH RI QHZ WUDJHGLHV´ LW KDVEHHQVXJJHVWHGWKDWIJȡĮȖȦȚį૵ȞIJ૵ȚਕȖ૵ȞȚIJ૵ȚțĮȚȞ૵ȚUHIHUVWRDFRQWHVW RIQHZWUDJHGLHVDVRSSRVHGWRDFRPSHWLWLRQRIROGGUDPDV 7KLVKRZ HYHUZRXOGVHHPWRVWUDLQWKH*UHHNVLQFHIJȡĮȖȦȚį૵ȞIJ૵ȚਕȖ૵ȞȚIJ૵ȚțĮȚȞ૵Ț PHDQV OLWHUDOO\ ³DW WKH QHZO\ LQVWLWXWHG DJRQ RI WUDJHGLHV´ ± ZLWK PDQ\ VFKRODUVDVVXPLQJWKDWWKLVQHZO\LQVWLWXWHGDJRQPXVWKDYHEHHQDQDJRQ RIROGWUDJHGLHV,QWKLVFDVHKRZHYHUZHZRXOGKDYHWRH[SODLQZK\WKH $WKHQLDQVDWVRPHSRLQWVKLIWHGWKHDQQRXQFHPHQWRIKRQRXUVIURPWKHQHZ O\FUHDWHGDJRQRIROGWUDJHGLHVWRWKHDJRQRIQHZWUDJHGLHVDVGRFXPHQWHG E\WKHODWHULQVFULSWLRQV1RWRQO\WKDWWKHWZRH[SUHVVLRQVIJȡĮȖȦȚį૵ȞIJ૵Ț ਕȖ૵ȞȚIJ૵ȚțĮȚȞ૵ȚDQGIJȡĮȖȦȚįȠ૙ȢțĮȚȞȠ૙ȢDSSHDUWREHLQWHUFKDQJHDEOHLQD QXPEHURIODWHUGRFXPHQWV,ZRXOGKHQFHIDYRXUDGLIIHUHQWVROXWLRQDQG WDNHWKHH[SUHVVLRQIJȡĮȖȦȚį૵ȞIJ૵ȚਕȖ૵ȞȚIJ૵ȚțĮȚȞ૵ȚWRUHIHUWRDJOREDOUHRU JDQL]DWLRQRIWKHGUDPDWLFDJRQHVRIWKH'LRQ\VLDZLWKLQZKLFKWKH³QHZ´ DJRQZRXOGKDYHEHHQWKHDJRQRIQHZSOD\V7KHOLWHUDU\HYLGHQFHLVLQ WKLVUHVSHFWQRWKHOSIXOWKHGHFUHHVWUDQVPLWWHGLQ'HPRVWKHQHV¶VSHHFK2Q WKHFURZQDFFRUGLQJWRZKLFKKRQRXUVZRXOGKDYHEHHQDQQRXQFHGLQWKH WKHDWUHDWWKHPRPHQWRIWKHFRQWHVWRIQHZWUDJHGLHVDQGZKLFKFRQVWLWXWH 0HWWH¶VPDLQHYLGHQFHIRUWKHH[LVWHQFHRIDWKHFRQWHVWRIQHZWUDJHGLHVLQ WKHV DUHQRWRULJLQDOGRFXPHQWVEXWODWH±DWWKHHDUOLHVW¿UVWFHQWXU\ %&±FUHDWLRQVZKLOH$HVFKLQHVLQKLV$JDLQVW&WHVLSKRQUHIHUVWRSURFOD

 6(*±țĮ੿ਕ_ȞİȚʌİ૙ȞIJઁȞıIJ੼ijĮȞȠȞǻȚȠȞȣı઀ȦȞIJ૵ȞȝİȖ੺ȜȦȞIJȡĮȖȦȚį૵>Ȟ@_ IJ૵ȚਕȖ૵ȞȚIJ૵ȚțĮȚȞ૵Ț  ,QVWDQFHVRIWKHQHZIRUPXODWLRQDUHGLVFXVVHGEHORZVRPHDUHOLVWHGE\0LNDO VRQ   Q  ,* ,, ±  DQG ± GDWHG UHVSHFWLYHO\ WRDQG%& ,QIDYRXURILQWHUSUHWLQJWKHH[SUHVVLRQDV³FRQ WHVWVRIQHZWUDJHGLHV´DUH0HWWH±ZKRWUXVWLQJWKHGRFXPHQWVTXRWHG E\ 'HPRVWKHQHV LQ KLV VSHHFK 2Q WKH FURZQ SXVKHV EDFN WKH IRUPXODWLRQ WR WKH V 3LFNDUG&DPEULGJH±3HUULQ±:LOVRQQ 1HUYHJQDDQGQ  7KXV 3HSSDV'HOPRXVRX  IROORZHG E\ 0LNDOVRQ  ± DQG 6XPPD 6XPPD  0RVWJODULQJO\LQ,*,,%& SUHVFULELQJDWOWKHSURFODPDWLRQRIWKH FURZQDZDUGHGWRWKHHSKHEHVǻȚȠȞȣıȓȦȞIJİIJ૵ȞਥȞ>ਙıIJ@İȚțĮȚȞȠ૙ȢIJȡĮȖȦȚįȠ૙ȢțĮ੿ ȆĮȞĮșȘȞĮȓȦȞțĮ੿ਫȜİȣıȚȞȓ!ȦȞIJȠ૙ȢȖȣȝȞȚțȠ૙ȢਕȖ૵ıȚȞDQGDWO±WKHSURFOD PDWLRQRIWKHFURZQDZDUGHGWRWKHNRVPHWHVRIWKHHSKHEHVǻȚȠȞȣıȓȦȞIJ@İIJ૵ȞਥȞ ਙıIJİȚIJȡĮȖȦȚį૵ȞIJ૶țĮȚȞ૶ਕȖ૵ȞȚțĮ੿ȆĮȞĮșȘȞĮȓȦȞțĮ੿ਫȜİȣıȚȞȓ_ȦȞIJȠ૙ȢȖȣȝȞȚțȠ૙Ȣ ਕȖ૵ıȚȞ6HH3HUULQ±DQGIRRWQRWHV±6XPPD

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



PDWLRQLQWKHWKHDWUHDWWKHPRPHQWRIWUDJHGLHVZLWKRXWIXUWKHUTXDOL¿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¿UVWVHFRQG DQGWKLUGLQWKH\HDUVWRVKRZVWKDWDQDJRQRIROGGUDPDVLQGHHG H[LVWHGDOWKRXJKLWLVXQFOHDUIURPWKHLQVFULSWLRQZKHWKHUWKLVKDSSHQHGDW WKH'LRQ\VLD$QGRIFRXUVHWKHLQVWLWXWLRQRIDUHJXODUFRPSHWLWLRQRIROG SOD\VDWWKH'LRQ\VLDZRXOGKDYHPDGHLWQHFHVVDU\WRGLVWLQJXLVKEHWZHHQ

 2Q'HPRVWKHQHVVHH² ਕȞĮȖ@Ƞȡİȣı੺IJȦıĮȞį੻țĮ੿ਝșȘ_>ȞĮ૙ȠȚIJȡĮȖȦȚį૵ȞIJ૵ȚțĮȚȞ૵ȚਕȖ૵ȞȚਥȞIJ@૵Țșİ੺IJȡȦȚ țĮIJ੹ IJĮ੝IJ੺ KRQRXUV WR WKH GHPRV RI (SKHVRV FD  %& $JRUD  ±

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



DQQRXQFHPHQWEHPDGHLQPRUHWKDQMXVWRQHYHQXHWKH\LQGLFDWHWKDWWKH SUDFWLFHRIDQQRXQFLQJKRQRXUVDWWKHPRPHQWRIWKHSHUIRUPDQFHRIQHZ WUDJHGLHVZHQWRQDWOHDVWXQWLOFD%& 7KLV EULQJV XV WR DQRWKHU FKDQJH WKDW DOVR WRRN SODFH LQ WKLV SHULRG KRQRXUVDUHQRZRIWHQDQQRXQFHGDWPRUHWKDQRQHIHVWLYDO7KH¿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

ਕȞİȚʌİ@૙ȞIJઁȞıIJ੼ijĮȞȠȞIJȠ૨IJȠȞǻȚ_>ȠȞȣı઀ȦȞIJ૵ȞਥȞਙıIJİȚIJȡĮȖȦȚį૵ȞIJ૵ȚțĮȚȞ@ ҕ ૵Ț ਕȖ૵ȞȚKRQRXUVWRWKHSROLVRI/DPLDZKRVHQWMXGJHVHQGRIWKHWKLUGFHQWXU\%& ,*,,ð±ਕȞİȚʌİ૙ȞIJઁȞıIJ੼ijĮ@ȞȠȞǻȚȠȞȣı઀_>ȦȞIJȡĮȖȦȚįȠ૙ȢțĮȚȞȠ૙ȢKRQ RXUV IRU D IDPLOLDU RI NLQJ 6HOHXNRV KHOSIXO WR$WKHQV  %& $JRUD   E ,*,,ð KRQRXUVIRU6WUDWRQRI$UJRV±%&+HVSHULD QWREHDQQRXQFHGǻȚȠȞȣıȓȦȞIJİ>IJ૵ȞਥȞਙıIJİȚțĮȚȞȠ૙Ȣ@_IJȡĮȖȦȚįȠ૙Ȣ ,QWKLVODVWFDVHLWKDVEHHQDUJXHGRQWKHEDVLVRIWKHIJİWKDWWKHVFULEHPD\KDYH RPLWWHGRQHHQWLUHOLQHDQGWKDWWKHKRQRXUVPD\KDYHEHHQDQQRXQFHGDWPRUHWKDQ MXVWRQHYHQXH  'HFUHH IRU 3KDLGURV SRVW  "  %& ,* ,,ð ± țĮ੿ ਕȞĮȖȠȡİ૨ıĮȚ IJઁȞıIJ੼ijĮȞȠȞǻȚ_ȠȞȣı઀ȦȞIJ૵ȞȝİȖ੺ȜȦȞIJȡĮȖȦȚį૵ȞIJ૵ȚਕȖ૵ȞȚIJ૵Ț_țĮȚȞ૵ȚYțĮ੿ ȆĮȞĮșȘȞĮ઀ȦȞIJ૵ȞȝİȖ੺ȜȦȞIJ૵ȚȖȣ_ȝȞȚț૵ȚਕȖ૵ȞȚ$JRUD,*,,6(* SUDLVHIRUWKHFLW\RI/DPLD%& DQG$JRUD,*;,,6XSSO 6(*±KRQRXUVIRU3U\WDQLVRI.DU\VWRV%& ਕȞİȚʌİ૙Ȟ IJઁȞıIJ੼ijĮȞȠȞIJȠ૨_IJȠȞǻȚȠȞȣı઀ȦȞIJ૵ȞਥȞਙıIJİȚIJȡĮȖȦȚįȠ૙>Ȣ@IJ૵Ț_țĮȚȞ૵ȚਕȖ૵ȞȚțĮ੿ ȆĮȞĮșȘȞĮ઀ȦȞIJ૵ȚȖȣȝȞȚț૵Ț$V:RRGKHDGQRWHVWKH3WROHPDLDKDGQRW\HWEHHQ LQVWLWXWHGEXWDOUHDG\LQZH¿QGDQQRXQFHPHQWVWKHUHDVZHOOVHHQH[WIRRW QRWH 2YHUDOOGLVFXVVLRQRIDQQRXQFHPHQWVDWWKHVHIHVWLYDOV6KHDU± DQG±  3URFODPDWLRQDW'LRQ\VLD3DQDWKHQDLDDQG3WROHPDLDKRQRXUVIRU$QWLRFKRIWKH &KU\VDRUHLVLQF%&6(*$JRUD-±>țĮ੿ਕȞĮȖȠȡİ૨ıĮȚ IJઁȞ@ıIJ੼ijĮȞȠ>ȞǻȚȠȞȣı઀ȦȞ@_>IJ૵Ȟਥ@ȞਙıIJİȚțĮȚȞȠ૙Ȣ>IJȡĮȖȦȚįȠ૙ȢIJ૵ȚਕȖ૵ȞȚț@ĮȚȞ૵ȚY ҕ țĮ੿ȆĮȞĮșȘȞĮ>઀@_>ȦȞ@țĮ੿ȆIJȠȜİȝ>Į@઀ȦȞIJ>Ƞ૙ȢȖȣȝȞȚțȠ૙Ȣਕ@Ȗ૵ıȚȞWKHWH[WLVKRZ HYHU SUREOHPDWLF DV WKHUH LV DQ RYHUNLOO LQ WHUPV RI QHZQHVV RI WKH WUDJLF DJRQ  3URFODPDWLRQ DW 'LRQ\VLD 3DQDWKHQDLD DQG (OHXVLQLD ,* ,,ð  VOLJKWO\ ODWHU WKDQ  %& KRQRXUV IRU 3KUDVHDV VRQ RI$HWRV IURP 3KOLRXV țĮ੿ ਕȞİ>Țʌİ૙Ȟ IJઁȞ ıIJ੼ijĮȞȠȞǻȚȠȞȣı઀ȦȞIJİIJ૵ȞਥȞਙıIJİȚ!țĮȚ>ȞȠ૙ȢIJȡĮȖȦȚįȠ૙ȢțĮ੿ȆĮȞĮșȘ@_>ȞĮ઀ȦȞ țĮ੿ ਫ@ȜİȣıȚȞ>઀Ȧ@Ȟ IJȠ૙Ȣ >ȖȣȝȞȚțȠ૙Ȣ ਕȖ૵ıȚ" ,* ,,ð  DQWH  %& IRU DQ XQ NQRZQ$JRUD,,,,,%&YHU\IUDJPHQWDU\IRUDQXQNQRZQ)URPWKHODWH WKLUGFHQWXU\6(* XQWLOFD%&,*,,ð WKHHSKHEHVVHHPWREH KRQRXUHGDWWKHVHIHVWLYDOVFDGRFXPHQWVWKHIRUPXODWLRQSUHVHQWVVRPHYDUL DQWVHJਕȞİȚʌİ૙ȞIJઁȞıIJȑijĮȞȠȞǻȚȠȞȣıȓȦȞ>IJ૵ȞȝİȖȐ@ȜȦȞIJ૵ȚțĮȚȞ૵>ȚਕȖ૵ȞȚ@țĮ੿ ȆĮȞĮșȘȞĮȓȦȞțĮ੿ਫ_ȜİȣıȚȞȓȦȞIJȠ૙ȢȖȣȝȞȚțȠ૙ȢਕȖ૵ıȚȞ,*,,ð±±



3DROD&HFFDUHOOL

DJRQHVKDYHE\QRZEHFRPHWKHFHQWUDO±SRVVLEO\WKHPRVWLPSRUWDQWDW DQ\UDWHWKHPRVWFRQVSLFXRXV±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¿F KLVWRULFDOVLWXDWLRQWKHVWDWXVRIWKHKRQRUDQGVDQGWKHGDWHDWZKLFKWKHKRQ RUL¿FGHFUHHVZHUHSDVVHGPD\DOOKHOSWRH[SODLQWKHFKRLFHRIWKH3DQDWKH QDLDRYHUWKH'LRQ\VLD7KH¿UVWGRFXPHQWLVDIDLUO\HDUO\RQHDVLWUHSRUWV WKHGHFLVLRQWRKRQRXU6SDUWRNRVDQG3DLULVDGHVWKHMRLQWUXOHUVRI%RVSRURV LQ%&WKHDZDUGDQGDQQRXQFHPHQWRIWKHFURZQDUHWREHUHSHDWHG HYHU\IRXU\HDUVDWWKHJUHDWHU3DQDWKHQDLD7KHZRUGLQJRIWKHGHFUHHWKDW WKHFURZQVEHPDGHDFFRUGLQJWRWKHGHFUHHYRWHGIRU/HXNRQ RSHQVWKHSRV

%&  3URFODPDWLRQ DW 'LRQ\VLD 3DQDWKHQDLD (OHXVLQLD DQG 3WROHPDLD SUDLVH RI WKH GHPRV RI (SKHVRV ± %&$JRUD   6(*  ± ǻȚȠȞȣı઀ȦȞIJ૵ȞਥȞਙıIJİȚțĮȚȞȠ૙ȢIJȡĮȖȦȚįȠ૙ȢțĮ੿ȆĮȞĮ>șȘ@_ȞĮ઀>Ȧ@ȞțĮ੿ਫȜİȣıȚȞ઀ȦȞ țĮ੿ȆIJȠȜİȝĮ઀ȦȞIJȠ૙ȢȖȣȝȞȚțȠ૙ȢਕȖ૵ıȚȞKRQRXUVWR.HSKLVRGRURV%&$JRUD >@6(*DQG,*,,ð±F%&KRQRXUVWRDQ $OH[DQGURVIRUVHUYLFHVUHQGHUHGLQFRQQHFWLRQZLWKNLQJVțĮ੿ਕȞİȚʌİ૙ȞIJઁȞıIJ੼ijĮ@ ȞȠȞǻȚȠȞȣı઀ȦȞIJİIJ૵ȞਥȞਙıIJİȚIJȡĮȖȦȚį૵ȞIJ૵ȚțĮȚ_>Ȟ૵ȚਕȖ૵ȞȚțĮ੿ȆĮȞĮșȘȞĮ઀ȦȞțĮ੿ ਫ@ȜİȣıȚȞ઀ȦȞțĮ੿ȆIJȠȜİȝ>Į઀@ȦȞIJȠ૙ȢȖȣȝȞȚțȠ૙ȢਕȖ૵ıȚȞ ,*,,ð%&6(* %&KRQRXUVIRUDQXQNQRZQKLSSDUFK,'HORVELVKRQRXUVWR NLQJ3KDUQDNHVRI3RQWXVDQGTXHHQ1\VD±%&,*,,ð±± %& YHU\ IUDJPHQWDU\ ,* ,,ð  PLG ,, %& IRU 3WROHP\9, 3KLORPHWRU VRQ RI 3WROHP\,*,,ðFD%&0RUHRYHULQIRXULQVFULSWLRQVGDWHGIURPWR FWKHFURZQVIRUWKHDJRQRWKHWDLRIWKH7KHVHLDDUHDQQRXQFHGDWWKHVHIHVWLYDOV IURP%&6(* WRFD,*,,ð WKHHSKHEHVDUHKRQRXUHGDW WKHVHIHVWLYDOV  'HFUHHIRU3U\WDQLV$JRUD6(*± ZLWK6KHDUDQG ±VHHDOVRDERYHQ7KHJUHDWHU3DQDWKHQDLDLQYROYHGEHVLGHVJ\PQLF HYHQWVDOVRPXVLFDODQGVWDUWLQJDWDQ\UDWHIURP%&GUDPDWLFHYHQWVVHHRQ WKH HYROXWLRQ RI WKH IHVWLYDO 6KHDU   WKH (OHXVLQLD KDG PXVLFDO J\PQLF DQG HTXHVWULDQFRQWHVWVDWDQ\UDWHLQ%&,*,,±FI3DUNHU ±/DUPRXU VRWKHUHZDVFKRLFH  ,* ,,   5KRGHV DQG 2VERUQH  ± ZKR QRWH WKDW WKH DZDUG RI FURZQVUHJXODUO\UDWKHUWKDQRQDVLQJOHRFFDVLRQLVDQXQXVXDODQGH[SHQVLYHKRQ RXU 2QHZRQGHUVZKHWKHUWKHFKRLFHRIWKH3DQDWKHQDLDRYHUWKH'LRQ\VLD PD\QRWKDYHEHHQGXHDOVRWRWKHGHVLUHRIDYRLGLQJD\HDUO\UHSHWLWLRQRIWKHDZDUG

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



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¿FUHDVRQVIRUWKHFKRLFHRIWKLVYHQXHUDWKHUWKDQ DQRWKHULQWKHODVWGRFXPHQWLQZKLFKWKHJ\PQLFJDPHVRIWKH3DQDWKHQDLD DUHFKRVHQDVWKHRQO\SODFHIRUWKHSURFODPDWLRQDGHFUHHGDWHGDIWHU %& LWLVFOHDUO\EHFDXVHWKHKRQRUDQG+HUDNOHLWRVVRQRI$VNOHSLDGHVIURP $WKPRQRQ UHVWRUHG WKH VWDGLRQ IRU WKH IHVWLYDO 2QH IXUWKHU LQVFULSWLRQ D GHFUHHRIWKH$WKHQLDQVLQ'HORVGDWHGWR±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

 2QWKHSDUDOOHOLVPEHWZHHQYLFWRUVDQGKRQRUDQGVLQWKLVVSHFL¿FLQVWDQFHVHH2V ERUQH±6KHDUDQG±VXJJHVWVWKDWWKHGDWHDWZKLFKWKH GHFUHHZDVSDVVHGPD\KDYHFRQGLWLRQHGWKHFKRLFHRIWKHIHVWLYDOIRUWKHDQQRXQFH PHQWEXWVKHDOVRPDNHVWKHLPSRUWDQWSRLQWWKDWWKLVGRHVQRWDFFRXQWIRUWKHODFN RIUHSHWLWLRQDWWKHIXWXUH'LRQ\VLD  ,*,,±&I6KHDU±  5HVSHFWLYHO\,*,,ðIUEOO±IJઁȞį੻ț੾>ȡȣțĮਕȞİȚʌİ@_૙ȞȆĮȞĮșȘȞĮ઀ȦȞ IJ૵ȚȖȣȝȞȚț૵ȚਕȖ૵ȞȚਥȞIJ>૵ȚıIJĮį઀ȦȚ@_੖IJȚ੒įોȝȠȢ੒ȀȠȜȠijȦȞ઀ȦȞਕȞĮIJ઀șȘıȚ>IJંȞįİ IJઁȞıIJ੼ij@_ĮȞȠȞțĮ੿IJ੽ȞʌĮȞȠʌȜ઀ĮȞਕȡȚıIJİ૙ȠȞIJİ૙ਝș>ȘȞ઼Țਫ਼ʌ੻ȡ@_IJȠ૨į੾ȝȠȣIJȠ૨ ਝșȘȞĮ઀ȦȞțĮ੿IJȠ૨į੾ȝȠȣIJȠ૨>ȀȠȜȠijȦȞ઀@_ȦȞ,*,,ðDQG,*,,ð%&  ,*,,ðIRUWKHGDWHVHH7UDF\  ,'HORV±IJȩIJİʌȡ૵IJȠȞȆĮȞĮșȘȞĮȓȠȚȢਥʌȠȓȘıİȞIJઁȞ_įોȝȠȞIJઁȞਝșȘȞĮȓȦȞ IJ૵Ȟ ਥȞǻȒȜȦȚ IJȚȝȘșો_ ȞĮȚ Ȥȡȣı૵Ț ıIJİijȐȞȦȚ ਕȞȘ!ȖȠȡİȣȝȑȞȦȚ ਥȞ _ IJ૵Ț ਥȞ ਙıIJİȚ șİȐIJȡȦȚ )RU GUDPDWLF FRQWH[WV DW WKH 3DQDWKHQDLD IURP WKH VHFRQG FHQWXU\ %& XQWLODWOHDVWWKH¿UVWFHQWXU\$'LQFOXGLQJDOVRQHZWUDJHGLHVFI,*,, VHH 6KHDU±



3DROD&HFFDUHOOL

WKHFRQWHVWRIFRPHG\±EXWWKHQ$L[RQHPD\KDYHKDGDSDUWLFXODUO\VWURQJ FRPLF WUDGLWLRQ 7KH F\FOLF FKRUXVHV DOVR DSSHDU QRW WR KDYH EHHQ D ID YRXULWHYHQXHIRUSXEOLFDQQRXQFHPHQWVLQ$WKHQVWKHRQO\LQVWDQFHRID SURFODPDWLRQ DW D FKRUDO FRQWHVW LV D GHFUHH DSSHQGHG WR D WUDGLWLR RI WKH HSLPHOHWDLRIWKHGRFN\DUGVGDWHGWR%&7KHGRFXPHQWSUHVFULEHV WKDWJROGFURZQVRIDQGGUDFKPDVUHVSHFWLYHO\EHRIIHUHGWR HI¿FLHQWWULHUDFKVDQGWKHDZDUGVEHSXEOLFO\SURFODLPHGDWWKH7KDUJHOLD ,WLVZRUWKQRWLQJWKDWWKLVLVWKH¿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±DVREVHUYHGE\0HWWH±WKDWGUDPDPXVW KDYH EHHQ DOLYH DQG LQ JRRG KHDOWK LW LV ZRUWK QRWLQJ WKDW WKH YHQXH FKRVHQ IRU WKH DQQRXQFHPHQWV ± E\ GH¿QLWLRQ D SUHVWLJLRXV RQH OLQNHG FORVHO\ZLWKFLYLFOLIH±LVQRWWKHPRPHQWUHVHUYHGIRUROGWUDJHG\ZKLFK KDUNHG EDFN WR WKH JUHDW SHULRG RI$WKHQLDQ WKHDWUH EXW WKH FRQWHVW RI

 ,* ,,  ਕȞİȚʌİ૙Ȟ į੻ țĮ੿ ǻȚȠȞȣı઀ȦȞ IJȠ૙Ȣ țȦȝ૳įȠ૙Ȣ IJȠ૙Ȣ ǹੁȟȦȞોıȚȞ ਥȞ IJ૵Ț șİ੺IJȡȦȚDQG$WKHQ0LWWUHVSHFWLYHO\GDWHGWRDQG %&&VDSRDQG6ODWHUWHUVHO\FRPPHQW³,QGHPHVZKHUHKRQRUL¿FGH FUHHVFDOOIRUSURFODPDWLRQVµDWWKHFRPLFFRQWHVW¶LWVHHPVDUHDVRQDEOHDVVXPSWLRQ WKDWQRWUDJHG\ZDVSHUIRUPHG´  ,*,, 5KRGHVDQG2VERUQH±EXWLQSDUWLFXODU±țĮ੿ ਕȞĮȖȠȡİȣı੺_>IJȦ੒țો@ȡȣȟIJોȢȕȠȣȜોȢĬĮȡ_>ȖȘȜ઀ȦȞ@IJ૵ȚਕȖ૵ȞȚIJȠઃȢıIJİ_ij੺ȞȠȣȢ  6HH:LOVRQ±ZKRIXUWKHUVXJJHVWVWKHORZHUOHYHORIDJRQLVWLFSUHVWLJHWR EHGHULYHGIURP¿QDQFLQJWKHQDY\DVDSRVVLEOHUHDVRQIRUWKHFKRLFH7KLVZRXOG LPSO\DFRQVFLRXVGHFLVLRQRIDQQRXQFLQJWKHKRQRXUVDWWKH7KDUJHOLDLQRUGHUWR PDNHWKHPOHVVFRQVSLFXRXV:LOVRQDVVXPHVWKDWWKHVHKRQRXUVZHUHQRW RFFDVLRQDOEXWZHUHSURFODLPHG\HDUO\WKLVGRHVQRWVHHPWREHERUQHRXWE\WKH WH[W  $FFRUGLQJWR0HWWHWKHUHZHUHQR'LRQ\VLDLQWKHDUFKRQVKLSVRI6\P PDFKRV%& DQG7KHR[HQRV%& QRULQWKRVHRI$QWKHVWHULRV %& DQG.DOOLVWUDWRV%& WKHGHFUHHKRQRXULQJWKHVWUDWHJRV$ULVWRSKDQHV GDWHGWR,*,,±YਕȞİȚʌİ૙Ȟį੻IJઁȞıIJ੼ijĮȞ>ȠȞ@_>țĮ@੿IJ੽ȞਕȞ੺șİıȚȞ IJોȢ İੁțંȞȠȢ ਞȜઆȚȦȞ IJİ IJ૵Ț ʌĮIJȡ઀ȦȚ ਕȖ૵ȞȚ țĮ੿ ਥȝ ȆĮȞ੺țIJȦ>Ț ਝʌĮ@_ >IJȠ@ȣȡ઀ȦȞ IJોȚ șȣı઀ĮȚ țĮ੿ ਥʌ੿ ĭȣȜİ૙ ੖IJĮȞ Ȗ઀ȞȘIJĮȚ ਲ șȣı઀Į IJોȚ ਝȡIJ੼ȝȚįȚ IJોȚ >ਝȖȡȠIJ੼@_ >ȡĮ@Ț țĮ੿ǻȚȠȞȣı઀ȦȞIJ૵ȞਥȞਙıIJİȚIJȡĮȖȦȚį૵ȞIJ૵ȚțĮȚȞ૵ȚਕȖ૵ȞȚ੖IJĮȞʌȡ૵IJȠ>Ȟ੒įોȝȠȢ@_ >ıȣ@ȞIJİȜİ૙IJ੹ǻȚȠȞ઄ıȚĮ LVWKHRQO\GRFXPHQWZKLFKVHHPVH[SOLFLWO\WRDOORZIRUWKH SRVVLELOLW\WKDWWKHUHPD\QRWEH'LRQ\VLDLQWKHIROORZLQJ\HDU

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



QHZWUDJHGLHV7KHUHSHUIRUPDQFHRIROGWUDJHGLHVPD\KDYHEHHQIHOWDV PDLQO\DQDIIDLURIDFWRUVVRPHWKLQJVSHFWDFXODUEXWIDLUO\GLVWDQWIURP FRQWHPSRUDU\FLYLFOLIHDVQR³QHZ´SOD\VKDYHVXUYLYHGLWLVGLI¿FXOWWR DVVHVVWKHLUSRWHQWLDOPHDQLQJIRUWKHDXGLHQFHV7KHLQVWDQFHVLQZKLFK FURZQVZHUHSURFODLPHGRQO\DWRWKHUIHVWLYDOVDQGQRWDOVRDWWKH'LR Q\VLDDUHYHU\UDUHDQGFDQEHH[SODLQHGZLWKUHIHUHQFHWRWKHQDWXUHRI WKHDFWLRQWKDWWKHFLW\ZLVKHGWRUHZDUGWKHVSHFL¿FKLVWRULFDOFLUFXP VWDQFHVRUFRQVLGHUDWLRQVWRGRZLWKWKHKRQRUDQGȡ@ ĮȖȦȚį૵ȞOO±IRUERWKVHH6(*   1XPEHUVIURP+DELFKW±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± KRQRXUV IRU $PSKLNORV VRQ RI .DOOLVWUDWRV RI &KLRV FD  %&  ıIJİijĮȞ૵ıĮȚ Į੝IJઁȞ į੺ijȞȘȢ _ ıIJİij੺ȞȦȚ ਥȞ IJ૵Ț ਕȖ૵ȞȚ IJ૵Ț! ȝȠȣıȚț૵Ț IJȠ૙Ȣ _ ਝʌȠȜȜȦȞ઀ȠȚȢ țĮ੿ ਕȞĮȖȠȡİ૨ıĮȚ țIJȜ ,* ;,  ± KRQRXUV IRU$UWHPLGRU RV RI $QWLRFK RI WKH &KU\VDRUHLV ± %& ZLWK µWUDQVLWLRQDO¶ IRUPXODWLRQ ıIJİijĮȞ૵ıĮȚĮ੝IJઁȞį੺ijȞȘ>Ȣ@_>ıIJ@İij੺ȞȦȚIJȠ૙ȢਝʌȠȜȜȦȞ઀ȠȚȢ_>੖@IJĮȞ਷ȚIJ૵ȞʌĮ઀įȦȞ ਕȖઅȞțĮ>੿@_>ਕȞ@ĮȖȠȡİ૨ıĮȚIJઁȞੂİȡȠ>ț@੾ȡȣțĮ_>ਥȞ@IJ૵Țșİ੺IJȡȦȚ ,*;,± KRQRXUVIRU6RVLELRVRI$OH[DQGULDPLGWKLUGFHQWXU\țĮ੿ਕȞĮȖȠȡİ૨ıĮȚIJઁȞੂİ>ȡ@ Ƞț੾ȡȣț>ĮIJȠ૙Ȣਝ@_>ʌ@ȠȜȜȦ>Ȟ઀ȠȚ@ȢਥȞIJ૵ȚਕȖ૵ȞȚIJ૵ȝʌĮ>઀įȦȞ ,*;,± KRQRXUVIRU$GPHWRVWKH0DFHGRQLDQ±%&ਕȞĮȖȠȡİ૨ıĮȚIJઁȞੂİȡȠț੾ȡȣțĮ ਥȞIJ૵Țșİ੺IJȡȦȚ_IJȠ૙ȢਝʌȠȜȜȦȞ઀ȠȚȢ੖IJĮȞਕȖȦȞ઀ȗȦȞIJĮȚȠੂȤȠȡȠ੿IJ૵Ȟ_ʌĮ઀įȦȞ ,*;, KRQRXUVIRU$ULVWRERXORVRI7KHVVDORQLNHFD±%& ,*;, KRQRXUVIRU$XWRNOHVVRQRI$LQHVLGHPRVRI&KDONLV±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¿HGDV VDFUHGਕȞĮȖȠȡİ૨ıĮȚIJઁȞ_ੂİȡȠț੾ȡȣțĮਥȞIJ૵Țșİ੺IJȡȦȚ੖IJĮȞȠੂੂİȡȠ੿Ȥ>Ƞ@_ȡȠ੿IJ૵Ȟ

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



7KH'HOLDQV¶SROLF\RIDQQRXQFLQJKRQRXUVDWWKH$SROORQLDZKLFKGLGQRW FRPSULVHGUDPDWLFSHUIRUPDQFHVLQVWHDGRIDWWKH'LRQ\VLDPD\KDYHEHHQ GLFWDWHG E\ D FRQVFLRXV GHVLUH RI GLIIHUHQWLDWLQJ WKHPVHOYHV IURP$WKHQV 7HOOLQJO\ZKHQWKHLVODQGIHOODJDLQXQGHU$WKHQLDQFRQWUROWKHDQQRXQFH PHQWRIKRQRXUVZDVWUDQVIHUUHGWRWKH'LRQ\VLD  2WKHULVODQGV1LV\URV&RV5KRGHV 7ZRKRQRUL¿FGHFUHHVRIWKHWKLUGFHQWXU\%&VKRZWKDWRQWKHVPDOOLVODQG RI1LV\URVWKHKRQRXUVZHUHDQQRXQFHGDWWKH'LRQ\VLDGXULQJWKH¿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±RUDWDQ\UDWHWKHRQHZKLFKLV KDUGO\HYHUPLVVLQJIURPVXFKUHFRUGVDVZHKDYH±LVWKHFKRUDODJRQDQG LW ZRXOG VHHP WKDW KRQRXUV ZHUH DQQRXQFHG GXULQJ FKRUDO SHUIRUPDQFHV 7KHHDUOLHVWGRFXPHQWLVDSUR[HQ\GHFUHHIURPWKHHQGRIWKHIRXUWKFHQ WXU\ %& IRU D 6LQRSHDQ 'LRQ\VLRV WKH FURZQ DZDUGHG WR KLP ZDV WR EH

ʌĮ઀įȦȞਕȖȦȞ઀ȗȦȞIJĮȚIJંįİIJઁț੾_>ȡ@ȣȖȝĮ ,*;,KRQRXUVIRU$QGURNOHVRI 3RO\UUKHQLDEHJLQQLQJRIVHFRQGFHQWXU\%&DOVRVDFUHGFKRUXVHVRISDLGHV,*;, KRQRXUVIRU&KDLUHDVWKH0DFHGRQLDQEHJLQQLQJ,,%&QRUPDOFKRUXVHV,* ;,EHJLQQLQJRIWKHVHFRQGFHQWXU\%&KRQRXUVIRU0DUFXVVRQRI3XEOLXV 5RPDQ,*;,EHJLQQLQJRIWKHVHFRQGFHQWXU\%&KRQRXUVIRU.WHVLSSRV RI&KLRVSRVVLEO\DOVRWKHH[WUHPHO\IUDJPHQWDU\,*;,,*;,,* ;,6OLJKWO\GLIIHUHQWLV,*;,¿UVWKDOIRIWKHWKLUGFHQWXU\KHUHWKH &KLDQVDVNWKH'HOLDQVWREHDOORZHGWRKRQRXUWKH'HOLDQ7HOHVRQVRQRI$XWRNOHV DQGDUHJUDQWHGSHUPLVVLRQWRGRWKLVLQ'HORVDWWKH$SROORQLDGXULQJWKHFKRUXVHV RIWKHSDLGHV  6LIDNLVZLWKUHIHUHQFHV  6FKZ\]HUDG ਝȡȤਫijQOO±ਕȞĮȖȠȡİ૨ıĮȚį੻IJઁȞıIJȑijĮȞȠȞ ਥȞIJ૵Ț_ਕ>Ȗ@૵ȞȚIJ૵ȞǻȚȠȞȣı઀ȦȞIJ઼Țʌȡ੺IJĮȚਖȝ੼ȡĮȚIJ૵ȞțȣțȜ઀ȦȞ:3HHN,QVFKULIWHQ YRQ GHQ GRULVFKHQ ,QVHOQ %HUOLQ  $EK 6lFKV$NDG GHU:LVV LQ /HLS]LJ 3KLOROKLVW.O QžF±%& įİįં>Ȥ@șĮȚIJ૵Țį੺ȝȦȚਥʌĮȚȞ੼ıĮȚ Ȇİ઀ıȚȠȞ ҕ ț ҕ>Į@੿ıIJİ>ijĮȞ૵ıĮȚȤȡȣı੼ȦȚ@_ıIJİij੺ȞȦȚਥȞIJ૵ȚਕȖ૵ȞȚIJ૵ȞǻȚȠȞȣı઀ȦȞIJ઼Ț ʌȡ੺IJĮȚਖȝ੼ȡĮȚIJ>૵Ȟ@_țȣțȜ઀ȦȞਕȡİIJ઼ȢਪȞİțĮțĮ੿İ੝ȞȠ઀ĮȢ«  6HJUH('DQG('ZLWK&HFFDUHOOL



3DROD&HFFDUHOOL

SURFODLPHGZKHQWKHSROLV¿UVWFHOHEUDWHGDFKRUDODJRQ7KHVSHFL¿FDWLRQ UHFXUVLQVRPHIXUWKHUGRFXPHQWVWKHRWKHUSRVVLELOLW\IRUWKHDQQRXQFH PHQWRIKRQRXUVLQWKHFRQWH[WRIWKH'LRQ\VLDIHVWLYDOVHHPVWREHMXVWDIWHU WKHOLEDWLRQVWKHVSRQGDLDVLQ¿YHGHFUHHVDOOGDWHGWRWKHVHFRQGFHQWXU\ %&2WKHUZLVHUHIHUHQFHLVPDGHVLPSO\WRDQDQQRXQFHPHQWDWWKHQH[W 'LRQ\VLDRU$VFOHSLHLD)RUZKDWFRQFHUQVXVLWLVHQRXJKWRUHPDUNWKDW WKHGHFUHHVHLWKHUJLYHQRVSHFL¿FDWLRQVRUSUHVFULEHPRPHQWVIRUWKHDQ QRXQFHPHQWGLIIHUHQWIURPWKHGUDPDWLFSHUIRUPDQFHV

 6HJUH('±ਕȞĮȖȖİ૙ȜĮȚIJઁȞı>IJ੼ijĮȞȠȞ@_>ਥ@ȞIJ૵ȚȤȠȡȚț૵ȚਕȖ૵ȞȚ੖țțĮʌȡ઼IJ>Į ıȣȞIJİȜોȚ੒į઼@_ȝȠȢFI6(* 6HHDOVR6(*FLWHGVXSUDQ   6HJUH('VHFRQGFHQWXU\%&DQXQNQRZQSROLVUHTXLUHVWKDWWKHKRQRXUVJUDQW HGPD\EHDQQRXQFHGDOVRLQ&RVDWWKHFKRUDODJRQ6(*GHFUHHRIWKH 7KHDQJHOHLVRIFD±%&UHTXLULQJWKDWWKHKRQRXUVJUDQWHGEHDQQRXQFHGLQ &RVDWWKHFKRUDODJRQRIWKH'LRQ\VLDOO±EXWWKLVSDUWLVHQWLUHO\UHVWRUHG  7LW &DO\PQLL7HVW ;,9 PLGWKLUG FHQWXU\ %& GHFUHHLQ ZKLFK &DO\PQDUHTXLUHV WKDWWKHKRQRXUVJUDQWHGWR3UD[LODVEHDQQRXQFHGDWWKHFKRUDODJRQRIWKH'LRQ\ VLDDVZHOODVDWWKHJ\PQLFDJRQRIWKHJUHDW$VNOHSLHLD6(*KRQRUL¿F GHFUHHRID&RDQGHPH" IRUWKHGRFWRU3UD[LDQD[VHFRQGKDOIRIWKHWKLUGFHQWXU\ %&UHTXLULQJWKHKRQRXUVWREHDQQRXQFHGLQ&RVOO±ਥȞIJ૵ȚȤȠȡȚ_ț૵ȚਕȖ૵ȞȚ IJ૵ȞǻȚȠȞȣı઀ȦȞțĮ੿ਥȞIJ૵ȚȖȣȝȞȚ_ț૵ȚIJ૵ȝȝİȖ੺ȜȦȞਝıțȜĮʌȚİ઀ȦȞ /LEDWLRQLQWKH FKRULNRLDJRQHVLVDOVRPHQWLRQHGDVRQHRIWKHSULYLOHJHVGXWLHVRIWKHSULHVWRIWKH .\UEDQWHV('HQGRIWKLUGFHQWXU\%&VDPHIRUWKH¿UVWFHQWXU\%&UHJXOD WLRQIRUWKHSULHVWKRRGRI+HUDNOHV.DOOLQLNRV('±  7KHGHFUHHV6(*DQGDOOIUDJPHQWDU\DQGDOO GDWLQJWRWKH,,FHQWXU\%&FRQWDLQDUHIHUHQFHWRVSRQGDLLQZKDWVHHPVWREHDQ DOPRVWVWDQGDUGIRUPXODWLRQ੖ʌȦȢਕ>Ȟ@ĮȖȠȡİȣșોȚ੒ıIJ੼>ijĮȞȠȢǻȚȠ@_>Ȟȣı@઀ȦȞIJİIJ૵Ț ʌ>ȡ@੺IJȦȚਕȖ૵ȞȚȝİIJ੹IJ>੹Ȣı@_>ʌȠ@Ȟį੹ȢțĮ੿ਥȞIJ૵ȚȖȣȝȞȚț૵ȚIJ૵ȞțĮIJ੹_ʌİȞIJĮİIJȘȡ઀įĮ ਝıțȜĮʌȚİ઀ȦȞ6(*±   7KHZRUGLQJRI6HJUH('%±DVHFRQGFHQWXU\GHFUHHRI+DOLFDUQDVVRV IRUWKH&RDQGRFWRU+HUPLDVFI6(*%(6(* GRHV QRW LPSO\ WKH H[LVWHQFH RI WZR 'LRQ\VLD LQ .RV DV VXSSRVHG E\ 6KHUZLQ:KLWH UDWKHUWKHKRQRXUVKDYHWREHDQQRXQFHGZKHQWKHFLW\ZLOO¿UVWFHOHEUDWHWKH'LRQ\ VLDZKLOHLQWKHFDVHRIWKH$VNODSLHLDWKHFLW\ZLOOZDLWXQWLOWKHPHJDOD$VNODSLHLD 6(*DKRQRUL¿FGHFUHHRI6LQRSHIRU'LRQQRVRI&RVFD%&UH TXLULQJWKHDQQRXQFHPHQWWREHPDGHLQ&RVOO± LVVLPLODUǻȚȠȞȣı઀ȦȞIJİ IJ૵ȚʌȡઆIJȦȚਕȖ૵Ȟ@_>ȚțĮ੿IJȠ૙ȢȂİȖ੺ȜȠȚ@ȢਝıțȜȘʌȚİ઀ȠȚȢਥȞIJ૵ȚȖȣȝȞ>Țț૵Ț@_>ਕȖ૵ȞȚ 7KH6LQRSHDQVPD\KDYHGHOLEHUDWHO\OHIWRSHQWKHRFFDVLRQRIWKHDQQRXQFHPHQW DWWKHQH[W'LRQ\VLDLQRUGHUWRDOORZWKH&RDQVDIUHHGHFLVLRQDVWRWKHFKRLFHRI WKHVSHFL¿FDJRQ6RDOVR6(*GHFUHHRI+DOLFDUQDVVRVIRUD&RDQ,,,,, %&6(*±DGHFUHHRI&KDONLVIRU&RDQMXGJHVWKHGHPRVRI&KDONLV UHTXHVWVWKDWWKHKRQRXUVWKH\KDYHJLYHQEHDQQRXQFHGDWWKHQH[W'LRQ\VLDDVZHOO DVDWWKHJUHDW$VNOHSLHLDDQG5KRPDLDLQWKHJ\PQLFDJRQHV FD%&6(*  &KLURQ±PLGVHFRQGFHQWXU\%&ZLWKDFODXVHUHTXHVWLQJ WKHDQQRXQFHPHQWRIFURZQV±EXWWKHWH[WLVWRRIUDJPHQWDU\IRULWWREHSRVVLEOHWR VD\DQ\WKLQJHOVH$WKLUGFHQWXU\GHFUHHRI7KDVRVIRU&RDQMXGJHV6(* DERYHQ DVNVWKH&RDQVWRDQQRXQFHWKHKRQRXUV³LQWKRVHDJRQHVLQZKLFKLW LVSUHVFULEHGIRUWKHPWRGRWKLVNLQGRIDQQRXQFHPHQWV´OO±

