,DWWULEXWHP\VXFFHVVWRWKLVߚ,QHYHUJDYHRUWRRNDQ\H[FXVH )ORUHQFH1LJKWLQJDOH &RS\ULJKWjE\0LNH%DUUHWW $OOULJKWVUHVHUYHG 1HLWKHUWKHDXWKRUQRUWKHSXEOLVKHURIWKLVERRNKDVDQ\DIILOLDWLRQZLWK$&7,QFQRUZLWKWKH$&7WHVW QRUZLWKDQ\RWKHUSHUVRQPHQWLRQHGLQWKLVERRNQRUZLWKDQ\WHVWSUHSDUDWLRQFRPSDQ\PHQWLRQHGLQWKLV ERRNDSDUWIURP7HVWLQJ,V(DV\//&$OOWUDGHPDUNVDUHWKHSURSHUW\RIWKHLUUHVSHFWLYHRZQHUV(YHU\ UHDVRQDEOHHIIRUWKDVEHHQPDGHWRHQVXUHWKDWWKHLQIRUPDWLRQLQWKLVERRNLVFRUUHFWEXWDQ\XVHRIWKLV ERRNRUUHOLDQFHRQWKHLGHDVFRQWDLQHGKHUHLQLVVWULFWO\DW\RXURZQULVN 7KH$&73UHS%ODFN%RRN ߡ7KH0RVW(IIHFWLYH$&76WUDWHJLHV(YHU3XEOLVKHGߢ %\0LNH%DUUHWW 'HGLFDWLRQ 7KLVERRNLVGHGLFDWHGWRP\IULHQGVDQGIDPLO\ߚSDVWSUHVHQWDQGIXWXUHߚDQGWRP\PDQ\FOLHQWVDQG UHDGHUVWKHZRUOGRYHUVRPHRIZKRPKDYHEHFRPHOLNHIULHQGVDQGIDPLO\WKHPVHOYHV<RXUVWHDGIDVW VXSSRUWKDVEHHQDEOHVVLQJDQG,DPPRUHJUDWHIXOWKDQ,FDQVD\ )UHH9LGHR'HPRQVWUDWLRQV ,I\RXߞGOLNHWRVHHYLGHRVRIVDPSOH$&7VROXWLRQVOLNHWKHRQHVLQWKLVERRNSOHDVHYLVLW ZZZ$&7SUHS9LGHRVFRP$VHOHFWLRQRIIUHHYLGHRVLVDYDLODEOHWKHUHIRUUHDGHUVRIWKLVERRN 7$%/(2)&217(176 '(',&$7,21 )5((9,'(2'(021675$7,216 127+$5'ߚ-86781868$/ *(77,1*7+(02672872)7+($&735(3%/$&.%22. $127(72&21&(51('3$5(176 )5(48(17/<$6.('48(67,216 ߡ+2::(//&$1,'2217+($&7"ߢ +2:7275$,1)257+($&7ߚ0$67(5,1*7+(,'($6,17+,6%22. 81'(567$1'<2850,67$.(6 7+(ߡ1$785$/7(677$.(5ߢ :+$7<28086781'(567$1'$%2877+($&7 7+(7587+$%2877+($&7 7+($&7ߞ6%,**(67:($.1(66 86,1*7+(5($/$&735(3*8,'(5'(',7,21 7+(ߡ5('%22.ߢ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ߞ7<285),567/$1*8$*( 3$57,1*$'9,&( 7+$1.6)255($',1* $33(1',;:5,7,1*722/%2; 1RW+DUGߚ-XVW8QXVXDO ߡ(YHU\JUHDWDQGGHHSGLIILFXOW\EHDUVLQLWVHOILWVRZQVROXWLRQ,WIRUFHVXVWRFKDQJHRXU WKLQNLQJLQRUGHUWRILQGLWߢ 1LHOV%RKU 0LOOLRQVRIVWXGHQWVZRUU\RYHUWKH$&7HYHU\\HDU7KH\VSHQGFRXQWOHVVKRXUV DQGGROODUV WU\LQJWR FUDPVFLHQWLILFWKHRULHVDQGREVFXUHWULJIRUPXODVLQWRWKHLUKHDGVVRWKH\FDQJHWWKHEHVWSRVVLEOHVFRUH ߚDQGPRVWRIWKHPMXVWHQGXSIUXVWUDWHGDQGXQKDSS\ZLWKWKHLUUHVXOWVGHVSLWHDOOWKHLUZRUN,I\RXߞUH UHDGLQJWKLVERRNLWߞVSUREDEO\EHFDXVH\RXߞUHDOVRXQKDSS\ZLWK\RXUSHUIRUPDQFHVRIDURQWKH$&7 ,I\RXZHUHKDSS\ZLWK\RXUVFRUH\RXZRXOGQߞWQHHGWRNHHSSUHSDULQJULJKW" %HFDXVHVRPDQ\SHRSOHKDYHVXFKDWRXJKWLPHZLWKWKH$&7 DQGZLWKRWKHUVWDQGDUGL]HGWHVWVOLNHLW WKHWHVWKDVGHYHORSHGDUHSXWDWLRQIRUEHLQJDGLIILFXOWREVWDFOHWRRYHUFRPH$ORWRISHRSOHZLOOWHOO\RX WKDWWKHRQO\ZD\WRߡSUHSDUHߢIRUWKH$&7LVWRUHDGQRYHOVVWXG\DGYDQFHGPDWKWDNH$3VFLHQFH FODVVHVZDWFKWKH'LVFRYHU\&KDQQHOEHWZHHQSUDFWLFHHVVD\VHFWLRQVDQGGRDOONLQGVRIRWKHU SRLQWOHVVO\ULJRURXVWKLQJV %XWWKRVHSHRSOHDUHZURQJ7KH$&7LVQߞWKDUGEHFDXVHLWߞVDGYDQFHG,WߞVKDUGEHFDXVHLWWHVWVWKH EDVLFVߚEXWLQYHU\VWUDQJHZD\V,WߞVGHVLJQHGDFFRUGLQJWRUXOHVWKDWDUHDFWXDOO\SUHWW\VLPSOHHYHQ WKRXJKWKH\ߞUHDOVRSUHWW\GLIIHUHQWIURPWKHUXOHVWKDWJRYHUQWHVWVLQKLJKVFKRRODQGFROOHJH 7KDWߞVDYHU\LPSRUWDQWLGHDVRPDNHVXUH\RXQHYHUIRUJHWLWWKH$&7LVRQO\FKDOOHQJLQJEHFDXVHLWߞVD ZHLUGWHVWRIEDVLFVNLOOVQRWEHFDXVHLWߞVDQDGYDQFHGWHVWWKDWUHZDUGV\RXIRUEHLQJDJHQLXV 7KLVERRNZLOOWHDFK\RXDVLPSOHDQGHIIHFWLYHDSSURDFKWRWKHWHVWDQDSSURDFKWKDWH[SORLWVWKH ZHDNQHVVHVFUHDWHGE\WKHVWDQGDUGL]HGQDWXUHRIWKH$&7<RXߞOOOHDUQWRWDNHWKHNQRZOHGJH\RXDOUHDG\ KDYHDQGDSSO\LWWRWKH$&7LQDZD\WKDWWKHWHVWZLOODFWXDOO\UHZDUGVR\RXFDQDFKLHYH\RXUKLJKHVW SRVVLEOHVFRUH 7KHDSSURDFK,ߞOOVKRZ\RXLQWKLVERRNLVRQH,ߞYHWDXJKWWRPDQ\PDQ\VWXGHQWVZKRXVHGLWWRJHWPXFK EHWWHUVFRUHVRQWKH$&7WKDQWKH\RULJLQDOO\WKRXJKWSRVVLEOH,I\RXSD\FDUHIXODWWHQWLRQWRWKHLGHDVDQG H[DPSOHVLQWKLVERRN\RXFDQXVHWKLVLQIRUPDWLRQWRLQFUHDVH\RXUVFRUHDVZHOOߚEXWWKDWZRQߞW KDSSHQXQOHVV\RXDFWXDOO\PDNHDQHIIRUWWROHDUQDQGSUDFWLFHWKHVHVWUDWHJLHV 'RQߞWH[SHFWWRUHDGWKLVZKROHERRNWKURXJKRQFHDQGWKHQMXVWDXWRPDWLFDOO\EHDEOHWRILQGWKHFRUUHFW DQVZHUWRHYHU\VLQJOH$&7TXHVWLRQ\RXHYHUVHHIRUWKHUHVWRI\RXUOLIH,I\RXUHDOO\ZDQWWRPD[LPL]H \RXUSHUIRUPDQFHLWLVQߞWHQRXJKMXVWWRUHDGZKDW,ߞYHZULWWHQ<RXDFWXDOO\KDYHWRDSSO\LWRQ\RXURZQ E\IROORZLQJWKHGULOOVDQGH[HUFLVHVLQWKLVERRNWU\LQJWRILJXUHRXWUHDOWHVWTXHVWLRQVIURP$&7,QF DQGOHDUQLQJIURP\RXUPLVWDNHV$SSO\LQJWKLVPHWKRGPHDQVDGMXVWLQJWRDGLIIHUHQWZD\RIWKLQNLQJ DERXWWKH$&7ZKLFKPHDQV\RXߞOOQHHGWRSUDFWLFHDJDLQVWUHDO$&7TXHVWLRQVXQWLO\RXJHWWKHKDQJRI LW7KLVGRHVWDNHDOLWWOHWLPHIRUPRVWSHRSOHEXWQRWQHDUO\DVPXFKWLPHDVWKHߡWUDGLWLRQDOߢ PDLQVWUHDPDSSURDFKߚDQGWKHUHVXOWVDUHIDUEHWWHU 6RLI\RXZDQWJUHDWUHVXOWVJLYHXVERWKDILJKWLQJFKDQFH5HDGWKLVZKROHERRNZLWKDQRSHQPLQG IROORZDORQJZLWKWKHTXHVWLRQZDONWKURXJKVWRVHHKRZWKHVHLGHDVDUHDSSOLHGWRUHDO$&7SUDFWLFH TXHVWLRQVJRWRZZZ$&7SUHS9LGHRVFRPWRZDWFKWKHIUHHYLGHRGHPRQVWUDWLRQVDQGߚDERYHDOOHOVH ߚVWLFNWRLWZKHQ\RXUXQLQWRVRPHWKLQJFKDOOHQJLQJRUVRPHWKLQJWKDWGRHVQߞWVHHPWRPDNHVHQVHDW ILUVW ,ߞYHGRQHHYHU\WKLQJ,FDQLQWKLVERRNWRVKRZ\RXKRZWKH$&7UHDOO\ZRUNVDQGKRZ\RXFDQEHDWLW 1RZLWߞVXSWR\RXWROHDUQWKDWPDWHULDOSUDFWLFHLWDQGPDNHLWKDSSHQ /HWߞVJHWULJKWGRZQWRLW 5HPHPEHU7KH5XOHV$QG'RQߞW*LYH8S 7KHUHZLOOEHWLPHVLQ\RXUSUDFWLFH DQGHYHQRQWHVWGD\ ZKHQ\RXHQFRXQWHUDTXHVWLRQWKDWVHHPVWR EUHDNWKHUXOHVWKDWZHߞOOWDONDERXWLQWKLVERRN7KLVKDSSHQVWRHYHU\ERG\ߚLWHYHQKDSSHQVWRPH RFFDVLRQDOO\ :KHQLWGRHVKDSSHQZHPXVWUHPHPEHUWKDWLWߞVDOZD\VEHFDXVHZHߞYHPDGHDPLVWDNH ,NQRZWKDWVRXQGVKDUVKEXW,VD\WKHH[DFWVDPHWKLQJWRP\VHOIZKHQ,UXQLQWRDTXHVWLRQ,FDQߞWILJXUH RXWDWILUVWߡ2ND\0LNHߚDFFRUGLQJWRWKHZD\\RXߞYHMXVWUHDGWKLVTXHVWLRQQRQHRIWKHDQVZHUFKRLFHV LVFRUUHFW%XW\RXNQRZWKDW$&7TXHVWLRQVDUHDOZD\VZULWWHQVRWKDWH[DFWO\RQHDQVZHUFKRLFHLVYDOLG DFFRUGLQJWRWKHWHVWߞVUXOHV7KDWPHDQV\RXPXVWKDYHPDGHDPLVWDNHDQGUHDGWKHTXHVWLRQZURQJߢ <RXVHHWKH$&7LVDVWDQGDUGL]HGWHVWWKDWߞVFDUHIXOO\FRQWUROOHG$VWDQGDUGL]HGWHVWPXVWDOZD\V IROORZWKHVDPHUXOHVRUHOVHLWZRXOGQߞWEHVWDQGDUGL]HGDQ\PRUH,WߞVLPSRUWDQWWKDWZHQHYHUHYHU IRUJHWWKDW 2QDVWDQGDUGL]HGWHVWWKHUHDUHOLPLWVWRWKHZD\VTXHVWLRQVFDQEHDVNHGDQGWKHUHDUHUXOHVDQG SDWWHUQVWKDWJRYHUQWKLQJVOLNHWKHUHODWLRQVKLSVDPRQJDQVZHUFKRLFHVWKHUHODWLRQVKLSRIWKHTXHVWLRQWR WKHUHOHYDQWSDVVDJHRUGLDJUDPDQGVRRQ,I\RXXQGHUVWDQGWKHVHUXOHVDQG\RXXQGHUVWDQGKRZ LPSRUWDQWWKH\DUH\RXߞOOGREHWWHURQWKHWHVWEHFDXVH\RXߞOONQRZKRZWRKDQGOHZKDW\RXVHHRQWHVW GD\,I\RXGRQߞWDSSUHFLDWHWKHLPSRUWDQFHRIWKHUXOHVWKHQ\RXߞOOVWDUWWRIHHOORVWSUHWW\TXLFNO\ EHFDXVHLWZLOOVHHPOLNHWKH$&7FRXOGDVN\RXDQ\WKLQJDWDOODQG\RXPLJKWQRWNQRZKRZWRDQVZHU 7KLVLVZK\LWߞVVRLPSRUWDQWWKDW\RXUHPHPEHUDOOWKRVHUXOHVDUHVWLOOLQHIIHFWHYHQZKHQDTXHVWLRQ FKDOOHQJHV\RX)RUFLQJ\RXUVHOIWRHYDOXDWHHDFKUHDO$&7TXHVWLRQLQWHUPVRIWKHWHVWߞVUXOHVZLOOJLYH \RXWKHEHVWFKDQFHRIILJXULQJRXWKRZWRDQVZHUWKHTXHVWLRQFRUUHFWO\ 7KHWHVWߞVUXOHVDUHQHYHUEURNHQ$OOWKHTXHVWLRQV\RXVHHRQDUHDO$&7 RQHWKDWߞVZULWWHQDQG SXEOLVKHGE\$&7,QF KDYHEHHQFDUHIXOO\HGLWHGDQGUHYLHZHGE\PDQ\SHRSOHWRPDNHVXUHWKH\ILWWKH $&7ߞVGHVLJQVWDQGDUGV,IDTXHVWLRQVKRZVXSRQWHVWGD\WKHQLWߞVYDOLGDQGLWߞ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ߞWVHHPWRIROORZWKHWHVWߞVUXOHVDWILUVW 6RZKHQWKLVKDSSHQVߚDQGLWGHILQLWHO\ZLOO,SURPLVH\RXߚUHPHPEHUWKDWWKH$&7LVLQWHQWLRQDOO\ WU\LQJWRJHW\RXWRPLVUHDGRUPLVXQGHUVWDQGVRPHWKLQJ 'RQߞWOHWLWJHWDZD\ZLWKWKDW *HWWLQJ7KH0RVW2XW2I7KH$&73UHS%ODFN%RRN 7KHEHVWZD\IRU\RXWRXVHWKLVERRNZLOOGHSHQGRQWKHWLPH\RXKDYHEHWZHHQQRZDQG\RXUWHVWGDWH ,I\RXߞUHQRWLQPXFKRIDWLPHFUXQFKWKHYHU\EHVWWKLQJWRGRLVMXVWWRUHDGWKHZKROHERRNLQRUGHU 'RLQJ\RXUEHVWRQWKH$&7DQGGRLQJWKDWHIILFLHQWO\LVYHU\PXFKDERXWGHYHORSLQJDQXQGHUVWDQGLQJRI WKHZD\WKHHQWLUHWHVWZRUNVHYHQLI\RXIHHOOLNH\RXRQO\QHHGKHOSLQRQHRUWZRVHFWLRQV5HDGLQJWKH ZKROHERRNZLOOJLYH\RXWKHFOHDUHVWRYHUDOOSLFWXUHRIWKHVSHFLDOZD\WKLVWHVWRSHUDWHVVRP\ UHFRPPHQGDWLRQIRUDQ\RQHZKRLVQߞWLQDWLPHFUXQFKLVDJDLQWRUHDGWKLVHQWLUHERRNLQWKHRUGHULWߞV SUHVHQWHG 2IFRXUVHVRPHSHRSOHDUHVKRUWRQWLPHIRUWKHLUSUHSDUDWLRQ,I\RXILQG\RXUVHOILQWKDWVLWXDWLRQWKHQ \RXVKRXOGUHDGWKHVHFWLRQVLQWKLVERRNWKDWSHUWDLQWRWKHVHFWLRQVDQGTXHVWLRQW\SHV\RXILQGPRVW FKDOOHQJLQJ%H\RQGWKDWWKRXJK\RXVKRXOGEHVXUHWRUHDGDIHZRWKHULPSRUWDQWVHFWLRQVWKDWGRQߞW UHODWHWRDQ\VSHFLILFTXHVWLRQW\SH7KHVHVHFWLRQVDUHXVHIXOEHFDXVHWKH\ߞOODGGUHVVWUDLQLQJLGHDVDQG IUHTXHQWO\DVNHGTXHVWLRQVUHODWHGWRWKH$&7DQGWKH\ߞOODOVRJLYH\RXDYLWDORYHUYLHZRIWKHVWUXFWXUH DQGIXQFWLRQRIWKHWHVWߚDQGWKDWNQRZOHGJHZLOOPDNHWKHVSHFLILFVWUDWHJLHVPRUHLQWXLWLYHDQGHDVLHUWR DSSO\ 7KDWVDLGKHUHDUHWKHVHFWLRQV\RXVKRXOGVWLOOUHDGHYHQLI\RXߞUHVKRUWRQWLPH w)UHTXHQWO\$VNHG4XHVWLRQV w+RZ7R7UDLQ)RU7KH$&7ߚ0DVWHULQJ7KH,GHDV,Q7KLV%RRN w8QGHUVWDQG<RXU0LVWDNHV w:KDW<RX0XVW8QGHUVWDQG$ERXW7KH$&7 w&DUHOHVVQHVV:LOO&RVW<RX w+LWWLQJ$7DUJHW6FRUH ,I\RXߞUHUHDGLQJWKLVOLWHUDOO\WKHQLJKWEHIRUHWKHWHVW\RXPD\GHFLGHRQO\WRUHDGWKHVHFWLRQVSHUWDLQLQJ WRWKHTXHVWLRQW\SHVWKDWJLYH\RXWKHPRVWWURXEOHߚEXWLIDWDOOSRVVLEOH,ߞGUHFRPPHQGWKDW\RXWU\WR UHDGWKHVHFWLRQV,MXVWOLVWHGDVZHOO :KDWߞV,Q7KLV%RRN :HߞOOVWDUWRXUGLVFXVVLRQRIWKH$&7ZLWKVRPHJHQHUDOLQIRUPDWLRQDERXWWKHSXUSRVHRIWKHWHVWKRZ LWߞVGHVLJQHGDQGZK\<RXPD\EHWHPSWHGWRVNLSRUVNLPWKLVLQIRUPDWLRQEXW,ZRXOGVWURQJO\ UHFRPPHQGWKDW\RXUHDGLWFDUHIXOO\LQVWHDG7KLVLQIRUPDWLRQOD\VDQLPSRUWDQWIRXQGDWLRQWKDWZLOOKHOS \RXXQGHUVWDQGZK\WKHVHVWUDWHJLHVZRUNZKLFKZLOOKHOS\RXWRDSSO\WKHPPRUHHIIHFWLYHO\DQG FRQVLVWHQWO\DV\RXOHDUQWKHP $IWHUWKDWZHߞOOORRNDWHDFKPDMRUTXHVWLRQW\SHRQWKH$&7:HߞOOOHDUQKRZHDFKTXHVWLRQW\SHZRUNV DQGWKHEHVWZD\WRDSSURDFKLW7KHQZHߞOOGRDZDONWKURXJKRIWKHPRVWFKDOOHQJLQJDQGQRWDEOH TXHVWLRQVRIHDFKW\SHWKDWDSSHDULQWKHSUDFWLFHWHVWVLQ\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG (GLWLRQ ZKLFK,ZLOODIIHFWLRQDWHO\UHIHUWRDVWKHߡ5HG%RRNߢEHFDXVHLWߞVUHGDQGLWߞVDERRN 7KDW ZD\\RXߞOOEHDEOHWRVHHP\WHFKQLTXHVLQDFWLRQDJDLQVWDZLGHYDULHW\RIUHDO$&7TXHVWLRQVZKLFK ZLOOKHOS\RXPDVWHUWKHVWUDWHJLHV\RXߞOOOHDUQLQWKLVERRN ,FDOOWKRVHTXHVWLRQVWKHPRVWFKDOOHQJLQJDQGQRWDEOHEHFDXVHWKH\ߞUHHLWKHUWKHRQHVWKDWP\SULYDWH WXWRULQJFOLHQWVWHQGWRDVNDERXWPRVWIUHTXHQWO\RUWKH\ߞUHWKHRQHVWKDW,FRQVLGHUWREHH[FHOOHQW H[DPSOHVRISDUWLFXODUFRQFHSWVIURPWKLVERRN $IWHUZHߞYHJRQHWKURXJKDOOWKHTXHVWLRQW\SHVDQGVHHQWKHWHFKQLTXHVLQDFWLRQDJDLQVWUHDOSUDFWLFH TXHVWLRQVRIHDFKW\SHZHߞOOFORVHZLWKDIHZVKRUWDUWLFOHVFRYHULQJRWKHUKHOSIXOWRSLFVVXFKDVPDNLQJ DQHOLWHVFRUH DQGDYRLGLQJFRPPRQ$&7PLVFRQFHSWLRQV 7KH5HDO$&73UHS*XLGHUG(GLWLRQ $.$7KHߡ5HG%RRNߢ %\QRZ,ߞYHDOUHDG\PHQWLRQHGWKHVRFDOOHGߡ5HG%RRNߢ,WVRIILFLDOQDPHLV7KH5HDO$&73UHS*XLGH UG(GLWLRQDQGLWߞVPDGHE\$&7,QF,ߞOOPHQWLRQLWPDQ\PDQ\PRUHWLPHVWKURXJKRXWWKHUHVWRIWKLV ERRN7KH5HG%RRNLVWKHRQO\$&7SUHSERRNWKDWߞVSXEOLVKHGE\WKHVDPHFRPSDQ\WKDWDFWXDOO\ZULWHV WKH$&7ZKLFKPHDQVLWߞVDOVRWKHRQO\ERRNWKDWFRQWDLQVUHDO$&7SUHSTXHVWLRQVZKLFKDUHDEVROXWHO\ HVVHQWLDOWR\RXUSUHSDUDWLRQ PRUHRQWKDWODWHU ,I\RXZDQWWRSUHSDUHIRUWKH$&7HIIHFWLYHO\\RXPXVWKDYHDFFHVVWRWKH5HG%RRN<RXFDQEX\LW RQOLQHDQG\RXFDQDOVRILQGLWLQORFDOERRNVWRUHV<RXFDQHYHQERUURZLWIURP\RXUVFKRROOLEUDU\RU ORFDOOLEUDU\1RPDWWHUZKHUH\RXJHWLWWKRXJK\RXQHHGDFRS\ $WWKHWLPHWKDW,ߞPZULWLQJWKLVWKHPRVWUHFHQWYHUVLRQLVWKHUGHGLWLRQVRWKDWߞVWKHRQH\RXVKRXOGXVH WRIROORZDORQJZLWKWKHZDONWKURXJKVLQWKLVERRN 7KH%ODFN%RRNWKDW\RXߞUHUHDGLQJULJKWQRZZLOOWHDFK\RXHIIHFWLYHVWUDWHJLHVIRUWDFNOLQJHYHU\W\SHRI UHDO$&7TXHVWLRQEXW\RXFDQRQO\SUDFWLFHWKRVHVWUDWHJLHVLI\RXKDYHUHDO$&7TXHVWLRQVWRSUHSZLWK ߚVROHWPHVD\LWRQHPRUHWLPH ,I\RXZDQWWRGRDJRRGMRERISUHSDULQJIRUWKH$&7\RXPXVWKDYHDFRS\RI7KH5HDO$&73UHS *XLGHUG(GLWLRQ $OVR,VWURQJO\VWURQJO\DGYLVHWKDW\RXDYRLGSUDFWLFHTXHVWLRQVIURPDQ\RWKHUFRPSDQ\ZHߞOOJHWLQWR WKHUHDVRQIRUWKDWVRRQ )LUVWOHWPHDGGUHVVDFRPPRQFRQFHUQ,VRPHWLPHVHQFRXQWHUIURPWKHSDUHQWVRIP\VWXGHQWV $1RWH7R&RQFHUQHG3DUHQWV ߡ,I\RXDUHWUXO\VHULRXVDERXWSUHSDULQJ\RXUFKLOGIRUWKHIXWXUHGRQ WWHDFKKLPWR VXEWUDFWߚWHDFKKLPWRGHGXFWߢ )UDQ/HERZLW] (YHU\VRRIWHQ,JHWDQHPDLOIURPDSDUHQWZKRLVFRQFHUQHGDERXWP\PHWKRGRISUHSDULQJIRU VWDQGDUGL]HGWHVWV%DVLFDOO\WKHSDUHQWLVZRUULHGWKDWDSSURDFKLQJWKHWHVWLQWKHZD\,UHFRPPHQG VRPHKRZFRUUXSWVWKHSXUSRVHRIWKHWHVWDVDOHDUQLQJH[SHULHQFHIRUKLVFKLOG/HWPHWDNHDPLQXWHWR DGGUHVVWKLVFRQFHUQLQWKHEHJLQQLQJVRZHߞUHDOORQWKHVDPHSDJHIRUWKHUHVWRIWKLVERRNDQGIRUWKH UHVWRI\RXUSUHSDUDWLRQ $V,ߞYHDOUHDG\PHQWLRQHGDQGDV,ߞOOFRQWLQXHWRPHQWLRQWKURXJKRXWWKHERRNVWDQGDUGL]HGWHVWVOLNHWKH $&7KDYHYHU\OLWWOHLQFRPPRQZLWKWKHWHVWV\RXPLJKWWDNHLQVFKRRO,QVFKRROWHVWVKDYHDORWWRGR ZLWK\RXUDELOLW\WRPHPRUL]HDORWRILQIRUPDWLRQDKHDGRIWLPHDQGWKHQUHFDOOWKDWPDWHULDORQWHVWGD\ %XWGRLQJZHOORQWKH$&7LVPXFKPRUHDERXWEHLQJDEOHWRXQGHUVWDQGDVHWRIVWDQGDUGL]HGUXOHVDQG SDWWHUQVDQGWKHQUHFRJQL]LQJWKRVHSDWWHUQVDQGUXOHVLQDFWLRQDQGUHVSRQGLQJDFFRUGLQJO\RQWHVWGD\LQ DKLJKO\UHSHWLWLYHZD\ ,QRWKHUZRUGVSUHSDULQJIRU DQGGRLQJZHOORQ WKH$&7LVQߞWDOHDUQLQJH[SHULHQFHLQWKHZD\\RX PLJKWWKLQNLWVKRXOGEH7KHVNLOOVWKDW\RXQHHGWRGRZHOORQWKH$&7VLPSO\DUHQߞWWKHVDPHVNLOOV \RXߞYHGHYHORSHGLQVFKRROIRUWKHPRVWSDUW /HWPHEHYHU\FOHDUKHUH,WKLQNOHDUQLQJLVH[WUHPHO\LPSRUWDQW,WKLQNLWߞVDYHU\ELJGHDOIRUVWXGHQWV WREHSDVVLRQDWHDERXWOHDUQLQJDQGXQGHUVWDQGLQJQHZPDWHULDO,WߞVHVVHQWLDOIRUDOORIXVWRUHDGQRYHOV DQGOHDUQKLVWRU\DQGVWXG\VFLHQFHDQGWRGHYHORSDQGJURZLQWHOOHFWXDOO\ߚQRWMXVWLQKLJKVFKRRORU FROOHJHEXWIRURXUZKROHOLYHV %XWLIDKLJKVFKRROVWXGHQWLVWU\LQJWRGRKHUEHVWRQWKH$&7WKHQGHYHORSLQJDQGJURZLQJLQWKRVH ZD\VVLPSO\LVQߞWJRLQJWRKHOSPXFKEHFDXVHWKH$&7GRHVQߞWDFWXDOO\UHZDUGWKDWNLQGRIJURZWK6R ZKHQ,VD\WKLQJVOLNHߡPDNHXSDQ\H[DPSOHV\RXZDQWIRU\RXUHVVD\ߢRUߡGRQߞWZRUU\DERXWH[DFWO\ ZKDWWKLVZRUGPHDQVߢRUߡWKHUHߞVQRSRLQWLQOHDUQLQJDGYDQFHGPDWKIRUPXODVIRUWKLVNLQGRIVLWXDWLRQߢ LWߞVDEVROXWHO\QRWEHFDXVH,ߞPDJDLQVWOHDUQLQJVWXIILQJHQHUDO,WߞVRQO\EHFDXVHWKHSRLQWRIWKLV%ODFN %RRNLVWRKHOSP\UHDGHUVJHWWKHEHVWVFRUHVRQWKH$&7WKDWWKH\SRVVLEO\FDQDQGGRLQJWKDWUHTXLUHV WKHPWRNQRZKRZWKHWHVWDFWXDOO\ZRUNVߚHYHQLILWVHHPVOLNHZHߞUHDYRLGLQJDQRSSRUWXQLW\WROHDUQ VRPHWKLQJ ,IWKDWߞVDVXUSULVHWR\RXEHDUZLWKPHDQGZHߞOODGGUHVVDOOWKRVHLVVXHVPRUHVSHFLILFDOO\LQWKH FRPLQJVHFWLRQV (YHQWKRXJKLWPLJKWVHHPOLNHSUHSDULQJIRUDWHVWDVLPSRUWDQWDVWKH$&7VKRXOGQHFHVVDULO\LQYROYH VKDUSHQLQJWKHVNLOOVRQHZRXOGWUDGLWLRQDOO\DVVRFLDWHZLWKEHLQJDߡJRRGVWXGHQWߢLWߞVSUREDEO\EHVWLI \RXGRQߞWORRNDWLWWKLVZD\,WߞVPXFKEHWWHULIZHXQGHUVWDQGWKDWGRLQJZHOORQWKH$&7UHTXLUHVD GLIIHUHQWVHWRIVNLOOVIURPWKRVHUHTXLUHGWRGRZHOOLQVFKRROVRWKDWZHFDQIRFXVRQGHYHORSLQJWKRVH VNLOOV7KH$&7LVVLPSO\DQREVWDFOHZHKDYHWRRYHUFRPHVRZHFDQPRYHRQWRWKHQH[WVWHSLQWKH HGXFDWLRQDOSURFHVV $JDLQ,ߞPDILUPEHOLHYHULQGRLQJZHOOLQVFKRROUHDGLQJZLGHO\OHDUQLQJQHZZRUGVDQGVWXG\LQJ PDWKDQGVFLHQFH EXWLI,WROGP\UHDGHUVWRGRWKRVHWKLQJVLQRUGHUWRLPSURYHWKHLU$&7VFRUHV,ߞGEHZDVWLQJWKHLU WLPH 6LQFHRXURQO\JRDOKHUHLVWRJHWWKHKLJKHVWVFRUHZHFDQDQGVLQFHWKDWLQYROYHVIROORZLQJDOOWKHUXOHV RIWKH$&7ZHߞOOIRFXVRQOHDUQLQJDQGH[SORLWLQJWKRVHUXOHVIRUWKHGXUDWLRQRIWKLV%ODFN%RRN 2ND\*ODGZHFRYHUHGWKDW,IVRPHRILWGLGQߞWPDNHVHQVHLWߞOOSUREDEO\EHFOHDUHGXSDIWHU\RXUHDG WKHQH[WIHZVHFWLRQVZKHQZHGLVFXVVKRZHYHU\ERG\WKLQNVWKH$&7ZRUNVDQGKRZLWDFWXDOO\ ZRUNV )UHTXHQWO\$VNHG4XHVWLRQV 7KHUHDUHDIHZTXHVWLRQVWKDW,KHDUIURPDOPRVWHYHU\ERG\,ZRUNZLWKRQWKH$&7VR,WKRXJKWLW ZRXOGEHDJRRGLGHDWRDGGUHVVWKRVHKHUH *HQHUDO4XHVWLRQV +RZPXFKWLPHGR,QHHGWRSUHSDUHIRUWKH$&7" 7KHUHLVQRXQLYHUVDODQVZHUWRWKLVTXHVWLRQߚVRPHVWXGHQWVZLOOIHHOFRPIRUWDEOHDIWHUVWXG\LQJIRURQO\ DFRXSOHRIGD\VZKLOHRWKHUVZLOOSUDFWLFHIRUDFRXSOHRIPRQWKVEHIRUHWKH\IHHOWKH\ߞYHJRWWKHKDQJRI LW,GHDOO\\RXVKRXOGSUREDEO\VWDUWDWOHDVWDFRXSOHRIPRQWKVRXWIURPWKHWHVWGDWHWRJLYH\RXUVHOI VRPHH[WUDWLPHEXWLI\RXKDYHOHVVWKDQWKDW\RXFDQVWLOOVHHJUHDWLPSURYHPHQW7U\WRWKLQNOHVVDERXW ߡSXWWLQJLQWKHWLPHߢDQGWKLQNPRUHDERXWGHYHORSLQJDEHWWHUXQGHUVWDQGLQJRIWKHWHVWZLWKHDFKSUDFWLFH VHVVLRQ +RZGLG\RXOHDUQWKHVHVWUDWHJLHV" ,GHYHORSHGWKHVHVWUDWHJLHVWKURXJKFDUHIXODQDO\VLVRIWKHWHVWRYHUWKHFRXUVHRIPDQ\\HDUV,ߞYHEHHQ WHDFKLQJWKHPQRZIRUZHOORYHUDGHFDGHWKURXJKDQXPEHURIGLIIHUHQWPHGLDDQGLQWKDWWLPH,ߞYH ZRUNHGWRUHILQHWKHWHFKQLTXHVߚDVZHOODVWKHZD\,WHDFKWKHPߚWRPDNHWKHZKROHSURFHVVDV HIIHFWLYHDQGHIILFLHQWDVSRVVLEOH7ROHDUQPRUHDERXWPHDQGP\EDFNJURXQGWDNHDORRNDWP\EORJDW ZZZ7HVWLQJ,V(DV\FRP :KDWߞVWKHEHVWZD\WRJHWVWDUWHG" $VSUHYLRXVO\GLVFXVVHGWKHEHVWZD\WRJHWVWDUWHGLVMXVWWRUHDGWKHPDWHULDOLQWKHRUGHULWߞVSUHVHQWHG <RXߞOOVWDUWRXWZLWKVRPHJHQHUDOLQIRUPDWLRQDERXWWKHWHVWWKHQ\RXߞOOOHDUQWKHVWUDWHJLHVIRUDJLYHQ VHFWLRQLQWKHDEVWUDFWWKHQ\RXߞOOVHHWKHPLQDFWLRQDJDLQVWUHDO$&7SUDFWLFHTXHVWLRQV EHVXUHWR IROORZDORQJLQ\RXUFRS\RIWKH5HG%RRN 2IFRXUVHDIWHUWKDWLWߞVLQFUHGLEO\LPSRUWDQWWKDW\RXWU\WKHVHWHFKQLTXHV\RXUVHOIRQUHDOSUDFWLFH$&7 TXHVWLRQVDQGWKHQFDUHIXOO\UHYLHZ\RXUSUDFWLFH0RUHRQWKDWODWHUHVSHFLDOO\LQWKHVHFWLRQFDOOHG ߡ+RZ7R7UDLQ)RU7KH$&7ߢ $OVRIRUDVHOHFWLRQRIYLGHRGHPRQVWUDWLRQVRIWKHLGHDVLQWKLVERRNFKHFNRXW ZZZ$&7SUHS9LGHRVFRP IUHHWRUHDGHUVRIWKLVERRN 'RWKHVHVWUDWHJLHVZRUNRQWKH6$7" $VZHߞOOEULHIO\GLVFXVVLQDQRWKHUVHFWLRQWKH6$7DQGWKH$&7DUHIXQGDPHQWDOO\WKHVDPH7KH\ߞUH ERWKLQWHUQDWLRQDOO\DGPLQLVWHUHGVWDQGDUGL]HGWHVWVIRUKLJKVFKRROVWXGHQWVWKDWSULPDULO\WHVWEDVLF UHDGLQJDQGPDWKVNLOOVLQZD\VWKDWGLIIHUIURPWKRVHXVHGE\ߡQRUPDOߢFODVVURRPWHVWV,QIDFWPRVWRI WKHTXHVWLRQVWKDWDSSHDURQHLWKHUWHVWFRXOGDOVRDSSHDURQWKHRWKHURQHEHFDXVHPRVWRIWKHUXOHVRQWKH WZRWHVWVDOORZWKHVDPHW\SHVRITXHVWLRQVLQPDQ\VLWXDWLRQV 7KHUHDUHH[FHSWLRQVWRWKLVRIFRXUVHߚ HDFKWHVWDOVRKDVTXHVWLRQW\SHVWKDWGRQߞWHYHQDSSHDURQWKHRWKHUWHVWIRURQHWKLQJ%XWWKHSULQFLSOHV XQGHUO\LQJWKHGHVLJQRILQGLYLGXDOTXHVWLRQVRQERWKWHVWVDUHVWLOOODUJHO\VLPLODU 6WLOOLWߞVLPSRUWDQWWRUHDOL]HWKDWVSHFLILFTXHVWLRQW\SHVWKDWPLJKWVHHPWREHFRPPRQWRERWKWHVWVDUH QRWSHUIHFWO\LGHQWLFDO(DFKWHVWKDVLWVRZQVSLQRQUHDGLQJZULWLQJDQGPDWKDQGRIFRXUVHWKH$&7 KDVWKH6FLHQFHVHFWLRQ DOWKRXJK\RXߞOOVHHWKDWWKLVVHFWLRQPRVWO\UHTXLUHVDFRPELQDWLRQRIWKHVNLOOV XVHGLQWKH5HDGLQJDQG0DWKVHFWLRQV 6RZKLOHDOOWKHXQGHUO\LQJSULQFLSOHVWKDW\RXߞOOOHDUQLQWKLV %ODFN%RRNDSSO\WRERWKWHVWVߚWKHLGHDRIWHVWLQJVLPSOHFRQFHSWVLQXQXVXDOZD\VWKHKLJKO\ VWDQGDUGL]HGVWUXFWXUHDQGVRRQߚWKHVSHFLILFVWUDWHJLHVIRUVSHFLILFTXHVWLRQW\SHVDUHQߞWDOOWKHVDPH,I \RXߞUHIDPLOLDUZLWKP\6$7SUHSDUDWLRQPDWHULDOV\RXPD\ILQGWKDWVRPHRIWKHPRUHJHQHUDO LQIRUPDWLRQLQWKLVERRNLVVLPLODUWRWKHJHQHUDOLQIRUPDWLRQLQP\6$7ERRNWKRXJKWKHVSHFLILFGHWDLOV UHODWHGWRWKHTXHVWLRQW\SHVPD\YDU\TXLWHDELW 6RPHVWXGHQWVDUHDEOHWRWDNHWKHIXQGDPHQWDOVRIP\DSSURDFKWRWKH$&7DQGPRGLI\WKHP DSSURSULDWHO\WREHXVHGRQWKH6$7,I\RXߞGOLNHWRWHVWWKDWRXWVLPSO\WU\WRDWWDFNVRPHUHDO6$7 SUDFWLFHTXHVWLRQVDIWHU\RXߞYHEHFRPHFRPIRUWDEOHZLWKWKHVWUDWHJLHVLQWKLVERRN,I\RXILQG\RXFDQ DSSO\WKHPHIIHFWLYHO\JUHDW,IQRWWKHQ\RXߞOOSUREDEO\ZDQWWRXVHVRPH6$7VSHFLILFWUDLQLQJ PDWHULDOV,UHFRPPHQGP\6$73UHS%ODFN%RRNIRUWKDWߚEXWRIFRXUVH,ߞPELDVHG :KDWLI,ZDQWWRVFRUHD"2UD"2U"2UD"2U" 7KHUHߞVDFRPPRQPLVFRQFHSWLRQWKDWDVWXGHQWZKRZDQWVWRDFKLHYHDFHUWDLQVFRUHVKRXOGIROORZD FHUWDLQVHWRIVWUDWHJLHVZKLOHDVWXGHQWZLWKDGLIIHUHQWWDUJHWVFRUHVKRXOGXVHGLIIHUHQWVWUDWHJLHV,Q UHDOLW\WKHWHVWߞVGHVLJQLVFRQVWDQWVR\RXVKRXOGXVHWKHVDPHVHWRIVWUDWHJLHVDQGWKHVDPHEDVLF DSSURDFKQRPDWWHUZKDW\RXUWDUJHWVFRUHPD\EH7KHRQO\GLIIHUHQFHLVWKDW\RXߞOOQHHGWREHPRUH DFFXUDWHLQ\RXUH[HFXWLRQLI\RXZDQWWRUHDFKDKLJKHUWDUJHWVFRUH 6RVWXGHQWVZKRZDQWKLJKHUVFRUHVRUJUHDWHULPSURYHPHQWVKRXOGEHXVLQJWKHVDPHVWUDWHJLHVDQG WHFKQLTXHVDVHYHU\ERG\HOVHߚWKH\MXVWKDYHWRWUDLQDQGSUDFWLFHDOLWWOHPRUHWRPDNHVXUHWKH\ߞUHXVLQJ WKRVHVWUDWHJLHVDQGWHFKQLTXHVPRUHFRQVLVWHQWO\DQGHIIHFWLYHO\DQGPDNLQJIHZHUPLVWDNHV ([DFWO\ KRZPXFKPRUHWUDLQLQJLVQHFHVVDU\ZLOOGHSHQGRQWKHVWXGHQWߞVVSHFLILFVLWXDWLRQ 7KHPRVWGLUHFWDQVZHULVWKDW\RXߞOOVWLOOXVHWKHVWUDWHJLHVODLGRXWLQWKLV%ODFN%RRNQRPDWWHUZKDW \RXߞYHVFRUHGEHIRUHRUZKDW\RXKRSHWRVFRUH7KHEHVWDSSURDFKLVWROHDUQWKHVHVWUDWHJLHVDQG SUDFWLFHWKHPXQWLO\RXFDQH[HFXWHWKHPDFFXUDWHO\HQRXJKWREHFRPIRUWDEO\LQ\RXUWDUJHWVFRUHUDQJH 2IFRXUVHWKHKLJKHU\RXUWDUJHWVFRUHWKHPRUHDFFXUDWH\RXߞOOQHHGWREHߚIRUDSHUIHFW\RXߞOO JHQHUDOO\RQO\EHDEOHWRPLVVRQHTXHVWLRQRUVRSHUVHFWLRQDWPRVW :KDWLI,FDQߞWJHWWKHVWUDWHJLHVWRZRUN" $WVRPHSRLQWDOPRVWHYHU\ERG\ߚP\VHOILQFOXGHGߚUXQVLQWRDSUDFWLFHTXHVWLRQWKDWWKH\MXVWFDQߞW VHHPWRVROYHZLWKWKHQRUPDOVWUDWHJLHV$OWKRXJKWKLVVRUWRIWKLQJLVDOZD\VDJJUDYDWLQJLWFDQEHDYHU\ EHQHILFLDOH[SHULHQFHLI\RXDSSURDFKLWLQWKHULJKWZD\ :KHQ\RXUXQLQWRDSUREOHPOLNHWKLVWKHYHU\ILUVWWKLQJ\RXVKRXOGGRLVFRQILUPWKDW\RXߞUHZRUNLQJ ZLWKDUHDO$&7TXHVWLRQZULWWHQE\$&7,QF,WߞVYHU\LPSRUWDQWWRZRUNRQO\ZLWKUHDOSUDFWLFH TXHVWLRQVIURPWKHWHVWPDNHUQRWIURPVRPHWKLUGSDUW\FRPSDQ\ ZHߞOOGLVFXVVWKDWLQPRUHGHWDLOODWHU ,IWKHTXHVWLRQLVQߞWZULWWHQE\WKHWHVWPDNHUWKHQWKHVWUDWHJLHVIURPWKLV%ODFN%RRNPLJKWQRWZRUN DJDLQVWLWVLQFHIDNHWHVWVXVXDOO\GRQߞWIROORZWKHUXOHVWKDWWKHUHDOWHVWGRHV $IWHUWKDWJREDFNDQGPDNHVXUHWKDW\RXߞYHUHDGWKHDQVZHUNH\FRUUHFWO\0DQ\WLPHV,ߞYHWDONHGWR VWXGHQWVZKRZHUHFRPSOHWHO\EDIIOHGE\DTXHVWLRQWKH\JRWZURQJWKDWWKH\ZHUHVXUHWKH\KDGVROYHG FRUUHFWO\RQO\WRKDYHWKHPUHDOL]HDIWHUZDUGVWKDWWKH\KDGVROYHGLWFRUUHFWO\LQWKHILUVWSODFHDQGKDG RQO\PLVUHDGWKHDQVZHUNH\ ,I\RXNQRZ\RXߞUHZRUNLQJZLWKDUHDO$&7TXHVWLRQDQG\RXNQRZ\RXߞYHUHDGWKHDQVZHUNH\ FRUUHFWO\DQG\RXߞUHVXUH\RXFDQߞWILJXUHRXWWKHTXHVWLRQWKHQ\RXߞUHLQDIUXVWUDWLQJVLWXDWLRQߚEXWLWߞV DOVRSRWHQWLDOO\DYHU\KHOSIXOVLWXDWLRQ /HWPHH[SODLQZK\ 7KH$&7LVKLJKO\VWDQGDUGL]HG7KDWPHDQVWKDWTXHVWLRQVRQWKH$&7PXVWEHUHSHWLWLYHLQDORWRIZD\V ߚWKH\KDYHWRGRVLPLODUWKLQJVLQVLPLODUZD\VRQHYHU\VLQJOHWHVWRUHOVHWKHUHZRXOGEHQR VWDQGDUGL]DWLRQ<RXPLJKW FRUUHFWO\ DVVXPHWKDWKDYLQJWRDVNWKHVDPHNLQGVRITXHVWLRQVRYHUDQG RYHUDJDLQZRXOGPDNHWKHWHVWWRRHDV\)RUWKLVUHDVRQWKHSHRSOHZKRPDNHWKHWHVWWU\WRGLVJXLVHWKH TXHVWLRQVDVEHVWWKH\FDQVRWKH\GRQߞWVHHPWRZRUNWKHVDPHZD\WKDWDOOWKHRWKHUTXHVWLRQVZRUN 7KDWPHDQV\RXߞOOILQGUHDO$&7SUDFWLFHTXHVWLRQVWKDWFDQEHDQVZHUHGXVLQJWKHWHFKQLTXHVDQG VWUDWHJLHVLQWKLVERRNEXWWKDWVHHPDWILUVWOLNHWKH\FDQߞWEHFDXVHWKHWHVWPDNHUKDVGRQHDJRRGMRERI PDNLQJLWVHHPOLNHDSDUWLFXODUTXHVWLRQLVGLIIHUHQWIURPDOOWKHRWKHUV 7KLVLVRQHRIWKHSULPDU\FKDOOHQJHV\RXߞOOHQFRXQWHULI\RXZDQWWREHDWWKLVWHVWZKHQ\RXILQG\RXUVHOI IDFLQJDTXHVWLRQWKDWVHHPVWREUHDNDOOWKHUXOHV\RXKDYHWRPDNHVXUH\RXGRQߞWJHWIUXVWUDWHGDQG DVVXPHWKDWWKHUXOHVPXVWQRWZRUNRUWKDWWKH$&7PXVWKDYHPHVVHGXSRQWKLVTXHVWLRQRUWKDW VRPHWKLQJHOVHRXWRI\RXUFRQWUROLVJRLQJRQ,I\RXOHW\RXUVHOIJHWIUXVWUDWHG\RXߞOOSUREDEO\JLYHXS DQGXOWLPDWHO\\RXUVFRUHZLOOVXIIHU,QVWHDGWDNHWKHWLPHWRXQGHUVWDQGHDFKTXHVWLRQWKDWIUXVWUDWHV\RX )LJXUHRXWZKDWߞVJRLQJRQZLWKLWZKHUH\RXZHQWZURQJLQ\RXULQLWLDODSSURDFKDQGZKDW\RXFDQGR WRDYRLGJHWWLQJVWXFNOLNHWKDWLQWKHIXWXUH 7KHPRUH\RXGRWKLVWKHPRUH\RXߞOOEHJLQWRXQGHUVWDQGKRZWKHWHVWUHDOO\ZRUNVDQGKRZLWߞVZULWWHQ ZKLFKZLOOPDNHLWKDUGHUDQGKDUGHUIRUWKHWHVWPDNHUWRWULFN\RXLQWKHIXWXUH7KDWߞVZK\JHWWLQJVWXFN RQDKDUGTXHVWLRQFDQDFWXDOO\EHDKXJHRSSRUWXQLW\IRULPSURYHPHQWVLQFHWKHWHVWLVVWDQGDUGL]HG HYHU\WLPH\RXJHWXQVWXFNIURPDGLIILFXOWVLWXDWLRQLVDWLPHWKDWKHOSV\RXDYRLGWKRVHNLQGVRIVLWXDWLRQV RQWHVWGD\ 6RKRZGR\RXJRDERXWWU\LQJWRILJXUHRXWDTXHVWLRQWKDWVWXPSV\RX")LUVW\RXߞOOZDQWWRPDNHVXUHWKH VWUDWHJ\\RXߞUHWU\LQJWRDSSO\LVDSSURSULDWHWRWKHVLWXDWLRQ)RUH[DPSOH\RXPLJKWEHDFFLGHQWDOO\ DSSO\LQJDQLGHDIRU$&7(QJOLVKWRDQ$&75HDGLQJTXHVWLRQ ,I\RXIHHOFRQILGHQWWKDWWKHVWUDWHJ\\RXߞUHWU\LQJWRXVHLVDSSURSULDWHWKHQWKHPRVWOLNHO\WKLQJLVWKDW \RXߞYHRYHUORRNHGRUPLVUHDGVRPHGHWDLOLQWKHWH[W,ILWߞVDPDWKTXHVWLRQ\RXPD\KDYHRYHUORRNHGD ODEHOHGYDOXHRQDGLDJUDPRUSXWDGHFLPDOLQWKHZURQJSODFHRUPL[HGXS\RXUSRVLWLYHDQGQHJDWLYH VLJQV,ILWߞVDVFLHQFHTXHVWLRQ\RXPD\KDYHPLVUHDGDORQJRUXQXVXDOVFLHQWLILFWHUPRU\RXPD\EH ORRNLQJDWWKHZURQJSDUWRIDJUDSKRUDWWKHZURQJJUDSKRUGLDJUDPHQWLUHO\2QDQ(QJOLVKTXHVWLRQ \RXPD\KDYHIDLOHGWRQRWLFHDFRPPDRU\RXPD\KDYHPLVXQGHUVWRRGH[DFWO\ZKDWDFHUWDLQSURQRXQ UHIHUVWRRU\RXPLJKWEHORRNLQJDWWKHZURQJVHQWHQFHRUSDUDJUDSK2QDUHDGLQJTXHVWLRQ\RXPD\EH ORRNLQJDWWKHZURQJSDVVDJH\RXPD\KDYHPLVVHGDZRUGOLNHߡQRWߢRUߡQRߢRUDSUHIL[OLNHߡXQߢRU \RXPD\KDYHPLVUHDGDQDQVZHUFKRLFH 2IFRXUVHWKHUHDUHRWKHUGHWDLOV\RXPLJKWRYHUORRNRUPLVUHDGDVZHOODQGSHUIRUPLQJZHOORQWKH$&7 FRPHVGRZQWRSD\LQJDWWHQWLRQWRDOOWKHVHOLWWOHGHWDLOV&DWFKLQJDQ\RQHRIWKHPLVQߞWGLIILFXOWEXW WU\LQJWRNHHSXSZLWKDOORIWKHPWKURXJKRXWDZKROHWHVWFDQEHFKDOOHQJLQJHVSHFLDOO\EHFDXVHDORWRI PDLQVWUHDPHGXFDWLRQQRZDGD\VWHQGVWRIRFXVOHVVRQGHWDLOVDQGPRUHRQWKHELJSLFWXUH 2QFH\RXDSSURDFKWKHWHVWZLWKWKHSURSHUPLQGVHW\RXVKRXOGKDYHQRWURXEOHWUDLQLQJ\RXUVHOIWRORRN IRUWKRVHGHWDLOVEXWWKHUHZLOOVWLOOEHWLPHVZKHQ\RXRYHUORRNRQHDQGFDQߞWILQGWKHULJKWDQVZHU,ILW KDSSHQVRQWHVWGD\WKHQPRYHRQDQGDQVZHUWKHTXHVWLRQV\RXFDQDQVZHUPRUHTXLFNO\EHIRUHFRPLQJ EDFNWRVSHQGWLPHRQWKHGLIILFXOWRQHV,ILWKDSSHQVLQSUDFWLFHWKHQZKHQ\RXUHYLHZ\RXUSUDFWLFH VSHQGDVPXFKWLPHDV\RXQHHGWRLQRUGHUWREHDEOHWRILQGRXWZKDWZHQWZURQJRQWKDWTXHVWLRQ2QFH \RXGRWKDW\RXZLOOKDYHWDNHQDODUJHVWHSIRUZDUGLQ\RXUWUDLQLQJ <RXPD\DOVRILQGLWKHOSIXOWRFKHFNRXWZZZ$&7SUHS9LGHRVFRPZKHUH,ߞYHPDGHVRPH GHPRQVWUDWLRQYLGHRVDYDLODEOHIRUIUHHWRWKHUHDGHUVRIWKLVERRN :KLFKSUDFWLFHERRNVVKRXOG,EX\" 7KLVERRNZDVZULWWHQVRWKDWWKHRQO\RWKHU$&7ERRN\RXߞGQHHGZRXOGEHWKHߡ5HG%RRNߢߚ7KH5HDO $&73UHS*XLGHUG(GLWLRQ<RXVKRXOGEHDEOHWRJHWLWIURPDQ\PDMRUERRNVHOOHUHLWKHURQOLQHRULQD SK\VLFDOERRNVWRUH<RXUVFKRROOLEUDU\PD\DOVRKDYHDFRS\%HDZDUHWKDWLI\RXJHWRQHIURPDOLEUDU\ LWPD\KDYHDOUHDG\EHHQPDUNHGXSE\VRPHRQHHOVHZKLFKLVQߞWLGHDOߚLISRVVLEOHJHWDIUHVKFRS\ 5HDGLQJ4XHVWLRQV <RXVD\WKHFRUUHFWDQVZHUWRHDFKTXHVWLRQLVDOZD\VVSHOOHGRXWRQWKHSDJHEXW, IRXQGDTXHVWLRQZKHUHLWLVQߞW:KDWGRHVWKDWPHDQ" <RXPD\UHPHPEHUWKDWHDUOLHUZHWDONHGDERXWKRZWKH$&7WULHVWREHWULFN\DQGWRPDNHLWVHHPOLNH WKHTXHVWLRQVDUHOHVVVWUDLJKWIRUZDUGWKDQWKH\DFWXDOO\DUH,GHILQLWHO\NQRZZKDWLWIHHOVOLNHWRORRNDW DTXHVWLRQDQGIHHOFHUWDLQWKDWWKHDQVZHULVQߞWULJKWWKHUHRQWKHSDJHEXWWKLVLVVXHLVDOZD\VWKHUHVXOW RIDQHUURUPDGHE\WKHWHVWWDNHU WKDWߞV\RXRUPH DQGQRWDQHUURUPDGHE\WKHWHVWPDNHU $&7,QF 2IFRXUVHDVDOZD\VWKLVRQO\DSSOLHVLI\RXߞUHXVLQJUHDO$&7SUDFWLFHTXHVWLRQVPDGHE\WKHWHVW PDNHU,I\RXߞUHXVLQJTXHVWLRQVZULWWHQE\VRPHRWKHUFRPSDQ\WKHQWKRVHDUHQߞWUHDO$&7TXHVWLRQVDQG WKH\FDQߞWEHH[SHFWHGWRZRUNWKHVDPHZD\DVWKHUHDOWKLQJ 7KHILUVWWKLQJ\RXQHHGWRGRLVVWHSEDFNDQGDFFHSWWKDWWKHHUURUPXVWEHRQ\RXUSDUWDQGUHDOL]HWKDW WKHDQVZHUWR\RXUSUREOHPPXVWEHVRPHZKHUHLQWKHSDVVDJHTXHVWLRQRUDQVZHUFKRLFH7KHQWU\WR FOHDU\RXUPLQGRIDQ\WKLQJ\RXߞYHWKRXJKWDERXWWKHTXHVWLRQVRIDUDQGWDNHDIUHVKORRNDWLW5HDGWKH SDVVDJHFDUHIXOO\UHDGWKHTXHVWLRQFDUHIXOO\DQGUHDGDOOWKHDQVZHUFKRLFHVFDUHIXOO\DQGGR\RXUEHVW WRILQGWKHSODFHLQWKHWH[WWKDWVSHOOVRXWWKHDQVZHUFKRLFHߚLWߞVLQWKHUH 7DNLQJWKHWLPHWRORRNFDUHIXOO\IRUWKHWH[WWKDWVXSSRUWVWKHULJKWDQVZHUZLOOJLYH\RXDEHWWHU XQGHUVWDQGLQJRIKRZWKHWHVWZRUNVDQGZLOOKHOSLPSURYH\RXUDELOLW\WRVSRWWKHVXSSRUWLQJWH[WIRU RWKHUFKDOOHQJLQJTXHVWLRQV,WߞVZRUWKWKHWLPHLWWDNHV ,JRWDTXHVWLRQZURQJEXWP\DQVZHULVEHWWHUWKDQWKHDQVZHUFKRLFHWKH$&7VD\VLV FRUUHFWߚQRZZKDW" 2QHELJPLVWDNHWKDWXQWUDLQHGWHVWWDNHUVPDNHZKHQWKH\DSSURDFKWHVWVOLNHWKH$&7LVJRLQJWKURXJKDOO WKHTXHVWLRQVDQGMXVWORRNLQJIRUWKHDQVZHUFKRLFHVWKDWVHHPEHVWWRWKHP %XWLWߞVYHU\LPSRUWDQWIRUXVWHVWWDNHUVWRXQGHUVWDQGWKDWWKH$&7GRHVQߞWFDUHZKDWZHWKLQN$WDOO 7KH$&7KDVLWVRZQV\VWHPIRUGHFLGLQJZKLFKDQVZHUFKRLFHVVDWLVI\LWVUHTXLUHPHQWVDQGZKLFKRQHV GRQߞW)RUWKDWUHDVRQZHKDYHWRVWRSORRNLQJDWDQVZHUFKRLFHVDQGWKLQNLQJߡ:KLFKRQHGR,OLNH EHVW"ߢ,QVWHDGZHVKRXOGWKLQNߡ:KLFKRIWKHVHFKRLFHVIXOILOOVWKH$&7ߞVUHTXLUHPHQWVIRUDFRUUHFW DQVZHUWRWKLVW\SHRITXHVWLRQ"ߢ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ߞOOVWLOOQHHGWREHIDPLOLDUZLWKHYHU\WKLQJLQWKH$&70DWK7RROER[ LQWKLV %ODFN%RRN LI\RXZDQWWREHUHDG\IRUDQ\WKLQJ\RXPLJKWHQFRXQWHULQDQ$&70DWKTXHVWLRQ )UHTXHQWO\MXVWNQRZLQJDIRUPXODLVQߞWJRLQJWREHHQRXJKWRJHW\RXWKHULJKWDQVZHUWRDQ$&7 0DWKSUREOHPߚ\RXߞOODOVRQHHGWREHIDPLOLDUZLWKWKHVSHFLDOFKDUDFWHULVWLFVRI$&70DWK TXHVWLRQVDQG\RXPD\KDYHWRJHWDOLWWOHߡFUHDWLYHߢLQ\RXUDSSURDFKWRDTXHVWLRQ 7RILQGRXWZKLFKWRSLFVWHQGWRFRPHXSLQ$&70DWKTXHVWLRQVRQHRIWKHEHVWWKLQJVWRGRLVWR UHDGWKHVHFWLRQRIWKLV%ODFN%RRNRQ$&70DWKTXHVWLRQVDQGWKHQMXVWSUDFWLFHZLWKDORWRIUHDO $&70DWKSUDFWLFHTXHVWLRQV )RUIXUWKHULQIRUPDWLRQDERXWWKH$&70DWKVHFWLRQWDNHDORRNDWWKHUHOHYDQWVHFWLRQRIWKLV%ODFN %RRN :KLFKW\SHRIFDOFXODWRUVKRXOG,XVH" 7KLVLVDFRPPRQTXHVWLRQZLWKDVLPSOHDQVZHUXVHWKHW\SHRIFDOFXODWRUWKDW\RXIHHOPRVWFRPIRUWDEOH ZLWK DVVXPLQJLWߞVDOORZHGRIFRXUVHPRVWFDOFXODWRUVDUHEXW\RXVKRXOGFKHFNWREHVXUH 5HPHPEHU WKDWWKHPRVWGLIILFXOWSDUWRIILQGLQJWKHFRUUHFWDQVZHUWRDQ$&70DWKTXHVWLRQRIWHQOLHVLQILJXULQJRXW KRZWRVHWXSWKHSUREOHPZKLFKLVVRPHWKLQJDFDOFXODWRUFDQߞWGR7KHERWWRPOLQHLVWKDWWKHPRVW LPSRUWDQWSDUWRI\RXUDSSURDFKWRWKLVVHFWLRQLV\RXURZQWUDLQLQJQRW\RXUFDOFXODWRU ,I\RXߞUHFRPIRUWDEOHZLWKJUDSKLQJFDOFXODWRUVWKHQ\RXVKRXOGSUREDEO\XVHRQHEHFDXVHWKH\FDQ VRPHWLPHVKHOS\RXDQVZHUPDWKTXHVWLRQVTXLFNO\DQGHDVLO\:HߞOOVHHWKLVLGHDGHPRQVWUDWHGLQWKH TXHVWLRQZDONWKURXJKVDWWKHHQGRIWKH0DWKVHFWLRQRIWKLV%ODFN%RRNߚWKHVROXWLRQ,SURYLGHIRU TXHVWLRQRQSDJHRIWKH5HG%RRNLVRQHJRRGH[DPSOH %XWGRQߞWZRUU\LI\RXߞUHQRWFRPIRUWDEOHZLWKJUDSKLQJFDOFXODWRUVEHFDXVHWKH\ߞUHQRWHYHQXVHIXORQ PRVWUHDO$&70DWKTXHVWLRQVDQGWKHUHߞVDOZD\VDWOHDVWRQHZD\WRVROYHHYHU\SUREOHPZLWKRXWD FDOFXODWRU'RQߞWWU\WRXVHDFDOFXODWRU\RXߞUHQRWFRPIRUWDEOHZLWKEHFDXVHWKHUHߞVDJRRGFKDQFH\RXߞOO PDNHPLVWDNHVWKDWFDQFRVW\RXWLPHDQGSRLQWV )RUPRUHRQWKHULJKWDSSURDFKWR$&70DWKFKHFNRXWWKH$&70DWKVHFWLRQRIWKLV%ODFN%RRN )RUPRUHRQVSHFLILFZD\VWRXVHFDOFXODWRUVRQWKH$&70DWKVHFWLRQVHHWKHVHFWLRQRIWKLV%ODFN%RRN ODEHOHGߡ8VLQJ$&DOFXODWRUߢDVZHOODVWKHZDONWKURXJKVLQWKH0DWKVHFWLRQRIWKLV%ODFN%RRN ,WULHGWRILQGWKHDQVZHUEDVHGVROHO\RQSDWWHUQVLQWKHDQVZHUFKRLFHVDQGLWGLGQߞW ZRUN:K\QRW" $OZD\VUHPHPEHUWKDWSDWWHUQVLQWKHDQVZHUFKRLFHVDUHVLPSO\KLQWVDWWKHLVVXHVZHFDQH[SHFWWREH LPSRUWDQWWRWKHVROXWLRQIRUWKDWTXHVWLRQ7KH\ߞOORIWHQSRLQWWRDOLNHO\FRUUHFWDQVZHUEXWQRWDOZD\V )RUWKDWUHDVRQ\RXVKRXOGQHYHUUHO\FRPSOHWHO\RQDQVZHUFKRLFHSDWWHUQVLQGHWHUPLQLQJWKHFRUUHFW DQVZHUWRDQ\TXHVWLRQXQOHVV\RXߞYHJLYHQXSWU\LQJWRDQVZHUWKHTXHVWLRQZLWKPDWKDQG\RXMXVWZDQW WRJXHVV 7KHEHVWZD\WRXVHWKHVHDQVZHUFKRLFHSDWWHUQVLVWROHWWKHPJXLGH\RXUDQDO\VLVLI\RXߞUHQRWVXUHZKDW WKHEHVWDSSURDFKWRDTXHVWLRQPLJKWEHDQGRUWRFKHFN\RXUDQVZHURQFH\RXߞYHILQLVKHGWKHSUREOHPWR PDNHVXUH\RXGLGQߞWPDNHDPLVWDNH0RUHRQWKDWLQWKH$&70DWKVHFWLRQODWHULQWKLVERRN (QJOLVK4XHVWLRQV ,IRXQGDFRUUHFWDQVZHUWKDWGRHVQߞWIROORZWKHUXOHVRIJUDPPDU,OHDUQHGLQVFKRRO +RZFDQWKDWEH" 5HPHPEHUWKDWWKHRQO\WKLQJWKDWPDWWHUVRQWKH$&7LVZKDWWKHSHRSOHZKRPDNHWKH$&7VD\LVULJKW ,QWKHFRQWH[WRI$&7(QJOLVKWKHUHDUHVRPHJUDPPDUUXOHVWKDWWKH$&7OLNHVWRIROORZWKDWPD\EH GLIIHUHQWIURPWKHUXOHV\RXߞUHXVHGWR,QIDFWWKH\PD\HYHQFRQWUDGLFWHDFKRWKHUGLUHFWO\SDUWLFXODUO\ ZKHUHSXQFWXDWLRQLVFRQFHUQHG 'RQߞWZRUU\7KHJUDPPDUUXOHVXVHGLQWKH$&7(QJOLVKVHFWLRQPXVWEHVWDQGDUGL]HGMXVWOLNHHYHU\ RWKHUDVSHFWRIWKHWHVWVRZHFDQOHDUQWKHVHUXOHVDQGDQVZHUWKHTXHVWLRQVDFFRUGLQJO\'RQߞWEH VKRFNHGLI\RXFRPHDFURVVDFRUUHFWDQVZHURQWKH$&7WKDWVHHPVWREUHDNWKHJUDPPDUUXOHV\RXߞUH XVHGWRRUDQLQFRUUHFWDQVZHUWKDWVHHPVWRIROORZWKHP$OZD\VOHDUQZKDWWKH$&7UHZDUGVDQG SXQLVKHVDQGDQVZHUTXHVWLRQVDFFRUGLQJO\)RUPRUHRQWKLVFKHFNRXWWKHVHFWLRQRIWKLVERRNWKDWGHDOV ZLWK$&7(QJOLVK :KDWLI,FDQߞWWKLQNRIJRRGH[DPSOHVIRUWKH$&7(VVD\" 5HPHPEHUWKDWDQ\H[DPSOH\RXFRPHXSZLWKLVILQHDVORQJDVLWVXSSRUWV\RXUDUJXPHQWߚLWGRHVQߞ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ߞYHQHYHUVWXGLHGWKRVH+RZDP,VXSSRVHGWRJHWD JRRGVFRUHRQWKH$&76FLHQFHVHFWLRQ" $V\RXH[SORUHWKH$&7\RXߞOOVHHWKDWWKHWHVWLVRIWHQQRWZKDWLWVHHPVWREHߚDQGWKH$&76FLHQFH VHFWLRQLVDSULPHH[DPSOHRIWKLV$OWKRXJKZHQRUPDOO\WKLQNRIDVFLHQFHWHVWDVVRPHWKLQJWKDWUHZDUGV XVIRUOHDUQLQJVFLHQWLILFFRQFHSWVEHIRUHKDQGZHߞOOVHHWKDWDOPRVWHYHU\$&76FLHQFHTXHVWLRQZLOODVN DERXWLQIRUPDWLRQWKDWߞVSURYLGHGE\WKHWHVWLWVHOIULJKWWKHUHRQWKHSDJHLQIURQWRI\RXLQRQHIRUPRU DQRWKHU2QWKHUDUHRFFDVLRQVZKHQ\RXGRQHHGRXWVLGHVFLHQWLILFNQRZOHGJHWKDWNQRZOHGJHZLOOEH EDVLFߚXVXDOO\WKHVRUWRIWKLQJ\RXPLJKWOHDUQLQHOHPHQWDU\VFKRRORUPLGGOHVFKRRO)RUPRUHRQWKLV FKHFNRXWWKHSDUWRIWKLV%ODFN%RRNWKDWFRYHUVWKH$&76FLHQFHVHFWLRQ ߡ+RZ:HOO&DQ,'R2Q7KH$&7"ߢ ߡ<RXUSUHVHQWFLUFXPVWDQFHVGRQ WGHWHUPLQHZKHUH\RXFDQJRWKH\PHUHO\GHWHUPLQH ZKHUH\RXVWDUWߢ 1LGR4XEHLQ 6RRQHURUODWHUDOPRVWHYHU\FOLHQW,ZRUNZLWKZLOODVNPHWKLVTXHVWLRQLQRQHIRUPRUDQRWKHU ߡ+RZZHOOFDQ,GRRQWKH$&7"ߢ 2IWHQWKH\ߞOOLQFOXGHWKHLUEHVWVFRUHWRGDWHRQDSUDFWLFH RUUHDO WHVWDQGWKHQPHQWLRQDWDUJHWVFRUH ߡ,I,ߞYHDOUHDG\JRWWHQDZRXOGLWEHSRVVLEOHIRUPHWRJHWD"ߢ 7KHUHߞVDSUHWW\JRRGFKDQFH\RXߞYHDVNHGVRPHRQHWKLVTXHVWLRQRUDWOHDVWWKRXJKWLWWR\RXUVHOI,WߞV XQGHUVWDQGDEOHߚWKH$&7LVDELJGHDODQGLWFDQKDYHDELJLPSDFWRQZKHUH\RXߞOOHQGXSJRLQJWR FROOHJHQRWWRPHQWLRQKRZPXFK\RXPLJKWSD\IRU\RXUHGXFDWLRQ &RQFHQWUDWLQJRQWKLVNLQGRITXHVWLRQSUREDEO\LVQߞWDJRRGXVHRI\RXUWLPHEXWKHUHߞVWKHPRVWFRPSOHWH DQVZHU,FDQJLYH\RXZLWKRXWNQRZLQJ\RXSHUVRQDOO\ ,I\RXKDYHWKHIROORZLQJVNLOOVWKHQ\RXKDYHDOORIWKHEDVLFWRROVWKDW\RXQHHGWRJHWDQ\VFRUHRQWKH $&7LQFOXGLQJD wVSHDNLQJDQGUHDGLQJ$PHULFDQ(QJOLVKZLWKRXWPXFKWURXEOH wNQRZLQJVRPHEDVLFVFLHQFH OLNHWKHLGHDWKDWLFHLVIUR]HQZDWHU wKDYLQJDUHDVRQDEOHXQGHUVWDQGLQJRIWKHEDVLFSULQFLSOHVRIDULWKPHWLFJHRPHWU\DOJHEUDDQG WULJRQRPHWU\ 7KLVLVWUXHEHFDXVHILQGLQJWKHFRUUHFWDQVZHUWRHYHU\TXHVWLRQRQWKH$&7UHTXLUHVQRWKLQJPRUHWKDQ WKHFRUUHFWDSSOLFDWLRQRIWKHVHVNLOOVRURIVRPHFRPELQDWLRQWKHUHRI 1RWLFHWKDW,VDLGWKHVHDUHWKHߡEDVLFWRROVߢ\RXQHHGWRJHWDQ\VFRUHߚVLPSO\KDYLQJWKHWRROVLVQߞWWKH VDPHWKLQJDVNQRZLQJKRZWRXVHWKHPSURSHUO\ZKLFKZLOOEHWKHUHDOIRFXVRIWKLVERRN$VLWWXUQVRXW PRVWSHRSOHZKRWDNHWKH$&7KDYHWKHQHFHVVDU\NQRZOHGJHWRVFRUHVLJQLILFDQWO\KLJKHURQWKHWHVWWKDQ WKH\DFWXDOO\GREXWWKH\DSSURDFKLWWKHZURQJZD\7KHSURSHUWHFKQLTXHPDNHVDPXFKELJJHU GLIIHUHQFHWKDQPRVWXQWUDLQHGWHVWWDNHUVHYHUUHDOL]H ߡ5HDOO\7KRXJK+RZ:HOO&DQ,'R2Q7KH$&7"ߢ <RXPLJKWIHHOOLNH,KDYHQߞWUHDOO\DGGUHVVHGWKHTXHVWLRQRIKRZZHOO\RXLQSDUWLFXODUFDQGRRQWKH $&7:HOOKHUHߞVDQRWKHUZD\WRORRNDWWKHDQVZHUWRWKDWTXHVWLRQWKHRQO\UHDOZD\WRNQRZKRZZHOO \RXFDQGRLVWRSUHSDUHIRUWKHWHVWFRUUHFWO\WDNHLWDQGWKHQILQGRXWZKDWWKHUHVXOWVDUH$OOWKDW PDWWHUVKHUHLVWKHDFWXDOVFRUH\RXJHWߚQRWZKDWVRPHWXWRURUGLDJQRVWLFWHVWVD\V\RXVKRXOGJHW $Q\WKLQJHOVHLVMXVWWDON %HVLGHVZKHWKHUVRPHRQHWHOOV\RXWKDW\RXVKRXOGEHDEOHWRJHWDRUD\RXߞUHVWLOOJRLQJWRKDYH WROHDUQWKHULJKWZD\WREHDWWKHWHVWDQGWKHQSUDFWLFHWKRVHPHWKRGVXQWLO\RXJHWWKHPULJKW6RNQRZLQJ WKHVFRUH\RXߡVKRXOGߢJHW ZKLFKLVMXVWVSHFXODWLRQDQ\ZD\ GRHVQߞWKDYHDQ\LPSDFWRQWKHZD\\RXߞOO SUHSDUHIRUWKHWHVWZKLFKLVZKDW\RXVKRXOGUHDOO\EHIRFXVLQJRQ $Q\RQHZLWKWKHEDVLFVNLOOVPHQWLRQHGDERYHKDVZKDWLWWDNHVWRVFRUHD5HDOO\7KHFKDOOHQJH HYHU\ERG\IDFHVLVWKDWWKH$&7LVYHU\GLIIHUHQWIURPWKHWHVWV\RXWDNHLQKLJKVFKRRO7KH$&7UHZDUGV \RXIRUILJXULQJRXWZHLUGTXHVWLRQVDERXWEDVLFFRQFHSWVDQGIRUSD\LQJFDUHIXODWWHQWLRQWRVPDOO GHWDLOV1HLWKHURIWKRVHVNLOOVUHTXLUHVDQ\DGYDQFHGNQRZOHGJH :KDWWKH\GRUHTXLUHLVWKDW\RXPDNHVRPHGHOLEHUDWHHIIRUWߚWKDW\RXUHDOO\ZRUNWRJHWDEHWWHU XQGHUVWDQGLQJRIKRZWKHWHVWZRUNVDQGFKDQJHWKHZD\\RXWKLQNDERXWLW,WPHDQVFDUHIXOO\UHYLHZLQJ \RXUSUDFWLFHWRVHHH[DFWO\ZKDWߞVVWRSSLQJ\RXIURPDQVZHULQJWKHTXHVWLRQV\RXILQGFKDOOHQJLQJ :KDWLI\RXRQO\KDYHOLPLWHGWLPHEHWZHHQQRZDQGWHVWGD\"(YHQLI\RXߞUHVKRUWRQWLPH\RXUEHVWEHW LVWRIRFXVRQSUHSDULQJDQGLPSURYLQJDVPXFKDV\RXFDQDQGOHWHYHU\WKLQJHOVHZRUNLWVHOIRXW7KLVLV JRRGOLIHDGYLFHLQJHQHUDODQGLWߞVFHUWDLQO\WUXHLQWHVWSUHSDVZHOO 3XWWLQJ<RXU7RROV7R:RUN 7KLV%ODFN%RRNZLOOGHILQLWHO\FRYHUWKHOLPLWHGVXEMHFWPDWWHULQYROYHGLQ$&7TXHVWLRQV VXFKDV EDVLFPDWKKRZWRIRUPWKHSRVVHVVLYHRIDSOXUDOQRXQDQGVRRQ EXWZHߞOOVSHQGPXFKPRUHWLPHRQ KHOSLQJ\RXGHYHORSWKHDELOLW\WRDSSO\WKRVHWRROVFRUUHFWO\DQGFRQVLVWHQWO\ $V,ߞYHPHQWLRQHGUHSHDWHGO\DQGZLOOFRQWLQXHWRPHQWLRQWKH$&7LVIXQGDPHQWDOO\GLIIHUHQWIURPWKH WHVWV\RXWDNHLQVFKRRO:KHQVRPHWKLQJLVWHVWHGLQVFKRRO\RXW\SLFDOO\VWXG\WKDWWKLQJIRUZHHNV OHDGLQJXSWRWKHWHVWDQGZKHQWKHWHVWGD\DUULYHV\RXKDYHDSUHWW\VSHFLILFLGHDRIZKDWߞOOEHRQWKH WHVWDQGKRZLWߞOOEHWHVWHG %XWWKH$&7LVQߞWDERXWFUDPPLQJIDFWVLQWR\RXUKHDG7KH$&7LVODUJHO\DWHVWRI\RXUDELOLW\WRNQRZ ZKLFKEDVLFVNLOOVWRXVHLQZKLFKVLWXDWLRQV /HWߞVLPDJLQHWKDWDQ$&7PDWKTXHVWLRQDVNV\RXWRILQGWKHDUHDRIDVWUDQJHORRNLQJILJXUHWKDWߞVPDGH XSRIVHYHUDOFLUFXODUFRPSRQHQWV<RXPLJKWQRWUHDOL]HDWILUVWWKDWWKHILJXUH\RXߞUHORRNLQJDWLVPDGH XSRIVHYHUDOFLUFOHV,QWKDWFDVHHYHQLIWKHIRUPXODIRUWKHDUHDRIDFLUFOHLVWKHRQO\IRUPXOD\RXQHHG WRNQRZDQGHYHQLI\RXNQRZWKDWIRUPXOD\RXPLJKWVWLOOQRWEHDEOHWRJHWWKHTXHVWLRQULJKWXQOHVV\RX HYHQWXDOO\UHDOL]HWKDWWKHIRUPXOD\RXNQRZLVUHOHYDQWWRWKHTXHVWLRQ ,QDFDVHOLNHWKDWWKHFKDOOHQJHZRXOGEHVLPSO\WRUHDOL]HZKDW\RXߞUHORRNLQJDWߚRQFH\RXFDQGRWKDW WKHDFWXDOPDWKLVSUHWW\VWUDLJKWIRUZDUG 7KHVDPHJHQHUDOFRQFHSWDSSOLHVWRRWKHU$&7TXHVWLRQVDVZHOODV\RXߞOOVHHODWHULQWKLV%ODFN%RRN ,QDGGLWLRQWRILJXULQJRXWZKLFKVNLOOVWRDSSO\WKHRWKHUPDLQFKDOOHQJHLVVLPSO\WRXVH\RXUVNLOOV FRUUHFWO\DQGDFFXUDWHO\ )RUH[DPSOHWKHUHߞVDYHU\SDUWLFXODUZD\WKDW\RXQHHGWRUHDGLQGLYLGXDOSKUDVHVRI$&7UHDGLQJ SDVVDJHV ZHߞOOWDONDERXWLWLQGHWDLOODWHU 7KLVZD\RIUHDGLQJLVDOPRVWWRWDOO\GLIIHUHQWIURPWKHZD\ ZHWHQGWRUHDGLQVFKRRO,QWKLVVLWXDWLRQWKHFKDOOHQJHLVWRORRNDWWKHSDVVDJHLQWKHZD\WKDWWKH$&7 UHZDUGVDQGQRWWRVOLSEDFNLQWRWKHKDELWRIUHDGLQJWKHSDVVDJHWKHZD\\RXZRXOGLQVFKRRO,WߞVWKH VRUWRIWKLQJWKDWLVQߞWGLIILFXOWWRGRDVLQJOHWLPHDIWHU\RXߞYHJRWWKHKDQJRILWߚEXW\RXKDYHWRWUDLQ \RXUVHOI WKURXJKSUDFWLFH WRGRLWFRUUHFWO\RYHUDQGRYHUDJDLQRQWHVWGD\ 7KHPRUH\RXSUDFWLFHDQGWUDLQIRUWKH$&7WKHPRUH\RXߞOOVHHWKDWLWߞVDYHU\UHSHWLWLYHWHVWߚLWKDVWR EHEHFDXVHLILWZHUHQߞWIXQGDPHQWDOO\WKHVDPHHYHU\WLPHLWZRXOGQߞWEHVWDQGDUGL]HGDQGWKHQWKHUH ZRXOGEHQRUHDVRQIRULWWRH[LVW 6RLI\RXZDQWWREHDWWKH$&7\RXߞOOKDYHWRWUDLQ\RXUVHOIWRGRVWUDQJHVLPSOHWDVNVRYHUDQGRYHU DJDLQ<RXߞOOQHHGWREHDEOHWRORRNDWDTXHVWLRQGHWHUPLQHZKLFKVLPSOHVNLOOVDUHUHTXLUHGWRILJXUH RXWWKHDQVZHUDSSO\WKRVHVNLOOVFRUUHFWO\PDNHVXUH\RXKDYHQߞWPDGHDQ\PLVWDNHVDQGWKHQPRYHRQ WRWKHQH[WTXHVWLRQ7KHQ\RXߞOOGRWKDWRYHUDQGRYHU DQGRYHU DJDLQXQWLO\RXߞYHFRPSOHWHGWKHWHVW ,WߞVYHU\UHSHWLWLYHDQGYHU\SUHGLFWDEOHRQFH\RXNQRZZKDWWRORRNIRUߚZKLFKLVZKDWZHߞOOEH GLVFXVVLQJLQWKHUHVWRIWKLV%ODFN%RRN *HWWLQJ%HWWHU :KHQHYHU\RXWU\WRJHWEHWWHUDWVRPHWKLQJLWߞVDJRRGLGHDWRILQGVRPHZD\WRPHDVXUHWKHSURJUHVV \RXߞUHPDNLQJߚLWߞVHQFRXUDJLQJWRVHHLPSURYHPHQWZKHQ\RXPDNHLWDQGLWߞVLPSRUWDQWWREHDZDUHLI \RXDUHQߞWPDNLQJDQ\SURJUHVVVR\RXFDQILJXUHRXWZKDWߞVJRLQJZURQJ 0RVWSHRSOHVLPSO\WUDFNWKHLUSURJUHVVE\VFRULQJWKHLUSUDFWLFHWHVWVRUSUDFWLFHVHFWLRQV7KLVLVQߞW XQUHDVRQDEOHVLQFH\RXUXOWLPDWHJRDOZLOOEHWRDFKLHYHDFHUWDLQVFRUHEXW,ILQGLWDELWRQH GLPHQVLRQDODQGQRWDOZD\VKHOSIXO ,QVWHDGHVSHFLDOO\LQWKHEHJLQQLQJ,OLNHWRUHFRPPHQGWKDW\RXIRFXVDOLWWOHOHVVRQWKHUHVXOWDQGD OLWWOHPRUHRQZKHWKHU\RXFDQUHILQHWKHH[HFXWLRQRIWKHSURSHUWHFKQLTXHV ,QRWKHUZRUGVLQVWHDGRIVD\LQJߡ,ZDQWWRVFRUHDWOHDVWDRQWKLVVHFWLRQߢ\RXPLJKWVD\ߡ,ZDQWWR WU\WRJHWWKURXJKWKLVHQWLUHPDWKVHFWLRQZLWKRXWPDNLQJDVLQJOHFDUHOHVVHUURUߢRUߡ,ZDQWWRGRDQ HQWLUH(QJOLVKVHFWLRQZLWKRXWPLVVLQJDVLQJOHTXHVWLRQUHODWHGWRSURQRXQVߢ :KHQVWXGHQWVPDNHVXUHWKHLUJRDOVDUHPRUHIRFXVHGRQVSHFLILFVNLOOVDQGOHVVDUELWUDU\WKHLUSUDFWLFH VFRUHVWHQGWRULVHKLJKHUDQGPRUHTXLFNO\WKDQZKHQWKHJRDOVDUHVLPSO\WLHGWRDFKLHYLQJDFHUWDLQ VFRUHߚHVSHFLDOO\ZKHQVWXGHQWVWLHWKRVHJRDOVWRNQRZQLVVXHVWKH\PLJKWKDYHLQDSDUWLFXODUVHFWLRQ 2IFRXUVHDV\RXJHWFORVHUWRWKHWHVWGDWHDQG\RXJHWDFKDQFHWRDGGUHVVDQ\PDMRULVVXHVLWPD\PDNH VHQVHWRWKLQNPRUHDERXWWKHDFWXDOVFRUHV\RXߞUHJHWWLQJ%XWE\WKDWSRLQW\RXPD\DOUHDG\EH SHUIRUPLQJZHOODERYH\RXUWDUJHWUDQJH +RZ7R7UDLQ)RU7KH$&7ߚ0DVWHULQJ7KH,GHDV,Q7KLV%RRN ߡ7KHHVVHQFHRIWUDLQLQJLVWRDOORZHUURUZLWKRXWFRQVHTXHQFHߢ 2UVRQ6FRWW&DUG ,WߞVYHU\LPSRUWDQWIRU\RXWRUHDGWKLV%ODFN%RRNDQGOHDUQDOOWKHVWUDWHJLHVIRUHDFKTXHVWLRQW\SH%XW LWߞVHYHU\ELWDVLPSRUWDQWWKDW\RXDFWXDOO\DSSO\WKDWNQRZOHGJHWRUHDO$&7SUDFWLFHTXHVWLRQVLQ\RXU WUDLQLQJ$IWHUDOOLWߞVRQHWKLQJWRUHDGDORQJDV,ZDON\RXWKURXJKDVROXWLRQWRDSUREOHPSRLQWLQJRXW DOOWKHWKLQJVWRZDWFKRXWIRUDQGEHFDUHIXODERXWDQGLWߞVVRPHWKLQJHQWLUHO\GLIIHUHQWWRDQVZHU TXHVWLRQVRQ\RXURZQZLWKRXWDQ\JXLGDQFHZKLFKLVZKDW\RXߞOOKDYHWRGRRQWHVWGD\ 6R\RX0867OHDUQWRGRWKHVHWKLQJVRQ\RXURZQ $IWHUTXHVWLRQVDERXWVSHFLILFTXHVWLRQW\SHVWKHPRVWFRPPRQTXHVWLRQ,KHDUFRPHVGRZQWRWKLVߡ+RZ VKRXOG,WUDLQIRUWKHWHVW"ߢ7KDWTXHVWLRQLVXVXDOO\IROORZHGE\DVWULQJRITXHVWLRQVDERXWGLIIHUHQW VSHFLILFWUDLQLQJVWUDWHJLHVDQGVFKHGXOHV%HFDXVH,KHDUWKHVHTXHVWLRQVVRRIWHQ,WKRXJKWLWZRXOGEHD JRRGLGHDWRDGGUHVVWKHPLQWKHEHJLQQLQJRIWKLV%ODFN%RRNEHIRUHZHHYHQJHWLQWRWKHVSHFLILF WUDLQLQJIRUHDFKVHFWLRQ 7KHERWWRPOLQHLVWKDWWKHUHߞVQRVLQJOHWUDLQLQJVFKHGXOHRUDSSURDFKWKDWZRUNVEHVWIRUHYHU\ERG\ (YHU\VWXGHQWKDVKHURZQVWUHQJWKVZHDNQHVVHVJRDOVDWWHQWLRQVSDQVFKHGXOLQJLVVXHVDQGVRRQ6R LQVWHDGRIWU\LQJWRSXWWRJHWKHUDRQHVL]HILWVDOODSSURDFK,ߞOOJLYH\RXVRPHJHQHUDOJXLGHOLQHVDQG WKHQ,ߞOODGYLVH\RXRQKRZWRWZHDNWKHPWRILW\RXSHUVRQDOO\ 7KH5HFRPPHQGHG3URJUHVVLRQ 0RVWSHRSOHWUDFNWKHLUSURJUHVVE\ORRNLQJDWSUDFWLFHWHVWVFRUHVEXW,ZRXOGQߞWUHFRPPHQGWKDWDW OHDVWQRWLQWKHEHJLQQLQJ7KHVFRUHRQWHVWGD\LVZKDWXOWLPDWHO\PDWWHUVRIFRXUVHEXWHYDOXDWLQJ \RXUVHOIEDVHGRQO\RQWKDWQXPEHULVQߞWJRLQJWREHYHU\KHOSIXODWWKLVVWDJH ,QVWHDGP\UHFRPPHQGDWLRQLVWKDW\RXWUDFN\RXUSURJUHVVEDVHGRQ\RXUXQGHUVWDQGLQJRIWKHWHVW7KLV LVPRUHVXEMHFWLYHEXWPRUHXVHIXODWWKLVSRLQWLQ\RXUWUDLQLQJ 7KHILUVWWKLQJ\RXZDQWWRGRLVGHYHORSDJHQHUDOXQGHUVWDQGLQJRIHDFKVHFWLRQRIWKHWHVW<RXFDQGR WKDWE\UHDGLQJWKLV%ODFN%RRNLQRUGHUDQGWKHQWDNLQJDORRNDWWKHVDPSOHVROXWLRQVXQWLO\RXIHHOOLNH \RXXQGHUVWDQGKRZWKHGLIIHUHQWTXHVWLRQW\SHVZRUN 1H[W\RXZDQWWRGHYHORSWKHDELOLW\WRUHFRJQL]HDQGXQGHUVWDQG\RXUPLVWDNHV1RWLFHWKDWZHߞUHQRW HYHQWU\LQJWRIL[WKRVHPLVWDNHV\HWZHߞUHMXVWWU\LQJWROHDUQWRUHFRJQL]HWKHP7KDWPHDQV\RXQHHGWR EHDEOHWRGRVRPHSUDFWLFHZRUNWKHQWDNHDVHFRQGORRNDWWKHTXHVWLRQV\RXPLVVHGDQGILJXUHRXW ZKHUH\RXZHQWZURQJ<RXQHHGWRLGHQWLI\ZKDW\RXPLVXQGHUVWRRGRURYHUORRNHGWKDWVWRSSHG\RXIURP DQVZHULQJWKHTXHVWLRQFRUUHFWO\DQGZKDW\RXFRXOGKDYHGRQHWRDYRLGWKHPLVWDNHDQGJHWWKHTXHVWLRQ ULJKW $IWHU\RXNQRZZK\\RXߞUHPDNLQJPLVWDNHV\RXQHHGWRWUDLQ\RXUVHOIWRIL[WKHP7KLVLVH[WUHPHO\ LPSRUWDQW7DNHWKHNQRZOHGJH\RXߞYHJDLQHGVRIDUDQGDSSO\LWLQ\RXUSUDFWLFHHLWKHUWRDYRLGHUURUVLQ WKHILUVWSODFHRUWRUHFRJQL]HWKHPDQGUHVROYHWKHPRQFH\RXߞYHPDGHWKHP<RXUJRDODWWKLVSRLQWLQ \RXUWUDLQLQJLVWRDYRLGFDUHOHVVPLVWDNHVVRWKDWWKHRQO\WLPH\RXPLVVDTXHVWLRQLVZKHQLWLQYROYHVD FRQFHSW\RXߞUHQRWIDPLOLDUZLWK 2QFHVWXGHQWVWUDLQWKHPVHOYHVWRVWRSPDNLQJFDUHOHVVHUURUVWKH\ߞUHW\SLFDOO\VFRULQJLQDUDQJHWKDW WKH\ߞUHTXLWHKDSS\ZLWK,I\RXJHWWRWKLVSRLQWDQG\RXVWLOOQHHGWRLQFUHDVH\RXUVFRUHWKHQ\RXߞOOQHHG WRWDNHDORRNDWZKDWߞVVWRSSLQJ\RXIURPDQVZHULQJWKHUHPDLQLQJTXHVWLRQV%HFDUHIXOWKRXJKߚWRR RIWHQVWXGHQWVFRQFOXGHWKDWWKH\ߞUHPLVVLQJ0DWKTXHVWLRQVEHFDXVHWKH\GRQߞWNQRZVRPHREVFXUH IRUPXODRUPLVVLQJ6FLHQFHTXHVWLRQVEHFDXVHWKH\GRQߞWNQRZHQRXJKSK\VLFVRUFKHPLVWU\,QDOPRVW HYHU\FDVHWKHUHDOLVVXHKDVWRGRZLWKDIDLOXUHWRXQGHUVWDQGVRPHSULQFLSOHRULGHDUHODWHGWRWKH VWUXFWXUHRIWKDWTXHVWLRQW\SH7DNHDFORVHORRNDQGWU\WRLGHQWLI\WKHUHDOLVVXHVR\RXFDQZRUNRQLW $OVRLI\RXߞUHKDYLQJSHUIRUPDQFHLVVXHVUHODWHGWRWLPLQJEHVXUHWRWDNHDORRNDWߡ7LPLQJ,VVXHVߢWKH VHFWLRQRIWKLVERRNWKDWGHDOVZLWKWLPHPDQDJHPHQW5HPHPEHUWKDWZKHQ\RXߞUHWU\LQJWRZRUNRQ\RXU WLPLQJ\RXUJRDOLVQߞWWRGRWKHVDPHWKLQJPRUHTXLFNO\LWߞVWRILQGDGLIIHUHQWZD\WRDQVZHUWKH TXHVWLRQLQIURQWRI\RXWKDWߞVIDVWHUDQGVLPSOHU 2UGHU2I$WWDFN $ORWRIVWXGHQWVOLNHWRVWDUWWKHLUSUHSDUDWLRQE\IRFXVLQJRQWKHVHFWLRQRIWKH$&7WKH\KDYHWKHPRVW WURXEOHZLWK7KDWߞVXQGHUVWDQGDEOH,I\RXߞYHJRWWKHWLPHWKRXJK,ߞGGHILQLWHO\UHFRPPHQG\RXSUHSDUH IRUHDFKVHFWLRQLQWKHRUGHUODLGRXWLQWKLVERRN7KDWZD\\RXߞOOEHDEOHWREXLOGRQWKHVNLOOVOHDUQHGLQ HDFKVHFWLRQDV\RXSURJUHVVWKURXJKWKHWUDLQLQJ ,DOPRVWDOZD\VVWDUWVWXGHQWVRIIRQWKH5HDGLQJVHFWLRQIRUDIHZUHDVRQV7KHILUVWUHDVRQLVWKDW FDUHIXOSUHFLVHUHDGLQJLVWKHPRVWLPSRUWDQWVNLOORQWKHHQWLUH$&7 \HVHYHQRQWKH0DWKDQG6FLHQFH VHFWLRQV VRLWPDNHVVHQVHWRVWDUWGHYHORSLQJWKDWVNLOOGLUHFWO\ULJKWIURPWKHEHJLQQLQJ7KHVHFRQG UHDVRQLVWKDWLWߞVXVXDOO\HDVLHUWRVHHKRZSUHGLFWDEOHDQGUHSHWLWLYHWKH0DWK6FLHQFHDQG(QJOLVK TXHVWLRQVDUHLIZHߞYHDOUHDG\VHHQKRZSUHGLFWDEOHDQGUHSHWLWLYHWKH$&75HDGLQJTXHVWLRQVDUH 7KHRQO\WZRVLWXDWLRQV,FDQWKLQNRILQZKLFK,ZRXOGQߞWUHFRPPHQGWKDW\RXVWDUWZLWK$&75HDGLQJ ZRXOGEHWKHIROORZLQJ <RXOLWHUDOO\QHYHUPLVVDQ\$&75HDGLQJSUDFWLFHTXHVWLRQVRU <RXKDYHYHU\OLWWOHWLPHEHIRUHWHVWGD\DQG\RXIHHO\RXQHHGWRVSHQGWKDWWLPHZRUNLQJRQRWKHU VHFWLRQV 8QOHVVRQHRIWKHVHDSSOLHVWR\RX,ZRXOGGHILQLWHO\VD\WKDW\RXVKRXOGVWDUW\RXUWUDLQLQJZLWKWKH$&7 5HDGLQJVHFWLRQ $IWHU\RXIHHOFRPIRUWDEOHZLWKWKH5HDGLQJVHFWLRQ,ILQGLWߞVXVXDOO\EHVWWRZRUNRQ$&70DWK$V ZHߞ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ߞGUHFRPPHQGWKDW\RXWDNHDORRNDWWKH6FLHQFHVHFWLRQ7KHVNLOOV\RXQHHGWRGRZHOORQWKH 6FLHQFHVHFWLRQDUHEDVLFDOO\WKHVDPHDVWKHRQHV\RXZLOOKDYHOHDUQHGIRU5HDGLQJDQG0DWK0RVWO\ \RXߞOOEHXVLQJWKHFDUHIXOUHDGLQJZHߞOOWDONDERXWLQWKH5HDGLQJVHFWLRQߚRQO\QRZLWߞOOEHDSSOLHGWR FKDUWVJUDSKVDQGVFLHQWLILFWH[WV<RXPD\DOVRQHHGDOLWWOHELWRIEDVLFPDWKWKURZQLQWKHUHDQGDWLQ\ ELWRIEDVLFVFLHQFHZKLFKLVVRPLQLPDOWKDWLWߞVDOPRVWLUUHOHYDQW:HߞOOWDONPRUHDERXWWKDWLQWKH 6FLHQFHWUDLQLQJVHFWLRQ 1H[W\RXߞOOZDQWWRORRNDWWKH$&7(QJOLVKVHFWLRQ6RPHRIWKHVHTXHVWLRQW\SHVZLOOUHTXLUHVNLOOVWKDW DUHVLPLODUWRWKHRQHVIURPWKH5HDGLQJVHFWLRQDQGRIFRXUVHZHߞOODOVRWDONDERXWKRZWRDWWDFNWKH RWKHUTXHVWLRQW\SHV /DVWZHߞOOWDONDERXWWKH$&7:ULWLQJ7HVWDOVRNQRZQDVWKH$&7(VVD\%HIRUH\RXVSHQGDQ\WLPHRQ WKLV\RXVKRXOGILQGRXWLI\RXUWDUJHWVFKRROVHYHQFDUHDERXWLWEHFDXVHPDQ\GRQߞWߚMXVWWDNHDORRNDW WKHVFKRROVߞZHEVLWHVRUFDOOWKHLUDGPLVVLRQVGHSDUWPHQWVGLUHFWO\WRILQGRXW,IWKH\GRWKHQRIFRXUVH \RXߞOOZDQWWRSUHSDUHIRUWKLVVHFWLRQDV\RXZRXOGIRUDQ\RWKHU,IWKH\GRQߞWFDUHWKHQ\RXGRQߞWZDQW WRVSHQGPXFKWLPHDWDOOZRUU\LQJDERXWWKLVSDUWRIWKHWHVW 'ULOOV$QG([HUFLVHV :KDWGR\RXGRWRSUHSDUHIRUDWHVWLQVFKRRO"<RXSUREDEO\JDWKHUWRJHWKHUDOOWKHQRWHVDQGPDWHULDOV \RXߞYHFRYHUHGOHDGLQJXSWRWKHWHVWDQG\RXVLWGRZQDQGPHPRUL]HWKRVHVSHFLILFFRQFHSWVEHFDXVH \RXNQRZWKH\ߞOOVKRZXSRQWHVWGD\7KLVZRUNVSUHWW\ZHOOIRUPRVWSHRSOHLQDKLJKVFKRRO HQYLURQPHQW :HOOPDQ\VWXGHQWVWU\WRGRVRPHWKLQJVLPLODUZKHQWKH\SUHSDUHIRUWKH$&77KH\UHYLHZDORWRI VFKRROPDWHULDODQGWKHQWKH\WDNHWKHWHVWߚDQGWKH\W\SLFDOO\ILQGWKDWDOOWKHLUSUHSDUDWLRQKDVYHU\OLWWOH SRVLWLYHLPSDFWRQWKHLU$&7SHUIRUPDQFHDQGWKH\ZRQGHUZKDWWRGRQH[W 2QFH\RXUHDGWKHWUDLQLQJVHFWLRQVRIWKLV%ODFN%RRNWKDWH[SODLQWKHSURSHUDSSURDFKWRHDFKTXHVWLRQ W\SH\RXߞOOVHHZK\WKHW\SLFDOVW\OHRISUHSDUDWLRQLVQߞWYHU\HIIHFWLYH3UHSDULQJIRUWKH$&7LVQߞWDERXW PHPRUL]DWLRQ7KHUHZLOOEHVRPHOLPLWHGDPRXQWRIPHPRUL]DWLRQDV\RXLQWHUQDOL]HWKHPDWHULDOEXW PRVWO\\RXߞOOEHOHDUQLQJDQGSUDFWLFLQJVNLOOVWKDW\RXFDQDSSO\WRUHDO$&7TXHVWLRQV ,QHDFKWUDLQLQJVHFWLRQRIWKLVERRN\RXߞOOGHYHORSDQXQGHUVWDQGLQJRIKRZDSDUWLFXODUSDUWRIWKHWHVW ZRUNVDQG\RXߞOOOHDUQDERXWWKHVWDQGDUGVDQGSDWWHUQVWKDWDSSHDURQHDFKTXHVWLRQW\SH2QFH\RXߞYH OHDUQHGWKDW\RXFDQUHDGWKURXJKWKHTXHVWLRQZDONWKURXJKVLQWKLVERRNDQGWKHQVSHQGVRPHWLPH ZRUNLQJZLWKUHDO$&7SUDFWLFHTXHVWLRQVRQ\RXURZQSRVVLEO\E\GRLQJVRPHRIWKHGULOOVZHߞOO GLVFXVVLQMXVWDPRPHQW(YHQWXDOO\\RXUJRDOLVWREHDEOHWRDSSO\WKHFRUUHFWWHFKQLTXHVWRUHDO$&7 TXHVWLRQVZLWKRXWDQ\KHOS /HWPHUHLWHUDWHWKDW\RXVKRXOGQߞWDFWXDOO\GRWKHIROORZLQJGULOOVXQWLO\RXߞYHVWXGLHGWKHWUDLQLQJ PDWHULDOVLQWKLVERRN,ߞPMXVWGLVFXVVLQJWKHPKHUHEHFDXVH,RIWHQJHWDVNHGDERXWWKLVZKHQ,ILUVWVWDUW ZRUNLQJZLWKDVWXGHQW :LWKWKDWLQPLQGKHUHDUHP\IRXUIDYRULWHGULOOVDQGH[HUFLVHV\RXFDQGRZLWKUHDO$&7SUDFWLFH TXHVWLRQVZKHQWKHWLPHFRPHV7KHVHZLOOKHOS\RXGHYHORSWKHVNLOOV\RXߞOOQHHGRQWHVWGD\ ,ߞYHJRQHDKHDGDQGJLYHQWKHPZHLUGQDPHVVRWKH\ߞOOEHHDV\WRUHPHPEHU 6HPL6WUXFWXUHG6WDUH$QG3RQGHU 7KLVLVDJUHDWORZSUHVVXUHZD\WREHJLQWRDSSO\\RXUNQRZOHGJHWRSUDFWLFHTXHVWLRQVDQGLWFDQDOVR EHDJRRGRSWLRQDV\RXSURJUHVVLQ\RXUSUHSDUDWLRQLI\RXIHHOOLNH\RXQHHGWRVSHQGVRPHWLPHRQD UHODWLYHO\XQVWUXFWXUHGH[HUFLVH $OO\RXQHHGWRGRLVIOLSWKURXJK\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG(GLWLRQ WKHߡ5HG%RRNߢ XQWLO\RXILQGDTXHVWLRQ\RXߞGOLNHWRZRUNRQ DQ\TXHVWLRQZLOOGR 7KHQ\RXMXVWWDNHDOOWKHWLPH\RXQHHGWRUHDGDQGWKLQNDERXWWKHTXHVWLRQWKHDQVZHUFKRLFHVDQGDQ\ DVVRFLDWHGSDVVDJHGLDJUDPFKDUWJUDSKRUDQ\WKLQJHOVH 2IFRXUVH\RXSUREDEO\ZDQWWRWKLQNDERXWZKDWWKHULJKWDQVZHULVDWVRPHSRLQWEXWEH\RQGWKDW\RX MXVWZDQWWRWKLQNDERXWHYHU\WKLQJHOVHWKDWFRXOGSRVVLEO\EHJRLQJRQLQWKLVTXHVWLRQ<RXUJRDOLVWR XQGHUVWDQGH[DFWO\ZKDWWKHZULWHUVDQGHGLWRUVRIWKHTXHVWLRQZHUHWKLQNLQJDERXWZKHQWKH\FUHDWHGLW :K\LVWKHTXHVWLRQZRUGHGWKHZD\LWLV":K\ZDVHDFKZURQJDQVZHUFKRLFHLQFOXGHGߚZKDWNLQGRI PLVWDNHVLVWKHTXHVWLRQWU\LQJWRJHW\RXWRPDNH"+RZFRXOGVRPHERG\PLVVWKLVTXHVWLRQ"&DQ\RX SUHGLFWDQ\FRPPRQPLVWDNHVWKDWWHVWWDNHUVPLJKWPDNHZKHQWKH\DWWHPSWWKLVTXHVWLRQ":KLFKVSHFLILF GHVLJQUXOHVGRHVWKHTXHVWLRQIROORZ"+RZFRXOGWKHHOHPHQWVRIWKLVTXHVWLRQDSSHDULQIXWXUH TXHVWLRQV" 7KHWKLQJV\RXFRXOGFKRRVHWRSRQGHUJRRQDQGRQWKRXJKVRPH$&7TXHVWLRQVGHILQLWHO\JLYHXVPRUH WRSRQGHUWKDQRWKHUVGR7KHSRLQWKHUHLVMXVWWRVSHQGDVPXFKDVWLPH\RXQHHGLQRUGHUWRWKLQNDERXW HYHU\SRVVLEOHDVSHFWRIWKHTXHVWLRQEDVHGRQZKDW\RXߞYHOHDUQHGIURPWKLV%ODFN%RRN,I\RXKDSSHQ WRJHWWKHDQVZHUZURQJWKHQRIFRXUVH\RXߞOOZDQWWRWKLQNDERXWZK\\RXJRWLWZURQJZKDW\RXPLVVHG RUPLVXQGHUVWRRGLQWKHTXHVWLRQDQGKRZ\RXFRXOGDYRLGWKDWPLVWDNHLQWKHIXWXUH%XWWKHJRDORIWKLV H[HUFLVHLVQߞWVLPSO\WRJHWWKHTXHVWLRQULJKWߚWKHJRDOLVMXVWWRXQGHUVWDQGKRZWKHTXHVWLRQZDVEXLOW LQWHUPVRIWKHFRQFHSWVIURPWKLV%ODFN%RRN $IWHU\RXߞYHWKRXJKWDERXWHYHU\DVSHFWRIDSDUWLFXODU$&7TXHVWLRQMXVWPRYHRQWRDQRWKHUTXHVWLRQ DQGSRQGHULWLQWKHVDPHZD\\RXSRQGHUHGWKHILUVWRQH:KHQ\RXߞUHGRQHPRYHRQWRDQRWKHUTXHVWLRQ DQGUHSHDWWKHSURFHVVDJDLQ$QGVRRQDQGVRRQIRUDVORQJDV\RXFDUHWRVLWDQGSRQGHU 2IFRXUVH\RXGRQߞWZDQWWRWU\WRORRNDWDTXHVWLRQWKLVZD\RQWHVWGD\2QWHVWGD\\RXUJRDOLVWREH HIILFLHQWDFFXUDWHDQGSXUSRVHIXOEHFDXVH\RXߞUHZRUNLQJZLWKDWLPHOLPLW 7KLVH[HUFLVHLVYHU\HIIHFWLYHEHFDXVHLWKHOSV\RXWRORRNDWDQ\JLYHQ$&7TXHVWLRQDQGWKHQVWDUWWR SXOOLWDSDUWDQGWKLQNDERXWLWHIIHFWLYHO\7KDWZD\LWߞOOEHPXFKHDVLHUIRU\RXWRVHSDUDWHULJKWDQVZHUV IURPZURQJDQVZHUVDQGLWߞOOEHPXFKKDUGHUIRUWKH$&7WRWULFN\RX 3UDFWLFH$QG$3RVWLH ,QWKHWLWOHIRUWKLVGULOOWKHZRUGߡSRVWLHߢVWDQGVIRUߡSRVWPRUWHPߢDQG,LQFOXGHGLWLQWKHWLWOHRIWKH GULOOWRPDNHLWYHU\FOHDUWKDWVLPSO\GRLQJDSUDFWLFHVHFWLRQRUWHVWLVQߞWHQRXJKE\LWVHOILI\RXZDQWWR VHHLPSURYHPHQW,WߞVDEVROXWHO\HVVHQWLDOWKDW\RXWKRURXJKO\UHYLHZDOORI\RXUSUDFWLFHZRUNEHIRUH \RXPRYHRQDQGGRPRUHSUDFWLFHZRUN /HWPHEHFOHDUߚZKHQ,WDONDERXWUHYLHZLQJDOORI\RXUSUDFWLFHZRUN,GRQߞWMXVWPHDQFKHFNLQJWKH DQVZHUNH\WRVHHZKDW\RXPLVVHG,PHDQJRLQJEDFNRYHUHYHU\VLQJOHTXHVWLRQ\RXPLVVHGRUZHUH XQVXUHDERXWDQGWU\LQJWRILJXUHRXWZKDWZDVJRLQJRQLQHDFKTXHVWLRQWKDWVWRSSHG\RXIURPEHLQJ FHUWDLQDERXWWKHFRUUHFWDQVZHU7KDWZD\\RXߞOONQRZKRZWRRYHUFRPHVLPLODULVVXHVRQWHVWGD\ 7\SLFDOO\WKHSURFHVVRIUHYLHZLQJ\RXUZRUNVKRXOGWDNHDERXWDVPXFKWLPHDVWKHRULJLQDOSUDFWLFH WDNHV DWOHDVWXQWLO\RXKLWDSRLQWZKHUH\RXGRQߞWPLVVDQ\TXHVWLRQVDWDOO ,QRWKHUZRUGVLI\RXVSHQG PLQXWHVGRLQJSUDFWLFHTXHVWLRQV\RXߞOOSUREDEO\VSHQGDERXWPLQXWHVGRLQJDWKRURXJKUHYLHZRI HYHU\WKLQJ\RXJRWZURQJ,WPLJKWWDNH\RXHYHQORQJHUHVSHFLDOO\LQWKHEHJLQQLQJ*LYHLWDVPXFKWLPH DVLWWDNHVWRGRDWKRURXJKMRE ,MXVWZDQWWRPDNHVXUHZHߞUHYHU\FOHDURQWKHLPSRUWDQFHRIWKHUHYLHZ,WߞVWKHPRVWLPSRUWDQWSDUWRI WKLVGULOOߚDQGWKHPRVWLPSRUWDQWSDUWRIDOO\RXUWUDLQLQJߚEHFDXVHLWߞVWKHSDUWZKHUH\RXVHHZKDW\RX GLGZURQJDQG\RXILJXUHRXWKRZWRIL[LWLQWKHIXWXUH0RVWSHRSOHZKRWU\WRSUHSIRUWKH$&7MXVWWDNH SUDFWLFHWHVWDIWHUSUDFWLFHWHVWZLWKRXWGRLQJDQ\UHDOUHYLHZDWDOODQGWKH\QHYHUILJXUHRXWZK\WKH\ߞUH QRWLPSURYLQJ<RXVLPSO\PXVWUHYLHZ\RXUZRUNRU\RXߞOOQHYHUUHDOL]HZKDW\RXߞUHFRQVLVWHQWO\GRLQJ ZURQJ 6R\RXߞOOGRDSUDFWLFHVHFWLRQRUDZKROHSUDFWLFHWHVWLI\RXIHHOOLNHLWDQGWKHQWKRURXJKO\UHYLHZ \RXUZRUNDIWHUZDUG<RXFDQGRWKHSUDFWLFHWLPHGRUXQWLPHGߚLWߞVQRWVRLPSRUWDQWWRZRUNZLWKD WLPHOLPLWLQWKHEHJLQQLQJEXWWKHUHDOWKLQJZLOOEHWLPHGRIFRXUVHVR\RXߞOOQHHGWRJHWFRPIRUWDEOH ZLWKWKDWDV\RXJHWFORVHUWRWKHWHVWGDWH $VZLWKWKHRWKHUGULOOVGRQߞWERWKHUGRLQJWKLVXQWLO\RXߞYHGLJHVWHGWKHWUDLQLQJPDWHULDOODWHULQWKLV ERRNEHFDXVH\RXߞOOMXVWJHWIUXVWUDWHGRWKHUZLVHDQG\RXZRQߞWKDYHPXFKWRJRRQZKHQ\RXWU\WR UHYLHZ\RXUPLVWDNHV$ERYHDOOGRQߞWERWKHUGRLQJSUDFWLFHVHFWLRQVLI\RXDUHQߞWJRLQJWRUHYLHZWKH RXWFRPHRQFH\RXߞUHGRQHVR\RXFDQILJXUHRXWZKDWߞVFDXVLQJ\RXUPLVWDNHV 7KHߡ6KRUWFXWߢ6HDUFK 7KHߡ6KRUWFXWߢ6HDUFKFDQEHDGULOORQLWVRZQRULWFDQEHSDUWRIWKHUHYLHZ\RXGRLQWKHSUHYLRXV H[HUFLVH(LWKHUZD\LQWKLVGULOO\RXQHHGWRNQRZWKHDQVZHUVWRWKHTXHVWLRQV\RXߞUHZRUNLQJZLWK DKHDGRIWLPH6RWKLVGULOOLVVRPHWKLQJ\RXVKRXOGGRZLWKTXHVWLRQVWKDW\RXߞYHDOUHDG\WULHGWRDQVZHU IRUVRPHRWKHUGULOO7KDWZD\\RXGRQߞWEXUQWKURXJKWKHOLPLWHGQXPEHURIUHDO$&7SUDFWLFHTXHVWLRQV DYDLODEOHIURP$&7,QF ,QWKLVGULOO\RXUJRDOLVWRWDNHDVPXFKWLPHDV\RXQHHGWRWU\WRILJXUHRXWDQ\DQGDOOߡVKRUWFXWVߢ\RX PLJKWKDYHEHHQDEOHWRXVHWRDUULYHDWWKHFRUUHFWDQVZHULQWKHOHDVWDPRXQWRIWLPHSRVVLEOH,ߞP SXWWLQJWKHZRUGߡVKRUWFXWVߢLQTXRWDWLRQPDUNVEHFDXVH,WDNHLVVXHZLWKWKHLGHDWKDWDSSURDFKLQJ TXHVWLRQVLQWKLVZD\LVOD]\$FWXDOO\LWUHTXLUHVPRUHFUHDWLYLW\DQGWUDLQLQJWKDQDQ\RWKHUDSSURDFK DQGWKHZKROHSRLQWRIWKLV%ODFN%RRNLVWRJHW\RXWREHDEOHWRLGHQWLI\DQGH[SORLWWKRVHߡVKRUWFXWVߢDV RIWHQDVSRVVLEOH7KHUHߞ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ߞ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ߞVQRWKLQJZURQJZLWKWKDWDWWKLV SRLQW2IFRXUVH\RXSUREDEO\ZRQߞWKDYHWKHOX[XU\RIVWDULQJDWDQLQGLYLGXDOTXHVWLRQIRUZKROH PLQXWHVRQWHVWGD\EXWGRLQJWKLVNLQGRIGULOOQRZDVSDUWRI\RXUSUHSDUDWLRQZLOOKHOS\RXLGHQWLI\ WKHVHNLQGVRIVXSHUHIILFLHQWVROXWLRQVPRUHTXLFNO\ZKHQLWFRXQWV $VZLWKWKHRWKHUGULOOV\RXVKRXOGZDLWWRGRWKLVRQHXQWLO\RXߞUHIDPLOLDUZLWKWKHWUDLQLQJPDWHULDODQG WKHQ\RXߞOONQRZZKDWWRORRNIRU :KDW:RXOG0DNH,W5LJKW" ,QWKLVGULOO\RXߞOOORRNDWZURQJDQVZHUFKRLFHVDQGDVN\RXUVHOIߡ:KDWZRXOGPDNHLWULJKW"ߢ )RUH[DPSOHLQD6FLHQFHTXHVWLRQWKDWDVNV\RXDERXWDYDOXHLQ7DEOH\RXPLJKWVHHDZURQJDQVZHU FKRLFHWKDWLQFRUUHFWO\XVHVWKHFRUUHVSRQGLQJYDOXHIURP7DEOH,QWKDWFDVHWKHDQVZHUWRߡ:KDW ZRXOGPDNHLWULJKW"ߢZRXOGEHߡ,IWKHTXHVWLRQDVNHGDERXW7DEOHLQVWHDGRI7DEOHWKHQWKLVDQVZHU FKRLFHZRXOGEHULJKWߢ )RUDQRWKHUH[DPSOHLID5HDGLQJTXHVWLRQDVNVIRUWKHPHDQLQJRIDFHUWDLQSKUDVHLQWKHWH[WDQGRQHRI WKHZURQJDQVZHUVJLYHVDFRUUHFWPHDQLQJIRUDQRWKHUSKUDVHODWHULQWKHWH[WWKHDQVZHUWRߡ:KDWZRXOG PDNHLWULJKW"ߢZRXOGEHߡ,IWKHTXHVWLRQKDGDVNHGDERXWWKHRWKHUSKUDVHLQWKHWH[WWKDWZRXOGPDNHLW ULJKWߢ $V\RXߞOOOHDUQODWHULQWKLV%ODFN%RRNWKH$&7ZLOOIUHTXHQWO\RIIHUZURQJDQVZHUFKRLFHVWKDWDUHVWLOO UHOHYDQWWRWKHSDVVDJHRUSUREOHPߚMXVWQRWLQWKHZD\WKDWWKHTXHVWLRQUHTXLUHV7KLQNLQJDERXWKRZWKH TXHVWLRQFRXOGEHFKDQJHGWRPDNHZURQJDQVZHUFKRLFHVFRUUHFWJLYHV\RXDQRWKHURSSRUWXQLW\WRWKLQN DERXWKRZWKHWHVWLVGHVLJQHGIURPWKHVWDQGSRLQWRI$&7,QFDQGLWZLOODOVRKHOS\RXWRLGHQWLI\ ZURQJDQVZHUVPRUHTXLFNO\DQGUHOLDEO\RQWHVWGD\ )LJXULQJ2XW<RXU6FKHGXOH $V,PHQWLRQHGDERYH,ߞYHIRXQGWKDWWKHUHߞVQRVLQJOHWUDLQLQJVFKHGXOHWKDWZRUNVEHVWIRUHYHU\VWXGHQW 6RLQVWHDGRIWU\LQJWRFRPHXSZLWKRQHWKDWZRXOGRQO\ZRUNIRUVRPHSHRSOH,ߞPOD\LQJRXWVRPHLGHDV \RXVKRXOGWKLQNDERXWWRGHWHUPLQHWKHEHVWDSSURDFKIRU\RX 'R<RX1HHG$Q(DUO\6WDUW" :KHQDWHDFKHUDVVLJQVDELJSURMHFWWKDWߞVGXHLQVHYHUDOZHHNVVRPHSHRSOHUXVKKRPHDQGEHJLQULJKW DZD\ZKLOHRWKHUVSUHIHUWRZDLWXQWLOWKHGD\RUWZREHIRUHWRJHWVWDUWHG1HLWKHUDSSURDFKLV QHFHVVDULO\EHWWHUDVORQJDV\RXߞUHKDSS\ZLWKWKHUHVXOWVWKDW\RXJHW 7KHPHWKRGVWKDW,WHDFKIRUWKH$&7FDQUHDOO\EHWDXJKWDQGOHDUQHGLQOHVVWKDQDZHHN%XWQRW HYHU\ERG\LVFRPIRUWDEOHZLWKWKDWDQGLI\RXDUHQߞWWKHQ\RXVKRXOGDOORZ\RXUVHOIPRUHWLPHߚ SUREDEO\DWOHDVWDPRQWKRUWZR ,I\RXߞUHXVHGWRGRLQJZRUNDWWKHODVWPLQXWHWKHQ\RXPLJKWIHHORND\ZLWKDORWOHVVSUHSDUDWLRQWLPH ,ߞYHVHHQERWKDSSURDFKHVZRUNTXLWHZHOODVORQJDVWKHSHUVRQLQTXHVWLRQIHOWFRPIRUWDEOHZLWKWKH DSSURDFKKHFKRVH :KDWߞV<RXU$WWHQWLRQ6SDQ" 6RPHSHRSOHFDQߞWVWDQGWRZRUNRQWKHLUSUHSDUDWLRQIRUPRUHWKDQPLQXWHVRUVRDWDWLPHZKHUHDV RWKHUVFDQJRIRUDFRXSOHRIKRXUVRUPRUHDQGVWLOOEHSURGXFWLYH,I\RXߞUHWKHVRUWRISHUVRQZLWKORZ WHVWSUHSVWDPLQD\RXߞUHJRLQJWRQHHGWRVWXG\PRUHIUHTXHQWO\WRPDNHXSIRULWLI\RXFDQVSHQGPRUH WLPHRQHDFKLQGLYLGXDOSUHSVHVVLRQWKHQ\RXZRQߞWQHHGWRKDYHVRPDQ\VHVVLRQV7KLVLVVRPHWKLQJ \RXQHHGWREHUHDOLVWLFDERXWDV\RXWU\WRPDSRXWWKHWLPH\RXߞOOVSHQGSUHSDULQJ +RZ0XFK2I$6FRUH,QFUHDVH$UH<RX6KRRWLQJ)RU" $V\RXPLJKWLPDJLQHVWXGHQWVZKRQHHGODUJHUVFRUHLQFUHDVHVVKRXOGSUREDEO\SODQWRDOORZ WKHPVHOYHVPRUHWLPHWRSUHSDUHWKDQVWXGHQWVZKRQHHGVPDOOHUVFRUHLQFUHDVHV +RZ0XFK:LOO<RX,PSURYH$IWHU(DFK3UDFWLFH6HVVLRQ2Q$YHUDJH" 8QIRUWXQDWHO\WKHUHߞVQRXQLYHUVDODQVZHUWRWKLVTXHVWLRQVRPHVWXGHQWVFDQWDNHSUDFWLFHWHVWVDQG VWLOOQRWLPSURYHPXFK XVXDOO\EHFDXVHWKH\DUHQߞWWUDLQHGZHOODQGWKH\GRQߞWUHYLHZWKHLUZRUN VXIILFLHQWO\ ZKLOHRWKHUSHRSOHUHDOO\WDNHWRWKHPDWHULDOTXLFNO\DQGPDNHQRWLFHDEOHLPSURYHPHQWLQ WKHLUILUVWSUDFWLFHVHVVLRQ,WZLOOGHSHQGDORWRQ\RXUFRQILGHQFHDQGRQKRZZHOO\RXWDNHGLUHFWLRQ,I \RXUHDGWKLV%ODFN%RRNEXWGRQߞWPDNHDFRQVFLRXVHIIRUWWRLPSOHPHQWZKDW\RXOHDUQ\RXU LPSURYHPHQWZLOOEHVORZHU,I\RXPDNHDZKROHKHDUWHGHIIRUWWRLPSOHPHQWWKHULJKWDSSURDFKWKRXJK \RXߞOOSUREDEO\SURJUHVVPRUHTXLFNO\HYHQLILWߞVIUXVWUDWLQJDWILUVW :KDWGHWHUPLQHV\RXUOHYHORISURJUHVVZLOOEHWKHTXDOLW\RI\RXUSUDFWLFHQRWWKHTXDQWLW\VRGRQߞWJR LQWRLWWKLQNLQJWKDW\RXMXVWQHHGWRJHWWKURXJKDFHUWDLQQXPEHURISUDFWLFHWHVWVLQRUGHUWRJHWWKHVFRUH \RXZDQW,QVWHDGEHSUHSDUHGWRJRWKURXJKDVPDQ\SUDFWLFHTXHVWLRQVDVQHFHVVDU\LQRUGHUWRIHHO FRPIRUWDEOHDSSO\LQJWKHFRUUHFWVWUDWHJLHVIRUHDFKSDUWRIWKHWHVW7KLVW\SLFDOO\WDNHVIHZHUSUDFWLFH VHVVLRQVWKDQSHRSOHH[SHFW%XWZKHWKHULWߞVPRUHRUIHZHUGRHVQߞWUHDOO\PDWWHUDVORQJDV\RXPDNH VXUHWRIRFXVRQWKHTXDOLW\RI\RXUSUDFWLFH0DNHVXUH\RXSD\DWWHQWLRQWRZKDW\RXߞUHGRLQJDQGPDNH VXUH\RXUHDOO\WU\WRFKDQJHWKHZD\\RXVHHWKHWHVW 'R<RX5HDOO\(YHQ1HHG$6FKHGXOH" 0RVWSHRSOHOLNHWKHLGHDRIPDSSLQJRXWDVFKHGXOHEHFDXVHLWIHHOVFRPIRUWDEOHDQGSURGXFWLYH(YHQ VR,ZRXOGOLNHWRSXWWKHLGHDRXWWKHUHWKDWPD\EH\RXGRQߞWQHHGWRWU\WRHVWDEOLVKDQ\NLQGRIULJLG VFKHGXOHIRU\RXUSUHSDUDWLRQ$OORZPHWRH[SODLQ %HFDXVHSUHSDULQJIRUDVWDQGDUGL]HGWHVWOLNHWKH$&7LVVRGLIIHUHQWIURPSUHSDULQJIRUDQRUPDOKLJK VFKRROWHVWLWߞVKDUGWRPDNHDQDFFXUDWHSUHGLFWLRQRIH[DFWO\KRZPXFKSUHSWLPH\RXߞOODFWXDOO\QHHG 7KDWPHDQVVWXGHQWVZKRWU\WROD\RXWDVFKHGXOHPLJKWTXLFNO\ILQGWKDWVRPHDVSHFWVRISUHSDUDWLRQWDNH DORWPRUHRUDORWOHVVWLPHWKDQWKH\DQWLFLSDWHGZKLFKFDQWKURZRIIWKHZKROHLGHDRIDVFKHGXOHDQG SRVVLEO\FUHDWHDVWUHVVIXOVLWXDWLRQ +HUHߞVZKDW,ZRXOGGRLQVWHDGLI,ZHUHLQ\RXUVKRHVVWDUWSUHSSLQJ LQVRPHZD\ DVHDUO\DV\RXFDQ ߚZKLFKLVWRVD\QRZ7KHSUHS\RXGRGRHVQߞWQHFHVVDULO\KDYHWREHWRUWXURXVDQGPLQGQXPELQJ ,I\RXߞUHVKRUWRQWLPH\RXߞOOSUREDEO\ZDQWWRJHWLQDVPXFKSUHSDUDWLRQDV\RXFDQEHWZHHQQRZDQG WHVWGD\DQ\ZD\,I\RXߞ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ߞUHPDNLQJJRRGSURJUHVVUHODWLYHWR\RXUWDUJHWVFRUHDQG\RXUWHVWGDWHWKHQNHHSLW XS,I\RXIHHOOLNH\RXߞUHQRWPDNLQJHQRXJKSURJUHVVWKHQWU\WRLQFUHDVHWKHDPRXQWRIIRFXVDQGHQHUJ\ \RXEULQJWR\RXUSUHSVHVVLRQVLIWKDWVWLOOGRHVQߞWZRUNWKHQFRQVLGHUPDNLQJPRUHWLPHWRSUHSDUH ,WUHDOO\LVWKDWVLPSOHߚMXVWVWD\PRWLYDWHGDQGNHHSDWLW 8QGHUVWDQG<RXU0LVWDNHV ߡ)DLOXUHLVWKHNH\WRVXFFHVVHDFKPLVWDNHWHDFKHVXVVRPHWKLQJߢ 0RULKHL8HVKLED $YLWDOVWHSLQ\RXULPSURYHPHQWRQWKH$&7LVGHYHORSLQJWKHDELOLW\WRUHFRJQL]HDQGXQGHUVWDQG\RXU PLVWDNHVDQGZHDNQHVVHVVR\RXFDQGRZKDWߞVQHFHVVDU\WRDYRLGWKHPLVWDNHVDQGVWUHQJWKHQWKH ZHDNQHVVHVߚDQGXOWLPDWHO\WRLPSURYH\RXUVFRUH %XWDVZHߞYHDOUHDG\GLVFXVVHG DQGZLOOFRQWLQXHWRGLVFXVVLQPRUHGHWDLO WKH$&7WHVWVGLIIHUHQW W\SHVRIVNLOOVIURPWKHVNLOOVWHVWHGLQWKHFODVVURRPDQGLWGRHVVRLQDKLJKO\VWUXFWXUHGDQG VWDQGDUGL]HGZD\WKDWߞVYHU\XQIDPLOLDUWRPRVWVWXGHQWV7KLVUHVXOWVLQDORWRIWHVWWDNHUVPLVVLQJ TXHVWLRQVEXWQRWXQGHUVWDQGLQJH[DFWO\ZK\WKH\ߞUHPLVVLQJWKRVHTXHVWLRQV 7KLVPHDQVWKDWLI\RXDUHQߞWFDUHIXOZKHQ\RXWU\WRILJXUHRXW\RXUZHDNSRLQWV\RXPLJKWHQGXS IRFXVLQJRQVNLOOVWKDWDUHLUUHOHYDQWWRWKHPLVWDNHV\RXߞUHPDNLQJZKLFKFDQFDXVH\RXWRZDVWHWLPH ZLWKRXWLPSURYLQJ\RXUVFRUH/HWPHJLYH\RXDQH[DPSOH /HWߞVVD\\RXPLVVDWULJTXHVWLRQZKLOH\RXߞUHZRUNLQJRQWKH$&70DWKVHFWLRQ$ORWRISHRSOHPLJKW GHFLGHWRUHVSRQGWRWKLVE\OHDUQLQJPRUHWULJRQRPHWU\VRWKHLUVFRUHVZRXOGLPSURYH7KH\PLJKWJRWR DPDWKWHDFKHUDQGDVNIRUKHOSRUJRRQOLQHDQGILQGVRPHWULJRQRPHWU\YLGHRV6RPHSHRSOHLQWKLV VLWXDWLRQPLJKWVSHQGKRXUVRUGD\VRUHYHQZHHNVPDNLQJWLPHWRVWXG\WULJLQWKHKRSHVRILPSURYLQJ WKHLUSHUIRUPDQFHRQWKH$&7 %XWKROGRQDPLQXWHߚZKDWLI\RXWDNHDFORVHUORRNDWWKHZD\\RXDSSURDFKHGWKHWULJTXHVWLRQWKDW VWDUWHGDOORIWKLV"<RXPLJKWQRWLFHWKDW\RXFURVVPXOWLSOLHGLQFRUUHFWO\RUHYHQWKDW\RXPLVUHDGWKH TXHVWLRQRUKDG\RXUFDOFXODWRULQWKHZURQJPRGHRUEXEEOHGDQDQVZHULQFRUUHFWO\ ,QRWKHUZRUGVMXVWPLVVLQJDWULJTXHVWLRQGRHVQߞWQHFHVVDULO\LQGLFDWHWKDW\RXQHHGWROHDUQPRUHWULJ 2QHRIWKHPRVWLPSRUWDQWVNLOOVLQ$&70DWK ZKDWHYHUWKHVSHFLILFVXEMHFWPDWWHU LVWKHDELOLW\WR H[HFXWHVLPSOHPDWKHPDWLFDORSHUDWLRQVFRQVLVWHQWO\DQGFRUUHFWO\LQP\H[SHULHQFHPXFKRIWKH DJJUDYDWLRQWKDWSHRSOHH[SHULHQFHRQWKH$&7FRPHVIURPDIDLOXUHWRGRWKDW7KHVLPSOHIDFWLVWKDW PRVWSHRSOHMXVWDUHQߞWXVHGWREHLQJDVFDUHIXOZLWKEDVLFPDWKDVWKH$&70DWKVHFWLRQUHTXLUHVWKHPWR EH ,QWKLVH[DPSOHWKDWPHDQV\RXFRXOGHQGXSVSHQGLQJGD\VRUZHHNVRQWULJRQRPHWU\ZKHQLQUHDOLW\ \RXPLJKWMXVWQHHGWRUHDGPRUHFDUHIXOO\WKLQNPRUHDERXWWKHDQVZHUFKRLFHVLQWKHTXHVWLRQRUHYHQ MXVWUHPHPEHUWRFDUU\DFRUUHFWO\ ,QWKHFRQWH[WRIWKH$&75HDGLQJVHFWLRQ\RXPLJKWPLVVDTXHVWLRQWKDWLQYROYHVDQXQIDPLOLDUZRUG DQGWKHQGHFLGH\RXQHHGWROHDUQZKDWWKDWZRUGPHDQV%XWFORVHULQVSHFWLRQRIWKHTXHVWLRQRIWHQ UHYHDOVWKDWWKHPHDQLQJRIWKHXQNQRZQZRUGLVQߞWGLUHFWO\UHOHYDQWWRILQGLQJWKHFRUUHFWDQVZHUDQGWKDW DPRUHFDUHIXODSSOLFDWLRQRIWKHVWUDWHJLHVLQWKLVERRNZRXOGKDYHOHG\RXWRWKHULJKWDQVZHUDQ\ZD\ 6RZKHWKHU\RXߞUHHYDOXDWLQJ\RXURZQSUDFWLFHRU\RXߞUHORRNLQJDWDGLDJQRVWLFWHVWIURPDWXWRURUWHVW SUHSFRPSDQ\ RUHYHQIURP$&7,QFLWVHOI EHFDUHIXO<RXPLJKWEHWROGWKDW\RXQHHGWROHDUQPRUH PDWKJUDPPDURUVFLHQFHߚRUZKRNQRZVZKDWHOVHߚEXWLWߞVPXFKPRUHOLNHO\WKDW\RXUSUREOHPLV UHODWHGWRH[HFXWLQJVRPHUHODWLYHO\EDVLFVNLOOLQDFRQVLVWHQWPDQQHU6WDQGDUGL]HGWHVWVOLNHWKH$&7 UHTXLUHDKLJKHUGHJUHHRISUHFLVLRQDQGFRQVLVWHQF\ HVSHFLDOO\LQH[HFXWLQJEDVLFVNLOOV WKDQQRUPDO FODVVURRPWHVWVGRDQGWKLVLVWKHPRVWFRPPRQGLIILFXOW\IRUPRVWVWXGHQWV :KHQ\RXORRNDWDTXHVWLRQ\RXߞYHPLVVHGJREDFNWKURXJK\RXUZRUNVR\RXFDQILJXUHRXWH[DFWO\KRZ \RXPDGH\RXUPLVWDNH,WPLJKWQRWKDYHDQ\WKLQJWRGRZLWKVXEMHFWPDWWHU,QIDFWPRVWWHVWWDNHUVFDQ SUREDEO\VDIHO\VWDUWZLWKWKHDVVXPSWLRQWKDWWKH\NQRZHQRXJKVXEMHFWPDWWHUWRDQVZHUDOPRVWDOO RU HYHQDOO WKHTXHVWLRQVRQDUHDO$&7 2QFH\RXNQRZWKHUHDOLVVXHWKDWFDXVHG\RXWRPLVVDTXHVWLRQ\RXFDQZRUNWRIL[LW,WPLJKWWDNHD OLWWOHELWPRUHWLPHLQWKHEHJLQQLQJEXWLWFDQVDYH\RXDWRQRIWLPHLQWKHORQJUXQLILWPHDQV\RXߞUHQRW ZDVWLQJHQHUJ\WU\LQJWRVWUHQJWKHQDQDUHDWKDWLVQߞWDFWXDOO\DZHDNQHVVRUZRUNLQJWRDYRLGDW\SHRI PLVWDNH\RXDUHQߞWDFWXDOO\PDNLQJLQWKHILUVWSODFH 7KHߡ1DWXUDO7HVW7DNHUߢ ߡ$WRQHWLPH,WKRXJKWWKHPRVWLPSRUWDQWWKLQJZDVWDOHQW,WKLQNQRZWKDWWKH\RXQJ PDQRUWKH\RXQJZRPDQPXVWSRVVHVVRUWHDFKKLPVHOIWUDLQKLPVHOILQLQILQLWH SDWLHQFHZKLFKLVWRWU\DQGWRWU\DQGWRWU\XQWLOLWFRPHVULJKWߢ :LOOLDP)DXONQHU 6RPHSHRSOHDUHߡQDWXUDOWHVWWDNHUVߢ:KDWGRHVWKDWPHDQ" ,WPHDQVWKH\MXVWVHHPWRKDYHDNQDFNIRUVFRULQJKLJKRQVWDQGDUGL]HGWHVWV:HߞYHDOOHQFRXQWHUHG WKHP7KH\PD\QRWEHWKHPRVWPRWLYDWHGVWXGHQWVWKH\PD\QRWDOZD\VJHWWKHKLJKHVWJUDGHVEXWIRU ZKDWHYHUUHDVRQWKH\MXVWVHHPWRWKULYHRQKLJKVWDNHVWHVWV ,WDOOKDVWRGRZLWKKDYLQJWKHULJKWPLQGVHWDQGDSSURDFK,I\RXXQGHUVWDQGZKDWߞVUHDOO\EHLQJWHVWHG DQG\RXXQGHUVWDQGZKDWLWUHDOO\WDNHVWRVHSDUDWHWKHZURQJDQVZHUVIURPWKHULJKWRQHV\RXFDQH[FHO RQWHVWGD\ZLWKDORWOHVVHIIRUWWKDQ\RXUSHHUVZLOOQHHG 7KLVLVZKDWߡQDWXUDOWHVWWDNLQJߢLVDOODERXW ,WߞVFHUWDLQO\QRWDERXWFKHDWLQJDQGLWߞVQRWDERXWEHLQJOD]\,WߞVDERXWXQGHUVWDQGLQJWKHVNLOOVDQG FKRLFHVWKDWWKHWHVWDFWXDOO\UHZDUGVDQGWKHQSUDFWLFLQJWKHPVR\RXFDQH[HFXWHWKHPDVZHOODV SRVVLEOHRQWHVWGD\ %HFDXVHWHVWVOLNHWKH$&7DUHVRZLGHO\PLVXQGHUVWRRG HYHQE\HGXFDWRUVZKRKDYHRQO\WKHEHVW LQWHQWLRQV DQGEHFDXVHVRPDQ\SHRSOHVSHQGVRPXFKWLPHRQGULOOVDQGWHFKQLTXHVWKDWGRQߞWDFWXDOO\ LPSURYHWKHLUVFRUHVDSSURDFKLQJWKH$&7DVDQDWXUDOWHVWWDNHUZRXOGLVPXFKOHVVWLPHFRQVXPLQJ WKDQWKHPRUHFRPPRQDSSURDFK 6RWKDWߞVRXUJRDOIRUWKLVPDQXDOWRWKLQNDQGDFWOLNHQDWXUDOWHVWWDNHUV:HߞUHJRLQJWRWDNHDOLWWOHELWRI WLPHXSIURQWWRXQGHUVWDQGWKHWHVWDQGWKDWZLOOVDYHXVORDGVRIWLPHGULOOLQJDQGFUDPPLQJODWHU7KHQ ZHߞOOEHDEOHWROHYHUDJHRXUH[LVWLQJNQRZOHGJHDVPXFKDVSRVVLEOHVRZHHQGXSZLWKWKHKLJKHVW VFRUHVSRVVLEOH ,QWKLVERRN,ߞOORIWHQUHIHUWRWKHLGHDRIDߡWUDLQHGWHVWWDNHUߢRUDQߡXQWUDLQHGWHVWWDNHUߢ:KHQ, PHQWLRQDߡWUDLQHGWHVWWDNHUߢ,ߞPWDONLQJDERXWVRPHRQHZKRPLJKWQRWEHDQDWXUDOWHVWWDNHUEXWZKR KDVVWXGLHGDQGLPSOHPHQWHGWKHߡQDWXUDOߢDSSURDFKWRVWDQGDUGL]HGWHVWVOLNHWKH$&7ߚWKHDSSURDFK ZHߞOOOHDUQLQWKLVERRN $QߡXQWUDLQHGWHVWWDNHUߢRIFRXUVHLVWKHW\SLFDOWHVWWDNHURQHZKRLVQߞWIDPLOLDUZLWKWKLVDSSURDFK 7KHDSSURDFK,WHDFKLQWKLVERRNLVWKHPRVWGLUHFWDQGHIIHFWLYHZD\,NQRZRIWRSUHSDUHIRUWKH$&7 DQGLWߞVWKHRQO\ZD\WKDW,UHFRPPHQG%XWVRPHWLPHVLWFDQVHHPDOLWWOHWRRJRRGWREHWUXHVROHWPH FOHDUXSVRPHFRPPRQFRQFHUQV ,WߞV1RW0DJLF ,ߞYHPDGHDORWRIELJSURPLVHVDERXWWKHDSSURDFKZHߞUHJRLQJWRXVH,ߞYHWROG\RXLWߞVJRLQJWRDOORZ \RXWRJHWDEHWWHUVFRUHZKLOHSUREDEO\VSHQGLQJOHVVWLPHVWXG\LQJ,ߞYHWROG\RXWKHUHߞVDKLGGHQ VWUXFWXUHWRWKHWHVWDQGWKDWZHFDQXQORFNLWWRPD[LPL]HRXUSHUIRUPDQFHRQWHVWGD\'RHVQߞWWKDWVHHP DOLWWOHRYHUWKHWRS" ,WPLJKWVRXQGWKDWZD\EXWLWߞVWUXH,I\RXUHDOO\WDNHWKHWLPHWRXQGHUVWDQGWKHVHWHFKQLTXHVDQGWKHQ \RXSUDFWLFHWKHPRQUHDO$&7SUDFWLFHTXHVWLRQV\RXߞOOVHHH[DFWO\ZKDW,ߞPWDONLQJDERXW%XW,VKRXOG SRLQWRXWULJKWQRZWKDWLWGRHVQߞWMXVWKDSSHQE\LWVHOI 6RPHWLPHV,ߞOOZRUNZLWKVWXGHQWVZKRJHWYHU\H[FLWHGDIWHUMXVWWDONLQJZLWKPHRQFHEHFDXVHWKH\IHHO OLNHWKH\ߞUHUHDOO\ILQDOO\XQGHUVWDQGLQJKRZLWDOOZRUNV7KHLUHDUOLHUIUXVWUDWLRQVHHPVXQQHFHVVDU\ 7KH\ߞUHUHDG\WRJHWLQWKHUHDQGJHWDSHUIHFWVFRUH DQGWKHQWKH\WU\RXWRQHRUWZRTXHVWLRQVDQGGRQREHWWHUWKDQEHIRUH 7KDWXVXDOO\GRHVQߞWPDNHWKRVHSHRSOHWRRKDSS\ 7KHSUREOHPLVWKDWVLPSO\UHDGLQJWKLVPDWHULDOLVQߞWJRLQJWRUHVXOWLQDSHUIHFWVFRUHIRUPRVWSHRSOHE\ LWVHOI <RXDFWXDOO\KDYHWRSUDFWLFHWKHVHWHFKQLTXHVRQUHDO$&7SUDFWLFHTXHVWLRQVXQWLO\RXFDQUHOLDEO\DSSO\ WKHP ,WXVXDOO\GRHVQߞWWDNHDWRQRISUDFWLFHWRVHHLPSURYHPHQWVLI\RXSUHSDUHLQWKHZD\V,UHFRPPHQGLQ WKLVERRNEXWLWGRHVWDNHVRPHSUDFWLFH 8QWLO\RXGRVWDUWSUDFWLFLQJLQWHOOLJHQWO\\RXSUREDEO\ZRQߞWVHHPXFKLPSURYHPHQWLQ\RXUVFRUHV ,QVFKRRO\RXRIWHQKDYHWHVWVZKHUHDWOHDVWSDUWRIWKHWHVWLQYROYHVPHPRUL]LQJIDFWV2QFH\RXߞYH PHPRUL]HGDIDFW\RXGRQߞWQHHGWRSUDFWLFHNQRZLQJLWULJKW"<RXMXVWNQRZLW,I\RXQHHGWRNQRZWKDW WKH%DWWOHRI:DWHUORRWRRNSODFHLQ\RXUHDGLWDIHZWLPHVDQG\RXNQRZLW7KDWߞVLW 3UHSSLQJIRUWKH$&7LVQߞWOLNHWKDW,OLNHWRWDONDERXWP\DSSURDFKWRWKHWHVWOHVVLQWHUPVRIVWXG\LQJ DQGPHPRUL]LQJDQGPRUHLQWHUPVRIWUDLQLQJDQGSUDFWLFLQJߚPRUHOLNHSOD\LQJDVSRUWRUOHDUQLQJD PXVLFDOLQVWUXPHQWWKDQOLNHFUDPPLQJIDFWVLQ\RXUKHDGIRUDW\SLFDOKLJKVFKRROWHVW 6RLWSUREDEO\LVQߞWHQRXJKMXVWWRUHDGWKLVERRNXQGHUVWDQGWKHWHVWDQGXQGHUVWDQGP\PHWKRGVZLWKRXW DFWXDOO\WU\LQJWRLPSOHPHQWWKHPRQ\RXURZQ7KDWߞVDQLPSRUWDQWILUVWVWHSRIFRXUVHDQGLWߞVJUHDWWR UHDGWKLVERRNDQGKDYHWKRVHPRPHQWVZKHQ\RXIHHOOLNH\RXߞUHILQDOO\JUDVSLQJKRZDOORIWKLVUHDOO\ ZRUNVDQGZKDW\RXQHHGWRGRWRJHW\RXUEHVWVFRUH 6WLOOWKHRQO\ZD\WREHVXUH\RXߞUHLPSURYLQJ\RXUVFRUHLVWRSUDFWLFHWKHPHWKRGXQWLO\RXFDQ FRQVLVWHQWO\DSSO\LWZHOO7KLVFDQWDNHVRPHWLPH,WVKRXOGWDNHDORWOHVVWLPHWKDQZKDWPRVWSHRSOHGR WRJHWUHDG\IRUWKH$&7DQG\RXUUHVXOWVVKRXOGEHDZKROHORWEHWWHUEXWLWVWLOOGRHVWDNHVRPHWLPH 6RGRQߞWEHGLVFRXUDJHGLI\RXUHDGWKLVZKROHERRNIHHOOLNH\RXXQGHUVWDQGHYHU\$&7TXHVWLRQ\RXߞYH HYHUVHHQDQGWKHQVLWGRZQDQGGRH[DFWO\DVZHOODV\RXDOZD\VGRRQDSUDFWLFHWHVWRQ\RXUILUVWWU\ <RXVWLOOKDYHWRJHWWKHKDQJRIWKLQJV/HDUQWKHPHWKRGSXWLQWKHSUDFWLFHDQG\RXߞOOVHHWKHUHVXOWV 5HSHWLWLRQ,V*RRG :HKDYHQߞWHYHQVWDUWHGWDONLQJDERXWFRQFUHWHWHFKQLTXHVIRUDWWDFNLQJGLIIHUHQWTXHVWLRQW\SHVRQWKH $&7DQG,ߞYHDOUHDG\UHSHDWHGP\VHOIDIHZWLPHVLQWKLVERRN $QG,ߞOOFRQWLQXHWRUHSHDWFHUWDLQFRQFHSWVIRUWKHUHVWRIWKLVERRN ,I\RXVWDUWWRJHWDJJUDYDWHGE\DOOWKLVUHSHWLWLRQ\RXVKRXOGGLUHFW\RXUDQJHUDWWKHSHRSOHZKRPDNH WKH$&7QRWDWPH <RXVHHWKH$&7LWVHOILVYHU\UHSHWLWLYH,WFRQVLVWHQWO\UHZDUGVDFHUWDLQVPDOOVHWRIEHKDYLRUVDQGLW FRQVLVWHQWO\SXQLVKHVDQRWKHUVHWRIEHKDYLRUV,I\RXZDQWWRVXFFHHG\RXQHHGWRKDYH RUGHYHORS DQ LQVWLQFWLYHDZDUHQHVVRIZKDWWKHWHVWUHZDUGVDQGZKDWLWSXQLVKHV,ߞYHOHDUQHGRYHUWKH\HDUVWKDWPRVW VWXGHQWVQHHGWRKDYHWKHVHLGHDVUHSHDWHGDORWRIWLPHVEHIRUHWKH\EHFRPHVHFRQGQDWXUH 7KLVLVDQRWKHUVLWXDWLRQZKHUHZHVHHWKDWWKH$&7LVQߞWOLNHVFKRRO,QVFKRROZHߞUHHQFRXUDJHGWR WKLQNFUHDWLYHO\DQGXVHRXULPDJLQDWLRQV6RPHVWXGHQWVWU\WRFDUU\WKLVPHQWDOLW\RYHUWRWKH$&7DQG WKH\KRSHWRXVHWKHSURFHVVRISUHSDULQJIRUWKHWHVWDVVRPHNLQGRIFUHDWLYHLQWHOOHFWXDOH[HUFLVH %XWWKH$&7GRHVQߞWUHZDUG\RXIRUWKLQNLQJXS\RXURZQDQVZHUV2QFH\RXVHHWKHWHVWIURPWKHULJKW SHUVSHFWLYH\RXߞOOVHHWKDWLWߞV(;75(0(/<UHSHWLWLYH<RXߞOOILQG\RXUVHOIORRNLQJIRUWKHVDPH HOHPHQWVLQWKHVDPHW\SHVRITXHVWLRQVRYHUDQGRYHUDJDLQ<RXߞOOVHHZURQJDQVZHUFKRLFHVWU\LQJWR WULFN\RXLQWKHVDPHZD\VRYHUDQGRYHUDJDLQ<RXߞOOHQFRXQWHUWKHVDPHNLQGVRIVHQWHQFHVSDVVDJHV FKDUWVDQGJUDSKVRYHUDQGRYHUDJDLQ $QGRYHUDQGRYHUDQGRYHUDJDLQ ,NQRZLWJHWVUHSHWLWLYHDQGERULQJEXWZHKDYHWROHDUQWRVHHUHSHWLWLRQDVDJRRGWKLQJRQWKH$&7 :KHQWKLQJVVWDUWWRIHHOUHSHWLWLYHRQWKH$&7ߚDQGZKHQ\RXߞUHJHWWLQJTXHVWLRQVULJKWRIFRXUVHߚLW PHDQV\RXߞYHUHDOO\LQWHUQDOL]HGWKHSDWWHUQVDQGVWDQGDUGL]DWLRQRIWKHWHVWDQG\RXߞUHRQ\RXUZD\WR JHWWLQJDJUHDWVFRUH 6RDV\RXFRQWLQXHWRUHDGWKLV%ODFN%RRNDQGDV\RXVHHPHJRLQJEDFNWRVRPHRIWKHVDPHFRQFHSWV DQGSDWWHUQVRYHUDQGRYHUDJDLQUHPHPEHUWKDW,ߞPGRLQJLWEHFDXVHWKH$&7LWVHOINHHSVJRLQJEDFNWR WKHVDPHLGHDVRYHUDQGRYHUDJDLQ:KHQ\RXVWDUWWRILQGWKHWHVWLQFUHGLEO\UHSHWLWLYHLWPHDQV\RXߞUH RQWKHULJKWWUDFNߚDQGLIP\RZQUHSHWLWLYHQHVVVWDUWVWRGULYH\RXDOLWWOHFUD]\,KRSHLWߞVEHFDXVH ZKDWHYHU,ߞPUHSHDWLQJLVVRFRPSOHWHO\EXUQHGLQWR\RXUPLQGWKDW\RXߞOOQHYHUIRUJHWLWWKURXJKDOO\RXU SUDFWLFHDQGUHYLHZDOOWKHZD\XSWRWHVWGD\ :K\,V7KH$&76R6FDU\" <RXPD\EHZRQGHULQJZK\SHRSOHDUHVRERWKHUHGE\WKH$&7LILWߞVUHDOO\DVVLPSOHDQGEHDWDEOHDV, VD\:K\LV$&7SUHSDUDWLRQVXFKDVFDU\VWUHVVIXOQHUYHZUDFNLQJH[SHULHQFHIRUVRPDQ\SHRSOH"7KH UHDVRQDVZHߞYHGLVFXVVHGLVWKDWSHRSOHZKRVWUXJJOHZLWKWKH$&7DUHDSSURDFKLQJLWWKHZURQJZD\ 7KH\ߞUHDSSURDFKLQJWKH$&7DVWKRXJKLWZHUHDQRUPDOKLJKVFKRROWHVWDQGLWLVQߞW %XWZK\DUHWKH\GRLQJWKDW"7KLVLVDYHU\YHU\LPSRUWDQWFRQFHSWWRXQGHUVWDQG7KH\DSSURDFKWKHWHVW WKHZURQJZD\EHFDXVHWKH\EX\LQWRWKH$&7ߞVUHSXWDWLRQ,QIDFWWKHSHRSOHZKRPDNHWKH$&7 GHVSHUDWHO\QHHGORWVRISHRSOHWRPLVXQGHUVWDQGWKHWHVWDQGDSSURDFKLWLQFRUUHFWO\LIHYHU\ERG\ XQGHUVWRRGWKHWHVWDQGVFRUHGZHOORQLWWKHUHZRXOGEHQRSRLQWLQKDYLQJLWEHFDXVHLWZRXOGQߞWKHOS FROOHJHVZHHGRXWWKHLUDSSOLFDQWV 6RKRZGRHV$&7,QFHQFRXUDJHKLJKVFKRROVWXGHQWVWRPLVXQGHUVWDQGWKHWHVW" :HOOZHߞOODGGUHVVWKHFRPSDQ\ߞVVSHFLILFWHFKQLTXHVLQPRUHGHWDLODVZHORRNDWLQGLYLGXDOTXHVWLRQ W\SHVODWHULQWKLVERRNEXWKHUHDUHVRPHRIWKHWKLQJV\RXߞOOUXQLQWRWRJLYH\RXDQLGHD w$&7,QFWHOOV\RXWKDWKLJKVFRULQJ$&7HVVD\VVKRZߡJRRGFRPPDQGRIODQJXDJHߢDQGDUH ߡHIIHFWLYHHVVD\VWKDWUHSUHVHQWVWURQJUHVSRQVHVߢEXWLQUHDOLW\WKHEHVWSUHGLFWRURIDQHVVD\ߞV VFRUHLVLWVOHQJWK w$&7,QFVD\VWKDW$&70DWKTXHVWLRQVDUHGHVLJQHGWRPHDVXUHߡWKHNQRZOHGJHVNLOOVDQG UHDVRQLQJWHFKQLTXHVWKDWDUHWDXJKWLQKLJKVFKRROPDWKHPDWLFVFRXUVHVߢEXW$&70DWKTXHVWLRQV WHQGWREHXQOLNHTXHVWLRQV\RXߞGKDYHWRDQVZHULQKLJKVFKRROPDWKFRXUVHV w$&7,QFHQFRXUDJHVWKHP\WKWKDWWKH$&76FLHQFHVHFWLRQUHTXLUHV\RXWREHIDPLOLDUZLWKGR]HQV RIILHOGVRIVFLHQWLILFVWXG\HYHQWKRXJKYHU\IHZTXHVWLRQVSHUWHVWUHTXLUHDQ\RXWVLGHVFLHQWLILF NQRZOHGJHDWDOO ,FRXOGJRRQDQG,ZLOOLQODWHUVHFWLRQVEXWIRUQRZ\RXJHWWKHLGHD7KHIDFWLVWKDW$&7,QFKDVWZR HTXDOO\LPSRUWDQWMREV2QHRIWKHPLVFRQWLQXLQJWRPDNHDUHSHWLWLYHSUHGLFWDEOHVWDQGDUGL]HGWHVW WKDWߞVWKHVDPHLQDOOWKHZD\VWKDWPDWWHUHYHU\WLPHWKDWLWߞVDGPLQLVWHUHGDQGWKDWUHTXLUHVOLWWOHRUQR RXWVLGHNQRZOHGJH7KHRWKHUMRELVWRFRQWLQXHWRHQFRXUDJHWKHSHUFHSWLRQWKDWWKHLUWHVWLVDVXEMHFW PDWWHURULHQWHGH[DPWKDWUHZDUGVWKHW\SHVRIVNLOOVDQGKDELWVWKDWVXFFHHGLQKLJKVFKRRODQGFROOHJH FODVVURRPV 7KDWZD\PRVWSHRSOHNHHSWU\LQJWRSUHSDUHIRUWKHNLQGRIWHVWWKH$&7SUHWHQGVWREHDQGWKH\NHHS VWUXJJOLQJZKHQWKH\WU\WRSHUIRUPRQWKHWHVWWKDWWKH$&7DFWXDOO\LV7KH$&7VHHPVP\VWHULRXVO\ GLIILFXOWRQO\DIHZVWXGHQWVDUHDEOHWRߡFUDFNWKHFRGHߢDQGVFRUHZHOODQGWKH$&7VWD\VUHOHYDQW 7KDWߞVZK\WKH$&7VHHPVVRVFDU\HYHQWKRXJKLWߞVQRWߚWKHSHRSOHEHKLQGWKHWHVWZRUNKDUGWRPDNHLW VHHPWKDWZD\%XWZHFDQOHDUQWRVHHWKURXJKDOORIWKDWDQGZHFDQVFRUHZHOOZLWKRXWZDVWLQJWLPH :KDW<RX0XVW8QGHUVWDQG$ERXW7KH$&7 ߡ+XPDQEHLQJVZKRDUHDOPRVWXQLTXHLQKDYLQJWKHDELOLW\WROHDUQIURPWKHH[SHULHQFH RIRWKHUVDUHDOVRUHPDUNDEOHIRUWKHLUDSSDUHQWGLVLQFOLQDWLRQWRGRVRߢ 'RXJODV$GDPV <RXߞYHKHDUGPHVD\DIHZWLPHVDOUHDG\WKDWLI\RXZDQWWREHDWWKH$&7LQWKHPRVWHIIHFWLYHHIILFLHQW ZD\SRVVLEOH\RXߞOOQHHGWRXQGHUVWDQGLWLQDZD\WKDWPRVWWHVWWDNHUVQHYHUGR,QRUGHUIRUXVWR XQGHUVWDQGWKH$&7ZHߞOOQHHGWRWDNHDVWHSEDFNDQGORRNDWZK\DQGKRZWKHWHVWZDVGHVLJQHG7KDW ZD\ZHFDQXQGHUVWDQGWKHOLPLWDWLRQVRIWKHWHVWKRZWKHWHVWWULHVWRPDNHXSIRUWKRVHOLPLWDWLRQVDQG KRZZHFDQWDNHIXOODGYDQWDJHRIWKHVLWXDWLRQ /HWPHVD\ULJKWQRZWKDWHYHQWKRXJKLWߞOORQO\WDNHDIHZPLQXWHVDQGDIHZSDJHVWRGLVFXVVWKLVGRLQJ VRLVFUXFLDOWR\RXUVXFFHVVRQWKH$&7$ORWRISHRSOHPD\EHWHPSWHGWRVNLSWKLVSDUWRIWKHERRNDQG JHWVWUDLJKWLQWRWKHPDWHULDOIRUVSHFLILFTXHVWLRQW\SHVEXWWKHVHQH[WIHZSDJHVDUHVRPHRIWKHPRVW LPSRUWDQWSDJHVLQWKLVZKROH%ODFN%RRNVRSOHDVHUHDGWKHPFDUHIXOO\DQGWDNHWKHWLPHWRXQGHUVWDQG WKHP :K\DUHWKHUHVWDQGDUGL]HGWHVWVOLNHWKH$&7"2QHVLPSOHDQVZHUPLJKWEHWKDWWKH\SURYLGHDVWDQGDUG PHDVXUHWKDWDOORZVVFKRROVWRFRPSDUHRQHVWXGHQWWRDQRWKHU:KHQDFROOHJHRUXQLYHUVLW\KDV DSSOLFDQWVIURPGLIIHUHQWEDFNJURXQGVZLWKFRPSOHWHO\GLIIHUHQWHGXFDWLRQDOH[SHULHQFHVLWFDQEHKDUGWR FRPSDUHWKHLU*3$VLQDPHDQLQJIXOZD\VLQFHWKRVH*3$VZLOOUHIOHFWGLIIHUHQWFODVVHVWDNHQDWGLIIHUHQW VFKRROV%XWLIDOOWKHDSSOLFDQWVWDNHDWHVWWKDWߞVߡVWDQGDUGL]HGߢVRWKDWWKHUHVXOWVRIWKHWHVWFDQEH UHOLDEO\FRPSDUHGWRHDFKRWKHUHYHQZKHQVWXGHQWVWDNHWKHWHVWRQGLIIHUHQWGD\VLQGLIIHUHQWSODFHVWKHQ FROOHJHVFDQKDYHVRPHZD\WRPHDVXUHVWXGHQWVDJDLQVWRQHFRQVLVWHQWVWDQGDUGZKLFKFDQ DWOHDVWLQ WKHRU\ JLYHXVVRPHLGHDDERXWZKLFKVWXGHQWVPLJKWEHEHWWHUVXLWHGWRDSDUWLFXODUFROOHJH /HWߞVWKLQNDERXWWKDWߚMXVWDERXWHYHU\VFKRROFRQVLGHUVERWK\RXU*3$DQG\RXU$&7 RU6$7 VFRUH ZKHQ\RXDSSO\7KLVVXJJHVWV DQGPDQ\RWKHUGHWDLOVFRQILUP WKDWVFKRROVFRQVLGHU\RXU*3$DQG\RXU VWDQGDUGL]HGWHVWVFRUHVWREHPHDVXUHPHQWVRIWZRGLIIHUHQWWKLQJV,IWKH\ERWKPHDVXUHGWKHVDPHWKLQJ WKHUHZRXOGEHQRQHHGWRWUDFNERWKRIWKHPULJKW" 6RWKHILUVWLPSRUWDQWWKLQJWRUHPHPEHUDERXWWKH$&7LVWKDWLWߞVDWRROXVHGE\VFKRROVLQWKHDGPLVVLRQV SURFHVV([FHSWLQFHUWDLQVLWXDWLRQVWKDWPLJKWUHTXLUHDVWXGHQWWRJHWDFHUWDLQVFRUHWREHFRQVLGHUHGIRU DVFKRODUVKLSRURWKHUDZDUGWKHRQO\UHDVRQSHRSOHWDNHWKH$&7LVEHFDXVHWKH\ߞUHDSSO\LQJWRD FROOHJH 7KLVHYLGHQFHVWURQJO\VXSSRUWVVRPHWKLQJ,ߞYHDOUHDG\VDLGDQGZLOOFRQWLQXHWRPHQWLRQWKURXJKRXWWKLV ERRN 'RLQJ:HOO2Q7KH$&7$QG'RLQJ:HOO,Q6FKRRO$UH7ZR 'LIIHUHQW7KLQJV7KH6NLOOV7KDW*HW5HZDUGHG2Q7KH$&7$UH1RW 7KH6DPH$V7KH6NLOOV7KDW*HW5HZDUGHG,Q7KH&ODVVURRP 7KLVLVZK\ZHDOONQRZSHRSOHZLWKDZHVRPHJUDGHVLQDGYDQFHGFODVVHVZKRVLPSO\FDQߞWILJXUHRXW KRZWRVFRUHZHOORQWKH$&7QRWWRPHQWLRQRWKHUVWXGHQWVZKRVWUXJJOHLQWKHFODVVURRPEXWZKRFDQ JHWHOLWHVWDQGDUGL]HGWHVWVFRUHVZLWKRXWUHDOO\VHHPLQJWRWU\YHU\KDUG ,WߞVDOVRZK\VWXGHQWVZKRVSHQGGR]HQVRIKRXUVRQWKHVRUWVRIDFWLYLWLHVWKDWPLJKWJHWUHZDUGHGLQD FODVVURRPߚOLNHPHPRUL]LQJIRUPXODVUHDGLQJQRYHOVDQGVRRQߚRIWHQHQGXSZLWKVFRUHVWKDWDUHQR EHWWHUWKDQWKH\ZHUHEHIRUHDOOWKDWZRUN)RUWKLVUHDVRQDVSUHYLRXVO\GLVFXVVHGZHZRQߞWEHVSHQGLQJ RXUWLPHRQWKDWNLQGRISUHSDUDWLRQ 7KHUHLVRIFRXUVHVRPHRYHUODSEHWZHHQWKHVNLOOVXVHGLQKLJKVFKRRODQGWKHVNLOOVXVHGRQWKHWHVW EXWLWߞVLPSRUWDQWIRUXVWRFODULI\HDUO\RQWKDWWKHPRVWLPSRUWDQWVNLOOVQHHGHGLQHDFKVFHQDULRDUH DFWXDOO\YHU\GLIIHUHQW 6RZHߞYHHVWDEOLVKHGWKDWWKHVNLOOVUHTXLUHGWRJHWDJRRGVFRUHRQWKH$&7DUHQߞWWKHVDPHDVWKHVNLOOV UHTXLUHGWRJHWJRRGJUDGHVLQKLJKVFKRRO1RZZHQHHGWRILJXUHRXWH[DFWO\KRZWKH\ߞUHGLIIHUHQWVR ZHNQRZZKDWNLQGVRIVNLOOVWRSUDFWLFHLQRUGHUWRGRZHOORQWKHWHVW $5HDO/LIH([DPSOH /HWߞVEHJLQE\LPDJLQLQJ\RXߞUHLQDW\SLFDOKLJKVFKRROFODVVURRPDQG\RXUWHDFKHULVJRLQJRYHUD PXOWLSOHFKRLFHWHVWKHߞ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ߞVTXLWHXQGHUVWDQGDEOH0RUH RIWHQWKDQQRWKLJKVFKRROWHDFKHUVDUHRYHUZRUNHG7KH\WHDFKPXOWLSOHFODVVHVDQGߚLQDGGLWLRQWR JUDGLQJKRPHZRUNDQGSURMHFWVߚWKH\KDYHWRPDNHWKHLURZQWHVWVIRUHDFKFODVV 6R\RXFDQVHHKRZDQRYHUZRUNHGWHDFKHUZKRKDVWRPDNHKLVRZQWHVWVDQGZKRSUREDEO\GRHVQߞW KDYHDVPXFKWLPHWRSURRIUHDGWKHPDVKHZRXOGOLNHPLJKWRFFDVLRQDOO\PDNHDQHUURULQWKHFUHDWLRQRI DWHVWTXHVWLRQ 7KLVVRUWRIWKLQJ'2(6127KDSSHQRQWKH$&7 ,NQRZWKDWHYHU\RQFHLQDORQJZKLOHDTXHVWLRQRQ WKHWHVWLVFKDOOHQJHGDQGRYHUWXUQHGEXWWKDWߞVVRXQXVXDOWKDWIRURXUSXUSRVHVLWPD\DVZHOOQHYHU KDSSHQ 7KH$&7LVQߞWDWHVWWKDWRQHEXV\SHUVRQZURWHWRXVHLQRQHKLJKVFKRROFODVV,WߞVDSURGXFWFUHDWHGE\ PDQ\SHRSOHRYHUDORQJSHULRGRIWLPHDQGRQHRIWKHPRVWLPSRUWDQWHOHPHQWVRIWKHWHVWLVWKDWWKH FRUUHFWDQVZHUFKRLFHIRUHDFKTXHVWLRQPXVWEHFRPSOHWHO\FHUWDLQ7KHWHUP,OLNHWRXVHLV ߡEXOOHWSURRIߢ2QHYHU\UHDO$&7TXHVWLRQWKH$&7FDQSRLQWWRFRQFUHWHFRQVLVWHQWUHDVRQVZK\WKH FRUUHFWDQVZHUFKRLFHLVFRUUHFWDQGZK\HYHU\RWKHUDQVZHUFKRLFHIRUWKDWTXHVWLRQLVZURQJ :K\LVWKLVVRLPSRUWDQW":HOOWKLQNDERXWZKDWWKH$&7LV,WߞVWKHEDFNERQHRIDQHQWLUHFRPSDQ\ ZKRVHSXUSRVHLVEDVLFDOO\WRPDNHWKH$&77KHFRPSDQ\WKDWPDNHVWKH$&7 ZKLFKLVFUHDWLYHO\ FDOOHGߡ$&7,QFߢ LVDQRQSURILWEXWLWVWLOOHPSOR\VDORWRISHRSOHDQGWKRVHSHRSOHߞVMREVGHSHQGRQ WKHWHVWEHLQJUHOHYDQWDQGXVHIXOWRWKHFROOHJHDGPLVVLRQVSURFHVV :HOOKRZUHOHYDQWRUXVHIXOZRXOGWKHWHVWEHLIWKHDQVZHUVZHUHQߞWEXOOHWSURRI",IWKHTXHVWLRQVZHUH VXEMHFWLYHRULIWKH\IUHTXHQWO\KDGPRUHWKDQRQHYDOLGDQVZHUEXWRQO\JDYHFUHGLWIRURQHDUELWUDU\ FKRLFHWKHQWKHUHZRXOGEHQRFRUUHODWLRQEHWZHHQ$&7VFRUHVDQGFROOHJHSHUIRUPDQFH,IWKDWZHUHWR KDSSHQFROOHJHVZRXOGTXLFNO\UHDOL]HWKDWWKH$&7ZDVQߞWDUHOLDEOHWRROIRUHYDOXDWLQJVWXGHQWVDQG WKH\ߞGVWRSDFFHSWLQJ$&7VFRUHVRQDSSOLFDWLRQV7KDWPHDQVSHRSOHZRXOGVWRSWDNLQJWKH$&7 7KLVLVZK\$&7,QFKDVSHRSOHZKRVHMRELVWRPDNHVXUHWKDWWKHTXHVWLRQVRQWKHWHVWDUHEXOOHWSURRI 6RKHUHߞVRXUQH[WLPSRUWDQWIDFWWRUHPHPEHU 7KH$&7ߞV9HU\([LVWHQFH'HSHQGV2Q(DFK4XHVWLRQ%HLQJ %XOOHWSURRI(YHU\4XHVWLRQ0XVW+DYH([DFWO\2QH3UHGLFWDEO\ &RUUHFW$QVZHU2U7KH$&7:RXOG+DYH1R5HDVRQ7R([LVW 7RH[SORUHIXUWKHUWKHLQQHUZRUNLQJVRIWKH$&7OHWߞVWKLQNDOLWWOHPRUHDERXWZKDWLWPHDQVIRUDWHVWWR EHVWDQGDUGL]HG)RURQHWKLQJLWPHDQVWKDWWZRSHRSOHFDQWDNHWKH$&7KXQGUHGVRIPLOHVDSDUWRQ GLIIHUHQWGD\VDQGWKHLUVFRUHVFDQVWLOOEHUHOLDEO\FRPSDUHGWRRQHDQRWKHU +RZLVWKDWSRVVLEOH" $&7,QFREYLRXVO\FDQߞWDGPLQLVWHUWKHH[DFWVDPHWHVWHYHU\VLQJOHWLPHZLWKWKHH[DFWVDPHTXHVWLRQV ZRUGIRUZRUG,ILWGLGWKDWSUHWW\VRRQHYHU\ERG\ZRXOGNQRZWKRVHTXHVWLRQVDQGHYHU\ERG\ZRXOG JHWDSHUIHFWVFRUHDQGWKH$&7ZRXOGEHXVHOHVV 7KDWPHDQVWKHFKDOOHQJHIRU$&7,QFLVWRPDNHDQHZWHVWZLWKFRPSOHWHO\GLIIHUHQWTXHVWLRQV RQWKH VXUIDFH IRUHDFKWHVWGDWHߚEXWWKHVFRUHVIRUHDFKQHZWHVWPXVWVWLOOEHFRQVLVWHQWO\DQGPHDQLQJIXOO\ FRPSDUDEOHWRHDFKRWKHU 6RKRZGRHV$&7,QFGRWKDW" :HOOWRVWDUWZLWKWKHEDVLFVWUXFWXUHIRUWKH$&7KDVWREHFRQVLVWHQWߚLWKDVWRKDYHWKHVDPHQXPEHURI DQVZHUFKRLFHVIRUHDFKJLYHQTXHVWLRQW\SHIURPWHVWWRWHVWWKHVDPHDPRXQWRIWLPHIRUEUHDNVLQ EHWZHHQVHFWLRQVWKHVDPHQXPEHURIVHFWLRQVZLWKWKHVDPHQXPEHURITXHVWLRQVRQHDFKVHFWLRQDQGVR RQ %XWWKDWLVQߞWHQRXJKE\LWVHOI$IWHUDOOMXVWDQVZHULQJPDWKTXHVWLRQVLQPLQXWHVLVQߞW DXWRPDWLFDOO\WKHVDPHWKLQJDVDQVZHULQJDQ\RWKHUVHWRIPDWKTXHVWLRQVLQPLQXWHV7KHTXHVWLRQV LQHDFKEDWFKPXVWWHVWWKHVDPHFRQFHSWVLQWKHVDPHZD\VZLWKRXWDFWXDOO\UHSHDWLQJHDFKRWKHU)RUWKDW PDWWHUWKHZURQJDQVZHUFKRLFHVWKHPVHOYHVPXVWEHZURQJLQVLPLODUZD\VߚLI\RXPDGHWZRYHUVLRQV RIDWHVWERWKDVNLQJWKHH[DFWVDPHTXHVWLRQVEXWRQHWHVWXVHGZURQJDQVZHUFKRLFHVWKDWZHUHYHU\ WULFN\DQGRQHRQO\XVHGZURQJDQVZHUFKRLFHVWKDWZHUHFOHDUO\ZURQJWKHQRQHWHVWZRXOGEHPXFK KDUGHUWKDQWKHRWKHUMXVWEHFDXVHWKHDQVZHUFKRLFHVZHUHGLIIHUHQW 7KLVE\WKHZD\KLQWVDWVRPHWKLQJYHU\LPSRUWDQWWKDWZHߞOOJHWLQWRODWHU <RXFDQSUREDEO\VHHZKHUH,ߞPJRLQJKHUHߚHYHU\RIILFLDO$&7RQHYHU\WHVWGDWHPXVWWHVWWKHVDPH WKLQJVLQWKHVDPHZD\VZLWKWKHVDPHW\SHVRIULJKWDQVZHUVDQGWKHVDPHW\SHVRIZURQJDQVZHUVRU HOVHWKHUHVXOWVIURPGLIIHUHQWWHVWGDWHVFRXOGQߞWEHUHOLDEO\FRPSDUHGWRRQHDQRWKHU2IFRXUVHWKHH[DFW TXHVWLRQVWKHPVHOYHVKDYHWREHGLIIHUHQWRQHDFKWHVWDVGRWKHH[DFWSDVVDJHVRQWKH(QJOLVK5HDGLQJ DQG6FLHQFHVHFWLRQVEXWWKHTXHVWLRQVDOZD\VKDYHWRIROORZWKHVDPHUXOHVDQGSDWWHUQVLQWKHH[DFW VDPHZD\VRQHYHU\WHVW 6RPHRIWKRVHUXOHVDQGSDWWHUQVDUHYHU\REYLRXVOLNHWKHQXPEHURITXHVWLRQVLQDVHFWLRQ7KHRWKHU VWDQGDUGVDUHPRUHVXEWOH7KH\DUHQߞWGLUHFWO\VWDWHGLQDQ\RIILFLDOPDWHULDOVIURP$&7,QFLQVWHDG WKH\ߞUHWKHVRUWRIWKLQJ\RXKDYHWRORRNIRUYHU\FDUHIXOO\ RUOHDUQIURPWKLV%ODFN%RRN- ,IWKHVH RWKHUVWDQGDUGVZHUHWRRHDV\WRILJXUHRXWWKHQHYHU\ERG\ZRXOGUHDOL]HH[DFWO\KRZWREHDWWKHWHVW 6RDOORIWKLVOHDGVXSWRRXUQH[WLPSRUWDQW$&7IDFW 7KH$&70XVW%H([DFWO\7KH6DPH,Q(YHU\,PSRUWDQW:D\ (YHU\7LPH,WߞV*LYHQ,W0XVW$OZD\V<LHOG7R7KH6DPH6WUDWHJLHV ,I<RX.QRZ7KRVH6WUDWHJLHV<RX&DQ%HDW7KH7HVW 7KHVWDQGDUGL]DWLRQRIWKH$&7PHDQVWKDWLIDVHWRIVWUDWHJLHVFDQEHDWWKHRIILFLDOWHVWVWKDWKDYHEHHQ UHOHDVHGLQVRXUFHVOLNHWKH5HG%RRNWKHQWKRVHVWUDWHJLHVPXVWEHDEOHWREHDWWKHWHVWHYHU\WLPH EHFDXVHDJDLQWKHWHVWKDVWREHIXQGDPHQWDOO\WKHVDPHHDFKWLPHLWߞVJLYHQ 6RLIZHFDQFRPHXSZLWKVWUDWHJLHVWKDWDOZD\VEHDWUHDOSUDFWLFH$&7TXHVWLRQVWKHQZHNQRZZHFDQ XVHWKRVHVWUDWHJLHVWREHDWWKHUHDO$&7RQWHVWGD\VRZHFDQJHWWKHVFRUHZHZDQWDQGPRYHRQZLWK RXUOLYHV 2IFRXUVH,ߞYHDOUHDG\FRPHXSZLWKWKRVHVWUDWHJLHVDQGWKLV%ODFN%RRNZLOOWHDFKWKHPWR\RX ,NHHSGULYLQJWKLVSRLQWKRPHEHFDXVHDOPRVWHYHU\WLPH,ZRUNZLWKVRPHRQHWKHUHFRPHVDSRLQW ZKHQWKHVWXGHQWVD\VVRPHWKLQJOLNHߡ2ND\0LNH,NQRZ\RXUVWUDWHJLHVDUHJUHDWPRVWRIWKHWLPHDQG WKH\XVXDOO\ZRUNEXW,IRXQGDSUDFWLFHTXHVWLRQZKHUH\RXUVWUDWHJLHVMXVWGRQߞWZRUN7KLVTXHVWLRQ PXVWMXVWEHGLIIHUHQWߢ/LWHUDOO\HYHU\VLQJOHWLPHWKLVKDSSHQVLWߞVEHFDXVHWKHVWXGHQWKDVRYHUORRNHGRU PLVXQGHUVWRRGDQLPSRUWDQWSDUWRIWKHTXHVWLRQRUIRUJRWWHQDQLPSRUWDQWSDUWRIWKHVWUDWHJ\2QFHZH LGHQWLI\WKHPLVWDNHLWEHFRPHVDSSDUHQWWKDWWKHTXHVWLRQLVMXVWDQRWKHUVWDQGDUGL]HGTXHVWLRQWKDWZH FDQEHDWXVLQJWKHVWUDWHJLHVLQWKLVERRN $V\RXFDQVHHPXFKRIWKHSURSHUDSSURDFKWRWKH$&7UHOLHVRQDGHHSXQGHUVWDQGLQJRIWKHWHVWߞV GHVLJQ$QGWKDWOHDGVXVWRRXUQH[WPDMRUSRLQW :H6KRXOG2QO\3UDFWLFH)RU7KH$&7:LWK5HDO$&74XHVWLRQV :ULWWHQ%\$&7,QF$QG1RW:LWK)DNH4XHVWLRQV:ULWWHQ%\$Q\ 2WKHU&RPSDQ\ %HFDXVHRIWKHVXEWOHVWDQGDUGVWKDW$&7,QFXVHVWRGHVLJQWKH$&7ZHPXVWRQO\HYHUZRUNZLWKUHDO $&7TXHVWLRQVFUHDWHGE\$&7,QFZKHQZHSUHSDUH$&7,QFLVWKHRQO\FRPSDQ\WKDWZHNQRZZH FDQWUXVWWRSURYLGHUHDO$&7SUDFWLFHTXHVWLRQVEHFDXVHLWߞVWKHRQO\FRPSDQ\WKDWGHVLJQVWKHUHDO$&7 $ORWRIRWKHUFRPSDQLHVOLNHWRZULWHWKHLURZQSUDFWLFHTXHVWLRQVIRUWZRPDLQUHDVRQVLWJLYHVWKHP PRUHVWXIIWRVHOO\RXDQGLWߞVHDVLHUWRJHW\RXWREHOLHYHWKDWWKHLUDGYLFHZRUNVZKHQWKH\ߞUHWKHRQHV ZKRZULWHWKHTXHVWLRQVWKDW\RXWU\WKHDGYLFHRQ ,WߞVHVVHQWLDOWKDW\RXRQO\XVHUHDO$&7SUDFWLFHTXHVWLRQVZKHQSUHSDULQJIRUWKH$&7IRUDOOWKH UHDVRQVZHߞYHMXVWWDONHGDERXW:KHQ\RXXVHUHDO$&7SUDFWLFHTXHVWLRQV\RXߞUHWUDLQLQJ\RXUVHOIRQD FRQVFLRXVOHYHODVZHOODVRQDQLQWXLWLYHOHYHOWRUHFRJQL]HDQGUHVSRQGWRWKHVWDQGDUGVLQUHDO$&7 TXHVWLRQV :KHQ\RXXVHVRPHRWKHUFRPSDQ\ߞVWHVWV\RXߞUHEDVLFDOO\OHDUQLQJDERXWKRZWKDWSDUWLFXODUFRPSDQ\ PDNHVWHVWVQRWDERXWKRZWKHDFWXDO$&7ZRUNV%XWRQWHVWGD\ZKHQLWUHDOO\FRXQWV\RXZRQߞWEH WDNLQJDWHVWPDGHE\WKDWRWKHUFRPSDQ\ZLOO\RX"6RZK\SUDFWLFHZLWKWKRVHIDNHWHVWVDWDOO" ,ߞOOVD\LWRQHPRUHWLPHߚQHYHUXVHDQ\WKLQJEHVLGHVUHDO$&7SUDFWLFHTXHVWLRQVLI\RXUJRDOLVWRGR ZHOORQWKHUHDO$&7 :KDW$ERXW+DUGHU3UDFWLFH4XHVWLRQV" 6RPHWHVWSUHSFRPSDQLHVKDYHDUHSXWDWLRQIRUPDNLQJIDNH$&7SUDFWLFHTXHVWLRQVWKDWDUHVXSSRVHGO\ KDUGHUWKDQWKHUHDOWKLQJ6RPHSHRSOHWKLQNLWߞVDJRRGLGHDWRSUDFWLFHZLWKWKHVHTXHVWLRQVEHFDXVH WKH\WKLQNWKDWSUDFWLFLQJZLWKVRPHWKLQJWKDWߞVKDUGHUWKDQWKHUHDOWKLQJZLOOPDNHWKHUHDOWKLQJVHHP HDV\E\FRPSDULVRQ %XWWKHVDPHEDVLFSUREOHPVWLOOH[LVWVߚWKHVHDUHIDNHSUDFWLFHTXHVWLRQVWKDWDUHQߞWQHFHVVDULO\PDGH DFFRUGLQJWRWKHUHDOVWDQGDUGVRIWKH$&7,IWKH\GRQߞWFKDOOHQJH\RXLQWKHVDPHZD\VWKDWDFWXDO$&7 TXHVWLRQVZRXOGFKDOOHQJH\RXWKHQLWGRHVQߞWPDWWHUKRZFKDOOHQJLQJWKH\DUHLQRWKHUZD\V ,PDJLQHWKDW\RXZDQWHGWROHDUQWRPDNHDJULOOHGFKHHVHVDQGZLFK:RXOGLWKHOS\RXWROHDUQKRZWR PDNH\RXURZQFKHHVHILUVW"3UREDEO\QRWHYHQWKRXJKPDNLQJ\RXURZQFKHHVHLVPXFKKDUGHUWKDQ PDNLQJDJULOOHGFKHHVHVDQGZLFK(YHQWKRXJKWKHWZRDFWLYLWLHVVRXQGOLNHWKH\ߞUHNLQGRIUHODWHGWKH ERWWRPOLQHLVWKDWOHDUQLQJWRPDNHFKHHVHLVDZDVWHRIWLPHLI\RXUDFWXDOJRDOLVWRPDNHDVDQGZLFK 6LPLODUO\DQ\WLPH\RXVSHQGZRUNLQJRQIDNH$&7SUDFWLFHTXHVWLRQVQRPDWWHUKRZKDUGWKH\DUHLV WLPH\RXߞUHQRWSXUVXLQJ\RXUDFWXDOJRDORIJHWWLQJEHWWHUDWUHDO$&7TXHVWLRQVEHFDXVHWKRVHIDNH TXHVWLRQVFRXOGEHEUHDNLQJWKH$&7ߞVUXOHVLIWKH\UHTXLUH\RXWRNQRZDQGGRWKLQJVWKDWWKHUHDOWHVW ZLOOQHYHUUHTXLUH\RXWRNQRZRUGR 6RLI\RXZDQWWRLPSURYH\RXUSHUIRUPDQFHRQWKH$&7\RXQHHGWRZRUNH[FOXVLYHO\ZLWKUHDO$&7 SUDFWLFHTXHVWLRQVZULWWHQE\$&7,QF 6XPPDU\ 2ND\7KDWVKRXOGFRYHUDOOWKHEDVLFLQIRUPDWLRQ\RXQHHGWRNQRZDERXWWKH$&7IRUQRZ,IDQ\RILWߞV XQFOHDU\RXPD\ZDQWWRJREDFNDQGUHDGLWRYHUDJDLQ7KHUHߞVPRUHWRNQRZDERXWWKHWHVWRIFRXUVH EXWPRVWRIZKDWߞVOHIWLVVSHFLILFWRWKHGLIIHUHQWTXHVWLRQW\SHVVRZHߞOOFRYHUWKDWZKHQZHJHWWRWKHP /HWߞVTXLFNO\UHFDS 'RLQJZHOORQWKH$&7LVQߞWWKHVDPHDVGRLQJZHOORQDQRUPDOKLJKVFKRROWHVW (YHU\TXHVWLRQRQWKH$&7PXVWEHEXOOHWSURRI 7KH$&7KDVWREHWKHVDPHLQDOOWKHZD\VWKDWPDWWHUHYHU\WLPHLWߞVDGPLQLVWHUHG <RXPXVWDOZD\VDQGRQO\XVHUHDOSUDFWLFH$&7TXHVWLRQVWRSUHSDUHIRUWKH$&7 ,I\RXߞYHUHDGDQGXQGHUVWRRGWKLVVHFWLRQ\RXߞUHQRZDUPHGZLWKDEHWWHUXQGHUVWDQGLQJRIWKH$&7WKDQ SUREDEO\RIWKHSHRSOHZKRWDNHWKHWHVWߚDQGZHKDYHQߞWHYHQVWDUWHGWDONLQJDERXWDFWXDOWHVWLWHPV \HW*RRGIRU\RX7KHNH\QRZLVIRUXVWREXLOGRQWKDWXQGHUVWDQGLQJDQGVWDUWDSSO\LQJLWWRLQGLYLGXDO TXHVWLRQV:HߞOOH[SORUHKRZWKRVHTXHVWLRQVDUHGHVLJQHGDQGKRZWRH[SORLWWKDWGHVLJQDQGWKHQZHߞOO SUDFWLFHZLWKUHDO$&7TXHVWLRQVXQWLOZHFDQDSSO\WKHSURSHUPHWKRGVUHOLDEO\ )LUVWWKRXJKZHߞOOFRYHUDIHZPRUHLPSRUWDQWFRQFHSWV 7KH7UXWK$ERXW7KH$&7 ߡ,I\RXZRXOGEHDUHDOVHHNHUDIWHUWUXWK\RXPXVWDWOHDVWRQFHLQ\RXUOLIHGRXEWDVIDU DVSRVVLEOHDOOWKLQJVߢ 5HQ©'HVFDUWHV ,I\RXߞYHEHHQSD\LQJDWWHQWLRQVRIDU\RXFDQSUREDEO\WHOOWKDWZHߞUHJRLQJWRORRNDWWKH$&7LQDZD\ WKDWߞVDOLWWOHGLIIHUHQWIURPWKHVWDQGDUGDSSURDFK)RUWKDWUHDVRQ\RXFDQDOVRSUREDEO\LPDJLQHWKDW WKHUHDUHPRUHWKDQDIHZFRPPRQߡP\WKVߢUHODWHGWRWKH$&7ߚZHߞOOWDONDERXWWKRVHDOLWWOHODWHU$IWHU DOOPDQ\RIWKHFRPPRQVWUDWHJLHVDQGSLHFHVRIDGYLFHUHODWHGWRWHVWWDNLQJDUHXOWLPDWHO\EDVHGRQD SRRUXQGHUVWDQGLQJRIWKHQDWXUHRIVWDQGDUGL]HGWHVWV 7KHUHߞVRQHSDUWLFXODUP\WKWKDWߞVYHU\VSHFLILFWRWKH$&7WKDWZHVKRXOGFOHDUXSLQWKHEHJLQQLQJ/HWߞV VWDUWZLWKDWLQ\ELWRIEDFNJURXQG <RXߞUHSUREDEO\DZDUHWKDWWKHWZRPDMRUVRFDOOHGߡFROOHJHHQWUDQFHH[DPVߢLQWKH8QLWHG6WDWHVDUHWKH $&7DQGWKH6$7 7KHWZRWHVWVDUHLQGLUHFWFRPSHWLWLRQZLWKHDFKRWKHU7KHJRRGSHRSOHEHKLQGWKH$&7ZDQWPRUH SHRSOHWRWDNHWKH$&7DQGWKHJRRGSHRSOHEHKLQGWKH6$7ZDQWPRUHSHRSOHWRWDNHWKH6$7 7KH6$7FRPHVXQGHUILUHIURPWLPHWRWLPHEHFDXVHRILWVYDULRXVVKRUWFRPLQJVDQGEHFDXVHRIRXU VRFLHW\ߞVJHQHUDOGLVVDWLVIDFWLRQZLWKVWDQGDUGL]HGWHVWLQJ7KHSHRSOHEHKLQGWKH$&7VHHPWRWU\WRWDNH DGYDQWDJHRIWKH6$7ߞVEDGSUHVVE\WDONLQJDERXWKRZGLIIHUHQWWKH$&7LVIURPWKH6$7 7KH\VD\WKH$&7LVDPRUHLQWHOOHFWXDOWHVW7KH\VD\WKDWLWߞVDEHWWHUWHVWRIUHDOVXEMHFWPDWWHU NQRZOHGJHߚDIWHUDOOLWKDVD6FLHQFHVHFWLRQDQGLWV0DWKVHFWLRQWHVWVWULJRQRPHWU\7KH\WU\WR RYHUVWDWHKRZGLIIHUHQWWKH$&7DQGWKH6$7DUHLQWKHKRSHWKDWSHRSOHZLOOWKLQNWKH$&7LVWKHEHWWHU WHVWDQGWKDWLWߞVWKHRQHHYHU\ERG\VKRXOGEHWDNLQJ DQGWKDWߞVWKHP\WK <RXVHHLQVSLWHRI$&7,QFߞVGHVLUHWRFRQYLQFHXVRWKHUZLVHWKH6$7DQGWKH$&7DUHODUJHO\WKH VDPHWHVWߚQRWLGHQWLFDOE\DQ\PHDQVEXWODUJHO\WKHVDPH0RVWRIWKHLQGLYLGXDOTXHVWLRQVWKDWDSSHDU RQRQHWHVWFRXOGDSSHDURQWKHRWKHU ZLWKWKHQRWDEOHH[FHSWLRQWKDWPRVWTXHVWLRQVRQWKH$&7KDYH RQO\DQVZHUFKRLFHVZKLOHPRVWTXHVWLRQVRQWKH6$7KDYHߚVWLOOWKHDQVZHUFKRLFHVDUHGHVLJQHG LQODUJHO\VLPLODUZD\VRQERWKWHVWV ,QIDFWEHFDXVHRIVRPHRIWKHVWULFWUXOHVWKDWDQ\WUXO\ VWDQGDUGL]HGWHVWPXVWIROORZWKHWZRWHVWVEDVLFDOO\0867EHWKHVDPHLQDORWRIZD\VLQRUGHUWRIXOILOO WKHLUFRPPRQUROHLQWKHDGPLVVLRQSURFHVV 6RPHRIWKHVSHFLILFGHWDLOVRIDSSURDFKLQJVSHFLILFTXHVWLRQW\SHVGLIIHURQHDFKWHVWEXWWKH$&7DQG 6$7DUHHVVHQWLDOO\WKHVDPHߡW\SHߢRIWHVW2QHLVQߞWPRUHRUOHVVLQWHOOHFWXDORUDFDGHPLFRU SUHGLFWDEOHWKDQWKHRWKHURQHLVLQDQ\ZD\WKDWPDWWHUV <RXߞOOVHHPRUHRIWKHGHWDLOVRIWKH$&7LQWKHFRPLQJFKDSWHUVIRFXVLQJRQHDFKTXHVWLRQW\SHEXWWKH IDFWLVWKDWERWKWHVWVSUHVHQWPDQ\RIWKHVDPHFKDOOHQJHVWRWHVWWDNHUV7KH\ERWKSUHVHQWVLPSOHPDWK FRQFHSWVLQXQXVXDOZD\V7KH\ERWKWHVWDIDLUO\SUHGLFWDEOHVHWRIJUDPPDWLFDOFRQFHSWVLQVLPLODUZD\V LQWKHLU(QJOLVK:ULWLQJVHFWLRQV7KH\ERWKHQFRXUDJHWKHLOOXVLRQRIWKHQHHGIRULQWHUSUHWDWLRQLQWKH 5HDGLQJVHFWLRQ $QGZKDWDERXWWKHGUHDGHG$&76FLHQFHVHFWLRQߚWKHRQHWKDWߞVVXSSRVHGWRPDNHDGUDPDWLFGLIIHUHQFH EHWZHHQWKH$&7DQGWKH6$7" <RXߞOOVHHWKLVLQPRUHGHWDLOZKHQZHWDONDERXWWKH6FLHQFHVHFWLRQVSHFLILFDOO\EXWIRUQRZOHWߞVMXVW VD\WKDWWKH6FLHQFHVHFWLRQSULPDULO\UHTXLUHVDFRPELQDWLRQRIWKHVNLOOV\RXXVHLQWKH5HDGLQJVHFWLRQ DQG0DWKVHFWLRQRIERWKWKH$&7DQGWKH6$77KDWߞVDOO$&76FLHQFHLVMXVWDOLWWOHUHDGLQJDOLWWOH PDWKDQGDWLQ\ELWRIDFWXDOVFLHQWLILFNQRZOHGJHHYHU\RQFHLQDZKLOH 2IFRXUVHZHߞOOFRYHUWKH GHWDLOVODWHULQWKLV%ODFN%RRN 7REHVXUHWKHUHDUHDIHZRWKHUGLIIHUHQFHVEHWZHHQWKHWHVWVDVZHOO7KH$&7KDVIHZHUVHFWLRQVDQG MXVWRQHVHFWLRQRIHDFKTXHVWLRQW\SHXQOLNHWKH6$77KHUHߞVQRSHQDOW\IRUZURQJDQVZHUVRQWKH$&7 OLNHWKHUHLVRQWKH6$7EXWWKDWDFWXDOO\VKRXOGQߞWKDYHPXFKRIDQLPSDFWRQ\RXUDSSURDFKLI\RXNQRZ KRZWKHWHVWZRUNV 6HHWKHߡ*XHVVLQJ2Q7KH$&7ߢVHFWLRQRIߡ7KH*HQHUDO*DPH3ODQ)RU$WWDFNLQJ $6HFWLRQ2I7KH$&72Q7HVW'D\ߢLQWKLV%ODFN%RRN 7KHOHQJWKVRIWKHVHFWLRQVRIWKHWZRWHVWVDUH GLIIHUHQWGLIIHUHQWWHVWWDNHUVVRPHWLPHVUHVSRQGPRUHSRVLWLYHO\WRRQHWHVWRUWKHRWKHUIRUWKDWUHDVRQ %XWWKRVHWKLQJVGRQߞWPDNHHLWKHUWHVWPRUHRUOHVVVLPLODUWRKLJKVFKRROWHVWVRUPDNHHLWKHUWHVWPRUH RUOHVVGHSHQGHQWRQKLJKVFKRROVXEMHFWPDWWHU /LNH,VDLGZHߞOOFRYHUDOOWKHVSHFLILFVWUDWHJLHVIRUWKHGLIIHUHQWTXHVWLRQW\SHVODWHULQWKLV%ODFN%RRN EXW,MXVWZDQWHGWRPDNHLWFOHDUIURPWKHEHJLQQLQJZKDWNLQGRIWHVWWKH$&7UHDOO\LV,WߞVDPDMRU VWDQGDUGL]HGWHVWIRUFROOHJHDGPLVVLRQVEDVLFDOO\MXVWOLNHWKHRWKHUPDMRUVWDQGDUGL]HGWHVWIRUFROOHJH DGPLVVLRQV ,WߞVLPSRUWDQWIRUXVWRFODULI\WKLVHDUO\RQEHFDXVHWRRPDQ\WHVWWDNHUVKDYHWKHLGHDWKDWJHWWLQJEHWWHU DWWKH$&7GHSHQGVRQOHDUQLQJߡVFKRROVWXIIߢPDWKVFLHQFHJUDPPDUOLWHUDU\WKHRU\DQGVRRQ%XWWKH $&7UHDOO\GRHVQߞWUHZDUGWKDWߚDVIDUDVVXEMHFWPDWWHUNQRZOHGJHLVFRQFHUQHGDOOWKH$&7UHDOO\ UHTXLUHVLVDEDVLFNQRZOHGJHRIPDWKDQGDJRRGJHQHUDODELOLW\WRUHDG$PHULFDQ(QJOLVK2IFRXUVH WKHUHPD\EHDPRPHQWZKHQ\RXQHHGWROHDUQKRZWKH$&7ZDQWV\RXWRIRUPDSRVVHVVLYHRQWKH (QJOLVKVHFWLRQRUKRZWRILQGWKHDUHDRIDFLUFOHRUVRPHWKLQJLI\RXGRQߞWDOUHDG\NQRZWKRVHUHODWLYHO\ EDVLFIRUPXODV%XWIRUWKHPRVWSDUWIRUPRVWSHRSOHLPSURYLQJRQWKH$&7LVDTXHVWLRQRIOHDUQLQJ KRZWKHWHVWLVGHVLJQHGDQGWKHQH[SORLWLQJWKHZHDNQHVVHVLQWKDWGHVLJQ 7KH$&7ߞV%LJJHVW:HDNQHVV ߡ$OOPHQFDQVHHWKHVHWDFWLFVZKHUHE\,FRQTXHUEXWZKDWQRQHFDQVHHLVWKHVWUDWHJ\ RXWRIZKLFKYLFWRU\LVHYROYHGߢ 6XQ7]X 7KH$&7ߞVVLQJOHELJJHVWZHDNQHVVLVSUREDEO\WKHIDFWWKDWLWKDVWRXVHWKHPXOWLSOHFKRLFHIRUPDWߚWKLV FDXVHVDORWRISUREOHPVIRUWKHWHVWPDNHUDQGWUDLQHGWHVWWDNHUVFDQWDNHDGYDQWDJHRIWKRVHSUREOHPVLI ZHXVHWKHULJKWVWUDWHJLHV :K\,V7KH$&70XOWLSOH&KRLFH" /HWߞVWDNHDVHFRQGWRGLVFXVVRQHRIWKHPRVWLPSRUWDQW DQGDOVRPRVWHDVLO\RYHUORRNHG DWWULEXWHVRI WKH$&7H[FHSWIRUWKHHVVD\HYHU\VLQJOHTXHVWLRQXVHVWKHPXOWLSOHFKRLFHIRUPDW:K\LVWKDW" :HߞOO WDONDERXWWKHHVVD\ODWHULQWKLV%ODFN%RRN 7KLQNDERXWLW,I\RXZHUHIDFHWRIDFHZLWKVRPHRQHDQG\RXUHDOO\ZDQWHGWRWHVWZKHWKHUVKHNQHZ VRPHWKLQJZRXOG\RXDVNKHUDPXOWLSOHFKRLFHTXHVWLRQRUZRXOG\RXMXVWDVNDUHJXODURSHQHQGHG TXHVWLRQZLWKRXWSURYLGLQJDQVZHUFKRLFHVDQGIRUFHKHUWRGHPRQVWUDWHKHUNQRZOHGJHE\FRPLQJXS ZLWKKHURZQDQVZHU" 2IFRXUVH\RXߞGMXVWDVNDQRSHQHQGHGTXHVWLRQDQGWKHQOHWKHUDQVZHUDVEHVWVKHFRXOG7KDWZRXOG EHWKHEHVWZD\WRNQRZLIWKHVWXGHQWUHDOO\JUDVSHGWKHPDWHULDO7KDWߞVZK\LWߞVPXFKKDUGHUWRIDNH \RXUZD\SDVWDQRUDOH[DPRUDQHVVD\TXHVWLRQRQDKLJKVFKRROWHVWWKDQLWLVWRJHWOXFN\DQGDQVZHUD PXOWLSOHFKRLFHTXHVWLRQFRUUHFWO\ %XWWKH$&7LVIXOORIPXOWLSOHFKRLFHTXHVWLRQV 7KHWHVWRQO\LQFOXGHVRQHHVVD\TXHVWLRQDQGDVZHߞOO VHHODWHUWKDWRQHHVVD\TXHVWLRQLVXQOLNHWKHTXHVWLRQV\RXVHHRQUHJXODUWHVWVLQVFKRRO,WGRHVQߞW UHTXLUHXVWRNQRZDQ\WKLQJVLQFHZHFDQPDNHXSZKDWHYHUSURRIZHOLNHZKHQZHDQVZHULW$JDLQ ZHߞOOFRYHUKRZWRKDQGOHWKH$&7(VVD\ODWHULQWKLV%ODFN%RRN :K\FDQߞ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ߙRUߙZKLOHPXOWLSOHFKRLFHVWDQGDUGL]HGWHVWVFDQEHPXFKPRUH SUHFLVHLQWKHLUJUDGLQJVFDOHV ,QVWHDGWKH$&7QHHGVDIRUPDWWKDWDOORZVLWWRJUDGHWHVWVHIILFLHQWO\DQGZLWKDKLJKGHJUHHRI DFFXUDF\,WDOVRQHHGVDIRUPDWWKDWDOORZVLWWRDSSO\WKHH[DFWVDPHVWDQGDUGVWRHYHU\VLQJOHWHVWWDNHU VRHDFKWHVWWDNHUߞVUHVXOWVFDQEHUHOLDEO\FRPSDUHGWRWKHUHVXOWVRIHYHU\RWKHUWHVWWDNHUZLWKDKLJK GHJUHHRISUHFLVLRQ 7KHVHJRDOVFDQRQO\EHDFKLHYHGLIWKHWHVWTXHVWLRQVSURYLGHDQVZHUFKRLFHVWRFKRRVHIURP 0XOWLSOHFKRLFHWHVWVDUHREYLRXVO\HDVLHUDQGPRUHHIILFLHQWWRJUDGHWKDQIUHHUHVSRQVHWHVWV7KH\DOVR DOORZDPXFKKLJKHUGHJUHHRISUHFLVLRQZKHQLWFRPHVWRDSSO\LQJVWDQGDUGVLQDGGLWLRQWRZULWLQJWKH TXHVWLRQSURPSWVWKHPVHOYHVDFFRUGLQJWRSDUWLFXODUVWDQGDUGVWKHWHVWLQJFRPSDQ\FDQVFXOSWFRUUHFW DQVZHUVDQGLQFRUUHFWDQVZHUVWRIROORZFHUWDLQVWDQGDUGVDVZHOO 7KDWߞVDPDMRUEHQHILWWR\RXDVDWHVWWDNHUEHFDXVHLWPHDQVWKDWHYHU\VLQJOH$&7TXHVWLRQKDVWRSXW WKHFRUUHFWDQVZHUULJKWLQIURQWRI\RXUIDFH ,WDOVRFKDQJHV\RXUMREDVDWHVWWDNHU,QVWHDGRIQHHGLQJWRNQRZWKHDFWXDODQVZHUWRDTXHVWLRQRQ\RXU RZQDOO\RXQHHGWRGRLVVHOHFWWKHULJKWDQVZHUIURPIRXURUILYHFKRLFHVWKDWDUHSURYLGHGIRU\RX7KDW GLIIHUHQFHPLJKWQRWVRXQGOLNHDELJGHDOEXWLWGHILQLWHO\FDQEH:HߞOOFRPHEDFNWRWKLVLGHDRYHUDQG RYHUDJDLQ 7KH,PSRUWDQFH2I$QVZHU&KRLFHV ,QWKLV%ODFN%RRNZHߞUHJRLQJWRGRHYHU\WKLQJZHFDQWRWDNHDGYDQWDJHRIWKHLQIRUPDWLRQSURYLGHGWR XVE\WKH$&7LQWKHWHVWLWVHOI:HߞUHJRLQJWRSXOO5HDGLQJDQVZHUVULJKWRXWRIWKHSURYLGHGWH[W ZLWKRXWLQWHUSUHWDWLRQRUVXEMHFWLYLW\:HߞUHJRLQJWRVHHWKURXJKVWUDQJHSUHVHQWDWLRQVRI0DWKSUREOHPV DQGXVHEDVLFIRUPXODV LIZHHYHQQHHGIRUPXODVDWDOO WRILQGWKHULJKWDQVZHUV:HߞUHJRLQJWRWDNHLQ DOOWKHVFLHQWLILFLQIRUPDWLRQEXLOWULJKWLQWR6FLHQFHTXHVWLRQVVRZHFDQILQGWKHFRUUHFWDQVZHUVWR TXHVWLRQVRQVFLHQWLILFWRSLFVZHߞYHQHYHUKHDUGRI$QGVRRQ 6WLOOLWߞVHDV\WRIRUJHWWKDWWKHUHߞVDQH[WUHPHO\LPSRUWDQWVRXUFHRILQIRUPDWLRQVLWWLQJULJKWLQIURQWRIXV RQHYHU\PXOWLSOHFKRLFHTXHVWLRQWKHDQVZHUFKRLFHVWKHPVHOYHV 7KLVLVZK\,HPSKDVL]HWKDWVWXGHQWVPXVWDOZD\V$/:$<6UHDGHDFK$&7TXHVWLRQFRPSOHWHO\ LQFOXGLQJWKHDQVZHUFKRLFHVEHIRUHWKH\VWDUWWRILJXUHRXWWKHDQVZHU7RRPDQ\SHRSOHMXVWUHDGWKH TXHVWLRQSURPSW WKHSDUWWKDWGRHVQߞWLQFOXGHWKHDQVZHUFKRLFHV WKHQVWRSDQGWU\WRVROYHWKHSUREOHP RQWKHLURZQWKHQFKHFNWRVHHLIWKHLUDQVZHULVUHIOHFWHGLQWKHFKRLFHV7KLVDSSURDFKWKRXJKW\SLFDO ZLOOPDNHOLIHKDUGHUIRU\RXDQGFDXVH\RXWRPLVVKLQWVDQGFOXHVWKDWDUHEDVLFDOO\VWDULQJ\RXLQWKH IDFHRQFH\RXNQRZKRZWRORRNIRUWKHP 2IFRXUVHZHߞOOWDONPRUHDERXWWKRVHFOXHVDVZHORRNDWHDFKTXHVWLRQW\SHVSHFLILFDOO\)RUQRZ,MXVW ZDQW\RXWRJHWXVHGWRWKLVLGHDULJKWIURPWKHEHJLQQLQJ 6RKRZFDQDQVZHUFKRLFHVPDNHDTXHVWLRQHDVLHU"/HWߞVWDNHDORRNDWDQH[WUHPHH[DPSOHWKDW,ߞOOPDNH XSULJKWQRZMXVWWRLOOXVWUDWHWKHSRLQW,PDJLQHWKDW\RXZHUHWDNLQJDKLVWRU\WHVWLQVFKRRODQG\RXVDZ WKLVTXHVWLRQ :KRZDVWKH.LQJRI3UXVVLDGXULQJWKH)UDQFR3UXVVLDQ:DU" 8QOHVV\RXߞUHD3UXVVLDQKLVWRU\EXII\RXߞGSUREDEO\VWDUWWRVZHDWDOLWWOHLI\RXVDZWKLVTXHVWLRQ 2I FRXUVHLWFRXOGQHYHUDSSHDURQWKHDFWXDO$&7$JDLQ,ߞPMXVWXVLQJLWWRLOOXVWUDWHDSRLQW 1RZOHWߞVLPDJLQHWKDW\RXVHHWKLVRQDWHVWLQVWHDG :KRZDVWKH.LQJRI3UXVVLDGXULQJWKH)UDQFR3UXVVLDQ:DU" $:LOKHOP, %3XUSOH &:HGQHVGD\ '7KH&OHYHODQG%URZQV ,IZHXVHRXUSRZHUVRIGHGXFWLRQZHFDQSUREDEO\SLFNFKRLFH $ ZLWKFRQILGHQFH:K\LVWKDW":HOO LWGRHVQߞWWDNHPXFKWKRXJKWWRUHDOL]HWKDWQHLWKHUSXUSOHQRU:HGQHVGD\QRUWKH&OHYHODQG%URZQV FRXOGHYHUEHWKHNLQJRIVRPHWKLQJ 6RHYHQWKRXJKZHSUREDEO\QHYHUZRXOGߞYHEHHQDEOHWRFRPHXSZLWKߡ:LOKHOP,ߢDVDQDQVZHURQRXU RZQDOPRVWDQ\RQHFRXOGSLFNWKHULJKWDQVZHURXWRIWKRVHIRXUFKRLFHV $OVRQRWHWKDWLI\RXKDGMXVWUHDGWKHTXHVWLRQUHDOL]HG\RXGLGQߞWNQRZWKHDQVZHUDQGWKHQVNLSSHGRQ WRWKHQH[WTXHVWLRQZLWKRXWWDNLQJDORRNDWWKHDQVZHUFKRLFHV\RXߞGEHPLVVLQJRXWRQHDV\SRLQWV 7KDWZDVDULGLFXORXVH[DPSOHRIFRXUVHEXWWKLVH[HUFLVHLOOXVWUDWHVWKHZD\DQVZHUFKRLFHVFDQKLQWDW WKHFRUUHFWDQVZHUZKHQFRQVLGHUHGLQWKHFRQWH[WRIWKHRULJLQDOTXHVWLRQ /HWߞVORRNDWDVOLJKWO\WULFNLHUYHUVLRQRIWKHVDPHTXHVWLRQ :KRZDVWKH.LQJRI3UXVVLDGXULQJWKH)UDQFR3UXVVLDQ:DU" $:LOKHOP, %+DORWL1JDWD &7KRPDV-HIIHUVRQ '1HOVRQ0DQGHOD ,QWKLVYHUVLRQDOORIWKHLQFRUUHFWDQVZHUFKRLFHVDUHSHRSOHߞVQDPHV7KLVPDNHVDVWUDWHJLFJXHVVD OLWWOHPRUHGLIILFXOWWKDQLWZDVWKHODVWWLPHDURXQG/HWߞVFRQVLGHUHDFKDQVZHUFKRLFHDVWKRXJKZHGRQߞW DOUHDG\NQRZWKHDQVZHU $ VRXQGVSODXVLEOH$WWKHYHU\OHDVWWKHUHߞVQRREYLRXVUHDVRQWRHOLPLQDWHLW7KHQDPHVRXQGVOLNHLW FRXOGEH3UXVVLDQDQGDORWRIQDPHVRINLQJVKDYHD5RPDQQXPHUDODIWHUWKHP % VHHPVOLNHLWߞVSUREDEO\ZURQJ:HPD\KDYHDQLGHDWKDW3UXVVLDZDVDFRXQWU\LQ(XURSHDQGWKLV QDPHGRHVQߞWVRXQG(XURSHDQ :HSUREDEO\NQRZWKDW & LVVRPHRQHIURP$PHULFDQKLVWRU\ZKRZDVSUREDEO\QHYHUWKH.LQJRI 3UXVVLDVLQFHKHNHSWSUHWW\EXV\LQ$PHULFD :HPD\KDYHKHDUGRIWKHSHUVRQLQDQVZHUFKRLFH ' EHIRUHDQGLIVRZHSUREDEO\NQRZKHZDVD PRUHUHFHQWILJXUHLQZRUOGKLVWRU\,IZHNQRZWKDWWKH)UDQFR3UXVVLDQZDUGLGQߞWKDSSHQWRRUHFHQWO\ ZHFDQEHSUHWW\FHUWDLQWKDW ' LVQߞWULJKW 7DNLQJDOORIWKDWLQWRFRQVLGHUDWLRQZHFDQEHSUHWW\FHUWDLQWKDW $ LVFRUUHFW (YHQLIZHKDYHQߞW KHDUGRI ' EHIRUHWKH5RPDQQXPHUDODIWHUWKHQDPHNLQGRIKHOSVVHOO $ LQWKLVFDVH 'R\RXVHHZKDWKDSSHQHGWKHUH"(YHQWKRXJKZHGLGQߞWQHFHVVDULO\NQRZDQ\WKLQJDERXWNLQJVRI3UXVVLD RUDERXWWKH)UDQFR3UXVVLDQZDUDQGHYHQWKRXJKDOOIRXUFKRLFHVZHUHSHRSOHߞVQDPHVZHZHUHDEOHWR DSSO\VRPHEDVLFUHDVRQLQJWRWKHDQVZHUFKRLFHVWRFRPHXSZLWKDSUHWW\VROLGLGHDRIZKLFKRQHZDV FRUUHFW 6RKRZPLJKWWKLVFRQFHSWDFWXDOO\KHOSXVRQWKHUHDO$&7":HOOLPDJLQH\RXߞUHORRNLQJDWDQ$&7 0DWKTXHVWLRQDQG\RXMXVWDUHQߞWVXUHZKHUHWRVWDUWߚEXW\RXߞYHUHDGDOOWKHDQVZHUFKRLFHVDQGPRVW RIWKHPKDYHVTXDUHURRWVLQWKHP7KLVPLJKWEHDKLQWWKDWWKHTXHVWLRQZLOOLQYROYHVTXDUHURRWVZKLFK PHDQVWKDWLWPLJKWLQYROYHWULDQJOHVDQGWKH3\WKDJRUHDQWKHRUHP$OLWWOHKLQWOLNHWKDWFDQSXVK\RXLQWKH ULJKWGLUHFWLRQVR\RXFDQJHWWRZRUNRQWKHSUREOHPLQVWHDGRIKHVLWDWLQJIRUDOLWWOHZKLOHZDVWLQJWLPH DQGSRVVLEO\JHWWLQJIOXVWHUHG 2U\RXPLJKWVHHDGLIIHUHQWNLQGRI$&70DWKTXHVWLRQDQG\RXPLJKWEHDEOHWRGHWHUPLQHWKDWWKH DQVZHUPXVWEHSRVLWLYH,IWKHDQVZHUFKRLFHVDUHDQGWKHQ\RXNQRZWKDWPXVWEH FRUUHFW,I\RXGRQߞWFKHFNRXWWKHDQVZHUFKRLFHVILUVW\RXߞGKDYHWRZRUNWKURXJKWKHZKROHSUREOHPWR FRPHXSZLWKWKHDQVZHU%XWLI\RXWDNHWKHWLPHWRQRWLFHWKHFKDUDFWHULVWLFVRIWKHDQVZHUFKRLFHVWKHQ DVVRRQDV\RXNQRZWKHDQVZHUPXVWEHSRVLWLYH\RXFDQPDUNDQGPRYHRQ 7KLVFRQFHSWGRHVQߞWMXVWDSSO\WR$&70DWKTXHVWLRQV,I\RXUHDGWKHDOOWKHDQVZHUFKRLFHVRQDQ$&7 (QJOLVKTXHVWLRQDQGQRWLFHWKDWWKHRQO\GLIIHUHQFHVDPRQJWKHDQVZHUFKRLFHVKDYHWRGRZLWKWKH SRVLWLRQVRIFRPPDVWKHQ\RXߞOONQRZWRIRFXVRQFRPPDSODFHPHQWLQVWHDGRIJHWWLQJGLVWUDFWHGE\DQ\ RWKHUHUURU\RXWKLQNPLJKWEHLQWKHUH,I\RXIHHOORVWRQDQ$&76FLHQFHTXHVWLRQDQGWKHQ\RXQRWLFH WKDWHYHU\DQVZHUFKRLFHLVLQWKHVDPHXQLWWKHQ\RXNQRZWKDW\RXSUREDEO\QHHGWRILQGDFKDUWRUJUDSK ZLWKPHDVXUHPHQWVLQWKDWXQLW 7KHVHDUHMXVWUHODWLYHO\EDVLFDSSOLFDWLRQVRIWKLVLGHDRQWKH$&7$VZHߞOOVHHLQGLYLGXDO$&7 TXHVWLRQW\SHVKDYHFHUWDLQZURQJDQVZHUSDWWHUQVDQGUXOHVWKDWDUHVSHFLILFWRWKH$&7.QRZLQJWKHVH DQGXVLQJWKHPZKHUHDSSURSULDWHFDQPDNHWKHWHVWHYHQHDVLHU:HߞOOH[SORUHWKLVLGHDDOLWWOHELWLQMXVW DPRPHQW +RSHIXOO\\RXEHJLQWRJHWWKHLGHD7KHDQVZHUFKRLFHVFDQFRQWDLQYDOXDEOHKLQWVDQGFOXHVWKDWFDQ NHHS\RXRQ\RXUJDPHWKURXJKRXWWKHWHVWDQGLI\RXGRQߞWWDNHWKHWLPHWRUHDGWKHPIRUHYHU\TXHVWLRQ \RXߞUHPDNLQJWKLQJVKDUGHURQ\RXUVHOI<RXZRQߞ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ߞUHPXFKOHVVOLNHO\WRIDOOIRUWKHP $OVRLI\RXNHHSWKHVHZURQJDQVZHUW\SHVLQPLQGZKLOH\RXSUDFWLFH\RXߞOOJHWEHWWHUDQGEHWWHUDW VSRWWLQJWKHPZKLFKZLOOPDNH\RXDQHYHQPRUHHIILFLHQW$&7GHVWUR\LQJPDFKLQHߚZKLFKLVNLQGRIWKH ZKROHSRLQWRIDOORIWKLVULJKW" 7KLVGRHVQߞWPHDQ\RXߞOOKDYHWRFODVVLI\HYHU\VLQJOHZURQJDQVZHUFKRLFH\RXVHHLI\RXZDQWWRGR ZHOORQWKLVWHVWRUHYHQWKDWLWZRXOGEHSRVVLEOHWRGRWKDWLI\RXZDQWHGWR1RWHYHU\VLQJOHFKRLFH ZLOOILWRQHRIWKHSDWWHUQVZHߞUHJRLQJWRWDONDERXW%XWDVZHOHDUQDERXWHDFKTXHVWLRQW\SHZHߞOO GLVFXVVWKHPDMRUDQVZHUFKRLFHSDWWHUQV\RXFDQH[SHFWWRVHHRQUHDO$&7SUDFWLFHTXHVWLRQV,I\RX NHHSWKHVHLQPLQGZKLOH\RXSUDFWLFH\RXߞOOEHVXUSULVHGDWKRZREYLRXVWKHVHZURQJVDQVZHUFKRLFHV ZLOOVWDUWWREHFRPH 8VLQJ$QVZHU&KRLFH3DWWHUQV :HߞOOWDONDERXWVSHFLILFDQVZHUFKRLFHSDWWHUQVDWWKHHQGRIRXUGLVFXVVLRQRIHDFKVHFWLRQRIWKHWHVW 7KRVHSDWWHUQVFDQEHH[WUHPHO\KHOSIXOEXWLWߞVYHU\LPSRUWDQWWKDWZHXQGHUVWDQGWKHSURSHUZD\WRXVH WKHP,WFDQEHWHPSWLQJWRUHO\RQWKHPWRRKHDYLO\EXWGRLQJWKDWLVPXFKPRUHOLNHO\WRKXUW\RXUVFRUH WKDQLWLVWRKHOSLW 6RWKHSRLQWRIXQGHUVWDQGLQJWKHGHVLJQRIWKHDQVZHUFKRLFHVLVQߞWWKDWWKH\ߞOOMXVWWHOO\RXWKHFRUUHFW DQVZHULI\RXNQRZKRZWRGHFRGHWKHP,QVWHDGXQGHUVWDQGLQJKRZWKH$&7XVHVZURQJDQVZHU SDWWHUQVZLOOKHOS\RXLQWZRPDLQZD\V ,I\RXORRNDWDTXHVWLRQDQG\RXߞUHQRWVXUHZKDWWRGRWKHDQVZHUFKRLFHVFDQRIWHQSRLQW\RXLQ WKHULJKWGLUHFWLRQEHFDXVHWKH\LQFOXGHFRQFHSWVWKDWWKHWHVWWKLQNVDUHUHOHYDQWWRWKHTXHVWLRQ 2QFH\RXߞYHIRXQGDQDQVZHUFKRLFHWKDW\RXOLNHWKHDQVZHUFKRLFHSDWWHUQVFDQKHOS\RXFRQILUP WKDW\RXߞUHSUREDEO\FRUUHFWߚRUWKH\FDQKHOS\RXFDWFKDPLVWDNHLI\RXZHUHZURQJ 7KLVLVDELJGHDOEHFDXVHLWKHOSVWRSUHYHQWWZRRIWKHPDLQWKLQJVWKDWWKH$&7WULHVWRGRLWWULHVWR SUHVHQWFRQFHSWVLQEL]DUUHZD\VVRZHߞUHQRWVXUHZKDWWRGRDQGLWWULHVWRJHWXVWRPDNHVLPSOH PLVWDNHVZLWKRXWQRWLFLQJWKHP6RDSSUHFLDWLQJWKHYDOXHRIDQVZHUFKRLFHVFDQEHDJUHDWZHDSRQ DJDLQVWWKHWHVW :HߞOOORRNDWDOORIWKLVLQPRUHGHWDLOZKHQZHWDONDERXWWKHGLIIHUHQWVHFWLRQVRIWKH$&7RIFRXUVH, MXVWZDQWWRPDNHVXUHIURPWKHEHJLQQLQJWKDW\RXXQGHUVWDQGKRZXVHIXOWKHDQVZHUFKRLFHVFDQEH7KH\ ZRQߞWDOZD\VWHOO\RXWKHFRUUHFWDQVZHURXWULJKWEXWWKH\FDQRIWHQSRLQW\RXLQWKHULJKWGLUHFWLRQDQG KHOSNHHS\RXIURPPDNLQJVPDOOPLVWDNHVWKDWFRVW\RXSRLQWVIRUQRUHDVRQ 8VLQJ7KH5HDO$&73UHS*XLGHUG(GLWLRQ 7KHߡ5HG%RRNߢ ߡ:KDWHYHU\RXZRXOGPDNHKDELWXDOSUDFWLFHLWDQGLI\RXZRXOGQRWPDNHDWKLQJ KDELWXDOGRQRWSUDFWLFHLWEXWDFFXVWRP\RXUVHOIWRVRPHWKLQJHOVHߢ (SLFWHWXV 7KH5HDO$&73UHS*XLGHUG(GLWLRQ WKHߡ5HG%RRNߢ LVWKHERRNSXEOLVKHGE\$&7,QFWKDWFRQWDLQV UHDOSUDFWLFH$&7WHVWV,ߞYHDOUHDG\PHQWLRQHGLWDIHZWLPHVEXW,ZDQWHGWRWDNHDQRSSRUWXQLW\WR GLVFXVVLWLQDOLWWOHPRUHGHWDLO )LUVWOHWߞVWDONDERXWWKLVERRNIURPWKHSHUVSHFWLYHRIWKHWHVWPDNHU$&7,QF7KDWFRPSDQ\ߞVMRELVWR FUHDWHDQGDGPLQLVWHUWKH$&7,WߞVDOVRWKHFRPSDQ\ߞVMREWRNHHSWKH$&7UHOHYDQWDQGXVHIXOIRU FROOHJHV3DUWRIWKDWXVHIXOQHVVLVPDNLQJVXUHWKHWHVWFUHDWHVDVSHFWUXPRIUHVXOWVߚLIHYHU\ERG\ZKR WRRNWKH$&7JRWURXJKO\WKHVDPHVFRUHWKHWHVWZRXOGQߞWKHOSFROOHJHVUDQNWKHLUDSSOLFDQWV ,QRWKHUZRUGVLWߞVQRWLQWKHLQWHUHVWRIWKHJRRGSHRSOHZKRPDNHWKH$&7WRWHOOXVH[DFWO\KRZWKHLU WHVWZRUNVVRZHFDQDOODFHLW,QIDFWLWߞVLQWKHLUEHVWLQWHUHVWWRNHHSPRVWRIWKHVWDQGDUGVDQGSDWWHUQV LQWKHWHVWDVVHFUHWDVSRVVLEOHVRWKDWWHVWWDNHUVZKRNQRZWKRVHVWDQGDUGVRUSDWWHUQVZLOOGRZHOODQG RWKHUWHVWWDNHUVZLOOVWUXJJOHDQGWKHZKROHWHVWWDNLQJSRSXODWLRQZLOOJHWDQLFHUDQJHRIVFRUHVWKDW FROOHJHVZLOOILQGXVHIXOLQWKHLUDGPLVVLRQVSURFHVVHV 6RZKLOH7KH5HDO$&73UHS*XLGHUG(GLWLRQLVH[WUHPHO\YDOXDEOHDVDVRXUFHRIUHDO$&7SUDFWLFH WHVWVߚZKLFK\RX0867KDYHLI\RXKRSHWRGRZHOORQWKLVWHVWߚWKH$&7SUHSDGYLFHLQWKHERRNLV RIWHQOHVVWKDQKHOSIXO<RXFDQUHDGLWLI\RXOLNHRIFRXUVHEXW,ZRXOGQߞWUHFRPPHQGIROORZLQJLWLQ PRVWFDVHV 7KHPRVWXVHIXOSUHSLQIRUPDWLRQLQWKH5HG%RRNDSSHDUVRQSDJHVDQGFKDSWHUVDQG3DJHV MXVWFRQWDLQJHQHUDOLQIRUPDWLRQDERXWZKDW\RXFDQEULQJWRWKHWHVWFHQWHUKRZ\RXߞOOFKHFNLQZKDWWR GRLI\RXJHWVLFNGXULQJWKHWHVWWKDWVRUWRIWKLQJ,WߞVQRWDEDGLGHDWRUHYLHZWKLVHVSHFLDOO\LI\RXߞYH QHYHUWDNHQWKH$&7EHIRUH &KDSWHULVLPSRUWDQWEHFDXVHLWWHOOV\RXKRZWRVFRUH\RXUSUDFWLFHWHVWVZKLFKLVKHOSIXOLI\RXߞGOLNH WRNQRZURXJKO\ZKHUH\RXVWDQGZLWK\RXUSUDFWLFHZRUN %XW&KDSWHULVWKHRQHWKDWUHDOO\FRXQWV7KLVLVWKHFKDSWHUWKDWFRQWDLQVUHDO$&7SUDFWLFHWHVWVZKLFK DUHDEVROXWHO\FUXFLDOWR\RXUSUHSDUDWLRQ:LWKRXWKDYLQJUHDOSUDFWLFHTXHVWLRQVߚDQG$&78$//< 35$&7,&,1*:,7+7+(0$1'5(9,(:,1*7+(0ߚ\RXFDQߞWKRSHWRLPSURYH\RXUSHUIRUPDQFH RQWKHWHVW ,ߞYHEHHQWHDFKLQJVWXGHQWVWKHPHWKRGVLQWKLV%ODFN%RRNIRUDORQJWLPHDQG,NQRZWKH\ߞUHHIIHFWLYH ZKHQXVHGFRUUHFWO\%XWHYHQLI\RXPHPRUL]HGHYHU\ZRUGLQWKLVERRNLWZRXOGQߞWKHOSPXFKLI\RX GLGQߞWDOVRSUDFWLFHDSSO\LQJWKHVWUDWHJLHVWRUHDOTXHVWLRQV5HDGLQJDQGXQGHUVWDQGLQJWKLV%ODFN%RRN LVRQO\SDUWRIWKHHTXDWLRQ<RX0867SUDFWLFHDSSO\LQJWKHVHVWUDWHJLHVWRUHDO$&7TXHVWLRQVRQ\RXU RZQ 6RPHWLPHV,KDYHSDUHQWVFRPSODLQWRPHWKDWWKHLUFKLOGKDVQߞWGRQHDVZHOODVH[SHFWHGRQWKH$&7 7KHUHDUHVHYHUDOTXHVWLRQV,DVNLQWKLVVLWXDWLRQWRKHOSPHJHWDQLGHDRIZKHUHWKHSUREOHPPLJKWOLH 2QHWKLQJ,DVNLVKRZZHOOWKHVWXGHQWKDGEHHQSHUIRUPLQJLQSUDFWLFHVHVVLRQVEHIRUHWKHUHDOWHVWߚZDV KHJHWWLQJTXHVWLRQVULJKWDWKRPHEXWQRWRQWHVWGD\"7KHQ,RIWHQOHDUQWKDWWKHVWXGHQWZDVQߞWGRLQJDQ\ SUDFWLFHDWDOO <RXFDQߞWH[SHFW\RXUVFRUHWRJRXSLI\RXGRQߞWSUDFWLFHDWOHDVWDOLWWOHELW-XVWUHDGLQJDERXWWKH WHFKQLTXHVDQGZDWFKLQJPHZDONWKURXJKVRPHVROXWLRQVRIUHDOTXHVWLRQVIURPWKH5HG%RRNZRQߞWKHOS \RXPXFKLI\RXGRQߞWJHWXVHGWRDSSO\LQJWKHPRQ\RXURZQ 7KHRWKHULPSRUWDQWSDUWRIFKDSWHULVWKHDQVZHUH[SODQDWLRQVEXW\RXKDYHWREHPRUHFDUHIXOZLWK WKRVH7KHSHRSOHZKRPDNHWKH$&7GHFLGHGWRLQFOXGHDQH[SODQDWLRQRIHYHU\VLQJOHSUDFWLFHTXHVWLRQ LQ7KH5HDO$&73UHS*XLGHUG(GLWLRQߚ\RXFDQILQGWKHPDWWKHHQGRIHDFKSUDFWLFHWHVW7KH H[SODQDWLRQVZLOOWHOO\RXZKLFKDQVZHUFKRLFHLVFRUUHFWDQGZK\DQGZKLFKDQVZHUFKRLFHVDUH LQFRUUHFWDQGZK\ 7KHVHH[SODQDWLRQVDUHQߞWDOZD\VWHUULEOHߚEXWWKH\XVXDOO\DUHQߞWJUHDWHLWKHU7KHUHDUHVRPHNH\ ZHDNQHVVHVLQWKHH[SODQDWLRQVIRUHDFKTXHVWLRQW\SHDQGZHߞOOORRNDWWKRVHLQPRUHGHWDLOIRUHDFK TXHVWLRQW\SHODWHU :HߞYHDOUHDG\WDONHGDERXWKRZWKH$&7ZDQWV\RXWRVHHLWVTXHVWLRQVLQDZD\WKDWߞVGLIIHUHQWIURPWKH ZD\WKH\UHDOO\DUH$PRQJRWKHUWKLQJVWKHWHVWGRHVQߞWZDQW\RXWRUHDOL]HKRZWKHULJKWDQVZHUFKRLFHV DUHREMHFWLYHO\FRUUHFWDQGKRZWKHZURQJRQHVDUHREMHFWLYHO\ZURQJ7KH$&7VHHPVWRZDQW\RXWR WKLQNWKHUHߞVVRPHNLQGRIJUD\DUHDRQWKHWHVWSUREDEO\EHFDXVHWKDWEHOLHIPDNHVWKHWHVWVHHPPRUH FKDOOHQJLQJ 8QIRUWXQDWHO\WKLVGHVLUHWRVHHPP\VWHULRXVRIWHQFRPHVWKURXJKLQWKH5HG%RRNߞVDQVZHUH[SODQDWLRQV )RUH[DPSOHPRVW5HG%RRNH[SODQDWLRQVVWDUWRXWE\VD\LQJVRPHWKLQJOLNHWKLVߡ4XHVWLRQ;7KHEHVW DQVZHULV<>HPSKDVLVPLQH@ߢ:KHQWKH5HG%RRNDGGUHVVHVWKHRWKHUFKRLFHVLWLQWURGXFHVWKHPE\ VD\LQJߡ7KHEHVWDQVZHULV127ߢDQGWKHQLWGLVFXVVHVWKHRWKHUFKRLFHV 'LG\RXFDWFKWKHVXEWOHLPSOLFDWLRQLQWKRVHSKUDVHV":KHQWKH5HG%RRNWDONVDERXWDߡEHVWߢDQVZHU LQVWHDGRIWDONLQJDERXWߡULJKWߢRUߡZURQJߢDQVZHUVPRVWUHDGHUVZLOOQDWXUDOO\PDNHWKHPLVWDNHRI DVVXPLQJWKDWPRUHWKDQRQHDQVZHUPLJKWEHSUHWW\JRRGEXWRQHRIWKHFKRLFHVLVVXEMHFWLYHO\ߡEHVWߢ DQGLWߞVRXUMREDVWHVWWDNHUVWRWU\WRJXHVVZKLFKDQVZHUWKHFKRLFHWKH$&7LVJRLQJWRUHZDUGߚDV RSSRVHGWRWKHUHDOLW\ZKLFKLVWKDWRQO\RQHDQVZHUFDQSRVVLEO\EHULJKWLIZHNQRZWKH$&7ߞVUXOHV ZKLOHWKHRWKHUFKRLFHVDUHDOOLQDUJXDEO\ZURQJLIZHNQRZWKH$&7ߞVUXOHV <RXPLJKWWKLQN,ߞPKDUSLQJRQWKLVWRRPXFKEHFDXVHLWPLJKWVHHPOLNHDPLQRUSRLQWULJKWQRZ%XWDV VRPHRQHZKRKDVVSHQWZHOORYHUDGHFDGHIRFXVLQJPRVWRIKLVZRUNLQJOLIHRQVWXG\LQJDQG XQGHUVWDQGLQJVWDQGDUGL]HGWHVWV,FDQVD\ZLWKRXWUHVHUYDWLRQWKDWWKLVSRLQWLVYHU\LPSRUWDQW3HRSOH ZKRGRQߞWHPEUDFHLWKDYHDPXFKKDUGHUWLPHLPSURYLQJRQWKHWHVWߚDOPRVWDQLPSRVVLEOHWLPH DFWXDOO\ 6RZKHQ\RXORRNDWWKHDQVZHUH[SODQDWLRQVLQ7KH5HDO$&73UHS*XLGHUG(GLWLRQLWߞVYHU\ LPSRUWDQWWKDW\RXGRQߞWIDOOIRUWKH$&7ߞVWULFNRIWKHߡEHVWߢDQVZHU)RUHYHU\TXHVWLRQWKHUHߞVRQH FRUUHFWDQVZHUFKRLFHDQGWKHUHVWDUHZURQJZLWKRXWH[FHSWLRQ'RQߞ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ߞOO OHDUQIURPPHLVFHUWDLQO\GLIIHUHQWIURPWKHZD\$&7,QFZDQWV\RXWRDSSURDFKWKHWHVWEHFDXVHWKH $&7ZRXOGQ WEHXVHIXOWRFROOHJHVLIHYHU\SHUVRQZKRWRRNLWGLGYHU\ZHOORQLW $WEHVWWKH5HG%RRNH[SODQDWLRQVDUHIUHTXHQWO\DGHTXDWH7KH\ߞOOJHQHUDOO\SRLQWRXWWKHPDMRULVVXHV LQYROYHGLQDTXHVWLRQDQGWKH\ߞOORFFDVLRQDOO\SRLQWRXWVRPHWKLQJRIYDOXHDERXWDZURQJDQVZHU FKRLFH$WZRUVWWKH\FDQEHXQFOHDUDQGHYHQPLVOHDGLQJ6RPHWLPHVWKH\FDQHYHQEHZURQJ +RZ&DQ7KH5HG%RRNߞV([SODQDWLRQV2I,WV2ZQ4XHVWLRQV%H:URQJ" :KHQ,VD\WKDWVRPHTXHVWLRQH[SODQDWLRQVIURPWKH5HG%RRNDUHߡZURQJߢ,GRQߞWPHDQWKDWWKH\ VXSSRUWWKHZURQJDQVZHUFKRLFHIRUWKHTXHVWLRQEHLQJH[SODLQHG,QVWHDGZKDW,PHDQLVWKDWWKH H[SODQDWLRQXVHVWKHZURQJUHDVRQLQJWRMXVWLI\ZK\DQDQVZHUFKRLFHLVULJKWRUZURQJ:HFDQWHOOWKH 5HG%RRNߞ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ߞVGHVFULSWLRQRIWKHFRUUHFWDQVZHU ZKLFKVD\VWKDWLWߡSURYLGHV WKHDGGHGGHWDLODVNHGIRULQWKHTXHVWLRQߢ DSSOLHVMXVWDVZHOOWRDWOHDVWRQHRIWKHZURQJDQVZHUVIRU WKDWTXHVWLRQDQGDUJXDEO\WRDOORIWKHZURQJDQVZHUV$WHVWWDNHUZKRWULHVWRUHO\RQWKH5HG%RRNߞV UHDVRQLQJIRUWKLVTXHVWLRQZLOOILQGKLPVHOIGUDZQWRZURQJDQVZHUVIRURWKHUTXHVWLRQVLQWKHIXWXUH %XWWKHH[SODQDWLRQLQWKLV%ODFN%RRNIRUWKHVDPHTXHVWLRQSURYLGHVDZD\WRXQGHUVWDQGWKHFRUUHFW DQVZHUWKDWRQO\DSSOLHVWRWKHFRUUHFWDQVZHUDQGZLOOUHOLDEO\DOORZ\RXWRLGHQWLI\FRUUHFWDQVZHUVRQ VLPLODU$&7TXHVWLRQVLQWKHIXWXUH 2IFRXUVHWKDWSDUWLFXODU5HG%RRNH[SODQDWLRQLVQߞWWKHRQO\RQHWKDW,ߞGFDOOߡZURQJߢ,MXVWVLQJOHGLW RXWKHUHEHFDXVHLWKDSSHQVWREHZURQJLQDZD\WKDWߞVUHODWLYHO\HDV\WRXQGHUVWDQGZLWKRXWJHWWLQJLQWR WKHGHWDLOVRIKRZGLIIHUHQWW\SHVRI$&7TXHVWLRQVDFWXDOO\ZRUN 'RQߞWJHWPHZURQJߚVRPHRI$&7,QFߞVH[SODQDWLRQVDUHGHFHQW7KHSUREOHPLVWKDWPDQ\RIWKHP DUHQߞW:HߞOOGLVFXVVSOHQW\RIRWKHUH[DPSOHVRIEDG5HG%RRNH[SODQDWLRQVLQWKHKXQGUHGVRI ZDONWKURXJKVLQWKLV%ODFN%RRN ,QIDFWRQHRIWKHPDMRUEHQHILWVRIWKLV%ODFN%RRNLVWKDWLWVSHOOVRXWWKHDFWXDOUHDVRQLQJEHKLQGWKH FRUUHFWDQVZHUVWR$&7TXHVWLRQVDQGWKHQGHPRQVWUDWHVUHSHDWHGO\KRZWKLVUHDVRQLQJVKRXOGEH DSSOLHGWRUHDOWHVWTXHVWLRQV7KDWPHDQVWKHH[SODQDWLRQVLQWKLV%ODFN%RRNDUHRIWHQYHU\GLIIHUHQW IURPZKDWWKH5HG%RRNH[SODQDWLRQVVD\ ,WSUREDEO\VHHPVRGGWR\RXWKDWWKH5HG%RRNLVQߞWDOZD\VFRQVLVWHQWDQGDFFXUDWHLQH[SODLQLQJLWVRZQ TXHVWLRQV,WVHHPHGVWUDQJHWRPHZKHQ,ILUVWQRWLFHGLWWRR,ߞPQRWVXUHZK\PDQ\RIWKHH[SODQDWLRQV DUHZURQJEXWWKHIDFWUHPDLQVWKDWWKH\DUHDV,ߞOOGHPRQVWUDWHLQPRUHGHWDLOZKHQZHWDONDERXW VSHFLILFTXHVWLRQVODWHURQ,WKLQNWKHSHRSOHZKRZULWHWKHH[SODQDWLRQVLQWKH5HG%RRNPXVWQRWEHWKH VDPHSHRSOHZKRZULWHWKHDFWXDOTXHVWLRQVߚHLWKHUWKDWRUVRPHRIWKH5HG%RRNH[SODQDWLRQVDUH GHOLEHUDWHO\LQWHQGHGWRPLVOHDGXVZKLFKVWULNHVPHDVXQOLNHO\ $WDQ\UDWHWKHZDONWKURXJKVLQWKLV%ODFN%RRNZLOOWHOO\RXGHILQLWLYHO\DQGREMHFWLYHO\ZK\WKHULJKW DQVZHUVWR5HG%RRNTXHVWLRQVDUHULJKWDQGZK\WKHZURQJDQVZHUVDUHZURQJ<RXߞOOVHHWKDWWKH DSSURDFK,UHFRPPHQGZRUNVRQDOOWKHTXHVWLRQVLQWKH5HG%RRNDVZHOODVRQDQ\UHDO$&7TXHVWLRQV \RXߞOOVHHLQWKHIXWXUHLQFOXGLQJRQWHVWGD\0\H[SODQDWLRQVZLOODOVRWHOO\RXZKLFKHUURUVPLJKWOHDG \RXWRFHUWDLQZURQJDQVZHUVDQGWKH\ߞOORIWHQVKRZ\RXPXOWLSOHDSSURDFKHVWRDQVZHUDJLYHQTXHVWLRQ VR\RXFDQGHFLGHZKLFKDSSURDFKVXLWV\RXEHVW &DUHOHVVQHVV:LOO&RVW<RX ߡ&RQFHQWUDWHDOO\RXUWKRXJKWVXSRQWKHZRUNDWKDQG7KHVXQ VUD\VGRQRWEXUQXQWLO EURXJKWWRDIRFXVߢ $OH[DQGHU*UDKDP%HOO 2QHRIWKHPRVWLPSRUWDQWGLIIHUHQFHVEHWZHHQWKH$&7DQGDQRUPDOKLJKVFKRROWHVWLVWKHH[WUHPH LPSRUWDQFHRIGHWDLOVRQWKH$&7ߚDQGWKLVPHDQVWKDWFDUHOHVVPLVWDNHVRQWKH$&7ZLOOEHPXFKPRUH KDUPIXOWR\RXUVFRUHWKDQWKH\ZRXOGEHLQDQRUPDOFODVVURRPVLWXDWLRQ ,QVFKRROIRULQVWDQFHPDWKWHDFKHUVPD\JLYH\RXSDUWLDOFUHGLWRQDWHVWTXHVWLRQLIWKH\FDQVHHWKDW\RX WULHGWRDSSO\WKHFRUUHFWIRUPXODHYHQWKRXJK\RXPDGHDVPDOOFDOFXODWLRQPLVWDNHDQGDUULYHGDWWKH ZURQJDQVZHU %XWZKDWKDSSHQVLI\RXVHWXSDQ$&70DWKSUREOHPFRUUHFWO\DQGGRDOPRVWHYHU\WKLQJULJKWEXWPDNHD VPDOOFDOFXODWLRQHUURURQWKHODVWVWHSDQGFKRRVHDZURQJDQVZHU" +HUHߞVZKDWKDSSHQV\RXJHWQRFUHGLWRQWKDWTXHVWLRQZKDWVRHYHU,WߞVH[DFWO\WKHVDPHDVLWZRXOGKDYH EHHQLI\RXߞGMXVWOHIWLWEODQNDQGGRQHQRZRUNDWDOO 2ULPDJLQH\RXߞUHLQDGLVFXVVLRQLQ(QJOLVKFODVVDERXWDFKDUDFWHULQDERRNZKRZDVYHU\XQKDSS\DQG \RXGHVFULEHGWKDWFKDUDFWHUDVEHLQJߡGHVSHUDWHߢ<RXU(QJOLVKWHDFKHUSUREDEO\ZRXOGQߞWWKLQNWZLFH DERXWWKLVVPDOOGLVFUHSDQF\VKHZRXOGVHHWKDW\RXFOHDUO\KDGDJHQHUDOXQGHUVWDQGLQJRIWKHPHQWDO VWDWHRIWKHFKDUDFWHUDQGVKHZRXOGDSSUHFLDWHWKDW\RXZHUHVKDULQJ\RXUSHUVSHFWLYHRQWKHERRN %XWRQDQ$&75HDGLQJTXHVWLRQ\RXFDQߞWGHVFULEHDQXQKDSS\FKDUDFWHUDVߡGHVSHUDWHߢXQOHVVWKHUHߞV VRPHWKLQJLQWKHWH[WWKDWVSHFLILFDOO\GHVFULEHVKRZWKDWFKDUDFWHUZDVLQDGLIILFXOWVLWXDWLRQDQGZDV IHHOLQJWRWDOO\KRSHOHVVEHFDXVHWKDWߞVZKDWWKHZRUGߡGHVSHUDWHߢVSHFLILFDOO\PHDQV$ORWRIGHVSHUDWH SHRSOHDUHSUREDEO\XQKDSS\EXWQRWHYHU\XQKDSS\SHUVRQLVGHVSHUDWHVRLI\RXFKRVHDQ$&7DQVZHU WKDWGHVFULEHGVRPHRQHDVߡGHVSHUDWHߢZLWKRXWVRPHWKLQJLQWKHWH[WWKDWVSHFLILFDOO\VXSSRUWHGLW\RXߞG EHFRPSOHWHO\ZURQJ1RSDUWLDOFUHGLWIRUWKHTXHVWLRQQRFRQVLGHUDWLRQIRU\RXURWKHUWKRXJKWVDERXWWKH FKDUDFWHUߚRQWKH$&7\RXߞUHMXVWZURQJH[DFWO\DVWKRXJK\RXߞGOHIWWKHTXHVWLRQEODQN 7KHVDPHFRQFHSWVDSSO\WRWKHRWKHUVHFWLRQVRIWKH$&7DVZHOORIFRXUVH2QHPDMRUUHDVRQWKDWWKH $&7LVVRFKDOOHQJLQJIRUVRPDQ\WHVWWDNHUVLVWKDWLWߞVVRKLJKO\GHWDLORULHQWHGHYHQWKRXJKLWOLPLWV LWVHOIWRUHODWLYHO\EDVLFVXEMHFWPDWWHU 1RWLFLQJWKHVHGHWDLOVDQGDYRLGLQJFDUHOHVVQHVVLVVRLPSRUWDQWWKDWPRVWVWXGHQWVFRXOGSUREDEO\KLW WKHLUWDUJHWVFRUHVVLPSO\E\WUDLQLQJWKHPVHOYHVWRHOLPLQDWHFDUHOHVVHUURUV<HVUHDOO\ߚLWߞVWKDWELJRI DGHDO 6R+RZ'R:H$YRLG7KHVH&DUHOHVV(UURUV" 7KHELJJHVWWKLQJ\RXQHHGWRGRWRDYRLGFDUHOHVVHUURUVLVWRUHDOL]HWKDWWKLVWHVWGHPDQGVDGLIIHUHQW PLQGVHWIURPWKHRQHWKDWPRVWKLJKVFKRROVWXGHQWVKDYHLQWKHFODVVURRP7KH$&7LVQߞWDERXWWKHELJ SLFWXUHRUDERXWDGYDQFHGPDWHULDO,WߞVDERXWVLPSOHLGHDVDQGVLPSOHWDVNVGRQHH[DFWO\WKHULJKWZD\ RYHUDQGRYHUDQGRYHUDJDLQ,I\RXOHW\RXUVHOIPDNHPLQRUPLVWDNHVLQWKDWSURFHVVLWߞOOKXUW\RXU VFRUHHYHQLI\RXDFWXDOO\GRXQGHUVWDQGWKHPDMRUFRQFHSWVLQYROYHG (PEUDFHWKLVGLIIHUHQWPLQGVHWZKHQ\RXߞUHSUHSDULQJIRUWKH$&7 DQGSHUIRUPLQJRQWHVWGD\ 5HYLHZ \RXUSUDFWLFHFDUHIXOO\DQGSD\DWWHQWLRQWRWKHVSHFLILFPLVWDNHV\RXPDNHVR\RXFDQPDNHDQHIIRUWWR DYRLGWKHPLQWKHIXWXUH +LWWLQJ$7DUJHW6FRUH ߡ6HWWLQJDJRDOLVQRWWKHPDLQWKLQJ,WLVGHFLGLQJKRZ\RXZLOOJRDERXWDFKLHYLQJLWDQG VWD\LQJZLWKWKDWSODQߢ 7RP/DQGU\ 9HU\RIWHQVWXGHQWVZKRSUHSDUHIRUWKH$&7KDYHDWDUJHWVFRUHLQPLQGW\SLFDOO\HLWKHUIRUD VFKRODUVKLSSURJUDPRUIRUDFHUWDLQVFKRROWKH\ߞGOLNHWRDWWHQG 7KHPRVWFRPPRQDSSURDFKWRWKLVNLQGRIVLWXDWLRQLVIRUVWXGHQWVWRZRUNKDUGWRLPSURYHRQHRIWKHLU PDMRUߡSUREOHPߢDUHDVߚIRUH[DPSOHLIDVWXGHQWߞV6FLHQFHVFRUHLVKLVORZHVWRQHKHPLJKWVSHQGDORW RIWLPHWU\LQJWRLPSURYHWKDWVHFWLRQVLQFHLWKDVWKHPRVWURRPIRULPSURYHPHQW 7KDWPLJKWVHHPORJLFDODQGLWPLJKWZRUNIRUVRPHSHRSOHEXWOHWPHSURSRVHDQDOWHUQDWLYHLI\RXߞUH WU\LQJWRKLWDWDUJHWVFRUHDQG\RXߞUHQRWWRRIDURII\RXPLJKWZDQWWRVWDUWE\WDNLQJ\RXUVWURQJHVWDUHD DQGJHWWLQJHYHQEHWWHUDWWKDW7KLVFDQEHYHU\HIIHFWLYHIRUDIHZGLIIHUHQWUHDVRQV )LUVWRIDOOLWߞV\RXUVWURQJHVWDUHDVR\RXPXVWEHUHDVRQDEO\FRPIRUWDEOHZLWKWKHPDWHULDOZKLFK PHDQVWKDWLPSURYLQJ\RXUSHUIRUPDQFHRQLWFRXOGEHOHVVVWUHVVIXODQGPRUHHIIHFWLYHWKDQWU\LQJWR LPSURYHLQDVHFWLRQ\RXILQGGLIILFXOW %XWWKHUHߞVDQRWKHULPSRUWDQWDQJOHWRFRQVLGHUDQGLWKDVWRGRZLWKWKHZD\WKHWHVWLVVFRUHG:KHQ\RX WDNHDVHFWLRQRIWKHWHVWߚWKH(QJOLVKVHFWLRQIRUH[DPSOHߚ\RXHQGXSZLWKDFHUWDLQQXPEHURITXHVWLRQV DQVZHUHGFRUUHFWO\RQDQ(QJOLVKVHFWLRQWKDWQXPEHULVVRPHZKHUHIURPWRVLQFHWKHUHDUH TXHVWLRQVRQWKDWVHFWLRQ 2IFRXUVH\RXUILQDOVFRUHIRUWKHVHFWLRQLVVRPHZKHUHIURPWRVRWKDWUDZVFRUHIURPWRPXVW EHFRQYHUWHGWRDILQDOVFRUHIURPWRߚDQGWKHSD\RIIIRUHDFKDGGLWLRQDOFRUUHFWDQVZHULVQߞW FRQVWDQW 7KHFORVHU\RXJHWWRWKHWRSRIWKHVFRULQJVFDOHWKHPRUHHDFKLQGLYLGXDOFRUUHFWDQVZHUWHQGVWR FRQWULEXWHWR\RXUVFRUH7RVHHZKDW,PHDQWDNHDORRNDWSDJHRI\RXUFRS\RI7KH5HDO$&73UHS *XLGHUG(GLWLRQ,QWKHVHFRQGFROXPQRIWKDWWDEOHXQGHUߡ(QJOLVKߢ\RXFDQVHHWKHQXPEHURI TXHVWLRQV\RXKDYHWRJHWULJKWWRHDUQWKHVFDOHGVFRUHLQWKHILUVWFROXPQRQWKHOHIWXQGHUߡ6FDOH6FRUHߢ 6ROHWߞVVD\\RXJRW(QJOLVKTXHVWLRQVULJKWߚWKDWZRXOGFRUUHVSRQGWRDVFDOHGVFRUHRI<RXFRXOG JHWPRUHTXHVWLRQVULJKW IRUDWRWDORI DQG\RXߞGVWLOORQO\KDYHDVFDOHGVFRUHRIߚWKDWߞVD SRLQWLPSURYHPHQWIRUPRUHFRUUHFWDQVZHUV 1RZOHWߞVLPDJLQH\RXߞUHKLJKHUXSRQWKHFKDUWDQG\RXߞYHDQVZHUHGTXHVWLRQVFRUUHFWO\7KDW FRUUHVSRQGVWRDVFDOHGVFRUHRI,QWKLVFDVHLI\RXJHWPRUHTXHVWLRQVULJKW IRUDWRWDORI TXHVWLRQVDQVZHUHGFRUUHFWO\ \RXߞOOKDYHDVFDOHGVFRUHRIߚWKDWߞVPRUHSRLQWVRQ\RXUILQDOVFRUH IRUWKDWVHFWLRQIRURQO\PRUHFRUUHFWDQVZHUV$WWKLVHQGRIWKHVFDOHDOPRVWHYHU\DGGLWLRQDOFRUUHFW DQVZHUJHWV\RXDQRWKHUVFDOHGSRLQWZKHUHDVLQWKHPLGGOHRIWKHVFDOH\RXFRXOGJHWVHYHUDOPRUH TXHVWLRQVULJKWDQGRQO\UDLVH\RXUVFDOHGVFRUHIRUWKDWVHFWLRQE\DSRLQWRUVR 1RWHYHU\WHVWKDVWKLVH[DFWFRQYHUVLRQVFDOHEHFDXVHWKHFRQYHUVLRQZLOOYDU\VOLJKWO\HDFKWLPHWKHWHVW LVDGPLQLVWHUHGIRUUHDVRQVZHGRQߞWQHHGWRDGGUHVVQRZ6WLOOZHߞOOJHQHUDOO\ILQGWKDWWKHUHߞVOHVV SD\RIIIRUHDFKLQGLYLGXDODGGLWLRQDOFRUUHFWDQVZHULQWKHPLGGOHRIWKHVFDOHWKDQWKHUHLVWRZDUGWKHWRS RIWKHVFDOH 6RLI\RXFDQLPSURYHRQVHFWLRQVZKHUH\RXߞUHDOUHDG\QHDUWKHXSSHUHQGRIWKHVFRULQJVFDOH\RXߞOOJHW DELJJHUSD\RIIIRUHDFKQHZFRUUHFWDQVZHULQVWHDGRIVWUXJJOLQJDJDLQVWTXHVWLRQVRQDVHFWLRQ\RXߞUH OHVVFRPIRUWDEOHZLWKDQGJHWWLQJDVPDOOHUSD\RIISHUTXHVWLRQ 2QHPRUHWKRXJKWLI\RXKDSSHQWREHJHWWLQJDSHUIHFWVFRUHRQ\RXUVWURQJHVWVHFWLRQ JRRGMREE\WKH ZD\ WKHQ\RXFDQMXVWPRYHRQWR\RXUQH[WEHVWVHFWLRQDQGVRRQDVQHHGHG :KDW,I,+DYH7R,PSURYH2Q$3DUWLFXODU6HFWLRQ" ,I\RXUWDUJHWVFRUHUHTXLUHV\RXWRLPSURYHRQDVSHFLILFVHFWLRQDQG\RXFDQߞWMXVWSLFNZKLFKVHFWLRQ \RXZDQWWRLPSURYHRQWKHQ\RXZRQߞWQHFHVVDULO\EHQHILWIURPWKHVFRULQJLVVXHZHMXVWGLVFXVVHGEXW \RXFDQVWLOOIRFXVRQWKHTXHVWLRQW\SHVZLWKLQWKDWVHFWLRQWKDW\RXGREHVWRQ )RUH[DPSOHLI\RXQHHGWRLPSURYH\RXU5HDGLQJVFRUHDQG\RXGREHVWRQWKHTXHVWLRQVZLWKOLQH FLWDWLRQVWKHQ\RXFDQZRUNRQOLQHFLWDWLRQTXHVWLRQVXQWLO\RXFDQUHOLDEO\DQVZHUHYHU\VLQJOHRQHRI WKHPFRUUHFWO\,I\RXQHHGWRLPSURYH\RXU(QJOLVKVFRUHDQG\RXߞUHEHWWHUDWWKH(QJOLVKTXHVWLRQVWKDW KDYHWRGRZLWKUHDGLQJFRPSUHKHQVLRQ\RXFDQVWDUWE\JHWWLQJHYHQEHWWHUDWWKRVH$QGVRRQ :KDW,I,1HHG$6LJQLILFDQW,PSURYHPHQW,Q0\6FRUH" ,I\RXQHHGWRLQFUHDVH\RXUVFRUHE\DODUJHPDUJLQLWSUREDEO\ZRQߞWEHHQRXJKMXVWWRZRUNRQ\RXU VWURQJHVWDUHDV,QVWHDG\RXߞOOOLNHO\KDYHWRLPSURYHLQVHYHUDODUHDV,I\RXGRQߞWKDYHDORWRIWLPHOHIW EHIRUH\RXKDYHWRWDNHWKHWHVWWKHQ\RXFDQVWDUW\RXUSUHSDUDWLRQE\ZRUNLQJRQ\RXUVWURQJHVWVHFWLRQ ILUVWWKHQPRYHRQWRWKHQH[WVWURQJHVWRQHDQGVRRQ$V\RXFRQWLQXHWRKRQH\RXUVNLOOVRQHDFK VXFFHVVLYHVHFWLRQWKHRGGVDUHJRRGWKDW\RXURYHUDOOXQGHUVWDQGLQJRIWKHWHVWZLOOGHYHORSLQVXFKD ZD\WKDWWKHRWKHUDUHDVRIWKHWHVWWKDWXVHGWRJLYH\RXWURXEOHPD\EHFRPHHDVLHU,I\RXGRKDYHDORWRI WLPHWKHQ,ߞGUHFRPPHQG\RXFRQVLGHUIROORZLQJWKHߡRUGHURIDWWDFNߢWKDW,UHFRPPHQGLQߡ+RZ7R 7UDLQ)RU7KH$&7ߚ0DVWHULQJ7KH,GHDV,Q7KLV%RRNߢ 7KH*HQHUDO*DPH3ODQ)RU$WWDFNLQJ$6HFWLRQ2I7KH$&72Q 7HVW'D\ ߡ:HFDQQRWPDNHHYHQWV2XUEXVLQHVVLVZLVHO\WRLPSURYHWKHPߢ 6DPXHO$GDPV ,QWKHQH[WFKDSWHUZHߞOOGLVFXVVVSHFLILFVWUDWHJLHVIRUGHDOLQJZLWKWLPHPDQDJHPHQWLVVXHVRQWKH$&7 %HIRUHZHGRWKDWWKRXJK,ZDQWWRPDNHVXUHZHߞUHRQWKHVDPHSDJHZKHQLWFRPHVWRWKHEHVWZD\WR DWWDFNDPXOWLSOHFKRLFHVHFWLRQRIWKH$&7ZKHQWKHFORFNLVUXQQLQJEHFDXVH,ߞYHOHDUQHGRYHUWKH \HDUVWKDWPRVWWHVWWDNHUVKDYHQHYHUOHDUQHGKRZWRGRWKDW 7KHRSWLPDOEDVLFDSSURDFKWRDVHFWLRQRIWKH$&7UHOLHVRQUHPHPEHULQJWKUHHLPSRUWDQWWKLQJVDWDOO WLPHV (YHU\TXHVWLRQRQDJLYHQVHFWLRQRIWKH$&7LVZRUWKRQHUDZSRLQWRQWKDWVHFWLRQQRPDWWHUKRZ KDUGRUHDV\WKHTXHVWLRQLVIRU\RX (YHU\UHDO$&7TXHVWLRQLVFDUHIXOO\GHVLJQHGVRWKDWLWIROORZVFHUWDLQUXOHV7KHDQVZHUWRDUHDO $&7TXHVWLRQLVQHYHUDUELWUDU\RUXQSUHGLFWDEOHLIZHNQRZWKH$&7ߞVUXOHVDQGLIZHUHDGDQG XQGHUVWDQGHYHU\ZRUGLQWKHTXHVWLRQ <RXVKRXOGDQVZHUHYHU\TXHVWLRQEHIRUHWLPHUXQVRXWRQWKHVHFWLRQ )RUWKHVHUHDVRQVWKHEHVWDSSURDFKWRDVHFWLRQRIWKH$&7LQYROYHVPDNLQJPXOWLSOHSDVVHVWKURXJKWKH VHFWLRQVRWKDW\RXPD[LPL]HWKHSRVVLELOLW\RIVSHQGLQJ\RXUWLPHDQGHQHUJ\ILJXULQJRXWWKHTXHVWLRQV WKDWZLOOVHHPHDVLHVWIRU\RXDQGPLQLPL]HWKHDPRXQWRIWLPHDQGHQHUJ\\RXVSHQGRQTXHVWLRQVWKDW \RXߞOOMXVWKDYHWRJXHVVRQDQ\ZD\ 2IFRXUVHDV\RXFRQWLQXHWRLPSURYH\RXUXQGHUVWDQGLQJRIWKHZD\ WKH$&7ZRUNVDQG\RXUH[HFXWLRQRIWKHLGHDVLQWKLV%ODFN%RRNWKHQXPEHURITXHVWLRQV\RXKDYHWR JXHVVRQZLOOGURSXQWLOLWLGHDOO\UHDFKHV]HUR $V\RXQHDUWKHHQGRIWKHDOORWWHGWLPHIRUWKHVHFWLRQ \RXVKRXOGVWDUWWKLQNLQJPRUHDERXWFKHFNLQJRYHU\RXUZRUNDQGJXHVVLQJRQDQ\TXHVWLRQV\RXKDYHQߞW DQVZHUHG\HW 2QWKHILUVWSDVVWKURXJKWKHVHFWLRQ\RXORRNDWHDFKTXHVWLRQLQRUGHUDQGGHFLGHZKHWKHUWRDQVZHULW RUVNLSLWIRUWKHPRPHQW w,I\RXWKLQN\RXXQGHUVWDQGWKHTXHVWLRQDQG\RXFDQDQVZHULWUHODWLYHO\TXLFNO\DQGHDVLO\WKHQ\RX JRDKHDGDQGDQVZHULW w,I\RXWKLQN\RXXQGHUVWDQGWKHTXHVWLRQEXWWKDWLWPLJKWWDNH\RXDUHODWLYHO\ORQJWLPHWRILJXUHRXW WKHDQVZHUWKHQ\RXVNLSLW<RXߞOOVDYHLWIRUDODWHUSDVV,I\RXZDQW\RXFDQPDUNWKDWTXHVWLRQ LQ\RXUWHVWERRNOHWLQDZD\WKDWOHWV\RXNQRZ\RXGHFLGHGWRVNLSLWEHFDXVH\RXWKRXJKWLWZRXOG WDNHDOLWWOHWRRORQJWRDQVZHUQRWEHFDXVH\RXWKRXJKW\RXZRXOGQߞWEHDEOHWRDQVZHULWDWDOO w,I\RXGRQߞWWKLQN\RXFDQILJXUHRXWWKHDQVZHUWRWKHTXHVWLRQWKHQ\RXVNLSLW$JDLQLI\RXZDQW \RXFDQPDUNWKHTXHVWLRQZLWKDTXLFNV\PEROLQ\RXUWHVWERRNOHWWKDWLQGLFDWHV\RXWKRXJKWWKH TXHVWLRQZDVWRRKDUGWKHILUVWWLPH\RXVDZLW,IWLPHSHUPLWV\RXߞOOFRPHEDFNWRWKHVHTXHVWLRQV ODWHU $WWKHHQGRI\RXUILUVWSDVVWKURXJKWKHVHFWLRQ\RXZLOOKDYHDQVZHUHGDOOWKHTXHVWLRQVWKDWVHHPHG IDLUO\TXLFNDQGHDV\IRU\RX<RXZLOODOVRKDYHORRNHGWKURXJKHYHU\TXHVWLRQLQWKHVHFWLRQDQG\RXߞOO KDYHDSUHWW\VROLGLGHDRIZKLFKTXHVWLRQVVHHPHGOLNHRQHV\RXZRXOGKDYHEHHQDEOHWRDQVZHULI\RX ZHUHZLOOLQJWRVSHQGPRUHWLPHRQWKHPDQGZKLFKTXHVWLRQVVHHPHGWRRKDUGIRU\RXWRDQVZHUZLWK FHUWDLQW\QRPDWWHUKRZPXFKWLPH\RXZHUHZLOOLQJWRVSHQGRQWKHP ,WWDNHVVRPHSUDFWLFHWRILJXUHRXWKRZDJJUHVVLYH\RXVKRXOGEHZLWKVNLSSLQJTXHVWLRQVGXULQJWKHILUVW SDVV6RPHSHRSOHOLNHWRVNLSDTXHVWLRQDVVRRQDVWKH\FRPHWRDZRUGRUDFRQFHSWWKH\ߞUHQRWIDPLOLDU ZLWKWKLVVDYHVWLPHEXWLWPLJKWFDXVH\RXWRVNLSTXHVWLRQVLQWKHILUVWSDVVWKDW\RXFRXOGKDYH DQVZHUHGFRUUHFWO\LI\RXߞ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ߞWZRUU\WRRPXFKDERXWREVHUYLQJDVWULFWRUGHUߚ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ߞYHEHHQDYRLGLQJVRIDU<RXPD\GLVFRYHUWKDW\RXDFWXDOO\FDQDQVZHUVRPHRIWKHP QRZEHFDXVH\RXUHDOL]HZKDW\RXKDGSUHYLRXVO\RYHUORRNHGRUPLVXQGHUVWRRG<RXPD\DOVRGHFLGH WKDWWKRVHTXHVWLRQVUHDOO\DUHWRRFKDOOHQJLQJIRU\RXWRDQVZHUDQG\RXߞOOKDYHWRJXHVVRQWKHP ,I\RXGRQߞWKDYHHQRXJKWLPHIRUDWKLUGSDVVWKHQ\RXVKRXOGVKLIW\RXUIRFXVWRJXHVVLQJRQWKH TXHVWLRQV\RXKDYHQߞWDQVZHUHG\HWDQGRUUHFKHFNLQJWKHTXHVWLRQV\RXߞYHDOUHDG\DQVZHUHG <RXPD\ EHZRQGHULQJKRZPXFKWLPHLVߡHQRXJKWLPHߢIRUDWKLUGSDVV7KHDQVZHUZLOOGHSHQGRQ\RXEHFDXVH GLIIHUHQWWHVWWDNHUVZLOOZRUNDWGLIIHUHQWVSHHGVDQGGHFLGHWRVNLSGLIIHUHQWQXPEHUVRITXHVWLRQVLQWKH ILUVWWZRSDVVHV<RXߞOOGHYHORSDVHQVHRIKRZPXFKWLPH\RXQHHGDV\RXNHHSSUDFWLFLQJZLWKUHDO$&7 TXHVWLRQV /HWߞVVSHQGDOLWWOHWLPHWDONLQJDERXWJXHVVLQJDQGUHFKHFNLQJRQWKH$&7EHFDXVHWKH\ߞUHYHU\ LPSRUWDQWVNLOOVWKDWPRVWWHVWWDNHUVLJQRUH *XHVVLQJ2Q7KH$&7 8QOLNHWKH6$7WKH$&7KDVQRZURQJDQVZHUSHQDOW\,QRWKHUZRUGVWKH$&7GRHVQߞWWDNHDQ\SRLQWV DZD\IURP\RXLI\RXDQVZHUDTXHVWLRQLQFRUUHFWO\ DVRSSRVHGWROHDYLQJLWEODQN :LWKWKDWLQPLQG WKHUHߞVQHYHUDUHDVRQWROHDYHDTXHVWLRQEODQNRQWKH$&7\RXVKRXOGDOZD\VDWOHDVWPDUNVRPHWKLQJ HYHQLI\RXߞUHMXVWUDQGRPO\FKRRVLQJDQDQVZHULQXQGHUDVHFRQG,WFDQߞWKXUW\RXDQGWKHUHߞVDVPDOO FKDQFHWKDWLWFRXOGKHOS %XWJXHVVLQJRQ$&7TXHVWLRQVVKRXOGQߞWEH\RXUGHIDXOWUHVSRQVH 1RWLFH,ߞPQRWVXJJHVWLQJWKDW\RXJXHVVRQDQ\TXHVWLRQVXQWLO\RXߞYHJRQHWKURXJKDWOHDVWWZRSDVVHVLQ DVHFWLRQDQGDQVZHUHGWKHTXHVWLRQV\RXFRXOGKDQGOHZLWKFHUWDLQW\ ,QFRQWUDVWPRVWXQWUDLQHGWHVWWDNHUVMXVWNLQGRIIORDWWKURXJKWKHHQWLUH$&7ZLWKRXWHYHUDFWXDOO\EHLQJ FHUWDLQDERXWWKHDQVZHUVWKH\ߞUHFKRRVLQJ7KHVHWHVWWDNHUVDUHEDVLFDOO\JXHVVLQJRQHYHU\VLQJOH TXHVWLRQ7KH\GRQߞWNQRZKRZWKH$&7ZRUNVWKH\GRQߞWKDYHDJDPHSODQDQGWKH\VXIIHUIRULW <RXQHHGWRPDLQWDLQDGLVFLSOLQHGDSSURDFKWRHYHU\UHDO$&7TXHVWLRQ\RXHQFRXQWHUEHFDXVHWKDWߞVWKH RQO\ZD\WRPDNHVXUH\RXDWWDFNHDFKTXHVWLRQXVLQJWKHSULQFLSOHVLQWKLV%ODFN%RRN7KHJXHVVLQJ PLQGVHWLVDGDQJHURXVWUDSWRIDOOLQWRDQGLWKDUPVDORWRI$&7WDNHUV 5HPHPEHUWKDWHYHU\TXHVWLRQDQGDQVZHURQWKH$&7PXVWEHEXOOHWSURRIDQGWKDWWKHUHߞVDOZD\V H[DFWO\RQHFRUUHFWDQVZHUDQGWKDWFRUUHFWDQVZHULVXQGHQLDEO\ULJKWDFFRUGLQJWRWKH$&7ߞVUXOHVߚQR PDWWHUKRZVWUDQJHLWPLJKWVHHPWRDQXQWUDLQHGWHVWWDNHU ,WߞVDEVROXWHO\LPSRUWDQWWKDW\RXUHPHPEHUWKLVDWDOOWLPHV,I\RXGRQߞW\RXPD\HQGXSIDFLQJD FKDOOHQJLQJTXHVWLRQWKDW\RXFDQߞWTXLWHILJXUHRXWULJKWDZD\DQG\RXPD\IRUJHWWKDWHYHU\TXHVWLRQKDV RQHFOHDUO\FRUUHFWDQVZHU<RXPLJKWGHFLGHWKDWWKLVRQHTXHVWLRQLVWKHH[FHSWLRQDQGWKDWUHDOO\WZRRU WKUHHRIWKHDQVZHUFKRLFHVDUHDOOHTXDOO\YDOLG7KHQ\RXPLJKWVWDUWWRGHYLDWHIURPWKHVWUDWHJLHV \RXߞYHOHDUQHGIURPWKLV%ODFN%RRNDV\RXJRWKURXJKWKHUHVWRIWKHWHVWDQG\RXPLJKWHQGXSZLWKD PXFKZRUVHVFRUHWKDQ\RXFRXOGKDYHDFKLHYHGLI\RXKDGMXVWUHPHPEHUHGWKHUXOHV 2IFRXUVH\RXߞUHSUREDEO\JRLQJWRUXQLQWR$&7TXHVWLRQVRQWHVWGD\WKDWFKDOOHQJH\RXVRPXFKWKDW \RXVNLSWKHPLQ\RXUILUVWWZRSDVVHV,QWKRVHFDVHV\RXVKRXOGVWLOOPDUNWKHDQVZHUFKRLFHWKDWVHHPV PRVWOLNHO\WREHFRUUHFW HLWKHUEHFDXVHRIWKHFRQWHQWRIWKHDQVZHUFKRLFHRUEHFDXVHLWILWVDQDQVZHU FKRLFHSDWWHUQWKDW\RXߞYHOHDUQHGLQWKLV%ODFN%RRN %XWLI\RXGRILQG\RXUVHOIJXHVVLQJRQDSDUWLFXODUTXHVWLRQ\RXKDYHWRUHPHPEHUWKDWLWߞVQRWEHFDXVH WKHTXHVWLRQFDQߞWEHDQVZHUHGZLWKFHUWDLQW\DQGLWߞVQRWEHFDXVHWKHVWUDWHJLHV\RXߞYHOHDUQHGLQWKLV %ODFN%RRNGRQߞWZRUN,WߞVEHFDXVHWKHUHߞVVRPHWKLQJDERXWWKLVTXHVWLRQWKDW\RXMXVWDUHQߞWVHHLQJ,W PLJKWEHDZRUG\RXGRQߞWUHDOO\NQRZRULWPLJKWEHDPDWKFRQFHSWWKDW\RXߞUHRYHUORRNLQJRUD FRPSOLFDWHGVHQWHQFH\RXGRQߞWTXLWHXQGHUVWDQGRULWPLJKWMXVWEHWKDW\RXߞUHJHWWLQJIOXVWHUHGDQG IRUJHWWLQJVRPHWKLQJDERXWKRZWKHTXHVWLRQVZRUN 7KDWߞVILQH<RXFDQEHWRWDOO\VWXPSHGDIHZWLPHVRQWHVWGD\DQGVWLOOJHWDJUHDWVFRUH7KHSRLQWLVQRW WREHDW\RXUVHOIXSDERXWLW<RXMXVWKDYHWRPDNHVXUH\RXGRQߞWORVHIDLWKLQ\RXU$&7WUDLQLQJVLPSO\ EHFDXVH\RXߞUHXQDEOHWRH[HFXWHWKDWWUDLQLQJVRPHWLPHV,I\RXߞYHJRWQRRWKHURSWLRQV\RXVKRXOGJXHVV RQDTXHVWLRQEHIRUHWLPHUXQVRXWUDWKHUWKDQOHDYHLWEODQN %XWJXHVVLQJVKRXOGQߞWEH\RXUJDPHSODQ8QGHUVWDQGLQJWKHWHVWDQGSD\LQJDWWHQWLRQWRWKHULJKWGHWDLOV VKRXOGEH\RXUJDPHSODQDQGWKDWߞVZKDW\RXߞOOOHDUQLQWKLV%ODFN%RRN 5H&KHFNLQJ<RXU$QVZHUV 2QHRIWKHPDMRUWKHPHVRIWKLV%ODFN%RRNLVWKDWWKH$&7LVDYHU\GHWDLORULHQWHGWHVWRIUHODWLYHO\ EDVLFFRQFHSWV7KLVPHDQVWKDWDORWRIWHVWWDNHUVFRVWWKHPVHOYHVDORWRISRLQWVMXVWEHFDXVHWKH\GRQߞW SD\HQRXJKDWWHQWLRQWRZKDWWKH\ߞUHGRLQJQRWEHFDXVHWKH\GRQߞWNQRZHQRXJKWRDQVZHUDTXHVWLRQ 6RLWVKRXOGFRPHDVQRVXUSULVHWKDW,KLJKO\UHFRPPHQGUHFKHFNLQJ\RXUDQVZHUVRQDVHFWLRQLI\RX KDYHWLPH <RXVKRXOGEHFRQVWDQWO\UHFKHFNLQJ\RXUZRUNDQG\RXUDVVXPSWLRQVDV\RXJRWKURXJKHDFK TXHVWLRQLQWKHILUVWSODFH<RXVKRXOGDOVREHXVLQJWKHNQRZOHGJHRIWKH$&7ߞVGHVLJQWKDW\RXJHWIURP WKLV%ODFN%RRNWRPDNHVXUH\RXFDQDFFRXQWIRUHDFKSDUWRIDTXHVWLRQDV\RXDQVZHULWEHFDXVHWKDWߞV DQRWKHUJRRGZD\WRPDNHVXUH\RXKDYHQߞWPDGHDVPDOOPLVWDNHVRPHZKHUH 7KHTXHVWLRQLVZKHWKHU\RXVKRXOGUHFKHFN\RXUDQVZHUVRUJXHVVRQWKHTXHVWLRQV\RXߞYHVNLSSHGLI \RXGRQߞWKDYHHQRXJKWLPHWRGRERWK $JDLQWKHDQVZHUFRPHVGRZQWR\RXUSHUVRQDOVW\OHDQGWHQGHQFLHV,I\RXGRDJRRGFDUHIXOMRERI FKHFNLQJ\RXUDQVZHUVDV\RXJRWKHQ\RXPD\QRWILQGDQ\PLVWDNHVLQ\RXUUHFKHFNLQJ2QWKHRWKHU KDQG\RXPD\DOVRILQGWKDW\RXߞUHQRWYHU\JRRGDWJXHVVLQJFRUUHFWO\RQWKH$&7LQZKLFKFDVHLWPLJKW PDNHPRUHVHQVHWRVKLIWPRUHRI\RXUHQHUJ\WRZDUGVUHFKHFNLQJWKHTXHVWLRQV\RXDFWXDOO\XQGHUVWDQG 7KHRQO\ZD\WRNQRZZKLFKDFWLYLW\LVPRVWOLNHO\WRUHVXOWLQH[WUDSRLQWVIRU\RXLVWRH[SHULPHQWZLWK ERWKRIWKHPLQ\RXUSUDFWLFHVHVVLRQV2IFRXUVHWKHPRVWLGHDOVFHQDULRLVRQHLQZKLFK\RXKDYHHQRXJK WLPHWRGRERWK 7KH%RWWRP/LQH 6RKHUHߞVWKHEHVWJHQHUDOZD\WRDSSURDFKDVHFWLRQRIWKH$&7<RXߞOOQRWLFHWKDWLWEHDUVOLWWOH UHVHPEODQFHWRZKDWPRVWSHRSOHGRRQWKHWHVWZKLFKLVVLPSO\WRPDUNWKHLUEHVWJXHVVRQHDFKTXHVWLRQ DVWKH\HQFRXQWHULW 6WDUWE\DQVZHULQJDOOWKHTXHVWLRQVWKDWVHHPUHODWLYHO\VLPSOHDQGHDV\IRU\RX6NLSWKHRQHVWKDW VHHPWRRKDUGRUWRRWLPHFRQVXPLQJIRUQRZ $IWHU\RXߞYHPDGH\RXUILUVWSDVVWKURXJKWKHVHFWLRQJREDFNRQ\RXUVHFRQGSDVVDQGGRWKH TXHVWLRQVWKDWVHHPHGOLNHWKH\ZRXOGEHWLPHFRQVXPLQJEXWVWLOOSRVVLEOHWRILJXUHRXW7U\WR DSSURDFKWKHPLQRUGHUIURPHDVLHVWWRKDUGHVWEXWGRQߞWREVHVVRYHUJHWWLQJWKHRUGHUH[DFWO\ULJKW 6NLSDQ\TXHVWLRQVWKDWWXUQRXWWREHWRRKDUGWRDQVZHU $IWHUWKHVHFRQGSDVVJREDFNDQGUHYLVLWWKHTXHVWLRQVWKDW\RXߞ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ߞUH JRLQJWKURXJKHDFKSDVV,WZRXOGEHDVKDPHWRZRUNWKURXJKWKHVHFWLRQFRUUHFWO\DQGVWLOOORVHDORWRI SRLQWVEHFDXVH\RXGLGQߞWSD\DWWHQWLRQWRWKHQXPEHULQJRQWKHDQVZHUVKHHW 7LPLQJ,VVXHV ߡ7LPHLVZKDWZHZDQWPRVWEXWZKDWZHXVHZRUVWߢ :LOOLDP3HQQ 2QHRIWKHELJJHVWFDXVHVRIVWUHVVLQVWDQGDUGL]HGWHVWLQJLVWKHWLPHOLPLW7KLVLVHVSHFLDOO\WUXHRQWKH $&7ZKLFKUHTXLUHV\RXWRDQVZHUPRUHTXHVWLRQVZLWKIHZHUEUHDNVWKDQPRVWRWKHUVWDQGDUGL]HGWHVWV SHRSOHWDNHEHIRUHFROOHJH0RVWRIWKHVWXGHQWV,ZRUNZLWKDUHDWOHDVWDOLWWOHFRQFHUQHGDERXWWKH WLPLQJDVSHFWRIWKHWHVWEHIRUHZHVWDUWZRUNLQJWRJHWKHUVRPHDUHH[WUHPHO\FRQFHUQHG :KHQ\RXNHHSUXQQLQJRXWRIWLPHEHIRUH\RXߞYHILQLVKHGDVHFWLRQLWߞVXQGHUVWDQGDEOHWKDW\RXPLJKWJHW DOLWWOHZRUULHG2IWHQVWXGHQWVZKRKDYHWKLVSUREOHPWU\WRVROYHLWE\WLPLQJWKHPVHOYHVDVWKH\GRD EXQFKRISUDFWLFHVHFWLRQVWKH\KRSHWRLPSURYHWKHLUWLPHPDQDJHPHQWZLWKRXWUHDOO\GRLQJDQ\WKLQJLQ SDUWLFXODUWRFKDQJHWKHLUDSSURDFK7KH\ߞUHEDVLFDOO\WU\LQJWRGRZKDWWKH\ߞYHDOZD\VGRQHDQGMXVW KRSLQJWKH\ߞOOVRPHKRZJHWLWGRQHIDVWHU %XWLQPRVWFDVHVHYHQVWXGHQWVZLWKPDMRUWLPLQJSUREOHPVDUHEHVWVHUYHGE\SXWWLQJWKRVHLVVXHVDVLGH WHPSRUDULO\DQGIRFXVLQJRQPDVWHULQJWKHFRQFHSWVSUHVHQWHGLQWKLVERRN,I\RXFDQGRWKDW\RXߞOORIWHQ ILQGWKDW\RXUWLPLQJLVVXHVUHVROYHWKHPVHOYHV /HWPHHODERUDWHRQWKDWDOLWWOH $Q\VLQJOH$&7TXHVWLRQFDQEHDSSURDFKHGLQDQXPEHURIGLIIHUHQWZD\V6RPHDSSURDFKHVZLOOUHVXOW LQZURQJDQVZHUVDQGVRPHLQFRUUHFWDQVZHUVVRPHWDNHDORQJWLPHDQGVRPHWDNHRQO\DPDWWHURI VHFRQGV1RWVXUSULVLQJO\SHRSOHZLWKWLPLQJLVVXHVRQWKH$&7XVXDOO\DSSURDFKTXHVWLRQVLQZD\VWKDW DUHPRUHWLPHFRQVXPLQJDQGFRPSOLFDWHGWKDQQHFHVVDU\LQVWHDGRIDWWDFNLQJTXHVWLRQVLQWKHHDVLHVWDQG PRVWGLUHFWZD\V %XWWKHVROXWLRQWRWKLVSUREOHPLVQߞWWRWUDLQ\RXUVHOIWRGRWKHFRPSOLFDWHGWLPHFRQVXPLQJDSSURDFKHV PRUHTXLFNO\DVWKRXJK\RXZHUHKLWWLQJIDVWIRUZDUGRQDYLGHR7KHVROXWLRQLVWROHDUQDFRPSOHWHO\ GLIIHUHQWDSSURDFKߚRQHWKDWߞVEHWWHUEHFDXVHLWߞVOHVVFRPSOLFDWHGDQGFDQQDWXUDOO\EHFRPSOHWHGLQOHVV WLPH 8VXDOO\WKHPRUHߡDFDGHPLFߢDSSURDFKWRDQ$&7TXHVWLRQߚWKHRQHWKDWIHHOVPRUHOLNHDVROXWLRQWRD QRUPDOKLJKVFKRROWHVWLWHPߚLVWKHPRVWFRPIRUWDEOHDQGIDPLOLDUDSSURDFKIRUPRVWWHVWWDNHUV 8QIRUWXQDWHO\LWߞVDOVRWKHDSSURDFKWKDWXVXDOO\WDNHVDORWPRUHWLPHWKDQQHFHVVDU\ 6LQFHPRVWSHRSOHGRQߞWDSSUHFLDWHWKHLPSRUWDQWGLIIHUHQFHVEHWZHHQWKH$&7DQGDQRUPDOKLJKVFKRRO WHVWWKH\DOVRGRQߞWUHDOL]HWKDWWKLVDFDGHPLFDSSURDFKLVXQQHFHVVDULO\VORZDQGFRPSOLFDWHGZKHQ DSSOLHGWRPRVWUHDO$&7TXHVWLRQV 6WXGHQWVZLWKRXWWLPLQJLVVXHVXVXDOO\DUHQߞWMXVWGRLQJWKHQRUPDOߡDFDGHPLFߢDSSURDFKDWVXSHUVSHHGV ,QVWHDGWKH\ߞUHXVLQJDQHQWLUHO\GLIIHUHQWDSSURDFKWKDWVLPSO\GRHVQߞWWDNHDVPXFKWLPH 7RLOOXVWUDWHWKLVLGHDOHWߞVLPDJLQHWKDWWZRSHRSOHHDFKKDYHWRFKRSDQRQLRQ2QHSHUVRQXVHVDNQLIH DQGDFXWWLQJERDUGDQGWDNHVILYHPLQXWHVWRJHWWKHMREGRQH7KHRWKHUSHUVRQXVHVDIRRGSURFHVVRUDQG WDNHVVHFRQGV ,VWKHVHFRQGSHUVRQEHWWHUDWFKRSSLQJRQLRQVWKDQWKHILUVWSHUVRQ"2IFRXUVHQRW6KHMXVWNQRZVKRZWR XVHWKHIRRGSURFHVVRUVKHߞGSUREDEO\WDNHMXVWDVORQJDVWKHILUVWSHUVRQLIVKHRQO\KDGDNQLIHDQG FXWWLQJERDUG6LPLODUO\WKHILUVWSHUVRQFRXOGSUREDEO\DOVRFKRSWKHRQLRQLQWHQVHFRQGVLIKHNQHZ DERXWWKHIRRGSURFHVVRU 6RLI\RXߞUHZRUULHGDERXWWLPHPDQDJHPHQW\RXUILUVWVWHSVKRXOGEHMXVWWROHDUQWKHPRVWHIILFLHQWZD\V WRDWWDFNWKH$&7ZKLFKLVZKDWZHߞOOFRYHULQWKLV%ODFN%RRNLQVWHDGRIWU\LQJWRJHWIDVWHUDWWKH DSSURDFK\RXߞUHDOUHDG\XVLQJ7KHRGGVDUHJRRGWKDW\RXUWLPHPDQDJHPHQWSUREOHPVZLOOQRORQJHU H[LVWRQFH\RXOHDUQWRDWWDFNHDFKTXHVWLRQWKHZD\DWUDLQHGWHVWWDNHUZRXOG<RXߞOOEHXVLQJWKHIRRG SURFHVVRULQVWHDGRIWKHNQLIHVRWRVSHDN 7KLVLVRQHRIWKHUHDVRQVWKDWSHRSOHZKRH[FHORQVWDQGDUGL]HGWHVWVOLNHWKH$&7RIWHQILQLVKVHFWLRQV ZLWKDWRQRIH[WUDWLPH,WߞVQRWEHFDXVHWKH\ߞUHVXSHUKXPDQLWߞVEHFDXVHXQGHUVWDQGLQJWKHWHVWJRHV KDQGLQKDQGZLWKDQVZHULQJTXHVWLRQVPRUHTXLFNO\ߚZKHQ\RXZRUNRQ\RXUXQGHUVWDQGLQJRIWKHWHVW WKHDYHUDJHWLPH\RXQHHGSHUTXHVWLRQZLOOQDWXUDOO\JRGRZQFRQVLGHUDEO\HYHQZLWKRXWVSHFLDOWUDLQLQJ WRLQFUHDVH\RXUVSHHG $OOWKHVDPHWKHUHDUHDIHZOLWWOHWLSVDQGVWUDWHJLHVWKDWPLJKWEHKHOSIXOIRUVRPHVWXGHQWVVROHWߞVWDON DERXWWKHPKHUH 6HFRQGV2U/HVV :KHQDSSURDFKHGFRUUHFWO\HYHU\VLQJOH$&7TXHVWLRQFDQEHDQVZHUHGLQVHFRQGVRUOHVVDQGPDQ\ FDQEHDQVZHUHGLQOHVVWKDQVHFRQGV$JDLQWKLVGRHVQߞWLQYROYHDFWXDOO\JRLQJWKURXJKDEXQFKRI FRPSOLFDWHGVWHSVDWOLJKWQLQJVSHHG,WPHDQVXVLQJDQDSSURDFKZLWKIHZHUTXLFNHUVWHSVLQWKHILUVW SODFH :KHQ,WDONDERXWKRZLWߞVSRVVLEOHWRFRPSOHWHDOOUHDO$&7TXHVWLRQVLQOHVVWKDQVHFRQGV,GRQߞW PHDQWKDW\RXKDYHWRGRHDFKSUREOHPLQOHVVWKDQVHFRQGVLQRUGHUWREHVXFFHVVIXO(YHQWKHEHVW WHVWWDNHUVUXQLQWRTXHVWLRQVWKH\MXVWKDYHDKDUGWLPHILJXULQJRXWDWILUVWDQGHYHQWKHTXLFNHVWVWXGHQWV JHWVWXFNRFFDVLRQDOO\%\WKHWLPH\RXߞYHJRWWKHULJKWWHFKQLTXHVGRZQWKRXJK\RXVKRXOGEHGRLQJ HQRXJKRIWKHTXHVWLRQVTXLFNO\HQRXJKWKDW\RXDUHQߞWKXUWE\WKHRQHVWKDWWDNHDOLWWOHPRUHWLPH 5HDG$/LWWOH)DVWHU 7KLVRQHPLJKWVHHPDOLWWOHREYLRXVEXWLWKHOSV7KHUHDUHDOONLQGVRIVSHHGUHDGLQJFRXUVHVDQG UHODWHGVFKRROVRIWKRXJKWRXWWKHUHEXWPRVWSHRSOHFDQQRWLFHDEO\LQFUHDVHWKHLUUHDGLQJVSHHGE\MXVW PDNLQJDSRLQWRIUHDGLQJIDVWHU,OLNHWRFRPSDUHLWWRZDONLQJPRVWSHRSOHFRXOGZDONIDVWHUWKDQWKH\ QRUPDOO\GRZLWKRXWPXFKH[WUDHIIRUW7KH\MXVWGRQߞWXQOHVVWKH\WKLQNDERXWLW 6RZKHWKHU\RXߞUHUHDGLQJIRUSOHDVXUHIRUVFKRRORUIRUWHVWSUHSMXVWFRQVFLRXVO\WKLQNDERXWGRLQJLW DOLWWOHIDVWHUWKDQQRUPDO,I\RXNHHSLWXS\RXVKRXOGEHDEOHWRVWDUWDXWRPDWLFDOO\UHDGLQJPRUH TXLFNO\ ,QJHQHUDOLI\RXFDQUHDGIDVWHQRXJKWRNHHSXSZLWK\RXUFODVVHVLQVFKRRO\RXVKRXOGQߞWKDYHDQ\WKLQJ WRZRUU\DERXWRQWKH$&7EXW\RXPLJKWDVZHOOWU\WKLVVWUDWHJ\RXWDQGVHHLILWKHOSV 2QHPRUHWKLQJLI\RXKDYHDVHULRXVLVVXHZLWKUHDGLQJVSHHGWKDWߞ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ߡ+RZ7R7UDLQ)RU7KH$&7ߢVHFWLRQ (YHQWDNLQJDOLWWOHEUHDNIURPWUDLQLQJWRWDNHDZDONDQGJHWVRPHIUHVKDLUFDQEHSURGXFWLYHLILWPHDQV \RXߞUHDEOHWRUHOD[DQGIRFXVRQWKHWHVWZKHQ\RXJHWEDFN 7KHRWKHUZD\RIGHDOLQJZLWKDQ[LHW\LVWRWDNHWKHWLPHWRXQGHUVWDQGZKHUHLWFRPHVIURPDQGWKHQ H[SORUHWKRVHLVVXHV ,QWKHYDVWPDMRULW\RIFDVHVLQP\H[SHULHQFHDQ[LHW\RYHUWKH$&7FRPHVIURPWKHIDFWWKDWLWߞVDQ LPSRUWDQWWHVWWKDWZLOOKDYHDQLPSDFWRQWKHFROOHJH\RXDWWHQGDQGPRVWSHRSOHDUHQߞWVXUHKRZWRGR ZHOORQLW /HWߞVDGGUHVVWKRVHLGHDV )LUVWRIDOO,VKRXOGSRLQWRXWWKDW\RXUXOWLPDWHKDSSLQHVVDQGVXFFHVVLQOLIHZLOOGHSHQGRQDORWPRUH WKDQ\RXU$&7VFRUH7KLVVLQJOHWKLQJLVQߞWJRLQJWRPDNHRUEUHDN\RXQRPDWWHUKRZPXFKLWPLJKWIHHO OLNHWKDWߞVWKHFDVHULJKWQRZ 6HFRQGO\LI\RXSODQWRJRWRFROOHJH\RXߞUHSUREDEO\JRLQJWRKDYHWRWDNHWKLVWHVW RUWKH6$7 7KHUHߞV EDVLFDOO\QRZD\DURXQGLWVR\RXPD\DVZHOOMXVWFRPPLWWRGRLQJWKHEHVW\RXFDQDQGWKHQVHHKRZLW JRHV )LQDOO\WKHWHVWFDQDOVRVHHPFKDOOHQJLQJEHFDXVHPRVWWHVWWDNHUVDQGWXWRUVGRQߞWXQGHUVWDQGKRZLW UHDOO\ZRUNV7KHRGGVDUHJRRGWKDWDORWRIWKHDGYLFH\RXߞYHUHFHLYHGDERXWWKH$&7LVQߞWDFWXDOO\ KHOSIXODQGPD\HYHQEHKDUPIXO,QWKDWFDVHWKHEHVWWKLQJWRGRLVMXVWWRVWDUWIURPVTXDUHRQHDQGXVH WKHPDWHULDOLQWKLVERRN<RXߞOOSUREDEO\ILQGWKDWSHUIRUPLQJRQWKHWHVWZLOOEHFRPHPXFKOHVVVWUHVVIXO WKDQLWXVHGWREH *R7KURXJK0XOWLSOH3DVVHV2Q(DFK6HFWLRQ $SSURDFKLQJHDFKVHFWLRQRIWKH$&7LQPXOWLSOHSDVVHVZLOODOORZ\RXWRPLQLPL]HWKHDPRXQWRIWLPH \RXZDVWHRQTXHVWLRQVWKDW\RXILQGPRUHFKDOOHQJLQJ)RUDGHWDLOHGGLVFXVVLRQRIWKLVLPSRUWDQW VWUDWHJ\VHHߡ7KH*HQHUDO*DPH3ODQ)RU$WWDFNLQJ$6HFWLRQ2I7KH$&72Q7HVW'D\ߢHDUOLHULQWKLV %ODFN%RRN 6XPPDU\ (YHU\VWXGHQWLVGLIIHUHQWEXWPRVWWLPHPDQDJHPHQWLVVXHVFRPHGRZQWRWKHWKLQJVZHGLVFXVVHGLQWKLV VHFWLRQ,QP\H[SHULHQFHWKHEHVWZD\IRUDOPRVWDQ\RQHWRGHDOZLWKWKLVSUREOHPLVWROHDUQDQG SUDFWLFHWKHWHFKQLTXHVLQWKLVERRNEHFDXVHPRVWVWXGHQWVZLOOILQGWKDWXVLQJWKHRSWLPDOWHFKQLTXHVZLOO DOORZWKHPWRDQVZHUTXHVWLRQVPXFKPRUHTXLFNO\WKDQWKH\GRRQWKHLURZQ 5HDGLQJ3DVVDJHV2Q7KH$&7 ߡ,WKDVEHHQHVWDEOLVKHGEH\RQGDVKDGRZRIGRXEWWKDWUHDGHUVLQJHQHUDOZDVWHDJUHDW GHDORIWLPHDQGHIIRUWߢ 0DQ\DDQG(ULF'H/HHXZ 6WXGHQWVIUHTXHQWO\DVNPHKRZWKH\VKRXOGUHDGWKLQJVRQWKH$&77KH\GRQߞWRQO\DVNPHKRZWRUHDG WKHSDVVDJHVLQWKH5HDGLQJVHFWLRQߚRQWKH$&7SDVVDJHVDSSHDULQWKH(QJOLVKDQG6FLHQFHVHFWLRQVDV ZHOODQGHYHQWKH0DWKVHFWLRQLQFOXGHVVHYHUDOTXHVWLRQVZLWKPXOWLSOHOLQHVRIWH[W 7KHEDVLFLVVXHLVWKLVSHRSOHRIWHQILQGLWLPSRVVLEOHWRUHDGDSDJHRUPRUHRIWH[WEHFRPHWKRURXJKO\ IDPLOLDUZLWKLWDQGWKHQDFFXUDWHO\DQVZHUDVHULHVRITXHVWLRQVRQLWDOOZLWKLQWKHWLPHOLPLWVIRUWKDW VHFWLRQ ,XQGHUVWDQGZKHUHWKH\ߞUHFRPLQJIURPEHFDXVHWKLVLVQߞWWKHVRUWRIWKLQJZHߞGH[SHFWWRGRLQDOPRVW DQ\QRUPDOFODVVURRPVLWXDWLRQ,QVFKRROLIZHߞUHVXSSRVHGWRVWXG\DWH[WZHJHWDOLWWOHPRUHWLPHWR GRLWEHIRUHZHKDYHWRWDNHDWHVWRQLW <HWDJDLQWKRXJKZHVHHDVLWXDWLRQRQWKH$&7WKDWGLIIHUVIURPZKDWZHߞGH[SHFWLQDQRUPDO FODVVURRPVHWWLQJ,WߞVYHU\LPSRUWDQWWKDW\RXXQGHUVWDQGWKLVFRQFHSWDVHDUO\DVSRVVLEOHVRWKDW\RX KDYHWKHULJKWPLQGVHWZKHQ\RXUHDGDSDVVDJHRQWKH$&7ߚZKHWKHULWߞVD5HDGLQJSDVVDJHD6FLHQFH SDVVDJHRUHYHQDQ(QJOLVKSDVVDJH :KHQ\RXUHDGDSDVVDJHRQWKH$&7\RXߞUHQRWVXSSRVHGWREHFRPHDQH[SHUWRQWKHWRSLFRIWKDW SDVVDJH$OO\RXZDQWWRGRZKHQ\RXUHDGDQ$&7SDVVDJHLVWRJHWDURXJKLGHDRIZKLFKFRQFHSWV DSSHDULQZKLFKSDUWVRIWKHSDVVDJHVR\RXFDQJREDFNDQGILQGWKHPODWHUZKHQDTXHVWLRQDVNVDERXW WKHP7KDWߞVDOO :HߞOOGLVFXVVWKLVLQPRUHGHWDLOLQWKHDSSURSULDWHVHFWLRQVRIWKLVERRNEXWIRUQRZ,ߞOOMXVWVD\WKDWDQ\ FRUUHFWDQVZHUWRDTXHVWLRQDERXWDQ$&7SDVVDJHPXVWEHGLUHFWO\VXSSRUWHGE\DVSHFLILFVHWRIZRUGV LQWKHWH[W 7KLVPHDQVWKDWDWDQ\JLYHQPRPHQWWKHRQO\SDUWRIDSDVVDJHWKDWZHQHHGWRFDUHDERXWLVWKHSDUWWKDW VXSSRUWVWKHFRUUHFWDQVZHUWRWKHTXHVWLRQZHߞUHZRUNLQJRQ %HFDXVHZHRQO\FDUHDERXWWKRVHVSHFLILFSDUWVRIWKHSDVVDJHZHGRQߞWQHHGDQ\NLQGRIߡELJSLFWXUHߢ XQGHUVWDQGLQJRIWKHWH[W:HGRQߞWQHHGWREHH[SHUWVRQZKDWWKHSDVVDJHLVWDONLQJDERXWߚZHMXVWQHHG WRNQRZZKHUHZHFDQILQGWKHFRUUHFWDQVZHUWRWKHTXHVWLRQZHߞUHZRUNLQJRQ 6RZKHQ\RXUHDG RUVNLP DSDVVDJH\RXߞUHQRWVXSSRVHGWREHDEVRUELQJDQGSURFHVVLQJDOOWKH LQIRUPDWLRQRQWKHSDJH<RXMXVWZDQWWRFUHDWHDURXJKߡPHQWDOPDSߢRIZKHUHWKHFRQFHSWVDSSHDU )RUH[DPSOHLPDJLQHWKDWSDUWRIDSDVVDJHPHQWLRQVVRPHRQHZKRGULYHVE\DSDUNRQWKHZD\WRVFKRRO /HWߞVVD\WKHILUVWPHQWLRQRIWKHSDUNDSSHDUVKDOIZD\GRZQWKHILUVWFROXPQRIWH[W,I\RXVHHDTXHVWLRQ WKDWDVNVDERXWWKHSDUN\RXMXVWQHHGWRNQRZWKDWWKHUHOHYDQWLQIRUPDWLRQIURPWKHSDVVDJHVKRXOGEH DERXWKDOIZD\GRZQWKHILUVWFROXPQRIWH[W7KHQ\RXFDQJREDFNDQGUHDGWKDWSDUWRIWKHWH[WPRUH FDUHIXOO\VR\RXFDQILQGWKHDQVZHU\RXQHHGDQGWKHQJRRQWRWKHQH[WTXHVWLRQ ,QRWKHUZRUGV\RXRQO\QHHGWRJREDFNDQGUHDGFORVHO\ZKHQ\RXߞUHKXQWLQJIRUWKHDQVZHUWRD VSHFLILFTXHVWLRQ:KHQ\RXUHDGRUVNLPDZKROHSDVVDJHDWRQFH\RXߞUHQRWWU\LQJWRSLFNXSHQRXJK LQIRUPDWLRQWRDQVZHUTXHVWLRQVߚ\RXߞ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ߞOOWDONDERXWDOORIWKHVHWRSLFVLQWKHWUDLQLQJDQGVHHWKHPLQWKHZDONWKURXJKVVRLIWKLV GRHVQߞWPDNHWRWDOVHQVH\HWMXVWNHHSUHDGLQJ7KHPRVWLPSRUWDQWWKLQJLVWKDW\RXXQGHUVWDQGWKDWZKHQ \RXUHDGDSDVVDJHRQWKH$&7\RXUJRDOLVQRWWRSURFHVVDQGUHPHPEHUDOOWKHPDWHULDOWKDW\RXVHH <RXRQO\ZDQWWREHJHQHUDOO\IDPLOLDUZLWKWKHORFDWLRQRIGLIIHUHQWSLHFHVRILQIRUPDWLRQVRWKDW\RXFDQ JREDFNDQGILQGWKDWLQIRDVTXLFNO\DVSRVVLEOHLIDTXHVWLRQDVNV\RXWRGRWKDW7KDWߞVDOO $&77UDLQLQJ :KHZ1RZZHߞYHJRWWHQWKURXJKWKHLQWURGXFWRU\PDWHULDO,WߞVDORWWRFRYHUEXWEHOLHYHPHߚ XQGHUVWDQGLQJWKDWPDWHULDOZLOOVDYH\RXDWRQRIWLPHDQGIUXVWUDWLRQEHFDXVHQRZ\RXKDYHDVROLG JHQHUDOXQGHUVWDQGLQJRIKRZWKH$&7ZRUNVZKLFKSXWV\RXZD\DKHDGRIWKHFXUYHFRPSDUHGWRDOOWKH RWKHUSHRSOHRXWWKHUHZKRKDYHWRWDNHWKHWHVW 7KLVLVWKHPRPHQWZHߞYHEHHQZDLWLQJIRUߚZHߞUHJRLQJWRVWDUWOHDUQLQJWKHVSHFLILFDSSURDFKWRHDFK TXHVWLRQW\SHVWDUWLQJZLWK$&75HDGLQJ-XVWEHDUDIHZWKLQJVLQPLQGDV\RXOHDUQDERXWHDFKTXHVWLRQ W\SH 7KLVWUDLQLQJ DQGHVSHFLDOO\WKHTXHVWLRQZDONWKURXJKV ZLOOSUREDEO\VHHPUHSHWLWLYHEXW UHSHWLWLRQLVJRRGRQWKH$&72QFH\RXGULOOWKHVHLGHDVLQWR\RXUKHDGLWߞOOEHWKDWPXFKKDUGHU IRUWKH$&7WRWULFN\RXRQWHVWGD\ 7KHWUDLQLQJLQWKLV%ODFN%RRNLVIDUPRUHYDOXDEOHZKHQ\RXVHHWKHVHLGHDVLQDFWLRQDJDLQVWUHDO $&7SUDFWLFHTXHVWLRQVIURPWKH5HG%RRN0DNHVXUH\RXUHDGWKURXJKWKHTXHVWLRQZDONWKURXJKV DIWHUHDFKWUDLQLQJVHFWLRQLQWKLV%ODFN%RRNDQGIROORZDORQJLQ\RXUFRS\RI7KH5HDO$&73UHS *XLGHUG(GLWLRQ <RXߞUHDOPRVWJXDUDQWHHGWRUXQLQWRDFRQFHSWRULGHDWKDWGRHVQߞWPDNHVHQVHWR\RXULJKWDZD\ 'RQߞWJHWGLVFRXUDJHG6WLFNZLWKLW,IZRUVHFRPHVWRZRUVWMXVWPRYHRQDQGPDNHDQRWHWR FRPHEDFNWRWKHFRQFHSWWKDWߞVWURXEOLQJ\RX,WPD\PDNHPRUHVHQVHDV\RXUHDGWKHUHVWRIWKH PDWHULDODQGORRNDWVRPHTXHVWLRQZDONWKURXJKV :LWKRXWIXUWKHUDGROHWߞVJHWVWDUWHGZLWK$&75HDGLQJ $&75HDGLQJ ߡ7HOOPHKRZ\RXDUHVHDUFKLQJDQG,ZLOOWHOO\RXZKDW\RXDUHVHDUFKLQJIRUߢ /XGZLJ:LWWJHQVWHLQ 2YHUYLHZDQG,PSRUWDQW5HPLQGHUVIRU$&75HDGLQJ4XHVWLRQV $&75HDGLQJLVWRXJKIRUDORWRIVWXGHQWVDQGLWNLQGRIHPERGLHVDFHQWUDOFRPSODLQWDORWRISHRSOH KDYHDERXWWKLVWHVWKRZFDQ\RXSLFNRQHULJKWDQVZHUWRDTXHVWLRQDERXWDSDVVDJH"+RZFDQDVWXGHQW EHVXUHVKHߞVFKRVHQWKHULJKWDQVZHUZKHQDQ\WKLQJDSHUVRQUHDGVPLJKWEHLQWHUSUHWHGLQVHYHUDO GLIIHUHQWZD\VWKDWDUHHTXDOO\YDOLG" 'RQߞWZRUU\7KLVLVRQHRIWKHPDQ\SDUWVRIWKH$&7WKDWDUHQRWKLQJOLNHWKHLUDSSDUHQWFRXQWHUSDUWVLQD QRUPDOKLJKVFKRROVLWXDWLRQ:HߞUHJRLQJWROHDUQH[DFWO\KRZWKH$&7FDQGHVLJQ5HDGLQJTXHVWLRQV ZLWKFRUUHFWDQVZHUVWKDWDUHMXVWDVEXOOHWSURRIDQGLQDUJXDEOHDVFRUUHFWDQVZHUVRQWKH$&70DWK VHFWLRQ $IWHUDOOZHߞYHDOUHDG\OHDUQHGWKDWWKHVHTXHVWLRQVDQGDQVZHUV0867EHߡEXOOHWSURRIߢߚQRPDWWHU ZKDWWKHVXEMHFWPDWWHUߚRUHOVHWKH$&7ZRXOGEHZRUWKOHVVWRFROOHJHV ,QIDFWWKH$&75HDGLQJVHFWLRQLVWKHEHVWSODFHWRVWDUWXQGHUVWDQGLQJKRZWKHWHVWUHDOO\ZRUNV,IZH FDQVHHWKHVWDQGDUGL]DWLRQDWZRUNKHUHLWߞOOKHOSXVXQGHUVWDQGWKHUHVWRIWKHWHVW 7KHRWKHUUHDVRQWKDW,DOZD\VOLNHWRGLVFXVVWKH5HDGLQJVHFWLRQILUVWLVWKDWWKHVHFUHWVNLOOUHTXLUHGWR EHDWWKH$&75HDGLQJVHFWLRQLVWKHVLQJOHPRVWLPSRUWDQWVNLOORQWKHHQWLUHWHVW,I\RXFDQUHDOO\WUXO\ XQGHUVWDQGDQGPDVWHUWKLVVNLOO\RXߞOOEHDEOHWRJHWDJUHDWVFRUHDFURVVWKHERDUGLQHYHU\VHFWLRQ 7KH%LJ6HFUHW2I$&75HDGLQJ :KDWLVWKLVVHFUHWVNLOOWKDW\RXQHHGWREHDWWKH$&75HDGLQJVHFWLRQ" 3VVVWߚGRQߞWWHOODQ\ERG\HOVH <RXKDYHWREHDEOHWRUHDG 7KDWߞVUHDOO\LW:HOOWREHPRUHVSHFLILF\RXKDYHWREHDEOHWRUHDGFDUHIXOO\DQGSUHFLVHO\,QRWKHU ZRUGV\RXKDYHWRKRQHWKHVNLOORIUHDGLQJH[DFWO\ZKDWߞVRQDSDJHDQGWDNLQJLQHYHU\WKLQJWKDWߞV VWDWHGGLUHFWO\LQWKHWH[WZLWKRXWWDNLQJLQDQ\WKLQJWKDWߞVQRW 7KDWSUREDEO\VHHPVOLNHLWVKRXOGEHSUHWW\VWUDLJKWIRUZDUG6RZK\LVWKLVSDUWRIWKH$&7VXFKD FKDOOHQJH" :HOOLWWXUQVRXWWKDWWKHNLQGRIUHDGLQJ\RXQHHGWRGRRQWKH$&7LVDOPRVWWKHH[DFWRSSRVLWHRIWKH NLQGRIUHDGLQJVWXGHQWVDUHWUDLQHGWRGRLQKLJKVFKRRO,ߞOOVKRZ\RXZKDW,PHDQ $5HDO/LIH([DPSOH /HWߞVLPDJLQHDW\SLFDO(QJOLVKFODVVURRPGLVFXVVLRQDQGWKHQFRQVLGHUKRZWKHVNLOOVGHYHORSHGGXULQJ VXFKDGLVFXVVLRQPLJKWEHLQFRUUHFWO\DSSOLHGWRD5HDGLQJTXHVWLRQRQWKH$&7 ,PDJLQH\RXߞUHLQDQ(QJOLVKFODVVGLVFXVVLQJDSDVVDJHIURPDERRN\RXߞUHFXUUHQWO\UHDGLQJ,QWKLV SDVVDJHWKHPDLQFKDUDFWHULVYHU\XSVHW6KHߞVMXVWOHDUQHGWKDWKHUFRXVLQKDVDVHULRXVLOOQHVVDQGWKH SDVVDJHGHVFULEHVKRZZRUULHGDQGFRQFHUQHGVKHLVIRUKLVKHDOWK<RXUWHDFKHUDVNVWKHFODVVIRUWKHLU RSLQLRQVRQWKHPDLQFKDUDFWHUߞVHPRWLRQDOVWDWH <RXUDLVH\RXUKDQGDQGVD\VRPHWKLQJOLNHߡ,WKLQNWKHPDLQFKDUDFWHUVHHPVWURXEOHGDQGFRQIOLFWHGߢ <RXUWHDFKHUDVNVߡ&RQIOLFWHG":K\GR\RXVD\FRQIOLFWHG"ߢ<RXWKHQJRRQWRH[SODLQWKDW\RXZHUHLQD SRVLWLRQOLNHWKLVRQFHDQG\RXUHPHPEHUIHHOLQJFRQIOLFWHGVR\RXWKLQNWKHFKDUDFWHUSUREDEO\IHHOV FRQIOLFWHGWRR<RXUWHDFKHUWKDQNV\RXIRU\RXUFRQWULEXWLRQDQGSUREDEO\DJUHHVWKDW\HVLWߞVSRVVLEOH WKHPDLQFKDUDFWHULQWKLVSDVVDJHPLJKWIHHOFRQIOLFWHG 7KLVVRUWRIRSHQLQWHUSUHWDWLRQLVRIWHQHQFRXUDJHGLQDFODVVURRPEXWLWߞOOFDXVH\RXWRPLVVDORWRI TXHVWLRQVRQWKH$&7 :HߞYHWDONHGDERXWWKHLGHDWKDWDOO$&7TXHVWLRQVKDYHWREHߡEXOOHWSURRIߢDQGREMHFWLYHLQRUGHUIRUWKH WHVWWRVHUYHLWVIXQFWLRQLQWKHDGPLVVLRQVSURFHVV7KHRQO\ZD\IRUDFRUUHFWDQVZHURQDQ$&7 5HDGLQJTXHVWLRQWRVDWLVI\WKLVUHTXLUHPHQWLVWRDYRLGDQ\NLQGRILQWHUSUHWDWLRQEHFDXVHLQWHUSUHWDWLRQ LVDOZD\VVXEMHFWLYH $QGWKHRQO\ZD\IRUDFRUUHFWDQVZHUFKRLFHWRUHIHUWRDSDVVDJHZLWKRXWLQWHUSUHWLQJLWLVWRUHVWDWH VRPHHOHPHQWRIWKHSDVVDJHH[DFWO\$Q\RWKHUGHVFULSWLRQRIWKHWH[WZRXOGQHFHVVDULO\LQYROYH LQWHUSUHWDWLRQDQGWKHQWKHFRUUHFWDQVZHUZRXOGQߞWEHREMHFWLYHO\FRUUHFWDQ\PRUH 6RLIWKHVDPHK\SRWKHWLFDOSDVVDJHZHZHUHMXVWWDONLQJDERXWDSSHDUHGRQDQ$&7WHVWDQG\RXFKRVH DQDQVZHUVD\LQJWKDWWKHPDLQFKDUDFWHUIHOWߡFRQIOLFWHGߢ\RXߞGJHWWKHTXHVWLRQZURQJHYHQWKRXJK\RXU (QJOLVKWHDFKHUZRXOGSUREDEO\DFFHSWWKDWDQDO\VLV ,IDQ$&7SDVVDJHGHVFULEHVVRPHRQHLQDGLIILFXOWVSRWDVXSVHWZRUULHGDQGFRQFHUQHGWKHQZHFDQ FKRRVHDQ\DQVZHUWKDWPHDQVH[DFWO\WKHVDPHWKLQJDVߡXSVHWߢߡZRUULHGߢRUߡFRQFHUQHGߢEXWZH FDQߞWSLFNDZRUGOLNHߡFRQIOLFWHGߢXQOHVVWKHWH[WVSHFLILFDOO\VWDWHVWKDWDFKDUDFWHUIHHOVWZRGLIIHUHQW HPRWLRQVDWWKHVDPHWLPHWKDWVHHPWRJRDJDLQVWHDFKRWKHUEHFDXVHWKDWߞVZKDWWKHZRUGߡFRQIOLFWHGߢ OLWHUDOO\PHDQV 2QWKHRWKHUKDQGLIWKHSDVVDJHVDLGVRPHWKLQJOLNHߡ,ZDVZRUULHGDERXWP\FRXVLQߞVLOOQHVVEXW,ZDV DOVRRSWLPLVWLFWKDWKHZDVVWURQJHQRXJKWRRYHUFRPHLWߢWKHQ\RXFRXOGSLFNDQDQVZHUFKRLFHWKDW GHVFULEHGWKHFKDUDFWHUDVߡFRQIOLFWHGߢEHFDXVHEHLQJߡZRUULHGߢDQGߡRSWLPLVWLFߢDUHWZRFRQIOLFWLQJ HPRWLRQV)XUWKHUWKHLGHDVRIWKRVHHPRWLRQVZRXOGEHFRQQHFWHGE\WKHZRUGߡEXWߢZKLFKVKRZVWKDW WKHVSHDNHUFRQVLGHUVWKHPWREHFRQIOLFWLQJLGHDV6HHKRZWKDWZRUNV" 2QWKH$&7LWߞVQRWHQRXJKWKDWEHLQJZRUULHGRUXSVHWLVDQHJDWLYHWKLQJDQGWKDWIHHOLQJFRQIOLFWHGLV W\SLFDOO\DQHJDWLYHWKLQJWKDWFRXOGNLQGRIJRDORQJZLWKWKHLGHDRIEHLQJXSVHWDQGZRUULHG,WGRHVQߞW PDWWHUWKDW\RXPLJKWIHHOFRQIOLFWHGLI\RXZHUHLQWKHSRVLWLRQGHVFULEHGLQWKHWH[WRUWKDW\RXWKLQN\RX FRXOGGHIHQG\RXUUHDVRQLQJLQDFODVVURRPGLVFXVVLRQ 7KHRQO\WKLQJWKDWPDWWHUVLQ$&75HDGLQJLVWKDWWKHDQVZHU\RXFKRRVHLVVXSSRUWHGGLUHFWO\DQG VSHFLILFDOO\LQWKHWH[WLQDZD\WKDWUHTXLUHVQRLQWHUSUHWDWLRQ,IDQDQVZHUFKRLFHLVVXSSRUWHGE\WKH WH[WLQWKDWZD\WKHQLWߞVULJKW,ILWߞVQRWWKHQLWߞVZURQJ 7KDWߞVVXFKDQLPSRUWDQWFRQFHSWWKDW,ߞOOVD\LWDJDLQZLWKH[FODPDWLRQSRLQWV 7KHRQO\WKLQJWKDWPDWWHUVLQDQ$&75HDGLQJTXHVWLRQLVWKDWWKHDQVZHU\RXFKRRVHLVVXSSRUWHG GLUHFWO\DQGVSHFLILFDOO\LQWKHWH[WZLWKRXWLQWHUSUHWDWLRQ,ILWLVWKHQ\RXߞUHULJKW,ILWߞVQRWWKHQ\RXߞUH ZURQJ -XVW7UXVW0Hߚ$W/HDVW8QWLO<RX5HDG7KH:DONWKURXJKV ,WPLJKWQRWVHHPOLNHZKDW,ߞPVD\LQJLVULJKW,ߞPVXUHWKDW\RXߞUHWKLQNLQJHYHQQRZRIWLPHVZKHQ \RXߞYHVHHQDQ$&75HDGLQJTXHVWLRQWKDWVHHPHGWRUHTXLUHLQWHUSUHWDWLRQRIWKHWH[W %XWWKHUHDVRQ\RXIHHOOLNH\RXVKRXOGEHLQWHUSUHWLQJWKHWH[WLVWKDW\RXߞYHDOZD\VEHHQWUDLQHGWRGR WKDWLQRWKHUVLWXDWLRQVDQGEHFDXVHWKH$&7ZDQWV\RXWRWKLQNWKDWLWߞVOLNHDUHJXODUVFKRROWHVW7KHWHVW VSHFLILFDOO\GHVLJQVDQVZHUFKRLFHVWKDWDUHVXSSRVHGWRWDNHDGYDQWDJHRI\RXUKDELWRILQWHUSUHWLQJ HYHU\WKLQJ\RXUHDGLQ\RXURZQZD\LQVWHDGRIMXVWUHDGLQJH[DFWO\ZKDWWKHWH[WVD\VDQGQRWKLQJPRUH 7KLVLVZK\DORWRISHRSOHPLJKWUHDGDSDVVDJHDERXWDFKDUDFWHUZKRIHHOVߡXSVHWߢߡZRUULHGߢRU ߡFRQFHUQHGߢDQGWKHQZURQJO\PDUNDQDQVZHUFKRLFHWKDWVD\VWKHFKDUDFWHUIHOWߡFRQIOLFWHGߢ6WXGHQWV DUHWDXJKWWRWKLQNRIZRUGVLQDSDVVDJHDVDSSUR[LPDWLRQVWKDWFDQEHWZLVWHGDQGWXUQHGWKLVZD\DQG WKDWWRDFFRPPRGDWHDORWRIGLIIHUHQWPHDQLQJV2QWKH$&7WKRXJKZRUGVFDQRQO\PHDQH[DFWO\ZKDW WKH\PHDQߚQRWKLQJPRUHDQGQRWKLQJOHVV 7KLVLVZKDW,ߞPWDONLQJDERXWZKHQ,VD\WKDWWKHRQO\VNLOO\RXQHHGRQWKH$&75HDGLQJVHFWLRQLVWREH DEOHWRUHDGFDUHIXOO\5HDOO\LIVRPHRQHUHDGVDERXWDFKDUDFWHUZKRIHHOVߡXSVHWߢߡZRUULHGߢRU ߡFRQFHUQHGߢDQGWKHQGHFLGHVWKDWWKHFKDUDFWHUPXVWIHHOߡFRQIOLFWHGߢWKDWSHUVRQKDVQߞWDFWXDOO\UHDG WKHSDVVDJHFDUHIXOO\DWOHDVWQRWDVIDUDVWKH$&7LVFRQFHUQHG,QVWHDGWKDWSHUVRQKDVUHDGDSDVVDJH WKDWFRQWDLQHGVRPHLQIRUPDWLRQDQGWKHQPDGHDQDVVXPSWLRQWKDWVRPHRWKHULQIRUPDWLRQPXVWDOVREH WUXHHYHQWKRXJKWKHSDVVDJHQHYHUVDLGLWZDV 6RWKLVLVZKDW,PHDQZKHQ,WDONDERXWFDUHIXOSUHFLVHHIIHFWLYHUHDGLQJ,PHDQWKDW\RXPXVWWUDLQ \RXUVHOIWRWDNHLQDOOWKHLQIRUPDWLRQLQWKHWH[WZLWKRXWPLVVLQJDQ\WKLQJDQGZLWKRXWDGGLQJLQDQ\RI \RXURZQDVVXPSWLRQV-XVWEHFDXVHVRPHRQHLVߡKDSS\ߢ\RXFDQߞWDVVXPHWKDWSHUVRQLVߡHQHUJHWLFߢ-XVW EHFDXVHVRPHRQHLVߡVDGߢWKDWGRHVQߞWPHDQWKHSHUVRQLVߡDQ[LRXVߢ:HPLJKWWKLQNRIWKHVHWHUPVDV EHLQJVLPLODUWRHDFKRWKHULQDFHUWDLQFRQWH[WEXWWKH\DUHQߞWDFWXDOO\V\QRQ\PV 2QWKH$&7ZHPXVWJHWXVHGWRWKHLGHDWKDWDZRUGPHDQVRQO\H[DFWO\ZKDWLWVD\VDQGQRWKLQJPRUH :URQJDQVZHUFKRLFHVZLOORIWHQWU\WRJHW\RXWRHTXDWHWZRGLIIHUHQWZRUGVWKDWVHHPVRUWRIUHODWHGVR WKDW\RXߞOOPDNHWKHNLQGRIDVVXPSWLRQ\RXPLJKWPDNHLQDQ(QJOLVKFODVVDQGWKHQJHWWKHTXHVWLRQ ZURQJ 5HPHPEHUZURQJDQVZHUFKRLFHVZLOOWU\WRH[SORLW\RXU(QJOLVKFODVVLQVWLQFWV6WD\RQ\RXUJXDUGDQG GRQߞWIDOOIRUWKHLUWULFNV &DUHIXO5HDGLQJ$W:RUN$JDLQVW$5HDO4XHVWLRQ :LWKWKDWLQPLQGOHWߞVWDNHDORRNDWWKHYHU\ILUVW5HDGLQJTXHVWLRQRQDQ$&7IURPWKH5HG%RRN<RX FDQILQGLWRQSDJHRIWKHUGHGLWLRQRI7KH5HDO$&73UHS*XLGH $VSUHYLRXVO\GLVFXVVHG\RX QHHGDFRS\RIWKH5HG%RRNLI\RXKRSHWRGRZHOORQWKH$&7EHFDXVHLWFRQWDLQVUHDOSUDFWLFH$&7 WHVWV $WDQ\UDWHZHߞUHJRLQJWRZDONWKURXJKWKLVTXHVWLRQ QXPEHURQSDJH DQGWKHDQVZHUFKRLFHV DQG\RXߞOOEHDEOHWRVHHDORWRIWKHFRQFHSWVLQSOD\WKDWZHߞYHEHHQGLVFXVVLQJVRIDU /HWPHSRLQWRXWULJKWKHUHWKDW,ߞPJRLQJWRWDNHPRUHWLPHJRLQJWKURXJKWKLVILUVWTXHVWLRQWKDQ,ZLOO ZLWKRWKHUH[DPSOHVODWHUMXVWWRWU\WRLOOXVWUDWHDVPXFKDVSRVVLEOHZLWKWKLVH[DPSOH'RQߞWEH LQWLPLGDWHGE\KRZORQJWKHH[SODQDWLRQLVDQGGRQߞWWKLQNWKDW\RXߞOOKDYHWRJRWKURXJKHYHU\GHWDLORI HYHU\DQVZHUFKRLFHWKHZD\,ߞPJRLQJWRGRLWULJKWQRZ7KHODWHUH[SODQDWLRQVZLOOEHPRUHLQGLFDWLYH RIDPRUHߡQRUPDOߢWKRXJKWSURFHVVIRUD5HDGLQJTXHVWLRQ7KLVH[SODQDWLRQLVMXVWORQJHUDQGPRUH LQYROYHGLQRUGHUWRKHOS\RXJHWLQWRWKHSURSHUPLQGVHWDQGWRGHPRQVWUDWHFOHDUO\ZKDWVHSDUDWHVWKH ULJKWDQVZHUIURPWKHZURQJDQVZHUV 6ROHWߞVMXPSLQ 5LJKWRIIWKHEDWWKHSURPSWIRUWKLVTXHVWLRQLQFOXGHVWKHSKUDVHߡZRXOGPRVWOLNHO\DJUHHߢ7KLVLVD SHUIHFWH[DPSOHRIKRZWKH$&7ZLOOSKUDVHLWVFRQFUHWHEXOOHWSURRIREMHFWLYHTXHVWLRQVLQWHUPV WKDWPDNHWKHPVRXQGOLNHDFODVVLFRSHQHQGHG(QJOLVKFODVVGLVFXVVLRQNLQGRITXHVWLRQ 7KHWHVWFRXOGKDYHVWDUWHGWKHTXHVWLRQZLWKDSKUDVHOLNHߡ:KLFKRIWKHIROORZLQJLVDWUXHVWDWHPHQW DERXWߢEHFDXVHUHDOO\WKDWߞVZKDWWKH$&7LVJRLQJWRUHZDUGߚDWUXHFRQFUHWHVWDWHPHQWWKDWߞV GLUHFWO\VXSSRUWHGE\WKHWH[W,QVWHDGWKH\WDONDERXWZKDW)UDQߡZRXOGPRVWOLNHO\DJUHHߢZLWK 'R\RXVHHKRZWULFN\WKHWHVWLVEHLQJ"7KH$&7LVWU\LQJWRSXW\RXLQWKHSRVLWLRQRIGHFLGLQJZKDWDQ LPDJLQDU\FKDUDFWHUߡZRXOGPRVWOLNHO\DJUHHߢZLWK7KH\ZDQW\RXWRDVN\RXUVHOIVRPHWKLQJOLNHߡ+RZ FRXOG,SRVVLEO\NQRZZKDW)UDQZRXOGPRVWOLNHO\DJUHHZLWK",RQO\MXVWKHDUGDERXWKHUDQGVKHߞVQRW HYHQUHDOߢ%XW\RXKDYHWRUHPHPEHUWKDW$&7TXHVWLRQVFDQQHYHUEHVXEMHFWLYHRUXQSUHGLFWDEOH,I WKH\ZHUHWKHWHVWZRXOGQߞWEHVWDQGDUGL]HG7KDWPHDQVWKHUHPXVWEHDFRQFUHWHUHDVRQLQWKHWH[WWKDW RQHDQVZHUFKRLFHLVULJKWDQGWKHRWKHUVDUHZURQJ 6RUU\WRJRRQDERXWWKDW,WߞVMXVWUHDOO\LPSRUWDQWWKDW\RXOHDUQWRFDWFKWKHVHWKLQJV :KHQ\RXVHHWKLVNLQGRIZRUGLQJ\RXKDYHWRJHWXVHGWRUHDGLQJLWDVVRPHWKLQJOLNHߡ:KLFKRIWKH IROORZLQJLVDWUXHVWDWHPHQWEDVHGRQWKHSDVVDJHDERXW)UDQߞVUHODWLRQVKLSZLWK/LQGD5RVH"ߢ1RZ \RXߞUHLQWKHULJKWPLQGVHW<RXߞUHQRWYHQWXULQJ\RXUEHVWJXHVVߚ\RXߞUHVHDUFKLQJIRUFRQFUHWHHYLGHQFH WRVXSSRUWDFRUUHFWDQVZHUDQGWRHOLPLQDWHLQFRUUHFWDQVZHUV 1RZZHORRNDWWKHILUVWDQVZHUFKRLFH:HNQRZWKDW $ LVFRUUHFWEHFDXVHLWߞVGLUHFWO\VXSSRUWHGE\ WKHWH[W,WVD\VWKHLUOLYHVDUHߡVWLOOFRQQHFWHGߢ7KLVLGHDLVVXSSRUWHGLQWKHWH[WE\SKUDVHVOLNHߡKRPLQJ SLJHRQߢ OLQH DQGߡKXPDQERRPHUDQJߢ OLQH ZKLFK)UDQXVHVWRGHVFULEHWKHZD\WKDW/LQGD5RVH ZRXOGFRPHEDFNLQWR)UDQߞVOLIH,WߞVDOVRVXSSRUWHGE\WKHIDFWWKDWOLQHVWKURXJKGHVFULEHKRZ )UDQKDVEHHQߡIRXQGߢE\/LQGD5RVHDIWHUߡZDLWLQJVRORQJߢ,QOLQHVWKURXJK)UDQWHOOVXVWKDW /LQGD5RVHZDVDEDE\)UDQJDYHXS\HDUVDJRߚDGLUHFWH[DPSOHRIKRZWKHLUOLYHVZHUHRQFH SK\VLFDOO\FRQQHFWHG6RZHߞUHWROGWKDW)UDQJDYHXS/LQGD5RVHDQGWKHQZDLWHGIRUGHFDGHVIRU/LQGD 5RVHWRILQGKHUOLNHDKRPLQJSLJHRQRUDERRPHUDQJߚWZRWKLQJVWKDWUHWXUQWRWKHLUVWDUWLQJSRLQWV7KH ZRUGߡFRQQHFWHGߢFDQPHDQDORWRIWKLQJVߚߡOLQNHGߢߡLQWHUUHODWHGߢߡLQWHUGHSHQGHQWߢDQGVRRQ,QIDFW DFFRUGLQJWRGLFWLRQDU\FRPRQHRIWKHOHVVFRPPRQPHDQLQJVIRUWKHZRUGߡFRQQHFWHGߢLVߡUHODWHGE\ IDPLO\WLHVߢZKLFKGLUHFWO\GHVFULEHV)UDQߞVUHODWLRQVKLSZLWKKHUGDXJKWHU/LQGD5RVH&OHDUO\ZHFDQ FRQILGHQWO\FRQFOXGHߚEDVHGRQWKHWH[WߚWKDW)UDQDQG/LQGD5RVHߡDUHVWLOOFRQQHFWHGߢ 7KLVDQVZHUFKRLFHDOVRLQFOXGHVWKHSKUDVHߡGHVSLWHORQJVHSDUDWLRQVRIWLPHDQGGLVWDQFHߢDQGWKDW SKUDVHLVDOVRUHIOHFWHGGLUHFWO\LQWKHWH[W:HNQRZ)UDQWKLQNVWKHVHSDUDWLRQKDVJRQHRQIRUDORQJ WLPHEHFDXVHVKHVSHFLILFDOO\XVHVWKHZRUGߡORQJߢLQOLQHVDQGWRGHVFULEHWKHDPRXQWRIWLPHVKHߞV EHHQVHSDUDWHGIURP/LQGD5RVH:HDOVRNQRZWKDWGLVWDQFHLVLQYROYHGEHFDXVHWKHOHWWHUIURP/LQGD 5RVHFDPHIURPDQRWKHUVWDWHDVZHFDQVHHLQOLQHVDQG LI)UDQGRHVQߞWNQRZDQ\RQHLQ7H[DVWKHQ VKHPXVWQRWOLYHLQ7H[DVEHFDXVHVKHNQRZVKHURZQPRWKHUZKRLVWKHUHZLWKKHU 6R)UDQDQG/LQGD 5RVHFOHDUO\KDYHDVHSDUDWLRQRIWLPHDQGGLVWDQFH $QGWKHUH\RXKDYHLWߚHYHU\SDUWRIWKHFRUUHFWDQVZHUFKRLFHLVGLUHFWO\VXSSRUWHGLQWKHWH[WHYHQ WKRXJKWKH$&7WULHGLWVEHVWWRPDNHWKHTXHVWLRQVHHPVXEMHFWLYHDQGRSHQHQGHG 1RZOHWߞVFKHFNRXWWKHRWKHUDQVZHUFKRLFHV &KRLFH % LVZURQJEHFDXVHQRWKLQJLQWKHWH[WPHQWLRQVDQ\UHVHQWPHQWEHWZHHQ)UDQDQG/LQGD5RVH (YHQLILWGLGWKHUHߞVQRLQGLFDWLRQDQ\ZKHUHWKDWWKH\ZRQߞWEHDEOHWRKDYHDJRRGUHODWLRQVKLS,WߞVWUXH WKDW)UDQVHHPVWREHJRLQJWKURXJKDORWRIHPRWLRQVWKDWFRXOGEHFKDUDFWHUL]HGDVQHJDWLYHߚLQOLQHV VKHGHVFULEHVIHHOLQJOLNHRQHRIߡWKRVH1D]LVߢZKRJHWVߡDUUHVWHGߢLQOLQHVVKHߞVLQ ߡGLVEHOLHIߢDQGIHHOVOLNHVKHKDVߡMXVWVKDNHQKDQGVZLWK'HDWKߢLQOLQHVKHVD\VWKHVLWXDWLRQLVߡQRW IDLUߢLQOLQHVKHߡEULVWOH>V@ߢ 7KHVHFRXOGDOOEHVHHQDVLQGLFDWRUVRIQHJDWLYHHPRWLRQVMXVWDVUHVHQWPHQWLVDQHJDWLYHHPRWLRQ%XW WKHWH[WQHYHUVSHFLILFDOO\VD\VWKDW)UDQEODPHV/LQGD5RVHIRU)UDQߞVQHJDWLYHHPRWLRQVZKLFKLVZKDW WKHZRUGߡUHVHQWPHQWߢZRXOGUHTXLUHLILWZHUHJRLQJWREHSDUWRIDFRUUHFWDQVZHURQDQ$&75HDGLQJ TXHVWLRQ 7KHUHߞVVWLOOPRUH(YHQLIWKHWH[WGHVFULEHG)UDQIHHOLQJUHVHQWIXOZKLFKLWGRHVQߞWZHߞGVWLOOQHHGWR VHHVRPHHYLGHQFHRIUHVHQWPHQWIURP/LQGD5RVHEHFDXVHWKHDQVZHUFKRLFHLQFOXGHVWKHSKUDVHߡHDFK RWKHUߢ(YHQLIWKHHQWLUHSDVVDJHZHUHDERXWKRZPXFK)UDQUHVHQWHG/LQGD5RVH ZKLFKDJDLQLWߞVQRW ZHߞGVWLOOQHHGVRPHWKLQJWRLQGLFDWHWKDW/LQGD5RVHUHVHQWHGKHUEDFNDQGWKLVSDVVDJHGRHVQߞWVD\ DQ\WKLQJOLNHWKDW $ORWRISHRSOHPLJKWUHDGWKLVSDVVDJHDQGMXVWQDWXUDOO\DVVXPHWKHUHFRXOGEHVRPHQHJDWLYHHPRWLRQV OLNHUHVHQWPHQWEHWZHHQDQDGRSWHGFKLOGDQGKHUELRORJLFDOPRWKHU,QIDFWLI\RXZHUHLQDQ(QJOLVK FODVVDQG\RXVDLG\RXWKRXJKW)UDQDQG/LQGD5RVHSUREDEO\UHVHQWHGHDFKRWKHUWRRPXFKWRKDYHDJRRG UHODWLRQVKLS\RXUWHDFKHUSUREDEO\ZRXOGQߞWWHOO\RXWKDW\RXZHUHZURQJ%XWWKDWGRHVQߞWPDWWHURQWKH $&7EHFDXVHWKHSDVVDJHQHYHUDFWXDOO\VD\VWKDW)UDQDQG/LQGD5RVHUHVHQWHDFKRWKHU &KRLFH & LVZURQJEHFDXVHLWWDNHVDFRQFHSWWKDWߞVEULHIO\PHQWLRQHGLQWKHSDVVDJHDQGWKHQJHWVLW EDFNZDUGVDQGMXPEOHG,WߞVWUXHWKDW)UDQߞVPRWKHUVXJJHVWVLQWKHODVWSDUDJUDSKWKDW)UDQPLJKWEH ߡZRUULHGߢWKDW/LQGD5RVHZLOOEHߡGLVDSSRLQWHGߢRUWKDW/LQGD5RVHPLJKWKDYHߡKDGWKLVELJIDQWDV\IRU DOOWKHVH\HDUVߢDERXWZKR)UDQZDV%XWWKDWߞVDGHVFULSWLRQRI/LQGD5RVHߞVGUHDPVRIDSHUIHFWPRWKHU LWKDVQRWKLQJWRGRZLWK)UDQKDYLQJDGUHDPRIDSHUIHFWGDXJKWHU2IFRXUVHWKLVSKUDVHLQWKHODVW SDUDJUDSKDOVRFDQߞWEHUHOHYDQWWR)UDQߞVIHHOLQJVEHFDXVHWKHTXHVWLRQDVNVZKDW)UDQWKLQNVDQG)UDQ QHYHUDFWXDOO\VD\VVKHIHHOVDQ\RIWKHWKLQJVWKDWKHUPRWKHUGHVFULEHV7KDWPHDQVZHFDQEHFHUWDLQWKDW WKLVDQVZHUFKRLFHLVLQFRUUHFWIRUVHYHUDOUHDVRQV /LNHFKRLFH % FKRLFH ' LVZURQJHYHQWKRXJKLWRIIHUVDQRWKHUIDLUO\UHDVRQDEOHDVVXPSWLRQEDVHGRQ WKHWH[W,QOLQHVDQG)UDQVD\VWKDW/LQGD5RVHߞVKDQGZULWLQJUHPLQGVKHURIKHURZQDQGLQOLQH )UDQߞVPRWKHUVD\V/LQGD5RVHߡORRNVMXVWOLNHߢ)UDQ6RWKHUHDUHLQGLFDWLRQVWKDW)UDQDQG/LQGD 5RVHKDYHWKLQJVߡLQFRPPRQߢ%XWWKHWH[WDEVROXWHO\QHYHUVD\VDQ\WKLQJDERXWZKHWKHULWZLOORUZRQߞW EHߡGLIILFXOWIRUWKHPWRJHWFORVHߢ 1RZLI\RXߞUHDQRSWLPLVWLFVRUWRISHUVRQDQG\RXWKLQNDVSHFLDOERQGH[LVWVEHWZHHQDSDUHQWDQGD FKLOGDQG\RXQRWLFHKRZWKHWH[WPHQWLRQV)UDQDQGKHUGDXJKWHUKDYLQJDIHZWKLQJVLQFRPPRQWKHQ \RXPLJKWIHHOOLNHLWߞVUHDVRQDEOHWRDVVXPHWKHWZRZRPHQZLOOEHFRPHFORVHRQFHWKH\JHWWRNQRZ HDFKRWKHU%XWWKHWH[WGRHVQߞWDFWXDOO\VD\WKDWVRLWߞVZURQJ$JDLQLWGRHVQߞWPDWWHUWKDWWKHDQVZHU FKRLFHPLJKWVHHPSODXVLEOHWRXVߚLWDFWXDOO\QHHGVWREHVWDWHGLQWKHWH[WWREHWKHFRUUHFWDQVZHUDQG LWLVQߞWVWDWHGLQWKHWH[W 7KHUHߞVRQHPRUHDVSHFWRIWKLVDQVZHUFKRLFHZHZDQWWREHFOHDUDERXW7KHFKRLFHVD\V)UDQDQG/LQGD 5RVHKDYHߡHQRXJKLQFRPPRQߢWKDWWKH\VKRXOGEHDEOHWRKDYHDFORVHUHODWLRQVKLS7KHWH[WPHQWLRQV WKH\KDYHDVLPLODUDSSHDUDQFHDQGVLPLODUKDQGZULWLQJ 7KLVDQVZHUFKRLFHLVQߞWZURQJMXVWEHFDXVHORRNLQJDOLNHDQGKDYLQJVLPLODUKDQGZULWLQJDUHQߞWDFWXDOO\ HQRXJKWRJXDUDQWHHDFORVHUHODWLRQVKLSZLWKVRPHRQHLQUHDOOLIH,QRWKHUZRUGV\RXFDQߞWMXVWUHDGWKH WH[WDQGWKHQWKLQNWR\RXUVHOIߡ:HOOSHUVRQDOO\,GRQߞWWKLQNWKDWߞVHQRXJKWRFUHDWHDFORVHUHODWLRQVKLS EHWZHHQWZRSHRSOHLQUHDOOLIHVR ' PXVWEHZURQJߢ 7KLVDQVZHUFKRLFHLV21/<ZURQJEHFDXVHWKHWH[WLWVHOIGRHVQߞWVSHFLILFDOO\VD\WKDWKDYLQJWKHVH WKLQJVLQFRPPRQLVVXIILFLHQWWROHDGWRDFORVHUHODWLRQVKLS 7KLVLVDYHU\LPSRUWDQWGLVWLQFWLRQ ,QRWKHUZRUGV\RXDUHQߞWH[SHFWHGWRORRNDWZKDW)UDQDQG/LQGD5RVHKDYHLQFRPPRQDQGWKHQGHFLGH ZKHWKHUWKDWߞVHQRXJKWRJXDUDQWHHDFORVHUHODWLRQVKLSLQ\RXURSLQLRQ:KHQ\RXHYDOXDWHWKLVDQVZHU FKRLFHRQWKH$&7\RXߞUHRQO\VXSSRVHGWRORRNIRUWZRWKLQJV wZKHWKHUWKHWH[WGHVFULEHVWKHWZRZRPHQDVKDYLQJWKLQJVLQFRPPRQDQG wZKHWKHUWKHWH[WDOVRWHOOV\RXWKDWKDYLQJWKRVHWKLQJVLQFRPPRQPHDQVLWZRQߞWEHGLIILFXOWIRUWKHP WRJHWFORVH <RXPXVWQRWIDOOLQWRWKHKDELWRIPDNLQJ\RXURZQMXGJPHQWFDOOVDERXWZKHWKHUDQDQVZHUFKRLFHLV UHDVRQDEOHRUXQUHDVRQDEOH<RXDOZD\VKDYHWRORRNDWZKDWWKHWH[WVD\V,IWKHWH[WFRQWUDGLFWVWKH DQVZHUFKRLFHRUGRHVQߞWDGGUHVVZKDWHYHUWKHDQVZHUFKRLFHVD\VWKHQWKHDQVZHUFKRLFHLVZURQJ ZKHWKHULWPDNHVVHQVHWR\RXRUQRW 5HPHPEHUDOOWKDWPDWWHUVLVH[DFWO\ZKDWߞVVWDWHGLQWKHWH[W6RLI\RXUHDGWKHWH[WDERXW)UDQDQG/LQGD 5RVHDQG\RXUHDGWKLVTXHVWLRQDQG\RXUHDGWKHDQVZHUFKRLFHV\RXFDQRQO\FRQFOXGHWKDWFKRLFH $ LVDEVROXWHO\WKHFRUUHFWDQVZHUEHFDXVHLWߞVGLUHFWO\UHVWDWHGLQWKHWH[WFKRLFHV % & DQG ' DUH DEVROXWHO\ZURQJEHFDXVHWKH\GLIIHUIURPWKHWH[W <RX0867LQWHQWLRQDOO\GHYHORSWKLVEODFNDQGZKLWHPLQGVHWDERXW$&75HDGLQJߚDQGDERXWWKHUHVWRI WKH$&7ߚLI\RXZDQWWRGR\RXUEHVWRQWKHWHVW $&75HDGLQJ$QVZHU&KRLFH3DWWHUQV /HWߞVFRQVLGHUVRPHRIWKHGLIIHUHQWDQVZHUFKRLFHSDWWHUQVRQ$&75HDGLQJ $&75HDGLQJ$QVZHU&KRLFH3DWWHUQ5HDVRQDEOH$VVXPSWLRQ 7KLVLVRQHRIWKHPRVWFRPPRQDQGPRVWGDQJHURXVZURQJDQVZHUFKRLFHW\SHV%DVLFDOO\WKLVW\SHRI ZURQJDQVZHUZLOOPDNHDVWDWHPHQWDERXWVRPHWKLQJUHODWHGWRWKHWH[WWKDWVRXQGVUHDVRQDEOHEXWLVQߞW DFWXDOO\PHQWLRQHGDQ\ZKHUHLQWKHWH[W $UHDOOLIHH[DPSOHRIWKLVW\SHRIZURQJDQVZHUFKRLFHLVFKRLFH % IURPWKHTXHVWLRQZHMXVWORRNHGDW QXPEHURQSDJHRIWKH5HG%RRN ,WPDNHVDVWDWHPHQWDERXWDQDGRSWHGGDXJKWHUDQGDELRORJLFDO PRWKHUWKDWPLJKWEHFRPSOHWHO\UHDVRQDEOHEXWLVQߞWVXSSRUWHGE\WKHWH[W 7KLVLVDQDVVXPSWLRQQRWDGLUHFWVWDWHPHQWIURPWKHWHVWVRLWߞVZURQJߚLWGRHVQߞWPDWWHUZKHWKHUZH PLJKWWKLQNWKHDVVXPSWLRQFDQEHGHIHQGHG 6RUHPHPEHUDQDQVZHUFKRLFHWKDWPDNHVDQDVVXPSWLRQWKDWLVQߞ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ߡ)UDQߞVGUHDPVRIDSHUIHFWGDXJKWHUߢJHWWLQJLQ WKHZD\RIWKHLUUHODWLRQVKLS7KLVLGHDZDVPHQWLRQHGLQWKHWH[WLQOLQHVߙEXWLWZDV)UDQߞV PRWKHUQRW)UDQZKRPHQWLRQHGLWߚDQGVKHPHQWLRQHGLWDVDVXJJHVWLRQRIWKHZD\/LQGD5RVHPLJKW IHHODERXW)UDQQRWWKHZD\)UDQPLJKWIHHODERXW/LQGD5RVH 6RWKHLGHDRIKDYLQJߡGUHDPVRIDSHUIHFWߢORQJORVWUHODWLYHLVPHQWLRQHGEXWQRWLQWKHZD\WKHTXHVWLRQ GHVFULEHV 6WXGHQWVPLJKWFKRRVHWKLVW\SHRIZURQJDQVZHUHLWKHUEHFDXVHWKH\ߞUHUHDGLQJWRRFDUHOHVVO\DQGWKH\ GRQߞWWDNHWKHWLPHWRUHDOL]HWKHLUPLVWDNHRUEHFDXVHWKH\DUHQߞWVXUHZKDWߞVJRLQJRQLQWKHTXHVWLRQEXW WKH\YDJXHO\UHPHPEHUVRPHWKLQJOLNHWKLVIURPWKHWH[WVRWKH\JRZLWKLW 5HPHPEHULI\RXVHHDFRQFHSWIURPWKHWH[WPHQWLRQHGLQDQDQVZHUFKRLFHPDNHVXUHWKDWWKHDQVZHU FKRLFHGHVFULEHVWKHFRQFHSWFRUUHFWO\LQDZD\WKDWߞVFRQVLVWHQWZLWKWKHZD\LWDSSHDUVLQWKHWH[W'RQߞW JHWVORSS\ $&75HDGLQJ$QVZHU&KRLFH3DWWHUQ([DFW2SSRVLWH 7KLVLVDQLQWHUHVWLQJW\SHRIZURQJDQVZHUFKRLFHWKDWFRPHVXSDORW<RXFDQSUREDEO\JXHVVKRZLW ZRUNV%DVLFDOO\WKH$&7ZLOOMXVWVWLFNLQDQDQVZHUFKRLFHWKDWߞVH[DFWO\WKHRSSRVLWHRIZKDWߞVVWDWHG LQWKHWH[W $UHDOOLIHH[DPSOHRIWKLVW\SHRIZURQJDQVZHUFKRLFHLV + IURPTXHVWLRQRQSDJHRIWKH5HG %RRN7KHTXHVWLRQDVNVZKDWWKHPDLQSRLQWRIWKHILUVWSDUDJUDSKLV,QWKDWSDUDJUDSK)UDQWDONVDERXW KRZVKHDOZD\VNQHZKHUGDXJKWHUZRXOGJHWLQFRQWDFWZLWKKHUDJDLQ,WHYHQVD\VLQOLQHVߡ,ZDV QRWVXUSULVHGZKHQ,ZDONHGGRZQWKHJUDYHOGULYHDQGIRXQGWKHIOLPV\HQYHORSH>IURPKHU GDXJKWHU@ߢ ,QVSLWHRIWKHSKUDVHߡ,ZDVQRWVXUSULVHGߢLQOLQH LQUHIHUHQFHWRJHWWLQJWKHOHWWHU FKRLFH + VD\V WKDWߡ)UDQILQGVWKHDUULYDORIDOHWWHUIURP/LQGD5RVHVXUSULVLQJߢ :K\ZRXOGWKH$&7RIIHUDZURQJDQVZHUFKRLFHWKDWߞVVXFKDQREYLRXVFRQWUDGLFWLRQRIWKHSDVVDJH" 7KHWHVWLVSUREDEO\KRSLQJWKDW\RXߞOOUHDGFDUHOHVVO\DQGRYHUORRNWKHZRUGߡQRWߢLQOLQHPLVUHDGLQJ WKHWH[WDVߡ,ZDVVXUSULVHGߢLQVWHDGRIߡ,ZDVQRWVXUSULVHGߢ 6HHZKDWDQHDV\PLVWDNHWKDWZRXOGEH"7KLVLVZK\ZHDOZD\VQHHGWRUHPHPEHUWKDWWKH$&7GRHVLQ IDFWRIIHUXVLQFRUUHFWDQVZHUFKRLFHVWKDWGLUHFWO\DQGREYLRXVO\FRQWUDGLFWWKHWH[W%HRQWKHORRNRXW $&75HDGLQJ$QVZHU&KRLFH3DWWHUQ&RPSOHWHO\,UUHOHYDQW <RXߞOODOVRIUHTXHQWO\VHHZURQJDQVZHUFKRLFHVWKDWDUHFRPSOHWHO\LUUHOHYDQWߚMXVWNLQGRIUDQGRP WKRXJKWVWKDWJHWVWXFNLQZLWKWKHRWKHUDQVZHUFKRLFHV $UHDOOLIHH[DPSOHRIWKLVNLQGRIZURQJDQVZHUFKRLFHLVFKRLFH ' IURPTXHVWLRQRQSDJHRIWKH 5HG%RRN7KHTXHVWLRQDVNVDERXWDUHDVRQDEOHFRQFOXVLRQWKDWFDQEHGUDZQIURPWKHOHWWHUDQGWKH SLFWXUHWKDW/LQGD5RVHVHQWWR)UDQ$OWKRXJKWKHRWKHUFKRLFHVKDYHDWOHDVWVRPHFRQQHFWLRQWR VRPHWKLQJLQWKHWH[WFKRLFH ' VD\VWKDW/LQGD5RVHߡFDUHVOLWWOHDERXWKRZVKHRUKHUKRXVHORRNVߢ 7KHUHߞVQRPHQWLRQDQ\ZKHUHLQWKHWH[WRIDQ\RQHEHLQJFRQFHUQHGRUXQFRQFHUQHGDERXWKHU DSSHDUDQFHRUWKHDSSHDUDQFHRIKHUKRPHZKLFKPDNHVWKLVDQVZHUFKRLFHFRPSOHWHO\LUUHOHYDQWWRWKH SDVVDJH /HWߞVWKLQNDERXWWKLVRQH:K\ZRXOGWKH$&7LQFOXGHFRPSOHWHO\LUUHOHYDQWDQVZHUFKRLFHV"3UREDEO\ EHFDXVHWKHWHVWPDNHUVNQRZWKDWORWVRIWHVWWDNHUVZLOOUHDGWKHSDVVDJHVXEMHFWLYHO\DQGWU\WRJLYH FUHGLWWRDQ\LQWHUSUHWDWLRQWKH\HQFRXQWHUMXVWOLNHWKH\ߞUHWDXJKWWRGRLQ(QJOLVKFODVV$QXQWUDLQHGWHVW WDNHUPLJKWUHDGFKRLFH ' DQGWKLQNߡ:RZ,GRQߞWHYHQUHPHPEHUWKHSDVVDJHPHQWLRQLQJ/LQGDURVH FDULQJDERXWKHUDSSHDUDQFHRUKHUKRPHߞVDSSHDUDQFHEXW,JXHVVWKDWPDNHVVHQVHߚ,GRQߞWVHHDQ\WKLQJ WRFRQWUDGLFWLWߢ2UDQXQWUDLQHGWHVWWDNHUPLJKWDOVRWKLQNߡ:RZߚ,PXVWKDYHPLVVHGDZKROH SDUDJUDSK,GLGQߞWVHHDQ\WKLQJDERXWWKLVZKHQ,UHDGWKHSDVVDJHߢ7KHQWKDWSHUVRQPLJKWJR IUDQWLFDOO\VHDUFKLQJWKURXJKWKHWH[WIRUVRPHWKLQJWKDWLVQߞWWKHUH 2IFRXUVHZHNQRZEHWWHU,WߞVQRWHQRXJKIRUWKHWH[WQRWWRFRQWUDGLFWDQDQVZHUFKRLFHWKHWH[WPXVW VSHFLILFDOO\VD\WKDWWKHDQVZHUFKRLFHLVFRUUHFW%XWDORWRISHRSOHZKRWDNHWKH$&7GRQߞWNQRZWKDW DQGPDQ\SHRSOHZLOOFKRRVHDQLUUHOHYDQWDQVZHUFKRLFHEHFDXVHLWIHHOVߡVDIHߢ'RQߞWGRWKDW +RZ7R5HDG3DVVDJHV2Q7KH$&75HDGLQJ6HFWLRQ $VDSURIHVVLRQDO$&7WXWRU,JHWDVNHGDORWRITXHVWLRQVDERXW$&7VWUDWHJ\DV\RXPLJKWLPDJLQH2QH RIWKHPRVWFRPPRQLVWKHTXHVWLRQRIKRZWRUHDG$&75HDGLQJSDVVDJHV$QRWKHUSRSXODUTXHVWLRQLV KRZWRWDNHQRWHVRQWKHSDVVDJHV /HWߞVWDONDERXWWKRVHWKLQJV0\DQVZHUVDUHSUHWW\VLPSOHUHDOO\ <RXFDQUHDGWKHSDVVDJHLQDQ\ZD\\RXZDQWDVORQJDVLWOHDYHV\RXHQRXJKWLPHWRILQLVKWKH VHFWLRQDQGPDUNDQVZHUVZLWKFHUWDLQW\<RXFDQHYHQVNLSUHDGLQJWKHSDVVDJHLI\RXSUHIHUDQG WKHQMXVWUHIHUEDFNWRSRUWLRQVRIWKHWH[WRQDTXHVWLRQE\TXHVWLRQEDVLV :HߞOOGLVFXVVWKLVPRUH EHORZ <RXVKRXOGQߞWWDNHQRWHVRQWKHSDVVDJH /LNHPRVWJRRG$&7DGYLFHWKRVHWZRWDFWLFVFRQWUDGLFWPRVWRIZKDW\RXPD\KDYHKHDUGIURPWHDFKHUV WXWRUVDQGSUHSERRNVVROHWߞVH[SORUHWKHPDOLWWOH ,I\RXKDYHQߞWDOUHDG\UHDGP\SUHYLRXVUHPDUNVRQ ZKDWVHSDUDWHVULJKWDQVZHUVIURPZURQJDQVZHUVRQ$&75HDGLQJTXHVWLRQV,ߞ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ߞVOLWHUDOO\QREHQHILWZKDWVRHYHULQWU\LQJWRJHWDQRYHUDOOLPSUHVVLRQRIWKH SDVVDJHEHFDXVHWKHUHZLOOQHYHUEHDUHDO$&7TXHVWLRQWKDWUHTXLUHVXVWRGRWKDWߚHYHQZKHQD TXHVWLRQVHHPVWRDVNDERXWEURDGHUFRQFHSWVRUODUJHSRUWLRQVRIWKHSDVVDJHWKHUHZLOODOZD\VEH FHUWDLQVSHFLILFSKUDVHVWKDWVXSSRUWWKHFRUUHFWDQVZHU 7REHVXUHWKHUHDUHVRPHVWXGHQWVZKRWU\WRGUDZLQIHUHQFHVIURPWKHWH[WDQGVWLOOKDYHVRPHVXFFHVV EXWLWߞVQRWWKHPRVWHIILFLHQWRUUHOLDEOHDSSURDFKDQGLWߞVQHYHUQHFHVVDU\:HFDQDOZD\VILQGWKH DQVZHUIRUHYHU\TXHVWLRQVSHOOHGRXWVRPHZKHUHLQWKHWH[WHYHQZKHQWKHTXHVWLRQDVNVDERXWWKHPDLQ LGHDRIDSDUDJUDSKRUSDVVDJH )RUWKLVUHDVRQLWGRHVQߞ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ߞWUHDG WRRVORZO\WRILQLVKWKHVHFWLRQEHIRUHWLPHLVFDOOHG2QHQRWHWKRXJKߚLI\RXUHDGWKHSDVVDJHILUVW GRQߞWZRUU\DERXWWU\LQJWRXQGHUVWDQGLWDVDQRUJDQLFZKROH'HILQLWHO\GRQߞWWDNHQRWHVRQLWIRU UHDVRQVZHߞOOJHWLQWRLQDPRPHQW-XVWJLYHLWDWKRURXJKRQFHRYHU<RXߞUHJRLQJWRKDYHWRFRPHEDFN WRVSHFLILFSDUWVRILWODWHUWRYHULI\ZKLFKDQVZHUFKRLFHVDUHFRUUHFWDQ\ZD\VRMXVWUHDGLWRQFHDQG PRYHRQWRWKHTXHVWLRQV 7KHVHFRQGPRVWSRSXODUDSSURDFKLVWRVNLSUHDGLQJWKHSDVVDJHDQGMXVWPRYHVWUDLJKWWRWKHTXHVWLRQV 7KHQ\RXVWDUWZLWKWKHTXHVWLRQVWKDWKDYHVSHFLILFOLQHFLWDWLRQV)RUHDFKFLWDWLRQTXHVWLRQ\RXJREDFN WRWKHUHOHYDQWSRUWLRQRIWKHWH[WUHDGWKDWSRUWLRQDQGWKHQFRQVLGHUWKHDQVZHUFKRLFHV:KHQ\RXߞYH ILQLVKHGDOOWKHFLWDWLRQTXHVWLRQV\RXߞOOJHQHUDOO\KDYHDJRRGLGHDRIKRZWKHSDVVDJHLVVWUXFWXUHG 7KHQ\RXPRYHRQWRWKHTXHVWLRQVZLWKQRFLWDWLRQV0DQ\RIWKRVHTXHVWLRQVZLOOPHQWLRQNH\FRQFHSWV WKDW\RXߞOOUHFDOOIURPWKHFLWDWLRQTXHVWLRQVVR\RXߞOONQRZZKHUHWRJREDFNLQWKHSDVVDJHDQGORFDWH WKRVHSRUWLRQVRIWKHWH[WDJDLQ:KHQDTXHVWLRQKDVQRFLWDWLRQDQGDOVRGRHVQߞWUHIHUWRVRPHWKLQJWKDW \RXߞYHDOUHDG\UHDG\RXFDQVLPSO\VNLPWKHSRUWLRQVRIWKHWH[WWKDW\RXKDYHQߞWUHDG\HWWRILQGWKH UHOHYDQWNH\WHUPVDQGSURFHHGDFFRUGLQJO\ 7KDWEULQJVXVWRWKHWKLUGW\SHRIDSSURDFKZKLFKVLPSO\LQYROYHVOLJKWO\VNLPPLQJWKHSDVVDJHEHIRUH DSSURDFKLQJWKHTXHVWLRQVLQRUGHUWRFRQVWUXFWDURXJKPHQWDOPDSRIZKHUHGLIIHUHQWWHUPVDQGFRQFHSWV DSSHDULQWKHSDVVDJH,ZDQWWRVWUHVVWKDWVR,ߞOOVD\LWDJDLQLQWKLVW\SHRIVNLPPLQJ\RXߞUHMXVW PRYLQJ\RXUH\HVWKURXJKWKHWH[WTXLFNO\127WU\LQJWRXQGHUVWDQGWKHWH[WEXWWU\LQJWRJHWDURXJKLGHD RIZKHUHYDULRXVFRQFHSWVDSSHDULQWKHWH[WVR\RXFDQXVH\RXUߡURDGPDSߢODWHU7KLVZD\LIDTXHVWLRQ ODFNVDFLWDWLRQ\RXFDQORRNDWWKHFRQFHSWVLQWKHTXHVWLRQDQGLQWKHDQVZHUFKRLFHVDQGUHFDOOWKRVH FRQFHSWVIURP\RXUVNLPPLQJZKLFKDOORZV\RXWR]HURLQRQWKHUHOHYDQWSDUWRIWKHWH[WDQGWKHQILQG \RXUDQVZHUV2IFRXUVH\RXFDQDOZD\VUHVNLPLI\RXQHHGWR $JDLQLWߞVLPSRUWDQWWREHDZDUHRIWKHVHGLIIHUHQWDSSURDFKHVDQGWREHUHDG\DQGZLOOLQJWRSOD\ DURXQGZLWKWKHPGXULQJ\RXUSUDFWLFHVHVVLRQVVR\RXFDQILJXUHRXWZKDWZRUNVEHVWIRU\RXSHUVRQDOO\ ,IP\H[SHULHQFHWROGPHWKDWRQHDSSURDFKZDVEHVWIRUHYHU\ERG\,ZRXOGUHFRPPHQGWKDWDSSURDFKߚ LQVWHDGP\H[SHULHQFHKDVUHSHDWHGO\VKRZQPHWKDWGLIIHUHQWVWXGHQWVZLOOSUHIHUGLIIHUHQWUHDGLQJ DSSURDFKHVEDVHGRQWKHLUSHUVRQDOLWLHVDQGVNLOOV <RXPD\EHZRQGHULQJZK\,ߞPRSSRVHGWRWKHLGHDRIWDNLQJQRWHVRQWKHWH[WDVZHOO7KHUHDVRQLV VLPSOHDFWXDOO\WDNLQJQRWHVLQYROYHVLQWHUSUHWLQJWKHWH[WDQGLQWHUSUHWLQJWKHWH[WLVQߞWKHOSIXORQWKH $&7$VZHNHHSGLVFXVVLQJWKHFRUUHFWDQVZHUWRHYHU\VLQJOHTXHVWLRQLVVSHOOHGRXWVRPHZKHUHRQWKH SDJHVRWKHUHߞVQRQHHGIRU\RXWRLQWHUSUHWZKDW\RXߞUHUHDGLQJ,IDOO\RXߞUHZRUULHGDERXWLVH[DFWO\ ZKDWWKHWH[WVD\VZKDWߞVWKHSRLQWRIWDNLQJDQRWH",WߞOOHLWKHUEHDQLQWHUSUHWDWLRQRIWKHWH[WZKLFKZH GRQߞWZDQWRUHOVHLWZLOOH[DFWO\UHVWDWHWKHWH[WZKLFKLVSRLQWOHVVEHFDXVHWKHQ\RXߞUHMXVWFRS\LQJ GRZQZKDWWKHWH[WDOUHDG\VD\V 7KH*HQHUDO3URFHVV)RU$QVZHULQJ$&75HDGLQJ4XHVWLRQV 0RVW$&75HDGLQJTXHVWLRQVFDQEHDQVZHUHGZLWKDIDLUO\VLPSOHSURFHVVZKLFKZHߞOOGLVFXVVQRZ /DWHU,ߞOOVKRZ\RXKRZWRDQVZHURWKHUW\SHVRI$&75HDGLQJTXHVWLRQVWKDWPLJKWVHHPDELWKDUGHUߚ DOWKRXJKWKHSURFHVVZHߞOOXVHIRUDOO$&75HDGLQJTXHVWLRQVLVEDVLFDOO\WKHVDPHZLWKDIHZYHU\ PLQRUYHU\RFFDVLRQDOPRGLILFDWLRQV )RUULJKWQRZOHWߞVDVVXPHWKDWZHߞUHWDONLQJDERXWTXHVWLRQVZLWKVSHFLILFOLQHFLWDWLRQV 5HDGRUVNLPWKHSDVVDJHLI\RXZDQWWR 7KHUHDUHDORWRIZD\VWRDSSURDFKUHDGLQJWKHDFWXDOSDVVDJHDVZHGLVFXVVHGHDUOLHU3LFNZKLFKHYHU DSSURDFKZRUNVIRU\RXZKHWKHULWߞVRQHRIWKHRQHV,H[SODLQHGRU\RXURZQDSSURDFK 5HDGWKHTXHVWLRQQRWLQJWKHFLWDWLRQ7KHQUHDGWKHFLWDWLRQ )LQGWKHFLWDWLRQLQWKHWH[WWKDWWKHTXHVWLRQLVUHIHUULQJWR5HDGLW,IWKHFLWHGOLQHSLFNVXSLQWKHPLGGOH RIDVHQWHQFHJREDFNXSWRWKHEHJLQQLQJRIWKDWVHQWHQFHDQGVWDUWWKHUH ,WPD\DOVRKHOSWRUHDGWKH VHQWHQFHEHIRUHRUDIWHUWKHVHQWHQFHVLQWKHFLWDWLRQEXWWKLVRIWHQLVQߞWQHFHVVDU\ )LQGWKUHHZURQJDQVZHUV ,WߞVJHQHUDOO\HDVLHVWWRILQGZURQJDQVZHUVILUVW)RURQHWKLQJWKHUHDUHWKUHHRIWKHPLQHYHU\TXHVWLRQ DVRSSRVHGWRMXVWWKHRQHULJKWDQVZHU)RUDQRWKHULWߞVXVXDOO\HDVLHUWRLGHQWLI\ZD\VWKDWDQVZHU FKRLFHVGLIIHUIURPWKHWH[WWKDQLWLVWRIHHOFRQILGHQWWKDWDFKRLFHVD\VH[DFWO\WKHVDPHWKLQJDVWKHWH[W ([SHFWWKDWPRVW DQGYHU\SRVVLEO\DOO RIWKHZURQJDQVZHUV\RXILQGRQDQ\RQHTXHVWLRQZLOOILWLQWR RQHRIWKHW\SHVZHWDONHGDERXWHDUOLHU ,I\RXHQGXSQRWEHLQJDEOHWRHOLPLQDWHFKRLFHVWKHQ\RXߞUHPDNLQJVRPHNLQGRIPLVWDNH,WPLJKWEH WKDW\RXߞYHPLVUHDGWKHWH[WRUWKHTXHVWLRQRUGLGQߞWUHDGHQRXJKRIWKHVXUURXQGLQJWH[W,WPLJKWEHWKDW \RXUXQGHUVWDQGLQJRIRQHRIWKHZRUGV\RXUHDGLVVOLJKWO\ RUYHU\ LQDFFXUDWH,WߞVRIWHQWKHFDVHWKDW SHRSOHZKRDUHOHIWZLWKRUDQVZHUFKRLFHVWKDWVHHPWRUHVWDWHWKHWH[WSUREDEO\DUHQߞWEHLQJSLFN\ HQRXJKDERXWVWLFNLQJWRH[DFWO\ZKDWHDFKZRUGPHDQVWRHQVXUHDQDFFXUDWHUHVWDWHPHQW ,I\RXHQGXSHOLPLQDWLQJDOODQVZHUFKRLFHVIURPFRQVLGHUDWLRQWKHQDJDLQ\RXߞYHGHILQLWHO\PDGH VRPHNLQGRIPLVWDNHEXWLWPLJKWEHDGLIIHUHQWNLQGRIPLVWDNH<RXPD\KDYHEHHQUHIHUULQJWRWKH ZURQJSDUWRIWKHSDVVDJHIRULQVWDQFH<RXPLJKWDOVRKDYHPLVUHDGRUPLVXQGHUVWRRGRQHRUPRUH ZRUGV &RQILUPWKHUHPDLQLQJDQVZHUFKRLFH 6HHLIWKHUHPDLQLQJDQVZHUFKRLFHILWVWKHULJKWDQVZHUSDWWHUQ LQRWKHUZRUGVVHHLILWUHVWDWHVFRQFHSWV DQGUHODWLRQVKLSVIURPWKHUHOHYDQWSRUWLRQRIWKHWH[WZLWKRXWFRQWUDGLFWLQJWKHWH[W ,ILWGRHVWKDWߞV JUHDW<RXߞYHIRXQGWKHULJKWDQVZHU ,I\RXVWLOOFDQߞWLGHQWLI\RQHFKRLFHWKDWFOHDUO\UHVWDWHVWKHSDVVDJHDQGWKUHHFKRLFHVWKDWGRQߞWUHVWDWH WKHSDVVDJH\RXVKRXOGPRYHRQDQGFRPHEDFNWRWKLVTXHVWLRQODWHU,I\RXFRPHEDFNODWHUDQGVWLOO FDQߞWFRPHXSZLWKDQDQVZHUDQGRULIWLPHLVUXQQLQJRXW\RXVKRXOGMXVWPDUN\RXUEHVWJXHVVVLQFH WKHUHߞVQRSHQDOW\IRUZURQJDQVZHUVRQWKH$&7ߚEXWUHPHPEHUWKDW\RXߞUHRQO\JXHVVLQJEHFDXVH\RX ZHUHXQDEOHWRH[HFXWHVRPHSDUWRIWKHSURSHUDSSURDFKWR$&75HDGLQJTXHVWLRQVQRWEHFDXVHWKLV TXHVWLRQZDVMXVWGLIIHUHQWVRPHKRZ,WߞVYHU\LPSRUWDQWWKDW\RXPDLQWDLQ\RXUDZDUHQHVVWKDWHYHU\$&7 5HDGLQJTXHVWLRQPXVWIROORZWKHVDPHUXOHVHYHQLI\RXHQGXSKDYLQJWRJXHVVRQVRPHRIWKHP 6HH ߡ7KH*HQHUDO*DPH3ODQ)RU$WWDFNLQJ$6HFWLRQ2I7KH$&72Q7HVW'D\ߢHDUOLHULQWKLV%ODFN%RRN IRUPRUHRQWKLV $QGWKDWߞVLWEHOLHYHLWRUQRWߚWKHSURFHVVIRU$&75HDGLQJTXHVWLRQVW\SLFDOO\LVQߞWDVFRPSOH[DVWKH SURFHVVHVIRURWKHUTXHVWLRQW\SHVFDQEH7DNHDORRNDWWKHZDONWKURXJKVWKDWEHJLQLQDIHZSDJHVWRVHH KRZWKLVSURFHVVFDQEHXVHGDJDLQVWUHDO$&75HDGLQJTXHVWLRQVIURPWKH5HG%RRN $V,QRWHGDERYHWKHVLPSOHSURFHVVZHMXVWZHQWWKURXJKZRUNVRQDOOOLQHFLWDWLRQTXHVWLRQVH[DFWO\DV GHVFULEHG,QDEURDGHUVHQVHLWDOVRZRUNVRQDOORWKHU$&75HDGLQJTXHVWLRQV%XWOHWߞVORRNDWVRPH VSHFLILFVPDOODGMXVWPHQWVZHPLJKWPDNHLIWKHTXHVWLRQLVQߞWH[DFWO\DFODVVLFOLQHFLWDWLRQTXHVWLRQ :KDW$ERXW3DUDJUDSK&LWDWLRQV" 6RPHWLPHVDTXHVWLRQDVNVDERXWDZKROHSDUDJUDSK7KHVHTXHVWLRQVZRUNWKHVDPHZD\DVOLQHFLWDWLRQ TXHVWLRQVH[FHSW\RXVKRXOGJRDKHDGDQGUHDGWKHZKROHSDUDJUDSK,IDTXHVWLRQDVNVDERXWWKHߡPDLQ SRLQWߢRIDSDUDJUDSK\RXZDQWWRFKRRVHWKHDQVZHUWKDWGHVFULEHVZKLFKHYHULGHDFRPHVXSPRVWRIWHQ LQWKHSDUDJUDSK :KDW$ERXW4XHVWLRQV:LWKRXW&LWDWLRQV" :KHQDTXHVWLRQKDVQRFLWDWLRQYHU\OLWWOHDFWXDOO\FKDQJHVLQRXUDSSURDFKWRLW7KHDQVZHUWRWKH TXHVWLRQLVVWLOOJRLQJWREHVSHOOHGRXWVRPHZKHUHLQWKHSDVVDJHEXWQRZLWPLJKWEHDQ\ZKHUHLQWKH SDVVDJHLQVWHDGRIEHLQJQHDUDVSHFLILFOLQHPHQWLRQHGLQWKHTXHVWLRQ /HWPHVD\WKDWDJDLQHYHQWKRXJKWKHUHߞVQRVSHFLILFFLWDWLRQWKHDQVZHULVVWLOOJRLQJWREHVSHOOHGRXW VRPHZKHUH<RXVKRXOG127WU\WRDQVZHUDTXHVWLRQOLNHWKLVE\PDNLQJDEURDGLQIHUHQFHIURPWKH RYHUDOOSDVVDJHWKDWLVQߞWGLUHFWO\VXSSRUWHGE\DFWXDOSKUDVHVIURPWKHWH[W 7KHRQO\FKDOOHQJLQJWKLQJWKDWVHSDUDWHVDTXHVWLRQOLNHWKLVIURPDTXHVWLRQZLWKDFLWDWLRQLVWKDWLWFDQ VRPHWLPHVEHKDUGHUWRORFDWHWKHSDUWRIWKHWH[WZLWKWKHDQVZHUߚEXWWKHUHLVVWLOODSDUWRIWKHWH[WWKDW VSHOOVRXWWKHDQVZHU ,ߞGUHFRPPHQGVDYLQJDQ\JHQHUDOTXHVWLRQVIRUODVW,QRWKHUZRUGV,ZRXOGVNLSDURXQGDQGGRDOOWKH FLWDWLRQTXHVWLRQVILUVWWKHQFRPHEDFNDQGSLFNXSWKHPRUHJHQHUDOTXHVWLRQV,GRWKLVEHFDXVH DQVZHULQJWKHFLWDWLRQTXHVWLRQVZLOOW\SLFDOO\FDXVHPHWRJREDFNWKURXJKDORWRIWKHWH[WDQG,ߞOORIWHQ ILQGWKDWWKHDQVZHUVWRJHQHUDOQRQFLWDWLRQTXHVWLRQVDUHULJKWWKHUHLQWKHFLWDWLRQVIRURWKHUTXHVWLRQV 7KDWZD\,FDQVDYHVRPHWLPHDQGHQHUJ\E\GRLQJWKHFLWDWLRQTXHVWLRQVILUVW (YHQLIDQVZHULQJWKHFLWDWLRQTXHVWLRQVGRHVQߞWDFWXDOO\FDXVHPHWRUHDGWKHSDUWRIWKHWH[WWKDWFRQWDLQV WKHDQVZHUWRDJHQHUDOTXHVWLRQ,VWLOOKDYHQߞWORVWDQ\WLPHߚ,ߞYHMXVWIDLOHGWRVDYHVRPHH[WUDWLPH WKDWߞVDOO3OXVLWߞVVWLOOKHOSIXOWRNQRZWKDWWKHDQVZHUWRWKHJHQHUDOTXHVWLRQLVQߞWLQWKHFLWDWLRQVIRUWKH RWKHUTXHVWLRQVEHFDXVH,NQRZ,GRQߞWQHHGWRUHUHDGRUVNLPWKRVHDUHDVRIWKHWH[WZKHQ,JREDFN WKURXJKWRWU\WRILQGWKHDQVZHUV 6RPHWLPHVWKHTXHVWLRQZLOOFRQWDLQDFLWDWLRQRIVRUWVHYHQLILWߞVQRWDOLQHFLWDWLRQRUDSDUDJUDSK FLWDWLRQ4XHVWLRQRQSDJHRI\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG(GLWLRQDVNVDERXW)UDQߞV IHHOLQJVߡZKHQVKHKDQGVKHUPRWKHUWKHOHWWHUIURP/LQGD5RVHߢ(YHQWKRXJKLWGRHVQߞWVD\ZKLFKOLQH WKLVKDSSHQVRQZHNQRZWKDWWKLVTXHVWLRQLVDVNLQJDERXWDFHUWDLQPRPHQWLQWKHWH[WDQGLIZHߞYH DOUHDG\DQVZHUHGVRPHRWKHUTXHVWLRQVDQGUHDGVRPHSLHFHVRIWKHSDVVDJHWKHQZHPLJKWEHDEOHWRXVH WKLVGHWDLOWRILQGWKHUHOHYDQWWH[WSUHWW\TXLFNO\ $JDLQWKHFULWLFDOWKLQJWRUHPHPEHUZLWKTXHVWLRQVWKDWODFNFLWDWLRQVLVWKDWWKHDQVZHULVDOZD\VFOHDUO\ VSHOOHGRXWLQEODFNDQGZKLWHVRPHZKHUHZLWKLQWKHSDVVDJHHYHQWKRXJKWKHTXHVWLRQODFNVDFLWDWLRQ 7KHUHLVOLWHUDOO\QHYHUDPRPHQWRQDUHDO$&7LQZKLFKWKHRQO\ZD\WRDQVZHUD5HDGLQJTXHVWLRQLVWR GUDZDJHQHUDOLQIHUHQFHIURPWKHRYHUDOOߡIHHOLQJߢRIWKHWH[W,IWKHUHZHUHDQ\TXHVWLRQVWKDWUHTXLUHG WKRVHNLQGVRILQIHUHQFHVWKHUHOLDELOLW\RIWKHWHVWZRXOGGLVDSSHDU :KDW$ERXW0DLQ,GHD4XHVWLRQV" (YHQWKRXJKTXHVWLRQVWKDWDVNDERXWWKHPDLQLGHDRIDSDUDJUDSKRUSDVVDJHGRQߞWSURYLGHVSHFLILFOLQH FLWDWLRQVZHߞOOVWLOOILQGWKDWWKHFRUUHFWDQVZHUUHVWDWHVVRPHWKLQJGLUHFWO\IURPWKHUHOHYDQWSDUWRIWKH WH[W,WߞVMXVWWKDWZHPLJKWKDYHDKDUGHUWLPHILQGLQJWKDWUHVWDWHPHQWVLQFHWKHSDUDJUDSKRUSDVVDJHWKDW ZHߞUHDVNHGDERXWPLJKWEHNLQGRIORQJ )RUWKDWUHDVRQ,ߞOORIWHQVDYHPDLQLGHDTXHVWLRQVXQWLO,ߞYHDQVZHUHGDOOWKHFLWDWLRQTXHVWLRQVIRUD SDVVDJHHVSHFLDOO\LIWKHPDLQLGHDTXHVWLRQLVDVNLQJDERXWDODUJHVWUHWFKRIWH[W 7KHUHߞVRQHRWKHUWKLQJZHQHHGWRNQRZDERXWPDLQLGHDTXHVWLRQVRQWKH$&7DQGLWߞVSUHWW\LPSRUWDQW VRSD\DWWHQWLRQRQWKHVHTXHVWLRQVZHߞOOVRPHWLPHVILQG7:2DQVZHUFKRLFHVWKDWUHIOHFWVRPHWKLQJLQ WKHWH[W :KHQWKDWKDSSHQVWKHFRUUHFWDQVZHUZLOOEHWKHRQHWKDWDSSHDUVPRUHIUHTXHQWO\ )RUDQH[DPSOHOHWߞVFKHFNRXWTXHVWLRQRQSDJHRIWKH5HG%RRN,WDVNVDERXWWKHPDLQLGHDRIWKH ILUVWSDUDJUDSKRIWKHWH[W:HVHHWKDWFKRLFHV ) DQG - ERWKLQFOXGHLGHDVWKDWDUHGLUHFWO\LQWKHWH[W ) LVUHIOHFWHGZKHQ)UDQFDOOV/LQGD5RVHDߡKRPLQJSLJHRQߢDQGDߡKXPDQERRPHUDQJߢZKR)UDQ ߡNQHZZRXOGPDNHD8WXUQߢDOORIZKLFKLQGLFDWHVWKDW)UDQH[SHFWHG/LQGD5RVHWRFRPHEDFNLQWRKHU OLIH)UDQDOVRVD\VVKHߡZDVQRWVXUSULVHGߢWRKHDUIURP/LQGD5RVHDOOLQWKHILUVWSDUDJUDSK - RQWKH RWKHUKDQGLVRQO\UHIOHFWHGLQWKHODVWOLQHRIWKHSDUDJUDSK ,QWKHVHVLWXDWLRQVZHNQRZWKH$&7UHZDUGVWKHDQVZHUFKRLFHWKDWDSSHDUVLQWKHWH[WPRUHIUHTXHQWO\ 7KDWPHDQV ) ZLOOEHWKHFRUUHFWDQVZHUEHFDXVHWKHLGHDRI)UDQNQRZLQJWKDW/LQGD5RVHZLOOFRQWDFW KHURQHZD\RUDQRWKHULVPHQWLRQHGPXOWLSOHWLPHVZKLOHWKHLGHDRIWKHWZRZRPHQKDYLQJVLPLODU KDQGZULWLQJLVRQO\PHQWLRQHGRQFH :KDW$ERXWߡ(;&(37ߢ4XHVWLRQV" 6RPHTXHVWLRQVWDNHWKHQRUPDOTXHVWLRQDQVZHULQJSURFHVVDQGWXUQLWRQLWVKHDGRIWHQE\XVLQJWKH ZRUGߡ(;&(37ߢRUߡ127ߢLQDOOFDSLWDOOHWWHUV6XFKDTXHVWLRQPLJKWVD\VRPHWKLQJOLNHߡDOORIWKH IROORZLQJDUHIRXQGLQWKHSDVVDJH(;&(37ߢ)RUDTXHVWLRQOLNHWKLVZHߞUHVWLOOJRLQJWRUHDGWKH UHOHYDQWSRUWLRQRIWKHWH[WFDUHIXOO\EXWQRZWKHFRUUHFWDQVZHULVJRLQJWREHWKHRQO\FKRLFHWKDWGRHV 127DSSHDULQWKHSDVVDJH ,WߞVDOZD\VLPSRUWDQWWRPDNHVXUH\RXUHDGDOOIRXUDQVZHUFKRLFHVIRUHYHU\TXHVWLRQ LWKHOSV\RXFDWFK PLVWDNHV ,WߞV(63(&,$//<LPSRUWDQWRQWKHVHߡ(;&(37ߢTXHVWLRQVEHFDXVHVWXGHQWVRIWHQ DFFLGHQWDOO\IRUJHWDERXWWKHZRUGߡ(;&(37ߢDQGMXVWFKRRVHWKHILUVWDQVZHUFKRLFHWKH\VHHWKDW DSSHDUVLQWKHWH[WߚDQGWKH\JHWWKHTXHVWLRQZURQJDVDUHVXOW,I\RXDFFLGHQWDOO\RYHUORRNWKHZRUG ߡ(;&(37ߢEXWVWLOOUHDGDOOIRXUDQVZHUFKRLFHV\RXߞOOKDYHDEHWWHUFKDQFHRIQRWLFLQJ\RXUPLVWDNH EHFDXVH\RXPLJKWQRWLFHWKDWPRUHWKDQRQHDQVZHUFKRLFHVHHPVWREHULJKW7KDWVKRXOGPDNH\RXUH HYDOXDWHWKHVLWXDWLRQ :KDW$ERXWߡ9RFDEXODU\,Q&RQWH[Wߢ4XHVWLRQV" 6RPHTXHVWLRQVDVN\RXKRZDZRUGLVXVHGLQWKHSDVVDJH7KH\RIWHQUHDGVRPHWKLQJOLNHWKLVߡ$VLWLV XVHGLQOLQHWKHZRUGߝVDGߞPHDQVߢ )RUWKHVHTXHVWLRQVMXVWOLNHIRUDOOWKHRWKHUVZHߞUHXOWLPDWHO\ORRNLQJIRUDQDQVZHUFKRLFHWKDWUHVWDWHV VRPHWKLQJIURPWKHSDVVDJHߚDQGQRWMXVWRQHWKDWUHVWDWHVWKHRULJLQDOZRUGLQWKHTXHVWLRQEHFDXVH VHYHUDORIWKHFKRLFHVZLOOSUREDEO\GRWKDWLQRQHVHQVHRUDQRWKHU,QVWHDGZHQHHGDZRUGWKDWUHVWDWHV DQLGHDIURPWKHVXUURXQGLQJWH[W,QWKHLPDJLQDU\TXHVWLRQDERYHLIWKHWH[WVDLGߡ7KHFUXPEOLQJROG ZDUHKRXVHZDVLQDVDGVWDWHE\WKHWLPHWKHLQVSHFWRUFORVHGLWIRUVDIHW\UHDVRQVߢWKHQWKHFRUUHFW DQVZHUZRXOGEHVRPHWKLQJOLNHߡZRUQRXWߢEHFDXVHߡZRUQRXWߢPHDQVWKHVDPHWKLQJDVߡFUXPEOLQJߢLQ WKLVFRQWH[WDQGWKHZDUHKRXVHWKDWߞVߡFUXPEOLQJߢLVDOVRGHVFULEHGDVߡVDGߢ<RXߞOOVHHH[DPSOHVRIWKLV FRQFHSWLQWKLV%ODFN%RRNߞVZDONWKURXJKVIRUWKLVVHFWLRQRIWKH$&7 :DONWKURXJKV7KH$&75HDGLQJ3URFHVV,Q$FWLRQ$JDLQVW5HDO4XHVWLRQV 7KHEHVWZD\WROHDUQWRXVHWKH$&75HDGLQJVWUDWHJLHVZHߞYHWDONHGDERXWLVWRVHHWKHPLQDFWLRQ DJDLQVWUHDO$&7SUDFWLFHTXHVWLRQV,UHDOO\FDQߞWVWUHVVHQRXJKKRZLPSRUWDQWLWLVIRU\RXWRJRWKURXJK WKHVHZDONWKURXJKVDQGOHDUQWKHSURFHVVILUVWKDQG ,QRUGHUWRGRWKDW\RXߞOOQHHGWRIROORZDORQJLQ\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG(GLWLRQ,I \RXVWLOOKDYHQߞWJRWWHQ\RXUKDQGVRQDFRS\RIWKDWERRNZHOOGRLW7KHERRNFRQWDLQVILYHUHDO$&7 SUDFWLFHWHVWVDQGUHDOSUDFWLFHWHVWVDUHDQHVVHQWLDOHOHPHQWRI\RXUWUDLQLQJ :HߞOOEHORRNLQJDWDVHOHFWLRQRIUHDOTXHVWLRQVIURPWKHSUDFWLFHWHVWVLQWKDWERRN7KHVHTXHVWLRQVZHUH VHOHFWHGIRURQHRUERWKRIWKHIROORZLQJUHDVRQV w7KH\ߞUHWKHTXHVWLRQV,ߞPPRVWRIWHQDVNHGDERXWZKHQ,ZRUNZLWKVWXGHQWVRQHRQRQH w7KH\ߞUHSDUWLFXODUO\HIIHFWLYHDWLOOXVWUDWLQJVRPHRIWKHFRQFHSWVZHWDONHGDERXWLQWKHWUDLQLQJ ,I\RXߞGOLNHWRVHHVRPHYLGHRGHPRQVWUDWLRQVRIWKHVHLGHDVJRWRZZZ$&7SUHS9LGHRVFRPIRUD VHOHFWLRQRIGHPRQVWUDWLRQYLGHRVWKDWDUHIUHHWRUHDGHUVRIWKLVERRN 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVDERXWWKHߡPDLQSRLQWߢRIWKHILUVWSDUDJUDSK$ORWRIVWXGHQWVVWUXJJOHZLWKWKHLGHDRI ILQGLQJWKHߡPDLQSRLQWߢRIDSDVVDJHRQWKH$&7EHFDXVHWKHSKUDVHߡPDLQSRLQWߢIHHOVOLNHLWߞVRSHQWR VRPHLQWHUSUHWDWLRQ%XWDVWUDLQHGWHVWWDNHUVZHNQRZWKDWDQ\FRUUHFWDQVZHUWRDߡPDLQSRLQWߢ TXHVWLRQRQWKH$&7PXVWGLUHFWO\UHVWDWHDSKUDVHIURPWKHWH[WLIPRUHWKDQRQHDQVZHUFKRLFHGRHVWKLV WKHQWKHFRUUHFWDQVZHUFKRLFHZLOOEHWKHRQHWKDWDSSHDUVPRVWIUHTXHQWO\LQWKHWH[W :LWKWKDWLQPLQGOHWߞVWDNHDORRNDWWKHDQVZHUFKRLFHVLQWKLVTXHVWLRQWRVHHZKLFKRQHLVFRUUHFW ) ORRNVOLNHWKHFRUUHFWDQVZHU7KHQDUUDWRULQWKHWH[WZKRLV)UDQVD\VUHSHDWHGO\WKDWVKHߡNQHZߢ WKDWDSDUWLFXODUSHUVRQZRXOGFRPHEDFNLQWRKHUOLIH OLQHVDQG DQGWKDWVKHߡZDVQRWVXUSULVHGߢWR UHFHLYHWKHOHWWHU OLQH 6KHGHVFULEHVWKLVSHUVRQDVDߡKRPLQJSLJHRQߢDQGDߡKXPDQERRPHUDQJߢ OLQHVDQG /DWHULQWKHSDVVDJHLQOLQHZHILQGRXWWKDWWKHSHUVRQZKRZURWHWKHOHWWHUDQGWKH SHUVRQUHIHUUHGWRDVߡVKHߢLQWKHILUVWSDUDJUDSKLV/LQGD5RVH5HPHPEHUWKDWWKH$&7VRPHWLPHV UHTXLUHVXVWRFRPELQHLQIRUPDWLRQIURPWZRGLIIHUHQWDUHDVRIWKHSDVVDJHVRLWFDQRIWHQEHKHOSIXOWR KDYHDJHQHUDODZDUHQHVVRIWKHFRQFHSWVWKDWDSSHDUWKURXJKRXWWKHHQWLUHWH[W 2IFRXUVHWKHFRUUHFW DQVZHUWRDQ$&75HDGLQJTXHVWLRQZLOODOZD\VUHIHUWRVRPHVSHFLILFFRPELQDWLRQRIZRUGVDQG SKUDVHVGLUHFWO\IURPWKHWH[W 6R ) ORRNVOLNHLWFRXOGEHWKHFRUUHFWDQVZHUFKRLFHDWILUVWEOXVKߚLWDSSHDUVLQWKHILUVWSDUDJUDSK DQGLWߞVPHQWLRQHGUHSHDWHGO\%XWDVWUDLQHGWHVWWDNHUVZHNQRZWKDWZHDOZD\VKDYHWRUHDGDOORIWKH DQVZHUFKRLFHVIRUHDFKTXHVWLRQWRPDNHVXUHZHKDYHQߞWPDGHDPLVWDNHVRPHZKHUH * ZLOOGHILQLWHO\EHWHPSWLQJWRVRPHWHVWWDNHUVZKRGRQߞWUHDGFDUHIXOO\EHFDXVHWKHSDUDJUDSKGRHV FRQWDLQWKHSKUDVHߡZLOGOLWWOHELUGߢ%XWLIZHUHDGFDUHIXOO\ZHVHHWKDWWKHSDUDJUDSKDFWXDOO\VD\VWKDW )UDQߞVPRWKHUߡDOZD\VWKRXJKWRI>/LQGD5RVH@DVVRPHZLOGOLWWOHELUG>HPSKDVLVPLQH@ߢ6RWKH SDUDJUDSKGRHVQߞWVD\DQ\WKLQJDERXWKRZ/LQGD5RVHDFWHGLWRQO\VD\VKRZWKHPRWKHUWKRXJKWRIKHU,Q IDFWLIZHUHDGWKHUHVWRIWKHSDVVDJHZHNQRZWKDW)UDQJDYHXS/LQGD5RVHZKHQ/LQGD5RVHZDVRQO\ DߡEDE\JLUOߢ OLQHV VRQHLWKHU)UDQQRUKHUPRWKHUZRXOGUHDOO\KDYHNQRZQ/LQGD5RVHߡZKHQ VKHZDV\RXQJߢ %XWZHGRQߞWVSHFLILFDOO\QHHGWREHDZDUHWKDW)UDQJDYH/LQGD5RVHDZD\ZKHQ/LQGD5RVHZDVD EDE\$OOZHUHDOO\QHHGWRGRLVNHHSLQPLQGWKDWLWߞVYHU\LPSRUWDQWWRUHDGFDUHIXOO\DQGWKHQWRQRWLFH WKHGLIIHUHQFHEHWZHHQKRZ0RWKHUߡWKRXJKWRIߢ/LQGD5RVH OLQHVDQG DQGKRZ/LQGD5RVHDFWHG ZKHQVKHZDV\RXQJ7KDWߞVHQRXJKIRUXVWRUHDOL]HWKDWWKLVFKRLFHGRHVQߞWUHVWDWHWKHSDVVDJHH[DFWO\VR LWPXVWEHZURQJ + LVWKHH[DFWRSSRVLWHRIZKDWWKHWH[WVD\V,QOLQH)UDQVD\VVKHZDVߡQRWVXUSULVHGߢZKHQVKH UHFHLYHGWKHOHWWHU%HYHU\FDUHIXORIWKLVNLQGRIZURQJDQVZHU,I\RXUHDGFDUHIXOO\\RXߞOOW\SLFDOO\EH DEOHWRQRWLFHZKHQDZURQJDQVZHULVDQH[DFWFRQWUDGLFWLRQRIWKHWH[W%XWLI\RXGRQߞWUHDGFDUHIXOO\ \RXFDQHDVLO\IDOOIRUDFKRLFHOLNHWKLV - GRHVDFWXDOO\GLUHFWO\UHVWDWHVRPHWKLQJIURPWKHHQGRIWKHILUVWSDUDJUDSK%XWDVWUDLQHGWHVWWDNHUV ZHNQRZWKDWLWVRPHWLPHVKDSSHQVWKDWDߡPDLQLGHDߢTXHVWLRQKDVWZRDQVZHUFKRLFHVWKDWUHVWDWHVRPH SRUWLRQRIWKHWH[W:KHQWKDWVLWXDWLRQDULVHVZHNQRZWKDWWKHFRUUHFWDQVZHUZLOOEHWKHRQHWKDW DSSHDUVPRUHIUHTXHQWO\LQWKHUHOHYDQWWH[W7KHLGHDWKDW)UDQEHOLHYHGWKDW/LQGD5RVHZRXOGFRPH EDFNLQWRKHUOLIHLVPHQWLRQHGVHYHUDOWLPHVLQWKHSDUDJUDSK ߡKRPLQJSLJHRQߢߡ8WXUQߢߡKXPDQ ERRPHUDQJߢ EXWWKHLGHDRIWKHLUKDQGZULWLQJEHLQJVLPLODULVRQO\PHQWLRQHGRQFH 7KLVTXHVWLRQSURYLGHVDJUHDWH[DPSOHRIDVLWXDWLRQLQZKLFKDQXQWUDLQHGWHVWWDNHUFRXOGHDVLO\IDOOIRU DZURQJDQVZHURUDWOHDVWVSHQGDORWRIWLPHGHEDWLQJEHWZHHQFKRLFHV ) DQG - %XWRQFHZHNQRZ WKHUXOHVRIWKHWHVWZHFDQVD\ZLWKFHUWDLQW\WKDWWKHFRUUHFWDQVZHUFKRLFHLV ) EHFDXVHLWUHVWDWHVWKH LGHDWKDWDSSHDUVPRVWIUHTXHQWO\LQWKHUHOHYDQWWH[W 1RWHWKDWWKH$&7ߞVRZQH[SODQDWLRQRIWKLVTXHVWLRQRQSDJHRIWKH5HG%RRNXVHVWKHVXEMHFWLYH LGHDRIVRPHWKLQJEHLQJDߡPDLQSRLQWߢRUDߡVXSSRUWLQJߢߡGHWDLOߢ7KLVLVDJRRGH[DPSOHRIWKHZD\WKH 5HG%RRNߞVRZQVROXWLRQVWRLWVTXHVWLRQVGRQߞWJLYHDZD\WKHIXQGDPHQWDOGHVLJQRIWKHWHVWDV,ߞYHVDLG PDQ\WLPHVEHIRUHDQGZLOOVD\PDQ\WLPHVDJDLQ7KHZULWHUVRIWKH5HG%RRNPD\XVHVXEMHFWLYH WHUPLQRORJ\ZKHQSURYLGLQJWKHLUH[SODQDWLRQVIRUWKHPDVVHVEXWWUDLQHGWHVWWDNHUVOLNHXVNQRZWKDW WKHUHߞVDOZD\VDQREMHFWLYHEODFNDQGZKLWHH[SODQDWLRQIRUHDFKFRUUHFWDQVZHUWRDUHDO$&7TXHVWLRQ ߚRWKHUZLVHWKHWHVWZRXOGEHXVHOHVVIRUFROOHJHV.HHSWKLVLQPLQGDWDOOWLPHV 3DJH4XHVWLRQ 7KLVTXHVWLRQLVDQRWKHURQHWKDWDQXQWUDLQHGWHVWWDNHUZRXOGSUREDEO\KDYHDYHU\KDUGWLPHZLWK,WߞV DOVRDQRWKHUH[DPSOHRIDTXHVWLRQZKRVHRIILFLDOVROXWLRQLQWKH5HG%RRNLVDOLWWOHPLVOHDGLQJWRWKH DYHUDJHSHUVRQ ,IZHORRNDWWKHWH[WZHFDQVHHWKDW)UDQKDQGVKHUPRWKHUWKHOHWWHUDWOLQH7KHWH[WLPPHGLDWHO\ DIWHUWKHVHQWHQFHWKDWGHVFULEHV)UDQKDQGLQJKHUPRWKHUWKHOHWWHUVD\VWKDWWKHOHWWHUZDVߡVKRUWߢDQG ߡEXVLQHVVOLNHߢEXWWKDW)UDQNQRZVWKHUHDUHDOVRߡORQJOHWWHUV>/LQGD5RVH@PXVWKDYHZULWWHQDQG FUXPSOHGLQWRWKHZDVWHEDVNHWߢ OLQHVDQG /HWߞVORRNDWWKHDQVZHUFKRLFHV $ LVWKHZURQJDQVZHUWKDWPRVWSHRSOHZLOOFKRRVHLIWKH\PLVVWKLVTXHVWLRQIURPP\H[SHULHQFH7KH VWDWHPHQWLQWKLVFKRLFHVHHPVOLNHDUHDVRQDEOHDVVXPSWLRQEHFDXVHPRVWSHRSOHFRXOGSUREDEO\ XQGHUVWDQGIHHOLQJGLVDSSRLQWHGE\JHWWLQJDVKRUWOHWWHUIURPVRPHRQHDIWHUVRPXFKWLPH%XWRXU DVVXPSWLRQVGRQߞWPHDQDQ\WKLQJRQWKH$&71RWKLQJLQWKHWH[WDFWXDOO\VD\VWKDW)UDQZDVGLVDSSRLQWHG LQWKHOHWWHUߞVOHQJWKVRWKLVFKRLFHLVLQFRUUHFW % ZRXOGEHDQRWKHUUHDVRQDEOHDVVXPSWLRQWRPDQ\UHDGHUVDQGLWߞVDOVRLQFRUUHFWRQWKH$&7EHFDXVH LWLVQߞWDFWXDOO\VWDWHGRQWKHSDJH)UDQKDVMXVWKHDUGDERXWWKHELUWKRIKHUJUDQGVRQZKLFKPRVWSHRSOH ZRXOGFRQVLGHUߡJRRGQHZVߢ$QGWKHWH[WHYHQPHQWLRQVߡJRRGQHZVߢLQWKHILUVWSDUDJUDSKZKHQ)UDQ GHVFULEHVSDLQWLQJKHUPDLOER[\HOORZ%XWWKHWH[WQHYHUVSHFLILFDOO\VD\VWKDW)UDQFRQVLGHUV%ODNHߞV ELUWKWREHJRRGQHZVߚQRUGRHVLWVD\WKDWVKHWKLQNVWKHELUWKLVEDGQHZVQHXWUDOQHZVRUDQ\RWKHU NLQGRIQHZV7KHWH[WGRHVQߞWUHVWDWHWKHLGHDLQWKLVFKRLFHVRWKLVFKRLFHLVZURQJߚHYHQLILWVHHPV OLNHDUHDVRQDEOHLQIHUHQFH & LV\HWDQRWKHUUHDVRQDEOHDVVXPSWLRQWKDWWXUQVRXWWREHDZURQJDQVZHURQWKH$&77KHWH[WGRHV GHVFULEHWKHOHWWHUDVߡEXVLQHVVOLNHߢEXWLWQHYHUVD\VDQ\WKLQJDERXWWKHOHWWHUEHLQJߡFROGߢߡLF\ߢ ߡGLVWDQWߢRUDQ\RWKHUZRUGOLNHWKDW7KHWH[WDOVRQHYHUPHQWLRQVWKHLGHDWKDW)UDQLVRIIHQGHG 6RPH PLJKWDUJXHWKDWWKHWH[WVD\V)UDQLVJHQHUDOO\XSVHWLQOLQHVWKURXJKEXWEHLQJXSVHWLVQߞWDOZD\V WKHVDPHWKLQJDVEHLQJRIIHQGHGߚDQGDQ\ZD\WKRVHOLQHVGRQߞWVD\)UDQLVXSVHWEHFDXVHWKHOHWWHULV ߡEXVLQHVVOLNHߢRUߡFROGߢ6KHߞVXSVHWLQWKRVHOLQHVEHFDXVHVKHߞVMXVWIRXQGRXWVKHߞVDJUDQGPRWKHU ZLWKRXWDQ\SULRUZDUQLQJ ' LVFRUUHFWEHFDXVHWKHWH[WVD\VWKDW)UDQFRXOGߡVHHߢDOORIWKHߡORQJOHWWHUV>/LQGD5RVH@PXVWKDYH ZULWWHQDQGFUXPSOHGLQWKHZDVWHEDVNHWߢEHIRUHVKHFRPSOHWHGWKHOHWWHUWKDWVKHPDLOHGWR)UDQ7KRVH ߡORQJOHWWHUVߢߡFUXPSOHGLQWKHZDVWHEDVNHWߢZKRVHߡJKRVWVߢDUHYLVLEOHWR)UDQFDQRQO\EHSUHYLRXV GUDIWVRIWKHOHWWHU)UDQLVKROGLQJVRFKRLFH ' GLUHFWO\VXSSRUWVWKHZD\)UDQߞVWKRXJKWVDUHGHVFULEHG LQWKHSDUDJUDSKWKDWPHQWLRQVKHUKDQGLQJWKHOHWWHUWRKHUPRWKHU 1RWHWKDWWKH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQZKLFKDSSHDUVRQSDJHUHSHDWHGO\VD\VWKDW )UDQIHHOVߡV\PSDWK\ߢIRU/LQGD5RVH7KHWH[WGRHVQߞWDFWXDOO\VD\WKDWWKRXJKߚLWRQO\VD\VWKDW)UDQ LVDZDUHKRZPXFKHIIRUWPXVWKDYHEHHQLQYROYHGQRWWKDW)UDQIHHOVVRUU\IRU/LQGD5RVHRUWKDWVKH IHHOVWKHVDPHZD\/LQGD5RVHIHHOVZKLFKLVZKDWWKHZRUGߡV\PSDWK\ߢZRXOGUHTXLUH,WߞVLPSRUWDQWWR EHRQWKHORRNRXWIRUWKRVHNLQGVRIGLVWLQFWLRQVDQGWKLVLVRQHPRUHH[DPSOHRIWKHZD\ZHFDQEH PLVOHGLIZHWDNHWKH5HG%RRNߞVVROXWLRQVWRRPXFKWRKHDUW 3DJH4XHVWLRQ 7KLVTXHVWLRQZLOOPLVOHDGDORWRIWHVWWDNHUVEHFDXVHLWDVNVXVWRLQIHUVRPHWKLQJEXWWKHNH\WRWKH FRUUHFWDQVZHULVDFWXDOO\VSHOOHGRXWRQWKHSDJHDVDOZD\V1RLQIHUHQFHLVQHFHVVDU\ ) LVLUUHOHYDQWWRWKHWH[WVRLWߞVZURQJ7KHUHLVQRWKLQJWRLQGLFDWHWKDW/LQGD5RVHOHIWKRPHWRJHW PDUULHG%H\RQGWKDWLQOLQH)UDQVSHFLILFDOO\VD\VWKDW/LQGD5RVHߡGLGQߞWPHQWLRQDQ\KXVEDQGDW DOOߢVRWKHUHߞVQRUHDVRQZKDWVRHYHUWRWKLQNWKDW/LQGD5RVHOHIWKRPHWRJHWPDUULHGRUHYHQWKDWVKH HYHUZDVPDUULHG * LVQRWVXSSRUWHGE\WKHWH[WHLWKHUߚWKHUHLVQRPHQWLRQRIDQ\DUJXPHQWEHWZHHQ)UDQDQG/LQGD 5RVH + LVDOVRQRWVXSSRUWHGE\WKHWH[Wߚ/LQGD5RVHߞVIDWKHULVQHYHUPHQWLRQHGDQ\ZKHUHLQWKHWH[W - LVWKHRQO\DQVZHUFKRLFHVXSSRUWHGE\WKHWH[WZKLFKPHDQVLWߞVFRUUHFW)UDQVSHFLILFDOO\GHVFULEHV /LQGD5RVHDVߡDEDE\JLUOߢWKDW)UDQߡJDYHXS\HDUVDJRߢLQOLQHVDQG7KDWߞVDOOZHQHHGWR UHDGWREHVXUHWKDW - LVFRUUHFWEXWWKHWH[WDOVRDOOXGHVWR0RWKHUZDQWLQJߡWRNHHSKHUߢDQGLQFOXGHV )UDQWHOOLQJ0RWKHUKHUFKLOGߞVQDPH7KLVLQGLFDWHVWKDW)UDQGLGQߞWDOUHDG\NQRZKHURZQGDXJKWHUߞV QDPH7KHUHDUHSOHQW\RIRWKHULQGLFDWLRQVWKDW/LQGD5RVHZDVJLYHQXSIRUDGRSWLRQDVZHOO /HWWKLVTXHVWLRQVHUYHDVRQHPRUHUHPLQGHUWKDWZHߞOODOZD\VILQGWKHFRUUHFWDQVZHUVSHOOHGRXWRQWKH SDJHVRPHZKHUHHYHQZKHQWKHTXHVWLRQLQFOXGHVDZRUGOLNHߡLQIHUUHGߢ 3DJH4XHVWLRQ 7KLVLVDFKDOOHQJLQJILUVWTXHVWLRQDERXWWKHSDVVDJHEHFDXVHLWDVNVXVDERXWߡRQHRIWKHPDLQSRLQWV LQWKHSDVVDJHߢ,I\RXߞYHUHDGRUVNLPPHGWKHZKROHSDVVDJHEHIRUHORRNLQJDWWKLVTXHVWLRQWKHQ\RX PD\IHHOOLNH\RXKDYHHQRXJKRIDQLGHDRIWKHSDVVDJHߞVPHVVDJHWRDWWDFNWKLVTXHVWLRQULJKWDZD\2Q WKHRWKHUKDQGLI\RXSUHIHUQRWWRUHDGWKHSDVVDJHEHIRUHWDFNOLQJWKHTXHVWLRQVWKHQ\RXPLJKWGHFLGHWR VNLSWKLVTXHVWLRQIRUQRZWU\WRDQVZHUVRPHRIWKHRWKHUTXHVWLRQVWKDWGHDOZLWKVPDOOHUSRUWLRQVRIWKH WH[WDQGWKHQUHWXUQWRWKLVTXHVWLRQDIWHU\RXߞYHJRW\RXUEHDULQJVDOLWWOHPRUH(LWKHUDSSURDFKFDQ ZRUNGHSHQGLQJRQ\RXUSHUVRQDOLQFOLQDWLRQ :KHQ\RXGHDOZLWKDߡPDLQSRLQWߢTXHVWLRQ\RXKDYHWRUHPHPEHUWKDWLWߞVVRPHWLPHVSRVVLEOHIRUWKHUH WREHPRUHWKDQRQHDQVZHUFKRLFHWKDWUHVWDWHVDQLGHDIURPWKHWH[W,IWKDWKDSSHQVWKHQWKHFRUUHFW DQVZHUZLOOEHWKHRQHWKDWUHVWDWHVWKHLGHDWKDWDSSHDUVPRVWRIWHQ 1RZOHWߞVORRNDWHDFKDQVZHUFKRLFHLQWXUQDQGVHHZKDWZHFRPHXSZLWK $ LVLQFRUUHFW7KHDXWKRUGRHVPHQWLRQWKHLGHDWKDWSHRSOHFDQߞWXQGHUVWDQGJRYHUQPHQWDQGKHGRHV PHQWLRQWKHLGHDRIQHZVSDSHUVDQGWHOHYLVLRQEXWKHQHYHUFRQQHFWVWKRVHLGHDVE\VD\LQJWKDWSHRSOH DUHXQDEOHWRXQGHUVWDQGJRYHUQPHQWEHFDXVHWKH\UHDGWRRPDQ\QHZVSDSHUVRUZDWFKWRRPXFK WHOHYLVLRQ/RWVRISHRSOHPLVWDNHQO\SLFNWKLVFKRLFHEHFDXVHWKH\NQRZLWߞVYDJXHO\UHODWHGWRFRQFHSWV WKH\UHPHPEHUIURPWKHSDVVDJHEXWDVWUDLQHGWHVWWDNHUVZHKDYHWRUHPHPEHUWRSD\DWWHQWLRQWRVPDOO GHWDLOVDQGWRORRNRXWIRUZURQJDQVZHUVWKDWWU\WRFRQIXVHXVE\MXPEOLQJWRJHWKHUVRPHLGHDVIURPWKH SDVVDJH7KLVLVDOVRDQH[DPSOHRIDZURQJDQVZHUWKDWPLJKWVHHPOLNHDGHFHQWLQWHUSUHWDWLRQRIWKH WH[WEXWWKDWGRHVQߞWPDWWHURQWKH$&7:KDWPDWWHUVRQWKH$&7LVWKDWWKHFRUUHFWDQVZHULVGLUHFWO\ UHVWDWHGLQWKHWH[WDQGWKLVDQVZHUFKRLFHGRHVQߞWPHHWWKDWVWDQGDUG6RLWߞVZURQJ % LVFRUUHFW7KHLGHDWKDW$PHULFDQVKDYHGLIILFXOW\LPSURYLQJJRYHUQPHQWEHFDXVHWKH\GRQߞW XQGHUVWDQGWKHGHWDLOVDSSHDUVPXOWLSOHWLPHVLQWKHWH[WPRVWGLUHFWO\LQWKHODVWVHQWHQFHRIWKHIRXUWK SDUDJUDSK OLQHV ,QWKDWVHQWHQFHWKHDXWKRUVD\VWKDWߡYRWHUVDUHXQDEOHߢWRWHOOߡWKHUDVFDOV >SROLWLFLDQV@KRZWRGRWKHLUMREVEHWWHUߢDQGWKHUHDVRQIRUWKLVLVWKDWWKHYRWHUVWKHPVHOYHVߡGRQߞW XQGHUVWDQGWKHWHFKQLFDOTXHVWLRQVߢRIJRYHUQPHQW1RWLFHKRZWKHSKUDVHߡGRQRWXQGHUVWDQGWKH WHFKQLFDOTXHVWLRQVߢLQOLQHPDWFKHVXSZLWKWKHSKUDVHߡGRQRWXQGHUVWDQGWKHLPSRUWDQWGHWDLOVߢLQWKH DQVZHUFKRLFHMXVWDVWKHSKUDVHDERXWJHWWLQJWKHUDVFDOVWRߡGRWKHLUMREVEHWWHUߢLQWKHWH[WPDWFKHVXS ZLWKWKHSKUDVHߡLPSURYLQJJRYHUQPHQWߢLQWKHDQVZHUFKRLFH -XVWWREHFOHDUWKHZRUGߡUDVFDOVߢLQWKH WH[WPXVWUHIHUWRSROLWLFLDQVEHFDXVHWKHUDVFDOVDUHSHRSOHWKDWFDQEHVHOHFWHGRUUHMHFWHGIRUWKHLUMREV E\YRWHUVDQGWKHRQO\SHRSOHLQWKDWSRVLWLRQDUHSROLWLFLDQVE\GHILQLWLRQ 1RWLFHWKDWWKH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQRQSDJHLVDELWPLVOHDGLQJ,WUHIHUVWRDOLVW RIRWKHUTXRWDWLRQVIURPWKHWH[WWKDWNLQGRIJRDORQJZLWKWKHLGHDRIWKHFRUUHFWDQVZHUEXWGRQߞW DFWXDOO\UHVWDWHLW7KH5HG%RRNH[SODQDWLRQWDONVDERXWKRZWKHWH[WGHVFULEHVYRWHUVDVSHRSOHZKR GRQߞWFDUHYHU\PXFKDERXWJRYHUQPHQWEXWWKRVHSKUDVHVDUHQߞWDFWXDOO\GLUHFWO\UHOHYDQWWRWKHFRUUHFW DQVZHUDQG\RXVKRXOGQߞWUHO\RQWKHPZKHQ\RXDQVZHUWKLVTXHVWLRQ%HLQJGLVLQWHUHVWHGLQVRPHWKLQJ LVGLIIHUHQWIURPEHLQJXQDEOHWRXQGHUVWDQGLW % LVFRUUHFWEHFDXVHRIVHQWHQFHVOLNHWKHRQHZH LGHQWLILHGLQOLQHVQRWEHFDXVHRIVHQWHQFHVDERXWYRWHUVEHLQJDSDWKHWLF,ZDQWWRPDNHVXUHWKLVLV FOHDUWR\RXEHFDXVHWKHRQO\ZD\WRSURFHHGRQWKH$&7ZLWKIXOOFRQILGHQFHDQGDFFXUDF\LVWRLQVLVW RQDQVZHUFKRLFHVWKDWUHVWDWHLGHDVIURPWKHWH[WQRWRQDQVZHUFKRLFHVWKDWNLQGRIJRDORQJZLWKLGHDV LQWKHWH[W & LVZURQJEHFDXVHLWFRQWUDGLFWVWKHWH[WZKLFKVSHFLILFDOO\VWDWHVLQOLQHVWKDWߡYRWHUVDUH XQDEOHWRWHOO>SROLWLFLDQV@KRZWRGRWKHLUMREVEHWWHUߢ)XUWKHUWKHDXWKRUDOVRPHQWLRQVLQOLQHV WKDWWKHLGHDWKDWߡHOHFWHGRIILFLDOVߢDUHߡGHPRFUDWLFDOO\UHVSRQVLYHߢLVߡODUJHO\DP\WKߢ7KHWH[WGRHV GUDZDGLVWLQFWLRQEHWZHHQHOHFWHGRIILFLDOVDQGEXUHDXFUDWVLQOLQHVWKURXJKEXWLWGRHVQߞ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ߚWKH\RQO\VD\WKDWPRUHYRWHUVXVHGWROLVWHQ WRSROLWLFDOVSHHFKHVDQGGHEDWHVDQGWKDWWKH\XVHGWREHORQJHUWKDQIRUW\ILYHVHFRQGV$QRWKHU SUREOHPZLWK ' LVWKDWWKHHQWHUWDLQPHQWDVSHFWRIWHOHYLVLRQLVRQO\PHQWLRQHGLQOLQHVZKLFKVD\ WKDWWHOHYLVLRQGRHVQRWߡLQWHQGWRORVH>LWV@SULPDU\YDOXHDVHQWHUWDLQPHQWߢ7KLVLVQRWWKHVDPHWKLQJDV VD\LQJWKDWWHOHYLVLRQKDVFXWEDFNRQWKHQHZVLQRUGHUWRRIIHUPRUHHQWHUWDLQPHQWLQVWHDGLWߞVD VWDWHPHQWWKDWWHOHYLVLRQߞVPDLQUHDVRQIRUH[LVWHQFHLVHQWHUWDLQPHQWZLWKQRPHQWLRQRIDFKDQJLQJUROH IRUWKHQHZVDWDOO7KHVHPLJKWVHHPOLNHWULYLDOO\VPDOOGLVWLQFWLRQVߚLQIDFWPRVWKLJKVFKRRODQG FROOHJH(QJOLVKWHDFKHUVZRXOGKDYHQRSUREOHPLI\RXRIIHUHGDVWDWHPHQWOLNHFKRLFH ' DVDVXPPDU\ RIWKLVWH[WGXULQJDFODVVURRPGLVFXVVLRQ%XWZHNQRZWKDWWKH$&7LVDORWPRUHGHPDQGLQJWKDQKLJK VFKRRORUFROOHJH(QJOLVKFODVVHVZKHQLWFRPHVWRQRWLFLQJVPDOOGHWDLOVDQGWKHVHNLQGVRIGLIIHUHQFHV EHWZHHQWKHWH[WDQGDQDQVZHUFKRLFHZLOODOZD\VLQGLFDWHDZURQJDQVZHURQWKH$&7 $VLWWXUQVRXWWKLVZDVDߡPDLQSRLQWߢTXHVWLRQZKHUHRQO\RQHDQVZHUFKRLFHUHVWDWHGDQLGHDIURPWKH SDVVDJHH[DFWO\1RWLFHWKRXJKKRZHDV\LWZRXOGEHWRPLVUHDGDFRXSOHRINH\SKUDVHVLQWKHDQVZHU FKRLFHVRUWKHSDVVDJHDQGHQGXSPLVVLQJWKHTXHVWLRQIRUQRUHDOUHDVRQ 3DJH4XHVWLRQ 7KHDQVZHUFKRLFHVIRUWKLVTXHVWLRQIROORZDYHU\FRPPRQSDWWHUQRQWKH$&77KHIRXUFKRLFHV HVVHQWLDOO\PL[DQGPDWFKWKHHOHPHQWVRIEHLQJLQH[SHULHQFHGH[SHULHQFHGHGXFDWHGXQHGXFDWHGDQG \RXQJWKH$&7GRHVWKLVEHFDXVHLWZDQWVWRWULFNWHVWWDNHUVZKRGRQߞWSD\YHU\FDUHIXODWWHQWLRQWRWKH WH[W 6RZHQHHGWRILQGWKHUHOHYDQWWH[WDQGWKHQUHDGLWYHU\FDUHIXOO\WRVHHZKLFKDQVZHUFKRLFHPDWFKHVLW H[DFWO\ 7KHUHOHYDQWSDUWRIWKHWH[WVWDUWVRQOLQHDQGFRQWLQXHVWRWKHHQGRIWKHWKLUGSDUDJUDSK:HFDQWHOO WKDWWKLVLVWKHUHOHYDQWSDUWRIWKHWH[WEHFDXVHZHVHHZRUGVOLNHߡUHSRUWHUߢߡMRXUQDOLVPVFKRROߢDQG ߡLQH[SHULHQFHGߢZKLFKDOOUHODWHWRWKHFRQFHSWVLQWKHDQVZHUFKRLFHVIRUWKLVTXHVWLRQ 6RQRZZHUHDGFDUHIXOO\DQGVHHZKDWߞVJRLQJRQ 7KHILUVWZRUGZHVHHLQFKRLFH ) LVߡLQH[SHULHQFHGߢ:HߞOOQRWLFHLQWKHWH[WWKDWWKHILUVWZRUGWKH DXWKRUXVHVWRGHVFULEHWKLVSHUVRQIURPWKHQHZVSDSHULVH[DFWO\WKHVDPHߡLQH[SHULHQFHGߢ OLQH ,I \RXߞUHUHDGLQJYHU\FDUHIXOO\\RXPD\QRWLFHWKDWWKHVHQWHQFHLQOLQHUHIHUVWRDMRXUQDOLVPVFKRRO JUDGXDWHEXWDJUDGXDWHRIMRXUQDOLVPVFKRROLVQRWQHFHVVDULO\DUHSRUWHU1RWLFHWKRXJKWKDWWKHDXWKRU FDOOVWKLVVDPHW\SHRISHUVRQDߡUHSRUWHUߢLQOLQH 6RWKHILUVWSDUWVRI ) DQG * ZRUNVLQFHWKH\XVHWKHH[DFWVDPHZRUGWKDWWKHWH[WXVHV:HDOVRVHH WKDW + LVZURQJEHFDXVHߡH[SHULHQFHGߢGLUHFWO\FRQWUDGLFWVWKHZRUGߡLQH[SHULHQFHGߢIURPWKHWH[W 7KLVLVDQH[DPSOHRIWKH$&7WU\LQJWRFRQIXVH\RXE\RIIHULQJDQDQVZHUFKRLFHWKDWLVWKHH[DFW RSSRVLWHRIZKDWWKHWH[WVD\V 7KHQH[WSDUWRIFKRLFH ) VD\VߡLQVXIILFLHQWO\HGXFDWHGߢ,IZHJREDFNWRWKHVHFRQGKDOIRISDUDJUDSK WKUHHZHߞOOVHHWKDWWKHDXWKRUWDONVDERXWKRZWKHUHSRUWHUKDVQHYHUWDNHQߡDGYDQFHGDOJHEUDWRVD\ QRWKLQJRIFDOFXOXVߢ 7KDWPHDQVWKHDXWKRUVSHFLILFDOO\SRLQWVRXWWKDWWKHUHSRUWHUߞVHGXFDWLRQGLGQߞWLQFOXGHFHUWDLQFODVVHV DQGWKDWDVDUHVXOWLWߞVKDUGIRUWKHUHSRUWHUWRXQGHUVWDQGWKHߡSURJUDPEXGJHWߢ7KDWGLUHFWO\ FRUUHVSRQGVWRWKHLGHDRIEHLQJߡLQVXIILFLHQWO\HGXFDWHGߢ6LQFHERWKSDUWVRIFKRLFH ) DUHGLUHFWO\ UHIOHFWHGLQWKHWH[WZHNQRZWKDW ) LVWKHFRUUHFWDQVZHU 2IFRXUVHZHߞOOQHHGWRFKHFNRXWWKHRWKHUFKRLFHVWRPDNHVXUHZHKDYHQߞWPDGHDPLVWDNH &KRLFHV * DQG - ERWKVD\WKDWWKHUHSRUWHULVߡZHOOHGXFDWHGߢEXWZHNQRZIURPWKHWH[WWKDWWKH DXWKRUGLVDJUHHVZLWKWKLVLGHDIRUWKHUHDVRQVZHMXVWVDZ 1RWHWKDWPDQ\WHVWWDNHUVZRXOGVHHWKHUHIHUHQFHVWRWKHUHSRUWHUEHLQJDߡJUDGXDWHߢRIߡMRXUQDOLVP VFKRROߢDQGFRQFOXGHWKDWWKHUHSRUWHUPXVWEHZHOOHGXFDWHG7KLVPLJKWVHHPOLNHDUHDVRQDEOH DVVXPSWLRQLIZHZHUHDOORZHGWRLQWHUSUHWWKHWH[WRQRXURZQߚEXWZHDUHQߞWDOORZHGWRLQWHUSUHWWKH WH[WRQRXURZQ:HKDYHWRORRNDWWKHDXWKRUߞVZRUGVDQGILJXUHRXWZKDWWKHDXWKRUWKLQNVRIMRXUQDOLVP VFKRROJUDGXDWHVDQGWKHDXWKRUVD\VWKDWSHRSOHZKRJRWRMRXUQDOLVPVFKRROGRQߞWWDNHDGYDQFHG DOJHEUDRUFDOFXOXVZKLFKPDNHVLWKDUGIRUWKHPWRXQGHUVWDQGWKHLGHDRIߡVROYLQJDJUDQGHTXDWLRQߢ OLQHVDQG 3DJH4XHVWLRQ 7KHߡGHVFULSWLRQRIWKHWD[VHPLQDUߢUHIHUUHGWRLQWKHTXHVWLRQWDNHVSODFHLQWKHILIWKSDUDJUDSK7KHILUVW VHQWHQFHRIWKDWSDUDJUDSKVD\VWKDWߡJRYHUQPHQWLVVRWHFKQLFDOWKDWHYHQFDUHHUFLYLOVHUYDQWVFDQQRW H[SODLQZKDWLVKDSSHQLQJߢ7KLVPDWFKHVXSDOPRVWH[DFWO\ZLWKFKRLFH $ VR $ LVWKHFRUUHFWDQVZHU &KRLFH % LQFRQWUDVWVD\VWKDWRQO\FLYLOVHUYDQWVFDQXQGHUVWDQGLWZKLFKLVREYLRXVO\ZURQJVLQFH WKHWH[WVSHFLILFDOO\VD\VWKDWWKH\FDQߞW%XWDORWRIWHVWWDNHUVZKRGRQߞWUHDGYHU\FDUHIXOO\ZLOODVVXPH WKDWSHRSOHZKRZRUNLQWKHJRYHUQPHQWPXVWEHDEOHWRXQGHUVWDQGLWVRWKH\ߞOOFKRRVH % DQGJHWWKH TXHVWLRQZURQJ & PLJKWEHWHPSWLQJWRVRPHWHVWWDNHUVEHFDXVH OLNHWKHWH[W LWPHQWLRQVWKH7D[5HIRUP$FWDQGLW VHHPVWRJRDORQJZLWKWKHJHQHUDOIHHOLQJLQWKHWH[WWKDWLVVXHVUHODWHGWRJRYHUQPHQWDUHJHWWLQJPRUH WHFKQLFDODQGGLIILFXOWWRXQGHUVWDQG%XWQRWKLQJLQWKHGHVFULSWLRQRIWKHWD[VHPLQDULQGLFDWHVWKDWWKH 7D[5HIRUP$FWKDVPDGHWKLQJVPRUHWHFKQLFDOWKDQWKH\XVHGWREHLQVWHDGWKHWH[WVLPSO\PHQWLRQV WKDWVRPH,56ODZ\HUVGRQߞWXQGHUVWDQGWKDWSDUWLFXODUDFWDVDQH[DPSOH7KHUHߞVQRVSHFLILFPHQWLRQRI WKLQJVEHLQJOHVVWHFKQLFDOEHIRUHWKHDFWVRZHFDQߞWDVVXPHWKDWWKH\ZHUH ' LVVLPLODUWR % LQWKDWLWDOVRFODLPVWKDWRQO\DFHUWDLQW\SHRIWD[H[SHUWDWWKHVHPLQDUFRXOG XQGHUVWDQGWKHVHWHFKQLFDOLVVXHVZKHQLQIDFWWKHWH[WVSHFLILFDOO\VD\V OLQHV WKDWWKH\GLGQߞW XQGHUVWDQGDQLPSRUWDQWWHFKQLFDOLVVXH 7KHUHDUHSUREDEO\WZRSULPDU\ZD\VWKDWWKH$&7LVKRSLQJWRFDWFK\RXZLWKWKLVTXHVWLRQ)LUVWLWߞV HDV\WRJHWPL[HGXSRQZKHWKHURQO\DFHUWDLQJURXSRISHRSOHFDQGRVRPHWKLQJRUQRWHYHQWKDWJURXS FDQGRVRPHWKLQJHVSHFLDOO\ZKHQWKHWHVWWDNHULVWU\LQJWRVFDQWKURXJKWKHVHFWLRQTXLFNO\%RWK % DQG ' GLUHFWO\FRQWUDGLFWWKHWH[WLQWKLVZD\DQGDWHVWWDNHUFRXOGHDVLO\UHDGHLWKHURIWKRVHFKRLFHVVHH VHYHUDOLGHDVIURPWKHWH[WDQGJHWWKHGHWDLOVZURQJ 7KHRWKHUZD\WKH$&7PLJKWFDWFK\RXKHUHLVWKDW % DQG ' FRQWDLQUHDVRQDEOHDVVXPSWLRQV 6RPHRQHZKRGLGQߞWUHDGWKHWH[WFDUHIXOO\FRXOGHDVLO\FRPHWRWKHFRQFOXVLRQWKDWRQO\DߡFDUHHUFLYLO VHUYDQWߢRUߡ,QWHUQDO5HYHQXH6HUYLFHWD[ODZ\HUߢPLJKWXQGHUVWDQGWKHWHFKQLFDODVSHFWVRIJRYHUQPHQW ZKLFKPDNHVHLWKHURIWKRVHFKRLFHVDSSHDOLQJ%XWZHDOZD\VKDYHWRUHPHPEHUWKDWRXURZQ DVVXPSWLRQVDUHLUUHOHYDQW7KH$&7ZLOOUHZDUGWKHVWDWHPHQWVWKDWDUHGLUHFWO\UHVWDWHGLQWKHSDVVDJH DQGFKRLFH $ FRPHVDOPRVWZRUGIRUZRUGRXWRIWKHUHOHYDQWWH[W 3DJH4XHVWLRQ 7KLVTXHVWLRQWULHVWRPLVOHDGXVE\DVNLQJZKDWWKHDXWKRUߡPRVWOLNHO\ߢPHDQV%XWZHKDYHWRUHPHPEHU WKDWWKHFRUUHFWDQVZHUZLOOVWLOOEHWKHRQO\FKRLFHWKDWߞVGLUHFWO\VWDWHGLQWKHWH[W/HWߞVWDNHDORRN ) UHVWDWHVDQLGHDWKDWߞVUHSHDWHGWKURXJKRXWWKHWH[WZKLFKPDNHVLWWKHFRUUHFWDQVZHU7KHUHOHYDQW LGHDLVVWDWHGLQOLQHVZKHQWKHDXWKRUVD\VWKDWSHRSOHߡNQRZOLWWOHDQGFDUHOHVVDERXWWKH WHFKQLFDOIXQFWLRQLQJRIWKHLUJRYHUQPHQWߢ1RWLFHKRZWKLVLGHDRIQRWFDULQJLQWKHWH[WGLUHFWO\UHIOHFWV WKHLGHDRIEHLQJߡQRWFRQFHUQHGߢLQWKHDQVZHUFKRLFHDQGQRWLFHKRZWKHSKUDVHߡWHFKQLFDOIXQFWLRQLQJ RIWKHLUJRYHUQPHQWߢUHVWDWHVWKHLGHDRIߡWHFKQLFDOEXWLPSRUWDQWGHWDLOVRIJRYHUQPHQWߢIURPWKHDQVZHU FKRLFH7KHUHDUHPDQ\RWKHUSODFHVLQWKHWH[WWKDWUHVWDWHWKLVLGHDDVZHOOEXWZHRQO\QHHGWRILQGRQH RIWKHPWRNQRZZHKDYHWKHULJKWDQVZHU * LVLQFRUUHFW0DQ\WHVWWDNHUVZLOOEHWHPSWHGE\WKLVFKRLFHEHFDXVHLWPHQWLRQVWKHVDPHߡP\WKߢWKDW WKHWH[WPHQWLRQVLQOLQH%XWXQOLNHWKHWH[W * VD\VWKDWFLWL]HQVDUHߡFRPSOHWHO\WDNHQLQߢE\WKDW P\WK5HPHPEHUWKDWLWߞVQRWHQRXJKIRUDQDQVZHUFKRLFHMXVWWRPHQWLRQVRPHWKLQJIURPWKHWH[W (YHU\WKLQJLQWKHFRUUHFWDQVZHUPXVWEHHFKRHGLQWKHWH[W7KHWH[WQHYHUPHQWLRQVZKHWKHUYRWHUVDUH ߡFRPSOHWHO\WDNHQLQߢE\WKLVP\WKRUSDUWLDOO\WDNHQLQRUQRWWDNHQLQDWDOOVRWKLVSKUDVHLV XQVXSSRUWHGE\WKHWH[WDQG * LVZURQJ + LVZURQJEHFDXVHQRWKLQJLQWKHWH[WWDONVDERXWFLWL]HQVEHLQJUHVSRQVLYHWRRIILFLDOVRUEXUHDXFUDWVߚ WKHLGHDRIRIILFLDOVRUEXUHDXFUDWVEHLQJߡGHPRFUDWLFDOO\UHVSRQVLYHߢWRYRWHUVFRPHVXSLQOLQHVDQG EXWWKLVDQVZHUFKRLFHWULHVWRWULFN\RXE\UHYHUVLQJWKHUHODWLRQVKLSLQWKHWH[W7KHWH[WGLVFXVVHVWKH FRQFHSWRISXEOLFRIILFLDOVEHLQJUHVSRQVLYHEXWWKLVFKRLFHWDONVDERXWFLWL]HQVEHLQJUHVSRQVLYH - OLNH * PHQWLRQVDFRQFHSWIURPWKHWH[WEXWDGGVLUUHOHYDQWGHWDLOVWKDWDUHQߞWIRXQGLQWKHWH[W,Q OLQHVWKURXJKWKHWH[WPHQWLRQVWKHLGHDRIDJRYHUQPHQWEHLQJOHJLWLPDWHEHFDXVHLWZDVHOHFWHG GHPRFUDWLFDOO\%XW - VD\VWKDWFLWL]HQVDUHߡQRWSUHSDUHGWRFRQFHGHOHJLWLPDF\WRDJRYHUQPHQWXQOHVV LWLVGHPRFUDWLFDOO\HOHFWHGߢ7KHWH[WQHYHUDFWXDOO\VD\VDQ\WKLQJDERXWGHPRFUDWLFHOHFWLRQVEHLQJD QHFHVVDU\HOHPHQWIRUYRWHUVWRFRQFHGHOHJLWLPDF\VRWKHZRUGߡXQOHVVߢLQWKHDQVZHUFKRLFHLV XQZDUUDQWHG$VWUDLQHGWHVWWDNHUVZHNQRZWKDWDQLGHDWKDWLVQߞWDGGUHVVHGLQWKHWH[WFDQߞWEHSDUWRID ULJKWDQVZHU 1RWLFHRQFHPRUHWKDWWKHFRUUHFWDQVZHULVWKHRQO\RQHWKDWߞVIXOO\VXSSRUWHGE\WKHWH[WHYHQWKRXJK WKHSURPSWRIWKHTXHVWLRQGHOLEHUDWHO\LQFOXGHVWKHPLVOHDGLQJSKUDVHߡPRVWOLNHO\ߢ5HPHPEHUWKDWWKRVH SKUDVHVVKRXOGDOZD\VEHLJQRUHGDQGZHVKRXOGDOZD\VORRNIRUWKHDQVZHUFKRLFHWKDWGLUHFWO\UHVWDWHV WKHWH[W 3DJH4XHVWLRQ 7KLVTXHVWLRQWHOOV\RXWRORRNDWOLQHVDQGWKHQDVNV\RXZKLFKDQVZHUFKRLFHDFFXUDWHO\GHVFULEHV WKHDXWKRUߞVJLUOKRRGDQGHDUO\DGXOWKRRG7KLVLVDJUHDWH[DPSOHRIKRZWKH$&7ORRNVPXFKPRUH FORVHO\DWWKHGHWDLOVRIDWH[WWKDQDOPRVWDQ\KLJKVFKRRO(QJOLVKWHDFKHUGRHV ,I\RXGRQߞWUHFDOOZKLFKSDUWVRIWKHWH[WPHQWLRQWKHYDULRXVORFDWLRQVLQWKHDQVZHUFKRLFHVRULI\RX KDYHQߞWUHDGRUVNLPPHGWKHIXOOWH[WEHIRUHDWWHPSWLQJWKLVTXHVWLRQWKHQLWPLJKWKHOSWRVNLPWKHWH[WDQG ORRNIRUWKHFDSLWDOOHWWHUVLQNH\ZRUGVIURPWKHDQVZHUFKRLFHVOLNHߡ&DOFXWWDߢߡ8QLWHG6WDWHVߢ ߡ(QJODQGߢߡ,ULVKߢߡ0DQKDWWDQߢߡ%DQJODGHVKߢDQGߡ)DULGSXUߢ 1RZOHWߞVWDNHDORRN ) VD\VWKHDXWKRUJUHZXSDQGZDVHGXFDWHGLQ&DOFXWWD:HFDQVHHWKDW&DOFXWWDLVPHQWLRQHGLQOLQHV WKURXJKZKHUHLWVD\VWKHDXWKRUߡDWWHQGHGDVFKRROLQ&DOFXWWDߢ7KDWORRNVJRRGVRIDU7KHQ ) VD\VVKHPRYHGWRWKH8QLWHG6WDWHV/LQHPHQWLRQVWKH8QLWHG6WDWHVDQGVD\Vߡ,KDYHIRXQGP\ZD\ WRWKH8QLWHG6WDWHVߢ6RWKLVDQVZHUFKRLFHVWLOOORRNVJRRG)LQDOO\ ) VD\VVKHOLYHGLQ0DQKDWWDQ ZHVHH0DQKDWWDQPHQWLRQHGLQOLQHDQGUHIHUUHGWRDVWKHDXWKRUߞVߡߝGHVKߞߢZKLFKPHDQVߡFRXQWU\ߢ DFFRUGLQJWROLQH6RFKRLFH ) LVFRUUHFWEHFDXVHHYHU\SDUWRILWPDWFKHVXSZLWKWKHWH[W 1RZOHWߞVORRNDWWKHRWKHUFKRLFHV 5HPHPEHUWKDW\RXDOZD\VKDYHWRJLYHHTXDOFRQVLGHUDWLRQWRHYHU\ DQVZHUFKRLFHRQWKHWHVWLQVWHDGRIMXVWGHFLGLQJ\RXOLNHRQHFKRLFHDQGQRWHYHQUHDOO\UHDGLQJWKH RWKHUV7KLVZD\\RXߞOOKDYHDEHWWHUFKDQFHRIFDWFKLQJDQ\PLVWDNHV\RXPLJKWKDYHPDGH 7KHELJJHVWSUREOHPZLWK * LVWKDWLWVD\VWKHDXWKRUZDVHGXFDWHGLQ(QJODQGE\,ULVKQXQV7KHWH[W DFWXDOO\VD\VLQOLQHVWKDWWKH,ULVKQXQVDWKHUVFKRROߡUHJDUGHGRXUZDOOHGRIIVFKRROFRPSRXQGLQ &DOFXWWDDVDFRUQHURI(QJODQGߢZKLFKPHDQVWKDWWKHFRPSRXQGLWVHOIZDVLQ&DOFXWWDEXWWKHQXQV WUHDWHGLWOLNHLWZDV(QJODQG6R * PXVWEHZURQJ + VD\VWKHDXWKRUZDVUDLVHGLQ%DQJODGHVKZKLFKLVQߞWPHQWLRQHGLQWKHWH[W,QIDFWOLQHVWKURXJK GHVFULEHDSODFHLQ%DQJODGHVKWKDWWKHDXWKRUKDVߡQHYHUVHHQߢ7KLVDQVZHUFKRLFHDOVRPHQWLRQV PRYLQJWR(QJODQGDWRQHSRLQWZKLFKLVQߞWVXSSRUWHGE\WKHWH[WDVZHMXVWVDZWKHRQO\PHQWLRQRI (QJODQGLQWKHSDVVDJHKDVWRGRZLWKWKHQXQVLQ&DOFXWWD - VD\VWKHDXWKRUZDVERUQLQ)DULGSXUEXWOLQHVWKURXJKUHIHUWR)DULGSXUDVWKHELUWKSODFHRIWKH DXWKRUߞVIDWKHUDQGDVDSODFHWKDWWKHDXWKRUKDVߡQHYHUVHHQߢ7KHDXWKRUDOVRUHIHUVWR)DULGSXUDV ߡXQJOLPSVHGߢLQOLQHZKLFKOLWHUDOO\PHDQVWKDWWKHDXWKRUKDVQHYHUVHHQLW(YHQLIZHLJQRUHWKRVH SKUDVHVWKHWH[WGRHVQߞWVSHFLILFDOO\VD\WKHDXWKRUZDVERUQLQ)DULGSXUZKLFKZRXOGVWLOOEHHQRXJKWR PDNH - ZURQJ 1RWLFHRQFHPRUHKRZDQXQWUDLQHGWHVWWDNHUFRXOGHDVLO\PLVVWKLVTXHVWLRQLIKHGLGQߞWUHDGFDUHIXOO\ HQRXJK5HPHPEHUWKDWWKH$&7UHTXLUHVXVWRSD\FRQVWDQWDWWHQWLRQWRVPDOOGHWDLOV 3DJH4XHVWLRQ 7KHUHDUHWZRUHDVRQV,WKLQNLWߞVLPSRUWDQWIRUXVWRGLVFXVVWKLVSDUWLFXODUTXHVWLRQ 7KHILUVWLVWKDWLWDVNVZK\WKHDXWKRUUHIHUVWR)DULGSXUDVDߡSKDQWRPߢLQOLQH7KLVW\SHRITXHVWLRQ DQQR\VDORWRISHRSOHEHFDXVHLWVHHPVWREHDVNLQJ\RXWRUHDGWKHDXWKRUߞVPLQGDQGILJXUHRXWKHU PRWLYDWLRQIRUFKRRVLQJDSDUWLFXODUZRUGZKLFKVHHPVXQIDLUO\VXEMHFWLYH%XWDVWUDLQHGWHVWWDNHUV ZHKDYHWRNQRZWKDWWKHDQVZHUWRWKLVTXHVWLRQOLNHWKHDQVZHUWRHYHU\$&75HDGLQJTXHVWLRQLV VRPHZKHUHGLUHFWO\RQWKHSDJHDQGUHTXLUHVQRVXEMHFWLYLW\DWDOOQRPDWWHUKRZWKHTXHVWLRQLVSKUDVHG 7KHVHFRQGUHDVRQLVSHUKDSVHYHQPRUHLPSRUWDQWSDUWRIWKH$&7ߞVRZQH[SODQDWLRQIRUWKLVTXHVWLRQLV DWOHDVWLQFRPSOHWHDQGPLVOHDGLQJDQGDUJXDEO\ZURQJ 5HPHPEHUWKDWZKHQ,VD\WKDWDTXHVWLRQ H[SODQDWLRQIURPWKH$&7LVߡZURQJߢZKDW,PHDQLVWKDWWKHORJLFLWIROORZVZRQߞWDOZD\VOHDG\RXWR ILQGFRUUHFWDQVZHUVRQIXWXUH$&7TXHVWLRQV,QRWKHUZRUGVVXFKDQH[SODQDWLRQFDQߞWUHIOHFWWKHDFWXDO UHDVRQLQJRIWKHWHVWEHFDXVHWKHWHVWLVVWDQGDUGL]HGDQGWKH5HG%RRNߞVH[SODQDWLRQZRXOGQߞWDOZD\V OHDGWRFRUUHFWDQVZHUV ,ߞOOH[SODLQPRUHDERXWZK\WKH$&7ߞVH[SODQDWLRQLVEDGDIWHUZHWDNHDORRNDW HDFKRIWKHDQVZHUFKRLFHV $ LVZURQJEHFDXVHWKHWH[WQHYHUPDNHVDQ\FRQQHFWLRQEHWZHHQ)DULGSXUDQGWKHDXWKRUߞVPRWKHU7KLV LVDQH[DPSOHRIWKHW\SHRIZURQJDQVZHUWKDWMXPEOHVLGHDVIURPWKHWH[W WKHDXWKRUߞVPRWKHUߞVWDOHVDUH UHIHUUHGWRLQOLQHVWKURXJK % LVZURQJEHFDXVHOLQHVWKURXJKH[SODLQWKDWߡGHVKߢPHDQVWKHDXWKRUߞVߡFRXQWU\ߢDQGLQOLQHV DQGVKHH[SODLQVWKDW)DULGSXUDQG0DQKDWWDQKDYHPHUJHGWRJHWKHUWREHFRPHKHUߡGHVKߢ,QRWKHU ZRUGVWKHDXWKRUߞVߡGHVKߢRUߡFRXQWU\ߢLQFOXGHVERWKSODFHVQRWMXVW0DQKDWWDQ<RXFDQSUREDEO\ LPDJLQHKRZHDVLO\DORWRIWHVWWDNHUVFRXOGPLVUHDGWKHWH[WDQGDFFLGHQWDOO\FKRRVHWKLVDQVZHU & LVZURQJWRR7KHWH[WGRHVVD\LQOLQHVDQGWKDW)DULGSXUߡLVQRZLQ%DQJODGHVKߢ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ߡDQFHVWUDOKRPHߢRIWKHDXWKRUߞVIDWKHULQOLQH%XWWKHDQVZHUFKRLFHVD\V)DULGSXULVWKHDQFHVWUDO KRPHRIWKHDXWKRUKHUVHOI<RXPD\EHZRQGHULQJZK\WKLVLVRND\ZKHQ,NHHSHPSKDVL]LQJUHSHDWHGO\ WKDWZHKDYHWRSD\YHU\FDUHIXODWWHQWLRQWRVXFKVPDOOGLIIHUHQFHV7KHUHDVRQWKLVLVRND\KDVWRGRZLWK WKHPHDQLQJRIWKHSKUDVHߡDQFHVWUDOKRPHODQGߢ$SHUVRQߞVߡDQFHVWRUVߢDUHWKHSHRSOHLQKHUOLQHDJHߚ KHUSDUHQWVJUDQGSDUHQWVJUHDWJUDQGSDUHQWVDQGVRRQ6RE\GHILQLWLRQWKHߡDQFHVWUDOKRPHODQGߢRI WKHDXWKRUߞVIDWKHUPXVWDOVREHWKHDXWKRUߞVDQFHVWUDOKRPHODQGEHFDXVHWKHDXWKRUߞVIDWKHULVRQHRIWKH DXWKRUߞVDQFHVWRUV7KHVHFRQGKDOIRIWKHDQVZHUFKRLFHߚZKLFKVD\VWKDWWKHDXWKRUKDVQHYHUEHHQWR )DULGSXUߚLVUHVWDWHGZKHQWKHWH[WFDOOV)DULGSXUDSODFHVKHKDVߡQHYHUVHHQߢ,QOLQH7KLVLGHDLV UHVWDWHGLQOLQHZKHQWKHDXWKRUVD\V)DULGSXULVߡXQJOLPSVHGߢ 1RZOHWߞVWDONDERXWZK\WKH$&7ߞVH[SODQDWLRQRQSDJHRIWKH5HG%RRNLVEDG7KH$&7FODLPV WKDW & LVZURQJVLPSO\EHFDXVHߡWKLVLVQߞWZK\VKHUHIHUVWR)DULGSXUDVDߝSKDQWRPߞߢ,QRWKHUZRUGV WKH$&7ߞVH[SODQDWLRQMXVWVXEMHFWLYHO\DVVHUWVWKDW & LVDWUXHVWDWHPHQWEXWLWߞVWKHZURQJWUXH VWDWHPHQWDQGDWHVWWDNHULVPDJLFDOO\VXSSRVHGWRNQRZWKDW$VZHߞYHGLVFXVVHGPDQ\WLPHVWKRXJK WKLVNLQGRIH[SODQDWLRQLVQHYHUUHDOO\WKHUHDVRQZK\DQDQVZHURQWKH$&7LVFRUUHFWHYHQWKRXJKZH PD\EHWHPSWHGWRDVVXPHLWLVLIZHJHWIUXVWUDWHGZLWKDSDUWLFXODUTXHVWLRQ $V,PHQWLRQHGDERYHWKHDFWXDOUHDVRQLQJEHKLQG & EHLQJDZURQJDQVZHUߚWKHREMHFWLYHUHDVRQLQJ WKDWZLOOFRQWLQXHWRDSSO\WRDOOIXWXUHRIILFLDO$&7TXHVWLRQVZLWKQRVXEMHFWLYHLQWHUSUHWDWLRQQHFHVVDU\ RQRXUSDUWߚLVWKDWWKHWH[WQHYHUDFWXDOO\VD\VWKDW)DULGSXUߡZDVRQFHSDUWRI,QGLDߢDVWKHDQVZHU FKRLFHFODLPV7KHWH[WGRHVVD\WKDWWKHDXWKRUWKLQNVVKHߡߝEHORQJVߞߢWR)DULGSXUDQGLWGRHVVD\WKDW ,QGLDLVߡWKHODUJHUSROLWLFDOHQWLW\WRZKLFK>VKH@JDYH>KHU@ILUVWDOOHJLDQFH OLQHV ߢEXWWKDW GRHVQߞWPHDQE\LWVHOIWKDW)DULGSXUXVHGWREHDSDUWRI,QGLD$VDSDUDOOHOH[DPSOH,PLJKWVD\WKDW, IHHO,EHORQJWR,UHODQGEHFDXVHLWߞVP\DQFHVWUDOKRPHODQGEXWWKDW,JDYHP\ILUVWSROLWLFDODOOHJLDQFHWR