PSH Annual Report (Print Ready Version)

Bản ghi

1

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

3 7KH &RPSDQ\ 3HUVKLQJ 6TXDUH +ROGLQJV /WG WKH ³&RPSDQ\ RU ³36+ ZDV LQFRUSRUDWHG ZLWK OLPLWHG OLDELOLW\ XQGHU WKH ODZV RI WKH %DLOLZLFN RI *XHUQVH\ RQ )HEUXDU\,W FRPPHQFHG RSHUDWLRQV RQ DV D UHJLVWHUHG RSHQ HQGHG LQYHVWPHQW VFKHPH DQG RQ 2FWREHU FRQYHUWHG LQWR D UHJLVWHUHG FORVHG HQGHG LQYHVWPHQW VFKHPH 3XEOLF 6KDUHV RI WKH &RPSDQ\ FRPPHQFHG WUDGLQJ RQ (XURQH[W $PVWHUGDP 1 9 ³(XURQH[W $PVWHUGDP RQ 2FWREHU ZLWK D WUDGLQJ V\PERO RI 36+ 7KH &RPSDQ\ KDV DSSRLQWHG 3HUVKLQJ 6TXDUH &DSLWDO 0DQDJHPHQW / 3 ³36&0 WKH ³,QYHVWPHQW 0DQDJHU RU ³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

4 &KDLUPDQ V 6WDWHPHQW,1752'8&7,21 ZDV D WXUEXOHQW \HDU IRU WKH &RPSDQ\ 'XULQJ WKH ILUVW KDOI RI WKH \HDU RXU SRUWIROLR FRPSDQLHV SHUIRUPHG ZHOO RXU QHW DVVHW YDOXH ³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³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³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

5 +,*+ :$7(5 0$5. 7KH WHUPV RI 36+ V LQYHVWPHQW PDQDJHPHQW DJUHHPHQW ZLWK 36&0 KDYH D ³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³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± )HEUXDU\ 7KH %RDUG PRQLWRUV WKH WUDGLQJ DFWLYLW\ RI WKH &RPSDQ\ V VKDUHV RQ D UHJXODU EDVLV 7KH,QYHVWPHQW 0DQDJHU LV FRPPLWWHG WR DQ RQJRLQJ SUR DFWLYH JOREDO LQYHVWRU UHODWLRQV HIIRUW

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³QHZ LVVXHV DV VXFK WHUP LV GHILQHG XQGHU 5XOHV DQG RI ),15$ 1HW UHWXUQV DOVR UHIOHFW WKH GHGXFWLRQ RI DPRQJ RWKHU WKLQJV PDQDJHPHQW IHHV EURNHUDJH FRPPLVVLRQV DGPLQLVWUDWLYH H[SHQVHV DQG SHUIRUPDQFH IHH LI DQ\ LLL &RPSRXQG DQQXDO UHWXUQV DUH WKRVH RI 3HUVKLQJ 6TXDUH / 3 ³36/3 WKH 3HUVKLQJ 6TXDUH IXQG ZLWK WKH ORQJHVW WUDFN UHFRUG DQG VXEVWDQWLDOO\ WKH VDPH LQYHVWPHQW VWUDWHJ\ WR WKH &RPSDQ\ 3OHDVH VHH IRRWQRWH LQ ³)RRWQRWHV WR.H\ +LJKOLJKWV DQG,QYHVWPHQW 0DQDJHU V 5HSRUW RQ SDJH IRU IXUWKHU LQIRUPDWLRQ

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

8 ,QYHVWPHQW 0DQDJHU V 5HSRUW +,6725,&$/ 3(5)250$1&( 3HUVKLQJ 6TXDUH +ROGLQJV /WG 3HUIRUPDQFH YV WKH HW 5HWXUQ 6 3 ± &XPXODWLYH 6LQFH,QFHSWLRQ &RPSRXQG $QQXDO 5HWXUQ 3HUVKLQJ 6TXDUH +ROGLQJV /WG 3HUIRUPDQFH YV WKH 6 3 3DVW SHUIRUPDQFH LV QRW D JXDUDQWHH RI IXWXUH UHVXOWV $OO LQYHVWPHQWV LQYROYH ULVN LQFOXGLQJ WKH ORVV RI SULQFLSDO 3OHDVH VHH DFFRPSDQ\LQJ IRRWQRWHV RQ SDJH

