marcato capital 4q14 letter to investors

7212019 Marcato Capital 4Q14 Letter To Investors

httpslidepdfcomreaderfullmarcato-capital-4q14-letter-to-investors 138

Q4 14 Narget _evkew amp Butibb

Nbrmah Freeg Fapktai Nahamene

NB_MAH F_EEG FAZKTAI NAHAMENEHT



Q 4 1 4 N a r g e t _ e v ke w amp B u t i bb g

Ietter tb Ceiibw Khvestbrs

Due tb a fbkhfkdehfe b tle faiehdar K wrkte ny Q4 ietter eafl yeardurkhm Vuper Obwi weeg ahd tle lype surrbuhdkhm tle eveht lasprbvkded khspkratkbh kh prkbr years br tle tlene b tle ietter rbn tle16 LarObwi (Orbtlers kn ahd blh afed b as bppbskhm fbafles)wlere we taiged aobut lbw Deehse ]khs Flanpkbhslkps (deehseruied amakh bh tle iast piay b tlks year‛s mane uhbrtuhateiy br usVealawgs ahs) tb tle knprboaoie ruh b Gurt ]arher wktl tle

Fardkhais kh wlere le was heariy ruh but b tbwh br a ruh bpbbr perbrnahfe eariy kh tle seasbh oebre fbhbuhdkhm lks sgeptkfsahd ieadkhm tlen tb tle Vuper Obwi (wlkfl tley slbuid lave wbh outbr bhe b tle nbst anazkhm passes kh Vuper Obwi lkstbry oy Oeh_betliksoermer) ]arher‛s lerbkf perbrnahfe was ahbtler renkhdertlat refeht perbrnahfe ks hbt a mbbd predkftbr b uture returhsdespkte tle predkieftkbh br khvestbrs tb pkfg nahamers tlat wayTere was fieariy a ibt b mreat naterkai br khvestneht iessbhs kh tle 15 Vuper Obwi tb fbne up wktl a tlene brtlks ietter rbn tle rkse b twb uhderrated quarteroafgs (iate rbuhd drac pkfgs) wlb lave oefbne tle oest kh tlemane despkte aii tle quahtktatkve ahaiysks tlat predkfted tley wbuid hever anbuht tb nufl (statkstkfs stkii fah‛tneasure leart ahd 1047297eid snarts) tb tle uhikgeiy rbbgke lerb wlb dkdh‛t brmet tlat ybu lave tb stay bfused bhevery shap oefause ybu hever ghbw wleh tle oaii ks fbnkhm ybur way (eveh wleh everybhe eise kh tle stadkun

ghew br sure kt was mbkhm tb oe a ruh hbt a pass bh tle iast Vealawgs piay7 weii everybhe out Zete Farrbii) tbdeehse wkhs flanpkbhslkps amakh as kt was tle Zatrkbts deehse tlat gept tle prbik1047297f Veattie behse but b tle ehdzbhe kh tle burtl quarter wlkfl aiibwed bn Orady‛s lerbkf perbrnahfe (Vuper Obwi refbrds br nbstfbnpietkbhs ahd nbst aii tkne D passes) tb oefbne NSZ wbrtly ratler tlah a bbthbte kh stbrkes aobut _usseii]kisbh‛s NSZ award tb tle knpbrtahfe b uhderstahdkhm tle dkerehfe oetweeh prboaokiktkes ahd pbsskokiktkeswleh nagkhm frktkfai defkskbhs kh bbtoaii ahd kh khvestkhm (kt was pbsskoie tlat a siaht patterh wbuid wbrg wleheverybhe was frusled tbmetler at tle bhe yard ikhe out kt was prboaoie tlat Narslawh Iyhfl (OeastNbde) wbuidmet tle iast yard mkveh tlree dbwhs ahd a tknebuthellip) Out tlks year we wkii tage a oreag rbn tle bbtoaiiahaibmkes ahd taig aobut ah NSZ wbrtly perbrner kh tle khvestneht ouskhess tlat las prbvkded nahy pearis bwksdbn (ahd a ikttie plkibsbply) bver tle years tlat we fah appiy tb tle furreht khvestneht ehvkrbhneht

Mebrme Vbrbs ks wkdeiy remarded as bhe b tle preenkheht khvestbrs b bur tkne acer fbnpkikhm a trafg refbrd bverbur defades rbn 13 tb 7 tlat ks wktlbut questkbh Laii b Cane naterkai Mkveh tlat tlere are sknpiy hbttlat nahy khvestbrs wlb lave trafg refbrds b tlks duratkbh kt ks tbuml tb nage dkreft fbnparksbhs at aii ahdnagkhm fbnparksbhs afrbss defades ks tbuml oefause b tle very dkereht efbhbnkf ahd narget ehvkrbhnehts tlatexkst rbn defade tb defade Cbr exanpie nagkhm mbbd returhs rbn 13 tb 1lt was pretty darh tbuml as tleVampZ 5 was essehtkaiiy 1047311at durkhm tlbse 14 years wlkie kt was pretty easy tb nage sbikd returhs rbn 1lt tb as tle VampZ 5 fbnpbuhded at 16 ahd weht up heariy tknes (wleh ybu put tle wlbie 41 year perkbdtbmetler tle VampZ 5 fbnpbuhded at 4 ahd turhed a $1 khvestneht khtb ùst uhder $4)Khterestkhmiy tlere ks bhe khvestbr wlb was kh tle narget tle ehtkre tkne as Vbrbs (ahd ks bceh tbuted as tlewbrid‛s mreatest khvestbr br sbne pretty mbbd reasbhs reiated tb fbhskstehfy ahd ibhmevkty) ahd aftuaiiy las a

_eciexkvkty0 Tle Skrtubus amp Tle Skfkbus

Vburfe(s)0 Qubrafbn




Cburtl Quarter 14

trafg refbrd tlat we fah stafg up skde oy skde wktl Mebrme tb makh sbne perspeftkve ]arreh Ouet fibsed lksprkvate partherslkp (OZI) tb hew fapktai kh 133 ahd oy 13 lad trahsktkbhed tb ruhhkhm as a fibsed ehd uhdhaned Oergslkre Latlaway (haned acer tle brkmkhai textkie nahuafturer tlat le obumlt a fbhtrbiikhm khterest khahd iater tbbg butrkmlt fbhtrbi) Vb wleh Vbrbs started tagkhm butskde fapktai khtb lks Dbuoie Eamie partherslkp kh13 (wlere le was ah Assbfkate at Arhlbid ahd V Oiekflrbeder) we lad burseives a lbrserafe Mebrme evehtuaiiyspuh lknsei but kh 1=6 khtb a prkvate 1047297rn Vbrbs Cuhd Nahameneht ahd iater estaoiksled tle Quahtun Cuhd astlekr prknary khvestneht velkfie Vbrbs was tle prknary Zbrtbikb Nahamer br nahy years out was verysuffessui kh oukidkhm ah extrabrdkhary tean b very taiehted khvestbrs tb wbrg at Quahtun ahd le evehtuaiiyfeded tle FKB respbhskokiktkes tb Vtahiey Drufgehnkiier (wlb aisb las a Laii b Cane trafg refbrd b lks bwh khfbnpbuhdkhm fikeht weaitl kh lks uhd Duqueshe Fapktai) Vbrbs oefane iess aftkve kh tle iate s ahdQuahtun aftuaiiy returhed aii butskde fapktai kh 11 fbhvertkhm tb a Cankiy Bstfe tb fbhfehtrate bh ruhhkhm tleVbrbs ankiy ahd Cbuhdatkbh assets

Vb br tle 41 years rbn 13 tb we lave mbbd data bh Quahtun vs Oergslkre (tlahgs tb Seryah Aiieh atJledmeuhd wlb fbiiefted tle khbrnatkbh ahd faifuiated tle returhs) ahd tle resuits are hbtlkhm slbrt bastbhkslkhm ]arreh fbnpbuhded weaitl bver tlat perkbd at a stuhhkhm 14 (nbre tlah dbuoie tle VampZ 5returh bver tle perkbd) ahd wbuid lave turhed a $1 khvestneht khtb $lt4 nkiikbh Vbrbs lbwever dkd a ùstikttie okt oetter fbnpbuhdkhm at 36 (wlkfl dbesh‛t sbuhd ikge tlat okm a dkerehfe) ahd tlrbuml tle nkrafie bibhm-tern fbnpbuhdkhm turhed tlat sane $1 brkmkhai khvestneht khtb ah extrabrdkhary $146= nkiikbh Hbwfieariy very ew khvestbrs oehe1047297tted fbnpieteiy rbn ahy b tlese tlree trafg refbrds Tbse hunoers assune tlatybu rekhvest aii tle dkvkdehds hever tage ahy dkstrkoutkbhs ahd khvested at tle oemkhhkhm ahd stayed khvested uhtkitle ehd Cbrty-bhe years ks a ibhm tkne tb stkfg tb bhe stratemy Kh aft tb prbvkde sbne perspeftkve bh lbw lard ktks tb stkfg tb ahy stratemy ibhm-tern we lave data tlat slbws tlat bver tle past years (a perkbd bhiy lai as ibhm

as tle Vbrbs perkbd) tle VampZ 5 Khdex las fbnpbuhded at lt yet tle averame khvestbr kh nutuai uhds las bhiynade 6 (rbn tle Daioar Vtudy) oefause khvestbrs are hbt very mbbd at stkfgkhm tb a stratemy ahd iettkhmfbnpbuhdkhm wbrg br tlen As anbus stbfg bperatbr esse Ikvernbre bhfe sakd rsquoKt was hever ny tlkhgkhm tlatnade tle okm nbhey br ne kt was aiways ny skttkhmbdquo Uhderstahdkhm uii weii tlat nbst khvestbrs bhiy earh araftkbh b wlat ks avakiaoie kh ahy khvestneht stratemy sknpie natl says tlat a raftkbh b Mebrme br ]arreh‛sperbrnahfe ks ar superkbr tb a raftkbh b tle VampZ 5 perbrnahfe Te prknary pbkht b aii b tle perbrnahfenatl lere ks tb estaoiksl tlat Mebrme Vbrbs ks bhe b tle wbrid‛s mreatest khvestbrs ahd we wbuid prboaoiy oe wksetb pay attehtkbh tb ahy iessbhs le ks wkiikhm tb slare wktl us ahd brtuhateiy le las oeeh wkiikhm tb slare nahy btlen bver tle years K lave fbnpkied a fbiieftkbh b rsquoVbrbsksnsbdquo rbn varkbus sburfes bver tle years ahd lavetweeted nahy b tlen khdkvkduaiiy tb prbvkde khskmlt bh a partkfuiar eveht br bppbrtuhkty kh tle narget out brtlks ietter K lave seiefted ny avbrkte 6 (nahy rbn a mreat fbnpehdkun b 5 b Mebrme‛s oest attlkhgkhmkhvestbrfbn) tb dksfuss tle Vbrbs plkibsbply b _e1047311exkvkty ahd nage tle fase br wly kt ks sb knpbrtahtbr khvestbrs tb uhderstahd partkfuiariy tbday

Mebrme Vbrbs was obrh bh Aumust 1 16 as Vflwartz Myoacutermy kh Oudapest Luhmary Lks atler iater flahmedtle ankiy hane rbn Vflwartz (rsquooiafgbdquo kh Mernah) tb Vbrbs (rsquowkii sbarbdquo kh Esperahtb) Vbrbs survkved tle Hazkbffupatkbh b Luhmary ahd nbved tb Ehmiahd kh 14= wlere le ehrbiied at tle Ibhdbh Vflbbi b Efbhbnkfs ahdoefane a studeht b tle plkibsbpler Gari Zbpper Kh 151 le earhed a OVf kh Zlkibsbply ahd kh 154 lefbnpieted a ZlD kh Zlkibsbply Vbrbs was deepiy knpafted oy lks nehtbr ahd enorafed fbre tehets b Zbpper‛steaflkhms khfiudkhm tle Lunah Uhfertakhty Zrkhfkpie (a buhdatkbhai eieneht b _e1047311exkvkty) ahd tle Advbfafy bCaisk1047297fatkbh (tle fbhstruft tlat enpkrkfai trutls fahhbt oe prbved fbhfiuskveiy oy boservatkbh out tley fah oe




Cburtl Quarter 14

aisk1047297ed) Te pbpuiar fbhfept b tle Oiafg Vwah ks ah exanpie b tle Caisk1047297fatkbh fbhstruft Te kdea tlat aiiswahs are wlkte fahhbt oe vaikdated oy tle boservatkbh b wlkte swahs (hb natter lbw nahy wlkte swahs bheboserves) out kt fah oe aisk1047297ed oy tle boservatkbh b a skhme oiafg swah Zbpper‛s tlebrkes were rbbted kh tlekdeas b Lunah Caiikokikty (tle kdea tlat tlkhgkhm partkfkpahts‛ ghbwiedme b ahy sktuatkbh ks aiways partkai ahddkstbrted oy tlekr okases ahd nksfbhfeptkbhs) ahd Fbnpiexkty Tebry (tle kdea tlat tle wbrid ks nbre fbnpiextlah bur fapafkty tb uhderstahd kt) wlkfl uitknateiy ied tb tle fbhfept b _e1047311exkvkty (tlat partkfkpahts partkaiokased br aise vkews ied tb khapprbprkate aftkbhs tlat knpafted tle aftuai systen kh wlkfl tle partkfkpahts arekhteraftkhm) b Zbpper Lunah Uhfertakhty arbse rbn twb hbtkbhs0 1) tlat kt was knpbsskoie tb ghbw wlatbtlers ghbw br dbh‛t ghbw ahd ) tlat btler partkfkpahts nay lave dkereht khterests br vaiues reiatkhm tb tlesysten kh wlkfl ybu are ehmamed Vbrbs fbhfiuded tlat lks hewiy buhd fbre plkibsbplkfai tehets fbhtradkfted tlekdeai b pereft ghbwiedme exkstkhm kh nargets br efbhbnkfs ahd oemah tb deveibp lks bwh plkibsbply oased bh tlekdea b knpereft uhderstahdkhm Vbrbs fane tb enorafe tle kdea tlat tlere ks a twb-way khteraftkbh oetweeh tleFbmhktkve (lbw we uhderstahd tle ehvkrbhneht kh wlkfl we khteraft lbw reaikty deternkhes bur vkew) ahd tleNahkpuiatkve (lbw we flahme tle ehvkrbhneht kh wlkfl we khteraft lbw bur khtehtkbhs knpaft tle wbrid) Khessehfe le pbstuiated tlat tle aftkbhs we tage are kh1047311uehfed oy lbw we perfekve tle ehvkrbhneht (wlkfl oyde1047297hktkbh wkii oe sgewed oy bur okases br iafg b fbnpiete khbrnatkbh le faiied tlese ertkie aiiafkes) ahd tlbsekhapprbprkate aftkbhs kh turh knpafted tle ehvkrbhneht wlkfl wbuid tleh flahme bur suosequeht vkew (kh ahehdiess eedoafg ibbp) Te hbtkbh b evbiutkbh wbuid iead tb fbhtkhubus sei-rekhbrfkhm fyfies (obtl vkrtubusahd vkfkbus) tlat le reasbhed fbuid expiakh tle obbnoust fyfies boserved kh 1047297hahfkai nargets

Te prkhfkpie b _e1047311exkvkty ks oased bh tle fbhstruft tlat nargets tehd tbward dksequkikorkun ratler tlahequkikorkun oefause tle aftkbhs b tle partkfkpahts are exammerated oy tlekr okases br nksfbhfeptkbhs aobut tlenarget ktsei ahd tlekr suosequeht aftkbhs tleh flahme tle vaiuatkbh b tlbse nargets wlkfl urtler rekhbrfestlbse okases kh a sei-rekhbrfkhm eedoafg ibbp Vbrbs dbes hbt nkhfe wbrds wleh le says tle fbhfept b a

meherai equkikorkun las hb reievahfe tb tle reai wbrid (kh btler w brds fiasskfai efbhbnkfs ks ah exerfkse kh

utkikty)bdquo As tle pkfture aobve sunnarkzes _e1047311exkvkty Tebry (_) ks uhdanehtaiiy dkereht rbn fiasskfaiEqukikorkun Tebry (E) bh 1047297ve prknary ieveis0 1) E nages tle assunptkbh tlat narget partkfkpahts lavekhstahtahebus affess tb pereft khbrnatkbh wlkie _ says tlat narget partkfkpahts aft bh knpereft khbrnatkbh) E assunes tlat nargets are fbnpbsed b ratkbhai aftbrs wlkie _ afghbwiedmes tlat narget partkfkpahts arekh1047311uehfed oy tlekr bwh okases ahd nksfbhfeptkbhs 6) E reikes bh tle fbhstruft tlat nargets nbve qukfgiy ahdestfkehtiy tbward a state b equkikorkun wlkie _ says tlat nargets are dbnkhated oy states b dksequkikorkunresuitkhm rbn eedoafg ibbps tlat iead tb vkrtubus (obbn) ahd vkfkbus (oust) fyfies 4) E says tlat nargettlebrksts ahd boservers are exterhai tb tle systen wlkie _ says tlat aii nenoers b tle systen are part b tlenarget boserved ahd 5) E assunes tlat tle tlebrkes bh tle nargets db hbt kh1047311uehfe br flahme tle nargetswlkie _ oeikeves tlat narget tlebrkes are a dkreft neahs b flahmkhm tle systens desfrkoed Vbrbs wbuid fieariy

hbt lave oeeh a ah b tle efbhbnkf tlebry K was suoèfted tb at tle Uhkverskty b Flkfamb (tle fehter b tleEstfkeht Nargets Lypbtlesks (ENL) uhkverse) ahd wbuid armue tlat kvbry tbwer efbhbnkf tlebry repiete wktlsknpikykhm assunptkbhs aobut ratkbhai expeftatkbhs ahd pereft khbrnatkbh are a waste b tkne br khvestbrs wlbnust earh tlekr ikvkhm kh tle reai wbrid Le wbuid armue tlat nargets are lkmliy KH-estfkeht spehdkhm tle ouig btle tkne kh varykhm states b dksequkikorkun resuitkhm kh nahy bppbrtuhktkes br khvestbrs tb earh exfess returhsMkveh lks trafg refbrd b meheratkhm exfess returhs kt ks lard tb reute lks ibmkf Kh re1047311eftkhm bh tlks pbkht bhelypbtlesks fbuid oe tlat tle fbre plkibsbply ah khvestbr adbpts fbuid (kh a _e1047311exkve nahher) aftuaiiy khfrease tleikgeiklbbd tlat tley aflkeve exfess returhs bver tkne Vknkiar tb lbw ah butstahdkhm mbier khfreases tle bdds blkttkhm fbhskstehtiy mbbd drkves oy vksuaikzkhm lkttkhm dbwh tle nkddie b tle akrway kh advahfe wlkie tle duerfbhskstehtiy sikfes khtb tle wbbds oy wbrrykhm aobut sikfkhm khtb tle wbbds as tley address tle oaii K we oeikeve




Cburtl Quarter 14

tlat we wkii earh exfess returhs oy uhderstahdkhm tle fyfikfai hature b nargets ahd tlekr re1047311exkve respbhse tbpartkfkpahts‛ fbiieftkve aftkbhs perlaps we fah expibkt tlbse bppbrtuhktkes nbre eeftkveiy ratler tlah oeexpibkted oy tlen

]leh blh Ouroahg rbn Zasspbrt Fapktai spbge at bur kFKB eveht tle tktie b lks speefl was rsquoZrkfe ks a Ikarbdquo afbhfept tlat Vbrbs expbuhds upbh wleh le says rsquotle meheraiiy affepted vkew ks tlat n argets are aiways rkmlt

tlat ks narget prkfes tehd tb dksfbuht uture deveibpnehts affurateiy eveh wleh kt ks uhfiear wlat tlbse

deveibpnehts are K start wktl tle b ppbskte vkew K oeikeve tle narget prkfes are aiways wrbhm kh tle sehse

tlat tley preseht a okased vkew b tle uturebdquo Te fbhstruft lere ks tlat kh a _e1047311exkve wbrid wlere nargetstehd hbt tbward equkikorkun out tbward dksequkikorkun tle furreht prkfe b a sefurkty ks hbt a re1047311eftkbh b rsquoakr vaiuebdquo as tle Estfkeht Nargets Lypbtlesks wbuid lave us oeikeve out ratler a tenpbrary rsquouhakr vaiuebdquo drkveh oytle vkrtubus br vkfkbus fyfies freated oy narget partkfkpahts‛ nksperfeptkbhs ahd tle resuitkhm fbiieftkvekhapprbprkate aftkbhs tlat fbne rbn partkfkpahts aftkhm bh tlbse nksperfeptkbhs A pereft exanpie b tlksplehbnehbh fbuid oe seeh at tle peag b tle equkty narget kh Narfl b wleh khvestbrs lad a fbiieftkvenksperfeptkbh b tle vaiue b teflhbibmy fbnpahkes ikge Nkfrbsbc ahd Fksfb (ahd nahy btler eveh nbre butra-mebusiy vaiued hanes) ahd khvestbrs were wkiikhm tb pay a prkfe br FVFB slares tlat kh tle ENL wbrid werefbnpieteiy ibmkfai ahd re1047311efted tle dksfbuhted uture vaiue b uture earhkhms br Fksfb Te ]aii Vtreet burhai rah a leadikhe stbry saykhm Fksfb wbuid oe tle 1047297rst $1 trkiikbh narget fap fbnpahy (a eat tlat stkii las hbt oeehaflkeved aitlbuml Appie ks mettkhm fibser at $36 okiikbh tbday) ahd ùokiaht khvestbrs were lappy tb pay $lt3 brevery $1 b earhkhms tlat Fksfb meherated kh 1 ust br sbne perspeftkve bh wly prkfe ks fieariy a ikar kt wbuidtage Vbrbs heariy 5 years tb fbnpbuhd $1 khtb $lt3 Ouet wbuid heed years ahd k we lad tb wakt br tleaverame returh kh tle VampZ 5 kt wbuid tage ainbst 3 years Vbrbs was rkmlt (as usuai) ahd tle FVFB nargetprkfe was wrbhm tle tefl ouooie frasled khvestbrs ikge Quahtun fieahed up oekhm slbrt tlbse fbnpahkes ahd

tbday 15 years iater FVFB stbfg ks stkii dbwh (35) rbn tlat peag vaiuatkbh Fksfb‛s narget fap ks bhiy $16okiikbh (dbwh rbn tle peag b $555 okiikbh) ahd kt ks lkmliy uhikgeiy tlat wkii ever lkt $1 trkiikbh as Lauwek khFlkha las a dkereht piah bh wlkfl miboai fbnpahy wkii dbnkhate tle hetwbrg equkpneht spafe kh tle uture bslbw _e1047311exkvkty kh aftkbh hbt bhe b tle 6= ]aii Vtreet Ahaiysts at tle tkne lad Fksfb rated ahytlkhm ibwer tlah arsquoOuybdquo br rsquoVtrbhm Ouybdquo (hbt a rsquoLbidbdquo br rsquoVeiibdquo ahywlere tb oe seeh) at tle prefkse peag kh tle stbfg a stbfg tlatwbuid tleh essehtkaiiy defikhe heariy kh a strakmlt ikhe br tle hext defade ahd a lai

Vbrbs speags spefk1047297faiiy aobut tle flaiiehme b nksperfeptkbhs wleh le says oekhm aware b _e1047311exkvkty

mehukheiy K an bceh bverwleined oy tle uhfertakhtkes K n fbhstahtiy bh watfl oekhm aware b ny bwh

nksfbhfeptkbhs oekhm aware tlat K n aftkhm bh nksfbhfeptkbhs ahd fbhstahtiy ibbgkhm tb fbrreft tlen

Nksfbhfeptkbhs piay a prbnkheht rbie kh ny vkew b tle wbrid

Te reaikty ks tlat we wkii hever lave fbnpietekhbrnatkbh (fbhtrary tb fbhvehtkbhai Equkikorkun Tebry)7 kh aft kt ks lkmliy uhikgeiy tlat we wkii eveh lave alkml ievei b mbbd khbrnatkbh at tle nbneht we are afed wktl tle na`brkty b defkskbhs we nust nage ]e arefbhtkhuaiiy surrbuhded oy uhfertakhty ahd bur orakh aftuaiiy wbrgs amakhst us kh tlks remard (ùst tb nage tlkhmseveh nbre flaiiehmkhm) Bur orakhs are fbhstahtiy obnoarded wktl luhdreds b knpuises ahd pkefes bkhbrnatkbh tb prbfess7 lbwever tle plyskbibmy bhiy aiibws br tle prbfesskhm b seveh br ekmlt knpuises sb burorakh aftuaiiy khfreases bur dkstbrtkbhnksfbhfeptkbh oy exfiudkhm tle ouig b tle avakiaoie khbrnatkbh ahdseieftkveiy lkmlikmltkhm ahd prbfesskhm tle nbst affesskoie nbst ankikar br nbst (tle wbrst) fibseiy aikmhed wktlbur furreht oeikes Te iast part ks sb dahmerbus oefause tle way we slbuid freate a oeike ks oy matlerkhm aiiavakiaoie khbrnatkbh exankhkhm kt ahd tleh defkdkhm Uhbrtuhateiy tle lunah orakh dbes exaftiy tle bppbsktekt brns tle oeike ahd tleh exfiudes ahy khbrnatkbh tlat fbhtradkfts tlat oeike uhiess we aftkveiy bverrkde ahd




Cburtl Quarter 14

brfe tle evaiuatkbh b aiterhatkve vkews ahd kdeas (expiakhs tle prepbhderahfe b extrene vkews bh pbiktkfsreikmkbh ahd nahy btler areas) ]ktlbut tagkhm tle aftkve apprbafl tb hbt bhiy afghbwiedme out tb prbaftkveiyuhderstahd ahd evaiuate ybur nksfbhfeptkbhs as Vbrbs desfrkoes aobve kt ks lkmliy uhikgeiy tlat ybu wkii oreagree b tle fyfikfai oelavkbr b tle lerd (wlkfl fah oe extreneiy larnui tb ybur resuits as ah khvestbr)

Vb as lunah oekhms fbhtkhuaiiy aft bh tlekr nksfbhfeptkbhs _e1047311exkvkty says tlat tlbse aftkbhs tleh oemkh tbdkstbrt tle 1047297hahfkai nargets tlenseives wlkfl tleh fah aftuaiiy knpaft tle aftuai uhdanehtais b tle nargetstlenseives Vbrbs says K fbhtehd tlat 1047297hahfkai nargets hever re1047311eft tle uhderiykhm reaikty affurateiy7 tley

aiways dkstbrt k t kh sbne way br ahbtler ahd tle dkstbrtkbhs 1047297hd expresskbh kh narget prkfes Tbse

dkstbrtkbhs fah bffaskbhaiiy 1047297hd ways tb a eft tle uhdanehtais tlat narget prkfes are suppbsed tb

re1047311eft Amakh we fah ibbg tb tle teflhbibmy ouooies ( ahd amakh kh 14) tb see lbw tlks re1047311exkve patterhwbrgs As tle prkfes b stbfgs kh tle teflhbibmy seftbr ruh up khvestbr perfeptkbhs b tle pbtehtkai knpaft btlbse teflhbibmkes (ahd fbnpahkes) oemkhs tb mrbw kh ah expbhehtkai aslkbh As tle nahka spreads nbre nbheyks attrafted tb tle khdustry ahd tle prkfe b stbfgs rkses at a rkskhm rate Te ever lkmler vaiuatkbhs b tle fbnpahkesaiibws tlen tb db tlkhms tlat aftuaiiy knpaft tlekr uhdanehtais sufl as afqukrkhm fbnpetktbrs (redufkhm fbnpetk-tkbh ahd khfreaskhm prkfkhm pbwer) br kssukhm nbre equkty br deot fapktai (expahdkhm tle resburfes b tle nbstpbwerui 1047297rns tb mrbw freate hew prbdufts ahd servkfes ahd khfrease fbnpetktkve pbsktkbh) Obtl b tleseaftkvktkes aftuaiiy iead khvestbrs tb pay ah eveh lkmler vaiuatkbh br tlbse rsquowkhhersbdquo as tle narget partkfkpahts‛perfeptkbh b tle fbnpahkes rkses kh a vkrtubus fyfie (ehaoied oy prefkseiy tlbse lkmler vaiuatkbhs)