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



,Q5KRGHVWRRFKRUDOFRQWHVWVVHHPWRKDYHEHHQFRQVLGHUHGDVDSDU WLFXODUO\ DSSURSULDWH YHQXH IRU SURFODPDWLRQV$ YHU\ IUDJPHQWDU\ GHFUHH RIWKH¿UVWKDOIRIWKHWKLUGFHQWXU\%&SUHVFULEHVWKDWWKHDJRQRWKHWDLRI WKH'LRQ\VLDDQG6HOHXNHLDDQQRXQFHWKHKRQRXUVLQWKHWKHDWUH,*;,,  ,QDQ$UJLYHGHFUHHIRUWKH5KRGLDQVGDWHGWRFD%&WKHKRQRXUV KDYHWREHDQQRXQFHGE\WKHDJRQRWKHWHVDW$UJRVDWWKHJ\PQLFDJRQRIWKH +HNDWRPERLD LQ 1HPHDDJDLQGXULQJWKHJ\PQLFDJRQ DQG DW 5KRGHV DW WKH'LRQ\VLDRQWKH¿UVWGD\RIWKHDJRQRIF\FOLFFKRUXVHVǻȚȠȞȣı઀ȠȚȢਥȞ IJ૵ȚਕȖ૵ȞȚIJ૵ȞțȣțȜ઀ȦȞ_>Ȥ@Ƞȡ૵ȞIJ઼Țʌȡ੺IJĮȚਖȝ੼ȡĮȚ FOHDUO\WKH5KRGLDQ DPEDVVDGRUV JDYH GHWDLOHG LQGLFDWLRQV DV WR WKH EHVW RFFDVLRQ IRU WKH DQ QRXQFHPHQWLQ5KRGHV2QWKHRWKHUKDQGDKRQRUL¿FGHFUHHRI&DPLURV IRU3DQDLWLRVVRQRI6LPRVGDWHGWRWKHWKLUGFHQWXU\%&VKRZVWKDWWKHSR OLVKDGWKHFKRLFHDPRQJYDULRXVYHQXHVWKHGHPRVGHFLGHVWKDWWKHDJRQR WKHWHVZLOODQQRXQFHWKHKRQRXUVFRQIHUUHGRQWR3DQDLWLRVDWWKH'LRQ\VLD RQWKH¿UVWGD\RIWKHDJRQRIWKHF\FOLFFKRUXVHVǻȚȠȞȣı઀ȠȚȢਥȞIJ૵ȚਕȖ૵ȞȚ IJ૵ȞțȣțȜ઀_ȦȞIJ઼Țʌȡ੺IJĮȚ ҕਖ ҕȝ ҕ੼ ҕȡ ҕĮ ҕȚ ҕO± EXWWKHWH[WJRHVRQWRDGGWKDW WKHQH[WGDPLRXUJRVVKRXOGDOVRFURZQ3DQDLWLRVDWWKHJ\PQLFDJRQRIWKH 3DQDWKHQDLDO± ,QDQRWKHUVOLJKWO\ODWHUVHFRQGFHQWXU\%& KRQ RUL¿FGHFUHHIURP&DPLURVWKHDJRQRWKHWHVFKRVHQIRUWKHIROORZLQJ\HDU ZLOOKDYHWRPDNHWKHDQQRXQFHPHQWRIWKHKRQRXUVDWWKHDJRQRIWKH3DQD WKHQDLDOOO± WKH'LRQ\VLDKDYHDOWRJHWKHUGLVDSSHDUHG,QWKHPLG WKLUGFHQWXU\DQRWKHUYHQXHIRUWKHDQQRXQFHPHQWVRIKRQRXUVZDVWKHDJRQ RIWKH+HOLHLDXQIRUWXQDWHO\QRGHWDLOVDVWRWKHH[DFWPRPHQWDUHJLYHQ 'HFUHHV E\ GHPHV FRXOG DOVR SUHVFULEH SURFODPDWLRQ RI KRQRXUV WKXV WKH KRQRXUVFRQIHUUHGE\WKH%U\NRXQWLRLRQD6DPLDQGRFWRU0HQRNULWRVVRQ RI0HQRGRWRVZLOOEH±¿WWLQJO\±DQQRXQFHGDWWKHDJRQRIWKH$VNODSLHLD ,*;,,VHFRQG¿UVWFHQWXU\%&ZLWK6(* $W/LQGRVD SRVVLELOLW\ VHHPV WR KDYH EHHQ WR DQQRXQFH WKH KRQRXUV LQ D V\OORJRV 2WKHUGRFXPHQWVFRQWHQWWKHPVHOYHVZLWKVWLSXODWLQJWKDWWKHKRQRXUVZLOO KDYHWREHDQQRXQFHGIRUHYHUZLWKDYHU\VLPSOHIRUPXODWLRQ7KLVODWHU

 6(*±DQG±FI6(*  0 6HJUH * 3XJOLHVH &DUUDWHOOL 7LWXOL &DPLUHQVHV $6$$ ;;9,,±;;,; ±  UHVSHFWLYHO\DQG  ,*;,,,*;,,6XSSOSDGHFUHHRI,RVGDWHGWRFD%&UHQHZLQJ IULHQGVKLSZLWKWKH5KRGLDQV  ,* ;,,    %& Ƞੂ ਥʌȚı>IJ੺@ IJĮȚ țĮ੿ Ƞੂ ț>੺ȡȣțİȢ ਥʌȚȝ@İȜȘș੼ȞIJȦ IJ઼Ȣ _ ıIJİijĮȞઆı>ȚȠȢțĮ੿ਕȞĮȖȠ@ȡİ઄ıȚȠȢਥȞIJ૵Ț਩ʌİ>Ț@_>IJ@ĮıȣȜȜંȖȦȚDQG,*;,, FD±%&RQERWK6(*   %DVLFDOO\įİįઆțĮȞIJȚį੻Į੝IJ૵ȚțĮ੿ਕȞĮȖંȡİȣıȚȞIJ઼ȞįİIJ઼ȞIJȚȝ઼ȞİੁȢIJઁȞਕİ੿ȤȡંȞȠȞ ZKLFKLVIRXQGLQ,*;,,IURP,DO\VRV,*;,,DQG0DLXUL 1XRYDVLOORJHHSLJUD¿FDIURP/LQGRVODWHVHFRQGFHQWXU\%&/LQGRV,, FD%&DQGWKHIROORZLQJ,,VSDQQLQJWKH HQWLUHFHQWXU\DQGVSHFLI\LQJDQQRXQFHPHQWRIWKHWLPDLIRUHYHUWKLVFRQWLQXHVLQWR



3DROD&HFFDUHOOL

IRUPXODWLRQLVPXFKVLPSOHUDQGPD\KDYHGHYHORSHGRXWRIWKHXQZLOOLQJ QHVVRUWKHLPSRVVLELOLW\WRGHFLGHLQDGYDQFHRQVRPHVSHFL¿FRFFDVLRQ 7R VXPPDULVH WKH SLFWXUH IURP WKH LVODQGV LV IDU IURP XQLIRUP ,I LQ 6DPRV3DURV6LSKQRVRU&HRVWKHKRQRXUVVHHPWRKDYHEHHQDQQRXQFHGDW WKH'LRQ\VLDDWWKHPRPHQWRIWKHWUDJLFFRPSHWLWLRQVMXVWDVZDVWKHFDVH LQ$WKHQVLQDUHPDUNDEO\KLJKQXPEHURISODFHVVXFKDV(XERHD'HORV &KLRV5KRGHVDQG&RVFKRUDOFRQWHVWVZHUHWKHYHQXHRIFKRLFH

 7KHDQQRXQFHPHQWRIKRQRXUVRXWVLGH$WKHQV  $VLD0LQRU ,Q$VLD0LQRUWRRWKHSRVVLELOLWLHVIRUWKHDQQRXQFHPHQWRIKRQRXUVYDU\ 7KHWUDJLFDJRQHVDWWKH'LRQ\VLDIHDWXUHIUHTXHQWO\,QDXQLTXHLQVWDQFH WKHH[DFWGD\RIWUDJLFSHUIRUPDQFHVLVVSHFL¿HGLPSO\LQJWKDWWKHVHODVWHG VHYHUDOGD\VWKLVPXVWKDYHEHHQWKHFDVHLQPDQ\RWKHUSODFHVLQFOXGLQJ $WKHQV WKRXJKIHZLIDQ\IRXQGLWFUXFLDOWRGLVWLQJXLVKDPRQJWKHGD\V $WDQ\UDWHLQDGHFUHHRIDQXQNQRZQFLW\±QRWQHFHVVDULO\ORFDWHGLQ$VLD 0LQRU±ZKLFKKRQRXUVMXGJHVVHQWE\,DVRVWKHFURZQVDUHWREHJLYHQRQ WKH¿UVWGD\RIWKHWUDJHGLHVZKLFKDUHWKHPVHOYHVSDUWRIDPXVLFDJRQ ,QPDQ\RWKHULQVWDQFHVWKHRQO\WKLQJZHFDQVD\LVWKDWDWDVSHFL¿FPR PHQW LQ WLPH KRQRXUV ZHUH SURFODLPHG RQ WKH RFFDVLRQ RI FKRUDO GDQFHV WKLVLVWKHFDVHRIWKHKRQRXUVGHFUHHGIRUWKH7HQLDQVDQGWKHLUHQYR\VE\ WKH7UDOOLDQHLVDWWKHHQGRIWKHVHFRQGFHQWXU\%&WKHKRQRXUVDUHWREH DQQRXQFHGLQ7UDOOHLVGXULQJWKH'LRQ\VLDRQWKH¿UVWGD\RIWKHN\NOLDDQG LQ7HQRVRQWKHRFFDVLRQZKHQDQQRXQFHPHQWVDUHXVXDOO\PDGH:HWKXV NQRZWKDW7UDOOHLVFHOHEUDWHG'LRQ\VLDZKLFKLQFOXGHGSHUIRUPDQFHVRIF\ FOLFFKRUXVHVDQGWKDWWKHVHODVWHGDWOHDVWWZRGD\VEXWHYHU\WKLQJHOVHLV

WKH¿UVWFHQWXU\$'ZLWK/LQGRV,, &DPLURVWRRSUHVHQWVWKLVSRVVLELOLW\LQ DGHFUHHRIWKH¿UVWFHQWXU\%&7LW&DP2QWKHERGLHVHPDQDWLQJGHFUHHVLQ 5KRGHVVHH*DEULHOVHQ  ,,DVRV ± Ȥȡȣı੼ȦȚ ıIJİij੺ȞȦȚ ҕ ਥȞ IJȠ૙ȢǻȚȠȞȣı઀_ >ȠȚȢ IJો@Ț ʌȡઆIJȘȚ ਲȝ੼ȡĮȚ >IJ@ ૵Ȟ IJȡĮȖȦȚį૵Ȟ IJોȢ į੻ _ >ਕȞĮȖȖİ@Ȝ઀ĮȢ IJ૵Ȟ ıIJ>İ@ij੺ȞȦȞ IJȠઃȢ ਕȖȦȞȠș੼IJĮȢ _ >IJȠ૨ ȝȠȣ@ıȚțȠ૨IJ੽ȞਥʌȚȝ੼ȜİȚĮȞʌȠȚ੾ıĮıșĮȚ7KHLQVFULSWLRQLVXQGDWHGIRUWKHXVHRIWKH VKRUW IRUPXOD DJRQRWKHWDL WRX PRXVLNRX QRZ DWWHVWHG IRU WKUHH FLWLHV 0DJQHVLD DQGWZRRWKHUGRFXPHQWVRIXQNQRZQRULJLQ VHH%(  ,*;,,>@± ,7UDOOHLVਲਕ_>ȞĮȖંȡİȣıȚȢȖ੼ȞȘIJĮȚIJ૵@ȞIJȚȝ૵ȞțĮ੿ IJ૵ȞıIJİij੺ȞȦȞʌĮȡ¶ਲȝ૙Ȟȝ੻ȞǻȚȠ_>Ȟȣı઀ȠȚȢțȣțȜ઀ȦȞIJોȚʌȡ@આIJȘȚਲȝ੼ȡĮȚਥʌȚȝİȜ੻Ȣ ȖİȞ੼ıșĮȚIJ૵ȚਥıȠ_>ȝ੼ȞȦȚȖȡĮȝȝĮIJİ૙ਥȞIJ૵ȚਥȤȠȝ੼@ȞȦȚ਩IJİȚਥȞȉ੾ȞȦȚį੻ʌȡȠȞȠȘș੼ȞIJȦȞ _>ȠੂਙȡȤȠȞIJİȢ" IJȠ૨ȖİȞ੼ıșĮȚIJ੽@ȞıIJİij੺ȞȦıȚȞĮ੝IJ>૵@ȞțĮ੿ਕȞĮȖંȡİȣ_>ıȚȞ੖IJĮȞ țĮ੿Ƞੂਫ਼ʌઁȉȘȞ઀ȦȞਥʌ>ૉȞȘȝ੼ȞȠȚਕȞĮȖȠȡİ઄ȠȞIJĮȚ)RUWKHFKRLFHOHIWWRWKH7HQLDQV VHHDERYHDQGQ

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



XQFHUWDLQEHJLQQLQJZLWKWKHTXHVWLRQRIZKDWHOVHZDVSDUWRIWKH'LRQ\VLD WUDJHG\DQGFRPHG\"ROGRUDQGQHZ"  $ IHZ XQDWWULEXWHG GHFUHHV VKRZ WKDW DQ XQNQRZQ FLW\ FKRVH FKRUDO SHUIRUPDQFHVIRUDQQRXQFHPHQWV7KXVDORQJWH[WRULJLQDWLQJIURPDQXQ NQRZQFLW\0DJQHVLDRQWKH0DHDQGHUEHLQJRQHSRVVLELOLW\ FRQIHUVDWD GDWHDURXQGFD%&KRQRXUVRQ$VVRVDQGWKHMXGJHVLWVHQW,QWKHFLW\ LVVXLQJWKHGHFUHHWKHFURZQVZLOOEHFRQIHUUHGDWWKH¿UVW'LRQ\VLDRQWKH ¿UVWGD\RIWKHDXOHWDLDQGWKHDQQRXQFHPHQWZLOOEHPDGHE\WKHDJRQR WKHWDLRIWKHPRXVLNRVDJRQDW$VVRVWKHORFDODJRQRWKHWHVRIWKHPXVLFDO DJRQLVDVNHGWRGRWKHVDPH2QWKHEDVLVRIWKLVWH[WDVLPLODUFRQWH[WIRU DQQRXQFHPHQWVKDVEHHQUHVWRUHGLQDGHFUHHRID,RQLDQFLW\IRUWKH&RDQ GHPRVDQGWKHMXGJHVLWVHQWGDWHGFD±%& $QRWKHU W\SH RI GLI¿FXOW\ LV SUHVHQWHG E\ D VLWXDWLRQ VXFK DV WKH RQH IRXQGLQ(SKHVRV7KLVFLW\WKDQNVWRDIDLUO\KLJKQXPEHURIHDUO\+HOOHQLV WLFKRQRUL¿FGHFUHHVIRUIRUHLJQHUVFD PLJKWEHWKRXJKWWRDOORZIRUD UHDVRQDEO\UHOLDEOHDQDO\VLV%XWFURZQVDQGHYHQPRUHVRSURFODPDWLRQV RIFURZQVDUHFRPSDUDWLYHO\UDUHPRUHRYHUWKHGHFUHHVPRVWO\GRQRWJLYH DQ\GHWDLOVDVWRWKHRFFDVLRQZKHQWKHDQQRXQFHPHQWLVWREHPDGHDSDUW IURP VSHFLI\LQJ WKDW WKLV VKRXOG KDSSHQ DW WKH 'LRQ\VLD LQ WKH WKHDWUH 7KHUHDUHKRZHYHUVRPHH[FHSWLRQVWRWKLVUXOHIRULQVWDQFHD+HOOHQLVWLF LQVFULSWLRQKRQRXULQJ6N\WKHVVRQRI$UFKLGDPRVDQ(SKHVLDQ SUHVFULEHV WKDWKHEHFURZQHGDQGWKHKRQRXUDQQRXQFHGDWWKHQH[W'LRQ\VLD³LQWKH FRQWHVWRIPHQ´ਥȞIJ૵ȚਕȖ૵ȞȚIJ૵ȞਕȞįȡ૵Ȟ +RZDUHZHWRHYDOXDWHWKLV

 ,QDQLQVFULSWLRQIURP'LG\PDGDWHGWRFD%&$QWLRFKRVWKHVRQRI6HOHXNRV LVRIIHUHGWKHSURKHGULDDWWKH'LRQ\VLDLQ0LOHWRVDQGDWWKH'LG\PHLDLQ'LG\PD ਥȞ@_IJȠ૙ȢțȣțȜ઀ȠȚȢਕȖ૵ıȚȞ'LG\PD,,'LH,QVFKULIWHQ7KHUHLVQRSURFODPD WLRQKHUHEXWREYLRXVO\WKHNLQJZLOOKDYHEHHQRIIHUHGZKDWZDVEHVWRQHZRQGHUV DERXW WKH UHDVRQ IRU WKH VSHFL¿FDWLRQ ³LQ WKH F\FOLF DJRQHV´ IURQW VHDWLQJ PLJKW KDYH EHHQ GHVLUDEOH WKURXJKRXW WKH IHVWLYDO RQH KDUGO\ LPDJLQHV WKH NLQJ EHLQJ DVNHGWRFKDQJHSODFHRQFHF\FOLFFKRUXVHVDUHRYHUDQGWUDJHG\EHJLQV2QWKHRWKHU KDQGLIWKHUHZDVQRGUDPDZK\WKHDGGLWLRQ"  ,$VVRVSRVVLEO\IURP0DJQHVLDDVVXJJHVWHGDOUHDG\E\:LOKHOPFI,0DJQH VLDEXWVHHDERYHQDQG%(  6(*±ıIJİijĮ@_>Ȟ૵ıĮȚĮ੝IJઁȞਥȞIJȠ૙Ȣʌ@ȡȫIJȠȚȢǻȚȠȞȣı>ȓȠȚȢĮ੝ȜȘIJ૵Ȟ@_ >IJોȚʌȡȫIJȘȚਲȝȑȡĮȚDQGOO>IJȒȞIJİਕȞĮȖ@_>ȖİȜȓĮȞIJ૵ȞıIJ@İijȐȞȦȞʌȠȚȒıĮıș>ĮȚ IJȠઃȢਕȖȦȞȠșȑIJĮȢIJȠ૨@_>ȝȠȣıȚțȠ૨@ਕȖ૵ȞȠȢ  (SKHVLDQSUR[HQ\GHFUHHVDUHGLVFXVVHGLQ+DELFKW  $W'LRQ\VLDLQWKHWKHDWUH,(SKHVRV%&FD,(SKHVRV,,,%& ,(SKHVRV,(SKHVRV,(SKHVRV%&6XSSO(SKHV  DQG   ERWK HDUO\ +HOOHQLVWLF WKH DQQRXQFHPHQW LQ WKH VHFRQG LV FRP SOHWHO\UHVWRUHG ,(SKHVRVFD8QLTXHO\DWWKH(SKHVHLDLQWKHWKHD WUH ,(SKHVRV  FD  %&  >țĮ੿ ਕ@ȞĮȖȖİ૙ȜĮȚ IJȠ૙Ȣ >ਫijİ@ıİ઀ȠȚȢ ਥȞ IJ૵Ț șİ੺IJȡȦȚ  ,(SKHVRV±ı>IJİijĮ@_>Ȟ૵ıĮȚĮ੝@IJઁȞȤȡȣı૵ȚıIJİij੺ȞȦȚਥȞIJȠ૙ȢǻȚȠȞȣı઀ȠȚȢ



3DROD&HFFDUHOOL

RQHVSHFL¿FVWLSXODWLRQDJDLQVWDOOWKHRWKHUVZKHUHWKHWH[WVLPSO\VD\V³LQ WKHWKHDWUH´"7KDWWKHVRXQGRIWKHDXORVZDVDSSUHFLDWHGLQ(SKHVRVDSSHDUV FOHDUO\IURPDGHFUHHGDWHGWRWKHEHJLQQLQJRIWKHWKLUGFHQWXU\KRQRXU LQJWKH%RHRWLDQDXORVSOD\HU@RQVRQRI,VPHQRGRURV,(SKHVRV LW ZRXOGKDYHEHHQLQWHUHVWLQJWRNQRZLQZKDWFRQWH[WKLVFURZQZDVWREH DQQRXQFHGEXWWKHVWRQHEUHDNVRIIMXVWDWWKDWPRPHQW+RZHYHUKRQRXUV IRU DQ DXORVSOD\HU LQ WKH HDUO\ WKLUG FHQWXU\ DUH QRW HQRXJK WR PDNH D FDVHIRUWKHRYHUDOOLPSRUWDQFHRIFKRUDOSHUIRUPDQFHV$QRWKHUGRFXPHQW IURP (SKHVRV ± D GHFUHH JLYLQJ FLWL]HQVKLS WR D YLFWRULRXV \RXQJ DWKOHWH ZKRJDYH(SKHVRVDVKLVRULJLQDWWKHPRPHQWRIKLVYLFWRU\DW1HPHDWKXV FRQIHUULQJJORU\RQWKHFLW\±FRPSOLFDWHVWKHVLWXDWLRQ\HWIXUWKHUWKHFLW\ SURFODLPV WKDW KH ZLOO EH (SKHVLDQ DV ZDV SURFODLPHG DW 1HPHD WKDW KH ZLOOUHFHLYHWKHKRQRXUVZKLFKWKHODZVSUHVFULEHIRUWKRVHZKRZLQDWWKH 1HPHDLQKLVFDWHJRU\DQG³WKDWKHEHDQQRXQFHGLQWKHDJRUDDVDOORWKHU YLFWRUVDUHDQQRXQFHG´7KLVLVWKHRQO\LQVWDQFHRIZKDWPXVWKDYHEHHQ DIDLUO\IUHTXHQWRFFXUUHQFHDQGLWVKRZVKRZLQVXI¿FLHQWRXUHYLGHQFHLV 1RQHWKHOHVVWKHUHDUHFDVHVZKHUHLWLVSRVVLEOHWRJRLQWRVRPHGHWDLO 7KXVIRULQVWDQFHIRU,DVRVZHDUHIDLUO\ZHOOLQIRUPHGRIWKHWKHDWULFDOOLIH RIWKHFLW\WKDQNVWRLWVVXEVFULSWLRQOLVWV7KHVHPDNHFOHDUWKDWWKHDWULFDO SHUIRUPDQFHV ZHUH GHHPHG LPSRUWDQW HQRXJK IRU WKH SROLV WR UHVRUW WR WKH VXEVFULSWLRQV\VWHPWRJXDUDQWHHWKHLUVXUYLYDOWKH¿UVWVHULHVDOVRDOORZXVWR VHHWKDWEHVLGHVFLWKDURGHVDQGDXORGHVWKH,DVLDQVUHJXODUO\KLUHGWUDJHGLDQV 6RZKDWRIWKHDQQRXQFHPHQWRIKRQRXUV",QDQLQVFULSWLRQIURP&D O\PQDGDWHGWRFD±WKHKRQRXUVGHFUHHGWRWKHSROLVRI,DVRVDQG WRLWVMXGJHVZLOOEHDQQRXQFHGE\WKHDJRQRWKHWHVLQ,DVRVDWWKH'LRQ\VLD RQ WKH ¿UVW GD\ RI WKH N\NOLD 6LPLODUO\ LQ DQRWKHU XQGDWHG  GHFUHH WKH KRQRXUVIRU+HUPRSKDQWRVVRQRI1RXPHQLRVDUHWREHDQQRXQFHGGXULQJ WKH'LRQ\VLDFDJRQLQWKHWKHDWUHZKHQWKHFLW\¿UVWZLOORUJDQLVHFKRUXV

IJȠ૙Ȣ ȝİIJ੹ ǺĮįȡંȝȚȠȞ ʌȡ઄IJĮȞȚȞ ਥȞ IJ૵Ț ਕȖ૵ȞȚ IJ૵Ȟ ਕȞįȡ૵Ȟ ȖİȞȠȝ੼Ȟ>ȘȢ ਕȞ@_ >ĮȖȖİ@Ȝ઀!ĮȢIJોıįİ!«  ,(SKHVRV±IRU$WKHQRGRURVVRQRI6HPRQSUREDEO\+HOOHQLVWLF țĮ੿ ਕȞĮȖȖİ૙ȜĮȚĮ੝IJઁȞਥȞIJોȚਕȖȠȡ઼ȚțĮș>੺@_ʌİȡȠੂਙȜȜȠȚȞȚț૵ȞIJİȢਕȞĮȖȖ੼ȜȜȠȞIJĮȚPHQ WLRQHGVXSUDQ 6HHRQWKLVWH[W6ODWHU6XPPD  6HHPRVWUHFHQWO\&URZWKHUZLWKHDUOLHUELEOLRJUDSK\7RGDWHOLVWVRIFRQ WULEXWRUVDUHNQRZQIDOOLQJLQWZRJURXSVD¿UVWVHULHVRIVHYHQOLVWVFRYHULQJWKH SHULRGIURPWKHHQGRIWKHWKLUGFHQWXU\WRWKHHDUO\V%&LQZKLFKWKHFLWL]HQV RIIHUVSHFL¿FVSHFWDFOHVDQGDVHFRQGODWHUVHULHVLQZKLFKWKHFLWL]HQVPDNHXQL IRUPSD\PHQWVRIGUDFKPDVWKHPHWRLNRL   06HJUH7LWXOL&DO\PQLLS;9,$± ,,DVRV±IJઁȞȝ੻ȞĮȖȦȞȠ_ ș੼IJȘȞਕȞĮȖȖİ૙ȜĮȚIJઁȞIJોȢʌંȜİȦȢıIJ੼ijĮȞȠȞțĮ੿IJઁȞ_>IJ@૵ȞįȚțĮıIJ૵ȞțȣțȜ઀ȦȞIJોȚ ʌȡઆIJȘȚ7KDWWKLVKDSSHQVLQWKHFRQWH[WRIWKH'LRQ\VLDLVVSHFL¿HGLQWKHUHTXHVW RIWKH&DO\PQLDQV±

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



HV$GLIIHUHQWYHQXHLVFKRVHQLQDGHFUHHRIWKH,DVLDQVKRQRXULQJD&RDQ FLWL]HQ7HOHXWLDVWKHDJRQRWKHWHVZLOODQQRXQFHWKHFURZQDWWKH¿UVWQH[W 'LRQ\VLD DIWHU WKH SRPSH :KLOH PRUH GDWD DQG VSHFL¿F GDWHV IRU WKH WH[WV ZRXOGKHOSLWLVVWULNLQJWKDWDOWKRXJKWKHUHZHUHWKHDWULFDOSHUIRU PDQFHVVWULFWRVHQVXDW,DVRVWKHLQVFULSWLRQVQHYHUPHQWLRQWUDJLFDJRQHV DQGSUHIHUWRLQGLFDWHFKRUDOSHUIRUPDQFHVRUWKHSRPSHDVWKHYHQXHIRU WKHDQQRXQFHPHQWRIKRQRXUV2QWKHRWKHUKDQGDGHFUHHRIWKH.RLQRQ RIWKH'LRQ\VLDFWHFKQLWDLRI,RQLDDQGWKH+HOOHVSRQWVKRZVWKDWWKHWHUP ³FKRUXVHV´PD\LQFOXGHWUDJHG\DQGFRPHG\LWDOORFDWHVDQXDOO\WZRDXORV SOD\HUVWZRWUDJHGLDQVWZRFRPHGLDQVDNLWKDURGRVDNLWKDULVWHVDQGWKHLU K\SHUHVLDLVRWKDWWKH,DVLDQVPD\EHDEOHWRFHOHEUDWHHYHU\\HDUFKRUXVHV IRUWKHJRGDFFRUGLQJWRWKHLUWUDGLWLRQV ,QVRPHRWKHULQVWDQFHVLWLVSRVVLEOHWRQRWLFHDQHYROXWLRQ$W3ULHQH WKHHDUOLHVWKRQRUL¿FGHFUHHVWR%& SUHVFULEHWKDWWKHKRQRXUVEH DQQRXQFHGDWWKH'LRQ\VLDGXULQJWKHFRQWHVWVRIWUDJHG\,QWZRPRUH FDVHVWKHRFFDVLRQLVQRWVSHFL¿HGEH\RQG³LQWKHWKHDWUHDWWKH'LRQ\VLD´ %XW ODWHU GRFXPHQWV VKRZ D VKLIW LQ WKH SUHIHUUHG YHQXH DQQRXQFHPHQWV GXULQJWKHWUDJLFFRPSHWLWLRQVDUHQRPRUHWREHIRXQG7KLVFKDQJHPD\ EHDGXPEUDWHGLQWKHZRUGLQJRID3ULHQHDQWKLUGFHQWXU\GHFUHHIRUWKUHH VLWRSK\ODNHVWKHLUFURZQVPXVWEHDQQRXQFHGLQWKHWKHDWUHDWWKH¿UVW'LR Q\VLDGXULQJWKHPXVLFDODJRQ±WKRXJKZKDWH[DFWO\LVPHDQWZLWKPXVL FDODJRQLVOHIWXQVSHFL¿HG7KH¿UVWFHUWDLQH[DPSOHRIWKHQHZWUHQGLV  ,,DVRV±ıIJİijĮȞ૵ıĮȚĮ੝IJઁȞȤȡȣı૵ȚıIJİ>ij੺ȞȦȚIJ૵ȚਥțIJȠ૨@__ȞંȝȠȣਥȞIJ૵Ț șİ੺IJȡȦȚ IJ૵Ț ǻȚȠȞȣ>ıȚĮț૵Ț ਕȖ૵ȞȚ@ _ ț ҕĮ ҕ੿ ਕȞĮȖȖİ૙ȜĮȚ IJઁȞ ț੾ȡȣțĮ ੖IJĮ ҕ>Ȟ ਲ ʌંȜȚȢ ʌȡ૵IJȠȞ@_ȤȠȡȠઃȢਙȖȘȚ  ,,DVRV±6HJUH('IURP&RV IJઁȞį੻ਕȖȦȞȠș੼IJ ҕȘȞਥʌȚȝİȜ੻ȢʌȠ>Ț੾@_ ıĮıșĮȚ ੖ʌȦȢ ਕȞĮȞȖİȜૌ ੒ ıIJ੼ijĮȞȠȢ ੰȚ IJİIJ઀ȝȘ>IJĮȚ@ _ ȉ ҕİȜİȣIJ઀ĮȢ IJોȢ ਕȞĮȞȖİȜ઀ĮȢ ȖȚȞȠȝ੼ȞȘȢਥȞ_IJȠ૙ȢʌȡઆIJȠȚȢǻȚȠȞȣı઀ȠȚȢȝİIJ੹IJ੽ȞʌȠȝʌ੾Ȟ  ,,DVRV ± PLG VHFRQG FHQWXU\ %&  Į੝ȜȘIJ੹Ȣ į઄Ƞ IJȡĮȖ૳įȠઃȢ į઄Ƞ țȦȝ૳įȠઃȢį઄ȠțȚșĮȡ૳įંȞțȚșĮȡȚıIJ੾Ȟ੖ʌȦȢ_ਙȖȦıȚȞIJ૵Țșİ૵ȚIJȠઃȢ>Ȥ@ȠȡȠઃȢțĮIJ੹ IJ੹ȢʌĮIJȡ઀ȠȣȢĮ੝IJ૵ȞįȚĮȖȡĮij੺Ȣ&I&URZWKHU±  6RLQDGHFUHHIRUMXGJHVIURP3KRNDLDDQRWKHUXQNQRZQFLW\DQG$VW\SDODLDGDW HG WR  %& , 3ULHQH  ± WKH DJRQRWKHWHV ZLOO DQQRXQFH WKH FURZQ IJȠ૙Ȣ ʌȡઆIJ>ȠȚ@ȢǻȚȠȞȣı઀ȠȚȢ IJȡĮȖȦȚį૵>Ȟ IJ@૵>Ț ĮȖ૵ȞȚ įȘ@_>Ȝ@Ƞ૨ȞIJĮ įȚ੹ IJોȢ ਕȞĮȞȖȖİȜ઀ĮȢ IJ੹ȢĮੁIJ઀ĮȢ«PRUHRYHUDPEDVVDGRUVZLOOEHVHQWWRHDFKRIWKHWKUHHSROHLVDVN LQJWKDWWKHKRQRXUVPD\EHDQQRXQFHGWKHUHWRRǻȚȠ>Ȟȣ@ı઀ȠȚȢਥȞIJ૵ȚĮȖ>૵@ȞȚIJ૵Ȟ IJȡĮȖȦȚį>૵@Ȟ_ țĮșંIJȚ țĮ੿ ȆȡȚȘȞİ૙Ȣ ʌĮȡૅ Įਫ਼IJȠ૙Ȣ ਥȥȘijȚıȝ੼ȞȠȚ İੁı઀Ȟ ±  6LPL ODUO\,3ULHQH±DGHFUHHIRUWKHSKURXUDUFKRV%LDVGDWHGWRWKH,,,FHQWXU\ %&(VWLSXODWHVIRUWKHSURFODPDWLRQWRKDSSHQLQWKHWKHDWUHǻȚȠ@Ȟȣı઀ȦȞIJȡĮȖȦȚį૵Ȟ IJ૵Țਕ_Ȗ૵ȞȚWKLVLVDOVRWKHFDVHRI,3ULHQH±DGHFUHHIRU/DULFKRVRIFD ±%&FURZQWREHDQQRXQFHGǻȚȠȞȣı઀ȠȚȢIJȡĮȖȦȚį૵>Ȟ@_>IJ@૵ȚʌȡઆIJȦȚਕȖ૵ȞȚ  7KH WKLUG GHFUHH KRQRXULQJ 1\PSKRQ WRR VWLSXODWHV WKDW WKH KRQRXUV ZLOO EH DQ QRXQFHGDWWKH¿UVW'LRQ\VLDGXULQJWKHWUDJLFFRPSHWLWLRQV,3ULHQH  , 3ULHQH ± țĮ੿ ਕȞĮȖȖİ૙ȜĮȚ Į੝IJ૵Ȟ IJȠઃȢ ı>IJİijȐȞȠȣȢ@_ ਥȞ IJ૵Ț șİȐIJȡȦȚ IJȠ૙Ȣ ʌȡȫIJȠȚȢǻȚȠȞȣıȓȠȚȢਥ>ȞਕȖ૵ȞȚ@_IJ૵ȚȝȠȣıȚț૵ȚįȘȜȠ૨ȞIJĮȢįȚ੹IJ>ો@ȢਕȞĮȖȖ>İȜȓĮȢ



3DROD&HFFDUHOOL

DKRQRUL¿FGHFUHHRIWKH3ULHQHDQVIRUWKHLUSKURXUDUFKRV1\PSKRQGDWHG WRFD±%&,3ULHQH± WKHDJRQRWKHWHVZLOODQQRXQFHWKH FURZQDWWKHQH[W'LRQ\VLDGXULQJWKH¿UVWDJRQRIWKHDXOHWDLLHRIWKH FKRUXVHV DFFRPSDQLHG E\ WKH DXORV IJȠ૙Ȣ ʌȡઆIJȠȚȢǻȚȠȞȣı઀ȠȚȢ Į੝ȜȘIJ૵>Ȟ@ _ IJ૵ȚʌȡઆIJȦȚਕȖ૵ȞȚ 6LPLODUO\DKRQRUL¿FGHFUHHRIWKHJDUULVRQLQ7HORQHD IRUWKHLUFRPPDQGHU+HOLNRQGDWHGDURXQG%&,3ULHQH±  SUHVFULEHVWKDWWKHKRQRXUVZLOOEHDQQRXQFHG³DWWKHQH[W'LRQ\VLDDWWKH FKRUDODJRQRIWKHFKLOGUHQDFFRPSDQLHGE\DXORVPXVLF´ਥȞIJȠ૙ȢʌȡઆIJȠȚȢ ҕ _>ǻ@ȚȠȞȣı઀ȠȚȢĮ੝ȜȘIJ૵ȞIJ૵>Ț@ਕ ҕȖ૵ȞȚIJ૵ȚʌĮ ҕȚįȚț૵>Țǜ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¿FHV $QHYROXWLRQVLPLODUWRWKDWDUJXHGIRULQWKHFDVHRI3ULHQHFDQEHSRV LWHG IRU .RORSKRQ$ UHFHQWO\ SXEOLVKHG GHFUHH RI$LJDL IRU .RORSKRQLDQ MXGJHVRIWKH¿UVWKDOIRIWKHWKLUGFHQWXU\KDVWKH.RORSKRQLDQVDJUHHWR WKH UHTXHVW RI SURFODPDWLRQRI KRQRXUV PDGH E\ WKH SHRSOH RI$LJDL DQG VWLSXODWHWKDWWKHSURFODPDWLRQZLOOEHPDGHDWWKHQH[WFHOHEUDWLRQRIDJRQHV E\WKHLUFLW\DWWKHJUHDW.ODULDE\WKHDJRQRWKHWDLDQGDWWKH'LRQ\VLDE\ WKHSU\WDQLV,QDKRQRUL¿FGHFUHHRIWKHVHFRQGKDOIRIWKHWKLUGFHQWXU\

IJ੹Ȣ@_ĮੁIJȓĮȢįȚૃਘȢıIJİijĮȞȠ૨ȞIJĮȚ$VLPLODUO\RSHQIRUPXODWLRQLQDGHFUHHRIWKH 3DULDQRL IRU WKH 3ULHQHDQV RI FD  %& ,3ULHQH ±  ,3DULRQ ± UHVWRUDWLRQVE\/RXLV5REHUW ʌĮȡĮțĮȜ੼@ıİȚȆȡȚȘȞİ૙ȢਕȞĮȖȖİ૙ȜĮȚIJઁȞ>ıIJ੼ij@ĮȞȠȞ IJȠ>૨į੾ȝȠȣ@_>țĮ੿ʌĮȡ¶Į੝IJȠ૙ȢਥȞIJ૵Țșİ੺IJ@ȡȦȚਥȞIJ૵ȚਕȖ૵ȞȚIJ૵ȞǻȚȠȞȣı઀Ȧ>Ȟ@੖IJ>Į@Ȟ >ਲʌંȜȚȢʌȡ૵IJȠȞ@_>ıȣȞIJİȜોȚIJȠઃȢȤȠȡȠઃȢ੖IJȚ«  , 3ULHQH    DQG   DQG , 3ULHQH    DQG   WZR YHU\ VLPLODU KRQRUL¿FGHFUHHVRIWKH,DVLDQVIRUMXGJHVIURP3ULHQHZLWKWKHDFFHSWDQFHRIWKH KRQRXUVE\WKH3ULHQHDQV  , 3ULHQH  9,,,  ਥȞ IJ૵Ț șİ੺IJȡȦȚ ǻ>ȚȠȞȣı઀ȦȞ Į੝ȜȘIJ૵Ȟ@ _ IJ૵Ț ਕȖ૵ȞȚ IJ૵Ț ʌĮȚįȚț૵>Ț੖IJĮȞ੒įોȝȠȢIJ੹Ȣ@_ʌĮIJȡ઀ȠȣȢıʌȠȞį੹ȢıȣȞIJ>İȜોȚ«  ,3ULHQH±GDWHGWRWKH,FHQWXU\%& ǻȚȠȞȣı઀ȠȚȢĮ੝Ȝ>ȘIJ૵ȞIJ૵ȚਕȖ૵ȞȚ IJ૵ȚʌĮȚįȚț૵Ț@੖IJĮȞ੒įોȝȠȢIJ੹ȢʌĮIJȡ઀_>ȠȣȢșȣı઀Į@ȢIJ૶ǻȚȠȞ઄ıȦȚਥʌȚIJİȜૌ«  *DXWKLHU6(* OO±)RUWKHUHTXHVWRIWKH$LJHDQVVHHOO± DQGOO±DQG±ZKHUHLWLVFLWHGE\WKH.RORSKRQLDQV7KHVSHFL¿FDWLRQ µJUHDW¶GRHVQRWKHUHLPSO\DQDJRQVWHSKDQLWHVEXWORFDOFRPSHWLWLRQVWULHWHULFRU

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



IRUIRUHLJQMXGJHVIURP/DPSVDNRVWKHFURZQKDVWREHDQQRXQFHGDWWKH 'LRQ\VLDDWWKH.ODULDPHJDODDQGDWWKH$QWLRFKHLDZKHQWKHSROLV¿UVWZLOO SUHVHQWWKHDJRQHVUHVSHFWLYHO\E\WKHSU\WDQLVDQGWKHDJRQRWKHWDLZLWKRXW IXUWKHUSUHFLVLRQV,QDQRWKHUWKLUGFHQWXU\KRQRUL¿FGHFUHHIRU3ULHQHDQ DPEDVVDGRUVWKHDQQRXQFHPHQWZLOOEHPDGHE\WKHSU\WDQLVDWWKH'LRQ\ VLDZKHQWKHSROLV¿UVWODFXQD SUHVHQWVWKHFKRUXVHVWRWKHJRGDQGLQWKH .ODULDDQG$QWLRFKHLDLQWKHJ\PQLFDJRQHV7KLVLVDOLWWOHPRUHSUHFLVH DOWKRXJKLWZRXOGEHQLFHWRNQRZH[DFWO\ZKDWNLQGRIFKRUXVHVDUHPHDQW )LQDOO\LQWZRKRQRUL¿FGHFUHHVRIWKHODVWTXDUWHURIWKHVHFRQGFHQWXU\%& WKHFKRUXVHVKDYHGLVDSSHDUHGWKHDQQRXQFHPHQWLVVWLOOWREHPDGHDWWKH 'LRQ\VLDDQGWKH.ODULDEXWLQWKHS\UUKLFFRQWHVWDQGLQWKHJ\PQLFDJRQHV IRUHYHU6RKHUHWRRZKLOHSURFODPDWLRQDWWKH'LRQ\VLDUHPDLQVDIHDWXUH WKHVSHFL¿FFRQWH[WRIWKHSURFODPDWLRQFKDQJHVLQWKHWKLUGFHQWXU\WKHGH FUHHVPHQWLRQSURFODPDWLRQDW³DJRQHV´RUZKHQWKHSROLVSUHVHQWVFKRUXVHV WRWKHJRGE\WKHHQGRIWKHVHFRQGFHQWXU\WKHSURFODPDWLRQLVPDGHDWWKH PRPHQW RI WKH S\UUKLF FRQWHVW ,W LV XQFOHDU KRZ IDU EDFN ZH PD\ SURMHFW WKLVFDQWKHXQVSHFL¿HGFKRUXVHVRIWKHHDUO\WKLUGFHQWXU\KDYHEHHQS\UUKLF FKRUXVHV"0RUHJHQHUDOO\LQWKHVHDQGRWKHUGRFXPHQWVZKDWH[DFWO\GRHV WKHUHIHUHQFHWRFKRULFFRPSHWLWLRQLPSO\"&RXOGLWKDYHLQFOXGHGWUDJHG\" 7ZR IXUWKHU LQVWDQFHV RI DQQRXQFHPHQWV DW WKH PRPHQW RI FKRUXVHV FRPHV IURP +DOLFDUQDVVRV D SRVVLEO\ IRXUWK FHQWXU\ KRQRUL¿F GHFUHH SRLQWVWR³WKH>«@GD\ZKHQFKRUXVHVSHUIRUP´LQWKHVHFRQGFHQWXU\%& DPRUHHODERUDWHIRUPXODLVXVHGIRUWKHVDPHSXUSRVH$VLPLODUZRUGLQJ LVIRXQGLQDGHFUHHRIWKHGHPRVRI7HRVKRQRXULQJDFLWL]HQRI0DJQHVLD RQWKH0DHDQGHUSUREDEO\WREHGDWHGWRWKH¿UVWKDOIRIWKHVHFRQGFHQWXU\ %&WKHFURZQLVWREHJLYHQLQ7HRVDWWKH'LRQ\VLDZKHQWKHFLW\RIIHUV

SHQWHWHULFPRUHLPSRUWDQWWKDQWKH\HDUO\RQHVHYHQVRWKH.ODULDDJ\PQLFIHV WLYDOVHHPWRKDYHEHHQPRUHLPSRUWDQW&RPSDULQJ.ODULDDQG'LRQ\VLD*DXWKLHU UHPDUNVWKDWWKH'LRQ\VLD³DUDWKHUEDQDOIHVWLYDOLQDOORI*UHHFHZLWKWKHH[FHS WLRQRI7HRVUHPDLQHGLUUHVSHFWLYHRIZKHWKHUZHPHDQJUHDWHURUVPDOOHU'LRQ\VLD DORFDODJRQ´  ,/DPSVDNRVOO±  ,3ULHQHZLWKWKHUHVWRUDWLRQVSURSRVHGE\3)ULVFK=3(± FI%(5REHUW± OO±IJોȢį੻ਕȞĮȖȖİȜ>઀ĮȢ>IJ૵Ȟ ıIJİij੺ȞȦȞIJ੽@ȞਥʌȚȝ੼ȜİȚĮȞʌȠȚ੾ıĮıșĮȚIJȠ૙Ȣȝ੻ȞǻȚȠȞȣı઀ȠȚȢIJઁȞʌȡ઄IJĮȞȚȞਥȞIJ૶ਕ>ȖȦ >ȞȚ««੖IJĮȞ@ਲʌંȜȚȢʌȡ૵IJȠȞIJȠઃȢȤȠȡȠઃȢıȣȞIJİȜોȚIJ૵Țșİ૵ȚIJȠ૙Ȣį੻ȀȜĮȡ઀ȠȚȢ IJȠ૙>Ȣ>ȝİȖ੺ȜȠȚȢțĮ੿IJȠ૙ȢਝȞIJ@ȚȠȤİ઀ȠȚȢIJȠઃȢਕȖȦȞȠș੼IJĮȢਥȞIJ૵ȚਕȖ૵ȞȚIJ૵ȚȖȣȝȞȚț૵Ț  6(*±%& FRO9±DQG6(*SRVW%&  FRO,,,±DPSOHFRPPHQWDU\LQ-DQG/5REHUW±DQG±RQ WKHS\UUKLFDW.RORSKRQ&HFFDUHOOLDQG&HFFDUHOOL±  *,%0  0F&DEH +DOLNDUQDVVRV  5REHUW    >² ਲ@ȝ੼ȡĮȚ ੖IJĮ>Ȟ Ƞੂ ȤȠȡȠ੿ ıȣȞIJİȜ૵ȞIJĮȚ DQG 6(*  ± 0F&DEH +DOLNDUQDVVRV   >ਥȞ IJ૵Ț șİ੺IJȡȦȚਥȞIJ૵ȚਕȖ૵ȞȚIJ૵Ț@_>ȝȠȣ@ıȚț૵Țਥʌ੹Ȟ੒įોȝȠȢȤȠȡȠઃȢਙȖȘҕ>Ț