9 7KH WDEOH DQG FKDUW EHORZ UHIOHFW WKH QHW SHUIRUPDQFH RI 3HUVKLQJ 6TXDUH / 3 ³36/3 WKH 3HUVKLQJ 6TXDUH IXQG ZLWK WKH ORQJHVW WUDFN UHFRUG VLQFH LQFHSWLRQ :H SUHVHQW WKH 3HUVKLQJ 6TXDUH / 3 WUDFN UHFRUG XVLQJ LWV KLVWRULFDO SHUIRUPDQFH IHH RI 3HUVKLQJ 6TXDUH / 3 3HUIRUPDQFH YV WKH /3 1HW 5HWXUQ 6 3 ± &XPXODWLYH 6LQFH,QFHSWLRQ &RPSRXQG $QQXDO 5HWXUQ 3HUVKLQJ 6TXDUH / 3 3HUIRUPDQFH YV WKH 6 3 3DVW SHUIRUPDQFH LV QRW D JXDUDQWHH RI IXWXUH UHVXOWV $OO LQYHVWPHQWV LQYROYH ULVN LQFOXGLQJ WKH ORVV RI SULQFLSDO 3OHDVH VHH DFFRPSDQ\LQJ IRRWQRWHV RQ SDJH

10 38%/,& $&7,9,67,19(670(176 6,1&(,1&(37,21 %HORZ DUH DOO RI WKH FRPSDQLHV WR GDWH ERWK ORQJ DQG VKRUW LQ ZKLFK 3HUVKLQJ 6TXDUH KDV WDNHQ D SXEOLF DFWLYH UROH LQ VHHNLQJ WR HIIHFWXDWH FKDQJH 3DVW SHUIRUPDQFH LV QRW D JXDUDQWHH RI IXWXUH UHVXOWV $OO LQYHVWPHQWV LQYROYH ULVN LQFOXGLQJ WKH ORVV RI SULQFLSDO 3OHDVH VHH DFFRPSDQ\LQJ IRRWQRWHV RQ SDJH