Vbrbs las desfrkoed lbw tlks vkrtubus fyfie fah iead tb narget ouooies drkveh oy _e1047311exkvkty0 stbfg narget

ouooies dbht mrbw but b tlkh akr T ey lave a sbikd oasks kh reaikty out reaikty as dkstbrted oy a n ksfbhfep-

tkbh Every ouooie fbhsksts b a trehd tlat fah oe boserved kh tle reai wbrid ahd a nksfbhfeptkbh reiatkhm

tb tlat trehd T e twb eienehts khteraft wktl eafl btler kh a re1047311exkve nahher Vb iet‛s mb oafg tb bur teflouooie exanpie Tere ks hb deoatkhm tle reaikty tlat tle teflhbibmy obbn tlat surmed kh tle iate 1s wlehnahy b tle mreat rahflkse fbnpahkes kh tle teflhbibmy khdustry ikge Nkfrbsbc Fksfb ahd [albb obbned ied tba nasskve surme kh prbduftkvkty khhbvatkbh ahd weaitl freatkbh Tese fbnpahkes were seiikhm ibts b lardwaresbcware ahd servkfes tb leip fbnpahkes nkmrate rbn tle FikehtVerver piatbrn ahd tle uture ibbged very orkmltbr tle trahsktkbh bhtb tlks hew hew Tkhm faiied tle Khterhet Te prboien was tlat tle reaikty b tle Khterhet waskhdeed orkmlt out khvestbrs‛ reaikty was dkstbrted oy tle nahka surrbuhdkhm tle furreht dbnkhahfe b tleseieadkhm fbnpahkes ahd tley were wkiikhm tb pay ahy prkfe (remardiess b uhdanehtai vaiues) tb rsquohbt nkss butbdquoKhvestbrs oeikeved tlat tlese fbnpahkes wbuid renakh dbnkhaht ahd tley lad a nksfbhfeptkbh tlat tle tkneiessruies b Fapktaiksn (lkml prb1047297ts attraft fbnpetktkbh) ahd Freatkve Destruftkbh (khhbvatkbh fbhtkhues ahd hewfbnpahkes surpass tle bid ieaders) hb ibhmer appiked Kt was ahbtler pereft exanpie b Vkr blh enpietbh‛s burnbst dahmerbus wbrds kh khvestkhm rsquoTks kne Kt‛s Dkerehtbdquo Kt hever ks dkereht ahd kt wash‛t kh (br amakhkh 14) as tle pbsktkve trehd eikfkted khvestbr oelavkbr tlat drbve tle narget tb ouooie ieveis as tle re1047311exkvekhteraftkbh b rkskhm prkfes ahd khvestbr ehtluskasn freated ah extrene vkrtubus fyfie (tle wbrst ouooie we laveever seeh kh UV equktkes wktl ZE ratkbs kh tle 4s) Kh aft at tle peag b tle ouooie tle narget fapktaikzatkbh btlbse tlree fbnpahkes was $16 trkiikbh ahd khstead b ruslkhm tb seii tlbse rkdkfuibus vaiuatkbhs slbrt tle bppbsktebffurred ahd a stuhhkhm anbuht b fapktai equkvaieht tb lt5 b aii tle nbhey ever khvested khtb teflhbibmybfused nutuai uhds up tb tlat pbkht 1047311bbded khtb tle narget kh tle 1047297rst bur nbhtls b ruslkhm tb ouy hbtseii tlese ouooikfkbus hanes As Zaui Larvey says ybu ghbw rsquotle rest b tle stbrybdquo0 tle nargets peaged ahdfrasled bver tle hext tlree years7 HAVDAQ eii fibse tb (lt) ahd bver $5 trkiikbh b weaitl was vapbrkzedbday tle fbiieftkve narget fap b NVC FVFB ahd [LBB ks $555 okiikbh ah anazkhm (3) defikhe bver 1047297ceeh




Cburtl Quarter 14

years

]e lave wrktteh kh prevkbus ietters aobut Flaries Gkhderoermer‛s seveh-year fyfie b obbns ahd ousts tlat biibwtle ouskhessefbhbnkf fyfie wlkfl resuits rbn tle khterpiay oetweeh rsquoKhskdersbdquo (tlbse wktl tle mreatestghbwiedme b fbnpahkes ikge bwhers nahameneht ahd prbesskbhai khvestbrs) ahd tle rsquoNassesbdquo (tlbse wktl tleieast ghbwiedme aobut fbnpahkes ikge retaki khvestbrs ahd ruies oased uhds) Te Khskders seii assets tb tle Nassesat tle tbp b nargets at peag prkfes ahd tle Nasses seii tlbse sane assets (at a nufl ibwer prkfe) tb tle Khskders attle obttbn b tle narget ]e saw tlks fyfie piay but bver tle seveh years rbn tb = wlere we ruh khtb tlehext exanpie b _e1047311exkvkty wrkt iarme Bhe b tle nbst dkreft re1047311eftkbhs b _e1047311exkvkty kh tle nargets tlat Vbrbsbuhd kh lks wbrg was tle reiatkbhslkp oetweeh fredkt ahd fbiiaterai Le sakd rsquoK nade tw b na`br dksfbverkes kh

tle fburse b wrktkhm0 bhe ks a re1047311exkve fbhheftkbh oetweeh fredkt ahd fbiiaterai tle aft b iehdkhm fah

flahme tle vaiue b tle fbiiaterai tle btler ks a re1047311exkve reiatkbhslkp oetweeh remuiatbrs ahd tle efbhbnkes

tley remuiatebdquo Te lbuskhm ouooie tlat was freated kh tle UV kh tle nkd-s was a fase study kh lbw tleexpahskbh b fredkt (Dr Mreehspah ehfburamkhm everybhe tb met okmmer nbrtmames) fah re1047311exkveiy flahme tle vaiuetb tle fbiiaterai oekhm ieht amakhst Lbuskhm prkfes surmed ever lkmler as mreater fredkt avakiaokikty khfreased tledenahd br lbnes oy orkhmkhm a mreater hunoer b ouyers khtb tle narget Bhiy iater dkd kt dawh bh khvestbrstlat tle khfrenehtai ouyers were faiied rsquoVuo-Zrknebdquo br a reasbh ahd tley were hbt as ikgeiy tb repay tlbse ibahs astle Zrkne obrrbwers lad oeeh lkstbrkfaiiy Bhfe amakh tle partkfkpahts kh tle narget lad tlekr reaikty (prkfesslbuid rkse as denahd surmes) aitered oy a nksfbhfeptkbh tlat aii lbneouyers were b equai quaikty ahd duraokikty

Vbrbs mbes bh tb say tlat nbhey vaiues db hbt sknpiy nkrrbr tle state b a akrs kh tle reai wbrid7 vaiuatkbh ks

a pbsktkve aft tlat nages ah knpaft b h tle fburse b evehts Nbhetary ahd reai plehbn eha are fbhhefted kh

a re1047311exkve aslkbh7 tlat ks tley kh1047311uehfe eafl btler nutuaiiy Te re1047311exkve reiatkbhslkp nahkests k tsei

nbst fieariy kh tle use ahd aouse b fredkt Kt ks fredkt tlat natters hbt nbhey (kh btler wbrds nbhetarksn

ks a aise kdebibmy)bdquo As tle vaiuatkbh b lbnes fbhtkhued tb rkse tlere was a re1047311exkve respbhse oy obrrbwers tbreafl br iarmer lbnes (prkfes fbuid bhiy mb up sb nbre bppbrtuhkty tb nage lume prb1047297ts) wlkfl urtlerkhfreased tle denahd br fredkt As oahgs fbuid hb ibhmer retakh tlat nufl rksg bh tlekr oaiahfe sleets tleybuhd ways tb sefurktkze tle ibahs ahd dkstrkoute tle rksg tb btler narget partkfkpahts Tks prbvkskbh b hewsefurktkes freated ahbtler re1047311exkve respbhse kh tle freatkbh b ieveramed pbbis b tlese rsquosaebdquo sefurktkes (br sb tlenbdeis sakd tley were sae) ahd tlat aiibwed tle oahgs tb urtler expahd tlekr iehdkhm aftkvktkes Teh tle sefbhdpart b tle Vbrbs dksfbvery fane khtb piay as tle _emuiatbrs re1047311exkveiy reiaxed tle ruies br tle freatkbh dkstrkou-tkbh ahd vaiuatkbh b tlese sefurktkes ieadkhm tb khfreased denahd ahd tle vkrtubus fyfie was set khtb bverdrkveOahgs fbuid lbid uhiknkted anbuhts b tlese sefurktkes kh tle aosehfe b narg-tb-narget rksg ahd ahbtler Vbrbsqubte appikes lere tlat rsquowlehever tlere ks a fbh1047311kft oetweeh uhkversai prkhfkpies ahd sei-khterest sei-

khterest ks ikgeiy tb prevaki Te uhkversai prkhfkpie tlat tlere slbuid oe a reiatkbhslkp oetweeh rksg b ibss ahdprbvkskbh b hew ibahs was bverrkddeh oy tle sei-khterest b brkmkhatkhm as nahy ibahs as pbsskoie tb meherate lkmlees ghbwkhm tlat tle rksg fbuid oe sbid tb btler khvestbrs tlrbuml sefurktkzatkbh (freatkhm nbre ees ahd nbre sei -khterest) Kh tle nad sfranoie br ibah freatkbh durkhm tle 1047297hai plase b tle Lbuskhm Ouooie tle mbverhnehtfreated ah ehvkrbhneht b essehtkaiiy ree nbhey oy aiibwkhm tle okm amehfkes Cahhke Nae ahd Creddke Naf (brZlbhy ahd Craudke as K bceh aeftkbhateiy reer tb tlen) tb sefurktkze ibahs tb tle obttbn b tle oarrei rksgs wktlfrazy terns ikge hb nbhey dbwh ahd khfredkoiy ibw rsquoteaserbdquo khterest rates Vbrbs las a fbnneht tlat appikes lereas weii wleh khterest rates are ibw we lave fbhdktkbhs br asset ouooies tb deveibp ]leh nbhey ks ree

tle ratkbhai iehder wkii geep bh iehdkhm uhtk i tlere ks hb bh e eise tb iehd tb Tat ks exaftiy wlat lappehedtle iehders exlausted tle pbbi b obrrbwers tle re1047311exkve knpaft b rkskhm denahd puslkhm prkfes lkmler oemah tb




Cburtl Quarter 14

wahe ahd tle vkrtubus fyfie turhed dranatkfaiiy (as tley aiways db evehtuaiiy) khtb a vkfkbus fyfie tlat trkmmeredtle Miboai Ckhahfkai Frksks ahd tlbse sane oahgs tlat nade aii tle kii-advksed ibahs were frusled oy nasskve ibssesreiated tb tle re1047311exkve expahskbh b fredkt Teh yet amakh wlat were Nr Gkhdieoermer‛s rsquoNassesbdquo dbkhm at tlepeag2 ]ly b fburse tley were ibadkhm up bh khdex uhds tlat were ibadkhm up bh wlat lad ruh tle nbst (khfiasskf re1047311exkve aslkbh) tle oahgs ahd 1047297hahfkais sb wleh Fktk ahd ObA eii (5) ahd Zlbhy ahd Craudke eii() khvestbrs iearhed yet amakh tlat prkfe ks a ikar

_e1047311exkvkty ks rbbted kh uhfertakhty ahd kt ks tlat uhfertakhty wlkfl ieads tb tle dranatkf nksfbhfeptkbhs b nargetpartkfkpahts wlb pusl nargets tb extrenes resuitkhm kh tle obbns ahd ousts we lave aii experkehfed bver tleyears Vbrbs las ah knpbrtaht oeike reiated tb tlks fbhstruft tlat tle 1047297hahfkai nargets meheraiiy are

uhpredkftaoie Vb tlat bhe las tb lave dk ereht sfeharkbs Te kdea tlat ybu fah aftuaiiy predkft wlats

mbkhm tb lappeh fbhtradkfts ny way b ibbgkhm at tle narget Tey say rksg de1047297hed nbre tlkhms tlat FAHlappeh tlah ]KII lappeh ahd le fbhtehded tlat tle kdea tlat ahybhe fbuid fbhskstehtiy pkfg but wlkfl b tlenyrkad butfbnes ks ikgeiy kh tle 1047297hahfkai nargets bver tkne was biiy Despkte tle flaiiehme b dkvkhkhm tle uturelks khvestneht stratemy was hbt tb db hbtlkhm (br ear b oekhm wrbhm) Bh tle fbhtrary le wbuid afghbwiedmetle uhfertakhty as weii as lks bwh okases ahd nksfbhfeptkbhs ahd obidiy nage defkskbhs ahd khvestnehts Lestates very fieariy ybu lave mbt tb nage defkskbhs eveh tlbuml ybu ghbw ybu nay oe wrbhm [bu faht

avbkd oekhm wrbhm out oy oekhm aware b tle uhfertakhtkes ybure nbre ikgeiy tb fbrreft ybur nkstages tlah

tle tradktkbhai khvestbr Le tleh mbes bh tb expiakh wly kt ks sb lard br nbst khvestbrs tb adnkt wleh tley arewrbhm tb affept tlat tley lave nade ah errbr ahd tb fbrreft tle errbr oebre kt mrbws khtb a nbre fbstiy nkstageK lave oeeh brtuhate tb khteraft wktl nahy b tle very oest khvestbrs kh tle wbrid tb taig aobut tlekr khvestnehtstratemkes ahd aii b tlen taig aobut tle aokikty tb iknkt tle ibsses wleh ybu nage a nkstage Vbrbs as aiwaystlkhgs aobut tle fbhfept wktl a plkibsbplkfai perspeftkve bhfe we reaikze tlat knpereft uhderstahdkhm ks tle

lunah fbh dktkbh tlere ks hb slane kh oekhm wrbhm bh iy kh ak ikhm tb fbrreft bur nkstages

Nagkhm nkstages as ah khvestbr ks khevktaoie out akikhm tb fbrreft ybur nkstages ks khexfusaoie ahd fah kh tlewbrst fkrfunstahfes oe fatafiysnkf tb ybur weaitl Vbrbs las aisb stated very fieariy wly tlks fbhfept ks perlapstle nbst knpbrtaht fbhfept kh khvestkhm kh saykhm K n bhiy rkfl oefause K ghbw wleh K n wrbhm K oaskfaiiy

lave survkved oy refbmhkzkhm ny nkstages K very bceh used tb met oafgafles due tb tle aft tlat K was

wrbhm ]lehever ybu are wrbhm ybu lave tb 1047297mlt br tage 1047311kmlt ]leh K nade tle defkskbh tle oafgafle

weht away Oekhm wrbhm neahs ybu are ibskhm nbhey Ibskhm nbhey neahs ybu are erbdkhm tle pbwer bfbnpbuhdkhm ahd mkveh Mebrme‛s anazkhm ibhm-tern trafg refbrd b fbnpbuhdkhm le fieariy hever stayed khpakh very ibhm [bu fah‛t fbnpbuhd at 36 (br ahy perkbd iet aibhe 41 years) k ybu dbh‛t refbmhkze ybur nks-tages ahd tage swkc ahd defkskve aftkbh tb fbrreft ybur errbrs Zeter Iyhfl was anbus br saykhm tlat tle oest waytb nage nbhey was tb rsquoiet ybur 1047311bwers mrbw ahd puii ybur weedsbdquo (ahbtler way b saykhm 1047297x ybur nkstages) Teprboien ks tlat nbst khvestbrs db tle bppbskte tley puii tlekr 1047311bwers at tle 1047297rst skmh b nagkhm a prb1047297t ahd tleyiet tlekr weeds mrbw oefause tley are tbb prbud tb adnkt tley are wrbhm br tbb stuoobrh kh wahtkhm tb slbw tlewbrid tlat tley are rkmlt Bh tle 1047311kp skde Vtahiey Drufgehnkiier wlb wbrged br Vbrbs br nahy years las oeehqubted bceh kh desfrkokhm tle nbst vaiuaoie iessbhs le iearhed rbn lks nehtbr ahd sakd K‛ve iearhed nahytlkhms rbn lkn out perlaps tle nbst skmhk1047297faht ks tlat kt‛s hbt wletler ybu‛re rkmlt br wrbhm tlat‛s knpbrtahtout lbw nufl nbhey ybu nage wleh ybu‛re rkmlt ahd lbw nufl ybu ibse wleh ybu‛re wrbhm Te ew tknes tlatVbrbs las ever frktkfkzed ne was wleh K was reaiiy rkmlt bh a narget ahd dkdh‛t naxknkze tle bppbrtuhkty Vbrbslas taumlt ne tlat wleh ybu lave trenehdbus fbhvkftkbh bh a trade ybu lave tb mb br tle ùmuiar Kt tagesfburame tb oe a pkm Kt tages fburame tb rkde a prb1047297t wktl lume ieverame As ar as Vbrbs ks fbhferhed wleh ybu‛re




Cburtl Quarter 14

rkmlt bh sbnetlkhm ybu fah‛t bwh ehbuml K ibve sb nufl aobut tlks qubte oefause kt ehfapsuiates sb nuflkhvestneht wksdbn ahd slbuid oe a nahtra br ahy khvestbr strkvkhm tb aflkeve ibhm-tern suffess Khvestkhm ks hbtaobut emb7 kt ks hbt aobut oekhm rkmlt7 kt ks aobut nagkhm nbhey Mreat khvestbrs dbh‛t fare aobut oekhm wrbhm --tley fbrreft nkstages ahd nbve bh tley bfus bh tle hext piay hbt tle iast piay Out nbst knpbrtahtiy mreatkhvestbrs ghbw wleh tley lave ah edme ahd tley are hbt arakd tb pusl tlekr pbsktkbh Te dkerehfe oetweeh pbbrkhvestbrs ahd mreat khvestbrs ks rsquoIbsers Averame Ibsersbdquo ahd rsquo]khhers Zress ]khhersbdquo K lave wrktteh aobut tlksoebre out every kmer Fuo K lave ever taiged tb las sakd tle sane tlkhm aobut tle Okm Fat (uikah) rsquole lad ahuhfahhy ghafg tb dbuoie UZbdquo Ahbtler mreat qubte rbn Zeter NfKhtyre ks appikfaoie lere rsquofbh1047297dehfefbnes hbt rbn aiways oekhm rkmlt out rbn hbt earkhm tb oe wrbhmbdquo

Ahbtler uhkque aspeft b tle Mehkus b Mebrme ks tlat le was hbt a rsquoSaiue Muybdquo br a rsquoMrbwtl Muybdquo br ahrsquoAftkvkstbdquo br ahy btler iaoei kh aft le says qukte enplatkfaiiy rsquony p efuikarkty ks tlat K dbht lave a partkfuiar

styie b khvestkhm br nbre exaftiy K try tb flahme ny styie tb 1047297t tle fbhdktkbhsbdquo Kh tle true spkrkt b_e1047311exkvkty oekhm respbhskve tb tle ehvkrbhneht ahd tagkhm advahtame b trehds wleh tley are trehdkhm br fapktai-kzkhm bh dkstress wleh kt exksts las earhed Vbrbs a reputatkbh as sknpiy oekhm a mreat Khvestbr (wktl a fapktai K ahdhb nbdk1047297er) Mkveh tle fbhstaht flahme kh tle nargets tle aokikty tb flahme ybur apprbafl tb fapktaikze bh tlbsebppbrtuhktkes prbvkdes mreater upskde tlah khvestkhm aibhmskde tle nasses Vbrbs fbnnehted bh tlks wleh lesays nargets are fbhstahtiy kh a state b uhfertakhty ahd 1047311 ux ahd n bhey ks nade oy dksfbuhtkhm tle bovk-

bus ahd oettkhm bh tle uh expefted K ybu db wlat everybhe eise ks dbkhm kt ks uhikgeiy ybu wkii nage butskzedreturhs Nkflaei Vtekhlardt (ahbtler Laii b Cane khvestbr) taigs aobut tle fbhfept b Sarkaht Zerfeptkbh (a vkewtlat ks neahkhmuiiy dkereht rbn tle fbhsehsus) ahd wbuid amree wktl Vbrbs tlat aii lks okm prb1047297ts fane rbnkhvestkhm kh uhexpefted butfbnes tlat turhed but tb oe rkmlt Crbn seedkhm snaii nahamers kh Takiahd ahdsuperskzkhm tlekr oest kdeas tb mkvkhm a nahamer $5 nkiikbh acer tley lad ibst nbre tlah = durkhm tle _usskah

MGB Frksks kh 1lt (wleh aii tle rsquooiue flkpbdquo khvestbrs were redeenkhm yes Vbrbs dbuoied lks nbhey kh iess tlaha year) tb oreagkhm tle Oahg b Ehmiahd br a fbbi okiikbh dbiiar bver-hkmlt prb1047297t Vbrbs ks ah khvestneht flaneie-bh wlb las tlrkved bh oettkhm bh tle uhexpefted ahd wkhhkhm Flaneiebhs flahme tb oiehd khtb tlekr surrbuhd-khms tb survkve ahd Vbrbs las sakd k K lad tb sun up ny praftkfai sgkiis K wbuid use bhe w brd0 survkvai Ahd

bperatkhm a ledme uhd utk ikzed ny trakhkhm kh survkvai tb tle uiiestbdquo Vbrbs survkved a Hazk bffupatkbh bLuhmary ahd a nyrkad b ike strummies kh lks patl tb estaoiksl a uhkque khvestneht plkibsbply rbbted kh tleDarwkhkah kdeai b survkvai b tle 1047297ttest (adapt br dke) ahd tlat plkibsbply ahd stratemy las prbdufed bhe b tlewbrid‛s mreatest khvestneht trafg refbrds

Orkhmkhm tle fbhversatkbh oafg tb _e1047311exkvkty kt ks khterestkhm tb iksteh tb Vbrbs taig aobut sbne b tle plkibsbplyahd stratemy tley utkikzed at Quahtun ahd lbw tley wbuid expibkt tlekr uhderstahdkhm b tle re1047311exkve prbfess khnargets tb fapture khvestneht bppbrtuhktkes Kh desfrkokhm Vbrbs Cuhd Nahameneht le sakd we try tb fatfl

hew trehds eariy ahd kh iater stames we try tb fatfl trehd reversais Terebre we tehd tb staokikze ratler

tlah destaokikze tle narget ]e are hbt dbkhm tlks as a puoikf servkfe Kt ks bur styie b nagkhm nbhey

Khterestkhmiy lks fbnneht fbhtradkfts tle fbhvehtkbhai wksdbn tlat ledme uhds are a destaokikzkhm aftbr khnargets as _e1047311exkvkty Tebry slbws us tlat kt ks tle nargets tlat trehd tbward dksequkikorkun ahd tlatbrmahkzatkbhs ikge VCN aftuaiiy leip prbvkde staokikty Kt ks aisb khterestkhm tlat le states very fieariy tlat tle mbai kstb extraft efbhbnkf rehts (nage nbhey) oy fapktaikzkhm bh tle fbiieftkve errbrs b tle orbad narget partkfkpahtsbiibwkhm tle obbnoust fyfies fbhstahtiy ouykhm wlat tley wksl tley wbuid lave obumlt ahd seiikhm wlat tleyare aobut tb heed (ikge tlbse khvestbrs seiikhm ledme uhds tbday tb flase tle lbt returhs tlat khdex uhds aflkevedbver past 1047297ve years) Bhe b ny persbhai avbrkte Vbrbs qubtes ks tlat rsquokt dbes hbt biibw tlat bhe slbuid aiways




Cburtl Quarter 14

mb amakhst tle prevakikhm trehd Bh tle fbhtrary nbst b tle tkne tle trehd prevakis 7 bhiy bffaskbhaiiy are

tle errbrs fbrrefted Nbst b tle tkne we are p uhksled k we mb amakhst tle trehd Bhiy at ah kh1047311eftkbh pbkht

are we rewardedbdquo Vb bceh pebpie khfbrreftiy iaoei mreat khvestbrs as fbhtrarkahs br vuitures ahd tlkhg tleysknpiy iay kh wakt br sbne okm dksibfatkbh ahd pbuhfe out Vbrbs says tlat tle ouig b tle returhs fbne rbnpatkehtiy skttkhm (tle esse Ikvernbre wbrd amakh) ahd rkdkhm tle trehds tbward tle extrenes tlat are freated oy tlere1047311exkve prbfess kh tle nargets Nbst khvestbrs nkss tle na`brkty b tle makhs avakiaoie kh a trehd oefause tleydbuot tle perskstehfe b _e1047311exkvkty ahd tle reiatkve khrequehfy wktl wlkfl tle fbiieftkve errbrs are fbrrefted

Hbw prefkseiy oefause tle trehds wkii mb tb extrenes kt ks frktkfai tb oe bh tle ibbgbut br tle kh1047311eftkbh pbkhts ahdoe ready tb reverse ybur pbsktkbh Vbrbs desfrkoes kt tlks way rsquotlks ikhe b reasbhkhm ieads ne tb ibbg br tle

1047311aw kh every khvestneht tlesks K an alead b tle furve K watfl but br teiitaie skmhs tlat a trehd nay oe

exlausted Teh K dksehmame rbn tle lerd ahd ibbg br a dk ereht khvestneht tlesksbdquo Te fbhtkhuai rsquoDevki‛sAdvbfatebdquo apprbafl nakhtakhs a dksfkpikhe tb hbt aii kh ibve wktl ybur bwh kdea br ahaiysks ahd iet tle narget teiiybu wleh kt ks tkne tb nbdky ybur lypbtlesks Zerlaps kt was Vbrbs‛ trakhkhm kh plkibsbply ahd lks nehtbrslkpuhder Gari Zbpper tlat khmrakhed kh lkn a dksfkpikhe tb fbhtkhuaiiy test lks tleses ahd respeft tle lunahuhfertakhty tlat aiibws bhe tb oe emb-iess ahd nbve bhtb tle hext kdea Vbrbs desfrkoes bhe b tle ways kh wlkflybu nay oe aoie tb teii wleh a trehd ks exlausted as rsquoslbrt tern vbiatk ik ty ks mreatest at turhkhm pbkhts ahd

dknkhksles as a trehd oefbnes estaoiksled Oy tle tkne aii tle partkfkpahts lave adùsted tle ruies b tle

mane w kii flahme amakh Sbiatkikty ks meherated wleh khvestbrs wktlbut fbhvkftkbh fahhbt lbid tlekr pbsktkbh astle trehd oemkhs tb flahme Te eariy adbpters b a trehd are tle nbst ghbwiedmeaoie ahd lave tle mreatest tknelbrkzbh sb tley are aoie tb lbid tlrbuml tle hbrnai ups ahd dbwhs tlat bffur kh tle nargets As tle trehdnatures tle iatefbners wlb are sknpiy flaskhm tle past perbrnahfe lave ikttie fbhvkftkbh kh tle trehd ahd fahoe easkiy slageh but wleh tle brkmkhai khvestbrs oemkh tb tage prb1047297ts ahd nbve bh Tat lkml ievei b vbiatkikty ks

khdeed a teiitaie skmh b turhkhm pbkhts (obtl up ahd dbwh) kh tle khvestneht nargets Bhe b tle okmmest reasbhsbr tlat ks tlat tle ouig b tle khvestneht fapktai ks fbhtrbiied oy iarme khstktutkbhs ahd Vbrbs desfrkoes tle prboien very weii kh saykhm tle trbuoie wktl khstktutkbhai khvestbrs ks tlat tlekr perbrnahfe ks usuaiiy neasured

reiatkve tb tlekr peer mrbup ahd hbt oy ah aosbiute yardstkfg Tks nages tlen trehd biibwers oy

de1047297hktkbh Tat trehd biibwkhm oelavkbr exaferoates tle re1047311exkve prbfess ahd ieads tb lkmler lkmls ahd ibweribws resuitkhm kh ibwer bveraii returhs br tle averame khvestbr ahd khstktutkbhs as a mrbup out aisb ieads tb truiybutstahdkhm returhs br khvestbrs ikge Vbrbs wlb uhderstahd _e1047311exkvkty ahd lave tle dksfkpikhe tb tage tle btlerskde b tlese slbrt-tern khvestbrs‛ nbvenehts

Te 1047297hai iessbh rbn Vbrbs ks qukte sknkiar tb tle iessbh we wrbte aobut a fbupie quarters amb khHbtDkerehtTkskne bh tle wksdbn b Vkr blh enpietbh wlb sakd tlat khvestbrs wbuid aiways asg lkn wlereks tle oest piafe tb khvest ahd le wbuid respbhd tb tlen tlat tlks was exaftiy tle wrbhm questkbh ahd tlat tleyslbuid ratler oe asgkhm wlere ks kt tle nbst nkseraoie2 Khvestkhm wlere tlkhms are mbbd ahd fbnbrtaoie wkiifbhskstehtiy ykeid nedkbfre returhs7 hbt oad returhs ùst hbt mreat returhs K lave bceh sakd tlat k ybu nage khkhvestneht ahd ybu eei BG ybu wkii nage BG returhs k ybu eei mbbd ybu wkii ikgeiy ibse nbhey ahd k ybu eit aikttie queasy ybu wkii ikgeiy nage nbhey Vbrbs says kt a ikttie okt dkerehtiy kh tlat tle wbrse a sktuatkbh

oefbnes tle iess k t tages tb turh kt arbuhd ahd tle okmmer tle upskde Lks vkew ks pereftiy aikmhed wktl Vkrblh br wktl Arùh Dkvefla at MNB wlb says rsquoybu nage tle nbst nbhey wleh tlkhms mb rbn truiy awui tbnereiy oadbdquo Vbrbs‛ pbkht ks tlat bhfe tlkhms met reaiiy oad ahd tle re1047311exkve prbfess las drkveh tle trehd tb tleextrene tle sikmltest flahme kh perfeptkbh fah turh tle tkde ahd tle okmmer tle nbve wkii oe bh tle btler skdeMebrme dbes add a fbupie quaik1047297ers lere kh saykhm tlat uhbrtuhateiy tle nbre fbnpiex tle systen tle



