ABSTRACT

ORQJLWXGLQDOUHDGLQJRI(DVWLQJKRZHYHUDEORRG\HQJDJHPHQWZLWKWZR,UDTL 'LYLVLRQVFUHDWHGDQRSSRUWXQLW\WRGHIHDWWKHHQHP\EHIRUHKDQGLQJWKHEDWWOH RYHU WR WKH IROORZRQGLYLVLRQV(DJOH7URRS LQLWLDWHG WKHEDWWOHZLWKD YLROHQW DVVDXOWDJDLQVWDEULJDGHRI WKH7DZDNDOQD'LYLVLRQRI WKH5HSXEOLFDQ*XDUG $IWHU(DJOH7URRS¶VDVVDXOWRWKHUHOHPHQWVLQWKH5HJLPHQWXVHGWKHLUWKHUPDO VLJKWVORQJZHDSRQVUDQJHDQGWKHHIIHFWVRIWDFWLFDOVXUSULVHWRDQQLKLODWHWKH HQHP\ 7KH UHYROXWLRQ RI 86 PLOLWDU\ PLJKW WKDW WRRN SODFH LQ WKH V FDPH WR

IUXLWLRQRQDEDUUHQGHVHUWEDWWOHILHOGLQ,UDT&RORQHO0F0DVWHU¶VVWRU\GHSLFWV WKHJURXQGZDUDWLWVJULWWLHVWDQGFDYDOU\PHQDWWKHLUILQHVW+LVDFFRXQWGHWDLOV WKHFRXUDJHRI$PHULFDQVROGLHUVWKHH[FHOOHQFHRIWKHLUWUDLQLQJWKHVXSHULRULW\ RI86HTXLSPHQWDQGPRVWLPSRUWDQWO\ZKDWLWZDVOLNHOHDGLQJFRPEDWIRUFHV WKURXJKRQHRIWKHPRVWLQWHQVHWDQNEDWWOHVRIWKHWZHQWLHWKFHQWXU\

/LHXWHQDQWV DUH FRPEDW OHDGHUV$OO VROGLHUVZLOO ORRN WR \RXZKHQ WKLQJV JHW WRXJKVR\RXPXVWEHOHDGHUVLQDOOWKLQJV7KHUHLVDWHQGHQF\LQRXU$UP\WR YLHZ OLHXWHQDQWV DV DSSUHQWLFHV RU QRYLFHV1RWKLQJ FRXOG EH IXUWKHU IURP WKH WUXWK8SRQFRPPLVVLRQLQJ\RXZLOOKDYHWKHPRVWLPSRUWDQWMRELQRXU$UP\$V 0DMRU*HQHUDO(UQHVW+DUPRQFRPPDQGHURIWKH6HFRQG$UPRUHG'LYLVLRQLQ :RUOG:DU,,REVHUYHGµWKHGLYLVLRQZLOOVXFFHHGRQO\DVWKHSODWRRQVXFFHHGV¶ 3ODWRRQVZLQ EDWWOHV 3ODWRRQ OHDGHUV EXLOG FRPEDW UHDG\ WHDPV DQG OHDG WKHLU VROGLHUVLQWRDFWLRQ 2XUXQLW¶VDFWLRQZDVRQHRIPDQ\ILJKWVLQ'(6(57 67250 DQGHYHU\RQHRI

WKRVHEDWWOHVZDVGLIIHUHQW7KH%DWWOHRI(DVWLQJPD\QRWEHDWDOOUHOHYDQWWR WKHZD\\RXZLOOILJKWDSODWRRQLQFRPEDWRUWRGHFLVLRQV\RXZLOOPDNHXQGHU ILUH :KDW &DUO YRQ &ODXVHZLW] VDLG DERXW PLOLWDU\ WKHRU\ LV DOVR LQVWUXFWLYH FRQFHUQLQJRXUXVHRIPLOLWDU\KLVWRU\WRSUHSDUHIRUIXWXUHFRPEDW,WµZLOOKDYH IXOILOOHGLWVPDLQWDVNZKHQLWLVXVHGWRDQDO\]HWKHFRQVWLWXHQWHOHPHQWVRIZDU WR GLVWLQJXLVK SUHFLVHO\ ZKDW DW ILUVW VLJKW VHHPV IXVHG WR H[SODLQ LQ IXOO WKH SURSHUWLHV RI WKHPHDQV HPSOR\HG DQG WR VKRZ WKHLU SUREDEOH HIIHFWV« ,W LV PHDQWWRHGXFDWHWKHPLQGRIWKHIXWXUHFRPPDQGHU«QRWWRDFFRPSDQ\KLPWR WKHEDWWOHILHOG¶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µ:KDWEDWWOHVKDYHLQFRPPRQLVKXPDQWKHEHKDYLRXURIPHQVWUXJJOLQJ WR UHFRQFLOH WKHLU LQVWLQFW IRU VHOISUHVHUYDWLRQ WKHLU VHQVH RI KRQRXU DQG WKH DFKLHYHPHQW RI VRPH DLP RYHU ZKLFK RWKHU PHQ DUH UHDG\ WR NLOO WKHP¶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¶VRYHUZKHOPLQJYLFWRU\RYHUD5HSXEOLFDQ*XDUGEULJDGH GXULQJWKH3HUVLDQ*XOI:DU

