The Future of Post-human Law: A Preface to a New Theory of Necessity, Contingency and Justice 1443819492, 9781443819497


271 68 3MB

English Pages [475] Year 2010

Report DMCA / Copyright

DOWNLOAD PDF FILE

Table of contents :
BOOKS ALSO BY PETER BAOFU
CONTENTS
TABLES
FOREWORD
ACKNOWLEDGEMENTS
ABBREVIATIONS
PART ONE
CHAPTER 1
PART TWO
CHAPTER 2
PART THREE
CHAPTER 3
PART FOUR
CHAPTER 4
BIBLIOGRAPHY
INDEX
Recommend Papers

The Future of Post-human Law: A Preface to a New Theory of Necessity, Contingency and Justice
 1443819492, 9781443819497

  • 0 0 0
  • Like this paper and download? You can publish your own PDF file online for free in a few minutes! Sign Up
File loading please wait...
Citation preview

7KH)XWXUHRI 3RVW+XPDQ/DZ 

7KH)XWXUHRI 3RVW+XPDQ/DZ

$3UHIDFHWRD1HZ7KHRU\ RI1HFHVVLW\&RQWLQJHQF\DQG-XVWLFH     %\ 

3HWHU%DRIX  



 &$0%5,'*(6&+2/$56 38%/,6+,1*    

     7KH)XWXUHRI3RVW+XPDQ/DZ$3UHIDFHWRD1HZ7KHRU\RI1HFHVVLW\&RQWLQJHQF\DQG-XVWLFHE\ 3HWHU%DRIX  7KLVERRNILUVWSXEOLVKHG  &DPEULGJH6FKRODUV3XEOLVKLQJ  %DFN&KDSPDQ6WUHHW1HZFDVWOHXSRQ7\QH1(;;8.   %ULWLVK/LEUDU\&DWDORJXLQJLQ3XEOLFDWLRQ'DWD $FDWDORJXHUHFRUGIRUWKLVERRNLVDYDLODEOHIURPWKH%ULWLVK/LEUDU\   &RS\ULJKW‹E\3HWHU%DRIX



$OOULJKWVIRUWKLVERRNUHVHUYHG1RSDUWRIWKLVERRNPD\EHUHSURGXFHGVWRUHGLQDUHWULHYDOV\VWHP RUWUDQVPLWWHGLQDQ\IRUPRUE\DQ\PHDQVHOHFWURQLFPHFKDQLFDOSKRWRFRS\LQJUHFRUGLQJRU RWKHUZLVHZLWKRXWWKHSULRUSHUPLVVLRQRIWKHFRS\ULJKWRZQHU  ,6%1  ,6%1   

BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 7R7KRVHLQWKH)XWXUH:RUOG%H\RQG-XVWLFH                 

 



 

BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB %22.6$/62%WUDGLWLRQDOO\ XQGHUVWRRG@ EHFDXVH WKH ZRUOG LV FKDRWLF DQG ZH FDQQRW XQGHUVWDQG LW WKURXJK UHDVRQ 7KHUH LV QR ULJKW UHDVRQRUPRUDOUHDOLW\WKDWZHPXVWXOWLPDWHO\GLVFRYHULIZHWKLQNRUWU\ KDUGHQRXJK:LOOWRSRZHULVWKHIXQGDPHQWDO KXPDQDELOLW\WR VWUXJJOH



7KH)XWXUHRI3RVW+XPDQ/DZ 



WKURXJKWKHLQFRPSUHKHQVLEOHDFFLGHQWRIWKHZRUOGWRPDNHOLIHVHQVLEOH DQGSUDFWLFDO´ -/LQDUHOOL  7KXV WKH ZLOO WR SRZHU LV QRW IRU ³VHOI SUHVHUYDWLRQ´ EXW IRU WKH ³HQKDQFHPHQW RI OLIH 1LHW]VFKH ZDV QRW D PRUDO VNHSWLF +XPDQV PXVW RYHUFRPHWKHJRDOLVEHFRPLQJRYHUPDQQRWWRPRGHORQHDIWHUDVDLQWRU *RG´ -/LQDUHOOL  ,QWKHHQGODZVVKRXOGEHFRQVWUXFWHGWRDOORZVXSHULRULQGLYLGXDOVWR SXUVXHWKLVRYHUFRPLQJIRUWKH³HQKDQFHPHQWRIOLIH´QRWUHVHQWLQJWKHP DVLQVODYHPRUDOLW\  %XWIRUWKHFULWLFVWKH1LHW]VFKHDQFDOOIRUWKHZLOOWRSRZHUKDVLWV GDUNVLGHXQVDLGDV-DFTXHV'HUULGD  RQFHWKXVZURWH³2QHPD\ ZRQGHU ZK\ WKH RQO\ WHDFKLQJ LQVWLWXWLRQ RU WKH RQO\ EHJLQQLQJ RI D WHDFKLQJLQVWLWXWLRQWKDWHYHUVXFFHHGHGLQWDNLQJDVLWVPRGHOWKHWHDFKLQJ RI1LHW]VFKHRQWHDFKLQJZLOOKDYHEHHQD1D]LRQH´

7KH&RQWLQJHQF\$UJXPHQW 8QOLNHWKHQHFHVVLW\DUJXPHQW²WKHUHLVDQRSSRVLWHYLHZSRLQWZKLFK FDQEHFDOOHGLQWKHDEVHQFHRIEHWWHUZRUGVWKHFRQWLQJHQF\DUJXPHQWDV LWSD\VPRUHDWWHQWLRQUHODWLYHO\VSHDNLQJDJDLQRQ E WKHVRFLHWDODQG E  WKH FXOWXUDO IDFWRUV ERWK RI ZKLFK VKDSH RYHU WLPH KRZ D ODZ EHFRPHVDFFHSWHGDQGHVWDEOLVKHGQRWEHFDXVHLWLVQHFHVVDU\EXWEHFDXVH LWLVFRQWQJHQWRQWKHFLUFXPVWDQWLDOIRUFHVRIKLVWRU\ ,Q WKLV VHQVH WKH ZRUG ³FRQWLQJHQF\´ LQ WKH DUJXPHQW LV VXJJHVWLYH EHFDXVH RI LWV PHDQLQJ IRU VRPHWKLQJ ZKLFK LV QRW QHFHVVDU\ EXW FRQWLQJHQWLQUHODWLRQWRVRFLHWDODQGFXOWXUDOFDXVHV +HUHDIHULVWKHVXPPDU\RIWKHVRFLHWDOFDXVHVLQ E DQGWKHFXOWXUDO FDXVHVLQ E LQDFFRUGDQFHWRWKHFRQWLQJHQF\DUJXPHQW²LQWKDWRUGHU 7KH6RFLHWDO 7KH VRFLHWDO YHUVLRQ RI WKH FRQWLQJHQF\ DUJXPHQW LV WR SD\ PRUH DWWHQWLRQWRVRFLHWDOFDXVHVLQVKDSLQJWKHRXWFRPHRIDODZ $JRRGH[DPSOHLQYROYHVODZDQGHFRQRPLFVE\WKH1REHO3UL]H ZLQQHU5RQDOG&RDVHZKRLQ³7KH3UREOHPRI6RFLDO&RVW´  PDGH WKH HVVHQWLDO SRLQW WKDW ³LI ZH OLYHG LQ D ZRUOG ZLWKRXW WUDQVDFWLRQ FRVWV SHRSOH ZRXOG EDUJDLQ ZLWK RQH DQRWKHU WR FUHDWH WKH VDPH DOORFDWLRQ RI UHVRXUFHVUHJDUGOHVVRIWKH ZD\DFRXUWPLJKWUXOHLQSURSHUW\GLVSXWHV´ :.  0RUHVSHFLILFDOO\³&RDVHXVHGWKHH[DPSOHRIDQXLVDQFHFDVHQDPHG 6WXUJHV Y %ULGJPDQ ZKHUH D QRLV\ VZHHWPDNHU DQG D TXLHW GRFWRU ZHUH QHLJKERXUVDQGZHQWWRFRXUWWRVHHZKRVKRXOGKDYHWRPRYH&RDVHVDLG

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





WKDWUHJDUGOHVVRIZKHWKHUWKHMXGJHUXOHGWKDWWKHVZHHWPDNHUKDGWRVWRS XVLQJ KLV PDFKLQHU\ RU WKDW WKH GRFWRU KDG WR SXW XS ZLWK LW WKH\ FRXOG VWULNHD PXWXDOO\EHQHILFLDOEDUJDLQDERXW ZKR PRYHV KRXVHWKDWUHDFKHV WKH VDPH RXWFRPH RI UHVRXUFH GLVWULEXWLRQ 2QO\ WKH H[LVWHQFH RI WUDQVDFWLRQFRVWVPD\SUHYHQWWKLV´ :. R  6R&RDVH¶VFODLPKHUHLVWKDW³WKHODZRXJKWWRSUHHPSWZKDWZRXOG KDSSHQDQGEHJXLGHGE\WKHPRVWHIILFLHQWVROXWLRQ7KHLGHDLVWKDWODZ DQG UHJXODWLRQ DUH QRW DV LPSRUWDQW RU HIIHFWLYH DW KHOSLQJ SHRSOH DV ODZ\HUV DQG JRYHUQPHQW SODQQHUV EHOLHYH &RDVH DQG RWKHUV OLNH KLP ZDQWHG D FKDQJH RI DSSURDFK WR SXW WKH EXUGHQ RI SURRI IRU SRVLWLYH HIIHFWVRQDJRYHUQPHQWWKDWZDVLQWHUYHQLQJLQWKHPDUNHWE\DQDO\VLQJ WKHFRVWVRIDFWLRQ´ :.  )RU WKH FULWLFV KRZHYHU &RDVH¶V DUJXPHQW UHSUHVHQWV WKH UHFXUUHQW FRQVHUYDWLYH LGHRORJ\ RI IUHH PDUNHW ZKLFK KDV EHHQ DGYRFDWHG E\ ³HFRQRPLVWVDQGODZ\HUVLQFOXGLQJ0LOWRQ)ULHGPDQDQG*DU\%HFNHU´LQ WKHLU YRFDO FDOO IRU ³GHUHJXODWLRQ DQG SULYDWLVDWLRQ´ DJDLQVW ³VWDWH UHJXODWLRQRUZKDWWKH\VHHDVUHVWULFWLRQVRQWKHRSHUDWLRQRIIUHHPDUNHW´ :.6-DNRE\  WKH\@ HPERG\ WKH SRSXODUZLOO´ :.S  %XWIRUWKHFULWLFVWKH*HUPDQKLVWRULFLVWVDUHUDWKHUWRRRQHVLGHGLQ LJQRULQJ RWKHU IDFWRUV ZKLFK FDQ GHWHUPLQH WKH GHYHORSPHQW RI ODZ RYHU WLPH)RULQVWDQFHVRPHDUJXHIRU³9HUQXQIWVUHFKW 1DWXUDO/DZ ´LQWKDW ³ODZ FRXOG EH GLVFRYHUHG RQO\ E\ UDWLRQDO GHGXFWLRQ IURP WKH QDWXUH RI PDQ´²QRWWKDWLWVKRXOGHPERG\³WKHSRSXODUZLOO´ :.S 

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

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7KH5HFRQVWUXFWLRQ7KHRU\RI/DZ 0\ UHFRQVWUXFWLRQ DUJXPHQW FDQ EH PRUH SUHFLVHO\ FDOOHG WKH UHFRQVWUXFWLRQWKHRU\RIODZVLQFHLWLVWRSURSRVHDQHZWKHRU\RIMXVWLFH 7KH UHFRQVWUXFWLRQ WKHRU\ RI ODZ KDV WKUHH GLVWLQFWLYH IHDWXUHV WR UHPHPEHU )LUVWO\LWPDNHVJRRGXVHRIDOOWKHRUHWLFDODSSURDFKHVLQWKHOLWHUDWXUH RQ ODZ OLNH WKH QHFHVVLW\ DUJXPHQW DQG WKH FRQWLQJHQF\ DUJXPHQW ²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²WREHHODERUDWHGLQWKHUHVWRIWKHERRNZLWKDVXPPDU\ LQWKHFRQFOXGLQJFKDSWHU ,Q WKH HQG WKHUH LV QR MXVWLFH ZLWKRXW LQMXVWLFH DV ILUVW SURSRVHG LQ )+&  LQ DFFRUGDQFH WR H[LVWHQWLDO GLDOHFWLFV²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³SRVWKXPDQ´IDWH



7KH)XWXUHRI3RVW+XPDQ/DZ 



7KHRU\DQG0HWD7KHRU\ 7KH UHFRQVWUXFWLRQ DUJXPHQW RU WKH UHFRQVWUXFWLRQ WKHRU\ RI ODZ SUHVXSSRVHVVRPHNLQGRIPHWDWKHRU\LQVSHFLDOUHODWLRQWRPHWKRGRORJ\ DQG RQWRORJ\²MXVW DV DOO WKHRULHV HLWKHU H[SOLFLWO\ RU LPSOLFLWO\ UHTXLUH WKHLURZQYHUVLRQVRIPHWDWKHRU\ ,Q P\ FDVH DV WKLV LV VRPHWKLQJ WKDW , UHJXODUO\ H[SODLQHG LQ P\ SUHYLRXV ERRNV , DOUHDG\ SURSRVHG P\ GLVWLQFWLYH DSSURDFK WR PHWKRGRORJ\ NQRZQ DV ³VRSKLVWLFDWHG PHWKRGRORJLFDO KROLVP´  DQG RQWRORJ\ NQRZQDV³H[LVWHQWLDOGLDOHFWLFV´  7KHQH[WWZRVHFWLRQVDUHWRLQWURGXFHP\PHWDWKHRU\RUH[LVWHQWLDO GLDOHFWLFVDQGVRSKLVWLFDWHGPHWKRGRORJLFDOKROLVPUHVSHFWLYHO\

$8QLILHG7KHRU\RI(YHU\WKLQJ ,Q WKH HQG P\ GLVWLQFWLYH DSSURDFK WR PHWDWKHRU\ VHUYHV DV D IRXQGDWLRQ WR XQLI\ DOO GRPDLQV RI NQRZOHGJH IRU DQ RYHUDUFKLQJ XQGHUVWDQGLQJ RI DOO IRUPV RI UHDOLW\ E\ ZD\ RI VRPH RQWRORJLFDO SULQFLSOHV DQG WKH FRPSUHKHQVLYH SHUVSHFWLYHV RI WKH PLQG QDWXUH VRFLHW\DQGFXOWXUH²DVZLOOEHH[SODLQHGLQWKHQH[WWZRVHFWLRQV  7KLV LV VR ZLWKRXW FRPPLWLQJ WKH VLQV RI UHGXFWLRQLVP DQG UHYHUVH UHGXFWLRQLVP DV RIWHQ VHHQ LQ PDQ\ KROLVWLF DSSURDFKHV ZLWK WKH IDG RI V\VHPVDSSURDFKDVDPRVWUHFHQWQRWRULRXVH[DPSOH VLQFHP\GLVWLQFWLYH DSSURDFKPDNHVJRRGXVHRIGLIIHUHQWVFKRROVRIWKRXJKWZLWKRXWIDYRULQJ DQ\ RI WKHP QRU WU\LQJ WR LQWHJUDWH WKHP DV WKH\ DUH QRW QHFHVVDULO\ FRPSDWLEOH ZLWK HDFK RWKHU  VR DV WR DGMXVW IRU VXEMHFWLYLW\ GLYHUVLW\ FRQIOLFWDQGFRPSOH[LW\IRUH[DPSOH ,Q WKLV VHQVH WKH ZRUG ³XQLILHG´ GRHV QRW KDYH WR PHDQ LQWHJUDWLYH DSSURDFKLQDQDUURZVHQVHQRUV\VWHPVDSSURDFKLQDEURDGRQHERWKRI ZKLFK,UHMHFWZKLOHOHDUQLQJIURPWKHP 7KLVRYHUDUFKLQJSURMHFW FRQVLVWLQJRIQXPHURXVWKHRULHVRIPLQHDV ZLOOEHVXPPDUL]HGLQWKHQH[WVHFWLRQ WKXVFRQVWLWXWHVP\JUDQGXQLIHG WKHRU\RIHYHU\WKLQJLQWKHZRUOGDQGEH\RQG

7KH/RJLFRI([LVWHQWLDO'LDOHFWLFV 7RVWDUWWKH RQWRORJ\ RI H[LVWHQWLDO GLDOHFWLFV FDQ EH VXPPDUL]HG LQ WKLV VHFWLRQ²WR EH UHSHDWHG RIWHQ YHUEDWLP ZLWK RQO\ D IHZ XSGDWHG UHYLVLRQV IURPP\SUHYLRXVZRUNV²DVWKLVLVVRPHWKLQJWKDW,RIWHQGR

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





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²DJDLQ RIWHQ YHUEDWLP 7KLVPHDQVWKDWIRUWKRVHUHDGHUVZKRKDGUHDGVRPHRIP\SUHYLRXV ERRNV WKH VXPPDU\ EHORZ LV UHDOO\ QRWKLQJ QHZ DOPRVW YHUEDWLP ZLWK RQO\VRPHPLQRUUHYLVLRQV DQGFDQEHVNLSSHG %XW IRU WKRVH ZKR KDYH QHYHU UHDG P\ SUHYLRXV ERRNV LW LV D JRRG UHYLHZRIWKHP

7KH&RQFHSWLRQRI([LVWHQWLDO'LDOHFWLFV RU,WV2QWLFV  7KLVRQWRORJ\ ZDVRULJLQDOO\ GHVLJQDWHGDV ³H[LVWHQWLDOGLDOHFWLFV´LQ %H\RQG &DSLWDOLVP WR 3RVW&DSLWDOLVP KHUHLQ DEEUHYLDWHG DV %&3&  DOWKRXJKLWZDVDOUHDG\DQDO\]HGLQRWKHUERRNVRIPLQHOLNHWKHYROXPHV RI7KH)XWXUHRI+XPDQ&LYLOL]DWLRQ )+& 7KH)XWXUHRI&DSLWDOLVPDQG 'HPRFUDF\ )&'  7KH )XWXUH RI 3RVW+XPDQ &RQVFLRXVQHVV )3+&  DQGWKHYROXPHVRI%H\RQG'HPRFUDF\WR3RVW'HPRFUDF\ %'3'  /HVW DQ\ FRQIXVLRQ RFFXUV LW LV LPSRUWDQW WR VWUHVV DW WKH RXWVHW WKDW WKH ZRUG H[LVWHQWLDO  LQ ³H[LVWHQWLDO GLDOHFWLFV´ KDV QRWKLQJ WR GR ZLWK ([LVWHQWLDOLVP ZKLFK , UHEXNHG LQ )+& )&' DQG DOVR )3+& ,QVWHDG WKH ZRUG KHUH PHUHO\ UHIHUV WR WKH H[LVWHQFH RI LQWHOOLJHQW OLIH ERWK SULPLWLYHDQGDGYDQFHG LQDEURDGVHQVH 6RPH%DVLF&RQFHSWV 7KH FRQFHSWLRQ RI H[LVWHQWLDO GLDOHFWLFV RU LWV RQWLFV  PDNHV XVH RI GLIIHUHQW FRQFHSWV OLNH ³VHWV´ ³HOHPHQWV´ ³UHODWLRQV´ ³RSHUDWLRQV´ ³IXQFWLRQV´ ³WUXWK YDOXHV´ ³D[LRPV´ ³SRVWXODWHV´ DQG ³SULQFLSOHV´²DV VKRZQ LQ 7DEOH   ZKLFK DUH  LPSRUWDQW IRU WKH XQGHUVWDQGLQJ RI DQ\ ORJLFRIRQWRORJ\ 7KDW FODULILHG²H[LVWHQWLDO GLDOHFWLFV DV D ODQJXDJH RI RQWRORJ\ FDQ EH DQDO\]HG LQ GLIIHUHQW ZD\V WKDW D ODQJXDJH DV DQ DQDORJ\ LV RIWHQ DQDO\]HG QDPHO\ LQ UHODWLRQ WR SKRQRORJ\ ³WKH VWXG\ RI SDWWHUQV RI D



7KH)XWXUHRI3RVW+XPDQ/DZ 



ODQJXDJH V VRXQGV´  SKRQHWLFV ³WKH VWXG\ RI WKH SK\VLFDO DVSHFWV RI VRXQGV RI KXPDQ ODQJXDJH´  PRUSKRQRORJ\ ³WKH VWXG\ RI WKH LQWHUQDO VWUXFWXUH RI ZRUGV´  V\QWD[ ³WKH VWXG\ RI KRZ ZRUGV FRPELQH WR IRUP JUDPPDWLFDO VHQWHQFHV´  VHPDQWLFV ³WKH VWXG\ RI WKH PHDQLQJ RI ZRUGV >OH[LFDO VHPDQWLFV@ DQG IL[HG ZRUG FRPELQDWLRQV >SKUDVHRORJ\@´  DQG SUDJPDWLFV ³WKHVWXG\RIKRZXWWHUDQFHVDUHXVHG«OLWHUDOO\ILJXUDWLYHO\ RURWKHUZLVH«LQFRPPXQLFDWLYHDFWV´  :.  %XWVLQFHP\WKHRU\RIH[LVWHQWLDOGLDOHFWLFVPDNHVXVHRIWKH(QJOLVK ODQJXDJHIRUFRPPXQLFDWLRQKHUHLWGRHVQRWSURSRVHDQHZZD\WRPDNH WKH SDWWHUQV RI D ODQJXDJH¶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³WKHGLOHPPDRIRQWRORJ\´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³SOXUDOLW\´ ³G\QDPLVP´ ³GXUDWLRQ´ ³LQWHUDFWLRQ´ ³OLIH´ ³FRQVFLRXVQHVV´ DQG ³YROLWLRQ´   E\ 5HJLQDOG )LUHKDPPHU   RQO\ FRQVWLWXWHV D ODWHVW DGGLWLRQ WR WKLV ROG LPSRYHULVKLQJ WUDGLWLRQ )LUVWO\ WKH FODVVLILFDWLRQ RI HQWLWLHV SURSHUWLHV DQG UHODWLRQVKLSV LV WRR PDWHULDOFHQWULF LQ RIWHQ IRFXVLQJ PRUH RQ WKH H[LVWHQFH RI PDWHULDO HQWLWLHVWKDQRQQRQPDWHULDORQHV 6HFRQGO\WKHFODVVLILFDWLRQLVWRRDQWKURSRFHQWULFLQRIWHQIDYRULQJ WKHIDFWRURIKXPDQDJHQF\LQGHSLFWLQJUHDOLW\

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





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

7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV RU,WV2QWRPHWKRGRORJ\ DQG2QWRORJLF  7KHV\QWD[RIH[LVWHQWLDOGLDOHFWLFVDQDORJRXVO\VSHDNLQJUHIHUVKHUH WRWKHVWUXFWXUHRIDQRQWRORJ\ZKLFKFDQEHVWXGLHGE\ZD\RIFRPELQLQJ LGHDV LQWR FRPSOH[ UHODWLRQVKLSV OLNH RQWRORJLFDO SULQFLSOHV WR GHSLFW UHDOLW\LQWKHZRUOG²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



7KH)XWXUHRI3RVW+XPDQ/DZ 



2I FRXUVH RQH FDQQRW WRWDOO\ UXOH RXW DQ\ UHODWLRQVKLS EHWZHHQ WZR HQWLWLHV HVSHFLDOO\ LQ D FRPSOH[ ZRUOG RI HYHU\WKLQJ EHLQJ OLQNHG WR HYHU\WKLQJHOVH²EXWWKHFRPSDULVRQKHUHLVUHODWLYHQRWDEVROXWH ,QWKLVVHQVHWKHIOH[LELOLW\LQIOH[LELOLW\SDLUFDQQRWEHDQRQWRORJLFDO SULQFLSOHVLQFHLWKDVVRPHWKLQJFORVHO\LQFRPPRQZLWKRWKHURQHV OLNH WKHVLPSOHQHVVFRPSOLFDWHGQHVVSULQFLSOHIRULQVWDQFH  $V DQ LOOXVWUDWLRQ VRPHWKLQJ ZKLFK LV IOH[LEOH LQ LQWHUSUHWDWLRQ LV PRUH OLNHO\ WR DOORZ PXOWLSOH YLHZSRLQWV DQG WKXV PDNHV WKH RYHUDOO SLFWXUHPRUHFRPSOLFDWHGWKDQRWKHUZLVH VLPSOH  E 6HFRQGO\DQRQWRORJLFDOSULQFLSOHFDQQRWEHUHGXQGDQWLQUHODWLRQ WRRWKHUSULQFLSOHVLQWKDWLWVRPHKRZGXSOLFDWHVRWKHUSULQFLSOHV ,QWKLVVHQVHIRULQVWDQFHWKHGLUHFWQHVVLQGLUHFWQHVVSDLUFDQQRWEH DQRQWRORJLFDOSULQFLSOHEHFDXVHLWVRPHKRZGXSOLFDWHVRWKHURQWRORJLFDO SULQFLSOHV OLNHWKHSUHFLVHQHVVYDJXHQHVVSULQFLSOHIRULQVWDQFH  $VDQLOOXVWUDWLRQVRPHWKLQJZKLFKLVGLUHFWPHDQVWREHULJKWWRWKH SRLQWDQGGRHVQRWQHHGWRJRWRDQXQQHFHVVDULO\ORQJORRS²VRLWLVOHVV YDJXHLQEHLQJFOHDUHUDERXWWKHWKLQJLQTXHVWLRQ F  7KLUGO\ DQ RQWRORJLFDO SULQFLSOH FDQQRW EH GHULYHG IURP RWKHU RQHV²DVLILWLVDFKLOGSDUHQWUHODWLRQVKLS ,Q WKLV VHQVH WKH FRQYHQLHQFHLQFRQYHQLHQFH SDLU FDQQRW EH DQ RQWRORJLFDOSULQFLSOHEHFDXVHLWFDQEHGHULYHGIURPRWKHURQHV OLNHWKH VORZQHVVTXLFNQHVVSULQFLSOHIRULQVWDQFH  )RU LQVWDQFH VRPHWKLQJ ZKLFK LV FRQYHQLHQW DOUHDG\ LPSOLHV WKDW LW FDQEHREWDLQHGTXLFNO\ UDWKHUWKDQVORZO\ ²DOOWKLQJVFRQVLGHUHG G  )RXUWKO\ DQ RQWRORJLFDO SULQFLSOH FDQQRW EH WULYLDO RU SDURFKLDO ²DVLILWLVRQO\RQHFRPSRQHQWFRPSHWLQJZLWKRWKHURQHVIRU LQFOXVLRQLQDVHW ,Q WKLV VHQVH WKH FRQVLVWHQF\LQFRQVLVWHQF\ SDLU FDQQRW EH DQ RQWRORJLFDOSULQFLSOHEHFDXVHLWVYDOLGLW\LVOLPLWHG RUSDURFKLDO DVLWFDQ EHHDVLO\FKDOOHQJHGDQGUHSODFHGE\RSSRVLQJPDMRU QRWPLQRU WKHRULHV HJWKHFRUUHVSRQGHQFHWKHRU\RIWUXWKWKHSUDJPDWLFWKHRU\RIWUXWKWKH VHPDQWLF WKHRU\ RI WUXWK DQG ZKDWQRW  QRW MXVW LQ DFFRUGDQFH WR WKH FRQVLVWHQF\WKHRU\RIWUXWK IRUFRQVLVWHQF\  ,Q WKLV VHQVH WKH FRQVLVWHQF\ DUJXPHQW LV RQO\ RQH DPRQJ GLIIHUHQW RSSRVLQJDUJXPHQWVLQUHODWLRQWRWKHORJLFRIZKDWFRQVWLWXWHV³WUXWK´ $OWKRXJK WKHVH H[DPSOHV DUH QRW H[KDXVWLYH WKH\ LOOXVWUDWLYH WKH VHOHFWLYHQHVVRIDQ\RQWRORJLFDOSULQFLSOHWREHH[LVWHQWLDOO\GLDOHFWLF   

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





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³VWUXFWXUH´ EXW FDQ EH UHFODVVLILHG XQGHU WKH FDWHJRU\ RI ³PHWKRG´DOWKRXJKLQVRGRLQJLWKDVDGLIIHUHQWPHDQLQJLQWKHFRQWH[W RIPHWKRG 7KH VDPH ORJLF DSSOLHV WR WKH VDPHGLIIHUHQFH SULQFLSOH XQGHU WKH FDWHJRU\ RI ³RXWFRPH´ ZKLFK FDQ EH UHFODVVLILHG XQGHU WKH FDWHJRU\ RI ³VWUXFWXUH´DOWKRXJKLQVRGRLQJRQFHPRUHLWKDVDGLIIHUHQWPHDQLQJLQ WKHFRQWH[WRIVWUXFWXUH F 7KLUGO\WKHSULQFLSOHVDUHWREHXQGHUVWRRGWRJHWKHUQRWWKDWHDFK SULQLFSOHLVWREHWUHDWHGLQGHSHQGHQWO\RIRWKHUV$IWHUDOOWKHSULQFLSOHV DUHPXWXDOO\FRQVWUDLQLQJLQWKDWWKH\ZRUNWRJHWKHUDVDZKROH G  )RXUWKO\ WKH SULQFLSOHV DUH UHOHYDQW WR DOO VXEMHFW PDWWHUV EXW VRPH SULQFLSOHV DUH PRUH XVHIXO WR VRPH VXEMHFW PDWWHUV WKDQ RWKHUV²DV LPSOLHGLQWKHV\PPHWU\DV\PPHWU\SULQFLSOH $QG H  ILIWKO\ WKH SULQFLSOHV FRQVWLWXWH RQO\ WZR OHYHOV RI DQDO\VLV WKLVWLPHDWWKHRQWRORJLFDODQGPHWKRGRORJLFDOOHYHOV²ZKLOHRWKHUOHYHOV RIDQDO\VLV IURPWKHSHUVSHFWLYHVRIWKHPLQGQDWXUHVRFLHW\DQGFXOWXUH  DUHDOVRQHHGHGLQRUGHUWRXQGHUVWDQGUHDOLW\LQLWVWRWDOLW\ DVH[SODLQHG LQWKHVHFWLRQRQ³VRSKLVWLFDWHGPHWKRGRORJLFDOKROLVP´VRDVWRDYRLGWKH GXDOGDQJHUVRIUHGXFWLRQLVPDQGUHYHUVHUHGXFWLRQLVP   



7KH)XWXUHRI3RVW+XPDQ/DZ 



2QWRPHWKRGRORJ\ :LWKWKHVHVHOHFWLRQFULWHULDDQGFODULILFDWLRQVLQPLQG²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²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²RULQDPRUHHOHJDQWWHUPWKHG\QDPLFVRIVSDFH WLPH LQ)&  ,Q7KH)XWXUHRI&RPSOH[LW\ )& ,DGGHGWKUHHPRUHSULQFLSOHVRQ WRSRIWKHWKUHHDIRUHPHQWLRQHGQDPHO\ G WKHSDUWLDOLW\WRWDOLW\SULQFLSOH RQWKHUHODWLRQVKLSVEHWZHHQ WKHSDUWVDQGWKH ZKROH H WKHRUGHUFKDRV SULQFLSOHRQWKHSDWWHUQRIWKLQJVDQG I WKHSUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOHRQWKHRFFXUUHQFHRIWKLQJV²DVSDUWRI WKHRQWRORJLFDOORJLFRI H[LVWHQWLDOGLDOHFWLFV

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





,Q 7KH )XWXUH RI $HVWKHWLF ([SHULHQFH RU VLPSO\ )$(  DQRWKHU SULQFLSOHLVDGGHGQDPHO\ J WKHHYROXWLRQWUDQVIRUPDWLRQSULQFLSOH RQ WKHPXOWLSOHNLQGVRIDJHQF\  $OVR LQ )$( , WKHQ UHFODVVLILHG WKH VHYHQ SULQFLSOHV LQWR IRXU FDWHJRULHV QDPHO\ L  LQ UHODWLRQ WR PHWKRG IRU WKH SDUWLDOLW\WRWDOLW\ SULQFLSOHDQGWKHSUHGLFWDELOLW\XQSUHGLFWDELOLW\SULQFLSOH LL LQUHODWLRQWR SURFHVVIRUWKHFKDQJHFRQVWDQF\SULQFLSOHDQGWKHRUGHUFKDRVSULQFLSOH LLL LQUHODWLRQWRDJHQF\IRUWKHV\PPHWU\DV\PPHWU\SULQFLSOHDQGWKH HYROXWLRQWUDQVIRUPDWLRQSULQFLSOHDQG LY LQUHODWLRQWRRXWFRPHIRUWKH UHJUHVVLRQSURJUHVVLRQSULQFLSOH ,Q7KH5LVHRI$XWKRULWDULDQ/LEHUDO'HPRFUDF\ $/' ,DGGHGWZR PRUH SULQFLSOHV QDPHO\ K  WKH VRIWQHVVKDUGQHVV SULQFLSOH RQ WKH IRUFH RIDJHQF\ ZKLFKLVWREHFODVVLILHGXQGHUWKHFDWHJRU\DERXWDJHQF\ DQG L WKHVDPHGLIIHUHQFHSULQFLSOHRQWKH PHWDPRUSKRVLVRI FKDQJH ZKLFK LVWREHFODVVLILHGXQGHUWKHFDWHJRU\DERXWRXWFRPH  ,Q 7KH )XWXUH RI ,QIRUPDWLRQ $UFKLWHFWXUH ),$  , LQWURGXFH WKUHH DGGLWLRQDOSULQFLSOHVWKDWLV M WKHVLPSOHQHVVFRPSOLFDGQHVVSULQFLSOHRQ WKHLQWHUFRQQHFWLRQDPRQJWKLQJV N WKHSUHFLVHQHVVYDJXHQHVVSULQFLSOH RQ WKH UHILQHPHQW RI WKLQJV DQG O  WKH VORZQHVVTXLFNQHVV SULQFLSOH RQ WKH VSHHG RI FKDQJH²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



7KH)XWXUHRI3RVW+XPDQ/DZ 



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²VR IDU DVVXPPDUL]HGLQ7DEOH  7KH3ULQFLSOHVDV6KRUW&XWV LQ D QRQ (XFOLGHDQ JHRPHWU\@ DQG FXUYHG VSDFHWLPH WHOOV  PDWWHU KRZ WR EHKDYH«6SDFH FRQWUDFWV QHDU PDVV DQG GLODWHV DZD\ IURP LW 7LPH GLODWHV QHDU PDVV DQG FRQWUDFWV DZD\ IURP LW &ORFNV SRVLWLRQHG IDUWKHUDZD\IURPWKHPDVVRIWKHHDUWKUXQIDVWHUWKDQFORFNVFORVHUWR WKHHDUWK´ /6KODLQ  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH            



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH7KHRUHWLFDO'HEDWHRQ6SDFH7LPH 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡3HWHU%DRIX¶V3HUVSHFWLYDO7KHRU\RI6SDFH7LPH ²VSDFHDQGWLPHFDQEHXQGHUVWRRGIURPPXOWLSOHSHUVSHFWLYHVEHWKH\ LQ UHODWLRQ WR FXOWXUH VRFLHW\ QDWXUH DQG WKH PLQG ZLWK HDFK SHUVSHFWLYH UHYHDOLQJ VRPHWKLQJ DERXW WKH QDWXUH RI VSDFHWLPH DQG VLPXOWDQHRXVO\GHOLPLWLQJLWVYLHZ7KLVLVVXEMHFWWR³WKHUHJUHVVLRQ SURJUHVVLRQSULQFLSOH´LQH[LVWHQWLDOGLDOHFWLFV ²HDFKSHUVSHFWLYHRIVSDFHDQGWLPHH[LVWVLQVRFLHW\DQGFXOWXUHZLWK JRRG UHDVRQV ZLWK VRPH EHLQJ PRUH VXFFHVVIXO DQG KHJHPRQLF GRPLQDQW WKDQRWKHUV7KLVLVVXEMHFWWR³WKHV\PPHWU\DV\PPHWU\ SULQFLSOH´LQH[LVWHQWLDOGLDOHFWLFV ²VSDFHDQGWLPHZLOOQRWODVWWREHHYHQWXDOO\VXSHUVHGHG DOWHUHG E\ SRVWKXPDQV LQ GLIIHUHQW IRUPV HJVWUHWFKLQJVKULQNLQJ VSDFHWLPH HQJLQHHULQJ PRUH GLPHQVLRQV RI VSDFHWLPH DQG PDQLSXODWLQJ PXOWLYHUVHV  EH WKH\  KHUH LQ WKLV XQLYHUVH RU LQ PXOWLYHUVHV 7KXV HYHQ WKH  SK\VLFDO H[LVWHQFH RI VSDFHWLPH FDQQRW ODVW IRUHYHU ZLWK HYHU PRUH WUDQVIRUPDWLRQV LQ WKH SURFHVV 7KLV LV VXEMHFW WR ³WKH FKDQJHFRQVWDQF\SULQFLSOH´LQH[LVWHQWLDOGLDOHFWLFV ²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²DQGIRU WKDWPDWWHUWKHUHVWRI)3+67      

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH0DLQ5HDVRQVIRU$OWHULQJ6SDFH7LPH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH1HHGWR0DNH1HZ(QHUJ\0DWWHU ²([PDQLSXODWLQJPROHFXODUERQGVIRUQHZPDWHULDOV ²([FUHDWLQJQDQRWHFKQRORJLHVRQWKHDWRPLFVFDOH ²([HQJLQHHULQJWKHDWRPLFQXFOHXV ²([UHVWUXFWXULQJPRVWHOHPHQWDU\SDUWLFOHV ²([LQYHQWLQJQHZIRUPVRIPDWWHUDQGHQHUJ\  ‡7KH1HHGWR&UHDWH1HZ6SDFH7LPH ²([FUHDWLQJ³ZDUSGULYH´ DVLQVFLHQFHILFWLRQ IRUVSDFHWUDYHO ²([FUHDWLQJ³SRFNHWXQLYHUVHV´  ‡7KH1HHGWR&RQTXHUWKH&RVPRVXQWR0XOWLYHUVHV ²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



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH7HFKQRORJLFDO)URQWLHUVRIWKH0LFUR:RUOG BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7\SH,0LQXV ²([EXLOGLQJVWUXFWXUHVDQGPLQLQJ  ‡7\SH,,0LQXV ²([SOD\LQJZLWKWKHJHQHWLFPDNHXSVRIOLYLQJWKLQJV  ‡7\SH,,,0LQXV ²([PDQLSXODWLQJPROHFXODUERQGVIRUQHZPDWHULDOV  ‡7\SH,90LQXV ²([FUHDWLQJQDQRWHFKQRORJLHVRQWKHDWRPLFVFDOH  ‡7\SH90LQXV ²([HQJLQHHULQJWKHDWRPLFQXFOHXV  ‡7\SH9,0LQXV ²([UHVWUXFWXULQJPRVWHOHPHQWDU\SDUWLFOHV  ‡7\SHŸ0LQXV ²([DOWHULQJWKHVWUXFWXUHRIVSDFHWLPH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV$VDOUHDG\LQGLFDWHGLQ6HFRI)3+&WKHSUREOHPZLWKWKLV PLFURFODVVLILFDWLRQ IURP %DUURZ¶V ZRUN  LV WKDW WKH FLYLOL]DWLRQ W\SHV ZLWKWKHH[FHSWLRQRI7\SHŸ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

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH)LQLW\7UDQVILQLW\DQG,QILQLW\ 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡,QILQLW\ ²7KH WHUP ³LQILQLW\´ ZKLFK LV ³V\PEROLFDOO\ UHSUHVHQWHG ZLWK ’´ GHULYHV IURP WKH /DWLQ LQILQLWDV RU ³XQERXQGHGQHVV´  WR UHIHU WR ³VHYHUDO GLVWLQFW FRQFHSWV²XVXDOO\ OLQNHG WR WKH LGHD RI ZLWKRXW HQG ²ZKLFK DULVH LQ SKLORVRSK\ PDWKHPDWLFV DQG WKHRORJ\´ :. F  ²,QWKHFRQWH[WRIPDWKHPDWLFV³LQILQLW\´LVRIWHQ³WUHDWHGDVLILWZHUH D QXPEHU LH LW FRXQWV RU PHDVXUHV WKLQJV DQ LQILQLWH QXPEHU RI WHUPV  EXW LW LV D GLIIHUHQW W\SH RI QXPEHU  IURP WKH UHDO QXPEHUV ,QILQLW\ LV UHODWHG WR OLPLWV«ODUJH FDUGLQDOV«SURMHFWLYH JHRPHWU\ H[WHQGHG UHDO QXPEHUV DQG WKH DEVROXWH ,QILQLWH´ IRU LQVWDQFH :. F   ‡7UDQVILQLW\ ²7RDYRLGFRQIXVLRQP\XVDJHRIWKHZRUG³WUDQVILQLWH´ DVXVHGKHUH LQ WKH RQWRORJLFDO SULQFLSOH  LV QRW WKH VDPH DV WKH RQH ZKLFK ZDV RULJLQDOO\ FRLQHG E\ *HRUJ &DQWRU WR UHIHU WR ³FDUGLQDO QXPEHUV RU RUGLQDO QXPEHUV WKDW DUH ODUJHU WKDQ DOO ILQLWH QXPEHUV \HW QRW QHFHVVDULO\DEVROXWHO\LQILQLWH´ LQWKH PLQGRI*RG DVRSSRVHGWR ³UHODWLYH´LQILQLW\ LQWKHPLQGRI0DQ  :.G ,QRWKHUZRUGV IRU&DQWRUWKHUHDUHWZRNLQGVRILQILQLW\³DEVROXWH´DQG³UHODWLYH´² ZLWK ³UHODWLYH´ LQILQLW\ RU ³WUDQVILQLW\´ LQ WKH PLQG RI 0DQ  EHLQJ GHSHQGHQW RQ ³DEVROXWH´ LQILQLW\ LQ WKH PLQG RI *RG  IRU LWV H[LVWHQFH ²%\FRQWUDVWP\XVDJHRIWKHZRUG³WUDQVILQLWH´KHUHGLIIHUVUDGLFDOO\ IURPWKHRQHXVHGE\&DQWRU DQGRWKHUPDWKHPDWLFLDQV DQGLVPRUH OLPLWHGLQOLJKWRIWKHSUREOHPVFRQIURQWLQJDQ\DWWHPSWWRXQGHUVWDQG WKHLGHDRILQILQLW\EHLWE\LQWXLWLRQLPDJLQDWLRQDQGFRQFHSWLRQ DV DOUHDG\VKRZQLQWKHSUHYRXVWKUHHVXEVHFWLRQV  ²:LWK WKLV FODULILFDWLRQ LQ PLQG , DOORZ QXPEHUV ZKLFK FDQ EH PDQ\ WLPHV ODUJHU²RU VPDOOHU IRU WKDW PDWWHU²WKDQ WKH ILQLWH WKLQJV WKDW ZH HQFRXQWHU LQ GDLO\ OLIH EXW WKH\ GR QRW KDYH WR EH UHODWHG WR WKH LGHDRILQILQLW\DWDOO ZKLFKPD\QRWH[LVW  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH   



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH)LQLW\7UDQVILQLW\DQG,QILQLW\ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡7UDQVILQLW\ FRQW¶G  ²2IFRXUVHWKHUHPD\EHVRPHERUGHUOLQHFDVHVLQZKLFKLWLVQRWFOHDU ZKHWKHUWKHQXPEHULQTXHVWLRQLVWUDQVILQLWH LQP\XVDJH RUVLPSO\ DPDWKHPDWLFDOFRQYHQLHQFH$JRRGH[DPSOHRIDERUGHUOLQHFDVHLV WKH3ODQFNXQLWRIOHQJWKIRU³WKHVPDOOHVWVSDFHSRVVLEO\PHDVXUHGLQ QDWXUH´ZKLFKLV³OHVVWKDQELOOLRQWKVRIWULOOLRQWKVRIWULOOLRQWKVRIDQ LQFK´ RU VRPHWKLQJ OLNH  î í PHWHUV  3 %DRIX D 1 0F$OHHU:.9'&RUEHWW  ²7KH LGHDV FRQFHUQLQJ V\PPHWU\ DQG GLPHQVLRQV LQ WKH H[DPSOHV DERYH ZHUHDGGUHVVHGLQ&KDSWHU7KUHHDQG&KDSWHU)RXURI)3+* )RU QRZ LW VXIILFHV WR IXUWKHU DGG WKDW LW LV PLQGERJJOLQJ WR HYHQ FRQFHLYH RU LPDJLQH H[WUHPH QXPEHUV OLNH WKH 3ODQFN XQLW RI OHQJWK RURWKHUV 'RHVLWUHDOO\H[LVWDWDOO"2ULVLWPHUHO\DPDWKHPDWLFDO FRQYHQLHQFHWRGHVFULEHDSK\VLFDOVLWXDWLRQWKDWWKHKXPDQPLQGGRHV QRWXQGHUVWDQGSURSHUO\" ²,Q DQ\ HYHQW ³WUDQVILQLW\´ LQ P\ XVDJH  FDQ EH XVHG DV D IXUWKHU H[WHQVLRQ RIQXPEHU WRWKHILQLWHQXPEHUVLQGDLO\OLIH²DOEHLWZLWK VRPHERUGHUOLQHFDVHVLQPLQG  ‡)LQLW\ ²,W UHIHUV WR QXPEHUV ZKLFK DUH ERXQGHG WKDW LV ZLWK DQ HQG  HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\  LQ UHODWLRQ WR WKLQJV LQ HYHU\GD\ OLIH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFH)URP6HFDQG6HFRI)3+*            

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KHRUHWLFDO6SHFXODWLRQVRI0XOWLYHUVHV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡³%DE\8QLYHUVHV´ ([$QGUH/LQGHDQGRWKHUV  ²([ ,Q D IODW XQLYHUVH WKHRU\ ³HYHQ LI RXU SDUW RI LW HYHQWXDOO\ FROODSVHV«VRPH VSRWV LQ WKH FRVPRV ZRXOG VXGGHQO\ VWDUW LQIODWLQJ RQ WKHLU RZQ FUHDWLQJ EUDQGQHZ EDE\ XQLYHUVHV ´ 3 %DRIX     ‡³3DUDOOHO8QLYHUVHV´ ([6WHSKHQ+DZNLQJDQGRWKHUV  ²([ ,Q TXDQWXP FRVPRORJ\ WKHUH DOORZV WKH H[LVWHQFH RI LQILQLWH QXPEHUVRISDUDOOHOXQLYHUVHVZLWKWXQQHOLQJDPRQJWKHP 0.DNX  +DZNLQJODWHUUHYLVHGKLVYLHZVRQWKLV  ‡³3RFNHW8QLYHUVHV´ ([$ODQ*XWK  ²([³$VWKHSRFNHWXQLYHUVHVOLYHRXWWKHLUOLYHVDQGUHFROODSVHRU GZLQGOHDZD\QHZXQLYHUVHVDUHJHQHUDWHGWRWDNHWKHLUSODFH:KLOH OLIHLQRXUSRFNHWXQLYHUVHZLOOSUHVXPDEO\GLHRXWOLIHLQWKHXQLYHUVH DV D ZKROH ZLOO WKULYH IRU HWHUQLW\´ $ *XWK   3 %DRIX    ‡³%UDQH:RUOGV´ ([:DUUHQ6LHJHO/LVD5DQGDOODQGRWKHUV  ²([2XUXQLYHUVHLVVWXFNRQDPHPEUDQHRIVSDFHWLPHHPEHGGHGLQ D ODUJHU FRVPRV ZLWK GLIIHUHQW EUDQH ZRUOGV FRQQHFWLQJ DQGRU FROOLGLQJZLWKHDFKRWKHU BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHVHH[DPSOHVDUHVROHO\LOOXVWUDWLYH QRWH[KDXVWLYH DQGVRPHRI WKH LWHPV FDQ EH UHFODVVLILHG VRPHZKHUH HOVH 1RU DUH WKH\ DOZD\V PXWXDOO\H[FOXVLYH6LQFHWKH\DUHJHQHUDOLWLHVH[FHSWLRQVDUHH[SHFWHG 6RXUFH)URP7DEOHRI)3+&          



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH&RQIXVLRQEHWZHHQ³0DQ\:RUOGV´DQG³0XOWLYHUVH´ 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡)LUVW3UREOHP ²7KHILUVWSUREOHPLQWKLVVHFRQGFRQIXVLRQFRQFHUQVDGHEDWHEHWZHHQ WKH ³PDQ\ZRUOGV´ LQWHUSUHWDWLRQ RI TXDQWXP PHFKDQLFV E\ +XJK (YHUHWW  DQGRWKHUVDQGWKH&RSHQKDJHQLQWHUSUHWDWLRQE\1LHOV %RKU DQG :HUQHU +HLVHQEHUJ RQ WKH HIIHFWV RI TXDQWXP VWDWHV DIWHU LQWHUDFWLQJ ZLWK DQ H[WHUQDO HQYLURQPHQW HJ E\ D PHDVXULQJ REVHUYHU  ²2Q WKH RQH KDQG WKH &RSHQKDJDQ LQWHUSUHWDWLRQ RI TXDQWXP PHFKDQLFVLVPRUHLQGHWHUPLQLVWLFLQLWVFRQFHUQZLWKWKHSUREDELOLWLHV RIWKHRXWFRPHVRIDZDYHIXQFWLRQDIWHULQWHUDFWLQJZLWKDQH[WHUQDO HQYLURQPHQW HJ E\ D PHDVXULQJ REVHUYHU XVLQJ OLJKW WR GHWHFW IRU H[DPSOH ³DQ HOHFWURQ LQ D SDUWLFXODU UHJLRQ DURXQG WKH QXFOHXV DW D SDUWLFXODU WLPH´ :. H  (DFK ZDYH IXQFWLRQ IRU WKH VWDWH RI D SDUWLFOHUHIHUVWR³DPDWKHPDWLFDOUHSUHVHQWDWLRQXVHGWRFDOFXODWHWKH SUREDELOLW\IRULWWREHIRXQGLQDORFDWLRQRUVWDWHRIPRWLRQ´ :. I  $QG WKH ³ZDYHIXQFWLRQ FROODSVH´ PHDQV WKDW ³WKH DFW RI PHDVXUHPHQWFDXVHVWKHFDOFXODWHGVHWRISUREDELOLWLHVWR FROODSVH WR WKHYDOXHGHILQHGE\WKHPHDVXUHPHQW´ :.I  ²2Q WKH RWKHU KDQG WKH (YHUHWW¶V LQWHUUSHWDWLRQ LV PRUH GHWHUPLQLVWLF LQ UHMHFWLQJ ³WKH REMHFWLYH UHDOLW\ RI ZDYHIXQFWLRQ FROODSVH´ DQG ³LQVWHDG H[SODLQLQJ WKH VXEMHFWLYH DSSHDUDQFH RI ZDYHIXQFWLRQ FROODSVHZLWKWKHPHFKDQLVPRITXDQWXPGHFRKHUHQFH´ :.J  7KHZRUGV³TXDQWXPGHFRKHUHQFH´KHUHUHIHUVWR³WKHPHFKDQLVPE\ ZKLFK TXDQWXP V\VWHPV LQWHUDFW ZLWK WKHLU HQYLURQPHQWV WR H[KLELW SUREDELOLVWLFDOO\DGGLWLYHEHKDYLRU´LQVXFKDZD\WKDW³WKHTXDQWXP QDWXUH RI WKH V\VWHP LV VLPSO\ OHDNHG  LQWR WKH HQYLURQPHQW´ :. J  )RU H[DPSOH ³>D@V D UHVXOW RI DQ LQWHUDFWLRQ WKH ZDYH IXQFWLRQV RI WKH V\VWHP DQG WKH PHDVXULQJ GHYLFH EHFRPH HQWDQJOHG ZLWKHDFKRWKHU'HFRKHUHQFHKDSSHQVZKHQGLIIHUHQWSRUWLRQVRIWKH V\VWHP V ZDYHIXQFWLRQ EHFRPH HQWDQJOHG LQ GLIIHUHQW ZD\V >LWDOLF DGGHG@ZLWKWKHPHDVXULQJGHYLFH´ :.J 7KXVIRU(YHUHWW WKH DSSHDUDQFH RI ³ZDYHIXQFWLRQ FROODSVH´ FDQ EH H[SODLQHG E\ ³TXDQWXPGHFRKHUHQFH´IRUTXDQWXPVWDWHVWREUDQFKRXWLQGLIIHUHQW LQGHSHQGHQWZRUOGVDIWHULQWHUDFWLQJZLWKDQH[WHUQDOHQYLURQPHQW BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH 

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KH&RQIXVLRQEHWZHHQ³0DQ\:RUOGV´DQG³0XOWLYHUVH´ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡)LUVW3UREOHP FRQW¶G  ²D@FFRUGLQJ WR UHODWLYLW\ \RX FDQ RQO\ PRYH WKURXJKWLPHLQRQHGLUHFWLRQ´ 12   ‡6HFRQG3UREOHP ²7KH VHFRQG SUREOHP FRQFHUQV ³WLPH GLODWLRQ XQGHU WKH 7KHRU\ RI *HQHUDO 5HODWLYLW\´ ZKLFK XQLILHVVSDFHWLPH ZLWK PDVVHQHUJ\LQD JHQHUDOWKHRU\ WKHVDPHUHVXOWRIWLPHGLODWLRQRFFXUV ²)RU LQVWDQFH ZKHQ ³RQH FORFN LV GHHSHU LQ D JUDYLW\ ZHOO WKDQ WKH RWKHU´DUHVXOWLVWKDW³WKHFORFNGHHSHULQWKHZHOO´ZLOO³WLFN«PRUH VORZO\ WKLV HIIHFW PXVW EH WDNHQ LQWR DFFRXQW ZKHQ FDOLEUDWLQJ WKH FORFNVRQWKHVDWHOOLWHVRIWKH*OREDO3RVLWLRQLQJ6\VWHPDQGLWFRXOG OHDG WR VLJQLILFDQW GLIIHUHQFHV LQ UDWHV RI DJLQJ IRU REVHUYHUV DW GLIIHUHQWGLVWDQFHVIURPDEODFNKROH´ :.L  ²0RUH SUHFLVHO\ E\ ZD\ RI DQRWKHU H[DPSOH ³LW KDV EHHQ FDOFXODWHG WKDWXQGHUJHQHUDOUHODWLYLW\DSHUVRQFRXOGWUDYHOIRUZDUGLQWLPHDW D UDWH IRXU WLPHV WKDW RI GLVWDQW REVHUYHUV E\ UHVLGLQJ LQVLGH D VSKHULFDO VKHOO ZLWK D GLDPHWHU RI  PHWHUV DQG WKH PDVV RI -XSLWHU )RU VXFK D SHUVRQ HYHU\ RQH VHFRQG RI WKHLU SHUVRQDO  WLPH ZRXOG FRUUHVSRQGWRIRXUVHFRQGVIRUGLVWDQWREVHUYHUV2IFRXUVHVTXHH]LQJ WKHPDVVRIDODUJHSODQHWLQWRVXFKDVWUXFWXUHLVQRWH[SHFWHGWREH ZLWKLQRXUWHFKQRORJLFDOFDSDELOLWLHVLQWKHQHDUIXWXUH´ :.L 5*RWW  ²7KH SRLQW KHUH KRZHYHU LV WKDW WLPH WUDYHO LQWR WKH IXWXUH LQ WKLV VHQVH LV DOORZHG WKHRUHWLFDOO\ VSHDNLQJ EXW LQ D YHU\ OLPLWHG ZD\ IURPWKHWKHRU\RIUHODWLYLW\%XWRQHFDQDOVRDVN:KDWLIWKHWKHRU\ RIUHODWLYLW\ZHUHZURQJ":HOOLQWKDWFDVHWKHUHZRXOGEHDQHHGWR ILQGDEHWWHUWKHRU\WRH[SODLQWLPHWUDYHOLQWRWKHIXWXUH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFH)URP6HFRI)3+*



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH3UREOHPVRI7LPH7UDYHOLQWRWKH3DVW 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡)LUVW3UREOHP ²7KH ILUVW SUREOHP FRQFHUQV WKH IDVWHUWKDQOLJKWVSHHG VLQFH LQ DFFRUGDQFH WR WKH WKHRU\ RI VSHFLDO UHODWLYLW\ ZKHQ DQ REMHFW JRHV IDVWHU WKDQ WKH VSHHG RI OLJKW VRPHWKLQJ ZHLUG FDQ KDSSHQ LQ WKDW LQVWHDG RI KDYLQJ WKH FORFN FOLFNLQJ PRUH VORZO\ LW LV PRYLQJ EDFNZDUGLQUHODWLRQWRVRPHLQHUWLDOIUDPHRIUHIHUHQFH²ZKLFKWKHQ UDLVLHVWKHLVVXHRIZKHWKHUWLPHWUDYHOLQWRWKHSDVWLVSRVVLEOHDWDOO ²%XWWKHSUREOHPKHUHLVDERXWWKHYLRODWLRQRIWKHODZRIFDVXDOLW\,Q HYHU\GD\ ODQJXDJH DQ H[FHOOHQW LOOXVWUDWLRQ RI FDXVDOLW\ YLRODWLRQ LV WKDWVXSSRVH\RXWUDYHOEDFNLQWRWKHSDVWDQGWKHQNLOO\RXUSDUHQWV WKLVWKHQPHDQVWKDW\RXFRXOGQRWKDYHEHHQERUQ%XWWKLVLVQRWWUXH VLQFH\RXDUHDOLYH ²J@HQHUDOUHODWLYLW\GHVFULEHVWKHXQLYHUVHXQGHUD V\VWHPRIILHOGHTXDWLRQV«DQGWKHUHH[LVWVROXWLRQVWRWKHVHHTXDWLRQV WKDW SHUPLW ZKDW DUH FDOOHG FORVHG WLPHOLNH FXUYHV  DQG KHQFH WLPH WUDYHOLQWRWKHSDVW«7KHILUVWRIWKHVHZDVSURSRVHGE\.XUW*|GHOD VROXWLRQ NQRZQ DV WKH *|GHO PHWULF EXW KLV DQG PDQ\ RWKHUV  H[DPSOH UHTXLUHV WKH XQLYHUVH WR KDYH SK\VLFDO FKDUDFWHULVWLFV WKDW LW GRHVQRWDSSHDUWRKDYH´ :.L.7KRUQH  ²%XW WKHQ WKH SUREOHP QRZ EHFRPHV ³:KHWKHU JHQHUDO UHODWLYLW\ IRUELGV FORVHG WLPHOLNH FXUYHV IRU DOO UHDOLVWLF FRQGLWLRQV LV XQNQRZQ´ :.L   ‡7KLUG3UREOHP ²7KH WKLUG SUREOHP FRQFHUQV ZRUPKROHV DQG UHODWHG RQHV DQG ³>Z@RUPKROHV DUH D K\SRWKHWLFDO ZDUSHG VSDFHWLPH ZKLFK DUH DOVR SHUPLWWHG E\ WKH (LQVWHLQ ILHOG HTXDWLRQV RI JHQHUDO UHODWLYLW\ DOWKRXJKLWZRXOGEHLPSRVVLEOHWRWUDYHOWKURXJKDZRUPKROHXQOHVV LW ZDV ZKDW LV NQRZQ DV D WUDYHUVDEOH ZRUPKROH´ :. L 0 9LVVHU   ,Q RWKHU ZRUGV ³D ZRUPKROH LV D K\SRWKHWLFDO WRSRORJLFDO IHDWXUH RI VSDFHWLPH WKDW LV IXQGDPHQWDOO\ D VKRUWFXW  WKURXJK VSDFH DQG WLPH 6SDFHWLPH FDQ EH YLHZHG DV D ' VXUIDFH DQG ZKHQ IROGHG  RYHU D ZRUPKROH EULGJH FDQ EH IRUPHG $ ZRUPKROH KDV DW OHDVW WZR PRXWKV ZKLFK DUH FRQQHFWHG WR D VLQJOH WKURDWRUWXEH,IWKHZRUPKROHLVWUDYHUVDEOHPDWWHUFDQ WUDYHO IURP RQHPRXWKWRWKHRWKHUE\SDVVLQJWKURXJKWKHWKURDW´ :.M  ²%XWWKHSUREOHPKHUHLVWKUHHIROGDVVKRZQLQZKDWIROORZV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH      



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH3UREOHPVRI7LPH7UDYHOLQWRWKH3DVW 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡7KLUG3UREOHP FRQW¶G  ²7KHILUVWSDUWRIWKHSUREOHPLVWKDW³WKHUHLVQRREVHUYDWLRQDOHYLGHQFH IRUZRUPKROHV´ :.M  ²7KH VHFRQG SDUW RI WKH SUREOHP LV WKDW LW LV QRW FOHDU KRZ H[DFWO\ ZRUPKROHV DQGEODFNKROHV IRUWKDW PDWWHU FRXOGDOORZ WLPHWUDYHO LQWRWKHSDVWDWDOO ²$QG WKH WKLUG SDUW RI WKH SUREOHP LV WKDW LI XVLQJ ZRUPKROHV DQG EODFNKROHVIRUWKDWPDWWHU WRWUDYHOLQWRWKHSDVWUHTXLUHVVRPHWKLQJ WRJRIDVWHUWKDQOLJKWWRRWKHQWKLVUDLVHVDQRWKHULVVXHFRQFHUQLQJWKH WZRSUREOHPVDVSUHYLRXVO\LQGLFDWHGLQWKHVXEVHFWLRQRQWKHIDVWHU WKDQOLJKWVSHHG  ‡)RXUWK3UREOHP ²7KH IRXUWK SUREOHP LV WKDW VRPH SK\VLFLVWV KDYH DUJXHG WKDW HYHQ VKRXOG WLPH WUDYHO LQWR WKH SDVW EH SRVVLEOH E\ ZD\ RI WKHVH WKUHH PHWKRGVWKHSHUVRQVWLOOZRXOGQRWUHWXUQWRWKHVDPHSDVWKLVWRU\WKDW KHH[DFWO\H[SHULHQFHGEHIRUHEXWLQDGLIIHUHQWRQH :.L  ²,Q RWKHU ZRUGV ³VWULFWO\ VSHDNLQJ´ WLPH WUDYHO LQWR WKH SDVW LV QRW ³UHDOO\´ SRVVLEOH LQ OLJKW RI WKHVH FULWLFLVPV VR WKHUH LV QR QHHG WR ZRUU\ WKDW RQH FRXOG WUDYHO LQWR WKH SDVW DQG NLOO RQH¶V SDUHQW DV D ZD\WRYLRODWHWKHODZRIFDVXDOLW\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFH)URP6HFRI)3+*              

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KH&RQFHSWXDO'LPHQVLRQVRI&RQVFLRXVQHVV DQG2WKHU0HQWDO6WDWHV  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡2Q+HUHGLW\DQG7LPH ²+HUHGLW\DQGWKH(QYLURQPHQW ²7KH3DVWDQGWKH3UHVHQW  ‡2Q/D\HUVRI0HQWDO6WDWHVDQG$EQRUPDOLW\ ²&RQVFLRXVQHVV8QFRQVFLRXVQHVVDQG3UHFRQVFLRXVQHVV ²1RUPDOLW\DQG3DUDQRUPDOLW\  ‡2Q2UJDQLFLW\DQG0RWLYDWLRQ ²0HFKDQLFLW\DQG2UJDQLFLW\ ²3ULPDU\0RWLYDWLRQVDQG0XOWLSOH0RWLYDWLRQV  ‡2Q2WKHU 0RVWO\(SLVWHPLF &RQVLGHUDWLRQV ²6\QWKHVLVDQG$QDO\VLV ²6LWXDWLRQDQGWKH6XEMHFW ²3URFHVVDQG2XWFRPH ²5HDVRQLQJDQG2WKHU0RGHVRI7KLQNLQJ ²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´ DQG-HVVH-DFNVRQ ZKREODPHVZKLWHUDFLVPIRUWKHIDLOXUHRI EODFNV WR FORVH WKH DFKLHYHPHQW JDS EHWZHHQ ZKLWHV DQG EODFNV LQ $PHULFD 7KH ZRUNVRQGHSHQGHQF\WKHRU\LQLQWHUQDWLRQDOSROLWLFDO HFRQRP\ ZLWKD0DU[LDQLQIOXHQFH DQGRQWKH3URWHVWDQWZRUNHWKLF E\0D[:HEHU DOVRSRLQWWRWKLVHQYLURQPHQWDOGLUHFWLRQ  ‡7KH*HQHWLF$SSURDFK ²7KHVLV ,W IRFXVHV LQVWHDG UHODWLYHO\  VSHDNLQJ DJDLQ RQ KHUHGLWRU\ IDFWRUV HJJHQHVDQGHYROXWLRQ LQH[SODLQLQJWKHDFKLHYHPHQWJDS DPRQJ LQGLYLGXDOV DQG IRU WKDW PDWWHU FRXQWULHV RU UHJLRQV ZKHQ FRQWUDVWHGZLWKWKHHQYULRQPHQWDOIDFWRUV ²'LVFRXUVH ([DPSOHV DUH +DQV (\VHQFN DQG :LOOLDP 6KHOGRQ LQ FRQVWLWXWLRQDO SV\FKRORJ\  .RQUDG /RUHQ] LQ KLV ZRUN RQ LQQDWH DJJUHVVLYH KXPDQ QDWXUH  *DU\ 0DUFXV RQ WKH FRPSOH[LWLHV RI KXPDQ WKRXJKW E\ D WLQ\ QXPEHU RI JHQHV  DQG 5REHUW 3ORPLQ WRJHWKHUZLWK0LFKDHO2ZHQDQG3HWHU0F*XIILQ RQWKHJHQHWLFEDVLV RIFRPSOH[KXPDQEHKDYLRUV  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH        

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KH7KHRUHWLFDO'HEDWHRQ1DWXUHYV1XUWXUH 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡7KH&RPSURPLVH$SSURDFK ²7KHVLV ,W VHHNV WKH PLGGOHRIWKHURDG DUJXPHQW LQ UHJDUG WR QDWXUH DQGQXUWXUHDQGUHJDUGVDOOGLIIHUHQFHVDPRQJLQGLYLGXDOVDQGJURXSV DV WKH UHVXOW RI WKH PL[WXUH RI ERWK QDWXUH DQG QXUWXUH PRUH RU OHVV HTXDOO\ ²'LVFRXUVH([DPSOHVLQFOXGH&0XUUD\DQG5+HUUQVWHLQ ³,WVHHPV KLJKO\OLNHO\WRXVWKDWERWKJHQHVDQGHQYLURQPHQWKDYHVRPHWKLQJWR GRZLWKWKLVLVVXH´ DQG'DQ 'HQQHWW ³6XUHO\ HYHU\RQHNQRZV  WKDW WKHQDWXUHQXUWXUHGHEDWHZDVUHVROYHGORQJDJRDQGQHLWKHUVLGHZLQV VLQFHHYHU\WKLQJ±LV±D±PL[WXUH±RI±ERWK±DQGLW¶V±DOO±YHU\ FRPSOLFDWHG«´  ‡7KH7UDQVFHQGHQW$SSURDFK ²7KHVLV ,W JRHV EH\RQG ERWK QDWXUH DQG QXUWXUH ZLWKRXW KRZHYHU FRPPLWWLQJ WKH FRPSURPLVH IDOODF\  LQ VKRZLQJ WKHLU FORVHO\ LQWHUWZLQHG LQWHUDFWLRQV LQ SURGXFLQJ WKH EHKDYLRUDO GLIIHUHQFHV DV RIWHQVHHQLQLQGLYLGXDOKXPDQHQGHDYRUVRQWKHPLFURVFDOHDQGIRU WKDWPDWWHULQFRXQWU\ RUUHJLRQDO HQGHDYRUVRQWKHPDFURRQH²LQ WKHFRQWH[WRIP\ILYHWKHVHVQDPHO\ D WKHFRPSURPLVHIDOODF\ E  QRRSSUHVVLRQZLWKRXWVHOIRSSUHVVLRQ F QRVXFFHVVZLWKRXWIDLOXUH G  WKH IDFWRU RI UDQGRPQHVV DQG H  WKH SRVWKXPDQ YLVLRQ WR EH HODERUDWHGLQ&KDSWHU6L[ ²'LVFRXUVH 3HWHU %DRIX SURSRVHG WKLV DSSURDFK RQ WKH EDVLV RI KLV ³WKHRU\ RI FRQWUDVWLYH DGYDQWDJHV´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



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH3K\VLFDO&KDOOHQJHVWR+\SHU6SDWLDO&RQVFLRXVQHVV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH8QGHUVWDQGLQJRID+LJKHU'LPHQVLRQDO:RUOGRI6SDFH7LPH ²([IRUWUDGLWLRQDODVSHFWVRIVSDFHWLPH HJOHQJWKZLGWKEUHDGWK DQGWLPH SOXVPRUHQHZGLPHQVLRQVLQWKHRU\RIK\SHUVSDFHZLWK SURIRXQG LPSOLFDWLRQV IRU SUDFWLFDO DSSOLFDWLRQV WR QHZ IRUPV RI FRQVFLRXVQHVV  ‡7KH0DVWHULQJRI'DUN0DWWHUDQG'DUN(QHUJ\ ²([³RUGLQDU\PDWWHU´ HJDWRPVPROHFXOHV DVDPHUHRIWKH XQLYHUVH ZLWK  PDGH RI ³FROG GDUN PDWWHU´ DQG WKH UHVW DERXW   RI P\VWHULRXV ³GDUN HQHUJ\´ ZLWK IXQGDPHQWDO VLJQLILFDQFH WR TXHVWLRQV DERXW WKH OLPLW RI WKH VSHHG RI HQHUJ\ RU LQIR  WKH DYDLODELOLW\RIHQHUJ\IRUXVHDQGWKHQDWXUHRIVSDFHWLPHMXVWWRFLWH VRPHH[DPSOHV  ‡7KH([SORUDWLRQRI0XOWLYHUVHV ²([WKHRUHWLFDOVSHFXODWLRQRIRWKHUXQLYHUVHV HJ³EDE\XQLYHUVHV´ ³JDWHZD\V´ LQ EODFN KROHV ³ZDYH IXQFWLRQ RI WKH XQLYHUVH´ ³PDQ\ ZRUOGV´ ³EUDQH ZRUOGV´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

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KH7KHRU\RI)ORDWLQJ&RQVFLRXVQHVV 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$WWKH0LFUR3K\VLFDO/HYHO ²([LQWHOOLJHQWOLIHZLWKRXWWKHKXPDQSK\VLFDOFKHPLFDOV\VWHP  ‡$WWKH&KHPLFDO/HYHO ²([VSDFHUDGLDWLRQDQGWR[LQV  ‡$WWKH%LR3V\FKRORJLFDO/HYHO ²([H[RELRORJLFDOHYROXWLRQLQGHHSVSDFH ²([JHQHWLFHQJLQHHULQJRIQHZEHLQJV  ‡$WWKH,QVWLWXWLRQDO/HYHO ²([SRVWFDSLWDOLVP ²([SRVWGHPRFUDF\  ‡$WWKH2UJDQL]DWLRQDO/HYHO ²([OHVVOHJDOIRUPDOLVWLFURXWLQHV  ‡$WWKH6WUXFWXUDO/HYHO ²([DOLHQIRUPVRIYLROHQFH  ‡$WWKH&XOWXUDO/HYHO ²([WUDQVFHQGLQJIUHHGRP ²([WUDQVFHQGLQJHTXDOLW\  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH            



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH7KHRU\RI)ORDWLQJ&RQVFLRXVQHVV 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$WWKH&RVPRORJLFDO/HYHO ²([SDUDOOHOXQLYHUVHV ²([SRFNHWXQLYHUVHV  ‡$WWKH6\VWHPLF/HYHO ²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²DQGRULJLQDOO\IURP)&'                   

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KH3RWHQWLDORI8QIROGLQJ8QFRQVFLRXVQHVV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡6XSHULRU6HQVHV ²7KURXJKVSDFH ‡([FODLUVHQWLHQFH LQIHHOLQJ  ‡([FODLUYR\DQFH LQVHHLQJ  ‡([FODLUDXGLHQFH LQKHDULQJ  ‡([FODLUDXVWDQFH LQWDVWLQJ  ‡([FODLUDOLHQFH LQVPHOOLQJ  ‡([FODLUFRJQL]DQFH LQNQRZLQJ  ²7KURXJKWLPH ‡([SUHFRJQLWLRQ LQNQRZLQJ SUHVHQWLPHQW LQIHHOLQJ  ‡([UHWURFRJQLWLRQ LQNQRZLQJ UHWURVHQWLPHQW LQIHHOLQJ   ‡6XSHULRU&RQWDFWV ²:LWKOLYLQJPLQGV ‡([WHOHSDWK\ ²:LWKWKHGHDG ‡([PHGLXPVKLS ²:LWKRWKHUOLYLQJHQWLWLHV ‡([WHOHNLQHVLV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV7KHFDWHJRULHVDQGH[DPSOHVDUHVROHO\LOOXVWUDWLYH QRWH[KDXVWLYH  DQG WKH FRPSDULVRQ LV UHODWLYH QRW DEVROXWH  QRU DUH WKH\ QHFHVVDULO\ PXWXDOO\ H[FOXVLYH $QG VRPH FDQ EH HDVLO\ UHFODVVLILHG HOVHZKHUH $V JHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFH$VXPPDU\RI&KRI)3+8           



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH)XWXUH([SORUDWLRQRI8QIROGLQJ8QFRQVFLRXVQHVV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,QWKH&RQWH[WRI1DWXUH ²([WKHKLJKHUGLPHQVLRQDOVSDFHWLPHLQK\SHUVSDFHWKHRU\ ²([WKHSDUWLFOHZDYHLQWHUDFWLRQVLQTXDQWXPPHFKDQLFV ²([WKHVWXG\RIEUDLQZDYHVLQHOHFWURPDJQHWLFWKHRU\  ‡,QWKH&RQWH[WRIWKH0LQG ²([WKHXQFRQVFLRXVIDQWDVLHVLQSV\FKRDQDO\VLV ²([WKHPLQGDOWHULQJGUXJVLQELRFKHPLVWU\ ²([WKHPDQLSXODWLRQRIQHXUDODFWLYLW\LQQHXURELRORJ\  ‡,QWKH&RQWH[WRI&XOWXUH ²([WKHFRUUHODWLRQEHWZHHQDQRPDORXVH[SHULHQFHDQG PRUDOUHOLJLRXVDHVWKHWLFLQWHUHVWVLQFXOWXUHVWXGLHV ²([WKHUROHRIP\WKVDQGODQJXDJHLQHSLVWHPRORJ\  ‡,QWKH&RQWH[WRI6RFLHW\ ²([GLIIHUHQWRUJDQL]DWLRQDODJHQGDVLQDQRPDORXVUHVHDUFK ²([WKHVFKRODUO\GLYLGHRQDQRPDORXVVWXG\ ²([LQWHUHVWVDQGSURSDJDQGDLQLQVWLWXWLRDQOUHVHDUFK ²([WKHWUDQVIRUPDWLYHSRZHURIWHFKQRORJ\LQUHVHDUFKRQ VRFLDOV\VWHPV ²([WKHQDWXUDODQGQRQQDWXUDOVHOHFWLRQRIRWKHUZRUOGVLQ H[RELRORJ\ ²([WKHUROHRIWKHSRVWKXPDQFRQVFLRXVPLQGLQTXDOLWDWLYH GHPRJUDSK\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ HDFK FDWHJRU\ DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH FRPSDULVRQ LV UHODWLYH QRW DEVROXWH  QRU DUH WKH\ QHFHVVDULO\ PXWXDOO\ H[FOXVLYH $QG VRPH FDQ EH HDVLO\ UHFODVVLILHG HOVHZKHUH$VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFH$VXPPDU\RI&KVRI)3+8LQFRQMXQFWLRQZLWKWKHUHVWRI WKHERRN      

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH&UHDWLYH7HFKQLTXHVDQG7UDLWV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 

‡&UHDWLYH7HFKQLTXHV ²&RPSUHKHQVLYHQHVV  ‡([%URDGQHVVRI6FRSH  ‡([,Q'HSWK$QDO\VLV  ‡([0XOWLIDFHWHG7D[RQRP\  ‡([1XPHURXV7KHRULHV ²$UUDQJHPHQW  ‡([6HSDUDWLRQ RU6XEWUDFWLRQ   ‡([&RPELQDWLRQ RU$GGLWLRQ   ‡([5HSODFHPHQW  ‡([5HYHUVDO  ‡([$FFRPPRGDWLRQ  ‡([6WUHWFKLQJ ²6HUHQGLSLW\  ‡([3OD\  ‡([&KDQFH  ‡&UHDWLYH7UDLWV ²2SHQQHVV5LVN  ‡([$ELOLW\WRZHOFRPHQHZLGHDVRUWRGRQHZWKLQJVZLWKULVN ²'LVFLSOLQH  ‡([$ELOLW\WRVDFULILFHZKDWHYHULWWDNHVWRVXFFHHG ²5HVLOLHQFH&RQILGHQFH  ‡([$ELOLW\WRWDNHIDLOXUHVWRPLQGQRWWRKHDUW ²7UXVW  ‡([$ELOLW\WRFRRSHUDWHZLWKRWKHUVIRUWHDPZRUNLIQHFHVVDU\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ WKH FDWHJRULHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH FRPSDULVRQ LV UHODWLYH QRW DEVROXWH  QRU DUH WKH\ QHFHVVDULO\ PXWXDOO\ H[FOXVLYH $QG VRPH FDQ EH HDVLO\ UHFODVVLILHG HOVHZKHUH$VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFH)URP6HFRI)3+&7)RUPRUHGHWDLOVDOVRUHDGWKHUHVWRIWKH ERRN     



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH'HVLUDELOLW\RI&UHDWLYLW\DQG,WV'DUN6LGHV 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡,Q5HODWLRQWR,QVWUXPHQWDO5DWLRQDOLW\ ²'HVLUDELOLW\ ‡([)RUWKHVDNHRIHIILFLHQF\DQGHIIHFWLYHQHVVLQWKLVFDSLWDOLVWHUD RIRXUWLPH ²8QGHVLUDELOLW\ ‡([:KDW0D[:HEHU  FDOOHGWKH³LURQFDJH´RIFDSLWDOLVP ZKHUH OLYH WKH ³VHQVXDOLVWV ZLWKRXW KHDUW VSHFLDOLVWV ZLWKRXW VSLULW´²RUVRPHWKLQJZKLFKWKH)UDQNIXUW6FKRROKDVIRUFHIXOO\ DVNHGXVWREHIUHHGIURP  ‡,Q5HODWLRQWR6XEVWDQWLYH5DWLRQDOLW\ ²'HVLUDELOLW\ ‡ ([ )RU WKH VDNH RI *RG WKH .LQJ 0RWKHUODQG RU RWKHU FRPSDUDEOHLGHDOV ²8QGHVLUDELOLW\ ‡(['RPLQDWLRQDQGRSSUHVVLRQRIYDULRXVIRUPV²VRPHWKLQJ ZKLFKWKHPRGHUQVKDGVWUXJJOHGWRIUHHWKHPVHOYHVIURPLQWKH ILUVWSODFHVLQFHWKHGDZQRIPRGHUQLW\  ‡,Q5HODWLRQWR$XWRQRPRXV5DWLRQDOLW\ ²'HVLUDELOLW\ ‡([)RUWKHVDNHRILWVHOIWKHDXWRQRP\RIFUHDWLYHHQGHDYRU ²8QGHVLUDELOLW\ ‡([7KHGHFDGHQFHRILWVRZQGHJHQHUDWLRQ HJWKHGRQZVLGHVRI SRVWPRGHUQLVPLQRXUSRVWPRGHUQWLPHVRUZKDW1LHW]VFKHRQFH FDOOHG WKH XQEHDUDEOH ³XQUHDOLW\´ DQG ³IDOVHQHVV´ RI WKH DXWRQRPRXVDUWLVW¶V³LQQHUPRVWH[LVWHQFH´²DQGLQRWKHUFDVHV WKH SDLQIXO VXIIHULQJ IURP GLIIHUHQW PHQWDO LOOQHVVHV IRU WKRVH KLJKO\FUHDWLYHLQGLYLGXDOV  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH       

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





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²DQGIRUWKDWPDWWHU)&' 6RXUFH)URP6HFRI)3+&7)RUPRUHGHWDLOVDOVRUHDGWKHUHVWRIWKH ERRN                             



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH3RVWKXPDQ,VP3RVW+XPDQLVPDQG7UDQV+XPDQLVP BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 

‡3RVW+XPDQLVP ²7KH QHRORJLVP ³SRVWKXPDQ´ XVHG LQ P\ ERRNV VKRXOG QRW EH FRQIXVHG ZLWK DQRWKHU WHUP ZKLFK ORRNV VLPLODU EXW KDV D WRWDOO\ GLIIHUHQW PHDQLQJ LQ WKH OLWHUDWXUH RI SRVWPRGHUQLVP QDPHO\ ³SRVW KXPDQLVP´²ZKLFK FRQVWLWXWHV D FULWLTXH RI ³KXPDQLVP´ DV WUDGLRQDOO\XQGHUVWRRG HVSHFLDOO\WKRXJKQRWH[FOXVLYHO\LQUHODWLRQ WR WKH LGHD RI SURJUHVV LQ VFLHQFH DQG UHDVRQ LQ WKH (QOLJKWHQPHQW SURMHFW  :.  ²0\ ZRUNV UHMHFW WKH SURMHFW RI ³SRVWPRGHUQLVP´ DQG SURSRVH WKH IXWXUHZRUOGRIZKDW,RULJQDOO\FDOOHG³DIWHUSRVWPRGHUQLW\´LQ)+& DQG)&'IRULQVWDQFH 

‡7UDQV+XPDQLVP ²$OVR WKH QHRORJLVP ³SRVWKXPDQ´ XVHG LQ P\ ERRNV VKRXOG QRW EH FRQIXVHGZLWKDVLPLODUWHUPZKLFKLVXVHGWRFKDPSLRQWKHLGHRORJ\ RI WHFKQRORJ\ IRU WKH IWXUXH FRH[LVWHQFH EHWZHHQ KXPDQV DQG F\ERUJVLQ³WUDQVKXPDQLVP´ :.D  ²,QVWHDG P\ WHUP ³SRVWKXPDQ´ LQ UHODWLRQ WR ³SRVWKXPDQLVP´ DOVR UHMHFWV ³WUDQVKXPDQLVP´ HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ LQ UHODWLRQ WR WKH SURPLVHV RI WHFKQRORJ\  DQG UHIHUV WR VRPHWKLQJ HOVH DOWRJHWKHUWKDWLVWKHIXWXUHH[WLQFWLRQRIKXPDQVDQGLWVSRVWKXPDQ VXFFHVVRUVLQGHHSVSDFHDQGEH\RQGXQWRPXOWLYHUVHV 

‡3RVWKXPDQ,VP ²:LWK WKHVH WZR FODULILFDWLRQV LQ PLQG WKH ³SRVWKXPDQV´ DV HQYLVLRQHGLQP\ERRNV FDQWDNHGLIIHUHQWIRUPVDQG,SURSRVHGLQ P\ GLIIHUHQW ERRNV VRPH RI WKHP VXFK DV ³XQIROGLQJ XQFRQVFLRXVQHVV´ ³IORDWLQJ FRQVFLRXVQHVV´ ³K\SHUVSDWLDO FRQVFLRXVQHVV´ ³WKLQNLQJ PDFKLQHV´ ³WKLQNLQJ URERWV´ ³JHQHWLFDOO\ DOWHUHGVXSHULRUEHLQJV´³F\ERUJV´DQGRWKHUV DVDOUHDG\DQDO\]HGLQ P\SUHYLRXVZRUNV  ²7KH\ZLOOHYROYHLQFRQMXQFWLRQZLWKRWKHUYLVLRQVRIPLQHLQUHODWLRQ WRQDWXUHVRFLHW\DQGFXOWXUH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFH)URP6HFRI)3+()RUPRUHGHWDLOVDOVRUHDGWKHUHVWRIWKH ERRN DQGRWKHUERRNVRIPLQH    

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KUHH*UHDW)XWXUH7UDQVIRUPDWLRQVRIWKH0DUWLDO%RG\ 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡9LUWXDO%DWWOH ²([YLUWXDOILJKW ²([YLUWXDOPHPRU\  ‡7KH+\SHU0DUWLDO%RG\ ²,QUHODWLRQWRWKHSK\VLFDOGLPHQVLRQ ‡([VWULNLQJ HJSXQFKLQJNLFNLQJWUDSSLQJDFXSUHVVXUHVWULNLQJ DQGVRRQLQDQDPD]LQJZD\  ‡([JUDSSLQJ HJWKURZLQJSLQQLQJMRLQWORFNLQJDQGVRRQLQDQ DPD]LQJZD\  ‡([UXQQLQJDQGZDONLQJ HJRQGLIIHUHQWVXUIDFHV  ‡([MXPSLQJ HJWKURXJKZDOOVWUHHVHWF  ‡([IO\LQJ HJWKURXJKVSDFH  ‡([HQGXULQJSDLQ HJDEVRUELQJSXQFKHVNLFNVDQGVRRQLQDQ DPD]LQJZD\  ‡([XVLQJH[WUHPHO\DGYDQFHGKLWHFKZHDSRQV ‡([KHDOLQJ HJZLWKVSHFLDOHQHUJ\HWF  ‡([HQWHULQJ HJLQWRGLIIHUHQWGLPHQVLRQVRIVSDFH  ‡ ([ VHQVLQJ HJ  LQ  H[WUDRUGLQDU\ ZD\V WKURXJK VSDFH DQG WLPH HWF  ‡([ZHDULQJKLWHFKVXLWVIRUGHIHQVLYHDQGRIIHQVLYHSXUSRVHV HJ OLNHDKLWHFKDUPRU  ²,QUHODWLRQWRWKHPHQWDOGLPHQVLRQ ‡([WKHDELOLW\WRUHOD[WKHPDUWLDOERG\LQDZD\WKDWFXUUHQWKXPDQV FDQQRW ‡([WKHDELOLW\WRFRQFHQWUDWHWKHPDUWLDOPLQGLQDZD\WKDWFXUUHQW KXPDQVDUHQRWDFFXVWRPHGWR ‡([WKHDELOLW\WREUHDWKHDQGEHWLPHO\LQSUHSDULQJWKHPDUWLDOERG\ IRUILJKWLQJLQDZD\WKDWFXUUHQWKXPDQVDUHQRWJRRGDW

 ‡7KH3RVW0DUWLDO)ORDWLQJ0LQG ²([WKHPLQGZLWKRXWWKHKXPDQERG\ ²([WKHTXHVWIRUVSLULWXDOLW\EH\RQGPDUWLDODUWV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH   



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KUHH*UHDW)XWXUH7UDQVIRUPDWLRQVRIWKH0DUWLDO%RG\ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ WKH FDWHJRULHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH FRPSDULVRQ LV UHODWLYH QRW DEVROXWH  QRU DUH WKH\ QHFHVVDULO\ PXWXDOO\ H[FOXVLYH $QG VRPH FDQ EH HDVLO\ UHFODVVLILHG HOVHZKHUH$VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFH)URP6HFRI)3+0$6HHWH[WIRUFLWDWLRQV                                 

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KUHH*UHDW)XWXUH7UDQVIRUPDWLRQVRIWKH6H[XDO%RG\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡9LUWXDO3OHDVXUH ²([YLUWXDO6H[ ²([YLUWXDO5HFDOO

 ‡7KH+\SHU6H[XDO%RG\ ²,QUHODWLRQWRWKHSK\VLFDOGLPHQVLRQ ‡ ([ WKH DELOLW\ WR SHUIRUP GLIIHUHQHW VH[XDO SRVLWLRQV ZLWKRXW WKH YDULRXVSK\VLFDOOLPLWDWLRQVWKDWKXPDQVFXUUHQWO\KDYH ‡([WKHDELOLW\WRSURGXFHXQXVXDODPRXQWRIVH[XDOHQHUJ\WRHQGXUH LQVH[XDODFWVLQDZD\WKDWKXPDQVFXUUHQWO\FDQQRW ‡([WKHDELOLW\WRHQJDJHLQPXOWLSOHVH[XDOH[SHULHQFHVFRPSDUDEOH WR EXW GLIIHUHQW IURP  QRQKXPDQ VH[XDOLW\ HJ KHUPDSKURGLWH PRQRHFLRXV VH[VZLWFKLQJ DQG PDQ\ RWKHU W\SHV  WKDW FXUUHQW KXPDQVFDQQRW ²,QUHODWLRQWRWKHPHQWDOGLPHQVLRQ ‡([WKHDELOLW\WRUHOD[WKHVH[XDOERG\LQDZD\WKDWFXUUHQWKXPDQV DUHQRWDFFXVWRPHGWR ‡([WKHDELOLW\WRFRQFHQWUDWHWKHVH[XDOPLQGLQDZD\WKDWFXUUHQW KXPDQVDUHQRWJRRGDW ‡([WKHDELOLW\WREUHDWKHDQGEHSDWLHQWLQSUHSDULQJWKHVH[XDOERG\ IRUVH[XDOLW\LQDZD\WKDWFXUUHQWKXPDQVDUHQRWDEOHWR

 ‡7KH3RVW6H[XDO)ORDWLQJ0LQG ²([WKHPLQGZLWKRXWWKHKXPDQERG\ ²([WKHTXHVWIRUVSLULWXDOLW\EH\RQGVH[XDOLW\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ WKH FDWHJRULHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH FRPSDULVRQ LV UHODWLYH QRW DEVROXWH  QRU DUH WKH\ QHFHVVDULO\ PXWXDOO\ H[FOXVLYH $QG VRPH FDQ EH HDVLO\ UHFODVVLILHG HOVHZKHUH$VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFH)URP6HFRI)3+66HHWH[WIRUPRUHLQIR      



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH7ULQLW\RI3UH0RGHUQLW\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡3UH)UHH6SLULWHG3UH0RGHUQLW\ 3UH0RGHUQLVP DQG ,WV,QWHUQDO6SOLW ²&RPSHWLQJ ZRUOGYLHZV DQG YDOXHV ERWK ZLWKLQ DQG EHWZHHQ OLQHDU FHQWULF HJ,VODPLF&KULVWLDQ-XGDLF,PSHULDO5RPDQ DQGF\FOLFDO FHQWULF HJ&RQIXFLDQ7DRLVW+LQGXDQG%XGGKLVW RULHQWDWLRQV ²&RPSDUHPRGHUQLVPZLWKSUHPRGHUQLVPKHUHLQUHODWLRQWRWKHVHYHQ GLPHQVLRQV RI KXPDQ H[LVWHQFH OLNH WKH WUXH DQG WKH KRO\ HJ GLIIHUHQW YHUVLRQV RI HSLVWHPLF GRJPDV DQG UHOLJLRXV VXSHUVWLWLRQV  WKH HYHU\GD\ DQG WKH WHFKQRORJLFDO HJGLIIHUHQW YHUVLRQV RI QRQ WHFKQRSKLOLVP DQG QRQFRQVXPHULVP  WKH EHDXWLIXOVXEOLPH HJ GLIIHUHQW YHUVLRQV RI DHVWKHWLF QRQDXWRQRP\  DQG WKH JRRG DQG WKH MXVW HJGLIIHUHQWYHUVLRQVRIPRUDOSDUWLFXODULVP   ‡3UH&DSLWDOLVW3UH0RGHUQLW\ 3UH0RGHUQL]DWLRQ DQG ,WV2ZQ'LVFRQWHQWV ²&RPSHWLQJ YHUVLRQV RI VRFLHWDO DUUDQJHPHQWV HJ IHXGDOLVP PRQDUFKLVPDQGWKHKRO\RUGHU   ‡+HJHPRQLF3UH0RGHUQLW\DQG,WV&RXQWHUYDLOLQJ)RUFHV ²'LIIHUHQWSRZHUFHQWHUVDQGWKHLUHQHPLHV HJWKH5RPDQ(PSLUH DQGWKH³EDUEDULDQKRUGHV´WKH³+RO\&UXVDGHV´DQGWKH0XVOLPVWKH 0LGGOH .LQJGRP DQG WKH LQYDGLQJ WULEHV GLIIHUHQW VRFLDO FDVWHV LQ ,QGLDDQGZDUULQJ*UHHNFLW\VWDWHV  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ HDFK FDWHJRU\ DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  QRU QHFHVVDULO\ PXWXDOO\ H[FOXVLYH DQG WKH FRPSDULVRQ LV UHODWLYH QRWDEVROXWH $VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV$OVRLWGRHV QRWPDWWHUZKDWWKH³EDVH´HUDLVLQWKHDQDO\VLVRIDQ\WULQLW\$QGLQWKH SUHVHQW FRQWH[W WKH ³EDVH´ HUD LV PRGHUQLW\ IRU LQVWDQFH ZLWK LWV ³IUHH VSLULWHG PRGHUQLW\´ DQG WKH RWKHU WZR SDUWV  6R IRU SUHPRGHUQLW\ WKH WULQLW\ WDNHV WKH IRUP RI VD\ ³SUHIUHHVSLULWHG SUHPRGHUQLW\´ WRJHWKHU ZLWKWKHRWKHUWZRSDUWV 6RXUFHV)URP&KRI%&,9DQGDOVRWKHYROXPHVRI)+&     

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KH7ULQLW\RI0RGHUQLW\ 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡)UHH6SLULWHG0RGHUQLW\ 0RGHUQLVP DQG,WV,QWHUQDO6SOLW ²2QWKH7UXHDQGWKH+RO\ ‡ 7KH  IUHHGRP IURP WKH GRJPDV RI WKH SDVW WR WKH EHWWHU XQGHUVWDQGLQJRIDQGXQLRQZLWKWKHZRUOGDQGVHOI &KRI)+&  ‡$OWHUQDWLYHGLVFRXUVHVDERXWWKHWUXH HJDQWLVFLHQFHGLVFRXUVHV  DQGWKHKRO\ QRQPDLQVWUHDPWKHRORJLHV  &KRI)+&  ²2QWKH7HFKQRORJLFDODQGWKH(YHU\GD\ ‡ 7KH IUHHGRP IURP OLIH KDUVKQHVV WR WKH KLJKHU WHFKQRSKLOLF FRQVXPHULVWLFOLIHIRUP &KRI)+&  ‡ $OWHUQDWLYH GLVFRXUVHV DERXW WKH HYHU\GD\  HJ WUDQVFHQGHQWDO PLQGVHWV DQGWKHWHFKQRORJLFDO HJ$UFDGLDQLVP  &KRI)+&  ²2QWKH*RRGDQGWKH-XVW ‡ 7KH IUHHGRP IURP WKH WKHRDULVWRFUDWLF W\UDQQ\ WR WKH PRUDO XQLYHUVDOLW\IRUDMXVWVRFLHW\ &KRI)+&  ‡ $OWHUQDWLYH GLVFRXUVHV DERXW WKH MXVW HJ &RPPXQLVP $QDUFKLVP  DQG WKH JRRG HJ 1D]LVP)DVFLVP DQG =DUDWKXVWULDQLVP  &KVRI)+&  ²2QWKH%HDXWLIXODQGWKH6XEOLPH ‡7KHIUHHGRPIURPWKHH[WHUQDOGLVWRUWLRQRIDHVWKHWLFSOHDVXUHWRWKH ERXQGOHVVLQILQLW\RIWRWDOLW\LQDUWLVWLFDXWRQRP\ &KRI)+&  ‡$OWHUQDWLYHGLVFRXUVHVDERXWWKHEHDXWLIXOVXEOLPH HJNLWVFKDQG KLVWRULFDODYDQWJDUGLVP  &KRI)+&    ‡&DSLWDOLVW0RGHUQLW\ 0RGHUQL]DWLRQ DQG,WV2ZQ'LVFRQWHQWV ²'XULQJWKH,QGXVWULDO5HYROXWLRQ ‡([0DU[RQWKHLQVWLWXWLRQRILQHTXDOLW\ &KRI)+&  ²'XULQJWKH0RGHUQ5DWLRQDO,QVWUXPHQWDO(SRFK ‡([:HEHURQWKHSROLWLFVRIVRIWOLEHUDOLQVWLWXWLRQV &KRI)+&  ²'XULQJWKH*UHDW'HSUHVVLRQ ‡([.H\QHVRQWKHP\WKRIWKHIUHHPDUNHW &KVRI)+&  ²'XULQJWKH&ROG:DU ‡([/DVFKRQWKHQDUFLVVLVWLFFXOWXUHLQGXVWU\ &KVRI)+&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH   





7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH7ULQLW\RI0RGHUQLW\ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡+HJHPRQLF0RGHUQLW\DQG,WV&RXQWHUYDLOLQJ)RUFHV ²7KH/HJDFLHVRI&RORQLDOLVPDQG,PSHULDOLVP ‡([(XURSHDQFRORQL]DWLRQRIPRVWRIWKHPRGHUQZRUOG &KRI )+&  ²7KH6WUXJJOHIRU'HFRORQLDOL]DWLRQ ‡([7KHFRXQWHUYDLOLQJIRUFHVRIUHVHQWPHQWUHFKDQWPHQW DQGUHJLRQDOLVP &KV RI)+&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ HDFK FDWHJRU\ DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  QRU QHFHVVDULO\ PXWXDOO\ H[FOXVLYH DQG WKH FRPSDULVRQ LV UHODWLYH QRWDEVROXWH $VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFHV)URPWKHYROXPHVRI)+&²DQGDOVRIURP)&'                         

&KDSWHU,QWURGXFWLRQ²7KH5XOHRI/DZ 





7DEOH7KH7ULQLW\RI3RVWPRGHUQLW\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡)UHH6SLULWHG3RVWPRGHUQLW\ 3RVWPRGHUQLVP DQG,WV,QWHUQDO6SOLW ²2QWKH7UXHDQGWKH+RO\ ‡3RVWPRGHUQSHUIRUPDWLYHWXUQIRUNQRZLQJDQGLWVHQHPLHV &KRI )+&  ‡3RVWPRGHUQFRPSDUDWLYHWKHRORJ\DQGLWVRSSRQHQWV &KRI)+&  ²2QWKH7HFKQRORJLFDODQGWKH(YHU\GD\ ‡ 3RVWPRGHUQ FRUSRUDWH WHFKQRORJLFDO PLQGVHW DQG LWV DGYHUVDULHV &KRI)+&  ‡3RVWPRGHUQSRVWPDWHULDOLVPDQGLWVFULWLFV &KRI)+&  ²2QWKH*RRGDQGWKH-XVW ‡3RVWPRGHUQSROLWLFVRIGLIIHUHQFHDQGLWVIRHV &KRI)+&  ²2QWKH%HDXWLIXODQGWKH6XEOLPH ‡3RVWPRGHUQGHFRQVWUXFWLRQDQGLWVGLVVHQWHUV &KRI)+&   ‡&DSLWDOLVW3RVWPRGHUQLW\ 3RVWPRGHUQL]DWLRQ DQG,WV2ZQ 'LVFRQWHQWV ²'XULQJWKH3RVW&ROG:DUDQG%H\RQG ‡ ([ SRVW)RUGLVP DQG LWV VKRUWFRPLQJV  &K RI )+& &KV RI )&'   ‡+HJHPRQLF3RVWPRGHUQLW\DQG,WV&RXQWHUYDLOLQJ)RUFHV ²7KH'HEDWHRQWKH*OREDO9LOODJH ‡([XQLFLYLOL]DWLRQDOLVPYVPXOWLFLYLOL]DWLRQDOLVP &KRI)+&  ²7KH5HVLVWDQFH0RYHPHQW ‡ ([ UHFKDQWPHQW DQG WKH SROLWLFV RI FLYLOL]DWLRQDO FODLPV HJ ,VODPLF &RQIXFLDQ DQG RWKHU HWKRV LQ UHODWLRQ WR WKH 6DPH  &K RI)+&&KRI)&'  ‡ ([ UHVHQWPHQW DQG WKH SROLWLFV RI UHVXUJHQFH HJ WKH ULVLQJ &KLQHVHVXSHUSRZHUWKHJURZLQJ(8DQGRWKHUSOD\HUVLQUHODWLRQ WRWKH86DQGKHUDOOLHV  &KRI)+&&KRI)&'  ‡ ([ UHJLRQDOLVP DQG WKH SROLWLFV RI LQHTXDOLW\ HJ WUDQV RU LQWHU QDWLRQDO EORFV WKH 1RUWK6RXWK GLYLGH 1*2¶V  &K RI )+& &KRI)&'  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ HDFK FDWHJRU\ DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  QRU QHFHVVDULO\ PXWXDOO\ H[FOXVLYH DQG WKH FRPSDULVRQ LV UHODWLYH QRWDEVROXWH $VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFHV)URP)&'DQGWKHYROXPHVRI)+&



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH7ULQLW\RI$IWHU3RVWPRGHUQLW\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡)UHH6SLULWHG$IWHU3RVWPRGHUQLW\ $IWHU3RVWPRGHUQLVP DQG ,WV,QWHUQDO6SOLW ²7KHGLVFRXUVHRIQDNHGFRQWLQJHQF\ &KRI)&'&KRI)3+&   ‡3RVW&DSLWDOLVW$IWHU3RVWPRGHUQLW\ $IWHU3RVWPRGHUQL]DWLRQ  DQG,WV2ZQ'LVFRQWHQWV ²'LIIHUHQWYHUVLRQVRISRVWFDSLWDOLVPDQGSRVWGHPRFUDF\DQG WKHLUHQHPLHV &KRI)&'&KVRI)3+&   ‡+HJHPRQLF$IWHU3RVWPRGHUQLW\DQG,WV&RXQWHUYDLOLQJ)RUFHV ²7KH&\FOLFDO3URJUHVVLRQRI+HJHPRQ\LQ0XOWLYHUVHV &KVRI )&'&KRI)3+&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ HDFK FDWHJRU\ DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  QRU QHFHVVDULO\ PXWXDOO\ H[FOXVLYH DQG WKH FRPSDULVRQ LV UHODWLYH QRWDEVROXWH $VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFHV)URP)&'DQGDOVR)+&                

‡3$577:2‡ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  1HFHVVLW\                              



 

 &+$37(5 1(&(66,7F@DXVDWLRQLVQRW EURNHQVLPSO\EHFDXVHDYLFWLPLVSDUWLFXODUO\ YXOQHUDEOH 7KLVLVNQRZQ DV WKH WKLQ VNXOO UXOH +RZHYHU LW PD\ EH EURNHQ E\ DQ LQWHUYHQLQJ DFW QRYXV DFWXV LQWHUYHQLHQV  RI D WKLUG SDUW\ WKH YLFWLP V RZQ FRQGXFW RU DQRWKHUXQSUHGLFWDEOHHYHQW´ :.E  E 0HQV5HD %HVLGHV WKH ³SK\VLFDO´ HOHPHQW RI FRPPLWLQJ D FULPH DV LQ DFWXV UHXV ²WKHUH LV DQRWKHU HOHPHQW ZKLFK KDV WR GR ZLWK WKH PLQG EHFDXVH WKH SURRI RI D FULPH DW WLPHV UHTXLUHV WKH SURRI RI  DQ ³LQWHQWLRQ´ WR FRPPLWWKH³ZURQJIXODFW´WKXVWKH/DWLQSKUDVHPHQVUHDPHDQV³JXLOW\ PLQG´IRUWKH³PHQWDO´HOHPHQWRIFRPPLWLQJDFULPH ,Q FULPLQDO ODZ RQH VKRXOG QRW FRQIXVH ³LQWHQWLRQ´ ZLWK ³PRWLYH´ )RU LQVWDQFH ³>L@I 0U +RRGUREV IURP ULFK 0U 1RWWLQJKDP EHFDXVH KLV PRWLYHLVWRJLYHWKHPRQH\WRSRRU0UV0DULDQKLV JRRGLQWHQWLRQV GR QRWFKDQJHKLVFULPLQDOLQWHQWLRQWRFRPPLWUREEHU\´ :.E 

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





2UWRSXWLWLQDGLIIHUHQW ZD\WKHUHDUHWZRNLQGVRILQWHQWLRQKHUH WKHFULPLQDOLQWHQWLRQWRUREWKHULFKDQGWKH PRUDOLQWHQWLRQWRKHOSWKH SRRU,QFULPLQDOODZLWLVLPSRUWDQWWRFRQVLGHUWKHFULPLQDOLQWHQWLRQ DV LQPHQVUHD  (YHQ WKHQ LQ FULPLQDO ODZ FULPLQDO LQWHQWLRQ FDQ EH WUHDWHG LQ GLIIHUHQW ZD\V DQG KHUHDIWHU DUH WKUHH ZHOONQRZQ FDVHV QDPHO\ E  VSHFLILF LQWHQW E  UHFNOHVVQHVV DQG E  QHJOLJHQFH :. E  V  E ,QVSHFLILFLQWHQWDGHIHQGDQWFDQEHDFFXVHGRIVD\³PXUGHU´ LI KH KDV WKH ³VSHFLILF LQWHQW WR NLOO >VRPHRQH@ RU ZLWK FRQVFLRXV UHFRJQLWLRQWKDWGHDWKRUVHULRXVERGLO\KDUPZLOOUHVXOW´ :.E  E ,QUHFNOHVVQHVVKRZHYHUDGHIHQGDQWGRHVQRWKDYHWKHFULPLQDO LQWHQWLRQ DOWKRXJK KH PD\ UHFRJQL]H WKH GDQJHU WKHUHIRUH ³D ORZHU WKUHVKROG RI PHQV UHD LV VDWLVILHG ZKHQ D GHIHQGDQW UHFRJQLVHV DQ DFW LV GDQJHURXVEXWGHFLGHVWRFRPPLWLWDQ\ZD\7KLVLVUHFNOHVVQHVV«,QWKLV ZD\ WKH LPSRUWDQFH RI PHQV UHD KDV EHHQ UHGXFHG LQ VRPH DUHDV RI WKH FULPLQDO ODZ´ :. E 7KH GHIHQGDQW LQ WKLV FDVH PD\ EH FKDUJHG ZLWK³PDQVODXJKWHU´QRW³PXUGHU´ E ,QQHJOLJHQFHDGHIHQGDQWKDVQHLWKHUWKHVSHFLILFLQWHQWQRUWKH UHFRJQLWLRQVD\WRNLOORUKXUWVRPHRQHEXWFRPPLWVWKHFULPHEHFDXVH RIDQDFFLGHQWRUDQHJOLJHQFHRQKLVSDUW :.E V ,QFDVHV OLNHWKLVKHFDQEHFKDUJHGZLWK³KRPLFLGH´ RUPRUHSUHFLVHO\³QHJOLJHQW KRPLFLGH´  F 6WULFW/LDELOLW\ &ULPLQDO  7KHUHLVDWKLUGHOHPHQWRIFRPPLWLQJDFULPHXQGHUFULPLQDOODZDQG LWKDVWRGRZLWK³VWULFWOLDELOLW\´ZKLFKLVFODVVLILHGQHLWKHUDV³PHQVUHD´ QRU³DFWXVUHXV´SHUVH :.W  7KHWHUP³VWULFWOLDELOLW\´LVQRUPDOO\XVHGLQFLYLOODZ OLNHWRUWODZ  QRW LQ FULPLQDO ODZ :. E  X  +RZHYHU ZKHQ LW LV XVHG LQ FULPLQDO ODZ VWULFW OLDELOLW\ LV D NLQG RI OLDELOLW\ ³IRU ZKLFK PHQV UHD«GRHV QRW KDYH WR EH SURYHQ LQ UHODWLRQ WR RQH RU PRUH HOHPHQWV FRPSULVLQJ WKH DFWXV UHXV´ DQG ³WKH OLDELOLW\ LV VDLG WR EH VWULFW EHFDXVH GHIHQGDQWVZLOOEHFRQYLFWHGHYHQWKRXJKWKH\ZHUHJHQXLQHO\LJQRUDQWRI RQH RU PRUH IDFWRUV WKDW PDGH WKHLU DFWV RU RPLVVLRQV FULPLQDO´ :. W  %XW VWULFW OLDELOLW\ LV QRW UHDOO\ DFWXV UHXV HLWKHU EHFDXVH WKH GHIHQGDQW HYHQ ZKHQ FRQYLFWHG LV ³QRW«FXOSDEOH LQ DQ\ UHDO ZD\ LH WKHUH LV QRW HYHQ FULPLQDO QHJOLJHQFH´²DQG WKHUH LV ³PLQLPDO VWLJPD´ DWWDFKHGWRDSHUVRQXSRQFRQYLFWLRQRIVWULFWOLDELOLW\ :.W 



7KH)XWXUHRI3RVW+XPDQ/DZ 



7KH GHIHQGDQW XSRQ FRQYLFWLRQ LV DVNHG WR FRPSHQVDWH ³IRU WKH GDPDJH DQG ORVV FDXVHG E\ KLVKHU DFWV DQG RPLVVLRQV UHJDUGOHVV RI FXOSDELOLW\ RUIDXOWLQFULPLQDOODZWHUPV« ´ :.X  6WULFWOLDELOLW\ODZVDUHWKHUHIRUH³DSSOLHGHLWKHULQUHJXODWRU\RIIHQFHV HQIRUFLQJ VRFLDO EHKDYLRXU ZKHUH PLQLPDO VWLJPD DWWDFKHV WR D SHUVRQ XSRQ FRQYLFWLRQ RU ZKHUH VRFLHW\ LV FRQFHUQHG ZLWK WKH SUHYHQWLRQ RI KDUP DQG ZLVKHV WR PD[LPLVH WKH GHWHUUHQW YDOXH RI WKH RIIHQFH´ :. W  $QG WKH\ DUH PRUH FRPPRQ LQ FDVHV LQYROYLQJ ³ZRUNLQJ DQG VDIHW\ VWDQGDUGV´ LQ ZRUNSODFHV ³WKH VHOOLQJ RI DOFRKRO WR XQGHUDJH SHUVRQV´ DQGVRRQ :.W  2EMHFWLYHVRI&ULPLQDO/DZ 7KLVFRQFHUQZLWK³WKHGHWHUUHQWYDOXHRIWKHRIIHQFH´LQVWULFWOLDELOLW\ QRZ EULQJV XV WR WKH LVVXH FRQFHUQLQJ WKH REMHFWLYHV RI FULPLQDO ODZ LQ JHQHUDO &ULPLQDO ODZ LPSRVHV GLIIHUHQW NLQGV DQG GHJUHHV RI SXQLVKPHQW RQ WKRVH FRQYLFWHG ZKLFK FDQ UDQJH IURP ³FDSLWDO SXQLVKPHQW´ LH GHDWK VHQWHQFH  WKURXJK ³SK\VLFDO RU FRUSRUDO SXQLVKPHQW´ HJ ³ZKLSSLQJ RU FDQLQJ´ DQG³LQFDUFHUDWLRQ LHMDLOVHQWHQFH WR³JRYHUQPHQWVXSHUYLVLRQ HJ KRXVH DUUHVW  DQG ³ILQHV´ HJ ³VHL]LQJ PRQH\ RU SURSHUW\ IURP D SHUVRQFRQYLFWHGRIDFULPH´  :.E  P@DQ\ DFW

XQQDWXUDOO\  XSVHWWLQJ WKH QDWXUDO EDODQFH RI WKH >7DR@«7KH 'DRGHMLQJ LQWHQGVWROHDGVWXGHQWVWRD UHWXUQ WRWKHLUQDWXUDOVWDWHLQKDUPRQ\ZLWK >WKH 7DR@«/DQJXDJH DQG FRQYHQWLRQDO ZLVGRP DUH FULWLFDOO\ DVVHVVHG 7DRLVP YLHZV WKHP DV LQKHUHQWO\ ELDVHG DQG DUWLILFLDO ZLGHO\ XVLQJ SDUDGR[HV WR VKDUSHQ WKH SRLQW´ :. FF % 9DQ 1RUGHQ  / .RKQ  $ JRRG ZD\ WR XQGHUVWDQG WKLV UHWXUQ WR WKH QDWXUDO VWDWH LV WKH DQDORJ\ JLYHQ E\ /LYLD .RKQ    LQ WKDW ³>W@HFKQRORJ\ PD\ EULQJ DERXWDIDOVHVHQVHRISURJUHVV7KHDQVZHUSURYLGHGE\ /DR]LLVQRWWKH UHMHFWLRQRIWHFKQRORJ\EXWLQVWHDGVHHNLQJWKHFDOPVWDWHRIZXZHLIUHH IURPGHVLUHV7KLVUHODWHVWRPDQ\VWDWHPHQWVE\/DR]LHQFRXUDJLQJUXOHUV WRNHHSWKHLUSHRSOH« VLPSOHPLQGHG ´ :.FF  7KLV ³FDOP VWDWH RI ZX ZHL´ FDQ EH ³YHU\ FRPSOH[´ DQG ³FDQ PHDQ

QRW GRLQJ DQ\WKLQJ  QRW IRUFLQJ  QRW DFWLQJ  LQ WKH WKHDWULFDO VHQVH

FUHDWLQJ QRWKLQJQHVV  DFWLQJ VSRQWDQHRXVO\  DQG IORZLQJ ZLWK WKH PRPHQW ´ :.FF  7KLV YDJXHQHVV DVLGH²ZX ZHL FDQ  EH XVHG ³WR H[SODLQ ]LUDQ RU KDUPRQ\ ZLWKWKH>7DR@«,WLQFOXGHVWKHFRQFHSWVWKDWYDOXHGLVWLQFWLRQV DUH LGHRORJLFDO DQG VHHLQJ DPELWLRQ RI DOO VRUWV DV RULJLQDWLQJ IURP WKH VDPHVRXUFH/DR]LXVHGWKHWHUPEURDGO\ZLWKVLPSOLFLW\DQGKXPLOLW\DV NH\YLUWXHVRIWHQLQFRQWUDVWWRVHOILVKDFWLRQ´ :.FF 



7KH)XWXUHRI3RVW+XPDQ/DZ 



:KHQ SXW LQ WKH FRQWH[W RI MXULVSUXGHQFH WKH 7DRLVW WUDGLWLRQ LV WR HPSKDVL]H D V\VWHP RI ODZV ZKLFK VKRZ WKH YLUWXHV RI ³VLPSOLFLW\´ ³PRGHUDWLRQ´DQG³KXPLOLW\´ :.FF  8QOLNH WKH ODZV RI WKH MXQJOH LQ VRFLDO 'DUZLQLVP IRU 0DQLIHVW 'HVWLQ\LQWKHFRQWH[WRIWKFHQWXU\$PHULFDWKH7DRLVWVZRXOGGRMXVW WKH RSSRVLWH LQ ³DYRLGLQJ VXFK FLUFXPVWDQFHV DV ZDU KDUVK ODZV DQG KHDY\WD[HV´ :.FF 7KH³WUDLORIWHDUV´ZRXOGQRWKDYHKDSSHQHG LQ D VRFLHW\ JRYHUQHG ZLWK WKH 7DRLVW V\VWHP RI ODZV ZKLFK HPSKDVL]H KXPLOLW\PRGHUDWLRQDQGVLPSOLFLW\ $&ULWLFDO/RRN 2IFRXUVHIRUWKHFULWLFVWKHSUREOHPZLWKWKH7DRLVWV\VWHPRIODZV FRQFHUQV WKH SRVVLELOLW\ DQG GHVLUDELOLW\ RI LWV REVHVVLRQ ZLWK ³KXPLOLW\ PRGHUDWLRQDQGVLPSOLFLW\´ )LUVWO\LQUHODWLRQWRWKHTXHVWLRQRISRVVLELOLW\LWLVQRWFOHDUWRZKDW H[WHQW D V\VWHP RI ODZV FDQ UHDOO\ EH VLPSOH LQ OLJKW RI WKH KLJKO\ FRPSOLFDWHG FKDUDFWHULVWLFV RI FRQWHPSRUDU\ VRFLHW\ LQ WKH ,QIRUPDWLRQ $JH )RULQVWDQFH5%XFNPLQVWHU)XOOHU  RQFHFRPSODLQHGDERXWWKH HQRUPRXVO\FRPSOLFDWHGQDWXUHRIFRQWHPSRUDU\SDWHQWODZVLQWKDW ³WKH 86 SDWHQW  ILOHV«DUH VR H[WUDRUGLQDULO\ FRPSOH[ DQG WKH LWHPV VR PXOWLWXGLQRXVWKDWDYHULWDEOHDUP\RIJRYHUQPHQWDOVHUYDQWVLVUHTXLUHGWR DWWHQG WKHP«7KLV FRPSOH[LW\ PDNHV LW LQHYLWDEOH WKDW WKH KXPDQ HTXDWLRQ LQYROYHG LQ JRYHUQPHQW VHUYDQWV UHODWLYH WR FDUHOHVVQHVV RU PHFKDQLFDO OLPLWDWLRQV VKRXOG RFFDVLRQ WKH JUDQWLQJ RI PXOWLWXGHV RI

SUREDEO\ LQYDOLGSDWHQWFODLPV´ :.HH  $QGLQUHODWLRQWRWKHTXHVWLRQRIGHVLUDELOLW\LWLVDOVRQRWFOHDUKRZ PXFKGHVLUDEOHD V\VWHPRIODZV ZKLFKLV VLPSOH PRGHUDWHDQG KXPEOH FDQUHDOO\EHZLWKRXWEHLQJWUDSSHGLQWRDFRQVHUYDWLYHLGHRORJ\RIQRQ LQWHUYHQWLRQIURPWKHVWDWH ,Q IDFW RQH RIWHQ FLWHG FULWLFLVP RI WKLV 7DRLVW YLHZ FRQFHUQV WKH TXHVWLRQDEOH FRQVHTXHQFH ZKHQ LPSOHPHQWHG RI ³HQFRXUDJLQJ UXOHUV WR NHHS WKHLU SHRSOH LQ LJQRUDQFH  RU VLPSOHPLQGHG «,W ZRXOG QRW EH XQXVXDO SROLWLFDO DGYLFH LI /DR]L OLWHUDOO\ LQWHQGHG WR WHOO UXOHUV WR NHHS WKHLUSHRSOHLJQRUDQW´VRDVWRPDNHLWHDVLHUWRPROGWKHPLQWRREH\LQJ WKHODZVLQWKDW7DRLVWZD\ :.FF  7KHVHFULWLFLVPDVLGH²WKHDQDO\VLVRIWKH7DRLVWDQWLDXWKRULWDULDQLVP LQWKHFRQWH[WRIQDWXUDOODZFDQWHDFKXVVRPHWKLQJYDOXDEOHLQUHJDUGWR WKH UHOHYDQFH RI VRPH RQWRORJLFDO SULQFLSOHV LQ H[LVWHQWLDO GLDOHFWLFV DQG JRRG H[DPSOHV LQFOXGH WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH WKH H[SOLFDELOLW\LQH[SOLFDELOLW\

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





SULQFLSOH WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH WKH VLPSOHQHVV FRPSOLFDWHGQHVV SULQFLSOH WKH RSHQQHVVKLGGHQQHVV SULQFLSOH WKH GHQVHQHVVHPSWLQHVV SULQFLSOH WKH FKDQJHFRQVWDQF\ SULQFLSOH WKH H[SDQVLRQFRQWUDFWLRQ SULQFLSOH WKH WKHRU\SUD[LV SULQFLSOH WKH FRQYHQWLRQQRYHOW\ SULQFLSOH WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH WKH V\PPHWU\DV\PPHWU\ SULQFLSOH WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH DQG WKHVDPHGLIIHUHQFHSULQFLSOH )RU LQVWDQFH LQ UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWH YLHZSRLQW HJ WKH DEVROXWH UHTXLUHPHQW LQ 7DRLVW MXUVLSUXGHQFHRIDV\VWHPRIODZVZKLFKVKRZWKHYLUWXHVRI³VLPSOLFLW\´ ³PRGHUDWLRQ´ DQG ³KXPLOLW\´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³WKH 7DR«DQG LWV PDQLIHVWDWLRQV«ZLOO IORZ EDFN FLUFXPYHQW DQG HYHQWXDOO\ XQGR DQ\ DWWHPSWVWRIRUFHLWLQWRDSDUWLFXODUSDWK´ WKHUHLVLQH[SOLFDELOLW\ HJWKH ODFN RI VXIILFLHQW H[SODQDWLRQ LQ 7DRLVP RI ZK\ H[DFWO\ WKH 7DR KDV WR HYHQWXDOO\UHWXUQLQWRDF\FOHDWDOOLQVWHDGRIPRYLQJLQDVWUDLJKWOLQHRU VRPHZKHUHHOVH  ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI WKH FKDUDFWHULVWLFV RI WKH 7DR OLNH WKH IRXU PDMRU RQHV DV GLVFXVVHG  WKHUH LV YDJXHQHVV HJ WKH HVVHQWLDO YDJXHQHVV RI WKH ³7DR´ LQ VSLWH RI WKH IRXU FKDUDFWHULVWLFV DV LGHQWLILHG EHFDXVH ³QHLWKHU LW QRU LWV SULQFLSOHV FDQ HYHU EH DGHTXDWHO\ H[SUHVVHGLQZRUGV´  ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJWKHVLPSOH7DRLVWYLHZRIDV\VWHPRIODZVZKLFKLVWREH PRGHUDWHKXPEOHDQGVLPSOH WKHUHLVFRPSOLFDWHGFRXQWHUSDUW HJWKH PRUHFRPSOLFDWHGYLHZE\WKHFULWLFVOLNH)XOOHUWKDWWKHODZVLQUHDOOLIH FDQEHHQRUPRXVO\FRPSOLFDWHGDVLQWKHFDVHDERXWSDWHQWV 



7KH)XWXUHRI3RVW+XPDQ/DZ 



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

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





KDUVK V\VWHP RI ODZV IRU WKRVH ZKR EHOLHYH LQ D PRUH DXWKRULWDULDQ ZRUOGYLHZ  ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJWKHSRVVLEOHDEXVHRIDQRQDXWKRULWDULDQ7DRLVWV\VWHPRI ODZV WR PDNH WKH SHRSOH ³LJQRUDQW´ DQG ³VLPSOHPLQGHG´ IRU FRQWURO  WKHUHLVSURJUHVVLRQ HJWKHSURJUHVVPDGHIRUDOHVVDXWKRULWDULDQV\VWHP RIODZVLQD7DRLVWFRPPXQLW\  $QGLQUHODWLRQWRWKHVDPHGLIIHUHQFHSULQFLSOHLIWKHUHLVVLPLODULW\ LQ RXWFRPH HJ WKH PROGLQJ RI LQGLYLGXDO EHKDYLRUV LQ DQ\ V\VWHP RI ODZVEHLW7DRLVWRUQRQ7DRLVW WKHUHLVGLIIHUHQFHLQRXWFRPH HJWKH OHVV DXWKRULWDULDQ QDWXUH RI D 7DRLVW V\VWHP RI ODZV DQG WKH PRUH DXWKRULWDULDQQDWXUHRIDQRQ7DRLVWRQHOLNHD0DU[LVWV\VWHPRIODZV 