11 /(77( $5(+2/'(56 'HDU 3HUVKLQJ 6TXDUH,QYHVWRU :KLOH ZH KDYH DOUHDG\ GLVWULEXWHG RXU $QQXDO /HWWHU WR \RX RQ -DQXDU\ D FRS\ RI ZKLFK LV DYDLODEOH RQ RXU ZHEVLWH ZZZ SHUVKLQJVTXDUHKROGLQJV FRP HYHQWV RI WKH ODVW WZR PRQWKV ZLWK UHVSHFW WR 9DOHDQW UHTXLUH IXUWKHU GLVFXVVLRQ :H LQWHQG WR FRQWLQXH WR SURYLGH \RX ZLWK DGGLWLRQDO LQIRUPDWLRQ RQ D WLPHO\ EDVLV DV HYHQWV WUDQVSLUH $V \RX PD\ NQRZ RXU DSSURDFK ZLWK UHVSHFW WR FRPPXQLFDWLRQV LV WR SURYLGH \RX ZLWK WKH LQIRUPDWLRQ WKDW ZH ZRXOG ZDQW LI RXU SRVLWLRQV ZHUH UHYHUVHG WKDW LV LI ZH ZHUH WKH VKDUHKROGHU DQG \RX ZHUH WKH LQYHVWPHQW PDQDJHU 7KH RQO\ FDYHDW LV WKDW ZH ZLOO QRW VKDUH LQIRUPDWLRQ WKDW ZLOO FUHDWH D FRPSHWLWLYH GLVDGYDQWDJH IRU 3HUVKLQJ 6TXDUH XQOHVV ZH DUH OHJDOO\ UHTXLUHG WR GR VR )RU H[DPSOH ZH ZLOO QRW WHOO \RX ZKDW ZH DUH EX\LQJ RU VHOOLQJ XQOHVV UHSRUWLQJ UHTXLUHPHQWV REOLJH XV WR GR VR,Q RXU 3RUWIROLR 8SGDWH VHFWLRQ WR IROORZ ZH SURYLGH DQ XSGDWH RQ UHFHQW HYHQWV DW 9DOHDQW ZKLFK LQFOXGH 6WHYH )UDLGLQ RXU 9LFH &KDLUPDQ DQG, MRLQLQJ WKH 9DOHDQW ERDUG DQG WKH DQQRXQFHPHQW WKDW 0LNH 3HDUVRQ &(2 ZLOO EH VWHSSLQJ GRZQ RQFH D QHZ &(2 EHJLQV ZRUN DW WKH FRPSDQ\ 5HFHQW HYHQWV KDYH UHTXLUHG XV WR WDNH D PRUH DFWLYH UROH DW WKH FRPSDQ\ DQG RXU SUHVHQFH RQ WKH ERDUG ZLOO QRZ JLYH XV LQIOXHQFH RYHU WKH VHOHFWLRQ RI WKH QHZ &(2 FDSLWDO DOORFDWLRQ DQG VWUDWHJ\, KDYH DOZD\V EHOLHYHG WKDW H[SHULHQFH LV EHVW GHILQHG DV PDNLQJ PLVWDNHV DQG OHDUQLQJ IURP WKHP, KDYH PDGH PDQ\ LQYHVWPHQW PLVWDNHV RYHU WKH ODVW QHDUO\ \HDUV PDQDJLQJ LQYHVWPHQWV EXW WKH RYHUDOO UHVXOW KDV EHHQ TXLWH VDWLVIDFWRU\, EHOLHYH WKDW WKLV LV SULQFLSDOO\ EHFDXVH ZH KDYH XVHG HUURUV RI MXGJPHQW H[HFXWLRQ RU DQDO\VLV DV LPSRUWDQW RSSRUWXQLWLHV IRU VWXG\ OHDUQLQJ DQG LQWURVSHFWLRQ :H LQWHQG WR GR VR KHUH 1RZ WKDW ZH KDYH EHJXQ WR VWDELOL]H RXU LQYHVWPHQW LQ 9DOHDQW ZH ZLOO EHJLQ WR FRQVLGHU WKH VLJQLILFDQW OHVVRQV WKDW ZH FDQ OHDUQ IURP WKLV H[SHULHQFH 2QH LPSRUWDQW OHVVRQ IURP WKH SDVW LV WKDW ZKLOH ZH QRUPDOO\ XVH RXU DFWLYH LQYHVWPHQW DSSURDFK WR FUHDWH YDOXH LQ D QHZ VLWXDWLRQ LW FDQ DOVR VHUYH LQ D GHIHQVLYH UROH ZKHQ D EXVLQHVV ZH RZQ HQFRXQWHUV VHYHUH FKDOOHQJHV 7KH GHFOLQH LQ WKH PDUNHW YDOXH RI 9DOHDQW FRXSOHG ZLWK WKH XQGHUSHUIRUPDQFH RI D QXPEHU RI RXU RWKHU LQYHVWPHQWV VLQFH WKH VXPPHU KDV EHHQ FRPSRXQGHG E\ WKH LPSDFW RI WKH OHYHUDJH IURP WKH ERQG LVVXDQFH ZH FRPSOHWHG LQ -XQH RI ODVW \HDU /HYHUDJH DPSOLILHV ERWK QHJDWLYH DQG SRVLWLYH UHWXUQV :H KDYH VXIIHUHG WKH QHJDWLYH FRQVHTXHQFHV RI OHYHUDJH DV D UHVXOW RI WKH GHFOLQH LQ WKH PDUNHW YDOXH RI WKH SRUWIROLR VLQFH $XJXVW :LWK LQFUHDVHV LQ WKH XQGHUO\LQJ YDOXH RI RXU KROGLQJV OHYHUDJH ZLOO DPSOLI\ RXU SRVLWLYH UHWXUQV 7KH ERQGV GR QRW KDYH DQ\ PDUN WR PDUNHW RU UDWLQJV EDVHG WULJJHUV VR GHFOLQHV LQ PDUNHW YDOXH GR QRW FDXVH DQ DFFHOHUDWLRQ RU RWKHU FKDQJHV WR WKHVH LQVWUXPHQWV 7KH UHFHQW 1$9 GHFOLQH KDV FDXVHG 6WDQGDUG 3RRU V WR SODFH WKH ERQG V %%% UDWLQJV RQ &UHGLW:DWFK ZLWK QHJDWLYH LPSOLFDWLRQV :H QRWH WKDW WKH ERQGV DUH WKH VHQLRU PRVW REOLJDWLRQV RI 36+ ± RWKHU WKDQ LQ WKH HYHQW ZH ZHUH WR XVH PDUJLQ OHYHUDJH ZKLFK ZH KDYH QR SODQV WR GR ± DQG GHVSLWH D VXEVWDQWLDO GHFOLQH LQ 1$9 DUH FRYHUHG E\ FDVK 8 6 7UHDVXULHV DQG KLJKO\ OLTXLG PDUNHWDEOH VHFXULWLHV WKDW UHSUHVHQW DERXW ILYH WLPHV WKH ELOOLRQ IDFH DPRXQW RI WKHVH VHFXULWLHV :KLOH 36+ V GLVFRXQW WR 1$9 KDV UHPDLQHG UHODWLYHO\ QDUURZ GXULQJ PRVW RI DQG HDUO\ ± W\SLFDOO\ OHVV WKDQ ±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

