Attainment of EU NO2 standards in the Netherlands

5,90UHSRUW $WWDLQPHQWRI(812VWDQGDUGVLQWKH 1HWKHUODQGV ,PSOHPHQWDWLRQRIWKHVW_{(8GDXJKWHUGLUHFWLYH} 5-0)RONHUW+&(HUHQV02GLMN 3%YDQ%UHXJHO/YDQ%UHH 7KLVLQYHVWLJDWLRQKDVEHHQSHUIRUPHGE\RUGHUDQGIRUWKHDFFRXQWRIWKH'LUHFWRUDWH*HQHUDO IRU(QYLURQPHQWDO3URWHFWLRQ'LUHFWRUDWH&OLPDWLF&KDQJHDQG,QGXVWU\ZLWKLQWKH IUDPHZRUNRISURMHFWµ3ROLF\DGYLFHQDWLRQDODQGLQWHUQDWLRQDO¶7KLVUHSRUWLVD WUDQVODWLRQRI5,90UHSRUW 5,9032%R[%$%LOWKRYHQWHOHSKRQHWHOHID[

5,90UHSRUW SDJHRI

6DPHQYDWWLQJ

2QGHUJHPLGGHOGHPHWHRURORJLVFKHRPVWDQGLJKHGHQ]DOGHOXFKWNZDOLWHLWYRRU12LQ 1HGHUODQGPHWEHVWDDQGEHOHLGHQXLWYRHULQJYDQKHW*RWKHQEXUJSURWRFROVWHUNYHUEHWHUHQ PDDUQRJQLHWYROGRHQDDQGHQLHXZH(8QRUPLQ2YHUVFKULMGLQJYDQGHQRUPYLQGW YRRUQDPHOLMNSODDWVELMZRQLQJHQODQJVVQHOZHJHQLQVWHGHOLMNJHELHG2PDOVQRJWHYROGRHQ DDQGHJUHQVZDDUGH]DOPRJHOLMNORNDDOYRRUPLOMDUGHQHXURDDQLQIUDVWUXFWXUHOHPDDWUHJHOHQ VORRSKXL]HQWXQQHOVOXLIHOVJHQRPHQPRHWHQZRUGHQ2RNELMXLWYRHULQJYDQKHW 1DWLRQDDO0LOLHXEHOHLGVSODQ103HQKHW%25%HUHLNEDDUKHLGV2IIHQVLHI5DQGVWDG YHUNHHUVEHOHLGZRUGWGHQRUPQRJRYHUVFKUHGHQLQ:HOGDDOWKHWDDQWDO RYHUVFKULMGLQJHQIRUVIDFWRU'HNRVWHQRPYHUYROJHQVDOVQRJPHWDDQSDVVLQJHQDDQGH ORNDOHLQIUDVWUXFWXXUDDQGHJUHQVZDDUGHWHYROGRHQEHGUDJHQGDQQRJHQNHOHWLHQWDOOHQ PLOMRHQHQHXUR3DVDOVHUQDGHXLWYRHULQJYDQ103LQLQ(XURSHHVYHUEDQGPD[LPDDO HPLVVLHUHGXFWLHHQYHUNHHUVEHOHLGZRUGWLQJH]HWGDQYLQGWHULQHQQDJHHQ RYHUVFKULMGLQJELMZRQLQJHQPHHUSODDWV

5,90UHSRUW SDJHRI

&RQWHQWV

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LQDLUTXDOLW\IRU12   &KDQJHVLQPRWRUZD\SUREOHPDUHDV   &RVWRIWDFNOLQJUHPDLQLQJSUREOHPDUHDV   &RQWULEXWLRQRI12[VRXUFHVWRXUEDQFRQFHQWUDWLRQV   $LUTXDOLW\IRU12LQRWKHU0HPEHU6WDWHV   $LUTXDOLW\VLWXDWLRQIRU12LQ   &KDQJHVLQDLUTXDOLW\IRU12   'LVFXVVLRQDQGFRQFOXVLRQV   'LVFXVVLRQ   &RQFOXVLRQV  5HIHUHQFHV  $QQH[12[HPLVVLRQVLQWKH1HWKHUODQGV  $QQH[7UDIILFLQWHQVLWLHV  $QQH[5RDGOLQNV±ZLWKH[FHHGHQFHGLVWDQFHVDVSHU&(  $QQH[%DFNJURXQGFRQFHQWUDWLRQV  $QQH[([FHHGHQFHGLVWDQFHV 

SDJHRI 5,90UHSRUW $QQH[1XPEHURIGZHOOLQJVLQH[FHHGHQFH]RQH  $QQH[$LUTXDOLW\LQ(8FLWLHVLQ  $QQH[12[HPLVVLHV(8LQ$,52,/,,  $QQH[(PLVVLRQFHLOLQJ1(&*RWKHQEXUJ  $QQH[&RQQHFWLRQEHWZHHQDQQXDODQGKRXUO\DYHUDJH12VWDQGDUG  $QQH[0DLOLQJOLVW 

5,90UHSRUW SDJHRI

6XPPDU\

*HQHUDO 7KHILUVW(8GDXJKWHUGLUHFWLYHZDVLPSOHPHQWHGLQ'XWFKOHJLVODWLRQRQ-XO\ &RQVHTXHQWO\WKH1HWKHUODQGVLVUHTXLUHGWRFRPSO\ZLWKWKHQHZVWDQGDUGIRU12LQ $QXPEHURIUHFHQWVWXGLHVLQGLFDWHWKDWWKHVWDQGDUGDWWKDWWLPHZLOOVWLOOEHH[FHHGHG HVSHFLDOO\QHDUPRWRUZD\VLQXUEDQDUHDV,QRUGHUWRDWWDLQWKHOLPLWYDOXHLWPD\EH QHFHVVDU\WRLPSOHPHQWORFDOLQIUDVWUXFWXUDOPRGLILFDWLRQVFRVWLQJELOOLRQVRIHXUR GHPROLWLRQRIKRXVHVFRQVWUXFWLRQRIWUHQFKHGPRWRUZD\VDQGWXQQHOVSODFLQJRISLWFKHG EDUULHUV 7KLVVWXG\KDVEHHQFRQGXFWHGWRH[DPLQHZKHWKHULWZRXOGEHSRVVLEOHWRDWWDLQWKHVWDQGDUG RXWVLGHGZHOOLQJVORFDWHGDORQJVLGHPRWRUZD\VWKURXJKDGGLWLRQDODEDWHPHQWSROLF\DQGZKDW WKHFRQVHTXHQFHVZRXOGEHLIWKHDWWDLQPHQWGDWHZHUHWREHSRVWSRQHG$OVRORRNHGLQWR ZHUHWKHPDMRUVRXUFHVRI12[LQFLWLHVWKHHIIHFWVRI12RQKHDOWKLQUHODWLRQWRWKH(8

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LVLPSOHPHQWHGWKHVWDQGDUGZLOOVWLOOEH H[FHHGHGLQDOWKRXJKWKHQXPEHURIGZHOOLQJVZKHUHWKHVWDQGDUGLVH[FHHGHGZLOOGURS FRQVLGHUDEO\WRDERXW,ILQDGGLWLRQWRWKH1(33WKHVHSDUDWHSROLF\RQWUDQVSRUW %25IRUWKHKHDYLO\SRSXODWHGZHVWHUQSDUWRIWKHFRXQWU\FDOOHGWKH5DQGVWDGLVDOVR LPSOHPHQWHGWKHQXPEHURIGZHOOLQJVVXEMHFWWRH[FHHGHQFHZLOOGURSIXUWKHUWRDURXQG 2QO\LIWKHHPLVVLRQUHGXFWLRQVDQGSROLF\RQWUDIILFDUHPD[LPDOO\HQIRUFHGDFURVV(XURSH LQDIWHULPSOHPHQWDWLRQRIWKH1(33SROLF\ZLOOWKHUHEHQRPRUHH[FHHGHQFHVQHDU GZHOOLQJVLQDQGEH\RQG &RVWRISRWHQWLDOPRGLILFDWLRQVWRORFDOLQIUDVWUXFWXUH ,IWKH1(33LVLPSOHPHQWHGWKHFRVWRIORFDOLQIUDVWUXFWXUDOPHDVXUHVWKDWPD\EHUHTXLUHG LQRUGHURIPHHWLQJWKHOLPLWYDOXHZLOOGURSIURPDIHZELOOLRQHXURWRPLOOLRQHXUR,I WKH%25LVDOVRLPSOHPHQWHGWKHFRVWZLOOGURSWRPLOOLRQHXUR7KHFRVWRI LPSOHPHQWLQJ12[SROLF\IURPWKH1(33LVDWDURXQGPLOOLRQHXURD\HDUE\RUGHUVRI PDJQLWXGHORZHUWKDQWKHFRVWVWKDWZRXOGEHQHHGHGIRUPRGLILFDWLRQVWRORFDOLQIUDVWUXFWXUH 8QFHUWDLQWLHVLQWKHFDOFXODWLRQ ,QZHDUHWDONLQJDERXWWKHWLSRIWKHLFHEHUJDVIDUDVH[FHHGHQFHVDUHFRQFHUQHG$ VOLJKWYDULDWLRQRILQWKHFRQFHQWUDWLRQFDQFDXVHWKHµLFHEHUJRIH[FHHGHQFHV¶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

SDJHRI 5,90UHSRUW DQGWKHXQFHUWDLQW\DERXWH[FHHGHQFHVGURSVVKDUSO\,QWKDWFDVHWKHFRQFHQWUDWLRQV GURSWRVXFKDOHYHOWKDW±WRFRQWLQXHWKHPHWDSKRUWKHKXJHLFHEHUJRIH[FHHGHQFHVQHDU GZHOOLQJVYLUWXDOO\GLVDSSHDUVEHQHDWKWKHZDYHV +HDOWKHIIHFWVDQG(812VWDQGDUGV /RQJWHUPH[SRVXUHWR12DQGWRWUDIILFUHODWHGSDUWLFXODWHDLUSROOXWLRQIRUZKLFK12LV WDNHQDVDQLQGLFDWRUFDQEHH[SHFWHGWRUHVXOWLQHIIHFWVRQKHDOWKDVZHOODERYHDVEHORZWKH DQQXDODYHUDJH(812VWDQGDUG,WLVXQGHUVWRRGIRU12DQGWKHDVVRFLDWHGDLUSROOXWLRQ

WKDWORQJWHUPPXOWL\HDUFKURQLFH[SRVXUHLVPRUHLPSRUWDQWWKDQVKRUWWHUPH[SRVXUH7KXV IRUWKHGHYHORSPHQWRISROLF\PHDVXUHVWKHORQJWHUPWUHQGLQFRQFHQWUDWLRQVSUREDEO\ FDUULHVPRUHZHLJKWWKDQWKHFRQFHQWUDWLRQLQDQ\LVRODWHG\HDUZKLFKPD\WXUQRXWWREH UHODWLYHO\KLJKHUDVDUHVXOWRIYHU\XQIDYRXUDEOHPHWHRURORJLFDOFRQGLWLRQV 12[VRXUFHVLQXUEDQDUHDV (PLVVLRQVIURPKRXVHKROGVDQGIURPWKHWUDGHVHUYLFHVDQGJRYHUQPHQWVHFWRUVODUJHO\ VSDFHKHDWLQJ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(80HPEHU6WDWHV

5,90UHSRUW SDJHRI

 ,QWURGXFWLRQ

2[LGHVRIQLWURJHQ12[DUHHPLWWHGLQWRWKHDLUPDLQO\LQFRPEXVWLRQSURFHVVHV5RDGDQG

RWKHUWUDIILFZKLFKDFFRXQWHGIRUWZRWKLUGVRIWKHHPLVVLRQVLQ5,90DDUHWKH SULQFLSDOVRXUFHRI12[$ERXWRI12[LVUHOHDVHGDVQLWURJHQPRQR[LGH12DQGDERXW