2Q)HEUXDU\WKH6HFRQG$UPRUHG&DYDOU\5HJLPHQWPRYHGLQWR,UDTDQG LQLWLDWHG LWV RIIHQVLYH FRYHULQJ IRUFH PLVVLRQ IRUZDUG RI *HQHUDO )UHGHULFN )UDQNV¶ 9,, &RUSV 7KH 9,, &RUSV¶ PLVVLRQ ZDV WR HQYHORS DQG GHIHDW WKH 5HSXEOLFDQ*XDUGIURPWKHZHVW7KH,UDTLGHIHQVHZDVPDLQO\RULHQWHGWRWKH VRXWK7KH5HSXEOLFDQ*XDUGZDVSRVLWLRQHGLQGHSWKWRWKHQRUWKWRSUHVHUYHLWV IUHHGRPWRPDQHXYHU6RPH5HSXEOLFDQ*XDUGXQLWVZHUHLQGHIHQVLYHSRVLWLRQV RWKHUVZHUHLQUHVHUYH7RWKHHDVWRI9,,&RUSVWKH0DULQHVUHLQIRUFHGZLWKWKH 6HFRQG $UPRUHG 'LYLVLRQ¶V 7LJHU %ULJDGH DWWDFNHG WR GHIHDW WKH HQHP\ DQG DGYDQFHRQ.XZDLW&LW\7R WKHZHVWRI9,,&RUSV WKH;9,,,$LUERUQH&RUSV DWWDFNHGGHHS WR FXW HQHP\HJUHVV URXWHV DQG WUDS WKH HQHP\2QFH WKH ,UDTLV GHWHFWHGRXUHIIRUWWRHQYHORSDQGGHVWUR\WKHLU$UP\LQ.XZDLWZLWKWKH9,,DQG ;9,,, $LUERUQH &RUSV HOHPHQWV RI WKH 5HSXEOLFDQ *XDUG LQFOXGLQJ WKH 7DZDNDOQD'LYLVLRQUHRULHQWHGWRWKHZHVW $VDQRIIHQVLYHFRYHULQJIRUFHWKH6HFRQG$UPRUHG&DYDOU\5HJLPHQWOHGWKH

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¶V ILJKW DQG RWKHU HQJDJHPHQWV JDYH WKH &RUSV FRPPDQGHU *HQHUDO )UHGHULFN )UDQNVWKHLQIRUPDWLRQKHZDQWHGEHIRUHKHFRPPLWWHGDµILVW¶RIKHDY\GLYLVLRQV WKDWZHUHPRYLQJEHKLQGWKHFDYDOU\ 2Q WKH ILUVW GD\ ZH WUDYHOHG RQO\ DERXW NLORPHWHUV LQWR ,UDT DQG WKHQ

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± VPDOO DUPRUHG SHUVRQQHO FDUULHUV 7KH\ ZHUH 5HSXEOLFDQ *XDUG YHKLFOHV * 7URRS WRRN FDSWXUHGYHKLFOHV WR WKH VTXDGURQ FRPPDQGSRVW VR WKDWZH FRXOG H[DPLQHPDSVDQGWKHFRQGLWLRQRIWKHZHDSRQVDQGHTXLSPHQWPXFKRIZKLFK

ZDVEUDQGQHZ$IWHUHQWHUWDLQLQJRXUVHOYHVE\UDFLQJWKHYHKLFOHVDURXQGIRUD ZKLOHZHUHWXUQHGWRRXUWURRSVWRDZDLWWKHQH[WGD\¶VRUGHUV:HDQWLFLSDWHG D ILJKW ,W ZDV FOHDU WKDW ZH KDG KLW WKH 5HSXEOLFDQ *XDUG VFUHHQ OLQH RU VHFXULW\]RQH ,WUDLQHGYHU\KDUGGXULQJWKHQLJKWRIWKHWKDQGDVDUHVXOWWKHUHZDVKHDY\

IRJRQWKHPRUQLQJRI)HEUXDU\:HFRXOGEDUHO\VHHPHWHUVVRPHWLPHV OHVV 7KH IRJ HYHQWXDOO\ OLIWHG EXW LW ZDV UHSODFHG E\ D VDQGVWRUP DQG WKH EORZLQJVDQGDOVR OLPLWHGYLVLELOLW\ WRYHU\ VKRUWGLVWDQFHV ,WZDVXQGHU WKRVH FRQGLWLRQV WKDW WKH 5HJLPHQW RUGHUHG XV WR FRQWLQXH RXU DWWDFN WR WKH HDVW WR LGHQWLI\WKHGHIHQVLYHSRVLWLRQVRIWKH5HSXEOLFDQ*XDUG:HKDGDIHHOLQJLQRXU JXWVWKDWZHZRXOGVRRQEHLQDILJKW7KHGLYLVLRQVRI9,,&RUSVZHUHVWLOOIDU RIIEXWZHUHFORVLQJWKHJDS2XUWURRSDQG*7URRSGHVWUR\HGVHYHUDOHQHP\ %03DQG07/%UHFRQQDLVVDQFHYHKLFOHVWKDWPRUQLQJ $IWHUPRYLQJLQWRWKHOHDGDORQJ6HFRQG6TXDGURQ¶VVRXWKHUQERXQGDU\ZLWK

7KLUG6TXDGURQRXUWURRSUHFHLYHGRUGHUVWRPRYHRXW,WZDVDERXWRQWKH DIWHUQRRQRI)HEUXDU\:HZHUHJLYHQDOLPLWRIDGYDQFHRIWKH(DVWLQJD QRUWK±VRXWKJULG OLQHRQ WKHPDS:HPRYHG LQD IRUPDWLRQFDOOHGDPRGLILHG FROXPQ VHFXULW\ ULJKW 2QH VFRXW SODWRRQ /LHXWHQDQW 0LNH 3HWVFKHN¶V )LUVW 3ODWRRQOHGZLWKWKUHHVFRXWVHFWLRQVRIWZRFDYDOU\ILJKWLQJYHKLFOHVHDFKLQD µYHH¶ IRUPDWLRQ 7KH RWKHU VFRXW SODWRRQ /7 7LP*DXWKLHU¶V 7KLUG 3ODWRRQ PRYHG DORQJ RXU VRXWKHUQ IODQN ZLWK JXQV RULHQWHG VRXWK WR FRYHU WKH JDS EHWZHHQ XV DQG 7KLUG 6TXDGURQ PRYLQJ EHKLQG XV WR RXU VRXWK 2XU PRUWDU VHFWLRQ IROORZHG)LUVW3ODWRRQ2XU WDQNVPRYHGEHKLQG WKHPRUWDUV LQDQLQH WDQNZHGJHZLWKP\WDQNLQWKHFHQWHU/70LNH+DPLOWRQ¶V6HFRQG3ODWRRQZDV WRP\WDQN¶VOHIW LQDQHFKHORQOHIWIRUPDWLRQDQG/7-HII'HVWHIDQR¶V)RXUWK 3ODWRRQZDVWRP\WDQN¶VULJKWLQDQHFKHORQULJKW %HFDXVH ZH KDG QR PDSV RI WKH DUHD ZH ZHUH XQDZDUH WKDW ZH ZHUH

SDUDOOHOLQJDURDGWKDWUDQZHVWWRHDVWDORQJRXUERXQGDU\ZLWK7KLUG6TXDGURQ 7KHURDGUDQWKURXJKDVPDOOYLOODJHDQGWKHQLQWR.XZDLW:HDOVRGLGQRWNQRZ WKDWZHZHUHHQWHULQJDQ,UDTLWUDLQLQJJURXQGUHFHQWO\UHRFFXSLHGE\DEULJDGH RI WKH 7DZDNDOQD 'LYLVLRQ ZKLFK KDG UHFHLYHG WKH PLVVLRQ RI KDOWLQJ RXU DGYDQFHLQWR.XZDLW 7KHHQHP\FRPPDQGHU0DMRU0RKDPPHGDQGKLVVROGLHUVNQHZWKHJURXQG

ZHOO7KHXQLWKDGXVHGWKHYLOODJHIRUELOOHWVDVWKH\FRQGXFWHGOLYHILUHWUDLQLQJ 0DMRU0RKDPPHGZKRKDGDWWHQGHGWKH,QIDQWU\2IILFHU$GYDQFHG&RXUVHDW )RUW%HQQLQJ*HRUJLDWKRXJKWLWZDVWKHLGHDOJURXQGIURPZKLFKWRGHIHQG+H DVVXPHGWKDWZHZRXOGKDYHWRPRYHDORQJURDGVWRDYRLGEHFRPLQJORVWLQWKH IHDWXUHOHVVGHVHUW+HZDVXQDZDUHRIRXU*OREDO3RVLWLRQLQJ6\VWHPFDSDELOLWLHV +HRUJDQL]HGKLVGHIHQVHDORQJWKHURDGE\IRUWLI\LQJWKHYLOODJHZLWKDQWLDLUFUDIW JXQVWREHXVHGLQ WKHJURXQGPRGHPDFKLQHJXQVDQGLQIDQWU\0RKDPPHG¶V GHIHQVHZDVIXQGDPHQWDOO\VRXQG+HWRRNDGYDQWDJHRIDQLPSHUFHSWLEOHULVHLQ WKHWHUUDLQWKDWUDQSHUSHQGLFXODUWRWKHURDGDQGGLUHFWO\WKURXJKWKHYLOODJHWR RUJDQL]HDµUHYHUVHVORSH¶GHIHQVHRQWKHHDVWVLGHRIWKDWULGJH+HDQWLFLSDWHG

WKDWXSRQHQFRXQWHULQJKLVVWURQJSRLQWDWWKHYLOODJHZHZRXOGE\SDVVLWHLWKHU WR WKHQRUWKRU WKHVRXWK+HEXLOW WZRHQJDJHPHQWDUHDVRU µNLOO VDFNV¶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¶

%UDGOH\ GURYH ULJKW RQ WRS RI DQ ,UDTL EXQNHU WKDW FRQWDLQHG DQ REVHUYDWLRQ HOHPHQW SRVLWLRQHG WR SURYLGH HDUO\ZDUQLQJ WR WKH IRUFHV LQ WKH YLOODJH 7ZR HQHP\VROGLHUVHPHUJHGDQGVXUUHQGHUHG66*0F5H\QROGVWRRNWKHPSULVRQHU DQGWUDQVSRUWHGWKHPWRRXUWUDLQV 0F5H\QROGV¶ ZLQJPDQ 6HUJHDQW 0DXULFH +DUULV UHPDLQHG DW WKH OLPLW RI

DGYDQFH DQG VFDQQHG LQWR WKH YLOODJH WKURXJK WKH EORZLQJ VDQG (YLGHQWO\ WKH ,UDTLVZDUQHGWKHIRUFHLQWKHYLOODJHDQG6HUJHDQW+DUULV¶%UDGOH\FDPHXQGHU PPDQGPDFKLQHJXQILUH7KHILUVW WKLQJKHGLGZDV WRUHSRUW WRKLVSODWRRQ OHDGHUZKRUHVSRQGHGµ:HOONLOOWKHP¶$V6*7+DUULVEHJDQWRHQJDJHZLWK KLVPPFKDLQJXQ/7*DXWKLHUPRYHG IRUZDUG DQGFRQWLQXHG WR UHSRUW WKH VLWXDWLRQ $VDSODWRRQOHDGHURUFRPSDQ\FRPPDQGHU\RXPXVWEHIRUZDUGWRKDYHD

FOHDUSLFWXUHRIWKHVLWXDWLRQ,DVNHG/7*DXWKLHUWRILUHD72:PLVVLOHLQWRWKH FHQWHU RI WKH YLOODJH VR WKDW WKH H[SORVLRQ ZRXOG RULHQW RXU WDQNV $IWHU P\ JXQQHU6WDII6HUJHDQW&UDLJ.RFKILUHGDURXQGWRPDUNFHQWHUDOOQLQHWDQNV ILUHGKLJKH[SORVLYHURXQGVLQWRWKHYLOODJHVLPXOWDQHRXVO\WRVXSSUHVVWKHHQHP\ SRVLWLRQ (YHU\RQH LQ WKH WURRS ZDV GRLQJ WKH ULJKW WKLQJ 7KHUH ZHUH ELJ H[SORVLRQV LQ WKH YLOODJH DQG LW ZRXOG KDYH EHHQ HDV\ IRU FUHZV WR EHFRPH GLVWUDFWHG7KHWURRS¶VWUDLQLQJSDLGRIIKRZHYHUDV)LUVW3ODWRRQPDLQWDLQHGLWV SULPDU\RULHQWDWLRQWRWKHHDVW ,I \RXNQRZZKHUH IULHQGO\ IRUFHV DUH DQG WKHUH LV QRW D GDQJHURI FLYLOLDQ

FDVXDOWLHV GR QRW KHVLWDWH WR VKRRW RU FRQGXFW UHFRQQDLVVDQFH E\ ILUH 6WDII 6HUJHDQW'DYLG/DZUHQFHZDV WKHFRPPDQGHURI)LUVW3ODWRRQ¶VQRUWKHUQPRVW %UDGOH\:KHQKLVJXQQHU6HUJHDQW%UDGOH\)HOWPDQVDLGµ+H\,¶YHJRWDKRW VSRWRXWWKHUH,¶PQRWVXUHZKDWLWLV¶/DZUHQFHUHVSRQGHGµ3XWD72:LQLW VHHZKDWLWLV¶/DZUHQFHLGHQWLILHGWKHKRWVSRWDVD7DVWKHWXUUHWZDVULSSHG IURPLWVKXOOLQWKHHQVXLQJH[SORVLRQ %HSUHSDUHGIRUFRQIXVLRQDQGFRQFXUUHQWDFWLYLW\$VZHILUHGLQWRWKHYLOODJH

DQGZKLOH/DZUHQFHZDV ODXQFKLQJDPLVVLOH WKH WURRS UHFHLYHG SHUPLVVLRQ WR DGYDQFHWRWKH(DVWLQJ,LQVWUXFWHG)LUVW3ODWRRQWRUHVXPHPRYHPHQWHDVW/7 3HWFKHNGLGQRWUHVSRQGLPPHGLDWHO\EHFDXVH/DZUHQFHZDVUHSRUWLQJµ&RQWDFW &RQWDFWHDVWWDQN¶$OWKRXJK,KDGQRW\HWUHFHLYHGWKDWUHSRUW,IHOWLWZDVEHVW IRUXVWRJRWRDµWDQNVOHDG¶IRUPDWLRQDQGLQVWUXFWHG*UHHQDQG:KLWHWKHWDQN

SODWRRQVWRµIROORZP\PRYH¶)LUVW3ODWRRQSXOOHGLQEHKLQGWKHWDQNZHGJHWR FRYHU RXU UHDU 7KLUG 3ODWRRQ UHWDLQHG UHVSRQVLELOLW\ IRU IODQN VHFXULW\$VZH EHJDQPRYLQJ IRUZDUG)LUVW3ODWRRQ UHVSRQGLQJ WR WKHFRQWDFW UHSRUWRQ WKHLU SODWRRQUDGLRQHWVWDUWHGILULQJPPKLJKH[SORVLYHPXQLWLRQVDFURVVWKHIURQW ,WZDVDOLWWOHXQQHUYLQJIRUWKHWDQNVDVZHPRYHGIRUZDUG,JDYH)LUVW3ODWRRQ DFHDVHILUHRUGHU± µ5HG WKLV LV%ODFNFHDVH ILUH¶7KH WZR WDQNSODWRRQV ZHUHVHSDUDWHGVOLJKWO\IURPRXUWDQN:KHQRXUWDQNFDPHRYHUWKHFUHVWRIWKH LPSHUFHSWLEOH ULVH QRUWK RI WKH YLOODJH 6*7 &UDLJ .RFK WKH JXQQHU DQG , LGHQWLILHG WKH HQHP\ VLPXOWDQHRXVO\$V6*7.RFK VDLG µWDQNVGLUHFW IURQW¶ , FRXOGVHHHLJKW7WDQNVLQSUHSDUHGSRVLWLRQVWRRXUIURQW 6WDQGDUGXQLWILUHDQGEDWWOHGULOOVDWWKHFUHZSODWRRQDQGFRPSDQ\OHYHOVDUH

HVVHQWLDOWRDFKLHYLQJVSHHGRIDFWLRQDQGLQDUPRUHGFRPEDWWKHVLGHWKDWVKRRWV ILUVWXVXDOO\ZLQV,JDYHWKHILUHFRPPDQGµ)LUH)LUH6$%27¶:HKDGD+($7 +LJK([SORVLYH$QWL7DQNURXQGORDGHGVRWKHRUGHUDOHUWHGWKHFUHZWRLQGH[ 6$%27DQGWKHQH[WURXQGZRXOGEHDNLQHWLFHQHUJ\URXQG$V6HUJHDQW.RFK ILUHGWKHILUVWURXQG,VHQWDFRQWDFWUHSRUWWRWKHWURRSµ7KLVLV%ODFN&RQWDFW HDVW(LJKW DUPRUHGYHKLFOHV*UHHQ DQG:KLWH DUH \RXZLWKPH"¶6*7.RFK GHVWUR\HGWZRPRUHWDQNVDVWKHWDQNSODWRRQVDFFHOHUDWHGPRYHPHQW7KHQDOO QLQH WDQNV EHJDQ HQJDJLQJ WRJHWKHU DV ZH DGYDQFHG ,Q DSSUR[LPDWHO\ RQH PLQXWH HYHU\WKLQJ LQ WKH UDQJH RI RXU JXQV ZDV LQ IODPHV (DJOH 7URRS GHPRQVWUDWHGJUHDWILUHGLVWULEXWLRQDQGFRQWUROZKLFKDOORZHGXVWRWDNHRXWD ORWRIWKHHQHP\DWRQFH6ROGLHUVWRRNDJJUHVVLYHDFWLRQDJDLQVWDQXPHULFDOO\ VXSHULRUIRUFHZLWKRXWKHVLWDWLRQ ,I\RXU VROGLHUVNQRZKRZ WKHSODWRRQDQG WURRSPDQHXYHUV WKH\ZLOO WDNH

LQLWLDWLYH2XUWDQNGULYHU63&&KULVWRSKHU+HGHQVNRJNQHZWKDWKHKDGWRVWHHU DSDWKWKDWSHUPLWWHGERWKWDQNSODWRRQVWRJHWWKHLUJXQVLQWRWKHILJKW+HWXUQHG GHJUHHVWRWKHULJKWDQGNHSWRXUIURQWDODUPRUWRZDUGWKHILUVWHQHP\WDQNVZH HQJDJHG+HDOVRGURYHWKURXJKDPLQHILHOGDYRLGHGWKHDQWLWDQNPLQHVDQGWROG PH RQ WKH LQWHUFRP µ6LU , WKLQN \RX QHHG WR NQRZ ZH MXVW ZHQW WKURXJK D PLQHILHOG¶+HNQHZWKDWLWZRXOGEHGDQJHURXVWRVWRSULJKWLQWKHPLGGOHRIWKHLU NLOOVDFNZHZRXOGKDYHEHHQVWDWLRQDU\WDUJHWV+HVDZWKDWZHKDGDZLQGRZ RIRSSRUWXQLW\ WR VKRFN WKH HQHP\DQG WDNH DGYDQWDJHRI WKH ILUVW EORZV6*7 .RFKKDGGHOLYHUHG ,QDQRWKHUH[DPSOHRIVROGLHULQLWLDWLYH66*'LJELHRUGHUHG3)&%HUWXELQWR

UHORDG 72:PLVVLOHV %HUWXELQ FRXOG QRW JHW WKH FDUJR KDWFK RSHQ KRZHYHU :KHQ KH NLFNHG WKH KDWFK UHOHDVH KH VKHDUHG LW RII 5DWKHU WKDQ WHOOLQJ KLV %UDGOH\FRPPDQGHUWKDWKHFRXOGQRWJHWWKH72:VUHORDGHGKHMXPSHGRXWRI WKHEDFNGRRUZKLOHWKHYHKLFOHZDVXQGHUVPDOODUPVDQGPDFKLQHJXQILUH+H FOLPEHG RQWR WKH EDFN RI WKH %UDGOH\ ORDGHG ERWK PLVVLOHV WKHQ WDSSHG KLV %UDGOH\FRPPDQGHURQWKHVKRXOGHUZKLOH\HOOLQJµ72:VDUHXS¶66*'LJELH QHDUO\MXPSHGRXWRIKLVVNLQEHFDXVHKHWKRXJKWWKDWDQ,UDTLKDGFOLPEHGRQWR WKH %UDGOH\ 7KHUH DUH FRXQWOHVV RWKHU VWRULHV RI (DJOH 7URRS VROGLHUV WDNLQJ LQLWLDWLYHDQGPDNLQJVLJQLILFDQWFRQWULEXWLRQVWRWKHILJKW

,I\RXDUHFRPPDQGLQJ WDQNVXVH WKHP WR WDNH WKHEUXQWRI WKH EDWWOH DQG DGYDQFHDJJUHVVLYHO\7DQNVGURYHDURXQGWKHDQWLWDQNPLQHVDQG%UDGOH\VDQG RWKHU YHKLFOHV IROORZHG LQ WKH WUDFNV RI WKH WDQNV:H UDQ RYHU D ORW RI DQWL SHUVRQQHOPLQHVEXWWKH\KDGQRHIIHFWRQDUPRUHGYHKLFOHV2XU6TXDGURQ6 WKHQ0DMRU'RXJODV0DF*UHJRU IRXJKW IRUZDUGZLWKXV LQKLV WDQNDVGLG WKH VTXDGURQWDFWLFDOFRPPDQGSRVW%UDGOH\FRPPDQGHGE\66*:LOOLDP%XUQVDQG /7-RKQ+LOOHQ0DF*UHJRU¶VWDQNKLWDQDQWLWDQNPLQHEXWWKHEODVWGLVDEOHGWKH WDQNRQO\VOLJKWO\DQGLWZDVDEOHWRFRQWLQXHDQGWKHQPDNHDUDSLGUHSDLUZKHQ ZHVWRSSHG &UHZ GULOO LQFOXGLQJ HQJDJHPHQWV DQG PLVILUH SURFHGXUHV DUH YLWDOO\

LPSRUWDQW,QRQHHQJDJHPHQW/7-HII'H6WHIDQR¶VWDQNFUHZFDPHDURXQGWKH YLOODJHGHVWUR\HGDQHQHP\WDQNDQGDFTXLUHGDVHFRQGWDQNWKDWZDVWUDYHUVLQJ RQ WKHP $ URXQG JRW VWXFN LQ WKH FKDPEHU 7KH ORDGHU JUDEEHG KROG RI WKH ORDGHU¶VKDWFKNLFNHGWKHURXQGLQWKHEUHHFKFDPHXSDQGWKHJXQQHUILUHGD URXQGDQGGHVWUR\HGD7DWYHU\FORVHUDQJH &RRUGLQDWLRQEHWZHHQSODWRRQVWRHQVXUHPXWXDOVXSSRUWDOVRSURYHGFULWLFDO

7KH EXUQLQJ WDQNV DQG SHUVRQQHO FDUULHUV RI WKH HQHP\¶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µ,NQRZ\RXGRQ¶WZDQWWRNQRZWKLVULJKWQRZEXW\RX¶UHDWWKHOLPLWRIDGYDQFH \RX¶UHDWWKH(DVWLQJ¶,UHVSRQGHGµ7HOOWKHPZHFDQ¶WVWRS7HOOWKHPZH¶UH LQ FRQWDFW DQGZH KDYH WR FRQWLQXH WKLV DWWDFN 7HOO WKHP ,¶P VRUU\¶:H KDG VXUSULVHGDQGVKRFNHGWKHHQHP\VWRSSLQJZRXOGKDYHDOORZHGWKHPWRUHFRYHU ,ZDV IUHH WRPDNH WKDW GHFLVLRQ EHFDXVH RI D FRPPDQG FOLPDWH WKDW QRW RQO\ HQFRXUDJHG LQLWLDWLYH EXW GHPDQGHG LW 2XU 5HJLPHQWDO &RPPDQGHU &RORQHO /'+ROGHUWROGXVGXULQJWUDLQLQJLQ*HUPDQ\WKDWµ%HFDXVHRIWKHSDFHRIWKH DFWLRQDQGWKHVL]HRIWKHFDYDOU\EDWWOHILHOGLPSRUWDQWGHFLVLRQVKDYHWREHPDGH TXLFNO\ E\ MXQLRU OHDGHUV LQ FRQWDFW « %HFDXVH WLJKW FHQWUDOL]HG FRQWURO RI RSHUDWLRQVLVQ¶WSRVVLEOHRUGHVLUDEOH«DOO5HJLPHQWDO OHDGHUVPXVW WUDLQWKHLU MXQLRUVWRGRWKHULJKWWKLQJVDQGWKHQWUXVWWKHPWRDFWLQGHSHQGHQWO\«/HDGHUV

PXVWWHDFKDQGSUDFWLFHPLVVLRQRUGHUV¶,WZDVDPHVVDJHDOOMXQLRUOHDGHUVLQWKH 5HJLPHQWLQWHUQDOL]HG :H FRQWLQXHG WR DWWDFN WRZDUG DQRWKHU YHU\ VXEWOH ULGJHOLQH RQ ZKLFK WKH

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µWDQNV WDQNV¶%\WKHWLPHKHJRWWRKLVREVHUYDWLRQSRVWDOOWKHYHKLFOHVLQKLVIRUZDUG GHIHQVLYHSRVLWLRQVZHUHLQIODPHV+HRUGHUHGWKHUHVHUYHWRHVWDEOLVKDVHFRQG GHIHQVLYHOLQHEXWLWZDVWRRODWH7KHWURRSVWRSSHGZKHQZHKDGQRWKLQJOHIWWR VKRRW7KHPDLQILJKWWRRNPLQXWHV:HFRQVROLGDWHGRQWKHULGJHOLQHWKDWWKH HQHP\UHVHUYHKDGRFFXSLHG 7KHUHZDVD ORWRIFRQFXUUHQWDFWLYLW\DVZHFRQVROLGDWHG:HKDGVSRUDGLF

FRQWDFW UDQJLQJ IURP QXLVDQFH PDFKLQHJXQ ILUH WR RQH FRPSDQ\VL]HG FRXQWHUDWWDFNRI7VDQG%03V:HFRRUGLQDWHGRXUILJKWZLWK*7URRSWRRXU QRUWKDQG, 7URRSOHGE\&DSWDLQ'DQ0LOOHUDQRWKHUFODVVPDWHDQGURRPPDWH IURP:HVW3RLQW,7URRSWRRXUVRXWKDVWKH\FDPHLQWRFRQWDFW:HGHVWUR\HG HQHP\YHKLFOHVDWORQJUDQJHIURPWKHGRPLQDWLQJSRVLWLRQRQWKHULGJH7KUHH %UDGOH\V IURP0LNH 3HWVFKHN¶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¶V VHFWRU WR RXUVRXWK 2XUILJKWZDVDORSVLGHGYLFWRU\)URPWKHLQLWLDWLRQRIRXUDVVDXOWXQWLOEDWWOH

KDQGRYHUZLWK)LUVW,QIDQWU\'LYLVLRQZHGHVWUR\HGDSSUR[LPDWHO\ILIW\7V WZHQW\ILYHDUPRUHGSHUVRQQHOFDUULHUVIRUW\WUXFNVDQGQXPHURXVRWKHUYHKLFOHV VXFKDV6$DLUGHIHQVHV\VWHPV2XUWURRSWRRNQRFDVXDOWLHV7KHUHZHUHPDQ\ UHDVRQVIRUWKRVHUHVXOWV

2QH RI WKH SULQFLSDO UHDVRQV LV $PHULFDQ DLU VXSUHPDF\ DQG WHFKQRORJLFDO VXSHULRULW\ :KLOH WKH SK\VLFDO GHVWUXFWLRQ WKDW WKH DLU FDPSDLJQ LQIOLFWHG RQ 0DMRU0RKDPPHG¶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

SURYHGLQDFFXUDWHIRUVHYHUDOUHDVRQV(YHU\WDQNURXQGILUHGDWXVRIZKLFKWKHUH ZHUHDWOHDVWIRXUIHOOVKRUW&RQWULEXWLQJIDFWRUVOLNHO\LQFOXGHGZRUQJXQWXEHV DQGZHWRUGDPSSURSHOODQWLQWKH7¶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

ORZVNLOO OHYHO$W ILUVWJODQFH0DMRU0RKDPPHGGHYHORSHGDJRRGGHIHQVLYH SODQ +H VHW XS D UHYHUVH VORSH GHIHQVH GHYHORSHG JRRG NLOO VDFNV ZLWK PLQHILHOGVDQGGXJLQSRVLWLRQVZLWKJRRGILHOGVRIILUH+HHVWDEOLVKHGDUHVHUYH ,WZDVKRZHYHUDGHIHQVHVXLWHGIRUDQ,UDQLDQLQIDQWU\KHDY\DWWDFNGXULQJWKH

,UDQ±,UDT:DUDQGQRW DGHIHQVHFDSDEOHRI FKDOOHQJLQJDQ$PHULFDQDUPRUHG FDYDOU\ WURRS0DMRU0RKDPPHG¶V FRQFHSWLRQRI WLPHDQG VSDFHZDV VNHZHG +LV YHKLFOH SRVLWLRQV DQG LQIDQWU\ EXQNHUV ZHUH WRR FORVH WRJHWKHU 2QFH ZH GHWHFWHGWKHILUVWWDQNVZHFRXOGRULHQWRQQHDUO\WKHHQWLUHIRUFHWKHUHZHUHQR SRVLWLRQVGHVLJQHGWRKLWXVIURPDQXQH[SHFWHGDQJOH$QWLSHUVRQQHOPLQHILHOGV ZHUH LQHIIHFWLYH DV WKH PLQHV GHWRQDWHG KDUPOHVVO\ XQGHU RXU WDQN WUDFNV 0RKDPPHG¶VUHVHUYHZDVWRRVKDOORZVXFKWKDWLWORVWLWVIUHHGRPWRPDQHXYHU DV VRRQ DV RXU WURRS SHQHWUDWHG WKH IRUZDUG GHIHQVLYH SRVLWLRQV 7KH GHIHQVH ZRXOGKDYHEHHQHIIHFWLYHDJDLQVWDGLVPRXQWHGLQIDQWU\DVVDXOWRUDJDLQVWOLJKWO\ DUPRUHG YHKLFOHV EXW LW ZDV LQHIIHFWLYH DJDLQVW DQ DUPRUHG FDYDOU\ DWWDFN 'HVSLWH,UDTLWDFWLFDOLQHSWLWXGHKRZHYHU5HSXEOLFDQ*XDUGVROGLHUVIRXJKWLQD GHWHUPLQHGPDQQHU WKHPDMRULW\RI WKHHQHP\IRXJKWXQWLO WKH\ZHUHNLOOHGRU ZRXQGHG 6XUSULVHVKRFNDQGWKHLQLWLDWLYHJDYHXVWUHPHQGRXVDGYDQWDJH:HGLGQRW

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

DQGWKHDJJUHVVLYHDFWLRQVRIFUHZVSODWRRQVDQGWKHXQLWDVDZKROH$OORIRXU VROGLHUV DWWDFNHG ZLWKRXW KHVLWDWLRQ D QXPHULFDOO\ VXSHULRU HQHP\ IRUFH WKDW SRVVHVVHGDOOWKHDGYDQWDJHVRIWKHGHIHQVH+RZWRGHYHORSWKDWRIIHQVLYHVSLULW LQXQLWVLVDVXEMHFWZRUWK\RI\RXUFRQVLGHUDWLRQDV\RXSUHSDUH\RXUVHOIWROHDG VROGLHUV

)LUVWDZRUGRIZDUQLQJ±RIIHQVLYHVSLULWGRHVQRWFRPHIURPVORJDQVRUIDOVH EUDYDGR$OORI WKDWHYDSRUDWHVTXLFNO\DVFRPEDWDSSURDFKHV2IIHQVLYHVSLULW GHULYHV IURP JHQXLQH FRQILGHQFH EDVHG LQ WRXJK UHDOLVWLF WUDLQLQJ ERQGV RI PXWXDO UHVSHFW DQG WUXVW DQG IDLWK LQ OHDGHUV DW DOO OHYHOV +HUH DUH VRPH VXJJHVWLRQVRQKRZ\RXPLJKWEXLOGJHQXLQHFRQILGHQFH )LUVWVHWFOHDUJRDOVDQGSULRULWLHV5HDGLQHVVIRUFRPEDWLVWKHRQO\VHQVLEOH

PHDVXUHIRUVXFFHVV)RUJHDJUHHPHQWDQGXQGHUVWDQGLQJDERXW\RXUXQLW¶VJRDOV DQGREMHFWLYHV±H[SODLQWKHPWR\RXUPHQDQGZRPHQ$VN\RXUWHDPZKDWNLQG RIDQRUJDQL]DWLRQWKH\ZDQWWRKDYHDQGWKHQVXPPDUL]HWKHLU SRLQWV<RXPLJKW VXJJHVWWKDWDWWDLQLQJWKRVHJRDOVLVDVHDV\DVPDNLQJDFROOHFWLYHFRPPLWPHQW WR DFKLHYH H[FHOOHQFH +RZ PXFK HIIRUW GRHV LW UHDOO\ WDNH WR PDNH XS WKH GLIIHUHQFH EHWZHHQ VLPSO\ DFFRPSOLVKLQJ WDVNV DQG DFFRPSOLVKLQJ WKRVH VDPH WDVNVWRWKHKLJKHVWVWDQGDUG",I\RXLQVSLUH\RXUWHDPWRPDNHH[FHOOHQFHURXWLQH WKDWOHYHORISHUIRUPDQFHZLOOEHFRPHVHOIVXVWDLQLQJ([FHOOHQFHLQWUDLQLQJDQG

RSHUDWLRQVLQSHDFHWLPHJHQHUDWHVFRQILGHQFHLQZDUWLPH 0DNHKLJKTXDOLW\WUDLQLQJ\RXUWRSSULRULW\(VWDEOLVKFOHDURXWFRPHRULHQWHG

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

6KDUHG H[SHULHQFH LQ WUDLQLQJ GHYHORSV FRQILGHQFH LQ RQH¶V RZQ DELOLW\ FRQILGHQFH LQ WKH WHDP DQG IDLWK LQ OHDGHUV 63& 5RGULJR 0DUWLQH] D WDQN JXQQHUZURWHDIWHUWKHEDWWOHWKDWKHQHYHUUHDOO\H[SHULHQFHGIHDUEHFDXVHµZH KDGWUDLQHGVRKDUGDQGRIWHQWKDWLWMXVWVHHPHGOLNHDQRWKHUILHOGSUREOHP¶7KHUH ZLOOEHQRWLPHWROHDUQQHZWHFKQLTXHVXQGHUILUH%DWWOHGULOOVSUHSDUHVROGLHUV DQGXQLWVWRUHVSRQGLPPHGLDWHO\DQGWRJHWKHUWRDQ\VLWXDWLRQ$IWHURXUFDYDOU\ WURRS¶VHQFRXQWHUZLWKD5HSXEOLFDQ*XDUGXQLWRXUORDGHU3)&-HIIUH\7D\ORU WROGPHµ,¶PQRWJRLQJWROLH,ZDVDERXWWRSDQLFEXW,VDLG³GRQ¶WSDQLFGR \RXUMRE´¶7KHVHQVRU\H[SHULHQFHRIEDWWOHLQYROYLQJGHDIHQLQJQRLVHPXOWLSOH ILUHEDOOVDQGWKLFNVPRNHFDQEHRYHUZKHOPLQJ$VRXUWURRSDWWDFNHGKRZHYHU RXU VROGLHUV H[HFXWHG EDWWOH GULOOV IODZOHVVO\ 66* -RKQ 0F5H\QROGV VFRXW VHFWLRQVHUJHDQWLQ7KLUG3ODWRRQUHFDOOHGWKDWµWKHFUHZGLGQ¶WKDYHWREHWROG ZKDWWRGR,WMXVWNLQGDFDPHQDWXUDO¶7KLUG3ODWRRQOHDGHU/77LPRWK\*DXWKLHU REVHUYHGWKDWKLVSODWRRQ¶VDFWLRQVZHUHµDOPRVWEXVLQHVVOLNH¶ )DLWKLQRIILFHUOHDGHUVKLSLVFULWLFDO-XQLRURIILFHUVHDUQUHVSHFWDQGWUXVWRYHU