12 Annual Report Year Endedd December 31, 2015 Last Friday, we received a letter from the United States Senate Special Committee on Aging which is conducting an investigation into the pricing of off-patenthe pharmaceutical industry and related regulatory and public policy concerns.. As you would expect, we will fully cooperate with the Committee s requests. drugss and is seeking our cooperation so thatt the Committee may better understand Along with the many questions we have received from investors, we have also received many supportive calls and s. You should know we are extremely appreciative of your support and we encouragee you to keep the questions coming. Sincerely, William A. Ackman 10 PERSHING SQUARE HOLDINGS, LTD.

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³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³25 RI D EDVLV SRLQW LPSURYHPHQW RYHU 7KLV ZDV WKH VHFRQG EHVW 25 LQ WKH LQGXVWU\ 'XULQJ WKH \HDU &3 UHSXUFKDVHG a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³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a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a PLOOLRQ GHIHQGLQJ LWVHOI DQG UHVSRQGLQJ WR JRYHUQPHQW LQTXLULHV \HW LW VWLOO UHIXVHV WR FROOHFW UHWDLO VDOHV GDWD ZKLFK LI WKH\ H[LVWHG FRXOG KHOS WKH FRPSDQ\ V GHIHQVH

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³VODS RQ WKH ZULVW LQ OLJKW RI WKH HQRUPRXV KDUP +HUEDOLIH LQIOLFWV RQ LWV YLFWLPV ZKLFK ZLOO FRQWLQXH LI LW LV QRW IRUFHG WR VWRS LWV S\UDPLGDO SUDFWLFHV +/) V KLJK SURILOH RYHU WKH ODVW WKUHH \HDUV ZLOO VXEMHFW WKH )7& V UHVROXWLRQ RI WKH +HUEDOLIH LQYHVWLJDWLRQ WR D KLJK GHJUHH RI SXEOLF VFUXWLQ\,I WKH )7& ZHUH WR OHW +HUEDOLIH RII WKH KRRN ± DQ XQOLNHO\ HYHQW LQ RXU YLHZ ± WKHQ DOO S\UDPLG VFKHPHV ZLOO EH DOORZHG WR IORXULVK QDWLRQZLGH DQG JOREDOO\ :LWKRXW WKH LQYHQWRU\ ORDGLQJ WKDW LV LQVSLUHG E\ WKH LQFHQWLYHV RI +HUEDOLIH V PDUNHWLQJ SODQ DQG WKH GHFHSWLRQ XVHG WR LQGXFH XQZLWWLQJ QRYLFH HQWUHSUHQHXUV WR SXUVXH WKH VR FDOOHG ³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± ZZZ )DFWV$ERXW+HUEDOLIH FRP ±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± DQG FRQWLQXHV WR EH ± WKH EULJKW VSRW LQ +HUEDOLIH V ILQDQFLDO SHUIRUPDQFH JURZLQJ RUJDQLFDOO\ LQ ([FOXGLQJ &KLQD ORFDO FXUUHQF\ QHW VDOHV GHFOLQHG LQ +HUEDOLIH UHSRUWHG VRPHZKDW LPSURYHG SHUIRUPDQFH LQ 4 SRVWLQJ SRVLWLYH a FXUUHQF\ DGMXVWHG UHYHQXH JURZWK H[ &KLQD DV WKH EXVLQHVV DSSHDUHG WR KDYH VWDELOL]HG LQ FHUWDLQ PDUNHWV 0DQDJHPHQW KDV JXLGHG WR PLG VLQJOH GLJLW FRQVWDQW FXUUHQF\ UHYHQXH JURZWK DQG FXUUHQF\ QHXWUDO (36 JURZWK RI WR +/) V (36 JXLGDQFH RI LPSOLHV UHDOL]HG (36 JURZWK RI WR +/) FRQWLQXHV WR SRLQW WR ³FKDQJHV WR WKH EXVLQHVV PRGHO DV WKH UHDVRQ IRU D ³WHPSRUDU\ UHVHW EXW ZH QRWH WKDW PHPEHU WUHQGV FRQWLQXH WR EH QHJDWLYH 6ORZLQJ JURZWK LQ QHZ 6DOHV /HDGHUV FRQWLQXHV WR