DVQLWURJHQGLR[LGH12$IWHUHPLVVLRQVRPHRIWKH12LVFRQYHUWHGLQWR127KH FRQFHQWUDWLRQVWKDWRFFXULQWKH1HWKHUODQGVDUHGHWHUPLQHGE\WKHODUJHVFDOH(XURSHDQ EDFNJURXQGFRQFHQWUDWLRQVDQGLQFUHDVHVFDXVHGE\ORFDOHPLVVLRQV7KHULVNRIKLJK FRQFHQWUDWLRQVLVJUHDWHVWQHDUPRWRUZD\VLQXUEDQDUHDV $GYHUVHHIIHFWVRI12RQKXPDQVDQGHFRV\VWHPVRFFXURQEULHIH[SRVXUHWRKLJKOHYHOVDQG RQFKURQLFH[SRVXUHWRORZOHYHOV,QRUGHUWRSURWHFWWKHSRSXODWLRQIURPWKHKHDOWKHIIHFWVRI 12VWDQGDUGVZHUHVHWLQWKHILUVWGDXJKWHUGLUHFWLYH(8 7KLVILUVW(8GDXJKWHUGLUHFWLYH(8ZDVLPSOHPHQWHGLQ'XWFKOHJLVODWLRQE\PHDQV RIDQ2UGHULQ&RXQFLO%XOOHWLQRI$FWV2UGHUVDQG'HFUHHVRQ-XO\7KH 12VWDQGDUGIRUWKHDQQXDODYHUDJHLV—JP)RUEULHIH[SRVXUHWKHKRXUO\DYHUDJH VWDQGDUGLV—JP7KLVVWDQGDUGPD\EHH[FHHGHGWLPHVD\HDU1RH[FHHGHQFHVRI WKHVWDQGDUGDUHH[SHFWHGLQ3UREOHPVFRXOGRFFXUZLWKUHJDUGWRDWWDLQLQJWKHDQQXDO DYHUDJHVWDQGDUGIRU12LQ 6WXGLHVFDUULHGRXWE\0HW]HWDODQG9DQ9HO]HHWDOVKRZWKDWWKH(8DQQXDO DYHUDJH12OLPLWYDOXHZLOOVWLOOEHH[FHHGHGLQSDUWLFXODUO\DORQJEXV\PRWRUZD\VLQ XUEDQDUHDV,QRUGHURIPHHWLQJWKHOLPLWYDOXHLWZLOOEHQHFHVVDU\WRLPSOHPHQWPHDVXUHV FRVWLQJELOOLRQV&RXQWULHVOLNHWKH8QLWHG.LQJGRP*HUPDQ\$XVWULDDQG%HOJLXPKDYH LQGLFDWHGWKDWWKH\DOVRH[SHFWGLIILFXOWLHVLQDWWDLQLQJWKLVVWDQGDUG900 7KHVWXG\FDUULHGRXWE\0HW]HWDO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7KH 'LUHFWRUDWH*HQHUDOIRU(QYLURQPHQWDO3URWHFWLRQ'*0UHTXHVWHGWKH5,90WRH[DPLQH WKHH[WHQWWRZKLFKWKH12VWDQGDUGZRXOGEHPHWDORQJPRWRUZD\VLQWKH1HWKHUODQGVDIWHU RULIFRPSOHPHQWDU\12[HPLVVLRQSROLF\ZLWKRXWLPSOHPHQWDWLRQRIDQ\ GUDVWLFLQIUDVWUXFWXUHFKDQJHVLVLPSOHPHQWHG4XHVWLRQVZHUHDOVRDVNHGDERXWWKHPDMRU VRXUFHVRI12[LQFLWLHVIRUSXUSRVHVRIFRPSOHPHQWDU\SROLF\WKHKHDOWKHIIHFWVRI12LQ UHODWLRQWRWKH(8VWDQGDUGWKHLPSDFWRQWKH1HWKHUODQGVRIPRUHVWULQJHQWHPLVVLRQSROLF\ SXUVXHGE\RWKHU(80HPEHU6WDWHVDQGWKHH[LVWLQJSUREOHPVLQRWKHU0HPEHU6WDWHV 7KLVUHSRUWILUVWRIDOOGLVFXVVHVWKHKHDOWKHIIHFWVRI12LQUHODWLRQWR(8VWDQGDUGVDQG JLYHVDQRYHUYLHZRI(8GLUHFWLYHV&KDSWHU,WWKHQUHSRUWVRQWKHPHWKRGRIUHVHDUFK &KDSWHUWKHIHDVLELOLW\RIPHHWLQJWKH12VWDQGDUGLQWKH1HWKHUODQGVWKHFRVWRI PRGLILFDWLRQVLQWKHORFDOLQIUDVWUXFWXUH&KDSWHUDQGWKHVLWXDWLRQLQRWKHU0HPEHU6WDWHV &KDSWHU)LQDOO\&KDSWHUSUHVHQWVWKHGLVFXVVLRQDQGFRQFOXVLRQV

5,90UHSRUW SDJHRI

 +HDOWKHIIHFWVDQGWKH(812



VWDQGDUG

:LWKWKHDGRSWLRQRIWKH$LU4XDOLW\)UDPHZRUN'LUHFWLYH(8(8DLUTXDOLW\SROLF\ ZDVJLYHQDQHZERRVW7KH(XURSHDQ&RPPLVVLRQZDVREOLJHGWRSUHVHQWWKH(XURSHDQ 3DUOLDPHQWDQGWKH&RXQFLORI0LQLVWHUVZLWKSURSRVDOVIRUVRFDOOHGGDXJKWHUGLUHFWLYHVIRU VXEVWDQFHVE\WKH\HDU 7KHOLQHVHWRXWLQWKHIUDPHZRUNGLUHFWLYHVWDUWVZLWKVXEVWDQWLDWLRQ5HFRPPHQGDWLRQV PDGHE\WKH:+2$LU4XDOLW\*XLGHOLQHVDQG81(&(DUHUHDVVHVVHGE\H[SHUWVIURPWKH 0HPEHU6WDWHVDQGVXSSOHPHQWHGZLWKLQIRUPDWLRQRQHPLVVLRQVDQGVRXUFHVRIWKH DSSURSULDWHFRPSRQHQWVPHDVXUHPHQWDQGDVVHVVPHQWWHFKQLTXHVDQGFRVWEHQHILWDQDO\VHV $OOWKLVLVSXEOLVKHGDVDVRFDOOHGµSRVLWLRQSDSHU¶2QWKHEDVLVRIWKLVLQIRUPDWLRQWKH &RPPLVVLRQWKHQSXWVIRUZDUGDSURSRVDOIRUDGLUHFWLYH :KHQHVWDEOLVKLQJOLPLWYDOXHVWKHSRVVLEOHKDUPIXOHIIHFWVRQKHDOWKIRUPRQO\RQHRIWKH FRQVLGHUDWLRQV7KHILUVWGDXJKWHUGLUHFWLYHVHWVVWDQGDUGVIRULQWHUDOLD12IRUZKLFKWKH UHFRPPHQGDWLRQVRIWKH:+2ZHUHDGRSWHG7KHGLUHFWLYHFRQWDLQVDQHYDOXDWLRQFODXVHWKDW VWDWHVWKDWWKHVWDQGDUGVIRUQLWURJHQGLR[LGHPXVWEHHYDOXDWHGLQLIQHZVFLHQWLILF LQIRUPDWLRQKDVEHFRPHDYDLODEOHRQKHDOWKHIIHFWVDQGRQWKHIHDVLELOLW\RIWKHVWDQGDUGV 7KLVFKDSWHUORRNVDWWKHKHDOWKHIIHFWVRI12LQUHODWLRQWRWKHVWDQGDUGIURPWKHILUVW GDXJKWHUGLUHFWLYH,WDOVREULHIO\GLVFXVVHVKRZZKHQDQGZKLFK(XURSHDQGLUHFWLYHVZLOOEH GUDZQXS

 6WDQGDUGVIRU12



LQUHODWLRQWRKHDOWKHIIHFWV

$FXWHLQKDODWLRQRI12FDQUHVXOWLQWLVVXHGDPDJHLQEURQFKLDOWXEHVDQGOXQJVLQD SXOPRQDU\IXQFWLRQGHFUHPHQWLQDQLQFUHDVHLQUHVSLUDWRU\FRPSODLQWVDQGLQDQLQFUHDVHG UHDFWLRQWRDOOHUJHQV(SLGHPLRORJLFDOVWXGLHVVKRZWKDWWKHUHLVDSRVLWLYHOLQNEHWZHHQ ZHHNO\DYHUDJH12H[SRVXUHDQGLQIHFWLRQVLQWKHEURQFKLDOWXEHVRIFKLOGUHQ7KHORQJ WHUPH[SRVXUHRIODERUDWRU\DQLPDOVWR12VKRZVWKDWLUUHYHUVLEOHFKDQJHVFDQRFFXULQWKH VWUXFWXUHDQGIXQFWLRQRIWKHOXQJVWKDWWKHHIIHFWLYLW\RIWKHLPPXQHV\VWHPFDQGHFOLQHDQG WKDWSXOPRQDU\HPSK\VHPDFDQDULVH

7KH:+2UHFRPPHQGHGYDOXHVIRU12:+2DUHDQG—JPIRUSURWHFWLRQ

DJDLQVWDFXWHDQGORQJWHUPHIIHFWVUHVSHFWLYHO\7KH(8KDVDGRSWHGWKHVHUHFRPPHQGHG YDOXHVLQKRXUO\DYHUDJHDQGDQQXDODYHUDJHOLPLWYDOXHV$QXPEHURIHSLGHPLRORJLFDOWLPH VHULHVDQDO\VHVDOVRFDUULHGRXWLQWKH1HWKHUODQGVDQGPDLQO\WDUJHWLQJKHDOWKHIIHFWV DVVRFLDWHGZLWK30VKRZWKDWHIIHFWVVXFKDVLQFUHDVHGSUHPDWXUH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—JP7KH DQQXDODYHUDJHFRQFHQWUDWLRQLVWKHUHVXOWRISHULRGVZLWKKLJKHUDQGZLWKORZHU

SDJHRI 5,90UHSRUW FRQFHQWUDWLRQV7KHFRQWULEXWLRQWRKHDOWKULVNVPDGHE\SHDNVLQWKHFRQFHQWUDWLRQVRI VKRUWHUDQGORQJHUGXUDWLRQLVGLIILFXOWWRLQGLFDWH,QVFLHQWLILFULVNHYDOXDWLRQVIRUDLU SROOXWDQWVWKHHPSKDVLVLVFRQVLGHULQJWKHFXUUHQWUHODWLYHO\µPRGHVW¶12FRQFHQWUDWLRQ OHYHOVRQWKHLPSDFWRIORQJWHUPFKURQLFH[SRVXUHLQSDUWLFXODU7KHORQJHUSHULRGRIWLPH RYHUZKLFKWKHFRQFHQWUDWLRQVDUHDYHUDJHGLVWRDFHUWDLQH[WHQWDUELWUDU\,WLVXQGHUVWRRG WKDWIRU12DQGWKHDVVRFLDWHGDLUSROOXWLRQ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

 (8GDXJKWHUGLUHFWLYHV

$IWHUWKH&RXQFLORI0LQLVWHUVDQGWKH(XURSHDQ3DUOLDPHQWKDYHDSSURYHGWKH&RPPLVVLRQ¶V SURSRVHGGLUHFWLYHDPHQGHGRURWKHUZLVHWKHGLUHFWLYHLVSXEOLVKHGLQWKHRIILFLDOMRXUQDORI WKH(XURSHDQ&RPPXQLWLHV7KH0HPEHU6WDWHVWKHQKDYHDVSHFLILFSHULRGZLWKLQZKLFKWR WUDQVSRVHWKHGLUHFWLYHLQWRWKHLUQDWLRQDOOHJLVODWLRQ 7KHILUVWGDXJKWHUGLUHFWLYH126230DQGOHDGZDVSXEOLVKHGRQ-XQHDQG FDPHLQWRIRUFHGD\VODWHU7KH0HPEHU6WDWHVWKHQKDGXQWLO-XO\WRLPSOHPHQW WKHGHFLVLRQLQWKHLUOHJLVODWLRQ2Q-XO\WKHILUVWGDXJKWHUGLUHFWLYHFDPHLQWRIRUFH LQWKH1HWKHUODQGVYLDDQ2UGHULQ&RXQFLO%XOOHWLQRI$FWV2UGHUVDQG'HFUHHV 7KHVHFRQGGDXJKWHUGLUHFWLYHIRU&2EHQ]HQHZDVSXEOLVKHGRQ'HFHPEHU(8 DQGKDVWREHLPSOHPHQWHGLQQDWLRQDOOHJLVODWLRQE\'HFHPEHU 7KHWKLUGGDXJKWHUGLUHFWLYHGHDOLQJZLWKR]RQHKDVEHHQSXEOLVKHGLQ)HEUXDU\,W VKRXOGEHLPSOHPHQWHGLQQDWLRQDOOHJLVODWLRQHLJKWHHQPRQWKVODWHU ,QWKHVXPPHURIWKH(XURSHDQ&RPPLVVLRQLVH[SHFWHGWRSXWIRUZDUGDSURSRVDOIRUD IRXUWKGDXJKWHUGLUHFWLYHFRQWDLQLQJSURSRVDOVIRUKHDY\PHWDOVQLFNHOFDGPLXPDUVHQLF DQGPHUFXU\DQGSRO\F\FOLFDURPDWLFK\GURFDUERQV3$+VLQFOXGLQJEHQ]RDS\UHQH