WKHODUJHUHQWLW\RIWKH8QLWHG6WDWHVߚERWKVWDWHPHQWVDUHWUXHEXWWKH\GRQߞWQHFHVVDULO\PHDQWKDW ,UHODQGZDVHYHUSDUWRIWKH8QLWHG6WDWHV6RWKHKLVWRULFDOIDFWWKDW)DULGSXUZDVRQFHSDUWRI,QGLDLVQߞW DFWXDOO\GLUHFWO\H[SUHVVHGDQ\ZKHUHLQWKHWH[W 6ROHWPHVD\LWRQHPRUHWLPHWREHSHUIHFWO\FOHDU & LVZURQJEHFDXVHWKHILUVWSDUWRIWKDWFKRLFH LVQߞWIRXQGDQ\ZKHUHDWDOOLQWKHWH[W$OVRWKH$&7ߞVH[SODQDWLRQRI & RQSDJHLV DWOHDVW PLVOHDGLQJEHFDXVHLWPDNHVLWVRXQGOLNH\RXMXVWKDYHWRJXHVVWKDW & LVZURQJIRUVXEMHFWLYHUHDVRQV ZKLFKLVVRPHWKLQJWKH$&7FDQQHYHUUHTXLUHXVWRGR /HWWKLVEHRQHPRUHUHPLQGHURIWKHLPSRUWDQFHRIXQGHUVWDQGLQJKRZWKH$&7DFWXDOO\ZRUNVDQGRI WDNLQJWKH5HG%RRNߞVH[SODQDWLRQVZLWKDJUDLQRIVDOW 3DJH4XHVWLRQ 7KLVLVRQHPRUHTXHVWLRQIRUZKLFKWKH5HG%RRNߞVRZQH[SODQDWLRQLVLQFRPSOHWH/HWߞVWDNHDORRN ) LVZURQJEHFDXVHLWߞVQRWVXSSRUWHGE\WKHWH[W)RURQHWKLQJWKHDQVZHUFKRLFHPHQWLRQVFXOWXUDO GLIIHUHQFHVߡDPRQJFKDUDFWHUVߢZKLOHWKHWH[WRQO\WDONVDERXWFXOWXUDOGLIIHUHQFHVEHWZHHQWKHFKDUDFWHUV DQGWKHDXGLHQFHRUEHWZHHQWKHDXWKRUDQGWKHDXGLHQFHEXWQRWDPRQJWKHFKDUDFWHUVWKHPVHOYHV * LVFRUUHFWEXWQRWH[DFWO\IRUWKHUHDVRQVWKDWWKH5HG%RRNJLYHVRQSDJH7KH5HG%RRNVD\V * LVFRUUHFWEHFDXVHWKHUHDGHUVߡQHYHUNQHZߢWKDWSHRSOHIURPRWKHUFXOWXUHVKDGDQߡLQQHUOLIHߢ7KLV LVSDUWLDOO\FRUUHFWUHDVRQLQJEHFDXVHWKHSKUDVHߡ,QHYHUNQHZߢLQWKHWH[WJRHVZLWKWKHLGHDRIQRW KDYLQJUHDOL]HGVRPHWKLQJLQWKHDQVZHUFKRLFH %XWWKHWH[WQHYHUDFWXDOO\VD\VWKDWKDYLQJDQߡLQQHUOLIHߢPHDQVKDYLQJVRPHWKLQJLQFRPPRQZLWKWKH DXWKRUߞVUHDGHUVߚWKHWH[WQHYHUVD\VWKDWWKHUHDGHUVKDYHLQQHUOLYHVRIWKHLURZQRQO\WKDWWKHUHDGHUV DUHVXUSULVHGDWWKHLQQHUOLYHVRIWKHFKDUDFWHUV6RWKHOLQHLQWKHWH[WDERXWWKHߡLQQHUOLIHߢLVQߞWHQRXJK E\LWVHOIWRPDNH * WKHFRUUHFWDQVZHU7RILQGWKHSDUWRIWKHWH[WZKHUHWKHDXWKRUVD\VWKDWKHUUHDGHUV KDYHVRPHWKLQJLQFRPPRQZLWKKHUFKDUDFWHUVZHKDYHWRORRNLQWKHIRXUWKSDUDJUDSKZKHUHWKHDXWKRU VD\VVKHVWUXJJOHVWRߡPDNHWKH$PHULFDQUHDGHUVKLSDFNQRZOHGJH>WKDW@WKHIRUHLJQERUQZLWK QRQ(XURSHDQODQJXDJHVDQGDSSHDUDQFHFDQEH$PHULFDQߢ,QWKDWSDUDJUDSKWKHDXWKRUVSHFLILFDOO\ VD\VWKDWKHUZULWLQJPDNHV$PHULFDQUHDGHUVUHDOL]HWKDWSHRSOHIURPQRQ(XURSHDQEDFNJURXQGVFDQEH $PHULFDQOLNHWKHPDQGWKLVLVZKDWWKHDQVZHUFKRLFHLVUHIHUULQJWRZKHQLWVD\VWKHUHDGHUVDQGWKH FKDUDFWHUVKDYHߡPXFKPRUHLQFRPPRQߢWKDQWKHUHDGHUVUHDOL]HG 1RWLFHKRZWKHߡQRQ(XURSHDQߢ SHRSOHUHIHUUHGWRLQWKHIRXUWKSDUDJUDSKDUHWKHVDPHSHRSOHWKHDXWKRUUHIHUVWRLQOLQHVDQG + LVLQFRUUHFWEHFDXVHWKHWH[WQHYHUVD\VDQ\WKLQJDERXWWKHQXPEHURIFKDUDFWHUVLQDQ\NLQGRIVWRU\ 7KLVLVDJRRGH[DPSOHRIDQDQVZHUFKRLFHWKDWߞVFRPSOHWHO\LUUHOHYDQWZKLFKLVWKHVRUWRIWKLQJWKDW PLJKWPDNH\RXVHFRQGJXHVV\RXUVHOIDQGZRQGHULI\RXPLVVHGVRPHWKLQJLQWKHWH[W - LVLQFRUUHFW7KHWH[WGRHVPHQWLRQWKHߡLQQHUOLIHߢRILPPLJUDQWVEXWLWQHYHUVD\VWKHLUߡLQQHUOLIHߢLV ߡVWURQJHUߢWKDQDQ\RQHHOVHߞV:DWFKRXWIRUDQVZHUFKRLFHVOLNHWKLVZKLFKWDNHDIDFWIURPWKHWH[WDQG WKHQDGGDOLWWOHH[WUDLQIRUPDWLRQWKDWLVQߞWIURPWKHWH[W $VZHߞYHDOUHDG\VHHQPDQ\WLPHVDQGDVZHߞOOFRQWLQXHWRVHHWKURXJKRXWWKLV%ODFN%RRN\RXKDYHWR EHYHU\FDUHIXOZLWKWKHVROXWLRQVIRXQGLQWKH5HG%RRNEHFDXVHWKH\GRQߞWDOZD\VIXOO\H[SODLQWKH WHVWߞVUHDVRQLQJ:KHQ\RXUHYLHZDTXHVWLRQPDNHVXUH\RXFRPHXSZLWKVROXWLRQVWKDWUHTXLUHQR VXEMHFWLYLW\DQGWKDWXVHUHDVRQLQJWKDWFRXOGEHDSSOLHGWRDOOUHDO$&7TXHVWLRQV7KHQ\RXߞOONQRZWKDW \RXWUXO\XQGHUVWDQGWKHWHVWDQGWKDW\RXߞOOEHDEOHWRILQGWKHFRUUHFWDQVZHUVWRIXWXUH$&7TXHVWLRQV UHOLDEO\ 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVDERXWWKHPHDQLQJRIDFHUWDLQSKUDVHLQWKHFRQWH[WRIWKHSDVVDJH1RWLFHWKDWWKH TXHVWLRQXVHVWHUPVOLNHߡLQIHUߢDQGߡPRVWUHDVRQDEOHߢWRJHW\RXWRWKLQNWKHUHߞVVRPHWKLQJVXEMHFWLYH DERXWWKHFRUUHFWDQVZHUZKHQRIFRXUVHZHNQRZWKDWWKHUHFDQߞWEHDQ\WKLQJVXEMHFWLYHDERXWDQ$&7 5HDGLQJTXHVWLRQ$VDOZD\VRQO\RQHFKRLFHZLOODFWXDOO\PDNHVHQVHLQWKHFRQWH[WRIWKHSDVVDJHLIZH SD\FDUHIXODWWHQWLRQWRGHWDLODQGORRNIRUWKHDQVZHUFKRLFHWKDWUHVWDWHVHOHPHQWVRIWKHWH[W $ LVZURQJHYHQWKRXJKLWVRXQGVOLNHDUHDVRQDEOHLQIHUHQFHLI\RXRQO\UHDGOLQHVWKURXJKDQG GRQߞWUHDGWKHUHVWRIWKHSDVVDJH7KHTXRWHPLJKWVRXQGOLNHLWFRXOGEHGHVFULELQJWKHHYROXWLRQRID GLQRVDXUEXWWKHSDVVDJHFOHDUO\LQGLFDWHVWKDWZHߞUHWDONLQJDERXWWKHHYROXWLRQRIWKHZD\UHVHDUFKHUV WKLQNDERXWGLQRVDXUV1RWHIRULQVWDQFHWKDWOLQHVDQGWDONDERXWWKHZD\VWKDWߡPRVW SDOHRQWRORJLVWVDUHQRZZLOOLQJWRYLHZ>GLQRVDXUV@ߢ %XWLIZHUHDGFDUHIXOO\ZHFDQWHOOWKDWWKHTXRWHLQOLQHVWKURXJKFDQߞWEHDERXWWKHHYROXWLRQRI GLQRVDXUVDQ\ZD\HYHQLIZHGRQߞWORRNDWDQ\RWKHUOLQHV7KHTXRWHEHJLQVE\UHIHUULQJWRߡWKH %URQWRVDXUXVWKDWZDOORZHGLQLWVSRQGDJHQHUDWLRQDJRߢZKLFKGRHVQߞWDFWXDOO\PDNHDQ\OLWHUDOVHQVH VLQFHDFWXDOGLQRVDXUVKDYHEHHQH[WLQFWIRUPLOOHQQLD6RWKHVHQWHQFHPXVWQRWUHIHUWRGLQRVDXUV HYROYLQJRYHUWKHFRXUVHRIDVLQJOHJHQHUDWLRQEHFDXVHWKHUHZHUHQRGLQRVDXUVRQHJHQHUDWLRQEHIRUH WKHWH[WZDVZULWWHQDQGWKHSDVVDJHLVWDONLQJDERXWKRZ%URQWRVDXUXVZDVߡDJHQHUDWLRQDJRߢ 5HPHPEHUWKDWLWߞVDOZD\VLPSRUWDQWWRUHDGHYHU\WKLQJRQWKH$&7YHU\FDUHIXOO\ % LVFRUUHFWEHFDXVHRIWKHWKLQJVZHMXVWGLVFXVVHGDERXWFKRLFH $ 7KHSDVVDJHFOHDUO\GLVFXVVHV FKDQJHVLQWKHZD\ߡPRVWSDOHRQWRORJLVWVDUHZLOOLQJWRYLHZ>GLQRVDXUV@ߢ OLQHV $OVRQRWLFH KRZWKHSKUDVHߡZLWKLQWKHODVWJHQHUDWLRQߢLQWKLVDQVZHUFKRLFHPDWFKHVXSZLWKWKHSKUDVHߡD JHQHUDWLRQDJRߢIURPWKHTXRWHLQWKHTXHVWLRQ & LVZURQJIRUDYDULHW\RIUHDVRQV7KHPRVWREYLRXVLVVXHLVSUREDEO\WKDWWKLVDQVZHUFKRLFH PHQWLRQVLOOXVWUDWLRQVߡLQDFFXUDWHO\GHSLFW>LQJ@ߢGLQRVDXUVߞOLIHVW\OHVEXWWKHWH[WGRHVQߞWDFWXDOO\WU\WR GHVFULEHZKDWWKRVHOLIHVW\OHVZHUHOLNH(YHU\WKLQJGLVFXVVHGLQWKHWH[WZLWKUHJDUGWRWKH%URQWRVDXUXV LVWKHRUHWLFDOEHFDXVHWKH%URQWRVDXUXVLVH[WLQFW6HYHUDOSKUDVHVIURPWKHWH[WLQGLFDWHWKDWWKHDXWKRU LVQߞWFODLPLQJWRNQRZIRUFHUWDLQZKDWGLQRVDXUVZHUHUHDOO\OLNHKHߞVRQO\H[SODLQLQJZKLFKYLHZKH DJUHHVZLWK 6HHIRUH[DPSOHߡKDYHXVXDOO\EHHQUHFRQVWUXFWHGߢLQOLQHߡPDQ\SDOHRQWRORJLVWVQRZ EHOLHYHߢLQOLQHVDQGߡ,UHJDUGLWDVߢLQOLQHVDQGDQGߡWKHUHYLVLRQLVWLQWHUSUHWDWLRQZKLFK ,VXSSRUWߢLQOLQHV ' LVDOVRZURQJEHFDXVHLWߞVQRWVXSSRUWHGE\WKHWH[W$JDLQQRWKLQJLQWKHWH[WGLVFXVVHVFKDQJHVLQWKH DFWXDOEHKDYLRURUDELOLWLHVRI%URQWRVDXUXV,QVWHDGWKHWH[WRQO\GLVFXVVHVWKHFKDQJHLQWKHZD\ UHVHDUFKHUVVHHWKHDQLPDODVZHGLVFXVVHGLQWKHH[SODQDWLRQVIRUFKRLFHV $ DQG % 5HPHPEHUDVDOZD\VWKDWHYHU\FRUUHFWDQVZHUWRDQ$&75HDGLQJTXHVWLRQPXVWEHIXOO\VXSSRUWHGE\ WKHWH[WHYHQLIWKHSURPSWXVHVPLVOHDGLQJSKUDVHVOLNHߡPRVWUHDVRQDEOHWRLQIHUߢ 3DJH4XHVWLRQ ,VLQJOHGRXWWKLVTXHVWLRQIRUGLVFXVVLRQEHFDXVHRIWKHUHODWLRQVKLSVZHFDQILQGDPRQJWKHDQVZHU FKRLFHVKHUH1RWHWKDWWKUHHRIWKHIRXUFKRLFHVGLVFXVVWKHUHODWLYHEUDLQVL]HVRIGLQRVDXUVDQGKXPDQV 7KLVW\SHRISDWWHUQRIWHQVWURQJO\VXJJHVWVWZRWKLQJVRQWKH$&7 7KHFRUUHFWDQVZHUZLOOSUREDEO\EHRQHRIWKHWKUHHFKRLFHVWKDWIRFXVRQEUDLQVL]HEHFDXVHWKH $&7W\SLFDOO\RQO\FKRRVHVWRUHSHDWDQLGHDLQDORWRIDQVZHUFKRLFHVZKHQWKHLGHDLVUHODWHGWR WKHFRUUHFWDQVZHU :HߞOOSUREDEO\QHHGWRUHDGUHDOO\FDUHIXOO\WRPDNHVXUHZHGRQߞWDFFLGHQWDOO\PLVXQGHUVWDQGWKH SDVVDJHDQGIDOOIRUDZURQJDQVZHUVLQFHWKHZURQJDQVZHUVZLOOKDYHDORWRIVLPLODULWLHVWRWKH ULJKWDQVZHU :KHQZHORRNEDFNDWWKHIRXUWKSDUDJUDSKZKLFKVSHFLILFDOO\GHVFULEHVߡWKHUHYLVLRQLVWLQWHUSUHWDWLRQߢ LQOLQHVDQGZHVHHWKDWOLQHVDQGPHQWLRQߡWKHLVVXHRIVWXSLGLW\DQGLWVFRUUHODWLRQZLWK VL]Hߢ6RZHFDQVHHWKDWZHߞYHIRXQGWKHUHOHYDQWSDUWRIWKHWH[WIRUWKLVTXHVWLRQEHFDXVHWKHTXHVWLRQ PHQWLRQVߡWKHUHYLVLRQLVWLQWHUSUHWDWLRQߢDQGWKHߡUHODWLRQVKLSEHWZHHQLQWHOOLJHQFHDQGSK\VLFDOVL]Hߢ MXVWDVWKLVSDUWRIWKHWH[WGRHV 7KHHQGRIWKLVSDUDJUDSKOLQHVVD\VWKDWWKHUHYLVLRQLVWLQWHUSUHWDWLRQߡGRHVPDLQWDLQWKDW >GLQRVDXUV@KDGWKHߝULJKWVL]HGߞEUDLQVIRUUHSWLOHVRIWKHLUERG\VL]Hߢ7KLVPDWFKHVXSGLUHFWO\ZLWK WKHFRUUHFWDQVZHU ' ZKLFKVD\VWKDWWKHEUDLQVDUHߡDSSURSULDWHO\VL]HGߢ $ LVZURQJEHFDXVHQRWKLQJUHODWHGWRWKHUHYLVLRQLVWLQWHUSUHWDWLRQLQWKHWH[WDFWXDOO\VD\VGLQRVDXUV KDGUHODWLYHO\ODUJHEUDLQVHYHQLIWKHWKHRU\GRHVVD\GLQRVDXUVߡZHUHQRWVPDOOEUDLQHGDWDOOߢ OLQH 0DQ\SHRSOHZKRGRQߞWUHDGFDUHIXOO\PLJKWDFFLGHQWDOO\HTXDWHWKHLGHDRIQRWEHLQJߡVPDOO EUDLQHGߢZLWKWKHLGHDRIEHLQJߡODUJHEUDLQHGߢEXWWKHVHLGHDVDUHQߞWH[DFWO\WKHVDPHEHFDXVHLWߞV SRVVLEOHWRKDYHDEUDLQWKDWߞVߡULJKWVL]HGߢDFFRUGLQJWRWKHDXWKRU OLQH % LVWKHH[DFWRSSRVLWHRIWKHWH[WZKLFKVD\VRQOLQHVDQGWKDWWKHDXWKRUߞVYLHZߡGRHVQRW HQVKULQHGLQRVDXUVDVSDUDJRQVRILQWHOOHFWߢ 1RWLFHWKDWZHGRQߞWQHHGWRNQRZZKDWWKHZRUGߡSDUDJRQߢ DFWXDOO\PHDQVKHUHߚZHMXVWKDYHWRUHDGWKHWH[WDQGPDWFKXSUHODWHGSKUDVHV & LVDQLGHDWKDWߞ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ߞYHDOUHDG\UHDGWKH DSSURSULDWHWH[WIRUTXHVWLRQZHVKRXOGNQRZWRORRNEDFNDWWKHHLJKWKSDUDJUDSKZKHUHOLQHVDQG VD\WKDWGLQRVDXUVߡGRPLQDWHGWKHHDUWKIRUVRORQJߢDQGߡKHOGVZD\IRUPLOOLRQ\HDUVߢ:HFDQ VHHULJKWDZD\WKDWFKRLFH ' PXVWEHFRUUHFW&KRLFHV % DQG & PHQWLRQQXPEHUVWKDWDSSHDULQOLQHV DQGUHVSHFWLYHO\&KRLFH $ GRHVQߞWDSSHDULQWKHWH[WEXWLWNLQGRIVRXQGVVLPLODUWRWKHFRUUHFW DQVZHUWKLVFKRLFHLVSUREDEO\LQFOXGHGWRWULFNSHRSOHZKRGRQߞWERWKHUWRJREDFNDQGUHFRQILUPWKDW WKHULJKWQXPEHULVRQHKXQGUHGPLOOLRQLQVWHDGRIRQHKXQGUHGWKRXVDQG 1RZWKLVPLJKWVHHPOLNHDIDLUO\REYLRXVTXHVWLRQWKDWߞVQRWUHDOO\ZRUWKH[SODLQLQJ%XW,ߞPLQFOXGLQJLW KHUHEHFDXVHSHRSOHDFWXDOO\GRPLVVWKLVTXHVWLRQIDLUO\RIWHQLIWKH\ߞUHQRWLQWKHKDELWRIUHDGLQJYHU\ FDUHIXOO\DWDOOWLPHVZKLOHWDNLQJWKH$&75HPHPEHUWKDW\RXUHDOO\FDQߞWDIIRUGWRPDNHFDUHOHVVHUURUV RQTXHVWLRQVOLNHWKLV0RVWWHVWWDNHUVFRXOGKLWWKHLUWDUJHWVFRUHVLIWKH\ZRXOGMXVWHOLPLQDWHWKHVHNLQGV RIPLVWDNHVDQGDOOLWWDNHVWRGRWKDWLVDZDUHQHVVDQGFRPPLWPHQWRQ\RXUSDUW 3DJH4XHVWLRQ ,VLQJOHGRXWWKLVTXHVWLRQIRUGLVFXVVLRQEHFDXVHLWߞVRQHWKDWDORWRISHRSOHPLVVXQQHFHVVDULO\,IZH MXVWUHDGFDUHIXOO\DQGSD\DWWHQWLRQWRWKHGHWDLOVߚOLNHZHDOZD\VQHHGWRGRRQWKH$&7ߚZHFDQ ILJXUHRXWWKHDQVZHU 2QHWKLQJ,ZRXOGQRWLFHSUHWW\TXLFNO\LVWKDWWKHILUVWWZRDQVZHUFKRLFHVUHIHUWRWKHQDUUDWRUDVDQ DGXOWZKLOHWKHODVWWZRUHIHUWRKHUDVDQDGROHVFHQW7KLVPHDQVWKDWWKHWH[WPXVWFOHDUO\LQGLFDWH ZKHWKHUVKHߞVDQDGXOWRUDQDGROHVFHQW6LQFHILJXULQJWKDWRXWZLOODOORZPHWRHOLPLQDWHWZRDQVZHU FKRLFHVLQRQHVKRW,ߞGSUREDEO\VWDUWWKHUH $WWKLVSRLQW,ߞGSUREDEO\VNLPWKURXJKWKHSDVVDJHDQGORRNIRUZRUGVOLNHߡDGXOWߢRUߡDGROHVFHQWߢRU DQ\RWKHUUHIHUHQFHWRDJH,ZRXOGVHHWKDWWKHZRUGߡDGROHVFHQWߢDSSHDUVLQOLQHDQGGRHVQߞWVHHPWR VKRZXSDQ\ZKHUHHOVHVR,ߞGSUREDEO\VWDUWE\IRFXVLQJWKHUH 7KDWVHQWHQFHWDONVDERXWWKHDXWKRUKDYLQJWRߡIRUJRWKHOX[XU\RIDGROHVFHQWH[SHULPHQWVߢLQRUGHUWREH DEOHWRKHOSKHUPRWKHU 1RZLI\RXNQRZWKHZRUGߡIRUJRߢWKHQ\RXFDQXQGHUVWDQGWKDWWKHDXWKRULVVD\LQJVKHߞOOJLYHXSKHU ULJKWWRDGROHVFHQWH[SHULPHQWVLQRUGHUWRKHOSKHUPRWKHU7KLVPHDQVWKHDXWKRUFDQߞWEHSDVWWKH DGROHVFHQWVWDJHRIKHUOLIHߚRWKHUZLVHLWZRXOGEHWRRODWHWRIRUJRDQ\WKLQJIURPWKDWVWDJH %XWZKDWLI\RXGRQߞWNQRZWKHZRUGߡIRUJR"ߢ 2QWKLVTXHVWLRQ\RXFRXOGDFWXDOO\ZRUNDURXQGWKDWXQNQRZQZRUGDVZLOORIWHQEHWKHFDVHRQWKH $&71RPDWWHUZKDWWKHZRUGߡIRUJRߢPHDQVZHFDQVWLOOWHOOIURPWKHVHQWHQFHWKDWWKHDXWKRULVWDONLQJ DERXWPDNLQJVRPHNLQGRIGHFLVLRQDERXWDGROHVFHQWH[SHULPHQWV,IWKHDXWKRUVWLOOKDVWKHFKDQFHWR PDNHDQ\GHFLVLRQVDERXWKHUDGROHVFHQWH[SHULPHQWVWKHQLWPXVWEHWKHFDVHWKDWVKHKDVQߞWSDVVHG WKURXJKDGROHVFHQFH\HWߚZKLFKDJDLQPHDQVVKHPXVWQRWEHDQDGXOW 7KHUHߞVDQRWKHUZD\WKHZRUGߡIRUJRߢFDQWULSSHRSOHXSDFWXDOO\,I\RXUHDGWKDWVHQWHQFHIURPWKHWH[W WRRTXLFNO\\RXPLJKWWKLQNWKHZRUGߡIRUJRߢLVDFWXDOO\WKHZRUGߡIRUJHWߢDQGWKHQ\RXPLJKWEHLQUHDO WURXEOHLI\RXUHDVRQHGWKDWRQO\DQDGXOWFRXOGߡIRUJHWߢKHUDGROHVFHQFH7KLVLVRQHPRUHH[DPSOHRIWKH H[WUHPHLPSRUWDQFHRIUHDGLQJFDUHIXOO\RQWKH$&7 6RZHNQRZ $ DQG % DUHZURQJEHFDXVHWKH\UHIHUWRWKHDXWKRUDVDQDGXOWQRWDQDGROHVFHQW ,IZHFRQVLGHUWKHUHVWRI & DQG ' ZHFDQWHOOWKDW & LVDOVRZURQJEHFDXVHWKHWH[WGRHVQߞWVD\WKH DXWKRULVߡLPDJLQLQJߢDQ\WKLQJߚVKHGHVFULEHVZKDWDFWXDOO\KDSSHQHG ' LVFRUUHFWEHFDXVHWKHDXWKRUVSHFLILFDOO\VD\VLQOLQHVDQGWKDWVKHZRXOGKDYHWRߡVFRRSP\ PRWKHURXWRIKDUPߞVZD\DQGJLYHKHUVDQFWXDU\ߢZKLFKPDWFKHVXSZLWKWKHLGHDRIߡHDV>LQJ@KHU PRWKHUߞVDGMXVWPHQWWROLIHLQWKH8QLWHG6WDWHVߢIURPWKHDQVZHUFKRLFH ,ߞGDOVROLNHWRSRLQWRXWWKDWLWߞVSRVVLEOHWRDQVZHUWKLVTXHVWLRQHYHQLIZHQHYHUILJXUHRXWZKHWKHUWKH DXWKRULVDQDGXOWRUDQDGROHVFHQWEHFDXVHZHFDQVWLOOIRFXVRQWKHRWKHUSDUWVRIWKHDQVZHUFKRLFHVDQG UHDGFDUHIXOO\ $ ZRXOGVWLOOKDYHWREHLQFRUUHFWEHFDXVHWKHWH[WGRHVQߞWVD\WKDWWKHPRWKHUDQGWKHQDUUDWRUZHUH RQO\YLVLWLQJWKH8QLWHG6WDWHV,QIDFWWKHODVWVHQWHQFHRIWKHSDVVDJHVSHFLILFDOO\PHQWLRQVWKDWWKHDXWKRU DQGKHUPRWKHUߡZRXOGQRWEHUHWXUQLQJߢWRWKHLUߡIRUPHUOLYHVߢ % KDVWKHVDPHSUREOHPDV $ EHFDXVHWKHWH[WQHYHUVD\VWKDWWKHDXWKRUSODQVWRUHWXUQ,QIDFWDVZH MXVWVDZWKHWH[WVD\VH[DFWO\WKHRSSRVLWH 3DJH4XHVWLRQ 3HRSOHPLVVWKLVTXHVWLRQDOOWKHWLPHDQGLWߞVXVXDOO\MXVWEHFDXVHWKH\GRQߞWDSSURDFKWKHTXHVWLRQZLWK GLVFLSOLQH )LUVWLWߞVDEVROXWHO\FULWLFDOWKDWZHQRWLFHWKHZRUGߡ(;&(37ߢLQDOOFDSV7KDWZRUGLQGLFDWHVWKDW ZHߞUHORRNLQJIRUWKHRQHFKRLFHWKDWWKHQDUUDWRUߞVPRWKHUGRHVQߞWILQGߡWURXEOLQJߢ,QRWKHUZRUGVWKH FRUUHFWDQVZHUZLOOEHWKHFKRLFHWKDWߞVQRWLQWKHWH[WZKLFKLVWKHRSSRVLWHRIWKHXVXDOVLWXDWLRQRQDQ $&75HDGLQJTXHVWLRQ ) LVZURQJEHFDXVHOLQHVDQGVD\ߡ0\PRWKHUGLGQRWDSSUHFLDWHWKHH[DFWLQJRUGHUOLQHVVߢ * LVZURQJEHFDXVHOLQHVWKURXJKVD\ߡ6KHFRXOGQRWJLYHLQWRWKHDEVHQFHRIFDUFDVVHVߢ + LVFRUUHFWEHFDXVHWKHWH[WQHYHUPHQWLRQVRWKHUVKRSSHUVEHLQJߡKXUULHGߢVRZHKDYHQRHYLGHQFHRI KRZWKHQDUUDWRUߞVPRWKHUPLJKWKDYHIHOWDERXWWKRVHNLQGVRIVKRSSHUVRUZKHWKHUWKH\ZHUHHYHQ SUHVHQWLQWKHVWRUH - LVZURQJEHFDXVHWKHDXWKRUH[SODLQVWKHFKHFNRXWV\VWHPLQOLQHVWKURXJKDQGWKHQWKHPRWKHU H[SHULHQFHVߡDIHZPRPHQWVߞKHVLWDWLRQߢEHFDXVHRIWKHߡSHFXOLDULW\RIP\H[SODQDWLRQߢWKHQLQOLQH WKHPRWKHUߡJUXPEOH>V@ߢEHFDXVHRIKRZWKHFKHFNRXWFOHUNWUHDWVKHU 1RZOHWPHFDOO\RXUDWWHQWLRQIRUDVHFRQGWRWKH5HG%RRNߞVH[SODQDWLRQRIWKLVTXHVWLRQZKLFKFDQEH IRXQGRQSDJH7KH5HG%RRNVD\V + LVFRUUHFWEHFDXVHRIOLQHLQWKHSDVVDJHZKLFKPHQWLRQV WKDWSHRSOHߡPHDQGHUHGߢWKURXJKWKHVWRUH7KH5HG%RRNSRLQWVRXWWKDWߡPHDQGHUHGߢLVVRUWRIWKH RSSRVLWHRIߡKXUULHGߢLQFKRLFH + %XWWKHZRUGߡPHDQGHUHGߢDFWXDOO\KDVQRWKLQJWRGRZLWK + EHLQJFRUUHFWLQWKHVHQVHWKDWWKHFRUUHFW DQVZHUWRDQߡ(;&(37ߢTXHVWLRQRQWKH$&7GRHVQߞWKDYHWRLQFOXGHDZRUGWKDWFRQWUDGLFWVWKHWH[W 7KHRQO\WKLQJQHHGHGWRPDNH + FRUUHFWLVWKHDEVHQFHRIDQ\PHQWLRQRIWKHPRWKHUEHLQJߡWURXEOHGߢ E\ߡKXUULHGVKRSSHUVߢ,QRWKHUZRUGVHYHQLIWKHZRUGߡPHDQGHUHGߢZHUHQߞWWKHUH + ZRXOGVWLOOEH FRUUHFWEHFDXVHWKHWH[WQHYHUPHQWLRQVWKHPRWKHUKDYLQJDQ\QHJDWLYHIHHOLQJVWRZDUGߡKXUULHG VKRSSHUVߢ $JDLQLWߞVLPSRUWDQWWRWDNHWKH$&7ߞVH[SODQDWLRQVRILWVRZQTXHVWLRQVZLWKDJUDLQRIVDOW,I\RXUHDG WKH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQ\RXPLJKWJHWWKHZURQJLGHDDERXWKRZߡ(;&(37ߢ TXHVWLRQVZRUNRQWKH$&77KHULJKWDQVZHUWRDQߡ(;&(37ߢTXHVWLRQGRHVQߞWKDYHWRFRQWUDGLFWWKH WH[WHYHQWKRXJKWKH5HG%RRNVD\V + LVFRUUHFWEHFDXVHRIWKHZRUGߡPHDQGHUHGߢ7KHULJKWDQVZHUWR DQߡ(;&(37ߢTXHVWLRQRQO\KDVWRIDLOWRVKRZXSLQWKHWH[WLQRUGHUWREHFRUUHFW 7KHUHߞVRQHPRUHWKLQJ,ZDQWWRPHQWLRQ<RXPD\UHPHPEHUWKDW,FRQVWDQWO\UHPLQG\RXWRJRWKURXJK DOOWKHDQVZHUFKRLFHVIRUHYHU\TXHVWLRQLQVWHDGRIMXVWSRXQFLQJRQDFKRLFH\RXOLNHDQGWKHQPRYLQJ RQWRWKHQH[WTXHVWLRQZLWKRXWUHDGLQJWKHRWKHUFKRLFHV7KLVW\SHRITXHVWLRQLVRQHRIWKHPDLQUHDVRQV WKDW,LQVLVW\RXFRQVLGHUDOOWKHDQVZHUFKRLFHVLI\RXRYHUORRNWKHZRUGߡ(;&(37ߢLQWKHTXHVWLRQ \RXߞOOSUREDEO\WKLQNWKDWFKRLFH ) ORRNVJRRGULJKWDZD\EXWLI\RXNHHSUHDGLQJWKURXJKWKHRWKHU FKRLFHV\RXߞOOSUREDEO\QRWLFHWKDW * DQG - DOVRVHHPGHFHQW<RXPLJKWHQGXSEHLQJSUHWW\VXUHWKDW PRUHWKDQRQHRIWKHDQVZHUFKRLFHVLVGLUHFWO\LQWKHWH[WHYHQWKRXJK\RXNQRZWKDWHYHU\$&7TXHVWLRQ FDQRQO\KDYHRQHFRUUHFWDQVZHU$QGWKDWVKRXOGPDNH\RXUHDOL]HWKDW\RXߞYHPDGHDPLVWDNHDWVRPH SRLQWLQ\RXUDSSURDFKWRWKLVTXHVWLRQߚZKLFKZRXOGJLYH\RXWKHFKDQFHWRUHHYDOXDWHWKHTXHVWLRQDQG KRSHIXOO\UHFRJQL]HWKDW\RXKDGRYHUORRNHGWKHZRUGߡ(;&(37ߢ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ߡDOOFKLOGUHQHYHQWXDOO\ ZDWFKWKHLUSDUHQWVߞDVWRQLVKLQJUHWXUQWRWKHYXOQHUDELOLW\RIFKLOGKRRGߢEXWWKDWߡWKHSURFHVVEHJLQV PXFKHDUOLHUWKDQH[SHFWHGߢIRUߡFKLOGUHQRILPPLJUDQWSDUHQWVߢ7KHQDUUDWRUDOVRPHQWLRQVߡKHOS>LQJ@ߢ KHUPRWKHULQOLQHDQGLQWKHUHVWRIWKDWSDUDJUDSK 7KHVHSKUDVHVPDWFKXSH[DFWO\ZLWKWKHFRUUHFWDQVZHUZKLFKLVFKRLFH % 7KHWH[WUHIHUVWRWKHLGHD WKDWDOOFKLOGUHQHYHQWXDOO\VHHVRPHWKLQJZKLFKPDWFKHVWKHLGHDRIߡWKHLQHYLWDEOHVKLIWߢLQWKHDQVZHU FKRLFH7KHLGHDRIWKHߡSDUHQWߞVUHWXUQWRWKHYXOQHUDELOLW\RIFKLOGKRRGߢIURPWKHSDVVDJHLV UHIOHFWHGLQWKHSKUDVHߡWKHYXOQHUDEOHSDUHQWߢLQWKHDQVZHUFKRLFH7KHLGHDRIߡSURWHFWLQJߢIURPWKH DQVZHUFKRLFHHFKRHVWKHLGHDRINHHSLQJWKHPRWKHUߡRXWRIKDUPߞVZD\ߢDQGߡJLY>LQJ@KHUVDQFWXDU\ߢLQ OLQHVDQG7KHSKUDVHߡWDNHVSODFHVRRQHUIRUFKLOGUHQRILPPLJUDQWVߢIURPWKHDQVZHUFKRLFH PDWFKHVXSZLWKWKHSKUDVHߡIRUXVWKHSURFHVVEHJLQVPXFKHDUOLHUWKDQH[SHFWHGߢ6RDOODVSHFWVRI FKRLFH % DUHVXSSRUWHGE\WKHWH[W &KRLFHV $ DQG & ERWKFRQWDLQLGHDVWKDWDUHUHODWHGWRWKRVHLQWKHWH[WEXWWKHVHFRQGKDOIRI $ FRQWUDGLFWVWKHWH[WZKLOH & LQFOXGHVGHWDLOVQRWPHQWLRQHGLQWKHWH[W ' LQWURGXFHVDWRWDOO\XQUHODWHGEXWSODXVLEOHFRQFHSWWKDWLVQߞWDGGUHVVHGDQ\ZKHUHLQWKHWH[WVRLWߞV ZURQJ$VZHNHHSVHHLQJWKH$&7ZLOOWKURZWKHVHDQVZHUFKRLFHVLQWKHUHVRPHWLPHVSUREDEO\ KRSLQJ\RXߞOOELWH5HPHPEHUWRVWD\GLVFLSOLQHGLQ\RXUDSSURDFKWRWKH$&75HDGLQJVHFWLRQDQGRQO\ PDUNDQDQVZHUZKHQ\RXFDQVHHKRZLWߞVVXSSRUWHGLQWKHWH[W 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVZKDWFDQEHߡUHDVRQDEO\LQIHUUHGIURPWKHSDVVDJHߢ5HPHPEHUWKDWWKH$&7XVHV WKHVHNLQGVRIVXEMHFWLYHSKUDVHVWRPDNHLWVRXQGOLNH\RXߞUHVXSSRVHGWRLQWHUSUHWVRPHWKLQJRUPDNHD MXGJPHQWFDOO%XWDVWUDLQHGWHVWWDNHUVZHNQRZZHߞOODOZD\VILQGWKHFRUUHFWDQVZHULQGLFDWHGLQWKH WH[WLQDQREMHFWLYHO\YHULILDEOHZD\ 6ROHWߞVWDNHDORRN $ LVZURQJEHFDXVHWKHDXWKRUGLUHFWO\TXRWHV-HIIHUVRQKLPVHOIGHVFULELQJKLVZRUNVDVQRWߡDLPLQJDW RULJLQDOLW\ߢ OLQH ZKLFKFRQWUDGLFWVWKHSKUDVHߡDWWHPSWVDWRULJLQDOLW\ߢLQWKHDQVZHUFKRLFH % LVFRUUHFW:HFDQVD\WKHDXWKRUWKRXJKW-HIIHUVRQZDVߡEULOOLDQWߢEHFDXVHLQOLQHWKHWH[W GHVFULEHV-HIIHUVRQߞVZRUGVDVߡLQJHQLRXVO\GRXEOHHGJHGߢDQGߡEULOOLDQWߢFDQEHDV\QRQ\PIRU ߡLQJHQLRXVߢ:HFDQDOVRVD\WKHDXWKRUWKRXJKW-HIIHUVRQZDVߡSUDFWLFDOߢEHFDXVHKHGHVFULEHV -HIIHUVRQߞVDSSURDFKWRWKH'HFODUDWLRQRI,QGHSHQGHQFHDVߡWKHREYLRXVSUDFWLFDOFRXUVHߢ OLQH 7KH DXWKRUGRHVQߞWVHH-HIIHUVRQDVDSODJLDUL]HUEHFDXVHKHVSHFLILFDOO\VD\VLQOLQHWKDWKLVVWDWHPHQWLV QRWPHDQWߡWRDFFXVH>-HIIHUVRQ@RISODJLDULVPߢ:HDOVRNQRZWKHDXWKRUGRHVQߞWVHH-HIIHUVRQDVD SURSKHWVLQFHKHVD\VLQOLQHVWKURXJKWKDWߡQRVHULRXVVWXGHQWKDVHYHUFODLPHGWKDW>-HIIHUVRQ@ IRUHVDZFRQVHTXHQFHVRIZKDWKHZURWHߢ)LQDOO\ZHNQRZWKHDXWKRUVDZ-HIIHUVRQDVDPDQ ߡZULWLQJXQGHUSUHVVXUHߢEHFDXVHOLQHVWKURXJKOLVWVHYHUDOIDFWRUVRIWKHߡFRQWH[WߢVXUURXQGLQJWKLV GRFXPHQWLQFOXGLQJ&RQJUHVVߡEHLQJRYHUZKHOPHGߢ 1RWLFHWKDWWKLVDQVZHUFKRLFHGHVFULEHVILYHDVSHFWVRI-HIIHUVRQߚWKDWKHZDVEULOOLDQW DQGSUDFWLFDO WKDWKHZDVQRWDSODJLDUL]HU RUDSURSKHW DQGWKDWKHZURWHXQGHUSUHVVXUH ,QRUGHUIRU WKHDQVZHUFKRLFHWREHFRUUHFWDOOILYHHOHPHQWVQHHGWREHVXSSRUWHGE\WKHWH[WDQGZHFDQVHHWKDW WKH\DUH & LVLQFRUUHFWEHFDXVHWKHWH[WQHYHUVD\V-HIIHUVRQVKRXOGJHWPRUHDWWHQWLRQWKDQKHGRHV ' LVLQFRUUHFWEHFDXVHWKHDXWKRUQHYHUGHVFULEHV-HIIHUVRQDVߡDYHUDJHߢ 6RPH$&75HDGLQJTXHVWLRQVOLNHWKLVRQHFDQUHTXLUHXVWRGUDZRQZRUGVDQGSKUDVHVWKDWDUH VFDWWHUHGWKURXJKRXWWKHWH[WLQVWHDGRIORFDOL]HGWRDSDUWLFXODUOLQHRUSDUDJUDSK.HHSWKLVLQPLQGDV \RXGHFLGHZKHWKHU\RXSUHIHUWRUHDGWKHWH[WEHIRUHDQVZHULQJWKHTXHVWLRQV<RXPLJKWILQGLWHDVLHUWR VNLSDTXHVWLRQOLNHWKLVRQHZKHQ\RXILUVWVHHLWDQGVDYHLWXQWLO\RXߞYHDQVZHUHGDOOWKHRWKHUTXHVWLRQV DERXWWKLVSDVVDJHZKLFKZRXOGDOORZ\RXPRUHRIDFKDQFHWRIDPLOLDUL]H\RXUVHOIZLWKWKHSDVVDJH ZKLOH\RXJDLQSRLQWVE\DQVZHULQJRWKHUTXHVWLRQV7KHQZKHQ\RXUHWXUQHGWRWKLVTXHVWLRQ\RXZRXOG SUREDEO\ILQGLWHDVLHUWRSLQSRLQWUHOHYDQWSKUDVHV 2IFRXUVHDV,PHQWLRQHOVHZKHUHLQWKLV%ODFN%RRNWKHUHLVQRVLQJOHEHVWZD\WRDSSURDFKUHDGLQJRU VNLPPLQJDSDVVDJHRQWKH$&75HDGLQJVHFWLRQWKDWLVJXDUDQWHHGWREHRSWLPDOIRUHYHU\WHVWWDNHU <RXߞOOQHHGWRH[SHULPHQWZLWK\RXUDSSURDFKXQWLO\RXILQGVRPHWKLQJWKDWZRUNVIRU\RX-XVWPDNHVXUH \RXUDSSURDFKDOORZV\RXWRDFFRPPRGDWHTXHVWLRQVOLNHWKLVRQHZKHUHWKHNH\SKUDVHVLQWKHSDVVDJH DSSHDUPDQ\OLQHVDSDUWIURPRQHDQRWKHU 3DJH4XHVWLRQ 7KLVTXHVWLRQLVZRUWKH[DPLQLQJFORVHO\EHFDXVHLWGHPRQVWUDWHVDORWRIWKHLVVXHVZHQHHGWREHRQWKH ORRNRXWIRURQWKH$&75HDGLQJVHFWLRQ )LUVWWKHTXHVWLRQDVNVXVWRILQGWKHVWDWHPHQWWKDWߡEHVWVXPPDUL]HVߢ/LQFROQߞVFRPPHQWVDQGPDQ\ XQWUDLQHGWHVWWDNHUVPLJKWEHZRUULHGWKDWPRUHWKDQRQHDQVZHUFKRLFHFRXOGEHDGHFHQWVXPPDU\RI WKHVHFRPPHQWV%XWDVWUDLQHGWHVWWDNHUVZHNQRZWKDWWKHFRUUHFWDQVZHUZLOOEHWKHRQO\FKRLFHWKDW DFFXUDWHO\VXPPDUL]HVWKHFRPPHQWV 7KHZURQJDQVZHUVIRUWKLVTXHVWLRQDUHDOVRSUHWW\VQHDN\HYHQIRUDQ$&7TXHVWLRQ(DFKRIWKHZURQJ DQVZHUVLVFRPSRVHGPRVWO\RIFRQFHSWVWDNHQGLUHFWO\IURPWKHWH[WEXWWKHZURQJDQVZHUVUHODWHWKRVH FRQFHSWVWRRQHDQRWKHULQZD\VWKDWGLIIHUIURPWKHZD\WKH\DSSHDULQWKHWH[W7KLVLVZK\LWߞVVR LPSRUWDQWWRPDNHVXUH\RXFKRRVHDQDQVZHUZLWKWKHULJKWFRQFHSWVDQGWKHULJKWUHODWLRQVKLSVDPRQJ WKRVHFRQFHSWVLQVWHDGRIMXVWOHDSLQJDWWKHILUVWFKRLFHWKDWVHHPVWRPHQWLRQWKHVDPHEDVLFLGHDVIURP WKHWH[W )LQDOO\WKLVTXHVWLRQGHPRQVWUDWHVDSDWWHUQWKDWZHߞOOVHHIDLUO\RIWHQRQWKH$&7DFURVVDOOIRXU PXOWLSOHFKRLFHVHFWLRQV7ZRRIWKHDQVZHUFKRLFHVEHJLQZLWKWKHVDPHSKUDVHZKLOHWKHRWKHUWZR FKRLFHVEHJLQZLWKGLIIHUHQWSKUDVHVERWK + DQG - EHJLQZLWKߡHYHQXQGHUSUHVVXUHRIZDUߢZKLOH ) VWDUWVZLWKߡHYHQGXULQJWKHILJKWߢDQG * VWDUWVZLWKߡHYHQGXULQJDUHYROXWLRQߢ&RQFHSWXDOO\WKRVH WKUHHSKUDVHVDUHDOOSUHWW\VLPLODUEXWRQO\ + DQG - XVHH[DFWO\WKHVDPHLQLWLDOSKUDVHV7KLVZLOO W\SLFDOO\VXJJHVWߚ%87'2(6127*8$5$17((ߚWKDWHLWKHU + RU - LVFRUUHFWEHFDXVHWKH$&7 RIWHQOLNHVWRUHSHDWHOHPHQWVRIWKHFRUUHFWDQVZHULQRQHRUPRUHLQFRUUHFWDQVZHUV 7KLVDOVRPHDQVZHQHHGWRSD\VWULFWDWWHQWLRQZKHQHYDOXDWLQJWKHODVWWZRFKRLFHVVLQFHWKH\VWDUWRXW YHU\VLPLODUO\,WZRXOGEHHDV\WRUHDOL]HWKDW\RXOLNHGRQHRIWKRVHFKRLFHVDQGWKHQWRWKLQNߡ2K, OLNHGWKHFKRLFHDERXWWKHSUHVVXUHRIZDUߢDQGWKHQDFFLGHQWDOO\ILOOLQWKHZURQJDQVZHUHYHQLI\RX FRUUHFWO\XQGHUVWRRGWKHTXHVWLRQMXVWEHFDXVH\RXJRWFRQIXVHGJRLQJEDFNDQGIRUWKEHWZHHQWKHWHVW ERRNOHWDQG\RXUDQVZHUVKHHW :KHZߚWKDWߞVDORWRIVWXIIWRPHQWLRQEHIRUHZHHYHQUHDOO\JHWLQWRWKHDQVZHUFKRLFHV/HWߞVWDNHD ORRNDWWKHPQRZ ) LVZURQJEHFDXVHLWVD\VWKDW-HIIHUVRQߞVVWDWHPHQWKDVEHHQXVHGDJDLQVWUHYROXWLRQDULHVEXW/LQFROQ VD\VWKHVWDWHPHQWZLOOEHXVHGDJDLQVWW\UDQWVDQGRSSUHVVRUV3HRSOHRIWHQLQFRUUHFWO\FKRRVH ) EHFDXVHWKH\PLVUHDGWKHSKUDVHߡDJDLQVWUHYROXWLRQDULHVߢLQWKLVDQVZHUFKRLFHDVWKRXJKLWVDLGߡE\ UHYROXWLRQDULHVߢ7KLVLVRQHPRUHH[DPSOHRIZK\LWߞVVRLPSRUWDQWWRUHDGFDUHIXOO\DQGWRUHDGDOORI WKHDQVZHUFKRLFHV5HDGLQJFDUHIXOO\PLJKWKHOS\RXDYRLGFKRRVLQJ ) LQWKHILUVWSODFHLI\RXGLG KDSSHQWRPLVUHDG ) WKHQUHDGLQJWKHRWKHUDQVZHUFKRLFHVPLJKWKHOS\RXWRUHDOL]H\RXUPLVWDNHZKHQ \RXJRWWRFKRLFH + DQGUHDOL]HGWKDWDQRWKHUFKRLFHDOVRVHHPHGWRUHVWDWHWKHSDVVDJH * VD\VWKDW-HIIHUVRQSUHGLFWHGIXWXUHW\UDQWVEXW/LQFROQQHYHUVDLG-HIIHUVRQDFWXDOO\SUHGLFWHGIXWXUH W\UDQWV/LQFROQRQO\VDLGWKDW-HIIHUVRQߞVZRUGVZRXOGKDYHDQHIIHFWRQWKHߡKDUELQJHUVRIUHDSSHDULQJ W\UDQQ\ߢ,QRWKHUZRUGV/LQFROQVD\VWKDW-HIIHUVRQߞVZRUGVZRXOGLPSDFWODWHUW\UDQWVEXW/LQFROQ QHYHUVD\VWKDW-HIIHUVRQDFWXDOO\GHOLEHUDWHO\SUHGLFWHGWKHUHZRXOGEHIXWXUHW\UDQWV $QRWKHULVVXHLV WKDWWKHSKUDVHߡKDUELQJHUVRIW\UDQQ\ߢLVQߞWH[DFWO\V\QRQ\PRXVZLWKWKHZRUGߡW\UDQWVߢVLQFHD KDUELQJHULVDQLQGLFDWLRQWKDWVRPHWKLQJLVFRPLQJ%XWPRVW$&7WDNHUVGRQߞWNQRZWKHZRUG ߡKDUELQJHUߢDQGDQ\ZD\ZHFDQVWLOOWHOOWKDWWKLVFKRLFHLVZURQJEHFDXVHRIWKHSUREOHPZLWKWKHZRUG ߡSUHGLFWHGߢDV,MXVWH[SODLQHG :HFDQVHHWKDWFKRLFH + LVFRUUHFWEHFDXVHHYHU\SDUWRI + LVVXSSRUWHGE\/LQFROQߞVZRUGV7KH DQVZHUFKRLFHEHJLQVZLWKWKHSKUDVHߡHYHQXQGHUSUHVVXUHRIZDUߢDQG/LQFROQߞVVWDWHPHQWPHQWLRQVWKDW -HIIHUVRQZDVߡLQWKHFRQFUHWHSUHVVXUHRIDVWUXJJOHIRUQDWLRQDOLQGHSHQGHQFHߢLQOLQHVDQG7KH DQVZHUFKRLFHDOVRVD\VWKDW-HIIHUVRQߞVGRFXPHQWߡQRWRQO\DQQRXQFHGDUHYROXWLRQEXWDOVRVSRNH DJDLQVWRSSUHVVLRQIRUDOOWLPHߢDQG/LQFROQFDOOHGWKHGHFODUDWLRQDߡPHUHO\UHYROXWLRQDU\GRFXPHQWߢLQ ZKLFK-HIIHUVRQߡLQWURGXFH>G@DUHEXNHWRRSSUHVVLRQߢ OLQHV WKDWZRXOGVWDQGIRUߡDOO FRPLQJGD\Vߢ6RDVDOZD\VZHVHHWKDWHYHU\SKUDVHLQWKHFRUUHFWDQVZHUFKRLFHLVGLUHFWO\UHVWDWHGLQ WKHUHOHYDQWSDUWRIWKHWH[W - VD\VWKDW-HIIHUVRQߡGDUHGW\UDQWVWRFRQWLQXDOO\UHDSSHDUߢEXW/LQFROQQHYHUGHVFULEHG-HIIHUVRQ LVVXLQJDGDUH 7KHUHߞVDORWJRLQJRQLQWKLVTXHVWLRQDQGLQP\H[SODQDWLRQߚLWPLJKWEHDJRRGLGHDWRUHYLHZERWKRI WKHPDFRXSOHRIWLPHVWRPDNHVXUH\RXGRQߞWPLVVDQ\WKLQJ 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVDERXWWKHߡPDLQSXUSRVHߢRIWKLVSDVVDJH$ORWRIWHVWWDNHUVKDYHWURXEOH DQVZHULQJTXHVWLRQVWKDWDVNDERXWDSDVVDJHߞVߡPDLQSXUSRVHߢEXWZHILQGWKHDQVZHUVWRTXHVWLRQVOLNH WKHVHGLUHFWO\LQWKHWH[WMXVWDVZHZRXOGZLWKDQ\RWKHU$&75HDGLQJTXHVWLRQ7KHRQO\H[WUD FRQVLGHUDWLRQZHPLJKWKDYHWRNHHSLQPLQGLVWKDWߡPDLQSXUSRVHߢTXHVWLRQVVRPHWLPHVLQFOXGHPRUH WKDQRQHDQVZHUFKRLFHWKDWGLUHFWO\UHIOHFWVWKHWH[W,IWKLVTXHVWLRQWXUQVRXWWREHOLNHWKDWWKHQWKH FRUUHFWDQVZHUZLOOEHWKHRQHWKDWߞVUHVWDWHGPRVWRIWHQLQWKHSDVVDJH $ LVFRUUHFWEHFDXVHLWGHVFULEHVDWRSLFWKDWFRPHVXSDJDLQDQGDJDLQLQWKLVSDVVDJH7KHDXWKRUWDONV DERXWߡKRZߢWKHVKRZHQGXUHGZKHQKHVD\VWKHVKRZߡFDSWXUHGWKHLPDJLQDWLRQDQGYLHZHUOR\DOW\RI PLOOLRQVRI$PHULFDQVߢ OLQHV DQGZKHQKHPHQWLRQVLWVߡPHWHRULFULVHWRSRSXODULW\ߢ OLQH DQGZKHQKHVD\VWKDWߡE\6WDU7UHNKDGEHFRPHWKHPRVWZDWFKHGRIIQHWZRUNVHULHVGUDPDRIDOO WLPHߢ OLQHVDQG 7KHDXWKRUWDONVDERXWߡZK\ߢWKHVKRZHQGXUHGZKHQKHVD\VLWߡEHQHILWHG JUHDWO\IURPEHLQJWKHULJKWVKRZDWWKHULJKWWLPHߢ OLQHVDQG DQGZKHQKHVD\VWKHVKRZ ߡUHVRQDWHGZLWKPLOOLRQVRILGHDOLVWLFDQGDZHVWUXFN$PHULFDQVߢ OLQHVDQG DQGZKHQKHVD\VQR RWKHUFODVVLFVKRZߡLOOXVWUDWH>G@WKHVFRSHRI$PHULFDߞVFXOWXUDOHYROXWLRQDVHORTXHQWO\ߢ OLQHVDQG DQGVRRQ7KHKRZVDQGZK\VRI6WDU7UHNߞVVXFFHVVFRPHXSDJDLQDQGDJDLQLQWKHSDVVDJHZKLFK LVZK\ $ LVWKHFRUUHFWDQVZHUWRWKLVߡPDLQSXUSRVHߢTXHVWLRQ % LVLQFRUUHFWHYHQWKRXJKWKHDXWKRUGRHVXVHWKHWKLUGSDUDJUDSKWRGLVFXVVZKDW$PHULFDQVRFLHW\ ZDVOLNHZKHQWKHRULJLQDOVHULHVZDVFUHDWHG5HPHPEHUWKDWߡPDLQSXUSRVHߢTXHVWLRQVRQWKH$&7 5HDGLQJVHFWLRQFDQVRPHWLPHVIHDWXUHPRUHWKDQRQHDQVZHUFKRLFHWKDWDSSHDUVLQWKHWH[WDQGWKH FRUUHFWDQVZHUWRVXFKDTXHVWLRQZLOOEHWKHFKRLFHWKDWߞVUHVWDWHGPRVWRIWHQLQWKHSDVVDJH % LVZURQJ EHFDXVHLWGRHVQߞWFRPHXSDVRIWHQDVWKHWRSLFRIߡKRZDQGZK\6WDU7UHNKDVHQGXUHGߢDVPHQWLRQHGLQ FKRLFH $ & LVLQFRUUHFWEHFDXVHWKHWH[WGRHVQߞWPHQWLRQWKHVWRU\OLQHFKDQJLQJRYHUWKH\HDUKLVWRU\RIWKH VKRZ ' LVDOVRLQFRUUHFWHYHQWKRXJKOLNH % LWGRHVDFWXDOO\UHVWDWHDQLGHDIURPWKHSDVVDJH7KHPDQ\ GLIIHUHQWIRUPVWDNHQE\WKH6WDU7UHNVWRU\DUHPHQWLRQHGLQWKHVHYHQWKSDUDJUDSKRIWKHSDVVDJHDQG DJDLQLQWKHODVWKDOIRIWKHODVWSDUDJUDSK6WLOOWKHKRZVDQGZK\VRI6WDU7UHNߞVVXFFHVVDUHPHQWLRQHG PRUHRIWHQVR $ LVFRUUHFW 7KLVTXHVWLRQFDQVHHPYHU\VXEMHFWLYHDQGFRQIXVLQJWRDQXQWUDLQHGWHVWWDNHU/HWWKLVEHRQHPRUH UHPLQGHURIWKHLPSRUWDQFHRIXQGHUVWDQGLQJKRZWKH$&7UHDOO\ZRUNVVRWKDWRQWHVWGD\\RXߞOONQRZ H[DFWO\KRZWRDQVZHUWKHVHDSSDUHQWO\VXEMHFWLYHTXHVWLRQVZLWKWRWDOFHUWDLQW\DQGREMHFWLYLW\ 3DJH4XHVWLRQ 0DQ\VWXGHQWVUHDGDTXHVWLRQOLNHWKLVDQGWKLQNߡ+RZDP,VXSSRVHGWRNQRZKRZWKHDXWKRUIHHOV DERXWWKLVVXEMHFW"ߢ%XWWUDLQHGWHVWWDNHUVNQRZWKDWWKHGHVFULSWLRQLQWKHFRUUHFWDQVZHUFKRLFHZLOOEH GLUHFWO\VXSSRUWHGE\WKHWH[WDQGWKHGHVFULSWLRQVLQWKHZURQJDQVZHUFKRLFHVZRQߞW$QGGRQߞWIRUJHW WKDWHDFKDQVZHUFKRLFHKHUHLQYROYHVWZRZRUGVߚERWKZRUGVKDYHWREHGLUHFWO\VXSSRUWHGE\WKHWH[W IRUWKHFRUUHFWDQVZHUWREHFRUUHFW ) LVLQFRUUHFWEHFDXVHQHLWKHUZRUGLVVXSSRUWHGE\WKHWH[W)RUDZRUGOLNHߡDPXVHGߢWREHDFFXUDWH WKHWH[WZRXOGKDYHWRLQFOXGHDSKUDVHOLNHߡLWPDNHVPHODXJKߢRUߡ,FDQߞWKHOSEXWFKXFNOHߢRU VRPHWKLQJOLNHWKDW)RUDZRUGOLNHߡWROHUDQFHߢWREHDFFXUDWHWKHUHZRXOGKDYHWREHDSKUDVHOLNHߡ, JXHVVVXFKDQGVXFKLVRND\ߢRUߡ,KDYHQRFKRLFHEXWWRJRDORQJZLWKVXFKDQGVXFKߢRUVRPHWKLQJOLNH WKDW:HGRQߞWVHHDQ\SKUDVHVOLNHWKLVLQWKHWH[W 6RPHXQWUDLQHGWHVWWDNHUVPLJKWWKLQNWKDWWKHDXWKRUVRXQGVLQWHOOLJHQWDQGWKH\PLJKWEHDEOHWRLPDJLQH WKDWVRPHRQHLQWKHDXWKRUߞVSRVLWLRQFRXOGIHHOVRPHWKLQJOLNHߡDPXVHGWROHUDQFHߢWRZDUGVD79VKRZ VRWKH\PLJKWWDONWKHPVHOYHVLQWRFKRRVLQJWKLVDQVZHU%XWWKRVHNLQGVRIFRQVLGHUDWLRQVDUHLUUHOHYDQW RQWKH$&7ߚDOOWKDWPDWWHUVLVZKHWKHUDQDQVZHUFKRLFHUHVWDWHVWKHWH[W7KLVRQHGRHVQߞWVRLWߞV ZURQJ * LVZURQJ,WߞVDOVRNLQGRIDQRGGDQVZHUFKRLFHEHFDXVHLWPHQWLRQVߡGHWDFKHGLQWHUHVWߢZKLFK VRXQGVOLNHDGLIILFXOWEDODQFHWRVWULNHߚKRZFDQDQDXWKRUEHVLPXOWDQHRXVO\GHWDFKHGDQGLQWHUHVWHG" $Q\ZD\LIZHORRNDWHDFKZRUGLQWKLVFKRLFHLQGLYLGXDOO\ZHVHHWKDW * PXVWEHZURQJ:HFDQߞW GHVFULEHWKHDXWKRUߞVDWWLWXGHDVGHWDFKHGVLQFHKHXVHVYHU\SRVLWLYHZRUGLQJWRGHVFULEHWKHVKRZOLNH ZKHQKHPHQWLRQVWKHVKRZߞVߡLQVLJKWDQGDGGHGSHUVSHFWLYHߢ OLQH RUZKHQKHVD\VQRRWKHUFODVVLF VKRZߡLOOXVWUDWHVWKHVFRSHRI$PHULFDߞVFXOWXUDOHYROXWLRQDVHORTXHQWO\ߢ OLQHVDQG RUZKHQKH PHQWLRQVWKHVKRZߞVߡSURYRFDWLYHLQVLJKWߢ OLQH DQGߡUHDVVXULQJFRPIRUWߢ OLQH 6LQFHWKHDXWKRU FOHDUO\KDVDSRVLWLYHHPRWLRQDOUHDFWLRQWRWKHVKRZWKH$&7ZRQߞWOHWXVGHVFULEHKLVDWWLWXGHDV ߡGHWDFKHGߢ + LVWKHFRUUHFWDQVZHUEHFDXVHZHFDQVHHLQDQXPEHURISODFHVWKHߡZDUPߢIHHOLQJWKHDXWKRUKDV WRZDUGWKHVKRZZKLFKJRHVKDQGLQKDQGZLWKKLVߡDSSUHFLDWLRQߢIRULWߚLQIDFWZHFRXOGHYHQDUJXH WKDWIHHOLQJZDUPO\DERXWVRPHWKLQJDQGDSSUHFLDWLQJLWDUHV\QRQ\PVLQWKLVFRQWH[W7KHSKUDVHV,FLWHG LQGLVFXVVLQJFKRLFH * FOHDUO\GHPRQVWUDWHWKHDXWKRUߞVSRVLWLYHDWWLWXGHWRZDUGVWKHVKRZ - LVLQFRUUHFWEHFDXVHQRWKLQJLQWKHWH[WVXSSRUWVWKHLGHDWKDWWKHDXWKRULVߡVNHSWLFDOߢDERXWWKLVVKRZ WRDQ\GHJUHH,QIDFWWKHSDVVDJHFORVHVZLWKWKHDXWKRUߞVSURFODPDWLRQWKDWߡDV$PHULFDJRHVEROGO\LQWR WKHQH[WPLOOHQQLXPVRZLOO6WDU7UHNLQSULQWRQWHOHYLVLRQDQGLQIRUPDWV\HWWRFRPHߢ,IߡVNHSWLFDOߢ ZHUHJRLQJWREHSDUWRIDFRUUHFWDQVZHUIRUWKLVTXHVWLRQWKHSDVVDJHZRXOGQHHGWRLQFOXGHVWDWHPHQWV OLNHߡ,ߞPQRWVXUHLI,EHOLHYHLQ6WDU7UHNߢRUߡ,WߞVGLIILFXOWWRDFFHSWVXFKDQGVXFKDERXW6WDU7UHNߢ DQGVRRQ 5HPHPEHUWKDWWKHFRUUHFWDQVZHUWRDQ$&75HDGLQJTXHVWLRQPXVWDOZD\VEHGLUHFWO\DQGREMHFWLYHO\ RQWKHSDJHHYHQZKHQWKHTXHVWLRQPLJKWVHHPVXEMHFWLYHWRXQWUDLQHGWHVWWDNHUV 3DJH4XHVWLRQ ,FKRVHWKLVTXHVWLRQIRUIXUWKHUGLVFXVVLRQEHFDXVHLWߞVDQRWKHUH[DPSOHRIWKH5HG%RRNJLYLQJDSRRU H[SODQDWLRQRIDQDQVZHUFKRLFHߚLQWKLVFDVHFKRLFH + ,WߞVLPSRUWDQWWRPDNHVXUH\RXXQGHUVWDQG ZKDWߞVUHDOO\ZURQJZLWK + LQDZD\WKDWZLOODOORZ\RXWRDQVZHU$&7TXHVWLRQVFRUUHFWO\LQWKH IXWXUH /HWߞVJRWKURXJKWKHDQVZHUFKRLFHVLQRUGHU &KRLFH ) LVFRUUHFWEHFDXVHWKHWKLUGSDUDJUDSKGHVFULEHVWKHWLPHRIWKHVKRZߞVFUHDWLRQDVRQHRI ߡVRFLDODQGSROLWLFDOFKDQJHߢGXULQJZKLFKLWZDVߡGLIILFXOWIRUSHRSOHWRXQLWHLQFRPPRQSXUSRVHߢDQG VD\VWKDWDQXPEHURIWRSLFVߡGLYLGHGPDQ\$PHULFDQVE\UDFHJHQGHUDJHDQGSROLWLFVߢ7KHVHSKUDVHV PDWFKXSGLUHFWO\ZLWKWKHߡXQVHWWOHGVRFLDODQGSROLWLFDOFRQGLWLRQVߢPHQWLRQHGLQFKRLFH ) VR ) LV ULJKW &KRLFH * LVZURQJEHFDXVHWKHߡJHQHUDOSRSXODULW\RIV\QGLFDWHGUHUXQVߢLVQHYHUPHQWLRQHGLQWKH SDVVDJH 7KH5HG%RRNߞVH[SODQDWLRQRQSDJHLVFRPSOHWHO\LQFRUUHFWZLWKUHVSHFWWRFKRLFH + 7KH5HG %RRNVD\V + DFFXUDWHO\GHVFULEHVDSRUWLRQRIWKHWH[WEXWWKDW + LVVWLOOZURQJEHFDXVHWKHTXHVWLRQ DVNVIRUWKHDXWKRUߞVRSLQLRQDQGWKHDXWKRUEHOLHYHVWKHVKRZߡRIIHUHGLQVLJKWDQGDGGHGSHUVSHFWLYHߢ 7KHUHDUHDWOHDVWWZRPDMRUSUREOHPVZLWKWKLVDQDO\VLV7KHILUVWSUREOHPLVWKDWWKHTXHVWLRQDVNVZK\ WKHDXWKRUWKRXJKWWKHVKRZZDVULJKWIRULWVWLPHQRWZK\WKHDXWKRUKLPVHOIOLNHGWKHVKRZVRWKH DXWKRUߞVSHUVRQDOIHHOLQJVRQWKHVKRZDUHQߞWUHOHYDQWWRWKHTXHVWLRQߚWKHRQO\UHOHYDQWLVVXHLVZKDWWKH DXWKRUVD\VDERXWYLHZHUVLQJHQHUDOEHLQJUHDG\WRHPEUDFHWKHVKRZ7KHVHFRQGSUREOHPLVWKDWWKH 5HG%RRNߞVH[SODQDWLRQLVFRPSOHWHO\REMHFWLYHO\ZURQJZKHQLWVD\VWKDWߡWKHDXWKRUKLPVHOIEHOLHYHV 6WDU7UHNZDVߝDZLQGRZLQWRFXUUHQWFRQWURYHUV\ߞWKDWߝRIIHUHGLQVLJKWDQGDGGHGSHUVSHFWLYHߞߢ7KH DXWKRUFOHDUO\VD\VWKDWWKHVKRZZDVVXFKDZLQGRZߡIRUWKRVHZKRVDZWKHSURJUDPߢWKDWZD\ OLQHV DQGHPSKDVLVPLQH EXWWKHDXWKRUQHYHUVD\VZKHWKHUKHZDVRQHRIWKRVHSHRSOHߚRULQGHHG ZKHWKHUWKHDXWKRUHYHQH[LVWHGDWDOOZKHQWKHVKRZZDVODXQFKHG 6RWKH5HG%RRNߞVH[SODQDWLRQLVZURQJDERXWZKDWWKHVHQWHQFHLQOLQHRIWKHWH[WPHDQVDQGLWߞV ZURQJDERXWZKHWKHUWKDWPHDQLQJLVPRUHUHOHYDQWWRWKHTXHVWLRQWKDQWKHUHIHUHQFHWRHVFDSLVPLQOLQH RIWKHWH[W ,WߞVEHFDXVHRI5HG%RRNH[SODQDWLRQVOLNHWKLVWKDW,ߞPSUHWW\VXUHWKHSHRSOHZKRZULWHWKH$&7ߞV H[SODQDWLRQVDQGWKHSHRSOHZKRZULWHWKHDFWXDO$&7DUHGLIIHUHQWSHRSOH )RUPRUHRQWKLVWRSLFVHH ߡ+RZ&DQ7KH5HG%RRNߞV([SODQDWLRQV2I,WV2ZQ4XHVWLRQV%H:URQJ"ߢHDUOLHULQWKLV%ODFN%RRN ,I\RXWDNHWKH5HG%RRNߞVH[SODQDWLRQRIFKRLFH + WRKHDUW\RXߞOOSUREDEO\DQVZHUVRPHIXWXUH$&7 TXHVWLRQVLQFRUUHFWO\EHFDXVHWKH5HG%RRNߞVH[SODQDWLRQRIWKLVSDUWLFXODUFKRLFHLVEDVHGRQD IXQGDPHQWDOPLVUHDGLQJRIWKHSURPSWWKHDQVZHUFKRLFHDQGWKHSDVVDJH $WWKLVSRLQW\RXPD\EHZRQGHULQJZKDWߞVDFWXDOO\ZURQJZLWK + LIWKHSUREOHPLVQߞWZKDWWKH5HG %RRNVD\VLWLV 7KHUHDOSUREOHPZLWK + LVWKHZRUGߡLQFUHDVLQJߢ7KHWH[WQHYHUVD\VWKHGHPDQGIRUHVFDSLVPZDV LQFUHDVLQJ RUGHFUHDVLQJRUVWD\LQJFRQVWDQWRUDQ\WKLQJHOVH VRWKHZRUGߡLQFUHDVLQJߢPDNHV + ZURQJ7KDWߞVDOOWKHUHLVWRLW7KHUHDUHRWKHUSUREOHPVZLWK + WRREXWWKHZRUGߡLQFUHDVLQJߢLV HQRXJKIRU + WREHZURQJ 2QFHPRUHZHVHHWKDWUHDGLQJFDUHIXOO\DQGXQGHUVWDQGLQJKRZWKHWHVWDFWXDOO\ZRUNVZLOODOORZXVWR VDYHWLPHDQGDQVZHUPRUHTXHVWLRQVFRUUHFWO\EHFDXVHLWDOORZVXVWR]HURLQRQZKDWDFWXDOO\PDWWHUV 2QHELJSUREOHPZLWK - LVVLPLODUWRWKHSUREOHP,MXVWPHQWLRQHGZLWK + 7KHWH[WQHYHUVD\VDQ\WKLQJ DERXWDFKDQJHLQWKHOHYHORISRZHUIRUWKHPLGGOHFODVVVRWKHZRUGߡLQFUHDVLQJO\ߢLQ - LVHQRXJKWR PDNHLWZURQJ $VWKLVTXHVWLRQDPSO\GHPRQVWUDWHV\RXUHDOO\GRQHHGWREHFDUHIXOZKHQ\RXZRUNZLWKWKH5HG %RRNߞVH[SODQDWLRQV,QVRPHFDVHVWKRVHH[SODQDWLRQVDUHTXLWHDGHTXDWHEXWLQPDQ\FDVHVWKH\ߞUH LQHIILFLHQWPLVOHDGLQJRUIODWRXWZURQJ 5HPHPEHUWKDWLWߞVDOZD\VLPSRUWDQWWRXQGHUVWDQGWKHXQGHUO\LQJUHDVRQLQJEHKLQGDFRUUHFWRULQFRUUHFW DQVZHUFKRLFHLQDZD\WKDWZLOODOORZ\RXWRLGHQWLI\FRUUHFWDQVZHUVFRQVLVWHQWO\LQWKHIXWXUH7KDWߞV ZK\RQHRIWKHSULPDU\JRDOVRIWKLV%ODFN%RRNLVWRWHDFK\RXZKDWWKH$&7DFWXDOO\UHZDUGVDQG SXQLVKHVߚVR\RXFDQNQRZZKDW\RXߞUHUHDOO\XSDJDLQVWDQGKRZWREHDWLW 3DJH4XHVWLRQ 7KLVTXHVWLRQJLYHVXVDQHVSHFLDOO\FOHDUH[DPSOHRIWKHLPSRUWDQFHRIUHDGLQJHYHU\WKLQJRQWKH$&7 YHU\FORVHO\ZLWKDOLWHUDOPLQGVHW 7KHTXHVWLRQDVNVDERXWWKHXVHRIWKHWHUPߡYLVLRQDU\ߢLQOLQHVRZHVKRXOGJREDFNDQGUHDGWKH VHQWHQFHWKDWFRQWDLQVWKDWWHUPDVZHOODVDVHQWHQFHRUWZREHIRUHDQGDIWHUVRZHKDYHDQLGHDRIWKH FRQWH[W $ LVLQFRUUHFWEHFDXVHLWVD\VWKHLVVXHVDGGUHVVHGE\6WDU7UHNߡZHUHQߞWSUREOHPVDWWKHWLPHߢEXWOLQH FDOOVWKHPߡFRQWHPSRUDU\VRFLDOSUREOHPVߢZKLFKPHDQVWKH\ZHUHSUREOHPVDWWKHWLPHߚWKHZRUG ߡFRQWHPSRUDU\ߢPHDQVߡKDSSHQLQJDWWKHVDPHWLPHߢ7KLVDQVZHUFKRLFHFRQWUDGLFWVWKHWH[WVRLWߞV ZURQJ % LVFRUUHFWEHFDXVHLWPHQWLRQVWKHVKRZߞVߡFRPSOH[WKHPHVߢDQGߡLPDJLQDWLRQDQGIRUHVLJKWߢ:HVHH WKHVHWKHPHVOLVWHGLQOLQHVDQGDQGZHVHHWKHLPDJLQDWLRQDQGIRUHVLJKWPHQWLRQHGLQOLQHVDQG ZKHQWKHWH[WPHQWLRQVWKHVKRZߞVߡLQVLJKWDQGDGGHGSHUVSHFWLYHߢ1RWLFHWKHVWURQJOLWHUDOVLPLODULW\ DPRQJWKHURRWVRIWKHNH\ZRUGVLQWKHTXHVWLRQDQGWKHWH[WߡYLVLRQDU\ߢߡLPDJ>H@LQDWLRQߢߡIRUH VLJKWߢߡLQVLJKWߢߡSHUVSHFWLYHߢ,IZHORRNDWWKHZRUGVRQWKLVIXQGDPHQWDOOHYHOZHVHHWKH\DOO UHYROYHDURXQGWKHVDPHLGHDRIVRPHWKLQJYLVXDODQGWKHQLWEHFRPHVHYHQFOHDUHUWKDWWKHSKUDVHV LQFOXGLQJWKRVHZRUGVDUHDOVRDOOWDONLQJDERXWWKHVDPHWKLQJV 1RZWREHFOHDU,ߞPQRWVD\LQJWKDW\RXKDYHWRQRWLFHWKHVLPLODULWLHVLQWKRVHURRWVLQRUGHUWRDQVZHU WKLVTXHVWLRQFRUUHFWO\3OHQW\RIXQWUDLQHGWHVWWDNHUVPLJKWEHDEOHWRDQVZHUWKLVTXHVWLRQFRUUHFWO\ EDVLFDOO\E\OXFNHYHQDWUDLQHGWHVWWDNHUFRXOGUHDOL]HWKDW % LVFRUUHFWZLWKRXWVWRSSLQJWRUHIOHFWRQ WKHDFWXDOURRWVRIWKHZRUGVLQYROYHG $QG,ߞPFHUWDLQO\QRWVD\LQJWKDWWKHFRUUHFWDQVZHUWRHYHU\VLQJOH$&75HDGLQJTXHVWLRQZLOO LQFRUSRUDWHURRWVWKDWDUHV\QRQ\PRXVZLWKWKHURRWVRIWKHUHOHYDQWZRUGVLQWKHWH[W ,MXVWZDQWHGWRSRLQWRXWWKHURRWVLQWKLVSDUWLFXODUTXHVWLRQVRWKDW,FRXOGUHLQIRUFHWKHLGHDWKDWZH VKRXOGDOZD\VEHRQWKHORRNRXWIRUSKUDVHVLQWKHDQVZHUFKRLFHVWKDWUHVWDWHSKUDVHVIURPWKHSDVVDJH H[DFWO\(YHQLIWKHFRUUHFWDQVZHUGRHVQߞWIHDWXUHZRUGVZKRVHURRWVDUHV\QRQ\PRXVZLWKWKHURRWVRI ZRUGVLQWKHSDVVDJHZHVWLOOZDQWWRDSSURDFKHDFKDQVZHUFKRLFHZLWKDFRPSOHWHO\OLWHUDOPLQGVHW PDNLQJVXUHZHGHDOZLWKZKDWHDFKZRUGDFWXDOO\PHDQVDQGQRWZLWKRXURZQLQWHUSUHWDWLRQVRU VXEMHFWLYHDVVXPSWLRQVDERXWHDFKZRUG & LVLQFRUUHFWEHFDXVHWKHWH[WQHYHUPHQWLRQVWKDWWKHVKRZRIIHUHGߡGUHDP\ߢRUߡXQUHDOLVWLFߢVROXWLRQV WRSUREOHPV0DQ\XQWUDLQHGWHVWWDNHUVZLOOEHGUDZQWRWKLVDQVZHUFKRLFHEHFDXVHWKH\ߞOODVVXPHWKDW DQ\VFLHQFHILFWLRQVKRZPXVWDXWRPDWLFDOO\EHߡXQUHDOLVWLFߢ%XWWKHWH[WGRHVQߞWDFWXDOO\VD\DQ\WKLQJ DERXWWKHVROXWLRQVEHLQJUHDOLVWLFRUXQUHDOLVWLF ' LVLQFRUUHFWEXWZHQHHGWRUHDGFDUHIXOO\WRXQGHUVWDQGZK\7KHWH[WPHQWLRQV6WDU7UHNߞVߡZLGH DSSHDOLQV\QGLFDWLRQߢLQOLQHEXWWKLVߡZLGHDSSHDOߢLVWKHDSSHDORIWKHVKRZLQJHQHUDO7KH TXHVWLRQRQWKHRWKHUKDQGVSHFLILFDOO\DVNVDERXWWKHߡYLVLRQDU\HSLVRGHVߢPHQWLRQHGLQOLQH7KH DXWKRUGRHVQߞWH[SOLFLWO\VD\WKDWHYHU\VLQJOHHSLVRGHRIWKHVKRZZDVYLVLRQDU\KHVD\VWKDWWKHUHZHUH VRPHYLVLRQDU\HSLVRGHVLQOLQHDQGWKHQKHVD\VDIHZVHQWHQFHVODWHUWKDWߡHLWKHUZD\ߢWKHVKRZ KDGߡZLGHDSSHDOLQV\QGLFDWLRQߢ7KHGLIIHUHQFHEHWZHHQWKHLGHDRIVSHFLILFYLVLRQDU\HSLVRGHVDQGWKH LGHDRIWKHVKRZLQJHQHUDOLVHQRXJKWRPDNHWKLVFKRLFHZURQJDQGWKHSKUDVHߡHLWKHUZD\ߢDOVR LQGLFDWHVWKDWWKHDXWKRULVQߞWFLWLQJWKHߡZLGHDSSHDOߢLQFRQQHFWLRQZLWKWKHߡYLVLRQDU\HSLVRGHVߢ <HWDJDLQZHVHHWKDWWKHNH\WRDQVZHULQJDQ$&75HDGLQJTXHVWLRQFRUUHFWO\LVWRUHDGFDUHIXOO\DQGWR EHGLVFLSOLQHGLQRXUVHDUFKIRUDQDQVZHUFKRLFHWKDWUHVWDWHVWKHUHOHYDQWSRUWLRQRIWKHWH[W 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVZKLFKDQVZHUFKRLFHH[SUHVVHVDSDUDGR[WKDWWKHDXWKRUVHHV0RVWXQWUDLQHGWHVW WDNHUVZLOOWU\WRPDNHDVXEMHFWLYHDVVHVVPHQWRIWKHDUWLFOHDQGFKRRVHWKHSDUDGR[WKDWPDNHVWKHPRVW VHQVHWRWKHPEXWZHNQRZWKDWZHKDYHWRORRNIRUSKUDVHVWKDWWKHDXWKRUVSHFLILFDOO\PHQWLRQVDV RSSRVLWHVLQWKHWH[W ) LVLQFRUUHFW7KHDXWKRUGRHVPHQWLRQߡFXOWXUDOYDOXHVߢLQOLQHVDQGEXWKHQHYHUPHQWLRQVWKH LGHDRIHQWHUWDLQPHQWEHLQJRSSRVHGWRWKRVHYDOXHVVRWKHUHߞVQRHYLGHQFHLQWKHWH[WWKDWWKHDXWKRU WKLQNVWKHUHߞVDSDUDGR[KHUH * LVFRUUHFWEHFDXVHWKHDXWKRUVSHFLILFDOO\GHVFULEHVߡWKHSDUDGR[ߢRIFRPELQLQJߡFKDQJLQJFXOWXUDO YDOXHVߢZLWKߡUHDVVXULQJFRPIRUWߢRIߡWKHߝNQRZQߞߢ OLQHVWKURXJK 7KHSKUDVHߡFKDQJLQJFXOWXUDO YDOXHVߢFRUUHVSRQGVGLUHFWO\WRWKHLGHDRIߡFKDQJHߢLQWKHDQVZHUFKRLFHDQGWKHSKUDVHVDERXWWKH ߡUHDVVXULQJFRPIRUWߢRIWKHߡߝNQRZQߞߢFRUUHVSRQGWRWKHZRUGߡIDPLOLDULW\ߢLQWKHDQVZHUFKRLFH 7KHQRWLRQWKDWWKHVHLGHDVDUHߡFRQIOLFWLQJߢLVUHLQIRUFHGE\WKHZRUGߡQRQHWKHOHVVߢLQOLQHZKLFK LQGLFDWHVWKDWRQHLGHDLVZRUNLQJDJDLQVWWKHRWKHU )XUWKHULIZHORRNDWOLQHVWKURXJKZHVHHWKDWWKHDXWKRUWDONVDERXWߡELWWHUFKDQJHߢEHLQJ ߡVZHHWHQ>HG@ߢE\ߡIDPLOLDULW\ߢRQ6WDU7UHN7KLVVHQWHQFHDOVRH[SOLFLWO\SRVLWLRQVߡFKDQJHߢDQG ߡIDPLOLDULW\ߢDVRSSRVLWHVDQGZRXOGEHHQRXJKIRUXVWRNQRZWKDW * ZDVFRUUHFWHYHQZLWKRXWOLQHV WKURXJK + LVLQFRUUHFWEHFDXVHWKHDXWKRUGHVFULEHVWKHNQRZOHGJHRIWKH6WDU7UHNXQLYHUVHDVDߡFRPIRUWߢ ZKLFKPHDQVWKHVHWZRLGHDVDUHQRWLQFRQIOLFWLQKLVRSLQLRQ - LVLQFRUUHFW$OWKRXJKWKHߡVXUYLYDOߢRIWKH6WDU7UHNXQLYHUVHDQGߡEHLQJSURYRFDWLYHߢDUHERWK PHQWLRQHGQRWKLQJLQWKHWH[WLQGLFDWHVWKDWWKHVHWZRFRQFHSWVDUHFRQIOLFWLQJLQWKHDXWKRUߞVRSLQLRQ 1RWLFHLQWKLVTXHVWLRQWKDWHYHQLIZHZHUHQߞWVXUHRIWKHPHDQLQJRIWKHZRUGߡSDUDGR[ߢWKHTXHVWLRQ LWVHOIHQGVZLWKWKHKLQWWKDW\RXQHHGWRORRNIRUߡFRQIOLFWLQJLGHDVߢLQDGGLWLRQWRWKHIDFWWKDWOLQHV WKURXJKVSHFLILFDOO\XVHWKHZRUGߡSDUDGR[ߢWRGHVFULEHWKLVVLWXDWLRQ 3DJH4XHVWLRQ 7KLVW\SHRITXHVWLRQRIWHQERWKHUVXQWUDLQHGWHVWWDNHUVEHFDXVHLWVHHPVWREHSUHWW\VXEMHFWLYH%XWDV DOZD\VZHNQRZWKDWWKHFRUUHFWDQVZHUZLOOKDYHWRUHVWDWHVRPHWKLQJGLUHFWO\RQWKHSDJH ,ZRXOGSUREDEO\DWWDFNWKLVTXHVWLRQE\WU\LQJWRILQGDQDUHDRIWKHWH[WZLWKWKHZRUGVߡ+HOPKROW]ߢDQG ߡ*RHWKHߢFORVHWRRQHDQRWKHU/LQHKDVERWKZRUGVVRWKDWPLJKWEHDJRRGSODFHWRVWDUWORRNLQJ :HFDQVHHLQWKDWOLQHWKDWߡ+HOPKROW]JDYHDGPLULQJOHFWXUHVRQ*RHWKHDQGKLVVFLHQFHߢ%XWWKH TXHVWLRQDVNVKRZ+HOPKROW]IHHOVDERXW*RHWKHߞVߡFRORUWKHRU\ߢVSHFLILFDOO\VRZHQHHGWRVHHLIWKH WH[WHTXDWHVWKHLGHDRI*RHWKHߞVVFLHQFHZLWKKLVFRORUWKHRU\LQRUGHUWRWHOOLIWKLVLVWKHULJKWSDUWRIWKH WH[W :HVHHDGLUHFWUHIHUHQFHWRߡ*RHWKHߞVFRORUWKHRU\ߢLQOLQHLQOLQHZHOHDUQWKDWPDQ\VDZ*RHWKHߞV FRORUWKHRU\DVߡSVHXGRVFLHQFHߢLQWKHQH[WVHQWHQFHWKHDXWKRUVD\VWKDWߡVFLHQFHߢDQG*RHWKHߞVWKHRU\ KDGVRPHWKLQJVLQFRPPRQWKHQZHUHDGWKDW+HOPKROW]JDYHDGPLULQJOHFWXUHVRQ*RHWKHߞVVFLHQFH6R ZHFDQVHHWKDWWKHLGHDRI*RHWKHߞVVFLHQFHDQGKLVFRORUWKHRU\DUHHTXDWHGLQWKHILUVWWKUHHVHQWHQFHVRI WKHSDVVDJH 7KLVPHDQVWKHFRUUHFWDQVZHUZLOOKDYHWRPDWFKXSZLWKWKHZRUGߡDGPLULQJߢ2QO\FKRLFH % GRHV WKDW 8QWUDLQHGWHVWWDNHUVPD\EHWHPSWHGWRSLFN $ & RU ' EHFDXVHRISKUDVHVOLNHߡGLVPLVVHGE\DOO KLVFRQWHPSRUDULHVߢߡZKLPV\ߢDQGߡSVHXGRVFLHQFHߢLQOLQHVWKURXJKEXWWKHVHSKUDVHVGRQߞWUHIOHFW +HOPKROW]ߞVRSLQLRQ7KHTXHVWLRQDVNVDERXW+HOPKROW]ߞVRSLQLRQQRWDERXWWKHJHQHUDORSLQLRQRI *RHWKHߞVXQQDPHGFRQWHPSRUDULHV 2QFHPRUHZHVHHWKHLPSRUWDQFHRIUHDGLQJFDUHIXOO\DQGSD\LQJFORVHDWWHQWLRQWRWKHWH[W 3DJH4XHVWLRQ $ORWRIXQWUDLQHGWHVWWDNHUVPLVVWKLVTXHVWLRQEHFDXVHWKH\QHYHUILQGWKHUHOHYDQWSRUWLRQRIWKHWH[W 7KH\JHWRYHUZKHOPHGE\WKHUHODWLYHFRPSOH[LW\RIWKLVSDVVDJHDQGMXVWWU\WRJXHVVWKHLUZD\WRWKH ULJKWDQVZHU %XWZHDOZD\VQHHGWRUHPHPEHUWKDWWKHFRUUHFWDQVZHULVVSHOOHGRXWLQWKHWH[WVRPHZKHUH,IZH KDYHQߞWIRXQGWKHSODFHZKHUHLWߞVVSHOOHGRXWWKHQZHHLWKHUKDYHQߞWORRNHGLQWKHULJKWSODFHRUZH KDYHQߞWXQGHUVWRRGWKHSDVVDJH ,QWKLVFDVHWKHVWUXFWXUHRIWKHTXHVWLRQWHOOVXVWKDWWKHFRUUHFWDQVZHUZLOODSSHDULQWKHSDVVDJH VRPHZKHUHZRUGIRUZRUGVLQFHWKHTXHVWLRQDVNVZKDW+HOPKROW]FDOOVVRPHWKLQJWKHFRUUHFWDQVZHU ZLOOKDYHWREHWKHSKUDVHWKDW+HOPKROW]DFWXDOO\XVHVLQWKHWH[W 6RZHFRXOGWU\WRILQGWKHUHOHYDQWSRUWLRQRIWKHSDVVDJHE\ORRNLQJIRUUHIHUHQFHVWRDSSOHVUHGQHVV OLJKWLQJRUDQ\RIWKHSKUDVHVLQWKHIRXUDQVZHUFKRLFHV :HZRXOGZDQWWRQRWLFHWKHSKUDVHߡFRORUFRQVWDQF\ߢLQTXRWDWLRQPDUNVLQOLQH6LQFHWKDWߞVRQHRI WKHDQVZHUFKRLFHSKUDVHVLWPLJKWEHDJRRGLGHDWRVHHKRZWKHWH[WGHVFULEHVWKLVWHUPVRZHFDQ ILJXUHRXWLIFKRLFH - LVULJKWRUZURQJ ,IZHUHDGWKHHQWLUHVHQWHQFHWKDWVWDUWVLQOLQHZHGRVHHWKDW+HOPKROW]XVHGWKHSKUDVHߡFRORU FRQVWDQF\ߢIRUVRPHWKLQJ$QGLIZHUHDGWKHIROORZLQJVHQWHQFHWKHWH[WGHVFULEHVWKHZD\ZH ߡFRQVLVWHQWO\VHH>DQDSSOH@DVUHGߢHYHQZKHQWKHߡLOOXPLQDWLRQߢߡYDU>LHV@ߢ7KLVVHQWHQFHHYHQLQFOXGHV WKHSKUDVHߡIRULQVWDQFHߢZKLFKUHIHUVEDFNWRWKHߡFRORUFRQVWDQF\ߢLGHDLQWKHSUHYLRXVVHQWHQFHWRWHOO XVLWߞVDQH[DPSOHRIWKDWFRQFHSW $WWKLVSRLQWLWORRNVOLNHFKRLFH - LVFRUUHFW %XW,ߞGVWLOOZDQWWRFKHFNRXWWKHRWKHUDQVZHUFKRLFHVRIFRXUVHMXVWWRPDNHVXUH,KDYHQߞWPLVUHDGRU PLVXQGHUVWRRGDQ\WKLQJ 7KHQH[WSKUDVH,VHHIURPWKHDQVZHUFKRLFHVLVߡVHQVRU\IOX[ߢZKLFKDSSHDUVLQFKRLFH * DQGLQOLQHV DQGRIWKHSDVVDJH7KLVVHQWHQFHVD\VWKDW+HOPKROW]YLHZHGFRORUFRQVWDQF\DVDQߡH[DPSOHRIWKH ZD\LQZKLFKZHDFKLHYHSHUFHSWXDOFRQVWDQF\JHQHUDOO\ߢDQGߡPDNHDVWDEOHSHUFHSWXDOZRUOGIURPD FKDRWLFVHQVRU\IOX[ߢ,IZHUHDGWKLVVHQWHQFHFDUHIXOO\ZHFDQVHHWKDWWKHLGHDRIWKHߡVHQVRU\IOX[ߢLV GHVFULEHGDVVRPHWKLQJGLIIHUHQWIURPWKHߡSHUFHSWXDOFRQVWDQF\ߢRUߡFRORUFRQVWDQF\ߢHDUOLHULQWKH VHQWHQFH7KHVHQWHQFHVD\VWKDWZHVRPHKRZWDNHWKHߡFKDRWLFVHQVRU\IOX[ߢDQGWXUQLWLQWRߡFRQVWDQF\ߢ 1RWLFHWKDWWKHZRUGVXVHGWRGHVFULEHWKHߡFRQVWDQF\ߢDQGWKHߡVHQVRU\IOX[ߢDUHDQWRQ\PVWKH SHUFHSWXDOFRQVWDQF\LVߡVWDEOHߢLQOLQHZKLOHWKHߡVHQVRU\IOX[ߢLVFKDRWLF$OORIWKLVLQGLFDWHV FOHDUO\WKDWߡVHQVRU\IOX[ߢLVQRWWKHVDPHLGHDDVDOZD\VSHUFHLYLQJDQDSSOHWREHUHG ߡ&RORUVHSDUDWLRQߢIURPFKRLFH + LVWKHQH[WSKUDVHIURPWKHDQVZHUFKRLFHVWRDSSHDULQWKHWH[WLQ OLQHVDQG7KRVHOLQHVDQGWKHSUHFHGLQJVHQWHQFHVPDNHLWFOHDUWKDWߡFRORUVHSDUDWLRQߢZDVD WDFWLFHPSOR\HGE\-DPHV&OHUN0D[ZHOO ZKRLVQDPHGLQOLQHVDQG 7HVWWDNHUVRIWHQIDOOIRUWKLV DQVZHUFKRLFHEHFDXVHWKHLGHDRIFRORUVHSDUDWLRQDSSHDUVQH[WWRDGHVFULSWLRQRIDQߡLPDJHWDNHQ WKURXJK>D@UHGILOWHUߢLQOLQHDQGORWVRISHRSOHGHVSHUDWHO\WU\WRHTXDWHWKDWWRWKHLGHDRIWKHUHG DSSOHLQWKHTXHVWLRQ%XWLIZHUHDGFDUHIXOO\ZHVHHWKDW+HOPKROW]KDVQRWKLQJWRGRZLWKFRORU VHSDUDWLRQLQWKHWH[W 7KHODVWSKUDVHZHQHHGWRFKHFNRXWLVߡVSOLWEHDPILOWHULQJߢIURPFKRLFH ) ,IZHVNLPIRUWKDWZHVHH WKHZRUGߡVSOLWEHDPߢDSSHDULQJLQOLQHEXWQRWLQFRQQHFWLRQZLWKWKHLGHDRIDILOWHUDQGQRWDVDQ H[DPSOHUHODWHGWR+HOPKROW]6RWKLVFDQߞWEHWKHULJKWDQVZHUHLWKHU 3DJH4XHVWLRQ 7HVWWDNHUVRIWHQPLVVWKLVTXHVWLRQEHFDXVHWKH\GRQߞWUHDGFDUHIXOO\HQRXJK 7KHTXHVWLRQXVHVWKHSKUDVHߡYDU\FRQVLGHUDEO\ߢDQGWKHVDPHSKUDVHDSSHDUVLQOLQHVDQGRIWKH WH[WZKLFKWDONVDERXWKRZWKHߡDFWXDOZDYHOHQJWKVUHIOHFWHGE\WKHDSSOHߢ OLQHVDQG ߡYDU\ FRQVLGHUDEO\GHSHQGLQJRQWKHLOOXPLQDWLRQߢ OLQHVDQG 6RWKHߡLOOXPLQDWLRQߢDIIHFWVWKHߡDFWXDOZDYHOHQJWKVUHIOHFWHGE\WKHDSSOHߢDFFRUGLQJWRWKHWH[W7KH ZRUGߡLOOXPLQDWLRQߢUHIHUVWROLJKWDQGWKHZRUGߡZDYHOHQJWKVߢLQWKLVFRQWH[WLVDOVRUHIHUULQJWROLJKW :HNQRZWKDWWKHLGHDRIߡUHIOHFWLQJߢRIIRIVRPHWKLQJPHDQVVWULNLQJWKDWWKLQJDQGERXQFLQJRIIVR FKRLFH ' PXVWEHFRUUHFWZKHQLWPHQWLRQVߡYDULDWLRQVLQWKHVRXUFHRIOLJKWUHDFKLQJWKHDSSOHߢ2QFH DJDLQZHVHHWKDWHYHU\SKUDVHLQWKHFRUUHFWDQVZHUFKRLFHGLUHFWO\UHIOHFWVWKHUHOHYDQWSRUWLRQRIWKH WH[W 7KHUHVWRIWKHFLWDWLRQPDNHVQRPHQWLRQRIWKHGLIIHUHQFHVEHWZHHQWKHYLHZHUߞVULJKWDQGOHIWH\HVRU WKHGLVWDQFHEHWZHHQWKHDSSOHDQGWKHH\HVVRZHNQRZWKRVHFKRLFHVPXVWEHZURQJ %XWZDLWDPLQXWHߚWKHWH[WGRHVGHVFULEHߡWKHYLHZHUߞVDELOLW\WRSHUFHLYHUHGLQDQ\OLJKWߢDVFKRLFH & GHVFULEHV6RZK\LVQߞW & WKHULJKWDQVZHU"2QFHPRUHLWDOOFRPHVGRZQWRWKHUHODWLRQVKLSVRI FRQFHSWVLQWKHSDVVDJH7KHTXHVWLRQDVNVXVZK\WKHUHIOHFWHGZDYHOHQJWKVYDU\%XWWKHWH[WGRHVQߞWVD\ WKDWWKHZDYHOHQJWKVYDU\DVDUHVXOWRISHRSOHߞ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ߞVQROLQHFLWDWLRQLQWKLVTXHVWLRQ,ZRXOGSUREDEO\VNLPWKHSDVVDJHIRUWKHQDPHߡ/DQGߢLI, KDGQߞWUHDGWKHSDVVDJHRULI,FRXOGQߞWUHPHPEHUZKLFKSDUWRIWKHSDVVDJHKDGWKDWLQIRUPDWLRQ :HVHHWKHGHVFULSWLRQRI/DQGߞVSKRWRJUDSKLFSURFHVVLQOLQHVWKURXJK7KHUHߞVQRPHQWLRQRI DQ\WKLQJOLNHߡDVFUHHQOLWIURPWKHIURQWDQGEDFNߢRUߡIOLFNHULQJOLJKWVRXUFHVߢEHLQJXVHGWRREWDLQWKH LPDJHVVR ) DQG * PXVWEHZURQJ 7KDWSDUWRIWKHWH[WVD\V/DQGPDGHߡWZREODFNDQGZKLWHLPDJHVXVLQJDVSOLWEHDPFDPHUDWDNHQDW WKHVDPHWLPHWKURXJKWKHVDPHOHQVߢ7KHZRUGߡDߢLQWKHSKUDVHߡDVSOLWEHDPFDPHUDߢPHDQVWKDW RQO\RQHFDPHUDZDVXVHGVR + PXVWDOVREHZURQJDQG - LVULJKW 3DJH4XHVWLRQ 7KLVTXHVWLRQVHHPVH[WUHPHO\VXEMHFWLYHWRPRVWXQWUDLQHGWHVWWDNHUVEXWDVDOZD\VZHߞOOILQGWKH DQVZHUZLWKFHUWDLQW\E\ORRNLQJDWWKHUHOHYDQWSDUWRIWKHWH[WDQGFKRRVLQJWKHDQVZHUFKRLFHWKDW PDWFKHVLW 7KLVTXHVWLRQLVDOVRDQRWKHUH[DPSOHRIWKHIUHTXHQWVKRUWFRPLQJVRIWKH5HG%RRNߞVDQVZHU H[SODQDWLRQV7KH$&7ߞVRIILFLDOH[SODQDWLRQRIWKLVTXHVWLRQRQSDJHRIWKH5HG%RRNPDNHV UHIHUHQFHWRWKHZURQJSDUWVRIWKHWH[WLQWU\LQJWRMXVWLI\WKHFRUUHFWDQVZHULI\RXXVHGWKDWNLQGRI UHDVRQLQJRQRWKHU$&7TXHVWLRQV\RXFRXOGYHU\HDVLO\HQGXSZLWKDORWRIZURQJDQVZHUV /HWߞVWDNHDORRNDWWKHDQVZHUFKRLFHVDQGVHHZKDWߞVUHDOO\JRLQJRQ $ LVFRUUHFWEHFDXVHLWGHVFULEHVWKHVLWXDWLRQLQERWKSDUDJUDSKVTXLWHOLWHUDOO\ 7KLVDQVZHUFKRLFHPHQWLRQVSHRSOHDFWLQJߡFDUHIXOO\ߢZKLFKOLWHUDOO\PHDQVWKDWWKH\DFWZLWKFDUHߚ WKH\WKLQNDERXWWKHSRVVLEOHFRQVHTXHQFHVRIWKHLUDFWLRQVDQGPDNHDGHOLEHUDWHHIIRUWWREHKDYHLQD ZD\WKDWZLOOFUHDWHDSDUWLFXODUUHVXOW7KHWZHOIWKSDUDJUDSKGHVFULEHVKRZ9LGDFKRRVHVQRWWRIDFH 7HGVRWKDWKHGRHVQߞWߡEHFRPHVLOHQWDQGZDQGHUDZD\ߢ7KHWKLUWHHQWKSDUDJUDSKGHVFULEHV7HGPDNLQJ ߡVORZDQGPHWLFXORXVߢFXWVLQWKHJODVVDQGEHLQJYHU\GLOLJHQWDERXWQRWZDVWLQJWKHJODVV,QERWKFDVHV ZHVHHDFKDUDFWHUDFWLQJZLWKFDUHPDNLQJDGHOLEHUDWHFKRLFHWRDYRLGDSDUWLFXODURXWFRPH 7KHDQVZHUFKRLFHDOVRPHQWLRQVWKHLGHDRIߡVKDWWHULQJVRPHWKLQJSUHFLRXVߢ7KHZRUGߡSUHFLRXVߢFDQ KDYHDORWRIGLIIHUHQWPHDQLQJVDQGVRPHRIWKHPDUHUHIOHFWHGLQWKHVHSDUDJUDSKV,QWKHWZHOIWK SDUDJUDSKZHVHHWKDW9LGDWKLQNVLWLVߡSHUIHFWߢDQGߡUDUHߢWRVHH7HGLIVRPHWKLQJLVߡSHUIHFWߢDQG ߡUDUHߢLWFRXOGGHILQLWHO\EHGHVFULEHGDVߡSUHFLRXVߢ $WILUVWLWPD\ORRNOLNHWKHVHUHPDUNVDSSO\WRWKH ZLOGSKHDVDQWVLQVWHDGRI7HGEXWLI\RXORRNFDUHIXOO\\RXߞOOVHHWKDWWKHUHPDUNVDSSO\WRERWK7HGDQG WKHSKHDVDQWVEHFDXVHRIWKHSKUDVHߡWKHVDPHߢLQOLQHVDQG ,QWKHWKLUWHHQWKSDUDJUDSKZHVHH WKDW7HGGRHVQߞWZDQWWRZDVWHWKHJODVVDQGWKDWLWߞVߡVSHFLDOߢWRKLPDQGWKRVHLGHDVFHUWDLQO\DOVR UHIOHFWWKHLGHDRIVRPHWKLQJEHLQJߡSUHFLRXVߢ 7KHZRUGߡVKDWWHUߢKDVPXOWLSOHPHDQLQJV,QDSK\VLFDOVHQVHLWUHIHUVWRWKHLGHDRIYLROHQWO\EUHDNLQJ VRPHWKLQJIUDJLOHDQGULJLGOLNHDSLHFHRIJODVVRUSRWWHU\%XWLQDQDEVWUDFWVHQVHLWFDQDOVRUHIHUWR WKHLGHDRIGDPDJLQJRUGHVWUR\LQJDQ\WKLQJOLNHZKHQZHVD\DQDWKOHWHVKDWWHUVDUHFRUGRUDFULVLV VKDWWHUVSHRSOHߞVFRQILGHQFH 6RERWKSDUDJUDSKVFOHDUO\UHIOHFWWKHLGHDRIDSHUVRQDFWLQJZLWKFDUHWRDYRLGGDPDJLQJRUGHVWUR\LQJ VRPHWKLQJWKH\WKLQNLVSUHFLRXV9LGDGRHVQߞWZDQWDSDUWLFXODUVLWXDWLRQWRHQGEHFDXVHRIKHUDFWLRQV DQG7HGGRHVQߞWZDQWWRVWUD\IURPKLVSODQDQGZDVWHKLVJODVV 1RWLFHWKDWWKH5HG%RRNߞVH[SODQDWLRQRQSDJHGRHVQߞWWRXFKRQPRVWRIWKRVHGHWDLOV,WGRHVQߞW VSHFLILFDOO\H[SODLQZK\9LGDߞVDFWLRQVLQWKHWZHOIWKSDUDJUDSKFRXOGEHFDOOHGߡFDUHIXOߢDQGLWGRHVQߞW H[SODLQZKLFKSKUDVHLQWKDWSDUDJUDSKMXVWLILHVWKHZRUGߡSUHFLRXVߢLQWKHDQVZHUFKRLFH7KH5HG %RRNߞVH[SODQDWLRQKLWVRQWKHSKUDVHߡZLOGWKLQJDWSHDFHߢEXWߡZLOGWKLQJDWSHDFHߢLVQߞWDGHILQLWLRQRI WKHZRUGߡSUHFLRXVߢߡ6RSHUIHFWVRUDUHߢLVWKHSKUDVHLQWKHWZHOIWKSDUDJUDSKWKDWMXVWLILHVWKHZRUG ߡSUHFLRXVߢLQWKHDQVZHUFKRLFHDQGWKH5HG%RRNߞVH[SODQDWLRQQHYHUH[SOLFLWO\PHQWLRQVLW7KH5HG %RRNDOVRGRHVQߞWH[SODLQZK\WKHZRUGߡVKDWWHUߢLVDSSURSULDWHLQWKHDQVZHUFKRLFH 6RWKH5HG%RRNH[SODQDWLRQHQGVXSEHLQJLQFRPSOHWHDQGVHHPVWRHQFRXUDJHDORRVHVXEMHFWLYH DSSURDFKWRWKHWH[W%XWLIZHUHDOO\VFUXWLQL]HWKH$&75HDGLQJVHFWLRQZHߞOOVHHWKDWRIILFLDO$&7 TXHVWLRQVDOZD\VLQFRUSRUDWHWKHW\SHRIOLWHUDOZRUGE\ZRUGDSSURDFKWKDW,ߞPWHDFKLQJ\RXLQWKLV %ODFN%RRN $V,ߞYHVDLGUHSHDWHGO\LWߞVLPSRUWDQWIRUXVWRDSSUHFLDWHWKHDFWXDOUHDVRQLQJEHKLQGWKHWHVWߞVGHVLJQ LQVWHDGRIWDNLQJWKH5HG%RRNH[SODQDWLRQVDWIDFHYDOXH 1RZOHWߞVH[DPLQHWKHRWKHUDQVZHUFKRLFHV % LVZURQJEHFDXVHZHKDYHQRUHDVRQWRWKLQNWKDWHLWKHUFKDUDFWHULVLQGLJQDQWRUIUXVWUDWHGIXUWKHU WKHWZRUHOHYDQWSDUDJUDSKVGRQߞWVD\DQ\WKLQJDERXWVXFFHVVEHLQJRXWRIUHDFK7KLVLVWKHNLQGRIZURQJ DQVZHUWKDWPLJKWDSSHDOWRDQXQWUDLQHGWHVWWDNHUZKRWULHVWRLQWHUSUHWWKHSDVVDJHDVOLWHUDWXUHLW VRXQGVOLNHDSODXVLEOHWKHRU\RIWKHFKDUDFWHUVߞPRWLYDWLRQVEXWLWKDVQRGLUHFWOLWHUDOVXSSRUWLQWKHWH[W & LVDOVRLQFRUUHFWEHFDXVHWKHUHOHYDQWSDUWRIWKHWH[WGRHVQߞWGHVFULEHHLWKHUFKDUDFWHUORVLQJLQWHUHVW DWDQ\SRLQWIRUDQ\UHDVRQ ' LVZURQJEHFDXVHQHLWKHURIWKHVHSDUDJUDSKVDFWXDOO\GHVFULEHVDVWUHQJWKRUDZHDNQHVVLQOLWHUDO WHUPV,IDQXQWUDLQHGWHVWWDNHUWULHGWRLQWHUSUHWWKLVWH[WLQDOLWHUDU\ZD\KHPLJKWDUELWUDULO\GHFLGHWKDW FHUWDLQEHKDYLRUVE\WKHFKDUDFWHUVVHHPZHDNRUVWURQJWRKLP%XWWKHWH[WQHYHUXVHVHLWKHURIWKRVH ZRUGVQRUDQ\V\QRQ\PRIWKRVHZRUGVVRWKLVFKRLFHLVZURQJ 3DJH4XHVWLRQ ,IZHJREDFNDQGUHDGWKHWKSDUDJUDSK ZKLFKFRQWDLQVOLQHZLWKWKHWHUPߡZLOGWKLQJߢ ZHFDQVHH WKDW9LGDVWDQGVOLVWHQLQJWR7HGߡLQWKHVDPHHYHQEUHDWKDQGKHDUWEHDWߢVKHXVHGZKHQVKHVDZZLOG SKHDVDQWVWKHQH[WVHQWHQFHVD\VLWZDVߡVRUDUHWRVHHDZLOGWKLQJDWSHDFHߢ7KHSKUDVHߡZLOGWKLQJDW SHDFHߢUHIHUVWRERWK7HGDQGWKHSKHDVDQWVEHFDXVHRIWKHSKUDVHߡWKHVDPHߢLQOLQHVDQG 6RFKRLFH ) LVFRUUHFW7KHZRUGߡUHYHUHQWO\ߢLQWKHDQVZHUFKRLFHUHIOHFWVWKHXVHRIWKHZRUGV ߡSHUIHFWߢDQGߡUDUHߢLQOLQH * LVZURQJEHFDXVHLWUHYHUVHVWKHLGHDRIZKLFKFKDUDFWHULVWKLQNLQJDERXWWKHRWKHUDQGEHFDXVHWKH WH[WGRHVQߞWVSHFLILFDOO\PHQWLRQWKDW7HGJHWVSK\VLFDOO\QHDUWR9LGDDWWKHIRUW/RRNRXWIRUWKHVHNLQGV RIVPDOOPLVWDNHVRQWKH$&7 + LVZURQJEHFDXVHWKHSDUDJUDSKGHVFULEHV9LGDߞVIHHOLQJVQRW7HGߞV - LVZURQJEHFDXVHWKHWH[WGRHVQߞWVD\WKDW9LGDZDQWV7HGWREHDGLIIHUHQWZD\ 2QFHPRUHZHVHHKRZLPSRUWDQWLWLVWRUHDGHYHU\WKLQJRQWKH$&7YHU\FDUHIXOO\ 3DJH4XHVWLRQ 0DQ\XQWUDLQHGWHVWWDNHUVZRXOGZRUU\WKDWWKH\QHHGHGWRKDYHDGHHSXQGHUVWDQGLQJRIWKHHQWLUH SDVVDJHWRDQVZHUDTXHVWLRQOLNHWKLVEXWLIZHUHDGFDUHIXOO\ZHߞOOVHHWKDWZHFDQDQVZHUWKHTXHVWLRQ MXVWE\XVLQJWKHFLWHGSDUDJUDSKDQGVWLFNLQJVWULFWO\WRWKHWH[WDQGSHUKDSVOLJKWO\VNLPPLQJRWKHUSDUWV RIWKHSDVVDJH /HWߞVWDNHDORRNDWWKHDQVZHUFKRLFHV ) LVZURQJEHFDXVHWKLVSDUDJUDSKGRHVQߞ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ߡWDNHVDQLQWHUHVWߢLQWKH DQVZHUFKRLFHJRHVZLWKWKHVHQWHQFHߡ,ߞOOEHFKHFNLQJߢLQOLQHWKHLGHDRIGHWHUPLQLQJKRZWKH SURMHFWVKRXOGEHFDUULHGRXWLQWKHDQVZHUFKRLFHLVUHIOHFWHGLQWKHDGYLFHLQWKHSDUDJUDSKDERXW ߡNHHS>LQJ@\RXUQDLOVWRJHWKHUߢDQGQRWGDPDJLQJWKHWUHHVWKHLGHDRIߡDYRLGLQJSUREOHPVߢLQWKHDQVZHU FKRLFHLVUHIOHFWHGLQWKHVWDWHPHQWWKDWWKHIRUWZLOOߡKDYHWRFRPHGRZQߢLIWKHߡWUHHVJHWGDPDJHGߢDQG WKHDGYLFHQRWWRGDPDJHWKHP - LVZURQJEHFDXVHWKHUHLVQRLQGLFDWLRQRIZKRVHZLOOLQJQHVVLVJUHDWHU6RPHXQWUDLQHGWHVWWDNHUV PLJKWEHWHPSWHGE\WKLVLQWHUSUHWDWLRQEXWLWߞVQRWOLWHUDOO\UHIOHFWHGDQ\ZKHUHLQWKHWH[WDWDOO 1RWLFHDJDLQWKDWZHGLGQߞWUHDOO\QHHGWRNQRZPXFKDERXWWKHUHVWRIWKHSDVVDJHLQRUGHUWRDQVZHU WKLVTXHVWLRQ$OOZHQHHGHGZDVWKHWH[WLQWKHFLWHGSDUDJUDSKDQGSHUKDSVDOLWWOHVNLPPLQJWRPDNH VXUHWKHWH[WKDGQRUHIHUHQFHVWR7HGEHLQJGLVFRXUDJHGWKHSURMHFWEHLQJGLVPDQWOHGRUWKHZLOOLQJQHVV WRDFFHSWUHVSRQVLELOLW\ 3DJH4XHVWLRQ ,QRUGHUWRDQVZHUWKLVߡ(;&(37ߢTXHVWLRQZHKDYHWRJRWKURXJKWKHSDVVDJHDQGHOLPLQDWHDQ\DQVZHU FKRLFHWKDWDSSHDUVLQWKHWH[WDVVRPHWKLQJWKDWWKHFRPSDQ\ߞVHPLVVLRQVKHOSSURGXFH 7KLVTXHVWLRQLVOLNHO\WRUHTXLUHPRUHZRUNWKDQPRVWRWKHU$&75HDGLQJTXHVWLRQVIRUWZRUHDVRQV ,WGRHVQߞWUHIHUXVWRDSDUWLFXODUOLQHRUSDUDJUDSKPHDQLQJWKDWHYHU\ZRUGLQWKHSDVVDJHLV SRWHQWLDOO\UHOHYDQW ,WߞVDQߡ(;&(37ߢTXHVWLRQPHDQLQJWKDWZHFDQRQO\DQVZHULWE\VXFFHVVIXOO\ORFDWLQJWKUHHRIWKH IRXUDQVZHUFKRLFHVVRPHZKHUHLQWKHWH[WVRZHߞOOKDYHWRILQGWKUHHWLPHVDVPDQ\WKLQJVLQWKH WH[WDVZHQRUPDOO\ZRXOG )RUWKHVHUHDVRQVDQGEHFDXVHWKLVLVWKHILUVWTXHVWLRQWKDWDGGUHVVHVWKHSDVVDJHRQSDJH,ZRXOG SUREDEO\VNLSWKLVTXHVWLRQZKHQ,ILUVWVDZLWDQGWU\WRDQVZHURWKHUTXHVWLRQVDERXWWKHSDVVDJHEHIRUH UHWXUQLQJWRWKLVRQH,I,GLGWKDW,PLJKWJHWOXFN\DQGUXQDFURVVVRPHRIWKHDQVZHUFKRLFHVIRUWKLV TXHVWLRQZKLOH,ߞPWU\LQJWRDSSURDFKRWKHUTXHVWLRQVDQGWKDWFRXOGVDYHPHVRPHWLPHZKHQ,WU\WR DQVZHUWKLVTXHVWLRQ$QGHYHQLI,GLGQߞWJHWOXFN\DQGVWXPEOHDFURVVVRPHRIWKHVHDQVZHUFKRLFHVLQ P\UHDGLQJIRURWKHUTXHVWLRQV,VWLOOZRXOGQߞWORVHDQ\WLPHE\GRLQJWKHTXHVWLRQVLQDGLIIHUHQWRUGHU 6R,ߞGKDYHQRWKLQJWRORVHDQGSRWHQWLDOO\VRPHWKLQJWRJDLQ )RUPRUHRQWKHVHNLQGVRILGHDVVHHWKH ߡ6NLS+DUG4XHVWLRQVߢVHFWLRQXQGHUߡ7LPLQJ,VVXHVߢHDUOLHULQWKLV%ODFN%RRN 6RQRZOHWߞVWDNHDORRNDWRXUDQVZHUFKRLFHV $ DSSHDUVLQOLQHVWKURXJKZKLFKVD\WKDWߡZDVWHVWHDPLVXVHGWRSURGXFHLQVXOLQߢ 6RZHNQRZFKRLFH $ LVZURQJEHFDXVHWKLVߡ(;&(37ߢTXHVWLRQUHTXLUHVXVWRILQGWKHRQHDQVZHU FKRLFHWKDWߞVQRWLQWKHWH[W 7KHQZHVHHLQOLQHWKDWIHUWLOL]HULVSURGXFHGDVSDUWRIWKHVDPHSURFHVVVRZHFDQHOLPLQDWHFKRLFH & )LQDOO\LQOLQHVWKURXJKZHFDQVHHWKDWWKHSRZHUFRPSDQ\ߡDOVRVTXHH]HVVXOIXUIURPLWV HPLVVLRQVEXWFRQYHUWVPRVWRILWWR LQGXVWULDOJ\SVXP ߢ6RWKDWHOLPLQDWHVFKRLFH ' 6LQFH % GRHVQߞWDSSHDULQWKHWH[WLWPXVWEHWKHFRUUHFWDQVZHUWRWKLVߡ(;&(37ߢTXHVWLRQ 6RPHSHRSOHPLJKWJHWFRQIXVHGDQGHOLPLQDWH % EHFDXVHOLQHVDQGVD\WKDWߡZDVWHVWHDPߢLVXVHG WRߡKHDWKRPHVߢߡHOLPLQDWLQJWKHQHHGIRURLOIXUQDFHVߢ2IFRXUVHߡHOLPLQDWLQJWKHQHHGIRURLO IXUQDFHVߢLVQߞWWKHVDPHWKLQJDVDFWXDOO\SURGXFLQJKHDWLQJRLOEXWPDQ\SHRSOHZLOODFFLGHQWDOO\VHHWKH ZRUGVߡKHDWߢDQGߡRLOߢLQWKHVDPHVHQWHQFHDQGEHPLVOHGEHFDXVHWKH\DUHQߞWUHDGLQJFDUHIXOO\HQRXJK %\WKHZD\QRWLFHWKDWTXHVWLRQWHOOVXVWRORRNDWOLQHVWKURXJKRIWKHSDVVDJH:KHQZHGR WKDWZHߞOOHQGXSJRLQJWKURXJKDOORIWKHFLWDWLRQV,UHIHUUHGWRLQWKLVVROXWLRQ6RLI\RXGHFLGHGWRVNLS WKLVTXHVWLRQDWILUVWDQGFRPHEDFNWRLWDIWHUDWWDFNLQJWKHRWKHUTXHVWLRQVIRUWKLVSDVVDJH\RXU H[SHULHQFHDQVZHULQJTXHVWLRQZRXOGKDYHJLYHQ\RXDSUHWW\JRRGLGHDRIZKHUHWRILQGPRVWRIWKH DQVZHUFKRLFHVIRUWKLVTXHVWLRQZKLFKZRXOGSUREDEO\KDYHVDYHG\RXVRPHWLPHDQGIUXVWUDWLRQ 3DJH4XHVWLRQ :HVKRXOGUHUHDGRUDWOHDVWVNLPWKHVHFRQGWKLUGDQGIRXUWKSDUDJUDSKVWRUHIUHVKRXUPHPRULHVIRU WKLVTXHVWLRQ,IZHGRZHߞOOVHHWKDWWKH\GHVFULEHWKHZD\WKH$VQDHVYHUNHW3RZHU&RPSDQ\6WDWRLO 5HILQHU\1RYR1RUGLVNDQG*\SURFDOOXVHHDFKRWKHUߞVZDVWHSURGXFWVWRSURGXFHWKLQJVZKLFKPHDQV FKRLFH $ LVFRUUHFW % LVZURQJHYHQWKRXJKPDQ\XQWUDLQHGWHVWWDNHUVZLOOEHWHPSWHGWRFKRRVHLWZKHQWKH\UHDGWKDWWKH ILUVWVHQWHQFHRIWKLVVHOHFWLRQFDOOVWKHWRZQRI.DOXQGERUJߡWKHZRUOGߞVPRVWHODERUDWHSURWRW\SHRIDQ HFRSDUNߢ7KHIDFWWKDW'HQPDUNKDVߡWKHZRUOGߞVPRVWHODERUDWHSURWRW\SHRIDQHFRSDUNߢGRHVQߞW QHFHVVDULO\PHDQLWߞVߡRQHRIWKHZRUOGߞVOHDGHUVLQGHYHORSLQJQHZVRXUFHVRIHQHUJ\ߢDVWKHDQVZHU FKRLFHUHTXLUHV+DYLQJDQHFRSDUNWKDWUHF\FOHVZDVWHSURGXFWVLVQߞWQHFHVVDULO\WKHVDPHWKLQJDV GHYHORSLQJQHZVRXUFHVRIHQHUJ\7KLVLV\HWDQRWKHUH[DPSOHRIWKHH[WUHPHLPSRUWDQFHRIUHDGLQJ HYHU\WKLQJRQWKH$&7YHU\FDUHIXOO\DQGQRWDOORZLQJ\RXUVHOIWRPDNHDVVXPSWLRQV & LVZURQJEHFDXVHWKHLGHDRIHOLPLQDWLQJWKHQHHGIRUHQHUJ\LVQHYHUPHQWLRQHGLQWKHSDVVDJH0DQ\ XQWUDLQHGWHVWWDNHUVZLOOIDOOIRUWKLVFKRLFHEHFDXVHWKH\GRQߞWUHDGLWFDUHIXOO\HQRXJK7KLVFKRLFHGRHV VHHPYDJXHO\UHODWHGWRWKHWH[WZKLFKWDONVDERXWHQHUJ\DQGUHF\FOLQJZHVHHLQOLQHVDQGWKDW VRPHߡZDVWHVWHDPߢLVXVHGWRߡKHDWWKLUW\ILYHKXQGUHGKRPHVLQWKHWRZQHOLPLQDWLQJWKHQHHGIRURLO IXUQDFHVߢEXWߡHOLPLQDWLQJWKHQHHGIRURLOIXUQDFHVߢLQWKHWH[WLVQRWWKHVDPHWKLQJDVHOLPLQDWLQJD ߡWRZQߞVQHHGIRUHQHUJ\ߢLQWKHDQVZHUFKRLFHEHFDXVHWKHWH[WQHYHUVD\VWKDWRLOIXUQDFHVDUHWKHRQO\ VRXUFHRIHQHUJ\LQWKHWRZQ ' LVLQFRUUHFWEHFDXVHLWߞVQRWVXSSRUWHGE\WKHWH[WHYHQLILWPLJKWVHHPUHDVRQDEOHWRDQXQLQIRUPHG UHDGHU7KHWH[WQHYHUPHQWLRQVPRQH\DWDOOVRWKH$&7ZRQߞWDFFHSWWKLVDVDFRUUHFWDQVZHU 3DJH4XHVWLRQ )RUWKLVTXHVWLRQZHQHHGWRILQGHYLGHQFHLQWKHWH[WWKDWHDFKSDUWRIWKHSDLULQWKHFRUUHFWDQVZHU FKRLFHSURYLGHVVRPHPDWHULDORUVHUYLFHWRLWVSDUWQHU$VDOZD\VWKLVZLOOUHTXLUHXVWRUHDGFDUHIXOO\ $ LVZURQJ7KHWH[WVD\V6WDWRLOSURYLGHVSXULILHGZDVWHJDVWR*\SURF OLQHVWKURXJK EXWZH GRQߞWVHHDQ\HYLGHQFHRI*\SURFSURYLGLQJDQ\WKLQJWR6WDWRLO % LVZURQJ$OWKRXJKZHFDQVHHWKDWWKH$VQDHVYHUNHW3RZHU&RPSDQ\SURYLGHVKHDWWRZDUPILVK IDUPVWKHWH[WGRHVQߞWPHQWLRQWKHILVKIDUPHUVGRLQJDQ\WKLQJIRUWKH$VQDHVYHUNHW3RZHU&RPSDQ\ & LVFRUUHFWEHFDXVH1RYR1RUGLVNSURYLGHVIHUWLOL]HUWRIDUPHUVLQOLQHVWKURXJKDQGWKH IDUPHUVߞSODQWVDUHWKHQXVHGߡWRIHHGWKHEDFWHULDLQWKHIHUPHQWDWLRQWDQNVߢ OLQHVDQG EDFNDW 1RYR1RUGLVN QRWHWKDWWKHIHUPHQWDWLRQWDQNVDUHPHQWLRQHGLQFRQQHFWLRQZLWK1RYR1RUGLVNRQOLQH 6RZHFDQVHHWKDWHDFKHOHPHQWRIWKLVSDLUSURYLGHVVRPHWKLQJWRWKHRWKHURQHMXVWDVWKHTXHVWLRQ UHTXLUHV ' LVLQFRUUHFWEHFDXVHWKHSDVVDJHGRHVQߞWPHQWLRQ6WDWRLODQG1RYR1RUGLVNSURYLGLQJWKLQJVWRRQH DQRWKHU 3DJH4XHVWLRQ $ORWRIXQWUDLQHGWHVWWDNHUVZLOOEHQHHGOHVVO\IUXVWUDWHGE\WKLVTXHVWLRQEHFDXVHWKH\ZRQߞWNQRZWKH PHDQLQJRIWKHZRUGߡRIIDOߢDQGWKH\ߞOOH[SHFWWKDWWRNHHSWKHPIURPXQGHUVWDQGLQJWKHDQVZHU%XWWKH TXHVWLRQLVZULWWHQLQDZD\WKDWGRHVQߞWUHTXLUHXVWRNQRZZKDWWKHZRUGPHDQVDOOZHKDYHWRGRLV ILQGWKHUHOHYDQWSRUWLRQRIWKHWH[WDQGVHHZKDWLWGHVFULEHV 6ROHWߞVGRWKDW ,IZHJREDFNDQGUHDGDERXWߡGHVLJQHGRIIDOߢLQOLQHZHFDQVHHWKDWLWUHIHUVWRWKHFRQFHSW GHVFULEHGLQWKHSUHYLRXVVHQWHQFHZKLFKVD\VWKDWVRPHFRPSDQLHVߡGHVLJQ>@WKHLUSURFHVVHVߢVRߡDQ\ ZDVWHLVYDOXDEOHDQGFDQEHXVHGE\VRPHRQHHOVHߢ7KLVPDWFKHVXSDOPRVWZRUGIRUZRUGZLWK FKRLFH $ ZKLFKVD\VWKDWߡFRPSDQLHVFDQGHVLJQZD\VLQZKLFKWKHLUZDVWHSURGXFWVFDQEHXVHGߢVR ZHNQRZ $ LVWKHFRUUHFWDQVZHU % ZLOOEHDWHPSWLQJFKRLFHEHFDXVHLWWDONVDERXWUHGXFLQJZDVWHZKLFKVHHPVWRJRDORQJZLWKWKH JHQHUDOWKHPHRIWKLVSDVVDJH%XWLIZHORRNDWWKHVSHFLILFVHQWHQFHLQOLQHZHVHHWKDWWKHNH\LGHDLV UHXVLQJZDVWHQRWUHGXFLQJLW7KHWH[WHYHQVD\VLQOLQHVWKURXJKWKDWߡDSURFHVVZLWKORWVRI ZDVWHPD\EHEHWWHUWKDQRQHZLWKDVPDOODPRXQWRIZDVWHߢXQGHUFHUWDLQFRQGLWLRQV5HPHPEHUWKDW \RXDOZD\VKDYHWRUHDGFDUHIXOO\DQGDYRLGPDNLQJDVVXPSWLRQVDERXWWKHWH[W & LVZURQJEHFDXVHWKHUHLVQߞWDQ\GLVFXVVLRQRIZKHWKHUWHFKQRORJ\KDVNHSWSDFHZLWKZDVWHGLVSRVDO ' LVZURQJEHFDXVHLWGRHVQߞWUHVWDWHWKHWH[WLQVWHDGLWMXVWMXPEOHVWRJHWKHUFHUWDLQFRQFHSWVIURPWKH WH[W7KHSDVVDJHGRHVPHQWLRQGHVLJQDQGLWDOVRPHQWLRQVODQGILOOVEXWLWGRHVQߞWWDONDERXWGHVLJQLQJ ODQGILOOV,WWDONVDERXWGHVLJQLQJLQGXVWULDOSURFHVVHVVRWKDWOHVVZDVWHHQGVXSLQODQGILOOV 1RWLFHDJDLQWKDWZHZHUHDEOHWRILQGWKHDQVZHUWRWKLVTXHVWLRQZLWKFRPSOHWHFRQILGHQFHHYHQWKRXJK ZHQHYHUKDGWRWKLQNDERXWWKHDFWXDOPHDQLQJRIWKHZRUGߡRIIDOߢ5HPHPEHUWKDWWKH$&7ZLOORIWHQOHW \RXZRUNDURXQGVPDOOJDSVLQ\RXUNQRZOHGJHLI\RXUHDGFDUHIXOO\DQGVWLFNWRWKHDSSURDFKODLGRXWLQ WKLV%ODFN%RRN 3DJH4XHVWLRQ 7KLVLVRQHRIWKRVH$&75HDGLQJTXHVWLRQVWKDWZLOOVHHPXQIDLUWRPDQ\XQWUDLQHGWHVWWDNHUVEHFDXVHLW DVNVXVWRILQGWKHFKRLFHWKDWߡEHVWFKDUDFWHUL]HVWKHDXWKRUߞVDWWLWXGHߢ0RVWSHRSOHZLOODSSURDFKWKLV TXHVWLRQVXEMHFWLYHO\EXWZHWUDLQHGWHVWWDNHUVNQRZWKDWWKHFRUUHFWDQVZHUZLOOEHWKHRQHWKDW REMHFWLYHO\UHVWDWHVLGHDVIURPWKHWH[WQRPDWWHUKRZVXEMHFWLYHWKHZRUGLQJRIWKHTXHVWLRQPLJKWVHHP WRVRPHERG\ZKRGRHVQߞWXQGHUVWDQGWKHWHVW :HDOVRNQRZWKDWZHGRQߞWKDYHWRDQVZHUWKLVTXHVWLRQILUVWMXVWEHFDXVHLWߞVWKHILUVWRQHLQWKHSDVVDJH 6LQFHWKLVTXHVWLRQGRHVQߞWKDYHDOLQHFLWDWLRQDQGVLQFHLWVHHPVOLNHLWPLJKWWRXFKRQPDQ\GLIIHUHQW SRUWLRQVRIWKHWH[WLWPLJKWEHHDVLHUWRZRUNWKURXJKVRPHRUDOORIWKHRWKHUTXHVWLRQVDERXWWKLV SDVVDJHILUVWDQGWKHQUHWXUQWRQXPEHUDIWHUZHKDYHDOLWWOHPRUHIDPLOLDULW\ZLWKWKHFRQFHSWVLQWKH SDVVDJH,WߞVXSWR\RXZKLFKRUGHU\RXFKRRVHWRDSSURDFKWKHTXHVWLRQVLQEXW,ߞGSUREDEO\VNLSWKLV TXHVWLRQWKHILUVWWLPHDURXQGDQGFRPHEDFNWRLWDIWHU,ߞGDQVZHUHGVRPHRIWKHRWKHUV 7KLVLVDOVRXQIRUWXQDWHO\DQRWKHUVWULNLQJH[DPSOHRIDTXHVWLRQZKRVHH[SODQDWLRQLQWKH5HG%RRNLV DWEHVW QHHGOHVVO\FRPSOLFDWHG7KH5HG%RRNߞVH[SODQDWLRQQHYHUH[SOLFLWO\UHIHUVWRWKHNH\SKUDVHVLQ WKHSDVVDJHWKDWGHFLGHWKHFRUUHFWDQVZHUZKLFKLVDVHULRXVSUREOHPIRUUHDGHUVZKRZDQWWROHDUQKRZ WKH$&7DFWXDOO\ZRUNVVRWKH\FDQLQFUHDVHWKHLUVFRUHV /HWߞVWDNHDORRN $ LVFRUUHFWEHFDXVHLWߞVIXOO\VXSSRUWHGE\WKHWH[W:HFDQVHHULJKWDZD\WKDWWKHDXWKRUߡZHOFRPHVߢ WKH&'520VEHFDXVHKHFDOOVWKHPߡSRWHQWLDOO\WKHPRVWLPSRUWDQWWKLQJWRKDSSHQWRWKHWH[WVRI 6KDNHVSHDUHVLQFHWKHWKFHQWXU\ߢLQWKHILUVWVHQWHQFHRIWKHSDVVDJH 7KHDQVZHUFKRLFHDOVRUHIHUVWRWKHߡRULJLQDOLQWHQWߢRIWKHSOD\ZULJKWDQGZHILQGWKDWUHIHUUHGWRLQ WKUHHSODFHVLQWKHSDVVDJHOLQHOLQHDQGOLQH ,QOLQHWKHDXWKRUVD\V6KDNHVSHDUHߡLQWHQGHG>KLVSOD\V@WREHUHSHDWHGO\SHUIRUPHGߢ/LQHVD\V 6KDNHVSHDUHߞVߡZRUGVZHUHQRWPHDQWWRUHPDLQRQWKHSDJHߢEHFDXVHWKH\ZHUHߡGHVWLQHGIRUWKH KXPDQYRLFHߢ/LQHVD\VWKHVDPHZRUGVߡZHUHPHDQWIRURXUHDUVDVZHOODVRXUH\HVߢ 7KRVHODVWWZRFLWDWLRQVDUHWKHRWKHUNH\SKUDVHVWKDWPDNH $ FRUUHFWEHFDXVHWKHDXWKRUVSHFLILFDOO\ VD\VLQWKRVHFLWDWLRQVWKDWWKHZRUNVRI6KDNHVSHDUHZHUHPHDQWWREHKHDUGQRWMXVWUHDG7KHSDVVDJH VD\VUHSHDWHGO\WKDW&'520VDOORZSHRSOHWRKHDUWKHSOD\VDVZHOODVUHDGWKHP VHHSDUDJUDSKIRU H[DPSOH %XWWKH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQRQSDJHQHYHUWRXFKHVRQWKRVHFULWLFDOFLWDWLRQV ,QVWHDGRIH[SOLFLWO\SLQSRLQWLQJWKHSKUDVHVWKDWDFWXDOO\PDNH $ FRUUHFWWKH5HG%RRNRIIHUVDOLVWRI YDJXHO\UHOHYDQWSKUDVHVWKDWGRQߞWFRQWUDGLFW $ EXWDOVRGRQߞWH[SOLFLWO\VXSSRUWLW7KH5HG%RRNߞV H[SODQDWLRQSRLQWVRXWWKDWWKH&'520DOORZVYLHZHUVWRLPDJLQHGLIIHUHQWYHUVLRQVRIWKHSOD\EXWLW QHYHUVD\VWKLVZDV6KDNHVSHDUHߞVLQWHQWEHFDXVHWKHSDVVDJHLWVHOIQHYHUVD\VWKLVZDV6KDNHVSHDUHߞV LQWHQW 7KHFORVHVWWKHSDVVDJHJHWVWRWKDWLVLQOLQHVWKURXJKZKHQLWVD\VWKDW6KDNHVSHDUH LQWHQGHGWKHSOD\VWREHߡUHSHDWHGO\SHUIRUPHGߢDQGDVDFRQVHTXHQFHRIWKDWLQWHQWLRQWKHSOD\V ߡZRXOGEHFRQWLQXDOO\FXWRUHYHQUDGLFDOO\UHFRQFHLYHGߢ%XWWKLVLVQߞWWKHVDPHWKLQJDVVD\LQJWKDW 6KDNHVSHDUHߞVLQWHQWLRQZDVWRKDYHWKHSOD\VUHFRQFHLYHG+LVLQWHQWLRQZDVWRKDYHWKHPSHUIRUPHG DQGWKHLUUHLPDJLQDWLRQLVSUHVHQWHGDVDE\SURGXFWRIWKHUHSHDWHGSHUIRUPDQFHVQRWDQLQWHQGHG RXWFRPHLQLWVHOI 7RDORWRISHRSOHHYHU\WKLQJ,ߞYHMXVWVDLGPD\VHHPOLNHVSOLWWLQJKDLUVIRUQRUHDVRQ%XW,KDYHDYHU\ JRRGUHDVRQIRUWDNLQJLVVXHZLWKWKH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQ,ZDQW\RXWRGRZHOORQ WKH$&7DQGWKLV5HG%RRNH[SODQDWLRQGRHVQߞWOD\DJRRGIRXQGDWLRQIRU\RXWRGRWKDW ,I\RXZDQWWRDQVZHU$&75HDGLQJTXHVWLRQVZLWKVSHHGDQGFRQILGHQFHDQGJHWWKHPULJKWWKHQ\RX QHHGWRORRNDWWKHWH[WLQWKHSUHFLVHOLWHUDOPLQGHGZD\WKDW,WHDFKLQWKLV%ODFN%RRN,I\RXXVHWKH YDJXHVXEMHFWLYHDSSURDFKRIWHQIRXQGLQ5HG%RRNH[SODQDWLRQV\RXߞOOZDVWHDORWRIWLPHRQWHVWGD\ DQGJHWDORWRITXHVWLRQVZURQJ 7KH$&7LVDOODERXWGHWDLOVDQGUHSHWLWLRQDQGWKDWߞVZK\,UHSHDWHGO\SRLQWLWRXWZKHQWKH5HG%RRN JHWVWKHGHWDLOVZURQJ,ZDQW\RXWRVXFFHHGRQWKHWHVWDQGWKHVHDUHWKHNLQGVRILVVXHV\RXQHHGWREH DZDUHRILQRUGHUIRUWKDWWRKDSSHQ 1RZOHWߞVWDNHDORRNDWWKHRWKHUFKRLFHV % LVLQFRUUHFWEHFDXVHWKHDXWKRUQHYHULQGLFDWHVWKDWWKH&'520VDFWXDOO\YHULILHGDQ\WKLQJ7KH SDVVDJHWDONVDERXWSHRSOHUHYLVLQJ6KDNHVSHDUHߞVSOD\VDQGLWWDONVDERXW&'520VEXWLWQHYHU FRQQHFWVWKRVHWZRLGHDVLQWKHZD\WKLVDQVZHUFKRLFHGRHV & LVLQFRUUHFWEHFDXVHDVGHVFULEHGLQWKHH[SODQDWLRQRIFKRLFH $ DERYHWKHDXWKRUSUDLVHVWKH&' 520VLQWKHILUVWVHQWHQFHRIWKHHVVD\+HQHYHUߡEHPRDQVWKHLUDUULYDOߢDVWKLVDQVZHUFKRLFHZRXOG UHTXLUH ' LVLQFRUUHFWEHFDXVHWKHDXWKRUQHYHUH[SUHVVHVDQ\VNHSWLFLVPDERXWWKHSRWHQWLDORI&'520VDQG QHYHUGLVFXVVHVSHRSOHZKRDUHLQWLPLGDWHGE\6KDNHVSHDUH 3DJH4XHVWLRQ %HFDXVHRIWKHZD\WKLVTXHVWLRQLVSKUDVHGWKHFRUUHFWDQVZHUPXVWUHVWDWHDFRQFHSWWKDWDSSHDUVLQWKH ODVWSDUDJUDSKEXWGRHVQߞWDSSHDUDQ\ZKHUHHOVHLQWKHSDVVDJH ,WPLJKWEHHDVLHUWRJRWKURXJKWKHDQVZHUFKRLFHVLIZHߞYHUHDGWKHSDVVDJHEHIRUHKDQGRULIZHߞYH DQVZHUHGDIHZRIWKHRWKHUTXHVWLRQVEHIRUHDWWDFNLQJWKLVRQH UHPHPEHUWKDWZHGRQߞWKDYHWRDQVZHU WKHTXHVWLRQVLQWKHRUGHUWKH\ߞUHSUHVHQWHG /HWߞVVHHZKDWZHILQG ) LVLQFRUUHFWEHFDXVHWKHDXWKRURIIHUVVSHFLILFH[DPSOHVRIWKHZD\&'520WHFKQRORJ\HQKDQFHV DSSUHFLDWLRQRI6KDNHVSHDUHLQWKHIRXUWKDQGILIWKSDUDJUDSKV * LVLQFRUUHFWEHFDXVHWKHILIWKSDUDJUDSKGLVFXVVHVVSHFLILFDFWRUVDQGDFWUHVVHVZKRKDYHSHUIRUPHG UROHVLQ6KDNHVSHDUHSOD\V:HFRXOGILQGWKHLUQDPHVE\VNLPPLQJWKHSDVVDJHIRUFDSLWDOOHWWHUVFORVH WRJHWKHULQWKHPLGGOHRIVHQWHQFHV + LVLQFRUUHFWEXWWKHUHDVRQLQJPLJKWEHDOLWWOHWULFN\7KHVSHFLILFUHDVRQZK\VFKRODUVVWDUWHGWR YLHZWKHSOD\VDVWUHDVXUHVLVQߞWGLVFXVVHGDQ\ZKHUHLQWKHSDVVDJHLQFOXGLQJWKHODVWSDUDJUDSK3HRSOH RIWHQLQFRUUHFWO\FKRRVH + EHFDXVHWKH\UHDVRQWKDWDFRQFHSWWKDWߞVQRWDQ\ZKHUHLQWKHSDVVDJHZRXOG VWLOOEHDEVHQWIURPWKHSDVVDJHLIWKHODVWSDUDJUDSKZHUHUHPRYHG7REHKRQHVW,FDQXQGHUVWDQGWKLV W\SHRIUHDVRQLQJDQG,GRQߞWWKLQNWKH$&7VKRXOGLQFOXGHWKHVHW\SHVRIZURQJDQVZHUVRQDTXHVWLRQ OLNHWKLV ZKLFKWKH\GRYHU\UDUHO\ %XWLIZHUHDGWKHRULJLQDOTXHVWLRQH[WUHPHO\OLWHUDOO\ZHVHHWKDW WKHSKUDVHߡZRXOGFRQWDLQQRVSHFLILFH[DPSOHV>HPSKDVLVPLQH@ߢLVLQWKHVXEMXQFWLYHDQGWHFKQLFDOO\ LQGLFDWHVWKDWWKHRULJLQDOSDVVDJHGRHVFRQWDLQVXFKDQH[DPSOHDVORQJDVWKHODVWSDUDJUDSKLVLQFOXGHG 'RQߞWJHWPHZURQJߚ,ߞPQRWGHIHQGLQJWKH$&7RQWKLV,WKLQNWKLVTXHVWLRQLVPLVOHDGLQJLQDZD\WKDW WUDQVFHQGVWKHQRUPDOPLVOHDGLQJWKDWKDSSHQVRQDVWDQGDUGL]HGWHVWOLNHWKH$&7DQGERUGHUVRQIODZHG WHVWGHVLJQ%XWLWߞVWHFKQLFDOO\WUXHWKDWWKHZRUGLQJRIWKHTXHVWLRQGRHVUHTXLUHXVWRILQGDFRQFHSWWKDW DSSHDUVLQWKHODVWSDUDJUDSKUDWKHUWKDQDFRQFHSWWKDWGRHVQߞWDSSHDUDQ\ZKHUHLQWKHSDVVDJH 6RKHUHߞVWKHERWWRPOLQHRQVRPHWKLQJOLNHWKLVLI\RXHYHUVHHDQRWKHUUHDO$&7TXHVWLRQZRUGHGOLNH WKLVMXVWNQRZWKDWWKHWHVWLVJRLQJWRUHTXLUH\RXWRILQGDFRQFHSWWKDWGRHVDSSHDUVRPHZKHUHLQWKH SDVVDJH %\WKHZD\WKLVLVRQHPRUHYHU\JRRGH[DPSOHRIWKHLPSRUWDQFHRIFRQVLGHULQJDOOWKHDQVZHUFKRLFHV ,I\RXDFFLGHQWDOO\VWRSSHGDW + WKLQNLQJLWZDVFRUUHFW\RXߞGPLVVWKHTXHVWLRQ%XWLI\RXVWLOOORRNHG DW - DV,WHDFK\RXWRGR\RXPLJKWKDYHVHHQWKDW - DOVRVHHPHGOLNHDYDOLGDQVZHUDQGIURPWKHUH \RXZRXOGKDYHEHHQDEOHWRILJXUHRXWWKDW - LVLQOLQHZLWKWKHZRUGLQJRIWKHTXHVWLRQZKLOH + LV WHFKQLFDOO\QRW - LVFRUUHFWEHFDXVHWKHODVWSDUDJUDSKHQGVZLWKDVSHFLILFH[DPSOHRIDQLQFRQVLVWHQF\LQWKHWH[WRI 5RPHRDQG-XOLHWWKHGLIIHUHQFHEHWZHHQߡUHVWߢDQGߡUXVWߢ7KHUHDUHQRRWKHUVSHFLILFSKUDVHVIURPWKH WH[WRID6KDNHVSHDUHSOD\LQWKHUHVWRIWKHSDVVDJH 3DJH4XHVWLRQ 7KLVTXHVWLRQRIWHQIUXVWUDWHVWHVWWDNHUV%XWDVDOZD\VZHߞOOILQGWKDWWKHIUXVWUDWLRQDQGFRQIXVLRQ GLVDSSHDULIZHUHDGFDUHIXOO\DQGWDNHWKLQJVRQHSKUDVHDWDWLPH 7KHTXHVWLRQPHQWLRQVWKDWWKHSDVVDJHUHIHUVWRߡHIIRUWVWRGD\E\HGLWRUVWRDVVHPEOHDILQDOYHUVLRQߢRID 6KDNHVSHDUHSOD\8VLQJVLPLODUZRUGLQJFKRLFH % UHIHUVWRWKHߡILQDOIRUPߢRI6KDNHVSHDUHߞVSOD\V $OORIWKHRWKHUDQVZHUFKRLFHVDUHZURQJEHFDXVHWKH\GHDOZLWKWKHLGHDWKDW6KDNHVSHDUHߞVSOD\VZHUH ߡRSHQߢDQGߡXQILQLVKHGߢ OLQHVDQG WKDWLVWKDWWKH\ZHUHRSHQWRLQWHUSUHWDWLRQDQGDGDSWDEOHDQG FKDQJHDEOHLQVWHDGRIEHLQJLQWHQGHGWRH[LVWLQVRPHߡILQDOߢIRUP 7KDWߞVUHDOO\DOOWKHUHLVWRLWRQDIXQGDPHQWDOOHYHO % LVULJKWEHFDXVHLWWDONVDERXWDߡILQDOIRUPߢWKDW FRUUHVSRQGVWRWKHSKUDVHߡILQDOYHUVLRQߢLQWKHRULJLQDOSURPSW 6RZK\GRVRPDQ\SHRSOHVWUXJJOHZLWKWKLVTXHVWLRQ" ,WKLQNWKHSULPDU\LVVXHIRUPRVWSHRSOHLVWKDWWKHSDVVDJHDVDZKROHUHMHFWVWKHLGHDRIDILQDOL]HGIRUP RI6KDNHVSHDUHߞVZRUNVEXWWKLVTXHVWLRQDVNVDERXWSHRSOHWU\LQJWRFUHDWHVXFKDILQDOL]HGIRUP6RLI \RXZDVWHWLPHZRUU\LQJDERXWWKHRYHUDOOWKHPHRIWKHSDVVDJH\RXFDQHQGXSFRQIXVLQJ\RXUVHOIRQWKLV TXHVWLRQ2QWKHRWKHUKDQGLI\RXMXVWNHHSLWVLPSOHDQGQRWLFHWKDWWKHSKUDVHߡILQDOYHUVLRQߢLVSUHWW\ PXFKDQH[DFWV\QRQ\PIRUWKHSKUDVHߡILQDOIRUPߢWKHQWKLVTXHVWLRQLVQߞWVXFKDELJGHDO 7KLVLVDJUHDWGHPRQVWUDWLRQRIWKHSRLQW,ߞYHPDGHUHSHDWHGO\WKURXJKRXWWKHVHVROXWLRQVWKH$&7 5HDGLQJVHFWLRQLVDOODERXWUHDGLQJFDUHIXOO\DQGSD\LQJDWWHQWLRQWRGHWDLOQRWDERXWWU\LQJWRDQDO\]HRU LQWHUSUHWDQ\WKLQJLQ\RXURZQZD\ 3DJH4XHVWLRQ 7KLVLVDQRWKHUTXHVWLRQWKDWWHVWWDNHUVRIWHQPLVVEHFDXVHWKH\GRQߞWIRFXVRQUHDGLQJWKHUHOHYDQWWH[W FDUHIXOO\7KHTXHVWLRQDVNVDERXWDVWDWHPHQWLQOLQH,IZHUHDGWKHHQWLUHVHQWHQFHWKDWFRQWDLQVWKH FLWDWLRQZHVHHWKDW ) LVFRUUHFWEHFDXVHLWGLUHFWO\UHVWDWHVWKHWH[W 7KHVHQWHQFHVWDUWLQJLQOLQHGHVFULEHVߡDVWDJHSHUIRUPDQFHDWLWVEHVWߢWKDWߡPDNHVXVWKLQN ߝWKLVPXVWEHVRߞߢZKLFKPDWFKHVXSGLUHFWO\ZLWKWKHLGHDRIߡDQDXGLHQFHPHPEHUߞVUHVSRQVHWRDKLJK TXDOLW\WKHDWHUSHUIRUPDQFHߢ7KHߡDXGLHQFHߢLQWKHDQVZHUFKRLFHUHIHUVWRߡXVߢLQOLQHWKH ߡUHVSRQVHߢLQWKHDQVZHUFKRLFHUHIHUVWRZKDWZHߞUHPDGHWRߡH[SHULHQFHߢDQGߡWKLQNߢLQOLQHVDQG WKHߡKLJKTXDOLW\WKHDWHUSHUIRUPDQFHߢLQWKHFKRLFHFRUUHVSRQGVWRߡDVWDJHSHUIRUPDQFHDWLWVEHVWߢ LQOLQHVDQG * LVZURQJEHFDXVHQRWKLQJLQWKHVXUURXQGLQJWH[WLQGLFDWHVWKLVLVDOLQHIURPDSOD\7KLVDQVZHU FKRLFHLVSUREDEO\LQWHQGHGWRFRQIXVHSHRSOHZKRGRQߞ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ߡDXWKRUߞVSXUSRVHߢDQGWKHSKUDVHߡPRVWOLNHO\ߢ(LWKHUSKUDVHLQGLYLGXDOO\ZRXOGEH OLNHO\WRPDNHPRVWWHVWWDNHUVWU\WRLQWHUSUHWWKHSDVVDJHVXEMHFWLYHO\DQGFRPELQLQJWKHPRQO\WHQGVWR PXOWLSO\WKDWHIIHFW %XWDVWUDLQHGWHVWWDNHUVZHNQRZWKHFRUUHFWDQVZHUFKRLFHZLOOEHVXSSRUWHGGLUHFWO\E\WKHWH[WQR PDWWHUKRZVXEMHFWLYHWKHZRUGLQJRIWKHTXHVWLRQVHHPVWREH,WߞVLPSRUWDQWWRUHPHPEHUWKRXJKWKDW ZKHQWKH$&7DVNVDERXWWKHߡSXUSRVHߢRUߡSRLQWߢ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ߞVWDNHDORRNDWWKHDQVZHUFKRLFHV $ LVLQFRUUHFWEHFDXVHWKHSDVVDJHGRHVQߞWVSHFLILFDOO\VD\DQ\GLIIHUHQFHVDUHߡLUUHFRQFLODEOHߢ DOWKRXJKLWGRHVPHQWLRQVRPHGLIIHUHQFHVDPRQJWKHRULHV:HPD\WKLQNWKDWWKHGLIIHUHQFHVVHHPGLIILFXOW WRUHFRQFLOHRUHYHQLPSRVVLEOHEXWWKH$&7GRHVQߞWFDUHZKDWZHWKLQNߚLWRQO\FDUHVZKDWߞVDFWXDOO\ RQWKHSDJH6LQFHWKHWH[WQHYHUVD\VWKDWWKHGLIIHUHQFHVFDQߞWEHUHFRQFLOHG $ LVZURQJ % LVLQFRUUHFW7KHSDVVDJHGRHVGLVFXVVWKHHDUO\KLVWRU\RI0DUVEXWWKDWGLVFXVVLRQLVQHYHUUHODWHGWR ߡRWKHUDVSHFWVRISODQHWDU\VFLHQFHߢDVWKLVDQVZHUFKRLFHZRXOGUHTXLUH & LVZURQJEXWZHQHHGWREHYHU\IDPLOLDUZLWKWKHUXOHVRIWKH$&7WRVHHZK\7KHILUVWSDUDJUDSK GRHVPHQWLRQWKHLGHDRI(DUWKߞVDWPRVSKHUHPDLQWDLQLQJDKLJKSUHVVXUHWKDWPDNHVLWSRVVLEOHIRUULYHUV DQGRFHDQVWRH[LVW OLQHVWKURXJK ,WDOVRPHQWLRQVWKDWGDWDIURP0DUVVHHPHGWRVXJJHVWWKDW0DUV RQFHKDGDWKLFNDWPRVSKHUHDQGZDWHURQLWVVXUIDFH OLQHVWKURXJK 6RWKHILUVWSDUDJUDSKGHILQLWHO\ PHQWLRQVDGLIIHUHQFHEHWZHHQWKHDWPRVSKHULFSUHVVXUHOHYHOVRQWKHWZRSODQHWVDQGLOOXVWUDWHVWKLV GLIIHUHQFHE\SRLQWLQJRXWWKDWVXUIDFHZDWHUFDQH[LVWRQ(DUWKEXWQRWRQ0DUV%XWZKHQZHORRNDWWKH QH[WDQVZHUFKRLFHZHߞOOVHHWKDWLWUHVWDWHVLGHDVWKDWDSSHDULQWKHWH[WIDUPRUHRIWHQWKDQWKLVLGHDRI LOOXVWUDWLQJGLIIHUHQFHVLQDWPRVSKHULFSUHVVXUHZKLFKRQO\RFFXUVLQWKHILUVWSDUDJUDSK5HPHPEHUWKDW TXHVWLRQVDERXWWKHDXWKRUߞVߡSXUSRVHߢFDQRIWHQKDYHPRUHWKDQRQHDQVZHUFKRLFHWKDWUHVWDWHVDSDUWRI WKHWH[WDQGWKHFRUUHFWDQVZHUZLOOEHWKHRQHWKDWLVUHVWDWHGPRVWRIWHQLQWKHWH[W ' LVFRUUHFWEHFDXVHWKHHQWLUHSDVVDJHPHQWLRQVߡUHFHQWWKHRULHVߢDQGߡFRQWURYHUVLHVߢUHODWHGWRHDUO\ 0DUWLDQKLVWRU\ w/LQHWDONVDERXWZKDWߡVFLHQWLVWVSURSRVHGߢWRH[SODLQZKDW0DUVߞVDWPRVSKHUHZDVOLNHZKHQLW IRUPHG7KLVLVDWKHRU\ w/LQHPHQWLRQVߡVFHQDULRVߢWKDWߡUHVHDUFKHUVKDYHVXJJHVWHGߢDQGWKHVHDUHDOVRWKHRULHV w/LQHPHQWLRQVZKDWVRPHVFLHQWLVWVKDYHߡK\SRWKHVL]HGߢDQGWKRVHK\SRWKHVHVDUHDOVRWKHRULHV w7KHIRXUWKSDUDJUDSKH[SODLQVWKHPHFKDQLFVEHKLQG0HORVKߞVDQG9LFNHU\ߞVWKHRU\DERXWWKHORVVRI WKH0DUWLDQDWPRVSKHUHDQGWKHILIWKSDUDJUDSKGHVFULEHVKRZWKH\WULHGWRWHVWWKHLUWKHRU\ZLWK FRPSXWHUPRGHOLQJ w/LQHVD\VߡVRPHUHVHDUFKHUVDUHTXHVWLRQLQJߢZKHWKHUWKHUHHYHUZDVDQDWPRVSKHUHRQ0DUVOLNH WKHRQHWKDW0HORVKDQG9LFNHU\EHOLHYHH[LVWHG7KLVLVDFRQWURYHUV\ߚDGLVDJUHHPHQWEHWZHHQ WZRVLGHV w/LQHVWKURXJKWDONDERXWDߡVXJJHVW>LRQ@WKDWWKHSODQHWPLJKWKDYHEHHQFRYHUHGE\LFHߢ ZKLFKLV\HWDQRWKHUWKHRU\ w7KHODVWSDUDJUDSKPHQWLRQV9LFNHU\ߡVWLFNLQJE\KHURULJLQDODVVXPSWLRQVߢZKLFKLVDQRWKHU UHIHUHQFHWR9LFNHU\ߞVSRVLWLRQLQWKHFRQWURYHUV\PHQWLRQHGLQWKHWKSDUDJUDSK 6RZHFDQVHHWKDWWKHߡUHFHQWWKHRULHVߢDQGߡFRQWURYHUVLHVߢPHQWLRQHGLQWKLVDQVZHUFKRLFHFRPHXS PXFKPRUHRIWHQLQWKHSDVVDJHWKDQWKHLGHDIURPFKRLFH & GRHVZKLFKPDNHVFKRLFH ' ULJKWDQG FKRLFH & ZURQJDFFRUGLQJWRWKH$&7ߞVUXOHVIRU5HDGLQJTXHVWLRQVDERXWWKHߡDXWKRUߞVSXUSRVHߢ 3DJH4XHVWLRQ $ORWRIWHVWWDNHUVPLVVWKLVTXHVWLRQEHFDXVHWKH\MXVWGRQߞWERWKHUWRJREDFNWRWKHSDVVDJHDQGGRXEOH FKHFNWKHQXPEHUVLQWKHDQVZHUFKRLFHV'RQߞWPDNHWKDWNLQGRIPLVWDNH'RQߞWOHWOD]LQHVVRUKDVWHNHHS \RXIURPFRUUHFWO\DQVZHULQJDUHODWLYHO\HDV\TXHVWLRQ :KHQZHORRNDWWKHGHVFULSWLRQRI9LFNHU\ߞVDQG0HORVKߞVZRUNRQWKHDPRXQWRIWLPHLWWRRNIRU0DUVߞV DWPRVSKHUHWRFKDQJHZHVHHWKDWSDUDJUDSKGHVFULEHVWKHLUFRPSXWHUPRGHOLQJ7KHODVWVHQWHQFHRI WKDWSDUDJUDSKZKLFKJRHVIURPOLQHVWRIHDWXUHVQXPEHUVWKDWDSSHDULQWKUHHRIWKHDQVZHU FKRLFHVIRUWKLVTXHVWLRQ wELOOLRQ w wPLOOLRQ 6RZKLFKQXPEHULVWKHFRUUHFWDQVZHU",IZHUHDGWKHVHQWHQFHFDUHIXOO\ZHVHHWKDWWKHUHVHDUFKHUVߞ PRGHOZDVߡDEOHWRJURZDWKLFNDWPRVSKHUHLQRQO\RUPLOOLRQ\HDUVߢ OLQHVWKURXJK 6RFKRLFH * LVFRUUHFW $VLWWXUQVRXWELOOLRQLVWKHQXPEHURI\HDUVWKDW9LFNHU\DQG0HORVKZHQWEDFNWRGHWHUPLQHWKH ߡLPSDFWUDWHߢWRXVHLQWKHLUPRGHOLQJDQGLVWKHDYHUDJHQXPEHURI\HDUVEHWZHHQLPSDFWV DFFRUGLQJWRWKDWUDWH 7KHQXPEHULQFKRLFH - DSSHDUVLQOLQHDVWKHDJHRIWKHSODQHW0DUV 7KLVTXHVWLRQPLJKWVHHPSUHWW\VLPSOHZKHQZHH[DPLQHLWFDOPO\EXWTXHVWLRQVOLNHWKLVRIWHQSURYH WURXEOHVRPHIRUPDQ\WHVWWDNHUVEHFDXVHWKH\GRQߞWVHL]HWKHRSSRUWXQLW\WRPDNHVXUHWKH\ORFNGRZQD FRUUHFWDQVZHURQDUHODWLYHO\HDV\TXHVWLRQ(DV\TXHVWLRQVFRXQWMXVWDVPXFKWRZDUGV\RXUVFRUHDV KDUGRQHVGRVRGRQߞWWKURZWKHPDZD\ 3DJH4XHVWLRQ 7KLVLV\HWDQRWKHU$&75HDGLQJTXHVWLRQZKRVHRIILFLDO5HG%RRNH[SODQDWLRQFRPSOHWHO\RYHUORRNVWKH NH\SKUDVHLQWKHSDVVDJH 7KHTXHVWLRQWDONVDERXWZKDWWKHSDVVDJHߡVWURQJO\VXJJHVWVߢDQGWKH5HG%RRNߞVH[SODQDWLRQRQSDJH WDONVDERXWZKDWWKHSDVVDJHߡLPSOLHVߢEXWWKHIDFWRIWKHPDWWHULVWKDWWKHSDVVDJHGLUHFWO\DQG VSHFLILFDOO\VWDWHVWKDWWKHVHFRQGVHWLVWKHILQDOVHW7KHUHLVQRVXJJHVWLRQRULPSOLFDWLRQLQYROYHG$V ZHߞYHVHHQUHSHDWHGO\WKURXJKRXWWKLV%ODFN%RRNWKHUHLVQHYHUDQ\VXJJHVWLRQRULPSOLFDWLRQLQYROYHG ZLWKWKH$&7HYHQLIWKH5HG%RRNWULHVWRWHOO\RXWKHUHLV 7KHRQO\PHQWLRQRIWKHVHWVLQWKHVKRZFRPHVLQWKHILUVWSDUDJUDSKVROHWߞVORRNWKHUH ,QWKHYHU\ILUVWVHQWHQFHRIWKHSDUDJUDSKZHVHHWKDWWKHߡMD]]VKRZߢZDVߡZLQGLQJGRZQߢZKHQLWZDV ߡQHDULQJWKHHQGRIWKHVHFRQGVHWߢ7KLVLVDOOWKH5HG%RRNߞVVROXWLRQPHQWLRQVZKHQLWMXVWLILHV $ DV WKHFRUUHFWDQVZHUEXWWKLVLVQߞWDFWXDOO\HQRXJKWRPDNH $ FRUUHFWDFFRUGLQJWRWKH$&7ߞVUXOHVIRUWKH 5HDGLQJVHFWLRQ)RULQVWDQFHLWPLJKWEHSRVVLEOHWKDWWKHVKRZFRXOGFRQVLVWRIWKUHHVHWVPD\EHWKH ILUVWWZRVHWVDUHPLQXWHVHDFKDQGWKHODVWRQHLVMXVWPLQXWHV,IWKDWZHUHWKHFDVHZHFRXOGVD\ WKDWWKHVKRZZDVߡZLQGLQJGRZQߢDVLWDSSURDFKHGWKHHQGRIWKHVHFRQGVHWEHFDXVHWKHUHZRXOGRQO\ EHDQRWKHUPLQXWHVRISHUIRUPDQFHDIWHUWKDWVHWFRPSDUHGWRWKHSUHYLRXVRUPLQXWHVRI SHUIRUPDQFHߚEXWLQWKLVK\SRWKHWLFDOVFHQDULRWKHVHFRQGVHWZRXOGQߞWKDYHWREHWKHILQDORQH 6RZK\LV $ DFWXDOO\FRUUHFWWKHQ" $ LVFRUUHFWEHFDXVHRIOLQHVDQGZKLFKVD\WKDWLWZDVFXVWRPDU\WRLQYLWHDPXVLFLDQRQVWDJH ߡWRZDUGWKHHQGRIWKHILQDOVHWߢ 6RWKHILUVWSDUDJUDSKVD\VWKDW(YHUHWW3D\QHZDVLQYLWHGRQVWDJHߡQHDULQJWKHHQGRIWKHVHFRQGVHWߢ$W WKHHQGRIWKHSDUDJUDSKZHߞUHWROGWKDWDPXVLFLDQLVFXVWRPDULO\LQYLWHGXSߡWRZDUGWKHHQGRIWKHILQDO VHWߢ7KDWPHDQVWKDWWKHߡVHFRQGVHWߢLQWKHILUVWVHQWHQFHRIWKHSDUDJUDSKDQGWKHߡILQDOVHWߢLQWKHODVW VHQWHQFHRIWKHSDUDJUDSKPXVWEHWKHVDPHVHW 6RWKHUHߞVDFWXDOO\QRVXJJHVWLRQRULPSOLFDWLRQLQYROYHG7KHILUVWSDUDJUDSKVD\VH[SOLFLWO\WKDWWKH ߡVHFRQGVHWߢLVWKHߡILQDOVHWߢWKRXJKZHKDYHWRUHDGFDUHIXOO\WRFDWFKLWDQGWKRXJKWKHRIILFLDO H[SODQDWLRQLQWKH5HG%RRNLWVHOIGRHVQߞWDFWXDOO\DFNQRZOHGJHLW /HWߞVFKHFNRXWWKHRWKHUFKRLFHV % LVWHPSWLQJIRUDORWRIWHVWWDNHUVEHFDXVHWKHGHVFULSWLRQRI(YHUHWW3D\QHߞVSOD\LQJFHUWDLQO\VRXQGV OLNHLWZRXOGWDNHDORQJWLPH%XWWKHWH[WQHYHUH[SOLFLWO\VD\VKRZORQJWKHSOD\LQJDFWXDOO\WDNHVQRU GRHVLWVD\DQ\WKLQJDERXWWKHOHQJWKRIWKHILUVWVHW6LQFHWKHUHߞVQRFRQFUHWHZD\WRNQRZWKHOHQJWKRI HLWKHUVHWWKHUHߞVQRZD\WRFRPSDUHWKHLUOHQJWKVDQGQRZD\WRVD\WKDW % LVUHIOHFWHGLQWKHWH[W & LVLQFRUUHFWEHFDXVHWKHWH[WQHYHUPHQWLRQVDWKLUGVHWRQ6XQGD\QLJKWLQIDFWWKHLGHDRIDWKLUGVHW LVUXOHGRXWE\WKHSKUDVHVTXRWHGLQRXUGLVFXVVLRQRIFKRLFH $ ' LVZURQJEHFDXVHWKHWH[WVD\VRIWKHPXVLFLDQVLQWKHEXOOSHQWKDWߡRQHRUWZRRIߢ OLQH WKH EDQGVWDQGPXVLFLDQVZHUHLQYLWHGߡWRVLWLQZLWKWKHEDQGߢߡWRZDUGWKHHQGRIWKHILQDOVHWߢ OLQHV WKURXJK ZKLFKPHDQVWKHPXVLFLDQVLQWKHEXOOSHQSOD\HGDORQJZLWKWKHEDQGDQGRQO\GLGWKDW WRZDUGWKHHQGRIWKHVHW7KHEHJLQQLQJRIWKHVHWPXVWKDYHEHHQSOD\HGE\WKHEDQG6RPHWHVWWDNHUV ZLOOEHWHPSWHGWRFKRRVHWKLVDQVZHULIWKH\GRQߞWUHDGWKHWH[WFDUHIXOO\HQRXJKEHFDXVHWKHODVWIHZ SDUDJUDSKVPDNHLWVRXQGOLNH(YHUHWW3D\QHLVSOD\LQJ6RQQ\%R\%OXHE\KLPVHOI%XWWKHWKSDUDJUDSK PHQWLRQVWKDWWKHEDVVLVWDQGGUXPPHUDUHSOD\LQJZLWKKLP $JDLQWKHPDLQOHVVRQWROHDUQIURPWKLVTXHVWLRQLVWKDWWKHFRUUHFWDQVZHUWRHYHU\TXHVWLRQRQWKH$&7 5HDGLQJVHFWLRQLVDOZD\VVWDWHGGLUHFWO\LQWKHWH[WHYHQZKHQWKH5HG%RRNߞVRZQH[SODQDWLRQGRHVQߞ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ߡWKHSXULVWVߢ 5HPHPEHUWKDWZHRQO\QHHGWRILQGRQHLQFRUUHFWGHVFULSWLRQ RIWKHWZR WRHOLPLQDWHDQDQVZHUFKRLFH DQGWKDWERWKGHVFULSWLRQVLQWKHULJKWDQVZHUPXVWEHVXSSRUWHGE\WKHWH[W /HWߞVWDNHDORRN ) LVZURQJEHFDXVHZHNQRZߡWKHSXULVWVߢDUHQߞWߡRSHQPLQGHGߢVLQFHZHFDQVHHLQOLQHWKDWWKH\ VKRZHGߡRSHQGLVJXVWߢDIWHURQO\DIHZFKRUGVRIPXVLFZLWKRXWJLYLQJ(YHUHWW3D\QHDFKDQFHWRVKRZ ZKDWKHZDQWHGWRGR * LVFRUUHFWEHFDXVHWKHWH[WJLYHVXVH[DPSOHVRIߡWKHSXULVWVߢEHLQJERWKߡVQREELVKߢDQGߡLQWROHUDQWߢ :HFDQVHHWKDWWKH\ߞUHVQREELVKLQOLQHZKLFKVD\VWKDWWKH\ߡQRUPDOO\UHIXVHGWRDSSODXGHYHQ JHQLXVߢDQGZHNQRZWKDWWKH\ߞUHLQWROHUDQWEHFDXVHOLQHVD\VWKH\VKRZHGߡRSHQGLVJXVWߢZKHQWKH\ KHDUG(YHUHWW3D\QHEHJLQWRSOD\ + LVZURQJEHFDXVHQRWKLQJLQWKHWH[WVXSSRUWVWKHLGHDWKDWWKH\ߞUHHLWKHUUDWLRQDORUHGXFDWHG:H PLJKWVXEMHFWLYHO\H[SHFWSHRSOHZKRFDUHDORWDERXWMD]]PXVLFWREHߡZHOOHGXFDWHGߢEXWWKDWߞVQRW HQRXJKRQWKH$&7VLQFHWKHWH[WGRHVQߞWH[SOLFLWO\VWDWHWKDWWKHSXULVWVDUHUDWLRQDORUHGXFDWHG + LV ZURQJ - LVZURQJEHFDXVHQRWKLQJLQWKHWH[WLQGLFDWHVWKHH[SHULHQFHOHYHORIWKHSXULVWVRQHZD\RUWKHRWKHU 3DJH4XHVWLRQ 7KLVLVDUHODWLYHO\HDV\DQGGLUHFWTXHVWLRQLIZHFRUUHFWO\ORFDWHWKHNH\SKUDVHLQWKHWH[WEXWPDQ\WHVW WDNHUVJLYHXSRQLWDQGGRQߞWWDNHWKHIHZH[WUDVHFRQGVWRPDNHVXUHWKH\ߞYHDFWXDOO\VHOHFWHGWKHULJKW DQVZHU 7KHWH[WVD\V(YHUHWW3D\QHߞVSOD\LQJLVߡDWDVORZHUWHPSRߢLQOLQHZKLFKFRXOGPLVOHDGDORWRIWHVW WDNHUVLQWRFKRRVLQJ ) $QGSDUDJUDSKVDQGGHVFULEH(YHUHWW3D\QHKLPVHOIDVERWKߡGHOLEHUDWHߢDQG ߡDEVHQWPLQGHGߢZKLFKFRXOGPDNHDORWRIWHVWWDNHUVFKRRVH * LQFRUUHFWO\2QWRSRIWKDWOLQH PHQWLRQVߡFKXUFKߢVRVRPHSHRSOHFRXOGEHPLVOHGLQWRFKRRVLQJ + WRR 7KHSUREOHPLVWKDWQRQHRIWKHVHLQFRUUHFWDQVZHUFKRLFHVVSHFLILFDOO\LQGLFDWHVZKDW+DWWLHWKLQNVDERXW WKHSOD\LQJ2QO\ - GRHVWKDWEHFDXVHZHVHH+DWWLHߞVYLHZRIWKHSHUIRUPDQFHLQOLQHVDQG ߡ>(YHUHWW3D\QH@WRRNWKHPRQDMR\RXVWHUULI\LQJUROOHUFRDVWHURIDULGH>VLF@LWVHHPHGWR+DWWLHߢ6LQFH WKLVGLUHFWO\VWDWHVWKDWߡLWVHHPHGWR+DWWLHߢWREHDߡUROOHUFRDVWHURIDULGHߢZHNQRZWKDW - LVFRUUHFW ) GHVFULEHVKRZWKHSOD\LQJVHHPHGWRWKHQDUUDWRU * GHVFULEHVKRZ(YHUHWW3D\QHKLPVHOIVHHPHGWR +DWWLH$QG + GHVFULEHVWKHDWPRVSKHUHDIWHU(YHUHWW3D\QHKDGILQLVKHGSOD\LQJ /HWWKLVTXHVWLRQEH\HWDQRWKHUUHPLQGHURIWKHLPSRUWDQFHRIUHDGLQJH[WUHPHO\FDUHIXOO\RQWKH$&7,I \RXPLVVRQHNH\SKUDVHLQWKHSURPSWRULQWKHSDVVDJHRULI\RXGRQߞWERWKHUWRORRNDWDOOWKHDQVZHU FKRLFHVLQWKHWH[W\RXFRXOGYHU\HDVLO\HQGXSWKURZLQJWKLVHDV\TXHVWLRQDZD\IRUQRUHDVRQ7KDWߞV H[DFWO\WKHNLQGRIPLVWDNHWKDWORZVFRULQJWHVWWDNHUVRIWHQPDNH'RQߞWGRWKDW 3DJH4XHVWLRQ 7KLVLVDQH[DPSOHRIDQߡ(;&(37ߢTXHVWLRQVRZHKDYHWRILQGWKHRQHDQVZHUFKRLFHWKDWLV127 SUHVHQWLQWKHWH[W7KLVZLOOUHTXLUHXVWRORFDWHWKUHHGLIIHUHQWDQVZHUFKRLFHVVRPHZKHUHLQWKHWH[W ZKLFKNLQGRIPHDQVZHKDYHWRZRUNWKUHHWLPHVDVKDUGRQWKLVTXHVWLRQDVZHPLJKWIRUDQRWKHU TXHVWLRQ 5HPHPEHUWKDWZHVKRXOGDOZD\VFRQVLGHUHYHU\DQVZHUFKRLFHLQDTXHVWLRQEXWLWߞVXVXDOO\ HDVLHUWRILJXUHRXWZK\DQDQVZHUFKRLFHIDLOVWRUHVWDWHWKHWH[WWKHQWREHFHUWDLQWKDWDFKRLFHDFWXDOO\ UHVWDWHVWKHWH[W )RUDORWRIWHVWWDNHUVLWPLJKWEHHDVLHUWRDSSURDFKWKLVTXHVWLRQDIWHUDQVZHULQJPRVWRUDOORIWKHRWKHU TXHVWLRQVLQWKLVSDVVDJHEHFDXVHGRLQJWKDWZLOOXVXDOO\KHOS\RXIDPLOLDUL]H\RXUVHOIZLWKPRVWRIWKH SDVVDJHZKLFKFRXOGPDNHLWHDVLHUWRILJXUHRXWZKLFKDQVZHUFKRLFHGRHVQߞWDFWXDOO\H[LVWLQWKHWH[W /HWߞVWDNHDORRNDQGVHHZKDWZHILQG ) LVWKHFRUUHFWDQVZHU7KHDXWKRUGRHVVD\DORWDERXWVSUDZOEXWKHQHYHUDFWXDOO\VD\VKRZORQJLWߞV EHHQKDSSHQLQJLQ86FLWLHV * LVZURQJEHFDXVHWKHDXWKRUVD\VVSHFLILFDOO\LQOLQHVDQGWKDWߡGHYHORSPHQWWKDWGHVWUR\V FRPPXQLWLHVLVQߞWSURJUHVVߢZKLFKDQVZHUVWKHTXHVWLRQLQ * + LVZURQJEHFDXVHOLQHVWKURXJKGHVFULEH]RQLQJODZVDQGFRGHVDQGWKHQOLQHVDQGVD\ WKHFRGHVDUHߡDPDMRUUHDVRQZK\SHUFHQWRIDOOWULSVLQWKH8QLWHG6WDWHVDUHWDNHQE\FDUߢZKLFK DQVZHUVWKHTXHVWLRQLQ + - LVZURQJEHFDXVHWKHDXWKRURIIHUVDQDQVZHUWRWKLVTXHVWLRQLQWKHILQDOSDUDJUDSKWKRXJKZHKDYHWR UHDGFDUHIXOO\WRVHHLW7KLVSDUDJUDSKGRHVQߞWDFWXDOO\XVHWKHZRUGߡVSUDZOߢEXWLWGRHVUHIHUWRWKH LGHDRIVKDSLQJFRPPXQLWLHVߡE\FKRLFHQRWE\FKDQFHߢDQGWKHLGHDRIPDNLQJFKRLFHVWKDWHQFRXUDJH ߡDOWHUQDWLYHVWRWKHDXWRPRELOHߢ,QWKHUHVWRIWKHSDVVDJHVSUDZOLVHTXDWHGZLWKXQSODQQHGFKDRWLF GHYHORSPHQWDQGDOVRZLWKZLGHVSUHDGUHOLDQFHRQFDUVIRUWUDQVSRUWDWLRQ6RZHNQRZWKDWWKHVWHSVLQ WKLVSDUDJUDSKWKDWFRXOGEHWDNHQWRILJKWEDGGHYHORSPHQWDQGWKHXVHRIFDUVDUHDOVRVWHSVWKDWZRXOG ILJKWVSUDZODFFRUGLQJWRWKHDXWKRU 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQPDNHVQRVHQVHDQGFDQRQO\KDYHEHHQZULWWHQE\VRPHRQH ZKRHLWKHUGLGQߞWUHDGRUGLGQߞWXQGHUVWDQGWKHTXHVWLRQDQGWKHWH[W7KHILUVWSUREOHPZLWKWKH5HG%RRN H[SODQDWLRQLVWKDWLWVD\VWKHZRUGߡOHDSIURJߢߡPHDQVWKDWWKHUHLVRSHQVSDFHEHWZHHQWKDWXUEDQIULQJH DQGWKHVXEGLYLVLRQVLQTXHVWLRQߢ%XWWKHZRUGߡOHDSIURJߢGRHVQߞWDFWXDOO\PHDQWKHUHPXVWEHRSHQ VSDFHEHWZHHQWZRWKLQJVLQIDFWLWVPHDQLQJGRHVQߞWLQGLFDWHDQ\WKLQJDERXWVSDWLDOUHODWLRQVKLSV LI DQ\WKLQJZHPLJKWHYHQDUJXHWKDWWZRSHRSOHFDQRQO\SOD\OHDSIURJLIWKH\ߞUHULJKWQH[WWRHDFKRWKHU 7KHVHFRQGSUREOHPLVWKDWWKHTXHVWLRQDQGWKHWH[WDUHWDONLQJDERXWDQLQGLYLGXDOKRXVHEHLQJ ߡGHWDFKHGߢZKLOHWKH5HG%RRNH[SODQDWLRQWDONVDERXWWKHIDFWWKDWVSDFHPXVWH[LVWEHWZHHQWKHXUEDQ IULQJHDQGWKHVXEGLYLVLRQVLQWKHWH[W)LQDOO\WKH5HG%RRNH[SODQDWLRQDVVXPHVWKDWDOOVXEGLYLVLRQV PXVWFRQVLVWRQO\RIGHWDFKHGKRPHVEXWLQUHDOLW\VXEGLYLVLRQVFDQIHDWXUHWRZQKRPHVDQGRWKHUQRQ GHWDFKHGKRXVLQJߚDQGRQWRSRIWKDWWKH$&75HDGLQJVHFWLRQZRXOGQHYHUUHTXLUHXVWRNQRZDERXW W\SHVRIKRXVLQJLQRUGHUWRDQVZHUDTXHVWLRQ6RWKH5HG%RRNH[SODQDWLRQIRUWKLVTXHVWLRQLVQߞWPXFK KHOSLIRXUJRDOLVWROHDUQWRDSSURDFKRWKHUTXHVWLRQVLQWKHIXWXUH /HWߞVWDONDERXWZKDWߞVDFWXDOO\KDSSHQLQJLQWKLVTXHVWLRQ 7KHZRUGߡGHWDFKHGߢLVXVHGLQOLQHLQWKHSKUDVHߡDGHWDFKHGKRPHLQWKHPLGGOHRIDJUDVV\ODZQߢ ,IWKHKRPHLVߡLQWKHPLGGOHRIDJUDVV\ODZQߢWKHQLWPDNHVVHQVHWRVD\WKDWLWPXVWEHߡVHWDSDUWߢIURP RWKHUKRPHVVLQFHWKHUHLVDJUDVV\ODZQDOODURXQGLW7KDWPHDQV * LVWKHFRUUHFWDQVZHU 7KHUHߞVQRWKLQJLQWKHWH[WWRVXSSRUWWKHLGHDWKDWWKHKRPHLQWKHVHQWHQFHZRXOGEHߡREMHFWLYHߢDQG WKHUHߞVDOVRQRWKLQJWRLQGLFDWHWKDWWKHKRPHKDVEHHQߡEURNHQDSDUWߢRUߡWDNHQDZD\ߢIURPDQ\WKLQJ 5HPHPEHUWKDWZKHQ\RXߞUHFKRRVLQJWKHPHDQLQJRIDZRUGXVHGLQFRQWH[WWKHUHKDVWREHVRPHWKLQJLQ WKHWH[WWKDWGLUHFWO\VXSSRUWV\RXUFKRLFHߚ\RXFDQߞWMXVWDQVZHUEDVHGRQDIHHOLQJ\RXJHWDERXWWKH ZRUGZLWKRXWYHULI\LQJWKDW\RXUDQVZHUGLUHFWO\UHVWDWHVDFRQFHSWWKDWLVH[SOLFLWO\VWDWHGLQWKHSDVVDJH +HUHIRULQVWDQFHZHVHHWKHSKUDVHߡLQWKHPLGGOHRIDJUDVV\ODZQߢZKLFKFRQFUHWHO\VXSSRUWVWKHLGHD WKDWWKHߡGHWDFKHGߢKRXVHPXVWEHߡVHWDSDUWߢIURPRWKHUKRXVHV 3DJH4XHVWLRQ /LNHHYHU\$&75HDGLQJTXHVWLRQWKLVRQHZLOOGHSHQGRQNH\SKUDVHVIRXQGLQWKHWH[W6LQFHWKH TXHVWLRQDVNVDERXWWKHQDUUDWRUߞVSRLQWRIYLHZDQGGRHVQߞWJLYHDVSHFLILFOLQHFLWDWLRQRUSDUDJUDSKIRU XVWRUHIHUWRZHPD\QHHGWREHEURDGO\IDPLOLDUZLWKWKHSDVVDJHLQRUGHUWRNQRZZKLFKSDUWVZH VKRXOGORRNDWPRUHFDUHIXOO\WRILQGWKHFRUUHFWDQVZHU)RUWKDWUHDVRQVRPHWHVWWDNHUVPLJKWSUHIHUWR VNLSWKLVTXHVWLRQDWILUVWDQGUHWXUQWRLWDIWHUWKH\ߞYHEHFRPHPRUHIDPLOLDUZLWKWKHSDVVDJHIURP DQVZHULQJRWKHUTXHVWLRQV $ LVFRUUHFW/LQHGHVFULEHVKRZWKHDXWKRUߞVLQWHUHVWLQIORZHUVEHJDQ ߡ,ZDVVHYHQWHHQZKHQLW VWDUWHGߢ 3DUDJUDSKVKRZVKRZKHUVWXG\RIIORZHUVEHFDPHDELJJHUSDUWRIKHUOLIHE\GHVFULELQJ KHULQFUHDVLQJXVHRIWKHILHOGJXLGHߡRYHUWKHQH[WVHYHUDO\HDUVWKLVILHOGJXLGHZRXOGEHFRPHP\ FORVHVWFRPSDQLRQߢ)LQDOO\WKHFORVLQJSDUDJUDSKGHVFULEHVKRZKHULQWHUHVWLQIORZHUVOHGKHUWR ߡWUDYHOߢGRZQDߡURDGߢWKDWLQFOXGHGߡJHRORJ\ELRJHRJUDSK\HYROXWLRQDU\ELRORJ\ߢZKLFKDUHDOO GLIIHUHQWGLVFLSOLQHVUHODWHGWRWKHVWXG\RIWKHQDWXUDOZRUOG7KLVPDWFKHVXSH[DFWO\ZLWKFKRLFH $ 1RWLFHWKDWZHGRQߞWQHHGWRNQRZWKHH[DFWPHDQLQJRIWKHZRUGVߡTXDWHUQDU\ߢDQGߡELRJHRJUDSK\ߢ EHFDXVHZHFDQWHOOWKDWZRUGVOLNHߡJHRORJ\ߢDQGߡELRORJ\ߢUHODWHWRWKHQDWXUDOZRUOGZHPLJKWDOVR QRWLFHWKDWߡERJVߢߡIRUHVWVߢߡFOLPDWHFKDQJHߢDQGߡFRQWLQHQWDOGULIWߢDUHDOVRSDUWRIWKHQDWXUDOZRUOG DQGDUHDOVRPHQWLRQHGDVWKLQJVWKHDXWKRUVWXGLHGDIWHUOHDUQLQJDERXWIORZHUV % LVLQFRUUHFWEXWMXVWEDUHO\7KHDXWKRUGRHVEHJLQE\GHVFULELQJDQHYHQWWKDWOHGWRDOLIHORQJ IDVFLQDWLRQEXWWKLVIDVFLQDWLRQLVZLWKIORZHUVLQJHQHUDOQRWZLWKDVWHUVLQSDUWLFXODU,WߞVWUXHWKDWWKH ILUVWIORZHUVKHWDNHVQRWLFHRILVDQDVWHUEXWWKHUHVWRIWKHSDVVDJHFOHDUO\LQGLFDWHVWKDWWKHDXWKRULV LQWHUHVWHGLQDOOIORZHUV5HPHPEHUWKDWHYHQRQHZURQJZRUGPDNHVDQHQWLUHDQVZHUFKRLFHLQFRUUHFW & LVLQFRUUHFWIRUDFRXSOHRIUHDVRQVEXWZHPD\QHHGWRUHDGFDUHIXOO\WRVHHKRZ)LUVWWKHSDVVDJH GRHVQߞWߡUHYLHZߢDQ\UHODWLRQVKLSVLWRQO\PHQWLRQVWKHPLQSDVVLQJ6HFRQGWKHSDVVDJHRQO\H[SOLFLWO\ PHQWLRQVWKDWWKHQDUUDWRUORYHVIORZHUVLWGRHVQߞWDFWXDOO\VD\WKDWWKLVLQWHUHVWLVVKDUHGE\WKH\RXQJ PDQLQWKHILUVWSDUDJUDSKRUE\-XOLHLQWKHODVWSDUDJUDSK7KH\RXQJPDQLQWKHRSHQLQJRIWKHSDVVDJH KDSSHQVWRNQRZZKDWDQDVWHULVEXWWKHUHߞVQRLQGLFDWLRQWKDWKHߞVLQWHUHVWHGLQIORZHUVLQJHQHUDO,QWKH FORVLQJSDUDJUDSK-XOLHLVGHVFULEHGDVVRPHRQHZKRDOVRLGHQWLILHVLQGLYLGXDOSODQWVEXWWKDWLVQߞWWKH VDPHWKLQJDVEHLQJLQWHUHVWHGLQIORZHUV ' LVZURQJEHFDXVHWKHWH[WQHYHUGHVFULEHVWKHDXWKRUKDYLQJDQ\NLQGRIFDUHHU 1RWLFHRQFHDJDLQKRZWKHTXHVWLRQKDQJVRQVSHFLILFNH\ZRUGVDQGSKUDVHVDQGKRZFULWLFDOLWLVWR UHDGWKHUHOHYDQWSDUWVRIWKHWH[WYHU\FDUHIXOO\ 3DJH4XHVWLRQ 7KHDQVZHUWRWKLVTXHVWLRQLV ' EHFDXVHWKHDXWKRUQHYHUDFWXDOO\JLYHVDQDPHIRUWKHIORZHUVKHߞV ORRNLQJDW6KHGRHVOLVWWKHQDPHVRIRWKHUIORZHUVWKDWDUHVLPLODUWRWKHRQHVKHߞVORRNLQJDWEXWVKH QHYHUSRVLWLYHO\LGHQWLILHVLW6KHILQLVKHVKHUGHVFULSWLRQRIWKLVLQFLGHQWLQOLQHVWKURXJKE\VD\LQJ ߡ,QRWLFHGWKDWWKHUHZHUHVL[PRUHSDJHVDKHDGHDFKSDFNHGZLWKILYHSHWDOHG\HOORZIORZHUVߚ6W -RKQVZRUWVORRVHVWULIHVSXFFRRQVߢ7KHVHQDPHVPDNHXSWKHILUVWWKUHHDQVZHUFKRLFHVIRUWKLV TXHVWLRQEXWWKHDXWKRUQHYHUVD\VWKDWRQHRIWKHPZDVWKHQDPHRIWKHIORZHUVKHIRXQG 3DJH4XHVWLRQ ,ZDQWWRFDOO\RXUDWWHQWLRQWRWKLVTXHVWLRQEHFDXVHLWߞVDSHUIHFWH[DPSOHRIWKHZD\FDUHOHVVWHVWWDNHUV RIWHQPLVV$&7TXHVWLRQVWKDWWKH\FRXOGKDYHHDVLO\DQVZHUHGFRUUHFWO\ 7KHWH[WFRQWDLQVPDQ\UHIHUHQFHVWRWKHLGHDRIWKH3HWHUVRQߞVERRNLQFRQQHFWLRQZLWKYDJXHUHIHUHQFHV WRWLPHWKDWPLJKWVHHPUHODWHGWRZRUGVOLNHߡGD\VߢߡZHHNVߢDQGߡPRQWKVߢLQWKHZURQJDQVZHU FKRLFHV/LQHPHQWLRQVWKHDXWKRURZQLQJWKHERRNߡIRUDERXWDZHHNߢZKLFKFRXOGLQGLFDWHDWLPH SHULRGPHDVXUHGLQGD\VRULQZHHNV/LQHLQGLFDWHVWKHDXWKRUZDVXVLQJWKHERRNߡE\WKHWLPHWKH QH[WVXPPHUFDPHߢZKLFKFRXOGEHDSHULRGRIWLPHPHDVXUHGLQPRQWKVIURPWKHHYHQWVDWWKHEHJLQQLQJ RIWKHWH[W &DUHOHVVXQWUDLQHGWHVWWDNHUVPLJKWEHWHPSWHGWRWU\WRJXHVVWKHFRUUHFWDQVZHUIURPWKRVHLQFRQFOXVLYH SKUDVHVLQWKHWH[W%XWGLVFLSOLQHGWUDLQHGWHVWWDNHUVNQRZWKDWWKHFRUUHFWDQVZHUPXVWEHVSHOOHGRXW VRPHZKHUHGLUHFWO\RQWKHSDJHߚLIZHKDYHQߞWIRXQGWKHDQVZHUVSHOOHGRXWLQEODFNDQGZKLWHWKHQZH KDYHQߞWILQLVKHGORRNLQJ ,QWKLVFDVHZKHQZHHYHQWXDOO\ORFDWHWKHVSHFLILFSRLQWLQWKHWH[WWKDWGHVFULEHVWKH3HWHUVRQߞVDVWKH DXWKRUߞVߡFORVHVWFRPSDQLRQߢLQOLQHZHVHHWKDWWKHERRNEHFDPHKHUFRPSDQLRQߡRYHUWKHQH[W VHYHUDO\HDUVߢ OLQH 7KDWPDWFKHVXSH[DFWO\ZLWKFKRLFH ' VRZHNQRZZHKDYHWKHFRUUHFW DQVZHUZLWKQRDPELJXLW\RUKHVLWDWLRQ 7KLVTXHVWLRQLVDUJXDEO\PRUHVWUDLJKWIRUZDUGWKDQPDQ\$&75HDGLQJTXHVWLRQVZLOOEHߚWKHFRUUHFW DQVZHULVDOZD\VVSHOOHGRXWLQWKHWH[WEXWLQWKLVFDVHZHߞUHGHDOLQJZLWKWKHH[DFWVDPHZRUGVDQG SKUDVHVLQWKHSURPSWWKHWH[WDQGWKHFRUUHFWDQVZHU5HPHPEHUWKDWWKLVTXHVWLRQFRXQWVWRZDUGV\RXU VFRUHMXVWDVPXFKDVHYHU\RWKHUTXHVWLRQGRHV,WZRXOGEHDVKDPHWRPLVVWKLVTXHVWLRQMXVWEHFDXVH \RXGLGQߞWIRUFH\RXUVHOIWRILQGWKHSDUWRIWKHWH[WWKDWZDVGLUHFWO\UHOHYDQWWRWKHTXHVWLRQ 3DJH4XHVWLRQ 7KLVTXHVWLRQZLOOEHFKDOOHQJLQJIRUDORWRIWHVWWDNHUVEHFDXVHWKLVSDVVDJHZLOOERUHPRVWUHDGHUVDQG EHFDXVHWKHTXHVWLRQKDVQRFLWDWLRQZKLFKPHDQVZHPD\KDYHDKDUGHUWLPHORFDWLQJWKHUHOHYDQW SRUWLRQRIWKHSDVVDJH 7KHRQO\GLUHFWPHQWLRQRIVDYLQJPRQH\FRPHVLQOLQHVWKURXJKZKLFKPHQWLRQVWKHLGHDRI ߡVDY>LQJ@PLOOLRQߢ,IZHORRNDWWKHUHVWRIWKHVKRUWSDUDJUDSKWKDWLQFOXGHVWKDWSKUDVHZHVHHWKDW WKHPRQH\ZRXOGEHVDYHGLIWKHDFFXUDF\RIWKHSUHGLFWLRQZHUHLQFUHDVHGE\SHUFHQW 7KLVVHHPVWRPDWFKXSSUHWW\FORVHO\ZLWKFKRLFH * ZKLFKKDVZRUGVOLNHߡIRUHFDVWHUVߢߡSUHGLFWߢDQG ߡDFFXUDWHO\ߢZKLFKUHVWDWHWKHZRUGVߡIRUHFDVWVߢߡSUHGLFWLRQߢDQGߡDFFXUDWHߢLQSDUDJUDSK6RLW ORRNVOLNHZHߞUHRQWKHULJKWWUDFN%XWZHKDYHWREHDEOHWRPDWFKXSHYHU\SKUDVHLQWKHDQVZHUFKRLFH ZLWKDSKUDVHLQWKHWH[WVRZHKDYHWRPDNHVXUHWKDWWKHSKUDVHߡTXDQWLW\RIZDWHULQWKHVQRZSDFNߢ IURPWKHDQVZHUFKRLFHKDVDFRUUHVSRQGLQJSKUDVHLQWKHWH[W 3DUDJUDSKLQFOXGHVSKUDVHVOLNHߡWKHPRGHOߢDQGߡWKHSUHGLFWLRQߢWKDWPXVWEHUHIHUULQJWRFRQFHSWV IURPHDUOLHULQWKHSDVVDJH ZHFDQRQO\XVHWKHZRUGߡWKHߢLQWKHSKUDVHߡWKHPRGHOߢLIZHߞYHDOUHDG\ GLVFXVVHGDSDUWLFXODUPRGHO 6ROHWߞVJREDFNWRWKHSUHYLRXVSDUDJUDSKDQGVHHLIZHFDQILJXUHRXW ZKDWߞVEHLQJSUHGLFWHG1RWLFHWKDWSDUDJUDSKWDONVDERXWKRZߡVFDQQLQJHOHFWURQPLFURVFRS\ߢLVXVHG WRIRUHFDVWߡDPRXQWVRIVQRZSDFNZDWHUߢ7KHSKUDVHߡVFDQQLQJHOHFWURQPLFURVFRS\ߢLQOLQHPDWFKHV XSZLWKWKHH[DFWVDPHSKUDVHLQWKHSURPSWZKLFKWHOOVXVWKDWSDUDJUDSKLVSUREDEO\UHOHYDQWWRWKH TXHVWLRQ$QGWKHSKUDVHߡDPRXQWVRIVQRZSDFNZDWHUߢLQOLQHPDWFKHVXSZLWKWKHSKUDVHߡTXDQWLW\RI ZDWHULQWKHVQRZSDFNߢIURPFKRLFH * 6RZHFDQVHHWKDWSDUDJUDSKWDONVDERXWXVLQJVFDQQLQJHOHFWURQPLFURVFRS\WRSUHGLFWWKHDPRXQWRI ZDWHULQDVQRZSDFNDQGWKDWSDUDJUDSKWDONVDERXWVDYLQJPRQH\E\LQFUHDVLQJWKHDFFXUDF\RIWKDW SUHGLFWLRQ7KDWPHDQV * LVGHILQLWHO\FRUUHFWEHFDXVHLWFOHDUO\UHVWDWHVWKHUHOHYDQWSRUWLRQRIWKHWH[W 1RWLFHWKDWDQVZHULQJWKLVTXHVWLRQUHDOO\GRHVQߞWUHTXLUHXVWRXQGHUVWDQGKRZVFDQQLQJHOHFWURQ PLFURVFRS\DFWXDOO\ZRUNVRUHYHQZKDWDVQRZSDFNLV$OOZHQHHGHGWRGRZDVPDWFKXSWKHSKUDVHV LQWKHSURPSWDQGFKRLFH * ZLWKWKHSKUDVHVIURPSDUWRIWKHWH[WDQGPDNHVXUHWKDWWKHUHODWLRQVKLSV DPRQJWKRVHSKUDVHVZHUHWKHVDPHLQWKHFKRLFHDQGLQWKHWH[W,QRWKHUZRUGVLWߞVHQRXJKWRNQRZWKDW ERWK * DQGWKHWH[WWDONDERXWVDYLQJPRQH\E\LPSURYLQJWKHDFFXUDF\RISUHGLFWLRQVDERXWWKHDPRXQW RIZDWHULQVQRZSDFNߚZHGRQߞWKDYHWRNQRZZKDWWKHWHFKQLFDOWHUPVDFWXDOO\PHDQMXVWKRZWKH\ UHODWHWRHDFKRWKHU /HWߞVORRNDWWKHRWKHUFKRLFHVQRZ ) LVZURQJ7KHSDVVDJHPHQWLRQVWKHSRVVLELOLW\RIDQLQFUHDVHGQHHGIRUZDWHULQWKHIXWXUHLQOLQHV WKURXJKEXWLWQHYHUFRQQHFWVWKDWLGHDWRWKHLGHDRIVDYLQJPRQH\WKURXJKWKHXVHRIVFDQQLQJHOHFWURQ PLFURVFRS\ + LVZURQJEHFDXVHWKHGLVFXVVLRQRIߡDJULFXOWXUDOUHVHDUFKHUVߢLQWKHVL[WKDQGVHYHQWKSDUDJUDSKV PDNHVQRPHQWLRQRIVDYLQJPRQH\ - LVZURQJDVZHOO7KHWH[WPHQWLRQVWKDWVQRZPHOWDFFRXQWVIRUߡDERXWSHUFHQWRIWKHDQQXDOZDWHU VXSSO\ߢRIWKRVHVWDWHVEXWWKDWߞVQRWWKHVDPHWKLQJDVVD\LQJWKDWVFDQQLQJHOHFWURQPLFURVFRS\ZLOOVDYH PRQH\E\LQFUHDVLQJWKHZDWHUVXSSO\E\SHUFHQW 3DJH4XHVWLRQ 0DQ\XQWUDLQHGWHVWWDNHUVZLOOPLVVWKLVTXHVWLRQEHFDXVHWKH\ߞUHWRROD]\WRJREDFNWRWKHWH[WDQGWDNH DVHFRQGORRNDWWKHFLWDWLRQWRPDNHVXUHWKH\GRQߞWPDNHDPLVWDNH,QVWHDGWKH\ߞOOWU\WRFKRRVHDQ DQVZHUEDVHGRQWKHLUPHPRU\RIWKHSDVVDJHDQGULVNWKURZLQJDZD\DQHDV\TXHVWLRQ ,IZHORRNEDFNDWWKHFLWDWLRQZHVHHYHU\FOHDUO\WKDWWKHSKUDVHߡPHWDPRUSKRVHGFRQGLWLRQVߢLV LPPHGLDWHO\IROORZHGE\DQH[SODQDWLRQߡFU\VWDOVRIWHQFKDQJHRQFHRQWKHJURXQGߢ 7KDWPDWFKHVH[DFWO\ZLWKFKRLFH & WKHFRUUHFWDQVZHU /HWߞVWDNHDORRNDWWKHZURQJDQVZHUV $ LVLQFRUUHFW7HPSHUDWXUHDQGKXPLGLW\DUHPHQWLRQHGLQOLQHEXWQRWLQFRQQHFWLRQZLWK ߡPHWDPRUSKRVHGFRQGLWLRQVߢ % LVDOVRLQFRUUHFW7KHWH[WPHQWLRQVGXVWLQOLQHEXWQRWLQFRQQHFWLRQZLWKߡPHWDPRUSKRVHG FRQGLWLRQVߢ ' LVDOVRZURQJ7KHWH[WPHQWLRQVFKDQJLQJHQYLURQPHQWDOFRQGLWLRQVLQWKHHOHYHQWKSDUDJUDSKEXWQRW LQFRQQHFWLRQZLWKߡPHWDPRUSKRVHGFRQGLWLRQVߢ 1RWLFHWKDWDOOWKUHHRIWKHZURQJDQVZHUFKRLFHVDSSHDUVRPHZKHUHLQWKHWH[WߚWKH\ߞUHMXVWQRWUHODWHG WRWKHSKUDVHߡPHWDPRUSKRVHGFRQGLWLRQVߢWKDWDSSHDUVLQWKHTXHVWLRQ%HFDXVHWKRVHWHUPVDSSHDULQWKH WH[WPDQ\WHVWWDNHUVZLOODFFLGHQWDOO\FKRRVHRQHRIWKHPߚWKH\ߞOOUHFDOOUHDGLQJVRPHWKLQJDERXWRQHRI WKHPDWVRPHSRLQWEXWWKH\ZRQߞWWDNHWKHH[WUDVHFRQGVWRORRNEDFNDWWKHFLWDWLRQLQWKHTXHVWLRQDQG VHHZKDWWKHWH[WDFWXDOO\VD\VDERXWWKHNH\SKUDVH'RQߞWPDNHWKDWNLQGRIPLVWDNH 3DJH4XHVWLRQ ,ZDQWHGWRWDONDERXWWKLVTXHVWLRQEHFDXVHLWߞVDQRWKHUJUHDWH[DPSOHRIDUHODWLYHO\VWUDLJKWIRUZDUG TXHVWLRQWKDWPDQ\XQWUDLQHGWHVWWDNHUVZLOOPLVVXQQHFHVVDULO\VLPSO\EHFDXVHWKH\GRQߞWPDNHDQHIIRUW WRUHDGFDUHIXOO\ 7KHWH[WH[SODLQVWKHUHODWLRQVKLSEHWZHHQVQRZIODNHVDQGVQRZFU\VWDOVLQOLQHVWKURXJK ߡVQRZIODNHVDUHFROOHFWLRQVRIWZRRUPRUHVQRZFU\VWDOVߢ7KLVPDWFKHVXSGLUHFWO\ZLWKWKHFRUUHFW DQVZHU ' ZKLFKVD\VWKDWVQRZIODNHVߡDUHFRPSRVHGRIPRUHWKDQRQHFU\VWDOߢ $ DQG & PLJKWEHWHPSWLQJFKRLFHVIRUVRPHWHVWWDNHUVZKRPLVUHDGWKHTXHVWLRQRUWKHWH[WEHFDXVH ERWKRIWKHVHDQVZHUFKRLFHVUHIHUWRVQRZFU\VWDOV7KH\ߞUHERWKZURQJEHFDXVHWKHTXHVWLRQDVNVXVIRU DQDWWULEXWHRIVQRZIODNHV % LVZURQJEHFDXVHLWUHYHUVHVWKHUHODWLRQVKLSGHVFULEHGLQ ' 7KLVDQVZHUFKRLFHVD\VWKDW VQRZIODNHVFRPELQHWRIRUPVQRZFU\VWDOVZKHQWKHWH[WVD\VWKDWWKHFU\VWDOVFRPELQHWRIRUPWKHIODNHV <RXFDQSUREDEO\VHHKRZHDVLO\DWHVWWDNHUPLJKWFKRRVH % LIKHGLGQߞWUHDGLWFDUHIXOO\HQRXJKDQGLI KHGLGQߞWORRNDWDOOWKHRWKHUFKRLFHVWRPDNHVXUHKHKDGQߞWPDGHDPLVWDNH (YHQWKRXJKWKLVSDVVDJHLVRQHRIWKHRQHVLQWKH5HG%RRNWKDWVWXGHQWVFRPSODLQDERXWWKHPRVWWKLV SDUWLFXODUTXHVWLRQLVDFWXDOO\SUHWW\VLPSOHLIZHORFDWHWKHUHOHYDQWSRUWLRQRIWKHWH[WDQGUHDGLW FDUHIXOO\.HHSWKDWLQPLQGWKHQH[WWLPH\RXVHHDGDXQWLQJRUERULQJSDVVDJHRQWKH$&7ߚQRVLQJOH TXHVWLRQZLOOUHTXLUH\RXWRKDYHDGHHSXQGHUVWDQGLQJRIWKHHQWLUHSDVVDJH 3DJH4XHVWLRQ 7KLVTXHVWLRQPLJKWFRQIXVHDORWRIWHVWWDNHUVDWILUVWHVSHFLDOO\LIWKH\KDYHQߞWUHDOO\UHDGPXFKRIWKH SDVVDJHEHIRUHWKH\WU\WRDQVZHULW $OORIWKHDQVZHUFKRLFHVWDONDERXWKRZWKHQDUUDWRUIHHOVDERXWJRLQJWRFROOHJHEXWWKHLGHDRIFROOHJH RQO\DSSHDUVRQFHLQWKHHQWLUHSDVVDJHZKHQWKHQDUUDWRUPHQWLRQVߡJRLQJWRWKHXQLYHUVLW\WKDWIDOOߢLQ OLQH,I\RXGRQߞWQRWLFHWKDWSKUDVHWKHQ\RXߞOOHQGXSFRQFOXGLQJWKDWDOORIWKHDQVZHUFKRLFHVDUH WRWDOO\XQUHODWHGWRWKHWH[WߚZKLFKLVLPSRVVLEOHRIFRXUVHEHFDXVHRQHRIWKHPKDVWREHWKHULJKW DQVZHU 7KHQDUUDWRUVD\VKHUIDPLO\KDVWRVHOOLWVZKHDWLQVWHDGRIKROGLQJLWߡLI,ZDVJRLQJWRWKHXQLYHUVLW\WKDW IDOOߢ OLQHVWKURXJK 7KDWPHDQV $ FDQߞWEHFRUUHFWEHFDXVHLWPHQWLRQVWKHQDUUDWRUEHLQJ ߡXQVXUHߢZKHWKHUVKHZDQWVWRJRWRFROOHJH6RPHWHVWWDNHUVPLJKWEHFRQIXVHGE\WKHZRUGߡLIߢLQWKH WH[WZKLFKPLJKWPDNHWKHDXWKRUVRXQGXQFHUWDLQLIZHGRQߞWUHDGFDUHIXOO\HQRXJK%XWLQWKLVFDVHWKH ZRUGߡLIߢRQO\PHDQVWKDWWKHDXWKRUߞVGHVLUHWRJRWRWKHXQLYHUVLW\LVWKHUHDVRQWKHZKHDWPXVWEHVROG LQ6HSWHPEHU7KLVLVFRQILUPHGE\WKHQH[WVHQWHQFHZKLFKVD\VWKHIDPLO\ߡFRXOGQߞWZDLWIRUߢWKHSULFH WRJRKLJKHUߡDORQJWRZDUG&KULVWPDVߢ OLQH % LVLQFRUUHFWEHFDXVHQRWKLQJLQWKHWH[WVXSSRUWVWKHLGHDWKDWWKHQDUUDWRUEHOLHYHVVKHߞOOEHSUHYHQWHG IURPJRLQJWRFROOHJHDQGQRWKLQJLQWKHWH[WDFWXDOO\LQGLFDWHVWKHFRVWRIDWWHQGLQJ & LVLQFRUUHFWEHFDXVHWKHQDUUDWRUQHYHUVD\VVKHߞVSODQQLQJWRVWD\RQDQRWKHU\HDUDWWKHIDPLO\UDQFK ' LVFRUUHFWEHFDXVHOLQHVWKURXJKVSHFLILFDOO\VD\WKDWWKHQDUUDWRUZDQWVWRJRWRFROOHJHLQWKH IDOODQGWKDWJRLQJWRFROOHJHGHSHQGVRQWKHPRQH\WKDWZRXOGFRPHIURPVHOOLQJWKHZKHDW6RPHWUDLQHG WHVWWDNHUVPLJKWJHWFDXJKWXSRQWKHSKUDVHߡDQ[LRXVO\DQWLFLSDWLQJߢLQWKHDQVZHUFKRLFHEXWLWߞV MXVWLILHGE\WKHQH[WWRODVWSDUDJUDSKLQWKHWH[WZKLFKVD\VWKHQDUUDWRUߡIHOWVRH[FLWHGߢDERXWVHOOLQJ WKHZKHDWHDUO\VRVKHFRXOGJRWRFROOHJHWKDWVKHߡFRXOGQߞWZDONVREHUO\ߢ 3DJH4XHVWLRQ 7KLVLVDQRWKHUTXHVWLRQWKDWWKH5HG%RRNH[SODLQVSRRUO\7KHRIILFLDO5HG%RRNH[SODQDWLRQRQSDJH VD\VWKHDQVZHUWRWKLVTXHVWLRQLV ' EHFDXVHRIWKHSKUDVHߡEORZVGLUWLQWR\RXUH\HVDQGKDLUߢ%XW ZHNQRZDVWUDLQHGWHVWWDNHUVWKDWWKLVH[SODQDWLRQFDQߞWEHWKHUHDORQHEHFDXVHWKH$&75HDGLQJ VHFWLRQUHTXLUHVFRUUHFWDQVZHUVWRUHVWDWHHOHPHQWVRIWKHWH[WDQGWKHLGHDRIEORZLQJGLUWLQWR VRPHRQHߞVIDFHLVQߞWWKHVDPHWKLQJDVWKHLGHDRISRZHUSUHVHQWHGLQFKRLFH ' &KRLFH ' LVDFWXDOO\FRUUHFWEHFDXVHRIWKHZRUGߡURDUVߢLQOLQH$FFRUGLQJWRWKH0HUULDP:HEVWHU RQOLQHGLFWLRQDU\WKHYHUEߡWRURDUߢPHDQVWRPDNHDVRXQGߡZLWKIXOOIRUFHߢDQGLWߞVWKLVLGHDRI IRUFHIXOQHVVWKDWߞVUHVWDWHGE\WKHZRUGߡSRZHUIXOߢLQFKRLFH ' LIWKHZLQGURDUVDQGURDULQJPHDQV GRLQJVRPHWKLQJZLWKIXOOIRUFHWKHQWKHZLQGLVIRUFHIXODQGߡIRUFHIXOߢLVDV\QRQ\PIRUߡSRZHUIXOߢ ,WPLJKWVHHPOLNH,ߞPQHHGOHVVO\VSOLWWLQJKDLUVKHUHHVSHFLDOO\LI\RXKDYHQߞWUHDGߡ+RZ&DQ7KH5HG %RRNߞV([SODQDWLRQV2I,WV2ZQ4XHVWLRQV%H:URQJ"ߢHDUOLHULQWKLV%ODFN%RRNZKHUH,H[SODLQZK\ WKH5HG%RRNߞVH[SODQDWLRQVIRULWVRZQTXHVWLRQVDUHRIWHQEDG%XW,DVVXUH\RXWKDWWKHVHVPDOO GLVWLQFWLRQVDUHDFWXDOO\YHU\LPSRUWDQWLI\RXZDQWWRPD[LPL]H\RXU$&7VFRUHߚLWߞVDEVROXWHO\FULWLFDO WKDW\RXXQGHUVWDQGKRZWKHWHVWDFWXDOO\GHFLGHVZKLFKFKRLFHVDUHFRUUHFWDQGZKLFKFKRLFHVDUH LQFRUUHFW,I\RXDSSURDFKDOOTXHVWLRQVLQWKHVXEMHFWLYHZD\WKDWWKH5HG%RRNUHFRPPHQGVIRUWKLV TXHVWLRQ\RXPLJKWRFFDVLRQDOO\JHWOXFN\DQGJHWDTXHVWLRQULJKWEXWPRVWRIWKHWLPH\RXߞOOHQGXS WDONLQJ\RXUVHOILQWRDZURQJDQVZHUZKLFKLVH[DFWO\ZKDWWKH$&7ZDQWV\RXWRGR ,I\RXZDQWWREHDEOHWRDQVZHU$&75HDGLQJTXHVWLRQVTXLFNO\FRUUHFWO\DQGFRQILGHQWO\WKHQ\RXKDYH WRORRNIRUWKHDQVZHUFKRLFHWKDWGLUHFWO\UHVWDWHVWKHNH\ZRUGVDQGSKUDVHVLQWKHWH[W$OZD\V1R H[FHSWLRQV 3DJH4XHVWLRQ 7RDQVZHUWKLV(;&(37TXHVWLRQZHQHHGWRGHFLGHZKLFKDQVZHUFKRLFHFDQߞWߡUHDVRQDEO\EHVDLGWR PHDQߢWKHVDPHWKLQJDVߡIHQFHGߢGRHVLQOLQH ,IZHJREDFNDQGUHDGWKHXVHRIWKHZRUGߡIHQFHGߢLQFRQWH[WLQOLQHZHVHHWKDWZHJHWWKHIROORZLQJ UHVXOWVZKHQZHWU\HDFKRIWKHDQVZHUFKRLFHVLQSODFHRIWKHZRUGߡIHQFHGߢ $ ߡ7KHQ,VKXWWKHPLQZLWKP\KDQGDQGSRXUHGRIIWKHZDWHUߢ % ߡ7KHQ,SHQQHGWKHPLQZLWKP\KDQGDQGSRXUHGRIIWKHZDWHUߢ & ߡ7KHQ,FRPPLWWHGWKHPLQZLWKP\KDQGDQGSRXUHGRIIWKHZDWHUߢ ' ߡ7KHQ,KHOGWKHPLQZLWKP\KDQGDQGSRXUHGRIIWKHZDWHUߢ :HFDQVHHWKDW $ % DQG ' VWLOOPDNHVHQVHDQGPHDQWKHVDPHWKLQJDVWKHRULJLQDOZKHUHDV & GRHVQߞWUHDOO\PDNHDQ\VHQVH7KHSKUDVHVߡWRVKXWLQߢߡWRSHQLQߢDQGߡWRKROGLQߢDOOVRXQGQDWXUDOWRD QDWLYH(QJOLVKVSHDNHUEXWWKHSKUDVHߡWRFRPPLWLQߢLVQRQVHQVHLQWKLVFRQWH[W)RUDOOWKHVHUHDVRQVZH NQRZWKDW & LVWKHFRUUHFWDQVZHUWRWKLVTXHVWLRQ $VZLWKPRVWߡ(;&(37ߢTXHVWLRQVWKH$&7LVSUREDEO\KRSLQJ\RXߞOOPLVUHDGWKHTXHVWLRQDQGSLFNWKH DQVZHUFKRLFHWKDW\RXWKLQNVRXQGVWKHFORVHVWLQPHDQLQJWRWKHZRUGߡIHQFHGߢLQVWHDGRISLFNLQJWKH RQHDQVZHUFKRLFHWKDWFDQߞWEHDV\QRQ\PIRUߡIHQFHGߢ 7KLVLVZK\LWߞVVRLPSRUWDQWWRUHDGHYHU\WKLQJFDUHIXOO\DQGWRPDNHVXUH\RXEULHIO\FRQVLGHUDOOWKH DQVZHUFKRLFHVIRUHYHU\TXHVWLRQVR\RXJLYH\RXUVHOIDFKDQFHWRFDWFK\RXURZQPLVWDNHV4XHVWLRQV OLNHWKLVDOVRGHPRQVWUDWHZK\LWߞVVRLPSRUWDQWWREHDZDUHRIWKH$&7ߞVUXOHVDQGWRIROORZWKHPZLWK H[WUHPHGLVFLSOLQH ,I\RXKDGRYHUORRNHGWKHZRUGߡ(;&(37ߢLQWKLVTXHVWLRQDQGWKRXJKWWKDW $ RU % VHHPHGOLNHWKH FRUUHFWDQVZHU\RXPLJKWVWLOOFDWFK\RXUPLVWDNHLI\RXORRNHGDWDOOWKHDQVZHUFKRLFHVDQGUHDOL]HGWKDW WZRRUWKUHHRIWKHFKRLFHVDOOVHHPHGHTXDOO\DFFHSWDEOH$QXQWUDLQHGWHVWWDNHULQWKDWVLWXDWLRQZRXOG MXVWUDQGRPO\SLFNDVLQJOHDQVZHUFKRLFHWKDWVHHPHGWKHEHVWEXWDWUDLQHGWHVWWDNHUNQRZVWKDWWKHUHߞV DOZD\VH[DFWO\RQHYDOLGFKRLFHDQGWKUHHLQYDOLGRQHV$WUDLQHGWHVWWDNHUNQRZVVKHߞVPDGHDPLVWDNH ZKHQVKHWKLQNVWKDWPRUHWKDQRQHDQVZHUFKRLFHLVDUJXDEO\FRUUHFW7KLVGLVFLSOLQHDQGDZDUHQHVV ZRXOGOHDGKHUWRUHHYDOXDWHWKHHQWLUHTXHVWLRQXOWLPDWHO\UHDOL]LQJWKDWVKHKDGRYHUORRNHGWKHZRUG ߡ(;&(37ߢDQGWKDW & ZDVDFWXDOO\FRUUHFW 7UDLQLQJ\RXUVHOIWRXQGHUVWDQGDQGLPSOHPHQWWKHLGHDVLQWKLV%ODFN%RRNZLOONHHS\RXIURPWKURZLQJ DZD\SRLQWVRQWKH$&7 3DJH4XHVWLRQ 0RVWXQWUDLQHGWHVWWDNHUVZLOOEHIUXVWUDWHGE\WKLVTXHVWLRQEHFDXVHWKHSURPSWVHHPVWREHDVNLQJXVWR LQWHUSUHWWKHSDVVDJHVXEMHFWLYHO\%XWDVWUDLQHGWHVWWDNHUVZHNQRZWKH$&7QHYHUDVNVXVWRGRWKDWߚ HYHQZKHQWKHTXHVWLRQXVHVSKUDVHVOLNHߡPRVWOLNHO\ߢDQGߡLQRUGHUWRߢWKHFRUUHFWDQVZHUPXVWVWLOOEH WKHRQO\FKRLFHWKDWGLUHFWO\UHVWDWHVHOHPHQWVRIWKHUHOHYDQWSRUWLRQRIWKHWH[W /HWߞVWDNHDORRN ,IZHJREDFNWRUHDGWKHFRQWH[WRIWKHSKUDVHߡZDONLQJWKURXJKߢLQOLQHZHߞOOVHHWKDWWKHUHOHYDQW VHQWHQFHFRQWDLQVWKHSKUDVHߡYLUWXDOO\ߝZDONLQJWKURXJKߞߢ %HFDXVHRIWKHDGYHUEߡYLUWXDOO\ߢDQGWKHSDUDJUDSKߞVUHIHUHQFHWRߡWKUHHGLPHQVLRQDOFRPSXWHU PRGHOLQJߢLQOLQHVDQGLWߞVFOHDUWKDW - LVFRUUHFW ) LVLQFRUUHFWEHFDXVHWKHSKUDVHߡZDONLQJWKURXJKߢGHVFULEHVZKDWߡUHVHDUFKHUVߢ OLQH GLGQRWZKDW DFWXDO5RPDQVGLG * LVLQFRUUHFWEHFDXVHWKLVVHQWHQFHKDVQRWKLQJWRGRZLWKWRXULVWVYLVLWLQJWKH&RORVVHXP6RPH XQWUDLQHGWHVWWDNHUVZLOOEHGUDZQWRWKLVDQVZHUFKRLFHEHFDXVHLWVHHPVOLNHFRPPRQVHQVHWRWKHPߚLW SUREDEO\LVWUXHWKDWWKHEHVWZD\WRWDNHDWRXURIWKH5RPDQ&RORVVHXPLVE\SURFHHGLQJDWDOHLVXUHO\ SDFH%XWWKHDFWXDOWH[WKDVQRWKLQJWRGRZLWKWKDWVR * LVZURQJ + LVLQFRUUHFWEHFDXVHWKHUHߞVQRZDUQLQJLQWKHWH[WDQGEHFDXVHWKHWH[WQHYHULQGLFDWHVZKHWKHU ߡUHVHDUFKHUVDUHMXVWEHJLQQLQJWRGHYHORSߢWKHVHPRGHOV $VZHFDQVHHWKHFRUUHFWDQVZHUWRWKLVTXHVWLRQLVVSHOOHGRXWLQEODFNDQGZKLWHRQWKHSDJHMXVWDVLW PXVWDOZD\VEHIRUDOORIILFLDO$&75HDGLQJTXHVWLRQV 3DJH4XHVWLRQ 7KHNH\KHUHLVWRQRWLFHWKHZRUGߡ/($67ߢDOOLQFDSLWDOOHWWHUV<RXPLJKWWKLQNWR\RXUVHOIߡ+RZ FRXOGVRPHRQHPLVVDZRUGLQDOOFDSLWDOOHWWHUVOLNHWKDW"ߢ%HOLHYHPHSHRSOHGRLWDOOWKHWLPH,GRLW P\VHOIHYHU\RQFHLQDZKLOHDQG,SURPLVH\RXWKDW\RXߞOOGRLWDWOHDVWRQFHRQ\RXU$&7MRXUQH\ 7KLVLVZK\LWߞVVRLPSRUWDQWWRPDNHVXUH\RXUHDGHYHU\TXHVWLRQFDUHIXOO\DQGWRPDNHVXUH\RXUHDG WKURXJKHDFKDQVZHUFKRLFHߚLI\RXGRRYHUORRNDZRUGOLNHߡ/($67ߢRUߡ(;&(37ߢLQWKHSURPSWRQH RIWKHEHVWZD\VWRFDWFK\RXUPLVWDNHLVWRORRNDWDOOWKHDQVZHUFKRLFHVDQGUHDOL]HWKDWPRUHWKDQRQH RIWKHPVHHPWRGHVFULEHWKHWH[WZKLFKLVQߞWWKHFDVHRQDTXHVWLRQZLWKRXWDZRUGOLNHߡ/($67 ߡ127ߢRUߡ(;&(37ߢ :LWKDOORIWKDWLQPLQGOHWߞVWDNHDORRNDWWKHDQVZHUFKRLFHV $ LVPHQWLRQHGVHYHUDOWLPHVWKURXJKRXWWKHWH[WLQOLQHVWKURXJKOLQHVWKURXJKOLQHV WKURXJKDQGVRRQ % GHVFULEHVDEURDGWRSLFWKDWFRPHVXSLQDOPRVWHYHU\SDUDJUDSK & PHQWLRQVDWRSLFWKDWRQO\FRPHVXSRQFHLQWKHILUVWVHQWHQFHRIWKHHVVD\ OLQHVWKURXJK ' LVDQRWKHUWRSLFWKDWFRPHVXSLQDOPRVWHYHU\SDUDJUDSK 6RZHFDQVHHSUHWW\FOHDUO\WKDW & LVWKHDQVZHUFKRLFHZKRVHWRSLFJHWVWKHOHDVWDWWHQWLRQLQWKH SDVVDJH 3DJH4XHVWLRQ 7KLVTXHVWLRQXVHVWKHSKUDVHߡPRVWGLUHFWO\ߢZKLFKPDNHVLWVRXQGOLNHPRUHWKDQRQHRIWKHSHRSOHLQ WKHDQVZHUFKRLFHVPLJKWKDYHH[SUHVVHGWKLVRSLQLRQVRPHZKDWGLUHFWO\DQGRXUMRELVWRPDNHD VXEMHFWLYHGHFLVLRQDERXWZKRH[SUHVVHGLWPRVWGLUHFWO\%XWDVWUDLQHGWHVWWDNHUVZHNQRZWKDWLWPXVW EHWKHFDVHWKDWRQO\RQHSHUVRQGLUHFWO\H[SUHVVHVWKHLGHDDQGRXUMRELVWRLGHQWLI\WKDWSHUVRQZLWKRXW