Q 4 1 4 N a r g e t _ e v ke w amp B u t i b bg 1

Cburtl Quarter 14

mreater tle rbbn br errbr Te lardest tlkhm tb ùdme ks wlat ievei b rksg ks sae Te nargets are lumefbnpiex adaptkve systens (tlat tehd tbward extrenes b dksequkikorkun tlahgs tb _e1047311exkvkty) ahd tle fbnpiexktylas oeeh rkskhm at ah ever-khfreaskhm pafe wktl miboaikzatkbh 1047297hahfkaikzatkbh sefurktkzatkbh Fehtrai Oahgkhtervehtkbh ahd tle khfrease kh speed b everytlkhm rbn khbrnatkbh dkssenkhatkbh tb tradkhm Lkmlerfbnpiexkty neahs mreater rksg b errbrs ahd lkmler fbsts br tlbse errbrs sb tle nbst flaiiehmkhm tlkhm tbdeternkhe affbrdkhm tb Vbrbs ks wlat ievei b rksg ks apprbprkate br khvestbrs tb tage ]lat tlese 1047297hai tlbumltsseen tb say qukte ibudiy ks tlat kh ah khfreaskhmiy fbnpiex khvestneht wbrid rksg nahameneht ahd nktkmatkbh areparanbuht tlat tle aokikty tb adnkt wleh ybu are wrbhm bh a pbsktkbh ahd exkt wktl a snaii ibss ks frktkfai tlat tlehefesskty tb nakhtakh bfus kh areas b strehmtl ahd expertkse ahd hbt stray khtb uhankikar terrktbry ks frufkai ahdtlat uhderstahdkhm lbw tle fbhstruft b _e1047311exkvkty fah leip us strufture pbsktkbhs nbre eeftkveiy tb fapktaikze bhkhvestneht trehds ahd tage advahtame b narget dksibfatkbhs ]e oeikeve tlat leedkhm tle iessbhs lkmlikmltedaobve fah leip aii b us spehd nbre tkne eh`bykhm tle rsquovkrtubusbdquo ahd iess tkne oekhm puhksled oy tle rsquovkfkbusbdquo



Q 4 1 4 N a r g e t _ e v k e w amp B u t i bb g 1

Cburtl Quarter 14

Cburtl Quarter _evkew

Kh tle Tkrd Quarter _evkew we qubted a ikhe rbntle Vefbhd Quarter _evkew tlat taiged aobut ahenermkhm fyfikfai plehbnehbh tlat lad deveibped khUV equkty nargets ahd sakd rsquotlere las oeeh a verykhterestkhm patterh kh eafl b tle past bur quarterstlat equkty nargets aii br tle 1047297rst twb tb bur weegsb tle perkbd ahd tleh turh slarpiy upwards wleh tleFehtrai Dbftbrs (Oahgers) amree tb prbvkde ahbtlerlkt b Nbhetary Nbrplkhebdquo Q6 nade tle patterh 1047297vekh a rbw ahd as Q4 started equktkes buhd tlenseivesamakh kh a akriy steep (weii steep oy QE _emknestahdards) defikhe tlat tle nyrkad rsquobp Faiiersbdquo weretrkunplahtiy ahhbuhfkhm was trkmmered oy tle KZB bAikoaoa kh nkd-Veptenoer (faiikhm tle lume denahdbr OAOA slares ah bovkbus skmh b spefuiatkveexfess) Te hext ew weegs were khdeed umiy brequkty khvestbrs as tle VampZ 5 piuhmed rbn 11 bh1lt tb 1lt3 bh 115 (a swkc (=4) drbp) ahd tle1047297rst twb weegs b tle quarter were dbwh yet amakh(53) ahd kh heed b ahbtler slbt b stknuiahtsUhbrtuhateiy Dbftbr Oerhahge was seenkhmiy bh

vafatkbh sb lbspktai adnkhkstratkbh seht kh tleplyskfkah‛s asskstaht Dbftbr Ouiiard tb try ahd faintle patkeht ]ktl hb aftuai syrkhme kh lahd Dr O uststarted taigkhm aobut lbw tlere was piehty bnbhetary nbrplkhe iec kh tle stbre rbbn ahd tlat lewas sure tlat Dr [eiieh wbuid oe qukfg tb khèft ahyahd aii fbners hext year k fbhdktkbhs lad hbtknprbved as sbbh as sle was mkveh ler wlkte fbatTe piafeob eeft tbbg bver knnedkateiy (aitlbumlusuaiiy tle patkeht aftuaiiy las tb khmest tle aftuaipiafeob br eeft tb wbrghellip) ahd nargets rkppedlkmler br tle oaiahfe b tle quarter (as tley are

suppbsed tb db kh year tlree b tle Zreskdehtkai Fyfiewlere tle averame Q4 returh ks lt) ahd tle patterhwas fbnpieted br tle skxtl tkne Tks surme wassknkiar tb sbnetlkhm we dksfussed iast quarter tlattlere was rsquoahbtler statkstkf tlat ks khterestkhm ks tlat khevery nkd-tern eieftkbh year skhfe ]] KK tle equktynarget returh rbn tle iast weeg b Bftboer tlrbumlyear-ehd las oeeh pbsktkve ahd urtler las averamedheariy bdquo Te nbve kh 14 started a weeg eariy

out rbn tle turh bh 113 equkty nargets were up13

]e were wrktkhm tle Q6 ietter rkmlt kh tle nkdst btlks turharbuhd ahd renkhded readers b wlat wewrbte kh ahuary tlat rsquolkstbrkfaiiy every $1 okiikbhb QE las trahsiated khtb 4 VampZ 5 pbkhts(faifuiated oy Iarry eddeibl at KV) ykeidkhm a year- ehd 14 vaiue br tle VampZ 5 b 5lt ($5 O b QEgt pbkhts bh tbp b startkhm ievei b 1lt4lt) wlkflturhs khtb ah 11 prkfe returh br tle khdex br tleyear Trbuml tle ehd b Q6 tle VampZ 5 was uplt6 aftuaiiy prefkseiy wlere kt slbuid oe k tlat 11returh was tle rkmlt hunoerbdquo ]e dksfussed lbw a5lt VampZ ievei iec a ikttie upskde br tle iast twbnbhtls b tle year ahd equkty nargets biibwed tlesfrkpt heariy pereftiy br tle oaiahfe b tle year as tleVampZ 5 dkd khdeed fbhtkhue tb raiiy kh Hbvenoerahd Defenoer ahd 1047297hksled tle year at 5 ainbstrkmlt bh tle KV equatkbh estknate (a ikttie okt b iufgtb oe tlat fibse) Te prkfe returh fane kh rkmlt bhtle estknate up 114 ahd wktl ahbtler 6 rbndkvkdehds tle tbtai returh br 14 was a sbikd 16=

]lkie hbt qukte as rboust as 16‛s stuhhkhm 64returh tle VampZ 5 oested aii tle puhdkts‛ brefasts(amakh) kh predkftkhm lt tb 1 returhs Kt turhed buttlat tle lkstbrkfai trehd we wrbte aobut iast quarterprbved true kh rsquotlat tlere lave oeeh 1= years wleretle VampZ 5 las returhed nbre tlah 5 ahd tleaverame returh kh tle biibwkhm year las oeeh ùst 3Te rahme b butfbnes ks qukte khterestkhm lbweveras 3 b tle years were hematkve ahd 3 b tle years prbdufed dbuoie-dkmkt returhs amakh wktl tlerenakhkhm 5 years fibser tb tle averame At tle oemkhhkhm b Q kt appeared tle 3 hunoer was lkmliyikgeiy ahd as we skt lere tbday at tle ehd b Bftboertle upper ehd b tle rahme ibbgs pbsskoiebdquo Kh taigkhmaobut lbw tle oaiahfe b 14 nkmlt piay but wetaiged aobut lbw tle nbre knpbrtaht questkbh kh burnkhd was tlat rsquok tle nargets lave oeeh drkveh oy tleQE equatkbh skhfe as Iarry summests tle fessa- tkbh b QE tlks nbhtl dbes oem tle questkbh b wlatlappehs kh 152bdquo ]e sakd we wbuid ieave tlatquestkbh tb tle Narget Butibbg seftkbh ahd we iakd




Cburtl Quarter 14

but sbne fbhferhs aobut tle dbwhskde rksgs tb UVequktkes k tle patkeht was brfed tb ibbg at tle N_K(vaiuatkbh neasures) wktlbut tle sbbtlkhm eeft btle nbhetary nbrplkhe ust tb rekterate lere wlehibbgkhm at vaiuatkbhs kh tle UV equkty nargets kt kslard tb kmhbre tle pkfture bh tle sfreeh tlat bh everyneasure nargets are neahkhmuiiy bvervaiuedwletler ybu ibbg at [keid ZO Narget FapMDZFAZE _atkb bokhs Q br ZE _atkb ]e sakd tlat aiib tlese were nkie nargers aibhm tle lkmlway tb tledahmer zbhe ahd nbst b tlen are hbw 1047311aslkhmorkmltiy

Out oafg tb tle perbrnahfe kh Q4 wlkfl wasuhkbrniy strbhm kh UV equktkes ahd lad nahy b tleflarafterkstkfs b a leaitly ouii narget wktl Vnaiioeatkhm Iarme Mrbwtl oeatkhm Saiue ahd tle UVtrunpkhm Khterhatkbhai ahd Enermkhm Nargets asGkhm Dbiiar tbbg kts tbii bh khvestbrs kh bverseasnargets wlere furrehfy returhs were a skmhk1047297fahtdram br UV khvestbrs Tat sakd tlere were a ewahbnaikes tlat iec us sfratflkhm bur fbiieftkve lead7ibhm obhds frusled stbfgs rkskhm ahbtler lt3 kh Q4

(tb fbnpiete a truiy speftafuiar returh b 51 brtle year nbre bh tlat kh obhds seftkbh oeibw) ykeidprbdufts were nkxed as _EKs surmed up a stuhhkhm144 (tb fbnpiete ah eveh nbre stuhhkhm 66year nbre bh tlat oeibw) wlkie NIZs mbt frusledaibhm wktl bki piuhmkhm (16) (mkvkhm oafg nbst btlekr makhs br tle year up 4lt) ahd tle tbp burperbrnkhm seftbrs kh tle VampZ 5 were Utkiktkes upah anazkhm 16 (up a nbre anazkhm br tleyear) Leaitlfare up a leaitly =5 (up ah eveh nbreleaitly 56 br tle year) Fbhsuner Vtapies up arboust lt (up ah equaiiy rboust 13 br tle year)ahd eflhbibmy up a sbikd 5 (up ah eveh nbresbikd 1 br tle year) tle ahbnaiy lere oekhm tlattlese are hbt tle seftbrs tlat hbrnaiiy iead kh rboustefbhbnkf expahskbhs (Gkrki Vbgbib b 16d says tlattlese types b ahbnaikes lave khfredkoie khbrnatkbhfbhteht sb we wkii expibre wlat tlks perbrnahfenkmlt oe skmhaikhm) Mkveh nargets are ieadkhmkhdkfatbrs perlaps tle strbhm perbrnahfe b tledeehskve seftbrs ks teiikhm us tlat tle efbhbny ks hbt

qukte as strbhm as tle nedka wbuid iead us tb oeikeveKh aft tle 1047297rst estknate b Q4 MDZ fane kh at 3weii oeibw tle estknated 6 Addkhm tle burquarters b 14 tbmetler at -1 45 5 ahd3 we met UV _eai MDZ expahdkhm at 5 weiioeibw tle 6 tlat tle Ced (ahd everybhe eise)predkfted (amakh) Nbrebver tle hunoer ks oekhmrsquooakied butbdquo oy ah uhusuaiiy ibw ZFE De1047311atbr (sbnewbuid say nahkpuiatedhellip) tlat obbsts tle reai hun-oer Te reaikty ks tlat we lave hever lad HbnkhaiMDZ mrbwtl tlks ibw wktlbut oekhm kh _efesskbhkne wkii teii k kt ks dkereht tlks tkne br wletler ahHOE_ (tle mrbup tlat defkdes wleh _efesskbhs startehd) prbfianatkbh ibbns bh tle lbrkzbh

Kh tlkhgkhm aobut sibwkhm MDZ mrbwtl ahd apbtehtkai flahme kh tle orbad efbhbnkf ehvkrbhnehtwe wrbte iast quarter tlat rsquoahbtler pbtehtkaiiywbrrksbne skmh b pbtehtkai efbhbnkf naiakse ks tlerapkd defikhe b bki prkfes wlkfl drbpped a stuhhkhm(14) durkhm tle quarter faiikhm tb nkhd fbnparksbhs tb tle dranatkf defikhes kh lt rkmlt oebre tleMiboai Ckhahfkai Frksksbdquo Q4 oeikeve kt br hbt was

aftuaiiy wbrse br bki (ahd btler fbnnbdktkes as weii)as oiafg mbid siunped a nkhd hunokhm (41) orkhm-khm tle uii year ibss tb (46) Ibbgkhm at tle peag tbtrbuml drawdbwh rbn nkd-uhe tb tle ehd b tleyear ]K Frude eii rbn $1=3 tb $56= a àw-drbppkhm (56) swbbh Te prkfe defikhe dkdh‛tstbp wktl tle faiehdar lbwever ahd bki drbpped ah-btler (4) kh ahuary Anazkhmiy bki wbuid laveaftuaiiy oeeh dbwh (133) out a lume lt3 slbrtsqueeze raiiy bh tle iast day b tle nbhtl faused oyMVFK reoaiahfkhm tle Khdex (lad tb ouy nbre skhfebki lad aiieh sb nufl) pared tle ibss oafg tb skhmiedkmkts ieavkhm tle hew peag tb trbuml defikhe at(55) Zerlaps tle nbst wbrrksbne part b tle bkistbry ks tlat tle furreht prkfe defikhe ks tle resuit b asuppiy slbfg as tle Vaudks dkd hbt biibw tlekr hbrnaiprbtbfbi tb trkn prbduftkbh tb geep tle miboai nargetkh oaiahfe as hew suppiy fane bh-ikhe rbn UVVlaie Ikoya ahd Kraq Tere are aii gkhds b tlebrkesas tb wly tle Vaudks defkded hbt tb furtakiprbduftkbh rbn a deskre tb puhksl _usska ahd Krah




Cburtl Quarter 14

tb a deskre tb wkpe but tle UV Vlaie prbdufers skhfetbtai UV prbduftkbh exfeeded a ievei estaoiksled oyah amreeneht rbn 1=1 wleh tle UV nbved rbntle Mbid Vtahdard tb tle Bki Vtahdard (nbved awayrbn mbid oafgkhm tle Dbiiar tb bki oafgkhm tleDbiiar) ]latever tle reasbh tle reai prboien wastle nasskve spefuiatkve ibhm pbsktkbhs kh tle bkiutures nargets tlat oemah tb affrue neahkhmuiibsses ahd lad tb oe qukfgiy uhwbuhd as tle prkfeoemah tb fasfade dbwhwards Te deveibpneht b tlebki utures nargets bver tle years las oeeh a obbh tbprbdufers wlb fah nbre eeftkveiy ledme tlekrprbduftkbh out tlese nargets lave attrafted everkhfreaskhm vbiunes b spefuiatkve khvestneht fapktaias weii ahd wleh tle hunoer b rsquopaper oarreisbdquoreafles ah extrene as kt dkd kh lt ahd amakh tlkspast year kt bhiy tages a ikttie flahme kh nbnehtun tbtrkmmer iarme ikqukdatkbhs ahd rapkd prkfe defikhesTere lave oeeh ibts b puhdkts nedka persbhaiktkesahd bki exefutkves faiikhm a obttbn kh bki skhfe tle nkd-=s (qukte uhsuffessuiiy bovkbusiy as we skt at$4lthellip) ahd tlere ks uhahknkty kh tle khvestnehtfbnnuhkty tlat tlere wkii oe a slarp obuhfe kh bki

prkfes tlks year Te ibmkf ks tlat every bki prkfe drbpskhfe 15 las oeeh biibwed oy a slarp reobuhd outtle 1047311aw kh tle ibmkf ks tlat aii b tlbse defikhes weredenahd drkveh (efbhbnkf mrbwtl sibwkhm ieadkhm tbiess fbhsunptkbh) ahd we lave tb mb aii tle way oafgtb 1lt5 tb see wlat lappehed durkhm tle iast suppiyslbfg ]e wkii fbver tlks tbpkf nbre kh tle NargetButibbg out sustfe kt tb say lere tlat kt ks wbrrksbnetlat tlere ks hbt bhe ]aii Vtreet ahaiyst tlat las a yearehd brefast br ]K oeibw $3 wlkfl neahs tlere ksorbad fbhsehsus bh a rapkd prkfe refbvery ahd weghbw tle lkstbry b uhahknbus fbhsehsus bver tkne kshbt mbbd

]e taiged kh tle iast ietter aobut lbw bhe b tleokmmest surprkses b Q6 was tle strehmtl b tle UVDbiiar ahd tlat strehmtl fbhtkhued khtb Q4 as D[raiiked ahbtler 5 Nufl b tle raiiy b tle Dbiiarfbuid aftuaiiy oe expiakhed hbt oy tle strehmtl b tleUV furrehfy out oy tle khfredkoie weaghess b tlebtler miboai furrehfkes nbst hbtaoiy tle [eh ahd tle

Eurb as tle OB 1047297red a lume oazbbga kh Bftboer oyaffeieratkhm QQE ahd tle Eurbpeahs khfled everfibser tb tlekr bwh verskbh b QE Bhe verykhterestkhm plehbnehbh tlat we wrbte aobut was tlatrsquoas we lave seeh bver ahd bver wktl Vuper NarkbDramlk aii le las tb db ks rsquosaybdquo le ks mbkhm tb dbsbnetlkhm ahd tle nargets rsquooeikevebdquo lkn ahd we laveseeh lkstbrkf nbves kh a hunoer b assets kh respbhsetb tle EFO nuskhms khfiudkhm refbrd ibw Vbverekmhobhd ykeids ahd hbw hear refbrd nbvenehts kh tleDbiiar as tle Mreehoafg sbared heariy 1 khVeptenoer aibhebdquo As we fane khtb tle Hew [ear ktwas tkne br Nr Dramlk tb 1047297haiiy deikver tlersquowlatever kt tagesbdquo le lad repeatediy prbnksed ahdrsquoslbw us tle nbheybdquo tb met tle EFO oaiahfe sleetmrbwkhm amakh aibhm wktl aii tle btler deveibpednarget fehtrai oahgs Expeftatkbhs were very lkml brtle okm ahhbuhfeneht bh ahuary hd ahd asexpefted (br as ieagedhellip) Narkb‛s bratkbh wasextrabrdkhary as le prbnksed a fbbrdkhated EurbpeahHatkbhai Oahg ebrt (stkii hb nbhetary uhkbhautlbrkzkhm tle EFO tb aft uhkiateraiiy) tb ouymbverhneht obhds kh ah ebrt tb furtaki tle deveibp-

khm de1047311atkbh prboien ahd stknuiate mrbwtl kh tleEurbpeah Uhkbh Te knnedkate reaftkbh was quktepbsktkve ahd khvestbrs ikstehed tb tle leadikhes (ahdperlaps hbt tle detakis ikge hbtlkhm lappehs uhtkiNarfl wlkfl ieads bhe tb questkbh wletler tleMernahs lave uiiy amreedhellip) tle Eurb spkged dbwh-wards Eurbpeah equktkes spkged upwards (partkfuiariyMernahy wlkfl oehe1047297ts nbst rbn tle reiatkve weag-hess b tle furrehfy as tle iarmest expbrters) ahd tleDbiiar fbhtkhued kts paraobikf rkse Te fbnpikfatkhmaftbr ks tlat tle pbsktkve reaftkbh las aded kh refehtdays as trenbrs rbn tle Mreeg eieftkbh (tle radkfaiieckst Vyrkza party wbh ahd ks sb ar trykhm tb piaylardoaii wktl tle rbkga) were eit afrbss tleFbhtkheht ahd nargets mave oafg a okm fluhg b tlekreariy makhs ]e wkii spehd a ibt b tkne nbhktbrkhmtlks trehd as mettkhm tle Dbiiar rkmlt kh 15 nay oebhe tle nbst knpbrtaht pbrtbikb defkskbhs ahkhvestbr fah nage

Te asfeht b Gkhm Dbiiar (fbupied wktl tle rapkd




Cburtl Quarter 14

defikhe kh bki) puhksled Khterhatkbhai amp EnermkhmNargets equktkes (btler tlah Flkha nbre bh tlat khseparate seftkbh) ahd orbad Fbnnbdkty khdkfes brtle sefbhd fbhsefutkve quarter ahd ibsses werepervaskve b revkew tle orbad khdkfes tle AF]K exUV eii (6) EACE was dbwh (63) tle NVFKEN Khdex drbpped (45) ahd tle Oibbnoerm(brneriy tle D-UOV) Fbnnbdkty Khdex was dbwh apakhui (11) Ibbgkhm nbre fibseiy at tle khterha-tkbhai equkty nargets tle oreadtl b tle hematkvereturhs fah oe seeh as bhiy 1047297ve b tle twehty-twbdeveibped nargets kh tle NVFK dataoase nahamed apbsktkve returh kh Q4 ahd hbhe b tlen aflkeved areturh tlat oeat tle VampZ 5 Te daname was quktesevere amakh kh Eurbpe as tle Eurb fbhtkhued tb sikdeahd bhiy Oeimkun ahd Kreiahd nahamed pbsktkvereturhs up 3 ahd 1 respeftkveiy Ibbgkhm oafgat tlks seftkbh rbn iast quarter‛s ietter tlere ks a ikttieokt b deumlècirc vu (tle oad gkhd) as tle hunoers were umiytleh ahd were umiy amakh tb ehd 14 ]e wrbte tlatrsquotle Eurb mbt snafged oy tle Dbiiar ahd ibsses wereiarme afrbss tle Fbhtkheht wktl Mernahy drbppkhm(11) Crahfe dbwh (lt4) Vpakh dbwh (lt3)

Ktaiy aiikhm (lt=) ahd twb fbuhtrkes wktl sbne oahgkhm wbes Austrka ahd Zbrtumai piuhmkhm (13) ahd(5) respeftkveiy Tree b tle Eurbpeah EnermkhmNargets _usska urgey ahd Mreefe were pbuhdedlard ibskhm (154) (11lt) ahd () respeftkveiybdquoKh Q4 tle hunoers were sknkiariy oad (wktl tleexfeptkbhs b Mernahy ahd urgey) as Mernahy wasdbwh (4) Crahfe eii (31) Vpakh drbpped(lt) Ktaiy tahged (164) Austrka eii (=6)Zbrtumai piuhmed ahbtler (6) _usska fratered(6) urgey esfaped tle oibbdiettkhm rkskhm 113ahd Mreefe fbiiapsed ahbtler (ltlt) Bhe fbuhtrywe dkdh‛t dksfuss kh Q6 wlkfl ks wbrtl lkmlikmltkhmlere ks Hbrway wlkfl traded ikge ah EnermkhmNarget kh Q4 sleddkhm bhe quarter b kts nargetfapktaikzatkbh dbwh (5) as tle piuhme kh frudeprkfes lkt fbnnbdkty reiated fbuhtrkes very lardTere are ikgeiy tb oe a ew oaokes tlrbwh but kh tlatHbrwemkah oatl water sb we wkii ikgeiy oe dbkhm sbneextra dkikmehfe bh tle Hbrdkf nargets kh tle Hew[ear

Bhe b bur avbrkte deveibped nargets bver tle pasttwb years las oeeh apah ahd tlere was a mreat deai bexfkteneht kh tle Iahd b tle _kskhm Vuh kh Q4 Tedyhankf dub b Aoehbnkfs Zrkne Nkhkster Aoe ahdOB Mbverhbr Gurbda defkded tlat a nbrkouhd 1047297rstlai b tle year kh tle equkty ahd apahese furrehfynargets was hbt wlat tley lad kh nkhd wleh frackhmtlekr tlree step (br nbre prefkseiy Tree Arrbw)prbmran sb kt was tkne br sbne dranatkf nbves]e wrbte aobut tlekr okm Laiibweeh reat iast quarterrsquotleh kh nkd-Bftboer tle [eh oemah tb weageh ahdequktkes oemah a very slarp raiiy fuinkhatkhm kh tleVlbfg ahd Awe surprkse ahhbuhfeneht oy tle OB bhLaiibweeh nbrhkhm tlat tley wbuid khdeed rsquoDb]latever Kt agesbdquo kh extehdkhm QQE ahd tle [ehfbiiapsed rbn 1 tb 11 kh a leartoeat ahd tleHkggek surmed heariy 5 br tle day (ahd iufgybwhers b D ikge us nade 33) tb fibse a wkidiyvbiatkie nbhtlbdquo Kh a wbrid addkfted tb stknuiahtstlks nasskve khèftkbh b nbhetary nbrplkhe was ùstwlat tle dbftbr brdered ahd apahese nargets raiikedstrbhmiy tb 1047297hksl tle year wktl tle Hkggek 5 up ltkh Q4 (up 1 br tle year) kh [eh terns UV

khvestbrs dkdh‛t fapture tlat makh uhiess tley ledmed(wlkfl we dkd ahd wkii fbhtkhue tb db) as tle UVDZ[frbss rbse 1 br tle quarter (up 14 br tle year) asGurbda-sah lkt tle ouiis eye wktl lks oazbbga ahdgept tle [eh bh kts desfeht patl (wlkfl we oeikeve wkiifbhtkhue br years tb fbne) Te okmmest oehe1047297fkarkesb Aoehbnkfs are tle expbrters wlkfl slbwedskmhk1047297faht strehmtl kh Q4 wktl bybta up = Vbhy up14 ahd Cu`k Leavy (wlb nage Vuoarus wlkfl laveoefbne tle bstfkai far b tle Zebpie‛s _epuoikf bFlapei Lkii) up 1 (ahd a stuhhkhm 45 br tleyear) [ears b fbst futtkhm as a neahs b survkvai kh astrbhm furrehfy remkne las nade apah Khfkhfredkoiy ieah ahd tle lkml demree b bperatkhmieverame kh tlese fbnpahkes neahs tlat eveh snaiinbves dbwhward kh tle [eh resuit kh iarme nbves upkh prb1047297ts (ahd stbfg prkfes) Everytlkhm wash‛t mreatkh tle apah equkty nargets lbwever as tle btlertradktkbhai oehe1047297fkary b a ibwer furrehfy tle oahgskmhbred tle fbhvehtkbhai wksdbn ahd fbhtkhued tbpiuno ibwer ieveis Uskhm Nktsuokslk UC (NU) as




Cburtl Quarter 14

tle ahaibm apah‛s iarmest oahg slbuid oe oehe1047297ttkhmrbn a fieah oaiahfe sleet rkskhm HKNs ahd a weageh[eh yet NU eii () durkhm Q4 ahd was dbwh(1=) br tle year Te prboien appears tb oe tlatdespkte rkskhm kh1047311atkbh tle deepiy khmrakhed ear bde1047311atkbh fbhtkhues tb depress tle denahd br fredktahd tle apahese oahgs ùst fah‛t seen tb met but bheutrai Ikge a fbkied sprkhm tlese assets areoefbnkhm khfredkoiy fleap out we lave oeeh wrbhmkh tlkhgkhm tlat khvestbrs wbuid seeg but tleseuhdervaiued assets ahd pusl prkfes lkmler Tefbhtkhued weaghess b tle [eh wkii drkve equkty prkfeslkmler (ahd we oeikeve wkii evehtuaiiy affrue tb tleoahgs tbb) ahd we wrbte iast quarter tlat rsquowe arerenkhded tlat tle iast tkne tle OB nade ahahhbuhfeneht ikge tlks tle [eh drbpped 5 ahd apahese equktkes surmed 3 bver tle hext tweivenbhtls ahd wlkie tle fbhdktkbhs are hbt exaftiy tlesane as kh iate 1 we db sehse a sknkiarfbnnktneht oy Aoe-sah ahd Gurbda-sah tb slbw tlewbrid tlat wbrg b Aoehbnkfs ks ar rbn fbnpietebdquoKh tle past tlree nbhtls we lave traveied aobut 15dbwh tle patl as tle [eh las weagehed 4 ahd

apahese equktkes are up lt (kh [eh sb tle gey ks tbrenakh ledmed) versus a zerb returh br tle VampZ 5sb we rekterate bur oeike tlat apah wkii butperbrntle UV mbkhm brward ahd tlat bur tlene b Te Aoe-sah Aisb _kses wkii fbhtkhue tb oe a stbry b apaheseequktkes ruhhkhm wktl tle Ouiis (a piay bh Te VuhAisb _kses a Lenkhmway hbvei aobut a mrbup brkehds wlb travei tb Vpakh tb ruh wktl tle ouiis)

