The Rise of Authoritarian Liberal Democracy [Illustrated] 1847183379, 9781847183378

Citation preview

7KH5LVH RI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 

7KH5LVH RI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ $3UHIDFHWRD1HZ7KHRU\RI&RPSDUDWLYH 3ROLWLFDO6\VWHPV    %\

 3HWHU%DRIX    

 







&$0%5,'*(6&+2/$5638%/,6+,1*

The Rise of Authoritarian Liberal Democracy: A Preface to a New Theory of Comparative Political Systems, by Peter Baofu This book first published 2007 by Cambridge Scholars Publishing 15 Angerton Gardens, Newcastle, NE5 2JA, UK British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Copyright © 2007 by Peter Baofu All rights for this book reserved. No part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the copyright owner. ISBN 1-84718-337-9; ISBN 13: 9781847183378

BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 7R7KRVHLQ3RVW'HPRFUDF\                                 

 

 

    

BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB %22.6$/62%0@\ PHWKRGRORJLFDO KROLVP DGYRFDWHV QHLWKHU HSLVWHPLF VXEMHFWLYLVP QRU HSLVWHPLF QRQVXEMHFWLYLVP HJ UHDOLVP LGHDOLVP DQG KLVWRULFLVP  QHLWKHU HSLVWHPLF UHODWLYLVP HJ VXEMHFWLYLVP  KLVWRULFLVP  QRU HSLVWHPLF DEVROXWLVP HJ UHDOLVP SRVLWLYLVP  QHLWKHU HSLVWHPLF UHGXFWLRQLVP QRU HSLVWHPLF HPHUJHQFLVP DQG QHLWKHU HSLVWHPLF REMHFWLYLVP HJ UHDOLVP LGHDOLVP  QRU HSLVWHPLF KLVWRULFLVP«1HLWKHU GRHV PHWKRGRORJLFDO KROLVP LQ P\ XVDJH DFFHSW WKH IDOVH PHWDFRQFHSWXDO GLFKRWRP\ EHWZHHQ QRPLQDOLVP DQG UHDOLVP«7KHVH IDOVH GLFKRWRPLHV«DUH WR EH WUDQVFHQGHG ,Q RWKHU ZRUGV PHWKRGRORJLFDO KROLVP GRHV QRW IXOO\ DFFHSW HSLVWHPLF UHDOLVP SRVLWLYLVP D IRUP RI HSLVWHPLF LGHDOLVP  KLVWRULFLVP VXEMHFWLYLVP DQG UHGXFWLRQLVP LQ HSLVWHPRORJ\ DQG SKLORVRSK\ RI VFLHQFH EXW OHDUQV IURP WKH VWUHQJWKV DQG ZHDNQHVVHV RI DOO RI WKH RSSRVLQJ DSSURDFKHV ZLWKRXW VLGLQJ ZLWK DQ\ RI WKHP«´)3+&   ‡³6RSKLVWLFDWHGPHWKRGRORJLFDOKROLVPLVVXEMHFWWRWKHFRQVWUDLQWVDVLPSRVHG E\ WKH V\QWD[ RI H[LVWHQWLDO GLDOHFWLFV HJ WKH SDUWLDOLW\WRWDOLW\ SULQFLSOH DQG WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH  (YHQ LQ SUHGLFWDELOLW\ RXWFRPHV DUHVXEMHFWWRXQFHUWDLQW\WKHGHJUHHRIZKLFKYDULHVIURPFDVHWRFDVH´)&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFHV$VXPPDU\RI6HFLQ)3+&²DQGDOVRIURP%11)3+67$/' DQG)&6HHWKHERRNVIRUPRUHGHWDLO               

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG0HWKRGRORJ\ 





7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH3DUWLDOLW\7RWDOLW\3ULQFLSOH ²7KH SDUWLDOLW\WRWDOLW\ SULQFLSOH LQ WKH RQWRORJ\ RI H[LVWHQWLDO GLDOHFWLFV WDUJHWV DJDLQVW WKH YDULHWLHV RI UHGXFWLRQLVP DQG UHYHUVHUHGXFWLRQLVP DV DOUHDG\ZRUNHGRXWLQP\SUHYLRXVERRNV   ‡$JDLQVWWKH9DULHWLHVRI5HGXFWLRQLVP ²0HWKRGRORJLFDO5HGXFWLRQLVP ‡ $ JRRG LQVWDQFH FRQFHUQV WKH GHEDWH EHWZHHQ GLIIHUHQW YHUVLRQV RI TXDOLWDWLYHDQGTXDQWLWDWLYHPHWKRGVDVDOUHDG\DQDO\]HGLQ)&DQGDOVR )+&  ²2QWRORJLFDO5HGXFWLRQLVP ‡ $Q H[FHOOHQW H[DPSOH LV WKH GHEDWH EHWZHHQ HPHUJHQWLVP DQG UHGXFWLRQLVPLQFRPSOH[LW\WKHRU\DQGDOVRLQSV\FKRORJ\DVHODERUDWHG LQ)3+&LQWKHFRQWH[WRI%HLQJDQG%HFRPLQJ  ²&RQFHSWXDO5HGXFWLRQLVP ‡ 6RPH LOOXVWUDWLYH LQVWDQFHV LQYROYH P\ULDG GXDOLWLHV OLNH PLQG YV ERG\ VHOI YV ZRUOG GHPRFUDF\ YV QRQGHPRFUDF\ DQG WKH OLNH DV DOUHDG\ DGGUHVVHGLQ)+&)3+&DQG%'3'IRULQVWDQFH  ²7KHRUHWLFDO5HGXFWLRQLVP ‡$IDVFLQDWLQJFDVHVWXG\FRQFHUQVZKDW,RULJLQDOO\FDOOHG³WKHIRXQGDWLRQ IDOODF\´ LQ )3+67 LQ DQ\ DWWHPSW WR QDLYHO\ XQGHUVWDQG VSDFHWLPH IURP WKH SK\VLFDO SHUVSHFWLYH DV WKH IRXQGDWLRQ DQG FRQVHTXHQWO\ WR GDQJHURXVO\GLVPLVVRWKHUSHUVSHFWLYHV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH            



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$JDLQVWWKH9DULHWLHVRI5HYHUVH5HGXFWLRQLVP ²0HWKRGRORJLFDO5HYHUVH5HGXFWLRQLVP ‡7KHUHLVWKH³DQ\WKLQJJRHV´PHQWDOLW\LQSRVWPRGHUQLVPHJGRLQJDUW ZLWKRXW SUD[LV GRLQJ DUW ZLWK SUD[LV DQG GRLQJ DUW E\ VXEODWLRQ  DV DQDO\]HGLQ&KRI)+& ²2QWRORJLFDO5HYHUVH5HGXFWLRQLVP ‡ 7KHUH DUH OLNHZLVH QR SULYLOHJHG RQWRORJ\ DQG WKH GRRU LV RSHQ IRU DQ\WKLQJ  LQ SRVWPRGHUQLVP HJ WKH HTXDO VWDWXV RI WKH RQWRORJ\ RI %HLQJYVWKDWRI%HFRPLQJDVDOUHDG\DGGUHVVHGLQ&KRI)+&²DQG DOVRLQ)3+&  ²&RQFHSWXDO5HYHUVH5HGXFWLRQLVP ‡ $Q\ FRQFHSW RI ³DUW´ HJ ILQH  DUW FDYH DUW RXWVLGHU DUW MXQN DUW  LV GHHPHG DFFHSWDEOH LQ SRVWPRGHUQLVP DV DOUHDG\ DGGUHVVHG LQ &K RI )+&  ²7KHRUHWLFDO5HYHUVH5HGXFWLRQLVP ‡ 7KHUH DUH D SOXUDOLW\ RI DUW DQG OLWHUDU\ WKHRULHV HJ 1HZ &ULWLFLVP 5RPDQWLFLVP ([SUHVVLRQLVP )HPLQLVW $UW 7KHRU\  LQ WKH SRVWPRGHUQ VFHQH ZLWK QR RQH EHLQJ VDLG WR EH EHWWHU WKDQ DQ\ RWKHUV DV DOVR DGGUHVVHG LQ &K RI )+&  ,Q %11 , LQWURGXFHG ³WKH FRPSURPLVH IDOODF\´DVDQRWKHUJRRGH[DPSOHRIWKHRUHWLFDOUHYHUVHUHGXFWLRQLVPLQ PLVOHDGLQJO\ WUHDWLQJ WKH JHQHWLF DQG HQYLURQPHQWDO DSSURDFKHV DV HTXDOO\YDOLG BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFHV $ VXPPDU\ RI P\ SUHYLRXV ERRNV HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ )+&)&')3+&%'3'%&3&%11)3+67%&,9)&)$(DQG$/'            



&+$37(5 $87+25,7$5,$1/,%(5$/'(02&5$&OH[LFDO VHPDQWLFV@ DQG IL[HG ZRUG FRPELQDWLRQV >SKUDVHRORJ\@´  DQG SUDJPDWLFV ³WKH VWXG\ RI KRZ XWWHUDQFHV DUH XVHG«OLWHUDOO\ ILJXUDWLYHO\ RU RWKHUZLVH«LQ FRPPXQLFDWLYH DFWV´ :. 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



%XW VLQFH P\ WKHRU\ RI H[LVWHQWLDO GLDOHFWLFV PDNHV XVH RI WKH (QJOLVK ODQJXDJH IRUFRPPXQLFDWLRQ KHUHLWGRHV QRWSURSRVHDQHZ ZD\WR PDNHWKH SDWWHUQVRIDODQJXDJH¶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¶V FRQVLGHU ILUVW WKH V\QWD[ RI H[LVWHQWLDO GLDOHFWLFV ILUVW EHORZ WR EH IROORZHG ZLWK WKH DQDO\VLV RI WKH VHPDQWLFV DQG SUDJPDWLFV RI WKH RQWRORJ\ UHVSHFWLYHO\

7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV 7KHV\QWD[RIH[LVWHQWLDOGLDOHFWLFVDQDORJRXVO\VSHDNLQJUHIHUVKHUHWRWKH VWUXFWXUHRIDQRQWRORJ\ZKLFKFDQEHVWXGLHGE\ZD\RIFRPELQLQJLGHDVLQWR FRPSOH[UHODWLRQVKLSVOLNHRQWRORJLFDOSULQFLSOHVWRGHSLFWUHDOLW\LQWKHZRUOG

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²RULQDPRUHHOHJDQW WHUPWKHG\QDPLFVRIVSDFHWLPHLQ)&  7KHQLQ7KH)XWXUHRI&RPSOH[LW\)& ,DGGHGWKUHHPRUHSULQFLSOHVRQ WRS RI WKH WKUHH DIRUHPHQWLRQHG QDPHO\ G  WKH SDUWLDOLW\WRWDOLW\ SULQFLSOH RQ WKHUHODWLRQVKLSVEHWZHHQWKHSDUWVDQGWKHZKROHH WKHRUGHUFKDRVSULQFLSOH RQWKHSURFHVVRIFKDQJHDQGI WKHSUHGLFWDELOLW\XQSUHGLFWDELOLW\SULQFLSOHRQ WKH RFFXUUHQFH RI WKLQJV²DV SDUW RI WKH RQWRORJLFDO ORJLF RI H[LVWHQWLDO GLDOHFWLFV $QG LQ 7KH )XWXUH RI $HVWKHWLF ([SHULHQFH RU VLPSO\ )$(  DQRWKHU SULQFLSOH LV DGGHG QDPHO\ J  WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH RQ WKH PXOWLSOHNLQGVRIDJHQF\ 

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG2QWRORJ\ 





,Q)$(,WKHQUHFODVVLILHGWKHSULQFLSOHVLQWRIRXUFDWHJRULHVQDPHO\L  LQUHODWLRQWRPHWKRGIRUWKHSDUWLDOLW\WRWDOLW\SULQFLSOHDQGWKHSUHGLFWDELOLW\ XQSUHGLFWDELOLW\ SULQFLSOH LL  LQ UHODWLRQ WR SURFHVV IRU WKH FKDQJHFRQVWDQF\ SULQFLSOH DQG WKH RUGHUFKDRV SULQFLSOH LLL  LQ UHODWLRQ WR DJHQF\ IRU WKH V\PPHWU\DV\PPHWU\SULQFLSOHDQGWKHHYROXWLRQWUDQVIRUPDWLRQSULQFLSOHDQG LY LQUHODWLRQWRRXWFRPHIRUWKHUHJUHVVLRQSURJUHVVLRQSULQFLSOH ,Q $/' KHUH  , DGG WZR PRUH SULQFLSOHV K  WKH VRIWQHVVKDUGQHVV SULQFLSOHRQWKHIRUFHRIDJHQF\ZKLFKLVWREHFODVVLILHGLQWKHFDWHJRU\DERXW DJHQF\ DQGL WKHVDPHGLIIHUHQFHSULQFLSOHDERXWWKHPHWDPRUSRVLVRIFKDQJH ZKLFKLVWREHFODVVLILHGLQWKHFDWHJRU\DERXWRXWFRPH  :LWKWKLVXSGDWHWKHFDWHJRU\LQUHODWLRQWRPHWKRGKDVWZRSULQFLSOHVYL] WKHSDUWLDOLW\WRWDOLW\SULQFLSOHDQGWKHSUHGLFWDELOLW\XQSUHGLFWDELOLW\SULQFLSOH  WKHFDWHJRU\LQUHODWLRQWRSURFHVVKDVWZRYL]WKHFKDQJHFRQVWDQF\SULQFLSOH DQGWKHRUGHUFKDRVSULQFLSOH WKHFDWHJRU\LQUHODWLRQWRDJHQF\KDVWKUHHYL] WKHV\PPHWU\DV\PPHWU\SULQFLSOHWKHHYROXWLRQWUDQVIRUPDWLRQSULQFLSOHDQG WKHVRIWQHVVKDUGQHVVSULQFLSOH DQGWKHFDWHJRU\LQUHODWLRQWRRXWFRPHKDVWZR YL]WKHUHJUHVVLRQSURJUHVVLRQSULQFLSOHDQGWKHVDPHGLIIHUHQFHSULQFLSOH  7KHUH DUH WKXV QLQH SULQFLSOHV RI H[LVWHQWLDO GLDOHFWLFV²VR IDU DV VXPPDUL]HGLQ7DEOH 

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³VHOI´ YV ³ZRUOG´ ³IUHHGRP´ YV ³XQIUHHGRP´ ³EDUEDULW\´ YV ³FLYLOL]DWLRQ´ ³LQGLYLGXDOLW\´YV³FRPPXQDOLW\´DQGVRRQ 2QH ZD\ WR GR VR WR JR EH\RQG  LV WR FRQVLGHU WKHP DOO LQ WHUPV RI FR H[LVWHQFHZLWKRXWIDYRULQJRQHRYHUWKHUHVW )RULQVWDQFHP\WKHRU\RI³SRVW FLYLOL]DWLRQ´ WR EH VXPPDUL]HG ODWHU LQ WKH VHFWLRQ RQ WKH SUDJPDWLFV RI H[LVWHQWLDO GLDOHFWLFV  LV WR JR EH\RQG EDUEDULW\ DQG FLYLOL]DWLRQ LQ WHUPV RI XQGHUVWDQGLQJEDUEDULW\DQGFLYLOL]DWLRQDVEHLQJFRH[LVWHQW $QG WKH VDPH ORJLF FDQ EH VDLG LQ UHODWLRQ WR P\ WKHRULHV RI ³SRVW GHPRFUDF\´ ³SRVWFDSLWDOVP´ DQG RWKHUV DOVR WR EH LQWURGXFHG ODWHU LQ WKH VHFWLRQ RQ WKH SUDJPDWLFV RI H[LVWHQWLDO GLDOHFWLFV  LQ UHJDUG WR IUHHGRP YV



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



XQIUHHGRP HTXDOLW\ YV LQHTXDOLW\ FRPPXQDOLW\ YV LQGLYLGXDOLW\ VSLULWXDOLW\ YVPDWHULDOLW\DQGVRRQ %XW WR FRQVLGHU WKHP DOO LQ WKH GLFKRWRPLHV²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´-:HLVEHUJ  7KXV LQ WKH EDWWOH EHWZHHQ WKH SROLWLFLDQV DQG WKH YRWHUV LQ OLEHUDO GHPRFUDF\ WKH IRUPHU KDV WKH DGYDQWDJH RI KLJKHU LQWHOOLJHQFH LQ SROLWLFV HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ LQ UHODWLRQ WR HPRWLRQDO DQG LQWHOOHFWXDO LQWHOOLJHQFHV  RYHU WKH ODWWHU LQ WKH FRQWH[W RI SROLWLFV ²DOWKRXJK WKH IRUPHU SURIHVVLRQDOSROLWLFLDQV PD\EHTXLWHVWXSLGLQRWKHUDUHDVRIOLIHDQGIRUWKDW PDWWHU FDQ RIWHQ FRPPLW EOXQGHUV DIWHU FRPLQJ LQWR SRZHU DV ZLOO EH FOHDU VKRUWO\  7KHUH LV KRZHYHU DQRWKHU H[SODQDWLRQ EHVLGHV WKH RQH RQ ORZHU LQWHOOLJHQFH RI WKH PDVVHV LQ SROLWLFV ZKLFK FDQ VKHG IXUWKHU OLJKW RQ WKH UHFXUUHQWHYLOGHHGVRIOLEHUDOGHPRFUDF\H[DFWO\ ZKHQLW IXQFWLRQV VR ZHOOLQ WKHVSLULWRIWKHSHRSOHDQGIRUWKHSHRSOHLQDGHPRFUDWLFSROLWLFDOV\VWHP

*URXS$QDO\VLVDQG0DVV.QRZOHGJH 7KLV RWKHU IDFWRU FRQFHUQV PDVV NQRZOHGJH QRW MXVW PDVV LQWHOOLJHQFH LQ SROLWLFV 6XUHO\LWLVTXLWHWUXHWKDWWKHODFNRILQWHOOLJHQFH²WKDWLVVWXSLGLW\²FDQ KDYHDQHJDWLYHLPSDFWRQWKHODFNRINQRZOHGJH²WKDWLVLJQRUDQFH²EHFDXVH ZKHQVRPHRQHLVWRRVWXSLGKHFDQQRWOHDUQZHOOFRQVHTXHQWO\KHLVLJQRUDQW RIZKDWKHFDQQRWOHDUQ %XWWKHFDXVDWLRQLV QRWVR VLPSOLVWLFVLQFHLJQRUDQFHFDQ RFFXUHYHQIRU VRPHRQHZKRLVYHU\LQWHOOLJHQWDVKHPD\EHWRREXV\LQGRLQJVRPHWKLQJHOVH DQGWKXVGRHVQRWKDYHWLPHWROHDUQZKDWLVLQTXHVWLRQWKDWLVSROLWLFVLQWKLV FDVH 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7KHUHDUHWZRUHDVRQVWREHXVHGKHUHDIWHUDVLOOXVWUDWLYHH[DPSOHVRQO\IRU WKH SRRU NQRZOHGJH RI WKH PDVVHV LQ SROLWLFV QDPHO\ D  SURIHVVLRQDO VSHFLDOL]DWLRQDQGWKHDGYDQWDJHRISROLWLFDOH[SHUWLVHDQGE LQIRIUDPLQJDQG IDOVHFRQVFLRXVQHVVWREHGLVFXVVHGKHUHDIWHU

3URIHVVLRQDO6SHFLDOL]DWLRQDQGWKH$GYDQWDJHRI3ROLWLFDO([SHUWLVH 7KHSKHQRPHQRQRISURIHVVLRQDOVSHFLDOL]DWLRQLVPRUHRIDPRGHUQRULJLQ DOWKRXJK WKH GLYLVLRQ RI ODERU LQWR P\ULDG GLIIHUHQW WDVNV DQG MREV KDG H[LVWHG ORQJEHIRUHHYHQLQDQWLTXLW\ 3ODWR LQ7KH5HSXEOLFIRULQVWDQFHVSRNHRIWKH³ QDWXUDO LQHTXDOLW\ RIKXPDQLW\WKDWLVHPERGLHGLQWKHGLYLVLRQRIODERXU´DVKHDVNHG³:HOOWKHQ KRZ ZLOO RXU VWDWH VXSSO\ WKHVH QHHGV" ,W ZLOO QHHG D IDUPHU D EXLOGHU DQG D ZHDYHUDQGDOVR,WKLQNDVKRHPDNHUDQGRQHRUWZRRWKHUVWRSURYLGHIRURXU ERGLO\QHHGV6RWKDWWKHPLQLPXPVWDWHZRXOGFRQVLVWRIIRXURUILYHPHQ´ :.M  ,Q PRGHUQ WLPHV HVSHFLDOO\ ZLWK WKH ,QGXVWULDO 5HYROXWLRQ DQG WKH ULVH RI :HVWHUQ FDSLWDOLVP RU ZKDW , FDOOHG LQ )+& ³FDSLWDOLVW PRGHUQLW\´  SURIHVVLRQDO VSHFLDOL]DWLRQ H[SHULHQFHG D UDSLG JURZWK IRU WKH LQFUHDVH RI HIILFLHQF\7KH³FXOWLYDWHGPDQ´LQ0D[:HEHU VSDUODQFH DQGWKH³XQLYHUVDO PDQ´LQ(PLOH'XUNKHLP VSDUODQFH RISUHPRGHUQLW\ZHUHQRZGLVSODFHGE\ WKH³WUDLQHGVSHFLDOLVW´$*LGGHQV  $GDP 6PLWK LQ $Q ,QTXLU\ LQWR WKH 1DWXUH DQG &DXVHV RI WKH :HDOWK RI 1DWLRQV ³PDUYHOHGRYHUKRZWHQVSHFLDOL]HGZRUNHUVLQDPDQXIDFWXULQJ ZRUNSODFHHDFKSHUIRUPLQJRQHVSHFLILFSDUWRIWKHWDVNRIPDNLQJSLQVHQGHG XSSURGXFLQJSLQVSHUGD\SLQVSHUZRUNHUSHUGD\ «%XWLIHDFK ZRUNHU GLG WKH MRE DORQH KH FRXOG RQO\ PDNH D KDQGIXO RI SLQV SHU GD\ $QG PDQ\ RI WKHVH LQGXVWULDO FRGHV SHQHWUDWHG LQWR WKH ZRUNLQJ VWUXFWXUH RI PDQ\ RWKHU RUJDQL]DWLRQV WKDW LV QRQIDFWRU\ RQHV  DV ZHOO DV H[HPSOLILHG E\ WKH LQVWLWXWLRQDOL]DWLRQ RI EXUHDXFUDWLF DGPLQLVWUDWLRQ´ 3 %DRIX   $ 6PLWK$7RIIOHU6(LVHQVWDGW  7KHUHIRUH@ WKH SUHVVXUH WR FUHDWH D VWDEOH SURILWDEOH EXVLQHVV LQYDULDEO\ GLVWRUWV WKH NLQGV RI QHZV LWHPV UHSRUWHG DV ZHOO DV WKH PDQQHUDQGHPSKDVLVLQZKLFKWKH\DUHUHSRUWHG7KLVRFFXUVQRWDVDUHVXOWRI FRQVFLRXV GHVLJQ EXW VLPSO\ DV D FRQVHTXHQFH RI PDUNHW VHOHFWLRQ WKRVH EXVLQHVVHV ZKRKDSSHQWRIDYRUSURILWVRYHU QHZVTXDOLW\VXUYLYH ZKLOHWKRVH WKDWSUHVHQWDPRUHDFFXUDWHSLFWXUHRIWKHZRUOGWHQGWREHFRPHPDUJLQDOL]HG´ :.O  6HFRQGO\ WKH\ DOVR DUJXHG DERXW ³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´:.O  2YHUWLPHDV1RUPDQ6RORPRQ RQFHULJKWO\VDLG³>W@KHYDVWEXONRI WKH 86 PHGLD LV LQ WKH KDELW RI GHILQLQJ HYHQWV DURXQG WKH ZRUOG ODUJHO\ LQ WHUPVRIZKDW¶VJRRGIRUWKH86JRYHUQPHQW²WKURXJKWKHH\HVRIWRSRIILFLDOV LQ:DVKLQJWRQ´ ,QIR IUDPLQJ²ZKHQ FRPELQHG ZLWK WKH IDFWRUV RI SURIHVVLRQDO VSHFLDOL]DWLRQDQGOHVVHUPDVVLQWHOOLJHQFHLQSROLWLFVDVDIRUHDQDO\]HG MXVWWR FLWH VRPH H[DPSOHV²LV XVHIXO WR XQGHUVWDQG KRZ DQG ZK\ WLPH DQG DJDLQ SROLWLFDO HOLWHV LQ OLEHUDO GHPRFUDF\ OLNH WKH 86  DUH DEOH WR DURXVH WKHLU VXSSRUWIRUUXWKOHVVPLOLWDULVPERWKDWKRPHDQGDEURDG =ROWDQ *URVVPDQ   RQFH VXPPDUL]HG IRXU PDMRU WKHPHV WKDW KDYH EHHQXVHGWRPDVN86PLOLWDULVPERWKDWKRPHDQGDEURDG³)LUVWWKH\ZHUH H[SODLQHG WR WKH 86 SXEOLF DV GHIHQGLQJ WKH OLYHV DQG ULJKWV RI FLYLOLDQ SRSXODWLRQVHG@WKHJURZLQJ6LQR6RYLHWULIW ´ ³6RPHZDUJDPHVVKRZHGWKDWDJUDGXDOHVFDODWLRQE\WKH8QLWHG6WDWHVFRXOG EHHYHQO\PDWFKHGE\1RUWK9LHWQDPHYHU\\HDU1RUWK9LHWQDPHVH



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



FDPH RI GUDIWLQJ DJH DQG SRWHQWLDOO\ FRXOG EH VHQW GRZQ WKH +R &KL 0LQK 7UDLO WR UHSODFH DQ\ ORVVHV DJDLQVW WKH 86 WKH 86 ZRXOG EH ILJKWLQJ WKH ELUWKUDWH ´²WKHILQGLQJRIZKLFKZDVDOVRGLVUHJDUGHG ³$Q\VKRZRIIRUFHE\WKH86LQWKHIRUPRIERPELQJRUJURXQGIRUFHVZRXOG VLJQDOWKH86LQWHUHVWLQGHIHQGLQJ6RXWK9LHWQDPDQGWKHUHIRUHFDXVHWKH86 JUHDWHUVKDPHLIWKH\ZHUHWRZLWKGUDZ´ ³/%- VEHOLHIWKDWWRRPXFKDWWHQWLRQJLYHQWRWKHZDUHIIRUWZRXOGMHRSDUGL]H KLV*UHDW6RFLHW\GRPHVWLFSURJUDPV´ ³7KHHIIHFWVRIVWUDWHJLFERPELQJPRVWZURQJO\EHOLHYHGWKDW1RUWK9LHWQDP SUL]HGLWVLQGXVWULDOEDVHVRPXFKLWZRXOGQRWULVNLWVGHVWUXFWLRQE\86DLU SRZHU DQG ZRXOG QHJRWLDWH SHDFH DIWHU H[SHULHQFLQJ VRPH OLPLWHG ERPELQJ EXW RWKHUV VDZ WKDW HYHQ LQ ::,, VWUDWHJLF ERPELQJ XQLWHG WKH YLFWLP SRSXODWLRQDJDLQVWWKHDJJUHVVRUDQGGLGOLWWOHWRKLQGHULQGXVWULDORXWSXW´ ³>7@KHVLPSOLVWLF'RPLQR7KHRU\UDWLRQDOHV´ZHUHXVHG  ³$IWHU SODFLQJ D IHZ WKRXVDQG $PHULFDQV LQ KDUP>IXO@ ZD\ LW EHFDPH SROLWLFDOO\ HDVLHU WR VHQG KXQGUHGV RI WKRXVDQGV RYHU ZLWK WKH SURPLVH WKDW ZLWK HQRXJK QXPEHUV WKH\ FRXOG SURWHFW WKHPVHOYHV DQG WKDW WR DEDQGRQ 9LHWQDPQRZ ZRXOGPHDQWKHHDUOLHULQYHVWPHQWLQPRQH\DQGEORRGZRXOG EHWKURZQDZD\´ ,QWKHHQG³WKHJUDGXDOHVFDODWLRQFKRVHQDOORZHGWKH/%-$GPLQLVWUDWLRQWR LQLWLDOO\ DYRLG QHJDWLYH SXEOLFLW\ DQG FULWLFLVP IURP &RQJUHVV DV ZHOO DV DYRLGHG GLUHFW ZDU DJDLQVW WKH &KLQHVH EXW VLPXOWDQHRXVO\ UHPRYHG WKH SRVVLELOLW\RIHLWKHUYLFWRU\RUZLWKGUDZDO´ BBBB  :KHQWKHZDUHQGLQZLWKWKHGHIHDWRI6RXWK9LHWQDPDQGWKHKDVW\ ZLWKGUDZDORIWKH86IRUFHVWKHUHZHUHPLOOLRQVRIOLYHVZKRGLHGEXWFRXOG KDYHEHHQVDYHG,QDQHVWLPDWLRQUHSRUWHGE\$JHQFH)UDQFH3UHVVHLQ$SULO  WKHUH FRXOG EH DV PDQ\ DV ³ PLOOLRQ 6RXWKHDVW $VLDQ OLYHV D ODUJH QXPEHURIZKRPZHUHFLYLOLDQV´ZKRGLHGGXULQJWKHZDU:.] 

7KH7HPSWDWLRQRIWKH%LJ,GHD 2QHLVWHPSWHGWRWKLQNRIFRXUVHWKDWQRZZHNQRZDERXWWKHGDQJHURI JURXSWKLQN WKLV NLQG RI HOLWH PLV FDOFXODWLRQ ZLOO QHYHU KDSSHQ DJDLQ 7KLQN WZLFHKRZHYHUDV,DOVRWKXVZDUQHGLQ%'3'  $PRVWUHFHQWFDVHLVQRQHRWKHUWKDQWKH86LQYDVLRQDQGRFFXSDWLRQRI ,UDTDQG$IJKDQLVWDQZKLFKLVVWLOORQJRLQJDVRI ,Q ,UDT DORQH WKH ³ZDU WKHUH IRU IRXU \HDUV >VLQFH @«KDV NLOOHG EHWZHHQDQGDPLOOLRQSHRSOHDQGKDVSURJUHVVLYHO\GHVWUR\HGPXFKRI

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQGWKH0LQG 





WKH SK\VLFDO JRYHUQPHQWDO DQG VRFLHWDO LQIUDVWUXFWXUH RI WKDW FRXQWU\´ 1 'DYLHV 3UHFLVHO\KHUHWKHVSHFWUHRIWKH9LHWQDP:DUGRHVQRWGLVDSSHDU ,QIDFWLQDUHFHQWDUWLFOHWLWOHG³:KR/RVW,UDT"´²0DUWLQ:DONHU  KDG WKLV WR UHPLQG XV DERXW WKH UHFXUUHQFH RI *URXSWKLQN LQ WKH %XVK DGPLQLVWUDWLRQ DV WROG E\ 6WHIDQ +DOSHU   DQG -RQDWKDQ &ODUNH LQ 7KH 6LOHQFH RI WKH 5DWLRQDO &HQWHU :K\ $PHULFDQ )RUHLJQ 3ROLF\ LV )DLOLQJ ³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«´ 7KH GDQJHU KHUH RI FRXUVH LV WKDW ³>W@KLV NLQG RI KLQGVLJKWSRZHUHG SROHPLFLVDXVHIXOUHPLQGHURIWKHGDQJHUVRIWKHJURXSWKLQNWKDWJULSSHGPXFK RI :DVKLQJWRQ V LQWHOOHFWXDO FRPPXQLW\ DQG &RQJUHVV DQG PXFK RI WKH 86 SRSXODWLRQ DIWHUWKHVKRFNRIWKHWHUURULVWDWWDFNVRI«+DOSHUDQG&ODUNH EXWWUHVV WKHLU DUJXPHQW E\ VXJJHVWLQJ WKDW WKH $PHULFDQ V\VWHP LV XQXVXDOO\ YXOQHUDEOH WR D %LJ ,GHD  WKDW FDQ EH H[SUHVVHG LQ D SXQJHQW SKUDVH OLNH 3UHVLGHQW%XVK V D[LVRIHYLO 7KH\FLWHWKHKLJKPLQGHGO\SDWULRWLFVORJDQVWKDW KDYH FDXJKW WKH QDWLRQDO LPDJLQDWLRQ IURP 0DQLIHVW 'HVWLQ\  WR $EUDKDP /LQFROQ V /DVW%HVW+RSHRQ(DUWK DQGWKH 'RPLQR7KHRU\ WKDWZDVGHSOR\HG WRMXVWLI\ $PHULFD V PLVDGYHQWXUHLQ9LHWQDP6XFKVLPSOLFLWLHVFDQ WXUQVRXU DVWKH\GLGZLWK6HQDWRU-RH0F&DUWK\ V5HG6FDUH´0:DONHU  7KH GDQJHU RI JURXSWKLQN VWLOO KDXQWV WKH HOLWHV RU WKH EHVW DQG WKH EULJKWHVW ²QRWOHVVWKDQWKHPDVVHV

%LRSV\FKRORJ\DQG $XWKRULWDULDQ/LEHUDO'HPRFUDF\ 7KHZLGHVSUHDGXVHRILQIRIUDPLQJDQGILOWHULQJ²ZKHQFRPELQHGZLWKWKH DGYDQWDJH RI SROLWLFDO H[SHUWLVH E\ SURIHVVLRQDO SROLWLFLDQV DQG RWKHUV HOLWHV  WKH HPRWLRQDO YXOQHUDELOLW\ RI WKH PDVVHV LQ SROLWLFV DQG WKH IDFWRU RI JURXSWKLQN²KDV HQRUPRXV FRQVHTXHQFHV WR WKH IRUPDWLRQ RI DXWKRULWDULDQ OLEHUDOGHPRFUDF\ , KDG DOUHDG\ H[WHQVLYHO\ DQDO\]HG LQ WKH YROXPH ZRUN %H\RQG 'HPRFUDF\ WR 3RVW'HPRFUDF\   WKH GLVWRUWLRQ RI LQIRUPDWLRQ²DPRQJ



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



PDQ\ RWKHU LVVXHV²E\ ERWK SULYDWH DQG SXEOLF RUJDQL]DWLRQV LQ FRQWHPSRUDU\ VRFLHW\HVSHFLDOO\WKRXJKQRWH[FOXVLYHO\ ZLWKWKH86DVDFDVHVWXG\ )RU LQVWDQFH LQ WKH DERYH H[DPSOH DERXW IUDPLQJ WKH GHEDWH RQ WKH $EX *KUDLE SULVRQ VFDQGDO DV D IRUP RI ³DEXVH´ QRW ³WRUWXUH´  , WKXV ZURWH LQ %'3'   ³'RQDOG 5XPVIHOG ZHQW HTXDOO\ IDU LQ SHUVLVWHQWO\ FDOOLQJ WKH QRWRULRXVSUDFWLFHVE\86WURRSVDJDLQVW,UDTLSULVRQHUV DIRUPRI DEXVH QRW

