$"&" ( ,& (7+,&6 %(&$86(:($5(12752%27 &$ 'HSDUWPHQWRI6RFLDO 6WXGLHV !& & $ 723,&6 !"$ ! " ! " à ( " ! " ! ª & $ $" /($51,1*2%-(&7,9(6 'LIIHUHQWLDWHEHWZHHQPRUDODQGQRQPRUDOVWDQGDUGV 5HFRJQL]HDQGUHFDOODPRUDOH[SHULHQFH 'HWHFWDPRUDOGLOHPPD ,GHQWLI\WKHWKUHHOHYHOVRIPRUDOGLOHPPDV ([SODLQZK\RQO\KXPDQEHLQJVFDQEHHWKLFDO 2VFTUJPO 5(,6(_3$*( ,QPDQ\SDUWVRIWKHZRUOGWKHLVVXHRIOHJDOL]LQJHXWKDQDVLDDOVRFDOOHGDVDVVLVWHGVXLFLGHKDVJRQH WKURXJKPDMRUGHEDWHVTXHVWLRQLQJWKHPRUDOLW\RIWKHDFW7KHUHDUHVRPHFRXQWULHVZKLFKKDVVRIDU OHJDOL]HGDVVLVWHGVXLFLGH+RZHYHULWLV\HWWREHVHHQZKHWKHUHXWKDQDVLDZLOOEHFRPHDODZLQWKH 3KLOLSSLQHV b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ËVGHDWKIRUWKHSXUSRVHRIUHOLHYLQJ LQWROHUDEOHLQWUDFWDEOHDQGLQFXUDEOHSDLQ b 3K\VLFLDQDVVLVWHG VXLFLGHb LV WKH GRFWRUËV GHOLEHUDWHDVVLVWDQFHLQPSOHPHQWLQJbbD SDWLHQWËVVXLFLGHSODQ b ,QPDNLQJPRUDOGHFLVLRQVZKDWVWDQGDUGV DUH ZH VXSSRVHG WR IROORZ" :KR PDGH WKHVH VWDQGDUGV" :LOO IROORZLQJ WKHVH VWDQGDUGV PDNH XV DOO HWKLFDOO\ PRUDO" 7KHVHDUHEXWDIHZTXHVWLRQVWKDWQHHGWR EHDQVZHUHGDVZHDUHFRPSHOOHGWRDELGH E\HWKLFDOSULQFLSOHVGDLO\ b 7KH ULJKWQHVV RU ZURQJQHVV RI DQ DFW PDNHVXVZLOOLQJO\RUXQZLOOLQJO\FRQIURQW WKH PRUDOLW\ RI RXU GHFLVLRQV ,W LV VLJQLILFDQW WKHUHIRUH WKDW ZH DQDO\]H FDUHIXOO\ QRW RQO\ WKH PRWLYH RI RXU DFWLRQV EXW WR EH FHUWDLQ WKDW RXU DFWLRQV DUHLQGHHGNHHSLQJXSZLWKWKH HWKLFDOYDOXHVWKDWZHKDYH b $W WKH IRUHIURQW RI WKLV GLVFXVVLRQ LV WKH YDOXH WKDW ZH JLYH WR PRUDO VWDQGDUGV ZKLFK VHUYH DV RXU JXLGH WR WKH ULJKWQHVV RIRXUEHKDYLRU:HDUHWLHGWRVRPHVHWV RI PRUDO VWDQGDUGV WKDW ZH EULQJ ZLWK XV DV ZH PDNH PRUDO GHFLVLRQV 7KHVH VWDQGDUGV VHUYH DV RXU FRPSDVV D VRUW RI OLJKW LQ RXU SDWK NHHSLQJ XV RQ RXU WRHV WKXVDOORZLQJXVWRFKHFNLIRXUDFWLRQV EHKRRYHVHWKLFDODQGPRUDOLGHDOV b (7+,&6_3$*( 7KH TXHVWLRQ RI ZKDW LV PRUDOO\ ULJKW DQG ZURQJ KDV KRXQGHG PDQ WKURXJKRXW KLVWRU\ :H DOORZHG RXUVHOYHV WR EH MXGJHGE\VWDQGDUGVWKDWZHKDYHLPSRVHG XSRQ RXUVHOYHV ,Q RXU DWWHPSW WR SHUIHFW RXU DFWLRQV DQG OLYH LQ SHDFH ZLWK RXU IHOORZV DQG ZLWK QDWXUH ZH GHHPHG LW QHFHVVDU\WRFUHDWHHWKLFDOVWDQGDUGVWKDW ZLOOVXUPLVHZKHWKHURXUDFWLRQVDUHJRRG DQG RI WKH JUHDWHVW YLUWXH RU LI ZH KDYH EHHQRXWULJKWO\PLVVLQJWKHPDUN b (7+,&6 UHIHUV WR WKH SKLORVRSKLFDO FRQFHSW RI PRUDOLW\ HQGHDYRUV WR XQGHUVWDQG PRUDO FRQFHSWV DQG MXVWLI\ PRUDOSULQFLSOHV,WDQDO\]HVFRQFHSWVVXFK