$/ ,77/(. 12:13 52-(&7$/,77/(.12:1352-(&72)38%/,&02'(51,=$7,212)5866,$1&28175<6,'(7+(1(:*(1(5$7,212)5866,$1,17(//,*(176,$$1'7+(1(:3($6$175<
,O\D*HUDVLPRY,IDQ\FRQWLQXLW\H[LVWVEHWZHHQWKH5XVVLDQFRXQWU\VLGHDW
WKHEHJLQQLQJRIWKHWZHQWLHWKFHQWXU\DQGWKHFXUUHQWUXUDOVLWXDWLRQLWLVWKHSHUVLVWHQWSUREOHPRIDPRGHUQL]DWLRQVWUDWHJ\,QGHHGDIWHUDOOWKHUDGLFDOWUDQVIRUPDWLRQVRIWKHSUHYLRXVFHQ
WXU\±7KH6WRO\SLQUHIRUPVWKHUHYROXWLRQWKH
FROOHFWLYL]DWLRQKXJHLQYHVWPHQWVLQWRDJULFXOWXUHGXULQJ
WKH%UH]KQHYHUD±WKH5XVVLDQFRXQWU\VLGHRQFHDJDLQDVD
FHQWXU\DJRFRQVWLWXWHVDZRUOGVXLJHQHULVERWKHFRQRPLFDOO\
DQGFXOWXUDOO\LVRODWHGIURPWKHPRGHUQL]HGXUEDQZRUOG,W
VHHPVWKDWDOOSUHYLRXVDWWHPSWVDWLPSRVLQJPRGHUQLVDWLRQVWUDWHJLHV³IURPDERYH´KDYHUHVXOWHGLQIDLOXUHZKDWHYHUWKHSROLWLFDORULHQWDWLRQ,QWKLVSDSHUZHZLOOGLVFXVVDFRPSOHWHO\GLI
IHUHQWSURMHFWIRU5XVVLDQDJULFXOWXUDOPRGHUQLVDWLRQDGYDQFHG
GXULQJWKHLQWHUUHYROXWLRQDU\GHFDGHE\DODUJHJURXSRIUXUDOSURIHVVLRQDOV DJURQRPLVWVHFRQRPLVWVHGXFDWRUV 
8QOLNHRWKHUPRGHUQL]DWLRQFDPSDLJQVWKLVSURMHFWDVVLJQHGWKH
JRYHUQPHQWDODJHQFLHVYLUWXDOO\QRGHFLVLYHUROHFKRRVLQJLQ
VWHDGWRPDNHWKHHGXFDWHGVRFLHW\ REVKFKHVWYHQQRVW¶ RIUXUDOVSHFLDOLVWVWKHPDLQSURWDJRQLVWVLQPRGHUQL]DWLRQ 
7KHLQVWLWXWLRQDOVHWWLQJIRUWKLVHIILFLHQWSXEOLFPRGHUQL]D
WLRQFDPSDLJQHPHUJHGDVDUHVXOWRIWKHDERUWLYHUHYROXWLRQRIDQGWKH6WRO\SLQDJUDULDQUHIRUP7KHDOOHJHGGH
IHDWRIWKHUHYROXWLRQOHGWKH5XVVLDQLQWHOOLJHQWVLDWRTXHVWLRQ
WKHWUDGLWLRQDOZRUOGYLHZDQGLWVSROLWLFDOUDGLFDOLVPDQGFRQ

   ,/<$*(5$6,029

WHPSWIRUURXWLQHVRFLRHFRQRPLFUHIRUPDWRU\DFWLYLW\7KHSUR
IRXQGFULVLVGHPRUDOL]HGWKHLGHRORJLFDOYDQJXDUGRIHGXFDWHG
5XVVLDQVRFLHW\WKXVDOORZLQJWKHWUDGLWLRQDOO\XQGHUDSSUHFLDWHGSURJUDPVRI³VPDOOGHHGV´DQGHFRQRPLFUHIRUPLVPWRDF
TXLUHDPRUHSURPLQHQWSRVLWLRQDPRQJWKH5XVVLDQSXEOLF)RU
PDQ\PHPEHUVRIWKHLQWHOOLJHQWVLDWKH6WRO\SLQUHIRUPVZHUHD
YLFWRU\IRUUHDFWLRQDVWKH\SURYRNHGZLGHVFDOHSURWHVWVLQVR
FLHW\EXWDOVRFKDQQHOHGDQXQSUHFHGHQWHGLQIOX[RIILQDQFHLQWR
DJULFXOWXUDOUHIRUP7KHVHGHYHORSPHQWVWRRNSODFHDJDLQVWDEDFNGURSRIJURZLQJLQWHUHVWLQDJULFXOWXUHDPRQJWKHHGXFDWHG
5XVVLDQSXEOLFUHIOHFWHGLQWKHZHOOGRFXPHQWHGG\QDPLFVRI
DJULFXOWXUHUHODWHGSHULRGLFDOV 7KHDQDWRP\RIWKDWFULVLVLVVKRZQLQ0DULQD0RJLOQHU0LIRORJLLD³SRGSRO¶QRJRFKHORYHND´UDGLNDO¶Q\LPLNURNRVPY5RVVLLQDFKDOD;;YHNDNDNSUHGPHWVHPLRWLFKHVNRJRDQDOL]D 0RVFRZ1HZ/LWHUDU\5H
YLHZ  ,QWKHZRUGVRIDFRQWHPSRUDU\5XVVLDQKLVWRULDQ³µ7KHVPDOOGHHGVWKHRU\¶RI,D9$EUDPRYZKLFKVXEVWDQWLDWHGWKHQHFHVVLW\RIFXOWXUDOZRUNLQ]HPVWYRVVLJQLILFDQWO\FKDQJHGWKHLGHRORJLFDORULHQWDWLRQRI
3RSXOLVP7KHLGHDRIDQDSROLWLFDOµJRLQJWRWKHSHRSOH¶ZDVFHQWUDOLQ
WKHVHOHFWLQJRILWVIRUPVZD\VDQGFKDUDFWHUDQGLWZDVUHDOLVWLF´6HH
99=YHUHY³0DUNVL]PLJHQH]LVQHRQDURGQLFKHVWYD3RPDWHULDODPSHUHSLVNL90&KHUQRYDV1)'DQLHOVRQRPYNRQWVHKJRGRY;,;Y´LQ196DPRYHUHG5RVVLLDLUHIRUP\6ERUQLNVWDWHL9\S 0RVFRZ SS,D9$EUDPRYZDVRQHRIWKHRULJLQDOLGHRORJLVWVRIWKH³VPDOOGHHGV´VHHKLV&KWRVGHODOR]HPVWYRLFKWRRQRGHODHW
6W3HWHUVEXUJ 
 %\WKHHQGRIWKHILUVWFHQWXU\RIWKH5XVVLDQDJULFXOWXUDOSUHVV¶H[LVW
HQFHLQWKH¶VWKHUHZHUHVRPHSHULRGLFDOVLQWKHHQWLUH5XVVLDQ(PSLUHGHGLFDWHGWRYDULRXVDVSHFWVRIODQGWLOOLQJIDUPLQJVWRFNEUHHG
LQJDQGIRUHVWU\6HH09LW¶¶³6HO¶VNRNKR]LDLVWYHQQDLDSHFKDW¶Y5RVVLL
NHHSLDWLGHVLDWLOHWLLX ´$JURQRPLFKHVNLL]KXUQDO  S
&KDUDFWHULVWLFDOO\HQRXJKXQWLOWKH¶VWKHPDMRULW\RIWKHVHSHULRGLFDOVWDUJHWHGDYHU\QDUURZFLUFOHRIUHDGHUVLQWHUHVWHGLQWKHRUHWLFDO
DVSHFWVRIDJULFXOWXUH)HZWLWOHVZHUHSXEOLVKHGE\WKHJRYHUQPHQW
PRVWRIWKHRWKHUVZHUHSXEOLVKHGE\,PSHULDOVRFLHWLHVVSHFLDOL]LQJLQ
VHSDUDWHEUDQFKHVRIWKHUXUDOHFRQRP\ VKHHSEUHHGLQJIRUHVWU\HWF 
DQGGXULQJWKHODVWWKLUGRIWKHFHQWXU\E\]HPVWYRV,WZDVSUREDEO\WKHLPSDFWRIWKHIDPLQHDQGWKHXQLWHGUHOLHIHIIRUWVE\WKHLQWHOOLJHQWVLDWKDWFKDQJHGWKHIDFHRIDJURMRXUQDOLVP DVLWFKDQJHGWKHSDW
WHUQRISXEOLFDFWLYLW\RIWKHHQWLUH³HGXFDWHGVRFLHW\´ 6HH5LFKDUG*
5REELQV-U)DPLQHLQ5XVVLD7KH,PSHULDO*RYHUQPHQW
5HVSRQGVWRD&ULVLV 1HZ<RUNDQG/RQGRQ&ROXPELD8QLYHUVLW\3UHVV  $/ ,77/(. 12:13 52-(&77DEOH
7KH1XPEHURI$JULFXOWXUDO3HULRGLFDOVLQ5XVVLD<HDU1XPEHURIWLWOHV              

7KHDFWXDOILJXUHVPD\YDU\GHSHQGLQJRQWKHFULWHULDRIVHOHFWLRQDGRSWHGE\GLIIHUHQWVWDWLVWLFLDQVEXWRWKHUVRXUFHVFRQILUPWKHEDVLFWUHQG%\DOPRVWKDOIRIDOODJULFXOWXUDOSHULRGLFDOVZHUHOHVVWKDQ\HDUVROGDQGRIDOOSXEOLFDWLRQVZHUHIRXQGHGDIWHU,IZHHTXDWHWKHQXPEHURI
VSHFLDOL]HGSHULRGLFDOVZLWKWKHSRSXODULW\RIWKHLUWRSLFZHFDQ
UHFRQVWUXFWWKH5XVVLDQSUHVVFKDUWV,QDJURMRXUQDOLVPDFFRXQWHGIRURIWKHSHULRGLFDOVSXEOLVKHGLQWKH5XVVLDQ(PSLUHZKLFKJDYHLWDQKRQRUDEOHWKLUGSODFHDPRQJRWKHUWRSLFV%\LWVVKDUHKDGJURZQWR$JULFXOWXUDOSHULRGLFDOVKHOGDILUPWKLUGSODFHFUHDWLQJDQLFKHRIWKHLURZQ
,ISURIHVVLRQDOSHULRGLFDOVZHUHUHDGSUHGRPLQDQWO\E\VSH
FLDOLVWVWKHUHZDVDQLQWHUPHGLDWHUDQJHEULGJLQJWKHZRUOGRI
 SS:%UXFH/LQFROQ,Q:DU¶V'DUN6KDGRZ7KH5XV
VLDQV%HIRUHWKH*UHDW:DU 1HZ<RUN7KH'LDO3UHVV S
%HQ(NORI5XVVLDQ3HDVDQW6FKRROV2IILFLDOGRP9LOODJH&XOWXUHDQG
3RSXODU3HGDJRJ\ %HUNHOH\DQG/RV$QJHOHV&DOLIRUQLD
8QLYHUVLW\RI&DOLIRUQLD3UHVV S'DYLG.HUDQV$JULFXOWXUDO(YROXWLRQDQGWKH3HDVDQWU\LQ5XVVLD7DPERY3URYLQFH
3K'GLVVHUWDWLRQ8QLYHUVLW\RI3HQQV\OYDQLD S
,QWKH¶VDQXPEHURIQHZPDLQO\ZHHNO\SHULRGLFDOVDSSHDUHG
WKDWWDUJHWHGDQHZW\SHRIUHDGHUVWLOOKLJKO\HGXFDWHGDQGZHOOWRGREXWDOVRKDYLQJDSUDFWLFDOLQWHUHVWLQDJULFXOWXUH KHQFHWKHVSUHDGRI
ZHHNO\HGLWLRQVLQFRQWUDVWWRWKHPRQWKO\DQGHYHQ\HDUO\SXEOLFDWLRQVRISUHYLRXVHSRFKV $WWKLVVWDJHORFDO]HPVWYRVDQGSURYLQFLDODJULFXOWXUDOVRFLHWLHVZHUHWKHOHDGLQJLQYHVWRUVLQWKHDJULFXOWXUDOSHULRGLFDOSUHVVGHPRQVWUDWLQJWKHGHFHQWUDOL]DWLRQRIWKHHPHUJLQJSXEOLFGLVFRXUVHRQWKHDJUDULDQTXHVWLRQ %DVHGRQGDWDGHULYHGIURP9LW¶¶³6HO¶VNRKR]LDLVWYHQQDLDSHFKDW¶Y
5RVVLL´S990RUDFKHYVNLLHG$JURQRPLFKHVNDLDSRPRVKFK¶Y
5RVVLL 3HWURJUDG'HSDUWPHQWRI$JULFXOWXUH S
 990RUDFKHYVNLLHG6SUDYRFKQLNSRVHO¶VNRNKR]LDLVWYHQQRLSHFKDWL 3HWURJUDG6SUDYRFKQRL]GDWHO¶VNRHELXURSUL'HSDUWDPHQWH=HP
OHGHOLLD SS[[LL[[LLL ,99RO¶IVRQHG*D]HWQ\LPLUQDJRG$GUHVQDLDLVSUDYRFKQDLDNQLJD 6W3HWHUVEXUJQRGDWH FROXPQV   ,/<$*(5$6,029