WRUWXUH  DV KH GLG QRW ZDQW WR EH UHVSRQVLEOH IRU WKH OHJDO FRQVHTXHQFHV  EHFDXVHRIWKHYLRODWLRQRIWKH*HQHYD&RQYHQWLRQV 6R KHZDVFRPIRUWDEOH ZLWKWKHZRUG³DEXVH´KHKHVLWDWHGWRXVHWRUWXUHWRGHVFULEHZKDWKDSSHQHGLQ $EX*KUDLE ´0'DYLG  2WKHUH[DPSOHVRIIUDPLQJDQGILOWHULQJLQWKHFRQWH[WRIWKH86LQYDVLRQ DQG RFFXSDWLRQ RI  ,UDT LQFOXGH IRU IXUWKHU LOOXVWUDWLRQ FDOOLQJ 6DGGDP D ³+LWOHU´ ZKR ³WKUHDWHQ>HG@ $PHULFD«LQ WKH IRUP RI D PXVKURRP FORXG´  EODPLQJ WKH YLROHQW LQVXUJHQF\ LQ ,UDT DV WKH ZRUN RI D IHZ ³H[WUHPLVWV´ DQQRXQFLQJWKHLPSRVLWLRQRIDSXSSHWJRYHUQPHQWLQ,UDTDV³WKHILUVWVWDJHRI GHPRFUDF\´ LQ WKH 0LGGOH (DVW GHQRXQFLQJ WKH UHOHDVH RI WKH SKRWRV RI ,UDTL SULVRQ WRUWXUH DV ³SROLWLFDOO\ PRWLYDWHG´ RU D NLQG RI ³SROLWLFDO SOR\´ DQG ODEHOLQJWKHSULVRQHUVRI ZDULQ,UDTDQG$IJKDQLVWDQDV ³HQHPH\FRPEDWDQWV´ WRJHWDZD\IURPWKHOHJDOFRQVWUDLQWVE\WKH*HQHQD&RQYHQWLRQV  0RUHLOOXVWUDWLYHH[DPSOHVRIGLIIHUHQWWHFKQLTXHVRIIUDPLQJDQGILOWHULQJ IRU UXWKOHVV SROLWLFDO SXUSRVHV DUH VKRZQ LQ 7DEOH  DQG 7DEOH  DV WKH\ ZHUHDOUHDG\H[WHQVLYHO\DQDO\]HGLQ%'3' 7KLVRIFRXUVHLVQRWWRVD\WKDWWKHPDVVHVDUHWRRGXPSWRHYHQWKLQN² ZKLFK LV DEVXUG ,Q IDFW PDQ\ YRWHUV LQ OLEHUDO GHPRFUDF\ GR QRW TXLWH WUXVW SURIHVVLRQDOSROLWLFLDQV ZKR KDYHHPRWLRQDOO\ PDQLSXODWHGWKHPDOOWRRRIWHQ ZLWKWRROLWWOHFRJQLWLYHVXEVWDQFH 0DQXHO&DVWHOOVZDVULJKWLQRQFHVD\LQJDOEHLWLQDGLIIHUHQWFRQWH[WWKDW ³FKDUDFWHUDVVDVVLQDWLRQKDVEHFRPHDSULPDU\SROLWLFDOWRRO«ZLWKQRVFDUFLW\ RIGDPDJLQJPDWHULDOWRGLJXSRQRSSRQHQWVPHGLDSROLWLFVKDVEHFRPHVFDQGDO SROLWLFV«7KHUHVXOWLVDJHQHUDOPLVWUXVWRIDOOSROLWLFLDQV´66FKRURZ  ,Q%'3',DOVRDQDO\]HGWKHSKHQRPHQRQRIYRWHUDSDWK\LQOLEHUDOGHPRFUDF\ G@$IULFDQ$PHULFDQVNLOOHG´LQ'HWURLW  ³$IWHU.LQJLVVKRWRYHUVROGLHUVLQFLWLHV´  ³1DWLRQDO*XDUGJXQILUHNLOOHGIRXUVWXGHQWV´DW.HQW6WDWH8QLYHUVLW\  7KHH[FHVVHVRIWKH)%,DQG&,$GXULQJWKHVRFLDOXQUHVWLQVDQGV ³$UP\GLUHFW>HG@:RXQGHG.QHHVLHJHRI/DNRWDV´LQ6RXWK'DNRWD  ³$UP\0DULQHVGHSOR\HGDJDLQVWDQWLSROLFHXSULVLQJ´LQ/RV$QJHOHV  7KHYLRODWLRQRIFLYLOOLEHUWLHVLQWKH3DWULRW$FWLQHDUO\¶V  )HZIRUPVRIUHSUHVVLRQHJUHYHUVHVH[LVPUHYHUVHUDFLVPHWF  BBBB  2QHPD\EHWHPSWHGWRWKLQNWKDWWKLVLVQRZKLVWRU\DQGWKHSDVWQRORQJHU DSSOLHVWRWKHPRUHSURJUHVVLYHHUDRIRXUWLPH7KLQNWZLFHRUWKULFH 7KLV LV DQRWKHU P\WK WKDW , GHEXQNHG LQ %'3' VLQFH IRU LQVWDQFH RQ -DQXDU\   WKH 86 6XSUHPH &RXUW WRRN DQRWKHU FDVH DQG WKLV WLPH ³DOORZHG WKH %XVK DGPLQLVWUDWLRQ WR NHHS VHFUHW WKH QDPHV DQG RWKHU EDVLF GHWDLOV DERXW KXQGUHGV RI SHRSOH TXHVWLRQHG DQG GHWDLQHG RU DUUHVWHG DIWHU WKH 6HSW   DWWDFNV :LWKRXW FRPPHQW WKH WRS FRXUW UHIXVHG WR KHDU DQ DSSHDO E\ FLYLO OLEHUWLHV DQG RWKHU JURXSV FKDOOHQJLQJ WKH VHFUHW DUUHVWV DQG GHWHQWLRQVIRUYLRODWLQJWKH)UHHGRPRI,QIRUPDWLRQ$FWDQGFRQVWLWXWLRQDOIUHH VSHHFKULJKWVXQGHUWKH)LUVW$PHQGPHQW´-9LFLQL  %XW RQH GRHV QRW QHHG WR DOZD\V WDUJHW WKH 86 6XSUHPH &RXUW DV D FDVH VWXG\ HYHQ PDQ\ MXGJHV DW WKH ORZHU OHYHOV LQ WKH MXGLFLDU\ KLHUDUFK\ DUH QRW LPPXQHIURPWKHPDWUL[RISRZHUDQGYHVWHGLQWHUHVWV )RULQVWDQFHDUHFHQWFRPSUHKHQVLYHVWXG\SXEOLVKHGLQ1RYHPEHURI LQ WKH 6WDQIRUG /DZ 5HYLHZ E\ WKUHH ODZ SURIHVVRUV²3KLOLS * 6FKUDJ DQG $QGUHZ,6FKRHQKROW]DW*HRUJHWRZQ8QLYHUVLW\/DZ&HQWHUDV ZHOODV-D\D 5DPML1RJDOHV DW 7HPSOH 8QLYHUVLW\ 6FKRRO RI /DZ²DQDO\]HG ³ GHFLVLRQV E\ LPPLJUDWLRQ MXGJHV LQFOXGLQJ WKRVH FDVHV IURP WKH  FRXQWULHV WKDWKDYHSURGXFHGWKHPRVWDV\OXPVHHNHUVLQUHFHQW\HDUVDPRQJWKHP&KLQD +DLWL&RORPELD$OEDQLDDQG5XVVLD7KHSURIHVVRUVFRPSDUHGIRUWKHILUVWWLPH WKH UHVXOWV RI LPPLJUDWLRQ FRXUW FDVHV RYHU PRUH WKDQ IRXU \HDUV ILQGLQJ YDVW GLIIHUHQFHV LQ WKH KDQGOLQJ RI FODLPV ZLWK JHQHUDOO\ FRPSDUDEOH IDFWXDO FLUFXPVWDQFHV´-3UHVWRQ  $VDQLOOXVWUDWLRQ³>L@QRQHRIWKHVWDUNHUH[DPSOHVFLWHG&RORPELDQVKDG DQ  SHUFHQW FKDQFH RI ZLQQLQJ DV\OXP IURP RQH MXGJH LQ WKH 0LDPL LPPLJUDWLRQ FRXUW DQG D  SHUFHQW FKDQFH IURP DQRWKHU MXGJH LQ WKH VDPH FRXUW«$FFRUGLQJ WR WKH VWXG\ JUHDW GLIIHUHQFHV DOVR SUHYDLO DPRQJ MXGJHV VLWWLQJ RQ WKH VDPH FRXUW DQG KHDULQJ VLPLODU DV\OXP FDVHV ,Q WKH 0LDPL



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



LPPLJUDWLRQ FRXUW RQH MXGJH JUDQWHG  SHUFHQW RI WKH DV\OXP FDVHV ZKLOH DQRWKHU JUDQWHG  SHUFHQW 2QH RI WKH PRVW VLJQLILFDQW IDFWRUV GHWHUPLQLQJ ZKHWKHUDMXGJHZRXOGEHOLNHO\WRDSSURYHDV\OXPSHWLWLRQVZDVVH[WKHVWXG\ IRXQG)HPDOHLPPLJUDWLRQMXGJHVJUDQWDV\OXPDWDSHUFHQWKLJKHUUDWHWKDQ WKHLUPDOHFROOHDJXHV´-3UHVWRQ  3KLOLS*6FKUDJWKXVFRQFOXGHG³,WLVYHU\GLVWXUELQJWKDWWKHVHGHFLVLRQV FDQ PHDQ OLIH RU GHDWK DQG WKH\ VHHP WR D ODUJH H[WHQW WR EH WKH UHVXOW RI D FOHUN¶VUDQGRPDVVLJQPHQWRIDFDVHWRDSDUWLFXODUMXGJH´-3UHVWRQ  ,QDQRWKHUGLVWXUELQJUHSRUWDOVRLQLWZDVIRXQGWKDWIRULQVWDQFHD 'LVWULFW RI &ROXPELD DGPLQLVWUDWLYH KHDULQJV MXGJH 5R\ 3HDUVRQ VXHG D SRRU GU\FOHDQHURZHGE\D6RXWK.RUHDQLPPLJUDQW IRUPLOOLRQRQO\EHFDXVH KH ZDV QRW KDSS\ ZLWK WKH ZD\ WKDW WKH VPDOO VWRUH RZQHU KDQGOHG D SDLU RI SDQWV RI KLV  RQ WLPH DV WKH RZQHU DOOHJHGO\ SURPLVHG ³6DWLVIDFWLRQ *XDUDQWHHG´DQG³6DPH'D\6HUYLFH´/7DNUXUL $QGWKHMXGJHLQVLVWHG RQWKHODZVXLWHYHQDIWHUWKHRZQHUXQGHULQWHQVHOHJDOSUHVVXUHZHQWEURNHWR RIIHUKLPWKHMXGJH DFRPSHQVDWLRQZKLFKZDVZRUWKDVPXFKDV IRU RQO\DVLQJOHSDLURIXVHGSDQWVRIKLV  $IWHU DOO MXGJHV LQ WKH 86 IHGHUDO V\VWHP DUH QRW DV LPSDUWLDO DV LV FRQYHQWLRQDOO\ DVVXPHG 7KH FDVH RI $WWRUQH\ *HQHUDO $OEHUWR *RQ]DOHV DQG KLV SUHGHFHVVRU -RKQ $VKFURIW LQ WKH HDUO\ ¶V LV DQ H[FHOOHQW H[DPSOH HVSHFLDOO\ LQ UHJDUG WR WKHLU ³FRXQWHUWHUURU SURJUDPV WKDW FRXUWV IRXQG XQFRQVWLWXWLRQDO DQG LQ VWDFNLQJ WKH UDQNV RI IHGHUDO SURVHFXWRUV ZLWK 5HSXEOLFDQ OR\DOLVWV´ / -RUGDQ D  7KLV EHWUD\V ³DQ LQVWLWXWLRQ WKDW LV VXSSRVHG WR RSHUDWH ODUJHO\ IUHH RI WKH :KLWH +RXVH DQG EH\RQG WKH UHDFK RI SROLWLFV´/-RUGDQD  3DXO 5RWKVWHLQ D SURIHVVRU DW *HRUJHWRZQ /DZ 6FKRRO WKXV H[SODLQHG ³7KLV LQWHUWZLQLQJ RI WKH SROLWLFDO ZLWK WKH UXQQLQJ RI WKH -XVWLFH 'HSDUWPHQW KDV JRQH RQ LQ RWKHU DGPLQLVWUDWLRQV ERWK 5HSXEOLFDQ DQG 'HPRFUDW´ / -RUGDQD  2UJDQL]DWLRQVLQOLEHUDOGHPRFUDF\HYHQZKHQWKH\DUHWRXSKROGWKHVSLULW RIWKHODZIRUMXVWLFHDUH QRWDQ\ OHVV YRLGRIWKH PDWUL[ RISRZHUDQG YHVWHG LQWHUHVWVWKDQWKHRQHVHOVHZKHUH %XW DV WKH 86 MXGLFLDU\ H[DPSOH DV WKH FDVH VWXG\ KHUH ZKLFK ZDV DOUHDG\PRUHHODERUDWHGLQ%'3' EHFRPHVGHHSO\LQVWLWXWLRQDOL]HGRYHUWLPH WKLV EULQJV XV WR D UHODWHG LVVXH FRQFHUQLQJ LWV LQVWLWXWLRQDO SUREOHPV QRW MXVW RUJDQL]DWLRQDORQHV 

6RFLDO,QVWLWXWLRQVRI*UHHG 7KH VKDN\ 86 MXGLFLDU\ KLVWRU\ DV XVHG DERYH IRU LOOXVWUDWLRQ  LV QRW VXUSULVLQJLIRQHFRQQHFWVLWWRWKHODUJHUGRPDLQRIVRFLDOLQVWLWXWLRQV$IWHUDOO

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





OLEHUDOGHPRFUDF\OLNHWKH86RIWHQHQGRUVHVDFDSLWDOLVWHFRQRPLFLQVWLWXWLRQ DVDVRFLDOIRXQGDWLRQ 9DULRXVVFKRODUVRYHUWKHGHFDGHVKDGZULWWHQP\ULDGYROXPHVRQWKHPDLQ FKDUDFWHULVWLFVRIWKHFDSLWDOLVWLQVWLWXWLRQDQGWZRH[FHOOHQWH[DPSOHVDUH0D[ :HEHU¶V 7KH 3URWHVWDQW (WKLFV DQG WKH 6SLULW RI &DSLWDOLVP DQG -RVHSK 6FKXPSHWHU¶V &DSLWDOLVP 6RFLDOLVP DQG 'HPRFUDF\ 0 :HEHU  * 9LNVQLQV-6FKXPSHWHU'*URVV 

7KH'RXEOH(GJHG:RUOGRI&DSLWDOLVP ,Q )+& )&' DQG HVSHFLDOO\ %&3& , H[WHQVLYHO\ DQDO\]HG WKH PDMRU FKDUDFWHULVWLFV RI FDSLWDOLVP DV D VRFLDO LQVWLWXWLRQ DQG WKHLU LPSOLFDWLRQV IRU VRFLHW\DQGRWKHUHQWLWLHVWRROLNHFXOWXUHQDWXUHDQGWKHPLQG  0RUH VSHFLILFDOO\ IRU LQVWDQFH LQ )&' DQG %&3& , HODERUDWHG RQ WKH ³LQGLYLGXDOLVWLF´ ³PDWHULDOLVWLF´ DQG ³OHJDOIRUPDOLVWLF´ FKDUDFWHULVWLFV RI D FDSLWDOLVWLQVWLWXWLRQ ,Q UHODWLRQ WR WKH OHJDOIRUPDOLVWLF FKDUDFWHULVWLF D FDSLWDOLVW LQVWLWXWLRQ LV PRUH FRQJHQLDO WR WKH LPSHUVRQDO SURFHGXUHV RI XQLYHUVDOLVP QRW SDUWLFXODULVP  DFKLHYHPHQW RULHQWDWLRQ QRW DVFULSWLRQ  HPRWLRQDO QHXWUDOLW\ QRW DIIHFWLYLW\  DQG GLIIXVLYHQHVV QRW VSHFLILFLW\  ,Q VR GRLQJ WKH FDSLWDOLVW PLQGVHWLVUXWKOHVVO\HIILFLHQF\RULHQWHG ,Q UHODWLRQ WR WKH LQGLYLGXDOLVW FKDUDFWHULVWLF LW LV OHVV IRFXVHG RQ WKH EHWWHUPHQW RI FRPPXQLW\ WKDQ RQ LQGLYLGXDO VHOIHQKDQFHPHQW ZKLFK LI IXOILOOHGLVDVVXPHGWRFROOHFWLYHO\VHUYHWKHFRPPXQLW\LQGLUHFWO\,QVRGRLQJ WKH FDSLWDOLVW PLQGVHW LV KLJKO\ VHOIFHQWHUHG LQ EHLQJ LQVWUXPHQWDO DQG FDOFXODWLYH LQ UHODWLRQ WR RWKHUV DV WKH PHDQV WR DQ HQG QRW DV WKH HQGV LQ WKHPVHOYHV &RPSHWLWLRQLQUHODWLRQWRRWKHUVLVFHQWUDOWRLWVJDPHQRWIRUWKH FRPPRQJRRG ,Q UHODWLRQ WR WKH PDWHULDOLVWLF FKDUDFWHULVWLF LW GRHV QRW VHHN PRUDO RU VSLULWXDO HQOLJKWHQPHQW DV LWV HQG EXW IDYRUV PRUH HDUWKO\ LQWHUHVWV LQ PRQH\ SRZHURUWKHOLNHZKLFKFDQEHZKDW5REHUW+HLOEURQHU RQFHUHJDUGHG DV³LQVDWLDEOHDOZD\VZDQWLQJPRUHDFFHSWLQJQROLPLWRIZKDWWRDFTXLUH ´3 %DRIX  ,Q WKH SURFHVV WKH FDSLWDOLVW WUDQVIRUPDWLRQ RU ZKDW , FDOOHG LQ )+& ³FDSLWDOLVWPRGHUQLW\´KDGFUHDWHGDKLVWRULFDOO\XQSUHFHGHQWHGZRUOGRIZHDOWK WRWKHSRLQWWKDWHYHQ.DUO0DU[GLGQRWIDLOWRJLYHFUHGLWWRLW )RU LQVWDQFH LQ WKH FDVH RI WKH (QJOLVK FDSLWDOLVW LQGXVWULDO UHYROXWLRQ 'DYLG/DQGHV LQWHUHVWLQJO\REVHUYHGWKDWLQLWVKH\GD\³WKHPLGGOH DQG XSSHU FODVVHV ZHUH FRQYLQFHG E\ WKH PDUYHORXV LQYHQWLRQV RI VFLHQFH DQG WHFKQRORJ\ WKH LQFUHDVLQJ PDVV DQG YDULHW\ RI PDWHULDO JRRGV WKH JURZLQJ VSHHG RI PRYHPHQW DQG FRQYHQLHQFH RI HYHU\GD\ DFWLYLWLHV´ WR DQ H[WHQW RI



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



WULXPSKDQWWHOHRORJ\WKDWWKH\WKRXJKW ³WKDWWKH\ ZHUH OLYLQJ LQ WKHEHVWRIDOO SRVVLEOHZRUOGVDQGZKDWLVPRUHDZRUOGJHWWLQJEHWWHUDOOWKHWLPH´ ,W ZDV KDUG DW WKH WLPH WR GLVSXWH WKLV VLQFH PDQ\ EHQHILWHG IURP WKH FDSLWDOLVW WUDQVIRUPDWLRQ ZLWK QXPHURXV ZLQQHUV OLNH WKRVH ³PDQDJHUV PHUFKDQWVDQGVKRSNHHSHUVWKRVHQHZO\VNLOOHGRIWKH ODERUDULVWRFUDF\ WKRVH FRQVXPHUV RI WKH QHZ FRPPRGLWLHV DQG WKRVH PXOWLSO\LQJ SURIHVVLRQDOV LQ JURZLQJWRZQVDQGFLWLHV´3%DRIX'/DQGHV  %XW 0DU[ ZDV DQJU\ HQRXJK WR SRLQW RXW WKH GDUNHU VLGH RI WKH (QJOLVK FDSLWDOLVWUHYROXWLRQDV,ZURWHLQ)+& WKDW³WKHFDSLWDOLVWKLVWRULFDO VWULYLQJ HQGHG XS FUHDWLQJ D QHZ RSSUHVVLYH VWUDWXP DJDLQVW D URRWOHVV SUROHWDULDW  WKRVH FRXQWOHVV ZRPHQ FKLOGUHQ DQG PHQ ZRUNLQJ LQ (QJOLVK IDFWRULHVXQGHUPRVWEUXWDOFRQGLWLRQVZKLFK0DU[ZDVULJKWO\PRVWLQGLJQDQW DERXW$QGPRUHLWDOVRFUHDWHGD VRRWDQGXJOLQHVVRIWKHIDFWRU\WRZQV PDGH SRVVLEOHE\WKHPRVWDGYDQFHGRUJDQL]DWLRQDOLQQRYDWLRQRIWKHWLPH,QIDFWWKLV LQQRYDWLRQ ZDV UHJDUGHG DV DQ H[HPSODU RI WKH VFLHQWLILF DQG WHFKQRORJLFDO DFKLHYHPHQWVGXULQJWKH,QGXVWULDO5HYROXWLRQ´  $QG PRUH ³WR WKRVH SDXSHU DSSUHQWLFHV WKRVH GLVSODFHG FUDIWVPHQ WKRVH ,ULVK LPPLJUDQWV ZKR GLG WKH GLUW\ ZRUN DQG WKRVH VRFLDO XQWRXFKDEOHV LQ YLOODJHV DQG XUEDQ VOXPVZ\QGV LQ WKH  V²WKH EHVW RI DOO SRVVLEOH ZRUOGV ZDV D PRVW SUHSRVWHURXV LGHD WKHUH FRXOG HYHU EH ' /DQGHV    $V WLPH ZHQW RQ WKH VRFLDO VFHQH ORRNHG XJOLHU VWLOO 7KHUH ZHUH SROOXWLRQ XUEDQ XJOLQHVV FRUUXSWLRQ LQIODWLRQ DOLHQDWLRQ XQHPSOR\PHQW ORQHOLQHVV UDFLVP FODVVFRQIOLFWEXUHDXFUDWLFUHGWDSHVIDPLO\GLVVROXWLRQPLQGOHVVFRQVXPHULVP DQG PDQ\ PRUH´ 3 %DRIX   $7RIIOHU   0XFK ODWHU WKHQ FDPHWKH*UHDW'HSUHVVLRQLQWKH¶VDQGWKHPDJLFRIWKHIUHHPDUNHWZDV QRWVRPDJLFDODVLWPLJKWVRXQGDWILUVW (YHQ PRUH LPSRUWDQWO\ VRPH VFKRODUV OLNH ,PPDQXHO :DOOHUVWHLQ   DQG$QGUH*XQGHU)UDQN DUJXHGWKDWWKHULVHRIFDSLWDOLVP DVDQHFRQRPLFV\VWHPPXVWEHXQGHUVWRRGLQUHODWLRQWRWKHODUJHUFRQWH[WRI WKH HQWLUH ZRUOG QRW MXVW DV DQ LVRODWHG FDVH RI DQ LQGLYLGXDO HFRQRP\  ,Q DQFLHQW WLPHV WKHUH ZHUH ³PLQLV\VWHPV RU ZKDW DQWKURSRORJLVWV FDOO EDQGV WULEHV DQG VPDOO FKLHIGRPV´ IROORZHG E\ ³VLQJOH VWDWH ZRUOGHPSLUHV DQG PXOWLSROLW\ ZRUOGHFRQRPLHV´ EHIRUH WKH\ ZHUH DOO VXSHUVHGHG E\ PRGHUQ ³ZRUOGV\VWHPV´RQWKHJOREDOVFDOH:.X  7KLV ³ZRUOGV\VWHPV´ DSSURDFK IRU LQVWDQFH FRQVLGHUV FDSLWDOLVP ³DV D KLVWRULFDOVRFLDOV\VWHP´ZKLFK³KDVDOZD\VLQWHJUDWHGDYDULHW\RIODERUIRUPV ZLWKLQDIXQFWLRQLQJGLYLVLRQRIODERUZRUOGHFRQRP\ &RXQWULHVGRQRWKDYH HFRQRPLHVEXWDUHSDUWRIWKHZRUOGHFRQRP\)DUIURPEHLQJVHSDUDWHVRFLHWLHV RUZRUOGVWKHZRUOGHFRQRP\PDQLIHVWVDWULSDUWLWHGLYLVLRQRIODERUZLWKFRUH VHPLSHULSKHUDO DQG SHULSKHUDO ]RQHV ,Q FRUH ]RQHV EXVLQHVVHV ZLWK WKH VXSSRUWRIVWDWHVWKH\RSHUDWHZLWKLQPRQRSROL]HWKHPRVWSURILWDEOHDFWLYLWLHV

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





RI WKH GLYLVLRQ RI ODERU ,Q UHFRJQL]LQJ D WULSDUWLWH SDWWHUQ ZRUOGV\VWHPV DQDO\VLVFULWLFL]HGGHSHQGHQF\WKHRU\ZLWKLWVELPRGDOV\VWHPRIRQO\FRUHVDQG SHULSKHULHV´:.X  6LQFH OLEHUDO GHPRFUDF\ OLNH WKH 86  LV WKH GRPLQDQW PHPEHU LQ WKH ³FRUH´]RQHVLWXDWHGZLWKLQWKHZRUOGV\VWHPVLWWHQGVWRGRPLQDWHRWKHUVLQD UXWKOHVV ZD\ IRU JUHHG EH LW DERXW PDUNHW DFFHVV FKHDS ODERU DQG QDWXUDO UHVRXUFHV MXVW WR FLWH WKUHH PDLQ WKRXJK QRW H[KDXVWLYH H[DPSOHV  DORQJ WKH JOREDOOLQHRIWKHWULSDUWLWHGLYLVLRQRIODERU

7KH'HVWUXFWLYH6LGHRIWKH,QVWLWXWLRQRI*UHHG 7KHGHVWUXFWLYHFRQVHTXHQFHVRIDQLQVWLWXWLRQZKLFKRSHQO\FHOHEUDWHVWKH ORYH RI PRQH\ DQG WKH GHVLUDELOLW\ RI JUHHG VR XQGHUVWRRG ERWK DW KRPH DQG DEURDGLQWKHZRUOGV\VWHPV DUHZHOOVXPPDUL]HGE\-RKQ0D\QDUG.H\QHV .H\QHV   GXULQJ WKH *UHDW 'HSUHVVLRQ WKXV ZURWH LQ KLV (VVD\V LQ 3HUVXDVLRQ ³>7@KH PRUDO SUREOHP RI RXU DJH LV FRQFHUQHG ZLWK WKH ORYH RI PRQH\ ZLWK WKH KDELWXDO DSSHDO WR WKH PRQH\ PRWLYH LQ QLQHWHQWKV RI WKH DFWLYLWLHVRIOLIHZLWKWKHXQLYHUVDOVWULYLQJDIWHULQGLYLGXDOHFRQRPLFVHFXULW\DV WKH SULPH REMHFW RI HQGHDYRU ZLWK WKH VRFLDO DSSUREDWLRQ RI PRQH\ DV WKH PHDVXUH RI FRQVWUXFWLYH VXFFHVV DQG ZLWK WKH VRFLDO DSSHDO WR WKH KRDUGLQJ LQVWLQFWDVWKHIRXQGDWLRQRIWKHQHFHVVDU\SURYLVLRQIRUWKHIDPLO\DQGIRUWKH IXWXUH«7KHORYHRIPRQH\DVDSRVVHVVLRQZLOOEHUHFRJQLVHGIRUZKDWLWLVD VRPHZKDW GLVJXVWLQJ PRUELGLW\ RQH RI WKRVH VHPLFULPLQDO VHPLSDWKRORJLFDO SURSHQVLWLHV ZKLFK RQH KDQGV RYHU ZLWK D VKXGGHU WR WKH VSHFLDOLVWV LQ PHQWDO GLVHDVH3HUKDSVLWLVQRWDQDFFLGHQWWKDWWKHUDFHZKLFKGLGPRVWWREULQJWKH SURPLVHRILPPRUWDOLW\LQWRWKHKHDUWDQGHVVHQFHRIRXUUHOLJLRQVKDVDOVRGRQH PRVW IRU WKH SULQFLSOH RI FRPSRXQG LQWHUHVW DQG SDUWLFXODUO\ ORYHV WKLV PRVW SXUSRVLYHRILQVWLWXWLRQV´ 'DYLG5+RIIPDQ WKXVULJKWO\REVHUYHG³6RPHFULPLQRORJLVWVKDYH DUJXHG WKDW SDUW RI $PHULFD¶V FULPH SUREOHP HPDQDWHV IURP WKH TXHVW IRU

LQVWDQWJUDWLILFDWLRQ ,QVWHDGRIVDYLQJRQH¶VPRQH\WRSXUFKDVHDGHVLUHGLWHP SHRSOHEHFRPHLPSDWLHQWDQGPRUHZLOOLQJWRWDNH VKRUWFXWV OHJDORULOOHJDOWR REWDLQ WKLV LWHP´ $IWHU DOO ³>F@DSLWDOLVP LQ $PHULFD LV FRYHUWO\ JRYHUQHG E\«XQZULWWHQ UXOHV«  7UHDW RWKHUV WKH ZD\ \RX ZRXOG 127 ZDQW WR EH WUHDWHG $OZD\VPHDVXUHWKHYDOXHRIKXPDQEHLQJVE\\RXUVHOILQWHUHVWQRW WKHLUV´'+RIIPDQ  ,WLVQRZRQGHUWKHQDVDQLOOXVWUDWLRQRIWKHFULPLQDOFRQVHTXHQFHVRIWKH LQVWLWXWLRQ RI JUHHG LQ DFWLRQ WKDW LQ WKH 86 DORQH ³>W@KHUH ZHUH  PLOOLRQ YLROHQW FULPHV UHSRUWHG«LQ ´²RIWHQ UHODWHG WR RIIHQVHV GULYHQ E\ JUHHG DQG UHODWHG GHVLUHV :32 G  $OVR LQ  ³WKUHH UHVLGHQWV RXW RI  DJH  RU DERYH JRW UREEHG«>5@HVLGHQWV DJH  RU DERYH H[SHULHQFHG 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



PLOOLRQFULPHVIRUHYHU\SHUVRQVDJHRUROGHUWKHUHRFFXUUHGRQHUDSH RUVH[XDODVVDXOWDQGRQHDVVDXOWZLWKLQMXU\´:32I  ,Q IDFW WKH GHVWUXFWLYH VLGH RI WKH VRFLDO LQVWLWXWLRQ RI JUHHG JRHV PRUH GHHSO\ WKDQ WKLV )RU LQVWDQFH LQ 3XEOLF &KRLFH 7KHRU\ WKHUH LV HYHQ DQ H[WHQVLYH GLVFXVVLRQ RI ³JRYHUQPHQW IDLOXUHV´ LQ OLEHUDO GHPRFUDF\ LQ VSHFLDO UHODWLRQ WR VXFK DFWRUV DV OHJLVODWRUV ZKR ³WU\ WR FKDQJH ODZV WR HQVXUH WKHLU FRQWLQXHG LQFXPEHQF\´  EXUHDXFUDWV  ZKR ³VHHN WR DGYDQFH WKHLU SRZHU DQG EXGJHWDXWKRULW\´ DQGUHJXODWRUVZKR³VHHNWRREWDLQEDUULHUVWRHQWU\RURWKHU VSHFLDOSURYLVLRQVRIWKHODZWKDWUHGXFHFRPSHWLWLRQLQFUHDVHVXEVLGL]DWLRQRU ERWK´:.P  :KDW PDNHV WKLQJV ZRUVH DV $QWKRQ\ 'RZQV LQ $Q (FRQRPLF 7KHRU\ RI 'HPRFUDF\IXUWKHUSRLQWHGRXWLV³WKHODFNRILQFHQWLYHVIRUYRWHUVWRPRQLWRU JRYHUQPHQW HIIHFWLYHO\´ EHFDXVH ³WKH YRWHU LV ODUJHO\ LJQRUDQW RI SROLWLFDO LVVXHV«´-6KDZ  &RQVHTXHQWO\ ³>W@KHUH LV QR GLUHFW UHZDUG IRU ILJKWLQJ SRZHUIXO LQWHUHVW JURXSV LQ RUGHU WR FRQIHU EHQHILWV RQ D SXEOLF WKDW LV QRW HYHQ DZDUH RI WKH EHQHILWVRURIZKRFRQIHUUHGWKHP7KXVWKHLQFHQWLYHVIRUJRRGPDQDJHPHQWLQ WKHSXEOLFLQWHUHVWDUHZHDN,QFRQWUDVWLQWHUHVWJURXSVDUHRUJDQL]HGE\SHRSOH ZLWK YHU\ VWURQJ JDLQV WR EH PDGH IURP JRYHUQPHQWDO DFWLRQ 7KH\  SURYLGH SROLWLFLDQVZLWKFDPSDLJQIXQGVDQGFDPSDLJQZRUNHUV,QUHWXUQWKH\UHFHLYHDW OHDVW WKH HDU  RI WKH SROLWLFLDQ DQG RIWHQ JDLQ VXSSRUW IRU WKHLU JRDOV«,Q DGGLWLRQ PDQ\ UHJXODWRU\ DJHQFLHV DSSHDU WR EH FDSWXUHG  E\ VSHFLDO LQWHUHVWV«&DSWXUH RFFXUV EHFDXVH EXUHDXFUDWV GR QRW KDYH D SURILW JRDO WR JXLGH WKHLU EHKDYLRU ,QVWHDG WKH\«UHO\ RQ &RQJUHVV IRU WKHLU EXGJHWV DQG RIWHQWKHSHRSOHZKRZLOOEHQHILWIURPWKHLUPLVVLRQFDQLQIOXHQFH&RQJUHVVWR SURYLGHPRUHIXQGV7KXVLQWHUHVWJURXSV²ZKRPD\EHDVGLYHUVHDVOREE\LVWV IRUUHJXODWHGLQGXVWULHVRUOHDGHUVRIHQYLURQPHQWDOJURXSV²EHFRPHLPSRUWDQW WR WKHP 6XFK LQWHUUHODWLRQVKLSV FDQ OHDG WR EXUHDXFUDWV EHLQJ FDSWXUHG E\ LQWHUHVWJURXSV´-6KDZ  7KLV³FDSWXUH´LGHDZDVZRUNHGRXWE\*HRUJH6WLJOHULQKLVDUWLFOH WLWOHG ³7KH WKHRU\ RI (FRQRPLF 5HJXODWLRQ´ DQG KH ODWHU ZHQW RQ WR ZLQ WKH 1REHO3UL]HLQ(FRQRPLFVLQ0)ULHGPDQ  ,Q WKH FDVH RI $PHULFDQ OLEHUDO GHPRFUDF\ WKH FHOHEUDWLRQ RI PRQH\ DQG JUHHGLQFDSLWDOLVPDVRQHRILWVVRFLDOLQVWLWXWLRQVKDVFRQWULEXWHGWRDSROLWLFDO HQYLURQPHQW LQ ZKLFK PRQH\ VSHDNV ORXGO\ LQ FROOXVLRQ ZLWK WKH EXVLQHVV RI JUHHG²ERWKD DWKRPHDQGE DEURDGWREHGLVFXVVHGUHVSHFWLYHO\KHUHDIWHU 6RPHRIWKHVHLVVXHVZHUHDOVRDOUHDG\GLVFXVVHGLQ%'3'DVVXPPDUL]HG LQ7DEOHRQGLIIHUHQWWHFKQLTXHVRIOHJDOIRUPDOLVWLFUXWKOHVVQHVVDQG7DEOH RQGLIIHUHQWGHPRFUDWLFYLRODWLRQVRILQWHUQDWLRQDOODZ DQGIRUWKDWPDWWHU LQ%&3& 

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





2QWKH'RPHVWLF)URQW$WKRPHDQH[FHOOHQWLOOXVWUDWLRQLVQRQHRWKHUWKDQWKH ³VRIWPRQH\´ SROLWLFV LQ ZKLFK SURIHVVLRQDO SROLWLFLDQV RIWHQ ILQG WKHPVHOYHV GHSHQGHQW RQ LQWHUHVW JURXSV IRU ILQDQFLDO FRQWULEXWLRQV WR WKHLU SROLWLFDO FDPSDLJQV IRU HOHFWLRQ DQG UHHOHFWLRQ²ZLWK SD\EDFNV RIWHQ LQ WHUPV RI SULYLOHJHGIDYRUVDQGSRVLWLRQV WREHH[SHFWHGLQYLFWRU\ 7KLV GHSHQGHQF\ LV DOO WKH PRUH SRZHUIXO DV WKH FRVWV RI SROLWLFDO FDPSDLJQV EHFRPH PRUH H[SHQVLYH RYHU WLPH )RU LQVWDQFH ³>L@Q  FDQGLGDWHV IRU WKH +RXVH RI 5HSUHVHQWDWLYHV ZKR UDLVHG OHVV WKDQ RQH PLOOLRQ 86 GROODUV KDG DOPRVW QR FKDQFH RI ZLQQLQJ 7KH DYHUDJH VXFFHVVIXO 6HQDWH FDPSDLJQ FRVW  PLOOLRQ GROODUV ,Q  DOO VWDWH FDPSDLJQV LQ WKH 8QLWHG 6WDWHVZHUHSUHGLFWHGWRFRVWDERXWELOOLRQGROODUV´3'2D ([SHQVHV OLNHWKLVDUHRIWHQEH\RQGWKHILQDQFLDODELOLW\RIDVLQJOHLQGLYLGXDOXQOHVVWKH SHUVRQLVVXSHUULFKZKLFKKRZHYHULVUDWKHUXQFRPPRQ  0RUHRYHU IRU WKH  SHULRG ³86 5HSXEOLFDQ DQG 'HPRFUDWLF ODZPDNHUVDFFHSWHGQHDUO\PLOOLRQ86GROODUVLQWULSVRIWHQWRUHVRUWVDQG H[FOXVLYH ORFDOHV«)URP -DQXDU\  WKURXJK -XQH  +RXVH DQG 6HQDWH PHPEHUV DQG WKHLU DLGHV ZHUH DZD\ IURP :DVKLQJWRQ IRU PRUH WKDQ  GD\V²DFRPELQHG\HDUV²RQDWOHDVWWULSV86ODZPDNHUVDFFHSWHG WKRXVDQGVRIFRVWO\MDXQWVWRVRPHRIWKHZRUOG VFKRLFHVWGHVWLQDWLRQVDWOHDVW WR3DULVWR+DZDLLDQGWR,WDO\´3'2D  ,WLVWKXVQRZRQGHUWKDW³E\WKHDPRXQWRI VRIWPRQH\ WRSROLWLFDO SDUWLHV IURP LQGLYLGXDOV DQG EXVLQHVVHV  UHDFKHG  PLOOLRQ DQG &RQJUHVV ZDV XQGHU LQWHQVH SROLWLFDO SUHVVXUH WR SDVV D QHZ ODZ WR UHJXODWH LW LQ  :3$&11 G@«WKH +DJXH UHJXODWLRQV RI  WKH FRPSDQLRQ WR WKH  *HQHYD FRQYHQWLRQV ERWKUDWLILHGE\WKH8QLWHG6WDWHV DVZHOODVWKH86DUP\ VRZQFRGHRIZDU 7KH +DJXH UHJXODWLRQV VWDWH WKDW DQ RFFXS\LQJ SRZHU PXVW UHVSHFW XQOHVV

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





DEVROXWHO\SUHYHQWHGWKHODZVLQIRUFHLQWKHFRXQWU\ ´³LQDFFRUGDQFHZLWKWKH UXOHVRIXVXIUXFW1.OHLQ ´3%DRIXD 5DQLD0DVULFRGLUHFWRURI WKH&DPSDLJQWR6WRSWKH:DU3URILWHHUVDQG(QGWKH&RUSRUDWH,QYDVLRQRI,UDT DW WKH ,QVWLWXWH IRU 6RXWKHUQ 6WXGLHV PDGH WKH VDPH SRLQW RI LOOHJDOLW\ 6 *RQVDOYHV  ,W LV QR ZRQGHU WKHQ WKDW ³WKH 86 LOOHJDOO\ WRRN RYHU ,UDTL RLO PRQH\ VHL]HGDVVHWVDQGWKHUHFRQVWUXFWLRQIXQGV,WLVXVLQJPDVVLYHDPRXQWVRIWKLV PRQH\WRDZDUGFRQWUDFWVWR«86FRPSDQLHVVXFKDV%HFKWHODQG+DOOLEXUWRQ 0%HQMDPLQ ´3%DRIXD $QG³ZDWFKGRJJURXSVVD\WKH8QLWHG 6WDWHVKDVQRULJKWWRGLVSHQVHZLWKWKHIXQGVDVLWSOHDVHV´(0HND\  0RUH³86VROGLHUVVWROHPRQH\DQGSURSHUWLHVIURPORFDOV´WRWKHSRLQW WKDWPDQ\,UDTLVRIWHQKDGWRKLGHWKHLUZHDOWKDVTXLFNO\DVSRVVLEOHZKHQHYHU WKH\VDZ86VROGLHUVDSSURDFKLQJWKHLUKRXVHV$&RFNEXUQE $QG³WKH 86WURRSVWRRNRYHUWKHEHVWKRWHOVDQGSDODFHVIRUPHUO\RFFXSLHGE\+XVVHLQ IRUWKHFRPIRUWRIWKH86WURRSV´1ZKLFK@ PXVW LQFOXGH IRUHLJQ SDUWLFLSDWLRQ´ PRVWO\ $PHULFDQ LQ SUDFWLFH  WR VHW RXW ³,UDTLRLOSROLFLHVDQGVHWFULWHULDIRUIRUHLJQFRPSDQLHVZRUNLQJLQWKHLQGXVWU\´ VRWKLV IRUHLJQLQYROYHPHQW JXDUDQWHHV WKHFRQWLQXHG $PHULFDQFRQWURORIWKH RLOLQGXVWU\LQ,UDTWKHUHDIWHU 1:RKOIRUWK*&KDGGRFN  7KLV LV OLNH VRPHRQH ZKR EUHDNV LQWR D VWRUH KROGV XS WKH VWRUH RZQHU GHVWUR\VWKHSURSHUWLHVLQVLGHDQGDVNVWKHRZQHUDWJXQSRLQWWKDWWKHODWWHUKDV WRUHSDLUDQGUHFRQVWUXFWWKHVWRUHWREHSDLGIRUE\WKHVWRUHRZQHUKLPVHOIDQG WKHUHDIWHUWKHLQWUXGHUZLOODOVRKDYHDQHIIHFWLYHFRQWURORIWKHUHVRXUFHVRIWKH VWRUH ,WLVQR ZRQGHUWKXVWKDW ³>P@DQ\LQWKH86DQG%DJKGDGH[SUHVV IHDUV WKDW WKH GUDIW RLO ODZ VD\V OLWWOH DERXW VKDULQJ RLO UHYHQXHV DPRQJ ,UDTL 6KLDV 6XQQLV DQG .XUGV DQG D ORW DERXW VHWWLQJ XS D IUDPHZRUN IRU LQYHVWPHQW WKDW ZRXOG EHQHILW IRUHLJQ FRPSDQLHV >PRVWO\ $PHULFDQ LQ SUDFWLFH@ DQG KDUP WKH ,UDTLVRYHUWKHORQJWHUP´(6DEU\  (YHQ WKH ,UDTL RLO PLQLVWHU ,VVDP $O &KDODEL XQGHU WKH 86 RFFXSDWLRQ SURWHVWHG DJDLQVW WKLV ODZ E\ VD\LQJ ³,W DLPV DW VHWWLQJ D IUDPHZRUN IRU LQYHVWPHQW E\ IRUHLJQ RLO FRPSDQLHV >PRVWO\ $PHULFDQ LQ SUDFWLFH@ LQFOXGLQJ IDYRUDEOH SURGXFWLRQVKDULQJ DJUHHPHQWV WKDW DUH W\SLFDOO\ XVHG WR UHZDUG FRPSDQLHVIRUWDNLQJRQULVN:HNQRZWKHRLOLVWKHUH*HRORJLFDOVWXGLHVKDYH EHHQ PDGH IRU GHFDGHV RQ WKHVH RLO ILHOGV VR ZK\ ZRXOG ZH OHW WKHP >WKH $PHULFDQV@ KDYH D VKDUH RI WKH RLO" ,UDTLV ZLOO VD\ WKLV LV VROLG SURRI WKDW $PHULFDQVKDYHVWDJHGWKHZDU«EHFDXVHRIWKLVODZ´(6DEU\  $QG 0RKDPPHG DO'\QHH PHPEHU RI SDUOLDPHQW UHSUHVHQWLQJ WKH ,UDTL )URQWIRU1DWLRQDO'LDORJXHDVNHGDQLPSRUWDQWTXHVWLRQIRUXVWRWKLQNKDUGHU DERXWWKH86UROHLQGUDIWLQJWKHRLOODZLQWKHILUVWSODFHDQGWKHQSUHVVXULQJ WKH ,UDTLV WR VLJQ LW ³7KH 86 WDONV DERXW WKH VRYHUHLJQW\ RI ,UDT EXW ZK\ DUH WKH\JHWWLQJLQYROYHGLQWKLVRLOODZ"´*&KDGGRFN  ,QWKHQDPHRIEXLOGLQJ³GHPRFUDF\´ERWKDWKRPHDQGDEURDGWKHRXWFRPH LV QRW OHVV EUXWDOO\ GHVWUXFWLYH DQG H[SORLWDWLYH 7KHUH LV D GLYLGH EHWZHHQ WKH SRZHUWKDWEHDQGWKHSRZHUWKDWEHQRWDWWKHVHUYLFHRIOLEHUDOGHPRFUDF\

6RFLDO6WUXFWXUHRI([FOXVLRQ 7KLVSRZHUGLYLGHFDQEHHYHQPRUHFOHDUO\XQGHUVWRRGLQWKHFRQWH[WRIWKH VRFLDOVWUXFWXUHRIH[FOXVLRQERWKDWKRPHDQGDEURDG

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





$ JRRG ZD\ WR VWDUW WKH FRQYHUVDWLRQ LV E\ ZD\ RI D VXPPDU\ RI WKH WKHRUHWLFDO GHEDWH RQ WKH GLVWULEXWLRQ RI SRZHU LQ D OLEHUDOGHPRFUDWLF VRFLDO VWUXFWXUH

(OLWHYV3OXUDOLVW7KHRULHVRI3RZHULQ/LEHUDO'HPRFUDF\ )RULOOXVWUDWLRQOHW¶VFRQVLGHUILYHFRQWUDVWLYHWKHRULHVIRUFRQWHQWLRQKHUH QDPHO\D FODVVLFDOSOXUDOLVWWKHRU\E HOLWHSOXUDOLVWWKHRU\F QHRSOXUDOLVW WKHRU\ G  HOLWH WKHRU\ DQG H  WKH WKHRU\ RI WKH F\FOLFDO SURJUHVVLRQ RI KHJHPRQ\ D  7KH FRQYHQWLRQDO ZLVGRP LQ OLEHUDO GHPRFUDF\ RIWHQ HPEUDFHV D FODVVLFDO SOXUDOLVW WKHRU\ RQ VRFLDO VWUXFWXUH WR WKH H[WHQW WKDW DV LV EHVW LOOXVWUDWHGE\5REHUW$'DKO¶VFODVVLF :KR*RYHUQV" ³SROLWLFDOSRZHU LQVRFLHW\«LVGLVWULEXWHGEHWZHHQDZLGHQXPEHURIJURXSV7KHVHJURXSVPD\ EH7UDGH8QLRQVLQWHUHVWJURXSVEXVLQHVVRUJDQLVDWLRQVDQGDQ\RIDPXOWLWXGH RI IRUPDO DQG LQIRUPDO FRDOLWLRQV´ :. Q  7KH UHVXOW LV D NLQG RI ³SRO\DUFK\´:.R  E %XWFODVVLFDOSOXUDOLVPZDVFULWLFL]HGDVWRRVLPSOLVWLFDQGQDLYHVLQFH VRPH FULWLFV ZLWK 0DU[LVW LQIOXHQFH  OLNH (OPHU (ULF 6FKDWWVFKQHLGHU   DSWO\REVHUYHGWKDW³>W@KHIODZLQWKHSOXUDOLVWKHDYHQLVWKDWWKHKHDYHQO\FKRUXV VLQJV ZLWK D VWURQJ XSSHUFODVV DFFHQW´²LQ ZKDW LV QRZ NQRZQ DV ³HOLWH SOXUDOLVP´ F  6WLOO VRPH RWKHU VFKRODUV SURSRVH ³QHRSOXUDOLVP´ LQVWHDG LQ DUJXLQJ WKDW VRPH HOLWH JURXSV WHQG WR EH PRUH LQIOXHQWLDO WKDQ RWKHUV VR WKDW ³3RO\DUFK\´ FDQ EHFRPH ³&RUSRUDWLVP´ :. R  &KDUOHV /LQGEORP IRU LQVWDQFH VKRZHG LQ 3ROLWLFV DQG 0DUNHWV   WKLV ³>S@ULYLOHJHG SRVLWLRQ RI EXVLQHVVLQ3RO\DUFK\´ZLWKWKHUHVXOWWKDW³HYHQLQWKHGHPRFUDFLHVPDVVHVDUH SHUVXDGHGWRDVNIURPHOLWHVRQO\ZKDWHOLWHVZLVKWRJLYHWKHP´:.R  G  2Q WKH RWKHU H[WUHPH LV HOLWH WKHRU\ XQOLNH HOLWH SOXUDOLVP  ZKLFK UHMHFWVSOXUDOLVWWKHRU\EHLWFODVVLFDOHOLWHRUQHR DQGDUJXHVIRUFHIXOO\WKDW ³D VPDOO PLQRULW\ FRPSULVHG RI PHPEHUV RI WKH HFRQRPLF HOLWH DQG SROLF\ SODQQLQJQHWZRUNVKROGWKHPRVWSRZHUQRPDWWHUZKDWKDSSHQVLQHOHFWLRQVLQ DFRXQWU\´:.S  & :ULJKW 0LOOV   IRU LQVWDQFH LQ 7KH 3RZHU (OLWH ³LGHQWLILHG D WULXPYLUDWH RI SRZHU JURXSV²SROLWLFDO HFRQRPLF DQG PLOLWDU\²ZKR IRUP D GLVWLQJXLVKDEOH DOWKRXJK QRW XQLILHG ERG\ ZLHOGLQJ SRZHU LQ WKH $PHULFDQ VWDWH´:.S  $QG 5REHUW 3XWQDP    LGHQWLILHG D QHZ HOLWH JURXS LQ SRZHU LQVWHDGWKDWLVWKHQHZLQIRHOLWH³,IWKHGRPLQDQWILJXUHVRIWKHSDVWKXQGUHG \HDUVKDYHEHHQWKHHQWUHSUHQHXUWKHEXVLQHVVPDQDQGWKHLQGXVWULDOH[HFXWLYH



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



WKH QHZ PHQ  DUH WKH VFLHQWLVWV WKH PDWKHPDWLFLDQV WKH HFRQRPLVWV DQG WKH HQJLQHHUVRIWKHQHZLQWHOOHFWXDOWHFKQRORJ\´ H HG@«WKHEODFNVFKRROZKHUHZKLWHVDUH DOPRVWKDOI RIWKHIDFXOW\ EXW DERXWRQHIRXUWKRIWKHGHSDUWPHQWFKDLUV IRUGHQ\LQJKHU RIWHQXUHEHFDXVHVKHLVDZKLWH ´ ,QDQRWKHUVLPLODUFDVH³DZKLWH(QJOLVKSURIHVVRU%RE5XVVDW/LYLQJVWRQH &ROOHJH DORQJ ZLWK VRPH RWKHU ZKLWH SURIHVVRUV LQ D ODZVXLW FODLPLQJ WKDW

/LYLQJVWRQHVHWRXWWRV\VWHPDWLFDOO\UHPRYHZKLWHVIURPOHDGHUVKLSSRVLWLRQV  ZLWK UHYLHZV VKRZLQJ H[SOLFLW UHYHUVHUDFLVW LQVWUXFWLRQV IURP %DUEDUD %URZQ WKH EODFN YLFH SUHVLGHQW IRU DFDGHPLF DIIDLUV´ ZLWK VXFK ZRUGV OLNH ³EULQJ LQ EODFN 3K' FKDLU´ ³KLUH EODFN FKHPLVW´ DQG ³EXLOG XS VFLHQFH DQG PDWK EODFN ´&112D3%DRIX  ,I RSSUHVVLRQ LV JHWWLQJ ³VRIWHU´ LQ UDWLRQDOLW\ WKDW LV ZLWKRXW QHFHVVDULO\ KDYLQJ WR XVH EUXWH IRUFH RU NLOO SHRSOH EXW ZLWKRXW EHLQJ OHVV GHDGO\ LQ HIIHFWLYHQHVV OLNH WKH IRUFHG UHVLJQDWLRQ RI 6XPPHUV DQG WKH GHQLDO RI RSSRUWXQLWLHV WR VRPH RQFHSULYLOHJHG JURXSV LQ WKH LOOXVWUDWLYH H[DPSOHV DIRUHFLWHG ²LW LV DOVR EHFRPLQJ PRUH ³VXEWOH´ HJ ³FUHHSLQJ SUHMXGLFH´ ³ELDVHGSURILOLQJ´DQG³JODVVFHLOLQJ´ DVVKRZQLQ)&' 7KLV RFFXUV LQ PDQ\ GLIIHUHQW ZD\V FRPLQJ LQ DOO VKDSHV DQG VL]HV DIIHFWLQJ DOO JURXSV LQFOXGLQJ WKH QHZ SRZHU JURXS FDWHJRULHV OLNH ³JURXSV IURPZLWKLQ´³PL[HGJURXSV´DQGLQWKHPRUHGLVWDQWIXFWXUH³SRVWKXPDQV´ ² DVDGGUHVVHGLQ)&'DQGODWHU%'3' :LWKRXW UHSHDWLQJ KHUH ZKDW ZDV DOUHDG\ DQDO\]HG LQ P\ SUHYLRXV ERRNV KHUH DUH WZR LOOXVWUDWLYH WDEOHV VXPPDUL]LQJ VRPH RI WKH ILQGLQJV RQ FUHHSLQJ SUHMXGLFHDQGELDVHGSURILOLQJLQ)&'ZKLFKDUHWRJLYHWKHUHDGHUVRPHLGHD WKRXJKLQDYHU\VPDOOSDUWRIZKDWZDVDQDO\]HGLQP\SUHYLRXVZRUNV %XWWKLVLVQRWWKHHQGRIWKHPDWWHU\HW $IWHU WKH  WHUURULVW DWWDFNV LQ  QHZ FDWHJRULHV IRU H[FOXVLRQ HPHUJHZKLFKLQFOXGHWKLVWLPHDQ\RQHZKRYRFDOO\RSSRVHVWKH86IRUHLJQ



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



SROLF\HVSHFLDOO\WKRXJK QRWH[FOXVLYHO\ LQUHODWLRQWRWKH 86LQYDVLRQDQG RFFXSDWLRQRI,UDTDQG$IJKDQLVWDQDVZHOODVWKH86ZDURQWHUURU )RU LQVWDQFH LQ HDUO\  LW ZDV GLVFRYHUHG WKDW ³WKH )HGHUDO %XUHDX RI ,QYHVWLJDWLRQ )%,  KDV DEXVHG WKH SRZHU LW ZDV JLYHQ XQGHU WKH 3DWULRW $FW ZKLFKZDVUXVKHGWKURXJKSDUOLDPHQWDIWHUWKHWHUURULVWDWWDFNVRQ7KH)%, KDVUHSHDWHGO\YLRODWHGWKHUHJXODWLRQVRIWKH-XVWLFH'HSDUWPHQWRIWKH8QLWHG 6WDWHV E\ ORRNLQJ LQWR WKH SULYDWH UHFRUGV RI FLWL]HQV UHVLGHQWV DQG IRUHLJQ YLVLWRUV«>,Q IDFW W@KH )%, REWDLQHG DFFHVV WR WHOHSKRQH HPDLO DQG ILQDQFLDO UHFRUGV RI D ODUJH QXPEHU RI SHRSOH E\ UHJXODUO\ LVVXLQJ 1DWLRQDO 6HFXULW\ /HWWHUVZKLFKDOORZLWWRGHPDQGUHFRUGVZLWKRXWWKHDSSURYDORIWKHFRXUWV,Q  DORQH LW LVVXHG  FRSLHV RI VXFK OHWWHUV UHODWLQJ WR  FDVHV XQGHULQYHVWLJDWLRQ´3'2  ,Q  WKH YLRODWLRQ ZDV HYHQ ZRUVH DV ³WKH )%, LVVXHG DQ HVWLPDWHG  UHTXHVWV 7KDW QXPEHU SHDNHG LQ  ZLWK  2YHUDOO WKH )%, UHSRUWHGLVVXLQJUHTXHVWVIRUQDWLRQDOVHFXULW\OHWWHUVEHWZHHQDQG  %XW WKDW GLG QRW LQFOXGH DQ DGGLWLRQDO  UHTXHVWV WKDW ZHUH QHYHU UHFRUGHGLQWKH)%, VGDWDEDVH«$ VDPSOHUHYLHZRIFDVHILOHVDWIRXU)%, ILHOG RIILFHV VKRZHG WKDW DJHQWV KDG XQGHUUHSRUWHG WKH QXPEHU RI QDWLRQDO VHFXULW\ OHWWHU UHTXHVWV E\ DERXW  SHUFHQW $GGLWLRQDOO\«WKH )%, LGHQWLILHG  SRVVLEOH YLRODWLRQV LQ LWV XVH RI WKH OHWWHUV LQFOXGLQJ IDLOLQJ WR JHW SURSHU DXWKRUL]DWLRQ PDNLQJ LPSURSHU UHTXHVWV XQGHU WKH ODZ DQG XQDXWKRUL]HG FROOHFWLRQ RI WHOHSKRQH RU ,QWHUQHW HPDLO UHFRUGV 7KH )%, DOVR XVHG H[LJHQW OHWWHUV WR TXLFNO\ JHW LQIRUPDWLRQ²VRPHWLPHV LQ QRQHPHUJHQF\ VLWXDWLRQV² ZLWKRXWJRLQJWKURXJKSURSHUFKDQQHOV,QDWOHDVWFDVHVWKHVHOHWWHUVZHUH VHQW WR WKUHH WHOHSKRQH FRPSDQLHV WR JHW ELOOLQJ UHFRUGV DQG VXEVFULEHU LQIRUPDWLRQ«´/-RUGDQ  $ PDMRU DOO\ RI WKH 86 LQ WKH ZDU RQ WHUURU QDPHO\ WKH 8. DQRWKHU OLEHUDOGHPRFUDF\DOVRKDVDFRPSDUDEO\VKDN\KLVWRU\)RULQVWDQFHE\ ³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´&112H  ,Q D VXUYH\ FRPPLVVLRQHG E\ WKH 6FLHQFH 0XVHXP LQ /RQGRQ IRU LWV 6FLHQFHRI6S\LQJH[KLELWLRQ LQDUHVHDUFKILQGLQJ VKRZHGWKDW ³%ULWRQV DUHDQDWLRQRIVSLHVULIOLQJWKURXJKWKHLUSDUWQHUV WH[WPHVVDJHVWDSSLQJSKRQH FRQYHUVDWLRQV DQG HYHQ WDLOLQJ ORYHG RQHV ZLWK ZHE FDPV DQG VDWHOOLWH

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





QDYLJDWLRQV\VWHPV«7KHPRVWIDYRUHGZD\RINHHSLQJWDEV«LVFKHFNLQJWKHLU WH[W PHVVDJHV ZLWK PRUH WKDQ KDOI  SHUFHQW  RI WKRVH TXHVWLRQHG DGPLWWLQJ VQHDNLQJDSHHN7KHQXPEHUVKRRWVXSWRSHUFHQWLQWKHWRDJHJURXS´ &112I  $QGWKH86ZHQWHYHQIXUWKHULQWKDWVWDUWLQJLQWKHHDUO\¶VLQLWV ERUGHU ZLWK 0H[LFR LW EXLOW LWV RZQ YHUVLRQ RI WKH %HUOLQ :DOO LQ WKH HDUO\ ¶VWKLVWLPH³DWKUHHOD\HUERUGHUIHQFH«DORQJNPRIWKH86ERUGHU FRYHULQJWKHXUEDQDUHDVZKHUHPRVWRIWKHLOOHJDOPLJUDQWVFURVVLQWRWKH86 WHUULWRU\´3'2  ,Q RQH GDLO\ EXOOHWLQ DERXW DQ DUHD LQ WKH ERUGHU GXULQJ HDUO\  DORQH ³WKH%LQDWLRQDO%RG\5HFRYHU\8QLW%%58 UHSRUWHGWKDWRIWKHGHDWKVDORQJ WKH 7HUULWRULDO 'HOLQHDWRU  DOLHQV GLHG RI HOHFWURFXWLRQ DORQJ WKH /DUHGR %URZQVYLOOH KLJKDPS IHQFH  ZHUH VKRW WR GHDWK E\ ERUGHU WURRSV IRU VXVSLFLRXVDFWLRQVGLHGIURPODQGPLQHH[SORVLRQVDQGIURPH[SRVXUHWR WR[LFVXEVWDQFHVDIWHUDWWHPSWVWRIRUJHWKH5LR*UDQGH´/&DUOVHQ %XW WKH PDLQVWUHDP PDVV PHGLD GLG QRW WDON PXFK DERXW WKHVH NLOOLQJV DQG WKH $PHULFDQSXEOLFRIWHQGLGQRWDQGVWLOOGRQRW NQRZPXFKDERXWWKHP 6LQJHU=DFN'H/D5RFKDIURPWKH³/LYHDQG5DUH´GLVF HYHQGHGLFDWHGD VRQJ WR SURWHVW DJDLQVW WKLV EUXWDO $PHULFDQ YHUVLRQ RI WKH %HUOLQ :DOO ³,W VHHPV DV VRRQ DV WKH ZDOO RI *HUPDQ\ IHOO WKH 86 JRYHUQPHQW ZDV EXV\ EXLOGLQJ RQH EHWZHHQ WKH ERUGHU EHWZHHQ WKH 86 DQG 0H[LFR 6LQFH  DV UHVXOWRIDORWRIWKHKDWHWDONDQGK\VWHULDWKDWWKHWKHJRYHUQPHQWRIWKH8QLWHG 6WDWHVKDVEHHQVSHDNLQJERGLHVKDYHEHHQIRXQGRQWKHERUGHU:HZURWH WKLVVRQJLQUHVSRQVHWRLW´:.  (YHQ PRUH GLVFULPLQDWLYHO\ WKH 86 QRZ OLQNV ³LOOHJDO LPPLJUDQWV´ ZLWK ³WHUURULVP´²D NLQG RI ³LPPLJUDWLRQWHUURULVP OLQN´ DV DQ H[FXVH IRU WKH H[FOXVLRQ )RU LQVWDQFH ³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´5:1  ,&(HYHQDVVHUWHGWKDW³LOOHJDOLPPLJUDQWVDIWHUDOO«DUH WKHSHRSOH ZKR

VXSSRUW WHUURULVP ´ 5:1   6R 0H[LFDQ 3UHVLGHQW 9LFHQWH )R[ ULJKWO\ VDLGWKDW³>W@KLV>NLQGRIH[FOXVLRQDJDLQVW0H[LFDQLOOHJDOLPPLJUDQWV@LVQRWDQ SURSHUUHVSRQVHWRDSUREOHP EHWZHHQIULHQGVQHLJKERUVDQGSDUWQHUV´3'2  



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



$QRWKHU PDMRU DOO\ RI WKH 86 LQ WKH ZDU RQ WHUURU WKDW LV ,VUDHO VWLOO DQRWKHU OLEHUDO GHPRFUDF\ DOVR EXLOW WKH QRWRURLXV ³-HUDVDOHP :DOO WKH IW KLJK FRQFUHWH EDUULHU LOOHJDOO\ EXLOW E\ ,VUDHO WR VHSDUDWH 3DOHVWLQLDQ VXEXUEV IURPWKHUHVWRIWKHFLW\´7%XWFKHU  $ JURXS RI  *HUPDQ ELVKRSV ZKR YLVLWHG WKH FLW\ IRU WKH  *HUPDQ %LVKRSV¶ &RQIHUHQFH LQ  WKXV ³FRPSDUHG ,VUDHO¶V WUHDWPHQW RI WKH 3DOHVWLQLDQV ZLWK WKH 1D]LV¶ PDOWUHDWPHQW RI -HZV LQ WKH :DUVDZ *KHWWR«:KLOH FURVVLQJ RQH RI WKH FKHFNSRLQWV LQWR (DVW -HUXVDOHP &DUGLQDO -RDFKLP0HLVQHU$UFKELVKRSRI&RORJQHVDLG« 7KLVLVVRPHWKLQJWKDWLVGRQH WR DQLPDOV QRW SHRSOH «UHIHULQJ WR WKH ZDOO DQG KHDYLO\ IRUWLILHG FKHFNSRLQWV ZKHUH 3DOHVWLQLDQV DUH VXEMHFWHG WR LQWUXVLYH TXHVWLRQLQJ DQG GHPDQGV IRU ,VUDHODSSURYHG GRFXPHQWDWLRQ« )RU PH LW LV D QLJKWPDUH , GLGQ¶W WKLQN , ZRXOGVHHVXFKD ZDOODJDLQ LQ P\OLIH-XVWOLNHWKH\EURXJKWWKH%HUOLQ:DOO GRZQVRWRRZLOOWKLVZDOOFRPHGRZQ ´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²QRWZLWKVWDQGLQJ WKH RIILFLDO UKHWRULF DERXWGRLQJJRRGIRUWKH0DQLIHVW'HVWLQ\WKH:KLWH0DQ¶V%XUGHQWKH:DU RQ )DVFLVP1D]LVP WKH )LJKW DJDLQVW &RPPXQLVP WKH :DU RQ 7HUURU RU ZKDWQRW

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





6RPHJRRGLOOXVWUDWLRQVKHUHFRQFHUQV³WKHODVWLQJDSSHDORIWKH)DU5LJKW IRU GHPRFUDF\´ LQ &K RI %'3'  ³WKH GHPRFUDWLF ZD\ RI WRUWXUH EUXWDOLW\ DQG UHYHQJH´ LQ &K RI %'3'  ³WKH KXPDQLWDULDQ P\VWLTXH´ LQ &K RI %'3'  DQG WKH ³V\VWHPDWLF HFRQRPLF H[SORLWDWLRQ´ LQ &K RI %'3' ²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³&ROXPELDDQG7KH6RORPRQ,VODQGVSXEOLFO\FULHGIRUPHUF\RUUDWKHU 8QFOH 6DP E\UHOXFWDQWO\VLJQLQJWKHVRFDOOHG $UWLFOH DJUHHPHQW$UWLFOHZDV LQFOXGHGLQWKH5RPH6WDWXWHRIWKH,QWHUQDWLRQDO&ULPLQDO&RXUW,&& DVDZD\ WR DFFRPPRGDWH H[LVWLQJ DJUHHPHQWV EHWZHHQ QDWLRQV WR UHWXUQ DFFXVHG ZDU FULPLQDOVWRWKHLUQDWLYHFRXQWU\IRUWULDO7KLVSURYLVLRQZDVQRWFRQWUDU\WRWKH 6WDWXWHVLQFHWKHFRXQWU\RIQDWLRQDOLW\DOZD\VKDVWKHRSWLRQWRLQYHVWLJDWHDQG WU\WKHDFFXVHGILUVW7KH8QLWHG6WDWHVKDVXVHGWKLVORRSKROHWRVWURQJDUPDV PDQ\FRXQWULHVDVSRVVLEOHWRJLYHLPPXQLW\WRDOO8QLWHG6WDWHVFLWL]HQV´ ,Q  6KRIQHU   QRWLFHG WKDW ³ FRXQWULHV KDG VLJQHG WKLV DJUHHPHQW«5LFKDUG 'LFNHU KHDG RI WKH LQWHUQDWLRQDO MXVWLFH SURJUDPV DW +XPDQ 5LJKWV :DWFK VWDWHG WKDW 86 DPEDVVDGRUV KDYH EHHQ DFWLQJ OLNH VFKRRO\DUGEXOOLHV ´ 7R PDNH WKH GLVFULPLQDWLRQ HYHQ PRUH DFXWH LQ RUGHU ³WR HQVXUH WKDW $PHULFDQV ZRXOG EH H[FOXGHG IURP WKH &RXUW¶V MXULVGLFWLRQ WKH 8QLWHG 6WDWHV ZHQWDERXWSDVVLQJDODZLQWKHLURZQFRXUWWRSURKLELWWKHLQWHUQDWLRQDOFRXUW¶V DELOLW\ WR VXESRHQD D 86 FLWL]HQ 7KH ILUVW RI WKHVH ODZV VSRQVRUHG E\ 5HSXEOLFDQV-HVVH+HOPV+HQU\+\GHDQG7RP'HOD\ZDVWLWOHGWKH$PHULFDQ 6HUYLFH0HPEHUV3URWHFWLRQ$FW$63$ +57KLV$FWQRWRQO\SURKLELWV WKH&RXUWIURPWU\LQJ$PHULFDQVEXWLWDOVRSURKLELWVWKH86IURPFRRSHUDWLQJ ZLWKWKH,&&WKLVLQFOXGHVVXSSO\LQJDQ\ODZHQIRUFHPHQWLQIRUPDWLRQWKDWPD\ DLGWKHFRXUWLQPHHWLQJRXWMXVWLFH´76KRIQHU  0RUHRYHU WKH 86 PLOLWDU\ EXOOLHG PDQ\ FRXQWULHV WR VLJQ DQRWKHU DJUHHPHQWWKLVWLPHWKHVRFDOOHG³VWDWXVRIIRUFHVDJUHHPHQW´62)$ ZKLFK ³LV D PRGHUQ OHJDF\ RI WKH QLQHWHHQWKFHQWXU\ LPSHULDOLVW SUDFWLFH LQ &KLQD RI

H[WUDWHUULWRULDOLW\ ²WKH ULJKW RIDIRUHLJQHUFKDUJHG ZLWKDFULPHWREHWXUQHG RYHU IRU WULDO WR KLV RZQ GLSORPDWLF UHSUHVHQWDWLYHV LQ DFFRUGDQFH ZLWK KLV QDWLRQDOODZQRWWRD&KLQHVHFRXUWLQDFFRUGDQFHZLWK&KLQHVHODZ«([WUDFWHG



