5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH (/(&7521,& &,7$7,21 )(' $SS 3 WK &LU )LOH 1DPH DS 81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB 81,7(' 67$7(6 2) $0(5,&$ ; 3ODLQWLII$SSHOOHH 1R Y ! /(21$5' & .5,06.< 'HIHQGDQW$SSHOODQW 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG 1Rn$QQ$OGULFK'LVWULFWsXGJH $UJXHGsXQH 'HFLGHGDQG)LOHG2FWREHU %HIRUH0$57,1&KLHIsXGJH%$7&+(/'(5DQG 0225(&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8(' 1DWKDQ /HZLQ 0,//(5 &$66,'< /$552&$ /(:,1 :DVKLQJWRQ '& IRU $SSHOODQW 3DXO % 2FNHQH $66,67$17 81,7(' 67$7(6 $77251(<&OHYHODQG2KLRIRU$SSHOOHH21%5,() 1DWKDQ /HZLQ sRG\ 0DQLHU .ULV 0,//(5 &$66,'< /$552&$ /(:,1 :DVKLQJWRQ '& IRU $SSHOODQW 8QLWHG6WDWHVY.ULPVN\ 1R 1R 8QLWHG6WDWHVY.ULPVN\ /LQGD 0 %HW]HU $66,67$17 81,7(' 67$7(6 H[FOXVLRQRIVHFWLRQ%EXWUDWKHUDVDVXSSOHPHQWWRORVV $77251(<&OHYHODQG2KLRIRU$SSHOOHH FDOFXODWLRQDVGLUHFWHGE\1RWH6HHLG BBBBBBBBBBBBBBBBB 7RVXSSRUWWKLVKROGLQJ/XFDVSRLQWHGWRWKH6HQWHQFLQJ *XLGHOLQHVj OLVW LQ $SSHQGL[ $ ZKLFK GHWHUPLQHV ZKLFK 23,1,21 JXLGHOLQHV DUH DSSOLHG WR ZKLFK VWDWXWHV 7KH 6HQWHQFLQJ BBBBBBBBBBBBBBBBB &RPPLVVLRQ UHIHUUHG WR $SSHQGL[ $ DV mVSHFLI\LQJ WKH JXLGHOLQHVHFWLRQRUVHFWLRQVRUGLQDULO\DSSOLFDEOHWRDVWDWXWH %2<&()0$57,1s5&KLHIsXGJH/HRQDUG.ULPVN\ RI FRQYLFWLRQl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jVVHQWHQFHZDV 'XULQJWKHV/HRQDUG.ULPVN\RZQHGDQGRSHUDWHG SURSHU :RUOGZLGH 3URFHVV 7HFKQRORJLHV LQ 1HZ sHUVH\ ZKLFK PDQXIDFWXUHGVSHFLDOL]HGPDFKLQHU\IRUSURFHVVLQJSDSHUDQG ,9 SODVWLFVIRULQGXVWULDOFXVWRPHUV,Q:RUOGZLGH3URFHVV 7HFKQRORJLHVSXUFKDVHG.HQW0DFKLQH&RPSDQ\DPDFKLQH .ULPVN\jV FKDOOHQJHV WR WKH MXU\ LQVWUXFWLRQV DQG KLV VKRS LQ 2KLR WKDW ZDV H[SHULHQFLQJ ILQDQFLDO GLIILFXOWLHV VHQWHQFHDOOIDLO:HWKHUHIRUH$)),50WKHGLVWULFWFRXUWjV $IWHU WKH SXUFKDVH .HQW 0DFKLQH &RPSDQ\ ZDV UHQDPHG GHFLVLRQ .HQW:RUOGZLGH0DFKLQH:RUNV.HQW ,QFOXGHG LQ WKH SXUFKDVH ZDV .HQWjV HPSOR\HH SHQVLRQ EHQHILWSODQDGPLQLVWHUHGE\WKHWUXVWGHSDUWPHQWRI1DWLRQDO &LW\ %DQN %\ WKH SODQjV DVVHWV H[FHHGHG ,Q DIWHU .HQW EHJDQ WR H[SHULHQFH ILQDQFLDOGLIILFXOWLHV.ULPVN\DSSURDFKHG1DWLRQDO&LW\%DQN IRUILQDQFLQJ+HUHTXHVWHGWKDW1DWLRQDO&LW\DSSURYHKLV UHTXHVWIRUDORDQRIWZHQW\ILYHSHUFHQWRIWKHSODQjVDVVHWVWR .HQW7KH%DQNUHMHFWHG.ULPVN\jVUHTXHVWDVDSURKLELWHG WUDQVDFWLRQ XQGHU (5,6$ 1DWLRQDO &LW\ VSHFLILFDOO\ WROG .ULPVN\WKDWKHQHHGHGDQH[HPSWLRQIURPWKH'HSDUWPHQW RI/DERUEHIRUHWKHEDQNFRXOGFRPSO\ZLWKKLVUHTXHVWIRU WKHORDQ 8QLWHG6WDWHVY.ULPVN\ 1R 1R 8QLWHG6WDWHVY.ULPVN\ FRXUWl8QLWHG6WDWHVY&RPHU)GWK&LU ,QUHVSRQVHWRWKLVUHMHFWLRQ.ULPVN\DSSRLQWHGKLPVHOIDV TXRWLQJ8QLWHG6WDWHVY3DUWLQJWRQ)G WUXVWHH RI WKH SODQ DQG WUDQVIHUUHG WKH SODQjV DVVHWV WR WK&LU +XQWLQJWRQ7UXVW&RPSDQ\ZLWKWKHXQGHUVWDQGLQJWKDWDIWHU .HQW DSSOLHG IRU DQ DGPLQLVWUDWLYH H[HPSWLRQ IURP WKH 2IIHQVHVVXFKDVODUFHQ\HPEH]]OHPHQWDQGRWKHUIRUPV 'HSDUWPHQWRI/DERU+XQWLQJWRQZRXOGJUDQWWKHORDQWKDW RIWKHIWDUHXVXDOO\VXEMHFWWRVHQWHQFLQJSXUVXDQWWRVHFWLRQ 1DWLRQDO&LW\KDGUHIXVHG7KHILUVWORDQZDVPDGHLQsXO\ %6HFWLRQ%jV&RPPHQWDU\OLVWVDVRQHRIWKH IRU.ULPVN\VLJQHGDSURPLVVRU\QRWHIRU FRYHUHGVWDWXWRU\SURYLVLRQV$QH[FHSWLRQH[LVWVKRZHYHU WKHORDQWKDWSURYLGHGIRUSHULRGLFLQWHUHVWSD\PHQWVDQGD LQ$SSOLFDWLRQ1RWHRIWKH&RPPHQWDU\ZKLFKVWDWHVWKDW GXHGDWHLQ.ULPVN\GLGQRWPDNHWKHORDQSD\PHQWV m>Z@KHUHWKHRIIHQVHLQYROYHGPDNLQJDIUDXGXOHQWORDQRU DQGH[WHQGHGWKHGXHGDWHWR FUHGLWFDUGDSSOLFDWLRQRURWKHUXQODZIXOFRQGXFWLQYROYLQJ DORDQRUFUHGLWFDUGWKHORVVLVWREHGHWHUPLQHGXQGHUWKH ,Q sXQH D .HQW UHSUHVHQWDWLYH VRXJKW DQRWKHU ORDQ SULQFLSOHV VHW IRUWK LQ WKH &RPPHQWDU\ WR 6HFWLRQ ) IURP WKH SODQ +XQWLQJWRQ 7UXVW &RPSDQ\ UHTXHVWHG )UDXGDQG'HFHLWl.ULPVN\FODLPVWKDWKLVHPEH]]OHPHQWV DGGLWLRQDO GRFXPHQWDWLRQ ZKLFK LW QHYHU UHFHLYHG :KHQ ZHUHDFWXDOO\ORDQVDQGWKDWLQDFFRUGDQFHZLWK1RWHRI +XQWLQJWRQ UHIXVHG WKH ORDQ UHTXHVW .ULPVN\ DV WUXVWHH VHFWLRQ% V&RPPHQWDU\KHVKRXOGKDYHEHHQVHQWHQFHG WUDQVIHUUHGWKHSODQjVDVVHWVWRDQHZFXVWRGLDQ)LIWK7KLUG XQGHUVHFWLRQ)UDWKHUWKDQVHFWLRQ% %DQN,Q$XJXVW.ULPVN\GLUHFWHG)LIWK7KLUG%DQNWR OLTXLGDWHWKLUW\SHUFHQWRIWKHSODQjVDVVHWVDQGWUDQVIHUWKH .ULPVN\UHOLHVRQ8QLWHG6WDWHVY/XFDV)G FDVK WR DQ DFFRXQW DW 0DULQH 0LGODQG %DQN )LIWK 7KLUG WK &LU ZKLFK DV GLUHFWHG E\ 1RWH XVHG UHVLJQHGDVFXVWRGLDQFLWLQJFRQFHUQWKDWWKHDFFRXQWZDVQRW VHFWLRQ )jV ORVV PDWUL[ WR FDOFXODWH VHFWLRQ %jV DFRQYHQWLRQDOWUXVWDFFRXQWEXWGLGWUDQVIHUWR VHQWHQFLQJSURYLVLRQVLQFRQQHFWLRQZLWKDQ86& WKH 0DULQH 0LGODQG DFFRXQW /DWHU )LIWK 7KLUG VHQW D RIIHQVH$VZHSRLQWHGRXWLQ/XFDVVHFWLRQ)DSSOLHV FKHFN WR 0DULQH 0LGODQG ZLWK D FRYHU OHWWHU WRDEURDGHUVSHFWUXPRIRIIHQVHVZKLOH%LVOLPLWHGWR LQGLFDWLQJWKDWWKHPRQH\ZDVLQUHJDUGWRWKH.HQWSHQVLRQ FHUWDLQW\SHVRIIUDXG6HHLGDWm7KH&RPPLVVLRQKDV SODQ .ULPVN\jV DFFRXQW ZLWK 0DULQH 0LGODQG ZDV QRW D GHWHUPLQHGWKDWWKHµDPRXQWRIORVVjLQIOLFWHGE\DOOFDWHJRULHV GHILQHGEHQHILWSHQVLRQSODQDFFRXQWDQGWKHUHIRUHZDVQRW RIIUDXGVVKRXOGEHGHWHUPLQHGLQDQLGHQWLFDOIDVKLRQEXW TXDOLILHGWRUHFHLYHWKHSODQIXQGV2QFHLWEHFDPHDZDUHRI WKDWWKHSDUWLFXODUNLQGVRIIUDXGFRYHUHGE\VHFWLRQ% WKLV0DULQH0LGODQGKRQRUHG)LIWK7KLUGjVUHTXHVWWRVWRS VKRXOGEHGHDOWZLWKPRUHKDUVKO\l,G SD\PHQW RQ WKH FKHFN 0DULQH 0LGODQG KDG KRZHYHU DOUHDG\VHQWRIWKHGHSRVLWWR8QLWHG 7KH&RPPHQWDU\WRVHFWLRQ)GRHVQRWLQFOXGH sHUVH\%DQNDW.ULPVN\jVUHTXHVW RULQWKHOLVWRIVWDWXWRU\SURYLVLRQVWRZKLFKLWDSSOLHV :HGHWHUPLQHGLQ/XFDVKRZHYHUWKDWHYHQWKRXJKVHFWLRQ 2Q$XJXVW.ULPVN\RSHQHGDQHZDFFRXQWZLWK'HDQ )GRHVQRWLQFOXGHDVWDWXWHLQLWV&RPPHQWDU\LWZRXOG :LWWHUWRZKLFK)LIWK7KLUGWUDQVIHUUHGWKHSODQjVUHPDLQLQJ EHDQHUURUWRLJQRUHWKHIDFWWKDWWKH&RPPHQWDU\WRVHFWLRQ DVVHWV,WZDVIURPWKLVDFFRXQWWKDW.ULPVN\WRRNWKHVHFRQG % VSHFLILFDOO\ GLUHFWV FRXUWV WR DSSO\ WKH SULQFLSOHV RI ORDQ RI RI WKH SODQjV DVVHWV 