DQ\VXEMHFWLYHLQWHUSUHWDWLRQQHFHVVDU\ ,ZRXOGSUREDEO\DWWDFNWKLVTXHVWLRQE\UHIHUULQJWRWKHSODFHVLQWKHWH[WZKHUH,\HU5HNKD5DKPDQDQG ,\HUߞVSDUHQWVDUHTXRWHGWRVHHZKLFKSHUVRQH[SUHVVHVWKHLGHDWKDWWKHK\EULGVKDYHPDWXUHGPXVLFDOO\ )RUFKRLFH $ ,\HUVD\VVRPHSRVLWLYHWKLQJVDERXW6RXWK$VLDQPXVLFLQOLQHVWKURXJKEXWKH QHYHUVSHFLILFDOO\VD\VDQ\WKLQJDERXWߡPDWXULQJPXVLFDOO\ߢ7KLVLVDJUHDWH[DPSOHRIDVLWXDWLRQLQ ZKLFK$&75HDGLQJLVQRWOLNHDQRUPDOKLJKVFKRRO(QJOLVKFODVVLQPRVW(QJOLVKFODVVHVLIDVWXGHQW UHDGOLQHVWKURXJKDQGVDLGWKDWLWPHQWLRQHGPDWXULW\WKHWHDFKHUZRXOGSUREDEO\DFFHSWWKDW SKUDVHDVDGHFHQWUHDFWLRQWRWKHWH[W%XWRQWKH$&7ZHQHHGWKHFRUUHFWDQVZHUWREHGLUHFWO\ VXSSRUWHGE\WKHWH[WDQGZHGRQߞWKDYHWKDWZLWKFKRLFH $ )RU % 5HNKDVD\VLQOLQHWKDWߡWKHPXVLFKDVFRPHRIDJHߢ6LQFHߡFRPLQJRIDJHߢLVDV\QRQ\PIRU ߡPDWXULQJߢ % LVWKHFRUUHFWDQVZHUEHFDXVH5HNKDFRPHVRXWDQGPDNHVWKLVVWDWHPHQWGLUHFWO\ & DQG ' DUHERWKZURQJEHFDXVHQHLWKHU5DKPDQQRU,\HUߞVSDUHQWVVD\DQ\WKLQJDWDOOLQWKHWH[W 3DJH4XHVWLRQ 0DQ\WHVWWDNHUVZLOOPLVVWKLVTXHVWLRQEHFDXVHWKH\ZRQߞWUHDGHQRXJKRIWKHUHOHYDQWWH[W,IZHRQO\ UHDGWKHVHQWHQFHIURPWKHWH[WWKDWKDVWKHZRUGߡORYHߢLQLWZHPLJKWEHFRQIXVHGEHFDXVHWKHVHQWHQFH PHQWLRQVVXEPHUVLEOHVDQGWKHVTXLGEXWLWGRHVQߞWDFWXDOO\VD\WKDWWKHPDQZKRPDGHWKHYLGHRORYHG HLWKHURIWKRVHWKLQJV,QWKHQH[WVHQWHQFHWKRXJKWKHWH[WVD\VFOHDUO\WKDWWKHPDQILOPHGWKHVTXLG EHFDXVHߡKLVJLUOIULHQGZDVLQWHUHVWHGLQPDULQHELRORJ\ߢ OLQH 7KDWPDNHVLWFOHDUWKDWWKHORYH UHIHUUHGWRLQOLQHLVIRUWKHPDQߞVJLUOIULHQGVR & LVFRUUHFW /HWߞVWDNHDORRNDWWKHRWKHUDQVZHUFKRLFHV $ LVZURQJEHFDXVHWKHWH[WQHYHULQGLFDWHVWKDWWKHPDQZKRPDGHWKHILOPORYHGWKHQHZVTXLG % LVDOVRZURQJEXWVRPHWHVWWDNHUVPLJKWDFFLGHQWDOO\FKRRVHLWLIWKH\GRQߞWUHDGWKHSDVVDJH FDUHIXOO\7KHPDQZKRPDGHWKHYLGHRRIWKHVTXLGGLGLWIRUKLVJLUOIULHQGDVZHMXVWVDZLQRXU GLVFXVVLRQRIFKRLFH & DQGKHGLGLWEHFDXVHWKHJLUOIULHQGߡZDVLQWHUHVWHGLQPDULQHELRORJ\ߢ%XWWKDW GRHVQߞWPHDQWKHPDQKLPVHOIORYHGPDULQHELRORJ\ ,QIDFWLWGRHVQߞWHYHQPHDQWKDWWKHPDQߞVJLUOIULHQG ORYHGPDULQHELRORJ\ߚEHLQJLQWHUHVWHGLQVRPHWKLQJDQGORYLQJLWDUHQߞWQHFHVVDULO\WKHVDPHWKLQJ ' LVZURQJEHFDXVHQRWKLQJLQWKHWH[WLQGLFDWHVWKDWWKHPDQZKRPDGHWKHYLGHRRIWKHVTXLGORYHG VXEPHUVLEOHV &RQFOXVLRQ <RXߞYHQRZVHHQWKH$&75HDGLQJDSSURDFKSXWWRWKHWHVWDJDLQVWDODUJHVHOHFWLRQRIUHDO$&75HDGLQJ TXHVWLRQV<RXSUREDEO\QRWLFHGWKDWLWZDVKLJKO\UHSHWLWLYHDQGGHWDLORULHQWHGDQGWKDWZHZHUHDOZD\V DEOHWRILQGWKHFRUUHFWDQVZHUVRPHZKHUHLQWKHWH[W.HHSWKDWLQPLQGDV\RXFRQWLQXHSUHSDULQJ 8VLQJ7KH4XHVWLRQ([SODQDWLRQV,Q7KH5HDO$&73UHS*XLGHUG (GLWLRQ :KHQ\RXORRNDWWKHTXHVWLRQH[SODQDWLRQVLQ7KH5HDO$&73UHS*XLGHUG(GLWLRQ\RXߞOOZDQWWRNHHS WZRPDLQWKLQJVLQPLQG )LUVWUHPHPEHUWRLJQRUHWKHZD\WKH5HG%RRNUHIHUVWRWKHFRUUHFWDQVZHUVDVWKHߡEHVWߢDQVZHUV$V WUDLQHGWHVWWDNHUVZHNQRZWKHUHDUHRQO\FRUUHFWDQVZHUVDQGLQFRUUHFWDQVZHUVDQGFRUUHFWDQVZHUV ZLOODOZD\VEHLQGLVSXWDEO\VXSSRUWHGE\WKHWH[WZKHUHDVLQFRUUHFWDQVZHUVZLOOQRWEH 6HFRQGDOWKRXJKWKH5HG%RRNߞVDFWXDOH[SODQDWLRQVDUHQߞWDOZD\VJUHDWWKH\RIWHQGRDGHFHQWMRERI KLJKOLJKWLQJWKHSKUDVHVIURPWKHWH[WWKDWHLWKHUVXSSRUWRUFRQWUDGLFWDQDQVZHUFKRLFH 9LGHR'HPRQVWUDWLRQV ,I\RXߞGOLNHWRVHHYLGHRVRIVRPHVDPSOHVROXWLRQVOLNHWKHRQHVLQWKLVERRNSOHDVHYLVLW ZZZ$&7SUHS9LGHRVFRPZKHUHDVHOHFWLRQRIIUHHYLGHRVLVDYDLODEOHIRUUHDGHUVRIWKLVERRN $&75HDGLQJ4XLFN6XPPDU\ 7KLVLVDRQHSDJHVXPPDU\RIWKHPDMRUUHOHYDQWFRQFHSWV8VHLWWRHYDOXDWH\RXUFRPSUHKHQVLRQRUMRJ \RXUPHPRU\)RUDPRUHLQGHSWKWUHDWPHQWRIWKHVHLGHDVVHHWKHUHVWRIWKLVVHFWLRQ 7KH%LJ6HFUHW7KHDQVZHUWRHYHU\TXHVWLRQFRPHVGLUHFWO\IURPZKDWߞVRQWKHSDJHZLWKRXWDQ\ LQWHUSUHWDWLRQRUVXEMHFWLYLW\ 7KHDFWXDOUXOHVIRUDWWDFNLQJ$&75HDGLQJTXHVWLRQVDUHVLPSOH7KHKDUGSDUWLVPDNLQJVXUH\RXIROORZ WKHPFDUHIXOO\DOOWKHWLPH+HUHWKH\DUH w&RUUHFWDQVZHUVDUHDOZD\VGLUHFWO\VXSSRUWHGLQWKHWH[W w'HWDLOVPDNHWKHGLIIHUHQFHߚWKLVLVQRWOLNHUHDGLQJLQKLJKVFKRRO w7KHUHLVDOZD\VRQHߚDQGRQO\RQHߚFRUUHFWDQVZHUSHUTXHVWLRQ +HUHDUHWKHPRVWFRPPRQZURQJDQVZHUSDWWHUQV\RXߞOOVHH w:URQJDQVZHUVPLJKWFRQWDLQDUHDVRQDEOHDVVXPSWLRQWKDWLVQߞWVWDWHGLQWKHWH[W w:URQJDQVZHUVPLJKWPHQWLRQFRQFHSWVIURPWKHWH[WEXWFRQIXVHWKHUHODWLRQVKLSEHWZHHQWKRVHLGHDV w:URQJDQVZHUVPLJKWVD\WKHH[DFWRSSRVLWHRIZKDWWKHWH[WVD\V w:URQJDQVZHUVPLJKWEHFRPSOHWHO\LUUHOHYDQWWRWKHWH[W +HUHߞVWKHJHQHUDO$&75HDGLQJSURFHVV w6NLPUHDGRUVNLSWKHSDVVDJH H[SHULPHQWWRILQGWKHPHWKRG\RXSUHIHU w5HDGWKHTXHVWLRQDQGQRWHDQ\FLWDWLRQ w5HDGWKHUHOHYDQWSRUWLRQRIWKHWH[W WKHFLWDWLRQLIWKHUHLVRQHRUWKHSDUWRIWKHWH[WWKDWLQYROYHV VLPLODUFRQFHSWVWRWKRVHPHQWLRQHGLQWKHTXHVWLRQ w)LQGWKUHHZURQJDQVZHUFKRLFHV PDNHXVHRIZURQJDQVZHUSDWWHUQV w&RQILUPWKHUHPDLQLQJDQVZHUFKRLFH w0DUNWKHFRUUHFWDQVZHU w6DYHJHQHUDOSDVVDJHTXHVWLRQVDQGPRUHGLIILFXOWTXHVWLRQVIRUWKHHQGDQGXVHWKHNQRZOHGJHRIWKH WH[W\RXߞYHJRWWHQIURPDQVZHULQJWKHRWKHUTXHVWLRQVWRPDNHWKHVHOHVVFKDOOHQJLQJ *REDFNWKURXJKWKH$&75HDGLQJZDONWKURXJKVDQGIROORZDORQJLQ\RXUFRS\RI7KH5HDO$&73UHS *XLGHUG(GLWLRQWRVHHGHPRQVWUDWLRQVRIWKHVHLGHDV $&70DWK ߡ,QPDWKHPDWLFVWKHDUWRISURSRVLQJTXHVWLRQVLVPRUHYDOXDEOHWKDQVROYLQJWKHPߢ *HRUJ&DQWRU 2YHUYLHZDQG,PSRUWDQW5HPLQGHUVIRU$&70DWK4XHVWLRQV :HMXVWFRYHUHGLQVRPHGHWDLOKRZWKHULJKWZD\WRKDQGOHWKH$&75HDGLQJVHFWLRQLVQߞWDWDOOOLNHWKH ULJKWZD\WRKDQGOHDW\SLFDO(QJOLVKFODVV,QDQ(QJOLVKFODVVZHJHWFUHGLWIRUEHLQJRSHQPLQGHGDQG LPDJLQDWLYHDQGIRUVHHLQJPXOWLSOHSRVVLEOHPHDQLQJVLQDSDVVDJH2QWKH$&75HDGLQJVHFWLRQZH PXVWLQWHUSUHWWKHWH[WWRPHDQRQO\DQGH[DFWO\ZKDWLWGLUHFWO\VD\VߚQRPRUHDQGQROHVV ,QWKHVDPHZD\WKDWEHLQJVXFFHVVIXORQWKH$&75HDGLQJVHFWLRQPHDQVZHKDYHWRUHFRJQL]HLWDV GLIIHUHQWIURPWKHNLQGRIUHDGLQJZHߞGGRLQVFKRROGRLQJZHOORQ$&70DWKPHDQVDSSUHFLDWLQJKRZ YHU\GLIIHUHQW$&70DWKLVIURPVFKRROPDWK <RXߞOODOVRVHHWKLVSDWWHUQUHSHDWHGZKHQZHWDONDERXW $&76FLHQFHDQG$&7(QJOLVK %XWIRUQRZOHWߞVWDNHDPLQXWHWRWKLQNDERXWZKDWWKH$&70DWKVHFWLRQLVDQGKRZLWKDVWRZRUN 7KHQZHߞOOEHLQDEHWWHUSRVLWLRQWRXQGHUVWDQGKRZWREHDWLW 7KH$&7LVJLYHQWRDURXQGPLOOLRQ$PHULFDQKLJKVFKRROVWXGHQWVHDFK\HDU7KRVHVWXGHQWVJRWRORWV RIGLIIHUHQWVFKRROVZLWKWKRXVDQGVRIGLIIHUHQWWHDFKHUVDQGWDNHORWVRIGLIIHUHQWNLQGVRIPDWKFODVVHV OLNHDOJHEUDJHRPHWU\WULJRQRPHWU\FDOFXOXVDQGVWDWLVWLFV 6RPHVWXGHQWVJRIDULQWRFDOFXOXVDQGVWDWLVWLFVZKLOHRWKHUVGRQߞWJHWSDVWEDVLFDOJHEUD6RPHVWXGHQWV KDYHWKHFKRLFHWRWDNHDGYDQFHGPDWKDQGRWKHUVJRWRVFKRROVZKHUHWKRVHFODVVHVDUHQߞWHYHQRIIHUHG +RZZRXOG\RXWHVWVXFKDODUJHGLYHUVHJURXSRIWHVWWDNHUVLI\RXZHUHLQFKDUJHRIWKH$&7" ,I\RXFDPHXSZLWKDYHU\DGYDQFHGWHVW ZLWKFDOFXOXVDQGVWDWLVWLFVDQGDGYDQFHGWULJRQRPHWU\ WKH VWXGHQWVZKRKDGQߞWWDNHQWKRVHVXEMHFWVZRXOGKDYHDOPRVWQRFKDQFHDWDJRRGVFRUHߚHYHQLIWKH\ZHUH YHU\JRRGLQWKHPDWKFODVVHVWKH\ߞGWDNHQWKH\ZRXOGQߞWNQRZKRZWRKDQGOHDQ$&70DWKVHFWLRQ ORDGHGZLWKDGYDQFHGPDWKWKH\ߞGQHYHUVHHQEHIRUH 2QWKHRWKHUKDQGLWVHHPVWKDWLI\RXPDGHDPDWKWHVWWKDWMXVWFRYHUHGDOOWKHEDVLFWRSLFVOLNHVLPSOH DOJHEUDJHRPHWU\DQGDOLWWOHWULJRQRPHWU\WKHQHYHU\ERG\ߞVVFRUHVZRXOGEHWRRKLJK6LPSOHPDWKOLNH WKDWZRXOGQߞWEHPXFKRIDFKDOOHQJHIRUPRVWKLJKVFKRROVWXGHQWVDQGDWHVWWKDWHYHU\ERG\VFRUHGZHOO RQZRXOGQߞWEHRIPXFKXVHWRFROOHJHVWU\LQJWRUDQNWKHLUDSSOLFDQWV 6RLWVHHPVOLNHWKHWHVWVKRXOGRQO\DVNDERXWUHODWLYHO\EDVLFKLJKVFKRROPDWKZKLOHVWLOOEHLQJKDUG HQRXJKWKDWQRWHYHU\ERG\ZRXOGGRZHOORQLW+RZFRXOGDWHVWDFFRPSOLVKWKDW" :HOORQHZD\ZRXOGEHWRWHVWVLPSOHPDWKLGHDVEXWWRSUHVHQWWKRVHVLPSOHPDWKLGHDVLQXQXVXDOZD\V WKDWVWXGHQWVDUHQߞWXVHGWRVHHLQJ,IWKHTXHVWLRQVDVNDERXWEDVLFPDWKLGHDVLQXQH[SHFWHGZD\VWKHQWKH WHVWFDQVLPXOWDQHRXVO\DFFRPSOLVKERWKJRDOVDQ\VWXGHQWZLWKDEDVLFOHYHORIPDWKNQRZOHGJHFRXOG SRWHQWLDOO\DQVZHUWKHTXHVWLRQVVLQFHWKHTXHVWLRQVZRXOGVWLFNWRDFHUWDLQVHWRIUHODWLYHO\VLPSOHPDWK FRQFHSWVEXWWKHXQXVXDOSUHVHQWDWLRQZRXOGFDXVHGLIILFXOWLHVIRUDORWRIVWXGHQWVVRVFRUHVZRXOGQߞWEH KLJKDFURVVWKHERDUG $VLWWXUQVRXWWKDWߞVH[DFWO\KRZWKH$&70DWKVHFWLRQZRUNV 7KDWߞVZK\\RXߞOOILQGVRPHVWXGHQWVZKRJHWVWUDLJKW$ߞVLQDGYDQFHGPDWKFRXUVHVEXWFDQߞWILJXUHRXW $&70DWKZKLOHRWKHUVWXGHQWVZKRߞYHRQO\HYHUGRQHUHODWLYHO\EDVLFVWXIILQPDWKFODVVHVFDQGR VXUSULVLQJO\ZHOORQWKH$&7,WߞVDGLIIHUHQWNLQGRIWHVWIURPZKDW\RXߞGH[SHFWLQDQRUPDOKLJKVFKRRO PDWKFODVVDQGLWUHTXLUHVDGLIIHUHQWDSSURDFKLI\RXZDQWWRVXFFHHG 7KH%LJ6HFUHW2I$&70DWK $WWKLVSRLQW\RXPLJKWQRWEHFRQYLQFHG<RXPLJKWDVN\RXUVHOIߡ,IWKHPDWKUHDOO\LVVRVLPSOHKRZ FRPHVRPDQ\SHRSOHWKLQNLWߞVVRFKDOOHQJLQJ"ߢ ,ZRXOGILUVWUHVSRQGE\SRLQWLQJRXWWKDWPDQ\SHRSOHWKLQN$&75HDGLQJLVLPSRVVLEOHWRPDVWHUDQG ZHߞYHDOUHDG\GLVFXVVHGDWOHQJWKKRZWKHRQO\WKLQJ\RXQHHGWRGRWRDQVZHUHYHU\TXHVWLRQLVMXVWWR UHDGFDUHIXOO\DQGILQGWKHDQVZHUFKRLFHWKDWGLUHFWO\UHVWDWHVWKHWH[W7KDWߞVVLPSOHHQRXJKWRGREXW PDQ\SHRSOHVWUXJJOHEHFDXVHWKH\GRQߞWNQRZWKH\ߞUHVXSSRVHGWRGRLW 7KLVLVWKHVDPHW\SHRIVLWXDWLRQZHVHHZLWK$&70DWK6WXGHQWVGRQߞWNQRZKRZWRKDQGOHWKLVNLQGRI WHVWVRWKH\ZDQWWRDSSURDFKLWOLNHWKH\DSSURDFKKLJKVFKRROPDWKWHVWVZKLFKZRQߞWZRUN<RXߞUH SUREDEO\VWDUWLQJWRXQGHUVWDQGZK\WKDWDSSURDFKIDLOVߚOHWߞVJRLQWRLWDOLWWOHELWPRUH 7KLQNDERXWWKHSHULRGRIWLPHOHDGLQJXSWRDW\SLFDOKLJKVFKRROPDWKWHVW,PDJLQHWKDW\RXUPDWKFODVV LVVWDUWLQJDQHZXQLWZKLFKSUREDEO\IRFXVHVRQDKDQGIXORIFORVHO\UHODWHGPDWKHPDWLFDOLGHDV)RU VHYHUDOGD\VRUZHHNV\RXߞOOVWXG\WKRVHLGHDV<RXߞOOJHWKRPHZRUNDVVLJQPHQWVLQZKLFK\RXPLJKWGR DIHZGR]HQSUREOHPVDWDWLPHWKDWDOOKDYH\RXUHSHDWEDVLFDOO\WKHVDPHVROXWLRQZLWKGLIIHUHQW QXPEHUVRYHUDQGRYHUDJDLQ 2QFH\RXߞYHGRQHHQRXJKGULOOLQJDQGSUDFWLFLQJRIWKRVHFRQFHSWV\RXߞOOWDNHDWHVW7KDWWHVWZLOODVN \RXWRGRDIHZGLIIHUHQWW\SHVRITXHVWLRQVߚDOOWKHWKLQJV\RXߞYHEHHQSUDFWLFLQJDQGGULOOLQJIRUZHHNV ,I\RXߞYHEHHQGRLQJ\RXUKRPHZRUNDQGSD\LQJDWWHQWLRQLQFODVVWKHQWKHPDWHULDORQWKHFODVVURRPWHVW ZLOODOOEHVWXII\RXߞYHVHHQDORWRIWLPHVEHIRUHDQGHYHU\TXHVWLRQZLOOEHEDVLFDOO\WKHVDPHWKLQJ RYHUDQGRYHUDJDLQ:KHQWKHWHVWLVRYHU\RXߞOOVWDUWDQHZXQLWRQDQHZWRSLFDQGJRWKURXJKWKHZKROH SURFHVVDJDLQZLWKQHZPDWHULDO 7KH$&70DWKVHFWLRQLVQRWKLQJOLNHWKDW$&70DWKTXHVWLRQVZLOODOOVHHPGLIIHUHQWIURPHDFKRWKHU :KHQ\RXORRNDWDQ$&70DWKTXHVWLRQLWPD\QRWEHLPPHGLDWHO\REYLRXVZKDW\RXߞUHHYHQVXSSRVHG WRGROHWDORQHKRZ\RXVKRXOGJRDERXWGRLQJLW,I\RXߞUHJRRGDWIROORZLQJWKHIRUPDWRIDQRUPDOPDWK WHVWLQVFKRROWKHQVRPH$&70DWKTXHVWLRQVPLJKWIHHOFRPSOHWHO\IRUHLJQWR\RX ,I\RXߞUHOLNHDORWRIXQWUDLQHGWHVWWDNHUV\RXߞOOJHWIUXVWUDWHG<RXPD\HYHQSDQLFDQG\RXߞOOSUREDEO\ FRQFOXGHWKDW$&70DWKLVZD\KDUGHUWKDQQRUPDOPDWKߚZKLFKLVH[DFWO\ZKDWWKHSHRSOHZKRPDNHWKH $&7ZDQW\RXWRWKLQN%XWSHRSOHRQO\WKLQNWKDWEHFDXVHQRERG\KDVHYHUWROGWKHPKRZWKH$&70DWK VHFWLRQUHDOO\ZRUNV 7KH7ZR&ULWLFDO&RPSRQHQWVRI$&70DWK6XFFHVV :HߞYHOHDUQHGWKDW$&70DWKLVDOODERXWUHODWLYHO\EDVLFPDWKLGHDVEHLQJSUHVHQWHGLQXQXVXDOZD\V 7KDWPHDQVWKHUHDUHWZRWKLQJVZHQHHGLQRUGHUWRGRZHOORQWKLVVHFWLRQ w:HQHHGEDVLFNQRZOHGJHRIWKHNLQGVRIPDWKWKDWFDQDSSHDURQWKH$&7 DULWKPHWLFDOJHEUD JHRPHWU\DQGDWLQ\ELWRIWULJRQRPHWU\ w:HQHHGDQXQGHUVWDQGLQJRIWKH$&7ߞVXQZULWWHQUXOHVSDWWHUQVDQGVWDQGDUGVWKDWJRYHUQWKHZD\ $&70DWKTXHVWLRQVFDQRSHUDWH 2QFHZHߞUHFRPIRUWDEOHZLWKWKHEDVLFPDWKFRQFHSWVWKDWFDQDSSHDURQWKH$&7DQGZHߞUHIDPLOLDU ZLWKWKHYDULRXVZD\VWKRVHEDVLFFRQFHSWVFDQEHSUHVHQWHGZHߞYHJRWHYHU\WKLQJZHQHHGWRDQVZHU DQ\$&70DWKTXHVWLRQZHߞOOHYHUVHHHYHQLIWKHTXHVWLRQWKURZVXVZKHQZHILUVWORRNDWLW :HߞOOVWDUWRIIE\FRYHULQJDOORIWKHEDVLFPDWKLGHDVWKDWFDQDSSHDULQ$&70DWKTXHVWLRQVLQWKHQH[W VHFWLRQWKH$&70DWK7RROER[ $&70DWK7RROER[ ,QWKHFRPLQJVHFWLRQZHߞOOEHGLVFXVVLQJWKHEHVWZD\WRDSSURDFKWKH$&70DWKVHFWLRQ:HߞOOWDON DERXWWKDWLQWHUPVRISDWWHUQVDQGVWUDWHJLHVDQGVWDQGDUGVDVZHGRZLWKWKHRWKHUVHFWLRQV %XWEHIRUHZHGRWKDWZHQHHGWREHVXUHWKDWZHߞUHIDPLOLDUZLWKDOOWKHPDWKFRQFHSWVWKDWDUHDOORZHG WRDSSHDULQWKH$&70DWKVHFWLRQߚPRVWRIWKHPDWKLVSUHWW\EDVLFE\KLJKVFKRRODQGFROOHJHVWDQGDUGV EXWZHVWLOOQHHGWRJRRYHULWWRPDNHVXUHZHߞUHSURSHUO\SUHSDUHG 7KHJRDORIWKLVVHFWLRQLVWRUHYLHZHDFKLPSRUWDQWFRQFHSWTXLFNO\DQGHIILFLHQWO\,I\RXQHHGPRUHRI DQH[SODQDWLRQIRUDQ\JLYHQWRSLFFRQVLGHUDVNLQJ\RXUPDWKWHDFKHUIRUDGGLWLRQDOJXLGDQFH <RXPLJKWQRWLFHWKDWWKHPDWHULDOLQWKLVUHYLHZDFWXDOO\VHHPVWREHHDVLHUWKDQWKHTXHVWLRQV\RXVHHLQ UHDO$&70DWKTXHVWLRQV7KDWߞVEHFDXVHWKHFKDOOHQJHLQWKHPDMRULW\RI$&70DWKTXHVWLRQVLVQߞWWKH DFWXDOPDWK\RXQHHGWRGRLWߞVILJXULQJRXWWKHSURSHUZD\WRVHWXSWKHVROXWLRQ2QFH\RXGRWKDWWKH PDWKLVRIWHQTXLWHVLPSOH DVZHߞOOVHHLQWKLV7RROER[DQGLQWKHZDONWKURXJKV 5HPHPEHUWKDW\RXGRQߞWKDYHWREHDQH[SHUWRQHYHU\RQHRIWKHVHFRQFHSWV<RXMXVWQHHGWREHDEOHWR XQGHUVWDQGWKHPDQGWRKDYHDQLGHDRIKRZWRZRUNZLWKWKHPLQRUGHUWREHUHDG\IRUWKLVVHFWLRQRIWKH WHVW$OVREHDULQPLQGWKDWVRPHRIWKLVPDWHULDOPLJKWVHHPXQIDPLOLDUZKHQ\RXILUVWORRNDWLWߚLI WKDWߞVWKHFDVH,VWURQJO\UHFRPPHQG\RXUHDGWKURXJKWKHZKROH7RROER[WZLFH0RVWVWXGHQWVDUHPRUH FRPIRUWDEOHZLWKWKHFRQFHSWVRQWKHVHFRQGUHDGWKURXJK 7KLVOLVWLVEDVHGRQWKHߡ&RQWHQWRIWKH$&70DWKHPDWLFV7HVWߢVHFWLRQRI7KH5HDO$&73UHS*XLGHUG (GLWLRQZKLFK\RXFDQILQGRQSDJHVDQGRIWKDWERRN,WDOVRLQFOXGHVDFRXSOHRIRWKHULGHDVWKDW DUHQߞWVSHFLILFDOO\PHQWLRQHGLQWKH5HG%RRNEXWWKDWVRPHWLPHVFRPHXSLQUHDO$&70DWKTXHVWLRQV $JDLQWKLVVHFWLRQLVQߞWDERXWOHDUQLQJWKHVWUDWHJLFDSSURDFKWRWKH$&70DWKVHFWLRQߚWKDWZLOOFRPH ODWHU)LUVW\RXMXVWKDYHWRPDNHVXUH\RXߞUHIDPLOLDUZLWKDUHODWLYHO\GU\ERULQJOLVWRIPDWKLGHDVDQG WKHEHVWZD\WRGRWKDWLVWRJRRYHUHDFKRQHDVFRPSOHWHO\ EXWTXLFNO\ DVSRVVLEOH/HWߞVJHWVWDUWHG 1XPEHUOLQHV $QXPEHUOLQHLVDVLPSOHGLDJUDPWKDWDUUDQJHVQXPEHUVIURPOHDVWWRJUHDWHVWYDOXHRQDOLQH 7KHSRVLWLRQVRQDQXPEHUOLQHFDQEHODEHOHGZLWKDFWXDOQXPEHUVRUZLWKYDULDEOHV ([DPSOH $EVROXWHYDOXH $QXPEHUߞVDEVROXWHYDOXHLVWKDWQXPEHUߞVGLVWDQFHIURP]HURRQWKHQXPEHUOLQH ([DPSOH DQGERWKKDYHDQDEVROXWHYDOXHRI:HVLJQLI\WKHDEVROXWHYDOXHRIDQXPEHUZLWKYHUWLFDO OLQHVRQHLWKHUVLGHRIWKHQXPEHU__ __ :HFDQFUHDWHHTXDWLRQVXVLQJDEVROXWHYDOXHVDQGRQHRUPRUHYDULDEOHV ([DPSOH _[_ [ RU[ 3URSHUWLHVRILQWHJHUV $Q\QXPEHUWKDWFDQEHH[SUHVVHGZLWKRXWDIUDFWLRQGHFLPDORUVSHFLDOV\PEROLVDQLQWHJHU ,QWHJHUVFDQEHQHJDWLYHRUSRVLWLYH =HURLVDQLQWHJHU ([DPSOH 7KHVHQXPEHUVDUHLQWHJHUV 7KHVHQXPEHUVDUH127LQWHJHUVͯ ,QWHJHUVFDQEHHYHQRURGG 2QO\LQWHJHUVFDQEHRGGRUHYHQߚDIUDFWLRQRUV\PEROLFQXPEHULVQHLWKHURGGQRUHYHQ (YHQLQWHJHUVFDQEHGLYLGHGE\ZLWKQRWKLQJOHIWRYHU 2GGLQWHJHUVKDYHDUHPDLQGHURIZKHQWKH\ߞUHGLYLGHGE\ ([DPSOH 7KHVHDUHHYHQLQWHJHUV 7KHVHDUHRGGLQWHJHUV $QHYHQQXPEHUSOXVDQHYHQQXPEHUUHVXOWVLQDQHYHQQXPEHU $QRGGQXPEHUSOXVDQRGGQXPEHUUHVXOWVLQDQHYHQQXPEHU $QRGGQXPEHUSOXVDQHYHQQXPEHUUHVXOWVLQDQRGGQXPEHU $QHYHQQXPEHUPXOWLSOLHGE\DQHYHQQXPEHUUHVXOWVLQDQHYHQQXPEHU $QHYHQQXPEHUPXOWLSOLHGE\DQRGGQXPEHUUHVXOWVLQDQHYHQQXPEHU $QRGGQXPEHUPXOWLSOLHGE\DQRGGQXPEHUUHVXOWVLQDQRGGQXPEHU 6RPHLQWHJHUVKDYHVSHFLDOSURSHUWLHVUHODWHGWRDGGLWLRQDQGPXOWLSOLFDWLRQ w:KHQ\RXPXOWLSO\RUGLYLGHDQ\QXPEHUE\WKHQXPEHULVXQFKDQJHG w:KHQ\RXPXOWLSO\DQ\QXPEHUE\WKHUHVXOWLV w,WߞVLPSRVVLEOHWRGLYLGHDQXPEHUE\RQWKH$&70DWKVHFWLRQ w$GGLQJRUVXEWUDFWLQJWRRUIURPDQ\QXPEHUOHDYHVWKDWQXPEHUXQFKDQJHG 'LJLWV $GLJLWLVWKHLQGLYLGXDOQXPEHUFKDUDFWHUXVHGWRZULWHDQXPEHU ([DPSOH 7KHVHDUHRQHGLJLWQXPEHUV 7KHVHDUHWZRGLJLWQXPEHUV 6SHFLDOFKDUDFWHUVDUHQRWGLJLWV ([DPSOH 7KHVHQXPEHUVGRQߞWLQYROYHGLJLWVͯL:HFDQUHIHUWRGLJLWVE\WKHRUGHUWKH\DSSHDULQWKH QXPEHUVWDUWLQJIURPWKHOHIW ([DPSOH 7KHWKLUGGLJLWLQWKHQXPEHULV 7KHILUVWGLJLWDIWHUWKHGHFLPDOLQWKHQXPEHULV 5DWLRQDOQXPEHUVYHUVXVLUUDWLRQDOQXPEHUV $UDWLRQDOQXPEHULVDQ\QXPEHUWKDWFDQEHH[SUHVVHGDVDUDWLRRIWZRLQWHJHUV ([DPSOHV ,UUDWLRQDOQXPEHUVFDQQRWEHH[SUHVVHGDVDUDWLRRIWZRLQWHJHUV ([DPSOHVRILUUDWLRQDOQXPEHUV %DVLFRSHUDWLRQV <RXߞOOKDYHWRGREDVLFRSHUDWLRQV DGGLWLRQVXEWUDFWLRQPXOWLSOLFDWLRQGLYLVLRQ ZLWKLQWHJHUV IUDFWLRQVDQGGHFLPDOV 7KHVHDUHH[DPSOHVRIEDVLFRSHUDWLRQVRQLQWHJHUV ߙ · 7KHVHDUHH[DPSOHVRIEDVLFRSHUDWLRQVRQIUDFWLRQV 7KHVHDUHGLVFXVVHGLQPRUHGHWDLOLQWKHߡ)UDFWLRQVߢVHFWLRQ 7KHVHDUHH[DPSOHVRIEDVLFRSHUDWLRQVRQGHFLPDOV ߙ · 0XOWLSOHV $ߡPXOWLSOHߢRIDQLQWHJHULVDQXPEHUWKDWFDQEHUHDFKHGZKHQWKHLQWHJHULVPXOWLSOLHGE\DQRWKHU LQWHJHU ([DPSOH LVDPXOWLSOHRIEHFDXVH DQGLVDQLQWHJHU 7KHPXOWLSOHVRIDUHDQGVRRQ (YHU\LQWHJHULVWKHVPDOOHVWPXOWLSOHRILWVHOI 7KH ߡOHDVW FRPPRQ PXOWLSOHߢ RI D VHW RI QXPEHUV LV WKH VPDOOHVW PXOWLSOH FRPPRQ WR HDFK PHPEHU RI WKH VHW ([DPSOH 7KHOHDVWFRPPRQPXOWLSOHRIDQGLVEHFDXVHLVWKHVPDOOHVWQXPEHUWKDWߞVDPXOWLSOH RIDQG )DFWRUV $ߡIDFWRUߢRIDQLQWHJHULVDQLQWHJHUWKDWFDQEHPXOWLSOLHGE\DQRWKHULQWHJHUWRDUULYHDWWKHRULJLQDO LQWHJHU ([DPSOH LVDIDFWRURIEHFDXVH DQGDQGDUHLQWHJHUV 7KHIDFWRUVRIDUHDQG 7KHߡJUHDWHVWFRPPRQIDFWRUߢRIDVHWRIQXPEHUVLVWKHODUJHVWIDFWRUFRPPRQWRHDFKPHPEHURIWKHVHW ([DPSOH 7KHJUHDWHVWFRPPRQIDFWRURIDQGLVEHFDXVHLVWKHODUJHVWQXPEHUWKDWߞVD IDFWRURIDQG LVDIDFWRURIHYHU\LQWHJHU (YHU\LQWHJHULVLWVRZQJUHDWHVWIDFWRU $ߡSULPHQXPEHUߢ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ߙ· )LUVWZHGRWKHRSHUDWLRQZLWKLQWKHSDUHQWKHVHV ߙ· 1H[WZHDGGUHVVWKHH[SRQHQWH[SUHVVLRQ ߙ· 7KHQZHGRDQ\PXOWLSOLFDWLRQLQWKHHTXDWLRQ · 7KHQZHGRWKHGLYLVLRQ · 1H[WZHGRDQ\DGGLWLRQ )LQDOO\ZHGRDQ\VXEWUDFWLRQWKDWPLJKWEHLQWKHHTXDWLRQ 7KDWJLYHVXVWKHVLPSOLILHGYDOXHRIWKHH[SUHVVLRQ :RUGSUREOHPV ,QJHQHUDO$&7ZRUGSUREOHPVDUHGHVFULSWLRQVRIHLWKHUUHDOOLIHVLWXDWLRQVRUDEVWUDFWFRQFHSWV ([DPSOHRIDZRUGSUREOHPDERXWDUHDOOLIHVLWXDWLRQߡ$QQEX\VWZRVDQGZLFKHVIRUIRXUGROODUVHDFK 6KHDOVREX\VDIHZERWWOHVRIZDWHU(DFKERWWOHRIZDWHUFRVWVVHYHQW\ILYHFHQWV$QQSD\VZLWKILIWHHQ GROODUVDQGJHWVIRXUGROODUVDQGVHYHQW\ILYHFHQWVLQFKDQJH+RZPDQ\ERWWOHVRIZDWHUGLGVKHEX\"ߢ ([DPSOHRIDZRUGSUREOHPDERXWDQDEVWUDFWFRQFHSWߡ,I\LVWKHDULWKPHWLFPHDQRIFRQVHFXWLYHHYHQ QXPEHUVZKDWLVWKHPHGLDQRIWKRVHFRQVHFXWLYHHYHQQXPEHUVLQWHUPVRI\"ߢ ,QRUGHUWRVROYH$&7ZRUGSUREOHPVZHKDYHWRWXUQWKHPLQWRPDWKSUREOHPV 7RGRWKDWZHQRWHDOOWKHQXPEHUVJLYHQLQWKHSUREOHPDQGZULWHWKHPGRZQRQVFUDWFKSDSHU7KHQZH LGHQWLI\NH\SKUDVHVDQGWXUQWKHPLQWRPDWKHPDWLFDOV\PEROVIRURSHUDWLRQVDQGYDULDEOHV)LQDOO\ZH XVHWKHVHWRUHODWHWKHQXPEHUVZHZURWHGRZQLQWKHILUVWSODFH ([DPSOH ,QWKHSKUDVHߡWZRVDQGZLFKHVIRUIRXUGROODUVHDFKߢ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ߞYHFRQYHUWHGWKHZRUGSUREOHPLQWRDPDWKSUREOHPZHFDQVROYHLWOLNHDQ\ RWKHUTXHVWLRQ:HߞOOWDONPRUHDERXWWKHJHQHUDODSSURDFKWR$&70DWKTXHVWLRQVLQRXUGLVFXVVLRQRI WKHߡ0DWK3DWKߢ )UDFWLRQV $IUDFWLRQLVDQXPEHUWKDWUHSUHVHQWVSDUWVRIDZKROH )UDFWLRQVORRNOLNHWKLV ([DPSOH 7KHQXPEHUDERYHWKHIUDFWLRQEDULVWKHQXPHUDWRU 7KHQXPEHUXQGHUWKHIUDFWLRQEDULVWKHGHQRPLQDWRU ,IWKHYDOXHRIWKHQXPHUDWRULVOHVVWKDQWKHYDOXHRIWKHGHQRPLQDWRUWKHYDOXHRIWKHIUDFWLRQLVOHVVWKDQ ,IDIUDFWLRQߞVQXPHUDWRULVJUHDWHUWKDQLWVGHQRPLQDWRUWKHQWKHYDOXHRIWKHIUDFWLRQLVJUHDWHUWKDQ ([DPSOH $Q\LQWHJHUFDQEHVHHQDVKDYLQJWKHGHQRPLQDWRUXQGHUQHDWKLW ([DPSOH 7KHߡUHFLSURFDOߢRIDIUDFWLRQLVZKDWZHJHWLIZHVZLWFKWKHQXPHUDWRUDQGGHQRPLQDWRURIWKHIUDFWLRQ ([DPSOH 0XOWLSO\LQJIUDFWLRQVUHTXLUHVWZRVWHSV)LUVWZHPXOWLSO\WKHQXPHUDWRUVWRILQGWKHQXPHUDWRULQWKH SURGXFWIUDFWLRQ6HFRQGZHPXOWLSO\WKHGHQRPLQDWRUVWRILQGWKHGHQRPLQDWRULQWKHSURGXFWIUDFWLRQ ([DPSOH 7RGLYLGHRQHIUDFWLRQE\DQRWKHUZHVLPSO\PXOWLSO\WKHILUVWIUDFWLRQE\WKH5(&,352&$/RIWKH VHFRQGIUDFWLRQ ([DPSOH ,I\RXPXOWLSO\DQRQ]HURLQWHJHUE\DIUDFWLRQWKDWߞVVPDOOHUWKDQWKHUHVXOWZLOOKDYHDVPDOOHU DEVROXWHYDOXHWKDQWKHRULJLQDOQXPEHUGLG ([DPSOHV )UDFWLRQDLVHTXDOWRIUDFWLRQELI\RXFRXOGPXOWLSO\WKHQXPHUDWRUDQGGHQRPLQDWRURIIUDFWLRQDE\WKH VDPHQXPEHUWRJHWWKHQXPHUDWRUDQGGHQRPLQDWRURIIUDFWLRQE ([DPSOHV ߡ6LPSOLI\LQJߢRUߡUHGXFLQJߢDIUDFWLRQLVWKHSURFHVVRIGLYLGLQJWKHQXPHUDWRUDQGGHQRPLQDWRURIWKH IUDFWLRQE\WKHLUJUHDWHVWFRPPRQIDFWRU ([DPSOH ,QRUGHUWRDGGRUVXEWUDFWIUDFWLRQVWKH\PXVWKDYHWKHVDPHGHQRPLQDWRU7KDWPHDQVZHKDYHWRILQGWKH ߡOHDVWFRPPRQGHQRPLQDWRUߢRIWKHIUDFWLRQVDQGWKHQFRQYHUWWKHIUDFWLRQVVRWKH\DOOKDYHWKHOHDVW FRPPRQGHQRPLQDWRUDVWKHLUGHQRPLQDWRUV7KHOHDVWFRPPRQGHQRPLQDWRURIWZRRUPRUHIUDFWLRQVLV WKHOHDVWFRPPRQPXOWLSOHRIWKHLUGHQRPLQDWRUV7KDWPLJKWVRXQGFRQIXVLQJVROHWߞVORRNDWDQH[DPSOH ([DPSOH ([SRQHQWV :KHQZHPXOWLSO\DQXPEHUE\LWVHOIDFHUWDLQQXPEHURIWLPHVWKHUHVXOWLVDQH[SRQHQWRIWKDWQXPEHU ([DPSOH \ \\\ \LVDQH[DPSOHRIDQH[SRQHQWLDOH[SUHVVLRQ,QWKLVH[DPSOHWKH\LVFDOOHGWKH ߡEDVHߢDQGWKHLVWKHH[SRQHQW ([SRQHQWVFDQEHHLWKHUSRVLWLYHRUQHJDWLYH 7RHYDOXDWHDSRVLWLYHH[SRQHQWZHPXOWLSO\WKHEDVHE\LWVHOIDVPDQ\WLPHVDVWKHH[SRQHQWWHOOVXVWR :HHYDOXDWHDQHJDWLYHH[SRQHQWWKHVDPHZD\ZHHYDOXDWHDSRVLWLYHH[SRQHQWH[FHSWWKDWZHWDNHWKH UHFLSURFDORIWKHHQGUHVXOW ([DPSOH :HFDQPXOWLSO\H[SRQHQWH[SUHVVLRQVLIWKH\KDYHWKHVDPHEDVH,QWKDWVLWXDWLRQZHMXVWDGGWKH H[SRQHQWV ([DPSOH Q Q QQQ QQQQ QQQQQQQ Q ,WߞVDOVRSRVVLEOHWRGLYLGHH[SRQHQWH[SUHVVLRQVZLWKWKHVDPHEDVHE\VXEWUDFWLQJWKHH[SRQHQWV ([DPSOH :HFDQDOVRUDLVHDQH[SRQHQWLDOH[SUHVVLRQWRDQRWKHUH[SRQHQWE\PXOWLSO\LQJWKHWZRH[SRQHQWV ([DPSOH Q Q Q Q Q Q Q 5DLVLQJDQ\QXPEHUWRDQH[SRQHQWRI]HURUHVXOWVLQWKHQXPEHU ([DPSOH Q /RJDULWKPV $ORJDULWKPLVDQH[SUHVVLRQWKDWWHOOVXVKRZPDQ\WLPHVZHPXOWLSO\RQHQXPEHUE\LWVHOIWRJHWDQRWKHU QXPEHU7KHH[SUHVVLRQORJ[ \ ]PHDQVWKDWLI\RXPXOWLSO\[E\LWVHOI]WLPHVWKHUHVXOWLV\,QWKDW H[SUHVVLRQZHZRXOGFDOO[WKHߡEDVHߢRIWKHORJDULWKPDVLQߡWKHORJDULWKPRI\ZLWKEDVH[LV]ߢ/HWߞV ORRNDWDQH[DPSOHZLWKUHDOQXPEHUV ([DPSOH ORJ EHFDXVHZHZRXOGKDYHWRPXOWLSO\E\LWVHOIWLPHVWRJHW /RJDULWKPVGRQߞ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ߡFURVVPXOWLSOLHGߢ 'RQߞWZRUU\LI\RXGRQߞWDOUHDG\NQRZKRZ WRGRWKLVߚLWߞVMXVWDQDOJHEUDLFVKRUWFXWDQG\RXGRQߞWVSHFLILFDOO\KDYHWRNQRZKRZWRGRLWIRUWKH $&7 ,IWZRTXDQWLWLHVKDYHDUHODWLRQVKLSVXFKWKDWLQFUHDVLQJRQHTXDQWLW\FDXVHVDFRQVLVWHQWSUHGLFWDEOH SURSRUWLRQDOLQFUHDVHLQWKHRWKHUTXDQWLW\ZHVD\WKRVHWZRTXDQWLWLHVߡYDU\GLUHFWO\ߢRUDUHߡGLUHFWO\ SURSRUWLRQDOߢ ([DPSOH ,PDJLQHWKDW\RX UHGULYLQJDFDUWKDWFDQJRPLOHVRQRQHJDOORQRIJDV,I\RXKDYHRQHJDOORQ RIJDV\RXFDQGULYHPLOHV,I\RXKDYHJDOORQV\RXFDQGULYHPLOHV,I\RXKDYH JDOORQV\RXFDQGULYHPLOHV7KHGLVWDQFH\RXFDQWUDYHOߡYDULHVGLUHFWO\ZLWKߢRULVߡGLUHFWO\ SURSRUWLRQDOWRߢWKHDPRXQWRIJDV\RXKDYHVLQFHHYHU\DGGLWLRQDOJDOORQRIJDVLQFUHDVHVWKH GLVWDQFH\RXFDQGULYHLQDSUHGLFWDEOHZD\ ,I[DQG\YDU\GLUHFWO\WKHQWKHLUUHODWLRQVKLSFDQEHH[SUHVVHGE\WKHHTXDWLRQ[ Y\ZKHUHYLVD FRQVWDQW ([DPSOH ,I[DQG\YDU\GLUHFWO\DQG[LVZKHQ\LVWKHQ[ \:HFDQVHHWKDWLQFUHDVLQJHLWKHU YDULDEOHDXWRPDWLFDOO\LQFUHDVHVWKHRWKHUYDULDEOH)RUH[DPSOHZHVHHWKDW[LVLI\LV ,IWZRTXDQWLWLHVKDYHDUHODWLRQVKLSVXFKWKDWLQFUHDVLQJRQHFDXVHVDFRQVLVWHQWSURSRUWLRQDOGHFUHDVHLQ WKHRWKHUZHVD\WKRVHWZRTXDQWLWLHVߡYDU\LQGLUHFWO\ߢRUDUHߡLQYHUVHO\SURSRUWLRQDOߢ ([DPSOH ,PDJLQHWKDW\RXDUHULGLQJ\RXUELNHIRUDGLVWDQFHRIPLOHV,I\RXULGH\RXUELNHDWPLOHV SHUKRXU\RXZLOOFRYHUWKHGLVWDQFHLQKRXUVߚKRXUVRIWUDYHOLQJDWPLOHVSHUKRXUPHDQV \RXFRYHUPLOHV+RZHYHULI\RXVSHHGXSWRPLOHVSHUKRXU\RXZLOOFRYHUWKHVDPH GLVWDQFHLQKRXUVߚKRXUVRIWUDYHOLQJDWPLOHVSHUKRXUPHDQV\RXFRYHUPLOHV:KHQ \RXGRXEOH\RXUVSHHG\RXFXWWKHWUDYHOWLPHLQKDOI:HFDQVD\WKDWVSHHGDQGWUDYHOWLPH YDU\LQGLUHFWO\RUDUHLQYHUVHO\SURSRUWLRQDOVLQFHLQFUHDVLQJRQHYDOXHFDXVHVWKHRWKHU YDOXHWRGHFUHDVHLQDFRQVLVWHQWSUHGLFWDEOHZD\ ,I[DQG\DUHLQYHUVHO\SURSRUWLRQDOWKHQ[\ YZKHUHYLVVRPHFRQVWDQW ([DPSOH ,I[DQG\YDU\LQGLUHFWO\DQG[LVZKHQ\LVWKHQZHNQRZ[\ ,QFUHDVLQJHLWKHUYDULDEOH FUHDWHVDGHFUHDVHLQWKHRWKHUIRUH[DPSOH[LVLI\LV 6LPSOHSUREDELOLW\ 7KHSUREDELOLW\RIDSRVVLEOHHYHQWWHOOVXVKRZOLNHO\WKDWHYHQWLVWRKDSSHQ,WߞVH[SUHVVHGDVDIUDFWLRQ ZLWKDYDOXHEHWZHHQDQG7KHFORVHUDSUREDELOLW\IUDFWLRQLVWRWKHPRUHOLNHO\WKHHYHQWLVWR KDSSHQWKHFORVHUDIUDFWLRQLVWR]HURWKHOHVVOLNHO\WKHHYHQWLVWRKDSSHQ 7RFUHDWHDSUREDELOLW\IUDFWLRQ\RXILUVWILJXUHRXWWKHWRWDOQXPEHURISRVVLEOHRXWFRPHVDQGPDNHWKDW QXPEHUWKHGHQRPLQDWRURIWKHIUDFWLRQ7KHQ\RXILJXUHRXWWKHQXPEHURIGHVLUHGRXWFRPHVWKDWVDWLVI\ WKHUHTXLUHPHQWVRIWKDWHYHQWDQG\RXPDNHWKLVQXPEHUWKHQXPHUDWRURIWKHIUDFWLRQ ([DPSOH :KDWߞVWKHSUREDELOLW\RIDIOLSSHGSHQQ\ODQGLQJWDLOVVLGHXS"7KHUHDUHSRVVLEOHRXWFRPHV ZKHQWKHSHQQ\LVIOLSSHGKHDGVRUWDLOV6RJRHVLQWKHGHQRPLQDWRURIWKHIUDFWLRQ2XWRI WKRVHRXWFRPHVZHߞUHRQO\LQWHUHVWHGLQRQH WDLOV VRJRHVLQWKHQXPHUDWRURIWKHIUDFWLRQ 7KDWPHDQVWKHSUREDELOLW\RIWKHFRLQODQGLQJWDLOVXSLV 7RILQGWKHSUREDELOLW\RIWZRRUPRUHHYHQWVKDSSHQLQJLQDURZZHMXVWPXOWLSO\WKHSUREDELOLW\RIWKH ILUVWHYHQWE\WKHSUREDELOLW\RIWKHVHFRQGHYHQW ([DPSOH :KDWߞVWKHSUREDELOLW\RIDSHQQ\ODQGLQJWDLOVVLGHXSWZLFHLQDURZ":HNQRZWKDWWKH SUREDELOLW\RIDSHQQ\ODQGLQJWDLOVVLGHXSRQHWLPHLV7KDWPHDQVWKHSUREDELOLW\RIDSHQQ\ ODQGLQJWDLOVVLGHXSWZLFHLQDURZLVWLPHVRU 3UREDELOLW\IUDFWLRQVFDQEHPDQLSXODWHGMXVWOLNHDQ\RWKHUIUDFWLRQVߚIRUH[DPSOHDSUREDELOLW\RILV HTXLYDOHQWWRDSUREDELOLW\RI ߡ&RXQWLQJSUREOHPVߢ :KDW,FDOODߡFRXQWLQJSUREOHPߢRQWKH$&7LVDTXHVWLRQWKDWDVNV\RXWRILJXUHRXWWKHWRWDOQXPEHURI ZD\VWKDWWZRRUPRUHHYHQWVFRXOGKDSSHQ <RXPD\KDYHVWXGLHGWKHVHSUREOHPVLQPDWKFODVVLIVR\RXSUREDEO\FDOOHGWKHPߡSHUPXWDWLRQDQG FRPELQDWLRQߢSUREOHPV +HUHߞVWKHJHQHUDOUXOHIRUWKHVHSUREOHPVLIWKHILUVWRIWZRHYHQWVFRXOGKDSSHQLQDQ\RQHRI[ZD\V DQGWKHVHFRQGRIWZRHYHQWVFRXOGKDSSHQLQDQ\RQHRI\ZD\VWKHQWKHWRWDOQXPEHURIZD\VWKDWWKH HYHQWVFRXOGKDSSHQWRJHWKHULVJLYHQE\[\ 7KDWPLJKWVRXQGDOLWWOHFRPSOLFDWHGVROHWߞVGRDQH[DPSOHDQG\RXߞ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ߞYHDOUHDG\FKRVHQRQHRIWKHRULJLQDORSWLRQVLQWKHILUVW HYHQWOHDYLQJRQO\RSWLRQVIRUWKHVHFRQGHYHQWEHFDXVHWKHTXHVWLRQVSHFLILHGWKDWWKHWZR W\SHVRIIUXLWPXVWEHGLIIHUHQWZKLFKPHDQVZHFDQߞ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ߞOOQHHGWREHIDPLOLDUZLWKZKHQLWFRPHVWRVWDWLVWLFVRQWKH$&7 DYHUDJH DULWKPHWLFPHDQ PHGLDQDQGPRGH 7KHDULWKPHWLFPHDQRIDVHWRIQXPEHUVLVZKDW\RXJHWZKHQ\RXDGGWKHQXPEHUVWRJHWKHUDQGWKHQ GLYLGHWKHUHVXOWE\WKHQXPEHURIWKLQJVWKDW\RXDGGHGWRJHWKHU 7KLVLVDOVRFDOOHGWKHߡDYHUDJHߢRIWKH VHWRIQXPEHUV ([DPSOH 7KHPHGLDQRIDVHWRIQXPEHUVLVWKHQXPEHULQWKHPLGGOHRIWKHVHWZKHQDOOWKHQXPEHUVLQWKDWVHWDUH RUGHUHGIURPOHDVWWRJUHDWHVW ([DPSOH 7KHPHGLDQRI^`LVEHFDXVHZKHQWKRVHQXPEHUVDUHRUGHUHGIURPOHDVWWRJUHDWHVW LVLQWKHPLGGOH ,IWKHVHWKDVDQHYHQQXPEHURIHOHPHQWVWKHQWKHPHGLDQRIWKDWVHWLVWKHDYHUDJHRIWKHWZRQXPEHUVWKDW HQGXSLQWKHPLGGOHRIWKHVHWZKHQWKHHOHPHQWVRIWKHVHWDUHRUGHUHGIURPOHDVWWRJUHDWHVW ([DPSOH 7KHPHGLDQRI^`LVEHFDXVHWKHUHߞVDQHYHQQXPEHURIHOHPHQWVLQWKHVHWDQG LVWKHDULWKPHWLFPHDQRIWKHWZRQXPEHUVLQWKHPLGGOHRIWKHVHWZKHQWKHQXPEHUVDUHRUGHUHG IURPOHDVWWRJUHDWHVW DQG 7KHPRGHRIDVHWRIQXPEHUVLVWKHQXPEHUWKDWDSSHDUVLQWKHVHWPRUHIUHTXHQWO\WKDQDQ\RWKHU ([DPSOH 7KHPRGHRI^`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ߞYHOHDUQHGLQ\RXUKLJKVFKRROPDWKFODVVHVߚE\FDUU\LQJRXWWKHVDPHRSHUDWLRQVRQERWK VLGHVRIWKHHTXDWLRQXQWLOWKHYDULDEOHLVDORQHRQRQHVLGHRIWKHHTXDOVVLJQDQGLWVYDOXHLVRQWKHRWKHU VLGH ([DPSOH ,IDQHTXDWLRQKDVPXOWLSOHYDULDEOHVZHFDQVROYHWKHHTXDWLRQߡLQWHUPVRIߢRQHSDUWLFXODUYDULDEOH7R GRWKLVZHMXVWLVRODWHWKHWDUJHWYDULDEOHRQRQHVLGHRIWKHHTXDWLRQ ([DPSOH $V\VWHPRIHTXDWLRQVLVDJURXSRIWZRRUPRUHHTXDWLRQVWKDWKDYHWKHVDPHYDULDEOHV ([DPSOH 7KLVLVDV\VWHPRIHTXDWLRQV DߙE DE 6ROYLQJDV\VWHPRIHTXDWLRQVPHDQVLGHQWLI\LQJWKHYDOXHVRIWKHYDULDEOHVLQWKHHTXDWLRQV2QHZD\WR GRWKLVLVWRVROYHRQHRIWKHHTXDWLRQVLQWHUPVRIDSDUWLFXODUYDULDEOHOLNHZHGLGLQWKHODVWH[DPSOH 7KHQZHVXEVWLWXWHWKDWYDOXHLQWRWKHRWKHUHTXDWLRQDQGREWDLQDQXPHULFDOYDOXHIRUWKHRWKHUYDULDEOH ([DPSOH 2SHUDWLRQVRQSRO\QRPLDOV $SRO\QRPLDOLVDQH[SUHVVLRQWKDWLQFOXGHVPXOWLSOHWHUPVDWOHDVWRQHRIZKLFKFRQWDLQVDYDULDEOH ([DPSOHV [ [ߙ[ DED :KHQZHZULWHDSRO\QRPLDOZHOLVWWKHWHUPVLQGHFUHDVLQJRUGHURIWKHH[SRQHQWRIWKHYDULDEOH7KDW VRXQGVFRPSOLFDWHGVROHWߞVORRNDWDQH[DPSOH [[[ߙ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ߞVDGGWKHSRO\QRPLDOV[[DQG[ [[[ ,QWKLVFDVHQRWKLQJFDQEHFRPELQHGEHFDXVHWKHUHDUHQROLNHWHUPV6RZHMXVWZULWHWKHVXPDVVKRZQ DERYH :HFDQPXOWLSO\DSRO\QRPLDOE\DQRWKHUTXDQWLW\E\PXOWLSO\LQJHDFKWHUPLQWKHSRO\QRPLDOE\WKDWWHUP ([DPSOH $ELQRPLDOLVDSRO\QRPLDOZLWKWZRWHUPV :HFDQPXOWLSO\RQHELQRPLDOE\DQRWKHUELQRPLDOXVLQJWKH)2,/WHFKQLTXHZKLFK\RXߞYHSUREDEO\ HQFRXQWHUHGLQ\RXUPDWKFODVVHV+HUHߞVKRZLWZRUNV ([DPSOH /HWߞVPXOWLSO\[E\[ߙ [ [ߙ )LUVWZHPXOWLSO\WKHILUVWWZRWHUPVRIHDFKSRO\QRPLDOWRJHWKHU WKHߡ)ߢLQ)2,/VWDQGVIRU ߡILUVWߢ 7KDWJLYHVXV[ [ RU[ 1H[WZHPXOWLSO\WKHRXWHUWZRWHUPVWRJHWKHU WKHߡ2ߢLQ)2,/VWDQGVIRUߡRXWHUߢ 7KDWJLYHV XV[ RU[ 1H[WZHPXOWLSO\WKHWZRLQQHUWHUPVWRJHWKHU WKHߡ,ߢLQ)2,/VWDQGVIRUߡLQQHUߢ 7KDWJLYHV XV [ RU[ /DVWZHPXOWLSO\WKHODVWWZRWHUPVRIHDFKSRO\QRPLDOWRJHWKHU WKHߡ/ߢLQ)2,/VWDQGVIRU ߡODVWߢ 7KDWJLYHVXV RU 1RZWKDWZHKDYHDOOWKHWHUPVZHVLPSO\DGGWKHPWRJHWKHU FRPELQJOLNHWHUPVDVDOZD\V [ [ [ [[ߙ 2QWKH$&7ZHFDQDOVRGLYLGHDSRO\QRPLDOE\DQRWKHUTXDQWLW\LIHDFKWHUPRIWKHSRO\QRPLDOKDVD IDFWRULQFRPPRQZLWKWKHTXDQWLW\ZHߞUHGLYLGLQJE\6LPSO\GLYLGHHDFKWHUPRIWKHSRO\QRPLDO LQGLYLGXDOO\ ([DPSOH )DFWRULQJSRO\QRPLDOV 2QWKH$&7IDFWRULQJSRO\QRPLDOVPHDQVWDNLQJDSRO\QRPLDODQGEUHDNLQJLWLQWRWZRH[SUHVVLRQVWKDW FDQEHPXOWLSOLHGWRJHWKHUWRJHWWKHRULJLQDOSRO\QRPLDO 2QWKH$&7WKHUHDUHWKUHHSRVVLEOHIDFWRULQJVLWXDWLRQV\RXߞOOQHHGWREHDEOHWRUHFRJQL]H FRPPRQIDFWRUV ߡ)2,/ߢLQUHYHUVH GLIIHUHQFHRIVTXDUHV 5HFRJQL]LQJFRPPRQIDFWRUVFRPHVGRZQWRQRWLFLQJWKDWHDFKWHUPLQDSRO\QRPLDOKDVDFRPPRQIDFWRU WKDWFDQEHIDFWRUHGRXW ([DPSOH ,IZHKDYHDSRO\QRPLDOOLNH [ ZHFDQVHHWKDWERWK[DQGDUHGLYLVLEOHE\7KDWPHDQV ZHFDQGLYLGHDWKUHHRXWRIHDFKWHUPLQWKHSRO\QRPLDODQGHQGXSZLWKWKHIDFWRUVDQG [ EHFDXVH [ [ )DFWRULQJSRO\QRPLDOVPHDQVGRLQJWKHVWHSVRI)2,/EDFNZDUGV,WFDQEHDOLWWOHLQWLPLGDWLQJEXWLWߞV HDVLHUWKDQLWORRNVZKHQ\RXJHWXVHGWRLW ([DPSOH 6XSSRVHZHߞUHDVNHGWRIDFWRUWKHWULQRPLDO[ߙ[ߙLQWRWZRELQRPLDOV :HߞOOQHHGWRUHYHUVH)2,/WKHWULQRPLDO:HFDQVHHWKHSURGXFWRIWKHILUVWWHUPVRIHDFK SRO\QRPLDOZLOOKDYHWREH[6RZHߞOOMXVWSLFNWZR[WHUPVWRWU\RXWOLNH[DQG[ [" [" :HDOVRNQRZWKHODVWWHUPVZLOOKDYHWRPXOWLSO\WRJHWKHUWRHTXDOVRWKH\PXVWEHHLWKHU DQGRUDQG:HߞOOMXVWWU\RQHSDLU UHYHUVH)2,/LQJRIWHQLQYROYHVDORWRIWULDODQGHUURU [ [ߙ 7KHQZHPXOWLSO\RXWRXUELQRPLDOVWRVHHLIZHߞYHUHYHUVH)2,/HGFRUUHFWO\ ,QWKLVFDVHZHJRWLWRQWKHILUVWWU\LI\RXGRQߞWRIFRXUVH\RXFDQORRNDWZKDWGLGQߞWZRUN DQGWU\RWKHUSDLUVRIIDFWRUV3UREOHPVOLNHWKLVRQWKH$&7DUHQߞWWRRFRPPRQDQGWKHIDFWRUV XVXDOO\DUHQߞWWRRKDUGWRILJXUHRXW7KLVJHWVDORWHDVLHUZLWKDOLWWOHELWRISUDFWLFH 7KHUHߞVDVSHFLDOFDVHLQIDFWRULQJELQRPLDOVFDOOHGDߡGLIIHUHQFHRIVTXDUHVߢ<RXFDQUHFRJQL]HD GLIIHUHQFHRIVTXDUHVEHFDXVHERWKWHUPVLQWKHELQRPLDOZLOOEHVTXDUHVDQGWKHVHFRQGWHUPZLOOEH VXEWUDFWHGIURPWKHILUVW WKLVLVZK\LWߞVFDOOHGDߡGLIIHUHQFHߢRIVTXDUHVWKLVVSHFLDOIDFWRULQJVKRUWFXW GRHVQߞWZRUNZKHQWKHVTXDUHVDUHDGGHGWRJHWKHU :KHQZHVHHWKLVVLWXDWLRQWKHWZRIDFWRUVDUHWKH IROORZLQJ wWKHVTXDUHURRWRIWKHILUVWWHUPSOXVWKHVTXDUHURRWRIWKHVHFRQGWHUP wWKHVTXDUHURRWRIWKHILUVWWHUPPLQXVWKHVTXDUHURRWRIWKHVHFRQGWHUP ([DPSOH [ߙ [ [ߙ 5HPHPEHUWKDWLVDVTXDUHDQGWKDW[LVWKHVDPHDV[7KDWPHDQVVRPHWKLQJOLNH[ߙLVD GLIIHUHQFHRIVTXDUHVDVZHOOZLWKIDFWRUVRI [ DQG [ߙ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wPHDQVߡOHVVWKDQߢ w!PHDQVߡJUHDWHUWKDQߢ wࡄPHDQVߡOHVVWKDQRUHTXDOWRߢ wࡅPHDQVߡJUHDWHUWKDQRUHTXDOWRߢ ,QHTXDOLWLHVDUHVROYHGWKHVDPHZD\WKDWHTXDWLRQVDUHVROYHGZLWKRQHLPSRUWDQWGLIIHUHQFHZKHQ\RX PXOWLSO\E\WRVROYHIRUDYDULDEOH\RXDOVRKDYHWRVZLWFKWKHGLUHFWLRQRIWKHLQHTXDOLW\V\PERO ([DPSOH 6RPHLQHTXDOLWLHVLQYROYHRQO\RQHYDULDEOH ([DPSOHV [ \ 6RPHLQHTXDOLWLHVLQYROYHPRUHWKDQRQHYDULDEOH ([DPSOHV \ [ߙ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ߞWLQYROYH RUWKHVTXDUHURRWRIDQHJDWLYHQXPEHUDQGDQLPDJLQDU\QXPEHULVDQ\ QXPEHUWKDWGRHVLQYROYH RUWKHVTXDUHURRWRIDQHJDWLYHQXPEHU ([DPSOHV RI UHDO QXPEHUV ([DPSOHVRILPDJLQDU\QXPEHUV ([DPSOHVRIFRPSOH[QXPEHUV L ߙL 7RGRRSHUDWLRQVLQYROYLQJ MXVWWUHDW OLNHLWVRZQYDULDEOHH[FHSWWKDWDQ\WLPH\RXJHWDQ LW EHFRPHVD L L L L L Lߙ 6HTXHQFHV $VHTXHQFHLVDVHULHVRIQXPEHUVWKDWIROORZVDUXOHVRWKDWLI\RXNQRZDQ\QXPEHULQWKHVHTXHQFHDQG \RXNQRZWKHUXOHWKDWJRYHUQVWKHVHTXHQFH\RXFDQILJXUHRXWDQ\RWKHUQXPEHULQWKHVHTXHQFH 7\SLFDOO\DVHTXHQFHRQWKH$&7ZLOOGHSHQGHLWKHURQDGGLWLRQVXEWUDFWLRQRUPXOWLSOLFDWLRQGLYLVLRQ $VHTXHQFHWKDWUHOLHVRQDGGLWLRQRUVXEWUDFWLRQWRJHQHUDWHWKHQH[WWHUPLVFDOOHGDQDULWKPHWLF VHTXHQFH ([DPSOHRIDQDULWKPHWLFVHTXHQFH ߨ HDFKWHUPLVPRUHWKDQWKHWHUPEHIRUHLW $VHTXHQFHWKDWUHOLHVRQPXOWLSOLFDWLRQRUGLYLVLRQWRJHQHUDWHWKHQH[WWHUPLVFDOOHGDJHRPHWULF VHTXHQFH ([DPSOHRIDJHRPHWULFVHTXHQFH ߨ HDFKWHUPLVWLPHVWKHWHUPEHIRUHLW <RXPD\KDYHVWXGLHGߡVHULHVߢLQ\RXUPDWKFODVVHV$&7TXHVWLRQVDERXWVHTXHQFHVDUHQߞWDV FRPSOLFDWHGDVDKLJKVFKRROPDWKTXHVWLRQDERXWDVHULHVFDQEH)RUH[DPSOHWKHUHߞVQRVLJPDQRWDWLRQ RQWKH$&7 ,I\RXߞYHQHYHUKHDUGRIVLJPDQRWDWLRQRU\RXߞYHQHYHUVWXGLHGIRUPDOPDWKHPDWLFDOVHULHV GRQߞWZRUU\DERXWLW 6HTXHQFHVRQWKH$&7FDQHLWKHUJRRQIRUHYHURUVWRSDWVRPHSRLQWGHSHQGLQJRQWKHVHWXSRIWKH TXHVWLRQ 7KH$&70DWKVHFWLRQPLJKWDVN\RXWRILJXUHRXWDQ\RIWKHIROORZLQJ w7KHVXPRIDFHUWDLQVHWRIWHUPVLQDVHTXHQFH w7KHDYHUDJHRIDFHUWDLQVHWRIWHUPVLQDVHTXHQFH w7KHYDOXHRIDSDUWLFXODUWHUPLQDVHTXHQFH &RPPRQ'LIIHUHQFHDQG&RPPRQ5DWLR 7KHߡFRPPRQGLIIHUHQFHߢRIDQDULWKPHWLFVHTXHQFHLVWKHGLIIHUHQFHEHWZHHQWZRFRQVHFXWLYHWHUPV ([DPSOH ,QWKLVVHTXHQFHWKHFRPPRQGLIIHUHQFHLVEHFDXVHWKHGLIIHUHQFHEHWZHHQHDFKWHUPDQGWKH WHUPEHIRUHLWLV ߨ 7KHߡFRPPRQUDWLRߢRIDJHRPHWULFVHTXHQFHLVWKHUDWLRRIDQ\RQHWHUPWRWKHWHUPEHIRUHLW ([DPSOH ,QWKLVVHTXHQFHWKHFRPPRQUDWLRLVEHFDXVHHDFKWHUPLVWLPHVWKHWHUPWKDWFRPHVEHIRUH LW ߨ 0DWULFHV $PDWUL[LVDVHWRIQXPEHUVGLVSOD\HGLQDJULGIRUPDW 7KHSOXUDORIߡPDWUL[ߢLVߡPDWULFHVߢ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ߞYHSUREDEO\ VHHQWKLVQRWDWLRQLQ\RXUFODVVHVEXWGRQߞWZRUU\LI\RXKDYHQߞWߚLWߞVQRWKDUGWROHDUQ $QJOHVLQDSODQH 'HJUHHVDUHWKHXQLWVWKDWZHXVHWRPHDVXUHDQJOHV ([DPSOHV 7KHPHDVXUHRIWKLVDQJOHLVGHJUHHV 7KLVDQJOHLVGHJUHHVDOVRFDOOHGDߡULJKWDQJOHߢ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ߡHTXLODWHUDOߢWULDQJOHKDVVLGHVWKDWDUHDOOWKHVDPHOHQJWKDQGLWVDQJOHVPHDVXUHGHJUHHVHDFK ([DPSOH ,QWKHHTXLODWHUDOWULDQJOḦ́-./EHORZDOOWKHVLGHVDUHRIHTXDOOHQJWKDQGDOOWKHDQJOHVDUH GHJUHHV $QߡLVRVFHOHVߢWULDQJOHKDVWZRVLGHVWKDWDUHWKHVDPHOHQJWKDVHDFKRWKHUDQGWZRDQJOHVWKDWDUHWKH VDPHVL]HDVHDFKRWKHU ([DPSOH ,QWKHLVRVFHOHVWULDQJOḦ́;<=EHORZVLGH;<LVWKHVDPHOHQJWKDVVLGH;=$OVRDQJOHV;<=DQG ;=<KDYHHTXDOPHDVXUHPHQWV $ߡULJKWߢWULDQJOHLQFOXGHVDQLQHW\GHJUHHDQJOHDVRQHRILWVWKUHHDQJOHV 7KHUHߞVDVSHFLDOUHODWLRQVKLSLQYROYLQJWKHPHDVXUHPHQWVRIWKHVLGHVRIDULJKWWULDQJOH,I\RXVTXDUHWKH OHQJWKVRIWKHWZRVKRUWHUVLGHVDQGWKHQDGGWKRVHWZRVTXDUHVWRJHWKHUWKHUHVXOWLVWKHVTXDUHRIWKH OHQJWKRIWKHORQJHVWVLGHRUK\SRWHQXVH ([DPSOH ,QWKHULJKWWULDQJOHEHORZDE F 7KLVIRUPXODDE FLVFDOOHGWKHߡ3\WKDJRUHDQ7KHRUHPߢDQGLWFRPHVXSDORWRQWKH$&7 :HFDOODVHWRIQXPEHUVWKDWVDWLVILHVWKLVIRUPXODDߡ3\WKDJRUHDQ7ULSOHߢ7KHUHDUHIRXURIWKHVHLQ SDUWLFXODUWKDW\RXߞOOZDQWWRNQRZRQWKH$&7 :KHQZHPXOWLSO\HDFKQXPEHULQD3\WKDJRUHDQWULSOHE\WKHVDPHQXPEHUZHJHWDQRWKHU3\WKDJRUHDQ WULSOH ([DPSOH :HNQRZWKDW^`LVD3\WKDJRUHDQWULSOHVRZHDOVRNQRZWKDW^`LVD3\WKDJRUHDQ WULSOHEHFDXVH^`LVZKDWZHJHWZKHQZHPXOWLSO\HDFKQXPEHULQ^`E\ $^࠼`ULJKWWULDQJOHKDVDQJOHPHDVXUHPHQWVRIRRDQGR $^࠼`ULJKWWULDQJOHKDVDQJOHPHDVXUHPHQWVRIRRDQGR ([DPSOHV 7KHIROORZLQJWZRߡVSHFLDOߢWULDQJOHVZLOOVKRZXSRQWKH$&7<RXVKRXOGEHIDPLOLDUZLWKWKHLU DQJOHPHDVXUHVDQGVLGHOHQJWKUDWLRV 7ZRWULDQJOHVDUHFDOOHGߡVLPLODUWULDQJOHVߢLIWKH\KDYHDOOWKHVDPHDQJOHPHDVXUHPHQWV %HWZHHQWZRVLPLODUWULDQJOHVWKHUHODWLRQVKLSEHWZHHQDQ\WZRFRUUHVSRQGLQJVLGHVLVWKHVDPHDV EHWZHHQDQ\RWKHUWZRFRUUHVSRQGLQJVLGHV ([DPSOH 7ULDQJOHV̈́345DQG̈́:;<EHORZDUHVLPLODU6LGH34KDVOHQJWKDQGVLGH:;KDVOHQJWKVR HYHU\VLGHPHDVXUHPHQWLQ̈́:;<PXVWEHWZLFHDVORQJDVWKHFRUUHVSRQGLQJVLGHLQ̈́345 7KHOHQJWKRIHDFKVLGHRIDWULDQJOHPXVWEHOHVVWKDQWKHVXPRIWKHOHQJWKVRIWKHRWKHUVLGHV 2WKHUZLVHWKHWULDQJOHZRXOGQߞWEHDEOHWRߡFORVHߢEHFDXVHWKHORQJHVWVLGHZRXOGEHWRRORQJIRUWKH RWKHUWZRVLGHVWRWRXFK ([DPSOH <RXFDQVHHLQWKLVGLDJUDPWKDWWKHORQJHVWVLGHLVORQJHUWKDQWKHWZRVKRUWHUVLGHVFRPELQHG ZKLFKPHDQVWKHWZRVKRUWHUVLGHVDUHWRRIDUDSDUWWRFRQQHFWDQGߡFORVHߢWKHWULDQJOH 3DUDOOHORJUDPV $SDUDOOHORJUDPLVDIRXUVLGHGILJXUHZLWKWZRSDLUVRISDUDOOHOVLGHV(DFKVLGHLVSDUDOOHOWRLWV RSSRVLWHVLGH ,QDSDUDOOHORJUDPWKHPHDVXUHVRIDOOIRXUDQJOHVDGGXSWRRDQGRSSRVLWHDQJOHVDUHHTXDO ([DPSOH ,QSDUDOOHORJUDP6798EHORZWKHVXPRIWKHLQWHULRUDQJOHVLVRDQGRSSRVLWHDQJOHVKDYH HTXDOPHDVXUHPHQWV 5HFWDQJOHV 5HFWDQJOHVDUHSDUDOOHORJUDPVZKRVHLQWHUQDODQJOHVHDFKPHDVXUHR 7KHDUHDRIDUHFWDQJOHLVHTXDOWRLWVOHQJWKWLPHVLWVZLGWK ([DPSOH 7KHUHFWDQJOHEHORZKDVDOHQJWKRIDQGDZLGWKRI7KDWPHDQVWKHDUHDLVRU ,I\RXNQRZWKHOHQJWKVRIDUHFWDQJOHߞVVLGHVWKHQ\RXFDQXVHWKH3\WKDJRUHDQ7KHRUHPWRILJXUHRXWWKH OHQJWKIURPRQHFRUQHUWRWKHRSSRVLWHFRUQHUZKLFKLVFDOOHGWKHߡGLDJRQDOߢ ([DPSOH ,QWKHUHFWDQJOHEHORZWKH3\WKDJRUHDQ7KHRUHPWHOOVXVWKDWGLDJRQDO(*PXVWKDYHDOHQJWKRI VLQFH 6TXDUHV $VTXDUHLVDVSHFLDONLQGRIUHFWDQJOHZLWKVLGHVRIHTXDOOHQJWK/LNHDUHFWDQJOHߞVDUHDDVTXDUHߞ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ߡWDQJHQWߢ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ͯE\WKHGLDPHWHU6LQFHWKHGLDPHWHULVWZR WLPHVWKHUDGLXVWKHFLUFXPIHUHQFHFDQDOVREHH[SUHVVHGDVWZRWLPHVͯWLPHVWKHUDGLXVRUͯU ([DPSOH &3LVDUDGLXVRIFLUFOH&ZLWKDOHQJWKRI7KHFLUFXPIHUHQFHRIFLUFOH&LVHTXDOWR RU 7KHDUHDRIDFLUFOHLVHTXDOWRͯWLPHVWKHVTXDUHRIWKHUDGLXVRUͯU ([DPSOH &3LVDUDGLXVRIFLUFOH&ZLWKDOHQJWKRI7KHDUHDRIFLUFOH&LVHTXDOWRͯ RUͯ 7UDQVODWLRQVURWDWLRQVDQGUHIOHFWLRQV 7KHZRUGVߡWUDQVODWLRQߢߡURWDWLRQߢDQGߡUHIOHFWLRQߢDOOGHVFULEHZD\VWKDWDQREMHFWFDQEHPRYHGLQD SODQH ,IDQREMHFWLVWUDQVODWHGWKDWPHDQVLWߞVVOLGLQJIURPRQHSODFHWRDQRWKHU,WGRHVQߞWVSLQIOLSRUURWDWH ([DPSOH ,QWKLVGLDJUDPWKHOHWWHUߡ%ߢLVEHLQJWUDQVODWHGLQWKHGLUHFWLRQLQGLFDWHGE\WKHDUURZ1RWLFH WKDWLWGRHVQߞWVSLQIOLSRUURWDWH ,IDQREMHFWLVURWDWHGWKHQLWߞVWXUQHGRUVSXQ:HKDYHWRNQRZZKDWSRLQWLWLVEHLQJWXUQHGZLWK UHIHUHQFHWRDQGZHVD\WKDWLWߞVEHLQJURWDWHGߡDERXWߢWKDWSRLQW ([DPSOH ,QWKLVGLDJUDPWKHOHWWHUߡ%ߢLVEHLQJURWDWHGDERXWWKHJLYHQSRLQW ,IDQREMHFWLVUHIOHFWHGDFURVVDOLQHWKHQWKHREMHFWLVIOLSSHGVRWKDWLWDSSHDUVDVDPLUURULPDJHRQWKH RWKHUVLGHRIWKDWOLQH ([DPSOH ,QWKHIROORZLQJGLDJUDPWKHOHWWHUߡ%ߢLVUHIOHFWHGDFURVVWKHGDVKHGOLQH 7KUHHGLPHQVLRQDOJHRPHWU\ <RXPLJKWRFFDVLRQDOO\HQFRXQWHUDQ$&70DWKTXHVWLRQWKDWLQYROYHVILQGLQJWKHYROXPHRIDWKUHH GLPHQVLRQDOREMHFW)LQGLQJWKDWYROXPHZLOOEHDVLPSOHPDWWHURINQRZLQJDQGDSSO\LQJWKHYROXPH IRUPXODIRUWKDWW\SHRIREMHFWVROHWߞ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ͯUWKHYROXPHLVHTXDOWRͯUK ([DPSOH 7KHFLUFXODUIDFHRIWKHF\OLQGHUEHORZKDVDUDGLXVRIDQGWKHF\OLQGHUKDVDKHLJKWRI7KDW PHDQVLWVYROXPHLVHTXDOWRͯ RUͯ 7KHYROXPHRIDVSKHUHLVHTXDOWR ͯU ([DPSOH 3RLQWVDQGOLQHVLQDSODQH $Q\WZRSRLQWVLQDSODQHFDQEHFRQQHFWHGE\DXQLTXHOLQH *LYHQDQ\WZRSRLQWVLQDSODQHWKHUHLVDPLGSRLQWKDOIZD\EHWZHHQWKHP $Q\VHWRIWKUHHRUPRUHSRLQWVPD\RUPD\QRWOLHRQWKHVDPHOLQH,IWKH\DUHRQWKHVDPHOLQHZHVD\ WKHSRLQWVDUHߡFROOLQHDUߢ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ߞVILQGWKHGLVWDQFHEHWZHHQWKHSRLQWV DQG :HߞOOEHJLQE\SORWWLQJWKHPDQGWKHQ FRQVWUXFWLQJDULJKWWULDQJOHZKRVHK\SRWHQXVHZLOOEHWKHGLVWDQFHEHWZHHQWKHSRLQWV 7KHOHQJWKRIWKHKRUL]RQWDOOHJLVWKHGLVWDQFHEHWZHHQWKHWZR[FRRUGLQDWHVDQGWKHOHQJWKRI WKHYHUWLFDOOHJLVWKHGLVWDQFHEHWZHHQWKHWZR\FRRUGLQDWHV ,QWKLVFDVHWKHKRUL]RQWDOOHQJWKLVߙ RUDQGWKHYHUWLFDOOHQJWKLVߙ RU2QFH \RXKDYHWKHOHQJWKVRIWKHWZROHJV\RXFDQSOXJWKHPLQWRWKH3\WKDJRUHDQ7KHRUHPDQGVROYH IRUWKHK\SRWHQXVH 7KHPLGSRLQWEHWZHHQWZRSRLQWVLQDFRRUGLQDWHSODQHLVWKHFRRUGLQDWHSDLUZKRVH[FRRUGLQDWHLVWKH DYHUDJHRIWKH[FRRUGLQDWHVRIWKHWZRSRLQWVDQGZKRVH\FRRUGLQDWHLVWKHDYHUDJHRIWKHLU\ FRRUGLQDWHV ([DPSOH )XQFWLRQV $IXQFWLRQFDQEHWKRXJKWRIDVDIRUPXODWKDWWHOOV\RXKRZWRVWDUWZLWKRQHYDOXHDQGJHQHUDWHDQRWKHU YDOXH )XQFWLRQVDUHRIWHQZULWWHQLQI [ QRWDWLRQDOVRFDOOHGߡIXQFWLRQQRWDWLRQߢ ([DPSOH I [ [LVDIXQFWLRQZULWWHQLQIXQFWLRQQRWDWLRQ 7KLVQRWDWLRQFDQEHZULWWHQZLWKRWKHUYDULDEOHVEHVLGHVIDQG[ OLNHK M \ ] DQGVRRQ %HVXUHQRWWRFRQIXVHI [ ZLWKDQH[SUHVVLRQOLNH I [ ZKLFKZRXOGPHDQߡIWLPHV[ߢ 7RILQGWKHYDOXHRIDIXQFWLRQIRUDFHUWDLQ[ZHSOXJWKH[LQWRWKHIXQFWLRQDQGVROYHIRUI [ ,QRWKHU ZRUGVZHLQVHUWRXUYDOXHIRU[HYHU\ZKHUHWKHIXQFWLRQKDVDQ[DQGWKHQZHGRWKHPDWKGHVFULEHGLQ WKHIXQFWLRQ ([DPSOH (YHU\IXQFWLRQKDVDߡGRPDLQߢDQGDߡUDQJHߢ 7KHGRPDLQRIDIXQFWLRQLVWKHVHWRIWKHQXPEHUVRQDQXPEHUOLQHWKDWJHQHUDWHDGHILQHGYDOXHZKHQ WKH\ߞUHSOXJJHGLQWRWKHIXQFWLRQIRU[ ([DPSOHV 7KHߡUDQJHߢRIDIXQFWLRQLVWKHVHWRIQXPEHUVWKDWI [ FDQSRVVLEO\HTXDO ([DPSOHV 7KHIXQFWLRQI [ [ߙKDVDUDQJHRIQHJDWLYHLQILQLW\WRSRVLWLYHLQILQLW\EHFDXVHLWߞVSRVVLEOH WRJHWDQ\QXPEHUIRUI [ ZKHQZHSOXJLQDOOSRVVLEOH[YDOXHV 7KHIXQFWLRQI [ [KDVDUDQJHIURP]HURWRSRVLWLYHLQILQLW\EHFDXVHDQ\YDOXHZHXVHIRU[ FDQUHVXOWLQDQ\QRQQHJDWLYHYDOXHIRUI [ EXWFDQQRWUHVXOWLQDQHJDWLYHYDOXHIRUI [ )RUHYHU\[YDOXHLQDIXQFWLRQWKHUHFDQEHQRPRUHWKDQFRUUHVSRQGLQJ\YDOXH,IDQHTXDWLRQ\LHOGV PXOWLSOH\YDOXHVIRUWKHVDPH[YDOXHWKHQWKDWHTXDWLRQLVQߞWDIXQFWLRQ :HFDQFKHFNWKHJUDSKRIDQH[SUHVVLRQWRVHHLILWߞVDIXQFWLRQE\XVLQJVRPHWKLQJFDOOHGߡWKHYHUWLFDO OLQHWHVWߢ ,QRUGHUIRUWKHJUDSKRIDIXQFWLRQWRSDVVWKHYHUWLFDOOLQHWHVWZHPXVWEHDEOHWRGUDZDYHUWLFDOOLQH DQ\ZKHUHRQWKHJUDSKRIWKHIXQFWLRQZLWKRXWFURVVLQJWKHIXQFWLRQPRUHWKDQRQFH +HUHߞVWKHJUDSKRIDOLQHDUIXQFWLRQ :HFDQVHHWKDWWKHIXQFWLRQUHSUHVHQWHGE\WKHGDVKHGOLQHSDVVHVWKHYHUWLFDOOLQHWHVWEHFDXVHZHFRXOG GUDZDYHUWLFDOOLQHDQ\ZKHUHRQWKHJUDSKDQGQHYHUFURVVWKHGDVKHGOLQHPRUHWKDQRQFHZLWKHDFK YHUWLFDOOLQH +HUHߞVDQH[DPSOHRIDJUDSKRIDQH[SUHVVLRQWKDWIDLOVWKHYHUWLFDOOLQHWHVWVRLWߞVQRWDIXQFWLRQ $VZHFDQVHHWKHUHDUHDQXPEHURISODFHVZKHUHZHFDQGUDZLQYHUWLFDOOLQHVWKDWZRXOGFURVVWKH JUDSKRIWKHH[SUHVVLRQPRUHWKDQRQFH $JDLQWKLVPHDQVWKHGDVKHGOLQHRQWKLVJUDSKLVQRWWKHJUDSKRIDIXQFWLRQ (YHQWKRXJKRQH[YDOXHRIDIXQFWLRQFDQߞWKDYHPXOWLSOH\YDOXHVRQH\YDOXHFDQEHVKDUHGE\PXOWLSOH [YDOXHVLQWKHVDPHIXQFWLRQߚWKHUHLVQRߡKRUL]RQWDOOLQHWHVWߢWKDWZHQHHGWRZRUU\DERXW /LQHDUHTXDWLRQVZLWKRQHYDULDEOH 2QWKH [\ FRRUGLQDWHSODQHDYHUWLFDORUKRUL]RQWDOOLQHFDQEHH[SUHVVHGDVDOLQHDUHTXDWLRQZLWKRQH YDULDEOH ([DPSOH $OVR /LQHDUIXQFWLRQV $OLQHDUIXQFWLRQLVDIXQFWLRQVXFKWKDWDOOWKH [\ YDOXHSDLULQJVIRUPDVWUDLJKWOLQHZKHQWKH\ߞUH SORWWHGDVSRLQWVRQDJUDSK ([DPSOH I [ [ߙLVOLQHDUEHFDXVHDOOWKH [\ SDLULQJVWKDWLWJHQHUDWHVIRUPDVWUDLJKWOLQHZKHQ SORWWHGRQDJUDSK +HUHDUHVRPH [\ SDLULQJVIRUWKHIXQFWLRQI [ [ߙ :KHQZHSORWWKH [\ SDLULQJVIURPDOLQHDUIXQFWLRQZHFDQVHHWKH\IDOOLQDVWUDLJKWOLQH ([DPSOH $V\RXFDQVHHZHߞYHRQO\SORWWHGVL[VSHFLILFSRLQWVEDVHGRQWKH [\ FRRUGLQDWHVZHJRWIRU VL[VSHFLILFYDOXHVRI[%XWZHFDQVHHWKDWWKHGRPDLQIRUI [ [ߙPXVWEHDOOQXPEHUVIURP QHJDWLYHLQILQLW\WRLQILQLW\EHFDXVHDQ\[YDOXHZHSOXJLQZLOOUHVXOWLQDGHILQHG\YDOXH6RZH FDQGUDZDOLQHFRQQHFWLQJWKHVHSORWWHGSRLQWVDQGWKHOLQHZLOOUHSUHVHQWDOOSRVVLEOH [\ SDLUV WKDWVDWLVI\I [ [ߙ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ߙLVWRFKRRVHWZRSRLQWVRQWKH OLQHDQGFRPSDUHWKHLUYHUWLFDODQGKRUL]RQWDOVHSDUDWLRQ:HߞOOXVHWKHSRLQWV DQG 7KHQXPHUDWRURIWKHVORSHIUDFWLRQZLOOEHWKHYHUWLFDOVHSDUDWLRQEHWZHHQWKHWZRSRLQWV7KH\ FRRUGLQDWHVRIWKHVHSRLQWVDUHDQG6LQFHߙ WKHYHUWLFDOVHSDUDWLRQLV $IWHUZHNQRZWKHYHUWLFDOVHSDUDWLRQEHWZHHQWKHWZRSRLQWVZHSXWWKDWYDOXHLQWKH QXPHUDWRURIWKHIUDFWLRQWKDWGHVFULEHVWKHVORSHRIWKHOLQHOLNHWKLV 1RZZHKDYHWRILQGWKHGHQRPLQDWRURIWKHVORSH7KDWQXPEHULVWKHKRUL]RQWDOVHSDUDWLRQ EHWZHHQWKHWZRSRLQWVZKLFKLVWKHVDPHDVWKHGLIIHUHQFHEHWZHHQWKH[FRRUGLQDWHV 7KH[FRRUGLQDWHVRIWKHVHSRLQWVDUHDQGߙLVVRWKHKRUL]RQWDOVHSDUDWLRQEHWZHHQWKH SRLQWVLVDOVRFRLQFLGHQWDOO\ 1RZZHSXWWKLVYDOXHIRUWKHKRUL]RQWDOVHSDUDWLRQLQWKHGHQRPLQDWRUWRJHWRXUVORSHIUDFWLRQ 1RWHWKDWLWGRHVQߞWPDWWHUZKLFKRUGHUZHVXEWUDFWWKH[DQG\YDOXHVLQDVORQJDVZHXVHWKH VDPHRUGHUIRUERWKFDOFXODWLRQV,QWKLVH[DPSOHZHVXEWUDFWHGWKH YDOXHVIURPWKH YDOXHVERWKWLPHV <RXߞOORIWHQVHHOLQHDUIXQFWLRQVZULWWHQLQVRPHWKLQJFDOOHGߡVORSHLQWHUFHSWIRUPDWߢZKLFKORRNVOLNH WKLV \ P[E 5HPHPEHUWKDWI [ LVWKHVDPHDV\LQWKLVFRQWH[W 7KLV\ P[EIRUPLVFDOOHGߡVORSHLQWHUFHSWIRUPDWߢEHFDXVHLWOHWVXVHDVLO\GHWHUPLQHWZRWKLQJV DERXWDJLYHQOLQH w,WVVORSH w,WV\LQWHUFHSW WKDWLVWKH\YDOXHDWZKLFKWKHOLQHFURVVHVWKH\D[LV ,QVORSHLQWHUFHSWIRUPDWPFRUUHVSRQGVWRWKHVORSHIUDFWLRQDQGELVWKH\LQWHUFHSW ([DPSOH 7KHIXQFWLRQI [ [ߙLVLQ\ P[EIRUPDW $FFRUGLQJWR\ P[EIRUPDW \UHSUHVHQWVWKHI [ YDOXH PUHSUHVHQWVWKHVORSHZKLFKLVWKHFRHIILFLHQWRI[,QWKHFDVHRII [ [ߙ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ߞOOQHYHUKDYHWRJUDSKDOLQHDUIXQFWLRQRQWKH$&7,QVWHDG\RXPLJKWKDYHWRXVH\RXU XQGHUVWDQGLQJRIJUDSKVWRILJXUHRXWDYDOXHRUWRSLFNRQHJUDSKRXWRIVHYHUDORWKHUVDVWKHFRUUHFW JUDSKRIDSDUWLFXODUIXQFWLRQ <RXUFDOFXODWRUPD\FRPHLQKDQG\IRUWKDWߚVHHߡ8VLQJ$&DOFXODWRUߢ ODWHULQRXUGLVFXVVLRQRIWKH$&70DWKVHFWLRQ *UDSKLQJTXDGUDWLFIXQFWLRQV ,QDTXDGUDWLFIXQFWLRQWKH[WHUPLVVTXDUHGZKHQWKHIXQFWLRQLVH[SUHVVHGLQLWVPRVWVLPSOLILHGIRUP ([DPSOH \ [LVDTXDGUDWLFIXQFWLRQ 4XDGUDWLFIXQFWLRQVDUH1(9(5OLQHDUߚLQVWHDGWKH\ߞUHUHSUHVHQWHGE\DFXUYHGOLQHRQWKH[\ FRRUGLQDWHSODQH <RXߞOOQHYHUKDYHWRGUDZWKHJUDSKRIDTXDGUDWLFIXQFWLRQRQWKH$&7<RXߞOORQO\KDYHWRXVHSURYLGHG JUDSKVWRDQVZHUTXHVWLRQVRUFKRRVHZKLFKJUDSKLVFRUUHFWIRUDJLYHQIXQFWLRQ $JDLQ\RXUFDOFXODWRU PD\EHXVHIXOLQWKRVHVLWXDWLRQV6HHߡ8VLQJ$&DOFXODWRUߢODWHURQLQRXUGLVFXVVLRQRIWKH$&70DWK VHFWLRQIRUPRUHRQWKDW 4XDGUDWLFIXQFWLRQVDOZD\VH[WHQGLQILQLWHO\HLWKHUXSRUGRZQ ([DPSOHV 7KHJUDSKRI\ [H[WHQGVߡXSߢLQILQLWHO\,WORRNVOLNHWKLV 7KHJUDSKRI\ [H[WHQGVߡGRZQߢLQILQLWHO\,WORRNVOLNHWKLV <RXFDQDOVRWKLQNRIWKHߡGLUHFWLRQߢRIWKHJUDSKRIDTXDGUDWLFHTXDWLRQLQWHUPVRILWVUDQJH:KHQWKH UDQJHH[WHQGVWRQHJDWLYHLQILQLW\WKHJUDSKߡRSHQVGRZQߢ:KHQWKHUDQJHH[WHQGVWRSRVLWLYHLQILQLW\WKH JUDSKߡRSHQVXSߢ 7KHKLJKHVWSRLQWRIDTXDGUDWLFIXQFWLRQWKDWߡRSHQVGRZQߢLVWKH [\ SDLUWKDWKDVWKHJUHDWHVW\YDOXH 7KHORZHVWSRLQWRIDTXDGUDWLFIXQFWLRQWKDWߡRSHQVXSߢLVWKH [\ SDLUWKDWKDVWKHORZHVW\YDOXH 7KHߡ]HURHVߢRIDTXDGUDWLFIXQFWLRQDUHWKHSRLQWVZKHUHWKHJUDSKRIWKHIXQFWLRQWRXFKHVRUFURVVHVWKH [D[LV7RILQGWKH]HURHVVHWI [ HTXDOWR]HURWKHQVROYHWKHUHVXOWLQJHTXDWLRQ ([DPSOH 7ULJRQRPHWU\ 7KHWULJRQRPHWU\WKDW\RXQHHGRQWKH$&7LVUHODWLYHO\EDVLFDQGOLPLWHG7KHPRVWLPSRUWDQWWKLQJV\RX QHHGWRNQRZDUHWKHWKUHHEDVLFWULJRQRPHWULFUDWLRVDQGWKHLULQYHUVHV <RXߞYHSUREDEO\OHDUQHGWKHWKUHHEDVLFUDWLRVLQPDWKFODVVZLWKWKHDFURQ\Pߡ62+&$+72$ߢ ߡ62+ߢVWDQGVIRU6LQH 2SSRVLWH+\SRWHQXVHߡ&$+ߢVWDQGVIRU&RVLQH $GMDFHQW+\SRWHQXVH ߡ72$ߢVWDQGVIRU7DQJHQW 2SSRVLWH$GMDFHQW*LYHQDULJKWWULDQJOH 7KHߡK\SRWHQXVHߢLVWKHVLGHWKDWߞVRSSRVLWHWKHULJKWDQJOH 7KHߡRSSRVLWHߢVLGHLVWKHRQHDFURVVIURPWKHDQJOHZKRVHVLQHFRVLQHRUWDQJHQWZHߞUHHYDOXDWLQJ 7KHߡDGMDFHQWߢVLGHLVWKHVLGHWKDWߞVQH[WWRWKHDQJOHZHߞUHHYDOXDWLQJ WKHRQHWKDWLVQߞWWKHK\SRWHQXVH <RXFDQXVHWKHVHUDWLRVWRVROYHIRUWKHOHQJWKVRIVLGHVRUWKHPHDVXUHRIDQJOHV ([DPSOH <RXVKRXOGEHDEOHWRUHFRJQL]HWKHJUDSKVRIVLQHFRVLQHDQGWDQJHQW 7KHSHULRGRIDJUDSKLVWKHVPDOOHVWVHFWLRQRIWKHJUDSKWKDW\RXFRXOGߡFRS\DQGSDVWHߢRYHUDQGRYHU DJDLQWRPDNHWKHJUDSK 7KHSHULRGRI\ VLQ[LVͯEHFDXVHWKHJUDSKUHSHDWVLWVHOIHYHU\ͯXQLWV <RXPD\DOVRVHHWKHWHUPVFRVHFDQWVHFDQWDQGFRWDQJHQWZKLFKPD\EHZULWWHQDVFVFVHFDQGFRW UHVSHFWLYHO\ &RVHFDQWLVWKHUHFLSURFDORIVLQH 6HFDQWLVWKHUHFLSURFDORIFRVLQH &RWDQJHQWLVWKHUHFLSURFDORIWDQJHQW &RVHFDQW +\SRWHQXVH2SSRVLWH 6HFDQW +\SRWHQXVH$GMDFHQW &RWDQJHQW $GMDFHQW2SSRVLWH 7KH$&70DWKVHFWLRQGRHVQߞWDOORZLWVHOIWRDVNTXHVWLRQVWKDWUHTXLUH\RXWRXQGHUVWDQGDGYDQFHGWULJ FRQFHSWV,WFDQRQO\WHVW\RXRQWKHVL[EDVLFWULJIXQFWLRQVVLQHFRVLQHWDQJHQWDQGWKHLUUHFLSURFDOV FRVHFDQWVHFDQWDQGFRWDQJHQWUHVSHFWLYHO\ 127(,I\RXߞYHVWXGLHGWULJRQRPHWU\LQVFKRRO\RXPD\EHIDPLOLDUZLWKWKHLGHDRIWULJRQRPHWULF LGHQWLWLHV$OWKRXJKWKH$&7VRPHWLPHVGHVLJQVTXHVWLRQVLQDZD\WKDWPDNHVXQWUDLQHGWHVWWDNHUVWKLQN WKH\QHHGWRXQGHUVWDQGKRZWRXVHWKHVHWULJLGHQWLWLHV\RXQHYHUDFWXDOO\QHHGWRNQRZWKHPIRUWKH $&7:HߞOOFRYHUWKLVLQPRUHGHWDLOZKHQZHWDONDERXWWKHXQZULWWHQUXOHVRIWKH$&70DWKVHFWLRQDQG WKHZDONWKURXJKVHFWLRQRIWKLV%ODFN%RRNDOVRLQFOXGHVVROXWLRQVIRUTXHVWLRQVOLNHWKLV ,I\RXߞYHQHYHU KHDUGRIWULJLGHQWLWLHVRULI\RXGRQߞWUHPHPEHUDQ\RIWKHPGRQߞWZRUU\ߚWKH\ߞUHQRWVRPHWKLQJ\RX QHHGWRNQRZIRUWKH$&7 &RQFOXVLRQ ,I\RXߞUHIDPLOLDUZLWKDOOWKHFRQFHSWVLQWKLVWRROER[WKHQ\RXKDYHWKHEDVLFPDWKNQRZOHGJHQHFHVVDU\ WRDQVZHUDQ\UHDO$&70DWKTXHVWLRQ2IFRXUVHLWߞVLPSRUWDQWWRUHPHPEHUWKDWVLPSO\NQRZLQJWKHVH FRQFHSWVLVQߞWHQRXJKWRJXDUDQWHHDJRRG$&70DWKVFRUH,WߞVHTXDOO\LPSRUWDQWߚSHUKDSVPRUH LPSRUWDQWߚWRIRFXVRQWKHGHVLJQRIWKH$&70DWKVHFWLRQDQGWROHDUQKRZWRWDNHDSDUWFKDOOHQJLQJ TXHVWLRQV $IWHUDOOWKHGLIIHUHQFHEHWZHHQSHRSOHZKRVFRUHKLJKRQWKH$&70DWKVHFWLRQDQGSHRSOHZKRGRQߞW XVXDOO\KDVYHU\OLWWOHWRGRZLWKPDWKNQRZOHGJH*HQHUDOO\VSHDNLQJSHRSOHZKRVFRUHKLJKHURQWKH $&70DWKVHFWLRQKDYHDEHWWHUXQGHUVWDQGLQJRIKRZWKHWHVWZRUNVDQGSD\PRUHDWWHQWLRQWRVPDOO GHWDLOVߚWKDWߞVZKDWDFWXDOO\VHWVWKHPDSDUWIURPWKHDYHUDJHWHVWWDNHU 2QWKHQH[WSDJHZHߞOOVWDUWWDONLQJDERXWWKHWDFWLFVWKDWWUDLQHGWHVWWDNHUVXVHZKHQWKH\DSSO\WKHLU PDWKNQRZOHGJHWRWKH$&7 8QZULWWHQ7HVW'HVLJQ5XOHV2I$&70DWK 1RZWKDWZHߞYHWDONHGDOLWWOHELWDERXWKRZ$&70DWKZRUNVDQGZHߞYHFRYHUHGWKHFRQFHSWVWKDWFDQ DSSHDULQ$&70DWKTXHVWLRQVOHWߞVWDONDERXWWKHXQZULWWHQUXOHVRI$&70DWK $&70DWK5XOH<RX+DYH7R.QRZ7KH:RUGV$QG6\PEROV ,QWKHZDONWKURXJKVZHORRNHGDWIRUWKH$&75HDGLQJVHFWLRQLWZDVRIWHQSRVVLEOHWRILQGDFRUUHFW DQVZHUFKRLFHIRUDTXHVWLRQHYHQLIZHGLGQߞWNQRZDIHZZRUGVLQWKHTXHVWLRQRULQWKHUHOHYDQW SRUWLRQRIWKHWH[W%XWLWZLOOXVXDOO\EHGLIILFXOWWRZRUNDURXQGXQNQRZQWHUPVRQWKH$&70DWK VHFWLRQLIDQ$&70DWKTXHVWLRQDVNVDERXWWKHJUHDWHVWFRPPRQIDFWRURIWZRQXPEHUV\RXKDYHYHU\ OLWWOHFKDQFHRIJHWWLQJWKDWTXHVWLRQULJKWLI\RXGRQߞWNQRZWKHGHILQLWLRQRIWKHWHUPߡJUHDWHVWFRPPRQ IDFWRUߢ )RUWXQDWHO\\RXVKRXOGQߞWKDYHDSUREOHPZLWKPDWKWHUPLQRORJ\RQWKH$&7LI\RXߞUHFRPIRUWDEOHZLWK WKHFRQFHSWVIURPWKH0DWK7RROER[LQWKLV%ODFN%RRN-XVWUHPHPEHUWKDW\RXQHHGWRJHWIDPLOLDUZLWK DQ\XQNQRZQPDWKWHUPV\RXPLJKWUXQLQWRZKLOH\RXߞUHSUHSDULQJ,WߞVYHU\OLNHO\WKDW\RXߞOOVHHWKRVH WHUPVDJDLQRQRWKHU$&70DWKTXHVWLRQVSRVVLEO\RQWHVWGD\ $&70DWK5XOH1R$GYDQFHG)RUPXODV <RXߞOOQHHGWRXVHVRPHIRUPXODVRQWKH$&7EXWWKHIRUPXODVZLOOEHUHODWLYHO\VLPSOHDQGODUJHO\ UHSHWLWLYH7KHUHDOFKDOOHQJHLVXVXDOO\ILJXULQJRXWH[DFWO\ZKDWWKHTXHVWLRQLVDVNLQJDQGWKHQGHFLGLQJ ZKLFKVLPSOHIRUPXODVWRDSSO\ 'RQߞWVSHQGDQ\WLPHZRUNLQJWKURXJKDGYDQFHGPDWKFRQFHSWVEHFDXVHWKH\ZRQߞWKHOS\RXRQWKLVWHVW ,QVWHDGIDPLOLDUL]H\RXUVHOIZLWKWKHLGHDVLQWKH$&70DWK7RROER[LQWKLV%ODFN%RRNDQGRQFH \RXߞYHUHDGDOOWKHWUDLQLQJVWDUWZRUNLQJWKURXJKWKH$&70DWKZDONWKURXJKVODWHULQWKLVVHFWLRQ %\WKHZD\URXJKO\RQFHSHUWHVW\RXߞOOUXQLQWRDPDWKTXHVWLRQ,FDOOWKHߡQRWHߢTXHVWLRQ7KHQRWH TXHVWLRQLVDWULJTXHVWLRQWKDWVHHPVIDLUO\DGYDQFHGDWILUVWEXWWKHQSURYLGHVDQRWHWKDWH[SODLQVWKH DGYDQFHGWULJIRUPXODQHFHVVDU\WRDQVZHUWKHTXHVWLRQ7KHVHTXHVWLRQVRIWHQLQWLPLGDWHWHVWWDNHUVZKR GRQߞWUHDGWKHQRWHEHFDXVHWKHTXHVWLRQVVHHPWRUHTXLUHDGYDQFHGWULJIRUPXODVLIZHGRQߞWUHDOL]HWKDW WKRVHIRUPXODVKDYHEHHQSURYLGHGIRUXVLQWKHTXHVWLRQ,IZHGRUHDGWKHTXHVWLRQFDUHIXOO\ZHFDQVHH WKDWWKHVHTXHVWLRQVDFWXDOO\MXVWUHTXLUHXVWRUHDGWKHSURYLGHGIRUPXODDQGVXEVWLWXWHWKHSURYLGHG YDOXHVLQWKHDSSURSULDWHSODFHVߚDUHODWLYHO\EDVLFPDWKVNLOO:HߞOOVHHH[DPSOHVRIWKHVHߡQRWHߢ TXHVWLRQVZKHQZHGRWKHTXHVWLRQZDONWKURXJKVLQDIHZSDJHV $&70DWK5XOH&DOFXODWLRQV$UH5HODWLYHO\6LPSOH $V\RXZRUNWKURXJKUHDO$&70DWKSUDFWLFHTXHVWLRQV\RXߞOOILQGWKDWWKHFDOFXODWLRQV\RXߞOOGRDUH UHODWLYHO\HDV\7KHUHDOFKDOOHQJHLVRIWHQLQNQRZLQJKRZWRVHWWKHSUREOHPXSߚWKHILQDOFDOFXODWLRQ \RXߞOOQHHGWRGRZLOOIUHTXHQWO\EHDORQJWKHOLQHVRIߡߢRUߡߢRUVRPHWKLQJOLNHWKDW ,QIDFWLI\RXILQG\RXUVHOIZULWLQJRXWDYHU\FRPSOH[H[SUHVVLRQZKLOHWU\LQJWRVROYHDTXHVWLRQWKDW FDQRIWHQEHDZDUQLQJVLJQWKDW\RXߞUHRQWKHZURQJWUDFN<RXߞOOVHHWKLVLGHDLQDFWLRQRQFHZHVWDUW JRLQJWKURXJKWKH$&70DWKTXHVWLRQZDONWKURXJKV $&70DWK5XOH/LPLWHG6XEMHFW0DWWHU $VZHߞYHGLVFXVVHGWKHUHߞVDOLPLWWRWKHPDWKFRQFHSWVWKDWFDQFRPHXSLQ$&70DWKTXHVWLRQVDQGDOO RIWKRVHFRQFHSWVDUHGLVFXVVHGLQWKH$&70DWK7RROER[LQWKLVERRN2QFH\RXIHHOJRRGDERXWWKRVH FRQFHSWV\RXNQRZDOOWKHPDWKLGHDV\RXQHHGWRNQRZIRUWKH$&70DWKVHFWLRQ$OOWKDWߞVOHIWLVWR OHDUQKRZWRGHDOZLWKWKHXQXVXDOSUHVHQWDWLRQRIWKRVHLGHDVLQUHDOTXHVWLRQV 7KLVLVLPSRUWDQWEHFDXVHPRVWXQWUDLQHGWHVWWDNHUVZLOOSDQLFZKHQWKH\VHHDFKDOOHQJLQJ$&70DWK TXHVWLRQEHFDXVHWKH\DVVXPHWKH\GRQߞWNQRZWKHPDWKLQYROYHG%XWWUDLQHGWHVWWDNHUVDUHFRQILGHQW WKH\NQRZDOOWKHPDWKQHFHVVDU\WRDQVZHUDQ\TXHVWLRQRQWKH$&7VRWKH\GRQߞWSDQLFZKHQWKH\VHHD VWUDQJHTXHVWLRQ,QVWHDGWKH\UHPDLQFDOPDQGIROORZWKHߡ0DWK3DWKߢZKLFKLVDURXJKRXWOLQHIRU VROYLQJFKDOOHQJLQJ$&70DWKTXHVWLRQVWKDWZHߞOOGLVFXVVLQDIHZSDJHV $&70DWK5XOH6HFRQGVRU/HVV 7KLVLVDQLPSRUWDQWFRQFHSWDQGLWPD\VHHPKDUGWREHOLHYHULJKWQRZHYHU\$&70DWKTXHVWLRQFDQ WHFKQLFDOO\EHVROYHGLQVHFRQGVRUOHVVLI\RXILQGWKHPRVWHIILFLHQWDSSURDFKWRLW %XWWKLVGRHVQߞWPHDQWKDW\RXUDQVZHUPXVWEHZURQJLILWWDNHV\RXORQJHUWKDQVHFRQGVWRILQGLW $VZHߞOOVHHLQWKH$&70DWKZDONWKURXJKVLQDIHZSDJHVZHFDQDOZD\VILQGPXOWLSOHYDOLG DSSURDFKHVWRHYHU\$&70DWKTXHVWLRQ$QDSSURDFKWKDWWDNHVORQJHUWKDQVHFRQGVLVQߞWQHFHVVDULO\ DQ\ZRUVHWKDQRQHWKDWWDNHVOHVVWKDQVHFRQGVDVORQJDV\RXVWLOOKDYHHQRXJKWLPHRYHUDOOWRILQLVK WKH$&70DWKVHFWLRQDQGJHWWKHVFRUH\RXQHHG %XWLWߞVYHU\LPSRUWDQWWRXQGHUVWDQGVWUDWHJLFDOO\WKDWHYHU\TXHVWLRQFDQEHDQVZHUHGLQOHVVWKDQ VHFRQGV7KLVLVLPSRUWDQWEHFDXVHWKH$&7OLNHVWRPDNHVLPSOHWKLQJVVHHPFRPSOLFDWHGVRWKDW XQWUDLQHGWHVWWDNHUVZRQߞWNQRZZKDWWRGR7KHWHVWZLOOJRRXWRILWVZD\WRPDNH\RXWKLQNWKDWVRPH TXHVWLRQVUHTXLUHRUPLQXWHVRIFRPSOLFDWHGFDOFXODWLRQVߚEXWLI\RXUHPHPEHUWKDWHYHU\UHDO$&7 0DWKTXHVWLRQFDQDFWXDOO\EHDQVZHUHGLQOHVVWKDQVHFRQGV\RXߞOOEHPRWLYDWHGWRWU\WRYLHZWKH TXHVWLRQLQVLPSOHUWHUPV 7KHVHXQGHUVHFRQGVROXWLRQVRIWHQLQYROYHXQRUWKRGR[ZD\VRIORRNLQJDWTXHVWLRQVLQPDQ\FDVHV WKH\ߞOOLQYROYHWHFKQLTXHV\RXUWHDFKHUZRXOGQߞWOHW\RXXVHLQDPDWKFODVV)RUH[DPSOH\RXPLJKWKDYH WRUHO\RQWKHVFDOHRIDGLDJUDPRUSOXJDQDUELWUDU\YDOXHLQWRDYDULDEOHH[SUHVVLRQߚZHߞOOWDONDERXW WKHVHWHFKQLTXHVDQGRWKHUVRYHUWKHFRPLQJSDJHV $&70DWK5XOH$OO1HFHVVDU\,QIRUPDWLRQ 8QOHVVWKHUHߞVDQDQVZHUFKRLFHWKDWVD\VWKHFRUUHFWDQVZHUFDQߞWEHGHWHUPLQHGIURPWKHJLYHQ LQIRUPDWLRQHYHU\VLQJOHTXHVWLRQPXVWSURYLGHDOOWKHLQIRUPDWLRQ\RXQHHGWRILQGWKHDQVZHU 6RPHWLPHVLWPLJKWVHHPOLNHDTXHVWLRQLVOHDYLQJVRPHWKLQJRXWߚLILWVHHPVWKDWZD\WKHQ\RXߞUH IRUJHWWLQJVRPHPDWKLGHDRURYHUORRNLQJVRPHWKLQJ,QWKLVFDVHZHKDYHWRWU\WRORRNDWDOOWKH LQIRUPDWLRQLQWKHSUREOHPLQDGLIIHUHQWZD\DQGJHQHUDWHDVROXWLRQ $JDLQZHߞOOH[SDQGRQWKLVLGHDZKHQZHWDONDERXWWKHJHQHUDOSURFHVVIRUDQVZHULQJ$&70DWK TXHVWLRQVDQGZKHQZHGRWKHPDWKZDONWKURXJKVLQDIHZSDJHV $&70DWK5XOH6FDOH,V3UHWW\0XFK$OZD\V$FFXUDWH 7KHLQVWUXFWLRQVIRUWKH$&70DWKVHFWLRQVSHFLILFDOO\VWDWHWKDWߡLOOXVWUDWLYHILJXUHVDUH127QHFHVVDULO\ GUDZQWRVFDOHߢ HPSKDVLVLQRULJLQDO ,QRWKHUZRUGVWKHWHVWLVWHOOLQJXVWKDWZHVKRXOGQߞWDVVXPHWKH GLDJUDPVDQGJUDSKVRQWKH$&70DWKVHFWLRQDUHGUDZQWRVFDOH EXWOLWHUDOO\HYHU\VLQJOHGLDJUDP,ߞYHHYHUVHHQLQDUHDO$&70DWKVHFWLRQKDVEHHQGUDZQWRVFDOH 7KDWPHDQVWKHLUDQJOHPHDVXUHPHQWVDUHFRQVLVWHQWZLWKZKDWWKHTXHVWLRQGHVFULEHVDQGWKHUHODWLYH OHQJWKVRIOLQHVDUHDFFXUDWHDVZHOO )RUH[DPSOHLIRQHVLGHRIDUHFWDQJOHLVODEHOHGXQLWVORQJDQG DQRWKHUVLGHLVODEHOHGXQLWVWKH$&7ߞVGLDJUDPZLOODFFXUDWHO\VKRZWKHORQJHUVLGHEHLQJWZLFHDV ORQJDVWKHVKRUWHUVLGH 7KLVFDQEHYHU\KHOSIXOEHFDXVHWKH$&7RIWHQSURYLGHVXVZLWKZURQJDQVZHUFKRLFHVWKDWDUHPXFK WRRODUJHRUWRRVPDOOWREHFRUUHFWZKHQZHFRQVLGHUWKHPLQWHUPVRIWKHGLDJUDPߞVVFDOHOHDYLQJWKH FRUUHFWDQVZHUDVWKHRQO\FKRLFHWKDWVHHPVSODXVLEOHUHODWLYHWRWKHVFDOH,QRWKHUZRUGVZHPLJKWVHH DTXHVWLRQWKDWDVNVXVWRILQGWKHPHDVXUHRIDQDQJOHLQDGLDJUDPDQGZHPD\EHDEOHWRWHOOWKDWWKH DQJOHLVVOLJKWO\ODUJHUWKDQRMXVWE\ORRNLQJDWWKHGLDJUDPEHFDXVHZHNQRZWKDWDRDQJOHLVD SHUIHFWULJKWDQJOHDQGWKHDQJOHLQWKHGLDJUDPLVVOLJKWO\ODUJHUWKDQWKDW7KHQZHPLJKWILQGWKDWWKH RQO\DQVZHUFKRLFHWKDWߞVVOLJKWO\ODUJHUWKDQRKDVDYDOXHRIRDQGWKHRWKHUIRXUYDOXHVLQWKH DQVZHUFKRLFHVDUHRRRDQGR,QWKDWFDVHZHFRXOGNQRZWKDWRPXVWEHFRUUHFWZLWKRXW HYHQGRLQJDQ\DFWXDOPDWK 6RNHHS\RXUH\HVRSHQIRURSSRUWXQLWLHVWRXVHDGLDJUDPWR\RXUDGYDQWDJHOLNHWKLV7KH\GRQߞWFRPHXS RQHYHU\VLQJOHTXHVWLRQRIFRXUVHEXWZKHQ\RXGRHQFRXQWHUWKHPWKH\FDQRIWHQJHW\RXTXLFNHDV\ SRLQWV,WߞVQRWXQFRPPRQIRUDUHDO$&70DWKVHFWLRQWRRIIHUXVRURSSRUWXQLWLHVWRDQVZHUTXHVWLRQV WKLVZD\ 2QHLPSRUWDQWQRWHHYHQWKRXJK,ߞYHQHYHUVHHQDQ$&70DWKGLDJUDPWKDWZDVQߞWWRVFDOH,DOZD\V GRXEOHFKHFNWKDWDGLDJUDPVHHPVWREHWRVFDOHEHIRUH,UHO\RQWKHVFDOHWRFKRRVHP\DQVZHU,XVXDOO\ GRWKLVE\PDNLQJDURXJKFRPSDULVRQRIWZRODEHOHGOHQJWKVRQWKHGLDJUDPWRFRQILUPWKDWWKHLUUHODWLYH OHQJWKVVHHPFRQVLVWHQWZLWKWKHODEHOV<RXߞOOVHHWKLVWHFKQLTXHLQDFWLRQIRUVRPHRIWKHZDONWKURXJKVLQ DIHZSDJHV $&70DWK5XOH$QVZHU&KRLFHV$UH,PSRUWDQW 7KHDQVZHUFKRLFHVIRUHDFK$&70DWKTXHVWLRQDUHQߞWUDQGRPO\JHQHUDWHGߚWKH\ߞUHFRQVWUXFWHGDV FDUHIXOO\DVWKHUHVWRIWKHTXHVWLRQ /HWߞVWKLQNDERXWWKLVߚLPDJLQHWKDW\RXZHUHGRLQJDQ$&70DWKTXHVWLRQDQG\RXFDPHXSZLWKDQ DQVZHURIEXWZDVQߞWDQDQVZHUFKRLFH,IWKDWKDSSHQHG\RXߞGEHJHWWLQJDIUHHVKRWWRWU\WRGR WKHSUREOHPDJDLQEHFDXVH\RXZRXOGNQRZ\RXߞGPDGHDPLVWDNH 7KH$&7GRHVQߞWZDQWWKDWWRKDSSHQVRLWWULHVWRSURYLGHZURQJDQVZHUVWKDWDQWLFLSDWHWKHPLVWDNHVLW WKLQNV\RXߞUHOLNHO\WRPDNH7KDWZD\LI\RXPDNHRQHRIWKRVHPLVWDNHV\RXߞOOILQGDQDQVZHUFKRLFH WKDWUHIOHFWVLWDQG\RXߞOOEHOLNHO\WRFKRRVHWKDWZURQJDQVZHUZLWKRXWUHDOL]LQJ\RXߞUHZURQJ 7KHVHFOHYHUO\SRVLWLRQHGZURQJDQVZHUFKRLFHVPLJKWVHHPOLNHWKH\ZRXOGPDNHLWKDUGHUWRJHW$&7 0DWKTXHVWLRQVULJKWEXWWKH\FDQDFWXDOO\ZRUNWRRXUDGYDQWDJHLIZHNQRZKRZWRH[SORLWWKHP 'HSHQGLQJRQWKHFRQWH[WRIWKHTXHVWLRQZHFDQXVHDVHWRIDQVZHUFKRLFHVWRJLYHXVKLQWVDERXWZKLFK FRQFHSWVDUHLQYROYHGLQWKHVROXWLRQWRWKHTXHVWLRQRUHYHQDERXWZKLFKDQVZHUFKRLFHLVOLNHO\WREH FRUUHFW :HߞOOWDONPRUHDERXWWKLVLQWKHVHFWLRQFDOOHGߡ$&70DWK$QVZHU&KRLFH3DWWHUQVߢDQG\RXߞOOVHH WKHVHFRQFHSWVLQDFWLRQLQWKH$&70DWKVHFWLRQZDONWKURXJKV 7HVWLQJ9DOXHV :HߞYHDOUHDG\VHHQKRZVRPHRIWKHZHDNQHVVHVRIWKHPXOWLSOHFKRLFHIRUPDWFDQEHXVHGWRRXU DGYDQWDJHRQWKH$&70DWKVHFWLRQ%XWWKHUHߞVDQRWKHUZD\ZHFDQVRPHWLPHVH[SORLWWKHPXOWLSOH FKRLFHIRUPDWDVZHOOZHFDQVRPHWLPHVWHVWYDOXHVIURPWKHDQVZHUFKRLFHVLQVWHDGRIKDYLQJWRVROYH DPDWKTXHVWLRQRQRXURZQ 7KHUHDUHWZRJHQHUDOW\SHVRIVLWXDWLRQVRQWKH$&70DWKVHFWLRQLQZKLFK\RXFDQILQGWKHFRUUHFW DQVZHUE\WHVWLQJYDOXHVLQDYDULDEOHH[SUHVVLRQ ,IDTXHVWLRQDVNVXVWRVROYHIRUDYDULDEOHDQGWKHDQVZHUFKRLFHVGRQߞWLQYROYHYDULDEOHVZHFDQRIWHQ MXVWSOXJHDFKDQVZHUFKRLFHEDFNLQWRWKHH[SUHVVLRQIURPWKHTXHVWLRQ ,IDTXHVWLRQKDVDYDULDEOH RUYDULDEOHV LQWKHDQVZHUFKRLFHVZHFDQRIWHQDVVLJQDQDUELWUDU\YDOXHWR WKDWYDULDEOH RUWKRVHYDULDEOHV DQGWKHQHYDOXDWHHDFKH[SUHVVLRQLQWKHSURPSWDQGWKHDQVZHUFKRLFHV %RWKRIWKHVHFRQFHSWVPLJKWPDNHDORWPRUHVHQVHRQFHLIZHFRQVLGHUVRPHH[DPSOHV:HߞOOORRNDW ERWKRIWKHPQRZVWDUWLQJZLWKWKHHDVLHURQH 3OXJJLQJYDOXHVIURPWKHDQVZHUFKRLFHVLQWRDQH[SUHVVLRQIURPWKHTXHVWLRQ 6RPHWLPHV\RXߞOOVHHDTXHVWLRQWKDWSUHVHQWVVRPHNLQGRIH[SUHVVLRQZLWKDVLQJOHYDULDEOHDQGWKHQ DVNV\RXIRUWKHQXPEHUWKDWPDNHVWKDWH[SUHVVLRQWUXH ,IVXFKDTXHVWLRQRQO\KDVQXPEHUVLQWKHDQVZHUFKRLFHVWKHQWKHPRVWVWUDLJKWIRUZDUG DQGIDVWHVW DSSURDFKLVVRPHWLPHVMXVWWRSOXJHDFKDQVZHUFKRLFHLQWRWKHYDULDEOHH[SUHVVLRQWRVHHZKLFKRQH ZRUNV/HWߞVORRNDWTXHVWLRQRQSDJHRIWKH5HG%RRNWRVHHWKLVLGHDLQDFWLRQ 7KLVTXHVWLRQDVNVXVZKLFKYDOXHߡLVDVROXWLRQWRWKHHTXDWLRQ[ߙ[ ߢ7KHQLWJLYHVXVILYH QXPEHUVWRFKRRVHIURP 6RPHWHVWWDNHUVZLOOVWDUWWU\LQJWRIDFWRURXWWKHHTXDWLRQWRILQGDVROXWLRQDVWKRXJKWKH\ZHUHWDNLQJDQ DOJHEUDWHVWLQKLJKVFKRRO7KLVDSSURDFKZLOOZRUNLI\RXGRLWFRUUHFWO\EXWDORWRISHRSOHGRQߞWOLNHWR IDFWRUH[SUHVVLRQVZLWKYDULDEOHV6LQFHZHNQRZWKDWRQHRIWKHYDOXHVLQWKHDQVZHUFKRLFHVPXVWEHD VROXWLRQIRUWKHHTXDWLRQZHFDQMXVWSOXJHDFKDQVZHUFKRLFHLQWRWKHHTXDWLRQDQGVHHZKLFKRQHPDNHV LWWUXH 5HPHPEHU\RXߞUHIUHHWRXVHDFDOFXODWRUWRGRWKLVLQFDVH\RXGRQߞWZDQWWRHYDOXDWHVRPHWKLQJOLNH ߙ LQ\RXUKHDG :KHQZHSOXJHDFKDQVZHUFKRLFHLQWRWKHHTXDWLRQIURPWKHSURPSWZHFDQVHHWKDWRQO\RQHRIWKHP UHVXOWVLQDYDOXHRI]HURDVGHVFULEHGLQWKHTXHVWLRQ7KDWPHDQVZHNQRZWKHFRUUHFWDQVZHULV % 1RZOHWߞVWDONDERXWDVOLJKWO\PRUHDGYDQFHGZD\WRDQVZHUDQ$&70DWKTXHVWLRQE\WHVWLQJYDOXHV 8VLQJDUELWUDU\YDOXHVWRWHVWDQVZHUFKRLFHVFRQWDLQLQJYDULDEOHV ,IWKHDQVZHUFKRLFHVIRUDTXHVWLRQLQYROYHDYDULDEOHZHFDQVRPHWLPHVVROYHWKHTXHVWLRQE\DVVLJQLQJ DYDOXHWRWKHYDULDEOHDQGWKHQHYDOXDWLQJWKHH[SUHVVLRQVSURYLGHGLQWKHSURPSWDQGLQWKHDQVZHU FKRLFHV ,NQRZWKDWPLJKWVRXQGDOLWWOHFRQIXVLQJVROHWߞVFKHFNRXWDUHDOOLIHH[DPSOHRIWKLVWHFKQLTXHLQDFWLRQ E\ORRNLQJDWTXHVWLRQIURPSDJHLQWKH5HG%RRN 7KLVTXHVWLRQDVNVXVZKLFKDQVZHUFKRLFHLVHTXLYDOHQWWR[\IRUDOOSRVLWLYHLQWHJHUV[\DQG]$OORI WKHDQVZHUFKRLFHVDUHIUDFWLRQVZLWKGLIIHUHQWFRPELQDWLRQVRIWKHYDULDEOHVLQWKHGHQRPLQDWRUDQGWKH QXPHUDWRU 7RDSSO\WKLVWHFKQLTXHWRWKHTXHVWLRQZHZRXOGMXVWFKRRVHVRPHYDOXHVIRU[\DQG]WKHQSOXJWKHP LQWRWKHDQVZHUFKRLFHVDQGVHHZKLFKRQHUHVXOWVLQDQH[SUHVVLRQWKDWߞVHTXDOWR[\7KHTXHVWLRQVDLG WKDW[\DQG]ZHUHDOOSRVLWLYHLQWHJHUVVRZH0867SLFNSRVLWLYHLQWHJHUVWRPDNHWKLVZRUN/HW VVD\ WKDW[ \ DQG] 7KDWPHDQVZHZDQWWRILQGDQH[SUHVVLRQLQWKHDQVZHUFKRLFHVWKDWZRXOGEHHTXDOWR UHPHPEHU WKDWZHSLFNHGIRU[DQGIRU\DQGWKHTXHVWLRQDVNHGIRUDYDOXHWKDWLVHTXDOWR[\ /HW VSOXJWKHVHYDOXHVLQWRHDFKDQVZHUFKRLFH :HFDQVHHWKDWRQO\ $ FDQEHFRUUHFWVLQFHLWߞVWKHRQO\FKRLFHWKDWFDQEHUHGXFHGWRRXUWDUJHWYDOXH 0RVWSHRSOHZLOODSSURDFKDTXHVWLRQOLNHWKLVE\PDQLSXODWLQJWKHYDULDEOHVZLWKRXWVXEVWLWXWLQJDQ\ DFWXDOQXPEHUV,I\RXߞUHFRPIRUWDEOHGRLQJWKDWJRULJKWDKHDGߚMXVWUHPHPEHUWKDWWKLVW\SHRITXHVWLRQ DOZD\VJLYHVXVWKHRSWLRQRIFRPLQJXSZLWKYDOXHVDQGWKHQDFWXDOO\WHVWLQJHDFKYDULDEOHH[SUHVVLRQ -XVWUHPHPEHUWKDWWKHYDOXHV\RXFKRRVHPXVWVDWLVI\WKHWHUPVRIWKHTXHVWLRQ LQWKLVFDVHWKH\QHHGHG WREHSRVLWLYHLQWHJHUVEHFDXVHWKHSURPSWGHPDQGHGLW $&RXSOH2I,PSRUWDQW1RWHV 7KHUHߞVRQHYHU\LPSRUWDQWWKLQJWREHDZDUHRIZKHQ\RXXVHWKLVWHFKQLTXH,WߞVSRVVLEOHWKURXJKVKHHU FKDQFHWKDW\RXPLJKWSLFNYDULDEOHVWKDWUHVXOWLQPRUHWKDQRQHDQVZHUFKRLFHFRLQFLGHQWDOO\PDWFKLQJ WKHH[SUHVVLRQIURPWKHTXHVWLRQ,IWKDWHYHUKDSSHQVMXVWSLFNQHZYDOXHVIRUWKHYDULDEOHVDQGUH HYDOXDWHHYHU\WKLQJ,WߞVH[WUHPHO\XQOLNHO\WKDWVXFKDFRLQFLGHQFHZLOOKDSSHQRQWKHVHFRQGWU\DVZHOO VRWKHUHVKRXOGRQO\EHRQHFKRLFHOHIWWKDWVDWLVILHVWKHTXHVWLRQ <RXFDQGHFUHDVHWKHOLNHOLKRRGRIWKLVNLQGRIFRLQFLGHQFHE\DYRLGLQJFHUWDLQYDOXHVZKHQ\RXPDNH \RXUVXEVWLWXWLRQ,ߞGDGYLVH\RXQRWWRFKRRVHWKHYDOXHVRUIRUDQ\TXHVWLRQEHFDXVHRIWKHLUXQLTXH SURSHUWLHV,DOVRWU\WRDYRLGSLFNLQJDQ\YDOXHVWKDWDOUHDG\DSSHDULQWKHSURPSWRULQWKHDQVZHU FKRLFHV ,WߞVDOVRLPSRUWDQWWRNHHSLQPLQGWKDW\RXGRQߞWKDYHWRXVHWKLVDSSURDFKLI\RXGRQߞWZDQWWR7KHUHDUH DOZD\VRWKHUZD\VWRDSSURDFKDTXHVWLRQEXWLWFDQVRPHWLPHVEHKHOSIXOWRUHPHPEHUWKDWWKLVRSWLRQ H[LVWVLI\RXFDQߞWILJXUHRXWDTXLFNDOJHEUDLFVROXWLRQWRWKHTXHVWLRQ <RXߞOOVHHWKLVDSSURDFKLQDFWLRQDJDLQVWRWKHUUHDO$&7SUDFWLFHTXHVWLRQVDV\RXJRWKURXJKWKH$&7 0DWKZDONWKURXJKVODWHULQWKLVVHFWLRQ $&70DWK$QVZHU&KRLFH3DWWHUQV (DUOLHULQWKLVERRNZHGLVFXVVHGWKHLPSRUWDQFHRIDQVZHUFKRLFHVLQJHQHUDO:HߞYHDOVRWDONHGDERXW GLIIHUHQWW\SHVRIDQVZHUFKRLFHVRQWKH$&75HDGLQJVHFWLRQ1RZOHWߞVWDNHDORRNDWVRPHRIWKH DQVZHUFKRLFHSDWWHUQV\RXߞOOVHHRQWKH$&70DWKVHFWLRQ <RXNQRZE\QRZWKDWZURQJDQVZHUFKRLFHVFDQFRQWDLQYDOXDEOHLQIRUPDWLRQLIZHNQRZKRZWRH[SORLW WKHP:HOOVRPHRIWKHVSHFLDOFKDUDFWHULVWLFVRIDQVZHUFKRLFHVRQWKH0DWKVHFWLRQFDQEHHVSHFLDOO\ XVHIXO 1RZ,VKRXOGSRLQWRXWWKDWVRPHSHRSOHVRUWRILQWXLWLYHO\MXVWߡJHWߢVRPHRIWKHFRQFHSWVWKDWZHߞUH DERXWWRWDONDERXW(YHQLI\RXIHHOOLNH\RXDOUHDG\NQRZVRPHRIWKLVVWXII,VWLOOUHFRPPHQGWKDW\RX UHDGWKLVVHFWLRQFDUHIXOO\,WFDQEHYHU\YDOXDEOHWRVHHWKHVHVWUDWHJLHVVSHOOHGRXWLQEODFNDQGZKLWHߚ DQG\RXPD\DOVRGLVFRYHUVRPHWDFWLFV\RXߞYHQHYHUWKRXJKWDERXWEHIRUH ,QRUGHUWRXQGHUVWDQGKRZWKHVHWVRIDQVZHUFKRLFHVRQWKH$&70DWKVHFWLRQDUHGHVLJQHGOHWߞV LPDJLQHZHߞUHDFWXDOO\LQFKDUJHRIZULWLQJDPDWKTXHVWLRQWKDWߞVJRLQJWREHXVHGRQWKH$&7:HߞYHJRW WKHEHJLQQLQJRIWKHTXHVWLRQDOOUHDG\WRJREXWZHQHHGWRDGGLQVRPHZURQJDQVZHUFKRLFHVWR FRPSOHWHLW 2XUPDLQJRDOLVWRSURYLGHFKRLFHVWKDWPLJKWWUDSVRPHRQHZKRPDGHDPLVWDNHLQVROYLQJWKHTXHVWLRQ RUZKRGLGQߞWXQGHUVWDQGWKHTXHVWLRQLQWKHILUVWSODFHDQGMXVWZDQWHGWRWDNHDJXHVV $VZHGLVFXVVHGHDUOLHULQߡ7KH$&7ߞV%LJJHVW:HDNQHVVߢLIWKHZURQJDQVZHUFKRLFHVDUHXQUHODWHGWR WKHTXHVWLRQLWߞOOEHWRRHDV\IRUWHVWWDNHUVWRLGHQWLI\WKHULJKWDQVZHUZLWKRXWXQGHUVWDQGLQJWKH TXHVWLRQ6RZHPLJKWWU\WRSURYLGHߡGHFR\ߢDQVZHUVWKDWDFRQIXVHGSHUVRQFRXOGDFFLGHQWDOO\SLFN /HWߞVORRNDWDIDNHVDPSOHTXHVWLRQWRLOOXVWUDWHWKLVFRQFHSW RIFRXUVHWKLVTXHVWLRQLVWRRVLPSOHWREH DQ$&70DWKTXHVWLRQEXWZHߞUHMXVWXVLQJLWWRLOOXVWUDWHDEDVLFFRQFHSW \ :KDWLVWKHYDOXHRI\" 1RZWKDWߞVQRWVRPHWKLQJPRVWWHVWWDNHUVFDQGRLQWKHLUKHDGV%XWPRVWWHVWWDNHUVFRXOGSLFNRXWWKH FRUUHFWDQVZHULQMXVWDIHZVHFRQGVLIWKHVHZHUHWKHDQVZHUFKRLFHV $ % & ' ( 7KHVHDQVZHUFKRLFHVPDNHWKHFRUUHFWDQVZHULQVWDQWO\REYLRXV7KHRQO\QXPEHUWKDWߞVUHPRWHO\ODUJH HQRXJKLVFKRLFH ' DQG ' LVWKHFRUUHFWDQVZHU%H\RQGWKDW w $ LVREYLRXVO\WRRVPDOO w % LVLPSRVVLEOHVLQFHZHߞUHPXOWLSO\LQJWZRQXPEHUVDQGQHLWKHUQXPEHULV]HUR w & LVLPSRVVLEOHVLQFHLWߞVQHJDWLYHDQGQHLWKHURIWKHWZRQXPEHUVEHLQJPXOWLSOLHGLVQHJDWLYH w ( LVLPSRVVLEOHVLQFHLWߞVDIUDFWLRQDQGZHߞUHPXOWLSO\LQJWZRZKROHQXPEHUV ,QRWKHUZRUGVWKHZURQJDQVZHUVPDNHWKLVIDNHTXHVWLRQYHU\HDV\IRUDQ\WHVWWDNHUZKRNQRZVWKH EDVLFVRIPXOWLSOLFDWLRQDQGZKRERWKHUVWRUHDGWKHDQVZHUFKRLFHV 7KLVLVDQH[WUHPHDQGXQUHDOLVWLFH[DPSOHGHVLJQHGWRLOOXVWUDWHDSRLQWEXW\RXVHHZKDW,PHDQ&RPLQJ XSZLWKVRPHSODXVLEOHLQFRUUHFWDQVZHUFKRLFHVLVHYHU\ELWDVLPSRUWDQWDVDQ\RWKHUSDUWRIWKHGHVLJQ RIWKHTXHVWLRQ 1RZOHWߞVWKLQNDOLWWOHPRUHDERXWKRZZHPLJKWWU\WRFRPHXSZLWKWKRVHLQFRUUHFWDQVZHUFKRLFHVLI ZHZHUHWU\LQJWRZULWHDQ$&70DWKTXHVWLRQ ,PDJLQHWKHTXHVWLRQZHߞUHFUHDWLQJLQYROYHVVROYLQJIRU[LQWKLVHTXDWLRQ [ DQGWKHQSOXJJLQJ[LQWRWKLVHTXDWLRQWRVROYHIRU\ \ [ )RUWKHILUVWVWHSDWHVWWDNHURQWKHULJKWWUDFNZRXOGILJXUHRXWWKDW[ EHFDXVH 7KHQVKHߞG SOXJ[LQWRWKHVHFRQGHTXDWLRQDQGJHW\ EHFDXVH <RXFDQSUREDEO\VHHWKDWRQHUHDOO\JRRGZURQJDQVZHUFKRLFHIRUXVWRLQFOXGHZRXOGEH6RPHWHVW WDNHUVPLJKWILJXUHRXWWKDW[ LQWKHILUVWSDUWRIWKHSUREOHPDQGWKHQIRUJHWWKDWZHDFWXDOO\DVNHG WKHPWRVROYHIRU\DQGWKH\VWLOOKDYHDQRWKHUVWHSOHIW 6RZHߞGGHILQLWHO\ZDQWWRLQFOXGHDVDZURQJDQVZHUFKRLFH7KDWZD\ZHߞGFDWFKDQ\ERG\ZKR PDQDJHGWRGRWKHILUVWSDUWRIWKHTXHVWLRQFRUUHFWO\EXWZKRORVWWUDFNRIZKDWWKHTXHVWLRQDFWXDOO\ DVNHGIRUDQGIDLOHGWRILQLVKLW $QRWKHUJRRGZURQJDQVZHUFKRLFHIRUXVWRLQFOXGHPLJKWEH6RPHWHVWWDNHUVPLJKWUHDOL]HWKDW[ EXWWKHQDFFLGHQWDOO\SOXJ[LQWRWKHVHFRQGHTXDWLRQLQVWHDGRI[5HDOO\[LVEXW[LVLID WHVWWDNHUDFFLGHQWDOO\SOXJJHG[ LQWRWKHH[SUHVVLRQ\ [KHߞGHQGXSZLWKDVWKHDQVZHU EHFDXVH 7KHUHDUHRWKHUVHWSDWWHUQVWKH$&7RIWHQXVHVWRJHQHUDWHZURQJDQVZHUFKRLFHVRQWKH0DWKVHFWLRQ DQGZHߞOOGLVFXVVWKHPEHORZ)RUQRZWKRXJK\RXJHWWKHLGHDWKH$&7SXWVDORWRIWKRXJKWLQWRWKH ZURQJDQVZHUFKRLFHVIRUHDFKTXHVWLRQ ,WߞVYHU\FOHYHURIWKHWHVWWRLQFOXGHWKHVHWULFN\ZURQJDQVZHUVLQRUGHUWRFDWFKDVPDQ\SHRSOHLQWKHLU PLVWDNHVDVSRVVLEOH%XWLIZHߞUHSD\LQJDWWHQWLRQZHFDQXVHWKHVHSDWWHUQVWRRXUDGYDQWDJH ,IWKH$&7KDVWRLQFOXGHZURQJDQVZHUVWKDWDUHFORVHO\UHODWHGWRWKLQJVJRLQJRQLQWKHTXHVWLRQDQGLI ZHNQRZKRZWRORRNIRUWKRVHUHODWLRQVKLSVLQWKHDQVZHUFKRLFHVWKHQWKHVHWRIDQVZHUFKRLFHVFDQ EHFRPHOLNHDVHWRIFOXHVWRKHOSXVUHDOL]HZKLFKPDWKFRQFHSWVDUHUHODWHGWRWKHTXHVWLRQߚLQVRPH FDVHVWKHDQVZHUFKRLFHVFDQHYHQRIIHUVWURQJKLQWVRIZKLFKDQVZHUFKRLFHLVOLNHO\WREHFRUUHFW 1RWHYHU\VLQJOHTXHVWLRQZLOOKDYHDQVZHUFKRLFHFOXHVH[DFWO\OLNHWKDWEXWDOPRVWHYHU\UHDO$&7 0DWKTXHVWLRQZLOOKDYHVRPHWKLQJLQWKHDQVZHUFKRLFHVWKDWFDQKHOSXVRXWLIZHNQRZWRORRNIRULW :LWKWKDWLQPLQGOHWߞVGLVFXVVDIHZRIWKHPRVWFRPPRQZURQJDQVZHUW\SHVLQUHDO$&70DWK TXHVWLRQV 2IFRXUVH\RXߞOOVHHDPSOHGHPRQVWUDWLRQVRIDOORIWKHVHFRQFHSWVLQXVHDJDLQVWUHDO$&7 TXHVWLRQVZKHQZHGRWKHPDWKZDONWKURXJKVLQDIHZSDJHV $&70DWK$QVZHU&KRLFH3DWWHUQߡ2Q7KH:D\ߢ$QVZHU 7KLVLVWKHVRUWRIWKLQJZHZHUHMXVWWDONLQJDERXW6RPHWLPHV\RXߞOOVHHDZURQJDQVZHUFKRLFHZLWKD QXPEHUWKDW\RXQHHGWRILQGLQRUGHUWRDQVZHUWKHTXHVWLRQEXWWKDWQXPEHULWVHOILVQߞWWKHULJKWDQVZHU <RXFDQVHHDUHDOOLIHH[DPSOHRIWKLVZURQJDQVZHUW\SHLQFKRLFH ( RITXHVWLRQRQSDJHRI7KH 5HDO$&73UHS*XLGHUG(GLWLRQ7KLVTXHVWLRQDVNV\RXKRZPXFKOHVVWKHVFKRROERDUGZRXOGSD\LI LWSD\VDVXEVWLWXWHWHDFKHUIRURQHGD\ߞVZRUNZKLOHWKHUHJXODUWHDFKHUWDNHVDGD\RIIZLWKRXWSD\7KH TXHVWLRQSURYLGHVWKHWHDFKHUߞVDQQXDOVDODU\WKHQXPEHURIGD\VLQWKHVFKRRO\HDUDQGWKHDPRXQWWKH VXEVWLWXWHJHWVSDLGIRURQHGD\ߞVZRUN ,QRUGHUWRVROYHWKLVTXHVWLRQ\RXILUVWKDYHWRILQGRXWKRZPXFKWKHWHDFKHUJHWVSDLGIRURQHGD\ߞV ZRUN7RGRWKDW\RXPXVWGLYLGHKLVVDODU\ E\WKHQXPEHURIGD\VKHZRUNV WRJHWKLV SD\IRURQHGD\ZKLFKLV %XWWKHTXHVWLRQGRHVQߞWDVNKRZPXFKWKHWHDFKHUJHWVSDLGIRUDGD\ߞVZRUN,WDVNVKRZPXFKOHVVWKH VFKRROERDUGSD\VWKHVXEVWLWXWHIRURQHGD\ߞVZRUN WKDQLWZRXOGSD\WKHIXOOWLPHWHDFKHU DQGWKHFRUUHFWDQVZHULVEHFDXVH 6R $ LVFRUUHFW %XWFKRLFH ( LVWKHUHWRRIIHUDVDQRSWLRQLQFDVHVRPHRQHILJXUHVRXWWKHILUVWSDUWRIWKHSUREOHP DQGWKHQIRUJHWVWRGRWKHUHVW 7KLVW\SHRIZURQJDQVZHUFKRLFHVKRZVXSIUHTXHQWO\%HIRUH\RXVHOHFWDQDQVZHUDOZD\VFKHFNWR PDNHVXUH\RXߞYHGRQHWKHZKROHSUREOHPDQGWKDWZKDW\RXߞYHVHOHFWHGLVDFWXDOO\WKHDQVZHUWRWKH TXHVWLRQEHLQJDVNHGDQGQRWMXVWDQXPEHU\RXQHHGWRILQGDORQJWKHZD\'RQߞWPDNHWKHPLVWDNHRI WKLQNLQJWKDW\RXPXVWEHULJKWEHFDXVH\RXDUULYHGDWDQXPEHUWKDWDSSHDUVLQRQHRIWKHDQVZHUFKRLFHV $&70DWK$QVZHU&KRLFH3DWWHUQ&DOFXODWLRQ0LVWDNH $V\RXFDQLPDJLQHDQRWKHUH[WUHPHO\FRPPRQW\SHRIZURQJDQVZHUFKRLFHVLPSO\LQYROYHVPDNLQJ VPDOOSUHGLFWDEOHFDOFXODWLRQPLVWDNHV 7KLVVRUWRIWKLQJPLJKWLQYROYHPXOWLSO\LQJZKHQZHߞUHVXSSRVHGWRGLYLGHRUILQGLQJWKHDUHDRIDILJXUH LQVWHDGRIWKHSHULPHWHU,WPLJKWUHIOHFWIRUJHWWLQJKRZWRGR)2,/RUDGGIUDFWLRQVFRUUHFWO\%DVLFDOO\ WKH$&7OLNHVWRJLYH\RXFKDQFHVWRPDNHWLQ\PLVWDNHVLQWKHH[HFXWLRQRIDVROXWLRQߚWKLVZD\\RXFDQ VWLOODUULYHDWDZURQJDQVZHUHYHQLI\RXILJXUHRXWWKHFRUUHFWRYHUDOODSSURDFKWRWKHTXHVWLRQ $UHDOOLIHH[DPSOHRIWKLVW\SHRIZURQJDQVZHUFDQEHIRXQGLQFKRLFH % RITXHVWLRQRQSDJHRI 7KH5HDO$&73UHS*XLGHUG(GLWLRQ7KLVTXHVWLRQDVNVXVWRILQGWKHWRWDOGLVWDQFHUXQE\.D\DLQWZR GD\VZKLFKUHTXLUHVXVWRDGG DQG 7RGRWKLVFRUUHFWO\RIFRXUVHZHߞGQHHGWRILQGDFRPPRQGHQRPLQDWRUVRWKDWERWKIUDFWLRQVFRXOGEH DGGHGWRJHWKHU ,QFLGHQWDOO\ZHߞGGRWKLVE\FRQYHUWLQJERWKIUDFWLRQVWRILIWHHQWKVZKLFKZRXOGJLYHXV WKHQXPEHUV DQG $GGLQJWKHPWRJHWKHUZRXOGJLYHXV %XWLIZHIRUJRWKRZIUDFWLRQVZRUNHGZHPLJKWMXVWWU\WRDGGWKHFRUUHVSRQGLQJQXPEHUVLQWKH H[SUHVVLRQVSOXVWRJLYHXVIRUWKHZKROHQXPEHUWKHQ LQWKHILUVWQXPHUDWRU SOXV LQWKH VHFRQGQXPHUDWRU WRJLYHXVIRUWKHQXPHUDWRUDQG LQWKHILUVWGHQRPLQDWRU SOXV LQWKHVHFRQG GHQRPLQDWRU WRJLYHXVIRUWKHGHQRPLQDWRU 7KDWZRXOGPLVWDNHQO\JLYHXV ZKLFKLVFKRLFH % ZKLFKLVLQFRUUHFW :HߞOOVHHPDQ\PRUHZURQJDQVZHUFKRLFHVWKDWJLYHXVWKHRSSRUWXQLW\WRPDNHWKHVHNLQGVRIPLVWDNHV LQWKHZDONWKURXJKV $&70DWK$QVZHU&KRLFH3DWWHUQ0RVW/LNH7KH2WKHUV 2U $OPRVW/LNH7KH2WKHUV %HLQJDZDUHRIWKLVSDWWHUQFDQJLYHXVDVLJQLILFDQWDGYDQWDJHRQWKH$&7EXWZHVKRXOGWDNHFDUHQRWWR UHO\RQLWWRRPXFK <RXVKRXOGQHYHUVHOHFWDQDQVZHUFKRLFHEDVHGSXUHO\RQWKLVSDWWHUQDORQHߚXQOHVV\RXߞYHJLYHQXSDOO KRSHRIXQGHUVWDQGLQJWKHTXHVWLRQDQG\RXߞUHMXVWPDUNLQJDQDQVZHUDVDEHVWJXHVV )RUPRUHRQWKLV VHHߡ*XHVVLQJ2Q7KH$&7ߢLQߡ7KH*HQHUDO*DPH3ODQ)RU$WWDFNLQJ$6HFWLRQ2I7KH$&72Q7HVW 'D\ߢHDUOLHULQWKLV%ODFN%RRN 7KHEDVLFLGHDEHKLQGWKLVSDWWHUQLVWKDWWKH$&7OLNHVWRLQFRUSRUDWHVRPHHOHPHQWVRIWKHFRUUHFW DQVZHULQWRWKHLQFRUUHFWDQVZHUVVRWKDWWHVWWDNHUVZKRFDQRQO\ILJXUHRXWSDUWRIDFRPSOLFDWHG TXHVWLRQZLOOVWLOOVHHPRUHWKDQRQHDQVZHUFKRLFHWKDWVHHPVOLNHLWPLJKWEHFRUUHFW%HFDXVHRIWKLV ZHߞOOIUHTXHQWO\ILQGWKDWWKHFRUUHFWDQVZHUWRDTXHVWLRQLVWKHDQVZHUFKRLFHWKDWKDVWKHJUHDWHVW QXPEHURIIHDWXUHVLQFRPPRQZLWKWKHRWKHUDQVZHUFKRLFHV 7KDWDEVWUDFWGHVFULSWLRQSUREDEO\VRXQGVDOLWWOHVWUDQJHVROHWߞVORRNDWDFRQFUHWHH[DPSOHRIWKLV FRQFHSW3OHDVHFKHFNRXWTXHVWLRQRQSDJHRIWKH5HG%RRN <RXFDQVHHWKDWDOOWKHDQVZHUFKRLFHVIRUWKDWTXHVWLRQVKDUHDIHZREYLRXVFKDUDFWHULVWLFV w7KH\DOOKDYHD\WHUP w7KH\DOOKDYHDQ[WHUPZLWKDFRHIILFLHQWRIHLWKHURU w7KH\DOOKDYHHLWKHUDSOXVVLJQRUDPLQXVVLJQDIWHUWKH[WHUP w7KH\DOOHQGZLWKHLWKHURU /HWߞVWU\WRILJXUHRXWZK\WKH$&7ZRXOGPDNHWKHDQVZHUFKRLFHVIRUWKLVTXHVWLRQEHVRVLPLODUWRRQH DQRWKHU:URQJDQVZHUFKRLFHVDUHRIWHQGHVLJQHGWRDWWUDFWXQWUDLQHGWHVWWDNHUVULJKW"2QDTXHVWLRQOLNH WKLVWKH$&7PLJKWZDQWWKHZURQJDQVZHUVWRVKDUHDVPDQ\IHDWXUHVDVSRVVLEOHZLWKWKHFRUUHFW DQVZHU7KDWZD\IRULQVWDQFHDWHVWWDNHUZKRFRUUHFWO\ILJXUHGRXWWKDWWKHFRHIILFLHQWRI[VKRXOGEH ZRXOGVWLOOKDYHWRILJXUHRXWZKHWKHU + RU - ZHUHFRUUHFW2QWRSRIWKDWHYHQLIDWHVWWDNHUFRUUHFWO\ GHWHUPLQHGWKDWWKHULJKWDQVZHUZDV\ [ߙKHPLJKWVWLOOPLVUHDGWKHDQVZHUFKRLFHVLIKHZHUHLQD KXUU\DQGDFFLGHQWDOO\EXEEOHWKHZURQJOHWWHUDQ\ZD\ 8QWUDLQHGWHVWWDNHUVGRWKDWNLQGRIWKLQJDOOWKH WLPH,WߞVRQHRIWKHUHDVRQVSHRSOHRIWHQIHHOOLNHWKH$&7LVJRLQJZHOOZKHQWKH\ߞUHWDNLQJLWRQO\WREH GLVDSSRLQWHGZKHQWKH\JHWWKHLUUHVXOWV )RUWKHVHNLQGVRIUHDVRQVZHߞOORIWHQILQGWKDWWKH$&7XVHVZURQJDQVZHUVWKDWLQFOXGHHOHPHQWVRIWKH ULJKWDQVZHUZKHQHYHUWKHFRUUHFWDQVZHUWRDTXHVWLRQLVFRPSOLFDWHGHQRXJKWRPDNHWKHVHNLQGVRI ZURQJDQVZHUVSRVVLEOH $QGWKLVPHDQVWKHFRUUHFWDQVZHUZLOORIWHQ EXWQRWDOZD\V EHWKHDQVZHUFKRLFHWKDWKDVWKHPRVW FKDUDFWHULVWLFVLQFRPPRQZLWKWKHRWKHUDQVZHUFKRLFHV :LWKWKDWLQPLQGOHWߞVWDNHDQRWKHUORRNDWWKHFKRLFHVLQTXHVWLRQIURPSDJHRIWKH5HG%RRN /HWߞVVHHLIZHFDQILJXUHRXWZKLFKDQVZHUFKRLFHKDVWKHPRVWLQFRPPRQZLWKWKHRWKHUFKRLFHV $OORIWKHDQVZHUFKRLFHVVWDUWZLWKߡ\ ߢVRZHNQRZWKHULJKWDQVZHUPXVWDOVRVWDUWZLWKߡ\ ߢ $IWHUWKDWRXWRIFKRLFHVKDYHDPLQXVVLJQZKLOHRXWRIGRQߞW7KDWPHDQVZHߞGH[SHFWWKHULJKW DQVZHUQRWWRKDYHDPLQXVVLJQLQWKDWSRVLWLRQEHFDXVHWKHPDMRULW\RIWKHDQVZHUFKRLFHVGRQߞW 1H[WZHVHHWKDWRXWRIFKRLFHVKDYHDQZKLOHRQO\RQHKDVD6RZHߞGH[SHFWWREHSDUWRIWKH FRUUHFWDQVZHUEHFDXVHLWDSSHDUVPRVWIUHTXHQWO\LQWKHDQVZHUFKRLFHVDWWKLVSRVLWLRQ $OORIWKHDQVZHUFKRLFHVWKHQKDYHDQ[ $IWHUWKDWRIWKHDQVZHUFKRLFHVKDYHDPLQXVVLJQZKLOHGRQߞWVRZHߞGH[SHFWWKHFRUUHFWDQVZHUWR KDYHDPLQXVVLJQLQWKLVSRVLWLRQLQRUGHUWRVLGHZLWKWKHPDMRULW\ )LQDOO\DQVZHUFKRLFHVIHDWXUHDLQWKHODVWSRVLWLRQZKLOHRQO\RQHKDVDQLQWKDWSRVLWLRQ 7DNLQJLQWRDFFRXQWDOORIWKHPRVWFRPPRQIHDWXUHVLQWKHDQVZHUFKRLFHVZHߞGH[SHFWWKHFRUUHFW DQVZHUWREH\ [ߙ DQGLWLV %HIRUH\RXJHWWRRH[FLWHGRYHUWKLVNLQGRIDSSURDFK,ZDQWWRVWUHVVWKDWWKLVDSSURDFKLV127XQGHU $1<FLUFXPVWDQFHVWKHRQO\WKLQJWKDW,ZRXOGUHFRPPHQG\RXUHO\RQZKHQDQVZHULQJDQ$&70DWK TXHVWLRQ 7KHUHDVRQ,WHOO\RXQRWWRUHO\RQWKLVSDWWHUQH[FOXVLYHO\LVQߞWWKDW,ZDQW\RXWROHDUQDFWXDOPDWK$VIDU DVWKLVWHVWLVFRQFHUQHG,GRQߞWFDUHLI\RXNQRZDQ\PDWKߚDQGQHLWKHUGRHVWKH$&7UHDOO\$OOWKH $&7FDUHVDERXWLVZKHWKHU\RXILOOLQWKHULJKWEXEEOHZKHQ\RXDQVZHUWKHTXHVWLRQ ZLWKRXWFKHDWLQJ VRWKDWߞVDOO,FDUHDERXWWRR DWOHDVWIRUWKHSXUSRVHVRIWKLV%ODFN%RRN 7KHUHDVRQ,WHOO\RXQRWWRUHO\H[FOXVLYHO\RQWKLVSDWWHUQLVWKDWLWGRHVQߞWZRUNRIWKHWLPH 6RPHWLPHVDVHWRIDQVZHUFKRLFHVVHHPVOLNHLWߞVVHWXSWRIROORZWKLVSDWWHUQDQGWKHULJKWDQVZHUHQGV XSQRWEHLQJWKHRQHZHߞGH[SHFW,QIDFWVRPHWLPHVWKHULJKWDQVZHULVWKHRQHZLWKWKHPRVWFRPPRQ FKDUDFWHULVWLFVLQDOOEXWRQHSODFH :HFDQFDOOWKLVUHODWHGSDWWHUQWKHߡ$OPRVW/LNH7KH2WKHUVߢSDWWHUQ <RXFDQVHHWKLVDQVZHUFKRLFHSDWWHUQLQTXHVWLRQQXPEHURQSDJHRIWKH5HG%RRN)RUWKLV TXHVWLRQ\RXPLJKWH[SHFWWKHULJKWDQVZHUWRKDYHWKHIROORZLQJHOHPHQWV wDILUVWWHUPRI VLQFHRXWRIFKRLFHVKDYHLQWKLVSRVLWLRQ wDVHFRQGWHUPRI[ VLQFHRXWRIFKRLFHVKDYH[LQWKLVSRVLWLRQ wDWKLUGWHUPRI\ VLQFHRXWRIKDYH\LQWKLVSRVLWLRQ %XWWKHULJKWDQVZHULVDFWXDOO\ + [\ZKLFKVLGHVZLWKWKHPDMRULW\RIWKHRWKHUDQVZHUFKRLFHVRQ WKHILUVWDQGWKLUGWHUPVEXWQRWRQWKHVHFRQGRQH,WߞVDOPRVWOLNHPRVWRIWKHRWKHUFKRLFHVEXWLW LQFOXGHVWKHOHVVFRPPRQRSWLRQIRUWKH[WHUP $V,VDLGWKLVNLQGRIWKLQJFDQKDSSHQRQWKH$&76RLIRXUJRDOLVWRDQVZHUHYHU\TXHVWLRQFRUUHFWO\ ZHKDYHWRFRQVLGHURWKHUWKLQJVLQDGGLWLRQWRWKHVHSDWWHUQV7KHSRLQWRIEHLQJDZDUHRIWKHVHSDWWHUQV LVQߞWWRGHSHQGH[FOXVLYHO\RQWKHPߚ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ߞWPDGHD ZURQJWXUQVRPHZKHUH <RXߞOOVHHVHYHUDOH[DPSOHVRIWKHVHNLQGVRIWDFWLFVGLVFXVVHGLQWKHZDONWKURXJKVLQDIHZSDJHV $&70DWK$QVZHU&KRLFH3DWWHUQ+DOI2U'RXEOH 7KHUHDUHPDQ\$&70DWKTXHVWLRQVWKDWLQYROYHPXOWLSO\LQJRUGLYLGLQJE\WZR)RUZKDWHYHUUHDVRQ LWߞVMXVWVRPHDUELWUDU\SDWWHUQWKH$&7OLNHVWRIROORZVRPHWLPHVHYHQZKHQLWGRHVQߞWVHHPSDUWLFXODUO\ UHOHYDQWWRDVSHFLILFTXHVWLRQWKDWLQFRUSRUDWHVLW $WDQ\UDWH\RXߞOORIWHQVHHLQFRUUHFWDQVZHUFKRLFHVRQWKH$&70DWKVHFWLRQWKDWDUHKDOIRIWKHULJKW DQVZHURUGRXEOHWKHULJKWDQVZHU )RUDUHDOOLIHH[DPSOHORRNDWTXHVWLRQRQSDJHRI\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG (GLWLRQ7KHFRUUHFWDQVZHULV - EXWFKRLFHV * DQG . DUHDQGUHVSHFWLYHO\ߚ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ߞOOVRPHWLPHVVHHWKLVSDWWHUQHYHQLQTXHVWLRQVWKDWGRQߞWUHDOO\LQYROYHWKH FRQFHSWRIGRXEOLQJRUKDOYLQJDQ\WKLQJ)RUH[DPSOHFKHFNRXWTXHVWLRQRQSDJHZKLFKLQYROYHV ILQGLQJWKHOHQJWKRIDVLGHRIDWULDQJOH7KHFRUUHFWDQVZHULVDQGRQHRIWKHZURQJDQVZHUVLVHYHQ WKRXJKQROLNHO\PLVWDNHRQWKHTXHVWLRQFRXOGOHDGDWHVWWDNHUWRGLYLGHWKHFRUUHFWDQVZHUE\ DFFLGHQWDOO\ 7KHRWKHUZURQJDQVZHUVWRWKHTXHVWLRQDOOLQYROYHPRUHXQGHUVWDQGDEOHPDWKHPDWLFDO HUURUVߚIRUDFRPSOHWHGLVFXVVLRQRIWKHPVHHWKLV%ODFN%RRNߞVZDONWKURXJKIRUWKHTXHVWLRQ 6RWKLVLVDQRWKHULPSRUWDQWSDWWHUQWRUHPHPEHULI\RXVHHWZRDQVZHUFKRLFHVDQGRQHLVWZLFHWKH RWKHURUHYHQLI\RXVHHWKUHHRUPRUHLQDVHULHVWKDWNHHSVPXOWLSO\LQJRUGLYLGLQJE\WZRWKHQRQHRI WKRVHFKRLFHVLVGLVSURSRUWLRQDWHO\OLNHO\WREHFRUUHFWߚ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ߞWHQRXJKRQWKHLURZQWRGHWHUPLQHDFRUUHFWDQVZHUZLWK FRPSOHWHFHUWDLQW\,WFDQEHYHU\WHPSWLQJWRVHHDVHULHVLQDVHWRIDQVZHUFKRLFHVDQGMXVWSLFNWKH PLGGOHWHUPEXWWKLVLVQߞWKRZWKHWHVWDOZD\VZRUNV7KLVLVMXVWDWUHQGWKDWFDQIUHTXHQWO\KHOS\RXWKLQN DERXWDTXHVWLRQIURPDGLIIHUHQWSHUVSHFWLYHLI\RXJHWVWXFN <RXPLJKWVHHDQVZHUFKRLFHVIRUPLQJDVHULHVLQZKLFKHDFKQXPEHULQFUHDVHVE\DVHWTXDQWLW\ߚOLNHWKH VHULHV7KLVPLJKWJLYH\RXDFOXHWKDWDGGLQJRUVXEWUDFWLQJLVSDUWRIILQGLQJWKHULJKW DQVZHU<RXPLJKWDOVRVHHFKRLFHVIRUPLQJDVHULHVWKDWLQYROYHVPXOWLSO\LQJE\DFHUWDLQQXPEHUߚOLNH 7KDWPLJKWWHOO\RXWKDWPXOWLSO\LQJRUGLYLGLQJE\WHQLVDSDUWRIILQGLQJWKHFRUUHFW DQVZHU $VZLWKDQ\RWKHUDQVZHUFKRLFHSDWWHUQLWߞVDOVRRFFDVLRQDOO\WUXHWKDWWKHFRUUHFWDQVZHUZRQߞWEHD SDUWRIDVHULHVLQWKHDQVZHUFKRLFHV%XWLWFDQVWLOOEHKHOSIXOWREHDZDUHRIWKHVHVHULHVDQGZLWK SUDFWLFH\RXߞOOEHDEOHWRXVHWKHPWRKHOS\RXVROYHTXHVWLRQVPRUHTXLFNO\DQGDFFXUDWHO\ :HߞOOVHHH[DPSOHVRIWKLVLGHDLQWKHZDONWKURXJKV 7KH*HQHUDO3URFHVV)RU$QVZHULQJ$&70DWK4XHVWLRQV ,ߞYHVDLGEHIRUHWKDWWKH$&7LVEDVLFDOO\RQHELJUHDGLQJWHVWDQGWKDWߞVDVWUXHRQWKH0DWKVHFWLRQDVLW LVDQ\ZKHUHHOVH,I\RXFDQWUDLQ\RXUVHOIWRUHDGFDUHIXOO\DQGSUHFLVHO\ߚMXVWOLNH\RXGRLQWKH5HDGLQJ VHFWLRQߚ\RXߞOOEHDEOHWRߡGHFRGHߢZKDWߞVJRLQJRQLQDQ\$&70DWKTXHVWLRQVR\RXFDQVHHWKURXJK WKHXQXVXDOSUHVHQWDWLRQWRWKHVLPSOHPDWKFRQFHSWXQGHUQHDWK +RZGRZHGRWKDW":HIROORZVRPHWKLQJ,FDOOWKHߡ0DWK3DWKߢ ,MXVWFDOOLWWKDWEHFDXVHLWUK\PHV 8QIRUWXQDWHO\ߚRUPD\EHIRUWXQDWHO\ߚ,KDYHQߞWEHHQDEOHWRFRPHXSZLWKJRRGUK\PLQJQDPHVIRU DQ\WKLQJHOVHLQWKLV%ODFN%RRN 7KH0DWK3DWK 7KH0DWK3DWKLVZKDW,FDOOWKHVWHSV\RXVKRXOGWDNHZKHQ\RXߞUHFRQIURQWHGZLWKDFKDOOHQJLQJ$&7 0DWKTXHVWLRQ 1RWHWKHZRUGV &RQVLGHUWKHDQVZHUFKRLFHV 'HWHUPLQHWKHUHOHYDQWPDWKGRPDLQV 7U\WRILJXUHRXWDVHFRQGVROXWLRQ &DUU\RXW\RXUVROXWLRQ &KHFNHYHU\WKLQJ %HIRUH,H[SODLQWKHVHVWHSVLQPRUHGHWDLO,MXVWZDQWWRSRLQWRXWWKDW\RXDUHRIFRXUVHIUHHWRPRGLI\ WKHPDV\RXVHHILWߚDVORQJDV\RXUPHWKRGFRQVLVWHQWO\\LHOGVFRUUHFWDQVZHUVDQGDOORZV\RXWR FRPSOHWHWKHVHFWLRQZLWKLQWKHWLPHOLPLW<RXVKRXOGDOVRIHHOIUHHWRLJQRUHWKHVHVWHSVFRPSOHWHO\RQ HDVLHUTXHVWLRQVLI\RXVHHZKDWWRGRULJKWDZD\7KH0DWK3DWKLVVLPSO\RQHZD\WRRUJDQL]H\RXU WKRXJKWVZKHQ\RXFDQߞWILJXUHRXWKRZWRDWWDFNDTXHVWLRQ 1RZOHWߞVORRNDWHDFKVWHSLQWXUQ 1RWHWKHZRUGV $V,ߞYHVDLGUHSHDWHGO\WKHHQWLUH$&7LVDUHDGLQJWHVWDQGUHDGLQJDFFXUDWHO\ZLOOGRZRQGHUVIRU\RXU VFRUHRQHYHU\VHFWLRQLQFOXGLQJWKLVRQH 7KHILUVWVWHSLQVROYLQJDQ\PDWKTXHVWLRQLVWRUHDGWKHHQWLUHTXHVWLRQFDUHIXOO\SD\LQJDWWHQWLRQWRWKH VSHFLILFPDWKWHUPVDQGFRQFHSWVWKDWDSSHDU ,QVFKRRO\RXXVXDOO\GRQߞWQHHGWRUHDGPDWKTXHVWLRQVVRFDUHIXOO\EHFDXVHVFKRROWHVWVDVNXVWRXVH WKHVDPHPDWKWHFKQLTXHVRYHUDQGRYHUDJDLQLQTXHVWLRQVWKDWDUHEDVLFDOO\LGHQWLFDOWRRQHDQRWKHU%XW $&70DWKGRHVQߞWZRUNOLNHWKDW:HQHYHUNQRZSUHFLVHO\ZKLFKFRPELQDWLRQRIEDVLFPDWKFRQFHSWV ZLOOEHWKURZQDWXVLQDSDUWLFXODUTXHVWLRQVRZHKDYHWRSD\DWWHQWLRQWRHDFKTXHVWLRQIURPWKHYHU\ EHJLQQLQJ &RQVLGHUWKHDQVZHUFKRLFHV 0RVWXQWUDLQHGWHVWWDNHUVZLOOUHDGWKHSURPSWRIDQ$&70DWKTXHVWLRQWKHQWU\WRDQVZHUWKHTXHVWLRQ RQWKHLURZQ:KHQWKH\KDYHDVROXWLRQWKH\OLNHWKH\ߞOOWU\WRVHHLILWPDWFKHVRQHRIWKHDQVZHU FKRLFHVLILWGRHVWKH\SLFNLWDQGPRYHRQZLWKRXWDQRWKHUWKRXJKW 7KDWDSSURDFKFDQOHDGWRDJUHDWVFRUHߚDVORQJDVWKHWHVWWDNHULVJRRGDWILJXULQJRXWZKDWHYHU\$&7 0DWKTXHVWLRQZDQWVKHUWRGRDQGDVORQJDVVKHQHYHUPDNHVDPLVWDNHLQUHDGLQJWKHTXHVWLRQRU SHUIRUPLQJKHUFDOFXODWLRQV)HZSHRSOHIDOOLQWRWKDWFDWHJRU\ :HWUDLQHGWHVWWDNHUVNQRZWKDWLWߞVPXFKVPDUWHUDQGHDVLHUWRFRQVLGHUWKHDQVZHUFKRLFHVDORQJZLWK WKHSURPSWIURPWKHYHU\EHJLQQLQJ:HNQRZWKHDQVZHUFKRLFHVFDQFRQWDLQFOXHVDQGXVHIXO LQIRUPDWLRQMXVWOLNHWKHTXHVWLRQSURPSWGRHV &RQFHSWVWKDWDSSHDULQWKHDQVZHUFKRLFHVFDQVKRZ\RXZKDWWKH$&7H[SHFWVWHVWWDNHUVWRWKLQNDERXW ZKHQWKH\DSSURDFKWKHTXHVWLRQ,IDOORIWKHDQVZHUFKRLFHVLQFOXGHͯWKDWߞ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ߡ$&70DWK$QVZHU&KRLFH3DWWHUQVߢ1RWLFLQJWKRVHSDWWHUQVFDQJLYH\RXLQVLJKWLQWR ZKLFKFKRLFHVPLJKWEHOLNHO\WREHFRUUHFW 'HWHUPLQHWKHUHOHYDQWPDWKGRPDLQV 1RZWKDW\RXߞYHUHDGWKHTXHVWLRQVWHPDQGDQVZHUFKRLFHVWKLQNDERXWZKDWDUHDVRIPDWKPLJKW SRVVLEO\EHUHODWHGWRWKHTXHVWLRQ6RPHWLPHVZKHQXQWUDLQHGWHVWWDNHUVFRPHDFURVVDTXHVWLRQWKH\ FDQߞWDQVZHUULJKWDZD\WKH\KDYHDQLQVWLQFWWRWU\WRWKURZDOOWKHLUPDWKNQRZOHGJHDWLWMXVWWRVHHZKDW KDSSHQV7KLVXVXDOO\MXVWJHWVFRQIXVLQJDQGZDVWHVWLPHOHDYLQJWKHPPRUHIUXVWUDWHGWKDQWKH\ZHUH EHIRUH 6RLQWKLVVWHSLQVWHDGRISDQLFNLQJDQGWKLQNLQJLQEURDGWHUPVDERXWDOOWKHPDWK\RXNQRZ\RXZDQWWR QDUURZ\RXUIRFXVWRWKHDUHDVRIPDWKWKDWDUHGLUHFWO\UHODWHGWRWKHTXHVWLRQ +RZGR\RXGRWKDW"%\WKLQNLQJDERXWWKHWHUPVFRQFHSWVDQGUHODWLRQVKLSV\RXߞYHLGHQWLILHGVRIDU 5HPHPEHUWKDWWKH$&70DWKVHFWLRQFDQRQO\WHVW\RXRQDFHUWDLQOLPLWHGLQYHQWRU\RIPDWKFRQFHSWVߚ WKDWߞVDQLQKHUHQWOLPLWDWLRQRILWVVWDQGDUGL]DWLRQ ,I\RXXQGHUVWDQGWKHPDWKFRQFHSWVIURPWKH0DWK7RROER[LQWKLV%ODFN%RRNWKHQ\RXWHFKQLFDOO\NQRZ HQRXJKPDWKWRDQVZHUHYHU\$&70DWKTXHVWLRQ\RXߞOOHYHUVHHDVORQJDV\RXFDQILJXUHRXWKRZWR FRPELQHWKRVHUHODWLYHO\EDVLFPDWKFRQFHSWVLQGLIIHUHQWZD\VWRVROYHWKH$&7ߞVTXHVWLRQV 7RZDUGWKDWHQGLWߞVLPSRUWDQWWRUHPHPEHUWKDWPDWKDOZD\VSURFHHGVORJLFDOO\E\VPDOOVWHSVߚQRWMXVW RQWKH$&7EXWHYHU\ZKHUH7KLVPHDQVWKHFRUUHFWDSSURDFKWRWKHTXHVWLRQPXVWEHFORVHO\UHODWHGWR WKHFRQFHSWVDQGUHODWLRQVKLSVWKDWDUHLQFOXGHGLQWKHSURPSWDQGWKHDQVZHUFKRLFHV DQGWKHGLDJUDPLI WKHUHLVRQH )RUH[DPSOHNH\FRQFHSWVLQWKHTXHVWLRQDQGWKHDQVZHUFKRLFHVZLOOOHW\RXNQRZZKDWNLQGRIPDWK \RXQHHGWRWKLQNDERXW,I\RXVHHZRUGVOLNHߡUDGLXVߢDQGߡGLDPHWHUߢ\RXNQRZWKHTXHVWLRQLVUHODWHG WRFLUFOHVZKLFKPHDQV\RXQHHGWRORRNIRURSSRUWXQLWLHVWRDSSO\WKHIHZFLUFOHUHODWHGLGHDVWKH$&7 DOORZVLWVHOIWRWHVW UDGLXVWDQJHQWDUFOHQJWKFLUFXPIHUHQFHDUHDDQGVRRQ ,IDTXHVWLRQPHQWLRQV VLQHWKHQLWߞVREYLRXVO\UHODWHGWREDVLFWULJDQG\RXQHHGWRVWDUWWKLQNLQJDERXWULJKWWULDQJOHVߡRSSRVLWH RYHUK\SRWHQXVHߢDQGVRRQ $VWUDLQHGWHVWWDNHUVZHWU\WRJHWDYHU\VSHFLILFLGHDRIWKHLQGLYLGXDOPDWKFRQFHSWVWKDWPLJKW SRVVLEO\EHUHODWHGWRWKHWKLQJVZHVHHLQWKHTXHVWLRQ,QWKHQH[WVWHSZHߞOOWU\WRILWWKRVHLQGLYLGXDO FRQFHSWVWRJHWKHULQDZD\WKDWOHWVXVILQGWKHVLPSOHVWPRVWGLUHFWVROXWLRQWRWKHTXHVWLRQ 7U\WRILJXUHRXWDVHFRQGVROXWLRQ 2QFH\RXߞYHWDNHQQRWHRIWKHFRQFHSWVDQGUHODWLRQVKLSVLQWKHTXHVWLRQDQGWKRXJKWDERXWZKDWW\SHVRI PDWKDUHUHODWHGWRWKHTXHVWLRQLWߞVWLPHWRWU\WRILWDOORIWKRVHSX]]OHSLHFHVWRJHWKHULQWRDVROXWLRQ 5HPHPEHUWKDWDOO$&70DWKTXHVWLRQVFDQEHDQVZHUHGLQVHFRQGVRUOHVVDQGPDQ\FDQEH DQVZHUHGLQOHVVWKDQVHFRQGV ,I\RXGRQߞWEHOLHYHPHQRZ\RXߞOOVHHZKDW,PHDQODWHUZKHQZH ZDONWKURXJKVRPHUHDO$&70DWKSUDFWLFHTXHVWLRQVIURPWKH5HG%RRN $V,PHQWLRQHGLQߡ8QZULWWHQ7HVW'HVLJQ5XOHV2I$&70DWKߢ\RXUVROXWLRQVFDQVWLOOEHSHUIHFWO\YDOLG HYHQLIWKH\WDNHORQJHUWKDQVHFRQGV%XW,VWLOOHQFRXUDJH\RXWRORRNIRUDVHFRQGVROXWLRQWRHDFK $&70DWKTXHVWLRQ\RXHQFRXQWHUEHFDXVHORRNLQJIRUWKRVHNLQGVRIVROXWLRQVZLOOHQFRXUDJH\RXWR DSSURDFKWKHVHFWLRQLQQRQWUDGLWLRQDOZD\V 7KHVHQRQWUDGLWLRQDODSSURDFKHVZLOOYDU\GHSHQGLQJRQWKHVXEMHFWPDWWHURIWKHTXHVWLRQDV\RXߞOOVHH ZKHQZHGRWKHZDONWKURXJKVLQDIHZSDJHV%XWKHUHDUHVRPHJHQHUDOLGHDVIRUGLVFRYHULQJWKHVH VLPSOLILHGTXLFNVROXWLRQV w/RRNRXWIRUWKHDQVZHUFKRLFHSDWWHUQVZHGLVFXVVHGLQߡ$&70DWK$QVZHU&KRLFH3DWWHUQVߢ7KH\ FDQRIWHQKHOS\RXSLQSRLQWWKHNH\FRQFHSWVWRDGGUHVVLQDJLYHQTXHVWLRQ w/RRNIRUH[SUHVVLRQVIURPWKHSURPSWWKDWDUHHTXLYDOHQWRUWKDWFDQFHOHDFKRWKHURXW w/RRNIRUZD\V\RXPLJKWSOXJDQVZHUFKRLFHVLQWRDQH[SUHVVLRQRUXVHDFDOFXODWRURUHOLPLQDWH FKRLFHVWKDWDUHPXFKWRRVPDOORUPXFKWRRODUJH w,QJHQHUDOGRQߞWUHO\RQIRUPXODV 7KH$&70DWKVHFWLRQGRHVRFFDVLRQDOO\WHVW\RXUNQRZOHGJHRI DIRUPXODGLUHFWO\EXW\RXߞOOILQGWKDWPRVWUHDO$&70DWKTXHVWLRQVGRQߞWKDYHIRUPXODLF VROXWLRQV w,QJHQHUDOORRNIRUWKHVROXWLRQWREHVLPSOHDQGGRQߞWIHHOOLPLWHGE\WKHWKLQJV\RXUPDWKWHDFKHULQ VFKRROZRXOGDFFHSW 7KHDELOLW\WRLGHQWLI\IDVWHIILFLHQWVROXWLRQVWR$&70DWKTXHVWLRQVLVDVNLOO\RXߞOOKDYHWRGHYHORS ZLWKSUDFWLFH*RLQJWKURXJKWKHZDONWKURXJKVWKDWDSSHDULQDIHZSDJHVZLOOEHDELJELJKHOSZLWKWKDW ,I\RXUHDGDQGXQGHUVWDQGDOORIWKLVPDWHULDODQG\RXZRUNZLWKUHDO$&70DWKTXHVWLRQVDQG\RXVWLFN ZLWKLWHYHQZKHQLWߞVIUXVWUDWLQJ\RXߞOOOHDUQWRFXWWKURXJKWKHEL]DUUHXQSUHGLFWDEOHSUHVHQWDWLRQVRIWKH TXHVWLRQVVR\RXFDQVHHWKHSUHGLFWDEO\VLPSOHPDWKFRQFHSWVWKDWDUHKLGGHQXQGHUQHDWK &DUU\RXW\RXUVROXWLRQ 1RZWKDW\RXߞYHUHDGWKHTXHVWLRQDQGWKHDQVZHUFKRLFHVIRFXVHGRQWKHUHOHYDQWPDWKGRPDLQVWKDWDUH DOORZHGWRDSSHDURQWKH$&7DQGWKRXJKWRIWKHPRVWHIILFLHQWVROXWLRQ\RXFDQ\RXUMRELVMXVWWR H[HFXWHWKHVROXWLRQ 2EYLRXVO\LWߞVLPSRUWDQWQRWWRPDNHDQ\VPDOOPLVWDNHVDWWKLVSRLQWVREHVXUH\RXJXDUGDJDLQVWDQ\ VPDOOPLVFDOFXODWLRQRUPLVUHDGLQJDWWKLVSRLQW 1RWLFHWKDWDFWXDOO\GRLQJWKHFDOFXODWLRQLVRQHRIWKHODVWVWHSVLQSURSHUO\DSSURDFKLQJDFKDOOHQJLQJ $&70DWKTXHVWLRQ,WߞVPXFKPRUHLPSRUWDQWWRVSHQGDIHZVHFRQGVLQWKHEHJLQQLQJUHDGLQJFDUHIXOO\ REVHUYLQJUHODWLRQVKLSVDPRQJWKHFRQFHSWVSUHVHQWLQWKHTXHVWLRQDQGWKHQWKLQNLQJGHOLEHUDWHO\DERXW WKHPRVWHIILFLHQWDSSURDFK\RXFDQFRPHXSZLWK,I\RXGRWKRVHWKLQJVZHOOWKHQWKHFDOFXODWLRQLWVHOI EHFRPHVDORWHDVLHUWRGRߚVRPHWLPHV\RXߞOOILQG\RXFDQDQVZHUWKHTXHVWLRQZLWKRXWHYHQGRLQJD FDOFXODWLRQDWDOO &KHFNHYHU\WKLQJ 7KLVLVWKHODVWVWHSDQGSHUKDSVWKHPRVWLPSRUWDQW 2QFH\RXߞYHGRQHHYHU\WKLQJHOVH\RX0867WDNHDPRPHQWWRUHHYDOXDWH\RXUVROXWLRQ 7KHUHDUHDORWRIGLIIHUHQWZD\VWRGRWKLVߚEXWDVXVXDOWKHQRUPDOZD\VRIGRLQJLWDUHQߞWUHDOO\WKDW UHOLDEOH :KDW,ZRXOG127UHFRPPHQGZRXOGEHWRJREDFNWKURXJKHYHU\WKLQJ\RXMXVWGLGDQGVHHLI\RXFDQ FDWFKDQ\PLVWDNHV0RVWSHRSOHZKRGRWKLVZLOOILQGWKDWWKH\MXVWUHPDNHWKHVDPHPLVWDNHVWKH\PDGH DIHZVHFRQGVEHIRUHVLQFHQRUHDOWLPHKDVSDVVHGDIWHUWKHLULQLWLDOVROXWLRQVDQGWKH\KDYHQߞWJLYHQ WKHPVHOYHVDFKDQFHWRVHHWKHTXHVWLRQGLIIHUHQWO\ ,QVWHDG,OLNHWRHYDOXDWHWKHTXHVWLRQIURPDIUHVKSHUVSHFWLYH7KLVZLOOEHPRUHOLNHO\WRKHOSPH LGHQWLI\DQ\PLVWDNHV,PLJKWKDYHMXVWPDGHEHFDXVH,ߞPQRWMXVWUXVKLQJEDFNWKURXJKWKHVDPHVWHSV, MXVWGLG 7KHHDVLHVWZD\WRHYDOXDWHWKHTXHVWLRQIURPDIUHVKSHUVSHFWLYHLVWRORRNDWWKHDQVZHUFKRLFHVDQGWU\ WRILJXUHRXWZK\WKH$&7LQFOXGHGWKHPLQWKHTXHVWLRQVLQFHPRVWZURQJDQVZHUFKRLFHVUHIOHFW PLVWDNHVWKDWFRXOGKDYHEHHQPDGHLQVROYLQJWKHTXHVWLRQ,WߞVQRWQHFHVVDU\WRILQGDQH[SODQDWLRQIRU HYHU\VLQJOHDQVZHUFKRLFHEXWZHߞOORIWHQVHHWKDWVRPHRIWKHZURQJDQVZHUFKRLFHVZLOOSRLQWWR HUURUVZHPLJKWKDYHPDGHLQRXUVROXWLRQ ,DOVRORRNWRVHHLI,FDQREVHUYHDQ\FRPPRQ$&7SDWWHUQVDPRQJWKHDQVZHUFKRLFHVDQGZKHWKHU WKRVHSDWWHUQVLQGLFDWHWKDWWKHDQVZHUFKRLFH,OLNHLVSUREDEO\FRUUHFW %RWKRIWKHVHDSSURDFKHVWRWKHTXHVWLRQDOORZPHWRVHHLWIURPDQRWKHUSHUVSHFWLYHZKLFKJLYHVPHD EHWWHUFKDQFHRIFDWFKLQJDQ\VPDOOPLVWDNHV,PLJKWKDYHPDGH <RXߞOOVHHVHYHUDOH[DPSOHVRIWKHVHLGHDVLQDFWLRQGXULQJWKHZDONWKURXJKVLQWKHQH[WIHZSDJHV $&70DWK3DWK&RQFOXVLRQ ,WPD\VHHPOLNHWKLV0DWK3DWKLVDOLWWOHFRPSOLFDWHGHVSHFLDOO\ZKHQ,ߞYHWROG\RXWKDWDOOUHDO$&7 0DWKTXHVWLRQVFDQEHDQVZHUHGLQVHFRQGVRUOHVV%XWLIZHWKLQNDERXWLWZHߞOOVHHWKHILUVWKDOIRI WKHSURFHVVLVMXVWUHDGLQJWKHZKROHTXHVWLRQDQGWKHDQVZHUVDQGPDWFKLQJXSVRPHRIWKHZRUGVWR PDWKLGHDV\RXNQRZDERXW7KLVLVVRPHWKLQJWKDWFDQEHGRQHYHU\TXLFNO\ZLWKSUDFWLFH7KHUHPDLQLQJ WKUHHVWHSVDUHFRPLQJXSZLWKDVROXWLRQH[HFXWLQJWKDWVROXWLRQDQGWKHQFKHFNLQJ\RXUZRUN7KHVH VWHSVFDQDOVREHGRQHTXLFNO\LI\RXSUDFWLFHORRNLQJIRUHIILFLHQWVROXWLRQVWR$&70DWKTXHVWLRQV <RXGRQߞWKDYHWRFRQVFLRXVO\PDSRXWHDFKVWHSDQGVORZO\GRWKHPRQHE\RQH,MXVWUHFRPPHQGWKDW \RXJHWLQWKHKDELWRIFRQVLGHULQJWKHVHVL[SRLQWVLI\RXZDQWWRDQVZHUTXHVWLRQVDVTXLFNO\DQG HIIHFWLYHO\DVSRVVLEOH7KLQNLQJDERXWWKHSUREOHPVLQWKLVZD\ZLOONHHS\RXIRFXVHGDQGKHOS\RXZRUN WKURXJKWKHWHVWZKLOHVWLOOJLYLQJ\RXDJRRGRSSRUWXQLW\WRFDWFK\RXUPLVWDNHVZKLFKLVYLWDOWRJHWWLQJ DJRRGVFRUH 1RZWKDWZHߞYHGLVFXVVHGWKHJHQHUDODSSURDFK,UHFRPPHQGIRUFKDOOHQJLQJTXHVWLRQVRQWKH$&70DWK VHFWLRQOHWߞVWDNHDORRNDWVRPHRWKHULVVXHVWKDWPLJKWFRPHXSRQVSHFLILFW\SHVRITXHVWLRQV $&70DWK&ORVLQJ7KRXJKWV :HߞYHFRYHUHGDOOWKHPDLQLVVXHVWKDWDUHJHQHUDOO\UHODWHGWRWKH$&70DWKVHFWLRQ,QWKLVVHFWLRQ ZHߞOOH[SORUHDIHZFRQFHSWVWKDWDSSO\PRUHWRFHUWDLQVXEW\SHVRI$&70DWKTXHVWLRQV$IWHUWKDW ZHߞOOSXWWKHVHVWUDWHJLHVWRWKHWHVWDJDLQVWUHDOSUDFWLFH$&70DWKTXHVWLRQVLQWKHZDONWKURXJKV 8VLQJ$&DOFXODWRU &DOFXODWRUVFDQGHILQLWHO\FRPHLQKDQG\RQWKH$&70DWKVHFWLRQߚEXWQRWDVRIWHQDVPDQ\XQWUDLQHG WHVWWDNHUVPLJKWH[SHFW7KHWULFNLVWRNQRZZKHQWRXVHWKHFDOFXODWRUDQGZKHQQRWWR 0RVWRIWKHGLIILFXOW\LQPRVW$&70DWKTXHVWLRQVLQYROYHVVLPSO\XQGHUVWDQGLQJDTXHVWLRQLQWKHILUVW SODFHDQGVHWWLQJLWXSFRUUHFWO\$V,ߞYHVDLGUHSHDWHGO\LQWKLV%ODFN%RRNWKHHQWLUH$&7LVSULPDULO\D UHDGLQJWHVWDQGWKDWLQFOXGHVWKH0DWKVHFWLRQ<RXߞOOVHHDORWRITXHVWLRQVWKDWFRPELQHEDVLFFRQFHSWV LQZD\V\RXߞYHQHYHUWKRXJKWRIEHIRUHDQGWKHPDMRUFKDOOHQJHZLWKWKRVHTXHVWLRQVZLOOLQYROYHFORVH UHDGLQJDQGFDUHIXOWKLQNLQJ2IFRXUVHFDOFXODWRUVDUHQߞWPXFKKHOSZKHQLWFRPHVWRUHDGLQJTXHVWLRQV DQGVHWWLQJXSVROXWLRQVWRWKHP ,QIDFWWKDWߞVSUREDEO\ZK\FDOFXODWRUVDUHDOORZHGRQWKH$&7LQWKH ILUVWSODFH5HPHPEHUWKDWWKHWHVWLVVWDQGDUGL]HGZKLFKPHDQVLWWULHVWRSURYLGHWKHVDPHWHVWLQJ H[SHULHQFHWRDOOWHVWWDNHUVVRWKHUHVXOWVIURPWKHLUWHVWVFDQEHFRPSDUHGWRHDFKRWKHULQDPHDQLQJIXO ZD\%XWWKH$&7GRHVQߞWPDQGDWHWKDWDOOWHVWWDNHUVXVHDSDUWLFXODUFDOFXODWRUQRUGRHVLWSURYLGHD VWDQGDUGFDOFXODWRUIRUDOOWHVWWDNHUV7KLVVWURQJO\VXJJHVWVWKDWWKHSHRSOHZKRZULWHWKH$&7GRQߞW WKLQNWKDWDFDOFXODWRULVOLNHO\WRKHOS\RXWRRPXFK %XWWKHUHDUHIRXUVLWXDWLRQV\RXFRXOGHQFRXQWHURQWKH$&7LQZKLFK\RXPD\ILQGDFDOFXODWRUWREH XVHIXO wVLPSOHFDOFXODWLRQV wHYDOXDWLQJPRUHDGYDQFHGQXPHULFDOH[SUHVVLRQV wJHQHUDWLQJJUDSKVIRUVRPHTXHVWLRQVDERXWIXQFWLRQV wHYDOXDWLQJH[SUHVVLRQVZLWKYDULDEOHV :HߞOOWDONDERXWHDFKRIWKHVHVLWXDWLRQVLQRUGHU 6LPSOHFDOFXODWLRQV 6RPHWHVWWDNHUVMXVWDUHQߞWFRQILGHQWGRLQJDQ\PDWKLQWKHLUKHDGDWDOOߚHLWKHUEHFDXVHWKH\GLVOLNHPDWK LQJHQHUDORUEHFDXVHWKH$&70DWKVHFWLRQLQSDUWLFXODUPDNHVWKHPYHU\QHUYRXV)RUWKHVHWHVWWDNHUV WKHFDOFXODWRUFDQEHDZHOFRPHFUXWFK7KH\PLJKWHYHQIHHOWKHQHHGWRXVHLWRQDOPRVWHYHU\TXHVWLRQ EHFDXVHWKH\GRQߞWHYHQWUXVWWKHPVHOYHVWRDGGRUVXEWUDFWVLQJOHGLJLWQXPEHUV 7KHUHߞVQRWKLQJZURQJZLWKXVLQJDFDOFXODWRURQHYHU\TXHVWLRQRIFRXUVHDVORQJDVLWZRUNVIRU\RXLQ \RXUSUDFWLFHVHVVLRQV<RXVKRXOGGRZKDWHYHU\RXKDYHWRGRRQWHVWGD\WRPDNHVXUHWKDW\RXGRQߞ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ߞ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ߞWEHHQRXJKWRILQGWKHDQVZHUEXW LWFDQKHOS\RX7KHVHNLQGVRIVLWXDWLRQVRIWHQDULVHLIDTXHVWLRQLQYROYHVWDNLQJDVTXDUHURRWRID QXPEHUWKDWLVQߞWVTXDUHRUILQGLQJDWKLUGURRWRIVRPHQXPEHU,I\RXߞGOLNHWRVHHVRPHZDONWKURXJKVRI VXFKTXHVWLRQVLQWKLV%ODFN%RRNFKHFNRXWWKHIROORZLQJ wP\ZDONWKURXJKIRUTXHVWLRQRQSDJHRIWKH5HG%RRN wP\ZDONWKURXJKIRUTXHVWLRQRQSDJHRIWKH5HG%RRN wP\ZDONWKURXJKIRUTXHVWLRQRQSDJHRIWKH5HG%RRN 7KH$&7PLJKWDOVRDVN\RXWRHYDOXDWHDQXPHULFDOH[SUHVVLRQLQYROYLQJVRPHWKLQJOLNHDPDWUL[RUD ORJDULWKPEXWWKHVHTXHVWLRQVFRPHXSHYHQPRUHUDUHO\WKDQTXHVWLRQVWKDWUHZDUG\RXIRUFRPLQJXS ZLWKWKHGHFLPDODSSUR[LPDWLRQRIDUDGLFDOH[SUHVVLRQ)RUDQH[DPSOHRIDFDOFXODWRUEDVHG ZDONWKURXJKRIDORJDULWKPTXHVWLRQRQWKH$&7SOHDVHVHHP\H[SODQDWLRQIRUTXHVWLRQRQSDJH RIWKH5HG%RRN ,Wߞ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ߚVRPHWLPHVWKDWߞVDOO\RXKDYHWRGRLQRUGHUWRILJXUHRXWWKHFRUUHFW DQVZHU 2IFRXUVH\RXVWLOOKDYHWRPDNHVXUH\RXUHDGWKHTXHVWLRQFDUHIXOO\DQGHQWHUWKHIXQFWLRQ FRUUHFWO\ 8QIRUWXQDWHO\WKHVHNLQGVRITXHVWLRQVGRQߞWFRPHXSYHU\RIWHQRQWKH$&7DQGWKH5HG%RRN H[SODQDWLRQVIRUWKHVHTXHVWLRQVDUHXQOLNHO\WRPHQWLRQWKDWWKH\FDQEHVROYHGZLWKJUDSKLQJFDOFXODWRUV LQDPDWWHURIVHFRQGV %XW,ߞOOEHKDSS\WRWHOO\RXZKHQJUDSKLQJDIXQFWLRQRQ\RXUFDOFXODWRUZRXOGEHWKHHDVLHVWZD\WR VROYHDTXHVWLRQRIFRXUVH)RUDQH[DPSOHRIDFDOFXODWRUEDVHGVROXWLRQWRD5HG%RRNTXHVWLRQWKDW DVNVXVWRLGHQWLI\WKHFRUUHFWJUDSKRIDIXQFWLRQVHHWKLV%ODFN%RRNߞVZDONWKURXJKIRUTXHVWLRQRQ SDJHRIWKH5HG%RRN)RUDQH[DPSOHRIDFDOFXODWRUEDVHGVROXWLRQWRD5HG%RRNTXHVWLRQDERXW WKHEHKDYLRURIDJUDSKVHHWKLV%ODFN%RRNߞVH[SODQDWLRQIRUTXHVWLRQRQSDJHRIWKH5HG%RRN <RXPD\DOVREHLQWHUHVWHGLQWKLV%ODFN%RRNߞVZDONWKURXJKIRUTXHVWLRQRQSDJHRIWKH5HG %RRN ,QHDFKRIWKRVHZDONWKURXJKV\RXߞOOQRWLFHWKDW,VWLOOJRWKURXJKWKHUHVWRIWKH0DWK3DWKHYHQWKRXJK, VKRZ\RXKRZWRDQVZHUWKHTXHVWLRQZLWKDFDOFXODWRU<RXߞOODOVRQRWLFHWKDW,GLVFXVVRWKHUVROXWLRQVWR WKHTXHVWLRQVWKDWGRQߞWUHO\RQFDOFXODWRUVEHFDXVHWKH$&7QHYHUUHTXLUHVXVWRXVHDFDOFXODWRUWR VROYHDTXHVWLRQ )LQDOO\\RXߞOODOVRQRWLFHWKDWWKHUHDUHQߞWDORWRITXHVWLRQVLQWKH5HG%RRNWKDWZRXOGUHZDUGXVIRU JUDSKLQJDIXQFWLRQEHVLGHVWKHRQHV,PHQWLRQHGKHUH$V,VDLGWKH$&70DWKVHFWLRQUHDOO\GRHVQߞW SURYLGHXVZLWKDORWRIRSSRUWXQLWLHVWRDQVZHUTXHVWLRQVFRUUHFWO\VLPSO\E\JUDSKLQJDIXQFWLRQ6R GRQߞWEHVXUSULVHGLI\RXGRQߞWVHHDQ\TXHVWLRQVRQWHVWGD\WKDWDOORZ\RXWRGRWKLVߚRQWKHRWKHUKDQG LI\RXGRVHHRQHPDNHVXUH\RXVHL]HWKHRSSRUWXQLW\WRJHWLWULJKW (YDOXDWLQJH[SUHVVLRQVZLWKYDULDEOHV 7KHFDOFXODWRUFDQDOVRRFFDVLRQDOO\FRPHLQKDQG\ZKHQDQ$&7TXHVWLRQDVNVXVWRHYDOXDWH H[SUHVVLRQVZLWKYDULDEOHVHVSHFLDOO\ZKHQWKHTXHVWLRQLVDVNLQJXVWRILQGWKHYDOXHRIDSDUWLFXODU YDULDEOH :HDOUHDG\GLVFXVVHGWKLVJHQHUDOLGHDLQWKHVHFWLRQFDOOHGߡ7HVWLQJ9DOXHVߢEXW,ZDQWWRUHYLVLWWKLV FRQFHSWEHFDXVHDFDOFXODWRUFDQVRPHWLPHVPDNHWKLVDSSURDFKHDVLHUWRXVH 7KHUHDUHWZRJHQHUDOZD\VLQZKLFKWKLVFDQEHGRQH w,IWKHDQVZHUFKRLFHVIRUDTXHVWLRQGRQߞWKDYHDQ\YDULDEOHVWKHQZHPD\EHDEOHWRXVHWKHFDOFXODWRU WRSOXJHDFKDQVZHUFKRLFHLQWRDQH[SUHVVLRQIURPWKHTXHVWLRQDQGGHWHUPLQHZKLFKFKRLFHLV FRUUHFW w,IVRPHRIWKHDQVZHUFKRLFHVLQFOXGHYDULDEOHVWKHQZHPD\EHDEOHWRDVVLJQDUELWUDU\YDOXHVWRWKH YDULDEOHVDQGWKHQXVHRXUFDOFXODWRUVWRHYDOXDWHHDFKDQVZHUFKRLFHDQGVHHZKLFKRQHH[SUHVVHVDQ DPRXQWHTXDOWRWKHH[SUHVVLRQLQWKHRULJLQDOTXHVWLRQ 7KDWPLJKWVRXQGDOLWWOHFRPSOLFDWHGEXWLW ZLOOSUREDEO\PDNHDORWPRUHVHQVHRQFH\RXVHHPHGRLWLQWKHZDONWKURXJKVLQDIHZSDJHV )RUDQH[DPSOHRIWKHILUVWW\SHRITXHVWLRQSOHDVHVHHP\ZDONWKURXJKLQWKLV%ODFN%RRNIRUTXHVWLRQ RQSDJHRIWKH5HG%RRN,QWKDWTXHVWLRQWKHFDOFXODWRUPDNHVLWPXFKHDVLHUWRHYDOXDWHH[SUHVVLRQV OLNHDQG )RUDQH[DPSOHRIWKHVHFRQGW\SHRITXHVWLRQSOHDVHVHHWKLV%ODFN%RRNߞVZDONWKURXJKIRUTXHVWLRQ RQSDJHRIWKH5HG%RRN,QWKDWFDVHWKHFDOFXODWRUPLJKWPDNHLWHDVLHUWRHYDOXDWHH[SUHVVLRQVOLNH .HHSDOORIWKHVHSRVVLEOHXVHVIRUFDOFXODWRUVLQPLQGDV\RXUHDGWKURXJKWKHZDONWKURXJKVLQWKLV%ODFN %RRNDQGDV\RXGR\RXURZQSUDFWLFHRQUHDO$&70DWKTXHVWLRQVߚEXWUHPHPEHUWKDWPRVWUHDO$&7 0DWKTXHVWLRQVFDQߞWEHVROYHGE\DFDOFXODWRUDQGWKDW\RXVWLOOQHHGWREHFDUHIXOQRWWRPDNHPLVWDNHV ZKHQ\RXXVHRQH <RX&DQߞW$OZD\V6ROYH)RU(YHU\9DULDEOH 2QHRIWKHWKLQJVWKH$&7OLNHVWRGREHVWLVWRWDNHDGYDQWDJHRI\RXUߡVFKRROPDWKߢLQVWLQFWV7KHWHVW GRHVWKLVLQDORWRIGLIIHUHQWZD\VDQGRQHRIWKHPLVWRSUHVHQW\RXZLWKDPDWKSUREOHPWKDWLQYROYHV VHYHUDOYDULDEOHV,QDVFKRROVHWWLQJZHߞGSUREDEO\VWDUWWU\LQJWRILQGWKHYDOXHVRIHDFKYDULDEOHRQWKH $&70DWKVHFWLRQZHߞOORIWHQILQGWKDWVRPHYDULDEOHVFDQߞWEHVROYHGIRULQGLYLGXDOO\ )RUH[DPSOHLIWKH$&7WHOOVXV [\ DQGWKHQDVNVIRUWKHYDOXHRI[\DORWRIWHVWWDNHUV ZRXOGZDVWHWKHLUWLPHWU\LQJWRVROYHIRUWKHDFWXDOYDOXHVRI[DQG\LQGLYLGXDOO\ZKLFKOLWHUDOO\ FDQߞWEHGRQHLQWKDWVLWXDWLRQ(LWKHUYDULDEOHFDQKDYHDQLQILQLWHQXPEHURIYDOLGVROXWLRQV %XWZHFDQVWLOOILJXUHRXWWKDW[\ VLQFH [\ DQG 6LQFH[\LVWKHVDPHDV [ \ WKDWPHDQV[\LVWKHVDPHWKLQJDVWLPHVZKLFKLV 'R\RXVHHKRZPXFKHDVLHUWKDWZDVRQFHZHOHWJRRIWKHLGHDRIWU\LQJWRVROYHIRUHDFKYDULDEOHDQG LQVWHDGWKRXJKWDERXWZKDWWKHTXHVWLRQZDVDFWXDOO\DVNLQJ" 2QHELJKLQWWKDW\RXGRQߞWQHHGWRVROYHIRULQGLYLGXDOYDULDEOHVRQDFHUWDLQTXHVWLRQLVZKHQWKDW TXHVWLRQDVNVIRUWKHYDOXHRIDQH[SUHVVLRQZLWKPRUHWKDQRQHYDULDEOHLQLWOLNH[\LQVWHDGRIMXVW DVNLQJIRUWKHYDOXHRIDQLQGLYLGXDOYDULDEOHOLNH[ 4XHVWLRQRQSDJHRIWKH5HG%RRNLVDQH[DPSOHRIWKLVFRQFHSW RQSDJHRIWKLVERRN 7KLV TXHVWLRQDVNVXVWRILQGWKHYDOXHRI EߙD ,QWKLVLQVWDQFHLWLVQߞWSRVVLEOHWRVROYHIRUWKHYDOXHRIERU DLQGLYLGXDOO\EXWZHFDQPDQLSXODWHWKHILUVWH[SUHVVLRQLQWKHTXHVWLRQWRILQGRXWWKDWEߙD 2QFH ZHNQRZWKDWZHNQRZWKDW EߙD PXVWEHWKHVDPHDV ZKLFKLVFKRLFH . <RXߞOOVHHPRUHH[DPSOHVRIWKLVVRUWRIWKLQJLQWKHTXHVWLRQZDONWKURXJKVLQDIHZSDJHV <RXU:RUN'RHVQߞW0DWWHU 7KLVLVDQRWKHUH[DPSOHRIKRZ$&70DWKGLIIHUVIURPVFKRROPDWKߚ\RXUZRUNGRHVQߞWPDWWHURQWKH $&7LQWKHVHQVHWKDWQRERG\LVJRLQJWRNQRZKRZ\RXDUULYHGDW\RXUDQVZHUV$ORWRIWHVWWDNHUVORVH DORWRIWLPHRQWKH$&70DWKVHFWLRQEHFDXVHVFKRROKDVFRQGLWLRQHGWKHPWRGRPDWKLQDYHU\IRUPDO PDQQHU %XWWKHUHߞVQRQHHGWRDSSURDFKPDWKIRUPDOO\RQWKH$&7,QIDFWZHߞOORIWHQUXQLQWRVLWXDWLRQVLQZKLFK WU\LQJWRIROORZWKHIRUPDODSSURDFKWRDQ$&70DWKTXHVWLRQPDNHVILQGLQJWKHULJKWDQVZHUKDUGHUDQG PRUHWLPHFRQVXPLQJ 2IFRXUVHLI\RXSUHIHUXVLQJIRUPDOPDWKIRUVRPHUHDVRQDQGLI\RXFDQGRLWTXLFNO\HQRXJKWRILQLVK WKH$&70DWKVHFWLRQLQWKHWLPHDOORWWHG DQG\RXJHWWKHTXHVWLRQVULJKW WKHQWKHUHߞVQRWKLQJLQKHUHQWO\ ZURQJZLWKWKDW%XWLI\RXKDYHWURXEOHZLWKWKH$&70DWKVHFWLRQWKHQ\RXVKRXOGQߞWIHHOREOLJDWHGWR DSSURDFKWKHVHFWLRQLQDZD\WKDWZRXOGSOHDVH\RXUKLJKVFKRROPDWKWHDFKHU$V,ߞYHPHQWLRQHG UHSHDWHGO\DQGDV\RXߞOOVHHZKHQZHJRWKURXJKWKHZDONWKURXJKVWKHHDVLHVWDQGIDVWHVWVROXWLRQVWR PDQ\$&70DWKTXHVWLRQVLQYROYHWDFWLFVWKDWDUHRQO\SRVVLEOHEHFDXVHRIWKHVWDQGDUGL]HGPXOWLSOH FKRLFHQDWXUHRIWKHWHVW'RQߞWEHDIUDLGWRHPEUDFHWKDW )LQGLQJ7KH$UHDV2I2GG/RRNLQJ6KDSHV 6RPH$&70DWKTXHVWLRQVZLOODVNXVWRILQGWKHDUHDRIDILJXUH7KLVFDQEHSDUWLFXODUO\FKDOOHQJLQJ ZKHQWKHILJXUHGRHVQߞWORRNOLNHDQ\RIWKHIDPLOLDUVKDSHVZKRVHDUHDIRUPXODVZHNQRZ %XWLIWKH$&7DVNVXVWRILQGWKHDUHDRIDQRGGORRNLQJVKDSHWKHQWKDWRGGORRNLQJVKDSHPXVWFRQVLVW RIVRPHFRPELQDWLRQRIߡQRUPDOߢVKDSHVOLNHUHFWDQJOHVWULDQJOHVFLUFOHVDQGWUDSH]RLGV:HFDQILQG WKHDUHDRIWKHRGGORRNLQJVKDSHE\ILQGLQJWKHLQGLYLGXDODUHDVRIWKHߡQRUPDOߢVKDSHVDQGFRPELQLQJ WKHP ,I\RXߞGOLNHWRVHHDQH[DPSOHRIWKLVFRQFHSWWDNHDORRNDWWKLV%ODFN%RRNߞVZDONWKURXJKRITXHVWLRQ IURPSDJHRIWKH5HG%RRN /HWWKLVEHRQHPRUHUHPLQGHUWKDWWKHEHVWWKLQJWRGRZKHQ\RXߞUHFRQIURQWHGZLWKDQXQIDPLOLDUVLWXDWLRQ RQWKH$&70DWKVHFWLRQLVWRNHHSDOHYHOKHDGDQGUHPHPEHUWKDW$&70DWKTXHVWLRQVFDQDOZD\VEH VROYHGUHODWLYHO\TXLFNO\XVLQJRQO\WKHFRQFHSWVIURPWKH$&70DWK7RROER[,QVWHDGRISDQLFNLQJOLNH DQXQWUDLQHGWHVWWDNHUZRXOG\RXUMRELVWRILJXUHRXWZKLFKFRQFHSWVIURPWKH7RROER[DUHUHOHYDQWWR WKHTXHVWLRQDQGKRZWRFRPELQHWKHPVRWKDWWKHTXHVWLRQFDQEHDQVZHUHGDVVLPSO\DQGGLUHFWO\DV SRVVLEOH 'RQߞW7KLQN$ERXW7KHߡ2UGHU2I'LIILFXOW\ߢ $ORWRIWHVWWDNHUVEHOLHYHWKH\ߞOOVHHKDUGHU$&70DWKSUREOHPVWRZDUGVWKHHQGRIDVHFWLRQDQG HDVLHUSUREOHPVWRZDUGWKHEHJLQQLQJRIDVHFWLRQ(YHQWKRXJKWKHUHPLJKWEHVRPHJHQHUDOWUXWKWRWKLV FRQFHSW GHSHQGLQJRQKRZZHGHILQHWKHZRUGVߡKDUGHUߢDQGߡHDVLHUߢ ,ߞGVWURQJO\DGYLVH\RXWRLJQRUH WKLVLGHDEHFDXVHLWGRHVQߞWDFWXDOO\KHOS\RXGREHWWHURQWKH$&70DWKVHFWLRQ )LUVWRIDOOZKDWߞVGLIILFXOWIRU\RXLVQߞWQHFHVVDULO\WKHVDPHWKLQJDVZKDWߞVGLIILFXOWIRURWKHUWHVWWDNHUV ߚHYHQLIHYHU\ERG\HOVHZKRWDNHVWKH$&7VWUXJJOHVZLWKTXHVWLRQQXPEHURQWHVWGD\WKDWGRHVQߞW PHDQ\RXZLOOWRR'LIIHUHQWSHRSOHFDQVHHGLIIHUHQWHTXDOO\YDOLGVROXWLRQVWRWKHVDPH$&70DWK TXHVWLRQDQGWKRVHHTXDOO\YDOLGVROXWLRQVFDQLQYROYHGLIIHUHQWOHYHOVRIFRPSOH[LW\DQGFKDOOHQJH6R WKHQRWLRQWKDWHDFKLQGLYLGXDOTXHVWLRQKDVDXQLYHUVDODPRXQWRIߡGLIILFXOW\ߢWKDWZLOOEHFRQVWDQWIRUDOO WHVWWDNHUVLVULGLFXORXV 6HFRQGO\UHJDUGOHVVRIDQ\JHQHUDORYHUDOOߡGLIILFXOW\ߢWUHQG\RXFDQVWLOOHQFRXQWHUUHODWLYHO\GLIILFXOW TXHVWLRQVQHDUWKHEHJLQQLQJRIDVHFWLRQDQGUHODWLYHO\HDV\TXHVWLRQVQHDUWKHHQGRIDVHFWLRQ HVSHFLDOO\DV\RXLPSURYH\RXUXQGHUVWDQGLQJRIKRZWKHWHVWZRUNV 0\PDMRUFRQFHUQKHUHLVWKDW,GRQߞWZDQW\RXWRPDNHDQ\DVVXPSWLRQVDERXWKRZKDUGDQ$&70DWK TXHVWLRQLVOLNHO\WREHXQWLO\RXߞYHDFWXDOO\UHDGLWDQGWKRXJKWDERXWLWDOLWWOH,WߞVDOVRLPSRUWDQWWR UHPHPEHUWKDWTXHVWLRQVFDQSRVHGLIIHUHQWW\SHVRIFKDOOHQJHVDQGDQ\RIWKRVHFKDOOHQJHVPLJKWOHDG \RXWRPLVVDTXHVWLRQ6RPHTXHVWLRQVVHHPSUHWW\VLPSOHEXWRIIHUDORWRIRSSRUWXQLWLHVWRPDNH FDUHOHVVPLVWDNHVRWKHUVPLJKWVHHPYHU\FKDOOHQJLQJDWILUVWEXWWKHQRIIHUDYHU\VLPSOHVROXWLRQWRD WUDLQHGWHVWWDNHUZKRNQRZVKRZWRVSRWLW -XVWDSSURDFKHDFK$&70DWKTXHVWLRQZLWKDQRSHQPLQGߚVRPHZLOOWDNHPRUHWLPHDQGHQHUJ\DQG RWKHUVZLOOWDNHOHVVWLPHDQGHQHUJ\,WGRHVQߞWGRDQ\JRRGWRWKLQNDERXWZKHWKHUDTXHVWLRQLVVXSSRVHG WREHHDV\RUKDUGIRURWKHUSHRSOHRUZKHWKHUDTXHVWLRQLVHDVLHURUKDUGHUWKDQWKHRQHVEHIRUHRUDIWHU LW(LWKHUZD\RXUMRELVDOZD\VWRORRNDWHDFKTXHVWLRQUHDGLWFDUHIXOO\WU\WRILJXUHRXWWKHPRVW HIILFLHQWVROXWLRQZHFDQLPSOHPHQWWKDWVROXWLRQDQGFKHFNIRUPLVWDNHV 7KDWZRQߞWFKDQJHEDVHGRQZKHUHWKHTXHVWLRQDSSHDUVLQWKHVHFWLRQ :KHQZHGRWKHZDONWKURXJKVLQDIHZSDJHV\RXߞOOVHHVHYHUDOH[DPSOHVRITXHVWLRQVWKDWDSSHDUHDUOLHU LQDVHFWLRQEXWFDQVWLOOEHYHU\WULFN\DQGTXHVWLRQVWKDWDSSHDUODWHULQDVHFWLRQEXWFDQVWLOOEH DQVZHUHGLQDIHZVHFRQGVE\DWUDLQHGWHVWWDNHU ߡ127ߢ$QGߡ(;&(37ߢ4XHVWLRQV 7KH$&7ORYHVWRXVHߡ127ߢDQGߡ(;&(37ߢTXHVWLRQVWRJHW\RXWRFKRRVHZURQJDQVZHUV:HVDZWKLV RQWKH$&75HDGLQJVHFWLRQDQGZHߞOOVHHLWLQWKH$&70DWKVHFWLRQDVZHOO ,QWKHVHTXHVWLRQVWKHUHZLOOEHIRXUDQVZHUFKRLFHVWKDWGRVDWLVI\ZKDWHYHUWKHTXHVWLRQLVDVNLQJDERXW DQGRQHWKDWGRHVQߞW7KHSHRSOHZKRPDNHWKH$&7DUHKRSLQJ\RXߞOORYHUORRNWKHZRUGߡ127ߢRU ߡ(;&(37ߢLQWKHSURPSW7KDWZD\\RXFDQQRWLFHRQHRIWKHIRXUDQVZHUFKRLFHVWKDWVHHPWRVDWLVI\ ZKDWWKHTXHVWLRQLVDVNLQJDERXWDQGWKHQFKRRVHWKDWDQVZHUZLWKRXWUHDOL]LQJ\RXZHUHVXSSRVHGWR ILQGWKHRQHFKRLFHWKDWGRHVQߞWVDWLVI\ZKDWHYHUWKHTXHVWLRQLVWDONLQJDERXW 7KLVLVRQHPRUHUHDVRQZK\LWߞVVRLPSRUWDQWWRUHYLHZDOOWKHDQVZHUFKRLFHVLQDTXHVWLRQEHIRUH\RX PRYHRQWRWKHQH[WTXHVWLRQ,I\RXRYHUORRNWKHZRUGߡ127ߢRUߡ(;&(37ߢDQGFKRRVHWKHILUVWDQVZHU FKRLFHWKDWVHHPVYDOLG\RXFDQVWLOOFDWFK\RXUPLVWDNHLI\RXORRNDWWKHRWKHUDQVZHUFKRLFHVEHFDXVH \RXߞOOQRWLFHWKDWVHYHUDORIWKHPVHHPWREHHTXDOO\YDOLG7KLVJLYHV\RXWKHFKDQFHWRJREDFNRYHUWKH TXHVWLRQDQGUHDOL]HWKDW\RXPLVUHDGLW :HFDQVHHDQH[DPSOHRIWKLVW\SHRIWUDSE\ORRNLQJDWTXHVWLRQRQSDJHRIWKH5HG%RRN7KH TXHVWLRQDVNVXVZKLFKFKRLFHߡGRHV127UHSUHVHQWDOLQHߢ,IZHDFFLGHQWDOO\RYHUORRNWKHZRUG127 ZHPLJKWWKLQNZHߞUHORRNLQJIRUWKHRQHDQVZHUFKRLFHWKDW'2(6FRQWDLQWKHHTXDWLRQRIDOLQH$ORWRI WHVWWDNHUVLQWKDWSRVLWLRQZRXOGMXVWFKRRVH $ DQGPRYHRQ%XWLIZHUHDGFDUHIXOO\ZHNQRZWKDWZH QHHGWRILQGWKHRQO\FKRLFHWKDWLV127WKHHTXDWLRQRIDOLQHZKLFKPHDQV ( LVFRUUHFW $JDLQLIZHKDGPLVVHGWKHZRUG127UHDGLQJDOORIWKHDQVZHUFKRLFHVVKRXOGVWLOOWLSXVRIIWKDWPRUH WKDQRQHFKRLFHVHHPHGYDOLGZKLFKVKRXOGKDYHSURPSWHGXVWRUHHYDOXDWHWKHTXHVWLRQDQGIL[RXU