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



IURP WKH &KLQHVH DW JXQ SRLQW WKH SUDFWLFH DURVH EHFDXVH IRUHLJQHUV FODLPHG WKDW« ZKLWHPHQ HQJDJHGLQFRPPHUFHLQ&KLQDVKRXOGQRWEHIRUFHGWRVXEPLW WRLW«)ROORZLQJWKH$QJOR&KLQHVH 2SLXP:DU RIWKH8QLWHG6WDWHV ZDVWKHILUVWQDWLRQWRGHPDQG H[WUDOLW\ IRULWVFLWL]HQV´&-RKQVRQ  7KH86PLOLWDU\KDVPXFKWRJDLQIURPWKHVHGLVFULPDWRU\SUDFWLFHVVLQFH WKH86KDGDVRIPRUHWKDQ86PLOLWDU\EDVHVDURXQGWKHZRUOG DQG ³WKHUH DUH VRPH  VH[XDO DVVDXOWV RU DWWHPSWHG VH[XDO DVVDXOWV HDFK \HDULQWKH PLOLWDU\´&-RKQVRQ (YHQ IRUHLJQ ZRPHQDUHQRW LPPXQH IURPVH[XDOFULPHVFRPPLWWHGE\86VROGLHUVIRUH[DPSOHLQ-DSDQWKHUHDUH FRXQWOHVV FDVHV RI -DSDQHVH ZRPHQ EHLQJ DWWDFNHG UDSHG DQG NLOOHG E\ $PHULFDQ*,¶VZKRZHUHSURWHFWHGKRZHYHUE\WKHLPPXQLW\EHFDXVHRIWKHVH LPSHULDOLVWDJUHHPHQWVLPSRVHGXSRQ-DSDQE\WKH86RFFXSDWLRQIRUFHV :RUVH WKH 86 PLOLWDU\ DWWDFNV RI RWKHU FRXQWULHV RYHU WKH GHFDGHV KDYH WLPH DQG DJDLQ YLRODWHG LQWHUQDWLRQDO ODZV DQG ORFDO ODZV $V DQ LOOXVWUDWLRQ ³>W@KHIRUPHU86$WWRUQH\*HQHUDOXQGHUWKH-RKQVRQ$GPLQLVWUDWLRQ5DPVH\ &ODUN QRWHG WKDW WKH FRQGXFW RI WKH 86 LQ WKH ILUVW *XOI :DU YLRODWHV SURYLVLRQVRIWKH+DJXH&RQYHQWLRQVRIWKH*HQHYD&RQYHQWLRQVRI DQG$UWLFOHVRI3URWRFRO,$GGLWLRQDOWRWKH*HQHYD&RQYHQWLRQVRI WKH 1XUHPEHUJ &KDUWHU RI  DQG VHYHUDO 86 PLOLWDU\ VHUYLFH PDQXDOV DGGUHVVLQJWKHODZVRIDUPHGFRQIOLFW «2Q0D\DQLQLWLDOFRPSODLQWRI ZDU FULPHV ZDV ILOHG FKDUJLQJ 3UHVLGHQW *HRUJH %XVK 9LFH 3UHVLGHQW 'DQ 4XD\OH 6HFUHWDU\ RI 'HIHQVH 'LFN &KHQH\ &KDLUPDQ RI WKH -RLQW &KLHIV RI 6WDII&ROLQ3RZHOODQG*HQ1RUPDQ6FKZDU]NRSIDQGRWKHUVZLWKFRXQWV RI FULPHV DJDLQVW SHDFH ZDU FULPHV FULPHV DJDLQVW KXPDQLW\ DQG RWKHU FULPLQDO DFWV  5HVSRQGLQJ WR WKHVH FKDUJHV DQ ,QWHUQDWLRQDO :DU &ULPHV 7ULEXQDO ZDV DUUDQJHG«3ULRU WR WKH RIILFLDO FRXUW KHDULQJV FRPPLVVLRQV RI ,QTXLU\+HDULQJVDQGPHHWLQJVZHUHKHOGLQGLIIHUHQWORFDWLRQVLQFOXGLQJ QDWLRQV DQG DOO IRXU UHJLRQV RI WKH 8QLWHG 6WDWHV 7KH RIILFLDO MXGJPHQW ZDV KDQGHGGRZQE\DQLQWHUQDWLRQDOSDQHORIMXGJHVRQ)HEUXDU\WKLQ 1HZ7@KLV WUHDWPHQW DPRXQWHG WR UHSHDWHGEUXWDOLW\XQWLOWKHSDWWHUQRIMXGJPHQWDQGSXQLVKPHQWZDVLQWHUQDOL]HG E\WKHSDWLHQW´:.U  ,Q 'LVFLSOLQH DQG 3XQLVK 7KH %LUWK RI WKH 3ULVRQ )RXFDXOW   ZHQW IXUWKHU WR FRPSDUH DQG FRQWUDVW WKH SUHPRGHUQ DQG PRGHUQ PHWKRGV RI SXQLVKPHQWZLWKRXWIDYRULQJRQHRYHUWKHRWKHU)RULQVWDQFHLQ³0RQDUFKLFDO 3XQLVKPHQW´RIWKHROGHUGD\VWKHUHZHUH³EUXWDOSXEOLFGLVSOD\VRIH[HFXWLRQV DQG WRUWXUH´ :. U  2Q WKH RWKHU KDQG LQ ³'LVFLSOLQDU\ 3XQLVKPHQW´ RI WKHPRGHUQHUDWKHUHHPHUJHWKHQHZ³SURIHVVLRQDOVSV\FKRORJLVWVSURJUDPPH IDFLOLWDWRUV SDUROH RIILFHUV HWF ´ ZKLFK ZLHOG ³SRZHU RYHU WKH SULVRQHU PRVW QRWDEO\ LQ WKDW WKH SULVRQHU V OHQJWK RI VWD\ GHSHQGV RQ WKH SURIHVVLRQDOV  RSLQLRQ´ $V D IXUWKHU LOOXVWUDWLRQ )RXFDXOW FRPPHQWHG RQ ³-HUHP\ %HQWKDP V

3DQRSWLFRQ GHVLJQ IRUSULVRQV«>,@QWKH3DQRSWLFRQDVLQJOHJXDUGFDQ ZDWFK RYHUPDQ\SULVRQHUVZKLOHWKHJXDUGUHPDLQVXQVHHQ7KHGDUNGXQJHRQRISUH PRGHUQLW\ KDV EHHQ UHSODFHG ZLWK WKH EULJKW PRGHUQ SULVRQ EXW )RXFDXOW FDXWLRQV WKDW YLVLELOLW\ LV D WUDS  ,W LV WKURXJK WKLV YLVLELOLW\«WKDW PRGHUQ VRFLHW\H[HUFLVHVLWVFRQWUROOLQJV\VWHPVRISRZHUDQGNQRZOHGJH«,QFUHDVLQJ YLVLELOLW\OHDGVWRSRZHUORFDWHGRQDQLQFUHDVLQJO\LQGLYLGXDOL]HGOHYHOVKRZQ E\ WKH SRVVLELOLW\ IRU LQVWLWXWLRQV WR WUDFN LQGLYLGXDOV WKURXJKRXW WKHLU OLYHV´ :.U  ,QIDFW)RXFDXOWWKRXJKWWKDW³D FDUFHUDOFRQWLQXXP UXQVWKURXJKPRGHUQ VRFLHW\ IURP WKH PD[LPXP VHFXULW\ SULVRQ WKURXJK VHFXUH DFFRPPRGDWLRQ SUREDWLRQ VRFLDO ZRUNHUV SROLFH DQG WHDFKHUV WR RXU HYHU\GD\ ZRUNLQJ DQG GRPHVWLF OLYHV $OO DUH FRQQHFWHG E\ WKH ZLWWLQJ RU XQZLWWLQJ  VXSHUYLVLRQ VXUYHLOODQFHDSSOLFDWLRQRIQRUPVRIDFFHSWDEOHEHKDYLRXU RIVRPHKXPDQVE\ RWKHUV´:.U  :LWK WKLV VFKRODUO\ EDFNJURXQG RI )RXFDXOW LQ PLQG²LW LV HDVLHU WR XQGHUVWDQG WKDW OLEHUDOGHPRFUDF\ LV QRW OHVV EUXWDO DQG GLVFLSOLQDU\ LQ LWV



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



GHDOLQJ ZLWK FULPHV DQG SXQLVKPHQW HVSHFLDOO\ LQ WKH FRQWH[W RI WKH VRFLDO V\VWHPVRIWHFKQRORJ\ERWKDWKRPHDQGDEURDG ,Q%'3',H[WHQVLYHO\DQDO\]HGP\ULDGPHWKRGVRIEUXWDOLW\FRPPLWHGE\ WKH86RYHUWKHGHFDGHV+HUHDIWHUDUHVRPHH[DPSOHVIRULOOXVWUDWLRQRQO\² ERWKDWKRPHDQGDEURDGWREHDQDO\]HGEHORZLQWKDWRUGHU  2Q WKH +RPH )URQW /HW¶V FRQVLGHU WKH KRPH IURQW ILUVW DQG WKH IRUHLJQ IURQW ODWHU 2QWKHKRPHIURQWIRULQVWDQFHIHGHUDO-XGJH:LOOLDP:D\QH-XVWLFHLQWKH 86RQFHHYHQZURWHWKDW³>P@DQ\LQPDWHVFUHGLEO\WHVWLILHGWRWKHH[LVWHQFHRI YLROHQFHUDSHDQGH[WRUWLRQLQWKHSULVRQV\VWHPDQGDERXWWKHLURZQVXIIHULQJ IURPVXFKDE\VPDOFRQGLWLRQV´+:RNXVFK  )RULQVWDQFHLQ6HSWHPEHU³DYLGHRWDSHGUDLGRQLQPDWHVDWDFRXQW\ MDLOLQ7H[DVVKRZHGJXDUGVXVLQJVWXQJXQVDQGDQDWWDFNGRJRQSULVRQHUVZKR ZHUHODWHUGUDJJHGIDFHGRZQEDFNWRWKHLUFHOOV´+:RNXVFK  ,QDQRWKHUH[DPSOH ³>R@Q2FWRIILFHUV IURPWKH7DFWLFDO6TXDG RIWKH*HRUJLD'HSDUWPHQWRI&RUUHFWLRQVUDLGHGWKHLQPDWHV OLYLQJTXDUWHUVDW 'RRO\ 6WDWH 3ULVRQ D PHGLXPVHFXULW\ IDFLOLW\ LQ 8QDGLOOD *D«:KDW IROORZHG«ZDVVLPSO\VLFN2IILFHUVRSHQHGFHOOGRRUVDQGRUGHUHGWKHLQPDWHV DOOPDOHVWRUXQRXWVLGHDQGVWULS:LWKIHPDOHSULVRQVWDIIPHPEHUVORRNLQJRQ DQGDWWLPHVODXJKLQJVHYHUDOLQPDWHV ZHUHVXEMHFWHGWRH[WHQVLYHDQG ZKROO\ XQQHFHVVDU\ ERG\ FDYLW\ VHDUFKHV 7KH LQPDWHV ZHUH RUGHUHG WR OLIW WKHLU JHQLWDOVWRVTXDWWREHQGRYHUDQGGLVSOD\WKHPVHOYHVHWF´%+HUEHUW  $JD\LQPDWH³ZDVWROGWKDWLIKHHYHUVDLGDQ\WKLQJDERXWWKHZD\KHZDV EHLQJWUHDWHGKH ZRXOGEHORFNHGXSDQGEHDWHQ XQWLO KH ZRXOGQ W ZDQWWREH JD\ DQ\PRUH  $Q RIILFHU ZKR ZDV VWDULQJ DW DQRWKHU QDNHG LQPDWH VDLG , EHW \RX FDQ WDS GDQFH  7KH LQPDWH ZDV IRUFHG WR GDQFH DQG WKHQ KDG KLV ERG\ FDYLWLHV VHDUFKHG«0U >:D\QH@ *DUQHU KLPVHOI WKH FRPPLVVLRQHU RI WKH 'HSDUWPHQWRI &RUUHFWLRQV ZDVSUHVHQWDWWKH'RRO\3ULVRQUDLG´%+HUEHUW   $QG WKH 86 &RQJUHVV HYHQ ZHQW VR IDU DV WR SDVV ³WKH 3ULVRQ /LWLJDWLRQ 5HIRUP$FW´LQZKLFKZDV³GHVLJQHGLQSDUWWROLPLW IULYRORXV ODZVXLWV E\LQPDWHV«,WVSHFLILFDOO\SURKLELWVWKHDZDUGLQJRIILQDQFLDOFRPSHQVDWLRQWR SULVRQHUV IRU PHQWDO RU HPRWLRQDO LQMXU\ ZKLOH LQ FXVWRG\ ZLWKRXW D SULRU VKRZLQJRISK\VLFDOLQMXU\ ´%+HUEHUW  +HUH DUH VRPH WURXEOHVRPH VWDWLVWLFV DERXW WKH 86 ODZ HQIRUFHPHQW DV D OLEHUDO GHPRFUDF\ QRW PXFK WDONHG DERXW LQ PDLQVWUHDP PHGLD DV SDUWLDOO\ LOOXVWUDWHGEHORZEXWIXOO\VKRZQLQ7DEOH  BBBB 

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





³1HDUO\PLOOLRQLQPDWHVZHUHKHOGLQVWDWHDQGIHGHUDOSULVRQVRUFRXQWU\ DQG PXQLFLSDO MDLOV LQ WKH 8QLWHG 6WDWHV E\ WKH HQG RI  ZKLFK ZDV WKH ODUJHVW LQ WKH ZRUOG VD\V WKH +XPDQ 5LJKWV 5HFRUG RI WKH 8QLWHG 6WDWHV LQ ´3'2E  ³7KHUHZHUHPLOOLRQYLROHQWFULPHVUHSRUWHGLQWKH8QLWHG6WDWHVLQ´ 3'2G $QGWKH86KDV³WKHKLJKHVWUDWHRIJXQUHODWHGKRPLFLGHVRI DOOLQGXVWULDOL]HGQDWLRQV´6+HDGGHQ  ³6WDWLVWLFV RI WKH 86 'HSDUWPHQW RI -XVWLFH VKRZHG WKDW WKH DGXOW 86 FRUUHFWLRQDO SRSXODWLRQ LQFOXGLQJ WKRVH RQ SUREDWLRQ RU SDUROH UHDFKHG D KLJK RI PRUH WKDQ VHYHQ PLOOLRQ PHQ DQG ZRPHQ IRU WKH ILUVW WLPH´ 3'2 E  ³$ERXWWKUHHSHUFHQWRIWKH86DGXOWSRSXODWLRQRURQHLQHYHU\DGXOWV ZHUHLQWKHQDWLRQ VSULVRQVDQGMDLOVRURQSUREDWLRQRUSDUROHDFFRUGLQJWRD +XPDQ5LJKWV:DWFKUHSRUWRQ'HFHPEHU´3'2E  ³7KH$JHQFH)UDQFH3UHVVHUHSRUWHGRQ1RYHPEHUWKDWWKHIHGHUDO V\VWHPZDVRSHUDWLQJDWSHUFHQWRYHUFDSDFLW\´3'2E  ³&UDLJ)XWWHUPDQSURIHVVRUZLWKWKH8QLYHUVLW\RI&KLFDJRZKRKDVVWXGLHG WKH&KLFDJR3ROLFH'HSDUWPHQW VKDQGOLQJRIFRPSODLQWVDJDLQVWRIILFHUVVDLG RYHU WKH SDVW ILYH \HDUV  RXW RI  SROLFH RIILFHUV LQ &KLFDJR KDG EHHQ WKH VXEMHFW RI  RU PRUH FRPSODLQWV &RPSODLQWV DOVR FDPH IURP WKH SULVRQVDVPDQ\SULVRQHUVZHUHWRUWXUHGWKHUH´3'2F   ³7KH 8QLWHG 6WDWHV LV WKH RQO\ FRXQWU\ LQ WKH ZRUOG WKDW DOORZV WKH XVH RI SROLFHGRJVWRWHUULI\SULVRQHUVVD\VWKH+XPDQ5LJKWV5HFRUGRIWKH8QLWHG 6WDWHVLQ«$+XPDQ5LJKWV:DWFKUHSRUWVDLGILYHVWDWHSULVRQVLQWKH 8QLWHG 6WDWHV LQFOXGLQJ &RQQHFWLFXW 'HODZDUH ,RZD 6RXWK 'DNRWD DQG 8WDKSHUPLWWKHXVHRIDJJUHVVLYHXQPX]]OHGGRJVWRWHUULI\DQGHYHQDWWDFN SULVRQHUVLQHIIRUWVWRUHPRYHWKHPIURPWKHLUFHOOV´3'2H   ³$ 86 JRYHUQPHQW UHSRUW LVVXHG RQ -DQ   VDLG WKDW DEXVHV RI LOOHJDOLPPLJUDQWVKDSSHQHGLQILYHSULVRQV´3'2H  ³,W ZDV UHSRUWHG WKDW WKH )ORULGD 6WDWH 3ULVRQ XVHG FKHPLFDO DJHQWV DJDLQVW SULVRQHUVWLPHVLQLQLQDQGLQDQG LQZKLFKOHIWSULVRQHUVVHULRXVO\LQMXUHGDQGVRPHZLWKPHQWDO GLVHDVHV³3'2H  ³7KH8QLWHG6WDWHVLVRQHRIWKHIHZFRXQWULHVWKDWVHQWHQFHFKLOGRIIHQGHUVWR GHDWK VD\V WKH +XPDQ 5LJKWV 5HFRUG RI WKH 8QLWHG 6WDWHV LQ ´ 3'2 J  BBBB 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



:HUHDOOWKLVWRKDSSHQLQ&KLQDSHRSOHZRXOGRXWUDJHVRXO\FU\REVFHQHZRUGV OLNH ³IDVFLVW´ ³EDUEDULF´ RU WKH OLNH %XW QR DOO WKLV KDSSHQV LQ WKH JRRG ROG 86$DV³WKHZRUOG¶VJUHDWHVWOLEHUDOGHPRFUDF\´  2QWKH)RUHLJQ)URQW$QGWKHVDPHLQKXPDQHWUHDWPHQWH[WHQGVDOOWKHPRUHWR IRUHLJQ QDWLRQDOV RQ ZKLFK , DOUHDG\ SURYLGHG DQ H[WHQVLYH GRFXPHQWDWLRQ LQ %'3' +HUHDIWHUDUHVRPHUDQGRPVWDWLVWLFVIRULOOXVWUDWLRQRQO\DVDOVRVKRZQ LQ7DEOHEXWLQPRUHGHWDLOV  BBBB  ³7KH8QLWHG6WDWHVKDVDIODJUDQWUHFRUGRIYLRODWLQJWKH*HQHYD&RQYHQWLRQ LQ V\VWHPDWLFDOO\ DEXVLQJ SULVRQHUV GXULQJ WKH ,UDTL :DU DQG WKH :DU LQ $IJKDQLVWDQ VD\V WKH +XPDQ 5LJKWV 5HFRUG RI WKH 8QLWHG 6WDWHV LQ ´ )RU ,QVWDQFH D ³UHSRUW UHOHDVHG LQ 1HZV 1LJKW RI %ULWLVK %URDGFDVWLQJ &RUSRUDWLRQ %%&  RULJLQDOO\ SURYLGHG E\ WKH 86EDVHG +XPDQ 5LJKWV )LUVWVKRZHGWKDWVLQFH$XJXVWSULVRQHUVKDGGLHGLQ$PHULFDQUXQ SULVRQV LQ ,UDT DQG $IJKDQLVWDQ $PRQJ WKH GHDG  GLHG RI SUHPHGLWDWHG PXUGHU  GHDWKV ZHUH VXVSLFLRXV DQG  WR  ZHUH WRUWXUHG WR GHDWK DFFRUGLQJWRDQ$)3UHSRUWRQ)HE´3'2K  ³'HWDLQHHV ZHUHURXWLQHO\ VXEMHFWWRVHYHUHEHDWLQJSDLQIXOVWUHVVSRVLWLRQV VHYHUHVOHHSGHSULYDWLRQDQGH[SRVXUHWRH[WUHPHFROGDQGKRWWHPSHUDWXUHV 6ROGLHUV ZHUH WROG WKDW PDQ\ DEXVLYH WHFKQLTXHV ZHUH DXWKRUL]HG E\ WKH PLOLWDU\ FKDLQ RI FRPPDQG DQG *HQHYD &RQYHQWLRQV GLG QRW DSSO\ WR WKH GHWDLQHHVDWWKHLUIDFLOLW\'HWDLQHHVDW&DPS1DPDD86GHWHQWLRQFHQWHUDW WKH %DJKGDG DLUSRUW²LQ YLRODWLRQ RI LQWHUQDWLRQDO ODZ²QRW UHJLVWHUHG ZLWK WKH,QWHUQDWLRQDO&RPPLWWHHRIWKH5HG&URVVZHUHUHJXODUO\VWULSSHGQDNHG DQG VXEMHFW WR EHDWLQJV´ 3'2 K  ,Q IDFW ³>E@HFDXVH WKH WUDLQLQJ ZDV GHYHORSHGGXULQJWKHFROGZDUWKHWHFKQLTXHVODWHUDGRSWHGE\WKH&,$DQG 6SHFLDO 2SHUDWLRQV RIILFHUV LQ ,UDT ZHUH EDVHG DW OHDVW LQ SDUW RQ KRZ WKH 6RYLHW8QLRQDQGLWVDOOLHVZHUHEHOLHYHGWRWUHDWSULVRQHUV6XFKWHFKQLTXHV LQFOXGHG SURORQJHG XVH RI VWUHVV SRVLWLRQV H[SRVXUH WR KHDW DQG FROG VOHHS GHSULYDWLRQDQGHYHQZDWHUERDUGLQJ´66KDQH  ³6RPH GHWDLQHHV ZHUH XVHG IRU WDUJHW SUDFWLFH ,Q 0D\  KXPDQ ULJKWV JURXS $PQHVW\ ,QWHUQDWLRQDO FRQGHPQHG WKH GHWHQWLRQ RI VRPH  SULVRQHUV LQ ,UDT ZLWKRXW FKDUJH RU WULDO 2Q )HEUXDU\   $XVWUDOLD V 6%6 79 DLUHG PRUH WKDQ  SLFWXUHV DQG YLGHR FOLSV WDNHQ DW ,UDT V $EX *KUDLESULVRQWKHLPDJHVLQFOXGHGDPDQ VWKURDWZDVFXWRIIOHIWIRUHDUPRI DPDQZDVOHIWZLWKEXUQVDQGVKUDSQHOZRXQGVDEORRGVWDLQHGLQWHUURJDWLRQ URRPDQGDVHHPLQJO\LQVDQHPDQ VERG\FRYHUHGZLWKKLVRZQIHFHV´3'2 K 

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





,QDFRPSUHKHQVLYHVXUYH\FRQGXFWHGE\WKH3HQWDJRQUHOHDVHGLQHDUO\ ZKLFK ³VDPSOHG PRUH WKDQ  VROGLHUV DQG PDULQHV EHWZHHQ $XJXVW DQG 2FWREHU´LQ,UDT³WKHVWXG\VKRZHGWKDWPRUHWKDQSHUFHQWVXSSRUW WKH LGHD RI WRUWXUH´ DQG ³>O@HVV WKDQ KDOI RI 0DULQHV DQG PRUH WKDQ KDOI RI $UP\VROGLHUVVDLGWKH\ZRXOGQRWUHSRUWDPHPEHURIWKHLUXQLWIRUNLOOLQJRU ZRXQGLQJDQLQQRFHQWFLYLOLDQ´$/1F $OVRRIWKHVROGLHUVDQG  RI 0DULQHV GLG QRW WKLQN WKDW ³QRQFRPEDWDQWV VKRXOG EH WUHDWHG ZLWK GLJQLW\DQGUHVSHFW´$/1F  ³$QRWKHU UHSRUW FDUULHG E\ WKH 1HZ H@[SHUWVDWWKH3HQWDJRQDQGWKH8QLWHG1DWLRQVHVWLPDWHWKDWZKLOH WRQVRI'8ZHUHXVHGLQ,UDTGXULQJWKH*XOI:DUXSWRWRQVRI'8ZHUH GXPSHGRQWKHFRXQWU\E\86OHGFRDOLWLRQIRUFHVGXULQJWKHLQYDVLRQ'8 UHPDLQVGHVWUXFWLYHIRUELOOLRQ\HDUV´+:RNXVFK  7KH OHWKDOLW\ RI '8ZHDSRQU\ FDQ EH H[WUHPH EHFDXVH ³>W@KH UDGLDWLRQ SURGXFHGE\GHSOHWHGXUDQLXPLQEDWWOHLVDSRLVRQDFDUFLQRJHQLFPDWHULDOWKDW FDXVHV ELUWK GHIHFWV OXQJ GLVHDVH NLGQH\ GLVHDVH OHXNHPLD EUHDVW FDQFHU O\PSKRPD ERQH FDQFHU DQG QHXURORJLFDO GLVDELOLWLHV«:KHQ '8 PXQLWLRQV H[SORGHWKHDLULVEDWKHGLQDILQHUDGLRDFWLYHGXVWZKLFKFDUULHVRQWKHZLQG LV HDVLO\ LQKDOHG DQG HYHQWXDOO\ HQWHUV WKH VRLO SROOXWHV JURXQG ZDWHU DQG HQWHUV WKH IRRG FKDLQ 8QH[SORGHG FDVLQJV JUDGXDOO\ R[LGL]H UHOHDVLQJ PRUH XUDQLXPLQWRWKHHQYLURQPHQW´35RFNZHOO  $OVRWKH86DQGLWVDOOLHVOLNH,VUDHODQGWKH8. KDYHIUHTXHQWO\XVHG GHDGO\ FOXVWHU ERPEV DJDLQVW WKH 2WKHUV DFFRUGLQJ WR D UHSRUW E\ +DQGLFDS

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





,QWHUQDWLRQDODFRUHFLSLHQWRIWKH1REHO3HDFH3UL]H7KHUHSRUW³IRXQG WKDW DERXW P FOXVWHU ERPEOHWV KDG EHHQ GURSSHG«VLQFH  %DVHG RQ IDLOXUH UDWHV RI  WKH JURXS HVWLPDWHG WKDW PP RI WKH GHYLFHV UHPDLQXQH[SORGHG´51RUWRQ7D\ORU  ,Q,UDTIRULQVWDQFH ³WKHUHSHDWHGXVHRIFOXVWHUERPEV>E\WKH 86@KDV OHIW D GHYDVWDWLQJ OHJDF\ WKDW FRQWLQXHV WR VHYHUHO\ UHVWULFW WKH OLYHV RI LWV SHRSOH«0RUHWKDQFLYLOLDQVKDYHEHHQNLOOHGRULQMXUHGE\IDLOHGFOXVWHU PXQLWLRQVVLQFHWKHHQGRIWKH*XOIZDU6RPHRIWKHFDVXDOWLHVKDYH EHHQ FKLOGUHQ´ 5 1RUWRQ7D\ORU   ,Q QHLJKERUO\ $IJKDQLVWDQ ³ER\V EHWZHHQILYHDQGZKRDUHWHQGLQJDQLPDOVDUHPRVWOLNHO\WREHFDVXDOWLHV´ EHFDXVHRIWKHVHERPEVE\WKH86DQGLWVDOOLHV51RUWRQ7D\ORU  ,VUDHOLQLWVLQYDVLRQRIVRXWKHUQ/HEDQRQKDGXVHGVRPDQ\FOXVWHU ERPEV SURYLGHG E\ WKH 86  WKHUH WKDW ³FOXVWHU PXQLWLRQV FRQWDPLQDWH DSSUR[LPDWHO\RIWKHODQGXVHGIRUIDUPLQJ7KHFRQWDPLQDWLRQRIHVVHQWLDO ODQGLVUHIOHFWHGLQWKHULVHRIFOXVWHUERPEFDVXDOWLHVIURPWZRSHU\HDUSULRUWR WRWZRSHUGD\LQWKHPRQWKVIROORZLQJODVWVXPPHU¶VFRQIOLFWZLWK,VUDHO´ 51RUWRQ7D\ORU  2Q1RYHPEHUWKWKH86IRUFHVXVHGHYHQPRUHOHWKDOW\SHVRIWKH ZHDSRQV RI PDVV GHVWUXFWLRQ LQ WKUHH GD\V RI LQGLVFULPLQDWH ERPELQJ RI )DOOXMDK LQ ,UDT DV )LQWDQ 'XQQH   WKXV UHSRUWHG ³,W ZDV LQKXPDQH EH\RQGEHOLHIDOPRVWEH\RQGFRPSUHKHQVLRQ7KHERPEEOLW]IHDWXUHGZHDSRQV RI PDVV GHVWUXFWLRQ EDQQHG QDSDOPW\SH PXQLWLRQV FKHPLFDO SRLVRQ JDV DQG VXSHUERPEVRIXSWRSRXQGV7KHJURXQGDVVDXOWZDVLQGLVFULPLQDWH7KH WDUJHWZDVDFLW\ ZKHUHDWOHDVWFLYLOLDQVRXWQXPEHUHGUHEHOILJKWHUVE\ RYHUWKLUW\WRRQH´ 7KLVXVHRIOHWKDOZHDSRQVUHYHDOVRPHWKLQJHYHQPRUHEUXWDOLQWKHXVHRI YLROHQFHDJDLQVWWKH2WKHUVIRUFRQTXHVWLQWKDWWKH86KDVWKHWHQGHQF\WRWHVW QHZ OHWKDO ZHDSRQV ZLWK WKH 2WKHUV DV D YLROHQW ZD\ WR H[SHULPHQW KRZ HIIHFWLYHWKH2WKHUVFDQEHNLOOHGE\QHZ ZHDSRQVZKLFKDUHMXVWPDGHE\WKH 86GHIHQVHPDQXIDFWXUHUV )RU LQVWDQFH PLOLWDU\ DQDO\VW :LOOLDP $UNLQ WROG XV VRPHWKLQJ WKDW WKH $PHULFDQSXEOLFGRHVQRWNQRZLQ³WKDWWKH0DULQHVEHLQJGHSOR\HGLQ,UDT>LQ @«EULQJ DORQJ WKH QHZHVW KLJKWHFK JDGJHW LQ $PHULFD V HYHUH[SDQGLQJ DUVHQDOWRWU\RXWRQZKDWHYHUUHVLVWDQW,UDTLVWKH\PD\KDSSHQWRUXQLQWR7KH /RQJ 5DQJH $FRXVWLF 'HYLFH /5$'  HPLWV D SRZHUIXO WRQH ZKLFK EULQJV DJRQL]LQJ SDLQ WR WKRVH ZLWKLQ HDUVKRW :KLOH :RRG\ 1RUULV FKDLUPDQ RI WKH $PHULFDQ 7HFKQRORJ\ &RUSRUDWLRQ ZKLFK PDQXIDFWXUHV WKH GHYLFH UHIXVHV WR FDOO LW D ZHDSRQ  KH FODLPV ,W ZLOO NQRFN >VRPH SHRSOH@ RQ WKHLU NQHHV ´17XUVH  $QRWKHU QHZ ZHDSRQ WR EH WHVWHG DJDLQVW WKH ,UDTLV LV WKH ³0RWKHU RI DOO %RPEV´ ZKLFK LV D ³SRXQG 0DVVLYH 2UGQDQFH $LU %ODVW VXSHUERPE



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



02$% «5HDU$GPLUDO5HW 6WHSKHQ%DNHUZKRZDVWKHEDWWOHJURXSFKLHI RIRSHUDWLRQVGXULQJ*XOI:DU,DQGLVQRZDVHQLRUIHOORZDWWKH:DVKLQJWRQ EDVHG&HQWHUIRU'HIHQVH,QIRUPDWLRQKDVRIIHUHGWKLVYLVLRQRIZKDWLWZRXOG EHOLNHWRXQOHDVKZHDSRQRQ7LNULWLQWKH6XQQLKHDUWODQGRI,UDT ,WZRXOG KH ZURWH HVVHQWLDOO\ YDSRUL]H HYHU\WKLQJ« 6KDUGV DQG IUDFWXUHV ZRXOG WUDYHO DW IHHWSHUVHFRQG7KHUH GEHDVKRFNZDYHRIVHYHUDOWKRXVDQGSRXQGVSHU VTXDUHLQFKGHJUHH@)DKUHQKHLWWHPSHUDWXUHV ´17XUVH   7KLVLVQRWQHZVDWDOO,Q9LHWQDPWKH86IRUFHV KDGH[WHQVLYHO\WHVWHG QHZZHDSRQVDJDLQVWWKH9LHWQDPHVH)RULQVWDQFH³>G@XULQJWKH9LHWQDP:DU WKH86PLOLWDU\XVHG6RXWKHDVW$VLDDVDPLOLWDU\ODERUDWRU\IRUWHVWLQJRXWDOO VRUWV RI ZHDSRQU\ LGHDV 3HUKDSV EHVW UHPHPEHUHG DUH WKH PDQ\ KDOIEDNHG KLJKWHFK ZHDSRQV V\VWHPV²VXFK DV 5REHUW 0F1DPDUD V IDPHG HOHFWURQLF EDWWOHILHOG  RI UHPRWH VHQVRUV DQG ODQGPLQHV DQG WKH YDULRXV SHRSOHVQLIILQJ  GHYLFHV XVLQJ ERWK OLYH EHGEXJV DQG FKHPLFDOPHFKDQLFDO DSSDUDWXVHV´ 1 7XUVH  2WKHUV LQFOXGH ³D QHZ JHQHUDWLRQ RI HQKDQFHG DQWLSHUVRQQHO PXQLWLRQV OLNH FOXVWHUERPE XQLWV WKDW UHSUHVHQWHG D VHDFKDQJH LQ OHWKDOLW\ RYHU :RUOG :DU ,,HUD DUPDPHQWV  DQG XSJUDGHG ZHDSRQV VXFK DV QDSDOP% WKH MHOOLHG JDVROLQHWKDWEXUQHGKRWWHUDQGORQJHUWKDQLWV:RUOG:DU,,SUHGHFHVVRU´1 7XUVH  ,Q OLJKW RI WKHVH HYLGHQFHV ZKLFK DUH QRW H[KDXVWLYH EXW LOOXVWUDWLYH DV WKHUH DUH PDQ\ PRUH DV SUHVHQWHG LQ WKH  YROXPHV RI %'3'  WKH 86 DV D OLEHUDOGHPRFUDF\KDVWLPHDQGDJDLQFRPPLWWHGZDUFULPHVZLWKLPSXQLW\ 7KHFULWLFDOREVHUYDWLRQE\3DXO 5RFNZHOO LV ZRUWKUHSHDWLQJ KHUH ³7KH8QLWHG6WDWHVLVERXQGE\«WKH+DJXH&RQYHQWLRQVRIDQGWKH *HQHYD&RQYHQWLRQVRIDQGWKH1XUHPEHUJ &RQYHQWLRQVDGRSWHGE\WKH 8QLWHG1DWLRQV'HFHPEHU²DOORIZKLFKVHWOLPLWVEH\RQGZKLFKE\ FRPPRQFRQVHQWGHFHQWSHRSOHVZLOOQRWJR´ %XWWKH86DVDOLEHUDOGHPRFUDF\KDVFRQVLVWHQWO\GLVUHJDUGHGWKHPDQG HYHQ³>X@QGHUWKH>86@&RQVWLWXWLRQDOOWUHDWLHVDUHSDUWRIWKHVXSUHPHODZRI WKH ODQG«>Z@LWKRXW WKDW SULQFLSOH DOO MXULVSUXGHQFH GHVFHQGV LQWR PHUH SLHW\ DQGSRZHU1RUGRYLRODWLRQVRIWKHODZVRIZDUE\RQHEHOOLJHUHQWYLQGLFDWHWKH ZDUFULPHVRIDQRWKHU«$UWLFOHRIWKH*HQHYD&RQYHQWLRQ,9LVFOHDUDQG XQDPELJXRXV ,W LV IRUELGGHQ WR HPSOR\ SRLVRQ RU SRLVRQHG ZHDSRQV WR NLOO WUHDFKHURXVO\ LQGLYLGXDOV EHORQJLQJ WR WKH KRVWLOH QDWLRQ RU DUP\ WR HPSOR\ DUPV SURMHFWLOHV RU PDWHULDO FDOFXODWHG WR FDXVH XQQHFHVVDU\ VXIIHULQJ  7KH *HQHYD 3URWRFRORI  H[SOLFLWO\ SURKLELWV DVSK\[LDWLQJ SRLVRQRXV RU RWKHU JDVVHVDQGDOODQDORJRXVOLTXLGVPDWHULDOVRUGHYLFHV ´35RFNZHOO  7KLV LV WR VD\ EOXQWO\ WKDW ³WKH PHDQV RI LQMXULQJ WKH HQHP\ DUH QRW XQOLPLWHG´ XQGHU LQWHUQDWLRQDO ODZV  3 5RFNZHOO   6LQFH WKH 86 KDV

