/XOODE\RI%LUGODQG
)RU0LPL


:KHQZHHQWHUHGWKHKLJKHVWFKDPEHUKHVDLGߧ/RQJDJRZLWKP\VHUYDQW,VSHQWHLJKWVXPPHUGD\VLQWKLVURRPDQG,ZURWHDOLWWOH
SRHPRQWKHZDOO,VKRXOGOLNHWRVHHWKHSRHPDJDLQ,IWKHGD\LVQRWHGEHQHDWKZKHQWKLVRFFXUUHGSOHDVHEHVRJRRGDVWRUHFRUG
LWIRUPHߨ6WUDLJKWDZD\,OHGKLPWRWKHVRXWKHUQZLQGRZLQWKHURRPWKHUHRQWKHOHIWLWVWRRG
žEHUDOOHQ*LSIHOQ 2YHUDOOWKHSHDNV
,VW5XK ,WLVFDOP
,QDOOHQ:LSIHOQ ,QDOOWKHWUHHWRSV
6S¾UHVWGX <RXIHHO
.DXPHLQHQ+DXFK +DUGO\DEUHDWK
'LH9¸JHOHLQVFKZHLJHQLP:DOGH %LUGVDUHTXLHWLQWKHZRRGV
:DUWHQXUEDOGH -XVWZDLWVRRQ
5XKHVWGXDXFK <RXZLOOUHVWWRR
'6HSWHPEHU*RHWKH
*RHWKH UHDG WKHVH IHZ OLQHV DQG WHDUV IORZHG GRZQ KLV FKHHNV 9HU\ VORZO\ KH GUHZ KLV VQRZZKLWH KDQGNHUFKLHI IURP KLV GDUN
EURZQ FRDW GULHG KLV WHDUV DQG VSRNH LQ D JHQWOH PRXUQIXO WRQH ߧ<HV MXVW ZDLW VRRQ \RX WRR ZLOO UHVWߨ +H IHOO TXLHW IRU KDOI D
PLQXWHORRNHGRQFHPRUHWKURXJKWKHZLQGRZLQWRWKHJORRP\VSUXFHIRUHVW7KHQKHWXUQHGWRPHDQGVDLGߧ:HOOOHWXVJRߨ
7KXV&KULVWLDQ0DKUUHSRUWVKRZ*RHWKHRQWKHHYHQLQJEHIRUHKLVODVWELUWKGD\YLVLWHGRQHPRUH
WLPHWKHKXQWLQJORGJHRQWKH.LFNHOKDKQPRXQWDLQQHDU,OPHQDX7KHVFHQHLVQRWMXVWKLVWRULFDO,W
PDGHKLVWRU\WRRߟOLWHUDU\KLVWRU\+HUHDQDXWKRUQHDUWKHHQGRIKLVOLIHFHUHPRQLRXVO\DUFKLYHV
KLVEHJLQQLQJV7RWKHOHWWHU*RHWKHIROORZVWKHUXOHVWKDWLQWKH\HDUVDURXQGSURGXFHGWKHQHZ
DXWKRUEDVHGNLQGRIWH[WFDOOHGߧOLWHUDWXUHߨ
7KHVH UXOHV ZHUH DOVR IRUPXODWHG LQ *RHWKHߤV %LOGXQJVURPDQ 7KHUH RQH UHDGV RI :LOKHOP
0HLVWHU ߤVUHODWLRQVKLSWRWKHSRHPVRIKLV\RXWK
8SWRQRZKHKDGFDUHIXOO\SUHVHUYHGHYHU\WKLQJWKDWKDGIORZHGIURPKLVSHQVLQFHKLVPLQGEHJDQWRGHYHORS+LVZULWLQJVZHUHWLHG
XSLQEXQGOHVZKLFKKHKDGKRSHGWRWDNHZLWKKLPRQKLVMRXUQH\>@
:KHQZHRSHQDOHWWHUWKDWZHRQFHZURWHDQGVHDOHGRQDSDUWLFXODURFFDVLRQEXWZKLFKQHYHUUHDFKHGWKHIULHQGLWZDVVHQWWRDQG
ZDVUHWXUQHGWRXVZHKDYHDVWUDQJHIHHOLQJDVZHEUHDNWKHVHDORXURZQVHDODQGFRQYHUVHZLWKRXUGLIIHUHQWVHOIDVZLWKDWKLUG
SHUVRQ-XVWVXFKDIHHOLQJLWZDVWKDWJULSSHGRXUKHUR

,QWKHVDPHVSLULWߟDVWKHDUFKLYLVWRIKLVRZQDXWKRUVKLSߟWKHHLJKW\RQH\HDUROGSRHWDVFHQGHGWKH
.LFNHOKDKQ ߧ7KH ROG LQVFULSWLRQ ZDV UHFRJQL]HGߨ *RHWKH QRWHV LQ KLV MRXUQDO DSURSRV RI WKH ODVW
RXUQH\KHKDVPDGH7KHMRXUQH\IHWFKHVEDFNPHVVDJHVWRWKHVHQGHUߟPHVVDJHVWKDWXQOLNHOHWWHUV
DUHQRWIXOILOOHGZKHQWKH\UHDFKWKHLUDGGUHVVHHV7KH\DUHߧOLWHUDWXUHߨLQWKHQHZVHQVHRIWKHZRUG
DQGWKDWPHDQVWKDWWKH\UHPDLQWKHSURSHUW\RIWKHLUDXWKRUIRUHYHUPRUH7KDWVDLGZKDWLVQHZLV
WKHGLYLVLRQRIODERU:KHUHDVWKHDVSLULQJSRHW:LOKHOP0HLVWHUߟLQRUGHUWRHVWDEOLVK>VWDWXLHUHQ@
KLV DXWKRUVKLS ߧVLQFH KLV PLQG EHJDQ WR GHYHORSߨߟPXVW JDWKHU DQG RUGHU ߧWKH SDSHUV LQ
FKURQRORJLFDOVHTXHQFHߨ*RHWKHWKHROGPDQFDQEXLOGRQWKHJRRGQHVVRIDJHRORJLVW0DKUWDNHV
QRWH IRU KLP ZKHQ D WH[W ZDV ZULWWHQߟZKRVH \RXWKIXO DXWKRU KDG DOUHDG\ GDWHG DQG VLJQHG LW LQ
DQWLFLSDWLRQ
+RZHYHUVRPHWKLQJVWUDQJHRFFXUV-XVWDVWKHDUFKLYLVW0HLVWHUH[SHULHQFHVDߧVWUDQJHIHHOLQJߨ
WKHDXWRELRJUDSKHUDQGߧFOHUN>.DQ]OLVW@RIKLVRZQLQWHULRUߨߟZKLFK*RHWKHKDVEHFRPHLQKLVROG
DJHߟH[SHULHQFHVDVWUHDPRIWHDUVWKDWSXWVDQHQGWRWKHOLWHUDU\DQDJQRULVLV2QFHPRUHUHUHDGLQJ
RQHߤVRZQZULWLQJVEHFRPHVDFRQYHUVDWLRQߧZLWKRXUGLIIHUHQWVHOIߨ7KHUHDGHUOHQGVKLVYRLFHWR
ZKDW LV ZULWWHQ KH UHSHDWV DQG DIILUPV ZKDW ߧ:DQGHUHU ߤV 1LJKW 6RQJߨ VD\V 7KHUHE\ KH KLPVHOI
HQWHUV WKH FKDLQ RI EHLQJV WR ZKRP WKH YHUVHV SURPLVH UHVW ILUVW WKH PRXQWDLQV DQG ELUGV WKHQ WKH
ZULWHUDQGILQDOO\DIWHUILIW\RQH\HDUVWKHUHDGHUߧWRRߨ7KURXJKWKHIORZRIWHDUVWKHDUFKLYLQJRI
WKH WH[W EHFRPHV LWV UHWXUQ HYHU\WKLQJߟWKH YLHZ RI WKH VXPPLWV DQG WKH VSUXFH IRUHVW WKH VHOI
DGGUHVVWKHVLOHQFHDWWKHHQGߟLWDOOKDSSHQVRQFHPRUHMXVWDVWKHIDGHGSHQFLOOLQHVDWWKHVRXWKHUQ
ZLQGRZKDYHGHVFULEHGDQGSUHVFULEHG
1RRQHFULHVDWKLVRZQZRUGVߟLIRQO\EHFDXVHWKHUHLVQRVXFKWKLQJDVߧZRUGVRIRQHߤVRZQߨ
2QO\ ZKHQ VRPHRQH HOVH KDV ZULWWHQ WKHP GRHV RQH UHDG DQG FU\ :KDW OLWHUDU\ VFKRODUV FDOO WKH
ߧO\ULFDO,ߨGRHVQRWH[LVWDWDOO,IWKHUHDGHULVSURPLVHGFDOPWKHQWKLVRFFXUVIRUDߧ\RXߨ)LIW\RQH
\HDUVDJRIRUWKHZULWHULWZDVQRGLIIHUHQW
7KH VWDWHPHQW ߧ, UHVWߨ LV D SUDJPDWLF SDUDGR[ 1R PRXWK FDQ YRLFH LW EHFDXVH VOHHS DQG GHDWK
H[FOXGH VSHDNLQJߟMXVW DV VSHDNLQJ H[FOXGHV VOHHS DQG GHDWK 7KH RQO\ H[FHSWLRQ WR WKH UXOH LV QR
H[FHSWLRQZKHQWKHPDJLFRIDQLPDOPDJQHWLVPHQDEOHVWKHGHDG0LVWHU9DOGHPDUߟLQ3RHߤVWDOHRI
WKHVDPHQDPHߟWRKROGRQWRODQJXDJHDQGWRDQVZHUWKHTXHVWLRQDERXWKLVFRQGLWLRQE\GHFODULQJ
ߧ, DP GHDGߨ KH SURPSWO\ GLVVROYHV LQ WKH EOLQN RI DQ H\H LQWR D VWLQNLQJ PDVV ߧIRU ZKLFK QR
ODQJXDJHKDVDQDPHߨ)RUWKLVPDVVWKHZRUGߧFRUSVHߨLVVWLOODHXSKHPLVP
$EVHQFH RFFXUV RQO\ LQ VSHHFK EXW QR VSHHFK RFFXUV LQ DEVHQFH 7KH YHUVHV RQ WKH .LFNHOKDKQ
VSHDN RI WKLV ODZ 7KH\ DUH GLVFRXUVH DERXW WKH VLWH WKDW H[FOXGHV VSHHFKߟDQG WKH VLWH WKDW VSHHFK
H[FOXGHV ߧ:DQGHUHU ߤV 1LJKW 6RQJߨ GRHV QRW PHDQ WKDW DW WKH SRHPߤV HQG ߧHYHQ WKH PRVW UHVWOHVV
EHLQJߟPDQߟPXVW UHVWߨ ,QVWHDG LW PHDQV VLPSO\ DQG ZLWKRXW KXPDQLVW DGGRQV WKDW WKH HQG RI
VSRNHQ VSHDNLQJ EHLQJV LV DW KDQG >GD¡ HV PLW GHQ JHVSURFKHQHQ VSUHFKHQGHQ :HVHQ ]X (QGH JHKW@
7KHRQHZKRVD\VWKDWPRXQWDLQVWUHHVDQGDQLPDOVDUHPXWHZLOOIDOOVLOHQWKLPVHOIߟDQGWKDWPHDQV
KHZLOOEHFRPHRQHZLWKWKHP
%HFDXVHLWLVGLVFRXUVHDERXWGLVFRXUVHDQGGLVFRXUVHDERXWWKHHQGRIGLVFRXUVHWKHWH[WUHIHUVDOO
LWVSDUDPHWHUVWRVSHDNLQJߟERWKWRWKHVSHDNHUDQGWRZKDWLVVSRNHQDERXW1DPLQJDILQDOߧEUHDWKߨ
LQWKHWUHHWRSVPHDQVWXUQLQJWKHZRUNLQWRDPHWDSKRURIUHVSLUDWLRQDQGYRLFHZKLFKDUHWKH5HDORI
ODQJXDJHDQGPDNHLWWKHVLEOLQJRIVOHHS7RVD\WKDWFUHSXVFXODUELUGVߧDUHTXLHW>VFKZHLJHQ@ߨPHDQV
KHDULQJWKHLUVRQJDVGLVFRXUVH>LKU6LQJHQZLHHLQ5HGHQK¸UHQ@ EHFDXVH DV +HLGHJJHU REVHUYHG
ߧRQO\ LQ WUXH VSHHFK LV LW SRVVLEOH DFWXDOO\ WR VD\ QRWKLQJ >QXU LP HFKWHQ 5HGHQ LVW HLJHQWOLFKHV
6FKZHLJHQ P¸JOLFK@ߨ 7KHUHIRUH WKH SRHP LQYRNHV DQ DFRXVWLF WZLOLJKW LQ ZKLFK WKH YRLFHV RI
QDWXUH DQG VSHDNLQJ VRXQGV >/DXWH@ DQG ZRUGV EHFRPH LQGLVWLQJXLVKDEOH 7KH ODVW ZRUGߟD
YDQLVKLQJ >YHUKDOOHQG@ ߧWRRߨߟH[SOLFLWO\ SXWV DQ HQG WR WKH GLIIHUHQFH EHWZHHQ WKHP 6RXQGV DQG
VSHDNLQJPHOWWRJHWKHULQWKHPRPHQWZKHQERWKFHDVH$WLWVHQGWKHSRHPSHUIRUPVZKDWLWVSHDNV
DERXW ZKDW LV XWWHUHG DQG WKH XWWHUDQFH FRLQFLGH $Q\ VSHHFK WKDW GUHDPV DZD\ LWV GLIIHUHQFH IURP
VRXQGVPXVWHQG
7KHUHIRUHLWLV$QRWKHUZKRVSHDNV:KHUHWKHWH[WSDVVHVIURPWKHVRXQGVRIQDWXUHWRWKHVSHDNHU
ZKRKHDUVWKHPWKHUHDSSHDUVLQKLVVWHDGDVXEMHFWRIXWWHUDQFH>†X¡HUXQJ@WKDWLVDߧ\RXߨIRUWKH
LPSOLFLWVSHDNHU,$QDPHOHVVYRLFHHQWHUVLQWRSOD\ZLWKRXWZKLFKWKHSRHPFRXOGQRWH[LVWDWDOOWKH
YRLFHRIDSURPLVH>=XVSUXFK@ZKLFKFDOOVWKHXQVSHDNDEOHHQGRIVSHHFKDߧUHVWߨ
(PLO 6WDLJHU RQFH REVHUYHG WKDW RQH ZRXOG GHVWUR\ ߧ:DQGHUHU ߤV 1LJKW 6RQJߨ E\ UHSODFLQJ ߧ\RX
IHHOߨ ZLWK ߧ\RX QRWLFHߨ 2QH ZRXOG GHVWUR\ LW HYHQ PRUH HIIHFWLYHO\ E\ UHSODFLQJ ߧ\RXߨ ZLWK ߧ,ߨ
)RUWKHSURPLVHRIWKH2WKHUߟDIDFWWRZKLFK*RHWKHߤVWHDUVEHDUZLWQHVVߟLVWKHGLVFXUVLYHHYHQWLQ
ߧ:DQGHUHU ߤV1LJKW6RQJߨ%HFDXVHQRRQHFDQSHUIRUPWKHSDUDGR[LFDOVSHHFKDFWRIQDPLQJKLVRZQ
DEVHQFHLQDEVHQFHVSRNHQEHLQJVDUHDEVROXWHO\UHOLDQWRQDOLHQGLVFRXUVHV>VLQG GLH JHVSURFKHQHQ
:HVHQDXIIUHPGH5HGHQVFKOHFKWKLQDQJHZLHVHQ@7KHODZKROGVDOOWKHPRUHIRUZRUGVVXFKDVߧUHVWߨ
>5XKH@ ߧVOHHSߨ DQG ߧGHDWKߨ WKH\ GHULYH IURP WKH GLVFRXUVH RI WKH 2WKHU 1HLWKHU GHL[LV QRU
LQWURVSHFWLRQFRXOGHYHUKDYHGUHDPHGWKHPXS
,I WKLV RQHLULF DQG WKHUHIRUH XQLYHUVDO ODZ JRYHUQV WKH DEVHQW SDUW\ߟWKDW KH ߧZDV DOUHDG\ GHDG
DQGMXVWGLGQRWNQRZLW\HWߨߟWKHQZRUGVZKLFKLVWRVD\WKHDSSHDUDQFH>GHU6FKHLQ@RINQRZOHGJH
DERXWWKLVODZEHORQJWRWKH2WKHUDORQH7KHQDPHOHVVYRLFHWKDWVXUIDFHVDWWKHHQGRIߧ:DQGHUHU ߤV
1LJKW6RQJߨDUWLFXODWHVWKHXQDUWLFXODWHGDQGVSHDNVWKHXQVSHDNDEOHߟDQGQRWEHFDXVHLWNQRZVEXW
VLPSO\EHFDXVHLWVD\VDQ\WKLQJDWDOO7KDWIDOOLQJVLOHQWZLOOEHUHVWDQGQRWGLVDSSHDUDQFH>9HUJHKHQ@
ZKLFK LV ZKDW WKH YHUVHV SURPLVH ZKHWKHU RU QRW D UHWXUQ ZLOO RFFXU WKH TXHVWLRQ SRVHG E\ WKH
WHDUVDQGWKHDIILUPDWLRQWKDWWKHRQHZKRUHVWVZLOOEHWKHVDPHDVWKHRQHZKRZDNHVWKHFRPIRUW
RIIHUHGE\WKHߧ\RXߨߟWKHZRUGVWKDWDUHYRLFHGFDQVD\DOOWKLVRQO\EHFDXVHLWZDVRQFHSURPLVHG
>]XJHVSURFKHQ@WRWKHP$FFRUGLQJO\WKHVLPSOHDFWRIXWWHUDQFHJUDQWVWKHQDPHOHVVYRLFHWKHVDPH
FDOP>%HUXKLJXQJ@RIZKLFKLWVSHDNV$JXDUDQWHHWKDWLWVHOIKDVQRJXDUDQWHHߟEHFDXVHWKHUHLVQR
2WKHURIWKH2WKHU ߟIHUULHVVWXSHILHGERGLHVRYHU$EVHQFH
7REHVXUHHYHU\RQHWDNHVXSZRUGV>MHGHUQLPPWGLH:¸UWHULQGHQ0XQG@WKDWQDPHWKHERG\DQG
LWVDEVHQFHV7KHVDPHKDQGDOVRDGGHGWKHODVWWZROLQHVWRߧ:DQGHUHU ߤV1LJKW6RQJߨ%XWVLQFHߧWKH
VXEMHFW    UHFHLYHV IURP WKH 2WKHU HYHQ WKH PHVVDJH KH KLPVHOI VHQGVߨ WKH\ DUH UHSHDWHG
>QDFKJHVSURFKHQ@DQGGHULYHWKHLUSRZHURQO\IURPUHSHWLWLRQ>1DFKJHVSURFKHQVHLQ@7KHUHLVIXUWKHU
HYLGHQFHRIWKLVRFFXUUHQFHLQ*RHWKHߤVZRUNV:HUWKHULQORYHIRU/RWWHVSHDNVLQWKHVDPHZD\WKDW
ߧ:DQGHUHU ߤV1LJKW6RQJߨGRHVZKHQLWIROORZVWKHZRUGVRIDQDPHOHVVYRLFH
<HVWHUGD\DV,ZDVOHDYLQJVKHJDYHPHKHUKDQGDQGVDLGߧ$GLHXGHDU:HUWKHUߨߟ'HDU:HUWKHU,WZDVWKHILUVWWLPHVKHKDGHYH
FDOOHGPHGHDUDQGLWSLHUFHGPHWKURXJKDQGWKURXJK,UHSHDWHGLWWRP\VHOIDKXQGUHGWLPHVDQGODVWQLJKWJHWWLQJUHDG\IRUEHGDQG
PXWWHULQJDOOVRUWVRIWKLQJV,VXGGHQO\VDLGߧ*RRGQLJKWGHDU:HUWKHUߨߟDQGODXJKHGRXWORXGWRKHDULW

7KLVQRFWXUQDOH[FKDQJHEHWZHHQDQ,DQGLWVGRXEOHGHULYHVDOOLWVSRZHUIURPDSURPLVH,WUHVWVRQ
WKHV\PEROLFJLIWRIWKH2WKHUZKRDORQHFDQELGJRRGQLJKW7KHߧWKLUGSHUVRQߨZLWKZKRP:LOKHOP
0HLVWHUFRPSDUHVߧRXUGLIIHUHQWVHOIߨWKHQLVDQ\WKLQJEXWDVLPSOHDOOHJRU\LWUXOHVWKHߧVHOIߨLWVHOI
ߟWKHYHU\VHOIWKDWWXUQVRXWWREHLPDJLQDU\,WLVMXVWWKDWGLIILFXOWWRILQGUHVWRQRQHߤVRZQ2QO\WKH
SOHGJHRI/RWWHߤVZRUGVPDNHV:HUWKHUߧGHDUߨWRKLPVHOI+HߟZKRLVQRWO\LQJZLWKKHUERG\ߟIDOOV
DVOHHSWRWKHHFKRRIKHUVSHHFKLQVWHDG,QGUHDPVWKHK\SQDJRJLFGLVFRXUVHRIWKH2WKHUIXOILOOVWKH
GHVLUHRIDORYHWKDWZDVDOZD\VDOUHDG\WKHZLVKWREHORYHG:HUWKHU ߤVORYHIRU/RWWHDIWHUDOOLV
ߧFRQVWLWXWHGQRWE\>KLV@ELRORJLFDOGHSHQGHQFHEXWE\>KLV@GHSHQGHQFHRQKHUORYHWKDWLVE\>KLV@
GHVLUH IRU KHU GHVLUHߨ $QG SUHFLVHO\ RQ WKLV SRLQWߟDV WKH QRYHO GHFODUHV H[SOLFLWO\ߟ/RWWH LV WKH
ߧLPDJH >(EHQELOG@ߨ RI KHU PRWKHU 7KH ORQHVRPH ZDQGHUHU RQ WKH .LFNHOKDKQ DQG WKH ORQHVRPH
VOHHSHULQ:DKOKHLPERWKH[SHULHQFHDOLWHUDOSDFLILFDWLRQ>6WLOOXQJ@ ZKHQ WKH K\SQDJRJLF YRLFH RI
WKH 0RWKHU UHWXUQV 7KH\ JHW ZKDW :HUWKHU KLPVHOI VD\V KH ߧQHHGHGߨ IURP WKH EHJLQQLQJ D
ߧOXOODE\ߨ


,QGHHGWKHFKLOGUHQߤVQXUVHVNQRZWKHYLUWXHVRIOLOLHVLQWKHQXUVHU\KHDYHQO\WKHULDFVVHGDWLYHV>5HTXLHV1LFRODL@JDUOLFSRWDWLRQV
DQGRSLXPߟDQGZKHQQRWKLQJHOVHLVWREHGRQHKXPPLQJDQGURFNLQJ

7KHELWWHUVFRUQRIDQDQRQ\PRXVUHIRUPSHGDJRJXHVD\VLW:HVWHUQODQGVGLGQRWDOZD\VHPSOR\
VXFKJHQWOHPHWKRGVRILQGXFLQJVOHHSDVߧ:DQGHUHU ߤV1LJKW6RQJߨWDNHVIRUJUDQWHG$WWKHHQGRI
WKHHLJKWHHQWKFHQWXU\ZKHQWKHJD]HRIWKHQHZDQWKURSRORJLFDOVFLHQFHV>0HQVFKHQZLVVHQVFKDIWHQ@
GLVFRYHUHG ZKHUH LQIDQWV OD\ LW VDZ WKDW QDNHG YLROHQFH VXUURXQGHG WKHP 1XUVHV DQG DWWHQGDQWV
FDOPHGWKHFULHVRIFKLOGUHQE\PHDQVWKDWQRIULHQGRIPDQNLQGFRXOGDSSURYH9HQHUDEOHPHWKRGVRI
PDNLQJFKLOGUHQVOHHS\DQGSXWWLQJWKHPWREHGLQFOXGHGGUXJVVXFKDVVSRRNDERXWLQGLVUHSXWDEOH
PHGLFLQHV ZKLFK LV WR VD\ RQFH WKH\ VKHG WKHLU PDVNV RSLXP DQG D PHWKRG FDOOHG 6WHFNZLFNHOQ
ZKLFKLQYROYHGSODFLQJWKHFKLOGRQDERDUGWKHOHQJWKRILWVERG\VZDGGOLQJLWWLJKWO\DQGPDNLQJD
NLQGRIPXPP\
)LQDOO\PHWKRGVLQYROYHGWKHFUDGOHRIZKLFKDQRWKHUUHIRUPHUGHFODUHG
)DUPRUHPLVWDNHQLVWKHJHQHUDOO\SUHYDOHQWFXVWRPDPRQJWKHSHDVDQWU\WRIRUFHWKHFKLOGUHQWRVOHHSRQHVHHNVWRDFKLHYHWKLV
WKURXJK FRQVWDQW UHFNOHVV URFNLQJ E\ VZLQJLQJ DQG VKDNLQJ WKURXJK EHDULQJ XS DQG GRZQ DQG YLJRURXV VLQJLQJ WKHVH PHWKRGV DUH
VRRQHUVXLWHGWRSURGXFHDWPRVWDSDVVLQJGD]HZKLFKJLYHVWKHILUVWLQGXFHPHQWWRVWXSLGLW\DQGLGLRF\

5HFHLYHGPHDQVRISXWWLQJFKLOGUHQWREHGDQGJHWWLQJWKHPWRVOHHSGLGQRWDFNQRZOHGJHWKHVRXORI
WKH FKLOG 7KH LQIDQW ZDV WUHDWHG DV D ERG\ OLNH DQ\ RWKHU 3UDFWLFHV GLG QRW WDNH LQWR DFFRXQW D
UHODWLRQVKLSWKDWHYHUVLQFHWKH$JHRI*RHWKHKDVJLYHQULVHWRLQQXPHUDEOHFHOHEUDWLRQVDQGK\PQV
WKH LQWHUDFWLRQ EHWZHHQ PRWKHU DQG FKLOG 7KLV LV ZK\ LQ WKH H\HV RI WKH SHGDJRJLFDO DQG
SV\FKRORJLFDOUHIRUPHUVZKRDWWKHHQGRIWKHHLJKWHHQWKFHQWXU\GLVFRYHUHGWKHLQIDQWDVWKHPDLQ
WDVNRIDOOFXOWXUDOZRUNSUHYDOHQWPHWKRGVDOOOHGߧWRVWXSLGLW\DQGLGLRF\ߨߟVXFKDUHWKHDWWULEXWHV
RI D VLPSOH >VFKOLFKW@ ERG\ ZKHQ WKH JD]H RI SV\FKRORJLVWV DVVHVVHV LW 7KH FKLOGUHQ RI QDVFHQW
(XURSHDQ VWDWHV QHHGHG D VRXO DQG VR UHIRUP ZDV D VWUDLJKWIRUZDUG PDWWHU RI GHFODULQJ PRWKHUV
ߧLUUHSODFHDEOHߨDQGSXWWLQJWKHPZKHUHIRUFHQWXULHVQXUVHPDLGVDQGDWWHQGDQWVKDGVWRRG
:LWK WKDW DOO WKH PHWKRGV RI SDFLILFDWLRQ DQG SXWWLQJWRUHVWFKDQJHG 7KH FUDGOH IHOO LQWR GLVXVH
7ZHQW\ILYH\HDUVDIWHUEHLQJOXOOHGWRVOHHSLQߧDQRYHUVL]HGFUDGOHRIZDOQXWLQODLGZLWKLYRU\DQG
HERQ\ߨ *RHWKH VKDUHG ZLWK KLV PRWKHU ߧWKDW VXFK URFNLQJ FULEV KDYH IDOOHQ RXW RI IDVKLRQ
DOWRJHWKHUߨEHFDXVHRIWKHQHZIUHHGRPDFFRUGHGWRFKLOGUHQ$JUHDWFDPSDLJQRIHQOLJKWHQPHQW
DJDLQVWVZDGGOLQJEDELHVZDVLQLWLDWHG'UXJVZHUHUHSODFHGE\WKHJHQWOHYRLFHRIWKH0RWKHU
$PRWKHU ߤVJHQWOHYRLFHLVDPXOWLSXUSRVHLQVWUXPHQW,WߧUHFRUGVRYHUߨ>¾EHUVSLHOW@ZKDWLVDOUHDG\
WKHUHDQGSXWVKDUPRQ\ZKHUHGLIIHUHQFHVRWKHUZLVHWHDUDW2FFLGHQWDOVFKHPHVRINQRZOHGJHߟWKH
VHQVHVDQGWKHLQWHOOHFWLQVWLQFWDQGDUWERGLO\GLVFLSOLQHDQGFXOWLYDWLRQRIWKHVRXO>.¸USHUWHFKQLNHQ
XQG 6HHOHQKHUVWHOOXQJ@ -RKDQQ +HLQULFK 3HVWDOR]]L ZKR QRW RQO\ IRXQGHG WKH PRGHUQ HOHPHQWDU\
VFKRROV\VWHP>9RONVVFKXOZHVHQ@EXWDOVRߧHOHYDWHGߨWKHߧUHODWLRQVKLSEHWZHHQPRWKHUDQGFKLOGWRWKH
SURWRW\SH RI SHGDJRJLFDO UHODWLRQV LQ JHQHUDOߨ H[SOLFLWO\ GHFODUHG DV PXFK ,QDVPXFK DV WKH QHZ
UXOHV RI LQIDQW FDUH DUH WDNHQ WR KHDUWߟWKDW LV QXUVHPDLGV DQG DWWHQGDQWV DUH H[FOXGHGߟߧWKH FKLOG
ILUVW KHDUVߨ DQG KHDUV RQO\ WKH YRLFH RI LWV PRWKHU  ߧ7KH ILUVW IHHOLQJ RI D VRXQGߤV UHODWLRQVKLS
ZLWK WKH REMHFW WKDW SURGXFHG LW LV WKH IHHOLQJ RI FRQQHFWLRQ EHWZHHQ \RXU YRLFH DQG \RX 0RWKHUߨ

7KLV UXOH RI DQ RULJLQDU\ DQG LQGHOLEOH LQVFULSWLRQ LV WR EH WDNHQ WR KHDUW E\ WKH PRWKHU DQG
SURPSWO\DSSOLHG
%ULQJIRUWKWRQHV\RXUVHOIFODSVWULNHVWDPSVSHDNVLQJߟLQVKRUWPDNHVRXQGVVRWKDW>WKHFKLOG@LVKDSS\DQGFOLQJVWR\RXVRWKD
LWORYHV\RXPD\ORIW\JUDFHIORZIURP\RXUOLSVSOHDVHKLPWKURXJK\RXUYRLFHWRRDVQRRQHHOVHGRHVDQGGRQRWEHOLHYHWKD
\RXQHHGDQ\SDUWLFXODUDUWIRUWKLV7KHVZHHWQHVVRIWKHVSHHFKWKDWIORZVIURP\RXUKHDUWLVLQILQLWHO\PRUHYDOXDEOHIRUWKHHGXFDWLRQ
>%LOGXQJ@RI\RXUFKLOGWKDQDQ\DUWRIVRQJߟZKHUHLQLQDQ\HYHQW\RXZLOODOZD\VVWDQGEHKLQGWKHQLJKWLQJDOHI

)LUVWRIDOOWKHPDWHUQDOYRLFHߟZKRVHߧJUDFHߨ>$QPXWK@DQGVZHHWQHVV>/LHEOLFKNHLW@LQVSLUHORYHLQ
UHWXUQߟVWDQGVLQPDUNHGFRQWUDVWWRWKHߧYLJRURXVVLQJLQJߨRIQXUVHVDQGPDLGV,WKDVDQLPPHGLDWH
HIIHFWRQWKHERG\RIWKHFKLOG7KLVYRLFHLVQDWXUHDQG\LHOGVQDWXUH>LVW1DWXUXQGJHKWDXI1DWXU@
)RUWKLVUHDVRQWKHQLJKWLQJDOHDORQHLVLWVVWDQGDUGߟDQGLWRIIHUVWKHPRGHOIRUDOOELUGVRQJ
0RWKHUZLWKZKRP,VSHDNߟDVVRRQDVWKHFKLOGUHFRJQL]HV\RXUYRLFHDV\RXUVWKHQWKHFLUFOHRIZKDWLWXQGHUVWDQGVHQODUJHVDQG
LWJUDGXDOO\UHFRJQL]HVWKHFRQQHFWLRQEHWZHHQWKHVRQJRIELUGVDQGWKHELUGEDUNLQJDQGWKHGRJZKLUULQJDQGWKHVSLQQLQJZKHHO


$WWKHVDPHWLPHKRZHYHUDPRWKHU ߤVYRLFHUHSUHVHQWVWKDWXQLTXHDQGSDUDGR[LFDODVSHFWRIQDWXUH
ZKLFKE\LWVHOIDQGZLWKRXWXQGHUJRLQJDQ\DOWHUDWLRQFDQPDNHLWVRZQWUDQVLWLRQWRDUWHGXFDWLRQ
DQGFXOWXUH
<RXULQVWLQFWGRHVQRWIRUFH\RXMXVWWREDEEOH>YRUODOOHQ@QRWHVWRFKHHUDQGGLVWUDFW>\RXUFKLOG@WKLVVDPHLQVWLQFWFRPSHOV\RXWR
VSHDNEHIRUHDQGWRKLPDQGWRSURQRXQFHZRUGVWRKLPHYHQWKRXJK\RXNQRZWKDWKHGRHVQRW\HWDVVRFLDWHDWKRXJKW>%HJULII
ZLWKWKHP

