52%(57Ã0&'28*$//Ã$57Ã*$//(5< $1'Ã$57Ã$11(; 5(3257Ã21Ã$&7,9,7,(6Ã )25Ã7+(Ã),1$1&,$/Ã<($5 Ã-8/<ÃÃÃÃ-81(Ã 35(3$5('Ã%< $57Ã*$//(5<Ã',5(&725 $1'Ã$57Ã*$//(5<Ã67$)) 7$%/(Ã2)Ã&217(176 3 %86,1(66Ã81,7Ã6800$5<Ã5(3257 $57Ã&2//(&7,21Ã5(3257 (;+,%,7,216Ã5(3257 ,1)250$7,21ÃÉÃ$'9,&(Ã5(3257 $&48,6,7,21Ã$33(1',; 3$*(Ã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ÃUHVXOWÃIRUÃWKHÃILQDQFLDOÃ\HDUÃZDVÃDQÃXQIDYRXUDEOHÃYDULDQFHÃRIÃÇÃRUÃÈÃ$ÃQXPEHUÃRIÃNH\ÃÃLVVXHVÃKDYHÃEHHQ LGHQWLILHGÃDQGÃDÃQXPEHUÃRIÃNH\ÃUHVSRQVHVÃKDYHÃDOVRÃEHHQÃGHYHORSHGÃDVÃWKHÃQHZÃ*DOOHU\ÃHQWHUVÃWKHÃFRQVWUXFWLRQÃSKDVH Ã,QWHUQDOÃ&RVWÃ,VVXHV 7KHUHÃZHUHÃWZRÃDUHDVÃUHODWLQJÃWRÃLQWHUQDOÃFRVWVÃDQGÃSURFHVVHVÃWKDWÃKDGÃDÃGLUHFWÃHIIHFWÃRQÃILQDQFLDOÃSHUIRUPDQFHÃ$ÃFKDQJH WRÃWKHÃSULQWLQJÃEXGJHWÃLQÃ'HFHPEHUÃÃÃ ÇN ÃPHDQWÃWKDWÃPRQLHVÃDOUHDG\ÃFRPPLWWHGÃDQGÃFRQWUDFWHGÃZHUHÃWKHQÃUHPRYHG IURPÃWKHÃEXGJHWÃ7KHÃ*DOOHU\ÃZDVÃXQDEOHÃWRÃDYRLGÃWKLVÃH[SHQGLWXUHÃ7KHÃRWKHUÃNH\ÃLQWHUQDOÃFRVWÃLVVXHÃZDVÃWKH XQH[SHFWHGÃJURZWKÃLQÃFRVWÃRIÃ0,6ÃFKDUJHVÃ'HPDQGÃIRUÃXVHÃRIÃWHFKQRORJ\ÃKDVÃJURZQÃVXEVWDQWLDOO\ÃGXULQJÃWKHÃUHYLHZÃSHULRG DQGÃVLJQLILFDQWÃDGGLWLRQDOÃUHVRXUFHVÃKDYHÃEHHQÃUHTXLUHGÃWRÃPHHWÃRXWSXWÃUHTXLUHPHQWVÃ7KLVÃDOVRÃLQYROYHVÃXSJUDGLQJ H[LVWLQJÃUHVRXUFHVÃÃ7KHÃLPSDFWÃRIÃWKHÃODUJHÃJURZWKÃLQÃWHFKQRORJ\ÃXVHÃKDVÃVHHQÃFRVWVÃH[FHHGLQJÃEXGJHWÃE\ÃRYHUÃÇN Ã([WHUQDOÃ5HYHQXH 7KHÃNH\ÃH[KLELWLRQÃHYHQWÃRIÃWKHÃODVWÃWZHOYHÃPRQWKVÃKDVÃEHHQÃWKHÃ:HDUDEOHÃ$UWÃ([KLELWLRQÃ 7KHÃÃUHYHQXHÃWDUJHWÃIRUÃWKLVÃHYHQW ZDVÃVHWÃDWÃÇNÃDQGÃWKHÃDFWXDOÃWDUJHWÃDFKLHYHGÃZDVÃMXVWÃXQGHUÃÇNÃ7KLVÃKDVÃDJDLQÃUDLVHGÃWKHÃLVVXHÃRIÃÃEDODQFLQJÃWKHÃFRVW RIÃDQÃLPSRUWDQWÃH[KLELWLRQÃDJDLQVWÃWKHÃDFFHVVÃWRÃWKDWÃH[KLELWLRQÃE\ÃWKHÃJHQHUDOÃSXEOLFÃDWÃDÃUHDVRQDEOHÃFRVW Ã0RQWKO\Ã)LQDQFLDOÃ3HUIRUPDQFH 