3DROD&HFFDUHOOL

WKH FKRUXVHV WR 'LRQ\VRV WKH WLPRXFKRL ZLOO WDNH FDUH RI WKH DQQRXQFH PHQW

 5HIHUHQFHVWRFKRUXVHVLQHSLJUDSKLFWH[WV KRZWRLQWHUSUHWWKHP" :H KDYH VHHQ WKDW LI VRPH IRUPXODWLRQV DUH UDWKHU YDJXH LQ DW OHDVW RQH FDVHWKHGH¿QLWLRQ³FKRUDOFRPSHWLWLRQ´LQFOXGHVWUDJHG\WZR6DPLDQKRQ RUL¿FGHFUHHVPDGHLWFOHDU±LIWKHUHVWRUDWLRQVDUHWREHWUXVWHG±WKDWWKH DQQRXQFHPHQWRIKRQRXUVZDVWREHGRQHGXULQJWKHWUDJLFDJRQHVRIWKH 'LRQ\VLDZKHQWKHFLW\ZRXOG¿UVWSUHVHQWFKRUXVHVWRWKHJRG7KHGHFUHH RI WKH .RLQRQ RI WKH 'LRQ\VLDF WHFKQLWDL RI ,RQLD DQG WKH +HOOHVSRQW IRU WKH ,DVLDQV DOVR LQFOXGHG WUDJHG\ DQG FRPHG\ XQGHU WKH WHUP ³FKRUXVHV´ $QRWKHU YHU\ IUDJPHQWDU\ DQG XQGDWHG  GHFUHH RI WKH 6DPLDQV LQ 0LQRD RQWKHLVODQGRI$PRUJRVGDWHGWRWKHVHFRQG¿UVWFHQWXU\%&KDVDYHU\ VLPLODUIRUPXODWLRQWKHFURZQLVWREHFRQIHUUHGDWWKH'LRQ\VLDGXULQJWKH WUDJLFSHUIRUPDQFHVZKHQWKHFLW\RIIHUVWKH¿UVWFKRUXVHVWRWKHJRG,I WKHUHVWRUDWLRQVDUHFRUUHFW³FKRUXVHV´KHUHPHDQV³WUDJLFSHUIRUPDQFHV´ 2IFRXUVHGUDPDWLFSHUIRUPDQFHVZHUH³FKRURLIRU'LRQ\VRV´WKHWUDJRGRL DUHLQLWLDOO\WKHPHPEHUVRIWKHWUDJLFFKRUXVDOWKRXJKWKHWHUPODWHUZDV XVHGDOVRIRUWKHDFWRUV%XWVKRXOGZHWKLQNRIGUDPDWLFFKRUXVHVLQDOORI WKHLQVWDQFHVZKHUHFKRUXVHVRQO\DUHPHQWLRQHG"7KHFKDQJHVLQWHUPLQRO RJ\EHWZHHQWKH¿IWKFHQWXU\DQGWKHODWH+HOOHQLVWLFSHULRGVKRXOGQRWEH XQGHUHVWLPDWHGQRUVKRXOGWKHFRQVHUYDWLVPDQGWKHYDULDWLRQVLQSUDFWLFH IURPRQHSODFHWRWKHRWKHU 7KHHSLJUDSKLFDOHYLGHQFHDWDQ\UDWHVXJJHVWVWKDWPDWWHUVZHUHUDWKHU FRPSOH[$QXPEHURIGRFXPHQWVDWWHVWVLQDPRUHRUOHVVVHFXUHZD\WKH SHUVLVWHQFH RI D WUDJLF FKRUXV LQ +HOOHQLVWLF WLPHV7KHVH FRPSULVH WKH  ,0DJQHVLD±ਥʌĮȚȞ੼ıĮȚī>ȜĮ૨țȠȞ@_>ਝįȝ@੾IJȠȣȂ੺ȖȞȘIJĮ੕ȞIJĮİ੝İȡȖ੼IJȘȞ IJȠ૨ į>੾ȝȠȣ@ _ >ıIJİ@ijĮȞ૵ıĮȚ į੻ Į੝IJઁȞ ਥȞ IJȠ૙Ȣ ǻȚȠȞȣı>઀ȠȚȢ@ _ >੖IJĮȞ@ IJ ҕȠઃȢ ȤȠȡȠઃȢ ıȣȞIJİȜ૵ȝİȞIJ૵ȚǻȚȠȞ઄>ıȦȚ@_>ıIJİij@੺ȞȦȚȤȡȣı૵ȚDQGDJDLQDWOLQH  5HVS VXSUD ± DQG Q   DQG Q  DQG ,* ;,,   OO ± >ıIJİij@ĮȞȠ૨ı>șĮȚ į@੻ Į੝IJઁȞ țĮ੿  >șĮȜȜȠ૨" @ ıIJİij੺ȞȦȚǻȚȠ>Ȟ@ȣı઀ȦȞ IJȡ>ĮȖȦȚ@įȠ૙Ȣ ੖IJĮȞIJȠઃȢ>ʌȡઆIJȠȣ@ȢȤȠȡȠઃȢ>ਲʌંȜȚȢ@IJ૵Țșİ૵Țıȣ>Ȟ@IJİȜ>ોȚ@ǜVHHDOVR,*;,, &RUUS/5REHUW5$DQG6(*   :LOVRQDQGQ±DSRHWDVNHGIRUDFKRUXVWKHDUFKRQJUDQWHGD FKRUXVWKHIHVWLYDOMXGJHVMXGJHGWKHFKRURLWUDJHG\DQGFRPHG\DUHUHVSHFWLYHO\ WKH³FKRURLRIWKHWUDJHGLDQV´DQG³RIWKHFRPHGLDQV´WKHXVHRIFKRUHJRVIRUWKH FLWL]HQDSSRLQWHGWRIXQGDWUDJLFFKRUXV¿WVWKLVSDWWHUQ+RZHYHULWPXVWEHQRWHG WKDWWKH$WKHQLDQVFRXOGGLVWLQJXLVKTXLWHZHOOEHWZHHQWKHYDULRXVW\SHVRIFKRURL  6LIDNLV±,RPLWIURPWKHGRFXPHQWVKHFLWHVWKHLQVFULSWLRQVFRQFHUQ LQJWKH6RWHULDDW'HOSKL6LIDNLV¶K\SRWKHVLVWKDWWKHPHPEHUVRIWKHGLWK\UDPELF

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



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¿UVWFHQWXU\%&UHFRUGLQJDYHU\ODUJH QXPEHURI$WKHQLDQWUDJLNRLFKRURGLGDVNDORLDQGZLWKDQLQVFULSWLRQRIWKH VDPHSHULRGIURP7DQDJUDGHWDLOLQJWKHH[SHQVHVLQFXUUHGIRUWKHFHOHEUD WLRQRIWKH6DUDSLHLDFKRURGLGDVNDORLDUHDJDLQPHQWLRQHGSRVVLEO\DOVR FKRUXVHVWKLVSDUWLVIUDJPHQWDU\ DQGVLQFHWKHUHDUHQRF\FOLFFKRUXVHV WKHVHVKRXOGEHLQWHUSUHWHGDVWUDJLFFKRUXVHVSHUIRUPLQJLQWKHFRQWHVWRI QHZWUDJHG\ 7RWKHVHGRFXPHQWVRWKHUVFDQEHDGGHG$SDUWLFXODUO\LQWHUHVWLQJFDVH LVWKDWRIWKHFLW\RI(UHVRVRQ/HVERVWKUHHGHFUHHVVSDQQLQJWKHSHULRG IURPWKHWKLUGWRWKHVHFRQGFHQWXU\%&DQGFRYHULQJYDULRXVSRVVLELOLWLHV LQWHUPVRIKRQRUDQGVFRQFXULQPDNLQJLWFOHDUWKDWKRQRXUVDUHDQQRXQFHG DOVR DWWKH'LRQ\VLDRQWKHRFFDVLRQRIWKHWUDJLFFRPSHWLWLRQE\DPDJ LVWUDWH EHDULQJ WKH QDPH RI FKRURVWDWDV WKH RWKHU IDYRXUHG YHQXHV EHLQJ WKHJ\PQLFFRPSHWLWLRQVRIWKH+HUDNOHLDDQGRIWKH3WROHPDLD 7KH¿UVW

FKRUXVHVPLJKWDOVRKDYHVHUYHGDVWUDJLFGDQFHUVLVQRWVXSSRUWHGE\WKHHYLGHQFH FI1DFKWHUJDHO6ODWHU  (XERHDQODZ,*;,,OIJȠઃȢȤȠȡȠઃȢIJ૵ȞਕȞįȡ૵ȞIJȡĮȖȚț૵ȞWKHUHDGLQJRI WKLVOLQHLVKRZHYHUGHEDWHGVHHWKHFRPPHQWVRI6ODWHU 7H[WDQGFRPPHQ WDU\LQ3LFNDUG&DPEULGJH±&VDSR6ODWHU±/H*XHQ D,±6HH6LIDNLV:LOVRQ±1HUYHJQD  6LIDNLVVHHQRZIRUWKHGRFXPHQW/H*XHQD,±  )',,,6LIDNLV$VQRWHGLELGE\6LIDNLVWKHSUHVHQFHRIWUDLQHUVRI GUDPDWLFFKRUXVHVDPRQJPHPEHUVRIWKH$WKHQLDQWHFKQLWDLVHUYHVDOVRDVHYLGHQFH IRUSHUIRUPDQFHVLQ$WKHQV  $UJRV6LIDNLV±DQG±6(* 7DQDJUD6LIDNLV± 6ODWHU±ULJKWO\SRLQWVRXWWKDWLWLVQRZKHUHTXHVWLRQLQWKLVGRFXPHQW RIDFKRUXVIRUWKHROGWUDJHG\EXWKHDGPLWVWRWKHSUHVHQFHRIDFRPLFDQHZ  WUDJLFDQGDVDW\ULFFKRUXV



3DROD&HFFDUHOOL

GRFXPHQWKRQRXUVDFLWL]HQ'DPRQVRQRI3RO\DUFKRVWKHRWKHUWZRDUH LQRQHLQVWDQFHDUHTXHVWRIWKH3DULDQRLWRSURFODLPLQ(UHVRVWKHKRQRXUV ZKLFKWKH\KDYHYRWHGIRUWKHGHPRVRI(UHVRVDQGWKHMXGJHVLWVHQWDQG DKRQRUL¿FGHFUHHRI(UHVRVIRUMXGJHVIURP0LOHWRVGDWHGWRWKH¿UVWKDOI RIWKHVHFRQGFHQWXU\,QDOORIWKHVHFDVHVWKHFKRURVWDWDVWDNHVFDUHRI WKHSURFODPDWLRQGXULQJWKHWUDJLFDJRQHVRIWKH'LRQ\VLDZKLOHWKHJ\PQD VLDUFKWDNHVFDUHRIWKDWDWWKH+HUDNOHLDDQG3WROHPDLD3URFODPDWLRQE\D FKRURVWDWDVWKXVGRHVQRWH[FOXGHWUDJLFDJRQHVLWVHHPVKRZHYHUKLJKO\ VLJQL¿FDQWWKDWWKHSHUVRQUHVSRQVLEOHIRUWKHSURFODPDWLRQDQGWKXVPRVW OLNHO\ IRU WKH RUJDQLVDWLRQ RI WKH SHUIRUPDQFHV GUDPDWLF DQG RWKHUZLVH  EHDUVWKHQDPHRIFKRURVWDWDV(YLGHQWO\LIWKHVHZHUHWUDJLFSHUIRUPDQFHV WKHFKRUXVUHWDLQHGDWOHDVWVRPHRILWVLPSRUWDQFH$FKRURVWDWDVLVDOVRLQ FKDUJHRISURFODLPLQJKRQRXUVLQVPDOO1HVRVEXWKHUHWKHGRFXPHQWGRHV QRWVSHFLI\LQZKDWDJRQ$IHZPRUHGRFXPHQWVPD\EHDGGHGWRWKHVH LQWULJXLQJSLHFHVRIHYLGHQFHIRUGUDPDWLFFKRUXVHVLQWKH+HOOHQLVWLFSHULRG WKXVWZRGRFXPHQWVIURP&\UHQHERWKGDWLQJWRWKHODVWWKLUGRIWKHIRXUWK FHQWXU\PHQWLRQFKRUXVHVRIWUDJHGLDQVFKRURLWUDJLNRLLQRQHWUDJRLGLN RXVFKRURXVLQWKHRWKHULQVFULSWLRQERWKGDWHGWRWKHV%& DORQJVLGH GLWK\UDPELFFKRUXVHVPXFKODWHUDOLVWRIYLFWRUVLQWKH/\VLPDFKHLDRI WKHVHFRQGFHQWXU\$'PHQWLRQVDYLFWRULRXVWUDJLFFKRUXVWKHLQYHQWLRQ LQWKHLPSHULDOSHULRGRIWKHWHUPPHVRFKRUXVDOVRSRLQWVWRWKHFRQWLQXHG LPSRUWDQFHRIWKHFKRUXV  ,*;,,OO±EXWVHHWKHWH[WRIIHUHGLQ,*;,,VXSSOS>ıIJİij@੺>ȞȦıĮ@Ț į੻Į੣IJȠȞ਩ȞIJİIJȠ૙ȢǻȚȠȞȣı઀ȠȚıȚ>IJ૵ਙȖȦȞȚIJ૵ȞIJȡĮȖઆįȦȞțĮ੿@ਥȞIJȠ૙ȢȖȣȝȞ઀țȠȚıȚ ਕȖઆȞİııȚȠੇȢıȣȞIJ੼Ȝ>İȚਕʌંȜȚȢIJ૵IJİਹȡ੺țȜİȚțĮ੿IJ૵@>ȕ@Įı઀ȜİȚȆIJȠȜİȝĮ઀ȦǜDQG IJ઼Ȣį੻ਕȞҕ >ҕ ĮȖȖİȜ઀ĮȢਥʌȚȝ੼Ȝİı@>șĮȚਥȝȝ@੻ȞIJȠ૙ȢǻȚȠȞȣı઀ȠȚıȚIJઁȖȤȠȡȠıIJ੺IJĮȠȞਥ>Ȟį੻ IJȠ૙ȢȆIJȠȜİȝĮ੼@>ȠȚıȚ@IJઁȖȖȣȝȞĮı઀ĮȡȤȠȞਙȧIJઁȞਥȞİıIJ੺țȠȞIJĮ7KHHGLWRUSURYLGHVQR GDWHEXWWKHGHFUHHPD\UHDVRQDEO\EHSXWVRPHZKHUHLQWKH,,,±,,FHQWXU\%&  ,*;,,6XSSO ,3DULRQ OO±ਕȞĮȖંȡİȣıĮȚį੻țĮ੿IJȠ੿Ȣ>ı@IJİij੺ȞȠȚȢ >ț@Įș੺ʌİȡਕȟҕ઀ĮȚıȚȆĮȡ઀ĮȞȠȚ਩ȞIJİIJȠ૙ȢਹȡĮț ҕȜ੼ȠȚıȚIJ૵>ਙ@ȖȦȞȚIJ૵Ȗȣ ҕȝȞ઀țȦțĮ੿ਥȞ IJȠ૙Ȣ ҕǻȚȠȞȣı઀ȠȚı>Ț@IJ૵ਙȖȦȞȚ>IJ@૵ȞIJȡĮȖઆȚįȦȞǜIJ઼Ȣį੻ਕȞĮȖȠȡİ઄ıȚ>ȠȢ@ਥʌȚȝ੼ȜİȚĮ>Ȟ@  >ʌ@Ƞ੾ıĮıșĮȚ ҕ ਥȝ ȝ ҕ>੻Ȟ@ IJȠ૙Ȣ ਹȡĮțȜ੼ȠȚıȚ >IJ@ઁȞ ȖȣȝȞĮı઀ĮȡȤȠ>Ȟ@  >ਥȞ@ į੻ IJȠ૙Ȣ ǻȚȠȞȣı઀>ȠȚıȚ@IJઁȞȤȠȡ>Ƞı@IJ ҕ੺IJĮȠȞDQG,0LOHW,&±±DQG± 7KHSURFODPDWLRQLVWREHUHSHDWHG\HDUO\  ,* ;,,    2*,6   ,$GUDP\WWHLRQ  OO ± GDWHG WR ± %&  >ıIJİ@ijĮȞȫIJȦį੻Į੣IJȠȞੑȤȠȡȠıIJ੺IJĮȢਙȧੑਥȞ>੼@>ȦȞ@ਥȞIJ૵ਙȖȦȞȚțĮ੿ੑȖțĮȡȣıı੼IJȦ ҕ ਕȞįȡĮȖ>Į@>ș઀@ĮȢ਩ȞİțĮțĮ੿İ੝ȞȠ઀ĮȢIJ઼ȢʌȡઁȢIJઁȞį઼>ȝȠȞ@  6(*DQG6(*GLVFXVVLRQLQ&HFFDUHOOLDQG0LODQH]L  0$0$9,,,:LOVRQ1HUYHJQD  'LVFXVVLRQLQ5REHUW±5HIHUHQFHVLQFOXGH6LGRQ$SROOVFKRO-X YHQDO)',,,6ODWHUDQGQDGGVVRPHUHIHUHQFHVIURPOLW HUDU\WH[WVWRWUDJRGRLZLWKDFKRUXV/XFLOOLXV$QWK3DO(SLFW'LVV 3OXW0RUDDQGVXJJHVWVWKDWWKHVHFKRUXVHVSHUWDLQHGRQO\WRQHZWUDJHGLHV/H *XHQLQIHUVWKHH[LVWHQFHRIWUDJLFFKRUXVHVIURPWKHFRQWLQXHGH[LVWHQFHRI WLWOHVRIWUDJHGLHVLQWKHSOXUDO

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



7KXVLQWKHPVHOYHVUHIHUHQFHVWRFKRUXVHVLQKRQRUL¿FGHFUHHVPD\EH WDNHQWRLQFOXGHWUDJLFFKRUXVHVSRVVLEO\RQO\RIQHZGUDPDIROORZLQJD K\SRWKHVLVDGYDQFHGE\6ODWHU EXWLQWKHJUHDWPDMRULW\RIWKHLQVWDQFHV LWLVTXLWHFOHDUIRULQVWDQFHWKURXJKWKHXVHRIWKHWHUP³F\FOLF´ WKDWZH KDYHWRGRZLWKFKRUDODQGQRWZLWKGUDPDWLFSHUIRUPDQFHV :HUH WKHVH KLUHG FKRUXVHV" 6RPH ± SUREDEO\ PRVW ± FHUWDLQO\ ZHUH VR WKH (XERHDQ RQHV  EXW , ZRXOG VXEPLW WKDW QRW DOO RI WKHP ZHUH ZH VKRXOG DW DQ\ UDWH VHULRXVO\ FRQVLGHU WKH SRVVLELOLW\ RI FLWL]HQ SDUWLFLSD WLRQ &ODURV RIIHUV D VWULNLQJ H[DPSOH RI WKH SHUVLVWHQFH RI ORFDO FLWL]HQ  FKRUXVHVFKRUXVHVRISDLGHVDQGSDUWKHQRLIRUWKHJRGV/RXLV5REHUWKDV SXEOLVKHGDQXPEHURIOLVWVPDLQO\RIWKHVHFRQGFHQWXU\$'UHFRUGLQJWKH YLVLWRIGHOHJDWLRQVRIWKHRURLDVLVVSHFL¿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¿QGV DFKRURGLGDVNDORVRUK\PQRGLGDVNDORVWKHVDPHPDQDNLWKDULVWVHQWIURP /DSSD +LHUDS\WQDVHQGVDORQJDQK\PQRGDUFKHV$JDLQVWWKHWKHRU\DG  6ODWHU,IWKLVZHUHWKHFDVHWKHQPD\EHWKHFRQWLQXHGH[LVWHQFHRIWKHFKRUXV PLJKWKDYHSOD\HGDUROHLQWKHGHFLVLRQRIWKH$WKHQLDQVWRSURFODLPKRQRXUVDWWKH PRPHQWRIWKHFRQWHVWRIQHZWUDJHGLHV  5HLVFK±PDLQWDLQHGWKDWFKRULNRLDJRQHVUHIHUVIURPWKH+HOOHQLVWLF SHULRGRQZDUGVWRFRPSHWLWLRQVRUVRPHWLPHVRQO\SHUIRUPDQFHVRIF\FOLFFKR UXVHVFRQVLGHUHGDVGLVWLQFWIURPWKHGUDPDWLFDJRQHV  )RU&KLRVFI6(*਱ȓșİȠȚʌĮȡİȖȑȞȠȞIJȠțĮ੿ʌĮȡșȑȞȠȚȠੂਫ਼ȝȞȒıĮȞIJİȢ IJੑȞșİȩȞ  7HQGRFXPHQWVIURP7DEDLQžWRDQGGLVFXVVLRQLQ5REHUW ± HLJKWHHQIURP+HUDNOHDRQWKH6DOEDNHQžWRDQG GLVFXVVLRQLQ5REHUW± ,UHSURGXFHKHUHWKHOLVWRQHRIWKHPRVW H[WHQVLYHLWFRPSULVHVDGLGDVNDORVDVZHOO ȉĮȕȘȞ૵Ȟ_ਥʌ੿ʌȡȣIJ੺ȞİȦȢਝʌંȜȜȦȞȠȢ _IJઁʌ࢝ੂİȡ੼ȦȢȀȜĮȣį઀Ƞȣ ૮Ƞ઄ijȠȣșİıʌȚ_૳įȠ૨ȞIJȠȢīȞĮ઀Ƞȣ ੉ȠȣȜ઀Ƞȣ ૮ȘȖ઀ȞȠȣ  ਝȜİ_ ȟ੺ȞįȡȠȣ ʌȡȠijȘIJİ઄ȠȞIJȠȢ _ Ȁ੺ȡʌȠȣ IJȠ૨ ਝIJIJ੺ȜȠȣ ȖȡĮȝȝĮIJİ઄_ ȠȞIJȠȢ ਝȜİȟ੺ȞįȡȠȣIJȠ૨ȂȘȞȠij઀ȜȠȣǜ_Ƞੂਫ਼ȝȞ੾ıĮȞIJİȢIJઁȞșİઁȞ_YDFʌĮ૙įİȢǜੂİȡİȠઃȢ_ ȉ઀IJȠȢ  ĭȜ੺ȕȚȠȢ  ĭȜĮȕ઀Ƞȣ  ȂȚșȡȚį੺IJȠȣ ȣੂઁȢ Ȇ ҕĮʌ઀ĮȢ _ ȆȣȜ੺įȘȢ ੗ȡșȡ઀Ƞȣ ਜ਼ȡșȡȚȠȢ ȆȣȜ੺įȠȣ_ ȂĮȡı઄ĮȢ ȕ࢝ ȈĮȝȠȣ ǽ੾ȞȦȞ țĮ੿ ਝȞįȡ੼ҕ_ ĮȢ Ƞੂ ਝȞįȡ੼Ƞȣ



3DROD&HFFDUHOOL

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

ȂİȞİțȜોȢȀĮȜȜȚțȜ੼Ƞ>ȣȢ@ǜ_șİȠʌȡંʌȠȚĬİĮȖ੼ȞȘȢǻȚȠȞȣı઀ȠȣțĮ੿ਝȜ>੼@_ȟĮȞįȡȠȢ ĬİĮȖ੼ȞȠȣȢǜįȚį੺ıțĮȜȠȢȉ઀IJȠȢ ĭȜ੺ȕȚȠȢ _ȈȦIJ઼ȢʌĮȡ੺įȠȟȠȢ$QXPEHURIRWKHU OLVWVLQ6(*±6HHDOVRWKHGLVFXVVLRQLQ%RZLH±  -g$,±QR6(*  ,6WUDWRQLNHLD  SUREDEO\ HQG RI WKH VHFRQG FHQWXU\$' GLVFXVVLRQ LQ 5RE HUW  ± VHH DOVR %RZLH  ±  ਩įȠȟİ IJૌ ȕȠȣȜૌ Į>ੂȡİ૙ıșĮȚ@ Ȟ૨Ȟ ਥț IJ૵Ȟ İ੣ ȖİȖȠȞંIJȦȞ ʌĮ૙įĮȢ IJȡȚ੺țȠȞ_ IJĮ Ƞ੢ıIJȚȞĮȢ țĮș¶ ਦț੺ıIJȘȞ ਲȝ੼ȡĮȞ ȝİIJ੹ IJ૵Ȟ įȘȝȠı઀ȦȞ ʌĮȚįȠijȣȜ੺țȦȞ ਙ>ȟİIJ@ĮȚ ੒ ʌĮȚįȠȞં>ȝȠȢ ੁȢ IJઁ ȕ@ȠȣȜİȣIJ੾ȡȚȠȞ ȜİȣȤȚȝȠȞȠ૨ȞIJĮȢ țĮ੿ ਥıIJİ_ ijĮȞȦȝ੼ȞȠȣȢ șĮȜȜȠ૨ ਩ȤȠȞIJĮȢ į੻ ȝİIJ੹ Ȥ૙ȡĮȢ ੒ȝȠ઀ȦȢ șĮȜȜȠ઄Ȣ Ƞ੆IJȚȞİȢ ıȣȞʌĮȡંȞ>IJȦȞ țĮ@੿ țȚșĮȡȚıIJȠ૨ țĮ੿ ț੾ȡȣțȠȢ ઋıȠȞIJĮȚ ੢ȝȞȠȞ ੔Ȟ _ਗȞıȣȞIJ੺ȟૉȈઆıĮȞįȡȠȢǻȚȠȝ੾įȠȣȢ੒ȖȡĮȝȝĮIJİȠ઄Ȣ6HHDOVRWKHGHFUHHRI6WUD WRQLFHDLQ&DULDIRU$VVRVPLG,,FHQWXU\%&0LFKHOFURZQVWREHDQQRXQFHG E\WKHDJRQRWKHWDLLQWKHPXVLFDODJRQIRU5RPHਥȞIJ૵ȚਕȖ૵ȞȚIJ૵ȚȝȠȣıȚț૵ȚIJ૵Ț ıȣȞIJİȜȠȣȝȑȞȦȚIJોȚ૽ȇȫȝȘȚ   %RZLH  7KH SRVVLELOLW\ RI FLYLF FKRUXVHV LQ WKH +HOOHQLVWLF SHULRG ERWK WUDJLF DQG F\FOLF LV VWURQJO\ DUJXHG IRU HJ E\ :LOVRQ  ± VHH DOVR :LOVRQZKRVHHVF\FOLFFKRUXVHVZKLFKKHTXDOL¿HVDVGLWK\UDPELF±EXW WKDWLVQRWLQHYLWDEOH DV³WHQDFLRXVO\HSLFKRULFLQFKDUDFWHU´XQOLNHWUDJHG\ZKLFK ZDVPRUHDQGPRUHWKHSUHVHUYHRIWUDYHOOLQJSURIHVVLRQDODFWRUV

7UDJHG\LQWKH&LYLFDQG&XOWXUDO/LIHRI+HOOHQLVWLF&LW\6WDWHV



LQ SDUW IRUPHG E\ ORFDOV WKDW ZRXOG H[SODLQ WKH FKRLFH RI FKRUDO SHUIRU PDQFHVDVWKHYHQXHIRUDQQRXQFHPHQWV

 7UDJHG\DQGWKHFLW\WKHHQGRIV\PELRVLV" ,WLVWLPHWRDWWHPSWVRPHFRQFOXVLRQV$WWKHEHJLQQLQJ,VXJJHVWHGWKDW RQHFRXOGDGGUHVVWKHTXHVWLRQRIWKHFKDQJHLQWKHFLYLFLPSRUWRIWUDJHG\ E\ORRNLQJDWWKHRFFDVLRQFKRVHQIRUWKHSURFODPDWLRQRIFLYLFKRQRXUV,Q SDUWLFXODU,ZDQWHGWRWHVWWKHDVVXPSWLRQRIDFRQWLQXHGFLYLFLPSRUWDQFHRI GUDPDWLFSHUIRUPDQFHVDQGDOVRPRUHJHQHUDOO\RIWKHLUSUHVWLJHYLVjYLV RWKHUIRUPVRIFKRUDODQGJ\PQLFSHUIRUPDQFH )URPWKHFROOHFWLRQRIGRFXPHQWVZHKDYHMXVWH[DPLQHGWKHIROORZLQJ PDLQSRLQWVHPHUJH )LUVWWKHUDQJHRIIHVWLYDOVDWZKLFKGUDPDZDVSHUIRUPHGVKRZVWKDW WKHVWURQJFRQQHFWLRQEHWZHHQWUDJLFSHUIRUPDQFHVDQG'LRQ\VLDFIHVWLYDO ZKLFK LV VXFK D GLVWLQFWLYH IHDWXUH RI ¿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¿QLWLYH FRQFOXVLRQV6WLOOLWVHHPVWRKDYHEHHQWKHFDVHWKDWQRWLQIUHTXHQWO\J\P QLFYLFWRULHVFRXOGIHWFKKLJKHUSUL]HVWKDQWKRVHLQGUDPDDQGVLPLODUO\ WKDW FLWKDURGHV DQG DXORVSOD\HUV ZHUH EHWWHU UHZDUGHG WKDQ DFWRUV 6RPH FDXWLRQLVKRZHYHUQHHGHGLQLQWHUSUHWLQJWKHHYLGHQFHIURPSUL]HOLVWVQRW RQO\DUHWKH\IHZWKH\DUHDOVRODWHDQGZHKDYHWRUHFNRQZLWKFKDQJHV 0RUHRYHUWKHDUWLVWVZHUHDOVRSDLGLQRUGHUWRJXDUDQWHHWKHLUSDUWLFLSDWLRQ

 )XUWKHUHYLGHQFHIRUFLYLFFKRUXVHVKDVEHHQFROOHFWHGE\:|UUOHLQKLVGLVFXVVLRQRI WKHIHVWLYDOLQVWLWXWHGE\&,XOLXV'HPRVWKHQHVLQWKHV$'DW2LQRDQGDSDUWLFX ODUO\VWULNLQJLVWKHH[LVWHQFHRIDFKRURVSROLWLNRVLQDWKLUGFHQWXU\OLVWRIYLFWRUVRI WKH0RXVHLDRI7KHVSLDL,*9,,SRVW$'WKHZLQQHULV±DVH[SHFWHG±D 7KHVSLDQ ZKLOH IRU WKH RWKHU PXVLFDO FDWHJRULHV WKH ZLQQHUV KDYH FRPH IURP DOO RYHUWKHDQFLHQWZRUOG6HH:|UUOH±%RZLH  $OORIWKLVLVIDLUO\XQFRQWURYHUVLDOIRUWKHHDUO\GLYRUFHIURPWKH'LRQ\VLDFIUDPH FI6FXOOLRQZKRDFWXDOO\DUJXHVIRUWKHQRQH[LVWHQFHRID'LRQ\VLDFIUDPH  SDVVLP)RUWKHDGGLWLRQRIGUDPDWRJ\PQLFRUPXVLFDOIHVWLYDOVVHH&VDSR6ODWHU IRUWKHWHFKQLWDL&HFFDUHOOL



3DROD&HFFDUHOOL

LQDIHVWLYDOEXWRIWKHSULFHVDJUHHGXVXDOO\QRUHFRUGVXUYLYHV@± 0D[¿HOG9DOHULH$ 7KH0LOLWDU\'HFRUDWLRQVRIWKH5RPDQ$UP\/RQGRQ 0HLHU&KULVWLDQ 7KH3ROLWLFDO$UWRI*UHHN7UDJHG\&DPEULGJH 5DX3HWHU 3DUDWUDJRGLD8QWHUVXFKXQJHLQHUNRPLVFKHQ)RUPGHV $ULVWRSKDQHV0XQLFK 5KRGHV3HWHU- ³1RWKLQJWR'RZLWK'HPRFUDF\$WKHQLDQ'UDPDDQGWKH SROLV´LQ-+6± 6FKHFKQHU5LFKDUG 3HUIRUPDQFH6WXGLHVDQ,QWURGXFWLRQ/RQGRQ 6FKLHUO3HWUD 'LH7UDJ|GLHQGHV3DFXYLXVHLQ.RPPHQWDU]XGHQ)UDJPHQWHQ PLW(LQOHLWXQJ7H[WXQGhEHUVHW]XQJ%HUOLQDQG1HZUHSULQWHGLQ5RPDQ6WXGLHV/LWHUDU\DQG+LVWRULFDO /LYHUSRRO±@ ²± 5HPXVD5RPDQ0\WK&DPEULGJH ²± 5RPDQ'UDPDDQG5RPDQ+LVWRU\([HWHU

'LRQ\VLDF7KHPHDQG'UDPDWLF$OOXVLRQLQ2YLG¶V 0HWDPRUSKRVHV Alison Keith 7KLVVWXG\H[SORUHVWKHWUDJLFWKHPHVDQGLPDJHU\RI2YLG¶V³7KHEDQ+LV WRU\´ZLWKDSDUWLFXODUIRFXVRQWKHHSLVRGHRIWKHGDXJKWHUVRI0LQ\DVWKDW RSHQVWKHIRXUWKERRNRI2YLG¶V0HWDPRUSKRVHV±WKHVWRULHVWKHWKUHHVLVWHUV WHOODVWKH\VSXUQWKHZRUVKLSRIWKHQHZJRG%DFFKXVDQGWKHLUVXEVHTXHQW WUDQVIRUPDWLRQLQWREDWVE\WKHVFRUQHGJRG± 6FKRODUVKLSRQWKH HSLVRGHIDOOVLQWRWKUHHEURDGFDWHJRULHVRQHDSSURDFKKDVEHHQWRFRQVLGHU WKHVRXUFHVDQGPRGHOVIRURQHRIWKHVLVWHUV¶QDUUDWLYHVXVXDOO\LQLVRODWLRQ IURPWKHRWKHUVDVHFRQGDSSURDFKKDVEHHQWRDQDO\]HWKH0LQ\DGV¶QDUUD WLYHDUWLVWU\LQQDUUDWRORJLFDORUSRHWRORJLFDOWHUPVZLWKRXWGHWDLOHGGLVFXV VLRQRIWKHUHODWLRQVEHWZHHQWKHVWRULHVWKHWKLUGZKLFKPLJKWEHEURDGO\ GHVFULEHG DV OLEHUDOIHPLQLVW KDV EHHQ WR IRFXV RQ UDSH QDUUDWLYHV LQ WKH SRHPWKHUHDUHWZRLQWKH0LQ\DGV¶WDOHV DJDLQZLWKRXWUHJDUGWRQDUUDWLYH FRQWH[W$OPRVWZLWKRXWH[FHSWLRQWKHVFKRODUO\OLWHUDWXUHRQWKH0LQ\DGV DQGWKHLUWDOHVKDVQRWVRXJKWWRLQWHJUDWHGHWDLOHGGLVFXVVLRQRIWKHIUDPLQJ WDOHFRQFHUQLQJWKHVLVWHUV¶WUDQVIRUPDWLRQLQWREDWVZLWKWKHVWRULHVWKH\ WHOORQHDQRWKHUDVWKH\VSLQOHWDORQHWRLQWHJUDWHWKHHSLVRGHDVDZKROH LQWRWKHODUJHUFRQWH[WRI2YLG¶V7KHEDQQDUUDWLYHWKDWVSDQVERRNVWKUHHDQG IRXURIWKH0HWDPRUSKRVHV± EXWWKHQQHLWKHUKDVWKHVFKRODUVKLS RQ2YLG¶VVRFDOOHG³7KHEDLG´LQFOXGHGGLVFXVVLRQRIWKH0LQ\DGHSLVRGH 7KLVLQWHJUDWLRQLVWKHSURMHFWRIWKLVFKDSWHU,EHJLQZLWKDGLVFXVVLRQRI



   

,DPJUDWHIXOWRP\FROOHDJXH0DUWLQ5HYHUPDQQIRUWKHLQYLWDWLRQWRSDUWLFLSDWHLQ WKHZRUNVKRSRQµ3RLQWVRI&RQWDFW*UHHN7UDJHG\LQWKH:HVWHUQ7UDGLWLRQXSWR WKHWK&HQWXU\¶LQ-XO\WRP\FROOHDJXH,QJR*LOGHQKDUGDQGP\KXVEDQG 6WHSKHQ5XSSIRUWKHLUDFXWHFRPPHQWVRQDQHDUOLHUYHUVLRQRIWKLVSDSHUDQGWR P\UHVHDUFKDVVLVWDQW-HVVLFD:HVWHUKROGIRUKHUHGLWRULDODVVLVWDQFHZLWKWKH¿QDO YHUVLRQ$OOUHPDLQLQJHUURUVDUHP\RZQ 'XNH5RKUHU3HUUDXG±+RO]EHUJ.QR[&DVWHOODQL /DEDWH5RELQVRQ /HDFK±5RVDWL &XUUDQ-DQDQ1XJHQW5LFKOLQ± 1RWDEOHH[FHSWLRQVDUH3HUGUL]HW1HZODQGVDQG6FKPLW]HU FI5RVDWL



$OLVRQ.HLWK

WKH VRXUFHV DQG WKHPHV RI 2YLG¶V ³7KHEDLG´ LQ LWV HQWLUHW\ DV SUHIDFH WR P\GLVFXVVLRQRIWKH0LQ\DGV¶WUDQVIRUPDWLRQDQGWKHUHODWLRQVKLSRIWKHLU VWRULHVERWKWRWKHLURZQWUDQVIRUPDWLRQDQGWRWKHODUJHUFRQWH[WRI2YLG¶V ³7KHEDLG´

 7KHSRLQWRIGHSDUWXUHIRUP\VNHWFKRIWKHVRXUFHVDQGWKHPHVRI2YLG¶V ³7KHEDLG´LVWKHEULOOLDQWSDSHUE\3KLOLS+DUGLHHQWLWOHG³2YLG¶V7KH EDQ 1DUUDWLYH 7KH )LUVW µ$QWL$HQHLG¶"´ ,Q WKLV DUWLFOH +DUGLH GLVFXVVHV 2YLG¶VQDUUDWLYHRIWKH+RXVHRI&DGPXVDW7KHEHVDVDQH[DPSOHRINWLVLVRU ³IRXQGDWLRQ´SRHWU\DSRSXODUVXEMHFWRI+HOOHQLVWLF*UHHNHSLF1RWLQJWKDW ³WKHVWRU\RI&DGPXVDQGKLVIDPLO\IRUPVDVHOIFRQWDLQHGXQLW´WKDW³WHOOV RIDNWLVLVWKDWJRHVZURQJ´+DUGLHDUJXHVWKDW2YLG¶V³7KHEDLG´LVFRQ VWUXFWHGZLWKFRQVWDQWUHIHUHQFHWRWKHJUHDWHSLFRI5RPH9HUJLO¶V$HQHLG +H EXLOGV RQ (UQVW %HUQEHFN¶V VW\OLVWLF DQDO\VLV RI 2YLG¶V UXSWXUH RI WKH HSLFWH[WXUHRIKLV9HUJLOLDQPRGHOVLQWKH,QRHSLVRGH0HW±  WR RIIHU D WKHPDWLF DQG VWUXFWXUDO DQDO\VLV RI WKH ³LQYHUVLRQV´ WKDW 2YLG SHUIRUPVRQWKHPRGHOVRIWKH$HQHLG+DUGLHLGHQWL¿HVVHYHUDOWKHPHVWKDW XQLI\WKHGLYHUVHWDOHVRI2YLG¶V7KHEDQQDUUDWLYHQRWDOORIZKLFKFRQFHUQ &DGPXV DQG KLV UHODWLYHV VXPPDU\ LQ )LJXUH   D FRQWUDVW EHWZHHQ FLW\ DQGFRXQWU\PDQDQGEHDVWWKHUHODWHGWKHPHVRIH[LOHDQGZDQGHULQJLQ WKHZLOGV³WKHUHSHDWHGLQWHUYHQWLRQRIDYHQJHIXOJRGDVDZD\RIVWUXFWXU LQJWKHQDUUDWLYH´VSHFWDFOHUHFRJQLWLRQDQGUHYHUVDO7KLV¿QDOWKHPDWLF FRPSOH[SRLQWVWRZKDW+DUGLHFDOOV³WKHSHUYDVLYHSUHVHQFHRIWKHWKHPHV RI$WWLFWUDJHG\LQ2YLG¶V7KHEDQWDOHV´DQGDOHUWVXVWR2YLG¶VRQJRLQJ HQJDJHPHQWZLWKWKHJHQUHRIWUDJHG\LQWKLVVHFWLRQRIWKH0HWDPRUSKRVHV V\QRSVHVLQ)LJXUH  0DQ\VFKRODUVKDYHWKRXJKWWKDW³WKHʌȐșȘRI'LRQ\VXVWKHSDWURQJRG RIWKHGUDPD>DV2YLGNQHZ$P@PD\ZHOOEHWKHROGHVWRIDOOGUDPDWLF

  

+DUGLH +DUGLH +DUGLH   Q DFNQRZOHGJHV WKH UHODWLRQ RI KLV VWXG\ WR WKDW RI %HUQEHFN   +DUGLHQ  +DUGLH  +DUGLHFI+DUGLH±±  2QWUDJHG\LQWKH0HWDPRUSKRVHVVHH+DUGLH&XUOH\*LOGHQKDUGDQG=LV VRV±.HLWK)RUSOD\VRQ'LRQ\VLDFWKHPHVVHH'RGGV[[YLLL± [[[LLL6HDIRUGQQ±)ORZHUQ,QRWHLQDGGLWLRQ$HVFK\OXV¶ 7R[RWLGHVRQ$FWDHRQ $WKDPDV6RSKRFOHV¶$WKDPDV$DQG%(XULSLGHV¶,QR

'LRQ\VLDF7KHPHDQG'UDPDWLF$OOXVLRQLQ2YLG¶V0HWDPRUSKRVHV



VXEMHFWV´DQG)URPD=HLWOLQKDVUHFHQWO\DUJXHGWKDW7KHEHVDVWKHELUWK SODFHRI'LRQ\VXVLVWKHVLWHSDUH[FHOOHQFHRI$WKHQLDQWUDJHG\&HUWDLQO\ WKH HSRQ\PRXV IRXQGHU RI WKH GUDPD 7KHVSLV KLPVHOI LV FUHGLWHG ZLWK D 3HQWKHXV:HSRVVHVVRQO\RQHH[WDQWWUDJHG\IURPDQ$HVFK\OHDQWULORJ\ RQD7KHEDQWKHPHWKH6HSWHPFRQWUD7KHEDVZKLFKIROORZHGD/DLXVDQG DQ2HGLSXVZLWKVDW\USOD\6SKLQ[%XWZHKHDULQDGGLWLRQRIWZRWULORJLHV RQVSHFL¿FDOO\'LRQ\VLDQVXEMHFWVIURPZKLFKOLWWOHRUQRWKLQJVXUYLYHV7KH VFKROLDVW RQ $ULVWRSKDQHV¶ 7KHVPRSKRULD]RXVDL PHQWLRQV DQ $HVFK\OHDQ /\FXUJHLDFRQVLVWLQJRIDQ(GRQRL³(GRQLDQV´ %DVVDULGHV³%DFFKDQWV´  1HDQLVNRL³5HVHPEOLQJLY\LVWKHSODQWFDOOHGVPLOD[ZKLFK¿UVWFDPHIURP&LOLFLDEXWLVQRZ PRUHFRPPRQLQ*UHHFH«,WEHDUVFOXVWHUVRIEHUULHVOLNHWKRVHRIWKHZLOGYLQH QRWRIWKHLY\WKH\DUHUHGLQFRORXUDQGWKHODUJHURQHVHQFORVHWKUHHKDUGEODFN VWRQHVEXWWKHVPDOOHUDVLQJOHVWRQH7KLVSODQWLVXQOXFN\WRXVHDWDOOVDFUHGULWHV DQGIRUZUHDWKVEHFDXVHLWKDVDPRXUQIXODVVRFLDWLRQDPDLGHQQDPHG6PLOD[KDY LQJEHHQWXUQHGLQWRDVPLOD[VKUXEEHFDXVHRIKHUORYHIRUD\RXWKQDPHG&URFXV 7KHFRPPRQSHRSOHQRWNQRZLQJWKLVXVXDOO\SROOXWHWKHLUIHVWLYDOVZLWKLWEHFDXVH WKH\WKLQNLWLVLY\MXVWDVLQWKHFDVHRIWKHSRHWVRU)DWKHU/LEHURU6LOHQXVZKR ZHDUZUHDWKHVPDGHRIZKRLQWKHZRUOGNQRZVZKDW@

 &I$U)URJV.UDWLQRVIU1DHYLXV/\FXUJXVIU:SDOOLVSDWDJLLVFURFRWLV PDODFLVPRUWXDOLEXVDQGVHHIXUWKHU5(VY³6DIIUDQ´  )UHTXHQWUHIHUHQFHVLQ¿IWKFHQWXU\%&(WUDJHG\DQGFRPHG\(XU%D $U1X(XSFI$U$Y  &I1+