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





WLPHDQGDJDLQLJQRUHVWKHPDVLWSOHDVHVPDQ\DEURDGFRQVLGHUWKLV$PHULFDQ UXWKOHVVQHVV ³D UHFNOHVV GLVUHJDUG IRU KXPDQ OLIH´ DV +RZDUG =LQQ   ULJKWO\VDLG G@&RHXUG $OHQHPLQLQJUHJLRQ´LQ,GDKR  ³$UP\EDWWOH>G@&UHHN,QGLDQUHYROW´LQ2NODKRPD  ³7URRSV%UHDNLQJRIPLQHUV VWULNHE\$UP\´LQ&RORUDGR  7KHDEXVHVRIGXHSURFHVVGXULQJ:RUOG:DU, ³$UP\LQWHUYHQH>G@DJDLQVWPLQHZRUNHUV´LQ:HVW9LUJLQLD  7KH5HG6FDUHDQG3DOPHU5DLGVDIWHU::, ³$UP\VWRS>SHG@::,YHWERQXVSURWHVW´LQ:DVKLQJWRQ'&  ³$UP\SXWGRZQ%ODFNUHEHOOLRQ´LQ'HWURLW  7KHHQFDPSPHQWRI-DSDQHVH$PHULFDQVGXULQJ::,, 7KHV\VWHPLFGLVFULPLQDWLRQDJDLQVWZRPHQ 7KHLQKXPDQHODLVVH]IDLUHWUHDWPHQWRIWKHORZHUFODVV 7KHFDOORXVSHUVHFXWLRQRILQQRFHQWGLVVHQWHUVGXULQJWKH0F&DUWK\HUD ³$UP\EDWWOH>G@$IULFDQ$PHULFDQVNLOOHG´LQ'HWURLW  ³$IWHU.LQJLVVKRWRYHUVROGLHUVLQFLWLHV´  ³1DWLRQDO*XDUGJXQILUHNLOOHGIRXUVWXGHQWV´DW.HQW6WDWH8QLYHUVLW\  7KHH[FHVVHVRIWKH)%,DQG&,$GXULQJWKHVRFLDOXQUHVWLQVDQGV ³$UP\GLUHFW>HG@:RXQGHG.QHHVLHJHRI/DNRWDV´LQ6RXWK'DNRWD  ³$UP\0DULQHVGHSOR\HGDJDLQVWDQWLSROLFHXSULVLQJ´LQ/RV$QJHOHV  7KHYLRODWLRQRIFLYLOOLEHUWLHVLQWKH3DWULRW$FWLQHDUO\¶V  )HZIRUPVRIUHSUHVVLRQHJUHYHUVHVH[LVPUHYHUVHUDFLVPHWF  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH$%ULHI+LVWRU\RIWKH5HVWULFWLRQRI&LYLO/LEHUWLHVDW+RPH 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\WKVW&HQWXULHV  3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH\ DUH DOVR UHODWLYH QRW DEVROXWH  QRU DUH WKH\ PXWXDOO\ H[FOXVLYH $V JHQHUDOLWLHV WKH\ DOORZH[FHSWLRQV 6RXUFHV)URP3%DRIX D $*RUH 3+DUW  =*URVVPDQ DQG'&UDU\                                 

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





7DEOH'LIIHUHQW7HFKQLTXHVRI/HJDO)RUPDOLVWLF5XWKOHVVQHVV LQ'HPRFUDF\ERWKDW+RPHDQG$EURDG 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡&RYHULQJ8SE\'HQ\LQJ ²([6HF 6HFRI%'3' ±([ GHQ\LQJ E\ WKH :KLWH +RXVH IRUPHU 7UHDVXU\ 6HFUHWDU\ 3DXO 2 1HLOO¶V DFFRXQW RI KRZ WKH %XVK DGPLQLVWUDWLRQ GHFHLYHG WKH $PHULFDQSXEOLFRQ:0'V  ‡&RYHULQJ8SE\+LGLQJ ²([6HF6HF 6HFRI%'3' ±([ NHHSLQJ TXLHW E\ 'RQDOG 5XPVIHOG DQG *HQ 5LFKDUG % 0\HUV FKDLUPDQ RI WKH -RLQW &KLHIV RI 6WDII DERXW WKHLU DXWKRUL]DWLRQ RI H[WUHPH LQWHUURJDWLRQ UXOHV ZKLFK HYHQWXDOO\ OHG WR WKH ,UDTL SULVRQ WRUWXUHVFDQGDO EHIRUHFRQJUHVVLRQDOKHDULQJV  ‡&RYHULQJ8SE\'HOD\LQJ ²([6HF6HF 6HFRI%'3' ±([GHOD\LQJ ³WKHUHOHDVHRIEDGQHZV²LQWKHKRSHWKDWVRPHWKLQJ JRRG ZLOOEUHDN´DWHFKQLTXHFKDUDFWHULVWLFRI5XPVIHOG¶V3HQWDJRQDVLQ WKHFDVHRIWKH,UDTLWRUWXUHVWRU\6+HUVK   ‡&RYHULQJ8SE\&UHHSLQJ ²([6HF 6HFRI%'3' ±([DVNLQJ&RQJUHVVE\WKH%XVKDGPLQLVWUDWLRQLQDFUHHSLQJZD\IRUDQ H[WUD  ELOOLRQ IRU WKH ,UDT ZDU LQ  ZKHQ WKH FRXQWU\ ZDV GLVWUDFWHGE\WKH,UDTLSULVRQWRUWXUHVFDQGDO1/   ‡&RYHULQJ8SE\3URWHFWLQJ ²([6HF6HF 6HFRI%'3' ±([SURWHFWLQJWKHSUHVLGHQWE\WKRVHFORVHWRKLPLQO\LQJWKDWKHZDVQRW LQIRUPHG DERXW WKH ,UDTL SULVRQ WRUWXUH LQFLGHQWV EHIRUHKDQG DQG WKHUHIRUH WKDW WKH EODPH VKRXOG QRW EH SXW KLJKHU WKDQ WKH ORZHU FKDLQVRIFRPPDQGLQWKH'HSDUWPHQWRI'HIHQVH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH         



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH'LIIHUHQW7HFKQLTXHVRI/HJDO)RUPDOLVWLF5XWKOHVVQHVV LQ'HPRFUDF\ERWKDW+RPHDQG$EURDG 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡&RYHULQJ8SE\(YDGLQJ ²([6HF 6HFRI%'3' ±([ HYDGLQJ E\ &RQGL 5LFH 86 1DWLRQDO 6HFXULW\ $GYLVRU FHUWDLQ FRQWURYHUVLDO TXHVWLRQV  DERXW  KRZ PXFK WKH %XVK DGPLQLVWUDWLRQ NQHZDERXWWHUURULVWWKUHDW EHIRUHWKH&RPPLVVLRQ ±([GUDIWLQJD81UHVROXWLRQE\WKH86WRDOORZDORQJWHUPRFFXSDWLRQ RI ,UDT ZLWK FUDIW\ ZRUGV OLNH ³WKH IRUFH V PDQGDWH LV RSHQHQGHG XQOHVV WKH FRXQFLO DGRSWV DQRWKHU UHVROXWLRQ´ EXW WKH 86 DV D SHUPDQHQW PHPEHU FDQ VLPSO\ YHWR DQ\ QHZ UHVROXWLRQ = 7RXIH    ‡&RYHULQJ8SE\%ODPLQJ ²([6HF 6HFRI%'3' ±([WUDQVIHUULQJWKHEODPHE\WKH:KLWHKRXVHWR³DIHZ´86VROGLHUVLQ UHJDUGWRWKH,UDTLSULVRQWRUWXUHVFDQGDODQGWKHUHE\FRYHULQJXSDQ\ UHVSRQVLELOLW\IRUGHPRQL]LQJ,UDT  ‡&RYHULQJ8SE\6KXWWLQJ8S ²([6HF6HF6HF 6HFRI %'3' ±([ REWDLQLQJ E\ WKH %XVK DGPLQLVWUDWLRQ D FRXUW RUGHU RQ JURXQG RI ³VWDWH VHFUHWV SULYLOHJH´ WR VLOHQFH 6LEHO (GPRQGV¶ UHYHODWLRQ WR WKH  FRPPLVVLRQ ZLWK GHWDLOHG GRFXPHQWV RI WKH :KLWH +RXVH¶V NQRZOHGJH RI DO4D LGD V WHUURULVW SODQV EHIRUH  ZKLFK WKH %XVK DGPLQLVWUDWLRQGHQLHGLQSXEOLF ±([ ILOWHULQJ 3UHYHQWLQJ XQIDYRUDEOH QHZV IURP EURDGFDVWLQJ LQ PDLQVWUHDPPHGLDDQGLQWHUUXSWLQJGLVFRXUDJLQJWRXJKTXHVWLRQLQJE\ UHSRUWHUV ±([ PDNLQJ 5LFKDUG )RVWHU WKH 0HGLFDUH V\VWHP V FKLHI DFWXDU\ TXLHW ZLWKWKHULVNRIGLVPLVVDOLIKHGDUHGWRWHOO&RQJUHVVWKHKLJKHUFRVW RI%XVK¶VKHDOWKSODQ ±([ ILOLEXVWHULQJ $QVZHULQJ TXHVWLRQV LQ D OHQJWK\ ZD\ ZLWKRXW VD\LQJ PXFK RI DQ\WKLQJ DV D ZD\ WR NLOO WLPH DQG SUHYHQWLQJ RWKHUV IURP KDYLQJWKHFKDQFHWRVD\PXFKRIDQ\WKLQJ E\&RQGL5LFHEHIRUHWKH  FRPPLVVLRQ DV D ZD\ WR GHIOHFW FULWLFLVPV RI %XVK¶V WURXEOLQJ ZDURQWHUURU BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH  

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





7DEOH'LIIHUHQW7HFKQLTXHVRI/HJDO)RUPDOLVWLF5XWKOHVVQHVV LQ'HPRFUDF\ERWKDW+RPHDQG$EURDG 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡([SRVLQJ5HYHDOLQJ ²([6HF 6HFRI%'3' ±([OHDNLQJWKHLGHQWLW\RI&,$RSHUDWLYH9DOHULH3ODPHDVDQUHWDOLDWLRQ RIKLVKXVEDQG¶VFULWLTXHRI%XVKRQZHDSRQVRIPDVVGHVWUXFWLRQ ±([ GHFODVVLI\LQJ VHOHFWLYHO\  VHQVLWLYH VHFUHW  WHVWLPRQ\ E\ 5LFKDUG &ODUN VR DV WR ORRN IRU DQ\ LQFRQVLVWHQF\ IRU SRVVLEO\ FKDUJLQJ KLP ZLWKSHUMXU\XQGHURDWKDVDZD\WRJHWUHYHQJHZLWKKLVFULWLTXHRI %XVKRQWKHZDURQWHUURU  ‡&KDUDFWHU7DUJHWLQJE\'LVSDUDJLQJ ²([6HF6HF6HF 6HF 6HFRI%'3' ±([PDNLQJWKHVWRU\DERXW5LFKDUG&ODUN¶VFULWLTXHRI%XVKDV³SHUVRQDO´ E\ SRUWUD\LQJ KLP DV D IRUPHU ³GLVJUXQWOHG´ HPSOR\HH  LQ RUGHU WR GLVFUHGLWKLP ±([ SURYLGLQJ QDVW\ PHGLD FRYHUDJH WKURXJK PDLQVWUHDP QHZV FKDQQHOV DJDLQVWDQWLZDUFULWLFVHJ)R[1HZVLQLWVSHUVRQDODWWDFNVRIDQWL %XVKSHRSOH  ±([FKDUDFWHUL]LQJWKHEURDGFDVWRIWKHSKRWRVRI,UDTLSULVRQWRUWXUHE\ WKH %XVK FDPS DV ³SROLWLFDOO\ PRWLYDWHG´ RU D NLQG RI ³SROLWLFDO SOR\´ZKLFKLV³XQFDOOHGIRU´  ‡&KDUDFWHU7DUJHWLQJE\*ORULI\LQJ ²([6HF6HF6HF 6HF 6HFRI%'3' ±([ FKDUDFWHUL]LQJ WKRVH 86 VROGLHUV LQ WKH ,UDTL WRUWXUH VFDQGDO DV LQKHUHQWO\ ³JRRG´ SHRSOH ZLWK D ³GHFHQW´ IDPLO\ EDFNJURXQG ZKLOH SRUWUD\LQJWKRVH ZKREHKHDGHG1LFKRODV%HUJDV ³EDUEDULF´DQGDQG ³DQLPDO´OLNH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH         



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH'LIIHUHQW7HFKQLTXHVRI/HJDO)RUPDOLVWLF5XWKOHVVQHVV LQ'HPRFUDF\ERWKDW+RPHDQG$EURDG 3DUW,9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡3UHVVXULQJ%ULELQJ²([6HF 6HFRI%'3' ±([SUHVVXULQJDQGWU\LQJWREULEH&RQJUHVVPDQ1LFN6PLWKLQUHJDUGWR KLV VRQ¶V FDPSDLJQ WR VXFFHHG KLP  XQOHVV KH YRWHG IRU WKH %XVK 0HGLFDUH SUHVFULSWLRQ ELOO LQ 1RYHPEHU  ZKLFK KH ILQDOO\ GLG ZLWKPXFKUHVHQWPHQW  ‡3URILOLQJ²([6HF6HF6HF 6HFRI%'3' ±([ URXQGLQJ XS PDQ\ PRVWO\ $UDEEDFNJURXQG PHQ DIWHU  ZLWKRXW DQ\ IRUPDO FKDUJHV DJDLQVW WKHP LQ UHODWLRQ WR WHUURULVP HYHQ \HDUV ODWHU ±([UHYHUVHGLVFULPLQDWLQJWKH6DPHE\WKH2WKHUV  ‡(YLGHQFH6SLQQLQJE\'DWD)DEULFDWLQJ ²([6HF6HF 6HF RI%'3' ±([ IDEULFDWLQJ ERJXV HYLGHQFHV E\ WKH 86 LQ VHFUHWO\ VKLSSLQJ VRPH ZHDSRQV RI PDVV GHVWUXFWLRQ WR ,UDT DQG GLVJXLVLQJ WKHP DV ,UDTL 6KRXOG WKLV DOOHJDWLRQ EH WUXH LW FRXOG EH XVHG DV D GHVSHUDWH ODVW UHVRUWWRVDYH%XVK¶VSROLWLFDOVFDQGDO01$  ±([PDNLQJXSWKHVWRU\E\VRPHIDPLOLHVRIWKH86VROGLHUVLQYROYHGLQ WKH SULVRQ WRUWXUH VFDQGDO DV D ZD\ WR GHIHQG WKHLU ORYHG RQHV LQ WURXEOH WKDWWKHVH[XDODEXVHWRUWXUHDQGKXPLOLDWLRQRI,UDTLVZHUH RQO\PHDQWWRIULJKWHQIXWXUH,UDTLSULVRQHUVVRDVWRHQFRXUDJHWKHP WRFRRSHUDWHDQGUHYHDOLQIRUPDWLRQDQGQRWKLQJPRUH  ‡(YLGHQFH6SLQQLQJE\,PSUHVVLRQ0DVVDJLQJ ²([6HF6HF  6HFRI%'3' ±([ DSSHDULQJ E\ %XVK DQG KLV HQWLUH WHDP WRJHWKHU RQ 79 DV D XQLWHG IURQWZLWKLWVLQWHUQDOVSOLWKLGGHQ WRGHIHQG5XPVIHOGLQUHJDUGWR WKH,UDTLSULVRQWRUWXUHVFDQGDO BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH      

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





7DEOH'LIIHUHQW7HFKQLTXHVRI/HJDO)RUPDOLVWLF5XWKOHVVQHVV LQ'HPRFUDF\ERWKDW+RPHDQG$EURDG 3DUW9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡5KHWRULF6SLQQLQJE\'RXEOH7DONLQJ ²([6HF6HF  6HFRI%'3' ±([SUHWHQGLQJE\*HRUJH%XVKIRUSXEOLFFRQVXPSWLRQWKDWWKH86LV DJDLQVWLPSHULDORFFXSDWLRQ³:H UHQRWDQLPSHULDOSRZHU´RQ$SULO    EXW DW WKH VDPH WLPH GRLQJ TXLWH WKH RSSRVLWH LQ SUDFWLFH DQGLQVLVWLQJWRVWDWLRQWURRSVLQ,UDTHYHQDIWHU-XQHWKHGHDGOLQH WRHQGRFFXSDWLRQ  ±([SURPLVLQJE\*HRUJH%XVKWRILQGDQGSURVHFXWHWKRVHZKRUHYHDOHG WKHVHFUHWLGHQWLW\RI&,$RSHUDWLYH9DOHULH3ODPHDVDQUHWDOLDWLRQRI KLVKXVEDQG¶VFULWLTXHRI%XVKRQ:0'V EXWGRLQJOLWWOHLQSUDFWLFH HYHQ RQH \HDU DIWHU DERXW WKH LQYHVWLJDWLRQ /DWHU ZKHQ , /HZLV 6FRRWHU /LEE\ 9LFH 3UHVLGHQW &KHQH\ V IRUPHU FKLHI RI VWDII ZDV FRQYLFWHGIRUKLVUROHLQWKHOHDN%XVK³FRPPXWHG´WKHVHQWHQFHVR WKDW /LEE\ GLG QRW QHHG WR JR WR MDLO $ *ROGVWHLQ   $QG WKH MXURUVZRQGHUHGZK\WKHPDMRUILJXUHVLQWKHOHDNOLNH.DUO5RYHDQG RWKHUVHJ'LFN&KHQH\ ZHUHQHYHUEURXJKWWRMXVWLFH  ‡5KHWRULF6SLQQLQJE\5HYHUVLQJ ²([6HF 6HFRI%'3' ±([ FODLPLQJ E\ %ULWLVK 3ULPH 0LQLVWHU 7RQ\ %ODLU WKH LPSRVLWLRQ RI D SXSSHWJRYHUQPHQWLQ,UDTDV³WKH ILUVW VWDJHRIGHPRFUDF\´IRUWKH ,UDTLV6LPLODUO\WKH6RYLHW8QLRQLQYDGHG$IJKDQLVWDQE\VD\LQJLWV RFFXSDWLRQ ZDV QHFHVVDU\ WR HYHQWXDOO\ EULQJ ³FLYLOL]DWLRQ GHPRFUDF\ZRPHQ VOLEHUDWLRQDQGVRFLDOMXVWLFH´WRWKH$IJKDQV  ‡5KHWRULF6SLQQLQJE\:RUG7ZLVWLQJ ²([6HF6HF6HF 6HF6HF 6HFRI%'3' ±([FDOOLQJWKH$IJKDQSULVRQHUVRIZDU³HQHP\FRPEDWDQWV´LQVWHDGVRDV WRGHQ\WKHPWKHMXGLFLDU\ULJKWVXQGHUWKH*HQHYD&RQYHQWLRQ ±([ODEHOLQJDQWLZDUSURWHVWHUVDV³XQSDWULRWLF´LQWKHZDURQWHUURU ±([ UHIXVLQJ E\ 'RQDOG 5XPVIHOG WR FDOO WKH JUXHVRPH PDOWUHDWPHQW RI ,UDTLVROGLHUVDIRUPRI³WRUWXUH´EXWRQO\DQ³DEXVH´EHFDXVHKHGLG QRWZDQWWKH³OHJDOLPSOLFDWLRQV´$0F)HDWWHUV  ±([XVLQJWKHPLVOHDGLQJZRUG³HPEDVV\´WRGHVFULEHDOOWKHKXQGUHGVRI FRPSRXQGVKRXVLQJWKHYDVW86RFFXSDWLRQIRUFHVWKURXJKRXW,UDT BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH'LIIHUHQW7HFKQLTXHVRI/HJDO)RUPDOLVWLF5XWKOHVVQHVV LQ'HPRFUDF\ERWKDW+RPHDQG$EURDG 3DUW9,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡5KHWRULF6SLQQLQJE\([DJJHUDWLQJ ²([6HF6HF6HF 6HF 6HFRI%'3' ±([EORZLQJRXWRISURSRUWLRQ([DJJHUDWLQJE\'RQDOG5XPVIHOG'HIHQVH 6HFUHWDU\ EHIRUH WKH  FRPPLVVLRQ WKH HPEROGHQLQJ HIIHFW RI WDUJHWLQJELQ/DGHQDVRQHZD\WRMXVWLI\WKH86REVHVVLRQZLWK,UDT LQVWHDGQRWZLWKWHUURULVP ±([VFDSHJRDWLQJ%ODPLQJWKHYLROHQWLQVXUJHQF\LQ,UDTDVWKHZRUNRID IHZ³H[WUHPLVWV´$OVRDVDZD\WRMXVWLI\³URXWLQJWKHPRXW´ ±([JORULI\LQJ3RUWUD\LQJ³´RI86WURRSVDV³JRRG´SHRSOHDQG WKH,UDTLSULVRQHUWRUWXUHLQFLGHQWVDV³LVRODWHG´FDVHVE\5HSXEOLFDQ 6HQ-RKQ:DUQHURI9LUJLQLDWKHFKDLUPDQRI6HQDWH$UPHG6HUYLFHV &RPPLWWHH  ‡5KHWRULF6SLQQLQJE\0LQLPL]LQJ ²([6HF6HF6HF6HF 6HF 6HFRI%'3' ±([GRZQSOD\LQJE\*HRUJH%XVKWKHUHDO,UDTZDUFRVWV ±([ GRZQJUDGLQJ  E\  PLQRULWLHV DW  KRPH WKH  ELRORJLFDO GLIIHUHQFHV EHWZHHQWKH6DPHDQGWKH2WKHUV ±([ VFDSHJRDWLQJ E\ WKH 86 PLOLWDU\ D IHZ VROGLHUV IRU WKH $PHULFDQ WRUWXUHRI,UDTLGHWDLQHHVLQVWHDGRIIL[LQJWKHV\VWHP  ‡(PRWLRQ0DQLSXODWLQJ²([6HF6HF6HF 6HFRI%'3' ±([ GHPRQL]LQJ IHDUPRQJHULQJ  &DOOLQJ 6DGGDP D ³+LWOHU´ DQG KLV WURRSV DV EUXWDO DQG HYLO ZLWK ZHDSRQV RI PDVV GHVWUXFWLRQ ZKLFK ³WKUHDWHQ$PHULFDLQWKHIRUPRIDPXVKURRPFORXG´ ±([ SOHDGLQJ IRU WKH UHVW RI WKH ZRUOG WR JLYH WKH 86LPSRVHG SXSSHW UHJLPH³DFKDQFH´WREXLOG³GHPRFUDF\´LQ,UDT ±([ WLPLQJ E\ WKH )%, WKH -XVWLFH 'HSDUWPHQW DQG WKH 'HSW RI +RPHODQG6HFXULW\WKHLQFUHDVHRIWHUURUDOHUWSDUWO\DVZD\WRUDLVH IHDU DQG UDOO\ LQ VXSSRUW RI WKH SUHVLGHQW ZKHQ KLV SXEOLF DSSURYDO UDWHGHFOLQHVVKDUSO\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH    

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





7DEOH'LIIHUHQW7HFKQLTXHVRI/HJDO)RUPDOLVWLF5XWKOHVVQHVV LQ'HPRFUDF\ERWKDW+RPHDQG$EURDG 3DUW9,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡6\PEROLF$FWLQJ'DPDJH&RQWUROOLQJ ²([6HF 6HFRI%'3' ±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±([DGPLWWLQJE\WKH1HZLQ UHJDUG WR WKH ILUVW *XOI :DU@«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´76KRIQHU  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH             



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH'LIIHUHQW'HPRFUDWLF9LRODWLRQVRI,QWHUQDWLRQDO/DZ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡ 8VLQJ ([FHVVLYH )RUFH²([ 6HF 6HF 6HF 6HF 6HF 6HFRI%'3' ±([ WKH ZHDSRQV RI YLROHQFH E\ 86 DQG %ULWLVK IRUFHV LQFOXGH LQ VRPH LQVWDQFHV ³DOPRVW  FOXVWHU PXQLWLRQV FRQWDLQLQJ D WRWDO RI QHDUO\ WZR PLOOLRQ VXEPXQLWLRQV RU ERPEOHWV«+5: DUJXHG WKDW WKHVHFLYLOLDQFDVXDOWLHVFRXOGKDYHEHHQSUHYHQWHGVRWDFWLFVOLNHWKLV FDQEHOLDEOHWRWKHYLRODWLRQRI³WKHODZVRIZDU´HJZDUFULPHV  -/REH  ±([³WRQVRI'8>GHSOHWHGXUDQLXP@ZHUHXVHGLQ,UDTGXULQJWKH*XOI :DUXSWRWRQVRI'8ZHUHGXPSHGRQWKHFRXQWU\E\86OHG FRDOLWLRQIRUFHVGXULQJWKHLQYDVLRQ'8UHPDLQVGHVWUXFWLYHIRU  ELOOLRQ \HDUV´ ZLWK KLJK UDGLRDFWLYH HIIHFWV + :RNXVFK   ³8QGHU $UWLFOH  RI WKH *HQHYD &RQYHQWLRQV LW LV D ZDU FULPH WR ODXQFK DQLQGLVFULPLQDWHDWWDFNDIIHFWLQJWKHFLYLOLDQSRSXODWLRQLQWKH NQRZOHGJHWKDWVXFKDQDWWDFNZLOOFDXVHDQH[FHVVLYHORVVRIOLIHRU LQMXU\WRFLYLOLDQV 8QGHUWKH+DJXH&RQYHQWLRQV$UWLFOHDQG

7KHULJKWRIEHOOLJHUHQWVWRDGRSWPHDQVRILQMXULQJWKHHQHP\LVQRW XQOLPLWHG  DQG ,W LV HVSHFLDOO\ IRUELGGHQ WR NLOO WUHDFKHURXVO\ LQGLYLGXDOV EHORQJLQJ WR WKH KRVWLOH QDWLRQ RU DUP\ ´3 5RFNZHOO    ‡ .LOOLQJ &LYLOLDQV²([ 6HF  6HF  6HF  6HF  6HF6HF 6HFRI%'3' ±([+XPDQ5LJKWV:DWFKFKDUJHGWKH86RIFRPPLWWLQJWKUHHFDWHJRULHV RIDYRLGDEOHYLROHQFHLI PRUHFDUH ZHUHWDNHQ  ZKLFKLV EDQQHGE\ LQWHUQDWLRQDO ODZ ³&LYLOLDQV NLOOHG GXULQJ UDLGV RQ SULYDWH KRPHV FLYLOLDQV NLOOHG LQ UHVSRQVH WR DWWDFNV DJDLQVW 86 VROGLHUV DQG FLYLOLDQV NLOOHG ZKHQ WKH\ IDLOHG WR VWRS DW  FKHFNSRLQWV´ /&URNH F  ³7KH 8QLWHG 6WDWHV LV ERXQG E\«WKH +DJXH &RQYHQWLRQV RI DQGWKH*HQHYD&RQYHQWLRQVRIDQGWKH1XUHPEHUJ &RQYHQWLRQVDGRSWHGE\WKH8QLWHG1DWLRQV'HFHPEHU²DOO RIZKLFKVHWOLPLWV´35RFNZHOOD  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH    

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





7DEOH'LIIHUHQW'HPRFUDWLF9LRODWLRQVRI,QWHUQDWLRQDO/DZ 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡ ,JQRULQJ 'XH 3URFHVV²([ 6HF 6HF 6HF 6HF 6HF 6HFRI%'3' ±([ WKH KDQGOLQJ RI SULVRQHUV DW *XDQWDQRPR YLRODWHG ³WKH *HQHYD &RQYHQWLRQ´ DQG ³WKHVH JURVV YLRODWLRQV RI WKHLU ULJKWV KDYH VHULRXVO\« GHOHJLWLPL]HG 86 HIIRUWV WR FRQWLQXH SURPRWLQJ +XPDQ 5LJKWVDURXQGWKH ZRUOG´$*RUH 7KHVDPH KROGVWUXH IRU RWKHU SULVRQHUV RI ZDU ) $UEXWKQRW   +XPDQ 5LJKWV :DWFK UHPLQGHG WKH 86 WKDW ³LQWHUQDWLRQDO ODZ SURKLELWV DUELWUDU\ GHWHQWLRQ%RWK $IJKDQLVWDQ DQG WKH 8QLWHG  6WDWHV VLJQHG WKH *HQHYD FRQYHQWLRQV $UWLFOH  RI WKH 7KLUG *HQHYD &RQYHQWLRQ UHTXLUHVFRXQWULHVDWZDUWRJUDQW32:VWDWXVWRDOOFDSWXUHGPHPEHUV RI D JRYHUQPHQW V UHJXODU DUPHG IRUFHV²ZKHWKHU WKH JRYHUQPHQW LV GLSORPDWLFDOO\UHFRJQL]HGRUQRW´&/HYHQGRVN\   ‡ $EXVLQJ7RUWXULQJ 3ULVRQHUV²([ 6HF 6HF  6HF RI %'3' ±([7KHWRUWXULQJRI,UDTLSULVRQHUVE\86WURRSV$PQHVW\,QWHUQDWLRQDO SURWHVWHGLWDV³FUXHOLQKXPDQRUGHJUDGLQJWUHDWPHQWRUSXQLVKPHQW EDQQHGE\LQWHUQDWLRQDOODZ´&+DQOH\ +XPDQ5LJKWV:DWFK FKDUJHG WKH 86 RI ³DFWV DJDLQVW GHWDLQHHV DPRXQWLQJ WR WRUWXUH RU FUXHOLQKXPDQHRUGHJUDGLQJWUHDWPHQW´%:KLWDNHU  ±([ 7KH VH[XDO DEXVH RI PDOH ,UDTL SULVRQHUV DQG UDSH RI IHPDOH ,UDTL SULVRQHUVE\86WURRSV9LRODWLRQRIWKH*HQHYD&RQYHQWLRQV  ‡&RPPLWWLQJ&RPSOLFLW\LQ9LROHQFH²([6HF6HF 6HF RI%'3' ±([ WKH 86 KDV HQJDJHG LQ VWDWHVSRQVRUHG WHUURULVP RYHU WKH GHFDGHV *RRG LQVWDQFH LV UHQGLWLRQ WR WRUWXUH DQG RWKHU IRUPV RI WHUULI\LQJ YLROHQFH ³2I DOO WKH FRQYHQWLRQV LQ KXPDQLWDULDQ ODZ QRQH LV PRUH UHOHYDQW WR FRQWHPSRUDU\ DIIDLUV WKDQ WKH 1XUHPEHUJ SULQFLSOH

&RPSOLFLW\LQWKHFRPPLVVLRQRIDFULPHDJDLQVWSHDFHDZDUFULPH RU D FULPH DJDLQVW KXPDQLW\ LV D FULPH XQGHU LQWHUQDWLRQDO ODZ ´3 5RFNZHOO  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH   



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH'LIIHUHQW'HPRFUDWLF9LRODWLRQVRI,QWHUQDWLRQDO/DZ 3DUW,9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡ ([SORLWLQJ /RFDO 5HVRXUFHV²([ 6HF 6HF  6HF RI %'3' ±([WKHLQIDPRXV2UGHUIRUSULYDWL]DWLRQE\WKH86RFFXS\LQJIRUFHLQ ,UDT ³FOHDUO\ YLRODWH>G@«WKH +DJXH UHJXODWLRQV RI  WKH FRPSDQLRQ WR WKH  *HQHYD FRQYHQWLRQV ERWK UDWLILHG E\ WKH 8QLWHG6WDWHV DVZHOODVWKH86DUP\ VRZQFRGHRIZDU7KH+DJXH UHJXODWLRQV VWDWH WKDW DQ RFFXS\LQJ SRZHU PXVW UHVSHFW XQOHVV DEVROXWHO\ SUHYHQWHG WKH ODZV LQ IRUFH LQ WKH FRXQWU\ ´ ³LQ DFFRUGDQFH ZLWK WKH UXOHV RI XVXIUXFW´ 1.OHLQ   5DQLD 0DVUL FRGLUHFWRU RI WKH &DPSDLJQ WR 6WRS WKH :DU 3URILWHHUV DQG (QG WKH &RUSRUDWH,QYDVLRQRI,UDTDWWKH,QVWLWXWHIRU6RXWKHUQ6WXGLHVVKDUHG WKHVLPLODUVHQWLPHQWRILOOHJDOLW\6*RQVDOYHV  ±([ WKH 86 LOOHJDOO\ WRRN RYHU ³,UDTL RLO PRQH\ VHL]HG DVVHWV DQG WKH UHFRQVWUXFWLRQ IXQGV ,W LV XVLQJ PDVVLYH DPRXQWV RI WKLV PRQH\ WR DZDUGFRQWUDFWVWR«86FRPSDQLHVVXFKDV%HFKWHODQG+DOOLEXUWRQ´ 0%HQMDPLQ $QG³ZDWFKGRJJURXSVVD\WKH8QLWHG6WDWHVKDV QRULJKWWRGLVSHQVHZLWKWKHIXQGVDVLWSOHDVHV´(0HND\  ±([ 86 VROGLHUV VWROH PRQH\ DQG SURSHUWLHV IURP ORFDOV«³>$ 86@ \RXQJRIILFHUEDVHGLQWKH6XQQL7ULDQJOHZURWHKRPHWRKLVIDPLO\LQ $XJXVW ,WVHHPVWKDWZKHQHYHUWKH\JHWWKHFKDQFHWKH\VWHDOPRQH\ IURP WKH ORFDOV , P QRW WDONLQJ DERXW VPDOO DPRXQWV RI FDVK , P WDONLQJDERXWDQLFH IDWEDQNUROO7KH\WDNHWKH PRQH\GXULQJUDLGV ZKLOHVHDUFKLQJFDUVZKLOHGHWDLQLQJORFDOV ´$&RFNEXUQ  ±([ ³2Q 0D\   WKH FDPHUD RI DQ $O -D]HHUD 6DWHOOLWH &KDQQHO FUHZ LQ %DVUD ILOPHG 86 WUXFNV WUDQVSRUWLQJ ,UDTL RLO DFURVV WKH ERUGHUWR.XZDLW´$-DQDEL  ±([ WKH 86 WURRSV WRRN RYHU WKH EHVW KRWHOV DQG SDODFHV IRUPHUO\ RFFXSLHGE\+XVVHLQIRUWKHFRPIRUWRIWKH86WURRSV1ZKLFK@ PXVW LQFOXGH IRUHLJQ SDUWLFLSDWLRQ´PRVWO\$PHULFDQLQSUDFWLFH WRVHWRXW³,UDTLRLOSROLFLHVDQGVHW FULWHULD IRU IRUHLJQ FRPSDQLHV ZRUNLQJ LQ WKH LQGXVWU\´ VR WKLV IRUHLJQ LQYROYHPHQW JXDUDQWHHV WKH FRQWLQXHG $PHULFDQ FRQWURO RI WKH RLO LQGXVWU\ LQ ,UDTWKHUHDIWHU  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH           