,QVWLQFW PDNHV WKH PRWKHU VSHDN WKDW LV LW PDNHV KHU SDVV EH\RQG LQVWLQFWV %RGLO\ GHVLUH
>.¸USHUOXVW@PDNHVWKHLQIDQWKHDUWKDWLVLWLQGXFHVWKHFKLOGWRUHFHLYHFRQFHSWVWKDWZLOOJREH\RQG
LWV ERG\ DQG DUWLFXODWH LW ,Q WKLV ZD\ UHIRUPHUVߤ PHVVDJH RI DQWLSK\VLV JOLGHV PLUDFXORXVO\ IURP
LQVWLQFWWRLQVWLQFW$OOYLROHQFHVHHPVWRKDYHEHHQH[FOXGHGIURPWKHDFTXLVLWLRQRIODQJXDJH,QGHHG
DOOHIIRUWVDLPIRUSUHFLVHO\VXFKEDQLVKPHQW7KHZRUGVWKDWPRWKHUO\LQVWLQFWLQVWLOOVLQWKHLQVWLQFW
RIWKHFKLOGUHSUHVHQWWKHH[DFWRSSRVLWHRILQKHULWHGHGXFDWLRQDOSUDFWLFHV>¾EHUOLHIHUWHV%LOGXQJVJXW@
:KHUHDVVFKRROPDNHVWKHFKLOGߧSDUURWZKROHVHQWHQFHVWRLWVHOIDQGWRWKHWHDFKHULQDODQJXDJHWKDW
LWKDVQRWOHDUQHGDQGWKDWLVQRWDWDOOWKHODQJXDJHLWVSHDNVGDLO\ߨPDWHUQDOLQVWUXFWLRQEHJLQV
ZLWKZKDWLVQHDUHVWWRWKHFKLOGDQGDOWRJHWKHUHYHU\GD\ߟZLWKWKHILHOGRISHUFHSWLRQDQGWKHFKLOGߤV
RZQ ERG\ 3HVWDOR]]LߤV %RRN RI 0RWKHUV KLV JXLGH IRU OHDUQLQJ WR QRWLFH FKLOGUHQ DQG VSHDNLQJ WR
WKHP EHJLQV E\ ߧWHDFKLQJ WKH PRWKHU WR VKRZ KHU FKLOG WKH RXWHU SDUWV RI KLV ERG\ DQG WR QDPH
WKHPߨ$UWLFXODWLRQLVOLQNHGWRGHL[LVZKLFKWDNHVDZD\DOOSRZHUIURPWKHVRYHUHLJQZLOOIXOQHVV
>:LOON¾U@ZLWKZKLFKDJLYHQFXOWXUHDUWLFXODWHVߟWKDWLVWRVD\GLVPHPEHUVߟERGLHV
%XW ZKHUH QR GHL[LV UHDFKHVߟLQ WKH ILHOG RI V\PEROLF UHODWLRQV WKDW GLVFORVHV REMHFWV DQG WKHLU
GHPRQVWUDELOLW\LQWKHILUVWSODFHߟWKHYRLFHWKDWURXVHVERWKORYHDQGORYHLQUHWXUQUHPDLQVHYHQ
DIWHU WKH DFTXLVLWLRQ RI ODQJXDJH DQG IRUHYHUPRUH D SXUH PHORV WKDW UHIHUV WR QRWKLQJ \HW PHDQV
HYHU\WKLQJ /RYH LWVHOI ,Q WKLV FDSDFLW\ WKH PDWHUQDO YRLFH SURYHV DOWRJHWKHU LUUHSODFHDEOH 2QO\
EHFDXVH LW KDV KHDUG WKH PDWHUQDO SOHGJH FDQ WKH FKLOG ILQG SRLQWV RI HQWU\ DQG QDPHV IRU DOO WKH
DEVHQFHV WKDW QR GHL[LV FDQ UHYHDOߟDQG ZLWKRXW ZKLFK LW FDQQRW DFKLHYH ERXUJHRLV LQGLYLGXDOLW\
ߧ:LWKRXWEHOLHILQߨWKH0RWKHUWKHUHLVߧQREHOLHILQKXPDQQDWXUHߨߟߧQREHOLHILQ*RGPXFKOHVV
EHOLHI LQ WKH OLNHQHVV RI *RG DQG 0DQ -HVXV &KULVWߨ  7KHUHIRUH WKH PRWKHU ߤV JHQWOH YRLFH
IXQFWLRQVDVWKHSHUIHFWUHSODFHPHQWIRUWKHRSLXPWKDWQXUVHVXVHGWRGLVSHQVHZKRHYHUKDVKHDUGLW
RQFHLVDGGLFWHGIRUOLIH
$FFRUGLQJO\WKHQHZWHFKQRORJ\IRULQVWLOOLQJDVRXOLQWRFKLOGUHQLQYROYHGGLVFORVLQJDILHOGLQ
ZKLFKVSHHFKDQGWKHVRXQGVRIQDWXUHWUDQVIRUPHGLQWRHDFKRWKHUZLWKRXWUHPDLQGHU>XQJHVFKLHGHQ@
$OODWRQFHWKHIDFWWKDWWKHDFWRIKHDULQJLVLQIDQWLOHLQDOLWHUDOVHQVHSURYLGHGWKHEDVLFSUHFRQGLWLRQ
IRU WKHRULHV RI ODQJXDJH DQG SUDFWLFHV RI ODQJXDJH WUDQVPLVVLRQ >6SUDFK¾EHUOLHIHUXQJVSUDNWLNHQ@
2QO\WKHYRLFHRIWKHPRWKHUFRXOGIXOILOOWKLVUROHEHFDXVHLWLVKDOIߧEUHDWKߨ>$WKHP@WKURXJKZKLFK
WKHFKLOGOHDUQVWRߧIHHOߨ>(PSILQGHQ@DQGKDOIDUWLFXODWLRQWKURXJKZKLFKLWDFTXLUHVODQJXDJH,Q
WKLVZD\DVHQVLELOLW\HPHUJHVWKDWH[FOXGHVߧVWXSLGLW\ߨDQGDFDSDFLW\IRUDUWLFXODWLRQWKDWH[FOXGHV
ߧLGLRF\ߨ ߧ5HVSLUDWRU\ HURJHQHLW\ߨ DQG LWV SDUWLDO REMHFW YRLFH LV QRW ߧOLWWOH VWXGLHGߨ DW DOOߟ
LQVWHDGLWLVߧLPSOHPHQWHGߨ>HLQJHVHW]W@LQDZKROO\H[SOLFLWPDQQHU
%HFDXVH LW EHJLQV LQ WKH LQWHUPHGLDWH VSDFH EHWZHHQ QDWXUH DQG FXOWXUH EUHDWK DQG ODQJXDJH DQG
VRXQGDQGVSHHFKFXOWXUL]DWLRQWKURXJKWKHPDWHUQDOYRLFHUHPDLQHGHTXDOO\IDUUHPRYHGIURPWKH
ERGLO\ LQWHUYHQWLRQV RI QXUVHPDLGV DQG IURP WKH H[SHUWV >9HUVW¦QGLJHQ@ DW VFKRROVߟMXVW DV WKH
NQRZOHGJHLQVWLOOHGE\WHDFKHUVDQGGRPHVWLFDWWHQGDQWVIHOOVXEMHFWLQDVLQJOHEUHDWKWR3HVWDOR]]LߤV
FULWLTXH7KHGUXJVDQGVZDGGOLQJRIWKHQXUVHPDLGVGLGQRWWXUQWKHFU\LQJRIFKLOGUHQZKRPWKH\
SDFLILHGHLWKHUE\UXVHRUE\IRUFHLQWRZRUGVߟWKH\VLPSO\ߧDQHVWKHWL]HGߨ3IHXIHU7KHJUDPPDUV
DQG HQF\FORSHGLDV WKDW ROGIDVKLRQHG VFKRROV DGGLFWHG WR URWH FRS\LQJ KDG GUXPPHG LQWR VWXGHQWV
KDGDOZD\VDOUHDG\VHYHUHGWKHUHODWLRQVKLSWRYRLFHVDQGFU\LQJߟWKH\VLPSO\LQVWUXFWHG,QFRQWUDVW
WKH KLVWRULFDO LQQRYDWLRQ RI WKH PDWHUQDO YRLFH HVWDEOLVKHG D UHODWLRQVKLS EHWZHHQ WKH 5HDO DQG WKH
6\PEROLFRIODQJXDJHZKLFKIUHHGWKH,PDJLQDU\LWVHOIWKH6RXO


7KH ILUVW FRQFHUQ RI QDWXUH IRU WKH ZHDNQHVV RI P\ VH[ LV FRQFHUQ IRU LWV UHVW 7KH ILUVW PDWHUQDO FDUH WKH EHJLQQLQJ RI DOOPRWKHUO\
ZRUULHVDQGWKHFHQWHURIWKHPDOOLVFRQFHUQWRFDOPWKHLQIDQW/RQJORQJEHIRUHWKHPRWKHUVSHQGVHYHQDPRPHQWWHDFKLQJWKHFKLOG
DQ\NLQGRIXQGHUVWDQGLQJ>(LQVLFKW@VKHVSHQGVZKROHGD\VLQPRYHPHQWDQGLQWHUUXSWVKHUK>RO\@VOHHSIRUPDQ\QLJKWVWRDVVXUHKLV
UHVW/RQJORQJEHIRUHVKHVHHNVWUDFHVRIUHDVRQLQKLPVKHJUDEVIRU>KDVFKHWQDFK@WUDFHVRIKLVORYH/RQJORQJEHIRUHVKHWKLQNV
RIGLUHFWLQJWKHXVHRIKLVVHQVHVVKHDOUHDG\IRUPVWKHVDPHZLWKJUHDWDUWLQWRDSWLWXGHVDQGKDELWVWKDWDVVXUHKLVUHVW>5XKH@,QWKLV
ZD\H[DOWHG1DWXUHVKRZVZLWKDOOKHUPLJKWUHVWLVZKDWLVPRVWQHFHVVDU\IRUWKHKXPDQFKLOG

6REHJLQV3HVWDOR]]LߤVIUDJPHQWRQWKHIXQGDPHQWVRIHGXFDWLRQ7KHߧUHVWߨWKDWWKHPRWKHUDVVXUHV
DQGRIIHUVE\SURYLGLQJIRUDOOWKDWWKHLQIDQWODFNVߟLQHYHU\VHQVHRIWKHZRUGߟLVWKHVDPHDVWKH
QHHGVIRUZKLFKQDWXUHSURYLGHVWRHYHU\KXPDQEHLQJ,WLVQRZRQGHUWKDW*RHWKHUHFRJQL]HGWKHROG
LQVFULSWLRQLQDQGRIQDWXUHSUHFLVHO\ZKHQFHOHEUDWLQJKLVELUWKGD\LWVPHVVDJHUHSHDWVWKHEHJLQQLQJ
LWVHOIߟߧWKHEHJLQQLQJRIDOOPRWKHUO\ZRUULHVߨZKLFKFRLQFLGHVZLWKWKHELUWKRIWKHFKLOG,WLVDOVR
QR ZRQGHU WKHQ WKDW KH UHSHDWHG WKH HQG RI WKH YHUVHV ߧLQ D JHQWOH PRXUQIXO WRQHߨ WKHLU PHORV
UHSHDWV WKH GHOLFDWH YRLFH WKDW ERWK SURPLVHV UHVW LQ ZKDW KDV EHHQ XWWHUHG >LP *H¦XVVHUWHQ@ DQG
DOUHDG\LVWKLVUHVWLQWKHDFWRIXWWHUDQFH>LP†XVVHUQ@
7KH QHZ ߧIXQGDPHQWV RI HGXFDWLRQߨ WKDW UHIRUP SHGDJRJ\ DQG UHIRUP SV\FKRORJ\ ODLG DOVR
UHSUHVHQWWKHIXQGDPHQWVRIWKHQHZSRHWLFO\ULFLVPWKDWDURXQGIRXQGLWVYRLFHߟLQWKHPRVW
OLWHUDOVHQVH/\ULFDEDQGRQHGWKHJURXQGLQJ>%RGHQ@RIZULWLQJDQGDVWKHHFKRDQGUHVRQDQFHRIDQ
RULJLQDU\YRLFHEHFDPHDYRLFHLQLWVRZQULJKW,WIRUJRWUHFHLYHGUHJXODWLRQVRIODQJXDJHEDVHGRQ
OLWHUDF\ ZKLFK KDG ERXQG SRHPV WR WKH UKHWRULFDO DUWV WR WKH VWRUHKRXVH RI HUXGLWLRQ >7UHVRU GHU
:LVVHQV@ DQG WR SRHWLF QRUPV >1RUPHQ GHU 9HUVOHKUH@ 1R WUDGLWLRQDO PHWULFDO VFKHPH JRYHUQV WKH
OLQHVWKDW*RHWKHZURWHRQWKH.LFNHOKDKQDQGQRWRSLFXQGHUOLHVDQGDXWKHQWLFDWHVWKHLUHTXDWLRQRI
VOHHSDQGGHDWK7KHSHDFHWKHSRHPDQQRXQFHVPD\EHWKHVDPHDVRQDQ\RWKHUQLJKWRUDOWHUQDWHO\
WKHODVWRQHHYHUߟRQO\WKHIDOVHSURIXQGLW\RIOLWHUDU\VFKRODUVKLSLJQRUHVWKHILUVWUHDGLQJLQRUGHU
WRKDYH\HWDQRWKHUWH[WE\*RHWKHRQWKHߧILQDOWKLQJVߨ7KHDOWHUQDWLYHFRUUHVSRQGVH[DFWO\WRWKH
FKDUJHSODFHGRQWKHPDWHUQDOYRLFHRIPHGLDWLQJEHWZHHQDOOIRUPVRIDEVHQFHERWKHYHU\GD\DQG
UHOLJLRXVWKURXJKWKHIXOOQHVVRILWVSUHVHQFH
ߧ:DQGHUHU ߤV1LJKW6RQJߨLVEDUHRIDOONQRZOHGJHMXVWDVWKHPRWKHUEULQJVODQJXDJH QHDUHU WR
KHU FKLOG WKURXJK ELUGVRQJ DQG WKH VRXQGV RI QDWXUH WKH SRHP FRQFHUQV RQO\ WKH LPPHGLDWH
HQYLURQPHQWߟZKHUH RQFH PRUH WKH YRLFHV RI ELUGV VSHDN )RU WKLV UHDVRQ LWV O\ULFLVP HVFDSHV
FRQFHSWXDOLW\DQGSDVVHVRYHUWRZKHUHODQJXDJHDQGWKHVHOIH[SUHVVLRQRIQDWXUHEHFRPHRQHDQG
WKHVDPH
$QDFRXVWLFWZLOLJKWHQFRPSDVVHVDQGGHILQHVWKHQHZSRHPVDURXQG*RHWKH
5DXVFKH)OX¡GDV7DOHQWODQJ 5XVKULYHUGRZQWKHYDOOH\
2KQH5DVWXQG5XK :LWKRXWUHVWRUUHSRVH
5DXVFKHIO¾VWUHPHLQHP6DQJ 5XVKZKLVSHUP\VRQJ
0HORGLHQ]X ,WVPHORGLHV

(LFKHQGRUII
2ZXQGHUEDUHU1DFKWJHVDQJ 2ZRQGURXVVRQJRIQLJKW
9RQIHUQLP/DQGGHU6WU¸PH*DQJ &RXUVHIURPDIDULQWKHODQGRIVWUHDPV
/HLV6FKDXHUQLQGHQGXQNOHQ%¦XPHQ 6RIWVKXGGHULQJLQWKHGDUNWUHHV

%UHQWDQREHJJLQJIRUDߧZKLVSHULQJOXOODE\ߨ
6LQJWHLQ/LHGVRV¾¡JHOLQGH 6LQJDVRQJDVVZHHWO\PLOG
:LHGLH4XHOOHQDXIGHQ.LHVHOQ $VWKHZHOOVRYHUWKHSHEEOHV
:LHGLH%LHQHQXPGLH/LQGH $VWKHEHHVDURXQGWKHOLQGHQ
 6XPPHQPXUPHOQIO¾VWHUQULHVHOQ +XPPXUPXUZKLVSHUEXEEOH

$QGILQDOO\WKHOLQHVWKDWEHWUD\HGWKHVHFUHWRIDOOWKHPXUPXULQJDQGUXVKLQJVRXQGVRIQDWXUHWR
SURVDLFSDSHULQWKHILUVWSODFH
'DOLHJLFKQXQGHV1DFKWVLP:DOG 7KHUHE\QLJKWLQWKHIRUHVW,OLH
(LQ:¦FKWHUKRUQYRQIHUQHVFKDOOW )URPDIDUDZDWFKPDQߤVKRUQVRXQGV
'DV5DXVFKHQGDVGHQ:DOGGXUFK]LHKW 7KHUXVKLQJEORZLQJWKURXJKWKHZRRGV
.OLQJWZLHGHU0XWWHU:LHJHQOLHG 6HHPVOLNHDPRWKHUߤVOXOODE\

7KHWH[WVGHFODUHLWWKHPVHOYHVߟDQGPRUHSUHFLVHO\WKDQLWHYHUFRXOGEHVDLGE\WKHOLWHUDU\VFKRODUV
DQG SKLORVRSKHUV ZKR RZH WKHP WKH LQVLJKW WKDW WKH QHZ O\ULFDO ߧODQJXDJH LQ LWV GLVWDQFH IURP
PHDQLQJ    LPLWDWHV 5DXVFKHQ DQG VROLWDU\ QDWXUHߨ 7KH LPLWDWLRQ RI WKH VRXQGV RI QDWXUH LV WKH
LPLWDWLRQRIWKHVLQJOHGLVFRXUVH>5HGH@WKDWHYHUVLQFHKDVEHHQFDOOHGERWKߧQDWXUHߨDQGߧVSHHFKߨ
VLPXOWDQHRXVO\IRULWLQGXFHVFDOPDQGQRWKLQJHOVH>VFKOHFKWKLQEHUXKLJW@
ߧ'HU0XWWHU:LHJHQOLHGߨ7KH0RWKHU ߤV/XOODE\UHSUHVHQWVWKHPDWUL[RI5RPDQWLFO\ULFSHULRG
ߟDQG WKHUHIRUH WKH PDWUL[ RI *RHWKHߤV ߧ1LJKW 6RQJߨ DV ZHOO 'HVSLWH DOO GRXEWV WKDW VFKRODUV RI
*HUPDQ OHWWHUV KDYH H[SUHVVHG D 6LOHVLDQ OXOODE\ߟDV $GDOEHUW .XKQ DOUHDG\ REVHUYHG LQ ߟLV
ERWKWKHVRXUFHDQGWKHSODLQWH[W>.ODUWH[W@RI*RHWKHߤVPRVWIDPRXVSRHP
6FKODI.LQGOHLQEDOGH 6OHHSOLWWOHRQHVRRQ
'LH9¸JHOHLQIOLHJHQLP:DOGH 7KHELUGVQRZIO\LQWKHZRRGV
6LHIOLHJHQGHQ:DOGZRKODXIXQGQLHGHU 7KH\DUHIO\LQJKHUHDQGWKHUH
8QGEULQJHQGHP.LQGOHLQGLH5XKߤ $QGVRRQZLOOEULQJUHVWEDFN
EDOGZLHGHU 7R\RX
6FKODI.LQGOHLQVFKODI 6OHHSOLWWOHRQHVOHHS

/LWHUDU\VFKRODUVDYRLGWKHVHXQDPELJXRXVZRUGVߟZKLFKHOLPLQDWHDOOGRXEWDVWRZKRLVVSHDNLQJ
LQ *RHWKHߤV YHUVHVߟLQ WZR ZD\V UXQQLQJ LQ RSSRVLWH GLUHFWLRQV 7KH GLVFRYHU\ RI WKH UHODWLRQVKLS
EHWZHHQ 0RWKHU DQG &KLOG GLVDSSHDUV HLWKHU LQ WKH VXSSRVHGO\ WLPHOHVV WUXWK RI WKH ߧVRXOߨ RU LQ D
KLVWRU\RIKLVWRULFDOGUDPD>+DXSWXQG6WDDWVDNWLRQHQ@
,QRUGHUWRH[SODLQWKDWDURXQGOXOODELHVVXGGHQO\UHSUHVHQWHGDILWWLQJVXEMHFWIRUOLWHUDWXUH
DQ HVVD\ HQWLWOHG ߧ=XP (UOHEQLVJHKDOW GHV :LHJHQOLHGHVߨ 7KH ([SHULHQWLDO &RQWHQW RI WKH /XOODE\
VLPSO\LQYRNHVߧWKHSULPRUGLDOXQLW\RIPRWKHUDQGFKLOGDVWKHRULJLQRIDOO\HDUQLQJILUVWDQGODVW
DQGWKHUHE\WKHRULJLQRIDOOUHOLJLRXVDQGDUWLVWLFFUHDWLRQߨ6XFKSV\FKRORJLFDOPHWDSK\VLFVGHQLHV
WKHIDFWWKDWWKH0LGGOH$JHVDQG5HQDLVVDQFHGLGQRWSURGXFHOLWHUDU\OXOODELHVߟDVZHOODVWKHIDFW
WKDWHYHQLQWKHHLJKWHHQWKFHQWXU\WKHXQFRPPRQZRUG:LHJHQOLHGFRXOGLQNHHSLQJZLWKYHQHUDEOH
UKHWRULFDO WUDGLWLRQ PHDQ D SRHP GHGLFDWHG WR SDUHQWV RQ WKH RFFDVLRQ RI D FKLOGߤV ELUWK 7KLV
RFFXUV WKURXJK UHIHUHQFH WR ROG &KULVWLDQ FUDGOHVRQJV >.ULSSHQOLHGHU@ߟZKRVH UHSODFHPHQW E\
OLWHUDU\OXOODELHVLVLQIDFWWKHPDWWHUWKDWQHHGVH[SODLQLQJ&RQYHUVHO\GLVFXVVLRQVVXFKDVWKHRQH
SUHVHQWHGLQDQHVVD\VLPSO\HQWLWOHGߧ&ULWLFDO5HDGLQJߨZKLFKH[SUHVVO\FDOOVIRUߧ:DQGHUHU ߤV1LJKW
6RQJߨWREHYLHZHGVRFLRKLVWRULFDOO\LQYRNHDFHUWDLQLOOPRRGSUHYDLOLQJEHWZHHQ*RHWKHDQG&DUO
$XJXVW*UDQG'XNHRI6D[H:HLPDU(LVHQDFKWKUHHRUIRXUGD\VEHIRUHWKHSRHPZDVFRPSRVHG
$FFRUGLQJO\ ߧ:DQGHUHU ߤV 1LJKW 6RQJߨ LV VXSSRVHG WR H[SUHVV *RHWKHߤV ߧGRXEW DW KLV VXFFHVV LQ
VKDSLQJKLVOLIHߨDORQJWKHOLQHVRIߧWKH(QOLJKWHQPHQWLGHDOVLQ:HLPDUVRFLHW\ߨ
6R FORVH WR HDFK RWKHU GR WKH SDVVLRQ IRU SROLWLFDO HQOLJKWHQPHQW DQG WKH SDVVLRQ IRU LJQRUDQFH
GZHOODPRQJDFDGHPLFV:KHWKHUWKH\UHFXUWRWLPHOHVVJLYHQVRIWKHVRXORUWRGHFLVLYHVRFLDODQG
KLVWRULFDOHYHQWV>+DXSWXQG6WDDWVDNWLRQHQ@ERWKZD\VRIIDLOLQJWRXQGHUVWDQG>9HUNHQQXQJHQ@ WKH
OXOODE\DUHMXVWDVFRPIRUWLQJDQGGHFHSWLYHDVWKHSRHPLVLWVHOIWKH\FORVHHDUVDQGH\HVWRWKHIDFW
WKDWVSHDNLQJLWVHOILVSXUHH[WHULRULW\ߧ>$@V\PEROLFZRUOGZLWKWKLVVDPHZRUOGWKHPDFKLQHLV
EXLOWߨ
 7KH PDFKLQHV RI VSHHFK GR QRW MXVW KDYH D KLVWRU\ߟWKH\ DOVR PDNH KLVWRU\ 7KH SV\FKRORJLFDO
SHGDJRJLFDOWHFKQLTXHVRIFXOWXUL]DWLRQWKDWZHUHEHVWRZHGRQ&HQWUDO(XURSHDURXQGFKDQJHG
WKH SDUDPHWHUV RI OLWHUDU\ LQIOXHQFH DQG HIIHFW >:LUNXQJ@ :KHQ O\ULF EHFDPH ߧ7KH 0RWKHU ߤV
/XOODE\ߨLWZDVQRORQJHUOLPLWHGWRWKHVSHHFKDFWVSHUIRUPHGE\SRHPVFRPSRVHGDFFRUGLQJWRWKH
DUVSRHWLFDRIROGFHOHEUDWLRQODPHQWSUDLVHDQGGHOLJKW6XFKIRUPVRIOLWHUDWXUHDOOSUHVXPHWKH
FDSDFLW\ IRU DUWLFXODWLRQ RI VSHDNHUV DQG KHDUHUV ߧ7KH 0RWKHU ߤV /XOODE\ߨ RQ WKH RWKHU KDQG
XQGHUPLQHVWKLVYHU\SUHFRQGLWLRQ,WKDVHIIHFWVRQOHYHOVWKDWFRQFHUQWKHPXWHERG\LWVSDUDPHWHUV
DUHPHORVVRXQGDQGEUHDWK6SHHFKLVVXHVRQO\WRH[WLQJXLVKLQDQLQILQLWHSDUDGR[7KHGHILQLWLRQ
WKDW*RWWKLOI+HLQULFK6FKXEHUWJDYHWRO\ULFDOPHWHULQLVDVFRPSUHKHQVLYHDVLWLVXQKHDUGRI
WRGD\LWVHIIHFWLVߧFDOPLQJSDUWLDOO\VRSRULILFDQGFRQGXFWVWKHVRXOLQWRWKHUHDOPRIGDUNIHHOLQJV
DQGGUHDPLQJߨ
7KLV GHILQLWLRQ LV PDGH WR RUGHU DV LW ZHUH DV D FRPPHQWDU\ RQ ߧ:DQGHUHU ߤV 1LJKW 6RQJߨ
7KHUHIRUH LW FRXOG EH LQWHJUDWHG ZLWKRXW DQ\ SUREOHP DW DOO LQWR *HUPDQ OLWHUDU\ KLVWRU\ 2QH
KXQGUHGILIW\\HDUVODWHULQDQH[HPSODU\DQDO\VLVRI%UHQWDQRߤVߧ'HU6SLQQHULQ/LHGߨ7KH6SLQQHU ߤV
6RQJ5LFKDUG$OHZ\QZURWHWKDWWKHSRHPߧJOLGHVHIIRUWOHVVO\LQWRWKHHDUVRIUHHRIYLROHQFHWKDW
RQHߤV DWWHQWLRQ LV VRRQHU OXOOHG WR VOHHS WKDQ H[HUWHGߨ $OO WKH VDPH O\ULF GRHV QRW H[HUFLVH VXFK
ZRQGHUVIRUWKHIRUPLPPDQHQWUHDVRQWKDWWR$OHZ\QߤVMR\LWFRPELQHVߧVLPSOHZRUGVDQGVKRUW
VHQWHQFHV VWUXQJ WRJHWKHU ZLWKRXW V\QWDFWLF H[WUDYDJDQFHߨ DQG GRHV QRW ߧH[HUW WKH LQWHOOHFW RU
IHHOLQJߨ ,QVWHDG LW GRHV VR EHFDXVH ߧ'HU 6SLQQHULQ /LHGߨ LV SDUW RI %UHQWDQRߤV &KURQLND HLQHV
IDKUHQGHQ6FK¾OHUVKHUHDPRWKHUVLQJVWRKHUVRQLQRUGHUWRPDNHWKHVSHHFKOHVVLQIDQWVOHHSDQG
E\WKLVPHDQVHVWDEOLVK>VWLIWHQ@DFKLOGKRRGPHPRU\WKDWZLOOSURYHXQIRUJHWWDEOHEHFDXVHLWRFFXUV
VR HDUO\ RQ ,Q DOWRJHWKHU OLWHUDO IDVKLRQ WKH O\ULFLVP RI  HPHUJHG IURP WKH VKRUW FLUFXLW
EHWZHHQWKHPRXWKVRIPRWKHUVDQGWKHHDUVRIFKLOGUHQ
8QOLNHSURIHVVLRQDOH[HJHWHVORYHUVDQGWHFKQLFLDQVILUVWQRWLFHGWKLVFRQQHFWLRQ%HWWLQD%UHQWDQR
PRUHHQDPRUHGRI*RHWKHWKDQDQ\RWKHUUHDGHUZURWHRIKLVSRHPVߤHIIHFWV
,WLV*RHWKHZKRVHQGVWKHVHOLJKWQLQJIODVKHVWKURXJKPHWKHQORRNVDWPHKHDOLQJO\DVWKRXJKP\VRUURZSDLQHGKLPVZDWKLQJP\
VRXODJDLQLQWKHVRIWZUDSSLQJVIURPZKLFKLWKDGIUHHGLWVHOIWKDWLWPD\ILQGSHDFHLQVOXPEHUDQGVOXPEHULQJWKULYHLQWKHJORU\R
QLJKW LQ WKH VXQ DQG WR WKH DLU E\ ZKLFK , DP URFNHG KH FRQILGHV PH , GR QRW ZDQW WR IHHO GLIIHUHQWO\ LQ UHJDUG WR KLP WKDQ LQ WKLV
SRHPLWLVWKHFUDGOHLQZKLFK,IHHOP\VHOIVXUURXQGHGE\V\PSDWK\QHDUHUKLVFDUHFDWFKLQJWKHWHDUVRIKLVORYHRQZKLFK,WKULYH