SURIHVVLRQDOVDQGWKDWRIWKHEURDGSXEOLF7KLVUDQJHFRQVLVWHG
RIDFRQVLGHUDEOHQXPEHURILWHPVRQDJUDULDQWKHPHVLQJHQHUDOSHULRGLFDOVDIIHFWLQJHYHQWKRVHUHDGHUVZKRZHUHQRWSURIHVVLRQDOO\HQJDJHGLQDJULFXOWXUH7KHUHDUHVWDWLVWLFVDYDLODEOH
RQWKHQXPEHURISXEOLFDWLRQVRQDJULFXOWXUDOLVVXHVWKDWDSSHDUHGHYHU\\HDULQODWHLPSHULDO5XVVLD$FFRUGLQJWRWKH
GDWDFROOHFWHGE\$'3HGDVKHQNRWKHSHDNRISXEOLFLQWHUHVW
LQDJULFXOWXUHRFFXUUHGLQZKHQPRUHWKDQWKRXVDQG
DUWLFOHVDQGHVVD\VRQGLIIHUHQWDVSHFWVRIWKHDJUDULDQTXHVWLRQ
ZHUHSXEOLVKHGLQYDULRXVSHULRGLFDOVWKDWLVDQHZSLHFHRQ
DJULFXOWXUHDSSHDUHGHYHU\PLQXWHV7KHVHHPLQJO\SHUPDQHQWJURZWKRISXEOLFLQWHUHVWLQDJULFXOWXUHZDVEURXJKWWRD
KDOWE\WKHRXWEUHDNRIWKHZDUEXWLWZDVQRWXQWLOWKDWWKH
VWHDG\GHFOLQHLQWKHQXPEHURISXEOLFDWLRQVWXUQHGLQWRDYLUWXDOFROODSVH
$IWHUWKHUHZDVDJURZLQJFRQVHQVXVDPRQJWKHHGX
FDWHGSXEOLFWKDWWKHZD\RXWRIWKHDJUDULDQFULVLVZDVWKH³URDG
OLWWOHNQRZQWRWKHIDUPHUVEXWZHOOVWXGLHGE\SHRSOHRI
VFLHQFHDQGUDWLRQDOSUDFWLFH´%\ZKLFKWKH\PHDQWWKHLQWHQVLILFDWLRQRISURGXFWLRQDGLYHUVLILFDWLRQRIFXOWLYDWHGFURSVDQGWKHLQWURGXFWLRQRIDPXOWLILHOGFURSURWDWLRQVFKHPH5XV
VLDQUXUDOSURIHVVLRQDOVFDPHRXWZLWKDSUHVFULSWLRQIRUPRG
HUQL]LQJWKHSHDVDQWHFRQRP\7KH\EHOLHYHGWKDWE\FKDQJLQJRQO\RQHHOHPHQWRIWKHROGYLFLRXVFLUFOH±WKHWKUHHILHOGU\H )RURYHU\HDUVXQWLOKLVGHDWKLQ$'3HGDVKHQNRFRPSRVHG
OLVWVRIDOOSXEOLVKHGSLHFHVRQDJULFXOWXUHUHJDUGOHVVRIWKHVRXUFHRI
SXEOLFDWLRQ$'3HGDVKHQNR8ND]DWHO¶NQLJ]KXUQDO¶Q\NKLJD]HWQ\NK
VWDWHLSRVHO¶VNRP\NKR]LDLVWYX]DJRG 6W3HWHUVEXUJ3HWURJUDG $O
H[DQGHU3HGDVKHQNRFODVVLILHGDOODJULFXOWXUHUHODWHGSXEOLFDWLRQVLQWR
FDWHJRULHVDQGZLWKVXFKDWLJKWQHWLWLVQRWOLNHO\WKDWPDQ\RIWKRVHSXEOLFDWLRQVKDGHVFDSHGKLVDWWHQWLRQ+HDOVRPDGHOLVWVRISHULRGLFDOVWKDWSXEOLVKHGDUWLFOHVRQWKHWRSLFGXULQJDJLYHQ\HDU6RPHRIWKRVHSHULRGLFDOVDSSHDUHGRQO\RFFDVLRQDOO\RQKLVOLVWIRUWKHLULQWHUHVWLQ
WKHWRSLFZDVRQO\WHPSRUDU\6WLOOWKHLUSUHVHQFHLVYHU\LPSRUWDQWDV
DQLQGLFDWLRQRISXEOLFLQYROYHPHQWLQWKHGLVFRXUVHRQDJULFXOWXUH )6HY³.YRSURVXRPHUDNKXOXFKVKHQLLDNUHVW¶LDQVNRJRNKR]LDLVWYD'RNODGPX6DPDUVNRPXJXEHUQVNRPXDJURQRPLFKHVNRPXVRYHVKFKDQLLX ´LQ2WFKHWRGHLDWHO¶QRVWLLVRVWRLDQLLVUHGVWY6DPDUVNRJRREVKFKHVWYDXOXFKVKHQLLDNUHVW¶LDQVNRJRNKR]LDLVWYD]DYWRURHWUHNKOHWLH
HJRVXVKFKHVWYRYDQLLD V;,JSR;,J  6DPDUD S  $/ ,77/(. 12:13 52-(&7FHQWHUHGFURSURWDWLRQVFKHPH±WKHQWKHZKROHSHDVDQWHFRQRP\ZRXOGEHWXUQHGXSVLGHGRZQ7KHPXOWLILHOGV\VWHPRIJURZLQJODERUFRQVXPLQJGLYHUVLILHGFXOWXUHVLQFOXGLQJURRW
FURSVFRUQRUIOD[ZRXOGSURWHFWSHDVDQWVIURPWRWDOKDUYHVWIDLOXUHVSURYLGHWKHLUFDWWOHZLWKPXFKQHHGHGIRGGHUDQGWKHLUILHOGVZLWKQDWXUDOIHUWLOL]HU7KLVLQWHQVLILFDWLRQRISURGXFWLRQFRXOGHDVHWKHSHDVDQWV¶KXQJHUIRUODQGDQGGLUHFWO\LQYROYH
WKHPLQWKHQDWLRQDOPDUNHWV\VWHP$QGQRPDWWHUKRZORQJSHDVDQWVVWXEERUQO\FRQWLQXHWREH
OLHYHWKDWWKHWKUHHILHOGV\VWHPKDVH[LVWHGDOPRVWIURPWKHFUH
DWLRQRIWKHZRUOGWKH\ZLOO>HYHQWXDOO\@KDYHWRLQWURGXFHD
QHZRUGHUDQGPRYHWRJUDVVFXOWLYDWLRQDQGWKHPXOWLILHOG>V\V
WHPRI@SURGXFWLRQ

7KLVZDVDUHDOO\JRRGSODQSURPLVLQJWRVROYH5XVVLD¶V
PRVWEXUQLQJSROLWLFDODQGHFRQRPLFSUREOHPVE\PHDQVRIDSXUHO\WHFKQLFDOSURFHGXUHSHUFHLYHGE\LWVVXSSRUWHUVDVTXLWHUHDOLVWLFDQGHIIHFWLYH7KHUHZDVRQO\RQH³EXW´LQWKLVSODQKRZWRFRPSHOPLOOLRQVRISHDVDQWVWRDGRSWLW7KH³$UFKLPHGH¶V
OHYHU´KDGWREHIRXQGWRWXUQWKHSHDVDQWZRUOGWRZDUGPRG
HUQL]DWLRQ,WZDVFOHDUWKDWSHDVDQWVZRXOGQHYHUGRVRRQWKHLURZQ7RWDOO\LVRODWHGIURPWKHHQWLUHZRUOGE\KLJKOHYHOVRILOOLWHUDF\DQGDJHROGVXSHUVWLWLRQV5XVVLDQ9LOODJHVFRXOGQRWFKDQJH
WKHLUDQFLHQWFXVWRPVDQGSUDFWLFHVDORQHDQGXQDLGHG$QRXW
VLGHIRUFHZDVQHFHVVDU\
7KHLQWHOOLJHQWVLDDQGWKHVSHFLDOLVWVZKRKDYHGHYRWHGWKHLUHIIRUWVWRWKHYLOODJHFDQDQGVKRXOGFRPHWRKHOSWKHSHDVDQWU\WRJLYHWKHPDWOHDVWDQRSSRUWXQLW\WREHFRPHIDPLOLDUZLWK
UDWLRQDOPDQDJHPHQWWRKHOSZLWKSXUFKDVLQJWKHQHFHVVDU\WRROVDQGVHHGVDQGWRSURYLGHWKHPZLWKJRRGEUHHGLQJVWRFN$OO
WKLVLVSRVVLEOH

,WZDVH[SHFWHGWKDWWKHKHOSWKHLQWHOOLJHQWVLDZRXOGRIIHU
WKHSHDVDQWU\ZRXOGQRWEHOLPLWHGWRGLUHFWLQWHUYHQWLRQLQORFDO
 0)UDQNIXUW³=DQLPDLWHV¶VNRWRYRGVWYRP 3LV¶PRNNUHVW¶LDQDPLXJDYRVWRND5RVVLL ´6DPDUVNLL]HPOHGHOHWV 2FWREHU S
 99)HUGLQDQGRY³1HVNRO¶NRVORYRPHONLNKVHO¶VNRNKR]LDLVWYHQQ\NKREVKHVWYDNK´9HWHULQDUQDLDNKURQLND9RURQH]KVNRLJXEHUQLL3XEOLFDWLRQRIWKH9RURQH]KSURYLQFH]HPVWYRERDUG 0DUFK SS
   ,/<$*(5$6,029

DIIDLUV,QWKHSXEOLFGLVFXVVLRQVRIWKHILUVWGHFDGHRIWKHWZHQWLHWKFHQWXU\LWZDVVHHQDVDPRUHFRPSOLFDWHGWDVN³)RUWKH
VDNHRIPDVVLPSURYHPHQWLQSHDVDQWKXVEDQGU\LWLVQHFHVVDU\WRLQYROYHWKHDJULFXOWXUDOSRSXODWLRQWKHPVHOYHVLQDFWLYLW\LQ
WKDWGLUHFWLRQ´(FKRLQJWKHIDPRXVVORJDQRIDJUHDWWKHRUHWLFLDQRIUDGLFDOSRSXOLVP3HWU7NDFKHYODWHUUHSHDWHGE\9ODGLPLU/HQLQ³/HDUQOHDUQDQGOHDUQ´WKH'RFWRURI9HWHULQDU\6FL
HQFHRIWKH8QLYHUVLW\RI%HUQ.6DNRYVNLLXUJHGLQ
³ZHQHHGVFKRROVRQFHDJDLQVFKRROVDQGDJDLQVFKRROV´ :KLOHWKHUHYROXWLRQDULHV7NDFKHYDQG/HQLQFDOOHGRQWKHLU
IROORZHUVWROHDUQKRZWRGHVWUR\WKHROGZRUOGDOWRJHWKHUWKH
SURIHVVLRQDOLQWHOOLJHQW6DNRYVNLLVDZVFKRROLQJDVDYHKLFOHWR
HOHYDWHWKHDUFKDLFSHDVDQWVWRWKHVWDQGDUGVRIPRGHUQFLYLOL]D
WLRQVRWKH\ZRXOGEHDEOHWRLPSURYHWKHLUVLWXDWLRQDQGHYHQWXDOO\WKHQDWLRQDOHFRQRP\:KHQLQ'HFHPEHU3HWU
6WUXYHVWDWHGWKDW³7KHTXHVWLRQRI5XVVLDQHFRQRPLFUHYLYDOLVILUVWRIDOODTXHVWLRQRIPDNLQJWKHQHZHFRQRPLFPDQ´ KH
PHUHO\VXPPHGXSSXEOLFGLVFXVVLRQVRIWKHSUHYLRXVKDOIGH
FDGH
+HQFHLQFRQWUDVWWRWKHFODVVLFDOUHYROXWLRQDU\LQFOLQHG
LQWHOOLJHQWVLDWKHQHZSRVWJHQHUDWLRQRI5XVVLDQLQWHOOLJHQWVLDWKDWZDVVKDSHGE\WKHFROOHFWLYHH[SHULHQFHRIWKHGLVLOOXVLRQPHQWLQUHYROXWLRQZDVFRPSRVHGRISHRSOHZKRVDZ
WKHLUWDVNDVDVVLVWLQJWKHSUHVXPDEO\DUFKDLFSHDVDQWVWRLQWH
JUDWHLQWRWKHPRGHUQVRFLHW\DQGHFRQRP\,IEHIRUHWKHLQWURGXFWLRQRIWKHFRQVWLWXWLRQDOUHJLPHSURJUHVVLYHHOHPHQWVRIVRFLHW\LQFOXGLQJPDQ\HYHQERXUJHRLVHOH
PHQWVZHUHWKLQNLQJLQDUHYROXWLRQDU\ZD\QRZDQHYROXWLRQ
DU\SRLQWRIYLHZKDVEHJXQWRSUHYDLOZKHUHKLWKHUWRLWZDVLPDJLQHGWKDWHYHQWKHPRVWUDGLFDOVROXWLRQIRUWKHDJUDULDQTXHVWLRQZRXOGWDNHDOLIHWLPHRIDJHQHUDWLRQWRDFKLHYH ..6DNRYVNLL³.SRGQLDWLLXLXOXFKVKHQLLXQDVKHJR]KLYRWQRYRGVWYD´9HVWQLNREVKFKHVWYHQQRLYHWHULQDULL  FROXPQ
 ,ELG 3%6WUXYH³(NRQRPLFKHVNLHSURJUDPP\LµQHHVWHVWYHQQ\LUH]KLP¶´
LQ3%6WUXYH3DWULRWLFDSROLWLNDNXO¶WXUDUHOLJLLDVRWVLDOLVP 0RV
FRZ5HVSXEOLND S
 ³9QXWUHQQHHRER]UHQLH´$JURQRPLFKHVNLL]KXUQDO  S  $/ ,77/(. 12:13 52-(&7$VDPDWWHURIIDFWWKHDJHQGDRIWKLVHPHUJLQJ1HZ*HQ
HUDWLRQRI5XVVLDQLQWHOOLJHQWVLDZDVDSURJUDPRIPRGHUQL]LQJ
WKHSHDVDQWPHQWDOLWpUDWKHUWKDQSXEOLFLQVWLWXWLRQV7KHUROH
RIWKH1HZ*HQHUDWLRQZDVWKHQWKHUROHRIGHFLVLYH³LQVWLJDWRUVRIPRGHUQL]DWLRQ´RU.XOWXUWUlJHUVLQWKH*HUPDQL]HGODQJXDJHRIWKDWHSRFK ZKRZRUNLQJDVUXUDOSURIHVVLRQDOVDWWHPSWHGWRVWLPXODWHPHFKDQLVPVIRUVHOISURSHOOHGPRGHUQL]D
WLRQDPRQJWKHSHDVDQWV7KHFODVVLFK\SRWKHVHVRIWKLVSUR
JUDPZHUHSURGXFHGLQE\DSURPLQHQWUHSUHVHQWDWLYHRI
WKH1HZ*HQHUDWLRQ$OH[DQGHU&KDLDQRY,QDVSHHFKGHOLY
HUHGDWWKH0RVFRZUHJLRQDOFRQJUHVVRIUXUDOSURIHVVLRQDOVKH
VXJJHVWHGWKDWDOORIWKHPVKRXOGVWULYH³>E@\PHDQVRILPSDFWLQJXSRQWKHPLQGDQGZLOORIWKHHFRQRPLFSHRSOH>NKR]LDLVWYHQQ\NKOXGHL@WRDZDNHQLQLWLDWLYHLQWKHLUPLOLHXDQGWRGL
UHFWWKLVLQLWLDWLYHLQDPRVWUDWLRQDOPDQQHU,QDZRUGWRFKDQJH
ROGLGHDVLQWRQHZLQWKHKHDGVRIWKHORFDOSRSXODWLRQ´,QD
IHZ\HDUV&KDLDQRYZRXOGEHFRPHDOHDGHURIWKH2UJDQL]D
WLRQ3URGXFWLRQVFKRROLQ5XVVLDQUXUDOVWXGLHVWKHVFKRRORI )RUDVRFLRORJLFDO\DQGKLVWRULFDOO\JURXQGHGPRGHORIWKH1HZ*HQHUDWLRQRI5XVVLDQLQWHOOLJHQWVLDVHHP\3K'WKHVLV7KH1HZ*HQHUDWLRQ
RI5XVVLDQ,QWHOOLJHQWVLDDV$FWRUVRI0RGHUQL]DWLRQ)DFLQJWKH&RXQ
WU\VLGH   5XWJHUV8QLYHUVLW\  7KHIROORZLQJSDVVDJHLVGHGLFDWHGWRDJURQRPLVWVZKRFRQVWLWXWHGWKH
IURQWOLQHRIWKH1HZ*HQHUDWLRQLQLWVHIIRUWVWRPRGHUQL]HWKHSHDVDQWU\EXWWKHVDPHFDQEHUHSHDWHGDERXWWKHHQWLUHSURMHFWRIWKH1HZ*HQHUDWLRQ³$QDJURQRPLVWLVD.XOWXUWUlJHUDQGSUREDEO\HYHQPRUH
VRWKDQDQ\RQHHOVHIRULQVWDQFHDWHDFKHURUDSK\VLFLDQ7KLVLVGH
WHUPLQHGE\WKHIDFWWKDWDQDJURQRPLVWVWD\VPXFKFORVHUWRWKHSV\FKRORJ\RIWKHSRSXODWLRQWKDQDOORWKHU.XOWXUWUlJHUV$QDJURQRPLVWLQ
KLVZRUNSHQHWUDWHVWRWKHYHU\HVVHQFHRISHDVDQWOLIHWRDJULFXOWXUHSURGXFLQJFUHDWLYHZRUNERWKLQWKHSHDVDQWV¶PLQGVDQGLQWKHHFRQRPLFUHJLPHRIWKHLUIDUPV´$,'¶LDNRY³,]]HPVNRLDJURQRPLFKHVNRLGHLDWHO¶QRVWL´=HPVNLLDJURQRP  S$QDWROLL'¶LDNRYKDGJUDGXDWHGIURPDPLGOHYHODJULFXOWXUDOFROOHJHLQDQGLQZDVZRUNLQJDVRQHRIHLJKWSUHFLQFWDJURQRPLVWVLQWKH%HOHEHLGLVWULFWRI
WKH8IDSURYLQFH6HH00*OXNKRY99=DUHWVNLLDQG916KWHLQ
HGV0HVWQ\LDJURQRPLFKHVNLLSHUVRQDOVRVWRLDYVKLLQDSUDYLWHO¶VWYHQQRL
LREVKFKHVWYHQQRLVOX]KEHLDQYDULDJ6SUDYRFKQLN 3HWURJUDG S
 0RVNRYVNLLREODVWQRLV¶¶H]GGHLDWHOHLDJURQRPLFKHVNRLSRPRVKFK¶LQD
VHOHQLLX7UXG\6¶¶H]GD 0RVFRZ SS   ,/<$*(5$6,029