PLVWDNH 7KH$&7DOZD\VSXWVWKHZRUGVߡ127ߢDQGߡ(;&(37ߢLQFDSLWDOOHWWHUVRQWKHVHNLQGVRITXHVWLRQVEXW \RXߞGEHVXUSULVHGKRZRIWHQSHRSOHFRPSOHWHO\RYHUORRNWKRVHZRUGV$OZD\VFRQVLGHUDOO\RXUDQVZHU FKRLFHVDQGDOZD\VUHDGFDUHIXOO\ :DONWKURXJKV7KH$&70DWK3URFHVV,Q$FWLRQ$JDLQVW5HDO4XHVWLRQV 1RZWKDWZHߞYHWDONHGDERXWWKHEHVWZD\WRDSSURDFK$&70DWKTXHVWLRQVZHߞUHJRLQJWRJRWKURXJKD VHOHFWLRQRIUHDO$&70DWKSUDFWLFHTXHVWLRQVWKDW\RXFDQIROORZDORQJZLWKLQ\RXUFRS\RI7KH5HDO $&73UHS*XLGHUG(GLWLRQ $VZDVWKHFDVHZLWKWKH$&75HDGLQJTXHVWLRQVWKHVHKDYHEHHQVHOHFWHGHLWKHUEHFDXVHWKH\ߞUH TXHVWLRQVWKDWP\RQHRQRQHWXWRULQJVWXGHQWVWHQGWRKDYHWKHPRVWWURXEOHZLWKRUEHFDXVHWKH\ߞUHJRRG UHSUHVHQWDWLRQVRIWKHFRQFHSWVZHߞYHWDONHGDERXWLQWKHWUDLQLQJ 2QFHPRUH,FDQߞWRYHUVWDWHWKHLPSRUWDQFHRIUHDGLQJWKURXJKWKHVHZDONWKURXJKVDQGVHHLQJWKHVHLGHDV LQDFWLRQDJDLQVWUHDO$&70DWKTXHVWLRQVIURPWKH5HG%RRN7KLVSDUWRIWKHSURFHVVLVDEVROXWHO\ FULWLFDOLI\RXZDQWWRLQWHUQDOL]HWKHVHVWUDWHJLHVDQGVFRUHDVKLJKRQWKH$&7DVSRVVLEOH ,I\RXߞGOLNHWRVHHVRPHYLGHRGHPRQVWUDWLRQVRIWKHVHLGHDVJRWRZZZ$&7SUHS9LGHRVFRPIRUD VHOHFWLRQRIYLGHRVWKDWDUHIUHHWRUHDGHUVRIWKLVERRN 3DJH4XHVWLRQ 7KLVTXHVWLRQGHPRQVWUDWHVDORWRIWKH$&7ߞVIDYRULWHWDFWLFVRQWKH0DWKVHFWLRQ,WIRFXVHVRQIDLUO\ EDVLFPDWKFRQFHSWVDQGLWRIIHUVDYDULHW\RIYHU\VLPLODUDQVZHUFKRLFHVWRWU\WRFRQIXVH\RX$V WUDLQHGWHVWWDNHUVZHNQRZWKDWZHQHHGWRDWWDFNWKLVTXHVWLRQYHU\FDUHIXOO\DQGSD\VWULFWDWWHQWLRQWR GHWDLOV :HߞUHDVNHGWRPXOWLSO\WKUHHWHUPVWRJHWKHU(DFKWHUPKDVDQXPHULFDOFRPSRQHQWDQ[WHUPDQGD\ WHUP 5LJKWRIIWKHEDWZHFDQPXOWLSO\WKHFRHIILFLHQWVWRJHWKHU DQG 0XOWLSO\LQJWKRVHQXPEHUVJLYHV XVZKLFKZLOOEHWKHILUVWWHUPLQWKHFRUUHFWDQVZHU:HNQRZWKDWRQO\ + - DQG . FDQEHULJKW VLQFH ) DQG * VWDUWZLWKLQVWHDGRI :K\GR ) DQG * VWDUWZLWK"%HFDXVHVRPHWHVWWDNHUV ZLOODFFLGHQWDOO\ILQGWKHVXPRIDQGZKLFKLV%XWZHߞUHORRNLQJIRUWKHSURGXFWVRZHZDQW $IWHUWKDWZHKDYHWRNQRZKRZWRPXOWLSO\WHUPVWKDWLQFOXGHH[SRQHQWV)LUVWZHKDYHWRPXOWLSO\[[ DQGDQRWKHU[ :KHQ\RXPXOWLSO\YDULDEOHH[SUHVVLRQVZLWKH[SRQHQWVDOO\RXKDYHWRGRLVDGGWKHH[SRQHQWVRQWKH WHUPVWKDWKDYHWKHVDPHEDVH7KDWPHDQVWKDW[ [ [LVWKHVDPHDV[ RU[ ,WPD\KHOSWRUHZULWH[ [ [OLNHWKLV [ [ [ [ [ [ [ 7KLVLVWKHVDPHDV[ [ [ [ [ [ [ZKLFKLVWKHVDPHDV[ 6RZHNQRZWKDWWKH[WHUPLQWKHFRUUHFWDQVZHUPXVWEH[ 6RPHWHVWWDNHUVZRXOGDFWXDOO\VWRSULJKW KHUHVLQFHWKHUHߞVRQO\RQHDQVZHUFKRLFHWKDWLQFOXGHVERWKDQG[%XWOHWߞVWDNHDORRNDWWKH\WHUP MXVWWRPDNHVXUHZHKDYHQߞWPDGHDPLVWDNH 7KHUHDUHRQO\WZR\WHUPVEHLQJPXOWLSOLHGDQGWKH\ߞUHERWKMXVW\6LQFH\ \ \WKHILQDOSLHFHRIWKH FRUUHFWDQVZHUPXVWEH\7KLVFRQILUPVWKDWWKHFRUUHFWDQVZHULVFKRLFH + [\ 7KLVLVDQH[DPSOHRIWKHߡ$OPRVW/LNH7KH2WKHUVߢDQVZHUFKRLFHSDWWHUQ2IWKHWKUHHWHUPVWKDWVKRZ XSLQWKHSUREOHP FRHIILFLHQW[WHUP\WHUP WKHFRUUHFWDQVZHUKDVWZRRIWKHWKUHHWHUPVLQFRPPRQ ZLWKWKHPDMRULW\RIWKHRWKHUDQVZHUFKRLFHV,QRWKHUZRUGV wRXWRIDQVZHUFKRLFHVVWDUWHGZLWK wRXWRIHQGHGZLWK\ wRQO\RXWKDG[IRUDQ[WHUP $JDLQWKLVLVDJUHDWH[DPSOHRIDTXHVWLRQWKDWDORWRIVWXGHQWVZLOOVWUXJJOHZLWKEHFDXVHLWߞVQRWWKHVRUW RIPDWKXQWUDLQHGWHVWWDNHUVH[SHFWWRVHHRQDQLPSRUWDQWWHVWOLNHWKH$&7 3DJH4XHVWLRQ 7KLVTXHVWLRQLVDJUHDWH[DPSOHRIWKHW\SHVRIUHODWLRQVKLSVWKDWIUHTXHQWO\H[LVWLQWKHDQVZHUFKRLFHVRI UHDO$&70DWKTXHVWLRQV$VWUDLQHGWHVWWDNHUVZHFDQXVHWKRVHNLQGVRIUHODWLRQVKLSVWRFKHFNRXU XQGHUVWDQGLQJRIWKHTXHVWLRQDQGWRKHOSUHDVVXUHRXUVHOYHVWKDWZHKDYHQߞWPDGHDPLVWDNH:HߞOOWDON DERXWWKHVHUHODWLRQVKLSVLQDPRPHQWEXWILUVWOHWߞVWDONDERXWWKHVROXWLRQWRWKHTXHVWLRQ 2QHVPDOOGLIILFXOW\LQWKLVTXHVWLRQLVWKDWDSHULPHWHUTXHVWLRQLQDPDWKFODVVZRXOGW\SLFDOO\LQFOXGHD GLDJUDPEXWWKLVRQHGRHVQߞW7KLVTXHVWLRQMXVWGHVFULEHVDUHFWDQJOHWKDWPHDVXUHVIHHWE\IHHW 7KDWZRXOGORRNVRPHWKLQJOLNHWKLVLIZHGLDJUDPPHGLW ,IZHDGGXSWKHOHQJWKVRIDOOWKHVLGHVRIWKHUHFWDQJOHZHJHW 6RWKH DQVZHULV - 1RZOHWߞ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ߞPFHUWDLQWKDWPDQ\SHRSOHZKRNQRZKRZWRILQGWKH SHULPHWHURIDUHFWDQJOHZRXOGVWLOOJHWLWZURQJGXHWRFDUHOHVVQHVV ,WDOOFRPHVEDFNWRVRPHWKLQJZHߞYHDOUHDG\WDONHGDERXWVHYHUDOWLPHVWKH$&7LVDUHDGLQJWHVWILUVW DQGIRUHPRVW7KHSHRSOHEHKLQGWKH$&7DUHQߞWUHDOO\WU\LQJWRVHHLI\RXNQRZZKDWDSHULPHWHULV EHFDXVHWKH\NQRZWKDWSUHWW\PXFKHYHU\ERG\ZKRWDNHVWKLVWHVWNQRZVWKDWFRQFHSW ,QVWHDGWKH\ߞUHUHDOO\WHVWLQJZKHWKHU\RXߞOOUHDGWKHTXHVWLRQFDUHIXOO\WDNHWKHWLPHWRXQGHUVWDQGLWDQG WKHQH[HFXWHWKHFRUUHFWDSSURDFKZLWKRXWPDNLQJPLVWDNHV 1RWLFHWRRKRZDQDZDUHQHVVRIWKHUHODWLRQVKLSVDPRQJWKHDQVZHUFKRLFHVFDQKHOSXVWREHVXUHZH KDYHQߞWPDGHDQ\VPDOOPLVWDNHVLQRXUDSSURDFK.QRZLQJWKDWWKHFRUUHFWDQVZHULVZHFDQVHH ZK\WKH$&7WKRXJKWLWFRXOGIRROXVZLWKWKHRWKHUFKRLFHV%XWLIZHDFFLGHQWDOO\WKRXJKWWKHFRUUHFW DQVZHUZDV $ IRULQVWDQFHWKHQORRNLQJDWWKHRWKHUDQVZHUFKRLFHVPLJKWPDNHXVUHDOL]HWKDWPRVWRI WKHPZRXOGEHLUUHOHYDQWWRWKHTXHVWLRQLIRXUXQGHUVWDQGLQJRIWKHTXHVWLRQZHUHFRUUHFWߚZKLFKVKRXOG OHDGXVWRUHHYDOXDWHWKHTXHVWLRQDQGKRSHIXOO\QRWLFHRXUPLVWDNH ,UHDOL]HRIFRXUVHWKDWWKLVLVQߞWH[DFWO\WKHKDUGHVW$&7TXHVWLRQ\RXߞOOHYHUVHH%XWLWߞVRIWHQHDVLHVW WRXQGHUVWDQGWKHVHLGHDVRQFH\RXߞYHVHHQWKHPDWZRUNZLWKVLPSOHUFRQFHSWV5HPHPEHUWKDWGRLQJ ZHOORQWKLVWHVWFRPHVGRZQWRUHDGLQJFDUHIXOO\DQGFRUUHFWO\DSSO\LQJWKHNQRZOHGJH\RXDOUHDG\KDYH 3DJH4XHVWLRQ $ORWRIVWXGHQWVZLOOVHHWKLVTXHVWLRQDQGLPPHGLDWHO\VWDUWWRVZHDWDOLWWOHEHFDXVHLWGRHVQߞWUHDOO\ ORRNOLNHWKHVRUWRIWKLQJ\RXߞGQRUPDOO\VHHLQDPDWKFODVV%XWDVWUDLQHGWHVWWDNHUVZHNQRZWKDWWKH $&7FDQRQO\WHVWXVRQEDVLFPDWKLGHDVLQWKH0DWK7RROER[DQGZHNQRZWKDWDOO$&70DWKTXHVWLRQV FDQEHDQVZHUHGLQVHFRQGVRUOHVV $UPHGZLWKWKDWNQRZOHGJHZHߞOOMXVWWU\WRJRWKURXJKWKHTXHVWLRQRQHVWHSDWDWLPH 7KHTXHVWLRQVWDUWVE\WHOOLQJXVWKDW[ 7KHQLWDVNVXVWRVROYHDQHTXDWLRQWKDWLQFOXGHVRQO\[ WHUPV6RZHߞOOGHILQLWHO\QHHGWRILJXUHRXWZKDW[LV 0RVWSHRSOHZKRWDNHWKH$&7ZRQߞWEHFRPIRUWDEOHWU\LQJWRWDNHWKHFXEHURRWRIDQXPEHUEHFDXVH IHZSHRSOHDUHWDXJKWWRPHPRUL]HFXEHURRWVLQVFKRRO %XWLIZHߞUHZHOOWUDLQHGZHVKRXOGQRWLFHWKHDQVZHUFKRLFHVDUHDOOZKROHQXPEHUV7KLVPHDQVWKDW[ FDQߞWEHDQXPEHUWKDWUHTXLUHVDGHFLPDORUDIUDFWLRQEDUEHFDXVHDQXPEHUOLNHWKDWZRXOGSUREDEO\ OHDGWRDILQDODQVZHUWKDWDOVRUHTXLUHGDGHFLPDORUDIUDFWLRQEDU 6LQFHLVDZKROHQXPEHUDQGWKHDQVZHUVDUHDOOZKROHQXPEHUVZHNQRZWKDWWKHFXEHURRWRILV OLNHO\JRLQJWREHHDV\WRILJXUHRXW:HFDQSUREDEO\MXVWVWDUWE\FXELQJVRPHVPDOOQXPEHUVXQWLOZH ILQGWKHRQHWKDWLVWKHFXEHRI +HUHߞVZKDWZHߞGJHW 7KHUH\RXJR6LQFH ZHNQRZWKDW[PXVWEHHTXDOWR ,I\RXSUHIHUWRXVHDFDOFXODWRUWKDWFDQILQGWKHWKLUGURRWRIDJLYHQQXPEHUWKDWZRXOGEHDQRWKHUZD\ WRGHWHUPLQHWKDW[LV DVVXPLQJ\RXXVHWKHFDOFXODWRUSURSHUO\ %XWEHFDUHIXOߚLVQߞWWKHFRUUHFWDQVZHUWRWKHTXHVWLRQHYHQWKRXJKLWDSSHDUVLQFKRLFH ) ) LVDQH[DPSOHRIDQߡ2Q7KH:D\ߢZURQJDQVZHUOLNHZHVDZLQRXUGLVFXVVLRQRIDQVZHUFKRLFH SDWWHUQVRQWKH$&70DWKVHFWLRQ:HMXVWGLGDOLWWOHELWRIZRUNDQGILJXUHGRXWSDUWRIWKHSUREOHPWKDW PLJKWKDYHVHHPHGLQWLPLGDWLQJDQGWKH$&7GHOLEHUDWHO\SURYLGHGDZURQJDQVZHUFKRLFHWKDWUHIOHFWV RXUZRUNXSWRWKLVSRLQW7KLVLVH[DFWO\WKHNLQGRIWKLQJ\RXKDYHWREHFDUHIXODERXWߚZKHQ\RXSLFNDQ DQVZHUFKRLFHWDNHDVHFRQGWRORRNDWWKHDFWXDOTXHVWLRQEHLQJDVNHGDQGPDNHVXUHWKDW\RXUDQVZHU DGGUHVVHVWKHTXHVWLRQ,QWKLVFDVHWKHH[SUHVVLRQZHߞUHDVNHGWRHYDOXDWHLVWKLV [࠼[ " 6RQRZWKDWZHNQRZ[LVZHMXVWSOXJLQWRWKDWH[SUHVVLRQIRU[ [࠼[ " ࠼ " 6RWKHDQVZHULVFKRLFH + 1RZOHWߞVWDNHDORRNDWWKHRWKHUFKRLFHV $VZHVDLGEHIRUHFKRLFH ) LVWKHYDOXHIRU[EXWLWߞVQRWWKHFRUUHFWDQVZHU * LVZKDW\RXPLJKWJHWLI\RXPXOWLSOLHGE\LQVWHDGRIVTXDULQJLW + LVWKHFRUUHFWDQVZHU - LVZKDW\RXߞGJHWLI\RXDGGHGWRLQVWHDGRIDGGLQJ࠼WR . LVQߞWUHODWHGWRWKHTXHVWLRQLQDQ\REYLRXVZD\WKDW,FDQVHH 'R\RXVHHWKHDQDO\VLVZHZHUHDEOHWRGRWKHUH":HGLGQߞWKDYHWRQRWLFHDOOWKRVHWKLQJVDERXWWKH DQVZHUFKRLFHVWRJHWWKHTXHVWLRQULJKWߚEXWLIZHGLGQRWLFHWKHPLWZRXOGKHOSXVQDYLJDWHWKHTXHVWLRQ PRUHTXLFNO\:HߞGKDYHDEHWWHULGHDRIZKDWWKHTXHVWLRQLVDVNLQJKRZWKHTXHVWLRQDVNVLWDQGKRZ WKHWHVWLVWU\LQJWRWULFNXV ,I\RXWU\WRXQGHUVWDQGDVPXFKDV\RXFDQDERXWHDFKTXHVWLRQDQGLWVDQVZHUFKRLFHVDWDJODQFH\RX FDQOHDUQWRVHHULJKWWKURXJKZKDWWKH$&7LVGRLQJLQDORWRIFDVHVZKLFKPDNHVLWDOPRVWLPSRVVLEOH IRUWKHWHVWWRIRRO\RX $QDO\]LQJDQVZHUFKRLFHVOLNHWKLVLVNLQGRIDKLJKHUOHYHOFRQFHSWEXWLWVHHPHGOLNHDJRRGSODFHWR SRLQWLWRXW,IWKLVSDUWRIWKHH[SODQDWLRQLVQߞWPDNLQJDWRQRIVHQVHULJKWQRZGRQߞ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ߞVWDNHDORRN 7KHTXHVWLRQDVNVIRUWKHSUREDELOLW\WKDWWKHVHOHFWHGPDUEOHZLOO127EHZKLWH/HWPHSRLQWRXWKHUH WKDWHYHQWKRXJKWKHZRUGߡ127ߢLVLQDOOFDSLWDOOHWWHUV,UHJXODUO\WXWRUYHU\LQWHOOLJHQWVWXGHQWVZKR ZLOOFRPSOHWHO\RYHUORRNWKDWZRUGGRWKHUHVWRIWKHPDWKFRUUHFWO\DQGWKHQFRPHXSZLWKWKHZURQJ DQVZHUߚQRWEHFDXVHWKH\GRQߞWXQGHUVWDQGWKHPDWKEXWEHFDXVHWKH\GLGQߞWUHDGFDUHIXOO\HQRXJK ,I\RXZDQWWKHEHVWSRVVLEOH$&7VFRUH\RXFDQJHW\RXKDYHWRPDNHWKHHIIRUWWRSD\FORVHDWWHQWLRQWR ZKDWߞVRQWKHSDJH <RXߞYHSUREDEO\QRWLFHGWKDW,UHSHDWWKLVLGHDDORW7KHUHߞVDUHDVRQIRUWKDW 6LQFHZHZDQWWRNQRZWKHSUREDELOLW\RISLFNLQJDQRQZKLWHPDUEOHWKHWRSQXPEHULQRXUIUDFWLRQZLOO EHWKHQXPEHURIQRQZKLWHPDUEOHVVLQFHHDFKQRQZKLWHPDUEOHLVRQHRIWKHSRVVLEOHGHVLUHG RXWFRPHV7KHUHDUHPDUEOHVWKDWDUHQߞWZKLWH UHGPDUEOHVDQGEOXHPDUEOHV VRZLOOEHWKH QXPEHUDERYHWKHEDU 1RZZHQHHGWRILJXUHRXWWKHQXPEHUEHORZWKHEDUߚWKHQXPEHURIWRWDOSRVVLEOHRXWFRPHV 7KHUHDUHWRWDOPDUEOHVLQWKHEDJ UHGEOXHDQGZKLWH VRWKDWPHDQVWKHUHDUHGLIIHUHQW SRVVLEOHRXWFRPHVߚLQGLYLGXDOPDUEOHVWKDWFRXOGEHVHOHFWHG6RWKHQXPEHUEHORZWKHEDUPXVWEH 7KDWPHDQVWKHDQVZHULV2IFRXUVHZHFDQUHGXFHWKDWWRE\GLYLGLQJWKHWRSDQGERWWRPRI WKHIUDFWLRQE\VRFKRLFH . LVWKHFRUUHFWDQVZHU :HߞOOQRWLFHULJKWDZD\WKDWRQHRIWKHWULFN\WKLQJVJRLQJRQLQWKLVTXHVWLRQLVWKHIDFWWKDWDOOWKHDQVZHU FKRLFHVDUHUHGXFHGVRQRQHRIWKHGHQRPLQDWRUVLV7KH$&7SUREDEO\VHWWKHTXHVWLRQXSWKLVZD\WR PDNHXVSDQLFDQGGRXEWRXUVHOYHVZKLOHGRLQJVRPHWKLQJWKDWߞVUHODWLYHO\VLPSOH2IFRXUVHDVWUDLQHG WHVWWDNHUVZHZRQߞWOHWWKLVERWKHUXVEHFDXVHZHNQRZKRZWRUHGXFHIUDFWLRQV 7KHRWKHUWULFN\WKLQJDVZHPHQWLRQHGEHIRUHLVWKHZRUGߡ127ߢLQWKHSURPSWZKLFKWHOOVXVWKDWZH KDYHWRILQGWKHSUREDELOLW\RIFKRRVLQJDQ\QRQZKLWHPDUEOHLQVWHDGRIDZKLWHPDUEOH,QIDFWZH PLJKWVXVSHFWWKHTXHVWLRQZRXOGLQFOXGHDQDQVZHUFKRLFHGHVLJQHGWRWULFNDQ\RQHZKRPLVVHGWKHZRUG ߡ127ߢDQGDFFLGHQWDOO\ZRUNHGRXWWKHSUREDELOLW\RISLFNLQJDZKLWHPDUEOHLQVWHDGRIDQRQZKLWH PDUEOH6XUHHQRXJK - GRHVH[DFWO\WKDW 1RZOHWߞVWDNHDORRNDWWKHRWKHUZURQJDQVZHUV ) LVZKDW\RXߞGJHWLI\RXGLGQߞWNQRZZKDWWRGRDQGMXVWSXWRQHRIWKHVL[HVIURPWKHSUREOHPRYHU WKHHLJKWDQGUHGXFHGLWWR * LVWKHSUREDELOLW\RIVHOHFWLQJDQRQUHGPDUEOH7KLVUHIOHFWV\HWDQRWKHUSRVVLEOHPLVUHDGLQJRIWKH TXHVWLRQ + LVZKDW\RXߞGJHWLI\RXDFFLGHQWDOO\DFFRXQWHGIRUEOXHPDUEOHVLQVWHDGRIZKHQILJXULQJRXWWKH QXPEHURIGHVLUHGSRVVLEOHRXWFRPHV JLYLQJ\RXUHGPDUEOHVSOXVEOXHPDUEOHVDERYHWKHIUDFWLRQ EDU /HWߞVWKLQNDERXWKRZ\RXPLJKWORRNRYHUWKHDQVZHUFKRLFHVWRFKHFN\RXUDQVZHU <RXVKRXOGIHHOSUHWW\JRRGDERXWFKRRVLQJ . EHFDXVHWKHPRVWOLNHO\PLVWDNHLVSUREDEO\PLVVLQJWKH ZRUG127DQG\RXFDQVHHWKDWDQVZHUFKRLFH - LVWKHUHWRFDWFKDQ\RQHZKRGLGWKDW,QIDFW - DQG . PDNHXSWKHRQO\SDLURIDQVZHUFKRLFHVWKDWDUHFRPSOHPHQWVRIHDFKRWKHU ZKLFKEDVLFDOO\PHDQV WKH\DGGXSWRRQH DQGLWߞVDJRRGEHWWKDWWKH$&7ZRXOGLQFOXGHWKHSUREDELOLW\WKDWLVWKHRSSRVLWHRI WKHFRUUHFWDQVZHURQDߡ127ߢTXHVWLRQOLNHWKLVߚLQRWKHUZRUGVWKHSUREDELOLW\WKDWUHSUHVHQWVWKH RSSRVLWHRXWFRPHIURPWKHRQHWKHSUREOHPLVDVNLQJDERXW$QGLI\RXJHWUHDOO\FRPIRUWDEOHZLWKWKH ZD\WKH$&7OLNHVWRXVHDQVZHUFKRLFHV\RXPLJKWHYHQQRWLFHWKDWIRXURXWRIWKHILYHFKRLFHVDUH JUHDWHUWKDQZKLFKZRXOGVWURQJO\VXJJHVWWKDWWKHFRUUHFWDQVZHULVDOVRJRLQJWREHJUHDWHUWKDQ ߚDQGLWLV 5HPHPEHUWKDWWKHUHߞ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ߞVQHYHUVHHQDTXHVWLRQOLNHWKLVEHIRUH EXWDWUDLQHGWHVWWDNHUMXVWWDNHVWKRVHLQVWUXFWLRQVDWIDFHYDOXHDQGWULHVWRIROORZWKHPFORVHO\ ,IWKHVXPRIHDFKURZFROXPQDQGGLDJRQDOPXVWEHHTXLYDOHQWDQGLIZHߞUHWU\LQJWRUHSODFHWKH TXHVWLRQPDUNZLWKDYDOXHWKDWIROORZVWKRVHUXOHVWKHQLWZLOOEHKHOSIXOWRILJXUHRXWWKHVXPVRIWKH H[LVWLQJURZVDQGFROXPQV 7RILQGRXWZKDWWKDWYDOXHLVMXVWSLFNDQ\RIWKHFRPSOHWHURZV WKHWRSRUERWWRPRQHV RUWKHFRPSOHWH FROXPQV WKHOHIWRUULJKWRQHV DQGDGGXSWKHWHUPVLQWKDWURZRUFROXPQ$QGVLQFHLWߞVDOZD\VYHU\ LPSRUWDQWWRJXDUGDJDLQVWWKHSRVVLELOLW\RIPDNLQJVPDOOPLVWDNHVRQWKH$&7,ߞGSUREDEO\UHFRPPHQG GRXEOHFKHFNLQJWKHVXPE\ORRNLQJDWDQRWKHUFRPSOHWHURZRUFROXPQ ,ߞOOWDNHWKHWRSURZIRUQRSDUWLFXODUUHDVRQ,IZHDGG[[DQG[ZHJHW[-XVWWRFKHFN,ߞOODOVR SLFNRQHRWKHUVHWRIWHUPVWRDGGXS/HWߞVORRNDWWKHERWWRPURZZKLFKLV[[DQG[\XSWKRVH DGGXSWR[DOVR6RHDFKURZFROXPQDQGGLDJRQDOPXVWDGGXSWR[ $JDLQZK\GLG,GRXEOHFKHFN WKDW",VLWEHFDXVH,ߞPQRWVXUHKRZWRDGGVLPSOHDOJHEUDLFWHUPV"2IFRXUVHQRW,GRXEOHFKHFNHGLW EHFDXVH,ߞYHGHOLEHUDWHO\GHYHORSHGWKHJRRGKDELWRIEHLQJFRQVWDQWO\RQJXDUGDJDLQVWDQ\VPDOO PLVWDNHVWKDWPLJKWFRPHXS,WZRXOGEHVWXSLGDQGSRLQWOHVVWRULVNWKURZLQJDZD\DUHODWLYHO\HDV\ TXHVWLRQEHFDXVH,ZDVWRROD]\WRYHULI\WKDW[LVWKHSURSHUVXPRIHDFKURZ 1RZZHNQRZWKDWWKHTXHVWLRQPDUNPXVWPDNHDOOWKHVHWVRIWHUPVLWߞVLQYROYHGLQDGGXSWR[ +HUHߞVWKHWKLQJߚEHFDXVHWKHVHDUHDOOMXVW[WHUPVZLWKFRHIILFLHQWV QRH[SRQHQWVDEVROXWHYDOXHVRU DQ\WKLQJWULFN\OLNHWKDW ZHGRQߞWKDYHWRFUHDWHDZKROHV\VWHPRIHTXDWLRQVWRILJXUHWKLVRXW$Q\WHUP WKDWZRUNVZLWKRQHURZFROXPQRUGLDJRQDOKDVWRZRUNZLWKDOORIWKHP 6ROHWߞVSLFNWKHURZULJKWDFURVVWKHPLGGOH<RXߞYHJRW[DQG[ZKLFKDGGXSWR[:KDWGR\RX KDYHWRDGGWR[WRJHW[":HOO[[LV[ZKLFKLVFKRLFH + $JDLQLWFDQߞWKXUWWRFKHFNE\ ORRNLQJDWDQRWKHUVHWRIWHUPVWRPDNHVXUH/HWߞVORRNDWWKHPLGGOHFROXPQ,IWKHTXHVWLRQPDUNLV[ OLNHZHWKLQNLWLVWKDWJLYHVXV[[DQG[7KRVHDOVRDGGXSWR[MXVWOLNHHYHU\WKLQJHOVH6RZH FDQEHVXUHWKDW + LVFRUUHFW 2QWKLVTXHVWLRQVRPHWHVWWDNHUVZLOOWU\WRVHWXSDZKROHV\VWHPRIHTXDWLRQVEHFDXVHWKH\RQO\IHHO FRPIRUWDEOHXVLQJDPDWKDSSURDFKWKDWZRXOGEHDSSURYHGE\WKHLUWHDFKHUV%XWVHWWLQJXSVXFKDV\VWHP ZRXOGLQYROYHLQWURGXFLQJDQRWKHUYDULDEOHWRWDNHWKHSODFHRIWKHTXHVWLRQPDUNDQGWKHQGRLQJDORW PRUHDOJHEUDWKDQQHFHVVDU\,WߞVPXFKHDVLHUMXVWWRORRNDWDURZDQGWKLQNߡ:KDWGR,JHWLI,DGGXS[ [DQG["ߢ 7KLVLVH[DFWO\ZKDW,ߞPWDONLQJDERXWZKHQ,VD\WKDWZHVKRXOGJHQHUDOO\WU\WRDYRLGIRUPDOL]HGPDWK VROXWLRQVRQWKH$&7EHFDXVHWKH\ߞUHRIWHQSRLQWOHVVO\PHVV\,I\RXߞUHZRUNLQJRQDQ$&70DWK VROXWLRQDQGLWVWDUWVWRVHHPUHDOO\FRPSOLFDWHGDQGLWORRNVOLNHLWߞVJRLQJWRWDNHPRUHWKDQVHFRQGV WRZRUNRXWWKHQ\RXߞUHSUREDEO\QRWRQWKHULJKWWUDFN(LWKHU\RXߞOOHQGXSZDVWLQJWLPHRQ\RXUZD\WR WKHULJKWDQVZHURU\RXߞOOHQGXSZDVWLQJWLPHDQGDUULYLQJDWWKHZURQJDQVZHURUPD\EHQRWHYHQ DUULYLQJDWDQ\DQVZHUFKRLFHDWDOO ,WߞVDOVRZRUWKQRWLQJWKDWLWߞVLPSRVVLEOHWRVROYHIRU[LQWKLVTXHVWLRQEHFDXVH[FDQKDYHDQ\YDOXH 7KLVLVRQHPRUHH[DPSOHRIKRZWKH$&70DWKVHFWLRQWULHVWRWDNHDGYDQWDJHRIRXUVFKRROPDWK LQVWLQFWVDORWRIXQWUDLQHGWHVWWDNHUVZLOOGLYHULJKWLQDQGWU\WRVROYHIRU[DVVRRQDVWKH\VHHWKLV TXHVWLRQEHFDXVHWKH\GRQߞWNQRZWKDWWKH\VKRXOGORRNFDUHIXOO\DWWKHTXHVWLRQEHIRUHWU\LQJWRVROYHLW DVZHOHDUQHGIURPWKH0DWK3DWK 1RZOHWߞVWDNHDORRNDWWKHZURQJDQVZHUV 1RWLFHWKDWFKRLFH ) LV[ZKLFKLVDQߡ2Q7KH:D\ߢZURQJDQVZHU[LVZKDWHDFKFROXPQDGGVXS WREXWWKDWߞVQRWZKDWWKHTXHVWLRQDVNHGIRU * LV[PRUHWKDQWKHULJKWDQVZHU - LVWKHRSSRVLWHRI WKHULJKWDQVZHUDQG . LVWKHRSSRVLWHRI * <RXFDQVHHKRZWKHVHZURQJDQVZHUFKRLFHVUHIOHFWWKH VLPSOHDULWKPHWLFPLVWDNHVWKDWPDQ\FDUHOHVVWHVWWDNHUVFRXOGPDNHRQWKLVTXHVWLRQ :KHQZHORRNDWWKHVHWRIDQVZHUFKRLFHVE\LWVHOIRXULQLWLDOH[SHFWDWLRQZRXOGSUREDEO\EHWKDW * LV PRVWOLNHO\WREHFRUUHFWEHFDXVHLWVDWLVILHVWKHJUHDWHVWQXPEHURI$&70DWKDQVZHUFKRLFHSDWWHUQV w,WߞVSRVLWLYHOLNHWKUHHRXWRIWKHILYHFKRLFHV FKRLFHV ) * DQG + w,WVRSSRVLWHLVSUHVHQWLQDQRWKHUDQVZHUFKRLFHOLNHIRXURXWRIWKHILYHFKRLFHV FKRLFHV * + - DQG . w,WߞVWKHPLGGOHQXPEHULQWKHVHULHV[[[ 6RZKHQZHVROYHWKHSUREOHPDQGFRQFOXGHWKDW[VHHPVWREHFRUUHFWUDWKHUWKDQ[ZHߞGGHILQLWHO\ ZDQWWRGRXEOHFKHFNRXUZRUNRQHODVWWLPHWRPDNHVXUHZHKDGQߞWPDGHDPLVWDNH%XWZKHQZHGRWKDW TXLFNO\ZHVHHRQFHPRUHWKDW[PXVWEHULJKW$QG[VWLOOIROORZVWZRRIWKHWKUHHSDWWHUQVPHQWLRQHG DERYHVRLWߞVQRWFRPSOHWHO\RXWRIOLQHZLWKWKHSDWWHUQVRQWKH$&70DWKVHFWLRQDQ\ZD\ 5HPHPEHUWKDWWKHVH$&70DWKSDWWHUQVFDQEHKHOSIXOLQDORWRIZD\VEXWWKH\VKRXOGQHYHUWDNHWKH SODFHRIDFWXDOPDWK,I\RXGRXEOHDQGWULSOHFKHFN\RXUZRUNDQG\RXߞ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ߞVDOVRDQH[DPSOHRIDTXHVWLRQWKDWWKH$&7ZLOOOHW\RXVROYHZLWKRXWGRLQJDQ\DFWXDOPDWKLI \RXQRWLFHWKHDQVZHUFKRLFHV 7KHTXHVWLRQGHVFULEHVDUHFWDQJOHZLWKVLGHVRIPHWHUVDQGPHWHUV7KHQLWDVNVKRZORQJWKH GLDJRQDORIWKHUHFWDQJOHLV 1RWLFHWKDW\RXFDQߞWDQVZHUWKLVTXHVWLRQLI\RXGRQߞWNQRZWKDWWKHZRUGߡGLDJRQDOߢPHDQVDVWUDLJKW OLQHIURPRQHFRUQHURIWKHUHFWDQJOHWRWKHRSSRVLWHFRUQHU7KLVLVRQHH[DPSOHRIZK\LWߞVVRLPSRUWDQW WRKDYHDVROLGFRPPDQGRIWKHEDVLFPDWKFRQFHSWVWKDWFDQDSSHDURQWKH$&70DWKVHFWLRQ :HFDQUHFRJQL]HWKDWWKHTXHVWLRQLVWDONLQJDERXWILQGLQJWKHK\SRWHQXVHRIDWULDQJOHZLWKVLGHVRI DQG 0RVWWHVWWDNHUVZLOOSUREDEO\DSSURDFKWKLVE\MXVWSOXJJLQJLWLQWRWKH3\WKDJRUHDQ7KHRUHPZKLFKZLOO ORRNOLNHWKLV 7KDWJLYHVXV + DVWKHFRUUHFWDQVZHU 7KHUHߞVQRWKLQJZURQJZLWKWKLVVROXWLRQDQGLI\RXFDQDSSO\LWZLWKRXWPDNLQJDQ\PLVWDNHV\RXFDQJHW WKHULJKWDQVZHULQUHODWLYHO\VKRUWRUGHUDQGPRYHRQ 6WLOOWKHUHDUHDFRXSOHRILQWHUHVWLQJWKLQJVWRQRWHLQWKLVTXHVWLRQ)RURQHWKLQJ\RXPLJKWQRWLFHWKDW DQGDUHERWKGLYLVLEOHE\WKHQ\RXFDQUHDOL]HWKDWWKRVHVLGHOHQJWKVFRUUHVSRQGWRWKHOHJVRID ULJKWWULDQJOH7KDWPHDQVWKHOHQJWKRIWKHGLDJRQDOPXVWEHHTXDOWR[ZKLFKLV ,IWKDWVRXQGVFRQIXVLQJRULILWVRXQGVKDUGHUWKDQMXVWXVLQJWKH3\WKDJRUHDQ7KHRUHPGRQߞWZRUU\ DERXWLWߚMXVWVWLFNZLWKWKH3\WKDJRUHDQ7KHRUHP(LWKHUDSSURDFKFDQJHW\RXWKHULJKWDQVZHUSUHWW\ TXLFNO\,WߞVDPDWWHURISHUVRQDOSUHIHUHQFH %XWWKHUHߞVDQRWKHUZD\WRVROYHWKLVTXHVWLRQWKDWDOPRVWGRHVQߞWLQYROYHFDOFXODWLQJDQ\WKLQJDWDOODQG LWߞVRQO\SRVVLEOHEHFDXVHRIWKHDQVZHUFKRLFHVWKH$&7KDVSURYLGHGIRUWKLVTXHVWLRQ 1RWLFHWKDWFKRLFHV ) DQG * DUHHDFKWRRVPDOOWREHWKHOHQJWKRIWKHGLDJRQDOEHFDXVHWKHGLDJRQDO PXVWEHORQJHUWKDQHLWKHURIWKHVLGHVRIWKHUHFWDQJOH %\WKHZD\WKHLGHDRIWKHGLDJRQDOEHLQJORQJHU WKDQHLWKHUVLGHLVQߞWDJHRPHWU\IDFWWKDW,ߞYHPHPRUL]HGDQG,ߞPQRWUHFRPPHQGLQJWKDW\RXPHPRUL]HLW ,WߞVMXVWVRPHWKLQJWKDWNLQGRIPDNHVVHQVHLI\RXWKLQNDERXWLWߚLIWKHGLDJRQDOZHUHWKHVDPHOHQJWKDV RQHRIWKHVLGHVWKHQLWFRXOGQߞWUHDFKDOOWKHZD\WRWKHRSSRVLWHFRUQHUIURPLWVVWDUWLQJFRUQHU6RWKH GLDJRQDOPXVWEHORQJHUWKDQHLWKHUVLGH 1RZQRWLFHWKDW - LVZKDW\RXJHWLI\RXMXVWDGGWKHWZRVLGHOHQJWKVWRJHWKHUVRLWߞVWRRELJWREHWKH GLDJRQDO 7KHGLDJRQDOLVWKHVKRUWHVWGLVWDQFHIURPRQHFRUQHUWRWKHRSSRVLWHFRUQHUVRLWKDVWREHOHVV WKDQWKHVXPRIERWKVLGHOHQJWKVWRJHWKHU )LQDOO\ . LVZKDW\RXJHWLI\RXGRXEOH - RULI\RXPLVUHDG WKHTXHVWLRQDQGILQGWKHSHULPHWHURIWKHUHFWDQJOHLQVWHDGRILWVGLDJRQDO7KLVLVHYHQELJJHUWKDQ - VR LWPXVWDOVREHZURQJ 6RLIZHSD\DWWHQWLRQWRKRZWKHDQVZHUFKRLFHVUHODWHEDFNWRWKHTXDQWLWLHVLQWKHTXHVWLRQZHFDQ DFWXDOO\VHHWKDWWZRFKRLFHVDUHWRRVPDOOWZRFKRLFHVDUHWRRELJDQGRQO\ + LVHYHQDSRVVLEOH FDQGLGDWHIRUWKHFRUUHFWDQVZHU,QWKDWZD\ZHFDQVROYHWKHTXHVWLRQLQDIHZVHFRQGVDQGQHYHUHYHQ SLFNXSDSHQFLOߚQRWEHFDXVHRIWKHPDWKLQYROYHGLQWKHTXHVWLRQEXWEHFDXVHRIWKHDQVZHUFKRLFHVWKH $&7JLYHVXV ,ߞ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ߞVRQHRILWVIDYRULWHWKLQJVWRGR $QRWKHUUHDVRQSHRSOHPLJKWPLVVWKLVTXHVWLRQLVWKDWWKHFRHIILFLHQWRI[LVZKLFKLVWKHVTXDUHRI ZKLFKLVRQHRIWKHZURQJDQVZHUFKRLFHV,I\RXߞUHLQDKXUU\\RXPLJKWJODQFHDWWKLVTXHVWLRQDQGMXVW VHH[DQGDQGWKHQWKLQNߡ2KWKDWߞVHDV\[VTXDUHGHTXDOVVR[PXVWEHRUߢ6XUHHQRXJK FKRLFH ' LVDQGFKRLFH ( LVWRWDNHDGYDQWDJHRIWKRVHNLQGVRIPLVWDNHV 1RWLFHDOVRWKDWWKHFRUUHFWDQVZHULVLQWKHPLGGOHRIDNLQGRIKDOYHVDQGGRXEOHVVHULHVZLWK DQGRQHLWKHUHQG$VZHߞYHDOUHDG\GLVFXVVHGPXOWLSO\LQJRUGLYLGLQJWKHFRUUHFWDQVZHUE\WZRLVD FRPPRQZD\WKDWWKH$&7FRPHVXSZLWKZURQJDQVZHUFKRLFHV/LNHDQ\RWKHUDQVZHUFKRLFHSDWWHUQRQ WKH$&70DWKVHFWLRQLWߞVQRWJRLQJWREHDFFXUDWHRQHYHU\VLQJOHTXHVWLRQEXWVHHLQJLWLQWKLVFDVHFDQ KHOSUHDVVXUHXVWKDWLVLQGHHGSUREDEO\FRUUHFW %HIRUHZHILQLVKZLWKWKLVTXHVWLRQ,ZDQWWRSRLQWRXWWKDWWKHUHߞVDQRWKHUZD\WRDSSURDFKLWLI\RXߞUH KDQG\ZLWK\RXUFDOFXODWRU\RXFRXOGMXVWXVHWKHFDOFXODWRUWRHYDOXDWHWKHH[SUHVVLRQZLWKHDFKDQVZHU FKRLFHSOXJJHGLQIRU[DQGWKHQFKRRVHWKHDQVZHUWKDWUHVXOWVLQDYDOXHRI]HUR6R\RXߞGHQWHUWKH IROORZLQJH[SUHVVLRQVLQ\RXUFDOFXODWRU w ߙ w ߙ w ߙ w ߙ w ߙ 7KHQ\RXMXVWVHHZKLFKRQHFDXVHV\RXUFDOFXODWRUWRUHWXUQDYDOXHRI]HURDQGWKDWߞVWKHFRUUHFWDQVZHU 5HPHPEHUWKDW\RXFDQGRWKRVHNLQGVRIWKLQJVRQWKH$&7VRPHWLPHVߚSHRSOHRIWHQIRUJHWWKDWVXFK HDV\DSSURDFKHVDUHSRVVLEOHEHFDXVHWKH\ZRXOGQߞWEHDOORZHGLQVRPHPDWKFODVVHV 3DJH4XHVWLRQ ,WZRXOGEHSHUIHFWO\ILQHWRDSSURDFKWKLVTXHVWLRQLQHLWKHURIWKHZD\VVXJJHVWHGE\WKH5HG%RRNRQ SDJHVR,ZRQߞ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ߞV RQO\SRVVLEOHWRGHWHUPLQHDYDOXHIRUDQH[SUHVVLRQWKDWLQYROYHVERWKYDULDEOHVQRWIRUHLWKHUYDULDEOH RQLWVRZQ ,IZHNHHSWKDWLQPLQGDQGXVHRQHRIWKHDSSURDFKHVLQWKH5HG%RRNIRUWKLVTXHVWLRQZHߞOOVHHWKDWWKH DQVZHULVDFWXDOO\SUHWW\HDV\WRILQG$OOZHKDYHWRGRLVSD\FDUHIXODWWHQWLRQWRZKDWWKHTXHVWLRQ DFWXDOO\VD\VDQGUHPHPEHUWKHNLQGVRIVWDQGDUGL]HGWULFNVWKDWWKH$&7OLNHVWRSOD\ 7KLVTXHVWLRQLVDOVRLQWHUHVWLQJEHFDXVHWKHFRUUHFWDQVZHUVDWLVILHVDORWRIWKHFRPPRQSDWWHUQVWKDW IUHTXHQWO\PDUNFRUUHFWDQVZHUVRQWKH$&70DWKVHFWLRQ w,WߞVVLPLODUWRWKUHHRXWRIILYHRIWKHDQVZHUFKRLFHVLQWKDWLWߞVSRVLWLYH w,WߞVWZLFHDVPXFKDVRQHRIWKHZURQJDQVZHUV w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ߞOOHLWKHUJHWFRQIXVHGDERXWKRZWRVWDUWRU PDNHDPHQWDOHUURULQ\RXUVROXWLRQ 7KH5HG%RRNߞVVROXWLRQWRWKHTXHVWLRQ ZKLFKDSSHDUVRQSDJH LVDGHTXDWHDVIDUDVLWJRHV,IWKH UDGLXVRIWKHFLUFOHLVWKHQLWVGLDPHWHULVZKLFKPHDQVWKDWWKHVLGHOHQJWKRIWKHVTXDUHLV ZKLFKPHDQVWKHDUHDLVRU6RFKRLFH . LVWKHFRUUHFWDQVZHU)LQH %XWQRWLFHKRZKDUGWKLVTXHVWLRQLVZRUNLQJWRPDNHXVWKLQNDERXWWKHFLUFOHUDWKHUWKDQWKHDUHDRIWKH VTXDUH )RURQHWKLQJWKHGLDJUDPVKRZVWKHUDGLXVDWDQXSZDUGDQJOHUDWKHUWKDQVKRZLQJDSHUIHFWO\KRUL]RQWDO RUYHUWLFDOUDGLXV,VXVSHFWWKDWWKH$&7GLGQߞWZDQWWRPDNHLWWRRREYLRXVWKDWWKHUDGLXVFRXOGEHXVHG WRHVWDEOLVKWKHZLGWKRUKHLJKWRIWKHVTXDUH )XUWKHU - LVWKHDUHDRIWKHFLUFOHDQG ) LVWKHDUHDRIWKHFLUFOHLI\RXIRUJHWDERXWͯ &DQ\RXVHHKRZDORWRIWHVWWDNHUVPLJKWPLVUHDGWKHTXHVWLRQWKLQNWKH\ZHUHVXSSRVHGWRILQGWKHDUHD RIWKHFLUFOHDQGWKHQFKRRVH - ZLWKRXWDVHFRQGWKRXJKW"7KLVLVH[DFWO\WKHNLQGRIPLVWDNHWKDW\RX KDYHWRPDNHVXUH\RXQHYHUHYHUPDNHRQWKH$&7 $ORQJVLPLODUOLQHV * LVZKDW\RXZRXOGJHWLI\RXVROYHGIRUWKHVTXDUHߞVSHULPHWHU LQVWHDGRILWVDUHDߚ\HWDQRWKHUSRVVLEOHPLVUHDGLQJWKDWWKH$&7LVWU\LQJWRWDNHDGYDQWDJHRI $OVRQRWLFHWKDW + LVZKDW\RXZRXOGJHWLI\RXVTXDUHGWKHUDGLXVDQGWKHQPXOWLSOLHGLWE\LQVWHDGRI PXOWLSO\LQJLWE\DQGWKHQVTXDULQJLW,WߞVDOVRKDOIRIWKHFRUUHFWDQVZHUZKLFKLVDFRPPRQZURQJ DQVZHUSDWWHUQRQWKH$&70DWKVHFWLRQDVZHߞYHGLVFXVVHGIRUVHYHUDOTXHVWLRQV 7KLVTXHVWLRQLVMXVWRQHPRUHSLHFHRIHYLGHQFHWRSURYHWKDWWKH$&7GHOLEHUDWHO\WULHVWRPLVOHDGDQG FRQIXVH\RX'RQߞWOHW\RXUVHOIJHWGLVWUDFWHGIURPWKHVLPSOHPDWKFRQFHSWVWKDWPDNHXSWKHEDFNERQHRI HDFKTXHVWLRQDQGGRQߞWIRUJHWWRUHDGWKHTXHVWLRQDQGDOOWKHDQVZHUFKRLFHVFDUHIXOO\ߚLWFDQKHOS\RX DYRLGVLPSOHPLVWDNHVWKDWZLOOFRVW\RXSRLQWVIRUQRUHDVRQ 3DJH4XHVWLRQ 7KLVLVDQRWKHUTXHVWLRQWKDWKDVDPXFKVLPSOHUVROXWLRQWKDQWKHRQHWKH5HG%RRNSURYLGHVRQSDJH %XWOHWߞVJRWKURXJKWKHWUDGLWLRQDODSSURDFKILUVWMXVWWRPDNHVXUH\RXXQGHUVWDQGWKHVROXWLRQ 3HUVRQDOO\,SUHIHUWRGUDZDGLDJUDPZKHQWKHTXHVWLRQGHVFULEHVDSK\VLFDOUHODWLRQVKLSDPRQJSRLQWV RUOLQHVEXWGRHVQߞWSURYLGHLWVRZQGLDJUDP2IFRXUVHWKHGLDJUDPZHGUDZGRHVQߞWKDYHWREHVFDOHG DFFXUDWHO\,WVSXUSRVHLVMXVWWRKHOSXVTXLFNO\YLVXDOL]HWKHVLWXDWLRQLQWKHTXHVWLRQ,WPLJKWORRNOLNH WKLV :HߞUHDVNHGWRILQGWKHGLVWDQFHEHWZHHQWKHWZRSRLQWVZKLFK,ߞYHLQGLFDWHGZLWKDGRWWHGOLQHLQP\ GLDJUDP $V\RXSUREDEO\NQRZWKHUHߞVDGLVWDQFHIRUPXODWKDWLVWDLORUHGH[DFWO\WRWKLVNLQGRIVLWXDWLRQ<RXFDQ ILQGLWRQSDJHRIWKH5HG%RRNLQWKH$&7ߞVRIILFLDOH[SODQDWLRQRIWKLVTXHVWLRQ 6LQFHWKHGLVWDQFHIRUPXODLVMXVWDVSHFLILFDSSOLFDWLRQRIWKH3\WKDJRUHDQ7KHRUHPDQGVLQFHWKH 3\WKDJRUHDQ7KHRUHPLVHDVLHUIRUPHWRUHPHPEHUWKDQWKHGLVWDQFHIRUPXOD,ߞGUDWKHUMXVWXVHWKH 3\WKDJRUHDQ7KHRUHP,I\RXSUHIHUWKHGLVWDQFHIRUPXODSOHDVHIHHOIUHHWRXVHWKDW :HFDQVHHIURPWKHGLDJUDPWKDWZHFDQPDNHWKHSRLQW EHWKHULJKWDQJOHLQRXUWULDQJOH7KH KRUL]RQWDOOHJRIWKHWULDQJOHKDVDOHQJWKRIDQGWKHYHUWLFDOOHJKDVDOHQJWKRI7KHXQNQRZQGLVWDQFH ZLOOEHRXUK\SRWHQXVH6RZHSOXJRXUOHJOHQJWKVLQWRWKH3\WKDJRUHDQ7KHRUHPDQGVROYHIRUWKH K\SRWHQXVH 6RFKRLFH ( LVFRUUHFW /LNH,VDLGWKDWߞVWKHWUDGLWLRQDOZD\WRDSSURDFKWKHTXHVWLRQߚHVVHQWLDOO\ZKDWWKH$&7WHOOV\RXWRGR RQSDJHRIWKH5HG%RRN %XWZHFDQDQVZHUWKHTXHVWLRQPXFKPRUHHDVLO\DQGGLUHFWO\LIZHFRQVLGHUWKHDQVZHUFKRLFHVIURPWKH EHJLQQLQJDQGSODFHWKHPLQFRQWH[WZLWKWKHTXDQWLWLHVLQWKHTXHVWLRQ WKHGLDJUDPPD\KHOSXVWRJUDVS WKHVHUHODWLRQVKLSVPRUHHDVLO\E\WKHZD\ ,IZHGRWKDWZHVHHWKDW $ LVWRRVPDOOWREHWKHGLVWDQFHEHFDXVHLWߞVVKRUWHUWKDQWKHYHUWLFDO VHSDUDWLRQEHWZHHQWKHWZRSRLQWV :HDOVRVHHWKDW % LVWRRODUJHWREHWKHGLVWDQFHEHFDXVHLWߞVWKHVXPRIWKHYHUWLFDOVHSDUDWLRQDQGWKH KRUL]RQWDOVHSDUDWLRQEXWWKHVWUDLJKWOLQHGLVWDQFHEHWZHHQWKHWZRSRLQWVPXVWEHVKRUWHUWKDQWKDWVXP 6LQFH % LVWRRODUJHZHFDQVHHWKDW & DQG ' DUHDOVRWRRODUJHVLQFHWKH\ߞUHELJJHUWKDQ % ( LVH[SUHVVHGDVDUDGLFDOEXWZHFDQWHOOLWPXVWUHVXOWLQDYDOXHEHWZHHQDQGEHFDXVHLV DQGLVDQGLVEHWZHHQDQG <RXFRXOGDOVRMXVWSXW࠼LQ\RXUFDOFXODWRUDQG\RXߞGVHH LWߞVURXJKO\ 6REDVLFDOO\LIZHFDQQRWLFHWKDW ( LVWKHRQO\DQVZHUFKRLFHWKDWߞVJUHDWHUWKDQ ZKLFKLVWKHYHUWLFDO VHSDUDWLRQEHWZHHQWKHSRLQWV DQGVPDOOHUWKDQ ZKLFKLVWKHVXPRIWKHKRUL]RQWDODQGYHUWLFDO VHSDUDWLRQV ZHFDQWHOOLWKDVWREHFRUUHFWZLWKRXWHYHQZRUU\LQJDERXWWKH3\WKDJRUHDQ7KHRUHPRUWKH GLVWDQFHIRUPXOD $QGKHUHߞVDQHYHQIDVWHUDSSURDFKWRWKLVTXHVWLRQLI\RXߞUHXSIRULWLI\RXUHDOL]HWKDWILQGLQJWKH GLVWDQFHZLOOXOWLPDWHO\LQYROYHWDNLQJWKHVTXDUHURRWRIDQRQVTXDUHQXPEHU EHFDXVH\RXߞOOKDYHWR DGGWRDVTXDUHQXPEHUDQGWKHQWDNHWKHVTXDUHRIWKDWVXP WKHQWKDWߞVDQRWKHUZD\WRUHDOL]HWKDW ( PXVWEHFRUUHFWZLWKRXWOLIWLQJ\RXUSHQFLO -XVWWREHFOHDU,ߞPQRWVD\LQJWKDWHLWKHURIWKRVHODVWWZRDSSURDFKHVLVQHFHVVDULO\EHWWHUWKDQWKH DSSURDFKHVLQWKH5HG%RRNRQSDJH,I\RXIHHOPRUHFRQILGHQWXVLQJDIRUPXODWRDSSURDFKWKLV TXHVWLRQWKHUHߞVQRWKLQJZURQJZLWKWKDW,ߞPMXVWWU\LQJWRSRLQWRXWWKDWWKHUHߞVRIWHQPRUHJRLQJRQLQDQ $&70DWKTXHVWLRQWKDQMXVWWKHPDWKLWVHOI :LWKWKDWLQPLQGOHWߞVWDNHDORRNDWVRPHPLVWDNHVWKDWFRXOGOHDGWRWKHYDULRXVZURQJDQVZHUV $ LVWKHGLIIHUHQFHEHWZHHQDQG,WߞVZKDW\RXߞGJHWLI\RXPLVWDNHQO\WKRXJKWWKHWZRSRLQWVZHUH FRQQHFWHGE\DKRUL]RQWDORUDYHUWLFDOOLQHLQVWHDGRIDGLDJRQDORQHZKLFKFRXOGKDSSHQLI\RXPLVUHDG WKHPDV DQG RU DQG % LVWKHVXPRIDQG,WߞVZKDW\RXߞGJHWLI\RXPDGHWKHPLVWDNHIURPWKHSUHYLRXVFKRLFH$1'\RX DOVRWKRXJKWRQHRIWKHSRLQWVZDVQHJDWLYH & LVWKHVTXDUHRI ZKLFK\RXFRXOGJHWLI\RXDSSOLHGWKHGLVWDQFHIRUPXODLQFRUUHFWO\ ' LVWKHVTXDUHRI ZKLFK\RXFRXOGDOVRJHWE\DSSO\LQJWKHGLVWDQFHIRUPXODLQFRUUHFWO\ 3DJH4XHVWLRQ 7KLVTXHVWLRQZLOOLQWLPLGDWHDORWRIXQWUDLQHGWHVWWDNHUVEHFDXVHLWVDSSHDUDQFHVHHPVVRGLIIHUHQWIURP DQ\WKLQJ\RXߞGEHOLNHO\WRHQFRXQWHULQDFODVVURRPVHWWLQJ%XWDVDOZD\VZHWUDLQHGWHVWWDNHUVNQRZ WKDW$&70DWKTXHVWLRQVPXVWUHO\RQEDVLFFRQFHSWVQRPDWWHUKRZVWUDQJHWKHLUSUHVHQWDWLRQVPD\EH :HDOVRNQRZWKHLPSRUWDQFHRIUHDGLQJFDUHIXOO\DWDOOWLPHVRQWKH$&7 6RZHMXVWUHDGWKHTXHVWLRQFDUHIXOO\DQGILQGRXWZKDWLWZDQWVIURPXV 7KHTXHVWLRQMXVWWHOOVXVWRFKRRVHWKHDQVZHUWKDWDFFXUDWHO\GHVFULEHVWKHWRWDOQXPEHURIGRWVLQWKH ILUVWQURZV7KDWߞVNLQGRIDZHLUGUHTXHVWEXWZHVKRXOGEHXVHGWRZHLUGFRPELQDWLRQVRIEDVLFLGHDV RQWKH$&70DWKVHFWLRQE\QRZ 1RWLFHWKDWZHGRQߞWKDYHWRILJXUHRXWWKDWUHODWLRQVKLSRQRXURZQߚ ZHMXVWKDYHWRUHFRJQL]HWKHFRUUHFWGHVFULSWLRQRIWKDWUHODWLRQVKLSIURPDVHWRIDQVZHUFKRLFHV 7KH5HG%RRNߞVH[SODQDWLRQRQSDJHVXJJHVWVWKDW\RXPDNHDWDEOHWRUHODWHWKHURZQXPEHUVWRWKH QXPEHURIGRWVDQGWKHQWU\WRILJXUHRXWWKHUHODWLRQVKLSRQ\RXURZQXVLQJWKHWDEOH%XW,ZRXOGQߞWGR WKDWLI,ZHUH\RX,WKLQNLWߞVDPXFKEHWWHULGHDWRNHHSDQRSHQPLQGDQGMXVWWHVWRXWHDFKDQVZHUFKRLFH WRVHHLIZKDWLWVD\VLVWUXH7KDWZLOOEHDORWOHVVIUXVWUDWLQJIRUPRVWSHRSOH $ VD\VWKHVXPRIWKHQXPEHURIGRWVLVDOZD\VHTXDOWRQRPDWWHUKRZPDQ\URZV\RXFRXQW:HFDQ GLVSURYHWKLVE\ORRNLQJDWMXVWWKHILUVWURZߚLQRWKHUZRUGVORRNLQJZKHUHQ DFFRUGLQJWRWKH ZRUGLQJLQWKHSURPSW:HVHHWKHUHߞVRQO\RQHGRWLQWKHILUVWURZ2QHGRWLVQߞWWKHVDPHWKLQJDV GRWVVRWKLVFKRLFHLVSUHWW\REYLRXVO\ZURQJLIZHXQGHUVWDQGZKDWWKHSURPSWPHDQVZKHQLWPHQWLRQV ߡWKHILUVWQURZVߢ%XWLI\RXGRQߞ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ߞWZRUNIRURWKHUURZVWKRXJK7REHH[WUDVXUHZHFDQWU\WKHWKLUGURZ ZKHUHQ $WURZV WKHUHLVDWRWDORIQLQHGRWV1LQHLVQߞWWZLFHDVPXFKDVWKUHHVRZHVHHRQFHDJDLQWKDWWKLVFKRLFH GRHVQߞWDFFXUDWHO\GHVFULEHWKHUHODWLRQVKLSEHWZHHQWKHQXPEHURIURZVDQGWKHVXPRIWKHGRWV & WHOOVXVWKDWWKHWRWDOLVHTXDOWRWLPHVWKHQXPEHURIURZV$V,PHQWLRQHGLQP\H[SODQDWLRQRI FKRLFH $ WKLVLVFOHDUO\LQFRUUHFWLIZHXQGHUVWDQGZKDWWKHSURPSWPHDQVZKHQLWXVHVWKHSKUDVHߡLQ WKHILUVWQURZVߢ)RUH[DPSOHWKHILUVWURZKDVRQO\RQHGRWQRWGRWV%XWLIZHGRQߞWTXLWHXQGHUVWDQG WKDWSKUDVHZHPLJKWWKLQN & LVFRUUHFWVLQFHWKHUHDUHGRWVRQWKHSDJHDQGURZVRQWKHSDJHDQG %XWDJDLQZHFDQRQO\UHDFKWKLVLQFRUUHFWFRQFOXVLRQLIZHPLVUHDGWKHTXHVWLRQDQGWKDW PLVUHDGLQJZRXOGDOVROHDGXVWRWKLQNWKDW $ LVFRUUHFW6LQFHZHNQRZWKDWRQO\RQHDQVZHUFKRLFH FDQEHFRUUHFWZHVKRXOGEHDEOHWRUHDOL]HWKDWZHPXVWKDYHPLVUHDGWKHTXHVWLRQDQGQHHGWRUH HYDOXDWHLW ' VD\VWKDWWKHUXQQLQJWRWDODWHDFKURZLVDOZD\VHTXDOWRWKHVTXDUHRIWKHQXPEHURIURZV/HWߞVWU\ WKLVRQHRXWDWRQHURZWKHUHLVRQHGRW2QHLVHTXDOWRRQHVTXDUHGVRWKDWFKHFNVRXW$WWZRURZV WKHUHDUHIRXUGRWVDQGIRXULVHTXDOWRWZRVTXDUHG7KHQZHKDYHDQGDQGDQGWKLV SDWWHUQGRHVZRUNDWHYHU\URZLQWKHGLDJUDPVRWKLVPXVWEHWKHFRUUHFWDQVZHUFKRLFH 2IFRXUVHDV WUDLQHGWHVWWDNHUVZHNQRZZHKDYHWRFKHFNHYHU\DQVZHUFKRLFHWRKHOSXVPDNHVXUHZHߞUHQRW PDNLQJDPLVWDNH ( PXVWEHZURQJEHFDXVHZHMXVWVDZWKDWWKHUHLVDUHODWLRQVKLSEHWZHHQWKHQXPEHURIURZVDQGWKH WRWDOQXPEHURIGRWV 7UDGLWLRQDOPDWKFODVVHVRIWHQOHDYHXVZLWKWKHIHHOLQJWKDWZHKDYHWREHWROGH[DFWO\KRZWRGR VRPHWKLQJEHIRUHZHFDQGRLWRXUVHOYHV7KH$&70DWKVHFWLRQWULHVWRWDNHDGYDQWDJHRIWKDW SURJUDPPLQJE\VKRZLQJXVTXHVWLRQVOLNHWKLVZLWKFRQFHSWVZHߞYHSUREDEO\QHYHUVHHQEHIRUH7KH $&7NQRZVWKDWPRVWWHVWWDNHUVZLOOJHWYHU\IUXVWUDWHGZLWKQRYHOTXHVWLRQVOLNHWKLV %XWWUDLQHGWHVWWDNHUVOLNHXVDOZD\VUHPHPEHUWKDWWKH$&70DWKVHFWLRQKDVWRUHO\RQYHU\EDVLFPDWK FRQFHSWVSUHVHQWHGLQZHLUGZD\VVRZHGRQߞWSDQLFZKHQZHVHHVRPHWKLQJVWUDQJH,QVWHDGZHUHDG FDUHIXOO\NHHSWKH$&7ߞVVWDQGDUGWULFNVLQPLQGDQGJHWWRZRUN 3DJH4XHVWLRQ 7KLVRQHPLJKWVHHPDOLWWOHWULFN\HVSHFLDOO\IRUSHRSOHZKRDUHQߞWFRPIRUWDEOHZLWKJUDSKLQJ LQHTXDOLWLHV%XWDVWUDLQHGWHVWWDNHUVZHNQRZWKDW$&70DWKTXHVWLRQVGRQߞWQHFHVVDULO\UHTXLUH NQRZOHGJHRIWKHPDWKFRQFHSWVWKH\VHHPWRLQYROYHߚLQIDFWZHNQRZWKH$&7RIWHQOLNHVWRWU\WR PLVOHDGXVE\PDNLQJTXHVWLRQVORRNKDUGHURUPRUHDGYDQFHGWKDQWKH\UHDOO\DUH ,WߞVDOZD\VLPSRUWDQWWRUHDGWKHDQVZHUFKRLFHVZKHQ\RXߞUHORRNLQJDWDQ$&70DWKTXHVWLRQEXWLWߞV HVSHFLDOO\LPSRUWDQWZKHQZHߞUHQRWVXUHH[DFWO\KRZWRSURFHHG,QWKLVFDVHZKHQZHFKHFNWKHDQVZHU FKRLFHVZHVHHWKDWHDFKDQVZHUFKRLFHKDVWKHIROORZLQJHOHPHQWV wDUHODWLRQVKLSEHWZHHQ\DQG[ wWKHZRUGߡDQGߢRUWKHZRUGߡRUߢ wDUHODWLRQVKLSEHWZHHQ[DQG 1RWLFLQJWKHVHSDWWHUQVLQWKHDQVZHUFKRLFHVDFWXDOO\PDNHVWKLVTXHVWLRQDORWHDVLHUIRUXV:HGRQߞW KDYHWRILJXUHRXWWKHVORSHVRIHLWKHURIWKHOLQHVLQWKHILJXUHEHFDXVHZHFDQWHOOIURPWKHDQVZHU FKRLFHVWKDWWKHVODQWHGOLQHPXVWKDYHDVORSHRI[,QVWHDGDOOZHKDYHWRGRLVILJXUHRXWZKLFK DQVZHUFKRLFHGHVFULEHVWKHVKDGHGUHJLRQDFFXUDWHO\ 7KHUHDUHDWOHDVWWZRZD\VZHFDQGRWKDWGHSHQGLQJRQKRZFRPIRUWDEOHZHDUHZLWKPDWK ,IZHߞUHIDPLOLDUZLWKWKHDFWXDOPDWKSULQFLSOHVLQYROYHGLQWKHTXHVWLRQWKHQZHDOUHDG\NQRZWKDWWKH ߡJUHDWHUWKDQߢLQHTXDOLW\FRUUHVSRQGVWRVKDGHGDUHDVDERYHRUWRWKHULJKWRIDOLQHZKLOHWKHߡOHVVWKDQߢ LQHTXDOLW\FRUUHVSRQGVWRVKDGHGDUHDVEHORZRUWRWKHOHIWRIDOLQH:HDOVRNQRZIURPWKHGLDJUDPWKDW WKHVKDGHGDUHDPXVWIDOOWRWKHULJKWRIWKHYHUWLFDOOLQH[ DQGWRWKHOHIWRIWKHVODQWHGOLQH\ [6R FKRLFH $ ZLOOEHFRUUHFW7KLVLVEDVLFDOO\WKHORJLFXVHGLQWKH5HG%RRNߞVRIILFLDOH[SODQDWLRQRQSDJH %XWWKHUHDUHRWKHUZD\VWRDSSURDFKWKLVTXHVWLRQZLWKRXWQHFHVVDULO\XQGHUVWDQGLQJDOORIWKHPDWK LQYROYHGLQWKH5HG%RRNߞVH[SODQDWLRQ 5HPHPEHUWKDW$&70DWKTXHVWLRQVDUHQߞWDOZD\VZKDWWKH\ VHHP ,IZHߞUHOHVVFRPIRUWDEOHZLWKPDWKFRQFHSWVWKHQLWPLJKWEHHDVLHUMXVWWRSLFNVRPHYDOXHVLQGLIIHUHQW UHJLRQVRIWKHJUDSKDQGWHVWWKHLU[DQG\YDOXHVDJDLQVWWKHDQVZHUFKRLFHVXQWLOZHILQGDVLQJOHDQVZHU FKRLFHWKDWDFFXUDWHO\GHILQHVRQO\WKHVKDGHGUHJLRQ )RUWKLVW\SHRIDSSURDFK,ߞGGHILQLWHO\ZDQWWRPDNHVXUHWKHFRUUHFWDQVZHUDFFXUDWHO\GHVFULEHVWKH YDOXH EHFDXVHWKDWSRLQWLVFOHDUO\LQVLGHWKHVKDGHGUHJLRQ6ROHWߞVVHHZKLFKDQVZHUFKRLFHV ZRXOGLQFOXGHWKDWSRLQW $ GRHV % GRHV & GRHVQߞW ' GRHV ( GRHVQߞW 6RZHFDQWHOOWKDW & DQG ( PXVWEHZURQJEHFDXVHWKH\GRQߞWZRUNZLWKWKHSRLQW ZKLFKLVD SRLQWWKDWIDOOVLQWKHVKDGHGUHJLRQ 1RZZHVKRXOGWHVWVRPHSRLQWVWKDWDUH127VXSSRVHGWRZRUNDQGHOLPLQDWHDQ\DQVZHUFKRLFHVIRU ZKLFKWKHWHVWSRLQWZRXOGEHYDOLG,ߞOOSLFNWKHSRLQW WRVWDUWVLQFHWKHYDOXHVRIDQGVKRXOGEH UHODWLYHO\HDV\WRWHVWRXW IRUWKDWPDWWHUDQ\YDOXHLVSUREDEO\JRLQJWREHSUHWW\HDV\WRZRUNZLWKRQ WKLVTXHVWLRQVLQFHZHߞUHMXVWFRPSDULQJYDOXHVWRRWKHUYDOXHV ,IZHWU\WKHYDOXHRI WKHVHDUHWKHUHVXOWVZHJHW $ LVQߞWYDOLGIRUWKHSRLQW % LVDOVRQRWYDOLGIRUWKHSRLQW & ZDVDOUHDG\HOLPLQDWHGZKHQZHWHVWHG ' LVYDOLGIRUWKHSRLQW ( ZDVDOVRDOUHDG\HOLPLQDWHGZKHQZHWHVWHG 5HPHPEHUWKDWWKHGLDJUDPLQWKHTXHVWLRQGRHVQߞWKDYHVKDGLQJLQWKHUHJLRQWKDWLQFOXGHV 7KDW PHDQVZHߞUHORRNLQJIRUDFRUUHFWDQVZHUWKDWLVQߞWYDOLGIRUWKHSRLQW 6R $ DQG % DUHVWLOOLQ WKHUXQQLQJZKLOH ' KDVEHHQHOLPLQDWHG $WWKLVSRLQWZHZRXOGQHHGWRWHVWDSRLQWLQDQRWKHUUHJLRQWRVHHLIZHFDQHOLPLQDWHHLWKHU $ RU % $QHDV\SRLQWWRWHVWZRXOGSUREDEO\EH 7KDWSRLQWLVQߞWLQWKHVKDGHGUHJLRQRIWKHJUDSKVRLW VKRXOGQRWEHYDOLGIRUWKHFRUUHFWDQVZHU/HWߞVWHVWLWIRU $ DQG % $ LVQߞWYDOLGIRUWKHSRLQW % LVYDOLGIRUWKHSRLQW 7KHVKDGHGUHJLRQLQFOXGHVWKHSRLQW EXWGRHVQߞWLQFOXGH RU 6RWKHFRUUHFWDQVZHU VKRXOGEHYDOLGIRU DQGLWVKRXOGEHLQYDOLGIRU DQGIRU 2QO\RQHDQVZHUFKRLFH PHHWVDOOWKUHHRIWKRVHFULWHULDDQGWKDWߞVFKRLFH $ 2IFRXUVHLIWKLVLGHDRIWHVWLQJGLIIHUHQWSRLQWVWRHOLPLQDWHDQVZHUFKRLFHVVHHPVWRRFRQIXVLQJRUWLPH FRQVXPLQJWKHQ\RXGRQߞWKDYHWRGRLWߚ\RXFRXOGDOZD\VMXVWXVHWKHILUVWDSSURDFKLI\RXZDQWRU\RX FRXOGVNLSWKLVTXHVWLRQDQGFRPHEDFNWRLWODWHU,MXVWZDQWHGWRZDONWKURXJKWKLVVHFRQGDSSURDFK EHFDXVHVRPHUHDGHUVPLJKWSUHIHULW $OVRMXVWWREHFOHDULWLVQߞWQHFHVVDU\WRWHVWDQ\RIWKHWKUHHVSHFLILFSRLQWVWKDW,WHVWHGLQRUGHUWR IROORZWKLVDSSURDFKLWZDVRQO\QHFHVVDU\WRWHVWSRLQWVLQGLIIHUHQWUHJLRQVRIWKHJUDSKDQGLWMXVW KDSSHQHGWKDWWKRVHWKUHHSRLQWVLQGLIIHUHQWUHJLRQVDUHWKHRQHV,FKRVH<RXFRXOGKDYHDFKLHYHGWKH VDPHUHVXOWVE\WHVWLQJWKHSRLQWV DQG IRULQVWDQFH 7KLVTXHVWLRQDOVRLQYROYHVWKHߡ$OPRVW/LNH7KH2WKHUVߢSDWWHUQEHFDXVHWKHFRUUHFWDQVZHUDJUHHGZLWK WKHPDMRULW\RIWKHDQVZHUFKRLFHVLQDOOEXWRQHUHVSHFWRXWRIWKHFKRLFHVKDYHߡDQGߢLQVWHDGRI ߡRUߢDQGRXWRIKDYHߡ[ࡅߢLQVWHDGRIߡ[ࡄߢ%XWRQO\RXWRIVWDUWHGZLWKߡ\ࡄ[ߢLQVWHDGRIߡ\ ࡅ[ߢ $JDLQWKHVHSDWWHUQVDUHQHYHUHQRXJKRQWKHLURZQWRJLYH\RXWKHFRUUHFWDQVZHUEXWWKH\FDQSRLQW\RX LQWKHULJKWGLUHFWLRQDQGKHOS\RXFKHFN\RXUZRUN 3DJH4XHVWLRQ 7KLVTXHVWLRQLVZRUWKGLVFXVVLQJIRUDFRXSOHRIYHU\LPSRUWDQWUHDVRQV)RURQHWKLQJLWߞVDTXHVWLRQWKDW IROORZVDFRXSOHRI$&70DWKSDWWHUQVEXWLQVRPHYHU\VXEWOHZD\V)RUDQRWKHUWKLQJLWߞVDFODVVLF H[DPSOHRIWKHZD\WKH$&70DWKVHFWLRQOLNHVWRPDNHTXHVWLRQVVHHPKDUGHUWKDQWKH\DUH$QGWRWRSLW DOORIILWߞV\HWDQRWKHUTXHVWLRQIRUZKLFKWKH5HG%RRNߞVRIILFLDOH[SODQDWLRQLVPRUHFRPSOLFDWHGWKDQLW QHHGVWREH 6ROHWߞVGLYHLQ 7KH$&7LVWU\LQJWRJLYH\RXWKHLPSUHVVLRQWKDWWKHFRUUHFWJUDSKLVJRLQJWREHDSDUDERODRUVRPH RWKHUTXDGUDWLFIXQFWLRQ7KDWߞVZK\WKHIXQFWLRQLQWKHTXHVWLRQLQFOXGHVWKHH[SUHVVLRQ[DQGVRPHRI WKHDQVZHUFKRLFHVIHDWXUHDSDUDEROD %XWWKHTXHVWLRQLVUHDOO\MXVWDVNLQJ\RXWRVLPSOLI\WKHH[SUHVVLRQDQGWKHQFKRRVHWKHDQVZHUZLWKWKH DSSURSULDWHJUDSK 5HPHPEHUWKDWWKH$&7FDQQHYHUUHDOO\DVN\RXWRJUDSKVRPHWKLQJRQ\RXURZQߚ EHFDXVHLWߞVORFNHGLQWRWKHPXOWLSOHFKRLFHIRUPDWLWFDQRQO\DVN\RXWRLGHQWLI\WKHFRUUHFWJUDSKIURPD VHWRIRSWLRQV :KHQ\RXVLPSOLI\WKHIUDFWLRQLQWKHIXQFWLRQ\RXߞOOVHHWKDWLWUHGXFHVWR[H[DFWO\ DVWKH5HG%RRNߞVH[SODQDWLRQRQSDJHGHVFULEHV8VLQJWKHFODVVLF\ P[EIRUPDWZHFDQVHH WKDWWKHFRUUHFWDQVZHUPXVWKDYHDVORSHRIDQGD\LQWHUFHSWRI7KDWߞVWKHJUDSKVKRZQLQFKRLFH $ 7KH5HG%RRNߞVH[SODQDWLRQRQSDJHDGGVWKDWWKHFRUUHFWDQVZHUPXVWKDYHDKROHDWWKHSRLQW 7KLVLVWUXHEXWVLQFHHYHU\JUDSKLQWKHDQVZHUFKRLFHVDOVRKDVDKROHDW[ LWGRHVQߞWUHDOO\ PDWWHULI\RXQRWLFHLWRUQRW ,I\RXߞUHQRWWRRFRPIRUWDEOHZLWKJUDSKLQJOLQHVDQGSDUDERODV\RXFRXOGWDNHDGYDQWDJHRIDPXFK IDVWHUZD\WRVROYHWKLVSUREOHPDVVXPLQJ\RXKDYHDJUDSKLQJFDOFXODWRU,I\RXVLPSO\WHOOWKH FDOFXODWRUWRJUDSKWKHIXQFWLRQGHVFULEHGLQWKHSURPSWWKHFRUUHFWUHVXOWZLOODSSHDURQWKHVFUHHQDQG \RXߞOOVHHWKDWLWPDWFKHVFKRLFH $ 7KH5HG%RRNQHYHUPHQWLRQVWKDWDJUDSKLQJFDOFXODWRUFDQJLYH \RXWKHDQVZHUWRWKLVTXHVWLRQLQDIHZVHFRQGVHYHQLI\RXGRQߞWNQRZWKHPDWK )LQDOO\OHWߞVWDONDERXWWKHDQVZHUFKRLFHSDWWHUQVLQYROYHGLQWKLVTXHVWLRQ $VWUDLQHGWHVWWDNHUVZHߞGZDQWWRQRWLFHWKDWWKUHHRIWKHDQVZHUFKRLFHVIHDWXUHVWUDLJKWOLQHVZKLOH RQO\WZRIHDWXUHSDUDERODV7KLVLVQߞWDJXDUDQWHHWKDWWKHFRUUHFWDQVZHUZLOOIHDWXUHDVWUDLJKWOLQHEXW LWߞVDSUHWW\VWURQJLQGLFDWLRQWKDWWKHFRUUHFWDQVZHUSUREDEO\IHDWXUHVDVWUDLJKWOLQH $QRWKHULQWHUHVWLQJWKLQJLVWKDWIRXURIWKHILYHFKRLFHVJRWKURXJKWKHSRLQW ZKLFKDOVRVWURQJO\ VXJJHVWV EXWGRHVQߞWJXDUDQWHH WKDWWKHFRUUHFWDQVZHUFKRLFHJRHVWKURXJKWKDWSRLQW :KDWDERXWWKH\LQWHUFHSWYDOXH":HFDQVHHWKDWFKRLFHV $ DQG ' IHDWXUHD\LQWHUFHSWDW :H FDQDOVRVHHWKDW % DQG ( HDFKIHDWXUHD\LQWHUFHSWDW 7KRVHWZR\LQWHUFHSWYDOXHVDSSHDUWKH PRVWIUHTXHQWO\LQWKHDQVZHUFKRLFHVߚWZLFHHDFKߚVRZHߞGH[SHFWWKDWRQHRIWKHPLVSUREDEO\FRUUHFW $QGKHUHߞVZKHUHWKLQJVJHWVXEWOHEHFDXVHWKH$&7LVXVLQJLWVVHTXHQFHSDWWHUQLQFKRLFHV $ % DQG & ,IZHORRNFDUHIXOO\ZHߞOOVHHWKDWWKHWKUHHFKRLFHVIHDWXUH\LQWHUFHSWVDW DQG UHVSHFWLYHO\ߚWKUHHYDOXHVLQDQHYHQO\VSDFHGVHULHV:HߞGH[SHFWWKDWWKHYDOXHLQWKHPLGGOHRIWKH VHULHVLVPRVWOLNHO\WREHFRUUHFWDQGWKDWߞV $OORIWKDWVWURQJO\UHLQIRUFHVWKDW $ LVSUREDEO\FRUUHFW 2QFHPRUHZHVHHWKDWWKHUHߞVDORWPRUHJRLQJRQLQWKLVTXHVWLRQWKDQPRVWWHVWWDNHUVZLOOHYHUUHDOL]H RUWKDQWKH$&7LWVHOIZLOOWHOO\RXDERXW.HHSWKDWLQPLQGDV\RXFRQWLQXHWRSUHSDUHߚWKH$&70DWK VHFWLRQLVQߞWDOZD\VZKDWLWVHHPV 3DJH4XHVWLRQ 7KLVTXHVWLRQZLOOIRROPRVWXQWUDLQHG$&7WDNHUV$WILUVWJODQFHLWPLJKWORRNSUHWW\XJO\LWKDVIRXU GLIIHUHQW*UHHNOHWWHUVDWDEOHDQGDQXQIULHQGO\ORRNLQJH[SUHVVLRQ %XWZHNQRZEHWWHUWKDQWRWDNHDQ$&70DWKTXHVWLRQDWIDFHYDOXH)RURQHWKLQJZHNQRZWKDWWULJ TXHVWLRQVRQWKH$&7FDQRQO\UHTXLUHXVWRNQRZWKHEDVLFGHILQLWLRQVRIVLQHFRVLQHWDQJHQWDQGVRRQ ߚWKH$&7GRHVQߞWDOORZLWVHOIWRDVNXVWULJTXHVWLRQVWKDWUHO\RQWKLQJVOLNHWKHFRPSOLFDWHGLGHQWLWLHV \RXPLJKWKDYHOHDUQHGLQDKLJKVFKRROWULJFODVV:HDOVRNQRZWKDWWULJTXHVWLRQVRQWKH$&7WKDW LQFOXGHDߡQRWHߢDUHDOZD\VMXVWH[HUFLVHVLQFDUHIXOUHDGLQJDQGVXEVWLWXWLRQQRPDWWHUKRZFRPSOLFDWHG WKH\ORRNDWILUVW ,QWKHQH[WSDUDJUDSKZHߞOOVWDUWJRLQJWKURXJKWKHVXEVWLWXWLRQEDVHGDSSURDFKWRWKHTXHVWLRQZKLFKLV EDVLFDOO\WKHRQHWKDWWKH5HG%RRNXVHVRQSDJH$IWHUWKDWWKRXJK,ZDQWWRVKRZ\RXDIDVWHU HDVLHUDSSURDFKWRWKHTXHVWLRQWKDWUHOLHVRQDFDOFXODWRUߚDQDSSURDFKWKH5HG%RRNGRHVQߞWWHOO\RX DERXW +HUHߞVKRZWKHVXEVWLWXWLRQDSSURDFKZRUNV7KHTXHVWLRQDVNVXVIRUVLQ ͯ DQGWKHQLWWHOOVXVWKH IROORZLQJ ͯ ͯͯ ,WDOVRWHOOVXVWKLV VLQ ͠͡ VLQ ͠ FRV ͡ FRV ͠ VLQ ͡ 7KHNH\WRWKHVXEVWLWXWLRQDSSURDFKLVWRUHDOL]HWKDWWKHH[SUHVVLRQߡͯͯߢFDQEHSOXJJHGLQIRUWKH ߡ ͠ߙ͡ ߢSRUWLRQRIWKHH[SUHVVLRQߡVLQ ͠͡ ߢ,QRWKHUZRUGVͯZLOOEHRXUYDOXHIRU͠DQGͯZLOO EHRXUYDOXHIRU͡ 7KDWPHDQVZHFDQWDNHRXUQHZYDOXHVIRU͠DQG͡DQGSOXJWKHPLQWRWKHWULJHTXDWLRQSURYLGHGLQWKH TXHVWLRQ+HUHߞVWKHRULJLQDOHTXDWLRQDVLWDSSHDUVRQWKHSDJH VLQ ͠͡ VLQ ͠ FRV ͡ FRV ͠ VLQ ͡ :KHQZHSOXJLQRXUYDOXHVIRU͠DQG͡ZHJHWWKLV VLQ ͯͯ VLQ ͯ FRV ͯ FRV ͯ VLQ ͯ 7KDWPLJKWVHHPDOLWWOHLQWLPLGDWLQJEHFDXVHZHSUREDEO\GRQߞWNQRZWKHYDOXHVIRUWKLQJVOLNH ߡVLQ ͯ FRV ͯ ߢRIIWKHWRSVRIRXUKHDGV%XWWKLVLV\HWDQRWKHUPRPHQWZKHQEHLQJWUDLQHGLQWKH$&7 ZLOOKHOS\RXDYRLGQHHGOHVVZRUU\EHFDXVHWUDLQHGWHVWWDNHUVNQRZWKDWWKH$&7GRHVQߞWUHTXLUH\RXWR PHPRUL]HGLIIHUHQWVLQHDQGFRVLQHYDOXHV6RLIWKHTXHVWLRQLVDVNLQJIRUVLQ ͯ FRV ͯ LWKDVWR SURYLGH\RXZLWKDZD\WRILJXUHWKDWRXW 6XUHHQRXJKZHVHHDWDEOHDWWKHHQGRIWKHTXHVWLRQWKDWLQFOXGHVDYDULHW\RIVLQHDQGFRVLQHYDOXHVIRU JLYHQDQJOHPHDVXUHPHQWV:HVHHWKHIROORZLQJ 1RZZHMXVWSOXJWKRVHYDOXHVLQDFFRUGLQJWRWKHHTXDWLRQSURYLGHGLQWKHTXHVWLRQ5HPHPEHUWKDWWKH RULJLQDOHTXDWLRQZDVWKLV VLQ ͠͡ VLQ ͠ FRV ͡ FRV ͠ VLQ ͡ $QGWKHQZHSOXJJHGLQͯIRU͠DQGͯIRU͡DQGZHJRWWKLV VLQ ͯͯ VLQ ͯ FRV ͯ FRV ͯ VLQ ͯ $QGQRZZHSOXJLQWKHVLQHDQGFRVLQHYDOXHVIURPWKHWDEOHDQGJHWWKLV $WWKLVSRLQWZHFDQSUREDEO\VWDUWWRVHHWKDWRXUZRUNLVEHJLQQLQJWRORRNOLNHWKHDQVZHUFKRLFHV ZKLFKLVDJRRGVLJQ$OOZHQHHGWRGRIURPKHUHLVVLPSOLI\WKHULJKWKDQGVLGHRIWKHHTXDWLRQDQGVHH ZKLFKDQVZHUFKRLFHLWPDWFKHV 6RZHFDQVHHWKDW . LVFRUUHFW . DOVRILWVWKHߡ$OPRVW/LNH7KH2WKHUVߢSDWWHUQEHFDXVHZHFDQVHHWKDWWKUHHRIWKHILYHFKRLFHVKDYH UDGLFDOH[SUHVVLRQVWKUHHRIWKHILYHKDYHDGHQRPLQDWRURIDQG . LVWKHRQO\FKRLFHWRLQFOXGH࠼ $OORIWKLVVXJJHVWVWKDWRXUFKRLFHKDVDYHU\JRRGOLNHOLKRRGRIEHLQJFRUUHFWLQWHUPVRIWKHSDWWHUQVWKH $&7OLNHVWRXVHRQWKH0DWKVHFWLRQ 1RWLFHWKDWWKHWDEOHFRQWDLQVLQIRUPDWLRQDERXWͯZKLFKKDVQRWKLQJWRGRZLWKWKHTXHVWLRQߚLWMXVW FOXWWHUVXSWKHWDEOHLQDQDWWHPSWWRPDNH\RXZRQGHULI\RXVKRXOGEHGRLQJVRPHWKLQJZLWKͯLQWKH IRUPXODVRPHZKHUH $V,PHQWLRQHGDERYHWKLVVXEVWLWXWLRQDSSURDFKLVHVVHQWLDOO\WKHRQHWKDWWKH5HG%RRNSURYLGHV,WߞVD ELWORQJDQGWHGLRXVEXWLWGRHVQߞWDFWXDOO\LQYROYHNQRZLQJDQ\WULJRQRPHWU\LI\RXUHDOO\WKLQNDERXWLW DOOZHKDGWRGRZDVUHFRJQL]HWKDWͯFRUUHVSRQGHGWR͠DQGWKDWͯFRUUHVSRQGHGWR͡DQGWKHQSOXJ WKHJLYHQYDOXHVLQWRWKHJLYHQHTXDWLRQ 1RZOHWߞVWDNHDORRNDWDPXFKPXFKIDVWHUZD\WRDQVZHUWKLVTXHVWLRQLI\RXߞUHFRPIRUWDEOHXVLQJ\RXU FDOFXODWRU 7KHTXHVWLRQLVEDVLFDOO\DVNLQJZKLFKDQVZHUFKRLFHLVDQH[SUHVVLRQHTXLYDOHQWWRVLQ ͯ 6RZH FRXOGVLGHVWHSDOORIWKHVXEVWLWXWLRQE\MXVWILQGLQJVLQ ͯ RQRXUFDOFXODWRUDQGWKHQHYDOXDWLQJHDFK DQVZHUFKRLFHZLWKWKHFDOFXODWRUWRVHHZKLFKRQHPDWFKHVWKHYDOXHRIVLQ ͯ 2XUFDOFXODWRUWHOOVXVWKDWVLQ ͯ LVURXJKO\HTXDOWR 5HPHPEHUWKDWZHKDYHWRXVHWKH ߡ5$'ߢRUߡUDGLDQVߢPRGHZKHQHYDOXDWLQJWKLVH[SUHVVLRQVLQFHLWߞVDWULJH[SUHVVLRQWKDWXVHVͯDQGWKH $&7WUHDWVVXFKH[SUHVVLRQVDVUDGLDQH[SUHVVLRQV 1RZZHMXVWSOXJHDFKDQVZHUFKRLFHLQWRRXUFDOFXODWRUWRH[SUHVVWKHPDOODVGHFLPDOV7KHRQHZKRVH YDOXHLVHVVHQWLDOO\ZLOOEHWKHULJKWDQVZHU6ROHWߞVWDNHDORRN ) JLYHVXV * JLYHVXV + JLYHVXVURXJKO\ - JLYHVXVURXJKO\ . JLYHVXVURXJKO\ 6RZHFDQVHHWKDWWKHH[SUHVVLRQLQ . LVHTXLYDOHQWWRVLQ ͯ ZKLFKVKRZVDJDLQWKDW . PXVWEH FRUUHFW ,ZDQWWRVD\YHU\FOHDUO\WKDW,ߞPQRWHQGRUVLQJHLWKHURIWKHVHWZRDSSURDFKHVRYHUWKHRWKHU7KH FDOFXODWRUDSSURDFKZLOOEHPXFKIDVWHUDQGHDVLHUIRUWHVWWDNHUVZKRNQRZKRZWRXVHWKHLUFDOFXODWRUV WRHYDOXDWHWULJH[SUHVVLRQVEXWWKHFDOFXODWRUDSSURDFKZLOOVHHPQRWWRZRUNLIDWHVWWDNHUGRHVQߞWXVH WKHߡ5$'ߢRUߡUDGLDQVߢPRGH2QWKHRWKHUKDQGWKHVXEVWLWXWLRQDSSURDFKFDQEHXVHGE\DQ\RQHZKR UHDGVFDUHIXOO\DQGSD\VDWWHQWLRQWRGHWDLOZKHWKHUWKDWSHUVRQKDVDFDOFXODWRURUQRW6RLWߞVDOODPDWWHU RIILQGLQJWKHDSSURDFKWKDWZRUNVEHVWIRU\RX,MXVWZDQWHGWRSRLQWRXWWKDWWKHFDOFXODWRUDSSURDFK H[LVWVIRUWKLVTXHVWLRQEHFDXVHLWߞVH[DFWO\WKHNLQGRIXVHIXOVKRUWFXWWKDWWKH5HG%RRNZLOOQHYHUWHOO \RXDERXWDQGLWZLOOEHXVHIXOLQRWKHUTXHVWLRQV\RXPLJKWVHHLQWKHIXWXUH 3DJH4XHVWLRQ 7KLVTXHVWLRQLVDSHUIHFWH[DPSOHRIKRZWKH$&7FDQWDNHDIDLUO\VWUDLJKWIRUZDUGPDWKFRQFHSWDQGWXUQ LWLQWRDTXHVWLRQWKDWZLOOVWLOOFRQIXVHDORWRIWHVWWDNHUVHVSHFLDOO\LIWKH\GRQߞWSD\DWWHQWLRQ/HWߞVWDNH DORRN 7KHTXHVWLRQWHOOVXVWKDWYDVHVFRVWDQGLWDVNVXVKRZPXFKRQHYDVHFRVWV7RILQGWKHFRVWRI RQHYDVHZHGLYLGHWKHWRWDOFRVWE\WKHQXPEHURIYDVHVZKLFKLVRU6RFKRLFH - LVWKH FRUUHFWDQVZHU %\LWVHOIWKDWLVQߞ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ߚLI\RXMXVWUHYHUVHWKHODVWWZRGLJLWVLQ \RXFRXOGWKLQN\RXZHUHORRNLQJDWLQVWHDG &KRLFH + UHVXOWVIURPDQRWKHUSRWHQWLDOPLVUHDGLQJEHFDXVHLWߞVZKDW\RXZRXOGJHWLI\RXGLYLGHG E\UDWKHUWKDQGLYLGLQJE\ ,WPLJKWVHHPOLNHDZDVWHRIWLPHWRVSHQGVRPXFKVSDFHGLVFXVVLQJWKLVTXHVWLRQZKLFKLVUHODWLYHO\ VLPSOH%XW,UHDOO\ZDQWWRGULYHKRPHWKHSRLQWWKDWPRVW$&70DWKTXHVWLRQVDUHDFWXDOO\SUHWW\VLPSOH ߚZKDW\RXUHDOO\KDYHWRORRNRXWIRUDUHVPDOOPLVWDNHVOLNHPLVUHDGLQJVZLWFKLQJWZRQXPEHUVDQGVR RQ$V,NHHSVD\LQJPRVWWHVWWDNHUVFRXOGKLWWKHLUWDUJHWVFRUHVLIWKH\ZRXOGMXVWDSSURDFKHYHU\VLQJOH TXHVWLRQZLWKGLVFLSOLQHDQGHOLPLQDWHXQQHFHVVDU\PLVWDNHVRQTXHVWLRQVOLNHWKLVRQH 3DJH4XHVWLRQ 7KLVLV\HWDQRWKHUH[DPSOHRIWKH$&7WU\LQJWRPDNHVRPHWKLQJPRUHFRPSOLFDWHGWKDQQHFHVVDU\0DQ\ XQWUDLQHGWHVWWDNHUVZLOOWU\WRVROYHIRUDDQGELQGLYLGXDOO\EXWWKDWߞVOLWHUDOO\LPSRVVLEOHKHUHߚHLWKHU YDULDEOHFDQKDYHDQLQILQLWHVHWRIYDOXHV,QVWHDGZHKDYHWRWDNHWKHIDFWWKDWDE DQGMXVWSOXJLQ HYHU\ZKHUHZHVHHWKHH[SUHVVLRQDE,WVRXQGVOLNHDSUHWW\VLPSOHWDVNRQFHZHUHDOL]HZKDWZHߞUH DFWXDOO\VXSSRVHGWRGREXWWKH$&7LVWU\LQJWRSUH\RQ\RXULQVWLQFWVIURPKLJKVFKRROPDWKEHFDXVHLW NQRZVWKDWPRVWWHVWWDNHUVZLOOLQVWLQFWLYHO\WU\WRVROYHIRUHYHU\YDULDEOHLQDTXHVWLRQ 2QFHZHSOXJLQIRUHDFKLQVWDQFHRIDEZHJHWWKLV ߙ 1RZZHKDYHWREHYHU\FDUHIXOWRIROORZWKHFRUUHFWRUGHURIRSHUDWLRQVZKHQHYDOXDWLQJWKLV H[SUHVVLRQ 6RPHWHVWWDNHUVZLOOEHVRIDPLOLDUZLWKWKHRUGHURIRSHUDWLRQVWKDWWKH\KDYHQRSUREOHPIROORZLQJLW DXWRPDWLFDOO\)RURWKHUVLWFDQEHXVHIXOWRUHPHPEHUWKHDFURQ\P3(0'$6ZKLFKVWDQGVIRUWKH IROORZLQJ 3DUHQWKHVHV ([SRQHQWV 0XOWLSOLFDWLRQ 'LYLVLRQ $GGLWLRQ 6XEWUDFWLRQ ,IZHIROORZWKDWRUGHUWRHYDOXDWHRXUH[SUHVVLRQZHJHWWKHIROORZLQJ 3DUHQWKHVHV 7KHUHDUHQRXQUHVROYHGSDUHQWKHWLFDOH[SUHVVLRQVVRZHFDQVNLSWKLVVWHS ([SRQHQWV 7KHUHߞVRQHH[SRQHQWLDOH[SUHVVLRQ LVVRZHFDQVXELQIRU ߙ 0XOWLSOLFDWLRQ 7KHUHߞVRQHPXOWLSOLFDWLYHH[SUHVVLRQ 7KDWߞVHTXDOWRVRQRZRXUH[SUHVVLRQORRNVOLNH WKLV ߙ 'LYLVLRQ 7KHUHߞVRQHH[SUHVVLRQZLWKGLYLVLRQDQGLWߞV 7KDWHTXDOVVRQRZRXUH[SUHVVLRQORRNV OLNHWKLV ߙ $GGLWLRQ 1RZZHKDYHWKUHHWHUPVEHLQJDGGHGDQG,IZHDGGWKHPRXUH[SUHVVLRQORRNVOLNH WKLV ߙ 6XEWUDFWLRQ )LQDOO\ZHKDYHRQHH[SUHVVLRQZLWKVXEWUDFWLRQ:KHQZHUHVROYHWKDWZHVHHWKDWWKHHTXDWLRQLV HTXDOWR 6RWKHDQVZHULV . $V\RXFDQVHHWKLVTXHVWLRQLVDFWXDOO\SUHWW\EDVLFRQFH\RXEUHDNLWGRZQ$VLVW\SLFDOO\WKHFDVHWKH $&7LVQߞWWU\LQJWRWULFN\RXZLWKDGYDQFHGPDWKFRQFHSWVRQWKLVTXHVWLRQLQVWHDGWKHWHVWLVWU\LQJWR RYHUZKHOP\RXZLWKVPDOOGHWDLOVLQWKHKRSHWKDW\RXߞOOPDNHDPLVWDNH7KLVLVZK\WUDLQHGWHVWWDNHUV DOZD\VPDNHLWDSRLQWWRSD\YHU\FORVHDWWHQWLRQWRHYHU\GHWDLOLQDTXHVWLRQ 3DJH4XHVWLRQ 7KH$&7RFFDVLRQDOO\LQFOXGHVPDWKTXHVWLRQVWKDWDVNKRZPDQ\SRVVLEOHDUUDQJHPHQWVRUFRPELQDWLRQV RIVRPHWKLQJFRXOGEHFUHDWHGLQDSDUWLFXODUVLWXDWLRQEDVHGRQDVHWRIUXOHV ,QPRVWKLJKVFKRROPDWKFODVVHVWKHVHNLQGVRITXHVWLRQVDUHUHIHUUHGWRDVߡFRPELQDWLRQDQG SHUPXWDWLRQߢTXHVWLRQV<RXPD\KDYHHQFRXQWHUHGWKHVHW\SHVRITXHVWLRQVLQDSUHFDOFXOXVFODVVRU SHUKDSVLQDVWDWLVWLFVFODVV7KHVHTXHVWLRQVFDQRIWHQEHYHU\FRPSOLFDWHGZKHQ\RXFRYHUWKHPLQ VFKRROEXWWKH$&7QHYHUPDNHVWKHPDVFRPSOLFDWHGDVWKH\FDQEHLQVFKRRO,QVWHDGWKH$&7IROORZV LWVQRUPDOJDPHSODQLWDVNVDIDLUO\EDVLFYHUVLRQRIDTXHVWLRQDQGKRSHV\RXUVFKRROLQVWLQFWVZLOONLFN LQDQGPDNHWKHTXHVWLRQVHHPKDUGHUWKDQLWUHDOO\LV 7KLVLWHPLVDOVRDJRRGH[DPSOHRIWKHUROHWKDWDQVZHUFKRLFHVFDQSOD\LQDQVZHULQJDQ$&70DWK TXHVWLRQߚEXWZHߞOOJHWWRWKDWLQDPLQXWH)LUVWOHWߞ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ߞYHHYHUFRYHUHGFRPELQDWLRQVDQGSHUPXWDWLRQVLQVFKRRO,ߞPVXUH\RXߞOO DJUHHWKDWWKLVTXHVWLRQLVDFWXDOO\SUHWW\VLPSOHUHODWLYHWRPRVWTXHVWLRQVRIWKDWW\SHߚDOOZHKDGWRGR ZDVPXOWLSO\WZRQXPEHUVWRJHWKHUZLWKRXWJHWWLQJLQWRIDFWRULDOVRUDQ\WKLQJHOVHFRPSOLFDWHGOLNHWKDW %XWOHWߞVVD\ZHGRQߞWUHDOL]HWKDWZHFDQMXVWPXOWLSO\WKHQXPEHURIMXQLRUVE\WKHQXPEHURIVHQLRUVWR ILQGWKHFRUUHFWDQVZHUDQGZHZDQWWRVHHLIZHFDQDQVZHUWKHTXHVWLRQDQ\ZD\ :HFRXOGVWDUWE\LPDJLQLQJWKDWZHVHOHFWRQHMXQLRU+RZPDQ\GLIIHUHQWSDLUVFDQZHPDNHZLWKWKDW RQHMXQLRU":HOOWKDWRQHMXQLRUFRXOGEHSDLUHGZLWKHDFKRIWKHGLIIHUHQWVHQLRUVWRPDNH GLIIHUHQWSDLUV7KDWߞVVRIDU 7KHQLPDJLQHWKDWZHSLFNDGLIIHUHQWMXQLRU7KDWߞVQHZSRVVLEOHSDLUVEHFDXVHWKLVQHZMXQLRUFDQ DOVREHSDLUHGZLWKHDFKRIWKHVHQLRUVMXVWOLNHWKHILUVWRQHFRXOG6RZHߞUHXSWRWRWDOSDLUVVR IDU 1RZLPDJLQHZHVHOHFWDWKLUGMXQLRULQVWHDG7KDWZRXOGJLYHXVPRUHQHZSRVVLEOHSDLUVEHFDXVH WKLVWKLUGMXQLRUFDQEHFRPELQHGZLWKDOORIWKHVHQLRUVMXVWOLNHWKHILUVWWZRMXQLRUV$WWKLVSRLQW ZHKDYHSDLUVDQGZHߞYHRQO\FRQVLGHUHGWKUHHMXQLRUVRXWRIVRZHNQRZWKHUHDUHPRUH2QO\ RQHDQVZHUFKRLFHLVJUHDWHUWKDQWKHFRUUHFWDQVZHU . 6HHKRZWKDWZRUNHG"(YHQZLWKRXWNQRZLQJWKHIRUPXODULJKWDZD\ZHFRXOGILQGDZD\WRUHDVRQ WKURXJKWKHTXHVWLRQDQGHOLPLQDWHIRXURIWKHDQVZHUFKRLFHVEHFDXVHWKH\ZHUHWRRVPDOO ,QIDFWOHWߞVWDONDERXWWKHDQVZHUFKRLFHVLQPRUHGHSWK:KHQZHWKLQNDERXWKRZWKHDQVZHUFKRLFHV UHODWHEDFNWRWKHTXDQWLWLHVLQWKHTXHVWLRQZHQRWLFHWKHIROORZLQJ ) UHSUHVHQWVWKHGLIIHUHQFHEHWZHHQWKHWZRQXPEHUVLQWKHTXHVWLRQ * LVWKHQXPEHURIVHQLRUV + LVWKHQXPEHURIMXQLRUV - LVWKHVXPRIWKHWZRQXPEHUVLQWKHTXHVWLRQ . LVWKHSURGXFWRIWKHWZRQXPEHUVLQWKHTXHVWLRQ ,I\RXZHUHSUHWW\VXUHWKDW\RXNQHZKRZWRKDQGOHWKHTXHVWLRQRULJLQDOO\WKHQWKHVHDQVZHUFKRLFHV ZRXOGSUREDEO\EHYHU\UHDVVXULQJEHFDXVH\RXZRXOGNQRZWKDW ) * + DQG - GRQߞWPDNHDQ\ VHQVHLQWKHFRQWH[WRIWKHTXHVWLRQ %XWZKDWLI\RXZHUHQߞWVXUHKRZWRDSSURDFKWKHTXHVWLRQEHIRUH\RXUHDGWKHFKRLFHV":HOOLQWKDWFDVH \RXPLJKWVWLOOEHDEOHWRXVHWKHDQVZHUFKRLFHVWRJHWDQLGHDRIKRZWRDQVZHUWKHTXHVWLRQ<RXPLJKW EHDEOHWRUHDVRQWKDW * DQG + GRQߞWPDNHPXFKVHQVHVLQFHHDFKQXPEHULVMXVWWKHQXPEHURI VWXGHQWVLQRQHRIWKHWZRJURXSVߚWKHUHߞVQRUHDVRQZK\WKHQXPEHURIVWXGHQWVLQRQHJURXSVKRXOGEH WKHFRUUHFWDQVZHUDVRSSRVHGWRWKHQXPEHURIVWXGHQWVLQWKHRWKHUJURXSVRZHFRXOGSUREDEO\ HOLPLQDWHERWKRIWKHVHFKRLFHVIURPFRQVLGHUDWLRQ:HFRXOGSUREDEO\DOVRHOLPLQDWH ) IRUWZR UHDVRQVLWGRHVQߞWPDNHDORWRIVHQVHWKDWVXEWUDFWLRQZRXOGEHLQYROYHGLQWKLVTXHVWLRQIRURQHWKLQJ DQGLWDOVRSUREDEO\GRHVQߞWPDNHDORWRIVHQVHIRUWKHILQDODQVZHUWREHDQXPEHUWKDWߞVPXFKVPDOOHU WKDQWKHQXPEHURIVWXGHQWVLQHLWKHUJURXS<RXPD\DOVREHDEOHWRHOLPLQDWH - LI\RXUHDVRQWKDWWKH VXPRIWKHWZRJURXSVFDQߞWEHWKHQXPEHURIGLIIHUHQWWZRSHUVRQFRPELQDWLRQVHYHQLILWߞVWKHQXPEHU \RXJHWZKHQ\RXFRPELQHDOOWKHSHRSOHLQHDFKJURXS . PLJKWPDNHVHQVHWR\RXLI\RXUHDOL]HWKDW QRQHRIWKHRWKHUQXPEHUVLVODUJHHQRXJKRULI\RXUHFDOOWKDWFRPELQDWLRQTXHVWLRQVW\SLFDOO\LQYROYH PXOWLSOLFDWLRQ ,QIDFW,ZRXOGHYHQVD\WKDWLI,VDZWKLVTXHVWLRQRQWHVWGD\DQGFRXOGQߞWVROYHLWRQP\RZQEHFDXVH, GLGQߞWUHPHPEHUWKHVSHFLILFVRIFRPELQDWLRQTXHVWLRQV,ZRXOGVWLOOEHVXUHWKDW . ZDVFRUUHFWLI, FRXOGUHFDOOWKDWFRPELQDWLRQTXHVWLRQVLQYROYHPXOWLSOLFDWLRQRULI,FRXOGUHFDOOWKDWFRPELQDWLRQ TXHVWLRQVGRQߞWLQYROYHDGGLWLRQRUVXEWUDFWLRQ 7KLVW\SHRIDSSURDFKWRWKHTXHVWLRQLVRQO\SRVVLEOHEHFDXVHWKHTXHVWLRQLVPXOWLSOHFKRLFHDQG EHFDXVHWKHDQVZHUFKRLFHVKDSSHQWREHVHWXSLQVXFKDZD\WKDWWKHDQVZHULVREYLRXVLIZHUHPHPEHU WKDWPXOWLSOLFDWLRQKDVWREHLQYROYHG 6RWKLVTXHVWLRQUHLQIRUFHVWKUHHLPSRUWDQWSRLQWVZKHQLWFRPHVWR$&70DWK)LUVWLWߞVLPSRUWDQWWR NHHSLQPLQGWKDW$&70DWKTXHVWLRQVWHQGWREHUHODWLYHO\VLPSOHߚHYHQZKHQDFRQFHSWPLJKWEHIURP SUHFDOFXOXVWKH$&7ZLOODVNDERXWDEDVLFDSSOLFDWLRQRIWKHLGHDQRWDQDGYDQFHGRQH6HFRQGZH QHHGWRUHPHPEHUWKDWWKHDQVZHUFKRLFHVRIWHQJLYHXVDORWRILQIRUPDWLRQDERXWGLIIHUHQWZD\VWRDWWDFN WKHTXHVWLRQDQGWKDWLWߞVRIWHQ EXWQRWDOZD\V SRVVLEOHWRDUULYHDWDFRUUHFWDQVZHUE\GLVTXDOLI\LQJ DQVZHUFKRLFHVZLWKURXJKUHFNRQLQJ)LQDOO\DQGPRVWLPSRUWDQWO\ZHDOZD\VQHHGWRUHPHPEHUWKDW WKHUHFDQEHORWVRIZD\VWRDWWDFNDQ\JLYHQ$&70DWKTXHVWLRQߚQRWMXVWWKHRQH\RXUPDWKWHDFKHU PLJKWUHFRPPHQG 3DJH4XHVWLRQ 7KLVLVDTXHVWLRQWKDWUHVWVRQ\RXUXQGHUVWDQGLQJRIWKHFRQFHSWRIVORSHDQGRQ\RXUDELOLW\WRSD\ FDUHIXODWWHQWLRQWRGHWDLO/LNHQHDUO\DQ\$&70DWKSUREOHPWKHUHDUHDIHZGLIIHUHQWZD\VWRORRNDWLW 7KH5HG%RRNߞVH[SODQDWLRQRQSDJHLVGHFHQWEXWQRWJUHDWߚLWߞVDELWWRRIRUPDOIRUPH,I\RXJHW LQWKHKDELWRIDSSURDFKLQJHYHU\TXHVWLRQZLWKWKDWPXFKIRUPDOLW\\RXߞOOSUREDEO\UXQLQWRSUREOHPV ZLWKWKHWLPHOLPLW +HUHߞVKRZ,ߞGSUREDEO\DSSURDFKWKHTXHVWLRQLQVWHDG,ߞGVWDUWRXWE\QRWLQJWKDWWKHUDWLRJLYHQIRUWKH UDPSVD\VWKDWLWULVHVIHHWIRUHYHU\KRUL]RQWDOIHHW7KHTXHVWLRQWKHQVD\VWKDWWKHUDPSRQO\ULVHV DWRWDORIIHHWDQGDVNVDERXWWKHKRUL]RQWDOGLVWDQFHRIWKHUDPS $ORWRISHRSOHZRXOGVHWXSDSURSRUWLRQKHUHOLNHWKHRQHLQWKH5HG%RRNRQSDJH%XWZHFRXOG DOVRWDNHDGYDQWDJHRIWKHIDFWWKDWWKHTXHVWLRQLVPXOWLSOHFKRLFHDQGWU\WRVHHLIZHFRXOGHOLPLQDWH DQ\FKRLFHVDVEHLQJWRRODUJHRUWRRVPDOO6LQFHLVDOLWWOHELWOHVVWKDQKDOIRIZHZDQWWKHFRUUHFW DQVZHUWREHDYDOXHWKDWߞVDOLWWOHELWOHVVWKDQKDOIRIߚ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ߞVH[SODQDWLRQIRUWKLVTXHVWLRQZKLFKDSSHDUVRQSDJHRIWKH5HG%RRN \RXߞ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ͯU 7KHUDGLXVRIWKHELJJHUFLUFOHLVVRLWVDUHDLVͯ )RUWKHVPDOOHUFLUFOHWKHGLDPHWHU 127WKHUDGLXV LV+DOIRIWKHGLDPHWHULVWKHUDGLXVVRWKH UDGLXVLV7KDWPHDQVWKDWWKHDUHDRIWKHVPDOOFLUFOHPXVWEHͯ RUͯ 6XEWUDFWLQJWKHVPDOOHUDUHDIURPWKHODUJHUJLYHVXVWKLV ͯͯ ͯ 6RWKHFRUUHFWDQVZHULV . ͯ $QGWKDWOHDGVPHWRWKHVHFRQGSRLQWRIVWUDWHJLFLPSRUWDQFHWKDW,ZDQWHGWRHPSKDVL]HDZHOOWUDLQHG WHVWWDNHUZKRߞVSD\LQJDWWHQWLRQWRWKLVTXHVWLRQGRHVQߞWHYHQQHHGWRGRDOOWKHFDOFXODWLQJWKDWZHMXVW GLG :HFDQDYRLGDOPRVWDOORIWKDWFDOFXODWLRQE\UHDOL]LQJWKDWWKHDUHDRIWKHVKDGHGUHJLRQPXVWEHJUHDWHU WKDQͯDQGPXVWLQYROYHͯVRPHKRZEHFDXVHLWZRXOGEHWKHGLIIHUHQFHEHWZHHQWKHDUHDVRIWZR FLUFOHV ,IZHFDQUHDOL]HERWKRIWKRVHWKLQJVWKHQZHNQRZULJKWDZD\WKDWͯPXVWEHWKHFRUUHFWDQVZHU EHFDXVHLWߞVWKHRQO\DQVZHUFKRLFHWKDWVDWLVILHVERWKRIWKRVHUHTXLUHPHQWV %XWKRZGRZHNQRZWKDWWKHDQVZHUPXVWEHJUHDWHUWKDQͯDQGPXVWVWLOOLQFOXGHͯ" :HOOZHNQRZWKHDUHDRIWKHVPDOOHUFLUFOHPXVWEHODUJHUWKDQͯEHFDXVHLWVUDGLXVLVDQGLV ELJJHUWKDQ$QGZHFDQDOVRVHHWKDWWKHDUHDRIWKHVKDGHGUHJLRQPXVWEHJUHDWHUWKDQWKHDUHDRIWKH VPDOOHUFLUFOHXVLQJWKHVFDOHRIWKHGLDJUDP $QGZHZRXOGNQRZWKDWWKHFRUUHFWDQVZHUPXVWLQFOXGHͯEHFDXVHLWߞVWKHGLIIHUHQFHEHWZHHQWKHDUHDV RIWZRFLUFOHVDQGHDFKFLUFOHPXVWKDYHDQDUHDPHDVXUHWKDWLQFOXGHVͯLIWKHUDGLLDUHLQWHJHUV :H FRXOGDOVRWHOOWKDWWKHFRUUHFWDQVZHULVOLNHO\WRLQFOXGHͯEHFDXVHWKHPDMRULW\RIDQVZHUFKRLFHV LQFOXGHLW :KHQ\RXSUDFWLFH$&70DWKTXHVWLRQVUHPHPEHUWKDW\RXUJRDOLVQߞWMXVWWRILQGWKHFRUUHFWDQVZHU FKRLFH<RXUJRDOLVWRSUDFWLFHILQGLQJWKHFRUUHFWDQVZHUFKRLFHDVHIILFLHQWO\DVSRVVLEOHVR\RXߞOOEH DEOHWRKDYHHQRXJKWLPHWRILQLVKWKHHQWLUHVHFWLRQZLWKFRQILGHQFHDQGSUHFLVLRQ$V,NHHSSRLQWLQJRXW LQWKHVHVROXWLRQV$&70DWKTXHVWLRQVRIWHQRIIHUXVOLWWOHߡVKRUWFXWVߢWKDWDOORZXVWRFRPSOHWHD TXHVWLRQRUFKHFNRXUZRUNYHU\TXLFNO\DQGZLWKWRWDOFHUWDLQW\DQGWKHVHVKRUWFXWVRIWHQKDYHYHU\OLWWOH WRGRZLWKIRUPDOPDWK 6RKHUHDUHWKHWZRNH\WKLQJVWROHDUQIURPWKLVTXHVWLRQ <RXILQGWKHDUHDVRIZHLUGVKDSHVRQ$&70DWKTXHVWLRQVE\DGGLQJRUVXEWUDFWLQJWKHDUHDV RIIDPLOLDUVKDSHV OLNHFLUFOHV ZKRVHDUHDIRUPXODV\RXFDQILQGLQWKH0DWK7RROER[LQWKLV %ODFN%RRN ,WߞVDOZD\VLPSRUWDQWWRSD\DWWHQWLRQWRWKHUHODWLRQVKLSVDPRQJDQVZHUFKRLFHVDQGWKH TXDQWLWLHVDQGFRQFHSWVLQWKHTXHVWLRQEHFDXVHDQDZDUHQHVVRIWKRVHUHODWLRQVKLSVFDQRIWHQ OHW\RXDQVZHUDTXHVWLRQPXFKPRUHGLUHFWO\ߚZLWKRXWVSHQGLQJWLPHDQGHQHUJ\RQIRUPDO PDWK 7KHVSHFLILFLGHDRIVXEWUDFWLQJWKHDUHDRIRQHFLUFOHIURPWKHDUHDRIDQRWKHUFLUFOHLVQߞWOLNHO\WRFRPH XSRQWKH$&70DWKVHFWLRQWRRRIWHQEXWWKHWZRJHQHUDOSULQFLSOHV,MXVWGHVFULEHGZLOOFRPH,QKDQG\ YHU\IUHTXHQWO\ZKLFKLVZK\\RXVKRXOGIRFXVRQWKHP 3DJH4XHVWLRQ 7KLVTXHVWLRQLVQߞWUHDOO\OLNHDQ\WKLQJ\RXߞGVHHLQWKHDYHUDJHKLJKVFKRROPDWKFODVV GR\RXQRWLFH KRZRIWHQ,KDYHWRVD\WKDWE\WKHZD\" +LJKVFKRROPDWKFODVVHVPLJKWJLYH\RXTXHVWLRQVZLWK GLDJUDPVRUTXHVWLRQVZLWKFXUYHVRUTXHVWLRQVDERXWWKHDUHDRIDWULDQJOHDQGWKRVHDUHDOOFRQFHSWV WKDWDSSHDULQWKLVTXHVWLRQ%XWWKLVTXHVWLRQFRPELQHVWKRVHLGHDVLQDZD\\RXߞYHSUREDEO\QHYHUVHHQ DQGWKH$&7GHVLJQVDQVZHUFKRLFHVWRWULFN\RXLQVSHFLILFZD\VWKDWKLJKVFKRROPDWKWHDFKHUV JHQHUDOO\GRQߞWXVH )RUWKDWUHDVRQLWZLOOEHH[WUHPHO\LPSRUWDQWWRUHDGWKHTXHVWLRQYHU\FDUHIXOO\ WKDWߞVDQRWKHUWKLQJ, VD\DOOWKHWLPHLVQߞWLW" :Hߞ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ߡOHVVWKDQߢYHUVXVߡJUHDWHUWKDQߢ ߡXQGHU)*ߢYHUVXVߡRYHU)*ߢ $QGFKRLFH + LVVRUWRIDߝQHXWUDOߞFKRLFHEHFDXVHLWVD\VWKDWWKHDUHDRIWKHWULDQJOHDQGWKHDUHDXQGHU WKHFXUYHDUHHTXDO 7KH$&7VHWVXSDJURXSRIFKRLFHVOLNH ) * - DQG . ZKHQLWZDQWVWRFRQIXVH\RXߚLWNQRZV WKDWDFHUWDLQSHUFHQWDJHRIWHVWWDNHUVZLOOJHWFRQIXVHGE\WKHKLJKGHJUHHRIVLPLODULW\DQGLWDOVRNQRZV WKDWPDQ\WHVWWDNHUVZLOOVLPSO\PLVUHDGRQHRIWKHZURQJDQVZHUVDQGFKRRVHLWEDVHGRQWKHLU PLVUHDGLQJHYHQLIWKH\DFWXDOO\XQGHUVWRRGWKHTXHVWLRQ 6RZKHQHYHU\RXVHHDTXHVWLRQZLWKDQVZHUFKRLFHVOLNHWKLV\RXQHHGWRLGHQWLI\ZKLFKFRQFHSWV\RXߞUH EHLQJWHVWHGRQ<RXDOVRQHHGWRSD\H[WUHPHO\FORVHDWWHQWLRQEHFDXVHLWZRXOGEHDVKDPHWRPLVVD UHODWLYHO\HDV\TXHVWLRQOLNHWKLVRQHVLPSO\EHFDXVHZHFRXOGQߞWEHERWKHUHGWRUHDGWKHDQVZHUFKRLFHV FDUHIXOO\ 3DJH4XHVWLRQ 7KLVLVDQRWKHUH[DPSOH OLNHTXHVWLRQRQSDJH RIZKDWVHHPVWREHDELJVFDU\WULJTXHVWLRQWKDW DFWXDOO\UHTXLUHVQRWULJNQRZOHGJHDWDOO,QIDFWRQWKLVRQH\RXGRQߞWHYHQQHHGWRGRWKHPDWK<RXMXVW QHHGWRVHWXSWKHSUREOHPFRUUHFWO\ZKLFK\RXGRE\XVLQJWKHIRUPXODSURYLGHGLQWKHTXHVWLRQDQGE\ UHDGLQJHYHU\WKLQJH[WUHPHO\FDUHIXOO\ߚLQFOXGLQJWKHDQVZHUFKRLFHVRIFRXUVH $VLVRIWHQWKHFDVHWKHUHDUHDWOHDVWWZRZD\VWRDSSURDFKWKLVTXHVWLRQ wWKHWUDGLWLRQDOPDWKHPDWLFDOZD\ZKLFKLQYROYHVDFWXDOO\GRLQJPDWKDQG wWKHZD\,ZRXOGGRLWZKLFKLQYROYHVSD\LQJFORVHDWWHQWLRQWRWKHTXHVWLRQDQGWKLQNLQJLQWHUPVRIWKH $&7ߞVGHVLJQ /HWߞVWDONDERXWWKHPRUHWUDGLWLRQDODSSURDFKILUVWZKLFKLVHVVHQWLDOO\WKHRQHSURYLGHGRQSDJHRI WKH5HG%RRN 7RXVHWKDWDSSURDFKZHQHHGWRILJXUHRXWKRZWRWDNHWKHYDOXHVIURPWKHTXHVWLRQDQGSOXJWKHPLQWR WKHIRUPXODWKDWߞVDOVRSURYLGHGLQWKHTXHVWLRQ+HUHߞVWKHIRUPXOD F DEDEFRV& 0RVWWHVWWDNHUVZRQߞ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ߞUHORRNLQJIRUWKHGLVWDQFHIURPWKHVKLSWRWKHERDWDQGWKDWWKHDQJOHRSSRVLWH WKDWVLGHRIWKHWULDQJOHLVDRDQJOH 6LQFHZHߞUHORRNLQJIRUWKDWXQODEHOHGGLVWDQFHIURPWKHVKLSWRWKHERDWDQGVLQFHWKDWGLVWDQFHLV RSSRVLWHDRDQJOHZHߞOOPDNHWKDWXQODEHOHGGLVWDQFHEHRXUORZHUFDVHFYDULDEOHDQGRXUXSSHUFDVH &YDULDEOHZLOOR7KHRQO\RWKHUYDOXHVZHKDYHLQWKHTXHVWLRQDUHWKHGLVWDQFHVDQGDQGWKRVH ZLOOEHRXUYDOXHVIRUDDQGE )RURXUSXUSRVHVLWGRHVQߞWPDWWHUZKLFKRQHLVDDQGZKLFKRQHLVE EHFDXVHWKHHTXDWLRQLVVHWXSVRWKHUHVXOWLVWKHVDPHHLWKHUZD\ 3OXJJLQJWKRVHYDOXHVLQWRWKHHTXDWLRQ IURPWKHQRWHJLYHVXVWKHIROORZLQJ F ߙ FRVR 7RVROYHIRUFZHMXVWWDNHWKHVTXDUHURRWRIHDFKVLGHDQGJHWWKLV 6RFKRLFH % LVFRUUHFW 1RZOHWߞVWDONDERXWKRZZHPLJKWDSSURDFKWKLVTXHVWLRQE\WDNLQJDGYDQWDJHRIWKH$&7ߞVGHVLJQ :HDOZD\VZDQWWREHDZDUHRIWKHDQVZHUFKRLFHVHVSHFLDOO\LIDTXHVWLRQVHHPVFKDOOHQJLQJWRXVDW ILUVWJODQFH ,QWKLVFDVHZHߞOOQRWLFHWKDWIRXURXWRIWKHILYHFKRLFHVDUHDOPRVWLGHQWLFDO&KRLFHV % & ' DQG ( DOOKDYHWKHIROORZLQJFRPSRQHQWVLQFRPPRQ wDUDGLFDOV\PERO DOVRFDOOHGDߡVTXDUHURRWV\PEROߢ w w 7KHRQO\GLIIHUHQFHVDPRQJWKRVHIRXUFKRLFHVDUHWKHIROORZLQJ w:KHWKHUWKHUHߞVDPLQXVVLJQRUDSOXVVLJQEHIRUHWKHLQWKHPLGGOHRIWKHH[SUHVVLRQ w:KHWKHUWKHH[SUHVVLRQUHIHUVWRFRVRRUFRVR 6RWKHUHDUHUHDOO\RQO\WKUHHWKLQJVZHQHHGWRILJXUHRXWLIZHZDQWWRILQGWKHULJKWDQVZHU ,VFKRLFH $ FRUUHFWRULVRQHRIWKHRWKHUIRXUFKRLFHVFRUUHFW" ,IWKHFRUUHFWDQVZHULVIRXQGLQFKRLFHV % & ' RU ( WKHQGRZHZDQWDPLQXVVLJQRUD SOXVVLJQEHIRUHWKH" ,IWKHFRUUHFWDQVZHULVIRXQGLQFKRLFHV % & ' RU ( WKHQGRZHZDQWWKHFRVLQHRIRRURI R" )LUVWOHWߞVVHHLIFKRLFH $ FDQEHFRUUHFW%HFDXVHZHNQRZWKH$&7RIWHQOLNHVWRPDNHWKHZURQJ DQVZHUVLPLWDWHWKHULJKWDQVZHUVLWߞVXQOLNHO\WKDW $ LVJRLQJWREHULJKWHYHQLIZHLJQRUHWKHUHVWRI WKHTXHVWLRQ:KHQZHSD\DWWHQWLRQWRWKHTXHVWLRQDQGQRWLFHWKDWWKHH[SUHVVLRQLQWKHQRWHLQFOXGHVDORW RIHOHPHQWVWKDWDUHQߞWSUHVHQWLQ $ VXFKDVDSOXVVLJQDQGDFRVLQHH[SUHVVLRQLWEHFRPHVSUHWW\FOHDU WKDW $ ODFNVVHYHUDOFULWLFDOHOHPHQWVIURPWKHQRWHLQWKHSURPSWVRLWFDQߞWEHULJKWVLQFHWKHUHߞVQR UHDVRQWRWKLQNWKRVHPLVVLQJHOHPHQWVZRXOGKDYHFDQFHOHGHDFKRWKHURXW 7KDWPHDQVWKDW % & ' RU ( PXVWEHFRUUHFW:KHQZHWDNHDORRNDWWKRVHFKRLFHVZHVHH WKH\ߞUHDOOYHU\VLPLODUWRRQHDQRWKHUZLWKRQO\WKHVPDOOGLIIHUHQFHVZHQRWHGDERYH 6RQRZRXURQO\UHDOMRELVWRILJXUHRXWZKLFKFRPELQDWLRQVRIWKRVHRSWLRQVLVFRUUHFWDQGWKHQSLFNWKH DQVZHUFKRLFHWKDWLQFOXGHVWKHULJKWIHDWXUHV /HWߞVVWDUWE\ILJXULQJRXWLIWKHULJKWDQVZHUFKRLFHVKRXOGKDYHDSOXVVLJQRUDPLQXVVLJQLQIURQWRIWKH LQWKHPLGGOHRIWKHH[SUHVVLRQ,IZHORRNEDFNDWWKHQRWHLQWKHTXHVWLRQZHFDQVHHWKDWWKHVLJQ EHIRUHWKHVKRXOGEHDPLQXVVLJQ6RFKRLFHV & DQG ( PXVWEHZURQJEHFDXVHWKH\KDYHSOXVVLJQV LQWKDWSRVLWLRQDQGWKHUHߞVQRUHDVRQWRWKLQNZHߞUHVXEWUDFWLQJQHJDWLYHYDOXHV ZKLFKZRXOGHIIHFWLYHO\ WXUQWKHPLQXVVLJQVLQWRSOXVVLJQV )LQDOO\ZHQHHGWRGHWHUPLQHZKHWKHUWKHFRUUHFWH[SUHVVLRQVKRXOGLQYROYHWKHFRVLQHRIDRDQJOHRUDQ RDQJOH,IZHORRNFDUHIXOO\ZHVHHWKDWWKHRQO\DQJOHPHDVXUHPHQWDQ\ZKHUHLQWKHTXHVWLRQLVDR PHDVXUHPHQW6RFKRLFH ' PXVWDOVREHZURQJ 6RPHWHVWWDNHUVPLJKWLQFRUUHFWO\DVVXPHWKDWDQR DQJOHPHDVXUHPHQWLVVWLOOUHOHYDQWWRWKHTXHVWLRQVLQFHRR RDQGWKHLGHDRIDRDQJOHLV RIWHQUHOHYDQWWRWULJTXHVWLRQVRQWKH$&7%XWWKHUHߞVQRPHQWLRQRIDRDQJOHLQWKLVTXHVWLRQVRZH KDYHQRUHDVRQWREHOLHYHWKDWDQRDQJOHZRXOGEHUHOHYDQWWRWKHTXHVWLRQ 6LQFH $ & ' DQG ( DUHDOOZURQJDQGVLQFH % KDVDOOWKHVDPHHOHPHQWVDVWKHH[SUHVVLRQLQ WKHTXHVWLRQZHNQRZWKDW % LVFRUUHFW 6RLQWKLVDQDO\VLVDOOZHQHHGHGWRGRZDVWRILQGWKHVLPLODULWLHVDQGGLIIHUHQFHVDPRQJWKHDQVZHU FKRLFHVDQGWKHQWKLQNDERXWKRZWKRVHWKLQJVUHODWHGEDFNWRWKHFRQFHSWVLQWKHTXHVWLRQ,QIDFW\RX FRXOGDUJXHWKDWWKLVTXHVWLRQUHTXLUHVQRNQRZOHGJHRIWULJRQRPHWU\ZKDWVRHYHUߚ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ߞGSUREDEO\QHYHUHQFRXQWHULQDQ\NLQGRIKLJKVFKRRORUFROOHJHPDWKFODVV $VZHDOZD\VGRLQWKHVHVLWXDWLRQVZHߞOOILJXUHRXWWKHFRUUHFWDQVZHUE\UHO\LQJRQFDUHIXOUHDGLQJ UHODWLYHO\EDVLFPDWKDQGDQDZDUHQHVVRIWKH$&7ߞVGHVLJQ 2IFRXUVHDVDOZD\VWKHILUVWWKLQJZHPXVWGRLVUHDGWKHTXHVWLRQFDUHIXOO\WRPDNHVXUHZHXQGHUVWDQG ZKDWZHߞUHEHLQJDVNHGWRGR 7KHTXHVWLRQUHIHUVWRߡDFHUWDLQSHUIHFWVTXDUHߢWKDWLVߡDQLQWHJHUEHWZHHQDQGߢ7KHQLW DVNVKRZPDQ\GLJLWVWKHVTXDUHURRWRIWKDWQXPEHUPXVWKDYH,QRUGHUWRDQVZHUWKLVTXHVWLRQZHߞOO QHHGWRNQRZWKHGHILQLWLRQVRIWKHIROORZLQJWHUPV DOORIZKLFKDUHLQWKH0DWK7RROER[LQWKLV%ODFN %RRN w,QWHJHU w'LJLW w6TXDUH ,IZHNQRZWKRVHWHUPVWKHQZHVKRXOGEHDEOHWRWHVWRXWDIHZGLIIHUHQWVFHQDULRVDQGGHWHUPLQHZKLFK DQVZHUFKRLFHLVFRUUHFW ,ZRXOGSUREDEO\VWDUWWRDSSURDFKWKLVTXHVWLRQE\WHVWLQJRXWVRPHGLIIHUHQWQXPEHUVDVH[DPSOHVRIWKH RSWLRQVLQHDFKDQVZHUFKRLFH)RULQVWDQFH,ZRXOGWHVW ) E\VTXDULQJDQGVLQFHLVWKHVPDOOHVW RQHGLJLWQXPEHUDQGLVWKHODUJHVWLVDQGLV7KDWUDQJHGRHVQߞWRYHUODSZLWKWKHUDQJHIURP WRWKDWDSSHDUVLQWKHTXHVWLRQ6R ) PXVWEHZURQJ ,ߞGWHVW * E\VTXDULQJDQGVLQFHLVWKHVPDOOHVWWZRGLJLWQXPEHUDQGLVWKHODUJHVWLV DQGLV7KDWUDQJHRIQXPEHUVGRHVRYHUODSZLWKWKHUDQJHIURPWRVRWKLV ORRNVOLNHDSURPLVLQJDQVZHUFKRLFH%XWLWߞVDOZD\VLPSRUWDQWWRFKHFNHYHU\DQVZHUFKRLFHZKHQ ZHߞUHWU\LQJWRWHVWRXWQXPEHUVOLNHWKLVMXVWWRPDNHVXUHZHKDYHQߞWPDGHDPLVWDNH6ROHWߞVWU\WKH RWKHUV :HFDQWHVW + E\VTXDULQJDQGEHFDXVHWKH\ߞUHWKHVPDOOHVWDQGODUJHVWGLJLWQXPEHUV LVDQGLV7KRVHQXPEHUVDUHRXWVLGHRIRXUWDUJHWUDQJHRIWR )LQDOO\ZHFDQWHVW - E\VTXDULQJDQGߚWKHVPDOOHVWDQGODUJHVWGLJLWQXPEHUVLV DQGLV7KRVHVTXDUHVDOVRIDOOZHOORXWVLGHRXUWDUJHWUDQJHRIWR :KDWDERXW . ":HNQRZWKDW . PXVWEHZURQJEHFDXVHZHWHVWHGWKHVPDOOHVWGLJLWQXPEHUWKH ODUJHVWGLJLWQXPEHUDQGWKHVPDOOHVWGLJLWQXPEHUDQGZHIRXQGWKDWDOOWKHSHUIHFWVTXDUHVEHWZHHQ DQGKDGWRKDYHGLJLWURRWVEHFDXVHVTXDULQJWKHVPDOOHVWGLJLWQXPEHU ZKLFKLV JLYHVXVDUHVXOWRIZKLFKLVRXWVLGHWKHWDUJHWUDQJHRIWR$QGZHDOVRNQRZWKDW VTXDULQJWKHODUJHVWGLJLWQXPEHUZKLFKLVJLYHVXVDUHVXOWRIZKLFKLVOHVVWKDQRXUWDUJHWUDQJH RIWR6RLWZRXOGQߞWEHWUXHWRVD\WKDWWKHDQVZHUFDQߞWEHGHWHUPLQHGEHFDXVHZHߞYH GHWHUPLQHGWKDWPXVWEHWKHDQVZHU 6RZHNQRZWKDW * LVFRUUHFW 1RWLFHKRZZHIRXQGWKHFRUUHFWDQVZHUE\WKLQNLQJDERXWWKHGHILQLWLRQVDQGSURSHUWLHVRIEDVLFWHUPV DQGE\WHVWLQJRXWDIHZSRVVLELOLWLHV0RVWXQWUDLQHGWHVWWDNHUVZKRKDYHGLIILFXOW\ZLWKWKLVSUREOHP ZLOOPDNHWKHPLVWDNHRIH[SHFWLQJIXWXUH$&70DWKTXHVWLRQVWRIRFXVRQWKHQXPEHURIGLJLWVLQD SDUWLFXODUNLQGRIVTXDUHQXPEHUEXWWKDWZRXOGEHDKXJHPLVWDNHߚ\RXߞOOSUREDEO\QHYHUVHHDUHDO $&70DWKTXHVWLRQH[DFWO\OLNHWKLVRQHHYHUDJDLQ,QVWHDG\RXߞOOVHHRWKHUTXHVWLRQVWKDWDVNDERXW IXQGDPHQWDOSURSHUWLHVRIEDVLFPDWKFRQFHSWVLQZHLUGZD\VDQGWKDWߞVZK\LWߞVVRLPSRUWDQWWRJUDVSWKH JHQHUDOSURFHVVRIZRUNLQJWKURXJKEL]DUUH$&70DWKTXHVWLRQV\RXFDQߞWSUHGLFWWKHVWUDQJHTXHVWLRQV WKDWZLOODSSHDURQWHVWGD\EXW\RXGRNQRZWKDWWKRVHTXHVWLRQVZLOOIROORZWKHUXOHVDQGSDWWHUQVWKDW ZHNHHSWDONLQJDERXWLQWKLV%ODFN%RRN 3DJH4XHVWLRQ +HUHߞVDQRWKHUSUREOHPRIWKHW\SHWKDWZHZRXOGQߞWQRUPDOO\VHHLQPDWKFODVV$VDOZD\VZHߞOOVLPSO\ UHDGLWFDUHIXOO\DQGUHDVRQWKURXJKLWDQGZHZRQߞWSDQLFMXVWEHFDXVHZHߞUHEHLQJDVNHGWRGR VRPHWKLQJVWUDQJH 7KLVTXHVWLRQDVNVXVKRZPDQ\SULPHQXPEHUVH[LVWRYHUDFHUWDLQLQWHUYDO1RWLFHWKDWWKHLQWHUYDOLV IDLUO\VPDOOߚRQO\QXPEHUVUHDOO\,QIDFWWKHLQWHUYDOLVVPDOOHQRXJKWKDWZHFRXOGMXVWJRDKHDGDQG OLVWHYHU\QXPEHULQWKDWLQWHUYDODQGVHHZKLFKRQHVDUHSULPH :HFDQOHDYHRXWDOOWKHHYHQQXPEHUVEHFDXVHDQ\HYHQQXPEHULVDXWRPDWLFDOO\GLYLVLEOHE\ZKLFK PHDQVLWFDQߞWEHSULPH H[FHSWIRULWVHOIEXWLVQߞWEHWZHHQDQG :LWKWKDWLQPLQGZHߞGJHW WKLVOLVW 1RZ,ߞGJRWKURXJKDQGHOLPLQDWHWKHPXOWLSOHVRIVLQFHZHߞYHDOUHDG\HOLPLQDWHGPXOWLSOHVRI 7KHUHߞVQRQHHGWRHOLPLQDWHPXOWLSOHVRIVLQFHZHߞYHDOUHDG\HOLPLQDWHGPXOWLSOHVRIDQGHYHU\ PXOWLSOHRILVDOVRDPXOWLSOHRI )RUWKHVDPHUHDVRQZHZRXOGQߞWQHHGWRHOLPLQDWHPXOWLSOHVRI DQGVRRQߚWKH\ߞUHDOUHDG\DFFRXQWHGIRULQWKHPXOWLSOHVRIWKDWZHUHPRYHG %XWZHFRXOGVWLOO HOLPLQDWHPXOWLSOHVRI $QGZHFRXOGHOLPLQDWHPXOWLSOHVRI )URPWKHUHZHFRXOGWU\HOLPLQDWLQJPXOWLSOHVRIDQGVRRQ,I\RXWU\WKDW\RXߞOOVHHWKDWQRQHRI WKHQXPEHUVRQWKHOLVWLVDIIHFWHG 6RWKDWOHDYHVDQG7KHVHQXPEHUVDUHVPDOOHQRXJKWKDWZHFDQWU\WRWKLQNRIDQ\ IDFWRUVIRUWKHPWKDWZHPLJKWKDYHPLVVHGUHDOL]HWKHUHDUHQߞWDQ\DQGEHFRQILGHQWLQWKDWFRQFOXVLRQ 6LQFHWKHUHDUHILYHQXPEHUVOHIWLQWKHOLVWWKHFRUUHFWDQVZHULV * 1RWLFHWKDWWKLVSUREOHPLVUHDOO\MXVWFKHFNLQJWRVHHLI\RXNQRZZKDWDSULPHQXPEHULVDQGZKHWKHU \RXFDQFDUHIXOO\FKHFNWKURXJKDVKRUWOLVWWRILQGWKHP7KH5HG%RRNH[SODQDWLRQPHQWLRQVWKHLGHDWKDW WKHODUJHVWSULPHQXPEHUWKDWQHHGVWREHFKHFNHGDVDIDFWRULV7KLVLVWUXHEXWLWߞVQRWVRPHWKLQJ\RX QHHGWRILJXUHRXWZKHQ\RXDQVZHUWKHTXHVWLRQLI\RXDFFLGHQWDOO\FKHFNIRUIDFWRUVOLNHDQG \RXPLJKWZDVWHIRXURUILYHVHFRQGVEXWRWKHUZLVHWKHUHߞVQRKDUPGRQH $QRWKHUFRPPRQDSSURDFKWRWKLVTXHVWLRQLVVLPSO\WRJRWKURXJKHDFKQXPEHULQWKHVHWDQGWU\WRWKLQN RIIDFWRUVIRULWQRWLQJDOOWKHQXPEHUVWKDWGRQߞWVHHPWRKDYHIDFWRUV,ߞ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ߞOO PDNHDFDUHOHVVPLVWDNHHLWKHULQILQGLQJWKHSULPHQXPEHUVRULQFRXQWLQJWKHPXSDIWHUZHߞYHIRXQG WKHP$VWUDLQHGWHVWWDNHUVZHVKRXOGWDNHWKLVVHWRIDQVZHUFKRLFHVDVDVWURQJVLJQDOWKDWZH DEVROXWHO\0867GRXEOHFKHFN RUHYHQWULSOHFKHFN RXUZRUNRQWKLVTXHVWLRQWRPDNHVXUHZH KDYHQߞWIDOOHQLQWRDWUDSIRUQRUHDVRQ$V,ߞYHVDLGPDQ\WLPHVDQGZLOOVD\PDQ\PRUHWLPHVWKHILUVW WKLQJZHVKRXOGIRFXVRQWRLQFUHDVH\RXUVFRUHVLJQLILFDQWO\LVWKHLGHDRIORRNLQJRXWIRUWKHOLWWOHWKLQJV DQGEHFRPLQJREVHVVLYHDERXWKDQGOLQJWKHPFRUUHFWO\3HRSOHZKRVFRUHRQWKH$&70DWKVHFWLRQ GRQߞWGRLWEHFDXVHWKH\NQRZDVHWRIVSHFLDOSULPHQXPEHUIRUPXODVWKDW\RXGRQߞWNQRZWKH\VFRUH LQSDUWE\PDNLQJDEVROXWHO\FHUWDLQWKDWWKH\GRQߞWPDNHOLWWOHPLVWDNHVWKDWFDQEHDYRLGHG.HHSWKDWLQ PLQGDWDOOWLPHV 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQUHDGVPRUHOLNHDIRUPDOL]HGSURRIWKDQOLNHDSUDFWLFDO VROXWLRQWRDQ$&7TXHVWLRQWKDWWKHDYHUDJHWHVWWDNHUZRXOGEHFDSDEOHRISXWWLQJWRJHWKHULQDIHZ VHFRQGV6ROHWߞVWDONDERXWWKLVTXHVWLRQIURPDSUDFWLFDOVWDQGSRLQW 7KHUHDUHWZRZD\VWRORRNDWWKLVVRUWRISUREOHP\RXFDQDSSURDFKLWLQWKHDEVWUDFWE\WKLQNLQJWKURXJK LWLQWHUPVRIWKHSULQFLSOHVRIDOJHEUDRU\RXFDQHYDOXDWHWKHTXHVWLRQFRQFUHWHO\E\SOXJJLQJQXPEHUVLQ IRUHDFKVFHQDULRDQGVHHLQJZKDWKDSSHQV/HWߞVORRNDWWKHFRQFUHWHZD\ILUVWVLQFHWKHFRQFUHWH DSSURDFKLVXVXDOO\WKHRQHWKDWߞVIDYRUHGE\WHVWWDNHUVZKRDUHOHVVFRQILGHQWLQWKHLUPDWKDELOLWLHV /HWߞVSLFNWKHQXPEHUVDQG,ߞPSLFNLQJERWKDSRVLWLYHDQGDQHJDWLYHQXPEHUEHFDXVHWKHTXHVWLRQ FOHDUO\GHDOVZLWKQHJDWLYHQXPEHUVDQG,ZDQWWRPDNHVXUH,GRQߞWPLVVVRPHWKLQJLPSRUWDQWE\RQO\ SOXJJLQJLQDSRVLWLYHQXPEHU ,ߞPGHOLEHUDWHO\DYRLGLQJQXPEHUVOLNHDQGEHFDXVHWKH\KDYHXQLTXHSURSHUWLHVWKDWPD\UHVXOWLQ VWUDQJHRXWFRPHVLI,SOXJWKHPLQWRFHUWDLQH[SUHVVLRQV,QWKLVSDUWLFXODUTXHVWLRQSOXJJLQJLQZRXOG VWLOOSURGXFHDUHVXOWWKDWZRXOGEHYDOLGIRUDOOUHDOQXPEHUVEXWSOXJJLQJLQZRXOGQߞW*HQHUDOO\ VSHDNLQJVWXGHQWVZKRDUHGUDZQWRWKHLGHDRISOXJJLQJLQQXPEHUVDUHQߞWXVXDOO\YHU\JRRGDW LGHQWLI\LQJFDVHVWKDWZLOOUHVXOWLQVWUDQJHRXWFRPHVEHFDXVHLGHQWLI\LQJWKRVHFDVHVUHTXLUHVWKLQNLQJLQ WKHDEVWUDFWDQGPRVWSHRSOHZKRSUHIHUSOXJJLQJLQQXPEHUVGRQߞWOLNHWRWKLQNDEVWUDFWO\6RDVD JHQHUDOSULQFLSOHDYRLGSOXJJLQJLQWKHQXPEHUVDQGZKHQDTXHVWLRQDVNVZKDWFRXOGEHWUXHIRUDOO UHDOQXPEHUV ,I,SOXJLQ,JHWWKHIROORZLQJUHVXOWV $QGLI,SOXJLQIRU[,JHWWKLV 6RZHFDQVHHWKDWERWKDQGUHVXOWHGLQ5RPDQQXPHUDOV,DQG,,KDYLQJHTXLYDOHQWRXWFRPHVZKLOH ,,,KDGDGLIIHUHQWRXWFRPH7KLVLQGLFDWHVWKDW $ LVFRUUHFW 1RZWKDWZHߞYHVHHQDFRXSOHRIFRQFUHWHH[DPSOHVOHWߞVORRNDWWKHTXHVWLRQLQWKHDEVWUDFW 7KHH[SUHVVLRQLQ5RPDQQXPHUDO,ZLOODOZD\VUHVXOWLQWKHDEVROXWHYDOXHRI[ LQRWKHUZRUGVLWZLOO DOZD\VUHVXOWLQDߡSRVLWLYHYHUVLRQߢRI[ 7KDWߞVEHFDXVHLWLQYROYHVVTXDULQJ[ZKLFKPXVWEHDUHDO QXPEHUDFFRUGLQJWRWKHTXHVWLRQ7KHVTXDUHRI[PXVWEHDSRVLWLYHQXPEHULI[LVDUHDOQXPEHU7KHQ ZHWDNHWKHVTXDUHURRWRIWKDWVTXDUHGYDOXHߚDQGVTXDUHURRWVRISRVLWLYHQXPEHUVDUHDOZD\VSRVLWLYH RQWKH$&7 7KHH[SUHVVLRQLQ5RPDQQXPHUDO,,ZLOODOVRDOZD\VUHVXOWLQWKHDEVROXWHYDOXHRI[EHFDXVHLWLQYROYHV WDNLQJWKHDEVROXWHYDOXHRI[DQGWKHDEVROXWHYDOXHRI[LVDOZD\VHTXDOWRWKHDEVROXWHYDOXHRI[ 7KLVYDOXHPXVWEHSRVLWLYHWRREHFDXVHDEVROXWHYDOXHVDUHDOZD\VSRVLWLYH 2QWKHRWKHUKDQGWKHH[SUHVVLRQLQ5RPDQQXPHUDO,,,ZLOODOZD\VUHVXOWLQWKHRSSRVLWHRIWKHDEVROXWH YDOXHRI[ߚLQRWKHUZRUGVLWZLOODOZD\VUHVXOWLQDߡQHJDWLYHYHUVLRQߢ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ߞYHVHHQWKRVHH[SUHVVLRQVDUHIRXQGLQ5RPDQQXPHUDOV,DQG ,,%XWORWVRISHRSOHPLVUHDGWKHTXHVWLRQDQGWKLQNWKH\ߞUHORRNLQJIRUWKHH[SUHVVLRQVWKDWZLOODOZD\V FRPHRXWHTXDOWRWKHRULJLQDOYDOXHIRU[QRPDWWHUZKLFKYDOXHZHHQWHUIRU[,IZHPLVUHDGWKH TXHVWLRQWKDWZD\WKHQZHߞOOHQGXSWKLQNLQJWKDW5RPDQQXPHUDOV,DQG,,ZRUNZKHQ[LVSRVLWLYHZKLOH ,,,ZRUNVZKHQ[LVQHJDWLYHLQWKDWFDVHZHߞGLQFRUUHFWO\FKRRVH ( ,IZHGLGWKDWLWZRXOGQߞWEH EHFDXVHZHGRQߞWNQRZKRZWRGRPDWKߚZHߞGEHFKRRVLQJWKHZURQJDQVZHUEHFDXVHZHKDG PLVXQGHUVWRRGZKDWWKHTXHVWLRQZDQWHGLQWKHILUVWSODFHEHFDXVHZHߞGPLVUHDGWKHTXHVWLRQ <HWDJDLQZHVHHWKDWWKLVTXHVWLRQOLNHVRPDQ\RWKHUVLVXOWLPDWHO\DOODERXWUHDGLQJFDUHIXOO\DQG H[HFXWLQJEDVLFPDWKLGHDVFDUHIXOO\,WGRHVQߞWUHTXLUHDQ\VXSHUDGYDQFHGPDWKNQRZOHGJH,WMXVW UHTXLUHVXVWRSD\FORVHDWWHQWLRQDWDOOWLPHV 3DJH4XHVWLRQ 7KLVTXHVWLRQIUXVWUDWHVDORWRIWHVWWDNHUV,WVHHPVOLNHWKHNLQGRIWKLQJ\RXZRXOGQHHGDIRUPXODIRUߚ LQGHHGLIWKLVTXHVWLRQZHUHWRDSSHDURQDWHVWLQKLJKVFKRRORUFROOHJH\RXFRXOGEHSUHWW\VXUHWKDWWKH WHDFKHUZDVWU\LQJWRVHHLI\RXNQHZWKHIRUPXODIRUWKHVXPRIDQDULWKPHWLFVHULHV %XWZHKDYHWRUHPHPEHUWKDWWKLVLVDQ$&70DWKTXHVWLRQDQGZHFDQDOZD\VILQGDQDOWHUQDWLYH DSSURDFKWRFKDOOHQJLQJPDWKTXHVWLRQVRQWKH$&7 7KH5HG%RRNGHVFULEHVVHYHUDOYDOLGDSSURDFKHVWRWKLVTXHVWLRQRQSDJH$VXVXDOWKRXJKWKH5HG %RRNVROXWLRQVGRQߞWDGGUHVVWKHWKLQJVWKDWDZHOOWUDLQHGWHVWWDNHUZRXOGQRWLFHZKHQDSSURDFKLQJWKLV TXHVWLRQ 2QHWKLQJZHߞGZDQWWRUHDOL]HLVWKDWLWZRXOGSUREDEO\EHDOLWWOHWLPHFRQVXPLQJWRILJXUHRXWWKH QXPEHURIFDOOVPDGHRQHDFKRIWKHWZHQW\GD\VDQGWKHQDGGWKRVHQXPEHUVXS,IWKHTXHVWLRQKDGRQO\ ZDQWHGXVWRILQGWKHWRWDODIWHUVL[RUVHYHQGD\VLWPLJKWKDYHPDGHPRUHVHQVHMXVWWROLVWWKHWRWDOVIRU HDFKGD\DQGDGGWKHPXSEXWILQGLQJWKHWRWDOIRUWZHQW\GD\VZRXOGWDNHDJRRGELWORQJHULIZHGLGLW WKDWZD\6R,SUREDEO\ZRXOGQߞWDSSURDFKWKHTXHVWLRQWKDWZD\ 6WLOOLWZRXOGQߞWEHWRWDOO\LPSRVVLEOH WROLVWWKHWRWDOVIRUDOOWZHQW\GD\VHVSHFLDOO\LIZHߞYHEHHQDEOHWRVDYHWLPHRQRWKHUTXHVWLRQVLQWKH VHFWLRQ6RLI\RXKDGWKHH[WUDPLQXWHRUWZRWKDW\RXߞGQHHGWROLVWWKHFDOOVIRUDOOGD\VWKDWZRXOGQߞW DFWXDOO\EHDEDGDSSURDFK,WPLJKWQRWEHRSWLPDOEXWVRPHWLPHVZHMXVWKDYHWRGRZKDWHYHUZHFDQ WKLQNRIWRVROYHDZHLUGTXHVWLRQߚDVVXPLQJWKHUHLVQߞWDQHDVLHUTXHVWLRQVRPHZKHUHLQWKHVHFWLRQWKDW ZHFRXOGKDQGOHLQOHVVWLPHRUZLWKPRUHFRQILGHQFH $QRWKHUDSSURDFKWRWKHTXHVWLRQLVWRUHPHPEHUWKDWLWߞVDPXOWLSOHFKRLFHTXHVWLRQOLNHDOORWKHU$&7 TXHVWLRQV7KDWPHDQVZHGRQߞWQHFHVVDULO\QHHGWRSURGXFHWKHDQVZHURQRXURZQߚLWPLJKWEHSRVVLEOH WRUXOHRXWVRPHRIWKHDQVZHUFKRLFHVWKURXJKURXJKHVWLPDWLRQZLWKRXWDFWXDOO\XVLQJDQ\PHPRUL]HG IRUPXODV ,IZHWDNHWKDWDSSURDFKZHFRXOGUHDOL]HWKDW0DUVKDOOPXVWPDNHDWOHDVWWRWDOFDOOVEHFDXVHKH PDNHVDWOHDVWFDOOVSHUGD\IRUGD\VDQG 7KDWߞVQRWHQRXJKIRUXVWREHDEOHWRUXOH DQ\WKLQJRXW\HWVLQFHHYHU\DQVZHUFKRLFHLVJUHDWHUWKDQ%XWOHWߞVNHHSSXUVXLQJWKDWOLQHRI UHDVRQLQJ 7KHߡH[WUDߢFDOOVWKDW0DUVKDOOPDNHVHYHU\GD\ZLOOTXLFNO\DGGXS%\GD\0DUVKDOOZLOOEHPDNLQJ PRUHߡH[WUDߢFDOOVWKDQߡRULJLQDOߢFDOOVߚLQRWKHUZRUGVRQGD\KHߞOOPDNHKLVߡRULJLQDOߢFDOOVSOXV ߡH[WUDߢRQHV VLQFHKHVWDUWHGPDNLQJH[WUDFDOOVSHUGD\RQGD\ )RUDOOWKHGD\VIURPGD\XQWLO GD\0DUVKDOOZLOORQO\FRQWLQXHWRPDNHDQLQFUHDVLQJQXPEHURIFDOOV7KDWPHDQVWKHWRWDOQXPEHURI ߡH[WUDߢFDOOVZLOOKDYHWREHJUHDWHUWKDQWKHWRWDOQXPEHURIߡRULJLQDOߢFDOOV 6RWKDWPHDQV $ DQG % PXVWEHPXFKWRRVPDOOWREHFRUUHFWDQVZHUV0DUVKDOOߞVߡRULJLQDOߢFDOOVZLOO EHDQGKLVߡH[WUDߢFDOOVZLOOEHDWOHDVWWKDWPDQ\VRKHPXVWPDNHDWOHDVWFDOOV7KDWPHDQVWKDW DQVZHUVLQWKHVDUHIDUWRRVPDOO )RUWKDWPDWWHU & PXVWDOVREHWRRVPDOOZRXOGEHWKHQXPEHURIFDOOVLIWKHߡH[WUDߢFDOOVZHUH H[DFWO\HTXDOWRWKHߡRULJLQDOߢFDOOVEXWZHFDQWHOOWKDWWKHQXPEHURIߡH[WUDߢFDOOVZRXOGKDYHWR H[FHHGWKHQXPEHURIߡRULJLQDOߢRQHVE\DQDPRXQWJUHDWHUWKDQ6RLVWRRVPDOO:HFDQDOVRWHOO WKDWWKHFRUUHFWDQVZHUPXVWHQGLQD]HURRUDILYHEHFDXVHLWZLOOEHWKHVXPRIߡRULJLQDOߢFDOOVDQG VRPHPXOWLSOHRIVLQFH0DUVKDOOPDNHVߡH[WUDߢFDOOVHDFKGD\6RLWߞVLPSRVVLEOHIRUWKHWRWDOQXPEHU RIFDOOVWRHQGLQDZKLFKLVDQRWKHUUHDVRQWKDWPXVWEHZURQJ 7KDWWHOOVXVWKDWWKHWRWDOQXPEHURIFDOOVZLOOEHHLWKHURUVLQFHWKRVHDUHRXURQO\UHPDLQLQJ FKRLFHV 7KHUHDUHDFRXSOHRIWKLQJVZHFRXOGGRDWWKLVSRLQWWRGHWHUPLQHZKLFKYDOXHLVFRUUHFW2QHWKLQJWKDW FRPHVWRPLQGIRUPHLVWKDWLVDOLWWOHELWOHVVWKDQ ZKLOHLVDOLWWOHPRUHWKDQ -XVWLQFDVH\RXߞUHZRQGHULQJ,GRQߞWKDYHWKHWLPHVWDEOHIRUPHPRUL]HGRIFRXUVH,QVWHDG,MXVW PHQWDOO\URXQGHGWREHFDXVH LVH[DFWO\7KHQ,FRXOGWHOOHDVLO\WKDWPXVWEHD OLWWOHOHVVWKDQ DQGPXVWEHDOLWWOHPRUHWKDQ 6RQRZWKHTXHVWLRQLVZKHWKHUWKHQXPEHURIߡH[WUDߢFDOOVZRXOGPRUHWKDQGRXEOHWKHQXPEHURI ߡRULJLQDOߢFDOOVVRWKDWWKHWRWDOQXPEHURIFDOOVZRXOGEHPRUHWKDQWKUHHWLPHVWKHQXPEHURIߡRULJLQDOߢ FDOOV6RPHWHVWWDNHUVPD\EHDEOHWRWHOOWKDWWKHQXPEHURIߡH[WUDߢFDOOVZRXOGEHOHVVWKDQWZLFHWKH QXPEHURIߡRULJLQDOߢFDOOVEXWPRVWZRQߞWIHHOFRPIRUWDEOHPDNLQJWKDWMXGJPHQWZLWKRXWDFWXDOO\GRLQJD FDOFXODWLRQ %XWWKHUHߞVVRPHWKLQJHOVHZHPLJKWQRWLFHLIZHߞUHWU\LQJWRWKLQNOLNHWKH$&77KHGLIIHUHQFHEHWZHHQ WKHYDOXHLQFKRLFH ' DQGWKHYDOXHLQFKRLFH ( LVH[DFWO\ߚZK\LVWKDW"7KH$&7FOHDUO\WKLQNV WKHUHߞVVRPHNLQGRIPLVWDNHZHFRXOGHDVLO\PDNHWKDWZRXOGFDXVHXVWREHRIIE\:KDWPLVWDNH FRXOGWKDWEH" :HPLJKWQRWLFHWKDWLVWKHSURGXFWRIDQGWZRQXPEHUVWKDWSOD\DVLJQLILFDQWUROHLQWKLV TXHVWLRQ$QGWKHQZHPLJKWUHDOL]HVRPHWKLQJYHU\LPSRUWDQWWKHTXHVWLRQVD\VWKDWWKHH[WUDFDOOVSHU GD\EHJLQRQWKHVHFRQGGD\QRWRQWKHILUVWGD\,QRWKHUZRUGVWKHILUVWGD\KDVFDOOVWKHVHFRQGGD\ KDVFDOOVWKHWKLUGGD\KDVDQGVRRQ%XWDWHVWWDNHUFRXOGHDVLO\PLVUHDGWKHTXHVWLRQDQGWKLQN WKDWWKHH[WUDFDOOVEHJDQRQWKHILUVWGD\,QWKDWVFHQDULRWKHILUVWGD\ZRXOGKDYHFDOOVWKHVHFRQG GD\ZRXOGKDYHWKHWKLUGZRXOGKDYHDQGVRRQ,IZHPLVUHDGWKHTXHVWLRQLQWKDWZD\ZHZRXOG HQGXSFRXQWLQJDQH[WUDILYHFDOOVIRUHDFKRIWKHWZHQW\GD\VߚIRUDWRWDORIH[WUDFDOOV 1RZZHXQGHUVWDQGZK\FKRLFH ( LVH[DFWO\FDOOVPRUHWKDQFKRLFH ' ( DQWLFLSDWHVWKHUHVXOW ZHZRXOGJHWLIZHPLVWDNHQO\VWDUWHGDGGLQJILYHFDOOVSHUGD\IURPGD\LQVWHDGRIIURPGD\ ' LV WKHULJKWDQVZHUDQGUHIOHFWVWKHUHVXOWLIZHFRUUHFWO\VWDUWDGGLQJILYHH[WUDFDOOVSHUGD\RQGD\ ,QP\H[SHULHQFHPRVWWHVWWDNHUVZLOOEHYHU\IUXVWUDWHGE\WKLVTXHVWLRQ6RWKLVLVDJRRGPRPHQWWR UHGLUHFW\RXUDWWHQWLRQWRWZRVHFWLRQVRIWKLV%ODFN%RRNߡ7KH*HQHUDO*DPH3ODQ)RU$WWDFNLQJ$ 6HFWLRQ2I7KH$&72Q7HVW'D\ߢDQGߡ7LPLQJ,VVXHVߢ7KRVHFRQVLGHUDWLRQVDUHYHU\LPSRUWDQWLI\RX ZDQWWRPD[LPL]H\RXUVFRUH 3DJH4XHVWLRQ $VXVXDOWKHUHDUHDORWRIZD\VWRDQVZHUWKLVTXHVWLRQ$OVRDVXVXDO,OLNHWRORRNIRUWKHTXLFNHVWRQH 7KH5HG%RRNߞVH[SODQDWLRQRQSDJHLVPDWKHPDWLFDOO\FRUUHFWRIFRXUVHEXWLWDSSURDFKHVWKH TXHVWLRQLQDWLPHFRQVXPLQJZD\DVXVXDO7KH5HG%RRNVKRZV\RXKRZWRJHQHUDWHWKHFRUUHFWDQVZHU RQ\RXURZQLJQRULQJWKHIDFWWKDWWKLVLVDPXOWLSOHFKRLFHTXHVWLRQ,WߞVRIWHQPXFKIDVWHUDQGHDVLHUWR WDNHWKHHQWLUHVHWRIDQVZHUFKRLFHVLQWRDFFRXQWDQGDSSURDFKWKHTXHVWLRQZLWKWKHJRDORILGHQWLI\LQJ WKHFRUUHFWDQVZHUIURPWKHRSWLRQVSURYLGHGE\WKHWHVWUDWKHUWKDQE\WU\LQJWRJHQHUDWHWKHULJKWDQVZHU RQRXURZQ ,IZHߞUHWKLQNLQJLQWHUPVRIPDWKHPDWLFDOIXQGDPHQWDOVRQHWKLQJVKRXOGMXPSRXWDWXVULJKWDZD\ZKHQ ZHVHHWKHDQVZHUFKRLFHVWKHTXHVWLRQWHOOVXVZHߞUHWU\LQJWRJUDSKDIXQFWLRQEXWWKUHHRIWKHDQVZHU FKRLFHVFDQߞWEHJUDSKVRIIXQFWLRQVE\GHILQLWLRQ&KRLFHV - * DQG + DOOIDLOVRPHWKLQJFDOOHGWKH ߡYHUWLFDOOLQHWHVWߢZKLFKVD\VLWߞVLPSRVVLEOHIRUDYHUWLFDOOLQHWRLQWHUFHSWWKHJUDSKRIDIXQFWLRQLQ PRUHWKDQRQHSRLQWDWDWLPH 7KLVLVMXVWDQRWKHUZD\RIVD\LQJWKDWDUHDOIXQFWLRQLVVHWXSVRWKDWQR VLQJOH[YDOXHLQWKHIXQFWLRQKDVPRUHWKDQRQH\YDOXHDVVRFLDWHGZLWKLW &KRLFH - KDVPXOWLSOH\ YDOXHVIRUHDFK[YDOXHIURP[ WR[ &KRLFH * KDVPXOWLSOH\YDOXHVIRUHDFK[YDOXHIURP[ WR[&KRLFH + KDVPXOWLSOH\YDOXHVIRUHDFK[YDOXHZKHUH [ࡄ 6RWKDWPHDQVHLWKHU ) RU . LVFRUUHFW/HWߞVVHHKRZZHFDQLGHQWLI\WKHULJKWRQH &KRLFHV ) DQG . DUHFRPSOHWHO\LGHQWLFDOH[FHSWIRUWZRWKLQJV ) VWDUWVZLWKDSRUWLRQRIDSDUDERODWKDWߡRSHQVGRZQZDUGߢZKLOH . VWDUWVZLWKRQHWKDWߡRSHQV XSZDUGߢ 7KHPLGGOHSLHFHRI ) KDVDILOOHGLQSRLQWDW[ ZKLOHWKHSLHFHWRWKHULJKWKDVDQHPSW\ HQGSRLQWDWWKDWYDOXHDQGWKHPLGGOHSLHFHRI . KDVDQHPSW\HQGSRLQWDW[ ZKLOHWKHSLHFHWR WKHULJKWKDVDILOOHGLQSRLQWDWWKDWYDOXH 6RLIZHFDQLGHQWLI\WKHFRUUHFWRSWLRQIRUHLWKHURIWKRVHWZRGLIIHUHQFHVZHFDQILQGWKHULJKWDQVZHU ,IZHUHPHPEHUWKHEDVLFVRISDUDERODVZHFRXOGTXLFNO\LGHQWLI\WKDWWKHSDUDERODLQWKHTXHVWLRQKDVD SRVLWLYH[YDOXHVRLWPXVWߡRSHQXSZDUGߢ7KDWPDNHV . FRUUHFW<RXFRXOGDOVRWHVWWKHGLIIHUHQFH EHWZHHQ ) DQG . E\HYDOXDWLQJWKHSDUDERODLQWKHTXHVWLRQDW[ WRILQGWKDWWKHFRUUHFW\YDOXHDW WKDWSRLQWLVDJDLQPDNLQJ ) ZURQJDQG . ULJKW:HFRXOGDOVREHVWURQJO\UHDVVXUHGWKDWWKH SDUDERODVKRXOGߡRSHQXSZDUGߢEHFDXVHWKUHHRIWKHILYHFKRLFHVEHJLQZLWKSDUDERODVWKDWߡRSHQ XSZDUGߢDQGZHNQRZWKDWWKH$&7RIWHQOLNHVWRUHSHDWHOHPHQWVRIWKHULJKWDQVZHUDPRQJDPDMRULW\ RIWKHDQVZHUFKRLFHV$QGRIFRXUVHLI\RXKDYHDJUDSKLQJFDOFXODWRU\RXFDQVLPSO\JUDSKWKH HTXDWLRQ\ [ߙ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ߚWKDWDOORZHGXVWRVDYHDORWRIWLPHEHFDXVHZH FRXOGILQGWKHGLIIHUHQFHVEHWZHHQ ) DQG . DQGIRFXVH[FOXVLYHO\RQWKHPZLWKRXWZRUU\LQJDERXWD ORWRIXQQHFHVVDU\HOHPHQWVRIWKHTXHVWLRQ)LQDOO\QRWLFHWKDWWKHFRUUHFWDQVZHUIROORZVWKHFRPPRQ $&7SDWWHUQRILQFRUSRUDWLQJDOOWKHHOHPHQWVWKDWDSSHDUPRVWIUHTXHQWO\LQWKHVHWRIDQVZHUFKRLFHV 7KLVTXHVWLRQLVDQH[FHOOHQWH[DPSOHRIWKHZD\DZHOOWUDLQHGWHVWWDNHUFDQH[SORLWWKHZHDNQHVVHVRI WKH$&7ߞVGHVLJQDQGILQGWKHFRUUHFWDQVZHUZLWKPLQLPDOWLPHDQGHIIRUW 3DJH4XHVWLRQ 0RVWWHVWWDNHUVSDQLFZKHQWKH\VHHWKLVTXHVWLRQEHFDXVHWKH\WKLQNWKH$&7LVWHVWLQJWKHLUDELOLW\WR ZULWHWKHHTXDWLRQIRUDJLYHQFLUFOHDQGPRVWWHVWWDNHUVGRQߞWUHPHPEHUKRZWRGRWKDW %XWZHDOZD\VKDYHWRUHPHPEHUWKDWWKH$&7FDQߞWUHDOO\WHVWRXUDELOLW\WRJHQHUDWHDQ\WKLQJVLQFHLWߞV DPXOWLSOHFKRLFHWHVW$OOLWFDQHYHUUHDOO\WHVWLVRXUDELOLW\WRLGHQWLI\WKHFRUUHFWDQVZHUIURPDVHWRI RSWLRQV 6RPHWLPHVWKHIDVWHVWZD\WRLGHQWLI\WKHFRUUHFWDQVZHULVWRJHQHUDWHLW\RXUVHOIRIFRXUVH%XW LWߞVRIWHQIDVWHUDQGHDVLHUWRLGHQWLI\WKHUHOHYDQWHOHPHQWVRIWKHDQVZHUFKRLFHVDQGXVHWKHPWR HOLPLQDWHWKHZURQJDQVZHUV :HNQRZWKDWRQHRIWKHDQVZHUFKRLFHVPXVWEHWKHFRUUHFWHTXDWLRQIRUWKHJLYHQFLUFOHDQGZHNQRZ WKDWWKHHTXDWLRQIRUDFLUFOHVKRZVWKHPDWKHPDWLFDOUHODWLRQVKLSEHWZHHQWKH[DQG\YDOXHVIRUDQ\SRLQW RQWKHFLUFOH7KDWPHDQVZHFDQWDNHWKH[DQG\YDOXHVIRUDIHZSRLQWVRQWKHFLUFOHDQGWU\SOXJJLQJ WKHPLQWRWKHGLIIHUHQWDQVZHUFKRLFHV:KHQZHILQGWKHRQHFKRLFHWKDWDFFXUDWHO\UHIOHFWVWKH UHODWLRQVKLSVDPRQJDOOWKHSRLQWVZHߞYHWHVWHGZHߞOONQRZWKDWLWPXVWEHWKHFRUUHFWDQVZHU 6ROHWߞVSLFNVRPHSRLQWVDQGWU\WKHPRXW7KHIRXUHDVLHVWSRLQWVWRLGHQWLI\DUHWKHRQHVZKHUHWKHFLUFOH WRXFKHVWKHVTXDUH w w w w 6ROHWߞVSOXJWKHILUVWSRLQWLQWRWKHILUVWHTXDWLRQLQWKHDQVZHUFKRLFHVDQGVHHZKDWKDSSHQV 6RZHFDQVHHWKDWWKHH[SUHVVLRQLQFKRLFH $ LVYDOLGIRUWKHSRLQW 6RIDUVRJRRG/HWߞVWU\ DQRWKHUSRLQWRQWKHFLUFOH 7KLVRQHVKRXOGDOVRVDWLVI\WKHFRUUHFWHTXDWLRQVLQFHLWߞVWKHULJKW PRVWSRLQWRQWKHFLUFOH/HWߞVSOXJLWLQDQGVHHZKDWKDSSHQV 6RWKHH[SUHVVLRQLQFKRLFH $ DOVRZRUNVIRUWKHSRLQW DVLWVKRXOG /HWߞVWU\DQRWKHUSRLQWWKDWOLHVRQWKHFLUFOHWRVHHLILWVDWLVILHVFKRLFH $ ,ߞ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ߚWKDWPHDQV $ LVLQWKHPLQRULW\ZKLFKZHNQRZLVRIWHQDVLJQWKDWLW PLJKWEHZURQJRQWKH$&72QFHWKHSDWWHUQFDOOVP\DWWHQWLRQWRWKDWLVVXH,ZRXOGGHILQLWHO\PDNHVXUH WRUHFKHFNP\FDOFXODWLRQVHVSHFLDOO\EHFDXVHLWFDQEHVRHDV\WRPDNHDVPDOOPLVWDNHDQGHQGXS VZLWFKLQJDVLJQOLNHWKDW%XWZKHQZHGRUHFKHFNWKHFDOFXODWLRQZHߞ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ߡߢDQGߡߢ,ZRXOGEHWWKDWRYHURIWKHWHVWWDNHUVZKRVDZWKLV TXHVWLRQRQWHVWGD\NQHZHQRXJKPDWKWRGRHDFKRIWKRVHVWHSVLQGLYLGXDOO\EXWPRVWRIWKHPGLGQߞ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ߞVELJJHUWKDQWKHRULJLQDOQXPEHUIURPVRWKH RYHUDOOLQFUHDVHZLOOEHPRUHWKDQODUJHUWKDQWKHYDOXH 7KH5HG%RRNGHPRQVWUDWHVWKLVLQLWVH[SODQDWLRQRQSDJHDQGSURYLGHVDFRXSOHRIZD\VWKDW\RX FDQFDOFXODWHWKHFRUUHFWDQVZHUDV$QGWKRVHVROXWLRQVDUHPDWKHPDWLFDOO\YDOLGRIFRXUVH %XWWKHUHߞVDPXFKIDVWHUZD\WRDGGUHVVWKHTXHVWLRQLIZHMXVWWKLQNDERXWWKHUHODWLRQVKLSVDPRQJWKH DQVZHUFKRLFHVDQGWKHFRQFHSWVLQWKHTXHVWLRQ :HNQRZULJKWDZD\WKDW + - DQG . PXVWEHZURQJEHFDXVHWKHFRUUHFWDQVZHUPXVWEHJUHDWHUWKDQ VLQFHWKHGLVWDQFHLQWKHTXHVWLRQKDGWZRVHSDUDWHLQFUHDVHVDQGRQHRIWKHPZDVRQLWVRZQ 6RHDFKRIWKHVHFKRLFHVLVWRRVPDOOWREHWKHFRUUHFWDQVZHU ,IZHWKLQNDERXWWKHSURSHUWLHVRIFRQVHFXWLYHSHUFHQWDJHLQFUHDVHVZHFDQUHDOL]HWKDWWKHFRUUHFW DQVZHUFDQߞWEHDIODWIRUWKHUHDVRQZHMXVWGLVFXVVHG 2QO\ ) LVODUJHHQRXJKVR ) PXVWEHFRUUHFW 0RVWWHVWWDNHUVZLOOPLVVWKLVTXHVWLRQEHFDXVHWKH\GRQߞWWKLQNDERXWLWFDUHIXOO\HQRXJKDQGVLPSO\ FKRRVH * 2QFHPRUHZHVHHWKHLPSRUWDQFHRISD\LQJDWWHQWLRQWRVPDOOGHWDLOVDQGRIWKLQNLQJDERXW WKHDQVZHUFKRLFHVDVSDUWRIWKHTXHVWLRQIURPWKHYHU\EHJLQQLQJ 3DJH4XHVWLRQ 7KLVTXHVWLRQFDQEHDSSURDFKHGLQDYDULHW\RIZD\V7KH5HG%RRNGHVFULEHVRQHYDOLGDSSURDFK ZKLFKLVWRXVHWKH3\WKDJRUHDQWKHRUHPVLQFHWKHWULDQJOHLVDULJKWWULDQJOHDFFRUGLQJWRWKHGLDJUDP 6R + LVFRUUHFWRIFRXUVH $VXVXDOWKHUHDUHRWKHUDSSURDFKHVZHFDQXVHDVZHOO$QRWKHUPDWKHPDWLFDODSSURDFKLVWRUHPHPEHU WKH3\WKDJRUHDQWULSOH^`DQGWRQRWLFHWKDWWKLVULJKWWULDQJOHLVMXVWWDNLQJWKDW3\WKDJRUHDQWULSOH DQGPXOWLSO\LQJHDFKVLGHOHQJWKE\ %XWWKHIDVWHVWDSSURDFKLQWKLVFDVHPLJKWEHWRWKLQNDERXWWKHUHODWLRQVKLSVRIWKHDQVZHUFKRLFHVWRWKH GLDJUDP:HFDQWHOOWKHGLDJUDPLQWKLVTXHVWLRQLVEDVLFDOO\GUDZQWRVFDOHDVZHH[SHFWLWWREHRQWKH $&70DWKVHFWLRQ:HFDQWHOOWKHGLDJUDPLVURXJKO\WRVFDOHEHFDXVHWKHZDOOGRHVDSSHDUWREHDV ORQJDVWKHODGGHUDQGWKHDQJOHEHWZHHQWKHWZROHJVLQWKHGLDJUDPLVGHILQLWHO\DULJKWDQJOH6ROHWߞV WKLQN ,IZHSLFNRUZHߞGEHVD\LQJWKHXQODEHOHGVLGHLVOHVVWKDQKDOIDVORQJDVORQJDVWKHZDOO ,IZHSLFNZHߞGEHVD\LQJWKHXQODEHOHGVLGHLVDELWPRUHWKDQKDOIDVORQJDVWKHK\SRWHQXVHRUWKH YHUWLFDOOHJEXWVWLOOVKRUWHUWKDQHLWKHU ,IZHSLFN࠼ZHߞGEHVD\LQJWKHXQODEHOHGVLGHLVEDVLFDOO\XQLWORQJEHFDXVH࠼LVDOLWWOHELWPRUH WKDQ <RXFDQXVH\RXUFDOFXODWRUWRILQGDGHFLPDODSSUR[LPDWLRQRI࠼LI\RXZDQW ,IZHSLFN࠼ZHߞGEHVD\LQJWKHXQODEHOHGVLGHLVURXJKO\XQLWVORQJEHFDXVH࠼LVURXJKO\ DJDLQXVHDFDOFXODWRUWRILQGWKDWYDOXHLI\RXZDQWWR :KHQZHORRNDWWKHGLDJUDPLWߞ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ߚLQRWKHUZRUGV . LVZKDW\RXߞGJHWLI\RXPLVWDNHQO\WKRXJKWWKHXQODEHOHGVLGHZDV WKHK\SRWHQXVHRIWKHWULDQJOHLQVWHDGRILWVVKRUWOHJ 6RWKHRQO\UHDOZD\WRDUULYHDW - DQG . DVZURQJDQVZHUVLVWRWU\WRXVHDIRUPXOD2QWKHRWKHU KDQGLIZHMXVWXVHWKHVFDOHRIWKHGLDJUDPWRDQVZHUWKHTXHVWLRQZHFDQߞWSRVVLEO\EHWULFNHGLQWR FKRRVLQJHLWKHURIWKRVHDQVZHUV6WLOOOHWPHEHDEVROXWHO\FOHDURQVRPHWKLQJKHUH,ߞPQRWVD\LQJWKH GLDJUDPEDVHGDSSURDFKLVQHFHVVDULO\EHWWHUWKDQWKHPDWKHPDWLFDODSSURDFK$OOWKDWPDWWHUVLVWKDW\RX JHWWRWKHFRUUHFWDQVZHULQDUHOLDEOHZD\,ߞPVLPSO\XVLQJWKLVTXHVWLRQWRSRLQWRXWRQFHDJDLQWKDWWKH $&70DWKVHFWLRQLVQߞWVWULFWO\DERXWNQRZLQJPDWKHPDWLFDOIRUPXODVRUGRLQJFRPSOLFDWHGFDOFXODWLRQV ,QPDQ\FDVHVOLNHWKLVRQHWKH$&7PDNHVLWSRVVLEOHWRDUULYHDWWKHFRUUHFWDQVZHUZLWKRXWUHDOO\ GRLQJDQ\FDOFXODWLRQV.HHSLQJWKLVLQPLQGFDQKHOS\RXILQGYHU\IDVWVROXWLRQVWRDORWRITXHVWLRQVRQ WKH$&7HYHQZKHQWKRVHTXHVWLRQVPLJKWVHHPGLIILFXOWRUQHDUO\LPSRVVLEOHIRUXQWUDLQHGWHVWWDNHUV 3DJH4XHVWLRQ 7KHILUVWWKLQJWRQRWLFHDERXWWKLVTXHVWLRQLVWKDWLWGRHVQߞWDVNXVWRDWWHPSWWRDGGWKHVHIUDFWLRQVRU DFWXDOO\PDQLSXODWHWKHPLQDQ\ZD\7KLVLVZK\LWߞVVRLPSRUWDQWWRUHDGDTXHVWLRQDOOWKHZD\WKURXJK EHIRUH\RXVWDUWWRZRUNRQLW0DQ\WHVWWDNHUVDUHLQVXFKDIUHQ]LHGVWDWHZKHQWKH\DFWXDOO\VLWGRZQRQ WHVWGD\WKDWWKH\ߞOOWU\WRVWDUWZRUNLQJRQDTXHVWLRQEHIRUHWKH\HYHQNQRZZKDWߞVEHLQJDVNHG 7KHTXHVWLRQDVNVXVWRILQGWKHOHDVWFRPPRQGHQRPLQDWRUIRUWKHVHWRIIUDFWLRQVWKDWLWJLYHVXV$V WUDLQHGWHVWWDNHUVIDPLOLDUZLWKWKHEDVLFPDWKFRQFHSWVWKDWFDQDSSHDURQWKH$&7ZHQHHGWRNQRZWKDW DVNLQJIRUWKHOHDVWFRPPRQGHQRPLQDWRULQDFDVHOLNHWKLVLVWKHVDPHWKLQJDVDVNLQJIRUWKHOHDVW FRPPRQPXOWLSOHRIWKHQXPEHUVLQWKHGHQRPLQDWRUV7KHOHDVWFRPPRQPXOWLSOHLVH[DFWO\ZKDWLWVRXQGV OLNHWKHVPDOOHVWQXPEHUWKDWߞVDPXOWLSOHRIHYHU\QXPEHULQWKHVHW6RZHQHHGWRILQGWKHOHDVWFRPPRQ PXOWLSOHRIDQG 7KHUHDUHWZRPDLQZD\VZHFDQWU\WRGRWKLVRQDQ$&70DWKTXHVWLRQ7KH5HG%RRNH[SODQDWLRQ VKRZVRQHZD\WRGRLWRQSDJH7KDWH[SODQDWLRQLQYROYHVGHULYLQJWKHSULPHIDFWRUL]DWLRQRIHDFK QXPEHUDQGWKHQFRQVWUXFWLQJDQHZSULPHIDFWRUL]DWLRQWKDWLQFRUSRUDWHVDOOWKHHOHPHQWVRIWKHRULJLQDO QXPEHUV7KHQHZSULPHIDFWRUL]DWLRQZLOOEHWKHSULPHIDFWRUL]DWLRQRIWKHOHDVWFRPPRQPXOWLSOH ,IWKDWVRXQGVXQQHFHVVDULO\FRQIXVLQJ\RXߞUHULJKWߚLWLV 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQLVWKHNLQGRIH[SODQDWLRQWKDWRQO\PDNHVVHQVHLI\RX DOUHDG\XQGHUVWDQGZKDWߞVEHLQJH[SODLQHG,QRWKHUZRUGVLWߞVQRWDYHU\XVHIXOH[SODQDWLRQDQGWKH DSSURDFKWKDWWKH5HG%RRNUHFRPPHQGVLVXQOLNHO\WREHKHOSIXOWRWHVWWDNHUVZKRFRXOGQߞWDQVZHUWKH TXHVWLRQRQWKHLURZQLQWKHILUVWSODFH 6ROHWߞVWDONDERXWWKHRWKHUZD\WRDSSURDFKWKLVTXHVWLRQZKLFKLVWRJRWKURXJKHDFKDQVZHUFKRLFHDQG VHHLILWߞVDPXOWLSOHRIHDFKGHQRPLQDWRULQWKHTXHVWLRQ6LQFHZHߞUHORRNLQJIRUWKHOHDVWFRPPRQ PXOWLSOHZHߞOOVWDUWZLWKWKHVPDOOHVWDQVZHUFKRLFHDQGWKHQZRUNRXUZD\XSIURPWKHUH LVDPXOWLSOHRIDQGEXWQRWDPXOWLSOHRI6RLWFDQߞWEHWKHOHDVWFRPPRQPXOWLSOHVLQFHLV RQHRIWKHQXPEHUVWKDWQHHGVWRIDFWRULQWRWKHFRUUHFWDQVZHU LVDPXOWLSOHRIDQGVRLWߞVDPXOWLSOHRIHDFKQXPEHULQWKHGHQRPLQDWRUV,WߞVDOVRWKH VHFRQGVPDOOHVWQXPEHULQWKHDQVZHUFKRLFHV2QO\LVVPDOOHUDQGZHDOUHDG\NQRZWKDWFDQߞ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ߞGHQGXSWKLQNLQJWKDWZDV WKHFRUUHFWDQVZHU$QGVRRQ6RZHVKRXOGGHILQLWHO\PDNHVXUHWRSDXVHIRUDPRPHQWDQGEHFHUWDLQ ZHKDYHQߞWPHVVHGXSEHFDXVHLWZRXOGEHDVKDPHWRWKURZDZD\DUHODWLYHO\VLPSOHTXHVWLRQOLNHWKLV RQHMXVWEHFDXVHZHPDGHDVPDOOPLVWDNHDQGFRXOGQߞWEHERWKHUHGWRILQGLWDQGFRUUHFWLW 2QFHZHGRXEOHFKHFNZHFDQFRQILUPWKDW % LVLQIDFWWKHFRUUHFWDQVZHU $VLVRIWHQWKHFDVHZHVHHWKDWWKHHDVLHVWZD\WRDSSURDFKWKLVTXHVWLRQLVVLPSO\WRZRUNWKURXJKWKH DQVZHUFKRLFHVUDWKHUWKDQWRXVHWKHSXUHO\PDWKHPDWLFDODSSURDFKVXJJHVWHGLQWKH5HG%RRN 5HPHPEHUWKDWWKHIDVWHVWDQGHDVLHVWZD\WRDSSURDFKDQ$&70DWKTXHVWLRQRIWHQLQYROYHVOLWWOHRUQR IRUPDOPDWKDWDOO 3DJH4XHVWLRQ $ORWRIWHVWWDNHUVZKRGRQߞWWDNHFDUHWRWKLQNLQWHUPVRIPDWKHPDWLFIXQGDPHQWDOVPLJKWEHFRQIXVHGE\ WKLVTXHVWLRQDQGWKH\PLJKWHYHQPLVVLWLIWKH\GRQߞ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wLVWKHVXPRIDQG wLVWKHVXPRIDQG wLVWKHVXPRIDQG wLVWKHVXPRIDQG %XWWKHUHߞVQRZD\WRDGGDQ\WZRRIWKRVHIRXUQXPEHUVWRJHWKHUDQGDUULYHDWVR . LVWKHFRUUHFW DQVZHU E\WKHZD\LVWKHVXPRIDELQWKLVTXHVWLRQVRWKHUHPLJKWEHVRPHZD\WRPLVUHDGWKHVHWXS DQGDUULYHDWE\DGGLQJWKHZURQJWKLQJVWRJHWKHU 7KHRQO\PDWKLQYROYHGLQWKLVTXHVWLRQLVIDLUO\EDVLFDULWKPHWLFDQGDOJHEUDEXW,ߞYHVHHQXQWUDLQHGWHVW WDNHUVPLVVWKLVTXHVWLRQIDUPRUHRIWHQWKDQ\RXPLJKWWKLQN:KHQWKH\GRPLVVLWPRVWRIWKHPFKRRVH - EHFDXVHWKH\GRQߞWSD\HQRXJKDWWHQWLRQWRWKHTXHVWLRQߚWKH\WKLQNWKHTXHVWLRQLVDVNLQJWKHPIRUWKH YDOXHRIDELQVWHDGRIDVNLQJIRUWKHRQO\FKRLFHWKDWFDQߞWSRVVLEO\EHWKHYDOXHRIDE,QRWKHU ZRUGVWKH\HQGXSPLVVLQJWKLV$&70DWKTXHVWLRQEHFDXVHRISRRUUHDGLQJQRWEHFDXVHWKH\GRQߞWNQRZ WKHQHFHVVDU\PDWK $V,ߞYHVDLGUHSHDWHGO\DQGDV,ߞOOFRQWLQXHWRVD\WKURXJKRXWWKLV%ODFN%RRNPRVWWHVWWDNHUVFRXOGKLW WKHLUWDUJHWVFRUHVLIWKH\ZRXOGVLPSO\HOLPLQDWHWKHVHNLQGVRIPLVWDNHV2QHRIWKHPDLQUHDVRQV,NHHS SRLQWLQJWKHVHWKLQJVRXWWR\RXRYHUDQGRYHUDJDLQLVWKDW\RXQHHGWROHDUQWREHFRPHREVHVVLYHDERXW WKHVHNLQGVRIVPDOOGHWDLOV 3DJH4XHVWLRQ 7KHUHDUHVHYHUDOWKLQJVZHFDQOHDUQIURPWKLVTXHVWLRQWKDWZLOOKHOS\RXRQIXWXUH$&70DWKTXHVWLRQV 2QHRIWKHILUVWWKLQJV,ߞGOLNHWRSRLQWRXWLVWKDWWKH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQLVQߞWYHU\ XVHIXO7KH5HG%RRNDGYLVHV\RXWRGUDZDQXPEHUOLQHDQGSORWWKHSRLQWVDQGRQLWDQGWKHQILQG WKHSRLQWLQWKHPLGGOHRI\RXUQXPEHUOLQH7KLVLVWHFKQLFDOO\DYDOLGDSSURDFKWRWKHTXHVWLRQEXWLWߞV IDUPRUHWLPHFRQVXPLQJWKDQQHFHVVDU\ 7KHIDVWHVWZD\WRDSSURDFKWKHTXHVWLRQLVWRUHDOL]HWKDWWKHPLGSRLQWRIWZRSRLQWVRQDQXPEHUOLQHLV WKHVDPHWKLQJDVWKHDYHUDJHRIWKHYDOXHVRIWKRVHWZRSRLQWV,QRWKHUZRUGVWKLVTXHVWLRQLVVLPSO\ DVNLQJIRUWKHDYHUDJHRIDQG:HFDQFDOFXODWHWKDWWKLVZD\ 6RWKHFRUUHFWDQVZHULVFKRLFH % 7KH5HG%RRNZDUQV\RXWKDW\RXPLJKWDFFLGHQWDOO\FRQIXVHWKHIRUPXODIRUWKHDYHUDJHZLWKWKHIRUPXOD IRUWKHGLVWDQFHIURPWKHPLGSRLQWWRWKHHQGSRLQWEXW,ߞYHQHYHUVHHQDSHUVRQPDNHWKDWPLVWDNH, DFWXDOO\GRXEWWKDWPDQ\WHVWWDNHUVZRXOGKDYHWKDWIRUPXODPHPRUL]HGVLQFHLWFRPHVXSYHU\UDUHO\LQ KLJKVFKRRORUFROOHJHPDWKFODVVHV 7REHFOHDU,ߞPQRWVD\LQJWKDWWKHLGHDRIGUDZLQJDQXPEHUOLQHLVQHFHVVDULO\DEDGRQH,I\RXGRLW FRUUHFWO\\RXߞOODUULYHDWWKHFRUUHFWDQVZHU,ߞPVLPSO\VD\LQJWKDWWKHQXPEHUOLQHDSSURDFKLVPRUH FRPSOLFDWHGDQGWLPHFRQVXPLQJWKDQWKHDYHUDJLQJDSSURDFK ,ߞGDOVROLNHWRWDONDERXWWKHRWKHUDQVZHUFKRLFHVEHFDXVHDQDO\]LQJWKRVHFKRLFHVPLJKWKHOS\RXILJXUH RXWKRZWRDSSURDFKWKHTXHVWLRQLI\RXZHUHVWXFNRQLW6XFKDQDQDO\VLVFDQDOVRKHOS\RXFKHFN\RXU ZRUNDIWHUWKHIDFW &KRLFH ( LVWKHWRWDOGLVWDQFHIURPWRZKLOHFKRLFH & LVWKHGLVWDQFHIURPRUWRWKH PLGSRLQW 7KLVPDNHVVHQVHVLQFH & LVKDOIRI ( &KRLFH ' LVWKHVXPRIDQGVRLWIROORZVWKHFRPPRQ$&7SDWWHUQRIEHLQJߡRQWKHZD\ߢWRWKH ULJKWDQVZHUߚ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ߞVH[SODQDWLRQLVXQQHFHVVDULO\FRPSOLFDWHGDQG IRUPDOL]HG,IZHIHHOSUHWW\FRQILGHQWZLWKH[SRQHQWVWKHQZHPLJKWQDWXUDOO\FRPHXSZLWKWKH5HG %RRNߞVDSSURDFKZKLFKDSSHDUVRQSDJH %XWPDQ\WHVWWDNHUVDUHQߞWYHU\FRPIRUWDEOHZLWKH[SRQHQWVDQGZRQߞWEHDEOHWRH[HFXWHWKH5HG%RRNߞV DSSURDFKZLWKFRQILGHQFH/XFNLO\IRUWKHPWKH\GRQߞWQHHGWRߚVLQFHWKH$&7LVDPXOWLSOHFKRLFHWHVW ZHFDQILQGWKHDQVZHUWRWKLVTXHVWLRQMXVWE\JRLQJWKURXJKHDFKRIWKHDQVZHUFKRLFHVDQGSOXJJLQJLWLQ IRU[LQWKHRULJLQDOHTXDWLRQ <RXߞOOSUREDEO\ZDQWWRXVH\RXUFDOFXODWRUIRUWKDWRIFRXUVH ,IZHGRWKDWZHߞOOVHHWKDWLVWKHRQO\YDOXHWKDWZRUNVIRU[EHFDXVH DQG 6R . PXVWEHFRUUHFW 2IFRXUVH\RXߞOOZDQWWRPDNHVXUH\RXHQWHUHDFKH[SUHVVLRQWKDW\RXߞUHWHVWLQJLQWR\RXUFDOFXODWRU FRUUHFWO\,I\RXNH\LQDQH[SUHVVLRQLQFRUUHFWO\\RXߞUHOLNHO\WRHQGXSFKRRVLQJWKHZURQJDQVZHU%XW LI\RXFDQHQWHUWKHH[SUHVVLRQVFRUUHFWO\WKHQ\RXFDQDQVZHUWKLVTXHVWLRQZLWKRXWHYHUNQRZLQJWKH SURSHUZD\WRVROYHHTXDWLRQVZLWKH[SRQHQWVLQWKHP 3DJH4XHVWLRQ 3HRSOHRIWHQPLVVWKLVTXHVWLRQEHFDXVHWKH\GRQߞWUHDGLWFDUHIXOO\HQRXJKHYHQWKRXJKWKLVLVDQRWKHU RQHRIWKRVH$&70DWKTXHVWLRQVWKDWGRHVQߞWDFWXDOO\UHTXLUH\RXWRGRDQ\FDOFXODWLRQVLI\RXGRQߞW ZDQWWR 7KH5HG%RRNH[SODQDWLRQRQSDJHVKRZVWZRGLIIHUHQWPDWKHPDWLFDODSSURDFKHVWRWKHTXHVWLRQߚ RQHXVLQJDOJHEUDDQGRQHXVLQJDQDUELWUDU\FRQFUHWHYDOXH 7KH5HG%RRNH[SODQDWLRQDOVRLQFOXGHVWKH EL]DUUHLQVWUXFWLRQߡZKHQ\RXSRXUEHVXUHWRJHWLWDOORXWRIWKHVPDOOHUERWWOHߢDVWKRXJKWKHDXWKRURI WKHH[SODQDWLRQWKLQNV\RXPLJKWWU\WRVROYHWKLVTXHVWLRQE\XVLQJDFWXDOERWWOHVRIFDWVXSIRUUHIHUHQFH HYHQWKRXJK,ߞPSUHWW\VXUH\RXFDQߞWEULQJFDWVXSERWWOHVLQWRWKHWHVWLQJFHQWHUZLWK\RX,KDYHQRLGHD KRZWKDWFRPPDQGIRXQGLWVZD\RQWRSDJHEXWDWWKLVSRLQW,FDQQRORQJHUEHVXUSULVHGE\DQ\WKLQJ, UHDGLQD5HG%RRNH[SODQDWLRQ %XWOHWߞVWDONDERXWKRZZHPLJKWDSSURDFKWKHTXHVWLRQZLWKRXWXVLQJDQ\UHDOPDWKDQGZLWKRXWKDYLQJ DFFHVVWRFDWVXSERWWOHV :HNQRZWKHELJERWWOHVWDUWVRXWIXOODQGWKDW$QJHODLVJRLQJWRDGGFDWVXSWRLWIURPWKHVPDOO ERWWOH7KDWPHDQVWKDWFKRLFHV $ DQG % FDQߞWSRVVLEO\EHFRUUHFWEHFDXVHWKH\ߞUHERWKVPDOOHUWKDQ WKHVWDUWLQJDPRXQWRIFDWVXSLQWKHERWWOH :HFDQDOVRZRUNRXWWKDW ' FDQߞWEHFRUUHFWEHFDXVHRQHERWWOHLVIXOODQGWKHRWKHUERWWOHLV IXOOEXWWKHERWWOHVDUHGLIIHUHQWVL]HVVRWKHUHߞVQRZD\WKDWFRPELQLQJWKHWZRERWWOHVFDQUHVXOWLQHLWKHU ERWWOHEHLQJSHUIHFWO\FRPSOHWHO\IXOO ,QVWHDGLIZHUHDGFDUHIXOO\ZHFDQVHHWKDWWKHFRQWHQWVRIWKHVPDOOHUERWWOH ZKLFKLVIXOO DUH EHLQJDGGHGWRWKHFRQWHQWVRIWKHODUJHUERWWOH ZKLFKLVIXOO 6RWKHODUJHUERWWOHZLOOEHPRUHIXOO WKDQLWZDVEXWQRWWRWDOO\IXOODQGFHUWDLQO\QRWRYHUIORZLQJ7KHRQO\DQVZHUFKRLFHLQWKDWUDQJHLV & VR & PXVWEHWKHFRUUHFWDQVZHU $VWUDLQHGWHVWWDNHUVZHDOZD\VZDQWWRWU\WRILJXUHRXWWKHPLVWDNHVWKDWWKH$&7ZDQWVXVWRPDNH)RU WKLVTXHVWLRQ,WKLQNRQHRIWKHHDVLHVWPLVWDNHVIRUDORWRIWHVWWDNHUVWRPDNHLVWRJHWWKHERWWOHVPL[HG XSDQGWRWKLQNWKDWWKHODUJHUERWWOHLVEHLQJSRXUHGLQWRWKHVPDOOHURQHDQGQRWWKHRWKHUZD\DURXQG,I ZHPDNHWKDWPLVWDNHߚZKLFKLVHVVHQWLDOO\DQLVVXHZLWKPLVUHDGLQJWKHTXHVWLRQUDWKHUWKDQDPDWK UHODWHGLVVXHߚZHHQGXSFKRRVLQJ ( DQGEHLQJZURQJ)RUWKDWPDWWHUFKRLFH ' LVDOVRWKHUHVXOWRID UHDGLQJHUURUEHFDXVHZHߞGHQGXSFKRRVLQJ ' LIZHGLGQߞWFDWFKWKDWWKHERWWOHVLQWKHTXHVWLRQDUH GLIIHUHQWVL]HV &KRLFHV $ DQG % PHDQZKLOHDUHZKDWZHZRXOGJHWLIZHDWWHPSWHGDFDOFXODWLRQDQGWKHQPDGHD PLVWDNHZLWKLW $ UHSUHVHQWVWKHSURGXFWRIDQGZKLFKKDVQRWKLQJWRGRZLWKWKHTXHVWLRQDQG % UHSUHVHQWVWKHSRUWLRQRIWKHODUJHUERWWOHWKDWZRXOGEHOHIWLIRIRIWKHODUJHUERWWOHZHUH UHPRYHGIURPLWUDWKHUWKDQDGGHGWRLW,QRWKHUZRUGVERWKDQVZHUFKRLFHVUHSUHVHQWZKDW\RXPLJKWJHW LI\RXWULHGWRVHWXSDQH[SUHVVLRQOLNH DQGWKHQPHVVHGXSWKHDULWKPHWLFVRPHKRZ 7KHVHW\SHVRIDQVZHUFKRLFHVVHUYHDVRQHPRUHUHDVRQZK\LWߞVRIWHQEHVWWRLJQRUHIRUPDOL]HGPDWK VROXWLRQVRQWKH$&70DWKVHFWLRQHVSHFLDOO\LI\RXߞUHQRWDYHU\VWURQJPDWKVWXGHQWߚVRPHTXHVWLRQV OLNHWKLVRQHDUHZULWWHQVRWKDW\RXFDQZRUNRXWWKHDQVZHUPRUHHDVLO\ZLWKRXWDFWXDOO\GRLQJDQ\PDWK LI\RXMXVWSD\DWWHQWLRQWRWKHGHWDLOVDQGWKLQNDERXWWKHPDOLWWOHELW 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQOHDYHVDORWWREHGHVLUHGVRWKHUHDUHDIHZWKLQJV,ߞGOLNH WRSRLQWRXWKHUH 7KHPRVWLPSRUWDQWWKLQJWRNHHSLQPLQGIRUWKLV$&70DWKTXHVWLRQߚDQGIRUPDQ\RWKHU$&70DWK TXHVWLRQVߚLVWKDW\RXߞUHQRWEHLQJWHVWHGRQVRPHWKLQJ\RXZHUHVXSSRVHGWRKDYHNQRZQLQDGYDQFH 1RERG\LVJRLQJWRDQVZHUWKLVTXHVWLRQE\UHFDOOLQJVRPHIDFWWKH\PHPRUL]HGRIIDIODVKFDUGRQFH7KH RQO\UHDOZD\WRDQVZHUWKLVTXHVWLRQLVWRXQGHUVWDQGWKHSURSHUWLHVRIWKHFRQFHSWVLQYROYHG LQWKLV FDVHWKHFRQFHSWVRIDEVROXWHYDOXHDQGLQHTXDOLW\ DQGWKHQXVHWKHPWRILJXUHRXWZKDWߞVJRLQJRQLQWKH TXHVWLRQ 6RLWߞVYHU\XQOLNHO\WKDW\RXߞOOHYHUVHHDQRWKHU$&70DWKTXHVWLRQWKDWGLUHFWO\WHVWVWKHH[DFWVDPH LGHDVEHLQJWHVWHGLQWKLVTXHVWLRQLQWKHH[DFWVDPHZD\,QVWHDG\RXߞOOVHHVRPHRWKHUTXHVWLRQWKDWDVNV DERXWVRPHRWKHUEDVLFPDWKSURSHUW\LQVRPHRWKHUVWUDQJHZD\7KDWߞVZK\LWߞVLPSRUWDQWIRUXVWR JHQHUDOL]HRXUGLVFXVVLRQRIHDFK$&70DWKTXHVWLRQDVPXFKDVSRVVLEOH 1RZLQWKLVSDUWLFXODUFDVHZHߞUHDVNHGWRILJXUHRXWZKDWPXVWEHWUXHDERXWDDQGELI_D_!_E_6RPH XQWUDLQHGWHVWWDNHUVPLJKWWU\WRFRPHXSZLWKDOLVWRIVWDWHPHQWVWKDWZRXOGKDYHWREHWUXHLQWKLV VFHQDULRDQGWKHQWU\WRILQGDQDQVZHUFKRLFHWKDWPDWFKHGRQHRIWKHLUJHQHUDWHGVWDWHPHQWV7KDWNLQGRI DSSURDFKFRXOGZRUNWHFKQLFDOO\EXWLWZRXOGSUREDEO\EHYHU\WLPHFRQVXPLQJߚLQIDFWLI\RXWKRXJKW RIWUXHVWDWHPHQWVWKDWZHUHGLIIHUHQWIURPWKHWUXHVWDWHPHQWWKH$&7SODFHGLQWKHDQVZHUFKRLFHVWKHQ FRPLQJXSZLWK\RXURZQVWDWHPHQWVEHIRUHKDQGZRXOGEHDWRWDOZDVWHRIWLPH)RUH[DPSOH\RXPLJKW ORRNDWWKHJLYHQVWDWHPHQWWKDW_D_!_E_DQGFRQFOXGHFRUUHFWO\WKDWDࡂZKLFKLVWUXHߚEXWLWߞVQRWRQH RIWKHDQVZHUFKRLFHVVR\RXZRXOGKDYHZDVWHG\RXUWLPHLQILJXULQJWKDWRXW 6RWKHVPDUWHUZD\WRDSSURDFKWKHTXHVWLRQLVSUREDEO\WRZRUNWKURXJKWKHDQVZHUFKRLFHVDQGVHH ZKLFKRQHPXVWEHWUXHJLYHQWKDW_D_!_E_ $ GRHVQߞWZRUN,ID EWKHQ_D_ _E_ZKLFKPHDQVLWߞVLPSRVVLEOHIRU_D_WREHJUHDWHUWKDQ_E_<RXFDQ HDVLO\WHVWWKLVZLWKDFRQFUHWHQXPEHUߚ,ߞOOUDQGRPO\FKRRVH,I D ELWߞV127WUXHWKDW__!__ EHFDXVHLVQRWJUHDWHUWKDQ % ZLOOWXUQRXWWREHWKHFRUUHFWDQVZHU,I_D_!_E_LWPXVWEHWUXHWKDWDDQGEDUHGLIIHUHQWQXPEHUV EHFDXVHWKH\KDYHGLIIHUHQWDEVROXWHYDOXHVߚLIWKH\ZHUHWKHVDPHQXPEHUWKH\ZRXOGKDYHWKHVDPH DEVROXWHYDOXHDVRQHDQRWKHUDVZHMXVWVDZZKHQZHWKRXJKWDERXWFKRLFH $ 6R % LVWKHFRUUHFW DQVZHU2IFRXUVHDVWUDLQHGWHVWWDNHUVZHZDQWWRPDNHVXUHZHORRNDWWKHRWKHUDQVZHUFKRLFHVVR ZHFDQEHPRUHFHUWDLQWKDWZHKDYHQߞWPDGHDPLVWDNHVRPHZKHUH & JLYHVXVDVWDWHPHQWWKDWFRXOGEHWUXHEXWLWGRHVQߞWKDYHWREHWUXH,WߞVSRVVLEOHWRWKLQNRIQXPEHUV WKDWZRXOGVDWLVI\WKHLQHTXDOLW\OLNHD DQGE ,QWKLVH[DPSOHLWߞVWUXHWKDWDEDQGLWߞVDOVR WUXHWKDW_D_!_E_%XW\RXFRXOGDOVRKDYHD DQGE DQGLWZRXOGVWLOOEHWUXHWKDW_D_!_E_HYHQ WKRXJKD!E7KHUHߞVDQRWKHUSUREOHPZLWKWKLVFKRLFHIURPDWHVWGHVLJQSHUVSHFWLYHLI & ZHUH FRUUHFWWKHQ % ZRXOGDXWRPDWLFDOO\KDYHWREHFRUUHFWDOVR,QRWKHUZRUGVLILW0867EHWUXHWKDWD EWKHQLWDOVR0867EHWUXHWKDWDࡂE6LQFHRQO\RQHDQVZHUFKRLFHFDQEHFRUUHFWSHUTXHVWLRQ & PXVWQRWEHFRUUHFWIRUWKDWUHDVRQDVZHOO ' LVWKHVDPHVLWXDWLRQDV & MXVWLQUHYHUVHLWFDQEHWUXHLQVRPHVFHQDULRVEXWLWGRHVQߞWKDYHWREH WUXHLQHYHU\VFHQDULR)XUWKHULI ' ZHUHDWUXHVWDWHPHQWWKHQ % ZRXOGDOVREHDWUXHVWDWHPHQWDQG WKH$&7RQO\DOORZVRQHFRUUHFWDQVZHUSHUTXHVWLRQVR ' PXVWEHZURQJIRUWKDWUHDVRQWRR ( LVDORWOLNH & DQG ' LQWKDWLWߞVSRVVLEOHWRILQGYDOXHVIRUDWKDWDUHJUHDWHUWKDQWKDWVDWLVI\WKH LQHTXDOLW\_D_!