'LRQ\VLDF7KHPHDQG'UDPDWLF$OOXVLRQLQ2YLG¶V0HWDPRUSKRVHV



3OLQ\¶V GLVFXVVLRQ RI WKH SODQW VXJJHVWV WZR UHDVRQV IRU$OFLWKRH¶V DYRLG DQFHRILWKHUHWKHXQKDSS\ORYHRI6PLOD[DQG&URFXVEHDUVDFHUWDLQUH VHPEODQFH WR KHU VLVWHU /HXFRQRH¶V WDOH RI WKH RULJLQ RI WKH IUDQNLQFHQVH VKUXEZKLOHWKHSODQW¶VFORVHDVVRFLDWLRQZLWK'LRQ\VXV¶HPEOHPWKHLY\ DQGWKHIHVWLYDOVRIKLV5RPDQFRXQWHUSDUW)DWKHU/LEHUPDNHLWDQXQSDODW DEOHWKHPHIRUWKH0LQ\DGVLQWKHFRQWH[WRIWKHLUGLVDYRZDORIKLVJRGKHDG ,QHYHU\FDVHWKHQZHFDQVHHWKDWWKHQDUUDWLYHV$OFLWKRHSDVVHVRYHU KDYHDFORVHWKHPDWLFUHODWLRQVKLSWRWKHP\WKRIWKHQHZJRG%DFFKXVDQG RU KLV FXOW REMHFWV DQG HPEOHPV %XW DOWKRXJK VKH UHMHFWV WKLV 'LRQ\VLDF PDWHULDOWKHJRGDQGKLVHPEOHPVFDQQRWEHVRHDVLO\LJQRUHGDQGWKHWDOH WKDWVKH¿QDOO\GHFLGHVWRWHOOWKHRULJLQRIWKHHQHUYDWLQJSRZHUVRIWKH&DU LDQVSULQJ6DOPDFLVLWVHOIIHDWXUHV'LRQ\VLDFWKHPHVDQGLPDJHU\:HPD\ QRWHLQDGGLWLRQWKHVLPLODULW\RIWKHQDPHVRIWKHODVWPHQWLRQHGFKDUDFWHU ZKRVHVWRU\$OFLWKRHSDVVHVRYHU6PLOD[HVSHFLDOO\VLQFHLWDSSHDUVLQDQ REOLTXH FDVH 6PLODFH DW   DQG WKH PDLQ FKDUDFWHU RI WKH QDUUDWLYH VKHFKRRVHVWRWHOO6DOPDFLV0HW± µXQGHVLWLQIDPLVTXDUHPDOH IRUWLEXVXQGLV_6DOPDFLVHQHUXHWWDFWRVTXHUHPROOLDWDUWXV_GLVFLWHFDXVD ODWHWXLVHVWQRWLVVLPDIRQWLV¶³/HDUQZKHUHWKHEDGUHSXWDWLRQRI6DOPDFLV FRPHVIURPKRZWKHVSULQJHPDVFXODWHVZLWKLWVSRZHUIXOZDWHUVDQGVRIW HQVWKHOLPEVLWWRXFKHV7KHFDXVHOLHVKLGGHQEXWWKHIRUFHRIWKHSRZHU LVYHU\ZHOONQRZQ´ $OFLWKRHLQVLVWVXSRQ6DOPDFLV¶SRZHUWRVRIWHQDQ\ OLPEVVKHWRXFKHVERWKDWWKHRSHQLQJRIKHUQDUUDWLYHKHUHDQGDWLWVFORVH ZKHUH+HUPDSKURGLWXVDVNVWKDWDOOPHQZKRHQWHUWKHVSULQJPD\HPHUJH OLNHKLPVHOIDVVHPLXLUL±  µHUJRXELVHOLTXLGDVTXRXLUGHVFHQGHUDWXQGDV VHPLPDUHPIHFLVVHXLGHWPROOLWDTXHLQLOOLV PHPEUDPDQXVWHQGHQVVHGLDPQRQXRFHXLULOL +HUPDSKURGLWXVDLW³QDWRGDWHPXQHUDXHVWUR HWSDWHUHWJHQHWUL[DPERUXPQRPHQKDEHQWL TXLVTXLVLQKRVIRQWHVXLUXHQHULWH[HDWLQGH VHPLXLUHWWDFWLVVXELWRPROOHVFDWLQXQGLV´ PRWXVXWHUTXHSDUHQVQDWLUDWDXHUEDELIRUPLV IHFLWHWLQFHVWRIRQWHPPHGLFDPLQHWLQ[LW¶ >$QGVRZKHQ+HUPDSKURGLWXVVDZWKDWWKHOLTXLGZDYHVLQWRZKLFKKHKDGGHVFHQG HGDVDPDQKDGPDGHKLPKDOIPDQDQGVRIWHQHGKLVOLPEVKHKHOGRXWKLVKDQGV DQGVDLGLQDYRLFHQRORQJHUPDQO\³*UDQWDJLIWWR\RXUVRQZKRVHQDPHGHULYHV IURPERWKRI\RXIDWKHUDQGPRWKHUZKRHYHUHQWHUVWKLVVSULQJDVDPDQOHWKLPJR IRUWKDKDOIPDQOHWKLPVXGGHQO\EHHPDVFXODWHGDWWKHWRXFKRIWKHZDWHUV´+LV SDUHQWVPRYHGE\KLVSOHDUDWL¿HGWKHZRUGVRIWKHLUELJHQGHUHGVRQDQGWRXFKHG WKHVSULQJZLWKDQLPSXUHGUXJ@

:LWKWKLVXQFDQQ\SRZHURIWKHVSULQJDQGLWVQ\PSK6DOPDFLV ZHPD\ FRPSDUHWKHWUDQVIRUPDWLRQHIIHFWHGLQWKHSRSXODWLRQRI7KHEHVE\'LRQ\ VXVDV3HQWKHXVUHSRUWVLW± 



$OLVRQ.HLWK

>PLUHU@«XRVQHDFULRUDHWDV RLXXHQHVSURSLRUTXHPHDHTXRVDUPDWHQHUH QRQWK\UVRVJDOHDTXHWHJLQRQIURQGHGHFHEDW" HVWHSUHFRUPHPRUHVTXDVLWLVVWLUSHFUHDWL LOOLXVTXHDQLPRVTXLPXOWRVSHUGLGLWXQXV VXPLWHVHUSHQWLVSURIRQWLEXVLOOHODFXTXH LQWHULLWDWXRVSURIDPDXLQFLWHXHVWUD LOOHGHGLWOHWRIRUWHVXRVSHOOLWHPROOHV HWSDWULXPUHWLQHWHGHFXV >6KRXOG,DGPLUH\RX\RXQJPHQDPRUHHQHUJHWLFDJHDQGQHDUHUP\RZQZKRP LWEH¿WVWREHDUDUPVQRWWKHWK\UVXVDQGWREHVKHOWHUHGZLWKZDUKHOPHWVQRWZLWK IROLDJH5HPHPEHU,EHJ\RXIURPZKDWVWRFN\RXDUHGHVFHQGHGDQGWDNHRQWKH FRXUDJHRIWKDWVQDNHZKRNLOOHGPDQ\DIRHDORQH+HSHULVKHGIRUKLVVSULQJDQG ZDWHUEXW\RXFRQTXHUIRU\RXUUHSXWDWLRQ+HJDYHEUDYHPHQWRGHDWK\RXGULYH RXWVRIWPHQDQGUHWDLQ\RXUDQFHVWUDOJORU\@

,QGHHG 3HQWKHXV FKDUDFWHUL]HV WKH IROORZHUV RI %DFFKXV VLPSO\ DV PROOHV ±  DQG GLVGDLQIXOO\ GLVPLVVHV WKHLU OHDGHU EHFDXVH OLNH D ZRPDQ KLV KDLU LV GUHQFKHG ZLWK P\UUK KH ZHDUV VRIW JDUODQGV DQG D ULFK FORDN RI JROG DQG SXUSOH ±  PDGLGXV PXUUD FULQLV PROOHVTXH FRURQDH _ SXUSXUDTXH HW SLFWLV LQWH[WXP XHVWLEXV DXUXP 7KXV 6DOPDFLV¶ SRZHU WR HQHUYDWHDOOWKRVHZKRHQWHUKHUVSULQJLVVLPLODULQLWVHIIHFWVWR'LRQ\VXV¶ LPSDFWRQGHYRWpDQGQRQGHYRWpDOLNH $OFLWKRH¶V6DOPDFLVWXUQVKHUVHOIRXWLQVLPLODUO\OX[XULRXVVW\OH±  VDHSH&\WRULDFRGHGXFLWSHFWLQHFULQHV HWTXLGVHGHFHDWVSHFWDWDVFRQVXOLWXQGDV QXQFSHUOXFHQWLFLUFXPGDWDFRUSXVDPLFWX PROOLEXVDXWIROLLVDXWPROOLEXVLQFXEDWKHUELV VDHSHOHJLWÀRUHV >2IWHQVKHFRPEVKHUKDLUZLWKDER[ZRRGFRPEDQGFKHFNVKHUVSULQJWRVHHZKDW EHFRPHVKHUQRZGUHVVHGLQDWUDQVOXFHQWJRZQVKHUHFOLQHVRQVRIWOHDYHVRUVRIW JUDVVHVRIWHQVKHJDWKHUVÀRZHUV«@

6DOPDFLV¶GHOLJKWLQWKHSOHDVXUHVRIWKHÀHVKDOLJQVKHUZLWKWKHJRG%DF FKXVZKRVHVHQVXDOLW\VRLQÀDPHV3HQWKHXVDQG$OFLWKRH¶VVLPLOHVLPSO\ IXUWKHU FRQQHFWLRQV ,Q UHVSRQVH WR 6DOPDFLV¶ EROG VSHHFK RI SURSRVLWLRQ +HUPDSKURGLWXVEOXVKHVDVEHFRPLQJO\DVULSHQLQJDSSOHVRQWKHWUHHJURZ UHGRUVWDLQHGLYRU\RUWKHPRRQWLQJHGZLWKFULPVRQZKHQEURQ]HF\PEDOV FODVKLQYDLQ±  «SXHULUXERURUDQRWDXLW QHVFLWHQLPTXLGDPRU VHGHWHUXEXLVVHGHFHEDW KLFFRORUDSULFDSHQGHQWLEXVDUERUHSRPLV

 &I1DHYLXV/\FXUJXVIU:TXRWHGDERYHQ  2QWKHXVHRIPLUURUVLQ'LRQ\VLDFULWXDOVHH6HDIRUG

'LRQ\VLDF7KHPHDQG'UDPDWLF$OOXVLRQLQ2YLG¶V0HWDPRUSKRVHV



DXWHERULWLQFWRHVWDXWVXEFDQGRUHUXEHQWL FXPIUXVWUDUHVRQDQWDHUDDX[LOLDULDOXQDH >$EOXVKPDUNHGWKHER\¶VIDFHIRUKHGRHVQRWNQRZZKDWORYHLVEXWLWEHFDPHKLP WREOXVK7KLVLVWKHFRORURIIUXLWKDQJLQJLQDVXQQ\RUFKDUGRURISDLQWHGLYRU\RU RIWKHPRRQJURZLQJUHGEHQHDWKKHUZKLWHJORZZKHQWKHF\PEDOVFODVKLQYDLQ WRDVVLVWKHU@

7KHFODVKRIWKHF\PEDOVZDVSRSXODUO\VXSSRVHGWRFRQMXUHXSDLGIRUWKH PRRQGXULQJDQHFOLSVHEXWLWLVVWLOOPRUHIDPLOLDUIURPLWVSURPLQHQWFXOW XVHLQ%DFFKLFULWXDOLQZKLFKLWLVRQGLVSOD\WKURXJKRXWWKH'LRQ\VLDF HSLVRGHVRI2YLG¶V³7KHEDLG´FI± $OFLWKRH¶VVLPLOH GUDPDWL]HVKHUUHMHFWLRQRI'LRQ\VXV¶JRGKHDGE\DWWULEXWLQJKLVLQVWUXPHQWV RIZRUVKLSWRWKHPRRQEXWDWWKHFRQFOXVLRQRIKHUWDOHWKHF\PEDOVULQJRXW LQKRQRXURI%DFFKXVGXULQJWKHJRG¶VHSLSKDQ\ 2WKHU'LRQ\VLDFLPDJHVLQWUXGHLQWR$OFLWKRH¶VWDOHLQWKHFRXUVHRID VHFRQGVHULHVRIVLPLOHV$IWHU+HUPDSKURGLWXVUHEXIIVWKHDPRURXVDGYDQF HVRIWKHQ\PSK6DOPDFLVSUHWHQGVWRDEDQGRQKHUVSULQJWRWKH\RXWKEXW LQVWHDGZLWKGUDZVRQO\IDUHQRXJKVRWKDWVKHFDQVS\RQKLPVHFUHWO\DVKH GLYHVLQWRKHUSRRODQGGLVSRUWVKLPVHOIDQRWKHULQVWDQFHRIYR\HXULVPLQ WKH7KHEDQQDUUDWLYH ,QÀDPHGZLWKGHVLUHDWWKHVLJKWWKHQ\PSKODXQFKHV KHUVHOIDWKLPHPEUDFLQJKLPDQGRYHUFRPLQJDOOKLVHIIRUWVDWUHVLVWDQFH OLNHDVHUSHQWFOLQJLQJWRDQHDJOHRULY\WRDWUHHRUDQRFWRSXVWRLWVSUH\ ±  GHQLTXHQLWHQWHPFRQWUDHODELTXHXROHQWHP LPSOLFDWXWVHUSHQVTXDPUHJLDVXVWLQHWDOHV VXEOLPHPTXHUDSLWSHQGHQVFDSXWLOODSHGHVTXH DGOLJDWHWFDXGDVSDWLDQWHVLQSOLFDWDODV  XWXHVROHQWKHGHUDHORQJRVLQWH[HUHWUXQFRV XWTXHVXEDHTXRULEXVGHSUHQVXPSRO\SXVKRVWHP FRQWLQHWH[RPQLGLPLVVLVSDUWHÀDJHOOLV >)LQDOO\VKHHQWZLQHGKHUVHOIDURXQGKLPDVKHVWUXJJOHGDJDLQVWKHUZLVKLQJWRHV FDSHOLNHDVQDNHZKLFKDQHDJOHVQDWFKHVXSDQGFDUULHVRIIEXWWKHKDQJLQJVQDNH ELQGVWKHELUG¶VKHDGDQGIHHWDQGHPEUDFHVWKHVSUHDGLQJZLQJVZLWKKHUWDLORU OLNHLY\ZKLFKLVDFFXVWRPHGWRHPEUDFHWDOOWUHHVRUOLNHDQRFWRSXVZKLFKKROGVLWV SUH\FDXJKWEHQHDWKWKHVHDLWVWHQWDFOHVHPEUDFLQJKLPRQHYHU\VLGH@

,Q (XULSLGHV¶ %DFFKDH WKH JRG LV ³FURZQHG ZLWK FURZQV RI VQDNHV´ %D ± DQGLQYRNHGE\WKHFKRUXVDV³DPDQ\KHDGHGVQDNH´%D±  EXWLY\LVDQHYHQPRUHSHUYDVLYHIHDWXUHRI'LRQ\VLDFLFRQRJUDSK\ ,QWKHWKLUGERRNRIWKH0HWDPRUSKRVHVWKHJRGUHYHDOVKLPVHOIZUHDWKHG LQLY\WRWKH7\UUKHQLDQVDLORUVDQGFDXVHVWKHSUROLIHUDWLRQRILY\RYHUWKHLU

 &I/XFU&DW7LE2$UV)DVWL0HW±   2QVQDNHVLQ%DFFKLFFXOWVHH6HDIRUGRQ±ZLWKIXUWKHUELEOLRJUDSK\



$OLVRQ.HLWK

RDUVDQGVDLOV± 0RUHRYHUWKHDSSHDUDQFHRIWKHJRG¶VLY\RQWKH 0LQ\DGV¶ORRPLVWKH¿QDOHOHPHQWLQ%DFFKXV¶SUHSDUDWLRQVIRUHSLSKDQ\DQ HSLSKDQ\WKDWLVWKHSUHOXGHWRWKHVLVWHUV¶WUDQVIRUPDWLRQLQWREDWV± TXRWHGDERYH $IWHUUHVROXWHO\VSLQQLQJDQGVWRU\WHOOLQJLQWKHVHFOXVLRQ RI WKHLU TXDUWHUV DOO GD\ ORQJ WKH GDXJKWHUV RI 0LQ\DV PXVW ¿QDOO\ FRQ IURQWWKHJRGZKRVHULWHVWKH\KDYHLJQRUHGDQGZKRVHJRGKHDGWKH\KDYH VSXUQHG 7KH FOLPDFWLF HQFRXQWHU XQGHUVFRUHV ERWK WKH 0LQ\DGV¶ LPSLHW\ DQGWKHRYHUZKHOPLQJSRZHURI'LRQ\VXVWKHGDQJHURXVJRGRILQWR[LFD WLRQZKRVHVKDGRZ\SUHVHQFHKDVH[HUWHGFRQVWDQWSUHVVXUHRQWKHVLVWHUV¶ WDOHV7KHJRG¶VUXWKOHVVVXSSUHVVLRQRIWKH0LQ\DGV¶YRLFHVEULQJVWRDFORVH WKHVLVWHUV¶QDUUDWLYHSDUDGHRIERUURZHG%DFFKLFWKHPHVDQGLPDJHU\ZLWK WUXO\SRHWLFMXVWLFH

%LEOLRJUDSK\ $QGUp-DFTXHV ³2YLGHKHOOpQLVWHHWOLQJXLVWH´LQ5HYXH3KLORORJLTXH ± %DUFKLHVL$OHVVDQGUR ³)XWXUH5HÀH[LYHWZR0RGHVRI$OOXVLRQDQG2YLG¶V +HURLGHV´LQ+DUYDUG6WXGLHVLQ&ODVVLFDO3KLORORJ\± %HDUH:LOOLDP 7KH5RPDQ6WDJH/RQGRQ %HUQEHFN(- %HREDFKWXQJHQ]XU'DUVWHOOXQJVDUWLQ2YLGV0HWDPRUSKRVHQ 0XQLFK %|PHU)UDQ]HG  32YLGLXV1DVR0HWDPRUSKRVHQ.RPPHQWDU%XFK,±,,, +HLGHOEHUJ %|PHU)UDQ]HG  32YLGLXV1DVR0HWDPRUSKRVHQ.RPPHQWDU%XFK,9±9 +HLGHOEHUJ &DVWHOODQL9LFWRU ³7ZR'LYLQH6FDQGDOV2YLG0HWIIDQGIIDQG KLV6RXUFHV´LQ7UDQVDFWLRQVRIWKH$PHULFDQ3KLORORJLFDO$VVRFLDWLRQ ± &DVWLJOLRQL$OR\VLXV ³$QDOHFWD3ODQXGHDDE2YLGL0HWDPRUSKRVHV6SHFWDQWLD´ LQ6,)&± &XUOH\'DQLHO 0HWDWKHDWHU+HURLQHVDQG(SKHEHVLQ2YLG¶V0HWDPRUSKRVHV 3K''LVV8QLYHUVLW\RI:DVKLQJWRQ6HDWWOH &XUUDQ/HR& ³5DSHDQG5DSH9LFWLPVLQWKH0HWDPRUSKRVHV´LQ$UHWKXVD ± &XUULH+XJK0DF/HRG ³2YLGDQGWKH5RPDQ6WDJH´LQ$XIVWLHJXQG 1LHGHUJDQJGHUU|PLVFKHQ:HOW± '¶$QQD*LRYDQQL ³/D7UDJHGLD/DWLQD$UFDLFDQHOOHµ0HWDPRUIRVL¶´ LQ$WWLGHO&RQYHJQR,QWHUQD]LRQDOH2YLGLDQR,,±5RPD 'DYLV1*UHJVRQ* 6WXGLHVLQWKH1DUUDWLYH(FRQRP\RI2YLG¶V 0HWDPRUSKRVHV3K''LVV8QLYHUVLW\RI&DOLIRUQLD%HUNHOH\ 'RGGV(5HG  (XULSLGHV%DFFKDHHGLWHGZLWKLQWURGXFWLRQDQG FRPPHQWDU\2[IRUG 'XH2WWR6WHHQ &KDQJLQJ)RUPV&RSHQKDJHQ 'XNH77 ³2YLG¶V3\UDPXVDQG7KLVEH´LQ&ODVVLFDO-RXUQDO± (UUHQ0DQIUHG ³'LH0HWDPRUSKRVHGHV0DXOEHHUEDXPV(LQ0LPXVEHL 2YLG´LQ$8±

'LRQ\VLDF7KHPHDQG'UDPDWLF$OOXVLRQLQ2YLG¶V0HWDPRUSKRVHV



)DQWKDP5(ODLQH ³0LPH7KH0LVVLQJ/LQNLQ5RPDQ/LWHUDU\+LVWRU\´ LQ&ODVVLFDO:RUOG± )HHQH\'HQLV ³7KH6OLSSHU\6WXIIRI(SLF´UHYLHZRI-%+DLQVZRUWK 7KH,GHDRI(SLF%HUNHOH\ 7LPHV/LWHUDU\6XSSOHPHQW )HOGKHUU$QGUHZ ³0HWDPRUSKRVLVDQG6DFUL¿FHLQ2YLG¶V7KHEDQ1DUUDWLYH´ LQ0DWHULDOLH'LVFXVVLRQL± )ORZHU+DUULHW ³)DEXODGH%DFFKDQDOLEXVWKH%DFFKDQDOLDQ&XOWRIWKH 6HFRQG&HQWXU\%&DQG5RPDQ'UDPD´LQ*HVLQH0DQXZDOGHG ,GHQWLWlWXQG $OWHULWlWLQGHUIUKU|PLVFKHQ7UDJ|GLH:U]EXUJ± )UHQNHO9 ³ĭǹȃǾĬǿȉǹȊȇȅȈ8QHOHPHQWRDUFDLFRQHO'LRQLVRGHOOH %DFFDQWL´LQ$FPH± *DVSDUUL&DUORD ³'LRQ\VRV´LQ/H[LFRQ,FRQRJUDSKLFXP0\WKRORJLDH &ODVVLFDH,,,=ULFKDQG0QFKHQ± *DVSDUUL&DUORE ³'LRQ\VRV%DFFKXV´LQ/H[LFRQ,FRQRJUDSKLFXP 0\WKRORJLDH&ODVVLFDH,,,=ULFKDQG0QFKHQ± *LOGHQKDUG,QJR=LVVRV$QGUHZ ³µ6RPDWLF(FRQRPLHV¶7UDJLF%RGLHVDQG3R HWLF'HVLJQLQ2YLG¶V0HWDPRUSKRVHV´LQ+DUGLH%DUFKLHVL+LQGVHGV ± *LOGHQKDUG,QJR=LVVRV$QGUHZ ³2YLG¶V1DUFLVVXV(FKRHVRI2HGLSXV´ LQ$PHULFDQ-RXUQDORI3KLORORJ\± +DUGLH3KLOLS ³2YLG¶V7KHEDQ+LVWRU\WKH)LUVWµ$QWL$HQHLG¶"´ LQ&ODVVLFDO4XDUWHUO\± +DUGLH3KLOLS%DUFKLHVL$HVVDQGUR+LQGV6WHSKHQHGV  2YLGLDQ 7UDQVIRUPDWLRQV(VVD\VRQ2YLG¶V0HWDPRUSKRVHVDQGLWV5HFHSWLRQ&DPEULGJH +LQGV6WHSKHQ ³*HQHUDOL]LQJDERXW2YLG´LQ5DPXV± +RO]EHUJ1LNODV ³2YLGV%DE\ORQLDND´LQ:LHQHU6WXGLHQ± +XQWHU5LFKDUGHG  7KHRFULWXV$6HOHFWLRQ&DPEULGJH -DQDQ0LFDHOD ³µ7KHUH%HQHDWKWKH5RPDQ5XLQ:KHUHWKH3XUSOH)ORZHUV *URZ¶2YLG¶V0LQ\DGVDQGWKH)HPLQLQH,PDJLQDWLRQ´$PHULFDQ-RXUQDORI 3KLORORJ\± -RFHO\Q+HQU\'HG  7KH7UDJHGLHVRI(QQLXV&DPEULGJH .DWVRXULV$QGUHDV* ³7KH6XLFLGH0RWLILQ$QFLHQW'UDPD´ LQ'LRQ\VLR± .HLWK$OLVRQ0 7KH3OD\RI)LFWLRQV6WXGLHVLQ2YLG¶V0HWDPRUSKRVHV %RRN$QQ$UERU ²± ³(W\PRORJLFDO:RUGSOD\LQ2YLG¶Vµ3\UDPXVDQG7KLVEH¶ 0HW± ´LQ&ODVVLFDO4XDUWHUO\± ²± ³6RXUFHVDQG*HQUHVLQ2YLG¶V0HWDPRUSKRVHV±´LQ%DUEDUD:HLGHQ %R\GHG $&RPSDQLRQWRWKH6WXG\RI2YLG/HLGHQ± .HQQH\(- ³1RWHVRQ2YLG,,´LQ&ODVVLFDO4XDUWHUO\± .QR[3HWHU 2YLG¶V0HWDPRUSKRVHVDQGWKH7UDGLWLRQVRI$XJXVWDQ3RHWU\ &DPEULGJH ²± ³3\UDPXVDQG7KLVEHLQ&\SUXV´LQ+DUYDUG6WXGLHVLQ&ODVVLFDO3KLORO RJ\± /DEDWH0DULR ³6WRULHGLLQVWDELOLWjO¶HSLVRGLRGL(UPDIURGLWRQHOOH 0HWDPRUIRVLGL2YLGLR´LQ0DWHULDOLH'LVFXVVLRQL± /DWHLQHU'RQDOG ³0\WKLFDQG1RQP\WKLF$UWLVWVLQ2YLG¶V0HWDPRUSKRVHV´ LQ5DPXV± /HDFK(OHDQRU:LQVRU ³(NSKUDVLVDQGWKH7KHPHRI$UWLVWLF)DLOXUHLQ2YLG¶V 0HWDPRUSKRVHV´LQ5DPXV± /HVN\$OELQ $+LVWRU\RI*UHHN/LWHUDWXUHWUDQVODWHGE\-:LOOLVDQG &GH+HHU1HZ«@RIKLVYLVXDO¿HOG´DQGDFORVHSUR[LPLW\WR WKHDFWLRQ,QKLVSRUWUD\DORIWKH*UHHNV¶DWWDFNIRUH[DPSOHKHUHODWHVWKDW WKHQXPHURXV3HUVLDQVKLSVLQWKHVWUDLW³VWUXFNHDFKRWKHUZLWKWKHLUEURQ]H PRXWKHGEHDNVDQGVKDWWHUHGDOOWKHURZLQJHTXLSPHQW´3HUV± WKXV PDNLQJLWHDV\IRUWKH*UHHNVWRHQFLUFOHWKHPDQGWXUQWKHPXSVLGHGRZQ 3HUV± 7KLVVHHPVWRLPSO\DSULYLOHJHGSRVLWLRQRIWKHPHVVHQJHU GXULQJWKHEDWWOHVLPLODUWRWKDWRI;HU[HVZKRPKHORFDWHVRQDQHDUE\KLOO ZKHQFHKHFRXOGORRNGRZQRQWKHVWUXJJOHEHORZ3HUV± /LNHZLVH WKHPHVVHQJHU¶VVWUHVVLQJWKDWWKHVHDFRXOGQRORQJHUEHVHHQEHFDXVHRIWKH PDQ\VKLSZUHFNVDQGFRUSVHVDQGWKDWWKHURFN\FRDVWVDOVR¿OOHGXSZLWK GHDGERGLHVLQGLFDWHVDEURDGVZHHSRIYLVLRQ3HUV±  &RQYHUVHO\WKHPHVVHQJHU¶VGHVFULSWLRQRIWKHHQGRIWKH3HUVLDQOHDGHU 0DWDOORVLQDVRUWRIFORVHXSZLWKLQDORQJFDWDORJXHRIGHDG3HUV±  ±KHPLQXWHO\UHSRUWVKRZ0DWDOORV¶IXOOWKLFNWDZQ\EHDUGWXUQVGDUNDVLW LVGLSSHGLQWRWKHEORRG\ZDWHU3HUV± ±VLJQDOVDPXFKQDUURZHU VFRSHIRUDGHWDLOOLNHWKHEHDUGRI0DWDOORVZRXOGFHUWDLQO\QRWKDYHEHHQ YLVLEOHIURPDIDU7KHPHVVHQJHULQ$HVFK\OXV¶3HUVLDQVWKXV³SODFHVKLP VHOIDOWHUQDWHO\DWDGLVWDQFHIURPDQGYHU\FORVHWRWKHVFHQH´+HFRP ELQHV WZR HQWLUHO\ GLIIHUHQW SHUVSHFWLYHV UHVXOWLQJ LQ D SRLQW RI YLHZ WKDW HTXDOVRPQLSUHVHQFH $WWKHVDPHWLPHDV%DUUHWWIXUWKHUVKRZVWKHPHVVHQJHULQKLVDFFRXQW RIWKHQDYDOEDWWOHWHQGVWRPLQLPL]HKLVRZQSDUWLFLSDWLRQLQWKHHYHQWVKH LVUHODWLQJDQGWRIDGHLQWRWKHEDFNJURXQG0RVWRIKLVVSHHFKLVGRPL QDWHGE\WKLUGSHUVRQSUHGLFDWHVDQGLPSHUVRQDOFRQVWUXFWLRQV)XUWKHUPRUH WKHUHDUHRQO\YHU\IHZLQVWDQFHVRIVHOIUHIHUHQFH7KHPHVVHQJHU¶VVHOI HIIDFHPHQWLVHYHQVRFRPSOHWHWKDWWKRVHZKROLVWHQWRKLVUHSRUWPD\HDVLO\ IRUJHWDERXWZKRLVQDUUDWLQJWKHVWRU\5DWKHUWKHHYHQWVSUHVHQWHGVHHP LQGHSHQGHQWIURPWKHREVHUYHUDQGWKHQDUUDWLYHDSSHDUVWR³WHOOLWVHOI´ ,QKLVLPSOLFLW FODLPWRERWKRPQLSUHVHQFHDQGQRQSUHVHQFHVR%DU UHWW¶VFRQFOXVLRQWKHPHVVHQJHU¶VQDUUDWLYHYRLFHFORVHO\UHVHPEOHVWKDWRI HSLF)RUWKHHSLFSRHWWRRPRYHVIUHHO\ZLWKLQWKHORFDWLRQKHLVGHVFULE

     

%DUORZ %DUUHWW± $OOWUDQVODWLRQVRI$HVFK\OXV¶3HUVLDQVDUHWDNHQIURP+DOO %DUUHWW ,ELG± /LQHƝPǀQ LVWKHH[FHSWLRQWKDWFRQ¿UPVWKHUXOH)RUWKHIRXURFFXUUHQFHVRI ¿UVWSHUVRQSOXUDOIRUPVIURPOLQHWRWKHHQGFI%DUUHWWQ  %DUUHWW[YLLTXRWLQJ%HQYHQLVWH

'UDPDDQG(SLF1DUUDWLYH



LQJDQG\HWDSSHDUVQRZKHUHLQWKH¿FWLRQDO VFHQH2QWKHWUDJLFVWDJHWKH YRLFHRIWKHPHVVHQJHUGLIIHUVFRQVLGHUDEO\IURPWKDWRIWKHRWKHUGUDPDWLV SHUVRQDH³:KLOHWKHUHLVRQWKHZKROHDVWURQJLGHQWL¿FDWLRQRIVSHDNHU DQGVSHHFKLQWUDJHG\WKHPHVVHQJHULQVKDUSGLVWLQFWLRQRIIHUVDQDUUDWLYH WKDWLQJHQHUDOLVFRQVSLFXRXVO\GLVDVVRFLDWHGIURPDQ\SDUWLFXODUSRLQWRI YLHZ´%\DVVXPLQJWKHYRLFHRIWKHHSLFSRHWWKHPHVVHQJHUWKXVOLEHUDWHV KLVDFFRXQWIURPWKHSDUWLDOLW\WKDWGH¿QHVWKHVSHHFKRIWKHRWKHUFKDUDFWHUV RQVWDJH 6LPXOWDQHRXVO\ WKH DI¿OLDWLRQ ZLWK HSLF HQKDQFHV KLVFUHGLELOLW\ HVWDEOLVKLQJKLVYRLFH±DVLVHVVHQWLDOIRUKLVUROH±DVDXWKRULWDWLYHLQWKH PDQ\FRPSHWLQJFODLPVWRWUXWKIXOQHVV³7UDJHG\>WKHUHIRUH@VKRZVLWVHOIWR EHLQGHEWHGWRHSLFQRWRQO\IRULWVFKDUDFWHUVDQGSORWVEXWDOVRIRULWVVXF FHVVIXOIXQFWLRQLQJDVWKHDWHU´ ,KDYHVXPPDUL]HGWKHUHVXOWVRIGH-RQJ¶VDQG%DUUHWW¶VDQDO\VLVRIWKH UROHRIWKHPHVVHQJHULQ*UHHNWUDJHG\DQGWKHQDUUDWLYHSUDFWLFHVWRRYHU FRPHWKHOLPLWDWLRQVLQKHUHQWLQKLVVWDWXVDVH\HZLWQHVVLQVRPHGHWDLOEH FDXVHWKHLUDSSURDFKFDQDOVREHIUXLWIXOO\DSSOLHGWRWKHPHVVHQJHUVFHQHLQ 6HQHFD¶V$JDPHPQRQ$VPHQWLRQHG(XU\EDWHV¶UHSRUWKDVEHHQFULWLFL]HG QRWRQO\IRUEHLQJGLVSURSRUWLRQDOO\ORQJEXWDOVRIRUODFNLQJDOOSUREDELOLW\ WKXVUXQQLQJFRXQWHUWRWKHYHU\IXQFWLRQRIWKHWUDJLFPHVVHQJHU+RZHYHU ,ZDQWWRVKRZLQWKHIROORZLQJWKDW6HQHFDHPSOR\VWKHVDPHVWUDWHJLHVWR IRUJH(XU\EDWHV¶QDUUDWLYHDXWKRULW\WKDWZH¿QGLQ(XULSLGHVDQG$HVFK\OXV ,VKDOODUJXHWKDWWKH5RPDQGUDPDWLVWDOVRFUHDWHVDVFHQDULRDVUHDOLVWLFDV SRVVLEOHDQGDGGLWLRQDOO\HQGRZVKLVPHVVHQJHUZLWKDGLVWLQFWO\HSLFYRLFH KDYLQJKLPDVVXPHDYDULHW\RISHUVSHFWLYHVZKLFKVXJJHVWRPQLSUHVHQFH ZKLOHVLPXOWDQHRXVO\REVFXULQJKLVLQYROYHPHQWLQWKHHYHQWVWKDWKHLVUH FRXQWLQJ ,URQLFDOO\LWZDVSUHFLVHO\WKHFRPSDULVRQZLWKWKHPHVVHQJHUVSHHFK LQDQRWKHUSOD\E\$HVFK\OXVKLV$JDPHPQRQWKDWZDVUHVSRQVLEOHIRUWKH KLJKO\XQIDYRXUDEOHDVVHVVPHQWRI6HQHFD¶VYHUVLRQ,QWKH*UHHNWUDJHG\ WKHKHUDOGDIWHUUHSRUWLQJWKHDUULYDORI$JDPHPQRQDW$UJRV$±  DQGUHFDSLWXODWLQJWKHPDQ\GLVFRPIRUWVWKH*UHHNDUP\KDGWRHQGXUHDW 7UR\ EHIRUH LWV ODWH YLFWRU\ $ ±  HQGV KLV VSHHFK ZLWK D GHVFULS WLRQRIWKHVWRUPWKDWRYHUWRRNWKH*UHHNVE\QLJKWRQWKHLUUHWXUQYR\DJH $± +H¿UVWGHVFULEHVWKHVWRUPLWVHOIDQGWKHGHVWUXFWLRQLWFDXVHG $± WKHQUHODWHVWKHHVFDSHRI$JDPHPQRQ¶VVKLSRQZKLFKKHKLP VHOI ZDV VDLOLQJ $ ±  DQG ¿QDOO\ VSHFXODWHV DERXW WKH IDWH RI WKH ÀHHW¶VRWKHUVKLSV$± HVSHFLDOO\WKDWRI0HQHODXVDERXWZKRPWKH FKRUXVKDGDVNHGKLPLQLWVLQWURGXFWRU\TXHVWLRQ$± $OOWKLVLV WROGLQQRPRUHWKDQWKLUW\OLQHV

 %DUUHWW[YLL  ,ELG[YLLL



$QQHWWH0%DHUWVFKL

7KHFRQWHQWDQGVWUXFWXUHRI(XU\EDWHV¶QDUUDWLYHLQ6HQHFD¶V$JDPHP QRQ LV PDUNHGO\ GLIIHUHQW 2I WKH WKUHH PDLQ WRSLFV FRYHUHG E\ WKH $HVFK\OHDQ KHUDOG WKH ODVW WZR DUH GHDOW ZLWK LQ WKH SUHFHGLQJ GLDORJXH EHWZHHQ(XU\EDWHVDQG&O\WHPQHVWUD$JD±D± LHDUHQRW SDUWRIWKHPHVVHQJHU¶VVSHHFKSURSHU7KHVWRUPRQWKHRWKHUKDQGLVSRU WUD\HG LQ H[KDXVWLYH GHWDLO $J ±  WDNLQJ XS DOPRVW RQHKXQGUHG OLQHV LQ FRQWUDVW WR RQO\ WHQ LQ$HVFK\OXV7KH UHSRUW LQFOXGHV QRW RQO\ D PLQXWH GHVFULSWLRQ RI WKH WXUPRLO RI WKH ZLQGV $J ±  WKH KHDY\ UDLQ DQG DEVROXWH GDUNQHVV $J ±D  WKH GDPDJH GRQH WR WKH VKLSV $JE± DQGWKHGHVSDLURIDOOPHQSUHVHQW$J± EXWDOVRRI WKHGHDWKRI$MD[2LOHXV DWWKHKDQGVRI$WKHQDDQG1HSWXQH$J±  ,QDGGLWLRQ6HQHFDIXUWKHUHQODUJHV(XU\EDWHV¶UKHVLVE\LQWHJUDWLQJDWWKH EHJLQQLQJDQH[WHQVLYHGHVFULSWLRQRIWKH*UHHNV¶GHSDUWXUHIURP7UR\DQG LQLWLDO SHULRG RI FDOP VDLOLQJ $J ±  DQG E\ FRQFOXGLQJ LW ZLWK DQ DFFRXQWRIWKHWUHDFKHU\RI1DXSOLXVZKROXUHGWKH*UHHNV¶VKLSVRQWRWKH &DSKHUHDQURFNVE\OLJKWLQJEHDFRQVDWWKHWRS$J± ,QFRQWUDVWWR $HVFK\OXV6HQHFDWKXVFRQFHQWUDWHVKLVDWWHQWLRQLQWKHPHVVHQJHUVSHHFK RI WKH $JDPHPQRQ H[FOXVLYHO\ RQ WKH YR\DJH DQG WKH GHVWUXFWLRQ RI WKH ÀHHWZKHUHDVWKH*UHHNWUDJHGLDQPDNHVWKLVRQO\WKHWKHPHRIWKHODVW VHFWLRQRIWKHKHUDOG¶VUHSRUW 3UHYLRXVVFKRODUVKLSKDVWDNHQVRPHSDLQVWRLGHQWLI\WKHWUDJLF VRXU FHVWKDW6HQHFDXVHGIRUKLVGHWDLOHGJUDSKLFVWRUPGHVFULSWLRQHVSHFLDOO\ ZLWKUHJDUGWRKLVFRPELQDWLRQRIWKHGHDWKRI$MD[DQGWKHGHFHLWRI1DX SOLXVZLWKWKHZUHFNLQJRIWKH*UHHNVKLSVRQWKHLUZD\KRPH7RVXPXS WKH¿UVWNQRZQDFFRXQWVWRFRQWDLQDOOWKUHHLQFLGHQWVFRPHIURPWKH+HO OHQLVWLFSHULRG$ODWHVXFFHVVRURI6HQHFDLV4XLQWXV6P\UQDHXVZKRLQWKH ODVWERRNRIKLV3RVWKRPHULFDOLNHZLVHUHSRUWVWKHGHVWUXFWLRQRIWKH*UHHN ÀHHWLQFRQMXQFWLRQZLWKWKHGURZQLQJRI$MD[DQGWKHUHYHQJHRI1DXSOL XV+RZHYHUVLQFHPRVWGUDPDWLFSRHWU\EHWZHHQWKH¿IWKFHQWXU\%&( DQGWKH¿UVW&(LVORVWDOODWWHPSWVWRGHWHUPLQH6HQHFD¶VVSHFL¿FPRGHOV PXVWUHPDLQKLJKO\VSHFXODWLYH %HVLGHVLWLVQRWWKHFRQQHFWLRQRIWKHWKUHHHSLVRGHVWKDWPDLQO\HYRNHG FULWLFLVPHYHQWKRXJKPDQ\DUHDGHUPD\KDYHIHOWWKDWE\GRLQJVR6HQHFD PDGHWKHDOUHDG\RYHUO\ORQJVSHHFKRI(XU\EDWHVHYHQORQJHU5DWKHULWKDV EHHQREMHFWHGWKDW(XU\EDWHVUHODWHVPXFKPRUHWKDQDSHUVRQRQERDUGRI RQHRIWKHVKLSVFRXOGKDYHVHHQJLYHQWKDWWKHORFDWLRQZDVYHU\ODUJHDQG PRUHLPSRUWDQWO\WKDWLWZDVVRGDUNGXULQJWKHVWRUP±DIDFWWKDWLVKLJK  )RUDQRXWOLQHRIWKHVSHHFKFI7DUUDQW  &I6WDFNPDQQ  )RUWKHJHQHUDOVLPLODULW\RIWKHDFFRXQWVLQFOXGLQJYHUEDOSDUDOOHOVDQGWKHFRQVH TXHQFHVWKDWPD\EHGUDZQIURPWKLVLHWKHK\SRWKHVLVRIDFRPPRQVRXUFHFI 7DUUDQW±FIDOVR+HLQ]H±DQG/LHGORIIZLWKQ

'UDPDDQG(SLF1DUUDWLYH



OLJKWHGVHYHUDOWLPHV±WKDWRQHFRXOGVLPSO\QRWVHHDQ\WKLQJDWDOO%\ KDYLQJ(XU\EDWHVUHFRXQWHYHQWVWKDWKHFRXOGQRWKDYHREVHUYHGKLPVHOI VR FULWLFV FODLPHG 6HQHFD GLVUHJDUGV WKH PHVVHQJHU¶V FRQYHQWLRQDO VWDWXV DVH\HZLWQHVVDQGXQGHUPLQHVKLVQDUUDWLYHFUHGLELOLW\+LVUHSRUWFDQWKXV QRWFUHDWHWKHLOOXVLRQRIEHLQJD³WUDQVSDUHQWZLQGRZXSRQWKHWUXWK´OLNH WKHKHUDOG¶VVSHHFKLQ$HVFK\OXV¶$JDPHPQRQEXWKDVWREHLQWHUSUHWHGDV WKHSURGXFWRIWKHSRHWZKRZDQWHGWRFRQWULEXWHWRWKHOLWHUDU\WUDGLWLRQRI VWRUPGHVFULSWLRQVDQGVHFXUHKLPVHOIDSURPLQHQWSRVLWLRQ $GPLWWHGO\ LW FDQQRW EH GHQLHG WKDW (XU\EDWHV LQ KLV VSHHFK UHSHDW HGO\ HPSKDVL]HV WKH SLWFK GDUNQHVV RI WKH QLJKW RI WKH VWRUP %HIRUH WKH VWRUPDULVHVIRULQVWDQFHKHSRLQWVRXWWKDWWKHPRRQDQGWKHVWDUVVXGGHQO\ GLVDSSHDUHGDQGWKDWWKHQLJKWZDVDGGLWLRQDOO\GDUNHQHGE\GHQVHFORXGV $J±  FXPVXELWROXQDFRQGLWXUVWHOODHODWHQW QHFXQDQR[HVWGHQVDWHQHEUDVREUXLW FDOLJRHWRPQLOXFHVXEGXFWDIUHWXP FDHOXPTXHPLVFHW 6XGGHQO\WKHPRRQZDVKLGGHQWKHVWDUVLQYLVLEOH 1LJKWZDVUHGRXEOHGDGHQVHJORRPVPRWKHUHG WKHGDUNQHVVVWROHHYHU\WUDFHRIOLJKWDQG FRQIRXQGHGVHDDQGVN\

2QFHWKHVWRUPUDJHVDWIXOOVSHHGLWJHWVHYHQGDUNHULQIDFWDVGDUNDVLQ WKHXQGHUZRUOGPDNLQJWKHPHQ¶VIDWHZRUVHEHFDXVHWKH\DUHXQDEOHWR UHFRJQL]HZKDWGHVWUR\VWKHP$J±  QHFKRFOHYDPHQGHQLTXHDHUXPQLVGDWXU YLGHUHVDOWHPHWQRVVHTXRSHUHDQWPDOR SUHPXQWWHQHEUDHOXPLQDHWGLUDH6W\JLV LQIHUQDQR[HVW 7KHVXIIHUHUVZHUHQRWHYHQJUDQWHGWKHUHOLHIRI DWOHDVWVHHLQJDQGNQRZLQJWKHGLVDVWHUWKDWGHVWUR\HGWKHP 'DUNQHVVZHLJKHGRQWKHLUH\HVWKHLQIHUQDO QLJKWRIWHUULEOH6W\[