5,90UHSRUW SDJHRI )LUVWGDXJKWHUGLUHFWLYH 7KHILUVWGDXJKWHUGLUHFWLYHVHWVELQGLQJVWDQGDUGVIRUWKHFRQFHQWUDWLRQVRIVXOSKXUGLR[LGH 62OHDGQLWURJHQGLR[LGH12DQGSDUWLFXODWHPDWWHUVXVSHQGHGSDUWLFXODWHV30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ZLOOEHFRPH DYDLODEOHDWWKHVDPHWLPHWKDWWKHHYDOXDWLRQRIWKHVW_{GDXJKWHUGLUHFWLYHLVSODQQHG}  _{$UWLFOHUHDGV1RODWHUWKDQ'HFHPEHUWKH&RPPLVVLRQVKDOOVXEPLWWRWKH(XURSHDQ3DUOLDPHQW} DQGWKH&RXQFLODUHSRUWEDVHGRQWKHH[SHULHQFHDFTXLUHGLQWKHDSSOLFDWLRQRIWKLV'LUHFWLYHDQGLQ SDUWLFXODURQWKHUHVXOWVRIWKHPRVWUHFHQWVFLHQWLILFUHVHDUFKFRQFHUQLQJWKHHIIHFWVRQKXPDQKHDOWKDQG HFRV\VWHPVRIH[SRVXUHWRVXOSKXUGLR[LGHQLWURJHQGLR[LGHDQGR[LGHVRIQLWURJHQGLIIHUHQWIUDFWLRQVRI SDUWLFXODWHPDWWHUDQGOHDGDQGRQWHFKQRORJLFDOGHYHORSPHQWVLQFOXGLQJWKHSURJUHVVDFKLHYHGLQPHWKRGVRI PHDVXULQJDQGRWKHUZLVHDVVHVVLQJFRQFHQWUDWLRQVRISDUWLFXODWHPDWWHULQDPELHQWDLUDQGWKHGHSRVLWLRQRI SDUWLFXODWHPDWWHUDQGOHDGRQVXUIDFHV«)XUWKHUPRUHWKH&RPPLVVLRQZLOOH[DPLQHWKHDQQXDOOLPLWYDOXHIRU WKHSURWHFWLRQRIKXPDQKHDOWKIRUQLWURJHQGLR[LGHDQGZLOOPDNHDSURSRVDOFRQILUPLQJRUPRGLI\LQJWKDW YDOXH

%DFNJURXQGWR(8GLUHFWLYHV

7KH&RPPLVVLRQKDVVHWWKLQJVLQPRWLRQIRUDOORIWKHVXEVWDQFHVUHIHUUHGWRLQWKH IUDPHZRUNGLUHFWLYH2QFRPSOHWLRQRIWKHVHLWLQWHQGVWRHPEDUNRQDQHZPRUH LQWHJUDWHGFRXUVHLQWKH&$)(&OHDQ$LUIRU(XURSHSURJUDPPHLQZKLFKWKHGDXJKWHU GLUHFWLYHVZLOOEHHYDOXDWHG$WSUHVHQW-XO\WKHSRVLWLRQLVDVIROORZV  )UDPHZRUNGLUHFWLYHDJUHHG 6HSWHPEHU  (R,([FKDQJHRI,QIRUPDWLRQGHFLVLRQDJUHHG -DQXDU\  (XURSHDQ3XEOLFDWLRQVW_{GDXJKWHUGLUHFWLYH} 621212[30DQG/HDG -XQH  (XURSHDQSXEOLFDWLRQQG_{GDXJKWHUGLUHFWLYH} %HQ]HQHDQG&2 'HFHPEHU  1RWLILFDWLRQRI&$)(SURJUDPPHE\(XURSHDQ&RPPLVVLRQWR &RXQFLORI0LQLVWHUVDQG(XURSHDQ3DUOLDPHQW 0D\  ,PSOHPHQWDWLRQRIVWGDXJKWHUGLUHFWLYHYLD'XWFK -XO\ 2UGHULQ&RXQFLO

 (XURSHDQ3XEOLFDWLRQRIUG_{GDXJKWHUGLUHFWLYH )HEUXDU\}

SDJHRI 5,90UHSRUW

&RQVHTXHQWO\WKLVGDWDPD\SOD\DQLPSRUWDQWUROHLQWKHHYDOXDWLRQRIWKHGLUHFWLYHE\WKH (XURSHDQ&RPPLVVLRQ,QDGGLWLRQWKHUHVXOWVRIWKHHYDOXDWLRQLQPD\FRQWULEXWH WRWKHGHFLVLRQPDNLQJRQLPSOHPHQWDWLRQRIWKHSUHSDUHGDFWLRQSODQV

5,90UHSRUW SDJHRI

 'HVFULSWLRQRISHUIRUPDQFHRIDGGLWLRQDOUHVHDUFK

7REHDEOHWRDQVZHUWKHTXHVWLRQRQWKHH[WHQWWRZKLFKWKH12VWDQGDUGFRXOGDOVREH DWWDLQHGDORQJPRWRUZD\VLQWKH1HWKHUODQGVDIWHURUZLWKFRPSOHPHQWDU\ SROLF\RQ12[HPLVVLRQVDGGLWLRQDOUHVHDUFKZDVFRQGXFWHG7KHVWDUWLQJSRLQWZDVWKH SUREOHPDUHDVIRUDORQJPRWRUZD\VLQXUEDQDUHDVWDNHQIURPWKHVWXG\FDUULHGRXWE\ WKH&HQWUHIRU(QHUJ\&RQVHUYDWLRQDQG&OHDQ7HFKQRORJ\&(0HW]HWDO 8VHZDVPDGHRIGDWDIURPH[LVWLQJUHVHDUFKDQGPHDVXUHPHQWVWRHVWLPDWH12LQWKH SUHVHQWVLWXDWLRQDQGWRREWDLQDJHQHUDOSLFWXUHRIWKHDLUTXDOLW\LQDQGDQ RYHUYLHZRIWKHVLWXDWLRQLQRWKHU0HPEHU6WDWHV)LUVWRIDOODEULHIRXWOLQHLVJLYHQRIWKH &(VWXG\IROORZHGE\WKHVWUXFWXUHRIDQGEDVLFGDWDHPLVVLRQDQGHPLVVLRQIDFWRUVWUDIILF LQWHQVLWLHVDQGURDGOLQNVVWUHWFKHVRIURDGGZHOOLQJVDQGFRVWRIORFDOPRGLILFDWLRQVWDNHQ IURPWKHVXSSOHPHQWDU\5,90VWXG\

 (DUOLHU&(VWXG\

7KH0LQLVWU\RI+RXVLQJ6SDWLDO3ODQQLQJDQGWKH(QYLURQPHQW9520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 )URPWKHVHURDGOLQNVDVHOHFWLRQZDVPDGHRIZKHUHSUREOHPVFRXOGEHH[SHFWHG WKHVHOHFWLRQEHLQJPDGHRQWKHEDVLVRIWUDIILFLQWHQVLW\PRUHWKDQYHKLFOHVSHU ZRUNLQJGD\)URPWKHRWKHUURDGOLQNVDVHOHFWLRQZDVPDGHIRUFRQWUROSXUSRVHVRQWKH EDVLVRIEDFNJURXQGFRQFHQWUDWLRQDQGWUDIILFLQWHQVLW\)URPWKLVLWHPHUJHGWKDWWKH VHOHFWLRQFULWHULRQRIYHKLFOHVSHUGD\JDYHDUHDVRQDEO\FRPSOHWHSLFWXUHRIWKH URDGVZLWKSUREOHPVLQ 8VLQJDPHWKRGRIFDOFXODWLRQEDVHGRQWDEOHVFRPSLOHGE\WKH1HWKHUODQGV2UJDQLVDWLRQIRU $SSOLHG6FLHQWLILF5HVHDUFK712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

SDJHRI 5,90UHSRUW (PSOR\LQJODQGXVHGDWD&(HVWLPDWHGWKHEXLOWXSDUHDDORQJWKHURDGOLQNV)URPWKH DQDO\VHVLWHPHUJHVWKDWURDGOLQNVUXQSDVWWKHµEXLOWHQYLURQPHQW¶&RXQWVPDGHZLWKWKH DLGRIYLVXDOREVHUYDWLRQVUHYHDOHGWKDWLQWKHFDVHRIURDGOLQNVGZHOOLQJVZHUHORFDWHGLQ WKHH[FHHGHQFH]RQH7KHQXPEHURIGZHOOLQJVLQYROYHGLVDERXWWR $URXJKHVWLPDWHZDVPDGHRIWKHFRVWRIWDNLQJUHPHGLDODFWLRQ,QDGGLWLRQWRWUDIILF PHDVXUHVWKHIROORZLQJRSWLRQVZHUHLQFOXGHGSODFLQJSLWFKHGEDUULHUVDORQJWKHURDG EXLOGLQJWUHQFKHGURDGVEXLOGLQJWXQQHOVRUGHPROLVKLQJKRXVHVLQWKHH[FHHGHQFH]RQH7KH PRVWH[WUHPHUHPHGLDWLRQDOWHUQDWLYHZDVWKHFRPSOHWHHOLPLQDWLRQRIH[FHHGHQFH]RQHV WKURXJKRXWWKH1HWKHUODQGV7KLVSURYHGWREHDQH[WUHPHO\H[SHQVLYHRSWLRQDERXW ELOOLRQHXUREHFDXVHLWZRXOGLQYROYHEXLOGLQJPDQ\WXQQHOV:LWKDPRUHVHOHFWLYHXVHRI SLWFKHGEDUULHUVDQGWXQQHOVZKHUHWKHµEXLOWHQYLURQPHQW¶RUPRUHVSHFLILFDOO\RQO\ GZHOOLQJVDUHDIIHFWHGOHVVH[WUHPHO\H[SHQVLYHDOWHUQDWLYHVSUHVHQWWKHPVHOYHV'HSHQGLQJ RQWKHFKRLFHVPDGHWKHFRVWRIWKHVHPRUHVHOHFWLYHRSWLRQVYDULHVIURPDERXWWR ELOOLRQHXUR

 5,90PHWKRGDQGEDVLFGDWD

8VLQJHPLVVLRQVFHQDULR09(&5,90EDQGQHZVFHQDULRVIRUDQG ZLWKDGGLWLRQDOPHDVXUHVWDUJHWVIRU12[FDOFXODWLRQVZHUHPDGHRIWKH12[ EDFNJURXQGFRQFHQWUDWLRQXVLQJ6,*0$9LVVHQEHUJHWDO7KHQZLWKWKHDLGRIWKH &$5PRGHO(HUHQVHWDODQGVXLWDEOHYHKLFOHHPLVVLRQIDFWRUVDQGYHKLFOHLQWHQVLWLHV WKHURDGOLQNVIURPWKH&(VWXG\ZKHUHWKHUHLVDQH[FHHGHQFHLQUHVLGHQWLDODUHDVZHUH UHFRPSXWHG &RPSDUHGZLWK09WKLVVWXG\VKRZHGFRQYHUVLRQRIUHYLVHGVSDWLDOHPLVVLRQGLVWULEXWLRQV IRU12WREHXVHGIRUGHQLWULILFDWLRQLQWKHVRLODLUFUDIW/72DJULFXOWXUDOPDFKLQHU\PRELOH DQGRWKHUVSHFLDOYHKLFOHVDQGWKHWUDGHVHUYLFHVDQGJRYHUQPHQWVHFWRU12[ZDV FRQYHUWHGLQWR12LQDFFRUGDQFHZLWK(HUHQVHWDO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