_E_EXWLWߞVDOVRSRVVLEOHWRILQGYDOXHVIRUDWKDWDUHQߞWJUHDWHUWKDQEXWVWLOOVDWLVI\WKH LQHTXDOLW\DVZHOO6RLWFDQEHWUXHEXWLWGRHVQߞWKDYHWREHWUXH 7KLVTXHVWLRQRQO\SURYLGHVIXUWKHUSURRIWKDWWKHPDLQFKDOOHQJHRIWKH$&70DWKVHFWLRQLVWRZRUN FDUHIXOO\WKURXJKVWUDQJHTXHVWLRQVDERXWEDVLFPDWKFRQFHSWV 3DJH4XHVWLRQ 0RVWWHVWWDNHUVZLOOZDQWWRGUDZWKHLURZQGLDJUDPVIRUWKLVTXHVWLRQDQG,ZRXOGSUREDEO\EHQR H[FHSWLRQLI,VDZWKLVTXHVWLRQRQWHVWGD\7KHFKDOOHQJHDVZHߞOOVRRQVHHLVWKDWZHGRQߞWNQRZWKH GLVWDQFHVEHWZHHQDQ\WZRSRLQWVZHRQO\NQRZWKHRUGHURIWKHSRLQWV%DVHGRQWKHGHVFULSWLRQLQWKH TXHVWLRQWKHRUGHURIWKHSRLQWVVKRXOGEH$%'&DQGRXUGUDZLQJPLJKWORRNOLNHWKLV 2UOLNHWKLV 2UWKLV 2UDQ\QXPEHURIRWKHUSRVVLELOLWLHVVRORQJDVWKHRUGHULVVWLOO$%'& 6LQFHZHZHUHQߞWJLYHQDQ\LQIRUPDWLRQDERXWVFDOHZHKDYHWRILJXUHVRPHWKLQJRXWEDVHGRQWKHRUGHU RIWKHSRLQWV 2QFHPRUHZHILQGDVLWXDWLRQZKHUHLWߞVSUREDEO\JRLQJWREHHDVLHVWWRJRWKURXJKHDFKDQVZHUFKRLFH RQHE\RQHDQGVHHLILWKDVWREHWUXHUDWKHUWKDQWU\LQJWRFRPHXSZLWKDWUXHVWDWHPHQWRQRXURZQ ) GRHVQߞWKDYHWREHDWUXHVWDWHPHQWEHFDXVHZHGRQߞWNQRZDQ\WKLQJDERXWWKHGLVWDQFHIURP%WR&RU IURP$WR%(LWKHUGLVWDQFHFRXOGEHDQ\YDOXHDQGQHLWKHUGLVWDQFHKDVDQ\LPSDFWRQWKHRWKHU * LVHVVHQWLDOO\WKHVDPHDV ) ZHZHUHQߞWWROGDQ\WKLQJDERXWWKHGLVWDQFHIURP%WR'RUIURP$WR %VRZHKDYHQREDVLVIRUWU\LQJWRPDNHDXQLYHUVDOO\WUXHVWDWHPHQWDERXWWKHUHODWLRQVKLSRIWKRVH GLVWDQFHV + LVDQRWKHUDQVZHUFKRLFHWKDWPLJKWRUPLJKWQRWEHWUXHIRUDOOZHNQRZ6LQFH%DQG&DUHRQ RSSRVLWHVLGHVRI'DQGQRRWKHULQIRUPDWLRQLVJLYHQWKHUHߞVQRZD\IRUXVWRNQRZWKHUHODWLYHOHQJWKV RIHLWKHUGLVWDQFH - KDVWKHVDPHSUREOHPWKDWDOORIWKHRWKHUFKRLFHVKDYHKDGVRIDU:HߞUHQRWJLYHQDQ\LQIRUPDWLRQ DERXWWKHGLVWDQFHIURP&WR'QRUDERXWWKHGLVWDQFHIURP$WR%DQGQHLWKHUGLVWDQFHKDVDQ\LPSDFWRQ WKHRWKHUVRZHFDQߞWVD\LIWKLVVWDWHPHQWLVWUXHRUQRW . LVDOLWWOHELWGLIIHUHQWIURPWKHRWKHUFKRLFHVLIZHORRNFDUHIXOO\ . FRPSDUHVWZRGLVWDQFHVWKDWGR KDYHDQLPSDFWRQRQHDQRWKHUEHFDXVHWKHGLVWDQFHIURP%WR&LQFOXGHVWKHGLVWDQFHIURP&WR'VLQFH 'LVEHWZHHQ%DQG& <RXPD\QHHGWRUHDGWKDWVHQWHQFHDJDLQIRULWWRPDNHVHQVH ,QRWKHUZRUGV HYHQWKRXJKZHGRQߞWNQRZWKHDFWXDOGLVWDQFHVEHWZHHQ%'DQG&ZHGRNQRZWKDWWKHGLVWDQFHIURP %WR&ZLOODOZD\VLQFOXGHWKHGLVWDQFHIURP'WR&SOXVVRPHH[WUDDPRXQWWRFRYHUWKHGLVWDQFHIURP% WR'6RLWPXVWDOZD\VEHWUXHWKDW%&LVJUHDWHUWKDQ&'ZKLFKPHDQV . LVFRUUHFW :KHQSHRSOHPLVVWKLVTXHVWLRQWKH\JHQHUDOO\PDNHRQHRUERWKRIWKHIROORZLQJPLVWDNHV 7KH\ZULWHWKHSRLQWVGRZQLQWKHZURQJRUGHU XVXDOO\DV$%&' 7KH\DVVXPHWKDWWKHSRLQWVDUHHYHQO\VSDFHG ,ߞPVXUH\RXߞOODJUHHWKDWQHLWKHURIWKRVHPLVWDNHVUHDOO\KDVWRGRZLWKDFWXDOPDWKLQWKHZD\WKDWPRVW SHRSOHWKLQNRIPDWK,QVWHDGERWKPLVWDNHVDUHWKHUHVXOWRIPLVUHDGLQJWKHTXHVWLRQRUQRWSD\LQJHQRXJK DWWHQWLRQWRVPDOOGHWDLOV$VZHߞYHVHHQUHSHDWHGO\WKH$&7OLNHVWRWXUQEDVLFPDWKFRQFHSWVLQWR FKDOOHQJLQJTXHVWLRQVE\LQWURGXFLQJEL]DUUHGHWDLOVWKDWGRQߞWQRUPDOO\DSSHDULQKLJKVFKRRORUFROOHJH PDWKTXHVWLRQV'RQߞWOHWWKHWHVWIRRO\RX 3DJH4XHVWLRQ $VXVXDOWKH5HG%RRNH[SODQDWLRQRQSDJHFRYHUVWKHEDVLFPDWKHPDWLFDODSSURDFKWRWKHTXHVWLRQ ZKLFKLVWRXVHWKHGLVWDQFHIRUPXODRUWKH3\WKDJRUHDQ7KHRUHP7RGRWKDW\RXSORWWKHWZRJLYHQSRLQWV DQGFRQVWUXFWDULJKWWULDQJOHVRWKDWWKHGLVWDQFHEHWZHHQWKHWZRSRLQWVLVWKHK\SRWHQXVHWKHYHUWLFDO VHSDUDWLRQEHWZHHQWKHWZRSRLQWVLVRQHOHJDQGWKHKRUL]RQWDOVHSDUDWLRQEHWZHHQWKHPLVWKHRWKHUOHJ $JDLQ\RXFDQVHHZKDWWKDWORRNVOLNHRQSDJHRIWKH5HG%RRN %XWWKHUHߞVDIDVWHUZD\WRDWWDFNWKLVTXHVWLRQ$VXVXDOWKLVIDVWHUDSSURDFKUHOLHVRQFRQVLGHULQJWKH DQVZHUFKRLFHVIURPWKHYHU\EHJLQQLQJUDWKHUWKDQWU\LQJWRVROYHWKHTXHVWLRQRQRXURZQDQGWKHQ ORRNLQJIRUDQDQVZHUFKRLFHWKDWPDWFKHVRXUDQVZHU :HFDQVHHWKDWWKHWZRGRWVKDYHDVHSDUDWLRQLQWKH[D[LVRIXQLWV VLQFHߙ DQGDVHSDUDWLRQ LQWKH\D[LVRIXQLWV VLQFHߙ 6RWKHKRUL]RQWDO [D[LV VHSDUDWLRQRIWKHWZRSRLQWVLVXQLWV DQGWKHYHUWLFDO \D[LV VHSDUDWLRQLVXQLWV :LWKWKDWLQPLQGOHWߞVWDNHDORRNDWRXUDQVZHUFKRLFHV ) ZRUNVRXWWRDQXPEHUEHWZHHQDQGEHFDXVH ࠼DQG ࠼7KLVLVWRRVPDOOWREHWKH GLVWDQFHEHWZHHQWKHWZRSRLQWVEHFDXVHLWߞVHYHQVPDOOHUWKDQMXVWWKHVHSDUDWLRQLQWKH\D[LVZKLFKLV * ZRUNVRXWWRDQXPEHUEHWZHHQDQGEHFDXVH ࠼DQG ࠼7KLVLVDOVRVPDOOHUWKDQWKH VHSDUDWLRQLQWKH\D[LVMXVWOLNH ) ZDVVRLWPXVWEHZURQJWRR + ZRUNVRXWWRDQXPEHUEHWZHHQDQGEHFDXVH ࠼DQG ࠼7KLVVHHPVOLNHD SODXVLEOHYDOXHIRUWKHGLVWDQFHEHWZHHQWKHWZRSRLQWVLIZHMXVWNLQGRIWKLQNDERXWLWRQDJXWOHYHO EHFDXVHZHNQRZWKHGLVWDQFHKDVWREHELJJHUWKDQHLWKHUWKH[D[LVVHSDUDWLRQRUWKH\D[LVVHSDUDWLRQ E\LWVHOIEXWVPDOOHUWKDQWKHVXPRIERWKVHSDUDWLRQVWRJHWKHUZKLFKLV - LVZKLFKLVWKHVXPRIWKHVHSDUDWLRQVEHWZHHQWKHWZRSRLQWVLQWKH[D[LVDQGLQWKH\D[LV7KDW PHDQVLWߞVWRRELJWREHWKHGLUHFWGLVWDQFHEHWZHHQWKHWZRSRLQWV . LVHYHQELJJHUWKDQVRLWFDQߞWSRVVLEO\EHWKHVWUDLJKWOLQHGLVWDQFHEHWZHHQWKHWZRSRLQWV 6RZHFDQVHHWKDW + LVWKHRQO\DQVZHUFKRLFHWKDWߞVHYHQSODXVLEOHJLYHQWKHFRQWH[WRIWKHTXHVWLRQ 7KDWPHDQVLWPXVWEHFRUUHFW 1RWLFHWKDWWKHYDOXHVLQ ) - DQG . DOOFRPHIURPPLVWDNHVWKDWDWHVWWDNHUFRXOGYHU\HDVLO\PDNH E\DFFLGHQWLIKHWULHGWRVHWWKHTXHVWLRQXSIRUPXODLFDOO\ZLWKRXWSDXVLQJWRWKLQNDERXWWKHTXHVWLRQLQ FRPPRQVHQVHWHUPV ) FRPHVIURPWU\LQJWRDSSO\WKHGLVWDQFHIRUPXODDQGDFFLGHQWDOO\WDNLQJWKH VTXDUHURRWRIWKHVXPRIWKHVHSDUDWLRQVLQWKHWZRD[HVUDWKHUWKDQWDNLQJWKHVTXDUHURRWRIWKHVXPRI WKHVTXDUHVRIWKRVHWZRGLVWDQFHV - FRPHVIURPDFRPSRXQGPLVWDNHIRUJHWWLQJWRVTXDUHWKH VHSDUDWLRQVLQWKHWZRD[HVEHIRUHDGGLQJWKHPDQGWKHQIRUJHWWLQJWRWDNHWKHVTXDUHURRWRIWKDWVXP$QG . FRPHVIURPIRUJHWWLQJWRWDNHWKHVTXDUHURRWRIWKHVXPRIWKHVTXDUHVRIWKHVHSDUDWLRQVLQWKHWZR D[HV )RUWKDWPDWWHU * VHHPVWRFRPHIURPDFFLGHQWDOO\VTXDULQJWKH[DQG\YDOXHVIRUWKHVHFRQG SRLQWDQGDGGLQJWKHPWRJHWKHUIRUVRPHUHDVRQWKHQWDNLQJWKHVTXDUHURRWZKLFKZRXOGEHDVHYHUH PLVDSSOLFDWLRQRIWKH3\WKDJRUHDQ7KHRUHP ,WZRXOGKDYHEHHQPXFKKDUGHUWRHVWLPDWHWKHFRUUHFWDQVZHUWRWKLVTXHVWLRQZLWKWRWDOFRQILGHQFHLI WKHUHKDGEHHQPRUHWKDQRQHDQVZHUFKRLFHLQWKHQHLJKERUKRRGRI࠼)RULQVWDQFHLIWKH$&7KDG LQFOXGHGZURQJDQVZHUVOLNH࠼DQG࠼LWZRXOGKDYHEHHQLPSRVVLEOHWRLGHQWLI\࠼DVWKHRQO\ DQVZHUFKRLFHWKDWZDVQߞWWRRVPDOORUWRRELJWREHWKHULJKWDQVZHUZLWKRXWDSSO\LQJWKHGLVWDQFH IRUPXODRUWKH3\WKDJRUHDQ7KHRUHP%XWWKH$&7GLGQߞWPDNHXVGRWKDWߚLQVWHDGWKHWHVWPDGHLW SRVVLEOHIRUXVWRHOLPLQDWHDOOWKHZURQJDQVZHUVMXVWE\XVLQJEDVLFPDWKWRUHDOL]HWKDWWKH\ZHUHWRR VPDOORUWRRODUJHWREHFRUUHFW ,QIDFWWKHZURQJDQVZHUFKRLFHVFOHDUO\VKRZWKDWWKH$&7VHWVRXWWRWUDSWKHWHVWWDNHUVZKRUHO\RQ IRUPXODVEHFDXVHWKHZURQJDQVZHUVFDQRQO\EHUHDFKHGLIDWHVWWDNHUXVHVDIRUPXODLQFRUUHFWO\7KLV LVRQHPRUHUHDVRQZK\ZHRIWHQVHHWKDWWRSVFRULQJ$&7WDNHUVGRQߞWUHO\YHU\PXFKRQIRUPDOPDWK 3DJH4XHVWLRQ 7KLVLVDQRWKHUJUHDWH[DPSOHRIDQ$&70DWKTXHVWLRQWKDWDVNVDERXWYHU\EDVLFPDWKHPDWLFDOFRQFHSWV LQVWUDQJHZD\V,WߞVDOVRDJUHDWH[DPSOHRIDTXHVWLRQWKDWUHTXLUHVXVWRSD\YHU\FDUHIXODWWHQWLRQWR VPDOOGHWDLOV 7KLVTXHVWLRQLQYROYHVWULJRQRPHWU\EXWWKHRQO\UHDOWULJNQRZOHGJHZHQHHGLVWKHEDVLF62+&$+72$ DFURQ\PZKLFKWHOOVXVWKDWWDQ$LQWKHTXHVWLRQZLOOEHHTXDOWRDE RSSRVLWHRYHUDGMDFHQW ZKLOHVLQ %LQWKHTXHVWLRQZLOOEHHTXDOWREF RSSRVLWHRYHUK\SRWHQXVH ,IZHPXOWLSO\WKRVHWZRYDOXHVZHJHW WKLV 7KHEYDULDEOHVLQWKHQXPHUDWRUDQGGHQRPLQDWRUFDQFHORXWDQGZHߞUHOHIWZLWKDF6R ) LVFRUUHFW $JDLQWKLVLVSUHWW\EDVLFPDWKDQGVRIDUP\DQDO\VLVGRHVQߞWUHDOO\GLIIHUIURPWKH5HG%RRNߞV H[SODQDWLRQRQSDJH%XW,ZDQWWRSRLQWRXWVRPHUHODWLRQVKLSVLQWKHDQVZHUFKRLFHVWKDWZHߞOOZDQW WREHDZDUHRIVRZHFDQPDNHVXUHZHKDYHQߞWPDGHDPLVWDNHRQWKHTXHVWLRQ 1RWLFHWKDWFKRLFH . LVWKHUHFLSURFDORIWKHFRUUHFWDQVZHU:HFDQSUREDEO\LPDJLQHZK\WKH$&7 WKLQNVVRPHERG\PLJKWSLFNWKDWFKRLFHE\DFFLGHQWDOO\RXߞGKDYHWRGRWRDUULYHDW . LVDFFLGHQWDOO\ IOLS\RXUVWDUWLQJIUDFWLRQVXSVLGHGRZQVRWKDW\RXPXOWLSOLHGEDDQGFELQVWHDGRIWKHRWKHUZD\ DURXQG1RWLFHDOVRWKDW ) DQG . DUHWKHRQO\WZRDQVZHUFKRLFHVWKDWDUHUHFLSURFDOVRIRQHDQRWKHU %HFDXVHWKLVTXHVWLRQLVRQHZKHUHLWZRXOGEHSUHWW\HDV\WRLPDJLQHDWHVWWDNHUIOLSSLQJWKHIUDFWLRQV XSVLGHGRZQE\DFFLGHQWWKHIDFWWKDW ) DQG . PDNHXSWKHRQO\SDLURIUHFLSURFDOVVKRXOGVHUYHDVD VWURQJLQGLFDWLRQWKDWRQHRIWKHPLVSUREDEO\FRUUHFW )XUWKHULIZHSD\FDUHIXODWWHQWLRQWRWKHDQVZHUFKRLFHVZHߞOOVHHWKDWFKRLFH ) IROORZVWKHFRPPRQ ULJKWDQVZHUSDWWHUQRIEHLQJߡ$OPRVW/LNH7KH2WKHUVߢEHFDXVHWKUHHRXWRIWKHILYHFKRLFHVKDYHDLQ WKHQXPHUDWRUDQGIRXURIWKHILYHKDYHFLQWKHGHQRPLQDWRU ) LVRQHRIWKHRQO\WZRFKRLFHVZLWKRXWE DQ\ZKHUHLQWKHIUDFWLRQVRLWߞ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ߞWFDUHDERXWWU\LQJWRXQGHUVWDQG ZK\WKH$&7GHVLJQHGWKHTXHVWLRQWKHZD\LWGLG%XWDWRSVFRULQJWHVWWDNHUNQRZVWKDWWKHVHNLQGVRI VPDOOGHWDLOVDUHDEVROXWHO\FULWLFDORQWKH$&7DQGZLOOLQJO\ORRNVRXWIRUWKRVHNLQGVRIGHWDLOVRQ HYHU\VLQJOHTXHVWLRQ3HRSOHZKRVFRUHDRQWKH$&70DWKVHFWLRQXVXDOO\NQRZHQRXJKPDWKWR VFRUHDRUHYHQDߚWKHSUREOHPLVWKDWWKH\GRQߞWSD\DWWHQWLRQWRWKLQJVOLNHWKHDQVZHUFKRLFH SDWWHUQVLQWKLVTXHVWLRQVRWKH\PDNHDORWRIXQQHFHVVDU\PLVWDNHV0DNHVXUH\RXJHWLQWKHKDELWRI WKLQNLQJOLNHWKH$&7VR\RXߞOOEHDEOHWRDYRLGORVLQJSRLQWVQHHGOHVVO\ 3DJH4XHVWLRQ 7KLVLVDSHUIHFWH[DPSOHRIWKHLPSRUWDQFHRIUHDGLQJRQ$&70DWK7KLVZKROHTXHVWLRQFRPHVGRZQWR UHDGLQJHYHU\WKLQJFDUHIXOO\DQGWKLQNLQJLQWHUPVRIEDVLFPDWKSULQFLSOHV 7KHJUDSKVKRZVDFKDQJHLQVORSHDWSRLQWDDIWHUWKDWSRLQWWKHJUDSKLVVWLOOLQFUHDVLQJEXWLWߞV LQFUHDVLQJDWDVORZHUUDWH7KHQZHߞUHDVNHGZKLFKRIGLIIHUHQWHYHQWVFRXOGKDYHFDXVHGWKLVWR KDSSHQ 2IFRXUVHWKHUHߞVQRIRUPXODZHFDQSRVVLEO\DSSO\WRILJXUHRXWZKLFK5RPDQQXPHUDOVDUHYDOLG,Q IDFWWKHUHߞVQRFDOFXODWLRQZHFDQGRDWDOOEHFDXVHZHKDYHQRQXPEHUVWRZRUNZLWK6RDOOZHFDQGR LVUHDGDQGWKLQNZKLFKVFHQDULRVLQWKHDQVZHUFKRLFHFRXOGFDXVHWKHGHSWKWRFRQWLQXHWRLQFUHDVHEXW QRWDVTXLFNO\" /HWߞVORRNDWHDFKRIWKHWKUHHSRVVLELOLWLHV (YHQW,VD\VWKHIORZRIZDWHULQWRWKHSRROZDVLQFUHDVHG,IWKHIORZZHUHLQFUHDVHGWKHGHSWKZRXOG DFFXPXODWHDWDQLQFUHDVHGUDWHEHFDXVHPRUHZDWHUZRXOGEHIORZLQJLQ6RWKLV5RPDQQXPHUDOGRHVQߞW ZRUNEHFDXVHWKHUHߞVQRZD\LWFRXOGDFFRXQWIRUZKDWZHVHHLQWKHJUDSKLIWKHRQO\FKDQJHWKDW KDSSHQVWRWKHSRROLVDQLQFUHDVHLQWKHIORZRILQFRPLQJZDWHUWKHQWKHUHߞVQRZD\IRUWKHGHSWKWRVWDUW FOLPELQJDWDVORZHUUDWH (YHQW,,VD\VWKHIORZRIZDWHULQWRWKHSRROZDVGHFUHDVHG,IWKHIORZZHUHGHFUHDVHGWKHGHSWKZRXOG VWLOOEHJURZLQJEXWDWDVORZHUUDWHZKLFKPDWFKHVXSZLWKZKDWZHߞUHVHHLQJLQWKHJUDSK (YHQW,,,VD\VWKHGUDLQZDVRSHQHG7KLVLVDELWPRUHGLIILFXOWWRWKLQNDERXWWKDQWKHILUVWWZRHYHQWV ZHUHEHFDXVHZHGRQߞWNQRZKRZELJWKHGUDLQLVRUKRZPXFKLWPLJKWDIIHFWWKLQJV,WPD\EHWKDW RSHQLQJWKHGUDLQFDXVHVWKHZDWHUWRGUDLQVRTXLFNO\WKDWWKHRYHUDOOGHSWKRIWKHSRROZRXOGGHFUHDVH XQWLOLWZDVHPSW\,WFRXOGDOVRKDSSHQWKDWZDWHUPLJKWGUDLQRXWDWH[DFWO\WKHVDPHUDWHLWZDVHQWHULQJ WKHSRROLQZKLFKFDVHWKHGHSWKZRXOGUHPDLQXQFKDQJHG%XWLWFRXOGDOVRKDSSHQWKDWWKHZDWHUPLJKW GUDLQRXWDWDUDWHWKDWZDVVORZHUWKDQWKHUDWHRIWKHZDWHUVWLOOHQWHULQJWKHSRROߚLQRWKHUZRUGVPD\EH ZDWHULVFRPLQJLQWRWKHSRRODWJDOORQVSHUPLQXWHDQGWKHQWKHGUDLQRSHQVDQGVWDUWVGUDLQLQJZDWHU DWJDOORQVSHUPLQXWH,QWKDWFDVHWKHGHSWKZRXOGVWLOOLQFUHDVHDIWHUWKHGUDLQZDVRSHQHGEXWDWD VORZHUUDWHZKLFKLVH[DFWO\ZKDWZHVHHLQWKHJUDSK6RWKLV5RPDQQXPHUDOFRXOGDFFRXQWIRUZKDWZH VHHLQWKHJUDSK 6LQFHERWK,,DQG,,,FRXOGH[SODLQWKHFKDQJHLQWKHJUDSKDWSRLQWDWKHFRUUHFWDQVZHULV ( 0DQ\XQWUDLQHGWHVWWDNHUVZLOOVHHWKLVTXHVWLRQDQGDVVXPHWKDWWKH$&7OLNHVWRDVNTXHVWLRQVDERXWWKH UDWHDWZKLFKZDWHUIORZVLQWRSRROVVRWKH\ߞOOSUDFWLFHDQVZHULQJWKRVHNLQGVRITXHVWLRQV'RQߞWPDNH WKDWPLVWDNH%\QRZZHVKRXOGNQRZWKDWWKH$&7FDQFRPELQHEDVLFPDWKFRQFHSWVLQDQ\EL]DUUHZD\ LWFKRRVHVߚWKHNH\WKLQJIRUXVWUDLQHGWHVWWDNHUVLVWRPDNHVXUHZHUHDGFDUHIXOO\DQGSD\DWWHQWLRQWR GHWDLOV 3DJH4XHVWLRQ 7KLVTXHVWLRQLVDJRRGH[DPSOHRIWKHZD\WKH$&7VRPHWLPHVWULHVWRLQWLPLGDWH\RXE\WU\LQJWRPDNH \RXWKLQN\RXQHHGWREHIDPLOLDUZLWKDFHUWDLQFRQFHSWHYHQZKHQWKHTXHVWLRQFDQEHDQVZHUHGZLWKRXW LW,QWKLVFDVHWKHWHVWZDQWV\RXWRJHWQHUYRXVLI\RXߞYHQHYHUKHDUGRIDIDPLO\RISDUDERODVEHIRUH,Q IDFWHYHQLI\RXKDYHKHDUGRIDIDPLO\RISDUDERODVEHIRUH\RXUIDPLOLDULW\ZLWKWKDWFRQFHSWPLJKWPDNH \RXWKLQNWKLVTXHVWLRQLVJRLQJWREHDORWKDUGHUWKDQLWDFWXDOO\LVߚUHPHPEHUWKDWWKH$&7FDQQHYHU DFWXDOO\DVNXVWRFUHDWHDJUDSKRUDQHTXDWLRQEHFDXVHLWߞVDPXOWLSOHFKRLFHWHVW$OOWKH$&7FDQDVN XVWRGRLVWRLGHQWLI\WKHFRUUHFWH[SUHVVLRQIURPDVHWRIRSWLRQV :LWKWKDWLQPLQGOHWߞVWDNHDORRNDWWKHJUDSKDQGDWRXUDQVZHUFKRLFHV :KHQDPXOWLSOHFKRLFHTXHVWLRQDVNVXVWRLGHQWLI\WKHFRUUHFWIXQFWLRQIRUDJLYHQFXUYHZHFDQRIWHQ FKRRVHDSRLQWRQWKDWFXUYHZLWKFOHDUO\LGHQWLILDEOHYDOXHVIRU[DQG\DQGWKHQSOXJWKRVHYDOXHVLQWR HDFKDQVZHUFKRLFHDQGVHHZKLFKFKRLFHLVDYDOLGH[SUHVVLRQIRUWKRVHWZRYDOXHV%XWWKDWZRXOGEH KDUGWRGRIRUWKLVTXHVWLRQEHFDXVHWKHRQO\SRLQWRQWKHFXUYHVWKDWߞVHDVLO\LGHQWLILDEOHLV ,IZH SOXJLQ[ DQG\ IRUHDFKDQVZHUFKRLFHWKHRQO\RQHWKDWGRHVQߞWZRUNLV + DQGZHߞUHVWLOOOHIW ZLWKIRXUSRVVLEOHDQVZHUFKRLFHV 6RZKDWHOVHFDQZHWU\" ,IZHVWLOOZDQWWRWU\WRHOLPLQDWHDQVZHUFKRLFHVEDVHGRQWKHSURSHUWLHVRIWKHLUIHDWXUHVZHFRXOG QRWLFHWKDW - DQG . ZRXOGERWKSURGXFHVRPHQHJDWLYH\YDOXHVVLQFHWKH\LQYROYHPXOWLSO\LQJ[E\ QHJDWLYHQXPEHUV 7KLVLVDQRWKHUZD\WRVD\WKDWERWK - DQG . ZRXOGSURGXFHJUDSKVWKDWߡRSHQ GRZQߢ 6LQFHWKHSDUDERODVLQWKHJUDSKGRQߞWRSHQGRZQRULQFOXGHDQ\QHJDWLYH\YDOXHVZHNQRZ DQG . PXVWEHZURQJ )URPWKHUHZHQHHGWRVHHLIZHFDQILJXUHRXWDZD\WRWHOOZKHWKHU ) RU * LVFRUUHFW7KHRQO\ GLIIHUHQFHEHWZHHQWKHPLVWKDW ) PXOWLSOLHVWKH[YDOXHE\QZKLOH * PXOWLSOLHVLWE\Q6RQRZ ZHQHHGWRGHFLGHZKLFKRIWKRVHLVDQDFFXUDWHGHVFULSWLRQRIZKDWZHVHHLQWKHJUDSKIURPWKH TXHVWLRQ7KHJUDSKVKRZVWKDWWKHFXUYHVEHFRPHQDUURZHUZKHQQLVJUHDWHUߚLQRWKHUZRUGVZKHQQLV JUHDWHUWKH\YDOXHLVKLJKHUIRUDJLYHQ[YDOXHWKDQLWLVZKHQQLVORZHU7KLVLQGLFDWHV ) LVWKH FRUUHFWDQVZHUEHFDXVH ) ZLOOJLYHXVDELJJHU\YDOXHIRUDQ\VLQJOH[YDOXHDVQJHWVELJJHUVLQFH ZHߞOOEHPXOWLSO\LQJ[E\DODUJHUYDOXHZKHQQLVODUJHU2QWKHRWKHUKDQG * ZRXOGKDYHXV PXOWLSO\LQJE\VPDOOHUDQGVPDOOHUIUDFWLRQVDVQJHWVODUJHUEHFDXVHLVOHVVWKDQDQGVRRQ ,IWKDWODVWSDUWDERXW ) DQG * GLGQߞWPDNHDORWRIVHQVHWR\RXGRQߞWZRUU\7KHUHDUHRWKHUZD\VWR DSSURDFKWKHTXHVWLRQDQGZHߞOOWDONDERXWWKHPQRZ ,IZHKDYHDJUDSKLQJFDOFXODWRURQHRWKHUDSSURDFKLVWRWU\JUDSKLQJVRPHRIWKHIXQFWLRQVLQWKHDQVZHU FKRLFHVWRVHHZKLFKFKRLFHFUHDWHVWKHDSSURSULDWHFXUYHV:HFRXOGWU\JUDSKLQJHDFKIXQFWLRQLQHDFK DQVZHUFKRLFHZLWKHDFKSRVVLEOHYDOXHRIQEXWWKDWVHHPVOLNHDQDZIXOORWRIZRUN,ߞGUDWKHUMXVWSLFN RQHYDOXHIRUQDQGJUDSKWKDWIRUHDFKDQVZHUFKRLFH7KDWPLJKWVKRZPHHQRXJKRIDGLIIHUHQFH EHWZHHQFXUYHVIRUPHWREHDEOHWRSLFNWKHULJKWDQVZHUFKRLFHLIQRW,FDQDOZD\VFRPHEDFNDQG JUDSKWKHRWKHUFXUYHVODWHU ,ߞOOFKRRVHWRJUDSKHDFKDQVZHUFKRLFHIXQFWLRQZLWKWKHQYDOXHVHWWRIRUWZRUHDVRQV ,NQRZWKHQXPEHUKDVXQLTXHSURSHUWLHVWKDWPLJKWFDXVHPRUHWKDQRQHDQVZHUFKRLFHWRVHHP RND\LI,XVHQ IRUHDFKFKRLFH ,KDYHDIHHOLQJWKDWXVLQJQ ZLOOUHDOO\DFFHQWXDWHWKHGLIIHUHQFHVDPRQJHDFKDQVZHUFKRLFH VLQFHLVWKHODUJHVWYDOXHIRUQWKDWZHKDYHLQRXUGLDJUDP 6RKHUHߞVZKDWZHJHWLIZHJUDSKHDFKDQVZHUFKRLFHZLWKQ ) 7KLVJUDSKRI[ORRNVH[DFWO\OLNHWKHJUDSKIRUWKHQ SDUDERODLQWKHRULJLQDOTXHVWLRQ:H FDQVHHWKDWLWORRNVOLNHLWJRHVQHDUWKHSRLQW IRULQVWDQFH * 7KLVJUDSKRI [GRHVQߞWORRNOLNHWKHJUDSKRIWKHQ SDUDERODLQWKHTXHVWLRQ7KLVJUDSK JRHVQHDUWKHSRLQW IRULQVWDQFHZKLOHWKHQ SDUDERODLQWKHRULJLQDOTXHVWLRQFOHDUO\GRHVQߞWJR QHDUWKDWSRLQW + 7KLVJUDSKRI[FOHDUO\LVQߞWWKHVDPHDVWKHJUDSKRIWKHQ SDUDERODLQWKHTXHVWLRQEHFDXVH LWV\LQWHUFHSWLV\ ZKLOHWKHJUDSKLQWKHRULJLQDOTXHVWLRQKDVD\LQWHUFHSWRI\ - 7KLVLVWKHJUDSKRI\ [ZKLFKFOHDUO\LVQߞWWKHVDPHDVWKHQ SDUDERODLQWKHRULJLQDO GLDJUDP,WGRHVQߞWHYHQH[WHQGLQWKHULJKWGLUHFWLRQ . 7KLVLVWKHJUDSKRI\ [DQGLWDOVRRSHQVLQWKHZURQJGLUHFWLRQMXVWOLNHWKHJUDSKLQ FKRLFH - GRHV 6RRXUFDOFXODWRUPDNHVLWFOHDUWKDWRQO\WKHIXQFWLRQIURP ) SURGXFHVDJUDSKWKDWORRNVOLNHWKH RULJLQDOQ JUDSKZKHQZHSOXJLQIRUQDQGJUDSKLW7KDWPHDQVWKDW ) PXVWEHWKHFRUUHFWDQVZHU +HUHߞVDQRWKHUZD\WRWKLQNDERXWWKHTXHVWLRQ,IZHORRNDWWKHGLDJUDPLQWKHRULJLQDOTXHVWLRQZHVHH WKDWDVWKHQYDOXHLQFUHDVHVWKH\YDOXHVJHWKLJKHUDQGKLJKHUߚLQRWKHUZRUGVDOOWKHSRLQWVRQWKHQ SDUDERODDUHKLJKHUWKDQWKHSRLQWVRQWKHQ SDUDERODZKLFKDUHKLJKHUWKDQWKHSRLQWVRQWKHQ SDUDEROD H[FHSWIRUZKHUH[ ZKLFKLVWKHVDPHSRLQWIRUDOOWKUHHSDUDERODV :HDOVRVHHWKDW WKHUHߞVQROLPLWWRKRZKLJKWKH\YDOXHVFDQJRLQWKHRULJLQDOGLDJUDP6RZHFRXOGDOVRJRWKURXJKWKH IXQFWLRQVLQWKHDQVZHUFKRLFHVDQGVHHZKLFKRQHVZRXOGUHIOHFWWKHVHIHDWXUHV )RU ) ZHFDQVHHWKDWLQFUHDVLQJQZRXOGDOZD\VUHVXOWLQDKLJKHUYDOXHIRU\VLQFHZHߞGEH PXOWLSO\LQJ[E\DODUJHUQXPEHU6R ) VWLOOVHHPVWRGHVFULEHWKHVLWXDWLRQLQWKHTXHVWLRQFRUUHFWO\ * GRHVQߞWZRUN,IZHLQFUHDVHQLQWKLVIXQFWLRQZHߞOOEHPXOWLSO\LQJ[E\DVPDOOHUDQGVPDOOHU IUDFWLRQߚDQGVRRQ7KDWPHDQVWKDWLQFUHDVLQJQZLOOJLYHXVORZHU\YDOXHVQRWKLJKHU RQHVVRWKLVFKRLFHLVZURQJ + DOVRGRHVQߞWZRUNEHFDXVHFKDQJHVWRQLQWKHIXQFWLRQIURP + ZLOOFKDQJHWKH\LQWHUFHSWRIWKH SDUDERODEXWDOOWKHSDUDERODVLQWKHRULJLQDOGLDJUDPKDYHWKHVDPH\LQWHUFHSW - KDVDSUREOHPEHFDXVHLWRSHQVߡGRZQߢPHDQLQJWKDWLWV\YDOXHVH[WHQGWRZDUGVQHJDWLYHLQILQLW\DV WKHDEVROXWHYDOXHRI[LQFUHDVHVEHFDXVHRIWKHQHJDWLYHVLJQRQWKH[WHUP7KLVGLIIHUVIURPWKHJUDSK LQWKHSURPSWZKLFKVKRZVWKHSDUDERODVRSHQLQJߡXSߢ . KDVWKHVDPHSUREOHPDV - LWRSHQVߡGRZQߢZKLOHWKHSDUDERODVLQWKHRULJLQDOJUDSKRSHQߡXSߢ $JDLQWKDWOHDYHVRQO\FKRLFH ) WKHFRUUHFWDQVZHU 2QFHZHWKLQNZHߞYHDUULYHGDWDQDQVZHULWߞVDOZD\VLPSRUWDQWWRFKHFNRXUZRUNDQGRQHRIWKHEHVW ZD\VWRGRWKDWRQWKH$&7HVSHFLDOO\RQWKH0DWKVHFWLRQLVWRORRNDWWKHUHODWLRQVKLSVDPRQJWKH DQVZHUFKRLFHVDQGVHHLIWKH\VHHPWRLQGLFDWHDQ\WKLQJ,QWKLVTXHVWLRQ ) VHHPVWREHIROORZLQJWKH ߡ0RVW/LNH7KH2WKHUVߢSDWWHUQZKLFKLVDJRRGVLJQWKDW ) LVOLNHO\WREHFRUUHFW w ) KDVDSRVLWLYHFRHIILFLHQWIRUWKH[WHUPOLNHWKUHHRXWRIWKHILYHFKRLFHV w ) LQYROYHVPXOWLSO\LQJWKH[WHUPE\DWHUPLQYROYLQJQOLNHIRXURXWRIWKHILYHFKRLFHVLQVWHDGRI MXVWDGGLQJDWHUPZLWKQ w ) DYRLGVDQ\IUDFWLRQEDUVLQWKHIXQFWLRQOLNHWKUHHRXWRIWKHILYHFKRLFHV $V,DOZD\VVD\WKHIDFWWKDW ) ILWVWKLVSDWWHUQLVQߞWHQRXJKE\LWVHOIWRJXDUDQWHHWKDW ) PXVWEH FRUUHFW%XWLWߞVDYHU\JRRGVLJQIRUXVWKDWZHߞYHSUREDEO\WKRXJKWDERXWWKHTXHVWLRQFRUUHFWO\DQGWKDW ) LVYHU\OLNHO\WREHFRUUHFWEHFDXVHZHFDQVHHWKDWWKH$&7LVWU\LQJWRPDNHVXUHWKHZURQJDQVZHUV EHDUDORWRIVLPLODULW\WRWKHULJKWDQVZHUZKLFKLVVRPHWKLQJWKHWHVWRIWHQOLNHVWRGR 1RZZHFDQOHDUQDORWIURPWKLVTXHVWLRQMXVWDVZHFDQOHDUQDORWIURPDQ\EL]DUUH$&7TXHVWLRQ 1RWLFHWKDWLWߞVSRVVLEOHWRDWWDFNWKLVTXHVWLRQLQDWOHDVWWZRZD\VWKDWGRQߞWDFWXDOO\LQYROYHDQ\UHDO FDOFXODWLRQV7KHFDOFXODWRUEDVHGDSSURDFKWKDWZHZHQWWKURXJKGRHVQߞWHYHQUHDOO\UHTXLUHXVWR XQGHUVWDQGDQ\WKLQJDERXWSDUDERODVDSDUWIURPEHLQJDEOHWRHQWHUDIXQFWLRQLQWRDFDOFXODWRUDQGWKHQ EHLQJDEOHWRFRPSDUHWKHFDOFXODWRUߞVVFUHHQWRWKHGLDJUDPLQWKHTXHVWLRQ$OVRQRWHWKDWWKHTXHVWLRQ UHIHUVWRWKHLGHDRIDߡIDPLO\RISDUDERODVߢEXWZHGRQߞWDFWXDOO\QHHGWRNQRZDQ\WKLQJDERXWZKDWWKDW SKUDVHPHDQVLQRUGHUWRDQVZHUWKHTXHVWLRQ,QVWHDGDOOZHKDYHWRGRLVUHDGFDUHIXOO\SD\DWWHQWLRQWR GHWDLOVDQGEHZLOOLQJWRWKLQNDERXWEDVLFPDWKLGHDVLQDZD\WKDWPLJKWEHQHZWRXV 5HPHPEHUWKDWLWߞVYHU\XQOLNHO\\RXߞOOHYHUVHHDQRWKHUTXHVWLRQH[DFWO\OLNHWKLVRQDUHDO$&7LQWKH IXWXUH%XW\RXߞOOGHILQLWHO\VHHRWKHUZHLUGTXHVWLRQVWKDWZLOOIRFXVRQWKHIXQGDPHQWDOSURSHUWLHVRI PDWKLGHDVLQZD\V\RXߞYHSUREDEO\QHYHUWKRXJKWRIEHIRUH:KHQWKDWKDSSHQV\RXUMREZLOOEHWR UHPDLQFDOPUHDGFDUHIXOO\DQGEHUHDG\WRDQDO\]HWKHTXHVWLRQLQWHUPVRIWKHLGHDVZHNHHSGLVFXVVLQJ DQGGHPRQVWUDWLQJLQWKLV%ODFN%RRNMXVWDVZHߞYHGRQHZLWKWKLVTXHVWLRQ 3DJH4XHVWLRQ 7KLVTXHVWLRQVHHPVYHU\FKDOOHQJLQJWRDORWRIWHVWWDNHUVEHFDXVHLWLQYROYHVIDFWRULQJDWULQRPLDO H[SUHVVLRQ<RXSUREDEO\KDYHVRPHH[SHULHQFHZLWKIDFWRULQJIURPDOJHEUDFODVV)DFWRULQJDWULQRPLDO LQWRWZRELQRPLDOVLVUHDOO\MXVWDPDWWHURIUHYHUVLQJWKH)2,/SURFHVV )LUVW2XWHU,QQHU/DVW <RXߞUH SUREDEO\PRUHFRPIRUWDEOHIDFWRULQJSRO\QRPLDOVZKHUHWKHFRHIILFLHQWRIWKH[WHUPLV,QWKLVFDVH WKRXJKWKHFRHIILFLHQWLVZKLFKFDQPDNHWKHUHYHUVH)2,/LQJDOLWWOHPRUHFKDOOHQJLQJ ,I\RXORRNDWWKH5HG%RRNH[SODQDWLRQRQSDJH\RXFDQVHHWKHZD\\RXUPDWKWHDFKHUZRXOG DSSURDFKWKLVTXHVWLRQLILWZHUHQߞWDPXOWLSOHFKRLFHTXHVWLRQRQWKH$&7%XWLWLVDPXOWLSOHFKRLFH TXHVWLRQRQWKH$&7RIFRXUVHZKLFKPHDQVWKHUHߞVSUREDEO\DQHDVLHUZD\WRWDFNOHLW$VXVXDOWKLV DSSURDFKWRWKHTXHVWLRQZLOOLQYROYHZRUNLQJZLWKWKHDQVZHUFKRLFHVIURPWKHYHU\EHJLQQLQJLQVWHDG RIXVLQJWKH5HG%RRNߞVDSSURDFKZKLFKWHOOV\RXWRLJQRUHWKHDQVZHUFKRLFHVXQWLO\RXߞYHILQLVKHG GRLQJVRPHSUHWW\FRPSOLFDWHGDOJHEUDDWZKLFKSRLQW\RXMXVWILQGWKHDQVZHUFKRLFHWKDWPDWFKHVWKH H[SUHVVLRQ\RXFDPHXSZLWKRQ\RXURZQ :KHQHYHUZHJHWVWXFNORRNLQJDWDFRPSOLFDWHGDOJHEUDLFH[SUHVVLRQRQWKH$&7ZHKDYHWRUHPHPEHU WKDWDOJHEUDLFH[SUHVVLRQVE\GHILQLWLRQGHPRQVWUDWHUHODWLRQVKLSVWKDWDUHWUXHIRUDQ\QXPEHU,QRWKHU ZRUGVWKLVTXHVWLRQLVWHOOLQJXVWKDWZHFRXOGSOXJDQ\QXPEHULQWR[DQGWKHQ[ߙZRXOGEHDIDFWRURI [ߙ[NZKHUHNLVRQHRIWKHQXPEHUVIURPWKHDQVZHUFKRLFHV6RLIZHZDQWZHFDQMXVWSLFND QXPEHUIRU[SOXJLWLQDQGWKHQVHHZKLFKDQVZHUFKRLFHFRXOGEHDYDOXHIRUNWKDWZRXOGPDNH[ߙ [NEHDPXOWLSOHRI[ߙ 6ROHWߞVSOXJLQDQXPEHUIRU[$VXVXDOZHZDQWWRWU\WRDYRLGDQ\QXPEHUWKDWPLJKWKDYHDZHLUG SURSHUW\UHODWLYHWRWKHTXHVWLRQRUWKDWDSSHDUVLQWKHTXHVWLRQEHFDXVHQXPEHUVZLWKZHLUGSURSHUWLHV PLJKWUHVXOWLQDVLWXDWLRQZKHUHPRUHWKDQRQHDQVZHUFKRLFHVHHPVWRZRUNDQGWKHQZHߞGMXVWKDYHWR UHSHDWWKHSURFHVVZLWKDQRWKHUQXPEHUWRVHHZKLFKDQVZHUFKRLFHVWLOOZRUNHG6RZHFDQSRWHQWLDOO\ VDYHRXUVHOYHVDORWRIZRUNLIZHMXVWSOXJLQDߡVDIHߢQXPEHUIURPWKHEHJLQQLQJ,QWKLVFDVH,IHHOOLNH SOXJJLQJLQWKHQXPEHUVLQFHLWVHHPVWRKDYHQRFRQQHFWLRQWRDQ\WKLQJLQWKHTXHVWLRQDQGVKRXOG WKHUHIRUHEHߡVDIHߢ :HFRXOGDOVRUHDOO\FKRRVHDQ\RWKHUQXPEHUWKDWZDVQߞWRU VLQFHWKRVHDUHWKHQXPEHUVZHZDQWWRDYRLGEHFDXVHWKH\DSSHDULQWKHSURPSWRULQWKHDQVZHU FKRLFHV ,I,SOXJLQIRU[WKHQP\[ߙH[SUHVVLRQKDVDYDOXHRI :KHQ,SOXJLQIRU[ߙ[N,JHWWKLV 6RQRZDOO,KDYHWRGRLVVHHZKLFKDQVZHUFKRLFHUHVXOWVLQDPXOWLSOHRIZKHQ,SOXJLWLQIRUNLQWKH H[SUHVVLRQN $ JLYHVXVߙZKHQSOXJJHGLQIRUNIRUDWRWDORIGLYLGHGE\LVߚD ZKROHLQWHJHUYDOXHZLWKQRGHFLPDODQGQRUHPDLQGHU6RWKLVYDOXHRINGRHVUHVXOWLQDPXOWLSOHRIRXU H[SUHVVLRQIRU[ߙ7KLVLVH[DFWO\ZKDW,ZDQWWRVHHLQWKHULJKWDQVZHUEXWZHVWLOOKDYHWRFKHFNRXW WKHRWKHUFKRLFHVWRPDNHVXUHWKDWRQO\RQHDQVZHUFKRLFHZRUNVߚLIZHDFFLGHQWDOO\FKRVHDYDOXHIRU[ WKDWKDVXQLTXHSURSHUWLHVUHODWLYHWRWKLVTXHVWLRQWKHQZHFRXOGHQGXSDFFLGHQWDOO\FRQFOXGLQJWKDW PRUHWKDQRQHDQVZHUFKRLFHPLJKWEHHTXDOO\ULJKW % JLYHVXVߙZKHQSOXJJHGLQIRUNIRUDWRWDORIGLYLGHGE\LV DSSUR[LPDWHO\ZKLFKPHDQVWKDWWKLVYDOXHRINGRHV127UHVXOWLQDPXOWLSOHRIRXUH[SUHVVLRQ IRU[ߙ & JLYHVXVߙZKHQSOXJJHGLQIRUNIRUDWRWDORIGLYLGHGE\LV DSSUR[LPDWHO\ZKLFKPHDQVWKDWWKLVYDOXHRINGRHV127UHVXOWLQDPXOWLSOHRIRXUH[SUHVVLRQ IRU[ߙ ' JLYHVXVZKHQSOXJJHGLQIRUNIRUDWRWDORIGLYLGHGE\LV DSSUR[LPDWHO\ZKLFKPHDQVWKDWWKLVYDOXHRINGRHV127UHVXOWLQDPXOWLSOHRIRXUH[SUHVVLRQ IRU[ߙ ( JLYHVXVZKHQSOXJJHGLQIRUNIRUDWRWDORIGLYLGHGE\LV DSSUR[LPDWHO\ZKLFKPHDQVWKDWWKLVYDOXHRINGRHV127UHVXOWLQDPXOWLSOHRIRXUH[SUHVVLRQIRU [ߙ 6RZHFDQVHHWKDWZKHQ[ RQO\FKRLFH $ PDNHVWKHH[SUHVVLRQ[ߙ[NLQWRDPXOWLSOHRI[ ߙ7KDWPHDQV $ PXVWEHFRUUHFW 7REHFOHDU,ߞPQRWVD\LQJWKDWWKH5HG%RRNߞVDSSURDFKLVZURQJDQGWKDWWKLVDSSURDFKLVULJKW7KH5HG %RRNߞVDSSURDFKWRWKLVTXHVWLRQRQLVSHUIHFWO\PDWKHPDWLFDOO\FRUUHFW$V,VDLGDERYHWKH5HG %RRNߞ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ߡIDFWRUߢ,IZHGRQߞWNQRZWKDW[ ߙEHLQJDIDFWRURI[ߙ[NPHDQVWKDWZHFDQGLYLGH[ߙ[NHYHQO\E\[ߙWKHQLWZLOOEH LPSRVVLEOHWRXVHWKHDSSURDFKDERYH 5HPHPEHUWKDWWKHUHߞVDOZD\VPRUHWKDQRQHZD\WRDWWDFNDQ$&70DWKTXHVWLRQDQG\RXFDQRIWHQ PDNHTXHVWLRQVPXFKHDVLHUE\NHHSLQJWKHDQVZHUFKRLFHVLQPLQGIURPWKHYHU\EHJLQQLQJ 3DJH4XHVWLRQ 7KLVLVDUHDOO\EL]DUUHTXHVWLRQIRUPRVWSHRSOHHYHQLIWKH\XQGHUVWDQGWKHEDVLFWULJLGHDVLQYROYHG EHFDXVHPRVWPDWKWHDFKHUVGRQߞWDVNTXHVWLRQVOLNHWKLVHVSHFLDOO\ZLWKWKRVHZHLUG*UHHNOHWWHUV LQYROYHG 7KH5HG%RRNߞVH[SODQDWLRQRIWKHTXHVWLRQ ZKLFKDSSHDUVRQSDJH LVPDWKHPDWLFDOO\FRUUHFWDV DOZD\VEXWLWPLJKWEHVRPHZKDWFRQIXVLQJ7KHUHDUHRWKHUZD\VZHFRXOGFKRRVHWRDWWDFNWKHTXHVWLRQ %HIRUHZHJHWLQWRWKDWOHWPHH[SODLQVRPHWKLQJWKDWDORWRIWHVWWDNHUVPLJKWQRWXQGHUVWDQGZKHQWKH\ VHHWKLVTXHVWLRQ7KH*UHHNOHWWHUV͠DQG͡ SURQRXQFHGߡDOSKDߢDQGߡEHWDߢUHVSHFWLYHO\ DUHQߞWDQ\NLQG RIIDQF\PDWKHPDWLFDOV\PERORUDQ\WKLQJWKH\ߞUHMXVWYDULDEOHVWKDWWKH$&7LVXVLQJWRUHSUHVHQW XQNQRZQDQJOHPHDVXUHPHQWV7KH$&7FRXOGMXVWDVHDVLO\KDYHXVHGDDQGERU[DQG\WRLQGLFDWH WKRVHDQJOHPHDVXUHPHQWVEXWLWFKRVHWRXVH͠DQG͡EHFDXVHWKHFODVVLFZD\WRLQGLFDWHWULJYDULDEOHVLV ZLWK*UHHNOHWWHUV6RGRQߞWEHWKURZQRIIE\LW 2QHWKLQJWKDWDWUDLQHGWHVWWDNHUZRXOGZDQWWRQRWLFHDERXWWKLVTXHVWLRQLVWKDWLWFRQWDLQVDORWRIWH[W VRZHߞOOZDQWWRPDNHVXUHZHUHDGLWFDUHIXOO\RIFRXUVH:KHQZHGRWKDWZHߞOOVHHWKDWDUF%$LVWKH VDPHOHQJWKDVDUF'&7KLVPHDQVWKDWWKHDQJOH$2%LVWKHVDPHGHJUHHPHDVXUHDVWKHDQJOH&2' WKRXJKLWJRHVLQWKHRWKHUߡGLUHFWLRQߢDFFRUGLQJWRWKHTXHVWLRQ 6RLIZHIRXQGWKHDQJOHPHDVXUHRI $2%LWFRXOGEHUHOHYDQWWRILQGLQJ&2' $QRWKHUYHU\LPSRUWDQWWKLQJWRQRWLFHLVWKDWWKHDQVZHUFKRLFHVDUHDOOJLYHQLQWHUPVRI͠DQG͡QRWLQ WHUPVRIDFWXDOFRQFUHWHQXPEHUV7KLVLVEHFDXVHLWߞVQRWSRVVLEOHWRDUULYHDWFRQFUHWHQXPHULFDOYDOXHV IRUWKHTXDQWLWLHVLQWKLVTXHVWLRQVLQFHWKHVHWXSRIWKHTXHVWLRQRQO\GHDOVLQWHUPVRIYDULDEOHVZLWKQR FRQFUHWHUHIHUHQFHSRLQW 7KDWGRHVQߞWDXWRPDWLFDOO\PHDQWKDW . LVWKHULJKWDQVZHU,WPLJKWVWLOOEH WKHFDVHWKDWRQHRIWKHH[SUHVVLRQVLQWKHDQVZHUFKRLFHVZLOODOZD\VJLYHWKHSURSHUYDOXHIRUDQJOH &2'LQWHUPVRI͠DQG͡ :HFDQDOVRWHOOWKDWWKHGLDJUDPLVGUDZQFORVHWRVFDOHEHFDXVHDQJOHV$2%DQG&2'DUHWKHVDPHVL]H LQWKHGLDJUDPMXVWDVWKHTXHVWLRQ LQGLUHFWO\ WHOOVXVWKH\DUH6RPD\EHZHFDQXVHWKDWWRR $WWKLVSRLQWWKHUHDUHWZRPDMRUW\SHVRIDSSURDFKHVZHPLJKWWDNHWRWKLVTXHVWLRQLIZHGRQߞWZDQWWR XVHDQDSSURDFKOLNHWKHRQHWKH5HG%RRNUHFRPPHQGVRQSDJH,I\RXߞYHEHHQSD\LQJDWWHQWLRQWR WKHLGHDVLQWKLV%ODFN%RRN\RXSUREDEO\NQRZZKDWWKH\DUHEHIRUH,HYHQZULWHWKHP :HFDQSOXJLQVRPHFRQFUHWHYDOXHVIRU͠DQG͡DQGVHHZKLFKDQVZHUFKRLFHPDNHVVHQVHLQOLJKW RIWKRVH :HFDQWDNHDORRNDWWKHDQVZHUFKRLFHVDQGVHHZKDWZHFDQILJXUHRXWIURPWKHPEDVHGRQKRZ WKH\UHODWHWRRQHDQRWKHUDQGKRZWKH\UHODWHWRWKHFRQFHSWVLQWKHTXHVWLRQ 6ROHWߞVWDNHDORRNDWHDFKNLQGRIDSSURDFK:HߞOOVWDUWZLWKWKHDSSURDFKRISOXJJLQJLQDFWXDOYDOXHV IRU͠DQG͡EHFDXVHGRLQJWKDWILUVWPLJKWKHOSPDNHWKHVHFRQGDSSURDFKFOHDUHUIRUVRPHUHDGHUV :KHQ,ORRNDWWKHGLDJUDPLWVHHPVWRPHWKDW͠ ZKLFKLVWKHPHDVXUHPHQWRIDQJOH$2& ORRNVOLNHLWߞV DERXWRDQG͡ ZKLFKLVWKHPHDVXUHPHQWRIDQJOH%2& ORRNVOLNHLWߞVDERXWR7KDWPDNHVDQJOH $2%DERXWRDQGZHNQRZWKDWDQJOH$2%LVWKHVDPHPHDVXUHPHQWDVDQJOH&2'VR&2'ZRXOG DOVREHDERXWREDVHGRQRXUHVWLPDWLRQ 1RZZHWDNHDORRNDWWKHDQVZHUFKRLFHVSOXJJLQJLQRIRU͠DQGRIRU͡DQGVHHZKDWKDSSHQV ) EHFRPHVR * EHFRPHVR + EHFRPHVR - EHFRPHVR 6R + ORRNVSUHWW\VLPLODUWRRXUWDUJHWYDOXHRIRH[FHSWWKDW + LVDQHJDWLYHQXPEHU:KDWGRZH PDNHRIWKDW" ,IZHORRNFDUHIXOO\DWWKHTXHVWLRQZHVHHWKDWZHDFWXDOO\ZDQWDQHJDWLYHQXPEHUIRUWKHFRUUHFW DQVZHUEHFDXVHWKHTXHVWLRQVD\VWKDWDQJOHPHDVXUHPHQWVLQWKHGLUHFWLRQRI͠DQG͡RQWKHGLDJUDPDUH SRVLWLYHQXPEHUVEXWRXUXQNQRZQPHDVXUHPHQWIRUDQJOH&2'KDVDQDUURZSRLQWLQJLQWKHRSSRVLWH GLUHFWLRQRIWKHDUURZVIRU͠DQG͡ߚZKLFKPHDQVWKDWRXUDQJOHPHDVXUHPHQWVKRXOGEHDQHJDWLYH QXPEHU6RRLVDSSURSULDWHDQGZHFDQVHHWKDW + LVFRUUHFW 1RZOHWߞVWU\DSSURDFKLQJWKHTXHVWLRQE\ZRUNLQJEDFNZDUGVIURPWKHDQVZHUFKRLFHVWRVHHZKDWWKDW PHWKRGPLJKWORRNOLNH:HߞOOUHO\KHDYLO\RQWKHIDFWWKDW$&70DWKGLDJUDPVDOZD\VVHHPWREHGUDZQ WRVFDOH $FWXDOO\LQWKLVSDUWLFXODUTXHVWLRQDVORQJDVWKHFLUFOHLVUHDOO\DFLUFOHDQGWKHDQJOHVDUHDOO GUDZQZLWKVWUDLJKWOLQHVIURPWKHFHQWHURIWKHFLUFOHLWߞVLPSRVVLEOHIRUWKHUHODWLRQVKLSVDPRQJWKH DQJOHVLQWKHGLDJUDPQRWWRUHSUHVHQWWKHLURZQUHODWLYHVFDOHVDFFXUDWHO\%XWGRQߞWZRUU\DERXWWKDW-XVW UHPHPEHUWKDWDOO$&7GLDJUDPVVHHPWREHGUDZQWRVFDOHߚVHHRXUGLVFXVVLRQRIVFDOHLQߡ8QZULWWHQ 7HVW'HVLJQ5XOHV2I$&70DWKߢHDUOLHULQWKLV%ODFN%RRNIRUPRUHRQWKDW ) GRHVQߞWVHHPWRZRUNEHFDXVHDQJOH&2'FOHDUO\LVQߞWWKHVDPHVL]HDVDQJOH%2&ZKLFKLVWKHRQH ODEHOHGZLWKWKH͡V\PEROLQWKHGLDJUDP * DOVRGRHVQߞWZRUNEXWZHPD\KDYHWRSD\FDUHIXODWWHQWLRQWRVHHZK\7KHH[SUHVVLRQ͡ߙ͠ EDVLFDOO\PHDQVWKDWZHߞUHWDNLQJWKHRSSRVLWHRIWKH͡YDOXHDQGWKHQVXEWUDFWLQJWKH͠YDOXHIURPWKDW 6LQFHWKHRULJLQDOYDOXHVIRUERWK͡DQG͠DUHSRVLWLYHWKLVH[SUHVVLRQZRXOGEHWKHVDPHWKLQJDVWXUQLQJ WKHPERWKLQWRQHJDWLYHQXPEHUVDQGWKHQDGGLQJWKHPWRJHWKHU,IZHORRNDWDQJOH&2'LQWKHGLDJUDP WKRXJKLWDSSHDUVWREHVPDOOHUWKDQHLWKHU$2& ZKLFKLV͠ RU%2& ZKLFKLV͡ VRLWFDQߞWSRVVLEO\EH WKHVDPHVL]HDVERWKRIWKHPDGGHGWRJHWKHU + LVWKHULJKWDQVZHUDVZHFDQVHHLIZHORRNFDUHIXOO\DWWKHGLDJUDP$QJOH&2'LVWKHVDPHVL]HDV DQJOH$2%DQGDQJOH$2%LVFOHDUO\WKHGLIIHUHQFHEHWZHHQ͠DQG͡7KHRQO\LVVXHLVWKDWWKLVDQVZHU FKRLFHLVDQHJDWLYHQXPEHUEXWDVZHVDZDERYHWKHTXHVWLRQH[SODLQVWKDWDQJOHVPHDVXUHGLQD FORFNZLVHGLUHFWLRQVKRXOGEHPHDVXUHGZLWKQHJDWLYHQXPEHUVDVWKLVRQHLV - LVFOHDUO\LQFRUUHFWEHFDXVH͠LVQߞWWKHVDPHVL]HDVDQJOH&2'LQWKHGLDJUDP . LVZURQJEHFDXVHZHFDQVHHWKDW + LVDYDOLGH[SUHVVLRQIRUDQJOH&2'LQWHUPVRI͠DQG͡ <HWDJDLQZHILQGWKDWWKH$&7KDVGHOLEHUDWHO\WULHGWRPDNHDTXHVWLRQORRNPXFKKDUGHUWKDQLWDFWXDOO\ LVDQGWKDWWKH5HG%RRNH[SODQDWLRQGRHVQߞ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ߞWPDGHDQ\PLVWDNHVLQWKHTXHVWLRQ$QGRQFH\RXVWDUWWRXQGHUVWDQGKRZWKHVHWKLQJV ZRUNRQUHODWLYHO\VLPSOHTXHVWLRQVLWߞVHDVLHUWRDSSO\WKHVDPHLGHDVWRPRUHFKDOOHQJLQJTXHVWLRQV 6ROHWߞVWDNHDORRN ) LVZKDW\RXߞGJHWLI\RXMXVWDGGHGWKHOHQJWKDQGWKHZLGWKZLWKRXWUHDOL]LQJWKDWWKHUHDUHWZRVLGHV ZLWKHDFKRIWKRVHOHQJWKV<RXFDQSUREDEO\LPDJLQHWKDWDORWRIFDUHOHVVWHVWWDNHUVPLJKWPDNHWKLV PLVWDNHHVSHFLDOO\LIWKH\ZHUHWU\LQJWRVSHHGWKURXJKWKHTXHVWLRQ * LVMXVWWZLFHWKHOHQJWKLQVWHDGRIEHLQJWZLFHWKHOHQJWKSOXVWZLFHWKHZLGWK7KLVVHHPVOLNHDOHVV OLNHO\PLVWDNHEXWP\H[SHULHQFHRYHUWKH\HDUVWHOOVPHWKDWDVPDOOSHUFHQWDJHRIWHVWWDNHUVZLOO DFFLGHQWDOO\IRUJHWDERXWWKHZLGWKZKHQFDOFXODWLQJWKHSHULPHWHUHVSHFLDOO\LIWKH\ߞ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ߞYH DQVZHUHGWKHTXHVWLRQFRUUHFWO\"/HWߞVLPDJLQHWKDWZHDFFLGHQWDOO\FDOFXODWHGWKHDUHDLQVWHDGRIWKH SHULPHWHU:KHQZHJREDFNWKURXJKWKHDQVZHUFKRLFHVDQGQRWLFHWKDW + LVWKHVXPRIWKHIRXUVLGHVRI WKHUHFWDQJOHRUWKDW ) LVWKHVXPRIWKHZLGWKDQGWKHOHQJWKRUWKDW * LVWKHVXPRIWKHWZROHQJWKZLVH VLGHVZHPLJKWVWDUWWRUHDOL]HWKDWDORWRIWKHDQVZHUFKRLFHVVHHPVWRUHIOHFWWKHLGHDRIDGGLQJWKHVLGH OHQJWKVWRJHWKHULQVWHDGRIPXOWLSO\LQJWKHPߚDQGWKDWVKRXOGWULJJHUXVWRJREDFNDQGGRXEOHFKHFNWKH TXHVWLRQZKLFKZRXOGKRSHIXOO\PDNHXVUHDOL]HRXUPLVWDNH ,NQRZLWPD\VHHPOLNHZHGRQߞWQHHGWRVSHQGDORWRIWLPHWKLQNLQJDERXWWKLVTXHVWLRQLQSUDFWLFHEXW ZHUHDOO\GR7KHPDMRULW\RI$&70DWKTXHVWLRQVDUHDORWPRUHVLPLODUWRWKLVTXHVWLRQWKDQPRVWWHVW WDNHUVWKLQNZKLFKLVZK\EHLQJYHU\JRRGDWDGYDQFHGPDWKLVXQOLNHO\WRKHOSPXFKZLWKWKH$&70DWK VHFWLRQ,QIDFWZKHQ,ߞYHZRUNHGZLWKWHVWWDNHUVZKRDUHSXVKLQJIRUDQHOLWHVFRUHOLNHDRUDLI WKH\PLVVRQHRUWZRTXHVWLRQVRQDWHVWWKRVHTXHVWLRQVWHQGWREHUHODWLYHO\VLPSOHRQHVOLNHWKHVH7HVW WDNHUVZKRDUHGRLQJZHOORIWHQJHWFRFN\DQGDVVXPHWKH\GRQߞWQHHGWRWKLQNYHU\PXFKDERXWFHUWDLQ TXHVWLRQVDQGWKDWߞVZKHQWKH$&7PDQDJHVWRWULFNWKHPZLWKDQDQVZHUFKRLFHWKDWUHIOHFWVDVLPSOH PLVWDNH 3DJH4XHVWLRQ 7KH5HG%RRNH[SODQDWLRQIRUWKLVTXHVWLRQLVRQSDJH$VDOZD\VLWߞVPDWKHPDWLFDOO\FRUUHFWDV XVXDOLWߞVDOVRPRUHFRPSOLFDWHGWKDQQHFHVVDU\ )RUDTXHVWLRQDERXWWKHOHDVWFRPPRQPXOWLSOH,ZRXOGSUREDEO\MXVWFKHFNWKURXJKHDFKRIWKHDQVZHU FKRLFHVVWDUWLQJZLWKWKHVPDOOHVWRQHXQWLO,IRXQGDQDQVZHUFKRLFHWKDWZDVDPXOWLSOHRIHDFKRIWKH QHFHVVDU\QXPEHUV ) DQG * GRQߞWZRUNULJKWRIIWKHEDWEHFDXVHWKH\ߞUHERWKOHVVWKDQVRWKH\FDQߞWSRVVLEO\EH PXOWLSOHVRI + GRHVQߞWZRUNEHFDXVHLWLVQߞWDPXOWLSOHRIHLWKHU - LVWKHFRUUHFWDQVZHUJRHVLQWRH[DFWO\WLPHVJRHVLQWRLWWLPHVDQGJRHVLQWRLW WLPHV6LQFHLWߞVDPXOWLSOHRIDOOWKHQXPEHUVDQGVLQFHDOOWKHDQVZHUFKRLFHVZLWKVPDOOHUQXPEHUVDUH ZURQJWKLVPXVWEHWKHVPDOOHVWFRPPRQPXOWLSOH . LVWKHSURGXFWRIWKHQXPEHUVPXOWLSOLHGWRJHWKHU6RLWߞVGHILQLWHO\DFRPPRQPXOWLSOHRIDOOWKUHH QXPEHUVEXWLWߞVQRWWKHOHDVWFRPPRQPXOWLSOHVRLWߞVQRWWKHULJKWDQVZHU 1RWHWKDWWKLVDSSURDFKRQO\ZRUNVEHFDXVHWKHTXHVWLRQLVPXOWLSOHFKRLFH,IZHKDGWRJHQHUDWHWKH DQVZHURQRXURZQWKHQRQHRIWKHDSSURDFKHVUHFRPPHQGHGE\WKH5HG%RRNZRXOGEHRXURQO\UHDO RSWLRQ%XWZHGRQߞWKDYHWRJHQHUDWHWKHDQVZHUߚ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ߞGDUULYHDW2QFHPRUHZHVHHWKDWWKH$&7GHOLEHUDWHO\ WULHVWRFDWFKSHRSOHZKRPDNHPLVWDNHVLQIRUPDOPDWKZKLFKLVZK\LWߞVRIWHQEHVWWRLJQRUHIRUPDO PDWKFRPSOHWHO\DQGMXVWZRUNWKURXJKWKHDQVZHUFKRLFHV 3DJH4XHVWLRQ 7KLVLV\HWDQRWKHUTXHVWLRQWKDWGHPRQVWUDWHVWKHLPSRUWDQFHRIUHDGLQJRQWKH$&70DWKVHFWLRQ EHFDXVHDQVZHULQJWKLVTXHVWLRQLVHVVHQWLDOO\DPDWWHURIUHDGLQJHYHU\WKLQJYHU\FDUHIXOO\ߚWKHVHWXS DQGWKHDQVZHUFKRLFHV 7KHFRUUHFWDQVZHULV ) DQGWKH5HG%RRNSURYLGHVDGHFHQWH[SODQDWLRQIRUWKLVRQSDJH %XW,ZDQWWRSRLQWRXWZKDWߞVJRLQJRQLQWKHRWKHUDQVZHUFKRLFHVDQGKRZDWUDLQHGWHVWWDNHUPLJKWXVH WKRVHDQVZHUFKRLFHVWRNHHSKLPVHOIIURPPDNLQJDQXQQHFHVVDU\PLVWDNHRQWKLVTXHVWLRQ ,QWKLVTXHVWLRQWKHFRUUHFWDQVZHUIROORZVWKHFRPPRQ$&7SDWWHUQRILQFRUSRUDWLQJWKHHOHPHQWVWKDW DSSHDUPRVWIUHTXHQWO\LQWKHHQWLUHVHWRIDQVZHUFKRLFHV7KHH[SUHVVLRQ Q DSSHDUVRQWKHOHIW KDQGVLGHRIWKHHTXDWLRQLQWKUHHRXWRIWKHILYHFKRLFHVDQGWKHH[SUHVVLRQQߙDSSHDUVRQWKHULJKW KDQGVLGHRIWKHHTXDWLRQLQWKUHHRXWRIWKHILYHFKRLFHVZHVHHWKDWWKHFRUUHFWDQVZHUFKRLFHLVWKHRQO\ RQHWKDWLQFRUSRUDWHVERWKRIWKHVHPRVWFRPPRQH[SUHVVLRQV $VDOZD\VWKHSUHVHQFHRIWKLVSDWWHUQLVQߞWHQRXJKE\LWVHOIWRJXDUDQWHHWKDW ) LVWKHFRUUHFWDQVZHU EXWLWVWURQJO\VXJJHVWVWKDW ) LVSUREDEO\ULJKW 7KH5HG%RRNVROXWLRQRQSDJHWHOOVXVWKDWWKHPRVWFRPPRQZURQJDQVZHUZDV + ZKLFKLVWKH UHVXOWRIPLVUHDGLQJHLWKHUWKHVHWXSRUWKHDQVZHUFKRLFHDQGDFFLGHQWDOO\FKRRVLQJߙQ,IWKHPDQ\ SHRSOHZKRPDGHWKDWPLVWDNHKDGWDNHQDPRPHQWWRVFDQWKHRWKHUDQVZHUFKRLFHVDQGQRWLFHWKDWQߙ DSSHDUHGPRUHRIWHQWKDQߙQ LQRWKHUZRUGVLIWKRVHSHRSOHKDGGRQHZKDW,ߞPWUDLQLQJ\RXWR GR WKHUHߞVDJRRGFKDQFHPRVWRIWKHPZRXOGKDYHEHHQSURPSWHGWRUHHYDOXDWHWKHLUGHFLVLRQWRPDNH VXUHWKDWWKH\ZHUHQߞWPDNLQJDPLVWDNH (DFKOLWWOHPLVWDNHOLNHWKLVZLOOUHVXOWLQDZURQJDQVZHUDQGHDFKZURQJDQVZHUFDQFRVWDQ\ZKHUH IURPDTXDUWHURIDSRLQW RQDYHUDJH WRDIXOOSRLQWRQWKHILQDOVFDOHRISRLQWVIRUWKH0DWKVHFWLRQ,I \RXZDQWWRPD[LPL]H\RXUVFRUH\RXVLPSO\FDQߞWDIIRUGWROHWWKHVHOLWWOHWKLQJVVOLSSDVW\RX7KDWߞV ZK\,NHHSSRLQWLQJRXWWKHVHVPDOOGHWDLOVRYHUDQGRYHUDQGJLYLQJ\RXWRROVWRKHOS\RXVWD\DOHUWWR WKHP,I\RXZDQWDJUHDWVFRUHRQWKH$&7\RXKDYHWREHFRPHREVHVVLYHDERXWWKHVHNLQGVRIWKLQJV 3DJH4XHVWLRQ 7KH5HG%RRNH[SODQDWLRQRQSDJHDGHTXDWHO\FRYHUVWKHWZRJHRPHWULFDSSURDFKHVWRWKLVTXHVWLRQ \RXFDQWKLQNRIWKHILJXUHDVD[UHFWDQJOHDWWDFKHGWRD[UHFWDQJOHRU\RXFDQWKLQNRILWDVD [UHFWDQJOHZLWKD[UHFWDQJOHFXWRXWRILW(LWKHUDSSURDFKFDQOHDG\RXWRWKHFRUUHFW DQVZHUFKRLFH + DVGHPRQVWUDWHGRQSDJHRIWKH5HG%RRN $VXVXDO,ZDQWWRSRLQWRXWZKDWߞVJRLQJRQZLWKWKHDQVZHUFKRLFHVDQGKRZDWUDLQHGWHVWWDNHUFRXOG XVHWKHPWRKHOSDYRLGDQ\PLVWDNHVLQWKHTXHVWLRQ )LUVWZHVKRXOGUHDOL]HWKDW ) DQG * DUHHDFKWRRVPDOOEHFDXVHHYHQWKHDUHDRIWKHODUJHSRUWLRQRI WKHGLDJUDPLV[ZKLFKLVPXFKODUJHUWKDQ %\VLPLODUORJLFZHFDQUHDOL]HWKDW . PXVWEHWRRODUJHEHFDXVHLVWLPHVDQGRXUILJXUH LVQߞ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ߞUHDVNHGIRUWKHDUHDRUILQGWKHDUHDZKHQWKH\ߞUHDVNHGIRU WKHSHULPHWHU ) UHSUHVHQWVWKHSHULPHWHURIWKH[UHFWDQJOHWKDWVRPHWHVWWDNHUVZLOOILQGLIWKH\ DSSURDFKWKLVTXHVWLRQE\DGGLQJWKHDUHDRIWKHWZRVPDOOHUUHFWDQJOHVWRJHWKHU 'R\RXVHHKRZWKLVTXLFNPHQWDOUXQGRZQRIZKDWߞVJRLQJRQLQWKHDQVZHUFKRLFHVKHOSVUHDVVXUHXV WKDWZHߞYHWKRXJKWDERXWWKHTXHVWLRQFRUUHFWO\",ߞ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ߞVH[SODQDWLRQRQSDJHZKLFKLQYROYHVIDFWRULQJWKHH[SUHVVLRQ[[ߙ LQWRWKHELQRPLDOV [ߙDQG[DQGWKHQVHWWLQJHDFKRIWKRVHHTXDOWR]HURDQGVROYLQJWRJHW[ RU[ DQGWKHQ DGGLQJWKRVHWZRSRVVLEOHYDOXHVIRU[ 7KLVTXHVWLRQDVNVXVWRILQGWKHVXPRIWKHWZRVROXWLRQVWRWKHHTXDWLRQ[[ߙ .QRZLQJKRZWKH$&7OLNHVWRGRWKLQJVZHPLJKWUHDVRQDEO\H[SHFWWKDWVRPHRIWKHZURQJDQVZHUV ZLOOEHWKHYDOXHVRIWKHLQGLYLGXDOVROXWLRQV7KDWZD\LIVRPHRQHZRUNHGRXWRQHVROXWLRQDQGIRUJRW ZKDWWKHTXHVWLRQZDVDVNLQJKHZRXOGKDYHDQDQVZHUFKRLFHWRSLFN 6LQFHWKHVXPRIWKHVROXWLRQVPXVWEHSUHVHQWLQWKHDQVZHUFKRLFHV EHFDXVHLWߞVWKHULJKWDQVZHU WKHUH VKRXOGEHRQHDQVZHUFKRLFHWKDWLVWKHVXPRIWZRRWKHUDQVZHUFKRLFHVLIRXUWKHRU\DERXWWKH LQGLYLGXDOVROXWLRQVDSSHDULQJDVZURQJDQVZHUFKRLFHVLVFRUUHFW 6XUHHQRXJKZHVHHWKDW & LVZKLFKLVWKHVXPRIIURP % DQGIURP ( 1RRWKHUVHWRIWKUHH DQVZHUFKRLFHVGHPRQVWUDWHVWKLVUHODWLRQVKLS 2IFRXUVH,DOZD\VVD\WKDWUHFRJQL]LQJDSDWWHUQOLNHWKLVLVQߞWHQRXJKIRUXVWREHFHUWDLQZHKDYHWKH ULJKWDQVZHUDQGWKLVTXHVWLRQLVQRH[FHSWLRQ%XWZHFDQHDVLO\FKHFNRXWDQGQRZWKDWZHWKLQN ZHߞYHLGHQWLILHGWKHPDVVROXWLRQV$OOZHKDYHWRGRLVSOXJLQHDFKRQHLQGLYLGXDOO\IRU[DQGVHHLIRXU RULJLQDOHTXDWLRQLVYDOLG 6RERWKVROXWLRQVFKHFNRXWDQGWKH\DGGXSWRZKLFKPHDQVZHNQRZWKDW & PXVWEHFRUUHFW 2QFHPRUHZHVHHWKHYDOXHRIOHDUQLQJWRWKLQNOLNHWKHWHVWDQGFRQVLGHULQJDOOWKHDQVZHUFKRLFHVDV ZHOODVWKHDFWXDOPDWKLQYROYHGLQWKHTXHVWLRQ 3DJH4XHVWLRQ 7KH5HG%RRNߞVVROXWLRQIRUWKLVTXHVWLRQLVDVXVXDOWKHVWUDLJKWIRUZDUGDSSURDFK\RXUPDWKWHDFKHU ZRXOGXVHLI\RXDVNHGWKLVTXHVWLRQLQVFKRRO%XWWKHUHDUHRWKHUDVSHFWVRIWKLVTXHVWLRQZHߞGZDQWWR FRQVLGHUDVWUDLQHGWHVWWDNHUV )RURQHWKLQJLI\RXGRQߞWIHHOFRPIRUWDEOHGHDOLQJZLWKWKHDOJHEUD\RXFRXOGDOZD\VMXVWWDNHHDFK DQVZHUFKRLFHDQGWHVWLWRXWDJDLQVWWKHWHDFKHUߞVVWDWHPHQWIURPWKHTXHVWLRQWRVHHZKLFKFKRLFHZRUNV ,I\RXGRWKDWWKHVHDUHWKHUHVXOWV ) GRHVQߞWZRUNEHFDXVHߙ HTXDOVQRW * ZRUNVRXWSHUIHFWO\EHFDXVHߙ GRHVHTXDOMXVWOLNHWKHWHDFKHUVDLGLWQHHGHGWR6R * LVFRUUHFW2IFRXUVHDVWUDLQHGWHVWWDNHUVZHNQRZZHVWLOOQHHGWRFKHFNRXWWKHUHPDLQLQJDQVZHU FKRLFHVWRKHOSUHDVVXUHRXUVHOYHVWKDWZHKDYHQߞWPDGHDPLVWDNH + LVLQFRUUHFWEHFDXVHߙ HTXDOVQRW - LVZURQJEHFDXVHߙ HTXDOVQRW . LVZURQJEHFDXVHߙ HTXDOVQRW 6RWKHUHߞVDQDSSURDFKWKDWGRHVQߞWUHTXLUH\RXWRIDFWRUDTXDGUDWLFH[SUHVVLRQLI\RXSUHIHUQRWWRGR WKDW :HߞGDOVRZDQWWRQRWLFHWKHFRPPRQ$&7SDWWHUQVDWZRUNLQWKHDQVZHUFKRLFHVKHUH ) * DQG + IRUPDVHULHVDQGZHNQRZWKDWWKHFRUUHFWDQVZHULVRIWHQWKHQXPEHULQWKHPLGGOHRIDVHULHVLIWKHUHߞV DVHULHVLQWKHDQVZHUFKRLFHV:HDOVRVHHWKDW . LVWZLFHDVPXFKDV * ZKLFKLVDQRWKHUSDWWHUQ LQGLFDWLQJWKDW * LVOLNHO\WREHFRUUHFW$OORIWKRVHWKLQJVZRXOGKHOSUHDVVXUHXVWKDWZHߞYHSUREDEO\ WKRXJKWDERXWWKHTXHVWLRQFRUUHFWO\ 7KHUHߞVRQHPRUHWKLQJ,ZDQWWRPHQWLRQKHUH7KHUHDVRQWKDW ) DQG + ERWKGLIIHUIURPWKHFRUUHFW DQVZHUE\LVSUREDEO\WKDWWKHWZRDOJHEUDLFVROXWLRQVWRWKLVTXHVWLRQDUHDQGDVWKH5HG%RRN H[SODLQVRQSDJH7KH$&7SUREDEO\WKLQNVWKDWVRPHSHRSOHZLOOWU\WRDGGWKRVHWZRVROXWLRQV ZKLFKZRXOGJLYH\RXRUDGGWKHLUDEVROXWHYDOXHVZKLFKZRXOGJLYH\RX7KHVHPLVWDNHVFDQ RQO\EHPDGHE\VRPHRQHZKRDWWHPSWVDIRUPXODLFVROXWLRQWRWKHTXHVWLRQZLWKRXWERWKHULQJWRSOXJWKH YDOXHVEDFNLQWRWKHWHDFKHUߞVVWDWHPHQWߚLI\RXMXVWSOXJWKHGLIIHUHQWDQVZHUFKRLFHVLQWRWKHVWDWHPHQW LWQHYHURFFXUVWR\RXWKDWRUPLJKWEHFRUUHFW7KLVLVRQHPRUHH[DPSOHRIKRZIRUPDOPDWKFDQ DFWXDOO\FDXVHPRUHGLIILFXOW\RQWKH$&7WKDQDWWDFNLQJTXHVWLRQVOHVVIRUPDOO\ 3DJH4XHVWLRQ 0DQ\WHVWWDNHUVZLOOEHWKURZQRIIE\WKHSKUDVHߡJHRPHWULFVHTXHQFHߢLQWKLVTXHVWLRQDQGLWߞVWUXHWKDW LWZRXOGEHKHOSIXOWRNQRZWKHPHDQLQJRIWKDWWHUPLQRUGHUWRDQVZHUWKHTXHVWLRQ $ߡJHRPHWULF VHTXHQFHߢLVDVHULHVRIQXPEHUVLQZKLFKHDFKWHUPLVPXOWLSOLHGE\WKHVDPHTXDQWLW\WRJHQHUDWHWKH QH[WWHUPLQWKHVHTXHQFH %XWZHGRQߞWQHFHVVDULO\QHHGWRNQRZWKHSKUDVHߡJHRPHWULFVHTXHQFHߢZKHQZHDSSURDFKWKLVTXHVWLRQ ,IZHNQRZWKDWDߡVHTXHQFHߢLVDVHWRIQXPEHUVJRYHUQHGE\VRPHUXOHRUSDWWHUQZHFDQMXVWORRNDWWKH WHUPVLQWKHVHTXHQFHDQGVHHKRZWKH\ߞUHFKDQJLQJ 6ROHWߞVORRNDWWKHWHUPV EFGDEFGDEFG ,I\RXORRNFORVHO\\RXPLJKWQRWLFHWKDWEDQGGDUHWKHVDPHLQHYHU\WHUPߚWKH\ߞUHMXVWEDQGG:KDW DERXWWKHRWKHUYDULDEOHV" :HOODJRHVIURPQRWEHLQJSUHVHQWLQWKHILUVWWHUPWREHLQJDLQWKHVHFRQGWHUPWREHLQJDLQWKHWKLUG WHUP,WVHHPVOLNHZHߞUHPXOWLSO\LQJE\RQHPRUHDZLWKHDFKQHZWHUPZKLFKPHDQVWKHQH[WWHUP VKRXOGKDYHDLQLW $QGKRZDERXWF",WJRHVIURPEHLQJFLQWKHILUVWWHUPWRFLQWKHVHFRQGWHUPWRFLQWKHWKLUGWHUP,W VHHPVOLNHZHߞUHMXVWPXOWLSO\LQJE\DQDGGLWLRQDOFHDFKWLPHDVZHOOVRWKHQH[WWHUPVKRXOGKDYHFLQ LW 6RZHZDQWDEFDQGG7KDWFRUUHVSRQGVWRWKHFRUUHFWDQVZHUFKRLFH ) ZKLFKLVDEFG ,QFLGHQWDOO\WKLVFRUUHFWDQVZHUIROORZVWKHFRPPRQ$&70DWKSDWWHUQRILQFRUSRUDWLQJWKHHOHPHQWVWKDW RFFXUPRVWFRPPRQO\LQWKHVHWRIDQVZHUFKRLFHV wWKUHHRXWRIILYHFKRLFHVKDYHD wWKUHHRXWRIILYHFKRLFHVKDYHE wWZRRXWRIILYHKDYHF ZKLFKDSSHDUVPRUHWKDQDQ\RWKHURSWLRQIRUF wIRXURXWRIILYHHQGLQG $JDLQWKHIDFWWKDW ) IROORZVWKHSDWWHUQRIEHLQJWKHFKRLFHWKDWKDVWKHPRVWLQFRPPRQZLWKWKH JUHDWHVWQXPEHURIDQVZHUFKRLFHVGRHVQRWE\LWVHOIPHDQWKDW ) LVFRUUHFWEXWLWߞVDYHU\VWURQJ LQGLFDWLRQWKDW ) LVSUREDEO\FRUUHFWDQGLWVKRXOGEHUHDVVXULQJWRXV 5HPHPEHUWKDWZHGLGQߞWUHDOO\QHHGWRNQRZZKDWDJHRPHWULFVHTXHQFHZDVWRDQVZHUWKLVTXHVWLRQDOO ZHKDGWRGRZDVREVHUYHWKHFKDQJHVIURPRQHWHUPWRWKHQH[W2IFRXUVHWKDWUHTXLUHGXVWRVWD\FDOP QRWLFHGHWDLOVDQGDYRLGVPDOOPLVWDNHVߚWKUHHWKLQJVWKH$&7DOZD\VUHZDUGV 3DJH4XHVWLRQ 7KLVTXHVWLRQLVYHU\FRQIXVLQJIRUDORWRIWHVWWDNHUVZKRGRQߞWUHDGLWFDUHIXOO\7KH5HG%RRN H[SODQDWLRQLVYHU\IRUPXODLFZKLFKGRHVQߞWKHOSߚLWDVVXPHV\RXKDYHDQLQWLPDWHNQRZOHGJHRI SDUDERODVZKLFKLVQRWWKHFDVHIRUPRVWWHVWWDNHUVDQGZKLFKLVQߞWQHFHVVDU\DWDOORQWKLVTXHVWLRQ 0RVWWHVWWDNHUVZLOOVLPSO\DVVXPHWKDWWKHVPDOOHVWYDOXHRI\ZLOOEHOLVWHGRQWKHWDEOH%XWLWZHORRN DWWKHWDEOHZHVHHWKDWWKHORZHVW\YDOXHLVߚDQGLWDSSHDUVWZLFH)XUWKHUFKRLFHV * DQG - ERWK UHIOHFW[YDOXHVWKDWFRUUHVSRQGWRWKDW\YDOXH 6RZHPLJKWVHHPWRKDYHDELWRIDSUREOHPKHUH:HNQRZWKHUHFDQRQO\EHRQHFRUUHFWDQVZHUSHU TXHVWLRQDQGZHDOVRNQRZWKDWLWORRNVOLNHWZRDQVZHUFKRLFHVDUHHTXDOO\YDOLG7KDWPHDQVZHQHHG WRILJXUHRXWZKDWߞVJRLQJRQ $WWKLVSRLQW,ߞGQRWLFHWKDWWKH[YDOXHVLQWKHWDEOHLQFUHDVHE\ߞVVRQXPEHUVOLNH[ [ DQG[ DUHQߞWUHSUHVHQWHGLQWKHWDEOHHYHQWKRXJKWKH\DSSHDULQWKHDQVZHUFKRLFHV 1RZLWVWDUWVWRFOLFNߚWKHUHKDVWREHDQ[YDOXHWKDWLVQߞWOLVWHGLQWKHWDEOHDQGLWKDVWRKDYHD\YDOXH ORZHUWKDQ 2QHZD\,FRXOGILQGWKDW[YDOXHZRXOGEHWRJUDSKWKHSDUDERODDQGWDNHDORRNDWLW7KDWZRXOGPDNHLW YHU\REYLRXVZKLFK[YDOXHKDGWKHORZHVWFRUUHVSRQGLQJ\YDOXH$QG,GRQߞWKDYHWRJUDSKWKHSDUDEROD P\VHOILI,GRQߞWUHPHPEHUKRZWRGRWKDWߚDOO,KDYHWRGRLVSXW\ [ߙ LQWRP\JUDSKLQJ FDOFXODWRUDQGORRNDWWKHUHVXOW,IZHGRWKDWZHߞOOVHHWKDWWKHORZHVWSRLQWRIWKHSDUDERODRFFXUVDW[ $QRWKHUDSSURDFKZRXOGEHWRWDNHWKH[YDOXHVIURPHDFKDQVZHUFKRLFHDQGSOXJWKHPLQWRWKHHTXDWLRQ WRVHHZKDWWKHFRUUHVSRQGLQJ\YDOXHVZHUH,IZHGRWKDWZHJHWWKLV ) UHVXOWVLQ ߙ ZKLFKLV ZKLFKLVRU + UHVXOWVLQ ߙ ZKLFKLV ZKLFKLV . UHVXOWVLQ ߙ ZKLFKLV ZKLFKLVRU ,GLGQߞWQHHGWRWHVW * DQG - EHFDXVHWKHLU\YDOXHVDUHDOUHDG\LQWKHWDEOH %\WKHZD\VLQFHWKH\ ERWKKDYHWKHVDPH\YDOXHDQGWKH\FDQߞWERWKEHULJKWWKH\PXVWERWKEHZURQJ 7KLVPDNHVLWFOHDUDJDLQWKDW + LVFRUUHFWVLQFHLVWKHVPDOOHVW\YDOXHRXWRIDOOWKHYDOXHVZHߞYH FRPHXSZLWK $WKLUGDSSURDFKLVMXVWWRORRNDWWKHWDEOHDQGWKLQNDERXWKRZSDUDERODVZRUN:HNQRZWKDWSDUDERODV DUHV\PPHWULFDODQGZHFDQVHHDV\PPHWU\LQWKH\YDOXHVIRUWKHODVWIRXUURZVRQWKHWDEOH 7KDWWHOOVXVWKDWWKH\YDOXHVDUHJHWWLQJORZHUDVWKHFXUYHDSSURDFKHV[ DQGWKHQKLJKHUDJDLQ DIWHU[ :HNQRZWKDWDSDUDERODFDQߞ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ߚUHPHPEHUWKDWWKH$&7RIWHQOLNHVWRPDNHWKHFRUUHFWDQVZHUEHWKHPLGGOHQXPEHULQ DVHULHVLIWKHDQVZHUFKRLFHVFRQWDLQDVHULHVRIQXPEHUV,QWKLVFDVHWKHILYHDQVZHUFKRLFHVFRQWDLQ DQDULWKPHWLFVHULHV DQGWKHFRUUHFWDQVZHULVWKHFKRLFHGLUHFWO\LQWKHPLGGOHRIWKHVHULHV H[DFWO\DVZHPLJKWH[SHFW 3DJH4XHVWLRQ 7KLVTXHVWLRQORRNVYHU\VWUDQJHDQGLQWLPLGDWLQJWRPRVWWHVWWDNHUVDQGWKH5HG%RRNߞVVROXWLRQRQSDJH LVDIDLUO\FRPSOLFDWHGXQLPDJLQDWLYHDSSURDFKXVLQJSXUHWULJRQRPHWU\DQGLJQRULQJWKHGHVLJQRI WKH$&7 2IFRXUVHDVWUDLQHGWHVWWDNHUVZHFDQILQGDPXFKIDVWHUHDVLHUVROXWLRQ )RURQHWKLQJZHFDQQRWHWKDWWKHGLDJUDPLQWKHTXHVWLRQLVDSSDUHQWO\GUDZQWRVFDOH:HFDQWHOOWKLV EHFDXVHWKHOHQJWKRIWKHOLQHVHJPHQWUHSUHVHQWLQJNPGRHVVHHPWREHDERXWRIWKHOHQJWKRIWKH VHJPHQWUHSUHVHQWLQJNPDQGWKHOHQJWKRIWKHNPVHJPHQWLVDOLWWOHOHVVWKDQKDOIDVORQJDVWKH NPVHJPHQW)XUWKHUWKHLQGLFDWHGDQJOHPHDVXUHPHQWVVHHPWREHSUHWW\DFFXUDWHߚWKHRDQJOH ORRNVOLNHLWߞVRRIIRIYHUWLFDODQGWKHRDQJOHORRNVOLNHLWߞVRRIIRIYHUWLFDO 6LQFHWKHGLDJUDPLVGUDZQWRVFDOHZHNQRZWKHYHUWLFDOOLQHVHJPHQWZLWKWKHTXHVWLRQPDUNLQLWPXVW DOVREHWRVFDOH:HFDQH\HEDOOLWDQGVHHWKDWLWORRNVWREHDOLWWOHPRUHWKDQWLPHVDVWDOODVWKH YHUWLFDOOLQHVHJPHQWODEHOHGNP,WߞVGHILQLWHO\QRWPRUHWKDQRUWLPHVDVWDOODVWKHNPVHJPHQW VRLWFDQߞWKDYHDKHLJKWRIRUZKLFKPHDQV % DQG & PXVWEHZURQJ 8VLQJVLPLODUORJLFZHFDQDOVRWHOOWKDW $ LVWRRVKRUWEHFDXVHWKHYHUWLFDOOLQHZLWKWKHTXHVWLRQPDUN LVGHILQLWHO\ORQJHULQWKHGLDJUDPWKDQWKHDQJOHGOLQHVHJPHQWWKDWߞVODEHOHGDNPOLQHVHJPHQW 7KDWOHDYHVXVZLWK ' DQG ( 7KHUHDUHWZRWKLQJVZHFRXOGXVHDWWKLVSRLQWWRLGHQWLI\WKHULJKW DQVZHU 2QHDSSURDFKLVWRUHDOL]HWKDWWKHFRUUHFWDQVZHUPXVWKDYHWKUHHFRPSRQHQWVLILWߞVQRWZULWWHQDVD GHFLPDODSSUR[LPDWLRQDNPFRPSRQHQWWRUHSUHVHQWWKHYHUWLFDOSDUWRIWKHWULSDQH[SUHVVLRQWR UHSUHVHQWWKHSDUWRIWKHWULSWKDWKDSSHQHGDWDRLQFOLQDWLRQDQGDQH[SUHVVLRQWRUHSUHVHQWWKHSDUWRI WKHWULSWKDWKDSSHQHGDWDRLQFOLQDWLRQ:HFDQVHHWKDW ( LVWKHRQO\FKRLFHZLWKDOOWKRVH FRPSRQHQWV UHPHPEHUWKDWH[SUHVVLRQVZLWK࠼DUHUHODWHGWRRRRWULDQJOHVDQGH[SUHVVLRQV ZLWK࠼DUHUHODWHGWRRRRWULDQJOHV %XWDQRWKHUPRUHFRQFUHWHDSSURDFKLVMXVWWRXVHWKHFDOFXODWRUWRDSSUR[LPDWHWKHYDOXHRI ' DQGWKH YDOXHRI ( DQGWKHQXVHWKHVFDOHRIWKHGLDJUDPWRILJXUHRXWZKLFKFKRLFHLVDSSURSULDWH,IZHGRWKDW ZHVHHWKDW ' LVDSSUR[LPDWHO\ZKLOH ( LVDSSUR[LPDWHO\$VZHQRWHGZKHQZHORRNHGDW $ WKHYHUWLFDOOLQHZLWKWKHTXHVWLRQPDUNLQLWLVFOHDUO\DJRRGELWORQJHUWKDQZKLFKPHDQVLWߞVD JRRGELWORQJHUWKDQWRR%XWLWGRHVORRNOLNHLWFRXOGEHDERXWXQLWVORQJߚWKDWHYHQILWVZLWK RXULQLWLDOREVHUYDWLRQWKDWWKHTXHVWLRQPDUNOLQHZDVDOLWWOHELWPRUHWKDQWLPHVDVWDOODVWKHNP VHJPHQWRIWKHIOLJKW6RZHFDQFRQILUPWKDW ( LVULJKWZLWKWKLVDSSURDFKWRR )LQDOO\LIZHWKLQNOLNHWKH$&7DOLWWOHELWZHFDQXQGHUVWDQGZK\ ' ZRXOGEHDQDWWUDFWLYHZURQJ DQVZHUIRUDORWRIWHVWWDNHUVLI ( LVWKHULJKWDQVZHU7HVWWDNHUVZKRWU\WRDSSO\IRUPDOWULJWRWKLV TXHVWLRQZLOOKDYHWRGRVRPHZRUNWRILJXUHRXWWKDWWKHWZRVODQWHGSRUWLRQVRIWKHIOLJKWKDYHGLVWDQFHV RI࠼DQG࠼0DQ\WHVWWDNHUVZLOOIRUJHWWKHUHߞVDNPFRPSRQHQWRIWKHIOLJKWDQGVLPSO\FKRRVH ' 2QFHZHUHFRQILUPWKDWWKHNPFRPSRQHQWRIWKHIOLJKWPXVWEHWDNHQLQWRDFFRXQWZHFDQEHHYHQ PRUHFHUWDLQWKDW ( LVFRUUHFW 0RVWWHVWWDNHUVSUREDEO\FDQߞWVROYHWKLVTXHVWLRQDWDOOHYHQLIWKH\GRPRVWRIWKHPZLOOWDNHDSUHWW\ ORQJWLPHWRGRLW%XWZHMXVWIRXQGDFRXSOHRIZD\VWRVROYHWKHTXHVWLRQZLWKRXWGRLQJDQ\UHDOPDWKDW DOO,QVWHDGZHQRWHGWKHGHWDLOVRIWKHTXHVWLRQVWKRXJKWDERXWWKHDQVZHUFKRLFHVDQGH[SORLWHGWKH $&7ߞVGHVLJQߚDOOWKLQJVWKDWWKH5HG%RRNߞVVDPSOHVROXWLRQVGRQߞWUHDOO\FRYHU 3DJH4XHVWLRQ 7KH5HG%RRNߞVVROXWLRQIRUWKLVTXHVWLRQOLNHLWVVROXWLRQVIRUPRVWRWKHUTXHVWLRQVWKDWLQYROYHFRQLF VHFWLRQV OLNHSDUDERODVDQGFLUFOHV UHTXLUHVXVWRNQRZFHUWDLQIRUPXODVWKDWPRVWWHVWWDNHUVZLOOKDYH ORQJIRUJRWWHQ)RUWXQDWHO\WKHUHDUHRWKHUZD\VWRDSSURDFKWKHTXHVWLRQWKDWUHO\PRUHRQWKH IXQGDPHQWDOVRIJUDSKLQJHTXDWLRQVDVZLOODOZD\VEHWKHFDVHRQWKH$&7 %XWLI\RXGRKDSSHQWRUHFDOOWKHGLIIHUHQWIRUPXODVIRULGHQWLI\LQJIHDWXUHVRIFLUFOHVIURPWKHLU HTXDWLRQVDQGLI\RXUHFDOOWKDWWKHIRUPXODIRUWKHDUHDRIDFLUFOHLV$ ͯUWKHQ\RXFDQDFWXDOO\WDFNOH WKLVTXHVWLRQYHU\YHU\TXLFNO\/HWߞVJHWWKDWRXWRIWKHZD\ILUVWDQGWKHQGLVFXVVWKHZD\WKHUHVWRIXV ZRXOGKDYHWRILQGWKHDQVZHU ,QWKHVWDQGDUGHTXDWLRQIRUDFLUFOHWKHFRQVWDQWYDOXHDWWKHHQGRIWKHHTXDWLRQLVHTXDOWRWKHVTXDUHRI WKHUDGLXV,QRWKHUZRUGVLWߞVDOUHDG\HTXLYDOHQWWRU6RLQWKHHTXDWLRQ[\ ZHFDQDOUHDG\ VHHWKDWLVUIRUWKLVFLUFOH ,IZHSOXJWKDWLQWRWKHIRUPXODIRUWKHDUHDRIDFLUFOHZHJHWWKLV 7KLVFRUUHVSRQGVWRWKHFRUUHFWDQVZHUZKLFKLV + $V,VDLGWKRXJKWKHUHߞVVWLOODQDSSURDFKDYDLODEOHWRWKRVHRIXVZKRPLJKWKDYHIRUJRWWHQKRZWRZRUN ZLWKWKHHTXDWLRQVIRUFLUFOHV $OOZHKDYHWRGRLVILJXUHRXWVRPHYDOXHVIRU[DQG\WKDWVDWLVI\WKHHTXDWLRQDQGWKHQZHFDQZRUNRXW WKHUDGLXVRIWKHFLUFOHIURPWKHUHDQGSOXJLWLQWRWKHDUHDIRUPXOD 7KHHDVLHVWSODFHWRVWDUWZLOOSUREDEO\EHZLWKDQ[RU\YDOXHRI]HUR/HWߞVVHHZKDWKDSSHQVLIZH PDNH[HTXDO]HUR 6RWKHUHDUHWZR\YDOXHVIRUWKLVHTXDWLRQZKHQ[ 7KDWJLYHVXVWZRSRLQWVIRUWKHFLUFOHVRIDU DQG 1RZOHWߞVPDNHWKH\WHUP]HURDQGVHHZKDWKDSSHQV7KDWJLYHVXV $JDLQZHߞYHJRWWZRYDOXHVZKLFKJLYHXVWZRSRLQWV DQG ,IZHJUDSKWKRVHSRLQWVDQGGUDZLQWKHFLUFOHWKH\GHILQHZHJHWWKLV ,WORRNVSUHWW\FOHDUWKDWRXUFLUFOHLVXQLWVDOOWKHZD\DFURVVZKLFKPHDQVLWVGLDPHWHUPXVWEHDQG LWVUDGLXVPXVWEHKDOIRIWKDWRU,IZHSOXJLQWKDWUDGLXVIRUUZHJHWWKLV $JDLQWKLVJLYHVXV + WKHFRUUHFWDQVZHU6RZHFDQVHHWKDWLWߞVSRVVLEOHWRGHWHUPLQHZKDWWKLVFLUFOH ORRNVOLNHDQGZKDWLWVDUHDPXVWEHZLWKRXWUHPHPEHULQJKRZWRZRUNZLWKWKHFODVVLFHTXDWLRQIRUD FLUFOH,QVWHDGZHFDQMXVWSOXJLQVRPHYDOXHVWRSORWVRPHSRLQWVDQGZRUNRXWWKHVL]HRIWKHFLUFOH WKDWZD\ 1RZOHWߞVWDNHDORRNDWWKHDQVZHUFKRLFHVWRVHHLIZHFDQUHDVVXUHRXUVHOYHVWKDWZHߞUHSUREDEO\ULJKW EDVHGRQWKHFRPPRQSDWWHUQVRIWKH$&70DWKVHFWLRQ,IZHNHHSLQPLQGWKDWZHQHHGHGWRVTXDUHD UDGLXVWRILQGWKHDQVZHUWRWKHTXHVWLRQZHPLJKWH[SHFWDORWRIVTXDUHVWRDSSHDULQWKHDQVZHU FKRLFHV6XUHHQRXJKLQWKHDQVZHUFKRLFHVZHILQG ZKLFKLV ZKLFKLV DQG ZKLFKLV ,QWKHPLGGOHRIWKDWVHULHVLVWKHFRUUHFWDQVZHUMXVWDVZHZRXOGQRUPDOO\H[SHFWRQWKH$&7 0DWKVHFWLRQ ,WDOVRPDNHVVHQVHWRVHHͯIRUDQRWKHUUHDVRQ,WZRXOGDSSHDOWRWHVWWDNHUVZKRIRXQGWKDWWKHUDGLXV ZDVDQGWKHQVWXFNDͯRQWKHDQGPDUNHGWKDWDQVZHUIRUJHWWLQJWKDWWKHUDGLXVQHHGHGWREHVTXDUHG +HUHߞVRQHPRUHWKLQJWRFRQVLGHUZKHQORRNLQJDWWKHVHDQVZHUFKRLFHV7KHIRUPXODIRUWKHDUHDRID FLUFOHUHTXLUHVXVWRVTXDUHWKHUDGLXV%XWDFRPPRQPLVWDNHSHRSOHPLJKWPDNHZRXOGEHWRGRXEOHWKH UDGLXVLQVWHDG2QO\RQHQXPEHUKDVLWVVTXDUHDQGLWVGRXEOHLQWKHDQVZHUFKRLFHVߚWKDWQXPEHULV ZKLFKLVWKHUDGLXVRIWKHFLUFOH ,QWKLVFDVHLWGRHVQߞWPHDQLVWKHFRUUHFWDQVZHUEXWWKHEXONRIWKHPDWKLQWKLVSUREOHPKDVWRGRZLWK ILQGLQJWKDWQXPEHUDQGWKHQVTXDULQJLWDQGPXOWLSO\LQJLWE\ͯWRJHWWKHFRUUHFWDQVZHUZKLFKLVͯ 7KHVHDUHWKHVRUWVRIWKLQJ\RXZDQWWRORRNRXWIRUZKHQHYHU\RXORRNDWDTXHVWLRQDQGLWVDQVZHU FKRLFHV 6HHLQJDOORIWKHVHUHODWLRQVKLSVDPRQJWKHDQVZHUFKRLFHVFDQKHOSUHDVVXUHXVWKDWZHߞYHSUREDEO\ WKRXJKWDERXWWKHTXHVWLRQWKHULJKWZD\ 3DJH4XHVWLRQ 7KLVTXHVWLRQߞVVHWXSORRNVYHU\VFDU\WRDORWRIWHVWWDNHUVEHFDXVHWKH\ߞYHQHYHUVHHQTXHVWLRQVOLNH WKLVLQPDWKFODVV7KH$&7LVUHDOO\OD\LQJLWRQWKLFNKHUHWKURZLQJDOONLQGVRIPDWKWHUPVDW\RXDQG HVVHQWLDOO\WU\LQJWRPDNH\RXJLYHXSEHIRUH\RXHYHQILQGRXWZKDWWKHTXHVWLRQLVDVNLQJ%XWWUDLQHG WHVWWDNHUVOLNHXVGRQߞWIDOOIRUWKDWNLQGRIWKLQJ ,QVWHDGZHߞOOUHDGFDUHIXOO\DQGWU\WRILJXUHRXWZKDWߞVJRLQJRQ 2QFHZHUHDGWKHGHVFULSWLRQDQGORRNDWWKHGLDJUDPZHVHHWKDWWKHTXHVWLRQLVDVNLQJXVWRILQGDQ DOJHEUDLFH[SUHVVLRQIRUWKHDUHDRIWKHUHFWDQJOHLQWHUPVRID /RRNLQJDWWKHDQVZHUFKRLFHVFRQILUPVWKDWWKHWHVWGRHVQߞWZDQWXVWRILQGDQDFWXDOQXPHULFDOYDOXHMXVW DQDOJHEUDLFH[SUHVVLRQZLWKD 2ND\6RKRZGRZHGRWKDW" 5HPHPEHUWKDWZHDOZD\VZDQWWRWKLQNLQWKHVLPSOHVWWHUPVSRVVLEOHDQGZHZDQWWRIRFXVRQ GHILQLWLRQVDQGSURSHUWLHVRIEDVLFPDWKFRQFHSWVZKHQHYHUZHFDQ7KLVTXHVWLRQDVNVXVWRILQGWKHDUHD RIDUHFWDQJOH%\GHILQLWLRQWKHDUHDRIDUHFWDQJOHLVIRXQGE\PXOWLSO\LQJWKHKHLJKWRIWKHUHFWDQJOHE\ LWVZLGWK 7KDWPHDQVZHQHHGWRNQRZWKHKHLJKWDQGWKHZLGWKRIWKHUHFWDQJOH,IZHORRNDWWKHGLDJUDPZHVHH WKDWWKHKHLJKWLVD2ND\WKDWߞVQRWVREDG)RUWKHZLGWKZHFDQVHHWKDWKDOIWKHZLGWKLVD7KDW PHDQVWKHHQWLUHZLGWKPXVWEHD 6RDOOZHKDYHWRGRLVPXOWLSO\WKRVHWZRYDOXHV+HUHߞVZKDWZHJHWZKHQZHGRWKDW 7KLVLVHTXLYDOHQWWRFKRLFH $ ZKLFKLVDD6R $ LVFRUUHFW 6HHKRZTXLFNDQGHDV\WKDWDFWXDOO\ZDVRQFHZHIRFXVHGRQWKHUHOHYDQWGHWDLOV"7KHSDUDERODDFWXDOO\ QHYHUKDGDQ\WKLQJWRGRZLWKDQ\WKLQJ /HWߞVWDNHDORRNDWWKHRWKHUDQVZHUFKRLFHVDQGVHHLIZHFDQILJXUHRXWVRPHPLVWDNHVWKDWPLJKWOHDGWR WKHP % LVZKDWZHJHWLIZHPLVWDNHQO\WKLQNWKHZLGWKRIWKHUHFWDQJOHLVDLQVWHDGRID & LVZKDWZHJHWLIZHPLVWDNHQO\ILQGWKHSHULPHWHULQVWHDGRIWKHDUHD ' LVKDOIRIWKHSHULPHWHUIRUSHRSOHZKRDGGWKHKHLJKWDQGWKHZLGWKLQVWHDGRIPXOWLSO\LQJWKHP ( LVWKHVTXDUHRIWKHKHLJKWRIWKHUHFWDQJOH %HLQJDEOHWRILJXUHRXWZKHUHWKHZURQJDQVZHUVDUHFRPLQJIURPPDNHVXVHYHQPRUHFHUWDLQWKDWZHߞYH FRUUHFWO\IRXQGWKHDUHD $QRWKHUDSSURDFKZHFRXOGWDNHZRXOGEHWRSOXJLQDYDOXHIRUD7KDWZRXOGOHWXVFDOFXODWHDYDOXHIRU WKHDUHDRIWKHUHFWDQJOHZLWKRXWUHDOO\GRLQJDQ\DOJHEUDLIZHGRQߞWOLNHDOJHEUD 7KHTXHVWLRQWHOOVXVWKDWDPXVWEHOHVVWKDQ࠼1RUPDOO\,GRQߞWOLNHWRSLFNDVDYDOXHWRSOXJLQEXW LQWKLVFDVH,ZLOOEHFDXVHWKHUHDUHQߞWRWKHULQWHJHUVEHWZHHQDQG࠼6RLID WKHQWKHKHLJKWRIWKH UHFWDQJOHLVWKLV 7KHZLGWKRIWKHUHFWDQJOHEHFRPHVEHFDXVHLWߞVDDQGDLV 7KDWPHDQVWKHDUHDRIWKHUHFWDQJOHLV ZKHQD 6RWKHDUHDLVLQRXUVFHQDULR 1RZZHMXVWJRWKURXJKHDFKDQVZHUFKRLFHDQGVXEVWLWXWHIRUD:HߞUHORRNLQJIRUDQDQVZHUFKRLFH WKDWHTXDOVZKHQDLV,IWKHUHߞVRQO\RQHFKRLFHZLWKDQH[SUHVVLRQWKDWZRUNVRXWWRZKHQDLV WKHQLWPXVWEHWKHULJKWDQVZHU $ JLYHVXVZKLFKLV7KLVLVZKDWZHߞUHORRNLQJIRUEXWZHVWLOOKDYHWRUHPHPEHUWRFKHFN DOOWKHRWKHUDQVZHUFKRLFHVVRZHFDQPDNHVXUHZHGLGQߞWDFFLGHQWDOO\SLFNDYDOXHIRUDWKDWUHVXOWVLQ PRUHWKDQRQHDQVZHUFKRLFHVHHPLQJWRZRUN % JLYHVXVZKLFKLV6RWKLVPXVWEHDZURQJDQVZHU & JLYHVXVZKLFKLV6RWKLVLVDOVRDZURQJDQVZHU ' JLYHVXVZKLFKLVVRWKLVLVDQRWKHUZURQJDQVZHU ( JLYHVXVߙZKLFKLVVRWKLVLVDQRWKHUZURQJDQVZHU 6RZHFDQVHHWKDWSOXJJLQJLQD DOORZVXVWRILQGWKHDUHDRIWKHUHFWDQJOHZLWKPLQLPDOZRUN /HWWKLVEHRQHPRUHUHPLQGHUWR\RXWKDWWKHߡPDWKߢRQWKH$&70DWKVHFWLRQLVQߞWQHDUO\DVFRPSOLFDWHG RUDGYDQFHGDVPRVWSHRSOHWKLQN 3DJH4XHVWLRQ $ORWRIWHVWWDNHUVGLVOLNHORJDULWKPTXHVWLRQVEHFDXVHWKH\QHYHUUHDOO\OHDUQHGKRZWRPDQLSXODWH ORJDULWKPVLQVFKRRO ,I\RXNQRZKRZWRZRUNZLWKORJDULWKPVWKLVTXHVWLRQLVIDLUO\VLPSOHDVWKH5HG%RRNH[SODQDWLRQRQ SDJHPDNHVFOHDU/HWߞVWDONDERXWWKDWVLPSOHDSSURDFKDQGWKHQZHߞOOWDONDERXWKRZWRDQVZHUWKH TXHVWLRQZLWKDFDOFXODWRULI\RXGRQߞWIHHOFRPIRUWDEOHZLWKORJDULWKPV :KHQZHKDYHORJ VRPHWKLQJ ZHߞUHVD\LQJߡ+RZPDQ\WLPHVGRZHPXOWLSO\E\LWVHOIWRJHW VRPHWKLQJ "ߢ,QWKLVFDVHZLWKORJ ZHߞUHVD\LQJߡ+RZPDQ\WLPHVGRZHPXOWLSO\E\LWVHOIWR JHW "ߢ 2IFRXUVHLIZHߞUHUDLVLQJWRWKHSRZHURIWKHQWKDWDXWRPDWLFDOO\PHDQVZHߞUHPXOWLSO\LQJE\ LWVHOIWLPHVVLQFHWKDWߞVWKHGHILQLWLRQRIDQH[SRQHQW7KHQXPEHURULVEHWZHHQDQG VRFKRLFH ' LVFRUUHFW ,IWKDWGRHVQߞWPDNHDQ\VHQVH\RXPD\ZDQWWRKHDGRYHUWRWKH0DWK7RROER[LQWKLV%ODFN%RRNDQG UHYLHZWKHEULHIVHFWLRQRQORJDULWKPV ,I\RXKDYHDJUDSKLQJFDOFXODWRU ZKLFKRFFDVLRQDOO\FRPHVLQKDQG\RQWKH$&7 WKHQDOO\RXKDYHWR GRLVHQWHUWKHH[SUHVVLRQIURPWKHTXHVWLRQDQGWKHFDOFXODWRUߞVGLVSOD\ZLQGRZZLOOVKRZ\RXWKDW ORJ LV$JDLQWKDWߞVEHWZHHQDQGVRWKHDQVZHULV ' ,QWKLVTXHVWLRQWKHUHDUHQߞWUHDOO\DQ\SDWWHUQVRUDQ\WKLQJWKDWZHFDQREVHUYHLQWKHDQVZHUFKRLFHVVR ZHVKRXOGMXVWPDNHH[WUDVXUHWKDWZHKDYHQߞWPDGHDQ\VPDOOPLVWDNHV5HFKHFNLQJ\RXUVHOIRQ\RXU JUDSKLQJFDOFXODWRUZRXOGEHDJRRGZD\WRGRWKDW 3DJH4XHVWLRQ /LNHPDQ\$&70DWKTXHVWLRQVWKLVRQHXOWLPDWHO\GHSHQGVRQWKHGHILQLWLRQRIDWHUPWKDWPDQ\WHVW WDNHUVPLJKWQRWXVHYHU\RIWHQLQPDWKFODVV,QWKLVFDVHWKHWHUPLVߡUDWLRQDOߢ$UDWLRQDOQXPEHULVD UHDOQXPEHUWKDWFDQEHH[SUHVVHGDVDUDWLREHWZHHQWZRLQWHJHUV$QLUUDWLRQDOQXPEHULVDQ\UHDO QXPEHUWKDWFDQߞWEHH[SUHVVHGLQVXFKDZD\)RULQVWDQFHWKHQXPEHULVUDWLRQDOEHFDXVHLWFRXOG EHH[SUHVVHGDVDQGERWKDQGDUHLQWHJHUV%XWWKHQXPEHU࠼LVLUUDWLRQDO EHFDXVHLWFDQߞWEHZULWWHQDVWKHUDWLRRIDQ\WZRLQWHJHUV :LWKWKDWLQPLQGOHWߞVWDNHDORRNDWWKHTXHVWLRQ :HFDQHOLPLQDWHFKRLFH $ ULJKWDZD\EHFDXVHWKHTXHVWLRQDVNVIRUDQLUUDWLRQDOQXPEHUDQG $ LV UDWLRQDO )URPKHUHZHFRXOGFKRRVHWRVROYHWKHHTXDWLRQLQWKHFODVVLFDOJHEUDLFZD\DVWKH5HG%RRN UHFRPPHQGVRQSDJH%XWDORWRIWHVWWDNHUVGRQߞWOLNHXVLQJIRUPDODOJHEUDWRVROYHHTXDWLRQV LQYROYLQJDEVROXWHYDOXHEUDFNHWV,IWKDWߞVKRZZHIHHOZHFRXOGMXVWWDNHHDFKDQVZHUFKRLFHDQGSOXJ LWLQWRWKHJLYHQHTXDWLRQXQWLOZHILQGWKHFKRLFHWKDWZRUNV % JLYHVXV_ ࠼ ߙ_ߙZKLFKLVWKHVDPHWKLQJDV_ߙ_ߙZKLFKZRUNVRXWWRߙZKLFKLVQߞW 6RWKLVLVDZURQJDQVZHU & JLYHVXV_ ࠼ ߙ_ߙZKLFKLVWKHVDPHWKLQJDV_ߙ_ߙZKLFKZRUNVRXWWRߙZKLFKLV 6RWKLVFKRLFHLVWKHFRUUHFWDQVZHU2IFRXUVHZHWUDLQHGWHVWWDNHUVNQRZZHVWLOOKDYHWRNHHS FKHFNLQJWKHUHPDLQLQJFKRLFHVWRKHOSXVPDNHVXUHZHKDYHQߞWPDGHDPLVWDNHVRPHZKHUH ' JLYHVXV_ ࠼ ߙ_ߙZKLFKLVWKHVDPHWKLQJDV_ߙ_ߙZKLFKZRUNVRXWWRߙZKLFK LVQߞW6RWKLVLVDZURQJDQVZHU ( JLYHVXV_ ࠼ ߙ_ߙZKLFKLVWKHVDPHWKLQJDV_ߙ_ߙZKLFKZRUNVRXWWRߙZKLFKDOVR LVQߞW 6RZHFDQVHHWKDW & LVWKHFRUUHFWDQVZHU 1RWLFHWKDW & LVWKHPLGGOHQXPEHULQWKHVHULHV࠼࠼࠼$VWUDLQHGWHVWWDNHUVZHNQRZWKDWߞVD JRRGVLJQWKDW & LVOLNHO\WREHFRUUHFWVRWKDWߞVUHDVVXULQJ 7KHRYHUDOONH\KHUHRWKHUWKDQXQGHUVWDQGLQJWKHFRQFHSWRIDEVROXWHYDOXHLVQRWLFLQJWKHZRUG ߡLUUDWLRQDOߢLQWKHTXHVWLRQ,I\RXRYHUORRNHGWKDWZRUGRULI\RXPLVUHDGLWDVߡUDWLRQDOߢ\RXFRXOG HDVLO\GRDOOWKHPDWKFRUUHFWO\DUULYHDWDVDVROXWLRQWRWKHHTXDWLRQDQGWKHQSLFNFKRLFH $ ߚEXW \RXߞGVWLOOKDYHWKHZURQJDQVZHUEHFDXVH\RXUHDGWKHTXHVWLRQLQFRUUHFWO\ %XWLI\RXUHDGFDUHIXOO\QRWLFHGWKHZRUGߡLUUDWLRQDOߢDQGWKHQIRXQGWKDWZDVDVROXWLRQ HLWKHUE\ GRLQJWKHDOJHEUDRUE\DFFLGHQWDOO\WHVWLQJLQWKHHTXDWLRQ \RXZRXOGNQRZWKDW\RXZHUHPLVVLQJ VRPHWKLQJZKLFKZRXOGJLYH\RXDVHFRQGFKDQFHWRFRUUHFW\RXUPLVWDNHE\VROYLQJIRUWKHRWKHU VROXWLRQ1HYHUXQGHUHVWLPDWHWKHYDOXHRIUHDGLQJFDUHIXOO\RQWKH$&7 3DJH4XHVWLRQ 7KLVLVGHILQLWHO\DZHLUGORRNLQJPDWKTXHVWLRQDQGWKHVROXWLRQLQWKH5HG%RRNRQSDJHLQFOXGHVD SUHWW\ELJWDEOHWKDWߞVQRWJRLQJWRKHOSDORWRIWHVWWDNHUVXQGHUVWDQGWKHTXHVWLRQDQ\EHWWHU6WLOOLIZH SD\DWWHQWLRQWRWKHGHWDLOVLQWKHTXHVWLRQZHߞOOILQGLWߞVQRWKLQJZHFDQߞWILJXUHRXW :HߞUHSUHVHQWHGZLWKDJUDSKVKRZLQJWKHGLVWDQFHEHWZHHQ0DOLNDDQGWKHPRWLRQVHQVRU7KHQZHߞUH VXSSRVHGWRSLFNHYHQWVIURPWKHSURYLGHGDQGSXWWKHPLQDQRUGHUWKDWGHVFULEHVZKDWߞVKDSSHQLQJ LQWKHJUDSK.LQGRIZHLUGEXWLWGRHVQߞWVRXQGWRRFRPSOLFDWHG $VDOZD\VZHZDQWWRWDNHDORRNDWWKHDQVZHUFKRLFHVEHIRUHZHJHWVWDUWHGDQGVHHLIZHQRWLFHDQ\ UHODWLRQVKLSVDPRQJWKHFKRLFHVDQGWKHFRQFHSWVLQWKHTXHVWLRQWKDWPLJKWEHXVHIXOLQILJXULQJRXWWKH DQVZHU $VLWWXUQVRXWWKHUHߞVDSUHWW\PDVVLYHVKRUWFXWKLGLQJLQWKHDQVZHUFKRLFHVߚDVLQJOHWKLQJZHFRXOG ILJXUHRXWWKDWZRXOGDXWRPDWLFDOO\VKRZXVWKHFRUUHFWDQVZHU'R\RXVHHZKDWLWLV"7DNHDORRNDWWKH VHWRIDQVZHUFKRLFHVDJDLQEHIRUH\RXUHDGWKHQH[WOLQHDQGVHHLI\RXFDQILQGWKHVKRUWFXWWKDWZRXOG NHHSXVIURPKDYLQJWRWKLQNDERXWDOOWKUHHHYHQWVLQDOOILYHDQVZHUFKRLFHV +HUHߞVWKHVKRUWFXWWKHILYHDQVZHUFKRLFHVHDFKKDYHDGLIIHUHQWILUVWHYHQWߚQXPEHUHG,,,,,,,9RU9 7KDWPHDQVDOOZHKDYHWRGRLVILJXUHRXWZKDWWKHILUVWHYHQWLVDQGWKHQZHMXVWSLFNWKHFKRLFHWKDW FRUUHFWO\UHIOHFWVWKDWILUVWHYHQW 2IFRXUVHHYHQLIZHWDNHDGYDQWDJHRIWKLVVKRUWFXWZHVWLOOKDYHWR FKHFNRYHUWKHRWKHUFKRLFHVDQGPDNHVXUHZHߞUHQRWPDNLQJDVPDOOPLVWDNHVRPHZKHUH (YHQW,PHQWLRQVVWDQGLQJVWLOO%XWZHFDQFOHDUO\VHHWKDWWKHGLVWDQFHLVFKDQJLQJLQWKHILUVWSDUWRIWKH JUDSKVRVKHFDQߞWEHVWDQGLQJVWLOO7KLVRQHLVRXW (YHQW,,PHQWLRQVZDONLQJDZD\IURPWKHVHQVRU,I0DOLNDGLGWKDWWKHGLVWDQFHZRXOGLQFUHDVHRQWKH JUDSK%XWLWߞVGHFUHDVLQJLQVWHDG6RWKLVFDQߞWEHWKHULJKWGHVFULSWLRQRIWKHILUVWSDUWRIWKHJUDSKHLWKHU (YHQW,,,FRUUHFWO\GHVFULEHV0DOLNDZDONLQJWRZDUGWKHPRWLRQGHWHFWRUEXWLWJHWVWKHVSHHGZURQJ7KH ILUVWVHFWLRQRIWKHJUDSKODVWVIRUDVSDQRIVHFRQGV7KHFKDQJHLQIHHWRYHUWKDWWLPHLV7KDWPDNHV IHHWSHUVHFRQGVZKLFKUHGXFHVWRIHHWSHUVHFRQGQRWIHHWSHUVHFRQG6R(YHQW,,,LVZURQJ (YHQW,9KDVWKHVDPHSUREOHPWKDW(YHQW,,KDGEHFDXVHLWDOVRVD\V0DOLNDZDVZDONLQJDZD\IURPWKH VHQVRU6R(YHQW,9LVQߞWDJRRGILWZLWKWKHILUVWSDUWRIWKHJUDSKHLWKHU (YHQW9LVDJRRGGHVFULSWLRQIRUWKHILUVWSDUWRIWKHJUDSKEHFDXVHLWGHVFULEHV0DOLNDZDONLQJWRZDUG WKHPRWLRQGHWHFWRUDQGLWXVHVWKHFRUUHFWUDWHIHHWSHUVHFRQG6LQFHZHNQRZIRUVXUHWKDWWKLVLVWKH ULJKWILUVWHYHQWZHNQRZFKRLFH . LVFRUUHFWEHFDXVH . LVWKHRQO\RSWLRQWKDWVWDUWVZLWK(YHQW9 6WLOOMXVWWREHVXUHZHKDYHQߞWPDGHDPLVWDNHZHVKRXOGORRNTXLFNO\DWWKHRWKHUHOHPHQWVRIFKRLFH . DQGPDNHVXUHWKH\ߞUHDFFXUDWH7KHVHFRQGSDUWRIFKRLFH . LV(YHQW,ZKLFKLQYROYHVVWDQGLQJ VWLOOIRUVHFRQGV7KDWILWVZLWKWKHIODWSDUWRIWKHJUDSKEHFDXVH0DOLNDߞ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ߞUH SUHVHQWHG 7KHYHU\ILUVWVHQWHQFHWHOOVXVWRߡFRQVLGHUDOOSDLUVRISRVLWLYHLQWHJHUVZDQG]ZKRVHVXPLVߢ7KDW VRXQGVOLNHDZHLUGUHTXHVWߚVRPHWKLQJZHߞGQHYHUEHDVNHGWRGRLQVFKRROߚEXWOHWߞVWKLQNDERXWWKRVH QXPEHUV,IZHZULWHWKHPGRZQZHJHWDOLVWOLNHWKLV 7KDWߞVQRWDORWRISDLUV,QIDFWWKHUHDUHRQO\IRXURIWKHP7KDWPHDQV ' DQG ( DUHHOLPLQDWHG LPPHGLDWHO\VLQFHWKH\ߞUHJUHDWHUWKDQ 7KHVPDOOQXPEHURISRVVLELOLWLHVIRUWKLVTXHVWLRQLVDYHU\VWURQJVLJQDOIURPWKH$&7WKDWZHߞ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ߞWPHDQZHFDQߞWILJXUHRXWWKHDQVZHULIZHSD\ DWWHQWLRQWRGHWDLOVUHDGFDUHIXOO\DQGNHHSWKHWHVWߞVGHVLJQLQPLQGߚUHPHPEHUWKDWRQHRIWKHNH\ LQGLFDWRUVWKDWZHQHHGHGWRFKHFNHDFKSDLURIYDOXHVPDQXDOO\ZDVWKHIDFWWKDWWKHUHZHUHRQO\IRXU SDLUVWRFKHFN0RVWWHVWWDNHUVZRXOGQߞWUHDOL]HWKHVLJQLILFDQFHRIWKDWORZQXPEHUVRWKH\ߞGVHDUFKLQ YDLQIRUVRPHNLQGRIIRUPDOL]HGZD\WRDSSURDFKWKHTXHVWLRQ 3DJH4XHVWLRQ 7KH$&7ORYHVWRKLGHULJKWWULDQJOHVLQRWKHUREMHFWVDQGWKHQLQYHQWZD\VWRDVN\RXWRILQGWKHP,QWKLV FDVHWKHWULDQJOHVDUHKLGGHQLQDFXEHLQVLGHDVSKHUHLQDGLDJUDPWKDWߞVVXSSRVHGWRPDNH\RXFRZHU LQIHDU 6WLOOLIZHFDQUHDGWKURXJKWKHTXHVWLRQFDUHIXOO\DQGVHWLWXSFRUUHFWO\ZHߞOOILQGWKDWWKHPDWKLVQR PRUHFKDOOHQJLQJWKDQLWKDVEHHQIRUDQ\RWKHU$&70DWKTXHVWLRQ :HQHHGWRILQGWKHUDGLXVRIWKHVSKHUHDQGZHߞUHJLYHQWKHOHQJWKRIRQHHGJHRIWKHFXEH+RZFDQZH GRWKDWXVLQJRQO\WKHEDVLFJHRPHWU\DQGWULJWKDWDUHDOORZHGRQWKH$&7" :HOOZHNQRZWKHUDGLXVLVWKHGLVWDQFHIURPWKHFHQWHURIWKHVSKHUHWRDQ\SRLQWRQWKHVSKHUH$QGZH FDQVHHWKHUHDUHHLJKWSRLQWVRQWKHFXEHWKDWWRXFKWKHVSKHUHߚWKHHLJKWFRUQHUVRIWKHFXEH,IZHFRXOG ILQGWKHGLVWDQFHIURPWKHFHQWHURIWKHVSKHUHWRDQ\RQHRIWKRVHSRLQWVZHߞGNQRZWKHUDGLXVEHFDXVH WKHFHQWHURIWKHVSKHUHDQGWKHFHQWHURIWKHFXEHDUHWKHVDPHSRLQW :HDOUHDG\NQRZWKHVLGHOHQJWKRIWKHFXEHDQGWKHVLGHVRIWKHFXEHGRWRXFKWKHFRUQHUVRIWKHFXEH %XWWKHVLGHVRIWKHFXEHGRQߞWSDVVWKURXJKWKHFHQWHURIWKHFXEHVSKHUH6RZHߞOOQHHGWRFRPHXSZLWK VRPHWKLQJHOVH $WWKLVSRLQWLWZRXOGEHJRRGWRUHDOL]HWKDWWKHGLDJRQDORIWKHFXEHDQGWKHGLDPHWHURIWKHVSKHUHDUH WKHVDPHGLVWDQFH,QRWKHUZRUGVWKHPHDVXUHPHQWIURPRQHFRUQHURIWKHFXEHWKURXJKWKHFHQWHURIWKH FXEHDQGRXWWRWKHYHU\RSSRVLWHFRUQHURIWKHFXEHLVWKHVDPHDVWKHGLDPHWHUEHFDXVHWKHFRUQHUVRI WKHFXEHDUHSRLQWVRQWKHVSKHUH %XWKRZFRXOGZHVHWXSDULJKWWULDQJOHWRILQGWKDWOHQJWK":HߞGKDYHWRNQRZWKHOHQJWKIURPRQHFRUQHU RIRQHIDFHRIWKHFXEHWRLWVRSSRVLWHFRUQHUOLNHWKLV ,IZHFRXOGILJXUHRXWWKHOHQJWKRIWKDWVHFRQGGDVKHGOLQHZHFRXOGXVHLW DORQJZLWKRQHYHUWLFDOVLGH RIWKHFXEH WRFUHDWHDULJKWWULDQJOHZLWKWKHGLDJRQDOGLDPHWHUOLQHDVWKHK\SRWHQXVH 6ROHWߞVILJXUHRXWWKHOHQJWKRIWKHOLQHUXQQLQJGLDJRQDOO\DFURVVWKHERWWRPIDFHRIWKHFXEH:HNQRZ WKDWWKHFXEHKDVDVLGHOHQJWKRIVRZHFDQXVHWKH3\WKDJRUHDQ7KHRUHPWRILQGWKHGLDJRQDO 1RZZHNQRZWKHGLDJRQDODFURVVWKHERWWRPIDFHRIWKHFXEHKDVDOHQJWKRI࠼ 1RWHWKDWWKLVQXPEHU LVWKHLQFRUUHFWߡ2Q7KH:D\ߢDQVZHUFKRLFH - DQGWKDWKDOYLQJLWZRXOGJLYHXVDQRWKHULQFRUUHFW DQVZHUFKRLFH * $V,VDLGEHIRUHZHFDQQRZXVHWKHGLDJRQDODFURVVWKHERWWRPIDFHRIWKHFXEHDVDOHJLQDQHZULJKW WULDQJOH7KHK\SRWHQXVHRIWKLVQHZULJKWWULDQJOHZLOOEHWKHGLDJRQDORIWKHFXEH DOVRDGLDPHWHURIWKH VSKHUH DQGWKHRWKHUOHJZLOOEHDYHUWLFDOHGJHRIWKHFXEH $SSO\LQJWKH3\WKDJRUHDQ7KHRUHPWRWKLVQHZULJKWWULDQJOHJLYHVXVWKHIROORZLQJUHVXOWIRUWKHFXEHߞV GLDJRQDO 6RWKHK\SRWHQXVHIURPRQHFRUQHURIWKHFXEHWRWKHRSSRVLWHFRUQHURIWKHFXEHLV࠼1RWLFHWKDWWKLVLV WKHLQFRUUHFWߡ2Q7KH:D\ߢ$QVZHU + 5HPHPEHUWKDWWKHTXHVWLRQDVNHGXVIRUWKHUDGLXVRIWKH FLUFOHQRWWKHGLDPHWHU 6LQFHWKHUDGLXVLVKDOIWKHGLDPHWHUWKHFRUUHFWDQVZHULVWKLV :KLFKFDQEHVLPSOLILHGWR࠼ZKLFKLVWKHFRUUHFWDQVZHUFKRLFH ) 7KLVVROXWLRQLQYROYHGDELWPRUHPDWKWKDQ,JHQHUDOO\OLNHWRGRRQWKH$&70DWKVHFWLRQEXWVRPHWLPHV WKDWFDQߞWEHDYRLGHG,ZDQWHGWRJRWKURXJKWKLVVROXWLRQEHFDXVHWKH5HG%RRNߞVDSSURDFKRQSDJH XVHVDIRUPXODIRUWKHGLDJRQDORIDUHFWDQJXODUSULVPDQG,ZDQWHGWRVKRZWKDWLWߞVSRVVLEOHWRILQGWKH DQVZHUZLWKRXWPHPRUL]LQJWKDWIRUPXOD EHFDXVH,ߞ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ߞPVXUHWKDWPDQ\WHVWWDNHUVZKRPLVVHGWKLVTXHVWLRQSUREDEO\XQGHUVWRRGKRZ WRDSSURDFKLWEXWDFFLGHQWDOO\FKRVHDQDQVZHUOLNH + EHFDXVHWKH\IRUJRWWRSD\DWWHQWLRQWRZKDWWKH TXHVWLRQDFWXDOO\VDLG'RQߞWWKURZSRLQWVDZD\OLNHWKDW 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVWRSOXJDYDOXHLQWRDIXQFWLRQWRILQGWKHUHVXOWPRUHVSHFLILFDOO\ZHQHHGWRSOXJ LQWKHYDOXHI LQWKHIXQFWLRQI [ [ [ $VWKH5HG%RRNWHOOVXVRQSDJHWKDWORRNV OLNHWKLV 6RWKHDQVZHULVFKRLFH % ,I\RXGRQߞWIHHOOLNHGRLQJWKDWPDWK\RXUVHOI\RXFRXOGMXVWSOXJWKHH[SUHVVLRQ LQWR \RXUFDOFXODWRUDQGLWZRXOGWHOO\RXWKHH[SUHVVLRQZDVHTXDOWR 7KLVLVDSUHWW\VWUDLJKWIRUZDUGTXHVWLRQEXWWKHUHDUHDFRXSOHRIWKLQJVLQWKHDQVZHUFKRLFHVWKDWZH VKRXOGWDONDERXW&KRLFH $ LVWKHYDOXHRIWKHQXPHUDWRUDQGLWߞVWKHUHWRFDWFKSHRSOHZKRPLJKWILQG WKDWQXPEHULQWKHSURFHVVRIVROYLQJWKHTXHVWLRQQRWLFHLWLQWKHDQVZHUFKRLFHVIRUJHWWKHUHVWRIWKH TXHVWLRQDQGWKHQPDUNWKHLUDQVZHUDQGPRYHRQZLWKRXWUHDOL]LQJWKHLUPLVWDNH,QRWKHUZRUGVLWߞVD FODVVLFH[DPSOHRIDZURQJDQVZHUWKDWߞVߡRQWKHZD\ߢWRWKHULJKWDQVZHU ' LVZKDW\RXPLJKWJHWLI\RXLJQRUHGWKHLQWKHQXPHUDWRUDQGWKHLQWKHGHQRPLQDWRUZKLFK ZRXOGOHDYH\RXZLWK[[RURU $OVRQRWHWKHVHULHVLQFKRLFHV & ' DQG ( $VWUDLQHGWHVWWDNHUVZHNQRZWKDWZHߞOO RIWHQILQGWKHFRUUHFWDQVZHULVWKHPLGGOHQXPEHULQDVHULHVLIDVHULHVDSSHDUVLQWKHVHWRIDQVZHU FKRLFHV%XWWKDWSDWWHUQLVQߞWDQDEVROXWHUXOHLWߞVMXVWDJHQHUDOSDWWHUQ6RPHWLPHVLWGRHVQߞWLQGLFDWHWKH ULJKWDQVZHUDQGWKLVTXHVWLRQLVRQHRIWKRVHWLPHV 3DJH4XHVWLRQ 7KLVTXHVWLRQJLYHVXVDUHODWLYHO\EDVLFHTXDWLRQLQDVOLJKWO\DZNZDUGIRUPDW$VDOZD\VWKHUHDUH PXOWLSOHZD\VWRDSSURDFKLW7KH5HG%RRNߞVDSSURDFKLVVRPHWKLQJOLNHWKLV 6RWKHDQVZHULVFKRLFH % %XWWKHUHߞVDQRWKHUDSSURDFKZHFDQWDNHKHUHLIZHGRQߞWUHDOO\OLNHVROYLQJWKLQJVDOJHEUDLFDOO\DQG WKDWLVWRWDNHHDFKDQVZHUFKRLFHDQGSOXJLWLQWRWKHJLYHQHTXDWLRQWRVHHZKLFKRQHPDNHVLWWUXH7KH FKRLFHWKDWPDNHVLWWUXHLVRIFRXUVHWKHFRUUHFWDQVZHU 7KUHHRIWKHZURQJDQVZHUVLQWKLVTXHVWLRQUHVXOWIURPYDULRXVDOJHEUDLFHUURUVZKLFKLVW\SLFDOIRUDQ DOJHEUDLF$&70DWKTXHVWLRQ7KHODVWZURQJDQVZHUVHHPVWREHDQH[DPSOHRIDFRPPRQSDWWHUQRQWKH $&70DWKVHFWLRQUDWKHUWKDQDPLVFDOFXODWLRQ $ LVZKDW\RXJHWLI\RXLJQRUHWKH[RXWVLGHWKHSDUHQWKHVHVLQWKHRULJLQDOHTXDWLRQEHFDXVH\RXGLGQߞW UHDGWKHTXHVWLRQFDUHIXOO\HQRXJK & LVWKHUHVXOWLI\RXLQFRUUHFWO\GLVWULEXWHWKHDQGHQGXSZLWK[ߙLQVWHDGRI[ߙ ' LVWKHUHVXOWLI\RXPDNHWKHPLVWDNHLQ & DQGDOVRHOLPLQDWHWKHRQWKHOHIWKDQGVLGHRIWKH HTXDWLRQWKHQDFFLGHQWDOO\VXEWUDFWIURPUDWKHUWKDQDGGLQJWRERWKVLGHV ( LVKDOIRIWKHULJKWDQVZHUZKLFKLVDFRPPRQ$&70DWKSDWWHUQIRUDZURQJDQVZHU ,NQRZWKLVTXHVWLRQLVSUREDEO\UHODWLYHO\HDV\IRUPRVWWHVWWDNHUVVRLWPD\VHHPVWUDQJHWKDW,ZDQWWR GLVFXVVLWZLWK\RX%XWDV,ߞYHVDLGUHSHDWHGO\WKHVHߡVLPSOHߢTXHVWLRQVDUHWKHUHDONH\WRKLWWLQJ\RXU WDUJHWVFRUH7KDWߞVZK\LWߞVVRFULWLFDOWKDWZHFRQVWDQWO\JRRYHUDOOWKHOLWWOHPLVWDNHVWKH$&7LVWU\LQJ WRJHW\RXWRPDNHDQGKRZ\RXFDQDYRLGWKHP7RSVFRUHUVRQWKH$&7DUHREVHVVLYHDERXWWKHVHOLWWOH GHWDLOV 3DJH4XHVWLRQ 7KH5HG%RRNߞ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ߚKRZGRZHH[SUHVVWKDW":HNQRZWKHILUVWILYHWHVWVFRUHV DGGXSWRDQGWKHTXHVWLRQWHOOVXVWRXVHWKHYDULDEOHVIRUWKHPLVVLQJVFRUH6RWKHVXPRIWKH VFRUHVPXVWEHV:KHQZHSOXJWKDWLQWRWKHQXPHUDWRURIWKHIUDFWLRQZHJHWWKLV V 7KDWߞVZKDWFKRLFH - VD\VVR - LVFRUUHFW 1RZOHWߞVWDONDERXWKRZZHFRXOGDSSURDFKWKLVTXHVWLRQE\LQFRUSRUDWLQJWKHDQVZHUFKRLFHVLQWRRXU DQDO\VLV1RWLFHWKDWFKRLFH - WKHFRUUHFWDQVZHUIROORZVWKHFRPPRQ$&7SDWWHUQRILQFRUSRUDWLQJDOO WKHPRVWFRPPRQHOHPHQWVIURPWKHVHWRIDQVZHUFKRLFHV w7KUHHRXWRIWKHILYHFKRLFHVKDYHVLQWKHQXPHUDWRULQVWHDGRIVEHLQJDGGHGRXWVLGHWKH IUDFWLRQ w7KUHHRXWRIWKHILYHFKRLFHVKDYHLQWKHGHQRPLQDWRU w)RXUFKRLFHVDUHVHWHTXDOWR $V,DOZD\VVD\LQWKHVHVLWXDWLRQVLWߞVLPSRUWDQWWRNHHSLQPLQGWKDW - LVQߞWJXDUDQWHHGWREHULJKWMXVW EHFDXVHLWILWVWKLVFRPPRQ$&7SDWWHUQVRPHWLPHVZHߞOOILQGWKDWWKHDQVZHUFKRLFHWKDWLQFRUSRUDWHVDOO WKHPRVWFRPPRQHOHPHQWVIURPWKHVHWRIDQVZHUFKRLFHVLVDFWXDOO\WKHZURQJDQVZHU%XWDQVZHU FKRLFHVWKDWILWWKLVSDWWHUQZLOORIWHQEHFRUUHFWDQGVHHLQJWKDWDQDQVZHUFKRLFHILWVWKLVSDWWHUQFDQKHOS UHDVVXUHXVRQWHVWGD\WKDWZHߞYHWKRXJKWDERXWWKHTXHVWLRQFRUUHFWO\ :HFRXOGDOVRXVHWKHVLPLODULWLHVDQGGLIIHUHQFHVDPRQJWKHDQVZHUFKRLFHVWRKHOSXVIRFXVRXUWKLQNLQJ LIZHZHUHQߞWVXUHKRZWRDSSURDFKWKHTXHVWLRQPDWKHPDWLFDOO\%\FRPSDULQJWKHDQVZHUFKRLFHVWRRQH DQRWKHUZHFDQQRWLFHWKHUHDUHRQO\WKUHHLVVXHVWKDWQHHGWREHDGGUHVVHGLQRUGHUIRUXVWRGHWHUPLQH WKHFRUUHFWDQVZHU+HUHWKH\DUHLQQRSDUWLFXODURUGHU :KHWKHUWKHULJKWKDQGVLGHRIWKHHTXDWLRQVKRXOGEHRU :KHWKHUVVKRXOGEHRXWVLGHRIWKHIUDFWLRQRUDGGHGLQWRWKHQXPHUDWRURIWKHIUDFWLRQ :KHWKHUWKHGHQRPLQDWRURIWKHIUDFWLRQVKRXOGEHRU (YHQLIZHGRQߞWIHHOFRQILGHQWGRLQJWKHPDWKLQWKLVTXHVWLRQRQRXURZQZHFDQVWLOOWKLQNWKURXJKHDFK RIWKHVHLVVXHVLQGLYLGXDOO\WRKHOSXVILJXUHRXWZKDWWKHULJKWDQVZHUVKRXOGORRNOLNH )RUWKHILUVWLVVXHZHFDQWHOOIURPUHDGLQJWKHTXHVWLRQWKDWQRPHQWLRQLVPDGHRISHUFHQWDJHVDQGWKH TXHVWLRQVSHFLILFDOO\VD\VWKDWWKHDYHUDJHZRXOGEHߡH[DFWO\SRLQWVߢ7KDWPHDQVWKDWWKHH[SUHVVLRQ IRUWKHDYHUDJHVKRXOGEHVHWWRQRWWR$JDLQWKHIDFWWKDWWKHPDMRULW\RIDQVZHUFKRLFHVKDYH UDWKHUWKDQRQWKHULJKWKDQGVLGHRIWKHHTXDWLRQDOVRVWURQJO\UHLQIRUFHVWKHLGHDWKDWLV SUREDEO\SDUWRIWKHFRUUHFWDQVZHU :KHQZHWKLQNDERXWWKHVHFRQGLVVXHZHPLJKWZDQWWRUHDOL]HWKDWVUHSUHVHQWVWKHVFRUHRIDQRWKHUWHVW WKDWPXVWEHDYHUDJHGLIZHNQRZWKDWDYHUDJLQJLQYROYHVDGGLQJWKLQJVXSDQGWKHQGLYLGLQJWKHQZH NQRZWKDWVQHHGVWREHGLYLGHGE\VRPHWKLQJVRPHKRZ7KDWPHDQVZHߞOOZDQWWRFKRRVHDQDQVZHU FKRLFHZLWKVLQWKHQXPHUDWRUQRWRQHZLWKVE\LWVHOI7KHIDFWWKDWWKHPDMRULW\RIDQVZHUFKRLFHVKDYHV LQWKHQXPHUDWRURIWKHDYHUDJHDOVRVWURQJO\VXJJHVWVWKDWZHߞUHSUREDEO\FRUUHFWLQRXUWKLQNLQJ 7RGHFLGHZKHWKHUWKHGHQRPLQDWRULQWKHIUDFWLRQVKRXOGEHRUZHQHHGWRWKLQNDERXWZKDWWKH GHQRPLQDWRUUHSUHVHQWV,QWKLVFDVHLWߞVUHODWHGWRWKHLGHDRIDYHUDJLQJWKHVFRUHVߚVSHFLILFDOO\WKH GHQRPLQDWRUUHSUHVHQWVWKHVWDJHLQWKHDYHUDJLQJSURFHVVZKHUHZHWDNHWKHVXPDQGWKHQGLYLGHLWE\WKH QXPEHURITXDQWLWLHVWKDWZHUHDGGHG6RZHߞUHEDVLFDOO\WU\LQJWRILJXUHRXWZKHWKHUWKHVXPEHLQJ DYHUDJHGLVWKHVXPRIILYHWKLQJVRURIVL[WKLQJV,IZHORRNFDUHIXOO\DWWKHTXHVWLRQZHVHHWKDWLWߞV WDONLQJDERXWWKHDYHUDJHRIߡDOOWHVWVߢ6RZHQHHGWRGLYLGHE\<HWDJDLQZHVHHWKDWPRVWRIWKH DQVZHUFKRLFHVKDYHLQWKHGHQRPLQDWRUZKLFKVWURQJO\WHQGVWRVXSSRUWRXUFRQFOXVLRQWKDWLV FRUUHFW :KHQZHORRNDWWKHDQVZHUFKRLFHVZHVHHWKDWRQO\RQHRSWLRQLQFRUSRUDWHVDOOWKUHHRIWKHHOHPHQWV ZHߞYHGHFLGHGXSRQDQGWKDWRSWLRQLV - WKHFRUUHFWDQVZHU 6RLQWKLVODVWDSSURDFKZHߞUHLGHQWLI\LQJWKHVLPLODULWLHVDQGGLIIHUHQFHVDPRQJWKHDQVZHUFKRLFHVDQG WKHQXVLQJWKHPWRKHOSXVILJXUHRXWZKLFKLVVXHVWKHTXHVWLRQUHTXLUHVXVWRWKLQNDERXW7KHQZHVRUW WKURXJKWKRVHLVVXHVRQHDWDWLPHDQGWKHQZHORRNIRUDQDQVZHUFKRLFHWKDWLQFRUSRUDWHVWKHHOHPHQWV ZHߞYHGHFLGHGRQ7KLVFDQEHDYHU\XVHIXODSSURDFKIRUTXHVWLRQVWKDWGRQߞWPDNHVHQVHWR\RXDWILUVW EHFDXVHLWFDQKHOS\RXJDLQDPHQWDOIRRWKROGRQWKHTXHVWLRQ 1RZ,NQRZLWPLJKWVHHPOLNHZHߞYHGLVFXVVHGWKLVTXHVWLRQDORWPRUHWKDQZHQHHGHGWR%XW,UHDOO\ ZDQWWRGULYHKRPHWKHLPSRUWDQFHRILQFRUSRUDWLQJWKHDQVZHUFKRLFHVLQWR\RXUDSSURDFKWRHDFK TXHVWLRQHVSHFLDOO\ZKHQWKHTXHVWLRQVVHHPGLIILFXOWWRXQGHUVWDQGDWILUVW7KHVHNLQGVRIWHFKQLTXHVFDQ KHOS\RXILQGYHU\TXLFNVLPSOHVROXWLRQVWRTXHVWLRQVWKDWRWKHUWHVWWDNHUVZLOOVWUXJJOHZLWK7KHUHߞVD UHDVRQ,NHHSUHSHDWLQJWKHVH LGHDV 3DJH4XHVWLRQ 7KLVTXHVWLRQEDVLFDOO\DVNVDERXWVFLHQWLILFQRWDWLRQ,I\RXߞUHIDPLOLDUZLWKVFLHQWLILFQRWDWLRQ\RXFDQ WHOOSUHWW\TXLFNO\WKDWWKHFRUUHFWDQVZHULVFKRLFH % $OWHUQDWLYHO\\RXFRXOGDOVRHQWHUWKLVLQWRD FDOFXODWRUDQGWHVWWKHYDOXHIRUQIURPHDFKDQVZHUFKRLFHWRVHHZKLFKRQHUHVXOWVLQWKHFRUUHFWDQVZHU EXW\RXߞGKDYHWREHYHU\FDUHIXODERXWW\SLQJLQWKHULJKWQXPEHUVDQGWKHQEHYHU\FDUHIXODERXW DFFXUDWHO\FRXQWLQJXSWKHUHVXOWLQJ]HURHVDQGGHFLPDOSODFHV 2XWVLGHRIWKRVHWZRDSSURDFKHVWKH5HG%RRNH[SODQDWLRQRQSDJHJLYHVXVDGHFHQWH[SODQDWLRQRI WKHXQGHUO\LQJPDWKLI\RXߞUHQRWIDPLOLDUZLWKVFLHQWLILFQRWDWLRQRUGRQߞWIHHOOLNHXVLQJDFDOFXODWRU %XWWKHPDLQUHDVRQ,ZDQWWRWDONDERXWWKLVTXHVWLRQLVWKDWLWSURYLGHV\HWDQRWKHUH[DPSOHRIDTXHVWLRQ WKDWFDQEHHDVLO\PLVVHGE\VRPHRQHZKRLVQߞWSD\LQJFDUHIXODWWHQWLRQHYHQLIWKDWSHUVRQXQGHUVWDQGV WKHFRQFHSWVLQYROYHG:KHQ\RXVHHDTXHVWLRQWKDWLQYROYHVDFHUWDLQQXPEHURIGHFLPDOSODFHVRUWKDW LQYROYHVDQ\WKLQJHOVHWKDWUHTXLUHVFDUHIXOFRXQWLQJ\RXQHHGWRPDNHDEVROXWHO\FHUWDLQWKDW\RXGRQߞW PLVFRXQWߚHVSHFLDOO\ZKHQWKHDQVZHUFKRLFHVLQYROYHQXPEHUVWKDWGLIIHUE\RQHDVZHVHHLQWKLVFDVH ,WZRXOGEHYHU\YHU\HDV\WRPLVFRXQWWKHIRXUGHFLPDOSODFHVDVWKUHHGHFLPDOSODFHVDQGWKHQFKRRVH & DQGPLVVWKHTXHVWLRQIRUQRJRRGUHDVRQ,WZRXOGDOVREHSRVVLEOHWRJHWFRQIXVHGDERXWZKDWWKH TXHVWLRQLVDVNLQJDQGFKRRVHRQHRIWKHDQVZHUFKRLFHVUHODWHGWREHFDXVHWKHQXPEHUKDV VHYHQGHFLPDOSODFHV.HHSDQH\HRXWIRUWKHVHNLQGVRIWKLQJVDQGGRQߞWOHW\RXUVHOIEHIRROHG 3DJH4XHVWLRQ 7KH5HG%RRNVROXWLRQWRWKLVTXHVWLRQZKLFKDSSHDUVRQSDJHRIWKH5HG%RRNUHDGVOLNHLWZDV ZULWWHQE\DORQHO\PDWKSURIHVVRUWU\LQJWRLPSUHVVDGDWH7KHUHߞVDEVROXWHO\QRQHHGWRLQYROYHIRUPDO PDWKHPDWLFDOQRWDWLRQIRUVHTXHQFHVEHFDXVHWKLVLVMXVWDPXOWLSOHFKRLFHTXHVWLRQRQWKH$&7ߚLWߞVQRW DQDFWXDOPDWKTXHVWLRQWKDWZRXOGUHTXLUHXVWRVROYHWKHSUREOHPRQRXURZQ ,I,VDZWKLVTXHVWLRQRQWHVWGD\,ߞGDSSURDFKLWLQDPXFKVLPSOHUZD\WKDQWKH5HG%RRNGRHV7KH TXHVWLRQWHOOVXVWKDWWKHDQJOHVRIWKHWULDQJOHKDYHGHJUHHPHDVXUHVWKDWIRUPDVHTXHQFHZLWKD ߡFRPPRQGLIIHUHQFHߢRIR ,QRUGHUWRDWWDFNWKHTXHVWLRQZHQHHGWRNQRZWKDWWKHSKUDVHߡFRPPRQ GLIIHUHQFHߢUHIHUVWRWKHGLIIHUHQFHEHWZHHQDQ\WZRFRQVHFXWLYHWHUPVLQWKHVHTXHQFHߚLQRWKHUZRUGV WKHTXHVWLRQLVWHOOLQJXVWKDWWKHDQJOHVLQWKHWULDQJOHIRUPDVHULHVOLNHRRRRUPD\EHRR RRUZKDWHYHU 6RZHQHHGWRILQGDVHULHVRIWKUHHDQJOHPHDVXUHPHQWVWKDWLQFUHDVHE\RHDFKWLPHDQGDGGXSWR R7KHFRUUHFWDQVZHUZLOOEHWKHILUVWQXPEHULQWKHVHULHVEHFDXVHWKDWߞVZKDWWKHTXHVWLRQDVNVIRU 7KHHDVLHVWWKLQJWRGRKHUHLVMXVWWRJRWKURXJKHDFKDQVZHUDQGVHHLILWZRUNVDVWKHILUVWQXPEHULQD VHULHVOLNHWKDW ) GRHVQߞWZRUNEHFDXVHWKHVHULHVZRXOGEHRRRDQGWKDWDGGVXSWRREXWWKHDQJOHVRID WULDQJOHPXVWDGGXSWRR * GRHVQߞWZRUNEHFDXVHWKHVHULHVZRXOGEHRRRZKLFKDGGVXSWRRVRWKRVHWKUHHYDOXHV DOVRFDQߞWEHWKHDQJOHPHDVXUHPHQWVRIDWULDQJOH + LVWKHFRUUHFWDQVZHUEHFDXVHWKHVHULHVZRXOGEHRRRDQGWKRVHWKUHHQXPEHUVDGGXSWR R2IFRXUVHDVWUDLQHGWHVWWDNHUVZHNQRZZHKDYHWRNHHSFKHFNLQJWKHRWKHUFKRLFHV - LVZURQJEHFDXVHWKHVHTXHQFHZRXOGEHRRRZKLFKRQO\DGGVXSWRR . LVZURQJEHFDXVHWKHVHTXHQFHZRXOGEHRRRZKLFKRQO\DGGVXSWRR 5HPHPEHUWKDWZHGRQߞWKDYHWRDSSURDFK$&70DWKTXHVWLRQVWKHZD\DWHDFKHUZRXOGPDNHXV DSSURDFKWKHPLQVFKRRO,QVWHDGNHHSLQPLQGWKDWWKHPRVWHIIHFWLYHDSSURDFKHVRQWKH$&7DUHXVXDOO\ WKHOHDVWIRUPDO0DNHLWDKDELWWRILQGWKHVLPSOHVWPRVWGLUHFWVROXWLRQVDYDLODEOH 3DJH4XHVWLRQ 0DQ\XQWUDLQHGWHVWWDNHUVDFFHSWWKH$&7ߞVFODLPWKDWLWWHVWVZKDWSHRSOHOHDUQLQVFKRRO:KHQWKRVH WHVWWDNHUVVHHDTXHVWLRQOLNHWKLVWKH\DVVXPHWKH\ZHUHVXSSRVHGWRKDYHPHPRUL]HGDOLVWRISURSHUWLHV RIHYHQDQGRGGQXPEHUVEHIRUHDWWHPSWLQJWKHWHVW:KHQWKH\UHDOL]HWKDWWKH\ߞYHQHYHUPHPRUL]HGVXFK DOLVWWKH\WHQGWRSDQLFDQGZURQJO\DVVXPHWKDWWKH\FDQߞWSRVVLEO\DQVZHUWKHTXHVWLRQFRUUHFWO\ %XWZHWUDLQHGWHVWWDNHUVNQRZWKDWHYHU\$&70DWKTXHVWLRQFDQEHZRUNHGRXWXVLQJUHODWLYHO\EDVLF PDWKSULQFLSOHVDQGFDUHIXODWWHQWLRQWRGHWDLO,QVWHDGRIH[SHFWLQJWRNQRZDOOWKHSURSHUWLHVRIHYHQ QXPEHUVDQGRGGQXPEHUVEHIRUHKDQGZHNQRZWKDWZHFDQMXVWWHVWRXWHDFKDQVZHUFKRLFHDQGILJXUH RXWZKLFKRQHZRUNV6ROHWߞVGRWKDW 7KHTXHVWLRQDVNVZKLFKVWDWHPHQWߡLVWUXHߢ6LQFHZHZDQWWRNQRZZKLFKVWDWHPHQWߡLVWUXH>HPSKDVLV PLQH@ߢQRWZKLFKRQHPLJKWEHWUXHRUFRXOGEHWUXHXQGHUVSHFLDOFLUFXPVWDQFHVDOOZHKDYHWRGRLVWU\ WRFRPHXSZLWKRQHH[DPSOHWRGLVSURYHHDFKVWDWHPHQWߚLIZHFDQGLVSURYHWKHVWDWHPHQWWKHQZHFDQ HOLPLQDWHLWVDQVZHUFKRLFH7KHFRUUHFWDQVZHUZLOOKDYHDVWDWHPHQWWKDWߞVLPSRVVLEOHWRGLVSURYH/HWߞV WDNHDORRN ,QWKHLQWHUHVWRINHHSLQJWKLQJVVLPSOH,ߞGSUREDEO\VWDUWRXWE\XVLQJWKHQXPEHUVDQGIRUH[DPSOHV ZLWKRGGQXPEHUVDQGDQGIRUH[DPSOHVZLWKHYHQQXPEHUVVLQFHWKRVHDUHWKHILUVWRGGQXPEHUVDQG WKHILUVWHYHQQXPEHUV,WKRXJKWRI ) VD\VWKHVXPRIDQ\WZRHYHQQXPEHUVLVRGG%XW ZKLFKLVHYHQVRWKLVLVQߞWWUXH6R ) LV ZURQJ * VD\VWKHVXPRIDQ\WZRRGGQXPEHUVLVRGG%XW ZKLFKLVHYHQVRWKLVLVQߞWWUXH6R * LV ZURQJ + VD\VWKHTXRWLHQWRIDQ\WZRHYHQQXPEHUVLVRGG%XW ZKLFKLVHYHQVRWKLVLVQߞWWUXH6R + LVZURQJ - VD\VWKHTXRWLHQWRIDQ\WZRHYHQQXPEHUVLVHYHQ ZKLFKLVHYHQVRWKLVPLJKWEHWKHULJKW DQVZHU$VDOZD\VZKHQZHDSSURDFKDTXHVWLRQE\WU\LQJWRWHVWRXWWKHDQVZHUFKRLFHVZHKDYHWR FKHFN$//WKHDQVZHUFKRLFHVWRPDNHVXUHWKDWRQO\RQHLVYDOLGߚ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ߞOOSUREDEO\ILQGWKDWRQO\RQH RIWKHDQVZHUFKRLFHVVWLOOKROGVWUXH 6ROHWߞVGRWKDW,ߞOOSLFNDQGIRUP\QH[WSDLURIHYHQQXPEHUVDQGDQGIRUP\QH[WSDLURIRGG QXPEHUV ,IZHUHWHVW - ZHVHHWKDW ZKLFKLVQߞWHYHQDQLQWHJHUVRLWߞVQHLWKHURGGQRUHYHQߚZKLFK PHDQVLWߞVQRWHYHQDQG - FDQߞWEHWKHULJKWDQVZHU ,IZHUHWHVW . ZHVHHWKDW ZKLFKLVRGGMXVWDV . VD\V6R . VWLOOKROGVXSDQGLWPXVW EHWKHFRUUHFWDQVZHUVLQFHZHߞYHIRXQGH[DPSOHVWKDWGLVSURYHDOOWKHRWKHUDQVZHUFKRLFHV /HWWKLVVROXWLRQUHPLQG\RXRIWKHLPSRUWDQFHRIWHVWLQJ(9(5<DQVZHUFKRLFHLI\RXGHFLGHWRDSSURDFK DTXHVWLRQE\HOLPLQDWLQJDQVZHUFKRLFHV 3DJH4XHVWLRQ 7KLVLVDQRWKHU$&7TXHVWLRQZLWKDGLDJUDPWKDWVHHPVWREHWRVFDOHߚQRWLFHWKDWWKHIDWKHUߞVKHLJKW GRHVVHHPWREHDERXWELJJHUWKDQWKHVRQߞVKHLJKWDQGWKHKRUL]RQWDOOLQHZLWKDGLVWDQFHRI GRHVVHHPWREHDELWPRUHWKDQWZLFHDVORQJDVWKHOLQHUHSUHVHQWLQJWKHVRQߞVKHLJKW$VWUDLQHGWHVW WDNHUVZHNQRZWKDWVRPH$&7TXHVWLRQVZLWKVFDOHGGLDJUDPVDUHZULWWHQVRWKDWRQO\RQHRIWKHDQVZHU FKRLFHVLVUHPRWHO\SRVVLEOHLIZHMXVWH\HEDOOWKHUHODWLYHGLPHQVLRQVRIWKHILJXUH6RZHVKRXOGFKHFN WRVHHLIWKLVLVRQHRIWKRVHTXHVWLRQV 6XUHHQRXJKLWLV:HߞUHDVNHGWRILQGWKHGLVWDQFHEHWZHHQWKHWZRSHRSOHDQGZHFDQVHHWKDWWKH GLVWDQFHLVDOLWWOHELWOHVVWKDQWKHKHLJKWRIWKHVRQ6LQFHWKHVRQߞVKHLJKWLVZHQHHGDQDQVZHU FKRLFHWKDWߞVDOLWWOHELWOHVVWKDQ2QO\RQHFKRLFHLVLQWKDWUDQJHDQGLWߞVFKRLFH * 6R * PXVWEH FRUUHFW :HPLJKWEHWHPSWHGE\FKRLFH ) EXW ) FDQRQO\EHFRUUHFWLIWKHGLVWDQFHEHWZHHQWKHWZRSHRSOHLV H[DFWO\KDOIWKHKHLJKWRIWKHVRQ,IZHORRNFORVHO\ZHVHHWKHGLVWDQFHLVJUHDWHUWKDQWKDW6R ) FDQߞW EHULJKW 2IFRXUVHZHFDQDOVRDSSURDFKWKLVTXHVWLRQXVLQJDFWXDOPDWKLIZHIHHOOLNHLW)RUPRUHRQWKDWVHH WKH5HG%RRNߞVVROXWLRQRQSDJH%XWQRWLFHWKDWWKHPDWKHPDWLFDOVROXWLRQLQYROYHVILQGLQJWKH GLVWDQFHIURPWKHVRQWRWKHHQGRIWKHIDWKHUߞVVKDGRZDQGWKDWGLVWDQFHLVߚZKLFKLVRQHRIWKHZURQJ DQVZHUVFKRLFH . :HFDQHDVLO\LPDJLQHWKDWPDQ\WHVWWDNHUVZKRDSSURDFKHGWKLVTXHVWLRQZLWKWKH SURSHUPDWKPLJKWIRUJHWZKLFKGLVWDQFHWKH\ZHUHDVNHGIRUDQGFKRRVH . HYHQWKRXJKWKH\XQGHUVWRRG DOOWKHJHRPHWU\LQYROYHG$VZHߞYHVHHQPDQ\WLPHVWKHQLWFDQDFWXDOO\EHPRUHGDQJHURXVVRPHWLPHV WRDSSURDFKDQ$&70DWKTXHVWLRQXVLQJDFWXDOPDWK,IZHMXVWH\HEDOOWKHGLDJUDPDQGWDNHDGYDQWDJHRI WKHVFDOHZHߞUHOHIWWRFRQFOXGHWKDWRQO\ * FRXOGSRVVLEO\EHFRUUHFWߚEXWLIZHWU\WRDSSURDFKWKH TXHVWLRQPDWKHPDWLFDOO\ZHPLJKWDFFLGHQWDOO\JHWWULFNHGLQWRSLFNLQJFKRLFH . LIZHߞUHQRWFDUHIXO 7REHFOHDU,ߞPQRWVD\LQJWKDWLWߞVQHFHVVDULO\ZURQJWRXVHIRUPDOPDWKRQWKH$&7,I\RXXVHLW FRUUHFWO\DQGSD\VWULFWDWWHQWLRQWRZKDWߞVJRLQJRQLQHDFKTXHVWLRQ\RXFDQDQVZHUHYHU\TXHVWLRQ FRUUHFWO\RIFRXUVH,ߞPMXVWWU\LQJWRPDNHWKHSRLQWWKDWIRUPDOPDWKLVQߞWWKHRQO\ZD\WRJRDQGLV DUJXDEO\QRWWKHEHVWZD\WRJRDWOHDVWIRUVRPHTXHVWLRQV+LJKVFRULQJWHVWWDNHUVXVHWKHPRVW H[SHGLHQWDSSURDFKWKH\FDQWKLQNRIIRUHDFKTXHVWLRQWKH\UXQDFURVV 3DJH4XHVWLRQ 7KH5HG%RRNߞVVROXWLRQIRUWKLVTXHVWLRQGRHVDGHFHQWMRERIH[SODLQLQJWKHVWUDLJKWIRUZDUG PDWKHPDWLFDODSSURDFKWRWKHTXHVWLRQDVZHߞGQRUPDOO\H[SHFW7KHTXHVWLRQFDQEHDSSURDFKHGHLWKHU ZLWKWKH3\WKDJRUHDQ7KHRUHPRUZLWKWKHGLVWDQFHIRUPXOD ZKLFKLVUHDOO\MXVWDPRGLILHGYHUVLRQRIWKH 3\WKDJRUHDQ7KHRUHP %XWWKHUHߞVDQRWKHUZD\WRDSSURDFKWKLVTXHVWLRQDVLVRIWHQWKHFDVHRQWKH$&70DWKVHFWLRQ,IZH FRQVLGHUWKHDQVZHUFKRLFHVLQWKHFRQWH[WRIWKHVHWXSZHFDQWHOOSUHWW\TXLFNO\WKDWWKUHHDQVZHU FKRLFHVDUHFOHDUO\WRRVPDOORQHLVFOHDUO\WRRODUJHDQGWKHRQO\UHPDLQLQJFKRLFHPXVWEHFRUUHFW 7KHKRUL]RQWDOVHSDUDWLRQEHWZHHQWKHWZRSRLQWVLVXQLWVEHFDXVHWKH[FRRUGLQDWHRIRQHSRLQWLV DQGWKH[FRRUGLQDWHRIWKHRWKHUSRLQWLVDQGߙLV 7KHYHUWLFDOVHSDUDWLRQEHWZHHQWKHWZRSRLQWVLVXQLWVEHFDXVHWKH\FRRUGLQDWHRIRQHSRLQWLVDQG WKH\FRRUGLQDWHRIWKHRWKHUSRLQWLVDQGߙLV 7KHVWUDLJKWOLQHGLVWDQFHEHWZHHQWKHWZRSRLQWVPXVWEHOHVVWKDQWKHVXPRIWKHKRUL]RQWDODQGYHUWLFDO VHSDUDWLRQVEXWPRUHWKDQHLWKHUWKHKRUL]RQWDORUYHUWLFDOVHSDUDWLRQLWVHOI6RWKHVWUDLJKWOLQHGLVWDQFH PXVWEHELJJHUWKDQEXWVPDOOHUWKDQ ,IZHORRNDWWKHDQVZHUFKRLFHVZHFDQVHHULJKWDZD\WKDWLVWRRVPDOO EHFDXVHLWߞVOHVVWKDQ DQG LVWRRELJ EHFDXVHWKHGLVWDQFHPXVWEHOHVVWKDQVLQFH 6RWKDWJHWVULGRIFKRLFHV ' DQG ( %XWZKDWDERXWFKRLFHV $ % DQG & " ,IZHHVWLPDWHWKHYDOXHRIWKHH[SUHVVLRQLQFKRLFH $ ZHVHHLWPXVWEHEHWZHHQDQGVLQFH࠼LV DQG࠼LVDQG࠼LVEHWZHHQWKRVHWZRYDOXHV7KDWߞVWRRVPDOOVR $ PXVWEHZURQJ ,IZHHVWLPDWHWKHYDOXHRI % ZHVHHWKDWLWߞVDOVREHWZHHQDQGEHFDXVH࠼LVDOVREHWZHHQ࠼DQG ࠼6R % LVDOVRWRRVPDOO ,IZHHVWLPDWHWKHYDOXHRI & ZHVHHWKDWLWߞVEHWZHHQDQGEHFDXVH࠼LVDQG࠼LV DQG࠼LVEHWZHHQWKRVHWZRYDOXHV$YDOXHEHWZHHQDQGZRXOGEHODUJHUWKDQDQGVPDOOHU WKDQVRLWߞVWKHRQO\DQVZHUFKRLFHWKDWVDWLVILHVWKHUHTXLUHPHQWRIEHLQJORQJHUWKDQWKHLQGLYLGXDO KRUL]RQWDODQGYHUWLFDOVHSDUDWLRQVDQGVKRUWHUWKDQWKHVXPRIWKRVHWZRVHSDUDWLRQV7KDWPHDQVLWߞVWKH RQO\FKRLFHWKDWFRXOGSRVVLEO\EHFRUUHFWߚDQGLWLVWKHFRUUHFWDQVZHU 1RZOHWߞ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ߞWEHDEOHWRILQGWKHDQVZHUWRWKLVTXHVWLRQTXLFNO\ HQRXJKLIWKH\WU\WRXVHDIRUPDODSSURDFKOLNHWKHRQHUHFRPPHQGHGE\WKH5HG%RRNEHFDXVHWKH\ ZRQߞWEHDEOHWRUHYHUVHWKHSURFHVVRIDGGLQJWZRDOJHEUDLFIUDFWLRQV $QHDVLHUDSSURDFKIRUPDQ\WHVWWDNHUVZRXOGEHWRFKRRVHDQXPEHUWRSOXJLQIRU[DQGWKHQHYDOXDWH WKHRULJLQDOIUDFWLRQDQGHDFKDQVZHUFKRLFHXVLQJWKDWYDOXHIRU[:KLFKHYHUDQVZHUFKRLFHPDWFKHVWKH YDOXHRIWKHRULJLQDOIUDFWLRQPXVWEHWKHFRUUHFWDQVZHU )RUWKLVTXHVWLRQ,ZRXOGSUREDEO\FKRRVH[ EHFDXVHLVDVPDOOQXPEHUWKDWGRHVQߞWDSSHDU DQ\ZKHUHLQWKHTXHVWLRQVRLWߞVXQOLNHO\WRKDYHDQ\VSHFLDOSURSHUWLHVUHODWLYHWRWKLVTXHVWLRQ2I FRXUVHZHFRXOGFKRRVHWRUHVROYHWKHVHH[SUHVVLRQVE\GRLQJRXURZQZRUNRUZHFRXOGSOXJWKHPLQWR DFDOFXODWRU EHLQJYHU\FDUHIXODERXWQRWKLWWLQJWKHZURQJEXWWRQVRIFRXUVH ,ߞOOVKRZWKHZRUNKHUH EXWLI\RXZDQWWRXVHDFDOFXODWRULQVWHDGWKHUHߞVQRWKLQJZURQJZLWKWKDW ,IZHSOXJLQIRUWKHRULJLQDOIUDFWLRQZHJHWWKLV ,IZHSOXJ LQWRDFDOFXODWRUZHJHWߨ6RLIZHߞUHVROYLQJWKHTXHVWLRQ ZLWKDFDOFXODWRURXUJRDOZRXOGEHWRORRNIRUDQDQVZHUFKRLFHWKDWDOVRHTXDOVߨZKHQZH SOXJLQWKDW[ 1RZZHMXVWSOXJLQ[ IRUHDFKDQVZHUFKRLFHDQGVHHZKLFKRQHFRPHVRXWWRRUߨ ) GRHVQߞWZRUNEHFDXVHLVQߞWHTXDOWRRUߨ * LVZURQJEHFDXVHLWZRXOGJLYHXVZKLFKLVQߞWHTXDOWRRUߨ + LVZURQJEHFDXVHLWZRXOGJLYHXVZKLFKLVQߞWHTXDOWRRUߨ - LVZURQJEHFDXVHLWZRXOGJLYHXVRUZKLFKLVQߞWHTXDOWRRUߨ . ZRXOGJLYHXVLIZHZRUNHGLWRXWE\KDQG,VWKDWHTXDOWR"7KHUHDUHWZRZD\V ZHFRXOGILJXUHWKDWRXW2QHZD\ZRXOGEHWRUHFRJQL]HWKDWWKHOHDVWFRPPRQGHQRPLQDWRUIRUWKRVHWZR IUDFWLRQVLVDQGWKHQFRQYHUWWKHPERWKDQGDGGWKHPWRJHWKHUߚEXWZHMXVWVDLGWKDWZHߞUHWU\LQJWR DSSURDFKWKLVTXHVWLRQIURPWKHVWDQGSRLQWRIDWHVWWDNHUZKRLVQߞWFRPIRUWDEOHZLWKPDQLSXODWLQJ IUDFWLRQV6ROHWߞVWU\DQRWKHUDSSURDFK:HFRXOGFRQYHUWERWKRIWKHVHIUDFWLRQVWRGHFLPDOH[SUHVVLRQV ZLWKRXUFDOFXODWRUDQGWKHQDGGWKHPDQGFRPSDUHWKHPWRWKHGHFLPDOHTXLYDOHQWRI7KHGHFLPDO HTXLYDOHQWRILVߨ7KHGHFLPDOHTXLYDOHQWRILV,IZHDGGWKHPWRJHWKHUZH JHWߨ7KHGHFLPDOHTXLYDOHQWRILVDOVRߨ6RZHFDQWHOOWKDW . LVDFWXDOO\ HTXLYDOHQWWRWKHRULJLQDOH[SUHVVLRQZKLFKPHDQVLWߞVWKHFRUUHFWDQVZHU 2IFRXUVHLIZHߞGMXVWVWDUWHG RXWE\XVLQJDFDOFXODWRUWRHYDOXDWHWKLVDQVZHUFKRLFHZHZRXOGKDYHVHHQWKDWLWZDVHTXDOWR ߨULJKWDZD\ 7REHFOHDU,ߞPQRWVXJJHVWLQJWKDWWKHUHߞVDQ\WKLQJZURQJZLWKXVLQJIRUPDOPDWKRQWKLVTXHVWLRQRURQ DQ\$&70DWKTXHVWLRQ0\JRDOLVVLPSO\WRGHPRQVWUDWHRQFHPRUHWKDWWKH$&7ߞVPXOWLSOHFKRLFH GHVLJQDOORZVXVWRWDNHDGYDQWDJHRIQRQIRUPDOL]HGDSSURDFKHVWRDORWRIWKHTXHVWLRQVLIZHߞUHQRW FRPIRUWDEOHZLWKWKHIRUPDODSSURDFKRULIZHZRXOGQߞWEHDEOHWRGHYLVHDIRUPDODSSURDFKWRWKH TXHVWLRQLQWKHOLPLWHGWLPHSURYLGHGE\WKH$&75HPHPEHUWKDWZHFDQDOZD\VILQGDQDOWHUQDWLYH VROXWLRQWRTXHVWLRQVRQWKH$&70DWKVHFWLRQ 3DJH4XHVWLRQ 7KH5HG%RRNߞVVROXWLRQWRWKLVTXHVWLRQDSSHDUVRQSDJH,WWDNHVWKHDSSURDFKRIVXEGLYLGLQJWKH FDNHLQWRURZVDQGFROXPQVIRUDWRWDORISLHFHV7KDWDSSURDFKLVDEVROXWHO\YDOLGEXWWKHUHDUHD FRXSOHRIRWKHUPDWKHPDWLFDODSSURDFKHVZHFRXOGIROORZ,QVWHDGRIFDOFXODWLQJWKHQXPEHURIURZVDQG FROXPQVWKDWWKHSULQFLSDOFXWVWKHFDNHLQWRZHFRXOGGLYLGHWKHDUHDRIWKHWRSRIWKHFDNHE\WKHDUHDRI WKHWRSRIRQHVOLFH:HFRXOGDOVRGLYLGHWKHYROXPHRIWKHHQWLUHFDNHE\WKHYROXPHRIRQHVOLFH )RUWKHILUVWDSSURDFKZHߞ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ߞGJHWWKLV LVFKRLFH ) DQLQFRUUHFWDQVZHU . LVZKDW\RXZRXOGJHWLI\RXPLVUHDGWKHTXHVWLRQDQGWKRXJKWWKHDUHDRIHDFKVOLFHZDVLQVWHDGRI $VXVXDOZHVHHWKDWWKLV$&70DWKTXHVWLRQFDQEHDWWDFNHGLQDYDULHW\RIZD\VEXWWKH\DOOUHTXLUHXV WRSD\FDUHIXODWWHQWLRQWRGHWDLODVZHGRWKHDSSURSULDWHEDVLFFDOFXODWLRQV 3DJH4XHVWLRQ 7KH5HG%RRNߞVVROXWLRQIRUWKLVTXHVWLRQRQSDJHLVQߞWEDGEXWWKHUHDUHDFRXSOHRIRWKHU FRQVLGHUDWLRQV,ߞGOLNHWRSRLQWRXW$V\RXPLJKWKDYHJXHVVHGE\QRZWKH\KDYHWRGRZLWKWKHVHWRI DQVZHUFKRLFHVWRWKLVTXHVWLRQDQGZKDWWKRVHFKRLFHVFDQWHOOXVWUDLQHGWHVWWDNHUVDERXWWKHWKLQJVZH QHHGWRORRNRXWIRUZKHQZHFKRRVHRXUDQVZHU 7KHKLJKGHJUHHRIVLPLODULW\DPRQJWKHDQVZHUFKRLFHVLVDYHU\VWURQJVLJQDOIURPWKHWHVWWKDWZHQHHG WRPDNHVXUHZHUHDGWKHSURPSWDQGWKHDQVZHUFKRLFHVH[WUHPHO\FDUHIXOO\EHFDXVHWKH$&7FOHDUO\ WKLQNVLWFDQIRROXVLQWRPDNLQJVRPHVPDOOPLVWDNHDQGWKHQDFFLGHQWDOO\FKRRVLQJDZURQJDQVZHUWKDWߞV YHU\VLPLODUWRWKHULJKWDQVZHU$VWKH5HG%RRNH[SODLQVWKHFRUUHFWDQVZHULV * EXWZHFDQ SUREDEO\LPDJLQHWKDWPDQ\WHVWWDNHUVZLOODFFLGHQWDOO\ILQGWKHSHULPHWHURIWKHHQWLUHILJXUHLQWKH GLDJUDPZKLFKLV - 6RPHPLJKWDOVRILQGWKHSHULPHWHURIWKHTXDGULODWHUDO$=%&ZKLFKLVUHSUHVHQWHG E\FKRLFH ) (DFKRIWKHVHPLVWDNHVLVTXLWHPLQRUEXWHDFKFDQEHHDVLO\PDGHE\DWHVWWDNHUZKRߞVLQ DKXUU\RUZKRPLVUHDGVWKHTXHVWLRQDQGHDFKZLOOOHDGGLUHFWO\WRDZURQJDQVZHU:KHQDWUDLQHGWHVW WDNHUVHHVDVLWXDWLRQOLNHWKLVVKHNQRZVWREHHYHQPRUHFDUHIXOWKDQXVXDODERXWGRXEOHFKHFNLQJWKDW VKHKDVQߞ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ߞYHSUREDEO\WKRXJKWDERXWWKHTXHVWLRQFRUUHFWO\ 7KHVHPD\VHHPOLNHXQQHFHVVDU\GHWDLOVEXWWKH\ߞUHDFWXDOO\TXLWHXVHIXOWKLQJVWRQRWLFHEHFDXVHWKH\ KHOSXVPDNHVXUHZHKDYHQߞWPDGHDFDUHOHVVHUURUDQGWKURZQSRLQWVDZD\IRUQRUHDVRQ,I\RXZDQWWR PD[LPL]H\RXUVFRUHWKHVHDUHWKHNLQGVRIWKLQJV\RXKDYHWRLQFRUSRUDWHLQWR\RXUURXWLQH 3DJH4XHVWLRQ ,H[SHFWWKDWWKH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQ ZKLFKDSSHDUVRQSDJH ZLOORQO\PDNH VHQVHWRSHRSOHZKRDOUHDG\XQGHUVWDQGWKHTXHVWLRQZKLFKPHDQVLWߞVQRWDYHU\KHOSIXOH[SODQDWLRQ,I \RXߞYHHYHUVWXGLHGWKHZD\VWKDWSDUDERODVFDQEHVKLIWHGDURXQGDFRRUGLQDWHSODQHWKURXJKFKDQJHV PDGHߡLQVLGHWKHSDUHQWKHVHVߢRUߡRXWVLGHWKHSDUHQWKHVHVߢSHUKDSVLQDSUHFDOFXOXVFODVVRUDQDOJHEUD FODVVWKHQWKH5HG%RRNߞVH[SODQDWLRQPD\MRJ\RXUPHPRU\%DVLFDOO\DGGLQJDSRVLWLYHQXPEHULQVLGH WKHSDUHQWKHVHVVKLIWVWKHJUDSKWRWKHOHIWZKLOHDGGLQJDQHJDWLYHQXPEHULQVLGHWKHSDUHQWKHVHVVKLIWVLW WRWKHULJKWDGGLQJDSRVLWLYHQXPEHURXWVLGHWKHSDUHQWKHVHVVKLIWVWKHJUDSKXSZKLOHDGGLQJDQHJDWLYH QXPEHURXWVLGHWKHSDUHQWKHVHVVKLIWVWKHJUDSKGRZQ,IWKDWGRHVQߞWPDNHVHQVHWR\RXRULI\RXMXVW GRQߞWOLNHUHPHPEHULQJLWWKHUHߞVDQHDVLHUZD\WRDSSURDFKDTXHVWLRQOLNHWKLV -XVWJUDSKWKHDQVZHUFKRLFHVRQ\RXUFDOFXODWRU ,I\RXGRWKDW\RXߞOOVHHWKDWRQO\FKRLFH . UHVXOWVLQDSDUDERODZLWKDYHUWH[DW ZKLFKLVZKDW WKHTXHVWLRQDVNHGXVWRILQG6R . PXVWEHFRUUHFW 7KHUHߞVHYHQDQRWKHUZD\\RXFRXOGDSSURDFKWKLVTXHVWLRQDQGLWGRHVQߞWUHTXLUH\RXWRUHPHPEHU DQ\WKLQJVSHFLILFDOO\UHODWHGWRSDUDERODVRUWRXVHDJUDSKLQJFDOFXODWRU7KLVRWKHUNLQGRIDSSURDFK LQYROYHVWKLQNLQJDERXWWKHYHUWH[RIWKHQHZSDUDERODDQGWKHQILQGLQJDQDQVZHUFKRLFHWKDWZRXOGKDYH WKHFRUUHFWYHUWH[E\SOXJJLQJYDOXHVLQIRU[DQGFKHFNLQJWKHP/HWߞVVHHKRZWKDWZRXOGZRUN 7KHSUREOHPGHVFULEHVDJUDSKRIWKHSDUDEROD\ [,WDOVRVKRZVXVWKHJUDSKLWVHOIZLWKDYHUWH[ FOHDUO\DW 7KHQLWDVNVXVWRILQGWKHHTXDWLRQRIWKLVSDUDERODLILWZHUHPRYHGXQLWVWRWKHULJKW DQGXQLWVGRZQ ,IWKLVJUDSKZHUHPRYHGXQLWVWRWKHULJKWDQGXQLWVGRZQZKHUHZRXOGWKDWYHUWH[JR":HOOULJKW QRZLWߞVDW ,IWKH[YDOXHPRYHGWKUHHXQLWVWRWKHULJKWLWZRXOGEH,IWKH\YDOXHPRYHGXQLWV GRZQLWZRXOGEH 6RWKHQHZJUDSKPXVWKDYHDYHUWH[DW 7KDWPHDQVWKDWLIZHSOXJLQDQ[YDOXHRIWRWKHFRUUHFW HTXDWLRQZHVKRXOGJHWD\YDOXHRI/HWߞVJLYHLWDVKRWDQGVHHZKDWKDSSHQV ) LV\ [ ,IZHSOXJLQIRU[ZHJHW ZKLFKLVZKLFKLVDQGQRW 7KLVRQHFDQߞWEHULJKW * LV\ [ ,IZHSOXJLQIRU[ZHJHW ZKLFKLVZKLFKLVDQGQRW 7KLVRQHDOVRFDQߞWEHULJKW + LV\ [ ,IZHSOXJLQIRU[ZHJHW ߙ ZKLFKLVZKLFKLV:URQJDJDLQ - LV\ [ ,IZHSOXJLQIRU[ZHJHW ߙ ZKLFKLVRU7KLVLVQߞWZKDWZHߞUH ORRNLQJIRU . LV\ [ ,IZHSOXJLQIRU[ZHJHW ߙ ߙZKLFKLVߙRU7KDWPHDQVWKLV JUDSKKDVDSRLQWDW 6LQFHLWߞVWKHRQO\DQVZHUFKRLFHWKDWJRHVWKURXJK ZHNQRZWKLVPXVW EHWKHFRUUHFWDQVZHU /HWPHSRLQWRXWVRPHWKLQJYHU\LPSRUWDQWWKRXJK,WߞVLPSRUWDQWWRUHDOL]HWKDW . LVQߞWFRUUHFWMXVW EHFDXVHLWJRHVWKURXJK $QLQILQLWHQXPEHURISDUDERODVDOVRJRWKURXJKWKDWSRLQWDQGWKH\ ZRXOGQߞWDOOEHYDOLGDQVZHUVWRWKLVTXHVWLRQ,QVWHDGLWZDVMXVWWKDWWKHFRUUHFWJUDSKZRXOGKDYHWRJR WKURXJKWKDWSRLQWDQGRQO\RQHDQVZHUFKRLFHKDSSHQVWRGRWKDW6LQFHZHNQRZ . LVWKHRQO\FKRLFH WKDWVDWLVILHVDFRQGLWLRQWKDWWKHFRUUHFWDQVZHUPXVWVDWLVI\ZHNQRZWKDW . PXVWEHULJKW ,IZHKDGIRXQGWKDWPRUHWKDQRQHDQVZHUFKRLFHZHQWWKURXJKWKHSRLQW WKHQZHߞGQHHGWRWHVW DQRWKHUSRLQWDVZHOORUHOVHDWWDFNWKHTXHVWLRQLQDGLIIHUHQWZD\%XWLWWXUQHGRXWWKDWZDVQߞWQHFHVVDU\ KHUH7KH$&7FRXOGKDYHLQFOXGHGPRUHWKDQRQHDQVZHUFKRLFHZKRVHJUDSKUDQWKURXJK EXWLW GLGQߞW7KHIDFWWKDWWKH$&7UHSHDWHGO\PDNHVTXHVWLRQVYXOQHUDEOHWRWKHVHNLQGVRIDSSURDFKHVVWURQJO\ LQGLFDWHVWKDWWKHWHVWLVGHOLEHUDWHO\GHVLJQHGWRUHZDUGWUDLQHGWHVWWDNHUVZKRWKLQNFULWLFDOO\DERXWWKH EHVWZD\VWRDWWDFNHDFKTXHVWLRQ5HPHPEHUWKDW\RXDUHQߞWERXQGE\WKHOLPLWVRIIRUPDOPDWKZKHQ\RX WDNHWKH$&7HVSHFLDOO\ZKHQ\RXVHHDSUREOHPDQGDUHQߞWVXUHKRZWRVROYHLWULJKWDZD\ 3DJH4XHVWLRQ 7KLVLVDJUHDWH[DPSOHRIDQ$&70DWKTXHVWLRQWKDWEHDUVDEVROXWHO\QRVLPLODULW\WRDQ\WKLQJWKDWPRVW WHVWWDNHUVZRXOGHQFRXQWHULQKLJKVFKRRORUFROOHJH7KH$&7VRPHWLPHVOLNHVWRDVNXVDERXWWKH ORJLFDOLPSOLFDWLRQVRIFHUWDLQVWDWHPHQWV:KLOHWKHUHDUHIRUPDOUXOHVIRUWKHVHVLWXDWLRQVPRVWSHRSOH GREHWWHUZLWKWKHVHTXHVWLRQVLIWKH\MXVWJRWKURXJKHDFKVWDWHPHQWDQGHYDOXDWHLWRQLWVRZQZLWKRXW WU\LQJWRUHPHPEHUDQ\IRUPDOORJLFDOUXOHV %\WKHZD\DVWKH5HG%RRNSRLQWVRXWRQSDJHHYHU\WUXHVWDWHPHQWRIWKHIRUPߡ,I[WKHQ\ߢKDVD YDULDQWWKDWߞVDOVRWUXHDQGWDNHVWKHIRUPߡ,IQRW\WKHQQRW[ߢ7KLVVHFRQGIRUPLVFDOOHGWKH ߡFRQWUDSRVLWLYHߢRIWKHILUVWIRUP<RXGRQߞWQHHGWRNQRZWKDWUHDOO\EXWLI\RXZDQWWRWKHUHLWLV $ VD\Vߡ,IDFDWLVIHPDOHWKHQLWLVWULFRORUߢ%XWWKHRULJLQDOVWDWHPHQWGRHVQߞWVD\WKDWDOOIHPDOHFDWV KDYHWREHWULFRORULWMXVWVD\VWKDWWULFRORUVKDYHWREHIHPDOH6R\RXFRXOGKDYHDIHPDOHFDWWKDWߞVRQO\ RQHFRORUDQGLWZRXOGQߞWFRQWUDGLFWWKHRULJLQDOVWDWHPHQW6RWKLVDQVZHUFKRLFHLVZURQJ % VD\Vߡ,IDFDWLVQRWDIHPDOHWKHQLWLVWULFRORUߢ7KLVFRQWUDGLFWVWKHRULJLQDOVWDWHPHQWGLUHFWO\ EHFDXVHWKLVVWDWHPHQWGHVFULEHVDQRQIHPDOHWULFRORUFDWZKLOHWKHRULJLQDOVWDWHPHQWVD\VDWULFRORUFDW PXVWEHIHPDOH6RWKLVDQVZHUFKRLFHLVZURQJWRR & VD\Vߡ,IDFDWLVQRWDIHPDOHWKHQLWLVQRWWULFRORUߢ,QRWKHUZRUGVLI\RXNQRZDFDWLVQRWIHPDOH \RXNQRZLWPXVWQRWEHWULFRORUEHFDXVHDOOWULFRORUFDWVDUHIHPDOHDVZHDUHWROGLQWKHRULJLQDO VWDWHPHQW7KLVLVWKHFRUUHFWDQVZHU2IFRXUVHZHKDYHWRFKHFNRXWHYHU\DQVZHUFKRLFHWRKHOSPDNH VXUHZHKDYHQߞWPLVUHDGRUPLVXQGHUVWRRGDQ\WKLQJ ' VD\Vߡ,IDFDWLVQRWWULFRORUWKHQLWLVDIHPDOHߢ%XWZHDUHQߞWJLYHQDQ\LQIRUPDWLRQDERXWQRQ WULFRORUFDWVWKH\FRXOGEHPDOHRUIHPDOHZLWKRXWFRQWUDGLFWLQJWKHRULJLQDOVWDWHPHQW7KLVRQHGRHVQߞW KDYHWREHWUXHVRLWߞVZURQJ ( VD\Vߡ,IDFDWLVQRWWULFRORUWKHQLWLVQRWDIHPDOHߢ%XWWKHRULJLQDOVWDWHPHQWQHYHUVDLGWKDWQRQ WULFRORUFDWVFDQߞWEHIHPDOHLWMXVWVDLGWKDWDOOWULFRORUFDWVDUHIHPDOHV7KLVRQHGRHVQߞWKDYHWREH WUXHVRLWߞVQRWULJKW 6RZHNQRZWKDW & LVWKHFRUUHFWDQVZHU1RWLFHWKHLPSRUWDQFHRIWKHSDUWRIWKHTXHVWLRQWKDWVD\V ߡZRXOGDOVRKDYHWREHWUXH>HPSKDVLVPLQH@ߢ7KLVLVHVSHFLDOO\LPSRUWDQWLQWKLVTXHVWLRQEHFDXVHVRPH RIWKHZURQJDQVZHUVFRXOGEHWUXHEXWGRQߞWQHFHVVDULO\KDYHWREHWUXH2QO\ & KDVWREHWUXHLIWKH RULJLQDOVWDWHPHQWLVWUXH $VDOZD\VZHVHHWKHLPSRUWDQFHRIFDUHIXOUHDGLQJDQGFDUHIXOWKLQNLQJRQWKH$&70DWKVHFWLRQ 3DJH4XHVWLRQ 7KLVTXHVWLRQORRNVYHU\LQWLPLGDWLQJWRPRVWWHVWWDNHUVODUJHO\EHFDXVHLWDVNVXVWRGRVRPHWKLQJPRVW RIXVKDYHSUREDEO\QHYHUVHHQEHIRUH7KHLGHDRIDSSO\LQJDIXQFWLRQWRDSDLURIYDOXHVVHSDUDWHGE\ FRPPDVLVVRPHWKLQJWKDWPRVWKLJKVFKRRODQGFROOHJHPDWKFODVVHVGRQߞWDGGUHVV %XWDVWUDLQHGWHVWWDNHUVZHQHHGWRUHPHPEHUWKHLPSRUWDQFHRIUHDGLQJFDUHIXOO\DQGWU\LQJWRZRUN WKURXJKWKHTXHVWLRQZLWKRXWJHWWLQJRYHUZKHOPHGE\SDUWVRIWKHTXHVWLRQWKDWPLJKWVHHPRGG :HߞUHWROGWKDWI DE EߙD7KHQZHߞUHDVNHGWRILQGI [\ [ߙ\ 7KHUHDUHWZRPDLQZD\VZHFDQDSSURDFKVRPHWKLQJOLNHWKLVDVXVXDO2QHLVWRXVHDVWULFWDOJHEUDLF DSSURDFKDVWKH5HG%RRNVROXWLRQGRHVRQSDJH7KHRWKHUDSSURDFKLVVLPSO\WRSLFNDFRXSOHRI QXPEHUVIRU[DQG\DQGSOXJWKHPLQWRWKHRULJLQDOH[SUHVVLRQDQGHDFKDQVZHUFKRLFHDQGVHHZKLFK DQVZHUFKRLFHPDWFKHVWKHRULJLQDOH[SUHVVLRQDIWHUZHGRWKDW0RVWWHVWWDNHUVZKRDUHLQLWLDOO\ FRQIXVHGE\WKLVTXHVWLRQZLOOILQGWKHVHFRQGDSSURDFKHDVLHUEXWOHWߞVWDNHDORRNDWERWKVWDUWLQJZLWK WKHDOJHEUDLFDSSURDFK :HFDQVHHWKDWWKHH[SUHVVLRQFRUUHVSRQGLQJWRDLQWKHRULJLQDOIXQFWLRQZLOOEH [\ DQGWKH H[SUHVVLRQFRUUHVSRQGLQJWRELQWKHRULJLQDOIXQFWLRQZLOOEH [ߙ\ 1RZZHQHHGWRSOXJWKDWLQWREߙ D7KDWJLYHVXVWKLV [ߙ\ ߙ [\ 6ROHWߞVZRUNLWRXWDOJHEUDLFDOO\ 6RWKHFRUUHFWDQVZHULVFKRLFH . WKHH[SUHVVLRQ[\ 7KHUHDUHDQXPEHURIPLVWDNHV\RXFRXOGPDNHKHUHWKDWZRXOGOHDG\RXWRWKHRWKHUDQVZHUFKRLFHV 6RPHFRPPRQRQHVLQFOXGH)2,/LQJRXW [\ LQFRUUHFWO\DQGIDLOLQJWRGLVWULEXWHWKHQHJDWLYHVLJQWR \7KHVHW\SHVRIPLVWDNHVDUHRQHUHDVRQWKDWWKHSXUHDOJHEUDLFDSSURDFKPLJKWQRWEHWKHEHVWLGHDIRU WHVWWDNHUVZKRDUHXQFRPIRUWDEOHZLWKDOJHEUD(YHQLIZHGRIHHOFRPIRUWDEOHZLWKDOJHEUDWKRXJKLWߞV VWLOOYHU\LPSRUWDQWWRPDNHVXUHZHSURFHHGZLWKJUHDWFDXWLRQDQGGRQߞWPDNHDQ\PLVWDNHVEHFDXVHZH FDQEHVXUHWKH$&7ZLOOSRVLWLRQZURQJDQVZHUFKRLFHVWRWUDSXVLIZHGR 1RZOHWߞVWDONDERXWWKHPRUHVWUDLJKWIRUZDUGDSSURDFKZKLFKLQYROYHVFKRRVLQJQXPEHUVIRU[DQG\ DQGWKHQSOXJJLQJWKHPLQWRHDFKH[SUHVVLRQLQWKHTXHVWLRQWRVHHZKLFKDQVZHUFKRLFHKDVWKHVDPH YDOXHDVWKHRULJLQDOH[SUHVVLRQ7KLVLVDVWUDWHJ\WKDWZHFDQXVHSUHWW\IUHTXHQWO\RQWKH$&70DWK VHFWLRQDQGE\QRZ\RXߞYHVHHQXVGRLWDORWLQWKLV%ODFN%RRN 7KHTXHVWLRQGRHVQߞWSODFHDQ\UHVWULFWLRQVRQ[RU\EXWZHNQRZWKDWZHVKRXOGFKRRVHYDOXHVIRU[DQG \WKDWDUHXQOLNHO\WRH[KLELWDQ\DEQRUPDOSURSHUWLHVUHODWLYHWRWKHTXHVWLRQ7KDWXVXDOO\PHDQVDYRLGLQJ DQGDQGDQ\QXPEHUVLQWKHTXHVWLRQRUWKHDQVZHUFKRLFHV6ROHWߞVFKRRVHIRU[DQGIRU\ ,ILW WXUQVRXWWKDWZHߞYHFKRVHQEDGO\DQGPRUHWKDQRQHDQVZHUFKRLFHVHHPVWREHHTXLYDOHQWWRWKHRULJLQDO H[SUHVVLRQWKHQZHFDQMXVWUHFKRRVHDQGUHWHVWXQWLORQO\RQHFKRLFHUHPDLQVHTXLYDOHQW6RLWߞVQRWWKH HQGRIWKHZRUOGLIZHߞYHFKRVHQEDGQXPEHUVߚLWMXVWPLJKWFRVWXVVRPHH[WUDWLPH 6XEVWLWXWLQJIRU[DQGIRU\JLYHVXVWKLVIRUWKHRULJLQDOH[SUHVVLRQ 1RZZHWDNHWKHVHYDOXHVDQGSOXJWKHPLQWRWKHI DE IXQFWLRQ2XUDLVDQGRXUELV 6RI [\ [ߙ\ ZKHQ[ DQG\ 1RZZHSOXJWKRVH[DQG\YDOXHVLQWRHDFKDQVZHUFKRLFHDQGVHHZKLFKRQHUHVXOWVLQDYDOXHRI ) JLYHVXV ZKLFKLVWKHVDPHDV ZKLFKLV6RLWߞVZURQJ * LVZKLFKLVQߞWWKHVDPHWKLQJDVVRLWߞVZURQJWRR + LVMXVWWKHRSSRVLWHRI ) VRLWߞOOZRUNRXWWREHZKLFKLVQߞWWKHVDPHWKLQJDV - ZRUNVRXWWREH ZKLFKLVWKHVDPHWKLQJDVZKLFKLV6RWKLVFKRLFHLV DOVRZURQJ . LV ZKLFKLV6RZHVHHRQFHPRUHWKDW . LVFRUUHFW $VDOZD\V,ߞPQRWHQGRUVLQJRQHDSSURDFKRYHUWKHRWKHU6RPHWHVWWDNHUVZLOOSUHIHUWKHDOJHEUDLF DSSURDFKDQGVRPHZLOOSUHIHUWRSLFNQXPEHUVDQGSOXJWKHPLQWRHDFKH[SUHVVLRQ7KHLPSRUWDQWWKLQJ WRNHHSLQPLQGLVWKDWWKHPXOWLSOHFKRLFHQDWXUHRIWKH$&7RIWHQPDNHVLWSRVVLEOHWRDSSURDFKDQ$&7 0DWKTXHVWLRQLQZD\VWKDWZRXOGQߞWEHSRVVLEOHLQDPDWKFODVV.HHSWKLVLQPLQGWKHQH[WWLPHDQ$&7 0DWKTXHVWLRQKDV\RXPRPHQWDULO\VWXPSHG &RQFOXVLRQ :KHZ:HMXVWORRNHGDWDORWRITXHVWLRQVWRJHWKHU<RXߞOOQRWLFHWKDWLQDOORIWKHZRUNZHMXVWGLGWKHUH ZHUHQߞWPDQ\SDUWLFXODUO\FKDOOHQJLQJPDWKHPDWLFDOFRQFHSWVRUDGYDQFHGPDWKIRUPXODVRULQWLPLGDWLQJ FDOFXODWLRQV$OVRDQ\WULJRQRPHWU\WKDWFDPHXSDFWXDOO\HQGHGXSEHLQJIDLUO\EDVLF ,QJHQHUDOWKHKDUGSDUWRIWKHVHTXHVWLRQVZDVMXVWILJXULQJRXWZKDWWKHWHVWZDVDFWXDOO\DVNLQJXVWRGR ߚDQGWKHQPDNLQJVXUHZHFDUULHGRXWRXUVROXWLRQVLQWKHPRVWHIILFLHQWDQGHIIHFWLYHZD\VSRVVLEOH WDNLQJFDUHQRWWRPDNHVPDOOPLVWDNHV 8VLQJ7KH4XHVWLRQ([SODQDWLRQV,Q7KH5HDO$&73UHS*XLGHUG (GLWLRQ 7KH$&70DWKTXHVWLRQVROXWLRQVLQ\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG(GLWLRQZLOOW\SLFDOO\ VKRZ\RXKRZ\RXUPDWKWHDFKHUPLJKWDSSURDFKDTXHVWLRQ7KLVFDQEHVRPHZKDWKHOSIXOLQWKDWLWFDQ SRLQWRXWVRPHFRQFHSWV\RXPLJKWQHHGWRXVHZKHQVROYLQJDSUREOHPEXW\RXߞOOSUREDEO\ILQGWKDWWKH 5HG%RRNߞVH[SODQDWLRQVDUHRIWHQXQQHFHVVDULO\ORQJDQGWHFKQLFDO 7KH5HG%RRNPD\DOVRWHOO\RXZKLFKHUURUVZRXOGOHDGWRVRPHRIWKHZURQJDQVZHUFKRLFHVEXWPRVW ZURQJDQVZHUFKRLFHVZRQߞWEHIXOO\H[SODLQHG ,I\RXGRILQG\RXUVHOIFRQVXOWLQJWKH5HG%RRNߞVH[SODQDWLRQVIRULWVTXHVWLRQVWU\WRUHPHPEHUWRDOVR NHHS\RXUH\HVRSHQIRUPRUHHIILFLHQWVROXWLRQVWKDWH[SORLWWKH$&7ߞVZHDNQHVVHVOLNHWKHVROXWLRQVZH MXVWFDPHXSZLWKLQWKHVH%ODFN%RRNZDONWKURXJKV 9LGHR'HPRQVWUDWLRQV ,I\RXߞGOLNHWRVHHYLGHRVRIVRPHVDPSOHVROXWLRQVOLNHWKHRQHVLQWKLVERRNSOHDVHYLVLW ZZZ$&7SUHS9LGHRVFRPZKHUHDVHOHFWLRQRIIUHHYLGHRVLVDYDLODEOHIRUUHDGHUVRIWKLVERRN $&70DWK4XLFN6XPPDU\ 7KLVLVDRQHSDJHVXPPDU\RIWKHPDMRUUHOHYDQWFRQFHSWV8VHLWWRHYDOXDWH\RXUFRPSUHKHQVLRQRUMRJ \RXUPHPRU\)RUDPRUHLQGHSWKWUHDWPHQWRIWKHVHLGHDVVHHWKHUHVWRIWKHVHFWLRQ 7KH%LJ6HFUHW7KH$&70DWKVHFWLRQWHVWVVLPSOHPDWKLGHDVLQXQXVXDOZD\V:HQHHGWRJHWXVHGWR UHDGLQJWKHSUREOHPVFDUHIXOO\VRZHNQRZZKDWH[DFWO\ZHߞUHEHLQJDVNHGWRGR 7KHFRQFHSWVWHVWHGLQ$&70DWKTXHVWLRQVDUHOLPLWHG$OORIWKRVHFRQFHSWVFDQEHIRXQGLQWKH$&7 0DWK7RROER[LQWKLVERRN $&70DWKTXHVWLRQVFDQDOOEHGRQHLQVHFRQGVRUOHVV 2IFRXUVHWKDWGRHVQߞWPHDQ\RXߞOOEHZURQJ LI\RXWDNHORQJHU 5HPHPEHUWKDWWKHPRVWHIILFLHQWVROXWLRQVWR$&70DWKTXHVWLRQVRIWHQLQYROYHQRQ WUDGLWLRQDOWHFKQLTXHVOLNHFRQVLGHULQJWKHVFDOHRIDGLDJUDPRUSD\LQJDWWHQWLRQWRDQVZHUFKRLFHVIURP WKHEHJLQQLQJ :URQJDQVZHUFKRLFHVFRQWDLQYDOXDEOHLQIRUPDWLRQ7KH\ߞUHMXVWDVLPSRUWDQWDVDQ\RWKHUSDUWRIWKH TXHVWLRQVRUHDGWKHPFDUHIXOO\7KLQNDERXWFRQFHSWVWKH\PLJKWLQYROYHDQGKRZTXDQWLWLHVLQGLIIHUHQW DQVZHUFKRLFHVPLJKWUHODWHWRRQHDQRWKHU +HUHDUHVRPHRIWKHPRVWFRPPRQDQVZHUFKRLFHSDWWHUQV\RXߞOOVHH w$ZURQJDQVZHUFKRLFHFRQWDLQVDQߡ2Q7KH:D\ߢDQVZHUWKDWߞVLQYROYHGLQWKHVROXWLRQWRWKH SUREOHPEXWLVQߞWWKHVROXWLRQLWVHOI w$ZURQJDQVZHUFKRLFHLVWKHUHVXOWRIDQHDV\PLVWDNHDWHVWWDNHUPLJKWPDNHZKHQVROYLQJWKH SUREOHP w$ZURQJDQVZHUFKRLFHLVKDOIRUGRXEOHWKHFRUUHFWDQVZHUFKRLFH w$FRUUHFWDQVZHUFKRLFHKDVFKDUDFWHULVWLFVWKDWDUHVLPLODUWRPRVWRIWKHZURQJDQVZHUFKRLFHV w$FRUUHFWDQVZHUFKRLFHLVSDUWRIDVHULHVZLWKRWKHUDQVZHUFKRLFHV +HUHߞVDQDEEUHYLDWHGYHUVLRQRIWKHJHQHUDO$&70DWKSURFHVVRUߡ0DWK3DWKߢUHFRPPHQGHGIRUXVH DJDLQVWFKDOOHQJLQJTXHVWLRQV w:RUGV5HDGWKHTXHVWLRQFDUHIXOO\DQGFRQVLGHUWKHVSHFLILFZRUGVWKDWDUHXVHG w$QVZHU&KRLFHV5HDGDQGFRQVLGHUWKHDQVZHUFKRLFHV1RWHFRQFHSWVDQGUHODWLRQVKLSV w0DWK'RPDLQV7KLQNDERXWZKDWDUHDVRIPDWKDUHLQYROYHGEDVHGRQFKDUDFWHULVWLFVRIWKHTXHVWLRQ DQGWKHDQVZHUFKRLFHV w6SHHG7KLQNRIDVROXWLRQWRWKHSUREOHPWKDWZLOOWDNHVHFRQGVRUOHVV7KHEHVW$&70DWK VROXWLRQVDUHRIWHQXQRUWKRGR[7KH\PLJKWLQYROYHWHVWLQJWKHDQVZHUFKRLFHVJUDSKLQJVRPHWKLQJRQD FDOFXODWRUREVHUYLQJSDWWHUQVLQWKHDQVZHUFKRLFHVDQGVRRQ w6ROYH'RWKHVROXWLRQ\RXFDPHXSZLWKLQWKHSUHYLRXVVWHS w&KHFN&KHFN\RXUZRUNSUHIHUDEO\E\WU\LQJWRLGHQWLI\WKH$&7ߞVUHDVRQLQJEHKLQGWKHZURQJ DQVZHUFKRLFHV5HPHPEHUWKDWKLJKVFRUHUVFDQߞWW\SLFDOO\DYRLGDOOPLVWDNHVWKH\ߞUHMXVWDEOHWR FDWFKWKHLUPLVWDNHVDIWHUWKH\PDNHWKHP *REDFNWKURXJKWKH$&70DWKZDONWKURXJKVDQGIROORZDORQJLQ\RXUFRS\RIWKH5HG%RRNWRVHH GHPRQVWUDWLRQVRIWKHVHLGHDV $&76FLHQFH ߡ6FLHQFHLVWKHEHOLHILQWKHLJQRUDQFHRIH[SHUWVߢ 5LFKDUG)H\QPDQ 2YHUYLHZ$QG,PSRUWDQW5HPLQGHUV)RU$&76FLHQFH $ORWRISHRSOHZRUU\DERXWWKH$&76FLHQFHVHFWLRQߚWKH\WKLQNLWPDNHVWKH$&7PRUHOLNHDQ DGYDQFHGKLJKVFKRROWHVWWKDQOLNHDUHJXODUVWDQGDUGL]HGWHVWEHFDXVHWKH\WKLQNLWUHDOO\UHTXLUHVDZLGH UDQJHRIVXEMHFWPDWWHUNQRZOHGJH 7KHUHDOLW\RIFRXUVHLVYHU\GLIIHUHQW-XVWDV\RXQHHGUHODWLYHO\EDVLFUHDGLQJDQGPDWKVNLOOVWREHDW WKH$&75HDGLQJDQG$&70DWKVHFWLRQV\RXRQO\QHHGEDVLFVFLHQWLILFNQRZOHGJHIRUWKH$&76FLHQFH VHFWLRQߚDQGHYHQWKDWEDVLFOHYHORINQRZOHGJHRQO\FRPHVLQWRSOD\RQDVPDOOKDQGIXORITXHVWLRQVRQ DQ\JLYHQ$&7 W\SLFDOO\IHZHUWKDQTXHVWLRQV $OORIWKHRWKHUTXHVWLRQVRQWKHVHFWLRQ URXJKO\WR RIWKHPGHSHQGLQJRQWKHGD\ UHTXLUHRQO\FDUHIXOUHDGLQJRIWH[WFKDUWVJUDSKVDQGGLDJUDPVZLWKD OLWWOHELWRIVLPSOHPDWKRFFDVLRQDOO\WKURZQLQ ,QRWKHUZRUGVWKHYDVWPDMRULW\RI$&76FLHQFHTXHVWLRQVUHTXLUHQRVFLHQWLILFNQRZOHGJHDWDOOHYHQ WKRXJKWKH\VRPHWLPHVWDONDERXWREVFXUHDUHDVRIVFLHQFHWKH\ߞUHMXVWUHDGLQJFRPSUHKHQVLRQTXHVWLRQV WKDWLQYROYHFKDUWVJUDSKVDQGGLDJUDPV ,I\RXWKLQNDERXWLWLWZRXOGEHYHU\GLIILFXOWWRPDNHDPHDQLQJIXOVWDQGDUGL]HGVFLHQFHWHVWWKDWXVHG DQ\FKDOOHQJLQJVFLHQWLILFVXEMHFWPDWWHUEHFDXVHVWXGHQWVDOODFURVVWKHFRXQWU\WDNHGLIIHUHQWVFLHQFH FODVVHVWDXJKWE\PDQ\GLIIHUHQWWHDFKHUV6R$&76FLHQFHFDQRQO\WHVWYHU\EDVLFVFLHQWLILFVNLOOVRU NQRZOHGJHWKDWDQ\KLJKVFKRROVWXGHQWFRXOGEHH[SHFWHGWRKDYHUHJDUGOHVVRIZKLFKVSHFLILFW\SHVRI VFLHQFHFODVVHVWKDWVWXGHQWKDGWDNHQ7KDWߞVWKHRQO\ZD\WRHQVXUHWKDWDVPDQ\WHVWWDNHUVDVSRVVLEOH KDYHWKHSRWHQWLDOWRVFRUHH[WUHPHO\ZHOORQWKHVHFWLRQ 7KLVLVWKHVDPHLVVXHZHLGHQWLILHGZKHQZH GLVFXVVHGWKHGHVLJQRIWKH$&70DWKVHFWLRQ 7KH%LJ6HFUHW2I$&76FLHQFH )RUWKHODUJHPDMRULW\RIWKHTXHVWLRQVDOOWKHLQIRUPDWLRQ\RXQHHGWRDQVZHUWKHTXHVWLRQZLOOEHULJKW WKHUHRQWKHSDJHMXVWOLNHRQWKH5HDGLQJVHFWLRQ<RXߞOOVHHWKDWWKH$&7WULHVWRPL[LQDVPXFK VFLHQWLILFWHUPLQRORJ\DVLWFDQRIWHQIURPVFLHQFHVPRVWVWXGHQWVZRXOGQHYHUVWXG\LQKLJKVFKRROLQ RUGHUWRPDNH\RXSDQLFEHFDXVH\RXߞUHXQIDPLOLDUZLWKWKHPDWHULDO%XW\RXQHYHUDFWXDOO\KDYHWRNQRZ DQ\RIWKRVHWHUPVH[FHSWWRPDWFKWKHPXSZLWKSKUDVHVRQDUHODWHGFKDUWDQGRUJUDSK 7KHUHߞVHYHQPRUHWRLWWKDQWKDWWKRXJKߚEHLQJVFLHQWLILFDOO\NQRZOHGJHDEOHFDQDFWXDOO\EHKDUPIXOWR \RXUVFRUHRQWKH$&76FLHQFHVHFWLRQLQVRPHLQVWDQFHVLI\RXGRQߞWNQRZZKDWWKH$&76FLHQFH VHFWLRQDFWXDOO\UHZDUGV :K\LVWKDW" 7KHUHDVRQPRVWSHRSOHVWUXJJOHZLWKDQ\DUHDRIWKH$&7LVWKDWWKH\ߞUHDSSURDFKLQJLWWKHZURQJZD\ 7HVWWDNHUVZKRSUHSDUHIRUWKH$&70DWKVHFWLRQE\VWXG\LQJDGYDQFHGWULJZLOOKDYHWURXEOHVHHLQJWKH VLPSOHPDWKDWWKHFRUHRIDQ\$&70DWKVHFWLRQ3HRSOHZKRSUHSDUHIRU$&75HDGLQJE\UHDOO\WU\LQJ WRGHYHORSWKHLUVNLOOVLQOLWHUDU\DQDO\VLVDQGQRWHWDNLQJZRQߞ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ߚWKLQJVPRVWKLJK VFKRROVWXGHQWVQHYHUJHWWRVWXG\7KHWHVWZLOOVKRZ\RXFRPSOH[ORRNLQJGLDJUDPV\RXߞYHQHYHUVHHQ EHIRUHDQGDVNDERXWK\SRWKHWLFDOH[SHULPHQWV\RXߞYHQHYHUKHDUGRIEHIRUH 7KHJRDORIDOORIWKLVLVWRPDNH\RXWKLQNߡ2KQR,ߞYHQHYHUVWXGLHGWKLVVWXIIEHIRUH,EHWHYHU\RWKHU NLGLQWKLVURRPKDVGRQHWKLVH[SHULPHQWRUEXLOWWKLVPRGHODQG,ߞPWKHRQO\RQHZKRߞVVLWWLQJKHUH WRWDOO\ORVWIHHOLQJOLNHDQLGLRW,ߞOOQHYHUJHWLQWRFROOHJHDWWKLVUDWHߢ 7KDWPLJKWEHDVOLJKWH[DJJHUDWLRQEXWLWߞVEDVLFDOO\DQDFFXUDWHGHSLFWLRQRIZKDWJRHVWKURXJKDORWRI XQWUDLQHGWHVWWDNHUVߞPLQGV7KH$&7ZDQWV\RXWRSDQLFDQGIHHOXQSUHSDUHGDQGLWGRHVQߞ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ߞWPDWWHUEHFDXVHWKHTXHVWLRQVLQWKLVSDVVDJHGRQߞWUHTXLUH\RXWR XQGHUVWDQGZKDWWKHSODWHDXVDUHRUZK\DQ\RQHFDUHVDERXWWKHPWKHTXHVWLRQVVLPSO\UHZDUG\RXIRU UHDGLQJLQIRUPDWLRQULJKWRXWRIWKHSDVVDJH :K\6RPH3HRSOH6WUXJJOH:LWK$&76FLHQFH $WWKLVSRLQW\RXPLJKWEHZRQGHULQJZK\VRPDQ\SHRSOHVWUXJJOHZLWKWKH$&76FLHQFHVHFWLRQLILW MXVWUHTXLUHVXVWRUHDGFDUHIXOO\DQGILQGLQIRUPDWLRQLQFKDUWVDQGGLDJUDPV +HUHߞVWKHDQVZHUSHRSOHVWUXJJOHEHFDXVHWKH\ߞUHQRWXVHGWRVHHLQJXQIDPLOLDUPDWHULDORQWHVWV ,QVFKRRODWHVWFRYHUVWKHPDWHULDO\RXߞYHDOUHDG\EHHQVWXG\LQJIRUZHHNV2QWKH$&7\RXߞOOEHDVNHG TXHVWLRQVDERXWDOONLQGVRIVFLHQWLILFDUHDV\RXߞYHQHYHUVWXGLHGEHIRUHDQGPD\EHQHYHUHYHQKHDUGRI ߚHFRORJ\DVWURQRP\QXFOHDUFKHPLVWU\PHWHRURORJ\DQGZKRNQRZVZKDWHOVH0RVWXQWUDLQHGWHVW WDNHUVVHHWKHVHXQIDPLOLDUWRSLFVDQGDVVXPHWKH\ߞUHXQSUHSDUHGIRUWKH$&76FLHQFHVHFWLRQ %XWDJDLQWKH$&76FLHQFHVHFWLRQGRHVQߞWH[SHFWWKHDYHUDJHKLJKVFKRROVHQLRUWREHDQH[SHUWLQ HFRORJ\DVWURQRP\QXFOHDUFKHPLVWU\PHWHRURORJ\RUDQ\RWKHUVFLHQWLILFVSHFLDOL]DWLRQ7KHPDWHULDO \RXQHHGWRDQVZHUWKHTXHVWLRQVZLOOEHULJKWLQIURQWRI\RXHYHQLILWXVHVWHUPVDQGXQLWV\RXߞYH QHYHUVHHQEHIRUH/HWߞVWDONDERXWWKDW 'HDOLQJZLWKVWUDQJHWHUPVDQGXQLWV <RXPXVWUHPHPEHUWKDWDQ\QHZFRQFHSW\RXHQFRXQWHURQWKH$&76FLHQFHVHFWLRQZLOOIDOOLQWRRQHRI WKUHHJURXSV ,WZLOOEHH[SODLQHGLQWKHWH[W ,WZRQߞWEHH[SODLQHGDQGLWZRQߞWEHUHOHYDQWWRDQVZHULQJDQ\RIWKHTXHVWLRQV ,WZRQߞWEHH[SODLQHGEXW\RXߞOOEHDEOHWRPDWFKDFRQFHSWLQDTXHVWLRQZLWKWKHVDPHFRQFHSW VRPHZKHUHLQWKHSDVVDJHOLNHRQDFKDUWRUDJUDSK 7KHILUVWWZRVLWXDWLRQVDUHSUREDEO\FOHDUHQRXJKEXWOHWߞVHODERUDWHRQWKHWKLUGRQHIRUDPRPHQWߚWKH LGHDWKDWDFRQFHSWPLJKWQRWUHDOO\EHH[SODLQHGEXWWKDW\RXFDQVWLOOZRUNDURXQGLWE\PDWFKLQJXSD FRQFHSWLQDTXHVWLRQZLWKWKHVDPHFRQFHSWLQDFKDUWRUVRPHWKLQJ ,PDJLQHZHVHHWKLVLPDJLQDU\TXHVWLRQRQWKH$&7 ߡ$FFRUGLQJWR7DEOHZKLFKJURXSKDVWKHPRVWEODUJJURXSLQJV"ߢ 2IFRXUVHWKDWߞVQRWDUHDO$&7TXHVWLRQ7KHZRUOGLVQߞWUHDG\WROHDUQWKHWUXWKDERXWEODUJJURXSLQJV :HGRQߞWNQRZZKDWEODUJJURXSLQJVDUH%XWWKHQZHQRWLFHWKDW7DEOHKDVWKLVLQIRUPDWLRQ 7KHDQVZHUWRWKHPDGHXSTXHVWLRQZRXOGEH*URXS'EHFDXVHWKHWDEOHVKRZVWKDW*URXS'KDV EODUJJURXSLQJVZKLFKLVPRUHWKDQDQ\RWKHUJURXS 6RWKHTXHVWLRQLVDFWXDOO\YHU\VWUDLJKWIRUZDUGLIZHMXVWLJQRUHWKHIDFWWKDWZHGRQߞWNQRZZKDWEODUJV DUH(YHQWKRXJK\RXߞYHQHYHUKHDUGWKHWHUPߡEODUJߢEHIRUHLQ\RXUOLIHDQGHYHQWKRXJK\RXߞOOSUREDEO\ QHYHUKHDULWDJDLQWKHDQVZHULVFRPSOHWHO\FOHDUEDVHGRQWKHLQIRUPDWLRQLQIURQWRI\RX 2QWKH6FLHQFHVHFWLRQRIWKH$&7\RXZLOOGHILQLWHO\KDYHWRGHDOZLWKFRQFHSWV\RXߞYHQHYHUKHDUGRI EHIRUH([SHFWLW:HOFRPHLW7KHLPSRUWDQWWKLQJLVQߞWWRNQRZDORWRIVFLHQFHLQDGYDQFHWKHLPSRUWDQW WKLQJLVMXVWWRJHWXVHGWRUHDGLQJFDUHIXOO\DQGILQGLQJWKHUHOHYDQWSDUWVRIWH[WVFKDUWVJUDSKVDQG ILJXUHV,QWKHQH[WSDJHVZHߞOOOHDUQPRUHDERXWKRZWRGRWKDWDQGWKHQZHߞOOVHHH[DPSOHVRILWLQ DFWLRQZKHQZHGRRXUZDONWKURXJKV 8QZULWWHQ7HVW'HVLJQ5XOHV2I$&76FLHQFH %\QRZLWVKRXOGEHFOHDUWKDWWKH$&76FLHQFHVHFWLRQKDVOLWWOHLQFRPPRQZLWKWKHNLQGRIVFLHQFHWHVWV \RXPLJKWWDNHLQDQRUPDOKLJKVFKRROFODVV7KHPDMRULW\RIWKLVVHFWLRQRIWKHWHVWFRPHVGRZQWREHLQJ DEOHWRUHDGTXHVWLRQVFDUHIXOO\WKHQEHLQJDEOHWRILQGWKHLQIRUPDWLRQ\RXQHHGWRDQVZHUTXHVWLRQVLQ WKHWH[WFKDUWVJUDSKVDQGVRRQWKDWPDNHXSWKHSDVVDJH\RXߞUHZRUNLQJRQ 7KHVHDUHWKHUXOHV\RXQHHGWRUHPHPEHUDV\RXWUDLQIRUWKH$&76FLHQFHVHFWLRQ $&76FLHQFH5XOH(YHU\3DUW2I7KH$QVZHU,V$OPRVW$OZD\V2Q 7KH3DJH,Q)URQW2I<RX (DFK$&76FLHQFHVHFWLRQZLOOKDYHDSSUR[LPDWHO\TXHVWLRQV RUIHZHU WKDWWHVWDFWXDOVFLHQWLILF NQRZOHGJH 7KDWNQRZOHGJHLVDOZD\VUHODWLYHO\EDVLFE\WKHZD\ߚZHߞOOWDONDERXWWKDWLQDOLWWOHELW )RUWKHUHVWRIWKHTXHVWLRQVHYHU\WKLQJ\RXQHHGWRILQGWKHDQVZHUZLOOEHRQWKHSDJHLQIURQWRI\RX ߚHLWKHULQWKHWH[WLQDFKDUWRUJUDSKRUGLDJUDPRUHYHQLQWKHTXHVWLRQLWVHOI RULQVRPHFRPELQDWLRQ RIWKRVHWKLQJV 7KH$&7QHYHUUHTXLUHV\RXWRNQRZDERXWREVFXUHEUDQFKHVRIVFLHQFHWKHQHFHVVDU\LQIRUPDWLRQ UHODWHGWRWKRVHEUDQFKHVRIVFLHQFHZLOODOZD\VEHVRPHZKHUHRQWKHSDJH $&76FLHQFH5XOH/DEHOV$UH,PSRUWDQW <RXߞOORIWHQQHHGWRILQGLQIRUPDWLRQRQDFKDUWJUDSKRUWDEOH*HWXVHGWRLGHQWLI\LQJWKHODEHOVRQWKHVH NLQGVRIILJXUHVDQGPDWFKLQJWKHPXSWRWKHZRUGVDQGSKUDVHVLQWKHTXHVWLRQDQGDQVZHUFKRLFHVWRILQG WKHLQIRUPDWLRQ\RXQHHG/RRNIRUODEHOVRQWKHWRSERWWRPOHIWDQGULJKWVLGHVRIJUDSKVDQGGLDJUDPV DVZHOODVZLWKLQWKHJUDSKVDQGGLDJUDPVWKHPVHOYHV:HߞOOVHHH[DPSOHVRIWKLVWKURXJKRXWWKH ZDONWKURXJKVLQDIHZSDJHV 7KLVPLJKWVRXQGOLNHDYHU\REYLRXVSLHFHRIDGYLFHEXW\RXߞGEH VXUSULVHGKRZRIWHQWHVWWDNHUVPLVWDNHQO\WKLQNWKH\FDQߞWDQVZHUDTXHVWLRQEHFDXVHWKH\IDLOHGWRORFDWH DODEHORQDQD[LVRIDJUDSKRUVRPHWKLQJ $&76FLHQFH5XOH%H6XUH7R8VH7KH5LJKW'DWD 0RVWTXHVWLRQVZLOOUHTXLUH\RXWRORRNVRPHZKHUHLQWKHSDVVDJHIRUVRPHNLQGRILQIRUPDWLRQ0DNH VXUH\RXߞUHORRNLQJLQWKHULJKWSODFH7KHUHPD\EHPRUHWKDQRQHH[SHULPHQWRUWDEOHRUFKDUWRU JUDSKLQDJLYHQSDVVDJHDQGWKH\RIWHQXVHVLPLODU RUHYHQLGHQWLFDO ODEHOVIRUWKHLUGDWD 6RZKHQ\RXUHIHUEDFNWRDILJXUHRUWDEOHLQWKHSDVVDJHPDNHVXUHWKHRQH\RXFKHFNLVDFWXDOO\WKHRQH WKHTXHVWLRQLVDVNLQJDERXW$JDLQ,NQRZWKLVPLJKWVRXQGNLQGRIREYLRXVEXWZHKDYHWRUHPHPEHU WKDWRQHRIWKH$&7ߞVPRVWHIIHFWLYHWDFWLFVRQDQ\VHFWLRQLVWRJLYHXQWUDLQHGWHVWWDNHUVWKHRSSRUWXQLW\ WRPDNHVPDOOVLPSOHPLVWDNHV$VWUDLQHGWHVWWDNHUVZHKDYHWRPDNHRXUVHOYHVORRNRXWIRUWKRVH VPDOOPLVWDNHVDWDOOWLPHV2QWKH6FLHQFHVHFWLRQDFFLGHQWDOO\ORRNLQJDWWKHZURQJSLHFHRIGDWDLVRQH RIWKHHDVLHVWZD\VWRIDOOIRUDZURQJDQVZHU $&76FLHQFH5XOH'RQߞW*HW,QWLPLGDWHG%\9RFDEXODU\ 7KH$&7ORYHVWRWU\WRLQWLPLGDWHXQWUDLQHGWHVWWDNHUVZLWKVFLHQWLILFYRFDEXODU\WKDWVRXQGVDGYDQFHG 7KLQNDERXWLW,QVFKRRODQ\WLPHZHVHHDVWUDQJHZRUGLQDVFLHQFHFODVVZHKDYHDWHDFKHUWKHUHWR WHOOXVZKDWLWPHDQV:HDUHQߞWXVHGWRUHDGLQJDVWUDQJHVFLHQWLILFWHUPDQGKDYLQJWRILJXUHLWRXWRQRXU RZQRUMXVWZRUNDURXQGLW7KH$&7NQRZVWKLVDQGLWZLOOLQWHQWLRQDOO\PDNHYHU\VWUDLJKWIRUZDUG TXHVWLRQVVHHPLQWLPLGDWLQJVLPSO\E\VWLFNLQJLQVFDU\XQIDPLOLDUZRUGVDQGSKUDVHVOLNHߡVWUDWRSDXVHߢ DQGߡIORRGEDVDOWSODWHDXߢ 'RQߞWOHWWKLVWKURZ\RX5HPHPEHURXUK\SRWKHWLFDOGLVFXVVLRQRIEODUJJURXSLQJVIURPDFRXSOHRISDJHV DJR,QWKHZDONWKURXJKV\RXߞOOVHHVHYHUDOH[DPSOHVRIHIIHFWLYHVROXWLRQVWR$&76FLHQFHTXHVWLRQVWKDW LQYROYHZRUNLQJDURXQGXQNQRZQWHUPVDQGFRQFHSWV $&76FLHQFH5XOH<RXߞOO1HHG7R.QRZ%$6,&6FLHQFH$)HZ 7LPHV3HU7HVW 7KHUHZLOOEHDIHZWLPHVSHUWHVWZKHQDFWXDOVFLHQWLILFNQRZOHGJHZLOOFRPHLQWRSOD\7KLVFRXOG KDSSHQDVPDQ\DVIRXURUILYHWLPHVLQWKHZKROHTXHVWLRQVHFWLRQEXWSUREDEO\RQHWRWKUHHWLPHV 