 &I6FKLQGOHU³>«@DXFKOlVVW6HQHFDLKQ>VF(XU\EDWHV@YLHOPHKUEH ULFKWHQ DOV HU LQ ¿QVWHUHU 1DFKW GLH VHLQHQ HLJHQHQ$QJDEHQ QDFK ZlKUHQG GHV 6HHVWXUPVKHUUVFKWEHREDFKWHQNRQQWH´6LPLODUO\DOUHDG\6WDFNPDQQ ³$EHU ZHQQ HLQPDO IHVWJHVWHOOW LVW GDVV ZlKUHQG GHU .DWDVWURSKH UDEHQVFKZDU]H 1DFKWKHUUVFKWVRGDVVPDQGLH+DQGYRU$XJHQQLFKWVLHKWGDQQNDQQHLQHUGHUGLH .DWDVWURSKHPLWHUOHEWKDWDP7DJGDUDXIK|FKVWHQVGDVEHULFKWHQZDVVLFKDQ%RUG GHVHLJHQHQ6FKLIIHV]XJHWUDJHQKDW´±7KHYDVWQHVVRIWKH*UHHNÀHHWLVUHSHDWHGO\ HPSKDVL]HGFIHJ$J  0LFKHOLQL  $OOWUDQVODWLRQVRI6HQHFD¶V$JDPHPQRQDUHWDNHQIURP)LWFK  &IDOVR$J±«FUHGHUHV«DWUXPUHEXVLQGXFLFKDRV



$QQHWWH0%DHUWVFKL

+RZHYHUDVFOHDUO\DV(XU\EDWHVVWUHVVHVWKHWKLFNGDUNQHVVRIWKHQLJKW MXVWVRFOHDUO\GRHVKHUHIHUWRWKHIDFWWKDWVRPHOLJKWQHYHUWKHOHVVLOOXPL QDWHGWKHVFHQHU\$IWHUGHVFULELQJWKHLQIHUQDOJORRPKHJRHVRQWRUHSRUW WKDW RFFDVLRQDOO\ ÀDVKHV RI OLJKWQLQJ EUHDN WKURXJK WKH GLUDH 6W\JLV QR[ $J±   H[FLGXQWLJQHVWDPHQ HWQXEHGLUXPIXOPHQHOLVDPLFDW  7@KH*UHHNV UHWXUQLQJIURP7UR\KDSS\EHFDXVHRIWKHLUYLFWRU\ZHUHPDGHXQKDSS\E\ WKHVWRUPWKHIRUWXQDWHVXUYLYRUVRIWKHZDUPHWZLWKPLVIRUWXQHDWVHD´ )XUWKHUPRUH VR 6KHOWRQ ³WKH VWRUP PXVW EH YLHZHG >«@ DV QDWXUH¶V UH VSRQVHWRYLRODWLRQVRIRUGHU´RUXQQDWXUDODFWVRQWKHKXPDQOHYHOWKHP VHOYHV SURYRNHG E\ LQQHU WXUPRLO DQG FRQÀLFWLQJ HPRWLRQV7KH *UHHNV HVSHFLDOO\$JDPHPQRQ DQG$MD[ ZHUH UHVSRQVLEOH IRU YDULRXV VDFULOHJHV

 &I%DUUHWW  $VPHQWLRQHG(XU\EDWHV¶UKHVLVLVQRWXQLTXHLQDGDSWLQJDW\SLFDOHSLFVHWSLHFHD VWRUPGHVFULSWLRQEXWZH¿QGVLPLODUWUHDWPHQWVRIFRQYHQWLRQDOHSLFPRWLIVDOVRLQ WKHPHVVHQJHUVSHHFKHVRIRWKHUWUDJHGLHVHJWKHSRUWUD\DORI+HUFXOHV¶FDWDEDVLV LQFOXGLQJDORQJGHVFULSWLRQRIWKHXQGHUZRUOGLQWKH+HUFXOHVIXUHQVRUWKHUHSRUW RIWKHQHFURPDQF\FDUULHGRXWE\7LUHVLDVDQGKLVGDXJKWHU0DQWRLQWKH2HGLSXV  7LHW]H±  &I HJ =ZLHUOHLQ   Q  UHJDUGLQJ WKH $JDPHPQRQ ³6R IUHPG VROFKH 3UXQNHU]lKOXQJHQ GHP HFKWHQ 'UDPDWLNHU VLQG VR JURVV LVW 6HQHFDV9RUOLHEH IU VLH´&IDOVR6WDFNPDQQ  6KHOWRQ±TXRWDWLRQRQS   ,ELG  ,ELG

'UDPDDQG(SLF1DUUDWLYH



±$JDPHPQRQKDGPXUGHUHGKLVGDXJKWHULQRUGHUWRJHWWKH*UHHNH[SHGL WLRQXQGHUZD\DQGWDNHUHYHQJHRQ7UR\$MD[KDGUDSHG&DVVDQGUDDWWKH DOWDURI$WKHQDRQFHWKHFLW\ZDVWDNHQ±DQGWKHXQLYHUVHUHDFWVWRWKHVH WUDQVJUHVVLRQVRIFRVPLFRUQDWXUDOODZE\SURGXFLQJDVWRUPRIFRVPLFGL PHQVLRQV7KDWVDLGDFRQFOXGLQJMXGJHPHQWOLNHWKDWRI5LFKDUG7DUUDQW¶V PD\VWLOOUHVRQDWHZLWKPDQ\WRGD\³7KHLQÀDWLRQRISLFWXUHVTXHRUKRUUL¿F PHVVHQJHUVSHHFKHV LQWR FHQWUDOO\VLWXDWHG VFHQHV PD\ EH DQRWKHU VLJQ RI 6HQHFD¶VIUHHGRPIURPDQGODFNRILQWHUHVWLQWKHWKHDWULFDOIRFXVRI*UHHN WUDJHG\´ 7KLVFODLPQRWZLWKVWDQGLQJ,ZRXOGOLNHWRVXJJHVWDQRWKHULQWHUSUHWD WLRQLQWKHUHPDLQLQJSDUWRIP\SDSHU,GRQRWGHQ\WKDW(XU\EDWHV¶VSHHFK LQWKH$JDPHPQRQLVDORQJDQGKLJKO\³HSLFL]HG´SDVVDJH,QIDFW,VKDOO DUJXHWKDW6HQHFDQRWRQO\³HSLFL]HV´EXWDFWXDOO\³K\SHUHSLFL]HV´(XU\ EDWHV¶UKHVLVDQGLQGRLQJVRHQKDQFHVWKHGUDPDWLFLPSDFWRIKLVUHSRUW )RUWKHRYHU H[WHQVLYHXVHRIHSLFQDUUDWLYHVWUDWHJLHVDGGVKHLJKWHQHGSD WKRVDQGVXVSHQVHLQWKHVSHFL¿FGUDPDWLFVLWXDWLRQRIWKHPHVVHQJHUVSHHFK ZKHUHWKHDXGLHQFHNQRZVWKDWLPSRUWDQWDQGDXWKHQWLF QHZVLVGHOLYHUHG ZKLFK ZLOO KDYH D SDUWLFXODU EHDULQJ RQ WKRVH WR ZKRP LW LV GHOLYHUHG , VKDOO WKXV FODLP WKDW WKH SURPLQHQFH RI HSLF  QDUUDWLRQ LQ WKH PLGGOH DFW RIWKH$JDPHPQRQGRHVQRWVKDWWHUWKHHPSDWK\RIWKHVSHFWDWRUEXWUDWKHU LQFUHDVHVLW%HVLGHVE\UHDGLQJ6HQHFD¶VWUDJLFQDUUDWLYHDJDLQVWHSLFWH[WV HVSHFLDOO\+RPHU¶V2G\VVH\DQG9HUJLO¶V$HQHLG,KRSHQRWRQO\WREULQJWR OLJKWVRPHDOOXVLYHPRPHQWVEXWDOVRWRGHPRQVWUDWHKRZWUDJHG\DGDSWVDV ZHOODVIXUWKHUGHYHORSVDQGLQWHQVL¿HVWKHOLWHUDU\WHFKQLTXHVRIHSLF (XU\EDWHVEHJLQVKLVQDUUDWLYHRIWKHGHVWUXFWLRQRIWKH*UHHNÀHHWZLWK DSURORQJHGDFFRXQWRIWKH*UHHNV¶SUHSDUDWLRQVIRUGHSDUWXUHDQGWKHVXEVH TXHQWSHULRGRIIDYRXUDEOHVDLOLQJ$J± +H¿UVWGHVFULEHVWKHJHQ HUDOKXUU\RIWKH*UHHNVWRPDNHWKHLUVKLSVUHDG\IRUFDVWLQJRII$J±  DQGWKHQSRUWUD\VLQJUHDWGHWDLOWKHH[FHOOHQWFRQGLWLRQVWKH\HQFRXQWHU DWVHDDQGWKHMR\RXVDWPRVSKHUHWKDWGRPLQDWHVWKHVLWXDWLRQ7KHZHDWKHU LVIDLUWKHZDWHUVDUHFDOPDJHQWOHEUHH]HELOORZVWKHVDLOVDQGHYHU\ERG\ LVKDSS\WROHDYH7UR\EHKLQG$J±  KLQFDXUDSULPROHQLVLPSHOOLWUDWHV DGODSVDYHOLVXQGDYL[DFWXOHYL

 )RUWKHFRVPLFGLPHQVLRQRI6HQHFDQWUDJHG\LQJHQHUDOFI6FKPLW]±7KH GHDWK RI $MD[ LQ WKH VWRUP DIWHU GLVSOD\LQJ RQFH DJDLQ KLV DUURJDQFH DQG IXURU $J   DQWLFLSDWHV DQG H[SODLQV $JDPHPQRQ¶V ODWHU NLOOLQJ DV 6HLGHQVWLFNHU QULJKWO\VWUHVVHV  7DUUDQW  )RUWKHWHUPFI-DQND  7KHUHSODFHPHQWRIDUPVZLWKRDUV$J± LVRIFRXUVHDV\PEROLFDFWLQGL FDWLQJWKHWUDQVLWLRQIURPZDUWRSHDFH



$QQHWWH0%DHUWVFKL

WUDQTXLOOD=HSK\ULPROOLVDIÀDWXWUHPXLW VSOHQGHWTXHFODVVHSHODJXVHWSDULWHUODWHW LXYDWYLGHUHQXGD7URLDHOLWRUD LXYDWUHOLFWLVROD6LJHLORFD 7KHQDEUHH]HJHQWOHDW¿UVWVOLSSHGLQWRWKHVDLOV DQGSXVKHGWKHVKLSVRQWKHFDOPZDWHUVZLWKVFDUFHO\DQ\FXUUHQW ZHUHUXIÀHGE\WKHVRIW=HSK\U¶VEUHDWK DQGWKHVHDZDVERWKHPEOD]RQHGDQGFRQFHDOHGE\WKHÀHHW :KDWDSOHDVXUHWRVHHWKHHPSW\VKRUHVRI7UR\ WRVHHWKHORQHO\WHUUDLQRIGHVHUWHG6LJHXP

,QWKHLUHDJHUQHVVWRUHWXUQKRPHDOOWKHVROGLHUVMRLQIRUFHVDQGURZDWIXOO VSHHG$J± VRWKDW³WKHIXUURZHGZDWHUVJOLVWHQHGWKHVKLSV¶VLGHV KLVVHG DQG ZKLWHIRDPVXQGHUHGWKHGDUNEOXH VHD´ $J ± VXOFDWD YLEUDQWDHTXRUDHWODWHUDLQFUHSDQWGLULPXQWTXHFDQDHFDHUXOXPVSXPDH PDUH 2QFHDVWURQJHUZLQGEORZVWKHPHQVHWGRZQWKHRDUV$J±  DQGLQGXOJHLQFRQWHPSODWLQJWKHODQGVFDSHRUWHOOLQJHDFKRWKHUZDUVWRULHV EHIRUH¿QDOO\HQMR\LQJWKHDSSHDUDQFHRIDJURXSRIGROSKLQV$J±  $V &DYLJOLD KDV VKRZQ (XU\EDWHV¶ GHVFULSWLRQ RI WKH *UHHNV¶ KDSSL QHVVDWWKHLUGHSDUWXUH$J±LXYDWYLGHUHQXGD7URLDHOLWRUDLXYDW UHOLFWLVROD6LJHLORFD FORVHO\UHFDOOV$HQHDV¶UHSRUWRIWKH7URMDQV¶MR\DQG UHOLHIRYHUWKHIHLJQHG UHWUHDWRIWKHLUHQHP\DWWKHEHJLQQLQJRI$HQHLG $HQ±«LXYDWLUHHW'RULFDFDVWUDGHVHUWRVTXHYLGHUHORFRVOL WXVTXH UHOLFWXP  7KH LQWHUWH[WXDO UHVRQDQFH FUHDWHV VXVSHQVH VLQFH LW PDNHVWKHDXGLHQFHUHDOL]HWKDWDOVRWKH*UHHNVJHWFDUULHGDZD\WRRVRRQ DQGUDVKO\EHOLHYHWKDWWKHGDQJHULVQRZRYHU-XVWDVWKH7URMDQVVXFFXPE WRWKHLOOXVLRQRIKDYLQJZRQWKHZDUDQGODWHUSD\WKHKLJKHVWSULFHSRVVLEOH IRUWKLVPLVMXGJHPHQWWKHVDFNRIWKHLUFLW\VRWKHYLFWRULRXV*UHHNVZLOOEH SXQLVKHGLQWKHLUFDVHWKHSULFHZLOOEHWKHGHVWUXFWLRQRIDOPRVWWKHHQWLUH ÀHHW7KHFRQQHFWLRQLVHYHQIXUWKHUKLJKOLJKWHGLQWKHIROORZLQJOLQHVSLF WXULQJWKHFDUHIUHHVDLOLQJIRUDVWKH*UHHNVOHDYHWKHLUVKLSVWRWKHZLQGDQG SDVVWKHWLPHWHOOLQJHDFKRWKHUZDUDQHFGRWHV$J± VRWKH7URMDQV LQWKHLUODVWQLJKWDEDQGRQWKHPVHOYHVWRZLQHDQGVOHHSZKLOHWKH*UHHN DUP\DSSURDFKHVIURPWKHVHD$HQ± 0RUHRYHUWKHUHIHUHQFH WRWKHVODXJKWHURI3ULDPDWWKHDOWDURI-XSSLWHU$J LVDQRPLQRXVUH PLQGHURIWKH*UHHNV¶PDQ\VDFULOHJLRXVDFWVDJDLQVWERWKJRGVDQGPHQDQG RIWKHSXQLVKPHQWZKLFKQRUPDOO\IROORZVVXFKYLRODWLRQV $OWKRXJK WKH XQVHWWOLQJ HIIHFW RI WKHVH DOOXVLRQV LV ULJKWO\ VWUHVVHG , ZRXOGOLNHWRSRLQWWRDGLIIHUHQWNLQGRIVXVSHQVHWKDW6HQHFDEXLOGVE\LQWH JUDWLQJDQH[WHQVLYHSRUWUD\DORIWKH*UHHNV¶MR\RXVGHSDUWXUHDQGWKHLQLWLDO

 &DYLJOLD±±  ,ELG±  7DUUDQWFIDOVR&DYLJOLD±

'UDPDDQG(SLF1DUUDWLYH



SOHDVDQWSKDVHRIWKHMRXUQH\7KHVHHPLQJO\JRRGZHDWKHUFRQGLWLRQVDQG DSHULRGRIFDOPVDLOLQJDUHDOVRIUHTXHQWO\PHQWLRQHGDWWKHEHJLQQLQJRI HSLFVWRUPGHVFULSWLRQV«@EHVFKUlQNWDOVRGLHDOOJHPHLQH6FKLOGHUXQJGHV8Q ZHWWHUVXQGGHU1RWGHU6FKLIIH±ZLHHUDXFKYRUKHUI QXU]ZHL9HUVHDQGLH 6FKLOGHUXQJGHUJOFNOLFKHQ)DKUWJHZHQGHWKDWWH±XQGHU]lKOWZLHGDV9HUGHUEHQ IRUWVFKUHLWHWXQGVLFKVWHLJHUW´  &I DOVR WKDW KHUH WKH QDUUDWLYH WLPH (U]lKO]HLW  DSSUR[LPDWHV WKH WLPH QDUUDWHG HU]lKOWH=HLW ZKLFKVLPLODUO\KHLJKWHQVWKHFUHGLELOLW\RIWKHUHSRUW



$QQHWWH0%DHUWVFKL

WXUPRLORIWKHZLQGV7KXVE\DPSOLI\LQJWKHFRQYHQWLRQDOEULHIUHIHUHQFH WR WKH ³FDOP EHIRUH WKH VWRUP´ LQWR D ORQJ DQG SLFWRULDOHFSKUDVLV 6HQHFD KHLJKWHQVWKHVXVSHQVHRIWKHSDVVDJHDQGLQFUHDVHVLWVGUDPDWLFLPSDFW 0\VHFRQGH[DPSOHRI6HQHFD¶V³K\SHUHSLFL]LQJ´WKHUHSRUWRI(XU\EDWHV LVWKHGHVFULSWLRQRIWKHUHDFWLRQRIWKHPHQFDXJKWLQWKHVWRUPDVZHOODV WKHHQVXLQJSRUWUD\DORIWKHHQGRI$MD[$J± 7KLVVHFWLRQFRYHULQJ VRPH¿IW\OLQHVFRQWDLQVWZRGLUHFWVSHHFKHVZKLFKWRJHWKHUWDNHXSPRUH WKDQRQHWKLUGRIWKHDFFRXQW1HHGOHVVWRVD\DKLJKLQFLGHQFHRIVSHHFKLVD W\SLFDOFKDUDFWHULVWLFRIHSLF7KHVSHHFKHVLQFUHDVHWKHUHDOLVPDQGYLYLGQHVV RI WKH QDUUDWLYH ± WHOOLQJO\ WKH +RPHULF HSLFV KDYH EHHQ FDOOHG ³GUDPDWLF´ IRUWKLVYHU\UHDVRQ3DUWLFXODUO\LQVWRUPGHVFULSWLRQVWKHHSLFSRHWUHJXODUO\ LQFOXGHVDODPHQWDWLRQVSHHFKRIWKHKHURWKDWLVDWWKHPHUF\RIUDLQZLQG DQGZDYHVLQRUGHUWRHPSKDVL]HKLVDQJXLVKDQGGHVSDLUEXWDOVRKLVFRXU DJHDQGVWUHQJWKFIHJ+RP2G±9HUJ$HQ± ,Q WKH$JDPHPQRQ6HQHFDDGRSWVWKLVSUDFWLFHEXWVLPXOWDQHRXVO\PRGL¿HVLW E\LQWHJUDWLQJLQWR(XU\EDWHV¶UKHVLVQRWRQO\DVSHHFKRIDSURPLQHQWKHUR $MD[HYHQLILQDQLQYHUVHGRUSHUYHUWHGIRUP EXWDOVRRQHRIWKHDQRQ\PRXV FUHZ$J± 7KLVH[WHQVLRQRIWKHWUDGLWLRQDOPRWLIRQFHDJDLQLVQRWD PHUHUKHWRULFDOHODERUDWLRQLQÀDWLQJDQGSURORQJLQJWKHQDUUDWLYHEXWRQWKH FRQWUDU\HQKDQFHVWKHSDWKRVRIWKHVFHQH ,QOLQHV±6HQHFDVWUHVVHVWKDWIHDUDQGGHVSHUDWLRQGULYH*UHHNV DQG7URMDQVDOLNHWREHVHHFKWKHJRGVWRKHOSWKXVXQGHUOLQLQJWKHH[WUDRU GLQDU\SURSRUWLRQVRIWKHVWRUPDQGWKHGHVWUXFWLRQLWFDXVHV$J±  LQYRWDPLVHURVXOWLPXVFRJLWWLPRU HDGHPTXHVXSHURV7URHVHW'DQDLURJDQW ([WUHPHIHDUGURYHWKHZUHWFKHVWRSUD\HU ZLWK7URMDQVDQG'DQDDQVPDNLQJWKHVDPHUHTXHVWRIWKHJRGV

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±HYHQLIWKLVPHDQVWKDWDOVRWKH*UHHNVZLOOEHVSDUHG$J± 

 &I6WDFNPDQQ±³'LHLG\OOLVFKH6FKLOGHUXQJGHU$EIDKUWYRQ7URMDGLH GXUFKDXVGHUKHOOHQLVWLVFKHQ'LFKWXQJDQ]XJHK|UHQVFKHLQWLVWXPGHV.RQWUDVWHV PLWGHUIROJHQGHQ.DWDVWURSKHZLOOHQHLQJHIKUW´

'UDPDDQG(SLF1DUUDWLYH



 RGLDVLGXUDQWWXD SODFHWTXHPLWWL'RULFXPH[LWLRJHQXV TXLGKRVVLPXOSHULUHQRELVFXPLXYDW TXLEXVSHULPXV"VLVWLWHLQIHVWXPPDUH YHKLWLVWD'DQDRVFODVVLVHW7URDVYHKLW  %XWLI\RXUKDWUHGHQGXUHV DQG\RXZDQWWKH'RULFDQUDFHGHVWUR\HG ZK\GR\RXGHVLUHWKHVHSHRSOHRQZKRVHDFFRXQW ZHDUHG\LQJWRGLHZLWKXV"&DOPWKHKRVWLOHVHDV WKLVÀHHWFDUULHV'DQDDQVEXWLWFDUULHV7URMDQVWRR

3DUDGR[LFDOO\WKXVWKHFDSWLYH7URMDQVZKRVHOLIHVRIDUGHSHQGHGRQWKH *UHHNV¶PHUF\EHFRPHWKHSRWHQWLDO VDYLRXUVRIWKHLUFRQTXHURUV±DIDFW WKDWKLJKOLJKWVWKHXWWHUGHVSDLURIWKHPHQFDXJKWLQWKHVWRUP%\UHQGHULQJ WKHLUVXSSOLFDWLRQVLQGLUHFWVSHHFKDQGLQVRGRLQJIXUWKHUXQGHUOLQLQJWKHLU FUHGLELOLW\6HQHFDPDNHVWKHLUPLVHU\HYHQPRUHSHUFHLYDEOHDQGLQWHQVL¿HV WKHHPRWLRQDOHIIHFWRIWKHVFHQH $WWKHVDPHWLPHWKHLUSLHW\FRQWUDVWVVKDUSO\ZLWKWKHEROGDUURJDQFH RI$MD[ WR ZKRP WKH SRHW XVLQJ WKH WUDQVLWLRQ IRUPXODHFFH DOLD FODGHV $J WXUQVLQWKHQH[WVHFWLRQ$J± +HLVWKHRQO\RQHZKR LV QRW RYHUFRPH E\ WHUURU $J ± VROXV LQYLFWXV PDOLV  OXFWDWXU $LD[ DOWKRXJK$WKHQDUHQHZVWKHVWRUPZLWKKHUIDWKHU¶VOLJKWQLQJEROWV $J± $MD[JHWVKLVYHU\³SULYDWH´VWRUPVRWRVSHDNLQLWLDWHG E\$WKHQDZKRPKHKDGLQVXOWHGE\UDSLQJ&DVVDQGUDDWWKHDOWDURIWKH JRGGHVV 7KH VDFULOHJH LV QRW H[SOLFLWO\ PHQWLRQHG E\ WKH SRHW EXW FHU WDLQO\ SUHVHQW LQ WKH DXGLHQFH¶V PHPRU\ +RZHYHU ZKHUHDV HYHU\ERG\ HOVHKDVORQJGURSSHGKLVHTXLSPHQWDQGUHVRUWHGWRSOHDGLQJDQGSUD\LQJ $J± $MD[VWLOOWULHVWRPHHWWKHZUDWKRIWKHZHDWKHUZLWKKLVDUV ³VWUDLQLQJRQWKHURSHVWRVKRUWHQVDLO´$J± (YHQDIWHUDQRWKHU EROWRI$WKHQDVPDVKHVKLVVKLSKHLVXQPRYHGDQGJUDVSLQJWKHEXUQLQJ ZUHFNDJHDQGHYHQWXDOO\FDWFKLQJ¿UHKLPVHOIVDLOVRQOLNHDKLJKVWRQ\ FUDJ$J±  QLOLOOHPRWXVDUGXDXWFDXWHVVDOR DPEXVWXVH[WDWGLULPLWLQVDQXPPDUH ÀXFWXVTXHUXPSLWSHFWRUHHWQDYHPPDQX FRPSOH[XVLJQHVWUD[LW 8QVKDNHQWKRXJKVFRUFKHGOLNHDORIW\FUDJ KHVWRRGRXWIURPWKHVDOWZDWHUVXQGHUHGWKHPDGGHQHGVHD EURNHWKHZDYHVZLWKKLVFKHVW$VKHJUDVSHGKLVVKLSWLJKWO\ KHFDXJKW¿UHIURPLW

 6FKLQGOHU  &DYLJOLD±  7KHFRPSDULVRQLVTXLWHFRPPRQRFFXUULQJIUHTXHQWO\LQHSLFDVZHOODVLQWUDJHG\ DV7DUUDQWSRLQWVRXW



$QQHWWH0%DHUWVFKL

+LVFRQWHPSWRIWKHJRGVLVIXOO\UHYHDOHGLQKLVVXEVHTXHQWVSHHFKZKLFK LVDQLQYHUVLRQRUSHUYHUWHGYDULDWLRQRIWKHXVXDOODPHQWDWLRQRIWKHHSLF KHURFDXJKWLQDVWRUP$MD[MHHUVDW$WKHQDDQG³HYHQRIIHUVWRVKRXWPRFN HU\DQGGH¿DQFHRI-RYH´$J± EHIRUH1HSWXQH¿QDOO\LQWHUYHQHV NQRFNLQJKLPLQWRWKHVHDDQGGURZQLQJKLPE\GLVORGJLQJWKHURFNRQZKLFK KHZDVVWDQGLQJ$J±WULGHQWHUXSHPVXEUXLWSXOVDPSDWHU1HS WXQXVLPLVH[HUHQVXQGLVFDSXWVROYLWTXHPRQWHP 7KHLQWHUWH[WXDOHFKR RIWKH¿UVWERRNRIWKH$HQHLGLQZKLFKWKHVHDJRG¶VDSSHDUDQFHHQVXUHV WKHFDOPLQJRIWKHVWRUPXQOHDVKHGE\-XQR$HQ±HPLVVDPTXH KLHPHPVHQVLW1HSWXQXVHWLPLVVWDJQDUHIXVDYDGLVJUDYLWHUFRPPRWXVHW DOWRSURVSLFLHQVVXPPDSODFLGXPFDSXWH[WXOLWXQGD KHOSVWRHPSKDVL]H $MD[¶VEODVSKHP\VLQFHLQFRQWUDVWWR$HQHDVKHLVQRWVDYHGEXWGHVWUR\HG E\1HSWXQH0RUHRYHUWKHODVWOLQHRIWKHQDUUDWLYH$J  WHUUDTXHHWLJQHYLFWXVHWSHODJRLDFHW >KH@OLHVFRQTXHUHGE\HDUWKDQG¿UHDQGVHD

QRWRQO\JXDUDQWHHVDQLFHUKHWRULFDOHIIHFWDWWKHHQGRIWKHDFFRXQWEXWDOVR VWUHVVHVWKHFRVPLFGLPHQVLRQVRI$MD[¶VK\EULV+LVLPSLRXVDFWVKDYHYLR ODWHGWKHQDWXUDORUGHUDQGGHVWDELOL]HGWKHXQLYHUVHDQGLWWKHUHIRUHWDNHV WKHMRLQWFROODERUDWLRQRIDOOWKUHHHOHPHQWVHDUWK¿UHDQGZDWHUWRHOLPL QDWHKLPDQGUHHVWDEOLVKRUGHU 7RVXPXS,KRSHWRKDYHVKRZQWKDW6HQHFDLQKLVPHVVHQJHUVFHQHV DGRSWV WKH VDPH QDUUDWLYH SUDFWLFHV WKDW RFFXU LQ *UHHN WUDJHG\ DQG WKDW WKHLUYHU\QDUUDWLYLW\LVQHYHU³DKDQGLFDSRUGLVDGYDQWDJH´5DWKHULWLV ³RIWHQDQLQVWUXPHQWH[SHUWO\ZLHOGHGE\WKHGUDPDWLVW>«@DQGDPHDQVWR FUHDWHYHU\VSHFLDODQGLPSUHVVLYHUHVXOWV´WKHUHE\SURYLQJWKDWPHVVHQ JHUVSHHFKHV±RQRURIIVWDJH±DUHH[FLWLQJDQGZKDWLVPRUHLPPHQVHO\ GUDPDWLF

%LEOLRJUDSK\ $PRURVR)LOLSSR ³$QQXQ]LHVFHQHG¶DQQXQ]LRQHOWHDWURGL/$QQHR6HQHFD´ 'LRQLVR± $J\RQ-HDQ3LHUUH 3LFWRULQIDEXOD/¶HFSKUDVLV±GHVFULSWLRGDQVOHVWUDJpGLHV GH6pQqTXH%UX[HOOHV

 0RWWR&ODUN  7KHOLQHUHIHUVEDFNWR$MD[¶VERDVWIXOVSHHFKFODLPLQJWRKDYHGHIHDWHGVHD¿UH KHDYHQ DQG 3DOODV KHUVHOI $J ±  ZKLFK LV VWURQJO\ UHPLQLVFHQW RI WLWDQR PDFKLFLPDJHU\  GH-RQJ  ,ELG

'UDPDDQG(SLF1DUUDWLYH



%DUORZ6KLUOH\$ 7KH,PDJHU\RI(XULSLGHV$6WXG\LQWKH'UDPDWLF8VHRI 3LFWRULDO/DQJXDJH/RQGRQ %DUUHWW-DPHV 6WDJHG1DUUDWLYH3RHWLFVDQGWKH0HVVHQJHULQ*UHHN7UDJHG\ %HUNHOH\/RV$QJHOHV/RQGRQ %UDQGW-RKDQQD $UJXPHQWDWLYH6WUXNWXULQ6HQHFDV7UDJ|GLHQ(LQH8QWHU VXFKXQJDQKDQGGHU3KDHGUDXQGGHV$JDPHPQRQ+LOGHVKHLP=ULFK 1HZ$HVFK@39±  )RUWKHQRWLRQRIJHQHULFHQULFKPHQWVHH+DUULVRQ

6HQHFDDQG3DQWRPLPH



 5XQQLQJFRPPHQWDULHV 5XQQLQJ FRPPHQWDULHV DUH SDVVDJHV LQ ZKLFK WKH HPRWLRQV WKH DFWLRQV RU WKHSK\VLFDODSSHDUDQFHRIDFKDUDFWHUDUHGHVFULEHGE\WKHFKRUXVRUE\DQ RWKHUDFWRULQWKHWKLUGSHUVRQXVXDOO\WKHFKDUDFWHUWKXVGHVFULEHGUHPDLQV PXWHDQGQHLWKHUKHDUVQRUUHDFWVWRZKDWLVVDLGWRRUDERXWKLPRUKHU5XQ QLQJFRPPHQWDULHVFDQDFFRPSDQ\DFWLRQVWDNLQJSODFHRQVWDJHRURIIVWDJH %ULHÀ\ SXW WKH\ FRQVLVW RI D VSHDNLQJ DFWRU YHUEDOL]LQJ WKH PXWH  SHUIRU PDQFHRIDVLOHQWDFWRU,Q*UHHNWUDJHG\WKLVWHFKQLTXHKDUGO\IHDWXUHVDWDOO H[WUDRUGLQDU\ HPRWLRQDO VWDWHV D IDYRXULWH WRSLF RI 6HQHFD¶V UXQQLQJ FRP PHQWDULHV IDUIURPEHLQJDUWLFXODWHGDWOHQJWKLQGLVFRXUVHWHQGWREHSUR MHFWHGLQVSHHFKE\ZKRHYHULVH[SHULHQFLQJWKHPRUE\PHDQVRIYHU\EULHI DQGVLPSOHGHVFULSWLRQV,QDGGLWLRQREVHUYDWLRQVDERXWHPRWLRQVDUHXVXDOO\ DGGUHVVHGWRWKHFKDUDFWHUFRQFHUQHGDQGWULJJHUVRPHNLQGRIUHVSRQVH5XQ QLQJFRPPHQWDULHVEHORQJWRWKRVHIHDWXUHVWKDWKDYHOHGVFKRODUVWRVXSSRVH WKDW6HQHFD¶VSOD\VZHUHQRWPHDQWWREHSHUIRUPHGRQVWDJHEHFDXVHLIWKH\ ZHUHVWDJHGWKHUHZRXOGKDYHEHHQQRQHHGWRGHVFULEHWKHDFWLRQVLQFHLW ZRXOGXQIROGEHIRUHWKHH\HVRIWKHDXGLHQFH7KXVDV=ZLHUOHLQPDLQWDLQV ³WKH VSHFWDWRU ZRXOG JHW WKH LPSUHVVLRQ WKDW KH LV ZLWQHVV WR D SDQWRPLPH SXWLQWRZRUGVLQDWURXEOHVRPHDQGSHGDQWLFZD\E\DWKLUGSHUVRQDVLIKH ZHUH EOLQG´ ,Q D UHFLWDWLRQ =ZLHUOHLQ¶V SUHIHUUHG PRGH RI SHUIRUPDQFH  WKLVSUREOHPRIFRXUVHGLVDSSHDUV0RUHUHFHQWO\KRZHYHU%HUQDUG=LPPHU PDQQ KDV RIIHUHG D FRPSOHWHO\ GLIIHUHQW LQWHUSUHWDWLRQ RI WKH SKHQRPHQRQ +H SURSRVHV SLFNLQJ XS D FXH SURYLGHG XQZLWWLQJO\ E\ =ZLHUOHLQ KLPVHOI WKDWWKHVHGHVFULSWLYHVFHQHVEHWRNHQWKHLQÀXHQFHRISDQWRPLPH6HQHFD¶V FKDUDFWHUVZRXOGWKXVUHHQDFWWKHUHODWLRQVKLSWKDWSHUWDLQVLQDSDQWRPLPLF SHUIRUPDQFHEHWZHHQWKHPXWH GDQFHUZKRHPERGLHVWKURXJKPRYHPHQW JHVWXUHDQGIDFLDOH[SUHVVLRQWKHZRUGVVXQJRUVSRNHQE\WKHQDUUDWRU7R XQGHUVWDQG6HQHFD¶VµUXQQLQJFRPPHQWDULHV¶DVDGHOLEHUDWHDGDSWDWLRQRID SDQWRPLPLFHOHPHQWGRHVQRWUHVROYHWKHLQWUDFWDEOHTXHVWLRQDVWRZKHWKHU 6HQHFDGHVLJQHGKLVWUDJHGLHVIRUSHUIRUPDQFHRUUHFLWDWLRQ%XWLWRSHQVDQ H[FLWLQJQHZYLVWDRQKLVSRHWLFWHFKQLTXH ,QZKDWIROORZV,ZRXOGOLNHWRLOOXVWUDWHWKLVSRLQWE\H[SORULQJVHYHUDO RIWKHVHUXQQLQJFRPPHQWDULHV+HUHLV0HGHD¶VQXUVHIURPWKH0HGHD0HG ± 

 ,KHUHDGRSWWKHGH¿QLWLRQE\/DUVRQ  =ZLHUOHLQ   ³'HU =XFKDXHU PVVWH GHQ (LQGUXFN EHNRPPHQ HU ZHUGH =HXJHHLQHU3DQWRPLPHGLHLKP±OlVWLJJHQXJ±DXFKQRFKSHGDQWLVFKYRQGULWWHQ 6HLWHEHVFKULHEHQZLUGDOVVHLHUEOLQG´  =LPPHUPDQQ±



$OHVVDQGUD=DQREL

$OXPQDFHOHUHPTXRUDSLVWHFWLVSHGHP"     UHVLVWHHWLUDVFRPSULPHDFUHWLQHLPSHWXP ,QFHUWDTXDOLVHQWKHRVJUHVVXVWXOLW FXPLDPUHFHSWRPDHQDVLQVDQLWGHR 3LQGLQLYDOLVYHUWLFHDXW1\VDHLXJLV WDOLVUHFXUVDWKXFHWKXFPRWXHIIHUR     IXURULVRUHVLJQDO\PSKDWLJHUHQV ÀDPPDWDIDFLHVVSLULWXPH[DOWRFLWDW SURFODPDWRFXORVXEHULÀHWXULJDW UHQLGHWRPQLVVSHFLPHQDIIHFWXVFDSLW KDHUHWPLQDWXUDHVWXDWTXHULWXUJHPLW     TXRSRQGXVDQLPLYHUJHW"8ELSRQHWPLQDV" XELVHLVWHÀXFWXVIUDQJHW"H[XQGDWIXURU QRQIDFLOHVHFXPYHUVDWDXWPHGLXPVFHOXV VHYLQFHW,UDHQRYLPXVYHWHULVQRWDV PDJQXPDOLTXLGLQVWDWHIIHUXPLPPDQHLPSLXP    YXOWXP)XURULVFHUQR'LIDOODQWPHWXP >0\FKLOGZKHUHDUH\RXUXVKLQJLQVXFKKDVWHIURPWKHKRXVH"6WRSFXUE\RXU DQJHUFRQWURO\RXUDJJUHVVLRQ/LNHDQHFVWDWLFPDHQDGWDNLQJHUUDWLFVWHSVFUD]HG DQGSRVVHVVHGE\WKHJRGRQVQRZ\3LQGXV¶SHDNRU1\VD¶VULGJHVVRVKHNHHSV UXQQLQJKHUHDQGWKHUHZLWKZLOGPRYHPHQWVZLWKVLJQVRIIUHQ]LHGUDJHLQKHUH[ SUHVVLRQ+HUIDFHLVEOD]LQJVKHGUDZVGHHSEUHDWKVVKHVKRXWVRXWZHHSVÀRRGVRI WHDUVEHDPVZLWKMR\VKHVKRZVHYLGHQFHRIHDFKDQGHYHU\HPRWLRQ6KHKHVLWDWHV WKUHDWHQVIXPHVODPHQWVJURDQV:KLFKZD\ZLOOWKHZHLJKWRIKHUPLQGFRPH GRZQ":KHUHZLOOVKHLPSOHPHQWKHUWKUHDWV":KHUHZLOOWKDWZDYHEUHDN"+HUUDJH LVFUHVWLQJ,WLVQRVLPSOHRUPRGHUDWHFULPHVKHLVFRQWHPSODWLQJVKHZLOORXWGR KHUVHOI,NQRZWKHKDOOPDUNVRIKHUROGDQJHU6RPHWKLQJJUHDWLVORRPLQJVDYDJH PRQVWURXVXQQDWXUDO,VHHWKHIDFHRI5DJH0D\WKHJRGVSURYHP\IHDUVZURQJ@

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¶VEHKDYLRXULVH[WUHPHO\HYRFDWLYHDQGIRFXVHV RQPRYHPHQWUHFXUVDWKXFHWKXFPRWXHIIHURSLFNLQJXSRQUDSLVSHGHP DQG UHWLQH LPSHWXP  IDFLDO IHDWXUHV DQG H[SUHVVLRQ RUH ÀDPPDWD IDFLHV RFXORVXEHULÀHWXULJDWUHQLGHW DQGYHUEDODQGQRQYHUEDOVRXQGVDQGQRLV

 7KLVDOVRPHDQVWKDWWKHDXGLHQFHLVQRWFOXHGLQRQWKHFKDQJHLQSHUVSHFWLYHXQWLO WKH±VXUSULVLQJ±WKLUGSHUVRQUHFXUVDWLQOLQH

6HQHFDDQG3DQWRPLPH



HVVSLULWXPH[DOWRFLWDWSURFODPDWUHQLGHWPLQDWXUTXHULWXUJHPLW 7KH GRPLQDQWH[SUHVVLRQLVRQHRIXWWHULQVDQLW\IXURULVVLJQDO\PSKDWLH[XQ GDW)XURUYXOWXP)XURULVFHUQR WKDWPDQLIHVWVLWVHOILQH[WUHPHVZLQJVLQ PRRGDQGFRQGXFWDQLPSUHVVLRQGHIWO\XQGHUVFRUHGE\WKHFRQVWUXFWLRQRI WKHYHUVHV±$IWHUWKUHHOLQHVZLWKWZRYHUEVHDFKSODFHGVWUDWHJLFDOO\ DWWKHEHJLQQLQJDQGHQGRIWKHYHUVHÀDPPDWD>VFHVW@aFLWDWSURFODPDW aULJDWUHQLGHWaFDSLW WKLVVHFWLRQRIWKHQXUVH¶VFRPPHQWDU\FRQFOXGHV ZLWKWKHTXLFN¿UHHQXPHUDWLRQRI¿YHVXFFHVVLYHYHUEVLQDV\QGHWRQKDHUHW PLQDWXUDHVWXDWTXHULWXUJHPLW,QVKRUWLI0HGHDHPERGLHV0DGQHVVYLVX DOO\WKHQXUVHGLDJQRVHVDQGYHUEDOL]HVWKHFRQGLWLRQ 2YHUDOOWKHSDVVDJHKDVORQJEDIÀHGFRPPHQWDWRUV+LQHVXPVXSWKH SUREOHP³7KHORQJGHVFULSWLRQRIWKHEHKDYLRXURI0HGHDZKLOHVKHKHUVHOI LVRQVWDJHLVUHJXODUO\WDNHQDVDVLJQWKDWWKHSOD\VZHUHQRWUHDOO\PHDQW IRUVWDJHSHUIRUPDQFH&HUWDLQO\LI0HGHDLVVXSSRVHGWREHDFWLQJRXWDOO WKH EHKDYLRXU DV WKH 1XUVH GHVFULEHV LW WKHQ WKH ZKROH SDVVDJH DQG OLQH LQSDUWLFXODUUHSUHVHQWVDKLVWULRQLFREVWDFOHFRXUVHWKDWLQSHUIRUPDQFH FRXOGZHOOEHFRPHFRPLFDQGLIWKHDFWRUVZRUHPDVNVWKHUHFRXOGEHQR TXHVWLRQ RI FKDQJHV RI IDFLDO H[SUHVVLRQ %XW LW LV SRVVLEOH WR UHJDUG WKH 1XUVH¶VGHVFULSWLRQ«DVDORQJDVLGH´7KLVLVDSHUFHSWLYHDVVHVVPHQWRI WKHFUX[EXWWKHVROXWLRQRIIHUHGLHWKDWZHDUHGHDOLQJZLWKDORQJDVLGH LVTXLWHXQVDWLVIDFWRU\,IWKHFKDUDFWHUSOD\LQJ0HGHDGRHVQRWDFWRXWWKH EHKDYLRXUDVGHVFULEHGE\WKH1XUVHWKLVHQWDLOVDQRGGGLVMXQFWLRQEHWZHHQ WKHFRQWHQWRIWKH³ORQJDVLGH´DQGWKHSHUIRUPDQFHRIWKHSURWDJRQLVW$QG WKHDSSDUHQWPLVPDWFKEHWZHHQGLVFRXUVHDQGDFWLRQWKHQUDLVHVWKHIXUWKHU TXHVWLRQZK\6HQHFDZRXOGKDYHRSWHGIRUWKLVWHFKQLTXHLQWKH¿UVWSODFH ,QDPLOGHUIRUPWKHVDPHTXHVWLRQDOVRGRJVWKHWKHVLVWKDW6HQHFDGLGQRW PHDQ KLV WUDJHGLHV WR EH SHUIRUPHG RQ VWDJH )RU WKH SURSRVLWLRQ WKDW WKH SOD\VZHUHGHVLJQHGIRUUHFLWDWLRQRQO\H[SODLQVZK\6HQHFDPD\QRWKDYH IHOWUHTXLUHGWRHQVXUHIHDVLELOLW\RISHUIRUPDQFHLWGRHVQRWH[SODLQZK\KH FKRVHWRLQWHJUDWHSDVVDJHVLQWRKLVSOD\VWKDWSULPDIDFLHLHLIDVVHVVHG DJDLQVWWKHFXVWRPVDQGFRQYHQWLRQVRI¿IWKFHQWXU\*UHHNWUDJHG\ GRQRW VHHPWROHQGWKHPVHOYHVHDVLO\WREHLQJDFWHGRXW 7KHIDFWRIWKHPDWWHULVKRZHYHUWKDWLQWKHSDQWRPLPHWUDGLWLRQWKH VSOLWEHWZHHQDSDUW\UHVSRQVLEOHIRUWKHGLVFRXUVHDQGDSDUW\UHVSRQVLEOH IRUWKHDFWLQJLVHQWLUHO\QRUPDODQGQDWXUDOLQGHHGFRQVWLWXWLYHRIWKHJHQUH 7KHQHDUPDWFKZRXOGVHHPWRVXJJHVWLIQRWHQFRXUDJHWKHSRVVLELOLW\WKDW 6HQHFDGHOLEHUDWHO\HPSOR\HGWKHUXQQLQJFRPPHQWDU\DVDWHFKQLTXHZHOO  +LQH  ,QWKHFDVHRIDSHUIRUPDQFHWKHJDSEHWZHHQWKHDFWLRQRQVWDJHDQGLWVYHUEDOL]D WLRQ GLVDSSHDUV ± DQG OLQHV IURP FRPHG\ VXJJHVW WKDW TXLFN PRRG VZLQJV FRXOG LQGHHGEHDFWHGRXW+LQHDSSRVLWHO\FLWHV3RPSRQLXVFRP5LEEHFN )OHW!¿WGHVXELWRKLODUXVWULVWLVVDOWDWULGHQVULQJLWXUDVDSDUDOOHOIRUOLQH