7KLV ORDQ VHFWLRQ)LQIUDXGXOHQWORDQFDVHV6HHLG:HKHOGWKDW FRQVLVWHGRIWZHOYHLQVWDOOPHQWVEHWZHHQ$XJXVWDQG ZDV DEVHQW IURP VHFWLRQ )jV OLVWHG VWDWXWRU\ s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m>V@XFK RI/DERULQYHVWLJDWRULQLWLDWHGDQRQVLWHLQYHVWLJDWLRQ7KH LQWHQW H[LVWV ZKHQHYHU WKH RIILFHU DFWV NQRZLQJO\ RU ZLWK LQVSHFWLRQUHVXOWHGLQDYROXQWDU\FRPSOLDQFHOHWWHUGDWHG0D\ UHFNOHVVGLVUHJDUGRIWKHEDQNjVLQWHUHVWVDQGWKHUHVXOWRIKLV VWDWLQJWKDWWKH5HJLRQDO'LUHFWRUZRXOGQRWEULQJD FRQGXFWLQMXUHVRUGHIUDXGVWKHEDQNl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sXO\+HZDVFKDUJHGZLWK LV WKH VDPH DV WKDW RI DQG 7KH WKLUWHHQFRXQWVRIWKHIWIURPDSHQVLRQIXQGLQYLRODWLRQRI VSHFLILF LQWHQW UHTXLUHG IRU ILQGLQJ D YLRODWLRQ RI 86&RQHIRUWKHORDQDQGRQHFRXQWIRUHDFKRI LQFOXGHV UHFNOHVV GLVUHJDUG IRU WKH LQWHUHVWV RI WKH SODQ WKH WZHOYH LQVWDOOPHQWV RI WKH ORDQ +H ZDV DOVR $FFRUGLQJO\WKHGLVWULFWFRXUWjVMXU\LQVWUXFWLRQVZLWKUHJDUG FKDUJHG ZLWK WKUHH FRXQWV RI VXEPLWWLQJ IDOVH (5,6$ WRZHUHFRUUHFW UHSRUWLQJIRUPVWRWKH,56LQYLRODWLRQRI86& $MXU\FRQYLFWHG.ULPVN\RQDOOEXWRQHRIWKHFRXQWV7KH ,,, GLVWULFWFRXUWGHWHUPLQHG.ULPVN\jVRIIHQVHOHYHOXQGHUWKH 8QLWHG 6WDWHV 6HQWHQFLQJ *XLGHOLQHV WR EH WZHQW\VL[ DQG )LQDOO\ .ULPVN\ FODLPV WKDW WKH GLVWULFW FRXUW HUUHG E\ VHQWHQFHGKLPWRILYH\HDUVLPSULVRQPHQWIROORZHGE\DWZR XVLQJVHFWLRQ%RIWKH6HQWHQFLQJ*XLGHOLQHVWRFRPSXWH \HDUSHULRGRIVXSHUYLVHGUHOHDVH.ULPVN\EHJDQVHUYLQJKLV KLVVHQWHQFHUDWKHUWKDQVHFWLRQ):HUHYLHZDGLVWULFW VHQWHQFHRQsXO\ FRXUW VIDFWXDOILQGLQJVLQUHODWLRQWRWKHDSSOLFDWLRQRIWKH VHQWHQFLQJJXLGHOLQHVXQGHUWKHFOHDUO\HUURQHRXVVWDQGDUG ,, 6HH 8QLWHG 6WDWHV Y 3RZHUV )G WK &LU m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jV QRW FRQWDLQ WKH VDPH FRPSOH[LWLHV IRXQG LQ 'XQFDQ DQG VSHFLILFLQWHQWUHTXLUHPHQW1RUPDOO\ZHUHYLHZWKHGLVWULFW .ULPVN\LGHQWLILHGQRYDULDQFHEHWZHHQWKHLQGLFWPHQWDQG FRXUWjVMXU\LQVWUXFWLRQVmWRGHWHUPLQHZKHWKHUWKH\IDLUO\DQG WKHSURRIDWWULDO7KHFRXUWWKHUHIRUHGLGQRWHUULQIDLOLQJWR DGHTXDWHO\ VXEPLWWHG WKH LVVXHV DQG DSSOLFDEOH ODZ WR WKH JLYHDPRUHVSHFLILFXQDQLPLW\LQVWUXFWLRQ MXU\l8QLWHG6WDWHVY:LOOLDPV)GWK &LU,QWKLVFDVHKRZHYHU.ULPVN\GLGQRWREMHFWWR & WKH LQVWUXFWLRQV DW WULDO :H WKHUHIRUH UHYLHZ WKH MXU\ LQVWUXFWLRQVIRUSODLQHUURU6HH8QLWHG6WDWHVY+RJOXQG .ULPVN\DVVHUWVWKDWWKHGLVWULFWFRXUWjVLQVWUXFWLRQWRWKH )GWK&LUm3ODLQHUURULVGHILQHGDV MXU\ ZLWK UHJDUG WR WKH VSHFLILF LQWHQW UHTXLUHPHQW RI DQHJUHJLRXVHUURURQHWKDWGLUHFWO\OHDGVWRDPLVFDUULDJHRI 86&ZDVDOVRHUURQHRXV$FFRUGLQJWR.ULPVN\WKH MXVWLFHl8QLWHG6WDWHVY%XVDFFD)GWK LQVWUXFWLRQVHTXDWHGVSHFLILFLQWHQWZLWKmUHFNOHVVGLVUHJDUGl &LU DQG WKHUHE\ SHUPLWWHG WKH MXU\ WR FRQYLFW KLP RI HPEH]]OHPHQW LI LW IRXQG RQO\ WKDW KH ZDV UHFNOHVV LQ $ SURWHFWLQJ WKH SODQjV LQWHUHVWV .ULPVN\ FODLPV WKDW WKH GLVWULFWFRXUWVKRXOGKDYHLQVWUXFWHGWKHMXU\WKDWLWPXVWILQG .ULPVN\FODLPVWKDWWKHGLVWULFWFRXUWHUUHGZKHQJLYLQJWKH WKDW.ULPVN\jVFRQGXFWZDVmSXUSRVHO\XQODZIXOlLQRUGHUWR MXU\LQVWUXFWLRQIRUWKHDOOHJHGYLRODWLRQRI86& ILQGDYLRODWLRQRI 7KHGLVWULFWFRXUWLQWKHMXU\LQVWUXFWLRQHQWLWOHGm(OHPHQWVRI WKH 2IIHQVHVl H[SODLQHG WKDW WKH NQRZOHGJH HOHPHQW RI 6HFWLRQ PDNHV LW XQODZIXO WR HPEH]]OH VWHDO RU ZRXOGEHVDWLVILHGLI XQODZIXOO\DQGZLOOIXOO\DEVWUDFWRUFRQYHUWWRRQHjVRZQXVH RUWRWKHXVHRIDQRWKHUDQ\RIWKHPRQLHVIXQGVVHFXULWLHV 0U.ULPVN\GLGVRNQRZLQJO\DQGZLOIXOO\>VLF@DQGL SUHPLXPVFUHGLWVSURSHUW\RURWKHUDVVHWVRIDQ\HPSOR\HH LQWKHFDVHRIDIDOVHVWDWHPHQWZLWKNQRZOHGJHWKDWWKH EHQHILWSODQVXEMHFWWR7LWOH,RI(5,6$RURIDQ\FRQQHFWHG VWDWHPHQWZDVIDOVHRUZLWKUHFNOHVVGLVUHJDUGIRULWVWUXWK IXQG7RSURYHDYLRODWLRQRIWKH8QLWHG6WDWHVPXVW RUIDOVLW\RULLLQWKHFDVHRIDFRQFHDOPHQWFRYHUXSRU VKRZWKDWWKHGHIHQGDQWmHPEH]]OHGIXQGVIURPDQ IDLOXUHWRGLVFORVHZLWKRXWDJURXQGIRUEHOLHYLQJWKDWKLV HPSOR\HH EHQHILW SODQ DQG ZLWK WKH VSHFLILF LQWHQW WR DFWLRQ ZDV ODZIXO RU ZLWK UHFNOHVV GLVUHJDUG IRU LWV GHSULYHWKHSODQRILWVIXQGVl8QLWHG6WDWHVY%XVDFFD ODZIXOQHVV )GWK&LU:KHWKHUDGHIHQGDQWKDV WKHUHTXLVLWHLQWHQWXQGHULVDTXHVWLRQRIIDFWIRUWKH ,Q86Y6 9HH&DUWDJH&R)GWK&LU MXU\6HHLG7KHSRUWLRQRIWKHMXU\LQVWUXFWLRQVWRZKLFK ZH IROORZHG WKH 6HFRQG &LUFXLW LQ KROGLQJ WKDW mWKH WHUP .ULPVN\ QRZ REMHFWV VWDWHV WKDW m>D@FWLQJ ZLWK µVSHFLILF µNQRZLQJO\j LQ UHTXLUHV RQO\ µSURRI RI D YROXQWDU\ LQWHQWjPHDQVDFWLQJZLWKLQWHQWWRGHSULYHWKHUHWLUHPHQWSODQ FRQVFLRXVIDLOXUHWRGLVFORVHZLWKRXWJURXQGIRUEHOLHYLQJWKDW RILWVIXQGVRUZLWKUHFNOHVVGLVUHJDUGIRUWKHLQWHUHVWVRIWKH VXFKQRQGLVFORVXUHLVODZIXORUZLWKUHFNOHVVGLVUHJDUGIRU UHWLUHPHQWSODQl ZKHWKHU RU QRW LW LV ODZIXOjl ,G DW TXRWLQJ 86 Y 7RONRZ )G G &LU .ULPVN\ .ULPVN\ DVVHUWV WKDW WKH JRYHUQPHQW PXVW SURYH WKDW D UHFRJQL]HV WKDW LQ WKH DERYHTXRWHG MXU\ LQVWUXFWLRQ WKH GHIHQGDQWDFWHGZLWKWKHSXUSRVHRIYLRODWLQJDQGWKDW GLVWULFWFRXUWDFFXUDWHO\VWDWHGWKHODZLQWKLVFLUFXLW.ULPVN\ UHFNOHVV GLVUHJDUG IRU WKH SODQjV LQWHUHVWV LV LQVXIILFLHQW WR DUJXHVKRZHYHUWKDWRWKHUMXU\LQVWUXFWLRQVJDYHDGLIIHUHQW HVWDEOLVK FXOSDELOLW\ 'HFLVLRQV LQ SULRU FDVHV KRZHYHU GHILQLWLRQ RI WKH LQWHQW HOHPHQW WKHUHE\ FUHDWLQJ D mUHDO 8QLWHG6WDWHVY.ULPVN\ 1R 1R 8QLWHG6WDWHVY.ULPVN\ SRVVLELOLW\lWKDWWKHMXU\FRQYLFWHG.ULPVN\ZLWKRXWILQGLQJ % WKDWKHSRVVHVVHGWKHFULPLQDOLQWHQWDFWXDOO\UHTXLUHG .ULPVN\ QH[W DOOHJHV WKDW WKH GLVWULFW FRXUW HUURQHRXVO\ ,QWKHLQVWUXFWLRQHQWLWOHGm.QRZLQJ$FWLRQlWKHGLVWULFW IDLOHGWRJLYHDPRUHVSHFLILFMXU\LQVWUXFWLRQRQXQDQLPLW\ FRXUWZURWHWKDWm>W@KHWKLUGHOHPHQWUHIHUVWR0U.ULPVN\ .ULPVN\FODLPVWKDWWKHGLVWULFWFRXUWVKRXOGKDYHSURYLGHG DFWLQJµNQRZLQJO\DQGZLOIXOO\>VLF@j:LWKUHVSHFWWRWKLV WKHMXU\ZLWKDXQDQLPLW\LQVWUXFWLRQWKDWVSHFLILFDOO\UHTXLUHG SKUDVHSOHDVHUHIHUWRSDJHµ,QIHUULQJ0HQWDO6WDWHjl DOO PHPEHUV RI WKH MXU\ WR DJUHH DV WR WKH IDOVLW\ RI DQ\ 7KHm,QIHUULQJ0HQWDO6WDWHlLQVWUXFWLRQVDLGLQSDUWm