ABSTRACT

PLVVLRQWRGHVWUR\HQHP\EXQNHUVDQGDEDQGRQHGHTXLSPHQW7KHEXQNHUVZHUH YHU\ ODUJHZLWK ODUJHTXDQWLWLHVRIRUGQDQFH7KHFKDOOHQJHVDURVHQRW MXVWRI

VDIHW\EXWRIWKHWHFKQLFDOPHWKRGVRIGHVWUXFWLRQSDUWLFXODUO\VLQFHWKHXQLWKDG LQVXIILFLHQWTXDQWLWLHVRIFRQYHQWLRQDOGHPROLWLRQVPDWHULDORQKDQG$GGHGWRWKH VLWXDWLRQ ZDV WKH IDFW WKDW 6DGGDP +XVVHLQ¶V DUP\ ZDV EHOLHYHG WR SRVVHVV FKHPLFDODQGELRORJLFDOZHDSRQV

3DUWRQH 'XULQJ2SHUDWLRQ'(6(57 67250FRDOLWLRQOHDGHUVZDQWHGWRVKRFNWKHHQHP\E\ DGYDQFLQJDVIDVWDVSRVVLEOHWKURXJKKLVOLQHVRIGHIHQVH0XFKRIWKHVXUSULVH KLQJHGXSRQWKHµ5LJKW+RRN¶RI;9,,,$LUERUQH&RUSV$VVLVWLQJWKH&RUSVLQ PRELOLW\ RSHUDWLRQV XS WKH7KHDWHU OHIW IODQNZDV WKH WK(QJLQHHU%DWWDOLRQ ZKLFKSURYLGHGPRELOLW\HQJLQHHUVXSSRUWWRWKHWK)UHQFK/LJKW'LYLVLRQWKH QG $LUERUQH 'LYLVLRQ DQG WKH ;9,,, $LUERUQH &RUSV $UWLOOHU\:H KDG WR µURDG¶GULYHRXUHTXLSPHQWDVKDXODVVHWVZHUHQRWDYDLODEOH$JUHDWOHDGHUVKLS FKDOOHQJHZDV WR ILQG WKH RSWLPDOPL[ RI VSHHG DQG UHVW VR WKDW WKH HQJLQHHU HTXLSPHQWZRXOGQRWEXUQXSLQWKHUDFHWRVXSSRUWWKHILJKW

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

DERXW NLORPHWHUV HDVW RI WKH WRZQ RI 5DIKD 0\ H[HFXWLYH RIILFHU ZDV LQVWUXPHQWDOLQFRRUGLQDWLQJIRUOLPLWHGKDXODVVHWVWRPRYHRXU/(SODWRRQWRWKLV QHZORFDWLRQ7KHVHDVVHWVZRXOGQRWVWD\ZLWKXVKRZHYHU'XULQJDEDWWDOLRQ RSHUDWLRQV PHHWLQJ LQ )HEUXDU\ WKH FRPSDQ\ FRPPDQGHUV UDLVHG WKH TXHVWLRQVDERXWPRYLQJQRUWK7KHDQVZHUZDVFOHDUZHZRXOGKDYHWRURDGRXU /(YHKLFOHV

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

7KHVLWXDWLRQDQGVROXWLRQ :HFURVVHGWKHOLQHRIGHSDUWXUHZLWKSHUFHQWRIRXUHTXLSPHQWIXOO\PLVVLRQ FDSDEOH'XHWRWKHKHDY\WUDIILFRIYHKLFOHVWU\LQJWRJHWWR0DLQ6XSSO\5RXWH 065 7H[DV ZH RQO\ ZHQW PLOHV LQ WKH ILUVW VL[ KRXUV RI WKH JURXQG FDPSDLJQEHIRUHILQGLQJDKDUERUDUHDRIIRIWKH0652QHFLYLOLDQUHQWHGURDG JUDGHUDQGDWRQWUDFWRUEURNHGRZQGXULQJWKHLQLWLDOFRQYR\DQGZHKDGWR OHDYHWKHFUHZVEHKLQGWRUHSDLUWKHP 2QWKHVHFRQGGD\RI WKHJURXQGFDPSDLJQZHFRQYR\HGQRUWKDORQJ065