5,90UHSRUW SDJHRI

 (PLVVLRQVFHQDULRVIRU12

[

HPLVVLRQV

12[HPLVVLRQVFHQDULRVIRUWKH1HWKHUODQGV 7KH&(VWXG\ZDVSHUIRUPHGRQWKHEDVLVRIWKH09(&VFHQDULR7KLVVFHQDULR FRQWDLQVSROLF\IRUZKLFKWKHUHJXODWLRQVRUIXQGLQJKDGEHHQILQDOLVHGRQ-DQXDU\ VHH&KDSWHU,QRUGHUWREHDEOHWRDVVHVVWKHLPSDFWRIDGGLWLRQDOSROLF\WDUJHWLQJVRXUFHV DVFHQDULRZDVGHVLJQHGRQWKHEDVLVRILQIRUPDWLRQIURP5,907KLVLQFRUSRUDWHG DGGLWLRQDOSROLF\FRPSDUHGWRWKH(XURSHDQ&RRUGLQDWLRQ(&VFHQDULR&3%IURP WKH)LIWK1DWLRQDO(QYLURQPHQWDO2XWORRN5,90EIRUDQGWDEOH $QQH[ )RUDUHFRQVWUXFWLRQZDVPDGHRIWKH1(33HPLVVLRQREMHFWLYHNW12[%DVHG RQWKH1(33HPLVVLRQREMHFWLYHSHUVHFWRUDQGWKH09ILJXUHVWKHHPLVVLRQUHGXFWLRQV UHTXLUHGSHUVHFWRUZHUHH[DPLQHG$FKHFNZDVDOVRPDGHRIWKHPHDVXUHVWKDWDSSO\EDVHG RQWKH'*01(33ZRUNLQJGRFXPHQWµHYDOXDWLRQRIDFLGLILFDWLRQWDUJHWV¶9520 7KHVHDUHLQFHQWLYHVIRUFOHDQHQJLQHVIRULQODQGVKLSSLQJRWKHUWUDIILFPHDVXUHVDOO FDWHJRULHVWLJKWHQLQJXSRIGHJUHHRQHPLVVLRQVWRFNVRIKHDWLQJLQVWDOODWLRQV%((6DQG 1DWLRQDOHPLVVLRQ5HJXODWLRQV1H5LQOLJKWLQGXVWU\WRWDOFDSDFLW\0:WKDQG ORZHULQJHPLVVLRQFHLOLQJVLQKHDY\LQGXVWU\7KH\DOVRLQFOXGHFOHDQHUJDVILUHG LQVWDOODWLRQVLQWKHWUDGHVHUYLFHVDQGJRYHUQPHQW76*VHFWRUDQGLQWKHDJULFXOWXUHDQG WKHFRQVXPHUVHFWRUWDEOH 7DEOH12[VFHQDULRVRIVXSSOHPHQWDU\SROLF\  12[UHFRQVWUXFWLRQRI1(33HPLVVLRQREMHFWLYH (PLVVLRQ NW &XUUHQWSROLF\(&09LQFO(852WUXFNV  /HVV ,QODQGVKLSSLQJFOHDQHQJLQHLQFHQWLYHVDERXWPLOOLRQ  7UDIILFPLVFHOODQHRXVPHDVXUHV  0HDVXUHVIRULQGXVWU\QRQ12[HPLVVLRQWUDGHVHFWRUVWLJKWHQLQJXS%((6DQG1H5 UHTXLUHPHQWVDQG12[HPLVVLRQWUDGHVHFWRUVFHLOLQJORZHUWKDQNWRQQH  76*DQGFRQVWUXFWLRQYDULRXVWHFKQRORJLHV  $JULFXOWXUHYDULRXVWHFKQRORJLHV  &RQVXPHUVYDULRXVWHFKQRORJLHV  /HDYHVLQ  12[PD[LPXPUHGXFWLRQSROLF\ &XUUHQWSROLF\(&09LQFO(852WUXFNV  /HVV 6WDQGDUGIRULQODQGVKLSSLQJVDPHDV(XURWUXFNVIURP UHWURILWLQVKLSVEXLOW EHIRUH  6WDQGDUGIRUVHDVKLSSLQJVDPHDV(XURWUXFNVIURP  (XURFDUVDQGYDQV  6WDQGDUGIRUPRELOHHTXLSPHQWVDPHDV(XURWUXFNVIURP  6&58/1EXUQHUVVWDWLRQDU\VRXUFHV  /HDYHVLQ  )RUWKHHPLVVLRQOHYHOVFRQFHLYDEOHIRUWKDW\HDUZHUHH[DPLQHGRQWKHEDVLVRIWKH DYDLODEOHWHFKQRORJ\)RUHVHHDEOHDGPLQLVWUDWLYHREVWDFOHVDQGWKHUHPDLQLQJLPSOHPHQWDWLRQ

SDJHRI 5,90UHSRUW SHULRGZHUHH[SOLFLWO\WDNHQLQWRDFFRXQW7HFKQRORJ\ZLWKDIDUUHDFKLQJLPSDFWIXHOFHOOV EHKDYLRXUDOFKDQJHVLQQRYDWLRQVPD[LPXPXVHRI6&58/1EXUQHUV6HOHFWLYH&DWDO\WLF 5HGXFWLRQ8OWUD/RZ12[ZDVQRWLQFOXGHG7KHPHDVXUHVLQYROYHWKHLQWURGXFWLRQRI6&5 IRUQHZHQJLQHVIRULQODQGVKLSVZLWKUHWURILW(XURVWDQGDUGVIRUFDUVYDQVDQG PRELOHHTXLSPHQWDQG6&58/1EXUQHUVIRUVWDWLRQDU\VRXUFHVVHHWDEOH7KH VFHQDULRGUDZQXSIRUWLHVLQZLWKFRQFHUQLQJPHDVXUHVDQGLVWHFKQLFDOO\IHDVLEOH LIDSRZHUIXOH[WUDSROLF\ERRVWLVJLYHQ9LUWXDOO\DOOWKHWHFKQLFDOPHDVXUHVSURSRVHGIRU UHTXLUHD(XURSHDQDSSURDFK %HVLGHVXQFHUWDLQWLHVLQWKH(&VFHQDULRLWVHOIWKHUHGXFWLRQVFHQDULRLVVXUURXQGHGE\ DGGLWLRQDOXQFHUWDLQWLHVDERXWWKHPHDVXUHV$URXJKHVWLPDWHZDVPDGHRIWKHLULPSDFW $WWDLQPHQWRIWKHWDUJHWVIRUDQGDOVRUHTXLUHFRQFUHWHDFWLRQWREHFRPPHQFHG VRRQSROLF\PHDVXUHVDQGIXQGLQJ)XUWKHULIHFRQRPLFJURZWKLQFUHDVHV*&ZRUNV RXWWRNWKLJKHUDQGWHFKQLFDOGHYHORSPHQWVDQGRUSROLF\DUHGLVDSSRLQWLQJHPLVVLRQV FRXOGZRUNRXWKLJKHU 7RJLYHDQLQGLFDWLRQRIWKHFRQFHQWUDWLRQEHWZHHQDQGDOLQHDULQWHUSRODWLRQRI WKHHPLVVLRQVZDVPDGHIRUµ¶2QO\IRULQODQGVKLSSLQJZDVLWDVVXPHGWKDWWKHOHYHORI HPLVVLRQVLQZRXOGEHWKHVDPHDVWKHOHYHORQDFFRXQWRIDVWDQGDUGLQFRUSRUDWLQJ DUHWURILWUHTXLUHPHQW:LWKLQWKHXQFHUWDLQWLHVVXUURXQGLQJWKHVFHQDULRVWKLVFDQEHWDNHQDV DURXJKLQGLFDWLRQIRU $FFRUGLQJWRHVWLPDWHVWKHFRVWRIDWWDLQLQJWKH12[WDUJHWLQLVDERXWPLOOLRQHXURD \HDU9520 (PLVVLRQVFHQDULRVIRU12[RXWVLGHWKH1HWKHUODQGV :LWKLQWKH(8DGLUHFWLYHZDVEHLQJSUHSDUHG&20ZKLFKDOVRLQFRUSRUDWHG HPLVVLRQFHLOLQJVIRUDOOWKH0HPEHU6WDWHVIRU7KLVZDVGHVLJQDWHGWKH1(&1DWLRQDO (PLVVLRQ&HLOLQJVGLUHFWLYH7KH&RPPLVVLRQ¶V1(&SURSRVDOVSURSRVHFRQVLGHUDEO\ JUHDWHUUHGXFWLRQVWKDQWKH*RWKHQEXUJDJUHHPHQWVRIWKH81(&(*RWKHQEXUJ SURWRFRO$QQH[ 7KHHPLVVLRQWDUJHWVVHWLQWKH*RWKHQEXUJSURWRFRODSSHDUIHDVLEOHZLWKFXUUHQWSROLF\7KH &RPPLVVLRQ¶V1(&SURSRVDONW12[IRUWKH1HWKHUODQGVRQWKHRWKHUKDQGLV FRPSDUDEOHDVUHJDUGVHIIRUWWRZKDWWKH1HWKHUODQGVZRXOGKDYHWRGRWRDWWDLQWKH1(33 WDUJHWV+RZHYHUZLWKWKHFRQVHQWRIWKH(XURSHDQ3DUOLDPHQWWKH(XURSHDQ(QYLURQPHQW &RXQFLOKDVORZHUHGWKHHPLVVLRQFHLOLQJVWRMXVWEHORZWKHOHYHORIWKH*RWKHQEXUJSURWRFRO VHH$QQH[ ,QWKLVVWXG\ERWKWKHRULJLQDOSURSRVDORIWKH(XURSHDQ&RPPLVVLRQDQGWKHSURSRVDO DFFHSWHGE\WKH&RXQFLORI0LQLVWHUVKDYHEHHQFRPSXWHG7KHLGHDEHKLQGWKLVLVWKDWWKH &RPPLVVLRQ¶V1(&VFHQDULRPDSVRXWWKHVLWXDWLRQLIWKHHQWLUH(8ZHUHWRGRURXJKO\WKH VDPHDVUHJDUGV12[SROLF\HIIRUWFRPSDUDEOHWR1(33&DOFXODWLRQVXVLQJWKH &RPPLVVLRQ¶V1(&SURSRVDOVKRZWKHVLWXDWLRQZLWKWKH1HWKHUODQGVEHLQJWKHRQO\FRXQWU\ WRLPSOHPHQWDGGLWLRQDOSROLF\1(33DQGWKHUHVWRIWKH(8GRLQJQRWKLQJH[WUD )RUFRXQWULHVRXWVLGHWKH(8WKHHPLVVLRQFHLOLQJVIRUIURPWKH*RWKHQEXUJSURWRFRO ZHUHXVHGDVUHIHUHQFH

5,90UHSRUW SDJHRI )RUDQGWKH*RWKHQEXUJVFHQDULRZDVVFDOHGIRUWKH(8XVLQJWKHUHGXFWLRQWKH 1HWKHUODQGVKDVLQDQGFRPSDUHGWR*RWKHQEXUJWKHLGHDEHKLQGWKLVEHLQJWKDW WKH(8ZLOOEHSXUVXLQJURXJKO\WKHVDPHSROLF\DVWKDWRIWKH1HWKHUODQGVEHFDXVHYLUWXDOO\ DOOWKHWHFKQRORJLFDOPHDVXUHVFRQVLGHUHGUHTXLUHD(XURSHDQDSSURDFK )RUDQGWKHQRQ(8FRXQWULHVZHUHOLNHZLVHVFDOHGWRWKH*RWKHQEXUJVFHQDULR XVLQJWKHUHGXFWLRQWKH1HWKHUODQGVKDVLQDQGFRPSDUHGWR*RWKHQEXUJ7KHLGHD LVWKDWWKHSUHVHQWSULQFLSDOQRQ(8FRXQWULHV3RODQG&]HFK5HSXEOLF+XQJDU\HWFZLOO SUREDEO\KDYHMRLQHGWKH(8DQGZLOOLPSOHPHQW(XURSHDQHQYLURQPHQWDOSROLF\ 7DEOH'HVFULSWLRQRIWKHFRPSXWHGVFHQDULRV $OWHUQDWLYH 'HVFULSWLRQ 1HWKHUODQGV (8 2WKHUFRXQWULHV 09(& &XUUHQWSROLF\DV DVVXPHGLQ09 *RWKHQEXUJ *RWKHQEXUJ 1(331(&

