8VHRIWKLVFRQWHQWLVVXEMHFWWRWKH7HUPVDQG&RQGLWLRQV

0XVFXODUG\VWURSKLHVDQGUHODWHGP\RSDWKLHV

&RQWULEXWRUV %HFDXVHQRWDOODQVZHUVDUHFUHDWHGHTXDO

.H\SRLQWV

0XVFXODUG\VWURSKLHVDUHJHQHWLFGLVRUGHUVGXHWRDYDULHW\RIFKURPRVRPDODEQRUPDOLWLHV$OODUHFKDUDFWHUL]HGE\SURJUHVVLYHPXVFOHZHDNQHVVEXWWKHGLVHDVHFRXUVHDQGGLVWULEXWLRQRIPXVFOHLQYROYHPHQWYDU\ZLWKWKHW\SHRIG\VWURSK\7KHUHLVQRGHILQLWLYHWUHDWPHQWWKHUDS\LVDLPHGDWDGDSWLYHVWUDWHJLHVDQGGHYLFHVSUHYHQWLRQRIFRPSOLFDWLRQVDQGVXSSRUWLYHFDUH

%DFNJURXQG

'HVFULSWLRQ

$JURXSRILQKHULWHGP\RSDWKLHVFKDUDFWHUL]HGE\SURJUHVVLYHPXVFOHZHDNQHVVDQGPXVFOHGHJHQHUDWLRQWKHPXVFOHVILUVWDIIHFWHGYDU\ZLWKHDFKW\SHRIPXVFXODUG\VWURSK\

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

%DFNWR7RS

(SLGHPLRORJ\

,QFLGHQFHDQGSUHYDOHQFH

,WLVEHOLHYHGWKDWWRSHRSOHDUHDIIHFWHGDQQXDOO\7KHDQQXDOLQFLGHQFHYDULHVZLWKHDFKPXVFXODUG\VWURSK\

'XFKHQQHWRFDVHVSHUSHUVRQV%HFNHUFDVHVSHUSHUVRQV0\RWRQLFPRVWFRPPRQDGXOWIRUPWRFDVHVSHUSHUVRQV)DFLRVFDSXORKXPHUDOFDVHVSHUSHUVRQV(PHU\'UHLIXVVFDVHVSHUOLYHELUWKV

7KHSUHYDOHQFHDOVRYDULHVZLWKHDFKPXVFXODUG\VWURSK\'XFKHQQHWRFDVHVSHUSHUVRQV

%HFNHUFDVHVSHUSHUVRQV

0\RWRQLFWRFDVHVSHUSHUVRQV

/LPEJLUGOHFDVHVSHUSHUVRQV

)DFLRVFDSXORKXPHUDOFDVHVSHUSHUVRQV

'HPRJUDSKLFV

$JH

7KHDJHDWRQVHWYDULHVZLWKHDFKPXVFXODUG\VWURSK\

&RQJHQLWDODWELUWK

'XFKHQQHHDUO\FKLOGKRRG

%HFNHUOLPEJLUGOHIDFLRVFDSXORKXPHUDOP\RWRQLFFKLOGKRRGDGROHVFHQFHDGXOWKRRGRUPLGGOHDJH

2FXORSKDU\QJHDOGLVWDOHDUO\DGXOWKRRGWRPLGGOHDJH

*HQGHU

0DOHSDWLHQWVDUHDIIHFWHGPRUHWKDQIHPDOHSDWLHQWVGXHWRWKH;OLQNHGUHFHVVLYHSDWWHUQRILQKHULWDQFHRI'XFKHQQH

%HFNHUDQG(PHU\'UHLIXVVPXVFXODUG\VWURSKLHV

*HQHWLFV

;OLQNHGLQKHULWDQFH

RISDWLHQWVZLWK'XFKHQQHRU%HFNHUPXVFXODUG\VWURSK\KDYHDJHQHGHOHWLRQDWEDQG;SIRU

SURGXFWLRQRIG\VWURSKLQ

(PHU\'UHLIXVVPXVFXODUG\VWURSK\LQYROYHVDQDEQRUPDOJHQHDWEDQG;T

$XWRVRPDOGRPLQDQWLQKHULWDQFH

0\RWRQLFPXVFXODUG\VWURSK\JHQHVKDYHEHHQPDSSHGWRFKURPRVRPHDUPTDQGEDQGT

7KHSUR[LPDOP\RWRQLFP\RSDWK\JHQHKDVEHHQPDSSHGWRFKURPRVRPH

7KHIDFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\JHQHKDVEHHQPDSSHGWREDQGT