$OHVVDQGUD=DQREL

NQRZQIURPSDQWRPLPH±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µPHGLFDO¶DWWLWXGHWRZDUGV WKH DQDWRP\ RI D PLQG LQ WKH WKUDOO RI SDVVLRQ LQ WKH SKUDVH RPQLV VSHFL PHQ,QRWKHUZRUGVWKHQXUVHWXUQVKHUDFFRXQWLQWRDGLDJQRVLVRI0HGHD¶V SDWKRORJLFDOVWDWHRIPLQGQRWXQOLNHRQHZKLFKDSURIHVVLRQDOSKLORVRSKHU VXFKDV6HQHFD FRXOGKDYHSURYLGHG,QGHHGWKHSDVVDJHEHDUVDUHPDUN DEOHUHVHPEODQFHWRWKHSK\VLRJQRP\RIDQJHUWKDW6HQHFDGHYHORSVLQWKH GH,UD±  9W VFLDV DXWHP QRQ HVVH VDQRV TXRV LUD SRVVHGLW LSVXP LOORUXP KDELWXP LQWXHUH QDPXWIXUHQWLXPFHUWDLQGLFLDVXQWDXGD[HWPLQD[YXOWXVWULVWLVIURQVWRUYDIDFLHV FLWDWXVJUDGXVLQTXLHWDHPDQXVFRORUYHUVXVFUHEUDHWYHKHPHQWLXVDFWDVXVSLULDLWD LUDVFHQWLXPHDGHPVLJQDVXQWÀDJUDQWDFPLFDQWRFXOLPXOWXVRUHWRWRUXERUH[DHV WXDQWHDELPLVSUDHFRUGLLVVDQJXLQHODEUDTXDWLXQWXUGHQWHVFRPSULPXQWXUKRUUHQW DFVXUULJXQWXUFDSLOOLVSLULWXVFRDFWXVDFVWULGHQVDUWLFXORUXPVHLSVRVWRUTXHQWLXP VRQXVJHPLWXVPXJLWXVTXHHWSDUXPH[SODQDWLVYRFLEXVVHUPRSUDHUXSWXVHWFRQSOR VDHVDHSLXVPDQXVHWSXOVDWDKXPXVSHGLEXVHWWRWXPFRQFLWXPFRUSXVPDJQDVTXH LUDHPLQDVDJHQVIRHGDYLVXHWKRUUHQGDIDFLHVGHSUDYDQWLXPVHDWTXHLQWXPHVFHQ WLXP±QHVFLDVXWUXPPDJLVGHWHVWDELOHYLWLXPVLWDQGHIRUPH >%XW\RXKDYHRQO\WREHKROGWKHDVSHFWRIWKRVHSRVVHVVHGE\DQJHUWRNQRZWKDW WKH\DUHLQVDQH)RUDVWKHPDUNVRIDPDGPDQDUHXQPLVWDNDEOH±DEROGDQGWKUHDW HQLQJPLHQDJORRP\EURZD¿HUFHH[SUHVVLRQDKXUULHGVWHSUHVWOHVVKDQGVDQ DOWHUHGFRORXUDTXLFNDQGPRUHYLROHQWEUHDWKLQJ±VROLNHZLVHDUHWKHPDUNVRIWKH DQJU\PDQKLVH\HVEOD]HDQGVSDUNOHKLVZKROHIDFHLVFULPVRQZLWKWKHEORRGWKDW VXUJHVIURPWKHORZHVWGHSWKVRIWKHKHDUWKLVOLSVTXLYHUKLVWHHWKDUHFOHQFKHG KLVKDLUEULVWOHVDQGVWDQGVRQHQGKLVEUHDWKLQJLVIRUFHGDQGKDUVKKLVMRLQWVFUDFN IURPZULWKLQJKHJURDQVDQGEHOORZVEXUVWVRXWLQWRVSHHFKZLWKVFDUFHO\LQWHOOL JLEOHZRUGVVWULNHVKLVKDQGVWRJHWKHUFRQWLQXDOO\DQGVWDPSVWKHJURXQGZLWKKLV IHHWKLVZKROHERG\LVH[FLWHGDQGSHUIRUPVJUHDWDQJU\WKUHDWVLWLVDQXJO\DQG KRUULEOHSLFWXUHRIGLVWRUWHGDQGVZROOHQIUHQ]\±\RXFDQQRWWHOOZKHWKHUWKLVYLFH LVPRUHH[HFUDEOHRUPRUHKLGHRXVWUDQVODWHGE\-RKQ:%DVRUH/RHE&ODVVLFDO /LEUDU\ @

7KHUXQQLQJFRPPHQWDU\ZLWKLWVREMHFWL¿FDWLRQRISDVVLRQWKXVKDVQDWX UDODI¿QLWLHVZLWK6HQHFD¶V6WRLFOHDQLQJV±LWLVDQLGHDOGUDPDWLFIRUPWR PDNHDSKLORVRSKLFDOSRLQWDQGJLYHQWKDWWKHSKLORVRSKLFDOSRLQWLVPDGH E\ D UDWKHU PDUJLQDO FKDUDFWHU LQ WKH SOD\ LWV HPSOR\PHQW UHLQIRUFHV WKH LPSUHVVLRQRILPSRWHQFHRISKLORVRSK\LQWKHIDFHRISDVVLRQZULWODUJH7KH H[KRUWDWLRQVE\WKHQXUVHDWDQ\UDWHWKDWFRQFOXGHWKHFLWHGSDVVDJHKDYH

6HQHFDDQG3DQWRPLPH



QREHDULQJVZKDWVRHYHURQWKHSURWDJRQLVWRIWKHXQIROGLQJSORWRIUHYHQJH 7KHSUD\HUDWWKHHQGUHPDLQVLQHIIHFWXDO 7KHUKHWRULFDODQGGUDPDWLFIXQFWLRQRIUXQQLQJFRPPHQWDULHVLQ6HQ HFD¶VRWKHUWUDJHGLHVFRUURERUDWHWKLVLQWHUSUHWDWLRQ,QWKH3KDHGUDIRULQ VWDQFHLQDFRQVWHOODWLRQYLUWXDOO\LGHQWLFDOWRWKHRQHIRXQGLQWKH0HGHDWKH QXUVHRI3KDHGUDDWRQHSRLQWGLDJQRVHVLQPLQXWHGHWDLOWKHFRQVHTXHQFHVRI KHUPLVWUHVV¶VXIIHULQJIURPWKHSDVVLRQRIORYH7KURXJKRXWWKHHPSKDVLV RI KHU GHVFULSWLRQ LV YHU\ PXFK RQ HPSLULFDO V\PSWRPV RI D SDWKRORJLFDO VWDWHRIPLQGDVVKHDVVLJQVYHUEDOPHDQLQJWRZKDW3KDHGUDHQDFWV,QWKLV FDVHWKHUXQQLQJFRPPHQWDU\GRHVGRXEOHGXW\DVGLDJQRVLVDQGUHYHODWLRQ EHFDXVH3KDHGUDGHVSLWHEHLQJEHVLGHKHUVHOIQHYHUWKHOHVVZLVKHVWRGHQ\ DQGFRQFHDOKHUFRQGLWLRQ±WRQRDYDLO7KHVXSSUHVVHGDQGLQWHUQDOLVDOO WRRDSSDUHQWLQKHUDSSHDUDQFHDQGKRZVKHFRQGXFWVKHUVHOI3KDH±  WRUUHWXUDHVWXWDFLWRHWLQFOXVXVTXRTXH TXDPYLVWHJDWXUSURGLWXUYXOWXIXURU HUXPSLWRFXOLVLJQLVHWODVVDHJHQDH OXFHPUHFXVDQWQLOLGHPGXELDHSODFHW     DUWXVTXHYDULHLDFWDWLQFHUWXVGRORU >7KHIHYHUVLOHQWO\EXUQVKHUDQGKHULQQHUPDGQHVVKRZHYHUPXFKFRQFHDOHGLV EHWUD\HGLQKHUIDFH)LUHEXUVWVIRUWKWKURXJKKHUH\HVKHUZHDU\VLJKWFDQQRWEHDU WKHGD\OLJKW1RWKLQJSOHDVHVKHU¿FNOHPLQGIRUORQJDQGKHUUHVWOHVVSDLQGLVWXUEV KHUERG\LQYDULRXVZD\@

$VLQWKHUXQQLQJFRPPHQWDU\IURPWKH0HGHDWKHRSHUDWLYHZRUGVWRGH VFULEH3KDHGUD¶VIUDPHRIPLQGLVPDGQHVVEURXJKWDERXWE\DQDWWDFNRI SDVVLRQIXURU /LNHWKHQXUVHRI0HGHD3KDHGUD¶VQXUVHRIIHUVDGLDJQRVWLF GLVTXLVLWLRQ WKDW UHYHDOV WKH VWDWH RI PLQG RI WKH SURWDJRQLVW ZKLOH DW WKH VDPH WLPH SURGXFLQJ VRPHWKLQJ DNLQ WR D FKRUHRJUDSK\ RI HQDFWHG HPR WLRQVWKURXJKRXWKHUFRPPHQWDU\VKHIRUHJURXQGVYDULRXVERG\SDUWVDQG PRYHPHQWVRI/RYH¶VYLFWLP3KDHGUDEHWUD\VKHULQVDQLW\LQKHUIDFLDOH[ SUHVVLRQYXOWX DVWKH¿UHRIORYHEXUVWVIURPKHUH\HVHUXPSLW RFXOLVLJQLV DQJXLVKPDNHVKHUVNLSDERXWXQFRQWUROODEO\DUWXVTXH YDULHLDFWDWLQFHUWXVGRORU VKHFROODSVHVDQGFDQQRWVXSSRUWKHUKHDGRQ KHUQHFN±QXQFXWVROXWRODELWXUPDUFHQVJUDGXHWYL[ODEDQWHVXVWLQHW FROORFDSXW VKHLVUHVWOHVVDQGFRQVWDQWO\FKDQJLQJDWWLWXGHDQGFRQGLWLRQ ± VHPSHU LPSDWLHQV VXLPXWDWXU KDELWXV  VKH ZDONV ZLWK XQFHUWDLQ VWHSVVLQFHVKHKDVORVWDOOKHUVWUHQJWK±YDGLWLQFHUWRSHGHLDPYLUL EXVGHIHFWD VKHLVZHDNDQGSDOH±QRQLGHPYLJRUQRQRUDWLQJXHQV QLWLGDSXUSXUHXVUXERU DQGVKHFULHVFRQWLQXRXVO\DQGDEXQGDQWO\± ODFULPDHFDGXQWSHURUDHWDVVLGXRJHQDHURUHLUULJDQWXU $JDLQDSKLOR  )RUDSDUDOOHOVHH6FKLHVDURRQWKHUROHDQGIXQFWLRQRI$WUHXV¶VLGHNLFNLQWKH 7K\HVWHVWKHLQHIIHFWXDOYRLFHRIUHDVRQ   6HH3KDH±



$OHVVDQGUD=DQREL

VRSKLFDOLQWHUHVWLQIRUPVWKHFRPPHQWDU\$V7DUUDQWKDVSRLQWHGRXWWKH 6WRLFVHQGRUVHGDQGHODERUDWHGWKHEHOLHIZLGHVSUHDGLQWKHDQFLHQWZRUOG WKDW ³WKH KHDUW¶V FRQVWUXFWLRQ FRXOG EH UHDG LQ WKH IDFH´ 6HQHFD LQ KLV WUHDWLVHVDQGGLDORJXHVUHSHDWHGO\H[SORUHVWKH³LQWHUIDFH´EHWZHHQLQWHUQDO HPRWLRQVDQGWKHLUVRPDWLFDUWLFXODWLRQ 7KHSDVVDJHVIURP0HGHDDQG3KDHGUDVKDUHDFRPPRQLGLRPWKDWUH FXUVLQUXQQLQJFRPPHQWDULHVIURPRWKHUSOD\V7RLOOXVWUDWH6HQHFD¶VVWH UHRW\SLFDOGHVLJQLWLVZRUWKORRNLQJDWVRPHIXUWKHUH[DPSOHVVXFKDVWKH FKRUXV¶GHVFULSWLRQRI&DVVDQGUDLQWKH$JDPHPQRQ$J±  6LOHWUHSHQWH3KRHEDVHWSDOORUJHQDV     FUHEHUTXHWRWXPSRVVLGHWFRUSXVWUHPRU VWHWHUHYLWWDHPROOLVKRUUHVFLWFRPD DQKHODFRUGDPXUPXUHLQFOXVRIUHPXQW LQFHUWDQXWDQWOXPLQDHWYHUVLUHWUR WRUTXHQWXURFXOLUXUVXVLPPRWLULJHQW     QXQFOHYDWLQDXUDVDOWLRUVROLWRFDSXW JUDGLWXUTXHFHOVDQXQFUHOXFWDQWHVSDUDW UHVHUDUHIDXFHVYHUEDQXQFFODXVRPDOH FXVWRGLWRUHPDHQDVLPSDWLHQVGHL >6XGGHQO\ 3KRHEXV¶ SULHVWHVV LV VLOHQW SDOORU VSUHDGV RYHU KHU FKHHFNV FRQWLQXDO WUHPEOLQJRYHUKHUZKROHERG\7KHKRO\ULEERQVVWDQGRXWKHUVRIWKDLUEULVWOHV +HUSDLQWLQJEUHDVWLVORXGZLWKSHQWXSXWWHUDQFHKHUJD]HLVXQVWHDG\DQGGURRS LQJKHUH\HVUROOEDFNZDUGVWKHQDJDLQDUH¿[HGDQGULJLG1RZVKHUDLVHVKHUKHDG DORIWKLJKHUWKDQXVXDODQGZDONVWDOOQRZVKHPDNHVUHDG\WRXQVHDOKHUUHOXF WDQWPRXWKQRZVKHWULHVLQYDLQWRKROGLQWKHZRUGVEHKLQGFORVHGOLSVDPDHQDG XQZLOOLQJWRHQGXUHWKHJRGWUDQVODWHGE\-RKQ*)LWFK/RHE&ODVVLFDO/LEUDU\  @

7KHFKRUXVKHUHGHWDLOVWKHSK\VLFDOFRQVHTXHQFHVRIVXIIHULQJIURPDERXW RI SURSKHWLF IXURU ,Q KHU IUHQ]\ &DVVDQGUD H[KLELWV WKH VDPH V\PSWRPV DVWKHHQUDJHG0HGHDDQGORYHVLFN3KDHGUD+HUH\HPRYHPHQWVDUHGH VFULEHGDWOHQJWKVKHZDONVXQVWHDGLO\DQGVKHZDYHUVDVWRZKHWKHURUQRW WREXUVWRXWLQVSHHFK7KHVDPHGHYLFHVDUHDOVRRQGLVSOD\LQVFHQHVZKHUH WKHFKDUDFWHUGHVFULEHGLVRIIVWDJHDVZHOODVLQPRUHWUDGLWLRQDOPHVVHQJHU VSHHFKHV$QH[DPSOHRIWKHIRUPHULVWKHQXUVH¶VGHVFULSWLRQRIKRZ'H LDQLUDUHDFWVWRWKHDUULYDORI,ROHLQWKH+HUFXOHV2HWDHXV± 7KH SDVVDJHVWDUWVRXWDVDUHSRUWRIWKLQJVSDVW±   7DUUDQWDG$J ZLWKIXUWKHUSDVVDJHVDQGELEOLRJUDSK\  6HHHJGH,UD&HWHUDOLFHWDEVFRQGHUHHWLQDEGLWRDOHUHLUDVHSURIHUWHWLQ IDFLHPH[LWTXDQWRTXHPDLRUKRFHIIHUYHVFLWPDQLIHVWLXV  )RU WKH ODWWHU VHH HJ WKH PHVVHQJHU LQ WKH 2HGLSXV ZKR MXVW OLNH WKH QXUVH LQ 0HGHDUHVRUWVWRDIDLUO\FRQYHQWLRQDOVLPLOHWRLOOXVWUDWHWKHLQVDQLW\RIWKHSURWDJR QLVWZKLFKLVPDQLIHVWLQKLVH\HV2HG±TXDOLVSHUDUYD/LE\FXVLQVDQLWOHR IXOYDP PLQDFL IURQWH FRQFXWLHQV LXEDP YXOWXV IXURUH WRUYXV DWTXH RFXOL WUXFHV JHPLWXVHWDOWXPPXUPXUHWJHOLGXVYRODWVXGRUSHUDUWXVVSXPDWHWYROYLWPLQDV

6HQHFDDQG3DQWRPLPH



VWHWLWIXUHQWLVLPLOLVDFWRUYXPLQWXHQV +HUFXOHDFRQLXQ[IHWDXW$UPHQLDLDFHQV VXEUXSHWLJULVKRVWHFRQVSHFWRH[LOLW DXWLXVVDWK\UVXPTXDWHUHFRQFHSWXPIHUHQV 0DHQDV/\DHXPGXELDTXRJUHVVXVDJDW KDHVLWSDUXPSHU >+HUFXOHV¶ZLIHVWRRGOLNHDPDGZRPDQJODULQJJULPO\6KHUHVHPEOHGDZKHOSHG WLJUHVVO\LQJEHQHDWKDFUDJLQ$UPHQLDWKDWOHDSVXSDWVLJKWRIWKHIRHRUD0DH QDGFDOOHGWREUDQGLVKWKHWK\UVXVTXLFNHQHGDQGULGGHQE\/\DHXVZKRKHVLWDWHV EULHÀ\XQVXUHZKHUHWRGLUHFWKHUVWHSVWUDQVODWHGE\-RKQ*)LWFK/RHE&ODVVLFDO /LEUDU\ @

+HUHDJDLQWKHHPSKDVLVLVRQPDGQHVVIXUHQWLVLPLOLV RQWKHJD]H WRUYXPLQWXHQV DQGRQXQFHUWDLQPRYHPHQW± WKHFRPSDULVRQ ZLWKDOLRQHVVDQGD0DHQDGLVVWHUHRW\SLFDOLPDJHU\%XWIURPDGUDPDWLF SRLQWRIYLHZDVXGGHQVKLIWRFFXUVLQWKHPLGGOHRIOLQHDQGWKHUHSRUW WXUQVLQWRFRPPHQWDU\8SXQWLOKDHVLWWKHQXUVHKDVXVHGWKHSDVWWHQVHEXW VKHWKHQVXGGHQO\VZLWFKHVLQWKHSUHVHQWZKLFKLPSOLHVWKDWVKHLVDFWXDOO\ VHHLQJ'HLDQHLUDDFWLQJRXWKHUIXU\RIIVWDJHEXWLQVLJKWRIWKHQXUVH 7KLV SUHSDUHVIRU'HLDQHLUD¶VHQWU\±  «WXPSHU+HUFXOHRVODUHV      O\PSKDWDUDSLWXUWRWDYL[VDWLVHVWGRPXV  LQFXUULWHUUDWVLVWLWLQYXOWXVGRORU SURFHVVLWRPQLVSHFWRULSDHQHLQWLPR QLKLOHVWUHOLFWXPÀHWXVLQVHTXLWXUPLQDV QHFXQXVKDELWXVGXUDWDXWXQRIXULW     FRQWHQWDYXOWXQXQFLQDUGHVFXQWJHQDH SDOORUUXERUHPSHOOLWHWIRUPDVGRORU HUUDWSHURPQHVTXHULWXULPSORUDWJHPLW >7KHQ VKH UXVKHG LQ IUHQ]\ WKURXJK +HUFXOHV¶ KRXVH WKH ZKROH EXLOGLQJ VFDUFHO\ JLYLQJ URRP HQRXJK VKH FKDUJHG IRUZDUG VZHUYHG VWRSSHG$OO KHU SDLQ FDPH LQWRKHUIDFHDOPRVWQRWKLQJZDVOHIWKLGGHQLQKHUEUHDVW7HDUVIROORZHGKDUGRQ WKUHDWV1RVLQJOHDWWLWXGHODVWHGORQJQRVLQJOHH[SUHVVLRQRIUDJHVDWLV¿HGKHUQRZ KHUFKHHNVÀDPHGQRZSDOORUH[SHOOHGWKHFRORXU+HUSDLQUDQJHGWKURXJKHYHU\ SRVVLEOHIRUPVKHODPHQWHGHQWUHDWHGJURDQHGWUDQVODWHGE\-RKQ*)LWFK/RHE &ODVVLFDO/LEUDU\ @

7KH VLPLODULWLHV ZLWK WKH GHVFULSWLRQV RI 0HGHD DQG 3KDHGUD ZKLFK DUH TXRWHGDQGDQDO\]HGDERYHDUHREYLRXVZHJHWDIXOOSK\VLRJQRP\RIWKH SDWKRORJ\RISDVVLRQ

DFPHUVXVDOWHPDJQXVH[XQGDWGRORU ,QWKHFDVHRI2HGLSXVRIFRXUVHWKHIRFXV RQWKHH\HVLVSDUWLFXODUO\DSSURSULDWHDVWKHHQWLUHUHSRUWRIWKHPHVVHQJHUZRUNV XSWRWKHFOLPDFWLFPRPHQWZKHQWKH\FRPHRXWKDOIZD\±WRPHHWWKHKDQGVWKDW ZRXOGURRWWKHPIURPWKHLUVRFNHWV2HG±DWFRQWUDWUXFHVRFXOLVWHWHUXQWHW VXDPLQWHQWLPDQXPXOWURLQVHTXXQWXUYXOQHULRFFXUUXQWVXR



$OHVVDQGUD=DQREL

,ZDQWWRFRQFOXGHWKLVVXUYH\ZLWKDSDVVDJHZKHUHMXVWDVLQWKH0HGHD WKHFKRLFHEHWZHHQLQWHUDFWLYHGUDPDDQGWKHVSOLWEHWZHHQYHUEDODUWLFXOD WLRQDQGDFWLRQLVWKHPDWL]HGLQWKHWH[WLWVHOIDQGLQDSDUWLFXODUO\HIIHFWLYH ZD\7RZDUGVWKHHQGRIWKH+HUFXOHVIXUHQV$PSKLWU\RQGHVFULEHVLQ³UHDO WLPH´KRZ+HUFXOHVPXUGHUVKLVZLIHDQGFKLOGUHQEHIRUHGHFLGLQJDJDLQVW WKHVKRFNHGLQWHUYHQWLRQRIWKHFKRUXVWRWXUQKLPVHOILQWR+HUFXOHV¶ODVW VDFUL¿FLDOYLFWLP+HDGGUHVVHVWKHKHURGLUHFWO\EHJJLQJKLPWRFRPSOHWH WKHEXWFKHULQJEXWKLVDWWHPSWWRLQWHUDFWZLWKWKHPDGPDQIDLOV7KHVFHQH WXUQVLQWRDUXQQLQJFRPPHQWDU\+I±$PSKLWU\RQVSHDNLQJ  1RQGXPOLWDVWLQDWHFRQVXPPDVDFUXP VWDWHFFHDGDUDVKRVWLDH[SHFWDWPDQXP     FHUYLFHSURQDSUDHEHRRFFXUURLQVHTXRU PDFWD±TXLGKRFHVW"HUUDWDFLHVOXPLQXP YLVXVTXHPDHURUKHEHWDWDQYLGHR+HUFXOLV PDQXVWUHPHQWHV"YXOWXVLQVRPQXPFDGLW HWIHVVDFHUYL[FDSLWHVXPPLVVRODEDW     ÀH[RJHQXLDPWRWXVDGWHUUDPUXLW XWFDHVDVLOYLVRUQXVDXWSRUWXPPDUL GDWXUDPROHVYLYLVDQOHWRGHGLW LGHPWXRVTXLPLVLWDGPRUWHPIXURU" VRSRUHVWUHFLSURFRVVSLULWXVPRWXVDJLW     >:HOOWKDWLVWKHZD\ WKHEDUEDULDQYLHZHGLW$QGWKH,WDOLDQVTXLWHDSSURSULDWHO\FDOOWKHGDQFHUDSDQWR PLPHSUHFLVHO\LQFRQVHTXHQFHRIZKDWKHGRHV@  (J,*55LYįȚ੹IJોȢIJȡĮȖȚțોȢਥȞȡ઄șȝȠȣțİȚȞ੾ıİȦȢIURP7K\DWHLUD 

$6RSKLVW¶V'UDPD/XFLDQDQG&ODVVLFDO7UDJHG\



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¿IWKFHQWXU\&( DWUDJLFDFWRUFRPHVWRD *UHHNFLW\DQGSHUIRUPVDWUDJHG\$W¿UVWWKHDXGLHQFHLVVKRFNHGEHFDXVH RIWKHXQXVXDOVSHFWDFOHEXWDIWHUDZKLOHWKH\JHWXVHGWRLWWKH\HYHQOLNH LWYHU\PXFK+RZHYHUDIHZGD\VODWHUWKLVWUDJLFSHUIRUPDQFHKDVEL]DUUH VLGHHIIHFWVWKHHQWLUHSRSXODWLRQRIWKHFLW\FRPHVGRZQZLWKDIHYHUDQG LQWKHLUPDGQHVVWKH\DOOEHJLQWRUHFLWHOLQHVIURP(XULSLGHDQWUDJHGLHVDW WKHWRSRIWKHLUOXQJV,Q/XFLDQ¶VDFFRXQWDQLPSRUWDQWHOHPHQWLVLPSOLHG ZKLFKLVVSHOOHGRXWE\(XQDSLXVWKLVPXVWKDYHEHHQWKH¿UVWSHUIRUPDQFH LQ D YHU\ ORQJ WLPH PD\EH WKH ¿UVW SHUIRUPDQFH WKDW WKH VSHFWDWRUV HYHU ZLWQHVVHG 7KHIDFWWKDW/XFLDQGRHVQRWFRPPHQWRQRUHYHQPHQWLRQWKLVLPSRUWDQW GHWDLOLVWHOOLQJ,IGUDPDWLFSHUIRUPDQFHVKDGEHHQTXLWHXVXDOLQKLVGD\VLW ZRXOGKDYHEHHQQHFHVVDU\WRH[SODLQWKLVIDFWWRWKHDXGLHQFH2EYLRXVO\WKH\ MXVWDFFHSWHGWKHSUHPLVHWKDWDSHUIRUPDQFHZDVVXFKDQXQXVXDOHYHQWWKDWLW FRXOGWULJJHU³GUDPDWLF´FRQVHTXHQFHV7KLVVHHPVWRFRQ¿UPZKDWZHKDYH VDLGEHIRUHDERXWWKHERRNLVKWH[WXDOQDWXUHRIWUDJHG\LQ/XFLDQ¶VZULWLQJV 1HYHUWKHOHVVDQXPEHURIUHIHUHQFHVLQ/XFLDQ¶VWH[WVDOVRUHIHUVWRQRQ WH[WXDOHOHPHQWVRIWUDJHG\DQGZHZLOOQRZWXUQWRWKHVHSDVVDJHV/XFLDQLV LQWHQVHO\DOPRVWREVHVVLYHO\LQWHUHVWHGLQWKHKLVWULRQLFGHFHSWLYHTXDOLW\RI *UHHNWUDJHG\7KDWWUDJHG\ZDVDNLQGRI³GHFHLW´ZDVDYLHZDOUHDG\FXU UHQWLQWKHFODVVLFDOSHULRGDVZLWQHVVHGE\DIDPRXVIUDJPHQWRI*RUJLDV

 6HHYRQ0RHOOHQGRUII  (XQDSLXV IJ  +LVWRULFL *UDHFL PLQRUHV ȀĮ੿ ıȣȞİȜșંȞIJȦȞ IJ੽Ȟ ȝ੻Ȟ ʌȡઆIJȘȞ ਲȝ੼ȡĮȞıijĮȜોȞĮȚIJોȢਥʌȚįİ઀ȟİȦȢǜȠ੝į੻Ȗ੹ȡIJ੽Ȟ੕ȥȚȞਫ਼ʌȠȝİ઀ȞĮȞIJĮȢIJȠઃȢșİĮIJ੺ȢਚIJİ ਙȡIJȚțĮ੿ʌȡ૵IJȠȞਦȠȡĮțંIJĮȢijİ઄ȖİȚȞșȜȚȕȠȝ੼ȞȠȣȢʌİȡ੿ਕȜȜ੾ȜȠȚȢțĮ੿ʌĮIJȠȣȝ੼ȞȠȣȢ >$QGZKHQWKH\JDWKHUHGWKHSHUIRUPDQFHRQWKH¿UVWGD\IHOOWKURXJKIRUWKHVSHF WDWRUVFRXOGQRWHYHQVWDQGWKHYLHZEHFDXVHWKH\VDZLWMXVWWKHQIRUWKH¿UVWWLPH DQGWKH\WRRNÀLJKWFUXVKLQJDQGWUDPSOLQJHDFKRWKHU@2QWKHTXHVWLRQRIWUDJLF SHUIRUPDQFHVLQ/XFLDQ¶VWLPHVHH6HHFN±  *RUJLDVIJ%96>ਲIJȡĮȖ૳įȓĮʌĮȡȑȤİȚ@ਕʌȐIJȘȞ਴Ȟ੖IJૃਕʌĮIJȒıĮȢįȚțĮȚȩIJİȡȠȢ IJȠ૨ȝ੽ਕʌĮIJ੾ıĮȞIJȠȢțĮ੿੒ਕʌĮIJȘșİ੿ȢıȠijઆIJİȡȠȢIJȠ૨ȝ੽ਕʌĮIJȘș੼ȞIJȠȢ>WUDJHG\RI IHUV DGHFHSWLRQZKHUHWKHPDQZKRGHFHLYHVLVPRUHMXVWWKDQWKHPDQZKRGRHV QRWGHFHLYHDQGWKHPDQZKROHWVKLPVHOIEHGHFHLYHGLVZLVHUWKDQWKHPDQZKR GRHVQRWOHWKLPVHOIEHGHFHLYHG@2Q*RUJLDVDQGWUDJHG\VHH6FKZLQJH+DO OLZHOO±



7KRPDV6FKPLW]

,Q /XFLDQ¶V ZULWLQJV ZH RIWHQ ¿QG SDVVDJHV HPSKDVL]LQJ WKH GLVFUHSDQF\ EHWZHHQWKHLQVLJQL¿FDQFHRIWKHDFWRUVDQGRIWKHVWDJHSURSVRQWKHRQH KDQGDQGWKHLUORIW\UROHVZLWKLQWKHWUDJLFSOD\VRQWKHRWKHUKDQG,QKLV 6DWXUQDOLD/XFLDQKDVWKHJRG&URQXVDUJXHWKDWWKHSRRUVKRXOGQRWHQY\ WKHULFKEHFDXVHWKHLUOLIHLVPXFKPRUHPLVHUDEOHWKDQRQHZRXOGWKLQNLWLV IXOORIGDQJHUVDQGZRUULHV$QGLI\RXORRNFORVHHQRXJK\RXVHHWKDWWKH\ DUHPXFKOHVVYLJRURXVDQGKHDOWK\WKDQSRRUSHRSOHZKRKDYHWRUHO\RQ WKHLUERG\WRHDUQWKHLUGDLO\EUHDG,QWKLVFRQWH[WULFKSHRSOHDUHFRPSDUHG WRWUDJLFFRVWXPHVVHHQIURPDGLVWDQFHWKH\ORRNDOOJROGHQDQGYHQHUDEOH \HWZKHQ\RXFRPHFORVH\RXUHDOL]HWKDWWKH\DUHPDGHXSRIZRUWKOHVVUDJV ਻IJ઀ȞĮਗȞĮ੝IJ૵Ȟ૧઺į઀ȦȢįİ૙ȟĮȚį઄ȞĮȚȠȝ੽ʌ੺ȞIJȦȢ੩ȤȡઁȞ੕ȞIJĮʌȠȜઃIJઁȞİțȡ૵įİȢ ਥȝijĮ઀ȞȠȞIJĮIJ઀ȞĮį੻ਥȢȖોȡĮȢਕijȚțંȝİȞȠȞIJȠ૙ȢĮ੝IJȠ૨ʌȠı઀ȞਕȜȜ੹ȝ੽ijȠȡ੺įȘȞਥʌ੿ IJİIJIJ੺ȡȦȞੑȤȠ઄ȝİȞȠȞ੒ȜંȤȡȣıȠȞȝ੻ȞIJ੹਩ȟȦțĮIJ੺ȡȡĮijȠȞį੻IJ੹਩ȞįȠȞ੮ıʌİȡĮੂ IJȡĮȖȚțĮ੿ਥıșોIJİȢਥț૧Įț૵Ȟʌ੺Ȟȣİ੝IJİȜ૵ȞıȣȖțİțĮIJIJȣȝ੼ȞĮȚ $JDLQZRXOG\RX¿QGLWHDV\WRSRLQWRXWRQHRIWKHPZKRZDVQRWDEVROXWHO\SDOH ORRNLQJYHU\PXFKOLNHGHDWK"2URQHZKRUHDFKHGROGDJHRQKLVRZQIHHWDQGQRW FDUULHGRQIRXUPHQ¶VEDFNVDOOJROGRQWKHRXWVLGHEXWZLWKKLVLQVLGHFREEOHGOLNH WKHFRVWXPHVLQWUDJHG\SDWFKHGXSRXWRITXLWHZRUWKOHVVUDJV"6DWXUQDOLD

7UDJHG\ DQG LWV SDUDSKHUQDOLD WKXV V\PEROL]H GHFHSWLYHQHVV ZH KDYH DO UHDG\VHHQDVLPLODUSRLQWLQWKHSDVVDJHIURP/XFLDQ¶V2Q6DODULHG3RVWV GLVFXVVHGDERYHZKHUHSUHWHQWLRXVLQWHOOHFWXDOVZHUHFRPSDUHGWRVSOHQGLG ERRNUROOVFRQWDLQLQJWUDJHGLHV ,QDVLPLODUYHLQ/XFLDQORRNVDWWUDJLFDFWRUVDQGWKHPDVNVWKH\ZHDU ,QWKHGLDORJXH7KH&RFNWKHSRRUFREEOHU0LF\OOXVDQGKLVKRXVHKROGFRFN GLVFXVVGUHDPVDQGGHVLUHV0LF\OOXVZDQWVWREHULFKEXWWKHFRFNVKRZV KLPKRZGDQJHURXVDQGZUHWFKHGWKHOLYHVRIULFKDQGSRZHUIXOSHRSOHDUH $VLQWKH6DWXUQDOLD/XFLDQDJDLQXVHVDFRPSDULVRQLQYROYLQJWUDJHG\ ȅੂ į੼ ੪Ȣ ij੾Ȣ șĮȞ੺ıȚȝĮ İ੝ȦȤȠ૨ȞIJĮȚ țĮ੿ IJĮ૨IJĮ ȝȣȡ઀ȠȚȢ țĮțȠ૙Ȣ ıȣȞંȞIJİȢ İੇIJ¶ ਥʌİȚį੹Ȟʌ੼ıȦıȚȞ੖ȝȠȚȠȚȝ੺ȜȚıIJĮijĮ઀ȞȠȞIJĮȚIJȠ૙ȢIJȡĮȖȚțȠ૙Ȣਫ਼ʌȠțȡȚIJĮ૙ȢੰȞʌȠȜȜȠઃȢ ੁįİ૙Ȟ਩ȞİıIJȚIJ੼ȦȢȝ੻ȞȀ੼țȡȠʌĮȢįોșİȞ੕ȞIJĮȢਲ਼ȈȚı઄ijȠȣȢਲ਼ȉȘȜ੼ijȠȣȢįȚĮį੾ȝĮIJĮ ਩ȤȠȞIJĮȢțĮ੿ȟ઀ijȘਥȜİijĮȞIJંțȦʌĮțĮ੿ਥʌ઀ıİȚıIJȠȞțંȝȘȞțĮ੿ȤȜĮȝ઄įĮȤȡȣıંʌĮıIJȠȞ ਲ਼Ȟ į੼ ȠੈĮ ʌȠȜȜ੹ Ȗ઀ȞİIJĮȚ țİȞİȝȕĮIJ੾ıĮȢ IJȚȢ Į੝IJ૵Ȟ ਥȞ ȝ੼ıૉ IJૌ ıțȘȞૌ țĮIJĮʌ੼ıૉ Ȗ੼ȜȦIJĮ įȘȜĮį੽ ʌĮȡ੼ȤİȚ IJȠ૙Ȣ șİĮIJĮ૙Ȣ IJȠ૨ ʌȡȠıȦʌİ઀Ƞȣ ȝ੻Ȟ ıȣȞIJȡȚȕ੼ȞIJȠȢ Į੝IJ૶ įȚĮį੾ȝĮIJȚઘȝĮȖȝ੼ȞȘȢį੻IJોȢਕȜȘșȠ૨ȢțİijĮȜોȢIJȠ૨ਫ਼ʌȠțȡȚIJȠ૨țĮ੿IJ૵ȞıțİȜ૵Ȟਥʌ੿ ʌȠȜઃȖȣȝȞȠȣȝ੼ȞȦȞ੪ȢIJોȢIJİਥıșોIJȠȢIJ੹਩ȞįȠșİȞijĮ઀ȞİıșĮȚ૧੺țȚĮį઄ıIJȘȞĮ੕ȞIJĮ țĮ੿IJ૵ȞਥȝȕĮIJ૵ȞIJ੽Ȟਫ਼ʌંįİıȚȞਕȝȠȡijȠIJ੺IJȘȞțĮ੿Ƞ੝Ȥ੿țĮIJ੹ȜંȖȠȞIJȠ૨ʌȠįંȢ %XW>WKHW\UDQWV@DV\RXVD\GRWKHLUIHDVWLQJDWWKHSHULORIWKHLUOLYHVDQGOLYHDPLG DWKRXVDQGLOOVEHVLGH7KHQZKHQWKH\IDOOWKH\PDNHQREHWWHU¿JXUHWKDQWKHDFWRUV WKDW\RXRIWHQVHHZKRIRUDWLPHSUHWHQGWREHD&HFURSVRUD6LV\SKXVRUD7HOH SKXVZLWKGLDGHPVDQGLYRU\KLOWHGVZRUGVDQGZDYLQJKDLUDQGJROGHPEURLGHUHG WXQLFVEXWLIDVRIWHQKDSSHQV RQHRIWKHPPLVVHVKLVIRRWLQJDQGIDOOVGRZQLQWKH PLGGOHRIWKHVWDJHLWQDWXUDOO\PDNHVIXQIRUWKHDXGLHQFHZKHQWKHPDVNJHWVEUR NHQWRSLHFHVGLDGHPDQGDOODQGWKHDFWRU¶VRZQIDFHLVFRYHUHGZLWKEORRGDQGKLV OHJVDUHEDUHGKLJKVRDVWRVKRZWKDWKLVLQQHUJDUPHQWVDUHPLVHUDEOHUDJVDQGWKDW WKHEXVNLQVZLWKZKLFKKHLVVKRGDUHKDSOHVVDQGGRQRW¿WWKHIRRW7KH&RFN

$6RSKLVW¶V'UDPD/XFLDQDQG&ODVVLFDO7UDJHG\



6LPLODUGHVFULSWLRQVRIWKHGLVFUHSDQF\EHWZHHQWKHVSOHQGLGRXWZDUGDS SHDUDQFHRIWKHUROHWKDWDQDFWRULVSOD\LQJDQGKLVUHDOLQQHUVHOIVHHWKH ZRUGVIJોȢਕȜȘșȠ૨ȢțİijĮȜોȢ³KLVUHDOKHDG´ DUHRIWHQDSSOLHGWRWKHVLWXD WLRQRIFRQWHPSRUDU\LQWHOOHFWXDOVHVSHFLDOO\RIVRSKLVWLFSHUIRUPHUVOLNHD WUDJLFDFWRUZKRLVDOZD\VLQGDQJHURIEHLQJXQPDVNHGWKHVRSKLVWLFGH FODLPHUFRQVWDQWO\UXQVWKHULVNRIEHLQJH[SRVHGDVDIUDXGDVVRPHRQHZKR LVDVVXPLQJDUROHWKDWLVMXVWWRRELJDQGORIW\IRUKLVVPDOOKXPDQERG\7KLV LPDJHFDQVHUYHDSROHPLFDOSXUSRVHDQGEHDGGUHVVHGWRDQRSSRQHQWDVLQ WKHIROORZLQJSDVVDJHIURPWKHHVVD\$SRORJ\IRU³2Q6DODULHG3RVWV´,Q 2Q6DODULHG3RVWV/XFLDQKDGDUJXHGWKDWDFFHSWLQJDSRVLWLRQDVDSULYDWH WXWRULQD5RPDQKRXVHKROGZDVDIRUPRIUH¿QHGVODYHU\WKDWFDQQRWIDLOWR GLVJXVWDWUXHLQWHOOHFWXDO,QWKHVLWXDWLRQWKDWWKLVQHZHVVD\SUHVXSSRVHV KHKLPVHOIKDGDFFHSWHGD¿QDQFLDOO\DWWUDFWLYHSRVLWLRQLQWKHVHUYLFHRIWKH 5RPDQVDQGKHQRZKDVWRGHIHQGKLPVHOIDJDLQVWDFFXVDWLRQVRIK\SRFULV\ SURGXFHGE\DQRSSRQHQWQDPHG6DELQXV/XFLDQ¶V$SRORJ\¿UVWVSHDNVLQ 6DELQXV¶SHUVRQDDQGRQHRIKLVSROHPLFDODUJXPHQWVLVWKDWDFWLQJLQVXFKD PDQQHULVEHLQJOLNHDWUDJLFDFWRUZKRFDQQRWVXVWDLQKLVORIW\UROHEXWZLOO EHVKRZQWREHDPHUHVHUYDQWZKRFDQEHERXJKWIRUPRQH\ ȀĮ઀IJȠȚIJ઀įİ૙țĮȚȞ੽Ȟਥʌ੿ı੻țĮIJȘȖȠȡ઀ĮȞȗȘIJİ૙ȞȝİIJ੹IJ੽ȞșĮȣȝĮıIJ੽ȞIJȡĮȖ૳į઀ĮȞȜ੼ȖȠȣıĮȞ  ȝȚı૵ıȠijȚıIJ੾Ȟ੖ıIJȚȢȠ੝ȤĮਫ਼IJ૶ıȠijંȢ Ƞ੝țਕʌȠȡ੾ıȠȣıȚį੻ȠੂțĮIJȘȖȠȡȠ૨ȞIJİȢțĮ੿ਙȜȜȦȞʌĮȡĮįİȚȖȝ੺IJȦȞਥʌ઀ıİਕȜȜ¶Ƞੂȝ੻Ȟ IJȠ૙ȢIJȡĮȖȚțȠ૙Ȣਫ਼ʌȠțȡȚIJĮ૙Ȣİੁț੺ıȠȣıȚȞȠ੄ਥʌ੿ȝ੻ȞIJોȢıțȘȞોȢਝȖĮȝ੼ȝȞȦȞਪțĮıIJȠȢ Į੝IJ૵Ȟਲ਼Ȁȡ੼ȦȞਲ਼Į੝IJઁȢ਺ȡĮțȜોȢİੁıȚȞ਩ȟȦį੻Ȇ૵ȜȠȢਲ਼ਝȡȚıIJંįȘȝȠȢਕʌȠș੼ȝİȞȠȚ IJ੹ ʌȡȠıȦʌİ૙Į Ȗ઀ȖȞȠȞIJĮȚ ਫ਼ʌંȝȚıșȠȚ IJȡĮȖ૳įȠ૨ȞIJİȢ ਥțʌ઀ʌIJȠȞIJİȢ țĮ੿ ıȣȡȚIJIJંȝİȞȠȚ ਥȞ઀ȠIJİį੻țĮ੿ȝĮıIJȚȖȠ઄ȝİȞȠ઀IJȚȞİȢĮ੝IJ૵Ȟ੪ȢਗȞIJ૶șİ੺IJȡ૳įȠțૌ +RZHYHUZK\QHHG,ORRNIRUDQHZFKDUJHDJDLQVW\RXZKHQWKDWVSOHQGLGWUDJHG\ VD\V³,KDWHDZLVHDFUHZKR¶VQRWZLVHIRUKLPVHOI´&&/@  TXDOHVLQWKHDWULVVLYHFDQWDQWXUVLYHVDOWDQWXUVLYHPLPLFDVFXUULOLWDWHULGHQWXU

$JDLQWKLVSDVVDJHLVPRVWQDWXUDOO\FRQVWUXHGDVDUHIHUHQFHWRWKHWKUHH W\SHVRIWKHDWULFDOSHUIRUPDQFHZKLFKDUHZHOODWWHVWHGLQWKHODWHU5RPDQ (PSLUH±DWUDJ{LGRVSHUIRUPLQJGUDPDWLFH[FHUSWVFDQWDQWXU DSDQWRPL PXVVDOWDQWXU DQGWKHPLPH ,QWKH:HVWDVLQWKH(DVWWKHWUDJ{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¶VWKHDWHUDQGIURP3RPSH\WRWKH SHUIRUPDQFHVWKDWJUDFHGWKHFRQWHPSRUDU\VWDJH,WLVWKHSDQWRPLPXVDQG WKHPLPXVZKRDORQHDSSHDUMXVWDVWKH\GRLQ/LEDQLXV¶VSHHFK7RWKH$Q WLRFKHQHVRQWKH(PSHURU¶V$QJHUZKLFKSURIHVVHGWRUHFRQFLOHWKHSDUWLQJ -XOLDQZLWKWKHFLW\LQ2U  /HWXVFORVHWKHWKHDWHUIRUDVKRUWWLPHDQGUHTXHVWWKHSDQWRPLPLDQGPLPLKHUHWR OHWRXUQHLJKERUVVKDUHWKHEOHVVLQJVWKH\SURYLGHDQGDOORZXVWRSDVVWKHVXPPHU ZLWKRXWDPXVHPHQWV

3HUKDSVWKHSRLQWKDVEHHQODERUHGDQGLOOXVWUDWHGLQH[FHVVLYHGHWDLO%XWLW LVLPSRUWDQWWRVWUHVVWKDWWKHQRUPVRIWKHDWULFDOSHUIRUPDQFHKDGDOUHDG\ FKDQJHGPDUNHGO\EHIRUHWKH&KULVWLDQVZHUHLQDQ\SRVLWLRQWRLQÀXHQFH WKHLUGHYHORSPHQWDQGEHIRUH&KULVWLDQYLHZVRQWKHVXEMHFWDUHGRFXPHQW HG7ZRZRUNVVXUYLYHLQZKLFK&KULVWLDQZULWHUVEHIRUHGHDOZLWKWKH PRUDODQGSUDFWLFDOTXHVWLRQVSRVHGE\WKHWKHDWUH±7HUWXOOLDQ¶VGH6SHF WDFXOLVZULWWHQVKRUWO\EHIRUHLQ&DUWKDJHDQG1RYDWLDQ¶VZRUNRIWKH VDPHQDPHZKLFKLVDOHWWHUZULWWHQKDOIDFHQWXU\ODWHUDQGODUJHO\PRG HOHG RQ7HUWXOOLDQ %RWK ZULWHUV DGGUHVV WKH TXHVWLRQ ZKHWKHU &KULVWLDQV

 2QZKLFKVHH%DUQHV7XUFDQHVS±WKHVWUXFWXUH ±µUHVXOWDW HWVXUYLH¶   (GLWHGE\:+DUWHO&6(/ ±*)'LHUFNV&&/± 1RYDWLDQ¶VDXWKRUVKLSRIWKLVZRUNZKLFKLVWUDQVPLWWHGXQGHUWKHQDPHRI&\SULDQ ZDVSURYHGE\:H\PDQ'HPPOHU0HOLQ$GHIHQVHRIWKHWUDQV PLWWHGDWWULEXWLRQZDVDWWHPSWHGE\:|OIÀLQEXWKHUHFDQWHGLQKLVUHYLHZRI 'HPPOHU$UFKLYIUODWHLQLVFKH/H[LFRJUDSKLH

&KULVWLDQVDQGWKH7KHDWHU



PD\DWWHQGJDPHVDQGVKRZVLQJHQHUDODQGERWKDQVZHUZLWKDUHVRXQGLQJ QHJDWLYH&RXQWHULQJWKHSOHDWKDWZDWFKLQJVSHFWDFXODLVDKDUPOHVVSOHD VXUH7HUWXOOLDQGHSOR\VDQDUJXPHQWWKDWKDVWZRVWDJHV)LUVWKHFRQWHQGV DWOHQJWKWKDWHYHU\VRUWRISXEOLFHQWHUWDLQPHQWLVLGRODWURXVE\QDWXUHDVD UHVXOWRILWVRULJLQKHQFHHYHU\&KULVWLDQ¶VEDSWLVPDOYRZWRUHQRXQFHWKH 'HYLOKLVHQWRXUDJHDQGKLVDQJHOVLQFOXGHVDUHQXQFLDWLRQRIWKHWKHDWHU 7KHQ 7HUWXOOLDQ DUJXHV WKDW WKH VSHFWDFXOD WKHPVHOYHV FRUUXSW WKRVH ZKR ZDWFKWKHPE\DURXVLQJEDVHDQGLPPRUDOHPRWLRQV1RYDWLDQUHSHDWVWKH VDPHWZRIROGDUJXPHQWLQDPRUHUHVWUDLQHGPDQQHUWKDWDYRLGVERWK7HUWXO OLDQ¶VTXLUNLQHVVDQGKLVUKHWRULFDOVSDUNOH %RWK7HUWXOOLDQDQG1RYDWLDQDVVXPHGWKDWWKHDWULFDOSHUIRUPDQFHVZHUH LQKHUHQWO\LGRODWURXV7KDWVHHPHGDQDWXUDOYLHZWRWDNHLQRUHV SHFLDOO\ZKHQDFFRXQWLVWDNHQRIWKHFRQWH[WLQZKLFKWUDJ{LGRLDQGSDQWR PLPL QRUPDOO\ SHUIRUPHG LQ WKH WKLUG FHQWXU\ WKDW LV LQ GUDPDWLF FRQWHVWV WKDWIRUPHGSDUWRIIHVWLYDOVLQKRQRURIWUDGLWLRQDOGLYLQLWLHVIHVWLYDOVZKRVH HVVHQWLDOHOHPHQWVZHUHDSURFHVVLRQLQKRQRURIDJRGRUJRGGHVVDVDFUL¿FH DQGDVHULHVRIFRQWHVWV(YHU\*UHHNFLW\KDGLWVORFDOFXOWRUFXOWVZKLFKZHUH QRUPDOO\WKHIRFXVRIDIHVWLYDORUIHVWLYDOVKHOGDWUHJXODULQWHUYDOVDQGFHO HEUDWHGE\DSURFHVVLRQDVDFUL¿FHDQGJDPHVFRQVLVWLQJRIDWKOHWLFFRPSHWL WLRQVRIFRPSHWLWLRQVLQWKHSHUIRUPLQJDUWVRURIDFRPELQDWLRQRIWKHWZR 'HVSLWH DSSHDUDQFHV 7HUWXOOLDQ DQG 1RYDWLDQ ZHUH PLVWDNHQ )RU WKH REYLRXVLGRODWU\RIWKHWKHDWHUFRXOGEHUHPRYHGMXVWDVHDVLO\DVWKHSDJDQ YHQHHULQWKHLPSHULDOFXOWZKLFKVXUYLYHGLQWRWKH¿IWKFHQWXU\LQDQH[ SXUJDWHGIRUP,WUHTXLUHGPHUHO\DFKDQJHLQWKHVXUURXQGLQJFHUHPRQ\ QRWDQDOWHUDWLRQLQWKHQDWXUHRISHUIRUPDQFH,Q5RPHLQWKHPLGGOHRIWKH IRXUWKFHQWXU\WKHUHZHUHRQHKXQGUHGDQGVHYHQW\¿YHGD\VRIJDPHVHDFK \HDU±WHQRIJODGLDWRULDOPXQHUDVL[W\IRXURIKRUVHUDFLQJDQGRQHKXQ GUHGDQGRQHRIGUDPDWLFOXGL,QWKHQHZFLW\RI&RQVWDQWLQRSOHWKHQHZO\ LQVWLWXWHGJDPHVZHUHDWWDFKHGQRWWRSDJDQIHVWLYDOVRIZKLFKWKHUHZHUH QRQHEXWWRWKHDSSRLQWPHQWRIPDJLVWUDWHVWKHFHOHEUDWLRQRIWULXPSKVDQG LPSHULDODQQLYHUVDULHV,QRWKHUFLWLHVIHVWLYDOVDQGVKRZVFRXOGFRQWLQXH DVEHIRUHSURYLGHGWKDWWKH\QRORQJHUFRPPHQFHGZLWKVDFUL¿FHWRWUDGL WLRQDO GHLWLHV DQG SURYLGHG WKDW H[SOLFLWO\ SDJDQ HOHPHQWV ZHUH UHPRYHG IURPWKHSURFHVVLRQDQGDQ\RWKHUDWWHQGDQWFHUHPRQLHV+HQFHWKHROGIHV WLYDOVFRXOGVXUYLYHLQDSXUL¿HGIRUPDVORQJDVFLWLHVFRXOGVXSSRUWWKHP &KDUORWWH5RXHFKpKDVUHFHQWO\GHVFULEHGWKHVHULRXVSUREOHPWKDWFRQ IURQWVDQ\DWWHPSWWRXQGHUVWDQGZKDWKDSSHQHGWRWKHLQQXPHUDEOHDJRQHV

 5RXHFKp±  2QWKHLPSHULDOFXOWLQ$IULFDLQWKH¿IWKFHQWXU\VHH&ORYHU±± ±  0OOHU±



7LPRWK\%DUQHV

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

7KHIDFWWKDWWKHWZRFRQVWLWXWLRQVWDNHGLIIHUHQWYLHZVRIWKHPDLRXPDLV OHVV LPSRUWDQW LQ WKH SUHVHQW FRQWH[W WKDQ WKH IDFW WKDW WKH\ ERWK EDODQFH WKHVDPHPRUDOVWDQGDUGDJDLQVWWKHVDPHSUDFWLFDORUSROLWLFDOQHFHVVLW\,W VKRXOGDOVREHQRWHGWKDW$UFDGLXVGLGQRWFKDQJHKLVPLQGDERXWZKHWKHURU QRWWRSHUPLWWKHPDLRXPDUDWKHUWKHWZRGRFXPHQWVUHÀHFWWKHYLHZVRIWKH SUDHWRULDQSUHIHFWV&DHVDULXVDQG$XUHOLDQXVWKHFRQVXOVRIDQGWR ZKRPWKH\ZHUHIRUPDOO\DGGUHVVHGLQDQG,QKLVGH3URYLGHQWLD 6\QHVLXVXVHG$XUHOLDQXVDQG&DHVDULXVDVWKHPRGHOVIRUKLVKHURDQGYLO ODLQUHVSHFWLYHO\WKHYLUWXRXV2VLULVDQGWKHZLFNHG7\SKRVEURWKHUVEXW ELWWHUHQHPLHV6LJQL¿FDQWO\LWLV$XUHOLDQXVZKRP6\QHVLXVSUHVHQWVDVD JRRG+HOOHQHZKRWDNHVWKHVWULFWHUYLHZRIWKHPDLRXPDDQGUHFHLYHVLQ VWUXFWLRQVWRDEROLVKLWHQWLUHO\-RKQ&KU\VRVWRPVXUHO\DSSURYHG &KULVWLDQVZHUHQRWDORQHLQUHJDUGLQJWKHWKHDWHURILPSHULDOWLPHVDV LPPRUDO6HYHUDOSDVVDJHVRIWKHORVWZRUNRI$ULVWLGHVWKDW/LEDQLXVTXRWHV IRUUHEXWWDOVWDWHWKLVSRLQWRIYLHZLQDIRUWKULJKWIDVKLRQDWOHDVWDVUHJDUGV WKHDUWRIWKHSDQWRPLPXV2U  ,WLVWKHUXLQRIFLWLHVDQGKRXVHKROGVDQGZKRHYHUZDWFKHVWKHPLVORVWDQGKLVLQ DELOLW\WRHVFDSHWKHPLVWKHZRUVWRIGLVDVWHUV

   

5RXFKp± )RUDUHFHQWEULHIJHQHUDOWUHDWPHQWVHH%OlQVGRUI 5RXHFKp± 2QWKHSLHW\RI$XUHOLDQXVVHH&DPHURQDQG/RQJ±

&KULVWLDQVDQGWKH7KHDWHU



7KH\WKHPVHOYHVOLYHGLVKRQRUDEO\DQGWKH\DOVRFRUUXSWWKHVSHFWDWRUVE\GUDJJLQJ WKHPWRZDUGZKDWLWLVZRUVHWRGR! $QRGRIWKHLUVLVPRUHFDSDEOHRISURGXFLQJPRUDOFRUUXSWLRQWKDQWKHZDUHQJLQHV RIRWKHUVDUHRIIRUFLQJWKHVXUUHQGHURIDFLW\

$ULVWLGHVGHSLFWHGSDQWRPLPLDVVH[XDOO\SURPLVFXRXVQREHWWHUWKDQPDOH SURVWLWXWHV WR ZKLFK /LEDQLXV UHSOLHG ± WUXWKIXOO\ LI UDWKHU ODPHO\ ± WKDW WKH\ZHUHQHLWKHUDOOSDUDJRQVRIYLUWXHQRUDOOPRQVWHUVRIGHSUDYLW\2U ± 7KHGHQLJUDWLRQRISDQWRPLPLWKDW$ULVWLGHVHPSOR\HGZDVLQ KHUHQWO\DSSHDOLQJWR&KULVWLDQPRUDOLVWVZKRFRXOGHDVLO\JLYHLWDGLVWLQF WLYHO\&KULVWLDQWZLVWE\DSSHDOWR-HVXV¶VD\LQJWKDW³,IDPDQORRNVRQD ZRPDQZLWKDOXVWIXOH\HKHKDVDOUHDG\FRPPLWWHGDGXOWHU\ZLWKKHULQKLV KHDUW´0DWWKHZ -RKQ&KU\VRVWRPGXO\TXRWHVWKLVSURRIWH[WLQKLV VHUPRQ³DJDLQVWWKRVHZKRDEDQGRQHGKLVFKXUFKDQGGHVHUWHGWRWKHKRUVH UDFHVDQGWKHDWHUV´&RQWUDOXGRVHWWKHDWUD>3*±@  -RKQZDVSURYRNHGE\LQMXUHGSULGHVRPHRIKLVFRQJUHJDWLRQLQ&RQVWDQ WLQRSOHSUHIHUUHGZDWFKLQJKRUVHVDQGPLPHVWRGHULYLQJPRUDOEHQH¿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± KHUZRUGVKHUJHVWXUHVKHUJODQFHVKHUZDONKHUUK\WKPKHUWRQHRIYRLFHKHU VHGXFWLYHOLPEV±DQG\RXUHWXUQKRPHZLWKFRXQWOHVVZRXQGV

$FFRUGLQJO\-RKQDQQRXQFHVKHZLOOQRWLQWKHIXWXUHDOORZDQ\RQHZKR VHWVIRRWLQDWKHDWHUWRHQWHUKLVFKXUFKRUVKDUHLQ&KULVWLDQFRPPXQLRQ ,WLVVLJQL¿FDQWWKDWZKHUHDV-RKQ¶VLUHZDVLQLWLDOO\DURXVHGE\&KULV WLDQV ZKR ZHQW WR WKH KLSSRGURPH DQG WKH WKHDWHU KH H[SOLFLWO\ H[FOXGHV IURPFRPPXQLRQRQO\WKHWKHDWHUJRHUV,PSHULDOOHJLVODWLRQPDGHDVLPLODU GLVWLQFWLRQEHWZHHQWKRVHSURIHVVLRQDOO\HQJDJHGLQWKHWZRW\SHVRIHQWHU WDLQPHQW7KH¿UVWLPSHULDOFRQVWLWXWLRQLQWKHFKDSWHUGH6FDHQLFLVLQWKH &RGH[7KHRGRVLDQXVZDVLVVXHGLQWRWKHSUDHIHFWXVXUELDW5RPHLW RUGDLQVWKDWVFDHQLFLPD\WDNHWKHVDFUDPHQWRQO\DWWKHSRLQWRIGHDWKLI WKH\UHFRYHUWKH\DUHIRUELGGHQIURPUHWXUQLQJWRWKHVWDJH&RG7K6 >PVV@ 7KHVHUXOHVZHUHQRWQHZLQVLQFHWKHPDLQSXUSRVHRIWKH H[WUDFWIURPWKHFRQVWLWXWLRQSUHVHUYHGLQWKH&RGH[7KHRGRVLDQXVLVWRVDIH  )RUIXOOHUGLVFXVVLRQRI-RKQ¶VDWWLWXGHWRZDUGVWKHWKHDWHUVHH9DQGHQEHUJKH 3DVTXDWR  7KHPHDQLQJRIKrGLDNULVLVLVXQFHUWDLQ,IROORZ0RQWIDXFRQ¶VLQWHUSUHWDWLRQ3* QD 



7LPRWK\%DUQHV

JXDUGWKHVXSSO\RIDFWRUVE\RUGHULQJLQVSHFWRUVWRDVFHUWDLQWKDWVFDHQLFL DOORZHGWRWDNHWKHVDFUDPHQWUHDOO\ZHUHLQGDQJHURIG\LQJ)RU&KULVWLDQ OHJLVODWRUVZHUHFRQIURQWHGE\DFRQVWDQWFRQÀLFWEHWZHHQWKHPRUDOLW\WKDW WKH\ RI¿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

,WLVWHPSWLQJWRLQIHUWKDW&KULVWLDQGLVDSSURYDORIWKHVWDJHKHOSVWRH[SODLQ WKHJURZLQJSRSXODULW\RIFKDULRWUDFLQJLQWKHIRXUWKDQG¿IWKFHQWXULHV ±DQGWKHDSSDUHQWFRQYHUVLRQRIWKHDWHUVIRUWKHH[KLELWLRQRIZDWHUVSHFWD FOHV7KH&RXQFLORI$UOHVLQH[FRPPXQLFDWHGERWKWKHDWULFDOSHUIRUP HUVDQGFKDULRWHHUVVRORQJDVWKH\FRQWLQXHGWRSHUIRUPRUWRUDFH&DQRQV   DQG WKH UXOLQJ ZDV UHSHDWHG YHUEDWLP DW D ODWHU &RXQFLO RI$UOHV LQ WKHVHFRQGKDOIRIWKH¿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

 &DPHURQ±LQYRNHVD³JHQXLQHFKDQJHRISRSXODUWDVWH´DQGLPSHULDO SDWURQDJH±ERWKRIZKLFKZHUHDIIHFWHGE\UHOLJLRXVFKDQJH  7UDYHUVDULHVS±  &RQFLOLD*DOOLDH$±$HG&0XQLHU&&/ +HIHOH DQG/HFOHUFT YROSWQRWHWKDWWKHSURKLELWLRQZDVUHLWHUDWHGDWWKH FRXQFLOLQ7UXOORLQDQGWKHQFHPDGHLWVZD\LQWR*UDWLDQ¶VKDQGERRNRIFDQRQ ODZ  &DPHURQII0F&RUPLFN±  .DVHU/HYLFN

&KULVWLDQVDQGWKH7KHDWHU



7KHWKLUGGHIHQVHRIWKHWKHDWHUWKDWVXUYLYHVIURPODWHDQWLTXLW\LV&KRUL FLXV¶GHIHQVHRIWKHPLPHVWRZKLFKKHJDYHWKHVLJQL¿FDQWSURJUDPPDWLF WLWOH 2Q %HKDOI RI 7KRVH :KR 5HSUHVHQW /LIH LQ WKH 7KHDWHU RI 'LRQ\VXV 7KLVVSHHFKZKLFKLVYHU\UHOHYDQWWRZKDWµ+HOOHQLVP¶PHDQWLQODWHDQWLT XLW\DSSHDUVWRQHHGDWKRURXJKUHHYDOXDWLRQ&KRULFLXVKHOGWKHPXQLFLSDO FKDLURIUKHWRULFDW*D]DLQWKHUHLJQRI-XVWLQLDQ$OOZKRKDYHGLVFXVVHG KLP UHFHQWO\ SUHVHQW KLP DV D &KULVWLDQ LQ D &KULVWLDQ FLW\ ,I WKDW ZHUH WUXHWKHQWKHVSHHFKZRXOGEHKLJKO\DQRPDORXVLQOLJKWRIWKHHYLGHQFHIRU DWWLWXGHVWRZDUGWKHPLPHSUHVHQWHGVRIDU)RU&KRULFLXVQRWRQO\GHIHQGV WKHPLPHDWOHQJWKDVPRUDOO\KDUPOHVVEXWHYHQVXJJHVWVWKDWZDWFKLQJLWLV PRUDOO\EHQH¿FLDO+HGLUHFWO\FRQIURQWVDQGFRQWUDGLFWVWKHDUJXPHQWID PLOLDUIURP-RKQ&KU\VRVWRPWKDWVSHFWDWRUVHVSHFLDOO\\RXQJDQGLPSUHV VLRQDEOHRQHVIDOOYLFWLPWRDQXQTXHQFKDEOHSDVVLRQIRUSOHDVXUHVEHFDXVH WKHLUUHDVRQLVFRUUXSWHGRUGHVWUR\HGE\ZKDWWKH\VHH  %XWP\JRRGVLUZKHQ\RXZDWFKDGXOWHU\WKHQ\RXDOVRVHHWKHPDJLVWUDWH¶VFRXUW WKHKXVEDQGRIWKHZRPDQFDXJKWLQÀDJUDQWLPDNHVDQDFFXVDWLRQWKHPDQZKR UDVKO\FRPPLWWHGDGXOWHU\LVWULHGZLWKKLVORYHUDQGWKHMXGJHWKUHDWHQVERWKZLWK SXQLVKPHQW

6LQFHFRQGLJQSXQLVKPHQWLVDOZD\VPHWHGRXWWRHYLOGHHGV&KRULFLXVDU JXHVWKHPLPHGRHVQRWVXEYHUWPRUDOLW\LWUHLQIRUFHVLW %RWK&KRULFLXVDQGKLVPLOLHXKDYH,EHOLHYH EHHQPLVLQWHUSUHWHG*D]D LVKHOGWRKDYHEHHQFRQYHUWHGIURPSDJDQLVPWR&KULVWLDQLW\DURXQGE\ ELVKRS3RUSK\ULXVZKRVHELRJUDSK\E\0DUNWKH'HDFRQKDVXVXDOO\EHHQ WDNHQDVWKHDXWKHQWLFDFFRXQWRIKRZ3RUSK\ULXVIRXQGRQO\&KULVWLDQV LQWKHFLW\ZKHQKHZDVFRQVHFUDWHGELVKRSLQEXWOHIWDFRQJUHJDWLRQ RIZKHQKHGLHGWZHQW\¿YH\HDUVODWHU2QWKLVVKRZLQJ*D]DEH FDPH WKRURXJKO\ &KULVWLDQ D FHQWXU\ EHIRUH &KRULFLXV DQG SUHVXPDEO\ LW UHPDLQHGVR8QIRUWXQDWHO\0DUN¶V/LIHRI3RUSK\ULXVLVDIUDXGXOHQWDQG LQDXWKHQWLF GRFXPHQW DOWKRXJK LW SXUSRUWV WR JLYH DQ H\HZLWQHVV DFFRXQW RIHYHQWVVHHQE\LWVDXWKRUDVDQDGXOWLQWKHVLWFRSLHV7KHRGRUHWXV¶ +LVWRU\RIWKH0RQNVLQ6\ULDZKLFKZDVZULWWHQLQWKHVDQGLWV\VWHP DWLFDOO\FRQWUDGLFWVNQRZQIDFWVIURPWKHSHULRGDERXWZKLFKLWZULWHV±RQ YLUWXDOO\HYHU\RFFDVLRQZKHUHLQGHSHQGHQWHYLGHQFHH[LVWV,WLVQRWQHF HVVDU\KHUHHLWKHUWRHVWDEOLVKWKHUHDOGDWHRIFRPSRVLWLRQRUWRDVVHVVWKH

 )RUDIXOOGLVFXVVLRQRIWKHVSHHFKEXWRQHEDVHGRQVHYHUDOSUHPLVHVWKDWDUHUH MHFWHGKHUHVHH5HLFK±  (J'RZQH\D±  2QWKHORQJFRQWURYHUV\RYHUWKHYDOXHRIWKHWH[WVHH*UpJRLUHDQG.XJHQHU YLL±O[[[L[ZKRDUHZLGHO\UHJDUGHGDVKDYLQJSURYHGWKDWWKHELRJUDSK\LVDQDX WKHQWLFH\HZLWQHVVDFFRXQWWKDWZDVODWHUH[SDQGHGDQGGUDPDWL]HGVHHHJ+ROXP    3HHWHUV0DF0XOOHQ%DUQHV



7LPRWK\%DUQHV

YDOLGLW\RIDUHFHQWDWWHPSWWRDQVZHUWKHDUJXPHQWVRI3DXO3HHWHUV±ZKR PDLQWDLQHGWKDWWKH/LIHRI3RUSK\ULXVEHORQJVWRWKHVHYHQWKFHQWXU\±E\ SURSRXQGLQJWKHK\SRWKHVLVWKDWLWLVDFDUHOHVVUHZRUNLQJLQDURXQGRI D GHOLEHUDWHO\ PLVOHDGLQJ GRFXPHQW RULJLQDOO\ FRPSRVHG LQ  ,W ZLOO VXI¿FHWRQRWHWKDWVLQFHWKH/LIHRI3RUSK\ULXVLVQRWZKDWLWSXUSRUWVWREH LWFDQQRWOHJLWLPDWHO\EHDGGXFHGDVSURRIWKDW*D]DZDVODUJHO\&KULVWLDQ LQWKH¿IWKFHQWXU\WKHUHOLJLRXVFRPSOH[LRQRIWKHFLW\UHPDLQVWREHGHOLQ HDWHGIURPJHQXLQHHYLGHQFH &KRULFLXVKLPVHOILVVW\OHGD&KULVWLDQE\3KRWLXVZKRLWLVDVVXPHG  RXJKWWRKDYHNQRZQ%XWLWLVFOHDUWKDW3KRWLXVNQHZQRWKLQJSUHFLVHDERXW &KRULFLXVH[FHSWZKDWKHLQIHUUHGIURPKLVZULWLQJV%LEOLRWKHFD +LV EHOLHIWKDWKHZDVD&KULVWLDQLVGHGXFHGIURP&KRULFLXV¶WZRSDQHJ\ULFVRQ %LVKRS0DUFLDQXVRI*D]DHVSHFLDOO\WKHHDUOLHURQHZLWKLWVGHVFULSWLRQRI WKH&KXUFKRI6DLQWV6HUJLXVDQG6WHSKDQXV2U 7KLVVSHHFKLVLQGHHGIXOO RI&KULVWLDQWHUPLQRORJ\DQGDOOXVLRQVWRWKHJRVSHOVEXWWKHUHLVKDUGO\DQ\ VLPLODU&KULVWLDQWHUPLQRORJ\LQ&KRULFLXV¶RWKHUVSHHFKHVDQGKHDOOXGHVWR WKH1HZ7HVWDPHQWQRZKHUHHOVHH[FHSWLQKLVIXQHUDU\VSHHFKRQ0DULDWKH PRWKHURI0DUFLDQXV2U 2QWKHFRQWUDU\DV:LOKHOP6FKPLGSXWLWORQJ DJRLQKLVVWLOOVWDQGDUGWUHDWPHQWRIWKHDXWKRU&KRULFLXVPRYHVLQDSDJDQ WKRXJKWZRUOGKHH[SRXQGV+RPHUDQGHYDOXDWHVP\WKVOLNHDFRQVHUYDWLYH SDJDQKHVWXGLRXVO\DYRLGVPHQWLRQLQJ&KULVWLDQFXVWRPVDQGDWWLWXGHVKH VSHDNVRI=HXVDVWKHFUHDWRURIWKHZRUOGDQGRIWKH)DWHVDVWKHDUELWHUVRI KXPDQOLIHDQGKHGHVFULEHVWKH,VODQGVRIWKH%OHVVHGZKHUHRQHPLJKWH[ SHFWWRKHDUVRPHWKLQJDERXWSHUVRQDOLPPRUWDOLW\7KHIDFWWKDWDQRI¿FLDO SRHWRUDWRURUSDQHJ\ULVWLQD&KULVWLDQFLW\FDQQRWDYRLGRQRFFDVLRQXVLQJ WKHUHOLJLRXVODQJXDJHRIWKHSHRSOHZKRPKHSUDLVHVLVQRWJRRGHYLGHQFHIRU KLVUHDOEHOLHIV:KDW&KRULFLXVUHYHDOVSHUKDSVLQDGYHUWHQWO\RIKLVGHHSHVW DVVXPSWLRQVDERXWOLIHDQGGHDWKVXUHO\VWDPSVKLPDVDSDJDQ &KRULFLXV¶GHIHQVHRIWKHPLPHUHPDLQVVXUSULVLQJHYHQLILWZDVSHQQHG E\ D SDJDQ )RU DOWKRXJK KLV PRGHO /LEDQLXV ZKRP KH XVHV KHDYLO\ WKURXJKRXWWKHVSHHFKGHIHQGHGSDQWRPLPLDQGGHFODUHGWKDWWKHLUDUWVZDV ³WKHPRVWXVHIXORIDOOWKLQJV´DQGWKDWLWKDGQRHYLOFRQVHTXHQFHVZKDWVR HYHU2U±HVS KHUHJDUGHGWKHPLPHLQDYHU\GLIIHUHQW OLJKW±DVWRWDOO\DQGLUUHGHHPDEO\GLVUHSXWDEOH/LEDQLXVVFROGHG$ULVWLGHV IRUDWWHPSWLQJWRGLVFUHGLWWKHUHVSHFWDEOHDUWRIWKHSDQWRPLPXVE\DVVRFLDW LQJSDQWRPLPLZLWKWKHPLPHZLWKZKLFKKHSURFODLPHGWKH\KDGYLUWXDOO\ QRWKLQJLQFRPPRQ2U± &KRULFLXVGHIHQGVWKHPLPHE\XVLQJ

 7URPEOH\±+HEDVHVKLVSLFWXUHRIWKH&KULVWLDQL]DWLRQRI*D]DH[ FOXVLYHO\RQWKHELRJUDSK\±   6FKPLG   ± 'HVSLWH WKH REVHUYDWLRQV VXPPDUL]HG KHUH 6FKPLG SUR QRXQFHGKLP³RKQH=ZHLIHO&KULVW´ 

&KULVWLDQVDQGWKH7KHDWHU



SUDLVHYHU\VLPLODUWRWKDWZKLFK/LEDQLXVKDGODYLVKHGRQWKHDUWRIWKHSDQ WRPLPXV&KRULFLXV¶VSHHFKLVDFDOFXODWHGDSRORJLDIRUVRPHWKLQJWKDWKH NQHZ&KULVWLDQVLQWKHRU\FRQGHPQHGSHUKDSVWKHUHIRUHKHLQWHQGHGLWDV DGHOLEHUDWHSURYRFDWLRQDQLPSOLFLWFULWLFLVPRIWKHFRQWUDGLFWLRQEHWZHHQ WKHWKHRUHWLFDOGHPDQGVRI&KULVWLDQPRUDOLW\DQGWKHDFWXDOEHKDYLRURIWKH &KULVWLDQVZKRPKHREVHUYHGLQ*D]D)RUDOWKRXJKWKHWKHDWHUGLVDSSHDUHG QRWORQJDIWHU&KRULFLXVWKHDUWVRIWKHPLPHDQGWKHSDQWRPLPXVSHUVLVWHG LQWRWKH%\]DQWLQHSHULRGDQGLWLVWKHPLPHQRWRQHRIWKHKLJKHUIRUPVRI GUDPDWLFDUWIURPZKLFKPRGHUQGUDPDLVOLQHDOO\GHVFHQGHG

$GGHQGXP 7KH GLVFXVVLRQ RI &KRULFLXV UHTXLUHV VLJQL¿FDQW PRGL¿FDWLRQ LQ OLJKW RI * :%RZHUVRFN0RVDLFVDV+LVWRU\7KH1HDU(DVWIURP$QWLTXLW\WR,VODP &DPEULGJH0DVVDQG/RQGRQ HVS±%RZHUVRFNDUJXHVWKDW /DWH$QWLTXHPRVDLFVIURPWKH1HDU(DVWGHSLFWLQJWKHJRG'LRQ\VXVZKRP &KRULFLXV SUDLVHV DQG VFHQHV IURP *UHHN P\WKRORJ\ UHÀHFW FRQWHPSRUDU\ SHUIRUPDQFHVRIPLPHVDQG³GHPRQVWUDWHDVKDUHGHQMR\PHQWRIWKHDQFLHQW DQGXQG\LQJWUDGLWLRQRIDQFLHQWP\WKV´VLQFH'LRQ\VXVZDV³WKHHQFRPSDVV LQJHQDEOLQJLQVSLUDWLRQIRUWKHPLPHVDQGWKURXJKWKHPIRUWKHPRVDLVLVWV ZKRHYRNHGWKHHQWHUWDLQPHQWVRIWKHLUFLWLHV´KHKROGVWKDWP\DWWHPSWWR GHQ\WKDW&KRULFLXVZDVD&KULVWLDQLVIXQGDPHQWDOO\PLVFRQFHLYHG

%LEOLRJUDSK\ $GVKHDG. ³7KH6HFUHW+LVWRU\RI3URFRSLXVDQGLWV*HQHVLV´LQ%\]DQWLRQ ± %DUQHV7LPRWK\' 7HUWXOOLDQD+LVWRULFDODQG/LWHUDU\6WXG\2[IRUG ²± ³7KH%DSWLVPRI7KHRGRVLXV,,´LQ6WXGLD3DWULVWLFD± ²± $WKDQDVLXVDQG&RQVWDQWLXV7KHRORJ\DQG3ROLWLFVLQWKH&RQVWDQWLQLDQ (PSLUH&DPEULGJH0DVV %HDFKDP5LFKDUG& 7KH5RPDQ7KHDWHUDQGLWV$XGLHQFH/RQGRQ %LHEHU0DUJDUHWH +LVWRU\RIWKH*UHHNDQG5RPDQ7KHDWHUQGHGQ3ULQFHWRQ %OlQVGRUI-UJHQ ³'HUVSlWDQWLNH6WDDWXQGGLH6FKDXVSLHOHLP&RGH[ 7KHRGRVLDQXV´LQLGHG 7KHDWHUXQG*HVHOOVFKDIWLP,PSHULXP5RPDQXP  0DLQ]HU)RUVFKXQJHQ]X'UDPDXQG7KHDWHU 7ELQJHQ± &DPHURQ$ODQ &LUFXV)DFWLRQV%OXHVDQG*UHHQVDW5RPHDQG%\]DQWLXP 2[IRUG &DPHURQ$OHQDQG/RQJ-DFTXHOLQH %DUEDULDQVDQG3ROLWLFVDWWKH&RXUWRI $UFDGLXV%HUNHOH\/RV$QJHOHVDQG2[IRUG

 5HLFK ±±



7LPRWK\%DUQHV

&DPHURQ$YHULO $JDWKLDV2[IRUG ²± &KDQJHDQG&RQWLQXLW\LQ6L[WK&HQWXU\%\]DQWLXP/RQGRQ ²± 3URFRSLXVDQGWKH6L[WK&HQWXU\/RQGRQ ²± &KULVWLDQLW\DQGWKH5KHWRULFRI(PSLUHWKH'HYHORSPHQWRI&KULVWLDQ 'LVFRXUVH%HUNHOH\DQG/RV$QJHOHV ²± 7KH0HGLWHUUDQHDQ:RUOGLQ/DWH$QWLTXLW\$'±/RQGRQ &ODXGH'LHWULFK 'LHE\]DQWLQLVFKH6WDGWLP-DKUKXQGHUW %\]DQWLQLVFKHV $UFKLY 0XQLFK &ORYHU)UDQN0± ³/HFXOWHGHVHPSHUHXUVGDQVO¶$IULFDYDQGDOH´LQ%XO OHWLQDUFKpRORJLTXHGX&RPLWpGHV7UDYDX[KLVWRULTXHVHWVFLHQWL¿TXHVQV± ± ²± ³(PSHURU:RUVKLSLQ9DQGDO$IULFD´LQ5RPDQLWDV&KULVWLDQLWDV8QWHU VXFKXQJHQ]XU*HVFKLFKWHXQG/LWHUDWXUGHUU|PLVFKHQ.DLVHU]HLW%HUOLQ± 'DJURQ*LOEHUW 1DLVVDQFHG¶XQHFDSLWDOH&RQVWDQWLQRSOHHWVHVLQVWLWXWLRQV GHj3DULV GH%HUQDUGL)HUUHUR'DULD± 7HDWULFODVVLFLLQ$VLD0LQRUHYROV5RPH 'HPPOHU$ hEHUGHQ9HUIDVVHUGHUXQWHU&\SULDQV1DPHQEHUOLHIHUWHQ 7UDNWDWHµ'HERQRSXGLFLWDH¶XQGµ'H6SHFWDFXOLV¶0XQLFK 'RZQH\*ODQYLOOH $+LVWRU\RI$QWLRFKLQ6\ULD3ULQFHWRQ ²±D *D]DLQWKH(DUO\6L[WK&HQWXU\1RUPDQ (OVQHU-DĞ ³3DXVDQLDVD*UHHN3LOJULPLQWKH5RPDQ:RUOG´LQ3DVWDQG 3UHVHQW± )UHUH6KHSSDUG6 ³7KH5RPDQ7KHDWHUDW&DQWHUEXU\´LQ%ULWDQQLD ± )ULHGOlQGHU/XGZLJ 'DUVWHOOXQJHQDXVGHU6LWWHQJHVFKLFKWH5RPVLQGHU=HLW YRQ$XJXVWXVEXV]XP$XVJDQJGHU$QWRQLQH,,WKHGQ/HLS]LJ )XFKV0LFKDHOD 8QWHUVXFKXQJHQ]XU$XVVWDWWXQJU|PLVFKHU7KHDWHULQ,WDOLHQ XQGGHQ:HVWSURYLQ]HQGHV,PSHULXP5RPDQXP0DLQ] *LDQRWWL*) ³/HWWHUDWXUDHVSHWWDFROLWHDWUDOLLQHWjLPSHULDOH´ LQ09HU]iU%DVVHG ,OWHDWURURPDQRGL7ULHVWHPRQXPHQWRVWRULDIXQ]LRQH  &RQWULEXWLSHUORVWXGLRGHOWHDWURDQWLFR%LEOLRWKHFD+HOYHWLFD5RPDQD  5RPH*HQHYDDQG0DLQ]± *RJRV6 ³'DVDQWLNH7KHDWHULQGHU3HULHJHVLVGHV3DXVDQLDV´ LQ.OLR± *RRGFKLOG5LFKDUG* .\UHQHXQG$SROORQLDUGHGQ=XULFK *UHHQ-RKQ5 ³7KHDWHU3URGXFWLRQ±´LQ/XVWUXP± ²± 7KHDWHULQ$QFLHQW*UHHN6RFLHW\1HZUHSULQWHGLQKLV2SHUD0LQRUD6HOHFWD$PVWHUGDP±±@ ²± ³$UFKDLRORJRV´LQ5(*±>UHSULQWHGLQKLV2SHUD0LQRUD 6HOHFWD$PVWHUGDP±±@ ²± 0pODQJHVV\ULHQVRIIHUWVj5HQp'XVVDXG3DULV± >UHSULQWHGLQKLV2SHUD0LQRUD6HOHFWD$PVWHUGDP±±@ ²± ³'HX[FRQFRXUVJUHFVj5RPH´LQ&5$,±>UHSULQWHGLQKLV2SHUD 0LQRUD6HOHFWD$PVWHUGDP±±@ ²± ³8QHYLVLRQGH3HUSpWXHPDUW\UHj&DUWKDJHHQ´LQ&5$,± >UHSULQWHGLQKLV2SHUD0LQRUD6HOHFWD$PVWHUGDP±±@ 5RTXHV'HQLV 6\QpVLRVGH&\UqQHHWOD&\UpQDwTXHGX%DV(PSLUH3DULV 5RXHFKp&KDUORWWH $SKURGLVLDVLQ/DWH$QWLTXLW\ -56PRQRJUDSK /RQGRQ ²± 3HUIRUPHUVDQG3DUWLVDQVDW$SKURGLVLDVLQWKH5RPDQDQG/DWH5RPDQ 3HULRG -56PRQRJUDSK /RQGRQ



7LPRWK\%DUQHV

6DOOPDQQ.ODXV ³&KULVWHQYRUGHP7KHDWHU´LQ-%OlQVGRUIHG 7KHDWHU XQG*HVHOOVFKDIWLP,PSHULXP5RPDQXP 0DLQ]HU)RUVFKXQJHQ]X'UDPDXQG 7KHDWHU 7ELQJHQ 6FKPLG: ³&KRULNLRV´LQ5(± 6FKQXVHQEHUJ&KULVWLQH 7KH5HODWLRQVKLSEHWZHHQWKH&KXUFKDQGWKH7KHDWHU ([HPSOL¿HGE\6HOHFWHG:ULWLQJVRIWKH&KXUFK)DWKHUVDQGE\/LWXUJLFDO7H[WV XQWLO$PDODULXVRI0HW]±±$'/DQKDP 7HPNLQ2ZVHL +LSSRFUDWHVLQD:RUOGRI3DJDQVDQG&KULVWLDQV%DOWLPRUH DQG/RQGRQ 7KHRFKDULGLV*- %HLWUlJH]XU*HVFKLFKWHGHVE\]DQWLQLVFKHQ3URIDQWKHDWHUV LP,9XQG9-DKUKXQGHUWKDXSWVlFKOLFKDXI*UXQGGHU3UHGLJWHQGHV-RKDQQHV &KU\VRVWRPXV3DWULDUFKHQYRQ&RQVWDQWLQRSHO /DRJUDSKLD3DUDUWHPD  7KHVVDORQLNL 7UDYHUVDUL* *OLVSHWWDFROLLQDFTXDQHOWHDWURWDUGRDQWLFR5RPH 7URPEOH\)UDQN5 +HOOHQLF5HOLJLRQDQG&KULVWLDQL]DWLRQF±/HLGHQ 7XUFDQ0DULH 7HUWXOOLHQ/HV6SHFWDFOHV'H6SHFWDFXOLV   6RXUFHVFKUpWLHQQHV 3DULV 9DQGHQEHUJKH%UXQR+ ³6DLQW-HDQ&KU\VRVWRPHHWOHVVSHFWDFOHV´ LQ=HLWVFKULIWIU5HOLJLRQVXQG*HLVWHVJHVFKLFKWH± 9LOOH*HRUJHV ³/HVMHX[GHJODGLDWHXUVGDQVO¶HPSLUHFKUpWLHQ´ LQ0()5± :HLVPDQQ:HUQHU .LUFKHXQG6FKDXVSLHOHGLH6FKDXVSLHOHLP8UWHLOGHU ODWHLQLVFKHQ.LUFKHQYlWHUXQWHUEHVRQGHUHU%HUFNVLFKWLJXQJYRQ$XJXVWLQ  &DVVLDFLDFXP :U]EXUJ :H\PDQ&DUO ³hEHUGLHGHP&\SULDQXVEHLJHOHJWHQ6FKULIWHQGH6SHFWDFXOLV XQGGH%RQR3XGLFLWLDH´LQ+LVWRULVFKHV-DKUEXFK± :|OIÀLQ(GXDUG ³&\SULDQVGH6SHFWDFXOLV´LQ$UFKLYIUODWHLQLVFKH /H[LFRJUDSKLH± :|UUOH0LFKDHO 6WDGWXQG)HVWLPNDLVHU]HLWOLFKHQ.OHLQDVLHQ6WXGLHQ]XHLQHU DJRQLVWLVFKHQ6WLIWXQJDXV2LQRDQGD 9HVWLJLD 0XQLFK =HUYHWWL1 ³2VVHUYD]LRQLVXVLJQL¿FDWRHIXQ]LRQHGHOWHDWURQHOODFXOWXUD URPDQD¶LQ0RQLND9HU]iU%DVVHG ,OWHDWURURPDQRGL7ULHVWHPRQXPHQWR VWRULDIXQ]LRQH &RQWULEXWLSHUORVWXGLRGHOWHDWURDQWLFR%LEOLRWKHFD+HOYHWLFD 5RPDQD 5RPH*HQHYDDQG0DLQ]±

7KH7UDJHG\RIWKH0LGGOH$JHV Carol Symes 7KHVWRU\JRHVOLNHWKLV7KHIDOORI5RPHDQGWKHULVHRI&KULVWLDQLW\ZKLFK (GZDUG*LEERQQRWRULRXVO\FRQVWUXHGDVRQHDQGWKHVDPHGHVWUR\HGWKH ULFKKHULWDJHRIDQWLTXLW\7KHDWUHVZHUHUHOHJDWHGWRREVFXULW\RUUDQVDFNHG DV TXDUULHV 3URIHVVLRQDO HQWHUWDLQHUV ZHQW XQGHUJURXQG GLHG RXW EXULHG ZLWKRXWVDFUDPHQWRUFHUHPRQ\*UDGXDOO\DVSHFL¿FDOO\&KULVWLDQEXWDU WLVWLFDOO\ LQIHULRU  PRGH RI WKHDWULFDOLW\ FDPH LQWR EHLQJ WKH OLWXUJ\ DQG RFFDVLRQDOO\DQLVRODWHGPRQDVWHU\PLJKWSURGXFHVRPHWKLQJWKDWFRXOGEH FDOOHGGUDPD7KDWWRRNDORQJWLPHKRZHYHUZKLOHWKHJHUPRIPHGLHYDO WKHDWUHPLJKWEHIRXQGLQWKHWHQWKFHQWXU\LWZRXOGQRWÀRZHUXQWLOWKHODWH WZHOIWKRUWKLUWHHQWKZKHQDIHZLVRODWHGWH[WVVXJJHVWWKDWPHGLHYDOPDQ ZDVVWHSSLQJEH\RQGWKHFRQ¿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¶V RIWFLWHG DQ[LHWLHV KDYH XVXDOO\ EHHQ WDNHQ DW IDFH YDOXH 0HDQZKLOHWKHUHODWLYHVFDUFLW\RIHDUO\UHFRUGVGRFXPHQWLQJWKHDFWLYLWLHV RIWKRVHZKRPDGHDOLYLQJDVWKHDWUHSURIHVVLRQDOVSOD\ZULJKWVDFWRUVPX VLFLDQVPLPHV KDVEHHQYLHZHGDVHYLGHQFHRIWKHDWUH¶VHUDGLFDWLRQZKHQ MX[WDSRVHGZLWKWKHUHODWLYHO\YROXPLQRXVFRQGHPQDWLRQVRIDIHZPHGLHYDO FULWLFVZKRVHUHPDUNVKDYHEHHQUHDGDVSURRIWKDWGUDPDWLFDFWLYLW\FRXOG EHVWLÀHGE\DQDXWKRULWDULDQ&KXUFKDQGWKDWWKHWKHDWULFDOLW\LQGLJHQRXV WR WKH 0LGGOH$JHV UHSUHVHQWV DW EHVW  DQ LPSRYHULVKPHQW RI WKH FODVVL

 

*LEERQYROFF;9DQG;9, )RUDVXPPDU\RIWKHVFKRODUVKLSFRQWULEXWLQJWRWKLVJUDQGQDUUDWLYHIURPWKHVHY HQWHHQWKWRWKHODWHWZHQWLHWKFHQWXU\VHH9LQFH±)RUDVHULHVRIFULWLFDO HVVD\VRQPHGLHYDOGUDPD±PDQ\RIZKLFKFDOOIRUDUHYLVLRQRIWKLVQDUUDWLYH±VHH 6LPRQHG 