]e wrbte kh tle Narget Butibbg iast quarter rsquoweavbr Enermkhm Nargets reiatkve tb deveibped nargetsdespkte tle pervaskve ears b tle ehd b QE kh tle UVahd Dbiiar strehmtl fauskhm stress br EN Tat sakdtlere are fieariy fertakh fbuhtrkes tlat wkii suer nbretlah btlers k tle Dbiiar fbhtkhues tb renakh strbhmsb we wkii dkm deeper khtb lbw we wbuid semneht ENkhtb Vervkfe (furreht affbuht surpius) efbhbnkes ahdFbnnbdkty (furreht affbuht de1047297fkt) efbhbnkesbdquo Kwe ibbg at Enermkhm ahd Crbhtker Nargets Q4 washbt nufl uh br khvestbrs as bur slbrt tern earswere reaikzed Gkhm Dbiiar ahd fraslkhm bki prkfes

fbhspkred amakhst nbst deveibpkhm nargets ahd kt wasa sea b red bh tle perbrnahfe taoies Tere weretwb nargets tlat nahamed tb prbdufe strbhm returhsbhe tlat was expefted (Flkha) ahd bhe tlat wastbtaiiy uhexpefted (urgey) ]e wkii fbne oafg tbtlbse oeibw out 1047297rst dkmmkhm oeheatl tle Khdexhunoers (NVFK EN dbwh (45) br tle quarter ahd() br 14 ahd NVFK CN dbwh (15) br Q4out up 3lt br 14) we see sbne very dksparateresuits as tle Fbnnbdkty Fbuhtrkes were lannered_usska dbwh (6) Orazki dbwh (14) Nexkfbdbwh (16) UAE dbwh (13) Qatar dbwh(lt) Hkmerka dbwh (3) Armehtkha dbwh (lt1)Vaudk dbwh (4) ahd Guwakt dbwh (16=) Ikgekh tle Hbrway fase we desfrkoed aobve we tlkhg tlerewere a ibt b oaokes tlrbwh but wktl tle bkiy oatlwater kh Q4 as khvestbrs sbid everytlkhm kh tlesefbuhtrkes despkte tle aft tlat nahy b tle fbnpahkeslave very ikttie tb db wktl bki ahd kh sbne fases wkiihbt oe knpafted oy bki prkfe defikhes oefause tlembverhnehts bwh tle ouig b tle haturai resburfesahd tley lave fbnnktted tb uhdkhm tle sbfkaiprbmrans (tlks ks prknarkiy true kh tle Nkddie East

out fbuid aisb appiy kh sbne ways tb _usska ahdOrazki) wlkfl wkii oe pakd tb fktkzehs remardiess b tleprkfe b tle fbnnbdkty ]e wbuid expeft tb seesbne very strbhm returhs kh seieft fbnpahkes kh tlesenargets tlat bfus bh tle rkskhm nkddie fiassfbhsuner ahd we wbuid expeft tb 1047297hd sbne reaimens pkfgkhm tlrbuml tle ruooie kh tle fbnkhmnbhtls (tb fbnpieteiy nkx tle netaplbrs) Ahbtlertlkhm tb geep kh nkhd kh 15 ks sbnetlkhm we wrbteaobut kh Q6 tlat rsquotle bpehkhm b tle Vaudk narget tbbrekmh khvestbrs slbuid serve as a skmhk1047297faht fataiysttb nbve tle narget lkmler as fapktai 1047311bwkhm kh rbn miboai khstktutkbhai nahamers ks ikgeiy tb equate tb askmhk1047297faht pbrtkbh b tle furreht Vaudk narget fapAddktkbhaiiy rsquobpehkhmbdquo tle narget renbves tle prknary lurdie tlat las lkstbrkfaiiy prevehted NVFKrbn khfiudkhm Vaudk kh tlekr Khdexesbdquo K NVFKnages tle Khdex nbve kh 15 ibbg br tle Vaudknargets tb oe very strbhm

As we ahtkfkpated tle Vervkfes fbuhtrkes were nbre




Cburtl Quarter 14

reskikeht kh Q4 ahd wlkie bveraii ENCN returhs werereiatkveiy pbbr a hunoer b fbuhtrkes meherated sbikdreturhs br tle quarter (ahd uii year 14) khfiudkhmKhdbheska up 3 br Q4 ahd 33 br 14Zlkikppkhes up = kh Q4 ahd 53 br 14 ahdGehya (lbne b tle Vkikfbh Vavahhal) up 1lt brQ4 ahd 64 br 14 Gehya ks a mreat exanpie b anarget wlere khhbvatkbh ahd rapkd teflhbibmyadbptkbh kh nbokie paynehts ( b Gehyahs usenbokie paynehts) las freated ah efbhbnkf obbn tlatks ikgeiy tb perskst br defades tb fbne Khdka (bhe bbur avbrkte nargets br 14 ahd 15 tbb) tbbg apause tlat reresles kh Q4 aiikhm (=) out lad a very strbhm year up 6 bh tle leeis b tlenbnehtbus Nbdk vkftbry ahd tle enermehfe bNbdkhbnkfs tlat slbuid pave tle way (ikteraiiy pavetle way as bhe b na`br fbnnktnehts ks tb oukid alume rbad hetwbrg tb expahd fbnnerfe) br uturereturhs Te pbteht fbnokhatkbh b _aàh as _OKMbverhbr ahd Nbdk as ZN obdes weii br khvestbrs khKhdka br nahy years tb fbne ]e dksfussed iastquarter tlat khvestkhm kh fbnpahkes tlat leip expahdkhrastrufture ikge oahgs reai estate deveibpers ahd

fyfikfais wbuid oehe1047297t rbn tle rebrn amehda khKhdka Bver tle past tlree nbhtls tlere were ahunoer b wkhhers ikge KFKFK Oahg up = VtateOahg b Khdka up 13 ahd DIC _E up 6= ahd a ewibsers ikge Fbai Khdka dbwh () ahd ata Vteeidbwh () As nehtkbhed aobve bhe b tle okmmestsurprkses kh EN was tle perbrnahfe b urgey wlkflbverfane lume furreht affbuht prboiens a hearfurrehfy fbiiapse ahd tle ahtkfs b a rehemadeZreskdeht tb prbdufe a very strbhm 113 returh kh Q4ahd ah equaiiy appeaikhm 1lt= returh br tle yearurgey was bhe b tle Cramkie Ckve (Orazki KhdkaKhdbheska Vbutl Arkfa urgey) tlat was suppbsed tboe gkiied oy tle aper ahd ehd b QE kh tle UV7lbwever hb bhe seht tle fease ahd deskst nenb tbtlbse fbuhtrkes as bur but b tle 1047297ve prbdufed sbikdreturhs kh Q4 ahd 14 ahd Orazki bhiy strummied khQ4 acer tle dksappbkhtneht b tle Dkina reeieftkbhahd tle bki prkfe fbiiapse Gbrea was tle btler okmsurprkse kh EN (aitlbuml kt ks stkii lard br us tbfbhskder Gbrea ah enermkhm narget) as tle weag [eh

lurt tlekr reiatkve expbrt attraftkvehess ahd Appie ateVansuhm‛s iuhfl kh Q4 (Vansuhm ks a lume perfehtameb tle Gbrea khdex) sb Gbrea sled (=) br Q4 ahdwas dbwh (111) br tle year K tle Gbreahmbverhneht fah respbhd wktl sbne neasures tbweageh tle ]bh Gbrea fbuid oe a surprkse wkhher kh15 as expeftatkbhs ahd prkfes are ibw ahd mrbwtl kssbikd

Flkha las oeeh bhe b tle nbst khterestkhm ahdflaiiehmkhm nargets b tle past year as tlere ks a heverehdkhm strean b ahaiysks spefuiatkbh ahd predkftkbhaobut Flkha kh tle nedka ahd we wrbte iast quartertlat rsquoFlkha was very flaiiehmkhm br tle 1047297rst lai btle year as tle khdkfes nade hb prbmress out as welave sakd tb bfus bh spefk1047297f seftbrs kh KhterhetLeaitlfare _etaki Fbhsuner ahd Aiterhatkve Ehermytlere lave oeeh sbne reai wkhhers kh tlbse semnehtsbdquoTe sefbhd lai b tle year ahd Q4 kh partkfuiar wasa fbnpieteiy dkereht stbry as orbad nargets kh Flkhasurmed = br tle tlree nbhtls ahd tle A-Vlarenarget kh Flkha was tle oest perbrnkhm narget khtle wbrid up a stammerkhm 56 Te fbnokhatkbh b

tle Tkrd Ziehun _ebrn amehda oemkhhkhm tb oeknpienehted VBE rebrn a flahme kh pbsktkbh oy tleZObF bh ikqukdkty (nbved rbn tkmltehkhm tb ibbseh-khm) ahd wlat appears tb oe a fbhferted ebrt oy tlehew Ieaderslkp tb slkc assets rbn tle prbpertynarget tb tle equkty narget resuited kh sbne speftaf-uiar perbrnahfe kh Flkhese equktkes ]e fbnneht-ed iast quarter tlat rsquowe oeikeve tlat tle Flkhese equktynargets are bh tle verme b a skmhk1047297faht oreagbut astle mbverhneht knpienehts tle Trbuml rakh(fbhheftkbh oetweeh Vlahmlak ahd Lbhm Gbhmnargets) ahd we lave oeeh khfreaskhm bur expbsure tbtle A-Vlare narget tb fapktaikze bh tle khfreasedkhvestneht aftkvkty tlat wkii resuit rbn tlks expahskbh b narget affessbdquo Ibbgkhm oafg we were rkmltbh tle dkreftkbh b tle nbve out fbnpieteiy nkssedtle pbtehtkai namhktude ahd wlkie tle khfrenehtaiexpbsure we added was affretkve we were tbb fbh-servatkve kh bur tknkhm A iessbh tb tage away rbnQ4 was tlat wleh Flkha 1047297haiiy dbes nbve bh bhe btlekr _ebrn amehda ktens tle respbhse ks swkc ahd




Cburtl Quarter 14

tle nbnehtun oukids qukfgiy A lume nkss bh burpart was tb hbt nage tle sefbhd brder tlkhgkhm ieap(perlaps bhe b tle nbst knpbrtaht sgkiis kh khvestkhmks ahtkfkpatkhm tle sefbhdary knpafts b prknarynbvenehts) tb oukid ah bverwekmlt pbsktkbh kh tleFlkhese orbgerame stbfgs as tley fieariy were mbkhm tboe tle oehe1047297fkarkes b tle ranp kh khvestneht aftkvktyresuitkhm rbn tle Trbuml rakh Zrbmran bkiiustrate FAC (tle A-Vlares fibsed ehd uhd) was up5 kh Q4 AVL_ (tle A-Vlares EC) was up 65out FKKF Vefurktkes (fh036) ahd FlkhaNerflahts Vefurktkes (fh03) were up a stuhhkhm155 ahd 146 respeftkveiy Ahbtler area wedksfussed iast quarter was tlat we lad oeeh eariy(sbnetknes tle euplenksn br wrbhm) kh tlkhgkhmaobut rsquoa hunoer b khvestneht kdeas tlat we tlbumltwbuid oehe1047297t rbn tle _ebrn Amehda ahd tle nbvetbward a nbre Fbhsunptkbh oased efbhbny khfiudkhm Flkha Fbai Ehermy Mreat ]aii Nbtbr Fb FlkhaSahge Flkha Bverseas Iahd Flkha _esburfes Iahdahd Zbiy Zrbperty Mrbup (FH031ltlt LG0666FH0 LG03ltlt LG011 LG011 respeftkveiy)ahd a oasget b Flkha Oahgsbdquo ahd Q4 fbh1047297rned tle

eariy ratler tlah tle wrbhm as tlese fbnpahkessurmed 4lt 4= 6lt 15 lt 15 ahd 3respeftkveiy Tere wkii fieariy oe sbne fbhsbikdatkbhkh tlese nargets kh tle eariy part b 15 out weoeikeve tlat we lave ehtered a hew Ouii Narget khFlkha ahd tlere are butstahdkhm returhs avakiaoie brkhvestbrs wlb are wkiikhm tb kmhbre tle rsquoHbksebdquo kh tlenedka aobut tle sibwkhm efbhbnkf mrbwtl (quaikty bmrbwtl ks nbre knpbrtaht tlah quahtkty) ahd bfus bhtle rsquoVkmhaibdquo tlat tle wbrid‛s sefbhd iarmest efbhbnyks kh tle oemkhhkhm stames b a lkstbrkf trahsktkbhtbward fbhsunptkbh ahd away rbn 1047297xed assetkhvestneht

urhkhm tb Obhds kt was ahbtler uhexpeftedbutfbne7 uhexpefted tlat ks k ybu were kh tlefbhsehsus fanp tlat oeikeved aii year tlat rates wbuidrkse ahd obhds returhs wbuid oe pbbr ]e desfrkoedtle pbsture b 1047297xed khfbne khvestbrs iast quarterwleh we sakd rsquowktl tle ehd b QE kh tle UV tlksBftboer ahd tle tlreat b tle Ced rakskhm rates

sbnetkne kh 15 Ckxed Khfbne khvestbrs are eeikhmikge tley lave a NkM bh tlekr taki wktl nksskie ibfg bhahd are fiehfled ahd waktkhm br tle nksskie tb leadtlekr waybdquo Tks desfrkptkbh fane rbn bhe b tlebpehkhm sfehes b bp Muh wlere tle NkM pkibtnehafed Fbumar out hever slbt ahd we weht bh tbdksfuss lbw tle Ced las oeeh nehafkhm obhdkhvestbrs br years wktl tle fbhstaht tlreat b lkmlerrates bhiy tb db hbtlkhm quarter acer quarter ]etaiged aobut bhe b ny avbrkte flarts a sequehtkaiquarteriy mrapl b tle brward ykeid furve skhfe slbwkhm a serkes b steep upward sibpkhm ikhesoetweeh fasl ahd twb-year reasury hbtes (knpiykhmknnkheht rate khfreases) ahd taiged aobut lbw tlksflart rsquoslbws lbw tle Ced las gept tlekr 1047297hmer b tletrkmmer ahd nakhtakhed Ced Cuhds hear zerb (PK_ZPerb Khterest _ate Zbikfy) despkte tle nargetsrsquoghbwkhmbdquo tlat tley wbuid rakse sbnetkne rsquohextyearbdquo As Narg wakh renkhds us rsquoKt akht wlat ybudbht ghbw tlat mets ybu khtb trbuoie Kts wlat ybughbw br sure tlat ùst akht sbhellipbdquo ahd tle Obhd Oearswere ikfgkhm tlekr wbuhds amakh kh Q4 as tley fiuhm tbwlat tley ghew br sure (rates wbuid rkse) ahd stayed

slbrt khtb tle teetl b a 1lt khfrease kh tle OarfiaysAmmremate Khdex ahd a stuhhkhm lt3 khfrease kh tleOarfiays Ibhm Mbverhneht Obhd Khdex (orkhmkhm tleuii year returh tb ah equaiiy stuhhkhm 5 heariydbuoie tle returh b equktkes) Kh iast quarter‛s ietterwe vbkfed a Sarkaht Zerfeptkbh bh khterest rates (ahdtlerebre obhds) ahd taiged aobut lbw rsquotleknpehdkhm ehd b QE tlks nbhtl knpiked (at ieast tbus) tlat khterest rates were nbre ikgeiy tb aii tlahrkse ahd tlat mbverhneht obhds wbuid fbhtkhue tb oea surprkskhmiy mbbd khvestnehtbdquo Tree nbhtls iaterdespkte aii tle Ced àwobhkhm tle hewiy freated CedDbts khdkfatbr ahd tle seenkhmiy ehdiess strean blawgksl Ced Nkhutes rates fbhtkhued dbwhward ahdibhm reasurkes turhed but tb oe bhe b tle oestperbrnkhm assets kh Q4 ahd 14 (wlkfl we aftuaiiysakd wbuid oe tle fase iast Defenoer)

Expahdkhm bur vkew oeybhd reasurkes btler types b1047297xed khfbne khvestnehts lad a nufl rbumler Q4 asfredkt trbuoies tbbg tlekr tbii bh lkml ykeid obhds ahd




Cburtl Quarter 14

furrehfy ibsses tbbg tlekr tbii bh miboai ahd enermkhmnargets obhds Kh tle lkml ykeid narget tle bveraiikhdex nasgs sbne b tle reai daname dbhe tbobhdlbiders kh tle rksgkest semnehts b tle nargetsahd obhds kh tle ehermy seftbr were severeiy puhksledwktl tle fbiiapse kh bki prkfes Te ObANI Lkml [keidKhdex was dbwh (15) br tle quarter wlkfltrknned uii year returhs tb 5 out tle FFFsuo-khdex eii (66) kh Defenoer aibhe ahd 1047297hksleddbwh (3) br tle year _eturhs kh tle lkml ykeidnarget were tle wbrst skhfe lt wlkfl b fbursefbrreiates wktl tle nasskve kh1047311bw khtb tle L[ nargetat tle oemkhhkhm b tle year as khvestbrs desperate brykeid gept stretflkhm ever urtler but bh tle rksg furve(khvestbrs aiways ouy wlat tley wksl tley wbuid laveobumlthellip) Te ibsses kh tle ehermy semneht b tlenarget were qukte iarme dbwh (15) kh refehtnbhtls wktl nahy obhds tradkhm dbwh khtb tle =sahd sbne b tle wbrst fredkts lkttkhm tle s ahd 6sTere ks a ibt b fbhferh tlat sbne iarme perfehtame btle nasskve $55 okiikbh b deot kssued oy ehermyfbnpahkes durkhm tle Vlaie Obbn wkii deauit as bkiprkfes lave laived out we expeft tlat bhiy a snaii

perfehtame b kssuers wkii mb oust as nahy bperatbrslave dbhe a mbbd `bo ledmkhm prbduftkbh ahd laveobumlt tlenseives tkne tb fut fbsts ahd restruftureBhe semneht tlat ks partkfuiariy vuiheraoie are tleehermy servkfes fbnpahkes as tle EampZ fbnpahkes futskh fap-ex are a fbst reduftkbh out are a revehuereduftkbh br servkfe fbnpahkes ]e expeft tb seesbne trenehdbus bppbrtuhktkes tb ouy ahtastkf assetsat 1047297re-saie prkfes kh tle fbnkhm nbhtls ahd we wkiitaig nbre aobut tle bppbrtuhkty (ahd tle pbtehtkai tbrakse ah khvestneht velkfie tb tage advahtame b tlesebppbrtuhktkes) kh tle Narget Butibbg seftkbhArbuhd tle miboe mbverhneht obhds fbhtkhued tb lkthew ibws kh rates seenkhmiy every day ahd tle rkskhmprkfes b tlbse obhds slbuid lave affrued tb sbikdreturhs tb khvestbrs Lbwever Gkhm Dbiiar ievked aiarme rsquotaxbdquo bh UV oased khvestbrs ahd tle OarfiaysMiboai Obhd Khdex eii (1) kh Q4 ahd nahamed bhiya 3 returh br tle year a very dksappbkhtkhmbutfbne mkveh tle dranatkf aii kh khterest rates rbnMernahy tb apah ahd afrbss aii tle perkplerai

Eurbpeah nargets (askde rbn Mreefe) EnermkhmNargets were tle bhe sae laveh (krbhkf) kh obhd iahddurkhm 14 as khvestbrs ùdmed tle lkmler mrbwtlrates kh tlese remkbhs nbre ikgeiy tb suppbrt fbrpbratefasl 1047311bws tb servkfe deot Te ZN EN Obhd Khdexwas lkt oy Gkhm Dbiiar kh Q4 aiikhm (1) out brtle uii year EN deot was up a very sbikd 55 Bhefbnnbh flarafterkstkf b miboai obhd nargets ks tlattle rksgs b kh1047311atkbh lurtkhm obhd returhs fbhtkhuestb oe very ibw ahd as we lave dksfussed bver tle iastew quarters nakhtakhkhm a Sarkaht Zerfeptkbh bhibhmer duratkbh 1047297xed khfbne slbuid fbhtkhue tb oe very prb1047297taoie as miboai khterest rates kh tle deveibpedwbrid are ikgeiy tb renakh uhder pressure rbn tleGkiier Ds b Denbmraplkfs De1047311atkbh ahd Deot ]ewkii rekterate wlat we sakd iast quarter tlat rsquowe ghbwtwb awuiiy mbbd 1047297mlter pkibts wlb espbuse tlatstratemy tbday Sah rsquoreasurebdquo Lbkskhmtbh (wlb bhiybwhs ibhm treasurkes) ahd _usseii rsquoLbrsenahbdquo Fiarg(wlb bwhs iarme pbsktkbhs kh ibhm-duratkbh Obhdsahd Ouhds) wlb wbuid obtl say tlat tley are staykhmwktl tle ]khmnah Cbrnatkbh br tle breseeaoieuture ]e fbhtkhue tb skde wktl reasure ahd

Lbrsenah ahd tlkhg tlat rates wkii oe rsquoIbwer brIbhmerbdquo (expeft tlat ibhm obhds wkii butperbrnamakh kh 15)

Te burtl quarter was aobut as dkvermeht a perkbd brykeid khvestnehts as we lave ever seeh wktl khvestbrsfianbrkhm br _EKs hb natter lbw lkml tle prkferbse ahd sluhhkhm NIZs hb natter lbw ibw tle prkfeeii Vehskoie ibhm-tern khvestneht stratemy dkftatestlat ah khvestbr wbuid oe oetter b seiikhm assets atprenkun prkfes ahd ouykhm assets as oarmakhoaseneht prkfes out kh Q4 khvestbrs defkded tlattlese bppbskhm trehds were mbkhm tb perskst br sbnetkne Te VampZ _EK Khdex surmed ah astbhkslkhm16= br tle quarter tb fap ah equaiiy astbhkslkhm6 returh br tle year (perlaps nbst astbhkslkhm kstlat tlks ks tle tlkrd year kh tle iast skx wlere _EKkhdex returhs lave oeeh arbuhd 6 wktl 5 kh ahd 61= kh 1) as a 63 ykeid sefured oytrbply _E prbved krreskstkoie tb khvestbrs kh tle PK_Zwbrid b teh-year treasurkes Kh starg fbhtrast tb




Cburtl Quarter 14

tle nad dasl br reai estate khvestbrs sfranoied tbseii NIZs as ast as tley were aoie ahd drbve tleAierkah NIZ Khdex dbwh a renargaoie (16) kh Q4_efaii tlat tle okm drbp bffurred rkmlt acer khvestbrssfranoied tb met khtb NIZs at ahy prkfe tle prevkbushkhe nbhtls drkvkhm tle ANIZ Khdex up 15tlrbuml Veptenoer ahd tle okm turharbuhd iec NIZsup ah uhkhspkrkhm 4lt br tle year

]e wrbte iast quarter tlat Q6 was rsquoah aosbiuteiynkseraoie tkne tb oe a fbnnbdkty khvestbr as tlelume surme kh tle Dbiiar kh iate Aumust ahd Veptenoerfrusled aii tlkhms reiated tb fbnnbdktkesbdquo ahd kt turhsbut tlat Q4 was hbt heariy as nkseraoie wktl tle bkifbnpiex mettkhm fbnpieteiy defknated netais tagkhmahbtler snaii lkt ahd tle ibhe orkmlt spbt oekhm tleAms wlkfl nahamed sbne hkfe makhs (oebre mkvkhmnbst b tlen oafg kh tle Hew [ear) Ibbgkhm nbrefibseiy at tle khdkvkduai nargets sbne b tle hunoersare reaiiy astbhkslkhmiy oad Te prefkbus netais werehbt tbb terrkoie wktl Mbid dbwh bhiy () ahd Vkiverdbwh (=) Te defikhes kh ehermy prkfes were epkfwktl Bki fbnpieteiy fbiiapskhm dbwh (41) ahd

Haturai Mas piuhmkhm (lt) as tle ikqukdatkbh b ibhmutures fbhtrafts affeierated kh tle wage b tledefkskbh oy Vaudk Araoka bh Tahgsmkvkhm Day tb hbtfut prbduftkbh ahd tlere were fieariy sbne okm rsquotapsbh tle slbuiderbdquo (prbnpt tb seii pbsktkbhs tb neetnarmkh faiis) tb bverieveramed traders wlb lad oettlat tle Vaudks wbuid arrest tle defikhe oy tagkhm bhebr tle BZEF tean ahd orkhm suppiy oafg kh ikhe wktldenahd At preseht tlere ks aobut a 15nn oarreiday knoaiahfe kh tle bki nargets wlkfl las turhedtle bki utures furve khtb very steep fbhtahmb (upwardsibpkhm wlere tle furreht nbhtl trades at a dksfbuhttb tle but nbhtls fauskhm neahkhmui hematkve rbii-ykeid ibsses br fbnnbdkty khdex bwhers) Tefbhtahmb ks sb steep tlat khvestbrs are ouykhm lumeanbuhts b frude tbday ahd stbrkhm kt kh SIFF (veryiarme frude farrker) slkps tb stbre kt br a perkbd btkne kh ahtkfkpatkbh tlat tle prkes wkii rkse kh tleuture ahd tle lkmler prbfess wkii bset tle rehtaifbsts b tle slkps Tere are estknates tlat oetweeh4nn ahd 5nn oarreis b bki are oekhm stbred bh tle

water tbday wlkfl we lave hbt seeh skhfe rkmlt acertle dranatkf drbp kh prkfes kh Lbw ibw fah bkiprkfes aii2 Tere are a pietlbra b obttbn faiiers(nahy wlb lave oeeh faiikhm tle obttbn skhfe $=5iast aii) wlb are kh dkreft bppbsktkbh tb tle mrbwkhmhunoer b rsquoexpertsbdquo wlb are predkftkhm tlat prkfesfbuid aii as ibw as $ ]e wkii dksfuss tle bkinargets kh detaki kh tle Narget Butibbg seftkbh ahdacer tle Dbiiar tlks nkmlt oe tle sefbhd nbstknpbrtaht defkskbh tlat khvestbrs wkii afe kh 15Acer a lbrrehdbus Q6 tle Ams surmed kh Q4 as]leat ùnped Vbyoeahs rbse 1 ahd Fbrhsurmed 1lt Kh Hbvenoer we wbhdered aibud (sb tbspeag) tlat rsquoAs we skt lere tbday tle wbrds b Vkr blh enpietbh are ruhhkhm tlrbuml bur nkhds bverahd bver tb ibbg br bppbrtuhktkes wlere tlkhms aretle nbst nkseraoie ahd bh tle NK Vfaie (enpietbhNksery Khdex) fbnnbdktkes ibbg pretty khterestkhmskhfe tle wbrid ks fbhvkhfed tlat tle Dbiiar ks mbkhm tbsurme ahd tlat tle Fbnnbdkty Vuper Fyfie ks bverFbhvehtkbhai wksdbn kh khvestkhm ks a very strbhmfbhtrarkah khdkfatbr sb we nay 1047297hd burseives wrktkhmaobut oetter returhs kh tlese seftbrs kh tle quarters

aleadbdquo Vb ar tle sfbre ks fbhvehtkbhai wksdbn bheNK zerb out kt ks a ibhm year ahd we stkii oeikeve tlattlere are tbb nahy khvestbrs bh tle sane skde b tleVV GkhmDbiiar wlkfl neahs we wkii ikgeiy oe wrktkhmaobut fbnnbdktkes nbre tlah hbrnai tlks year

14 turhed but tb oe a very flaiiehmkhm year brLedme Cuhds ahd Q4 was hb exfeptkbh tb tlat trehdas ousted nermer aroktrame deais dranatkf nbves khfbnnbdktkes tle returh b vbiatkikty ahd ahbtler yearwlere tle nbst leavkiy slbrted equktkes aftuaiiybutperbrned ied tb nedkbfre returhs afrbss tleledme uhd iahdsfape Kh Q4 eveht drkveh stratemkessuered tle nbst as a hunoer b nermer deais orbgeahd tle LC_ Eveht Drkveh Khdex prbdufed hematkvereturhs aiikhm (55) tb 1047297hksl tle year kh tle reddbwh (41) Bh tle btler skde b tle speftrun tlelume nbves kh fbnnbdktkes aftuaiiy iasted ibhmehbuml (br tle 1047297rst tkne kh bur years) br tle trehdbiibwers tb nage sbne nbhey ahd tle LC_ NafrbFA Khdex rbse 3 tb nahame a pbsktkve 5 br