&RPPLVVLRQ 5HFRQVWUXFWLRQ1(33 1(&&RPPLVVLRQ *RWKHQEXUJ

1(331(&

&RXQFLO 5HFRQVWUXFWLRQ1(33 1(&&RXQFLO *RWKHQEXUJ

1(33 ,QWHUSRODWLRQ

1(33 1(33

*RWKHQEXUJVFDOHGWR1/

UHGXFWLRQYLVjYLV*RWKHQEXUJ *RWKHQEXUJVFDOHGWR1/UHGXFWLRQYLVjYLV

*RWKHQEXUJ

1(33 PD[LPXP

DGGLWLRQDOSROLF\ *RWKHQEXUJVFDOHGWR1/UHGXFWLRQYLVjYLV*RWKHQEXUJ *RWKHQEXUJVFDOHGWR1/UHGXFWLRQYLVjYLV

*RWKHQEXUJ

 5RDGWUDIILFHPLVVLRQIDFWRUV

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

SDJHRI 5,90UHSRUW 7DEOH12[HPLVVLRQIDFWRUVJNP

7\SHRI

WUDIILF (&09 (&LQWHUSRODWLRQ (&09



NPKU NPKU NPKU NPKU NPKU NPKU NPKU NPKU NPKU

3DVVHQJHU         

)UHLJKW         

1(33 1(33LQWHUSRODWLRQ 1(33PD[SROLF\



NPKU NPKU NPKU NPKU NPKU NPKU NPKU NPKU NPKU

3DVVHQJHU          )UHLJKW       

 7UDIILFLQWHQVLWLHVDQGURDGOLQNV

$EULHIDQDO\VLVRIWKHWUDIILFLQWHQVLWLHVYHUVXVWKHQXPEHURIGZHOOLQJVZLWKLQ PHWUHVDORQJWKHPRWRUZD\VKRZVWKHVHURDGOLQNV)LJXUHDQG$QQH[WRLQFOXGH WKHSULQFLSDOSUREOHPDUHDVDORQJPRWRUZD\VLQWKH1HWKHUODQGV 'DWDIURPWKH/06ZHUHXVHGIRUWKHWUDIILFGDWDSHUURDGOLQNLQDQGWKHWZR VFHQDULRVXVHGIRUWKHVH\HDUVVSDQQHGWKHPDUJLQRIWKHH[SHFWHGDYHUDJHZHHNGD\LQWHQVLW\ 7KHPDUJLQLVFRYHUHGE\DUHIHUHQFHVFHQDULRFXUUHQWSROLF\DQGDVFHQDULRZLWKYROXPH RIWUDIILFPHDVXUHVDVLWLVTXLWHSRVVLEOHWKDWDVFHQDULRFRQWDLQLQJPDQ\WHFKQLFDOPHDVXUHV IRU12[ZLOOSUREDEO\KDYHPHDVXUHVUHODWLQJWRWUDIILFYROXPHDVZHOO)RUWKLVUHDVRQWKH IROORZLQJVFHQDULRVZHUHVHOHFWHG$99  UHIHUHQFHZLWKRXW%25  %25DOWHUQDWLYH  UHIHUHQFH  1993PL[ 7KH%25WUDIILFSROLF\IRUWKH5DQGVWDGVFHQDULRLQFOXGHVDGGLWLRQDOSXEOLFWUDQVSRUW SURMHFWVDQGDUXVKKRXUFKDUJHKDVEHHQLQWURGXFHGLQWKHQHWZRUNRIWUXQNURDGV7KLV UHVXOWVLQDORZHULQWHQVLW\WKDQLQWKHUHIHUHQFHVLWXDWLRQGHVSLWHH[SDQVLRQRIWKHURDG QHWZRUNFDSDFLW\LQWKH%25,QWKHQDWLRQDOWUDIILFDQGWUDQVSRUWSODQ1993PL[DODUJH QXPEHURISROLF\RSWLRQVIDUUHDFKLQJRUDGGLWLRQDOKDYHEHHQLPSOHPHQWHGFRPSDUHGZLWK WKHUHIHUHQFHSD\ODQHVYDULDWLRQRIIL[HGFDUH[SHQVHVFRQJHVWLRQOHY\H[SDQVLRQRIURDG FDSDFLW\DQGLPSURYHPHQWVLQSXEOLFWUDQVSRUW&RQVHTXHQWO\LQWHQVLW\LVORZHUWKDQLQWKH UHIHUHQFH$QQH[ 7KHUHIHUHQFHWUDIILFLQWHQVLW\ILJXUHVIRUIURP&(DQGWKH/06ILJXUHVGLIIHUKHUHIRU WKUHHURDGOLQNV$$$$FFRUGLQJWRWKHVXSSOLHU5$1'(XURSHWKH&( VFHQDULRVDQGWKHILJXUHVXVHGKHUHDUHGLIIHUHQW7KH&(LQWHQVLWLHVIRU$DQG$DUH DQGIRU$KLJKHU

5,90UHSRUW SDJHRI

 0RGHOVIRUFRQFHQWUDWLRQFDOFXODWLRQV

)RUWKHFDOFXODWLRQRIEDFNJURXQGFRQFHQWUDWLRQVXVHZDVPDGHRI6,*0$9LVVHQEHUJHWDO ZKLFKLVEDVHGRQFDOFXODWLRQVPDGHZLWK2367RFDOFXODWHFRQFHQWUDWLRQVDORQJ PRWRUZD\VXVHZDVPDGHRIWKH&$5PRGHO7KH236DQGWKH&$5PRGHODUHGHVFULEHG EULHIO\EHORZ 236 7KH2SHUDWLRQDO3ULRULW\6XEVWDQFHV236PRGHOLVDPRGHOIRUWKHDWPRVSKHULFWUDQVSRUWRI FKHPLFDOV7KHLQSXWGDWDLWUHTXLUHVDUHGDWDRQHPLVVLRQVVWDFNKHLJKWVWKHUPDOFRQWHQWLI DQ\DQGPHWHRURORJLFDOGDWD7KHPRGHOFDQFDOFXODWHSHULRGDYHUDJHGFRQFHQWUDWLRQVDQG GHSRVLWLRQVRQDQDWLRQDORUVPDOOHUVFDOH$GHWDLOHGGHVFULSWLRQRIWKHPRGHOFDQEHIRXQGLQ 9DQ-DDUVYHOGDQG9DQ-DDUVYHOG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 ,QWKLVVWXG\WKHEDFNJURXQGUHJLRQDODQGXUEDQZDVFDOFXODWHGXVLQJ6,*0$%DFNJURXQG FRQFHQWUDWLRQVZHUHXVHGRQDVFDOHRI[NP7KHWUDIILFHPLVVLRQVZHUHFDOFXODWHGIURP WKHQXPEHUDQGW\SHRIYHKLFOHSHUKRXUSHULRGWKHLUDYHUDJHVSHHGDQGHPLVVLRQIDFWRUV )RUWKHPRWRUZD\FDOFXODWLRQVLQWKLVVWXG\WKH&$5PRGHOZDVPRGLILHGDQGFDOLEUDWHG DJDLQVW&(FDOFXODWLRQVEDVHGRQWKH712WUDIILFPRGHODQGWKH712ERRNRIWDEOHV &DOFXODWLRQVRQLQGLYLGXDOURDGOLQNVKDYHDQXQFHUWDLQW\RIDERXWIRUDQQXDODYHUDJH FRQFHQWUDWLRQV<RXFDQILQGPRUHLQIRUPDWLRQDERXWWKH&$5PRGHOLQ(HUHQVHWDO

 (VWDEOLVKLQJUHVLGHQWLDODUHDH[SRVXUH

8VLQJWKH$&1$GGUHVV&RRUGLQDWHV1HWKHUODQGVGDWDEDVHIRUDQGKRXVLQJGDWDIURP G%0DLOHUVRXUFH5,90&,0WKHQXPEHURIGZHOOLQJVWKDWZHUHLQVLGHWKH&(H[FHHGHQFH ]RQHLQZDVHVWDEOLVKHGIRU0HW]HWDO&RQWUDU\WR&(WKHGZHOOLQJV ZLWKLQDUDGLXVRIPRIWKHURDGD[LVZHUHDOVRLQFOXGHG,QFRQWUDVWWR&(WKHH[FHHGHQFH GLVWDQFHZDVGHWHUPLQHGIRUHDFKVLGHRIWKHURDGDQGZDVQRWNHSWWKHVDPHIRUERWKVLGHV 7KHGLIIHUHQFHVSHUURDGOLQNEHWZHHQWKH&(DQG5,90PHWKRGDUHLQDQXPEHURIFDVHV FRQVLGHUDEOH7KHWRWDOQXPEHURIGZHOOLQJVIDOOVLQWKHVDPHRUGHURIPDJQLWXGHIRUERWK PHWKRGVWKRXJK5,90VWRWDOHVWLPDWHZRUNVRXWVOLJKWO\ORZHU

SDJHRI 5,90UHSRUW 7DEOH5HFRXQWRIWKHQXPEHURIGZHOOLQJVZLWKLQH[FHHGHQFH]RQHVGLIIHUVIRUHDFKVLGHXVLQJ*,6

DFFRUGLQJWR0HW]HWDO

5RDGOLQN 3URYLQFH 1XPEHURI

GZHOOLQJV &( 1XPEHURI GZHOOLQJV 5,90 $ 5RWWHUGDP$LUSRUW.OHLQSROGHUSOHLQ 6RXWK+ROODQG   $ *HX]HQYHOG+DDUOHP 1RUWK+ROODQG   $ 2VGRUS*HX]HQYHOG 1RUWK+ROODQG   $ 'RUGUHFKW¶V*UDYHQGHHO 6RXWK+ROODQG   $ &HQWUXP.URRVZLMN 6RXWK+ROODQG   $ )H\HQRRUGY=RHOHQODDQ 6RXWK+ROODQG   $ 2VGRUS6ORWHQ 1RUWK+ROODQG   $ .HWKHOSOHLQ6FKLHGDP 6RXWK+ROODQG   $ 3ULQV$OH[DQGHU.UDOLQJHQ 6RXWK+ROODQG   $ =ZLMQGUHFKW'RUGUHFKW 6RXWK+ROODQG   $ -FW%DGKRHYHGRUS%DGKRHYGRUS 1RUWK+ROODQG   $ 9RRUEXUJ%H]XLGHQKRXW 6RXWK+ROODQG   $ $-FW5LGGHUNHUN+HQGULN,GR $PEDFKW 6RXWK+ROODQG   $ &HQWUXP)H\HQRRUG 6RXWK+ROODQG   $ +HQGULN,GR$PEDFKW=ZLMQGUHFKW 6RXWK+ROODQG   $ -FW5LGGHUNHUN$-FW5LGGHUNHUN 6RXWK+ROODQG   $ 6ORWHQ-FW%DGKRHYHGRUS 1RUWK+ROODQG   $ 'H%LOW%LOWKRYHQ 8WUHFKW   $ 1LHXZJHLQ=XLG9LDQHQ 8WUHFKW   $ -FW9DOEXUJ-FW(ZLMN *HOGHUODQG   $ .OHLQSROGHUSOHLQ&HQWUXP 6RXWK+ROODQG   $ &KDUORLV9DDQSOHLQ 6RXWK+ROODQG   $ 9DDQSOHLQMFW5LGGHUNHUN 6RXWK+ROODQG   $ +DDUOHP+DYHQV:HVW 1RUWK+ROODQG   $ .UDOLQJHQ&HQWUXP 6RXWK+ROODQG   727$/   )LJXUH7KHURDGOLQNVVWXGLHGLQWKH'XWFKPRWRUZD\QHWZRUN $ $ $ $ $ $ $WP $WP $ $ $ $

5,90UHSRUW SDJHRI )LJXUH'ZHOOLQJVLQ5RWWHUGDP2YHUVFKLH$DIIHFWHGEH\RQGWKHDQQXDODYHUDJH(8VWDQGDUG VKDGHGLQ&RQFHQWUDWLRQVDFFRUGLQJWR0HW]HWDO