&DURO6\PHV

FDOWUDGLWLRQ:LWKUHVSHFWWR%\]DQWLXPZKHUHWKHWH[WVRIDQFLHQW*UHHFH ZHUHDFWXDOO\SUHVHUYHGIRUSRVWHULW\DVLPLODUO\SUHMXGLFLDOUHDGLQJRIWKH UHFRUGKDVOHGVFKRODUVWRWKHLURQLFFRQFOXVLRQWKDWWKHVRFLHW\WRZKLFKZH RZH RXU NQRZOHGJH RI WUDJHG\ ZDV LJQRUDQW RI LWV GUDPDWLF SRVVLELOLWLHV 6XSSRVHGO\SOD\VZHUHFRSLHGLQDQDWPRVSKHUHRIDULGSHGDQWU\QHYHUHQ OLYHQHGE\SHUIRUPDQFH0RUHRYHULWLVFRPPRQO\DUJXHGWKDWWKH(DVWHUQ 5RPDQ(PSLUHSURGXFHGRQO\DVLQJOHGUDPDWLFGRFXPHQWLQWKHFRXUVHRI DWKRXVDQG\HDUVWKHȋȡȚıIJઁȢʌȐıȤȦȞLQYDULDEO\GLVPLVVHGDVDKDP¿VWHG SDVWLFKHDOOHJHGO\XQVXLWDEOHDQGXQLQWHQGHGIRUSHUIRUPDQFH ,QRUGHUWRGLVPDQWOHWKLVWUDJLFSDUDGLJPWKLVHVVD\ZLOOEHJLQE\GH EXQNLQJ WKH P\WK RI *UHHN WUDJHG\¶V PXUGHU E\ WKH 0LGGOH$JHV ,W ZLOO WKHQJRRQWRVXUYH\WKHZD\VLQZKLFKPHGLHYDOLQWHOOHFWXDOVLQWKH/DWLQ VSHDNLQJ:HVWXQGHUVWRRGDQGLQYRNHGERWKWKHJHQUHDQGWKHFRQFHSWRI WUDJHG\WUDQVODWLQJLWLQWRWHUPVVXLWHGWRWKHLURZQWLPHV

:KR.LOOHG*UHHN7UDJHG\" 2QHUHFHQWDVVHVVPHQWRIWUDJHG\¶VSRVWFODVVLFDOKLVWRU\PD\EHWDNHQWR UHSUHVHQWWKHSURVHFXWLRQLQWKHFDVHDJDLQVWWKH0LGGOH$JHV$OWKRXJK³D YHVWLJLDONQRZOHGJHRIWUDJHG\ZDVSUHVHUYHGWKURXJKWKHPHGLXPRISDQWR PLPH´LQWKHHDVWHUQ5RPDQ(PSLUHWKHEDUEDURXVSUDFWLFHVRIWKHFRS\LVWV ZKRSUHVHUYHGWKHWH[WVRIFDQRQLFDOSOD\VGXULQJWKHQLQWKFHQWXU\PDGH WKLV ³WUDJHG\¶V GDUNHVW KRXU´ 0HDQZKLOH ³WKH VLWXDWLRQ LQ WKH :HVW ZDV XQGHUVWDQGDEO\PXFKEOHDNHU´³&RQVLGHUHGZLWKWKHJHQHUDOGHFOLQHRIWKH SHUIRUPLQJDUWVZKLFKGDWHVIURPWKHHDUO\%\]DQWLQHDJHQR*UHHNWUDJHG\ VRIDUDVZHNQRZZDVSHUIRUPHGRQDVWDJHWKURXJKRXWWKLVORQJSHULRG WKRXJK LQIRUPDO UHDGLQJV PLJKW KDYH WDNHQ SODFH LQ SULYDWH KRXVHV´ DQG ³>S@UHFLVHO\ZKDWIXQFWLRQWKHSOD\VVHUYHGLQWKHVFKRROVLVLPSRVVLEOHWR GHWHUPLQHWKRXJKLWLVSUREDEOHWKDWWKH\ZHUHXVHGLQWKHWHDFKLQJRIEDVLF JUDPPDUDQGWKHSULQFLSOHVRIUKHWRULF«0RVWVWXGHQWVKRZHYHUZRXOG KDYHVWXGLHGRQO\VHWVSHHFKHVDQGVHWVFHQHVYHU\IHZFDQKDYHKDGWKH H[SHUWLVHRUWKHVWD\LQJSRZHUWRUHDGDZKROHSOD\´7KDQNIXOO\WKRXJK HYHU\RQHVXGGHQO\EHFDPHPXFKVPDUWHUVRWKDW³VFULEHVZLWKJHQXLQHSUH

 

0\RZQYHU\GLIIHUHQWLQWHUSUHWDWLRQ RIWKHHYLGHQFHKDVEHHQGHYHORSHGLQ6\PHV ,QZKDWIROORZV,HQJDJHWKHDUJXPHQWVRI.HOO\DQG 'R[ 7KH RQO\ VWXG\ FLWHG ZLWK DQ\ UHJXODULW\ DPRQJ$QJORSKRQH VFKRODUV LV /D3LDQD DGLVWLOODWLRQRI/D3LDQDZKRVHDUJXPHQWLVGULYHQE\WKHVDPHSVHXGR 'DUZLQLDQ PRGHO RI WKHDWULFDO HYROXWLRQ WKDW LQIRUPHG WKH VFKRODUVKLS RI WUDJRH GLD@DVVRPHKDYHLWFRPHVIURPWUDJRDQGRGHEHFDXVHLWLVVDLGWKDWDWRQH WLPHWKHWUDJLFDXWKRUVZRXOGEHDZDUGHGDWUDJRVWKDWLVDJRDWDVDSUL]H IRUWKHLUVRQJ´,QWKHFRQWHPSRUDU\FKURQLFOHRI)UpFXOIELVKRSRI/LVLHX[ ± WUDJHG\¶VHDUOLHVWEHJLQQLQJVDUHPRUHVREHUO\WLHGWRWKHGDWLQJ RIWKH%DE\ORQLDQ&DSWLYLW\ZKHQ$ONPDQDQG6WHVLFKRURVZHUHUHJDUGHGDV IDPRXVSRHWVDQG6DSSKRÀRXULVKHGRQ/HVERV³,QWKRVHGD\VDWUDJXVZDV JLYHQDVDSUL]HWRWKRVHZKRVWURYHZLWKHDFKRWKHULQFRPSHWLWLRQWKDWLVD JRDWZKHQFHWKH\DUHVDLGWREHFDOOHGWUDJRHGRL´ %\ FRQWUDVW 6HGXOLXV 6FRWXV À ±  DQ ,ULVK JUDPPDULDQ DQG ERQD¿GHVFKRODURI*UHHNUHVLGHQWLQ/LqJHULQJVDOOWKHLPDJLQDWLYHFKDQJ HVRQWKHKLVWRU\RIWUDJHG\¶VLQYHQWLRQDQGVRFLDOIXQFWLRQLQKLVFRPPHQ WDU\RQWKHJUDPPDURI'RQDWXV 7UDJHG\LVGHULYHGIURPWKH*UHHNZRUGIJȡȐȖȠȢWKDWLV³KHJRDW´VLQFHZKRHYHU FRPSRVHG D VRQJ ZRXOG UHFHLYH D JRDW DV D UHZDUG ± ZKHQFH WKH SRHW &DUPLQH QDP>VLFTXL@WUDJLFRYLOHPFHUWDYLWREKLUFXP>+RUDFH$UVSRHWLFDY@$OWHU QDWLYHO\WUDJHG\GHULYHVIURPWKH*UHHNWUDFRQRGRQ>FIIJȡĮȤȪȞȦ@WKDWLVDKDUVK DQGODPHQWDEOHVRQJIRULWLVPDGHXSRIEDWWOHVDQGWKHNLOOLQJRIPHQ7UDJHG\ LQGHHGPLJKWEHVDLGWREHµDVRQJQDPHGDIWHUJRDWV¶LQWZRZD\VHLWKHUEHFDXVH WKHDQFLHQWV*UHHNVZKHQWKH\UHWXUQHGIURPZDUKDGWKHKDELWRIVDFUL¿FLQJDV PDQ\JRDWVDVWKH\NLOOHGPHQRUEHFDXVHKHZKRFRPSRVHGDVRQJDERXWDEDWWOH UHFHLYHGDJRDWDVDUHZDUG2UWUDJHG\PD\EHGHULYHGIURPWKH*UHHNIJȡȣȖȓĮWKDW LVµGUHJV¶VLQFHZKHQWKH\FRPSRVHGWKDWVRUWRIVRQJWKH\UHFHLYHGGUHJVZKHQFH +RUDFHSHUXQFWLIDHFLEXVRUD>$UVSRHWLFDY@7KHQFHIJ੹IJȡĮȖȒȝĮIJĮWKHWLQ\ OLWWOHIDYRUVZKLFKLQ/DWLQDUHFDOOHGµGHVVHUWV¶

 5DEDQXV0DXUXV([FHUSWLRGH$UWHJUDPPDWLFD3ULVFLDQL3/³,JLWXUFR PRHGLD D WUDJRHGLD GLIIHUW TXRG LQ WUDJRHGLD LQWURGXFXQWXU KHURHV GXFHV UHJHV LQFRPRHGLDKXPLOHVDWTXHSULYDWDHLQLOODOXFWXVH[VLOLDFDHGHVLQKDFDPRUHV YLUJLQXPUDSWXV´  3/±³7UDJRHGLDXWTXLGDPYROXQWDWUDJRHWRGHGLFWDHVWTXRGROLP DXFWRULEXVWUDJLFLVWUDJRVLGHVWKLUFXVSUDHPLXPFDQWXVSURSRQHEDWXU´  )UpFXOI+LVWRULDH3/±³4XLEXVWHPSRULEXVLQDJRQHFHUWDQWLEXV WUDJXVGDEDWXULQSUDHPLRLGHVWKLUFXVXQGHDLXQWWUDJRHGRVQXQFXSDWRV«$OFPDQ HW6WHVLFKRUXVSRHWDHFODULKDEHQWXU«3HULGHPWHPSXV6DSSKRPXOLHULQGLYHUVR SRHPDWHFODUXLW´  6HGXOLXV6FRWXV,Q'RQDWLDUWHPPDLRUHP%RRN,,7KLVWH[WLVQRWLQFOXGHGLQWKH 3/DOWKRXJKRWKHUZRUNVRIWKHVDPHDXWKRUDUH±DUHPLQGHUWKDWWKLVULFKVDPSOH RIGDWDLVLQFRPSOHWHDQGQRWQHFHVVDULO\UHSUHVHQWDWLYHRIDOOPHGLHYDOSHUVSHFWLYHV RQWUDJHG\RUDQ\WKLQJHOVH,KDYHFRQVXOWHGWKHHGLWLRQRI/|IVWHGW± ³7UDJRHGLDGLFLWXUD*UHFRYHUERTXRGHVWIJȡȐȖȠȢLGHVWµKLUFXV¶TXLDTXLLOOXGFDU PHQFRPSRQHEDQWKLUFXPLQPHUFHGHDFFLSLHEDQWXQGHSRHWD&DUPLQHQDP>VLF TXL@WUDJLFRYLOHPFHUWDYLWREKLUFXP>+RUDFH$UVSRHWLFDY@9HOWUDJRHGLD GLFLWXUD*UHFRTXRGHVWWUDFRQRGRQLGHVWGXUXPHWODPHQWDELOHFDUPHQHVWHQLP

7KH7UDJHG\RIWKH0LGGOH$JHV



6HGXOLXVZKRVHZRUNVLQFOXGHWKHRQO\NQRZQ/DWLQFRPPHQWDU\RQ3RU SK\U\¶V,VDJRJHZDVXQOLNHPDQ\RIKLVFRQWHPSRUDULHVLQWKDWKHPLJKW DFWXDOO\KDYHUHDGD*UHHNWUDJHG\±RUDWOHDVWKDYHUHDGPRUHH[WHQVLYHO\ DERXWWKHP+HFHUWDLQO\KDVIXQÀDXQWLQJKLVVXSHULRUNQRZOHGJHDQGSXOO LQJDIHZOHJVLQDFRQWH[WZKHUHDGLVFXVVLRQRIWUDJHG\ZRXOGVHHPWREH LUUHOHYDQW)RUXQOLNH%HGHDQG5DEDQXV6HGXOLXVLVQRWGHDOLQJZLWKSR HWLFIRUPVLQWKLVSDVVDJHEXWZLWKSURSHUQRXQVRIFRPSRVLWHJHQGHU±WKH FRPRHGLD(XQXFKWKHWUDJRHGLD2UHVWHVWKHIHPDOH VKLSQDPHG&HQWDXU ±VRWKDWKLVPHGLWDWLRQRQWKHJHQUHZKLFKLQFOXGHVDV\QRSVLVRIIDPLO\ G\VIXQFWLRQLQWKH+RXVHRI$WUHXV LVUHDOO\DQH[WHQGHGJORVVRQWKHUDWKHU JUDWXLWRXV VWDWHPHQW ³:KHQ , VD\ µ,¶P UHDGLQJ 2UHVWHV¶ \RX XQGHUVWDQG WKDW,PHDQDSOD\ZKLFKLVZULWWHQDERXWKLPE\7HUHQFHWKHNLQGZKLFKLV FDOOHGDWUDJHG\´TXLDFXPGLFRµ2UHVWHPOHJR¶LQWHOOLJLVIDEXODPTXDHGH HRVFULSWDHVWDSXG7HUUHQWLXP 4XDHWUDJRHGLDYRFDWXU6LQFHKHKDVWDNHQ WKHWURXEOHWRDGGXFHLWDVDQH[DPSOHLWLVQHFHVVDU\WRRIIHUDQH[SODQDWLRQ $UVSRHWLFDY@,QGHIJ੹IJȡĮȖȒȝĮIJĮGLFXQWXUYLOLD PXQXVFXODTXDH/DWLQHµEHOODULD¶YRFDQWXU´ 7HUWXOOLDQ3/± 3/± 3/ -HURPH$GYHUVXV-RYLQLDQXP,3/³7RWDH(XULSLGLVWUDJRHGLDHLQPX OLHUXPPDOHGLFWDVXQW´&I3/DQRQ\PRXVWUHDWLVH'HQXSWLLV  -RKQRI6DOLVEXU\ 3HWHURIWKH%ORLV 6HHDOVREHORZ



&DURO6\PHV

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ÀXHQWLDO ± KH PHQWLRQVLWRYHUWLPHV±DFWXDOO\LQYRNHVWUDJHG\LWVHOIRQRQO\VHYHQ RFFDVLRQVRQFHLQWKHIDPRXVFRQIHVVLRQRIKLV\RXWKIXOGHYRWLRQWRWKHVWDJH DQGLWVVSHFWDFOHRI³VRUURZIXODQGWUDJLFWKLQJV´OXFWXRVDDWTXHWUDJLFD  WZLFHLQWKH&LW\RI*RGWKUHHWLPHVDVDVLPLOHIRUDVRUURZIXOHYHQW DQGRQFHLQKLVFRPPHQWDU\RQWKH6HUPRQRQWKH0RXQW0DWWKHZ± VHHEHORZ $QRWKHULQGLUHFWUHIHUHQFHWRWUDJHG\RFFXUVLQWKH&RQIHVVLRQV ZKHQ$XJXVWLQHEUDJVDERXWKLVRZQVNLOODVDWUDJHGLDQLQSHUIRUPLQJKLV SDUW\SLHFH7KH)O\LQJ0HGHD±ZKLFK(GLWK+DOOKDVFDOOHG³DIDVFLQDWLQJ ZLQGRZRQWKHODWH5RPDQWKHDWUHZKHUHIDPRXVVRQJVRQP\WKLFDOWKHPHV ZHUHVWLOOEHLQJVXQJE\H[SHUWVLQJHUVPRUHWKDQHLJKWFHQWXULHVVLQFHWKH ¿UVWDFWRUWRLPSHUVRQDWH(XULSLGHV¶0HGHDKDGÀRZQRIIWR$WKHQV´ 2IWKHVHUHIHUHQFHVWRWUDJHG\LQ$XJXVWLQH¶VZULWLQJVWKHGLVFXVVLRQRI WKH6HUPRQRQWKH0RXQWZDVWKHPRVWOLNHO\WRKDYHLQÀXHQFHGWKHZD\V WKDWVXEVHTXHQWFRPPHQWDWRUVGHDOWZLWKDORFXVFODVVLFXVWKHSDVVDJHWKDW ZRXOGVHHPWRUHYHDO&KULVW¶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

       

(J3/ 3/ 3/ %DUQHVWKLVYROXPH S $XJXVWLQHRI+LSSR&RQIHVVLRQV,,,3/6HH'R[± 3/ 3/ &RQIHVVLRQV ,,, LQ 3/ ± 6HH +DOO   7\SLFDOO\ .HOO\ LV PXFK PRUHVNHSWLFDODERXWWKHYDOXHRIWKLVHSLVRGHIRUWKHKLVWRU\RISHUIRUPDQFH.HOO\ ±

7KH7UDJHG\RIWKH0LGGOH$JHV



HQDFWHG LV QRW WUXO\ KLPVHOI EXW WDNHV RQ WKH DSSHDUDQFH RI WKH FKDUDFWHU DQG LV FDOOHGDK\SRFULWD

$V'RQQDOHH'R[KDVREVHUYHG³$XJXVWLQHXQGHUVWRRGWKHDWUHDVDVRFLDO UHDOLW\ LQ D ZD\ ODWHU &KULVWLDQV FRXOG QRW´ ZKLFK LV RQH RI WKH UHDVRQV ZK\KHIRXQGLWVRSRZHUIXO±DQGSRWHQWLDOO\SUREOHPDWLFIRUKLPDQGIRU KLV FRQWHPSRUDULHV WKH ZRUG K\SRFULWD UHWDLQHG LWV SULPDU\ PHDQLQJ DQG FRQMXUHGXSLPDJHVRISURIHVVLRQDODFWRUV7KHVHDVVRFLDWLRQVZHUHERWKOHVV OLYHO\ DQG OHVV LPPHGLDWH IRU ODWHU WKHRORJLDQV 0RUHRYHU WKH ZRUG K\S RFULWDTXLFNO\WRRNRQLWVVHFRQGDU\PHDQLQJWKHPHDQLQJDVFULEHGWRLWE\ -HVXVDQGDQDO\]HGE\$XJXVWLQHLWZDVQRORQJHUDWHFKQLFDOWHUPIRU³DF WRU´EXWDZRUGGHVLJQDWLQJDSUHWHQGHUWRYLUWXHDORYHURISLRXVGLVSOD\$V VXFKLWQRORQJHUUHTXLUHGH[SODQDWLRQ3HUKDSVWKLVLVZK\RQO\RQHPHGL HYDODXWKRU5DEDQXV0DXUXVIROORZV$XJXVWLQHLQLPSOLFDWLQJWUDJHGLDQV H[SOLFLWO\LQKLVGLVFXVVLRQRIWKLVSDVVDJHIURP0DWWKHZ¶VJRVSHO )XUWKHUPRUH DSDUW IURP D KDQGIXO RI RWKHU GLUHFW ERUURZLQJV IURP SDWULVWLFDXWKRUVDV,QRWHGDERYH WKHUHDUHIHZDGGLWLRQDOUHIHUHQFHVWR WUDJHG\XQGHUVWRRGDVDQHIDULRXVSUDFWLFHRIWKHSDJDQSDVW7KHKLVWRULDQ *UHJRU\RI7RXUVF± XQGHUVFRUHVWKHYLOODLQ\RI1HURE\DOOHJLQJ WKDWKHVDQJWUDJHGLHVZKLOH5RPHEXUQHG$OGKHOPRI6KHUERUQHF±  VRPHZKDWHTXLYRFDOO\GHVFULEHVWKHVSHFWDFOHRI&KULVWLDQPDUW\UGRP DW5RPHDVDWUDJHG\LQKLVWUHDWLVH³,Q3UDLVHRI9LUJLQLW\´,QDORQJGL GDFWLFSRHP0DUERGRI5HQQHVF± LQFOXGHVDPLVRJ\QLVWULII RQ-HURPH¶VDVVHVVPHQWRI(XULSLGHVZKHQQDPLQJIHPDOHZURQJGRHUVIURP VDFUHG KLVWRU\ -H]HEHO  DQG IURP WKH VWRULHV ³WUDJHGLDQV DUH DSW UHFLWH WR WKHSHRSOH´+HOHQ&O\W PQHVWUD $QGLQWKHHDUO\WZHOIWKFHQWXU\EHVWL DU\DWWULEXWHGWR+XJKRI)RXLOOR\WKHVHGXFWLYHHIIHFWVRIVLUHQV¶VRQJVDUH PDGHDQDORJRXVWRWKHPRUDOGLVVROXWLRQH[SHULHQFHGE\ORYHUVRIGUDPD ³ZKRDUHUDYLVKHGE\WKHGHOLJKWVRIWKHZRUOGWKHSRPSDQGSOHDVXUHVRI

 $XJXVWLQH'HVHUPRQH'RPLQLLQPRQWHOLEURVGXRV,,3/³&XPHUJR IDFLVHOHPRV\QDPLQTXLWQROLWXEDFDQHUHDQWHWHVLFXWK\SRFULWDHIDFLXQWLQVLQD JRJLVHWLQYLFLVXWJORUL¿FHQWXUDEKRPLQLEXV1ROLLQTXLWVLFXHOOHLQQRWHVFHUHXW K\SRFULWDH0DQLIHVWXPHVWDXWHPK\SRFULWDVQRQTXRGRFXOLVSUDHWHQGXQWKRPLQXP LGHWLDPFRUGHJHVWDUH6XQWHQLPK\SRFULWDHVLPXODWRUHVWDPTXDPSURQXQWLDWRUHV SHUVRQDUXPDOLHQDUXPVLFXWLQWKHDWULFLVIDEXOLV1RQHQLPTXLDJLWSDUWHV$JDPHP QRQLVLQWUDJRHGLDYHUELJUDWLDVLYHDOLFXLXVDOWHULXVDGKLVWRULDPYHOIDEXODPTXDH DJLWXU SHUWLQHQWLV YHUH LSVH HVW VHG VLPXODW HXP HW K\SRFULWDGLFLWXU´ , KDYH DOVR FRQVXOWHG0XW]HQEHFKHUHG ±  'R[  5DEDQXV0DXUXV&RPPHQWDULXPLQ0DWWKDHXP,,3/  *UHJRU\RI7RXUV+LVWRULD9,3/  $OGKHOPRI6KHUERUQH'HODXGLEXVYLUJLQLWDWLV3/  0DUERGRI5HQQHV'HDSWRJHQHURVFULEHQGL³'HPHUHWULFH´ 3/6HH .HOO\



&DURO6\PHV

WKH WKHDWUH XQGRQH E\ WUDJHGLHV DQG FRPHGLHV´ %XW ERWK TXDQWLWDWLYHO\ DQGTXDOLWDWLYHO\WKHVHUHIHUHQFHVDUHRIQHJOLJLEOHLQWHUHVWZKHQFRPSDUHG WRWKHULFKHUDQGPRUHFRPSOH[XVHVRIWUDJHG\LQRWKHUFRQWH[WV ,,,³7UDJHG\´DVDZD\RIGHVFULELQJWKHHUURUVRI-HZVWKHHYLOVRIKHUHV\ RUWKHHIIHFWVRIVFKLVPZLWKLQWKH&KXUFK 0XFKPRUHVLJQL¿ FDQWWKDQDQ\QHJDWLYHFRQQRWDWLRQVDWWDFKHGWRWUDJHG\¶VSDJDQKHULWDJHLV LWV YLWDO IXQFWLRQ ZLWKLQ QDUUDWLYHV RI -XGHR&KULVWLDQ KLVWRU\ ERWK LQ WKH %LEOLFDOSDVWDQGWKHFRQWHPSRUDU\PHGLHYDO SUHVHQW,Q)UpFXOI¶VZRUOG FKURQLFOHDV, QRWHG DERYH WUDJHG\¶V JHQHVLV LV OLQNHG WR WKH %DE\ORQLDQ &DSWLYLW\ RI WKH -HZV ZKLOH LWV IXUWKHU GHYHORSPHQW RYHU WLPH LV WUDFHG DORQJVLGHWKHHYHQWVRIWKH2OG7HVWDPHQWGRZQWRWKH¿UVWFHQWXU\&(VR WKDWLWIXQFWLRQVDVDXVHIXOFKURQRORJLFDOPDUNHUFRUUHFWHGWH[WKDV³FRQVSHFWXV´@PHRPHQVDPDGYHUVXVHRVTXLWULEXODQW PH([SOLFDUHHQLPQRQSRVVXPTXRWSHUHJUHSURIHFWXVLQFRPPRGLWDWLEXVTXDWLDU MXYDWTXHKRPLQHPH[WHULRUHPSRWLXVOXJHUHTXDPVFULEHUH´  &RVPDVRI3UDJXH&KURQLFRQ%RKHPRUXP3/³&DHWHULYHURTXLVXSHUV WLWHVIXHUXQWH[JHQWHLOODGHOLWXHUXQWIXJDDOLLLQ3RORQLDPDOLLIXJLHQWHVLQ3DQQR QLDPGHTXRUXPH[FLGLRVLPXOHWGLVFLGLROLFHWDPSODPKDEHDPXVDGVFULEHQGXP PDWHULDP VHG QH YLGHDPXU YHOXW KLUFLQR FDQWX H[SOLFXLVVH WUDJHGLDP UHGHDPXV XQGHSDXORGLJUHVVLVXPXVDGFKURQLFDP´  6LJLEHUWRI*HPEORX[0LUDFXOL6:LFEHUWL3/³>0@XOWDHHWPDJQDHDG YHUVLWDWHV RFFXUUHUXQW QRELV « 4XDP WUDJHGLDP TXLD VDWLV FDQWDWD HVW LQ PXQGL WKHDWURKLFUHIHUUHVXSHUVHGHRFXPSURSULXPORFXPGHVLGHUHWHMXVSOHQDUHODWLR´



&DURO6\PHV

KHSURFODLPV³%HKROG,KDYHDFFXUDWHO\LQYHVWLJDWHGDQGWUXO\H[SODLQHG ZKDWRUGHUO\DUUDQJHPHQWRI*RGZDVSUHGLVFORVHGLQWKHIDOORIWKH'XNH ,GRQRWVHOOLQYHQWHGWUDJHG\QRUGR,YDOXHWKHORXGJXIIDZVWKHJURXQG OLQJVJLYHWRFRPHG\¶VFKDWWHUUDWKHU,WUXWKIXOO\UHSRUWPDQLIROGHYHQWVIRU OHDUQHG UHDGHUV´ +LV QHDU FRQWHPSRUDU\ *HUKRK RI 5HLFKHUVEHUJ DOVR DGYRFDWHG WKH H[SRVLWRU\ RYHU WKH GUDPDWLF ZKHQ ³ZULWLQJ KLVWRU\ LQ WKH SODLQVW\OH´WKHEHWWHUWRHQVXUHWKHDXWKRU¶VFODULW\DQGWKHOLVWHQHUUHDG HU¶VXQGHUVWDQGLQJ3@RHPDWXPJHQHUDVXQWWULDDXWHQLPDFWLYXP YHOLPLWDWLYXPHVWTXRG*UDHFLGUDPDWLFRQYHOPLFWLFRQDSSHOODQWDXWHQDUUDWLYXP TXRG*UDHFLH[HJHPDWLFRQYHODSDQJHOWLFRQQXQFXSDQWDXWFRPPXQHYHOPL[WXP TXRG*UDHFLFRHQRQYHOPLFWRQYRFDQW«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´  *HUKRKRI5HLFKHUVEHUJ&RPPHQWDULXVDXUHXV3/±³*HQXVGUDPDWL FXPYDULLVSHUVRQLVFRQWH[WXPFRQYHQLWFDUPLQLEXVQXSWLDOLEXVXWVXQW&DQWLFDFDQ WLFRUXP+RFHWLDPLQFRPRHGLLVYHOWUDJRHGLLVDJHQGLVREVHUYDWXPHVWDVDHFXODUL EXVDXFWRULEXVTXLDKRFJHQXVORTXHQGLPDJLVFRPPRGXPYLGHEDWXUYHOWULVWLWLDH YHOODHWLWLDHYHODOWHULXVTXDOLWDWLVDQLPLPRYHQGLVDIIHFWLRQLEXV´



&DURO6\PHV

WKDWKDGLQVSLUHG&DVVLRGRUXVZKHQKHJORVVHVWKHLQMXQFWLRQQRWWRVWUD\ DIWHU³IDOVHJRGV´DVDZDUQLQJDJDLQVW³SOD\WKLQJVRUWKHDWULFDORUVWDJHG VKRZV´ZKHWKHU³WKH\VLPXODWHZHGGLQJVDQG\RXWKIXOORYHDIIDLUVDVLQWKH FRPHGLHVRUELWWHUKLVWRULHVDVLQWKHWUDJHGLHV´ +HUHDQGHOVHZKHUHLQFRQWHPSRUDU\ZULWLQJVLWLVFOHDUWKDWWKHOLYLQJ OLWXUJ\RIWKHSUHVHQWLVQRWEHLQJFRPSDUHGWRWKHGHDGGUDPDRIWKHSDVW EXWWRWKHSOD\VUHDGWDXJKWDQGSHUIRUPHGLQHYHU\FDWKHGUDODQGPRQDV WHU\VFKRRO*HUKRKHYHQQDPHVVRPHRIWKHHSRQ\PRXVFKDUDFWHUVIDPLOLDU IURPWKHSOD\VRI7HUHQFHDQGWKHLUPDQ\FRQWHPSRUDU\VSLQRIIV'DYRVDQG 3KRUPLR7KDwV7KUDVR 6RPHRIWKHVHQHZSOD\VZHUHVXSSOLHGE\WKH VWDWHVPDQ3HWHURI%ORLVF±F DQGKLVEURWKHU:LOOLDPDSURPL QHQWDEERWZKRVHVXUYLYLQJFRPHG\$OGDZDVUHPHPEHUHGDGPLULQJO\LQ RQHRI3HWHU¶VOHWWHUVDORQJVLGHDORVW³WUDJHG\DERXW)ODXUDDQG0DUFXV´ DQGDPRQJVHUPRQVDQGWKHRORJLFDOWUDFWV3HWHUKLPVHOIZDVFKLGHGIRU ZDVWLQJKLVWLPH³LQZULWLQJFRPHGLHVDQGWUDJHGLHV´LQDOHWWHUIURP-RKQ RI6DOLVEXU\SDVWLPHVWKDWDOHWWHURI3HWHUWKH9HQHUDEOHDOVRWHVWL¿HVWR EHLQJSDUWLFXODUO\DWWUDFWLYHWR\RXQJPRQNVZKRORYHGUHDGLQJFRPHGLHV DORXGZHHSLQJRYHUWUDJHGLHVDQGRWKHU³VWXSLGLWLHV´VWXOWLWLDH ,Q-RKQ RI6DOLVEXU\¶VRZQ3ROLFUDWLFXVVLYHGHQXJLVFXULDOLXPHWGHYHVWLJLLVSKL ORVRSKRUXP³2QWKH7UXPSHULHVRI&RXUWLHUVDQGWKH7UDFNVRIWKH3KLORVR SKHUV´ FRPSRVHGDURXQGGXULQJKLVH[LOHIURPWKHFRXUWRI+HQU\,, RI(QJODQG³WKLVZRUOGO\FRPHG\RUWUDJHG\´RIWKHFRXUWLWVHOIEHFRPHV DQ LQGH[ RI KLV RZQ HUD¶V DUWLVWLF DQG PRUDO LPSRYHULVKPHQW DIRUFH WKDW ³HIIHPLQL]HVWKHYLULOLW\RIWKHPLQG´DQGOHDGVWRK\VWHULFDOEHKDYLRU7UDJ HG\¶VSUHYDOHQFHLQWKHDJHRI1HURLVDGGXFHGDVSURRIRIWKLVDORQJZLWK -HURPH¶VODSLGDU\UHPDUNDERXW(XULSLGHV¶PXOLHUXPPDOHGLFWD  &RPPHQWDULXPLQSVDOPRV3/³LGHVWOXGLFUDVYHOWKHDWUDOHVDFVFHQLFDV LQTXRUXPVSHFWDFXOLVHVWTXLGHPLQVDQLDYHUDVHGREKRFUHFWHGLFLWXU«TXRGGXP DXWVLPLODQWXUQXSWLDHDPDWRULDHTXHQDHQLDHXWLQFRPRHGLLVDXWDPDUDHKLVWRULDH XWLQWUDJRHGLLVSHUVRQDHODUYDWDH´6HH'R[  6\PHV  3HWHURI%ORLV3/³1RPHQYHVWUXPGLXWXUQLRUHPHPRULDFRPPHQGDELOH UHGGHQWWUDJRHGLDYHVWUDGH)ODXUDHW0DUFRYHUVXVGHSXOLFHHWPXVFDFRPRHGLD YHVWUDGHDOGDVHUPRQHVYHVWULHWFDHWHUDWKHRORJLFDHIDFXOWDWLVRSHUDTXDHXWLQDP GLIIXVLXVHVVHQWDFFHOHEULXVSXEOLFDWD´  -RKQRI6DOLVEXU\3/³LQVFULEHQGLVFRPRHGLLVHWWUDJRHGLLV´  3HWHUWKH9HQHUDEOH(SLVWRODH,; 3/³4XLGLQDQLVWXGLRFXPFRPRHGLVUH FLWDVFXPWUDJRHGLVGHSORUDVFXPPHWULFLVOXGLVFXPSRHWLVIDOOLVFXPSKLORVRSKLV IDOOHULV"´  -RKQRI6DOLVEXU\3ROLFUDWLFXV,,,3/³'HPXQGDQDFRPRHGLDYHOWUD JRHGLD´DQG9,,,±FI, LQ3/FI ³YLULOLWDWHPPHQWLVHI¿PL QDW´6HHDOVR3/)LYHIXUWKHUUHIHUHQFHVWRWUDJHG\DVDQDQFLHQW GUDPDWLFJHQUHDUHHLWKHUQRQFRPPLWDORUDSSURYLQJDQGDQRWKHUGHVLJQDWHVWKHOXF WXRVDWUDJRHGLDRIWKH-HZVVHHDERYH6HHDOVRWKHGLVFXVVLRQLQ'R[±

7KH7UDJHG\RIWKH0LGGOH$JHV



7KHVHGHQXQFLDWLRQVRIWKHDWUHZHUHIDUIURPQHZEXWWKH\ZHUHSUR YRNHG E\ D QHZ /DWLQ SRHWLFV DV ZHOO DV E\ WKH QHZ FKDOOHQJH WR /DWLQ KHJHPRQ\SRVHGE\YDULRXV(XURSHDQYHUQDFXODUVZKRVHFRQWULEXWLRQVWR PHGLHYDOSHUIRUPDQFHSUDFWLFHVZHUHQRZEHLQJSUHVHUYHGLQZULWLQJ DJRQRWKHWD@LQWKLVFRQWHVWVRSHDFHLVDQ QRXQFHGWRWKHSHRSOHE\WKHMXGJHDQGRQHLVLQYLWHGWRDIHDVW7KHQE\WKH,WH PLVVDHVWWKH\DUHWROGWRUHWXUQKRPHLQMR\WKH\VKRXW³WKDQNVEHWR*RG´DQG FRPHEDFNKRPHUHMRLFLQJ

 3DULV%LEOLRWKqTXHQDWLRQDOHIRQGVODWLQIROFIODWIRO6HH +DXUpDXHG   6\PHV±  +RQRULXV*HPPDDQLPDH,3/³6FLHQGXPTXRGKLTXLWUDJRHGLDVLQ WKHDWULVUHFLWDEDQWDFWXVSXJQDQWLXPJHVWLEXVSRSXORUHSUDHVHQWDEDQW6LFWUDJL FXV QRVWHU SXJQDP &KULVWL SRSXOR &KULVWLDQR LQ WKHDWUR (FFOHVLDH JHVWLEXV VXLV UHSUDHVHQWDW HLTXH YLFWRULDP UHGHPSWLRQLV VXDH LQFXOFDW ,WDTXH FXP SUHVE\WHU 2UDWHGLFLW&KULVWXPSURQRELVLQDJRQLDSRVLWXPH[SULPLWFXPDSRVWRORVRUDUH PRQXLW3HUVHFUHWXPVLOHQWLXPVLJQL¿FDW&KULVWXPYHOXWDJQXPVLQHYRFHDGYLF WLPDPGXFWXP3HUPDQXXPH[SDQVLRQHPGHVLJQDW&KULVWLLQFUXFHH[WHQVLRQHP 3HU FDQWXP SUDHIDWLRQLV H[SULPLW FODPRUHP &KULVWL LQ FUXFH SHQGHQWLV 'HFHP QDPTXH SVDOPRV VFLOLFHW D 'HXV PHXV UHVSLFH XVTXH ,Q PDQXV WXDV FRPPHQGR

7KH7UDJHG\RIWKH0LGGOH$JHV



+RQRULXV¶GLVFXVVLRQRIWUDJHG\DV'R[UHPDUNV³VWDQGVRXWDVXQXVXDOLQ LWV DSSURDFK WR H[SODLQLQJ KRZ WKH HQWLUH 0DVV ZRUNV HIIHFWLYHO\ DV ULWX DO´,@WLVFOHDUWKDW+RQRULXV¶LGHDRIWUDJHG\LVPRUHPHGLHYDOWKDQFODVVLFDO´ RSLQHV+HQU\$QVJDU.HOO\LQ7KH,GHDVDQG)RUPVRI7UDJHG\IURP$ULVWR WOHWRWKH0LGGOH$JHVDQGKHJRHVRQWRH[SRVHWKHWKHRORJLDQ¶VLJQRUDQFH

VSLULWXP PHXP FDQWDYLW HW VLF H[VSLUDYLW 3HU &DQRQLV VHFUHWXP LQQXLW 6DEEDWL VLOHQWLXP3HUSDFHPHWFRPPXQLFDWLRQHPGHVLJQDWSDFHPGDWDPSRVW&KULVWLUHV XUUHFWLRQHPHWJDXGLLFRPPXQLFDWLRQHP&RQIHFWRVDFUDPHQWRSD[HWFRPPXQLR SRSXORDVDFHUGRWHGDWXUTXLDDFFXVDWRUHQRVWURDEDJRQRWKHWD QRVWUR SHU GXHO OXPSURVWUDWRSD[DMXGLFHSRSXORGHQXQWLDWXUDGFRQYLYLXPLQYLWDWXU'HLQGHDG SURSULDUHGLUHFXPJDXGLRSHU,WHPLVVDHVWLPSHUDWXU4XLJUDWLDV'HRMXELODWHW JDXGHQVGRPXPUHPHDW´  'R[±6HHDOVR%HVWXO±  6LFDUGRI&UHPRQD3/  'R[±6\PHV±  6HHDOVRWKHGLVFXVVLRQRI+RQRULXVDQGWKHTXHVWLRQRI&KULVWLDQWUDJHG\LQWKH SDSHUE\'RPHQLFR3LHWURSDROR  7KHHGLWLRQRI%UDPEVPDNHVLWHDV\WRWUDFHWKHVRXUFHVZRYHQWRJHWKHUIURP WKHSOD\V2QWKHVWUXFWXUHRIWKHSOD\VHH7XLOLHU2QWKHODUJHUFXOWXUDO DQGWKHRORJLFDOFRQWH[WLQZKLFKWKLVWUDQVXEVWDQWLDWLRQEHFDPHSRVVLEOHVHH3XFK QHU



&DURO6\PHV

RIZKDWWUDJHG\UHDOO\ZDV±MXVWDVKHFULWLFL]HV,VLGRUHRI6HYLOOH¶V³FRQMHF WXUHV´ZKLOHSUDLVLQJ³WKHPRUHHQOLJKWHQHGYLHZVRIWZHOIWKFHQWXU\ZULW HUV´DVRSSRVHGWRWKRVH³WRWDOO\LQWKHGDUN´DW³ORZSRLQWV´LQWKHKLVWRU\ RIWUDJHG\¶VUHFHSWLRQ$OWKRXJK.HOO\¶VDYRZHGDLPLV³WRVHHZKDWDXWKRUV RIWKHSDVWPHDQWE\WKHZRUGDVDOLWHUDU\RUGUDPDWLFWHUP´KHPHDVXUHV WKHVHPHDQLQJVDJDLQVWWKH\DUGVWLFNRIWKH3RHWLFVRUWKHODWHUDFKLHYHPHQWV RI'DQWH&KDXFHUDQG6KDNHVSHDUH0\YHU\GLIIHUHQWJRDOKDVEHHQWR DUJXHWKDWWKHWUDJHG\RIWKH0LGGOH$JHVLVZRUWK\RIFRQVLGHUDWLRQLQLWV RZQULJKW,WVKRXOGQRWEHGLVPLVVHGEHFDXVHLWGRHVQRWIXO¿OODQLPSRV VLEOHDQDFKURQLVWLFGHVLUHIRUGLUHFWDFFHVVWRWKHWKHDWUHRIDQWLTXLW\$QG ZLWKWKHDVVLVWDQFHRIDWRRORQO\UHFHQWO\PDGHDYDLODEOHWRVFKRODUVLWKDV DFWXDOO\ EHHQ SRVVLEOH WR SURYH WKDW WKH PHGLHYDO XVHV RI WUDJHG\ DUH QRW FRQ¿QHGWRD³UDWKHUOLPLWHGQXPEHURIZULWHUVLQWKH0LGGOH$JHV´DV.HOO\ DOOHJHV0DQ\LIQRWPRVWRIWKHSULQFLSDODXWKRUVFRQVLGHUHGUHSUHVHQWDWLYH E\WKHHGLWRUVRIWKH3DWURORJLD/DWLQDKDYHVRPHWKLQJWRVD\DERXWLWRU ZLWKLW0RUHRYHUWKHYDVWPDMRULW\RIWKHVHDXWKRUVGRQRW³FRQVLGHULWWR UHIHUWRDQREVROHWHJHQUH´DV.HOO\FODLPVEXWUHJDUGLWDVXVHIXOIRUXQGHU VWDQGLQJWKHLURZQHYHUFKDQJLQJSUHVHQWV )LUVWDQGIRUHPRVWWKH/DWLQVSHDNLQJLQWHOOHFWXDOVDFWLYHLQWKH:HVW EHWZHHQWKHVHFRQGDQGWZHOIWKFHQWXULHVFRQVLGHUHGWUDJHG\WREHDQLP SRUWDQWSDUWRIWKHLUFXOWXUDOKHULWDJHDQGDQREMHFWRILQWHQVHFXULRVLW\FDW HJRU\, ,IWKHLUFXULRVLW\ZDVLOOLQIRUPHGWKDWZDVWKHUHVXOWRIKLVWRULFDO DFFLGHQWVDQGSURFHVVHVWKDWEHJDQORQJEHIRUHWKH0LGGOH$JHV±DVGHP RQVWUDWHGLQWKH¿UVWSRUWLRQRIWKLVHVVD\±DQGWRZKLFKPRGHUQVFKRODU VKLSLVVWLOOVXEMHFW,WLVDSUREOHPWKH\LQKHULWHGQRWRQHWKDWWKH\FDXVHG 6HFRQGDULO\WUDJHG\ZDVVSRNHQRIDVDGDQJHURXVSDJDQULWHEXWPDLQO\E\ DIHZVHOHFWFULWLFVZKRVHSHUVSHFWLYHVPDGHLWV\PEROLFRIWKUHDWVWRWKHLU ÀHGJOLQJ&KXUFKFDWHJRU\,, )RUDPXFKODUJHUDQGPRUHGLYHUVHJURXSRI HDUO\DQGPHGLHYDO&KULVWLDQVWUDJHG\KDGDVSHFL¿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

 .HOO\[LLL

7KH7UDJHG\RIWKH0LGGOH$JHV



:KHWKHUDQ\RIWKHVHPHGLHYDOWUDJHGLHVZHUH³DFFXUDWH´DWWHPSWVWRUH YLYH³DXWKHQWLF´WUDJHG\GRHVQRWPDWWHU:KDWPDWWHUVLVWKHYLWDOZRUNWKDW WUDJHG\FRQWLQXHGWRDFFRPSOLVKEH\RQGWKHWKHDWUHRI'LRQ\VXVLQVWDWHV XQERUQDQGDFFHQWV\HWXQNQRZQWRWKHFLWL]HQVRIDQFLHQW$WKHQV

%LEOLRJUDSK\ $XJXVWLQH'HVHUPRQH'RPLQLLQPRQWHOLEULGXRHG$OPXW0XW]HQEHFKHU  &RUSXV&KULVWLDQRUXP6HULHV/DWLQD7XUQKRXW %DULVK-RQDV 7KH$QWLWKHDWULFDO3UHMXGLFH%HUNHOH\DQG/RV$QJHOHV %HVWXO7KRPDV 7H[WVRIWKH3DVVLRQ/DWLQ'HYRWLRQDO/LWHUDWXUHDQG0HGLHYDO 6RFLHW\3KLODGHOSKLD %LGH]-RVHSK)UDQ]&XPRQWHGV  ,PS&DHVDULV)ODYLL&ODXGLL,XOLDQL HSLVWXODHOHJHVSRHPDWDIUDJPHQWDYDULD3DULV %RZPDQ$ODQ.*UHJ:RROIHGV  /LWHUDF\DQG3RZHULQWKH$QFLHQW:RUOG &DPEULGJH %URZQ3HWHU* ³$FWRUVDQG$FWRU0DQDJHUVDW5RPHLQWKH7LPHRI3ODXWXV DQG7HUHQFH´LQ(DVWHUOLQJ+DOOHGV ± %R\OH$- 7UDJLF6HQHFD$Q(VVD\LQWKH7KHDWULFDO7UDGLWLRQ/RQGRQDQG 1HZ