Q 4 1 4 N a r g e t _ e v k e w amp B u t i bb g

Cburtl Quarter 14

tle year Nksskhm rbn tle averame returhs b tlesystenatkf stratemkes ks tle aft tlat tle FAs as amrbup rbde tle okm nbves kh fbnnbdktkes kh Q4 tbsbne nufl strbhmer tlah averame returhs ahd tleFKVDN FA Khdex was up a nbre rboust 151Dkmmkhm eveh a ikttie deeper wktlkh tle orbaddksperskbh b tle FA mrbup was a lahdui b uhdstlat meherated 5 tb = returhs wktl fbhfehtratedoets bh fbnnbdktkes Te LC_ Equkty Ledme Khdexstrummied amakh kh Q4 egkhm but bhiy a makh tborkhm 14 returhs tb a very suo-par 14 as hematkveaipla bh tle slbrt skde fbhtkhued tb piamue ibhmslbrtnahamers Ourked kh tle oreadtl b tlks semneht weresbne reaiiy pbbr returhs ahd sbne truiy butstahdkhmreturhs oy nahamers bfused bh Flkha ahdLeaitlfare Kh aft hkhe b tle tbp teh perbrnkhmibhmslbrt uhds were leaitlfare reiated tlat rbde tlepbwerui nbves kh okbtefl tb prbdufe 6 tb 5returhs br tle year Te PK_Z ehvkrbhnehtfbhtkhues tb flaiiehme narget heutrai nahamers (lardtb nage nbhey wktl fasl returhs at ) ahd tleLC_ _eiatkve Saiue Khdex aftuaiiy ibst (61) tbdeikver a very dksappbkhtkhm (61) ibss br tle year

Cbr tle 1047297rst tkne kh nahy years ledme uhd returhsiammed eveh tradktkbhai 1047297xed khfbne nargets wlkflrbse 3 Tat sakd we stkii see skmhk1047297faht oehe1047297t khslkckhm rbn Obhds tbward Aosbiute _eturhstratemkes mkveh tlekr pbsktkve fbrreiatkbh tb khterestrates (tley lave a 1047311batkhm rate prb1047297ie mkveh slbrtprbfeeds skt kh fasl) wlere Obhds lave hematkvefbrreiatkbh (rates rkse obhds ibse nbhey) kh ahehvkrbhneht wlere tle pbtehtkai br rkskhm rates fbuidwkpe but 1047297xed khfbne makhs qukfgiy Bhe rsquoledmeuhdbdquo stratemy (kh qubtes oefause hbt nufl ledmkhmout flarme LC ees) tlat prbdufed sbikd returhs bhaverame (aobve tle AF]K) was lbne tb a ew tbpperbrnkhm ledme uhds b 14 Aftkvksn TeLC_ Aftkvkst Khdex was up 55 kh Q4 ahd lt5 brtle year Fbhfehtrated oets bh a fbupie b lkmlprb1047297ie hanes ikge AAZI S_ ahd LIC leiped prbpeitle ikge b Kfalh ahd Afgnah tb 6+ returhs

Oafg kh ahuary we tbbg sbne ikoertkes wktl tleFlkhese zbdkaf ahd rehaned tle [ear b tle Lbrse

tle [ear b tle Aiikmatbr as we oeikeved tlat nahynargets lave nbved tb extrenes (aiikmatbr àws bpeh)kh 16 ahd were due br a shap oafg (aiikmatbr àwsfibse) kh 14 ]e expefted tle okm wkhhers kh 16deveibped nargets equktkes (apah UV Eurbpe) ahdsnaii fap equktkes tb afe leadwkhds wlkie tle okmibsers b 16 enermkhm nargets mbid nkhers mbidahd ibhm obhds wbuid lave takiwkhds kh tle Hew[ear Te eariy resuits were ehfburamkhm as tle aiikma-tbr àws oemah tb shap slut qukfgiy kh 14 as ahy-tlkhm reiated tb saety surmed ahd equktkes strummied khtle 1047297rst lai b tle year As tle year prbmressed lbw-ever tle resuits oefane nbre nkssed as fbnnbdktkestunoied kh tle sefbhd lai b tle year as tle GkhmDbiiar tlene enermed enermkhm nargets mave oafgnufl b tlekr eariy makhs ahd iarme fap UV equktkes1047297haiiy faumlt a okd iate kh Q4 tb 1047297hksl strbhmiy Tebhe aiikmatbr àw tlat perbrned prefkseiy as expeftedwas tle ibhm obhd vs VampZ 5 àws as tley fibsedhkfeiy ahd reversed bver tle fburse b tle year wktlibhm reasurkes deikverkhm heariy twkfe tle returh bequktkes apah strummied eariy ahd perbrned weii khtle fibskhm stretfl wlkie Eurbpe ahd snaii faps were

iammards as expefted ahd mbid ahd mbid nkhers werestrbhm eariy ahd very weag iate wktl nkhers aiikhmskmhk1047297fahtiy khtb tle red kh Q4 Bveraii tlere was aibt b àw shappkhm mbkhm bh kh 14 ahd kt was dkst-fuit br nbst khvestbrs tb nage a ibt b nbhey Terewere sbne mreat perbrnahfes ahd tlere were returhstb oe lad kh piafes ikge Khdka Flkha Okbtefl IbhmObhds bh tle ibhm skde ahd slbrtkhm fbnnbdktkesprbdufed sbne butstahdkhm returhs br tle FAs ahda lahdui b ehermy traders ahd uhdanehtai ibhmslbrt nahamers wlb stepped up tb slbrt bki wleh tlena`brkty were faiikhm br a obttbn kh tle aii As 14fane tb a fibse we khfreased bur bfus bh tle tleneb bur Q6 ietter Lkmlway tb tle Dahmer Pbhe ahdprepared br tle turouiehfe tlat we saw bh tle lbrk-zbh Iast year was aobut dbdmkhm Aiikmatbrs7 15nay oe nbre aobut fbnoat ahd tle wbrds b Skper‛sadnbhktkbh tb Naverkfg‛s fiass at bp Muh rsquotlere arehb pbkhts br sefbhd piafebdquo




Cburtl Quarter 14

Narget Butibbg

Iet‛s tage a qukfg ibbg oafg kh brder tb prbvkde sbnebuhdatkbh br ibbgkhm brward khtb tle Hew [earBhe b tle tlkhms we dksfussed kh Lkmlway tb tleDahmer Pbhe was lbw rsquowe duooed 14 tle [ear btle Aiikmatbr wleh we dkd bur 1047297rst Arbuhd tle ]brid]eokhar kh ahuary ahd we lad skx gey remkbhaikhvestneht tlenes wlere we tlbumlt kt wbuid oe (tbqubte Naverkfg) a armet _kfl EhvkrbhnehtbdquoFbnkhm khtb 14 we saw bppbrtuhktkes kh ArmehtkhaVpakh Mreefe Khdka Flkha ahd apah ahd tagkhm aibbg at tle sfbreobard tlbse areas deikvered sbikdresuits bveraii kh tle quarter ahd br tle uii year asArmehtkha Khdka ahd Flkha (A-Vlares) sbared apahwas sbikd Vpakh was lkt oy tle aiikhm Eurb ahd Mreefewas punneied kh Q4 as ears b tle ieckst Vyrkza partywkhhkhm tle eieftkbh mrew strbhmer As tle yearprbmressed we dbve deeper khtb a hunoer b areaswlere we saw fbnpeiikhm tarmet bppbrtuhktkes ahdiksted a hunoer b tlbse spefk1047297f kdeas kh iast quarter‛sNarget Butibbg Ibbgkhm at tle iast tlree nbhtlsoebre we dkve khtb bur vkew br tle rest b 15 kt ks

fiear tlat lekmltehed vbiatkikty freated nahy wkhhersahd ibsers ahd khvestbrs lad tb oe hknoie ahd taftkfaitb fapture exfess returhs kh 14 As we dksfussed khtle Q4 _evkew seftkbh aobve kt was a tunuitubus yearwlere nahy nargets were 1047311at tlere were a ew tlatprbdufed lume returhs (ikge A-Vlares ahd Khdka) ahdnufl b tle returhs br tle ew nargets tlat prbdufedreturhs were earhed kh tle iast ekmlt tb teh weegs btle year (em 11 b tle 16= kh tle VampZ 5 returhfane acer 115) Vb iet‛s tage a peeg at lbw sbne btle oest kdeas rbn iast quarter perbrned ahd seewlere we stahd tbday

]e dksfussed a qubte rbn bur sunner A]][]eokhar ]leh ZKKMV Ciy tlat sakd rsquoslbuid tle EFOstart expahdkhm tlekr oaiahfe sleet amakh tlat wkii prbvkde a orksg takiwkhd br Eurbpeah assets ahd tleMKKZV fbuhtrkes kh partkfuiar wlkfl are nufl nbreieveramed tb tle upskde as tley are startkhm rbn aibwer oasebdquo ]e aisb nehtkbhed lbw rsquoEurbpe as awlbie las oeeh bstfkaiiy iec br dead as a refeht

Efbhbnkst fbver slbws ah bovkbusiy dead parrbt wktlCrau-Hekh Nergei stahdkhm hext tb kt saykhm rsquokt‛s bhiyrestkhmhellipbdquo Mkveh tle ibhm-tern trafg refbrd b ahkhverse fbrreiatkbh oetweeh namazkhe fbvers ahduture perbrnahfe kt nade sehse tlat perlapsEurbpe was due br a perkbd b butperbrnahfe yetwe heeded a fataiyst Ibbgkhm at tle oasget bEurbpeah ECs br Mernahy Crahfe ZbrtumaiKreiahd Ktaiy Mreefe ahd Vpakh we saw nkxedperbrnahfe bver tle past tlree nbhtls wktl E]Mup = E]Q up 4 ZMAI dbwh (16) EK_I up1 E]K dbwh (6) M_EG dbwh (16) ahd E]Zdbwh () Lbwever wleh we ibbg at perbrnahfeskhfe tle EFO ahhbuhfeneht b a QE Zrbmran brEurbpe bh ahuary hd (tle fataiyst) we saw adkereht stbry wktl tlbse nargets up 5 4 1 =6 1 ahd respeftkveiy versus a rkse b brtle VampZ 5 ]e aisb pbkhted but tlat rsquotle FAZEratkbs br tlese fbuhtrkes teii us tlat tle returhs bvertle hext defade wkii oe very strbhm out tle butibbgbr tle hext teh nbhtls ks iess fiear mkveh aii tleuhfertakhty reiated tb mbverhneht trahsktkbhs EFO pbikfkes ahd Eurb nenoerslkp `bfgeykhm ]e are

1047297hdkhm ibts b fleap assets afrbss a wkde swatl b tlenargets out we are fbmhkzaht b tle hear-tern rksgssb wkii oe fautkbus kh bur ahmie b asfeht kh tle ZKKMVaiibfatkbhbdquo ]e lave oeeh fautkbus bh oukidkhmpbsktkbhs kh Eurbpe tb date out wktl Vuper Narkb ahdCrau-Hekh Nergei apparehtiy bh tle sane 1047311kmlt piahwe are hbw steepehkhm tle ahmie b apprbafl ahd areoemkhhkhm tb oukid a neahkhmui bverwekmlt

Oafg kh tle UV we taiged aobut lbw kt nkmlt oe tknetb piay a ikttie deehse saykhm rsquoah khterestkhm tradelere wbuid oe tb mb ibhm tle lkml quaikty iarme faps(tb rsquolkdebdquo k ybu reaiiy nust lave meherai UVexpbsure) ahd slbrt tle ùhgy hanes amakhst tlen sbibhm K]I ahd slbrt K]Nbdquo Tat deehskve pbstureturhed but tb oe mbbd advkfe br a ew weegs eariy khQ4 out tleh narget nbnehtun turhed up bhDefenoer 15tl ahd tle pakr oefane pretty lkmliyfbrreiated ahd dkd hbt meherate nufl returh Mkvehbur lkstbry b oekhm rsquoeariybdquo bh bur deehse faiisperlaps tlks wbuid hbt oe a oad kdea br tle fbnkhm




Cburtl Quarter 14

nbhtls out nufl depehds bh miboai ikqukdkty ]edbve khtb sbne spefk1047297f seftbrs saykhm rsquokh leaitlfaretle okbtefl seftbr ibbged stretfled amakh as KOO kshbw lt lkmler tlah tle Ceoruary peag tlat prefededtle () fbrreftkbh kh Narfl ahd nuitkpies seensokt extehded acer ahbtler lume ruh kh 14bdquo Fautkbhwas fieariy hbt warrahted lere as tle okbtefl seftbrfbhtkhues tb nage hew lkmls ahd KOO was up vsVZ[ bhiy up 4 bver tle past tlree nbhtls ]e sakdrsquotle dksperskbh kh teflhbibmy las oeeh qukte dranatkfas tle bid tefl hanes ikge NVC KHF B_FI ahdLZQ are up 6 wlkie tle hew tefl hanes ikgeZFIH EOA[ MBBMI ahd HCI are 1047311at Tere ksah eveh wkder dksperskbh oetweeh CO up heariy 4ahd ANPH dbwh () ahd we wbuid expeft tb seesbne neah reverskbh kh tlese semnehts kh tle hextew quartersbdquo Te BidHew efl oattie was nbre ba draw (sikmlt edme tb tle Hew) wktl tle Bid Muardfbnkhm kh dbwh (=) up 1 up 1 ahd up =wlkie tle Hew Muard was dbwh (lt) up = dbwh(6) ahd up 1lt Lbwever tle COANPH oattiepiayed but qukte hkfeiy as a pakr trade wktl CO up 1ahd ANPH up 5 ]e taiged aobut lbw kh

rsquo1047297hahfkais we fbhtkhue tb oeikeve tlat tle okm oahgslave oeeh rsquoDbdd-Crahgedbdquo ahd lave oeeh turhed khtbutkiktkes as tley fah hb ibhmer iever up tb ieveis heededtb meherate okm returhs kh a PK_Z wbridbdquo Tks vkewlas oeeh sbikd as tle oahgs strummied wktl F dbwh(4) ZN dbwh (1) OAF dbwh (6) ]CF up 4MV 1047311at ahd NV up 5 ]e taiged aobut tle fbhsunerspafe saykhm rsquowe fane khtb tle year tlkhgkhmkhvestbrs heeded tb rsquotlkhg butskde tle Okm Obxbdquo ase-Fbnnerfe was mbkhm tb nage kt tbuml bhtradktkbhai retaki ]e tlkhg tlere wkii oe fbhtkhued pressure bh tlese ouskhess nbdeis out tlere are twbslbrt-tern aftbrs tlat nay nage tlese tenpbraryibhms prkvate equkty okds ahd ibwer mas prkfesbdquo Bhfue fbnpahkes ikge OO[ OOO[ FZ ahd VLIDsurmed ahd ZEN was aftuaiiy tageh but oy a ZE okdahd tley aii rbse snartiy up 15 13 3 ahd15 respeftkveiy Bhe khdustry wktlkh tle fbhsunerspafe we lave ibved skhfe Bftboer b 1 las oeehtle Akrikhes ]e nehtkbhed iast quarter lbw rsquoweikged tle Akrikhes out we aisb see fbhtkhued strehmtl

kh btler travei reiated ouskhesses ikge Far _ehtais ahdLbteisbdquo ]e dkd ah A]][ ]eokhar tktiedFbhsbikdatkbh gt Upskde ahd fbhtkhue tb ikgekhdustrkes wlere tlere ks fbhsbikdatkbh (akrikhes farrehtais nedka teflhbibmy ehermy nbokie autbsdeehse) Kh tle past tlree nbhtls tle akrikhesfbhtkhue tb meherate strbhm returhs wktl AAI up1lt DAI up 11 UAI up 3 IUS up 3 ahdOIU up 43 (ahd we tlkhg tlese hunoers dbh‛tre1047311eft lume obbsts tb EZV fbnkhm rbn ibwer bkiprkfes kh 15) Kh far rehtais Lertz was up 5 ahdAvks was up 1 ahd kh lbteis Vtarwbbd was up 6ahd Lkitbh was up 16 Ckhaiiy we hbted tlat rsquoweexpeft fbhtkhued strbhm mrbwtl kh Deehse as mebpbiktkfai tehskbhs rkse ahd fbuhtrkes ikge apah ahdFlkha khfrease nkiktary spehdkhmbdquo wlkfl las piayedbut as expefted wktl IN up 4 MD dbwh () OAup ahd HBF up 1

Bur pbsktkve stahfe bh apah piayed but weii as Drbse 3 out bur fbnnehtary tlat rsquoperlaps tle nbstfbnpeiikhm bppbrtuhkty tle oahgs (VNCM NUNCM _esbha Vlkhsek) lave hbw obttbned ahd hbw

lave very skmhk1047297faht upskde (fbuid rkse as nufl as3 tb 1) as tlekr _BEs fbhtkhue tb refbver ahdorbgerame 1047297rns ikge Hbnura ahd Dakwa slbuid oevery strbhm perbrners as dbnestkf tradkhm vbiuneskhfrease ahd brekmh fapktai returhs tb tle apahesenargetbdquo dkd hbt piay but as expefted at aii Te oahgsfbhtkhued tb oe flaiiehmed tb put hew ibah nbhey tbwbrg ahd tle stbfgs strummied dbwh (1) up dbwh (3) up 6 ahd dbwh (lt) respeftkveiy wlkietle orbgers were aisb nkxed wktl HN_ dbwh (11)ahd Dakwa up 4 Bur vkew bh tle [eh lbweverfbhtkhued tb meherate strbhm returhs wlere we sakdrsquo1047297haiiy we rekterate tle pbkht we lave dksfussed brnahy quarters hbw tlat rsquoapah las hb flbkfe out tb pursue a weager [ehbdquo ahd tle [eh dkd khdeed sikpahbtler (3) br tle past ew nbhtls ahd we expeftnbre weaghess alead (see Vurprkse oeibw)

Ibbgkhm at Enermkhm Nargets we hbted tlat kt nadesehse tb spikt fbuhtrkes khtb twb mrbups Vervkfe-oasedahd Fbnnbdkty-oased rsquoas tle iatter appear nbre




Cburtl Quarter 14

vuiheraoie tb tle miboai mrbwtl sibwdbwh ahd Flkha‛sredufed appetkte br fbnnbdktkes kh partkfuiarbdquo Tksokurfated pbsture wbrged very weii kh tle past tlreenbhtls as fbuhtrkes ikge _usska Orazki ahd Nexkfbstrummied aiikhm (1lt) (1) ahd (14)respeftkveiy wlkie fbuhtrkes ikge Khdka akwah ahdFlkha rbse 6 6 ahd lt respeftkveiy Dkvkhm aikttie deeper we taiged aobut _usska saykhm rsquosbne btle fleapest assets bh tle piahet exkst kh _usska tbdaykh partkfuiar tle Ehermy fbnpahkes tle iarmest oahgahd tle prknary Khterhet fbnpahy ]lkie kt ks lardtb see wleh tle hematkve _usska rletbrkf wkii eoo weare fbh1047297deht tlat ibhm-tern khvestbrs wlb ouy tleseassets as tlese prkfes wkii nage nuitkpies b tlekrnbhey A pbkht tb geep kh nkhd ks tlat nbst b tleibss tlks year kh tlese hanes las aftuaiiy fbne rbn_uoie deprefkatkbh ahd we expeft tlat trehd kshearkhm kts ehdbdquo ]e hbted tlat kt was ikgeiy tlatseftbrs reiated tb ehermy (nbst pebpie tlkhg _usska ks ùst ah ehermy piay wlere we oeikeve kt ks aisb afbhsuner piay) wbuid strummie tlrbuml nkd-Defenoer (tax-ibss seiikhm 1047297hksles) ahd tlat tlere wasa flahfe tlat tlkhms fbuid turh nbre pbsktkve Bver

tle ehtkre perkbd b tle iast tlree nbhtls tle returhsbh _usskah equktkes lave oeeh dreadui wktl Iugbki1047311at Mazprbn dbwh () Voeroahg dbwh (6lt)[ahdex dbwh (4) ahd tle _V EC dbwh (1=) astle _UOUVD fbiiapsed (61) Lbwever skhfe 115_usskah equktkes are a fbnpieteiy dkereht stbry (astbry we tlkhg extehds tlrbumlbut 15 see Vurprkse5 oeibw) wktl tlbse sane hanes up 44 lt dbwh (4) ahd up 6 ahd tle _UOUVD 1047297rner oy4 ]e aisb lkmlikmlted Armehtkha saykhm rsquowe lave piayed kh tlree equktkes Nafrb Oahg Zanpa Ehermkaahd [ZC as we tlkhg tle rewards butwekml tle rksgs at preseht sb we wkii fbhtkhue tb sfaie khtb bppbrtuhktkesas tley arksebdquo Zerbrnahfe br tle servkfesfbnpahkes las oeeh strbhm wktl ONA up 1lt ahdZAN up out [ZC strummied aibhm wktl btlerbki-reiated hanes aiikhm (6) Kh Khdka we wrbtetlat rsquokhvestbrs wkii oe rewarded br lavkhm expbsuretb khdustrkes ahd fbnpahkes tlat leip Khdka mrbw tbtlekr uii pbtehtkai (Ehmkheerkhm FbhstruftkbhEieftrkf Zbwer) expahd tlekr nkddie fiass (Oahgkhm

Ckhahfe Khsurahfe) ahd leip mrbw tlekr fbhsunptkbh(Khterhet _etaki e-Fbnnerfe)bdquo Zerbrnahfe wasnkxed bver tle perkbd as sbne prb1047297t tagkhm khDefenoer was reversed oy strbhm perbrnahfe kh15 ieavkhm hanes ikge EZK N ahd KOH aii uparbuhd 4 Ckhaiiy we sakd tlat rsquowe oeikeve tleFlkhese equkty nargets are bh tle verme b askmhk1047297faht oreagbut as tle mbverhneht knpienehtstle Trbuml rakh (fbhheftkbh oetweeh Vlahmlak ahdLbhm Gbhm nargets) ahd we lave oeeh khfreaskhm burexpbsure tb tle A-Vlare narget tb fapktaikze bh tlekhfreased khvestneht aftkvkty tlat wkii resuit rbn tlksexpahskbh b narget affessbdquo Te nbve kh A-Vlareswas hbtlkhm slbrt b speftafuiar kh tle past tlreenbhtls as AVL_ surmed 65 (aftuaiiy was up kh tleibw-4s oebre sbne prb1047297t tagkhm kh ahuary) ahdwe expeft tlat tle Ouii Narget ks ùst mettkhm started khFlkha (see Vurprkse 1 oeibw)

]e wrbte akriy extehskveiy iast quarter aobut ehermyahd dksfussed lbw tle tean lad dbhe a mreat deai bresearfl bh fbnpahkes tb fbne up wktl a rsquoslbppkhmikstbdquo b attraftkve hanes tlat we wbuid waht tb bwh at

fertakh prkfe ieveis ]e sakd tlat rsquowe see veryskmhk1047297faht upskde pbtehtkai kh fbnpahkes ikge EBMCAHM FZE ]II ZD _VZZ ahd _KFE as tleyexefute bh tlekr deveibpneht piahs ahd fbnnbdkty prkfes staokikze as suppiy ahd denahd fbne oafg khtboaiahfebdquo Vb as kt turhs but we were perlaps bveriykh1047311uehfed oy aii tle obttbn-faiiers kh Bftboer(khfiudkhm sbne anbus bhes ikge Obbhe Zkfgehswlb sakd bki fbuidh‛t mb oeibw $=5hellip) ahd we were aikttie eariy kh tlkhgkhm aobut wbrds ikge rsquooaiahfebdquo khtle bki narget Te mbbd hews ks tlat we werefautkbus aobut re-ehterkhm tlese nargets ahd avbkdedtle addktkbhai pakh tlat bffurred kh Q4 Bver tlewlbie perkbd tlese hanes lad nkxed perbrnahfe astle lume ibsses afrbss tle obard tlrbuml tle ehd btax-ibss seiikhm kh nkd-Defenoer lave oeeh reversedkh a ew fases Te tkfgers aobve were up up =up 16 dbwh (6=) dbwh (13) up 1= ahd dbwh(=) respeftkveiy as tle refbvery las oeeh veryrsquooaskh spefk1047297fbdquo (Zernkah ahd Eamie Cbrd dbkhm weiiOaggeh ahd Narfeiius hbt sb nufl) as tle narget ks




Cburtl Quarter 14

paykhm very fibse attehtkbh tb narmkhai fbsts mkveh tleuhfertakhty kh tle bki nargets ]e aisb dksfussed lbwtlere was ahbtler way tb piay ehermy kh saykhm rsquoweaisb fbhtkhue tb see bppbrtuhkty kh tle MZs b NIZsikge EE ahd ZAMZ wlkfl lave a preerred fiakn bhtle bperatkhm fasl 1047311bws b tle pkpeikhe assetsbdquoDespkte ibwer prkfes UV prbduftkbh wkii rkse kh 15ahd aii tlbse lydrbfarobhs lave tb oe trahspbrted sbpkpeikhes wkii oehe1047297t Mkveh tle turnbki kh tle ehermyspafe khvestbrs seen tb stkii oe nksskhm tle dkerehfeoetweeh tlese fbnpahkes ahd tle EampZ fbnpahkes sbEE was bhiy up bver tle past tlree nbhtls ahdZAMZ was dbwh (6) sb tle bppbrtuhkty lere ksikgeiy stkii qukte rboust

]e dum khtb tle ehermy servkfes fbnpahkes ahd hbtedtlat rsquofbnpahkes ikge LAI VIO ahd OLK leipfbnpahkes drkii nbre weiis tb nakhtakh prbduftkbhieveis ahd lbid ieases (ybu nust drkii wktlkh a fertakhanbuht b tkne kh brder tb nakhtakh iease bh afreame)ahd we partkfuiariy ikge tle uhkt efbhbnkfs b tlesahd fbnpahkes LFIZ VIFA CNVA ahd ENEVbdquo]lat we nkssed lere was tlat as prkfes eii tle EampZ

fbnpahkes wbuid put pressure bh tle prkfes flarmedoy servkfes fbnpahkes ahd narmkhs wbuid oesqueezed Tese fbnpahkes tbbg sbne skmhk1047297fahtpakh bver tle past tlree nbhtls wktl LAI dbwh() VIO dbwh (1) OLK up (oekhm tagehbver oy LAI) wlkie tle sahd hanes eii (1) (66)(4) ahd (6lt) respeftkveiy Te bhiy orkmlt spbtlere las oeeh tle dranatkf turharbuhd kh tle 1047297rst twbweegs b Ceoruary as bki prkfes lave reobuhded hkfeiyrbn tle nkd-$4s tb tle ibw $5s (we dbh‛t tlkhg tlksks sustakhaoie see Vurprkse lt oeibw) las faused sbneneahkhmui slbrt fbverkhm kh tle servkfes seftbr ahdLFIZ VIFA ahd ENEV raiiked 6 3 ahd 6respeftkveiy Ahbtler reiated ehermy kdea wedksfussed was fbai as we sakd tlat rsquotle _epuoikfah wkhkh tle Vehate sets up tle pbtehtkai br iemksiatkbh tlatwkii oe nbre avbraoie tb tle fbai fbnpahkes sb ktley fah avbkd oahgruptfy kh tle hear tern tlerefbuid oe sbne khterestkhm bppbrtuhktkes kh hanes ikgeAFK OU AH_ ]I FH ahd FIDbdquo Tks kdeaibbged khterestkhm br a fbupie weegs pbst-eieftkbh as

tlese stbfgs raiiked lard out tleh tle euplbrka adedahd tley fbiiapsed tb ieveis tlat faused severe ibssesbver tle perkbd Te fbai hanes were defknateddbwh (45) (lt) (65) (55) () ahd (66)respeftkveiy as dksfusskbh b oahgruptfy reafled aevered pktfl Teh ùst tb fbhbuhd aii nargetpartkfkpahts a nasskve slbrt squeeze ehsued bh tle1047297rst tradkhm day b Ceoruary ahd tle fbai fblbrt ks upa rboust 3 13 5 15 11 ahd 13 kh tle iastteh tradkhm sesskbhs ]e lave fbnnehted tlat KC tlefbai fbnpahkes fah avbkd oahgruptfy tle equktkes wkiiaft ikge bptkbhs ahd tle returhs fah oe lume out tle vbiatkikty nages tlese hanes heariy uhtbuflaoie brnbst khvestbrs Ahbtler khdustry mkveh up rbn deadks tle bslbre drkiiers ahd we fbnnehted iast quartertlat rsquotle defikhes appear tb oe reaflkhm extrene ieveisahd tlere fbuid oe bppbrtuhkty kh hanes ikge _KMDB HE ES A] _DF ahd VD_I sb we wkii oeibbgkhm br skmhs b a nbnehtun turh tb wade khtbtle spafebdquo Ikge tle fbai hanes tle ehtkre perkbd wasoibbdy wktl ibsses b (63) (5) (1) (4lt)(1=) (1) ahd (43) respeftkveiy out amakh ikgetle fbai hanes a nasskve slbrt squeeze oemah kh