16 ZHLJK RQ +HUEDOLIH V DELOLW\ WR UHFUXLW QHZ PHPEHUV DQG FRQVWDQW FKXUQ KDV FDXVHG WKH WRWDO PHPEHU EDVH WR IODW OLQH 7KH S\UDPLG LV QR ORQJHU JURZLQJ 5HFHQWO\ +/) ZDV IRUFHG WR UHVWDWH GRZQZDUG D EXVLQHVV PHWULF WKDW LW FDOOV ³$FWLYH 1HZ 0HPEHUV ZKLFK LW FODLPV VKRZV ³HQJDJHPHQW E\ GLVWULEXWRUV 7KH FRPSDQ\ LQWURGXFHG WKLV PHWULF RQ LWV 4 HDUQLQJV FDOO ± LQ FRQMXQFWLRQ ZLWK GHWHULRUDWLRQ LQ RYHUDOO UHFUXLWPHQW ± EXW KDV QHYHU GHILQHG ZKDW WKH WHUP ³$FWLYH 1HZ 0HPEHUV PHDQV RU KRZ LW LV FDOFXODWHG QRU KRZ RU ZKHQ PHPEHUV EHFRPH ³LQDFWLYH +/) H[SODLQHG WKH UHFHQW UHVWDWHPHQW E\ VD\LQJ WKDW $FWLYH 1HZ 0HPEHUV LV D QRQ *$$3 PHDVXUH WKDW GRHV QRW DSSHDU LQ LWV ILQDQFLDO VWDWHPHQWV :KLOH WKH FRPSDQ\ LV QRZ PDNLQJ OLJKW RI WKH LPSRUWDQFH RI WKLV PHDVXUH LW SUHYLRXVO\ KDV WUXPSHWHG WKH LQFUHDVHV LQ WKLV PHWULF DV DQ LQGLFDWLRQ RI IXWXUH JURZWK SRWHQWLDO,UUHVSHFWLYH RI WKH UHYLVHG ³$FWLYH 1HZ 0HPEHU GLVFORVXUH WKH QXPEHU RI WRWDO QHZ PHPEHUV UHFUXLWHG HDFK TXDUWHU KDV EHHQ RQ D GRZQWUHQG GHFOLQLQJ a IURP LQ 4 WR LQ 4 3\UDPLG VFKHPHV OLNH 3RQ]L VFKHPHV UHTXLUH QHZ UHFUXLWV WR UHSODFH H[LWLQJ YLFWLPV )RU WKH ILUVW WLPH LQ PDQ\ \HDUV +HUEDOLIH LV KDYLQJ WURXEOH UHSODFLQJ IDLOHG GLVWULEXWRUV ZLWK QHZ UHFUXLWV 7KH WUHDGPLOO QRZ DSSHDUV WR EH PRYLQJ IDVWHU WKDQ WKH UXQQHU 'HVSLWH ZHDN RSHUDWLQJ SHUIRUPDQFH UREXVW PXOWLSOH H[SDQVLRQ \LHOGHG D WRWDO UHWXUQ RI IRU +/) VKDUHV LQ DIWHU D GHFOLQH LQ $W LWV FXUUHQW VWRFN SULFH LQ WKH ORZ V +/) VWRFN WUDGHV DW WLPHV HDUQLQJV JXLGDQFH :H EHOLHYH WKDW WKLV SULFH DVVLJQV OLWWOH WR QR GRZQVLGH IRU DQ DGYHUVH UHJXODWRU\ RXWFRPH QRU LV LW MXVWLILHG E\ D EXVLQHVV RI +/) V SRRU TXDOLW\ $V D UHVXOW ZH EHOLHYH WKDW +/) FXUUHQWO\ UHSUHVHQWV DQ H[WUHPHO\ DWWUDFWLYH ULVN UHZDUG IRU VKRUW VHOOHUV 7KH +RZDUG +XJKHV &RUSRUDWLRQ ++& ++& ZDV VSXQ RII E\ *HQHUDO *URZWK 3URSHUWLHV **3 DV LW HPHUJHG IURP EDQNUXSWF\,W ZDV IRUPHG VR WKDW FHUWDLQ **3 DVVHWV ZKRVH IXOO YDOXH ZDV QRW UHDOL]HG LQ D PDOO 5(,7 