 (VWDEOLVKLQJFRVWRIORFDOPRGLILFDWLRQVIRUSUREOHPDUHDV

7KH&(VWXG\ORRNHGLQGHWDLODWORFDOPHDVXUHVWDNHQQHDUPRWRUZD\VWRVROYHWKHDLUTXDOLW\ SUREOHPDUHDV7KHPHDVXUHVLQFOXGHWUHQFKHGURDGVSLWFKHGEDUULHUVWUDIILFPHDVXUHVDQG WXQQHOV)URPWKLVDQDO\VLVDQXPEHURIDOWHUQDWLYHVZHUHGUDZQXSIRUVROYLQJWKHSUREOHP DUHDVDORQJDOOWKHURDGOLQNVDQGRQURDGOLQNVZLWKEXLOGLQJVDQGGZHOOLQJV,QRUGHUWR FDOFXODWHWKHFRVWDURXJKDYHUDJHHVWLPDWHZDVPDGHRIWKHFRVWSHUPHDVXUHSHUURDGOLQN WDEOH)RUWKHGHPROLWLRQRIDGZHOOLQJWKHFRVWVRIDQDYHUDJHRZQHURFFXSLHGSURSHUW\ eZHUHPXOWLSOLHGE\WKHGHPROLWLRQFRVWVe7KH&(VWXG\GLGQRW H[DPLQHZKHWKHUWKHRZQHURFFXSLHGSURSHUWLHVLQWKHH[FHHGHQFH]RQHVZHUHDYHUDJH SURSHUWLHV1RFRVWVZHUHDVVXPHGLQWKH&(VWXG\IRUWUDIILFPHDVXUHVVSHHGUHVWULFWLRQV DOWHUQDWLYHURXWHV 7DEOH$OWHUQDWLYHVWRPRGLILFDWLRQVQHDUPRWRUZD\VSOXVDVVRFLDWHGFRVWSULFHOHYHO $OWHUQDWLYH 0HDVXUHSHUH[FHHGHQFH GLVWDQFH 'LUHFWFRVWVSHUXQLWHXUR $OWHUQDWLYH*'HPROLWLRQ 7HDULQJGRZQGZHOOLQJV!P  $OWHUQDWLYH(&RPELQHGSDFNDJH 7UDIILFPHDVXUHVP  3LWFKHGEDUULHUVRQHDFKVLGHRI URDGP PLOOLRQ 7XQQHOSHUURDGOLQN!P PLOOLRQ

SDJHRI 5,90UHSRUW 6RXUFH0HW]HWDO )RUDQLQGLFDWLRQRIFRVWVDQGFRVWUHGXFWLRQLIFRPSOHPHQWDU\SROLF\LVLPSOHPHQWHGWZR SDFNDJHVRI&(PHDVXUHVZHUHFRPSXWHG7KHVHSDFNDJHVDOWHUQDWLYHV(DQG*FRYHUWKH FRVWVPDSSHGRXWE\&(ELOOLRQHXUR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,QWKLVDOWHUQDWLYH WKHFKHDSHVWVROXWLRQIURPDOWHUQDWLYH(RU*ZDVXVHGWRWDFNOHWKHH[FHHGHQFH 7KH&(FDOFXODWLRQVRIWKHFRVWDQGWKH5,90FDOFXODWLRQVGLIIHUVOLJKWO\EHFDXVHLQWKH 5,90FDOFXODWLRQFRQVLGHUDWLRQLVJLYHQWRWKHQHHGIRUDSLWFKHGEDUULHUIRUHDFKVLGHRIWKH URDGDQGWKHQXPEHURIGZHOOLQJVZDVHVWDEOLVKHGGLIIHUHQWO\IHZHUGZHOOLQJV1HLWKHU GLGWKH5,90FDOFXODWLRQVFRQVLGHUDFRPELQDWLRQRISLWFKHGEDUULHUVDQGGHPROLWLRQ KRZHYHUWKH\GLGFRQVLGHUDQRSWLPXPVLWXDWLRQLQYROYLQJGHPROLWLRQSLWFKHGEDUULHUVDQG WXQQHOV$FRPSXWDWLRQRIWKH&(UHIHUHQFHFRVWELOOLRQHXURLQWKH5,90PDQQHU SURGXFHVYLUWXDOO\WKHVDPHFRVWWKRXJKELOOLRQHXUR

5,90UHSRUW SDJHRI

 $LUTXDOLW\IRU12



LQWKH1HWKHUODQGV

7KH12VWDQGDUGIRUWKHDQQXDODYHUDJHLV—JP)RUEULHIH[SRVXUHWKHKRXUO\DYHUDJH VWDQGDUGLV—JP7KLVVWDQGDUGPD\EHH[FHHGHGWLPHVD\HDU,QDGGLWLRQWROLPLW YDOXHVWKHVWGDXJKWHUGLUHFWLYHDQGWKH'XWFK$LU4XDOLW\'HFUHHKDVSODQWKUHVKROGVOLPLW YDOXHSOXVPDUJLQRIWROHUDQFH7KHVHDUHWKUHVKROGVIRUWKHDLUTXDOLW\OHYHODERYHZKLFKLW LVPDQGDWRU\WRGUDZXSSODQV7KHDLPRIWKHVHSODQVLVFRPSOLDQFHZLWKWKHOLPLWYDOXHVE\ DWWKHODWHVW7KHOHYHORIWKHSODQWKUHVKROGVIRU12LQLVKLJKHUWKDQWKH OLPLWYDOXHVDQGZLOOEHWLJKWHQHGXSHDFK\HDU,QWKHOHYHORIWKHSODQWKUHVKROGV ZLOOHTXDOWKHOLPLWYDOXHV 7KLVFKDSWHULQGLFDWHVZKDWWKHDLUTXDOLW\LVDWSUHVHQWVHFWLRQ,WWKHQJLYHVDQ LQGLFDWLRQRIWKHH[SHFWHGFKDQJHLQDLUTXDOLW\IRUWKHUHIHUHQFHDQGFRPSOHPHQWDU\SROLF\ VFHQDULRIRUVHFWLRQ7KLVLVIROORZHGE\DGLVFXVVLRQRIWKHFRQWULEXWLRQ PDGHE\12[VRXUFHVLQ$PVWHUGDPDQG5RWWHUGDPVHFWLRQKRZWKHSUREOHPDUHDV DORQJPRWRUZD\VLQXUEDQDUHDVZLOOGHYHORSVHFWLRQDQGILQDOO\WKHFRVWRIUHVROYLQJ UHPDLQLQJSUREOHPDUHDVVHFWLRQ )LJXUH$QQXDODYHUDJHQLWURJHQGLR[LGHFRQFHQWUDWLRQVDORQJEXV\WUDIILFURXWHVLQNPLQWKH1HWKHUODQGV LQ*UHHQEHORZWKH(8VWDQGDUGIRU—JP_{<HOORZH[FHHGHQFHRIWKH(8VWDQGDUGIRU} 5,90D

 $LUTXDOLW\IRU12



LQ

7KHDQQXDOPHDQFRQFHQWUDWLRQDYHUDJHGIRUWKH1HWKHUODQGVZDV—JP_{LQ)LJXUH} VKRZVWKHDQQXDODYHUDJHFRQFHQWUDWLRQDFURVVWKH1HWKHUODQGV7KHKLJKHVW FRQFHQWUDWLRQVRFFXUUHGLQWKH5DQGVWDGDQGWKHORZHVWLQWKHQRUWKHDVW([FHHGHQFHVRIWKH —JP_{OHYHORFFXUUHGLQWKHXUEDQEDFNJURXQGRI$PVWHUGDPDQG5RWWHUGDP} /RFDOHPLVVLRQVPDLQO\IURPWUDIILFFDQJLYHULVHWRDKLJKHUFRQFHQWUDWLRQLQVHYHUDO ORFDWLRQVWKRXJK)LJXUHVKRZVDFDOFXODWLRQIRULQZKLFKWKHQXPEHURINLORPHWUHV                      &RQFHQWUDWLRQ—JP 5RDGNP

SDJHRI 5,90UHSRUW RIURDGLVVHWDJDLQVWWKHFDOFXODWHGFRQFHQWUDWLRQ$ORQJDERXWNLORPHWUHVRIURDGDQ H[FHHGHQFHRIWKH—JP_{VWDQGDUGZDVFDOFXODWHG/RFDWHGLQWKLVH[FHHGHQFH]RQHDUH} DURXQGGZHOOLQJVLQKDELWHGE\DERXWSHRSOH 7KHH[SHFWHGFRQFHQWUDWLRQVIRUZLOOLIWKHPHWHRURORJLFDOFRQGLWLRQVDUHVLPLODUEH URXJKO\FRQVLVWHQWZLWKWKHPRVWUHFHQWFRQFHQWUDWLRQGLVWULEXWLRQILJXUHFDOFXODWHGIRU 7KHVHGDWDVKRZWKDWWKHOLPLWYDOXHSOXVPDUJLQRIWROHUDQFHWRJHWKHULQWRWDO —JPIRU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—JPZDVIRXQGWRURXJKO\FRUUHVSRQGZLWKLVDV VWULFWDVWKHKRXUO\DYHUDJHVWDQGDUGRI—JP_{ZKLFKPD\EHH[FHHGHGWLPHVD\HDU} $QQH[$QDQQXDODYHUDJHRI—JPKDVDFRUUHVSRQGLQJKRXUO\YDOXHRI —JPZKLFKPD\EHH[FHHGHGWLPHVD\HDURUD—JPKRXUO\VWDQGDUG ZKLFKPD\EHH[FHHGHGDERXWWLPHVD\HDU7KLVPHDQVWKDWWKHDQQXDODYHUDJHVWDQGDUG IRU12LVVWULFWHUWKDQWKHKRXUO\DYHUDJHVWDQGDUG,IWKHDQQXDODYHUDJHLVQRWH[FHHGHG WKHKRXUO\DYHUDJHYDOXHZLOOQRWEHH[FHHGHGHLWKHU (PHUJLQJIURPWKHDERYHPHQWLRQHGLVWKDWFRQFHQWUDWLRQVRQDOLPLWHGVFDOHZKLFKH[FHHG WKHDQQXDODYHUDJHRIWKHSODQWKUHVKROGDERYH—JP7KLVPHDQVWKDWH[FHHGHQFHRIWKH KRXUO\DYHUDJHVWDQGDUGLVVWLOOSRVVLEOH([FHHGHQFHRIWKLVVWDQGDUGLVPRVWOLNHO\LQ ORFDWLRQVZKHUHWKHGLUHFW12HPLVVLRQVDUHUHODWLYHO\KLJKHJLQODUJHFLWLHVDWORFDWLRQV ZKHUHWKHUHLVDORWRIVORZPRYLQJWUDIILFGLHVHODQGRWKHUZLWKFROGHQJLQHVLHQRWFORVH WRPRWRUZD\V 7KHSODQWKUHVKROGIRUWKHKRXUO\DYHUDJHLVQRWH[FHHGHGLQ1RH[FHHGHQFHVRIWKH KRXUO\DYHUDJHVWDQGDUGDUHH[SHFWHGIRU

 &KDQJHVLQDLUTXDOLW\IRU12

 7KHDLUTXDOLW\IRU12LPSURYHVFRQVLGHUDEO\IURPDVDUHVXOWRIHPLVVLRQ UHGXFWLRQVLQDQGRXWVLGHWKH1HWKHUODQGVLQWKHUHIHUHQFHVFHQDULRIRU09(&ILJXUH ,Q09(&WKHDQQXDODYHUDJH(8VWDQGDUGLQWKHXUEDQEDFNJURXQGRIWKH 5RWWHUGDPDJJORPHUDWLRQDQGLQWKHYLFLQLW\RI1LMPHJHQVDQGGUHGJHVLVVWLOOH[FHHGHG KRZHYHU  _7KH12 IUDFWLRQLQWKH12[HPLVVLRQIURPFROGHQJLQHVLVKLJKHUWKDQIURPKRWHQJLQHV

5,90UHSRUW SDJHRI

)LJXUH$QQXDODYHUDJH12FRQFHQWUDWLRQDFURVVWKH1HWKHUODQGVIRUDQGWKHGLIIHUHQWVFHQDULRV

09(&1(33&RXQFLODQG&RPPLVVLRQDQG1(33DQG1(33XQGHUDYHUDJH PHWHRURORJLFDOFRQGLWLRQV

SDJHRI 5,90UHSRUW ,QDOOWKHHPLVVLRQDOWHUQDWLYHVLQZKLFKDGGLWLRQDOSROLF\LVLPSOHPHQWHG1(33D GURSLQWKHDQQXDODYHUDJH12FRQFHQWUDWLRQFRPSDUHGZLWKWKHUHIHUHQFH09(& LVFDOFXODWHG7KHDOWHUQDWLYHV1(33&RXQFLODQG&RPPLVVLRQDUHYLUWXDOO\WKHVDPH,Q ERWK&RXQFLODQG&RPPLVVLRQQRH[FHHGHQFHRFFXUVLQWKHXUEDQEDFNJURXQGRI5RWWHUGDP RUWKHVXUURXQGLQJVRI1LMPHJHQZLWKDYHUDJHPHWHRURORJLFDOFRQGLWLRQV 2QO\XQGHUPHWHRURORJLFDOFRQGLWLRQVDGYHUVHWRDLUTXDOLW\DUHH[FHHGHQFHVRIWKH(8 VWDQGDUGDOVRH[SHFWHGIRU1(33LQWKH5RWWHUGDPDJJORPHUDWLRQDQGLQWKHYLFLQLW\RI 1LMPHJHQVDQGGUHGJHV 7KHDOWHUQDWLYHVZLWKPD[LPXPHPLVVLRQSROLF\IRUDQGVKRZQRPRUH H[FHHGHQFHVILJXUH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