7KLVVFLHQWLILFNQRZOHGJHZLOOEHYHU\EDVLFߚVRPHWKLQJOLNHNQRZLQJZKLFKHOHPHQWVZDWHULVPDGHXS RIRUZKHUHDFHOOPHPEUDQHLVORFDWHG WKHDQVZHUVDUHߡK\GURJHQDQGR[\JHQߢDQGߡRQWKHRXWVLGHRID FHOOߢUHVSHFWLYHO\ %XWWKHVHTXHVWLRQVRIWHQZRQߞWVHHPVREDVLFRQWKHVXUIDFH7KH$&7ZLOOWU\WRGUHVVWKHPXSLQ FRPSOLFDWHGVHQWHQFHVWRPDNHWKHPVRXQGPRUHDGYDQFHGDQGVSHFLDOL]HGWKDQWKH\UHDOO\DUH:HߞOOWDON DERXWWKLVLQPRUHGHWDLOODWHUDQG\RXߞOOVHHDIHZH[DPSOHVLQWKH$&76FLHQFHZDONWKURXJKV $QGUHPHPEHUߚHYHQLI\RXVRPHKRZPHVVXSHYHU\VLQJOHRQHRIWKHVHEDVLFNQRZOHGJHTXHVWLRQV\RX FDQW\SLFDOO\VWLOOVFRUHDERYHDRQWKH6FLHQFHVHFWLRQGHSHQGLQJRQWKHGD\LI\RXSLFNXSDOOWKH TXHVWLRQVWKDWGRQߞWUHTXLUHDQ\RXWVLGHNQRZOHGJH ,QIDFW\RXFDQRIWHQVFRUHDRURQWKH6FLHQFH VHFWLRQLI\RXPLVVHYHU\EDVLFNQRZOHGJHTXHVWLRQEXWJHWDOOWKHRWKHUTXHVWLRQVULJKW +RZ7R5HDG3DVVDJHV2Q7KH$&76FLHQFH6HFWLRQ -XVWDVDORWRISHRSOHDVNDERXWWKHEHVWZD\WRUHDG$&75HDGLQJSDVVDJHVDORWRISHRSOHDVNDERXWWKH EHVWZD\WRUHDG$&76FLHQFHSDVVDJHVߚDQGWKHDQVZHULVEDVLFDOO\WKHVDPH7KHUHߞVQRVLQJOHߡEHVWߢ ZD\WRGRWKLV7KHUHDUHWKUHHEDVLFZD\VWRDSSURDFKLWDQG\RXVKRXOGWU\HDFKRQHLQSUDFWLFHWRVHH ZKDWZRUNVEHVWIRU\RX 2SWLRQ5HDGWKHZKROHSDVVDJHILUVW 7KLVLVSUREDEO\WKHPRVWSRSXODUDSSURDFKZLWKXQWUDLQHGWHVWWDNHUV,QWKLVPHWKRG\RXMXVWUHDGWKH HQWLUHSDVVDJHEHIRUHORRNLQJDWWKHTXHVWLRQV:KHQ\RXJHWWRDQ\WDEOHVRUILJXUHV\RXGRQߞWQHHGWR UHDGDOORIWKHYDOXHVEXW\RXVKRXOGWDNHQRWHRIDQ\ODEHOVRQD[HVKHDGLQJVRQFROXPQVDQGVRRQ 7KLVZD\\RXߞOONQRZZKLFKSDUWVRIWKHSDVVDJHWRUHIHUEDFNWRZKHQDTXHVWLRQDVNVDERXWDVSHFLILF W\SHRIGDWD 'RQߞWERWKHUWU\LQJWRJUDVSHYHU\WKLQJ\RXUHDGLI\RXWDNHWKLVDSSURDFK7KHSRLQWLVQߞWWRXQGHUVWDQG HYHU\WKLQJWKDWߞVJRLQJRQLQWKHSDVVDJHߚWKHSRLQWLVMXVWWRVHHJHQHUDOO\ZKLFKSDUWVRIWKHSDVVDJHWDON DERXWSDUWLFXODUFRQFHSWVVR\RXߞOONQRZZKHUHWRORRNLQPRUHGHWDLOZKHQDTXHVWLRQDVNVDERXWWKRVH FRQFHSWV 2SWLRQ6NLSWKHSDVVDJHDQGJRULJKWWRWKHTXHVWLRQV ,QWKLVPHWKRG\RXGRQߞWHYHQORRNDWWKHSDVVDJHILUVW\RXMXVWVWDUWLQZLWKWKHILUVWTXHVWLRQ7KLV PHWKRGLVDOLWWOHHDVLHUZLWK$&76FLHQFHSDVVDJHVWKDQLWLVZLWK$&75HDGLQJSDVVDJHVEHFDXVH$&7 6FLHQFHTXHVWLRQVWHQGWRUHIHUWRVSHFLILFSDUWVRIWKHSDVVDJHPRUHFOHDUO\ )RUH[DPSOHLPDJLQHWKDWDTXHVWLRQVD\VVRPHWKLQJOLNHߡ,Q)LJXUHZKDWZDVWKHUHJURPLQDWLRQLQGH[ RIWKDSSHQWRQLXP"ߢ ,NQRZWKDWߡUHJURPLQDWLRQߢDQGߡWKDSSHQWRQLXPߢDUHQߞWDFWXDOO\ZRUGV,ߞPXVLQJ WKHPLQP\LPDJLQDU\TXHVWLRQWRGHPRQVWUDWHRQFHPRUHKRZZHFDQRIWHQZRUNDURXQGXQNQRZQZRUGV RQWKH$&76FLHQFHVHFWLRQ 7RDQVZHUWKLVLPDJLQDU\TXHVWLRQZLWKRXWUHDGLQJWKHSDVVDJHILUVWZHߞG MXVWILQG)LJXUHILQGDFROXPQZLWKDODEHOOLNHߡ5HJURPLQDWLRQ,QGH[ߢDQGWKHQORFDWHWKHYDOXHIRU WKDSSHQWRQLXP$WQRSRLQWLQWKDWSURFHVVZRXOGZHQHHGWRNQRZDQ\WKLQJDERXWWKHUHVWRIWKHSDVVDJH 7KHQZHFRXOGMXVWUHSHDWWKHSURFHVVZLWKWKHQH[WTXHVWLRQߚZHߞGLGHQWLI\WKHNH\WHUPVDQGYDOXHVLQ WKHTXHVWLRQDQGWKHQORFDWHWKRVHWHUPVDQGRUYDOXHVLQWKHSDVVDJHDQGILQGWKHDQVZHU <RXߞOOVHHVHYHUDOH[DPSOHVRIWKLVLGHDLQWKHZDONWKURXJKV 6RPHSHRSOHILQGWKLVDSSURDFKKHOSIXOEHFDXVHWKH\FDQMXVWIRFXVRQWKHUHOHYDQWSDUWRIHDFKSDVVDJH ZLWKDJLYHQTXHVWLRQLQPLQGRWKHUSHRSOHMXVWILQGWKLVWHFKQLTXHFRQIXVLQJEHFDXVHLWPHDQVVNLSSLQJ DURXQGLQWKHSDVVDJH7U\LWRXWDQGVHHKRZLWZRUNVIRU\RX 2SWLRQ6NLPWKHSDVVDJHWKHQUHDGWKHTXHVWLRQV 7KLVPHWKRGFRPELQHVWKHSUHYLRXVWZRPHWKRGVDQGLWߞVWKHRQH,JHQHUDOO\SUHIHU WKRXJKDJDLQ\RX VKRXOGJLYHHDFKRQHDVKRWDQGVHHZKLFKRQH\RXSHUVRQDOO\OLNHEHVW ,QWKLVPHWKRGZHߞUHJRLQJWR VWDUWRXWE\TXLFNO\VNLPPLQJWKHSDVVDJH7DNHQRWHRIDQ\XQXVXDOWHFKQLFDOWHUPVIRUPXODVRU LWDOLFL]HGSKUDVHV*ODQFHDWDQ\ILJXUHVUHDGWKHODEHOVRQFKDUWVDQGJUDSKVDQGVRRQ,QMXVWDPLQXWH RUVR\RXFDQKDYHDUHDVRQDEOHLGHDRIZKHUHGLIIHUHQWSLHFHVRILQIRUPDWLRQDUHLQWKHSDVVDJH 7KHQ\RXߞOOEHLQDEHWWHUSRVLWLRQWRILQGWKHUHOHYDQWLQIRUPDWLRQLQWKHSDVVDJHDIWHU\RXߞYHUHDGDQ LQGLYLGXDOTXHVWLRQHYHQWKRXJK\RXRQO\LQYHVWHGDPLQLPDODPRXQWRIWLPHVNLPPLQJEHIRUHKDQG &RQFOXVLRQ $V,VDLGWKLVLVEDVLFDOO\WKHVDPHDVUHDGLQJSDVVDJHVIRU$&75HDGLQJH[FHSWWKDW$&76FLHQFH SDVVDJHVFDQLQFOXGHFKDUWVJUDSKVDQGVRRQDQGWKH6FLHQFHTXHVWLRQVZLOOWHQGWRGLUHFW\RXPRUH VSHFLILFDOO\WRWKHUHOHYDQWDUHDVRIWKHSDVVDJH-XVWWU\RXWWKHGLIIHUHQWPHWKRGVDQGVHHZKDW\RXSUHIHU 8VLQJ6LPSOH7UHQGV7R0DNH3UHGLFWLRQV 2QWKH$&76FLHQFHVHFWLRQ\RXߞOORFFDVLRQDOO\QHHGWRPDNHVLPSOHSUHGLFWLRQVEDVHGRQFOHDUWUHQGV LQGDWDIURPWKHSDVVDJH7KDWGDWDPLJKWEHIRXQGLQDFKDUWJUDSKWDEOHGLDJUDPߚEDVLFDOO\DQ\WKLQJ ZLWKQXPEHUV 7KHSUHGLFWLRQVZLOOHVVHQWLDOO\UHTXLUH\RXWRGHWHUPLQHZKHWKHUDQXPEHUVKRXOGEHJUHDWHUWKDQRUOHVV WKDQDQXPEHUDOUHDG\LQWKHGDWDRUEHWZHHQWZRQXPEHUVDOUHDG\LQWKHGDWD 7KHEHVWZD\WRGLVFXVVWKLVLVWRXVHDUHDOH[DPSOHIURPWKH5HG%RRN/HW VORRNDWTXHVWLRQRQSDJH $VDOZD\VZHZDQWWRILJXUHRXWZKHUHZHQHHGWRORRNLQWKHSDVVDJHEDVHGRQWKHSKUDVHVLQWKH TXHVWLRQ7KHTXHVWLRQPHQWLRQVߡ7DEOHRU)LJXUHߢ6LQFHLWVD\VߡRUߢZHFDQORRNDWHLWKHURQH /HW VVWDUWRXWE\ORRNLQJDW7DEOH 7KHUHߞVQRSDUWLFXODUUHDVRQ,FKRVHWRORRNDW7DEOHLQVWHDGRI )LJXUH,MXVWKDGWRSLFNRQHWRORRNDWILUVWVR,SLFNHGRQH 7KHTXHVWLRQDOVRPHQWLRQVDQߡLQLWLDOVSHHGRIPLKUߢ:HFDQVHHWKDWWKHILUVWFROXPQRI7DEOHLV ODEHOHGߡ,QLWLDOVSHHG PLKU ߢ6RIDUVRJRRG1H[WWKHTXHVWLRQDVNVXVZKDW'ZLOOEHߡDFFRUGLQJWR 0HWKRGߢ:HFDQVHHWKDWWKHODVWFROXPQLQ7DEOHKDVWZRODEHOVߡ0HWKRGߢDQGߡ'ߢ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ߞWLQFOXGHYDOXHVOLNHIWDQGIWߚWKDWLVYDOXHVWKDWZRXOGERWK VHHPOLNHUHDVRQDEOHHVWLPDWHVRIZKDW'PLJKWEHIRUDQLQLWLDOVSHHGRIPLKU,IWKHDQVZHUFKRLFHV KDGLQFOXGHGYDOXHVOLNHWKDWWKHUHZRXOGKDYHEHHQQRZD\IRUXVWRPDNHDGLVWLQFWLRQEHWZHHQWKHP DQGGHFLGHZKLFKRQHZDVULJKW,QVWHDGWKH$&7KDGWRJLYHXVEURDGUDQJHVDQGLWZDVRXUMREWR LGHQWLI\WKHUDQJHWKDWZRXOGFOHDUO\LQFOXGHWKHYDOXHZHZHUHORRNLQJIRU:KHQHYHU\RXVHHDTXHVWLRQ OLNHWKLVWKHUHZLOOEHRQO\RQHFOHDUO\FRUUHFWDQVZHUFKRLFHVXSSRUWHGE\WKHGDWDߚMXVWOLNHWKHUHLVRQ DQ\RWKHUUHDO$&76FLHQFHTXHVWLRQ ,QWKLVTXHVWLRQZHZHUHDVNHGDERXWDQLQLWLDOVSHHGWKDWZDVJUHDWHUWKDQDQ\VKRZQLQWKHWDEOHRU JUDSK2QDQRWKHUTXHVWLRQZHPLJKWEHDVNHGDERXWDYDOXHWKDWߞVOHVVWKDQDQ\YDOXHLQDJLYHQWDEOHRU JUDSKߚWKHVDPHSULQFLSOHZRXOGDSSO\DQGZHZRXOGMXVWDQVZHUEDVHGRQDFOHDUWUHQGLQWKHGDWD ,W VDOVRSRVVLEOHIRUWKH$&7WRDVNXVDERXWDYDOXHWKDWIDOOVEHWZHHQWZRRIWKHYDOXHVSURYLGHGLQWKH GDWD)RUH[DPSOHZKDWLIWKLVTXHVWLRQKDGWROGXVWRORRNDW7DEOHDQGDVNHGXVZKDW'ZRXOGEHIRU DQLQLWLDOVSHHGRIPLKUDFFRUGLQJWR0HWKRG" :HOOPLKULVQ WLQWKHWDEOHEXWZHFDQVHHDYDOXHIRUPLKUDQGDYDOXHIRUPLKU%DVHGRQWKH WUHQGRIWKH'YDOXHLQFUHDVLQJDVLQLWLDOVSHHGLQFUHDVHVZHFDQVHHWKDWWKH'YDOXHIRUPLKUZRXOG EHEHWZHHQWKH'YDOXHVIRUPLKUDQGIRUPLKUVLQFHPLKULVEHWZHHQPLKUDQGPLKU 6RWKHFRUUHFWDQVZHUWRWKDWNLQGRITXHVWLRQPLJKWKDYHEHHQVRPHWKLQJOLNHߡEHWZHHQIWDQGIWߢ $JDLQLIZHVDZDTXHVWLRQOLNHWKLVEDVHGRQDWUHQGLQWKHGDWDZHZRXOGQ WVHHDQVZHUFKRLFHVOLNH IWIWDQGIWEHFDXVHWKHUHZRXOGQߞWEHHQRXJKGDWDSURYLGHGLQWKHWDEOHWRDOORZXVWR GHWHUPLQHDSUHFLVHYDOXHDVWKHFRUUHFWDQVZHU7KHWHVWZRXOGKDYHWRJLYHXVUDQJHVRIYDOXHVWR FKRRVHIURPVRWKHUHFRXOGRQO\EHRQHDQVZHUFKRLFHWKDWFRXOGSRVVLEO\EHFRUUHFWEDVHGRQWKH LQIRUPDWLRQLQWKHSDVVDJH 7KLVLVDQLPSRUWDQWFRQFHSWRQWKH$&76FLHQFHVHFWLRQDQG\RXߞOOGHILQLWHO\VHHLWRQWHVWGD\ $&76FLHQFH4XHVWLRQ7\SHV ,OLNHWRWKLQNRIWKH$&76FLHQFHVHFWLRQLQWHUPVRIIRXUPDLQTXHVWLRQW\SHVDQGRQHPLQRUTXHVWLRQ W\SH,ߞPQRWDGYLVLQJ\RXWRWDNHWKHWLPHWRFODVVLI\HDFKTXHVWLRQEHIRUH\RXGRLWVLQFHWKHEDVLF DSSURDFKWRHDFKW\SHZLOOVWLOOEHWKHVDPH,ߞPMXVWEUHDNLQJWKHPLQWRJURXSVOLNHWKLVVRZHFDQGLVFXVV ZKDWNLQGVRITXHVWLRQV\RXVKRXOGH[SHFWWRVHHRQWKLVVHFWLRQRIWKHWHVW /HWߞVWDNHDORRN ߡ3XUH'DWDߢ 0DQ\RIWKHTXHVWLRQV\RXߞOOVHHZLOOEHZKDW,FDOOߡ3XUH'DWDߢTXHVWLRQV7KHVHTXHVWLRQVDUHH[DFWO\ ZKDWWKH\VRXQGOLNHߚWKH\DVN\RXDUHODWLYHO\VLPSOHVWUDLJKWIRUZDUGTXHVWLRQDERXWWKHSURYLGHGGDWD DQG\RXߞOOQHHGWRUHDGWKHGDWDDFFXUDWHO\DQGFKRRVHWKHDSSURSULDWHDQVZHU 7KLVSURFHVVLVHVVHQWLDOO\WKHVDPHRQH\RXXVHIRU$&75HDGLQJ7KHRQO\GLIIHUHQFHLVWKDW\RXߞOO XVXDOO\EHUHDGLQJWDEOHVJUDSKVDQGGLDJUDPVLQVWHDGRIVHQWHQFHVRUSDUDJUDSKV,I\RXߞUHFRPIRUWDEOH ZLWK$&75HDGLQJDQGLI\RXFDQJHWFRPIRUWDEOHDSSO\LQJWKHVDPHEDVLFWHFKQLTXHWRFKDUWVJUDSKV DQGGLDJUDPV\RXߞOOEHILQH/LNHHYHU\WKLQJHOVHRQWKH$&7LWMXVWWDNHVVRPHFDUHIXOWKRXJKWDQGVRPH FDUHIXOSUDFWLFHDQGWKHQ\RXߞOOJHWWKHKDQJRILWDQGILQGLWYHU\UHSHWLWLYH 5HPHPEHUWKDWLWߞVJRRGIRU WKH$&7WREHUHSHWLWLYHEHFDXVHWKDWPHDQVZHFDQSUHGLFWLWVEHKDYLRUDQGXVHWKDWSUHGLFWDELOLW\WR DQVZHUTXHVWLRQVFRUUHFWO\DQGVFRUHKLJK ߡ3XUH3DUDJUDSKߢ 7KHQH[WW\SHRITXHVWLRQZHߞOOWDONDERXWLVZKDW,FDOOWKHߡ3XUH3DUDJUDSKߢTXHVWLRQ$V\RXPLJKW JXHVVWKLVW\SHRITXHVWLRQLVEDVHGSXUHO\RQZKDW\RXUHDGLQDSDUDJUDSKLQWKHSDVVDJH7KHVHDUHMXVW UHDGLQJFRPSUHKHQVLRQTXHVWLRQVDQGZHߞOODSSURDFKWKHPWKHVDPHZD\ZHDSSURDFKTXHVWLRQVRQWKH $&75HDGLQJVHFWLRQ7KHVHTXHVWLRQVFDQDSSHDULQDQ\SDVVDJHRQWKH6FLHQFHVHFWLRQEXWWKH\ߞOO XVXDOO\DSSHDULQWKHKHDYLHVWFRQFHQWUDWLRQRQWKHߡ6FLHQWLVWYV6FLHQWLVWߢRUߡ6WXGHQWYV6WXGHQW ߢW\SHRISDVVDJH -XVWOLNHZHGRRQWKH$&75HDGLQJVHFWLRQZHߞOOSLFNWKHDQVZHUFKRLFHWKDWUHVWDWHVWKHUHOHYDQWSDUW RIWKHWH[WZLWKRXWFRQWUDGLFWLQJLW:HߞOOUHDGFDUHIXOO\DQGZHZRQߞWEHWKURZQRIIE\VFLHQWLILFWHUPV ZHߞUHQRWIDPLOLDUZLWK ߡ'DWD3OXV3DUDJUDSKߢ $V\RXPLJKWLPDJLQHIURPWKHQDPHWKHߡ'DWD3OXV3DUDJUDSKߢTXHVWLRQVZLOODVNXVVRPHWKLQJWKDW FRPELQHVLQIRUPDWLRQIURPDSDUDJUDSKLQWKHSDVVDJHZLWKGDWDIRXQGLQDFKDUWJUDSKGLDJUDPHWF $JDLQZHߞOOMXVWORRNFDUHIXOO\DWWKHLQIRUPDWLRQWKDWߞVUHOHYDQWWRWKHTXHVWLRQDQGWKHQZHߞOODSSO\ ZKDWZHILQGWRDQVZHUWKHTXHVWLRQ ߡ'DWD3OXV'DWDߢ )LQDOO\WKHUHDUHWKHߡ'DWD3OXV'DWDߢTXHVWLRQV7KHVHZLOOUHTXLUHXVWRXVHWZRGLIIHUHQWGDWDVRXUFHV IURPWKHSDVVDJHߚIRULQVWDQFHZHPLJKWKDYHWRFRPELQHDGDWDSRLQWIURPDOLQHJUDSKZLWKDVHSDUDWH GDWDSRLQWIURPDWDEOHLQWKHVDPHSDVVDJH 7KHVHW\SHVRITXHVWLRQVDUHRIWHQDOLWWOHKDUGHUWKDQRWKHUTXHVWLRQVRQWKH6FLHQFHVHFWLRQMXVWEHFDXVH WKH\LQYROYHSURFHVVLQJDOLWWOHPRUHLQIRUPDWLRQWKDQRWKHUTXHVWLRQVGR%XWDVZLWKHYHU\RWKHUPDMRU TXHVWLRQW\SHRQWKH$&76FLHQFHVHFWLRQDOOZHUHDOO\KDYHWRGRLVUHDGFDUHIXOO\DQGXVHWKHDYDLODEOH LQIRUPDWLRQWRDQVZHUWKHTXHVWLRQ 7KH0LQRU4XHVWLRQ7\SH 1RZOHWߞVWDONDERXWWKHILQDODQGOHDVWLPSRUWDQWTXHVWLRQW\SHߚQDPHO\WKHVPDOOQXPEHURIߡ$FWXDO 6FLHQFHߢTXHVWLRQVRQHDFK$&76FLHQFHVHFWLRQ 5RXJKO\WRWLPHVSHU6FLHQFHVHFWLRQ\RXߞOOVHHDTXHVWLRQWKDWUHTXLUHV\RXWRXVHUHDOVFLHQWLILF NQRZOHGJH<RXߞOOW\SLFDOO\EHDEOHWRVSRWWKHVHTXHVWLRQVEHFDXVHWKH\ߞOOLQYROYHWHUPVWKDWGRQߞW DSSHDUDQ\ZKHUHHOVHLQWKHSDVVDJHHVSHFLDOO\LQWKHDQVZHUFKRLFHV:KHQWKLVGRHVKDSSHQWKH TXHVWLRQZLOOGHSHQGRQYHU\EDVLFVFLHQFHWKHNLQGRIWKLQJWKDWDOPRVWDQ\KLJKVFKRROVWXGHQWZRXOG KDYHDJRRGFKDQFHRINQRZLQJ 5HPHPEHUWKDWDVWDQGDUGL]HGWHVWOLNHWKH$&7LVRQO\XVHIXOLILWWHVWV VNLOOVWKDWDOPRVWDOOWHVWWDNHUVFRXOGEHH[SHFWHGWRKDYH7KDWPHDQVDQ\RXWVLGHVFLHQWLILFNQRZOHGJH UHTXLUHGE\WKHWHVWPXVWEHSUHWW\EDVLF $VZHߞYHVHHQZLWKRWKHUTXHVWLRQW\SHVWKH$&7ZLOORIWHQWU\WRPDNHWKHVHTXHVWLRQVDSSHDUPRUH DGYDQFHGDQGFKDOOHQJLQJWKDQWKH\DFWXDOO\DUHVR\RXߞOOQHHGWREHSUHSDUHGIRUWKDW $QH[DPSOHRIDQߡ$FWXDO6FLHQFHߢTXHVWLRQLVTXHVWLRQRQSDJHRI\RXUFRS\RI7KH5HDO$&7 3UHS*XLGHUG(GLWLRQ7KHTXHVWLRQVWDWHVWKDWLQRVPRVLVZDWHUPRYHVWKURXJKDVHPLSHUPHDEOH EDUULHU,WWKHQDVNVWKURXJKZKLFKVWUXFWXUHWKHRVPRVLVLQWKHSDVVDJHRFFXUV ,IZHORRNEDFNDWWKHSDVVDJHWKHILUVWDQGRQO\PHQWLRQRIRVPRVLVFRPHVLQWKHILUVWEXOOHWSRLQWZKLFK GHVFULEHVߡDQHWPRYHPHQWRI+2EHWZHHQWKHF\WRSODVPRIWKHSODQWVߞFHOOVDQGWKHHQYLURQPHQWYLD RVPRVLVߢ )LUVWRIDOOZHKDYHWRUHPHPEHUWKDW$&76FLHQFHTXHVWLRQVFDQQHYHUUHTXLUHXVWRSURGXFHDQDQVZHU RQRXURZQ7KH\FDQRQO\UHTXLUHXVWRFKRRVHWKHFRUUHFWDQVZHUIURPDSURYLGHGVHWRIRSWLRQV7KDW PHDQVZHGRQߞWKDYHWRFRPHXSZLWKRXURZQDQVZHURXWRIWKLQDLU:HMXVWKDYHWRSLFNWKHFRUUHFW DQVZHUIURPDVHWRISRVVLELOLWLHV 7KHDQVZHUVDVZHPLJKWH[SHFWDUHDSSURSULDWHO\VFLHQWLILFVRXQGLQJDQGLQWLPLGDWLQJMXVWDVZHNQRZ WKH$&7ZDQWVWKHPWREH:HKDYHߡ&KURPRVRPHVߢߡ1XFOHDUHQYHORSHߢߡ&HOOPHPEUDQHߢDQGߡ5RXJK HQGRSODVPLFUHWLFXOXPߢ $WWKLVSRLQWPRVWXQWUDLQHGWHVWWDNHUVZRXOGEHZRQGHULQJLIWKHLUVFLHQFHWHDFKHUVHYHUWDXJKWWKHP DERXWWRPDWRSODQWVJURZLQJLQKLJKVDOWHQYLURQPHQWV VLQFHWKDWߞVZKDWWKHSDVVDJHIRUWKLVTXHVWLRQLV DERXW 2UWKH\PLJKWEHVWUXJJOLQJWRJXHVVZKDWDURXJKHQGRSODVPLFUHWLFXOXPLV7KDWߞVH[DFWO\ZKDW WKH$&7ZDQWVXVWRGRVRZHZRQߞWQRWLFHKRZVLPSOHWKHTXHVWLRQDFWXDOO\LV /HWߞVORRNDWLWDJDLQ:KDWGRHVWKHWH[WGHVFULEH",WGHVFULEHVZDWHUPRYLQJߡEHWZHHQWKHSODQWVߞ FHOOVDQGWKHHQYLURQPHQWYLDRVPRVLVߢ 6RZHNQRZWKDWRVPRVLVLQYROYHVPRYLQJZDWHUEHWZHHQWKHFHOOVDQGWKHHQYLURQPHQW ,IZHWKLQNDERXWLWWKDWPHDQVWKHZDWHUPXVWEHPRYLQJIURPLQVLGHWKHFHOOVWRRXWVLGHWKHFHOOV EHFDXVHߡWKHHQYLURQPHQWߢRIWKHFHOOVPXVWE\GHILQLWLRQEHDQDUHDRXWVLGHRIWKHFHOOVVXUURXQGLQJWKH FHOOV ,I\RXUHPHPEHUDQ\WKLQJDERXWFHOOV\RXSUREDEO\UHPHPEHUWKDWDFHOOE\GHILQLWLRQLVHQFORVHGLQ VRPHVRUWRIPHPEUDQHZKLFKLVDVWUXFWXUHWKDWVHOHFWLYHO\OHWVVRPHVWXIIWKURXJKDQGNHHSVRWKHUVWXII RXW 7KHUHߞVQRZD\WKDWZDWHUFDQSDVVIURPLQVLGHDFHOOWRWKHFHOOߞVHQYLURQPHQWZLWKRXWJRLQJWKURXJKWKDW PHPEUDQHVRWKHDQVZHUPXVWEH & (YHQWKRXJKWKDWTXHVWLRQPLJKWKDYHVHHPHGLQWLPLGDWLQJLWDFWXDOO\FDPHGRZQWRVRPHUHODWLYHO\EDVLF VFLHQFH:HKDGWRNQRZWKDWWKHSKUDVHߡWKHHQYLURQPHQWߢGHVFULEHGVRPHWKLQJRXWVLGHRIDFHOODQGZH KDGWRNQRZWKDWDFHOOPHPEUDQHLVWKHEDUULHUEHWZHHQWKHLQVLGHRIWKHFHOODQGWKHRXWVLGHRIWKHFHOO 7KDWߞVDOO :HQHYHUQHHGHGWRNQRZZKDWWKHWHUPߡRVPRVLVߢPHDQWEHFDXVHLWZDVGHVFULEHGLQWKHSDVVDJHIRUXV :HQHYHUQHHGHGWRNQRZZKDWDURXJKHQGRSODVPLFUHWLFXOXPZDVEHFDXVHDQRWKHUDQVZHUFKRLFH HQGHGXSEHLQJFRUUHFW ,WZDVMXVWDPDWWHURIFXWWLQJWKURXJKWKHXQQHFHVVDU\LQIRUPDWLRQLQWKHTXHVWLRQWRVHHWKHUHODWLYHO\ VLPSOHFRQFHSWWKHWHVWZDVDFWXDOO\DVNLQJDERXW ߡEXWZKDWLI,GLGQߞWNQRZWKDW"ߢ 'RQߞWZRUU\LI\RXGLGQߞWNQRZZKDWDFHOOPHPEUDQHZDVDQG\RXGRQߞWWKLQN\RXFRXOGKDYHDQVZHUHG WKDWH[DPSOHTXHVWLRQFRUUHFWO\,QIDFW\RXGRQߞWUHDOO\QHHGWRZRUU\YHU\PXFKLI\RXQHYHUDQVZHUD VLQJOHߡ$FWXDO6FLHQFHߢTXHVWLRQFRUUHFWO\RQWKH$&7EHFDXVHWKHQXPEHURITXHVWLRQVOLNHWKLVRQDQ\ JLYHQWHVWLVUHODWLYHO\VPDOO2QPRVWGD\V\RXFDQPLVVDOORIWKHߡ$FWXDO6FLHQFHߢTXHVWLRQVDQGVWLOO VFRUHDERYHRQWKH6FLHQFHVHFWLRQ XVXDOO\DRUDQGVRPHWLPHVHYHQD LI\RXJHW HYHU\WKLQJHOVHULJKW 5HPHPEHUWKDWDOOWKHRWKHUTXHVWLRQVRQO\UHTXLUH\RXWRILQGWKHUHOHYDQW LQIRUPDWLRQLQWKHSURYLGHGWH[W ,I\RXUHDGDQߡ$FWXDO6FLHQFHߢTXHVWLRQDQGLWVDQVZHUFKRLFHVFDUHIXOO\DQG\RXVWLOODUHQߞWVXUHZKLFK FKRLFHWRJRZLWKMXVWSLFNWKHRQHWKDWVHHPVPRVWFORVHO\UHODWHGWRWKHVXEMHFWPDWWHULQWKHTXHVWLRQ <RXߞOOSUREDEO\EHULJKWDQGHYHQLI\RXDUHQߞWVWDULQJDWDTXHVWLRQZKRVHDQVZHU\RXGRQߞWNQRZ PHDQV\RXߞUHZDVWLQJWLPHWKDWFRXOGEHVSHQWRQTXHVWLRQVZKRVHDQVZHUVDUHULJKWWKHUHLQWKHSDVVDJH 6LQFHWKHUHߞVQRSHQDOW\IRUZURQJDQVZHUVRQWKH$&7\RXPD\DVZHOOSLFNWKHRQHWKDWORRNVEHVWWR \RXDQGWKHQPRYHRQ ,I\RXZDQWWRVFRUHKLJKRQWKH$&76FLHQFHVHFWLRQLWߞVJRLQJWREHIDUPRUHLPSRUWDQWIRU\RXWRIRFXV RQWKHTXHVWLRQVWKDWGRQߞWUHTXLUHDQ\RXWVLGHVFLHQWLILFNQRZOHGJHEHFDXVHWKHUHDUHDORWPRUH TXHVWLRQVOLNHWKDWDQGEHFDXVHLWߞVLPSRVVLEOHWRJXHVVZKLFKWRSLFVZLOOEHFRYHUHGE\WKHߡ$FWXDO 6FLHQFHߢTXHVWLRQVDQ\ZD\VRWKHUHߞVQRUHDOZD\WRSUHSDUHIRUWKHP 2QHPRUHWKLQJUHPHPEHUWKDWWKHIHZߡ$FWXDO6FLHQFHߢTXHVWLRQVRQWKHWHVWPXVWEHOLPLWHGWR UHODWLYHO\EDVLFVXEMHFWPDWWHU,I\RXVHHDTXHVWLRQWKDWߞVFOHDUO\DVNLQJDERXWVRPHREVFXUHVFLHQWLILF FRQFHSWDQGQHLWKHUWKHDQVZHUFKRLFHVQRUWKHWHUPVLQWKHTXHVWLRQLQFOXGHDQ\WKLQJWKDWWKHDYHUDJH $&7VWXGHQWKDVHYHUKHDUGRIEHIRUHWKHQLWߞVLPSRUWDQWWRUHPHPEHUWKDWWKHDQVZHUWRWKDWTXHVWLRQ PXVWDSSHDUVRPHZKHUHLQWKHSDVVDJH 1RZWKDWZHߞYHH[SORUHGWKHPRVWFRPPRQTXHVWLRQW\SHVOHWߞVWDONDERXWVRPHJHQHUDOZD\VWR DSSURDFKWKHVHTXHVWLRQV $JDLQZHߞOOVHHVSHFLILFH[DPSOHVRIKRZWRDSSURDFKDOORIWKHVHTXHVWLRQ W\SHVZKHQZHGRWKHZDONWKURXJKVLQDIHZSDJHV $&76FLHQFH$QVZHU&KRLFH3DWWHUQV /HWߞVWDNHDORRNDWVRPHFRPPRQDQVZHUFKRLFHSDWWHUQVRQWKH$&76FLHQFHVHFWLRQ $&76FLHQFH$QVZHU&KRLFH3DWWHUQ$OO2I2QH7\SH 2Q$&76FLHQFHTXHVWLRQV\RXߞOORIWHQVHHDVHWRIDQVZHUFKRLFHVWKDWLQFOXGHVWKHIXOOUDQJHRI SRVVLEOHYDOXHVIURPDWDEOHRUFKDUW,QRWKHUZRUGVWKHTXHVWLRQPLJKWUHIHUWRJURXSVDQGDQG WKHDQVZHUFKRLFHVIRUDJLYHQTXHVWLRQPLJKWEH $ *URXS % *URXS & *URXS ' *URXS 6LPLODUO\DSDVVDJHPLJKWWDONDERXWIRXUSHULRGVRIWLPHDQG\RXUDQVZHUFKRLFHVPLJKWMXVWEHWKRVH IRXUWLPHSHULRGV ,QDVLWXDWLRQOLNHWKLVLWPLJKWVHHPOLNH\RXߞUHQRWJRLQJWRJHWPXFKXVHRXWRIDQDO\]LQJWKHDQVZHU FKRLFHV %XWWKLVNLQGRIDQVZHUFKRLFHVHWLVVWLOOKHOSIXOEHFDXVHLWFDQSRLQW\RXWRDFHUWDLQSDUWRIWKHGDWD EHLQJSUHVHQWHGWR\RX )RUH[DPSOHLIWKHVHWRIDQVZHUFKRLFHVRQO\LQFOXGHVWKHIRXUWLPHSHULRGVPHQWLRQHGLQWKHSDVVDJH DQGWKHUHߞVDJUDSKWKDWJLYHVLQIRUPDWLRQDERXWWKRVHGLIIHUHQWWLPHSHULRGVWKHQWKDWJUDSKLVSUREDEO\ ZKHUH\RXVKRXOGVWDUWORRNLQJWRILQGWKHDQVZHU7KHDQVZHUFKRLFHVFDQKHOSPDNHWKDWH[WUDFOHDU 6LPLODUO\LIDOOWKHDQVZHUFKRLFHVDUHGLIIHUHQWW\SHVRIPHWDODQGWKRVHPHWDOQDPHVPDWFKXSWRODEHOV RQRQHRIWKHFKDUWVWKHQWKDWߞVDJRRGLQGLFDWRUWKDW\RXߞOOSUREDEO\ILQGWKDWFKDUWWREHXVHIXOLQ DQVZHULQJWKHTXHVWLRQ ,IWKHDQVZHUFKRLFHVDUHDOOQDPHVRIJDVHVWKHUHߞVSUREDEO\DFKDUWRUDJUDSKVRPHZKHUHWKDWWDONV DERXWWKRVHGLIIHUHQWJDVHV <RXJHWWKHLGHD$VLQ$&70DWK$&76FLHQFHDQVZHUFKRLFHVFDQJLYH\RXDQLGHDRIWKHVRUWVRIWKLQJ \RXPLJKWQHHGWRFRQVLGHUZKHQILQGLQJWKHDQVZHUIRUDTXHVWLRQ%DVLFDOO\RQHRIWKHELJJHVWSRVVLEOH FKDOOHQJHVRQDQ\$&76FLHQFHTXHVWLRQLVWRILQGWKHUHOHYDQWLQIRUPDWLRQLQWKHJLYHQSDVVDJHDQGWKH DQVZHUFKRLFHVFDQSURYLGHDVHWRIUHOHYDQWNH\ZRUGVRUYDOXHVWKDWFDQKHOS\RXILQGZKDW\RXߞUH ORRNLQJIRU $&76FLHQFH$QVZHU&KRLFH3DWWHUQ([DFW2SSRVLWH <RXPD\UHPHPEHUWKLVDQVZHUFKRLFHSDWWHUQIURPWKH$&75HDGLQJVHFWLRQ6RPHWLPHV\RXߞOOVHHD ZURQJDQVZHUFKRLFHWKDWߞVWKHRSSRVLWHRIWKHFRUUHFWDQVZHU,WPD\GHVFULEHWKHRSSRVLWHRID UHODWLRQVKLSWKDWDSSHDUVLQWKHSDVVDJHRULWPD\UDQNVRPHYDOXHVLQWKHRSSRVLWHRUGHUIURPWKHZD\ WKH\ߞUHUDQNHGLQWKHFRUUHFWDQVZHUDQGVRRQ7KH$&7SUREDEO\GRHVWKLVWRPDNH\RXVHFRQGJXHVV \RXUVHOIDQGZRQGHULI\RXJRWVRPHWKLQJEDFNZDUGVLQWKHSDVVDJH 6RLI\RXVHHWZRDQVZHUFKRLFHVWKDWDUHRSSRVLWHVRIRQHDQRWKHUGRQߞWJHWWKURZQRII'RXEOHFKHFN WKHTXHVWLRQWKHSDVVDJHDQGWKHDQVZHUFKRLFHVWRPDNHVXUH\RXߞUHSLFNLQJWKHULJKWRQH $&76FLHQFH$QVZHU&KRLFH3DWWHUQ&RPSOHWHO\,UUHOHYDQW 7KLVLVDQRWKHUDQVZHUFKRLFHSDWWHUQWKDWZHVDZLQWKH$&75HDGLQJVHFWLRQVRPHWLPHV\RXߞOOVHHDQ DQVZHUFKRLFHWKDWߞVFRPSOHWHO\LUUHOHYDQWWRWKHSDVVDJH$JDLQWKH$&7LVSUREDEO\MXVWWU\LQJWRFDWFK \RXRIIJXDUGDQGPDNH\RXZRQGHULI\RXRYHUORRNHGVRPHWKLQJLQWKHSDVVDJH-XVWGRXEOHFKHFN HYHU\WKLQJWRPDNHVXUH\RXߞUHRQWKHULJKWWUDFNDQGGRQߞWJHWIOXVWHUHG $&76FLHQFH$QVZHU&KRLFH3DWWHUQ<HV<HV1R1R 7KLVLVDQDQVZHUFKRLFHSDWWHUQWKDWVKRZVXSRQRWKHUVHFWLRQVDVZHOOEXWLWߞVSUREDEO\PRVWSUHYDOHQW RQWKH$&76FLHQFHDQG$&7(QJOLVKVHFWLRQV <RXߞOOVHHDTXHVWLRQWKDWDVNVZKLFKRIWZRSRVVLELOLWLHVPLJKWKDSSHQLQDJLYHQVLWXDWLRQ7KHDQVZHU FKRLFHVZLOOIHDWXUHWZRFKRLFHVWKDWVXSSRUWRQHSRVVLELOLW\DQGWZRFKRLFHVWKDWVXSSRUWDQRWKHU SRVVLELOLW\DQGHYHU\FKRLFHZLOORIIHUDGLIIHUHQWUHDVRQWRVXSSRUWWKDWSRVVLELOLW\ 7KDWPLJKWVRXQGFRQIXVLQJVROHWߞVPDNHXSDQH[DPSOH,PDJLQHDSRUWLRQRIWKHWH[WVD\VWKLV ߡ,WZDVYHU\FORXG\7XHVGD\QLJKW:KHQWKHUHLVDYHU\FORXG\QLJKWLWDOZD\VUDLQVWKHQH[W GD\ߢ 1RZLPDJLQHDTXHVWLRQWKDWVD\V ߡ%DVHGRQWKHWH[WZLOOLWUDLQRQ:HGQHVGD\"ߢ <RXPLJKWVHHDQVZHUFKRLFHVOLNHWKLV $ <HVEHFDXVHLWDOZD\VUDLQVRQ:HGQHVGD\V % <HVEHFDXVHLWZDVYHU\FORXG\RQ7XHVGD\QLJKW & 1REHFDXVH:HGQHVGD\QLJKWZDVQߞWFORXG\ ' 1REHFDXVHLWGLGQߞWUDLQ7XHVGD\ 1RWLFHWKDWWKHUHDUHWZRDQVZHUFKRLFHVWRVXSSRUWHDFKSRVVLELOLW\ WZRߡ\HVߢDQVZHUVDQGWZRߡQRߢ DQVZHUV EXWMXVWNQRZLQJZKHWKHUWKHDQVZHULVߡ\HVߢRUߡQRߢLVQߞWHQRXJKEHFDXVHHDFKTXHVWLRQ RIIHUVLWVRZQVXSSRUWWKDWPXVWEHWDNHQLQWRFRQVLGHUDWLRQ +HUHߞVWKHWKLQJLQPRVWFDVHV\RXFDQUXOHRXWWKUHHDQVZHUVE\LJQRULQJWKH\HVQRSDUWRIWKHDQVZHU DQGMXVWFKHFNLQJZKHWKHUWKHUHVWRIWKHDQVZHUFKRLFHLVVXSSRUWHGE\WKHWH[W ,QWKLVFDVHZHFDQUXOHRXW $ EHFDXVHWKHUHߞVQRLQGLFDWLRQWKDWLWDOZD\VUDLQVRQ:HGQHVGD\V:H FDQUXOHRXW & EHFDXVHWKHWH[WGRHVQߞWVD\DQ\WKLQJDERXWZKHWKHU:HGQHVGD\QLJKWZDVFORXG\$OVR ' PXVWEHZURQJEHFDXVHWKHUHLVQߞWDQ\PHQWLRQRIZKHWKHULWUDLQHG7XHVGD\ 2QFH\RXߞYHGRQHWKDW\RXFDQVHHWKDWWKHRQO\FKRLFHOHIWLV % DQGZHFDQFRQILUPWKDWWKLVDQVZHULV VXSSRUWHGE\WKHWH[W <RXFDQRIWHQUXOHRXWDOOLQFRUUHFWDQVZHUVMXVWE\FKHFNLQJWRVHHZKHWKHUWKHSDVVDJHVXSSRUWVWKH UHDVRQJLYHQIRUHDFKDQVZHU,I\RXHOLPLQDWHWKHXQVXSSRUWHGDQVZHUVDQG\RXߞUHVWLOOOHIWZLWKPRUH WKDQRQHDQVZHUFKRLFHWKDWGHVFULEHVVRPHWKLQJLQWKHSDVVDJHWKHQ\RXFDQHOLPLQDWHWKHUHPDLQLQJ FKRLFHWKDWFLWHVUHDVRQLQJXQUHODWHGWRWKHTXHVWLRQ,IWKLVGRHVQߞWPDNHDQ\VHQVH\HWGRQߞWZRUU\ߚ \RXߞOOVHHH[DPSOHVRIWKLVVRUWRIWKLQJZKHQ\RXUHDGWKH$&76FLHQFHZDONWKURXJKV 2QHPRUHWKLQJߚ,FDOOWKLVWKHߡ<HV<HV1R1RߢSDWWHUQEXWWKHWZRFKRLFHVDUHQߞWDOZD\Vߡ\HVߢDQG ߡQRߢ<RXPLJKWVHHDTXHVWLRQWKDWDVNVZKHWKHUVRPHWKLQJLQFUHDVHVRUGHFUHDVHVLQZKLFKFDVHWKHUH ZLOOEHWZRFKRLFHVWKDWVD\ߡLQFUHDVHߢDQGWZRWKDWVD\ߡGHFUHDVHߢHDFKZLWKLWVRZQVXSSRUWLQJUHDVRQ 7KHUHPLJKWDOVREHDTXHVWLRQWKDWDVNVZKHWKHU*URXSRU*URXSIURPDSDVVDJHZLOOGRVRPHWKLQJ DQGWKHUHZLOOEHWZRFKRLFHVWKDWVD\ߡ*URXSߢGRHVLWDQGWZRFKRLFHVWKDWVD\ߡ*URXSߢGRHVLWHDFK IRUGLIIHUHQWUHDVRQV<RXߞOOJHWXVHGWRUHFRJQL]LQJWKHSDWWHUQDV\RXZRUNZLWKSUDFWLFH$&76FLHQFH TXHVWLRQV 7KH*HQHUDO3URFHVV)RU$QVZHULQJ 0RVW $&76FLHQFH4XHVWLRQV 1RZWKDWZHߞYHGLVFXVVHGDOOWKHLPSRUWDQWDVSHFWVRI$&76FLHQFHTXHVWLRQVZHFDQWDNHDORRNDWWKH UHFRPPHQGHGVWHSE\VWHSSURFHVVIRUDQVZHULQJPRVWRIWKHPߚWKDWLVDOORIWKHTXHVWLRQVWKDWLQYROYH PDWHULDOSUHVHQWHGLQWKHSDVVDJHZKLFKZLOOXVXDOO\EHWRRXWRIWKHTXHVWLRQVRQDQ\JLYHQ 6FLHQFHVHFWLRQ 7KHߡ$FWXDO6FLHQFHߢTXHVWLRQVDV,FDOOWKHPGRQߞWUHDOO\FDOOIRUDPHWKRGLFDODSSURDFK:HVLPSO\ UHFRJQL]HWKDWZHߞUHGHDOLQJZLWKRQHRIWKRVHTXHVWLRQVZKHQZHVHHWKDWWKHDQVZHUFKRLFHVDUHQߞW UHIOHFWHGDQ\ZKHUHLQWKHSDVVDJHDQGWKHQZHGRRXUEHVWWRDQVZHUWKHPEDVHGRQRXURXWVLGHVFLHQWLILF NQRZOHGJH$JDLQHDFK$&76FLHQFHVHFWLRQZLOORQO\IHDWXUHDVPDOOKDQGIXORIߡ$FWXDO6FLHQFHߢ TXHVWLRQV 6RWKHIROORZLQJDSSURDFKLVLQWHQGHGIRUXVHRQWKHPDMRULW\RI$&76FLHQFHTXHVWLRQVߚWKHRQHVWKDW GRQߞWUHTXLUHDQ\RXWVLGHNQRZOHGJHEHFDXVHDOOWKHUHOHYDQWLQIRUPDWLRQLVSUHVHQWLQWKHSDVVDJH$V DOZD\V\RXFDQVHHH[DPSOHVRIWKLVSURFHVVLQWKHZDONWKURXJKVLQDIHZSDJHV 5HDGVNLPRUVNLSWKHSDVVDJH $VZHGLVFXVVHGDIHZSDJHVDJR\RXߞOOZDQWWRHLWKHUUHDGVNLPRUVNLSWKHSDVVDJHDFFRUGLQJWR\RXU SUHIHUHQFH 5HDGWKHTXHVWLRQFDUHIXOO\QRWLQJNH\WHUPV :HߞYHFRYHUHGWKLVRYHUDQGRYHUDJDLQDQGLWQHYHUVWRSVEHLQJLPSRUWDQW\RXPXVWWDNHWKHWLPHWRUHDG WKHTXHVWLRQFDUHIXOO\1RWLFHDQ\NH\VFLHQWLILFWHUPVߚLQRWKHUZRUGVDQ\WHFKQLFDOVRXQGLQJWHUPVWKDW DUHQߞWSDUWRIPRVWSHRSOHߞVHYHU\GD\FRQYHUVDWLRQ'RQߞWZRUU\LI\RXGRQߞWNQRZZKDWDWHUPPHDQV HLWKHUWKHSDVVDJHZLOOH[SODLQLWRUQRQHRIWKHTXHVWLRQVZLOOUHTXLUH\RXWRXQGHUVWDQGLW 5HDGWKHDQVZHUFKRLFHVFDUHIXOO\ 7KLVVWHSLVYHU\LPSRUWDQWEHFDXVHUHDGLQJWKHDQVZHUFKRLFHVZLOOWHOO\RXZKHUHWRORRNLQWKH SDVVDJHVDQGRUZKLFKRSWLRQVWRFRQVLGHUZKLOH\RXORRNIRUWKHDQVZHUWRWKHTXHVWLRQ )LQGWKHUHOHYDQWSDUWRIWKHSDVVDJH 2QFH\RXߞYHUHDGWKHTXHVWLRQDQGWKHDQVZHUFKRLFHVFDUHIXOO\\RXNQRZZKDWLQIRUPDWLRQ\RXQHHGWR ILQG ,IWKHWH[WPHQWLRQVDVSHFLILFDUHDRIWKHSDVVDJHOLNHߡ6WXG\ߢRUߡ7DEOHߢWKHQORRNWKHUH ,IWKHUHDUHQRVSHFLILFLQGLFDWLRQVRIWDEOHVRUILJXUHVWRORRNDWLQWKHSDVVDJH\RXFDQVWLOOPDWFKXS WHFKQLFDOWHUPVIURPWKHTXHVWLRQDQGDQVZHUFKRLFHVZLWKNH\SKUDVHVLQWKHWH[WRULQODEHOVRQDFKDUW JUDSKRUWDEOH $JDLQZHߞOOVHHSOHQW\RIH[DPSOHVRIWKLVLQWKHZDONWKURXJKV )LQGWKHFRUUHFWDQVZHURUHOLPLQDWHWKUHHZURQJDQVZHUV 6RPHTXHVWLRQVZLOOOHQGWKHPVHOYHVWRHOLPLQDWLQJZURQJDQVZHUVDQGLQVRPHFDVHVLWߞOOEHHDVLHUMXVW WRILQGWKHULJKWDQVZHU(LWKHUZD\XVHWKHLQIRUPDWLRQLQWKHSDVVDJHWRVHOHFWDFRUUHFWDQVZHU,QPRVW FDVHV\RXߞOOHLWKHUEHPDWFKLQJDVSHFLILFYDOXHIURPWKHGDWDWRDVSHFLILFYDOXHLQDQDQVZHUFKRLFHRU \RXߞOOEHWUHDWLQJߡ3XUH3DUDJUDSKߢTXHVWLRQVIURPWKHSDVVDJHWKHVDPHZD\\RXZRXOGWUHDW$&7 5HDGLQJTXHVWLRQV(LWKHUZD\DFWXDOO\ILQGLQJWKHDQVZHULVDUHODWLYHO\PLQRUVWHS LQWHUPVRI GLIILFXOW\ RQFH\RXߞYHWDNHQWKHWLPHWRORFDWHWKHUHOHYDQWSDUWRIWKHWH[WLQWKHSUHYLRXVVWHSV 5HPHPEHUWRUHDGFDUHIXOO\ 'RXEOHFKHFN\RXUDQVZHU 2QFH\RXߞYHGRQHHYHU\WKLQJDQGIRXQG\RXUDQVZHUWDNHDQRWKHUORRNDWWKHTXHVWLRQ'LG\RXUHIHUWR WKHULJKWVWXG\"'LG\RXILQGWKHULJKWFKDUW"'LG\RXORRNDWWKHULJKWGDWHUDQJHRUWHPSHUDWXUHRUGHSWK RUZKDWHYHU RQWKHULJKWFKDUWRUJUDSK"'LG\RXRYHUORRNDZRUG"&DQ\RXORRNDWWKHDQVZHUFKRLFHV \RXWKLQNDUHZURQJDQGILJXUHRXWZKLFKPLVWDNHVWKH$&7ZDQWVXQWUDLQHGWHVWWDNHUVWRPDNHWRDUULYH DWWKRVHDQVZHUV" 5HPHPEHUWKDWKLJKVFRULQJWHVWWDNHUVVWLOOPDNHPLVWDNHVߚWKH\ߞUHMXVWEHWWHUDWFDWFKLQJWKHP DIWHUZDUGV*HWLQWKHKDELWRIGRXEOHFKHFNLQJ\RXUVHOIDIWHU\RXSLFNDQDQVZHU 2QFH\RXߞUHVDWLVILHGZLWK\RXUDQVZHUPDUNLWRQ\RXUVKHHWDQGPRYHRQ &ORVLQJ7KRXJKWV 'RLQJZHOORQWKH$&76FLHQFHVHFWLRQFRPHVGRZQWRDIHZWKLQJV w5HDGFDUHIXOO\0DNHVXUHWKDW\RXUHDGRQO\ZKDWWKHWH[WVD\V'RQߞWPDNHDQ\DVVXPSWLRQVDERXW ZKDWLVQߞWH[SOLFLWO\PHQWLRQHG w'RQߞWEHLQWLPLGDWHG<RX:,//VHHXQIDPLOLDUVFLHQWLILFWHUPV\RXߞOOSUREDEO\VHHDORWRIWKHP 'RQߞWOHWWKHPVFDUH\RX(LWKHUWKH\GRQߞWPDWWHURUWKHLUPHDQLQJZLOOEHPDGHFOHDUHQRXJKLQWKH SDVVDJHIRU\RXWRDQVZHUWKHTXHVWLRQV w5HO\RQWKHSDVVDJHV7KHLQIRUPDWLRQ\RXQHHGWRDQVZHUDOPRVWHYHU\TXHVWLRQLVRQWKHSDJHLQIURQW RI\RX0DWFKXSNH\WHUPVDQGXQLWVIURPWKHTXHVWLRQDQGWKHDQVZHUFKRLFHVWRILJXUHRXWZKHUHWR ILQGWKHDQVZHULQWKHSDVVDJH w6HULRXVO\UHDGFDUHIXOO\5HDGLQJFDUHIXOO\LVWKHZD\WRDSSURDFKHYHU\VLQJOHTXHVWLRQRQWKH$&7 VR,ߞOOOLVWLWKHUHDJDLQ5HDGFDUHIXOO\DWDOOWLPHVߚDQGSUDFWLFHUHDGLQJFDUHIXOO\ߚDQG\RXZRQߞWJR ZURQJ :DONWKURXJKV7KH$&76FLHQFH3URFHVV,Q$FWLRQ$JDLQVW5HDO4XHVWLRQV 1RZWKDWZHߞYHWDONHGDERXWWKHEHVWZD\WRDWWDFN$&76FLHQFHTXHVWLRQVOHWߞVDWWDFNVRPH$&7 6FLHQFHTXHVWLRQV$VDOZD\V\RXߞOOZDQWWRIROORZDORQJLQ\RXUFRS\RIWKH5HG%RRNߚ7KH5HDO$&7 3UHS*XLGHUG(GLWLRQ ,NHHSVD\LQJWKLVEXWLWߞVEHFDXVHLWߞVUHDOO\LPSRUWDQW\RXQHHGWRVHHKRZWKLVDSSURDFKZRUNVDJDLQVW UHDO$&76FLHQFHSUDFWLFHTXHVWLRQVVRSOHDVHEHVXUHWRUHDGWKHVHZDONWKURXJKV2QFHPRUHWKHVH SDUWLFXODUTXHVWLRQVZHUHVHOHFWHGHLWKHUEHFDXVHWKH\ߞUHWKHTXHVWLRQVWKDWP\RQHRQRQHWXWRULQJ VWXGHQWVDVNPHDERXWPRVWRIWHQRUEHFDXVHWKH\GRDSDUWLFXODUO\JRRGMRERILOOXVWUDWLQJVRPHRIWKH LGHDVZHߞYHWDONHGDERXWLQWKLV%ODFN%RRN ,I\RXߞGOLNHWRVHHVRPHYLGHRGHPRQVWUDWLRQVRIWKHVHLGHDVJRWRZZZ$&7SUHS9LGHRVFRPIRUD VHOHFWLRQRIGHPRQVWUDWLRQYLGHRVWKDWDUHIUHHWRUHDGHUVRIWKLVERRN 3DJH4XHVWLRQ 7KLVTXHVWLRQLVDJUHDWH[DPSOHRIZKDWWKH$&7KRSHVWRGRZLWKLWV6FLHQFHVHFWLRQ,WߞVDTXHVWLRQ DERXWߡPDQWOHSOXPHVߢZKLFKLVVXUHWREHDQXQIDPLOLDUWHUPWRWKHRYHUZKHOPLQJPDMRULW\RIWKHWHVW WDNHUVZKRVHHWKLVTXHVWLRQ 7HUPVOLNHWKLVDUHXVHGLQWHQWLRQDOO\WRPDNHXVSDQLFEXWZHKDYHWRUHPHPEHUWKDWPRVWKLJKVFKRRO VWXGHQWVGRQߞWVWXG\PDQWOHSOXPHVLQVFKRROVRQRERG\HOVHWDNLQJWKH$&7KDVDQ\SULRUH[SHULHQFH ZLWKWKLVWRSLF7KHWHVWPXVWSURYLGHDOOWKHLQIRUPDWLRQZHQHHGWRDQVZHUWKHTXHVWLRQFRUUHFWO\ $QGRIFRXUVHLIZHORRNDWWKLVTXHVWLRQDQGWKHPDWHULDOSURYLGHGZHߞOOVHHWKDWLWGRHVFRQWDLQDOOWKH LQIRUPDWLRQZHQHHG$OORIWKHDQVZHUFKRLFHV UHPHPEHUWRUHDGWKHDQVZHUFKRLFHV FRPSDUHWKHKHDG WRWKHWDLODQGLIZHORRNDW)LJXUHZKLFKLVSDUWRIWKHߡSOXPHPRGHOLQ6WXG\ߢZHFDQVHHWKDWWKH KHDGDQGWKHWDLODUHFOHDUO\ODEHOHGVRZHNQRZZHߞUHORRNLQJDWWKHULJKWSDUWRIWKHSDJH 7KHILUVWWKUHHDQVZHUFKRLFHVDOOPHQWLRQWKHGLDPHWHUDQGZHFDQVHHWKDWWKHERWWRPRI)LJXUHLV ODEHOHGߡGLDPHWHUߢ/HWߞVWDNHDORRNDWWKHDQVZHUFKRLFHVDQGVHHZKLFKRQHGHVFULEHVWKHUHODWLRQVKLS DFFXUDWHO\ $ VD\VWKHKHDGVDUHDERXWKDOIWKHGLDPHWHURIWKHWDLOV,IZHORRNDWWKHILJXUHZHFDQVHHWKDWKHDGLV ZLGHUWKDQWKHWDLOQRWQDUURZHUVRWKLVDQVZHUFKRLFHLVQߞ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ߞVDERXWWZLFHDV ZLGH6R % LVWKHFRUUHFWDQVZHU & VD\VWKHKHDGDQGWKHWDLODUHWKHVDPHGLDPHWHUEXW)LJXUHFOHDUO\VKRZVWKHKHDGLVZLGHUWKDQWKH WDLO ' WDONVDERXWGHQVLW\ZKLFKLVQߞWPHQWLRQHGDQ\ZKHUHLQ6WXG\RU)LJXUHVRWKLVFKRLFHLV LUUHOHYDQWDQGZURQJ 7KLVTXHVWLRQLVSUHWW\VLPSOHRQFHZHDFWXDOO\DWWHPSWLWEXWWKDWGRHVQߞWPHDQZHFDQWDNHLWIRUJUDQWHG ,I\RXߞUHQRWFDUHIXO\RXߞOOUXQWKHULVNRIPLVUHDGLQJVRPHWKLQJDQGSLFNLQJDZURQJDQVZHU 3DJH4XHVWLRQ 'RQߞWZRUU\LI\RXߞYHQHYHUVHHQWKHWHUPߡIORRGEDVDOWSODWHDXߢRUKHDUGRIDߡ0\UߢXQLW5HPHPEHUWKDW ZHGRQߞWQHHGWRNQRZZKDWWKRVHWKLQJVPHDQRUZK\DQ\VFLHQWLVWZRXOGDFWXDOO\FDUHDERXWWKHP$OO ZHKDYHWRGRLVUHDGWKHTXHVWLRQFDUHIXOO\DQGORRNDWWKHJLYHQLQIRUPDWLRQDQGZHߞOOILQGWKHDQVZHU ODLGRXWLQIURQWRIXV 7KHTXHVWLRQDVNVDERXWWKHUHVXOWVRI6WXG\DQG6WXG\VD\VWKDWLWVUHVXOWVDUHLQ7DEOH7DEOH SURYLGHVDYDULHW\RIGDWDDQGWKHGLIIHUHQWSDUWVRIWKHWDEOHDUHFOHDUO\PDUNHG7KHTXHVWLRQPHQWLRQVD ߡIORRGEDVDOWSODWHDXWKDWSURGXFHGODYDIRUDSHULRGRI0\Uߢ:HFDQVHHDODEHORQ7DEOHWKDWVD\V ߡ/HQJWKRIWLPHODYDZDVSURGXFHG 0\U ߢVRZHFDQWHOOWKDWߞVJRLQJWREHUHOHYDQWWRRXUDQVZHU7KH TXHVWLRQDOVRDVNVDERXWߡODYDYROXPHߢDQGZHFDQVHHWKDWߡ/DYDYROXPHߢLVDODEHORQWKHWDEOHDV ZHOOIXUWKHUUHDVVXULQJXVWKDWZHߞYHFRUUHFWO\ORFDWHGWKHUHOHYDQWLQIRUPDWLRQWRDQVZHUWKHTXHVWLRQ 7KHDQVZHUFKRLFHVDOVRLQFOXGHTXDQWLWLHVOLNHNPDQGNPDQGWKHVHDUH TXDQWLWLHVWKDWDSSHDULQWKHߡ/DYDYROXPHߢFROXPQ 6RZHߞUHGHILQLWHO\ORRNLQJDWWKHULJKWSDUWRIWKHSDVVDJH1RZRXUMRELVMXVWWRILJXUHRXWZKDWWKH DQVZHULV 7KHTXHVWLRQDVNVDERXW0\UEXWWKDWTXDQWLW\GRHVQߞWDSSHDULQWKHߡ/HQJWKRIWLPHODYDZDV SURGXFHGߢFROXPQߚRQO\WKHTXDQWLWLHVDQGDSSHDU6RWKHUHDUHWZRSRVVLELOLWLHVKHUH HLWKHUZHߞUHORRNLQJDWWKHZURQJLQIRUPDWLRQDQGWKHUHߞVDGDWDSRLQWIRU0\UVRPHZKHUHHOVHRU HOVHWKLVLVRQHRIWKRVH$&76FLHQFHTXHVWLRQVWKDWZDQWVXVWRLGHQWLI\DWUHQGLQWKHGDWDDQGWKHQPDNH DVLPSOHSUHGLFWLRQEDVHGRQWKDWWUHQG 7KHUHDUHWZRPDMRUZD\VZHFDQWHOOWKDWWKHVHFRQGSRVVLELOLW\LVWKHVFHQDULRZHߞUHGHDOLQJZLWK2QH LVWKDWDOORIWKHGHWDLOVZHPHQWLRQHGEHIRUH WKHQDPHVRIWKHFROXPQVDQGWKHFRUUHVSRQGHQFHEHWZHHQ WKHXQLWVDQGWKHQXPEHUVLQWKHDQVZHUFKRLFHVDQGWKHWDEOH LQGLFDWHWKDWZHߞUHORRNLQJLQWKHULJKW SODFH$QRWKHULPSRUWDQWGHWDLOLVWKDWWKHTXHVWLRQXVHVWKHSKUDVHߡZRXOGPRVWOLNHO\KDYHDODYDYROXPH >HPSKDVLVPLQH@ߢ2QWKH$&76FLHQFHVHFWLRQWKDWSKUDVHLQGLFDWHVWKDWZHߞUHEHLQJDVNHGWRPDNHD SUHGLFWLRQUDWKHUWKDQEHLQJDVNHGWRUHDGDYDOXHGLUHFWO\RIIWKHSDJH 6RZKDWWUHQGFDQZHLGHQWLI\WKDWWHOOVXVZKDWNLQGRIYDOXHZRXOGSUREDEO\JRLQWKHߡ/DYDYROXPHߢ FROXPQLIWKHUHZHUHDQRWKHUURZRISODWHDXGDWDZLWKDYDOXHRILQWKHFROXPQODEHOHGߡ/HQJWKRI WLPHODYDZDVSURGXFHG 0\U "ߢ,IZHORRNDWWKHH[LVWLQJGDWDZHFDQVHHWKDWWKHORZHVW0\UYDOXHLV FRUUHVSRQGLQJWRDߡ/DYDYROXPHߢRI7KHQH[WORZHVW0\UYDOXHLVZLWKD FRUUHVSRQGLQJߡ/DYDYROXPHߢRI7KHVHFRQGKLJKHVW0\UYDOXHLVZKLFKFRUUHVSRQGVWRD ߡ/DYDYROXPHߢYDOXHRI7KHKLJKHVW0\UYDOXHLVDQGLWFRUUHVSRQGVWRDߡ/DYDYROXPHߢ YDOXHRI 6RZHFDQVHHWKDWODYDYROXPHLQFUHDVHVDV0\ULQFUHDVHVZLWKRXWH[FHSWLRQ 6LQFHWKHTXHVWLRQDVNVXVDERXW0\UZKLFKLVKLJKHUWKDQDQ\RWKHU0\UYDOXHOLVWHGRQWKHWDEOHLW PDNHVVHQVHWKDWWKHFRUUHVSRQGLQJߡ/DYDYROXPHߢYDOXHZRXOGDOVREHJUHDWHUWKDQWKHODUJHVWQXPEHU OLVWHGLQWKHߡ/DYDYROXPHߢFROXPQ7KHODUJHVWYDOXHLQWKDWFROXPQLVNPVRWKHFRUUHFW DQVZHUWRWKLVTXHVWLRQLV ' ߡRYHUNPߢ 7KHRWKHUDQVZHUFKRLFHVDUHMXVWWKHUDQJHVDPRQJWKHRWKHUYDOXHVIURPWKHߡ/DYDYROXPHߢFROXPQLQ 7DEOH 1RWLFHWKDWZHZHUHDEOHWRILQGWKHDQVZHUZLWKRXWKDYLQJDQ\LGHDDWDOODERXWODYDSURGXFWLRQIORRG EDVDOWSODWHDXVRUDQ\WKLQJHOVHLQYROYHGLQWKHTXHVWLRQ$OOZHKDGWRGRZDVLGHQWLI\WKHSDUWRIWKH SDVVDJHWKDWLQFOXGHGNH\ZRUGVDQGTXDQWLWLHVWKDWDSSHDUHGLQWKHTXHVWLRQDQGWKHQSD\FDUHIXO DWWHQWLRQWRWKHGDWD 7KHUHߞVRQHRWKHUWKLQJ,ߞGOLNHWRSRLQWRXW,IZHWULHGWRWKLQNORJLFDOO\DERXWWKHVLWXDWLRQLQWKH TXHVWLRQLWPLJKWPDNHVHQVHWKDWWKHYROXPHRIODYDSURGXFHGZRXOGEHJUHDWHULIWKHOHQJWKRI SURGXFWLRQWLPHZDVJUHDWHUߚWKHORQJHUWKHODYDߞVSURGXFHGWKHPRUHODYDWKHUHVKRXOGEHULJKW"%XW LWߞVYHU\LPSRUWDQWWRUHDOL]HWKDWZHFDQJHWWKHFRUUHFWDQVZHUZLWKRXWKDYLQJWRWKLQNDERXWWKHDFWXDO UHDOZRUOGVFHQDULRVWKDWJHQHUDWHGWKLVGDWD,QIDFWLWߞVDFWXDOO\EHWWHULIZH'21ߞ7WU\WRWKLQNDERXW WKHSUDFWLFDODSSOLFDWLRQRIWKHFRQFHSWVLQWKHSDVVDJHEHFDXVHLWVRPHWLPHVKDSSHQVWKDWSHRSOHFDQJHW FRQIXVHGZKHQWKH\GRWKDW,WߞVPXFKVDIHUDQGPXFKIDVWHUWRIRFXVH[FOXVLYHO\RQWKHGDWDRQWKHSDJH 3DJH4XHVWLRQ :HߞUHDVNHGDERXWWKHUHODWLRQVKLSEHWZHHQWKHDJHRIDIORRGEDVDOWSODWHDXDQGWKHOHQJWKRIWLPHODYD ZDVSURGXFHGDWWKDWSODWHDX7KHILUVWWKLQJZHZDQWWRGR DIWHUUHDGLQJWKHZKROHTXHVWLRQDQGWKH DQVZHUFKRLFHVRIFRXUVH LVILQGWKHLQIRUPDWLRQZHQHHGWRDQDO\]H $VZLWKWKHODVWTXHVWLRQWKLVTXHVWLRQGHDOVZLWK6WXG\WKHUHVXOWVRIZKLFKDUHODLGRXWLQ7DEOH:H FDQVHHWKDWWKHߡ$JHߢFROXPQLVWKHVHFRQGRQHDQGWKHߡ/HQJWKRIWLPHODYDZDVSURGXFHGߢLVWKHIRXUWK FROXPQ :HFDQVHHLQWKHߡ$JHߢFROXPQWKDWWKHQXPEHUVLQFUHDVHDVZHPRYHGRZQWKHFROXPQDQG 7KHFRUUHVSRQGLQJߡ/HQJWKRIWLPHߢQXPEHUVDUHDQGWKHQ:KLOHWKHILUVWVHWRI QXPEHUVLQFUHDVHVIURPEHJLQQLQJWRHQGWKHVHFRQGVHWGHFUHDVHVIURPWREXWWKHQLQFUHDVHVDW WKHHQGWR 1RZOHWߞVWDNHDORRNDWWKHDQVZHUFKRLFHVDQGVHHZKLFKRQHDFFXUDWHO\GHVFULEHVWKHUHODWLRQVKLS ) VD\VWKDWERWKFROXPQVLQFUHDVHWRJHWKHU7KDWߞVFOHDUO\QRWWKHFDVHDVZHMXVWVDZ * VD\VWKDWWKHߡ$JHߢFROXPQLQFUHDVHVDVWKHߡ/HQJWKRIWLPHߢFROXPQGHFUHDVHV7KDWߞVDOPRVW WUXHߚWKHߡ/HQJWKRIWLPHߢFROXPQGHFUHDVHVDVZHUHDGGRZQWKHILUVWWKUHHURZVEXWWKHQLW LQFUHDVHVDWWKHYHU\HQGIURPWR7KH$&7ZRQߞWDFFHSWWKLVDVWKHFRUUHFWDQVZHUFKRLFH EHFDXVHWKHVHQWHQFHGRHVQߞWSHUIHFWO\GHVFULEHWKHGDWD<RXFDQSUREDEO\LPDJLQHKRZDORWRIXQWUDLQHG WHVWWDNHUVZLOOEHWHPSWHGWRFKRRVHWKLVHLWKHUEHFDXVHWKH\GRQߞWERWKHUWRORRNDWDOOWKHQXPEHUVLQWKH ߡ/HQJWKRIWLPHߢFROXPQRUEHFDXVHWKH\ILJXUHLWߞVRND\IRUWKHDQVZHUFKRLFHWREHJHQHUDOO\ DFFXUDWHHYHQLILWߞVQRWSHUIHFWO\DFFXUDWH + LVDOVRZURQJEHFDXVHLWJHWVWKHUHODWLRQVKLSEHWZHHQWKHWZRFROXPQVEDFNZDUGV,WVD\VWKDWWKH YDOXHVLQWKHߡ/HQJWKRIWLPHߢFROXPQLQFUHDVHDQGWKHQGHFUHDVHDVZHUHDGGRZQWKHURZVEXW DFWXDOO\WKH\GHFUHDVHDQGWKHQLQFUHDVH7KLVLVDQRWKHUWKLQJWKH$&7ORYHVWRGRZLWKZURQJDQVZHUV RQWKH6FLHQFHVHFWLRQSURYLGHDQRSWLRQWKDWGLUHFWO\FRQWUDGLFWVWKHGDWDLQWKHKRSHWKDWVRPHWHVW WDNHUVZLOOJHWWKLQJVEDFNZDUGVLQWKHLUKHDGV - LVWKHFRUUHFWDQVZHU$VZHߞYHVHHQWKHUHߞVQRUHDOUHODWLRQVKLSEHWZHHQWKHWZRVHWVRIQXPEHUVߚ DVRQHLQFUHDVHVVWHDGLO\WKHRWKHUGHFUHDVHVDQGWKHQMXPSVXSDWWKHHQG $ORWRISHRSOHZLOOIHHOXQFRPIRUWDEOHVD\LQJWKHUHߞVQRUHODWLRQVKLSEHFDXVHLQDUHDOVFLHQFHFODVV\RX DOPRVWQHYHUERWKHULQYHVWLJDWLQJDSRVVLEOHUHODWLRQVKLSXQOHVV\RXUWHDFKHUDOUHDG\NQRZVWKDW\RX VKRXOGILQGRQH6RLWFDQIHHOZHLUGWREHWROGWRILQGDUHODWLRQVKLSDQGWKHQUHDOL]HWKHUHLVQߞ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ߞWUHTXLUHXVWRILJXUHRXWVSHFLILFQXPEHUVOLNHWKDW6RZHFDQSUREDEO\ VWDUWE\MXVWGRLQJDTXLFNFKHFNRIHDFKWLPHSHULRGWRVHHLIDQ\WKLQJMXPSVRXWDWXV $ FRYHUVWKHHQGRI<HDUWRWKHHQGRI<HDU7KHSHULRGIURPWRRQ)LJXUHVKRZVDSUHWW\IODW OLQHZLWKRXWPXFKFKDQJHLQQHWSURGXFWLYLW\/HWߞVORRNDWWKHQH[WRQH % FRYHUVWKHHQGRI<HDUWRWKHHQGRI<HDU$JDLQWKHOLQHUHPDLQVSUHWW\IODW & FRYHUVWKHHQGRI<HDUWRWKHHQGRI<HDU7KLVSHULRGLQFOXGHVDGUDPDWLFMXPSLQQHW SURGXFWLYLW\&OHDUO\WKLVLVWKHODUJHVWLQFUHDVHRIDQ\DQVZHUFKRLFHZHߞYHVHHQVRIDU ' FRYHUVWKHHQGRI<HDUWRWKHHQGRI<HDU$JDLQLQ)LJXUHWKLVSHULRGLVSUHWW\IODW :HFDQVHHWKDWFKRLFH & LVWKHFOHDUZLQQHUEHFDXVHWKHRWKHUFKRLFHVVKRZOLWWOHRUQRLQFUHDVHLQ QHWSURGXFWLYLW\DQG & VKRZVDELJMXPS ,QP\H[SHULHQFHSHRSOHZKRPLVVWKLVTXHVWLRQXVXDOO\FKRRVH ' 7KHUHDUHWZRUHDVRQVSHRSOHPLJKW GRWKLV2QHUHDVRQLVWKDWWKH\PLJKWWKLQNWKHTXHVWLRQLVDVNLQJZKLFKSHULRGKDVWKHKLJKHVWDPRXQWRI QHWSURGXFWLYLW\LQVWHDGRIWKHODUJHVWLQFUHDVH7KHSHULRGIURP<HDUWR<HDULQ)LJXUHVKRZVD OHYHORISURGXFWLYLW\DWEXWWKHUHߞVQRDFWXDOLQFUHDVHGXULQJWKDWSHULRG7KHRWKHUUHDVRQIRUWKH PLVWDNHLVWKDWSHRSOHRIWHQORRNDW)LJXUHLQVWHDGRI)LJXUH,Q)LJXUHWKHSHULRGIURP<HDUWR <HDUFRQWDLQVWKHODUJHVWLQFUHDVHLQWKHJUDSKߚEXWWKHTXHVWLRQWROGXVWRORRNDW)LJXUHVRWKH JUDSKLQ)LJXUHLVLUUHOHYDQW 6LWXDWLRQVOLNHWKLVUHPLQGXVWKDWLWߞVDOZD\VLPSRUWDQWWRUHDGFDUHIXOO\,WZRXOGEHDVKDPHWRPLVVWKLV TXHVWLRQMXVWEHFDXVHZHZHUHQߞWSD\LQJDWWHQWLRQWRWKHWHVW 3DJH4XHVWLRQ 7KHTXHVWLRQDVNVDWZKLFKWHPSHUDWXUHDOORIWKHOLTXLGVKDGWKHVDPHYROXPHLQ([SHULPHQW,IZHORRN DW([SHULPHQWZHVHHWKDWLWLQYROYHGWUDFNLQJKRZIDUGLIIHUHQWOLTXLGVURVHXSDFDSLOODU\WXEHZKHQ WKH\ZHUHH[SRVHGWRGLIIHUHQWWHPSHUDWXUHV 7KHRQO\JUDSKDVVRFLDWHGZLWK([SHULPHQWLV)LJXUH,Q)LJXUHWHPSHUDWXUHLVPHDVXUHGDFURVVWKH [D[LVDQGWKHULVHRIWKHOLTXLGLVPHDVXUHGRQWKH\D[LV%DVHGRQWKHTXHVWLRQZHQHHGWRILQGDYDOXH IRUZKLFKDOORIWKHOLTXLGVKDGWKHVDPHWHPSHUDWXUHDQGWKHVDPHYROXPH ZHߞOOGLVFXVVWKHFRQQHFWLRQ EHWZHHQYROXPHDQGULVHLQDPRPHQW :HFDQVHHWKDWWKHRQO\SODFHRQWKHJUDSKWKDWVKRZVWKHVDPHYDOXHIRUDOOWKHOLTXLGVDWDJLYHQ WHPSHUDWXUHLVWKHERWWRPOHIWFRUQHURIWKHJUDSKDWGHJUHHV&HOVLXV6R ) LVFRUUHFW1RQHRIWKH RWKHUFKRLFHVFDQEHFRUUHFWEHFDXVHDWDQ\RWKHUWHPSHUDWXUHWKHOLTXLGVKDYHGLIIHUHQWYDOXHVIRUWKH ߡULVHRIOLTXLGߢDORQJWKHYHUWLFDOD[LV ,WPD\QRWEHLPPHGLDWHO\FOHDUWRVRPHWHVWWDNHUVWKDWWKHߡYROXPHߢUHIHUUHGWRLQWKHSURPSW FRUUHVSRQGVWRWKHߡULVHRIOLTXLGߢRQWKHYHUWLFDOD[LVRI)LJXUH,IZHKDYHDOLWWOHDZDUHQHVVRI VFLHQWLILFIXQGDPHQWDOVZHPD\FRPHWRUHFRJQL]HWKDWDQLQFUHDVHLQYROXPHIURPWKHULVLQJKHDWRIWKH ZDWHUEDWKLVWKHUHDVRQWKDWWKHOLTXLGVDPSOHVULVHXSWKHFDSLOODU\WXEH%XWHYHQLIZHGRQߞWUHDOL]H WKDWZHFDQVWLOOQRWLFHWKDWWKHTXHVWLRQUHIHUVWRWKHWHPSHUDWXUHVRIOLTXLGVDPSOHVDQGWKDWWKHRQO\ LQGLFDWLRQRIDQ\WKLQJKDYLQJWRGRZLWKWHPSHUDWXUHLQ([SHULPHQWDSSHDUVLQ)LJXUHߚLQIDFWWKH KRUL]RQWDOD[LVRI)LJXUHLVWKHRQO\SDUWRIWKHHQWLUHSDVVDJHWKDWPHQWLRQVWKHQXPEHUVDQG ZKLFKDUHDQVZHUFKRLFHVIRUWKLVTXHVWLRQ6RZHNQRZWKDW)LJXUHLVZKDWZHVKRXOGEHORRNLQJDW ZKHQZHDQVZHUWKLVTXHVWLRQ)URPWKHUHZHFDQQRWLFHWKDWWKHRQO\WHPSHUDWXUHYDOXHLQ)LJXUHWKDW VKRZVFRPPRQYDOXHVIRUWKHOLTXLGVDPSOHVLVWKHRWHPSHUDWXUHVRYROXPHPXVWEHUHODWHGWRߡULVHRI OLTXLGߢ5HPHPEHUWKDWWKH$&76FLHQFHVHFWLRQRQO\UHTXLUHVYHU\OLWWOHNQRZOHGJHRIVFLHQFHߚLIZH SD\FORVHDWWHQWLRQWRWKHSDVVDJHDQGPDNHVXUHZHߞUHUHDGLQJRXUGDWDIURPWKHULJKWSODFHZHFDQVHH WKDWLWߞVSRVVLEOHWRDQVZHUWKLVTXHVWLRQZLWKRXWUHDOO\NQRZLQJZKDWߞVJRLQJRQLQWKHH[SHULPHQWDWDOO 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVWRILQGWKHXSSHUERXQGDU\RIWKHWKHUPRVSKHUHLQߡWKHGDWDSURYLGHGߢ%XWWKHRQO\ GDWDZHߞUHSURYLGHGLVWKHEL]DUUHGLDJUDPDWWKHERWWRPRISDJHDORQJZLWKWKHRQHSDUDJUDSK ZULWHXSDWWKHWRSRIWKHSDJH,IZHORRNDWDOORIWKDWLQIRUPDWLRQZHߞOOILQGWKDWDFHUWDLQUDQJHRIWKH GLDJUDPLVODEHOHGZLWKWKHZRUGߡWKHUPRVSKHUHߢ%XWQRWKLQJLQGLFDWHVWKHXSSHUERXQGDU\RIWKH WKHUPRVSKHUH ,IZHORRNEHORZWKHߡWKHUPRVSKHUHߢODEHOLQWKHGLDJUDPZHߞOOVHHODEHOVIRUWKHPHVRVSKHUH VWUDWRVSKHUHDQGWURSRVSKHUH%HWZHHQWKRVHODEHOVZHߞOOVHHGDVKHGKRUL]RQWDOOLQHVZLWKWKHODEHOV ߡPHVRSDXVHߢߡVWUDWRSDXVHߢDQGߡWURSRSDXVHߢ:HPLJKWEHWHPSWHGWRWKLQNWKDWWKRVHKRUL]RQWDOOLQHV LQGLFDWHWKHXSSHUERXQGDULHVRIWKHPHVRVSKHUHVWUDWRVSKHUHDQGWURSRVSKHUHߚDQGSHUKDSVWKH\GRIRU DOOZHNQRZ%XWWKHSDVVDJHQHYHUDFWXDOO\VD\VWKDWWKRVHOLQHVUHSUHVHQWWKHERXQGDULHVRUWKDWWKHߡ SDXVHߢVXIIL[RQZRUGVOLNHߡPHVRSDXVHߢLQGLFDWHVDERXQGDU\ (YHQLIZHGLGDVVXPHWKDWWKHߡSDXVHVߢZHUHERXQGDULHV DQGDJDLQWKH\PLJKWDFWXDOO\EHERXQGDULHV ߚWKHSDJHGRHVQߞWH[SOLFLWO\VD\RQHZD\RUWKHRWKHU WKHUHߞVQRߡWKHUPRSDXVHߢDQ\ZKHUHRQWKHSDJH :HPLJKWDOVRWU\WRDSSURDFKWKHTXHVWLRQE\ORRNLQJDWWKHDQVZHUFKRLFHV7KH\DOOLQGLFDWH PHDVXUHPHQWVLQNLORPHWHUV,IZHORRNDWWKHGLDJUDPLWߞVSUHWW\FOHDUWKH\ߞUHDOOUHIHUULQJWRYDOXHVRQ WKHOHIWPRVWYHUWLFDOD[LVZKLFKLVODEHOHGߡDOWLWXGHߢ QRWHWKDWWKHODEHOPDWFKHVXSZLWKWKHZRUG ߡDOWLWXGHߢLQWKHSURPSW 1HDUWKHWRSRIWKDWD[LVOLQHZHFDQVHHWKHYDOXHVDQGZKLFK FRUUHVSRQGWRWKHWKUHHDQVZHUFKRLFHVLQWKHTXHVWLRQ %XWWKHUHߞVQRWKLQJDWDQ\RIWKRVHPDUNHUVWKDWLQGLFDWHVWKHXSSHUERXQGDU\RIWKHWKHUPRVSKHUH6RWKH DQVZHULV - ,QP\H[SHULHQFHDORWRISHRSOHZKRJHWWKLVZURQJFKRRVH + NPEHFDXVHWKDWߞVWKHODUJHVWYDOXH OLVWHGRQWKHDOWLWXGHD[LV%XWWKHUHߞVQRLQGLFDWLRQWKDWWKLVLVZKHUHWKHXSSHUOLPLWRIWKHWKHUPRVSKHUH LVDVZHMXVWVDZ,WߞVMXVWWKDWWKHD[LVKDVWRVWRSVRPHZKHUHDQGZKRHYHUPDGHWKHJUDSKGHFLGHGQRW WRFRQWLQXHWKHDOWLWXGHD[LVSDVWNP $VXVXDOZHGRQߞWQHHGWRKDYHDQ\LGHDZKDWWKHZRUGVߡWKHUPRVSKHUHߢߡPHVRVSKHUHߢߡVWUDWRVSKHUHߢ RUߡWURSRVSKHUHߢPHDQLQRUGHUWRDQVZHUWKLVTXHVWLRQ$OOZHKDYHWRGRLVORFDWHWKHZRUG ߡWKHUPRVSKHUHߢLQWKHGLDJUDPDIWHUVHHLQJLWLQWKHTXHVWLRQDQGWKHQVHDUFKIRUVRPHLQGLFDWLRQRIDQ XSSHUERXQGDU\DQGUHDOL]HWKDWWKHUHLVQߞWRQHRQWKHGLDJUDP 3DJH4XHVWLRQ 7KLVTXHVWLRQJLYHVXVDOLWWOHH[WUDLQIRUPDWLRQDQGWKHQDVNVXVDTXHVWLRQEDVHGRQWKDWLQIRUPDWLRQ$V LWWXUQVRXWWKHDQVZHUWRWKHTXHVWLRQLVDFWXDOO\FRQWDLQHGZLWKLQWKHTXHVWLRQLWVHOILIZHWKLQNFDUHIXOO\ DERXWLW7KLVVSHFLILFVLWXDWLRQGRHVQߞWDULVHYHU\RIWHQRQWKH$&7EXWLWߞVVWLOODYHU\JRRG GHPRQVWUDWLRQRIWKHJHQHUDOLPSRUWDQFHRIUHDGLQJFORVHO\DQGWKLQNLQJFDUHIXOO\ 7KHTXHVWLRQWHOOVXVWKDWDWPRVSKHULFERXQGDULHVDUHKLJKHUWKDQXVXDORYHUDUHDVZLWKPRUHGLUHFWVRODU UDGLDWLRQ7KHQLWDVNVZKDWZRXOGPRVWOLNHO\EHWUXHLIWKHUHZHUHOHVVVRODUUDGLDWLRQWKDQWKHUH FXUUHQWO\LV /HWߞVVWRSDQGWKLQNDERXWWKDWIRUDPRPHQW,IPRUHVRODUUDGLDWLRQOHDGVWRKLJKHUERXQGDULHVWKHQOHVV VRODUUDGLDWLRQDXWRPDWLFDOO\OHDGVWRORZHUERXQGDULHVLIZHFRQVLGHUWKHVLWXDWLRQORJLFDOO\7KH SDVVDJHDQGWKHGLDJUDPGRQߞWVD\DQ\WKLQJH[SOLFLWO\DERXWDWPRVSKHULFERXQGDULHVRUFKDQJHVLQWKH DPRXQWRIVRODUUDGLDWLRQEXWWKHFRQFOXVLRQLVLQHVFDSDEOHLIZHߞUHWROGWKDWPRUHVRODUUDGLDWLRQOHDGV WRKLJKHUERXQGDULHV7KH$&7ߞVVROXWLRQWRWKLVTXHVWLRQVRUWRIKLQWVDWWKLVRQSDJHRIWKH5HG %RRNEXWLWGRHVQߞWH[SODLQWKHUHDVRQLQJEHKLQGWKLVFRQFOXVLRQ6ROHWPHVKRZ\RXZK\LWKDVWREH WUXH 7KHWHUPVߡPRUHߢDQGߡKLJKHUߢDUHUHODWLYHWHUPV7KH\RQO\PDNHVHQVHZKHQWKH\ߞUHXVHGLQ FRPSDULVRQWRWKLQJVWKDWDUHVPDOOHURUORZHULQVRPHZD\6RLIZHߞUHWROGDERXWDQDUHDZLWKߡPRUH GLUHFWVRODUUDGLDWLRQߢZHKDYHWRDVNRXUVHOYHVߡPRUHWKDQZKDW"ߢ7KHDQVZHURIFRXUVHLVWKDWLWߞV PRUHWKDQWKHVRODUUDGLDWLRQLQDQDUHDZLWKOHVVGLUHFWVRODUUDGLDWLRQ6LPLODUO\LIZHߞUHWROGWKDWPRUH UDGLDWLRQOHDGVWRߡKLJKHUߢߡDWPRVSKHULFERXQGDULHVߢZHVKRXOGDVNRXUVHOYHVߡKLJKHUWKDQZKDW"ߢ7KH DQVZHUWKHUHLVWKDWWKH\ߞUHKLJKHUWKDQDWPRVSKHULFERXQGDULHVWKDWDUHORZHU,ILWVRXQGVOLNH,ߞPMXVW WDONLQJLQFLUFOHVWKDWߞVEHFDXVH,DPߚDQGWKDWߞVWKHZKROHSRLQWLIZHVD\WKDWPRUHUDGLDWLRQOHDGVWR KLJKHUERXQGDULHVWKDWߞVDXWRPDWLFDOO\WKHVDPHWKLQJDVVD\LQJWKDWOHVVUDGLDWLRQOHDGVWRORZHU ERXQGDULHV<RXFDQߞWKDYHRQHVLWXDWLRQZLWKRXWWKHRWKHU,WZRXOGEHDORJLFDOLPSRVVLELOLW\ 6R * LVWKHFRUUHFWDQVZHU &KRLFH ) LVWKHH[DFWRSSRVLWHRIWKHFRUUHFWDQVZHUZKLFKPLJKWVRXQGVLOO\LIZHߞYHXQGHUVWRRGWKH TXHVWLRQFRUUHFWO\EXWLWߞVH[DFWO\WKHNLQGRIZURQJDQVZHUWKDWDORWRISHRSOHZLOOSLFNLIWKH\ DFFLGHQWDOO\PLVVDZRUGVRPHZKHUHLQWKHTXHVWLRQRULQWKHDQVZHUFKRLFH7KH$&7IUHTXHQWO\ LQFOXGHVDZURQJDQVZHUWKDWߞVWKHGLUHFWRSSRVLWHRIWKHULJKWDQVZHUDQGLWGRHVVRYHU\GHOLEHUDWHO\ EHFDXVHLWNQRZVWKDWDFHUWDLQSHUFHQWDJHRIWHVWWDNHUVZLOOPDNHVRPHVPDOOPLVWDNHRQDQ\JLYHQ TXHVWLRQ1HYHUIRUJHWWKDWWKH$&7LVSULPDULO\DUHDGLQJWHVWDQGFDUHIXOUHDGLQJLVWKHPRVWLPSRUWDQW VNLOO\RXFDQGHYHORSQRPDWWHUZKDWVHFWLRQ\RXߞUHZRUNLQJRQ +RZPDQ\WLPHVKDYH,UHSHDWHGWKLV LGHDE\QRZ",WPXVWEHLPSRUWDQWRUVRPHWKLQJ 3DJH4XHVWLRQ 7KLVPLJKWVRXQGOLNHDQLQWLPLGDWLQJTXHVWLRQWRPRVWWHVWWDNHUV:HPLJKWUHDGWKLVDQGZRQGHUKRZ WKHUHFDQHYHQEHDQ\XQGLVFRYHUHGVKULPSVSHFLHVOHIWLQWKHVWFHQWXU\RUZK\LWߞVRND\WRDVVXPHWKDW WKHVKULPSDUHRQO\OLPLWHGE\WHPSHUDWXUH LQVWHDGRIE\FXUUHQWVRUE\WKHSUHVHQFHRIDSUHGDWRURUMXVW E\WKHLULQGLYLGXDOVKULPSLVKSUHIHUHQFHV %XWZHWUDLQHGWHVWWDNHUVNQRZWKDWWKH$&7LVGHOLEHUDWHO\ WU\LQJWRPDNHWKHTXHVWLRQVRXQGDVVFLHQWLILFDQGWHFKQLFDODVSRVVLEOHMXVWWRVFDUHRIIWKHXQWUDLQHGWHVW WDNHUV:HDOVRNQRZWKDWQRQHRIWKDWVWXIIUHDOO\PDWWHUVWRXVDVWHVWWDNHUV :HߞUHWROGWRORRNDW)LJXUH:HߞUHJLYHQDGHSWKRIPDQGZHQHHGWRILQGDFRUUHVSRQGLQJ WHPSHUDWXUH 7KDWPLJKWVRXQGVLPSOHHQRXJKEHIRUH\RXDFWXDOO\WU\WRGRLWEXWPDQ\WHVWWDNHUVVLPSO\FDQߞWILQGWKH WHPSHUDWXUHGDWDRQ)LJXUHDWOHDVWQRWZKHQWKH\ILUVWORRNIRULW6RWKH\JLYHXSDQGMXVWJXHVV ZKLFKLVDPLVWDNHRIFRXUVH :HPXVWDOZD\VUHPHPEHUZKDWWKH$&76FLHQFHVHFWLRQLVUHDOO\WHVWLQJ,WߞVQRWDVWDQGDUGL]HGWHVWRI \RXUVKULPSUHODWHGNQRZOHGJHߚLILWZHUHLWPLJKWPDNHVHQVHIRUDJUDSKDERXWVKULPSWROHDYHRXW VRPHLPSRUWDQWLQIRUPDWLRQ,QVWHDGWKH$&76FLHQFHVHFWLRQLVDWHVWRI\RXUDELOLW\WRILQGLQIRUPDWLRQ WKDWߞVODLGRXWIRU\RXLQWH[WVJUDSKVFKDUWVDQGGLDJUDPV6RLIWKLVTXHVWLRQWHOOV\RXWRORRNDW)LJXUH DQGGUDZDFRQFOXVLRQDERXWWHPSHUDWXUHWKHQWKHUHPXVWߚDQG,PHDQ0867ߚEHVRPHNLQGRI LQIRUPDWLRQDERXWWHPSHUDWXUHLQ)LJXUH,IZHGRQߞWVHHLWZKHQZHILUVWORRNIRULWWKHQZHQHHGWR ORRNPRUHFDUHIXOO\EHFDXVHLW0867EHWKHUH $VLWWXUQVRXWPRVWWHVWWDNHUVLJQRUHWKHWRSKRUL]RQWDOD[LVRQWKHJUDSKLQ)LJXUHZKLFKLVZKHUHWKH WHPSHUDWXUHLQIRUPDWLRQDSSHDUV7KH\DOVRLJQRUHWKHNH\DERYHWKHJUDSKZKLFKDOVRPHQWLRQV WHPSHUDWXUH6RWKH\KXQWLQYDLQIRUDVHWRIQXPEHUVLQWKHVDPHVFDOHDVWKHQXPEHUVLQWKHDQVZHU FKRLFHV 7KDWߞVWKHUHDVRQ,ZDQWWRGLVFXVVWKLVTXHVWLRQ7KH5HG%RRNVROXWLRQRQSDJHVLPSO\VD\VWKDWWKH WHPSHUDWXUHFXUYH ZKLFKLVWKHRQHZLWKVROLGEODFNGRWVRQLWVGDWDSRLQWV KDVDWHPSHUDWXUHYDOXHRI R&FRUUHVSRQGLQJWRDQRFHDQGHSWKRIP7KDWߞVWUXHEXWLWGRHVQߞWDGGUHVVWKHIDFWWKDWPRVWWHVW WDNHUVZKRVWUXJJOHZLWKWKLVTXHVWLRQGRVREHFDXVHWKH\FDQߞWORFDWHWKHWHPSHUDWXUHLQIRUPDWLRQLQWKH ILUVWSODFHEHFDXVHWKH\ߞUHQRWFRQGLWLRQHGWRORRNDWKRUL]RQWDOD[HVWKDWDUHDERYHDJUDSKLQVWHDGRI EHORZLW7KH5HG%RRNDOVRGRHVQߞ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ߚHYHQZKHQLWVHHPVQRWWREHDWILUVW ,QWKHHQGWKLVTXHVWLRQUHDOO\MXVWERLOVGRZQWRWKHIROORZLQJߡ:KLFKRIWKHDQVZHUFKRLFHVFRQWDLQVD WHPSHUDWXUHUHODWHGQXPEHUWKDWFRUUHVSRQGVLQVRPHZD\WRDGHSWKRIPRQ)LJXUH"ߢ2QFHZH QRWLFHWKDWWKHFXUYHZLWKWKHILOOHGLQGRWVUHSUHVHQWVWHPSHUDWXUHDQGWKDWWKHKRUL]RQWDOD[LVDWWKHWRSRI WKHJUDSKLQGLFDWHVWHPSHUDWXUHLWߞVSUHWW\FOHDUWKDWR&FKRLFH % PXVWEHFRUUHFW 6RZHQHYHUKDGWRNQRZDQ\WKLQJDERXWVKULPSWRILQGWKDWDQVZHU,WMXVWWRRNSUDFWLFHDQGFDUHIXO UHDGLQJ 3UREDEO\WKHPRVWFRPPRQSUREOHPWKDWSHRSOHUXQLQWRKHUHLVWKDWWKH\IDLOWRQRWLFHWKHߡWHPSHUDWXUHߢ ODEHORQWKHWRSRI)LJXUH$OZD\VUHPHPEHUWRORRNDWWKHHQWLUHJUDSKFKDUWRUZKDWHYHUWKHSDVVDJH GLUHFWV\RXWRLQRUGHUWRPDNHVXUH\RXߞUHJHWWLQJDOOWKHLQIRUPDWLRQ2WKHUZLVHLWߞVYHU\HDV\WRPLVVD TXHVWLRQWKDW\RXFRXOGRWKHUZLVHKDYHDQVZHUHGFRUUHFWO\ 3DJH4XHVWLRQ 7KLVTXHVWLRQLVDELWPRUHPLVOHDGLQJWKDQPRVW$&76FLHQFHTXHVWLRQVZLOOEHEHFDXVHLWVHHPVWR LQFRUSRUDWHRQO\GDWDIURP7DEOHZKHQZHILUVWUHDGLWLQWKHHQGLWWXUQVRXWWKDW7DEOHGRHVQߞWKDYH DOOWKHLQIRUPDWLRQZHQHHG0RVWWHVWWDNHUVZLOOQHHGWRFRQVXOWERWK7DEOHDQG)LJXUHWRJHWKHU WKRXJKLWߞVDUJXDEO\SRVVLEOHWRDQVZHUWKHTXHVWLRQXVLQJRQO\)LJXUH )LUVWOHWߞVWDONDERXWKRZWRDSSURDFKWKHTXHVWLRQXVLQJERWK7DEOHDQG)LJXUHZKLFKLVWKHDSSURDFK WKDWPRVWWHVWWDNHUVVHHPWRIROORZZKHQWKH\DQVZHUWKHTXHVWLRQFRUUHFWO\$IWHUWKDWZHߞOOGLVFXVVD ZD\WRDSSURDFKWKHTXHVWLRQWKDWUHOLHVRQO\RQ)LJXUH 7KHTXHVWLRQXVHVSKUDVHVOLNHߡ7DEOHߢDQGߡYPDQGYPߢDOORIZKLFKVHHPWRLQGLFDWHWKDW7DEOH ZLOOFRQWDLQWKHDQVZHUWRWKHTXHVWLRQZKLFKLVXOWLPDWHO\DERXWߡR[\JHQSDUWLDOSUHVVXUHVEHORZPP +Jߢ%XWZKHQZHORRNDW7DEOHZHGRQߞWVHHDQ\WKLQJDWDOODERXWR[\JHQSDUWLDOSUHVVXUHRUDQ\WKLQJ PHDVXUHGLQXQLWVRIPP+J 0DQ\XQWUDLQHGWHVWWDNHUVZRXOGSDQLFDWWKLVPRPHQWEXWZHNQRZWKHNH\WRWKHFRUUHFWDQVZHUPXVWEH H[SOLFLWO\VWDWHGVRPHZKHUHRQWKHSDJHVRZHMXVWNHHSORRNLQJIRUVRPHWKLQJUHODWHGWRR[\JHQSDUWLDO SUHVVXUHDQGRUWKHPP+JXQLW7KHUHDUHRQO\WZRRWKHUSODFHVWRORRNWKHSDUDJUDSKDWWKHEHJLQQLQJRI WKHSDVVDJHDQGWKHJUDSKLQ)LJXUH:HߞOOVHHWKDWߡR[\JHQSDUWLDOSUHVVXUH PP+J ߢLVWKHQDPHRI WKHERWWRPKRUL]RQWDOD[LVRQ)LJXUH7KLVORRNVSURPLVLQJ1RZRXUMRELVWRILJXUHRXWKRZWKHR[\JHQ SDUWLDOSUHVVXUHYDOXHVIURP)LJXUHUHODWHWRWKHYPDQGYPYDOXHVIURP7DEOH 7KHRQO\GDWDWKDWߞVFRPPRQWRERWK7DEOHDQG)LJXUHLVWKHGDWDWKDWKDVWRGRZLWKRFHDQGHSWK PHDVXUHGLQPHWHUV7KHODEHORQWKHYHUWLFDOD[LVLQ)LJXUHLVߡRFHDQGHSWK P ߢDQG7DEOHKDVD FROXPQZLWKWKHKHDGLQJߡ'HSWKUDQJH P ߢ7KLVFRPPRQGDWDLVWKHRQO\WKLQJFRQQHFWLQJ7DEOHWR )LJXUHZKLFKPHDQVLWߞVWKHRQO\WKLQJWKDWFDQSRVVLEO\FRQQHFWWKHLGHDRIYPDQGYP ZKLFK DSSHDULQ7DEOH WRWKHLGHDRIR[\JHQSDUWLDOSUHVVXUH ZKLFKDSSHDUVLQ)LJXUH ,IZHORRNDWWKHߡ'HSWKUDQJHߢYDOXHVIRUYPDQGYPZHVHHWKDWERWKKDYHUDQJHVWKDWHQGZLWK P,IZHORRNDWPRQWKHYHUWLFDOD[LVRI)LJXUHZHVHHWKDWLWFRUUHVSRQGVWRDQR[\JHQSDUWLDO SUHVVXUHDURXQGPP+J WKHFXUYHVKRZLQJR[\JHQSDUWLDOSUHVVXUHLVWKHRQHZLWKWKHHPSW\ER[HVDW WKHGDWDSRLQWVDVWKHNH\DWWKHWRSRI)LJXUHLQGLFDWHV 6RZHVHHWKDWWKHUHߞVDFRUUHODWLRQEHWZHHQPRIGHSWKDQGDQR[\JHQSDUWLDOSUHVVXUHRIPP+J 7KDWPHDQVFKRLFH & LVFRUUHFWEHFDXVHLWVWDWHVWKDWYPDQGYPFDQߞWJREH\RQGPLQGHSWK EHFDXVHWKH\FDQߞWVWDQGPRUHWKDQPP+JRIR[\JHQSDUWLDOSUHVVXUH $V,PHQWLRQHGDERYHLWߞVDUJXDEO\SRVVLEOHWRDQVZHUWKLVTXHVWLRQZLWKRXWHYHUORRNLQJDW7DEOH:H FDQGRWKDWLIZHIRFXVRQWKHDQVZHUFKRLFHVIURPWKHYHU\EHJLQQLQJDQGQRWLFHWKDWWKUHHRIWKHIRXU FKRLFHVDUHUHODWHGWRWHPSHUDWXUHRUGHSWKDQGWKDW)LJXUHUHODWHVR[\JHQSDUWLDOSUHVVXUH ZKLFK DSSHDUVLQWKHSURPSW WRWHPSHUDWXUHDQGGHSWK ZKLFKDSSHDULQWKHDQVZHUFKRLFHV )URPWKHUHZHMXVWORRNDWHDFKRIWKHDQVZHUFKRLFHV $ LVZURQJEHFDXVH)LJXUHGRHVQߞWUHODWHWKHWHPSHUDWXUHYDOXHRIR&WRDQR[\JHQSDUWLDOSUHVVXUH RIPP+J,QVWHDGDWHPSHUDWXUHRIR& IRXQGRQWKHXSSHUKRUL]RQWDOD[LV FRUUHVSRQGVWRDQ R[\JHQSDUWLDOSUHVVXUHRIDERXWPP+J IRXQGRQWKHORZHUKRUL]RQWDOD[LV % LVZURQJEHFDXVHR[\JHQSDUWLDOSUHVVXUH ZKLFKLVPHQWLRQHGLQWKHTXHVWLRQ RQO\DSSHDUVLQ)LJXUH DQG)LJXUHGRHVQߞWVD\DQ\WKLQJDERXWZDWHUFRQWHQWVRWKLVDQVZHUFKRLFHLVLUUHOHYDQWWRWKHGDWD 7KLVFKRLFHLVDOVRLQFRUUHFWEHFDXVH7DEOHVKRZVWKDWYPDQGYPKDYHZDWHUFRQWHQWOHYHOV URXJKO\LQOLQHZLWKDOOWKHRWKHUVSHFLHVEXWIRUSXUSRVHVRIWKLVGHPRQVWUDWLRQZHߞUHDSSURDFKLQJWKH TXHVWLRQXVLQJRQO\)LJXUH & LVFRUUHFWEHFDXVH)LJXUHGRHVVKRZWKDWDQR[\JHQSDUWLDOSUHVVXUHRIPP+JFRUUHVSRQGVWRD GHSWKRIP ' LVZURQJEHFDXVH)LJXUHVKRZVWKDWDGHSWKRIPFRUUHVSRQGVWRDQR[\JHQSDUWLDOSUHVVXUHRI URXJKO\PP+J ,QWKLVVHFRQGDSSURDFKWRWKHTXHVWLRQZHߞUHOLWHUDOO\WUHDWLQJWKHHQWLUHTXHVWLRQDVWKRXJKLWVLPSO\ VDLGߡ:KLFKRIWKHIROORZLQJDQVZHUFKRLFHVFRQWDLQVDQXPEHUWKDWߞVUHODWHGWRPP+JLQWKH SURYLGHGGDWD"ߢ,WPD\VRXQGULGLFXORXVEXWWKH$&76FLHQFHVHFWLRQDFWXDOO\UHZDUGVWKLVNLQGRI DSSURDFKLQDORWRIFDVHV,WߞVMXVWRQHPRUHPDQLIHVWDWLRQRIDSULQFLSOHWKDWZHߞYHVHHQSOD\HGRXWRYHU DQGRYHUDJDLQDFURVVWKHHQWLUH$&7DPXOWLSOHFKRLFHWHVWFDQQHYHUWHVW\RXUDELOLW\WRJHQHUDWH DQVZHUVRQ\RXURZQ0XOWLSOHFKRLFHWHVWVFDQRQO\HYDOXDWH\RXUDELOLW\WRLGHQWLI\DFRUUHFWDQVZHU IURPDVHWRISURYLGHGFKRLFHV2QWKH$&76FLHQFHVHFWLRQWKDWW\SLFDOO\MXVWPHDQVILJXULQJRXWZKLFK DQVZHUFKRLFHFRQWDLQVDQXPEHUWKDWߞVUHODWHGWRVRPHWKLQJLQWKHSURPSW )LQDOO\,ߞGOLNHWRDGGUHVVWKHDQVZHUFKRLFHVIRUWKLVTXHVWLRQ1RWLFHWKDW $ WDONVDERXWWHPSHUDWXUH % WDONVDERXWZDWHUFRQWHQWDQG & DQG ' ERWKWDONDERXWGHSWK$VZHߞYHRIWHQVHHQWKH$&7OLNHV WRLQFOXGHZURQJDQVZHUVWKDWPLPLFHOHPHQWVRIWKHULJKWDQVZHUVRLIZHVHHWZRDQVZHUFKRLFHVZLWK RQHWKLQJLQFRPPRQ GHSWK DQGWKHQWZRRWKHUDQVZHUFKRLFHVWKDWHDFKGLVFXVVWKHLURZQXQLTXH FRQFHSWV WHPSHUDWXUHDQGZDWHUFRQWHQW WKHUHߞVDYHU\JRRGFKDQFHWKDWRQHRIWKHFKRLFHVUHODWHGWR GHSWKLVJRLQJWREHFRUUHFW,WߞVQRWDQDEVROXWHO\FHUWDLQJXDUDQWHHEXWLWߞVDYHU\VWURQJOLNHOLKRRG.HHS WKDWLQPLQGDV\RXZRUNWKURXJKIXWXUH$&76FLHQFHTXHVWLRQV 3DJH4XHVWLRQ 7KLVTXHVWLRQLVIURPRQHRIWKH$&76FLHQFHSDVVDJHVWKDWߞVEDVLFDOO\DUHDGLQJFRPSUHKHQVLRQSDVVDJH $VZHߞ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ߞGDSSURDFKWKLVTXHVWLRQE\QRWLQJDQ\FRQFHSWVWKDWVWDQGRXWDVSUREDEOHH[DPSOHV RIMDUJRQRUWHFKQLFDOWHUPLQRORJ\UHODWHGWRWKHSDVVDJH2QHWKLQJWKDWOHDSVRXWDWPHULJKWDZD\LVWKH LGHDRIRQHFKLPQH\EHLQJߡPRUHHIILFLHQWߢWKDQDQRWKHUFKLPQH\ZKLFKDSSHDUVLQWKHSURPSW7KLVLVD SUHWW\VWUDQJHSKUDVHVLQFHSHRSOHLQHYHU\GD\OLIHGRQߞWQRUPDOO\WDONDERXWFKLPQH\VEHLQJHIILFLHQWRU LQHIILFLHQW7KDWPHDQVLWߞVSUREDEO\VRPHWKLQJWKDWDSSHDUVGLUHFWO\LQWKHWH[WDQGILQGLQJLWLQWKHWH[W ZLOOSUREDEO\JLYHPHDJRRGLQGLFDWLRQRIZKHUH,FDQILQGWKHDQVZHU ,ߞGDOVRZDQWWRQRWLFHVLPLODULWLHVDQGGLIIHUHQFHVDPRQJWKHDQVZHUFKRLFHVDQGWKLQNDERXWKRZWKRVH WKLQJVPLJKWEHUHOHYDQWWRWKHFRQFHSWVLQWKHTXHVWLRQ(DFKDQVZHUFKRLFHWDONVDERXWRQHRIWKH FKLPQH\VEHLQJWDOOHUWKDQWKHRWKHUDQGZKHWKHUWKHVWXGHQWVZRXOGDJUHHRQZKLFKRQHVKRXOGEHWDOOHU 6RLWORRNVOLNHWKHFRQFHSWV,ZDQWWRILQGLQWKHSDVVDJHDUHJRLQJWREHUHODWHGWRFKLPQH\VEHLQJ HIILFLHQWDQGRUWDOO:LWKWKDWLQPLQG,ߞGWDNHDORRNDWWKHVWDWHPHQWVPDGHE\WKHGLIIHUHQWVWXGHQWV ,GRQߞWVHHDQ\WKLQJLQWKHILUVWSDUDJUDSKRI6WXGHQWߞVVWDWHPHQWDERXWFKLPQH\HIILFLHQF\RUKHLJKW%XW WKHILUVWVHQWHQFHRIWKHVHFRQGSDUDJUDSKRI6WXGHQWߞVVWDWHPHQWVD\Vߡ$VFKLPQH\KHLJKWLQFUHDVHV HIILFLHQF\LQFUHDVHVߢ7KHILUVWVHQWHQFHRIWKHVHFRQGSDUDJUDSKRI6WXGHQWߞVVWDWHPHQWFRQWDLQVWKH H[DFWVDPHVHQWHQFHߡ$VFKLPQH\KHLJKWLQFUHDVHVHIILFLHQF\LQFUHDVHVߢ6RERWKVWXGHQWVH[SOLFLWO\VWDWH WKDWLQFUHDVHGFKLPQH\KHLJKWDQGLQFUHDVHGHIILFLHQF\JRWRJHWKHU7KDWPDWFKHVZLWKWKHFRUUHFWDQVZHU FKRLFH % 1RWLFHWKDWWKLVDSSURDFKGRHVQߞWUHDOO\JLYHXVDQ\LGHDZKDWWKHVWXGHQWVPHDQZKHQWKH\WDONDERXW FKLPQH\HIILFLHQF\$OVRQRWLFHWKDWLWGRHVQߞWPDWWHUZKHWKHUZHXQGHUVWDQGFKLPQH\HIILFLHQF\DWDOOߚ WKHRQO\WKLQJWKDWPDWWHUVLVWKDWZHFDQFOHDUO\LGHQWLI\VHQWHQFHVLQWKHSDVVDJHWKDWUHODWHFKLPQH\ HIILFLHQF\WRKHLJKW $OVRQRWLFHDOOWKHZD\VZHFRXOGPHVVWKLVTXHVWLRQXSLIZHߞUHQRWFDUHIXOZLWKRXUUHDGLQJ:HPLJKW PLVUHDGWKHZRUGߡLQFUHDVHVߢDVߡGHFUHDVHVߢ:HPLJKWPLVUHDG&KLPQH\<DV&KLPQH\;RUYLFHYHUVD $Q\RQHRIWKRVHPLVWDNHVZRXOGFDXVHXVWRDQVZHUWKHTXHVWLRQLQFRUUHFWO\7KH$&7GHOLEHUDWHO\VHWV XSTXHVWLRQVZLWKVHYHUDOVPDOOGHWDLOVOLNHWKHVHDQGWKHQSRVLWLRQVWKHVHWRIZURQJDQVZHUVWR DQWLFLSDWHVPDOOPLVWDNHVLQUHDGLQJRUFRPSUHKHQVLRQDVZHߞYHVHHQFRXQWOHVVWLPHVE\QRZ.HHSWKLV LQPLQGHYHU\VHFRQG\RXߞUHWDNLQJWKH$&7VR\RXFDQPDNHVXUH\RXGRQߞWIDOOIRUDQ\RIWKHWHVWߞV WUDSV 3DJH4XHVWLRQ 7KLVTXHVWLRQRIWHQERWKHUVWHVWWDNHUVEHFDXVHLWVHHPVWRWDOO\XQUHODWHGWRWKHSDVVDJHDWILUVWVLQFH 6WXGHQWߞVH[SODQDWLRQLVDOODERXWVPRNHJRLQJXSDFKLPQH\QRWDERXWSODQHVIO\LQJ%XWZHFDQVHHWKDW WKHFRPPRQHOHPHQWLVWKHLGHDRIDLUPRYLQJRYHUVRPHWKLQJDQGVRPHWKLQJULVLQJXS)RUWKHFKLPQH\ LWߞVZLQGEORZLQJRYHUWKHWRSRIWKHFKLPQH\FDXVLQJVPRNHWRULVHXSWKHFKLPQH\ߚVRZKDWZRXOGWKDW PHDQIRUDQDLUSODQH" /HWߞVORRNDWH[DFWO\ZKDW6WXGHQWVD\V ߡ:KHQDLUDWWKHWRSRIWKHFKLPQH\PRYHVDWDKLJKHUVSHHGWKDQDLUDWWKHERWWRPRIWKHFKLPQH\WKH SUHVVXUHGLIIHUHQFHEHWZHHQWKHERWWRPDQGWKHWRSRIWKHFKLPQH\LVVRJUHDWWKDWDLULVIRUFHGXSZDUG FDUU\LQJVPRNHZLWKLWߢ 6RZKHQWKHDLURQWRSLVPRYLQJIDVWHUWKDQWKHDLURQWKHERWWRPDLULVIRUFHGXSZDUGDQGLWFDUULHVWKH VPRNHZLWKLW+RZZRXOGWKDWILWLQWRWKHH[SODQDWLRQIRUDQDLUSODQHVWD\LQJXSLQWKHDLU",QWKHFDVHRI DQDLUSODQHWKHDLUSODQHLVEHKDYLQJOLNHWKHVPRNHGRHVߚLWߞVULVLQJEHFDXVHWKHDLUXQGHUQHDWKLWLV ULVLQJ6RZHZDQWWKHDQVZHUFKRLFHWKDWGHVFULEHVVRPHWKLQJVLPLODUWRZKDWFDXVHVWKHVPRNHWRULVHߚ VSHFLILFDOO\WKHRQHWKDWGHVFULEHVDLUPRYLQJIDVWHURYHUVRPHWKLQJWKDQLWPRYHVDWWKHERWWRPRI VRPHWKLQJDQGFDXVLQJWKDWWKLQJWRULVHDVDUHVXOW7KDWPHDQVFKRLFH ) PXVWEHFRUUHFW $VDOZD\VOHWߞVWDNHDPRPHQWWRQRWLFHWKHUHVWRIWKHDQVZHUFKRLFHVDQGWKLQNDERXWKRZWKH\UHODWHWR WKHDQVZHUFKRLFHZHWKLQNLVFRUUHFW7KHILUVWWZRFKRLFHVUHODWHWRDGLIIHUHQFHDERYHWKHZLQJDV RSSRVHGWREHORZLWDQGWKHODVWWZRFKRLFHVUHODWHWRDGLIIHUHQFHLQIURQWRIWKHZLQJDVRSSRVHGWR EHKLQGLW:HFDQEHVXUHWKHODVWWZRFKRLFHVDUHZURQJVLQFHQRWKLQJLQ6WXGHQWߞVVWDWHPHQWKDV DQ\WKLQJWRGRZLWKWKLQJVLQIURQWRIWKHFKLPQH\RUEHKLQGLW:LWKLQWKHILUVWWZRFKRLFHVZHVHHDQRWKHU FRPPRQDQVZHUFKRLFHSDWWHUQRQWKH$&76FLHQFHVHFWLRQHDFKFKRLFHLVWKHH[DFWRSSRVLWHRIWKH RWKHU$VWUDLQHGWHVWWDNHUVZHNQRZWKDWWKH$&7LVKRSLQJZHߞOOPLVUHDGRUPLVLQWHUSUHWWKHWH[WRUWKH TXHVWLRQDQGHQGXSFKRRVLQJDQDQVZHUWKDWߞVH[DFWO\WKHRSSRVLWHRIWKHFRUUHFWRQH6RZHMXVWKDYHWR PDNHVXUHZHUHDGYHU\FDUHIXOO\WRNHHSIURPJHWWLQJFRQIXVHGEHWZHHQ ) DQG * ,IZHGRLWߞVFOHDU WKDW ) LVFRUUHFW $V\RXߞYHSUREDEO\QRWLFHGE\QRZWKH$&7JLYHVXVWKHRSSRUWXQLW\WREHZURQJEHFDXVHRIVRPH WULYLDOPLVWDNHOLNHWKLVRQDOPRVWHYHU\VLQJOHTXHVWLRQ,I\RXZDQWWRPD[LPL]H\RXUVFRUH\RXUHDOO\ KDYHWREHFRPHREVHVVLYHDERXWQRWPDNLQJWKHVHVPDOOPLVWDNHVZKLFKLVZK\,NHHSSRLQWLQJWKHPRXW IRUHYHU\VLQJOHH[SODQDWLRQ 3DJH4XHVWLRQ 7KH5HG%RRNߞVVROXWLRQIRUWKLVTXHVWLRQRQSDJHHQGVZLWKWKHSKUDVHߡDOORWKHUH[SHULPHQWDO SURFHGXUHVZRXOGEHKHOGFRQVWDQWߢ7KDWߞVDQDZIXOO\VFLHQFH\ EXWQRWDFWXDOO\VFLHQWLILF SKUDVH DQGWKRVHNLQGVRISKUDVHVRIWHQOHDGWHVWWDNHUVWRWKLQNWKH\KDYHWRXQGHUVWDQGDFWXDOVFLHQFHLQRUGHUWR GRZHOORQWKH$&76FLHQFHVHFWLRQ:KLOH,HQFRXUDJHHYHU\RQHWRVWXG\DQGXQGHUVWDQGVFLHQFHLQUHDO OLIHDFWXDOVFLHQFHKDVSUDFWLFDOO\QREHDULQJRQWKH$&7ZKDWVRHYHU:HGRQߞWQHHGWRNQRZZKDWLW PHDQVIRUDSURFHGXUHWREHߡKHOGFRQVWDQWߢHYHQWKRXJKWKH5HG%RRNߞVVROXWLRQXVHVWKDWSKUDVHߚZH FDQVWLOODQVZHUWKHTXHVWLRQMXVWE\UHDGLQJWKHSDVVDJHDQGILQGLQJWKHDQVZHUFKRLFHWKDWUHSHDWVWKH VDPHFRQFHSWVIURPWKHSDVVDJH 7KLVTXHVWLRQRIWHQLQWLPLGDWHVWHVWWDNHUVZKRߞYHQHYHUWDNHQFKHPLVWU\EHIRUHEHFDXVHWKH\DVVXPHLWߞV WKHNLQGRIWKLQJWKH\VKRXOGKDYHOHDUQHGLQVFKRRO%XWZHWUDLQHGWHVWWDNHUVNQRZWKDWWKHDQVZHUWRD IDLUO\WHFKQLFDOTXHVWLRQOLNHWKLVPXVWEHVRPHZKHUHRQWKHSDJH6RRXUMRELVMXVWWRILQGLW 7KHTXHVWLRQPHQWLRQVFKDQJLQJDFRORULQJDJHQWLQWKHH[SHULPHQWDQGWKHQPDNLQJDFKDQJHWRWKH SURFHGXUHRIWKHH[SHULPHQWDVZHOO$JDLQWKLVZLOOEHDWRWDOO\IRUHLJQFRQFHSWWRPRVWWHVWWDNHUV HYHQLIWKH\ߞYHWDNHQFKHPLVWU\LQKLJKVFKRRO7RILQGWKHDQVZHUZHQHHGWRVHHZKDWWKHTXHVWLRQVD\V DERXWWKHVLJQLILFDQFHRIWKHFRORULQJDJHQWLQWKHVHH[SHULPHQWVDQGZHQHHGWRVHHZKLFKDQVZHUFKRLFH UHIOHFWVFRQFHSWVWKDWDSSHDULQWKHSDVVDJH)RUWKDWZHQHHGWRJREDFNWRWKHSDUWRIWKHSDVVDJHWKDW PHQWLRQVWKLVFRORULQJDJHQWDQGZKDWLWGRHV 1RWHWKDWWKHWDEOHVDQGWKHILJXUHGRQߞWVD\DQ\WKLQJDERXWWKHIXQFWLRQRIWKHFRORULQJDJHQWLQWKH H[SHULPHQWDOSURFHGXUH7KH\GRPHQWLRQWKHFRQFHSWRIߡDEVRUEDQFHߢEXWWKH\GRQߞWVSHFLILFDOO\VD\ DQ\WKLQJDERXWWKHSURFHGXUH6LQFHWKHWDEOHVDQGILJXUHGRQߞWKDYHDQ\UHOHYDQWLQIRUPDWLRQZHߞOOKDYH WRORRNLQWKHDFWXDOWH[WWRILQGRXWKRZWKHFRORULQJDJHQWLVLQYROYHGLQWKHSURFHGXUH :KHQZHGRWKDWZHVHHWKDWWKHFRORULQJDJHQWLVILUVWPHQWLRQHGLQWKHGHVFULSWLRQRI([SHULPHQW ZKLFKVD\VWKDWWKHFRORULQJDJHQWIRUPVDߡSXUSOHFRPSRXQGWKDWVWURQJO\DEVRUEVOLJKWRIDVSHFLILF ZDYHOHQJWKߢ7KHWH[WVD\VWKHFRORULQJDJHQWLVDGGHGWRDOOWKHVDPSOHVROXWLRQV7KHQDFRORULPHWHULV XVHGWRPHDVXUHWKHDEVRUEDQFH7KHWH[WH[SODLQVWKDWDFRORULPHWHULVߡDGHYLFHWKDWPHDVXUHVKRZPXFK OLJKWRIDVHOHFWHGZDYHOHQJWKLVDEVRUEHGE\DVDPSOHߢ 1RZOHWߞVVHHKRZWKHDQVZHUFKRLFHVPDWFKXSDJDLQVWWKHWH[W ) GRHVQߞWPDWFKWKHWH[WEHFDXVHWKHRULJLQDOFRORULQJDJHQWZDVDGGHGWRDOOWKHVDPSOHVQRWMXVWWRWKH EODQNVROXWLRQ7KHUHߞVQRWKLQJLQWKHSURPSWWKDWLQGLFDWHVDUHDVRQZK\WKHQHZFRORULQJDJHQWVKRXOGEH XVHGDQ\GLIIHUHQWO\VR ) LVZURQJ * GRHVQߞWPDNHDQ\VHQVHLQWKHFRQWH[WRIWKHSURPSWLWVHOI7KHSURPSWVD\VWKDWWKHH[SHULPHQWVZLOO EHUHSHDWHGߡXVLQJDGLIIHUHQWFRORULQJDJHQWߢ%XWWKLVDQVZHUFKRLFHUHIHUVWRXVLQJERWKDJHQWVWRJHWKHU VRLWPXVWEHZURQJ + FRQWUDGLFWVWKHWH[WEHFDXVHWKHODVWVHQWHQFHRIWKHSDUDJUDSKIRU([SHULPHQWWDONVDERXW VXEWUDFWLQJWKHDEVRUEDQFHRIWKHEODQNVROXWLRQEXW + WDONVDERXWDGGLQJWKDWTXDQWLW\7KLVLVDQRWKHU H[DPSOHRIWKH$&76FLHQFHVHFWLRQߞVFRPPRQSDWWHUQRILQFOXGLQJDQDQVZHUFKRLFHWKDWGLUHFWO\ FRQWUDGLFWVWKHSDVVDJH - LVWKHFRUUHFWDQVZHUEHFDXVHWKHWH[WLQGLFDWHVWKDWWKHFRORULPHWHUPHDVXUHVߡOLJKWRIDVHOHFWHG ZDYHOHQJWKߢDQGWKDWWKHFRORULQJDJHQWDEVRUEVߡOLJKWRIDVSHFLILFZDYHOHQJWKߢ7KDWPHDQVWKDW FKDQJLQJWKHFRORULQJDJHQWWRRQHWKDWSURGXFHVDGLIIHUHQWFRORUZLOOUHTXLUHXVWRFKDQJHWKHFRORULPHWHU VRLWPHDVXUHVDGLIIHUHQWVSHFLILFZDYHOHQJWK WRPDWFKWKHQHZFRORU 6RWKLVHQGVXSEHLQJDQH[DPSOHRIDTXHVWLRQWKDWUHOLHVRQWKHWH[WXDOHOHPHQWVRIWKHSDVVDJHUDWKHU WKDQRQWDEOHVDQGILJXUHV,QSDVVDJHVWKDWLQFRUSRUDWHWDEOHVDQGILJXUHVLWߞVPRUHFRPPRQIRUTXHVWLRQV QRWWRLQYROYHWKHWH[WXDOHOHPHQWVRIWKHSDVVDJHPXFK RUHYHQDWDOO EXWVRPHWLPHVZHߞOOUXQLQWR TXHVWLRQVOLNHWKLV'RQߞWZRUU\WKRXJKߚDVORQJDVZHNHHSFRQVWDQWO\UHPLQGLQJRXUVHOYHVWRIRFXVRQ ZKDWߞVVSHOOHGRXWRQWKHSDJHZHFDQDQVZHUDQ\WHFKQLFDOTXHVWLRQWKH$&76FLHQFHVHFWLRQWKURZVDW XV 3DJH4XHVWLRQ 7KLVLVDQRWKHUH[DPSOHRIKRZWKH$&7WULHVWRPDNHTXHVWLRQVVRXQGPRUHWHFKQLFDODQGGLIILFXOWWKDQ WKH\DFWXDOO\DUH%XWWUDLQHGWHVWWDNHUVNQRZWKDWWKH$&7GRHVQߞWDFWXDOO\WHVWRXUNQRZOHGJHRI DGYDQFHGRUREVFXUHDUHDVRIVFLHQFHVRZHߞOOMXVWUHDGFDUHIXOO\DQGILJXUHRXWZKDWߞVJRLQJRQ 8QIRUWXQDWHO\WKLVLVDOVRDQH[DPSOHRIDTXHVWLRQWKDWWKH5HG%RRNH[SODLQVSUHWW\SRRUO\ VHHLWV FRPPHQWDU\RQSDJHZKLFKHVVHQWLDOO\UHVWDWHVWKHLGHDWKDWDEVRUEHGOLJKWOHDGVWRDKLJKHU PHDVXUHPHQWWKUHHRUIRXUWLPHVLQVWHDGRIDFWXDOO\H[SODLQLQJZK\ /HWߞVWDNHDORRNDQGVHHZKDWߞV JRLQJRQ ,QRUGHUWRXQGHUVWDQGKRZWKHVFHQDULRLQWKLVTXHVWLRQZRXOGDIIHFWWKHPHDVXUHPHQWVZHQHHGWRPDNH VXUHZHXQGHUVWDQGKRZWKHPHDVXUHPHQWVZRUN7KLVLVVSHOOHGRXWLQWKHSDUDJUDSKIRU([SHULPHQW 7KDWSDUDJUDSKVD\VZHFDQWHVWWKHDPRXQWRI12LQDVDPSOHE\DGGLQJDFKHPLFDOWKDWWXUQVSXUSOH ZKHQLWELQGVZLWK12DQGWKHQPHDVXULQJKRZSXUSOHHDFKVDPSOHLVZLWKDFRORULPHWHU6RWKHWKLQJ WKDWZHߞUHDFWXDOO\PHDVXULQJZLWKWKHFRORULPHWHULVWKHߡSXUSOHQHVVߢRIHDFKVDPSOH ZKLFKWKHSDVVDJH FDOOVߡDEVRUEDQFHߢ DQGWKHQZHߞUHFRUUHODWLQJWKHDPRXQWRISXUSOHQHVVZLWKWKHDPRXQWRI12 EHFDXVH12LVWKHVWXIIWKDWELQGVZLWKWKHFRORULQJDJHQWWRWXUQWKHVDPSOHSXUSOH 1RZOHWߞVWKLQNDERXWKRZWKDWUHODWHVWRWKHVFHQDULRLQWKHTXHVWLRQ7KHTXHVWLRQWDONVDERXWVRPHRWKHU VWXIILQWKHVDPSOHVIURP([SHULPHQWWKDWZRXOGDOVRDEVRUEWKHVDPHNLQGRIOLJKWDV12DQGZRXOG WKHUHIRUHDOVRUHJLVWHURQWKHFRORULPHWHUDVWKHVDPHNLQGRISXUSOHDVWKHFRORULQJDJHQW,QRWKHUZRUGV DFFRUGLQJWRWKHTXHVWLRQWKLVRWKHUVWXIILQWKHPHDWVDPSOHVLVWKHVDPHSXUSOHFRORUDVWKH12DIWHU WKHFRORULQJDJHQWLVDGGHGHYHQWKRXJKWKHRWKHUVWXIILVQߞWDFWXDOO\12 ,IZHWKLQNDERXWLWWKDWPHDQVWKHVDPSOHVZLOOVHHPWREHߡH[WUDSXUSOHߢEHFDXVHWKHUHZLOOEHH[WUD VWXIILQWKHVDPSOHVWKDWߞVWKHVDPHSXUSOHDVWKH12FRPSRXQG6RLWߞOOVHHPOLNHWKHUHߞVPRUH12LQ WKHVDPSOHVWKDQWKHUHUHDOO\LVEHFDXVHZHߞUHHTXDWLQJSXUSOHQHVVZLWK12DQGWKHUHZLOODFWXDOO\EH VRPHSXUSOHQHVVLQWKHVDPSOHVWKDWLVQߞWFRPLQJIURP12 6R ) LVFRUUHFW 1RWLFHWKDWWKH$&7JLYHVXVDQDQVZHUFKRLFHIRUHYHU\FRQFHLYDEOHZD\WKDWZHFRXOGPHVVWKLVXSߚ ZHFDQFKRRVHWKDWWKHUHDGLQJVZLOOEHKLJKHUORZHUVRPHWLPHVKLJKHUDQGVRPHWLPHVORZHURUWKH VDPH6RWKHUHߞVQRWPXFKZHFDQJOHDQIURPWKHVHWRIDQVZHUFKRLFHVLQWKLVFDVHXQIRUWXQDWHO\H[FHSW WKDWZHQHHGWRSD\FDUHIXODWWHQWLRQWRKRZWKHSDVVDJHGHVFULEHVWKHUHODWLRQVKLSEHWZHHQSXUSOHQHVV DQG12 %XWZHDOUHDG\NQHZZHQHHGHGWRGRWKDWDQ\ZD\ULJKW" 3DJH4XHVWLRQ 7KLVTXHVWLRQMXVWDVNVXVWRZKDWGHFLPDOSRLQWWKHZHHNO\DYHUDJHDLUWHPSHUDWXUHVZHUHPHDVXUHGLQ 7DEOH,IZHORRNDW7DEOHZHFDQVHHWKDWDOOWKHQXPEHUVJRWRWKHKXQGUHGWKVSODFHZKLFKLVWZR GLJLWVWRWKHULJKWRIWKHGHFLPDO7KDWPHDQVWKHULJKWDQVZHULV ) R& 7KLVLVDJUHDWH[DPSOHRIDTXHVWLRQWKDWVRPHWHVWWDNHUVZLOOPLVVVLPSO\EHFDXVHWKH\GRQߞWUHDGLW FDUHIXOO\HQRXJKRUWDNHWKHWLPHWRGRXEOHFKHFNWKHPVHOYHV1RWLFHIRULQVWDQFHWKDWLI\RXPLVUHDGWKH TXHVWLRQDQGORRNDW7DEOHLQVWHDG\RXߞOOWKLQNWKHDQVZHULV * 2QWKHRWKHUKDQGZHPLJKWPLVUHDG WKHTXHVWLRQLQDQRWKHUZD\DQGFKRRVH - EHFDXVHHDFKYDOXHLQ7DEOHLVEHWZHHQDQG$V TXHVWLRQVOLNHWKLVGHPRQVWUDWHZHVLPSO\PXVWGHYHORSWKHKDELWRIGRXEOHFKHFNLQJHYHU\WKLQJZHGR DQGEHLQJFRQVWDQWO\RQWKHORRNRXWIRUWKHVHVPDOOPLVWDNHVVRZHFDQPDNHVXUHWKH\GRQߞWFRVWXV SRLQWV 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVDERXWWKHߡHIILFLHQF\RILOOXPLQDWLRQߢZKLFKVHHPVWREHDQLQYHQWHGWHUPMXVWIRU WKLVTXHVWLRQ$VWUDLQHGWHVWWDNHUVZHNQRZWKDWWKH$&7KDVWRGHILQHWKHWHUPVWKDWLWLQYHQWVVRZHߞUH QRWFRQFHUQHGZKHQZHUXQLQWRDTXHVWLRQZLWKDQLQYHQWHGWHUPߚZHMXVWUHDGFDUHIXOO\WRILQGRXWZKDW LWPHDQV ,QWKLVFDVHWKHHIILFLHQF\RILOOXPLQDWLRQLVWKHLQWHQVLW\RIWKHOLJKWDEVRUEHGE\WKHSODQWVGLYLGHGE\WKH LQWHQVLW\RIOLJKWSURYLGHGWRWKHSODQWV6RLIZHZDQWWRILQGWKHHIILFLHQF\RILOOXPLQDWLRQLQ6HFWLRQ DQGFRPSDUHLWWRWKHRWKHUVHFWLRQVZHQHHGWRNQRZWKHVHWZRIDFWRUVIRUHDFKVHFWLRQ wLQWHQVLW\RIOLJKWDEVRUEHG wLQWHQVLW\RIOLJKWSURYLGHG :KHQZHORRNWKURXJKWKHDQVZHUFKRLFHVWRVHHZKDWRXURSWLRQVDUHZHILQGWKDW $ DQG % LQGLFDWH WKHFRQFOXVLRQLVMXVWLILHGEXWFLWHWZRGLIIHUHQWUHDVRQVIRUWKHMXVWLILFDWLRQZKLOH & DQG ' LQGLFDWH WKHFRQFOXVLRQLVQRWMXVWLILHGDQGFLWHWZRGLIIHUHQWUHDVRQVIRUWKHODFNRIMXVWLILFDWLRQ,WߞVSDUWLFXODUO\ LQWHUHVWLQJWKDW ' VD\VWKHUHߞVQRWHQRXJKLQIRUPDWLRQWRGUDZDFRQFOXVLRQ7KDWPHDQVWKDWZHPLJKW QRWILQGVRPHRIWKHGDWDZHߞUHORRNLQJIRUZKHQZHJREDFNWRWKHSDVVDJHWRVHHZKLFKDQVZHUFKRLFHLV FRUUHFW ,IZHORRNDWWKHLQIRUPDWLRQLQWKHSDVVDJHZHVHHWKHLGHDRIߡDYHUDJHOLJKWLQWHQVLW\ߢEXWZHGRQߞWVHH DQ\WKLQJDERXWWZRVHSDUDWHYDOXHVIRUOLJKWDEVRUEHGDQGOLJKWSURYLGHG6RWKHFRUUHFWDQVZHULV ' EHFDXVHZHGRQߞWKDYHHQRXJKLQIRUPDWLRQDYDLODEOHWRXVWRFDOFXODWHHIILFLHQF\RILOOXPLQDWLRQDV GHILQHGE\WKLVTXHVWLRQ ,QJHQHUDODORWRISHRSOHZLOOKHVLWDWHWRVD\WKHUHߞVQRWHQRXJKLQIRUPDWLRQWRGHWHUPLQHVRPHWKLQJEXW LIZHߞYHUHDGWKHTXHVWLRQDQGWKHSDVVDJHFDUHIXOO\DQGZHVWLOOFDQߞWILQGWKHLQIRUPDWLRQZHFDQEH FRQILGHQWLQVD\LQJWKDWWKHLQIRUPDWLRQSURYLGHGLVLQVXIILFLHQW 2QHPRUHWKLQJߚWKLVTXHVWLRQLVDJUHDWH[DPSOHRIWKHLPSRUWDQFHRIUHDGLQJDOOWKHDQVZHUFKRLFHV EHIRUHZHVWDUWWU\LQJWRILQGDQDQVZHU2WKHUZLVHLQWKLVFDVHZHPLJKWKDYHZDVWHGVHYHUDOPLQXWHV WU\LQJWRKXQWGRZQDQDQVZHUWKDWGLGQߞWH[LVWEHFDXVHZHPLJKWQRWKDYHUHDOL]HGWKHUHZDVDQRSWLRQWR VD\WKDWILQGLQJWKHDQVZHUZDVLPSRVVLEOH 3DJH4XHVWLRQ 7RDQVZHUWKLVTXHVWLRQZHMXVWKDYHWRORRNDWWKHGDWDLQ7DEOHDQGVHHZKLFKDQVZHUFKRLFH GHVFULEHVZKDWZHVHHWKHUH:HNQRZWKDWߞVZKHUHZHVKRXOGORRNEHFDXVHWKHTXHVWLRQUHIHUVWRߡWKH UHVXOWVIURP([SHULPHQWߢDQGDOORIWKRVHUHVXOWVDUHLQ7DEOH 6ROHWߞVWDNHDORRNDWWKHDQVZHUFKRLFHVDQGVHHZKDWߞVJRLQJRQ &KRLFH ) LVZURQJEHFDXVHWKHKLJKHVWSHUFHQWRI&2ZDVUHFRUGHGIRUWKH0RGHO<7KLV PHDVXUHPHQWLVIRXQGLQ7DEOHDWWKHWKPLQXWHDIWHUVWDUWLQJ:HFDQNLQGRIWHOOLWߞVWKHODUJHVW PHDVXUHPHQWDWDJODQFHEHFDXVHLWߞVWKHRQO\PHDVXUHPHQWZLWKWZRGLJLWVWRWKHOHIWRIWKHGHFLPDO SRLQW &KRLFH * LVFRUUHFWEHFDXVHLWߞVWUXHWKDWHYHU\URZRIGDWDVKRZVORZHUYDOXHVIRUWKHPRGHOV WKDQLWGRHVIRUWKHPRGHOVDQGEHFDXVHWKHPRGHOVDUHWKHߡQHZHUFDUVߢUHIHUUHGWRLQWKH K\SRWKHVLVLQWKHSURPSW &KRLFH + ZLOOEHWHPSWLQJIRUDORWRIWHVWWDNHUVEHFDXVHWKHVHFRQGKDOIRIWKHFKRLFHLVIDFWXDOO\ FRUUHFWLWߞVWUXHWKDWWKH0RGHO<KDGWKHVLQJOHKLJKHVWUHDGLQJ%XWWKHILUVWKDOIRIWKHDQVZHU FKRLFHLVZURQJEHFDXVHLWߞVDEDGLQWHUSUHWDWLRQRIWKHGDWDWKHGDWDGRHVVXSSRUWWKHK\SRWKHVLVLQWKH TXHVWLRQ :KLOHZHߞUHRQWKHVXEMHFW,VKRXOGSRLQWRXWWKDWWKHREVHUYDWLRQLQWKLVDQVZHUFKRLFHLVQߞW HQRXJKWRSURYHWKHK\SRWKHVLVRQLWVRZQEHFDXVHWKHK\SRWKHVLVLVDERXWFRPSDULQJROGHUFDUVWRQHZHU FDUVVRDVLQJOHGDWDSRLQWFDQߞWSURYHLW%XWWKHIDFWWKDWDQROGHUFDUKDGWKHKLJKHVWUHFRUGHG SHUFHQWDJHGRHVVXSSRUWWKHK\SRWKHVLVVLQFHLWߞVFRQVLVWHQWZLWKWKHK\SRWKHVLV &KRLFH - LVZURQJEHFDXVHWKHREVHUYDWLRQLQWKHVHFRQGKDOIRIWKHFKRLFHVD\VWKHRSSRVLWHRIZKDWWKH WDEOHVKRZV7KHPRGHOVKDGXQLIRUPO\KLJKHUSHUFHQWDJHVQRWORZHURQHV7KLVDQVZHUFKRLFHZLOO DOVREHWHPSWLQJIRUVRPHWHVWWDNHUVZKRPLVUHDGWKHGDWDRUUHPHPEHULWLQFRUUHFWO\DQGGRQߞ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ߡ&2IUHHDLUߢWKDWZRXOGPHDQWKDWWKHVDPSOHJHWWLQJPHDVXUHG ZRXOGFRQWDLQVRPHDLUWKDWKDGQR&2LQLWDWDOO$GGLQJVRPHWKLQJWKDWKDVQR&2WRWKHVDPSOHZRXOG GHFUHDVHWKHSHUFHQWDJHRI&2LQWKDWVDPSOH$VDUHVXOWDOORIWKHSHUFHQWDJHVWKDWZHUHPHDVXUHG ZRXOGEHORZHU7KDWPHDQVWKDWFKRLFH & LVWKHFRUUHFWDQVZHU 1RWLFHWKDW\RXGRQߞWQHHGWKHLQIRUPDWLRQSURYLGHGLQSDUHQWKHVHVLQWKLVTXHVWLRQ ߡWKHFRPSRVLWLRQRI DLU LV 1 2 $U DQG RWKHU JDVHVߢ 7KH $&7 MXVW WKUHZ LQ WKDW LQIRUPDWLRQ WR PDNH WKHTXHVWLRQVHHPPRUHFRPSOLFDWHGZKLFKLVVRPHWKLQJWKHWHVWOLNHVWRGRZKHQLWFDQ$OO\RXQHHGWR NQRZLVWKDWWKHDLUFRQWDPLQDWLQJWKHVDPSOHKDVQR&2ZKLFKZLOOEULQJGRZQWKHSHUFHQWRI&2LQHDFK VDPSOH,WGRHVQߞWPDWWHUZKDWWKHFRPSRVLWLRQRIWKHDLULVEH\RQGWKDW 3DJH4XHVWLRQ 7KLVTXHVWLRQPLJKWORRNOLNHLWUHTXLUHV\RXWRGRVRPHFDOFXODWLQJ$QG\RXFRXOGGRDFDOFXODWLRQKHUH LI\RXZDQWHGWRߚWKDWߞVZKDWWKH5HG%RRNDGYLVHVLQLWVH[SODQDWLRQRQSDJH%XWLWLVQߞWQHFHVVDU\ /HWߞVORRNDWWKHRWKHUZD\ZHFRXOGDSSURDFKWKLVTXHVWLRQLIZHGRQߞWIHHOOLNHGRLQJWKHFDOFXODWLRQ 7KHTXHVWLRQPHQWLRQV$FWLYLW\DQG$FWLYLW\FRQWDLQV7DEOH7DEOHKDVDFROXPQZLWKWKHKHDGLQJ ߡ,PDJHVL]HߢZKLFKPDWFKHVZLWKWKHSKUDVHߡLPDJHVL]HߢWKDWDSSHDUVLQWKHSURPSWIRUWKLVTXHVWLRQVR ZHNQRZWKDWZHߞUHORRNLQJDWGDWDWKDWߞVUHOHYDQWWRWKHTXHVWLRQ7KHߡ,PDJHVL]HߢFROXPQLQ7DEOH KDVWKHIROORZLQJYDOXHV7KHFRUUHVSRQGLQJYDOXHVLQWKHߡ0ߢFROXPQRI7DEOHDUH 6RZHFDQVHHDVLPSOHWUHQGDVWKHLPDJHVL]HLQFUHDVHVWKH0YDOXHLQFUHDVHV 7KHSURPSWDVNVDERXWDQLPDJHVL]HRIZKLFKLVEHWZHHQDQG7KDWPHDQVWKDWWKH0YDOXHIRU DQLPDJHVL]HRIPXVWEHEHWZHHQDQGEHFDXVHWKRVHDUHWKH0YDOXHVIRULPDJHVL]HVRI DQG2QO\RQHDQVZHUFKRLFHIDOOVLQWKDWUDQJHZKLFKLV + 6R + LVFRUUHFW 2IFRXUVHZKHQZH QRWLFHWKDWRQHRIWKHZURQJDQVZHUV ) RQO\GLIIHUVIURPWKHFRUUHFWDQVZHUE\DVLQJOH]HURZHߞOO ZDQWWRPDNHH[WUDVXUHZHߞYHUHDGWKHWDEOHFDUHIXOO\DQGKDYHQߞWVRPHKRZHQGHGXSEHLQJRIIE\D IDFWRURI%XWWKHIDFWWKDWPRUHDQVZHUFKRLFHVHQGZLWKWZR]HURHVWKDQZLWKRQH]HURRUWKUHH]HURHV LVDJRRGVLJQWKDWWZRLVSUREDEO\WKHFRUUHFWQXPEHURI]HURHVIRUWKHULJKWDQVZHU $JDLQZHFRXOGDOZD\VFKRRVHWRXVHWKHIRUPXODIRU0IURPWKHSDVVDJHDVWKH5HG%RRNVROXWLRQ GRHV,KDSSHQWRSUHIHUORRNLQJDWWKHGDWDLQWKLVFDVHEXWHLWKHUDSSURDFKLVILQH ,I\RXZHUHWRGRWKH FDOFXODWLRQLQVWHDG,WKLQN\RXߞGUXQDJUHDWHUULVNRIPLVFDOFXODWLQJDQGEHLQJRIIE\DIDFWRURI ZKLFKPLJKWOHDG\RXWRFKRRVH ) DFFLGHQWDOO\ 1RWLFHWKDWDQVZHULQJWKHTXHVWLRQGRHVQߞWUHTXLUHXV WRXQGHUVWDQGDQ\WKLQJDERXW$FWLYLW\RUHYHQ ZKDWDQREMHFWLYHOHQVLVRUZK\DQ\ERG\ZRXOGFDUHDERXWFDOFXODWLQJ08QGHUVWDQGLQJWKRVHWKLQJV GRHVQߞWFRQWULEXWHWRDQVZHULQJWKLVTXHVWLRQDWDOO.HHSWKLVNLQGRIWKLQJLQPLQGWKHQH[WWLPH\RXVHH DQ$&76FLHQFHTXHVWLRQWKDWPLJKWVHHPDOLWWOHVWUDQJH 3DJH4XHVWLRQ 7KLVLVRQHH[DPSOHRIDQ$&76FLHQFHTXHVWLRQWKDWDFWXDOO\GRHVVHHPWRUHTXLUHXVWRGRDEDVLF FDOFXODWLRQXQOLNHTXHVWLRQVDQGIURPWKHVDPHSDVVDJH7KH5HG%RRNߞ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ߞVWKHFRUUHFWDQVZHU $V,QRWHGDERYHWKLVSDUWLFXODU%ODFN%RRNH[SODQDWLRQGRHVQߞWUHDOO\DGGDQ\WKLQJWRWKH5HG%RRN H[SODQDWLRQIRUWKHTXHVWLRQ,ߞPRQO\DGGUHVVLQJWKLVTXHVWLRQEHFDXVH,ZDQWWRGLVWLQJXLVKLWIURP TXHVWLRQVDQGLQWKHVDPHSDVVDJH7RXQWUDLQHGWHVWWDNHUVLWZLOOVHHPDVWKRXJKHDFKRIWKHVH WKUHHTXHVWLRQVUHTXLUHVXVWRGRVRPHPDWKEXWRQO\WKLVTXHVWLRQDFWXDOO\GRHV 6RPHPLJKWDUJXHWKDW LWߞVSRVVLEOHWRGRWKLVTXHVWLRQZLWKRXWDUHDOFDOFXODWLRQDVZHOOEHFDXVHWKH\PLJKWEHDEOHWRQRWLFH WKDWWKH0RQREMHFWLYHOHQVLVVRPXFKODUJHUWKDQWKH0YDOXHVIRUWKHRWKHUOHQVHVWKDWLWZLOOPRUH WKDQFRPSHQVDWHIRUWKHIDFWWKDWWKHREMHFWLQ ' LVWKHVKRUWHVWREMHFW,QP\H[SHULHQFHWKRXJKPRVW WHVWWDNHUVZRXOGEHEHWWHURIIVLPSO\GRLQJWKHFDOFXODWLRQVUDWKHUWKDQWU\LQJWRWKLQNLQWKRVHDEVWUDFW DQGUHODWLYLVWLFWHUPV 3DJH4XHVWLRQ 7KLVTXHVWLRQLVVLPLODUWRTXHVWLRQIURPWKHVDPHSDVVDJHLQWKHVHQVHWKDWERWKTXHVWLRQVPLJKWVHHP WRUHTXLUHXVWRGRVRPHNLQGRIFDOFXODWLRQEXWZHFDQDFWXDOO\GHWHUPLQHWKHFRUUHFWDQVZHUMXVWE\ ORRNLQJDWWKHUHOHYDQWGDWD7KH5HG%RRNH[SODQDWLRQRQSDJHPHQWLRQVWKDW5LQWKHJLYHQHTXDWLRQ LVLQYHUVHO\SURSRUWLRQDOWRRQHYDOXHDQGGLUHFWO\SURSRUWLRQDOWRDQRWKHUEXWZHGRQߞWQHHGWRWKLQN DERXWDQ\RIWKDWWRDQVZHUWKHTXHVWLRQ 7KHTXHVWLRQPHQWLRQV$FWLYLW\DQG$FWLYLW\LQFOXGHV7DEOH7DEOHKDVDFROXPQZLWKWKHKHDGLQJ ߡ1$ߢDQGDQRWKHUFROXPQZLWKWKHKHDGLQJߡ5ߢ7KHVHWZRFRQFHSWVPDWFKXSGLUHFWO\ZLWKWKHFRQFHSWV RIߡ1$ߢDQGߡ5ߢWKDWZHVHHLQWKHSURPSWVRZHNQRZWKDW7DEOHLVZKHUHZHߞUHVXSSRVHGWREH ORRNLQJ :KHQZHORRNDW7DEOHZHFDQVHHWZRVLPSOHWUHQGV 7KH5YDOXHVGHFUHDVHDVZHPRYHIURPOHQVWROHQV 7KH1$YDOXHVLQFUHDVHDVZHPRYHIURPOHQVWROHQV 7KLVLVZKDWWKH5HG%RRNVROXWLRQLVJHWWLQJDWZKHQLWPHQWLRQVWKDWWKHJLYHQIRUPXODVKRZV5YDULHV GLUHFWO\ZLWKͪDQGLQGLUHFWO\ZLWK1$%XWZHGRQߞWQHHGWRNQRZDERXWGLUHFWDQGLQGLUHFWYDULDWLRQWR DQVZHUWKLVTXHVWLRQDQGZHGHILQLWHO\GRQߞWQHHGWRNQRZKRZWRUHDGDQHTXDWLRQDQGWHOOZKLFK YDULDEOHVZLOOYDU\LQZKLFKZD\ZLWKZKLFKRWKHUYDULDEOHV7KDWߞ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ߞWILJXUHRXWZKHUHWRILQGWKH DQVZHU7KH\GRQߞWNQRZZKLFKSDUWRIWKHILJXUHFRUUHVSRQGVWRDWHPSHUDWXUHRI.RUDZDYHOHQJWK RI[PDQGWKH\FDQߞWILJXUHRXWZK\DOOWKHDQVZHUFKRLFHVKDYHߡZDWWVSHUPߢLQWKHP $VZHWUDLQHGWHVWWDNHUVNQRZDOORIWKHVHSUREOHPVPXVWFRPHIURPQRWQRWLFLQJNH\GHWDLOVRIWKH ILJXUHVLQFHWKHTXHVWLRQVSHFLILFDOO\PHQWLRQVWKHILJXUHDQGVLQFHWKHUHߞVQRZD\WKH$&7FRXOG SRVVLEO\H[SHFWDOOWHVWWDNHUVWRNQRZVRPHWKLQJDERXWWKHEULJKWQHVVRIDEODFNERG\ RUHYHQZK\ DQ\ERG\ZRXOGFDUHZKDWDEODFNERG\ZDVLQWKHILUVWSODFH 6ROHWߞVLQVSHFWWKHILJXUH:KHQWKHILJXUHLVDJUDSKLWߞVSUHWW\PXFKDOZD\VDJRRGLGHDWRWDNHDORRNDW WKHODEHOVRQWKHD[HVVROHWߞVVWDUWWKHUH 7KHYHUWLFDOD[LVLVODEHOHGߡEULJKWQHVVߢZKLFKPDWFKHVXSZLWKWKHZRUGߡEULJKWQHVVߢLQWKHTXHVWLRQ SURPSW6RWKDWߞVSURPLVLQJ,IZHNHHSUHDGLQJDIWHUWKHZRUGߡEULJKWQHVVߢRQWKHYHUWLFDOD[LVODEHOZH VHHWKDWEULJKWQHVVLVPHDVXUHGLQXQLWVRIZDWWVSHUPZKLFKLVWKHSKUDVHWKDWNHHSVDSSHDULQJLQDOO WKHDQVZHUFKRLFHV6RWKDWKHOSVVROYHWKHDSSDUHQWP\VWHU\RIWKHDQVZHUFKRLFHV1RZOHWߞVNHHS ORRNLQJDWWKHILJXUHDQGVHHZKDWHOVHZHFDQILQG 7KHKRUL]RQWDOD[LVLVODEHOHGߡZDYHOHQJWKߢZKLFKLVJRRGIRUXVEHFDXVHߡZDYHOHQJWKߢZDVDQRWKHU ZRUGWKDWDSSHDUHGLQWKHTXHVWLRQSURPSW7KHUHVWRIWKHKRUL]RQWDOD[LVVD\VWKHZDYHOHQJWKLV PHDVXUHGLQXQLWVRIPZKLFKLVDOVRXVHIXOIRUXVWRQRWLFHEHFDXVHLWPDWFKHVXSZLWKWKHSDUWRIWKH SURPSWWKDWPHQWLRQVDZDYHOHQJWKEHLQJPHDVXUHGLQXQLWVRIP %XWZHVWLOOKDYHQߞWIRXQGWKHSDUWRIWKHILJXUHWKDWPHQWLRQVDQ\WKLQJEHLQJ.$QGZHߞUHUXQQLQJRXW RISODFHVWRORRN $WWKLVSRLQWZHVKRXOGUHPHPEHUWKDWZHDOZD\VKDYHWRPDNHVXUHZHߞYHUHDGDQ\IRRWQRWHVOHJHQGV NH\VRURWKHUVXUURXQGLQJLQIRUPDWLRQWKDWPLJKWQRWKDYHLQLWLDOO\GUDZQRXUH\HZKHQZHORRNHGDWWKH ILJXUH ,QWKLVFDVHWKHNH\DERYHWKHILJXUHLQGLFDWHVWKDWWKHGRWWHGOLQHFRUUHVSRQGVWR.7KDWߞVJUHDW EHFDXVHZHFDQQRZXQGHUVWDQGWKDWWKHTXHVWLRQLVDVNLQJXVWRORRNDWWKHGRWWHGOLQHZKHQZHDQVZHU WKHTXHVWLRQ:HFDQDOVRVHHWKDWWKHQRWHLQSDUHQWKHVHVEHORZWKHILJXUHLQGLFDWHVWKDWWKHEULJKWQHVV YDOXHVFRQWLQXHWRGHFUHDVHDERYHZDYHOHQJWKVRI[P7KDWߞ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ߞWPDWWHUZKLFKFXUYHZHHQGXSORRNLQJDWEHFDXVHDOOWKUHHRIWKHFXUYHVLQ WKHILJXUHDUHDOUHDG\DWYDOXHVEHORZRQWKHYHUWLFDOD[LVE\WKHWLPHWKH\UHDFKRQWKHKRUL]RQWDO D[LV%XWLWߞVVWLOOLPSRUWDQWWREHLQWKHKDELWRILGHQWLI\LQJZKHUHDOORIWKHQXPEHUVDQGNH\SKUDVHVLQ HDFKSURPSWDUHFRPLQJIURPVRLWߞ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ߞWLQWKHILJXUHߚLIWKHWHVWLV DVNLQJ\RXWRILQGVRPHWKLQJLWߞVRQWKHSDJHVRPHZKHUH 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQZKLFKDSSHDUVRQSDJHLVWHFKQLFDOO\FRUUHFWEXW,ߞYH EHHQDVNHGDERXWLWVRPDQ\WLPHVE\VRPDQ\SHRSOHWKDW,ߞGOLNHWRDGGUHVVWKLVTXHVWLRQKHUH 7KHTXHVWLRQWHOOVXVWKDWWKHUDGLDWLRQIURPDVWDUFDQEHJUDSKHGWKHVDPHZD\DVWKHUDGLDWLRQIURPD EODFNERG\RIDVLPLODUWHPSHUDWXUH$OOWKLVPHDQVLVWKDWZHQHHGWRILQGWKHDQVZHUFKRLFHWKDWIROORZV WKHVDPHSDWWHUQVDVWKHJUDSKRIWKHEODFNERG\FXUYHLQWKHILJXUH :HGRQߞ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ߡEULJKWQHVVߢDQG DKRUL]RQWDOD[LVODEHOHGߡZDYHOHQJWKߢVRZHGRQߞWQHHGWRWKLQNDERXWZKHWKHUWKDWIHDWXUHLVFRUUHFW 6LQFHZHNQRZWKDWZHߞUHVXSSRVHGWRILQGWKHDQVZHUFKRLFHWKDWߞ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ߡWKDWWKHZDYHOHQJWKZLWKWKHPD[LPXPEULJKWQHVVLQFUHDVHVDVWKHWHPSHUDWXUHGHFUHDVHVߢ7KLVLV WHFKQLFDOO\FRUUHFWEXWXQQHFHVVDULO\FRPSOLFDWHGߚLWMXVWPHDQVWKDWLI\RXORRNFDUHIXOO\DWWKHJUDSKLQ WKHILJXUHDQGDW - \RXߞOOVHHWKDWWKHWKUHHSHDNVLQWKHWKUHHFXUYHVGRQߞWOLQHXSSHUIHFWO\RQWKHVDPH YHUWLFDOOLQHEHFDXVHWKHSHDNIRUWKHKLJKHVWWHPSHUDWXUHFXUYHLVDOLWWOHWRWKHOHIWRIWKHSHDNIRUWKH WHPSHUDWXUHFXUYHLQWKHPLGGOHZKLFKLVDOLWWOHWRWKHOHIWRIWKHSHDNIRUWKHORZHVWWHPSHUDWXUHFXUYH (YHQWKRXJKWKH5HG%RRNVROXWLRQQRWHVWKLVLWߞVDELWWRRWHFKQLFDOWREHWKHUHDOEDVLVIRUWKH$&7ߞV UHDVRQLQJRQWKLVTXHVWLRQ$PXFKPRUHJHQHUDOL]HGREVHUYDWLRQOLNHߡDOOWKHKXPSVLQWKHRULJLQDOJUDSK DUHSXVKHGRYHUWRWKHOHIWLQVWHDGRIWKHULJKWߢLVMXVWILQHIRU$&7SXUSRVHV 3DJH4XHVWLRQ 2QFHDJDLQZHVHHWKDWWKH5HG%RRNߞVH[SODQDWLRQIRUDQ$&7TXHVWLRQLVIDUPRUHFRPSOLFDWHGWKDQ QHFHVVDU\7KH5HG%RRNVROXWLRQZKLFKFDQEHIRXQGRQSDJHODXQFKHVLQWRDGLVFXVVLRQRIWKH IRUFHVH[HUWHGE\YDULRXVIOXLGVLQ([SHULPHQWEXWZHGRQߞWQHHGWRXQGHUVWDQGDQ\RIWKRVHߚLQIDFW ZHGRQߞWHYHQUHDOO\QHHGWRUHDG([SHULPHQWH[FHSWWRPDNHVXUHWKDWWKHOLTXLGUHIHUUHGWRLQWKH TXHVWLRQLVWKHKH[DQHUHIHUUHGWRLQWKHSDVVDJH ,QVWHDGDOOZHKDYHWRGRLVQRWLFHWKDW)LJXUHFRQWDLQVDGLDJUDPZLWKDGUDZLQJRIWKHH[SHULPHQWDO VHWXSDQGWKDWGLDJUDPVKRZVWKHߡPDQRPHWHUߢZLWKDORZHUIOXLGOHYHORQWKHOHIWDQGDKLJKHUIOXLG OHYHORQWKHULJKW7KHUHߞVDOVRDQDUURZSRLQWLQJWRWKDWSDUWRIWKHGLDJUDPZLWKWKHSKUDVHߡKHLJKWRI+J DIWHUDGGLWLRQRIKH[DQHߢ :HFDQDOVRVHHLQWKHDQVZHUFKRLFHVWKDWWKHFROXPQRQWKHOHIWVKRZVWKHPDQRPHWHUߡEHIRUHOLTXLGZDV DGGHGߢZKLOHWKHFROXPQRQWKHULJKWVKRZVWKHPDQRPHWHUߡDIWHU+JOHYHOVWDELOL]HGߢ7KHGHVFULSWLRQ RI([SHULPHQWWHOOVXVWKDWWKH+JOHYHOVWDELOL]HGDIWHUWKHOLTXLGKH[DQHZDVDGGHGߚLQRWKHUZRUGV WKDWWKHPDQRPHWHULQ)LJXUHVKRXOGFRUUHVSRQGWRWKHPDQRPHWHULQWKHULJKWKDQGFROXPQLQWKHFRUUHFW DQVZHUFKRLFHEHFDXVHWKH\ERWKVKRZWKHPDQRPHWHUDIWHUWKHOLTXLGKH[DQHZDVDGGHG 2QO\RQHDQVZHUFKRLFHKDVDQLPDJHLQWKHULJKWKDQGFROXPQWKDWPDWFKHVXSZLWKWKHLPDJHRIWKH PDQRPHWHULQ)LJXUHDQGWKDWߞVFKRLFH * 6R * LVFRUUHFW 1RWLFHWKDW - LVWKHRSSRVLWHRI * ߚLWJHWVWKHLPDJHVLQWKHWZRFROXPQVUHYHUVHG7KLVLVDFRPPRQ W\SHRIZURQJDQVZHUIRUWKH$&7WRLQFOXGHEHFDXVHVRPHWHVWWDNHUVZLOOJHWFRQIXVHGDVWRWKHSURSHU RUGHURIWKHLPDJHV $OVRQRWLFHWKDWDQVZHULQJWKLVTXHVWLRQGLGQߞWUHTXLUHXVWRNQRZZKDWDߡPDQRPHWHUߢDFWXDOO\PHDVXUHV RUZK\VRPHRIWKHKH[DQHHYDSRUDWHGRUZKDWKH[DQHHYHQLV$VWUDLQHGWHVWWDNHUVZHNQRZWKDWZH QHHGWRDWWDFNHDFKTXHVWLRQLQWKHPRVWGLUHFWDQGVLPSOLILHGZD\SRVVLEOHRQWKH$&76FLHQFHVHFWLRQ WKDWXVXDOO\ EXWQRWDOZD\V PHDQVZHMXVWILQGDUHOHYDQWILJXUHRUWDEOHDQGWKHQPDWFKLWWRRQHRIWKH DQVZHUFKRLFHV 3DJH4XHVWLRQ 7KLVTXHVWLRQUHTXLUHVXVWRUHDGFORVHO\ߚDQGLWDOVRUHTXLUHVXVWRNQRZZKDWDWHVWWXEHLV :HOONLQG RINHHSUHDGLQJ $VZHGLVFXVVHGLQWKH6FLHQFHWUDLQLQJVHFWLRQRIWKLV%ODFN%RRNWKH$&7VRPHWLPHVLQFOXGHVD TXHVWLRQRUWZRWKDWDFWXDOO\GRHVUHTXLUH\RXWRKDYHVRPHVFLHQWLILFNQRZOHGJHWKDWGRHVQߞWDSSHDU GLUHFWO\RQWKHSDJHEXWWKDWNQRZOHGJHLVDOZD\VIDLUO\EDVLF)RULQVWDQFHWKHUHPLJKWEHDTXHVWLRQWKDW UHTXLUHV\RXWRNQRZWKDWZDWHUFRQWDLQVK\GURJHQDQGR[\JHQRUWKDWGRJVDUHPDPPDOVRUVRPHWKLQJ HOVHWKDWߞVSUHWW\HOHPHQWDU\ 7KLVSDUWLFXODUTXHVWLRQVHHPVWRUHTXLUHXVWRNQRZZKDWDWKHUPRPHWHUORRNVOLNH:HDOVRQHHGWR NQRZWKDWDWHVWWXEHLVEDVLFDOO\DF\OLQGHUWKDWߞVVHDOHGRQRQHHQGDQGRSHQRQWKHRWKHU6RPHSHRSOH PLJKWDUJXHWKDWZHGRQߞWUHDOO\QHHGWRNQRZZKDWDWHVWWXEHLVWRDQVZHUWKLVTXHVWLRQEHFDXVHWKH SDVVDJHWHOOVXVWKDWWKHWULDQJXODUWKLQJLQ)LJXUHLVDIODVNVRWKHWULDQJXODUWKLQJVLQFKRLFHV & DQG ' PXVWDOVREHIODVNV7KDWߞVDYDOLGSRLQW,WKLQNEXWZHZRXOGVWLOOQHHGWRNQRZWKDWDIODVNLVQRWD W\SHRIWHVWWXEHRUDQRWKHUZRUGIRUWHVWWXEH :LWKDOORIWKDWLQPLQGOHWߞVORRNDWWKHTXHVWLRQ $VWKH5HG%RRNSRLQWVRXWRQSDJHLIZHUHDG([SHULPHQWFDUHIXOO\DQGNQRZZKDWDWHVWWXEH ORRNVOLNHLWߞVSUHWW\FOHDUWKDW % LVFRUUHFWEHFDXVHRQO\ % VKRZVDWHVWWXEHZLWKDWKHUPRPHWHU LQVLGHLWZKLFKLVSDUWRIWKHGHVFULSWLRQLQ([SHULPHQW ,QFRQWUDVW $ VKRZVDWHVWWXEHQH[WWRD WKHUPRPHWHUZLWKERWKRIWKHPLQVLGHVRPHWKLQJHOVHDQG ' VKRZVDIODVNߚQRWDWHVWWXEHߚZLWKD WKHUPRPHWHULQLW 6RPHWHVWWDNHUVPLJKWWKLQNWKDWWKHDSSDUDWXVLQ([SHULPHQWQHHGVWRUHVHPEOHWKHWKLQJIURP)LJXUH VRWKH\PLJKWEHWHPSWHGWRSLFN $ RU & %XW([SHULPHQWQHYHUPHQWLRQVDPDQRPHWHUVRZHFDQ HOLPLQDWHFKRLFHV $ DQG & VLQFHWKH\ERWKKDYHRQH 'RQߞWEHWRRXSVHWLI\RXZRXOGKDYHPLVVHGWKLVTXHVWLRQEHFDXVH\RXGLGQߞWNQRZWKHGLIIHUHQFH EHWZHHQDWHVWWXEHDQGDIODVN,WߞVRQO\RQHTXHVWLRQRQWKH6FLHQFHVHFWLRQVRLWFDQߞWLPSDFW\RXU RYHUDOO$&7VFRUHWRRKHDYLO\E\LWVHOI,QIDFW\RXFRXOGWHFKQLFDOO\VWLOOPDNHDRQWKH6FLHQFH VHFWLRQDQGDRQWKHWHVWRYHUDOOLIWKLVZHUHWKHRQO\TXHVWLRQ\RXPLVVHGRQWKHHQWLUHWHVW'RQߞW H[SHFWIXWXUH$&76FLHQFHVHFWLRQVWRDVNTXHVWLRQVDERXWWKHGLIIHUHQFHEHWZHHQDWHVWWXEHDQGDIODVN EHFDXVHWKH\SUREDEO\ZRQߞWߚLQVWHDG\RXߞOOSUREDEO\VHHVRPHRWKHUEDVLFVFLHQWLILFFRQFHSWVEHLQJ WHVWHGLQWKHIHZTXHVWLRQVSHUWHVWWKDWUHTXLUH\RXWRKDYHVRPHRXWVLGHNQRZOHGJH ,WߞVEHFDXVHRITXHVWLRQVOLNHWKLVWKDWZHQHHGWRPDNHDEVROXWHO\FHUWDLQWKDWZHJHWTXHVWLRQVULJKWZKHQ WKH\RQO\UHTXLUHXVWRUHDGWKHDQVZHUVGLUHFWO\IURPWKHSDJHߚZKLFKLVZKDWWKHYDVWPDMRULW\RI$&7 6FLHQFHTXHVWLRQVZLOOGR 3DJH4XHVWLRQ 7KH5HG%RRNVROXWLRQRQSDJHWULHVWRH[SODLQWKLVTXHVWLRQWKHZD\DVFLHQWLVWPLJKWWKLQNRILWQRW WKHZD\DWHVWWDNHUVKRXOGWKLQNRILW 7KHEHVWZD\WRDWWDFNWKLVTXHVWLRQLVSUREDEO\WRUHDGWKHGHVFULSWLRQRI([SHULPHQWDQGWKHQJR WKURXJKHDFKDQVZHUFKRLFHDQGFRQVLGHULWLQOLJKWRIZKDWWKHH[SHULPHQWHUGLGLQ([SHULPHQW ) GRHVQߞWPDNHDQ\VHQVHEHFDXVHWKHUHߞVQHYHUDQ\PHQWLRQRI+2YDSRUEHLQJLQWKHIODVNRUFRPLQJ RXWRILW * GRHVQߞWPDNHVHQVHHLWKHU7KHPLQXWHVRIZDLWLQJKDSSHQHGEHIRUHWKHUHZDVDQ\OLTXLGLQWKHIODVN WRHYDSRUDWHVRLWGRHVQߞWPDNHVHQVHIRUWKHH[SHULPHQWHUWRZDLWLQRUGHUWRDOORZVRPHWKLQJLQWKH IODVNWRHYDSRUDWHZKHQWKDWVRPHWKLQJLVQߞWWKHUH\HW + LVLQFRUUHFWEHFDXVHWKHH[SHULPHQWHUGRHVQߞWZDLWIRUWKH+JWRVWDELOL]HXQWLOVHYHUDOVWHSVDIWHUKH ZDLWVPLQXWHV - LVFRUUHFWEHFDXVHLWߞVWKHRQO\WKLQJWKDWPDNHVVHQVHLQWKHFRQWH[WRIWKHH[SHULPHQW7KHWH[WVD\V WKDWWKHH[SHULPHQWHUZDLWHGILYHPLQXWHVLPPHGLDWHO\DIWHULWGHVFULEHVKRZWKHH[SHULPHQWHUSXWWKH IODVNLQWKH+2EDWK:HGRQߞWQHHGWREHDZDUHRIWKHVFLHQWLILFUHDVRQLQJSURYLGHGLQWKH5HG%RRNߞV H[SODQDWLRQRQSDJHEHFDXVH - LVWKHRQO\DQVZHUFKRLFHWKDWߞVHYHQSRVVLEOHJLYHQWKHVHTXHQFH RIVWHSVLQ([SHULPHQW 5HPHPEHUWKDWWKH$&76FLHQFHVHFWLRQGRHVQߞWUHTXLUH\RXWRKDYHDVWURQJVFLHQWLILFEDFNJURXQG,WMXVW UHTXLUHV\RXWRUHDGFDUHIXOO\DQGSD\DWWHQWLRQ 3DJH4XHVWLRQ 7RDQVZHUWKLVTXHVWLRQZHߞOOQHHGWRVHHZKDWWKHSDVVDJHVD\VDERXWSURWHLQVKDSHVZLWKUHODWLYHO\ORZ HQHUJ\VLQFHWKDWߞVZKDWWKHSURPSWPHQWLRQV:HGRQߞWQHHGWRZRUU\LIZHGRQߞWNQRZDQ\WKLQJDERXW SURWHLQVRUDERXWHQHUJ\RUZK\DSURWHLQZRXOGKDYHDFHUWDLQW\SHRIVKDSH:HMXVWQHHGWRILQGWKH UHOHYDQWLQIRUPDWLRQLQWKHSDVVDJHDQGPDWFKLWWRWKHFRUUHFWDQVZHU 7KHSDVVDJHVSHFLILFDOO\VD\VWKDWߡORZHUHQHUJ\VKDSHVDUHPRUHVWDEOHWKDQKLJKHUHQHUJ\VKDSHVߢ7KH ZRUGߡVWDEOHߢPHDQVVRPHWKLQJOLNHߡXQFKDQJLQJߢDQGWKHRQO\DQVZHUFKRLFHWKDWUHIOHFWVWKLVLGHDRI VWDELOLW\LV ' ZKLFKWDONVDERXWPDLQWDLQLQJ RUKROGLQJ DVKDSH6R ' LVWKHFRUUHFWDQVZHU /HWߞVWDNHDORRNDWWKHZURQJDQVZHUV $ LVZURQJEHFDXVHWKHWH[WVSHFLILFDOO\GHVFULEHVUDQGRPFRLOVDVߡKLJKHQHUJ\VKDSHVߢEXWWKH TXHVWLRQDVNHGDERXWVKDSHVZLWKORZHQHUJ\ % LVZURQJEHFDXVHQRWKLQJLQWKHSDVVDJHPHQWLRQVDQ\SURWHLQODFNLQJDSULPDU\VWUXFWXUH & LVZURQJEHFDXVHWKHWH[WVSHFLILFDOO\VWDWHVWKDWߡDUHODWLYHO\KLJKHQHUJ\VKDSHPD\GHQDWXUHߢEXW WKHTXHVWLRQDVNVDERXWDUHODWLYHO\ORZHQHUJ\VKDSH 7KLVTXHVWLRQHQGVXSEHLQJRQHPRUHH[DPSOHRIVRPHWKLQJZHFDQDQVZHURQWKH$&76FLHQFHVHFWLRQ ZLWKRXWUHDOO\XQGHUVWDQGLQJWKHVFLHQFHEHKLQGLW 3DJH4XHVWLRQ ,QRUGHUWRDQVZHUWKLVTXHVWLRQZHQHHGWRXQGHUVWDQGWKHWHUPVLQWKHTXHVWLRQDQGLQWKHDQVZHU FKRLFHV7KHWH[WWHOOVXVWKDWZKHQDSURWHLQLVߡFRPSOHWHO\GHQDWXUHGߢLWPXVWEHFRPSOHWHO\XQIROGHG VLQFHWKHWH[WSDUHQWKHWLFDOO\GHILQHVߡGHQDWXUHߢDVߡXQIROGߢ6RZKHQWKHTXHVWLRQDVNVZKLFKW\SHRI VWUXFWXUHIURPWKHDQVZHUFKRLFHVLVQRWLPSDFWHGE\WKHSURWHLQGHQDWXULQJLWߞVUHDOO\DVNLQJZKLFK VWUXFWXUHLVQߞWLPSDFWHGE\WKHSURWHLQXQIROGLQJ 7KHGHVFULSWLRQIRUߡSULPDU\VWUXFWXUHߢLQWKHSDVVDJHGRHVQߞWVD\DQ\WKLQJDERXWIROGLQJ 7KHGHVFULSWLRQVRIߡVHFRQGDU\VWUXFWXUHߢDQGߡWHUWLDU\VWUXFWXUHߢERWKPHQWLRQߡIROGLQJSDWWHUQVߢVRWKH\ ZRXOGEHDIIHFWHGE\DSURFHVVRIXQIROGLQJ 7KHGHVFULSWLRQIRUߡTXDWHUQDU\VWUXFWXUHߢPHQWLRQVߡFOXVWHULQJEHWZHHQPRUHWKDQIROGHGSRO\SHSWLGHߢ DQGWKHILUVWVHQWHQFHRIWKHSDVVDJHWHOOVXVWKDWDSRO\SHSWLGHLVSDUWRIDSURWHLQ6RLIWKHTXDWHUQDU\ VWUXFWXUHKDVWRGRZLWKIROGHGSDUWVRIDSURWHLQWKHQFRPSOHWHO\XQIROGLQJDSURWHLQPXVWLPSDFWWKH TXDWHUQDU\VWUXFWXUHDVZHOO 6RZHFDQVHHWKDWRQO\WKHSULPDU\VWUXFWXUHLVXQDIIHFWHGE\IROGLQJRUXQIROGLQJZKLFKPHDQVWKDW ) PXVWEHFRUUHFW 1RWLFHWKDWZHGLGQߞWQHHGWRXQGHUVWDQGDQ\RIWKHDFWXDOVFLHQFHRISURWHLQVRUDPLQRDFLGVWRDQVZHU WKLVTXHVWLRQHYHQWKRXJKWKH5HG%RRNVROXWLRQRQSDJHUHIHUVWRERWKWKLQJV$OOZHUHDOO\KDGWR GRZDVUHDGWKHSDVVDJHWRUHDOL]HWKDWGHQDWXULQJZDVWKHVDPHWKLQJDVXQIROGLQJDQGWKHQSLFNWKH DQVZHUFKRLFHWKDWGLGQߞWLQYROYHIROGLQJDFFRUGLQJWRWKHSDVVDJH 3DJH4XHVWLRQ ,QRUGHUWRDQVZHUWKLVTXHVWLRQFRUUHFWO\ZHPXVW DVDOZD\V UHDGWKHZKROHTXHVWLRQDQGORRNDWDOOWKH DQVZHUFKRLFHV%XWLWߞVLPSRUWDQWWRUHDOL]HWKDWFKHFNLQJRXWWKHDQVZHUFKRLFHVLQWKLVFDVHDOVR LQYROYHVORRNLQJDWWKHNH\EHORZWKHDQVZHUFKRLFHVZKLFKKHOSVXVWRUHDOL]HWKDWZHߞUHUHDOO\EHLQJ DVNHGWRFRPSDUHWKHHQHUJ\OHYHOVRIDUDQGRPO\FRLOHGVKDSHWKHDFWLYHVKDSHDQGWKHPRVWVWDEOH VKDSHRIDSURWHLQLQDZD\WKDWLVFRQVLVWHQWZLWK6FLHQWLVWߞ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ߡWKHDFWLYHVKDSHRIDSURWHLQLVDOZD\VLGHQWLFDOWRWKHSURWHLQߞVORZHVWHQHUJ\ VKDSHߢ&KRLFH + UHIOHFWVWKDWYLHZEHFDXVHLWVKRZVWKDWWKHDFWLYHVKDSHLVWLHGIRUWKHORZHVWOHYHORI HQHUJ\ 6LQFH + LVFRQVLVWHQWZLWK6FLHQWLVWߞVDVVHUWLRQVLWPXVWQRWEHWKHFRUUHFWDQVZHU%XWOHWߞVORRNDW WRPDNHVXUHWKDWLWILWVZLWK6FLHQWLVWߞVYLHZVRZHFDQPDNHVXUHZHKDYHQߞWPDGHDPLVWDNH 7KHILQDOVHQWHQFHRI6FLHQWLVWߞVVWDWHPHQWVD\VWKDWDSURWHLQFDQKDYHߡDQDFWLYHVKDSHWKDWKDVPRUH HQHUJ\WKDQLWVORZHVWHQHUJ\VKDSHߢ7KLVLVFHUWDLQO\FRQVLVWHQWZLWKFKRLFH - ZKLFKVKRZVDQDFWLYH VKDSH WKHJUD\EDU DWDKLJKHUOHYHORIUHODWLYHHQHUJ\WKDQWKHORZHVWHQHUJ\VKDSH6RZHFDQFRQILUP WKDW - LVWKHFRUUHFWDQVZHU 3DJH4XHVWLRQ $WILUVWWKLVTXHVWLRQPLJKWVHHPWREHDVNLQJVRPHWKLQJWKDWUHTXLUHVVRPHVFLHQWLILFNQRZOHGJHRXWVLGH RIZKDWߞVSURYLGHGLQWKHSDVVDJH%XWLWWHOOVXVWRORRNDW)LJXUHDQGLIZHWDNHDPLQXWHWRORRNDWWKH DQVZHUFKRLFHVRQO\RQHRIWKHPDJUHHVZLWKZKDW)LJXUHVD\VZKLOHWKHRWKHUWKUHHGLUHFWO\FRQWUDGLFW WKHILJXUH )LJXUHFOHDUO\VKRZVWKHVDWXUDWLRQFXUYHIRU&D&2EHLQJWRWKHULJKWRIWKHGDVKHGYHUWLFDOOLQHWKDW LQGLFDWHVVDWXUDWLRQZKHQZHߞUHORRNLQJDWDGHSWKOHVVWKDQNP7KHVDWXUDWLRQFXUYHLVVROLGO\LQWKH DUHDODEHOHGߡVXSHUVDWXUDWHGߢ2QO\FKRLFH + VD\VWKDWVHDZDWHULVVXSHUVDWXUDWHGZLWK&D&2DWWKLV GHSWKVR + LVFRUUHFW ,I\RXߞYHVWXGLHGFKHPLVWU\\RXPD\NQRZWKDWVXSHUVDWXUDWLRQRIWHQOHDGVWRSUHFLSLWDWLRQHYHQZLWKRXW ORRNLQJDWWKHILJXUH%XWLWߞVLPSRUWDQWWKDWZHDOZD\VORRNDWWKHGDWDSURYLGHGE\WKH$&7EHFDXVHZH PD\VRPHWLPHVILQGWKDWRXUXQGHUVWDQGLQJRIDGYDQFHGVFLHQWLILFFRQFHSWVGLIIHUVIURPZKDWWKH$&7ߞV GDWDVKRZVRUIURPZKDWWKH$&7LVDFWXDOO\DVNLQJXVDERXW1RWLFHWKDWWKLVTXHVWLRQGRHVQߞWUHTXLUH DQ\XQGHUVWDQGLQJRIZKDWZRXOGFDXVH&D&2WRSUHFLSLWDWHRXWRIVHDZDWHULQOHVVWKDQNPRIZDWHU $OOZHKDGWRGRZDVUHDGWKHTXHVWLRQDQGWKHDQVZHUFKRLFHVFDUHIXOO\UHDOL]HWKDWZHZHUHEHLQJ DVNHGDERXW)LJXUHDQGWKHQILQGWKHRQO\DQVZHUFKRLFHWKDWDFWXDOO\DJUHHGZLWK)LJXUH 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQZKLFKDSSHDUVRQSDJHLVXQQHFHVVDULO\FRPSOLFDWHG 1RWKLQJQHZWKHUHRIFRXUVH7KH5HG%RRNWDONVDERXWXVLQJVSHFLILFJUDYLW\DQGGHQVLW\WRGHWHUPLQH WKHFRUUHFWDQVZHU:KLOHWKDWDSSURDFKLVQߞWZURQJLWLJQRUHVDQDSSURDFKWKDWߞVPXFKVLPSOHUIRUPRVW WHVWWDNHUV/HWߞVWDONDERXWWKHHDVLHUDSSURDFK 7KLVTXHVWLRQPLJKWVHHPGLIILFXOWDWILUVWEHFDXVHLWGRHVQߞWVSHFLILFDOO\UHIHUWRDQ\SDUWLFXODUWDEOHDQG LWGRHVQߞWXVHDQ\XQLWVRUNH\WHFKQLFDOWHUPVWKDWPLJKWJLYHXVPRUHRIDQLGHDZKHUHWRORRN(DFK DQVZHUFKRLFHGRHVUHIHUWRDVSHFLILFVDPSOHIURPRQHRIWKHWDEOHVEXWZKHQZHORRNDWWKHLQIRUPDWLRQ LQWKRVHVDPSOHVZHGRQߞWVHHDQ\LQIRUPDWLRQWKDWFOHDUO\LQGLFDWHVDZHLJKW%XWZHNQRZZHPXVWEH ORRNLQJDWWKHULJKWSDUWRIWKHSDVVDJHEHFDXVHHDFKDQVZHULQGLFDWHVDSDUWLFXODUVDPSOHDQGWKH LQIRUPDWLRQIRUWKRVHVDPSOHVRQO\DSSHDUVLQWKHWZRWDEOHV 6RZKDWߞVJRLQJRQ" $V,PHQWLRQHGDERYH,ߞOODGGUHVVWKHTXHVWLRQDVWKRXJKZHGRQߞWXQGHUVWDQGZKDWWKHSURPSWPHDQV ZKHQLWDVNVDERXWߡZHLJK>LQJ@WKHPRVWߢ +HUHDUHWKHGDWDIRUHDFKVDPSOHPHQWLRQHGLQWKHDQVZHUFKRLFHV ) 9ROXPHP/&RORU6SHFLILFJUDYLW\6ROLGV * 9ROXPHP/&RORU6SHFLILFJUDYLW\6ROLGV + 9ROXPHP/&RORU6SHFLILFJUDYLW\6ROLGV - 9ROXPHP/&RORU6SHFLILFJUDYLW\6ROLGV 7KHSURPSWVSHFLILHVWKDWZHߞUHRQO\JRLQJWREHXVLQJDP/DPRXQWRIHDFKVDPSOHVRWKHYROXPHGDWD LVQߞWUHDOO\UHOHYDQWWRDQVZHULQJWKHTXHVWLRQ,QRWKHUZRUGVLWGRHVQߞWPDWWHUWKDWWKHVDPSOHLQFKRLFH ) ZDVP/DQGWKHRQHLQFKRLFH * ZDVP/EHFDXVHWKHSURPSWWHOOVXVWKDWZHߞUHMXVW ORRNLQJDWP/RIHDFKVDPSOH 6RWKDWOHDYHVXVZLWKRQO\FRORUVSHFLILFJUDYLW\DQGRUVXVSHQGHGVROLGVWRFRQVLGHUZKHQZHWU\WR ILJXUHRXWZKLFKVDPSOHVKRXOGZHLJKWKHPRVW 1RWLFHWKDWWKHVDPSOHLQFKRLFH + KDVWKHKLJKHVWYDOXHVLQDOOWKUHHRIWKRVHFDWHJRULHV 6RZKHWKHUWKHZHLJKWRIWKHP/VDPSOHLVGHWHUPLQHGE\FRORUVSHFLILFJUDYLW\RUVXVSHQGHGVROLGV FKRLFH + PXVWZHLJKWKHPRVWQRPDWWHUZKDWZKLFKPDNHV + WKHFRUUHFWDQVZHU <RXPD\EHWKLQNLQJߡ,VQߞWLWSRVVLEOHWKDWWKHUHFRXOGEHDFRPSOLFDWHGIRUPXODWKDWFRXOGJLYHXVD FDOFXODWLRQZHFRXOGXVHWRGHWHUPLQHWKHZHLJKWRIVWXGHQWXULQHDQGWKDWWKLVIRUPXODPLJKWPDNHLWVR WKDWDP/PHDVXUHRIWKHVDPSOHLQ + LVQߞWDFWXDOO\WKHKHDYLHVW"ߢ,IZHZHUHDFWXDOVFLHQWLVWVZKR ZHUHDFWXDOO\VWXG\LQJWKHDFWXDOXULQHRIDFWXDOVWXGHQWV\RXߞGEHULJKWWRZRQGHUDERXWWKDW%XWZHߞUH MXVWZHOOWUDLQHG$&7WDNHUVDQVZHULQJDPXOWLSOHFKRLFHTXHVWLRQDQGZHNQRZWKDWWKH$&76FLHQFH VHFWLRQGRHVQߞWUHTXLUHXVWRGRFRPSOLFDWHGFDOFXODWLRQVߚHVSHFLDOO\LIWKHSDVVDJHGRHVQߞWHYHQPHQWLRQ DIRUPXODIRUWKDWFDOFXODWLRQWRIROORZ:HDOVRNQRZWKH$&76FLHQFHVHFWLRQKDVWRSURYLGHXVZLWK DQ\IRUPXODVLWZDQWVXVWRXVHDQGZHNQRZWKDWWKHUHLVQRIRUPXODLQWKHSDVVDJHIRUGHWHUPLQLQJWKH ZHLJKWRIVWXGHQWXULQH 6RWKLVTXHVWLRQFDQEHDQVZHUHGZLWKWRWDOFRQILGHQFHHYHQLIZHGRQߞWXQGHUVWDQGWKDWGHQVLW\DQG VSHFLILFJUDYLW\DUHUHOHYDQWWRZHLJKW 7KH5HG%RRNVROXWLRQRQWKHRWKHUKDQGUHOLHVRQWKHIDFWWKDWZHLJKWLVDPHDVXUHPHQWRIWKHIRUFHRI JUDYLW\RQDVSHFLILFREMHFWDQGWKDWIRUFHLVWKHUHVXOWRIWKHDPRXQWRIPDVVLQWKHREMHFW7KHGHQVLW\RI DQREMHFWLVWKHUDWLRRILWVPDVVWRWKHVSDFHLWWDNHVXSDQGVSHFLILFJUDYLW\LVDUDWLRRIWKHGHQVLW\RIDQ REMHFWWRWKHGHQVLW\RIZDWHU7KDWSUREDEO\VRXQGVSUHWW\FRPSOLFDWHGLI\RXߞYHQHYHUVWXGLHGWKRVH WKLQJVEHIRUHEXWLWDOOERLOVGRZQWRWKLVWKHKLJKHUDQREMHFWߞVVSHFLILFJUDYLW\WKHJUHDWHUWKHZHLJKWRI DJLYHQYROXPHRIWKDWREMHFW%XWDJDLQ\RXGRQߞWQHHGWRNQRZ$1<RIWKLVWRDQVZHUWKLVTXHVWLRQ FRUUHFWO\$OO\RXKDYHWRGRLVORRNDWWKHVDPSOHVLQHDFKDQVZHUFKRLFHLJQRUHWKHYROXPHGDWD VLQFH WKHTXHVWLRQVSHFLILHVDFRQVWDQWYROXPHIRUHDFKVDPSOH DQGWKHQQRWLFHWKDWRQHVDPSOHKDVWKHKLJKHVW QXPEHUVLQDOOWKHRWKHUFDWHJRULHV1RDFWXDOVFLHQFHUHTXLUHG 1RZOHWߞVWDONDERXWWKHZD\VWKDWZHFRXOGPHVVWKLVTXHVWLRQXSLIZHߞUHQRWSD\LQJDWWHQWLRQEHFDXVH WKHUHDUHDORWRIWKHP 2QHZD\WRPHVVWKHTXHVWLRQXSLVWRWU\WRILQGWKHVDPSOHZLWKWKHJUHDWHVWZHLJKWRQ\RXURZQUDWKHU WKDQFRPSDULQJWKHJLYHQDQVZHUFKRLFHVWRVHHZKLFKRIWKRVHZHLJKVWKHPRVWDVWKHTXHVWLRQDVNV\RX WRGR,I\RXORRNDWWKHWDEOHVDQGWU\WRILQGWKHVLQJOHVDPSOHWKDWZRXOGZHLJKWKHPRVW\RXߞOOVHHWKDW LWߞVDFWXDOO\WKHDPVDPSOHIURP6WXGHQW$ DJDLQWKLVLVWUXHZKHWKHU\RXXVHWKH5HG%RRNߞ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ߞWOLVWHGLQDOSKDEHWLFDORUGHULQWKH DQVZHUFKRLFHV,ߞYHVHHQWHVWWDNHUVPLVVWKLVTXHVWLRQLQSUDFWLFHEHFDXVHWKH\ILJXUHGRXWWKDW6WXGHQW $ߞVVDPSOHZDVWKHKHDYLHVWDQGWKHQDFFLGHQWDOO\PDUNHG ) DQ\ZD\VLQFHLWZDVWKHILUVWDQVZHU FKRLFHEXEEOHLQWKHTXHVWLRQDQGWKH\DXWRPDWLFDOO\DVVRFLDWHGWKHLGHDRIߡ$ߢZLWKWKHILUVWEXEEOH 6RWKLVTXHVWLRQHQGVXSUHLQIRUFLQJDORWRIWKHSRLQWVWKDW,ߞYHHPSKDVL]HGUHSHDWHGO\WKURXJKWKLV%ODFN %RRN,WGRHVQߞWDFWXDOO\UHTXLUHXVWRNQRZDQ\WKLQJDERXWVFLHQFHHYHQWKRXJKWKH5HG%RRNZRXOGOLNH XVWRWKLQNRWKHUZLVH%XWLWGRHVUHTXLUHXVWRUHDGFDUHIXOO\DQGFRUUHFWO\QDYLJDWHVHYHUDOSRWHQWLDO WUDSVWKDWDUHGHOLEHUDWHO\EXLOWLQWRWKHTXHVWLRQ 3DJH4XHVWLRQ ,QRUGHUWRDQVZHUWKLVTXHVWLRQZHQHHGWRFRPSDUHWKHIROORZLQJVHWVRIWKLQJV WKH IUHH]LQJ SRLQW RI +2 ZLWKRXW 1D&O WR WKH IUHH]LQJ SRLQW RI +2 ZLWK PROH RI 1D&O WKHERLOLQJSRLQWRI+2ZLWKRXW1D&OWRWKHERLOLQJSRLQWRI+2ZLWKPROHRI1D&O $IWHUZHFRPSDUHWKHPZHߞOOILQGWKHDQVZHUFKRLFHWKDWDFFXUDWHO\GHVFULEHVWKHLUUHODWLRQVKLSV ,QRUGHUWRPDNHWKLVFRPSDULVRQZHߞOOQHHGWRNQRZWKHERLOLQJSRLQWDQGIUHH]LQJSRLQWRI+2ZLWKRXW DQ\1D&OLQLW7KDWLQIRUPDWLRQGRHVQߞWDSSHDULQHLWKHUWDEOHEXWLWGRHVDSSHDULQWKHODVWVHQWHQFHRI WKHYHU\ILUVWSDUDJUDSKLQWKHSDVVDJHZKLFKVD\VWKDW+2IUHH]HVDW &DQGERLOVDW & <RXPLJKWDOUHDG\NQRZWKDWSXUHZDWHUERLOVDW &DQGIUHH]HVDW &DWVWDQGDUGSUHVVXUHEXWLWߞV DOZD\VEHVWWRFKHFNWKHSDVVDJHIRUWKLVW\SHRILQIRUPDWLRQEHFDXVH\RXPLJKWUHPHPEHULWLQFRUUHFWO\ RUWKHWHVWPLJKWXVHGLIIHUHQWYDOXHVRUGLIIHUHQWXQLWVIURPZKDW\RXߞUHXVHGWR5HPHPEHUWKDW\RXZDQW WRUHO\RQLQIRUPDWLRQVWUDLJKWRXWRIWKHSDVVDJHRUTXHVWLRQZKHQHYHUSRVVLEOH 6R+2ZLWKQR1D&OIUHH]HVDW &:HFDQVHHLQ7DEOHWKDWZLWKPROHRI1D&ODGGHG+2 IUHH]HVDW &7KDWPHDQVWKHUHߞ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ߞWOHWWKHVHNLQGVRIPLVWDNHVKDSSHQ 3DJH4XHVWLRQ ,I\RXߞYHHYHUVWXGLHGFKHPLVWU\\RXPLJKWWKLQNWKDWWKLVTXHVWLRQUHTXLUHV\RXWRXQGHUVWDQGKRZ PROHFXOHVRI&D&/DQG1D&OEUHDNLQWRLRQVZKHQPL[HGZLWKZDWHU%XWWKDWߞ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ߞVWKHDPRXQWWKDWWKHTXHVWLRQDVNVXVDERXW:HFDQVHHWKDWLWORZHUVWKHIUHH]LQJSRLQWE\ &,I WKDWߞVWKHFDVHZHFDQH[SHFW&D&OWRKDYHDERXWWKDWHIIHFWZKHQPROHLVDGGHGWR+26RWKH FKDQJHVKRXOGEHJUHDWHUWKDQR&EXWOHVVWKDQR& + LVWKHDQVZHUFKRLFHWKDWFRYHUVWKDWUDQJH VR + LVFRUUHFW 7KLVTXHVWLRQPD\VHHPDOLWWOHWULFN\DWILUVWEXWLWUHDOO\GRHVQߞWUHTXLUHDQ\NQRZOHGJHRIFKHPLVWU\ DQGLWRQO\UHTXLUHVDVPDOODPRXQWRIPHQWDOPDWKߚHQRXJKPDWKWREHDEOHWRWHOOWKDWLVWZLFHDV PXFKDV5HPHPEHUWKDW$&76FLHQFHTXHVWLRQVZLOODOZD\VWXUQRXWWREHIDLUO\VLPSOHLIZH UHPHPEHUWRDSSURDFKWKHPFRUUHFWO\ 3DJH4XHVWLRQ 7KLVTXHVWLRQPLJKWVRXQGOLNHLWUHTXLUHVXVWRPDNHDQDFWXDOVFLHQWLILFLQIHUHQFHDERXWWKHVWXGLHV GHVFULEHGEXWLIZHUHDGWKHDQVZHUFKRLFHVRQO\RQHRIWKHPLVDFWXDOO\VXSSRUWHGE\WKHWH[W $ FDQߞWEHULJKWEHFDXVH)LJXUHVKRZVWKHDYHUDJHDLUWHPSHUDWXUHE\PRQWKIRUWKH\HDUDQGLWߞVQRW EHORZ &\HDUURXQG % LVWKHFRUUHFWDQVZHUEHFDXVHZHNQRZIRUVXUHWKHUHZHUHJODFLHUVSUHVHQWDWPDQ\GLIIHUHQW ORFDWLRQVVLQFHWKHWH[WGHVFULEHVJODFLHUVDWORFDWLRQVLQWKH$UFWLFDQGORFDWLRQVLQWKH$QWDUFWLF & FDQߞWEHULJKWEHFDXVHWKHWH[WQHYHUVD\VWKHUHZHUHVHYHUDOPRQWKVGXULQJWKH\HDUZLWKQR SUHFLSLWDWLRQ,QIDFWWKHZULWHXSIRU6WXG\VD\VWKDWFRQWDLQHUVZHUHSODFHGDWWKHORFDWLRQVWRFROOHFW VQRZIDOOIRUDQHQWLUH\HDUZLWKRXWHYHUPHQWLRQLQJWKDWWKHUHZRXOGEHDSHULRGZLWKRXWVQRZIDOOUDLQ RURWKHUSUHFLSLWDWLRQ ' FDQߞWEHFRUUHFWEHFDXVHWKHUHLVQRPHQWLRQRIߡODUJHDUHDVRIEDUHVRLODQGURFNSUHVHQWߢDQ\ZKHUH LQWKHSDVVDJH7KHSDVVDJHURXWLQHO\PHQWLRQVGULOOLQJLFHFRUHVZLWKQRPHQWLRQRIURFNVRUVRLOSUHVHQW LQWKHFRUHV 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQZKLFKDSSHDUVRQSDJHPDNHVLWVRXQGOLNHZHKDYHWR NQRZVRPHWKLQJDERXWVFLHQFHLQRUGHUWREHDEOHWRXQGHUVWDQGZK\WKHVWXGLHVZHUHFDUULHGRXWDWWKHVH VLWHV%XWDVZHMXVWVDZZHGLGQߞWDFWXDOO\KDYHWRGRDQ\VFLHQWLILFDQDO\VLVKHUHZHFDQNQRZWKDW % LVWKHFRUUHFWDQVZHUEHFDXVHLWߞVWKHRQO\RQHWKDWUHIOHFWVDIDFWVXSSRUWHGLQWKHSDVVDJH7KHRWKHU FKRLFHVDUHFOHDUO\QRWPHQWLRQHGLQWKHSDVVDJH'RQߞWPDNHWKHVH$&76FLHQFHTXHVWLRQVKDUGHUWKDQ WKH\DFWXDOO\DUH 3DJH4XHVWLRQ 7KLVTXHVWLRQLVDOLWWOHFRQIXVLQJIRUPRVWSHRSOH3DUWRIWKHLQWLPLGDWLRQFRPHVIURPWKHQRWDWLRQLWVHOI ZKLFKPRVWWHVWWDNHUVZRQߞWEHIDPLOLDUZLWK7KHZRUGLQJLVDOVRDOLWWOHDZNZDUG%XWLIZHUHDG FDUHIXOO\DQGIRFXVRQRQHSDUWDWDWLPHZHFDQJHWWKURXJKLW ,QVWHDGRIWKHߡͣ2ߢV\PERO,ߞPJRLQJWRXVHWKHSKUDVHߡ2LQGH[ߢZKLFKDSSHDUVLQWKHSDVVDJH EHFDXVH,WKLQNLWߞVHDVLHUWRXQGHUVWDQGߚIRUDORWRIWHVWWDNHUVHYHU\WLPHWKH\UHDGߡͣ2ߢWKHLUH\HV JOD]HRYHUDQGLWPHDQVQRWKLQJ,DOVRGRQߞWZDQWWRNHHSXVLQJWKHSKUDVHߡ22UDWLRߢIRUWKHVDPH UHDVRQߚSHRSOHWHQGWRUHDGULJKWRYHUWKDWZLWKRXWDFWXDOO\QRWLFLQJLW,QVWHDGRIVD\LQJߡ22UDWLRߢ ,ߞPMXVWJRLQJWRVD\ߡWKHUDWLRߢDQG\RXߞOONQRZZKDW,PHDQ1RUPDOO\,ZRXOGQߞWERWKHUFRPLQJXS ZLWKVSHFLDOSKUDVHVIRUWKLQJVLQDQ$&76FLHQFHTXHVWLRQߚ,ߞGMXVWXVHWKHVDPHSKUDVHVWKH$&7XVHG %XWLQWKLVFDVH,ߞYHKDGVRPDQ\WHVWWDNHUVWHOOPHWKH\ZHUHVRFRQIXVHGE\ߡͣ2ߢDQGߡ22UDWLRߢ WKDW,ߞYHGHFLGHGWRUHQDPHWKHPVRPHWKLQJHDVLHURQWKHH\HV 1RZZLWKWKDWLQPLQGLIZHXQUDYHOWKHILUVWVHQWHQFHLQWKHSURPSWZHVHHWKDWLWߞVDVNLQJXVKRZߡWKH UDWLRߢRIRQHVDPSOHPXVWFRPSDUHWRߡWKHUDWLRߢRIWKHVWDQGDUGLIWKH2LQGH[IRUWKHVDPSOHLV]HUR 7KHQWKHDQVZHUFKRLFHVJLYHDOLVWRISRVVLEOHUHODWLRQVKLSV 7KHUHDUHDORWRIZD\VZHFRXOGDSSURDFKWKLV7KH5HG%RRNߞVVROXWLRQLVIDLUO\VWUDLJKWIRUZDUGLW QRWHVWKDWWKH2LQGH[FDQRQO\EH]HURLIWKHQXPHUDWRULQLWVIRUPXODLV]HURDQGWKHQXPHUDWRUFDQ RQO\EH]HURLIߡWKHUDWLRߢIRUWKHVDPSOHDQGߡWKHUDWLRߢIRUWKHVWDQGDUGDUHLGHQWLFDOEHFDXVHWKH QXPHUDWRULVIRXQGE\VXEWUDFWLQJߡWKHUDWLRߢRIWKHVWDQGDUGIURPߡWKHUDWLRߢRIWKHVDPSOHDQGWKHRQO\ ZD\WRVXEWUDFWRQHQXPEHUIURPDQRWKHUQXPEHUDQGHQGXSZLWK]HURLVIRUWKHQXPEHUVWREHLGHQWLFDO 6R * ZRXOGKDYHWREHFRUUHFW%XWWKLVLVDELWPRUHDEVWUDFWWKDQPDQ\WHVWWDNHUVZLOOIHHO FRPIRUWDEOHZLWK ,IZHZDQWHGWRWKLQNDELWPRUHDOJHEUDLFDOO\ZHPLJKWDSSURDFKWKHTXHVWLRQOLNHWKLV 7KLVLVUHDOO\MXVWDPRUHIRUPDOL]HGZD\WRDUULYHDWWKHVDPHFRQFOXVLRQIRXQGLQWKH5HG%RRNZKLFK LVDJDLQWKDWߡWKHUDWLRߢIRUWKHVDPSOHPXVWEHHTXDOWRߡWKHUDWLRߢIRUWKHVWDQGDUG $WKLUGZD\WRDSSURDFKWKHTXHVWLRQLVWRERUURZDWHFKQLTXHZHZRXOGQRUPDOO\XVHIRUWKH$&70DWK VHFWLRQDQGDFWXDOO\SOXJQXPEHUVLQWRWKHIRUPXODIRUWKH2LQGH[DFFRUGLQJWRWKHGLIIHUHQW UHODWLRQVKLSVGHVFULEHGLQWKHDQVZHUFKRLFHVXQWLOZHDUULYHDWDQDQVZHUFKRLFHWKDWJHQHUDWHVDQ2 LQGH[RI]HUR )RULQVWDQFHWRWHVWFKRLFH ) ZHFRXOGVD\WKDWߡWKHUDWLRߢIRUWKHVDPSOHZDVDQGߡWKHUDWLRߢIRUWKH VWDQGDUGZDV,IZHSOXJWKRVHYDOXHVLQWKH2LQGH[GRHVQߞWHTXDO]HUR 7RWHVWFKRLFH * ZHFRXOGVD\WKDWߡWKHUDWLRߢIRUWKHVDPSOHZDVDQGߡWKHUDWLRߢIRUWKHVWDQGDUG ZDVDOVR3OXJJLQJWKRVHQXPEHUVLQ RUDQ\SDLURILGHQWLFDOQXPEHUV GRHVFUHDWHDQ2LQGH[RI ]HUREHFDXVH * LVWKHFRUUHFWDQVZHU 7RWHVWFKRLFH + ZHFRXOGSOXJLQIRUߡWKHUDWLRߢRIWKHVDPSOHDQGIRUߡWKHUDWLRߢRIWKHVWDQGDUG DQGLWZRXOGQߞWJHQHUDWHDQ2LQGH[RI]HUR )LQDOO\WRWHVWFKRLFH - ZHFRXOGSOXJLQDVߡWKHUDWLRߢIRUWKHVDPSOHDQGDVߡWKHUDWLRߢIRUWKH VWDQGDUG$JDLQZHߞGVHHWKDWWKH2LQGH[ZDVQߞW]HUR -XVWWREHFOHDU,ߞPGHILQLWHO\127UHFRPPHQGLQJWKDW\RXJRWKURXJKDOORIWKLVVXEVWLWXWLRQRUDOJHEUDLF PDQLSXODWLRQLI\RXGRQߞWIHHOOLNHLW,ߞPMXVWWU\LQJWRVKRZWKDWLWߞVSRVVLEOHLI\RXGRQߞWIHHO FRPIRUWDEOHDSSURDFKLQJWKHTXHVWLRQLQDQ\RWKHUZD\7KHPRVWGLUHFWDSSURDFKLVSUREDEO\VRPH FRPELQDWLRQRIQRWLFLQJWKDWWKHQXPHUDWRULQWKHIUDFWLRQQHHGVWREH]HURDQGQRWLFLQJWKDWRQHRIWKH DQVZHUFKRLFHVVXJJHVWVPDNLQJWKHWZRYDOXHVIRUߡWKHUDWLRߢLGHQWLFDO%XWVRPHWHVWWDNHUVZRQߞWQRWLFH WKDWULJKWDZD\ZKLFKLVZK\,ZDQWHGWRSRLQWRXWWKHRWKHUDSSURDFKHVWKDWFRXOGEHWDNHQ 3DJH4XHVWLRQ 7RDQVZHUWKLVTXHVWLRQFRUUHFWO\ZHQHHGWRILQGVRPHWKLQJWKDWERWKVFLHQWLVWVDJUHHFDXVHGWKHRFHDQWR EHR[\JHQSRRU2QHJRRGZD\WRGRWKLVLVWRVNLPWKHVWDWHPHQWVRIERWKVFLHQWLVWVORRNLQJIRUSKUDVHV OLNHߡR[\JHQSRRUߢߡKDYLQJOLWWOHR[\JHQߢߡZLWKRXWR[\JHQߢDQGVRRQ ,IZHGRWKDWZHVHHWKDWWKHSKUDVHߡR[\JHQSRRUߢDSSHDUVGLUHFWO\LQERWKVWDWHPHQWV 6FLHQWLVWRQO\GHVFULEHVRFHDQZDWHUDVߡR[\JHQSRRUߢRQFHDWWKHHQGRIKHUVWDWHPHQWZKLFKVD\VWKDW FKDQJLQJWHPSHUDWXUHVZHUHߡVORZLQJRFHDQFLUFXODWLRQDQGFDXVLQJRFHDQZDWHUWREHFRPHR[\JHQ SRRUߢ 6FLHQWLVWDOVRRQO\GHVFULEHVRFHDQZDWHUDVߡR[\JHQSRRUߢRQHWLPHZLWKWKHIROORZLQJFODLPLQ UHODWLRQWRYHUWLFDOFLUFXODWLRQߡVLQFHWKLVFLUFXODWLRQZDVDEVHQW0DWKHRFHDQZDWHUZDVVWDJQDQW DQGR[\JHQSRRUߢ 6RZHFDQVHHWKDWERWKVFLHQWLVWVWDONDERXWRFHDQZDWHUEHLQJR[\JHQSRRUZKHQWKHFLUFXODWLRQRIRFHDQ ZDWHUߡVORZHGVWRSSHGRUZDVDEVHQWߢ7KDWPHDQVWKDWFKRLFH * LVFRUUHFW 7KHZURQJDQVZHUVIRUWKLVTXHVWLRQDUHVRPHZKDWVLPLODUWRWKHZURQJDQVZHUVZHPLJKWH[SHFWWRILQG LQWKH$&75HDGLQJVHFWLRQ ) WDONVDERXWFLUFXODWLRQUHYHUVLQJEXWQHLWKHUVFLHQWLVWPHQWLRQVWKDWVR ) LVZURQJ + WDONVDERXWRFHDQLFRUJDQLVPVEXWQHLWKHUVFLHQWLVWPHQWLRQVRUJDQLVPVDVIDFWRUVWKDWDIIHFW FLUFXODWLRQߚ6FLHQWLVWGRHVVD\WKDWFLUFXODWLRQDIIHFWHGRUJDQLVPVEXWQRWWKDWRUJDQLVPVDIIHFW FLUFXODWLRQ6R + LVZURQJ - KDVWKHVDPHEDVLFSUREOHPDV + ZKLFKLVWKDW6FLHQWLVWGRHVQߞWPHQWLRQRUJDQLVPVDWDOODQG 6FLHQWLVWRQO\PHQWLRQVWKHPDVWKLQJVWKDWDUHDIIHFWHGE\FLUFXODWLRQ 3DJH4XHVWLRQ $WILUVWJODQFHWKLVTXHVWLRQGHILQLWHO\ORRNVOLNHVRPHWKLQJ\RXPLJKWEHDVNHGLQFKHPLVWU\FODVVZKHQ OHDUQLQJKRZWREDODQFHUHDFWLRQV,QIDFWWZRRIWKHZURQJDQVZHUVߚ * DQG - ߚDUHLQFRUUHFWO\ EDODQFHGVRDORWRIXQWUDLQHGWHVWWDNHUVZLWKH[SHULHQFHLQFKHPLVWU\ZLOOOHDSWRWKHLQFRUUHFW DVVXPSWLRQWKDWWKH\VKRXOGDSSURDFKWKLVTXHVWLRQIURPWKDWSHUVSHFWLYH %XWZHWUDLQHGWHVWWDNHUVNQRZWKHUHPXVWEHVRPHWKLQJLQWKHSDVVDJHWKDWZLOOVKRZXVZKDWWKH UHDFWLRQVKRXOGORRNOLNH ,IZHORRNDWWKHYHU\ERWWRPRIWKHILUVWFROXPQRIWH[WLQWKHSDVVDJHZHVHHWKLVUHDFWLRQ +2࠱+2 $QGLIZHJREDFNDQGUHDG([SHULPHQWZHVHHWKDWLWGHVFULEHVEDVLFDOO\WKHRSSRVLWHRIZKDWWKH TXHVWLRQLVDVNLQJDERXW([SHULPHQWWDONVDERXWFRPELQLQJ+DQG2WRIRUP+2ZKLOHWKLVTXHVWLRQ LVWDONLQJDERXW+2EUHDNLQJGRZQWRIRUP+DQG26LQFH+2࠱+2GHVFULEHVWKHIRUPDWLRQ RIZDWHULQ([SHULPHQWZHZDQWWKHDQVZHUFKRLFHIRUWKLVTXHVWLRQWKDWUHYHUVHVWKDWSURFHVVZKLFKLV + ,QRWKHUZRUGVZHZDQW +2࠱+2 LQVWHDGRI +2࠱+2 )XUWKHUPRUHMXVWIURPUHDGLQJWKHGHVFULSWLRQLQWKHTXHVWLRQZHVKRXOGNQRZWKDWZHߞUHWDONLQJDERXW +2EUHDNLQJGRZQLQWR+DQG2VR+2VKRXOGEHRQWKHOHIWVLGHRIWKHDUURZDQG+DQG2VKRXOG EHRQWKHULJKWVLGHRIWKHDUURZ7KDWHOLPLQDWHVFKRLFHV ) DQG * LPPHGLDWHO\ 7KHQUHDGLQJFDUHIXOO\ZLOOVKRZXVWKDW - LVZURQJEHFDXVHLWSXWVWKHLQIURQWRIWKH2UDWKHUWKDQ LQIURQWRIWKH+ZKHUHLWLVLQWKHSDVVDJH ,IZHNQRZFKHPLVWU\ZHPLJKWDOVRUHDOL]H - LVZURQJ EHFDXVHLWߞVQRWDEDODQFHGUHDFWLRQߚLWKDV+DQG2RQWKHOHIWEXW+DQG2RQWKHULJKW%XW DJDLQLWߞVDOZD\VEHWWHUWRUHO\RQZKDWߞVLQWKHWH[WWKDQWRUHO\RQRXWVLGHNQRZOHGJH )RUDOORIWKHVHUHDVRQVZHNQRZWKDW + LVWKHFRUUHFWDQVZHU 3DJH4XHVWLRQ 7KH5HG%RRNH[SODQDWLRQIRUWKLVTXHVWLRQRQSDJHLVSUHWW\WKRURXJKDQGTXLWHYDOLGIURPD VFLHQWLILFVWDQGSRLQW%XW,ߞGOLNHWRSRLQWRXWDQDSSURDFKWRWKHTXHVWLRQWKDW,WKLQNLVSUREDEO\DORW IDVWHUDQGHDVLHUIRUPDQ\WHVWWDNHUVDQGZKLFKGRHVQߞWUHTXLUHPXFKVFLHQWLILFUHDVRQLQJDWDOO 1RWLFHWKDW % WDONVDERXWDFRQWDPLQDWLRQZLWKߡUHDFWLYHLPSXULWLHV>HPSKDVLVPLQH@ߢDQG ' WDONV DERXWߡRWKHUUHDFWLRQVRFFXUULQJߢVHSDUDWHO\IURPWKHUHDFWLRQEHLQJVWXGLHG6LQFHERWKFKRLFHVWDON DERXWH[WUDWKLQJVUHDFWLQJLQWKHH[SHULPHQWERWKFKRLFHVPXVWEHZURQJ7KLQNDERXWLWWKHUHFDQRQO\ EHRQHFRUUHFWDQVZHUIRUHDFKTXHVWLRQDQGERWKRIWKHVHFKRLFHVWDONDERXWWKHSRWHQWLDOIRUH[WUD UHDFWLRQVVLQFHWKH\FDQߞWERWKEHFRUUHFW EHFDXVHWKDWZRXOGUHTXLUHWKHTXHVWLRQWRKDYHWZRFRUUHFW DQVZHUV WKH\PXVWERWKEHZURQJ :HFDQDOVRQRWLFHWKDW & LVLQFRUUHFWLIZHORRNEDFNDWWKHGHVFULSWLRQRI([SHULPHQWDQGUHDOL]HWKDW WKHߡFKDQJHVLQWKHPDVVHVRIWKHWXEHVHFWLRQVFRQWDLQLQJ&D&OZHUHXVHGWRFDOFXODWHWKHPDVV RI+2IRUPHGߢ6RLILWZHUHSRVVLEOHIRU+2WROHDYHWKHH[SHULPHQWZLWKRXWEHLQJDEVRUEHGE\WKH &D&OWKHQWKHFKDQJHLQWKHPDVVRIWKH&D&OZRXOGQߞWEHDQDFFXUDWHLQGLFDWLRQRIWKHDPRXQWRI+2 IRUPHGDQGWKHUHVXOWVZRXOGEHPLVOHDGLQJ6R & LVDOVRVRPHWKLQJWKDWZRXOGLPSDFWWKHRXWFRPH 2QO\FKRLFH $ WDONVDERXWDFRQWDPLQDWLRQZLWKߡQRQUHDFWLYHLPSXULWLHV>HPSKDVLVPLQH@ߢ6LQFHWKH ZRUGߡQRQUHDFWLYHߢPHDQVWKDWWKHLPSXULWLHVZRXOGQߞWUHDFWZLWKDQ\WKLQJLQWKHH[SHULPHQWWKHLU SUHVHQFHFRXOGQߞWDIIHFWWKHRXWFRPHDWDOOZKLFKPHDQVWKH\ZRXOGQߞWLQWHUIHUHZLWKWKHLQWHUSUHWDWLRQRI WKHUHVXOWV6R $ LVFRUUHFW 1RWLFHWKHLPSRUWDQFHRIWKHZRUGߡ127ߢLQWKHTXHVWLRQߚLIZHGLGQߞWFDWFKWKDWZRUGZKHQUHDGLQJWKH TXHVWLRQDQGLIZHGLGQߞWFKHFNDOORIRXUDQVZHUFKRLFHVZHPLJKWHQGXSWKLQNLQJZHZHUHORRNLQJIRU DVLQJOHDQVZHUFKRLFHWKDWZRXOGFDXVHDQHUURULQLQWHUSUHWLQJWKHUHVXOWVDQGWKHQZHPLJKWKDYH FKRVHQ % DVVRRQDVZHUHDGLWDQGPRYHGRQWRWKHQH[WTXHVWLRQZLWKRXWFDWFKLQJRXUPLVWDNH 8QWUDLQHGWHVWWDNHUVGRWKDWNLQGRIWKLQJDOOWKHWLPHDQGLWFDQFRVWWKHPORWVRISRLQWV5HDGFDUHIXOO\ DQGWKLQNFDUHIXOO\DQG\RXߞOOILQGWKH$&7WREHDQH[WUHPHO\UHSHWLWLYHWHVWRIH[WUHPHO\EDVLFLGHDV VRPHWLPHVSUHVHQWHGLQVWUDQJHZD\VMXVWOLNH,NHHSVD\LQJLWLV 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVIRUWKHKRUL]RQWDOOHQJWKRIWKHFKDLQRQWKHWDEOHWRSEHIRUHWKHFKDLQZDVUHOHDVHG ,IZHߞ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ߞWSRVVLEOH2IFRXUVHWKHLQFOXVLRQRIWKLVDQVZHUFKRLFHIROORZVDYHU\FRPPRQZURQJDQVZHU SDWWHUQRQWKH$&7EHFDXVHWKLVFKRLFHFDQEHVHHQDVWKHH[DFWRSSRVLWHRIWKHFRUUHFWFKRLFHZKLFK LQYROYHVVXEWUDFWLQJ<LQVWHDGRIDGGLQJLW :HFDQDOVRHOLPLQDWH + EHFDXVHWKHUHLVQRWKLQJLQWKHWH[WWRVXSSRUWWKHLGHDWKDW<WKHOHQJWKRI FKDLQKDQJLQJYHUWLFDOO\RYHUWKHHGJHRIWKHWDEOHLVHTXDOWRWKHKRUL]RQWDOOHQJWKRIWKHFKDLQO\LQJRQ WKHWDEOHWRS )LQDOO\ZHFDQHOLPLQDWH - EHFDXVHZHNQRZWKDWLWߞVHTXDOWRWKHWRWDOOHQJWKRIWKHFKDLQ6LQFHZH NQRZDSRUWLRQRIWKHFKDLQ < LVKDQJLQJYHUWLFDOO\RIIWKHHGJHRIWKHWDEOHWRSZHNQRZWKDWWKH KRUL]RQWDOOHQJWKRQWKHWDEOHWRSFDQQRWEHHTXDOWRWKHIXOOOHQJWKRIWKHFKDLQ 6RWKHUHDUHDWOHDVWWZRZD\VWRVHHWKDW * LVWKHFRUUHFWDQVZHUߚEXWERWKGHSHQGRQUHDGLQJWKH TXHVWLRQWKLQNLQJDERXWWKHDQVZHUFKRLFHVDQGJHWWLQJWKHLQIRUPDWLRQ\RXQHHGGLUHFWO\IURPWKH