WKRXJKWZKLFKVKDSHGWKHPHWKRGRORJLFDOIUDPHZRUNDQGWKHRUHWLFDOSUHPLVHVRIWKH1HZ*HQHUDWLRQRI5XVVLDQLQWHOOLJHQWVLDDVDVRFLDOPRYHPHQW$OWKRXJKWKH1HZ*HQHUDWLRQPRGHUQL]DWLRQSURMHFWIRFXVHG
RQWKHWUDQVIRUPDWLRQRIPHQWDOUDWKHUWKDQLQVWLWXWLRQDOVWUXFWXUHVLWVWLOOQHHGHGFHUWDLQLQVWLWXWLRQDOIUDPHZRUNVIRULWVLP
SOHPHQWDWLRQ7KHLGHDOPRGHOZDVIRXQGLQLWLDOO\LQWKH,WDOLDQ&DWWHGUD$PEXODQWHGL$JULFROWXUD SO&DWWHGUH$PEXODQWL  7KH2UJDQL]DWLRQ3URGXFWLRQ6FKRRO 236 LQ5XVVLDQHFRQRPLFWKRXJKWDWWUDFWHGWKHDWWHQWLRQRI:HVWHUQDQG5XVVLDQVFKRODUVDWGLIIHUHQWSRLQWVRIWLPHDQGIRUGLIIHUHQWUHDVRQV7KH:HVWHUQVFKRODUVZKRUHGLVFRY
HUHGWKH236LQWKHVZHUHIDVFLQDWHGE\WKHHFRQRPLFFRQFHSWVRIWKLVJURXSDVRSSRVHGWRWKRVHRI0DU[LVWVFKRODUVLQWKHV7KHVH
GHEDWHVUHVHPEOHGGLVSXWHVEHWZHHQWKH0DU[LVWVDQGQRQFODVVLFDOWKH
RULVWVRIWKHV6HH1DXP-DVQ\6RYLHW(FRQRPLVWVRIWKH7ZHQWLHV
1DPHVWREH5HPHPEHUHG &DPEULGJH SS7HRGRU6KD
QLQ7KH$ZNZDUG&ODVV3ROLWLFDO6RFLRORJ\RI3HDVDQWU\LQD'HYHORS
LQJ6RFLHW\5XVVLD 2[IRUG 6XVDQ*URVV6RORPRQ
7KH6RYLHW$JUDULDQ'HEDWH$&RQWURYHUV\LQ6RFLDO6FLHQFH
 %RXOGHU:HVWYLHZ3UHVV 6XVDQ*URVV6RORPRQ³5XUDO
6FKRODUVDQGWKH&XOWXUDO5HYROXWLRQ´LQ6KHLOD)LW]SDWULFNHG&XO
WXUDO5HYROXWLRQLQ5XVVLD %ORRPLQJWRQDQG/RQGRQ,QGLDQD8QLYHUVLW\3UHVV SSHWF
6RYLHWKLVWRULDQVLQWULHGWRLQWHUSUHWWKHSROLWLFDOGHFODUDWLRQVRIWKH&KDLDQRYLVWVLQVXSSRUWRI1(3DVJURXQGVIRU3HUHVWURLND¶V
OHJLWLPL]DWLRQ 9%DUQHWWUHFHQWO\FDPHWRWKHVDPHFRQFOXVLRQLQ9LQ
FHQW%DUQHWW³5HFHQW6RYLHW:ULWLQJVRQ(FRQRPLF7KHRU\DQG3ROLF\
IURP1(3´&RH[LVWHQFHSS $VDUXOHERWKKLVWRULRJUDSKLFDOPRYHPHQWVLJQRUHGWKHSUH5HYROXWLRQDU\KDOIRIWKH
2UJDQL]DWLRQ3URGXFWLYH6FKRRO¶VDFWLYLW\DQGWKHVRFLDOSRVLWLRQDQGYLHZVRILWVPHPEHUV,QUHFHQW\HDUVWKLVVLWXDWLRQKDVEHHQFKDQJLQJ
LQWKHKLVWRULRJUDSK\DVLWVPDLQIRFXVVKLIWHGWRZDUGWKHJHQHVLVRIWKH
263DVDSKHQRPHQRQVXLJHQHULV6HHIRULQVWDQFH6''RPQLNRY
0LURYR]]UHQLH$9&KDLDQRYD $YWRUHIHUDWGLVVHUWDWVLLNDQGLGDWDLVWRULFKHVNLNKQDXN0RVFRZ,QVWLWXWLVWRULL5$1 $OHVVDQGUR6WDQ]LDQL³5XVVNLHHNRQRPLVW\]DJUDQLWVHLYJJ3UHGVWDYOHQLLDRU\QNHLWVLUNXOLDWVLLLGHL´LQ,X6KHUUHUDQG%$QDQ¶LFKHGV5XVVND
LDHPLJUDWVLLDGRJRGD±ODERUDWRULLDOLEHUDO¶QRLLUHYROLXWVLRQQRLP\VOL 6W3HWHUVEXUJ(YURSHLVNLL'RP SS,9*HUDVLPRY7YRUFKHVWYR$9&KDLDQRYDYRWHFKHVWYHQQRLL]DUXEH]KQRLLVWRULRJUDSKLL $YWRUHIHUDWGLVVHUWDWVLLNDQGLGDWDLVWRULFKHVNLNKQDXN.D
]DQ.D]DQ8QLYHUVLW\ $OHVVDQGUR6WDQ]LDQL/¶eFRQRPLHHQUpYROXWLRQ/HFDVUXVVH 3DULV$OELQ0LFKHO6$   $/ ,77/(. 12:13 52-(&7RUWKHPRELOHFRQVXOWLQJEXUHDXVVWDIIHGZLWKWZRRUWKUHHVSH
FLDOLVWVLQDJULFXOWXUH7KLVPRELOHDJULFXOWXUDORIILFHZRXOGVWD\DWDSODFHIRUDIHZ\HDUVHVWDEOLVKLQJFRQWDFWZLWKWKH
SRSXODWLRQDQGSURSDJDWLQJUDWLRQDOWHFKQLTXHVRIDJULFXOWXUH
7RDGRSWWKHDGYDQFHGWHFKQLTXHVDQGWRSXUFKDVH³WKHQHFHV
VDU\WRROVDQGVHHGVJRRGVLUHV´WKHSRRUSHDVDQWVQHHGHG
PRQH\ZKLFKWKH\FRXOGQRWREWDLQWKURXJKRUGLQDU\EDQNORDQV+HQFHPRELOHEXUHDXVRUJDQL]HGDJULFXOWXUDOFRRSHUDWLYHVDPRQJWKHSURSDJDWHGSHDVDQWVDQGWDXJKWWKHPKRZWRUXQ
WKRVHRUJDQL]DWLRQV&RRSHUDWLYHVDVUHJLVWHUHGFRUSRUDWLRQVFRXOGJXDUDQWHHWKHUHSD\PHQWRIORDQVDQGKHQFHDFFXPXODWHG
PXFKQHHGHGPRQH\DWDPRGHVWUDWH)XUWKHUPRUHEX\LQJ
ZKROHVDOHZDVFKHDSHUDQGWKHTXDOLW\RIJRRGVZDVHQVXUHGE\
RIILFLDOFRQWUDFWV:KHQDIWHUDIHZ\HDUVWKHF\FOHRIWHDFKLQJRUJDQL]LQJDQGLPSOHPHQWDWLRQRIWKHQHZOHVVRQVZDVFRP
SOHWHGDPRELOHEXUHDXPRYHGWRDQHZORFDWLRQZKHUHWKH
IDPHRILWVDFFRPSOLVKPHQWVKDGDOUHDG\SUHSDUHGWKHJURXQG
IRUDQHZPDJLFDOWUDQVIRUPDWLRQ
 7KHILUVW&DWWHGUD$PEXODQWHGL$JULFROWXUDZDVHVWDEOLVKHGLQ5RYLJR
LQ%\WKHWXUQRIWKHFHQWXU\WKHUHZHUHPRELOHEXUHDXVRIDJULFXOWXUHLQ,WDO\DQGLQEXUHDXVZLWKDGGLWLRQDOEUDQFK
HV,QPRELOHEXUHDXVHPSOR\HGVSHFLDOLVWVLQDJULFXOWXUHRIZKRPKDGUHFHLYHGDJULFXOWXUDOHGXFDWLRQLQWKHLQVWLWXWLRQVRIKLJKHUOHDUQLQJ6HH96D]RQRY³3RSXOLDUL]DWVLLDVHO¶VNRNKR]LDLVWYHQQ\NK]QDQLLY,WDOLL´6HO¶VNRNKR]LDLVWYHQQRHREUD]RYDQLH  S
 7KLVLVKRZFRQWHPSRUDU\%ULWLVKREVHUYHUVGHVFULEHGWKH&DWWHGUH$PEXODQWLZKLFKWKH\WUDQVODWHGDVWKH7UDYHOLQJ6FKRROV³WKH7UDY
HOLQJ6FKRROVVXEVLGL]HGWRVRPHH[WHQWE\*RYHUQPHQWEXWIRXQGHG
E\SULYDWHLQLWLDWLYHDQGFKLHIO\VXSSRUWHGE\WKH3URYLQFLDO&RXQFLOV
DQGSULYDWH6DYLQJV%DQNVDUHEULQJLQJDYHU\SUDFWLFDONLQGRIWHDFKLQJWRWKHSHDVDQW¶VGRRU(QWLUHO\WKHFUHDWLRQRIWKHODVWWHQ\HDUVWKH\
QXPEHUWKLUW\QLQHFKLHIO\LQWKH1RUWKEXWLQFOXGLQJDIHZLQWKH&HQ
WHUDQG6RXWK7KHGXWLHVRIWKHWUDYHOLQJWHDFKHUDUHP\ULDG+HJLYHVILIW\RUVL[W\OHFWXUHVLQWKH\HDULQGLIIHUHQWFHQWHUVKHJLYHVSUDFWLFDOGHPRQVWUDWLRQVKHVXSHUYLVHVH[SHULPHQWDOSORWVKHVLWVLQKLVRIILFH
HYHU\PDUNHWGD\IRURUDOFRQVXOWDWLRQKHKDVFODVVHVLQVSHFLDOVXE
MHFWVVXFKDVJUDIWLQJDQGSUXQLQJKHWUDLQVHOHPHQWDU\WHDFKHUVWROHF
WXUHLQWKHLUWXUQRQDJULFXOWXUDOVXEMHFWVVRPHWLPHVKHSXEOLVKHVDQ
DJULFXOWXUDOMRXUQDOKHNHHSVORRNRXWIRUSK\OOR[HUDDQGVXSHULQWHQGV
WKHPHDVXUHVWRVWDPSLWRXWLILWDSSHDUVVRPHWLPHVKHKDVQXUVHULHVWR
VXSSO\$PHULFDQYLQHVWRFNVRULQWURGXFHVEXOOVDQGUDPVRILPSURYHG