WLPH WKURXJK GHPRQVWUDWHG FRPSHWHQFH WUHDWLQJ RWKHUV ZLWK UHVSHFW DQG

GHPRQVWUDWLQJ WKDW \RX FDUH JHQXLQHO\ IRU WKRVH LQ \RXU FKDUJH ,Q \RXU HDUO\ VHQVLQJVHVVLRQVZLWK\RXUWHDPKDQGRXWFDUGVDQGDVNWKHPWRZULWHGRZQWKH WKLQJVWKDWDUHJRLQJZHOOLQWKHRUJDQL]DWLRQDQGWKLQJVWKDWQHHGLPSURYHPHQW <RXZLOOEHVXUSULVHGDWKRZHDV\PDQ\RI WKHLPSURYHPHQWVDUHDQGPDNLQJ WKRVHFKDQJHVZLOOKHOSHVWDEOLVK\RXUFUHGLELOLW\DVDOHDGHU1RRQHH[SHFWV\RX WREHWKHH[SHUWRQDOODVSHFWVRI\RXUXQLW¶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

OHDGHUV DQG JLYH WKHP FDQGLG IHHGEDFN DERXW WKHLU SHUIRUPDQFH 5HFRJQL]H KRZHYHU WKDWVRPHZLOOQRWKDYHDQDSWLWXGHIRU OHDGHUVKLS<RXPXVW UHSODFH WKHP <RX VROGLHUV PXVW KDYH FRQILGHQFH LQ OHDGHUV DW DOO OHYHOV 6ROGLHU FRQILGHQFH LV JURXQGHG DW WKH VTXDG RU FUHZ OHYHO 7KH GULYHU RI %UDGOH\ (DJOH63&0DWW/HHH[SODLQHGZKDWDOORZHGKLPWRVXSSUHVVIHDUDQGGULYH GLUHFWO\WRZDUGDODUJHHQHP\GHIHQVLYHSRVLWLRQµ,ZDVFRQILGHQWLQP\FUHZ, NQHZZHZHUHDJRRGWHDP¶ $VDOHDGHU\RXDUHDOVRDWHDFKHU0DNHLWDJRDOWRWHDFKHYHQWKHPRVWMXQLRU

PHPEHURI\RXUWHDPHYHU\WKLQJ\RXNQRZDERXWWKHZD\\RXUXQLWILJKWVDQG DERXWWKHFXUUHQWRSHUDWLRQ7KDWNQRZOHGJHIUHHVSHRSOHWRWDNHWKHLQLWLDWLYH± WRDFWZLWKRXWRUGHUV$V*HQHUDO(UQHVW+DUPRQREVHUYHGGXULQJ:RUOG:DU,, µ7KH$PHULFDQVROGLHULVIXQGDPHQWDOO\LQWHOOLJHQWDQGGRHVDORWRIWKLQNLQJIRU KLPVHOI,IKHXQGHUVWDQGVWKHJHQHUDOSODQDQGZKDW\RXDUHWU\LQJWRGRKHZLOO YHU\RIWHQFRQWULEXWHJUHDWO\WRWKHVXFFHVVRIWKDWSODQ«,I,KDGWLPH,ZRXOG WHOODOOSULYDWHVSUDFWLFDOO\HYHU\WKLQJDERXWWKHSODQVDQGZRXOGJHWPXFKEHWWHU UHVXOWV WKHUHE\¶ .QRZLQJ WKHGHWDLOV RI WKHRSHUDWLRQ DQG DOO WKH HOHPHQWVRI IRUFH WKDW WKH 8QLWHG 6WDWHV PLOLWDU\ LV EULQJLQJ WR EHDU ZLOO HPEROGHQ \RXU VROGLHUV 'R QRW EH RYHUO\ FRQFHUQHG ZLWK \RXU RZQ HPRWLRQDO UHDFWLRQ WR FRPEDW

/HDGHUVDUHLQODUJHPHDVXUHLQVXODWHGIURPIHDU<RXZLOOEHSUHRFFXSLHGZLWK \RXUFRQFHUQDQGUHVSRQVLELOLW\IRU\RXUVROGLHUV,WLVOLNHO\WKDW\RXZLOOVLPSO\ QRWKDYHWLPHIRUIHDU.HHSDFOHDUKHDGDQGUHPDLQFDOP$VDSODWRRQOHDGHURU FRPSDQ\ FRPPDQGHU WKLQN DQ KRXU DKHDG &RPEDW LV FKDUDFWHUL]HG E\ ORQJ SHULRGVRIPRYHPHQWRU LQDFWLYLW\ IROORZHGE\EULHI SHULRGVRI IXULRXV DFWLRQ (QVXUHWKDW\RXUXQLWLVSUHSDUHGWRJDLQDQHDUO\DGYDQWDJHLQWKHILUVWHQFRXQWHU ZLWK WKHHQHP\7KLQNDERXWZKDWPLJKWJRZURQJDVDPHDQVRIDQWLFLSDWLQJ

SUREOHPV5HPHPEHUKRZHYHUQRWWRWDNHFRXQVHORI\RXUIHDUVRQFH\RXKDYH FRQVLGHUHGWKHSRVVLELOLWLHVWDNHDJJUHVVLYHDFWLRQ 6RPH WRGD\ DUJXH WKDW FKDQJHV LQ FRPPXQLFDWLRQV DQG LQIRUPDWLRQ

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¶KDUGVKLSVDQGWDNHWKHVDPHULVNV\RXDVNWKHPWR WDNH,QVKRUWOHDGIURPWKHIURQW 2XUQDWLRQLVDWZDU,WLVOLNHO\WKDWZHZLOOFRQWLQXHWRILJKWDJDLQVWWKRVHZKR

KDWH XV QRW IRU DQ\WKLQJZH KDYH GRQH EXW IRU ZKRZH DUH 2XU QDWLRQ DQG HVSHFLDOO\ WKHPHQDQGZRPHQZKRZLOOGHSHQGRQ\RXU OHDGHUVKLSQHHG\RX <RX DUH OLNHO\ WR IDFH FRPEDW VLWXDWLRQV IDUPRUH FKDOOHQJLQJ WKDQ WKRVH WKDW (DJOH 7URRS 6HFRQG $UPRUHG &DYDOU\ 5HJLPHQW IDFHG DW WKH %DWWOH RI (DVWLQJ7KHNH\VWRVXFFHVVXQGHUWKRVHWRXJKFRQGLWLRQVKRZHYHUDUHOLNHO\WR EHWKHVDPH