7KHÃWUHQGÃRIÃILQDQFLDOÃSHUIRUPDQFHÃYDULHGÃWKURXJKRXWÃWKHÃ\HDUÃÃ7KLVÃZDVÃFDXVHGÃE\ÃWZRÃWKLQJVÃZLWKÃWKHÃPDLQÃRQHÃEHLQJ WKHÃKLVWRULFDOÃSUDFWLFHÃRIÃGLYLGLQJÃEXGJHWVÃE\ÃWZHOYHÃ)RUÃIL[HGÃFRVWVÃWKLVÃZDVÃUHDVRQDEOHÃEXWÃWKHÃQDWXUHÃRIÃ*DOOHU\ÃRSHUDWLRQV PHDQWÃDÃQXPEHUÃRIÃGLVWRUWLRQVÃZHUHÃFDXVHGÃLQÃWKHÃPRQWKO\ÃUHVXOWVÃ+DYLQJÃVDLGÃWKDWÃWKHUHÃZHUHÃVWLOOÃLVVXHVÃWKDWÃQHHGHG DGGUHVVLQJÃDQGÃVWUHQXRXVÃHIIRUWVÃZHUHÃPDGHÃLQÃWKHÃODWWHUÃSDUWÃRIÃWKHÃ\HDUÃWRÃLGHQWLI\ÃDQGÃUHFWLI\ÃYDULDQFHÃLVVXHVÃ7KHÃWUHQGV VKRZQÃEHORZÃKHOSÃH[SODLQÃWKHÃSDWWHUQVÃRIÃDFWLYLW\ Cumulative Financial Variance Ç Ç Ç Ç Ç Ç W U U U U O O\ V H H H H U\ U\ K UL \ H X X E E E E D D UF S D Q - J R X X D $ 0 X X P W P P Q U - $ WH F H H D E 0 S 2 Y F - H H R H ) 6 1 ' Ã&DSLWDOÃ3URJUDPPH 7KHÃFDSLWDOÃSURJUDPPHÃLVÃPDLQO\ÃIRFXVHGÃRQÃDFTXLVLWLRQVÃRIÃDUWÃZRUNVÃWRÃHQVXUHÃWKHÃFXUUHQF\ÃDQGÃTXDOLW\ÃRIÃWKHÃFROOHFWLRQÃLV PDLQWDLQHGÃRQÃEHKDOIÃRIÃWKHÃSHRSOHÃRIÃ&DQWHUEXU\ÃSDUWLFXODUO\ÃLQÃUHODWLRQÃWRÃWKHÃIXWXUHÃQHHGVÃRIÃWKHÃQHZÃ*DOOHU\Ã7KHÃ DFTXLVLWLRQVÃEXGJHWÃZDVÃÈÃH[SHQGHGÃDWÃWKHÃHQGÃRIÃWKHÃ\HDUÃÃ7KLVÃZDVÃUHGXFHGÃVOLJKWO\ÃIURPÃWRWDOÃEXGJHWÃWRÃDVVLVWÃLQ UHGXFLQJÃWKHÃRSHUDWLRQDOÃGHILFLWÃÃ7KHÃLQDGHTXDF\ÃRIÃWKHÃEXGJHWÃSURYLVLRQÃLVÃKLJKOLJKWHGÃE\ÃWKHÃIDFWÃWKDWÃQRÃDUWZRUNV ZHUHÃSXUFKDVHGÃDIWHUÃ-DQXDU\ÃGXHÃWRÃEXGJHWÃFRQVWUDLQWVÃ,QFOXGHGÃLQÃWKLVÃEXGJHWÃLVÃDÃVPDOOÃSURYLVLRQÃIRUÃÃ$UWÃLQÃ3XEOLFÃ3ODFHV $QÃDPRXQWÃZDVÃVHWÃDVLGHÃDVÃDÃFRQWULEXWLRQÃWRZDUGVÃWKHÃDFTXLVLWLRQÃRIÃWKHÃ0LOOHQQLXPÃPXUDOÃE\Ã3KLOLSÃ7UXVWWXPÃIRUÃWKHÃFLW\Ã7KH UHPDLQGHUÃZDVÃGHGLFDWHGÃDWÃWKHÃDSSURYDOÃRIÃWKHÃ$UWÃLQÃ3XEOLFÃ3ODFHVÃ:RUNLQJÃ3DUW\ÃWRÃDVVLVWÃLQÃWKHÃÃFRPPLVVLRQLQJÃRIÃWKHÃPDMRUÃ SXEOLFÃVFXOSWXUHÃIRUÃWKHÃQHZÃ&KULVWFKXUFKÃ$UWÃ*DOOHU\Ã6FXOSWXUHÃ*DUGHQÃ 5HDVRQÃIRUÃ9R\DJLQJ ÃE\Ã*UDKDPÃ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