7KHRFXORSKDU\QJHDOPXVFXODUG\VWURSK\JHQHKDVEHHQPDSSHGWREDQGT

$XWRVRPDOUHFHVVLYHLQKHULWDQFHFRQJHQLWDOPXVFXODUG\VWURSKLHVLQFOXGHODPLQLQGHILFLHQF\ZKLFKKDVEHHQ

PDSSHGWREDQGTDQG)XNX\DPDZKLFKKDVEHHQPDSSHGWREDQGT

%RWKDXWRVRPDOGRPLQDQWDQGDXWRVRPDOUHFHVVLYHLQKHULWDQFHSDWWHUQVH[LVWIRUYDULRXVIRUPVRIGLVWDODQGOLPEJLUGOH

PXVFXODUG\VWURSKLHV

,QIRUPDWLRQRQWKHJHQHWLFVRIVSHFLILFPXVFXODUG\VWURSKLHVLVDYDLODEOHWKURXJKWKH1DWLRQDO&HQWHUIRU%LRWHFKQRORJ\

,QIRUPDWLRQV2QOLQH0HQGHOLDQ,QKHULWDQFHLQ0DQ20,0DQG*HQH7HVWV:HEVLWHV

%DFNWR7RS

&DXVHVDQGULVNIDFWRUV

$OOPXVFXODUG\VWURSKLHVDQGUHODWHGP\RSDWKLHVDUHFDXVHGE\JHQHWLFGHOHWLRQVDQGPXWDWLRQV

7KHVHJHQHWLFGLVRUGHUVFDQEHGLIIHUHQWLDWHGE\WKHW\SHRILQKHULWDQFH

;OLQNHGUHFHVVLYHLQKHULWDQFH'XFKHQQH%HFNHUDQG(PHU\'UHLIXVVPXVFXODUG\VWURSKLHV

$XWRVRPDOGRPLQDQWLQKHULWDQFHSUR[LPDOP\RWRQLFP\RSDWK\DQGIDFLRVFDSXORKXPHUDODQGRFXORSKDU\QJHDO

PXVFXODUG\VWURSKLHV

$XWRVRPDOUHFHVVLYHLQKHULWDQFHFRQJHQLWDODQG)XNX\DPDPXVFXODUG\VWURSKLHV

0L[HGDXWRVRPDOGRPLQDQWDQGDXWRVRPDOUHFHVVLYHLQKHULWDQFHSDWWHUQVVRPHIRUPVRIGLVWDODQGOLPEJLUGOH

PXVFXODUG\VWURSKLHV

,QVRPHFDVHVRI'XFKHQQHDQG%HFNHUPXVFXODUG\VWURSKLHVWKHGLVHDVHDULVHVIURPDQHZPXWDWLRQLQDJHQHUDWKHUWKDQ

IURPDQLQKHULWHGGHIHFWLYHJHQH

6FUHHQLQJ

)RUVRPHPXVFXODUG\VWURSKLHVLQZKLFKWKHDIIHFWHGSURWHLQSURGXFWVKDYHEHHQLGHQWLILHGJHQHWLFDQDO\VLVFDQLGHQWLI\

ERWKFDUULHUVDQGDIIHFWHGSDWLHQWVKRZHYHUVFUHHQLQJLVQRWGRQHURXWLQHO\XQOHVVWKHUHLVDSRVLWLYHIDPLO\KLVWRU\GXH

WRFRVWDQGODFNRIDQHIIHFWLYHFXUH

,QIRUPDWLRQDERXWWKHDYDLODELOLW\RIJHQHWLFWHVWLQJIRUPXVFXODUG\VWURSK\LVDYDLODEOHRQWKH1DWLRQDO&HQWHUIRU

%LRWHFKQRORJ\,QIRUPDWLRQV*HQH7HVWV:HEVLWH

3ULPDU\SUHYHQWLRQ

%HFDXVHWKH\DUHLQKHULWHGGLVRUGHUVPXVFXODUG\VWURSKLHVFDQQRWEHSUHYHQWHGLQSDWLHQWVH[SUHVVLQJDIIHFWHGJHQH

SURGXFWVKRZHYHUJHQHWLFFRXQVHOLQJDQGIDPLO\SODQQLQJPD\EHFRQVLGHUHGLQSDWLHQWVZLWKDSRVLWLYHIDPLO\KLVWRU\

RIPXVFXODUG\VWURSKLHVZKRPD\EHFDUULHUVRIDIIHFWHGJHQHV

'LVFXVVLRQRIWKHULVNVRIPXVFXODUG\VWURSK\RFFXUUHQFHLQIDPLO\PHPEHUVRISDWLHQWVZLWKPXVFXODUG\VWURSKLHVDQG

WKHLURIIVSULQJFDQKHOSIDPLOLHVWDNHDSODQQHGDSSURDFKWRWKHGLVHDVHLQVXFFHHGLQJJHQHUDWLRQV

'LDJQRVLV

%DFNWR7RS

6XPPDU\DSSURDFK

,QDGGLWLRQWRDWKRURXJKKLVWRU\DQGSK\VLFDOH[DPLQDWLRQWKHGLDJQRVLVLVEDVHGRQ

(OHYDWHGVHUXPFUHDWLQHNLQDVHOHYHOV

(OHFWURP\RJUDSKLFILQGLQJV

+LVWRSDWKRORJLFIHDWXUHVRQPXVFOHELRSV\DQGDFFXUDWHGHWHUPLQDWLRQRISURWHLQH[SUHVVLRQLQPXVFOHWLVVXHIRUVRPH

G\VWURSKLHV

5HVXOWVRIJHQHWLFWHVWLQJ

%DFNWR7RS

&OLQLFDOSUHVHQWDWLRQ

6\PSWRPV

'XFKHQQHDQG%HFNHUPXVFXODUG\VWURSKLHV

0XVFXODUZHDNQHVVLQLWLDOO\WKHIDPLO\PD\UHSRUWWRHZDONLQJFOXPV\JDLWZLWKIUHTXHQWIDOOVDQGRUSURJUHVVLYH

GLIILFXOW\FOLPELQJVWDLUVRUUXQQLQJ

:HDNQHVVLVSUHVHQWE\DJHLQSDWLHQWVZLWK'XFKHQQHPXVFXODUG\VWURSK\E\WR\HDUVRIDJHPRVWFKLOGUHQ

UHTXLUHOHJEUDFHVDQGWKHPDMRULW\DUHQRQDPEXODWRU\E\DJH

7KHRQVHWRIZHDNQHVVLVXVXDOO\GHOD\HGXQWLOWKHVHFRQGRUWKLUGGHFDGHRIOLIHLQSDWLHQWVZLWK%HFNHUPXVFXODU

G\VWURSK\DQGLVRIWHQDFFRPSDQLHGE\OHJFUDPSVLQDGROHVFHQFH

0\RWRQLFPXVFXODUG\VWURSK\

)DFLDOZHDNQHVVRSHQPRXWKDQGGURRS\H\HOLGV

:HDNQHVVDQGPXVFOHZDVWLQJRIWKHIDFHIHHWKDQGVDQGQHFNLQLWLDOO\

*RQDGDOG\VIXQFWLRQ

0\RWRQLDLQDELOLW\RIWKHPXVFOHVWRUHOD[DIWHUFRQWUDFWLRQRIWHQQRWERWKHUVRPHWRWKHSDWLHQW

)DFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\

)DFLDOVKRXOGHUDQGSUR[LPDODUPZHDNQHVVRIWHQSUHVHQWVE\WKHWKLUGGHFDGHRIOLIHDQGSURJUHVVHVJUDGXDOO\

)DFLDOZHDNQHVVVSDUHVWKHH[WUDRFXODUPXVFOHVWRQJXHDQGSKDU\Q[

:LWKGLVHDVHSURJUHVVLRQZHDNQHVVRIWKHORZHUH[WUHPLWLHVPD\DIIHFWWKHSHOYLFPXVFOHVEXWPRUHRIWHQUHVXOWVLQIRRW

GURSDQGXSWRRISDWLHQWVEHFRPHZKHHOFKDLUERXQG

/LPEJLUGOHPXVFXODUG\VWURSK\

:HDNQHVVEHJLQVLQWKHVKRXOGHUVRUSHOYLVDOWKRXJKVRPHW\SHVDUHDVVRFLDWHGZLWKPRUHGLVWDOZHDNQHVVHVSHFLDOO\RI

WKHFDOYHV

:HDNQHVVXVXDOO\VSDUHVWKHIDFHH\HVDQGSKDU\Q[

7KHVSHFWUXPRIGLVHDVHUDQJHVIURPVHYHUHHDUO\RQVHWWRPLOGVORZO\SURJUHVVLYH

(PHU\'UHLIXVVPXVFXODUG\VWURSK\

7RHZDONLQJDQGVPDOOELFHSV:HDNQHVVRIWKHVKRXOGHUVXSSHUDUPVDQGVKLQPXVFOHVDFFRPSDQLHGE\UHODWLYHO\HDUO\GHYHORSPHQWRIIOH[LRQFRQWUDFWXUHVRIHOERZVDQG$FKLOOHVWHQGRQV

&RQJHQLWDOPXVFXODUG\VWURSK\DQGFRQJHQLWDOP\RSDWKLHV

*HQHUDOL]HGZHDNQHVVFRQWUDFWXUHVDQGMRLQWGHIRUPLWLHVLQVRPHSDWLHQWVDUHSUHVHQWDWELUWKRUIURPHDUO\LQIDQF\+\SRWRQLDPD\EHSUHVHQWLQLQIDQF\6RPHVXEW\SHVLQFOXGHPHQWDOUHWDUGDWLRQDQGVHL]XUHV

2FXORSKDU\QJHDOPXVFXODUG\VWURSK\

,QLWLDOO\SDWLHQWVXVXDOO\UHSRUWSWRVLVZKLFKPD\LQWHUIHUHZLWKYLVLRQEXWQRWGLSORSLD8VXDOO\DSSHDUVLQWKHIRXUWKRUILIWKGHFDGHRIOLIHDQGSURJUHVVHVVORZO\EXWDVHYHUHSHGLDWULFYDULDQWH[LVWV6ZDOORZLQJJUDGXDOO\EHFRPHVDVHYHUHSUREOHP6SHHFKDOVRPD\EHFRPHGLIILFXOW(YHQWXDOO\PRUHJHQHUDOL]HGIDFLDOPDVWLFDWRU\QHFNDQGSUR[LPDOOLPEPXVFOHZHDNQHVVDUHQRWHG

'LVWDOPXVFXODUG\VWURSK\

3URJUHVVLYHZHDNQHVVLQWKHGLVWDOOHJVRFFXUVZLWKPRVWW\SHVFDXVLQJIRRWGURSRUGLIILFXOW\FOLPELQJVWDLUVDOWKRXJKVRPHW\SHVEHJLQZLWKZDVWLQJRIWKHKDQGVDQGIRUHDUPV2QVHWPD\EHDVHDUO\DVDGROHVFHQFHLQSDWLHQWVZLWKWKH0L\RVKLW\SHRUDVODWHDVWKHHLJKWKGHFDGHLQSDWLHQWVZLWK:HODQGHUP\RSDWK\(YHQWXDOO\WKHZHDNQHVVVSUHDGVWRLQFOXGHRWKHUGLVWDOPXVFOHV3DWLHQWVZLWKVRPHVXEW\SHVGHYHORSSUR[LPDOPXVFOHZHDNQHVVRUSKDU\QJHDOZHDNQHVV

6LJQV

'XFKHQQHDQG%HFNHUPXVFXODUG\VWURSKLHV

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

0\RWRQLFPXVFXODUG\VWURSK\

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

)DFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\

)DFLDOPXVFOHZHDNQHVVLQDELOLW\WRSXUVHOLSVZULQNOHEURZEORZRXWFKHHNVRUZKLVWOHVHHQLQFKLOGKRRGRUDGROHVFHQFH(YHQWXDOOHJLQYROYHPHQWPD\OHDGWRIRRWGURSRUSUR[LPDOOHJZHDNQHVV0D\SUHVHQWDV\PPHWULFDOO\VXFKDVZLWKRQHZLQJHGVFDSXOD

5HWLQDOYDVFXODUDEQRUPDOLWLHVZLWKWKHSRVVLELOLW\RIUHWLQDOGHWDFKPHQWVDUHVHHQRFFDVLRQDOO\+HDULQJORVVLQFKLOGUHQUDUH5DUHWHQGHQF\IRUFDUGLDFDUUK\WKPLDV

/LPEJLUGOHPXVFXODUG\VWURSK\

:HDNQHVVFDQEHJLQLQVKRXOGHUVRUSHOYLVGHSHQGLQJRQWKHVXEW\SHEXWXVXDOO\VSDUHVWKHIDFHH\HVDQGSKDU\Q[0D\EHFOLQLFDOO\LQGLVWLQJXLVKDEOHIURP'XFKHQQHRU%HFNHUPXVFXODUG\VWURSK\0D\DIIHFWJLUOVDVZHOODVER\VIURPHDUO\FKLOGKRRGWRODWHDGXOWKRRG&DUGLRP\RSDWK\LVSUHVHQWLQSDWLHQWVZLWKVRPHVXEW\SHV

(PHU\'UHLIXVVPXVFXODUG\VWURSK\

*UDGXDOPXVFOHZHDNQHVVDQGDWURSK\HVSHFLDOO\RIWKHSUR[LPDODUPVDQGFDOYHV-RLQWGHIRUPLWLHVDUHFRPPRQLQLWLDOO\DIIHFWLQJWKHHOERZVDQGDQNOHVDQGODWHUWKHH[WHQVRUVRIWKHQHFNDQGVSLQH&DUGLDFFRQGXFWLRQDEQRUPDOLWLHVZLWKDULVNRIVXGGHQGHDWKEUDG\FDUGLDVDQGDWULDOYHQWULFXODUFRQGXFWLRQGHILFLWV

&RQJHQLWDOPXVFXODUG\VWURSK\DQGFRQJHQLWDOP\RSDWKLHV

,WLVRIWHQGLIILFXOWWRGLVWLQJXLVKEHWZHHQG\VWURSKLFDQGP\RSDWKLFIRUPVG\VWURSK\LVPRUHOLNHO\WREHSURJUHVVLYHUHFHVVLYHO\LQKHULWHGDQGRIWHQLQYROYHVWKHQHUYRXVV\VWHP+\SRWRQLDLQLQIDQF\-RLQWGHIRUPLWLHVDUHFRPPRQDWELUWKRULQLQIDQF\&RJQLWLRQPD\EHQRUPDOVXFKDVLQSDWLHQWVZLWKODPLQLQPHURVLQGHILFLHQF\EXWVHYHUHPHQWDOUHWDUGDWLRQDQG

VHL]XUHVDUHFRPPRQLQSDWLHQWVZLWKRWKHUW\SHVVXFKDV)XNX\DPDPXVFXODUG\VWURSK\2FXODUDEQRUPDOLWLHVDUHRIWHQDVVRFLDWHGZLWKFRUWLFDOG\VSODVLDZKLFKLVVHHQLQVHYHUDOW\SHV

2FXORSKDU\QJHDOPXVFXODUG\VWURSK\

,QLWLDOO\ELODWHUDOSURJUHVVLYHSWRVLVDQGH[WUDRFXODUPXVFOHZHDNQHVVPD\LQWHUIHUHZLWKYLVLRQEXWGLSORSLDLVUDUHDQGSXSLOVDUHQRUPDO'\VSKDJLDJUDGXDOO\GHYHORSVDQGSDWLHQWPD\ORVHZHLJKWDVHDWLQJEHFRPHVGLIILFXOW2WKHUHDUO\VLJQVLQFOXGHG\VSKRQLDDQGIDFLDOZHDNQHVV:HDNQHVVPD\JUDGXDOO\VSUHDGWRLQFOXGHWKHQHFNIOH[RUVDQGSUR[LPDOOLPEV

'LVWDOPXVFXODUG\VWURSK\

0RVWW\SHVDUHFKDUDFWHUL]HGE\SURJUHVVLYHZHDNQHVVLQWKHGLVWDOOHJVRIWHQDQWHULRUFRPSDUWPHQWZHDNQHVVFDXVHVIRRWGURSDOWKRXJKWKH0L\RVKLW\SHSUHVHQWVZLWKSRVWHULRUFRPSDUWPHQWZHDNQHVVFDXVLQJWRHZDONLQJDQGGLIILFXOW\ZLWKVWDLUFOLPELQJ+RZHYHUDIHZW\SHVVXFKDV:HODQGHUP\RSDWK\EHJLQZLWKZDVWLQJRIKDQGVDQGIRUHDUPV&DUGLRP\RSDWK\DQGUHVSLUDWRU\LQVXIILFLHQF\KDYHEHHQVHHQLQSDWLHQWVZLWKP\RILEULOODUGHVPLQP\RSDWK\

3K\VLFDOH[DPLQDWLRQ

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

4XHVWLRQVWRDVN

3UHVHQWLQJFRQGLWLRQ

:KDWV\PSWRPVDUH\RXH[SHULHQFLQJ"0XVFOHZHDNQHVVLVWKHSULPDU\V\PSWRPRIQRWH7KHVSHFLILFPXVFOHJURXSVDIIHFWHGGHSHQGRQWKHW\SHRIPXVFXODUG\VWURSK\3DWLHQWVZLWKIDVFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\PD\SUHVHQWZLWKPXVFOHSDLQRUIDWLJXH3DWLHQWVZLWKP\RWRQLFPXVFXODUG\VWURSK\PD\KDYHFDWDUDFWV

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

)DPLO\KLVWRU\

'RDQ\RI\RXUIDPLO\PHPEHUVKDYHVLPLODUV\PSWRPV"0XVFXODUG\VWURSKLHVDUHLQKHULWHGGLVRUGHUV

%DFNWR7RS

'LDJQRVWLFWHVWLQJ

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

6HUXPFUHDWLQHNLQDVH

'HVFULSWLRQ

9HQRXVEORRGVDPSOH0HDVXUHPHQWRIWKHSURGXFWRIPXVFOHEUHDNGRZQ

1RUPDOUDQJHV

)HPDOHSDWLHQWVWR,8/0DOHSDWLHQWVWR,8/

&RPPHQWV

5HVXOWVIRUWKHYDULRXVPXVFXODUG\VWURSKLHVDUHDVIROORZV'XFKHQQHOHYHOVDUHWRWLPHVQRUPDORIWHQWR,8/%HFNHUWR,8//LPEJLUGOHOHYHOVDUHPRGHUDWHO\HOHYDWHG(PHU\'UHLIXVVDQGIDFLRVFDSXORKXPHUDOOHYHOVDUHPLOGO\RUPRGHUDWHO\HOHYDWHG0\RWRQLFDQGRFXORSKDU\QJHDOOHYHOVDUHQRUPDORUVOLJKWO\HOHYDWHG'LVWDOOHYHOVDUHQRUPDOWRPRGHUDWHO\HOHYDWHGH[FHSWLQSDWLHQWVZLWKWKH0L\RVKLW\SHLQZKRPOHYHOVDUHWRWLPHVWKHQRUPDOOHYHO&RQJHQLWDOOHYHOVDUHXVXDOO\HOHYDWHGHVSHFLDOO\SRVWQDWDOO\EXWWKHQPD\QRUPDOL]H

1RWGHILQLWLYHO\GLDJQRVWLF(OHYDWLRQVPD\EHGXHWRPXVFOHWUDXPDHJIURPLQWUDPXVFXODULQMHFWLRQVQHHGOHHOHFWURP\RJUDSK\RURWKHUGLVHDVHVLQFOXGLQJSRO\P\RVLWLVGHUPDWRP\RVLWLVWK\URLGGLVHDVHP\RFDUGLDOLQIDUFWLRQVWURNHVKRFNDQGVHSVLV$EQRUPDOUHVXOWVPD\EHVHHQLQSDWLHQWVWDNLQJRSLDWHVGH[DPHWKDVRQHHWKDQROGLJR[LQIXURVHPLGHLPLSUDPLQHSKHQREDUELWDORUOLWKLXP

*HQHGHOHWLRQPXWDWLRQVWXGLHV

'HVFULSWLRQ

9HQRXVEORRGVDPSOH

&RPPHQWV

&RQILUPWKHGLDJQRVLVRIVRPHPXVFXODUG\VWURSKLHVLIWKHDIIHFWHGJHQHKDVEHHQLGHQWLILHGDQGDVSHFLILFODERUDWRU\WHVW

H[LVWV

/DFNRISURWHLQH[SUHVVLRQRUPXWDWLRQVZLWKLQG\VWURSKLQG\VWURSKLQDVVRFLDWHGSURWHLQVRURWKHUJHQHVDUHOLQNHGZLWK

PXVFXODUG\VWURSK\UHVXOWVIRUYDULRXVPXVFXODUG\VWURSKLHVDUHDVIROORZV

'XFKHQQHG\VWURSKLQOHYHOVDUHOHVVWKDQRIQRUPDO

%HFNHUG\VWURSKLQOHYHOVDUHOHVVWKDQRIQRUPDO

(PHU\'UHLIXVVPXWDWLRQVLQHPHULQDUHSUHVHQW

0\RWRQLFWKHUHLV&7*H[SDQVLRQLQWKHG\VWURSKLDP\RWRQLFDSURWHLQNLQDVHJHQH

:LOOQRWDVVLVWLQGLDJQRVLVRIDPXVFXODUG\VWURSK\IRUZKLFKWKHJHQHUHVSRQVLEOHKDVQRWEHHQLGHQWLILHGLQFOXGLQJ

SRLQWPXWDWLRQVQRWUHFRJQL]HGE\WKHWHVWLQJHQHVWKDWKDYHEHHQLGHQWLILHGDVWKHFDXVHRIGLVHDVHHJRISDWLHQWVZLWK'XFKHQQHRU%HFNHUPXVFXODUG\VWURSK\KDYHGHFUHDVHGRUDEVHQWG\VWURSKLQEXWDQRUPDOWHVWUHVXOW

([SHQVLYHDQGPD\QRWEHUHLPEXUVHGE\VRPHLQVXUDQFHFDUULHUV

0XVFOHELRSV\

'HVFULSWLRQ

0XVFOHVSHFLPHQJHQHUDOO\IURPDPLOGWRPRGHUDWHO\DIIHFWHGPXVFOHLQVWHDGRIHQGVWDJHPXVFOH

1RUPDOUHVXOW

8QLIRUPILEHUVL]HZLWKRXWFHQWUDOQXFOHLDFKHFNHUERDUGSDWWHUQRIW\SH,DQGW\SH,,PXVFOHILEHUVDQGQRGHJHQHUDWLRQ

RIPXVFOHFHOOV

&RPPHQWV

0D\VKRZSDWKRORJLFFKDQJHVRIPXVFOHILEHUVDQGLPPXQRVWDLQLQJPD\LGHQWLI\SURWHLQGHILFLWVUHVXOWVIRUYDULRXV

PXVFXODUG\VWURSKLHVDUHDVIROORZV

'XFKHQQHILEHUQHFURVLVILEHUVSOLWWLQJLQFUHDVHGFRQQHFWLYHWLVVXHDQGIDWDQGILEHUVL]HYDULDELOLW\FRPSOHWH

ODFNRIG\VWURSKLQRQLPPXQRVWDLQLQJ

%HFNHUILEHUQHFURVLVILEHUVSOLWWLQJLQFUHDVHGFRQQHFWLYHWLVVXHDQGIDWDQGILEHUVL]HYDULDELOLW\UHODWLYHODFN

RIG\VWURSKLQRQLPPXQRVWDLQLQJ

(PHU\'UHLIXVVODFNRIHPHULQRQLPPXQRVWDLQLQJ

/LPEJLUGOHODFNRIVDUFRJO\FDQVFDYHROLQRUG\VIHUOLQRQLPPXQRVWDLQLQJ

&RQJHQLWDOODFNRIODPLQLQFKDLQRUIXNXWLQRQLPPXQRVWDLQLQJ

0\RWRQLFH[FHVVLYHFHQWUDOQXFOHLDQGW\SH,DWURSK\

)DFLRVFDSXORKXPHUDOGHJHQHUDWLQJILEHUVDQGVPDOODQJXODWHGILEHUVZLWKLQIODPPDWRU\FHOOV

2FXORSKDU\QJHDOLQWUDF\WRSODVPLFULPPHGYDFXROHVRULQWUDQXFOHDULQFOXVLRQVPD\EHVHHQ

5HVXOWVPD\EHQRUPDOLQVRPHIHPDOHFDUULHUVRI'XFKHQQHPXVFXODUG\VWURSK\

$EQRUPDOKLVWRORJLFILQGLQJVPD\EHVHHQLQSDWLHQWVZLWKSRO\P\RVLWLVRUGHUPDWRP\RVLWLVPD\EHFRQIXVHGZLWK

IDFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\GXHWRWKHSUHVHQFHRIPRQRQXFOHDULQIODPPDWRU\LQILOWUDWHVRUWR[LF

LQIODPPDWRU\LQIHFWLRXVRUPHWDEROLFP\RSDWKLHV

5HVXOWVPD\EHIDOVHO\DEQRUPDOLIDQLQDGHTXDWHVDPSOHLVWDNHQRULIWKHWLVVXHLVQRUPDORUWRRVFDUUHG

0D\EHSDLQIXODQGWKHUHLVDULVNRILQIHFWLRQKHPDWRPDDQGVHQVRU\ORVVDWWKHZRXQGVLWH

(OHFWURP\RJUDSK\

'HVFULSWLRQ

(OHFWURSK\VLRORJLFWHVWWKDWLQFOXGHVERWKDQHUYHFRQGXFWLRQWHVWWKDWPHDVXUHVFRQGXFWLRQRIHOHFWULFDOVWLPXODWLRQRI

QHUYHVWRKHOSHYDOXDWHIRUQHXURSDWK\DQGDQHHGOHH[DPLQDWLRQRIDIIHFWHGPXVFOHVWRDVVHVVIRUVLJQVRIP\RSDWK\RU

GHQHUYDWLRQ

1RUPDOUHVXOWV

6LOHQFHDWUHVWDQGQRUPDOPXVFOHDFWLRQSRWHQWLDOGLVFKDUJHVZLWKYROLWLRQ

1RUPDOQXPHULFYDOXHVIRUPRWRURUVHQVRU\QHUYHFRQGXFWLRQYHORFLWLHV/DFNRIGHFUHPHQWRULQFUHPHQWLQFRPSRXQGPXVFOHDFWLRQSRWHQWLDODPSOLWXGHZLWKUHSHWLWLYHQHUYHVWLPXODWLRQ

&RPPHQWV

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

(OHFWURFDUGLRJUDSK\

'HVFULSWLRQ

*UDSKLFUHSUHVHQWDWLRQRIHOHFWULFDODFWLYLW\RIWKHKHDUW

&RPPHQWV

0D\GHWHFWSRWHQWLDOO\OHWKDOFDUGLDFDEQRUPDOLWLHVLQSDWLHQWVZLWK'XFKHQQH%HFNHU(PHU\'UHLIXVVOLPEJLUGOHGLVWDORUP\RWRQLFPXVFXODUG\VWURSK\UHVXOWVIRUYDULRXVPXVFXODUG\VWURSKLHVDQGP\RSDWKLHVDUHDVIROORZV

'XFKHQQHPXVFXODUG\VWURSK\WDOOULJKWSUHFRUGLDO5ZDYHVDQGGHHSOHIWSUHFRUGLDO4ZDYHVDUHVHHQLQRISDWLHQWV(PHU\'UHLIXVVDQGP\RWRQLFPXVFXODUG\VWURSKLHVVLQXVEUDG\FDUGLDSURORQJDWLRQRIWKH35LQWHUYDOFRQGXFWLRQEORFN0\RILEULOODUGHVPLQP\RSDWK\KHDUWEORFNDQGDUUK\WKPLDV

'HWHFWLRQRIFDUGLDFFRQGXFWLRQGHILFLWVSHUPLWVHDUO\WUHDWPHQWDQGPD\EHOLIHVDYLQJ2QO\VKRZVFDUGLDFDFWLYLW\IRUDVKRUWSHULRGRIWLPHKRXU+ROWHUPRQLWRULQJVKRXOGEHFRQVLGHUHGLIDUUK\WKPLDVDUHVWURQJO\VXVSHFWHG&DUGLDFDUUK\WKPLDVDQGVRPHGUXJVLQFOXGLQJDQWLDUUK\WKPLFDJHQWVPD\FDXVHFDUGLDFFRQGXFWLRQDEQRUPDOLWLHV

05,

'HVFULSWLRQ

1RQUDGLRJUDSKLFEUDLQLPDJLQJPRGDOLW\SURYLGLQJKLJKUHVROXWLRQLQFURVVVHFWLRQDODQGORQJLWXGLQDOYLHZV

&RPPHQWV

0D\DVVLVWLQWKHGLDJQRVLVRIFRQJHQLWDOPXVFXODUG\VWURSKLHVPD\VKRZSRRUZKLWHPDWWHUP\HOLQDWLRQLQLQIDQF\RUSRO\PLFURJ\ULDK\GURFHSKDOXVRUK\SRSODVWLFFRUWLFRVSLQDOWUDFWV6FDQVFDQDSSHDUQRUPDOHYHQLQDIIHFWHGFKLOGUHQQHRQDWHVZLWKFRQJHQLWDOPXVFXODUG\VWURSK\PD\KDYHPLQLPDOP\HOLQDWLRQ8VXDOO\GRQHLQLQIDQWVDQGVPDOOFKLOGUHQLQZKRPVHGDWLRQLVUHTXLUHGZLWKLWVDVVRFLDWHGULVNV

%DFNWR7RS

'LIIHUHQWLDOGLDJQRVLV

0\DVWKHQLDJUDYLV

0\DVWKHQLDJUDYLVLVDQDXWRLPPXQHGLVRUGHURIQHXURPXVFXODUWUDQVPLVVLRQ&KDUDFWHUL]HGE\YDULDEOHPXVFOHZHDNQHVVWKDWLVZRUVHQHGE\H[HUFLVHDQGLPSURYHGZLWKUHVW,QLWLDOV\PSWRPVRIWHQLQFOXGHSWRVLVGLSORSLDG\VSKDJLDRUH\HOLGFORVXUHZHDNQHVVDSSUR[LPDWHO\RISDWLHQWV

GHYHORSJHQHUDOL]HGZHDNQHVV

GHYHORSJHQHUDOL]HGZHDNQHVV3DWLHQWVPD\H[SHULHQFHGLIILFXOW\FKHZLQJDQGG\VDUWKULDDQGPD\KDYHDQDEQRUPDODSSHDULQJVPLOH2QVHWLVRIWHQLQDGXOWKRRGZLWKPXVFOHIDWLJDELOLW\EHLQJWKHPRVWFRPPRQV\PSWRPUHSRUWHG

(QGRFULQHFDXVHVRISUR[LPDOPXVFOHZHDNQHVV

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

0HWDEROLFFDXVHVRISUR[LPDOPXVFOHZHDNQHVV

'LVHDVHVRIJO\FRJHQVWRUDJHDQGOLSLGPHWDEROLVPFDQFDXVHHLWKHUSURJUHVVLYHPXVFOHZHDNQHVVRUYDU\LQJGHJUHHVRIH[HUFLVHLQGXFHGFUDPSLQJDQGP\RJORELQXULD3URJUHVVLYHSUR[LPDOPXVFOHZHDNQHVVDQGH[HUFLVHLQWROHUDQFHDUHDPRQJWKHV\PSWRPVDVVRFLDWHGZLWKPLWRFKRQGULDOP\RSDWKLHV

,QIODPPDWRU\FDXVHVRISUR[LPDOPXVFOHZHDNQHVV

'HUPDWRP\RVLWLVFDQRFFXUDWDQ\DJHZLWKSUR[LPDOJUHDWHUWKDQGLVWDOZHDNQHVVDQGDUDVKWKDWXVXDOO\VWDUWVRQWKHILQJHUVDQGDURXQGWKHH\HVEXWPD\LQFOXGHWKHIDFHDQGQHFN3RO\P\RVLWLVDOVRLVFKDUDFWHUL]HGE\SUR[LPDOJUHDWHUWKDQGLVWDOZHDNQHVVDQGDIIHFWVDOOPXVFOHW\SHVVRSDWLHQWVXVXDOO\DGXOWVDOVRPD\GHYHORSFRQJHVWLYHKHDUWIDLOXUHRUG\VSKDJLD(LWKHUSRO\P\RVLWLVRUGHUPDWRP\RVLWLVFDQRYHUODSZLWKFRQQHFWLYHWLVVXHGLVHDVHV,QFOXVLRQERG\P\RVLWLVFDXVHVJUDGXDOO\SURJUHVVLYHSUR[LPDODQGGLVWDOZHDNQHVVLQROGHUDGXOWV3RO\P\DOJLDUKHXPDWLFDLVFKDUDFWHUL]HGE\PXVFOHSDLQDQGIDWLJXHDOWKRXJKQRWXVXDOO\WUXHZHDNQHVVLQHOGHUO\DGXOWVDQGLVOLQNHGWRJLDQWFHOODUWHULWLV+XPDQLPPXQRGHILFLHQF\YLUXVP\RVLWLVLVDSUR[LPDOP\RSDWK\WKDWLVXVXDOO\SDLQOHVVDQGLVDVVRFLDWHGZLWKDKLJKFUHDWLQHNLQDVHOHYHO

0HGLFDWLRQLQGXFHGSUR[LPDOPXVFOHZHDNQHVV

0D\EHVHHQLQSDWLHQWVWDNLQJVWHURLGVFROFKLFLQHFKORURTXLQHDPLRGDURQHEORFNHUVSHQLFLOODPLQHFKROHVWHUROORZHULQJDJHQWVRUF\FORVSRULQH$OWKRXJKPXVFOHZHDNQHVVPD\EHJLQVKRUWO\DIWHUVWDUWLQJWKHPHGLFDWLRQLWPD\DOVRGHYHORSRYHU\HDUV&RPELQDWLRQVRIFHUWDLQPHGLFDWLRQVDUHDVVRFLDWHGZLWKDKLJKHUULVNWKDQWKHLQGLYLGXDODJHQWVHVSHFLDOO\LQSDWLHQWVZLWKUHQDOIDLOXUH7KHUDWHRIQHFURWL]LQJP\RSDWK\WULJJHUHGE\FKROHVWHUROORZHULQJDJHQWVLVKLJKHULQSDWLHQWVZLWKUHQDOLQVXIILFLHQF\ZKRDUHWDNLQJRWKHUPHGLFDWLRQVHJF\FORVSRULQHFRQFRPLWDQWO\

6SLQDOPXVFXODUDWURSKLHV

&KDUDFWHUL]HGE\GHJHQHUDWLRQRIDQWHULRUKRUQFHOOVRIWKHVSLQDOFRUGDQGPRWRUQHXURQVRIWKHEUDLQVWHP+\SRWRQLDIODFFLGZHDNQHVVGHFUHDVHGRUDEVHQWGHHSWHQGRQUHIOH[HVIDVFLFXODWLRQVDQGDWURSK\PD\EHSUHVHQW/LPEGHIRUPLWLHVGHYHORSZLWKSURJUHVVLYHZHDNQHVV,QIDQWLOHFKLOGKRRGDQGDGXOWIRUPVH[LVW

1RQG\VWURSKLFP\RWRQLDVDQGFKDQQHORSDWKLHV

1RQG\VWURSKLFP\RWRQLDVVXFKDVP\RWRQLDFRQJHQLWD7KRPVHQGLVHDVHODFNWKHZHDNQHVVDQGZDVWLQJWKDWDUH

FKDUDFWHULVWLFRIG\VWURSKLFP\RWRQLDDQGV\VWHPLFDEQRUPDOLWLHVGRQRWRFFXU

'XHWRP\RWRQLDWKHUHLVH[FHVVLYHVWLIIQHVVDQGLPSDLUHGUHOD[DWLRQDIWHUYROXQWDU\PXVFOHFRQWUDFWLRQRUSHUFXVVLRQ

UHOD[DWLRQDIWHUDWLJKWJULSRUWLJKWH\HOLGFORVXUHLVYHU\VORZ

0\RWRQLDLVREVHUYHGRQPXVFOHSHUFXVVLRQDQGHOHFWURP\RJUDSK\UHDGLO\HOLFLWVHOHFWULFDOP\RWRQLD

,QKHULWDQFHLVXVXDOO\GRPLQDQW3URJUHVVLYHZHDNQHVVVHOGRPRFFXUVH[FHSWLQVRPHSDWLHQWVZLWKDUHFHVVLYHIRUPRI

P\RWRQLDFRQJHQLWD%HFNHUJHQHUDOL]HGP\RWRQLD

3HULRGLFSDUDO\VHVDUHSDUR[\VPDOGLVRUGHUVRIZHDNQHVVZLWKQRUPDOF\EHWZHHQHSLVRGHVSHUPDQHQWZHDNQHVVLVYHU\

UDUH

%HFDXVHQRQG\VWURSKLFP\RWRQLDVDQGSHULRGLFSDUDO\VHVDUHFDXVHGE\PXWDWLRQVRIYDULRXVPXVFOHLRQFKDQQHOVWKH

WHUPFKDQQHORSDWKLHVLVDOVRXVHGWRGHVFULEHWKLVJURXSRIGLVRUGHUV

&KDQQHORSDWKLHVDUHQRWGLIILFXOWWRGLVWLQJXLVKIURPG\VWURSKLHVEHFDXVHV\VWHPLFDEQRUPDOLWLHVDQGSHUPDQHQW

ZHDNQHVVDUHDEVHQWVWLIIQHVVLVSURPLQHQWDQGWKHV\PSWRPVDUHRIDSDUR[\VPDOQDWXUH7KH\DUHPHQWLRQHGKHUHRQO\

EHFDXVHRIWKHSRWHQWLDOIRUFRQIXVLRQGXHWRRYHUODSSLQJWHUPLQRORJ\DQGEHFDXVHWKHSULPDU\RUJDQRILQYROYHPHQWLV

PXVFOH

%DFNWR7RS

&RQVXOWDWLRQ

0RVWSDWLHQWVZLWKSURJUHVVLYHPXVFXODUG\VWURSK\DQGP\RSDWK\QHHGWREHUHIHUUHGWRDQHXURORJLVWZLWKVSHFLDO

H[SHUWLVHLQQHXURPXVFXODUGLVHDVHVIRUDSSURSULDWHGLDJQRVWLFHYDOXDWLRQZKLFKFRXOGLQFOXGHHOHFWURP\RJUDSK\

JHQHWLFWHVWLQJDQGPXVFOHELRSV\LIQHFHVVDU\

&DUHIXOFOLQLFDODVVHVVPHQWE\DQHXURORJLVWLVQHFHVVDU\LQSDWLHQWVZLWKZHDNQHVVRIXQFHUWDLQHWLRORJ\$WWLPHV

ZHDNQHVVRIGLYHUVHHWLRORJLHVPD\VLPXODWHWKHZHDNQHVVRIPXVFXODUG\VWURSK\)RULQVWDQFHVORZO\SURJUHVVLYHIDFLDO

DQGEXOEDUZHDNQHVVZLWKIDVFLFXODWLRQVDVVHHQLQSDWLHQWVZLWKWKHUDUHVH[OLQNHGUHFHVVLYH.HQQHG\GLVHDVHPD\

PLPLFP\RWRQLFG\VWURSK\DQGPXVFOHDWURSK\GXHWRP\RWRQLDFRQJHQLWDLQ\RXQJSDWLHQWVPD\PLPLF'XFKHQQH

PXVFXODUG\VWURSK\

5HVSLUDWRU\PXVFOHZHDNQHVVDQGYHQWLODWRU\FRPSURPLVHRFFXUDVDUHVXOWRIPDQ\PXVFXODUG\VWURSKLHV(DUO\DQG

DQWLFLSDWRU\FRQVXOWDWLRQVZLWKDSXOPRQRORJLVWSK\VLDWULVWVOHHSVSHFLDOLVWDQGQXWULWLRQLVWDUHZRUWKZKLOHDQGDUHEHVW

IDFLOLWDWHGE\DFKLOGRUDGXOWQHXURORJLVW

7UHDWPHQW

%DFNWR7RS

6XPPDU\DSSURDFK

0XVFXODUG\VWURSKLHVDUHLQKHULWHGGLVRUGHUVZLWKQRNQRZQFXUHV

7KHJRDOVRIWUHDWPHQWDUHWRSUHYHQWDQGFRUUHFWVNHOHWDODEQRUPDOLWLHVVORZWKHSURJUHVVLRQRIGLVHDVHPDLQWDLQ

DPEXODWLRQIRUDVORQJDVSRVVLEOHDQGWRSUHYHQWDVVRFLDWHGFRPSOLFDWLRQV

3UHGQLVRQHPD\LPSURYHPXVFOHVWUHQJWKLQSDWLHQWVZLWK'XFKHQQHPXVFXODUG\VWURSK\

3KHQ\WRLQDQGPH[LOHWLQHDUHXVHIXOIRUV\PSWRPDWLFUHOLHIRIERWKHUVRPHP\RWRQLDLQSDWLHQWVZLWKP\RWRQLFPXVFXODU

G\VWURSK\

6HYHUDORWKHUPHGLFDWLRQVLQFOXGLQJFDOFLXPFKDQQHOEORFNHUVDOEXWHUROSV\FKRVWLPXODQWVVWHURLGVSDULQJ

LPPXQRVXSSUHVVDQWVF\FORVSRULQH$D]DWKLRSULQHFUHDWLQHDQGDPLQRDFLGVXSSOHPHQWVJOXWDPLQHOHXFLQH[DQWKLQH

R[LGDVHLQKLELWRUVDOORSXULQROHUJRWDONDORLGVPHWK\VHUJLGHFKHODWRUVSHQLFLOODPLQHPD]LQGROLVD[RQLQHDQG

VXSHUR[LGHGLVPXWDVHKDYHEHHQVWXGLHGLQSDWLHQWVZLWKPXVFOHGLVRUGHUVDQGVKRZQWREHLQHIIHFWLYHRUFRXOGQRWEH

UHFRPPHQGHGRQWKHEDVLVRILQDGHTXDWHGDWDIXUWKHUVWXGLHVDUHQHFHVVDU\

6XUJHU\PD\EHUHTXLUHGWRFRUUHFWVNHOHWDODEQRUPDOLWLHVDQGPDLQWDLQDPEXODWLRQ

2UWKRVHVPD\EHDQDOWHUQDWLYHIRUPDLQWDLQLQJDPEXODWLRQLQSDWLHQWVZKRDUHXQDEOHRUXQZLOOLQJWRXQGHUJRVXUJHU\

3K\VLFDOWKHUDS\KHOSVSDWLHQWVWRUHPDLQLQGHSHQGHQWDVSDVVLYHH[HUFLVHVPLQLPL]HWKHGHYHORSPHQWRIFRQWUDFWXUHV

2FFXSDWLRQDOWKHUDS\DVVLVWVSDWLHQWVZLWKWKHIXQFWLRQVRIGDLO\OLYLQJ

&DUGLDFSDFHPDNHUVPD\EHQHFHVVDU\WRSUHYHQWVXGGHQGHDWKIURPFDUGLDFFRPSOLFDWLRQV

3RVLWLYHSUHVVXUHYHQWLODWLRQDQGRWKHUUHVSLUDWRU\VXSSRUWPHDVXUHVPD\EHQHFHVVDU\WRWUHDWUHVSLUDWRU\LQVXIILFLHQF\

%DFNWR7RS

0HGLFDWLRQV

3UHGQLVRQH>(%0@

,QGLFDWLRQ

3UHGQLVRQHLVXVHGIRUWKHV\PSWRPDWLFWUHDWPHQWRI'XFKHQQHPXVFXODUG\VWURSK\WKLVLVDQRIIODEHOLQGLFDWLRQ

'RVHLQIRUPDWLRQ

,QFKLOGUHQ

PJNJGRUPJNJHYHU\RWKHUGD\RUDOO\WRLPSURYHRUVXVWDLQPXVFOHIXQFWLRQ$VWKHFKLOGJURZVWKHGRVHSHUNLORJUDPPD\QHHGWREHGHFUHDVHGHJWRPJNJGRUDVWROHUDWHG

0DMRUFRQWUDLQGLFDWLRQV

)XQJDOLQIHFWLRQ

&RPPHQWV

$SSHDUVWRSURORQJDPEXODWLRQE\XSWR\HDUVDQGPD\GHFUHDVHDSRSWRVLVRIP\RWXEHVGHFHOHUDWHP\RILEHUQHFURVLVDQGLPSURYHVWUHQJWK'RVHVKLJKHUWKDQPJIRUZHHNVRUORQJHUPD\OHDGWRFOLQLFDOO\UHOHYDQWVXSSUHVVLRQRIWKHSLWXLWDU\DGUHQDOD[LV

(YLGHQFH

$V\VWHPDWLFUHYLHZRIVL[UDQGRPL]HGFRQWUROOHGWULDOV5&7VHYDOXDWLQJWKHHIIHFWRIFRUWLFRVWHURLGVRQPXVFOHVWUHQJWKDQGIXQFWLRQLQFKLOGUHQZLWK'XFKHQQHPXVFXODUG\VWURSK\IRXQGWKDWVWHURLGWKHUDS\LQFUHDVHGPXVFOHVWUHQJWKDQGIXQFWLRQLQWKHVKRUWWHUPPRQWKVWR\HDUVEXWWKHORQJWHUPEHQHILWUHPDLQVXQFOHDU7KHUHYLHZHUVFDXWLRQWKDWDQ\EHQHILWPXVWEHZHLJKHGDJDLQVWWKHORQJWHUPDGYHUVHHIIHFWVRIORQJWHUPVWHURLGXVH>@/HYHORIHYLGHQFH

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

/HDUQDERXWHYLGHQFHJUDGLQJV\VWHP

3KHQ\WRLQ

,QGLFDWLRQ

3KHQ\WRLQLVXVHGWRWUHDWP\RWRQLDLQSDWLHQWVZLWKP\RWRQLFG\VWURSK\WKLVLVDQRIIODEHOLQGLFDWLRQ

'RVHLQIRUPDWLRQ

9DULDEOHGHSHQGLQJRQWKHSDWLHQWVZHLJKWDQGFOLQLFDOV\PSWRPVEXWJHQHUDOO\WRPJGWLWUDWHGWRFRQWUROV\PSWRPVEXWQRWWRH[FHHGVWDQGDUGVHUXPOHYHOVWRDYRLGWR[LFLW\

0DMRUFRQWUDLQGLFDWLRQV

$GDPV6WRNHVV\QGURPH$WULRYHQWULFXODUEORFN

%UDG\FDUGLD

+\SHUVHQVLWLYLW\WRK\GDQWRLQ

&RPPHQWV

5HODWLYHO\VDIHIRUWKHWUHDWPHQWP\RWRQLDDVDOWHUQDWLYHVTXLQLQHWRFDLQLGHFDQH[DFHUEDWHFDUGLDFDUUK\WKPLDVWR

YDULRXVGHJUHHV

0H[LOHWLQH>(%0@

,QGLFDWLRQ

0H[LOHWLQHLVXVHGWRUHGXFHKDQGJULSUHOD[DWLRQWLPHLQSDWLHQWVZLWKP\RWRQLFPXVFXODUG\VWURSK\W\SHWKLVLVDQRII

ODEHOLQGLFDWLRQ

'RVHLQIRUPDWLRQ

WRPJWKUHHWLPHVGDLO\IRUZHHNV

0DMRUFRQWUDLQGLFDWLRQV

$WULRYHQWULFXODUEORFN

&DUGLRJHQLFVKRFN

&RPPHQWV

&RQVLGHUHGWREHDVDIHDQGHIIHFWLYHWUHDWPHQWIRUP\RWRQLD

(YLGHQFH

7ZRSURVSHFWLYHUDQGRPL]HGGRXEOHEOLQGSODFHERFRQWUROOHGFURVVRYHUWULDOVZHUHFRQGXFWHGWRHYDOXDWHWKHHIIHFWVRI

PH[LOHWLQHPJWKUHHWLPHVDGD\DQGPJWKUHHWLPHVDGD\RQKDQGJULSP\RWRQLDDQGFDUGLDFFRQGXFWLRQLQ

SDWLHQWVZLWKP\RWRQLFPXVFXODUG\VWURSK\W\SH7ZHQW\SDWLHQWVSDUWLFLSDWHGLQHDFKRIWKHWZRWULDOVPDNLQJWKHP

WKHODUJHVWVXFKWULDOVFRQGXFWHGWRGDWH%RWKGRVHVZHUHHIIHFWLYHLQUHGXFLQJKDQGJULSP\RWRQLDLQWKHVKRUWWHUPDQG

ZHUHZHOOWROHUDWHGZLWKRXWSURGXFLQJVLJQLILFDQWDGYHUVHHYHQWVRUFDUGLDFFRQGXFWLRQDEQRUPDOLWLHV3DWLHQWVZLWK

VLJQLILFDQWSUHH[LVWLQJFDUGLDFGLVHDVHZHUHQRWDEO\H[FOXGHGIURPSDUWLFLSDWLRQ>@/HYHORIHYLGHQFH

/HDUQDERXWHYLGHQFHJUDGLQJV\VWHP

%DFNWR7RS

1RQGUXJWUHDWPHQWV

6XUJHU\>(%0@

6XUJLFDOIL[WXUHRIFRQWUDFWXUHVPD\H[WHQGDPEXODWLRQDQGSURORQJLQGHSHQGHQWIXQFWLRQ

:DONHUDVVLVWHGDPEXODWLRQVKRXOGEHJLQDVVRRQDVSRVVLEOHIROORZLQJVXUJHU\

'HSHQGLQJRQWKHW\SHRIVXUJHU\FDVWVPD\EHZRUQIRUWRZHHNV

$VVRFLDWHGZLWKSDLQDQGWKHSRVVLELOLW\RILQIHFWLRQ

6XUJHRQVKDYHGLIIHUHQWOHYHOVRIH[SHULHQFHZLWKWKHVHSURFHGXUHV

(YLGHQFH

6XUJLFDOLQWHUYHQWLRQVDUHEHQHILFLDOLQVHOHFWHGSDWLHQWVZLWKPXVFXODUG\VWURSK\

$V\VWHPDWLFUHYLHZHYDOXDWLQJWKHHYLGHQFHIRUWKHUHODWLYHHIILFDF\RIVFDSXODUIL[DWLRQWHFKQLTXHVLQLPSURYLQJXSSHU

OLPEIXQFWLRQLQSDWLHQWVZLWKPXVFXODUG\VWURSK\HVSHFLDOO\IDFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\IRXQGWKDW

VXUJLFDOLQWHUYHQWLRQVDSSHDUWRSURGXFHVLJQLILFDQWEHQHILWVEXWWKHVHPXVWEHEDODQFHGDJDLQVWSRVWRSHUDWLYH

LPPRELOL]DWLRQQHHGIRUSK\VLRWKHUDS\DQGSRWHQWLDOFRPSOLFDWLRQV>@/HYHORIHYLGHQFH

$V\VWHPDWLFUHYLHZLQFOXGHGDVLQJOH5&7FRPSDULQJWKHHIIHFWRIHDUO\VXUJHU\YHUVXVWKDWRIQRQVXUJLFDOPDQXDO

VWUHWFKLQJRQDQNOHGRUVLIOH[LRQLQER\VZLWK'XFKHQQHPXVFXODUG\VWURSK\,QFUHDVHGUDQJHRIPRWLRQZDVVHHQLQ

WKHVXUJLFDOJURXSDWPRQWKVEXWWKLVHIIHFWZDVQRWPDLQWDLQHGDWWKHPRQWKIROORZXS)XQFWLRQDORXWFRPHV

IDYRUHGWKHQRQVXUJLFDOJURXS>@/HYHORIHYLGHQFH

$OWKRXJKSURVSHFWLYHDQGUHWURVSHFWLYHFDVHVHULHVKDYHVXJJHVWHGSRWHQWLDOEHQHILWQR5&7VKDYHEHHQFRQGXFWHGWR

DVVHVVWKHHIIHFWLYHQHVVRIVFROLRVLVVXUJHU\LQSDWLHQWVZLWK'XFKHQQHPXVFXODUG\VWURSK\)XUWKHUVWXGLHVDUHQHHGHG

EHIRUHHYLGHQFHEDVHGUHFRPPHQGDWLRQVFDQEHPDGH>@/HYHORIHYLGHQFH

/HDUQDERXWHYLGHQFHJUDGLQJV\VWHP

2UWKRVHV

$LGLQSRVWXUHFRUUHFWLRQDQGPD\DVVLVWLQLQGHSHQGHQWDPEXODWLRQ

3DWLHQFHLVUHTXLUHGWRHQVXUHVXFFHVVIXOILWWLQJDQGHIIHFWLYHWUHDWPHQW

7KHILWVKRXOGEHUHDVVHVVHGSHULRGLFDOO\DQGIUHTXHQWO\LQJURZLQJFKLOGUHQ

3K\VLFDOWKHUDS\>(%0@

([HUFLVHDQGSDVVLYHVWUHWFKLQJPD\LPSURYHPXVFOHVWUHQJWKDQGUDQJHRIPRWLRQVORZWKHSURJUHVVLRQRIZHDNQHVV

UHGXFHFRQWUDFWXUHVDQGSURPRWHIXQFWLRQDOLQGHSHQGHQFH

3DWLHQWVVKRXOGEHLQVWUXFWHGWRFRQWLQXHWKHSUHVFULEHGH[HUFLVHVDQGVWUHWFKLQJDWKRPHHQFRXUDJHPHQWDQGVXSSRUWDUH

UHTXLUHG

2YHUH[HUWLRQFDQFDXVHIDWLJXH

0XVFOHIXQFWLRQVKRXOGEHDVVHVVHGUHJXODUO\

(YLGHQFH

7KHUHLVLQVXIILFLHQWHYLGHQFHWKDWH[HUFLVHDQGRWKHUSK\VLFDOWKHUDS\PHDVXUHVLPSURYHIXQFWLRQLQSDWLHQWVZLWKVRPHIRUPVRI

PXVFXODUG\VWURSK\

$V\VWHPDWLFUHYLHZIRXQGLQVXIILFLHQWHYLGHQFHWKDWPRGHUDWHLQWHQVLW\VWUHQJWKWUDLQLQJLVEHQHILFLDOLQSDWLHQWVZLWK

P\RWRQLFPXVFXODUG\VWURSK\RUIDFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\EXWLWGRHVQRWDSSHDUWREHKDUPIXO>@/HYHO

RIHYLGHQFH

$QRWKHUV\VWHPDWLFUHYLHZIRXQGOHYHO,,,LHLQGLFDWLRQVRIHIIHFWLYHQHVVHYLGHQFHRIWKHHIIHFWLYHQHVVRIDHURELF

H[HUFLVHLQSDWLHQWVZLWKPXVFOHGLVRUGHUV$OWKRXJKWKHUHZDVLQVXIILFLHQWHYLGHQFHRIWKHHIIHFWLYHQHVVRIPXVFOH

VWUHQJWKHQLQJH[HUFLVHVDORQHWKHHIIHFWLYHQHVVRIWKHFRPELQDWLRQRIPXVFOHVWUHQJWKHQLQJH[HUFLVHVDQGDHURELF

H[HUFLVHZDVVXSSRUWHGE\OHYHO,,LHOLNHO\WREHHIIHFWLYHHYLGHQFH>@/HYHORIHYLGHQFH

/HDUQDERXWHYLGHQFHJUDGLQJV\VWHP

2FFXSDWLRQDOWKHUDS\

,QWHUDFWLRQVZLOOEHSDWLHQWVSHFLILF

$VVLVWDQFHGHYLFHVVXFKDVZULVWVSOLQWVEUDFHVDQGZKHHOFKDLUVPD\DVVLVWSDWLHQWVZLWKDPEXODWLRQDQGDFWLYLWLHVRI

GDLO\OLYLQJ

0D\SHUPLWLQGHSHQGHQWOLYLQJIRUH[WHQGHGSHULRGVRIWLPHHQKDQFHVTXDOLW\RIOLIHDQGIDFLOLWDWHVFRSLQJDQG

DGDSWDWLRQE\WKHSDWLHQW

(QFRXUDJHPHQWDQGVXSSRUWDUHLPSRUWDQWSHULRGLFIROORZXSPD\EHUHTXLUHGWRHQVXUHWKDWDGDSWLYHGHYLFHVDUHVWLOO

EHLQJXVHGSURSHUO\DQGDUHIXQFWLRQLQJZHOO

&DUGLDFSDFHPDNHU

0LPLFVDWULDOYHQWULFXODUV\QFKURQ\HOLPLQDWLQJWKHQHHGIRUDQWLDUUK\WKPLFGUXJVDQGSUHYHQWLQJFDUGLDFDUUK\WKPLDV

DQGVXGGHQGHDWKGXHWRFDUGLDFHYHQWV

6XUJLFDOLPSODQWDWLRQLVDVVRFLDWHGZLWKSDLQDQGWKHULVNRISRVVLEOHLQIHFWLRQ

)DLOXUHVPD\UHVXOWIURPEDWWHU\GHSOHWLRQORRVHFRQQHFWLRQVEHWZHHQWKHSDFLQJOHDGDQGWKHJHQHUDWRURULQFUHDVHVLQ

WKHSDFLQJWKUHVKROGGXHWRORFDOWLVVXHUHDFWLRQVRUGUXJV

(OHFWURFDUGLRJUDSK\VKRXOGEHGRQH\HDUO\IROORZLQJVXUJLFDOLPSODQWDWLRQ

3RVLWLYHSUHVVXUHYHQWLODWLRQDQGRWKHUUHVSLUDWRU\VXSSRUWLYHPHDVXUHV

,PSURYHOXQJIXQFWLRQDQGSURORQJOLIHH[SHFWDQF\

3XOPRQDU\IXQFWLRQVKRXOGEHDVVHVVHGDWHYHU\IROORZXSYLVLW

6NLQEUXLVHVDQGWLVVXHQHFURVLVFDQEHPLQLPL]HGZLWKWKHXVHRIDQDGHTXDWHO\VL]HGPDVNFDUHIXOSODFHPHQWRIWKH

PDVNDQGSODFHPHQWRIDK\GURFROORLGGUHVVLQJEHWZHHQWKHVNLQDQGWKHPDVN

%DFNWR7RS

6SHFLDOFLUFXPVWDQFHV

&RPRUELGLWLHV

3HULRSHUDWLYHPDQDJHPHQWRISDWLHQWVZLWKQHXURPXVFXODUGLVRUGHUVHVSHFLDOO\P\RWRQLFPXVFXODUG\VWURSK\DQGVRPH

RWKHUPXVFXODUG\VWURSKLHVFRQJHQLWDOP\RSDWKLHVDQGP\RWRQLDFRQJHQLWDUHTXLUHVVSHFLDOH[SHUWLVH6RPHSDWLHQWV

PD\EHSURQHWRWKHGHYHORSPHQWRIPDOLJQDQWK\SHUWKHUPLDV\QGURPHDQGVRPHPD\H[SHULHQFHDGYHUVHUHDFWLRQVWR

DQHVWKHWLFDJHQWVZLWKVXEVHTXHQWGLIILFXOW\IURPYHQWLODWRUZHDQLQJ,IVXUJHU\LVDQWLFLSDWHGDOOFDUHJLYHUVVKRXOGEH

DOHUWHGLQDGYDQFHHVSHFLDOO\WKHDQHVWKHVLRORJ\WHDPVXUJHRQVDQGSRVWRSHUDWLYHFDUHJLYHUV

,QSUHJQDQWSDWLHQWVZLWKP\RWRQLFPXVFXODUG\VWURSK\ODERUFDQEHFRPSOLFDWHGGXHWRXWHULQHDEQRUPDOLWLHV

3DWLHQWVDWLVIDFWLRQOLIHVW\OHSULRULWLHV

3DWLHQWJRDOVLQFOXGHSUHVHUYDWLRQRIPXVFOHIXQFWLRQUHWHQWLRQRILQGHSHQGHQFHIRUDVORQJDVSRVVLEOHDQGSURORQJDWLRQRIOLIH

H[SHFWDQF\

%DFNWR7RS

&RQVXOWDWLRQ

3DWLHQWVZLWKQHXURPXVFXODUGLVRUGHUVVKRXOGEHUHIHUUHGWRWKHIROORZLQJVSHFLDOLVWV

1HXURPXVFXODUVSHFLDOLVWIRUWUHDWPHQW

3K\VLFDOWKHUDSLVWIRUPDLQWHQDQFHRIQHXURPXVFXODUIXQFWLRQDQGPLQLPL]DWLRQRIFRQWUDFWXUHV

2UWKRWLVWIRUILWWLQJRIRUWKRVHVWRDVVLVWLQZDONLQJDQGWRGHOD\WKHRQVHWRIVFROLRVLV

2UWKRSHGLFVXUJHRQIRUUHOHDVHRIFRQWUDFWXUHVRUIL[DWLRQRIMRLQWV

3XOPRQRORJLVWIRUUHVSLUDWRU\GLIILFXOWLHV

&DUGLRORJLVWIRUFDUGLDFFRPSOLFDWLRQV

2SKWKDOPRORJLVWIRUYLVLRQGLIILFXOWLHV

*HQHWLFFRXQVHORUIRUDVVLVWDQFHLQIDPLO\SODQQLQJ

)ROORZXS

0RQLWRULQJ

3DWLHQWVVKRXOGEHDVVHVVHGUHJXODUO\E\DPXOWLGLVFLSOLQDU\WHDPRIKHDOWKFDUHSURIHVVLRQDOV

7KHLPSRUWDQFHRIUHJXODUIROORZXSWRPRQLWRUSURJUHVVLRQRIGLVHDVHVKRXOGEHHPSKDVL]HGDVSURJUHVVLRQPD\RFFXU

VRJUDGXDOO\WKDWWKHSDWLHQWVIDPLO\LVXQDZDUH

0XVFOHIXQFWLRQFRQWUDFWXUHVYLVXDOIXQFWLRQVHL]XUHVLQSDWLHQWVZLWKFRQJHQLWDOPXVFXODUG\VWURSK\DELOLW\WR

SHUIRUPDFWLYLWLHVRIGDLO\OLYLQJDQGFDUGLRSXOPRQDU\IXQFWLRQVKRXOGEHPRQLWRUHGUHJXODUO\DWHDFKYLVLW

3URJQRVLV

3DWLHQWVZLWK'XFKHQQH%HFNHUDQGVRPHOLPEJLUGOHPXVFXODUG\VWURSKLHVH[SHULHQFHSURJUHVVLYHPXVFOHZHDNQHVV

FRQWUDFWXUHVLQDELOLW\WRDPEXODWHN\SKRVFROLRVLVDQGUHVSLUDWRU\G\VIXQFWLRQ'XFKHQQHPXVFXODUG\VWURSK\FDQEH

IDWDOE\DJHGXHWRUHVSLUDWRU\LQVXIILFLHQF\LIYHQWLODWRU\VXSSRUWLVQRWSURYLGHGOLIHH[SHFWDQF\LVOHVVWKDQ\HDU

RQFHGLXUQDOK\SHUFDSQLDGHYHORSVZKHUHDVSDWLHQWVZLWK%HFNHUPXVFXODUG\VWURSK\RIWHQVXUYLYHXQWLOWKHIRXUWKRU

ILIWKGHFDGHEHIRUHGHYHORSLQJUHVSLUDWRU\SUREOHPV

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

&RPSOLFDWLRQV

'XFKHQQHPXVFXODUG\VWURSK\

5HVSLUDWRU\LQIHFWLRQVDQGUHVSLUDWRU\IDLOXUHLQWKHODWHUVWDJHV&DUGLDFFRQGXFWLRQGHILFLWV'\VSKDJLDRUDFXWHJDVWULFGLODWLRQ0DOLJQDQWK\SHUWKHUPLD

%HFNHU(PHU\'UHLIXVVDQGVRPHIRUPVRIGLVWDODQGOLPEJLUGOHPXVFXODUG\VWURSKLHV

&DUGLDFFRQGXFWLRQGHILFLWV

0\RWRQLFPXVFXODUG\VWURSK\

&DWDUDFWV'\VSKDJLDRUDFXWHJDVWULFGLODWLRQ(QGRFULQRSDWKLHV5HVSLUDWRU\IDLOXUHLQSDWLHQWVZLWKWKHFRQJHQLWDOIRUP

&RQJHQLWDOPXVFXODUG\VWURSK\

6HL]XUHV0HQWDOUHWDUGDWLRQ6SHHFKSUREOHPV

2FXORSKDU\QJHDOPXVFXODUG\VWURSK\

6ZDOORZLQJSUREOHPVLQFOXGLQJFKRNLQJ5HFXUUHQWSQHXPRQLD

)DFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\

+\SHUWHQVLRQ+HDULQJORVV5HWLQDOGHWDFKPHQW

3DWLHQWHGXFDWLRQ

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

*HQHWLFFRXQVHOLQJLVDYDLODEOHWRDVVLVWLQIDPLO\SODQQLQJ

%DFNWR7RS

2QOLQHLQIRUPDWLRQIRUSDWLHQWV

)DFLRVFDSXORKXPHUDO0XVFXODU'\VWURSK\6RFLHW\*HQHWLFV+RPH5HIHUHQFH

'XFKHQQHDQG%HFNHUPXVFXODUG\VWURSK\(PHU\'UHLIXVVPXVFXODUG\VWURSK\)DFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\)XNX\DPDFRQJHQLWDOPXVFXODUG\VWURSK\2FXORSKDU\QJHDOPXVFXODUG\VWURSK\7LELDOPXVFXODUG\VWURSK\8OOULFKFRQJHQLWDOPXVFXODUG\VWURSK\

0XVFXODU'\VWURSK\$VVRFLDWLRQ0XVFXODU'\VWURSK\)DPLO\)RXQGDWLRQ1DWLRQDO+XPDQ*HQRPH,QVWLWXWH/HDUQLQJ$ERXW'XFKHQQH0XVFXODU'\VWURSK\1DWLRQDO,QVWLWXWHRI1HXURORJLFDO'LVRUGHUVDQG6WURNH1,1'60XVFXODU'\VWURSK\,QIRUPDWLRQ3DJH3DUHQW3URMHFW0XVFXODU'\VWURSK\

5HVRXUFHV

%DFNWR7RS

6XPPDU\RIHYLGHQFH

(YLGHQFH

7KHUHLVHYLGHQFHWKDWFRUWLFRVWHURLGVDUHEHQHILFLDOLQWKHWUHDWPHQWRI'XFKHQQHPXVFXODUG\VWURSK\

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

7KHUHLVHYLGHQFHWKDWPH[LOHWLQHLVEHQHILFLDOLQWKHWUHDWPHQWRIKDQGJULSP\RWRQLDLQSDWLHQWVZLWKP\RWRQLFPXVFXODUG\VWURSK\W\SH

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

6XUJLFDOLQWHUYHQWLRQVDUHEHQHILFLDOLQVHOHFWHGSDWLHQWVZLWKPXVFXODUG\VWURSK\

$V\VWHPDWLFUHYLHZHYDOXDWLQJWKHHYLGHQFHIRUWKHUHODWLYHHIILFDF\RIVFDSXODUIL[DWLRQWHFKQLTXHVLQLPSURYLQJXSSHUOLPEIXQFWLRQLQSDWLHQWVZLWKPXVFXODUG\VWURSK\HVSHFLDOO\IDFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\IRXQGWKDWVXUJLFDOLQWHUYHQWLRQVDSSHDUWRSURGXFHVLJQLILFDQWEHQHILWVEXWWKHVHPXVWEHEDODQFHGDJDLQVWSRVWRSHUDWLYHLPPRELOL]DWLRQQHHGIRUSK\VLRWKHUDS\DQGSRWHQWLDOFRPSOLFDWLRQV>@/HYHORIHYLGHQFH$V\VWHPDWLFUHYLHZLQFOXGHGDVLQJOH5&7FRPSDULQJWKHHIIHFWRIHDUO\VXUJHU\YHUVXVWKDWRIQRQVXUJLFDOPDQXDOVWUHWFKLQJRQDQNOHGRUVLIOH[LRQLQER\VZLWK'XFKHQQHPXVFXODUG\VWURSK\,QFUHDVHGUDQJHRIPRWLRQZDVVHHQLQWKHVXUJLFDOJURXSDWPRQWKVEXWWKLVHIIHFWZDVQRWPDLQWDLQHGDWWKHPRQWKIROORZXS)XQFWLRQDORXWFRPHVIDYRUHGWKHQRQVXUJLFDOJURXS>@/HYHORIHYLGHQFH$OWKRXJKSURVSHFWLYHDQGUHWURVSHFWLYHFDVHVHULHVKDYHVXJJHVWHGSRWHQWLDOEHQHILWQR5&7VKDYHEHHQFRQGXFWHGWRDVVHVVWKHHIIHFWLYHQHVVRIVFROLRVLVVXUJHU\LQSDWLHQWVZLWK'XFKHQQHPXVFXODUG\VWURSK\)XUWKHUVWXGLHVDUHQHHGHGEHIRUHHYLGHQFHEDVHGUHFRPPHQGDWLRQVFDQEHPDGH>@/HYHORIHYLGHQFH

7KHUHLVLQVXIILFLHQWHYLGHQFHWKDWH[HUFLVHDQGRWKHUSK\VLFDOWKHUDS\PHDVXUHVLPSURYHIXQFWLRQLQSDWLHQWVZLWKVRPHIRUPVRIPXVFXODUG\VWURSK\

$V\VWHPDWLFUHYLHZIRXQGLQVXIILFLHQWHYLGHQFHWKDWPRGHUDWHLQWHQVLW\VWUHQJWKWUDLQLQJLVEHQHILFLDOLQSDWLHQWVZLWKP\RWRQLFPXVFXODUG\VWURSK\RUIDFLRVFDSXORKXPHUDOPXVFXODUG\VWURSK\EXWLWGRHVQRWDSSHDUWREHKDUPIXO>@/HYHORIHYLGHQFH

$QRWKHUV\VWHPDWLFUHYLHZIRXQGOHYHO,,,LHLQGLFDWLRQVRIHIIHFWLYHQHVVHYLGHQFHRIWKHHIIHFWLYHQHVVRIDHURELFH[HUFLVHLQSDWLHQWVZLWKPXVFOHGLVRUGHUV$OWKRXJKWKHUHZDVLQVXIILFLHQWHYLGHQFHRIWKHHIIHFWLYHQHVVRIPXVFOHVWUHQJWKHQLQJH[HUFLVHVDORQHWKHHIIHFWLYHQHVVRIWKHFRPELQDWLRQRIPXVFOHVWUHQJWKHQLQJH[HUFLVHVDQGDHURELFH[HUFLVHZDVVXSSRUWHGE\OHYHO,,LHOLNHO\WREHHIIHFWLYHHYLGHQFH>@/HYHORIHYLGHQFH

%DFNWR7RS

5HIHUHQFHV

(YLGHQFHUHIHUHQFHV

>@0DQ]XU$@0R[OH\57UG$VKZDO63DQG\D6HWDO3UDFWLFHSDUDPHWHUFRUWLFRVWHURLGWUHDWPHQWRI'XFKHQQHG\VWURSK\UHSRUWRIWKH4XDOLW\6WDQGDUGV6XEFRPPLWWHHRIWKH$PHULFDQ$FDGHP\RI1HXURORJ\DQGWKH3UDFWLFH&RPPLWWHHRIWKH&KLOG1HXURORJ\6RFLHW\1HXURORJ\3XE0HG&URVV5HI

>@/RJLJLDQ(/0DUWHQV:%0R[OH\57WKHWDO0H[LOHWLQHLVDQHIIHFWLYHDQWLP\RWRQLDWUHDWPHQWLQP\RWRQLFG\VWURSK\W\SH1HXURORJ\3XE0HG&URVV5HI

>@2UUHOO5:&RSHODQG65RVH056FDSXODUIL[DWLRQLQPXVFXODUG\VWURSK\&RFKUDQH'DWDEDVH6\VW5HY&'3XE0HG&URVV5HI

>@&KHXN'.:RQJ9:UDLJH(HWDO6XUJHU\IRUVFROLRVLVLQ'XFKHQQHPXVFXODUG\VWURSK\&RFKUDQH'DWDEDVH6\VW5HY&'3XE0HG&URVV5HI

>@9RHW1%YDQGHU.RRL(/5LSKDJHQ,,/LQGHPDQ(YDQ(QJHOHQ%**HXUWV$&6WUHQJWKWUDLQLQJDQGDHURELFH[HUFLVHWUDLQLQJIRUPXVFOHGLVHDVH&RFKUDQH'DWDEDVH6\VW5HY&'3XE0HG&URVV5HI

>@&XS(+3LHWHUVH$-7HQ%URHN3DVWRRU-0HWDO([HUFLVHWKHUDS\DQGRWKHUW\SHVRISK\VLFDOWKHUDS\IRUSDWLHQWVZLWKQHXURPXVFXODUGLVHDVHVDV\VWHPDWLFUHYLHZ$UFK3K\V0HG5HKDELO3XE0HG&URVV5HI

*XLGHOLQHV

7KH$PHULFDQ$FDGHP\RI1HXURORJ\KDVSURGXFHGWKHIROORZLQJ

0R[OH\57UG$VKZDO63DQG\D6HWDO3UDFWLFHSDUDPHWHUFRUWLFRVWHURLGWUHDWPHQWRI'XFKHQQHG\VWURSK\5HSRUWRIWKH4XDOLW\6WDQGDUGV6XEFRPPLWWHHRIWKH$PHULFDQ$FDGHP\RI1HXURORJ\DQGWKH3UDFWLFH&RPPLWWHHRIWKH&KLOG1HXURORJ\6RFLHW\1HXURORJ\