FRXOG UHFHLYH DSSURSULDWH PDQDJHPHQW DWWHQWLRQ DQG UHFRJQLWLRQ LQ WKH SXEOLF PDUNHWV ++& LV FRPSULVHG RI LQFRPH SURGXFLQJ RSHUDWLQJ DVVHWV PDVWHU SODQQHG FRPPXQLWLHV ³03& DQG VWUDWHJLF GHYHORSPHQWV 1RZ LQ LWV ILIWK \HDU DV D SXEOLF FRPSDQ\ PDQDJHPHQW KDV GHVLJQHG DQG ODXQFKHG D FRPSUHKHQVLYH GHYHORSPHQW DQG RU PRQHWL]DWLRQ SODQ IRU HDFK DVVHW ++& FRQWLQXHG WR PDNH VLJQLILFDQW SURJUHVV LQ E\ FRPSOHWLQJ D QXPEHU RI GHYHORSPHQWV ODXQFKLQJ DQG DGYDQFLQJ QHZ SURMHFWV VHOOLQJ FRQGRV FRPPHUFLDO DQG UHVLGHQWLDO ORWV DQG OHDVLQJ RIILFH DQG UHWDLO VSDFH 6LJQLILFDQW JURZWK LQ QHW RSHUDWLQJ LQFRPH ³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±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¼ ELOOLRQ RU WLPHV /70 (%,7'$,Q $XJXVW 1RPDG DJUHHG WR SXUFKDVH WKH KLJKO\ FRPSOHPHQWDU\ QRQ 8. DVVHWV RI )LQGXV IRU aǧ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a DV ZHDNHU DJ PDUNHWV D UHGXFWLRQ LQ GLVWULEXWRU LQYHQWRULHV DQG LQFUHDVHG FRUSRUDWH FRVWV PRUH WKDQ RIIVHW WKH EHQHILW RI FRVW V\QHUJLHV 8QGHUO\LQJ (%,7'$ LQ 3HUIRUPDQFH 6ROXWLRQV GLYLVLRQ JUHZ GXH WR VWURQJ SHUIRUPDQFH DW 0DF'HUPLG RIIVHW E\ ZHDNHU SHUIRUPDQFH DW $OHQW DQG 20,Q DGGLWLRQ WKH VWUHQJWKHQLQJ 8 6 GROODU VLJQLILFDQWO\ UHGXFHG UHSRUWHG (%,7'$ JURZWK E\ a 3$+ LVVXHG PXOWLSOH UHGXFWLRQV WR LQLWLDO (%,7'$ JXLGDQFH,Q $XJXVW 3ODWIRUP DQQRXQFHG D UHGXFWLRQ GXH WR ); DQG WKHQ LQ 2FWREHU DQ DGGLWLRQDO UHGXFWLRQ GXH WR IXUWKHU ); GHWHULRUDWLRQ DQG WKH GHFOLQH LQ $J GLVWULEXWRU LQYHQWRULHV 3$+ KDV VXEVWDQWLDO ILQDQFLDO OHYHUDJH FXUUHQWO\ a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a (%,7'$ JURZWK EHIRUH ); DQG LPSUHVVLYH 6DPH 6WRUH 6DOHV 666 JURZWK DW ERWK %XUJHU.LQJ a DQG 7LP +RUWRQV a 465 FRQWLQXHG WR PDNH SURJUHVV RQ WKH %XUJHU.LQJ 8 6 WXUQDURXQG ZKHUH 666 JUHZ $W 7LP +RUWRQV 465 VLJQLILFDQWO\ UHGXFHG H[SHQVHV DQG FDSH[ ZLWK RYHUKHDG FRVWV UHGXFHG E\ PRUH WKDQ 7KH ŝ &ŝŷăŷđŝăů ƌğɛƶůƚɛ ĨŽƌ ϮϬϭϱ ĂƌĞ ƉƌŽͲĨŽƌŵĂ ĨŽƌ ƌljɛƚă ůğŷƚ ĂŶĚ KD ĂĐƋƵŝƐŝƚŝŽŶƐ