 &KDQJHVLQPRWRUZD\SUREOHPDUHDV

7KHURDGOLQNVVHOHFWHGE\&(EHFDXVHWKHUHZHUHGZHOOLQJVORFDWHGZLWKLQWKHH[FHHGHQFH ]RQHDQQXDODYHUDJH!—JPDUHUHFRPSXWHGLQWKLVVHFWLRQIRUUHIHUHQFHDQG FRPSOHPHQWDU\SROLF\VFHQDULRVWDEOH7KH1(33VFHQDULRFRPELQHGZLWKWKH&RXQFLO SURSRVDOZDVGLVUHJDUGHGDVLWSURGXFHGYLUWXDOO\WKHVDPHDVWKH1(33FRPELQHGZLWKWKH &RPPLVVLRQSURSRVDOVHHVHFWLRQ([FHHGHQFHGLVWDQFHVZHUHFDOFXODWHGIURPXSWR DQGLQFOXGLQJP7KHXQFHUWDLQW\RQDQLQGLYLGXDOURDGOLQNDVWKHUHVXOWRIDSRVVLEOH FKDQFHHUURULVJUHDW)RUWKLVUHDVRQWKHUHVXOWVVKRZQZHUHDJJUHJDWHGDVIDUDVSRVVLEOH 7DEOH&RPSXWDWLRQDOSURFHGXUHIRUPRWRUZD\VFHQDULRV 1DPHRIVFHQDULR 7UDIILFLQWHQVLW\ ₁₂ [EDFNJURXQG 9HKLFOHHPLVVLRQIDFWRU

UHI09(& 5HIHUHQFH (&09 (&09

UHIQHSSQHF 5HIHUHQFH 1(33&RPPLVVLRQ 1(33

ERUQHSSQHF %RU 1(33&RPPLVVLRQ 1(33

QHSS %RU1993 1(33 1(33 QHSS 1993PL[ 1(33 1(33 _{6HHVHFWLRQ} 7KHH[FHHGHQFHGLVWDQFHVIRU&(DUHKLJKHUWKDQWKHUHIHUHQFHVFHQDULRUHI09(&IRU DYHUDJHPHWHRURORJLFDOFRQGLWLRQVWDEOHPDLQO\EHFDXVH&(XVHGKLJKHUHPLVVLRQ IDFWRUV,QWKH&(FDOFXODWLRQVWUDIILFVSHHGVDUHRQDYHUDJHNPKUIDVWHUWKDQLQWKH5,90 FDOFXODWLRQV&RQVHTXHQWO\WKH&(HPLVVLRQIDFWRUVDUHKLJKHUIRUFDUVDQGKLJKHU IRUWUXFNV7KH5,90EDFNJURXQGFRQFHQWUDWLRQVKRZHYHUDUHRQDYHUDJHVOLJKWO\KLJKHU WKDQWKHRQHVXVHGE\&(VHH&KDSWHU$VDUHVXOWWKH5,90H[FHHGHQFHGLVWDQFHVDUH KLJKHURQDQXPEHURIURDGOLQNVEXWRQDYHUDJHWKHVFDOHGLSVWRZDUGVORZHUYDOXHV

5,90UHSRUW SDJHRI 7KHH[FHHGHQFHGLVWDQFHFOHDUO\GHFUHDVHVLQWKHDOWHUQDWLYHVLQZKLFKSROLF\LQFUHDVHV ILJXUH7KHGRZQZDUGWUHQGLQWKHEDFNJURXQGFRQFHQWUDWLRQDQGWKHHPLVVLRQIDFWRUV IRUURDGWUDIILFUHI09(&!UHIQHSS!ERUQHSSQHF!QHSS!QHSS FDQEHFOHDUO\VHHQLQDGHFUHDVHLQWKHH[FHHGHQFHGLVWDQFH,QWKHUHIHUHQFHWKHH[FHHGHQFH GLVWDQFHRQURDGOLQNVZDVJUHDWHUWKDQPHWUHVXQGHUDYHUDJHFRQGLWLRQV:KHQWKH 1(33LVLPSOHPHQWHGQRZKHUHLVWKHUHDQH[FHHGHQFHGLVWDQFHRIPRUHWKDQPHWUHV XQGHUDYHUDJHFRQGLWLRQV,QDQGZLWKPD[LPXPUHGXFWLRQSROLF\WKHUHLVDQ H[FHHGHQFHGLVWDQFHRIPRUHWKDQPHWUHVRQWZRDQG]HURURDGOLQNVUHVSHFWLYHO\XQGHU DYHUDJHPHWHRURORJLFDOFRQGLWLRQV 7DEOH([FHHGHQFHGLVWDQFHLQPHWUHVSHUURDGOLQNIRUGLIIHUHQWVFHQDULRVWKHKLJKHVWH[FHHGHQFHGLVWDQFH IURPWKHURDGD[LVSHUURDGOLQNIRUDQDYHUDJHPHWHRURORJLFDO\HDU

&( UHI09HF UHIQHSS

QHF ERUQHSSQHF QHSS QHSS $       $       $±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

SDJHRI 5,90UHSRUW          &(  UHI09   UHI1( 33  ERU1 (33  1(33   1(33  0HWHRURORJ\ $ YH UD JH H [F HH GH QF H GL VW DQ FH P  DGYHUVH DYHUDJH IDYRXUDEOH )LJXUH$YHUDJHH[FHHGHQFHGLVWDQFHRQURDGOLQNVVLGHVIRUGLIIHUHQWVFHQDULRVDQGPHWHRURORJLFDO FRQGLWLRQV 7DEOHVKRZVWKHQXPEHURIKRXVHVZLWKLQWKHH[FHHGHQFHGLVWDQFHVIRUDYHUDJH IDYRXUDEOHDQGDGYHUVHPHWHRURORJLFDOFRQGLWLRQV$QQH[VKRZVWKHQXPEHURIGZHOOLQJV SHUURDGOLQN ,QDQDYHUDJHPHWHRURORJLFDO\HDUWKHQXPEHURIGZHOOLQJVDERYHWKHVWDQGDUGFDQEH HVWLPDWHGDWDERXWDORQJURDGOLQNVIRUWKHUHIHUHQFHVLWXDWLRQLQ UHI09(&2IWKHVHGZHOOLQJVDERXWKDOIDUHORFDWHGLQWKH5RWWHUGDPDJJORPHUDWLRQ ULQJURDG$$DQGWKHRWKHUKDOILQWKH$PVWHUGDPDJJORPHUDWLRQ$ZHVW7KH QXPEHURIGZHOOLQJVGHFOLQHVFRQVLGHUDEO\KRZHYHULQWKHDOWHUQDWLYHVLQYROYLQJDGGLWLRQDO SROLF\:KHQWKH1(33LVLPSOHPHQWHGWKHQXPEHURIH[SRVHGGZHOOLQJVIDOOVE\DIDFWRU RIWRDURXQGDORQJURDGOLQNVLQDQDYHUDJH\HDU,ILQDGGLWLRQWRWKH1(33WKH VSHFLDOWUDIILFSROLF\IRUWKH5DQGVWDGLVLPSOHPHQWHGWKHQXPEHURIGZHOOLQJVGURSVE\KDOI DJDLQWRDERXWDORQJURDGOLQNV:LWKDPD[LPXPUHGXFWLRQSROLF\WKHUHZLOOEHQR GZHOOLQJVLQDQH[FHHGHQFH]RQHXQGHUDYHUDJHFRQGLWLRQVLQ 7DEOH1XPEHURIGZHOOLQJVZLWKLQWKHH[FHHGHQFHGLVWDQFHLQWKHYDULRXVDOWHUQDWLYHV

&( UHI09HF UHIQHSSQHF ERUQHSSQHF QHSS QHSS $YHUDJH PHWHRURORJ\       $GYHUVH PHWHRURORJ\  !  _{   } )DYRXUDEOH PHWHRURORJ\       _{,QDQXPEHURIFDVHVWKHH[FHHGHQFHGLVWDQFHLV!P7KHQXPEHURIGZHOOLQJVZDVGHWHUPLQHGDWP}

5,90UHSRUW SDJHRI )LJXUH1XPEHURIGZHOOLQJVLQH[FHHGHQFH]RQHVLQGLIIHUHQWVFHQDULRVXQGHUGLIIHUHQWPHWHRURORJLFDO FRQGLWLRQV ,QDQDGYHUVHPHWHRURORJLFDO\HDUWKHFDOFXODWLRQVVKRZPRUHWKDQGZHOOLQJVZLWKLQ DQH[FHHGHQFH]RQHDORQJURDGOLQNVNPRIPRWRUZD\)RU1(33WKHQXPEHURI GZHOOLQJVDIIHFWHGLQDQDGYHUVH\HDULVDERXWDORQJURDGOLQNV,ILQDGGLWLRQWRWKH 1(33WKHVSHFLDOWUDIILFSROLF\IRUWKH5DQGVWDG%25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

SDJHRI 5,90UHSRUW )LJXUH&RQQHFWLRQEHWZHHQDYHUDJHH[FHHGHQFHGLVWDQFHRYHUURDGOLQNVDQGWKHQXPEHURIGZHOOLQJVLQ WKHH[FHHGHQFH]RQH

 &RVWRIWDFNOLQJUHPDLQLQJSUREOHPDUHDV

/RFDOPHDVXUHVFDQEHWDNHQWRUHVROYHWKHSUREOHPDUHDVDORQJPRWRUZD\V7KHVHPHDVXUHV LQFOXGHGHPROLVKLQJKRXVHVSODFLQJSLWFKHGEDUULHUVWUDIILFPHDVXUHVDQGWKHFRQVWUXFWLRQRI WXQQHOV7KHFRVWFDOFXODWLRQVDUHEDVHGRQWKH&(FDOFXODWLRQV0HW]HWDO6HFWLRQ H[SODLQHGKRZWKHFRVWRIWKHVHPHDVXUHVZDVHVWLPDWHG7KLVVHFWLRQLQGLFDWHVWKH YDULRXVFRVWVSHUVFHQDULRIRUUHVROYLQJWKHSUREOHPDUHDVDWWKHORFDOOHYHO 7DEOH&RVWLQELOOLRQVRIHXURWRDYRLGH[FHHGHQFHLQWKHFDVHRIDYHUDJHDYDGYHUVHDGYDQG IDYRXUDEOHIDYPHWHRURORJ\IRUWKHGLIIHUHQWDOWHUQDWLYHV &RVW

ELOOLRQVRIHXUR 5()09(& &( 5()1(331(& %251(331(& 1(33 1(33

0HWHR DY DGY IDY DY DY DGY IDY DY DGY DY DGY DY DGY

$OWHUQDWLYH* 'HPROLVK              $OWHUQDWLYH( &RPELQHGSDFNDJH              2SWLPXP     _{        } &RPELQDWLRQRISLWFKHGEDUULHUVDQGGHPROLWLRQWXQQHOVDUHQRWDQRSWLRQ 7DEOHVKRZVWKHFRVWRIPRGLILFDWLRQVQHDUPRWRUZD\VWRHQVXUHWKDWQRGZHOOLQJVDUH DIIHFWHGLQH[FHVVRIWKHVWDQGDUG7KHFRVWUDQJHIRUDYHUDJHFLUFXPVWDQFHVLQWKHUHIHUHQFH VLWXDWLRQ09IRULVHVWLPDWHGDWWRELOOLRQHXUR7KHFDOFXODWLRQVVKRZD VXEVWDQWLDOUHGXFWLRQLQFRVWIRUWKHDOWHUQDWLYHVLQYROYLQJDGGLWLRQDOSROLF\:KHQWKH1(33 LVLPSOHPHQWHGWKHFRVWIDOOVE\DIDFWRURIWRPLOOLRQHXURXQGHUDYHUDJH FRQGLWLRQV7KHLPSOHPHQWDWLRQRI%25WKHVSHFLDOWUDIILFSROLF\IRUWKH5DQGVWDGRQWRSRI WKH1(33SURGXFHVDQDGGLWLRQDOUHGXFWLRQLQWKHPRGLILFDWLRQFRVWVRIDERXWPLOOLRQ $IWHUWKHUHDUHQRH[FHHGHQFHVLQUHVLGHQWLDODUHDVXQGHUDYHUDJHFRQGLWLRQVVRWKHUH DUHQRFRVWVIRUPRGLILFDWLRQVHLWKHU \ [_{[} 5_{ }                   $YHUHJDH[FHHGDQFHGLVWDQFHP ' Z HOOLQ JV