DVULJKWDQGZURQJDQGVHHNVWRHVWDEOLVK SULQFLSOHVRIULJKWEHKDYLRUWKDWPD\VHUYH DVJXLGHVWRDFWLRQIRUSHRSOHWRIROORZ 3RMPDQ 025$/,7<LVWKH HIIRUWWRJXLGH RQHËVFRQGXFWE\ UHDVRQWKDWLVbWR GRZKDWWKHUHDUH WKHEHVWUHDVRQV IRUGRLQJZKLOH JLYLQJHTXDO ZHLJKWWRWKH LQWHUHVWVRIHDFK LQGLYLGXDObZKR ZLOOEHDIIHFWHGE\ ZKDWRQHGRHV 5DFKHOV (7+,&6_3$*( 025$/96 121025$/ :+$7$5(025$/67$1'$5'6" b 7RDQDO\]HZKDWLVPRUDOO\DFFHSWDEOHRU QRWLWLVVLJQLILFDQWWR]HURLQRQWKH GHILQLWLRQRIPRUDOLW\DQGWKHVWDQGDUGV WKDWSRLQWRXWZKHWKHUDQDFWLRQLVPRUDO RUQRW b 0DVRQ GHVFULEHVWKDWPRUDOLW\LV DFKLHYHGZKHQDVHWRISRVVLEOHPRUHVRI DQ\VRFLDOJURXSDUHREVHUYHGDQG DFKLHYHG b 0RUHV SURQRXQFHGPRUHD\V DUH VWURQJO\KHOGQRUPVZKLFKHSLWRPL]HWKH GHHSO\KHOGVWDQGDUGVRIZKDWLVULJKWDQG ZURQJ 6WROOH\ b 0RUDOVWDQGDUGVDUHWKRVHHWKLFDO SULQFLSOHVWKDWZHOLYHE\DQGEHOLHYHb 7KHVHDUHLPSRUWDQWEOXHSULQWVRIRXU EHKDYLRUZKLFKZHDELGHE\GDLO\DQGDUH LQIOXHQFHGE\RXUVRFLHW\RUE\FHUWDLQ HWKLFDOXQLYHUVDOV ¼ (7+,&6_3$*( :+$7$5(121025$/ 67$1'$5'6" b 1RQPRUDO VWDQGDUGV DUH WKRVH XQZDQWHG SULQFLSOHV ZKLFK DUH LQ RSSRVLWLRQ WR HYHU\WKLQJWKDWZHDUHH[SHFWHGWREHDQG GR /LNHZLVH QRQPRUDO VWDQGDUGV DUH LQIOXHQFHGODUJHO\E\WKHFRQVWUXFWV SUHVFULEHGLQRXUVRFLHW\ b b ¼ b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b b $V 0DVRQ H[SODLQV ZH ZLOO H[SHULHQFH D PRUDO GLOHPPD LI ZH DUH IDFHG ZLWK WZR DFWLRQV RI HDFK RI ZKLFK LW ZRXOG EH FRUUHFW WR VD\ LQ WKH DSSURSULDWH VHQVH RI RXJKW WKDWLWRXJKWWREHGRQHDQGERWK RIZKLFKZHFDQQRWGR b b $V GHILQHG HXWKDQDVLD H[LVWV WR DW OHDVW KHOS D SDWLHQW GLH D JRRG GHDWK (]UD H[SODLQHGLWVWKUHHIRUPVZLWKWKH DVVXPSWLRQ WKDW WKH SDWLHQW KDV DQ DFXWH WHUPLQDO FKURQLF LOOQHVV WKDW PHGLFDO WUHDWPHQWFDQQRWUHPHG\RUHYHQFXUH 5(,6(_3$*(b b Í:H DUH FDSDEOH RI PDNLQJ MXGJPHQWV DERXW RXU RZQ DQG RWKHU SHRSOH V EHKDYLRU DQG KDYH WKH FDSDFLW\ FRQVFLRXVO\WRFKDQJHWKHZD\ZHEHKDYH DQGVRFLHW\DVZKROHÎ *XOGEHUJ b +HQFHLWLVRQO\XVKXPDQVZKRDUHDEOH WR PDNH RUDO FKRLFHV UHIOHFW UHWKLQN DQG UHDOLJQRXUDFWLRQVWRZKDWLVPRUDOO\DQG HWKLFDOO\DFFHSWDEOH7KHVHFKRLFHVDUHQRW LQKHUHQW LQ RWKHU OLYLQJ EHLQJV 7KXV ZH DUH LQ D YHU\ VSHFLDO SRVLWLRQ DV ZH DUH JLYHQWKDWLQQDWHFDSDELOLW\WRPDNHPRUDO GHFLVLRQV b 7+5((/(9(/6 2)025$/ ',/(00$,1 :25.3/$&( 7KHGLOHPPDKHUHLVZKHQWKHHPSOR\HHËV HWKLFDOVWDQGDUGVDUHLQRSSRVLWLRQWRWKDW RIKLVRUKHUHPSOR\HUZKLFKFRXOGOHDGWR WHQVLRQVLQWKHZRUNSODFH