7KHQILQDOO\WKHUHLV:DJQHUZKRDFFRUGLQJWR1LHW]VFKHEUHZHGXSDZKROHDUUD\RIRSLDWHVDQG
VHGDWLYHVRIWKHZLOOߟWKDWLVWUDQVIHUUHGDOOWKHLPDJLQDU\HIIHFWVRI5RPDQWLFSRHWU\LQWRWKH5HDORI
WHFKQRORJ\:DJQHUZURWHRIKLV/LHGߧ'RUVPRQHQIDQWߨ
,WZDVVRVXFFHVVIXOWKDWZKHQ,KDGWULHGLWRYHUVRIWO\VHYHUDOWLPHVRQWKHSLDQRP\ZLIHZKRZDVLQEHGFDOOHGRXWWRPHWKDWL
ZDVKHDYHQO\IRUVHQGLQJRQHWRVOHHS

,I WKH K\SQDJRJLF YRLFH RI WKH PRWKHU SURYLGHV WKH PRGHO IRU WKH QHZ SRHWU\ DQG LWV HIIHFWV WKHVH
SRHPVߟQRWZLWKVWDQGLQJ HYHQ WKH PRVW XSWRGDWH WKHRULHV RI O\ULFߟGR QRW LQYROYH PDWWHUV RI
H[SUHVVLRQ7KHSDUDPHWHURIߧH[SUHVVLRQߨUHIHUVDQXWWHUDQFHWRLWVVSHDNHU+\SQDJRJLFHIIHFWVLQ
FRQWUDVWRFFXULQWKHDGGUHVVHH
5DUHO\GRHV/DFDQߤVODZߟWKDWߧVW\OHߨRQQRFRXQWZKDWVRHYHULVߧWKHPDQߨEXWUDWKHUߧWKHPDQ
RQH DGGUHVVHVߨߟKROG DV VWULFWO\ DV LW GRHV IRU WKH OLWHUDU\ OXOODE\ ,Q LWV GLVWDQFH IURP PHDQLQJ
>%HGHXWXQJVIHUQH@ WKH OXOODE\ VRXQGV IRU DQ LQIDQW WKDW KDUNV \HW GRHV QRW KHDU 7KH LGHDOLVWLF
SKLORVRSKLFDO DHVWKHWLFV RI WKH $JH RI *RHWKHߟZKLFK FRQVLGHUHG O\ULF WR EH VHOIH[SUHVVLRQߟ
GLVFHUQHGWKHPDWWHUDVOLWWOHDVGRWKHOLQJXLVWLFDHVWKHWLFVRIRXURZQWLPHZKLFKGHFODUHO\ULFWREH
ߧHJRFHQWULFߨRUߧLQQHUߨVSHHFK%RWKGHILQLWLRQVUHPDLQVWXFNLQWKHGLVFXUVLYHVSDFHRSHQHGE\WKH
LQYHQWLRQ RI WKH ߧVRXOߨ ,W LV WKH FKDUDFWHULVWLF DPELJXLW\ RI WKH SV\FKRJHQLF PDWHUQDO YRLFH WKDW LW
VHHPVWRLQWURGXFHVLPSO\WKURXJKPDNLQJDVRXQGWKHFKLOGLQWRVSHHFKWKDWFDQEHFHOHEUDWHGDVWKH
FKLOGߤV RZQ GLVFRXUVHߟDQG LQ LWV KLJKHVW IRUP DV WKH O\ULF RI D JHQLXV )URP WKLV UXVH RI KLVWRU\
GHULYHVWKHLQWHULRULW\WKDWVHHPVWRVSHDNLQWKHSRHPVߟDQLQWHULRULW\WKDWWKHRULHVDVFULEHWRWKHP
\HWDJDLQ
7KH YHUVHV VFULEEOHG RQ WKH ZRRGHQ ZDOO RI WKH .LFNHOKDKQ LQDXJXUDWHG D QHZ HSRFK RI O\ULF
EHFDXVHWKH\VSRNHߟDQGVSHDNߟVLPXOWDQHRXVO\RIWKHHQGDQGRIWKHRULJLQVRIVSHHFK2IWKHHQG
DIWHUWKHEUHDWKLQWKHWUHHWRSVKDVFHDVHGDQGWKHELUGVIDOOVLOHQWEUHDWKLQJLWVHOIZLOOUHVWߟWKHEUHDWK
WKDW LV DUWLFXODWHG UHVSLUDWLRQ WKDW LV WKH YRLFH 2I WKH RULJLQV WKH OLQHV WKDW GR ZLWKRXW D WLWOH RU D
PDUNHURIJHQUHUHFRUGLQVWHDGWKHGD\RIWKHLUFUHDWLRQDQGWKHQDPHRIWKHLUFUHDWRUߟDQGVRWKH\
VWDQGDSDUWRQWKHVWUHQJWKRIWKLVVLJQDWXUHDORQHRQFHDQGIRUDOOIURPWKHIDGLQJPXUPXUZLWKRXW
DQDXWKRUWKDWWKH\DUHDQGWKH\VWDQGDSDUWIURPWKHIDGLQJPXUPXUZLWKRXWDQDGGUHVVHHWKDWWKH\
FUHDWH>GLFKWHQ@'LVFRXUVHDERXWWKHHQGRIGLVFRXUVHDQGGLVFRXUVHDERXWWKHRULJLQRIGLVFRXUVHDUH
XVWWKDWFRPSOHPHQWDU\
7KH SKDQWDVP RI WKH DXWKRU DV WKH PDVWHU IURP ZKRP GLVFRXUVH LV WR EH ERUQ DQG WR ZKRP LW
VKRXOG IRUHYHU EHORQJ HPHUJHG DW WKH VDPH SRLQW LQ KLVWRU\ ZKHQ WKH ߧ/DQJXDJH RI 0DQNLQGߨ
>0HQVFKHQVSUDFKH@ EHFDPH WKH ߧ0RWKHU 7RQJXHߨ >0XWWHUVSUDFKH@ *RHWKHߟWR FHOHEUDWH KLV ODVW
ELUWKGD\ߟIHWFKHVEDFNLQWRGLVFRXUVHDQGSUHVHQFHWKHVDPHOLQHVWKDWVSHDNRIKRZVRXQGLQJDQG
VSHDNLQJHQGLQFDOPDQGDEVHQFH+HKLPVHOIDVWKHH[HPSODU\$XWKRUGRHVZKDWWKHJRGKHDGGRHV
LQ7RUTXDWR7DVVRKHPDNHVVSHHFKSRVVLEOHHYHQZKHUHߧPDQIDOOVVLOHQW>GHU 0HQVFK YHUVWXPPW@ߨ
7KHYHUVHVRQWKH.LFNHOKDKQߟDVWKHSURGXFWDQGGRFXPHQWRIDXWKRULDOELRJUDSK\DQGFKURQRORJ\
VXFK DV LW KDV H[LVWHG VLQFH *RHWKHߤV TXDVLGLYLQH JHVWXUH WUDQVIRUPHG LQWR KLV &ROOHFWHG :RUNVߟ
KDYHVRIDUVXUYLYHGWKHIDGLQJDQGGLVDSSHDUDQFHRIWKHLURULJLQDOLQVFULSWLRQ
6LQFHWKHQRWKHUWHFKQRORJLHVKDYHHPHUJHGWRPDQDJHWKHHIIHFWVDQGGHFD\RIGLVFRXUVH:KHQ
WKHTXHVWLRQߧ:KRLVVSHDNLQJ"ߨLVDVNHGWDXWRORJ\ߟWKHIDFWWKDWWKHRQHZKRLVVSHDNLQJLVDOZD\V
WKHVDPHRQHVSHDNLQJߟYDQLVKHV1RZߧ:DQGHUHU ߤV1LJKW6RQJߨDWLWOHJLYHQODWHURQQRORQJHU
FRQFHDOVWKHIDFWWKDWQHLWKHUWKHߧZDQGHUHUߨQRUWKHDXWKRURIIHUVWKHZRUGVRISURPLVHDQGUHVW>GDV
:RUW GHV =XVSUXFKV XQG GHU 6WLOOXQJ@ ,QVWHDG D KLVWRULFDO ILJXUH RI WKH 2WKHU GRHV VR 6LQFH WKHQ
RWKHUVRXQGVKDYHJURZQDXGLEOHWRRߧ%LUGODQGߨZDVQRODQGRIZLQJHGFUHDWXUHVEXWDEDULQ1HZ
<RUN ߧ7KH %LUGߨ ZDV WKH QDPH RI DQ DOWR VD[RSKRQH SOD\HU $QG ZKHQ KH SOD\HG ߧ/XOODE\ RI
%LUGODQGߨLWZDVDVLJQDOQRWDOXOODE\