Ceoruary ahd tlese stbfgs lave raiiked 1 = lt6 1lt 1 ahd 4 bver tle 1047297rst twb weegs bCeoruary ]e expeft ehermy tb renakh vbiatkie br tleoaiahfe b 15 ahd we wkii oe spehdkhm a ibt b tkneibbgkhm at bppbrtuhktkes kh obtl tle deot ahd equktynargets br aii b bur pbrtbikbs

]leh we were dbkhm bur year-ehd A]][ ]eokharkh Defenoer sbnebhe asged tle questkbh k we sawahytlkhm surprkskhm bh tle lbrkzbh br 15 _atlertlah ahswer b tle tbp b ny lead K tlbumlt tlatsbuhded ikge a mreat tbpkf br tle ahuary Arbuhd tle]brid faii ahd set b tb fbne up wktl a ikst b 1Vurprkses br tle Hew [ear Kh tlkhgkhm aobut tleNarget Butibbg seftkbh br tlks quarter tlesesurprkses seened ikge a pereft oaseikhe br bur furreht vkew b tle wbrid Bhe faveat ks heeded lbwever asVurprkses are a ikttie dkereht tlah aftuai brefasts(aitlbuml prboaoiy aobut ùst as affuratehellip) as tleyare khtehtkbhaiiy freated tb oe hbh-fbhsehsus ahdlave sbne reasbhaoie prboaokikty b hbt bffurrkhm




Cburtl Quarter 14

Te uhikgeiy hature b a true Vurprkse ks aftuaiiy areaiiy mbbd tlkhm as tley fah oe qukte prb1047297taoie askhvestnehts k ybu are pbsktkbhed br tlen ahd tleyaftuaiiy db bffur b rane tle dksfusskbh b tle 1Vurprkses K lave khfiuded lere a De1047297hktkbh aDksfiakner ahd a Quaik1047297er

De1047297hktkbh0 A Vurprkse ks a varkaht perfeptkbh (ahkdea tlat ks naterkaiiy dkereht rbn fbhsehsus) tlat Koeikeve las a oetter tlah 5 flahfe b bffurrkhm khtle furreht year (tle gey ks tlat kt nust oe naterkaiiy dkereht)

Dksfiakner0 K lave khtehtkbhaiiy hbt read ahy b tlebtler iksts b 15 Vurprkses (nbst knpbrtahtiyOyrbh‛s) sb ahy sknkiarkty oetweeh tle Vurprkses khtlks presehtatkbh ahd ahy b tlbse predkftkbhs ksfbkhfkdehtai br perlaps evkdehfe (k tley natfl tleOiafgstbhe ikst) tlat tlere was sbne flahheikhmaftuaiiy mbkhm bhhellip

Quaik1047297er0

Tere ks nufl wksdbn aobut tle biiy bpredkftkbh (sbne b kt iksted oeibw) ahd kt wbuid

prboaoiy lave oeeh wkse tb defikhe tle request tbprbdufe tlks iksthellip Tat sakd tle prbfess b tlkhgkhmaobut Sarkaht Zerfeptkbhs ahd Vfeharkbs ks vaiuaoie tbbur khvestneht prbfess ahd kt was aftuaiiy gkhd b uhtb spehd sbne extra tkne tlkhgkhm butskde tle obx

Kh tle presehtatkbh K iksted tlree mreat qubtes aobuttle biiy b nagkhm predkftkbhs tlat wbuid oe leipuitb geep kh nkhd0

rsquoNagkhm predkftkbhs ks lard espefkaiiy aobut tleuturehellipbdquo [bmk Oerra

rsquoTe 1047297hahfkai nargets meheraiiy are uhpredkftaoie Vbtlat bhe las tb lave dkereht sfeharkbs Te kdea tlatybu fah aftuaiiy predkft wlats mbkhm tb lappehfbhtradkfts ny way b ibbgkhm at tle nargetbdquo MebrmeVbrbs (khterestkhm tlat bhe b tle qubtes was rbnMebrme eveh oebre K ghew tle tlene b tle ietterwbuid oe aobut lkn)

rsquoTbse wlb lave ghbwiedme dbht predkft Tbse wlb predkft dbht lave ghbwiedmebdquo Iab zu

Vb we ber tlese Vurprkses nbre as exanpies bSarkaht Zerfeptkbhs tb prbnpt deoate ahd dksfbursereaikzkhm tlat slbuid tley aftuaiiy piay but (ikgeiy tlatlai wkii -- tle prboien ks deternkhkhm wlkfl laihellip)tley fbuid iead tb very prb1047297taoie resuits skhfe tley arefbhtrary tb tle furreht fbhsehsus ahd tley are ikgeiyhbt prkfed khtb tle nargets Ahbtler pbkht tb oenkhdui b ks tlat a year ks a ibhm tkne tlkhms fahflahme sbnetknes dranatkfaiiy ahd we heed tbrenenoer tle wksdbn b blh Nayhard Geyhes wlbanbusiy qukpped rsquowleh tle afts flahme K flahmeny nkhd wlat db ybu db skr2bdquo ]e wkii renakh vkmkiaht durkhm tle year tb trafg tle prbmress b eaflb tlese Vurprkses ahd ibbg br bppbrtuhktkes tbfapktaikze bh tlen kh tle pbrtbikbs out wkii aisb oeready tb flahme bur nkhds (ahd bur pbsktkbhkhm)slbuid tle afts flahme

Vurprkse 10 e Iuia Zkvbt

Kh a deumlècirc vu experkehfelargehkhm oafg tb tle Orazki eieftkbhs tle

radkfai Vyrkza Zarty wkhs tle Mreeg Eieftkbh (was stkiia pbtehtkai surprkse skhfe wrbte oebre eieftkbh) outAiexks skpras turhs but tb hbt oe as extrene tb tleiec as expefted (ùst ikge Iuia) ahd tle Mreeg equktynarget surmes (ùst ikge Orazki dkd br hext 1047297ve years)turhkhm but tb oe bhe b tle oest perbrnkhm nargetsbr 15

]leh Iukz Khaacutefkb Iuia da Vkiva was fanpakmhkhm tboefbne tle Zreskdeht b Orazki kh tle eariy s tlewbrid oeikeved tlat le was a radkfai extrenkst wlbwbuid db krreparaoie larn tb tle fbuhtry k eieftedKh aft durkhm tle skx nbhtls ieadkhm up tb tleeieftkbh kh Bftboer b tle Kobvespa Khdex eii(5) as pbiis slbwed tlat Iuia was tb oe tle hextZreskdeht Vlbrtiy acer le was eiefted kt oefaneappareht tlat Iuia was hbt bhiy a slrewd pbiktkfkah(le ghew wlat tle pbpuiafe wahted tb lear kh brdertb met eiefted) out le was aisb a nbre fehtrkstouskhess-brkehted ieader ahd tle equkty nargets khOrazki oemah a nuitk-year raiiy tlat tbbg stbfgs up




Cburtl Quarter 14

nbre tlah lt bver tle hext 1047297ve years Vbne wbuidarmue tlat tle equkty raiiy was sknpiy a uhftkbh b tleFlkha ied fbnnbdkty obbn (fieariy tlat was aaftbr) out tlere ks hb questkbh tlat Iuia‛s strbhmieaderslkp was a prknary aftbr kh tle refbvery Testbry b Aiexks skpras kh Mreefe biibws tle sanesfrkpt le was orahded a radkfai extrenkst tle nargetseii nbre tlah (5) ieadkhm up tb (ahd rkmlt acer) lkseieftkbh ahd kt appears tlat le ks sibwiy ieahkhm nbretbward tle fehter aiready Nahy wkii say tlat Mreefelas hbtlkhm tb seii tb tle miboai narget piafe tle wayOrazki dkd out kt ks hbt hefessarkiy tle vbiune b tradeout ratler lbw ibw are tle vaiuatkbhs b fbnpahkes(bhe b ibwest FAZE ratkbs kh tle wbrid) lbw araibhm kh tle refbvery (bhe b bhiy Eurbpeah fbuhtrkeswktl pbsktkve MDZ mrbwtl ahd refbrd settkhm tburksntlks year) ahd lbw nufl fapktai wkii 1047311bw khtb tlenarget (sb ar tlks las oeeh tle nksskhm khmredkeht)Bver tle 1047297rst twb weegs b Ceoruary tlere las oeeh aibt b sparrkhm wktl tle miboai nedka ahd sbne hbt sbavbraoie manes b flkfgeh wktl tle rbkga ahd NrDramlk (Vuper Narkb dkdh‛t oikhg) ]e oeikeve tlattle rletbrkf wkii fbhtkhue tb sbceh obtl skdes wkii

fbnprbnkse (ùst ikge tley dkd kh 11 out ikgeiy hbtqukte as extreneiy kh avbr b tle EU tlks tkne hbnbre Austerkty) ahd tle nargets wkii fbhtkhue tbrefbver as tle uhfertakhty b tle eieftkbh ks repiafedoy tle bfus bh tle wbrg tlat las tb oe dbhe ]e seebppbrtuhktkes kh obtl Mreeg Mbverhneht Obhds ahdMreeg equktkes (partkfuiariy tle oahgs wlere kh uiidksfibsure we lave oeeh eariywrbhm sb arhellip) ahdwlkie tle patl wkii hbt oe snbbtl we expeft tlatreturhs wkii oe qukte attraftkve bver tle fburse b tleyear

Vurprkse 0 Turhkhm apahese K _eaiiy khg VbDespkte tle OB ahd tle EFO pkfgkhm up tle QE oatbhrbn tle Ced ahd fbnnkttkhm tb purflase $ltO ahd$35O b mbverhneht obhds eafl nbhtl respeftkveiyDe1047311atkbh reenermes as tle prknary efbhbnkfflaiiehme kh tle deveibped wbrid MDZ mrbwtl staiisahd miboai khterest rates fbhtkhue tb aii

Te Oahg b Ehmiahd tle Vwkss Hatkbhai Oahg ahd tle

Ced lave aii tageh a oreag rbn tle QE reiay ahd lavestbpped expahdkhm tlekr Oaiahfe Vleets Tey lavefbiieftkveiy passed tle oatbh tb tle OB ahd tle EFO(wlkfl 1047297haiiy fbhvkhfed tle Mernahs tlat tleyheeded tb db sbnetlkhm) ahd tle miboai ikqukdktypunp wkii fbhtkhue tb oe prkned kh 15 (at ieast tlatks wlat Nr Dramlk sakd wbuid lappeh kh Narfl outtley lave hever aftuaiiy obumlt ahy obhd tley sakdtley were mbkhm tb kh ahy btler prbmran) Lbpefbhtkhues tb sprkhm eterhai kh tle MDZ brefastkhmmane as tle puhdkts aii bver tle wbrid stkii lave rboustmrbwtl expeftatkbhs br miboai efbhbnkes (despkteaftuai evkdehfe tlat tle deveibped nargets lave hbteveh fbne fibse tb tlbse estknates br years) Teexpeftatkbhs br tle UV tb mrbw kh exfess b 6 seenqukte leady (mkveh tle skxtl fbhsefutkve year b suo6 mrbwtl kh 14) ahd tle brefast br Eurbpe tbreturh tb expahskbh seens a okt bptknkstkf mkveh tlatCrahfe ùst sikpped oafg kh tb _efesskbh ahd tleIeadkhm Efbhbnkf Khdkfatbrs are turhkhm dbwhKhdkfatkhm eveh nbre sibwkhm mrbwtl alead ZNKslave turhed dbwh kh nbst b tle deveibped wbrid ahdtle Ckhahfkai Fbhdktkbhs Khdex kh obtl tle EU ahd

UV lave rbiied bver lard pbkhtkhm tb sibwer hbtaster mrbwtl alead Kh addktkbh de1047311atkbh ks oafg khtle EU (FZK ùst turhed hematkve) ahd wktl tlefbiiapse kh tle prkfe b bki brward kh1047311atkbhexpeftatkbhs lave frasled tbward 1 khdkfatkhm rksgb de1047311atkbh kh tle UV as weii Eurbpeah obhd ykeidsare aiready at nuitk-fehtury ibws wktl Mernah Ouhdshbw tradkhm oeibw MOs ahd a slbfgkhm bEurbpeah deot las hematkve ykeids tbday (tlat ks $14trkiikbh wbrtl) UV ykeids eii kh 14 fbhtrary tb aii3= efbhbnksts pbiied tb start tle year ahd ykeids lavepiuhmed amakh tb start 15 Ainbst hb bhe oeikevestlat rates wkii geep aiikhm wlkfl fah oe seeh kh tlenasskve slbrt khterest kh Mbverhneht Obhds out tlelahdui b pebpie wlb lave renakhed ibhm (ikge burtwb avbrkte 1047297mlter pkibts Lbkskhmtbh ahd Lbrsenah)fbhtkhue tb meherate strbhm returhs

Vurprkse 60 Iet‛s Db Iknob Hbw Fbhtrary tb tleCed Dbts (hew hew tlkhm) tle prepbhderahfe bEfbhbnksts‛ predkftkbhs (ùst ikge kh 14) ahd tle




Cburtl Quarter 14

fbhtkhuaiiy upward sibpkhm Ced Cuhds utures furves(skhfe ) tle Ced dbes hbt rakse rates kh 15 ahdibhm obhd rates tage but tle 1 ibws kh ykeid

Bhe b ny avbrkte flarts b tle past ew years lasoeeh a funuiatkve flart b tle Ced Cuhds Cuturesfurves eafl quarter skhfe Te mrapl slbws afbibrui fbiieftkbh b upward sibpkhm ikhes tlatessehtkaiiy lave predkfted (khfbrreftiy bovkbusiy) tlattle Ced wbuid rakse rates oetweeh 5 ahd 5 bvertle 1 tb 4 nbhtls Te furreht furve slbws tlatslbrt-tern khterest rates wkii oe 1 oy tle ehd b tlksyear (br perspeftkve tle 1 furve sakd rates wbuidoe 5 oy 1 ahd tle 1 furve sakd rates wbuidoe 1 tbday khstead b tle aftuai zerb) Te Ced Dbtsflart (eafl mbverhbr mets a dbt tb predkft tlekrestknate br rates eafl b tle hext tlree years) ks evehnbre ammresskve slbwkhm tlat tle ouig b tle CedObard tlkhg rates wkii oe 15 tb oy tle ehd b15 Tere ks a hear fbhsehsus tlat tle Ced wkiioemkh tb rakse slbrt-tern rates kh tle sunner (ahdtlat fbhsehsus mrew ibuder wktl tle strbhm ahuary `bos data) yet obtl teh-year ahd tlkrty-year treasurkes

lad raiiked very strbhmiy (ykeids eii lard) tlks year upuhtki iast weeg ]e lave seeh tlks patterh nahy tkneskh tle past year tle obhd oears mrbwi ibudiy ahy tknesbne UV efbhbnkf hunoer ks reiatkveiy strbhm ahdrates raiiy a ew oasks pbkhts oebre leadkhm oafgdbwh Te nybpkf bfus bh tle UV efbhbnkf datakmhbres tle iarmer miboai de1047311atkbhary trehds tlat arepuiikhm dbwh rates aii arbuhd tle wbrid ahd bhe tlkhmwe lave boserved bver ahd bver ks tlat tle 1-yearreasury biibws tle 1-year Ouhd wlkfl ksskmhk1047297fahtiy ibwer Ckhaiiy tlere ks hb nkstagkhm tleibhm-tern trehd flahheis bh tle 1-year ahd 6-yearreasurkes sb uhtki sufl tkne as ykeids oreag but btlbse flahheis kt ks tbuml hbt tb see ibwer br ibhmeras tle nahtra kh tle obhd narget Bhe reaioehe1047297fkary b tle ibwer rates las oeeh tle lbuskhmkhdustry ahd tle lbuskhm stbfgs lave oeeh ibbgkhmmbbd iateiy sb tley fbuid fbhtkhue tb slkhe kh a ibwerbr ibhmer ehvkrbhneht ahd tle Khdex LO wkii dbweii out sbne b tle fbnpbhehts ikge IEH ZLNGOL DLK BI ahd _[I fbuid db eveh oetter Ah-

btler oehe1047297fkary b tlks trehd wkii oe tle assetnahamers wlb spefkaikze kh 1047297xed khfbne ahd hanesikge OIG OG IN CKK ]D_ ahd V fbuid fbhtkhuetb lave takiwkhds

Vurprkse 40 Lere‛s tb [bu Nr Gkhdieoermer Fbhbuhdkhm tle fbhvehtkbhai wksdbn tlat tlefbhvermehfe b tle 6 rd year b a Zreskdehtkai Fyfie(averame 1 returh skhfe ]]KK) ahd tle 5 tl year b adefade (hb dbwh years skhfe 15) vkrtuaiiy muarahtees a pbsktkve returh br UV equktkes tle VampZ5 oreags tle strkhm b 3 fbhsefutkve up years ahdsuers kts 1047297rst ibskhm year skhfe lt

]e dksfussed Flaries Gkhdieoermer‛s Fyfie Tebryeariker kh tlks ietter out amakh qukfgiy le pbskts tlattle efbhbny ahd nargets biibw a seveh-year obbnoust fyfie drkveh oy repeataoie khvestbr oelavkbrsMkveh tle iast twb fyfikfai peags were kh 1 ahdlt we wbuid oe due br ahbtler peag kh 15 tlatwbuid resuit kh dksappbkhtkhm returhs br UV equktkesTat sakd tle trehd data ks extreneiy pbsktkve br tleVampZ 5 kh 15 wktl bur khdkfatbrs predkftkhm very

strbhm returhs Ckrst tle tweive nbhtls biibwkhm ankd-tern eieftkbh lave hever oeeh hematkve (skhfe]]KK) ahd lave averamed 13 Vefbhd tle tlkrdyear b tle Zreskdehtkai Fyfie averames 1 (wktl bhiytwb 1047311at years skhfe ]]KK) Tkrd wleh tle Vtratemasrehd Nbdei ks pbsktkve kh Defenoer tle narget ksup tle biibwkhm year a stuhhkhm 4 b tle tkneCburtl tlere las hbt oeeh a nkd-defade year (ehd kh5) kh tlks fehtury wktl a hematkve returh kh aft tleouig b years lave oeeh aobve 5 [et tlere ks afbuhtervakikhm trehd tlat ks khterestkhm khsbar as ktaikmhs wktl Nr Gkhdieoermer‛s perkbdkfkty Te VampZ5 las hever oeeh up seveh years kh a rbw Vb as15 prbmresses we wkii see k tle VampZ 5 wkii oe tleahtk-Fraps mane tlks year ahd rbii a iufgy seveh Tebhe wkidfard reiated tb tlks Vurprkse ks tlat tle natl kspredkfated bh hb nbre QE as we stkii oeikeve tlat brevery $1 okiikbh b Ced Oaiahfe Vleet expahskbh tleVampZ 5 wkii rkse 4 pbkhts (aobut ) K tle Cedflahmes fburse (br dbes sbne steaitl purflaseswlkfl lave refehtiy oeeh repbrted) tleh tlere fbuid




Cburtl Quarter 14

oe sbne addktkbhai annuhktkbh puslkhm br tle iufgysevehtl

Vurprkse 50 TNK ]rkt Iarme Despkte ah bhmbkhmnkiktary fbh1047311kft kh Ugrakhe tle knpaft b fbbrdkhated

miboai efbhbnkf sahftkbhs rapkdiy aiikhm bki prkfesredufed mbverhneht tax revehues a fbiiapskhmfurrehfy ahd a ibbnkhm efbhbnkf dbwhturh ahddbwhmrades b tlekr mbverhneht deot ahd fbhsehsustlat _usska ks sknpiy rsquouh-khvestaoiebdquo Vkr blhenpietbh turhs but tb oe rkmlt tlat Ouii Nargets areobrh bh Zessknksn ahd _usskah equktkes turh but tboe bhe b tle oest miboai nargets kh 15

Te _usskah equkty narget was a dksaster brkhterhatkbhai khvestbrs as tle fbiiapse kh bki prkfes khtle sefbhd lai b tle year trkmmered a piuhme kh tle_uoie tlat faused ahy khvestbr wlb was hbt ledmedoafg tb ibfai furrehfy tb ibse upwards b (45)(depehdkhm bh tle furrehfy) Aftuaiiy tle _usskahequkty narget ktsei was surprkskhmiy staoie mkveh aiitle nafrbefbhbnkf ahd mebpbiktkfai flaiiehmes kh tleremkbh out prkfes are sb khfredkoiy ibw (tbtai narget

ZE ks oeibw 5) tlat khvestbrs wlb lave stayed tlefburse are ibhm-tern bfused strbhm lahds Ibbgkhmalead khtb 15 tle _usskah efbhbny ks pbksed tbreturh tb _efesskbh (tlahgs tb tle bki prkfe defikhe) asfurreht bki prkfes are predkftkhm a 5 fbhtraftkbh khtle efbhbny (aitlbuml _usskah brefasters say bhiy1) ahd bhe fbuid fbhfiude tlat tle equkty nargetwkii biibw tle efbhbny dbwh Ah aiterhatkve vkew kstlat tle narget las oeeh a ieadkhm hbt iammkhmkhdkfatbr ahd wktl tle _V Khdex aiready dbwh (55)funuiatkveiy bver tle past bur years perlaps tleefbhbnkf perbrnahfe ks krreievaht tb stbfg prkfes attlks pbkht Kh ibbgkhm oafg at tle iast okm drbp kh bki khlt Bki fbiiapsed (=) ahd _usskah stbfgs weredbwh (=5) tb (lt5) (depehdkhm bh tle khdex) outtleh were up a stammerkhm 14 kh lahdkiybutpafkhm tle miboai equkty nargets ahd tle bki re-obuhd b ]lkie hbt brefastkhm prefkseiy tlesane gkhd b reobuhd mkveh tlat tlere ks hbt tle saneievei b miboai stknuius rbn Flkha ahd tle UV tlkstkne arbuhd out mkveh tle extreneiy fleap

vaiuatkbhs tle pbtehtkai br a neahkhmui pbsktkvesurprkse exksts Vb ar kh 15 _usska las appeared tbdefbupie sikmltiy rbn bki prkfes ahd tle prbspeft br atrue fease 1047297re kh Ugrakhe wbuid oe ah addktkbhaitakiwkhd tb nbve rbn Zessknksn tb Vgeptkfksn tlestate wlere Ouii Nargets reaiiy mrbw

Vurprkse 30 Aii at Miktters Te affeieratkbh btle Miboai Furrehfy ]ar rekmhktes tle denahd br tleuitknate furrehfy Mbid ahd tle Oaroarbus _eikfsurmes tb hew lkmls kh 15 farrykhm tle nkhers aibhmbr tle rkde

As tle miboai furrehfy wars rame ahd tle QE oatbh kspassed rbn tle UV UG ahd Vwkss Fehtrai Oahgs tbtle OB ahd EFO kt las oeeh khterestkhm tlks year tbwatfl prefkbus netais suddehiy oemkh tb trade ikgefurrehfkes amakh F[D Vkiver ks up 1 Mbid ks up4 tle Dbiiar ks up 65 tle [eh ks up 1 tle AUDks dbwh (4) ahd tle Eurb trakis tle pafg dbwh (3)Kt las oeeh anazkhm tb watfl lbw qukfgiy aii khvestbrs ùnped bh tle ibhm skde b tle VV Gkhm Dbiiar ahdtle trade was eeikhm extreneiy frbwded rkmlt khtb tle

EFO ahhbuhfeneht b tlekr brn b QE (hbt reai QEout a way br tle khdkvkduai fbuhtry Fehtrai Oahgs tbouy mbverhneht obhds) ahd everybhe expefted tleEurb tb met lannered ahd tle Dbiiar fbhtkhue rkskhmout b fburse tle bppbskte lappehed ahd tle Eurblas oeeh strehmtlehkhm sikmltiy skhfe tle hd ahd tleDbiiar peaged bh tle sane day Khterestkhmiy mbidfane khtb tle year wktl sbne nbdest nbnehtunlavkhm ùnped 1 rbn eieftkbh day iast year tb tleEFO ahhbuhfeneht day (wlkie tle VampZ 5 was upbhiy bver sane perkbd) ahd lad nade ahknpbrtaht oreag but aobve tle dna kh nkd-ahuary Mbid las raiiked lard rbn $115 oafg tb$16 kh ùst bver a nbhtl ahd we were slbwed amrapl tlat lkmlikmlted reskstahfe bverlead at $165ahd tlere was aisb data tlat slbwed lbw mbid ladoefbne bverobumlt ahd nkmlt oe due br a puiioafgAs k bh fue mbid rbiied bver bh tle EFO ahhbuhfe-neht day (ahd was lkt lard amakh wktl tle strbhm `boshunoer) ahd las hbw retrafed aobut a quarter b tlemakh (tlat sakd mbid ks stkii up 4 [D 15 vs 1047311at br




Cburtl Quarter 14

tle VampZ 5) Bhe btler khterestkhm pbkht ks tlat tleratkb b AU (H[VE Arfa Mbid OUMV Khdex) tb MbidOuiikbh reafled tle ibwest ievei kh lkstbry at tle ehdb 14 ahd mkveh tlat mbid lad seenkhmiy turhednbre pbsktkve kt appeared tlat mbid nkhers were duebr a raiiy _aiiy tley dkd br tle 1047297rst ew weegs b15 AU surmed fibse tb oebre rbiikhm bver bhtle EFO QE ahhbuhfeneht ahd lave mkveh oafgaobut 4 b tle makhs out tle nkhers are stkii up 1F[D

Vurprkse =0 ]ater Ckhds Kts Ievei Fehtrai Oahgskh tle Enermkhm Nargets are brfed tb stknuiate tlekrefbhbnkes kh respbhse tb tle nasskve OB ahd EFOobhd purflase prbmrans ahd tle resuitkhm expahskbhb ikqukdkty uhibfgs tle extrene vaiue kh EnermkhmNarget equktkes ieadkhm tlen tb butperbrn tledeveibped nargets br tle 1047297rst tkne skhfe 1

Bhe b tle flaiiehmes afkhm Fehtrai Oahgers kh tleEnermkhm Nargets bver tle past ew years las oeehtle surprkskhm rkse b kh1047311atkbh kh nahy EN fbuhtrkessurprkskhm oefause tle prboien br tle Deveibped

Nargets las oeeh 1047297mltkhm de1047311atkbh wlkfl aiibwedtlen tb stknuiate ahd obbst asset prkfes Te lkmlerieveis b kh1047311atkbh nade sehse mkveh tle oetterdenbmraplkf prb1047297ie (nbre ybuhm pebpie ieads tblkmler kh1047311atkbh nbre bid pebpie ieads tb nbrede1047311atkbh) ahd lkmler mrbwtl kh tle EN out werefreatkhm flaiiehmes br EN Fehtrai Oahgers tb geeppafe wktl tle ikqukdkty expibskbh kh tle DNLbwever tle rapkd aii kh fbnnbdkty prkfespartkfuiariy bki ahd bbd was freatkhm a wkhdbw bbppbrtuhkty br tle EN FOs tb `bkh kh tle rate futtkhmahd okhd ouykhm party ]e lave seeh a hunoer bsurprkse rate futs refehtiy kh piafes ikge Khdka ahdFlkha wlere tle na`brkty b tle FZK ks bbd ahdehermy as kh1047311atkbhary pressures lave wahed Nahytlkhms lave flahmed kh EN kh refeht years out bhetlkhm tlat renakhed fbhstaht ks tle reiatkve ievei bmrbwtl vs tle DN ahd wlkie tlat mrbwtl lasfbhtkhued tb oe qukte rboust khvestbrs‛ ears aobutCed aperkhm ahd sibwkhm rates b mrbwtl (ratler tlahbfuskhm bh rkskhm quaikty b mrbwtl) las pusled

prkfes dbwh tb ieveis wlere tle vaiuatkbhs areextreneiy fbnpeiikhm

]leh ibbgkhm at twb neasures b reiatkveattraftkvehess narget fapMDZ ahd ZE tb Mrbwtlratkbs we see sbne very fbnpeiikhm vaiues NargetfapMDZ (tle Ouet Khdkfatbr as kt ks faiied skhfe]arreh preers tlks netlbd b ibbgkhm at bveraii vaiuatkbh) slbuid rahme rbn = tb 1 tb oeaverame lkmler ks expehskve ahd ibwer ks fleap Nahyfbuhtrkes aii rkmlt kh tle hbrnai rahme out tlere aresbne butikers bh obtl skdes Bh tle expehskve skdeVwktzeriahd ahd Vkhmapbre stahd but at 6 ahd1lt out tley are uhkque mkveh tlekr very snaii MDZahd tlekr lbidkhm fbnpahy rkehdiy ùrksdkftkbhs tlatlave attrafted nahy brekmh fbnpahkes tb ikst tlereTe UV ks de1047297hkteiy kh tle expehskve fanp (aitlbumlhbt as extrene as kh ) at 16 ahd tle UGNaiayska ahd Vbutl Arkfa are pretty expehskve asweii Bh tle fleap skde tlere are sbne frazy ibwhunoers (sbne very fbnpeiikhm bppbrtuhktkes) wktlArmehtkha at ah khfbnprelehskoie 1 lai amakh asibw as _usska at 1 ahd twb-tlkrds ibwer tlah Orazki

at 65 Khterestkhm bh tle fleap skde ks Mernahy at4= (wlkfl ks up heariy 1 F[D perlaps drkvehoy vaiue ouyers kh addktkbh tb Eurb sgeptkfs) ahdFlkha despkte tle okm raiiy kh Q4 ks stkii qukte fleap at4 Ahbtler neasure b fleaphess ZE tb Mrbwtl(ZEM _atkb) slbws tlat DNs are qukte prkfey reiatkvetb tlekr redufed mrbwtl prb1047297ie Te ZEM ratkb brMiboai Equktkes as a wlbie ks 43 out ibbgkhm at DNtle ZEM ratkbs are nufl lkmler wktl tle UV at ==Mernahy at ahd apah at 13 wlkie EN are nuflibwer wktl bveraii EN at 3 ahd sbne hbtaoienargets ikge Khdka ahd Flkha at 61 ahd 1= Ibbgkhmnbre fibseiy at Khdka tle ZE appears lkmler tlahbtler EN out tlat ks oefause tle Khdex las nbreteflhbibmy fbnpahkes (lkmler ZEs) ahd iessfbnnbdkty fbnpahkes (ibwer ZEs) tlah tle btlerEN fbuhtrkes ]e tlkhg Khdka ibbgs very attraftkvepartkfuiariy mkveh tle nbnehtun freated oyNbdkhbnkfs ahd tle surprkse easkhm b khterest ratesoy Fehtrai Oahg Mbverhbr _aàh Kh a very ouiikslskmh br Khdkah equktkes ibfai khvestbrs are ouykhm




Cburtl Quarter 14

stbfgs kh skze br tle 1047297rst tkne skhfe lt

Vurprkse lt0 Hb Crafgkhm Arbuhd Fbhtrary tb tle

furreht fbhsehsus tlat Bki prkfes lave obttbned ahdwkii reobuhd oafg tb $=-$lt oy year ehd fbhtkhukhmikqukdatkbh b spefuiatkve ibhm utures pbsktkbhs drkvesBki dbwh fibse tb tle lt ibws ($6) ahd prkfes staykh tle $4-$5 rahme nufl ibhmer tlah expefted asstrufturai flaiiehmes kh tle UV ahd BZEF nage ktdkstfuit br narget partkfkpahts tb nbve suppiy denahd oafg khtb oaiahfe

Te bki narget las oeeh bhe b tle oest exanpies b_e1047311exkvkty kh aftkbh kh tle past ew years as afbnokhatkbh b a nasskve khfrease kh hbh-fbnnerfkaikhvestbrs ah expibskbh b ehermy deot kssuahfe ahdtle resuitkhm obbn kh UV prbduftkbh freated a vkrtubus fyfie tlat frested kh uhe b iast year ahdtrahsktkbhed tb a partkfuiariy hasty vkfkbus fyfie wktlrkmltehkhm speed Ibbgkhm oafg a ikttie okt kh tlewage b tle Miboai Ckhahfkai Frksks bki prkfes ladstaokikzed arbuhd $4 ahd tlere was a fbnnbh oeike(nksfbhfeptkbh) tlat bki prkfes wbuidh‛t refbver ahy

tkne sbbh (tley lad peaged at $14= rkmlt oebre tleFrksks) as denahd was expefted tb renakh nbrkouhdahd suppiy ibbged very leaitly Tere was fbhsehsus(a nksfbhfeptkbh) tlat prkfes fbuidh‛t refbver kh tlewage b tle miboai efbhbnkf sibwdbwh ahd tlerewere ikteraiiy hb fbnnerfkai ibhm pbsktkbhs kh tleutures nargets As usuaiiy lappehs wleh sehtknehtreafles tlese extrenes (ahd Fehtrai Oahgs tlrbwtrkiikbhs b dbiiars b stknuius at tle miboai efbhbny)denahd reobuhded slarpiy ahd denahd exfeededsuppiy br hkhe b tle hext tweive quarters as prkfesoemah tb rkse qukfgiy As prkfes rbse rbn $4 tb $ltbver tle hext year narget partkfkpahts reafted kh tleexpefted re1047311exkve nahher ahd oemah tb oukidspefuiatkve het ibhm pbsktkbhs amakh wlkfl pusledprkfes lkmler Te re1047311exkvkty oetweeh tle suppiydenahd knoaiahfes ahd tle rkskhm vbiune b khves-tbrs piaykhm fatfl-up pusled prkfes aobve $1 kh11 A orke perkbd b vbiatkikty bffurred arbuhd tleUV deot dbwhmrade ahd tle tlreat b a Eurb-Frkskstrkmmered oy a rsquoMrexktbdquo (Mreefe exktkhm tle Eurbzbhe

sbuhds ankikarhellip) pusled prkfes oafg dbwh tbward$lt out tle qukfg resbiutkbh b tle prboien wlehDramlk sakd le wbuid db rsquowlatever kt tagesbdquo tb saveEurbpe was aii tle bki narget heeded tb pusl khtb aspefuiatkve ibhm ouykhm rehzy bver tle hext fbupie byears fuinkhatkhm kh tle nasskve 43 het ibhmfbhtrafts pbsktkbh kh uhe b iast year (essehtkaiiy burpaper oarreis b bki br every reai oarrei b bki)

As Vbrbs says every ouooie las at kts rbbt a oasks khreaikty dkstbrted oy a nksperfeptkbh Khvestbrs dkd hbtuhderstahd lbw tle re1047311exkve respbhse b iehders khtbtle slaie bki ouskhess was aftuaiiy flahmkhm tleuhdanehtais b tle bki narget oy ueikhm a lumedrkiikhm obbn tlat resuited kh UV bki prbduftkbhmrbwkhm rbn 55 nkiikbh oarreis a day kh 1 tbheariy 5 nkiikbh oarreis a day kh 14 Vb ibhm as bkiwas aobve tle perfekved narmkhai fbst b $lt oahgswbuid iehd wktl refgiess aoahdbh ahd tley punped$55 okiikbh khtb EampZ fbnpahkes aii bver tle bki patflTe Anerkfah Ehermy _ehakssahfe was upbh us ahdtle spefuiatkve ever tb fapktaikze bh wlat wbuid oe abhe-way tkfget tb rkfles reafled a evered pktfl

reaflkhm ah apex at tle vkrtubus fyfie peag kh uheUhbrtuhateiy khvestbrs nkssed a fbupie b deveibp-nehts tlat wbuid bhfe amakh re1047311exkveiy turh tlefyfie rbn vkrtubus tb vkfkbus very rapkdiy ]leh tleUV prbduftkbh ieveis mrew oy 16 nkiikbh oarreis kh askhmie year suddehiy tle narget nbved rbnoaiahfed tb bversuppiked ahd sbne b tle ibhms oemahtb tage prb1047297ts fauskhm prkfes tb oemkh tb sikp Nargetpartkfkpahts enorafed ahbtler nksperfeptkbh tlat bkifbuidh‛t pbsskoiy mb nufl oeibw tle narmkhai fbst bprbduftkbh ahd everybhe was sure tlat tlere was a1047311bbr kh tle narget arbuhd $=5 Zerlaps tle nbstfbnkfai (wktl tle oehe1047297t b lkhdskmlt) was tlat tleEKA (tle wbrid‛s iarmest ehermy khbrnatkbh ehtkty)predkfted tlat tlere was 5 fertakhty tlat bki prkfesfbuid hbt mb oeibw $lt kh 14 Lbwever prkfes geptaiikhm pauskhm bhiy orke1047311y at $=5 rkmlt oebre tle okmBZEF neetkhm bh Tahgsmkvkhm Day wlere everybhewas bhfe amakh sure tlat Vaudk wbuid fut prbduftkbhahd orkhm tle narget oafg khtb oaiahfe (oefause aiitle BZEF fbuhtrkes heeded $1+ bki tb oaiahfe tlekr




Cburtl Quarter 14

oudmets) Te resuitkhm slbfg tb tle systen wlehVaudk defkded hbt tb fut was swkc ahd re1047311exkve prkfeseii dranatkfaiiy nbre seiiers trked tb ikqukdate ahdprkfes fbiiapsed dbwh khtb tle nkd-$4s

Vb tle obttbn faiiers lave fbne but bhfe amakh saykhmtlat bki prkfes lave seeh tlekr ibws ahd tlat prkfes wkiirapkdiy refbver tb tlekr 14 ieveis ]ly ks everybhesb sure tlks wkii lappeh2 ]ly ks tlere hbt bhe (hbtbhehellip) ]aii Vt ahaiyst wktl a year-ehd prkfe tarmetbr bki oeibw $32 Zrknarkiy oefause everybhe ksibbgkhm at tle data rbn 15 bh tlat slbws tlat eafltkne bki prkfes lave drbpped prefkpktbusiy tley lavereobuhded slarpiy (ùst ikge stbfgs kh tle QE Era ktlas pakd tb ouy tle dkps) out tle prboien ks tlat eafldrbp skhfe 15 was a denahd slbfg hbt a suppiyslbfg ahd denahd slbfgs lave oeeh fured oy tlenasskve stknuius prbppkhm up fbhsunptkbh ahdehfburamkhm spefuiatkbh (tle spef ibhms lave aftuaiiykhfreased amakh) wlkie suppiy slbfg refbverkes areneasured kh years hbt nbhtls ]e laveh‛t seeh a okmsuppiy slbfg skhfe 1lt5 out tlat bhe gept bki prkfesdbwh br heariy tlree years as Vaudk reasserted

fbhtrbi b tle nargets wlkfl appears tb oe prefkseiywlat tley are dbkhm tlks tkne wb btler aftbrs tlatare oekhm bveribbged (narget partkfkpaht nksperfep-tkbhs) are0 1) tle steep Fbhtahmb (upward sibpkhmutures furve) kh tle bki narget ks ehfburamkhm anasskve oukid kh stbrame (tahgs Sery Iarme FrudeFarrkers tahgers etf are oekhm ibaded wktl bki tb seiiiater at lkmler prkfes) wlkfl wkii evehtuaiiy fbne tbnarget ahd depress prkfes ahd ) nufl b 15 UVprbduftkbh ks ledmed at lkmler prkfes ahd nahy ieaseslave fiauses tlat requkre tle prbpertkes tb oe drkiied khbrder tb nakhtakh fbhtrbi sb 15 prbduftkbh ks ikgeiytb rkse hbt aii wlkfl wkii urtler pressure tle suppiydenahd prboien Add tle aft tlat Kraq ùstahhbuhfed hew lkmls kh prbduftkbh ahd Ikoyahprbduftkbh las fbne oafg aster tlah ahtkfkpated ahdkt appears uhikgeiy tlat tle nargets wkii oe oafg khoaiahfe ahy tkne sbbh

Vb wly are prkfes raiiykhm kh tle past fbupie b weegsrbn tle nkd-$4s tb tle nkd-$5s ahd wly ks tle

nedka trunpetkhm a hew ouii narget kh bki2 Tere wasa surprkse kh tle nargets bh tle iast day bh ahuarywleh tle MVFK Khdex reoaiahfkhm (bki lad aiieh sbnufl tlat tle Khdex lad tb ouy a ibt nbre utures)faumlt sbne khvestbrs b muard ahd trkmmered a slarpslbrt fbverkhm raiiy (wlkie tlere are stkii het spefuia-tkve ibhms tlere are a ibt b slbrts tbb) b = tlatCrkday Bver tle past fbupie b weegs tle bki nargetslave oeeh very vbiatkie rkskhm ahd aiikhm nbre tlah6 bh nbst days wktl nbre up days tlah dbwhrefehtiy resuitkhm kh tle nbve upwards Vbrbs saystlat vbiatkikty aiways khfreases at turhkhm pbkhts sbtlere ks ah khfreaskhm hunoer b puhdkts fiaknkhm tlattle trehd ks aobut tb flahme oafg tb pbsktkve ahd bkiwkii surme br tle oaiahfe b tle year ]e renakhsgeptkfai ahd wlkie we are hbt as oearksl as Fktkwlkfl refehtiy puoiksled a repbrt bh wly bki fbuideaskiy aii tb $ tlks year oebre refbverkhm wefbhtkhue tb oeikeve tlat tle fbhsehsus br a steepreobuhd wkii oe prbveh wrbhm as tle uhdanehtaistrunp tle refeht spefuiatkve aftkvkty wb btlerfbhskderatkbhs are0 1) tlere ks a seasbhai patterh kh bkitlat nages ibws arbuhd tle sprkhm slbuider

(trahsktkbh rbn leatkhm tb drkvkhm seasbh) kh Aprkiahd leads lkmler durkhm tle sunner nbhtls ahd )tlere fbuid oe a denahd respbhse tb tle ibwer prkfestlat khfreases fbhsunptkbh ahd orkhms tle nargetfibser tb oaiahfe ]e wkii nbhktbr tlesedeveibpnehts out sb ar tle uhdanehtais pbkht tbfbhtkhued weaghess wktl skmhk1047297faht vbiatkikty (ahanazkhm stat lere ks tlat tlere lave oeeh nbre days kh15 wlere bki las nbved 85 khtraday tlah kh 116 amp 14 fbnokhed) as narget partkfkpahtsdeternkhe wletler we wkii see nbre rsquovkfkbusbdquo br aswktfl oafg tbward rsquovkrtubusbdquo Bhe iast reiated pbkhttb geep ah eye bh ks tlat tle oahgs lave lumederkvatkve expbsure ahd ibah expbsure tb tle ehermykhdustry tlat fbuid fause sbne pakh as tle nargetoemkhs tb adùst arbuhd nkd-year sb tle swbbh khoahg stbfgs kh ahuary fbuid oe bresladbwkhm sbnekhterestkhm tknes alead

Vurprkse 0 Bhiy ]ay But Gurbda-sah ahd tleOB puii but tle oazbbga amakh kh 15 tagkhm akn at a




Cburtl Quarter 14

UVDZ[ ievei b 14 kh ah attenpt tb stknuiate prb1047297tsb apah Khf sb tley wkii rakse wames trkmmerkhm avkrtubus fkrfie tb oreag de1047311atkbh ahd aflkeve tle tarmet kh1047311atkbh rate apahese equktkes tam aibhm brtle rkde ahd tle Hkggek reafles oy year-ehd

Vkhfe tle ahhbuhfeneht b tle Aoehbnkfs tlree-arrbw attafg kh Hbvenoer b 1 tle prbmran lasprbdufed sbne speftafuiar resuits as tle [ehdefikhed rbn =lt tb 1 tle Hkggek nbre tlahdbuoied rbn lt5 tb 1= ahd tle de1047311atkbh mehkelas seenkhmiy oeeh put oafg kh tle obttie as tle FZK kssbikdiy pbsktkve (wktl Fbre FZK aftuaiiy rkmlt arbuhdtle OB tarmet b ) Zerlaps eveh nbreknpbrtahtiy tlahgs tb tle fbhtkhued fbnnktneht oytle Gurbda-sah tb expahd tle QQE prbmran tlebrward expeftatkbhs b kh1047311atkbh are rkskhm br tle 1047297rsttkne kh defades ]lkie tlere las oeeh a mrbwkhmflbrus b sgeptkfs bh apah (ahd Aoehbnkfs khpartkfuiar) we are enobidehed kh bur pbsktkve vkew btle apah narget oy Vkr blh enpietbh‛s renkhdertlat ouii nargets mrbw bh sgeptkfksn ]e are aisbnkhdui tlat ankdst tle assertkbhs tlat apahese

equktkes lave mbhe tbb ar tbb ast ahd tlat tle weag[eh ks aftuaiiy lurtkhm tle dbnestkf efbhbny wesknpiy renakh bfused bh tle data wlkfl slbws amraduai refbvery b mrbwtl biibwkhm tle setoafg acertle Fbhsunptkbh ax khfrease (ikge tle lume reobuhdkh naflkhe tbbi brders tlks nbhtl) ahd pbkht tb tleibhm-tern flart b tle Hkggek wlkfl slbws tlat tlereks stkii trenehdbus lead rbbn tb refbver tle prevkbuslkmls rbn twb defades past

Fbrpbrate prb1047297ts at apah Khf fbhtkhue tb set hewrefbrds ahd tle slares b expbrt-brkehted fbnpahkes(ikge tle far fbnpahkes bybta ahd Cu`k Leavy(Vuoaru) ahd eieftrbhkfs fbnpahkes ikge Vbhy ahdZahasbhkf) fbhtkhue tb nage hew lkmls bh tbp b very rboust advahfes kh tle past twb years A obhuslere ks tlat surprkskhmiy apahese equktkes are aftuaiiyfleaper tbday tlah oebre tle raiiy started oefause tleearhkhms mrbwtl las oeeh sb rboust Bur expeftatkbhsare tlat tle OB wkii fbhtkhue tb renakhaffbnnbdatkve ahd prbvkde ikqukdkty tb uei

fbhtkhued narmkh expahskbh urtler khfreases kh_BE ahd lkmler stbfg prkfes At tle fbre bAoehbnkfs ks a fbnnktneht tb fbhtkhued weagehkhmb tle [eh (sbne nkmlt say tley lave hbaiterhatkvehellip) ahd we wbuid expeft tb see 14 bh tleUVDZ[ oy tle ehd b 15 Ny mbbd rkehd blhNauidkh sakd at a fbherehfe kh Faynah kh eariyCeoruary wlere we obtl were speagkhm tlat tle [ehwkii see ahd tleh 5 kh tle years tb fbne Tksnbve wkii hbt oe ikhear ahd we db see sbne reskstahfeat 16 (ahd fbrreiated reskstahfe br tle Hkggek at1lt4) out bhfe tlbse ieveis are fieared we expeft tbsee tle 14 ahd ieveis b surprkse aflkevediater tlks year A fbupie b rksgs tb tlks butibbg aretlat 1) tlere ks sbne sbrt b miboai equkty dksruptkbhtlat resuits kh a 1047311kmlt tb saety tlat wbuid khfiude tle[eh ahd tle [eh aftuaiiy strehmtlehs versus tledbiiar br ) tle Flkhese suddehiy defkde tb ehmame khtle miboai furrehfy wars ahd devaiue tle _NO wlkflwbuid iead tb a tenpbrary strehmtlehkhm b tle [eh asZ[_NO farry trades are brfed tb oe uhwbuhd

Vurprkse 10 Mbats Fikno Nbuhtakhs Kh spkte b

tle fafbplbhy b oad hews aobut sibwkhm MDZ mrbwtl ah knpehdkhm efbhbnkf lard iahdkhm a pbtehtkai furrehfy fbiiapse a ibbnkhm oahgkhm frksksahd a pervaskve reai estate ouooie fbupied wktl earstlat lume returhs kh tle Vlahmlak narget kh 14 lave pusled equkty nargets tbb ar tbb ast Flkha bstfkaiiy ehters a hew Ouii Narget ahd equktkes (obtl LbhmGbhm ahd Vlahmlak) raiiy strbhmiy amakh kh 15

Lardiy a day mbes oy tlat ybu dbh‛t read a leadikheaobut ahbtler leadwkhd br tle Flkhese efbhbny adkre predkftkbh b a lard iahdkhm br ah assertkbh tlattle rsquoobbgs are fbbgedbdquo br tlat rsquotle hunoers dbh‛tadd upbdquo ]lat aiways seens tb oe nksskhm rbn tleselyperobikf prbfianatkbhs ks sbne ahaiysks bh ikhgameoafg tb tle Tkrd Ziehun _ebrn Amehda tlat tleHew Ieaderslkp kh Flkha iakd but oebre fbnkhm tbpbwer tlat tley were khteht bh frafgkhm dbwh bhfbrruptkbh slkckhm mrbwtl rbn 1047297xed assetkhvestneht tbward fbhsunptkbh ahd prbvkdkhm anbre streanikhed remuiatbry ehvkrbhneht tlat wbuid




Cburtl Quarter 14

ehfburame khhbvatkbh ahd mrbwtl Zbwerui_ebrners bver tle fburse b lkstbry lave oeeh veryOuiiksl br equkty nargets ahd we fah largeh oafg tbtle _eamahTatfler era tb see sknkiarktkes tb wlatZrenker k ks attenptkhm tb aflkeve kh Flkha bver tlefbnkhm defade ]e oeikeve tlat tlks _ebrn Amehdalas set tle stame br a pbwerui ahd ibhm-iastkhm ouiinarget as tle re1047311exkve syhermkes oetweeh miboainarget partkfkpahts ahd tle Flkhese efbhbny uei a vkrtubus fyfie b deveibpneht kh tle years alead Tetrenehdbus suffess b tle Trbuml rakh Zrbmrantlat las khfreased equkty aftkvkty ks ùst bhe exanpieb lbw tle Hew Ieaderslkp ks puslkhm tle efbhbnkfnbdei oeybhd tle prbperty nargets khtb btler assetnargets Flkha ks aisb lume oehe1047297fkary b tle drbp khbki prkfes ahd as kh1047311atkbh las nbderated tle ZObFlas oeeh aoie tb khfrease nbhey suppiy mrbwtl amakhwlkfl las estaoiksled a takiwkhd br 1047297hahfkai assetsTey lave oeeh aoie tb fut khterest rates ahd ibwer tle_eserve _equkrenehts br tle oahgs wlkfl lasspurred hew ibah mrbwtl wlkfl kh a re1047311exkvenahher ehaoies khvestbrs ahd fbnpahkes tb expahdtlereoy knprbvkhm tle uhdanehtais b tle bveraii

systen resuitkhm kh khfreaskhm prkfes

Bhe surprkse wktlkh tle surprkse las oeeh tlewkiikhmhess b tle ZObF tb aiibw tle _NO tb weageh(essehtkaiiy ehmamkhm kh tle miboai furrehfy wars) tbspur lkmler expbrts ieadkhm tb lkmler prb1047297ts rbn ahunoer b seftbrs ahd khdustrkes Kh 14 kt was tleA-Vlares narget tlat ied wktl speftafuiar makhs b56 out sb ar kh 15 kt las oeeh tkne br tleL-Vlares ahd VBEs tb piay fatfl-up ]e wbuidexpeft tb see strehmtl afrbss aii Flkhese equktynargets kh 15 ahd tlere ks sbne pbsskokikty tlat tle vkrtubus fyfie fbuid prbdufe tle type b rboust ouiinarget tlat we saw kh tle UV kh tle nkd-s b tlatpbkht we fbhtkhue tb see tle oest bppbrtuhktkes kh 1047297veseftbrs Khterhet e-Fbnnerfe Fbhsuner VtapiesLeaitlfare ahd Aiterhatkve Ehermy ahd arepartkfuiariy exfkted aobut tle mrbwtl pbtehtkai khe-Fbnnerfe wlkfl (affbrdkhm tb a FIVA repbrt)fbuid fbnpbuhd at 3 a year br tle hext defadeEveh nbre astbhkslkhm ks tlat tle Nbokie semneht b

e-Fbnnerfe ks expefted tb mrbw at 5 per year brtle hext defade wlkfl wleh ybu db tle natl b15X1tl pbwer ybu met a narget tlat wbuid expahdoy 33 a tarmet rkfl ehvkrbhneht khdeed Ahbtlerpbkht wbrtl tlkhgkhm aobut was nade durkhm a mreatdksfusskbh durkhm bur BFKB _buhdtaoie durkhm tleGZNM Faynah Aiterhatkve Khvestneht Vunnkt tlattle Flkhese narget appears tb oe kh a perkbd verysknkiar tb tle UV wleh ibhmslbrt stratemkesprbdufed partkfuiariy strbhm returhs due tb tlefreatkve destruftkbh tlat ieads tb okm wkhhers ahd okmibsers as ah efbhbny trahsktkbhs tbwardfbhsunptkbh

Obhus0 Vurprkse 110 Ikttie Iuxurkes Hbt Ehbuml Kh fbhtrast tb tle pbwerui harratkve tle lumewkhdaii br UV fbhsuners rbn ibwer masbikhe prkfes akis tb naterkaikze as sbne b tle savkhms areappiked tb redufe deot ahd khfrease savkhms ahd tleibss b `bos rbn tle efbhbnkf dbwhturh kh tle BkiVtates fbuhterafts tle pbsktkve knpaft b tle oaiahfeUV _eai MDZ mrbwtl lbvers arbuhd (br tle 3 tl fbhsefutkve year) ahd taig b QE4 oemkhs kh tle aii

]leh K was freatkhm tle 1 Vurprkses K mbt bh a rbiiahd aftuaiiy fane up wktl ah extra bhe tlat brkmkhatedrbn aii tle lbbpia arbuhd tle fbhsuner wkhdaii tlatwas fbnkhm rbn ibwer mas prkfes Hunoers wereoekhm tlrbwh arbuhd kh tle nedka b $ okiikbh tb$6 okiikbh ahd expeftatkbhs were very lkml tlat aiitlks nbhey wbuid knnedkateiy 1047311bw khtb fbhsunptkbhahd obbst MDZ Out a uhhy tlkhm lappehed oetweehtle mas punp ahd tle nkhk nart Fbhsuners dkd ouya ew extra pafgames b fkmarettes (NB _AK IBsurmed) ahd a ew nbre obtties b oeer (AOK0OOLEKA0HA VAO0IH surmed) ahd dkd aftuaiiy ouy aikttie nbre rbn ]ai-Nart (]N) out tle bveraiiretaki saies 1047297mures (ùst reieased) aftuaiiy eii slbwkhmtlat fbhsuners leid bh tb sbne b tlbse savkhmsperlaps tb pay dbwh sbne deot br nayoe sbfg awaysbne savkhms kh tle eveht tlat tle ibw mas prkfes were1047311eetkhm (mas prkfes aftuaiiy lave rkseh sikmltiy durkhmCeoruary) As tle rsquoVurprksebdquo tktie knpikes ah extraibttery tkfget br a fup b fbee at Vtaroufgs (VOU)




Cburtl Quarter 14

wbh‛t ùkfe MDZ ehbuml tb nage up br tle ibstpurflaskhm pbwer b tle 1 pebpie wlbn areexpefted tb ibse `bos (lkml paykhm `bos) kh tle bkipatfl ahd we dbh‛t expeft tb see UV MDZ lkt tle 6ievei kh 15 br tle sevehtl year kh a rbw Bhekhterestkhm area tlat las seeh strbhm rkskhm denahd ksnbvke tleaters ahd ANF _MF FHG FGEF HFNKahd NFV lave aii oeeh very strbhm iateiy as kt appearsdate hkmlt at tle nbvkes stkii ks a ikttie iuxury (ahd wewbh‛t aii skt at lbne aibhe watflkhm HCI) Ahbtleroehe1047297fkary b ibwer bki prkfes wkii oe tle farfbnpahkes ahd miboai autb nahuafturers wlb aresuddehiy seiikhm nbre VUSs ahd rufgs (lkmlernarmkhs) stbfgs ikge DAK0M_ ZAL60M_ ON]0M_N rafkhm ahd eveh tle UV fbnpahkes C ahd MNlave oeeh pkfgkhm up b iate Ahbtler khterestkhmdeveibpneht reiated tb tlks Vurprkse ks tlat despkte aibwer tlah ahtkfkpated Q4 MDZ prkht tle fyfikfaistbfgs lave oeeh oelavkhm as k mrbwtl were mbkhm tbaffeierate (lbpe sprkhms eterhai) sb we wkii geep bureye bh tle senkfbhduftbrs as tley are a mrbup tlatusuaiiy skmhais strbhmer mrbwtl alead sb hanes ikgeO_FN GIKF N_SI IIF NVFF HSDA ahd

H lave oeeh sbikd ahd eveh twb okm hanes tlat ladstrummied eariy kh tle Hew [ear NU ahd QFBNlave turhed slarpiy aibhm wktl tle bki raiiy khCeoruary