19 FRPSDQ\ PDLQWDLQHG D KLJK OHYHO RI QHW XQLW JURZWK DW ERWK %XUJHU.LQJ DQG 7LP +RUWRQV +RZHYHU WKH VWUHQJWKHQLQJ 86 GROODU PDWHULDOO\ UHGXFHG UHSRUWHG ILQDQFLDO UHVXOWV DV ); UHGXFHG UHSRUWHG (%,7'$ E\ a,q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a LQ WR a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³QHZ LVVXHV DV VXFK WHUP LV GHILQHG XQGHU 5XOHV DQG RI ),15$ 7KH LQFHSWLRQ GDWH IRU WKH &RPSDQ\ LV DQG WKH LQFHSWLRQ GDWH IRU 3HUVKLQJ 6TXDUH / 3 LV -DQXDU\ 7KH SHUIRUPDQFH GDWD SUHVHQWHG RQ SDJHV IRU WKH 6 3 XQGHU ³&XPXODWLYH 6LQFH,QFHSWLRQ LV FDOFXODWHG IURP RU -DQXDU\ DV DSSOLFDEOH 7KH 6 3 ³LQGH[ KDV EHHQ VHOHFWHG IRU SXUSRVHV RI FRPSDULQJ WKH SHUIRUPDQFH RI DQ LQYHVWPHQW LQ WKH &RPSDQ\ RU 3HUVKLQJ 6TXDUH / 3 DV DSSOLFDEOH WRJHWKHU WKH ³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³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³EHOLHYH ³H[SHFW SRWHQWLDO ³FRQWLQXH ³PD\ ³ZLOO ³VKRXOG ³VHHN ³DSSUR[LPDWHO\ ³SUHGLFW ³LQWHQG ³SODQ ³HVWLPDWH ³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