b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b 5(,6(_3$*(b )5(('20$6)281'$7,212)(7+,&6 Í$XWRQRP\ÎOLWHUDOO\PHDQVJLYLQJWKHODZWRRQHVHOIDQGRXU XQGHUVWDQGLQJ SURYLGHV ODZV WKDW FRQVWLWXWH WKH D SULRUL IUDPHZRUN RI RXU H[SHULHQFH 6WDQIRUG (QF\FORSHGLD RI 3KLORVRSK\ 7KLV D SULRU NQRZOHGJH LV SULRU WR RU LQGHSHQGHQW RI H[SHULHQFH EXW PRUH LPSRUWDQWO\ LGHQWLFDO IRU DOO KXPDQ EHLQJV DQG QRW VXEMHFW WR FKDQJH /RXGHQ b (7+,&6_3$*( 7RH[SODLQKLVFRQFHSWRIDXWRQRP\RUIUHHGRPDVIRXQGDWLRQ RI PRUDO DFW .DQW SRLQWHG RXW WKDW PRUDO ULJKWQHVV DQG ZURQJQHVVDSSO\RQO\WRIUHHDJHQWVZKRKDYHWKHFDSDFLW\WR UHJXODWH WKHLU EHKDYLRU DQG KDYH LW LQ WKHLU SRZHU DW WKH WLPH RI WKHLU DFWLRQV HLWKHU WR DFW ULJKWO\ RU QRW +HQFH ZKHQ ZH PDNH FKRLFHV ZH PXVW DFW XQGHU WKH LGHD RI IUHHGRP 0RUDOLW\DV)UHHGRPQG 4C782B !4& 1I X I X I WI1 X I3XIII XIX IXII X IX II X BI.I I IIX III X IXWI I IIX IIII X I B >Y Y XY Y X YYXY Y Y * Y Y :XY c Y Y X Y Y Y Y Y Y Y *Y FY Y Y Y Y c Y Y Y Y Y-= XY !#.*Y Y 7XY c Y Y Y Y Y Y Y -Y .Y YY YYYY Y Y Y Y Y Y -B 4 YY? XY !%.*Y 7XY Y Y Y Y Y Y Y Y *Y >Y Y Y Y Y Y Y Y c Y Y Y Y Y Y Y Y Y : Y *Y A Y Y Y Y Y Y Y Y *Y C Y XY Y Y Y Y Y Y Y Y Y *Y 7XY Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y YY * ¼ B Y Y Y Y Y Y Y Y XY Y Y Y Y * = XY Y Y Y Y Y Y Y Y Y Y Y XYB YY XYY Y Y Y Y Y XY Y Y Y YY Y YY * -01+$IInIII> 4CC782B !4& ' I6B6 !*YYF YYYY YYY Y YYc 0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll *YY Y Y Y Y YY YY YY Y YY Y0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll 8B7YY Y YY YYY Y0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll #*YYF Y Y Y Y Y Y YYY 0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll $*YFY YYY Y YY YY Y 0Y7Y YY YY 0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll -&-#),)I/#!01+IInIII6? %*YF YY Y Y Y Y YY YY Y0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll &*Y8Y Y YYY Y YYY XY YY Y YY Y0Y4 * llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll '*Y3YYYYYY YYY 0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll >BIB Y Y Y Y YY Y Y Y YYY Y Y YYY 0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll !*Y3YY YY Y Y Y 0Y4 *YF Y Y Y YYY Y Y 0 llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll llllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll lllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllll