25YEARS 2018 ANNUAL REPORT ANNUAL 2018 CELEBRATING CELEBRATING
SIMON PROPERTY GROUP, INC. 2018 ANNUAL REPORT LIVE WORK PLAY STAY SHOP
CONTENTS
II FROM THE CHAIRMAN, CEO & PRESIDENT IV FINANCIAL HIGHLIGHTS VIII INVESTMENT HIGHLIGHTS XI SUSTAINABILITY HIGHLIGHTS XII BOARD OF DIRECTORS & MANAGEMENT 1 10-K 54 MANAGEMENT’S DISCUSSION & ANALYSIS 74 FINANCIAL STATEMENTS
Simon Property Group, Inc. (NYSE: SPG) is an S&P 100 company and a leader in the global retail real estate industry. THE SHOPS AT CRYSTALS Las Vegas, NV
2018 ANNUAL REPORT I FROM THE CHAIRMAN, CEO & PRESIDENT DEAR FELLOW SHAREHOLDERS,
On December 14, 2018, we celebrated with great pride (but little fanfare) our 25th anniversary as a public company. Over the last 25 years, like many companies and industries, we have dealt with seismic shifts within our industry. In our case, these changes have forced us to be better operators, more thoughtful and astute capital allocators and willing to invest in our business with conviction, despite the ever-changing environment. David Simon Chairman, CEO & Some of the more meaningful many pundits have tried to kill • Lead the industry in successful President shifts of the last 25 years in our off physical retail real estate and and profitable acquisitions, industry include (but, of course, yet, even with these constant where we can add value. are not limited to): challenges, this has only made us • Export our “know-how” stronger and more profitable. • The dramatic increase in the internationally. adoption of mobile, digital and Certainly our priorities and Our overriding strategy has e-commerce. approach change, but the provided us with the foundation • The changing demographics strategy we laid out several years to adapt quickly to both and psychographics of our ago has enabled us to prosper in economic cycles and the consumer, i.e., aging Baby today’s volatile business climate. changing role that our shopping Boomer versus the ever- As a reminder, our strategy destinations have for our changing Millennial. includes some of the following consumers. elements: • The barbell effect on consumer My job (not solely) as I have said spending, i.e., the need and • Focus on the ownership of high- before is to balance the two “P’s” desire for value on one hand quality retail real estate. (Product and Profitability). How versus the higher-end consumer • Increase our presence in major we make our product better and seeking unique luxury products metropolitan markets. at the same time continue to and services on the other. grow our profitability. It is with • Own assets along the price this focus that I am pleased to • The Great Recession and all spectrum of retail real estate, billion report another year of record $ 5.7 the psychological changes that dealing with the barbell Consolidated results for 2018, and I also take Revenue occurred with it. effect (from value to luxury great pride as we look over our • consumers). The transient role of brands now complete 25-year history as today versus 25 years ago. • Lead the industry in promoting a public company. $2.4 billion • The evolutionary role of our shopping destinations as Net Income department stores. a “Marketing Medium” and Consistent outperformance, connecting with our community whether it’s measured through • Over-leveraged retailers cash flow growth, value creation primarily as a result of leveraged and consumer directly and being less reliant on the retailers or returns to shareholders, $4.3 billion buyouts and significant stock has been a hallmark of Simon FFO to do that. buybacks resulting in lack of Property Group (“SPG”, “Simon” • investments in their business Densify our well-located real or the “Company”). Over the and many failures. estate with elements that decades, we have carefully grown foster a live, work, play and $5.7 billion • The rise of social media and the our Company to be the global Our Share impact on the consumer. stay environment including leader it is today. We are laser- of Total NOI apartments, office, hotels, These are just examples of some focused on our leasing activities, entertainment, restaurants, property management operations of the major disruptions we have and health and wellness. adjusted to over the last 25 years. and capital structure, so that we $7.9 0 Dividends can be as creative, efficient and Per Share During the last quarter-century,
II SIMON PROPERTY GROUP, INC. nimble as possible. We continue to differentiate ourselves by seeking to grow our business while striving to do what is best for our stakeholders and the communities in which we operate. It is with great appreciation and admiration for the entire organization that I would like to highlight some of our achievements over the last quarter-century. At the time of our December, 1993 IPO, our portfolio was THE SHOPS AT CLEARFORK Fort Worth, TX concentrated in suburban, middle market mall properties. Over the course of the next industry measure, has grown • Net income was $2.437 billion, reinforces the importance of decade, we completed a series from $150 million at the or $7.87 per share (record). high-quality brick-and-mortar of thoughtful, accretive, value- time of our IPO to more than • FFO increased 7.6% to locations to a retailer’s strategy. enhancing acquisitions of high- $4.3 billion in 2018. $4.325 billion, or $12.13 per • The $661 per square foot quality regional mall portfolios • We have increased the diluted share (record). retailer sales productivity is a and individual assets in major Company’s annual FFO • Achieved a compound annual long way from the $240 per metropolitan areas that served generation by more than twenty- FFO per share growth rate of square foot productivity our as a source of growth for our five times since our IPO. 8% over the last four years. portfolio generated in 1993. Company. In the process, • Total consolidated revenue has An increase of more than we created an unparalleled • Total portfolio net operating increased more than thirteen 175% over the 25 years. organization in the retail real income grew 3.7%, or more times from $424 million to estate industry. We recognized than $230 million year-over- approximately $5.7 billion. the consumer’s penchant for year, to $6.464 billion (record). RETURNING CAPITAL TO SHAREHOLDERS brands at value prices, so we • The gross market value of our • Comparable property NOI • Capital returned to shareholders added the Premium Outlets® portfolio has increased from increased 2.3% for our U.S. in 2018 totaled nearly and The Mills® platforms to $3.5 billion to more than Malls, Premium Outlets® and $3.2 billion, comprised of our portfolio. $90 billion. The Mills®. $2.8 billion in dividends and • From our IPO through year- With Simon’s global brand • Generated over $1.5 billion more than $350 million in share end 2018, ownership of Simon name recognition, it was in excess cash flow, after buybacks. natural and beneficial for us to Property Group (SPG) common dividends. stock provided a total return • Common stock dividends paid expand internationally. From our • We are pleased our stock once in 2018 were $7.90 per share, ® to shareholders of more than Premium Outlets in Asia, Mexico again outperformed our direct an increase of 10.5% from 2017, and Canada, to our Designer 2,750%, or a compound annual return of more than peers as well as the S&P 500, and we expect to distribute at Outlets in Europe and Canada in 2018. least $8.20 per share in 2019. with McArthurGlen and our 14% compared to the S&P 500 investment in Klépierre, a leading compound annual return of • We have paid more than pan-European pure play retail 9% over the same period. OPERATING METRICS $28 billion in dividends over property company, our global As our portfolio has grown, we We again delivered strong our 25-year history as a public reach provides retailers access have also improved the quality operational results: company, and at our current dividend rate, by the second to an irreplaceable portfolio of of our assets, decreased our • Occupancy for our U.S. Malls quarter of 2019, we will have high-quality retail assets in high- leverage and vastly increased and Premium Outlets® ended cumulatively paid more than barrier-to-entry markets. the diversity of our income the year at 95.9% and The $100.00 per share in dividends generation. Approximately Mills® occupancy ended the Our focus on improving our since our IPO. Especially 48% of our net operating income year at 97.6%. product, through expansions, (“NOI”) now comes from our considering that our IPO price • Our U.S. Malls and Premium densifications, greater know- malls platform, 42% comes from was $22.25 per share—WOW! how and evolving and changing Outlets® occupancy has been our value platforms (Premium • We repurchased approximately the tenant mix, has resulted in over 95% for the last seven Outlets® and The Mills®) and 8.1 million shares for increasing the cash flow of years, even with the challenges 10% from our international approximately $1.4 billion, our assets. our industry has faced from platform. in total, under our stock retailer bankruptcies and store Through disciplined execution, repurchase program that was With that backdrop, let’s turn to closures. authorized in 2015. our strategy has resulted in the 2018 highlights. • Reported retailer sales across industry-leading results, year in • Earlier this year, your Board our portfolio were $661 per and year out. Our Company has of Directors authorized a new square foot, an increase of more achieved growth and scale that FINANCIAL RESULTS $2 billion stock repurchase than 5% year-over-year. few could have imagined possible We continued our track record of program. and the following are just some of posting record financial results in • Retailer sales productivity the impressive numbers to report 2018, including: has increased each quarter over the last 25 years: for the last two years, and all • Consolidated revenue increased platforms ended 2018 at record • Our annual funds from more than 2% to $5.658 billion levels. This productivity further operations (“FFO”), an important (record).
2018 ANNUAL REPORT III FINANCIAL HIGHLIGHTS
Year ended December 31. Dollars in millions, except per share figures. 2018 2017 Consolidated Revenue $ 5,658 $ 5,539 Net Income Per Share (Diluted) 7. 8 7 6.24 Funds from Operations (FFO) 4,325 4,021 FFO Per Share (Diluted) 12.13 11.21 Dividends Per Share 7. 9 0 7.1 5 Common Stock Price at December 31 1 6 7. 9 9 171.74 Total Equity Capitalization 59,855 61,573 Total Market Capitalization(1) 90,156 93,050 (1) Includes our share of consolidated and joint venture debt.
CONSOLIDATED OUR SHARE OF FFO PER DIVIDENDS PER REVENUE TOTAL NOI DILUTED SHARE DILUTED SHARE $ IN BILLIONS $ IN BILLIONS 5.54 5.44 5.53 $12.13 $7.90 $5.66 $5.71 5.27 $ 11.21 $ $ $ 4.87 $ 7.15 10.49 5.16 $ $ $ 9.86 4.96 $ 4.84 $ 6.50 $ 8.90 $ $ $ 6.05 $ 5.15 $
14 15 16 17 18 14 15 16 17 18 14 15 16 17 18 14 15 16 17 18
This annual report contains a number of forward-looking statements. For more information, refer to the Company’s fourth quarter and full-year 2018 results and SEC filings on our website at investors.simon.com. This report also references non-GAAP financial measures including funds from operations, or FFO, FFO per share, our share of otalt net operating income, or NOI, portfolio NOI growth and comparable property NOI growth. These financial measures are commonly used in the real estate industry and we believe they provide useful information to investors when used in conjunction with GAAP measures. For a definition of FFO and reconciliations of each of the non-GAAP measures used in this report to the most directly comparable GAAP measure, refer to the Company’s fourth quarter and full-year 2018 results, SEC filings and Non-GAAP Reconciliations section under Financials at investors.simon.com.
TOTAL RETURN PERFORMANCE 200
$150.33 150 $146.27 $141.46
100
Simon Property Group, Inc. 50 FTSE NAREIT Equity REIT Index 12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18 S&P 500 Index
COMPOUND YEAR-END 2018 ANNUAL RETURN ANNUAL 2013 2014 2015 2016 2017 2018 RETURN 3-YEAR 5-YEAR Simon Property Group, Inc. $ 100.00 $ 131.19 $ 144.61 $ 136.63 $ 137.96 $ 141.46 2.5% −0.7% 7.2% FTSE NAREIT Equity REIT Index $ 100.00 $ 130.14 $ 134.30 $ 145.74 $ 153.36 $ 146.27 −4.6% 2.9% 7.9% S&P 500 Index $ 100.00 $ 113.69 $ 115.26 $ 129.05 $ 157.22 $ 150.33 −4.4% 9.3% 8.5%
The line graph above compares the percentage change in the cumulative total shareholder return on our common stock as compared to the cumulative total return of the S&P 500 Index and the FTSE NAREIT Equity REIT Index for the period December 31, 2013 through December 31, 2018. The graph assumes an investment of $100 on December 31, 2013, a reinvestment of dividends and actual increase in the market value of the common stock relative to an initial investment of $100. The comparisons in this table are required by the Securities and Exchange Commission and are not intended to forecast or be indicative of possible future performance.
IV SIMON PROPERTY GROUP, INC. • We have an additional 25 plus opportunities from the recapture of department store spaces in various stages of development. Opportunities to enhance the value of our well- located real estate with diverse uses will be a driver of growth for our Company. • Our redevelopment activities will continue to create modern and innovative live, work, play, stay and shop communities that will complement our retail destinations.
NEW DEVELOPMENT • We still believe in selective new development. • We opened Denver Premium Outlets, a 328,000 square foot outlet center located THE FORUM SHOPS AT CAESARS PALACE Las Vegas, NV in Thornton, Colorado. The center features breathtaking Atlanta, Georgia, and Southdale views of the majestic Rocky BALANCE SHEET REDEVELOPMENT AND Center in Edina (Minneapolis), Mountains skyline with state-of- • Thoughtful balance sheet DENSIFICATION OF OUR Minnesota. These projects the-art amenities including an management is a fundamental IRREPLACEABLE REAL range in scope from new interactive Play Park for children strength of our Company ESTATE AND RECAPTURE anchors to the addition of of all ages, an outdoor fireplace and we continue to have the OF DEPARTMENT STORES specialty retail, restaurants, and a canine watering station— strongest balance sheet in • We completed more than fitness resorts, office, and all designs and features that our industry. 30 redevelopment projects hotel. At Phipps Plaza, we are provide a sense of placemaking. across all of our platforms in • redeveloping the former Belk • We announced a 50/50 joint Amended and extended our the U.S. and internationally. $3.5 billion unsecured multi- department store into a new venture to create Los Angeles currency revolving credit facility • Our total investment in 150-room Nobu Hotel and Premium Outlets in Carson, with a lower pricing grid for five redevelopment projects in Restaurant, Life Time Athletic, California, a state-of-the-art years, further enhancing our 2018 was approximately Life Time Work, 13-story outlet destination designed to strong financial flexibility. $600 million with an average Class A office building and attract affluent local residents yield of approximately 8% and other food and beverage and international tourists. This • Expanded our commercial paper our redevelopment project operators. The transformation will be an exciting project, on facility program to $2 billion. pipeline is approximately of this former department store well-located real estate, in one • Our industry-leading balance $3.5 billion and growing. space will significantly enhance of the country’s most attractive sheet metrics at the end of • Redevelopments and the value of our existing markets and in the heart of 2018 included: expansions were completed at shopping destination and blend Los Angeles County. seamlessly into the surrounding –– Net debt to NOI was Aventura Mall in Miami, Florida; • Since 2012, we have invested catchment area. 5.1 times—the lowest in Del Amo Fashion Center in approximately $7.0 billion our sector Torrance, California; Desert Hills • Determining the proper in redevelopment and new –– Interest coverage ratio was Premium Outlets in Cabazon replacement use for former development projects. (Palm Springs), California; department store spaces 5.1 times • We have an identified pipeline Katy Mills in Houston, Texas; is not a one-size-fits-all –– Long-term issuer rating of of more than $5.0 billion, which Northshore Mall in Boston, formula. It varies by location A / A2 continues to be the includes $1.5 billion in new Massachusetts; Town Center and how we can best highest in the real estate development and $3.5 billion in at Boca Raton in Boca Raton, redevelop the real estate. For industry redevelopment and expansion example, at Northgate Mall in Florida; and Woodfield Mall in opportunities, with an expected • Our liquidity is more than Seattle, Washington, we are Chicago, Illinois, to name just investment of more than $7.5 billion and we have minimal re-imagining this 60-year-old a few. $1.0 billion per year in 2019 and financing requirements over the center to include NHL Seattle’s • We opened more than 2020. We expect to fund these next two years. Corporate Headquarters and 40 anchor/specialty tenants future growth opportunities on practice facility, one million • Our balance sheet provides a in 2018 and expect to open a financially accretive basis with square feet of Class A office, distinct advantage and should another 35 projects in 2019. our excess cash flow. not be overlooked. We have the over 1,000 residential units • At the end of 2018, we had financial flexibility and access to and approximately 375 hotel 10 former department store multiple sources of capital that, rooms, all served by a new mass INTERNATIONAL space redevelopment projects when coupled with our excess transit solution. This current • Our international platform under construction with cash flow, enables us to pursue retail-only shopping mall will be contributes 10% of our earnings an aggregate gross cost of growth opportunities. completely transformed upon and is extremely profitable. approximately $725 million our completion. including Phipps Plaza in
2018 ANNUAL REPORT V STANFORD SHOPPING CENTER Palo Alto, CA
PREMIUM OUTLET COLLECTION EDMONTON INTERNATIONAL AIRPORT ST. JOHNS TOWN CENTER Jacksonville, FL Edmonton, Canada
• Expanding our international projects is estimated to be restaurants opened across our • Continued to open locations business has been an important approximately $100 million and portfolio in 2018. for new luxury brands including component of our long-term will generate an average yield of • Continue to add sophisticated Aquazarra, Ba&sh, Eton, Golden growth strategy and further approximately 8%. restaurants to our portfolio Goose, Paige, Sergio Rossi, and strengthens our relationship • We have broken ground on our including North Italia at Fashion Zimmerman, to name a few. with global retailers. first Premium Outlet in Bangkok, Valley, Blanco Tacos + Tequila • Whether it is working with • We opened Premium Outlet Thailand. at The Galleria, Water Grill and new brands or international Collection Edmonton • We have six significant Frida Mexican Cuisine at The retailers seeking to establish a International Airport, a expansions under construction Forum Shops to name a few. presence in the United States, 428,000 square foot outlet in Canada, Italy, Japan, South • Our portfolio generates nearly our leasing team’s goal is to center located in Edmonton, Korea, and the United Kingdom, $4 billion in annual food sales create opportunities for retailers Canada. The only fully enclosed all expected to open in late 2019 per year through more than looking to bring their retail ideas outlet shopping center in the and early 2020. This includes 2,500 restaurants/dining to life. Edmonton Metropolitan area the expansion of the highly pavilions. features 100 fashion brands and productive Gotemba Premium • MARKETING outlet stores, as well as a variety Launched unique entertainment Outlets in Japan. • Our marketing strategy is of signature services: from the concepts to create interactive • focused on the most creative delivery of purchases directly Our 21% investment in Klépierre experiences. Added more than and innovative content and to guests’ homes to flight continues to grow in value as 20 new entertainment/lifestyle media platforms to drive information and refresh facilities they execute on their strategy concepts to our portfolio in awareness, shopper traffic for travelers. to enhance the quality of their 2018, including Peppa Pig World leading pan-European pure of Play, Ten Pin Eatery, XD Ride and sales for the brands and • Significant expansions were play retail property company, Adventure, Pinstripes, and retailers in our centers and completed at Johor Premium resulting in record results Blocks to Bricks. create engagement with our Outlets in Malaysia, Shisui consumer. despite a challenging European • Premium Outlets in Japan and With brick-and-mortar stores economy. • Our marketing team Toronto Premium Outlets as the cornerstone of any • collaborates with leading in Canada. I am still amazed we can successful retailer’s strategy, operate from Indianapolis we continued to open locations brands on cutting-edge virtual • Total gross costs invested to Thailand on an extremely for many formerly online- reality activations to drive store in these four international profitable basis. only retailers such as Casper, traffic and on localized digital development projects was Cuyana, Eloquii, Fabletics, campaigns to build awareness approximately $325 million with Fashion Nova, Hope & Henry, for in-store initiatives. an average cash yield on cost LEASING AND NEW Indochino, Modcloth, Peloton, • We have more than 8 million of 8%. CONCEPTS OPENED • We signed nearly 4,000 leases Tommy John, UNTUCKit, Warby social media followers with over • We have three new international totaling more than 14 million Parker and many others. 1.5 billion impressions. development projects under square feet in 2018! • Identified over 130 new and • Increased the number of construction: Mexico (opening unique brands as part of our “Today at Apple” social/digital summer 2019), Spain (opening • Continue to devote significant new business program, which campaigns to promote local fall 2019) and the United efforts to add dining and resulted in over 230 new deals programming at Apple stores in Kingdom (opening spring 2020). entertainment concepts to our in 2018. Simon destinations. Our investment in these three properties. More than 60 new
VI SIMON PROPERTY GROUP, INC. • Expanded a partnership with impressions and drove selection of gift card choices • Grew the Simon Insider Disney Junior for quarterly 1.8 million shopper visits. and the lowest handling fees in loyalty program members by events and co-branded Play • Launched a new “Family at the sector. nearly 30% at participating Zones at select centers. Simon” platform showcasing centers and members spent • Amplified the “Touch, Try, Buy” family-oriented programming, INNOVATION approximately 20% more than an average shopper. marketing campaign to TV, shopping, dining, and • We complement investments video, social media and outdoor entertainment at local centers in our physical product • Grew our industry-leading advertising. This campaign across digital, on-center and with investments in technical Premium Outlet loyalty is an innovative and creative social media. innovations focused on membership program by approach to extolling the improving the shopping 12% and launched a new virtues of shopping in real life SIMON BRAND VENTURES experience and driving VIP Rewards Days driving for key products such as denim, significant incremental sales for • Provided brands and retailers shopper traffic. cosmetics and luxury items. participating retailers. with unique opportunities to • In the process of building a • Extended the “What’s New engage shoppers through a new consumer-facing digital • Developed a new concept Now” program to 113 centers— variety of media and activation platform (our fifth platform) called “Dwell,” an elevated including center-specific opportunities tailored to their in anticipation of a launch in customer lounge situated in content featuring the latest new specific needs, supported 2019. The new platform will common areas with a range of deals, brands, merchandise and by an unrivaled team of local, extend and deepen our online modern amenities, which will programming. The program is regional and national sales engagement with shoppers and debut later this year. curated and showcased through representatives committed to drive incremental traffic and • Enhanced product and brand our digital assets, giving our delivering turnkey, results-driven sales to participating retailers search capabilities across all shoppers a convenient way of solutions to our clients. and brands. local center websites to give learning what’s new at their • Continued to lead our industry • Created the Simon Quickeats shoppers increased visibility favorite center. by a significant margin, program, offering consumers into the merchandise available • Produced a programmatic outpacing the out-of-home the convenience of ordering at their favorite center. digital campaign targeting advertising market and our food from their mobile devices tourists at various stages in their industry as a whole, and and skipping the line with pick- SIMON VENTURES journey resulting in more than positively impacting bottom- up at the counter or having food • Simon Ventures is focused on 283 million impressions, over line results. delivered to them in the center. growth stage investments in 700,000 website visits and a • Leveraged Simon’s digital media • Expanded the industry’s largest companies that are operating 15% increase in traffic network to drive strong digital Happy Returns program to at the intersection of retail among viewers. media revenue growth of 68%. 16 new properties, generating and technology to drive • Implemented a successful • Grew revenues from our retail thousands of incremental forward innovative consumer campaign for Tax Free and Back- segment by 12%, with new and touchpoints with online experiences. to-School shopping, including emerging brands like Casper, shoppers. • These investments provide digital, social, video, streaming UNTUCKit, Tommy John, and • Significantly expanded our our Company with access to audio and TV content delivering others opening stores in our proprietary parking programs. exciting growth opportunities over 332 million impressions centers taking advantage of the Launched our Parking Made that have the potential to and driving more than 1.1 million Simon Media Network. Easy program in 45 centers. generate new sources of value visits to our centers. • Achieved a record level of gift Expanded our MyPark program creation. • Implemented a high-impact card sales in 2018, increasing and are testing a new Parking • Generate unique and campaign for Holiday shopping, sales by over $200 million, Express solution that gives proprietary deal flow that including digital, social, video, driven by a strong promotional shoppers a convenient upfront extends across critical retail and streaming audio and TV program, the industry’s widest parking option for quick pick- technology markets, from that delivered 627 million ups in the center. New York to Hong Kong.
2018 MARKETING CAMPAIGNS Our creative marketing strategy is driven by rich storytelling, audience segmentation, and data analysis to deliver compelling messages to our shoppers across multiple media channels to drive traffic and Back to School Video engagement. Premium Outlets TV Spot
Social Media Campaign Simon SAID Editorial Platform Holiday Video
2018 ANNUAL REPORT VII INVESTMENT HIGHLIGHTS
NEW DEVELOPMENT
DENVER PREMIUM OUTLETS Thornton (Denver), CO INTERNATIONAL INVESTMENT
QUERÉTARO PREMIUM OUTLETS Querétaro, Mexico MÁLAGA DESIGNER OUTLET Málaga, Spain
VIII SIMON PROPERTY GROUP, INC. TRANSFORMATION
KING OF PRUSSIA King of Prussia, PA WOODBURY COMMON PREMIUM OUTLETS Central Valley, NY
THE SHOPS AT RIVERSIDE Hackensack, NJ
PHIPPS PLAZA Atlanta, GA
2018 ANNUAL REPORT IX manage each of our assets as if it is our only asset. While it is good to reflect on our past, we must turn the page and continue to focus on the future. We are a team that sees things differently with a relentless focus on the future. The passion that fuels us is a burning desire to continue to get better every day. With a remarkable quarter- century of growth behind us, we look forward to the future from a strong position. We are better positioned than ever to continue to improve our Product and our Profitability, the two P’s! My Uncle Fred passed away recently and he will surely be missed. Brothers Mel, Herb and THE WESTCHESTER White Plains, NY Fred started the predecessor company, Melvin Simon & Associates (“MSA”) nearly • Investment criteria skew heavily • Installed 560 electric vehicle • More than 30 million visitors 60 years ago. Uncle Fred ran mall towards a very select group of charging stations at over enjoyed dedicated play spaces leasing for MSA and engendered companies that simultaneously 110 properties across the U.S. within our shopping malls. loyalty from both his leasing demonstrate strong growth and • Please read our white paper • 100% of our properties have team and the retailers in those cash flow potential. on the advantages of physical received national “StormReady” early and crazy days of shopping • Portfolio company additions in retail compared to e-commerce designation by the National center development. The three 2018 included Bird, Foursquare, when it comes to sustainability. Weather Service. StormReady brothers from the “Bronx” have Bustle Digital Group, Verishop We have the clear advantage! indicates that our properties written quite the American story. and 9Count. You can read the white paper at can act as a safe space during We are proud to continue that sustainability.simon.com. severe weather conditions. tradition today. Simon is the first real estate SUSTAINABILITY I would like to thank Rick Sokolov company to have achieved such • Our sustainability vision is to COMMUNITY IMPACT for his 23 years of distinguished status across all its locations. be recognized as a leader in • Simon shopping centers are service to our Company. Rick has sustainable development and destinations for consumers • Our properties send 16% less been an invaluable partner and operations of retail properties to shop, dine, entertain, and waste to landfill than the played a critical role since joining in the U.S. have in-person connections broader industry. us in 1996 when we acquired • Achieved CDP’s “Leadership” and experiences with friends, • Simon’s $7 billion investment in DeBartolo Realty Corporation. recognition for top sustainability family, and community members redeveloping its properties over I am pleased that we will performance for a third in the ever-growing age of the last seven years continues to continue to benefit from Rick’s consecutive year and received digitalization. provide a significant jobs boost expertise as he continues to serve a Green Star rating, the highest • 5,000 Simon jobs representing to the local economies of the on our Board of Directors and as designation for sustainability $372 million in wages. communities it serves. our Vice Chairman. in the real estate industry • Over 300,000 retail jobs across • Graduated more than I would also like to thank our awarded by the Global Real Simon centers, representing 17,500 students from Simon Board of Directors for their Estate Sustainability Benchmark over $5.9 billion in annual wages. Youth Foundation’s (“SYF”) contributions in 2018. I cannot (GRESB), for five consecutive 35 academies across 15 states conclude this letter without • $5 billion in combined property years. in the U.S., while also awarding thanking all of my Simon tax payments from Simon • more than $17 million in colleagues for their continued Achieved a 37% reduction in and sales tax generated from scholarships over the last commitment, dedication electricity consumption across its tenants’ sales, delivering 20 years. Please read about the and support. the portfolio, which represents significant revenue for state good work SYF does at syf.org. 363 million Kwh (2003 to 2017). and local governments. Finally, I also thank you, our • Reduced greenhouse gas • 100% of Simon shopping malls shareholders, for your continued emissions by 45%, eliminating participate in local community CLOSING support. Your comments and 261,169 metric tons of carbon activities and, on average, each As I reflect on the last quarter- thoughts are always welcome dioxide equivalents—including Simon property is actively century, I can’t help but feel a and appreciated. scope 1, scope 2, and for scope engaged with four community sense of pride and joy in what we 3 only employee commuting organizations. have built and accomplished. It is and business travel (2003 an honor to lead such an amazing • to 2017). Over $7 million raised for charity team of talented people. As I said from more than 350 public in my first shareholder letter, and • Executed LED retrofit projects fundraising events held at Simon at over 178 properties. in many others since then, we properties, including Company are committed to our long-term contributions. strategy and we will continue to David Simon Chairman, CEO & President
X SIMON PROPERTY GROUP, INC. SUSTAINABILITY HIGHLIGHTS For Simon, sustainability is a business approach that enhances the communities in which we operate as well as long-term shareholder value by embracing opportunities, improving our bottom line and mitigating environmental and social risks. Our sustainability vision is to be recognized as a leader in sustainable development and operations of retail properties in the U.S. We define and implement sustainability initiatives that consider all stages of our business. The four areas of our sustainability framework are outlined below:
SUSTAINABILITY FOCUS AREAS
Properties Customers Communities Employees Strive for efficiency in Anticipate customers’ needs and Create meaningful social and Strive for high levels of employee operating our properties with enhance the shopping experience economic impact in the engagement by creating a culture innovative solutions that lower at Simon centers while assisting communities in which we operate that attracts and retains the operational costs and reduce our our tenants to be successful in and build strong communities industry’s best talent environmental footprint their business through development and engagement activities
KEY ACCOMPLISHMENTS We continuously monitor our performance and set ambitious targets for our sustainability initiatives. Key accomplishments include1:
• Achieved a 37% reduction in • Executed LED retrofit projects • 100% of centers participate in • Engaged in sustainability electricity consumption across at over 178 properties across local community engagement thought leadership by the portfolio which represents the U.S. activities—353 fundraising conducting a lifecycle 363 million Kwh (2003–2017). events held across Simon assessment to measure impact • Installed 560 electric vehicle properties in 2017. of online versus brick-and- • Reduced GHG emissions by charging stations at over mortar shopping behaviors. 45% across the portfolio which 110 properties across the U.S. • Awarded more than $17 million The results of the study represents 261,169 metric tons in scholarships to nearly • Completed feasibility review for concluded that online shopping of CO e—including scope 1, 5,000 students and helped more 2 on-site solar and energy battery can have a 7% larger negative scope 2, and for scope 3 only than 17,500 students graduate storage projects across the environmental impact than employee commuting and from high school through portfolio. Pilot on-site solar and in-mall shopping. business travel (2003–2017). Simon Youth Foundation’s energy battery storage projects 35 academies across 15 states initiated across select sites in in the U.S. the U.S.
INTERNATIONAL RECOGNITION Simon has consistently been recognized for its sustainability disclosure and performance by third parties:
• Achieved CDP’s “Leadership” recognition for sustainability CDP has built the most comprehensive collection of self-reported environmental data performance for a third consecutive year (2016–2018). in the world. Their network of investors and purchasers, representing over $100 trillion, along with policy makers around the globe, use this data and insights to make better- • Received a Green Star rating, the highest designation for informed decisions.
sustainability in the real estate industry awarded by the Global Real GRESB is an industry-driven organization committed to assessing the ESG performance Estate Sustainability Benchmark (GRESB), for five consecutive years of real assets globally, including real estate portfolios. More than 75 institutional (2014–2018). investors use GRESB data to engage with investment managers to enhance and protect shareholder value. GRESB investor members represent over USD 18 trillion in • Recognized as StormReady by the National Weather Service. institutional capital. Read more about progress on our sustainability goals in the 1 All environmental indicators include properties within Simon’s Company’s 2018 Sustainability Report at sustainability.simon.com operational control boundary and exclude organic growth.
2018 ANNUAL REPORT XI BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND MEMBERS OF SENIOR MANAGEMENT
BOARD OF DIRECTORS EXECUTIVE OFFICERS PREMIUM OUTLETS Glyn F. Aeppel David Simon Stephen Yalof President and Chief Executive Officer Chairman of the Board, Chief Executive Officer Chief Executive Officer of Glencove Capital and President Larry Weinstein Larry C. Glasscock Steven E. Fivel Executive Vice President — Leasing Former Chairman and CEO of Anthem, Inc. General Counsel and Secretary Peter Baxter Karen N. Horn, Ph.D. John Rulli Executive Vice President — Luxury Leasing Senior Managing Director President of Malls and of Brock Capital Group Chief Administrative Officer Danielle De Vita Executive Vice President — Real Estate Allan Hubbard Brian J. McDade Co-Founder, Chairman and Executive Vice President, Chief Financial Leslie Swanson Partner of E&A Companies Officer and Treasurer Executive Vice President — Property Management Reuben S. Leibowitz Alexander L. W. Snyder Managing Member of JEN Partners Assistant General Counsel and Assistant Secretary CORPORATE Gary M. Rodkin Former Chief Executive Officer Richard S. Sokolov of ConAgra Foods, Inc. MALLS Director and Vice Chairman Stefan M. Selig Michael E. McCarty Stanley Shashoua Founder of BridgePark Advisors LLC President of Simon Development Chief Investment Officer
David Simon Eric Sadi Mikael Thygesen Chairman of the Board, Chief Executive Officer Chief Operating Officer — Leasing Chief Marketing Officer and President — and President of Simon Property Group, Inc. Simon Brand Ventures Michael J. Nevins Herbert Simon Chief Operating Officer — Malls Business Andres Lugo Chairman Emeritus of the Board of Executive Vice President— Simon Property Group, Inc. Vicki Hanor Construction Group Senior Executive Vice President and Managing Daniel C. Smith, Ph.D. Director — Luxury Leasing Mark J. Silvestri President and Chief Executive Officer of Executive Vice President—Corporate the Indiana University Foundation and Jonathan Murphy Real Estate and Chief Operating Officer— Clare W. Barker Professor of Marketing, Executive Vice President — Leasing and Development Indiana University Kelley School of Business Strategic Projects Chidi Achara J. Albert Smith, Jr. Sharon Polonia Senior Vice President and Chairman, Chase Indiana and Executive Vice President — Leasing Chief Creative Officer Managing Director, JPMorgan Private Bank Michael Romstad Steven K. Broadwater Richard S. Sokolov Executive Vice President — Property Senior Vice President—Financial Director and Vice Chairman of Management Reporting and Operations Simon Property Group, Inc. Charles Davis Natalie Hwang Marta R. Stewart Senior Vice President — Development Senior Managing Director—Simon Ventures Retired Executive Vice President and Chief Financial Officer of Norfolk Southern John Phipps J. Michelle Mahaffey Corporation Senior Vice President — Development Senior Vice President and Chief Human Resources Officer Sundesh N. Shah Audit Committee Senior Vice President—Specialty Development Adam J. Reuille J. Albert Smith, Jr., Chairman, Senior Vice President and Larry C. Glasscock, Reuben S. Leibowitz, Kathleen Shields Chief Accounting Officer Stefan M. Selig, Marta R. Stewart Senior Vice President — Development David Schacht Compensation Committee Senior Vice President and Reuben S. Leibowitz, Chairman, THE MILLS Chief Information Officer Allan Hubbard, Daniel C. Smith, Ph.D., J. Albert Smith, Jr., Stefan M. Selig Gary Duncan Thomas Ward President Senior Vice President — Investor Relations Governance and Nominating Committee Rhonda D. Bandy Brian J. Warnock Karen N. Horn, Ph.D., Chairman, Senior Vice President—Leasing Senior Vice President — Acquisitions and Glyn F. Aeppel, Larry C. Glasscock, Financial Analysis Allan Hubbard, Gary M. Rodkin Jay E. Buckey Senior Vice President—Leasing
William Hopper Senior Vice President—Specialty Development
XII SIMON PROPERTY GROUP, INC. 81,7('67$7(6 6(&85,7,(6$1'(;&+$1*(&200,66,21 :DVKLQJWRQ'&
)250. $118$/5(325738568$17726(&7,2125 G 2)7+( 6(&85,7,(6(;&+$1*($&72) )RUWKHILVFDO\HDUHQGHG'HFHPEHU 6,0213523(57<*5283,1& 6,0213523(57<*5283/3 ([DFWQDPHRIUHJLVWUDQWDVVSHFLILHGLQLWVFKDUWHU
'HODZDUH 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS,QF 'HODZDUH 6LPRQ3URSHUW\*URXS/3 6LPRQ3URSHUW\*URXS/3 6LPRQ3URSHUW\*URXS/3 6WDWHRILQFRUSRUDWLRQ &RPPLVVLRQ)LOH1R ,56(PSOR\HU RURUJDQL]DWLRQ ,GHQWLILFDWLRQ1R :HVW:DVKLQJWRQ6WUHHW ,QGLDQDSROLV,QGLDQD $GGUHVVRISULQFLSDOH[HFXWLYHRIILFHV =,3&RGH
5HJLVWUDQW¶VWHOHSKRQHQXPEHULQFOXGLQJDUHDFRGH 6HFXULWLHVUHJLVWHUHGSXUVXDQWWR6HFWLRQ E RIWKH$FW 7LWOHRIHDFKFODVV 1DPHRIHDFKH[FKDQJHRQZKLFKUHJLVWHUHG 6LPRQ3URSHUW\*URXS,QF &RPPRQVWRFNSDUYDOXH 1HZ ,QGLFDWHE\FKHFNPDUNLIWKH5HJLVWUDQWLVDZHOONQRZQVHDVRQHGLVVXHU DVGHILQHGLQ5XOHRIWKH6HFXULWLHV$FW ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕/ŶĐ͘zĞƐ_EŽ ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕>͘W͘zĞƐ_EŽ ,QGLFDWHE\FKHFNPDUNLIWKH5HJLVWUDQWLVQRWUHTXLUHGWRILOHUHSRUWVSXUVXDQWWR6HFWLRQRU6HFWLRQ G RIWKH$FW ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕/ŶĐ͘zĞƐEŽ_ ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕>͘W͘zĞƐEŽ_ ,QGLFDWHE\FKHFNPDUNZKHWKHUWKH5HJLVWUDQW KDVILOHGDOOUHSRUWVUHTXLUHGWREHILOHGE\6HFWLRQRU G RIWKH6HFXULWLHV([FKDQJH$FWRIGXULQJWKHSUHFHGLQJ PRQWKV RUIRUVXFKVKRUWHUSHULRGWKDWWKH5HJLVWUDQWZDVUHTXLUHGWRILOHVXFKUHSRUWV DQG KDVEHHQVXEMHFWWRVXFKILOLQJUHTXLUHPHQWVIRUWKHSDVWGD\V ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕/ŶĐ͘zĞƐ_EŽ ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕>͘W͘zĞƐ_EŽ ,QGLFDWHE\FKHFNPDUNZKHWKHUWKH5HJLVWUDQWKDVVXEPLWWHGHOHFWURQLFDOO\HYHU\,QWHUDFWLYH'DWD)LOHUHTXLUHGWREHVXEPLWWHGSXUVXDQWWR5XOHRI5HJXODWLRQ67 RIWKLVFKDSWHU GXULQJWKHSUHFHGLQJPRQWKV RUIRUVXFKVKRUWHUSHULRGWKDWWKH5HJLVWUDQWZDVUHTXLUHGWRVXEPLWVXFKILOHV ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕/ŶĐ͘zĞƐ_EŽ ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕>͘W͘zĞƐ_EŽ ,QGLFDWH E\FKHFNPDUNLIGLVFORVXUHRIGHOLQTXHQWILOHUVSXUVXDQWWR,WHP RI 5HJXODWLRQ6.LVQRWFRQWDLQHGKHUHLQDQG ZLOOQRWEHFRQWDLQHGWRWKHEHVWRI 5HJLVWUDQW¶V NQRZOHGJHLQGHILQLWLYHSUR[\RULQIRUPDWLRQVWDWHPHQWVLQFRUSRUDWHGE\UHIHUHQFHLQ3DUW,,,RIWKLV)RUP.RUDQ\DPHQGPHQWWRWKLV)RUP. ,QGLFDWHE\FKHFNPDUNZKHWKHUWKH5HJLVWUDQWLVDODUJHDFFHOHUDWHGILOHUDQDFFHOHUDWHGILOHUDQRQDFFHOHUDWHGILOHUVPDOOHUUHSRUWLQJFRPSDQ\RUDQHPHUJLQJJURZWKFRPSDQ\ 6HHWKHGHILQLWLRQVRI³ODUJHDFFHOHUDWHGILOHU´³DFFHOHUDWHGILOHU´³VPDOOHUUHSRUWLQJFRPSDQ\´DQG³HPHUJLQJJURZWKFRPSDQ\´LQ5XOHERIWKH([FKDQJH$FW FKHFNRQH 6LPRQ3URSHUW\*URXS,QF /DUJHDFFHOHUDWHGILOHU_ $FFHOHUDWHGILOHU1RQDFFHOHUDWHGILOHU 6PDOOHUUHSRUWLQJFRPSDQ\ (PHUJLQJJURZWKFRPSDQ\ 6LPRQ3URSHUW\*URXS/3 /DUJHDFFHOHUDWHGILOHU $FFHOHUDWHGILOHU 1RQDFFHOHUDWHGILOHU _ 6PDOOHUUHSRUWLQJFRPSDQ\ (PHUJLQJJURZWKFRPSDQ\ ,IDQHPHUJLQJJURZWKFRPSDQ\LQGLFDWHE\FKHFNPDUNLIWKH5HJLVWUDQWKDVHOHFWHGQRWWRXVHWKHH[WHQGHGWUDQVLWLRQSHULRGIRUFRPSO\LQJZLWKDQ\QHZRUUHYLVHGILQDQFLDO DFFRXQWLQJVWDQGDUGVSURYLGHGSXUVXDQWWR6HFWLRQ D RIWKH([FKDQJH$FW ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕/ŶĐ͘ ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕>͘W͘ ,QGLFDWHE\FKHFNPDUNZKHWKHUWKH5HJLVWUDQWLVDVKHOOFRPSDQ\ DVGHILQHGLQUXOHERIWKH$FW ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕/ŶĐ͘zĞƐEŽ_ ^ŝŵŽŶWƌŽƉĞƌƚLJ'ƌŽƵƉ͕>͘W͘zĞƐEŽ_ 7KHDJJUHJDWHPDUNHWYDOXHRIVKDUHVRIFRPPRQVWRFNKHOGE\QRQDIILOLDWHVRI6LPRQ3URSHUW\*URXS,QFZDVDSSUR[LPDWHO\PLOOLRQEDVHGRQWKHFORVLQJVDOHSULFHRQ WKH1HZ 7KLVUHSRUWFRPELQHVWKHDQQXDOUHSRUWVRQ)RUP.IRUWKHDQQXDOSHULRGHQGHG'HFHPEHURI6LPRQ 3URSHUW\*URXS,QFD'HODZDUHFRUSRUDWLRQDQG6LPRQ3URSHUW\*URXS/3D'HODZDUHOLPLWHGSDUWQHUVKLS8QOHVV VWDWHGRWKHUZLVHRUWKHFRQWH[WRWKHUZLVHUHTXLUHVUHIHUHQFHVWR³6LPRQ´PHDQ6LPRQ3URSHUW\*URXS,QFDQGUHIHUHQFHV WRWKH³2SHUDWLQJ3DUWQHUVKLS´PHDQ6LPRQ3URSHUW\*URXS/35HIHUHQFHVWR³ZH´³XV´DQG³RXU´PHDQFROOHFWLYHO\ 6LPRQ WKH 2SHUDWLQJ 3DUWQHUVKLS DQG WKRVH HQWLWLHVVXEVLGLDULHV RZQHG RU FRQWUROOHG E\ 6LPRQ DQGRU WKH 2SHUDWLQJ 3DUWQHUVKLS 6LPRQLVDUHDOHVWDWHLQYHVWPHQWWUXVWRU5(,7XQGHUWKH,QWHUQDO5HYHQXH&RGHRIDVDPHQGHGRUWKH ,QWHUQDO5HYHQXH&RGH:HDUHVWUXFWXUHGDVDQXPEUHOODSDUWQHUVKLS5(,7XQGHUZKLFKVXEVWDQWLDOO\DOORIRXUEXVLQHVV LVFRQGXFWHGWKURXJKWKH2SHUDWLQJ3DUWQHUVKLS6LPRQ¶VPDMRULW\RZQHGSDUWQHUVKLSVXEVLGLDU\IRUZKLFK6LPRQLVWKH JHQHUDO SDUWQHU $V RI 'HFHPEHU 6LPRQ RZQHG DQ DSSUR[LPDWH RZQHUVKLS LQWHUHVW LQ WKH 2SHUDWLQJ 3DUWQHUVKLSZLWKWKHUHPDLQLQJRZQHUVKLSLQWHUHVWRZQHGE\OLPLWHGSDUWQHUV$VWKHVROHJHQHUDOSDUWQHURIWKH 2SHUDWLQJ3DUWQHUVKLS6LPRQKDVH[FOXVLYHFRQWURORIWKH2SHUDWLQJ3DUWQHUVKLS¶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• HQKDQFHVLQYHVWRUV¶XQGHUVWDQGLQJRI6LPRQDQGWKH2SHUDWLQJ3DUWQHUVKLSE\HQDEOLQJLQYHVWRUVWRYLHZWKH EXVLQHVVDVDZKROHLQWKHVDPHPDQQHUDVPDQDJHPHQWYLHZVDQGRSHUDWHVWKHEXVLQHVV • HOLPLQDWHV GXSOLFDWLYH GLVFORVXUH DQG SURYLGHV D PRUH VWUHDPOLQHG SUHVHQWDWLRQ VLQFH VXEVWDQWLDOO\ DOO RI WKH GLVFORVXUHLQWKLVUHSRUWDSSOLHVWRERWK6LPRQDQGWKH2SHUDWLQJ3DUWQHUVKLSDQG •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¶ HTXLW\ SDUWQHUV¶ HTXLW\ DQG QRQFRQWUROOLQJ LQWHUHVWV DUH WKH PDLQ DUHDV RI GLIIHUHQFHEHWZHHQWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWVRI6LPRQDQGWKRVHRIWKH2SHUDWLQJ3DUWQHUVKLS7KHGLIIHUHQFHV EHWZHHQVWRFNKROGHUV¶HTXLW\DQGSDUWQHUV¶HTXLW\UHVXOWIURPGLIIHUHQFHVLQWKHHTXLW\LVVXHGDWWKH6LPRQDQG2SHUDWLQJ 3DUWQHUVKLSOHYHOV7KHXQLWVKHOGE\OLPLWHGSDUWQHUVLQWKH2SHUDWLQJ3DUWQHUVKLSDUHDFFRXQWHGIRUDVSDUWQHUV¶HTXLW\LQ WKH 2SHUDWLQJ 3DUWQHUVKLS¶V ILQDQFLDO VWDWHPHQWV DQG DV QRQFRQWUROOLQJ LQWHUHVWV LQ 6LPRQ¶V ILQDQFLDO VWDWHPHQWV 7KH QRQFRQWUROOLQJLQWHUHVWVLQWKH2SHUDWLQJ3DUWQHUVKLS¶VILQDQFLDOVWDWHPHQWVLQFOXGHWKHLQWHUHVWVRIXQDIILOLDWHGSDUWQHUVLQ YDULRXV FRQVROLGDWHG SDUWQHUVKLSV 7KH QRQFRQWUROOLQJ LQWHUHVWV LQ 6LPRQ¶V ILQDQFLDO VWDWHPHQWV LQFOXGH WKH VDPH QRQFRQWUROOLQJLQWHUHVWVDWWKH2SHUDWLQJ3DUWQHUVKLSOHYHODQGDVSUHYLRXVO\VWDWHGWKHXQLWVKHOGE\OLPLWHGSDUWQHUVRI WKH2SHUDWLQJ3DUWQHUVKLS$OWKRXJKFODVVLILHGGLIIHUHQWO\WRWDOHTXLW\RI6LPRQDQGWKH2SHUDWLQJ3DUWQHUVKLSLVWKHVDPH 7RKHOSLQYHVWRUVXQGHUVWDQGWKHGLIIHUHQFHVEHWZHHQ6LPRQDQGWKH2SHUDWLQJ3DUWQHUVKLSWKLVUHSRUWSURYLGHV • VHSDUDWHFRQVROLGDWHGILQDQFLDOVWDWHPHQWVIRU6LPRQDQGWKH2SHUDWLQJ3DUWQHUVKLS • D VLQJOH VHW RI QRWHV WR VXFK FRQVROLGDWHG ILQDQFLDO VWDWHPHQWV WKDW LQFOXGHV VHSDUDWH GLVFXVVLRQV RI QRQFRQWUROOLQJLQWHUHVWVDQGVWRFNKROGHUV¶HTXLW\RUSDUWQHUV¶HTXLW\DFFXPXODWHGRWKHUFRPSUHKHQVLYHLQFRPH ORVV DQGSHUVKDUHDQGSHUXQLWGDWDDVDSSOLFDEOH • DFRPELQHG0DQDJHPHQW¶V'LVFXVVLRQDQG$QDO\VLVRI)LQDQFLDO&RQGLWLRQDQG5HVXOWVRI2SHUDWLRQVVHFWLRQ WKDWDOVRLQFOXGHVGLVFUHWHLQIRUPDWLRQUHODWHGWRHDFKHQWLW\DQG • VHSDUDWH 3DUW,, ,WHP 0DUNHW IRU 5HJLVWUDQW¶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³RXU´DFWLRQVRUKROGLQJV$OWKRXJKWKH2SHUDWLQJ3DUWQHUVKLSLVJHQHUDOO\WKHHQWLW\WKDW GLUHFWO\RULQGLUHFWO\HQWHUVLQWRFRQWUDFWVDQGMRLQWYHQWXUHVKROGVDVVHWVDQGLQFXUVGHEWZHEHOLHYHWKDWUHIHUHQFHVWR ³ZH´³XV´RU³RXU´LQWKLVFRQWH[WLVDSSURSULDWHEHFDXVHWKHEXVLQHVVLVRQHHQWHUSULVHDQGZHRSHUDWHVXEVWDQWLDOO\DOORI RXUEXVLQHVVWKURXJKWKH2SHUDWLQJ3DUWQHUVKLS 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 $QQXDO5HSRUWRQ)RUP. 'HFHPEHU 7$%/(2)&217(176 ,WHP1R 3DJH1R 3DUW, %XVLQHVV $ 5LVN)DFWRUV % 8QUHVROYHG6WDII&RPPHQWV 3URSHUWLHV /HJDO3URFHHGLQJV 0LQH6DIHW\'LVFORVXUHV 3DUW,, 0DUNHWIRUWKH5HJLVWUDQW¶V&RPPRQ(TXLW\5HODWHG6WRFNKROGHU0DWWHUVDQG,VVXHU 3XUFKDVHVRI(TXLW\6HFXULWLHV 6HOHFWHG)LQDQFLDO'DWD 0DQDJHPHQW¶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pSLHUUH6$RU.OpSLHUUHDSXEOLFO\ WUDGHG3DULVEDVHGUHDOHVWDWHFRPSDQ\ ZKLFKRZQVRUKDVDQ LQWHUHVWLQVKRSSLQJFHQWHUVORFDWHGLQFRXQWULHVLQ(XURSH )RU D GHVFULSWLRQ RI RXU RSHUDWLRQDO VWUDWHJLHV DQG GHYHORSPHQWV LQ RXU EXVLQHVV GXULQJ VHH ,WHP³0DQDJHPHQW¶V'LVFXVVLRQDQG$QDO\VLVRI)LQDQFLDO&RQGLWLRQDQG5HVXOWVRI2SHUDWLRQV´RIWKLV)RUP. 2WKHU3ROLFLHV 7KHIROORZLQJLVDGLVFXVVLRQRIRXULQYHVWPHQWSROLFLHVILQDQFLQJSROLFLHVFRQIOLFWRILQWHUHVWSROLFLHVDQGSROLFLHV ZLWKUHVSHFWWRFHUWDLQRWKHUDFWLYLWLHV2QHRUPRUHRIWKHVHSROLFLHVPD\EHDPHQGHGRUUHVFLQGHGIURPWLPHWRWLPH ZLWKRXWDVWRFNKROGHUYRWH Investment Policies :KLOHZHHPSKDVL]HHTXLW\UHDOHVWDWHLQYHVWPHQWVZHPD\DOVRSURYLGHVHFXUHGILQDQFLQJWRRULQYHVWLQHTXLW\RU GHEW VHFXULWLHV RI RWKHU HQWLWLHV HQJDJHG LQ UHDO HVWDWH DFWLYLWLHV RU VHFXULWLHV RI RWKHU LVVXHUV FRQVLVWHQW ZLWK 6LPRQ¶V TXDOLILFDWLRQDVD5(,7+RZHYHUDQ\RIWKHVHLQYHVWPHQWVZRXOGEHVXEMHFWWRWKHSHUFHQWDJHRZQHUVKLSOLPLWDWLRQVDQG JURVVLQFRPHWHVWVQHFHVVDU\IRU5(,7TXDOLILFDWLRQ7KHVH5(,7OLPLWDWLRQVPHDQWKDW6LPRQFDQQRWPDNHDQLQYHVWPHQW WKDWZRXOGFDXVHLWVUHDOHVWDWHDVVHWVWREHOHVVWKDQRILWVWRWDODVVHWV6LPRQPXVWDOVRGHULYHDWOHDVWRILWV JURVVLQFRPHGLUHFWO\RULQGLUHFWO\IURPLQYHVWPHQWVUHODWLQJWRUHDOSURSHUW\RUPRUWJDJHVRQUHDOSURSHUW\LQFOXGLQJ³UHQWV IURPUHDOSURSHUW\´GLYLGHQGVIURPRWKHU5(,7VDQGLQFHUWDLQFLUFXPVWDQFHVLQWHUHVWIURPFHUWDLQW\SHVRIWHPSRUDU\ LQYHVWPHQWV,QDGGLWLRQ6LPRQPXVWDOVRGHULYHDWOHDVWRILWVJURVVLQFRPHIURPVXFKUHDOSURSHUW\LQYHVWPHQWVDQG IURPGLYLGHQGVLQWHUHVWDQGJDLQVIURPWKHVDOHRUGLVSRVLWLRQVRIVWRFNRUVHFXULWLHVRUIURPRWKHUFRPELQDWLRQVRIWKH IRUHJRLQJ 6XEMHFWWR6LPRQ¶V5(,7OLPLWDWLRQVZHPD\LQYHVWLQWKHVHFXULWLHVRIRWKHULVVXHUVLQFRQQHFWLRQZLWKDFTXLVLWLRQV RILQGLUHFWLQWHUHVWVLQUHDOHVWDWH6XFKDQLQYHVWPHQWZRXOGQRUPDOO\EHLQWKHIRUPRIJHQHUDORUOLPLWHGSDUWQHUVKLSRU PHPEHUVKLSLQWHUHVWVLQVSHFLDOSXUSRVHSDUWQHUVKLSVDQGOLPLWHGOLDELOLW\FRPSDQLHVWKDWRZQRQHRUPRUHSURSHUWLHV:H PD\LQWKHIXWXUHDFTXLUHDOORUVXEVWDQWLDOO\DOORIWKHVHFXULWLHVRUDVVHWVRIRWKHU5(,7VPDQDJHPHQWFRPSDQLHVRU VLPLODUHQWLWLHVZKHUHVXFKLQYHVWPHQWVZRXOGEHFRQVLVWHQWZLWKRXULQYHVWPHQWSROLFLHV Financing Policies %HFDXVH6LPRQ¶V5(,7TXDOLILFDWLRQUHTXLUHVXVWRGLVWULEXWHDWOHDVWRILWV5(,7WD[DEOHLQFRPHZHUHJXODUO\ DFFHVV WKH GHEW PDUNHWV WR UDLVH WKH IXQGV QHFHVVDU\ WR ILQDQFH DFTXLVLWLRQV GHYHORS DQG UHGHYHORS SURSHUWLHV DQG UHILQDQFHPDWXULQJGHEW:HPXVWFRPSO\ZLWKWKHFRYHQDQWVFRQWDLQHGLQRXUILQDQFLQJDJUHHPHQWVWKDWOLPLWRXUUDWLRRI GHEWWRWRWDODVVHWVRUPDUNHWYDOXHDVGHILQHG)RUH[DPSOHWKH2SHUDWLQJ3DUWQHUVKLS¶VOLQHVRIFUHGLWDQGWKHLQGHQWXUHV IRUWKH2SHUDWLQJ3DUWQHUVKLS¶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¶V%RDUGRI'LUHFWRUVGHWHUPLQHVWRVHHNDGGLWLRQDOFDSLWDOZHPD\UDLVHVXFKFDSLWDOE\RIIHULQJHTXLW\RU LQFXUULQJ GHEW FUHDWLQJ MRLQW YHQWXUHV ZLWK H[LVWLQJ RZQHUVKLS LQWHUHVWV LQ SURSHUWLHV HQWHULQJ LQWR MRLQW YHQWXUH DUUDQJHPHQWVIRUQHZGHYHORSPHQWSURMHFWVUHWDLQLQJFDVKIORZVRUDFRPELQDWLRQRIWKHVHPHWKRGV,I6LPRQ¶V%RDUGRI 'LUHFWRUVGHWHUPLQHVWRUDLVHHTXLW\FDSLWDOLWPD\ZLWKRXWVWRFNKROGHUDSSURYDOLVVXHDGGLWLRQDOVKDUHVRIFRPPRQVWRFN RURWKHUFDSLWDOVWRFN6LPRQ¶V%RDUGRI'LUHFWRUVPD\LVVXHDQXPEHURIVKDUHVXSWRWKHDPRXQWRIRXUDXWKRUL]HGFDSLWDO RUPD\LVVXHXQLWVLQDQ\PDQQHUDQGRQVXFKWHUPVDQGIRUVXFKFRQVLGHUDWLRQDVLWGHHPVDSSURSULDWH:HPD\DOVR UDLVH DGGLWLRQDO FDSLWDO E\ LVVXLQJ FRPPRQ XQLWV RI SDUWQHUVKLS LQWHUHVW LQ WKH 2SHUDWLQJ 3DUWQHUVKLS RU XQLWV 6XFK VHFXULWLHVDOVRPD\LQFOXGHDGGLWLRQDOFODVVHVRI6LPRQ¶VSUHIHUUHGVWRFNRUSUHIHUUHGXQLWVRISDUWQHUVKLSLQWHUHVWLQWKH 2SHUDWLQJ3DUWQHUVKLSRUSUHIHUUHGXQLWV ZKLFKPD\EHFRQYHUWLEOHLQWRFRPPRQVWRFNRUXQLWVDVWKHFDVHPD\EH ([LVWLQJVWRFNKROGHUVDQGXQLWKROGHUVKDYHQRSUHHPSWLYHULJKWWRSXUFKDVHVKDUHVRUXQLWVLQDQ\VXEVHTXHQWLVVXDQFHV RIVHFXULWLHVE\XV$Q\LVVXDQFHRIHTXLW\FRXOGGLOXWHDVWRFNKROGHU¶VLQYHVWPHQWLQ6LPRQRUDOLPLWHGSDUWQHU¶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¶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¶VLQLWLDOERUURZLQJFDSDFLW\RIELOOLRQPD\EHLQFUHDVHGWRELOOLRQGXULQJLWVWHUP7KHLQLWLDOPDWXULW\GDWH RIWKH6XSSOHPHQWDO)DFLOLW\ZDVH[WHQGHGWR-XQHDQGFDQEHH[WHQGHGIRUDQDGGLWLRQDO\HDUWR-XQH DWRXUVROHRSWLRQVXEMHFWWRRXUFRQWLQXHGFRPSOLDQFHZLWKWKHWHUPVWKHUHRI7KHEDVHLQWHUHVWUDWHRQWKH6XSSOHPHQWDO )DFLOLW\ZDVUHGXFHGWR/,%25SOXVEDVLVSRLQWVIURP/,%25SOXVEDVLVSRLQWVZLWKDQDGGLWLRQDOIDFLOLW\IHHRI EDVLVSRLQWV7KH&UHGLW)DFLOLWLHVSURYLGHIRUERUURZLQJVGHQRPLQDWHGLQ86GROODUV(XUR &RPPHUFLDO 3DSHU SURJUDP IURP ELOOLRQ WR ELOOLRQ RU WKH QRQ86 GROODU HTXLYDOHQW WKHUHRI 7KH 2SHUDWLQJ 3DUWQHUVKLSPD\LVVXHXQVHFXUHGFRPPHUFLDOSDSHUQRWHVGHQRPLQDWHGLQ86GROODUV(XURDQGRWKHUFXUUHQFLHV1RWHV LVVXHGLQQRQ86FXUUHQFLHVPD\EHLVVXHGE\RQHRUPRUHVXEVLGLDULHVRIWKH2SHUDWLQJ3DUWQHUVKLSDQGDUHJXDUDQWHHG E\WKH2SHUDWLQJ3DUWQHUVKLS1RWHVDUHVROGXQGHUFXVWRPDU\WHUPVLQWKH86DQG(XURFRPPHUFLDOSDSHUQRWHPDUNHWV DQGUDQN HLWKHUE\WKHPVHOYHVRUDVDUHVXOWRIWKHJXDUDQWHHGHVFULEHGDERYH pari passuZLWKWKH2SHUDWLQJ3DUWQHUVKLS¶V RWKHU XQVHFXUHG VHQLRU LQGHEWHGQHVV 7KH &RPPHUFLDO 3DSHU SURJUDP LV VXSSRUWHG E\ WKH &UHGLW )DFLOLWLHV DQG LI QHFHVVDU\RUDSSURSULDWHZHPD\PDNHRQHRUPRUHGUDZVXQGHUHLWKHU&UHGLW)DFLOLW\WRSD\DPRXQWVRXWVWDQGLQJIURP WLPHWRWLPHRQWKH&RPPHUFLDO3DSHUSURJUDP :HPD\DOVRILQDQFHRXUEXVLQHVVWKURXJKWKHIROORZLQJ • LVVXDQFHRIVKDUHVRIFRPPRQVWRFNRUSUHIHUUHGVWRFNRUZDUUDQWVWRSXUFKDVHWKHVDPH • LVVXDQFHRIDGGLWLRQDOXQLWV • LVVXDQFHRISUHIHUUHGXQLWV • LVVXDQFHRIRWKHUVHFXULWLHVLQFOXGLQJXQVHFXUHGQRWHVDQGPRUWJDJHGHEW • GUDZVRQRXU&UHGLW)DFLOLWLHV • ERUURZLQJVXQGHUWKH&RPPHUFLDO3DSHUSURJUDPRU •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onflict of Interest Policies :H PDLQWDLQ SROLFLHV DQG KDYH HQWHUHG LQWR DJUHHPHQWV GHVLJQHG WR UHGXFH RU HOLPLQDWH SRWHQWLDO FRQIOLFWV RI LQWHUHVW6LPRQKDVDGRSWHGJRYHUQDQFHSULQFLSOHVJRYHUQLQJWKHIXQFWLRQFRQGXFWVHOHFWLRQRULHQWDWLRQDQGGXWLHVRILWV VXEVLGLDULHV DQG 6LPRQ¶V %RDUG RI 'LUHFWRUV DQG WKH &RPSDQ\ DV ZHOO DV ZULWWHQ FKDUWHUV IRU HDFK RI WKH VWDQGLQJ &RPPLWWHHVRI6LPRQ¶V%RDUGRI'LUHFWRUV,QDGGLWLRQ6LPRQ¶V%RDUGRI'LUHFWRUVKDVD&RGHRI%XVLQHVV&RQGXFWDQG (WKLFVZKLFKDSSOLHVWRDOORILWVRIILFHUVGLUHFWRUVDQGHPSOR\HHVDQGWKRVHRILWVVXEVLGLDULHV$WOHDVWDPDMRULW\RIWKH PHPEHUVRI6LPRQ¶V%RDUGRI'LUHFWRUVPXVWTXDOLI\DQGGRTXDOLI\DVLQGHSHQGHQWXQGHUWKHOLVWLQJVWDQGDUGVRIWKH1HZ Policies With Respect To Certain Other Activities :HLQWHQGWRPDNHLQYHVWPHQWVZKLFKDUHFRQVLVWHQWZLWK6LPRQ¶VTXDOLILFDWLRQDVD5(,7XQOHVV6LPRQ¶V%RDUGRI 'LUHFWRUVGHWHUPLQHVWKDWLWLVQRORQJHULQ6LPRQ¶VEHVWLQWHUHVWVWRVRTXDOLI\DVD5(,76LPRQ¶V%RDUGRI'LUHFWRUVPD\ PDNHVXFKDGHWHUPLQDWLRQEHFDXVHRIFKDQJLQJFLUFXPVWDQFHVRUFKDQJHVLQWKH5(,7UHTXLUHPHQWV6LPRQKDVDXWKRULW\ WRLVVXHVKDUHVRILWVFDSLWDOVWRFNRURWKHUVHFXULWLHVLQH[FKDQJHIRUSURSHUW\:HDOVRKDYHDXWKRULW\WRUHSXUFKDVHRU RWKHUZLVHUHDFTXLUH6LPRQ¶VVKDUHVWKH2SHUDWLQJ3DUWQHUVKLS¶VXQLWVRUDQ\RWKHUVHFXULWLHV2Q)HEUXDU\ 6LPRQ¶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¶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• WKHTXDOLW\ORFDWLRQDQGGLYHUVLW\RIRXUSURSHUWLHV • RXUPDQDJHPHQWDQGRSHUDWLRQDOH[SHUWLVH • RXUH[WHQVLYHH[SHULHQFHDQGUHODWLRQVKLSVZLWKUHWDLOHUVOHQGHUVDQGVXSSOLHUVDQG • RXUPDUNHWLQJLQLWLDWLYHVDQGFRQVXPHUIRFXVHGVWUDWHJLFFRUSRUDWHDOOLDQFHV &HUWDLQ$FWLYLWLHV 'XULQJWKHSDVWWKUHH\HDUVZHKDYH • LVVXHGVKDUHVRI6LPRQFRPPRQVWRFNXSRQWKHH[FKDQJHRIXQLWVLQWKH2SHUDWLQJ3DUWQHUVKLS • LVVXHGUHVWULFWHGVKDUHVRI6LPRQFRPPRQVWRFNDQGORQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWVRU /7,3XQLWVQHWRIIRUIHLWXUHVXQGHU7KH6LPRQ3URSHUW\*URXS6WRFN,QFHQWLYH3ODQDVDPHQGHGRUWKH 3ODQ • SXUFKDVHG VKDUHV RI 6LPRQ FRPPRQ VWRFN LQ WKH RSHQ PDUNHW IRU ELOOLRQ SXUVXDQW WR RXU 5HSXUFKDVH3URJUDP • LVVXHGXQLWVLQWKH2SHUDWLQJ3DUWQHUVKLSLQH[FKDQJHIRUWKHUHPDLQLQJLQWHUHVWLQDIRUPHUMRLQWYHQWXUH SURSHUW\ • UHGHHPHGXQLWVLQWKH2SHUDWLQJ3DUWQHUVKLSDWDQDYHUDJHSULFHRISHUXQLWLQFDVK • DPHQGHGWKH6XSSOHPHQWDO)DFLOLW\LQ$SULOWRLQFUHDVHRXUERUURZLQJFDSDFLW\DQGDPHQGHGDQGH[WHQGHG WKH6XSSOHPHQWDO)DFLOLW\LQ)HEUXDU\WRIXUWKHULQFUHDVHRXUERUURZLQJFDSDFLW\H[WHQGLWVWHUPDQGUHGXFH LWVEDVHLQWHUHVWUDWH • DPHQGHGDQGH[WHQGHGWKH&UHGLW)DFLOLW\LQ0DUFKWRH[WHQGLWVWHUPDQGUHGXFHLWVEDVHLQWHUHVWUDWH • ERUURZHGDPD[LPXPDPRXQWRIPLOOLRQXQGHUWKH&UHGLW)DFLOLWLHVWKHRXWVWDQGLQJDPRXQWRIERUURZLQJV XQGHUWKH&UHGLW)DFLOLW\DVRI'HFHPEHUZDVPLOOLRQDQGQRERUURZLQJVZHUHRXWVWDQGLQJXQGHU WKH6XSSOHPHQWDO)DFLOLW\ • LQFUHDVHGWKHERUURZLQJFDSDFLW\RIWKH&RPPHUFLDO3DSHUSURJUDPIURPELOOLRQWRELOOLRQLQ1RYHPEHU WKHRXWVWDQGLQJDPRXQWRI&RPPHUFLDO3DSHUQRWHVDVRI'HFHPEHUZDVPLOOLRQDQG • SURYLGHGDQQXDOUHSRUWVFRQWDLQLQJILQDQFLDOVWDWHPHQWVDXGLWHGE\RXULQGHSHQGHQWUHJLVWHUHGSXEOLFDFFRXQWLQJ ILUPDQGTXDUWHUO\UHSRUWVFRQWDLQLQJXQDXGLWHGILQDQFLDOVWDWHPHQWVWRRXUVHFXULW\KROGHUV (PSOR\HHV $W'HFHPEHUZHDQGRXUDIILOLDWHVHPSOR\HGDSSUR[LPDWHO\SHUVRQVDWYDULRXVSURSHUWLHVDQGRIILFHV WKURXJKRXWWKH8QLWHG6WDWHVRIZKLFKDSSUR[LPDWHO\ZHUHSDUWWLPH$SSUR[LPDWHO\RIWKHVHHPSOR\HHVZHUH ORFDWHGDWRXUFRUSRUDWHKHDGTXDUWHUVLQ,QGLDQDSROLV,QGLDQD &RUSRUDWH+HDGTXDUWHUV 2XU FRUSRUDWH KHDGTXDUWHUV DUH ORFDWHG DW :HVW :DVKLQJWRQ 6WUHHW ,QGLDQDSROLV ,QGLDQD DQG RXU WHOHSKRQHQXPEHULV $YDLODEOH,QIRUPDWLRQ 6LPRQLVDODUJHDFFHOHUDWHGILOHU DVGHILQHGLQ5XOHERIWKH6HFXULWLHV([FKDQJH$FWRIDVDPHQGHG RUWKH([FKDQJH$FW DQGLVUHTXLUHGSXUVXDQWWR,WHPRI5HJXODWLRQ6.WRSURYLGHFHUWDLQLQIRUPDWLRQUHJDUGLQJRXU ZHEVLWHDQGWKHDYDLODELOLW\RIFHUWDLQGRFXPHQWVILOHGZLWKRUIXUQLVKHGWRWKH6HFXULWLHVDQG([FKDQJH&RPPLVVLRQRUWKH 6(&2XU,QWHUQHWZHEVLWHDGGUHVVLVZZZVLPRQFRP2XUDQQXDOUHSRUWVRQ)RUP.TXDUWHUO\UHSRUWVRQ)RUP4 FXUUHQWUHSRUWVRQ)RUP.DQGDPHQGPHQWVWRWKRVHUHSRUWVILOHGRUIXUQLVKHGSXUVXDQWWR6HFWLRQ D RU G RIWKH ([FKDQJH$FWDUHDYDLODEOHRUPD\EHDFFHVVHGIUHHRIFKDUJHWKURXJKWKH³$ERXW6LPRQ,QYHVWRU5HODWLRQV´VHFWLRQRI RXU,QWHUQHWZHEVLWHDVVRRQDVUHDVRQDEO\SUDFWLFDEOHDIWHUZHHOHFWURQLFDOO\ILOHVXFKPDWHULDOZLWKRUIXUQLVKLWWRWKH 6(&2XU,QWHUQHWZHEVLWHDQGWKHLQIRUPDWLRQFRQWDLQHGWKHUHLQRUFRQQHFWHGWKHUHWRDUHQRWDQGDUHQRWLQWHQGHGWREH LQFRUSRUDWHGLQWRWKLV$QQXDO5HSRUWRQ)RUP. 7KHIROORZLQJFRUSRUDWHJRYHUQDQFHGRFXPHQWVDUHDOVRDYDLODEOHWKURXJKWKH³$ERXW6LPRQ,QYHVWRU5HODWLRQV *RYHUQDQFH´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¶VH[HFXWLYHRIILFHUVDVRI)HEUXDU\ 1DPH $JH 3RVLWLRQ 'DYLG6LPRQ &KDLUPDQRIWKH%RDUG&KLHI([HFXWLYH2IILFHUDQG3UHVLGHQW -RKQ5XOOL 3UHVLGHQWRI0DOOVDQG&KLHI$GPLQLVWUDWLYH2IILFHU 6WHYHQ()LYHO *HQHUDO&RXQVHODQG6HFUHWDU\ %ULDQ-0F'DGH ([HFXWLYH9LFH3UHVLGHQW&KLHI)LQDQFLDO2IILFHUDQG7UHDVXUHU $OH[DQGHU/:6Q\GHU $VVLVWDQW*HQHUDO&RXQVHODQG$VVLVWDQW6HFUHWDU\ $GDP-5HXLOOH 6HQLRU9LFH3UHVLGHQWDQG&KLHI$FFRXQWLQJ2IILFHU 7KHH[HFXWLYHRIILFHUVRI6LPRQVHUYHDWWKHSOHDVXUHRI6LPRQ¶V%RDUGRI'LUHFWRUVH[FHSWIRU'DYLG6LPRQZKRLV VXEMHFWWRDQHPSOR\PHQWDJUHHPHQWZKLFKPD\FDOOIRUFHUWDLQSD\PHQWVXSRQWHUPLQDWLRQ 0U6LPRQKDVVHUYHGDVWKH&KDLUPDQRI6LPRQ¶V%RDUGRI'LUHFWRUVVLQFH&KLHI([HFXWLYH2IILFHURI6LPRQ RULWVSUHGHFHVVRUVLQFHDQGDVVXPHGWKHSRVLWLRQRI3UHVLGHQWLQ0U6LPRQKDVDOVREHHQDGLUHFWRURI6LPRQ RULWVSUHGHFHVVRUVLQFHLWVLQFRUSRUDWLRQLQ0U6LPRQZDVWKH3UHVLGHQWRI6LPRQ¶VSUHGHFHVVRUIURPWR )URPWR0U6LPRQZDV9LFH3UHVLGHQWRI:DVVHUVWHLQ3HUHOOD &RPSDQ\)URPWRKHZDVDQ $VVRFLDWHDW)LUVW%RVWRQ&RUS+HLVWKHVRQRIWKHODWH0HOYLQ6LPRQDQGWKHQHSKHZRI+HUEHUW6LPRQ 0U5XOOLVHUYHVDV6LPRQ¶V3UHVLGHQWRI0DOOVDQG&KLHI$GPLQLVWUDWLYH2IILFHU0U5XOOLMRLQHG0HOYLQ6LPRQ $VVRFLDWHV ,QF RU 06$ LQ DQG KHOG YDULRXV SRVLWLRQV ZLWK 06$ DQG 6LPRQ WKHUHDIWHU 0U5XOOL EHFDPH &KLHI $GPLQLVWUDWLYH2IILFHULQDQGZDVSURPRWHGWR6HQLRU([HFXWLYH9LFH3UHVLGHQWLQ0U5XOOLZDVSURPRWHGWR 3UHVLGHQWRI0DOOVLQ 0U)LYHOVHUYHVDV6LPRQ¶V*HQHUDO&RXQVHODQG6HFUHWDU\3ULRUWRUHMRLQLQJ6LPRQLQDV$VVLVWDQW*HQHUDO &RXQVHO DQG $VVLVWDQW 6HFUHWDU\ 0U)LYHO VHUYHG DV ([HFXWLYH 9LFH 3UHVLGHQW *HQHUDO &RXQVHO DQG 6HFUHWDU\ RI %ULJKWSRLQW,QF0U)LYHOZDVSUHYLRXVO\HPSOR\HGE\06$IURPXQWLODQGWKHQE\6LPRQIURPWR 0U)LYHOZDVSURPRWHGWR*HQHUDO&RXQVHODQG6HFUHWDU\LQ 0U0F'DGHVHUYHVDV6LPRQ¶V([HFXWLYH9LFH3UHVLGHQW&KLHI)LQDQFLDO2IILFHUDQG7UHDVXUHU0U0F'DGHMRLQHG 6LPRQLQDVWKH'LUHFWRURI&DSLWDO0DUNHWVDQGZDVSURPRWHGWR6HQLRU9LFH3UHVLGHQWRI&DSLWDO0DUNHWVLQ 0U0F'DGHEHFDPH7UHDVXUHULQDQGZDVSURPRWHGWR([HFXWLYH9LFH3UHVLGHQWDQG&KLHI)LQDQFLDO2IILFHULQ 0U6Q\GHUVHUYHVDV6LPRQ¶V$VVLVWDQW*HQHUDO&RXQVHODQG$VVLVWDQW6HFUHWDU\0U6Q\GHUMRLQHG6LPRQLQ DV6HQLRU'HSXW\*HQHUDO&RXQVHO,PPHGLDWHO\SULRUWRMRLQLQJ6LPRQ0U6Q\GHUZDV0DQDJLQJ3DUWQHURIWKH&ULPVRQ )XOFUXP6WUDWHJLF,QVWLWXWH0U6Q\GHUSUHYLRXVO\VHUYHGDV([HFXWLYH9LFH3UHVLGHQW*HQHUDO&RXQVHODQG&RUSRUDWH 6HFUHWDU\IRU%HHFKFUDIW&RUSRUDWLRQDVZHOODV&KLHI&RXQVHO0HUJHUV $FTXLVLWLRQVIRU.RFK,QGXVWULHV,QF0U6Q\GHU ZDVSURPRWHGWR$VVLVWDQW*HQHUDO&RXQVHODQG$VVLVWDQW6HFUHWDU\LQ 0U5HXLOOHVHUYHVDV6LPRQ¶V6HQLRU9LFH3UHVLGHQWDQG&KLHI$FFRXQWLQJ2IILFHUDQGSULRUWRWKDWDV6LPRQ¶V9LFH 3UHVLGHQWDQG&RUSRUDWH&RQWUROOHU0U5HXLOOHMRLQHG6LPRQLQDQGZDVSURPRWHGWR6HQLRU9LFH3UHVLGHQWDQG&KLHI $FFRXQWLQJ2IILFHULQ ,WHP$5LVN)DFWRUV The following factors, among others, could cause our actual results to differ materially from those expressed or implied in forward - looking statements made in this Annual Report on Form 10 - K and presented elsewhere by our management from time to time. These factors may have a material adverse effect on our business, financial condition, liquidity, results of operations, funds from operations, or FFO, and prospects, which we refer to herein as a material adverse effect on us or as materially and adversely affecting us, and you should carefully consider them. Additional risks and uncertainties not presently known to us or which are currently not believed to be material may also affect our actual results. We may update these factors in our future periodic reports. 5LVNV5HODWLQJWR5HWDLO2SHUDWLRQV Conditions that adversely affect the general retail environment could materially and adversely affect us. 2XUFRQFHQWUDWLRQLQWKHUHWDLOUHDOHVWDWHPDUNHW±RXUSULPDU\VRXUFHRIUHYHQXHLVUHWDLOWHQDQWV±PHDQVWKDWZH FRXOG EH PDWHULDOO\ DQG DGYHUVHO\ DIIHFWHG E\ FRQGLWLRQV WKDW PDWHULDOO\ DQG DGYHUVHO\ DIIHFW WKH UHWDLO HQYLURQPHQW JHQHUDOO\LQFOXGLQJZLWKRXWOLPLWDWLRQ • OHYHOV RI FRQVXPHU VSHQGLQJ FKDQJHV LQ FRQVXPHU FRQILGHQFH LQFRPH OHYHOV DQG IOXFWXDWLRQV LQ VHDVRQDO VSHQGLQJLQWKH8QLWHG6WDWHVDQGLQWHUQDWLRQDOO\ • FRQVXPHUSHUFHSWLRQVRIWKHVDIHW\FRQYHQLHQFHDQGDWWUDFWLYHQHVVRIRXUSURSHUWLHV • WKHLPSDFWRQRXUUHWDLOWHQDQWVDQGGHPDQGIRUUHWDLOVSDFHDWRXUSURSHUWLHVIURPWKHLQFUHDVLQJXVHRIWKH ,QWHUQHWE\UHWDLOHUVDQGFRQVXPHUV • WKHFUHGLWZRUWKLQHVVRIRXUUHWDLOWHQDQWVDQGWKHDYDLODELOLW\RIQHZFUHGLWZRUWK\WHQDQWVDQGWKHUHODWHGLPSDFW RQRXURFFXSDQF\OHYHOVDQGUHQWDOUHYHQXHV • ORFDOUHDOHVWDWHFRQGLWLRQVVXFKDVDQRYHUVXSSO\RIRUUHGXFWLRQLQGHPDQGIRUUHWDLOVSDFHRUUHWDLOJRRGV GHFUHDVHVLQUHQWDOUDWHVDQGGHFOLQHVLQUHDOHVWDWHYDOXHV • WKHZLOOLQJQHVVRIUHWDLOHUVWROHDVHVSDFHLQRXUSURSHUWLHVDWDWWUDFWLYHUHQWVRUDWDOO • FKDQJHVLQ HFRQRPLF FRQGLWLRQV ZKLFK FDQ UHVXOW IURP JOREDO HYHQWV VXFK DV LQWHUQDWLRQDO WUDGH GLVSXWHV D IRUHLJQGHEWFULVLVIRUHLJQFXUUHQF\YRODWLOLW\QDWXUDOGLVDVWHUVZDUFLYLOXQUHVWDQGWHUURULVPDVZHOODVIURP GRPHVWLFLVVXHVVXFKDVJRYHUQPHQWSROLFLHVDQGUHJXODWLRQVWDULIIVHQHUJ\SULFHVPDUNHWG\QDPLFVULVLQJ LQWHUHVWUDWHVDQGOLPLWHGJURZWKLQFRQVXPHULQFRPH • LQFUHDVHG RSHUDWLQJ FRVWV DQG FDSLWDO H[SHQGLWXUHV ZKHWKHU IURP UHGHYHORSPHQWV UHSODFLQJ WHQDQWV RU RWKHUZLVHDQG • FKDQJHVLQDSSOLFDEOHODZVDQGUHJXODWLRQVLQFOXGLQJWD[HQYLURQPHQWDOVDIHW\DQG]RQLQJ Some of our properties depend on anchor stores or other large nationally recognized tenants to attract shoppers and we could be materially and adversely affected by the loss of one or more of these anchors or tenants. 2XUSURSHUWLHVDUHW\SLFDOO\DQFKRUHGE\GHSDUWPHQWVWRUHVDQGRWKHUODUJHQDWLRQDOO\UHFRJQL]HGWHQDQWV&HUWDLQ RIRXUDQFKRUVDQGRWKHUWHQDQWVKDYHFHDVHGWKHLURSHUDWLRQVGRZQVL]HGWKHLUEULFNDQGPRUWDUSUHVHQFHRUIDLOHGWR FRPSO\ZLWKWKHLUFRQWUDFWXDOREOLJDWLRQVWRXVDQGRWKHUV )RU H[DPSOH DPRQJ GHSDUWPHQW VWRUHV DQG RWKHU QDWLRQDO UHWDLOHUV ² RIWHQ UHIHUUHG WR DV ³ELJ ER[´ VWRUHV ²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e face potential adverse effects from tenant bankruptcies. %DQNUXSWF\ILOLQJVE\UHWDLOHUVFDQRFFXUUHJXODUO\LQWKHFRXUVHRIRXURSHUDWLRQV,IDWHQDQWILOHVIRUEDQNUXSWF\WKH WHQDQWPD\KDYHWKHULJKWWRUHMHFWDQGWHUPLQDWHRQHRUPRUHRILWVOHDVHVZLWKXVDQGZHFDQQRWEHVXUHWKDWLWZLOODIILUP RQHRUPRUHRILWVOHDVHVDQGFRQWLQXHWRPDNHUHQWDOSD\PHQWVWRXVLQDWLPHO\PDQQHU$EDQNUXSWF\ILOLQJE\RUUHODWLQJ WRRQHRIRXUWHQDQWVZRXOGJHQHUDOO\SURKLELWXVIURPHYLFWLQJWKLVWHQDQWDQGEDUDOOHIIRUWVE\XVWRFROOHFWSUHEDQNUXSWF\ GHEWVIURPWKDWWHQDQWRUIURPWKHLUSURSHUW\XQOHVVZHUHFHLYHDQRUGHUSHUPLWWLQJXVWRGRVRIURPWKHEDQNUXSWF\FRXUW ,QDGGLWLRQZHFDQQRWHYLFWDWHQDQWVROHO\EHFDXVHRILWVEDQNUXSWF\,IDOHDVHLVDVVXPHGE\WKHWHQDQWLQEDQNUXSWF\ DOOSUHEDQNUXSWF\EDODQFHVGXHXQGHUWKHOHDVHPXVWEHSDLGWRXVLQIXOO,IDOHDVHLVUHMHFWHGWKHXQVHFXUHGFODLPZH KROGDJDLQVWDEDQNUXSWWHQDQWPLJKWEHSDLGRQO\WRWKHH[WHQWWKDWIXQGVDUHDYDLODEOHDQGRQO\LQWKHVDPHSHUFHQWDJH DVLVSDLGWRDOORWKHUKROGHUVRIXQVHFXUHGFODLPVDQGWKHUHDUHUHVWULFWLRQVXQGHUEDQNUXSWF\ODZVWKDWOLPLWWKHDPRXQW RIWKHFODLPZHFDQPDNHLIDOHDVHLVUHMHFWHG$VDUHVXOWLWLVOLNHO\WKDWZHZRXOGUHFRYHUVXEVWDQWLDOO\OHVVWKDQWKHIXOO YDOXHRIDQ\XQVHFXUHGFODLPVZHKROG,QDGGLWLRQZHPD\PDNHOHDVHPRGLILFDWLRQVHLWKHUSUHRUSRVWEDQNUXSWF\IRU FHUWDLQWHQDQWVXQGHUJRLQJVLJQLILFDQWILQDQFLDOGLVWUHVVLQRUGHUIRUWKHPWRFRQWLQXHDVDJRLQJFRQFHUQ)XUWKHUPRUHZH PD\ EH UHTXLUHG WR LQFXU VLJQLILFDQW H[SHQVH LQ UHWHQDQWLQJ WKH VSDFH IRUPHUO\ OHDVHG WR WKH EDQNUXSW WHQDQW :H FRQWLQXDOO\VHHNWRUHOHDVHYDFDQWVSDFHVUHVXOWLQJIURPWHQDQWWHUPLQDWLRQV7KHEDQNUXSWF\RIDWHQDQWSDUWLFXODUO\DQ DQFKRUWHQDQWRUDQDWLRQDOWHQDQWZLWKPXOWLSOHORFDWLRQVPD\UHTXLUHDVXEVWDQWLDOUHGHYHORSPHQWRIWKHLUVSDFHWKH VXFFHVVRIZKLFKFDQQRWEHDVVXUHGDQGPD\PDNHWKHUHWHQDQWLQJRIWKHLUVSDFHGLIILFXOWDQGFRVWO\DQGLWDOVRPD\EH PRUH GLIILFXOW WR OHDVH WKH UHPDLQGHU RI WKH VSDFH DW WKH DIIHFWHG SURSHUW\ )XWXUH WHQDQW EDQNUXSWFLHV PD\ VWUDLQ RXU UHVRXUFHVDQGLPSDFWRXUDELOLW\WRVXFFHVVIXOO\H[HFXWHRXUUHOHDVLQJVWUDWHJ\DQGFRXOGPDWHULDOO\DQGDGYHUVHO\DIIHFW XV We face a wide range of competition that could affect our ability to operate profitably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xcess space at our properties could materially and adversely affect us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e may not be able to lease newly developed properties and renew leases and relet space at existing properties. :HPD\QRWEHDEOHWROHDVHQHZSURSHUWLHVWRDQDSSURSULDWHPL[RIWHQDQWVWKDWJHQHUDWHVRSWLPDOFXVWRPHUWUDIILF $OVRZKHQOHDVHVIRURXUH[LVWLQJSURSHUWLHVH[SLUHWKHSUHPLVHVPD\QRWEHUHOHWRUWKHWHUPVRIUHOHWWLQJLQFOXGLQJWKH FRVWRIDOORZDQFHVDQGFRQFHVVLRQVWRWHQDQWVPD\EHOHVVIDYRUDEOHWKDQWKHFXUUHQWOHDVHWHUPV,IZHHOHFWWRSXUVXHD ³PL[HGXVH´UHGHYHORSPHQWZHH[SRVHRXUVHOYHVWRULVNVDVVRFLDWHGZLWKHDFKQRQUHWDLOXVH HJRIILFHUHVLGHQWLDOKRWHO DQGHQWHUWDLQPHQW 7RWKHH[WHQWWKDWRXUOHDVLQJJRDOVDUHQRWDFKLHYHGZHFRXOGEHPDWHULDOO\DQGDGYHUVHO\DIIHFWHG 5LVNV5HODWLQJWR5HDO(VWDWH,QYHVWPHQWVDQG2SHUDWLRQV Our international activities may subject us to different or greater risk from those associated with our domestic operations. $VRI'HFHPEHUZHKHOGLQWHUHVWVLQFRQVROLGDWHGDQGMRLQWYHQWXUHSURSHUWLHVWKDWRSHUDWHLQ$XVWULD &DQDGD)UDQFH,WDO\*HUPDQ\-DSDQ0DOD\VLD0H[LFRWKH1HWKHUODQGV6RXWK.RUHDDQGWKH8QLWHG.LQJGRP:H DOVRKDYHDQHTXLW\VWDNHLQ.Op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• DGYHUVHHIIHFWVRIFKDQJHVLQH[FKDQJHUDWHVIRUIRUHLJQFXUUHQFLHV • FKDQJHVLQIRUHLJQSROLWLFDODQGHFRQRPLFHQYLURQPHQWVUHJLRQDOO\QDWLRQDOO\DQGORFDOO\ • LPSDFWIURPLQWHUQDWLRQDOWUDGHGLVSXWHVDQGWKHDVVRFLDWHGLPSDFWRQRXUWHQDQWV¶VXSSO\FKDLQDQGFRQVXPHU VSHQGLQJOHYHOV • FKDOOHQJHVRIFRPSO\LQJZLWKDZLGHYDULHW\RIIRUHLJQODZVLQFOXGLQJFRUSRUDWHJRYHUQDQFHRSHUDWLRQVWD[HV DQGOLWLJDWLRQ • GLIIHULQJOHQGLQJSUDFWLFHV • GLIIHUHQFHVLQFXOWXUHV • FKDQJHVLQDSSOLFDEOHODZVDQGUHJXODWLRQVLQWKH8QLWHG6WDWHVWKDWDIIHFWLQWHUQDWLRQDORSHUDWLRQV • FKDQJHVLQDSSOLFDEOHODZVDQGUHJXODWLRQVLQWKHVHIRUHLJQMXULVGLFWLRQV • GLIILFXOWLHVLQPDQDJLQJLQWHUQDWLRQDORSHUDWLRQVDQG • REVWDFOHVWRWKHUHSDWULDWLRQRIHDUQLQJVDQGFDVK 2XU LQWHUQDWLRQDO DFWLYLWLHV UHSUHVHQWHG DSSUR[LPDWHO\ RI FRQVROLGDWHG QHW LQFRPH DQG RI RXU QHW RSHUDWLQJLQFRPHRU12,IRUWKH\HDUHQGHG'HFHPEHU7RWKHH[WHQWWKDWZHH[SDQGRXULQWHUQDWLRQDODFWLYLWLHV WKHDERYHULVNVFRXOGLQFUHDVHLQVLJQLILFDQFHZKLFKLQWXUQFRXOGKDYHDPDWHULDODGYHUVHHIIHFWRQXV We face risks associated with the acquisition, development, redevelopment and expansion of properties. :HUHJXODUO\DFTXLUHDQGGHYHORSQHZSURSHUWLHVDQGUHGHYHORSDQGH[SDQGH[LVWLQJSURSHUWLHVDQGWKHVHDFWLYLWLHV DUHVXEMHFWWRYDULRXVULVNV:HPD\QRWEHVXFFHVVIXOLQSXUVXLQJDFTXLVLWLRQGHYHORSPHQWRUUHGHYHORSPHQWH[SDQVLRQ RSSRUWXQLWLHV ,Q DGGLWLRQ QHZO\ DFTXLUHG GHYHORSHG RU UHGHYHORSHGH[SDQGHG SURSHUWLHV PD\ QRW SHUIRUP DV ZHOO DV H[SHFWHGLPSDFWLQJRXUDQWLFLSDWHGUHWXUQRQLQYHVWPHQW:HDUHVXEMHFWWRRWKHUULVNVLQFRQQHFWLRQZLWKDQ\DFTXLVLWLRQ GHYHORSPHQWDQGUHGHYHORSPHQWH[SDQVLRQDFWLYLWLHVLQFOXGLQJWKHIROORZLQJ • DFTXLVLWLRQ RU FRQVWUXFWLRQ FRVWV RI D SURMHFW PD\ EH KLJKHU WKDQ SURMHFWHG SRWHQWLDOO\ PDNLQJ WKH SURMHFW XQIHDVLEOHRUXQSURILWDEOH • GHYHORSPHQW UHGHYHORSPHQW RU H[SDQVLRQV PD\ WDNH FRQVLGHUDEO\ ORQJHU WKDQ H[SHFWHG GHOD\LQJ WKH FRPPHQFHPHQWDQGDPRXQWRILQFRPHIURPWKHSURSHUW\ • ZHPD\QRWEHDEOHWRREWDLQILQDQFLQJRUWRUHILQDQFHORDQVRQIDYRUDEOHWHUPVRUDWDOO • ZHPD\EHXQDEOHWRREWDLQ]RQLQJRFFXSDQF\RURWKHUJRYHUQPHQWDODSSURYDOV • RFFXSDQF\UDWHVDQGUHQWVPD\QRWPHHWRXUSURMHFWLRQVDQGWKHSURMHFWPD\QRWEHDFFUHWLYHDQG • ZHPD\QHHGWKHFRQVHQWRIWKLUGSDUWLHVVXFKDVGHSDUWPHQWVWRUHVDQFKRUWHQDQWVPRUWJDJHOHQGHUVDQGMRLQW YHQWXUHSDUWQHUVDQGWKRVHFRQVHQWVPD\EHZLWKKHOG ,I D GHYHORSPHQW RU UHGHYHORSPHQWH[SDQVLRQ SURMHFW LV XQVXFFHVVIXO HLWKHU EHFDXVH LW LV QRW PHHWLQJ RXU H[SHFWDWLRQVZKHQRSHUDWLRQDORUZDVQRWFRPSOHWHGDFFRUGLQJWRWKHSURMHFWSODQQLQJZHFRXOGORVHRXULQYHVWPHQWLQWKH SURMHFW)XUWKHULIZHJXDUDQWHHWKHSURSHUW\¶VILQDQFLQJRXUORVVFRXOGH[FHHGRXULQYHVWPHQWLQWKHSURMHFW ,Q WKH HYHQW WKDW WKHVH ULVNVZHUH UHDOL]HG DW WKH VDPH WLPH DW PXOWLSOH SURSHUWLHV ZH FRXOG EH PDWHULDOO\ DQG DGYHUVHO\DIIHFWHG Real estate investments are relatively illiquid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e have a substantial debt burden that could affect our future operations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he agreements that govern our indebtedness contain various covenants that impose restrictions on us that might affect our ability to operate freely. :HKDYHDYDULHW\RIXQVHFXUHGGHEWLQFOXGLQJWKH&UHGLW)DFLOLWLHVVHQLRUXQVHFXUHGQRWHVDQGFRPPHUFLDOSDSHU DQGVHFXUHGSURSHUW\OHYHOGHEW&HUWDLQRIWKHDJUHHPHQWVWKDWJRYHUQRXULQGHEWHGQHVVFRQWDLQFRYHQDQWVLQFOXGLQJ DPRQJRWKHUWKLQJVOLPLWDWLRQVRQRXUDELOLW\WRLQFXUVHFXUHGDQGXQVHFXUHGLQGHEWHGQHVVVHOODOORUVXEVWDQWLDOO\DOORI RXU DVVHWV DQG HQJDJH LQ PHUJHUV DQG FHUWDLQ DFTXLVLWLRQV ,Q DGGLWLRQ FHUWDLQ RI WKH DJUHHPHQWV WKDW JRYHUQ RXU LQGHEWHGQHVVFRQWDLQILQDQFLDOFRYHQDQWVWKDWUHTXLUHXVWRPDLQWDLQFHUWDLQILQDQFLDOUDWLRVLQFOXGLQJFHUWDLQFRYHUDJH UDWLRV7KHVHFRYHQDQWVPD\UHVWULFWRXUDELOLW\WRSXUVXHFHUWDLQEXVLQHVVLQLWLDWLYHVRUFHUWDLQWUDQVDFWLRQVWKDWPLJKW RWKHUZLVHEHDGYDQWDJHRXVWRXV,QDGGLWLRQRXUDELOLW\WRFRPSO\ZLWKWKHVHSURYLVLRQVPLJKWEHDIIHFWHGE\HYHQWVEH\RQG RXUFRQWURO)DLOXUHWRFRPSO\ZLWKDQ\RIRXUILQDQFLQJFRYHQDQWVFRXOGUHVXOWLQDQHYHQWRIGHIDXOWZKLFKLIQRWFXUHGRU ZDLYHG FRXOG DFFHOHUDWH WKH UHODWHG LQGHEWHGQHVV DV ZHOO DV RWKHU RI RXU LQGHEWHGQHVV ZKLFK FRXOG KDYH D PDWHULDO DGYHUVHHIIHFWRQXV Disruption in the capital and credit markets may adversely affect our ability to access external financings for our growth and ongoing debt service requirements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dverse changes in our credit rating could affect our borrowing capacity and borrowing terms. 7KH2SHUDWLQJ3DUWQHUVKLS¶VRXWVWDQGLQJVHQLRUXQVHFXUHGQRWHV&UHGLW)DFLOLWLHVWKH&RPPHUFLDO3DSHUSURJUDP DQG6LPRQ¶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n increase in interest rates would increase our interest costs on variable rate debt and could adversely impact our ability to refinance existing debt on attractive terms, or at all; our hedging interest rate protection arrangements may not effectively limit our interest rate risk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imon and certain subsidiaries of the Operating Partnership have elected to be taxed as REITs in the United States and certain international operations also are structured to be taxed in a manner similar to the REIT structure. The failure to maintain Simon’s or these subsidiaries’ qualifications as REITs or changes in local tax laws or regulations in certain of our international operations could result in adverse tax consequences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• 6LPRQRUDQ\VXFKVXEVLGLDU\ZLOOQRWEHDOORZHGDGHGXFWLRQIRUGLVWULEXWLRQVWRVWRFNKROGHUVLQFRPSXWLQJWD[DEOH LQFRPH • 6LPRQRUDQ\VXFKVXEVLGLDU\ZLOOEHVXEMHFWWRFRUSRUDWHOHYHOLQFRPHWD[RQWD[DEOHLQFRPHDWWKHFRUSRUDWH UDWHDQG •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he tax imposed on REITs engaging in “prohibited transactions” may limit our ability to engage in transactions which would be treated as sales for U.S. federal income tax purposes. $5(,7¶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distribution requirements could adversely affect our liquidity and our ability to execute our business plan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³WKHUHTXLUHGPLQLPXPGLVWULEXWLRQDPRXQW´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omplying with REIT requirements might cause us to forego otherwise attractive acquisition opportunities or liquidate otherwise attractive investments. 7R TXDOLI\ WR EH WD[HG DV 5(,7V IRU 86 IHGHUDO LQFRPH WD[ SXUSRVHV 6LPRQ DQG FHUWDLQ VXEVLGLDULHV RI WKH 2SHUDWLQJ3DUWQHUVKLSPXVWHQVXUHWKDWDWWKHHQGRIHDFKFDOHQGDUTXDUWHUDWOHDVWRIWKHYDOXHRIWKHLUUHVSHFWLYH DVVHWVFRQVLVWRIFDVKFDVKLWHPVJRYHUQPHQWVHFXULWLHVDQG³UHDOHVWDWHDVVHWV´ DVGHILQHGLQWKH,QWHUQDO5HYHQXH &RGH LQFOXGLQJ FHUWDLQ PRUWJDJH ORDQV DQG VHFXULWLHV 7KH UHPDLQGHU RI WKHLU UHVSHFWLYH LQYHVWPHQWV RWKHU WKDQ JRYHUQPHQWVHFXULWLHVTXDOLILHGUHDOHVWDWHDVVHWVDQGVHFXULWLHVLVVXHGE\DWD[DEOH5(,7VXEVLGLDU\RU756 JHQHUDOO\ FDQQRWLQFOXGHPRUHWKDQRIWKHRXWVWDQGLQJYRWLQJVHFXULWLHVRIDQ\RQHLVVXHURUPRUHWKDQRIWKHWRWDOYDOXHRI WKHRXWVWDQGLQJVHFXULWLHVRIDQ\RQHLVVXHU $GGLWLRQDOO\LQJHQHUDOQRPRUHWKDQRIWKHYDOXHRI6LPRQ¶VDQGWKHVHVXEVLGLDULHV¶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artnership tax audit rules could have a material adverse effect on us. 7KH%LSDUWLVDQ%XGJHW$FWRIFKDQJHVWKHUXOHVDSSOLFDEOHWR86IHGHUDOLQFRPHWD[DXGLWVRISDUWQHUVKLSV 8QGHUWKHUXOHVDPRQJRWKHUFKDQJHVDQGVXEMHFWWRFHUWDLQH[FHSWLRQVDQ\DXGLWDGMXVWPHQWWRLWHPVRILQFRPHJDLQ ORVVGHGXFWLRQRUFUHGLWRIDSDUWQHUVKLS DQGDQ\SDUWQHU¶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egislative, administrative, regulatory or other actions affecting REITs, including positions taken by the IRS, could have a material adverse effect on us and our investors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¶VDGMXVWHGWD[DEOHLQFRPHH[FHSWIRU WD[SD\HUVWKDWHQJDJHLQFHUWDLQUHDOHVWDWHEXVLQHVVHVDQGHOHFWRXWRIWKLVUXOH SURYLGHGWKDWVXFKHOHFWLQJWD[SD\HUV PXVWXVHDQDOWHUQDWLYHGHSUHFLDWLRQV\VWHPIRUFHUWDLQSURSHUW\ 5LVNV5HODWLQJWR-RLQW9HQWXUHV We have limited control with respect to some properties that are partially owned or managed by third parties, which may adversely affect our ability to sell or refinance them. $VRI'HFHPEHUZHRZQHGLQWHUHVWVLQLQFRPHSURGXFLQJSURSHUWLHVZLWKRWKHUSDUWLHV2IWKRVH SURSHUWLHVDUHLQFOXGHGLQRXUFRQVROLGDWHGILQDQFLDOVWDWHPHQWV:HDFFRXQWIRUWKHRWKHUSURSHUWLHVRUWKHMRLQWYHQWXUH SURSHUWLHV DV ZHOO DV RXU LQYHVWPHQWV LQ .OpSLHUUH D SXEOLFO\ WUDGHG 3DULVEDVHG UHDO HVWDWH FRPSDQ\ $p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¶DVVHWV7KHUHPDLQLQJMRLQWYHQWXUHSURSHUWLHV.OpSLHUUH DQGRXUMRLQWYHQWXUHVZLWK$p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¶VRIILFHUVDQGRUGLUHFWRUVIURPIRFXVLQJWKHLUWLPHDQGHIIRUWVRQRXU EXVLQHVV&RQVHTXHQWO\DFWLRQVE\RUGLVSXWHVZLWKSDUWQHUVRURWKHURZQHUVPLJKWUHVXOWLQVXEMHFWLQJSURSHUWLHVRZQHG E\WKHSDUWQHUVKLSRUMRLQWYHQWXUHWRDGGLWLRQDOULVN,QDGGLWLRQZHULVNWKHSRVVLELOLW\RIEHLQJOLDEOHIRUWKHDFWLRQVRIRXU SDUWQHUVRURWKHURZQHUV The Operating Partnership guarantees debt or otherwise provides support for a number of joint venture properties. -RLQWYHQWXUHGHEWLVWKHOLDELOLW\RIWKHMRLQWYHQWXUHDQGLVW\SLFDOO\VHFXUHGE\DPRUWJDJHRQWKHMRLQWYHQWXUH SURSHUW\ZKLFKLVQRQUHFRXUVHWRXV1HYHUWKHOHVVWKHMRLQWYHQWXUH¶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s owners of real estate, we can face liabilities for environmental contamination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ur efforts to identify environmental liabilities may not be successful. $OWKRXJKZHEHOLHYHWKDWRXUSRUWIROLRLVLQVXEVWDQWLDOFRPSOLDQFHZLWK86IHGHUDOVWDWHDQGORFDOHQYLURQPHQWDO ODZVDQGUHJXODWLRQVUHJDUGLQJKD]DUGRXVRUWR[LFVXEVWDQFHVWKLVEHOLHILVEDVHGRQOLPLWHGWHVWLQJ1HDUO\DOORIRXU SURSHUWLHVKDYHEHHQVXEMHFWHGWR3KDVH,RUVLPLODUHQYLURQPHQWDODXGLWV7KHVHHQYLURQPHQWDODXGLWVKDYHQRWUHYHDOHG QRUDUHZHDZDUHRIDQ\HQYLURQPHQWDOOLDELOLW\WKDWZHEHOLHYHLVUHDVRQDEO\OLNHO\WRKDYHDPDWHULDODGYHUVHHIIHFWRQXV +RZHYHUZHFDQQRWDVVXUH\RXWKDW • SUHYLRXVHQYLURQPHQWDOVWXGLHVZLWKUHVSHFWWRWKHSRUWIROLRUHYHDODOOSRWHQWLDOHQYLURQPHQWDOOLDELOLWLHV • DQ\SUHYLRXVRZQHURFFXSDQWRUWHQDQWRIDSURSHUW\GLGQRWFUHDWHDQ\PDWHULDOHQYLURQPHQWDOFRQGLWLRQQRW NQRZQWRXV • WKHFXUUHQWHQYLURQPHQWDOFRQGLWLRQRIWKHSRUWIROLRZLOOQRWEHDIIHFWHGE\WHQDQWVDQGRFFXSDQWVE\WKHFRQGLWLRQ RIQHDUE\SURSHUWLHVRUE\RWKHUXQUHODWHGWKLUGSDUWLHVRU • IXWXUHXVHVRUFRQGLWLRQV LQFOXGLQJZLWKRXWOLPLWDWLRQFKDQJHVLQDSSOLFDEOHHQYLURQPHQWDOODZVDQGUHJXODWLRQV RUWKHLQWHUSUHWDWLRQWKHUHRI ZLOOQRWUHVXOWLQHQYLURQPHQWDOOLDELOLWLHV We face risks associated with climate change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³JUHHQ´EXLOGLQJFRGHVPD\UHTXLUHXVWRPDNHLPSURYHPHQWVWRRXUH[LVWLQJSURSHUWLHV RULQFUHDVHWD[HVDQGIHHVDVVHVVHGRQXVRURXUSURSHUWLHV 2WKHU)DFWRUV$IIHFWLQJ2XU%XVLQHVV Some of our potential losses may not be covered by insurance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¶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³DOOULVN´EDVLVLQWKHDPRXQWRIXSWRELOOLRQ'HVSLWHWKHH[LVWHQFHRIWKLVLQVXUDQFHFRYHUDJHDQ\WKUHDWHQHGRU DFWXDOWHUURULVWDWWDFNVZKHUHZHRSHUDWHFRXOGPDWHULDOO\DQGDGYHUVHO\DIIHFWXV We face risks associated with security breaches through cyber - attacks, cyber intrusions or otherwise, as well as other significant disruptions of our information technology (IT) networks and related systems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ur success depends, in part, on our ability to attract and retain talented employees, and the loss of any one of our key personnel could adversely impact our business. 7KHVXFFHVVRIRXUEXVLQHVVGHSHQGVLQSDUWRQWKHOHDGHUVKLSDQGSHUIRUPDQFHRIRXUH[HFXWLYHPDQDJHPHQW WHDPDQGNH\HPSOR\HHVDQGRXUDELOLW\WRDWWUDFWUHWDLQDQGPRWLYDWHWDOHQWHGHPSOR\HHVFRXOGVLJQLILFDQWO\LPSDFWRXU IXWXUHSHUIRUPDQFH&RPSHWLWLRQIRUWKHVHLQGLYLGXDOVLVLQWHQVHDQGZHFDQQRWDVVXUH\RXWKDWZHZLOOUHWDLQRXUH[HFXWLYH PDQDJHPHQWWHDPDQGRWKHUNH\HPSOR\HHVRUWKDWZHZLOOEHDEOHWRDWWUDFWDQGUHWDLQRWKHUKLJKO\TXDOLILHGLQGLYLGXDOV IRUWKHVHSRVLWLRQVLQWKHIXWXUH/RVLQJDQ\RQHRUPRUHRIWKHVHSHUVRQVFRXOGKDYHDPDWHULDODGYHUVHHIIHFWRQXV Provisions in Simon’s charter and by - laws and in the Operating Partnership’s partnership agreement could prevent a change of control. 6LPRQ¶VFKDUWHUFRQWDLQVDJHQHUDOUHVWULFWLRQRQWKHDFFXPXODWLRQRIVKDUHVLQH[FHVVRIRILWVFDSLWDOVWRFN 7KHFKDUWHUSHUPLWVWKHPHPEHUVRIWKH6LPRQIDPLO\DQGUHODWHGSHUVRQVWRRZQXSWRRI6LPRQ¶VFDSLWDOVWRFN 2ZQHUVKLSLVGHWHUPLQHGE\WKHORZHURIWKHQXPEHURIRXWVWDQGLQJVKDUHVYRWLQJSRZHURUYDOXHFRQWUROOHG6LPRQ¶V %RDUG RI 'LUHFWRUV PD\ E\ PDMRULW\ YRWH SHUPLW H[FHSWLRQV WR WKRVH OHYHOVLQ FLUFXPVWDQFHV ZKHUH 6LPRQ¶V %RDUG RI 'LUHFWRUVGHWHUPLQHVWKDW6LPRQ¶VDELOLW\WRTXDOLI\DVD5(,7ZLOOQRWEHMHRSDUGL]HG7KHVHUHVWULFWLRQVRQRZQHUVKLSPD\ KDYHWKHHIIHFWRIGHOD\LQJGHIHUULQJRUSUHYHQWLQJDWUDQVDFWLRQRUDFKDQJHLQFRQWUROWKDWPLJKWRWKHUZLVHEHLQWKHEHVW LQWHUHVWRI6LPRQ¶VVWRFNKROGHUVRUWKH2SHUDWLQJ3DUWQHUVKLS¶VXQLWKROGHUVRUSUHIHUUHGXQLWKROGHUV2WKHUSURYLVLRQVRI 6LPRQ¶VFKDUWHUDQGE\ODZVFRXOGKDYHWKHHIIHFWRIGHOD\LQJRUSUHYHQWLQJDFKDQJHRIFRQWUROHYHQLIVRPHRI6LPRQ¶V VWRFNKROGHUVRUWKH2SHUDWLQJ3DUWQHUVKLS¶VXQLWKROGHUVRUSUHIHUUHGXQLWKROGHUVGHHPVXFKDFKDQJHWREHLQWKHLUEHVW LQWHUHVWV 7KHVH LQFOXGH SURYLVLRQV SUHYHQWLQJ KROGHUV RI 6LPRQ¶V FRPPRQ VWRFN IURP DFWLQJ E\ ZULWWHQ FRQVHQW DQG UHTXLULQJWKDWXSWRIRXUGLUHFWRUVLQWKHDJJUHJDWHPD\EHHOHFWHGE\KROGHUVRI&ODVV%FRPPRQVWRFN,QDGGLWLRQFHUWDLQ SURYLVLRQVRIWKH2SHUDWLQJ3DUWQHUVKLS¶VSDUWQHUVKLSDJUHHPHQWFRXOGKDYHWKHHIIHFWRIGHOD\LQJRUSUHYHQWLQJDFKDQJH RIFRQWURO7KHVHLQFOXGHDSURYLVLRQUHTXLULQJWKHFRQVHQWRIDPDMRULW\LQLQWHUHVWRIXQLWVLQRUGHUIRU6LPRQDVJHQHUDO SDUWQHURIWKH2SHUDWLQJ3DUWQHUVKLSWRDPRQJRWKHUPDWWHUVHQJDJHLQDPHUJHUWUDQVDFWLRQRUVHOODOORUVXEVWDQWLDOO\DOO RILWVDVVHWV The United Kingdom’s pending departure from the European Union could have a material adverse effect on us. )ROORZLQJ D QDWLRQDO UHIHUHQGXP LQ -XQH WKH 8QLWHG .LQJGRP IRUPDOO\ QRWLILHG WKH (XURSHDQ &RXQFLO RQ 0DUFKRILWVLQWHQWLRQWRZLWKGUDZIURPWKH(XURSHDQ8QLRQ ³(8´ FRPPRQO\UHIHUUHGWRDV³%UH[LW´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¶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¶ EXVLQHVVHVDQGFRXOGDPSOLI\WKHFXUUHQF\ULVNVIDFHGE\XV ,WHP%8QUHVROYHG6WDII&RPPHQWV 1RQH ,WHP3URSHUWLHV United States Properties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¶V &RDFK &ROXPELD 6SRUWVZHDU *DS2XWOHW+ 0-&UHZ/HYL V/RIW2XWOHW0LFKDHO.RUV1LNH 3ROR5DOSK/DXUHQ6NHFKHUV7RPP\+LOILJHU8QGHU$UPRXU :LOOLDPVEXUJ3UHPLXP2XWOHWV 9$ :LOOLDPVEXUJ )HH $FTXLUHG $GLGDV$PHULFDQ(DJOH2XWILWWHUV$QQ7D\ORU%DQDQD5HSXEOLF %URRNV %URWKHUV %XUEHUU\ &DOYLQ .OHLQ &RDFK -&UHZ .DWH 6SDGH1HZ 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 3URSHUW\7DEOH 863URSHUWLHV 2ZQHUVKLS,QWHUHVW 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 3URSHUW\7DEOH 863URSHUWLHV 2ZQHUVKLS,QWHUHVW 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 3URSHUW\7DEOH 863URSHUWLHV 2ZQHUVKLS,QWHUHVW Simon Property Group, Inc. Simon Property Group, L.P. Property Table U.S. Properties FOOTNOTES: (1) This property is managed by a third party. (2) Our direct and indirect interests in some of the properties held as joint venture interests are subject to preferences on distributions in favor of other partners or us. (3) The date listed is the expiration date of the last renewal option available to the operating entity under the ground lease. In a majority of the ground leases, we have a right to purchase the lessor’s interest under an option, right of first refusal or other provision. Unless otherwise indicated, each ground lease listed in this column covers at least 50% of its respective property. (4) Joint venture properties accounted for under the equity method. (5) Malls - Executed leases for all company-owned GLA in mall stores, excluding majors and anchors. Premium Outlets and The Mills - Executed leases for all company-owned GLA (or total center GLA). (6) Indicates box, anchor, major or project currently under development/construction or has announced plans for development. (7) Indicates ground lease covers less than 50% of the acreage of this property. (8) Tenant has multiple locations at this center. (9) Indicates ground lease covers outparcel only. (10) Tenant has an existing store at this center but will move to a new location. 35 (11) We receive substantially all the economic benefit of the property due to a preference or advance. (12) We own a mortgage note that encumbers Pheasant Lane Mall that entitles us to 100% of the economics of this property. (13) Indicates anchor has announced its intent to close this location. (14) Indicates box, anchor, major or project currently under development/construction by a third party. (15) Owned by a third party. (16) Includes multi-family tenant on-site. (17) GLA includes office space. Centers with more than 75,000 square feet of office space are listed below: Auburn Mall - 85,619 sq. ft. Circle Centre - 130,635 sq. ft. Copley Place - 893,670 sq. ft. Domain, The - 156,240 sq. ft. Fashion Centre at Pentagon City, The - 169,089 sq. ft. Oxford Valley Mall - 137,791 sq. ft. Shops at Clearfork, The - 142,684 sq. ft. United States Lease Expirations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uropean Investments $W'HFHPEHUZHRZQHGVKDUHVRUDSSUR[LPDWHO\RI.OpSLHUUHZKLFKKDGDTXRWHG PDUNHWSULFHRISHUVKDUH.OpSLHUUHLVDSXEOLFO\WUDGHG3DULVEDVHGUHDOHVWDWHFRPSDQ\ZKLFKRZQVRUKDVDQ LQWHUHVWLQVKRSSLQJFHQWHUVORFDWHGLQFRXQWULHV $VRI'HFHPEHUZHKDGDFRQWUROOLQJLQWHUHVWLQD(XURSHDQLQYHVWHHZLWKLQWHUHVWVLQQLQH'HVLJQHU2XWOHW SURSHUWLHV(LJKWRIWKHRXWOHWSURSHUWLHVDUHORFDWHGLQ(XURSHDQGRQHRXWOHWSURSHUW\LVORFDWHGLQ&DQDGD2IWKHHLJKW SURSHUWLHVLQ(XURSHWZRDUHLQ,WDO\WZRDUHLQWKH1HWKHUODQGVDQGRQHHDFKLVLQ$XVWULD*HUPDQ\)UDQFHDQGWKH 8QLWHG .LQJGRP $V RI 'HFHPEHU RXU OHJDO SHUFHQWDJH RZQHUVKLS LQWHUHVWV LQ WKHVH HQWLWLHV UDQJHG IURPWR :HRZQDLQWHUHVWLQ9DOXH5HWDLO3/&DQGDIILOLDWHGHQWLWLHVZKLFKRZQDQGRSHUDWHQLQHOX[XU\RXWOHWV WKURXJKRXW(XURSH:HDOVRKDYHDPLQRULW\GLUHFWRZQHUVKLSLQWKUHHRIWKRVHRXWOHWV Other International Investments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p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² 5RHUPRQG'HVLJQHU2XWOHW3KDVH 5RHUPRQG )HH $GLGDV .DUO /DJHUILHOG /LX -R /RQJFKDPS 7DJ +HXHU 7RP 7DLORU:RROULFK 5RVDGD'HVLJQHU2XWOHW 5RRVHQGDDO )HH $GLGDV&DOYLQ.OHLQ(VSULW*XHVV1LNH3XPD62OLYHU 6XEWRWDO1HWKHUODQGV 81,7('.,1*'20 $VKIRUG'HVLJQHU2XWOHW .HQW )HH $GLGDV %RVH &DOYLQ .OHLQ &ODUNV )RVVLO )UHQFK &RQQHFWLRQ *DS*XHVV1LNH3ROR5DOSK/DXUHQ6XSHUGU\7RPP\+LOILJHU 6XEWRWDO(QJODQG &$1$'$ 9DQFRXYHU'HVLJQHU2XWOHWV 9DQFRXYHU *URXQG/HDVH $UPDQL&DOYLQ.OHLQ&RDFK*DS.DWH6SDGH1HZ Land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¶SOXJORDGFRQVXPSWLRQVZHUH LQFOXGHGLQ6LPRQ¶VVXVWDLQDELOLW\GLVFORVXUHVLQFHDQGDUHUHSRUWHGLQ6LPRQ¶VDQQXDOVXVWDLQDELOLW\UHSRUWSXEOLVKHG LQDFFRUGDQFHZLWKWKHJXLGHOLQHVRIWKH*OREDO5HSRUWLQJ,QLWLDWLYHV *5, WKHPRVWZLGHO\XVHGLQWHUQDWLRQDOVWDQGDUGIRU VXVWDLQDELOLW\UHSRUWLQJ 6LPRQ¶VVXVWDLQDELOLW\SHUIRUPDQFHZDVRQFHDJDLQUHFRJQL]HGE\LQWHUQDWLRQDORUJDQL]DWLRQV,Q6LPRQZDV DZDUGHGDVFRUHRI$E\&'3LQWKHFOLPDWHFKDQJHTXHVWLRQQDLUHZKLFKLGHQWLILHVWKHFRPSDQ\DVDVXVWDLQDELOLW\OHDGHU IRUGULYLQJVLJQLILFDQWUHGXFWLRQLQHPLVVLRQVLPSOHPHQWLQJVWUDWHJLHVWRPDQDJHFOLPDWHUHODWHGULVNVDQGRSSRUWXQLWLHVDV ZHOODVVHWWLQJFRPSDQ\ZLGHVXVWDLQDELOLW\JRDOV6LPRQZDVDOVRDZDUGHGD*UHHQ6WDUUDQNLQJWKHGHVLJQDWLRQDZDUGHG IRUOHDGHUVKLSLQVXVWDLQDELOLW\SHUIRUPDQFHE\WKH*OREDO5HDO(VWDWH6XVWDLQDELOLW\%HQFKPDUN *5(6% Mortgages and Unsecured Debt 7KHIROORZLQJWDEOHVHWVIRUWKFHUWDLQLQIRUPDWLRQUHJDUGLQJWKHPRUWJDJHVHQFXPEHULQJRXUSURSHUWLHVDQGWKH SURSHUWLHVKHOGE\RXUGRPHVWLFDQGLQWHUQDWLRQDOMRLQWYHQWXUHDUUDQJHPHQWVDQGDOVRRXUXQVHFXUHGFRUSRUDWHGHEW 6XEVWDQWLDOO\DOORIWKHPRUWJDJHDQGSURSHUW\UHODWHGGHEWLVQRQUHFRXUVHWRXV 0RUWJDJHDQG8QVHFXUHG'HEW $VRI'HFHPEHU 'ROODUVLQWKRXVDQGV ,QWHUHVW )DFH $QQXDO'HEW 0DWXULW\ 3URSHUW\1DPH 5DWH $PRXQW 6HUYLFH 'DWH Consolidated Indebtedness: Secured Indebtedness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pDO 4XDNHU%ULGJH0DOO 4XHUp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¶V&RPPRQ(TXLW\5HODWHG6WRFNKROGHU0DWWHUVDQG,VVXHU3XUFKDVHVRI(TXLW\ 6HFXULWLHV Simon Market Information 6LPRQ¶VFRPPRQVWRFNWUDGHVRQWKH1HZ Holders 7KHQXPEHURIKROGHUVRIUHFRUGRIFRPPRQVWRFNRXWVWDQGLQJZDVDVRI)HEUXDU\7KH&ODVV% FRPPRQVWRFNLVVXEMHFWWRWZRYRWLQJWUXVWVDVWRZKLFK+HUEHUW6LPRQDQG'DYLG6LPRQDUHWKHWUXVWHHV6KDUHVRI &ODVV%FRPPRQVWRFNFRQYHUWDXWRPDWLFDOO\LQWRDQHTXDOQXPEHURIVKDUHVRIFRPPRQVWRFNXSRQWKHRFFXUUHQFHRI FHUWDLQHYHQWVDQGFDQEHFRQYHUWHGLQWRVKDUHVRIFRPPRQVWRFNDWWKHRSWLRQRIWKHKROGHUV Dividends :HPXVWSD\DPLQLPXPDPRXQWRIGLYLGHQGVWRPDLQWDLQ6LPRQ¶VVWDWXVDVD5(,76LPRQ¶VIXWXUHGLYLGHQGVDQG IXWXUHGLVWULEXWLRQVRIWKH2SHUDWLQJ3DUWQHUVKLSZLOOEHGHWHUPLQHGE\6LPRQ¶V%RDUGRI'LUHFWRUVLQLWVVROHGLVFUHWLRQ EDVHGRQDFWXDODQGSURMHFWHGILQDQFLDOFRQGLWLRQOLTXLGLW\DQGUHVXOWVRIRSHUDWLRQVFDVKDYDLODEOHIRUGLYLGHQGVDQGOLPLWHG SDUWQHUGLVWULEXWLRQVFDVKUHVHUYHVDVGHHPHGQHFHVVDU\IRUFDSLWDODQGRSHUDWLQJH[SHQGLWXUHVILQDQFLQJFRYHQDQWVLI DQ\DQGWKHDPRXQWUHTXLUHGWRPDLQWDLQ6LPRQ¶VVWDWXVDVD5(,7 &RPPRQVWRFNFDVKGLYLGHQGVGXULQJDJJUHJDWHGSHUVKDUH&RPPRQVWRFNFDVKGLYLGHQGVGXULQJ DJJUHJDWHGSHUVKDUH,QWKHILUVWTXDUWHURI6LPRQ¶V%RDUGRI'LUHFWRUVGHFODUHGDTXDUWHUO\FDVKGLYLGHQGRI SHUVKDUHRIFRPPRQVWRFNSD\DEOHRQ)HEUXDU\WRVWRFNKROGHUVRIUHFRUGRQ)HEUXDU\ :HRIIHUDGLYLGHQGUHLQYHVWPHQWSODQWKDWDOORZV6LPRQ¶VVWRFNKROGHUVWRDFTXLUHDGGLWLRQDOVKDUHVE\DXWRPDWLFDOO\ UHLQYHVWLQJFDVKGLYLGHQGV6KDUHVDUHDFTXLUHGSXUVXDQWWRWKHSODQDWDSULFHHTXDOWRWKHSUHYDLOLQJPDUNHWSULFHRIVXFK VKDUHVZLWKRXWSD\PHQWRIDQ\EURNHUDJHFRPPLVVLRQRUVHUYLFHFKDUJH Unregistered Sales of Equity Securities 1RQH Issuances Under Equity Compensation Plans )RULQIRUPDWLRQUHJDUGLQJWKHVHFXULWLHVDXWKRUL]HGIRULVVXDQFHXQGHURXUHTXLW\FRPSHQVDWLRQSODQVVHH,WHP RIWKLV$QQXDO5HSRUWRQ)RUP. Issuer Purchases of Equity Securities 7RWDOQXPEHU $SSUR[LPDWH RIVKDUHV YDOXHRIVKDUHV SXUFKDVHGDV WKDWPD\\HW 7RWDOQXPEHU $YHUDJH SDUWRISXEOLFO\ EHSXUFKDVHG RIVKDUHV SULFHSDLG DQQRXQFHG XQGHU 3HULRG SXUFKDVHG SHUVKDUH SURJUDPV SURJUDPV 2FWREHU2FWREHU ² ² ² ² 1RYHPEHU1RYHPEHU ² ² ² ² 'HFHPEHU'HFHPEHU 2Q )HEUXDU\ 6LPRQ¶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he Operating Partnership Market Information 7KHUHLVQRHVWDEOLVKHGWUDGLQJPDUNHWIRUXQLWVRUSUHIHUUHGXQLWV Holders 7KHQXPEHURIKROGHUVRIUHFRUGRIXQLWVZDVDVRI)HEUXDU\ Distributions 7KH2SHUDWLQJ3DUWQHUVKLSPDNHVGLVWULEXWLRQVRQLWVXQLWVLQDPRXQWVVXIILFLHQWWRPDLQWDLQ6LPRQ VTXDOLILFDWLRQDV D5(,76LPRQLVUHTXLUHGHDFK\HDUWRGLVWULEXWHWRLWVVWRFNKROGHUVDWOHDVWRILWV5(,7WD[DEOHLQFRPHDIWHUFHUWDLQ DGMXVWPHQWV)XWXUHGLVWULEXWLRQVZLOOEHGHWHUPLQHGE\6LPRQ¶V%RDUGRI'LUHFWRUVLQLWVVROHGLVFUHWLRQEDVHGRQDFWXDO DQG SURMHFWHG ILQDQFLDO FRQGLWLRQ OLTXLGLW\ DQG UHVXOWV RI RSHUDWLRQV FDVK DYDLODEOH IRU GLVWULEXWLRQV FDVK UHVHUYHV DV GHHPHGQHFHVVDU\IRUFDSLWDODQGRSHUDWLQJH[SHQGLWXUHVILQDQFLQJFRYHQDQWVLIDQ\DQGWKHGLVWULEXWLRQVWKDWPD\EH UHTXLUHGWRPDLQWDLQ6LPRQ VVWDWXVDVD5(,7 'LVWULEXWLRQVGXULQJDJJUHJDWHGSHUXQLW'LVWULEXWLRQVGXULQJDJJUHJDWHGSHUXQLW,QWKH ILUVWTXDUWHURI6LPRQ¶V%RDUGRI'LUHFWRUVGHFODUHGDTXDUWHUO\FDVKGLYLGHQGRISHUVKDUH7KHGLVWULEXWLRQ UDWHRQWKH2SHUDWLQJ3DUWQHUVKLS¶VXQLWVLVHTXDOWRWKHGLYLGHQGUDWHRQ6LPRQ¶VFRPPRQVWRFN Unregistered Sales of Equity Securities 1RQH Issuer Purchases of Equity Securities 'XULQJWKH\HDUHQGHG'HFHPEHUWKH2SHUDWLQJ3DUWQHUVKLSUHGHHPHGXQLWVIURPHLJKWOLPLWHG SDUWQHUVIRUPLOOLRQLQFDVK ,WHP6HOHFWHG)LQDQFLDO'DWD 7KHIROORZLQJWDEOHVVHWIRUWKVHOHFWHGILQDQFLDOGDWD7KHVHOHFWHGILQDQFLDOGDWDVKRXOGEHUHDGLQFRQMXQFWLRQZLWK WKHILQDQFLDOVWDWHPHQWVDQGQRWHVWKHUHWRDQGZLWK0DQDJHPHQW¶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¶V 'LVFXVVLRQ DQG $QDO\VLV RI )LQDQFLDO &RQGLWLRQ DQG 5HVXOWV RI 2SHUDWLRQV IRU D GHILQLWLRQ DQG UHFRQFLOLDWLRQ RI ))2 WR FRQVROLGDWHGQHWLQFRPHDQGIRU6LPRQ))2SHUVKDUHWRQHWLQFRPHSHUVKDUH ,WHP0DQDJHPHQW¶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pSLHUUH6$RU.OpSLHUUH D SXEOLFO\ WUDGHG 3DULVEDVHG UHDO HVWDWH FRPSDQ\ ZKLFK RZQV RU KDV DQ LQWHUHVW LQ VKRSSLQJ FHQWHUV ORFDWHG LQ FRXQWULHVLQ(XURSH :HJHQHUDWHWKHPDMRULW\RIRXUUHYHQXHVIURPOHDVHVZLWKUHWDLOGLQLQJHQWHUWDLQPHQWDQGRWKHUWHQDQWVLQFOXGLQJ • EDVHPLQLPXPUHQWV • RYHUDJHDQGSHUFHQWDJHUHQWVEDVHGRQWHQDQWV¶VDOHVYROXPHVDQG •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• DWWUDFWLQJDQGUHWDLQLQJKLJKTXDOLW\WHQDQWVDQGXWLOL]LQJHFRQRPLHVRIVFDOHWRUHGXFHRSHUDWLQJH[SHQVHV • H[SDQGLQJDQGUHWHQDQWLQJH[LVWLQJKLJKO\SURGXFWLYHORFDWLRQVDWFRPSHWLWLYHUHQWDOUDWHV • VHOHFWLYHO\DFTXLULQJRULQFUHDVLQJRXULQWHUHVWVLQKLJKTXDOLW\UHDOHVWDWHDVVHWVRUSRUWIROLRVRIDVVHWV • JHQHUDWLQJFRQVXPHUWUDIILFLQRXUUHWDLOSURSHUWLHVWKURXJKPDUNHWLQJLQLWLDWLYHVDQGVWUDWHJLFFRUSRUDWHDOOLDQFHV DQG • VHOOLQJVHOHFWLYHQRQFRUHDVVHWV :HDOVRJURZE\JHQHUDWLQJVXSSOHPHQWDOUHYHQXHVIURPWKHIROORZLQJDFWLYLWLHV • HVWDEOLVKLQJ RXU PDOOV DV OHDGLQJ PDUNHW UHVRXUFH SURYLGHUV IRU UHWDLOHUV DQG RWKHU EXVLQHVVHV DQG FRQVXPHUIRFXVHGFRUSRUDWHDOOLDQFHVLQFOXGLQJSD\PHQWV\VWHPV VXFKDVKDQGOLQJIHHVUHODWLQJWRWKHVDOHV RI EDQNLVVXHG SUHSDLG FDUGV QDWLRQDO PDUNHWLQJ DOOLDQFHV VWDWLF DQG GLJLWDO PHGLD LQLWLDWLYHV EXVLQHVV GHYHORSPHQWVSRQVRUVKLSDQGHYHQWV • RIIHULQJSURSHUW\RSHUDWLQJVHUYLFHVWRRXUWHQDQWVDQGRWKHUVLQFOXGLQJZDVWHKDQGOLQJDQGIDFLOLW\VHUYLFHVDQG WKHSURYLVLRQRIHQHUJ\VHUYLFHV • VHOOLQJRUOHDVLQJODQGDGMDFHQWWRRXUSURSHUWLHVFRPPRQO\UHIHUUHGWRDV³RXWORWV´RU³RXWSDUFHOV´DQG •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• SURYLGHWKHFDSLWDOQHFHVVDU\WRIXQGJURZWK • PDLQWDLQVXIILFLHQWIOH[LELOLW\WRDFFHVVFDSLWDOLQPDQ\IRUPVERWKSXEOLFDQGSULYDWHDQG •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• LPSURYHGRSHUDWLQJSHUIRUPDQFHDQGVROLGFRUHEXVLQHVVIXQGDPHQWDOVLQDQGWKHLPSDFWRIRXUDFTXLVLWLRQ GHYHORSPHQWDQGH[SDQVLRQDFWLYLW\ • QHWJDLQVSULPDULO\UHODWHGWRGLVSRVLWLRQDFWLYLW\RIPLOOLRQRUSHUGLOXWHGVKDUHXQLW • DQRQFDVKLQYHVWPHQWJDLQRIPLOOLRQRUSHUGLOXWHGVKDUHXQLWLQ • EXVLQHVV LQWHUUXSWLRQ LQVXUDQFH SURFHHGV IURP 3XHUWR 5LFR RI PLOOLRQ LQ RU SHU GLOXWHG VKDUHXQLW • LQFUHDVHGLQFRPHUHODWHGWRGLVWULEXWLRQVIURPDQLQWHUQDWLRQDOLQYHVWPHQWLQRIPLOOLRQRUSHU GLOXWHGVKDUHXQLWDQG • DFKDUJHRQHDUO\H[WLQJXLVKPHQWRIGHEWRIPLOOLRQRUSHUGLOXWHGVKDUHXQLWLQSDUWLDOO\RIIVHW E\ • JDLQVRIPLOOLRQRUSHUGLOXWHGVKDUHXQLWIURPWKHVDOHVRIPDUNHWDEOHVHFXULWLHV • DQXQIDYRUDEOHPLOOLRQRUSHUGLOXWHGVKDUHXQLWQRQFDVKPDUNWRPDUNHWDGMXVWPHQWRQDQHTXLW\ LQYHVWPHQWDQG •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²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• 5HSD\LQJ RXU • 'HFUHDVLQJRXUERUURZLQJVXQGHUWKH2SHUDWLQJ3DUWQHUVKLS¶VJOREDOXQVHFXUHGFRPPHUFLDOSDSHUQRWHSURJUDP RUWKH&RPPHUFLDO3DSHUSURJUDPE\PLOOLRQ • 5HGHHPLQJDWSDUPLOOLRQRIVHQLRUXQVHFXUHGQRWHVZLWKDIL[HGLQWHUHVWUDWHRIRQ-DQXDU\ • 8QHQFXPEHULQJDSURSHUW\E\UHSD\LQJDQPLOOLRQPRUWJDJHORDQZLWKDQLQWHUHVWUDWHRI • 5HILQDQFLQJWKHELOOLRQPRUWJDJHORDQDQGPLOOLRQFRQVWUXFWLRQORDQDW$YHQWXUD0DOOLQZKLFKZH KDYHDQRQFRQWUROOLQJLQWHUHVWZLWKDELOOLRQPRUWJDJHORDQDWDIL[HGLQWHUHVWUDWHRIWKDW PDWXUHVRQ-XO\ • 5HILQDQFLQJWKH¼PLOOLRQYDULDEOHUDWHPRUWJDJHORDQPDWXULQJLQDW1RYHQWDGL3LDYH'HVLJQHU 2XWOHWLQZKLFKZHKDYHDLQWHUHVWZLWKD¼PLOOLRQIL[HGUDWHPRUWJDJHORDQWKDWPDWXUHVLQ •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• SURSHUWLHVWKDWDUHFRQVROLGDWHGLQRXUFRQVROLGDWHGILQDQFLDOVWDWHPHQWV • SURSHUWLHVZHDFFRXQWIRUXQGHUWKHHTXLW\PHWKRGRIDFFRXQWLQJDVMRLQWYHQWXUHVDQG • WKHIRUHJRLQJWZRFDWHJRULHVRISURSHUWLHVRQDWRWDOSRUWIROLREDVLV %DVLV3RLQW %DVLV3RLQW &KDQJH &KDQJH 860DOOVDQG3UHPLXP2XWOHWV Ending Occupancy &RQVROLGDWHG ESV ESV 8QFRQVROLGDWHG ESV ESV 7RWDO3RUWIROLR ESV ESV Average Base Minimum Rent per Square Foot &RQVROLGDWHG 8QFRQVROLGDWHG 7RWDO3RUWIROLR Total Sales per Square Foot &RQVROLGDWHG 8QFRQVROLGDWHG 7RWDO3RUWIROLR 7KH0LOOV Ending Occupancy ESV ESV Average Base Minimum Rent per Square Foot Total Sales per Square Foot 3HUFHQWDJHVPD\QRWUHFDOFXODWHGXHWRURXQGLQJ3HUFHQWDJHDQGEDVLVSRLQWFKDQJHVDUHUHSUHVHQWDWLYHRIWKHFKDQJHIURP WKHFRPSDUDEOHSULRUSHULRG Ending Occupancy Levels and Average Base Minimum Rent per Square Foot. (QGLQJ RFFXSDQF\ LV WKH SHUFHQWDJH RI JURVV OHDVDEOH DUHD RU */$ ZKLFK LV OHDVHGDV RI WKH ODVW GD\ RI WKH UHSRUWLQJ SHULRG :H LQFOXGH DOO FRPSDQ\RZQHGVSDFHH[FHSWIRUPDOODQFKRUVPDOOPDMRUVPDOOIUHHVWDQGLQJDQGPDOORXWORWVLQWKHFDOFXODWLRQ%DVH PLQLPXPUHQWSHUVTXDUHIRRWLVWKHDYHUDJHEDVHPLQLPXPUHQWFKDUJHLQHIIHFWIRUWKHUHSRUWLQJSHULRGIRUDOOWHQDQWVWKDW ZRXOGTXDOLI\WREHLQFOXGHGLQHQGLQJRFFXSDQF\ Total Sales per Square Foot.7RWDOVDOHVLQFOXGHWRWDOUHSRUWHGUHWDLOWHQDQWVDOHVRQDWUDLOLQJPRQWKEDVLVDW RZQHG*/$ IRUPDOOVWRUHVZLWKOHVVWKDQVTXDUHIHHW LQWKHPDOOVDQG7KH0LOOVDQGVWRUHVZLWKOHVVWKDQ VTXDUH IHHW LQ WKH 3UHPLXP 2XWOHWV 5HWDLO VDOHV DW RZQHG */$ DIIHFW UHYHQXH DQG SURILWDELOLW\ OHYHOV EHFDXVH VDOHV GHWHUPLQHWKHDPRXQWRIPLQLPXPUHQWWKDWFDQEHFKDUJHGWKHSHUFHQWDJHUHQWUHDOL]HGDQGWKHUHFRYHUDEOHH[SHQVHV FRPPRQDUHDPDLQWHQDQFHUHDOHVWDWHWD[HVHWF WKDWWHQDQWVFDQDIIRUGWRSD\ Current Leasing Activities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apan Data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• :HDVDOHVVRUUHWDLQVXEVWDQWLDOO\DOORIWKHULVNVDQGEHQHILWVRIRZQHUVKLSRIWKHLQYHVWPHQWSURSHUWLHVDQG DFFRXQWIRURXUOHDVHVDVRSHUDWLQJOHDVHV:HDFFUXHPLQLPXPUHQWVRQDVWUDLJKWOLQHEDVLVRYHUWKHWHUPVRI WKHLUUHVSHFWLYHOHDVHV6XEVWDQWLDOO\DOORIRXUUHWDLOWHQDQWVDUHDOVRUHTXLUHGWRSD\RYHUDJHUHQWVEDVHGRQ VDOHVRYHUDVWDWHGEDVHDPRXQWGXULQJWKHOHDVH\HDU:HUHFRJQL]HRYHUDJHUHQWVRQO\ZKHQHDFKWHQDQW¶V VDOHVH[FHHGLWVVDOHVWKUHVKROG • :HUHYLHZLQYHVWPHQWSURSHUWLHVIRULPSDLUPHQWRQDSURSHUW\E\SURSHUW\EDVLVZKHQHYHUHYHQWVRUFKDQJHVLQ FLUFXPVWDQFHV LQGLFDWH WKDW WKH FDUU\LQJ YDOXH RI LQYHVWPHQW SURSHUWLHV PD\ QRW EH UHFRYHUDEOH 7KHVH FLUFXPVWDQFHVLQFOXGHEXWDUHQRWOLPLWHGWRDGHFOLQHLQDSURSHUW\¶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• 7RPDLQWDLQ6LPRQ¶VVWDWXVDVD5(,7ZHPXVWGLVWULEXWHDWOHDVWRI5(,7WD[DEOHLQFRPHLQDQ\JLYHQ\HDU DQGPHHWFHUWDLQDVVHWDQGLQFRPHWHVWV:HPRQLWRURXUEXVLQHVVDQGWUDQVDFWLRQVWKDWPD\SRWHQWLDOO\LPSDFW 6LPRQ¶V 5(,7 VWDWXV ,Q WKH XQOLNHO\ HYHQW WKDW ZH IDLO WR PDLQWDLQ 6LPRQ¶V 5(,7 VWDWXV DQG DYDLODEOH UHOLHI SURYLVLRQVGRQRWDSSO\ZHZRXOGEHUHTXLUHGWRSD\86IHGHUDOLQFRPHWD[HVDWUHJXODUFRUSRUDWHLQFRPHWD[ UDWHVGXULQJWKHSHULRG6LPRQGLGQRWTXDOLI\DVD5(,7,I6LPRQORVWLWV5(,7VWDWXVLWFRXOGQRWHOHFWWREHWD[HG DVD5(,7IRUIRXUWD[DEOH\HDUVIROORZLQJWKH\HDUGXULQJZKLFKTXDOLILFDWLRQZDVORVWXQOHVVLWVIDLOXUHZDVGXH WRUHDVRQDEOHFDXVHDQGFHUWDLQRWKHUFRQGLWLRQVZHUHPHW$VDUHVXOWIDLOLQJWRPDLQWDLQ5(,7VWDWXVZRXOG UHVXOWLQDVLJQLILFDQWLQFUHDVHLQWKHLQFRPHWD[H[SHQVHUHFRUGHGDQGSDLGGXULQJWKRVHSHULRGV • :HPDNHHVWLPDWHVDVSDUWRIRXUYDOXDWLRQRIWKHSXUFKDVHSULFHRIDVVHWDFTXLVLWLRQV LQFOXGLQJWKHFRPSRQHQWV RIH[FHVVLQYHVWPHQWLQMRLQWYHQWXUHV WRWKHYDULRXVFRPSRQHQWVRIWKHDFTXLVLWLRQEDVHGXSRQWKHUHODWLYHIDLU YDOXHRIHDFKFRPSRQHQW7KHPRVWVLJQLILFDQWFRPSRQHQWVRIRXUYDOXDWLRQVDUHW\SLFDOO\WKHGHWHUPLQDWLRQRI UHODWLYHIDLUYDOXHWRWKHEXLOGLQJVDVLIYDFDQWODQGDQGPDUNHWYDOXHRILQSODFHOHDVHV,QWKHFDVHRIWKHIDLU YDOXHRIEXLOGLQJVDQGIDLUYDOXHRIODQGDQGRWKHULQWDQJLEOHVRXUHVWLPDWHVRIWKHYDOXHVRIWKHVHFRPSRQHQWV ZLOODIIHFWWKHDPRXQWRIGHSUHFLDWLRQRUDPRUWL]DWLRQZHUHFRUGRYHUWKHHVWLPDWHGXVHIXOOLIHRIWKHSURSHUW\ DFTXLUHGRUWKHUHPDLQLQJOHDVHWHUP,QWKHFDVHRIWKHPDUNHWYDOXHRILQSODFHOHDVHVZHPDNHRXUEHVW HVWLPDWHVRIWKHWHQDQWV¶DELOLW\WRSD\UHQWVEDVHGXSRQWKHWHQDQWV¶RSHUDWLQJSHUIRUPDQFHDWWKHSURSHUW\ LQFOXGLQJ WKH FRPSHWLWLYH SRVLWLRQ RI WKH SURSHUW\ LQ LWV PDUNHW DV ZHOO DV VDOHV SVI UHQWV SVI DQG RYHUDOO RFFXSDQF\FRVWIRUWKHWHQDQWVLQSODFHDWWKHDFTXLVLWLRQGDWH2XUDVVXPSWLRQVDIIHFWWKHDPRXQWRIIXWXUH UHYHQXHWKDWZHZLOOUHFRJQL]HRYHUWKHUHPDLQLQJOHDVHWHUPIRUWKHDFTXLUHGLQSODFHOHDVHV •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³5HVXOWV2YHUYLHZ´VHFWLRQWKHIROORZLQJDFTXLVLWLRQVGLVSRVLWLRQV DQGRSHQLQJVRIFRQVROLGDWHGSURSHUWLHVDIIHFWHGRXUFRQVROLGDWHGUHVXOWVLQWKHFRPSDUDWLYHSHULRGV • 2Q6HSWHPEHUZHRSHQHG'HQYHU3UHPLXP2XWOHWVDVTXDUHIRRWFHQWHULQ7KRUQWRQ 'HQYHU &RORUDGR:HRZQDLQWHUHVWLQWKLVFHQWHU • 2Q6HSWHPEHUZHDFTXLUHGWKHUHPDLQLQJLQWHUHVWLQWKHSUHYLRXVO\XQFRQVROLGDWHG7KH2XWOHWV DW2UDQJHLQ/RV$QJHOHV&DOLIRUQLDIURPRXUMRLQWYHQWXUHSDUWQHU • 'XULQJZHGLVSRVHGRIWZRUHWDLOSURSHUWLHV • 2Q$SULOWKURXJKRXU(XURSHDQLQYHVWHHZHDFTXLUHG5RVDGD'HVLJQHU2XWOHWDVTXDUHIRRW FHQWHULQ5RRVHQGDDO1HWKHUODQGV:HKDYHDLQWHUHVWLQWKLVFHQWHU • 2Q$SULOWKURXJKRXU(XURSHDQLQYHVWHHZHRSHQHG3URYHQFH'HVLJQHU2XWOHWDVTXDUHIRRW FHQWHULQ0LUDPDV)UDQFH:HKDYHDLQWHUHVWLQWKLVQHZFHQWHU • 'XULQJZHGLVSRVHGRIWKUHHUHWDLOSURSHUWLHV • 'XULQJWKHILUVWTXDUWHURIZHFRQVROLGDWHGWZR'HVLJQHU2XWOHWSURSHUWLHVLQ(XURSHWKDWKDGSUHYLRXVO\ EHHQDFFRXQWHGIRUXQGHUWKHHTXLW\PHWKRG'XULQJWKHWKLUGTXDUWHURIZHFRQVROLGDWHGWZRPRUH'HVLJQHU 2XWOHWSURSHUWLHVLQ(XURSHZKLFKZHUHSUHYLRXVO\DFFRXQWHGIRUXQGHUWKHHTXLW\PHWKRG ,QDGGLWLRQWRWKHDFWLYLWLHVGLVFXVVHGDERYHDQGLQ³5HVXOWV2YHUYLHZ´WKHIROORZLQJDFTXLVLWLRQVGLVSRVLWLRQVDQG RSHQLQJVRIMRLQWYHQWXUHSURSHUWLHVDIIHFWHGRXULQFRPHIURPXQFRQVROLGDWHGHQWLWLHVLQWKHFRPSDUDWLYHSHULRGV • 'XULQJWKHIRXUWKTXDUWHURIRXULQWHUHVWLQWKH*HUPDQGHSDUWPHQWVWRUHSURSHUWLHVRZQHGWKURXJKRXU LQYHVWPHQW LQ +%6 *OREDO 3URSHUWLHV RU +%6 ZDV VROG DV IXUWKHU GLVFXVVHG LQ 1RWH RI WKH QRWHV WR WKH FRQVROLGDWHGILQDQFLDOVWDWHPHQWV • 'XULQJ ZH FRQWULEXWHG RXU LQWHUHVW LQ WKH OLFHQVLQJ YHQWXUH RI $pURSRVWDOH IRU DGGLWLRQDO LQWHUHVWV LQ $XWKHQWLF%UDQGV*URXS//&RU$%*2XUQRQFRQWUROOLQJLQWHUHVWLQ$%*LV • 2Q0D\ZHDQGRXUSDUWQHURSHQHG3UHPLXP2XWOHW&ROOHFWLRQ(GPRQWRQ,QWHUQDWLRQDO$LUSRUWD VTXDUHIRRWVKRSSLQJFHQWHULQ(GPRQWRQ $OEHUWD &DQDGD:HKDYHDQRQFRQWUROOLQJLQWHUHVWLQWKLVQHZ FHQWHU • 'XULQJZHGLVSRVHGRIRXULQWHUHVWLQRQHUHWDLOSURSHUW\ • 2Q6HSWHPEHUZHDQGRXUSDUWQHURSHQHG7KH6KRSVDW&OHDUIRUNDVTXDUHIRRWFHQWHULQ )RUW:RUWK7H[DV:HKDYHDQRQFRQWUROOLQJLQWHUHVWLQWKLVQHZFHQWHU • 2Q-XQHZHDQGRXUSDUWQHURSHQHG1RUIRON3UHPLXP2XWOHWVDVTXDUHIRRWFHQWHULQ1RUIRON 9LUJLQLD:HKDYHDQRQFRQWUROOLQJLQWHUHVWLQWKLVQHZFHQWHU • 2Q-XQHZHDQGRXUSDUWQHURSHQHG*HQWLQJ+LJKODQGV3UHPLXP2XWOHWVLQ.XDOD/XPSXU0DOD\VLD :HKDYHDQRQFRQWUROOLQJLQWHUHVWLQWKLVVTXDUHIRRWFHQWHU • 2Q$SULOZHDQGRXUSDUWQHURSHQHG6LKHXQJ3UHPLXP2XWOHWVDVTXDUHIRRWFHQWHULQ6LKHXQJ 6HRXO 6RXWK.RUHD:HKDYHDQRQFRQWUROOLQJLQWHUHVWLQWKLVQHZFHQWHU • 'XULQJZHGLVSRVHGRIRXULQWHUHVWVLQIRXUUHWDLOSURSHUWLHV • 2Q1RYHPEHUZHDQGRXUSDUWQHURSHQHGDVTXDUHIRRWUHWDLOFRPSRQHQWRI%ULFNHOO&LW\&HQWUH LQ0LDPL)ORULGD:HKDYHDQRQFRQWUROOLQJLQWHUHVWLQWKHUHWDLOFRPSRQHQWRIWKLVFHQWHU • 2Q2FWREHUZHDQGRXUSDUWQHURSHQHG&ODUNVEXUJ3UHPLXP2XWOHWVDVTXDUHIRRWRXWOHW FHQWHULQ&ODUNVEXUJ0DU\ODQG:HKDYHDQRQFRQWUROOLQJLQWHUHVWLQWKLVQHZFHQWHU • 2Q 6HSWHPEHU ZH ZHUH SDUW RI D FRQVRUWLXP WKDW FRPSOHWHG WKH DFTXLVLWLRQ RI $pURSRVWDOH RXW RI EDQNUXSWF\2XUQRQFRQWUROOLQJLQWHUHVWLQWKHUHWDLORSHUDWLRQVYHQWXUHLV • 2Q-XQHZHDQGRXUSDUWQHURSHQHGDVTXDUHIRRWRXWOHWFHQWHULQ&ROXPEXV2KLR:HKDYH DQRQFRQWUROOLQJLQWHUHVWLQWKLVQHZFHQWHU • 2Q$SULOZHDFTXLUHGDQRQFRQWUROOLQJLQWHUHVWLQ7KH6KRSVDW&U\VWDOVDVTXDUHIRRW PDOOLQ/DV9HJDV1HYDGD • 2Q)HEUXDU\WKURXJKRXU(XURSHDQLQYHVWHHZHDQGRXUSDUWQHUDFTXLUHGDQRQFRQWUROOLQJLQWHUHVW LQDQRXWOHWFHQWHULQ2FKWUXS*HUPDQ\ )RUWKHSXUSRVHVRIWKHIROORZLQJFRPSDULVRQVEHWZHHQWKH\HDUVHQGHG'HFHPEHUDQGDQGWKH \HDUVHQGHG'HFHPEHUDQGWKHDERYHWUDQVDFWLRQVDUHUHIHUUHGWRDVWKHSURSHUW\WUDQVDFWLRQV,QWKH IROORZLQJGLVFXVVLRQVRIRXUUHVXOWVRIRSHUDWLRQV³FRPSDUDEOH´UHIHUVWRSURSHUWLHVZHRZQHGDQGRSHUDWHGLQERWK\HDUV LQWKH\HDUWR\HDUFRPSDULVRQV 'XULQJWKHWKLUGTXDUWHURIWZRRIRXUZKROO\RZQHGSURSHUWLHVORFDWHGLQ3XHUWR5LFRVXVWDLQHGVLJQLILFDQW GDPDJHDVDUHVXOWRI+XUULFDQH0DULD)RUSXUSRVHVRIWKHEHORZFRPSDULVRQVWKHVHSURSHUWLHVDUHDOVRLQFOXGHGLQWKH SURSHUW\WUDQVDFWLRQVGXHWRWKHIDFWWKH\ZHUHQRWRSHQIRUEXVLQHVVGXULQJWKHHQWLUHW\RIWKHSHULRGVEHLQJFRPSDUHG Year Ended December 31, 2018 vs. Year Ended December 31, 2017 0LQLPXPUHQWVLQFUHDVHGPLOOLRQGXULQJRIZKLFKWKHFRPSDUDEOHUHQWVLQFUHDVHGPLOOLRQRU SULPDULO\DWWULEXWDEOHWRDQLQFUHDVHLQEDVHPLQLPXPUHQWVRIIVHWSDUWLDOO\E\DPLOOLRQGHFUHDVHUHODWHGWRWKHSURSHUW\ WUDQVDFWLRQV2YHUDJHUHQWVLQFUHDVHGPLOOLRQRUDVDUHVXOWRIDQLQFUHDVHLQWHQDQWVDOHV 7RWDORWKHULQFRPHLQFUHDVHGPLOOLRQSULPDULO\GXHWRDPLOOLRQLQFUHDVHUHODWHGWRDQRQFDVKJDLQ DVVRFLDWHG ZLWK RXU FRQWULEXWLRQ RI RXU LQWHUHVW LQ WKH $p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pURSRVWDOHDVFRPSDUHGWRDQG LQFUHDVHGZLWKKROGLQJDQGLQFRPHWD[HVUHODWHGWRFHUWDLQRIRXULQWHUQDWLRQDOLQYHVWPHQWV ,QFRPHIURPXQFRQVROLGDWHGHQWLWLHVLQFUHDVHGPLOOLRQSULPDULO\GXHWRWKHVWURQJHURSHUDWLRQVRIWKHUHWDLO RSHUDWLRQVYHQWXUHRI$pURSRVWDOHDQGIDYRUDEOHUHVXOWVRIRSHUDWLRQVIURPRXULQWHUQDWLRQDOMRLQWYHQWXUHLQYHVWPHQWVDQG RXUDFTXLVLWLRQDQGGHYHORSPHQWDFWLYLW\RIIVHWSDUWLDOO\E\RXUVKDUHRIDQHDUO\UHSD\PHQWFKDUJHDWRQHRIRXUMRLQW YHQWXUHSURSHUWLHV 'XULQJ ZH UHFRUGHG QHW JDLQV RI PLOOLRQ UHODWHG WR SURSHUW\ LQVXUDQFH UHFRYHULHV RI SUHYLRXVO\ GHSUHFLDWHGDVVHWVDQGPLOOLRQSULPDULO\UHODWHGWRRXUGLVSRVLWLRQRIWZRUHWDLOSURSHUWLHVDVZHOODVWKHGLVSRVDORI RXULQWHUHVWLQWKH*HUPDQGHSDUWPHQWVWRUHVRZQHGWKURXJKRXULQYHVWPHQWLQ+%6DVIXUWKHUGLVFXVVHGLQ1RWHRIWKH QRWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWV'XULQJZHUHFRUGHGDPLOOLRQJDLQUHODWHGWR.OpSLHUUH¶VVDOHRI FHUWDLQDVVHWVSDUWLDOO\RIIVHWE\WKHGLVSRVLWLRQRIRXULQWHUHVWLQRQHXQFRQVROLGDWHGUHWDLOSURSHUW\WKDWUHVXOWHGLQDORVV RIPLOOLRQ 6LPRQ¶VQHWLQFRPHDWWULEXWDEOHWRQRQFRQWUROOLQJLQWHUHVWVLQFUHDVHGPLOOLRQGXHWRDQLQFUHDVHLQWKHQHW LQFRPHRIWKH2SHUDWLQJ3DUWQHUVKLS Year Ended December 31, 2017 vs. Year Ended December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pURSRVWDOH DQG RXU DFTXLVLWLRQ DQG GHYHORSPHQW DFWLYLW\ 'XULQJZHUHFRUGHGDPLOOLRQJDLQUHODWHGWR.OpSLHUUH¶VVDOHRIFHUWDLQDVVHWVSDUWLDOO\RIIVHWE\WKH GLVSRVLWLRQRIRXULQWHUHVWLQRQHXQFRQVROLGDWHGUHWDLOSURSHUW\WKDWUHVXOWHGLQDORVVRIPLOOLRQ'XULQJZH UHFRUGHGDJDLQUHODWHGWR.OpSLHUUH¶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³&DVK)ORZV´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¶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³)LQDQFLQJDQG'HEW´'XULQJZHDOVR • SDLG VWRFNKROGHU GLYLGHQGV DQG XQLWKROGHU GLVWULEXWLRQV WRWDOLQJ DSSUR[LPDWHO\ ELOOLRQ DQG SUHIHUUHG XQLW GLVWULEXWLRQVWRWDOLQJPLOOLRQ • IXQGHG FRQVROLGDWHG FDSLWDO H[SHQGLWXUHV RI PLOOLRQ LQFOXGLQJ GHYHORSPHQW DQG RWKHU FRVWV RI PLOOLRQ UHGHYHORSPHQW DQG H[SDQVLRQ FRVWV RI PLOOLRQ DQG WHQDQW FRVWV DQG RWKHU RSHUDWLRQDO FDSLWDOH[SHQGLWXUHVRIPLOOLRQ • IXQGHGLQYHVWPHQWVLQXQFRQVROLGDWHGHQWLWLHVRIPLOOLRQ • UHFHLYHG LQVXUDQFH SURFHHGV IURP WKLUGSDUW\ FDUULHUV IRU SURSHUW\ UHVWRUDWLRQ UHPHGLDWLRQ DQG EXVLQHVV LQWHUUXSWLRQIURPKXUULFDQHGDPDJHVLQ3XHUWR5LFRRIPLOOLRQ • UHFHLYHG SURFHHGV RQ WKH VDOH RI FHUWDLQ DVVHWV UHODWHG WR RXU QRQFRQWUROOLQJ LQWHUHVW LQ D MRLQW YHQWXUH RI PLOOLRQDQG • IXQGHGWKHUHSXUFKDVHRIPLOOLRQRI6LPRQ¶VFRPPRQVWRFNDQGWKHUHGHPSWLRQRIPLOOLRQRIWKH 2SHUDWLQJ3DUWQHUVKLS¶VXQLWV ,QJHQHUDOZHDQWLFLSDWHWKDWFDVKJHQHUDWHGIURPRSHUDWLRQVZLOOEHVXIILFLHQWWRPHHWRSHUDWLQJH[SHQVHVPRQWKO\ GHEWVHUYLFHUHFXUULQJFDSLWDOH[SHQGLWXUHVDQGGLYLGHQGVWRVWRFNKROGHUVDQGRUGLVWULEXWLRQVWRSDUWQHUVQHFHVVDU\WR PDLQWDLQ6LPRQ¶V5(,7TXDOLILFDWLRQRQDORQJWHUPEDVLV,QDGGLWLRQZHH[SHFWWREHDEOHWRJHQHUDWHRUREWDLQFDSLWDOIRU QRQUHFXUULQJFDSLWDOH[SHQGLWXUHVVXFKDVDFTXLVLWLRQVPDMRUEXLOGLQJUHGHYHORSPHQWVDQGH[SDQVLRQVDVZHOODVIRU VFKHGXOHGSULQFLSDOPDWXULWLHVRQRXWVWDQGLQJLQGHEWHGQHVVIURP • H[FHVVFDVKJHQHUDWHGIURPRSHUDWLQJSHUIRUPDQFHDQGZRUNLQJFDSLWDOUHVHUYHV • ERUURZLQJVRQWKH&UHGLW)DFLOLWLHVDQG&RPPHUFLDO3DSHUSURJUDP • DGGLWLRQDOVHFXUHGRUXQVHFXUHGGHEWILQDQFLQJRU •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nsecured Debt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¶VLQLWLDOERUURZLQJFDSDFLW\RIELOOLRQPD\EHLQFUHDVHGWRELOOLRQGXULQJLWVWHUPDQG SURYLGHV IRU ERUURZLQJV GHQRPLQDWHG LQ 86 GROODUV (XUR DYHUDJHLQWHUHVWUDWHRI7KHVHERUURZLQJVKDYHDZHLJKWHGDYHUDJHPDWXULW\GDWHRI)HEUXDU\DQGUHGXFH DPRXQWVRWKHUZLVHDYDLODEOHXQGHUWKH&UHGLW)DFLOLWLHV 2Q-DQXDU\WKH2SHUDWLQJ3DUWQHUVKLSUHGHHPHGDWSDUPLOOLRQRIVHQLRUXQVHFXUHGQRWHVZLWKD IL[HGLQWHUHVWUDWHRI 2Q-XO\WKH2SHUDWLQJ3DUWQHUVKLSUHSDLG Mortgage Debt 7RWDOPRUWJDJHLQGHEWHGQHVVZDVELOOLRQDQGELOOLRQDW'HFHPEHUDQGUHVSHFWLYHO\ 'XULQJWKH\HDUHQGHG'HFHPEHUZHUHSDLGDPRUWJDJHORDQRIPLOOLRQZLWKDQLQWHUHVWUDWHRI 2Q-XO\1RYHQWDGL3LDYH'HVLJQHU2XWOHWLQZKLFKZHRZQDLQWHUHVWUHILQDQFHGLWV¼PLOOLRQ YDULDEOHUDWHPRUWJDJHORDQPDWXULQJLQZLWKD¼PLOOLRQIL[HGUDWHPRUWJDJHORDQWKDWPDWXUHVLQ 2Q6HSWHPEHUDVGLVFXVVHGLQ1RWHRIWKHQRWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWVZHDFTXLUHG WKHUHPDLQLQJLQWHUHVWLQ7KH2XWOHWVDW2UDQJHIURPRXUMRLQWYHQWXUHSDUWQHUUHVXOWLQJLQWKHFRQVROLGDWLRQRIWKH H[LVWLQJIL[HGUDWHPRUWJDJHORDQRIPLOOLRQ7KHORDQPDWXUHVRQ$SULODQGEHDUVLQWHUHVWDW Covenants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ontractual Obligations and Off-balance Sheet Arrangements ,QUHJDUGVWRORQJWHUPGHEWDUUDQJHPHQWVWKHIROORZLQJWDEOHVXPPDUL]HVWKHPDWHULDODVSHFWVRIWKHVHIXWXUH REOLJDWLRQV RQ RXU FRQVROLGDWHG LQGHEWHGQHVV DV RI 'HFHPEHU DQG VXEVHTXHQW \HDUV WKHUHDIWHU GROODUV LQ WKRXVDQGV DVVXPLQJWKHREOLJDWLRQVUHPDLQRXWVWDQGLQJWKURXJKLQLWLDOPDWXULWLHV $IWHU 7RWDO /RQJ7HUP'HEW ,QWHUHVW3D\PHQWV &RQVROLGDWHG&DSLWDO([SHQGLWXUH &RPPLWPHQWV ² ² ² /HDVH&RPPLWPHQWV 5HSUHVHQWVSULQFLSDOPDWXULWLHVRQO\DQGWKHUHIRUHH[FOXGHVQHWGLVFRXQWVDQGGHEWLVVXDQFHFRVWV 9DULDEOHUDWHLQWHUHVWSD\PHQWVDUHHVWLPDWHGEDVHGRQWKH/,%25RURWKHUDSSOLFDEOHUDWHDW'HFHPEHU 5HSUHVHQWVFRQWUDFWXDOFRPPLWPHQWVIRUFDSLWDOSURMHFWVDQGVHUYLFHVDW'HFHPEHU2XUVKDUHRIHVWLPDWHG GHYHORSPHQWUHGHYHORSPHQWDQGH[SDQVLRQDFWLYLW\LVIXUWKHUGLVFXVVHGEHORZXQGHU³'HYHORSPHQW$FWLYLW\´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¶V LQWHUHVW,IZHGHFLGHWRVHOODQ\RIRXUMRLQWYHQWXUHLQWHUHVWVZHH[SHFWWRXVHWKHQHWSURFHHGVWRUHGXFHRXWVWDQGLQJ LQGHEWHGQHVVRUWRUHLQYHVWLQGHYHORSPHQWUHGHYHORSPHQWRUH[SDQVLRQRSSRUWXQLWLHV Acquisitions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ispositions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pSLHUUHGLVSRVHGRILWVLQWHUHVWVLQFHUWDLQ VKRSSLQJFHQWHUVUHVXOWLQJLQDJDLQRIZKLFKRXUVKDUHZDVPLOOLRQ 'XULQJ ZH GLVSRVHG RI RXU LQWHUHVWV LQ RQH XQFRQVROLGDWHG UHWDLO SURSHUW\ 7KH ORVV UHFRJQL]HG RQ WKLV WUDQVDFWLRQZDVDSSUR[LPDWHO\PLOOLRQ$VGLVFXVVHGLQ1RWHRIWKHQRWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWV .OpSLHUUHGLVSRVHGRILWVLQWHUHVWVLQFHUWDLQVKRSSLQJFHQWHUVUHVXOWLQJLQDJDLQRIZKLFKRXUVKDUHZDVPLOOLRQ 'XULQJ ZH GLVSRVHG RI RXU LQWHUHVWV LQ WZR XQFRQVROLGDWHG PXOWLIDPLO\ UHVLGHQWLDO LQYHVWPHQWV WKUHH FRQVROLGDWHG UHWDLO SURSHUWLHV DQG IRXU XQFRQVROLGDWHG UHWDLO SURSHUWLHV 2XU VKDUH RI WKH JURVV SURFHHGV IURP WKHVH WUDQVDFWLRQV ZDV PLOOLRQ 7KH JDLQ RQ WKH FRQVROLGDWHG UHWDLO SURSHUWLHV ZDV PLOOLRQ 7KH JDLQ RQ WKH XQFRQVROLGDWHG UHWDLO SURSHUWLHV ZDV PLOOLRQ 7KH DJJUHJDWH JDLQ RI PLOOLRQ IURP WKH VDOH RI WKH WZR XQFRQVROLGDWHGPXOWLIDPLO\UHVLGHQWLDOLQYHVWPHQWVLVLQFOXGHGLQRWKHULQFRPHDQGUHVXOWHGLQDQDGGLWLRQDOPLOOLRQLQ WD[HVLQFOXGHGLQLQFRPHDQGRWKHUWD[HV$VGLVFXVVHGLQ1RWHRIWKHQRWHVWRWKHFRQVROLGDWHGILQDQFLDOVWDWHPHQWV .OpSLHUUHGLVSRVHGRILWVLQWHUHVWLQFHUWDLQ6FDQGLQDYLDQSURSHUWLHVGXULQJWKHIRXUWKTXDUWHUUHVXOWLQJLQDJDLQRIZKLFK RXUVKDUHZDVPLOOLRQ -RLQW9HQWXUH)RUPDWLRQ$FWLYLW\ 2Q6HSWHPEHUZHDQGDJURXSRIFRLQYHVWRUVDFTXLUHGFHUWDLQDVVHWVDQGOLDELOLWLHVRI$p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p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ew Domestic Developments, Redevelopments and Expansions 2Q6HSWHPEHUZHRSHQHG'HQYHU3UHPLXP2XWOHWVDVTXDUHIRRWFHQWHULQ7KRUQWRQ 'HQYHU &RORUDGR:HRZQDLQWHUHVWLQWKLVSURMHFW7KHFRVWRIWKLVSURMHFWZDVPLOOLRQ International Development Activity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pWDUR3UHPLXP2XWOHWV4XHUpWDUR0H[LFR 0;1 -XO 0iODJD'HVLJQHU2XWOHW0i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¶V %RDUG RI 'LUHFWRUV GHFODUHGDTXDUWHUO\FDVKGLYLGHQGIRUWKHILUVWTXDUWHURIRISHUVKDUHRIFRPPRQVWRFNSD\DEOHRQ)HEUXDU\ WRVWRFNKROGHUVRIUHFRUGRQ)HEUXDU\7KHGLVWULEXWLRQUDWHRQXQLWVLVHTXDOWRWKHGLYLGHQGUDWHRQFRPPRQ VWRFN,QRUGHUWRPDLQWDLQLWVVWDWXVDVD5(,76LPRQPXVWSD\DPLQLPXPDPRXQWRIGLYLGHQGV6LPRQ¶VIXWXUHGLYLGHQGV DQGWKH2SHUDWLQJ3DUWQHUVKLS¶VIXWXUHGLVWULEXWLRQVZLOOEHGHWHUPLQHGE\6LPRQ¶V%RDUGRI'LUHFWRUVLQLWVVROHGLVFUHWLRQ EDVHGRQDFWXDODQGSURMHFWHGILQDQFLDOFRQGLWLRQOLTXLGLW\DQGUHVXOWVRIRSHUDWLRQVFDVKDYDLODEOHIRUGLYLGHQGVDQGOLPLWHG SDUWQHUGLVWULEXWLRQVFDVKUHVHUYHVDVGHHPHGQHFHVVDU\IRUFDSLWDODQGRSHUDWLQJH[SHQGLWXUHVILQDQFLQJFRYHQDQWVLI DQ\DQGWKHDPRXQWUHTXLUHGWRPDLQWDLQ6LPRQ¶VVWDWXVDVD5(,7 2Q$SULO6LPRQ¶V%RDUGRI'LUHFWRUVDXWKRUL]HG6LPRQWRUHSXUFKDVHXSWRELOOLRQRIFRPPRQVWRFN RYHUDWZHQW\IRXUPRQWKSHULRGDVPDUNHWFRQGLWLRQVZDUUDQWDQGRQ)HEUXDU\6LPRQ¶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¶VH[LWIURPWKH (XURSHDQ 8QLRQ FKDQJHV WR DSSOLFDEOH ODZV RU UHJXODWLRQV RU WKH LQWHUSUHWDWLRQ WKHUHRI ULVNV DVVRFLDWHG ZLWK WKH DFTXLVLWLRQGHYHORSPHQWUHGHYHORSPHQWH[SDQVLRQOHDVLQJDQGPDQDJHPHQWRISURSHUWLHVJHQHUDOULVNVUHODWHGWRUHDO HVWDWHLQYHVWPHQWVLQFOXGLQJWKHLOOLTXLGLW\RIUHDOHVWDWHLQYHVWPHQWVWKHLPSDFWRIRXUVXEVWDQWLDOLQGHEWHGQHVVRQRXU IXWXUHRSHUDWLRQVDQ\GLVUXSWLRQLQWKHILQDQFLDOPDUNHWVWKDWPD\DGYHUVHO\DIIHFWRXUDELOLW\WRDFFHVVFDSLWDOIRUJURZWK DQGVDWLVI\RXURQJRLQJGHEWVHUYLFHUHTXLUHPHQWVDQ\FKDQJHLQRXUFUHGLWUDWLQJFKDQJHVLQPDUNHWUDWHVRILQWHUHVWDQG IRUHLJQH[FKDQJHUDWHVIRUIRUHLJQFXUUHQFLHVFKDQJHVLQWKHYDOXHRIRXULQYHVWPHQWVLQIRUHLJQHQWLWLHVRXUDELOLW\WR KHGJH LQWHUHVW UDWH DQG FXUUHQF\ ULVN RXU FRQWLQXHG DELOLW\ WR PDLQWDLQ RXU VWDWXV DV D 5(,7 FKDQJHV LQ WD[ ODZV RU UHJXODWLRQVWKDWUHVXOWLQDGYHUVHWD[FRQVHTXHQFHVULVNVUHODWLQJWRRXUMRLQWYHQWXUHSURSHUWLHVHQYLURQPHQWDOOLDELOLWLHV FKDQJHV LQ LQVXUDQFH FRVWV WKH DYDLODELOLW\ RI FRPSUHKHQVLYH LQVXUDQFH FRYHUDJH VHFXULW\ EUHDFKHV WKDW FRXOG FRPSURPLVHRXULQIRUPDWLRQWHFKQRORJ\RULQIUDVWUXFWXUHQDWXUDOGLVDVWHUVWKHSRWHQWLDOIRUWHUURULVWDFWLYLWLHVDQGWKHORVV RINH\PDQDJHPHQWSHUVRQQHO:HGLVFXVVHGWKHVHDQGRWKHUULVNVDQGXQFHUWDLQWLHVXQGHUWKHKHDGLQJ5LVN)DFWRUVLQ 3DUW,,WHP$RIWKLV$QQXDO5HSRUWRQ)RUP.:HPD\XSGDWHWKDWGLVFXVVLRQLQVXEVHTXHQWRWKHUSHULRGLFUHSRUWV EXWH[FHSWDVUHTXLUHGE\ODZZHXQGHUWDNHQRGXW\RUREOLJDWLRQWRXSGDWHRUUHYLVHWKHVHIRUZDUGORRNLQJVWDWHPHQWV ZKHWKHUDVDUHVXOWRIQHZLQIRUPDWLRQIXWXUHGHYHORSPHQWVRURWKHUZLVH 1RQ*$$3)LQDQFLDO0HDVXUHV ,QGXVWU\SUDFWLFHLVWRHYDOXDWHUHDOHVWDWHSURSHUWLHVLQSDUWEDVHGRQSHUIRUPDQFHPHDVXUHVVXFKDV))2GLOXWHG ))2SHUVKDUH12,SRUWIROLR12,DQGFRPSDUDEOHSURSHUW\12,:HEHOLHYHWKDWWKHVHQRQ*$$3PHDVXUHVDUHKHOSIXO WRLQYHVWRUVEHFDXVHWKH\DUHZLGHO\UHFRJQL]HGPHDVXUHVRIWKHSHUIRUPDQFHRI5(,7VDQGSURYLGHDUHOHYDQWEDVLVIRU FRPSDULVRQDPRQJ5(,7V:HDOVRXVHWKHVHPHDVXUHVLQWHUQDOO\WRPHDVXUHWKHRSHUDWLQJSHUIRUPDQFHRIRXUSRUWIROLR :HGHWHUPLQH))2EDVHGRQWKHGHILQLWLRQVHWIRUWKE\WKH1DWLRQDO$VVRFLDWLRQRI5HDO(VWDWH,QYHVWPHQW7UXVWV RU1$5(,7DVFRQVROLGDWHGQHWLQFRPHFRPSXWHGLQDFFRUGDQFHZLWK*$$3 • H[FOXGLQJUHDOHVWDWHUHODWHGGHSUHFLDWLRQDQGDPRUWL]DWLRQ • H[FOXGLQJJDLQVDQGORVVHVIURPH[WUDRUGLQDU\LWHPVDQGFXPXODWLYHHIIHFWVRIDFFRXQWLQJFKDQJHV • H[FOXGLQJJDLQVDQGORVVHVIURPWKHVDOHGLVSRVDORUSURSHUW\LQVXUDQFHUHFRYHULHVRISUHYLRXVO\GHSUHFLDWHG UHWDLORSHUDWLQJSURSHUWLHV • H[FOXGLQJLPSDLUPHQWFKDUJHVRIGHSUHFLDEOHUHDOHVWDWH • SOXVWKHDOORFDEOHSRUWLRQRI))2RIXQFRQVROLGDWHGHQWLWLHVDFFRXQWHGIRUXQGHUWKHHTXLW\PHWKRGRIDFFRXQWLQJ EDVHGXSRQHFRQRPLFRZQHUVKLSLQWHUHVWDQG • DOOGHWHUPLQHGRQDFRQVLVWHQWEDVLVLQDFFRUGDQFHZLWK*$$3 :H KDYH DGRSWHG 1$5(,7¶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• GRQRWUHSUHVHQWFDVKIORZIURPRSHUDWLRQVDVGHILQHGE\*$$3 • VKRXOGQRWEHFRQVLGHUHGDVDOWHUQDWLYHVWRFRQVROLGDWHGQHWLQFRPHGHWHUPLQHGLQDFFRUGDQFHZLWK*$$3DVD PHDVXUHRIRSHUDWLQJSHUIRUPDQFHDQG • DUHQRWDOWHUQDWLYHVWRFDVKIORZVDVDPHDVXUHRIOLTXLGLW\ 7KHIROORZLQJVFKHGXOHUHFRQFLOHVWRWDO))2WRFRQVROLGDWHGQHWLQFRPHDQGIRU6LPRQGLOXWHGQHWLQFRPHSHUVKDUH WRGLOXWHG))2SHUVKDUH LQWKRXVDQGV )XQGVIURP2SHUDWLRQV $ &KDQJHLQ))2IURPSULRUSHULRG &RQVROLGDWHG1HW,QFRPH $GMXVWPHQWVWR$UULYHDW))2 'HSUHFLDWLRQDQGDPRUWL]DWLRQIURPFRQVROLGDWHGSURSHUWLHV 2XUVKDUHRIGHSUHFLDWLRQDQGDPRUWL]DWLRQIURPXQFRQVROLGDWHGHQWLWLHV LQFOXGLQJ.OpSLHUUHDQG+%6 *DLQXSRQDFTXLVLWLRQRIFRQWUROOLQJLQWHUHVWVVDOHRUGLVSRVDORIRU UHFRYHU\RQDVVHWVDQGLQWHUHVWVLQXQFRQVROLGDWHGHQWLWLHVDQG LPSDLUPHQWQHW % 8QUHDOL]HGFKDQJHLQIDLUYDOXHRIHTXLW\LQVWUXPHQWV ² ² 1HWLQFRPHDWWULEXWDEOHWRQRQFRQWUROOLQJLQWHUHVWKROGHUVLQSURSHUWLHV 1RQFRQWUROOLQJLQWHUHVWVSRUWLRQRIGHSUHFLDWLRQDQGDPRUWL]DWLRQ 3UHIHUUHGGLVWULEXWLRQVDQGGLYLGHQGV ))2RIWKH2SHUDWLQJ3DUWQHUVKLS $ ))2DOORFDEOHWROLPLWHGSDUWQHUV 'LOXWLYH))2DOORFDEOHWRFRPPRQVWRFNKROGHUV $ 'LOXWHGQHWLQFRPHSHUVKDUHWRGLOXWHG))2SHUVKDUHUHFRQFLOLDWLRQ 'LOXWHGQHWLQFRPHSHUVKDUH 'HSUHFLDWLRQDQGDPRUWL]DWLRQIURPFRQVROLGDWHGSURSHUWLHVDQGRXU VKDUHRIGHSUHFLDWLRQDQGDPRUWL]DWLRQIURPXQFRQVROLGDWHGHQWLWLHV LQFOXGLQJ.OpSLHUUHDQG+%6QHWRIQRQFRQWUROOLQJLQWHUHVWVSRUWLRQRI GHSUHFLDWLRQDQGDPRUWL]DWLRQ *DLQXSRQDFTXLVLWLRQRIFRQWUROOLQJLQWHUHVWVVDOHRUGLVSRVDORIRU UHFRYHU\RQDVVHWVDQGLQWHUHVWVLQXQFRQVROLGDWHGHQWLWLHVDQG LPSDLUPHQWQHW % 8QUHDOL]HGFKDQJHLQIDLUYDOXHRIHTXLW\LQVWUXPHQWV ² ²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¶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¶VPDQDJHPHQWLVUHVSRQVLEOHIRUPDLQWDLQLQJHIIHFWLYHLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJDQGIRU LWVDVVHVVPHQWRIWKHHIIHFWLYHQHVVRILQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJLQFOXGHGLQWKHDFFRPSDQ\LQJ0DQDJHPHQW¶V 5HSRUWRQ,QWHUQDO&RQWURORYHU)LQDQFLDO5HSRUWLQJ2XUUHVSRQVLELOLW\LVWRH[SUHVVDQRSLQLRQRQWKH&RPSDQ\¶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¶V LQWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ LV D SURFHVV GHVLJQHG WR SURYLGH UHDVRQDEOH DVVXUDQFH UHJDUGLQJWKHUHOLDELOLW\RIILQDQFLDOUHSRUWLQJDQGWKHSUHSDUDWLRQRIILQDQFLDOVWDWHPHQWVIRUH[WHUQDOSXUSRVHVLQDFFRUGDQFH ZLWKJHQHUDOO\DFFHSWHGDFFRXQWLQJSULQFLSOHV$FRPSDQ\¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJLQFOXGHVWKRVHSROLFLHV DQGSURFHGXUHVWKDW SHUWDLQWRWKHPDLQWHQDQFHRIUHFRUGVWKDWLQUHDVRQDEOHGHWDLODFFXUDWHO\DQGIDLUO\UHIOHFWWKH WUDQVDFWLRQV DQG GLVSRVLWLRQV RI WKH DVVHWV RI WKH FRPSDQ\ SURYLGH UHDVRQDEOH DVVXUDQFH WKDW WUDQVDFWLRQV DUH UHFRUGHGDVQHFHVVDU\WRSHUPLWSUHSDUDWLRQRIILQDQFLDOVWDWHPHQWVLQDFFRUGDQFHZLWKJHQHUDOO\DFFHSWHGDFFRXQWLQJ SULQFLSOHVDQGWKDWUHFHLSWVDQGH[SHQGLWXUHVRIWKHFRPSDQ\DUHEHLQJPDGHRQO\LQDFFRUGDQFHZLWKDXWKRUL]DWLRQVRI PDQDJHPHQWDQGGLUHFWRUVRIWKHFRPSDQ\DQG SURYLGHUHDVRQDEOHDVVXUDQFHUHJDUGLQJSUHYHQWLRQRUWLPHO\GHWHFWLRQ RIXQDXWKRUL]HGDFTXLVLWLRQXVHRUGLVSRVLWLRQRIWKHFRPSDQ\¶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¶V LQWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ DV RI 'HFHPEHU EDVHG RQ FULWHULD HVWDEOLVKHG LQ ,QWHUQDO &RQWURO ± ,QWHJUDWHG )UDPHZRUN LVVXHG E\ WKH &RPPLWWHH RI 6SRQVRULQJ 2UJDQL]DWLRQV RI WKH 7UHDGZD\ &RPPLVVLRQ )UDPHZRUN DQG RXU UHSRUW GDWHG )HEUXDU\ H[SUHVVHG DQ XQTXDOLILHG RSLQLRQ WKHUHRQ %DVLVIRU2SLQLRQ 7KHVHILQDQFLDOVWDWHPHQWVDUHWKHUHVSRQVLELOLW\RIWKH&RPSDQ\¶VPDQDJHPHQW2XUUHVSRQVLELOLW\LVWRH[SUHVV DQRSLQLRQRQWKH&RPSDQ\¶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¶VDXGLWRUVLQFH ,QGLDQDSROLV,QGLDQD )HEUXDU\ 5HSRUWRI,QGHSHQGHQW5HJLVWHUHG3XEOLF$FFRXQWLQJ)LUP 7KH3DUWQHUVRI6LPRQ3URSHUW\*URXS/3DQGWKH%RDUGRI'LUHFWRUVRI6LPRQ3URSHUW\*URXS,QF 2SLQLRQRQ,QWHUQDO&RQWURORYHU)LQDQFLDO5HSRUWLQJ :HKDYHDXGLWHG6LPRQ3URSHUW\*URXS/3¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJDVRI'HFHPEHU EDVHG RQ FULWHULD HVWDEOLVKHG LQ ,QWHUQDO &RQWURO ±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¶VPDQDJHPHQWLVUHVSRQVLEOHIRUPDLQWDLQLQJHIIHFWLYHLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJDQG IRU LWV DVVHVVPHQW RI WKH HIIHFWLYHQHVV RI LQWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ LQFOXGHG LQ WKH DFFRPSDQ\LQJ 0DQDJHPHQW¶V5HSRUW RQ ,QWHUQDO&RQWURO RYHU )LQDQFLDO 5HSRUWLQJ 2XU UHVSRQVLELOLW\ LV WR H[SUHVV DQ RSLQLRQ RQ WKH 3DUWQHUVKLS¶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¶V LQWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ LV D SURFHVV GHVLJQHG WR SURYLGH UHDVRQDEOH DVVXUDQFH UHJDUGLQJWKHUHOLDELOLW\RIILQDQFLDOUHSRUWLQJDQGWKHSUHSDUDWLRQRIILQDQFLDOVWDWHPHQWVIRUH[WHUQDOSXUSRVHVLQDFFRUGDQFH ZLWKJHQHUDOO\DFFHSWHGDFFRXQWLQJSULQFLSOHV$FRPSDQ\¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJLQFOXGHVWKRVHSROLFLHV DQGSURFHGXUHVWKDW SHUWDLQWRWKHPDLQWHQDQFHRIUHFRUGVWKDWLQUHDVRQDEOHGHWDLODFFXUDWHO\DQGIDLUO\UHIOHFWWKH WUDQVDFWLRQV DQG GLVSRVLWLRQV RI WKH DVVHWV RI WKH FRPSDQ\ SURYLGH UHDVRQDEOH DVVXUDQFH WKDW WUDQVDFWLRQV DUH UHFRUGHGDVQHFHVVDU\WRSHUPLWSUHSDUDWLRQRIILQDQFLDOVWDWHPHQWVLQDFFRUGDQFHZLWKJHQHUDOO\DFFHSWHGDFFRXQWLQJ SULQFLSOHVDQGWKDWUHFHLSWVDQGH[SHQGLWXUHVRIWKHFRPSDQ\DUHEHLQJPDGHRQO\LQDFFRUGDQFHZLWKDXWKRUL]DWLRQVRI PDQDJHPHQWDQGGLUHFWRUVRIWKHFRPSDQ\DQG SURYLGHUHDVRQDEOHDVVXUDQFHUHJDUGLQJSUHYHQWLRQRUWLPHO\GHWHFWLRQ RIXQDXWKRUL]HGDFTXLVLWLRQXVHRUGLVSRVLWLRQRIWKHFRPSDQ\¶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¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJDVRI'HFHPEHUEDVHGRQFULWHULD HVWDEOLVKHG LQ ,QWHUQDO &RQWURO ± ,QWHJUDWHG )UDPHZRUN LVVXHG E\ WKH &RPPLWWHH RI 6SRQVRULQJ 2UJDQL]DWLRQV RI WKH 7UHDGZD\ &RPPLVVLRQ )UDPHZRUN DQG RXU UHSRUW GDWHG )HEUXDU\ H[SUHVVHG DQ XQTXDOLILHG RSLQLRQ WKHUHRQ %DVLVIRU2SLQLRQ 7KHVHILQDQFLDOVWDWHPHQWVDUHWKHUHVSRQVLELOLW\RIWKH3DUWQHUVKLS¶VPDQDJHPHQW2XUUHVSRQVLELOLW\LVWRH[SUHVV DQRSLQLRQRQWKH3DUWQHUVKLS¶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¶VDXGLWRUVLQFH ,QGLDQDSROLV,QGLDQD )HEUXDU\ 6LPRQ3URSHUW\*URXS,QF Consolidated Balance Sheets (Dollars in thousands, except share amounts) 'HFHPEHU'HFHPEHU $66(76 ,QYHVWPHQWSURSHUWLHVDWFRVW /HVVDFFXPXODWHGGHSUHFLDWLRQ &DVKDQGFDVKHTXLYDOHQWV 7HQDQWUHFHLYDEOHVDQGDFFUXHGUHYHQXHQHW ,QYHVWPHQWLQXQFRQVROLGDWHGHQWLWLHVDWHTXLW\ ,QYHVWPHQWLQ.OpSLHUUHDWHTXLW\ 'HIHUUHGFRVWVDQGRWKHUDVVHWV 7RWDODVVHWV /,$%,/,7,(6 0RUWJDJHVDQGXQVHFXUHGLQGHEWHGQHVV $FFRXQWVSD\DEOHDFFUXHGH[SHQVHVLQWDQJLEOHVDQGGHIHUUHGUHYHQXHV &DVKGLVWULEXWLRQVDQGORVVHVLQXQFRQVROLGDWHGHQWLWLHVDWHTXLW\ 2WKHUOLDELOLWLHV 7RWDOOLDELOLWLHV &RPPLWPHQWVDQGFRQWLQJHQFLHV /LPLWHGSDUWQHUV¶SUHIHUUHGLQWHUHVWLQWKH2SHUDWLQJ3DUWQHUVKLSDQGQRQFRQWUROOLQJ UHGHHPDEOHLQWHUHVWVLQSURSHUWLHV (48,7< 6WRFNKROGHUV¶(TXLW\ &DSLWDOVWRFN WRWDOVKDUHVDXWKRUL]HGSDUYDOXH VKDUHVRIH[FHVVFRPPRQVWRFNDXWKRUL]HGVKDUHVRISUHIHUUHGVWRFN 6HULHV-FXPXODWLYHUHGHHPDEOHSUHIHUUHGVWRFNVKDUHVDXWKRUL]HG LVVXHGDQGRXWVWDQGLQJZLWKDOLTXLGDWLRQYDOXHRI &RPPRQVWRFNSDUYDOXHVKDUHVDXWKRUL]HGDQG LVVXHGDQGRXWVWDQGLQJUHVSHFWLYHO\ &ODVV%FRPPRQVWRFNSDUYDOXHVKDUHVDXWKRUL]HGLVVXHG DQGRXWVWDQGLQJ ² ² &DSLWDOLQH[FHVVRISDUYDOXH $FFXPXODWHGGHILFLW $FFXPXODWHGRWKHUFRPSUHKHQVLYHORVV &RPPRQVWRFNKHOGLQWUHDVXU\DWFRVWDQGVKDUHVUHVSHFWLYHO\ 7RWDOVWRFNKROGHUV¶HTXLW\ 1RQFRQWUROOLQJLQWHUHVWV 7RWDOHTXLW\ 7RWDOOLDELOLWLHVDQGHTXLW\ The accompanying notes are an integral part of these statements. 6LPRQ3URSHUW\*URXS,QF Consolidated Statements of Operations and Comprehensive Income (Dollars in thousands, except per share amounts) )RUWKH The accompanying notes are an integral part of these statements. 6LPRQ3URSHUW\*URXS,QF Consolidated Statements of Cash Flows (Dollars in thousands) )RUWKH 6LPRQ3URSHUW\*URXS,QF Consolidated Statements of Equity (Dollars in thousands) $FFXPXODWHG2WKHU &RPSUHKHQVLYH &DSLWDOLQ &RPPRQ6WRFN 3UHIHUUHG &RPPRQ ,QFRPH ([FHVVRI3DU $FFXPXODWHG +HOGLQ 1RQFRQWUROOLQJ 7RWDO 6WRFN6WRFN /RVV 9DOXH 'HILFLW 7UHDVXU\ ,QWHUHVWV (TXLW\ %DODQFHDW'HFHPEHU ([FKDQJHRIOLPLWHGSDUWQHUXQLWV FRPPRQVKDUHV1RWH ² 6HULHV-SUHIHUUHGVWRFNSUHPLXPDPRUWL]DWLRQ 6WRFNLQFHQWLYHSURJUDP FRPPRQVKDUHVQHW ² $PRUWL]DWLRQRIVWRFNLQFHQWLYH 7UHDVXU\VWRFNSXUFKDVH VKDUHV /RQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWV ,VVXDQFHRIXQLWHTXLYDOHQWVDQGRWKHUQHW FRPPRQVKDUHV UHSXUFKDVHG $GMXVWPHQWWROLPLWHGSDUWQHUV LQWHUHVWIURPFKDQJHLQRZQHUVKLSLQWKH 2SHUDWLQJ3DUWQHUVKLS ² 'LVWULEXWLRQVWRFRPPRQVWRFNKROGHUVDQGOLPLWHGSDUWQHUVH[FOXGLQJ 2SHUDWLQJ3DUWQHUVKLSSUHIHUUHGLQWHUHVWV 'LVWULEXWLRQWRRWKHUQRQFRQWUROOLQJLQWHUHVWSDUWQHUV 2WKHUFRPSUHKHQVLYHLQFRPH 1HWLQFRPHH[FOXGLQJDWWULEXWDEOHWRSUHIHUUHGLQWHUHVWVLQWKH 2SHUDWLQJ3DUWQHUVKLSDQGDWWULEXWDEOHWRQRQFRQWUROOLQJ UHGHHPDEOHLQWHUHVWVLQSURSHUWLHV %DODQFHDW'HFHPEHU ([FKDQJHRIOLPLWHGSDUWQHUXQLWV FRPPRQVKDUHV1RWH ² 6HULHV-SUHIHUUHGVWRFNSUHPLXPDPRUWL]DWLRQ 6WRFNLQFHQWLYHSURJUDP FRPPRQVKDUHVQHW ² $PRUWL]DWLRQRIVWRFNLQFHQWLYH 7UHDVXU\VWRFNSXUFKDVH VKDUHV /RQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWV ,VVXDQFHRIXQLWHTXLYDOHQWVDQGRWKHUQHW FRPPRQVKDUHV UHSXUFKDVHG $GMXVWPHQWWROLPLWHGSDUWQHUV LQWHUHVWIURPFKDQJHLQRZQHUVKLSLQWKH 2SHUDWLQJ3DUWQHUVKLS ² 'LVWULEXWLRQVWRFRPPRQVWRFNKROGHUVDQGOLPLWHGSDUWQHUVH[FOXGLQJ 2SHUDWLQJ3DUWQHUVKLSSUHIHUUHGLQWHUHVWV 'LVWULEXWLRQWRRWKHUQRQFRQWUROOLQJLQWHUHVWSDUWQHUV 2WKHUFRPSUHKHQVLYHLQFRPH 1HWLQFRPHH[FOXGLQJDWWULEXWDEOHWRSUHIHUUHGLQWHUHVWVLQWKH 2SHUDWLQJ3DUWQHUVKLSDQGDORVVDWWULEXWDEOHWRQRQFRQWUROOLQJ UHGHHPDEOHLQWHUHVWVLQSURSHUWLHV %DODQFHDW'HFHPEHU ([FKDQJHRIOLPLWHGSDUWQHUXQLWV FRPPRQVKDUHV1RWH ² ,VVXDQFHRIOLPLWHGSDUWQHUXQLWV XQLWV 6HULHV-SUHIHUUHGVWRFNSUHPLXPDPRUWL]DWLRQ 6WRFNLQFHQWLYHSURJUDP FRPPRQVKDUHVQHW ² 5HGHPSWLRQRIOLPLWHGSDUWQHUXQLWV XQLWV $PRUWL]DWLRQRIVWRFNLQFHQWLYH 7UHDVXU\VWRFNSXUFKDVH VKDUHV /RQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWV &XPXODWLYHHIIHFWRIDFFRXQWLQJFKDQJH ,VVXDQFHRIXQLWHTXLYDOHQWVDQGRWKHU FRPPRQVKDUHV UHSXUFKDVHG $GMXVWPHQWWROLPLWHGSDUWQHUV LQWHUHVWIURPFKDQJHLQRZQHUVKLSLQWKH 2SHUDWLQJ3DUWQHUVKLS ² 'LVWULEXWLRQVWRFRPPRQVWRFNKROGHUVDQGOLPLWHGSDUWQHUVH[FOXGLQJ 2SHUDWLQJ3DUWQHUVKLSSUHIHUUHGLQWHUHVWV 'LVWULEXWLRQWRRWKHUQRQFRQWUROOLQJLQWHUHVWSDUWQHUV 2WKHUFRPSUHKHQVLYHLQFRPH 1HWLQFRPHH[FOXGLQJDWWULEXWDEOHWRSUHIHUUHGLQWHUHVWVLQWKH 2SHUDWLQJ3DUWQHUVKLSDQGDWWULEXWDEOHWRQRQFRQWUROOLQJ UHGHHPDEOHLQWHUHVWVLQSURSHUWLHV %DODQFHDW'HFHPEHU The accompanying notes are an integral part of these statements. 6LPRQ3URSHUW\*URXS/3 Consolidated Balance Sheets (Dollars in thousands, except unit amounts) 'HFHPEHU'HFHPEHU $66(76 ,QYHVWPHQWSURSHUWLHVDWFRVW /HVV²DFFXPXODWHGGHSUHFLDWLRQ &DVKDQGFDVKHTXLYDOHQWV 7HQDQWUHFHLYDEOHVDQGDFFUXHGUHYHQXHQHW ,QYHVWPHQWLQXQFRQVROLGDWHGHQWLWLHVDWHTXLW\ ,QYHVWPHQWLQ.OpSLHUUHDWHTXLW\ 'HIHUUHGFRVWVDQGRWKHUDVVHWV 7RWDODVVHWV /,$%,/,7,(6 0RUWJDJHVDQGXQVHFXUHGLQGHEWHGQHVV $FFRXQWVSD\DEOHDFFUXHGH[SHQVHVLQWDQJLEOHVDQGGHIHUUHGUHYHQXHV &DVKGLVWULEXWLRQVDQGORVVHVLQXQFRQVROLGDWHGHQWLWLHVDWHTXLW\ 2WKHUOLDELOLWLHV 7RWDOOLDELOLWLHV &RPPLWPHQWVDQGFRQWLQJHQFLHV 3UHIHUUHGXQLWVYDULRXVVHULHVDWOLTXLGDWLRQYDOXHDQGQRQFRQWUROOLQJUHGHHPDEOH LQWHUHVWVLQSURSHUWLHV (48,7< 3DUWQHUV¶(TXLW\ 3UHIHUUHGXQLWVXQLWVRXWVWDQGLQJ/LTXLGDWLRQYDOXHRI *HQHUDO3DUWQHUDQGXQLWVRXWVWDQGLQJUHVSHFWLYHO\ /LPLWHG3DUWQHUVDQGXQLWVRXWVWDQGLQJUHVSHFWLYHO\ 7RWDOSDUWQHUV¶HTXLW\ 1RQUHGHHPDEOHQRQFRQWUROOLQJLQWHUHVWVLQSURSHUWLHVQHW 7RWDOHTXLW\ 7RWDOOLDELOLWLHVDQGHTXLW\ The accompanying notes are an integral part of these statements. 6LPRQ3URSHUW\*URXS/3 Consolidated Statements of Operations and Comprehensive Income (Dollars in thousands, except per unit amounts) )RUWKH The accompanying notes are an integral part of these statements. 6LPRQ3URSHUW\*URXS/3 Consolidated Statements of Cash Flows (Dollars in thousands) )RUWKH The accompanying notes are an integral part of these statements. 6LPRQ3URSHUW\*URXS/3 Consolidated Statements of Equity (Dollars in thousands) 3UHIHUUHG 6LPRQ 0DQDJLQJ /LPLWHG 1RQFRQWUROOLQJ7RWDO 8QLWV *HQHUDO3DUWQHU 3DUWQHUV ,QWHUHVWV (TXLW\ %DODQFHDW'HFHPEHU 6HULHV-SUHIHUUHGVWRFNSUHPLXPDQGDPRUWL]DWLRQ /LPLWHGSDUWQHUXQLWVH[FKDQJHGWRFRPPRQXQLWV XQLWV ² 6WRFNLQFHQWLYHSURJUDP FRPPRQVKDUHVQHW ² ² $PRUWL]DWLRQRIVWRFNLQFHQWLYH 7UHDVXU\XQLWSXUFKDVH XQLWV /RQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWV ,VVXDQFHRIXQLWHTXLYDOHQWVDQGRWKHU XQLWVDQG FRPPRQXQLWV $GMXVWPHQWWROLPLWHGSDUWQHUV LQWHUHVWIURPFKDQJHLQ RZQHUVKLSLQWKH2SHUDWLQJ3DUWQHUVKLS ² 'LVWULEXWLRQVH[FOXGLQJGLVWULEXWLRQVRQSUHIHUUHGLQWHUHVWV FODVVLILHGDVWHPSRUDU\HTXLW\ 1HWLQFRPHH[FOXGLQJSUHIHUUHGGLVWULEXWLRQVRQWHPSRUDU\ HTXLW\SUHIHUUHGXQLWVRIDQGDWWULEXWDEOHWR QRQFRQWUROOLQJUHGHHPDEOHLQWHUHVWVLQSURSHUWLHV 2WKHUFRPSUHKHQVLYHLQFRPH %DODQFHDW'HFHPEHU 6HULHV-SUHIHUUHGVWRFNSUHPLXPDQGDPRUWL]DWLRQ /LPLWHGSDUWQHUXQLWVH[FKDQJHGWRFRPPRQXQLWV XQLWV ² 6WRFNLQFHQWLYHSURJUDP FRPPRQVKDUHVQHW ² ² $PRUWL]DWLRQRIVWRFNLQFHQWLYH 7UHDVXU\XQLWSXUFKDVH XQLWV /RQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWV ,VVXDQFHRIXQLWHTXLYDOHQWVDQGRWKHU XQLWVDQG FRPPRQXQLWV $GMXVWPHQWWROLPLWHGSDUWQHUV LQWHUHVWIURPFKDQJHLQRZQHUVKLSLQ WKH2SHUDWLQJ3DUWQHUVKLS ² 'LVWULEXWLRQVH[FOXGLQJGLVWULEXWLRQVRQSUHIHUUHG LQWHUHVWVFODVVLILHGDVWHPSRUDU\HTXLW\ 1HWLQFRPHH[FOXGLQJSUHIHUUHGGLVWULEXWLRQVRQWHPSRUDU\ HTXLW\SUHIHUUHGXQLWVRIDQGDORVVDWWULEXWDEOH WRQRQFRQWUROOLQJUHGHHPDEOHLQWHUHVWVLQSURSHUWLHV 2WKHUFRPSUHKHQVLYHLQFRPH %DODQFHDW'HFHPEHU ,VVXDQFHRIOLPLWHGSDUWQHUXQLWV XQLWV 6HULHV-SUHIHUUHGVWRFNSUHPLXPDQGDPRUWL]DWLRQ /LPLWHGSDUWQHUXQLWVH[FKDQJHGWRFRPPRQXQLWV XQLWV ² 6WRFNLQFHQWLYHSURJUDP FRPPRQXQLWVQHW ² ² $PRUWL]DWLRQRIVWRFNLQFHQWLYH 5HGHPSWLRQRIOLPLWHGSDUWQHUXQLWV XQLWV 7UHDVXU\XQLWSXUFKDVH XQLWV /RQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWV &XPXODWLYHHIIHFWRIDFFRXQWLQJFKDQJH ,VVXDQFHRIXQLWHTXLYDOHQWVDQGRWKHU FRPPRQXQLWV $GMXVWPHQWWROLPLWHGSDUWQHUV LQWHUHVWIURPFKDQJHLQ RZQHUVKLSLQWKH2SHUDWLQJ3DUWQHUVKLS ² 'LVWULEXWLRQVH[FOXGLQJGLVWULEXWLRQVRQSUHIHUUHGLQWHUHVWV FODVVLILHGDVWHPSRUDU\HTXLW\ 1HWLQFRPHH[FOXGLQJSUHIHUUHGGLVWULEXWLRQVRQWHPSRUDU\ HTXLW\SUHIHUUHGXQLWVRIDQGDWWULEXWDEOH WRQRQFRQWUROOLQJUHGHHPDEOHLQWHUHVWVLQSURSHUWLHV 2WKHUFRPSUHKHQVLYHLQFRPH %DODQFHDW'HFHPEHU The accompanying notes are an integral part of these statements. 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV 2UJDQL]DWLRQ 6LPRQ3URSHUW\*URXS,QFLVD'HODZDUHFRUSRUDWLRQWKDWRSHUDWHVDVDVHOIDGPLQLVWHUHGDQGVHOIPDQDJHGUHDO HVWDWHLQYHVWPHQWWUXVWRU5(,7XQGHUWKH,QWHUQDO5HYHQXH&RGHRIDVDPHQGHGRUWKH,QWHUQDO5HYHQXH&RGH 5(,7VZLOOJHQHUDOO\QRWEHOLDEOHIRU86IHGHUDOFRUSRUDWHLQFRPHWD[HVDVORQJDVWKH\GLVWULEXWHQRWOHVVWKDQRI WKHLU5(,7WD[DEOHLQFRPH6LPRQ3URSHUW\*URXS/3LVRXUPDMRULW\RZQHG'HODZDUHSDUWQHUVKLSVXEVLGLDU\WKDWRZQV DOORIRXUUHDOHVWDWHSURSHUWLHVDQGRWKHUDVVHWV8QOHVVVWDWHGRWKHUZLVHRUWKHFRQWH[WRWKHUZLVHUHTXLUHVUHIHUHQFHVWR 6LPRQPHDQ6LPRQ3URSHUW\*URXS,QFDQGUHIHUHQFHVWRWKH2SHUDWLQJ3DUWQHUVKLSPHDQ6LPRQ3URSHUW\*URXS/3 5HIHUHQFHVWR ZHXVDQGRXUPHDQFROOHFWLYHO\6LPRQ WKH2SHUDWLQJ3DUWQHUVKLSDQGWKRVHHQWLWLHVVXEVLGLDULHV RZQHGRUFRQWUROOHGE\6LPRQDQGRUWKH2SHUDWLQJ3DUWQHUVKLS8QOHVVRWKHUZLVHLQGLFDWHGWKHVHQRWHVWRFRQVROLGDWHG ILQDQFLDO VWDWHPHQWV DSSO\ WR ERWK 6LPRQ DQG WKH 2SHUDWLQJ 3DUWQHUVKLS $FFRUGLQJ WR WKH 2SHUDWLQJ 3DUWQHUVKLS V SDUWQHUVKLSDJUHHPHQWWKH2SHUDWLQJ3DUWQHUVKLSLVUHTXLUHGWRSD\DOOH[SHQVHVRI6LPRQ :HRZQGHYHORSDQGPDQDJHSUHPLHUVKRSSLQJGLQLQJHQWHUWDLQPHQWDQGPL[HGXVHGHVWLQDWLRQVZKLFKFRQVLVW SULPDULO\RIPDOOV3UHPLXP2XWOHWVDQG7KH0LOOV$VRI'HFHPEHUZHRZQHGRUKHOGDQLQWHUHVWLQ LQFRPHSURGXFLQJSURSHUWLHVLQWKH8QLWHG6WDWHVZKLFKFRQVLVWHGRIPDOOV3UHPLXP2XWOHWV0LOOVIRXUOLIHVW\OH FHQWHUVDQGRWKHUUHWDLOSURSHUWLHVLQVWDWHVDQG3XHUWR5LFR,QWHUQDWLRQDOO\DVRI'HFHPEHUZHKDG RZQHUVKLSLQWHUHVWVLQQLQH3UHPLXP2XWOHWVLQ-DSDQIRXU3UHPLXP2XWOHWVLQ6RXWK.RUHDWKUHH3UHPLXP2XWOHWVLQ &DQDGDWZR3UHPLXP2XWOHWVLQ0DOD\VLDDQGRQH3UHPLXP2XWOHWLQ0H[LFR:HDOVRRZQDQLQWHUHVWLQHLJKW'HVLJQHU 2XWOHWSURSHUWLHVLQ(XURSHDQGRQH'HVLJQHU2XWOHWSURSHUW\LQ&DQDGD2IWKHHLJKWSURSHUWLHVLQ(XURSHWZRDUHORFDWHG LQ,WDO\WZRDUHORFDWHGLQWKH1HWKHUODQGVDQGRQHHDFKLVORFDWHGLQ$XVWULD*HUPDQ\)UDQFHDQGWKH8QLWHG.LQJGRP $VRI'HFHPEHUZHDOVRRZQHGDHTXLW\VWDNHLQ.OpSLHUUH6$RU.OpSLHUUHDSXEOLFO\WUDGHG3DULVEDVHG UHDOHVWDWHFRPSDQ\ZKLFKRZQVRUKDVDQLQWHUHVWLQVKRSSLQJFHQWHUVORFDWHGLQFRXQWULHVLQ(XURSH :HJHQHUDWHWKHPDMRULW\RIRXUUHYHQXHVIURPOHDVHVZLWKUHWDLOGLQLQJHQWHUWDLQPHQWDQGRWKHUWHQDQWVLQFOXGLQJ • EDVHPLQLPXPUHQWV • RYHUDJHDQGSHUFHQWDJHUHQWVEDVHGRQWHQDQWV¶VDOHVYROXPHDQG • UHFRYHUDEOHH[SHQGLWXUHVVXFKDVSURSHUW\RSHUDWLQJUHDOHVWDWHWD[HVUHSDLUDQGPDLQWHQDQFHDQGDGYHUWLVLQJ DQGSURPRWLRQDOH[SHQGLWXUHV 5HYHQXHVRIRXUPDQDJHPHQWFRPSDQ\DIWHULQWHUFRPSDQ\HOLPLQDWLRQVFRQVLVWSULPDULO\RIPDQDJHPHQWIHHVWKDW DUHW\SLFDOO\EDVHGXSRQWKHUHYHQXHVRIWKHSURSHUW\EHLQJPDQDJHG :HDOVRJURZE\JHQHUDWLQJVXSSOHPHQWDOUHYHQXHVIURPWKHIROORZLQJDFWLYLWLHV • HVWDEOLVKLQJ RXU SURSHUWLHV DV OHDGLQJ PDUNHW UHVRXUFH SURYLGHUV IRU UHWDLOHUV DQG RWKHU EXVLQHVVHV DQG FRQVXPHUIRFXVHGFRUSRUDWHDOOLDQFHVLQFOXGLQJSD\PHQWV\VWHPV VXFKDVKDQGOLQJIHHVUHODWLQJWRWKHVDOHV RI EDQNLVVXHG SUHSDLG FDUGV QDWLRQDO PDUNHWLQJ DOOLDQFHV VWDWLF DQG GLJLWDO PHGLD LQLWLDWLYHV EXVLQHVV GHYHORSPHQWVSRQVRUVKLSDQGHYHQWV • RIIHULQJSURSHUW\RSHUDWLQJVHUYLFHVWRRXUWHQDQWVDQGRWKHUVLQFOXGLQJZDVWHKDQGOLQJDQGIDFLOLW\VHUYLFHVDQG WKHSURYLVLRQRIHQHUJ\VHUYLFHV • VHOOLQJRUOHDVLQJODQGDGMDFHQWWRRXUSURSHUWLHVFRPPRQO\UHIHUUHGWRDV³RXWORWV´RU³RXWSDUFHOV´DQG •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pSLHUUH $p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¶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¶LQWHUHVWDWWKHHQGRIHDFKSHULRGWRUHIOHFWWKHLULQWHUHVWLQWKH QHWDVVHWVRIWKH2SHUDWLQJ3DUWQHUVKLS 3UHIHUUHGXQLWUHTXLUHPHQWVLQWKH2SHUDWLQJ3DUWQHUVKLS¶VDFFRPSDQ\LQJFRQVROLGDWHGVWDWHPHQWVRIRSHUDWLRQV DQGFRPSUHKHQVLYHLQFRPHUHSUHVHQWGLVWULEXWLRQVRQRXWVWDQGLQJSUHIHUUHGXQLWVDQGDUHUHFRUGHGZKHQGHFODUHG 6XPPDU\RI6LJQLILFDQW$FFRXQWLQJ3ROLFLHV Investment Properties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¶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urchase Accounting :HDOORFDWHWKHSXUFKDVHSULFHRIDVVHWDFTXLVLWLRQVDQGDQ\H[FHVVLQYHVWPHQWLQXQFRQVROLGDWHGHQWLWLHVWRWKH YDULRXVFRPSRQHQWVRIWKHDFTXLVLWLRQEDVHGXSRQWKHUHODWLYHIDLUYDOXHRIHDFKFRPSRQHQWZKLFKPD\EHGHULYHGIURP YDULRXVREVHUYDEOHRUXQREVHUYDEOHLQSXWVDQGDVVXPSWLRQV$OVRZHPD\XWLOL]HWKLUGSDUW\YDOXDWLRQVSHFLDOLVWV7KHVH FRPSRQHQWVW\SLFDOO\LQFOXGHEXLOGLQJVODQGDQGLQWDQJLEOHVUHODWHGWRLQSODFHOHDVHVDQGZHHVWLPDWH • WKHUHODWLYHIDLUYDOXHRIODQGDQGUHODWHGLPSURYHPHQWVDQGEXLOGLQJVRQDQDVLIYDFDQWEDVLV • WKH PDUNHW YDOXH RI LQSODFH OHDVHV EDVHG XSRQ RXU EHVW HVWLPDWH RI FXUUHQW PDUNHW UHQWV DQG DPRUWL]H WKH UHVXOWLQJPDUNHWUHQWDGMXVWPHQWLQWRUHYHQXHV • WKHYDOXHRIFRVWVWRREWDLQWHQDQWVLQFOXGLQJWHQDQWDOORZDQFHVDQGLPSURYHPHQWVDQGOHDVLQJFRPPLVVLRQV DQG • WKHYDOXHRIUHYHQXHDQGUHFRYHU\RIFRVWVIRUHJRQHGXULQJDUHDVRQDEOHOHDVHXSSHULRGDVLIWKHVSDFHZDV YDFDQW 7KHUHODWLYHIDLUYDOXHRIEXLOGLQJVLVGHSUHFLDWHGRYHUWKHHVWLPDWHGUHPDLQLQJOLIHRIWKHDFTXLUHGEXLOGLQJRUUHODWHG LPSURYHPHQWV :H DPRUWL]H WHQDQW LPSURYHPHQWV LQSODFH OHDVH DVVHWV DQG RWKHU OHDVHUHODWHG LQWDQJLEOHV RYHU WKH UHPDLQLQJOLIHRIWKHXQGHUO\LQJOHDVHV:HDOVRHVWLPDWHWKHYDOXHRIRWKHUDFTXLUHGLQWDQJLEOHDVVHWVLIDQ\ZKLFKDUH DPRUWL]HGRYHUWKHUHPDLQLQJOLIHRIWKHXQGHUO\LQJUHODWHGLQWDQJLEOHV Cash and Cash Equivalents :HFRQVLGHUDOOKLJKO\OLTXLGLQYHVWPHQWVSXUFKDVHGZLWKDQRULJLQDOPDWXULW\RIGD\VRUOHVVWREHFDVKDQGFDVK HTXLYDOHQWV&DVKHTXLYDOHQWVDUHFDUULHGDWFRVWZKLFKDSSUR[LPDWHVIDLUYDOXH&DVKHTXLYDOHQWVJHQHUDOO\FRQVLVWRI FRPPHUFLDOSDSHUEDQNHUV¶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quity Instruments and Debt Securities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air Value Measurements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ains on Issuances of Stock by Equity Method Investees :KHQ RQH RI RXU HTXLW\ PHWKRG LQYHVWHHV LVVXHV DGGLWLRQDO VKDUHV WR WKLUG SDUWLHV RXU SHUFHQWDJH RZQHUVKLS LQWHUHVWLQWKHLQYHVWHHPD\GHFUHDVH,QWKHHYHQWWKHLVVXDQFHSULFHSHUVKDUHLVKLJKHURUORZHUWKDQRXUDYHUDJHFDUU\LQJ DPRXQWSHUVKDUHZHUHFRJQL]HDQRQFDVKJDLQRUORVVRQWKHLVVXDQFHZKHQDSSURSULDWH7KLVQRQFDVKJDLQRUORVVLV UHFRJQL]HGLQRXUQHWLQFRPHLQWKHSHULRGWKHFKDQJHRIRZQHUVKLSLQWHUHVWRFFXUV Use of Estimates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egment and Geographic Locations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eferred Costs and Other Assets 'HIHUUHGFRVWVDQGRWKHUDVVHWVLQFOXGHWKHIROORZLQJDVRI'HFHPEHU 'HIHUUHGOHDVHFRVWVQHW ,QSODFHOHDVHLQWDQJLEOHVQHW $FTXLUHGDERYHPDUNHWOHDVHLQWDQJLEOHVQHW 0DUNHWDEOHVHFXULWLHVRIRXUFDSWLYHLQVXUDQFHFRPSDQLHV *RRGZLOO 2WKHUPDUNHWDEOHDQGQRQPDUNHWDEOHVHFXULWLHV 3UHSDLGVQRWHVUHFHLYDEOHDQGRWKHUDVVHWVQHW Deferred Lease Costs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ntangibles 7KHDYHUDJHUHPDLQLQJOLIHRILQSODFHOHDVHLQWDQJLEOHVLVDSSUR[LPDWHO\\HDUVDQGLVEHLQJDPRUWL]HGRQD VWUDLJKWOLQHEDVLVDQGLVLQFOXGHGZLWKGHSUHFLDWLRQDQGDPRUWL]DWLRQLQWKHFRQVROLGDWHGVWDWHPHQWVRIRSHUDWLRQVDQG FRPSUHKHQVLYH LQFRPH 7KH IDLU PDUNHW YDOXH RI DERYH DQG EHORZ PDUNHW OHDVHV LV DPRUWL]HG LQWR UHYHQXH RYHU WKH UHPDLQLQJOHDVHOLIHDVDFRPSRQHQWRIUHSRUWHGPLQLPXPUHQWV7KHZHLJKWHGDYHUDJHUHPDLQLQJOLIHRIWKHVHLQWDQJLEOHV 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV LVDSSUR[LPDWHO\\HDUV7KHXQDPRUWL]HGDPRXQWRIEHORZPDUNHWOHDVHVLVLQFOXGHGLQDFFRXQWVSD\DEOHDFFUXHG H[SHQVHVLQWDQJLEOHVDQGGHIHUUHGUHYHQXHVLQWKHFRQVROLGDWHGEDODQFHVKHHWVDQGZDVPLOOLRQDQGPLOOLRQ DVRI'HFHPEHUDQGUHVSHFWLYHO\7KHDPRXQWRIDPRUWL]DWLRQRIDERYHDQGEHORZPDUNHWOHDVHVQHW ZKLFKLQFUHDVHGUHYHQXHIRUWKH\HDUVHQGHG'HFHPEHUDQGZDVPLOOLRQPLOOLRQDQG PLOOLRQ UHVSHFWLYHO\ ,I D OHDVH LV WHUPLQDWHG SULRU WR WKH RULJLQDO OHDVH WHUPLQDWLRQ DQ\ UHPDLQLQJ XQDPRUWL]HG LQWDQJLEOHLVZULWWHQRIIWRHDUQLQJV 'HWDLOVRILQWDQJLEOHDVVHWVDVRI'HFHPEHUDUHDVIROORZV ,QSODFHOHDVHLQWDQJLEOHV $FFXPXODWHGDPRUWL]DWLRQ ,QSODFHOHDVHLQWDQJLEOHVQHW $FTXLUHGDERYHPDUNHWOHDVHLQWDQJLEOHV $FFXPXODWHGDPRUWL]DWLRQ $FTXLUHGDERYHPDUNHWOHDVHLQWDQJLEOHVQHW (VWLPDWHGIXWXUHDPRUWL]DWLRQDQGWKHLQFUHDVLQJ GHFUHDVLQJ HIIHFWRQPLQLPXPUHQWVIRURXUDERYHDQGEHORZ PDUNHWOHDVHVDVRI'HFHPEHUDUHDVIROORZV %HORZ $ERYH ,PSDFWWR 0DUNHW 0DUNHW 0LQLPXP /HDVHV /HDVHV 5HQW1HW 7KHUHDIWHU Derivative Financial Instruments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¼ 1RYHPEHU ² ¼ 0D\ ¼ 0D\ ¼ 0D\ /LDELOLW\EDODQFHVLQWKHDERYHWDEOHDUHLQFOXGHGLQRWKHUOLDELOLWLHV ,QWKHILUVWTXDUWHURIZHHQWHUHGLQWRD(XURGHQRPLQDWHGFURVVFXUUHQF\VZDSDJUHHPHQWWRPDQDJHRXU H[SRVXUHWRFKDQJHVLQIRUHLJQH[FKDQJHUDWHVE\VZDSSLQJPLOOLRQRIIL[HGUDWH86GROODUGHQRPLQDWHG GHEWWRIL[HGUDWH(XURGHQRPLQDWHGGHEWRI¼PLOOLRQ7KHFURVVFXUUHQF\VZDSPDWXUHVRQ'HFHPEHU 7KHIDLUYDOXHRIRXUFURVVFXUUHQF\VZDSDJUHHPHQWDW'HFHPEHULVPLOOLRQDQGLVLQFOXGHGLQGHIHUUHG FRVWVDQGRWKHUDVVHWV,QWKHWKLUGTXDUWHURIZHHQWHUHGLQWRD Noncontrolling Interests 6LPRQ 'HWDLOVRIWKHFDUU\LQJDPRXQWRIRXUQRQFRQWUROOLQJLQWHUHVWVDUHDVIROORZVDVRI'HFHPEHU /LPLWHGSDUWQHUV¶LQWHUHVWVLQWKH2SHUDWLQJ3DUWQHUVKLS 1RQUHGHHPDEOHQRQFRQWUROOLQJLQWHUHVWVLQSURSHUWLHVQHW 7RWDOQRQFRQWUROOLQJLQWHUHVWVUHIOHFWHGLQHTXLW\ 1HWLQFRPHDWWULEXWDEOHWRQRQFRQWUROOLQJLQWHUHVWV ZKLFKLQFOXGHVQRQUHGHHPDEOHDQGUHGHHPDEOHQRQFRQWUROOLQJ LQWHUHVWVLQFRQVROLGDWHGSURSHUWLHVOLPLWHGSDUWQHUV¶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¶LQWHUHVWIURPFKDQJHLQRZQHUVKLSLQWKH 2SHUDWLQJ3DUWQHUVKLS 8QLWVLVVXHGWROLPLWHGSDUWQHUV ²² 8QLWVH[FKDQJHGIRUFRPPRQVKDUHV 8QLWVUHGHHPHG ² ² /RQJWHUPLQFHQWLYHSHUIRUPDQFHXQLWV &RQWULEXWLRQVE\QRQFRQWUROOLQJLQWHUHVWVQHWDQGRWKHU 1RQFRQWUROOLQJLQWHUHVWVHQGRISHULRG 7KH2SHUDWLQJ3DUWQHUVKLS 2XU HYDOXDWLRQ RI WKH DSSURSULDWHQHVV RI FODVVLI\LQJ WKH 2SHUDWLQJ 3DUWQHUVKLS¶V FRPPRQ XQLWV RI SDUWQHUVKLS LQWHUHVW RU XQLWV KHOG E\ 6LPRQ DQG WKH 2SHUDWLQJ 3DUWQHUVKLS V OLPLWHG SDUWQHUV ZLWKLQ SHUPDQHQW HTXLW\ FRQVLGHUHG VHYHUDOVLJQLILFDQWIDFWRUV)LUVWDVDOLPLWHGSDUWQHUVKLSDOOGHFLVLRQVUHODWLQJWRWKH2SHUDWLQJ3DUWQHUVKLS¶VRSHUDWLRQV DQGGLVWULEXWLRQVDUHPDGHE\6LPRQDFWLQJDVWKH2SHUDWLQJ3DUWQHUVKLS¶VVROHJHQHUDOSDUWQHU7KHGHFLVLRQVRIWKH JHQHUDO SDUWQHU DUH PDGH E\ 6LPRQ V %RDUG RI 'LUHFWRUV RU PDQDJHPHQW 7KH 2SHUDWLQJ 3DUWQHUVKLS KDV QR RWKHU JRYHUQDQFHVWUXFWXUH6HFRQGO\WKHVROHDVVHWRI6LPRQLVLWVLQWHUHVWLQWKH2SHUDWLQJ3DUWQHUVKLS$VDUHVXOWDVKDUHRI FRPPRQVWRFNRI6LPRQRUFRPPRQVWRFNLIRZQHGE\WKH2SHUDWLQJ3DUWQHUVKLSLVEHVWFKDUDFWHUL]HGDVEHLQJVLPLODU WRDWUHDVXU\VKDUHDQGWKXVQRWDQDVVHWRIWKH2SHUDWLQJ3DUWQHUVKLS /LPLWHG SDUWQHUV RI WKH 2SHUDWLQJ 3DUWQHUVKLS KDYH WKH ULJKW XQGHU WKH 2SHUDWLQJ 3DUWQHUVKLS¶V SDUWQHUVKLS DJUHHPHQWWRH[FKDQJHWKHLUXQLWVIRUVKDUHVRIFRPPRQVWRFNRUFDVKDVVHOHFWHGE\6LPRQDVWKHVROHJHQHUDOSDUWQHU $FFRUGLQJO\ZHFODVVLI\XQLWVKHOGE\OLPLWHGSDUWQHUVLQSHUPDQHQWHTXLW\EHFDXVH6LPRQPD\HOHFWWRLVVXHVKDUHVRI FRPPRQ VWRFN WR OLPLWHG SDUWQHUV H[HUFLVLQJ WKHLU H[FKDQJH ULJKWV UDWKHU WKDQ XVLQJ FDVK 8QGHU WKH 2SHUDWLQJ 3DUWQHUVKLS¶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²EHJLQQLQJRI SHULRG 1HWLQFRPHDWWULEXWDEOHWRQRQFRQWUROOLQJQRQUHGHHPDEOHLQWHUHVWV 'LVWULEXWLRQVWRQRQFRQWUROOLQJQRQUHGHHPDEOHLQWHUHVWKROGHUV &RQWULEXWLRQVE\QRQFRQWUROOLQJQRQUHGHHPDEOHLQWHUHVWVQHWDQGRWKHU 1RQFRQWUROOLQJQRQUHGHHPDEOHLQWHUHVWVLQSURSHUWLHVQHW²HQGRISHULRG Accumulated Other Comprehensive Income (Loss) 6LPRQ 7KHFKDQJHVLQFRPSRQHQWVRIRXUDFFXPXODWHGRWKHUFRPSUHKHQVLYHLQFRPH ORVV FRQVLVWHGRIWKHIROORZLQJQHW RIQRQFRQWUROOLQJLQWHUHVWDVRI'HFHPEHU 1HWXQUHDOL]HG &XUUHQF\ $FFXPXODWHG ORVVHVRQ WUDQVODWLRQ GHULYDWLYH PDUNHWDEOH DGMXVWPHQWV JDLQVQHW VHFXULWLHV 7RWDO %HJLQQLQJEDODQFH 2WKHUFRPSUHKHQVLYH ORVV LQFRPHEHIRUH UHFODVVLILFDWLRQV $PRXQWVUHFODVVLILHGIURPDFFXPXODWHGRWKHU FRPSUHKHQVLYHLQFRPH ORVV ² ² 1HWFXUUHQWSHULRGRWKHUFRPSUHKHQVLYH ORVV LQFRPH (QGLQJEDODQFH 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV 7KH UHFODVVLILFDWLRQV RXW RI DFFXPXODWHG RWKHU FRPSUHKHQVLYH LQFRPH ORVV FRQVLVWHG RI WKH IROORZLQJ DV RI 'HFHPEHU $PRXQW $PRXQW $PRXQW UHFODVVLILHG UHFODVVLILHG UHFODVVLILHG IURP IURP IURP DFFXPXODWHG DFFXPXODWHG DFFXPXODWHG 'HWDLOVDERXWDFFXPXODWHGRWKHU RWKHU RWKHU RWKHU FRPSUHKHQVLYHLQFRPH ORVV FRPSUHKHQVLYH FRPSUHKHQVLYH FRPSUHKHQVLYH $IIHFWHGOLQHLWHPZKHUH FRPSRQHQWV LQFRPH ORVV LQFRPH ORVV LQFRPH ORVV QHWLQFRPHLVSUHVHQWHG &XUUHQF\WUDQVODWLRQDGMXVWPHQWV ² ² *DLQXSRQDFTXLVLWLRQRI FRQWUROOLQJLQWHUHVWVVDOHRU GLVSRVDORIRUUHFRYHU\RQ DVVHWVDQGLQWHUHVWVLQ XQFRQVROLGDWHGHQWLWLHVDQG LPSDLUPHQWQHW ² ² 1HWLQFRPHDWWULEXWDEOHWR QRQFRQWUROOLQJLQWHUHVWV ² ² $FFXPXODWHGGHULYDWLYHORVVHVQHW ,QWHUHVWH[SHQVH ² ² *DLQXSRQDFTXLVLWLRQRI FRQWUROOLQJLQWHUHVWVVDOHRU GLVSRVDORIRUUHFRYHU\RQ DVVHWVDQGLQWHUHVWVLQ XQFRQVROLGDWHGHQWLWLHVDQG LPSDLUPHQWQHW 1HWLQFRPHDWWULEXWDEOHWR QRQFRQWUROOLQJLQWHUHVWV 5HDOL]HGJDLQRQVDOHRIPDUNHWDEOH VHFXULWLHV ² ² 2WKHULQFRPH ² ² 1HWLQFRPHDWWULEXWDEOHWR QRQFRQWUROOLQJLQWHUHVWV ² ²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² ² 1HWFXUUHQWSHULRGRWKHUFRPSUHKHQVLYH ORVV LQFRPH (QGLQJEDODQFH 7KH UHFODVVLILFDWLRQV RXW RI DFFXPXODWHG RWKHU FRPSUHKHQVLYH LQFRPH ORVV FRQVLVWHG RI WKH IROORZLQJ DV RI 'HFHPEHU $PRXQW $PRXQW $PRXQW UHFODVVLILHG UHFODVVLILHG UHFODVVLILHG IURP IURP IURP DFFXPXODWHG DFFXPXODWHG DFFXPXODWHG 'HWDLOVDERXWDFFXPXODWHGRWKHU RWKHU RWKHU RWKHU FRPSUHKHQVLYHLQFRPH ORVV FRPSUHKHQVLYH FRPSUHKHQVLYH FRPSUHKHQVLYH $IIHFWHGOLQHLWHPZKHUH FRPSRQHQWV LQFRPH ORVV LQFRPH ORVV LQFRPH ORVV QHWLQFRPHLVSUHVHQWHG &XUUHQF\WUDQVODWLRQDGMXVWPHQWV ² ² *DLQXSRQDFTXLVLWLRQRI FRQWUROOLQJLQWHUHVWVVDOHRU GLVSRVDORIRUUHFRYHU\RQ DVVHWVDQGLQWHUHVWVLQ XQFRQVROLGDWHGHQWLWLHVDQG LPSDLUPHQWQHW $FFXPXODWHGGHULYDWLYHORVVHVQHW ,QWHUHVWH[SHQVH ² ² *DLQXSRQDFTXLVLWLRQRI FRQWUROOLQJLQWHUHVWVVDOHRU GLVSRVDORIRUUHFRYHU\RQ DVVHWVDQGLQWHUHVWVLQ XQFRQVROLGDWHGHQWLWLHVDQG LPSDLUPHQWQHW 5HDOL]HGJDLQRQVDOHRIPDUNHWDEOH VHFXULWLHV ² ² 2WKHULQFRPH 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV Revenue Recognition :HDVDOHVVRUUHWDLQVXEVWDQWLDOO\DOORIWKHULVNVDQGEHQHILWVRIRZQHUVKLSRIWKHLQYHVWPHQWSURSHUWLHVDQG DFFRXQWIRURXUOHDVHVDVRSHUDWLQJOHDVHV:HDFFUXHPLQLPXPUHQWVRQDVWUDLJKWOLQHEDVLVRYHUWKHWHUPVRIWKHLU UHVSHFWLYHOHDVHV6XEVWDQWLDOO\DOORIRXUUHWDLOWHQDQWVDUHDOVRUHTXLUHGWRSD\RYHUDJHUHQWVEDVHGRQVDOHVRYHUDVWDWHG EDVHDPRXQWGXULQJWKHOHDVH\HDU:HUHFRJQL]HRYHUDJHUHQWVRQO\ZKHQHDFKWHQDQW¶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¶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anagement Fees and Other Revenues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¶VHVWLPDWHV7RWDOLQVXUDQFHUHVHUYHVIRURXU LQVXUDQFHVXEVLGLDULHVDQGRWKHUVHOILQVXUDQFHSURJUDPVDVRI'HFHPEHUDQGDSSUR[LPDWHGPLOOLRQ DQGPLOOLRQUHVSHFWLYHO\DQGDUHLQFOXGHGLQRWKHUOLDELOLWLHVLQWKHFRQVROLGDWHGEDODQFHVKHHWV,QIRUPDWLRQUHODWHG WR WKH VHFXULWLHV LQFOXGHG LQ WKH LQYHVWPHQW SRUWIROLR RI RXU FDSWLYH LQVXUDQFH VXEVLGLDU\ LV LQFOXGHG ZLWKLQ WKH ³(TXLW\ ,QVWUXPHQWVDQG'HEW6HFXULWLHV´VHFWLRQDERYH 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV Allowance for Credit Losses :HUHFRUGDSURYLVLRQIRUFUHGLWORVVHVEDVHGRQRXUMXGJPHQWRIDWHQDQW¶VFUHGLWZRUWKLQHVVDELOLW\WRSD\DQG SUREDELOLW\RIFROOHFWLRQ,QDGGLWLRQZHDOVRFRQVLGHUWKHVHFWRULQZKLFKWKHWHQDQWRSHUDWHVDQGRXUKLVWRULFDOFROOHFWLRQ H[SHULHQFHLQFDVHVRIEDQNUXSWF\LIDSSOLFDEOH$FFRXQWVDUHZULWWHQRIIZKHQWKH\DUHGHHPHGWREHQRORQJHUFROOHFWLEOH 3UHVHQWHGEHORZLVWKHDFWLYLW\LQWKHDOORZDQFHIRUFUHGLWORVVHVGXULQJWKHIROORZLQJ\HDUV )RUWKH Income Taxes 6LPRQDQGFHUWDLQVXEVLGLDULHVRIWKH2SHUDWLQJ3DUWQHUVKLSKDYHHOHFWHGWREHWD[HGDV5(,7VXQGHU6HFWLRQV WKURXJKRIWKH,QWHUQDO5HYHQXH&RGHDQGDSSOLFDEOH7UHDVXU\UHJXODWLRQVUHODWLQJWR5(,7TXDOLILFDWLRQ,QRUGHUWR PDLQWDLQWKLV5(,7VWDWXVWKHUHJXODWLRQVUHTXLUHWKHHQWLW\WRGLVWULEXWHDWOHDVWRI5(,7WD[DEOHLQFRPHWRLWVRZQHUV DQGPHHWFHUWDLQRWKHUDVVHWDQGLQFRPHWHVWVDVZHOODVRWKHUUHTXLUHPHQWV:HLQWHQGWRFRQWLQXHWRDGKHUHWRWKHVH UHTXLUHPHQWVDQGPDLQWDLQ6LPRQ¶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³UHQWVIURPUHDOSURSHUW\´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¶VLQFRPHRUORVVIRUHDFK\HDULVLQFOXGHGLQWKH LQFRPH WD[ UHWXUQV RI WKH SDUWQHUV DFFRUGLQJO\ QR DFFRXQWLQJ IRU LQFRPH WD[HV LV UHTXLUHG LQ WKH DFFRPSDQ\LQJ FRQVROLGDWHGILQDQFLDOVWDWHPHQWVRWKHUWKDQDVGLVFXVVHGDERYHIRURXU756V $V RI 'HFHPEHU DQG ZH KDG QHW GHIHUUHG WD[ OLDELOLWLHV RI PLOOLRQ DQG PLOOLRQ UHVSHFWLYHO\ZKLFKSULPDULO\UHODWHWRWKHWHPSRUDU\GLIIHUHQFHVEHWZHHQWKHFDUU\LQJYDOXHRIEDODQFHVKHHWDVVHWVDQG OLDELOLWLHVDQGWKHLUWD[EDVHV7KHVHGLIIHUHQFHVZHUHSULPDULO\FUHDWHGWKURXJKWKHFRQVROLGDWLRQRIYDULRXV(XURSHDQ DVVHWVLQDVGLVFXVVHGIXUWKHULQ1RWH$GGLWLRQDOO\ZHKDYHGHIHUUHGWD[OLDELOLWLHVUHODWHGWRRXU756VFRQVLVWLQJ RIRSHUDWLQJORVVHVDQGRWKHUFDUU\IRUZDUGVIRU86IHGHUDOLQFRPHWD[SXUSRVHVDVZHOODVWKHWLPLQJRIWKHGHGXFWLELOLW\ RIORVVHVRUUHVHUYHVIURPLQVXUDQFHVXEVLGLDULHVWKRXJKWKHVHDPRXQWVDUHQRWPDWHULDOWRWKHILQDQFLDOVWDWHPHQWV7KH QHWGHIHUUHGWD[OLDELOLW\LVLQFOXGHGLQRWKHUOLDELOLWLHVLQWKHDFFRPSDQ\LQJFRQVROLGDWHGEDODQFHVKHHWV 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV :HDUHDOVRVXEMHFWWRFHUWDLQRWKHUWD[HVLQFOXGLQJVWDWHDQGORFDOWD[HVIUDQFKLVHWD[HVDVZHOODVLQFRPHEDVHG DQGZLWKKROGLQJWD[HVRQGLYLGHQGVIURPFHUWDLQRIRXULQWHUQDWLRQDOLQYHVWPHQWVZKLFKDUHLQFOXGHGLQLQFRPHDQGRWKHU WD[HVLQWKHFRQVROLGDWHGVWDWHPHQWVRIRSHUDWLRQVDQGFRPSUHKHQVLYHLQFRPH Corporate Expenses +RPHDQGUHJLRQDORIILFHFRVWVSULPDULO\LQFOXGHFRPSHQVDWLRQDQGSHUVRQQHOUHODWHGFRVWVWUDYHOEXLOGLQJDQG RIILFHFRVWVDQGRWKHUH[SHQVHVIRURXUFRUSRUDWHKRPHRIILFHDQGUHJLRQDORIILFHV*HQHUDODQGDGPLQLVWUDWLYHH[SHQVH SULPDULO\ LQFOXGHV H[HFXWLYH FRPSHQVDWLRQ EHQHILWV DQG WUDYHOH[SHQVHV DV ZHOO DV FRVWV RI EHLQJ D SXEOLF FRPSDQ\ LQFOXGLQJFHUWDLQOHJDOFRVWVDXGLWIHHVUHJXODWRU\IHHVDQGFHUWDLQRWKHUSURIHVVLRQDOIHHV New Accounting Pronouncements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²2YHUDOO5HFRJQLWLRQDQG0HDVXUHPHQW RI)LQDQFLDO$VVHWVDQG)LQDQFLDO/LDELOLWLHVZKLFKUHTXLUHVHQWLWLHVWRUHFRJQL]HFKDQJHVLQHTXLW\LQYHVWPHQWVZLWKUHDGLO\ GHWHUPLQDEOHIDLUYDOXHVLQQHWLQFRPH:HUHFRJQL]HGDFXPXODWLYHHIIHFWDGMXVWPHQWRIPLOOLRQDVRIDGRSWLRQRQ -DQXDU\WRUHFODVVLI\XQUHDOL]HGJDLQVSUHYLRXVO\UHSRUWHGLQDFFXPXODWHGRWKHUFRPSUHKHQVLYHLQFRPHIRUHTXLW\ LQVWUXPHQWVZLWKUHDGLO\GHWHUPLQDEOHIDLUYDOXHVWKDWZHUHSUHYLRXVO\DFFRXQWHGIRUDVDYDLODEOHIRUVDOHVHFXULWLHVDQG FHUWDLQHTXLW\LQVWUXPHQWVSUHYLRXVO\DFFRXQWHGIRUXVLQJWKHFRVWPHWKRGIRUZKLFKWKHPHDVXUHPHQWDOWHUQDWLYHGHVFULEHG EHORZZDVQRWHOHFWHG)RUWKRVHHTXLW\LQVWUXPHQWVWKDWGRQRWKDYHUHDGLO\GHWHUPLQDEOHIDLUYDOXHVWKH$68SHUPLWV WKHDSSOLFDWLRQRIDPHDVXUHPHQWDOWHUQDWLYHXVLQJWKHFRVWRIWKHLQYHVWPHQWOHVVDQ\LPSDLUPHQWVSOXVRUPLQXVFKDQJHV UHVXOWLQJIURPREVHUYDEOHSULFHFKDQJHVIRUDQLGHQWLFDORUVLPLODULQYHVWPHQWRIWKHVDPHLVVXHU7KLVJXLGDQFHLVDSSOLHG SURVSHFWLYHO\XSRQWKHRFFXUUHQFHRIDQHYHQWZKLFKHVWDEOLVKHVIDLUYDOXHWRDOORWKHUHTXLW\LQVWUXPHQWVZHDFFRXQWIRU XVLQJWKHPHDVXUHPHQWDOWHUQDWLYH ,Q)HEUXDU\WKH)$6%LVVXHG$68/HDVHVZKLFKZLOOUHVXOWLQOHVVHHVUHFRJQL]LQJPRVWOHDVHG DVVHWVDQGFRUUHVSRQGLQJOHDVHOLDELOLWLHVRQWKHEDODQFHVKHHW/HVVRUDFFRXQWLQJZLOOUHPDLQVXEVWDQWLDOO\VLPLODUWRWKH FXUUHQWDFFRXQWLQJKRZHYHUFHUWDLQUHILQHPHQWVZHUHPDGHWRFRQIRUPWKHVWDQGDUGZLWKWKHUHFHQWO\LVVXHGUHYHQXH UHFRJQLWLRQJXLGDQFHLQ$68VSHFLILFDOO\UHODWHGWRWKHDOORFDWLRQDQGUHFRJQLWLRQRIFRQWUDFWFRQVLGHUDWLRQHDUQHG IURPOHDVHDQGQRQOHDVHUHYHQXHFRPSRQHQWV$68DOVROLPLWVWKHFDSLWDOL]DWLRQRIOHDVLQJFRVWVWRLQLWLDOGLUHFW FRVWVZKLFKLIDSSOLHGLQZRXOGKDYHUHGXFHGRXUFDSLWDOL]HGOHDVLQJFRVWVDQGFRUUHVSRQGLQJO\LQFUHDVHGH[SHQVHV E\DSSUR[LPDWHO\PLOOLRQ 6XEVWDQWLDOO\DOORIRXUUHYHQXHVDQGWKHUHYHQXHVRIRXUHTXLW\PHWKRGLQYHVWPHQWVDUHHDUQHGIURPDUUDQJHPHQWV WKDWDUHZLWKLQWKHVFRSHRI$688SRQDGRSWLRQRI$68RQ-DQXDU\FRQVLGHUDWLRQUHODWHGWR 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV QRQOHDVHFRPSRQHQWVLGHQWLILHGLQRXUOHDVHDUUDQJHPHQWVDUHDFFRXQWHGIRUXVLQJWKHJXLGDQFHLQ$68ZKLFK IRUQHZDQGDPHQGHGOHDVHVZHKDYHGHWHUPLQHGZRXOG L QHFHVVLWDWHWKDWZHUHDOORFDWHFRQVLGHUDWLRQUHFHLYHGXQGHU PDQ\RIRXUOHDVHDUUDQJHPHQWVEHWZHHQWKHOHDVHDQGQRQOHDVHFRPSRQHQW LL UHVXOWLQUHFRJQL]LQJUHYHQXHDOORFDWHG WRRXUSULPDU\QRQOHDVHFRPSRQHQW FRQVLGHUDWLRQUHFHLYHGIURPIL[HGFRPPRQDUHDPDLQWHQDQFHDUUDQJHPHQWV RQD VWUDLJKWOLQHEDVLVDQG LLL UHTXLUHVHSDUDWHSUHVHQWDWLRQRIUHYHQXHUHFRJQL]HGIURPOHDVHDQGQRQOHDVHFRPSRQHQWVRQ RXUVWDWHPHQWVRIRSHUDWLRQVDQGFRPSUHKHQVLYHLQFRPH+RZHYHURQ-XO\WKH)$6%LVVXHG$68 ZKLFKFUHDWHGDSUDFWLFDOH[SHGLHQWWKDWSURYLGHVOHVVRUVDQRSWLRQQRWWRVHSDUDWHOHDVHDQGQRQOHDVHFRPSRQHQWVZKHQ FHUWDLQFULWHULDDUHPHWDQGLQVWHDGDFFRXQWIRUWKRVHFRPSRQHQWVDVDVLQJOHOHDVHFRPSRQHQW:HGHWHUPLQHGWKDWRXU QHZDQGDPHQGHGOHDVHDUUDQJHPHQWVZLOOPHHWWKHFULWHULDXQGHUWKHSUDFWLFDOH[SHGLHQWWRDFFRXQWIRUOHDVHDQGQRQ OHDVHFRPSRQHQWVDVDVLQJOHOHDVHFRPSRQHQWZKLFKDOOHYLDWHVWKHUHTXLUHPHQWXSRQDGRSWLRQRI$68WKDWZH UHDOORFDWHRUVHSDUDWHO\SUHVHQWOHDVHDQGQRQOHDVHFRPSRQHQWV$VDUHVXOWZHZLOOUHFRJQL]HFRQVLGHUDWLRQUHFHLYHG IURP IL[HG FRPPRQ DUHD PDLQWHQDQFH DUUDQJHPHQWV RQ D VWUDLJKWOLQH EDVLV IRU QHZ RU DPHQGHG OHDVHV DV WKLV FRQVLGHUDWLRQLVDWWULEXWHGWRWKHOHDVHFRPSRQHQW )XUWKHU $68 UHTXLUHV UHFRJQLWLRQ LQ RXU FRQVROLGDWHG EDODQFH VKHHWV RI OHDVHV RI ODQG DQG RWKHU DUUDQJHPHQWV ZKHUH ZH DUH WKH OHVVHH 8SRQ DGRSWLRQ RQ -DQXDU\ ZH UHFRJQL]HG D ULJKW RI XVH DVVHW DQG FRUUHVSRQGLQJOHDVHOLDELOLW\RIPLOOLRQUHSUHVHQWLQJWKHSUHVHQWYDOXHRIIXWXUHOHDVHSD\PHQWVUHTXLUHGXQGHURXU OHVVHH DUUDQJHPHQWV :H XWLOL]HG OHDVH WHUPV UDQJLQJ IURP WR LQFOXGLQJ SHULRGV IRU ZKLFK H[HUFLVLQJ DQ H[WHQVLRQRSWLRQLVUHDVRQDEO\DVVXUHGDQGGLVFRXQWUDWHVIURPWRZKHQGHWHUPLQLQJWKHSUHVHQWYDOXHRI IXWXUHOHDVHSD\PHQWV$OORIRXUH[LVWLQJOHVVHHDUUDQJHPHQWVXSRQDGRSWLRQZLOOFRQWLQXHWREHFODVVLILHGDVRSHUDWLQJ OHDVHVLQZKLFKFDVHWKHSDWWHUQRIOHDVHH[SHQVHUHFRJQLWLRQZLOOEHXQFKDQJHG ,Q -XQH WKH )$6% LVVXHG $68 )LQDQFLDO ,QVWUXPHQWV &UHGLW /RVVHV ZKLFK LQWURGXFHG QHZ JXLGDQFHIRUDQDSSURDFKEDVHGRQH[SHFWHGORVVHVWRHVWLPDWHFUHGLWORVVHVRQFHUWDLQW\SHVRIILQDQFLDOLQVWUXPHQWV,W DOVRPRGLILHVWKHLPSDLUPHQWPRGHOIRUDYDLODEOHIRUVDOHGHEWVHFXULWLHVDQGSURYLGHVIRUDVLPSOLILHGDFFRXQWLQJPRGHOIRU SXUFKDVHGILQDQFLDODVVHWVZLWKFUHGLWGHWHULRUDWLRQVLQFHWKHLURULJLQDWLRQ,QVWUXPHQWVLQVFRSHLQFOXGHORDQVKHOGWR PDWXULW\GHEWVHFXULWLHVDQGQHWLQYHVWPHQWVLQOHDVHVDVZHOODVUHLQVXUDQFHDQGWUDGHUHFHLYDEOHV,Q1RYHPEHU WKH)$6%LVVXHG$68ZKLFKFODULILHVWKDWRSHUDWLQJOHDVHUHFHLYDEOHVDUHRXWVLGHWKHVFRSHRIWKHQHZVWDQGDUG 7KLVVWDQGDUGZLOOEHHIIHFWLYHIRUXVLQILVFDO\HDUVEHJLQQLQJDIWHU'HFHPEHU:HDUHFXUUHQWO\HYDOXDWLQJWKH LPSDFWWKDWWKHDGRSWLRQRIWKHQHZVWDQGDUGZLOOKDYHRQRXUFRQVROLGDWHGILQDQFLDOVWDWHPHQWV ,Q)HEUXDU\WKH)$6%LVVXHG$68³2WKHU,QFRPH*DLQVDQG/RVVHVIURPWKH'HUHFRJQLWLRQRI 1RQILQDQFLDO$VVHWV´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cquisitions 2Q6HSWHPEHUZHDFTXLUHGWKHUHPDLQLQJLQWHUHVWLQ7KH2XWOHWVDW2UDQJHIURPRXUMRLQWYHQWXUH SDUWQHU 7KH 2SHUDWLQJ 3DUWQHUVKLS LVVXHG XQLWV RU DSSUR[LPDWHO\ PLOOLRQ DV FRQVLGHUDWLRQ IRU WKH DFTXLVLWLRQ7KHSURSHUW\LVVXEMHFWWRDPLOOLRQIL[HGUDWHPRUWJDJHORDQ:HDFFRXQWHGIRUWKLVWUDQVDFWLRQ DVDQDVVHWDFTXLVLWLRQDQGVXEVWDQWLDOO\DOORIRXULQYHVWPHQWKDVEHHQGHWHUPLQHGWRUHODWHWRLQYHVWPHQWSURSHUW\ 2017 Acquisitions 2Q$SULORXUFRQWUROOHG(XURSHDQLQYHVWHHDFTXLUHGDLQWHUHVWLQDQRXWOHWFHQWHULQ5RRVHQGDDO 1HWKHUODQGVIRUFDVKFRQVLGHUDWLRQRIPLOOLRQDQGWKHDVVXPSWLRQRIH[LVWLQJPRUWJDJHGHEWRIPLOOLRQ,Q0D\ WKHDVVXPHGORDQZDVUHILQDQFHGZLWKDPLOOLRQPRUWJDJHORDQGXHLQDIWHUDYDLODEOHH[WHQVLRQRSWLRQV ZLWKDQLQWHUHVWUDWHRI(85,%25SOXV 2016 Acquisitions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ispositions 'XULQJZHUHFRUGHGQHWJDLQVRIPLOOLRQSULPDULO\UHODWHGWRGLVSRVLWLRQDFWLYLW\ZKLFKLQFOXGHGWKH IRUHFORVXUH RI WZR FRQVROLGDWHG UHWDLO SURSHUWLHV LQ VDWLVIDFWLRQ RI WKHLU PLOOLRQ DQG PLOOLRQ QRQUHFRXUVH PRUWJDJHORDQVDQGDVGLVFXVVHGLQ1RWHRXULQWHUHVWLQWKH*HUPDQGHSDUWPHQWVWRUHSURSHUWLHVRZQHGWKURXJKRXU LQYHVWPHQWLQ+%6ZDVVROGGXULQJWKHIRXUWKTXDUWHURI$OVRDVGLVFXVVHGIXUWKHULQ1RWH.OpSLHUUHGLVSRVHGRI LWVLQWHUHVWVLQFHUWDLQVKRSSLQJFHQWHUVGXULQJUHVXOWLQJLQDJDLQRIZKLFKRXUVKDUHZDVPLOOLRQ 2017 Dispositions 'XULQJ ZH GLVSRVHG RI RXU LQWHUHVW LQ RQH XQFRQVROLGDWHG UHWDLO SURSHUW\ 7KH ORVV UHFRJQL]HG RQ WKLV WUDQVDFWLRQZDVDSSUR[LPDWHO\PLOOLRQ$VGLVFXVVHGLQ1RWH.OpSLHUUHGLVSRVHGRILWVLQWHUHVWVLQFHUWDLQVKRSSLQJ FHQWHUVGXULQJWKHVHFRQGTXDUWHUUHVXOWLQJLQDJDLQRIZKLFKRXUVKDUHZDVPLOOLRQ 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV 2016 Dispositions 'XULQJ ZH GLVSRVHG RI RXU LQWHUHVWV LQ WZR XQFRQVROLGDWHG PXOWLIDPLO\ UHVLGHQWLDO LQYHVWPHQWV WKUHH FRQVROLGDWHG UHWDLO SURSHUWLHV DQG IRXU XQFRQVROLGDWHG UHWDLO SURSHUWLHV 2XU VKDUH RI WKH JURVV SURFHHGV IURP WKHVH WUDQVDFWLRQV ZDV PLOOLRQ 7KH JDLQ RQ WKH FRQVROLGDWHG UHWDLO SURSHUWLHV ZDV PLOOLRQ 7KH JDLQ RQ WKH XQFRQVROLGDWHG UHWDLO SURSHUWLHV ZDV PLOOLRQ 7KH DJJUHJDWH JDLQ RI PLOOLRQ IURP WKH VDOH RI WKH WZR XQFRQVROLGDWHGPXOWLIDPLO\UHVLGHQWLDOLQYHVWPHQWVLVLQFOXGHGLQRWKHULQFRPHDQGUHVXOWHGLQDQDGGLWLRQDOPLOOLRQLQ WD[HVLQFOXGHGLQLQFRPHDQGRWKHUWD[HV$VGLVFXVVHGLQ1RWH.Op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¶V%RDUGRI'LUHFWRUVGHFODUHGDTXDUWHUO\FDVKGLYLGHQGRISHUVKDUHRI FRPPRQVWRFNSD\DEOHRQ)HEUXDU\WRVWRFNKROGHUVRIUHFRUGRQ)HEUXDU\7KH2SHUDWLQJ3DUWQHUVKLS¶V GLVWULEXWLRQUDWHRQRXUXQLWVLVHTXDOWRWKHGLYLGHQGUDWHRQ6LPRQ¶VFRPPRQVWRFN ,QYHVWPHQW3URSHUWLHV ,QYHVWPHQWSURSHUWLHVFRQVLVWRIWKHIROORZLQJDVRI'HFHPEHU /DQG %XLOGLQJVDQGLPSURYHPHQWV 7RWDOODQGEXLOGLQJVDQGLPSURYHPHQWV )XUQLWXUHIL[WXUHVDQGHTXLSPHQW ,QYHVWPHQWSURSHUWLHVDWFRVW /HVV²DFFXPXODWHGGHSUHFLDWLRQ ,QYHVWPHQWSURSHUWLHVDWFRVWQHW &RQVWUXFWLRQLQSURJUHVVLQFOXGHGDERYH ,QYHVWPHQWVLQ8QFRQVROLGDWHG(QWLWLHVDQG,QWHUQDWLRQDO,QYHVWPHQWV Real Estate Joint Ventures and Investments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nconsolidated Property Transactions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p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p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¶V%D\&RPSDQ\$VRI'HFHPEHU+%6KDGSURSHUWLHVLQWKH86DQGSURSHUWLHVLQ *HUPDQ\'XULQJWKHIRXUWKTXDUWHURIRXULQWHUHVWLQWKH*HUPDQGHSDUWPHQWVWRUHSURSHUWLHVZDVVROGWR+XGVRQ¶V %D\&RPSDQ\DQG6,*1$5HWDLO+ROGLQJVUHVXOWLQJLQDJDLQRIPLOOLRQ$VRI'HFHPEHU+%6FRQWLQXHVWR RZQ86SURSHUWLHV2XUVKDUHRIQHWLQFRPHQHWRIDPRUWL]DWLRQRIRXUH[FHVVLQYHVWPHQWZDVPLOOLRQDQG PLOOLRQ IRU WKH \HDU HQGHG 'HFHPEHU DQG UHVSHFWLYHO\ 7RWDO DVVHWV DQG WRWDO OLDELOLWLHV RI +%6 DV RI 'HFHPEHUZHUHELOOLRQDQGPLOOLRQUHVSHFWLYHO\7RWDOUHYHQXHVRSHUDWLQJLQFRPHDQGFRQVROLGDWHG QHW LQFRPH ZHUH DSSUR[LPDWHO\ PLOOLRQ PLOOLRQ DQG PLOOLRQ UHVSHFWLYHO\ IRU WKH \HDU HQGHG 'HFHPEHUDQGPLOOLRQPLOOLRQDQGPLOOLRQUHVSHFWLYHO\IRUWKH\HDUHQGHG'HFHPEHU 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV International Investments :HFRQGXFWRXULQWHUQDWLRQDORSHUDWLRQVSULPDULO\WKURXJKMRLQWYHQWXUHDUUDQJHPHQWVDQGDFFRXQWIRUWKHPDMRULW\ RIWKHVHLQWHUQDWLRQDOMRLQWYHQWXUHLQYHVWPHQWVXVLQJWKHHTXLW\PHWKRGRIDFFRXQWLQJ European Investments $W'HFHPEHUZHRZQHGVKDUHVRUDSSUR[LPDWHO\RI.OpSLHUUHZKLFKKDGDTXRWHG PDUNHWSULFHRISHUVKDUH2XUVKDUHRIQHWLQFRPHQHWRIDPRUWL]DWLRQRIRXUH[FHVVLQYHVWPHQWZDVPLOOLRQ PLOOLRQDQGPLOOLRQIRUWKH\HDUVHQGHG'HFHPEHUDQGUHVSHFWLYHO\%DVHGRQDSSOLFDEOH (XUR86'H[FKDQJHUDWHVDQGDIWHURXUFRQYHUVLRQRI.OpSLHUUH¶VUHVXOWVWR*$$3.OpSLHUUH¶VWRWDODVVHWVWRWDOOLDELOLWLHV DQGQRQFRQWUROOLQJLQWHUHVWVZHUHELOOLRQELOOLRQDQGELOOLRQUHVSHFWLYHO\DVRI'HFHPEHUDQG ELOOLRQELOOLRQDQGELOOLRQUHVSHFWLYHO\DVRI'HFHPEHU.OpSLHUUH¶VWRWDOUHYHQXHVRSHUDWLQJ LQFRPHDQGFRQVROLGDWHGQHWLQFRPHZHUHDSSUR[LPDWHO\ELOOLRQPLOOLRQDQGPLOOLRQUHVSHFWLYHO\IRU WKH\HDUHQGHG'HFHPEHUELOOLRQPLOOLRQDQGPLOOLRQIRUWKH\HDUHQGHG'HFHPEHU DQGELOOLRQPLOOLRQDQGPLOOLRQUHVSHFWLYHO\IRUWKH\HDUHQGHG'HFHPEHU 'XULQJWKH\HDUVHQGHG'HFHPEHUDQG.OpSLHUUHFRPSOHWHGWKHGLVSRVDORILWVLQWHUHVWVLQ FHUWDLQ VKRSSLQJ FHQWHUV ,Q FRQQHFWLRQ ZLWK WKHVH GLVSRVDOV ZH UHFRUGHG JDLQV RI PLOOLRQ PLOOLRQ DQG PLOOLRQ UHVSHFWLYHO\ UHSUHVHQWLQJ RXU VKDUH RI WKH JDLQVUHFRJQL]HG E\ .Op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¶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sian Joint Ventures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ummary Financial Information $VXPPDU\RIRXUHTXLW\PHWKRGLQYHVWPHQWVDQGVKDUHRILQFRPHIURPVXFKLQYHVWPHQWVH[FOXGLQJ.OpSLHUUH $pURSRVWDOH$%*DQG+%6IROORZV'XULQJZHGLVSRVHGRIRXULQWHUHVWLQRQHUHWDLOSURSHUW\'XULQJZH GLVSRVHGRIRXULQWHUHVWVLQIRXUUHWDLOSURSHUWLHVDQGRXULQYHVWPHQWVLQWZRPXOWLIDPLO\UHVLGHQWLDODVVHWV 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV &20%,1('%$/$1&(6+((76 'HFHPEHU 'HFHPEHU $VVHWV ,QYHVWPHQWSURSHUWLHVDWFRVW /HVVDFFXPXODWHGGHSUHFLDWLRQ &DVKDQGFDVKHTXLYDOHQWV 7HQDQWUHFHLYDEOHVDQGDFFUXHGUHYHQXHQHW 'HIHUUHGFRVWVDQGRWKHUDVVHWV 7RWDODVVHWV /LDELOLWLHVDQG3DUWQHUV¶'HILFLW 0RUWJDJHV $FFRXQWVSD\DEOHDFFUXHGH[SHQVHVLQWDQJLEOHVDQGGHIHUUHGUHYHQXH 2WKHUOLDELOLWLHV 7RWDOOLDELOLWLHV 3UHIHUUHGXQLWV 3DUWQHUV¶GHILFLW 7RWDOOLDELOLWLHVDQGSDUWQHUV¶GHILFLW 2XU6KDUHRI 3DUWQHUV¶GHILFLW $GG([FHVV,QYHVWPHQW 2XUQHW,QYHVWPHQWLQXQFRQVROLGDWHGHQWLWLHVDWHTXLW\ ³([FHVV,QYHVWPHQW´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¶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pSLHUUH $p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ixed-Rate Debt: 0RUWJDJHQRWHVLQFOXGLQJDQGRIQHWSUHPLXPVDQG DQGRIGHEWLVVXDQFHFRVWVUHVSHFWLYHO\:HLJKWHGDYHUDJHLQWHUHVW DQGPDWXULW\RIDQG\HDUVDW'HFHPEHU 8QVHFXUHGQRWHVLQFOXGLQJDQGRIQHWGLVFRXQWVDQG DQGRIGHEWLVVXDQFHFRVWVUHVSHFWLYHO\:HLJKWHGDYHUDJHLQWHUHVW DQGPDWXULW\RIDQG\HDUVDW'HFHPEHU &RPPHUFLDO3DSHU VHHEHORZ 7RWDO)L[HG5DWH'HEW Variable-Rate Debt: 0RUWJDJHVQRWHVLQFOXGLQJDQGRIGHEWLVVXDQFHFRVWV UHVSHFWLYHO\:HLJKWHGDYHUDJHLQWHUHVWDQGPDWXULW\RIDQG\HDUV DW'HFHPEHU &UHGLW)DFLOLW\ VHHEHORZ LQFOXGLQJDQGRIGHEWLVVXDQFH FRVWVUHVSHFWLYHO\DW'HFHPEHU 7RWDO9DULDEOH5DWH'HEW 2WKHU'HEW2EOLJDWLRQV 7RWDO0RUWJDJHVDQG8QVHFXUHG,QGHEWHGQHVV General.2XUXQVHFXUHGGHEWDJUHHPHQWVFRQWDLQILQDQFLDOFRYHQDQWVDQGRWKHUQRQILQDQFLDOFRYHQDQWV,IZH ZHUHWRIDLOWRFRPSO\ZLWKWKHVHFRYHQDQWVDIWHUWKHH[SLUDWLRQRIWKHDSSOLFDEOHFXUHSHULRGVWKHGHEWPDWXULW\FRXOGEH DFFHOHUDWHGRURWKHUUHPHGLHVFRXOGEHVRXJKWE\WKHOHQGHULQFOXGLQJDGMXVWPHQWVWRWKHDSSOLFDEOHLQWHUHVWUDWH$VRI 'HFHPEHUZHZHUHLQFRPSOLDQFHZLWKDOOFRYHQDQWVRIRXUXQVHFXUHGGHEW $W'HFHPEHURXUFRQVROLGDWHGVXEVLGLDULHVZHUHWKHERUURZHUVXQGHUQRQUHFRXUVHPRUWJDJHQRWHV VHFXUHG E\ PRUWJDJHV RQ SURSHUWLHV LQFOXGLQJ WZR VHSDUDWH SRROV RI FURVVGHIDXOWHG DQG FURVVFROODWHUDOL]HG PRUWJDJHVHQFXPEHULQJDWRWDORIILYHSURSHUWLHV8QGHUWKHVHFURVVGHIDXOWSURYLVLRQVDGHIDXOWXQGHUDQ\PRUWJDJH LQFOXGHG LQ WKH FURVVGHIDXOWHG SRRO PD\ FRQVWLWXWH D GHIDXOW XQGHU DOO PRUWJDJHV ZLWKLQ WKDW SRRO DQG PD\ OHDG WR DFFHOHUDWLRQRIWKHLQGHEWHGQHVVGXHRQHDFKSURSHUW\ZLWKLQWKHSRRO&HUWDLQRIRXUVHFXUHGGHEWLQVWUXPHQWVFRQWDLQ ILQDQFLDODQGRWKHUQRQILQDQFLDOFRYHQDQWVZKLFKDUHVSHFLILFWRWKHSURSHUWLHVWKDWVHUYHDVFROODWHUDOIRUWKDWGHEW,IWKH DSSOLFDEOHERUURZHUXQGHUWKHVHQRQUHFRXUVHPRUWJDJHQRWHVZHUHWRIDLOWRFRPSO\ZLWKWKHVHFRYHQDQWVWKHOHQGHU FRXOGDFFHOHUDWHWKHGHEWDQGHQIRUFHLWVULJKWVDJDLQVWWKHLUFROODWHUDO$W'HFHPEHUWKHDSSOLFDEOHERUURZHUV XQGHUWKHVHQRQUHFRXUVHPRUWJDJHQRWHVZHUHLQFRPSOLDQFHZLWKDOOFRYHQDQWVZKHUHQRQFRPSOLDQFHFRXOGLQGLYLGXDOO\ RULQWKHDJJUHJDWHJLYLQJHIIHFWWRDSSOLFDEOHFURVVGHIDXOWSURYLVLRQVKDYHDPDWHULDODGYHUVHHIIHFWRQRXUILQDQFLDO FRQGLWLRQOLTXLGLW\RUUHVXOWVRIRSHUDWLRQV Unsecured Debt $W'HFHPEHURXUXQVHFXUHGGHEWFRQVLVWHGRIELOOLRQRIVHQLRUXQVHFXUHGQRWHVRIWKH2SHUDWLQJ 3DUWQHUVKLS PLOOLRQ RXWVWDQGLQJ XQGHU WKH &UHGLW )DFLOLW\ DQG PLOOLRQ RXWVWDQGLQJ XQGHU WKH 2SHUDWLQJ 3DUWQHUVKLS¶VJOREDOXQVHFXUHGFRPPHUFLDOSDSHUSURJUDPRU&RPPHUFLDO3DSHUSURJUDP 2Q'HFHPEHUZHKDGDQDJJUHJDWHDYDLODEOHERUURZLQJFDSDFLW\RIELOOLRQXQGHUWKH&UHGLW)DFLOLW\ DQGWKH2SHUDWLQJ3DUWQHUVKLS¶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¶VLQLWLDOERUURZLQJFDSDFLW\RIELOOLRQPD\EHLQFUHDVHGWRELOOLRQGXULQJLWVWHUPDQG SURYLGHV IRU ERUURZLQJV GHQRPLQDWHG LQ 86 GROODUV (XUR Mortgage Debt 7RWDOPRUWJDJHLQGHEWHGQHVVZDVELOOLRQDQGELOOLRQDW'HFHPEHUDQGUHVSHFWLYHO\ 'XULQJWKH\HDUHQGHG'HFHPEHUZHUHSDLGDPRUWJDJHORDQRIPLOOLRQZLWKDQLQWHUHVWUDWHRI 2Q-XO\1RYHQWDGL3LDYH'HVLJQHU2XWOHWLQZKLFKZHRZQDLQWHUHVWUHILQDQFHGLWV¼PLOOLRQ YDULDEOHUDWHPRUWJDJHORDQPDWXULQJLQZLWKD¼PLOOLRQIL[HGUDWHPRUWJDJHORDQWKDWPDWXUHV LQ 2Q6HSWHPEHUDVGLVFXVVHGLQ1RWHZHDFTXLUHGWKHUHPDLQLQJLQWHUHVWLQ7KH2XWOHWVDW2UDQJH IURPRXUMRLQWYHQWXUHSDUWQHUUHVXOWLQJLQWKHFRQVROLGDWLRQRIWKHH[LVWLQJIL[HGUDWHPRUWJDJHORDQRIPLOOLRQ7KH ORDQPDWXUHVRQ$SULODQGEHDUVLQWHUHVWDW 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV Debt Maturity and Other 2XUVFKHGXOHGSULQFLSDOUHSD\PHQWVRQLQGHEWHGQHVVDVRI'HFHPEHUDUHDVIROORZV 7KHUHDIWHU 7RWDOSULQFLSDOPDWXULWLHV 1HWXQDPRUWL]HGGHEWSUHPLXP 'HEWLVVXDQFHFRVWVQHW 2WKHU'HEW2EOLJDWLRQV 7RWDOPRUWJDJHVDQGXQVHFXUHGLQGHEWHGQHVV ,QFOXGHV PLOOLRQ DJJUHJDWH SULQFLSDO DPRXQW RI VHQLRU XQVHFXUHG QRWHV UHSDLG DW PDWXULW\ RQ )HEUXDU\DQGPLOOLRQLQ*OREDO&RPPHUFLDO3DSHU86' 2XUFDVKSDLGIRULQWHUHVWLQHDFKSHULRGQHWRIDQ\DPRXQWVFDSLWDOL]HGZDVDVIROORZV )RUWKH Derivative Financial Instruments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ebt Issuance Costs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air Value of Debt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¶V%RDUGRI'LUHFWRUVLVDXWKRUL]HGWRUHFODVVLI\H[FHVVFRPPRQVWRFNLQWRRQHRUPRUHDGGLWLRQDOFODVVHVDQG VHULHVRIFDSLWDOVWRFNWRHVWDEOLVKWKHQXPEHURIVKDUHVLQHDFKFODVVRUVHULHVDQGWRIL[WKHSUHIHUHQFHVFRQYHUVLRQDQG RWKHU ULJKWV YRWLQJ SRZHUV UHVWULFWLRQV OLPLWDWLRQV DV WR GLYLGHQGV DQG TXDOLILFDWLRQV DQG WHUPV DQG FRQGLWLRQV RI UHGHPSWLRQRIVXFKFODVVRUVHULHVZLWKRXWDQ\IXUWKHUYRWHRUDFWLRQE\WKHVWRFNKROGHUV7KHLVVXDQFHRIDGGLWLRQDOFODVVHV RUVHULHVRIFDSLWDOVWRFNPD\KDYHWKHHIIHFWRIGHOD\LQJGHIHUULQJRUSUHYHQWLQJDFKDQJHLQFRQWURORIXVZLWKRXWIXUWKHU DFWLRQRIWKHVWRFNKROGHUV7KHDELOLW\WRLVVXHDGGLWLRQDOFODVVHVRUVHULHVRIFDSLWDOVWRFNZKLOHSURYLGLQJIOH[LELOLW\LQ FRQQHFWLRQZLWKSRVVLEOHDFTXLVLWLRQVDQGRWKHUFRUSRUDWHSXUSRVHVFRXOGKDYHWKHHIIHFWRIPDNLQJLWPRUHGLIILFXOWIRUD WKLUGSDUW\WRDFTXLUHRURIGLVFRXUDJLQJDWKLUGSDUW\IURPDFTXLULQJDPDMRULW\RI6LPRQ¶VRXWVWDQGLQJYRWLQJVWRFN +ROGHUVRIFRPPRQVWRFNDUHHQWLWOHGWRRQHYRWHIRUHDFKVKDUHKHOGRIUHFRUGRQDOOPDWWHUVVXEPLWWHGWRDYRWHRI VWRFNKROGHUVRWKHUWKDQIRUWKHHOHFWLRQRIGLUHFWRUV7KHKROGHUVRI6LPRQ¶V&ODVV%FRPPRQVWRFNKDYHWKHULJKWWRHOHFW XSWRIRXUPHPEHUVRI6LPRQ¶V%RDUGRI'LUHFWRUV$OORXWVWDQGLQJVKDUHVRIWKH&ODVV%FRPPRQVWRFNDUHVXEMHFW WRWZRYRWLQJWUXVWVDVWRZKLFK+HUEHUW6LPRQDQG'DYLG6LPRQDUHWKHWUXVWHHV6KDUHVRI&ODVV%FRPPRQVWRFNFRQYHUW DXWRPDWLFDOO\LQWRDQHTXDOQXPEHURIVKDUHVRIFRPPRQVWRFNXSRQWKHRFFXUUHQFHRIFHUWDLQHYHQWVDQGFDQEHFRQYHUWHG LQWRVKDUHVRIFRPPRQVWRFNDWWKHRSWLRQRIWKHKROGHUV Common Stock and Unit Issuances and Repurchases ,Q 6LPRQ LVVXHG VKDUHV RI FRPPRQ VWRFN WR WZR OLPLWHG SDUWQHUV RI WKH 2SHUDWLQJ 3DUWQHUVKLS LQ H[FKDQJHIRUDQHTXDOQXPEHURIXQLWVSXUVXDQWWRWKHSDUWQHUVKLSDJUHHPHQWRIWKH2SHUDWLQJ3DUWQHUVKLS'XULQJWKH \HDU HQGHG 'HFHPEHU WKH 2SHUDWLQJ 3DUWQHUVKLS UHGHHPHG XQLWV IURP HLJKW OLPLWHG SDUWQHUV IRU PLOOLRQLQFDVK7KHVHWUDQVDFWLRQVLQFUHDVHG6LPRQ¶VRZQHUVKLSLQWHUHVWLQWKH2SHUDWLQJ3DUWQHUVKLS 2Q6HSWHPEHUWKH2SHUDWLQJ3DUWQHUVKLSLVVXHGXQLWVLQFRQQHFWLRQZLWKWKHDFTXLVLWLRQRIWKH UHPDLQLQJLQWHUHVWLQ7KH2XWOHWVDW2UDQJHDVGLVFXVVHGLQ1RWH 2Q)HEUXDU\6LPRQ¶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imited Partners’ Preferred Interest in the Operating Partnership and Noncontrolling Redeemable Interests in Properties.7KHUHGHPSWLRQIHDWXUHVRIWKHSUHIHUUHGXQLWVLQWKH2SHUDWLQJ3DUWQHUVKLSFRQWDLQSURYLVLRQVZKLFKFRXOG UHTXLUHWKH2SHUDWLQJ3DUWQHUVKLSWRVHWWOHWKHUHGHPSWLRQLQFDVK$VDUHVXOWWKLVVHULHVRISUHIHUUHGXQLWVLQWKH2SHUDWLQJ 3DUWQHUVKLSUHPDLQVFODVVLILHGRXWVLGHSHUPDQHQWHTXLW\ 7KHUHPDLQLQJLQWHUHVWVLQDSURSHUW\RUSRUWIROLRRISURSHUWLHVZKLFKDUHUHGHHPDEOHDWWKHRSWLRQRIWKHKROGHURU LQFLUFXPVWDQFHVWKDWPD\EHRXWVLGH6LPRQ¶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¶SUHIHUUHGLQWHUHVWLQWKH2SHUDWLQJ3DUWQHUVKLSDQG QRQFRQWUROOLQJUHGHHPDEOHLQWHUHVWVLQSURSHUWLHV 7.50% Cumulative Redeemable Preferred Units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¶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oncontrolling Redeemable Interests in Properties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¶VRSWLRQLQHLWKHUFDVKRUIXOO\UHJLVWHUHGVKDUHVRIFRPPRQ VWRFN RI 6LPRQ 7KHVH SUHIHUUHG XQLWV KDYH D FDUU\LQJ YDOXH RI PLOOLRQ DQG DUH LQFOXGHG LQ SUHIHUUHG XQLWV DW OLTXLGDWLRQYDOXHLQWKHFRQVROLGDWHGEDODQFHVKHHWVDW'HFHPEHUDQG 3HUPDQHQW(TXLW\ 6LPRQ Preferred Stock. 'LYLGHQGV RQ DOO VHULHV RI SUHIHUUHG VWRFN DUH FDOFXODWHG EDVHG XSRQ WKH SUHIHUUHG VWRFN¶V SUHIHUUHG UHWXUQ PXOWLSOLHG E\ WKH SUHIHUUHG VWRFN¶V FRUUHVSRQGLQJ OLTXLGDWLRQ YDOXH 7KH 2SHUDWLQJ 3DUWQHUVKLS SD\V SUHIHUUHGGLVWULEXWLRQVWR6LPRQHTXDOWRWKHGLYLGHQGV6LPRQSD\VRQWKHSUHIHUUHGVWRFNLVVXHG 3 Series J 8 /8% Cumulative Redeemable Preferred Stock.'LYLGHQGVDFFUXHTXDUWHUO\DWDQDQQXDOUDWHRI SHUVKDUH6LPRQFDQUHGHHPWKLVVHULHVLQZKROHRULQSDUWRQRUDIWHU2FWREHUDWDUHGHPSWLRQSULFHRI SHUVKDUHSOXVDFFXPXODWHGDQGXQSDLGGLYLGHQGV7KLVSUHIHUUHGVWRFNZDVLVVXHGDWDSUHPLXPRIPLOOLRQ7KH XQDPRUWL]HGSUHPLXPLQFOXGHGLQWKHFDUU\LQJYDOXHRIWKHSUHIHUUHGVWRFNDW'HFHPEHUDQGZDVPLOOLRQ DQGPLOOLRQUHVSHFWLYHO\ 7KH2SHUDWLQJ3DUWQHUVKLS 3 Series J 8 /8% Cumulative Redeemable Preferred Units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he Simon Property Group 1998 Stock Incentive Plan, as amended.7KLVSODQRUWKHSODQSURYLGHVIRU WKHJUDQWRIHTXLW\EDVHGDZDUGVZLWKUHVSHFWWRWKHHTXLW\RI6LPRQLQWKHIRUPRIRSWLRQVWRSXUFKDVHVKDUHVVWRFN DSSUHFLDWLRQULJKWVUHVWULFWHGVWRFNJUDQWVDQGSHUIRUPDQFHEDVHGXQLWDZDUGV2SWLRQVPD\EHJUDQWHGZKLFKDUHTXDOLILHG DV³LQFHQWLYHVWRFNRSWLRQV´ZLWKLQWKHPHDQLQJRI6HFWLRQRIWKH,QWHUQDO5HYHQXH&RGHDQGRSWLRQVZKLFKDUHQRWVR TXDOLILHG$QDJJUHJDWHRIVKDUHVRIFRPPRQVWRFNKDYHEHHQUHVHUYHGIRULVVXDQFHXQGHUWKHSODQ 7KHSODQLVDGPLQLVWHUHGE\WKH&RPSHQVDWLRQ&RPPLWWHHRI6LPRQ¶V%RDUGRI'LUHFWRUVRUWKH&RPSHQVDWLRQ &RPPLWWHH7KH&RPSHQVDWLRQ&RPPLWWHHGHWHUPLQHVZKLFKHOLJLEOHLQGLYLGXDOVPD\SDUWLFLSDWHDQGWKHW\SHH[WHQWDQG WHUPVRIWKHDZDUGVWREHJUDQWHGWRWKHP,QDGGLWLRQWKH&RPSHQVDWLRQ&RPPLWWHHLQWHUSUHWVWKHSODQDQGPDNHV DOORWKHUGHWHUPLQDWLRQVGHHPHGDGYLVDEOHIRULWVDGPLQLVWUDWLRQ2SWLRQVJUDQWHGWRHPSOR\HHVEHFRPHH[HUFLVDEOHRYHU WKHSHULRGGHWHUPLQHGE\WKH&RPSHQVDWLRQ&RPPLWWHH7KHH[HUFLVHSULFHRIDQHPSOR\HHRSWLRQPD\QRWEHOHVVWKDQ WKHIDLUPDUNHWYDOXHRIWKHVKDUHVRQWKHGDWHRIJUDQW(PSOR\HHRSWLRQVJHQHUDOO\YHVWRYHUDWKUHH\HDUSHULRGDQG H[SLUHWHQ\HDUVIURPWKHGDWHRIJUDQW 'LUHFWRUVZKRDUHQRWDOVRRXUHPSOR\HHVRUHPSOR\HHVRIRXUDIILOLDWHVDUHHOLJLEOHWRUHFHLYHDZDUGVXQGHUWKH SODQ(DFKLQGHSHQGHQWGLUHFWRUUHFHLYHVDQDQQXDOFDVKUHWDLQHURIDQGDQDQQXDOUHVWULFWHGVWRFNDZDUG ZLWKDJUDQWGDWHYDOXHRI&RPPLWWHHFKDLUVUHFHLYHDQQXDOUHWDLQHUVIRUWKH&RPSDQ\¶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rograms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¶V SHUIRUPDQFH FRPSDUHGWRWKHWDUJHW))2SHUIRUPDQFHFULWHULDDQGKDVDPD[LPXPSRWHQWLDOIDLUYDOXHRIPLOOLRQ7KHYDOXHRIWKH ))2EDVHGDZDUGLVUHFRUGHGDVH[SHQVHRYHUWKHSHULRGIURPWKHJUDQWGDWHWRWKHGDWHDWZKLFKWKHDZDUGVLIHDUQHG ZRXOGEHFRPHYHVWHGEDVHGRQRXUDVVHVVPHQWDVWRZKHWKHULWLVSUREDEOHWKDWWKHSHUIRUPDQFHFULWHULDZLOOEHDFKLHYHG GXULQJWKHDSSOLFDEOHSHUIRUPDQFHSHULRGV 7KHJUDQWGDWHIDLUYDOXHVRIDQ\/7,3XQLWVEDVHGRQ765SHUIRUPDQFHDUHHVWLPDWHGXVLQJD0RQWH&DUORPRGHO DQGWKHUHVXOWLQJIL[HGH[SHQVHLVUHFRUGHGUHJDUGOHVVRIZKHWKHUWKH765SHUIRUPDQFHFULWHULDDUHDFKLHYHGLIWKHUHTXLUHG VHUYLFHLVGHOLYHUHG7KHJUDQWGDWHIDLUYDOXHVDUHEHLQJDPRUWL]HGLQWRH[SHQVHRYHUWKHSHULRGIURPWKHJUDQWGDWHWRWKH GDWHDWZKLFKWKHDZDUGVLIHDUQHGZRXOGEHFRPHYHVWHG 7KH&RPSHQVDWLRQ&RPPLWWHHDSSURYHG/7,3XQLWJUDQWVDVVKRZQLQWKHWDEOHEHORZ7KHH[WHQWWRZKLFK/7,3 XQLWVZHUHHDUQHGDQGWKHDJJUHJDWHJUDQWGDWHIDLUYDOXHDUHDVIROORZV *UDQW'DWH7DUJHW *UDQW'DWH)DLU9DOXHRI 9DOXHRI))2 /7,33URJUDP /7,38QLWV(DUQHG 765$ZDUG %DVHG$ZDUG /7,3SURJUDP PLOOLRQ ² /7,3SURJUDP PLOOLRQ ² /7,3SURJUDP ² PLOOLRQ ² /7,3SURJUDP 7REHGHWHUPLQHGLQ PLOOLRQ ² /7,3SURJUDP7UDQFKH$ 7REHGHWHUPLQHGLQ PLOOLRQ PLOOLRQ /7,3SURJUDP7UDQFKH% 7REHGHWHUPLQHGLQ PLOOLRQ PLOOLRQ :H UHFRUGHG FRPSHQVDWLRQ H[SHQVH QHW RI FDSLWDOL]DWLRQ DQG IRUIHLWXUHV UHODWHG WR WKHVH /7,3 SURJUDPV RI DSSUR[LPDWHO\ PLOOLRQ PLOOLRQ DQG PLOOLRQ IRU WKH \HDUV HQGHG 'HFHPEHU DQG UHVSHFWLYHO\ Restricted Stock.7KHSODQDOVRSURYLGHVIRUVKDUHVRIUHVWULFWHGVWRFNWREHJUDQWHGWRFHUWDLQHPSOR\HHVDW QR FRVW WR WKRVH HPSOR\HHV VXEMHFW WR DFKLHYHPHQW RI LQGLYLGXDO SHUIRUPDQFH DQG FHUWDLQ ILQDQFLDO DQG UHWXUQEDVHG SHUIRUPDQFHPHDVXUHVHVWDEOLVKHGE\WKH&RPSHQVDWLRQ&RPPLWWHHUHODWHGWRWKHPRVWUHFHQW\HDU¶VSHUIRUPDQFH2QFH JUDQWHGWKHVKDUHVRIUHVWULFWHGVWRFNWKHQYHVWDQQXDOO\RYHUDWKUHH\HDURUDIRXU\HDUSHULRG DVGHILQHGLQWKHDZDUG 7KHFRVWRIUHVWULFWHGVWRFNJUDQWVZKLFKLVEDVHGXSRQWKHVWRFN¶VIDLUPDUNHWYDOXHRQWKHJUDQWGDWHLVUHFRJQL]HGDV H[SHQVHUDWDEO\RYHUWKHYHVWLQJSHULRG7KURXJK'HFHPEHUDWRWDORIVKDUHVRIUHVWULFWHGVWRFNQHWRI 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV IRUIHLWXUHVKDYHEHHQDZDUGHGXQGHUWKHSODQ,QIRUPDWLRQUHJDUGLQJUHVWULFWHGVWRFNDZDUGVLVVXPPDUL]HGLQWKH IROORZLQJWDEOHIRUHDFKRIWKH\HDUVSUHVHQWHG )RUWKH DQGHOLJLEOHWRYHVWEDVHGRQWKHDWWDLQPHQWRI&RPSDQ\EDVHGSHUIRUPDQFHJRDOVLQDGGLWLRQWRWKHVHUYLFHEDVHGYHVWLQJ UHTXLUHPHQWLQFOXGHGLQWKHRULJLQDO$ZDUG7KH&XUUHQW$ZDUGGRHVQRWFRQWDLQDQRSSRUWXQLW\IRU0U6LPRQWRUHFHLYH DGGLWLRQDO /7,3 XQLWV DERYH DQG EH\RQG WKH RULJLQDO $ZDUG VKRXOG RXU SHUIRUPDQFH H[FHHG WKH KLJKHU HQG RI WKH SHUIRUPDQFHFULWHULD7KHSHUIRUPDQFHFULWHULDRIWKH&XUUHQW$ZDUGDUHEDVHGRQWKHDWWDLQPHQWRIVSHFLILF))2SHUVKDUH %HFDXVHWKHSHUIRUPDQFHFULWHULDKDVEHHQPHWDPD[LPXPRI/7,3XQLWVRUWKH$XQLWV/7,3XQLWVRU WKH%XQLWVDQG/7,3XQLWVRUWKH&XQLWVEHFDPHHDUQHGRQ'HFHPEHU'HFHPEHUDQG 'HFHPEHUUHVSHFWLYHO\,IWKHUHOHYDQWSHUIRUPDQFHFULWHULDKDGQRWEHHQDFKLHYHGDOORUDSRUWLRQRIWKH&XUUHQW $ZDUGZRXOGKDYHEHHQIRUIHLWHG7KHHDUQHG$XQLWVYHVWHGRQ-DQXDU\HDUQHG%XQLWVYHVWHGRQ-DQXDU\ DQGHDUQHG&XQLWVZLOOYHVWRQ-XQHVXEMHFWWR0U6LPRQ¶VFRQWLQXHGHPSOR\PHQWWKURXJKVXFKDSSOLFDEOH GDWH7KHJUDQWGDWHIDLUYDOXHRIWKHUHWHQWLRQDZDUGRIPLOOLRQLVEHLQJUHFRJQL]HGDVH[SHQVHRYHUWKHHLJKW\HDU WHUPRIKLVHPSOR\PHQWDJUHHPHQWRQDVWUDLJKWOLQHEDVLVEDVHGRQWKHDSSOLFDEOHYHVWLQJSHULRGVRIWKH$XQLWV%XQLWV DQG&XQLWV :H DOVR PDLQWDLQ D WD[TXDOLILHG UHWLUHPHQW N VDYLQJV SODQ DQG RIIHU QR RWKHU SRVWUHWLUHPHQW RU SRVWHPSOR\PHQWEHQHILWVWRRXUHPSOR\HHV Exchange Rights 6LPRQ /LPLWHGSDUWQHUVLQWKH2SHUDWLQJ3DUWQHUVKLSKDYHWKHULJKWWRH[FKDQJHDOORUDQ\SRUWLRQRIWKHLUXQLWVIRUVKDUHV RIFRPPRQVWRFNRQDRQHIRURQHEDVLVRUFDVKDVGHWHUPLQHGE\6LPRQ¶V%RDUGRI'LUHFWRUV7KHDPRXQWRIFDVKWREH SDLGLIWKHH[FKDQJHULJKWLVH[HUFLVHGDQGWKHFDVKRSWLRQLVVHOHFWHGZLOOEHEDVHGRQWKHWUDGLQJSULFHRI6LPRQ¶VFRPPRQ VWRFNDWWKDWWLPH$W'HFHPEHU6LPRQKDGUHVHUYHGVKDUHVRIFRPPRQVWRFNIRUSRVVLEOHLVVXDQFH XSRQWKHH[FKDQJHRIXQLWVVWRFNRSWLRQVDQG&ODVV%FRPPRQVWRFN 7KH2SHUDWLQJ3DUWQHUVKLS /LPLWHGSDUWQHUVKDYHWKHULJKWXQGHUWKHSDUWQHUVKLSDJUHHPHQWWRH[FKDQJHDOORUDQ\SRUWLRQRIWKHLUXQLWVIRU VKDUHVRI6LPRQFRPPRQVWRFNRQDRQHIRURQHEDVLVRUFDVKDVGHWHUPLQHGE\6LPRQLQLWVVROHGLVFUHWLRQ,I6LPRQ VHOHFWVFDVK6LPRQFDQQRWFDXVHWKH2SHUDWLQJ3DUWQHUVKLSWRUHGHHPWKHH[FKDQJHGXQLWVIRUFDVKZLWKRXWFRQWULEXWLQJ FDVKWRWKH2SHUDWLQJ3DUWQHUVKLSDVSDUWQHUV¶HTXLW\VXIILFLHQWWRHIIHFWWKHUHGHPSWLRQ,IVXIILFLHQWFDVKLVQRWFRQWULEXWHG 6LPRQZLOOEHGHHPHGWRKDYHHOHFWHGWRH[FKDQJHWKHXQLWVIRUVKDUHVRI6LPRQFRPPRQVWRFN7KHDPRXQWRIFDVKWR 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV EHSDLGLIWKHH[FKDQJHULJKWLVH[HUFLVHGDQGWKHFDVKRSWLRQLVVHOHFWHGZLOOEHEDVHGRQWKHWUDGLQJSULFHRI6LPRQ¶V FRPPRQ VWRFN DW WKDW WLPH 7KH QXPEHU RI VKDUHV RI 6LPRQ¶V FRPPRQ VWRFN LVVXHG SXUVXDQW WR WKH H[HUFLVH RI WKH H[FKDQJHULJKWZLOOEHWKHVDPHDVWKHQXPEHURIXQLWVH[FKDQJHG &RPPLWPHQWVDQG&RQWLQJHQFLHV Litigation :HDUHLQYROYHGIURPWLPHWRWLPHLQYDULRXVOHJDODQGUHJXODWRU\SURFHHGLQJVWKDWDULVHLQWKHRUGLQDU\FRXUVHRI RXUEXVLQHVVLQFOXGLQJEXWQRWOLPLWHGWRFRPPHUFLDOGLVSXWHVHQYLURQPHQWDOPDWWHUVDQGOLWLJDWLRQLQFRQQHFWLRQZLWK WUDQVDFWLRQVVXFKDVDFTXLVLWLRQVDQGGLYHVWLWXUHV:HEHOLHYHWKDWFXUUHQWSURFHHGLQJVZLOOQRWKDYHDPDWHULDODGYHUVH HIIHFWRQRXUILQDQFLDOFRQGLWLRQOLTXLGLW\RUUHVXOWVRIRSHUDWLRQV:HUHFRUGDOLDELOLW\ZKHQDORVVLVFRQVLGHUHGSUREDEOH DQGWKHDPRXQWFDQEHUHDVRQDEO\HVWLPDWHG 6XEVHTXHQW WR 'HFHPEHU ZH VHWWOHG D ODZVXLW ZLWK RXU IRUPHU LQVXUDQFH EURNHU $RQ 5LVN 6HUYLFHV &HQWUDO,QFUHODWHGWRWKHVLJQLILFDQWIORRGGDPDJHVXVWDLQHGDW2SU\0LOOVLQ0D\,QDFFRUGDQFHZLWKDSUHYLRXV DJUHHPHQWZLWKWKHSULRUFRLQYHVWRULQ2SU\0LOOVDSRUWLRQRIWKHVHWWOHPHQWZDVUHPLWWHGWRWKHFRLQYHVWRU2XUVKDUH RIWKHVHWWOHPHQWZDVDSSUR[LPDWHO\PLOOLRQZKLFKZDVUHFRUGHGDVRWKHULQFRPHLQWKHILUVWTXDUWHURI Lease Commitments $VRI'HFHPEHUDWRWDORIRIWKHFRQVROLGDWHGSURSHUWLHVDUHVXEMHFWWRJURXQGOHDVHV7KHWHUPLQDWLRQ GDWHVRIWKHVHJURXQGOHDVHVUDQJHIURPWR7KHVHJURXQGOHDVHVJHQHUDOO\UHTXLUHXVWRPDNHIL[HGDQQXDO UHQWDOSD\PHQWVRUDIL[HGDQQXDOUHQWDOSD\PHQWSOXVDSHUFHQWDJHUHQWFRPSRQHQWEDVHGXSRQWKHUHYHQXHVRUWRWDO VDOHVRIWKHSURSHUW\,QDGGLWLRQZHKDYHVHYHUDOUHJLRQDORIILFHORFDWLRQVWKDWDUHVXEMHFWWROHDVHVZLWKWHUPLQDWLRQGDWHV UDQJLQJIURPWR7KHVHRIILFHOHDVHVJHQHUDOO\UHTXLUHXVWRPDNHIL[HGDQQXDOUHQWDOSD\PHQWVSOXVSD\RXU VKDUHRIFRPPRQDUHDUHDOHVWDWHDQGXWLOLW\H[SHQVHV6RPHRIRXUJURXQGDQGRIILFHOHDVHVLQFOXGHHVFDODWLRQFODXVHV DQGUHQHZDORSWLRQV:HLQFXUUHGJURXQGOHDVHH[SHQVHDQGRIILFHOHDVHH[SHQVHZKLFKDUHLQFOXGHGLQRWKHUH[SHQVH DQGKRPHRIILFHDQGUHJLRQDOH[SHQVHUHVSHFWLYHO\DVIROORZV )RUWKH 7KHUHDIWHU 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV 'ROODUVLQWKRXVDQGVH[FHSWVKDUHSHUVKDUHXQLWDQGSHUXQLWDPRXQWV DQGZKHUHLQGLFDWHGDVLQPLOOLRQVRUELOOLRQV Insurance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¶VSROLF\$VLPLODUSROLF\ZULWWHQHLWKHUWKURXJKRXUFDSWLYH LQVXUDQFHFRPSDQ\RURWKHUILQDQFLDODUUDQJHPHQWVFRQWUROOHGE\XVDOVRSURYLGHVLQLWLDOFRYHUDJHIRUSURSHUW\LQVXUDQFH DQGFHUWDLQZLQGVWRUPULVNVDWWKHSURSHUWLHVORFDWHGLQFRDVWDOZLQGVWRUPORFDWLRQV :HFXUUHQWO\PDLQWDLQLQVXUDQFHFRYHUDJHDJDLQVWDFWVRIWHUURULVPRQDOORIRXUSURSHUWLHVLQWKH8QLWHG6WDWHVRQ DQ³DOOULVN´EDVLVLQWKHDPRXQWRIXSWRELOOLRQ'HVSLWHWKHH[LVWHQFHRIWKLVLQVXUDQFHFRYHUDJHDQ\WKUHDWHQHGRU DFWXDOWHUURULVWDWWDFNVZKHUHZHRSHUDWHFRXOGDGYHUVHO\DIIHFWRXUSURSHUW\YDOXHVUHYHQXHVFRQVXPHUWUDIILFDQGWHQDQW VDOHV Hurricane Impacts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uarantees of Indebtedness -RLQWYHQWXUHGHEWLVWKHOLDELOLW\RIWKHMRLQWYHQWXUHDQGLVW\SLFDOO\VHFXUHGE\WKHMRLQWYHQWXUHSURSHUW\ZKLFKLV QRQUHFRXUVH WR XV $V RI 'HFHPEHU DQG WKH 2SHUDWLQJ 3DUWQHUVKLS JXDUDQWHHG MRLQW YHQWXUH UHODWHG PRUWJDJHLQGHEWHGQHVVRIPLOOLRQDQGPLOOLRQUHVSHFWLYHO\ RIZKLFKZHKDYHDULJKWRIUHFRYHU\IURPRXU YHQWXUHSDUWQHUVRIPLOOLRQ 0RUWJDJHVJXDUDQWHHGE\WKH2SHUDWLQJ3DUWQHUVKLSDUHVHFXUHGE\WKHSURSHUW\RIWKH MRLQWYHQWXUHZKLFKFRXOGEHVROGLQRUGHUWRVDWLVI\WKHRXWVWDQGLQJREOLJDWLRQDQGZKLFKKDYHHVWLPDWHGIDLUYDOXHVLQ H[FHVVRIWKHJXDUDQWHHGDPRXQW Concentration of Credit Risk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²%DVLFDQG'LOXWHG :HLJKWHGDYHUDJHVKDUHVRXWVWDQGLQJ² %DVLFDQG'LOXWHG 6LPRQ3URSHUW\*URXS/3 1HWLQFRPHDWWULEXWDEOHWRXQLWKROGHUV 1HWLQFRPHSHUXQLW²%DVLFDQG'LOXWHG :HLJKWHGDYHUDJHXQLWVRXWVWDQGLQJ² %DVLFDQG'LOXWHG 7RWDOUHYHQXH 2SHUDWLQJLQFRPHEHIRUHRWKHULWHPV &RQVROLGDWHGQHWLQFRPH 6LPRQ3URSHUW\*URXS,QF 1HWLQFRPHDWWULEXWDEOHWRFRPPRQ VWRFNKROGHUV 1HWLQFRPHSHUVKDUH²%DVLFDQG'LOXWHG :HLJKWHGDYHUDJHVKDUHVRXWVWDQGLQJ² %DVLFDQG'LOXWHG 6LPRQ3URSHUW\*URXS/3 1HWLQFRPHDWWULEXWDEOHWRXQLWKROGHUV 1HWLQFRPHSHUXQLW²%DVLFDQG'LOXWHG :HLJKWHGDYHUDJHXQLWVRXWVWDQGLQJ²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¶VPDQDJHPHQWLQFOXGLQJLWV&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUDVDSSURSULDWHWR DOORZWLPHO\GHFLVLRQVUHJDUGLQJUHTXLUHGGLVFORVXUHV%HFDXVHRILQKHUHQWOLPLWDWLRQVGLVFORVXUHFRQWUROVDQGSURFHGXUHV QRPDWWHUKRZZHOOGHVLJQHGDQGRSHUDWHGFDQSURYLGHRQO\UHDVRQDEOHDQGQRWDEVROXWHDVVXUDQFHWKDWWKHREMHFWLYHV RIGLVFORVXUHFRQWUROVDQGSURFHGXUHVDUHPHW 2XUPDQDJHPHQWZLWKWKHSDUWLFLSDWLRQRI6LPRQ¶V&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUHYDOXDWHG WKHHIIHFWLYHQHVVRIWKHGHVLJQDQGRSHUDWLRQRI6LPRQ¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVDVRI'HFHPEHU %DVHGRQWKDWHYDOXDWLRQ6LPRQ¶V&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUFRQFOXGHGWKDWDVRI'HFHPEHU 6LPRQ¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVZHUHHIIHFWLYHDWDUHDVRQDEOHDVVXUDQFHOHYHO 0DQDJHPHQW V5HSRUWRQ,QWHUQDO&RQWURO2YHU)LQDQFLDO5HSRUWLQJ 6LPRQLVUHVSRQVLEOHIRUHVWDEOLVKLQJDQGPDLQWDLQLQJDGHTXDWHLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJ,QWHUQDO FRQWURORYHUILQDQFLDOUHSRUWLQJLVGHILQHGLQ5XOHD I XQGHUWKH([FKDQJH$FWDVDSURFHVVGHVLJQHGE\RUXQGHUWKH VXSHUYLVLRQRI 6LPRQ¶VSULQFLSDOH[HFXWLYHDQGSULQFLSDOILQDQFLDORIILFHUVDQGHIIHFWHGE\6LPRQ¶V%RDUGRI'LUHFWRUV PDQDJHPHQWDQGRWKHUSHUVRQQHOWRSURYLGHUHDVRQDEOHDVVXUDQFHUHJDUGLQJWKHUHOLDELOLW\RIILQDQFLDOUHSRUWLQJDQGWKH SUHSDUDWLRQRIILQDQFLDOVWDWHPHQWVIRUH[WHUQDOSXUSRVHVLQDFFRUGDQFHZLWK86JHQHUDOO\DFFHSWHGDFFRXQWLQJSULQFLSOHV DQGLQFOXGHVWKRVHSROLFLHVDQGSURFHGXUHVWKDW • 3HUWDLQWRWKHPDLQWHQDQFHRIUHFRUGVWKDWLQUHDVRQDEOHGHWDLODFFXUDWHO\DQGIDLUO\UHIOHFWRXUWUDQVDFWLRQVDQG GLVSRVLWLRQRIDVVHWV • 3URYLGHUHDVRQDEOHDVVXUDQFHWKDWWUDQVDFWLRQVDUHUHFRUGHGDVQHFHVVDU\WRSHUPLWSUHSDUDWLRQRIILQDQFLDO VWDWHPHQWV LQ DFFRUGDQFH ZLWK 86 JHQHUDOO\ DFFHSWHG DFFRXQWLQJ SULQFLSOHV DQG WKDW RXU UHFHLSWV DQG H[SHQGLWXUHVDUHEHLQJPDGHRQO\LQDFFRUGDQFHZLWKDXWKRUL]DWLRQVRIRXUPDQDJHPHQWDQGGLUHFWRUVDQG •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¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJDVRI'HFHPEHU,Q PDNLQJWKLVDVVHVVPHQWZHXVHGWKHFULWHULDVHWIRUWKE\WKH&RPPLWWHHRI6SRQVRULQJ2UJDQL]DWLRQVRIWKH7UHDGZD\ &RPPLVVLRQ &262 LQ,QWHUQDO&RQWURO,QWHJUDWHG)UDPHZRUN %DVHGRQWKDWDVVHVVPHQWDQGFULWHULDZHEHOLHYH WKDWDVRI'HFHPEHU6LPRQ¶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¶V&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUDVDSSURSULDWHWRDOORZWLPHO\GHFLVLRQVUHJDUGLQJ UHTXLUHGGLVFORVXUHV%HFDXVHRILQKHUHQWOLPLWDWLRQVGLVFORVXUHFRQWUROVDQGSURFHGXUHVQRPDWWHUKRZZHOOGHVLJQHGDQG RSHUDWHG FDQ SURYLGH RQO\ UHDVRQDEOH DQG QRW DEVROXWH DVVXUDQFH WKDW WKH REMHFWLYHV RI GLVFORVXUH FRQWUROV DQG SURFHGXUHVDUHPHW 2XUPDQDJHPHQWZLWKWKHSDUWLFLSDWLRQRI6LPRQ¶V&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUHYDOXDWHG WKHHIIHFWLYHQHVVRIWKHGHVLJQDQGRSHUDWLRQRIWKH2SHUDWLQJ3DUWQHUVKLS¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVDVRI 'HFHPEHU%DVHGRQWKDWHYDOXDWLRQ6LPRQ¶V&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUFRQFOXGHGWKDW DVRI'HFHPEHUWKH2SHUDWLQJ3DUWQHUVKLS¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVZHUHHIIHFWLYHDWDUHDVRQDEOH DVVXUDQFHOHYHO 0DQDJHPHQW V5HSRUWRQ,QWHUQDO&RQWURO2YHU)LQDQFLDO5HSRUWLQJ 7KH2SHUDWLQJ3DUWQHUVKLSLVUHVSRQVLEOHIRUHVWDEOLVKLQJDQGPDLQWDLQLQJDGHTXDWHLQWHUQDOFRQWURORYHUILQDQFLDO UHSRUWLQJ ,QWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ LV GHILQHG LQ 5XOH D I XQGHU WKH ([FKDQJH $FW DV D SURFHVV GHVLJQHGE\RUXQGHUWKHVXSHUYLVLRQRI6LPRQ¶VSULQFLSDOH[HFXWLYHDQGSULQFLSDOILQDQFLDORIILFHUVDQGHIIHFWHGE\6LPRQ¶V %RDUGRI'LUHFWRUVPDQDJHPHQWDQGRWKHUSHUVRQQHOWRSURYLGHUHDVRQDEOHDVVXUDQFHUHJDUGLQJWKHUHOLDELOLW\RIILQDQFLDO UHSRUWLQJDQGWKHSUHSDUDWLRQRIILQDQFLDOVWDWHPHQWVIRUH[WHUQDOSXUSRVHVLQDFFRUGDQFHZLWK86JHQHUDOO\DFFHSWHG DFFRXQWLQJSULQFLSOHVDQGLQFOXGHVWKRVHSROLFLHVDQGSURFHGXUHVWKDW • 3HUWDLQWRWKHPDLQWHQDQFHRIUHFRUGVWKDWLQUHDVRQDEOHGHWDLODFFXUDWHO\DQGIDLUO\UHIOHFWRXUWUDQVDFWLRQVDQG GLVSRVLWLRQRIDVVHWV • 3URYLGHUHDVRQDEOHDVVXUDQFHWKDWWUDQVDFWLRQVDUHUHFRUGHGDVQHFHVVDU\WRSHUPLWSUHSDUDWLRQRIILQDQFLDO VWDWHPHQWV LQ DFFRUGDQFH ZLWK 86 JHQHUDOO\ DFFHSWHG DFFRXQWLQJ SULQFLSOHV DQG WKDW RXU UHFHLSWV DQG H[SHQGLWXUHVDUHEHLQJPDGHRQO\LQDFFRUGDQFHZLWKDXWKRUL]DWLRQVRIRXUPDQDJHPHQWDQGGLUHFWRUVDQG •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¶V LQWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ DV RI 'HFHPEHU ,Q PDNLQJ WKLV DVVHVVPHQW ZH XVHG WKH FULWHULD VHW IRUWK E\ WKH &RPPLWWHH RI 6SRQVRULQJ 2UJDQL]DWLRQV RI WKH 7UHDGZD\ &RPPLVVLRQ &262 LQ ,QWHUQDO &RQWURO,QWHJUDWHG )UDPHZRUN %DVHG RQ WKDW DVVHVVPHQW DQG FULWHULD ZH EHOLHYH WKDW DV RI 'HFHPEHU WKH 2SHUDWLQJ 3DUWQHUVKLS¶V LQWHUQDO FRQWURO RYHU ILQDQFLDOUHSRUWLQJZDVHIIHFWLYH $WWHVWDWLRQ5HSRUWRIWKH5HJLVWHUHG3XEOLF$FFRXQWLQJ)LUP 7KHDXGLWUHSRUWRI(UQVW ,WHP%2WKHU,QIRUPDWLRQ 'XULQJWKHIRXUWKTXDUWHURIWKH\HDUFRYHUHGE\WKLV$QQXDO5HSRUWRQ)RUP.WKH$XGLW&RPPLWWHHRI6LPRQ¶V %RDUGRI'LUHFWRUVDSSURYHGFHUWDLQDXGLWDXGLWUHODWHGDQGQRQDXGLWWD[FRPSOLDQFHDQGWD[FRQVXOWLQJVHUYLFHVWREH SURYLGHGE\(UQVW 3DUW,,, ,WHP'LUHFWRUV([HFXWLYH2IILFHUVDQG&RUSRUDWH*RYHUQDQFH 7KHLQIRUPDWLRQUHTXLUHGE\WKLVLWHPLVLQFRUSRUDWHGKHUHLQE\UHIHUHQFHWRWKHGHILQLWLYHSUR[\VWDWHPHQWIRU6LPRQ¶V DQQXDOPHHWLQJRIVWRFNKROGHUVWREHILOHGZLWKWKH6(&SXUVXDQWWR5HJXODWLRQ$DQGWKHLQIRUPDWLRQLQFOXGHG XQGHUWKHFDSWLRQ([HFXWLYH2IILFHUVRIWKH5HJLVWUDQWLQ3DUW,KHUHRI ,WHP([HFXWLYH&RPSHQVDWLRQ 7KHLQIRUPDWLRQUHTXLUHGE\WKLVLWHPLVLQFRUSRUDWHGKHUHLQE\UHIHUHQFHWRWKHGHILQLWLYHSUR[\VWDWHPHQWIRU6LPRQ¶V DQQXDOPHHWLQJRIVWRFNKROGHUVWREHILOHGZLWKWKH6(&SXUVXDQWWR5HJXODWLRQ$ ,WHP6HFXULW\2ZQHUVKLSRI&HUWDLQ%HQHILFLDO2ZQHUVDQG0DQDJHPHQWDQG5HODWHG6WRFNKROGHU0DWWHUV 7KHLQIRUPDWLRQUHTXLUHGE\WKLVLWHPLVLQFRUSRUDWHGKHUHLQE\UHIHUHQFHWRWKHGHILQLWLYHSUR[\VWDWHPHQWIRU6LPRQ¶V DQQXDOPHHWLQJRIVWRFNKROGHUVWREHILOHGZLWKWKH6(&SXUVXDQWWR5HJXODWLRQ$ ,WHP&HUWDLQ5HODWLRQVKLSVDQG5HODWHG7UDQVDFWLRQVDQG'LUHFWRU,QGHSHQGHQFH 7KHLQIRUPDWLRQUHTXLUHGE\WKLVLWHPLVLQFRUSRUDWHGKHUHLQE\UHIHUHQFHWRWKHGHILQLWLYHSUR[\VWDWHPHQWIRU6LPRQ¶V DQQXDOPHHWLQJRIVWRFNKROGHUVWREHILOHGZLWKWKH6(&SXUVXDQWWR5HJXODWLRQ$ ,WHP3ULQFLSDO$FFRXQWDQW)HHVDQG6HUYLFHV 7KHLQIRUPDWLRQUHTXLUHGE\WKLVLWHPLVLQFRUSRUDWHGKHUHLQE\UHIHUHQFHWRWKHGHILQLWLYHSUR[\VWDWHPHQWIRU6LPRQ¶V DQQXDOPHHWLQJRIVWRFNKROGHUVWREHILOHGZLWKWKH6(&SXUVXDQWWR5HJXODWLRQ$ 7KH$XGLW&RPPLWWHHRI6LPRQ V%RDUGRI'LUHFWRUVSUHDSSURYHVDOODXGLWDQGSHUPLVVLEOHQRQDXGLWVHUYLFHVWREH SURYLGHGE\(UQVW $XGLW)HHV $XGLW5HODWHG)HHV 7D[)HHV $OO2WKHU)HHV ² ²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inancial Statements 7KHIROORZLQJFRQVROLGDWHGILQDQFLDOVWDWHPHQWVRI6LPRQ3URSHUW\*URXS,QFDQG 6LPRQ3URSHUW\*URXS/3DUHVHWIRUWKLQ3DUW,,LWHP 5HSRUWVRI,QGHSHQGHQW5HJLVWHUHG3XEOLF$FFRXQWLQJ)LUP &RQVROLGDWHG)LQDQFLDO6WDWHPHQWVRI6LPRQ3URSHUW\*URXS,QF &RQVROLGDWHG%DODQFH6KHHWVDVRI'HFHPEHUDQG &RQVROLGDWHG6WDWHPHQWVRI2SHUDWLRQVDQG&RPSUHKHQVLYH,QFRPHIRUWKH \HDUVHQGHG'HFHPEHUDQG &RQVROLGDWHG6WDWHPHQWVRI&DVK)ORZVIRUWKH\HDUVHQGHG 'HFHPEHUDQG &RQVROLGDWHG6WDWHPHQWVRI(TXLW\IRUWKH\HDUVHQGHG'HFHPEHU DQG &RQVROLGDWHG)LQDQFLDO6WDWHPHQWVRI6LPRQ3URSHUW\*URXS/3 &RQVROLGDWHG%DODQFH6KHHWVDVRI'HFHPEHUDQG &RQVROLGDWHG6WDWHPHQWVRI2SHUDWLRQVDQG&RPSUHKHQVLYH,QFRPHIRUWKH\HDUV HQGHG'HFHPEHUDQG &RQVROLGDWHG6WDWHPHQWVRI&DVK)ORZVIRUWKH\HDUVHQGHG'HFHPEHU DQG &RQVROLGDWHG6WDWHPHQWVRI(TXLW\IRUWKH\HDUVHQGHG'HFHPEHU DQG 1RWHVWR&RQVROLGDWHG)LQDQFLDO6WDWHPHQWV Financial Statement Schedule 6LPRQ3URSHUW\*URXS,QFDQG6LPRQ3URSHUW\*URXS/36FKHGXOH,,,²6FKHGXOH RI5HDO(VWDWHDQG$FFXPXODWHG'HSUHFLDWLRQ 1RWHVWR6FKHGXOH,,, 2WKHUILQDQFLDOVWDWHPHQWVFKHGXOHVDUHRPLWWHGEHFDXVHWKH\DUHQRWDSSOLFDEOHRUWKH UHTXLUHGLQIRUPDWLRQLVVKRZQLQWKHILQDQFLDOVWDWHPHQWVRUQRWHVWKHUHWR Exhibits 7KH([KLELW,QGH[DWWDFKHGKHUHWRLVKHUHE\LQFRUSRUDWHGE\UHIHUHQFHWRWKLV,WHP ,WHP)RUP.6XPPDU\ 1RQH (;+,%,7,1'(; ([KLELWV 6HSDUDWLRQDQG 'LVWULEXWLRQ$JUHHPHQWE\DQGDPRQJ6LPRQ3URSHUW\*URXS,QF6LPRQ3URSHUW\ *URXS/3 :DVKLQJWRQ 3ULPH *URXS,QF DQG :DVKLQJWRQ 3ULPH *URXS/3 GDWHG DV RI 0D\ LQFRUSRUDWHG E\ UHIHUHQFHWR([KLELWRIWKH5HJLVWUDQW¶V&XUUHQW5HSRUWRQ)RUP.ILOHG0D\ 5HVWDWHG &HUWLILFDWH RI ,QFRUSRUDWLRQ RI 6LPRQ 3URSHUW\ *URXS ,QF LQFRUSRUDWHG E\ UHIHUHQFH WR $SSHQGL[$ RI 6LPRQ3URSHUW\*URXS,QF¶V3UR[\6WDWHPHQWRQ6FKHGXOH$ILOHG0DUFK $PHQGHGDQG5HVWDWHG%\/DZVRI6LPRQ3URSHUW\*URXS,QFDVDGRSWHGRQ0DUFK LQFRUSRUDWHGE\ UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG0DUFK &HUWLILFDWHRI3RZHUV'HVLJQDWLRQV3UHIHUHQFHVDQG5LJKWVRIWKH 6HULHV-&XPXODWLYH5HGHHPDEOH3UHIHUUHG 6WRFN3DU9DOXH LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUW RQ)RUP.ILOHG2FWREHU &HUWLILFDWHRI'HVLJQDWLRQRI6HULHV$-XQLRU3DUWLFLSDWLQJ5HGHHPDEOH3UHIHUUHG6WRFN LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG0D\ 6HFRQG $PHQGHG DQG 5HVWDWHG &HUWLILFDWH RI /LPLWHG 3DUWQHUVKLS RI WKH /LPLWHG 3DUWQHUVKLS LQFRUSRUDWHG E\ UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS/3 V$QQXDO5HSRUWRQ)RUP.ILOHG0DUFK (LJKWK$PHQGHGDQG5HVWDWHG/LPLWHG3DUWQHUVKLS$JUHHPHQWRI6LPRQ3URSHUW\*URXS/3GDWHGDVRI0D\ LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶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¶V 4XDUWHUO\ 5HSRUW RQ )RUP4ILOHG0D\ 9RWLQJ7UXVW$JUHHPHQW9RWLQJ$JUHHPHQWDQG3UR[\GDWHGDVRI0DUFKEHWZHHQ'DYLG6LPRQ0HOYLQ 6LPRQDQG+HUEHUW6LPRQ LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V4XDUWHUO\5HSRUW RQ)RUP4ILOHG0D\ )RUPRIWKH,QGHPQLW\$JUHHPHQWEHWZHHQ6LPRQ3URSHUW\*URXS,QFDQGLWVGLUHFWRUVDQGRIILFHUV LQFRUSRUDWHG E\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V)RUP6ILOHG$XJXVW 5HJ1R 5HJLVWUDWLRQ5LJKWV$JUHHPHQWGDWHGDVRI6HSWHPEHUE\DQGDPRQJ6LPRQ3URSHUW\*URXS,QFDQGWKH SHUVRQVQDPHGWKHUHLQ LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ )RUP.ILOHG2FWREHU ([KLELWV 5HJLVWUDWLRQ5LJKWV$JUHHPHQWGDWHGDVRI$XJXVWE\DQGDPRQJ6LPRQ3URSHUW\*URXS,QFDQGWKH SHUVRQVQDPHGWKHUHLQ LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRIWKH5HJLVWUDWLRQ6WDWHPHQWRQ)RUP6ILOHG 0DUFK 5HJ1R 5HJLVWUDWLRQ5LJKWV$JUHHPHQWGDWHGDVRI1RYHPEHUE\DQGEHWZHHQ2¶&RQQRU5HWDLO3DUWQHUV/3DQG 6LPRQ'H%DUWROR*URXS,QF LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRIWKH5HJLVWUDWLRQ6WDWHPHQWRQ)RUP6 ILOHG'HFHPEHU 5HJ1R 6LPRQ 3URSHUW\ *URXS/3 $PHQGHG DQG 5HVWDWHG 6WRFN ,QFHQWLYH 3ODQ LQFRUSRUDWHG E\ UHIHUHQFH WR ([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG$SULO )RUPRI1RQTXDOLILHG6WRFN2SWLRQ$ZDUG$JUHHPHQWXQGHUWKH6LPRQ3URSHUW\*URXS/36WRFN,QFHQWLYH 3ODQ LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V$QQXDO5HSRUWRQ)RUP.ILOHG 0DUFK )RUPRI3HUIRUPDQFH%DVHG5HVWULFWHG6WRFN$ZDUG$JUHHPHQWXQGHUWKH6LPRQ3URSHUW\*URXS/36WRFN ,QFHQWLYH 3ODQ LQFRUSRUDWHG E\ UHIHUHQFH WR ([KLELW RI 6LPRQ 3URSHUW\ *URXS ,QF¶V $QQXDO 5HSRUW RQ )RUP.ILOHG)HEUXDU\ )RUPRI1RQ(PSOR\HH'LUHFWRU5HVWULFWHG6WRFN$ZDUG$JUHHPHQWXQGHUWKH6LPRQ3URSHUW\*URXS/3 6WRFN,QFHQWLYH3ODQ LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V$QQXDO5HSRUWRQ )RUP.ILOHG0DUFK (PSOR\PHQW $JUHHPHQW EHWZHHQ 6LPRQ 3URSHUW\ *URXS ,QF DQG 'DYLG 6LPRQ HIIHFWLYH DV RI -XO\ LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG-XO\ )LUVW$PHQGPHQWWR(PSOR\PHQW$JUHHPHQWEHWZHHQ6LPRQ3URSHUW\*URXS,QFDQG'DYLG6LPRQGDWHGDVRI 0DUFK LQFRUSRUDWHG E\ UHIHUHQFH WR ([KLELW RI 6LPRQ 3URSHUW\ *URXS ,QF¶V &XUUHQW 5HSRUW RQ )RUP.ILOHG$SULO 1RQ4XDOLILHG 'HIHUUHG &RPSHQVDWLRQ 3ODQ GDWHG DV RI 'HFHPEHU LQFRUSRUDWHG E\ UHIHUHQFH WR ([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V4XDUWHUO\5HSRUWRQ)RUP4ILOHG1RYHPEHU $PHQGPHQW²3HUIRUPDQFH%DVHG5HVWULFWHG6WRFN$JUHHPHQWGDWHGDVRI0DUFK LQFRUSRUDWHGE\ UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶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¶V&XUUHQW5HSRUWRQ)RUP.ILOHG-XO\ ([KLELWV )LUVW$PHQGPHQWWR6LPRQ3URSHUW\*URXS6HULHV&(2/7,38QLW$ZDUG$JUHHPHQWGDWHGDVRI'HFHPEHU LQFRUSRUDWHG E\ UHIHUHQFH WR ([KLELW RI 6LPRQ 3URSHUW\ *URXS ,QF¶V $QQXDO 5HSRUW RQ )RUP. ILOHG )HEUXDU\ 6HFRQG$PHQGPHQWWR6LPRQ3URSHUW\*URXS6HULHV&(2/7,38QLW$ZDUG$JUHHPHQWGDWHGDVRI0DUFK LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG$SULO 6LPRQ3URSHUW\*URXS$PHQGHGDQG5HVWDWHG6HULHV&(2/7,38QLW$ZDUG$JUHHPHQWGDWHGDVRI'HFHPEHU LQFRUSRUDWHGE\UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG -DQXDU\ &HUWLILFDWHRI'HVLJQDWLRQRI6HULHV/7,38QLWVRI6LPRQ3URSHUW\*URXS/3 LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS,QF V&XUUHQW5HSRUWRQ)RUP.ILOHG-XO\ )RUPRI6LPRQ3URSHUW\*URXS6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFHWR([KLELW RI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG-XO\ &HUWLILFDWHRI'HVLJQDWLRQRI6HULHV/7,38QLWVRI6LPRQ3URSHUW\*URXS/3 LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS/3 V4XDUWHUO\5HSRUWRQ)RUP4ILOHG0D\ $PHQGHG DQG 5HVWDWHG &HUWLILFDWH RI 'HVLJQDWLRQ RI 6HULHV /7,3 8QLWV RI 6LPRQ 3URSHUW\ *URXS/3 LQFRUSRUDWHG E\ UHIHUHQFH WR ([KLELW RI 6LPRQ 3URSHUW\ *URXS/3 V 4XDUWHUO\ 5HSRUW RQ )RUP4 ILOHG 0D\ )RUPRI6LPRQ3URSHUW\*URXS6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFHWR([KLELW RI6LPRQ3URSHUW\*URXS,QF¶V4XDUWHUO\5HSRUWRQ)RUP4ILOHG0D\ 6LPRQ3URSHUW\*URXS$PHQGHGDQG5HVWDWHG6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFH WR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG$SULO &HUWLILFDWHRI'HVLJQDWLRQRI6HULHV/7,38QLWVRI6LPRQ3URSHUW\*URXS/3 LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS/3 V4XDUWHUO\5HSRUWRQ)RUP4ILOHG0D\ )RUPRI6LPRQ3URSHUW\*URXS6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFHWR([KLELW RI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG$SULO )RUPRI6LPRQ3URSHUW\*URXS([HFXWLYH2IILFHU/7,3:DLYHUGDWHG$SULO LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG$SULO 6LPRQ 3URSHUW\ *URXS &(2 /7,3 8QLW $GMXVWPHQW :DLYHU GDWHG $SULO LQFRUSRUDWHG E\ UHIHUHQFH WR ([KLELWRI6LPRQ3URSHUW\*URXS,QF¶V&XUUHQW5HSRUWRQ)RUP.ILOHG$SULO )RUPRI6LPRQ3URSHUW\*URXS6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFHWR([KLELW RI6LPRQ3URSHUW\*URXS,QF¶V4XDUWHUO\5HSRUWRQ)RUP4ILOHG0D\ &HUWLILFDWHRI'HVLJQDWLRQRI6HULHV/7,38QLWVRI6LPRQ3URSHUW\*URXS/3 LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS/3 V4XDUWHUO\5HSRUWRQ)RUP4ILOHG0D\ $PHQGHGDQG5HVWDWHG&UHGLW$JUHHPHQWGDWHGDVRI0DUFK LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS/3¶V&XUUHQW5HSRUWRQ)RUP.ILOHG0DUFK )RUPRI6LPRQ3URSHUW\*URXS6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFHWR([KLELW RI6LPRQ3URSHUW\*URXS,QF¶V4XDUWHUO\5HSRUWRQ)RUP4$IRUWKHTXDUWHUHQGHG0DUFKILOHGRQ -DQXDU\ &HUWLILFDWHRI'HVLJQDWLRQRI6HULHV/7,38QLWVRI6LPRQ3URSHUW\*URXS/3 LQFRUSRUDWHGE\UHIHUHQFHWR ([KLELWRI6LPRQ3URSHUW\*URXS/3 V4XDUWHUO\5HSRUWRQ)RUP4$IRUWKHTXDUWHUHQGHG0DUFK ILOHGRQ-DQXDU\ ([KLELWV )RUPRI6LPRQ3URSHUW\*URXS6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFHWR([KLELW RI6LPRQ3URSHUW\*URXS,QF¶VDQG6LPRQ3URSHUW\*URXS/3¶V4XDUWHUO\5HSRUWRQ)RUP4IRUWKHTXDUWHU HQGHG0DUFKILOHGRQ0D\ )RUP RI &HUWLILFDWH RI 'HVLJQDWLRQ RI 6HULHV /7,3 8QLWV RI 6LPRQ 3URSHUW\ *URXS /3 LQFRUSRUDWHG E\ UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶VDQG6LPRQ3URSHUW\*URXS/3¶V4XDUWHUO\5HSRUWRQ )RUP4IRUWKHTXDUWHUHQGHG0DUFKILOHGRQ0D\ $PHQGPHQW1RWR$PHQGHGDQG5HVWDWHG&UHGLW$JUHHPHQWGDWHGDVRI$SULO LQFRUSRUDWHGE\UHIHUHQFH WR([KLELWRI6LPRQ3URSHUW\*URXS/3¶V&XUUHQW5HSRUWRQ)RUP.ILOHG$SULO $PHQGHGDQG5HVWDWHG&UHGLW$JUHHPHQWGDWHGDVRI0DUFK LQFRUSRUDWHGE\UHIHUHQFH WR([KLELWRI6LPRQ3URSHUW\*URXS/3¶V&XUUHQW5HSRUWRQ)RUP.ILOHG0DUFK $PHQGHGDQG5HVWDWHG&UHGLW$JUHHPHQWGDWHGDVRI)HEUXDU\ LQFRUSRUDWHGE\UHIHUHQFH WR([KLELWRI6LPRQ3URSHUW\*URXS/3¶V&XUUHQW5HSRUWRQ)RUP.ILOHG)HEUXDU\ )RUPRI6LPRQ3URSHUW\*URXS6HULHV/7,38QLW$ZDUG$JUHHPHQW LQFRUSRUDWHGE\UHIHUHQFHWR([KLELW RI6LPRQ3URSHUW\*URXS,QF¶VDQG6LPRQ3URSHUW\*URXS/3¶V4XDUWHUO\5HSRUWRQ)RUP4IRUWKHTXDUWHU HQGHG0DUFKILOHGRQ0D\ )RUP RI &HUWLILFDWH RI 'HVLJQDWLRQ RI 6HULHV /7,3 8QLWV RI 6LPRQ 3URSHUW\ *URXS /3 LQFRUSRUDWHG E\ UHIHUHQFHWR([KLELWRI6LPRQ3URSHUW\*URXS,QF¶VDQG6LPRQ3URSHUW\*URXS/3¶V4XDUWHUO\5HSRUWRQ )RUP4IRUWKHTXDUWHUHQGHG0DUFKILOHGRQ0D\ /LVWRI6XEVLGLDULHVRI6LPRQ3URSHUW\*URXS,QFDQG6LPRQ3URSHUW\*URXS/3 6LPRQ3URSHUW\*URXS,QF²&RQVHQWRI(UQVW 6LPRQ3URSHUW\*URXS/3²&RQVHQWRI(UQVW 6LPRQ 3URSHUW\ *URXS,QF² &HUWLILFDWLRQ E\ WKH &KLHI ([HFXWLYH 2IILFHU SXUVXDQW WR 5XOHD D RI WKH 6HFXULWLHV([FKDQJH$FWRIDVDGRSWHGSXUVXDQWWR6HFWLRQRIWKH6DUEDQHV2[OH\$FWRI 6LPRQ3URSHUW\*URXS,QF²&HUWLILFDWLRQE\WKH&KLHI)LQDQFLDO2IILFHUSXUVXDQWWR5XOHD D RIWKH6HFXULWLHV ([FKDQJH$FWRIDVDGRSWHGSXUVXDQWWR6HFWLRQRIWKH6DUEDQHV2[OH\$FWRI 6LPRQ 3URSHUW\ *URXS/3² &HUWLILFDWLRQ E\ WKH &KLHI ([HFXWLYH 2IILFHU SXUVXDQW WR 5XOHD D RI WKH 6HFXULWLHV([FKDQJH$FWRIDVDGRSWHGSXUVXDQWWR6HFWLRQRIWKH6DUEDQHV2[OH\$FWRI 6LPRQ 3URSHUW\ *URXS/3² &HUWLILFDWLRQ E\ WKH &KLHI )LQDQFLDO 2IILFHU SXUVXDQW WR 5XOHD D RI WKH 6HFXULWLHV([FKDQJH$FWRIDVDGRSWHGSXUVXDQWWR6HFWLRQRIWKH6DUEDQHV2[OH\$FWRI 6LPRQ3URSHUW\*URXS,QF²&HUWLILFDWLRQE\WKH&KLHI([HFXWLYH2IILFHUDQG&KLHI)LQDQFLDO2IILFHUSXUVXDQWWR 86&6HFWLRQDVDGRSWHGSXUVXDQWWR6HFWLRQRIWKH6DUEDQHV2[OH\$FWRI 6LPRQ3URSHUW\*URXS/3²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eal Estate and Accumulated Depreciation December 31, 2018 (Dollars in thousands) &RVW&DSLWDOL]HG 6XEVHTXHQWWR *URVV$PRXQWV$W:KLFK 'DWHRI ,QLWLDO&RVW $FTXLVLWLRQ &DUULHG$W&ORVHRI3H ULRG &RQVWUXFWLRQ %XLOGLQJVDQG %XLOGLQJVDQG %XLOGLQJVDQG $FFXPXODWHG RU 1DPH /RFDWLRQ (QFXPEUDQFHV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV 7RWDO 'HSUHFLDWLRQ $FTXLVLWLRQ Malls %DUWRQ&UHHN6TXDUH $XVWLQ7; ² %DWWOHILHOG0DOO 6SULQJILHOG02 %D\3DUN6TXDUH *UHHQ%D\:, ² %UHD0DOO %UHD /RV$QJHOHV &$ ² %URDGZD\6TXDUH 7\OHU7; ² ² %XUOLQJWRQ0DOO %XUOLQJWRQ %RVWRQ 0$ ² &DVWOHWRQ6TXDUH ,QGLDQDSROLV,1 ² &LHOR9LVWD0DOO (O3DVR7; ² &ROOHJH0DOO %ORRPLQJWRQ,1 ² &ROXPELD&HQWHU .HQQHZLFN:$ ² ² &RSOH\3ODFH %RVWRQ0$ ² ² ² ² &RUDO6TXDUH &RUDO6SULQJV 0LDPL )/ ² ² &RUGRYD0DOO 3HQVDFROD)/ ² 'RPDLQ7KH $XVWLQ7; ² (PSLUH0DOO 6LRX[)DOOV6' ² )DVKLRQ0DOODW.H\VWRQH ,QGLDQDSROLV,1 7KH ² ² )LUHZKHHO7RZQ&HQWHU *DUODQG 'DOODV 7; ² ² )RUXP6KRSVDW&DHVDUV /DV9HJDV19 7KH ² ² ² ² *UHHQZRRG3DUN0DOO *UHHQZRRG ,QGLDQDSROLV ,1 ² +D\ZRRG0DOO *UHHQYLOOH6& ² ,QJUDP3DUN0DOO 6DQ$QWRQLR7; .LQJRI3UXVVLD .LQJRI3UXVVLD 3KLODGHOSKLD 3$ ² ² /D3OD]D0DOO 0F$OOHQ7; ² /DNHOLQH0DOO &HGDU3DUN $XVWLQ 7; ² /HQR[6TXDUH $WODQWD*$ ² ² /LYLQJVWRQ0DOO /LYLQJVWRQ 1HZ 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 Real Estate and Accumulated Depreciation December 31, 2018 (Dollars in thousands) &RVW&DSLWDOL]HG 6XEVHTXHQWWR *URVV$PRXQWV$W:KLFK 'DWHRI ,QLWLDO&RVW $FTXLVLWLRQ &DUULHG$W&ORVHRI3H ULRG &RQVWUXFWLRQ %XLOGLQJVDQG %XLOGLQJVDQG %XLOGLQJVDQG $FFXPXODWHG RU 1DPH /RFDWLRQ (QFXPEUDQFHV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV 7RWDO 'HSUHFLDWLRQ $FTXLVLWLRQ 0F&DLQ0DOO 1/LWWOH5RFN$5 ² ² 0HQOR3DUN0DOO (GLVRQ 1HZ 3KLSSV3OD]D $WODQWD*$ ² ² 3OD]D&DUROLQD &DUROLQD 6DQ-XDQ 35 ² 3ULHQ/DNH0DOO /DNH&KDUOHV/$ ² 5RFNDZD\7RZQVTXDUH 5RFNDZD\ 1HZ 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 Real Estate and Accumulated Depreciation December 31, 2018 (Dollars in thousands) &RVW&DSLWDOL]HG 6XEVHTXHQWWR *URVV$PRXQWV$W:KLFK 'DWHRI ,QLWLDO&RVW $FTXLVLWLRQ &DUULHG$W&ORVHRI3H ULRG &RQVWUXFWLRQ %XLOGLQJVDQG %XLOGLQJVDQG %XLOGLQJVDQG $FFXPXODWHG RU 1DPH /RFDWLRQ (QFXPEUDQFHV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV 7RWDO 'HSUHFLDWLRQ $FTXLVLWLRQ 6WDQIRUG6KRSSLQJ&HQWHU 3DOR$OWR 6DQ-RVH &$ ² ² ² ² 6XPPLW0DOO $NURQ2+ ² 7DFRPD0DOO 7DFRPD 6HDWWOH :$ ² ² 7LSSHFDQRH0DOO /DID\HWWH,1 ² 7RZQ&HQWHUDW%RFD5DWRQ %RFD5DWRQ 0LDPL )/ ² ² 7RZQ&HQWHUDW&REE .HQQHVDZ $WODQWD *$ ² 7RZQH(DVW6TXDUH :LFKLWD.6 ² 7UHDVXUH&RDVW6TXDUH -HQVHQ%HDFK)/ ² 7\URQH6TXDUH 6W3HWHUVEXUJ 7DPSD )/ ² 8QLYHUVLW\3DUN0DOO 0LVKDZDND,1 ² :DOW:KLWPDQ6KRSV +XQWLQJWRQ6WDWLRQ 1HZ :ROIFKDVH*DOOHULD 0HPSKLV71 ² :RRGODQG+LOOV0DOO 7XOVD2. ² ² Premium Outlets $OEHUWYLOOH3UHPLXP2XWOHWV $OEHUWYLOOH 0LQQHDSROLV 01 ² ² $OOHQ3UHPLXP2XWOHWV $OOHQ 'DOODV 7; ² ² $XURUD)DUPV3UHPLXP $XURUD &OHYHODQG 2+ 2XWOHWV ² ² %LUFK5XQ3UHPLXP2XWOHWV %LUFK5XQ 'HWURLW 0, ² &DPDULOOR3UHPLXP2XWOHWV &DPDULOOR /RV $QJHOHV &$ ² &DUOVEDG3UHPLXP2XWOHWV &DUOVEDG 6DQ'LHJR &$ ² &DUROLQD3UHPLXP2XWOHWV 6PLWKILHOG 5DOHLJK 1& &KLFDJR3UHPLXP2XWOHWV $XURUD &KLFDJR ,/ ² &LQFLQQDWL3UHPLXP2XWOHWV 0RQURH &LQFLQQDWL 2+ ² ² &OLQWRQ&URVVLQJ3UHPLXP &OLQWRQ&7 2XWOHWV ² 'HQYHU3UHPLXP2XWOHWV 7KRUQWRQ 'HQYHU &2 ² 'HVHUW+LOOV3UHPLXP &DED]RQ 3DOP 2XWOHWV 6SULQJV &$ ² ² (GLQEXUJK3UHPLXP2XWOHWV (GLQEXUJK ,QGLDQDSROLV ,1 ² ² 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 Real Estate and Accumulated Depreciation December 31, 2018 (Dollars in thousands) &RVW&DSLWDOL]HG 6XEVHTXHQWWR *URVV$PRXQWV$W:KLFK 'DWHRI ,QLWLDO&RVW $FTXLVLWLRQ &DUULHG$W&ORVHRI3HULRG &RQVWUXFWLRQ %XLOGLQJVDQG %XLOGLQJVDQG %XLOGLQJVDQG $FFXPXODWHG RU 1DPH /RFDWLRQ (QFXPEUDQFHV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV 7RWDO 'HSUHFLDWLRQ $FTXLVLWLRQ (OOHQWRQ3UHPLXP2XWOHWV (OOHQWRQ 7DPSD )/ ² )ROVRP3UHPLXP2XWOHWV )ROVRP 6DFUDPHQWR &$ ² ² *LOUR\3UHPLXP2XWOHWV *LOUR\ 6DQ-RVH &$ ² ² *UDQG3UDLULH3UHPLXP *UDQG3UDLULH 'DOODV 2XWOHWV 7; ² *URYH&LW\3UHPLXP2XWOHWV *URYH&LW\ 3LWWVEXUJK 3$ ² *XOISRUW3UHPLXP2XWOHWV *XOISRUW06 ² ² ² +DJHUVWRZQ3UHPLXP +DJHUVWRZQ 2XWOHWV %DOWLPRUH:DVKLQJWRQ '& 0' ² +RXVWRQ3UHPLXP2XWOHWV &\SUHVV +RXVWRQ 7; ² ² -DFNVRQ3UHPLXP2XWOHWV -DFNVRQ 1HZ 2XWOHWV ² ² .LWWHU\3UHPLXP2XWOHWV .LWWHU\0( ² ² /DV$PHULFDV3UHPLXP 6DQ'LHJR&$ 2XWOHWV ² ² /DV9HJDV1RUWK3UHPLXP /DV9HJDV19 2XWOHWV ² /DV9HJDV6RXWK3UHPLXP /DV9HJDV19 2XWOHWV ² ² /HH3UHPLXP2XWOHWV /HH0$ ² /HHVEXUJ&RUQHU3UHPLXP /HHVEXUJ :DVKLQJWRQ 2XWOHWV '& 9$ ² ² /LJKWKRXVH3ODFH3UHPLXP 0LFKLJDQ&LW\ &KLFDJR 2XWOHWV ,/ ,1 ² ² 0HUULPDFN3UHPLXP2XWOHWV 0HUULPDFN1+ ² 1DSD3UHPLXP2XWOHWV 1DSD&$ ² ² 1RUWK%HQG3UHPLXP 1RUWK%HQG 6HDWWOH 2XWOHWV :$ ² ² 1RUWK*HRUJLD3UHPLXP 'DZVRQYLOOH $WODQWD 2XWOHWV *$ ² ² 2UODQGR,QWHUQDWLRQDO 2UODQGR)/ 3UHPLXP2XWOHWV ² ² 2UODQGR9LQHODQG3UHPLXP 2UODQGR)/ 2XWOHWV ² 3HWDOXPD9LOODJH3UHPLXP 3HWDOXPD 6DQ 2XWOHWV )UDQFLVFR &$ ² ² 3KLODGHOSKLD3UHPLXP /LPHULFN 3KLODGHOSKLD 2XWOHWV 3$ ² ² 3KRHQL[3UHPLXP2XWOHWV &KDQGOHU 3KRHQL[ $= ² ² ² ² ² 3LVPR%HDFK3UHPLXP 3LVPR%HDFK&$ 2XWOHWV ² 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 Real Estate and Accumulated Depreciation December 31, 2018 (Dollars in thousands) &RVW&DSLWDOL]HG 6XEVHTXHQWWR *URVV$PRXQWV$W:KLFK 'DWHRI ,QLWLDO&RVW $FTXLVLWLRQ &DUULHG$W&ORVHRI3H ULRG &RQVWUXFWLRQ %XLOGLQJVDQG %XLOGLQJVDQG %XLOGLQJVDQG $FFXPXODWHG RU 1DPH /RFDWLRQ (QFXPEUDQFHV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV 7RWDO 'HSUHFLDWLRQ $FTXLVLWLRQ 3OHDVDQW3UDLULH3UHPLXP 3OHDVDQW3UDLULH 2XWOHWV &KLFDJR ,/0LOZDXNHH :, ² 3XHUWR5LFR3UHPLXP %DUFHORQHWD35 2XWOHWV ² 4XHHQVWRZQ3UHPLXP 4XHHQVWRZQ 2XWOHWV %DOWLPRUH 0' ² 5LR*UDQGH9DOOH\3UHPLXP 0HUFHGHV 0F$OOHQ 2XWOHWV 7; ² ² 5RXQG5RFN3UHPLXP 5RXQG5RFN $XVWLQ 2XWOHWV 7; ² ² 6DQ)UDQFLVFR3UHPLXP /LYHUPRUH 6DQ 2XWOHWV )UDQFLVFR &$ ² 6DQ0DUFRV3UHPLXP 6DQ0DUFRV 2XWOHWV $XVWLQ6DQ$QWRQLR 7; ² ² 6HDWWOH3UHPLXP2XWOHWV 7XODOLS 6HDWWOH :$ ² ² ² ² 6W$XJXVWLQH3UHPLXP 6W$XJXVWLQH 2XWOHWV -DFNVRQYLOOH )/ ² 7DPSD3UHPLXP2XWOHWV /XW] 7DPSD )/ ² 7KH&URVVLQJV3UHPLXP 7DQQHUVYLOOH3$ 2XWOHWV ² 7XFVRQ3UHPLXP2XWOHWV 0DUDQD 7XFVRQ $= ² ² 9DFDYLOOH3UHPLXP2XWOHWV 9DFDYLOOH&$ ² ² :DLNHOH3UHPLXP2XWOHWV :DLSDKX +RQROXOX +, ² ² :DWHUORR3UHPLXP2XWOHWV :DWHUORR1< ² ² :LOOLDPVEXUJ3UHPLXP :LOOLDPVEXUJ9$ 2XWOHWV ² :RRGEXUQ3UHPLXP2XWOHWV :RRGEXUQ 3RUWODQG 25 ² ² :RRGEXU\&RPPRQ &HQWUDO9DOOH\ 1HZ 3UHPLXP2XWOHWV 6LPRQ3URSHUW\*URXS,QF 6LPRQ3URSHUW\*URXS/3 Real Estate and Accumulated Depreciation December 31, 2018 (Dollars in thousands) &RVW&DSLWDOL]HG 6XEVHTXHQWWR *URVV$PRXQWV$W:KLFK 'DWHRI ,QLWLDO&RVW $FTXLVLWLRQ &DUULHG$W&ORVHRI3H ULRG &RQVWUXFWLRQ %XLOGLQJVDQG %XLOGLQJVDQG %XLOGLQJVDQG $FFXPXODWHG RU 1DPH /RFDWLRQ (QFXPEUDQFHV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV /DQG ,PSURYHPHQWV 7RWDO 'HSUHFLDWLRQ $FTXLVLWLRQ Designer Outlets /D5HJJLD'HVLJQHU2XWOHW 0DUFLDQLVH 1DSOHV ,WDO\ ² 1RYHQWD'L3LDYH'HVLJQHU 9HQLFH,WDO\ 2XWOHW ² 3DUQGRUI'HVLJQHU2XWOHW 9LHQQD$XVWULD ² 3URYHQFH'HVLJQHU2XWOHW 3URYHQFH)UDQFH ² ² 5RHUPRQG'HVLJQHU2XWOHW 5RHUPRQG1HWKHUODQGV ² 5RVDGD'HVLJQHU2XWOHW 5RRVHQGDDO 1HWKHUODQGV ² Community Centers $%48SWRZQ $OEXTXHUTXH10 ² 8QLYHUVLW\3DUN9LOODJH )RUW:RUWK7; ² Other Properties &DOKRXQ0DUNHWSODFH &DOKRXQ*$ ² )ORULGD.H\V2XWOHW&HQWHU )ORULGD&LW\)/ ² *DIIQH\0DUNHWSODFH *DIIQH\ *UHHQYLOOH&KDUORWWH 6& ² /HEDQRQ0DUNHWSODFH /HEDQRQ 1DVKYLOOH 71 ² ²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• %XLOGLQJVDQG,PSURYHPHQWV²W\SLFDOO\\HDUVIRUWKHVWUXFWXUH\HDUVIRUODQGVFDSLQJDQGSDUNLQJORW DQG\HDUVIRU+9$&HTXLSPHQW • 7HQDQW$OORZDQFHVDQG,PSURYHPHQWV²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³VLJQLILFDQWVXEVLGLDULHV´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¶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¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVDQGSUHVHQWHG LQWKLVUHSRUWRXUFRQFOXVLRQVDERXWWKHHIIHFWLYHQHVVRIWKHGLVFORVXUHFRQWUROVDQGSURFHGXUHVDV RIWKHHQGRIWKHSHULRGFRYHUHGE\WKLVUHSRUWEDVHGRQVXFKHYDOXDWLRQDQG G 'LVFORVHGLQWKLVUHSRUWDQ\FKDQJHLQWKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJWKDW RFFXUUHGGXULQJWKHUHJLVWUDQW¶VPRVWUHFHQWILVFDOTXDUWHU WKHUHJLVWUDQW¶VIRXUWKILVFDOTXDUWHULQ WKHFDVHRIDQDQQXDOUHSRUW WKDWKDVPDWHULDOO\DIIHFWHGRULVUHDVRQDEO\OLNHO\WRPDWHULDOO\DIIHFW WKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJDQG 7KHUHJLVWUDQW¶VRWKHUFHUWLI\LQJRIILFHUDQG,KDYHGLVFORVHGEDVHGRQRXUPRVWUHFHQWHYDOXDWLRQRILQWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ WR WKH UHJLVWUDQW¶V DXGLWRUV DQG WKH DXGLW FRPPLWWHH RI UHJLVWUDQW¶V ERDUG RI GLUHFWRUV RUSHUVRQVSHUIRUPLQJWKHHTXLYDOHQWIXQFWLRQ D $OOVLJQLILFDQWGHILFLHQFLHVDQGPDWHULDOZHDNQHVVHVLQWKHGHVLJQRURSHUDWLRQRILQWHUQDOFRQWURO RYHUILQDQFLDOUHSRUWLQJZKLFKDUHUHDVRQDEO\OLNHO\WRDGYHUVHO\DIIHFWWKHUHJLVWUDQW¶VDELOLW\WR UHFRUGSURFHVVVXPPDUL]HDQGUHSRUWILQDQFLDOLQIRUPDWLRQDQG E $Q\IUDXGZKHWKHURUQRWPDWHULDOWKDWLQYROYHVPDQDJHPHQWRURWKHUHPSOR\HHVZKRKDYHD VLJQLILFDQWUROHLQWKHUHJLVWUDQW¶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¶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¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVDQGSUHVHQWHG LQWKLVUHSRUWRXUFRQFOXVLRQVDERXWWKHHIIHFWLYHQHVVRIWKHGLVFORVXUHFRQWUROVDQGSURFHGXUHVDV RIWKHHQGRIWKHSHULRGFRYHUHGE\WKLVUHSRUWEDVHGRQVXFKHYDOXDWLRQDQG G 'LVFORVHGLQWKLVUHSRUWDQ\FKDQJHLQWKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJWKDW RFFXUUHGGXULQJWKHUHJLVWUDQW¶VPRVWUHFHQWILVFDOTXDUWHU WKHUHJLVWUDQW¶VIRXUWKILVFDOTXDUWHULQ WKHFDVHRIDQDQQXDOUHSRUW WKDWKDVPDWHULDOO\DIIHFWHGRULVUHDVRQDEO\OLNHO\WRPDWHULDOO\DIIHFW WKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJDQG 7KHUHJLVWUDQW¶VRWKHUFHUWLI\LQJRIILFHUDQG,KDYHGLVFORVHGEDVHGRQRXUPRVWUHFHQWHYDOXDWLRQRILQWHUQDO FRQWURO RYHU ILQDQFLDO UHSRUWLQJ WR WKH UHJLVWUDQW¶V DXGLWRUV DQG WKH DXGLW FRPPLWWHH RI UHJLVWUDQW¶V ERDUG RI GLUHFWRUV RUSHUVRQVSHUIRUPLQJWKHHTXLYDOHQWIXQFWLRQ D $OOVLJQLILFDQWGHILFLHQFLHVDQGPDWHULDOZHDNQHVVHVLQWKHGHVLJQRURSHUDWLRQRILQWHUQDOFRQWURO RYHUILQDQFLDOUHSRUWLQJZKLFKDUHUHDVRQDEO\OLNHO\WRDGYHUVHO\DIIHFWWKHUHJLVWUDQW¶VDELOLW\WR UHFRUGSURFHVVVXPPDUL]HDQGUHSRUWILQDQFLDOLQIRUPDWLRQDQG E $Q\IUDXGZKHWKHURUQRWPDWHULDOWKDWLQYROYHVPDQDJHPHQWRURWKHUHPSOR\HHVZKRKDYHD VLJQLILFDQWUROHLQWKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJ 'DWH)HEUXDU\ V%5,$1-0&'$'( %ULDQ-0F'DGH ([HFXWLYH9LFH3UHVLGHQW&KLHI)LQDQFLDO2IILFHUDQG 7UHDVXUHU (;+,%,7 &(57,),&$7,2138568$1772 58/(D D G D 2)7+(6(&85,7,(6(;&+$1*($&72) $6$'237('38568$1772 6(&7,212)7+(6$5%$1(62;/(<$&72) ,'DYLG6LPRQFHUWLI\WKDW ,KDYHUHYLHZHGWKLVDQQXDOUHSRUWRQ)RUP.RI6LPRQ3URSHUW\*URXS/3 %DVHGRQP\NQRZOHGJHWKLVUHSRUWGRHVQRWFRQWDLQDQ\XQWUXHVWDWHPHQWRIDPDWHULDOIDFWRURPLWWRVWDWHDPDWHULDO IDFWQHFHVVDU\WRPDNHWKHVWDWHPHQWVPDGHLQOLJKWRIWKHFLUFXPVWDQFHVXQGHUZKLFKVXFKVWDWHPHQWVZHUHPDGHQRW PLVOHDGLQJZLWKUHVSHFWWRWKHSHULRGFRYHUHGE\WKLVUHSRUW %DVHGRQP\NQRZOHGJHWKHILQDQFLDOVWDWHPHQWVDQGRWKHUILQDQFLDOLQIRUPDWLRQLQFOXGHGLQWKLVUHSRUWIDLUO\SUHVHQWLQ DOOPDWHULDOUHVSHFWVWKHILQDQFLDOFRQGLWLRQUHVXOWVRIRSHUDWLRQVDQGFDVKIORZVRIWKHUHJLVWUDQWDVRIDQGIRUWKHSHULRGV SUHVHQWHGLQWKLVUHSRUW 7KHUHJLVWUDQW¶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¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVDQGSUHVHQWHGLQWKLVUHSRUW RXUFRQFOXVLRQVDERXWWKHHIIHFWLYHQHVVRIWKHGLVFORVXUHFRQWUROVDQGSURFHGXUHVDVRIWKHHQGRIWKHSHULRG FRYHUHGE\WKLVUHSRUWEDVHGRQVXFKHYDOXDWLRQDQG G 'LVFORVHGLQWKLVUHSRUWDQ\FKDQJHLQWKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJWKDWRFFXUUHG GXULQJWKHUHJLVWUDQW¶VPRVWUHFHQWILVFDOTXDUWHU WKHUHJLVWUDQW¶VIRXUWKILVFDOTXDUWHULQWKHFDVHRIDQDQQXDO UHSRUW WKDWKDVPDWHULDOO\DIIHFWHGRULVUHDVRQDEO\OLNHO\WRPDWHULDOO\DIIHFWWKHUHJLVWUDQW¶VLQWHUQDOFRQWURO RYHUILQDQFLDOUHSRUWLQJDQG 7KHUHJLVWUDQW¶VRWKHUFHUWLI\LQJRIILFHUDQG,KDYHGLVFORVHGEDVHGRQRXUPRVWUHFHQWHYDOXDWLRQRILQWHUQDOFRQWURORYHU ILQDQFLDO UHSRUWLQJ WR WKH UHJLVWUDQW¶V DXGLWRUV DQG WKH DXGLW FRPPLWWHH RI UHJLVWUDQW¶V ERDUG RI GLUHFWRUV RU SHUVRQV SHUIRUPLQJWKHHTXLYDOHQWIXQFWLRQV D $OOVLJQLILFDQWGHILFLHQFLHVDQGPDWHULDOZHDNQHVVHVLQWKHGHVLJQRURSHUDWLRQRILQWHUQDOFRQWURORYHUILQDQFLDO UHSRUWLQJZKLFKDUHUHDVRQDEO\OLNHO\WRDGYHUVHO\DIIHFWWKHUHJLVWUDQW¶VDELOLW\WRUHFRUGSURFHVVVXPPDUL]H DQGUHSRUWILQDQFLDOLQIRUPDWLRQDQG E $Q\IUDXGZKHWKHURUQRWPDWHULDOWKDWLQYROYHVPDQDJHPHQWRURWKHUHPSOR\HHVZKRKDYHDVLJQLILFDQWUROH LQWKHUHJLVWUDQW¶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¶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¶VGLVFORVXUHFRQWUROVDQGSURFHGXUHVDQGSUHVHQWHGLQWKLVUHSRUW RXUFRQFOXVLRQVDERXWWKHHIIHFWLYHQHVVRIWKHGLVFORVXUHFRQWUROVDQGSURFHGXUHVDVRIWKHHQGRIWKHSHULRG FRYHUHGE\WKLVUHSRUWEDVHGRQVXFKHYDOXDWLRQDQG G 'LVFORVHGLQWKLVUHSRUWDQ\FKDQJHLQWKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJWKDWRFFXUUHG GXULQJWKHUHJLVWUDQW¶VPRVWUHFHQWILVFDOTXDUWHU WKHUHJLVWUDQW¶VIRXUWKILVFDOTXDUWHULQWKHFDVHRIDQDQQXDO UHSRUW WKDWKDVPDWHULDOO\DIIHFWHGRULVUHDVRQDEO\OLNHO\WRPDWHULDOO\DIIHFWWKHUHJLVWUDQW¶VLQWHUQDOFRQWURO RYHUILQDQFLDOUHSRUWLQJDQG 7KHUHJLVWUDQW¶VRWKHUFHUWLI\LQJRIILFHUDQG,KDYHGLVFORVHGEDVHGRQRXUPRVWUHFHQWHYDOXDWLRQRILQWHUQDOFRQWURORYHU ILQDQFLDO UHSRUWLQJ WR WKH UHJLVWUDQW¶V DXGLWRUV DQG WKH DXGLW FRPPLWWHH RI UHJLVWUDQW¶V ERDUG RI GLUHFWRUV RU SHUVRQV SHUIRUPLQJWKHHTXLYDOHQWIXQFWLRQV D $OOVLJQLILFDQWGHILFLHQFLHVDQGPDWHULDOZHDNQHVVHVLQWKHGHVLJQRURSHUDWLRQRILQWHUQDOFRQWURORYHUILQDQFLDO UHSRUWLQJZKLFKDUHUHDVRQDEO\OLNHO\WRDGYHUVHO\DIIHFWWKHUHJLVWUDQW¶VDELOLW\WRUHFRUGSURFHVVVXPPDUL]H DQGUHSRUWILQDQFLDOLQIRUPDWLRQDQG E $Q\IUDXGZKHWKHURUQRWPDWHULDOWKDWLQYROYHVPDQDJHPHQWRURWKHUHPSOR\HHVZKRKDYHDVLJQLILFDQWUROH LQWKHUHJLVWUDQW¶VLQWHUQDOFRQWURORYHUILQDQFLDOUHSRUWLQJ 'DWH)HEUXDU\ V%5,$1-0&'$'( %ULDQ-0F'DGH ([HFXWLYH9LFH3UHVLGHQW&KLHI)LQDQFLDO2IILFHUDQG 7UHDVXUHURI6LPRQ3URSHUW\*URXS,QF*HQHUDO3DUWQHU ([KLELW &(57,),&$7,2138568$1772 86&6(&7,21 $6$'237('38568$1772 6(&7,212)7+(6$5%$1(62;/(<$&72) ,Q FRQQHFWLRQ ZLWK WKH $QQXDO 5HSRUW RI 6LPRQ 3URSHUW\ *URXS,QF RQ )RUP. IRU WKH SHULRG HQGHG 'HFHPEHUDVILOHGZLWKWKH6HFXULWLHVDQG([FKDQJH&RPPLVVLRQRQWKHGDWHKHUHRI WKH³5HSRUW´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³&RPSDQ\´ RQ)RUP.IRUWKHSHULRG HQGHG'HFHPEHUDVILOHGZLWKWKH6HFXULWLHVDQG([FKDQJH&RPPLVVLRQRQWKHGDWHKHUHRI WKH³5HSRUW´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his page has been intentionally left blank. This page has been intentionally left blank. This page has been intentionally left blank. INVESTOR INFORMATION CORPORATE HEADQUARTERS ANNUAL REPORT ON FORM 10-K Simon Property Group, Inc. A copy of the Simon Property Group, Inc. Annual Report on Form 10-K 225 West Washington Street filed with the United States Securities and Exchange Commission can Indianapolis, IN 46204 be obtained free of charge by: 317-636-1600 • Contacting the Investor Relations Department at 800-461-3439 or [email protected]; or TRANSFER AGENT AND REGISTRAR • Accessing the Financials page of the website at investors.simon.com Computershare, our transfer agent, maintains the records for our registered shareholders and can assist you with a variety of shareholder services including address changes, certificate ANNUAL MEETING replacement/transfer and dividends. The Annual Meeting of Shareholders of Simon Property Group, Inc. will be held on Wednesday, May 8, 2019, at 225 W. Washington St., Shareholder correspondence should be mailed to: Indianapolis, IN, at 8:30 a.m., local time. P.O. Box 505000 Louisville, KY 40233-5000 COMPANY SECURITIES Overnight correspondence should be mailed to: Simon Property Group, Inc. common stock and one issue of preferred Computershare stock are traded on the New York Stock Exchange (“NYSE”) under the 462 South 4th Street following symbols: Suite 1600 Louisville, KY 40202 Common Stock SPG 8.375% Series J Cumulative Preferred SPGPrJ 800-454-9768 or 781-575-2723 (Outside the U.S.) The quarterly price range on the NYSE for the common stock and the 800-952-9245 (TDD for Hearing Impaired) dividends declared per share for each quarter in the last two fiscal www.computershare.com/investor years are shown below. DECLARED DIRECT STOCK PURCHASE/DIVIDEND 2017 HIGH LOW CLOSE DIVIDENDS REINVESTMENT PROGRAM Computershare administers a direct stock purchase and dividend First Quarter $ 188.10 $ 163.55 $ 172.03 $ 1.75 reinvestment plan that allows interested investors to purchase Simon Property Group stock directly, rather than through a broker, Second Quarter 176.17 150.15 161.76 1.75 and become a registered shareholder. The program offers many Third Quarter 167.12 152.51 161.01 1.80 features including dividend reinvestment. For detailed information, Fourth Quarter 172.35 153.71 171.74 1.85 contact Computershare at 800-454-9768 or www.computershare.com/investor. DECLARED 2018 HIGH LOW CLOSE DIVIDENDS WEBSITE First Quarter $ 173.02 $ 147.28 $ 154.35 $ 1.95 Information such as financial results, corporate announcements, Second Quarter 173.26 145.78 170.19 1.95 dividend news and corporate governance is available on Simon’s Third Quarter 186.03 166.95 176.75 2.00 website: investors.simon.com Fourth Quarter 191.49 159.77 1 6 7. 9 9 2.00 SHAREHOLDER INQUIRIES 800-461-3439 ©2019 Simon Property Group, Inc. [email protected] Design: Ideas On Purpose, New York, www.ideasonpurpose.com Printing: Digital Color Concepts Photography (page II): Michel Labelle INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP Indianapolis, IN All paper in this report is certified to the Forest Stewardship Council® (FSC®) standards. TWENTY-FIVE YEARS OF EXCEPTIONAL ACHIEVEMENTS +2,752% TOTAL SHAREHOLDER RETURN SIMON PROPERTY GROUP, INC. +10% REVENUE CAGR +8% 2018 ANNUAL REPORT FFO PER SHARE CAGR +6% DIVIDENDS PER SHARE CAGR $90B+ TOTAL MARKET CAPITALIZATION INCREASE