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





7DEOH6\VWHPDWLF(FRQRPLF([SORLWDWLRQLQ$FWLRQ &DVH²7KH2LO/DZ'UDIWHGE\WKH86IRU,UDTWR6LJQLQ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHVHH[DPSOHVDUHVROHO\LOOXVWUDWLYHQRWH[KDXVWLYH RIWKHH[SORLWDWLYH QDWXUHRIWKHRLOODZGUDIWHGE\WKH86ZKLFKZDVWKHQSDVVHGRQWRWKH,UDTLV IRUVLJQDWXUH ,WLVQR ZRQGHUWKXVWKDW ³>P@DQ\LQWKH86DQG%DJKGDGH[SUHVV IHDUV WKDW WKH GUDIW RLO ODZ VD\V OLWWOH DERXW VKDULQJ RLO UHYHQXHV DPRQJ ,UDTL 6KLDV 6XQQLV DQG .XUGV DQG D ORW DERXW VHWWLQJ XS D IUDPHZRUN IRU LQYHVWPHQW WKDW ZRXOG EHQHILW IRUHLJQ FRPSDQLHV >PRVWO\ $PHULFDQ LQ SUDFWLFH@ DQG KDUP WKH ,UDTLVRYHUWKHORQJWHUP´(6DEU\  (YHQ WKH ,UDTL RLO PLQLVWHU ,VVDP $O &KDODEL XQGHU WKH 86 RFFXSDWLRQ SURWHVWHG DJDLQVW WKLV ODZ E\ VD\LQJ ³,W DLPV DW VHWWLQJ D IUDPHZRUN IRU LQYHVWPHQW E\ IRUHLJQ RLO FRPSDQLHV >PRVWO\ $PHULFDQ LQ SUDFWLFH@ LQFOXGLQJ IDYRUDEOH SURGXFWLRQVKDULQJ DJUHHPHQWV WKDW DUH W\SLFDOO\ XVHG WR UHZDUG FRPSDQLHVIRUWDNLQJRQULVN:HNQRZWKHRLOLVWKHUH*HRORJLFDOVWXGLHVKDYH EHHQ PDGH IRU GHFDGHV RQ WKHVH RLO ILHOGV VR ZK\ ZRXOG ZH OHW WKHP >WKH $PHULFDQV@ KDYH D VKDUH RI WKH RLO" ,UDTLV ZLOO VD\ WKLV LV VROLG SURRI WKDW $PHULFDQVKDYHVWDJHGWKHZDU«EHFDXVHRIWKLVODZ´(6DEU\  $QG 0RKDPPHG DO'\QHH PHPEHU RI SDUOLDPHQW UHSUHVHQWLQJ WKH ,UDTL )URQWIRU1DWLRQDO'LDORJXHDVNHGDQLPSRUWDQWTXHVWLRQIRUXVWRWKLQNKDUGHU DERXWWKH86UROHLQGUDIWLQJWKHRLOODZLQWKHILUVWSODFHDQGWKHQSUHVVXULQJ WKH ,UDTLV WR VLJQ LW ³7KH 86 WDONV DERXW WKH VRYHUHLJQW\ RI ,UDT EXW ZK\ DUH WKH\JHWWLQJLQYROYHGLQWKLVRLOODZ"´*&KDGGRFN  6RXUFHV)URP1:RKOIRUWK *&KDGGRFN 9:DOW DQG (6DEU\               



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH7KH3ROLWLFVRI)DYRULWLVPDQG([FOXVLRQ,  7KH&DVHRI869HWRHVRI815HVROXWLRQV&ULWLFDORI,VUDHO  3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡³3DOHVWLQH6\ULDQ/HEDQHVH&RPSODLQWSRZHUGUDIWUHVROXWLRQ  ´ ‡³3DOHVWLQH([DPLQDWLRQRI0LGGOH(DVW6LWXDWLRQSRZHUGUDIW UHVROXWLRQ6 ´ ‡³3DOHVWLQH(J\SWLDQ/HEDQHVH&RPSODLQWSRZHUGUDIWSRZHU UHVROXWLRQ6 ´ ‡³3DOHVWLQH0LGGOH(DVW3UREOHPLQFOXGLQJ3DOHVWLQLDQTXHVWLRQ SRZHUGUDIWUHVROXWLRQ6 ´ ‡³3DOHVWLQH6LWXDWLRQLQ2FFXSLHG$UDE7HUULWRULHVSRZHUGUDIW UHVROXWLRQ6 ´ ‡³3DOHVWLQH5HSRUWRQ&RPPLWWHHRQ5LJKWVRI3DOHVWLQLDQ3HRSOH SRZHUGUDIWUHVROXWLRQ6 ´ ‡³3DOHVWLQH3DOHVWLQLDQ5LJKWV7XQLVLDQGUDIWUHVROXWLRQ6 ´ ‡³3DOHVWLQH*RODQ+HLJKWV-RUGDQGUDIWUHVROXWLRQ65HY ´ ‡³3DOHVWLQH6LWXDWLRQLQ2FFXSLHG7HUULWRULHV-RUGDQGUDIWUHVROXWLRQ 6 ´ ‡³3DOHVWLQH,QFLGHQWDWWKH'RPHRIWKH5RFNLQ-HUXVDOHPSRZHUGUDIW 5HVROXWLRQ´ ‡³3DOHVWLQH&RQIOLFWLQ/HEDQRQ6SDLQGUDIWUHVROXWLRQ6 ´ ‡³3DOHVWLQH&RQIOLFWLQ/HEDQRQ)UDQFHGUDIWUHVROXWLRQ65HY  ´ ‡³3DOHVWLQH&RQIOLFWLQ/HEDQRQ8665GUDIWUHVROXWLRQ65HY DVRUDOO\DPHQGHG ´ ‡³3DOHVWLQH6LWXDWLRQLQ2FFXSLHG7HUULWRULHVSRZHUGUDIWUHVROXWLRQ 6 ´ ‡³2FFXSLHG$UDE7HUULWRULHV:KROHVDOHFRQGHPQDWLRQRI,VUDHOL VHWWOHPHQWSROLFLHV²QRWDGRSWHG´ ‡³6/HEDQRQ&RQGHPQV,VUDHOLDFWLRQLQVRXWKHUQ/HEDQRQ6 ´ ‡³2FFXSLHG7HUULWRULHV'HSORUHV UHSUHVVLYHPHDVXUHV E\,VUDHODJDLQVW $UDESRSXODWLRQ6 ´ ‡³/HEDQRQ&RQGHPQV,VUDHOLSUDFWLFHVDJDLQVWFLYLOLDQVLQVRXWKHUQ /HEDQRQ6 ´ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH   

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG6RFLHW\ 





7DEOH7KH3ROLWLFVRI)DYRULWLVPDQG([FOXVLRQ,  7KH&DVHRI869HWRHVRI815HVROXWLRQV&ULWLFDORI,VUDHO  3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡³2FFXSLHG7HUULWRULHV&DOOVXSRQ,VUDHOWRUHVSHFW0XVOLPKRO\SODFHV 65HY ´ ‡³/HEDQRQ&RQGHPQV,VUDHOLSUDFWLFHVDJDLQVWFLYLOLDQVLQVRXWKHUQ /HEDQRQ65HY ´ ‡³/LE\D,VUDHO&RQGHPQV,VUDHOLLQWHUFHSWLRQRI/LE\DQSODQH 65HY ´ ‡³/HEDQRQ'UDIWVWURQJO\GHSORUHGUHSHDWHG,VUDHOLDWWDFNVDJDLQVW /HEDQHVHWHUULWRU\DQGRWKHUPHDVXUHVDQGSUDFWLFHVDJDLQVWWKHFLYLOLDQ SRSXODWLRQ6 ´ ‡³/HEDQRQ'UDIWFRQGHPQHGUHFHQWLQYDVLRQE\,VUDHOLIRUFHVRI 6RXWKHUQ/HEDQRQDQGUHSHDWHGDFDOOIRUWKHLPPHGLDWHZLWKGUDZDORI DOO,VUDHOLIRUFHVIURP/HEDQHVHWHUULWRU\6 ´ ‡³/HEDQRQ'UDIWVWURQJO\GHSORUHGWKHUHFHQW,VUDHOLDWWDFNDJDLQVW /HEDQHVHWHUULWRU\RQ'HFHPEHU6 ´ ‡³2FFXSLHGWHUULWRULHV'UDIWFDOOHGRQ,VUDHOWRDFFHSWGHMXUH DSSOLFDELOLW\RIWKHWK*HQHYD&RQYHQWLRQ6 ´ ‡³2FFXSLHGWHUULWRULHV'UDIWXUJHG,VUDHOWRDELGHE\WKH)RXUWK*HQHYD &RQYHQWLRQUHVFLQGWKHRUGHUWRGHSRUW3DOHVWLQLDQFLYLOLDQVDQG FRQGHPQHGSROLFLHVDQGSUDFWLFHVRI,VUDHOWKDWYLRODWHWKHKXPDQULJKWV RIWKH3DOHVWLQLDQSHRSOHLQWKHRFFXSLHGWHUULWRULHV6 ´ ‡³2FFXSLHGWHUULWRULHV6WURQJO\GHSORUHG,VUDHOLSROLFLHVDQGSUDFWLFHVLQ WKHRFFXSLHGWHUULWRULHVDQGVWURQJO\GHSORUHGDOVR,VUDHO VFRQWLQXHG GLVUHJDUGRIUHOHYDQW6HFXULW\&RXQFLOGHFLVLRQV´ ‡³2FFXSLHGWHUULWRULHV&RQGHPQHG,VUDHOLSROLFLHVDQGSUDFWLFHVLQWKH RFFXSLHGWHUULWRULHV´ ‡³2FFXSLHGWHUULWRULHV'HSORUHG,VUDHO VSROLFLHVDQGSUDFWLFHVLQWKH RFFXSLHGWHUULWRULHV´ ‡³2FFXSLHGWHUULWRULHV1$0GUDIWUHVROXWLRQWRFUHDWHDFRPPLVVLRQDQG VHQGWKUHHVHFXULW\FRXQFLOPHPEHUVWR5LVKRQ/H]LRQZKHUHDQ,VUDHOL JXQPHQVKRWGRZQVHYHQ3DOHVWLQLDQZRUNHUV´ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH     



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH7KH3ROLWLFVRI)DYRULWLVPDQG([FOXVLRQ,  7KH&DVHRI869HWRHVRI815HVROXWLRQV&ULWLFDORI,VUDHO  3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡³0LGGOH(DVW&RQILUPVWKDWWKHH[SURSULDWLRQRIODQGE\,VUDHOLQ(DVW -HUXVDOHPLVLQYDOLGDQGLQYLRODWLRQRIUHOHYDQW6HFXULW\&RXQFLO UHVROXWLRQVDQGSURYLVLRQVRIWKH)RXUWK*HQHYDFRQYHQWLRQH[SUHVVHV VXSSRUWRISHDFHSURFHVVLQFOXGLQJWKH'HFODUDWLRQRI3ULQFLSOHVRI ´ ‡³0LGGOH(DVW&DOOVXSRQ,VUDHOLDXWKRULWLHVWRUHIUDLQIURPDOODFWLRQVRU PHDVXUHVLQFOXGLQJVHWWOHPHQWDFWLYLWLHV´ ‡³0LGGOH(DVW'HPDQGVWKDW,VUDHOFHDVHFRQVWUXFWLRQRIWKHVHWWOHPHQW LQHDVW-HUXVDOHPFDOOHG-DEDO$EX*KQHLPE\WKH3DOHVWLQLDQVDQG+DU +RPDE\,VUDHO DVZHOODVDOOWKHRWKHU,VUDHOLVHWWOHPHQWDFWLYLW\LQWKH RFFXSLHGWHUULWRULHV´ ‡³&DOOIRU812EVHUYHUV)RUFHLQ:HVW%DQN*D]D´ ‡³&RQGHPQHGDFWVRIWHUURUGHPDQGHGDQHQGWRYLROHQFHDQGWKH HVWDEOLVKPHQWRIDPRQLWRULQJPHFKDQLVPWREULQJLQREVHUYHUV´ ‡³2QWKHNLOOLQJE\,VUDHOLIRUFHVRIVHYHUDO81HPSOR\HHVDQGWKH GHVWUXFWLRQRIWKH:RUOG)RRG3URJUDPPH:)3 ZDUHKRXVH´ ‡³'HPDQGWKDW,VUDHOKDOWWKUHDWVWRH[SHO3DOHVWLQLDQOHDGHU6R@ LQ DGGLWLRQ WR OLWWHULQJ WKH $IJKDQ FRXQWU\VLGH ZLWK FOXVWHU ERPEVDQGDVHLVPLFVKRFNZDUKHDGVLWDSSHDUV86OHGIRUFHVKHOSHGLUUDGLDWH WKH ORFDO HQYLURQPHQW ZLWK XQVSHDNDEOH FLYLOLDQ KHDOWK LPSOLFDWLRQV´ + :RNXVFK  

,Q,UDTGXULQJ³WKH*XOI:DUGHSOHWHGXUDQLXP'8 EXOOHWVDQGVKHOOV ZHUH ZLGHO\ XVHG E\ 86 IRUFHV EHFDXVH RI '8 V DELOLW\ WR FXW WKURXJK FRQYHQWLRQDO DUPRU SODWLQJ RQ WDQNV '8ZHDSRQU\ EXUQV XSRQ FRQWDFW HPLWWLQJ UDGLRDFWLYH GXVW ZKLFK FDQ WKHQ VSUHDG DFURVV D ODUJH UHJLRQ´ + :RNXVFK  

'XULQJWKHVHFRQGDWWDFNRI,UDTLQWKH86XVHG'8ZHDSRQVDJDLQ ³3UHVLGHQW %XVK DQG WKH 3HQWDJRQ DXWKRUL]HG WKH XVH RI GHSOHWHG XUDQLXP IRU WKHVKRFNDQGDZHFDPSDLJQDJDLQVW,UDTLQ0DUFK´35RFNZHOO  (YHQ³>H@[SHUWVDWWKH3HQWDJRQDQGWKH8QLWHG1DWLRQVHVWLPDWHWKDWZKLOH WRQVRI'8ZHUHXVHGLQ,UDTGXULQJWKH*XOI:DUXSWRWRQVRI'8ZHUH GXPSHGRQWKHFRXQWU\E\86OHGFRDOLWLRQIRUFHVGXULQJWKHLQYDVLRQ'8 UHPDLQVGHVWUXFWLYH IRUELOOLRQ \HDUV´+:RNXVFK 7KHOHWKDOLW\RI '8ZHDSRQU\ FDQ EH H[WUHPH EHFDXVH ³>W@KH UDGLDWLRQ SURGXFHG E\ GHSOHWHG XUDQLXPLQEDWWOHLVDSRLVRQDFDUFLQRJHQLFPDWHULDOWKDWFDXVHVELUWKGHIHFWV OXQJGLVHDVHNLGQH\GLVHDVHOHXNHPLDEUHDVWFDQFHUO\PSKRPDERQHFDQFHU DQGQHXURORJLFDOGLVDELOLWLHV«:KHQ'8PXQLWLRQVH[SORGHWKHDLULVEDWKHGLQ D ILQH UDGLRDFWLYH GXVW ZKLFK FDUULHV RQ WKH ZLQG LV HDVLO\ LQKDOHG DQG HYHQWXDOO\ HQWHUV WKH VRLO SROOXWHV JURXQG ZDWHU DQG HQWHUV WKH IRRG FKDLQ 8QH[SORGHG FDVLQJV JUDGXDOO\ R[LGL]H UHOHDVLQJ PRUH XUDQLXP LQWR WKH HQYLURQPHQW´35RFNZHOO  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH  



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH7HFKQRORJ\DQG&RQTXHVW 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\ 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  $QRWKHU QHZ ZHDSRQ WR EH WHVWHG DJDLQVW WKH ,UDTLV LV WKH ³0RWKHU RI DOO %RPEV´ ZKLFK LV D ³SRXQG 0DVVLYH 2UGQDQFH $LU %ODVW VXSHUERPE 02$% «5HDU$GPLUDO5HW 6WHSKHQ%DNHUZKRZDVWKHEDWWOHJURXSFKLHI RIRSHUDWLRQVGXULQJ*XOI:DU,DQGLVQRZDVHQLRUIHOORZDWWKH:DVKLQJWRQ EDVHG&HQWHUIRU'HIHQVH,QIRUPDWLRQKDVRIIHUHGWKLVYLVLRQRIZKDWLWZRXOG EHOLNHWRXQOHDVKZHDSRQRQ7LNULWLQWKH6XQQLKHDUWODQGRI,UDT ,WZRXOG KH ZURWH HVVHQWLDOO\ YDSRUL]H HYHU\WKLQJ« 6KDUGV DQG IUDFWXUHV ZRXOG WUDYHO DW IHHWSHUVHFRQG7KHUH GEHDVKRFNZDYHRIVHYHUDOWKRXVDQGSRXQGVSHU VTXDUHLQFKGHJUHH@)DKUHQKHLWWHPSHUDWXUHV ´17XUVH   

$OVRWKH86DQGLWVDOOLHVOLNH,VUDHODQGWKH8.  KDYH IUHTXHQWO\ XVHG GHDGO\ FOXVWHU ERPEV DJDLQVW WKH 2WKHUV DFFRUGLQJ WR D UHSRUW E\ +DQGLFDS ,QWHUQDWLRQDODFRUHFLSLHQWRIWKH1REHO3HDFH3UL]H7KHUHSRUW³IRXQG WKDW DERXW P FOXVWHU ERPEOHWV KDG EHHQ GURSSHG«VLQFH  %DVHG RQ IDLOXUH UDWHV RI  WKH JURXS HVWLPDWHG WKDW PP RI WKH GHYLFHV UHPDLQ XQH[SORGHG´ 5 1RUWRQ7D\ORU   ,Q ,UDT IRU LQVWDQFH ³WKH UHSHDWHG XVH RI FOXVWHU ERPEV >E\ WKH 86@ KDV OHIW D GHYDVWDWLQJ OHJDF\ WKDW FRQWLQXHVWRVHYHUHO\UHVWULFWWKHOLYHVRILWVSHRSOH«0RUHWKDQFLYLOLDQV KDYHEHHQNLOOHGRULQMXUHGE\IDLOHGFOXVWHUPXQLWLRQVVLQFHWKHHQGRIWKH *XOI ZDU6RPHRIWKH FDVXDOWLHV KDYHEHHQFKLOGUHQ´51RUWRQ7D\ORU   ,Q QHLJKERUO\ $IJKDQLVWDQ ³ER\V EHWZHHQ ILYH DQG  ZKR DUH WHQGLQJ DQLPDOV DUH PRVW OLNHO\ WR EH FDVXDOWLHV´ EHFDXVH RI WKHVH ERPEV E\ WKH 86 DQG LWV DOOLHV 5 1RUWRQ7D\ORU  ,VUDHO LQ LWV  LQYDVLRQ RI VRXWKHUQ /HEDQRQ KDG XVHG VR PDQ\ FOXVWHU ERPEV SURYLGHG E\ WKH 86  WKHUH WKDW ³FOXVWHUPXQLWLRQVFRQWDPLQDWHDSSUR[LPDWHO\RIWKHODQGXVHGIRUIDUPLQJ 7KH FRQWDPLQDWLRQ RI HVVHQWLDO ODQG LV UHIOHFWHG LQ WKH ULVH RI FOXVWHU ERPE FDVXDOWLHV IURP WZR SHU \HDU SULRU WR  WR WZR SHU GD\ LQ WKH PRQWKV IROORZLQJODVWVXPPHU¶VFRQIOLFWZLWK,VUDHO´51RUWRQ7D\ORU  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH\ DUH DOVR UHODWLYH QRW DEVROXWH  QRU DUH WKH\ PXWXDOO\ H[FOXVLYH $V JHQHUDOLWLHV WKH\ DOORZH[FHSWLRQV 6RXUFHV)URPGLIIHUHQWVRXUFHVDVFLWHG6HHDOVR%'3'IRUPRUH  



&+$37(5 $87+25,7$5,$1/,%(5$/'(02&5$&7KHUHZDV@WKHPHVVLDQLFVHQVHWKDWLWZDV$PHULFD VUHVSRQVLELOLW\WR EULQJWKHIUXLWVRIKHUFLYLOL]DWLRQWRDEHQLJKWHGDQGVDYDJHSHRSOH´'6LOEH\   ,Q WKH SURFHVV WKH 86 IRUFHV FRPPLWWHG VR PXFK EUXWDOLW\ DQG DWURFLW\ DJDLQVWWKHQDWLYHVLQWKH3KLOLSSLQHVWKDWWRWKLVGD\LWLVVWLOORQHRIWKHPRVW LQIDPRXV PLOLWDU\ PDVVDFUHV FRPPLWWHG E\ WKH 86 DUPHG IRUFHV DEURDG ,Q IDFWWKHGHURJDWRU\UDFLVWWHUP³IXFNLQJJRRN´FDQEHODUJHO\WUDFHGEDFNWRWKLV LQIDPRXVKLVWRU\RI$PHULFDQEUXWDOLW\DQGDWURFLW\LQWKH3KLOLSSLQHVDQGODWHU LQWKHHYHQPRUHKRUULILF$PHULFDQLQYROYHPHQWLQ9LHWQDP  0RUH UHFHQWO\ WKH $PHULFDQ ³QHRFRQVHUYDWLYH´ PRYHPHQW UXWKOHVVO\ MXVWLILHGLWVLQYDVLRQDQGRFFXSDWLRQRI,UDTDQG$IJKDQLVWDQLQWKH¶VZLWK WKHORIW\JRDORILPSRVLQJGHPRFUDF\LQWKH0LGGOH(DVW,QIDFW³>W@KHQHRFRQV DUJXHG WKDW GHPRFUDF\ PLJKW EH DQ DQWLGRWH WR WKH 0LGGOH (DVW V SUREOHPV«7KH\FODLPHGWKDWWKHDVVHUWLRQRI$PHULFDQSRZHUPLJKWZLSHRXW

9LHWQDP V\QGURPH «7KH\ WDONHG DERXW OLQNLQJ $PHULFDQ SRZHU ZLWK $PHULFDQLGHDOVEXWLWWXUQHGRXWDW$EX*KUDLEDQG*XDQWiQDPRWKDWSRZHU FDQFRUUXSWWKRVHLGHDOV´(&  :LWKKLQGVLJKW6WHIDQ+DOSHU DQG-RQDWKDQ&ODUNHLQ7KH6LOHQFHRI WKH5DWLRQDO&HQWHU:K\$PHULFDQ)RUHLJQ3ROLF\LV)DLOLQJWKHUHIRUHDUJXHG DV UHSRUWHG E\ 0 :DONHU   WKDW ³WKH $PHULFDQ V\VWHP LV XQXVXDOO\ YXOQHUDEOH WR D %LJ ,GHD  WKDW FDQ EH H[SUHVVHG LQ D SXQJHQW SKUDVH OLNH 3UHVLGHQW%XVK V D[LVRIHYLO 7KH\FLWHWKHKLJKPLQGHGO\SDWULRWLFVORJDQVWKDW KDYH FDXJKW WKH QDWLRQDO LPDJLQDWLRQ IURP 0DQLIHVW 'HVWLQ\  WR $EUDKDP /LQFROQ V /DVW%HVW+RSHRQ(DUWK DQGWKH 'RPLQR7KHRU\ WKDWZDVGHSOR\HG WRMXVWLI\ $PHULFD V PLVDGYHQWXUHLQ9LHWQDP6XFKVLPSOLFLWLHVFDQ WXUQVRXU DVWKH\GLGZLWK6HQDWRU-RH0F&DUWK\ V5HG6FDUH´0:DONHU 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



,W LV WKLV NLQG RI ULJKWZLQJ SROLWLFDO ,GHDOLVP FRPELQHG ZLWK UXWKOHVV SROLWLFDO5HDOLVPWKDWKDVFRQWULEXWHGWRWKHORQJKLVWRU\RIYLROHQWDGYHQWXUHV E\ OLEHUDO GHPRFUDF\ ERWK DW KRPH DQG DEURDG²WKH RIILFLDO UKHWRULF RI WKH FRQWUDU\QRWZLWKVWDQGLQJ 7KH$PHULFDQLGHRORJLFDOVORJDQVLQUHJDUGWRWKH:KLWH0DQ¶V%XUGHQWKH 0DQLIHVW'HVWLQ\WKH,QVWLWXWLRQRI%ODFN6ODYHU\WKH&RQFHQWUDWLRQ&DPSVIRU -DSDQHVH $PHULFDQV WKH 5HVHUYDWLRQ $UHDV IRU 1DWLYH $PHULFDQV WKH &ROG :DU WKH :HVWHUQ )URQWLHU 0RYHPHQW WKH :DU RQ 7HUURU DQG WKH *UHDWHU 0LGGOH (DVW ,QLWDWLYH IRU 'HPRFUDF\ MXVW WR FLWH VRPH PDMRU H[DPSOHV VSHDN YROXPHV DERXW WKLV YLROHQW WUDGLWLRQ RI $PHULFDQ OLEHUDO GHPRFUDF\ LQ DFWLRQ ZLWK WKH VWURQJ WKRXJK PL[HG  DFFHQWV RI SROLWLFDO 5HDOLVP DQG ,GHDOLVP VR XQGHUVWRRG

7KH+LVWRULFDO5HFRUGVDW+RPHDQG$EURDG 7KH KLVWRULFDO UHFRUGV RI WKHVH WZR PDLQ LGHRORJLHV LQ DFWLRQ DUH QRW ODFNLQJLQGHHGZKHQ$PHULFDQOLEHUDOGHPRFUDF\LVLQTXHVWLRQ /HW¶VFRQVLGHUILUVWD WKHKRPHIURQWDQGWKHQE WKHIRUHLJQIURQW  2Q WKH +RPH )URQW ,Q &KDSWHU )RXU RQ QDWXUH DQG DXWKRULWDULDQ OLEHUDO GHPRFUDF\,DOUHDG\OLVWHGWKHQXPHURXVYLROHQWDGYHQWXUHVLQZKLFKWKH86 DVDFRXQWU\KDGHQJDJHGRYHUWLPHWRWKHSRLQWWKDWLWEHFRPHVDPDLQWUDLWLQ WKH$PHULFDQOLEHUDOGHPRFUDWLFFXOWXUHWKDWLVWKHUXWKOHVVPLQGVHWWRFRQTXHU IRU WKH JORU\ DQG LGHDO RI WKH FRXQWU\ OLWHUDOO\ E\ DQ\ PHDQV QHFHVVDU\ ,WV IRXQGDWLRQ UHVWV RQ D ORQJ KLVWRU\ RI YLROHQFH²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¶V HUD RYHU WKHLU DOOHJHG FRPPXQLVW FRQQHFWLRQ  RU RI WKH SHRSOH RI ,VODPLF DQG $UDE GHVFHQW RYHU WKHLU DOOHJHG WHUURULVWOLQN FDQQRWEHDGHTXDWHO\GHVFULEHGLQZRUGV 7KLV LV VR HYHQ LI WKH H[DPSOHV KHUH DJDLQ DUH QRW H[KDXVWLYH EXW LOOXVWUDWLYH &RQVHTXHQWO\ LW LV TXLWH VHQVLEOH WR XQGHUVWDQG WKDW LI MXVWLFH LV WR EH VHUYHG IRU WKH YLFWLPV DIRUHFLWHG LW LV QRW VXIILFLHQW WR SXW WKH HOLWHV LQ OLEHUDO

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





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´  $OEDQLD³6ROGLHUVXQGHUILUHGXULQJHYDFXDWLRQRIIRUHLJQHUV´  6XGDQ³0LVVLOHVDWWDFNRQSKDUPDFHXWLFDOSODQWDOOHJHGWREH WHUURULVW  QHUYHJDVSODQW´  $IJKDQLVWDQ³0LVVLOHVDWWDFNRQIRUPHU&,$WUDLQLQJFDPSVXVHGE\ ,VODPLFIXQGDPHQWDOLVWJURXSVDOOHJHGWRKDYHDWWDFNHGHPEDVVLHV´  IRU $PHULFDQ *,¶V DIWHU ::,,@ GHVSLWH LQWHUQDO UHSRUWV WKDW ZRPHQ ZHUH EHLQJ FRHUFHG LQWR SURVWLWXWLRQ 7KH $PHULFDQV DOVR KDG IXOONQRZOHGJHE\WKHQRI-DSDQ VDWURFLRXVWUHDWPHQWRIZRPHQLQFRXQWULHV DFURVV $VLD WKDW LW FRQTXHUHG GXULQJ WKH ZDU 7HQV RI WKRXVDQGV RI ZRPHQ ZHUH HPSOR\HG WR SURYLGH FKHDS VH[ WR 86 WURRSV´ DIWHU ::,, &112 J  ³$PHULFDQ KLVWRULDQ -RKQ 'RZHU LQ KLV ERRN (PEUDFLQJ 'HIHDW -DSDQ LQ WKH :DNH RI ::,,  VD\V WKH FKDUJH IRU D VKRUW VHVVLRQ ZLWK D SURVWLWXWH ZDV  \HQ RU DERXW D GROODU URXJKO\ WKH FRVW RI KDOI D SDFN RI FLJDUHWWHV´&112J 0DQ\RIWKHVH ZRPHQUHVSRQGHGWR PLVOHDGLQJ DGV IRU GHFHQW MRE RSSRUWXQLWLHV EXW HQGHG XS LQ FRHUFHG SURVWLWXWLRQ IRU $PHULFDQ *,¶V D QXPEHU RI WKHP EHFDPH VR DVKDPHG DV WR ODWHU FRPPLW VXLFLGH  2IFRXUVHWKHOLVWKHUHLVQRWH[KDXVWLYHIRUVXUHEXWLOOXVWUDWLYHRQO\WRJLYH VRPHLGHDRIWKHWLSRIDQLFHEHUJLQUHODWLRQWRWKHUDWLRQDOL]DWLRQRIXQUHDVRQLQ OLEHUDO GHPRFUDF\ DV LW EHFRPHV PRUH DGYDQFHG DQG GHYHORSHG²DOWKRXJK D ORQJHUOLVWLVVKRZQLQ7DEOH

%DUEDULW\LQ&LYLOL]DWLRQ 7LPH DQG DJDLQ PDQ\ LQ GHPRFUDF\ ZKHQ WKH\ EHFRPH PRUH DGYDQFHG LQ GHYHORSPHQWDUHLQFUHDVLQJO\LQWROHUDQWRIWKH2WKHUVDQG XQUHDVRQDEOHWRWKH 2WKHUV 7KHLUVVRWKH\WKLQNVWDQGIRUWKHKLJKHVWSRLQWRIFLYLOL]WLRQZLWKWKHUHVW WKH2WKHUV DVEDUEDULFVXEKXPDQLJQRUDQWRUWKHOLNH²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´'6LOEH\  :LWK WKLV H[FXVH LQ PLQG WKH ³HDUO\ WK FHQWXU\ 86 RFFXSDWLRQ RI WKH 3KLOLSSLQHV´ ZKLFK ³LV«WKH PRVW IUHTXHQWO\ FLWHG HYLGHQFH WKDW 86 PLOLWDU\ LQWHUYHQWLRQ DEURDG KDV DQ LPSHULDO FKDUDFWHU :DU FULPHV E\ 86 VROGLHUV FRQGXFWHG E\ RUGHUV IURP VXSHULRU PLOLWDU\ RIILFHUV KDYH EHHQ GRFXPHQWHG *HQHUDO-DFRE+6PLWKWROGKLVRIILFHUV ,ZDQWQRSULVRQHUV,ZLVK\RXWRNLOO DQG EXUQ WKH PRUH \RX NLOO DQG EXUQ WKH EHWWHU LW ZLOO SOHDVH PH , ZDQW DOO SHUVRQV NLOOHG ZKR DUH FDSDEOH RI EHDULQJ DUPV« ´ :. Y 6 0LOOHU   $QG LQ WKH 86 LQYDVLRQ DQG RFFXSDWLRQ RI ,UDT LQ  ³>D@FFRUGLQJ WR GDWD SURYLGHG E\ WRS 86 PHGLFDO HSLGHPLRORJ\ JURXS LQ WKH :RUOG¶V WRS 3XEOLF +HDOWK 6FKRRO WKH 1REHO /DXUHDWHFRQWDLQLQJ %ORRPEHUJ 6FKRRO RI 3XEOLF +HDOWK  DW WKH WRS 86 -RKQV +RSNLQV 8QLYHUVLW\ SXEOLVKHG SHHU UHYLHZHG LQ WKH WRS 8. PHGLFDO MRXUQDO 7KH /DQFHW DQG HQGRUVHG E\  WRS $XVWUDOLDQPHGLFDOH[SHUWVDIWHUIRXU\HDUVRI$PHULFDQPLOLWDU\RFFXSDWLRQRI ,UDT WKH QXPEHU RI ,UDTLGHDWKV DYRLGDEOH GHDWKV GHDWKV WKDW GLG QRW KDYH WR KDSSHQ KDVWRSSHG21(0,//,21´$$EGXOODK  0RUHRYHU³WRPLOOLRQUHIXJHHVKDYHIOHGWKHLUKRPHVWKHUHDUHUXLQV DUH HYHU\ZKHUH LQ ,UDT ZLWK VRPH RI LWV FLWLHV DQG WRZQV VLPSO\ UHGXFHG WR GHEULVQXPHURXVFXOWXUDOJHPVRUWUHDVXUHVKDYHEHHQORRWHGRUJRWORVWDQGLWV SHWUROHXP SURGXFWLRQ DQG H[SRUWV DW SUHVHQW DUH PXFK ORZHU WKDQ WKH SUHZDU OHYHOV´;/L  ,Q WKLV VHQVH OLEHUDO GHPRFUDF\ LV QRW PXFK GLIIHUHQW IURP ZKDW 7R\QEHH     RQFH VDLG RI DQFLHQW FLYLOL]DWLRQV LQ WKDW ³>H@YHU\RQH RI WKHP >WKHHPSLUHVLQKLVWRU\@ZDVFRQYLQFHGWKDWLWZDVWKHRQO\FLYLOL]HGVRFLHW\LQ WKH ZRUOG DQG WKDW WKH UHVW RI PDQNLQG ZHUH EDUEDULDQV XQWRXFKDEOHV RU LQILGHOV´ ,Q %&,9 , SURSRVHG WKH ³WKHRU\ RI SRVWFLYLOL]DWLRQ´ DV VXPPDUL]HG LQ 7DEOHV LQWKDWWKHPRUHFLYLOL]HGDOLIHVHWWOHPHQWLVWKHPRUHEDUEDULF LWEHFRPHVDWWKHVDPHWLPH$QGOLEHUDOGHPRFUDF\OLNHWKH86LVDQH[FHOOHQW H[DPSOHRIWKLVEDUEDULW\DVLWEHFRPHVPRUHDGYDQFHGLQGHYHORSPHQW