   ,/<$*(5$6,029&RQWHPSRUDU\VWDWLVWLFVVKRZHGWKHUHPDUNDEOHHIIHFWLYH
QHVVRI&DWWHGUH$PEXODQWLVR5XVVLDQLQWHOOHFWXDOVIRXQGWKHP
WREHWKHNH\WRVXFFHVVLQPRGHUQL]LQJWKHSHDVDQWU\7KDQNVWRWKHPRELOHDJULFXOWXUDORIILFHWKHNQRZOHGJHRIWKHIHZZDVDEOHWRFKDQJHWKHOLYHVRIWKHPDQ\7KHVHFUHWZDVLQDZDNHQ
LQJWKHLQLWLDWLYHRIWKHPDVVHVLQPRELOL]LQJWKHPE\PHDQVRIFRRSHUDWLYHRUJDQL]DWLRQV$,&KXSURYD5XVVLDQHFRQRPLVW
DQGDSURPLQHQWSXEOLFILJXUHLQWURGXFHGWKH5XVVLDQREVKFKHVWYHQQRVW¶WRWKHSKHQRPHQRQRIWKH&DWWHGUD$PEXODQWHGL$JULFROWXUDLQLQDVHULHVRIDUWLFOHVSXEOLVKHGLQWKHOLEHU
DOQHZVSDSHU5XVVLDQ1HZV$WWKDWWLPHWKHLGHDRIWKH&DW
EUHHGVKHRUJDQL]HVIUXLWVKRZVKHLQWURGXFHVZKHUHKHILQGVLWSRVVL
EOH9LOODJH%DQNVDQG&RRSHUDWLYH'DLULHVRUSUHDFKHVWKHDGYDQWDJHVRIMRLQLQJWKHORFDO6\QGLFDWH,WLVDZRUNWKDWSUREDEO\KDVQRSDUDOOHOHLWKHULQ)UDQFHRU(QJODQGDQGLWVSUDFWLFDOXVHIXOQHVVLVPDWFKHGE\
LWVSRSXODULW\7KHFRVWRIHDFKµFKDLU¶YDULHVEHWZHHQàDQGà´
6HH%ROWRQ.LQJDQG7KRPDV2NH\,WDO\7RGD\ /RQGRQ-DPHV1LVEHW
&R/LPLWHG SS
 &I6WDQ]LDQL³5XVVNLHHNRQRPLVW\]DJUDQLWVHLYJJ´S6WDQ]LDQL/¶eFRQRPLHHQUpYROXWLRQ/HFDVUXVVHS 7KHVHDUWLFOHVZHUHODWHULQFOXGHGE\&KXSURYLQDFROOHFWLRQRIKLVHV
VD\VRQWKHDJUDULDQTXHVWLRQ6HH$,&KXSURY³5HIRUPD]HPOHGHOLLD
Y,WDOLL  ´LQ$,&KXSURY.UHVW¶LDQVNLLYRSURV6WDW¶L
JJ 0RVFRZ,]GDWHO¶VWYREU6DEDVKQLNRY\K SS6HHDOVR
$,&KXSURY³$JURQRPLFKHVNDLDSRPRVKFK¶QDVHOHQLLXY,WDOLL  ´
LQ$,&KXSURY.UHVW¶LDQVNLLYRSURVSS,Q$OH[DQGHU&KXSURYZURWHHQWKXVLDVWLFDOO\WR$).RQL³7KHPRVWLQWHUHVWLQJSDUWRIP\WUDYHOVLQZDVDWULSLQ0D\WR1RUWKHUQ,WDO\E\QRPHDQV
GLG,H[SHFWWRHQFRXQWHUVRPXFKWKDWZDVFXULRXVDQGWRUHFHLYHVR
PDQ\YLYLGLPSUHVVLRQV,QWKHSHUVRQRISURIHVVRUVRIWKHVRFDOOHGµPRELOHEXUHDXVRIDJULFXOWXUH¶LQ3DGRYD3DUPDDQG9HURQD,HQFRXQWHUHGWUXHHQWKXVLDVWVVDLQWO\SHRSOHZKRJDYHWKHPVHOYHVHQWLUHO\WR
VHUYLQJWKHSHRSOH7KH\DUHOLNHRXU]HPVWYRDJURQRPLVWVRQO\ZLWKDPXFKEURDGHUDQGPRUHDFWLYHUROH´4XRWHGLQ$).RQL³,]YRVSRPLQDQLLRE$,&KXSURYH´LQ$).RQL5HFKLLVWDW¶L 0RVFRZ SS[[[LL[[[LLL&KXSURY¶VSXEOLFDWLRQVRQWKH,WDOLDQH[SHULHQFHRI
SXEOLF LHQRQJRYHUQPHQW DJULFXOWXUDODVVLVWDQFHEHFDPHWUXO\DU
FKHW\SDOIRUWKH1HZ*HQHUDWLRQRI5XVVLDQLQWHOOLJHQWVLDZKRZHUH
OLWHUDOO\EURXJKWXSRQWKHVHHVVD\V$VODWHDVWKH\ZHUHVWLOOUHFRPPHQGHGWRD\RXQJHUFRKRUWRIDJULFXOWXUDOVSHFLDOLVWVDVDVDFUHG
WHVWDPHQWRIWKH1HZ*HQHUDWLRQDVD³KDQGERRNWKDWHYHU\DJURQRPLVW
PXVWKDYH´6HH=KXUQDO]DVHGDQLLDJXEHUQVNRJRDJURQRPLFKHVNRJR  $/ ,77/(. 12:13 52-(&7WHGUD$PEXODQWHLQ5XVVLDFRXOGRQO\EHUHJDUGHGDVDQRWKHU
EHDXWLIXOGD\GUHDPRIWKHLQWHOOLJHQWVLDZKLFKKDGQRFKDQFH
RIHYHUFRPLQJWUXH1RWKLQJFRXOGPRYHIUHHO\DURXQGWKHSUH
5HYROXWLRQDU\5XVVLDQFRXQWU\VLGHDQGFHUWDLQO\DXWKRULWLHVZRXOGQRWDOORZLQWHOOLJHQWWRSURSDJDWHQHZLGHDVDPRQJWKH
SHDVDQWU\IURPWKHFDWWHGUD<HWWKHLGHDZDVQRWIRUJRWWHQ,QWKHVSULQJRIDQRWKHUGLVWLQJXLVKHGUXUDOVFKRODU'13ULDQLVKQLNRYGHFLGHGWKDW
LWZDVWKHULJKWPRPHQWWRUHWXUQWRWKHLVVXHRIWKH,WDOLDQPR
ELOHEXUHDXV,QDIHZLVVXHVRIWKHVSHFLDOZHHNO\0HVVHQJHURI$JULFXOWXUHKHSXEOLVKHGDQDUWLFOHLQZKLFKKHGUHZGLUHFWSDU
DOOHOVEHWZHHQWKH,WDOLDQH[SHULHQFHDQGWKH5XVVLDQUHDOLW\$VLWWXUQHGRXWWKHDWWHPSWPLVILUHGGXHWRWKHZDYHRIDJUDUL
DQGLVRUGHUVLQWKH5XVVLDQFRXQWU\VLGHZKLFKSXWWKHLVVXHRI
OHJDOLQLWLDWLYHVDPRQJWKHSHDVDQWU\RQKROGIRUDZKLOH,W
WRRNDQHZJHQHUDWLRQRIUXUDOVFKRODUVWRSXWWKHLGHDRIPRELOH
EXUHDXVRI$JULFXOWXUHLQWRSUDFWLFH'XULQJKLVWULSWR,WDO\$OH[DQGHU&KDLDQRYDSXSLORI3URIHVVRU3ULDQLVKQLNRYDW0RV
FRZ$JULFXOWXUDO,QVWLWXWHUHFHLYHGILUVWKDQGH[SHULHQFHRIZKDW
KHKDGUHDGDERXWLQWKHZULWLQJVRIKLVWXWRUV,QKHSXEOLVKHGDQDUWLFOHLQZKLFKKHSXWWRJHWKHUDGUDIWRIWKH5XVVLDQFRXQWU\VLGH¶VPRGHUQL]DWLRQSURJUDPDQGDGHVFULSWLRQRIWKH,WDOLDQPRELOHEXUHDXVDVDPRGHORIWKHLQVWLWXWLRQWKDWZRXOGFDUU\RXWWKLVSURJUDPVRYHVKFKDQLLD.D]DQVNRJRJXEHUQVNRJR]HPVWYDVHQWLDEULDJRGD.D]DQ S
 '13ULDQLVKQLNRY³µ=HPVNDLDDJURQRPLLD¶Y,WDOLL´9HVWQLNVHO¶VNRJRNKR]LDLVWYD   $9&KDLDQRY³6WUDQVWYXLXVKFKLHNDIHGU\Y,WDOLL´9HVWQLNVHO¶VNRJRNKR]LDLVWYD  S$WWKLVSRLQWZHFRQWUDGLFWWKHVWDWHPHQWRI*HRUJH<DQH\WKDW³WKH>DJULFXOWXUDO@VSHFLDOLVWVVHWRXWWRµLPSURYH¶GHVSLWHWKHIDFWWKDWQRRQHOHDVWRIDOOWKHLUVXSHUYLVRUVKDGDQ\FRQ
FUHWHJHQHUDOO\DFFHSWHGLGHDRIZKDWWKHSURFHVVRILPSURYHPHQWHQ
WDLOHG´*HRUJH<DQH\7KH8UJHWR0RELOL]H$JUDULDQ5HIRUPLQ5XV
VLD 8UEDQD,/8QLYHUVLW\RI,OOLQRLV3UHVV S
+LVRWKHUZLVHIXQGDPHQWDOVWXG\DFWXDOO\LJQRUHVWKHOHYHORIWKHSXE
OLF¶VRZQPRGHUQL]DWLRQPRYHPHQWZKLFKEHVLGHVKDYLQJDWUHPHQGRXVSRWHQWLDORILWVRZQZDVRQHRIWKHPDMRUIDFWRUVEHKLQGWKHJRYHUQ
PHQW¶V³XUJHWRPRELOL]H´WKHFRXQWU\VLGH   ,/<$*(5$6,029(YHQDIWHUWKHSDUWLDOGHPRFUDWL]DWLRQRIWKH5XVVLDQSROLWLFDOUHJLPHEURXJKWDERXWE\WKH5HYROXWLRQWKHPRELOH
EXUHDXVSURMHFWFRXOGQRWEHLPSOHPHQWHGLQ5XVVLDLQLWVRULJLQDOYHUVLRQ1RLQGHSHQGHQWSXEOLFDVVRFLDWLRQFRXOGDIIRUGWKRXVDQGVRIPRELOHEXUHDXVZKLOHWKHVWDWHZDVQRWLQWHUHVWHG
LQVXSSRUWLQJVXFKDQLQLWLDWLYH7KHLQVWLWXWLRQDOYHKLFOHQHFHV
VDU\IRUWKHLPSOHPHQWDWLRQRIWKHPRELOHEXUHDXVSURMHFWZDV
IRXQGLQWKHDJURQRP\SUHFLQFWQHWZRUN
7KHDJURQRP\SUHFLQFWQHWZRUNSURMHFWSODQQHGWRPXOWLSO\WKHQXPEHURI]HPVWYRDJURQRPLVWVE\GLYLGLQJHDFKGLVWULFW XH]G LQWRDQXPEHURISUHFLQFWV7KHSUHFLQFWDJURQRPLVWZDVVXSSRVHGWRIROORZWKHSURJUDPXVHGE\WKH&DWWHGUD$P
EXODQWHH[FHSWWKDWWKH\ZRXOGVWD\LQWKHVDPHSODFHDQGJUDGXDOO\H[SDQGWKHLULQIOXHQFHRYHUWKHQHLJKERULQJYLOODJHV7KDW
ZDVWKHPRVWDPELWLRXV³VPDOOGHHGV´SURMHFW5XVVLDQREVKFKHVWYHQQRVW¶HYHUGHYLVHG'XULQJWKHODVWGHFDGHRI,PSHUL
DO5XVVLDWKHSUHFLQFWDJURQRPLVWEHFDPHDV\QRQ\PIRUWKH
SURJUHVVLYHUHSUHVHQWDWLYHRIREVKFKHVWYHQQRVW¶DQHPHUJLQJ
QHZLGHDORIWKHLQWHOOLJHQWDSURIHVVLRQDOO\WUDLQHGSHUVRQZKRDSSOLHGWKHUHFHLYHGNQRZOHGJHWRVHUYHWKHSHRSOH7KHVHHPLQJO\REVFXUHSURIHVVLRQRIWKHSUHFLQFWDJURQRPLVWZKRZDVVXSSRVHGWROLYHDQGZRUNLQWKHGHSWKRIUXUDO5XVVLDIDUDZD\
IURPWKHFLW\FHQWHUVWKDWIRUPHGSXEOLFRSLQLRQEHFDPHKLJKO\SURPLQHQWGXULQJWKHLQWHUUHYROXWLRQDU\SHULRG7RDJUHDWH[WHQWWKHKLJKYLVLELOLW\ZDVSURGXFHGE\WKHVKHHUQXPEHUVRI
SUHFLQFWDJURQRPLVWVRUPRUHSUHFLVHO\E\WKHUDSLGLQFUHDVH
%HWZHHQWKH)LUVW5XVVLDQ5HYROXWLRQDQGWKH)LUVW:RUOG:DU
WKHQXPEHURISUHFLQFWDJURQRPLVWVLQFUHDVHGWLPHVDVFDQ
EHVHHQLQWKHIROORZLQJWDEOH
 $VDPDWWHURIIDFWWKHYHU\LGHDRIFRQFHQWUDWLQJWKHZRUNRIDJURQRPLVWVRYHURQHRUWZRFRXQWLHV YRORVWL KDGDOUHDG\EHHQH[SUHVVHGLQDWWKHDJURQRPLVWFRQIHUHQFHRI3HUP¶SURYLQFH,QWKH3URY
LQFH]HPVWYRERDUGKDGSDVVHGWKHDSSURSULDWHUHVROXWLRQEXWQRWKLQJKDSSHQHGIRUWKHQH[WWHQ\HDUVXQWLO9ODGLPLU9DUJLQEHFDPHWKH3UR
YLQFLDO$JURQRPLVW(YHQWKHQWKHV\VWHPRI'LVWULFW$JURQRPLVW¶VGHSXWLHVDGRSWHGE\WKH3HUP¶]HPVWYRZDVQRWH[DFWO\DQH[DPSOHRI
SUHFLQFWDJURQRP\QHLWKHULQWKHSULQFLSOHRIRUJDQL]DWLRQQRULQWKH
TXDQWLW\RIDJURQRPLVWV  $/ ,77/(. 12:13 52-(&77DEOH
7KH1XPEHURI$JURQRP\3UHFLQFWVLQ5XVVLD
<HDU

       

1XPEHURISUHFLQFWV       'HVSLWHWKHJHQHUDODJUHHPHQWDERXWWKHDLPVDQGEDVLFSULQFLSOHVRISUHFLQFWDJURQRP\HYHU\SURYLQFLDO]HPVWYRKDGWR
GHFLGHPDQ\SUDFWLFDOTXHVWLRQVLQDFFRUGDQFHZLWKORFDOFRQGLWLRQV%\REVHUYHUVGLVWLQJXLVKHGWKUHHPDMRUIRUPVRI
SUHFLQFWDJURQRP\RUJDQL]DWLRQV7KHDJURQRPLVWVRIWKH(ND
WHULQRVODYSURYLQFHZHUHNQRZQIRUWKHLUKLJKSXEOLFDFWLYLVP
7KH\GHGLFDWHGWKHPDMRULW\RIWKHLUHIIRUWVWRSURSDJDWLQJUDWLRQDOWHFKQLTXHVDPRQJSHDVDQWVDQGRUJDQL]LQJSHDVDQWFRRSHUDWLYHV7KH.KDUNRYDJURQRPLVWVUHSUHVHQWHGDQRWKHUW\SHIRFXVLQJRQZRUNZLWKLQGLYLGXDOIDUPVRUSDUWLFXODUVHFWRUVRIDJULFXOWXUH)LQDOO\0RVFRZSURYLQFH¶VSUHFLQFWDJURQRPLVWV
ZHUHGLVWLQJXLVKHGE\WKHLU³FRPPXQDO´VSLULWWKH\ZRUNHGRQ
LPSURYLQJRUJDQL]DWLRQSODQVIRUHQWLUHSHDVDQWFRPPXQHV'RXEWOHVVWKHLGHRORJLFDOSUHIHUHQFHVRIWKHORFDO]HPVWYRDQG
HPSOR\HHVKDGDJUHDWLPSDFWRQZKLFKRIWKHVHPDLQPRGHOVWKH\FKRVH7KHFDVHRI.D]DQDQG6DPDUDSURYLQFHVFDQJLYH
XVDQLQVLJKWLQWRWKHPHGLDODSSURDFKWRZDUGSUHFLQFWDJURQR
P\FKDUDFWHULVWLFRIPDQ\]HPVWYRV3UHFLQFWDJURQRP\ZDVLQWURGXFHGLQ.D]DQSURYLQFHLQEXWLWZDVQRWXQWLOWKHVXPPHURIWKDWWKHGHWDLOHG
JXLGHOLQHVIRUWKLVLQVWLWXWLRQZHUHHODERUDWHGE\WKHFRQIHUHQFH
RISURYLQFLDODJURQRPLVWVDQGWKHUHSUHVHQWDWLYHVRIWKH]HPVWYRERDUG,WZDVGHFLGHGWKDWLQIXWXUH.D]DQSURYLQFHZRXOG
EHGLYLGHGLQWRDJURQRP\SUHFLQFWVHDFKSUHFLQFWQRWWRH[ %DVHGRQWKHGDWDGHULYHGIURP(=DUHPED³8FKDVWNRYDLDDJURQRPLLD
Y5RVVLL´$JURQRPLFKHVNLL]KXUQDO  S0RUDFKHYVNLLHG
$JURQRPLFKHVNDLDSRPRVKFK¶Y5RVVLLS
 $,DURVKHYLFK³2VQRYQ\HSULQWVLS\XFKDVWNRYRLDJURQRPLFKHVNRLRUJDQL]DWVLL´%HVVDUDEVNRHVHO¶VNRHNKR]LDLVWYR  S,,6K
WXWVHU³3ROR]KHQLHXFKDVWNRYRLRUJDQL]DWVLLLHH]DGDFKLY.D]DQVNRLJXEHUQLL´LQ=KXUQDO\LSRVWDQRYOHQLLHSUHGYDULWHO¶QRJRVRYHVKFKDQLLDDJURQRPRYSUL.D]DQVNRLJXEHUQVNRL]HPVNRLXSUDYHLLXOLD
J .D]DQ S   ,/<$*(5$6,029

FHHGVTXDUHYHUVWV VTPLOHV DQGWRKDYHQRPRUH
WKDQYLOODJHV,WZDVWREHVWDIIHGZLWKDQDJURQRPLVWZLWK
WKHHGXFDWLRQRIQROHVVWKDQDPLGOHYHODJULFXOWXUDOFROOHJH
DQGDGHSXW\DJURQRPLVW7KHSUHFLQFWDJURQRPLVWVKRXOGDVVLVW
DOO]HPVWYRWD[SD\HUVLQGLVFULPLQDWHO\LQFOXGLQJPHPEHUVRIFRPPXQHVDQGWKRVHZKROHIWWKHFRPPXQHXQGHUWKHSURYLVLRQVRIWKH6WRO\SLQODQGUHIRUP3UHFLQFWDJURQRPLVWVZHUH
DOVRWRKHOSLQGLYLGXDOVVHHNLQJSURIHVVLRQDOFRQVXOWDWLRQEXW
WKHLUPDLQHGXFDWLRQDODFWLYLW\ZDVWREHFRQFHQWUDWHGRQWKH
FROOHFWLYHVRILQLWLDWLYHSHDVDQWVLHWKHFRRSHUDWLYHVRUJDQL]HGZLWKWKHLUDVVLVWDQFH$JULFXOWXUDOFRRSHUDWLYHVZHUHVXSSRVHG
WREHFRPHWKHPHDQVIRUDJURQRPLVWV¶PDVVLQWHUYHQWLRQLQWR
SHDVDQWDIIDLUV3UHFLQFWDJURQRPLVWVOLYHGLQYLOODJHVDORQJVLGHWKHSHDV
DQWVUHQWLQJFRWWDJHVRUVRPHWLPHVRQO\SDUWRIDFRWWDJH
'XULQJWKHZLQWHUIURP1RYHPEHUWR)HEUXDU\DJURQRPLVWVOHF
WXUHGLQWKHYLOODJHVDERXWWKHPRVWXUJHQWLVVXHVRIORFDODJULFXOWXUH)RULQVWDQFH6DPDUDDJURQRPLVW.LVHOHYYLVLWHGYLOODJHVRIKLVSUHFLQFWZKHUHDOWRJHWKHUSHDVDQWVOLVWHQHG
WRKLVH[SODQDWLRQVRIKRZWRPLQLPL]HWKHLPSDFWRIGURXJKWRQ
WKHLUFURSV+HQFHGXULQJRQHZLQWHUKHPDQDJHGWRYLVLW
RIWKHYLOODJHVDQGVSHDNWRRIWKHKRPHRZQHUVRIKLVSUH
FLQFW+HHYHQPDQDJHGWRVHOOERRNVRQDJULFXOWXUHDQG
GLVWULEXWHGPRUHIRUIUHH7KLVZDVDUDWKHUVXFFHVVIXOVHD
VRQIRUWKHDJURQRPLVW.LVHOHYDQGPXFKRIWKLVVXFFHVVFDQEH
DWWULEXWHGWRWKHIDFWWKDWKLVSUHFLQFWZDVWKHFHQWUDORQHLQWKH'LVWULFWQHLJKERULQJWKHFLW\RI6DPDUD7KHSHDVDQWVRIWKLV
SUHFLQFWZHUHLQYROYHGLQPDUNHWUHODWLRQVWRDJUHDWHUGHJUHH
WKDQWKHSHDVDQWVOLYLQJLQWKHVRXWKHUQSDUWRI6DPDUDGLVWULFW
7KH\DSSURDFKHG$OHNVHL.LVHOHYDVNLQJIRUKLVKHOSWRFKDQJH
WKHLUFURSURWDWLRQVFKHPHDQGHQWKXVLDVWLFDOO\RUJDQL]HGFRRSHUDWLYHV,QDZRUGWKLVZDVDOPRVWDQLGHDORIWKHSURMHFW
RIWKHSUHFLQFWDJURQRP\ 3RVWDQRYOHQLLDSUHGYDULWHO¶QRJRVRYHVKFKDQLLDDJURQRPRYSUL.D]DQ
VNRLJXEHUQVNRL]HPVNRLXSUDYHLLLXOLDJRGD .D]DQ SS
 ³2WFKHWRGHLDWHO¶QRVWL.UDVQRLDUVNRJRXFKDVWNRYRJRDJURQRPD$$
.LVHOHYD]DJRG´LQ8FKDVWNRYDLDDJURQRPLFKHVNDLDRUJD  $/ ,77/(. 12:13 52-(&77KH\RXQJDJURQRPLVW$QGUHL5\VKNLQZDVOHVVOXFN\ZDVKLVILUVW\HDUDVDSUHFLQFWDJURQRPLVW+LVSUHFLQFWZDVODUJHUWKDQWKH.LVHOHY¶VDQGORFDWHGRQWKHHDVWHUQRXWVNLUWVRI
WKH6DPDUD'LVWULFW7KHGHVFULSWLRQRIKLVILUVW\HDUH[SHULHQFH
FRQWDLQVLQYDOXDEOHSV\FKRORJLFDOGHWDLOVRIZKDWIDFHGDUXUDOSURIHVVLRQDODWWKHEHJLQQLQJRIKLVZRUNDPRQJWKHSHDVDQWV)URPWKHYHU\EHJLQQLQJ,HQFRXQWHUHGDZDOORIPLVWUXVWIURP
WKHSHDVDQW¶VWRZDUGDQ\QHZSHUVRQGUHVVHGLQFLYLFFORWKHV>WKHZDOO@WKDWGRHVQRWGLVDSSHDUHYHQDIWHUDFORVHDFTXDLQWDQFHDQGZKLFKGRRPHGPDQ\LQLWLDWLYHV
>@,YLVXDOL]HP\SUHFLQFWDVDKXJHHQHP\WHUULWRU\ZKHUH
HYHU\LQKDELWDQWLVORFNHGXSLQKLVRZQIRUWUHVV(DFKIRUWUHVV
KDVLWVRZQSHFXOLDULWLHVLWVZHDNSRLQWV7KHDWWDFNLQJDJURQRPLVWPXVWVWXG\DOOWKHSHFXOLDULWLHVRIWKRVHIRUWUHVVHVDQG
VWDUWZLWKWKHZHDNHVWDQGRQO\WKHQDIWHUMRLQLQJIRUFHVZLWK
WKHGHIHDWHGDWWDFNWKHVWURQJHU
>@,KDYHH[SHULHQFHGDOOWKHVHGLVFRPIRUWVRIDEHJLQQHUDJURQRPLVWDQG,ZRXOGQRWOLNHWRH[SHULHQFHWKHUROHRIDQHZFRPHULQDQHZSODFHDJDLQ

5\VKNLQGLVFRYHUHGWKDWWKHSHDVDQWDXGLHQFHZDVQRWSUH
SDUHGWREHOHFWXUHGLQWKHZD\KHDQGKLVIHOORZ.XOWXUWUlJHUV
KDGEHHQGXULQJWKHLUVFKRRO\HDUV3HDVDQWVHDJHUO\VXSSRUWHG
DQ\FRQYHUVDWLRQRQDFRQFUHWHWRSLFEXWKLVDWWHPSWVWRJHQHU
DOL]HWRSUHVHQWKLVYLVLRQRIDUDWLRQDOO\RUJDQL]HGIDUPWRWKHPXVXDOO\HVWUDQJHGKLVDXGLHQFH)ROORZLQJWKHUHFRPPHQGDWLRQVRIKLVFLW\HGXFDWRUV5\VKNLQWULHGWRFDWFKWKHSHDVDQWV¶DWWHQ
WLRQE\VKRZLQJVOLGHVZLWKD³PDJLFODQWHUQ´EXWKHVRRQIRXQG
WKDWWKHVOLGHVZHUHWRRDEVWUDFWWREHRIDQ\KHOSLQVXSSRUWLQJ
KLVSRLQWRIYLHZZLWKWKHDGGHGGLVDGYDQWDJHRIDWWUDFWLQJORWV
RIFKLOGUHQIRUZKRPLWZDVSXUHHQWHUWDLQPHQW8QOLNH$OH
NVHL.LVHOHY$QGUHL5\VKNLQGLGQRWILQGWKHSHDVDQWVWREH
SDUWLFXODUO\LQWHUHVWHGLQERRNV'HVSLWHDOOWKHVHKDQGLFDSV5\VKNLQPDQDJHGWRGHOLYHUOHFWXUHV±WKHVDPHQXPEHUDV.LVHOHY±ZKLFKZHUHDWWHQGHG
QL]DWVLLD6DPDUVNRJRXH]GQRJR]HPVWYD]DJRG 6DPDUD SS
 $$5\VKNLQ³2WFKHWUDLRQQRJRDJURQRPDSR=XERYVNRPXXFKDVWNX´
LQ8FKDVWNRYDLDDJURQRPLFKHVNDLDRUJDQL]DWVLLD6DPDUVNRJRXH]GQRJR]HPVWYD]DJRG 6DPDUD SS   ,/<$*(5$6,029

E\VRPHSHDVDQWV:KHQLQVSULQJDOOSUHFLQFWDJURQRPLVWVEHJDQGLVWULEXWLQJDJULFXOWXUDOPDFKLQHVIURP]HPVWYRZDUHKRXVHVDQGUHQWLQJFHQWHUVSHDVDQWVIURP5\VKNLQ¶VSUH
FLQFWGHPRQVWUDWHGDQLQFUHGLEOHGHPDQGIRUVHHGGULOOVDQG
KDUYHVWHUV+HQFHDOWKRXJKGHDIWRFHUWDLQSURSKHFLHVRUSURSK
HWVSHDVDQWVOHDUQHGSUDFWLFDOWKLQJVYHU\IDVW$VLWWXUQHGRXW
LQVXPPHUWKRVHSHDVDQWVZKRSORZHGXSWKHLUIDOORZODQGVXSRQWKHUHFRPPHQGDWLRQRIWKHLUDJURQRPLVWKDUYHVWHGFURSVWLPHVKLJKHUWKDQWKHDYHUDJH
$WWKLVSRLQWZHDSSURDFKWKHFUXFLDOSUREOHPLQDQ\PRG
HUQL]DWLRQFDPSDLJQZKHWKHURUQRWVXFKDPRGHUQLVDWLRQSUR
JUDPZLOOEHWDNHQRQERDUGE\LW¶VLQWHQGHGUHFLSLHQWVDQGLILW
LVWRZKDWH[WHQWZLOOLWEHDFWHGXSRQ7KHLQIDPRXVFKROHUDULRWVRIWKH¶VZKHQSHDVDQWVPXUGHUHGSK\VLFLDQVVXVSHFWHGRIFDXVLQJWKHGLVHDVHDQGWKHRFFDVLRQDOUHIXVDORISHDVDQWVWROHWDJURQRPLVWVLQWRWKHLUYLOODJHV±DOOFRQWULEXWHGWRWKHFUH
DWLRQRIWKHLPDJHRIWKHGDUNDQGLQHUWSHDVDQWU\WKDWGRPLQDWHGSXEOLFGLVFRXUVHDWWKHEHJLQQLQJRIWKHWZHQWLHWKFHQWXU\:KDWWKHQJDYHWKHUXUDOSURIHVVLRQDOVKRSHWKDWSHDVDQWVZHUH
DEOHWRXQGHUVWDQGWKHLUPRGHUQL]DWLRQVHUPRQDQGUHVSRQGDGHTXDWHO\"5DWKHUWKDQHQFORVHWKHLQWHOOHFWXDOV¶SHVVLPLVWLFFKDUDFWHUL]DWLRQRIWKHSHDVDQWU\ZLWKQXPHURXVPHDQLQJOHVVLQYHUWHG
FRPPDVDVVRPHKLVWRULDQVGR DSSDUHQWO\KLQWLQJWKDWWKHRSSRVLWHZDVWKHFDVH  OHWXVORRNDWWKHSKHQRPHQRQRIDQHZ ,ELGSS
 .10XNKDQRY³6DPDUVNDLDXH]GQDLDXFKDVWNRYDLDDJURQRPLFKHVNDLDRUJDQL]DWVLLD]DJRG´LQ8FKDVWNRYDLDDJURQRPLFKHVNDLDRUJDQL]DWVLLD6DPDUVNRJRXH]GQRJR]HPVWYD]DJRG 6DPDUD S )RULQVWDQFH<DQQL.RWVRQLVLQWKHHVVD\FKDUDFWHULVWLFDOO\WLWOHG³+RZ
3HDVDQWV%HFDPH%DFNZDUG$JUDULDQ3ROLF\DQG&RRSHUDWLYHVLQ5XV
VLD´H[SOLFLWO\VWDWHVWKDWµEDFNZDUGQHVV¶DQGµEHQLJKWHG
QHVV¶ZHUHEXWLQWHOOHFWXDOV¶³FRQVWUXFWLRQV´8QIRUWXQDWHO\QHLWKHULQ
WKLVHVVD\QRULQKLVGRFWRUDOGLVVHUWDWLRQRUWKHVXEVHTXHQWERRNGLG<.RWVRQLVSURYHRUDWOHDVWVWDWHH[SOLFLWO\WKDWWKHSHDVDQWVZHUHDFWXDOO\QHLWKHUµEDFNZDUG¶QRUµEHQLJKWHG¶DQGWKDWWKHLULQIHULRUVRFLRHFRQRPLF
DQGFXOWXUDOSRVLWLRQZDVEXWDFRQVWUXFWLRQRIWKHLQWHOOHFWXDOV6HHKLV³+RZ3HDVDQWV%HFDPH%DFNZDUG$JUDULDQ3ROLF\DQG&RRSHUDWLYHV
LQ5XVVLD´LQ-XGLWK3DOORWHG7UDQVIRUPLQJ3HDVDQWV
6RFLHW\6WDWHDQGWKH3HDVDQWU\6HOHFWHG3DSHUVIURPWKH)LIWK:RUOG&RQJUHVVRI&HQWUDODQG(DVW(XURSHDQ6WXGLHV 1HZ<RUN
6W0DUWLQ¶V3UHVV,QF SS  $/ ,77/(. 12:13 52-(&7JHQHUDWLRQRISHDVDQWVZKLFKEHFDPHMXQLRUSDUWQHUVLQWKH1HZ*HQHUDWLRQRI5XVVLDQLQWHOOLJHQWVLDDQGDQHZJHQHUDWLRQRI
HQOLJKWHQHGRUOLEHUDOEXUHDXFUDWV LQWKHLUPRGHUQL]DWLRQHIIRUWV
LQFRQWUDVWWRPHGLFDOVHUYLFHVRUSXEOLFHGXFDWLRQHFRQRPLF
SROLFLHVUHTXLUHGDFHUWDLQLQWHOOHFWXDOOHYHORQWKHSDUWRISHDV
DQWV±WKH\KDGWRXQGHUVWDQGWKHDGYLFHJLYHQWRWKHPDQGEH
UHDG\WRDVVXPHWKHULVNRILQQRYDWLRQV$WWKHEHJLQQLQJRIWKH
WZHQWLHWKFHQWXU\DQHZJHQHUDWLRQRISHDVDQWVHGXFDWHGLQ]HP
VWYRVFKRROVWRRNFHQWUDOVWDJHLQ5XVVLDQUXUDOOLIHDQG]HPVWYRDFWLYLVWVZKRRUJDQL]HGWKHVHSHDVDQWVLQWRUXUDOFUHGLWFRRSHUDWLYHVIRXQGLWSRVVLEOH³IRUWKHILUVWWLPH´WRRSSRVHDQ³RUJDQL]HGFRQVFLRXVQXFOHXV´WRDEHQLJKWHG WHPQ\H XQRUJDQL]HGPDVV

)ROORZLQJ.LPLWDND0DWVX]DWRZHZRXOGDUJXHWKDWUXUDOSURIHVVLRQDOVPDGHWKHLUZDJHURQWKLVJURXSRIQHZSHDVDQWVPRUHG\QDPLFDQGUHVSRQVLYHWKDQWKHFRQVHUYDWLYHEXONRIYLOODJHUV$FFRUGLQJWRWKH=HPVWYR6XUYH\RIUXUDOWHDFKHUVWKRXJKWWKDWVFKRROLQJPDGHWKHLUSXSLOVPRUHVRFLDOO\DZDUH$PRQJWKRVHUHVSRQGHQWVWHDFKHUVVSHFLILFDOO\VWDWHGWKDWHGXFDWHGSHDVDQWVKDGFORVHUUHODWLRQVZLWKWKHORFDOLQ
WHOOLJHQWVLD:HFDQHVWLPDWHWKHQXPEHURIUHSUHVHQWDWLYHVRI³DQHZJHQHUDWLRQRISHDVDQWV´ZKRQRWRQO\DGHTXDWHO\UHVSRQGHGWRWKHPRGHUQL]DWLRQHIIRUWVRIWKHDJULFXOWXUDOVSHFLDOLVWVEXWDFWLYHO\SDUWLFLSDWHGLQWKLVZRUN 'DYLG$-0DFH\³$JULFXOWXUDO5HIRUPDQG3ROLWLFDO&KDQJH7KH&DVH
RI6WRO\SLQ´LQ7KHRGRUH7DUDQRYVNLHG5HIRUPLQ0RGHUQ5XVVLDQ+LVWRU\3URJUHVVRU&\FOH" :RRGURZ:LOVRQ&HQWHU3UHVVDQG&DP
EULGJH8QLYHUVLW\3UHVV SS
 .LPLWDND0DWVX]DWR³7KH)DWHRI$JURQRPLVWVLQ5XVVLD7KHLU4XDQWLWDWLYH'\QDPLFVIRUPWR´5XVVLDQ5HYLHZ $SULO S
 (NORI5XVVLDQ3HDVDQW6FKRROVSS
 ,QWKHZRUGVRI6FRWW6HUHJQ\³6RFLDOO\DQGFXOWXUDOO\WKHVHµFRQVFLRXV¶SHDVDQWVUHPDLQHGPRUHFORVHO\WLHGWRWKHYLOODJHWKDQPDQ\WHDFKHUVRISHDVDQWRULJLQDQGDVVXFKRFFXSLHGDVWUDWHJLFSRVLWLRQDVLQWHUPHGLDULHVEHWZHHQWKHUXUDOFRPPXQLW\DQGRXWVLGHUV´6HH6FRWW-6HUHJQ\³3HDVDQW8QLRQV'XULQJ´LQ(VWKHU.LQJVWRQ0DQQDQG7LPRWKY
0L[WHUHGV3HDVDQW(FRQRP\&XOWXUHDQG3ROLWLFVRI,PSHULDO5XV
VLD 3ULQFHWRQ3ULQFHWRQ8QLYHUVLW\3UHVV S   ,/<$*(5$6,029

7KHVHSHDVDQWVFRPSRVHGWKHPDMRULW\RIWKHYROXQWDU\FRUUHVSRQGHQWVRIWKH]HPVWYRVWDWLVWLFDOEXUHDXV,QZKHQ
WKH1HZ*HQHUDWLRQ¶VPRYHPHQWZDVODXQFKHGWKHROGHVW
SURYLQFLDO]HPVWYRVDORQHKDGDOPRVWIXOOWLPHYLOODJH
FRUUHVSRQGHQWV VRPHRIZKRPZHUHSHDVDQWV7KHLU
WDVNZDVWRUHSRUWDIHZWLPHVD\HDUDERXWWKHSURVSHFWLYHDQG
DFWXDOKDUYHVWWKHSULFHVRIODQGJUDLQLWVWUDQVSRUWDWLRQDQGLQ
VRPHSURYLQFHVHYHQWKHG\QDPLFRIWKHORFDOPDUNHWV7KLV
DORQHPDGHWKHYROXQWDU\FRUUHVSRQGHQWVWKHPRVWHFRQRPLFDOO\FRQVFLRXVSDUWRIWKHSHDVDQWU\WKLQNLQJLQWHUPVRIPDUNHW
 990RUDFKHYVNLLHG6SUDYRFKQ\HVYHGHQLDRGHLDWHO¶QRVWL]HPVWYSR
VHO¶VNRP\NKR]LDLVWYX SRGDQQ\PQDJRG S[[[7KLVHGLWLRQSURYLGHGLQIRUPDWLRQDERXWWKHVWDWLVWLFDORUJDQL]DWLRQVRIRXWRI]HPVWYRVZLFKDOWRJHWKHUKDGRYHUYROXQWDU\FRUUHVSRQGHQWV
7KHWRWDOILJXUHRIFRUUHVSRQGHQWVPXVWEHVRPHZKHUHEH\RQG
IRUVXFK³SHDVDQWGRPLQDWHG´SURYLQFHVDV9LDWNDRU2ORQHWVPXVWKDYH
KDGPDQ\KXQGUHGVRIFRUUHVSRQGHQWV7KHUHLVLQGLUHFWHYLGHQFHWKDW
3VNRYSURYLQFHDORQHKDGRYHUDWKRXVDQGFRUUHVSRQGHQWVDOWKRXJKWKH
H[DFWILJXUHZDVQRWUHSRUWHG6HH0RUDFKHYVNLLHG6SUDYRFKQ\HVYHGH
QLDRGHLDWHO¶QRVWL]HPVWYSRVHO¶VNRP\NKR]LDLVWYX SRGDQQ\PQD
JRG S
 ,QWKH0RVFRZSURYLQFHWKHUHZHUHYROXQWDU\FRUUHVSRQGHQWVSHDVDQWV  FOHUJ\PHQ  DQGWHDFKHUV  ,QWKH,DURVODYSURYLQFHILJXUHVZHUHDOPRVWLGHQWLFDORIFRUUHVSRQGHQWVZHUHSHDVDQWVZHUHPHPEHUVRIWKHFOHUJ\6HH
0RUDFKHYVNLLHG6SUDYRFKQ\HVYHGHQLDRGHLDWHO¶QRVWL]HPVWYSR
VHO¶VNRP\NKR]LDLVWYX SRGDQQ\PQDJRG SS,Q
LQWKH6DPDUDSURYLQFHRIWKHFRUUHVSRQGHQWVZHUHSHDV
DQWVPHPEHUVRIWKHFRPPXQHDQGZHUHWKHLQGLYLGXDOIDUPHUV$OWRJHWKHUSHDVDQWVDFFRXQWHGIRURIWKH6DPDUDVWDWLVWLFDOEXUHDX¶VYROXQWDU\FRUUHVSRQGHQWV6HH$97HLWHO¶³&KWRJRYRULWQDVHOH
QLH6DPDUVNRLJXEHUQLLR]HPVNRLDJURQRPLL´LQ7UXG\JR6DPDUVNRJRJXEHUQVNRJRDJURQRPLFKHVNRJRVRYHVKFKDQLDGHNDEULDJRGD 6DPDUD S
 0RUDFKHYVNLLHG6SUDYRFKQ\HVYHGHQLDRGHLDWHO¶QRVWL]HPVWYSR
VHO¶VNRP\NKR]LDLVWYX SRGDQQ\PQDJRG SS
6RPH]HPVWYRVSURYLGHGFRUUHVSRQGHQWVZLWKVSHFLDOQRWHERRNVZLWK
TXHVWLRQVWREHDQVZHUHGGXULQJD\HDUDQGDWLPHWDEOHIRUWKHP7KH.D]DQ]HPVWYRQRWHERRNIRUIRULQVWDQFHLQFOXGHGTXHVWLRQVZKLFKZHUHPRUHRUOHVVHYHQO\GLVWULEXWHGIURP-DQXDU\WR'HFHPEHU
6HH=DSLVQDLDNQL]KNDNRUUHVSRQGHQWDVWDWLVWLFKHVNRJRRWGHOHQLLDQD
JRG .D]DQ6WDWLVWLFKHVNRHRWGHOHQLH.D]DQVNRLJXEHUQVNRL]HP
VNRLXSUDY\ SS  $/ ,77/(. 12:13 52-(&7FRQMXQFWXUHVDQGUHJDUGLQJDJULFXOWXUHDVDSKHQRPHQRQRI³SURGXFWLRQ´UDWKHUWKDQDVDQHOHPHQWRIWKHWUDGLWLRQDOSHDVDQWZD\
RIOLIH7KHFRPPRQSUDFWLFHRIWKH]HPVWYRWRUHZDUGWKHYROXQWDU\FRUUHVSRQGHQWVZLWKDJULFXOWXUDOSHULRGLFDOVDQGSRSXODUEURFKXUHVRQO\UHLQIRUFHGWKHSRVLWLRQRIYLOODJHFRUUHVSRQGHQWVDVDQ³RXWSRVW´RIUXUDOPRGHUQL]DWLRQ7KXVDIHZWHQVRIWKRXVDQGVRISHDVDQWVWKHYROXQWDU\FRUUHVSRQGHQWVFRQVWLWXWHGWKH
EDVLVIRUWKHSURGXFWLYHHIIRUWVRIWKHDJULFXOWXUDOVSHFLDOLVWVDQGWKHEXONRISHDVDQWUHDGHUVRIDJULFXOWXUDOSHULRGLFDOV,QGHHGLWZDVYHU\LPSRUWDQWWRUXUDOPRGHUQL]HUVWRVXV
WDLQUDSSRUWZLWKWKHLUUHDGHUVDQGHVSHFLDOO\ZLWKSHDVDQWVWR
EHDVVXUHGWKDWWKHSHRSOHZKRPWKH\ZHUHDERXWWRDVVLVWZHUHDFWXDOO\LQWHUHVWHGLQPRGHUQL]DWLRQ6HFWLRQVOLNH³4XHVWLRQV
DQG$QVZHUV´LQSHULRGLFDOVFKHFNHGWKH³SXOVH´RILQWHOOLJHQ
WVLDSHDVDQWFRPPXQLFDWLRQRQDUHJXODUEDVLVZKLOHVSHFLDOXVXDOO\DQQXDOVXUYH\VDPRQJWKHVXEVFULEHUVSURYLGHGDFRP
SOH[VRFLRORJLFDOPDSRIWKHUHDGHUV:HVKDOOWDNHDFORVHU
ORRNDWWKHDXGLHQFHRIWKHPDJD]LQHV6DPDUD$JULFXOWXULVWDQG
7KH3HDVDQW&DXVHZKLFKUHSUHVHQWHGWZRPDMRUW\SHVRIDJULFXOWXUDOSHULRGLFDOIRUSHDVDQWVDQGUXUDOLQWHOOLJHQWVLDDORFDOSXEOLFDWLRQZLWKWKHUXQRIWRFRSLHVDQGDFHQWUDOXVXDOO\0RVFRZ SHULRGLFDOSXEOLVKLQJYHU\SURPLQHQWDJULFXOWXUDOVSHFLDOLVWVZLWKDUXQRIRYHUFRSLHV7KH6DPDUD$JULFXOWXULVWZDVSXEOLVKHGE\WKH6DPDUD
6RFLHW\IRU,PSURYLQJWKH3HDVDQW(FRQRP\ 628.. ZLWKDQ
DYHUDJHUXQRIFRSLHV6XEVFULSWLRQFRYHUHGRQO\KDOIRI
WKHSXEOLVKHUV¶H[SHQVHV KHQFHWKHSULPDU\JRDORIWKHPDJD (DFKFRUUHVSRQGHQWDQQXDOO\UHFHLYHGDJULFXOWXUDOSHULRGLFDOVDQGOLWHUDWXUHZRUWKWZRUXEOHVRQDYHUDJH9HU\RIWHQ]HPVWYRVJDYHFRUUHVSRQGHQWVIUHHVXEVFULSWLRQVWRWKHLURZQSXEOLFDWLRQV WKXV.D]DQFRUUHVSRQGHQWVUHFHLYHGIUHHVXEVFULSWLRQVWRWKH.D]DQ*D]HWWH RU
WRDPDMRUSURYLQFLDODJULFXOWXUDOSHULRGLFDO LQ3ROWDYDFRUUHVSRQGHQWVZHUHPDGHVXEVFULEHUVWRWKHZHHNO\)DUPHURIWKH3ROWDYD$JULFXOWXUDO6RFLHW\ 7KLVZD\WKHSHDVDQWVUHFHLYHGIUHHDFFHVVWRTXDOLW\DQGUHOHYDQWUHJLRQDOLQIRUPDWLRQZKLOHWKHSXEOLVKHUVLQFUHDVHG
WKHUDQNVRIWKHLUVXEVFULEHUV
 2WFKHWRGHLDWHO¶QRVWLLVRVWRLDQLLVUHGVWY6DPDUVNRJRREVKFKHVWYDXOXFKVKHQLLDNUHVW¶LDQVNRJRNKR]LDLVWYD]DYWRURHWUHNKOHWLHHJRVXVKFKHVWYRYDQLLD V;,JSR;,J S   ,/<$*(5$6,029]LQHZDVWRHQOLJKWHQLWVUHDGHUV,WUHJXODUO\SXEOLVKHGUHSOLHVWRWKHSHDVDQW¶VOHWWHUVZKRDFWXDOO\UHDGWKHPDJD]LQHDQGHYHQ
ZURWHWRWKHHGLWRULDOERDUGUHSOLHVLQLQ
LQ7KHPDMRULW\RIVXEVFULEHUVOLYHGLQ6DPDUDSURY
LQFHEXWWKHPDJD]LQHDOVRFLUFXODWHGLQQHLJKERULQJ6DUDWRY
6LPELUVN8ID.D]DQ2UHQEXUJDQG$VWUDNKDQSURYLQFHV$F
FRUGLQJWRVXUYH\VFRQGXFWHGE\WKHHGLWRULDOERDUGLQDQG
WKHPDMRULW\RIWKHLUUHDGHUV DWOHDVWWKHLUPRVWDFWLYH
RQHV ZHUHSHDVDQWV,QRIWKRVHZKRUHWXUQHGWKH
TXHVWLRQQDLUHVZHUHSHDVDQWVZKLOHLQWKHVXUYH\WKHLUVKDUH
LQFUHDVHGWR
7KH0RVFRZ3HDVDQW&DXVHZDVDSULYDWHHQWHUSULVHDQG
KHQFHFRXOGQRWDIIRUGDFKDULWDEOHDWWLWXGHWRZDUGLWVUHDGHUVEXWZLWKDQDYHUDJHUXQRIFRSLHVLWFRXOGVXVWDLQWKHVDPH
ORZVXEVFULSWLRQIHHDVWKH6DPDUD$JULFXOWXULVW8QOLNHWKH
UHJLRQDO6DPDUDPDJD]LQH7KH3HDVDQW&DXVHZDVUHDGDOORYHU(XURSHDQ5XVVLD7KHPDSRILWVVXEVFULEHUVSXEOLVKHGLQ$X
JXVWRIVKRZHGWKDWWKHPDJD]LQHKDGWKHVDPHQXPEHURIUHDGHUVLQWKHFHQWUDO0RVFRZSURYLQFHDVLQWKHGLVWDQW3HUP¶SURYLQFH WRJHWKHUDFFRXQWLQJIRURIDOOVXEVFULEHUV 7KHUH
ZHUHHTXDOSHUFHQWDJHVRIVXEVFULEHUVLQQHLJKERULQJ.DOXJDSURYLQFHDQGLQ9LDWNDSURYLQFHVRPHPLOHVDZD\IURP
0RVFRZ$PRQJWKHUHDGHUVZKRDQVZHUHGWKHPDJD]LQH¶V
TXHVWLRQQDLUHLQZHUHSHDVDQWV ZKLFKLVFORVHWRWKH
RIWKH6DPDUD$JULFXOWXULVW¶VVXUYH\LQ 
7KHUXUDOPRGHUQL]HUVZHUHTXLWHFRQFHUQHGDERXWWKHDFFHVVLELOLW\DQGFRPSUHKHQVLELOLW\RIWKHLUSXEOLFDWLRQV7KURXJKRXWWKHSHULRGXQGHUFRQVLGHUDWLRQLQWHOOHFWXDOVRIWHQGLVFXVVHG
DGYLFHDQGUHFRPPHQGDWLRQVRQKRZWRZULWHIRUWKHSHDVDQW
 ,ELGS
 ,ELGSS
 *$5)I'HSDUWDPHQWSROLWVLL'2SG³2SURL]YHGHQLLDNKSRYUHPHQQRLSHFKDWLL]GDYDLHP\NKSURIHVVLRQDO¶Q\PLRUJDQL]DWVLLDPL´O
 .UHVW¶LDQVNRHGHOR $XJXVW FRYHUSDJH ³µ.UHVW¶LDQVNRHGHOR¶LHJRFKLWDWHOL´.UHVW¶LDQVNRHGHOR $XJXVW S  $/ ,77/(. 12:13 52-(&7DXGLHQFH HGXFDWLRQDOOLWHUDWXUHZDVWKRURXJKO\UHYLHZHGSUL
RUWREHLQJUHFRPPHQGHGIRUPDVVGLVWULEXWLRQDPRQJSHDVDQWV
DQGVSHFLDOOLVWVRISRSXODUERRNVRQYDULRXVDVSHFWVRIDJULFXOWXUHZHUHGLVWULEXWHG$VUHDGHUV¶UHSOLHVLQGLFDWHGWKHSHDV
DQWVXQGHUVWRRGWKHLQWHOOLJHQWVLDNXOWXUWUlJHUVDQGDSSUHFLDWHGWKHLUHIIRUWV ,QDWWKHEHJLQQLQJRIWKH1HZ*HQHUDWLRQ¶VFDPSDLJQDUHYROXWLRQDU\WXUQHGFRRSHUDWLYHLGHRORJLVW99.KL]KQLDNRYH[SODLQHGWR
WKHHGXFDWRUV³:ULWLQJSRSXODUO\LVQRWDVHDV\DVPDQ\DXWKRUVRIµERRNVIRUWKHSHRSOH¶WKLQN%HVLGHVDFRPSOHWHNQRZOHGJHRIWKHTXHVWLRQDQG
JHQHUDODELOLW\WRH[SUHVVRQH¶VWKRXJKWVLWLVDOVRQHFHVVDU\WRNQRZWKH
SV\FKRORJ\RIWKHDXGLHQFHLWLVQHFHVVDU\WRKDYHPXFKLQWXLWLRQWRVSHDNZLWKWKLVDXGLHQFHQRWRQO\LQDFRPSUHKHQVLEOHODQJXDJHEXW
DOVRXVLQJXQGHUVWDQGDEOHLPDJHVDQGH[DPSOHVDQGDQDGHTXDWHV\V
WHPRIWKLQNLQJ´6HH99.KL]KQLDNRY³%LEOLRJUDILLDLOLWHUDWXUQRHRER]UHQLH´9HVWQLNNRRSHUDWVLL  S(LJKW\HDUVODWHURQ
WKHHYHRIWKH)HEUXDU\5HYROXWLRQWKHHGLWRULDOERDUGRIWKHPDJD]LQH
7KH1HZ6SLNHXUJHGWKHLUFRQWULEXWRUV³2XUILUVWSOHD±ZULWHVLPSO\XVLQJIRUHLJQZRUGVDQGFRPSOH[SKUDVHVRQO\LIDEVROXWHO\QHFHVVDU\DQGDOZD\VZLWKH[SODQDWLRQV5HPHPEHUWKDWDOPRVWDOORXUUHDGHUVDUH
JHQXLQHSHDVDQWVZKRZLOOQRWXQGHUVWDQGDIRUHLJQZRUG,WLVQRWVR
KDUGWRZULWHVLPSO\WKHUHLVQRQHFHVVLW\WRHPXODWHIRONVSHHFK7KH
VHFRQGSOHD±GRQRWZULWHDWJUHDWOHQJWK:ULWHQRPRUHWKDQIRXU
SDJHVRIDXVXDOVKHHW>IRUPDW@ DOZD\VRQRQHVLGHRILW 7KXVGRQRW
ZULWHLQDQLQYROYHGDQGOHQJWK\PDQQHUEXWVLPSO\DQGEULHIO\±WKLV
ZD\\RXZLOOKHOSWKH1HZ6SLNHWREHFRPHDWUXO\SRSXODUPDJD]LQH
VRRQHU´6HH5HGDNWVLLD³.VRWUXGQLNDPµ1RYRJRNRORVD¶´1RY\LNR
ORV )HEUXDU\ S )RULQVWDQFHLQDVSHFLDOFRPPLVVLRQRI.D]DQDJULFXOWXUDO
VSHFLDOLVWVFKDLUHGE\WKHSURYLQFLDODJURQRPLVW,,6KWXWVHUUHYLHZHG
EURFKXUHVRQYDULRXVDVSHFWVRIDJULFXOWXUHDQGIRXQGRQO\RI
WKHPDSSURSULDWHIRUGLVWULEXWLRQDPRQJWKHSHDVDQWVRIWKHSURYLQFH
6HH=KXUQDO]DVHGDQLLDJXEHUQVNRJRDJURQRLFKHVNRJRVRYHVKFKDQLD.D]DQVNRJRJXEHUQVNRJR]HPVWYDVHQWLDEULDJRGDSS
 6RPHRIWKRVHOLVWVZHUHGHVLJQHGWRNHHSORFDOUXUDOVSHFLDOLVWVSRVWHG
RQWKHODWHVWSXEOLFDWLRQVDYDLODEOHIRUGLVWULEXWLRQDPRQJSHDVDQWVRWKHUVWDUJHWHGSRSXODUYLOODJHOLEUDULHVRUJDQL]HGDQGSDWURQL]HGE\WKH
ORFDO³YLOODJHLQWHOOLJHQWVLD´,QWKHODWWHUFDVHOLVWVRIVXJJHVWHGOLWHUDWXUHLQGLVFULPLQDWHO\FRYHUHGDEURDGVSHFWUXPRIWRSLFVEXWGLIIHUHQWL
DWHGE\FRVWDPRQJWKHVXJJHVWHGVHWVRIERRNV7KXVWKHUHZHUHOLVWVFRVWLQJDQGHYHQUXEOHV6HH6SLVRNNQLJGOLDQDURGQ\NK
VHO¶VNRNKR]LDLVWYHQQ\NKELEOLRWHN6RVWDYOHQ.RPLVVLHLRPHUDNKVRGHLVWYLLDXVWURLVWYXQDURGQ\NKFKWHQLLSRVHO¶VNRPXNKR]LDLVWYX 3HWURJUDG
*8=L='HSDUWDPHQW=HPOHGHOLLD    ,/<$*(5$6,029:KLOHWKH0RVFRZ3HDVDQW&DXVHZDVYLHZHGE\WKHSHDV
DQWVDVDNLQGRIJHQHUDOVRFLRSROLWLFDOSXEOLFDWLRQDVRXUFHRI
LQIRUPDWLRQDERXWWKH6WDWH'XPDDQGFXUUHQWDJULFXOWXUDOSROLF\ GHVSLWHPDQ\VSHFLDODUWLFOHVRQDJULFXOWXUDOWRSLFV  WKH
UHJLRQDO6DPDUD$JULFXOWXULVWZDVUHDGIRULWVSUDFWLFDODGYLFH
7KHVHZHUHWZRGLIIHUHQWW\SHVRINXOWXUWUlJHUQDUUDWLYHIRU
ZKHUHDVDSHDVDQWDFFHSWHGWKHJHQHUDOFKDUDFWHURIUHSRUWVRQ
UHFHQW'XPDGHFLVLRQVKHGHPDQGHGXWWHUVSHFLILFLW\IURPWKH
SXEOLFDWLRQVRQKRZWRDFWXDOO\LPSURYHWKHHIILFLHQF\RIWKHLUIDUPV0DQ\SHDVDQWVHYHQVXJJHVWHGWKDWWKH6DPDUD$JULFXOWXULVWVKRXOGSXEOLVKDUWLFOHVZULWWHQE\WKRVHSHDVDQWVZKR
ZHUHVXFFHVVIXOLQLQWURGXFLQJFHUWDLQNLQGVRILPSURYHPHQWVEHFDXVHWKH\GLGQRWWKLQNWKDWH[DPSOHVIURPODUJHHVWDWHVZHUH
RIPXFKXVHWRWKHP
,QJHQHUDOGHVSLWHWKHGLVFXUVLYHSURMHFWLRQVRIWKHUXUDOLQWHOOLJHQWVLDDQGHYHQRIVRPHEHWWHUHGXFDWHGSHDVDQWV SHDV ,ELGS
 2WFKHWRGHLDWHO¶QRVWLLVRVWRLDQLLVUHGVWY6DPDUVNRJRREVKFKHVWYDXOXFKVKHQLLDNUHVW¶LDQVNRJRNKR]LDLVWYD]DYWRURHWUHNKOHWLHHJRVXVKFKHVWYRYDQLLD V;,JSR;,J S
 ,QDSHDVDQWRIWKHYLOODJHRI6HPHQRYND1RYRX]HQVNGLVWULFWFRPPHQWHGRQWKHSXEOLFDWLRQVLQWKH6DPDUD$JULFXOWXULVW³LQJHQHUDOZHXQGHUVWDQGDUWLFOHVLQWKH6$SDUWLFXODUO\E\WKHDJURQRPLVW6HY
EXWWKHWKLQJLVHYHU\WKLQJLQWKRVHDUWLFOHVLVQRWDERXWRXUGLVWULFWDQG
RWKHUORFDOLWLHVDUHDOLHQWRXVWKHSHRSOHRI6HPHQRYND´6HH2WFKHWR
GHLDWHO¶QRVWLLVRVWRLDQLLVUHGVWY6DPDUVNRJRREVKFKHVWYDXOXFKVKHQLLDNUHVW¶LDQVNRJRNKR]LDLVWYD]DYWRURHWUHNKOHWLHHJRVXVKFKHVWYRYDQLLD V
;,JSR;,J S
 ,ELG ,QDQGDIHZGR]HQUHVSRQGHQWVWRWKH6DPDUD$JULFXOWXULVW¶VVXUYH\VSHFXODWHGWKDWZKLOHWKH\SHUIHFWO\XQGHUVWRRGWKHPDJD
]LQH¶VSXEOLFDWLRQVWKHLU³FRQWHQWLVXQFOHDUIRUDSHDVDQWZKRRQO\
JUDGXDWHGIURPDSULPDU\VFKRROGXHWRWKHQXPEHURILQFRPSUHKHQVL
EOHIRUHLJQZRUGVDQGLQWHOOHFWXDOH[SUHVVLRQV´³,XQGHUVWDQGEXWIRU
WKHSHDVDQWLWVKRXOGEHZULWWHQLQDPRUHSRSXODUVW\OH´6HH2WFKHWR
GHLDWHO¶QRVWLLVRVWRLDQLLVUHGVWY6DPDUVNRJRREVKFKHVWYDXOXFKVKHQLLDNUHVW¶LDQVNRJRNKR]LDLVWYD]DYWRURHWUHNKOHWLHHJRVXVKFKHVWYRYDQLLD V
;,JSR;,J SS,WLVZRUWKQRWLFLQJWKDWDPRQJWKRVHZKRZHUHFRQFHUQHGDERXWWKHFRPPRQSHDVDQW¶VDELOLW\WRJUDVS
WKHVHQVHRI³WRRLQWHOOHFWXDO´SXEOLFDWLRQVWKHUHZHUHDWOHDVWIRXUEHW
WHUHGXFDWHGSHDVDQWV LQ 7KLVPDNHVWKHHVVHQFHDQGFRQILJXUDWLRQRIWKHERXQGDU\EHWZHHQWKHPRGHUQL]HUVDQGWKHSHDVDQWVDV  $/ ,77/(. 12:13 52-(&7DQWUHDGHUVRIWKHDJULFXOWXUDOSUHVVZHUHDEOHWRUHDFWDGHTXDWHO\WRWKHDSSHDORIWKH1HZ*HQHUDWLRQRI5XVVLDQLQWHOOLJHQWVLD
HYHQLQLWVPRVWDEVWUDFWZULWWHQIRUP,QIDFWWKHDFWXDOQXP
EHURISHDVDQWUHDGHUVRIWKHDJULFXOWXUDOSUHVVZDVPDQ\WLPHVKLJKHUWKDQWKHPHUHTXDQWLW\RISHDVDQWVVXEVFULEHUVEHFDXVH
XVXDOO\HYHU\LVVXHZDVUHDGE\DOOWKHOLWHUDWHDQGLQWHUHVWHGQHLJKERUVRIWKHDFWXDOVXEVFULEHU7KHDJULFXOWXUDOSUHVVVWLPXODWHGWKH³QHZSHDVDQWV´WRVWLFNWRJHWKHUIRUPLQJWKHQXFOHXVRIDSHDVDQWEUDQFKRIWKHHPHUJLQJUXUDOSXEOLFVSKHUH$VWKH1HZ*HQHUDWLRQ¶VPRGHUQL]DWLRQSURMHFWZDVIRUPXODWHGRQWKHSUHFLQFWDJURQRP\PRGHOLWUHVHUYHGDQDX[LOLDU\UROHIRUWKHDJULFXOWXUDOSUHVVZKLOHSXWWLQJPDMRUHPSKDVLVRQWKHSHUVRQDOHGXFDWLRQDOHIIRUWVRIUXUDOSURIHVVLRQDOV7KRVHHIIRUWVZHUHLQVWLWXWLRQDOL]HGLQWZRPDMRUIRUPVRQHGD\YLO
ODJHOHFWXUHVE\DSUHFLQFWDJURQRPLVWRUDQDJULFXOWXUDOVSHFLDOLVWRQDSDUWLFXODUVXEMHFWDQGVKRUWWHUP XVXDOO\IRUWQLJKWFRXUVHVWDXJKWE\DQXPEHURIVSHFLDOLVWV%HWZHHQWKH)LUVW
5XVVLDQ5HYROXWLRQDQG:RUOG:DU,WKHIXQGLQJIRUVXFKHGX
FDWLRQDODFWLYLWLHVLQFUHDVHGDOPRVWWLPHV,QVRPH
WKHLU³REMHFWLILHGFODVVSDUH[FHOOHQFH´PRUHFRPSOLFDWHGWKDQ3LHUUH%RXUGLHXDQGKLVGLVFLSOHVDPRQJWKHKLVWRULDQVRI,PSHULDO5XVVLDXVHG
WRWKLQN$SSDUHQWO\GLVFXUVLYHSURMHFWLRQVRQDQGIRUWUDGLWLRQDOSHDVDQWU\ZHUHQRWDQH[FOXVLYHSULYLOHJHRIWKHHGXFDWHGFLW\HOLWHUDWKHUHYHU\SDUWLFLSDQWLQDFXOWXUDOGLDORJXHVRRQHURUODWHUGLVFRYHUHGWKDWLQ
WKHLULVRODWLRQIURPWKHRXWHUZRUOGWUDGLWLRQDOSHDVDQWVZHUH³VHPLRWLFDOO\LQYLVLEOH´DQGWKXVVHPDQWLFDOO\PDUNHGE\WKHRWKHUV±XQWLOWKH
PRPHQWZKHQWKH\ZRXOGVSHDNRXWIRUWKHPVHOYHV
 $FFRUGLQJWRWKHVXUYH\RIWKHPDJD]LQH7KH3HDVDQW&DXVHWKH
PDMRULW\RIUHVSRQGHQWVVKDUHGHYHU\LVVXHRIWKHPDJD]LQHZLWKWRSHRSOH(YHQPRUHSHRSOHUHDGHYHU\VLQJOHLVVXHRIWKHPDJD]LQHZKHQ
LWZDVVXEVFULEHGWRE\DWHDKRXVHDJULFXOWXUDOFRRSHUDWLYHRUDFLYLF
PLQGHGGHDFRQ6HH³µ.UHVW¶LDQVNRHGHOR¶LHJRFKLWDWHOL´SS
 7KHHPHUJHQFHRIUHDGLQJFLUFOHVDPRQJWKHSHDVDQWVWHVWLILHGWRWKH
EHJLQQLQJRIWKLVSURFHVVIDUPHUVRI0RJLOHYSURYLQFHWRJHWKHUVXE
VFULEHGWRDQXPEHURIPDJD]LQHVLQFOXGLQJ7KH3HDVDQW&DXVHLQWKH
7HWXVKLGLVWULFW .D]DQSURYLQFH WKHJURZLQJFLUFOHRISHDVDQWVVXE
VFULEHGWRDIHZSHULRGLFDOVWRJHWKHU6HH³µ.UHVW¶LDQVNRHGHOR¶LHJR
FKLWDWHOL´S1,DNXVKNLQ³,]NUHVW¶LDQVNLNKSLVHP´.UHVW¶LDQVNRHGHOR 1RYHPEHU S
 $ /D]DUHQNR ³5DVSURVWUDQHQLH VHO¶VNRNKR]LDLVWYHQQ\NK ]QDQLLYQHVKNRO¶Q\PSXWHP´6HO¶VNRNKR]LDLVWYHQQRHREUD]RYDQLH  
S   ,/<$*(5$6,029

SHDVDQWVDWWHQGHGRQHGD\OHFWXUHVLQYLOODJHV'XULQJWKHVDPH\HDUDOPRVWSHDVDQWVVWXG
LHGLQVKRUWWHUPFRXUVHVDQGLQWKHUHZHUHFRXUVHVSODQQHG EHFDXVHRIWKHZDURQO\KDOIRIWKHPDFWXDOO\
WRRNSODFH 7KHVHLPSUHVVLYHILJXUHVDUHDQLPSRUWDQWLQGLFDWLRQRIWKHUXUDOSURIHVVLRQDOV¶UROHLQWKHPRGHUQL]DWLRQRISHDV
DQWVDQGDVHYLGHQFHWKDWLQDVLQJOH\HDUDGR]HQWKRXVDQG
DJULFXOWXUDOVSHFLDOLVWVDQGWKHLUDVVLVWDQWVZHUHDEOHWRUHDFKDYHU\VLJQLILFDQWVHFWLRQRIWKHSHDVDQWU\ 
7KLVLQHYLWDEO\VNHWFK\SUHVHQWDWLRQRIWKHPRGHUQL]DWLRQFDPSDLJQE\WKHDJULFXOWXUDOO\FRQFHUQHG5XVVLDQLQWHOOLJHQWVLDGXULQJWKHLQWHUUHYROXWLRQDU\GHFDGHGHPRQVWUDWHV
WKHFRPSOH[LW\RIWKHWRSLFDQGKRZGLIILFXOWLWLVWRVWXG\,Q
FRQFOXVLRQ,ZRXOGOLNHWRHPSKDVL]HWKHIROORZLQJFUXFLDOGLI
IHUHQFHVEHWZHHQWKHEXUHDXFUDWLF DGPLQLVWUDWLYH PRGHUQL]D
WLRQSURJUDPVDQGSXEOLF QRQJRYHUQPHQW LQLWLDWLYHVIRUHFRQRPLFDQGVRFLDOPRELOL]DWLRQ8QOLNHWKHEXUHDXFUDWLFGHWDLOHGWRWKHSRLQWRIUHGXQGDQF\SURJUDPVRIWKHJRYHUQPHQWLQLWLDWHGLQVWLWXWLRQDOPRG
HUQL]DWLRQFDPSDLJQVWKHSXEOLFPRGHUQL]DWLRQPRYHPHQW¶V
SURJUDPRIDFWLRQLVDPDWWHURIVRFLDOFRQVHQVXVLWLVVSUHDGWKURXJKSXEOLF\HWZKHQ³GLVWLOOHG´IURPVXFKPDVVVRXUFHVDV
SURIHVVLRQDODQGJHQHUDOSHULRGLFDOVLWDSSHDUVQROHVVFOHDUWKDQ
JRYHUQPHQWDOGHFUHHV7KHDFWLYLWLHVRISXEOLFPRGHUQL]HUVDUHRQO\SRVVLEOHZLWKLQWKHFRQWH[WRIDFRQVWDQWGLDORJXHZLWKWKHLUFOLHQWVZKLFKLPSOLHVWZRQHFHVVDU\SUHUHTXLVLWHV WKHPRGHUQL]HU¶VDELOLW\WRDFFRPPRGDWHWKHXQSUHGLFWDEOHUHDOLW\EH\RQGWKHGHEDWHDQG
LGHRORJLFDOVORJDQV WKHFOLHQW¶VDELOLW\WRUHVSRQGWRWKHPRG
HUQL]HU¶VPHVVDJH
7KHUHVXOWVRIWKHVHSXEOLFFDPSDLJQVDUHPHDVXUHGQRW
E\WKHSHUFHQWDJHRISHRSOHZKRFKDQJHGWKHLUOHJDOVWDWXVRU ,ELGS,IHYHU\SHDVDQWUHSUHVHQWHGRQHKRXVHKROGWKHQDJULFXOWXUDOVSHFLDOLVWVGLUHFWO\FRQWDFWHGRIDOOIDUPV ,ELGSS  $/ ,77/(. 12:13 52-(&7WKHWHUPVRIWKHLUSURSULHW\SRVVHVVLRQEXWE\FKDQJHVLQWKLQN
LQJDQGLQWKHSV\FKRORJLFDOFOLPDWH>]HLWJHLVW@,IWKHSHDVDQWVDGRSWHGHYHQDVPDOOSURSRUWLRQRIWKHUHFRPPHQGHGLPSURYH
PHQWVLQWKHLUWHFKQLTXHRUH[SHULPHQWHGZLWKFURSURWDWLRQ
VFKHPHVFKDQJHGWKHWUDGLWLRQDOFDOHQGDUIRUDJULFXOWXUDOZRUNRUPDGHILUVWVWHSVLQPDUNHWLQJWKHLUSURGXFWV±WKHHIIRUWVRIUXUDOSURIHVVLRQDOV DJURQRPLVWVHFRQRPLVWVHGXFDWRUV ZHUH
SURGXFWLYH
:KLOHWKHDGPLQLVWUDWLYHPHDVXUHVVHHPUDGLFDOIDVWDQG
XQLILHGWKH\FDQQRWFKDQJHWKHHFRQRPLFPDQDQGFRQVHTXHQWO\WKHSDWWHUQRIHFRQRPLFDQGVRFLDOGHYHORSPHQW:RUOG:DU,
DQGWKHUHYROXWLRQDU\XSKHDYDORILQWHUUXSWHGDGHFDGHRI
5XVVLD¶VUXUDOSURIHVVLRQDOV¶HIIRUWVZKLFKPDNHVLWGLIILFXOWWR
DVVHVVWKHUHVXOWVRIWKLVPRYHPHQW+RZHYHUHYHQDOLPLWHG
VXFFHVVLQWKRVHHIIRUWVVHHPVZRUWKVWXG\LQJSDUWLFXODUO\EH
FDXVHWKHGHFDGHVRI6RYLHWVWDWHVRFLRHFRQRPLFHQJLQHHULQJ
KDYH\LHOGHGTXLWHXQLPSUHVVLYHUHVXOWV   ,/<$*(5$6,029

  