7KH$PHULFDQ&ROOHJHRI&KHVW3K\VLFLDQVKDVSURGXFHGWKHIROORZLQJ

%LUQNUDQW'-3DQLWFK+%%HQGLWW-2HWDO$PHULFDQ&ROOHJHRI&KHVW3K\VLFLDQVFRQVHQVXVVWDWHPHQWRQWKHUHVSLUDWRU\DQGUHODWHGPDQDJHPHQWRISDWLHQWVZLWK'XFKHQQHPXVFXODUG\VWURSK\XQGHUJRLQJDQHVWKHVLDRUVHGDWLRQ&KHVW

7KH$PHULFDQ7KRUDFLF6RFLHW\KDVSURGXFHGWKHIROORZLQJ

)LQGHU-'%LUQNUDQW'&DUO-HWDO5HVSLUDWRU\FDUHRIWKHSDWLHQWZLWK'XFKHQQHPXVFXODUG\VWURSK\$76FRQVHQVXVVWDWHPHQW$P-5HVSLU&ULW&DUH0HG

7KH$PHULFDQ$FDGHP\RI3HGLDWULFVKDVSURGXFHGWKHIROORZLQJ

$PHULFDQ$FDGHP\RI3HGLDWULFV6HFWLRQRQ&DUGLRORJ\DQG&DUGLDF6XUJHU\&DUGLRYDVFXODUKHDOWKVXSHUYLVLRQIRULQGLYLGXDOVDIIHFWHGE\'XFKHQQHRU%HFNHUPXVFXODUG\VWURSK\3HGLDWULFV

)XUWKHUUHDGLQJ

5RFKD&7+RIIPDQ(3/LPEJLUGOHDQGFRQJHQLWDOPXVFXODUG\VWURSKLHVFXUUHQWGLDJQRVWLFVPDQDJHPHQWDQGHPHUJLQJWHFKQRORJLHV&XUU1HXURO1HXURVFL5HS0F1DOO\(03\WHO30XVFOHGLVHDVHVWKHPXVFXODUG\VWURSKLHV$QQX5HY3DWKRO&DUGDPRQH0'DUUDV%75\DQ00,QKHULWHGP\RSDWKLHVDQGPXVFXODUG\VWURSKLHV6HPLQ1HXURO.LVVHO-70HQGHOO-50XVFXODUG\VWURSK\KLVWRULFDORYHUYLHZDQGFODVVLILFDWLRQLQWKHJHQHWLFHUD6HPLQ1HXURO%|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

%DFNWR7RS

&RGHV

,&'FRGH

0XVFXODUG\VWURSKLHVDQGRWKHUP\RSDWKLHV

&RQJHQLWDOKHUHGLWDU\PXVFXODUG\VWURSK\

+HUHGLWDU\SURJUHVVLYHPXVFXODUG\VWURSK\

0\RWRQLFG\VWURSK\

%DFNWR7RS

)$4

:KHQVKRXOGER\VZLWK'XFKHQQHPXVFXODUG\VWURSK\EHJLQWDNLQJVWHURLGV"%HFDXVHWKHJRDOLVWRSUHVHUYH

DPEXODWLRQIRUDVORQJDVSRVVLEOHVWHURLGVVKRXOGEHFRQVLGHUHGLQPLGGOHFKLOGKRRGDSSUR[LPDWHO\\HDUVRIDJH

ZKHQWKHSDWLHQWLVVWLOODPEXODWRU\EXWEHJLQQLQJWRKDYHVHULRXVGLIILFXOW\ZDONLQJ7KHEHQHILWVRIVWHURLGWUHDWPHQW

DIWHUWKHFKLOGLVFRQILQHGWRDZKHHOFKDLUDUHOHVVFOHDU

:KDWVKRXOGEHGRQHZKHQDFKLOGZLWK'XFKHQQHPXVFXODUG\VWURSK\EHJLQVH[SHULHQFLQJDGYHUVHHIIHFWVRIVWHURLG

WUHDWPHQW"7DSHULQJDQGGLVFRQWLQXDWLRQRIVWHURLGVLVDQRSWLRQZKHQDGYHUVHHIIHFWVDUHSUREOHPDWLF+RZHYHU

FRQWLQXLQJVWHURLGWUHDWPHQWDWDUHGXFHGGRVHPD\DOVREHFRQVLGHUHG)RUH[DPSOHVRPHVWXGLHVKDYHIRXQGWKDW

VPDOOHUVWHURLGGRVHVSHUNLORJUDPRIERG\ZHLJKWDUHEHQHILFLDO7KXVDGRVHRIPJNJGWKDWZDVVWDUWHGDWDJH

FRXOGEHUHGXFHGWRPJNJGDWDJH

:KDWLVWKHUROHRIUHVSLUDWRU\VXSSRUWLQSDWLHQWVZLWKPXVFXODUG\VWURSKLHV"1RQLQYDVLYHYHQWLODWRU\VXSSRUWKDV

EHHQVKRZQWRSURORQJVXUYLYDOLQSDWLHQWVZLWK'XFKHQQHPXVFXODUG\VWURSK\DQGSURYLGHVV\PSWRPDWLFUHOLHILQ

SDWLHQWVZLWKRWKHUPXVFXODUG\VWURSKLHV+RZHYHUPXVFXODUG\VWURSKLHVDUHSURJUHVVLYHDQGWKHLVVXHRIZKHWKHUWKH

SDWLHQWZRXOGEHLQWHUHVWHGLQLQYDVLYHYHQWLODWRU\VXSSRUWVKRXOGEHDGGUHVVHGEHIRUHUHVSLUDWRU\FRPSURPLVHGHYHORSV

:KHQLVVXUJLFDOWKHUDS\DSSURSULDWH"6WXGLHVKDYHVKRZQWKDWVXUJLFDOUHOHDVHRIFRQWUDFWXUHVFDQSURORQJDPEXODWLRQ

DQGVORZWKHGHYHORSPHQWRIVFROLRVLVLQSDWLHQWVZLWK'XFKHQQHPXVFXODUG\VWURSK\$VZLWKDQ\SURFHGXUHWKH

H[SHULHQFHRIRUWKRSHGLFVXUJHRQVGLIIHUV6FROLRVLVVXUJHU\FDQEHFRQVLGHUHGWRKHOSGHFUHDVHWKHHIIHFWVRI'XFKHQQH

PXVFXODUG\VWURSK\RQUHVSLUDWRU\IXQFWLRQLQDGROHVFHQWV

+RZLVODWHRQVHWOLPEJLUGOHPXVFXODUG\VWURSK\GLVWLQJXLVKHGIURPDQLQIODPPDWRU\P\RSDWK\VXFKDV

SRO\P\RVLWLVLQD\RXQJDGXOWSUHVHQWLQJZLWKJUDGXDORQVHWRISUR[LPDOPXVFOHZHDNQHVVDQGDPRGHUDWHO\

HOHYDWHGVHUXPFUHDWLQHNLQDVHOHYHO"7KHSUHVHQFHRIRWKHUV\PSWRPVRUVLJQVRILQIODPPDWLRQRUDFRQQHFWLYHWLVVXH

GLVHDVHZKLFKZRXOGVXJJHVWDQRYHUODSV\QGURPHIDYRUVWKHGLDJQRVLVRIDQLQIODPPDWRU\P\RSDWK\$IDPLO\KLVWRU\

RIPXVFOHGLVHDVHIDYRUVWKHGLDJQRVLVRIODWHRQVHWOLPEJLUGOHPXVFXODUG\VWURSK\$OWKRXJKLQIODPPDWRU\P\RSDWKLHV

RIWHQKDYHPRUHDFXWHRQVHWDQGDUHDVVRFLDWHGZLWKKLJKHUFUHDWLQHNLQDVHOHYHOVWKDQOLPEJLUGOHPXVFXODUG\VWURSK\LW

PD\QRWDOZD\VEHHDV\WRGLIIHUHQWLDWHEHWZHHQWKHWZRV\QGURPHV(OHFWURP\RJUDSK\RIWHQVKRZVIHDWXUHVRILUULWDELOLW\

DQGDEQRUPDOGLVFKDUJHVLQSDWLHQWVZLWKLQIODPPDWRU\P\RSDWKLHV(YHQDPXVFOHELRSV\PD\QRWEHHQWLUHO\

GLDJQRVWLFDVWKHUHPD\EHPLOGWRPRGHUDWHLQIODPPDWLRQLQDSDWLHQWZLWKPXVFXODUG\VWURSK\8OWLPDWHO\DWULDORI

RUDOVWHURLGVFDQEHXVHGDQLQIODPPDWRU\P\RSDWK\PD\UHVSRQGWRWKLVWUHDWPHQWEXWDOLPEJLUGOHPXVFXODUG\VWURSK\

ZLOOQRW

&RQWULEXWRUV

5RVH'RPLQJR0'

6DW\6DW\D0XUWL0')$$1

*RUGRQ+%DXVWLDQ0'

>@0DQ]XU$@0R[OH\57UG$VKZDO63DQG\D6HWDO3UDFWLFHSDUDPHWHUFRUWLFRVWHURLGWUHDWPHQWRI'XFKHQQHG\VWURSK\UHSRUWRIWKH

4XDOLW\6WDQGDUGV6XEFRPPLWWHHRIWKH$PHULFDQ$FDGHP\RI1HXURORJ\DQGWKH3UDFWLFH&RPPLWWHHRIWKH&KLOG1HXURORJ\

6RFLHW\1HXURORJ\

3XE0HG&URVV5HI

>@/RJLJLDQ(/0DUWHQV:%0R[OH\57WKHWDO0H[LOHWLQHLVDQHIIHFWLYHDQWLP\RWRQLDWUHDWPHQWLQP\RWRQLFG\VWURSK\

W\SH1HXURORJ\

3XE0HG&URVV5HI

>@2UUHOO5:&RSHODQG65RVH056FDSXODUIL[DWLRQLQPXVFXODUG\VWURSK\&RFKUDQH'DWDEDVH6\VW5HY&'3XE0HG&URVV5HI

>@&KHXN'.:RQJ9:UDLJH(HWDO6XUJHU\IRUVFROLRVLVLQ'XFKHQQHPXVFXODUG\VWURSK\&RFKUDQH'DWDEDVH6\VW5HY&'3XE0HG&URVV5HI

>@9RHW1%YDQGHU.RRL(/5LSKDJHQ,,/LQGHPDQ(YDQ(QJHOHQ%**HXUWV$&6WUHQJWKWUDLQLQJDQGDHURELFH[HUFLVHWUDLQLQJIRUPXVFOHGLVHDVH&RFKUDQH'DWDEDVH6\VW5HY&'3XE0HG&URVV5HI

>@&XS(+3LHWHUVH$-7HQ%URHN3DVWRRU-0HWDO([HUFLVHWKHUDS\DQGRWKHUW\SHVRISK\VLFDOWKHUDS\IRUSDWLHQWVZLWKQHXURPXVFXODUGLVHDVHVDV\VWHPDWLFUHYLHZ$UFK3K\V0HG5HKDELO3XE0HG&URVV5HI

5HYLVHG0DU

/DVWXSGDWHG0DU

&RS\ULJKW(OVHYLHU,QF$OOULJKWVUHVHUYHGZZZPGFRQVXOWFRP

%RRNPDUN85/GDVSG[PGERG\"W\SH PHGHLG XBBPWB

&OLHQW,3$GGUHVV'$6+RVWKDXV