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



&RQWDU\ WR FRQYHQWLRQDO ZLVGRP²WKH ODQJXDJH WKDW OLEHUDO GHPRFUDF\ XQGHUVWDQGV EHVW LV IRUFH QRW UHDVRQ DV LW EHFRPHV PRUH VXFFHVVIXO LQ EHLQJ PRUH DQG PRUH LPSHULDOLVW WRZDUGV WKH 2WKHUV EH WKH\ DW KRPH RU DEURDG :KRHYHUVWDQGVLQWKHZD\ZLOOQRWEHVDIHDQGZLOOEHHOLPLQDWHGLQRQHZD\ RUDQRWKHUDOOLQWKHQDPHRIFLYLOL]DWLRQZLWKDKLJKHUORIW\ PLVVLRQWKDWWKH ZRUOGKDVQHYHUVHHQEHIRUH

0ROGLQJ)RUFH DQG$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 2QH RIWHQ KHDUV LQ OLEHUDO GHPRFUDF\ WKDW VR DQG VR ³HYLO´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³2I DOO WKH FRQYHQWLRQV LQ KXPDQLWDULDQ ODZ QRQH LV PRUH UHOHYDQW WR FRQWHPSRUDU\ DIIDLUV WKDQ WKH 1XUHPEHUJSULQFLSOH &RPSOLFLW\LQWKHFRPPLVVLRQRIDFULPHDJDLQVWSHDFHD ZDUFULPHRUDFULPHDJDLQVWKXPDQLW\LVDFULPHXQGHULQWHUQDWLRQDOODZ ´ 'RHVDQ\RQHVWLOOUHPHPEHUWKDW*HRUJH:%XVKZDVHOHFWHGWZLFHIRUWKH 86SUHVLGHQF\MXVWDVLWVDOO\LQWKH8.7RQ\%ODLUZDVHOHFWHGWKULFHQRW WZLFH IRU WKH %ULWLVK SULPH PLQLVWHUVKLS LQ VSLWH RI ZKDW LV NQRZQ DERXW WKH GLUW\ZDUVLQ,UDTDQG$IJKDQLVWDQ" 7REODPHWKH PROGLQJIRUFH RIFXOWXUHLVWRRVLPSOLVWLFRIFRXUVH²MXVWDV WKHUHDUHPXOWLSOHURRWVRIWKHDXWKRULWDULDQFKDUDFWHURIOLEHUDOGHPRFUDF\LQLWV DGYDQFHGVWDJHOLNHWKH86 DVDOUHDG\DQDO\]HGLQWKHODVWWKUHHFKDSWHUV :KDW WKHQ FDQ EH FRQFOXGHG QRZ WKDW WKH PXOWLSOH URRWV RI DXWKRULWDULDQ OLEHUDOGHPRFUDF\KDYHEHHQDQDO\]HG"7KLVLVWKHWRSLFIRUZKLFKZHQRZWXUQ WR &KDSWHU (LJKW WKH QH[W FKDSWHU  RQ WKH IXWXUH RI DXWKRULWDULDQ OLEHUDO GHPRFUDF\   

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH$&ULWLTXHRIWKH'HPRFUDWLF3HDFH7KHRU\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  7KH&ODLPE\WKH'HPRFUDWLF3HDFH7KHRU\ ±([ 7KH .DQWLDQ WKHVLV RI SHUSHWXDO SHDFH LH UHSXEOLFDQ FRQVWLWXWLRQDO JRYHUQPHQW FRPPHUFLDO LQWHUGHSHQGHQFH DQG LQWHUQDWLRQDO RUJDQL]DWLRQV   $&ULWLTXHRIWKH'HPRFUDWLF3HDFH7KHRU\ ±([SROLWLFDO5HDOLVPHJYLROHQWFRQIOLFWVGXHWRPXWXDOGHSHQGHQFHLQ HFRQRPLFLQWHUGHSHQGHQFH  ±([WKHDUJXPHQWVVXPPDUL]HGE\3HWHU%DRIX ‡WKHWKHVLVEHJVIRUDQH[SODQDWLRQ ‡WKHWHUP GHPRFUDF\ LVGHILQHGLQVXFKDZD\DVWREHXQYHULILDEOH ‡GHPRFUDWL]LQJVWDWHVDUHPRUHOLNHO\WRILJKWWKDQVWDWHVZLWKQR UHJLPHFKDQJH ‡VWDWHVGHPRFUDWLFRUQRW QRUPDOO\GRQRWILJKWDQ\ZD\ ‡WKHUHDUHQRVXIILFLHQWFDVHVWREHVWDWLVWLFDOO\VLJQLILFDQW ‡GHPRFUDFLHVWKHPVHOYHVKDYHIDLOHGWRSUHYHQWFLYLOZDUV ‡GHPRFUDFLHVWHQGWREHWKHPRVWDJJUHVVLYHLQLQYDGLQJDQG FRQTXHULQJRWKHUV ‡DOOQRQGHPRFUDWLFV\VWHPVDUHPLVOHDGLQJO\OXPSHGWRJHWKHULQD PHVV\FDWHJRU\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHH[DPSOHVDUHVROHO\LOOXVWUDWLYHQRWH[KDXVWLYH DQGWKHFRPSDULVRQ LVUHODWLYHQRWDEVROXWH QRUDUHWKH\PXWXDOO\H[FOXVLYH$VJHQHUDOLWLHVWKH\ DOORZH[FHSWLRQV 6RXUFHV)URP6HFRI%'3'6HHWH[WIRUPRUHLQIRDQGUHIHUHQFHVVRPHRI ZKLFK LQFOXGH % 5XVVHWW   5 5RVHFUDQFH   ' &RSHODQG   - 0HDUVKHLPHU   . :DOW]   ( 0DQVILHOG   &/D\QH DQG65RVDWR           



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH'HPRFUDF\DJDLQVW'HPRFUDF\ 'XULQJWKH&ROG:DUDQG6KRUWO\$IWHUZDUGV 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  'XULQJWKH&ROG:DU ±([7KH86YV,UDQDJDLQVW0RVVDGHSLQ  ±([7KH86YV*XDWHPDODDJDLQVW$UEHQW]LQ  ±([7KH86YV,QGRQHVLDDJDLQVW6XNDUQRLQ  ±([7KH86YV%ULWLVK*X\DQDDJDLQVWWKHOHIWLVWVLQ  ±([7KH86YV%UD]LODJDLQVW4XDGURLQDQG  ±([7KH86YV&KLOHDJDLQVW$OOHQGHLQ  ±([7KH86YV1LFDUDJXDDJDLQVWWKH6DQGLQLVWDVLQ   6KRUWO\$IWHUWKH&ROG:DU ±([7KH86YV,UDQDJDLQVW.KDWDPLLQ¶VDQG$KPDGLQHMDGLQ ¶V  ±([7KH86YV9HQH]XHODIRUWKHIDLOHGFRXSDJDLQVW&KDYH]LQ  ±([7KH86YVWKH3DOHVWLQLDQWHUULWRULHVDJDLQVWWKHGHPRFUDWLFDOO\ HOHFWHG+DPDVJRYHUQPHQWVLQFH  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHH[DPSOHVDUHVROHO\LOOXVWUDWLYHQRWH[KDXVWLYH DQGWKHFRPSDULVRQ LVUHODWLYHQRWDEVROXWH QRUDUHWKH\PXWXDOO\H[FOXVLYH$VJHQHUDOLWLHVWKH\ DOORZH[FHSWLRQV 6RXUFHV)URP%'3'6HHWH[WIRUPRUHLQIRDQGUHIHUHQFHVHVSHFLDOO\IURP6 5RVDWR 3$JHH 5)LVN DQG$/1                

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH$%ULHI+LVWRU\RI0LOLWDU\,PSHULDOLVP$EURDG 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\  3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  $UJHQWLQD³%XHQRV$LUHVLQWHUHVWVSURWHFWHG´  &KLOH³0DULQHVFODVK>HG@ZLWKQDWLRQDOLVWUHEHOV´  +DLWL³%ODFNUHYROWRQ1DYDVVDGHIHDWHG´  +DZDLL³,QGHSHQGHQWNLQJGRPRYHUWKURZQDQQH[HG´LQ  1LFDUDJXD³0RQWKORQJRFFXSDWLRQRI%OXHILHOGV´  &KLQD³0DULQHVODQG>HG@LQ6LQR-DSDQHVH:DU´  .RUHD³0DULQHVNHSWLQ6HRXOGXULQJZDU´  3DQDPD³0DULQHVODQG>HG@LQ&RORPELDQSURYLQFH´  1LFDUDJXD³7URRSV0DULQHVODQG>HG@LQSRUWRI&RULQWR´  &KLQD³%R[HU5HEHOOLRQIRXJKWE\IRUHLJQDUPLHV´  " 3KLOLSSLQHV³6HL]HGIURP6SDLQNLOOHG)LOLSLQRV´  " &XED³6HL]HGIURP6SDLQVWLOOKROG1DY\EDVH´  " 3XHUWR5LFR³6HL]HGIURP6SDLQRFFXSDWLRQFRQWLQXHV´  " *XDP³6HL]HGIURP6SDLQVWLOOXVHDVEDVH´  1LFDUDJXD³0DULQHVODQG>HG@DWSRUWRI6DQ-XDQGHO6XU´  " 6DPRD³%DWWOHRYHUVXFFHVVLRQWRWKURQH´  1LFDUDJXD³0DULQHVODQG>HG@DWSRUWRI%OXHILHOGV´  3DQDPD³%URNHRIIIURP&RORPELD´DQQH[HGFDQDO  +RQGXUDV0DULQHVLQWHUYHQH>G@LQUHYROXWLRQ´  'RPLQLFDQ5HSXEOLF³86LQWHUHVWVSURWHFWHGLQ5HYROXWLRQ´  .RUHD³0DULQHVODQG>HG@LQ5XVVR-DSDQHVH:DU´  &XED³0DULQHVODQG>HG@LQGHPRFUDWLFHOHFWLRQ´  1LFDUDJXD³ 'ROODU'LSORPDF\ SURWHFWRUDWHVHWXS´  +RQGXUDV³0DULQHVODQG>HG@GXULQJZDUZLWK1LFDUDJXD´  3DQDPD³0DULQHVLQWHUYHQH>G@LQHOHFWLRQFRQWHVW´  1LFDUDJXD³0DULQHVODQG>HG@LQ%OXHILHOGVDQG&RULQWR´  +RQGXUDV³86LQWHUHVWVSURWHFWHGLQFLYLOZDU´  &KLQD³&RQWLQXRXVRFFXSDWLRQZLWKIODUHXSV´  &XED³86LQWHUHVWVSURWHFWHGLQFLYLOZDU´  3DQDPD³0DULQHVODQG>HG@GXULQJKHDWHGHOHFWLRQ´  +RQGXUDV³0DULQHVSURWHFW>HG@86HFRQRPLFLQWHUHVWV´  1LFDUDJXD³\HDURFFXSDWLRQIRXJKWJXHULOODV´  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH   



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH$%ULHI+LVWRU\RI0LOLWDU\,PSHULDOLVP$EURDG 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\  3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  0H[LFR³1DYDO$PHULFDQVHYDFXDWHGGXULQJUHYROXWLRQ´  'RPLQLFDQ5HSXEOLF³1DYDO)LJKWZLWKUHEHOVRYHU6DQWR'RPLQJR´  0H[LFR³6HULHVRILQWHUYHQWLRQVDJDLQVWQDWLRQDOLVWV´  +DLWL³\HDURFFXSDWLRQDIWHUUHYROWV´  'RPLQLFDQ5HSXEOLF³\HDU0DULQHRFFXSDWLRQ´  &XED0LOLWDU\RFFXSDWLRQHFRQRPLFSURWHFWRUDWH  ::,³>)@RXJKW*HUPDQ\IRU\HDUV´  5XVVLD³)LYHODQGLQJVWRILJKW%ROVKHYLNV´  3DQDPD³ 3ROLFHGXW\ GXULQJXQUHVWDIWHUHOHFWLRQV´  +RQGXUDV³0DULQHVODQG>HG@GXULQJHOHFWLRQFDPSDLJQ´  G@IRU,WDO\DJDLQVW6HUEVLQ'DOPDWLD´  *XDWDPDOD³ZHHNLQWHUYHQWLRQDJDLQVWXQLRQLVWV´  7XUNH\³7URRSVIRXJKWQDWLRQDOLVWVLQ6P\UQD´  &KLQD³'HSOR\PHQWGXULQJQDWLRQDOLVWUHYROW´  1LFDUDJXD³7URRSVODQGHGWZLFHGXULQJHOHFWLRQVWULIH´  3DQDPD³0DULQHVVXSSUHVV>HG@JHQHUDOVWULNH´  &KLQD³0DULQHVVWDWLRQHGWKURXJKRXWWKHFRXQWU\´  (O6DOYDGRU³1DYDO:DUVKLSVVHQWGXULQJ0DUWLUHYROW´  ::,,³>)@RXJKW-DSDQ,WDO\DQG*HUPD\´XVHGDWRPLFERPEV  ,UDQ³1XFOHDUWKUHDW´³6RYLHWWURRSVWROGWROHDYHQRUWK´  HG@H[WUHPHULJKWLQFLYLOZDU´  *HUPDQ\³1XFOHDU7KUHDW´³$WRPLFFDSDEOHERPEHUVJXDUG>HG@ %HUOLQ$LUOLIW´  &KLQD³7URRSV0DULQHVHYDFXDWH>G@$PHULFDQVEHIRUH&RPPXQLVW YLFWRU\´  3KLOLSSLQHV³&,$GLUHFW>HG@ZDUDJDLQVW+XN5HEHOOLRQ´  3XHUWR5LFR³,QGHSHQGHQFHUHEHOOLRQFUXVKHGLQ3RQFH´  .RUHD³866RXWK.RUHD>IRXJKW@&KLQD1RUWK.RUHDWRVWDOHPDWH DERPEWKUHDWLQDQGDJDLQVW&KLQDLQ6WLOOKDYHEDVHV´  ,UDQ³&,$RYHUWKU>HZ@GHPRFUDF\LQVWDOO>HG@6KDK´  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH  

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH$%ULHI+LVWRU\RI0LOLWDU\,PSHULDOLVP$EURDG 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\  3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  9LHWQDP³1XFOHDUWKUHDW´³)UHQFKRIIHUHGERPEVWRXVHDJDLQVW

VHLJH´ 

*XDWHPDOD³&,$GLUHFW>HG@H[LOHLQYDVLRQDIWHUQHZJRY WQDWLRQDOL]HG

86FRPSDQ\ODQGVERPEHUVEDVHGLQ1LFDUDJXD´ 

(J\SW³1XFOHDUWKUHDW´³6RYLHWVWROGWRNHHSRXWRI6XH]FULVLV´  /HEDQDRQ³0DULQHRFFXSDWLRQDJDLQVWUHEHOV´  ,UDT³1XFOHDUWKUHDW´³,UDTZDUQHGDJDLQVWLQYDGLQJ.XZDLW´  &KLQD³1XFOHDUWKUHDW´³&KLQDWROGQRWWRPRYHRQ7DLZDQLVOHV´  3DQDPD³)ODJSURWHVWVHUXSW>HG@LQWRFRQIURQWDWLRQ´  9LHWQDP³)RXJKW6RXWK9LHWQDPUHYROWDQG1RUWK9LHWQDPRQH

PLOOLRQNLOOHGLQORQJHVW86ZDUDWRPLFERPEWKUHDWVLQODQG O´  /DRV³0LOLWDU\EXLOGXSGXULQJJXHUULOODZDU´  &XED³&,$GLUHFWHGH[LOHLQYDVLRQIDLO>HG@´  *HUPDQ\³1XFOHDUWKUHDW´³$OHUWGXULQJ%HUOLQ:DOOFULVLV´  &XED³1XFOHDUWKUHDWQDYDO%ORFNDGHGXULQJPLVVLOHFULVLVQHDUZDU ZLWK6RYLHW8QLRQ´  3DQDPD³3DQDPDQLDQVVKRWIRUXUJLQJFDQDO VUHWXUQ´  ,QGRQHVLD³0LOOLRQNLOOHGLQ&,$DVVLVWHGDUP\FRXS´  'RPLQLFDQ5HSXEOLF³0DULQHVODQG>HG@GXULQJHOHFWLRQFDPSDLJQ´  *XDWHPDOD*UHHQ%HUHWVLQWHUYHQH>G@DJDLQVWUHEHOV´  &DPERGLD³8SWRPLOOLRQNLOOHGLQGHFDGHRIERPELQJVWDUYDWLRQ DQGSROLWLFDOFKDRV´  2PDQ³86GLUHFW>HG@,UDQLDQPDULQHLQYDVLRQ´  /DRV³86GLUHFW>H@6RXWK9LHWQDPHVHLQYDVLRQ FDUSHWERPEV  FRXQWU\VLGH´  0LGGOH(DVW³1XFOHDUWKUHDW´³:RUOGZLGHDOHUWGXULQJ0LGHDVW :DU´  &KLOH³&,$EDFNHGFRXSRXVW>HG@HOHFWHGPDU[LVWSUHVLGHQW´  &DPERGLD6KLSFDSWXUHG³GLHLQFRSWHUFUDVK´  $QJROD³&,$DVVLVW>HG@6RXWK$IULFDQEDFNHGUHEHOV´  ,UDQ³>1@XFOHDUWKUHDW´³DERUWHGERPELQJUDLGWRUHVFXHHPEDVV\ KRVWDJHVWURRSVGLHLQFRSWHUSODQHFUDVK6RYLHWVZDUQHGQRWWRJHW LQYROYHGLQUHYROXWLRQ´  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH 



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH$%ULHI+LVWRU\RI0LOLWDU\,PSHULDOLVP$EURDG 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\  3DUW,9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  /LE\D³7ZR/LE\DQMHWVVKRWGRZQLQPDQHXYHUV´  (O6DOYDGRU³$GYLVRUV´³RYHUIOLJKWVDLGDQWLUHEHOZDU´³VROGLHUV

EULHIO\LQYROYHGLQKRVWDJHFODVK´ 

1LFDUDJXD³&,$GLUHFW>HG@H[LOH&RQWUD LQYDVLRQVSODQW>HG@

KDUERUPLQHVDJDLQVWUHYROXWLRQ´ 

/HEDQRQ³0DULQHVH[SHO>HG@3/2DQGEDFN>HG@3KDODQJLVWV´

³1DY\ERPE>HG@DQGVKHOO>HG@0XVOLPSRVLWLRQV´  *UHQDGD³,QYDVLRQ´³IRXU\HDUVDIWHUUHYROXWLRQ´  +RQGXUDV³0DQHXYHUVKHOS>HG@EXLOGEDVHVQHDUERUGHUV´  ,UDQ³7ZR,UDQLDQMHWVVKRWGRZQRYHU3HUVLDQ*XOI´  /LE\D³>1@DYDO$LUVWULNH>G@WRWRSSOHQDWLRQDOLVWJRY W´  %ROLYLD³$UP\DVVLVW>HG@UDLGVRQFRFDLQHUHJLRQ´  ,UDQ³86LQWHUYHQH>G@RQVLGHRI,UDTLQZDU´  /LE\D³7ZR/LE\DQMHWVVKRWGRZQ´  9LUJLQ,VODQGV³6W&URL[%ODFNXQUHVWDIWHUVWRUP´  3KLOLSSLQHV³$LUFRYHUSURYLGHGIRUJRYHUQPHQWDJDLQVWFRXS´  " 3DQDPD³1DWLRQDOLVWJRYHUQPHQWRXVWHGE\VROGLHUV OHDGHUVDUUHVWHGNLOOHG´  /LEHULD³)RUHLJQHUVHYDFXDWHGGXULQJFLYLOZDU´  6DXGL$UDELD³,UDTFRXQWHUHGDIWHULQYDGLQJ.XZDLW WURRSVDOVRVWDWLRQHGLQ2PDQ4DWDU%DKUDLQ8$(,VUDHO´  ,UDT³%ORFNDGHRI,UDTLDQG-RUGDQLDQSRUWVDLUVWULNHVSOXV NLOOHGLQLQYDVLRQRI,UDTDQG.XZDLWQRIO\]RQHRYHU.XUGLVKQRUWK 6KLLWHVRXWKODUJHVFDOHGHVWUXFWLRQRI,UDTLPLOLWDU\´  .XZDLW³.XZDLWUR\DOIDPLO\UHWXUQHGWRWKURQH´  6RPDOLD³86OHG8QLWHG1DWLRQVRFFXSDWLRQGXULQJFLYLOZDU UDLGVDJDLQVWRQH0RJDGLVKXIDFWLRQ´  G@LQWR86FRPEDWPLVVLRQVLQ6XOX$UFKLSHODJR QH[WWR0LQGDQDR´  "&RORPELD³86VSHFLDOIRUFHVVHQWWRUHEHO]RQHWREDFNXS &RORPELDQPLOLWDU\SURWHFWLQJRLOSLSHOLQH´  ",UDT³6DGGDPUHJLPHWRSSOHGLQ%DJKGDG86DQG8.IRUFHVRFFXS\ FRXQWU\DQGEDWWOH6XQQLDQG6KLLWHLQVXUJHQFLHV&ODVKHVRQERUGHU ZLWK6\ULD´  /LEHULD³%ULHILQYROYHPHQWLQSHDFHNHHSLQJIRUFHDVUHEHOVGURYHRXW OHDGHU´  +DLWL³0DULQHVODQG>HG@DIWHUUHEHOVRXVW>HG@HOHFWHG3UHVLGHQW $ULVWLGHZKRZDVDGYLVHGWROHDYHE\:DVKLQJWRQ´  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH    



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH$%ULHI+LVWRU\RI0LOLWDU\,PSHULDOLVP$EURDG 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\  3DUW9,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  3DNLVWDQ³&,$DLUVWULNHVRQ$O4DHGDUHIXJHYLOODJHVNLOOFLYLOLDQV´  6RPDOLD³+HOLFRSWHUJXQVKLSUDLGQDYDOEORFNDGHDJDLQVW,VODPLVWV´ 

BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH\ DUH DOVR UHODWLYH QRW DEVROXWH  QRU DUH WKH\ PXWXDOO\ H[FOXVLYH $V JHQHUDOLWLHV WKH\ DOORZH[FHSWLRQV 6RXUFH)URP=*URVVPDQ                             

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH%DUEDULW\DQGWKH5DWLRQDOL]DWLRQRI8QUHDVRQ 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\ 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 

,Q3ROLWLFDO$IIDLUV  7KH

86 KDV SURSDJDGHG WKH GHPRFUDWLF LGHDO IRU FHQWXULHV FDOOHG WKH 0XMDKHGHHQH.KDOT RU 0(.@ EDVHG LQ ,UDTGHVSLWHEHLQJFRQVLGHUHGWHUURULVWVE\WKH8QLWHG6WDWHV« ,UDQLDQRIILFLDOV WLHG WKH 0(. WR DQ H[SORVLRQ LQ )HEUXDU\ >RI @ DW D JLUOV  VFKRRO LQ =DKHGDQ ,UDQ«7KH 86 PLOLWDU\«UHJXODUO\ HVFRUWV 0(. VXSSO\ UXQV EHWZHHQ%DJKGDGDQGLWVEDVH&DPS$VKUDI´0:DUH   :KHQVRPH86DOOLHVOLNH,VUDHO KDYHEUXWDOO\WUHDWHGWKH2WKHUVOLNHWKH 3DOHVWLQLDQVDQGWKH$UDEV WKH86KDVFRQVLVWHQWO\GRQHDOOLWFRXOGWRSURWHFW WKHP IURP SURVHFXWLRQ RU FRQGHPQDWLRQ $Q H[FHOOHQW H[DPSOH LV WKH ORQJ KLVWRU\RIWKH86WRYHWRDOO81UHVROXWLRQVFULWLFDORI,VUDHOLQUHODWLRQWRWKH 3DOHVWLQLDQV DQG $UDEV DV VKRZQ LQ 7DEOH   DQG RI WKH 86 VXSSRUW RI ,VUDHO¶V UHIXVDO WR FRPSO\ ZLWK 81 UHVROXWLRQV DV VKRZQ LQ 7DEOH   %XW ZKHQWKHODWWHUWKH3DOHVWLQLDQVDQGWKH$UDEV GRVRPHWKLQJDJDLQVW,VUDHOWKH 86LVTXLFNWRWDNHPHDVXUHVWRFRQGHPQRUVDQFWLRQWKHUHVSRQVLEOHJURXSV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH     



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH%DUEDULW\DQGWKH5DWLRQDOL]DWLRQRI8QUHDVRQ 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 

,Q-XGLFLDU\$IIDLUV   :KHQ

86 JRYHUQPHQW QDWLRQDOV ZRUN DEURDG WKH\ H[SHFW RWKHU JRYHUQPHQWVWRJUDQWWKHPGLSORPDWLFLPPXQLW\HYHQLIWKH\DFWXDOO\DUH&,$ DJHQWVDQGRWKHUVXEYHUVLYHDJHQWVRIWKH86JRYHUQPHQW)RUH[DPSOHZKHQ VRPH  &,$ DJHQWV ZHUH IRXQG WR KDYH HQJDJHG LQ UHQGLWLRQ WR WRUWXUH RI D 0XVOLPLPDPDQGWKXV YLRODWHGWKH,WDOLDQ ODZLQWKH86 JRYHUQPHQW UHIXVHGWRWXUQWKHPRYHUWRWKH,WDOLDQFRXUWZKLFKKDGLVVXHGDUUHVWZDUUDQWV IRU WKH $PHULFDQ IXJXWLYHV -RKQ %HOOLQJHU WKH 86 VWDWH GHSDUWPHQW V OHJDO DGYLVHU  VDLG ³,I ZH JRW DQ H[WUDGLWLRQ UHTXHVW IURP ,WDO\ ZH ZRXOG QRW H[WUDGLWH86RIILFLDOVWR,WDO\´$/1 %XWZKHQVRPH,UDQLDQGLSORPDWV ZKRZHUHDOVRJXHVWVRIWKH,UDTLJRYHUQPHQW ZHUHIRXQGLQ,UDTLQWKH 86RFFXSDWLRQIRUFHVGHWDLQHGWKHPDQGLJQRUHGWKHLUGLSORPDWLFVWDWXVHYHQ VD\LQJWKDWWKH86KDVWKHULJKWWR NLOORUFDSWXUHDQ\RQHZKLFKLVWKHVDPH FDOORXV SROLF\ WKDW WKH PDLQ 86 DOO\ LQ WKH UHJLRQ ,VUDHO KDV FRQVLVWHQWO\ SXUVXHGDJDLQVWWKH3DOHWLQLDQVDVZHOOLOOXVWUDWHGE\DZDUQLQJE\,VUDHOL3ULPH 0LQLVWHU (KXG 2OPHUW LQ  ZKR VDLG ³1R RQH LV LPPXQH´ LQ UHIHULQJ WR ,VUDHO¶V SROLF\ WR FRQVWDQWO\ SXUVXH WKH +DPDV ZKHUHYHU WKH\ DUH  3'2 Q0,VLNRII /DWHURQRQH,UDQLDQGLSORPDW-DODO6KDUDILZKRZDV DEGXFWHGE\³DJHQWVRIDQ,UDTLRUJDQL]DWLRQRSHUDWLQJXQGHU&,$VXSHUYLVLRQ´ LQ  ³DFFXVHG WKH &,$ RI WRUWXULQJ KLP GXULQJ KLV WZRPRQWK GHWHQWLRQ´ ZLWK YDULRXV WRUWXUH WHFKQLTXHV LQ IDFW ³VLJQV RI WRUWXUH ZHUH VWLOO YLVLEOH RQ 6KDUDIL´ZKHQKHZDVODWHUUHOHDVHG&112G   7KH

86 6XSUHPH &RXUW UXOHG LQ  WKDW IRUHLJQ QDWLRQDOV LQ RWKHU FRXQWULHVFDQEHVXHGIRUDUWZRUNVRZQHGE\$PHULFDQQDWLRQDOVEXWVWROHQ- 9LFLQL %XWWKH86FRXUWV\VWHPGRHVQRWDOORZ$PHULFDQQDWLRQDOVWREH VXHGIRUVWROHQDUWZRUNVIURPDEURDG BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH        

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH%DUEDULW\DQGWKH5DWLRQDOL]DWLRQRI8QUHDVRQ 7KH&DVHRI$PHULFDQ/LEHUDO'HPRFUDF\ 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 

,Q-XGLFLDU\$IIDLUV   7KH

86 RIWHQ GHPDQGV WKDW VRPH IRUHLJQ QDWLRQDOV LQ WKH 2WKHUV HJ 6DGGDP +XVVHLQ RI ,UDT RU 6ORERGDQ 0LORVHYLF RI 6HUELD  DUH WR EH WULHG IRU ZDU FULPHV RU FULPHV DJDLQVW KXPDQLW\  IRU $PHULFDQ *,¶V DIWHU ::,,@ GHVSLWH LQWHUQDO UHSRUWV WKDW ZRPHQ ZHUHEHLQJFRHUFHGLQWRSURVWLWXWLRQ7KH$PHULFDQVDOVRKDGIXOONQRZOHGJHE\ WKHQ RI -DSDQ V DWURFLRXV WUHDWPHQW RI ZRPHQ LQ FRXQWULHV DFURVV $VLD WKDW LW FRQTXHUHG GXULQJ WKH ZDU 7HQV RI WKRXVDQGV RI ZRPHQ ZHUH HPSOR\HG WR SURYLGH FKHDS VH[ WR 86 WURRSV´ DIWHU ::,, &112 J  ³$PHULFDQ KLVWRULDQ -RKQ 'RZHU LQ KLV ERRN (PEUDFLQJ 'HIHDW -DSDQ LQ WKH :DNH RI ::,, VD\VWKHFKDUJHIRUDVKRUWVHVVLRQZLWKDSURVWLWXWHZDV\HQRUDERXW DGROODUURXJKO\WKHFRVWRIKDOIDSDFNRIFLJDUHWWHV´&112J 0DQ\RI WKHVH ZRPHQ UHVSRQGHG WR PLVOHDGLQJ DGV IRU GHFHQW MRE RSSRUWXQLWLHV EXW HQGHGXSLQFRHUFHGSURVWLWXWLRQIRU$PHULFDQ*,¶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



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH7KH7KHRUHWLFDO'HEDWHRQ&LYLOL]DWLRQ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH3URJUHVVLYH7KHRU\RI&LYLOL]DWLRQ ²7KHVLV7KH³FLYLOL]LQJ´SURFHVVLV³JRRG´DVRSSRVHGWRWKH³EDUEDUL]LQJ´ SURFHVVDVVRPHWKLQJ³EDG´UHODWLYHO\VSHDNLQJ ²'LVFRXUVH(VSHFLDOO\WKRXJKQRWH[FOXVLYHO\LQWKH(QOLJKWHQPHQWHUDDQG D ELW EHIRUH ([DPSOH 7KRPDV +REEHV²LQ WKDW WKH WULEHV LQ SULPLWLYH VRFLHWLHVZHUH³VDYDJHV´  ‡7KH5RPDQWLF7KHRU\RI%DUEDULW\ ²7KHVLV7KH³FLYLOL]LQJ´SURFHVVLV³EDG´DVRSSRVHGWRWKH³EDUEDUL]LQJ´ SURFHVVDVVRPHWKLQJ³JRRG´UHODWLYHO\VSHDNLQJ ²'LVFRXUVH (VSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ LQ WKH &RXQWHU (QOLJKWHQPHQW FLUFOH ([DPSOH -HDQ-DFTXHV 5RXVVHDX²LQ WKDW FLYLOL]DWLRQ³FRUUXSWV´PHQDQGWKH³VDYDJHV´DUHLQIDFW³QREOH´  ‡7KH0RGHUDWH7KHRU\RI&LYLOL]DWLRQ ²7KHVLV 7KH ³FLYLOL]LQJ´ SURFHVV LV ³JRRG´ EXW WKHUH LV D SULFH WR SD\ HVSHFLDOO\LQV\VWHPDWLFFRPSXOVLYH VHOIFRQWURO ²'LVFRXUVH (VSHFLDOO\  WKRXJK  QRW H[FOXVLYHO\ LQ VRPH ODWH PRGHUQ DQG SRVWPRGHUQ FLUFOHV ([DPSOH 1RUEHUW (OLDV²LQ WKDW VRFLDO PDQQHUV EHFRPH PRUH UHILQHG LQ WKH FLYLOL]LQJ SURFHVV EXW VHOIFRQWURO DOVR EHFRPHVPRUHV\VWHPDWLF  ‡7KH7KHRU\RI3RVW&LYLOL]DWLRQ ²7KHVLV 7KH FLYLOL]LQJ SURFHVV LV DV HYLO DQG JRRG DV EDUEDULW\ DQG HDFK FDQQRW H[LVW ZLWKRXW WKH RWKHU WR  EH  HYHQWXDOO\ VXSHUVHGHG E\ SRVW FLYLOL]DWLRQXQWRWKHSRVWKXPDQDJH ²'LVFRXUVH 3URSRVHG E\ 3HWHU  %DRIX  6HH WKH UHVW RI %&,9 IRU PRUH DQDO\VLV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFH)URP%&,9RQWKHWKHRUHWLFDOGHEDWH        