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LVDWELOOLRQVXEVWDQWLDOO\ KLJKHUDIDFWRURI:LWKIDYRXUDEOHPHWHRURORJ\FRQFHQWUDWLRQORZHUWKHFRVWDW PLOOLRQHXURDIDFWRURI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 ,WVKRXOGEHQRWHGWKHUHIRUHWKDWWKHFRVWVDUHLQGLFDWLYHGXHWRWKHXQFHUWDLQWLHVLQ H[FHHGHQFHFDOFXODWLRQVPD\DOVRGLIIHUFRQVLGHUDEO\

 &RQWULEXWLRQRI12

[

VRXUFHVWRXUEDQFRQFHQWUDWLRQV

7KHUHODWLYHVKDUHRIWKHXUEDQFRQFHQWUDWLRQDQGWKHEDFNJURXQGFRQFHQWUDWLRQLQWKH FRXQWU\VLGHRXWVLGHWKHFLW\ZDVFDOFXODWHGIRUWKHYDULRXV12[VRXUFHVLQ$PVWHUGDPDQG 5RWWHUGDP)RUWKLVSXUSRVHWKHFRQWULEXWLRQVWRWKH12[FRQFHQWUDWLRQZHUHFDOFXODWHGDWD SRLQWLQWKHFLW\DQGDSRLQWRXWVLGHWKHFLW\7KHXUEDQVKDUHZDVGHWHUPLQHGE\GHGXFWLQJ WKHVRXUFHFRQWULEXWLRQVRXWVLGHWKHFLW\IURPWKHFRQWULEXWLRQVLQWKHFLW\7KLVZDVGRQHIRU UHIHUHQFHVFHQDULR09(&DQGWKHVFHQDULRVLQYROYLQJDGGLWLRQDOSROLF\ 1(331(33DQG1(33WDEOH 7KHGLIIHUHQFHVEHWZHHQWKHXUEDQDQGWKHEDFNJURXQGFRQWULEXWLRQVRI$PVWHUGDPDQG 5RWWHUGDPZHUHVPDOOIRUDOOWKHVFHQDULRVDOWKRXJKLQ5RWWHUGDPWKHKDUERXUDQGLQ $PVWHUGDP6FKLSKRODLUSRUWDUHVHHQWRPDNHDKLJKHUFRQWULEXWLRQWRERWKWKHEDFNJURXQG DQGWKHXUEDQFRQFHQWUDWLRQ%HFDXVHWKHDJULFXOWXUDOFRQFHQWUDWLRQRXWVLGHXUEDQDUHDVLV KLJKHUWKDQLQXUEDQDUHDVWKLVVHFWRUZDVDVVLJQHGDµQHJDWLYH¶YDOXHLQWKHFDOFXODWLRQVIRU WKHXUEDQFRQWULEXWLRQ ,QDOOWKHVFHQDULRVURDGWUDIILFZDVWKHFKLHIVRXUFHRI12[LQXUEDQDUHDVFRQWULEXWLQJ DURXQG7KHµRWKHUWUDIILF¶FDWHJRU\ODUJHO\FRPSULVHVPRELOHHTXLSPHQWHJHDUWK PRYLQJHTXLSPHQWFUDQHVSLOHGULYHUVIRUNOLIWWUXFNV$OWKRXJKWKHVHDUHSODFHGXQGHUWKH KHDGLQJRIURDGWUDIILFRIILFLDOO\WKH\DUHQRW7KHLUHPLVVLRQVDUHOLQNHGWRWKHSRSXODWLRQ

SDJHRI 5,90UHSRUW GHQVLW\DQGVRPDLQO\RFFXULQXUEDQDUHDV'XHWRDVL]HDEOHUHGXFWLRQLQURDGWUDIILFLQ WKHUHODWLYHVKDUHRIURDGWUDIILFLQWKHXUEDQFRQFHQWUDWLRQGHFOLQHVWRZDUGV KRXVHKROGVDQGWKHWUDGHVHUYLFHVDQGJRYHUQPHQWVHFWRUODUJHO\VSDFHKHDWLQJDUHDIWHU WUDIILFWKHSULQFLSDOVRXUFHRI12[LQXUEDQDUHDV7KHLUUHODWLYHVKDUHLQFUHDVHVIURPWR DERXWRIWKHXUEDQFRQWULEXWLRQLQWKHVFHQDULRVGXHWRWKHIDFWWKDWWKHVHHPLVVLRQV LQFUHDVHVOLJKWO\IURPWRLQWKHVHVFHQDULRV$QQH[7RJHWKHUWUDIILF KRXVHKROGVDQGWKHWUDGHVHUYLFHVDQGJRYHUQPHQWVHFWRUDUHJRRGIRUDERXWRIXUEDQ HPLVVLRQV 7DEOH5HODWLYHFRQWULEXWLRQRI12[VRXUFHVWRWKHXUEDQDQGEDFNJURXQGFRQFHQWUDWLRQIRU12[$QQXDO DYHUDJH12FRQFHQWUDWLRQLQWKHEDFNJURXQGDQGLQWKHFLW\LVLQSDUHQWKHVHV %DFNJURXQG  PYHF 1(33 _{1(33 1(33} $¶GDP 5¶GDP $¶GDP 5¶GDP $¶GDP 5¶GDP $¶GDP 5¶GDP $¶GDP 5¶GDP 12FRQFHQWUDWLRQ —JP           3HUFHQWDJH 5RDGWUDIILFWRWDO           /LJKWURDGWUDIILF           +HDY\URDGWUDIILF           2WKHUWUDIILF _{         } )RUHLJQFRXQWULHV           $JULFXOWXUH _{         } +RXVHKROGV76*           6KLSSLQJ           ,QGXVWU\ (QHUJ\           $Y LDWLRQ           2WKHU           8UEDQFRQWULEXWLRQ  09(& 1(33 _{1(33 1(33} $¶GDP 5¶GDP $¶GDP 5¶GDP $¶GDP 5¶GDP $¶GDP 5¶GDP $¶GDP 5¶GDP 12FRQFHQWUDWLRQLQ WKHFLW\—JP           3HUFHQWDJH 5RDGWUDIILFWRWDO           /LJKWURDGWUDIILF           +HDY\URDGWUDIILF           2WKHUWUDIILF _{         } +RXVHKROGV&63           ,QGXVWU\ (QHUJ\           6KLSSLQJ           $Y LDWLRQ           $JULFXOWXUH _{         } 2WKHU           _{1(33&RPPLVVLRQWKHFRQFHQWUDWLRQLVKLJKHUZLWKWKH&RXQFLODOWHUQDWLYH} _{0DLQO\PRELOHHTXLSPHQW} _{,QFOXGLQJGHQLWULILFDWLRQLQDJULFXOWXUDODQGRWKHUVRLOV} 5RDGWUDIILFLVWKHSULQFLSDOVRXUFHRIEDFNJURXQGFRQFHQWUDWLRQVIRUDOOWKHVFHQDULRV DQGWRJHWKHUZLWKIRUHLJQFRXQWULHVDJULFXOWXUHKRXVHKROGVDQG &63DERXWDQGVKLSSLQJLVJRRGIRURIWKH12[HPLVVLRQFRQWULEXWLRQ,Q WKHVFHQDULRVZLWKH[WUDSROLF\LQDQGRXWVLGHWKH1HWKHUODQGVWKHUHODWLYHIRUHLJQ FRQWULEXWLRQWRWKHEDFNJURXQGFRQFHQWUDWLRQIRU$PVWHUGDPDQG5RWWHUGDPGHFOLQHVDERXW 7KDQNVWRWKHVXEVWDQWLDOUHGXFWLRQVLQWKHVKLSSLQJVHFWRULWVUHODWLYHFRQWULEXWLRQDOVR GHFOLQHVLQWKHEDFNJURXQG7KHUHODWLYHFRQWULEXWLRQRIWUDGHVHUYLFHVDQGJRYHUQPHQWDQG KRXVHKROGVVSDFHKHDWLQJLQFUHDVHVWRZDUGVEHFDXVHHPLVVLRQVLQFUHDVHVOLJKWO\

5,90UHSRUW SDJHRI ,IWKH1(33LVLPSOHPHQWHGLQWKHXUEDQFRQWULEXWLRQLQSDUWLFXODUGHFOLQHVZKHQ FRPSDUHGWRWKHUHIHUHQFH$IWHUWKDWWKHXUEDQFRQWULEXWLRQVWDELOLVHVLQ5RWWHUGDPDQG VKRZVDVOLJKWLQFUHDVHLQ$PVWHUGDPXSWRDQGLQFOXGLQJ7KHUHDVRQIRUWKLVLQFUHDVH LVWKDWDORQJVLGHWKHVXEVWDQWLDOUHGXFWLRQLQPRVWVHFWRUVWKHUHLVDVOLJKWLQFUHDVHLQ KRXVHKROGHPLVVLRQVDQGWKRVHRIWKHWUDGHVHUYLFHVDQGJRYHUQPHQWVHFWRUVSDFHKHDWLQJ DQGWRDOHVVHUH[WHQWHPLVVLRQVIURPDLUWUDIILFIURP1(33WR1(33

5,90UHSRUW SDJHRI

 $LUTXDOLW\IRU12



LQRWKHU0HPEHU6WDWHV

2WKHUFRXQWULHVRIWKH(8VXFKDVWKH8QLWHG.LQJGRP*HUPDQ\%HOJLXPDQG$XVWULDKDYH LQGLFDWHGWKDWWKH\ZLOOKDYHGLIILFXOW\DWWDLQLQJWKH12OLPLWYDOXHV900 *HUPDQ\KDVQRLGHDDV\HWRIWKHVFDOHRISUREOHPDUHDVWKDWZLOORFFXU)RUH[DPSOHLQ 1RUWK5KLQH:HVWSKDOLDWKH5XKUQRVWXG\KDV\HWEHHQPDGHRISRVVLEOHH[FHHGHQFHVRI WKHVWDQGDUGDORQJPRWRUZD\V7KH*HUPDQVGRQRWFRQVLGHULWSRVVLEOHWRJLYHDGHWDLOHG SLFWXUHRIWKHFRVW\HW7KH\VD\LWZLOORQO\EHSRVVLEOHDVUHJXODWLRQVDUHLPSOHPHQWHGLQ SDUWLFXODUDIWHUWKHILUVWSODQVKDYHEHHQPDGH ,QWKH8QLWHG.LQJGRPWKHQDWLRQDOWDUJHWLVDWWDLQPHQWRIWKH12VWDQGDUGRI—JPDV DQQXDODYHUDJHDVHDUO\DVLQVWHDGRI/RFDODXWKRULWLHVDUHH[SHFWHGWRGHDOZLWK DQ\SUREOHPDUHDV$WWDLQPHQWRIWKLVVWDQGDUGLVKRZHYHUH[SHFWHGWREHGLIILFXOWDWOHDVW LQ3UREOHPVDUHDOVRVWLOOH[SHFWHGLQELJFLWLHVOLNH/RQGRQLQ

)LJXUH([FHHGHQFHVRIDQQXDODYHUDJH12RI—JPLQWKH(8'DWDRQ)UDQFHDQG/X[HPERXUJQRW

DYDLODEOHODFNRIGDWDRQ,WDO\IRUDQGRQ*UHHFHIRU6RXUFH5,90$LUEDVH           $XVWU LD %HOJL XP 'HQPD UN )LQODQ G *HUPD Q\ *UHH FH ,UHODQ G ,WDO\ 3RUWXJ DO 6SDLQ 6ZHG HQ 7KH1 HWKHUOD QGV 8QLWH G.LQJG RP 6 WDW LR QV Z LWK H [FHHG DQ FHV