SDVVDJH$OZD\VUHPHPEHUWKHLPSRUWDQFHRIFDUHIXOO\UHDGLQJWKHTXHVWLRQDQVZHUFKRLFHVDQG SDVVDJH 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQRQSDJHLVJRRGDVIDUDVLWJRHVEXWLWGRHVQߞ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ߞVVXUIDFHZRXOGKDYHWREHDSSUR[LPDWHO\FPJUHDWHUWKDQWKHRQHRQWKH(DUWKߞVVXUIDFH 7KHPLVWDNHWKDWPDQ\WHVWWDNHUVZLOOPDNHLVWRFKRRVH & ZKLFKPHQWLRQVDGLVWDQFHRIFP$VZH MXVWVDZFPLVURXJKO\WKH<YDOXHWKDWFRUUHVSRQGVWRDIDOOWLPHRIVHFRQGVRQWKH0RRQ DFFRUGLQJWR)LJXUHߚEXWWKHTXHVWLRQDVNVIRUWKHGLIIHUHQFHEHWZHHQWKHWZRFKDLQOHQJWKVQRWWKH OHQJWKRIWKHFKDLQRQWKHPRRQLWVHOI&DQ\RXVHHKRZDORWRIWHVWWDNHUVZLOOLJQRUHWKHUHVWRIWKH ZRUGVLQFKRLFH & DQGFKRRVHLWEHFDXVHLWKDVWKHQXPEHULQLW" 7KHNH\WKLQJKHUHLVWREHDULQPLQGWKDWWKHDQVZHUFKRLFHVDUHJLYHQLQWHUPVRIWKHWZRYDOXHVUHODWLYH WRHDFKRWKHU:KHQSHRSOHFKRRVH & EHFDXVHLWKDVWKHQXPEHUWKH\GRQߞWPDNHWKDWPLVWDNH EHFDXVHWKH\GRQߞWXQGHUVWDQGVFLHQFHRUEHFDXVHWKH\FDQߞWUHDGJUDSKVRUEHFDXVHWKH\ߞUHQRWFXWRXW IRUFROOHJH7KH\PDNHWKHPLVWDNHEHFDXVHWKH\ߞUHQRWSD\LQJDWWHQWLRQWRWKHTXHVWLRQ7KH\GRQߞWUHDG DOORIWKHZRUGVLQDOORIWKHDQVZHUFKRLFHVDQGUHDOL]HWKDWWKHTXHVWLRQLVQߞWMXVWDVNLQJIRUWKHYDOXHRQ WKHJUDSKWKDWFRUUHVSRQGVWRDFHUWDLQ<YDOXH7KLVLVZK\RQDQ\VHFWLRQRIWKH$&7\RXDOZD\VKDYH WRPDNHVXUH\RXUHDGWKHDQVZHUFKRLFHVFDUHIXOO\DQGWKDWWKHDQVZHU\RXߞUHSURYLGLQJDFWXDOO\ DQVZHUVWKHTXHVWLRQ\RXZHUHDVNHG 3DJH4XHVWLRQ 7KH5HG%RRNVROXWLRQIRUWKLVTXHVWLRQDSSHDUVRQSDJH,WPDNHVWKHVDPHWDFWLFDOPLVWDNHWKDWPRVW WHVWWDNHUVZLOOPDNHRQWKLVTXHVWLRQLWDFWXDOO\ILQGVWKHPDWKHPDWLFDODYHUDJHRIWKHYDOXHVLQERWK ILJXUHV:KLOHWKLVDSSURDFKZLOOOHDGWRWKHFRUUHFWDQVZHULI\RXH[HFXWHLWFRUUHFWO\LWZLOODOVRWDNH PRUHWLPHDQGHQHUJ\WKDQQHFHVVDU\ 6LQFHWKHTXHVWLRQDVNVZKLFKVLWHVKDGWKHKLJKHUDYHUDJHVߚDQGVLQFHWKLVLVWKH$&76FLHQFHVHFWLRQ ZKLFKQHYHUUHTXLUHVXVWRGRPXFKPDWKߚZHFDQSUREDEO\ILJXUHRXWZKLFKYDOXHVKDYHWKHKLJKHVW DYHUDJHVE\JODQFLQJDWWKHGDWD 6XUHHQRXJKERWKJUDSKVVKRZVLJQLILFDQWO\PRUHEODFNWKDQWKH\GRJUH\6LQFHEODFNLVDVVRFLDWHGZLWK 6LWHZHNQRZWKDW6LWHKDVWKHKLJKHUDYHUDJHYDOXHVLQERWKILJXUHVVRFKRLFH ) LVFRUUHFW 7KDWߞVDOOWKHUHLVWRLW6LQFHWKHTXHVWLRQGRHVQߞWUHTXLUHXVWRILQGWKHDFWXDODYHUDJHVWKHUHߞVQRQHHGWR VSHQGWKHWLPHRUHQHUJ\GRLQJLW7KDWWLPHLVSUREDEO\EHWWHUVSHQWRQDQVZHULQJPRUHTXHVWLRQV 7KHDQVZHUFKRLFHVIRUWKLVTXHVWLRQIROORZDVWDQGDUGSDWWHUQIRU$&76FLHQFHTXHVWLRQVLQWKDWWKH\ RIIHUHYHU\SRVVLEOHFRPELQDWLRQRIWZRSDLUVRIRSWLRQV6RDOOZHKDYHWRGRLVPDNHVXUHWKDWZHUHDG FDUHIXOO\ߚIRULQVWDQFHPDNHVXUHWKHTXHVWLRQLVDVNLQJIRUWKHKLJKHUDYHUDJHYDOXHVDQGQRWWKHORZHU RQHV 3DJH4XHVWLRQ 7KH5HG%RRNH[SODQDWLRQIRUWKLVTXHVWLRQRQSDJHLVGHFHQWDVIDUDVLWJRHVEXWWKHUHDUHDIHZ WKLQJV,ߞGOLNHWRSRLQWRXWDERXWWKLVTXHVWLRQWKDWWKH5HG%RRNGRHVQߞWDGGUHVV )LUVWRIDOOQRWLFHWKDWWKH$&7RQO\PHQWLRQVWKHVWRQHIO\ODUYDHDQGWKHSKUDVHߡDTXDWLFLQYHUWHEUDWHߢLQ WKLVTXHVWLRQWRKHOSLWVRXQGPRUHVFLHQWLILF$OOWKHTXHVWLRQLVUHDOO\DVNLQJLVZKHWKHUWKHZDWHUTXDOLW\ LVEHWWHUDW6LWHRUDW6LWH $QGWKDWߞVDQRWKHULQWHUHVWLQJSRLQWߚPDQ\WHVWWDNHUVPLJKWQDWXUDOO\DVVXPHWKDWDQLQFUHDVHGQXPEHURI ODUYDHZRXOGFRUUHVSRQGWRDORZHUOHYHORIZDWHUTXDOLW\EHFDXVHPRVWSHRSOHZRXOGEHXQKDSS\WR ILQGODUYDHLQWKHLUZDWHU%XWWKHTXHVWLRQVSHFLILFDOO\VD\VWKDWDQLQFUHDVHGQXPEHURIODUYDH FRUUHVSRQGVWRDKLJKHUOHYHORIZDWHUTXDOLW\,I\RXGRQߞWUHDGFDUHIXOO\DQGZLWKDQRSHQPLQG\RX FRXOGHDVLO\PDNHDVPDOOPLVWDNHWKDWZRXOGSUHYHQW\RXIURPDQVZHULQJWKHTXHVWLRQFRUUHFWO\ )LQDOO\,ߞGOLNHWRSRLQWRXWWKDWWKHTXHVWLRQLWVHOIRQO\UHIHUVXVWR7DEOHZKLFKKDVDFROXPQWLWOHG ߡ$YHUDJH%,ߢDQGWKDWFROXPQRQO\KDVQXPHULFDOYDOXHVߚEXWWKHDQVZHUFKRLFHVGRQߞWKDYHQXPHULFDO YDOXHVIRU%,,QVWHDGWKH\IHDWXUHZRUGVOLNHߡSRRUߢRUߡH[FHOOHQWߢZKLFKPLJKWVHHPYHU\VXEMHFWLYHWR XVDWILUVW :KHQWKDWNLQGRIWKLQJKDSSHQVRQWKH$&76FLHQFHVHFWLRQLWPHDQVWKDWZHߞUHQRWORRNLQJDWWKHULJKW SDUWRIWKHSDVVDJH,QWKLVFDVHZHQHHGWRQRWLFHWKDW7DEOHJLYHVXVDZD\WRFRUUHODWH%,YDOXHVZLWK WKHZRUGVߡH[FHOOHQWߢߡJRRGߢߡIDLUߢDQGߡSRRUߢ 1RZZHFDQVHHWKDW6LWHߞVDYHUDJH%,RIIURP7DEOHZRXOGEHUDWHGߡH[FHOOHQWߢDFFRUGLQJWR 7DEOH)XUWKHUZHFDQVHHWKDW6LWHߞVDYHUDJH%,RIFRUUHVSRQGVWRDUDWLQJRIߡIDLUߢRQ7DEOH :LWKWKLVLQIRUPDWLRQZHFDQFRQILGHQWO\FKRRVHDQVZHUFKRLFH % ZKLFKVD\VWKHLQIRUPDWLRQLQ7DEOH GRHVVXSSRUWWKHLGHDWKDW6LWHZRXOGVXSSRUWPRUHODUYDHDQGWKDW6LWHߞVUDWLQJZDVH[FHOOHQWDQG 6LWHߞVUDWLQJZDVIDLU 7KLVLV\HWDQRWKHUJUHDWH[DPSOHRIDQ$&76FLHQFHTXHVWLRQWKDWߞVDFWXDOO\YHU\VLPSOHEXWWKDWRIIHUVD ORWRIRSSRUWXQLWLHVIRUVPDOOPLVWDNHVWKDWFRXOGFDXVHXVWRDQVZHUWKHTXHVWLRQLQFRUUHFWO\LIZHߞUHQRW UHDGLQJFDUHIXOO\DQGSD\LQJDWWHQWLRQWRGHWDLOV 3DJH4XHVWLRQ ,WߞVHDV\WRORRNDWWKLVTXHVWLRQDQGEHDOLWWOHLQWLPLGDWHGEHFDXVHLWVRXQGVOLNHLWUHTXLUHVVRPHRXWVLGH VFLHQWLILFNQRZOHGJH%XWZHWUDLQHGWHVWWDNHUVNQRZWKDWWKH$&76FLHQFHVHFWLRQFDQߞWUHTXLUHXVWR NQRZVRPHWKLQJDVWHFKQLFDODVWKHGHWDLOVRIWKHUHDFWLRQUHIHUUHGWRLQWKHSDVVDJHZKLFKORRNVOLNHWKLV $O+2࠱$O 2+ + 6RWKDWPHDQVWKHUHKDVWREHVRPHZD\WRILJXUHRXWWKHDQVZHUHYHQLIZHRQO\KDYHDYHU\VKDOORZ JUDVSRIZKDWߞVJRLQJRQLQWKHSDVVDJH :HSUREDEO\NQRZWKDWWKHDUURZLQWKHPLGGOHRIWKHUHDFWLRQHTXDWLRQLQGLFDWHVWKHSURFHVVRIUHDFWLRQ ZKLFKPHDQVWKDWWKLVUHDFWLRQSURGXFHV$O 2+ DQG+ ,IZHGRQߞWNQRZZKDWWKHDUURZLQGLFDWHVZH FDQVWLOODQVZHUWKHTXHVWLRQߚ,ߞOOJHWWRWKDWDSSURDFKLQDPLQXWH :KHQZHORRNDWWKHDQVZHUFKRLFHVZHVHHVRPHWKLQJLQWHUHVWLQJWKH\DOOUHIHUWRWKHLGHDRIRQH FKHPLFDOFRPSRXQGEHLQJFRQYHUWHGLQWRDQRWKHUEXWRQO\RQHRIWKHDQVZHUFKRLFHVVKRZVDQ\WKLQJ EHLQJFRQYHUWHGLQWRRQHRIWKHSURGXFWVIURPWKHUHDFWLRQLQWKHSDVVDJH $ PHQWLRQV+2WXUQLQJLQWR$O%XWWKHJLYHQUHDFWLRQVKRZV$ODQG+2ERWKRQWKHOHIWVLGHRIWKH DUURZEHLQJFRQYHUWHGLQWRRWKHUWKLQJVQRWRQHEHLQJFRQYHUWHGLQWRWKHRWKHU6RWKLVFKRLFHFDQߞWEH ULJKW % LVWKHVDPHDV $ MXVWLQUHYHUVHDQGLWKDVWKHVDPHSUREOHPWKHUHDFWLRQIURPWKHSDVVDJHVKRZV $ODQG+2ERWKEHLQJFRQYHUWHGLQWRRWKHUWKLQJV6RWKLVFKRLFHLVDOVRZURQJ & WDONVDERXWVRPHWKLQJIURPWKHOHIWVLGHRIWKHUHDFWLRQIURPWKHSDVVDJHEHLQJFRQYHUWHGLQWR VRPHWKLQJWKDWDSSHDUVRQWKHULJKWVLGHRIWKHUHDFWLRQIURPWKHSDVVDJH6RWKLVRQHPLJKWEHFRUUHFWߚDW WKHYHU\OHDVWLWWDONVDERXWVRPHWKLQJWKDWߞVDFWXDOO\KDSSHQLQJLQWKHUHDFWLRQIURPWKHSDVVDJH ' LVWKHUHYHUVHRI & EHFDXVHLWGHVFULEHV$O 2+ EHLQJFRQYHUWHGWR$O%XWWKHUHDFWLRQLQWKH SDVVDJHFOHDUO\VKRZV$ORQWKHOHIWVLGHRIWKHHTXDWLRQDQG$O 2+ RQWKHULJKWVLGHRIWKHHTXDWLRQVR DFWXDOO\$OLVEHLQJFRQYHUWHGLQWR$O 2+ DQGQRWWKHRWKHUZD\DURXQG6RWKLVFKRLFHPXVWEHZURQJ DVZHOO 7KDWPHDQV & PXVWEHFRUUHFWHYHQLIZHGRQߞWUHDOO\XQGHUVWDQGZKDWWKHTXHVWLRQLVWDONLQJDERXW EHFDXVHRQO\ & DFWXDOO\PDWFKHVZKDWߞVJRLQJRQLQWKHSDVVDJH 1RZOHWߞVWDONDERXWKRZZHFRXOGDSSURDFKWKHTXHVWLRQHYHQLIZHGLGQߞWNQRZWKDWWKHGLUHFWLRQRIWKH DUURZLQWKHUHDFWLRQLQGLFDWHVWKDW$ODQG+2DUHFRPLQJWRJHWKHUWRIRUP$O 2+ DQG+,IZHORRN IRURWKHUSDUWVRIWKHSDVVDJHWKDWPHQWLRQ+ZHFDQVHHWKDW7DEOHUHIHUVWR+EHLQJߡSURGXFHGߢ7KH SDUDJUDSKDERYH7DEOHDOVRUHIHUVWR+EHLQJߡSURGXFHGߢ7KLVPHDQVWKDWWKHUHDFWLRQLQWKHSDVVDJH PXVWEHSURGXFLQJ+6LQFH+LVRQWKHVDPHVLGHRIWKHDUURZDV$O 2+ ZHNQRZWKDW$O 2+ LV DOVREHLQJSURGXFHGE\WKHUHDFWLRQZKLFKPHDQVWKDWVWXIILVEHLQJFRQYHUWHGLQWR$O 2+ DQG+ 1RWLFHZKDWKDSSHQHGWKHUH:HGLGQߞWKDYHWRVSHQGDQ\WLPHWKLQNLQJDERXWZKDWUDWHߡWKH H[SHULPHQWHUVZHUHDEOHWRPRQLWRUߢߡE\PHDVXULQJWKHYROXPHRI+ߢ:HGLGQߞWUHDOO\KDYHWR XQGHUVWDQGDQ\FKHPLVWU\RUNQRZZKDWWKHGLIIHUHQWFKHPLFDOV\PEROVLQWKHTXHVWLRQUHIHUWR:KHQZH DFWXDOO\ORRNHGDWWKHDQVZHUFKRLFHVDQGFRPSDUHGWKHPWRWKHSDVVDJHRQO\FKRLFH & ZDVHYHQ SRVVLEOHEHFDXVHWKHRWKHUWKUHHFKRLFHVDOOVKRZHGWKHZURQJWKLQJVEHLQJSURGXFHG $OZD\VUHPHPEHUWRNHHSWKHDQVZHUFKRLFHVLQPLQGIURPWKHYHU\EHJLQQLQJEHFDXVHWKH\RIWHQRIIHU VWURQJFOXHVDERXWWKHEHVWZD\WRDSSURDFKDTXHVWLRQ$QGUHPHPEHUQRWWRJHWLQWLPLGDWHGZKHQWKH $&7WULHVWRPDNHDTXHVWLRQORRNPRUHWHFKQLFDOWKDQLWLV 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQZKLFKDSSHDUVRQSDJHLVGHFHQWDQGVWUDLJKWIRUZDUG %XWLWOHDYHVRXWRQHLPSRUWDQWGHWDLO,ߞGOLNHWRDGGUHVVZKLFKLVWKHFRQFHSWRISRWHQWLDOHQHUJ\ 3RWHQWLDOHQHUJ\LVHQHUJ\WKDWߞVVWRUHGRUWUDSSHGLQVRPHZD\VRWKDWLWFDQEHUHOHDVHGODWHU$ FRPSUHVVHGVSULQJKDVSRWHQWLDOHQHUJ\EHFDXVHWKHVSULQJZLOOH[HUWDIRUFHZKHQLWUHWXUQVWRLWV RULJLQDOSRVLWLRQDIWHUWKHFRPSUHVVLRQLVVWRSSHG7KLVGHILQLWLRQRIߡSRWHQWLDOHQHUJ\ߢLVDIDLUO\EDVLF VFLHQWLILFFRQFHSWDQGNQRZLQJLWZRXOGPDNHDQVZHULQJWKLVTXHVWLRQHDVLHUWRGR %XWVRPHWHVWWDNHUVZRQߞWNQRZWKHGHILQLWLRQRISRWHQWLDOHQHUJ\,QWKDWFDVHZHFRXOGSUREDEO\VWLOO ZRUNRXWWKDWDJUHDWHUZHLJKWDQGJUHDWHUFRPSUHVVLRQZRXOGSUREDEO\UHVXOWLQPRUHHQHUJ\EHLQJ LQYROYHGHVSHFLDOO\VLQFHWKHVLWXDWLRQLQ7ULDOOHDYHVWKHVSULQJWRWDOO\XQFKDQJHGVLQFHWKHVFDOHLV HPSW\6RZHFRXOGVWLOOFKRRVHWKHFRUUHFWDQVZHUFKRLFH & ZLWKDKLJKGHJUHHRIFRQILGHQFH $JDLQZHQHHGHGDOLWWOHELWRIRXWVLGHLQIRUPDWLRQKHUHEXWLWZDVSUHWW\EDVLFߚZHRQO\QHHGHGWR NQRZ RUEHDEOHWRLQIHU WKDWDFRPSUHVVHGVSULQJZLWKZHLJKWRQLWLVVWRULQJPRUHSRWHQWLDOHQHUJ\WKDQ DQXQFRPSUHVVHGVSULQJZLWKRXWZHLJKWRQLW:HGLGQߞWQHHGWRNQRZDQ\UHODWHGIRUPXODVRUDQ\WKLQJ HOVHPRUHDGYDQFHGWKDQWKDW 3DJH4XHVWLRQ 7KLVTXHVWLRQPLJKWVHHPOLNHLWߞVDVNLQJXVWRDQDO\]HWKHSURFHGXUHLQWKHH[SHULPHQWIURPDVFLHQWLILF VWDQGSRLQW%XWDVXVXDOLIZHSD\FORVHDWWHQWLRQWRWKHSDVVDJHZHߞOOILQGWKDWRQO\RQHDQVZHUFKRLFH PDNHVVHQVH ,IZHUHDGWKHWH[WZHVHHWKDWWKHVWXGHQWVSXWDSHQFLORQHDFKVFDOHDQGWKHQODLGDERDUGRQWRSRIWKH SHQFLOVVRWKDWLWVSDQQHGWKHGLVWDQFHIURPRQHVFDOHWRWKHRWKHU$IWHUWKDWWKH\VHWWKHGLDOVWR]HUR 6RZKDWZDVWKHLPSDFWRIVHWWLQJWKHGLDOVWR]HUR":HOOEHIRUHWKHGLDOVZHUHVHWWR]HURWKH\PXVWKDYH VKRZHGVRPHNLQGRIUHDGLQJEHFDXVHWKHWZRSHQFLOVDQGWKHERDUGZHUHRQWKHVFDOHV 2QWRSRIWKDW LIWKH\ZHUHQߞWVKRZLQJDQ\UHDGLQJWKHUHZRXOGEHQRQHHGWRUHVHWWKHPWR]HURߚWKH\ߞGDOUHDG\EHDW ]HURLIWKHUHZHUHQRUHDGLQJ ,IWKHVWXGHQWVKDGQߞWVHWWKHGLDOVWR]HURDWWKLVSRLQWWKHQWKHVFDOHV ZRXOGVKRZWKHZHLJKWRIWKHSHQFLOVDQGWKHERDUGWKDWZHUHDOUHDG\RQWKHUHSOXVWKHZHLJKWRIDQ\ DGGLWLRQDOREMHFW %\VHWWLQJWKHVFDOHWR]HURWKH\UHPRYHGWKHZHLJKWRIWKHSHQFLOVDQGERDUGIURPWKHUHDGLQJVRWKDW ZKHQRWKHUREMHFWVZHUHDGGHGWRWKHVFDOHVWKHVFDOHVZRXOGRQO\VKRZWKHZHLJKWRIWKHQHZREMHFWV 7KDWPHDQVDQ\PHDVXUHPHQWWKH\WRRNDIWHUVHWWLQJWKHGLDOWR]HURZRXOGEHPDGHZLWKRXWWKHZHLJKWRI WKHSHQFLOVDQGERDUG7KDWPDWFKHVXSZLWKWKHFRUUHFWDQVZHUFKRLFH - ZKLFKVD\VLWZDVGRQHWR ߡVXEWUDFWߢ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ߞUHWDONLQJDERXWWKHZHLJKWVRIWKHVFDOHV WKHPVHOYHVEXW7ULDOVDQGGRQߞWVKRZDQ\WKLQJZHLJKLQJWKHVFDOHVWKHPVHOYHV 2QFHDJDLQZHVHHWKDWDTXHVWLRQRQWKH$&76FLHQFHVHFWLRQVHHPVWRUHTXLUHXVWRXQGHUVWDQGWKH VFLHQWLILFSURFHVVEXWFORVHULQVSHFWLRQUHYHDOVWKDWRQO\RQHRIWKHDQVZHUFKRLFHVUHIOHFWVZKDWZHVHH GLUHFWO\RQWKHSDJHDQGWKDWFKRLFHLVDXWRPDWLFDOO\FRUUHFW.HHSWKLVNLQGRIWKLQJLQPLQGZKHQ\RXUXQ LQWRFKDOOHQJLQJ$&76FLHQFHTXHVWLRQVLQWKHIXWXUH 3DJH4XHVWLRQ 7KLVTXHVWLRQFDQEHLQWLPLGDWLQJIRUVRPHSHRSOHEHFDXVHLWORRNVOLNHZHߞUHH[SHFWHGWRGHULYHVRPH NLQGRIFRPSOLFDWHGIRUPXODZKLFKLVVRPHWKLQJWKDWDUHDOVFLHQWLVWPLJKWKDYHWRGR%XWLIZHZRUN EDFNZDUGVIURPWKHDQVZHUFKRLFHVDQGMXVWXVHVRPHRIWKHGDWDIURP7DEOHZHFDQQDLOGRZQWKH FRUUHFWDQVZHUSUHWW\TXLFNO\ 7KHPRVWVWUDLJKWIRUZDUGZD\WRDWWDFNWKLVTXHVWLRQLVSUREDEO\MXVWWRVWDUWSOXJJLQJYDOXHVIURP7DEOH LQWRHDFKDQVZHUFKRLFH/HWߞVMXVWXVHWKHILUVWURZRIYDOXHVLQ7DEOHDQGVHHZKDWKDSSHQV 7KHILUVWURZRIGDWDIURPWKH7DEOHVKRZVWKDWZKHQWKHYROXPHRIKHSWDQHLVP/WKHYROXPHRI LVRRFWDQHLVP/DQGWKHRFWDQHQXPEHULV ,IZHSOXJWKRVHYDOXHVLQWRFKRLFH $ ZHߞOOQRWLFHWKDWZHHQGXSGLYLGLQJE\]HURVLQFHWKHYDOXHIRU ߡYROXPHRIKHSWDQHߢLV]HURDQGWKDWߞVWKHRQO\WKLQJLQWKHGHQRPLQDWRUIRU $ 6RZHNQRZWKDW $ PXVWEHZURQJEHFDXVHLWߞVPDWKHPDWLFDOO\LPSRVVLEOHWRGLYLGHDQXPEHUE\]HUR ,IZHSOXJWKHVDPHYDOXHVLQWRWKHIRUPXODLQFKRLFH % ZHߞOOILQGWKDWLWKDVWKHYROXPHRIKHSWDQHE\ LWVHOILQWKHQXPHUDWRU7KDWPHDQVWKHH[SUHVVLRQLQFKRLFH % ZRXOGKDYHXVGLYLGH]HURE\ZKDWHYHULV LQWKHGHQRPLQDWRUDQGWKHQPXOWLSO\E\ZKLFKPXVWSURGXFHDUHVXOWRI]HUR6LQFHZHQHHGDQ RFWDQHQXPEHURIWRJRZLWKWKHQXPEHUVZHߞUHSOXJJLQJLQIURPWKHILUVWURZRIGDWDLQ7DEOHZH NQRZ % LVDOVRZURQJ &KRLFH & RIIHUVXVDQH[SUHVVLRQWKDWZRQߞWEHXQGHILQHGRUHTXDOWR]HURHYHQZKHQZHSOXJLQ]HUR IRUWKHYROXPHRIKHSWDQH:KHQZHSOXJLQWKHYDOXHVZHߞYHEHHQXVLQJIURPWKHILUVWURZRIGDWDLQ 7DEOHZHJHWWKLV 6RZKHQZHWDNHWKHYDOXHVIRUWKHILUVWURZRIGDWDLQ7DEOHDQGSOXJWKHPLQWRFKRLFH & ZHJHWD UHVXOWRIZKLFKLVWKHRFWDQHQXPEHUIURPWKHILUVWURZRI7DEOH7KDWPHDQVWKLVHTXDWLRQZRUNVDW OHDVWIRUWKHILUVWURZRIYDOXHV1RZOHWߞVORRNDWWKHILQDODQVZHUFKRLFH &KRLFH ' KDVKHSWDQHDORQHLQWKHQXPHUDWRUDJDLQOLNHFKRLFH % GLGVRLWZLOOKDYHWRFRPHRXWWREH ]HURDVZHOOZKLFKPHDQVLWFDQߞWEHFRUUHFWVLQFHZHߞUHORRNLQJIRUDILQDOUHVXOWRI ,IPRUHWKDQRQHH[SUHVVLRQKDGZRUNHGIRUWKHILUVWVHWRIYDOXHVZHZRXOGKDYHKDGWRWU\WKHQH[WURZ RIYDOXHVXQWLOZHIRXQGWKDWRQO\RQHH[SUHVVLRQZRUNHGIRUDOOWKHYDOXHVLQWKHWDEOH%XWZHZHUHDEOH WRUXOHRXWWKUHHRIWKHIRXUFKRLFHVMXVWE\WHVWLQJWKHILUVWURZRIYDOXHVLQ7DEOH6LQFHRQO\FKRLFH & ZRUNHGIRUWKRVHYDOXHVZHNQRZWKDW & LVWKHFRUUHFWDQVZHU,IZHIHHOOLNHLWZHFDQWHVWDQRWKHUVHW RIYDOXHVWRPDNHVXUHZHKDYHQߞWPDGHDPLVWDNHDQGWKDW & ZRUNVIRUWKRVHYDOXHVDVZHOO 1RWLFHWKDWLIZHMXVWORRNDWWKHWDEOHDQGJODQFHWKURXJKWKHDQVZHUFKRLFHVDQGLIZHUHDOL]HWKDW SOXJJLQJLQIRUKHSWDQHKDVWREHDEOHWRSURGXFHDUHVXOWRIZHFDQUXOHRXW $ % DQG ' LPPHGLDWHO\VLQFHDKHSWDQHYDOXHRI]HURLQWKRVHH[SUHVVLRQVUHVXOWVLQHLWKHU]HURRUDQXQGHILQHGUHVXOW QRPDWWHUZKDWWKHYDOXHIRULVRRFWDQHLV6LQFHZHWUDLQHGWHVWWDNHUVNQRZWKDWWKH$&76FLHQFHVHFWLRQ GRHVQߞWOLNHWRPDNHXVGRPXFKDFWXDOPDWKZHFDQXQGHUVWDQGZK\WKHWHVWLQFOXGHGGDWDSRLQWVZLWKD YDOXHRI]HURWKH\ߞUHPXFKHDVLHUWRSOXJLQWRWKLVVHWRIDQVZHUFKRLFHV 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVZKLFKRIWKHIXHOVIURP([SHULPHQWZRXOGEHߡEHWWHUߢLQDQHQJLQHWKDWUXQV EHWZHHQDQGUSP,IZHORRNDW([SHULPHQWZHFDQVHHWKHUHLVDWDEOHOD\LQJRXWVRPH LQIRUPDWLRQDERXW)XHO$DQG)XHO% $WILUVWLWPLJKWQRWEHFOHDUKRZZHߞUHVXSSRVHGWRGHWHUPLQHZKLFKIXHOLVߡEHWWHUߢEXWLIZHUHDGWKH DQVZHUFKRLFHVZHߞOOVHHWKDWHYHU\VLQJOHRQHPDNHVUHIHUHQFHWRWKH(252IFRXUVH(25LVQߞW DQ\WKLQJZHߞUHVXSSRVHGWRNQRZDERXWDOUHDG\ߚLWPXVWEHLQIRUPDWLRQZHFDQILQGLQWKHSDVVDJH7KH WH[WIRU([SHULPHQWWHOOVXVWKDW(25LVߡWKHPLQLPXPRFWDQHQXPEHURIDIXHOUHTXLUHGIRUDQHQJLQHWR RSHUDWHZLWKRXWEHFRPLQJGDPDJHGߢ ,I(25LVWKHPLQLPXPQXPEHUWKDWFDQEHXVHGZLWKRXWGDPDJHWKHQZHREYLRXVO\ZDQWWKHIXHOWRKDYH DKLJKHURFWDQHQXPEHUWKDQWKH(256LQFHZHZDQWWRILJXUHRXWZKLFKIXHOLVEHVWDWDOOVSHHGVEHWZHHQ DQGZHQHHGWRVHHKRZWKHRFWDQHQXPEHUVRIERWKIXHOVFRPSDUHWRWKH(25DWHDFKHQJLQH VSHHGLQ7DEOH :KHQZHGRWKDWZHߞOOVHHWKDWWKHRFWDQHQXPEHURIERWKIXHOVLVRYHUWKH(25LQDOOEXWRQHFDVHߚWKH RFWDQHQXPEHURI)XHO%LVOHVVWKDQWKH(25DWUSP6LQFHRQO\)XHO$KDVDQRFWDQHQXPEHU DERYHWKH(25DWHDFKVSHHGZHNQRZWKDW % LVFRUUHFW 1RWLFHWKDWZHFRXOGDOVRMXVWHOLPLQDWHFKRLFHV $ & DQG ' EDVHGRQWKHVXSSRUWLQJLQIRUPDWLRQLQ HDFKFKRLFH $ VD\VWKDW)XHO$ߞVRFWDQHQXPEHUZDVORZHUWKDQWKH(25DWHDFKVSHHGZKLFKLVQߞWFRUUHFW & VD\VWKDW)XHO%ߞVRFWDQHQXPEHUZDVORZHUWKDQWKH(25DWHDFKVSHHGZKLFKDOVRLVQߞWFRUUHFW ' VD\VWKDW)XHO%ߞVRFWDQHQXPEHUZDVKLJKHUWKDQWKH(25DWHDFKVSHHGWHVWHGZKLFKLVQߞWFRUUHFW HLWKHU 7KDWDSSURDFKZRXOGDOVRKDYHOHIWXVZLWK % DVWKHFRUUHFWDQVZHU 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQRQSDJHLVRND\DVIDUDVLWJRHVWKHLQWURGXFWLRQVD\V WKDWVKRUWSHULRGFRPHWVKDYHLQFOLQDWLRQVRIRRUOHVVDQGRQO\FKRLFH ' IDOOVRXWVLGHRIWKDWUDQJH VRLWPXVWEHFRUUHFW ,MXVWZDQWHGWRSRLQWWKLVTXHVWLRQRXWEHFDXVHLWߞVRQHPRUHJRRGH[DPSOHRIDQ$&7TXHVWLRQWKDWߞVYHU\ EDVLFEXWYHU\HDV\WRPLVVLIZHߞUHQRWSD\LQJFDUHIXOHQRXJKDWWHQWLRQ:HDOZD\VKDYHWRPDNHVXUHZH UHDGWKHSURPSWDQGDOOWKHDQVZHUFKRLFHVFDUHIXOO\ 3DJH4XHVWLRQ $JDLQWKH5HG%RRNVROXWLRQRQSDJHLVGHFHQWߚLWFRUUHFWO\SRLQWVRXWWKDWWKHNH\HOHPHQWRIWKH TXHVWLRQLVWKDWJLDQWSODQHWVOLNH-XSLWHUDIIHFWWKHRUELWDOSHULRGVRIVRPHFRPHWVDQGWKDW6DWXUQLVWKH RQO\JLDQWSODQHWLQWKHDQVZHUFKRLFHVZKLFKPDNHV - FRUUHFW %XW,ZDQWHGWRGLVFXVVWKLVTXHVWLRQEHFDXVHLWߞVRQHRIWKHUHODWLYHO\UDUH$&76FLHQFHTXHVWLRQVWKDW DFWXDOO\GRHVUHTXLUHRXWVLGHVFLHQWLILFNQRZOHGJH$VDOZD\VLQWKHVHVLWXDWLRQVWKHUHTXLUHGRXWVLGH NQRZOHGJHLVUHODWLYHO\EDVLFߚZHQHHGHGWRNQRZWKDW6DWXUQZDVWKHRQO\JLDQWSODQHWLQWKHDQVZHU FKRLFHV7KLVFRQFHSWLVDOVRIDLUO\XQOLNHO\WREHWHVWHGRQWKH$&7HYHUDJDLQVRGRQߞWERWKHU PHPRUL]LQJIDFWVDERXWWKHSODQHWVIRUIXWXUH$&76FLHQFHTXHVWLRQV ,I\RXKDSSHQHGWRVWXG\WKHVRODUV\VWHPDOLWWOHELWDWVRPHSRLQWDQG\RXUHPHPEHUHGWKDW6DWXUQLVD JLDQWSODQHWJUHDW,IQRWGRQߞWZRUU\DERXWLWDQGGRQߞWZRUU\DERXWZKLFKEDVLFIDFWZLOOEHWHVWHGRQ WKHUHDO$&7ZKHQ\RXWDNHLW7KHUHߞVVLPSO\QRZD\WRSUHGLFWZKDWLWZLOOEH,QVWHDGMXVWIRFXVRQ UHILQLQJ\RXUDSSURDFKWRWKH$&76FLHQFHVHFWLRQVR\RXFDQPDNHVXUH\RXJHWTXHVWLRQVULJKWZKHQWKH DQVZHULVGLUHFWO\RQWKHSDJHߚVLQFHWKDWZLOOEHWKHFDVHIRUWKHYDVWPDMRULW\RI$&76FLHQFH TXHVWLRQV )RUH[DPSOHRQWKLVSDUWLFXODUWHVW\RXFRXOGVWLOOVFRUHDRQWKH6FLHQFHVHFWLRQLI\RX RQO\PLVVHGWKLVTXHVWLRQTXHVWLRQDQGTXHVWLRQZKLFKDUHWKHWKUHHTXHVWLRQVIURPWKLVWHVWWKDW UHTXLUHRXWVLGHNQRZOHGJH:LWKDRQWKH6FLHQFHVHFWLRQ\RXFRXOGVWLOOWHFKQLFDOO\VFRUHDRQWKH $&7RYHUDOO 3DJH4XHVWLRQ 7KLVTXHVWLRQGHVFULEHVRVPRVLVDVZDWHUPRYLQJWKURXJKDEDUULHUDQGWKHQDVNVXVWKURXJKZKLFK VWUXFWXUHWKHRVPRVLVRFFXUVLQWKHSDVVDJH6RZHQHHGWRORRNDWWKHWH[WWRILQGWKHߡRVPRVLVߢUHIHUUHG WRLQWKHSDVVDJH ,IZHGRWKDWZHߞOOVHHWKDWWKHILUVWEXOOHWSRLQWLQWKHSDVVDJHGHVFULEHVߡDQHWPRYHPHQWRI+2 EHWZHHQWKHF\WRSODVPRIWKHSODQWVߞFHOOVDQGWKHHQYLURQPHQWYLDRVPRVLVߢ :HFDQWHOOWKDWߡWKHF\WRSODVPRIWKHSODQWVߞFHOOVߢPXVWEHVRPHWKLQJLQVLGHWKHFHOODQGZHNQRZWKDW ߡWKHHQYLURQPHQWߢPXVWEHRXWVLGHWKHFHOO,IVRPHWKLQJPRYHVIURPLQVLGHWKHFHOOWRRXWVLGHWKHFHOOLW PXVWSDVVWKURXJKWKHFHOOPHPEUDQHZKLFKLVWKHEDUULHUEHWZHHQWKHLQVLGHRIWKHFHOODQGWKH HQYLURQPHQW7KDWPHDQVWKHFRUUHFWDQVZHULVFKRLFH & 7KLVLVDQRWKHUTXHVWLRQWKDWUHTXLUHVDVPDOODPRXQWRIRXWVLGHNQRZOHGJHߚDVZHWUDLQHGWHVWWDNHUV NQRZWKHUHPLJKWEHWKUHHRUVRTXHVWLRQVOLNHWKLVRQDYHUDJHSHUWHVW%XWQRWLFHKRZEDVLFWKLVIDFW ZDVUHDOO\:HGLGQߞWQHHGWRNQRZDQ\WKLQJDERXWWKHURXJKHQGRSODVPLFUHWLFXOXPRUDERXWKRZ FKURPRVRPHVZRUNRUDERXWWKHSODQW$UDELGRSVLVWKDOLDQD:HRQO\QHHGHGWRNQRZWKDWWKHFHOO PHPEUDQHVHSDUDWHVZKDWߞVLQVLGHWKHFHOOIURPZKDWߞVRXWVLGHWKHFHOO $FWXDOO\LIZHMXVWNQRZWKDWWKH ZRUGߡPHPEUDQHߢUHIHUVWRDELRORJLFDOVWUXFWXUHWKDWVHUYHVDVDERXQGDU\ZHFDQSUREDEO\DQVZHUWKH TXHVWLRQIURPWKDWDORQH $V,DOZD\VVD\ZKHQZHWDONDERXWDQ$&76FLHQFHTXHVWLRQWKDWUHTXLUHVRXWVLGHNQRZOHGJHLWߞV LPSRUWDQWQRWWRJHWWRRZRUULHGLI\RXGLGQߞWKDSSHQWRNQRZWKHDQVZHUWRWKLVRQH+RSHIXOO\\RXߞOOJHW WKHQH[WRQHEXWZKHWKHU\RXGRRUQRWLWߞ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ߡFRQGXFWLRQߢUHIHUVWRWKHSURFHVVRIKHDWPRYLQJDORQJDQREMHFW IURPRQHHQGWRWKH RWKHU RUIURPRQHVROLGREMHFWWRDQRWKHUWKURXJKGLUHFWFRQWDFW7KHZRUGߡFRQYHFWLRQߢUHIHUVWRWKH SURFHVVRIKHDWPRYLQJWKURXJKDJDVRUDOLTXLGWKDWߞVLQPRWLRQ7KHZRUGߡUDGLDWLRQߢUHIHUVWRWKH SURFHVVRIKHDWEHLQJUHOHDVHGWKURXJKHOHFWURPDJQHWLVP ,QWKLVFDVHVLQFHWKHKHDWLVPRYLQJWKURXJKVROLGREMHFWVWKHPVHOYHVZHNQRZWKDWPRVWRIWKHKHDW EHLQJWUDQVIHUUHGPXVWEHPRYLQJE\ZD\RIFRQGXFWLRQ7KDWPHDQV + LVWKHFRUUHFWDQVZHU 2QFHPRUHZHVHHDTXHVWLRQWKDWUHTXLUHVDOLWWOHRXWVLGHVFLHQWLILFNQRZOHGJHߚRQHELJKLQWWKDWWKLVLV WKHFDVHLVWKDWWKHZRUGVߡUDGLDWLRQߢߡFRQYHFWLRQߢDQGߡFRQGXFWLRQߢIURPWKHTXHVWLRQDUHQߞWPHQWLRQHG DQ\ZKHUHLQWKHSDVVDJH ,IZHߞUHQRWVXUHZKLFKLVWKHFRUUHFWDQVZHUZHPLJKWUHDOL]HWKDWZKHQVRPHWKLQJFRQGXFWVHOHFWULFLW\ WKHHOHFWULFLW\LVPRYLQJDORQJDQREMHFWRUDVWULQJRIREMHFWVLQDZD\WKDWߞVVLPLODUWRWKHZD\WKH SDVVDJHGHVFULEHVWKHKHDWPRYLQJIURPRQHURGWRDQRWKHU ,I\RXߞUHGHDOLQJZLWKRQHRIWKHIHZTXHVWLRQVSHU6FLHQFHVHFWLRQWKDWGRHVUHTXLUHVRPHDFWXDO VFLHQWLILFNQRZOHGJHDQGLI\RXߞYHJRWQRWKLQJHOVHWRJRRQ\RXFDQWU\ORRNLQJIRUVRPHVLPSOHEDVLF FRQQHFWLRQOLNHWKLVPDUN\RXUDQVZHUDQGPRYHRQ7KHUHߞVQREHQHILWWRVLWWLQJDQGVWDULQJDWRQHRIWKH IHZTXHVWLRQVWKDWUHTXLUHRXWVLGHVFLHQWLILFNQRZOHGJHZKHQWKHPDMRULW\RIWKHTXHVWLRQVRQWKH$&7 6FLHQFHVHFWLRQFDQEHDQVZHUHGZLWKLQIRUPDWLRQRQWKHSDJHLQIURQWRI\RX 6RGRQߞWOHWWKLVTXHVWLRQERWKHU\RXWRRPXFKߚ\RXUJRDOLVVWLOOWRPDVWHUDQVZHULQJWKHTXHVWLRQVWKDW KDYHDQVZHUVGLUHFWO\RQWKHSDJH$JDLQDV,H[SODLQHGLQRXUGLVFXVVLRQRITXHVWLRQVDQGIURP WKLVVHFWLRQ\RXZRXOGVWLOOVFRUHDRQWKLVSDUWLFXODU$&76FLHQFHVHFWLRQLI\RXRQO\PLVVHGWKH WKUHHTXHVWLRQVWKDWUHTXLUHRXWVLGHVFLHQWLILFNQRZOHGJH$QGWKDWVFRUHZRXOGDFWXDOO\VWLOODOORZ\RXWR PDNHDSHUIHFWRYHUDOORQWKHHQWLUH$&7LI\RXVFRUHGVRQWKHRWKHUWKUHHVHFWLRQV 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVZKLFKRIWKHDQVZHUFKRLFHVZLOOKDYHWKHKLJKHVWYDOXHRI5DVVXPLQJWKH\DOO KDYHWKHVDPḦ́77KHGLIIHUHQFHVDPRQJWKHDQVZHUFKRLFHVVHHPWRUHODWHWRWKHWRWDOOHQJWKRIWKH DUUDQJHPHQWDQGWKHQXPEHURIURGVVRZHVKRXOGORRNEDFNLQWRWKHSDVVDJHWRVHHLIZHFDQILQG VRPHWKLQJWKDWUHODWHV5WRWKHQXPEHURIURGVRUWKHWRWDOOHQJWK 7KHFKDOOHQJHRIWKLVTXHVWLRQFRPHVSULPDULO\IURPWKHIDFWWKDWWKHTXHVWLRQGRHVQߞWWHOOXVZKLFKSDUWRI WKHSDVVDJHWRORRNDWIRUWKHDQVZHU%XWVLQFHWKHTXHVWLRQLVDVNLQJDERXW5ZHFDQIRFXVRQWKHSDUWV RIWKHSDVVDJHWKDWPHQWLRQ5DQGVHHZKLFKRQHVDUHUHOHYDQWWRRXUDQVZHUFKRLFHV 7DEOHGRHVQߞWVHHPWREHUHOHYDQWEHFDXVHLWVKRZVGLIIHUHQW5YDOXHVZLWKGLIIHUHQẄ́7YDOXHVEXWWKH TXHVWLRQWHOOVXVWKDWDOORIWKHURGVLQWKHDQVZHUFKRLFHVKDYHWKHVDPḦ́7 )LJXUHVHHPVUHOHYDQWEHFDXVHLWUHODWHV5WROHQJWKDQGZHFDQVHHWKDWWKHDQVZHUFKRLFHVVKRZ LGHQWLFDOURGVDUUDQJHGDWGLIIHUHQWOHQJWKV )LJXUHGRHVQߞWORRNUHOHYDQWWRRXUDQVZHUFKRLFHVEHFDXVHLWUHODWHV5WRFURVVVHFWLRQDQGWKHURGVLQ WKHDQVZHUFKRLFHVDOOKDYHWKHVDPHFURVVVHFWLRQVLQFHZHߞUHWROGWKH\ߞUHLGHQWLFDO 6R)LJXUHLVZKHUHZHZDQWWRIRFXVRXUDWWHQWLRQ,WVKRZVDJUDSKUHODWLQJWKH5YDOXHWRWKHOHQJWKVRI GLIIHUHQWURGV:HFDQVHHWKDW5JHWVVPDOOHUDVWKHOHQJWKJHWVODUJHU7KDWPHDQVWKDWWKHDQVZHUFKRLFH ZLWKWKHJUHDWHVW5YDOXHZLOOEHWKHRQHZLWKWKHVKRUWHVWOHQJWK,QWKLVFDVHWKDWߞVFKRLFH $ ZKLFKLV WKHFRUUHFWDQVZHU 2IFRXUVHZHZDQWWRPDNHVXUHZHUHDGYHU\FDUHIXOO\WRPDNHFHUWDLQWKDWWKHTXHVWLRQGLGLQGHHGDVN IRUWKHKLJKHVWYDOXHRI5DVRSSRVHGWRWKHORZHVWYDOXHDVWKLVNLQGRIPLVWDNHLVYHU\FRPPRQIRUWHVW WDNHUVZKRDUHQߞWLQWKHKDELWRISD\LQJFRQVWDQWDWWHQWLRQWRWKHWHVW 3DJH4XHVWLRQ ,QRUGHUWRDQVZHUWKLVTXHVWLRQZHQHHGWRNQRZZKDWWKHTXHVWLRQPHDQVZKHQLWWDONVDERXWWKH FRQFHQWUDWLRQRI/L&OLQFUHDVLQJ,QWKLVFRQWH[WFRQFHQWUDWLRQLVWKHUDWLREHWZHHQWKHDPRXQWRI/L&ODQG WKHDPRXQWRI+2LQWKHVDPSOH 6RWKHFRQFHQWUDWLRQRI/L&OFDQLQFUHDVHLQWZRGLIIHUHQWZD\VIRURXUSXUSRVHV 7KHDPRXQWRI/L&OFDQLQFUHDVHZKLOHWKHDPRXQWRI+2UHPDLQVWKHVDPH 7KHDPRXQWRI+2FDQGHFUHDVHZKLOHWKHDPRXQWRI/L&OUHPDLQVWKHVDPH 1RWLFHWKDWWKLVFRQFOXVLRQFRPHVIURPWKHGHILQLWLRQRIWKHZRUGߡFRQFHQWUDWLRQߢZKLFKLVDFRPPRQ (QJOLVKZRUGQRWDWHFKQLFDOVFLHQWLILFWHUP :LWKWKDWLQPLQGOHWߞVFRQVLGHU)LJXUH,WVKRZVWKUHHWULDOVHDFKLQYROYLQJJRI/L&OGLVVROYHGLQ GLIIHUHQWDPRXQWVRI+26RZKLFKWULDOKDVWKHKLJKHUFRQFHQWUDWLRQ":HOOLIWKHDPRXQWRI/L&OLVWKH VDPHLQHDFKVDPSOHWKHQWKHVDPSOHZLWKWKHOHDVWDPRXQWRI+2ZLOOKDYHWKHKLJKHVWFRQFHQWUDWLRQRI /L&O 6RWKHKLJKHVWFRQFHQWUDWLRQRI/L&ORFFXUVLQWKHWULDOZLWKJRI+2DQGWKHORZHVWFRQFHQWUDWLRQRI /L&ORFFXUVLQWKHVDPSOHZLWKJRI+2 :HFDQVHHLQ)LJXUHWKDWWKHFXUYHUHSUHVHQWLQJWKHKLJKHVWFRQFHQWUDWLRQRI/L&ODOZD\VKDVWKHKLJKHVW ̈́7YDOXHVDVVRFLDWHGZLWKLWIRUDQ\JLYHQPDVVZKLOHWKHFXUYHUHSUHVHQWLQJWKHORZHVWFRQFHQWUDWLRQRI /L&ODOZD\VKDVWKHORZHVẄ́7YDOXHV6RZHNQRZWKDWWKHFRUUHFWDQVZHULV ) 7KLVTXHVWLRQSUHVHQWVWKHXVXDODVVRUWPHQWRIWUDSVWKDWWKH$&7OLNHVWRXVHRQWKH6FLHQFHVHFWLRQ2QH RIWKHZURQJDQVZHUVLVWKHH[DFWRSSRVLWHRIWKHFRUUHFWDQVZHUDQGWKHTXHVWLRQJLYHVXVVHYHUDO RSSRUWXQLWLHVWRPLVUHDGRUPLVXQGHUVWDQGWKLQJVDQGHQGXSFKRRVLQJ + :HPLJKWPLVUHDGWKHSURPSW DQGWKLQNWKDWLWDVNVZKDWKDSSHQVDVWKH/L&OFRQFHQWUDWLRQGHFUHDVHGRUZHPLJKWPLVXQGHUVWDQGWKH FRQFHSWRIFRQFHQWUDWLRQDQGWKLQNWKDWWKHVDPSOHZLWKJ+2KDGWKHORZHVWFRQFHQWUDWLRQ$VZHߞYH VHHQRYHUDQGRYHUDJDLQWKHVHW\SHVRIVPDOOPLVWDNHVDUHWKH$&7ߞVPDLQWDFWLFWRXVHDJDLQVWXV7KLV LVZK\ZHPXVWDOZD\VUHDGFDUHIXOO\DQGSD\DWWHQWLRQ 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQVWDUWVRQSDJHDQGLWߞVPXFKORQJHUDQGPRUH FRPSOLFDWHGWKDQQHFHVVDU\ 7KDWH[SODQDWLRQWHOOVXVWRORRNDW7DEOHIRUWKHPDSGLVWDQFHVEHWZHHQFHUWDLQSDLUVRIJHQHVDQGWKHQ WRQRWLFHWKDWWKHPRGHOVUHIHUUHGWRLQWKHTXHVWLRQREVHUYHWKRVHGLVWDQFHVDQGWKHQWRGRDFRXSOHRI RWKHUWKLQJV7KLVDSSURDFKFDQOHDGWRWKHFRUUHFWDQVZHUEXWLWߞVPXFKHDVLHUWRORRNDW)LJXUHDQG ZRUNWKURXJKWKHDQVZHUFKRLFHV :HNQRZWKDW)LJXUHLVWKHSURSHUSODFHWRORRNEHFDXVHWKHTXHVWLRQUHIHUVWRߡPRGHOVߢDQG)LJXUH LVWKHRQO\SODFHZKHUHZHVHHIRXUPRGHOV 7KHILJXUHGRHVQߞWKDYHDQ\PDUNLQJVRUDQ\WKLQJWRKHOSXVPHDVXUHWKHGLVWDQFHVVRZHߞUHJRLQJWRKDYH WRH\HEDOOWKHPDQGJRIURPWKHUHߚZHFDQWUXVWWKDWWKLVDSSURDFKZLOOZRUNEHFDXVHZHNQRZWKDWWKH $&76FLHQFHVHFWLRQGRHVQߞWUHTXLUHXVWRPDNHH[WUHPHO\SUHFLVHUHDGLQJVWKDWZRXOGUHTXLUHDQ\NLQG RIPHDVXULQJGHYLFH6RWKHGLIIHUHQFHVDPRQJWKHGLVWDQFHVPXVWEHREYLRXVHQRXJKIRUXVWRFRPHWRD FOHDUFRQFOXVLRQLIZHMXVWORRNDWWKHP /HWߞVWDNHLWRQHDQVZHUFKRLFHDWDWLPH ,IZHORRNDWWKHGLVWDQFHVEHWZHHQ$DQG%LQHDFKPRGHOWKH\DSSHDUWREHSUHWW\FRQVLVWHQW6RFKRLFH ) ORRNVJRRGEXWZHߞOOQHHGWRWDNHDORRNDWWKHRWKHUFKRLFHVWREHVXUHZHߞUHXQGHUVWDQGLQJWKH TXHVWLRQFRUUHFWO\ 7KHGLVWDQFHVEHWZHHQ$DQG&LQWKHILUVWWZRPRGHOVORRNSUHWW\VLPLODUEXWLQDQGWKHGLVWDQFHVDUH PXFKVKRUWHUVR * LVREYLRXVO\QRWFRUUHFW 7KHGLVWDQFHVEHWZHHQ%DQG'DUHYHU\VKRUWLQPRGHOVDQGDQGFOHDUO\ORQJHULQWKHRWKHUPRGHOV 6R + LVDOVRQRWFRUUHFW )LQDOO\WKHGLVWDQFHEHWZHHQ&DQG'LVYHU\ORQJLQPRGHODQGYHU\VKRUWLQPRGHOVRWKDWߞVHQRXJK IRUXVWRVD\WKDW - LVZURQJDVZHOO 6LQFHZHFDQFOHDUO\VHHWKDWWKHPRGHOVGRQߞWDJUHHDERXWWKHGLVWDQFHVEHWZHHQWKHJHQHSDLUVLQ FKRLFHV * + DQG - DQGEHFDXVHWKHGLVWDQFHVEHWZHHQ$DQG%VHHPWREHFRQVLVWHQWIURPPRGHOWR PRGHOZHNQRZWKDWFKRLFH ) PXVWEHWKHFRUUHFWDQVZHU 1RWLFHWKDWZHZHUHDEOHWRUHDFKWKLVFRQFOXVLRQZLWKRXWNQRZLQJDQ\WKLQJDERXWJHQHVPRGHOV5)RU DQ\WKLQJHOVHLQWKHSDVVDJH5HPHPEHUWKDWWKH$&76FLHQFHVHFWLRQGRHVQߞWUHTXLUHXVWRNQRZDQ\ DGYDQFHGRUREVFXUHVFLHQWLILFIDFWV 3DJH4XHVWLRQ 7KLVLVRQHRIWKRVHUDUH$&76FLHQFHTXHVWLRQVWKDWUHTXLUHRXWVLGHVFLHQWLILFNQRZOHGJHWRDQVZHU$V LVDOZD\VWKHFDVHZLWKWKHVHTXHVWLRQVZHMXVWQHHGJHQHUDOEDVLFNQRZOHGJHRIWKHVXEMHFWPDWWHULQ RUGHUWRDQVZHUWKLVTXHVWLRQFRUUHFWO\ߚHYHQWKRXJKWKH$&7GRHVLWVEHVWWRPDNHWKHTXHVWLRQVHHP FRPSOLFDWHGDQGGLIILFXOW/HWߞVWDNHDORRN 7KLVTXHVWLRQDVNVZKLFKRIWKHDQVZHUFKRLFHVFRQWDLQVWKHQDPHRIWKHWKLQJWKDWߞVIRUPHGGLUHFWO\DIWHU WKHSURFHVVWKDWLQFOXGHVFURVVLQJRYHUZKLFKLVGLVFXVVHGLQWKHEHJLQQLQJRIWKHSDVVDJH7KDWVRXQGV SUHWW\VFLHQWLILFDQGVFDU\ULJKW" :HOOOHWߞVWKLQNDERXWLWDOLWWOHELW,IZHJREDFNWRWKHSDVVDJHZHVHHWKDWFURVVLQJRYHULVUHODWHGWR FKURPRVRPHV,IWKHUHߞVRQHWKLQJZHUHPHPEHUDERXWFKURPRVRPHVLWߞVSUREDEO\WKDWWKH\ߞUHUHODWHGWR UHSURGXFWLRQLQVRPHZD\ULJKW" 0DQ\WHVWWDNHUVZKRߞYHKDGDELRORJ\FODVVZLOOUHPHPEHUWKDWJDPHWHVSOD\DUROHLQWKHSURFHVVRI UHSURGXFWLRQDQGDUHUHODWHGWRFRQFHSWVOLNHPHLRVLVFKURPRVRPHVDQGJHQHVZKLFKDOODSSHDULQWKH SDVVDJH7KDWZLOOEHHQRXJKIRUWKHPWRUHDOL]HWKDW - LVWKHFRUUHFWDQVZHU %XWVRPHWHVWWDNHUVPD\QRWUHFRJQL]HWKHWHUPߡJDPHWHߢVRWKH\ߞOOQHHGWRWU\WRHOLPLQDWHVRPHRWKHU DQVZHUFKRLFHV :HPLJKWUHPHPEHUWKDWQHXURQVKDYHWRGRZLWKWKHQHUYRXVV\VWHP RUZHPD\EHDEOHWRJXHVVWKDW IURPWKHߡQHXURߢSDUWRIWKHZRUG 7KHQHUYRXVV\VWHPLVQߞWGLUHFWO\UHODWHGWRUHSURGXFWLRQDQG FKURPRVRPHVVR ) LVLQFRUUHFW 6NLQFHOOVDUHQߞWSDUWLFXODUO\UHOHYDQWWRUHSURGXFWLRQHLWKHUVR * LVLQFRUUHFW ,WPLJKWEHKDUGWRILJXUHRXWZKDWDQHU\WKURF\WHLVLIZHGRQߞWDOUHDG\NQRZWKHWHUP LWߞVDUHGEORRG FHOOE\WKHZD\ ,IZHKDSSHQWRNQRZZKDWWKHZRUGPHDQVWKHQZHFDQWHOOWKDW + LVDOVRQRWGLUHFWO\ UHODWHGWRFKURPRVRPHVDQGJHQHH[FKDQJHVZKLFKPHDQVLWPXVWDOVREHZURQJ (YHQLIZHGRQߞWNQRZWKHWHUPVLQ + RU - ZHFDQDWOHDVWPDNHDTXLFNJXHVVEHWZHHQWKHWZR FKRLFHVDQGWKHQPRYHRQ 'RQߞWEHDODUPHGLI\RXZRXOGQߞWEHDEOHWRDQVZHUWKLVTXHVWLRQRQWHVWGD\$VZHߞYHVHHQLQHYHU\WHVW IURPWKH5HG%RRN DQGLQHYHU\RWKHUUHDO$&7\RXߞOOHYHUVHH HDFK$&76FLHQFHVHFWLRQFRQWDLQVD KDQGIXORITXHVWLRQVDWPRVWWKDWDFWXDOO\UHTXLUHXVWRNQRZVRPHNLQGRIEDVLFVFLHQWLILFIDFWWKDWLVQߞW SUHVHQWRQWKHSDJH7KRVHEDVLFVFLHQWLILFIDFWVDUHQߞWUHSHDWHGIURPWHVWWRWHVWVRWKHUHߞVQRSRLQWLQ VWXG\LQJPHLRVLVWRWU\WRUDLVH\RXU$&7VFRUHEHFDXVHLWߞVYHU\XQOLNHO\WKDWDQ\PDWHULDOIURPWKLV TXHVWLRQZLOODSSHDURQDIXWXUH$&7,QVWHDGLWߞVLPSRUWDQWWRIRFXVRQPDVWHULQJWKHFRUUHFWDSSURDFKWR WKH$&76FLHQFHTXHVWLRQVWKDWUHTXLUH\RXWRILQGWKHDQVZHURQWKHSDJHEHFDXVHWKRVHTXHVWLRQVPDNH XSWKHYDVWPDMRULW\RIHDFK$&76FLHQFHVHFWLRQ,QIDFWWKLVTXHVWLRQDQGQXPEHUDUHWKHRQO\WZR TXHVWLRQVRQWKLVSDUWLFXODU$&76FLHQFHVHFWLRQWKDWUHTXLUHRXWVLGHNQRZOHGJH,I\RXPLVVWKHPERWK EXWDQVZHUHYHU\WKLQJHOVHFRUUHFWO\\RXߞOODFWXDOO\VWLOOPDNHDSHUIHFWVFDOHGVFRUHRQWKH6FLHQFH VHFWLRQDV\RXFDQVHHRQSDJHLQWKH5HG%RRNZKLFKKDVWKHFRQYHUVLRQWDEOHIRUWKLVSUDFWLFHWHVW 3DJH4XHVWLRQ 7KLVTXHVWLRQORRNVSUHWW\VFDU\WRPRVWWHVWWDNHUVߚLQIDFWWKHHQWLUHSDVVDJHGRHV %XWDVDOZD\VZHWUDLQHGWHVWWDNHUVNQRZWKDWWKH$&7FDQߞWUHTXLUHXVWRNQRZDGYDQFHGKLJKO\ WHFKQLFDOIDFWVDERXWVRPHWKLQJOLNHWKHUDGLRDFWLYHGHFD\RIDSDUWLFXODULVRWRSH6RLIWKH$&7LVDVNLQJ XVDTXHVWLRQDERXWVRPHWKLQJOLNHWKDWWKHQLWPXVWEHSRVVLEOHWRILQGWKHDQVZHUVRPHZKHUHLQWKH SDVVDJHߚZLWKRXWDFWXDOO\NQRZLQJDQ\FKHPLVWU\ 7KHUHDUHDIHZGLIIHUHQWZD\VZHFDQILJXUHRXWWKHDQVZHUWRWKLVTXHVWLRQ7KH5HG%RRNߞ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ߞUHZRUNLQJZLWK5DDVWKH FKHPLFDOV\PERO EHFDXVHLWߞ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ߞWPDGHDQ\PLVWDNHVPDUN - DQGPRYHRQ 1RWLFHWKDWQHLWKHURIWKHVHDSSURDFKHVUHTXLUHVXVWRNQRZDQ\WKLQJDWDOODERXWUDGLRDFWLYHGHFD\ 5DGLXPLVRWRSHVQXFOHLRUDQ\WKLQJHOVH.HHSWKLVNLQGRIWKLQJLQPLQGWKHQH[WWLPH\RXVHHDQ$&7 6FLHQFHTXHVWLRQWKDWVHHPVVFDU\DQGWHFKQLFDO 3DJH4XHVWLRQ 7KLVTXHVWLRQDVNVXVZKDWZRXOGEHSURGXFHGLIDQXFOHXVRI XQGHUZHQWVRPHWKLQJFDOOHGߡEHWDGHFD\ߢ<RXPLJKWEHWKLQNLQJߡ,GRQߞWNQRZZKDWEHWDGHFD\LVߢ 'RQߞWZRUU\ߚ\RXFDQVWLOOILQGWKHFRUUHFWDQVZHUZLWKRXWNQRZLQJWKHWHUPߡEHWDGHFD\ߢLQDGYDQFH $OO\RXKDYHWRGRLVORRNDW)LJXUHDQGXVHDOOWKHLQIRUPDWLRQLWSURYLGHVDQGFRPSDUH)LJXUHWRWKH DQVZHUFKRLFHV :KHUHLVߡEHWDGHFD\ߢPHQWLRQHGLQ)LJXUH",WߞVLQWKHNH\DQGWKHNH\VD\VWKDWWKH͡V\PEROLQGLFDWHV EHWDGHFD\6ROHWߞVORRNDW)LJXUHDQGVHHZKDWZHFDQOHDUQIURPWKDW /RRNDWWKHEHJLQQLQJRIWKHVHTXHQFHQHDUWKHWRSOHIWFRUQHU7KHUHߞVDSRLQWDW 7KHQWKHOLQH PRYHVGLDJRQDOO\XQLWVWRWKHULJKWDQGXQLWVGRZQ LQWHUPVRI=DQG$UHVSHFWLYHO\ 7KHOLQH VHJPHQWFRUUHVSRQGLQJWRWKDWPRYHLVPDUNHGZLWKDQ͠ZKLFKWKHNH\WHOOVXVPHDQVߡDOSKDGHFD\ߢ )URPWKLVQHZVSRWWKHSRLQWPRYHVWRWKHOHIWXQLWZLWKRXWPRYLQJYHUWLFDOO\DWDOO7KDWPRYHPHQWRI XQLWWRWKHOHIWLVPDUNHGZLWKD͡VRZHNQRZLWߞVDQH[DPSOHRIEHWDGHFD\7KHQLWPRYHVOHIWRQH PRUHXQLWDQGWKDWVHJPHQWLVDOVRPDUNHGZLWKD͡ 1H[WWKHOLQHVHJPHQWPRYHVGLDJRQDOO\XQLWVWRWKHULJKWDQGXQLWVGRZQDJDLQDQGWKDWPRYHLV PDUNHGZLWKDQRWKHU͠ :HFDQNHHSJRLQJWKURXJKWKHUHVWRI)LJXUHEXWLWVHHPVSUHWW\FOHDUWKDWWKH͡V\PEROZKLFK FRUUHVSRQGVWREHWDGHFD\MXVWPHDQVWKDWWKHOLQHPRYHVRQHXQLWWRWKHOHIW 6ROHWߞVJHWEDFNWRWKHRULJLQDOTXHVWLRQ:HߞUHDVNHGZKDWZRXOGEHSURGXFHGLIDQXFOHXVRI XQGHUZHQWEHWDGHFD\,QWHUPVRI)LJXUHEHWDGHFD\LVMXVWPRYLQJRQHVSDFHWRWKHOHIW6ROHWߞVILQG WKHSRLQWZKHUH VKRXOGEHRQWKHILJXUH,WߞVDWWKHLQWHUVHFWLRQRIWKHYHUWLFDOOLQHFRUUHVSRQGLQJWRDQGWKHKRUL]RQWDO OLQHFRUUHVSRQGLQJWR )URPWKDWSRLQWZHPRYHRQHXQLWWRWKHOHIW:KHUHDUHZHQRZ":HߞUHDWD=YDOXHRIDQGWKHVDPH $YDOXHRI:KHQZHPRYHRXUH\HVXSWKHYHUWLFDOOLQHDW= ZHVHHWKDWWKHHOHPHQWKDVFKDQJHG WR3D7KH$YDOXHUHPDLQVXQFKDQJHGVRWKHUHVXOWLV ZKLFKPDWFKHVXSZLWK * 6R * LVWKHFRUUHFWDQVZHU 7KDWDSSURDFKLVSUHWW\VLPLODUWRWKH5HG%RRNߞVH[SODQDWLRQRQSDJH%XWWKHUHߞVDQRWKHUDSSURDFK ZHFDQXVHLIZHMXVWIRFXVRQWKHDQVZHUFKRLFHVDQGLWGRHVQߞWUHTXLUHXVWRXQGHUVWDQGWKHJUDSKLFDO UHSUHVHQWDWLRQRIEHWDGHFD\WKDWDSSHDUVLQ)LJXUH $VZHVDZZKHQZHORRNHGDWTXHVWLRQIURPWKLVSDVVDJHWKHWRSQXPEHULQWKH IRUPDWPXVWEHODUJHUWKDQWKHERWWRPQXPEHUEHFDXVHWKHWRSQXPEHULVWKHVXPRIWKHERWWRPQXPEHUDQG VRPHRWKHUQXPEHU6RDQVZHUFKRLFHV ) DQG - PXVWEHZURQJEHFDXVHWKH\GRQߞWKDYHWRSQXPEHUV WKDWDUHODUJHUWKDQWKHLUERWWRPQXPEHUV %HWZHHQFKRLFH * DQGFKRLFH + WKHRQO\GLIIHUHQFHLVZKHWKHUWKHFKHPLFDOV\PEROLV3DRU7K6R QRZZHKDYHWRILJXUHRXWZKLFKRIWKRVHV\PEROVLVFRUUHFW6LQFHWKH\RQO\DSSHDURQ)LJXUHLQWKH SDVVDJHZHFDQORRNWKHUHDQGVHHWKDW3DFRUUHVSRQGVWRD=YDOXHRIZKLOH7KFRUUHVSRQGVWRD= YDOXHRI6LQFHZHNQRZWKDWPXVWEHSDUWRIWKHFRUUHFWDQVZHU EHFDXVHLWߞVFRPPRQWRERWK * DQG + DQGRQHRIWKHPPXVWEHFRUUHFW ZHDOVRNQRZWKDW3DLVWKHDSSURSULDWHFKHPLFDOV\PERO6R ZHFDQILJXUHRXWWKDW * PXVWEHFRUUHFWHYHQLIZHGRQߞWUHDOO\XQGHUVWDQGKRZEHWDGHFD\UHODWHVWR )LJXUH7KLVLVRQHPRUHJRRGH[DPSOHRIWKHLPSRUWDQFHRIFRQVLGHULQJWKHVLPLODULWLHVDQGGLIIHUHQFHV DPRQJDQVZHUFKRLFHVZKHQ\RXDSSURDFKDQ$&7TXHVWLRQ 3DJH4XHVWLRQ 7KH5HG%RRNߞVH[SODQDWLRQIRUWKLVTXHVWLRQRQSDJHDFWXDOO\UHIHUVWRWKHIRUPXODWKDWDSK\VLFLVW ZRXOGXVHWRUHODWHNLQHWLFHQHUJ\WRPDVVDQGYHORFLW\,I\RXKDSSHQWRNQRZWKDWIRUPXODRIIWKHWRSRI \RXUKHDG\RXFRXOGXVHLWRIFRXUVHEXWLWߞVULGLFXORXVWRDVVXPHWKDWPRVW$&7WDNHUVZLOOKDYHWKDW IRUPXODPHPRUL]HGZKHQWKH\WDNHWKHWHVW,ZRXOGQߞWUHFRPPHQGWKDW\RXERWKHUWROHDUQWKDWIRUPXODIRU IXWXUH$&7TXHVWLRQVEHFDXVHLWߞVH[WUHPHO\XQOLNHO\WKDWDIXWXUH$&7TXHVWLRQZLOOWHVWLW$VZHߞYH VHHQWKURXJKRXWRXUGLVFXVVLRQRIWKH$&76FLHQFHVHFWLRQWKH$&7VHHPVWRILQGDQHZDUHDRIEDVLF VFLHQWLILFNQRZOHGJHWRLQFRUSRUDWHZLWKHDFKQHZWHVW 6ROHWߞVWDONDERXWKRZZHPLJKWDSSURDFKWKLVTXHVWLRQHYHQLIZHGRQߞWNQRZWKHIRUPXODWRUHODWH NLQHWLFHQHUJ\WRPDVVDQGYHORFLW\ 7KHILUVWWKLQJ,ZRXOGGRLQWKLVVLWXDWLRQDVLQVRPDQ\RWKHUVLWXDWLRQVRQWKH$&7LVWRORRNDWWKH DQVZHUFKRLFHVDQGVHHKRZWKH\UHODWHWRRQHDQRWKHU:HVHHWKDWWKHDQVZHUFKRLFHVIROORZDFRPPRQ SDWWHUQRQWKH$&76FLHQFHVHFWLRQWKH\RIIHUHYHU\SRVVLEOHFRPELQDWLRQRIWKHLGHDWKDWHLWKHU RUHLVPRYLQJDWDKLJKHUVSHHGDQGWKHLGHDWKDWHLWKHU RUHLVPRUHPDVVLYH6RDOOZHKDYHWRGRLVIRFXVRQWKRVHWZRLVVXHV ,WߞVSUREDEO\HDVLHUWRILJXUHRXWZKLFKSDUWLFOHLVODUJHUILUVW ,IZHߞYHHYHUWDNHQDFKHPLVWU\FODVVZHSUREDEO\NQRZWKDWHOHFWURQVDUHVPDOOHUWKDQQXFOHLRUDWRPV WKHHV\PEROUHSUHVHQWVDQHOHFWURQDVZHFDQVHHIURP7DEOH (YHQLIZHߞUHQRWIDPLOLDUZLWKWKH UHODWLYHVL]HVRIHOHFWURQVDQGQXFOHLZHFRXOGSUREDEO\JXHVVWKDWWKH QXFOHXVLVODUJHUWKDQWKHHOHFWURQEHFDXVHZHNQRZWKDWWKH QXFOHXVLVPDGHXSRIDWOHDVWSDUWLFOHVZKLOHWKHHOHFWURQLVRQO\RQHSDUWLFOH 6RWKHFRUUHFWDQVZHUZLOOKDYHWRLQFOXGHWKHLGHDWKDWWKHHOHFWURQLVVPDOOHUWKDQWKH QXFOHXV7KDWLGHDLVUHIOHFWHGLQFKRLFHV ) DQG - 1RZZHQHHGWRILJXUHRXWZKLFKSDUWLFOHVKRXOGEHPRYLQJIDVWHUߚWKHVPDOOHURQHRUWKHELJJHURQH 7KHSURPSWVD\VWKDWERWKSDUWLFOHVZRXOGߡKDYHWKHVDPHNLQHWLFHQHUJ\ߢ /HWߞVSURFHHGDVWKRXJKZH GRQߞWNQRZZKDWWKHZRUGߡNLQHWLFߢPHDQVIRUSXUSRVHVRIWKLVGLVFXVVLRQ ,PDJLQHWKDWZHKDYHWZRHYHU\GD\REMHFWVRIGLIIHUHQWPDVVHVߚVD\DERZOLQJEDOODQGDJROIEDOO,IZH DSSO\WKHVDPHDPRXQWRIHQHUJ\WRHDFKEDOOZKLFKRQHZLOOUROODZD\IDVWHU":HFDQSUREDEO\WHOOWKDW WKHVPDOOHUREMHFWZLOOUROOIDVWHU,WPDNHVVHQVHLI\RXWKLQNDERXWLWLIWKHDPRXQWRIHQHUJ\LVFRQVWDQW WKHVPDOOHUREMHFWVKRXOGEHDIIHFWHGE\WKHHQHUJ\PRUHEHFDXVHLWKDVOHVVߡVWXIIߢWREHDUWKHLPSDFWRI WKHHQHUJ\ )ROORZLQJWKDWLGHDZHFDQWHOOWKDWWKHHOHFWURQVKRXOGPRYHIDVWHUWKDQWKHQXFOHXVEHFDXVHLWKDVOHVV PDVVIRUWKHHQHUJ\WRZRUNRQZKLFKPHDQVWKDWWKHHQHUJ\VKRXOGEHDEOHWRGULYHWKHPDVVDZD\PRUH TXLFNO\ $JDLQWKLQNRISXVKLQJDJROIEDOORUDERZOLQJEDOOZLWKWKHVDPHDPRXQWRISRZHUߚZRXOGQߞW WKHOHVVPDVVLYHJROIEDOOPRYHIDVWHU" 6R - LVWKHFRUUHFWDQVZHU 'RQߞWZRUU\LI\RXZHUHQߞ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ߡVPDOOHUPROHFXOHVHDVLO\GLIIXVH LQWRWKHSRUHV/DUJHUPROHFXOHVGRQRWDVHDVLO\GLIIXVHLQWRWKHSRUHVߢ1RZZHNQRZWKDWZKLFKHYHURI WKH3RU3PROHFXOHVLVVPDOOHUGLIIXVHGPRUHHDVLO\VRZHMXVWKDYHWRILQGRXWWKHLUUHODWLYHVL]HV :HFDQVHHGDWDDERXWWKHVHPROHFXOHVOLVWHGLQ7DEOH7KHEORFNRIWH[WXQGHU)LJXUHWHOOVXVWKDW $00VWDQGVIRUߡDYHUDJHPROHFXODUPDVVߢZKLFKFRQILUPVWKDWZHDUHORRNLQJDWWKHLUVL]HVDV PHDVXUHGLQDPXRUߡDWRPLFPDVVXQLWVߢDVWKHERWWRPRIWKHWDEOHWHOOVXV :KHQZHFKHFNWKHWDEOHZHVHHWKDW3LVWKHVPDOOHURIWKHWZRPROHFXOHVZKLFKPHDQVLWVKRXOG GLIIXVHPRUHHDVLO\LQWRWKHSRUHV7KDWPHDQVWKHFRUUHFWDQVZHULV * VLQFHLWFRUUHFWO\LGHQWLILHV ZKLFKPROHFXOHZRXOGGLIIXVHPRUHHDVLO\DQGFRUUHFWO\FRPSDUHVWKHPROHFXOHVߞ$00V 1RWHWKDWZHFRXOGDOVRKDYHUXOHGRXW ) DQG - EDVHGRQWKHIDFWWKDWWKH\PDNHLQFRUUHFWVWDWHPHQWV DERXWWKHUHODWLYH$00VRIWKHPROHFXOHV 3DJH4XHVWLRQ ,QRUGHUWRDQVZHUWKLVTXHVWLRQFRUUHFWO\ZHQHHGWRWKLQNDERXWZKDWZHNQRZDERXWPROHFXOHVWKDW PHDVXUHDPX,IZHORRNWKURXJKWKHSDVVDJHZHߞOOVHHLQ7DEOHWKDW3PROHFXOHVPHDVXUH DPX:HFDQDOVRVHHWKDW)LJXUHVKRZVDOOWKHPROHFXOHVIURP7DEOHDQDO\]HGLQWKHVDPH ZD\DVWKHPROHFXOHVLQ)LJXUH :KHQZHORRNDW)LJXUHZHFDQVHHWKDWWKHODUJHUWKHPROHFXOHLVWKHORZHULWV57LV0ROHFXOH3LV SUHVHQWLQWKHILJXUHDWMXVWXQGHUPLQXWHVRI57:HFDQDOVRVHHWKDWDOORIWKHPROHFXOHVVPDOOHUWKDQ 3KDYHKLJKHUYDOXHVIRU57$ORQJWKHVDPHOLQHVZHFDQVHHWKDWODUJHUPROHFXOHVLQ7DEOHKDYH ORZHU57YDOXHVLVLQ)LJXUH :LWKWKDWLQPLQGZHFDQORRNDW00DQG0LQ)LJXUHWRGHFLGHZKLFKLIDQ\DUHSUREDEO\ODUJHU WKDQDPX2QO\0KDVDQ57WKDWߞVORZHUWKDQWKH57RI3VRZHNQRZWKDW0PXVWKDYHD VL]HODUJHUWKDQWKHVL]HRI3ZKLFKZDVDPX7KDWPHDQV $ LVWKHFRUUHFWDQVZHU 1RWLFHWKDWWKLVTXHVWLRQUHTXLUHGXVWRFRPELQHLQIRUPDWLRQIURPWKUHHGLIIHUHQWSODFHVLQWKHSDVVDJH 7DEOH)LJXUHDQG)LJXUH 5HPHPEHUWKDWWKLVKDSSHQVVRPHWLPHVRQWKH$&76FLHQFHVHFWLRQEXW DVDOZD\VLQWKHVHVLWXDWLRQVZHZHUHDEOHWRILQGWKHUHOHYDQWLQIRUPDWLRQE\ORRNLQJWKURXJKWKHSDVVDJH DQGWKHGDWDIRUXQXVXDOWHFKQLFDOWHUPVIURPWKHTXHVWLRQDQGWKHDQVZHUFKRLFHVߚLQWKLVFDVHWKRVH FRQFHSWVIURPWKHTXHVWLRQLQFOXGHGWKLQJVOLNHDPXDQG0DQGWKHQORFDWLQJWKRVHWKLQJVLQWKH GDWDOHGXVWRUHDOL]HWKDWFRQFHSWVOLNH3DQG57ZHUHDOVRUHOHYDQW,WߞVDOODERXWFDUHIXOUHDGLQJDQG SD\LQJDWWHQWLRQWRGHWDLOV 3DJH4XHVWLRQ $ORWRISHRSOHDUHQߞWVXUHZKDWWRGRZLWKWKLVSUREOHPEHFDXVHLWIHHOVOLNHLWPLJKWUHTXLUHVRPHNLQGRI RXWVLGHLQIRUPDWLRQEXWLWߞVDFWXDOO\MXVWWHVWLQJDYHU\VLPSOHLGHDEDVHGRQGDWDIURPWKHSDVVDJH :Hߞ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ߞUHVPDOOHUZKLFKPHDQVLWZRXOGWDNHPRUH RIWKHPWRPDNHXSDJLYHQDPRXQWRIPDVV6RWKHFRUUHFWDQVZHULV - 'R\RXVHHKRZWKLVGRHVQߞWUHDOO\KDYHDQ\WKLQJWRGRZLWKPROHFXOHVRUUHDOO\HYHQZLWKVFLHQFH",WߞV UHDOO\MXVWDERXWFRXQWLQJ ,WZRXOGEHOLNHLIWKHTXHVWLRQVDLGߡ,I\RXKDYHSRXQGVRISRXQG ZHLJKWVDQGSRXQGVRISRXQGZHLJKWVGR\RXKDYHPRUHSRXQGZHLJKWVRUSRXQGZHLJKWV"ߢ2I FRXUVHWKHDQVZHUZRXOGEHWKDW\RXKDYHPRUHSRXQGZHLJKWVEHFDXVHLWZRXOGWDNHPRUHRIWKHPWR UHDFKDJLYHQZHLJKW 7KH$&7MXVWIRXQGDPRUHVFLHQWLILFVRXQGLQJZD\WRDVNWKLVTXHVWLRQVRLWFRXOGFRQIXVHDORWRI SHRSOHZKLFKLVH[DFWO\ZKDWWKHWHVWLVSUHWW\PXFKDOZD\VWU\LQJWRGR 3DJH4XHVWLRQ ,QRUGHUWRDQVZHUWKLVTXHVWLRQZHQHHGWRUHIHUWR)LJXUHZKHUHZHFDQILQGWKHGDWDDERXWWKHPDVV ORVWE\WKHOHDYHVDW27KHNH\DERYHWKHILJXUHLVFULWLFDOIRUWKLVEHFDXVHWKHUHDUHIRXUGLIIHUHQW OLQHVLQ)LJXUHDQGZHKDYHWRPDNHVXUHZHߞUHSD\LQJDWWHQWLRQWRWKHULJKWRQH6LQFHZHߞUH DQVZHULQJDTXHVWLRQDERXWOHDYHVLQDQDWPRVSKHUHRI2ZHQHHGWRWUDFNWKHVROLGEODFNOLQH 1RZOHWߞVFKHFNWKHUDQJHVRIHDFKDQVZHUFKRLFH ) DQG * ERWKVKRZGURSVLQWKHSHUFHQWRIPDVV UHPDLQLQJ&KRLFH + VKRZVDGURSDVZHOOEXWOHVVRIRQH&KRLFH - FRUUHVSRQGVWRDPXFKVWHHSHU GURSWKDQDQ\RIWKHRWKHUFKRLFHVVRZHNQRZWKDW - PXVWEHWKHFRUUHFWDQVZHU 1RWLFHWKDWFKRLFH * FRUUHVSRQGVWRDYHU\VWHHSGURSLQWKHOLQHVFRUUHVSRQGLQJWRWKHGDWDIRUSDSHU ߚQRWIRUOHDYHV,ߞPVXUH\RXFDQLPDJLQHWKDWORWVRIWHVWWDNHUVZLOOPDNHVRPHNLQGRIFDUHOHVV PLVWDNHWKDWOHDGVWKHPWRSLFN * EHFDXVHWKH\PLVUHDGWKHGDWDWKHNH\RUWKHTXHVWLRQ$OZD\VPDNH VXUH\RXORRNDWWKHNH\VR\RXNQRZ\RXߞUHZRUNLQJZLWKWKHULJKWLQIRUPDWLRQ 3DJH4XHVWLRQ 7KH5HG%RRNߞVVROXWLRQWRWKLVTXHVWLRQRQSDJHQHJOHFWVWRH[SODLQDFUXFLDOVWHSWKDWPDQ\WHVW WDNHUVKDYHSUREOHPVZLWKDQG,ߞGMXVWOLNHWRH[SODLQZKDWWKDWVWHSLV 7KHTXHVWLRQWDONVDERXWWKHLGHDRIDWUHHߡEXUQ>LQJ@FRPSOHWHO\ߢRUQRWEXW7DEOHGRHVQߞWVSHFLILFDOO\ PHQWLRQWKHLGHDRIDFRPSOHWHEXUQ %XWZKHQZHORRNDW7DEOHZHVHHDORWRIGDWDSRLQWVWKDWDSSHDUDVWKHOHWWHU)HYHQWKRXJKWKHWDEOH GRHVQߞWKDYHDNH\WKDWH[SODLQVZKDWWKH)VPHDQ6RZHߞOOQHHGWRILQGVRPHRWKHUH[SODQDWLRQIRUWKH OHWWHU):KHQZHWXUQWRWKHSDVVDJHZHVHHLQWKHSDUDJUDSKDERYH7DEOHWKDWWKH)FRUUHVSRQGVWRD ߡIDLOHGEXUQߢZKLFKLVDWULDOLQZKLFKWKHVDPSOHGRHVQߞWEXUQFRPSOHWHO\ 6RQRZZHNQRZWKDWWKH)YDOXHVLQ7DEOHLQGLFDWHWKDWDVDPSOHGLGQߞ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ߞWQHHGWRNQRZDQ\WKLQJDWDOODERXWWKH3DOHR]RLFHUDRUDERXWPRGHUQ3LQXV WUHHV:HNQRZWKH$&7ORYHVWRWKURZLQLUUHOHYDQWVFLHQWLILFZRUGVWRLQWLPLGDWHXVZKHQLWFDQ'RQߞW OHWLWLQWLPLGDWH\RX &RQFOXVLRQ %\QRZ\RXߞYHVHHQDORWRIUHDO$&76FLHQFHTXHVWLRQVDQG,KRSH\RXߞUHJHWWLQJXVHGWRWKHLGHDWKDW \RXQHHGWRNQRZYHU\OLWWOHDFWXDOVFLHQFHIRUWKH$&77KLVSDUWRIWKHWHVWLVUHDOO\DORWOLNHWKH$&7 5HDGLQJVHFWLRQH[FHSWWKDWLWLQYROYHVWDEOHVDQGILJXUHVDQGVFLHQWLILFVXEMHFWPDWWHU 7KHPRVWLPSRUWDQWVNLOO\RXQHHGWRGHYHORSLVWKHDELOLW\WRUHDGWKHTXHVWLRQDQGXVHWKHNH\WHUPVLQ WKHTXHVWLRQDQGWKHDQVZHUFKRLFHVWRILQGWKHLQIRUPDWLRQ\RXQHHGLQWKHSDVVDJH,I\RXFDQMXVWGRWKDW RYHUDQGRYHUDJDLQ\RXߞOOJHWDJUHDWVFRUHRQWKH$&76FLHQFHVHFWLRQ 8VLQJ7KH4XHVWLRQ([SODQDWLRQV,Q7KH5HDO$&73UHS*XLGHUG (GLWLRQ 7KHUHLVVRPHYDOXHLQWKHTXHVWLRQGLVFXVVLRQVLQ7KH5HDO$&73UHS*XLGHUG(GLWLRQDVORQJDV\RX XVHWKHPDSSURSULDWHO\)LUVWRIDOO\RXZDQWWRLJQRUHDQ\SKUDVLQJDERXWߡWKHEHVWDQVZHUߢ)RUHYHU\ TXHVWLRQWKHUHLVRQHFRUUHFWDQVZHUFKRLFHDQGWKHUHDUHWKUHHLQFRUUHFWDQVZHUFKRLFHV<RXߞOOQHYHU KDYHWRFKRRVHDߡEHVWߢDQVZHUIURPDPRQJVHYHUDOߡJRRGߢDQVZHUVߚFKRLFHVDUHDOZD\VHLWKHUULJKWRU ZURQJDQGHDFKTXHVWLRQRQO\KDVRQHDQVZHUWKDWFRXOGEHFRUUHFWDFFRUGLQJWRWKH$&7ߞVUXOHV $OVR\RXߞOOJHQHUDOO\ILQGWKDWH[SODQDWLRQVLQWKH5HG%RRNWHQGWREHPRUHIRUPDOWKDQQHFHVVDU\DQG WKH\DOVRWHQGWREULQJXSRXWVLGHNQRZOHGJH\RXGRQߞWDFWXDOO\QHHGZKHQ\RXߞUHDQVZHULQJDTXHVWLRQ 7KH\DOVRRIWHQIDLOWRSRLQWRXWZD\V\RXFRXOGHOLPLQDWHLQFRUUHFWDQVZHUFKRLFHVEDVHGRQKRZWKH\ FRQWUDGLFWWKHSDVVDJHRUDUHQRWVXSSRUWHGE\WKHSDVVDJH 6RLI\RXILQG\RXUVHOIVWXFNRQDTXHVWLRQWKDWZHGLGQߞWZDONWKURXJKLQWKLV%ODFN%RRN\RXPD\ZDQW WRWDNHDORRNDWWKHH[SODQDWLRQIRUWKDWTXHVWLRQLQWKH5HG%RRNWRJHWDQLGHDRIRQHZD\WRVROYHWKDW TXHVWLRQ-XVWEHDULQPLQGWKDWWKHUHߞVSUREDEO\DTXLFNHUOHVVVFLHQWLILFZD\WRVROYHWKDWTXHVWLRQ DQGRUWKDW\RXPD\EHDEOHWRHOLPLQDWHVRPHDQVZHUFKRLFHVLQZD\VWKDWDUHQߞWPHQWLRQHGLQWKH ZDONWKURXJKVLQWKDWERRN 9LGHR'HPRQVWUDWLRQV ,I\RXߞ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ߞWIUHDNRXWZKHQ\RXVHHVFLHQWLILFWHUPV\RXGRQߞWNQRZ7KH\ߞOOHLWKHUEHH[SODLQHGLQWKHSDVVDJH VRPHZKHUHRU\RXZRQߞWQHHGWRNQRZWKHPWRDQVZHUWKHTXHVWLRQ 8VHWKHULJKWGDWD0DQ\SDVVDJHVLQYROYHPXOWLSOHWDEOHVJUDSKVHWFZLWKVLPLODULQIRUPDWLRQ&KHFNWR PDNHVXUH\RXߞUHXVLQJWKHULJKWGDWDWRDQVZHUDJLYHQTXHVWLRQ 3D\FORVHDWWHQWLRQWRWKHODEHOVRQJUDSKVFKDUWVDQGGLDJUDPV7KHVHZLOOWHOO\RXZKHWKHUWKHGDWD \RXߞUHORRNLQJDWLVUHOHYDQWWRWKHTXHVWLRQ\RXߞUHWU\LQJWRDQVZHU 7KHUHZLOOEHYHU\IHZTXHVWLRQVWKDWUHTXLUH\RXWRNQRZDQ\VFLHQFHRQ\RXURZQߚSODQRQWR TXHVWLRQVOLNHWKLVDWPRVW7KHVHTXHVWLRQVDUHRIWHQGHVLJQHGWRVHHPOLNHWKH\ߞUHDGYDQFHGWRDQ XQWUDLQHGWHVWWDNHUEXWWKH\UHDOO\KLQJHRQEDVLFLGHDV<RXߞOONQRZ\RXߞUHGHDOLQJZLWKRQHRIWKHVH TXHVWLRQVZKHQLWLQYROYHVWHUPVWKDWDUHQߞWLQWKHSDVVDJH $QVZHUFKRLFHVDUHLPSRUWDQWEHFDXVHWKH\FDQWHOO\RXZKDW\RXߞOOQHHGWRWKLQNDERXWWRDQVZHUWKH TXHVWLRQ7KH\ߞUHDVLPSRUWDQWDVDQ\RWKHUSDUWRIWKHTXHVWLRQVRDOZD\VUHDGWKHPFDUHIXOO\ +HUHDUHVRPHRIWKHFRPPRQDQVZHUFKRLFHSDWWHUQV\RXߞOOVHH w$QVZHUFKRLFHVFRQWDLQDOOWKHDQVZHUVRIDFHUWDLQW\SHWKDWDUHUHOHYDQWWRWKHTXHVWLRQߚWKLVFRXOG PHDQHYHU\GDWHUDQJHRQDFKDUWHYHU\W\SHRIPHWDOXVHGLQDQH[SHULPHQWHDFKWHPSHUDWXUHRQD JUDSKDQGVRRQ7KLVZLOOWHOO\RXWRIRFXVRQWKHSDUWRIWKHSDVVDJHWKDWGHDOVZLWKWKLVFRQFHSW w:URQJDQVZHUFKRLFHVDUHRIWHQWKHH[DFWRSSRVLWHRIWKHFRUUHFWDQVZHU w:URQJDQVZHUFKRLFHVFRQWDLQVWZRYHUVLRQVHDFKRIWZRSRVVLEOHDQVZHUVZLWKGLIIHUHQWVXSSRUWLQJ VWDWHPHQWV(OLPLQDWHVXSSRUWLQJVWDWHPHQWVWKDWDUHQߞWVXSSRUWHGE\WKHWH[WRUDUHLUUHOHYDQW +HUHߞVWKHJHQHUDO$&76FLHQFHSURFHVV 5HDGVNLPRUVNLSWKHSDVVDJHGHSHQGLQJRQ\RXUSUHIHUHQFH 5HDGWKHTXHVWLRQFDUHIXOO\QRWLQJNH\VFLHQWLILFWHUPV 5HDGWKHDQVZHUFKRLFHVFDUHIXOO\ /RRNDWWKHUHOHYDQWSDUWRIWKHSDVVDJH )LQGWKHFRUUHFWDQVZHURUHOLPLQDWHWKUHHZURQJDQVZHUV 'RXEOHFKHFN\RXUDQVZHUPDUNLWDQGPRYHRQ *REDFNWKURXJKWKH$&76FLHQFHZDONWKURXJKVDQGIROORZDORQJLQ\RXUFRS\RI7KH5HDO$&73UHS *XLGHUG(GLWLRQWRVHHGHPRQVWUDWLRQVRIWKHVHLGHDV $&7(QJOLVK ߡ7KXV,JRWLQWRP\ERQHVWKHHVVHQWLDOVWUXFWXUHRIWKHRUGLQDU\%ULWLVKVHQWHQFHZKLFKLV DQREOHWKLQJߢ :LQVWRQ&KXUFKLOO 2YHUYLHZDQG,PSRUWDQW5HPLQGHUV)RU$&7(QJOLVK $WWKLVSRLQWZHߞ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ߞWUHDOO\ NQRZYHU\PXFKDERXWWKHJUDPPDUDQGVW\OHRI$PHULFDQ(QJOLVKEHFDXVHWKRVHWKLQJVDUHDOPRVWQHYHU WDXJKWLQ$PHULFDQKLJKVFKRROVߚDQGHYHQZKHQWHDFKHUVGRWU\WRFRYHUWKRVHWRSLFVWKH\DOPRVWQHYHU WHDFKWKHPLQDZD\WKDWDJUHHVZLWKWKH$&7EHFDXVHWKH$&7(QJOLVKVHFWLRQLVEDVHGRQWKHUXOHVRI ZULWWHQJUDPPDUWKDWZHUHSRSXODULQWKHPLGGOHRIWKHWKFHQWXU\ 6RKHUHߞVWKHERWWRPOLQHPRVWWHVWWDNHUVZKRZDQWWRGRZHOORQWKH$&7(QJOLVKVHFWLRQZLOOQHHGWR OHDUQVRPHJUDPPDUFRQFHSWVHYHQLIWKHLU(QJOLVKWHDFKHUVKDYHSUDLVHGWKHLUZULWLQJDELOLW\LQFODVV %XWGRQߞWSDQLF 7KHUHDUHQߞWYHU\PDQ\JUDPPDUFRQFHSWVRQWKH$&7DQGWKHIHZFRQFHSWVWKDWGRDSSHDURQWKHWHVW DUHQߞWYHU\DGYDQFHG$OVRWKH$&7(QJOLVKVHFWLRQLWVHOIRIWHQJLYHV\RXFOXHVWRKHOS\RXLGHQWLI\WKH ULJKWDQVZHUWRDTXHVWLRQLI\RXNQRZZKHUHWRORRNIRUWKHP 2QWRSRIWKDWWKHUHDUHWKUHHJHQHUDOZD\VWROHDUQWKHJUDPPDU\RXQHHGIRUWKH$&7 <RXFDQUHDGWKURXJKWKHWHVWWDNLQJDGYLFHLQWKLV%ODFN%RRNWDNHDORRNDWWKHZDONWKURXJKVLQ WKLV%ODFN%RRNDQGWKHH[SODQDWLRQVLQWKH5HG%RRNDQGMXVWVRUWRIߡJHWWKHKDQJRILWߢZLWKRXW REVHVVLQJRYHUUXOHV <RXFDQVWXG\DOOWKHVWUDWHJLHVUXOHVDQGSULQFLSOHVLQWKLVERRN ZKLFKDUHIRXQGLQWKLVVHFWLRQ DQGLQWKHߡ:ULWLQJ7RROER[ߢLQWKH$SSHQGL[RIWKLV%ODFN%RRN XQWLO\RXKDYHFRPSOHWHDQGWRWDO PDVWHU\RIWKHPDQGWKHHQWLUH(QJOLVKVHFWLRQRIWKH$&7FRZHUVEHIRUH\RX <RXFDQWDNHDVRUWRIPLGGOHSDWKZKLFKLQYROYHVPDNLQJDFRQVFLRXVHIIRUWWROHDUQDIHZRIWKH PDMRUFRQFHSWVWKDWWKH$&7WHVWVDQGWKHQUHO\LQJRQSUDFWLFDOH[SHULHQFHZLWKZDONWKURXJKVDQG VDPSOHWHVWVWRILOOLQWKHUHVW $Q\RIWKRVHWKUHHDSSURDFKHVFDQZRUNJUHDWGHSHQGLQJRQ\RXUSHUVRQDOLW\DQGWKHW\SHRIVFRUH\RX QHHG ,QJHQHUDOPRVWRIWKHVWXGHQWV,ߞYHZRUNHGZLWKSUHIHUWKHPRUHLQIRUPDODSSURDFKRIUHDGLQJWKURXJK VRPHTXHVWLRQZDONWKURXJKVIURPWKLV%ODFN%RRNDQGWU\LQJVRPHSUDFWLFHTXHVWLRQVIURPWKH5HG%RRN WRGHYHORSDQLQWXLWLYHXQGHUVWDQGLQJRIKRZWKH$&7(QJOLVKVHFWLRQZRUNV6RPHSUHIHUWKHPLGGOH DSSURDFKRIGHOLEHUDWHO\OHDUQLQJDIHZFRQFHSWVLQGHWDLODQGWKHQVRDNLQJXSWKHUHVWWKURXJKDUHODWLYHO\ VKRUWSHULRGRIWULDODQGHUURU 2QHLPSRUWDQWQRWHWKRXJKLI\RXߞUHVKRRWLQJIRUDRUKLJKHURQWKH$&7(QJOLVKVHFWLRQ\RXߞOOKDYH YHU\OLWWOHURRPIRUHUURUZKLFKPHDQV\RXߞOOSUREDEO\QHHGWRPDNHDFRQVFLRXVGHFLVLRQWRPDVWHUWKH $&7ߞVJUDPPDUUXOHV,I\RXZDQWWRVFRUHLQWKDWUDQJH\RXEDVLFDOO\KDYHWRJRWKURXJKDOOTXHVWLRQV RQWKHHQWLUH(QJOLVKVHFWLRQDQGRQO\PLVVDERXWRUTXHVWLRQVDWPRVWDQGLWߞVYHU\KDUGWRUHDFKWKDW OHYHORIDFFXUDF\ZLWKRXWEHLQJFRQVFLRXVO\DZDUHRIWKH$&7ߞVLGHDRIJUDPPDUUXOHV $QGHYHQLI\RX WKLQN\RXDOUHDG\KDYHDSHUIHFWXQGHUVWDQGLQJRIPRGHUQ(QJOLVKJUDPPDU,ZDQWWRFDXWLRQ\RXJHQWO\ WKDWWKH$&7ZLOOSUREDEO\GLVDJUHHZLWK\RXRQDWOHDVWDIHZLVVXHV %\WKHZD\WKH$&7ZLOOQHYHUWHVW\RXRQWKHVSHFLILFQDPHVRIJUDPPDWLFDOWHUPVOLNHߡSDUWLFLSOHߢ ߡJHUXQGߢߡQRPLQDWLYHߢDQGVRRQVRGRQߞWZRUU\LI\RXFDQߞWNHHSWKRVHWHUPVVWUDLJKW RULI\RXߞYH QHYHUHYHQKHDUGRIWKHP ,QVWHDGWKH$&7WHVWV\RXUDZDUHQHVVRILWVSULQFLSOHVRIJUDPPDUDQGVW\OH E\KDYLQJ\RXFKRRVHWKHIRUPRIDSKUDVHWKDWLWFRQVLGHUVVXSHULRUZLWKLQWKHFRQWH[WRIDSDVVDJH6R HYHQLI\RXFKRRVHWROHDUQDOOWKHUXOHVDQGSULQFLSOHVLQWKH$SSHQGL[RIWKLV%ODFN%RRN\RXߞOOQHYHU KDYHWRDQVZHUGLUHFWTXHVWLRQVDERXWJUDPPDWLFDOWHUPLQRORJ\RQWKH$&7 1RZWKDWZHߞYHDGGUHVVHGVRPHRIWKHLPSRUWDQWSUHOLPLQDU\LVVXHVZLWKWKH$&7(QJOLVKVHFWLRQOHWߞV WDONDERXWWKHVHFWLRQߞVELJVHFUHW 7KH%LJ6HFUHW2I$&7(QJOLVK 7KHELJVHFUHWRIWKH$&7(QJOLVKVHFWLRQLVWKDWLWGRHVQߞWIROORZWKHVDPHUXOHVDQGFRQYHQWLRQVWKDW PDQ\HGXFDWHGSHRSOHIROORZZKHQWKH\ZULWHRUVSHDNLQ$PHULFDQ(QJOLVKWRGD\,QVWHDGLWIROORZVD VHWRIUXOHVWKDWPLJKWORRVHO\EHGHVFULEHGDVWKHUXOHVWKDWJRYHUQHGVWDQGDUGZULWWHQ$PHULFDQ(QJOLVK LQWKHHDUO\WRPLGWKFHQWXU\ 0RVWWHVWWDNHUVGRQߞWUHDOL]HWKLV:KHQHYHUWKH\FRPHDFURVVDQHZ$&7(QJOLVKTXHVWLRQWKH\MXVW WKLQNߡ:KLFKFKRLFHZRXOGPDNHWKLVSKUDVHVRXQGEHVWWRPH"ߢ 7KLVLVDKXJHPLVWDNH%\QRZZHVKRXOGUHDOL]HWKDWWKH$&7GRHVQߞWFDUHZKDWVRXQGVJRRGWR\RXRU WRPHRUWRDQ\ERG\HOVHZKRGRHVQߞWZULWHWKH$&76RLQVWHDGRIORRNLQJDWDQ$&7TXHVWLRQDQG DQVZHULQJEDVHGRQZKDWVRXQGVJRRGWRXVZHVKRXOGEHDQVZHULQJEDVHGRQZKDWWKH$&7FRQVLVWHQWO\ UHZDUGV7KDWߞVDOO:KDW\RXDQG,WKLQNVRXQGVJRRGRUEDGLVQߞWLPSRUWDQWLILWGLVDJUHHVZLWKWKH $&7ߞVUXOHVDQGSDWWHUQV /HWPHVD\LWDJDLQZKHQ\RXߞUHIDFHGZLWKDQ$&7(QJOLVKTXHVWLRQ\RXVKRXOGLPPHGLDWHO\DVN \RXUVHOIߡ:KLFKDQVZHUVDWLVILHVWKH$&7ߞVVWDQGDUGVDQGSDWWHUQVIRUWKLVW\SHRITXHVWLRQ"ߢ :KHQZHWDONHGDERXWWKH$&75HDGLQJVHFWLRQHDUOLHULQWKLV%ODFN%RRNZHWDONHGDERXWKRZRQHRI WKHELJJHVWUHDVRQVSHRSOHVWUXJJOHZLWKWKRVHTXHVWLRQVLVWKDWWKH\ߞ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ߞWUHZDUGXVIRUXVLQJFRPPDVOLNHWKDWߚLQVWHDGLWKDVLWVRZQULJLGUXOHVDERXWFRPPD XVDJH6LPLODUO\PDQ\WHVWWDNHUVZRXOGDOVRQDWXUDOO\XVHDSRVWURSKHVSDUWLFLSOHVDQGSURQRXQVLQ ZD\VWKH$&7GRHVQߞWUHZDUG %\WKHZD\GRQߞWEHQHUYRXVLI\RXGRQߞWNQRZZKDWDSDUWLFLSOHLVRULIWKHUHDUHRWKHUWHFKQLFDO JUDPPDWLFDOWHUPV\RXߞUHQRWIDPLOLDUZLWK5HPHPEHUWKDWWKH$&7QHYHUUHTXLUHVXVWRNQRZWKHQDPH RIDJUDPPDWLFDOFRQFHSWLWRQO\UHTXLUHVXVWRLGHQWLI\WKHIRUPRIDSKUDVHWKDWLWFRQVLGHUVWREH FRUUHFWRUWRGHVFULEHVRPHWKLQJLQWKHSDVVDJHWKHVDPHZD\ZHPLJKWGHVFULEHLWRQWKH$&75HDGLQJ VHFWLRQ -XVWDVZHOHDUQHGWRDWWDFNWKHTXHVWLRQVRQWKH5HDGLQJ0DWKDQG6FLHQFHVHFWLRQVLQDV\VWHPDWLFDQG GHSHQGDEOHZD\ߚHYHQWKRXJKWKH\PRVWO\DVNXVWRGRWKLQJVZHGRQߞWQRUPDOO\GRLQVFKRROߚZHFDQ OHDUQWREHDW$&7(QJOLVKTXHVWLRQVLQDUHOLDEOHZD\$VZHGLGZLWKWKHRWKHUVHFWLRQVZHߞOOXVHDQ DSSURDFKWKDWߞVWDLORUHGWRWKHUHSHWLWLYHSDWWHUQVDQGLVVXHVWKDWFRPHXSLQWKLVSDUWRIWKHWHVW:HߞOOVHH WKDWPRVWRIWKHTXHVWLRQVLQWKH$&7(QJOLVKVHFWLRQWHVWRQO\DKDQGIXORIFRQFHSWVRYHUDQGRYHUDJDLQ &RPPDV,Q7KH$&7(QJOLVK6HFWLRQ %HIRUHZHJHWLQWRDOOWKHGHWDLOVRIWKH$&7(QJOLVKVHFWLRQOHWߞVWDONDERXWKRZWKH$&7WHVWVFRPPD XVDJHRQWKDWVHFWLRQ ,ߞOONHHSWKLVGLVFXVVLRQEULHIߚZHZRQߞWWRXFKRQDOOWKHKRZVDQGZK\VRISURSHUFRPPDXVDJHRQWKH $&7EXWZHߞOOFRYHUDIHZVLPSOHUXOHVWKDWZLOOKHOS\RXXQGHUVWDQGZKDWNLQGRIFRPPDXVDJHWKH $&7(QJOLVKVHFWLRQUHZDUGV 7KHPDMRULW\RI$&7(QJOLVKTXHVWLRQVGRQߞ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ߡP\WKVߢWKDW,HQFRXQWHUZKHQZRUNLQJZLWK P\FOLHQWV 0<7+&RPPDVVKRXOGEHXVHGWRVKRZWKDWDSHUVRQZRXOGWDNHDEUHDWKLIWKHVHQWHQFHZHUHUHDG RXWORXG 0<7+:KHQDVHQWHQFHFRQWDLQVWRRPDQ\ZRUGVLQDURZZLWKQRSXQFWXDWLRQ\RXVKRXOGSXWD FRPPDLQWKHUHWREUHDNXSWKHVHQWHQFH ,ZDQWWRPDNHWZRWKLQJVFOHDU )$&77KH$&7GRHVQߞWUHZDUGFRPPDSODFHPHQWEDVHGRQZKHUHDVSHDNHUZRXOGSDXVHLI UHDGLQJWKHVHQWHQFHDORXG )$&77KH$&7GRHVQߞWFDUHKRZPDQ\ZRUGVDSSHDULQDURZZLWKRXWSXQFWXDWLRQ ,QVWHDGWKH$&7(QJOLVKVHFWLRQUHZDUGVFRPPDXVDJHWKDWFRUUHFWO\GHPRQVWUDWHVWKHUHODWLRQVKLSV DPRQJFRQFHSWVLQDVHQWHQFH /HWPHDOVRPDNHWKHEURDGHUSRLQWWKDWZHVKRXOGDSSURDFKTXHVWLRQVWKDWLQYROYHFRPPDSODFHPHQW ZLWKWKHDWWLWXGHWKDWLWߞVEHWWHUWRDYRLGFRPPDVXQOHVVZHKDYHDQDFWXDOFRQFUHWHUHDVRQWRSXWRQHLQD SDUWLFXODUSDUWRIDVHQWHQFH :HߞOOWDONDERXWZKDWWKRVHFRQFUHWHUHDVRQVDUHLQWKHQH[WVHFWLRQDQGLQ WKH:ULWLQJ7RROER[LQWKH$SSHQGL[RIWKLV%ODFN%RRN ,QRWKHUZRUGVLIDSKUDVHZRXOGEHDFFHSWDEOH ZLWKRXWFRPPDVWKHQWKH$&7ZDQWVXVWROHDYHRXWFRPPDV ,WߞVDOVRYHU\LPSRUWDQWWKDW\RXUHDGWKHZDONWKURXJKVDWWKHHQGRIWKLVWUDLQLQJVHFWLRQVR\RXFDQVHH ZKDWWKHVHFRPPDSODFHPHQWTXHVWLRQVDUHDFWXDOO\OLNH ,QWKHQH[WVHFWLRQZHߞOOWDNHDORRNDWWKHGLIIHUHQWLVVXHVWKDWFDQFRPHXSLQWKH$&7(QJOLVKVHFWLRQ LQFOXGLQJWKHYDULRXVDSSURSULDWHZD\VIRUFRPPDVWREHXVHGLQ$&7(QJOLVKTXHVWLRQV6WXGHQWVRIWHQ ILQGWKDWWKHFRUUHFWXVDJHRIFRPPDVRQWKH$&7GLIIHUV DWOHDVWVRPHZKDW IURPZKDWWKH\ߞYHEHHQ WDXJKWDERXWFRPPDVLQVFKRRO 5HPHPEHUWKDWZKHQZHWDNHWKH$&7ZHPXVWIRFXVRQWKHUXOHVDQGSDWWHUQVWKDWWKH$&7UHZDUGV HYHQLIWKRVHUXOHVDQGSDWWHUQVGRQߞWDJUHHZLWKWKHUXOHVDQGSDWWHUQVZHߞGH[SHFWLQDFODVVURRPVHWWLQJ ,QWKLV%ODFN%RRNZHߞOOMXVWIRFXVRQGRLQJZKDWWKH$&7(QJOLVKVHFWLRQDFWXDOO\UHZDUGVZKHQLW FRPHVWRFRPPDV RUDQ\RWKHUWRSLFIRUWKDWPDWWHU 1RZWKDWZHߞYHEULHIO\DGGUHVVHGWKRVHLPSRUWDQWFRPPDLVVXHVOHWߞVWDNHDORRNDWWKHTXHVWLRQW\SHV WKDWZHߞOOHQFRXQWHURQWKH$&7(QJOLVKVHFWLRQ $&7(QJOLVK4XHVWLRQ7\SHV ,JHQHUDOO\HQFRXUDJHWHVWWDNHUVWRWKLQNRIWKHTXHVWLRQVRQWKH$&7(QJOLVKVHFWLRQDVIDOOLQJLQWRWZR URXJKW\SHV7KHVHW\SHVDUHP\RZQSHUVRQDOFODVVLILFDWLRQVQRWRIILFLDOFODVVLILFDWLRQVIURPWKH$&7 VR\RXZRQߞWVHHWKHPOLVWHGRUGHVFULEHGWKLVZD\RQWKHDFWXDOWHVWRULQWKH5HG%RRN 7KHVHW\SHVDUHSUHWW\VHOIH[SODQDWRU\ wߡ5HDGLQJ&RPSUHKHQVLRQߢTXHVWLRQV w*UDPPDU6W\OH3XQFWXDWLRQTXHVWLRQV w4XHVWLRQVWKDWFRPELQHJUDPPDUVW\OHSXQFWXDWLRQHOHPHQWVZLWKUHDGLQJFRPSUHKHQVLRQHOHPHQWV 7UDLQLQJ\RXUVHOIWRUHFRJQL]HWKHVHEURDGTXHVWLRQW\SHVZLOOPDNHLWHDVLHUIRU\RXWRIRFXVRQWKH FRQFHSWVWKDWPLJKWEHWHVWHGLQDSDUWLFXODUTXHVWLRQ7KLVLQWXUQZLOOPDNHWKH$&7(QJOLVKVHFWLRQ HDVLHUWRDSSURDFK 'RQߞWJHWVWUHVVHGRXWDWWKHWKRXJKWRIOHDUQLQJWRUHFRJQL]HWKHVHGLIIHUHQWTXHVWLRQW\SHV,WߞOOEHFRPH VHFRQGQDWXUHSUHWW\TXLFNO\DQGLWߞVQRWUHDOO\VRPHWKLQJWKDWFDQOHDG\RXWRDZURQJDQVZHULI\RXGRLW ZURQJLWߞOOXVXDOO\MXVWVDYH\RXVRPHWLPHLI\RXGRLWULJKW$V,VDLGLWߞVPRUHDERXWKHOSLQJ\RXIRFXV \RXUPLQGRQWKHVSHFLILFWULFNVWKH$&7LVWU\LQJWRSOD\RQ\RXZLWKDQ\SDUWLFXODUTXHVWLRQ 1RZOHWߞVWDONDERXWHDFKTXHVWLRQW\SHLQPRUHGHWDLODQGDERXWVRPHRIWKHPDMRULVVXHVWKDWWKH$&7 ZLOOWHVWZLWKHDFKTXHVWLRQW\SH 5HDGLQJ&RPSUHKHQVLRQ4XHVWLRQV 7KHVHFRQGPDMRUW\SHRITXHVWLRQLVZKDW,FDOODߡ5HDGLQJ&RPSUHKHQVLRQߢTXHVWLRQ7KHVHTXHVWLRQV DUHUHODWLYHO\HDV\WRVSRWEHFDXVH$&7(QJOLVKTXHVWLRQVZLWKSURPSWVLQYROYHUHDGLQJFRPSUHKHQVLRQ VRPHKRZ DVRSSRVHGWRTXHVWLRQVWKDWVLPSO\RIIHUDVHWRIDQVZHUFKRLFHVZKLFKXVXDOO\IRFXVRQ JUDPPDUVW\OHRUSXQFWXDWLRQ 7KHFRUUHFWDQVZHUVWRWKHVHTXHVWLRQVJHQHUDOO\UHZDUGWKHVDPHNLQGRIOLWHUDODSSURDFKWRWKHWH[WWKDW ZHߞYHDOUHDG\VHHQLQWKH5HDGLQJDQG6FLHQFHVHFWLRQVRIWKH$&7WKH\GLUHFWO\UHVWDWHRUUHIOHFWWKH FRQFHSWVDQGUHODWLRQVKLSVIURPWKHUHOHYDQWSDUWRIWKHSDVVDJH $V\RXPLJKWLPDJLQHZHߞOODOVRILQGWKDWWKHZURQJDQVZHUFKRLFHVRQWKHVHNLQGVRITXHVWLRQVDUH IUHTXHQWO\VLPLODUWRWKHW\SHVRIZURQJDQVZHUVZHߞOOHQFRXQWHURQWKH$&75HDGLQJVHFWLRQVRPH ZURQJDQVZHUVZLOOGLUHFWO\FRQWUDGLFWWKHWH[WVRPHZLOOFRQIXVHWKHUHODWLRQVKLSVDPRQJFRQFHSWVIURP WKHWH[WDQGVRRQ 7KHUHDUHDIHZGLIIHUHQWVSHFLILFIRUPVWKDWWKHVHTXHVWLRQVFDQWDNH:HߞOOORRNDWWKHPQRZ ߡ0RVWUHOHYDQWLQIRUPDWLRQߢ <RXߞOOHQFRXQWHUTXHVWLRQVWKDWDVNZKLFKRIWKHDQVZHUFKRLFHVSURYLGHVWKHߡPRVWUHOHYDQWLQIRUPDWLRQߢ UHJDUGLQJVRPHWKLQJ7RILQGWKHDQVZHUWRWKLVW\SHRITXHVWLRQ\RXZDQWWRORRNIRUWKHFKRLFHWKDWRQO\ WDONVDERXWZKDWWKHTXHVWLRQDVNVDERXW )RUH[DPSOHLIWKHTXHVWLRQDVNVIRUWKHߡPRVWUHOHYDQWLQIRUPDWLRQߢUHJDUGLQJLFHFUHDPFRQHVWKHQ\RX ZDQWWRSLFNWKHDQVZHUWKDWRQO\WDONVDERXWLFHFUHDPFRQHVߚQRWDERXWSRSVLFOHVRUPRYLHVRUSDUWLHV RUDQ\WKLQJHOVH 7REXLOGRQWKDWH[DPSOH\RXPLJKWVHHDQVZHUFKRLFHVWKDWWDONDERXWLFHFUHDPFRQHVEXWWKDWWKURZLQ RWKHULQIRUPDWLRQDVZHOO7KRVHFKRLFHVZRXOGEHZURQJߚ\RXMXVWZDQWWRILQGWKHRQHWKDWIRFXVHVRQO\ RQWKHUHOHYDQWWRSLF )RUDUHDOOLIHH[DPSOHRIWKLVW\SHRITXHVWLRQOHWߞVORRNDWTXHVWLRQRQSDJHRI\RXUFRS\RI7KH 5HDO$&73UHS*XLGHUG(GLWLRQ7KHTXHVWLRQDVNVZKLFKYHUVLRQRIWKHVHQWHQFHSURYLGHVߡWKHPRVW UHOHYDQWLQIRUPDWLRQߢDERXWWKHߡQDUUDWRUߞVIDPLOLDULW\ߢZLWKDQH[FKDQJHVWXGHQWQDPHG/LJLD $OOIRXUYHUVLRQVRIWKHVHQWHQFH WKHJLYHQYHUVLRQLQWKHSDVVDJHDQGWKHWKUHHYDULDWLRQV PHQWLRQWKDW WKHQDUUDWRUVDZ/LJLDDWVFKRROHYHQWVDQGRUUHDGDVWRU\DERXWKHULQWKHVFKRROSDSHU7KUHHRIWKHP DOVRDGGH[WUDLQIRUPDWLRQWKDWLVQߞWUHODWHGWRDQ\WKLQJHOVHLQWKHSDVVDJH $ PHQWLRQVWKDWVFKRROHYHQWVDUHߡVRPHWLPHVVXSSRUWHGILQDQFLDOO\E\ORFDOEXVLQHVVHVߢ % PHQWLRQVWKDWWKHVFKRROSDSHUߡLVZULWWHQE\VWXGHQWVLQWHUHVWHGLQMRXUQDOLVPߢ ' VD\VVRPHWKLQJDERXWWKHQDUUDWRUFKHFNLQJIRUORFDOPRYLHOLVWLQJV 7KHVHWKUHHDQVZHUVPXVWDOOEHZURQJEHFDXVHWKH\LQWURGXFHQHZLQIRUPDWLRQWKDWߞVXQUHODWHGWRWKH ߡQDUUDWRUߞVIDPLOLDULW\ߢZLWK/LJLD 2QO\WKHFRUUHFWDQVZHU & IRFXVHVH[FOXVLYHO\RQLQIRUPDWLRQWKDWWHOOVXVDERXWߡWKHQDUUDWRUߞV IDPLOLDULW\ZLWK/LJLDߢZKLFKLVZKDWWKHSURPSWDVNHGXVIRU /HWPHWDNHDPLQXWHWRUHPLQG\RXDOVRWKDWHYHU\RQHRIWKRVHDQVZHUFKRLFHVZDVJUDPPDWLFDOO\DQG VW\OLVWLFDOO\DFFHSWDEOHߚWKHFRQFHUQLVSXUHO\IRUWKHFRQWHQWRIWKHVHQWHQFHVDQGZKHWKHUWKH\VWLFNWR WKHWRSLFWKDWWKHTXHVWLRQLVDVNLQJDERXW ߡ%HVWFRQFOXVLRQߢ 6RPHTXHVWLRQVZLOORIIHUGLIIHUHQWVHQWHQFHVDQGDVNZKLFKRQHLVWKHߡEHVWFRQFOXVLRQߢIRUWKHSDVVDJH 7KHEHVWFRQFOXVLRQZLOOEHWKHRQHWKDWIRFXVHVRQWKHPDLQWRSLFRIWKHSDVVDJHRIWHQRQVRPHWKLQJ WKDWߞVPHQWLRQHGLQWKHWLWOHRIWKHSDVVDJHLWVHOI ,IPRUHWKDQRQHDQVZHUFKRLFHPHQWLRQVLGHDVIURPWKHSDVVDJHWKHQZHZDQWWRSLFNWKHDQVZHUFKRLFH ZLWKWKHLGHDWKDWFRPHVXSPRVWIUHTXHQWO\LQWKHSDVVDJH $TXHVWLRQRIWKLVW\SHPLJKWHYHQDVNVRPHWKLQJOLNHߡ:KLFKVHQWHQFHZRXOGEHVWFRQFOXGHWKLVHVVD\ ZKLOHW\LQJWKHHQGRIWKHHVVD\EDFNWRWKHEHJLQQLQJ"ߢ,QWKLVFDVH\RXMXVWZDQWWRILQGWKHFKRLFHWKDW WDONVDERXWWKHPDLQWRSLFRIWKHSDVVDJHDQGDOVRPHQWLRQVVRPHWKLQJUHODWHGWRWKHEHJLQQLQJRIWKH HVVD\ )RUDUHDOOLIHH[DPSOHRIDߡEHVWFRQFOXVLRQߢTXHVWLRQORRNDWTXHVWLRQRQSDJHRIWKH5HG%RRN 7KLVTXHVWLRQDVNVXVZKLFKVHQWHQFHLIWUXHZRXOGEHVWFRQFOXGHWKHHVVD\ :HNQRZWKHFRUUHFWDQVZHUZLOOEHWKHRQHWKDWߞVUHODWHGWRWKHPDLQWRSLFRIWKHSDVVDJHDFFRUGLQJWR WKH$&7ߞVUHDGLQJFRPSUHKHQVLRQSULQFLSOHVWKHDQVZHUFKRLFHZLWKWKHPDLQWRSLFIURPWKHSDVVDJH ZLOOEHWKHRQHWKDWPHQWLRQVWKHJUHDWHVWQXPEHURIFRQFHSWVIURPWKHSDVVDJH,QWKLVFDVHZHFDQ HOLPLQDWH $ % DQG ' EHFDXVHHDFKFKRLFHRQO\GHDOVZLWKRQHFRQFHSW DWPRVW IURPWKHODVW SDUDJUDSK&KRLFH & LVFRUUHFWEHFDXVHLWPHQWLRQVWZRFRQFHSWVIURPWKHSDVVDJHߡ6SDQLVKߢDQG ߡGDQFHVWHSVߢ )RUWKHVHUHDVRQVZHFDQEHVXUH & LVWKHFRUUHFWDQVZHU ߡ0RVWHIIHFWLYHLQWURGXFWLRQߢ $ORQJVLPLODUOLQHVWKH$&7PLJKWDOVRDVNZKLFKVHQWHQFHLVWKHߡPRVWHIIHFWLYHߢLQWURGXFWLRQXVXDOO\ WRDSDUDJUDSK7KHDQVZHUZLOOEHWKHVHQWHQFHWKDWGLVFXVVHVWKHVDPHWRSLFVWKDWDUHGLVFXVVHGLQWKH RWKHUVHQWHQFHVLQWKDWSDUDJUDSK,IPRUHWKDQRQHDQVZHUFKRLFHPHQWLRQVDWRSLFWKDWߞVDOUHDG\LQWKH SDUDJUDSKWKHQWKHFRUUHFWDQVZHUZLOOEHWKHRQHWKDWPHQWLRQVWKHODUJHVWQXPEHURIFRQFHSWVIURPWKH SDUDJUDSK <RXPLJKWVHHZURQJDQVZHUFKRLFHVUHODWHGWRWKHSUHYLRXVSDUDJUDSKRUZURQJDQVZHUFKRLFHVWKDW PDNHVRPHEURDGVWDWHPHQWUHODWHGWRWKHSDVVDJHDVDZKROHEXWWKDWGRQߞWUHVWDWHDQ\LGHDVIURPWKH SDUDJUDSKEHLQJLQWURGXFHG7KHFRUUHFWDQVZHUFKRLFHZLOOLQFOXGHLGHDVIURPWKHSDUDJUDSKEHLQJ LQWURGXFHG /HWߞVORRNDWDQH[DPSOH4XHVWLRQRQSDJHDVNVXVZKLFKDQVZHUFKRLFHߡZRXOGPRVWHIIHFWLYHO\ LQWURGXFHߢWKHSDUDJUDSKLWZRXOGDSSHDULQ7KHSDUDJUDSKLVDERXWWKHEHOWZD\ZKLFKLVDPDVVLYH H[SUHVVZD\LQWKH:DVKLQJWRQ'&DUHD7KHFRUUHFWDQVZHUFKRLFHPHQWLRQVWKHLGHDRIWKHEHOWZD\ DQGDOVRPHQWLRQVWKDWWKHVSHDNHUSODQQHGWRDYRLGWKHEHOWZD\ERWKRIWKHVHFRQFHSWVDUHUHVWDWHGLQWKH UHVWRIWKHSDUDJUDSKZKHQWKHDXWKRUWDONVDERXWDVNLQJSHRSOHIRUKHOSZLWKRWKHUURXWHV 7ZRRUWKHZURQJDQVZHUVWRWKLVTXHVWLRQGRQߞWPHQWLRQDQ\WKLQJGLUHFWO\IURPWKHSDUDJUDSK2QHRWKHU ZURQJDQVZHUFKRLFH - GRHVPHQWLRQWKHEHOWZD\EXWLWDOVRLQFOXGHVWKHLGHDRIߡRIILFLDO:DVKLQJWRQߢ DQGߡDQLVODQGߢDQGQHLWKHURIWKRVHFRQFHSWVDSSHDUVLQWKHUHVWRIWKHSDUDJUDSK6RWKHFRUUHFWDQVZHU LVWKHRQHWKDWPHQWLRQVWKHPRVWFRQFHSWVIURPWKHUHVWRIWKHSDUDJUDSKMXVWDVZHZRXOGH[SHFW ߡ0RVWHIIHFWLYHWUDQVLWLRQߢ :KHQ\RXVHHDTXHVWLRQWKDWDVNVZKLFKDQVZHUFKRLFHZRXOGPDNHWKHߡPRVWHIIHFWLYHWUDQVLWLRQߢIURP RQHSDUDJUDSKWRDQRWKHU\RXMXVWQHHGWRILQGWKHDQVZHUFKRLFHWKDWPHQWLRQVRUUHIHUVWRVRPHWKLQJ IURPHDFKRIWKHWZRSDUDJUDSKV ,IWKHILUVWSDUDJUDSKLVDERXWZRRGHQUROOHUFRDVWHUVDQGWKHVHFRQGSDUDJUDSKLVDERXWFDURXVHOVWKHQ \RXVKRXOGSLFNWKHDQVZHUFKRLFHWKDWUHIHUVWRERWKZRRGHQUROOHUFRDVWHUVDQGFDURXVHOV ,IRQHSDUDJUDSKLVDERXWNLFNEDOODQGWKHQH[WSDUDJUDSKLVDERXWOLIWLQJZHLJKWVWKHQ\RXZDQWWKH DQVZHUFKRLFHWKDWUHIHUVWRERWKNLFNEDOODQGOLIWLQJZHLJKWV<RXJHWWKHLGHD :HFDQVHHDUHDOOLIHH[DPSOHRIDߡPRVWHIIHFWLYHWUDQVLWLRQߢTXHVWLRQLQTXHVWLRQRQSDJHRIWKH 5HG%RRN7KLVTXHVWLRQDVNVZKLFKFKRLFHߡPRVWHIIHFWLYHO\JXLGHVWKHUHDGHUIURPWKHSUHFHGLQJ SDUDJUDSKLQWRWKLVQHZSDUDJUDSKߢ:HNQRZWKHFRUUHFWVHQWHQFHZLOOEHWKHRQHWKDWPHQWLRQV VRPHWKLQJIURPWKHSUHFHGLQJSDUDJUDSKDQGVRPHWKLQJIURPWKLVSDUDJUDSK 7KHRQO\DQVZHUFKRLFHWKDWGRHVWKLVLV + 7KDWFKRLFHPHQWLRQVߡIULHQGO\VHUYLFHߢZKLFKDSSHDUVLQ WKHEHJLQQLQJRIWKHILUVWSDUDJUDSKDQGߡPDFKLQHVߢZKLFKDUHPHQWLRQHGLQWKHVHFRQGSDUDJUDSK7KDW PHDQV + LVFRUUHFW &KRLFH ) RQO\PHQWLRQVFRQFHSWVIURPWKHVHFRQGSDUDJUDSKVRLWߞVZURQJ&KRLFH * PHQWLRQVD FRQFHSWIURPWKHILUVWSDUDJUDSKEXWGRHVQߞWPHQWLRQDQ\WKLQJIURPWKHVHFRQGSDUDJUDSKVRLWߞVDOVR ZURQJ&KRLFH - PLJKWWULFNDORWRISHRSOHZKRGRQߞWUHDGFDUHIXOO\EHFDXVHLWPHQWLRQVߡVHUYLFHߢ IURPWKHILUVWSDUDJUDSKDQGߡZDVKLQJPDFKLQHV>HPSKDVLVPLQH@ߢߚEXWWKHPDFKLQHVLQWKHVHFRQG SDUDJUDSKDUHQߞWZDVKLQJPDFKLQHVVR - GRHVQߞWDFWXDOO\UHVWDWHDQ\FRQFHSWIURPWKHVHFRQG SDUDJUDSKZKLFKPHDQVLWߞVZURQJ 6HQWHQFHRUSDUDJUDSKSODFHPHQW <RXߞOOVRPHWLPHVHQFRXQWHUTXHVWLRQVWKDWDVNZKHUHDVHQWHQFHRUSDUDJUDSKVKRXOGEHVWEHSODFHG,QD TXHVWLRQOLNHWKLVWKH$&7ZDQWVVHQWHQFHVDQGSDUDJUDSKVWRDSSHDULQDVHTXHQFHWKDWPDNHVWKHPUHIHU WRHDFKRWKHULQDORJLFDORUGHU )RUH[DPSOHLIRQHVHQWHQFHVD\Vߡ0\EURWKHUKDGDGRJQDPHG6QRZIODNHߢWKHQWKDWVHQWHQFHQHHGVWR FRPHEHIRUHDVHQWHQFHWKDWVD\Vߡ7KDWGRJZRXOGIROORZKLPHYHU\ZKHUHߢ,WZRXOGQߞWPDNHVHQVHWR XVHWKHZRUGߡWKDWߢWRUHIHUWRWKHGRJXQOHVVWKHUHߞVDOUHDG\DSUHYLRXVVHQWHQFHWKDWLQWURGXFHVWKHGRJ $OVRLIRQHVHQWHQFHUHIHUVWRVRPHWKLQJLQDQRWKHUVHQWHQFHWKHQWKH$&7ZLOOZDQWWKRVHVHQWHQFHVWR DSSHDUDVFORVHWRJHWKHUDVSRVVLEOH /HWߞVORRNDWDUHDOOLIHH[DPSOHTXHVWLRQRQSDJHRI7KH5HDO$&73UHS*XLGHUG(GLWLRQ7KH TXHVWLRQDVNVDERXWWKHSODFHPHQWRI6HQWHQFH ,I\RXUHDGWKHSDUDJUDSK\RXߞOOVHHWKDWVHQWHQFHPHQWLRQVߡWKHWKUHDWVߢ8SWRWKDWSRLQWLQWKHSDVVDJH QRWKUHDWKDVEHHQPHQWLRQHG7KHVHQWHQFHWKDWDFWXDOO\LQWURGXFHVWKHWKUHDWVLVVHQWHQFHZKLFK LQFOXGHVWKHSKUDVHߡWKUHDWHQLQJHYHU\VRUWRIGUDVWLFDFWLRQߢ6RDFFRUGLQJWRWKH$&7ߞVUXOHVRI VHQWHQFHRUGHULQJVHQWHQFHPXVWEHPRYHGVRWKDWLWFRPHVEHIRUHVHQWHQFHVRWKDWVHQWHQFHߞVXVH RIWKHZRUGߡWKHߢLQWKHSKUDVHߡWKHWKUHDWVߢZLOOPDNHVHQVH &KRLFHV % & DQG ' ZRXOGDOOUHVXOWLQVHQWHQFHDSSHDULQJEHIRUHVHQWHQFHVRWKH\DOOVDWLVI\ WKH$&7ߞVUXOHDERXWDVHQWHQFHUHIHUULQJWRVRPHWKLQJDSSHDULQJDIWHUWKHVHQWHQFHWKDWILUVWLQWURGXFHV WKDWWKLQJ1RZZHORRNDWWKHRWKHUKDOIRIWKDWUXOHZKLFKVD\VWKDWZKHQDVHQWHQFHUHIHUVWRVRPHWKLQJ LQDQRWKHUVHQWHQFHWKRVHWZRVHQWHQFHVVKRXOGDSSHDUDVFORVHWRJHWKHUDVWKH\FDQ :LWKWKDWLQPLQGZHNQRZWKDWFKRLFH ' LVFRUUHFWEHFDXVHLWSXWVWKHVHQWHQFHVWRJHWKHUDQGLWSXWV WKHLQWURGXFWLRQRIWKHߡWKUHDWHQLQJߢVLJQVEHIRUHWKHUHIHUHQFHWRߡWKHWKUHDWVߢ 3UHFLVLRQ9RFDEXODU\ $IHZWLPHVSHUWHVW\RXPLJKWVHHDTXHVWLRQZLWKDQXQGHUOLQHGZRUGDQGWKUHHDOWHUQDWLYHVIRUWKDW ZRUG7KHUHZRQߞWEHDQ\SXQFWXDWLRQLQYROYHGRUGLIIHUHQWIRUPVRIWKHVDPHZRUGߚMXVWIRXUGLIIHUHQW ZRUGVZLWKVRPHZKDWVLPLODUPHDQLQJV (YHQWKRXJKWKHVHTXHVWLRQVGRQߞWKDYHDQ\SURPSWVWKH\ߞUHEDVLFDOO\UHDGLQJFRPSUHKHQVLRQTXHVWLRQV 7KHZRUGVLQWKHDQVZHUFKRLFHVZLOORIWHQEHZRUGV\RXFRXOGSUREDEO\XVHLQWHUFKDQJHDEO\LQD FODVVURRPGLVFXVVLRQEXWWKHLUVSHFLILFPHDQLQJVZRQߞWEHTXLWHWKHVDPHDQGRQHZLOOFOHDUO\EHD EHWWHUFKRLFHWKDQWKHRWKHUVZKHQ\RXWKLQNFDUHIXOO\DERXWWKHPHDQLQJRIHDFKZRUGDQGWKHVHQWHQFH WKH\ߞOOEHLQVHUWHGLQWR 7\SLFDOO\WKHVHZRUGVDUHQߞWXQXVXDOߚWKH\WHQGWREHZRUGVWKDWWHVWWDNHUVDUHIDPLOLDUZLWKEXWZKRVH SUHFLVHPHDQLQJVPLJKWQRWEHVRPHWKLQJWKHDYHUDJHWHVWWDNHUQRUPDOO\SD\VDQ\DWWHQWLRQWR 7KHNH\WRDQVZHULQJWKHVHTXHVWLRQVFRUUHFWO\LVWRWKLQNLQDSUHFLVHZD\DERXWZKDWHDFKUHOHYDQWZRUG DFWXDOO\PHDQVDQGZKDWLWFDQEHXVHGWRGHVFULEH)RUDUHDOOLIHH[DPSOHORRNDWTXHVWLRQRQSDJH RI\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG(GLWLRQ7KDWTXHVWLRQDVNVXVZKHWKHUWKHZRUG ߡLQWHQVHߢߡFXQQLQJߢߡDFXWHߢRUߡYLYLGߢLVWKHEHVWZRUGWRXVHLQDVHQWHQFHDERXWZROYHVߞKHDULQJ DELOLWLHV $OORIWKHVHZRUGVPLJKWVHHPWREHYDJXHO\DSSURSULDWHEXWZHNQRZE\QRZWKDWWKH$&7LVQߞW VDWLVILHGLIZHMXVWSLFNDQDQVZHUFKRLFHWKDWߞVYDJXHO\DSSURSULDWH,QVWHDGZHQHHGWRWKLQNDERXWZKDW HDFKZRUGDFWXDOO\PHDQVDQGKRZLWILWVLQWRWKHVHQWHQFH 7KHILUVWFKRLFHVD\VZROYHVKDYHߡLQWHQVHߢKHDULQJ'RHVWKDWUHDOO\PDNHVHQVH":HPLJKWVD\WKDWD VFDU\H[SHULHQFHLVߡLQWHQVHߢRUHYHQWKDWDIODYRULVߡLQWHQVHߢEXWGRHVLWPDNHVHQVHWRFDOOKHDULQJ ߡLQWHQVH"ߢ1RWUHDOO\7KHZRUGߡLQWHQVHߢLVXVHGWRGHVFULEHDQH[SHULHQFHWKDWZHSHUFHLYHZLWKRXU VHQVHVEXWLWFDQߞWUHDOO\EHXVHGWRGHVFULEHWKRVHVHQVHVWKHPVHOYHV :KDWDERXWWKHZRUGߡFXQQLQJ"ߢ0D\EHWKLVLVDZRUGZHDVVRFLDWHZLWKZROYHVEXWLWKDVWRGRZLWK EHLQJFOHYHURUWULFN\,WGRHVQߞWPDNHPXFKVHQVHWRGHVFULEHKHDULQJDVߡFXQQLQJߢVLQFHWKHKHDULQJ LWVHOIFDQߞWWULFNDQ\RQH +RZDERXWWKHZRUGߡDFXWH"ߢ7KLVPHDQVVRPHWKLQJOLNHߡILQHO\WXQHGߢRUߡVKDUSߢ,WFRXOGPDNHVVHQVH WRFDOOKHDULQJߡDFXWHߢVRWKLVZLOOEHWKHFRUUHFWDQVZHU .HHSUHDGLQJWRVHHZKDWZHPLJKWQHHGWRGR ZLWKWKLVTXHVWLRQLIZHGRQߞWNQRZWKHZRUGߡDFXWHߢ )LQDOO\OHWߞVFRQVLGHUWKHZRUGߡYLYLGߢ<RXPLJKWGHVFULEHDSLFWXUHDVߡYLYLGߢLILWVHHPVYHU\UHDOWR \RXEXWLWGRHVQߞWPDNHVHQVHWRXVHWKLVZRUGWRGHVFULEHߡKHDULQJߢߡ+HDULQJߢLVDVHQVHEXWߡYLYLGߢ WKLQJVLQYROYHLPDJHV6RWKLVFKRLFHLVQRJRRGHLWKHU ,IZHGRQߞWNQRZWKHZRUGߡDFXWHߢLWPD\VWLOOEHSRVVLEOHWRDQVZHUWKLVTXHVWLRQFRUUHFWO\LIZHFDQ UHDOL]HWKDWWKHRWKHUWKUHHDQVZHUFKRLFHVFDQߞWEHXVHGWRGHVFULEHKHDULQJIRUWKHUHDVRQVZHMXVWZHQW RYHU:HFDQRIWHQZRUNDURXQGZRUGVZHGRQߞWNQRZRQWKH$&7DQGWKLVTXHVWLRQLVDQH[DPSOHRI WKDW,ZRXOGQߞWUHFRPPHQGWKDW\RXPHPRUL]HWKHZRUGߡDFXWHߢDVSDUWRI\RXU$&7SUHSDUDWLRQWKRXJK ߚLWߞVYHU\XQOLNHO\WKDWWKHZRUGZLOOFRPHXSRQWHVWGD\DWOHDVWQRWLQVXFKDZD\WKDW\RXFRXOGQߞW DQVZHUDTXHVWLRQFRUUHFWO\XQOHVV\RXNQHZZKDWLWPHDQW $JDLQLI\RXMXVWVNLPPHGWKHVHZRUGVRULI\RXKHDUGDQ\RIWKHPXVHGLQWKLVFRQWH[WLQDFODVVURRP GLVFXVVLRQ\RXߞGSUREDEO\WKLQNDQ\RIWKHPFRXOGEHDGHTXDWH%XWLI\RXWDNHWKHWLPHWRWKLQNFDUHIXOO\ DERXWHDFKRQH\RXߞOOILQGWKDWRQO\RQHFDQDFWXDOO\GHVFULEHߡKHDULQJߢLQDZD\WKDWPDNHVVHQVH :HߞOORIWHQVHHVRPHWKLQJLQWKHFRQWH[WRIWKHVHQWHQFHWKDWJLYHVXVDSUHWW\VSHFLILFLGHDRIZKDWWKH FRUUHFWDQVZHUVKRXOGPHDQ,QWKH5HG%RRNH[DPSOHZHMXVWGLVFXVVHGWKHVHQWHQFHLQFOXGHGWKHSKUDVH ߡZKLFKPDNHVLWSRVVLEOHIRUWKHPWRSLFNXSWKHVRXQGRIKRZOLQJIURPDVIDUDZD\DVWHQPLOHVߢ7KLV SKUDVHWHOOVXVWKDWWKHFRUUHFWDQVZHUVKRXOGKDYHVRPHWKLQJWRGRZLWKEHLQJDEOHWRKHDUWKLQJVIURPD ORQJZD\RIIZKLFKJRHVDORQJZLWKWKHZRUGߡDFXWHߢ 6RZKHQ\RXVHHDSUHFLVLRQYRFDEXODU\TXHVWLRQEHVXUHWRFKHFNWKHFRQWH[WLQFOXGLQJWKHVHQWHQFHV EHIRUHDQGDIWHUWKHRQHLQTXHVWLRQWRVHHZKLFKNH\SKUDVHV\RXFDQILQG 2QHPRUHWKLQJߚWKHZD\WRSUHSDUHIRUTXHVWLRQVOLNHWKHVHLVQߞWWRPHPRUL]HWKRXVDQGVRIYRFDEXODU\ ZRUGV0RVWRIWKHZRUGVLQWKHDQVZHUFKRLFHVDUHRQHVWKDWWHVWWDNHUVDUHDOUHDG\IDPLOLDUZLWKDQG WKHUHDOLVVXHLVEHLQJYHU\SDUWLFXODUDERXWWKHPHDQLQJVRIWKRVHZRUGV $QGLI\RXUXQLQWRDTXHVWLRQZLWKZRUGV\RXGRQߞWNQRZ\RXPD\ZHOOEHDEOHWRZRUNDURXQGWKHP,Q WKH5HG%RRNH[DPSOHZHMXVWXVHGIRULQVWDQFHVRPHWHVWWDNHUVPLJKWQRWNQRZWKHZRUGߡDFXWHߢ%XW LIWKH\KDYHGHFHQWLGHDVRIWKHPHDQLQJVRIWKHRWKHUWKUHHZRUGVDQGWKH\LQVLVWRQILQGLQJDJRRGPDWFK WKH\FDQUHDOL]HWKDWWKHWKUHHZRUGVWKH\NQRZDUHDOOZURQJZKLFKPHDQVWKDWߡDFXWHߢPXVWEHFRUUHFW $GGLQJRUGHOHWLQJDSKUDVHRUVHQWHQFH 6RPHWLPHVWKHTXHVWLRQZLOOWHOO\RXWKDWWKHDXWKRULVFRQVLGHULQJDGGLQJRUGHOHWLQJDSDUWLFXODU VHQWHQFH7KHQ\RXߞOOEHDVNHGLQRQHZD\RUDQRWKHUZKDWWKHLPSDFWRIWKDWFKDQJHZRXOGEHRQWKH SDVVDJH 7KHDQVZHUVWRWKHVHW\SHVRITXHVWLRQVGHSHQGRQDOOWKHVDPHSULQFLSOHVRIUHDGLQJFRPSUHKHQVLRQWKDW ZHߞYHEHHQGLVFXVVLQJIRURWKHU$&7TXHVWLRQV<RXZRQߞWKDYHWRLQWHUSUHWDQ\WKLQJߚ\RXߞOOMXVWQHHGWR SLFNWKHDQVZHUWKDWSODLQO\GHVFULEHVZKDWWKHVHQWHQFHRUSKUDVHLVGRLQJ /HWߞVORRNDWDQH[DPSOHIURPWKH5HG%RRN4XHVWLRQRQSDJHRIWKDWERRNVD\VWKHDXWKRULV FRQVLGHULQJGHOHWLQJWKHSKUDVHߡPRVWO\ROGHUSHRSOHIURPDURXQGWKHQHLJKERUKRRGߢIURPDVHQWHQFHLQ WKHSDVVDJHDQGDVNVZKDWWKHHVVD\ZRXOGORVHZLWKRXWWKDWSKUDVH 7KHILUVWDQVZHUFKRLFHVD\VLWZRXOGORVHߡVSHFLILFGHVFULSWLYHPDWHULDOߢ6LQFHWKHSKUDVHߡPRVWO\ROGHU SHRSOHIURPDURXQGWKHQHLJKERUKRRGߢVSHFLILFDOO\GHVFULEHVWKHߡUHJXODUFXVWRPHUVߢLQWKHUHVWRIWKH VHQWHQFHWKLVLVWKHFRUUHFWDQVZHU 7KHQH[WDQVZHUFKRLFHVD\VWKHSKUDVHߡPRVWO\ROGHUSHRSOHIURPDURXQGWKHQHLJKERUKRRGߢLVDߡGHWDLO SURYLGLQJDORJLFDOWUDQVLWLRQߢEXWWKLVSKUDVHLVQߞWDWUDQVLWLRQEHFDXVHLWGRHVQߞWGLVFXVVDQ\FRQFHSWV WKDWDSSHDULQWKHQH[WVHQWHQFHRIWKHSDVVDJH6RWKDWFKRLFHLVZURQJ 7KHQH[WFKRLFHVD\VWKHSKUDVHLVߡIRUHVKDGRZLQJWKHFRQFOXVLRQߢRIWKHSDVVDJHEXWWKHSDVVDJHߞV HQGLQJKDVQRSDUWLFXODUFRQQHFWLRQZLWKWKHLGHDRIߡPRVWO\ROGHUSHRSOHIURPDURXQGWKHQHLJKERUKRRGߢ 6RWKLVFKRLFHLVDOVRZURQJ )LQDOO\WKHODVWFKRLFHFDOOVWKHSKUDVHߡDQXQGHUVWDWHPHQWRILPSRUWDQWLQIRUPDWLRQߢEXWWKHUHߞVQRWKLQJ LQWKHUHVWRIWKHSDVVDJHWKDWJLYHVXVDQ\UHDVRQWRFDOOLWDQXQGHUVWDWHPHQW RUDQRYHUVWDWHPHQWIRUWKDW PDWWHU RUWRWKLQNRILWDVLPSRUWDQWLQIRUPDWLRQ7KLVFKRLFHLVZURQJWRR $V\RXFDQVHHKHUH DQGDV\RXߞOOVHHLQWKHTXHVWLRQZDONWKURXJKVLQDIHZSDJHV RQO\WKHFRUUHFW DQVZHUFKRLFHZLOODFFXUDWHO\GHVFULEHWKHUHODWLRQVKLSVRIWKHSKUDVHVLQWKHSURPSWDQGWKHSDVVDJHLQD OLWHUDOZD\ ߡ:RXOGWKLVHVVD\IXOILOOWKHZULWHUߞVJRDO"ߢ 6RPHWLPHVDWWKHHQGRIDSDVVDJH\RXߞOOVHHDTXHVWLRQWKDWVWDWHVDSRVVLEOHJRDORIWKHZULWHULQ ZULWLQJWKHHVVD\DQGWKHQDVNV\RXLIWKDWJRDOZDVIXOILOOHGE\WKHHVVD\7KHDQVZHUFKRLFHVIRUWKLV W\SHRITXHVWLRQZLOOW\SLFDOO\GHPRQVWUDWHWKHߡ\HV\HVQRQRߢSDWWHUQZHVDZLQRXUGLVFXVVLRQRIWKH $&76FLHQFHVHFWLRQLQWKLVFDVHWZRDQVZHUFKRLFHVZLOOVD\WKHZULWHUߞVJRDOZDVIXOILOOHGDQGWZR ZLOOVD\LWZDVXQIXOILOOHGDQGHDFKFKRLFHZLOORIIHUDGLIIHUHQWUHDVRQIRULWVFRQFOXVLRQ /LNHWKHRWKHUUHDGLQJFRPSUHKHQVLRQTXHVWLRQW\SHVRQWKH$&7(QJOLVKVHFWLRQWKHFRUUHFWDQVZHUZLOO EHWKHRQHWKDWGLUHFWO\DQGOLWHUDOO\GHVFULEHVWKHSDVVDJHDQGLVUHOHYDQWWRWKHJRDOPHQWLRQHGLQWKH SURPSW <RXFDQRIWHQHOLPLQDWHDOORIWKHZURQJDQVZHUVVLPSO\E\JHWWLQJULGRIWKHRQHVWKDWPDNHVWDWHPHQWV WKDWDUHQߞWVXSSRUWHGE\WKHWH[W,I\RXGRHOLPLQDWHXQVXSSRUWHGDQVZHUFKRLFHVDQGILQGWKDW\RXߞYHVWLOO JRWPRUHWKDQRQHDQVZHUFKRLFHOHIWMXVWHOLPLQDWHDQ\FKRLFHWKDWLVQߞWUHOHYDQWWRWKHTXHVWLRQDQG \RXߞOOEHOHIWZLWKWKHFRUUHFWDQVZHU )RUDUHDOOLIHH[DPSOHRIWKLVTXHVWLRQW\SHORRNDWTXHVWLRQRQSDJHRIWKH5HG%RRN7KLV TXHVWLRQDVNVXVWRVXSSRVHWKDWWKHZULWHUZDQWHGߡWRZULWHDEULHIHVVD\IRFXVLQJRQWKHKLVWRU\DQG GHYHORSPHQWRI7HMDQRPXVLFߢDQGLWDVNVXVZKHWKHUWKLVHVVD\ZRXOGIXOILOOWKDWJRDO &KRLFH ) LVFRUUHFWEHFDXVHLWDFFXUDWHO\VD\VWKHSDVVDJHߡGHVFULEHVWKHRULJLQVRI7HMDQRPXVLFDQG RQHRILWVHDUO\LPSRUWDQWILJXUHVߢ7KLVLVFRQVLVWHQWZLWKWKHSDVVDJHWKHILUVWWZRSDUDJUDSKVRIWKH SDVVDJHGHVFULEHKRZ7HMDQRPXVLFZDVFUHDWHGDQGWKHWKLUGSDUDJUDSKWDONVDERXWߡWKHILUVW7HMDQR PXVLFLDQWRJDLQVWDUVWDWXVߢ6LQFHWKHSDVVDJHGHILQLWHO\WDONVDERXWߡWKHKLVWRU\DQGGHYHORSPHQWRI 7HMDQRPXVLFߢDVWKHSURPSWGHVFULEHVFKRLFH ) LVFRUUHFW :HNQRZ * PXVWEHZURQJEHFDXVHLWPDNHVDIDOVHVWDWHPHQWDERXWWKHSDVVDJHߚWKHHVVD\GRHVQߞW PHQWLRQFRQWULEXWLRQVWKDW7HMDQRPXVLFKDVPDGHWRRWKHUIRONPXVLFWUDGLWLRQV 7KHSDVVDJHGRHVVD\ WKDWRWKHUIRONWUDGLWLRQVFRQWULEXWHGWR7HMDQRPXVLFEXWLWGRHVQߞWVD\7HMDQRPXVLFFRQWULEXWHGWRWKHP 5HPHPEHUWKDWWKH$&7OLNHVWRLQFOXGHZURQJDQVZHUFKRLFHVWKDWUHYHUVHUHODWLRQVKLSVIURPWKHWH[W OLNHWKLVRQHGRHV &KRLFH + LVZURQJEHFDXVHZKHWKHUWKHHVVD\UHIHUVWRRWKHUPXVLFDOIRUPVLVLUUHOHYDQWWRWKHVWDWHG JRDOLQWKHTXHVWLRQ&KRLFH - LVZURQJIRUWKHVDPHUHDVRQWKHLVVXHRIIRFXVLQJRQO\RQRQH7HMDQR PXVLFLDQLVQߞWQHFHVVDULO\UHOHYDQWWRWKHJRDORIVXFFHVVIXOO\ZULWLQJߡDEULHIHVVD\IRFXVLQJRQWKH KLVWRU\DQGGHYHORSPHQWRI7HMDQRPXVLFߢ *UDPPDU6W\OH3XQFWXDWLRQ4XHVWLRQV 7KHVHTXHVWLRQVWHVW\RXUDELOLW\WRLGHQWLI\WKHIRUPRIDSKUDVHRUVHQWHQFHWKDWVRXQGVWKHPRVWSOHDVLQJ DFFRUGLQJWRWKH$&7ߞVUXOHV 7KHVHTXHVWLRQVFDQRIWHQWHVWUXOHEDVHGFRQFHSWVOLNHSURSHUYHUEFRQMXJDWLRQVWKHSURSHUXVHRI SXQFWXDWLRQWKHIRUPDWLRQRISRVVHVVLYHVDQGVRRQ7KH\DOVRVRPHWLPHVRIIHUXVPRUHWKDQRQHDQVZHU FKRLFHWKDWߞVJUDPPDWLFDOO\DFFHSWDEOHDQGDVNXVWRLQGLFDWHZKLFKRQHVRXQGVWKHPRVWDSSURSULDWH DFFRUGLQJWRWKH$&7 ,NQRZWKDWPD\VRXQGOLNHDSUHWW\VXEMHFWLYHH[HUFLVHDQGOLNHH[DFWO\WKHNLQG RIWKLQJWKH$&7ZRXOGQHYHUDVN%XWZHߞOOILQGWKDWWKHFRUUHFWDQVZHUVWRWKHVHTXHVWLRQVDUHMXVWDV SUHGLFWDEOHDVWKHFRUUHFWDQVZHUWRDQ\RWKHU$&7TXHVWLRQEHFDXVHWKH$&7FRQVLVWHQWO\UHZDUGVWKH VDPHDWWULEXWHVLQWKHFRUUHFWDQVZHUVWR(QJOLVKTXHVWLRQV <RXߞOOW\SLFDOO\EHDEOHWRLGHQWLI\WKHVHTXHVWLRQVEHFDXVHRIWKHIROORZLQJDWWULEXWHV w7KHTXHVWLRQZRQߞWKDYHDVHSDUDWHSURPSWߚLWߞVMXVWDOLVWRIDQVZHUFKRLFHV w7KHILUVWDQVZHUFKRLFHZLOOVD\ߡ12&+$1*(ߢ 7KHVHJUDPPDUVW\OHSXQFWXDWLRQTXHVWLRQVFDQFRYHUDORWRIGLIIHUHQWDUHDVRIJUDPPDUVW\OHDQG SXQFWXDWLRQEXWGRQߞWZRUU\ߚ\RXPD\DOUHDG\NQRZVRPHRUPRVWRIWKHVXEMHFWPDWWHUWKDWWKH\ߞOOWHVW :HߞOOMXVWQHHGWRKLJKOLJKWWKHLPSRUWDQWWKLQJVWKDWZLOOFRPHXSLQ$&7(QJOLVKTXHVWLRQV)XUWKHUPRUH PRVWLQGLYLGXDOTXHVWLRQVZLOORQO\FRYHURQHRUWZRWRSLFVHDFK :HߞOOORRNDWWKHPDLQJUDPPDUVW\OHSXQFWXDWLRQLVVXHVRQHE\RQH $OVREHFDXVHRIWKHZD\VWKDWGLIIHUHQWSDUWVRIDVHQWHQFHLQWHUDFWZLWKHDFKRWKHUWKHUHZLOOEHVRPH RYHUODSDPRQJWKHFRQFHSWVZHWDONDERXWߚVRGRQߞWZRUU\LIVRPHRIWKHVHLGHDVUXQWRJHWKHUDOLWWOHELW LQ\RXUPLQG$VORQJDV\RXFDQXQGHUVWDQGWKHULJKWDQVZHUZKHQ\RXߞUHSUDFWLFLQJ\RXߞUHLQJRRG VKDSH 2QHPRUHWKLQJߚLI\RXߞUHIHHOLQJFRQIXVHGDV\RXߞUHUHDGLQJWKURXJKDQ\RQHRIWKHVHWRSLFVMXVWILQLVK UHDGLQJDOOWKHZD\WKURXJKLW,ߞOODOZD\VIROORZXSZLWKH[DPSOHVZKHQQHFHVVDU\DQGWKHH[DPSOHV ZLOOWHQGWRFOHDUWKLQJVXS ,WߞVRIWHQDORWKDUGHUWRXQGHUVWDQGDGHVFULSWLRQRIWKHVHLVVXHVWKDQLWLVMXVWWRORRNDWDQH[DPSOHDQG VHHZKDWZHߞUHWDONLQJDERXW6RMXVWNHHSDWLWHYHQLIWKLQJVGRQߞWVHHPFOHDUULJKWDZD\ 7KLVLVDOVRDJRRGWLPHIRUPHWREULQJXSWKHLPSRUWDQFHRIWKHTXHVWLRQZDONWKURXJKV\RXߞOOVHHDIWHU WKLVWUDLQLQJ:HߞOOFRYHUDORWRIVWXIILQWKLVWUDLQLQJVHFWLRQEXW\RXߞOOUHDOO\JHWWKHEHVWVHQVHRIKRZWR EHDW$&7(QJOLVKTXHVWLRQVE\IROORZLQJDORQJLQ\RXUFRS\RI7KH5HDO$&73UHS*XLGHUG(GLWLRQ ZLWKWKHZDONWKURXJKVLQWKLV%ODFN%RRN7KDWZD\\RXFDQVHHDOORIWKLVPDWHULDOLQDFWLRQZKLFKZLOO UHDOO\KHOS\RXUHFRJQL]HWKHVHFRQFHSWVZKHQ\RXVHHWKHPRQWHVWGD\ $QGDIWHUWKDWRIFRXUVHWKHPRVWLPSRUWDQWWKLQJLVDOZD\VIRU\RXWRGRVRPHUHDOSUDFWLFH$&7(QJOLVK TXHVWLRQVRQ\RXURZQDIWHU\RXߞYHOHDUQHGWKHPDWHULDOLQWKLV%ODFN%RRN :HߞOOVWDUWZLWKWKHILUVWVNLOOZKLFKPD\VRXQGSUHWW\EDVLFEXWLVDFWXDOO\UHDOO\LPSRUWDQW 127(7KHIROORZLQJVHFWLRQZLOOLQYROYHDORWRIERWKJRRGDQGEDGH[DPSOHVRIWKHFRQFHSWVZHߞOOEH WDONLQJDERXW-XVWWRNHHSWKLQJVFOHDU,ߞOOVWDUWDQ\EDGH[DPSOHZLWKDQDVWHULVN 6RLI\RXVHHDQ H[DPSOHWKDWEHJLQVZLWKDQDVWHULVN\RXߞOONQRZWKDWLWVKRZVVRPHWKLQJ\RXVKRXOGDYRLGRQWKH$&7 (QJOLVKVHFWLRQ 6HQWHQFH)UDJPHQWV 2QWKH$&7DSURSHUVHQWHQFHLVQߞWMXVWDQ\JURXSRIZRUGVZLWKDSHULRGDIWHULW6RPHJURXSVRIZRUGV DUHDFFHSWDEOHVHQWHQFHVDQGVRPHDUHPLVVLQJNH\HOHPHQWV7KHVHDUHDOOVHQWHQFHV 0\VLVWHUORYHVWRSOD\EDVNHWEDOO 7KHGRJLVEDUNLQJLQWKHIURQW\DUG ,I,GRQߞWKXUU\,ߞPJRLQJWREHODWHIRUZRUN $OORIWKHVHJURXSVRIZRUGVGHVFULEHVRPHRQHRUVRPHWKLQJGRLQJVRPHWKLQJ7KH\H[SUHVVDFRPSOHWH WKRXJKW 7KHVHDUH127VHQWHQFHV 7KHPDQGULYLQJLQWKHFDUQH[WWRPH :KLOH,ZDVZDLWLQJLQOLQHDWWKHEDQN %HFDXVH,ZDVWRRWLUHGWRVWDQGXSDQ\PRUH 7KHVHJURXSVRIZRUGVDUHFDOOHGߡVHQWHQFHIUDJPHQWVߢEHFDXVHWKH\DUHQߞWFRPSOHWHVHQWHQFHVE\$&7 VWDQGDUGV7KH\PLJKWGHVFULEHWKLQJVEXWWKH\DUHQߞWFRPSOHWHLQWKHZD\WKDWDFRUUHFWVHQWHQFHLV FRPSOHWH7KHVHIUDJPHQWVOHDYHTXHVWLRQVXQDQVZHUHGOLNHWKHIROORZLQJ w:KDWDERXWWKHPDQGULYLQJLQWKHFDUQH[WWR\RXߚZKDWGLGKHGRDSDUWIURPMXVWGULYLQJQH[WWR\RX" w:KDWKDSSHQHGZKLOH\RXZHUHZDLWLQJLQOLQHDWWKHEDQN" w:KDWKDSSHQHGEHFDXVH\RXZHUHWRRWLUHGWRVWDQGXSDQ\PRUH" 1RWLFHWKDWWKHSUREOHPZLWKWKHVHIUDJPHQWVLVQߞWMXVWWKDWLWߞVSRVVLEOHWRDVNTXHVWLRQVDERXWWKHP7KH SUREOHPLVWKDWWKHIUDJPHQWLWVHOILQYLWHVDTXHVWLRQZLWKRXWRIIHULQJDQDQVZHU7DNHDQRWKHUORRNDWWKLV IUDJPHQW :KLOH,ZDVZDLWLQJLQOLQHDWWKHEDQN 7KHZRUGߡZKLOHߢVSHFLILFDOO\LQGLFDWHVWKHLGHDRIVRPHRWKHUWKLQJWKDWDOVRKDSSHQHGGXULQJWKHSHULRG ZKHQߡ,ZDVZDLWLQJLQOLQHDWWKHEDQNߢ:LWKRXWWKHZRUGߡZKLOHߢZHߞGKDYHDFRPSOHWHVHQWHQFH ZKLFKZRXOGORRNOLNHWKLV ,ZDVZDLWLQJLQOLQHDWWKHEDQN 7KHUHDUHDORWRIVSHFLILFWKLQJVWKDWFDQWXUQDVHQWHQFHLQWRDIUDJPHQWDQGLWߞVQRWUHDOO\QHFHVVDU\WR JRRYHUWKHPDOOULJKWQRZ VHHWKH$SSHQGL[LI\RXߞUHUHDOO\LQWHUHVWHGLQDWHFKQLFDOGHVFULSWLRQRIZKDW PDNHVDFRPSOHWHVHQWHQFH $VDVSHDNHURI(QJOLVK\RXVKRXOGKDYHDEDVLFXQGHUVWDQGLQJRIZKDW PDNHVVRPHWKLQJDVHQWHQFHDQGDQ\PDMRUJDSVLQ\RXUXQGHUVWDQGLQJVKRXOGEHILOOHGLQE\WKLVWUDLQLQJ VHFWLRQWKHTXHVWLRQZDONWKURXJKVDQG\RXURZQSUDFWLFH ,WߞVYHU\LPSRUWDQWIRU\RXWREHDEOHWRWHOOWKHGLIIHUHQFHEHWZHHQDFRPSOHWHVHQWHQFH ZKLFKLV DFFHSWDEOHRQWKH$&7 DQGDIUDJPHQW ZKLFKLVQߞW <RXPLJKWVHHDTXHVWLRQDERXWVRPHWH[WWKDWORRNV OLNHWKLV ,KDGWKHUDGLRSOD\LQJVR,FRXOGOLVWHQWRVRPHPXVLF$V,ZDVJDUGHQLQJ 7KHSUREOHPZLWKWKLVH[DPSOHLVWKDWߡDV,ZDVJDUGHQLQJߢLVMXVWDIUDJPHQWQRWDVHQWHQFH7KHZRUG ߡDVߢLPSOLHVDFRQQHFWLRQZLWKVRPHWKLQJHOVHWKDWQHHGVWREHLQWKHVDPHVHQWHQFH,QWKLVFDVHWKH SKUDVHDERXWWKHJDUGHQLQJQHHGVWREHMRLQHGZLWKWKHVHQWHQFHߡ,KDGWKHUDGLRSOD\LQJVR,FRXOGOLVWHQ WRVRPHPXVLFߢ :KHQ\RXORRNDWWKHDQVZHUFKRLFHV DV\RXZRXOGLIWKLVZHUHDUHDO$&7TXHVWLRQ \RXVKRXOGEHDEOH WRUHFRJQL]HWKDWWKHXQGHUOLQHGSRUWLRQQHHGVWREHFKDQJHGWRWKLV ,KDGWKHUDGLRSOD\LQJVR,FRXOGOLVWHQWRVRPHPXVLFDV,ZDVJDUGHQLQJ 7KHUHߞVDUHDOOLIHH[DPSOHRIDVHQWHQFHIUDJPHQWLVVXHLQTXHVWLRQRQSDJHRIWKH5HG%RRN7KH RULJLQDOYHUVLRQRIWKLVVHQWHQFHLVߡ2QHRIWKHVHVHOIGHIHQVHZKLFKLQFOXGHVSURWHFWLQJWHUULWRU\ߢ7KLV LVDIUDJPHQWEHFDXVHWKHUHߞVQRPDLQYHUEWKDWHYHUVD\VDQ\WKLQJDERXWߡRQHRIWKHVHߢ ,I\RXߞGOLNHWR OHDUQPRUHDERXWWKHGLIIHUHQFHVEHWZHHQVHQWHQFHIUDJPHQWVDQGFRPSOHWHVHQWHQFHVWDNHDORRNDWWKH VHFWLRQRQFODXVHVDQGSKUDVHVLQWKH:ULWLQJ7RROER[DWWKHHQGRIWKLVERRN :HQHHGWRSXWDYHUELQWKHUHWKDWFRPSOHWHVWKHWKRXJKWWKDWVWDUWHGZLWKWKHSKUDVHߡRQHRIWKHVHߢLQ RUGHUWRPDNHWKLVDFRPSOHWHVHQWHQFH7KHRQO\FKRLFHWKDWRIIHUVRQHLV % WKHFRUUHFWDQVZHUZKLFK SURYLGHVWKHYHUEߡLVߢDIWHUWKHSKUDVHߡRQHRIWKHVHߢVRWKDWWKHVHQWHQFHZRXOGUHDGߡ2QHRIWKHVHLV VHOIGHIHQVHZKLFKLQFOXGHVSURWHFWLQJWHUULWRU\ߢ 5XQ2Q6HQWHQFHV <RXPD\DOVRVHHVRPHWKLQJOLNHWKLV ,JUDEEHGP\XPEUHOODRQP\ZD\RXWWKHGRRULWZDVUDLQLQJRXWVLGHDQG,GLGQߞWZDQWWRJHW ZHW ,QWKLVFDVH\RXZDQWWRUHFRJQL]HWKDW\RXߞUHDFWXDOO\ORRNLQJDWWZRJURXSVRIZRUGVWKDWFRXOGHDFKEH LQGHSHQGHQWVHQWHQFHVRQWKHLURZQߚRQO\WKHUHߞVQRSXQFWXDWLRQVHSDUDWLQJWKHP:HFDOOWKLVVLWXDWLRQD ߡUXQRQVHQWHQFHߢDQGLWߞVQRWDFFHSWDEOHRQWKH$&7 2QWKH$&7WKHUHDUHWZRDFFHSWDEOHW\SHVRISXQFWXDWLRQIRUVHSDUDWLQJWZRJURXSVRIZRUGVWKDWFRXOG EHFRPSOHWHVHQWHQFHVRQWKHLURZQ wWKHSHULRG wWKHVHPLFRORQ 7KDWPHDQVWKDWHLWKHURIWKHWZRIROORZLQJYHUVLRQVZRXOGEHDFFHSWDEOHRQWKH$&7 ,JUDEEHGP\XPEUHOODRQP\ZD\RXWWKHGRRU,WZDVUDLQLQJRXWVLGHDQG,GLGQߞWZDQWWRJHW ZHW ,JUDEEHGP\XPEUHOODRQP\ZD\RXWWKHGRRULWZDVUDLQLQJRXWVLGHDQG,GLGQߞWZDQWWRJHW ZHW 7KHILUVWYHUVLRQDGGVDSHULRGDQGFDSLWDOL]HVWKHOHWWHUߡ,ߢLQWKHZRUGߡLWߢ7KHVHFRQGYHUVLRQMXVW DGGVDVHPLFRORQEHWZHHQߡGRRUߢDQGߡLWߢ $JDLQWKHVHDUHERWKHTXDOO\DFFHSWDEOHZD\VWRGLYLGHWKHWZRVHQWHQFHV1HLWKHUYHUVLRQLVEHWWHURU ZRUVHWKDQWKHRWKHURQWKH$&7,I\RXVHHDVLWXDWLRQOLNHWKLVRQWKH$&7\RXZRQߞWKDYHWRFKRRVH EHWZHHQDSHULRGRUDVHPLFRORQWRVHSDUDWHWKHWZRVHQWHQFHVVLQFHERWKDUHDFFHSWDEOH(LWKHU\RXߞOO VHHRQO\RQHRIWKHWZRLQWKHDQVZHUFKRLFHVRUߚLI\RXGRVHHERWKߚ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ߡWDNHߢLVLQWKHWKLUGSHUVRQSOXUDOIRUPLQVWHDGRIWKHWKLUGSHUVRQ VLQJXODUIRUP%HFDXVHWKHQRXQߡVDQGZLFKߢLVVLQJXODUWKHYHUEPXVWEHLQWKHDSSURSULDWHVLQJXODUIRUP ߡWDNHVߢ 7KHUHDUHWZRSULPDU\ZD\VWKH$&7ZLOOWU\WRWULFN\RXLQWRQRWQRWLFLQJWKDWDYHUELVFRQMXJDWHG LQFRUUHFWO\7KHILUVWRQHZHߞOOWDONDERXWLVVRPHWKLQJ,FDOOWKHߡLQWHUYHQLQJSKUDVHߢ -XVWDVWKHQDPHVXJJHVWVWKHLQWHUYHQLQJSKUDVHLVDSKUDVHWKDWWKH$&7VWLFNVEHWZHHQDQRXQDQGLWV YHUE7KHWHVWGRHVWKLVEHFDXVHLWߞVKRSLQJ\RXߞOOJHWFRQIXVHGDQGWKLQNWKHYHUEVKRXOGPDWFKXSZLWKD ZRUGLQWKHLQVHUWHGSKUDVHLQVWHDGRIPDWFKLQJXSZLWKWKHPDLQQRXQWKDWDFWXDOO\GRHVWKHDFWLRQRIWKH YHUE /HWߞVORRNDWDQH[DPSOHRIWKHPLVWDNHWKDWWKH$&7ZDQWV\RXWRPDNH $VDQGZLFKZLWKWRPDWRHVDQGRQLRQVWDNHDORQJWLPHWRPDNH 7KHDERYHVHQWHQFHKDVH[DFWO\WKHVDPHYHUEHUURULQLWWKDWWKHSUHYLRXVH[DPSOHKDGLQFRUUHFWO\ PDWFKLQJWKHVLQJXODUQRXQߡVDQGZLFKߢZLWKWKHSOXUDOYHUEIRUPߡWDNHߢ7KHGLIIHUHQFHLVWKDWWKLV VHQWHQFHLQFOXGHVWKHSKUDVHߡZLWKWRPDWRHVDQGRQLRQVߢLQEHWZHHQWKHZRUGVߡVDQGZLFKߢDQGߡWDNHߢ 7KDWSKUDVHFDQEHFRQIXVLQJLI\RXߞUHQRWFDUHIXO,I\RXMXVWORRNDWWKHZRUGVULJKWDURXQGWKHYHUE \RXߞOOVHHWKHSKUDVHߡRQLRQVWDNHDORQJWLPHߢZKLFKORRNVRND\E\LWVHOIDWILUVWJODQFH<RXߞOORQO\ UHDOL]HWKHVXEMHFWRIWKHYHUEVKRXOGEHWKHZRUGߡVDQGZLFKߢLI\RXVWDQGEDFNDQGORRNDWWKHZKROH VHQWHQFH7KHQ\RXFDQVHHWKDWWKHWKLQJGRLQJWKHWDNLQJLVDFWXDOO\WKHVDQGZLFKVRWKHFRUUHFWIRUPRI WKHVHQWHQFHVKRXOGORRNOLNHWKLV $VDQGZLFKZLWKWRPDWRHVDQGRQLRQVWDNHVDORQJWLPHWRPDNH 6RZKHQHYHU\RXVHHDQVZHUFKRLFHVWKDWLQYROYHGLIIHUHQWIRUPVRIDYHUEWKHILUVWWKLQJ\RXZDQWWRGR LVUHDGWKHZKROHVHQWHQFHDQGPDNHVXUH\RXILQGRXWZKLFKQRXQLVDFWXDOO\GRLQJWKHDFWLRQRIWKDWYHUE 2QFH\RXNQRZWKDW\RXFDQPHQWDOO\UHPRYHDQ\LQWHUYHQLQJSKUDVHVIURPWKHVHQWHQFHWRPDNHVXUHWKH VXEMHFWDQGYHUEPDWFKHDFKRWKHUߚLQWKLVFDVH\RXߞGJHWWKHVHQWHQFHߡ$VDQGZLFKWDNHVDORQJWLPHWR PDNHߢ:LWKDVKRUWHUFOHDUHUVHQWHQFHOLNHWKLVLWߞVHDVLHUWRFKHFNLIDYHUELVLQWKHSURSHUIRUP :HFDQVHHDUHDOOLIHH[DPSOHRIWKLVLVVXHLQTXHVWLRQRQSDJHRIWKH5HG%RRN7KHTXHVWLRQ LQFOXGHVWKHSKUDVHߡ WKHFROOHFWLYHVRXQGRIWKHZROYHVKRZOLQJLQYDULRXVNH\VDOVRPDNHWKHSDFNVHHP ODUJHUߢ,QWKLVH[DPSOHWKHSKUDVHߡRIWKHZROYHVKRZOLQJLQYDULRXVNH\VߢFRPHVEHWZHHQWKHQRXQ ߡVRXQGߢDQGLWVYHUE2QFHZHPHQWDOO\UHPRYHWKDWLQWHUYHQLQJSKUDVHZHUHDOL]HWKHQRXQWKDWWKHYHUE PXVWDJUHHZLWKLVWKHVLQJXODUQRXQߡVRXQGߢDQGQRWWKHSOXUDOQRXQVߡZROYHVߢRUߡNH\Vߢ7KHQZHNQRZ WKDWZHQHHGWKHVLQJXODUYHUEIRUPߡPDNHVߢZKLFKLVFKRLFH - WKHFRUUHFWDQVZHU 6RPHWLPHVWKH$&7XVHVDTXHVWLRQߞVDQVZHUFKRLFHVWRWU\WRFRQIXVHXVDERXWWKHSURSHUIRUPRID YHUE<RXPLJKWVHHVRPHWKLQJOLNHWKLV 7KHROGHVWSHUVRQLQWKH7ZLQ&LWLHVKDVVZHSWWKHNLWFKHQIORRU $ 12&+$1*( % KDYHEHHQVZHHSLQJ & VZHHS ' DUHVZHHSLQJ ,I\RXVFDQWKURXJKWKHDQVZHUFKRLFHVLWPLJKWORRNOLNHWKHTXHVWLRQLVDVNLQJZKLFKWHQVHWKHYHUE VKRXOGEHLQVLQFHWKHDQVZHUFKRLFHVDOOSUHVHQWGLIIHUHQWWHQVHVDQGDVSHFWVRIWKHYHUEߡWRVZHHSߢ 7KDWFDQEHFRQIXVLQJHVSHFLDOO\ZKHQWKHVHQWHQFHGRHVQߞWJLYHXVDQ\FOXHVDERXWDSDUWLFXODUWLPH IUDPH ,I\RXORRNPRUHFORVHO\WKRXJK\RXߞOOQRWLFHWKDWFKRLFHV % & DQG ' DUHDOOSOXUDOYHUEIRUPV EXWWKHZRUGߡSHUVRQߢLVVLQJXODUVRWKHFRUUHFWDQVZHUVKRXOGDFWXDOO\EHDVLQJXODUYHUEIRUP7KH RULJLQDOSKUDVHLVWKHRQO\VLQJXODURQHVR $ ZRXOGEHWKHFRUUHFWDQVZHULIWKLVZHUHDQ$&7TXHVWLRQ 7KLVLVDQRWKHUUHDVRQZK\LWߞVVRLPSRUWDQWWRUHDGWKHZKROHVHQWHQFHDQGILJXUHRXWZKLFKQRXQDFWXDOO\ JRHVZLWKDQXQGHUOLQHGYHUE 7KHUHߞVDUHDOOLIHH[DPSOHRIWKLVLVVXHLQTXHVWLRQRQSDJHRIWKH5HG%RRN7KLVTXHVWLRQ LQYROYHVWKHSKUDVHߡWKHSDQHOLQJRQWKHZDOOVKDVEHHQSDLQWHGWRPDWFKߢ7KHDQVZHUFKRLFHVLQFOXGH WKUHHSOXUDOYHUEIRUPVWZRDUHGLIIHUHQWSDVWWHQVHIRUPVDQGRQHLVLQWKHSUHVHQWWHQVH7RWKH XQWUDLQHGWHVWWDNHULWPLJKWVHHPOLNHZHQHHGWRILJXUHRXWZKLFKWHQVHLVDSSURSULDWH%XWLQUHDOLW\WKH QRXQWKDWVKRXOGJRZLWKWKHYHUELVWKHVLQJXODUQRXQߡSDQHOLQJߢ7KLVVLQJXODUQRXQQHHGVDVLQJXODUYHUE IRUPDQGWKHRQO\DQVZHUFKRLFHZLWKDVLQJXODUYHUEIRUPLVWKHFRUUHFWDQVZHUFKRLFH ) 7KHUHߞVRQHPRUHLPSRUWDQWYHUELVVXHWKDW\RXPLJKWVHHDQGLWORRNVOLNHWKLV :KHQKHOHIWWRJRWRWKHEDWKURRPKHJLYHQXSKLVVHDW 7KLVVHQWHQFHLVZURQJEHFDXVHߡJLYHQߢLVQߞWWKHFRUUHFWIRUPRIWKHYHUEߡWRJLYHߢLQWKLVFDVH7KHZRUG ߡJLYHQߢLVDSDVWSDUWLFLSOHRIWKHYHUEߡWRJLYHߢLWFDQRQO\EHXVHGZLWKDYHUVLRQRIDKHOSLQJYHUEOLNH ߡLVߢRUߡKDVߢ <RXGRQߞWKDYHWRNQRZZKDWWKHSKUDVHߡSDVWSDUWLFLSOHߢPHDQVWRDQVZHUDQ$&7 (QJOLVKTXHVWLRQFRUUHFWO\ߚ\RXMXVWKDYHWREHDEOHWRUHFRJQL]HWKDWWKLVYHUEIRUPLVLQDSSURSULDWH 7KHUHDUHDWOHDVWWZRZD\VWRIL[DSKUDVHOLNHWKLVZHFDQHLWKHUDGGLQWKHPLVVLQJKHOSLQJYHUERUZH FDQFKDQJHWKHZRUGߡJLYHQߢWRDIRUPWKDWGRHVQߞWQHHGDKHOSLQJYHUE6RKHUHDUHWZRFRUUHFWHG YHUVLRQVRIWKLVVHQWHQFH :KHQKHOHIWWRJRWRWKHEDWKURRPKHKDGJLYHQXSKLVVHDW :KHQKHOHIWWRJRWRWKHEDWKURRPKHJDYHXSKLVVHDW (LWKHURIWKRVHWZRYHUVLRQVRIWKHVHQWHQFHFRXOGEHJUDPPDWLFDOO\DFFHSWDEOHRQWKH$&7 :HFDQVHHDUHDOOLIHH[DPSOHRIWKLVLVVXHLQTXHVWLRQRQSDJHRIWKH5HG%RRN7KHVHQWHQFH PHQWLRQVߡWKHGD\VEHIRUHWZRWHHQDJHUVWDNHQRYHUWKHSKRQHߢ,QWKLVH[DPSOHߡWDNHQߢLVDQ LQDSSURSULDWHFRQMXJDWLRQRIWKHYHUEߡWRWDNHߢ7KHDSSURSULDWHIRUPZRXOGEHߡWZRWHHQDJHUVWRRN RYHUߢZKLFKPHDQVWKHFRUUHFWDQVZHULV % 3RVVHVVLYHV /XFNLO\WKH$&7ߞVUXOHVIRUSRVVHVVLYHVDUHDFWXDOO\SUHWW\VLPSOHHYHQLIWKH\GLIIHUIURPWRGD\ߞV FRPPRQXVDJH 7KHUHDUHWKUHHWKLQJV\RXQHHGWRNQRZLI\RXZDQWWRIRUPSRVVHVVLYHVRQWKH$&7 )LUVW\RXQHHGWRNQRZKRZSRVVHVVLYHSURQRXQVDUHIRUPHG0RVWSHRSOHDUHFRPIRUWDEOHZLWKWKHVH SRVVHVVLYHSURQRXQV wP\ w\RXU wKLV wKHU 7KHRQHVWKDWVRPHWLPHVFDXVHWURXEOHWHQGWREHWKHVH wLWV wZKRVH wWKHLU 3HRSOHRIWHQPL[XSWKRVHSRVVHVVLYHSURQRXQVZLWKWKHVHFRQWUDFWLRQV w7KHSRVVHVVLYHSURQRXQߡLWVߢLVFRQIXVHGZLWKWKHFRQWUDFWLRQߡLWߞVߢZKLFKLVVKRUWIRUߡLWLVߢ w7KHSRVVHVVLYHSURQRXQߡZKRVHߢLVFRQIXVHGZLWKWKHFRQWUDFWLRQߡZKRߞVߢZKLFKLVVKRUWIRUߡZKR LVߢ w7KHSRVVHVVLYHSURQRXQߡWKHLUߢLVFRQIXVHGZLWKWKHFRQWUDFWLRQߡWKH\ߞUHߢZKLFKLVVKRUWIRUߡWKH\ DUHߢ 6RKHUHߞVWKHUXOHWRUHPHPEHUIRUWKHVHWKUHHWURXEOLQJSRVVHVVLYHSURQRXQVWKHVHSRVVHVVLYHSURQRXQV FRQWDLQQRDSRVWURSKHV,I\RXߞUHLQDSRVLWLRQZKHUH\RXKDYHWRFKRRVHEHWZHHQߡLWVߢDQGߡLWߞVߢRU ߡZKRVHߢDQGߡZKRߞVߢRUߡWKHLUߢDQGߡWKH\ߞUHߢUHPHPEHUWKDWWKHFKRLFHZLWKWKHDSRVWURSKHLVD FRQWUDFWLRQDQGWKHRWKHULVDSRVVHVVLYHIRUP:KHQHYHU\RXVHHWKHVHFRQWUDFWLRQVLQDVHQWHQFHRUDQ DQVZHUFKRLFHLPDJLQHWKHPLQWKHLUߡXQFRQWUDFWHGߢVWDWHDQG\RXVKRXOGEHDEOHWRWHOOLIWKH\ߞUH DSSURSULDWH wߡ,WߞVߢZLWKDQDSRVWURSKHFDQDOZD\VEHUHDGDVߡLWLVߢ wߡ:KRߞVߢZLWKDQDSRVWURSKHFDQDOZD\VEHUHDGDVߡZKRLVߢ wߡ7KH\ߞUHߢZLWKDQDSRVWURSKHFDQDOZD\VEHUHDGDVߡWKH\DUHߢ 0DQ\SHRSOHDUHXQVXUHDERXWVHQWHQFHVOLNHWKHVH 6KHVDWLQWKHFDUDQGKRQNHGLWߞVKRUQ :KRߞVKRXVHLVWKLV" %XWLIZHLPDJLQHWKHFRQWUDFWLRQVLQWKHLUߡXQFRQWUDFWHGߢIRUPVWKHJUDPPDWLFDOHUURUVEHFRPHDORW PRUHREYLRXV 6KHVDWLQWKHFDUDQGKRQNHGLWLVKRUQ :KRLVKRXVHLVWKLV" :KHQ\RXJHWLQWRWKHKDELWRIUHDGLQJߡLWߞVߢDVߡLWLVߢߡZKRߞVߢDVߡZKRLVߢDQGߡWKH\ߞUHߢDVߡWKH\DUHߢ >@ \RXZRQߞWEHWULFNHGE\WKDWNLQGRIVHQWHQFH 7KHVHFRQGWKLQJWRUHPHPEHUDERXWSRVVHVVLYHVLVWKDWD3/85$/QRXQHQGLQJLQߡVߢZLOODOZD\VIRUP LWVSRVVHVVLYHZLWKDVLQJOHDSRVWURSKHDQGQRWKLQJPRUH+HUHDUHVRPHH[DPSOHV 7KLVWR\EHORQJVWRWKHFDWV,WLVWKHFDWVߞWR\ 7KRVHDUHWKHJLUOVߞELNHV7KRVHELNHVEHORQJWRWKHJLUOV 7KDWODZQPRZHUEHORQJVWRWKHQHLJKERUV,WLVWKHQHLJKERUVߞODZQPRZHU ,QHDFKRIWKHVHWKUHHVLWXDWLRQVWKHUHߞVDSOXUDOQRXQWKDWHQGVLQߡVߢ wFDWV wJLUOV wQHLJKERUV 7RIRUPDSOXUDOIRUHDFKRIWKRVHZRUGV\RXMXVWDGGDQDSRVWURSKHDQGGRQߞWFKDQJHDQ\WKLQJHOVH wFDWVߞ wJLUOVߞ wQHLJKERUVߞ 6RWKDWߞVWKHVHFRQGUXOHWRIRUPWKHSRVVHVVLYHRIDSOXUDOQRXQHQGLQJLQߡVߢMXVWDGGDQDSRVWURSKHWR WKHHQG 7KHWKLUGUXOHLVWKDW(9(5<27+(5.,1'2)1281IRUPVLWVSRVVHVVLYHE\DGGLQJDQDSRVWURSKH $1'DQߡVߢ7KDWߞVULJKWZLWKWKHH[FHSWLRQRISURQRXQVDQGSOXUDOQRXQVHQGLQJLQߡVߢHYHU\QRXQRQ WKH$&7IRUPVLWVSRVVHVVLYHZLWKDQDSRVWURSKHDQGDQߡVߢ +HUHDUHDIHZH[DPSOHVRIZRUGVWKDWJHWDQDSRVWURSKHDQGDQߡVߢRQWKH$&71RWHWKDWPDQ\RIWKHVH SRVVHVVLYHIRUPVGLIIHUIURPPRGHUQXVDJH DQGWKDWLQFOXGHVWKHWKLQJV\RXUWHDFKHUVPLJKWZULWH 7KLVEDOOEHORQJVWRP\GRJ,WLVP\GRJߞVEDOO 7KHJDPHEHORQJVWRWKHFKLOGUHQ,WLVWKHFKLOGUHQߞVJDPH -HVVKDVDFDU,WLV-HVVߞVFDU 7KHDEDFXVKDVZRRGHQEHDGV7KH\DUHWKHDEDFXVߞVZRRGHQEHDGV 7KHJHHVHOLYHRQDSRQG,WLVWKHJHHVHߞVSRQG 7KHPLFHOLYHLQWKHZDOO7KDWLVWKHPLFHߞVKRPH 6ROHWߞVGRDTXLFNUHYLHZRIWKHWKUHHSRVVHVVLYHUXOHV\RXQHHGWRNQRZIRUWKH$&7 7KHSRVVHVVLYHSURQRXQVߡWKHLUߢߡZKRVHߢDQGߡLWVߢGRQߞWLQFOXGHDSRVWURSKHV 7KHSRVVHVVLYHIRUPRIDSOXUDOQRXQHQGLQJLQߡVߢLVIRUPHGE\DGGLQJDQDSRVWURSKHDQGQRWKLQJ HOVH 7KHSRVVHVVLYHIRUPRI(9(5<27+(5.,1'2)1281LVIRUPHGE\DGGLQJDQDSRVWURSKHDQG DQߡVߢQRPDWWHUZKDWOHWWHURUVRXQGWKHEDVHQRXQHQGVLQ 2QFH\RXOHDUQWKHVHUXOHVDQGVHHWKHPLQDFWLRQRQVRPHUHDO$&7SUDFWLFHTXHVWLRQVWKH\ߞOOEHFRPH VHFRQGQDWXUH )RUDUHDOOLIHH[DPSOHRIDTXHVWLRQLQYROYLQJSRVVHVVLYHVWDNHDORRNDWTXHVWLRQRQSDJH7KH WH[WPHQWLRQVߡ DFRPSDQ\ZKRߞVVORJDQLVߢDQGZHߞUHJLYHQWKHRSSRUWXQLW\WRFKDQJHߡZKRߞVߢWR ߡZKRVHߢ/HWߞVWKLQNDERXWZKDWߞVEHLQJVDLGKHUH$UHZHVD\LQJߡ DFRPSDQ\ZKRLVVORJDQLV"ߢ1R ZHߞUHVD\LQJWKDWWKHVORJDQEHORQJVWRWKHFRPSDQ\ߚWKDWWKLVLVWKHFRPSDQ\ߞVVORJDQ7KDWPHDQVZH QHHGWKHSRVVHVVLYHIRUPRIߡZKRߢZKLFKLVFKRLFH % ߡZKRVHߢ :KR9HUVXV:KRP <RXߞOORFFDVLRQDOO\VHH$&7(QJOLVKTXHVWLRQVWKDWUHTXLUH\RXWRFKRRVHEHWZHHQߡZKRߢDQGߡZKRPߢ )RUH[DPSOH\RXPD\VHHDVHQWHQFHOLNHWKLV 7KLVLVWKHPDQZKRWDXJKWPHKRZWRULGHDELNH 7KHQ\RXPD\KDYHWRGHFLGHZKHWKHUߡZKRߢRUߡZKRPߢ RUVRPHWKLQJHOVH LVDSSURSULDWHLQWKLVVSDFH ,QWKHFDVHDERYHߡZKRߢLVWKHFRUUHFWFKRLFH<RXXVHWKHZRUGߡZKRߢWRGHVFULEHVRPHWKLQJRU VRPHRQHGRLQJDQDFWLRQ+HUHWKHZRUGߡZKRߢUHIHUVWRߡWKHPDQߢDQGߡWKHPDQߢGRHVWKHDFWLRQ LQGLFDWHGE\WKHZRUGߡWDXJKWߢ <RXXVHߡZKRPߢWRGHVFULEHVRPHRQHZKRߞVEHLQJDFWHGXSRQOLNHLQWKLVVHQWHQFH +HLVDOVRWKHPDQZKRP,DFFLGHQWDOO\KLWZLWKP\ELNHEHIRUH,NQHZKRZWRULGHLW ,QWKLVVHQWHQFHWKHZRUGߡZKRPߢLVFRUUHFWEHFDXVHLWUHIHUVWRVRPHRQHUHFHLYLQJWKHDFWLRQRIJHWWLQJ KLWߡ:KRPߢUHIHUVWRߡWKHPDQߢDQGLQWKLVVHQWHQFHߡWKHPDQߢUHFHLYHVWKHDFWLRQRIEHLQJߡKLWZLWKP\ ELNHߢ +HUHߞVDQRWKHUZD\WRWKLQNDERXWLWWKDWߞVVLPSOHUIRUPRVWSHRSOH,WLQYROYHVWXUQLQJDVHQWHQFHLQWRD TXHVWLRQDQGWKHQILJXULQJRXWKRZWKDWTXHVWLRQZRXOGEHDQVZHUHG/HWߞVWDNHDORRN ,PDJLQH\RXQHHGWRHYDOXDWHDVHQWHQFHOLNHWKLV 7KLVLVWKHPDQZKRWDXJKWPHKRZWRULGHDELNH 7XUQLWLQWRDTXHVWLRQ :KRZKRP WDXJKWPHKRZWRULGHDELNH" 7KHQDQVZHULW +HWDXJKWPHKRZWRULGHDELNH ,I\RXߞGXVHWKHZRUGߡKHߢWRDQVZHUWKHTXHVWLRQWKHQߡZKRߢLVWKHSURSHUIRUP ,I\RXߞGXVHWKHZRUGߡKLPߢWRDQVZHUWKHTXHVWLRQWKHQߡZKRPߢLVWKHSURSHUIRUP \RXFDQUHPHPEHU WKLVEHFDXVHWKH\ERWKHQGLQߡPߢ /HWߞVGRLWZLWKWKHRWKHUVHQWHQFH +HLVDOVRWKHPDQZKRP,DFFLGHQWDOO\KLWZLWKP\ELNHEHIRUH,NQHZKRZWRULGHLW 7XUQLWLQWRDTXHVWLRQ :KRZKRP GLG,DFFLGHQWDOO\KLWZLWKP\ELNH" 7KHQDQVZHULW ,KLWKLPZLWKP\ELNH 6LQFHZHߞGDQVZHUWKHTXHVWLRQZLWKߡKLPߢZHNQRZWKHSURSHUIRUPLQWKHRULJLQDOVHQWHQFHZRXOGEH ߡZKRPߢ 6RUHPHPEHUWKDWߡZKRߢFRUUHVSRQGVZLWKߡKHߢDQGߡZKRPߢFRUUHVSRQGVZLWKߡKLPߢ DJDLQ\RXFDQ UHPHPEHUWKDWEHFDXVHERWKߡZKRPߢDQGߡKLPߢHQGZLWKWKHOHWWHUߡPߢ 2IFRXUVHLIWKHVHQWHQFHKDVWRGRZLWKDJLUORUDZRPDQ\RXFDQMXVWPHQWDOO\VZLWFKRXWߡVKHߢIRU ߡKHߢDQGߡKHUߢIRUߡKLPߢRU\RXFDQDOZD\VWKLQNRILWLQWHUPVRIIHPDOHSURQRXQVLI\RXZDQWWR,MXVW SUHIHUWRWHDFKLWLQWHUPVRIߡKHߢDQGߡKLPߢEHFDXVHߡKHߢDQGߡZKRߢVRXQGNLQGRIVLPLODUDQGVRGR ߡKLPߢDQGߡZKRPߢZKLFKXVXDOO\PDNHVLWHDVLHUIRUSHRSOHWRUHPHPEHUWKHFRUUHFWXVDJHVRIWKH ZRUGV /HWߞVORRNDWWKLVLQRQHPRUHH[DPSOH,PDJLQHZHKDGWRFKRRVHWKHFRUUHFWYHUVLRQRIWKLVVHQWHQFH 7KDWߞVWKHER\WR ZKRZKRP ,JDYHDOOP\WR\V :KHQZHUHDGWKDWZHPLJKWDVNRXUVHOYHVߡ7RZKRZKRPGLG\RXJLYHDOO\RXUWR\V"ߢ7KHDQVZHUWR WKLVTXHVWLRQZRXOGEHߡ,JDYHDOOP\WR\VWRKLPߢ%HFDXVH,ߞGDQVZHUZLWKߡKLPߢ RUߡKHUߢLILWZHUHD JLUO ,NQRZWKDWWKHFRUUHFWIRUPLQWKHRULJLQDOVHQWHQFHLVߡZKRPߢ 7KDWߞVWKHER\WRZKRP,JDYHDOOP\WR\V 7KHUHߞVDUHDOOLIHH[DPSOHRIWKLVLQTXHVWLRQRQSDJHRIWKH5HG%RRN7KHRULJLQDOTXHVWLRQ PHQWLRQVߡ/LJLD$QWROLQH]ZKRFDPHIURP%XFDUDPDQJD&ROXPELDߢ:HKDYHWKHRSWLRQRIFKDQJLQJ ߡZKRߢWRߡZKRPߢ%XWLIZHORRNDWWKHVHQWHQFHZHFDQVHHWKDWߡZKRߢLVFRUUHFWEHFDXVHWKHVHQWHQFH GHVFULEHV/LJLDGRLQJWKHDFWLRQLQWKHYHUEߡFDPHߢ6LQFHWKHSHUVRQEHLQJGHVFULEHGE\ZKRZKRPLV GRLQJDQDFWLRQLQWKLVFDVHQRWUHFHLYLQJWKHDFWLRQZHNQRZWKDWZHQHHGWKHߡZKRߢIRUPDVLQFKRLFH $ ,IZHZDQWHGWRWXUQWKHVHQWHQFHLQWRDTXHVWLRQZHZRXOGVD\ߡ:KRFDPHIURP%XFDUDPDQJD &ROXPELD"ߢ7KHDQVZHUZRXOGEHߡ6KHFDPHIURP%XFDUDPDQJD&ROXPELDߢ6LQFHZHNQRZWKDWߡVKHߢ FRUUHVSRQGVWRߡKHߢDQGߡZKRߢZHFDQDJDLQVHHWKDWWKHߡZKRߢIRUPLVQHHGHGZKLFKZHILQGLQFKRLFH $ 0XFK9HUVXV0DQ\ <RXPD\DOVRHQFRXQWHUVLWXDWLRQVRQWKH$&7WKDWWHVW\RXRQWKHGLIIHUHQFHEHWZHHQߡPXFKߢDQGߡPDQ\ߢ 7KHVHDUHWZRZRUGVWKDWDORWRISHRSOHXVHLQWHUFKDQJHDEO\LQQRUPDOVSHHFKDQGHYHQLQWKH FODVVURRPEXWWKH\DFWXDOO\KDYHWZRGLIIHUHQWSXUSRVHVDQGPHDQLQJV ߡ0DQ\ߢLVXVHGWRGHVFULEHDQXPEHURIVHSDUDWHWKLQJVWKDW\RXFRXOGFRXQWRQ\RXUILQJHUV RURQ\RXU IULHQGVߞILQJHUVLI\RXUDQRXWRI\RXURZQ +HUHDUHDIHZH[DPSOHV 7KHUHDUHPDQ\FDWVLQP\QHLJKERUKRRG <RXKDYHWRRPDQ\EDJVWRFDUU\ 0DQ\SHRSOHFDPHWRVHHKHUSOD\ :HNQRZWKDWZKHQZHWDONDERXWWKLQJVOLNHߡFDWVߢߡEDJVߢDQGߡSHRSOHߢZHߞUHWDONLQJDERXWVHWVRI LQGLYLGXDOWKLQJVWKDWFDQEHFRXQWHG 2QWKHRWKHUKDQGߡPXFKߢLVXVHGWRGHVFULEHWKLQJVWKDWFDQߞWEHFRXQWHGVHSDUDWHO\ <RXJDYHPHWRRPXFKPLON $IWHUWKHOLJKWVZHQWRXWWKHUHZDVPXFKFRQIXVLRQ 1HDUWKHHTXDWRUWKHUHLVPXFKVXQVKLQH ,QFRQWH[WߡPLONߢߡFRQIXVLRQߢDQGߡVXQVKLQHߢFDQߞWEHFRXQWHGZLWK\RXUILQJHUVVR\RXKDYHWRXVHWKH ZRUGߡPXFKߢLQVWHDGRIߡPDQ\ߢWRGHVFULEHWKHP 7KLVLVWKHVRUWRIWKLQJWKDWPDQ\(QJOLVKVSHDNHUVZRXOGDOUHDG\MXVWߡJHWߢRQDQLQWXLWLYHOHYHOEXW DFWXDOO\WKLQNLQJDERXWWKHGLVWLQFWLRQUHTXLUHVDQDWWHQWLRQWRGHWDLOEH\RQGZKDWPRVW(QJOLVKWHDFKHUV UHTXLUHLQDFODVVURRPVHWWLQJ%HFDXVHZHGRQߞWQRUPDOO\WKLQNDERXWWKLQJVOLNHWKHGLIIHUHQFHEHWZHHQ ߡPXFKߢDQGߡPDQ\ߢLWFDQEHGLIILFXOWWRIHHOVXUHDERXWWKDWGLIIHUHQFHRQWHVWGD\ߚXQOHVVZHߞYHEHHQ WUDLQHGSURSHUO\DKHDGRIWLPH :HFDQVHHDUHDOOLIHH[DPSOHRIWKLVLVVXHLQTXHVWLRQRQSDJHRIWKH5HG%RRN7KHRULJLQDO YHUVLRQRIWKHVHQWHQFHLQYROYHVWKHSKUDVHߡWRRPXFKRUWRRIHZTXDUWHUVߢ:HNQRZWKLVYHUVLRQPXVWEH LQFRUUHFWEHFDXVHLWXVHVWKHZRUGߡPXFKߢWRPRGLI\WKHFRXQWDEOHQRXQߡTXDUWHUVߢDQGZHNQRZWKDW FRXQWDEOHQRXQVPXVWEHPRGLILHGZLWKߡPDQ\ߢQRWߡPXFKߢ7KHFRUUHFWDQVZHULV & ZKLFKIL[HVWKLV SUREOHPZLWKRXWFUHDWLQJDQ\QHZSUREOHPV ߡ:RXOGRIߢ 7KLVGRHVQ WFRPHXSWRRRIWHQRQWKH$&7EXW\RXVWLOOQHHGWREHDZDUHRILW :KHQSHRSOHVSHDNWKH\RIWHQSURQRXQFHWKHSKUDVHߡZRXOGKDYHߢVRLWVRXQGVMXVWOLNHWKHQRQVHQVH SKUDVHߡ ZRXOGRIߢ7KLVLVVXFKDZLGHVSUHDGHUURUWKDWVRPHWHVWWDNHUVZLOOUHDGDVHQWHQFHOLNHWKLV RQHDQGQHYHUQRWLFHDPLVWDNH ,ZRXOGRIGRQHWKDWVRRQHULI,ZHUH\RX 7KHVHQWHQFHVKRXOGUHDG ,ZRXOGKDYHGRQHWKDWVRRQHULI,ZHUH\RX <RXFDQVHHDUHDOOLIHH[DPSOHRIWKLVLVVXHLQTXHVWLRQRQSDJH7KHXQGHUOLQHGSRUWLRQRIWKH WH[WLVߡZRXOGRIEHHQߢZKLFKQHHGVWREHFKDQJHGWRߡZRXOGKDYHEHHQߢVRFKRLFH % LVFRUUHFW &RPSDUDWLYHV$QG6XSHUODWLYHV &RPSDUDWLYHVDQGVXSHUODWLYHVDUHW\SHVRIZRUGVWKDWDUHXVHGWRGHVFULEHKRZVRPHWKLQJVUHODWHWR RWKHUWKLQJV 7KHFRPSDUDWLYHYHUVLRQRIDQDGMHFWLYHRUDGYHUEHLWKHUHQGVLQߡHUߢRUEHJLQVZLWKWKHZRUGߡPRUHߢRU ߡOHVVߢ+HUHDUHVRPHH[DPSOHVRIFRPSDUDWLYHV VPDUWHU ELJJHU KDSSLHU PRUHLQWHOOLJHQW OHVVGLVJXVWLQJ PRUHTXLFNO\ 7KHVXSHUODWLYHYHUVLRQRIDQDGMHFWLYHRUDGYHUEHLWKHUHQGVLQߡHVWߢRUEHJLQVZLWKWKHZRUGߡPRVWߢRU ߡOHDVWߢ+HUHDUHVRPHH[DPSOHVRIVXSHUODWLYHV VPDUWHVW ELJJHVW KDSSLHVW PRVWLQWHOOLJHQW OHDVWGLVJXVWLQJ PRVWTXLFNO\ 6RPHZRUGVKDYHLUUHJXODUO\IRUPHGFRPSDUDWLYHVDQGVXSHUODWLYHVEXWOXFNLO\WKH\ߞUHYHU\FRPPRQ ZHOONQRZQIRUPV+HUHDUHDFRXSOHRIH[DPSOHV EHWWHUEHVW PRUHPRVW $OVRUHPHPEHUWKDWZHXVHWKHZRUGߡWKDQߢWRFRPSDUHWZRWKLQJVߚQRWWKHZRUGߡWKHQߢ7KLVGRHVQߞW FRPHXSPXFKRQWKH$&7EXWLWGRHVFRPHXSRFFDVLRQDOO\VRLWߞVVRPHWKLQJWRZDWFKRXWIRU 7KHUHߞVRQHPRUHLPSRUWDQWQRWHZHQHHGWRFRYHURQWKLVWRSLF&RPSDUDWLYHIRUPVDUHFUHDWHGXVLQJ (,7+(5 ߡHUߢ25ߡPRUHOHVVߢDQGVXSHUODWLYHIRUPVDUHFUHDWHGXVLQJ(,7+(5ߡHVWߢ25ߡPRVWOHDVWߢ<RX 1(9(5IRUPDFRPSDUDWLYHXVLQJERWKߡHUߢ$1'ߡPRUHOHVVߢRUDVXSHUODWLYHXVLQJERWKߡHVWߢ$1' ߡPRVWOHDVWߢ7KDWPHDQVSKUDVHVOLNHWKHVHDUHZURQJRQWKH$&7 PRUHKDSSLHU PRVWELJJHVW /LNHDORWRIFRQFHSWVWKDWFRPHXSLQ$&7(QJOLVKTXHVWLRQVWKLVLVVRPHWKLQJ\RXߞUHSUREDEO\DOUHDG\ EDVLFDOO\IDPLOLDUZLWKRQDQXQFRQVFLRXVOHYHOEXW\RXPLJKWQRWEHVXUHZKLFKYHUVLRQLVFRUUHFWZKHQ VRPHRQHDVNV\RXDERXWLWߚVRPDNHVXUH\RXߞUHFRPIRUWDEOHZLWKWKLVLGHD 7KHUHߞVDQH[DPSOHLQYROYLQJDFRPSDUDWLYHSKUDVHLQTXHVWLRQRQSDJHRIWKH5HG%RRN7KH XQGHUOLQHGSRUWLRQRIWKHVHQWHQFHLVߡIDUPRUHEXVLHUߢ&KRLFHV % DQG & RIIHURWKHUYHUVLRQVRID FRPSDUDWLYHSKUDVHDQG ' LVDVXSHUODWLYHSKUDVH 6RPHSHRSOHPLJKWWKLQNWKH\QHHGWRFKRRVHEHWZHHQDFRPSDUDWLYHIRUPDQGDVXSHUODWLYHIRUPWR DQVZHUWKLVTXHVWLRQ%XWEHFDXVHZHNQRZWKDWFRPSDUDWLYHVDUHIRUPHGXVLQJHLWKHUWKHZRUGߡPRUHߢ RUWKHߡHUߢHQGLQJDQGZHNQRZWKDWVXSHUODWLYHVDUHIRUPHGXVLQJHLWKHUWKHZRUGߡPRVWOHDVWߢRUWKH ߡHVWߢHQGLQJZHFDQVHHWKDWRQO\FKRLFH % RIIHUVDJUDPPDWLFDOO\DFFHSWDEOHYHUVLRQRIWKHXQGHUOLQHG SKUDVH7KDWPHDQV % LVFRUUHFW ߡ&RPPD6DQGZLFKߢ &RPPDVDUHWHVWHGSUHWW\KHDYLO\RQWKH$&7EXWPDQ\WHVWWDNHUVLQWXLWLYHO\VHQVHVRPHRIWKHVLWXDWLRQV ZKHQFRPPDVDUHRND\RQWKHWHVW,QMXVWDPRPHQW,ߞOOH[SODLQRQHRIWKHFRPPDVFHQDULRVWKDWWHVW WDNHUVDUHQߞWDOZD\VIDPLOLDUZLWKEXWEHIRUH,GRWKDW,ZDQWWRPDNHVRPHWKLQJH[WUHPHO\FOHDU ,ߞ012768**(67,1*7+$77+(ߡ&200$6$1':,&+ߢ,67+(21/<:$<7+$7&200$6 $5(86('217+($&7&RPPDVFDQEHXVHGLQDYDULHW\RIZD\VRQWKH$&7DQG\RXVKRXOGWDNHD ORRNDWWKH:ULWLQJ7RROER[LQWKH$SSHQGL[RIWKLV%ODFN%RRNLI\RXߞUHLQWHUHVWHGLQDWHFKQLFDO GHVFULSWLRQRIWKHSURSHUZD\VWRXVHFRPPDVRQWKH$&7(QJOLVKVHFWLRQ,ߞPQRWLQFOXGLQJWKDWIXOO GLVFXVVLRQULJKWQRZEHFDXVHH[SHULHQFHKDVVKRZQPHWKDWPRVWVWXGHQWVDUHQߞWLQWHUHVWHGLQLWߚPRVW VWXGHQWVSUHIHUWRILOOLQDQ\JDSVLQWKHLUNQRZOHGJHRIFRPPDXVHE\ORRNLQJWKURXJKTXHVWLRQ ZDONWKURXJKVDQGKDYLQJDIHZRIWKHPRUHFKDOOHQJLQJFRQFHSWVVSHOOHGRXWFRQFUHWHO\6RWKDWߞVZKDW ,ߞPGRLQJKHUH $JDLQLI\RXߞGOLNHWRVHHDIXOOGHWDLOHGWUHDWPHQWRIDOOWKHZD\VWKDWFRPPDVFDQEHXVHGRQWKH$&7 SOHDVHVHHWKH:ULWLQJ7RROER[LQWKH$SSHQGL[RIWKLV%ODFN%RRN 1RZOHWߞVWDONDERXWWKHVSHFLILFFRPPDLVVXH,ZDQWHGWRDGGUHVVKHUH,WߞVVRPHWKLQJ,OLNHWRFDOOD ߡFRPPDVDQGZLFKߢ ߡ&RPPDVDQGZLFKߢLVQRWDWHFKQLFDOJUDPPDWLFDOWHUP,WߞVVRPHWKLQJ,PDGHXSWR KHOSWHVWWDNHUVUHPHPEHUWKLVFRQFHSW $VWKHQDPHLPSOLHVDߡFRPPDVDQGZLFKߢLVDSKUDVH ߡVDQGZLFKHGߢEHWZHHQWZRFRPPDVRUEHWZHHQDFRPPDDQGDSHULRG7KLVSDUWLFXODUW\SHRISKUDVH LVQߞWDFRPSOHWHVHQWHQFHRUDSDUWRIDOLVW,QVWHDGLWߞVDGHVFULSWLYHSKUDVHWKDWSURYLGHVDGGLWLRQDO LQIRUPDWLRQDERXWVRPHWKLQJWKDWߞVJRLQJRQLQDVHQWHQFH 2QHWKLQJWKH$&7RIWHQOLNHVWRGRRQWKH(QJOLVKVHFWLRQLVWRXQGHUOLQHDSDUWRIDVHQWHQFHDQGJLYH\RX VHYHUDODQVZHUFKRLFHVWKDWIHDWXUHFRPPDVLQGLIIHUHQWSODFHVZLWKLQWKHXQGHUOLQHGSKUDVH ,QWKHFDVHRIDSURSHUߡFRPPDVDQGZLFKߢWKHFRPPDVQHHGWREHSODFHGRQHLWKHUHQGRIWKHSKUDVHLQ VXFKDZD\WKDWWKHHQWLUHߡVDQGZLFKߢ WKHSKUDVHDQGWKHFRPPDV FRXOGEHUHPRYHGOHDYLQJEHKLQGD FRPSOHWHVHQWHQFH /HWߞVORRNDWDFRXSOHRIH[DPSOHVRIWKLVVR\RXFDQDFWXDOO\VHHZKDW,ߞPWDONLQJDERXW,QWKHVH H[DPSOHV,ߞOOXQGHUOLQHWKHߡFRPPDVDQGZLFKߢ 7KHPDQQH[WGRRUZKRWROGXVZHFRXOGERUURZKLVODZQPRZHUZDVDOZD\VYHU\KHOSIXO ,QWKDWFDVHUHPRYLQJWKHߡFRPPDVDQGZLFKߢJLYHVXVWKLV 7KHPDQQH[WGRRUZDVDOZD\VYHU\KHOSIXO +HUHߞVDQRWKHUH[DPSOH,PDJLQHZHVWDUWZLWKWKLVVHQWHQFH 7KHRUDQJHVKLUWZKLFKLVWKHRQH,ZDQWHGWRZHDULVQߞWFOHDQULJKWQRZ 5HPRYLQJWKHߡFRPPDVDQGZLFKߢJLYHVXVWKLV 7KHRUDQJHVKLUWLVQߞWFOHDQULJKWQRZ ,QHDFKFDVH\RXFDQVHHWKDWZKHQWKHFRPPDVDQGWKHSKUDVHEHWZHHQWKHPDUHUHPRYHGZKDWߞVOHIWLV VWLOODFRPSOHWHVHQWHQFH 7KHUHDUHDIHZGLIIHUHQWZD\VWKDWWKH$&7PLJKWSUHVHQWDVHQWHQFHOLNHWKLV6RPHWLPHVWKHHQWLUH SKUDVHPLJKWEHXQGHUOLQHGDQGLWߞOOEH\RXUMREWRILQGWKHULJKWFRPPDSODFHPHQWIRUWKHZKROHSKUDVH DVLQWKHH[DPSOHVDERYH6RPHWLPHVWKHUHPLJKWEHDQXQGHUOLQHGSRUWLRQWKDWRQO\RYHUODSVZLWKRQH KDOIRIWKHFRPPDVDQGZLFK(LWKHUZD\\RXQHHGWREHDEOHWRUHFRJQL]HWKLVW\SHRISKUDVHDQGPDNH VXUHWKHFRPPDVDUHSODFHGLQVXFKDZD\WKDWWKHFRPPDVDQGZLFKFDQEHUHPRYHGIURPWKHVHQWHQFH DQGVWLOOOHDYHEHKLQGDFRPSOHWHVHQWHQFH/HWߞVORRNDWRXUWZRH[DPSOHVDJDLQWKLVWLPHZLWKWKH FRPPDVSODFHGLQFRUUHFWO\ 7KHPDQQH[WGRRUZKRWROGXVZHFRXOGERUURZKLVODZQPRZHUZDVDOZD\VYHU\KHOSIXO 5HPRYLQJWKHSKUDVHEHWZHHQWKHFRPPDVZRXOGJLYHXVWKLVXQDFFHSWDEOHIUDJPHQW 7KHPDQQH[WGRRUFRXOGERUURZKLVODZQPRZHUZDVDOZD\VYHU\KHOSIXO +HUHߞVDQRWKHUH[DPSOHRIDQLPSURSHUXVHRIFRPPDV 7KHRUDQJHVKLUWZKLFKLVWKHRQH,ZDQWHGWRZHDULVQߞWFOHDQULJKWQRZ 5HPRYLQJWKHSKUDVHEHWZHHQWKHFRPPDVZRXOGJLYHXVWKLVXQDFFHSWDEOHIUDJPHQW 7KHRUDQJHVKLUWULJKWQRZ ,QWKHVHH[DPSOHVZHFDQVHHWKDWUHPRYLQJWKHߡFRPPDVDQGZLFKߢOHDYHVEHKLQGDQLQFRPSOHWH VHQWHQFHZKLFKZRXOGEHXQDFFHSWDEOHRQWKH$&7 :KDWLIWKHFRPPDVDUHFRUUHFWO\SODFHGRQHLWKHUHQGRIWKHߡFRPPDVDQGZLFKߢEXWWKHUHߞVDQRWKHU FRPPDLQWKHPLGGOH":HOOWKHQZHߞGKDYHWZRߡFRPPDVDQGZLFKHVߢDQGZHߞGKDYHWREHDEOHWR UHPRYHHLWKHURQH RUERWK DQGEHOHIWZLWKDFRPSOHWHVHQWHQFH+HUHDUHWZRH[DPSOHVWKDWHDFK LQYROYHWZRFRPPDVDQGZLFKHVDIWHUHDFKRQH\RXߞOOVHHWZRPRUHYHUVLRQVRIWKHVHQWHQFHHDFKZLWK RQHRIWKHWZRVDQGZLFKHVUHPRYHG +HUHߞVDQH[DPSOHRIDVHQWHQFHZLWKDFRXSOHRIEDGߡFRPPDVDQGZLFKHVߢ 7KHPDQQH[WGRRUZKRWROGXVZHFRXOGERUURZKLVODZQPRZHUZDVDOZD\VYHU\KHOSIXO 7KLVLVZKDWZHZRXOGJHWLIZHUHPRYHGWKHILUVWEDGߡVDQGZLFKߢ 7KHPDQQH[WGRRUFRXOGERUURZKLVODZQPRZHUZDVDOZD\VYHU\KHOSIXO 7KLVLVZKDWZHZRXOGJHWLIZHUHPRYHGWKHVHFRQGEDGߡVDQGZLFKߢ 7KHPDQQH[WGRRUZKRWROGXVZHZDVDOZD\VYHU\KHOSIXO +HUHߞVDQRWKHUH[DPSOHRIDVHQWHQFHZLWKDFRXSOHRIEDGߡFRPPDVDQGZLFKHVߢ 7KHRUDQJHVKLUWZKLFKLVWKHRQH,ZDQWHGWRZHDULVQߞWFOHDQULJKWQRZ 7KLVLVZKDWZHZRXOGJHWLIZHUHPRYHGWKHILUVWEDGߡVDQGZLFKߢ 7KHRUDQJHVKLUWRQH,ZDQWHGWRZHDULVQߞWFOHDQULJKWQRZ 7KLVLVZKDWZHZRXOGJHWLIZHUHPRYHGWKHVHFRQGEDGߡVDQGZLFKߢ 7KHRUDQJHVKLUWZKLFKLVWKHLVQߞWFOHDQULJKWQRZ ,QERWKRIWKHVHH[DPSOHVWKHUHVXOWLQJSKUDVHVDUHQߞWFRPSOHWHVHQWHQFHVZKLFKPHDQVWKHVHFRPPD SODFHPHQWVZRXOGQߞ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ߡDQG DEDOO\RXWKRXJKWZDVORVWZLOOߢ\RXZRXOGEHOHIWZLWKߡ7KHQDJDLQ\RXFDQVRPHWLPHVJHWOXFN\ LQH[SOLFDEO\ERXQFHEDFNLQWRSOD\ߢ $OORIWKHVHFRPPDSODFHPHQWVEUHDNWKH$&7ߞVUXOHVIRUFRPPDXVDJHE\FUHDWLQJEDGFRPPD VDQGZLFKHVVRWKHFRUUHFWDQVZHULV % ZKLFKWDNHVRXWWKHFRPPDHQWLUHO\ 2QHODVWQRWH\RXPD\VHHWKHߡFRPPDVDQGZLFKߢFRQFHSWRQWKHWHVWZLWKGDVKHVDURXQGWKHSKUDVH LQVWHDGRIFRPPDV7KH\GRQߞWVKRZXSWRRRIWHQEXWߡGDVKVDQGZLFKHVߢIXQFWLRQMXVWOLNHߡFRPPD VDQGZLFKHVߢRQWKH$&7 /LVW2I7ZR7KLQJV 6RPHWLPHV\RXߞOOHQFRXQWHUDQXQGHUOLQHGSKUDVHRQWKH$&7WKDWLQYROYHVDOLVWRIWZRWKLQJVߚLQRWKHU ZRUGVMXVWDQ\WZRQRXQVMRLQHGE\WKHZRUGߡDQGߢ ,W VLPSRUWDQWWRUHPHPEHUWKHUHVKRXOG127EHDFRPPDLPPHGLDWHO\EHIRUHRUDIWHUWKHZRUGߡDQGߢLQD OLVWRIWZRWKLQJVRQWKH$&7(QJOLVKVHFWLRQ /HW VORRNDWDQH[DPSOHRIWKLVLQWKH5HG%RRN 4XHVWLRQRQSDJHLQYROYHVWKHXQGHUOLQHGSKUDVHߡWLPHDQGWKHFKDQQHOߢ,QWKLVH[DPSOHWKHOLVWRI WZRWKLQJVDVLWRULJLQDOO\DSSHDUVLQWKHSDVVDJHLVWKHSKUDVHߡWKHWLPHDQGWKHFKDQQHOߢ 6LQFHZHNQRZDOLVWRIWZRWKLQJVVKRXOGQߞWLQFOXGHDFRPPDHLWKHULPPHGLDWHO\EHIRUHRUDIWHUWKHZRUG ߡDQGߢZHQHHGWRILQGDQDQVZHUFKRLFHWKDWIROORZVWKLVUXOH2QO\FKRLFH & IROORZVWKHUXOHZLWKRXW FUHDWLQJDQ\RWKHUSUREOHPVVR & LVFRUUHFW 127(,WFDQEHDFFHSWDEOHWRSXWDFRPPDGLUHFWO\EHIRUHߡDQGߢZKHQLWߞVQRWEHLQJXVHGWRFRQQHFW WZRQRXQVLQDOLVWRIWZRWKLQJV)RUH[DPSOHLQWKHVHQWHQFHߡ,VDZWKHSOD\ODVWZHHNDQG,WKRXJKWLW ZDVJUHDWߢWKHZRUGߡDQGߢLVQߞWFRQQHFWLQJWZRQRXQVLQDOLVWRIWZRVRWKHFRPPDEHIRUHߡDQGߢLV DFFHSWDEOHDFFRUGLQJWRWKHUXOHVRIWKH$&7(QJOLVKVHFWLRQ$OVRLQDOLVWRUVHULHVRIPRUHWKDQWZR WKLQJVWKH$&7ZDQWVXVWRSXWDFRPPDLPPHGLDWHO\EHIRUHWKHZRUGߡDQGߢDVLQWKHVHQWHQFHߡ6KHWRRN KHUEULHIFDVHFHOOSKRQHDQGODSWRSFRPSXWHUWRZRUNZLWKKHUߢ:HFDQVHHDQH[DPSOHRIWKLVW\SHRI OLVWLQTXHVWLRQRQSDJHRIWKH5HG%RRN ,GLRPV :HQHHGWRWDNHDPLQXWHWRWDONDERXWSUHSRVLWLRQDOLGLRPVIRUWZRPDLQUHDVRQVWKH\RFFDVLRQDOO\FRPH XSRQWKH$&7DQGWKH\LQYROYHDFRQFHSWWKDWPDQ\WHVWSUHSDUDWLRQUHVRXUFHVH[SODLQSRRUO\ 7KHZRUGߡLGLRPߢKDVWZRGLIIHUHQWPHDQLQJV,QDORRVHVHQVHWKHߡLGLRPRIDODQJXDJHߢLVWKHQDWXUDO ZD\WKDWQDWLYHVSHDNHUVRIWKDWODQJXDJHFRPPXQLFDWH,QDVWULFWHUVHQVHDQLGLRPLVDQLQGLYLGXDO SKUDVHWKDWߞVFRQVLGHUHGWREHJUDPPDWLFDOO\FRUUHFWIRUUHDVRQVWKDWFDQߞWEHSUHGLFWHGRUH[SODLQHGE\D JUDPPDWLFDOUXOH,QRWKHUZRUGVWKLVVHFRQGW\SHRILGLRPLVDQH[SUHVVLRQWKDWߞVVLPSO\ULJKWEHFDXVH LWߞVULJKWHYHQWKRXJKLWKDVQRGHWHFWDEOHVLPLODULW\WRDQ\RWKHUFRUUHFWSKUDVH 7KLVVHFRQGW\SHRILGLRPLVWKHW\SH,ߞPUHIHUULQJWRZKHQ,WDONDERXWLGLRPVRQWKH$&7/HWߞVFRQVLGHU DTXLFNH[DPSOH<RXߞUHSUREDEO\IDPLOLDUZLWKWKHSKUDVHߡWRIDOOLQORYHߢ:K\LVQߞWLWߡ WRIDOOZLWK ORYHߢRUߡ WRIDOOWRORYH"ߢ7KHUHߞVQRORJLFDOUHDVRQIRURQHRIWKRVHSKUDVHVWREHDFFHSWDEOHZKLOHWKH RWKHUWZRDUHQߞWߚORYHLVQߞWD