Vurprkses ]e tlkhg 15 ks ikgeiy tb oe a year uii bsurprkses as kt fbhtkhues tb eei a ibt ikge tle iast tknetlere was sb nufl rsquofertakhtybdquo kh tle nargets aobutHew Zaradkmns ahd Hew ]brid Brders oafg kh ]leh khvestbrs lave reafled tlat re1047311exkve naxknunahd are aii ieahkhm bhe way kh fertakh nargets tleknpaft b surprkses ks nufl mreater Kh everybhe was fertakh tlat Khterhet vaiuatkbhs werereasbhaoie tlat Khdexkhm was tle bhiy way tb khvestahd tlat tlere wbuid hever oe ahbtler _efesskbhoefause tle Ced lad aobiksled tle ouskhess fyfieVbuhds ankikar Mkveh tlks fbhsehsus we wkiinakhtakh bur oaseikhe br tle okm pbsktkbhs ieahkhmtbward Aftkve Nahameneht away rbn Zasskve ahdKhdexes tbward Ledmed Vtratemkes ahd away rbnIbhm Bhiy kh tle UV tbward Zrkvate Khvestnehts

bver puoikf khvestnehts wlehever pbsskoie (enplasksbh Vnaii Ouybuts Mrbwtl Fapktai (wktl extraenplasks kh EN) Ehermy ahd Iehdkhm) tbwardEnermkhm Nargets bver Deveibped Nargets ahdtbward _eai Assets reiatkve tb Ckhahfkai AssetsKnpbrtahtiy k tle 15-1= perkbd dbes khdeedbiibw tle ahaibm b tle - perkbd tlere wkiioe anpie bppbrtuhktkes bh tle ibhm skde bh tle slbrtskde ahd kh tle prkvate nargets eveh k tle bveraiiehvkrbhneht turhs but tb oe flaiiehmkhm brtradktkbhai assets ]e fbhtkhue tb see tle rksgs bde1047311atkbh butwekmlkhm tle rksgs b kh1047311atkbh yet tlerestkii seen tb oe sbne attraftkve bppbrtuhktkes kh reaiassets as we ibbg brward Zerlaps tle okmmestVurprkse b aii wbuid oe sbnetlkhm we stated iastquarter rsquotlat k reai assets were tb sbnelbwbutperbrn 1047297hahfkai assets kh tle afe b tle lumefbhsehsus bpkhkbh tlat fbnnbdktkes wkii frasl ahdourh slbt dbwh oy Gkhm Dbiiarbdquo A ew exanpies bfbnpahkes tlat fbuid oe okm wkhhers k tle fbnnbdktysuper fyfie resunes are SAIE OLZ ahd CF ahd tlesteei fbnpahkes ikge ahd AGV (br k we waht tb metreaiiy ahfy we fah fbnokhe Vurprkses ahd mb br a

_usskah steei fbnpahy NI) Ahbtler area tb tlkhgaobut ks tle puoikf nahameneht fbnpahkes b tleprkvate equkty 1047297rns wlkfl wkii tage advahtame b tlebppbrtuhktkes kh dkstressed deot ehermy ahd NampA ahdhanes ikge O BAG GG_ ahd FM fbuid prbvkdesbikd returhs kh ah ehvkrbhneht wlere tle kiikqukdktyprenkun fbhtkhues tb oe rewarded

Kh fibskhm tle Narget Butibbg seftkbh iast quarter wewrbte rsquoas we lead dbwh tle Lkmlway tb tle DahmerPbhe ahd ahtkfkpate ah khterestkhm (read flaiiehmkhm)year br khvestbrs kh 15 we are renkhded b afbupie b truksns kh meheratkhm strbhm ibhm-ternkhvestneht returhs0 1) Cbiibw _by Heuoermer‛s tlreeruies k) dbh‛t ibse nbhey kk) dbh‛t ibse nbhey ahd kkk)dbh‛t brmet tle 1047297rst twb ruies ) Khvest wktlbutenbtkbh ahd bfus bh eiknkhatkhm uhbrfed errbrsahd 6) [bu fah‛t predkft ybu fah preparebdquo Te iastpbkht fbuid lave easkiy oeeh sakd oy Mebrme (ratlertlah Lbward Nargs) as tle hbtkbh tlat ybu fah‛tpredkft 1047297t weii wktl Vbrbs‛ way b ibbgkhm at nargets




Cburtl Quarter 14

ahd le was iaser bfused bh aiways oekhm weiiprepared Khterestkhmiy lks netlbd b preparatkbhwas qukte dkereht tlah nbst wlkfl we wkii dksfussoeibw _e1047311exkvkty says tlat prkfes kh tle narget dbhbt re1047311eft true vaiue oefause b tle nksperfeptkbhsahd okases b tle partkfkpahts Vknkiariy Vbrbs asgedrletbrkfaiiy rsquolbw mbbd are nargets kh predkftkhm

reai-wbrid deveibpnehts2 _eadkhm tle refbrd k t ks

strkgkhm lbw nahy faian ktkes tlat were ah tkfkpated

dkd hbt kh aft naterkaikze Ckhahfkai nargets

fbhstahtiy ahtkfkpate evehts obtl bh tle pbsktkve

ahd bh tle hematkve skde wlkfl ak i tb naterkaikze

exaftiy oefause tley lave oeeh ahtkfkpated

(re1047311exkvkty kh aftkbh amakh) Kt ks ah bid `bge tlat

tle stbfg narget las predkfted seveh b tle iast

twb refesskbhs Nargets are bceh wrbhmbdquo Vb tlekdea b ah bveraii Narget Butibbg wbuid oe ahatlenatb Vbrbs as le was nbre prbhe tb uskhm tle re1047311exkvehature b tle nargets tb leip lkn freate lks vkewsKhvest 1047297rst ahd tleh khvestkmate Oaskfaiiy Vbrbswbuid freate a lypbtlesks (oafg tb lks Zlkibsbplytrakhkhm uhder Zbpper) tage a tbelbid pbsktkbh tb testtle lypbtlesks ahd wakt br tle narget tb prbve

wletler le was rkmlt br wrbhm K tle narget wehtamakhst lks pbsktkbh ahd le eit uheasy (em mets aoafgafle) le wbuid adnkt lks nkstage ahd fut lksibsses Ahbtler frktkfai fbnpbheht kh brnkhm ahkhvestneht kdea was tb use rsquoDevki‛s Advbfatesbdquo Vbrbssakd rsquok ybu lave ah khvestneht tlesks ybu ikge ruh

kt oy pebpie wlb suppbrt tle btler skde b tle

armuneht Vee k ybu stk ii ikge tle tlesks acerwardbdquo Ahbtler uhkque aspeft tb tle way Vbrbs wbuid tlkhgaobut kdeas was tlat le preerred tb taig tb bhiy rsquoa

seieft ew pebpie wlb fah oe reaiiy leipuibdquo ratlertlah pay attehtkbh tb tle pietlbra b fbhstahtkhbrnatkbh rbn sburfes tlat le dkd hbt deenfrktkfai Vbrbs was very okm bh dksehmameneht Leoeikeved kt was frktkfai tb tage tkne tb reaiiy tlkhg lesakd rsquotb oe suffessui ybu heed ieksure [bu heed

tkne lahmkhm leavkiy bh ybur lahds tb taig tb

pebpie read ahd re1047311eftbdquo Ckhaiiy Vbrbs (ikge nahybtler mreat khvestbrs) oeikeved kt was knpbrtaht tb oeseieftkve tb reaiiy pkfg ybur spbts Ouett wbuid saytlat ybu dbh‛t lave tb swkhm uhtki ybu met tle rsquoat

pktflbdquo oefause tlere are rsquohb faiied tlkrd strkges khkhvestkhmbdquo ahd ereny Mrahtlan wbuid say tlat rsquoybubhiy heed bhe br twb reaiiy mbbd kdeas a yearbdquo Vbrbssunned up lks verskbh b tlks kdea kh a fbhversatkbhwktl lks rkehd Oyrbh ]ekh (brneriy b NbrmahVtahiey hbw Skfe Flakrnah b Oiafgstbhe) wleh lesakd rsquotle trbuoie wktl ybu Oyrbh ks tlat ybu mb tb

wbrg every day ahd tlkhg ybu slbuid db

sbnetlkhm K dbh‛t K bhiy mb tb wbrg bh tle days

tlat nage sehse tb mb tb wbrg ahd K reaiiy db

sbnetlkhm bh tlat day Out ybu mb tb wbrg ahd

ybu db sbnetlkhm every day ahd dbh‛t reaikze

wleh kt‛s a spefkai daybdquo Iksteh read re1047311eft brn alypbtlesks ahd iet tle re1047311exkve hature b tle nargetsteii ybu wleh ybu are rkmlt tleh reaiiy db sbnetlkhmspefkai oe a pkm Te wksdbn b Mebrme Vbrbssunned up kh a ew fiauses ]e lave oeeh ikstehkhmtb tle nargets re1047311eftkhm ahd fah see a lahdui bkdeas deveibpkhm wlere we fah oukid neahkhmuipbsktkbhs tb tage advahtame b tle vkrtubus fyfies tlatare deveibpkhm ahd prbteft us rbn tle vkfkbus fyfiestlat are apprbaflkhm bh tle lbrkzbh

Update bh Nbrmah Freeg

Ahdrea Vzkmetly fbhtkhues tb tage khvestbr edufatkbhebrts tb tle hext ievei wktl tle reorahdkhm b tleHbrtl Farbikha Khvestneht Khstktute (rsquoHFKKbdquo) ]lkietle fbhteht ahd ibmkstkfs b tle eveht wkii oe tle saneHFKK wkii hbw oe a nenoerslkp brmahkzatkbh bpeh tbkhvestbrs ahd nahamers kh tle Vbutleast Nenoerslkpmrahts affess tb aii HFKK evehts leid tlrbumlbut tleyear ]e oeikeve tle reorahdkhm b HFKK wkii aiibw ustb mkve bur khvestbrs ahd btler nenoers b tlekhvestneht fbnnuhkty affess tb sbne b tleKhdustry‛s nbst sbumlt acer speagers ahd khvestnehtprbesskbhais As aiways tlere ks hb ee br NbrmahFreeg advksbry fikehts tb `bkh tle brmahkzatkbh ahdtley are autbnatkfaiiy fbhskdered lbhbrary nenoerswktl ree affess tb aii evehts Ziease narg yburfaiehdars br tlks year‛s Vprkhm Cbrun wlkfl wkii oeleid bh Nay 1lt-1 at tle Unstead Lbtei kh FaryHbrtl Farbikha ]lkie tle eveht ks stkii a ew nbhtls




Cburtl Quarter 14

away we are aiready extreneiy exfkted aobut burspeager ikst wlkfl aiready khfiudes sbne b tle oest khtle ouskhess0 Gyie Oass Dehhks Martnah ahd DahkeiFikcbh Cbr nbre khbrnatkbh aobut tle Khstktute brtle 15 Vprkhm Cbrun piease vksktwwwhfkhvestnehtkhstktutebrm br fbhtaft Ahdrea brDbhha Lbiiy dkreftiy at ahdreaJahhuaifbhheftfbnahd dbhhaJahhuaifbhheftfbn

[bu slbuid fbhtkhue tb refekve nbhtliy khvktatkbhs tbbur Arbuhd tle ]brid wktl [usgb weokhar serkes ]elbpe tlese weokhars are edufatkbhai ahd khterestkhmbr tlbse b ybu wlb ibm-bh As aiways we are lappytb prbvkde repiays ahd presehtatkbhs tb ahy faii ybunay lave nkssed Ziease save tle date br tleCeoruary 4tl rsquoKtkherary br 15bdquo weokhar at 10pnEV wlere K wkii preseht Nbrmah Freeg‛s oest kdeasbr tle year Te Narfl 3tl weokhar at 10pn EDwkii bfus bh tle Zrkvate Equkty Kiikqukdkty Zrenkunwlkfl ks 1047297ttkhm mkveh tle refeht iauhfl b bur prkvateequkty uhds Cbr nbre khbrnatkbh aobut Arbuhd tle]brid wktl [usgb br tb oe added tb bur nakikhm ikstpiease enaki us at K_Jnbrmahfreegfapfbn

]e oeikeve 15 wkii preseht mreat bppbrtuhktkes brtle Ckrn ahd we are exfkted tb mrbw ahd fbhtkhue tbexpahd bh tle sbiutkbhs we prbvkde bur khvestbrs ]elbpe ybu wkii oe aoie tb `bkh us kh Nay br tle HbrtlFarbikha Khvestneht Khstktute ahd ibbg brward tbseekhm ybu tleh

]ktl warnest remards

Narg ] [usgbFlke Exefutkve Bstfer amp Flke Khvestneht Bstfer

Tks dbfuneht ks br khbrnatkbhai purpbses bhiy ahd ks hektler ah ber tb seii hbr asbikfktatkbh b ah ber tb ouy khterests kh ahy sefurkty Hektler tle Vefurktkes ahdExflahme Fbnnksskbh hbr ahy Vtate sefurktkes adnkhkstratbr las passed bh br eh-dbrsed tle nerkts b ahy sufl berkhms hbr ks kt khtehded tlat tley wkii NbrmahFreeg Fapktai Nahameneht IIF dbes hbt warraht tle affurafy adequafy fbnpiete-hess tkneikhess br avakiaokikty b ahy khbrnatkbh prbvkded oy hbh-Nbrmah Freegsburfes



Meherai

Tks ks hektler ah ber tb seii hbr a sbikfktatkbh bc ah ber tb ouy khterests kh ahy khvestneht cuhd nahamed oy Nbrmah Freeg Fapktai Nahameneht IIF br kts astikates hbr slaii tlere oe ahy saie bc

sefurktkes kh ahy state br ùrksdkftkbh kh wlkfl sufl ber br sbikfktatkbh br sai e wbuid oe uhiawcui prkbr tb remkstratkbh br quaik1047297fa tkbh uhder tle iaws bc sufl state br ùrksdkftkbh Ahy sufl

berkhm fah oe nade bhiy at tle tkne a quaik1047297ed beree refekves a Fbh1047297dehtkai Zrkvate Berkhm Nenbrahdun ahd btler bperatkve dbfunehts wlkfl fbhtakh skmhk1047297faht detakis wktl respeft tb rksgs ahd

slbuid oe farecuiiy read Hektler tle Vefurktkes ahd Exflahme Fbnnksskbh hbr ahy Vtate sefurktkes adnkhkstratbr las passed bh br ehdbrsed tle nerkts bc ahy sufl berkhms bc tlese sefurktkes hbr ks kt

khtehded tlat tley wkii Tks dbfuneht ks cbr khcbrnatkbhai purpbses bhiy ahd slbuid hbt oe dkstrkouted Vefurktkes dkstrkouted tlrbuml bwh Laii Nenoer CKH_AVKZF br tlrbuml Hbrtlerh Ikmlts

Nenoer CKH_AVKZF

Zercbrnahfe Dksfibsures

Tere fah oe hb assurahfe tlat tle khvestneht boèftkves bc ahy cuhd nahamed oy Nbrmah Freeg Fapktai Nahameneht IIF wkii oe aflkeved br tlat kts lkstbrkfai percbrnahfe ks khdkfatkve bc tle percbr-nahfe kt wkii aflkeve kh tle cuture

Cbrward Ibbgkhm Vtatenehts

Tks presehtatkbh fbhtakhs fertakh statenehts tlat nay khfiude cbrward-ibbgkhm statenehts wktlkh tle neahkhm bc Veftkbh =A bc tle Vefurktkes Aft bc 166 ahd Veftkbh 1E bc tle Vefurktkes Exflahme

Aft bc 164 Aii statenehts btler tlah statenehts bc lkstbrkfai caft khfiuded lerekh are cbrward-ibbgkhm statenehts Khfiuded anbhm cbrward-ibbgkhm statenehts are anbhm btler tlkhms state-

nehts aobut bur cuture butibbg bh bppbrtuhktkes oased upbh furreht narget fbhdktkbhs Aitlbuml tle fbnpahy oeikeves tlat tle expeftatkbhs re1047311efted kh tlese cbrward-ibbgkhm statenehts are reasbha-

oie tley db khvbive assunptkbhs rksgs ahd uhfertakhtkes ahd tlese expeftatkbhs nay prbve tb oe khfbrreft Aftuai resuits fbuid dker naterkaiiy crbn tlbse ahtkfkpated kh tlese cbrward-ibbgkhm state-

nehts as a resuit bc a varkety bc caftbrs Bhe slbuid hbt piafe uhdue reikahfe bh tlese cbrward-ibbgkhm statenehts wlkfl speag bhiy as bc tle date bc tlks dksfusskbh Btler tlah as requkred oy iaw tle

fbnpahy dbes hbt assune a duty tb update tlese cbrward-ibbgkhm statenehts

Khdkfes

Te khdex khcbrnatkbh ks khfiuded nereiy tb slbw tle meherai trehds kh fertakh nargets kh tle perkbds khdkfated ahd ks hbt khtehded tb knpiy tlat tle pbrtcbikb bc ahy cuhd nahamed oy Nbrmah Freeg

Fapktai Nahameneht IIF was sknkiar tb tle khdkfes kh fbnpbsktkbh br eieneht bc rksg Te khdkfes are uhnahamed hbt khvestaoie lave hb expehses ahd re1047311eft rekhvestneht bc dkvkdehds ahd dkstrkou-

tkbhs Khdex data ks prbvkded cbr fbnparatkve purpbses bhiy A varkety bc caftbrs nay fause ah khdex tb oe ah khaffurate oehflnarg cbr a partkfuiar pbrtcbikb ahd tle khdex dbes hbt hefessarkiy re1047311eft

tle aftuai khvestneht stratemy bc tle pbrtcbikb

Hb ]arrahty

Nbrmah Freeg Fapktai Nahameneht IIF dbes hbt warraht tle af furafy adequafy fbnpietehess tkneikhess br avakiaokikty bc ahy khcbrnatkbh prbvkded oy hbh-Nbrmah Freeg sburfes

_ksg Vunnary

Khvestneht boèftkves are hbt prbèftkbhs bc expefted percbrnahfe br muarahtees bc ahtkfkpated khvestneht resuits Aftuai percbrnahfe ahd resuits nay vary suostahtkaiiy crbn tle stated boèftkves wktl

respeft tb rksgs Khvestnehts are spefuiatkve ahd are neaht cbr sbplkstkfated khvestbrs bhiy Ah khvestbr nay ibse aii br a suostahtkai part bc kts khvestneht kh cuhds nahamed oy Nbrmah Freeg Fapktai

Nahameneht IIF Tere are aisb suostahtkai restrkftkbhs bh trahscers Fertakh bc tle uhderiykhm khvestneht nahamers kh wlkfl tle cuhds nahamed oy Nbrmah Freeg Fapktai Nahameneht IIF khvest

nay enpiby ieverame (fertakh Nbrmah Freeg cuhds aisb enpiby ieverame) br slbrt seiikhm nay purflase br seii bptkbhs br derkvatkves ahd nay khvest kh spefuiatkve br kiikqukd sefurktkes Cuhds bc cuhds

lave a hunoer bc iayers bc cees ahd expehses wlkfl nay bset prb1047297ts Tks ks a orkec sunnary bc khvestneht rksgs Zrbspeftkve khvestbrs slbuid farecuiiy revkew tle rksg dksfibsures fbhtakhed kh tle

cuhds‛ Fbh1047297dehtkai Zrkvate Berkhm Nenbrahda

_usseii 6 Khdex (D_K) mdash tlks khdex neasures tle percbrnahfe bc tle 6 iarmest UV fbnpahkes oased bh tbtai narget fapktaikzatkbh wlkfl represehts apprbxknateiy lt bc tle khvestaoie UV

equkty narget De1047297hktkbh ks crbn tle _usseii Khvestneht Mrbup

NVFK EACE Khdex mdash tlks ks a cree 1047311bat-adùsted narget fapktaikzatkbh khdex tlat ks deskmhed tb neasure deveibped narget equkty percbrnahfe exfiudkhm tle UV amp Fahada Nbrmah Vtahiey Fapktai

Khterhatkbhai de1047297hktkbh ks crbn Nbrmah Vtahiey

NVFK ]brid Khdex mdash tlks ks a cree 1047311bat-adùsted narget fapktaikzatkbh khdex tlat ks deskmhed tb neasure miboai deveibped narget equkty percbrnahfe Nbrmah Vtahiey Fapktai Khterhatkbhai de1047297hktkbh ks crbn

Nbrmah Vtahiey

1-Day UV -Okii mdash slbrt-tern UV reasury sefurktkes wktl nkhknun dehbnkhatkbhs bc $1 ahd a naturkty bc tlree nbhtls Tey are kssued at a dksfbuht tb cafe vaiue De1047297hktkbh ks crbn tle Depart-

neht bc reasury

LC_ Aosbiute _eturh Khdex mdash prbvkdes khvestbrs wktl expbsure tb ledme cuhds tlat seeg staoie percbrnahfe remardiess bc narget fbhdktkbhs Aosbiute returh cuhds tehd tb oe fbhskderaoiy iess vbia-

tkie ahd fbrreiate iess tb na`br narget oehflnargs tlah dkreftkbhai cuhds De1047297hktkbh ks crbn Ledme Cuhd _esearfl Khf

Z Nbrmah Miboai Obhd Khdex mdash tlks ks a fapktaikzatkbh-wekmlted khdex bc tle tbtai returh bc tle miboai mbverhneht obhd nargets (khfiudkhm tle UV) khfiudkhm tle eeft bc furrehfy Fbuhtrkes ahd

kssues are khfiuded kh tle khdex oased bh skze ahd ikqukdkty De1047297hktkbh ks crbn Z Nbrmah

Oarfiays Lkml [keid Obhd Khdex mdash tlks khdex fbhsksts bc aii hbh-khvestneht mrade UV ahd [ahgee obhds wktl a nkhknun butstahdkhm anbuht bc $1 nkiikbh ahd naturkhm bver bhe year De1047297hktkbh ks crbn

Oarfiays

Oarfiays Ammremate Obhd Khdex mdash tlks ks a fbnpbskte khdex nade up bc tle Oarfiays MbverhnehtFbrpbrate Obhd Khdex Nbrtmame-Oafged Vefurktkes Khdex ahd Asset-Oafged Vefurktkes Khdex wlkfl

khfiudes sefurktkes tlat are bc khvestneht-mrade quaikty br oetter lave at ieast bhe year tb naturkty ahd lave ah butstahdkhm par vaiue bc at ieast $1 nkiikbh De1047297hktkbh ks crbn Oarfiays

VampZ 5 Khdex mdash tlks ks ah khdex fbhskstkhm bc 5 stbfgs flbseh cbr narget skze ikqukdkty ahd khdustry mrbupkhm anbhm btler caftbrs Te khdex ks a narget-vaiue wekmlted khdex eafl stbfg‛s wekmlt

kh tle khdex ks prbpbrtkbhate tb kts narget vaiue De1047297hktkbh ks crbn Vtahdard ahd Zbbr‛s

Oarfiays Mbverhneht Fredkt Obhd Khdex mdash khfiudes sefurktkes kh tle Mbverhneht ahd Fbrpbrate Khdkfes Vpefk1047297faiiy tle Mbverhneht Khdex khfiudes treasurkes ahd amehfkes Te Fbrpbrate Khdex

khfiudes puoikfiy kssued UV fbrpbrate ahd [ahgee deoehtures ahd sefured hbtes tlat neet spefk1047297f naturkty ikqukdkty ahd quaikty requkrenehts

LC_K Enermkhm Nargets Khdex mdash tlks ks ah Enermkhm Nargets khdex wktl a remkbhai khvestneht cbfus kh tle cbiibwkhm mebmraplkf areas0 Aska ex-apah _usskaEasterh Eurbpe Iatkh Anerkfa Acrkfa br

tle Nkddie East

LC_K CBC0 Dkversk1047297ed Khdex mdash khvests kh a varkety bc stratemkes anbhm nuitkpie nahamers7 lkstbrkfai ahhuai returh ahdbr a stahdard devkatkbh meheraiiy sknkiar tb tle LC_K Cuhd bc Cuhd Fbnpbskte

khdex7 denbhstrates meheraiiy fibse percbrnahfe ahd returhs dkstrkoutkbh fbrreiatkbh tb tle LC_K Cuhd bc Cuhd Fbnpbskte Khdex A cuhd kh tle LC_K CBC Dkversk1047297ed Khdex tehds tb slbw nkhknai ibss

kh dbwh nargets wlkie aflkevkhm superkbr returhs kh up nargets De1047297hktkbh ks crbn Ledme Cuhd _esearfl Khf




Ietter tb Ceiibw Khvestbrs

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Fardkhais kh wlere le was heariy ruh but b tbwh br a ruh bpbbr perbrnahfe eariy kh tle seasbh oebre fbhbuhdkhm lks sgeptkfsahd ieadkhm tlen tb tle Vuper Obwi (wlkfl tley slbuid lave wbh outbr bhe b tle nbst anazkhm passes kh Vuper Obwi lkstbry oy Oeh_betliksoermer) ]arher‛s lerbkf perbrnahfe was ahbtler renkhdertlat refeht perbrnahfe ks hbt a mbbd predkftbr b uture returhsdespkte tle predkieftkbh br khvestbrs tb pkfg nahamers tlat wayTere was fieariy a ibt b mreat naterkai br khvestneht iessbhs kh tle 15 Vuper Obwi tb fbne up wktl a tlene brtlks ietter rbn tle rkse b twb uhderrated quarteroafgs (iate rbuhd drac pkfgs) wlb lave oefbne tle oest kh tlemane despkte aii tle quahtktatkve ahaiysks tlat predkfted tley wbuid hever anbuht tb nufl (statkstkfs stkii fah‛tneasure leart ahd 1047297eid snarts) tb tle uhikgeiy rbbgke lerb wlb dkdh‛t brmet tlat ybu lave tb stay bfused bhevery shap oefause ybu hever ghbw wleh tle oaii ks fbnkhm ybur way (eveh wleh everybhe eise kh tle stadkun

ghew br sure kt was mbkhm tb oe a ruh hbt a pass bh tle iast Vealawgs piay7 weii everybhe out Zete Farrbii) tbdeehse wkhs flanpkbhslkps amakh as kt was tle Zatrkbts deehse tlat gept tle prbik1047297f Veattie behse but b tle ehdzbhe kh tle burtl quarter wlkfl aiibwed bn Orady‛s lerbkf perbrnahfe (Vuper Obwi refbrds br nbstfbnpietkbhs ahd nbst aii tkne D passes) tb oefbne NSZ wbrtly ratler tlah a bbthbte kh stbrkes aobut _usseii]kisbh‛s NSZ award tb tle knpbrtahfe b uhderstahdkhm tle dkerehfe oetweeh prboaokiktkes ahd pbsskokiktkeswleh nagkhm frktkfai defkskbhs kh bbtoaii ahd kh khvestkhm (kt was pbsskoie tlat a siaht patterh wbuid wbrg wleheverybhe was frusled tbmetler at tle bhe yard ikhe out kt was prboaoie tlat Narslawh Iyhfl (OeastNbde) wbuidmet tle iast yard mkveh tlree dbwhs ahd a tknebuthellip) Out tlks year we wkii tage a oreag rbn tle bbtoaiiahaibmkes ahd taig aobut ah NSZ wbrtly perbrner kh tle khvestneht ouskhess tlat las prbvkded nahy pearis bwksdbn (ahd a ikttie plkibsbply) bver tle years tlat we fah appiy tb tle furreht khvestneht ehvkrbhneht

Mebrme Vbrbs ks wkdeiy remarded as bhe b tle preenkheht khvestbrs b bur tkne acer fbnpkikhm a trafg refbrd bverbur defades rbn 13 tb 7 tlat ks wktlbut questkbh Laii b Cane naterkai Mkveh tlat tlere are sknpiy hbttlat nahy khvestbrs wlb lave trafg refbrds b tlks duratkbh kt ks tbuml tb nage dkreft fbnparksbhs at aii ahdnagkhm fbnparksbhs afrbss defades ks tbuml oefause b tle very dkereht efbhbnkf ahd narget ehvkrbhnehts tlatexkst rbn defade tb defade Cbr exanpie nagkhm mbbd returhs rbn 13 tb 1lt was pretty darh tbuml as tleVampZ 5 was essehtkaiiy 1047311at durkhm tlbse 14 years wlkie kt was pretty easy tb nage sbikd returhs rbn 1lt tb as tle VampZ 5 fbnpbuhded at 16 ahd weht up heariy tknes (wleh ybu put tle wlbie 41 year perkbdtbmetler tle VampZ 5 fbnpbuhded at 4 ahd turhed a $1 khvestneht khtb `ust uhder $4)Khterestkhmiy tlere ks bhe khvestbr wlb was kh tle narget tle ehtkre tkne as Vbrbs (ahd ks bceh tbuted as tlewbrid‛s mreatest khvestbr br sbne pretty mbbd reasbhs reiated tb fbhskstehfy ahd ibhmevkty) ahd aftuaiiy las a

_eciexkvkty0 Tle Skrtubus amp Tle Skfkbus

Vburfe(s)0 Qubrafbn




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Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14

Narget Butibbg










Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14

Narget Butibbg










Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14

Narget Butibbg










Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14









Cburtl Quarter 14

Narget Butibbg










Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











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Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14

Narget Butibbg










Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14










Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14









Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14










Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14




Quaik1047297er0















Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14











Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14











Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14













Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14












Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14











Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14












Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14










Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14










Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14





























Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East







Cburtl Quarter 14









Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East






Meherai






Nenoer CKH_AVKZF










Khdkfes





Hb ]arrahty


_ksg Vunnary












Nbrmah Vtahiey


neht bc reasury






Oarfiays








tle Nkddie East




marcato capital 4q14 letter to investors

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