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH1R)UHHGRP:LWKRXW8QIUHHGRPLQWKH&LYLOL]LQJ3URFHVVHV 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH5DWLRQDOL]LQJ3URFHVVDWWKH/HYHORI&XOWXUH  ²LIIUHHUIURPWKHGRPLQDQFHRIXQUHDVRQDVLQEDUEDULVP LQWKHFLYLOL]LQJ SURFHVV WKHQ OHVV IUHH IURP WKH UDWLRQDOL]LQJ SURFHVV EH LW LQ WKH IRUP RI WKHSULQFLSOHRIHLWKHUWUDQVFHQGHQFHRULPPDQHQFH  ²LI IUHHU IURP WKH SULQFLSOH RI LPPDQHQFH LQ WKH UDWLRQDOL]LQJ SURFHVV WKHQ OHVVIUHHIURPWKHLQFOLQDWLRQWRFRPPLWWHUURULQWKHQDPHRIUHDVRQDQGWKH UHODWLYH XQGHUGHYHORSPHQW RI QRQUHDVRQ  HJ LQ UHODWLRQ WR \RJD DQG PHGLWDWLRQ  ²LIIUHHUIURPWKHSULQFLSOHRIWUDQVFHQGHQFHLQWKHUDWLRQDOL]LQJSURFHVVWKHQ OHVVIUHHIURPWKHUHODWLYHXQGHUGHYHORSPHQWRIUHDVRQHJLQUHODWLRQWR V\VWHPDWLF PHWKRGRORJ\ DQGWKHRFFXUUHQFHRIRSSUHVVLRQLQWKH QDPHRI QRQUHDVRQ  ‡7KH3DFLI\LQJ3URFHVVDWWKH/HYHORI6RFLHW\  ²LI IUHHU IURP WKH GRPLQDQFH RI SLOODJH DV LQ VDYDJHU\  LQ WKH FLYLOL]LQJ SURFHVV WKHQ OHVV IUHH IURP WKH SDFLI\LQJ SURFHVV EH LW LQ WKH IRUP RI H[WHUQDOFRQWURORUVHOIFRQWURO  ²LI IUHHU IURP VHOIFRQWURO LQ WKH SDFLI\LQJ SURFHVV WKHQ OHVV IUHH IURP WKH WHPSWDWLRQ RI H[SDQVLRQLVW RSSUHVVLRQ DQG UHEHOOLRXV PLQGVHW LQ H[WHUQDO FRQWURO ²LI IUHHU IURP H[WHUQDO FRQWURO LQ WKH SDFLI\LQJ SURFHVV WKHQ OHVV IUHH IURP WKHJUXHVRPHSV\FKRORJLFDOVHOIWRUWXUHDQGFRQIRUPLVPLQVHOIFRQWURO BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH             



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH1R)UHHGRP:LWKRXW8QIUHHGRPLQWKH&LYLOL]LQJ3URFHVVHV 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH6WHZDUGL]LQJ3URFHVVDWWKH/HYHORI1DWXUH  ²LI IUHHU IURP WKH GRPLQDQFH RI QDWXUH DV LQ WKH VWDWH RI QDWXUH  LQ WKH FLYLOL]LQJSURFHVVWKHQOHVVIUHHIURPWKHVWHZDUGL]LQJSURFHVVEHLWLQWKH IRUPRIWKHVWHZDUGVKLSRIFUHDWLRQRUWKHFRYHQDQWZLWKQDWXUH  ²LI IUHHU IURP WKH VWHZDUGVKLS RI FUHDWLRQ LQ WKH VWHZDUGL]LQJ SURFHVV WKHQ OHVVIUHHIURPPDWHULDOXQGHUGHYHORSPHQWUHODWLYHO\VSHDNLQJDQGVSLULWXDO H[FOXVLRQLQWKHFRYHQDQWZLWKQDWXUH ²LIIUHHUIURPWKHFRYHQDQWZLWKQDWXUHLQWKHVWHZDUGL]LQJSURFHVVWKHQOHVV IUHHIURPHFRORJLFDOGHJUDGDWLRQDQGVSLULWXDOGLVFRQQHFWLRQIURPQDWXUHLQ WKHVWHZDUGVKLSRIFUHDWLRQ  ‡7KH6XEOLPLQJ3URFHVVDWWKH/HYHORIWKH0LQG  ²LIIUHHUIURPWKHGRPLQDQFHRIVSRQWDQHLW\DVLQWKHZLOGVWDWHRIWKHPLQG  LQWKHFLYLOL]LQJSURFHVVWKHQOHVVIUHHIURPWKHVXEOLPLQJSURFHVVEHLWLQ WKH IRUP RI F\FOLFDOFHQWULF  VHOIUHILQHPHQW RU OLQHDUFHQWULF  VHOI GLVFLSOLQH ²LI IUHHU IURP F\FOLFDOFHQWULF  VHOIUHILQHPHQW LQ WKH VXEOLPLQJ SURFHVV WKHQOHVVIUHHIURPWKHOLQHDUFHQWULF VHOIUHJLPHQDVDIRUPRIQHXURVLV  ²LIIUHHUIURPOLQHDUFHQWULF VHOIGLVFLSOLQHLQWKHVXEOLPLQJSURFHVVWKHQ OHVV IUHH IURP WKH F\FOLFDOFHQWULF  VHOIWRUWXUH HTXDOO\ DV D IRUP RI QHXURVLV  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ HDFK FDWHJRU\ DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQGWKHFRPSDULVRQLVUHODWLYHQRWDEVROXWH QRUDUHWKH\QHFHVVDULO\PXWXDOO\ H[FOXVLYH$QGVRPHFDQEHHDVLO\UHFODVVLILHGHOVHZKHUH$VJHQHUDOLWLHVWKH\ DOORZH[FHSWLRQV 6RXUFHV)URP%&,96HHDOVR)+&)&')3+&%'3'DQG%&3&          

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH1R(TXDOLW\:LWKRXW,QHTXDOLW\LQWKH&LYLOL]LQJ3URFHVVHV 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH5DWLRQDOL]LQJ3URFHVVDWWKH/HYHORI&XOWXUH  ²LIPRUHHTXDOIRUWKHUROHRIUDWLRQDOL]DWLRQLQWKHUDWLRQDOL]LQJSURFHVVRI FLYLOL]DWLRQDO PDNLQJ  WKHQ OHVV HTXDO IRU WKDW RI P\WKLFL]DWLRQ DV LQ EDUEDULVP  ²LI PRUH HTXDO IRU WKH SULQFLSOH RI WUDQVFHQGHQFH LQ OLQHDUFHQWULF  UDWLRQDOL]LQJSURFHVVWKHQOHVVHTXDOIRUWKHSULQFLSOHRILPPDQHQFH ²LI PRUH HTXDO IRU WKH SULQFLSOH RI LPPDQHQFH LQ F\FOLFDOFHQWULF  UDWLRQDOL]LQJSURFHVVWKHQOHVVHTXDOIRUWKHSULQFLSOHRIWUDQVFHQGHQFH  ‡7KH3DFLI\LQJ3URFHVVDWWKH/HYHORI6RFLHW\  ²LI PRUH HTXDO IRU SDFLILFDWLRQ LQ FLYLOL]DWLRQDO PDNLQJ WKHQ OHVV HTXDO IRU WKHLQVWLWXWLRQRISLOODJLQJDQGRWKHUVDVLQVDYDJHU\  ²LIPRUHHTXDOIRUH[WHUQDOFRQWUROUHODWLYHO\VSHDNLQJLQSDFLI\LQJSURFHVV WKHQOHVVHTXDOIRUVHOIFRQWURO ²LI PRUH HTXDO IRU VHOIFRQWURO UHODWLYHO\ VSHDNLQJ LQ  SDFLI\LQJ SURFHVV WKHQOHVVHTXDOIRUH[WHUQDOFRQWURO  ‡7KH6WHZDUGL]LQJ3URFHVVDWWKH/HYHORI1DWXUH  ²LIPRUHHTXDOIRUVWHZDUGVKLSLQWKHVWHZDUGL]LQJSURFHVVRIFLYLOL]DWLRQDO PDNLQJ  WKHQ OHVV HTXDO IRU UHYHUHQW VXEPLVVLYH  H[LVWHQFH DV LQ EDUEDULVP  ²LI PRUH HTXDO IRU WKH VWHZDUGVKLS RI FUHDWLRQ LQ OLQHDU FHQWULF  VWHZDUGL]LQJ SURFHVV WKHQ OHVV HTXDO IRU WKH F\FOLFDOFHQWULF  FRYHQDQW ZLWKQDWXUHIRUKDUPRQLRXVFRH[LVWHQFH ²LI PRUH HTXDO IRU WKH F\FOLFDOFHQWULF  FRYHQDQW ZLWK QDWXUH LQ WKH VWHZDUGL]LQJSURFHVVWKHQOHVVHTXDOIRUWKHOLQHDUFHQWULF VWHZDUGVKLSRI QDWXUHIRUGRPLQDWLRQ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH        



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH1R(TXDOLW\:LWKRXW,QHTXDOLW\LQWKH&LYLOL]LQJ3URFHVVHV 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH6XEOLPLQJ3URFHVVDWWKH/HYHORIWKH0LQG  ²LIPRUHHTXDOIRUWKHUROHRIUHDVRQLQWKHVXEOLPLQJSURFHVVWKHQOHVVHTXDO IRUWKDWRIXQUHDVRQDVLQWKHQDWXUDOVWDWHRIZLOGQHVV  ²LI PRUH HTXDO IRU WKH SULPDF\ RI UHDVRQ LQ OLQHDUFHQWULF  VXEOLPLQJ SURFHVV WKHQ OHVV HTXDO IRU RWKHU IDFXOWLHV HJ LQWXLWLRQ H[LVWHQWLDO IHHOLQJVDQGDQDORJRXVWKLQNLQJ LQF\FOLFDOFHQWULFRQH ²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

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH)LYH7KHVHVRQ3RVW&LYLOL]DWLRQ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡ 3RVWFLYLOL]DWLRQ QR ORQJHU WUHDWV FLYLOL]DWLRQ DV JRRG DQG EDUEDULW\ DV HYLO UHODWLYHO\  VSHDNLQJ  QRU GRHV LW QRVWDOJLFDOO\ UHJDUG EDUEDULW\ DV JRRG DQG FLYLOL]DWLRQDVHYLOUHODWLYHO\VSHDNLQJDJDLQ &LYLOL]DWLRQLVDVHYLODQGJRRGDV EDUEDULW\  ‡3RVWFLYLOL]DWLRQDOVRQRORQJHUDFFHSWVWKHGLFKRWRP\EHWZHHQFLYLOL]DWLRQDQG EDUEDULW\&LYLOL]DWLRQFDQQRWH[LVWZLWKRXWEDUEDULW\,WLVQRORQJHUQHFHVVDU\WR SUHVHUYHFLYLOL]DWLRQDQ\PRUHWKDQLWLVLPSHUDWLYHWRGHVWUR\EDUEDULW\7RJR EH\RQG FLYLOL]DWLRQ DQG EDUEDULW\ LV WR DFNQRZOHGJH WKH FRH[LVWHQFH RI ERWK DOWKRXJKWKHGHJUHHRIVFDOLQJRQHRYHUWKHRYHUYDULHVIURPFDVHWRFDVH²EXWLV QRWWREHH[WUHPHLQODUJHO\IDYRULQJRQHRYHUWKHRWKHURQDYHUDJHVXEMHFWWR WKHFRQVWUDLQWVRIH[LVWHQWLDOGLDOHFWLFV   ‡3RVWFLYLOL]DWLRQLVWKXVVXEMHFWWRWKHFRQVWUDLQWVRIH[LVWHQWLDOGLDOHFWLFV 7KHUHLVQRIUHHGRPZLWKRXWXQIUHHGRPDQGQRHTXDOLW\ZLWKRXWLQHTXDOLW\IRU LQVWDQFH 7KHUH ZLOO EH QR XWRSLD HYHQ VKRXOG WKHUH EH RQH WKHUH ZRXOG EH G\VWRSLDHPEHGGHGZLWKLQLW  ‡ 3RVWFLYLOL]DWLRQ ZLOO HYHQWXDOO\ UHSODFH FLYLOL]DWLRQ DV D IRUP RI OLIH VHWWOHPHQW  WR EH GRPLQDWHG E\ SRVWFDSLWDOLVW DQG SRVWGHPRFUDWLF OLIHIRUPV KHUHRQHDUWKDQGLQGHHSVSDFHEHVLGHVRWKHUDOLHQOLIHIRUPVWKDWZHKDYHQHYHU NQRZQ XQWRWKHSRVWKXPDQDJHLQ PXOWLYHUVHV7KRVHIHZSRVWKXPDQV ZKR NHHS FLYLOL]DWLRQ ZLOO OLYH LQ D ³SRVWKXPDQ FLYLOL]DWLRQ´ ZKLOH WKH UHVW WKH PDMRULW\ ZKRFKRRVHSRVWFLYLOL]DWLRQZLOOHYROYHWRZDUGVWKHVWDWHRI³SRVW KXPDQ SRVWFLYLOL]DWLRQ´ 2QH WKHUHIRUH VKRXOG QRW FRQIXVH ³SRVWKXPDQ FLYLOL]DWLRQ´ZLWK³SRVWKXPDQSRVWFLYLOL]DWLRQ´DVWKHWZRDUHQRWWKHVDPH  ‡3RVWFLYLOL]DWLRQZLOOFRQIURQWSV\FKRVLVDVDSULPDU\SUREOHPLQWKHFXOWXUHRI YLUWXDOLW\XQWRWKHSRVWKXPDQDJHMXVWDVFLYLOL]DWLRQKDVQHXURVLVDVDSULPDU\ RQH RI LWV RZQ DOWKRXJK ERWK QHXURVLV DQG SV\FKRVLV DUH PDMRU SUREOHPV LQ ERWK  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHFRPSDULVRQLQHDFKFDWHJRU\LVUHODWLYHQRWDEVROXWH QRUDUHWKH\ QHFHVVDULO\PXWXDOO\H[FOXVLYH$QGVRPHFDQEHHDVLO\UHFODVVLILHGHOVHZKHUH $VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFHV)URP%&,96HHDOVR)+&)&')3+&%'3'DQG%&3&  



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH%DUEDULW\&LYLOL]DWLRQDQG3RVW&LYLOL]DWLRQ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH5DWLRQDOL]LQJ3URFHVVDWWKH/HYHORI&XOWXUH  ²%DUEDULW\ ‡0RUHP\WKLFL]LQJWKDQUDWLRQDOL]LQJUHODWLYHO\VSHDNLQJ ²&LYLOL]DWLRQ ‡0RUHUDWLRQDOL]LQJWKDQP\WKLFL]LQJUHODWLYHO\VSHDNLQJ ²3RVW&LYLOL]DWLRQ ‡%H\RQGWKHGLFKRWRP\VXEMHFWWRH[LVWHQWLDOGLDOHFWLFV  ‡7KH3DFLI\LQJ3URFHVVDWWKH/HYHORI6RFLHW\  ²%DUEDULW\ ‡0RUHSLOODJLQJWKDQSDFLI\LQJUHODWLYHO\VSHDNLQJ ²&LYLOL]DWLRQ ‡0RUHSDFLI\LQJWKDQSLOODJLQJUHODWLYHO\VSHDNLQJ ²3RVW&LYLOL]DWLRQ ‡%H\RQGWKHGLFKRWRP\VXEMHFWWRH[LVWHQWLDOGLDOHFWLFV  ‡7KH6WHZDUGL]LQJ3URFHVVDWWKH/HYHORI1DWXUH  ²%DUEDULW\ ‡0RUHUHYHULQJWKDQVWHZDUGL]LQJUHODWLYHO\VSHDNLQJ ²&LYLOL]DWLRQ ‡0RUHVWHZDUGL]LQJWKDQUHYHULQJUHODWLYHO\VSHDNLQJ ²3RVW&LYLOL]DWLRQ ‡%H\RQGWKHGLFKRWRP\VXEMHFWWRH[LVWHQWLDOGLDOHFWLFV  ‡7KH6XEOLPLQJ3URFHVVDWWKH/HYHORIWKH0LQG  ²%DUEDULW\ ‡0RUHLPSXOVLQJWKDQVXEOLPLQJUHODWLYHO\VSHDNLQJ ²&LYLOL]DWLRQ ‡0RUHVXEOLPLQJWKDQLPSXOVLQJUHODWLYHO\VSHDNLQJ ²3RVW&LYLOL]DWLRQ ‡%H\RQGWKHGLFKRWRP\VXEMHFWWRH[LVWHQWLDOGLDOHFWLFV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHFRPSDULVRQLQHDFKFDWHJRU\LVUHODWLYHQRWDEVROXWH QRUDUHWKH\ QHFHVVDULO\PXWXDOO\H[FOXVLYH$QGVRPHFDQEHHDVLO\UHFODVVLILHGHOVHZKHUH $VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFHV)URP%&,96HHDOVR)+&)&')3+&%'3'DQG%&3&  

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH7\SHVRI6XSHU&LYLOL]DWLRQLQWKH&RVPRV 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7\SH, ²D FLYLOL]DWLRQ ZKLFK JDLQV FRQWURO RI DQG XVHV WKH WRWDO HQHUJ\ RXWSXW ³IDOOLQJ RQ LWV SODQHW IURP LWV VXQ IRU LQWHUVWHOODU FRPPXQLFDWLRQ´ RU LQ JHQHUDO VSDFH FRORQL]DWLRQ  )RU 1 .DUGDVKHY ZKR SURSRVHG WKH ILUVW WKUHH W\SHV KXPDQ FLYLOL]DWLRQ LV FXUUHQWO\ 7\SH =HUR 7\SH 2  ZKLFK LV EHORZHYHQ7\SH,VLQFHLWV SUHVHQWHQHUJ\FRQVXPSWLRQIRUDOOSXUSRVHV OHWDORQHIRULQWHUVWHOODUFRPPXQLFDWLRQLVVWLOOWLPHVOHVV  ‡7\SH,, ²D FLYLOL]DWLRQ ZKLFK JDLQV FRQWURO RI DQG XVHV GLUHFWO\ WKH WRWDO HQHUJ\ RXWSXW RI LWV VXQ IRU LQWHUVWHOODU FRPPXQLFDWLRQ RU LQ JHQHUDO VSDFH FRORQL]DWLRQ   ‡7\SH,,, ²DFLYLOL]DWLRQZKLFKJDLQVFRQWURORIDQGXVHVWKHWRWDOHQHUJ\RXWSXWRILWV JDOD[\IRULQWHUVWHOODUFRPPXQLFDWLRQRULQJHQHUDOVSDFHFRORQL]DWLRQ   ‡7\SH,9 ²DFLYLOL]DWLRQZKLFKJDLQVFRQWURORIDQGXVHVWKHWRWDOHQHUJ\RXWSXWRILWV FOXVWHU RI JDOD[LHV IRU LQWHUVWHOODU FRPPXQLFDWLRQ RU LQ JHQHUDO VSDFH FRORQL]DWLRQ   ‡7\SH9 ²DFLYLOL]DWLRQZKLFKJDLQVFRQWURORIDQGXVHVWKHWRWDOHQHUJ\RXWSXWRILWV VXSHUFOXVWHU RI JDOD[LHV IRU LQWHUVWHOODU FRPPXQLFDWLRQ RU LQ JHQHUDO VSDFHFRORQL]DWLRQ  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH          



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH7\SHVRI6XSHU&LYLOL]DWLRQLQWKH&RVPRV 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7\SH«Q ²6RFRQWLQXHVWKHVHULHVLQZKDW,FDOOWKHF\FOLFDOSURJUHVVLRQRIKHJHPRQ\ LQWKHFRVPRVDQGEH\RQG BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH 5XVVLDQ DVWURSK\VLFLVW 1LNRODL .DUGDVKHY SURSRVHG WKH ILUVW WKUHH W\SHV RI VXSHU FLYLOL]DWLRQ LQ WHUPV RI WRWDO HQHUJ\ RXWSXW IRU LQWHUVWHOODU FRPPXQLFDWLRQ&60 ,H[WHQGKLVDUJXPHQWIXUWKHUWRSURSRVH7\SH,9 7\SH97\SH9,DQG7\SH«QLQWKHFRQWH[WRI P\FODLPDERXWWKHF\FOLFDO SURJUHVVLRQRIKHJHPRQ\LQWKHFRVPRVDQGEH\RQG 6RXUFHV)URP7DEOHRI)&'6HH)+&)&'DQG)3+&IRUPRUHLQIR                           

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH7KH&LYLOL]DWLRQDO3URMHFW IURP3UH0RGHUQLW\WR$IWHU3RVWPRGHUQLW\ 3DUW,    0DLQ QDUUDWLYHV

0DLQ LQVWLWXWLRQV

0DLQ WHFKQR ORJLFDODQG HFRQRPLF UHYROXWLRQV

3UH0RGHUQ

0RGHUQ

3RVWPRGHUQ

$IWHU 3RVWPRGHUQ ‡6DFUDOQHVV ‡)UHHGRP ‡0XOWLSOLFLW\ ‡1DNHG ‡&RXUWOLQHVV ‡(TXDOLW\ ‡+\EULGL]DWLRQ FRQWLQJHQF\ ‡9LWDOLVP ‡)UDWHUQLW\ ‡&\FOLFDO ‡$QLPLVP SURJUHV VLRQRI KHJHPRQ\ ‡0RQDUFK\ ‡&DSLWDOLVP ‡&DSLWDOLVP ‡3RVW ‡$ULVWRFUDF\ ‡/LEHUDOLVP ‡/LEHUDOLVP &DSLWDOLVP ‡)HXGDOLVP ‡6RFLDOLVP ‡3RVWPRGHUQ ‡3RVW ‡+RO\RUGHU ‡1D]LVP SROLWLFVRI 'HPRFUDF\ ‡3ULPLWLYLVP ‡)DVFLVP GLIIHUHQFH ‡2WKHUV ‡$JULFXOWXUDO ‡6HUYLFH ‡,QIRUPDWLRQDO ‡%LRORJLFDO ‡,QGXVWULDO ‡0DWHULDO ‡(QHUJ\ ‡6SDFH ‡2WKHUV

 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH    

        



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH7KH&LYLOL]DWLRQDO3URMHFW IURP3UH0RGHUQLW\WR$IWHU3RVWPRGHUQLW\ 3DUW,,   

3UH0RGHUQ 0RGHUQ

3RVWPRGHUQ

0DLQ DJHQWV

‡0DOHV ‡8SSHU VWUDWD ‡0LQLVWDWHV

‡0DOHV ‡8SSHU VWUDWD ‡:KLWHV ‡(PSLUHV

0DLQ LPSDFWV

‡/RFDO

‡,QWHU QDWLRQDO

‡0DOHV ‡8SSHU VWUDWD ‡:KLWHV ‡2WKHUV ‡6XSUDVWDWHV ‡,2¶V ‡*OREDO

0DLQ ‡7RZDUGV RXWFRPHV PRGHUQWL\ ‡5LVHRI OLQHDU  F\FOLFDO FHQWULF FLYLOL]D WLRQV

‡7RZDUGV SRVW PRGHUQLW\ ‡'RPLQDQFH RIOLQHDU FHQWULF FLYLOL]DWLRQ

‡7RZDUGV DIWHUSRVW PRGHUQWL\ ‡/LQHDU FHQWULF FLYLOL]D WLRQLQ FULVLV

$IWHU 3RVWPRGHUQ ‡3RVW KXPDQV ‡+XPDQV ‡2WKHUV

‡2XWHU VSDFH ‡0XOWLYHUVH ‡7RZDUGV KXPDQ  PD\EH SRVW KXPDQ  H[WLQFWLRQ ‡5LVHRI SRVW FLYLOL]D WLRQ HVSHFLDOO\LQ SRVWKXPDQ IRUPVRI VSDFHWLPH

 1RWHV7KHH[DPSOHVLQHDFKFDWHJRU\DUHVROHO\LOOXVWUDWLYHQRWH[KDXVWLYH QRU QHFHVVDULO\PXWXDOO\H[FOXVLYHDQGWKHFRPSDULVRQLVUHODWLYHQRWDEVROXWH $V JHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFHV )URP 7DEOH  RI )&'²DQG DOVR IURP %&,9 RQ SRVWFLYLOL]DWLRQ DQG)3+67 

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH&LYLOL]DWLRQDO+ROLVP 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$WWKH0LFUR3K\VLFDO7KHRUHWLFDO/HYHO ²([ 0DVWHULQJ RI TXDQWXP PHFKDQLFV HOHFWURPDJQHWLVP DQG RWKHU ILHOGV IRU WKH XQGHUVWDQGLQJ RI D EURDG UDQJH RI DQRPDORXV H[SHULHQFHV DQG WKHDSSOLFDWLRQIRUDUWLILFLDOLQWHOOLJHQFH6HFRI)3+&   ‡$WWKH&KHPLFDO7KHRUHWLFDO/HYHO ²([ 8QSUHFHGHQWHG H[SDQVLRQ RI DQG YLROHQFH WR  WKH PLQG WKURXJK HYHU QHZ IRUPV RI GUXJV DQG YLUWXDO WHFKQRORJLHV IRU WKDW PDWWHU  &K RI )&'   ‡$WWKH%LRORJLFDO7KHRUHWLFDO/HYHO ²([ +XPDQV DUH QRW ELRORJLFDOO\ HTXDO RQ WKH EDVLV RI UDFH JHQGHU HWKQLFLW\ DJH DQG ZKDWQRW 6HF  &K RI )&' %11  $QG SRVW KXPDQVZLOOH[SHULHQFHWKHVDPHIDWHLQDQHYHQPRUHDPD]LQJZD\  ‡$WWKH3V\FKRORJLFDO7KHRUHWLFDO/HYHO ²([+XPDQFRJQLWLYHLPSDUWLDOLW\DQGHPRWLRQDOQHXWUDOLW\DUHTXLWHOLPLWHG 6HFVRI)&'  ²([5LVHRI)ORDWLQJ&RQVFLRXVQHVV&KRI)&'&KV RI)3+&   ‡$WWKH2UJDQL]DWLRQDO7KHRUHWLFDO/HYHO ²([$GPLQLVWUDWLYHFRORQL]DWLRQRIGHHSVSDFHZLWKOHVVOHJDOIRUPDOLVPLQ VRPHFRUQHUV&KVRI)&'   ‡$WWKH,QVWLWXWLRQDO7KHRUHWLFDO/HYHO ²([ %RWK FDSLWDOLVP DQG GHPRFUDF\ ZLOO QRW ODVW WR EH VXSHUVHGHG E\ GLIIHUHQW YHUVLRQV RI SRVWFDSLWDOLVP DQG SRVWGHPRFUDF\ LQ DIWHU SRVWPRGHUQLW\&KRI)&'   ‡$WWKH6WUXFWXUDO7KHRUHWLFDO/HYHO ²([6RFLDOVWUDWLILFDWLRQUHDSSHDUVLQHYHUQHZIRUPVDOVRZLWKQHZFDXVHV DQG QHZ SOD\HUV LQ WKH F\FOLFDO SURJUHVVLRQ RI KHJHPRQ\ &KV RI )&'  ²([7KHZRUOGRIK\SHUHPSLUHVDQGWKHXQLRQRIWKHXQLRQV%:7  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH  



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH&LYLOL]DWLRQDO+ROLVP 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$WWKH6\VWHPLF7KHRUHWLFDO/HYHO ²([2XWHUVSDFHH[SDQVLRQORFDOĺUHJLRQDOĺJOREDOĺVRODUĺJDODFWLF ĺFOXVWHU\ĺPXOWLYHUVDO&KRI)&'  ²(['HPRJUDSKLFWUDQVLWLRQKXPDQH[WLQFWLRQDQGWKHULVHRISRVWKXPDQV HJ F\ERUJV WKLQNLQJ PDFKLQHV WKLQNLQJ URERWV JHQHWLFDOO\ DOWHUHG VXSHULRUEHLQJVIORDWLQJFRQVFLRXVQHVVK\SHUVSDWLDOFRQVFLRXVQHVV &K RI)3+&&KRI)&' &KRI)+&  ²([ 1HZ WHFKQRORJLFDO IRUFHV LQ PDWHULDO VFLHQFHV HOHFWURQLF DQG FRPPXQLFDWLRQVFLHQFHVHQHUJ\VFLHQFHVELRVFLHQFHVPDQXIDFWXULQJDQG HQJLQHHULQJVFLHQFHVDQGVSDFHVFLHQFHV&KRI)&' &KRI)+&  ²([6\VWHPDWLFGRPLQDQFHWRZDUGVQDWXUHIRUVSDFHFRORQL]DWLRQ&KV RI)&'&KV RI)+&   ‡$WWKH&XOWXUDO7KHRUHWLFDO/HYHO ²([7KHSRVWKXPDQWUDQVFHQGHQFHRIIUHHGRPDQGHTXDOLW\&KRI)&'  ²([ 0HWKRGRORJLFDO  +ROLVP &K RI )&' &K RI )3+& 6HF  6HFRI%&3&  ²([7KH(YROXWLRQIURP%DUEDULW\WR3RVW&LYLOL]DWLRQ%&,9   ‡$WWKH&RVPRORJLFDO7KHRUHWLFDO/HYHO ²([ 0DVWHULQJ RI GDUN PDWWHU DQG GDUN HQHUJ\ DQG WKH H[SORUDWLRQ RI PXOWLYHUVHV&KRI)3+&&KRI)&' &KRI)+&  ²([$OWHUQDWLRQRIVSDFHWLPH)3+67  ²([7KHHPHUJHQFHRIK\SHUVSDWLDOFRQVFLRXVQHVV)3+&   ‡$W2WKHU/HYHOV ²([ +LVWRULFDO SUHPRGHUQLW\ ĺ PRGHUQLW\ ĺ SRVWPRGHUQLW\ ĺ DIWHU SRVWPRGHUQLW\ KXPDQ GLVWLQFWLRQ DQG WKH ULVH RI SRVWKXPDQV LQFOXGLQJ IORDWLQJFRQVFLRXVQHVV &KRI)+& &KRI)&'  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHVHH[DPSOHVDUHVROHO\LOOXVWUDWLYHQRWH[KDXVWLYH DQGVRPHRIWKH LWHPV FDQ EH UHFODVVLILHG VRPHZKHUH HOVH 1RU DUH WKH\ DOZD\V PXWXDOO\ H[FOXVLYH 6LQFH WKH\ DUH JHQHUDOLWLHV H[FHSWLRQV DUH H[SHFWHG $QG WKH FRPSDULVRQLVUHODWLYHQRWDEVROXWH 6RXUFHV)URP7DEOHRI)3+&²ZLWKGHWDLOVIURP)+&)&'DQGWKHUHVW 

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH7KHRULHVRQ&LYLOL]DWLRQDO+ROLVP 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ,7KHRULHVLQ5HODWLRQWR1DWXUH ²$WWKH0DFUR3K\VLFDO&RVPRORJLFDO 7KHRUHWLFDO/HYHO ‡([7KHRU\RI+\SHU6SDWLDO&RQVFLRXVQHVV3HWHU%DRIX  &KRI)3+&  ‡([7KHRU\RI)ORDWLQJ&RQVFLRXVQHVV3HWHU%DRIX  &KRI)&'&KV RI)3+&  ‡([3HUVSHFWLYDO7KHRU\RI6SDFH7LPH3HWHU%DRIX  )3+67  ‡(['LDOHFWLF7KHRU\RI&RPSOH[LW\3HWHU%DRIX  )&  ‡([7KHRU\RIWKH*HRSRZHURI1DWXUH3HWHU%DRIX  &KRI$/'  ²$WWKH0LFUR3K\VLFDO7KHRUHWLFDO/HYHO ‡([3HUVSHFWLYDO7KHRU\RI6SDFH7LPH3HWHU%DRIX  )3+67  ‡(['LDOHFWLF7KHRU\RI&RPSOH[LW\3HWHU%DRIX  )&   ,,7KHRULHVLQ5HODWLRQWRWKH0LQG ²$WWKH%LRORJLFDO7KHRUHWLFDO/HYHO ‡([7KHRU\RI&RQWUDVWLYH$GYDQWDJHV3HWHU%DRIX  6HF &KRI)&'%11  ²$WWKH3V\FKRORJLFDO7KHRUHWLFDO/HYHO ‡([7KHRU\RI)ORDWLQJ&RQVFLRXVQHVV3HWHU%DRIX  &KRI)&'&KV RI)3+&  ‡([7KHRU\RI&RJQLWLYH3DUWLDOLW\3HWHU%DRIX  6HFRI)&'6HFRI%&3&  ‡([7KHRU\RI(PRWLRQDO1RQ1HXWUDOLW\3HWHU%DRIX  6HFRI)&'6HFRIRI%&3&  ‡([7KHRU\RI%HKDYLRUDO$OWHUDWLRQ3HWHU%DRIX  6HFRI%&3&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH     



7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ 



7DEOH7KHRULHVRQ&LYLOL]DWLRQDO+ROLVP 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ,,,7KHRULHVLQ5HODWLRQWR6RFLHW\ ²$WWKH2UJDQL]DWLRQDO7KHRUHWLFDO/HYHO ‡([7KHRU\RI(&LYLF$OLHQDWLRQ3HWHU%DRIX  &KRI)&'  ‡([&RPELQDWLRQDO7KHRU\RI2UJDQL]DWLRQDO%HKDYLRU3HWHU%DRIX  &KRI$/'  ²$WWKH,QVWLWXWLRQDO7KHRUHWLFDO/HYHO ‡([7KHRU\RI3RVW&DSLWDOLVP3HWHU%DRIX  &KRI)&'&KV RI)3+&%&3&  ‡([7KHRU\RI3RVW'HPRFUDF\3HWHU%DRIX  &KRI)&'&KV RI)3+&%'3'  ‡(['\QDPLF7KHRU\RI&RPSDUDWLYH3ROLWLFDO6\VWHPV3HWHU%DRIX  $/'  ²$WWKH6WUXFWXUDO7KHRUHWLFDO/HYHO ‡([7KHRU\RIWKH&\FOLFDO3URJUHVVLRQRI+HJHPRQ\3HWHU%DRIX  &KVRI)&'&KV RI)3+&%'3'  ‡([7KHRU\RIWKH&\FOLFDO3URJUHVVLRQRI(PSLUH%XLOGLQJ 3HWHU%DRIX  %:7  ²$WWKH6\VWHPLF7KHRUHWLFDO/HYHO ‡([7KHRU\RI3RVW+XPDQLW\3HWHU%DRIX  &KRI)+&&KV RI)&'&KV RI)3+&  ‡([7KHRU\RIWKH&\FOLFDO3URJUHVVLRQRI6\VWHP,QWHJUDWLRQ DQG)UDJPHQWDWLRQ3HWHU%DRIX  &KVRI)&'  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB FRQWLQXHGRQQH[WSDJH           

&KDSWHU$XWKRULWDULDQ/LEHUDO'HPRFUDF\DQG&XOWXUH 





7DEOH7KHRULHVRQ&LYLOL]DWLRQDO+ROLVP 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ,97KHRULHVLQ5HODWLRQWR&XOWXUH ²$WWKH&XOWXUDO7KHRUHWLFDO/HYHO ‡([7KHRU\RIWKH(YROXWLRQIURP%DUEDULW\WR3RVW&LYLOL]DWLRQ 3HWHU%DRIX  %&,9  ‡([7KHRU\RIWKH7ULQLW\RI0RGHUQLW\WR,WV$IWHU 3RVWPRGHUQ&RXQWHUSDUW3HWHU%DRIX  )+&&KRI)&'  ‡([7UDQVIRUPDWLYH7KHRU\RI$HVWKHWLF([SHULHQFH3HWHU%DRIX  )$(   97KHRULHVLQ5HODWLRQWRWKH5HVW ²$W2WKHU/HYHOV+LVWRULFDO  ‡([7KHRU\RIWKH(YROXWLRQIURP3UH0RGHUQLW\WR$IWHU 3RVWPRGHUQLW\3HWHU%DRIX  )+&&KRI)&')3+&   9,0HWD7KHRULHV ²$WWKH0HWKRGRORJLFDO0HWD7KHRUHWLFDO/HYHO ‡([7KHRU\RI([LVWHQWLDO'LDOHFWLFV3HWHU%DRIX  )+&)&')3+&%'3')&)$($/'  ²$WWKH2QWRORJLFDO0HWD7KHRUHWLFDO/HYHO ‡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

‡3$57)285‡ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  &RQFOXVLRQ                              





&+$37(5 &21&/86,21²7+()8785( 2)$87+25,7$5,$1/,%(5$/'(02&5$&