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

ODQHDQGWKHQULJJHGPXQLWLRQVWREORZWKHPLQHVLQSODFH)RUWXQDWHO\IRU;9,,, $LUERUQH&RUSVP\FRPSDQ\ZDVSUHVHQW WR FOHDU WKHPLQHILHOG DOORZLQJ WKH &RUSV$UWLOOHU\WRFRQWLQXHWKHILJKW

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µSURRI¶ WKH ODQHV GULYLQJZLWK WKH EODGHVGRZQWRHQVXUHDOOGHEULVDQGRUPXQLWLRQVZHUHFRPSOHWHO\JRQHIURPWKH ODQHV , UHFRPPHQGHG WKH JUDGHU GULYHUV IRU %URQ]H 6WDU 0HGDOV IRU WKHLU SHUIRUPDQFH RI GULYLQJ WKURXJK WKH PLQHILHOGV WKH DZDUGV ZHUH ODWHU GRZQ JUDGHG E\ KLJKHU KHDGTXDUWHUV WR FRPEDW $5&20V >$UP\ &RPPHQGDWLRQ 0HGDOV@ +DGWKH065EHHQZLGHRSHQIRURXUFRQYR\LWZRXOGKDYHEHHQWHPSWLQJWR

JHW WKH HTXLSPHQW LQWR WKH VHFWRU DV IDVW DV SRVVLEOH QHJOHFWLQJ WKH VSHHG UHVWULFWLRQV IRU WKHHQJLQHHUHTXLSPHQW7KLVFRXOGKDYHEHHQGLVDVWURXV LI WKH HTXLSPHQW EURNH GRZQ $V D OHDGHU , ZDV UHVSRQVLEOH IRU DFFRPSOLVKLQJ WKH PLVVLRQ EXW , DOVR KDG WR ZHLJK WKH ULVNV RI QRW IROORZLQJ P\ PDLQWHQDQFH RIILFHU¶VUHFRPPHQGDWLRQV7RDUULYHHDUOLHUZLWKOHVVHTXLSPHQWFRXOGKDYHEHHQ XVHOHVV$VLW WXUQHGRXWZHVSHQWDERXW±KRXUVFOHDULQJPLQHVDQGPDNLQJ VDIHWUDIILFODQHVIRUWKH&RUSVDQGWRP\NQRZOHGJHQRYHKLFOHZDVGDPDJHG GXHWRWKHFOXVWHUERPEV $V DQ DIWHUWKRXJKW FRXOG ;9,,, $LUERUQH &RUSV KDYH SURYLGHGPRUH KDXO

DVVHWV WR XV SHUKDSV DVVLVWLQJ XV LQ UHDFKLQJ WKH /RJLVWLFV %DVH DQG DFFRPSOLVKLQJ WKHPLVVLRQ":LWK WKH QG$LUERUQH'LYLVLRQ UHTXLULQJ GXPS WUXFNVWR WUDQVSRUW WURRSVDQGVHYHUDOGLYLVLRQVSRVLWLRQLQJDUPRUHGYHKLFOHV LQ WKHZHVW IRU WKH µ/HIW+RRN¶ , GRQ¶W WKLQN RXU FRUSV HQJLQHHU EDWWDOLRQ QRQ GLYLVLRQDOXQLWZDVKLJKRQ WKH OLVW IRUDGGLWLRQDOKDXODVVHWV7KHRQO\YLDEOH RSWLRQOHIWWRPHZDVWRGULYHHDFKSLHFHRIHTXLSPHQW

3DUWWZR 7ZRZHHNVEHIRUH WKHJURXQGFDPSDLJQZDV WRVWDUWD3)&IURPQG3ODWRRQ GHFLGHGWKDWKHZRXOGWKUHDWHQKLVSODWRRQ+HZURWHQDPHVRIKLVVTXDGPHPEHUV RQKLVKHOPHWEDQGDQGVWDUWHGWDONLQJDERXWKRZVRPHSODWRRQPHPEHUVZRXOG QRWPDNH LWEDFN IURP,UDT7KH ILQDOHSLVRGHRFFXUUHGZKHQKH WULHG WRSXWD

PP URXQG XQGHU WKH KHOPHW EDQG RI KLV KHOPHW DQGPHQWLRQHG WKDW WKDW URXQGZDVIRUVRPHRIKLVµEXGGLHV¶$OORIWKLVRFFXUUHGLQDPDWWHURIKRXUV7KH OHDGHUVKLSFKDOOHQJHZDVFULWLFDO+RZZDV,WRLVRODWHWKLVVROGLHUIURPWKHRWKHU PHPEHUVRIWKHFRPSDQ\DQGFRQWLQXHWRSUHSDUHIRUFRPEDW"

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µEXGGLHV¶

7KHVROXWLRQ ,ZDVDWDFRQVWUXFWLRQVLWHZKHQWKHRSHUDWLRQVVHUJHDQWUDGLRHGPHDERXWWKH LQFLGHQW,LPPHGLDWHO\RUGHUHGWKH3ODWRRQ6HUJHDQWWRWDNHWKHVROGLHU¶VZHDSRQ DQG DOO URXQGV DQG FRQILQHG KLP WR WKH SODWRRQ WHQWZLWK DQ1&2JXDUG7KH 3ODWRRQ6HUJHDQWWKHQVHDUFKHGWKHVROGLHU¶VEHORQJLQJVDQGWRRNDZD\DOORWKHU REMHFWVWKDWFRXOGLQIOLFWKDUPLQFOXGLQJSRFNHWNQLYHV 0\JXWIHHOLQJZDVWKDWWKLVVROGLHUZDVVFDUHG8QIRUWXQDWHO\KHKDQGOHGKLV

IHDULQDQXQDFFHSWDEOHPDQQHU0\)LUVW6HUJHDQWDQG,TXHVWLRQHGKLPDWOHQJWK DERXWKLVDFWLRQVDQGKHLPPHGLDWHO\H[SUHVVHGUHJUHW, LQIRUPHGKLPWKDWKH ZDVWREHVHSDUDWHGIURPWKH$UP\FKDSWHUHGRXW+HWKHQUHDOO\WXUQHGRQWKH UHPRUVHEXW,WROGKLPLWZDVWRRODWHIRUWKDW,FRXOGQRWWROHUDWHWKUHDWVWRP\ VROGLHUVHYHQLQMHVWDQG,KDGDWRXJKWLPHEHOLHYLQJWKDWDOORIKLVDFWLRQVKDG EHHQVLPSO\ZKLPVLFDO 7KLV ZDV D WHUULEO\ VWUHVVIXO WLPH IRU WKH FRPSDQ\ 2QH RI RXU RZQ KDG

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¶V PLQGDWHDVH7KHVROGLHUZDVJRQHZLWKLQDIHZGD\VKHDGHGEDFNWR)RUW%UDJJ DQGRXWRIWKH$UP\0\RQO\FRQFHUQWKHQZDVWKDW,KDGUHOHDVHGDQXQVWDEOH LQGLYLGXDOEDFNKRPHZKHUHRXUIDPLOLHVZHUHEXWQRLQFLGHQWVHYHURFFXUUHG,Q IDFWDERXWD\HDUODWHU,UHFHLYHGDOHWWHUIURPDEDNHU\LQWKH0LGZHVWDVNLQJIRU DFKDUDFWHUUHFRPPHQGDWLRQ7KLVH[VROGLHUZDVDSSO\LQJIRUDMREDQGKDGOLVWHG PHDVDUHIHUHQFH

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µWHDP¶ RIWKLVVROGLHUHQDEOHGXVWRDFFRPSOLVKRXUPLVVLRQWRSUHSDUHIRUFRPEDW

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

PLVVLRQORFDWLRQDQGRQ0DUFKZHFRQYR\HGIRUVL[KRXUVWR2EMHFWLYH*ROG DQDPPXQLWLRQ VWRUDJHSRLQW FRQVLVWLQJRI DERXWDPPXQLWLRQ EXQNHUV DQG VHYHUDO ZDUHKRXVHV (DFKZDUHKRXVHZDV XQGHUJURXQG FRYHUHG E\ UHLQIRUFHG FRQFUHWHDQGVHYHUDOIHHWRIHDUWK$SSDUHQWO\WKH$OOLHGDLU IRUFHVKDGWULHGWR GHVWUR\ WKLV VLWH ZLWK DLUGURSSHG PXQLWLRQV EXW LW ZDV QRW YXOQHUDEOH WR DLU DWWDFN(QJLQHHUVZHUHQHHGHGWRGHVWUR\WKHEXQNHUVE\XVLQJGHPROLWLRQVULJJHG LQVLGHWKHEXQNHUV

7KHFKDOOHQJH 7KHUHZDVQRSRZHULQWKLVSDUWRI,UDT(DFKEXQNHUZDVLPPHQVHFRYHULQJD IHZ WKRXVDQG VTXDUH IHHW DQG FRQWDLQLQJ VHYHUDO KXQGUHG DQG HYHQ LQ VRPH FDVHVVHYHUDOWKRXVDQGURXQGVRIDPPXQLWLRQ:HILUVWKDGWRFOHDUHDFKEXQNHU WRHQVXUH WKHUHZHUHQR ,UDTLVRUERRE\WUDSV LQVLGH WKHPDQG WKHQZHKDG WR GHVWUR\ WKHP8VLQJ IODVKOLJKWV DQG RQH VTXDG SHU EXQNHU WKLV ZDV D WHGLRXV SURFHVV2QFHZHZHUH VXUH LWZDV VDIH WR HQWHUZH KDG WR GHWHUPLQH KRZ WR GHVWUR\HDFKEXQNHU

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

FRPSDQ\ZDVVHOHFWHGWRLQYHQWRU\DQGULJWZREXQNHUVIRUDµWHVWVKRW¶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±0DUFK±ZHZHQWLQWRLQVSHFWWKHVLWH0*-RKQVRQZKR

FRPPDQGHGWKHQGEURXJKWKLVVWDIIE\WRVHHWKHSURJUHVV7KHUHZDVGHEULV DOORYHUWKHSODFHZLWKDIHZVPDOOILUHVVWLOOEXUQLQJ7KLVQRZEHFDPHDKXJH FKDOOHQJH+RZFDQZHHQVXUHWKDWHDFKEXQNHULVGHVWUR\HGZLWKRXWURXQGVEHLQJ FRRNHGRII"$OVRZLWKDIHZVPDOOILUHVLQWKHDUHDZDVLWVDIHWREULQJLQWKH FRPSDQ\WRGHVWUR\WKHRWKHUEXQNHUV":RXOGZHEHDEOHWRJHWWRDUDOO\SRLQW LQWLPHEHIRUHWKHFKDUJHVZHQWRII")LQDOO\KRZFRXOGZHEHVXUHWKDWWKHUHZHUH QRFKHPLFDOPXQLWLRQV"

7KHVROXWLRQ 2Q0DUFKP\FRPSDQ\ULJJHGEXQNHUVIRUGHPROLWLRQDQGRQ0DUFKZH ULJJHG DQRWKHU EXQNHUV 2Q PRVW GHPROLWLRQ UDQJHV , KDG EHHQ RQ WKH H[SORVLYHVOLPLWZDVSRXQGV2QDQG0DUFKRXUEDWWDOLRQVHWFKDUJHV RII LQ GR]HQV RI EXQNHUV FRQWDLQLQJ VHYHUDO KXQGUHG WKRXVDQG SRXQGV RI H[SORVLYHV7KH(QJLQHHU2IILFHU%DVLF DQG$GYDQFHG&RXUVHVGLGQRW KDYH D SDJH LQ P\ )0 )LHOG 0DQXDO WR FRYHU WKDW 7KH %DWWDOLRQ 6 GLG KRZHYHUFDOFXODWHWKDWWKHPLQLPXPVDIHGLVWDQFHIURPDGHPROLWLRQWKLVODUJH ZDVDWOHDVWPLOHV :LWKWKHKHOSRIWKH(2'1&2VZHGHWHUPLQHGWKDWHDFKEXQNHUZRXOGQHHG

D µKLJK\LHOG¶ GHWRQDWLRQ FUHDWLQJ HQRXJK KHDW WR PHOW HYHU\ URXQG LQ WKH GHWRQDWLRQ QRW DOORZLQJ LQGLYLGXDO URXQGV WR FRRN RII , FDOFXODWHG WKDW HDFK EXQNHUZRXOGQHHGDERXWSRXQGVRIH[SORVLYHVWRVWDUWWKHGHPROLWLRQ:H

GLG QRW KDYH WKLV PXFK & &RPSRVLWLRQ W\SH SODVWLF H[SORVLYH VR ZH LPSURYLVHG XVLQJ %DQJDORUH WRUSHGRHV FUDWHULQJ FKDUJHV DQ\WKLQJ ZH FRXOG ILQG:HSODFHGWKHFKDUJHVRQDVPDQ\RIWKHURXQGVDVSRVVLEOHW\LQJWKHPDOO WRJHWKHUZLWKGHWRQDWLQJFRUGDQGWKHQZHUDQWKHWLPHIXVHRXWRIHDFKEXQNHU :H WKHQ FRQGXFWHG D FRPSOHWH UHKHDUVDO 7ZLFH :H KDG 1&2V VWDQGLQJ

RXWVLGHRIHDFKEXQNHUQH[WWRWKHIXVHLJQLWHUV(YHU\UDGLRLQWKHEDWWDOLRQZDV RQ WKHFRPPDQGQHW$WDVSHFLILHG WLPH WKHEDWWDOLRQFRPPDQGHUVDLG µ*R¶ (DFK1&2VDLGµ%RRP¶DQGVLPXODWHGSXOOLQJWKHIXVHLJQLWHU+HWKHQPRYHG WRWKHURDGZD\ZKHUHDYHKLFOHSLFNHGKLPXSDQGKHDGHGWRWKHUDOO\SRLQW2QFH HDFKYHKLFOHSDVVHGDFRPSDQ\FKHFNSRLQW WKHFRPPDQGHUVP\FRXQWHUSDUWV DQG,FRXQWHGERGLHVDQGUDGLRHGWKHEDWWDOLRQWKDWDOOZHUHDFFRXQWHGIRU$WWKH UDOO\ SRLQW D WKRURXJK FRXQW ZDV DJDLQ FRQGXFWHG (DFK UHKHDUVDO WRRN PLQXWHV ZKLFK JDYH DQRWKHU PLQXWHV DV D EXIIHU FRQVLGHULQJ WKH PLQXWHWLPHIXVH

(SLORJXH 7KHGHPROLWLRQVZHUHFRPSOHWHO\VXFFHVVIXO,PDGHVXUHWKDWHDFKEXQNHUZDV LQYHQWRULHG RQ SDSHU DQG ZLWK YLGHR FDPHUDV DQG WKH LQIRUPDWLRQ ZDV IRUZDUGHGWRWKHQG$WQRWLPHGLGZHVHHPDUNLQJVLQGLFDWLQJWKDWWKHURXQGV ZHUHRWKHUWKDQFRQYHQWLRQDOPXQLWLRQV<HDUVODWHUKRZHYHU,GLGILQGRXWWKDW WKHEDWWDOLRQ¶V6VHFWLRQKDGGHWRQDWHGVRPHURFNHWVLQDSLWZKLFKZDVDIHZ PLOHVIURPWKHEXQNHUVLWHDQGWKDWWKRVHURFNHWVPD\KDYHFRQWDLQHGFKHPLFDO PXQLWLRQV(YHU\VROGLHU LQP\FRPSDQ\ZDVVDIHO\RXWRI WKHGHPROLWLRQDUHD EHIRUHWKHILUVWEXQNHUGHWRQDWHG $JDLQ , WKLQN WKH ELJ LVVXHV DUH WUXVW DQG FRPPXQLFDWLRQ $V D \RXQJ

OLHXWHQDQW , KDG GLVFXVVLRQV ZLWK PHQWRUV RQ WUXVWLQJ VROGLHUV , IHOW WKDW P\ 1&2V ZHUH FRPSOHWHO\ SURIHVVLRQDO DQG KDG D ELW PRUH H[SHULHQFH ZLWK GHPROLWLRQVWKDQ,7KHVDPHJRHVIRUWKH(2'1&2V0\VROGLHUVORRNHGWRPH IRUVWHDGLQHVVDPLG WKLV WXUPRLO ,VSHQWHYHU\GD\ WDONLQJ WR WKHPDERXWEHLQJ SURIHVVLRQDO WDNLQJ FDUH RI HDFK RWKHU DQG OHDUQLQJ IURP WKHLU 1&2V , DOVR UHLQIRUFHGWKHVWDQGDUGVRIZRUNLQJZLWKIODNYHVWVDQGKHOPHWVDWDOOWLPHV0 FKHPLFDODODUPVZHUHRSHUDWLQJHYHU\WLPHZHZHQWLQWRWKHEXQNHUDUHDV(YHU\ VTXDGKDGVHYHUDO0FKHPLFDOGHWHFWLRQNLWVLQFDVHDQDODUPZRXOGVRXQG $OORIP\VROGLHUVZKRZHQWQRUWKRQWKLVPLVVLRQPDGHLWEDFNWR6DXGL$UDELD DQGWRWKHLUIDPLOLHVLQWKH8QLWHG6WDWHV :KDW¶V WKHNH\WRRYHUFRPLQJOHDGHUVKLSFKDOOHQJHV")LUVWJDWKHUDOORI WKH

LQIRUPDWLRQDYDLODEOH7KLVXVXDOO\PHDQVWDONLQJZLWKVXERUGLQDWHVDQGJHWWLQJ WKHLUUHFRPPHQGDWLRQV$\RXQJOHDGHUPD\QRWKDYHKDGDOORIWKHH[SHULHQFHV WKDWVHQLRU1&2VRURWKHURIILFHUVKDYHKDG6HFRQGNHHSWKHFRPPXQLFDWLRQV OLQHVRSHQ%\FRQVWDQWO\LQIRUPLQJWKHVROGLHUVRIWKHPLVVLRQDOHDGHUNHHSVKLV VROGLHUVIRFXVHGRQWKHPLVVLRQ+HDOVRHOLPLQDWHVWKHRSSRUWXQLWLHVIRUUXPRUV WRVWDUW&2/)ORZHUVP\EULJDGHFRPPDQGHUGXULQJ'(6(57 67250YLVLWHGHDFK

EDWWDOLRQDVRIWHQDVKHFRXOGVSUHDGLQJKLVYLHZRIZKDWZDVKDSSHQLQJ,WULHG WRGRWKHVDPHZLWKP\VROGLHUV9LVLWWKHPZKLOHRQJXDUGLQWKHPLGGOHRIWKH QLJKWZKLOHDWDFRQVWUXFWLRQVLWHRUHYHQZKLOHLQOLQHIRUFKRZ)LQDOO\DOHDGHU PXVWHVWDEOLVKWUXVWZLWKKLVVROGLHUV7KH\ZLOODOZD\VORRNWRWKHLUOHDGHUVIRU JXLGDQFH3URYLGHWKDWJXLGDQFH*LYHWKHPDPLVVLRQDQGOHWWKHPLPSUHVV\RX ZLWKWKHLULQJHQXLW\$IWHUWKHFKDOOHQJHKDVEHHQRYHUFRPHUHZDUG\RXUVROGLHUV IRUWKHMREZHOOGRQH