1HFHVVLW\DQG6RFLHW\ %HVLGHVWKHSHUVSHFWLYHVRIWKHPLQG LQ6HF DQGQDWXUH LQ6HF  ²D WKLUG SHUVSHFWLYH LQYROYHV WKH UROH RI VRFLHW\ LQ UHODWLRQ WR QHFHVVLW\LQWKHFRQWH[WRIWKHODZ 7ZR LOOXPLQDWLQJ FDVH VWXGLHV FDQ EH SURYLGHG KHUH QDPHO\   LQWHUQDWLRQDOSXEOLFODZDQGWKH,QWHUQDWLRQDO&ULPLQDO&RXUWDQG   FRQVWLWXWLRQDO ODZ DQG WKH EDODQFH RI SRZHU²WR EH DGGUHVVHG KHUHDIWHU UHVSHFWLYHO\

,QWHUQDWLRQDO3XEOLF/DZDQGWKH,QWHUQDWLRQDO&ULPLQDO&RXUW $ JURZLQJ SKHQRPHQRQ LQ WKH LQWHUQDWLRQDO DUHQD FRQFHUQV WKH LQVWLWXWLRQ RI LQWHUQDWLRQDO SXEOLF ODZ ZLWK LWV FODLP RI XQLYHUVDO MXULVGLFWLRQ RYHU GLIIHUHQW QDWLRQVWDWHV RQ FHUWDLQ LPSRUWDQW LVVXHV² ODUJHO\³GXHWRWKHLQFUHDVHLQJOREDOWUDGHDUPHGFRQIOLFWHQYLURQPHQWDO GHWHULRUDWLRQRQDZRUOGZLGHVFDOHDZDUHQHVVRIKXPDQULJKWVYLRODWLRQV UDSLG DQG YDVW LQFUHDVHV LQ LQWHUQDWLRQDO WUDQVSRUWDWLRQ DQG D ERRP LQ JOREDOFRPPXQLFDWLRQV´HVSHFLDOO\LQWKHWKFHQWXU\DQG EH\RQG :. II  %\ GHILQLWLRQ ³SXEOLF LQWHUQDWLRQDO ODZ FRQFHUQV WKH VWUXFWXUH DQG FRQGXFW RI VRYHUHLJQ VWDWHV DQG LQWHUJRYHUQPHQWDO RUJDQL]DWLRQV 7R D OHVVHUGHJUHHLQWHUQDWLRQDOODZDOVRPD\DIIHFWPXOWLQDWLRQDOFRUSRUDWLRQV DQG LQGLYLGXDOV DQ LPSDFW LQFUHDVLQJO\ HYROYLQJ EH\RQG GRPHVWLF OHJDO LQWHUSUHWDWLRQDQGHQIRUFHPHQW´ :.II  :LWK WKLV GHILQLWLRQ LQ PLQG DQ HODERUDWLRQ RI WKH QDWXUH RI LQWHUQDWLRQDOSXEOLFODZFDQEHSURYLGHGKHUHDIWHU DQGDOVRVXPPDUL]HGLQ 7DEOH   LQ UHODWLRQ WR D  LWV VFRSH E  LWV VRXUFHV F  LWV LQWHUSUHWLYH



7KH)XWXUHRI3RVW+XPDQ/DZ 



SUREOHP G  LWV HQIRUFHPHQW SUREOHP DQG H  WKH FDVH VWXG\ RI WKH LQWHUQDWLRQDOFULPLQDOFRXUWLQWKHFRQWH[WRIWKHWUDYHVW\RIMXVWLFH 7KH6FRSHRI,QWHUQDWLRQDO3XEOLF/DZ $W OHDVW RQ SDSHU WKH VFRSH RI LQWHUQDWLRQDO SXEOLF ODZ FDQ EH TXLWH H[WHQVLYH LQGHHG DQG LW LV DOVR JURZLQJ UDSLGO\ LQ WKH DJH RI JOREDOL]DWLRQ &RQVLGHU WKH IROORZLQJ WKUHH FDWHJRULHV RI WKH VFRSH RI LQWHUQDWLRQDO SXEOLFODZIRULOOXVWUDWLRQ )LUVWO\³LQWHUQDWLRQDOODZGHDOVZLWKWKHDFTXLVLWLRQRIWHUULWRU\VWDWH LPPXQLW\DQGWKHOHJDOUHVSRQVLELOLW\RIVWDWHVLQWKHLUFRQGXFWZLWKHDFK RWKHU«,W«LQFOXGHV WKH LPSRUWDQW IXQFWLRQV RI WKH PDLQWHQDQFH RI LQWHUQDWLRQDO SHDFH DQG VHFXULW\ DUPV FRQWURO WKH SDFLILF VHWWOHPHQW RI GLVSXWHV DQG WKH UHJXODWLRQ RI WKH XVH RI IRUFH LQ LQWHUQDWLRQDO UHODWLRQV (YHQZKHQWKHODZLVQRWDEOHWRVWRSWKHRXWEUHDNRIZDULWKDVGHYHORSHG SULQFLSOHV WR JRYHUQ WKH FRQGXFW RI KRVWLOLWLHV DQG WKH WUHDWPHQW RI SULVRQHUV´ :.II  6HFRQGO\³>L@QWHUQDWLRQDOODZLVDOVRXVHGWRJRYHUQLVVXHVUHODWLQJWR WKHJOREDOHQYLURQPHQWWKHJOREDOFRPPRQVVXFKDVLQWHUQDWLRQDO ZDWHUV DQGRXWHUVSDFHJOREDOFRPPXQLFDWLRQVDQGZRUOGWUDGH´ :.II  $QG WKLUGO\ ³>L@QWHUQDWLRQDO ODZ LV VLPLODUO\ FRQFHUQHG ZLWK WKH WUHDWPHQW RI LQGLYLGXDOV ZLWKLQ VWDWH ERXQGDULHV 7KHUH LV WKXV D FRPSUHKHQVLYH UHJLPH GHDOLQJ ZLWK JURXS ULJKWV WKH WUHDWPHQW RI DOLHQV WKH ULJKWV RI UHIXJHHV LQWHUQDWLRQDO FULPHV QDWLRQDOLW\ SUREOHPV DQG KXPDQULJKWVJHQHUDOO\´ :.II  7KH6RXUFHVRI,QWHUQDWLRQDO3XEOLF/DZ %XW ZKDW JLYHV LQWHUQDWLRQDO SXEOLF ODZ LWV DOOHJHG MXULVGLFWLRQ RYHU GLIIHUHQWQDWLRQVWDWHVRQLVVXHVDVLOOXVWUDWHG DERYH LQWKHFRQWH[WRIWKH FDWHJRULHVRILWVVFRSH" +LVWRULFDOO\WKHUHDUHVRPHLPSRUWDQWVRXUFHVRILQWHUQDWLRQDOSXEOLF ODZ ZKLFK FDQ EH FODVVLILHG RQ WKH EDVLV RI WZR PDLQ JURXSV QDPHO\ ³WKHDJUHHPHQWV>WUHDWLVHV@DPRQJQDWLRQV MXVLQWHUJHQWHV ´DQG³WKHODZ RIQDWLRQV MXVJHQWLXP ´ :.II JJJ  7KHILUVWRQH³WKHDJUHHPHQWVDPRQJQDWLRQV´UHIHUWRIRULQVWDQFH D LQWHUQDWLRQDOWUHDWLHVDPRQJQDWLRQV :.II JJJ $QGWKH VHFRQGRQH³WKHODZRIQDWLRQV´KDVLQPLQGIRUH[DPSOHVRPHWKLQJOLNH E  ³LQWHUQDWLQDO FXVWRP´ F  ³WKH JHQHUDO SULQFLSOHV RI ODZ´ DQG G  ³MXGLFLDOGHFLVLRQVDQGWHDFKLQJV´ :.II JJJ 

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





D ,QUHJDUGWRLQWHUQDWLRQDOWUHDWLHVWKLVNLQGRILQWHUQDWLRQDOSXEOLF ODZ LPSRVHV ³REOLJDWLRQV´ RQ QDWLRQVWDWHV ZKLFK ³H[SUHVVO\ DQG YROXQWDULO\DFFHSWEHWZHHQWKHPVHOYHVLQWUHDWLHV´ :.II  E ,QUHJDUGWRLQWHUQDWLRQDOFXVWRPWKLVNLQGRILQWHUQDWLRQDOSXEOLF ODZ  ³LV GHULYHG IURP WKH FRQVLVWHQW SUDFWLFH RI 6WDWHV DFFRPSDQLHG E\ RSLQLR MXULV LH WKH FRQYLFWLRQ RI 6WDWHV WKDW WKH FRQVLVWHQW SUDFWLFH LV UHTXLUHG E\ D OHJDO REOLJDWLRQ«$WWHPSWV WR FRGLI\ FXVWRPDU\ LQWHUQDWLRQDOODZSLFNHGXSPRPHQWXPDIWHUWKH6HFRQG:RUOG:DUZLWK WKHIRUPDWLRQRIWKH,QWHUQDWLRQDO/DZ&RPPLVVLRQ ,/& XQGHUWKHDHJLV RI WKH 8QLWHG 1DWLRQV &RGLILHG FXVWRPDU\ ODZ LV PDGH WKH ELQGLQJ LQWHUSUHWDWLRQ RI WKH XQGHUO\LQJ FXVWRP E\ DJUHHPHQW WKURXJK WUHDW\ )RU VWDWHVQRWSDUW\WRVXFKWUHDWLHVWKHZRUNRIWKH,/&PD\VWLOOEHDFFHSWHG DVFXVWRPDSSO\LQJWRWKRVHVWDWHV´ :.II  F  ,Q UHJDUG WR ³WKH JHQHUDO SULQFLSOHV RI ODZ´ WKLV NLQG RI LQWHUQDWLRQDO SXEOLF ODZ UHIHUV WR WKRVH SULQFLSOHV ³FRPPRQO\ UHFRJQL]HG E\ WKH PDMRU OHJDO V\VWHPV RI WKH ZRUOG &HUWDLQ QRUPV RI LQWHUQDWLRQDO ODZ DFKLHYH WKH ELQGLQJ IRUFH RI SHUHPSWRU\ QRUPV MXV FRJHQV  DV WR LQFOXGHDOOVWDWHVZLWKQRSHUPLVVLEOHGHURJDWLRQV´ :.II  G  $QG LQ UHJDUG WR MXGLFLDO GHFLVLRQV DQG WHDFKLQJV WKLV NLQG RI LQWHUQDWLRQDOSXEOLFODZUHOLHVRQ³MXGJPHQWVRILQWHUQDWLRQDOWULEXQDOVDV ZHOO DV VFKRODUO\ ZRUNV´ ZKLFK ³KDYH WUDGLWLRQDOO\ EHHQ ORRNHG WR DV SHUVXDVLYH VRXUFHV IRU FXVWRP LQ DGGLWLRQ WR GLUHFW HYLGHQFH RI VWDWH EHKDYLRU DQGWKH\DUHDOVRH[SOLFLWO\PHQWLRQHGDVVXFKLQ$UWRIWKH 6WDWXWH RI WKH ,QWHUQDWLRQDO &RXUW RI -XVWLFH DV VXEVLGLDU\ PHDQV IRU WKH GHWHUPLQDWLRQRIUXOHVRIODZ ´ :.II  7KH,QWHUSUHWDWLYH3UREOHPRI,QWHUQDWLRQDO3XEOLF/DZ %XWWKHVHVRXUFHVRILQWHUQDWLRQDOSXEOLFODZDUHQRWDOZD\VFU\VWDOO\ FOHDUWRHYHU\RQHDQGWRXQGHUVWDQGWKHPUHTXLUHLQWHUSUHWDWLRQZKLFKFDQ EHFRPH D PDMRU SRLQW RI FRQWHQWLRQ DPRQJ WKRVH LQ GLVSXWH DQG WKXV FRQVWLWXWHV D PDMRU FKDOOHQJH WR WKH QDwYH FODLP RI WKH XQLYHUVDO MXULVGLFWLRQRILQWHUQDWLQDOSXEOLFODZ 7KRVHZKRFKDOOHQJHDJLYHQLQWHUSUHWDWLRQRILQWHUQDWLRQDOSXEOLFODZ FDQFRPHIURPGLIIHUHQWSDUWLHVLQDGLVSXWHDQGWKHVHSDUWLHVFDQEH³WKH SURWDJRQLVWV´ WKHPVHOYHV WKH ³MXGLFLDO ERGLHV´ OLNH ³WKH ,QWHUQDWLRQDO &RXUWRI-XVWLFH´ DQGVRRQ 7KLV LQWHUSUHWLYH SUREOHP SHUVLVWV DOWKRXJK ³WKH 9LHQQD &RQYHQWLRQ RQWKH/DZRI7UHDWLHVZULWHVRQWKHWRSLFRILQWHUSUHWDWLRQWKDW« >D@WUHDW\ VKDOOEHLQWHUSUHWHGLQJRRGIDLWKLQDFFRUGDQFHZLWKWKHRUGLQDU\PHDQLQJ WREHJLYHQWRWKHWHUPVRIWKHWUHDW\LQWKHLUFRQWH[WDQGLQWKHOLJKWRILWV REMHFWDQGSXUSRVH ´ :.II 



7KH)XWXUHRI3RVW+XPDQ/DZ 



+LVWRULFDOO\WKHUHDUHWKUHHPDMRUDSSURDFKHVWRLQWHUSUHWDWLRQLQWKH FRQWH[W RI LQWHUQDWLRQDO SXEOLF ODZ ZKLFK DUH QDPHO\ D  ³WH[WXDO´ E  ³VXEMHFWLYH´DQG F ³HIIHFWLYH´²DVVKRZQEHORZ  ‡ ³7KH WH[WXDO DSSURDFK´²³D UHVWULFWLYH LQWHUSUHWDWLRQ ZKLFK EDVHV LWVHOI RQ WKH RUGLQDU\ PHDQLQJ  RI WKH WH[W WKDW DSSURDFK DVVLJQV FRQVLGHUDEOHZHLJKWWRWKHDFWXDOWH[W´ ‡ ³7KH VXEMHFWLYH DSSURDFK´²³ZKLFK WDNHV LQWR FRQVLGHUDWLRQ >L@ WKH LGHDEHKLQGWKHWUHDW\>LL@WUHDWLHV LQWKHLUFRQWH[W DQG>LLL@ZKDWWKH ZULWHUVLQWHQGHGZKHQWKH\ZURWHWKHWH[W´ ‡³$WKLUGDSSURDFK´²³ZKLFKEDVHVLWVHOIRQLQWHUSUHWDWLRQ LQWKHOLJKW RILWVREMHFWDQGSXUSRVH LHWKHLQWHUSUHWDWLRQWKDWEHVWVXLWVWKHJRDO RIWKHWUHDW\DOVRFDOOHG HIIHFWLYHLQWHUSUHWDWLRQ ´  6XUHO\WKHUHFDQEHRWKHUDSSURDFKHVWRLQWHUSUHWDWLRQVXFKDVDQHFOHFWLF RQHWRFRPELQHWKHWKUHHEXWWKHSRLQWKHUHLVLOOXVWUDWLYH QRWH[KDXVWLYH  ,Q DGGLWLRQ KRZ WKHVH WKUHH DSSURDFKHV DUH XVHG FDQ DOVR EH GHSHQGHQWRQWKHFRPSHWLQJJXLGLQJSULQFLSOHVWREHDSSHDOHGWRVXFKDV ³PRQLVP´DQG³GXDOLVP´ :.KKK  ,Q ³PRQLVP´ ERWK ³WKH LQWHUQDO >QDWLRQDO@ DQG LQWHUQDWLRQDO OHJDO V\VWHPV IRUP D XQLW\«,QWHUQDWLRQDO ODZ GRHV QRW QHHG WR EH WUDQVODWHG LQWR QDWLRQDO ODZ 7KH DFW RI UDWLI\LQJ WKH LQWHUQDWLRQDO ODZ LPPHGLDWHO\ LQFRUSRUDWHV WKH ODZ LQWR QDWLRQDO ODZ ,QWHUQDWLRQDO ODZ FDQ EH GLUHFWO\ DSSOLHGE\DQDWLRQDOMXGJHDQGFDQEHGLUHFWO\LQYRNHGE\FLWL]HQVMXVWDV LILWZHUHQDWLRQDOODZ´ :.KKK  %\FRQWUDVWLQ³GXDOLVP´WKHUHLVQRLQKHUHQWXQLW\³EHWZHHQQDWLRQDO DQG LQWHUQDWLRQDO ODZ´ DQG WKHUHIRUH DQ LQWHUQDWLRQDO ODZ QHHGV WR EH WUDQVODWHG RUDFFHSWHG LQWRDQDWLRQDOODZIRULWWRKDYHOHJDOIRUFH :. KKK  ,QRWKHUZRUGV³>Z@LWKRXWWKLVWUDQVODWLRQLQWHUQDWLRQDOODZGRHVQRW H[LVW DV ODZ >LQ DFFRUGDQFH WR GXDOLVP@«,I D VWDWH DFFHSWV D WUHDW\ EXW GRHVQRWDGDSWLWVQDWLRQDOODZLQRUGHUWRFRQIRUPWRWKHWUHDW\RUGRHVQRW FUHDWH D QDWLRQDO ODZ H[SOLFLWO\ LQFRUSRUDWLQJ WKH WUHDW\ WKHQ LW YLRODWHV LQWHUQDWLRQDOODZ%XWRQHFDQQRWFODLPWKDWWKHWUHDW\KDVEHFRPHSDUWRI QDWLRQDO ODZ &LWL]HQV FDQQRW UHO\ RQ LW DQG MXGJHV FDQQRW DSSO\ LW 1DWLRQDO ODZV WKDW FRQWUDGLFW LW UHPDLQ LQ IRUFH $FFRUGLQJ WR GXDOLVWV QDWLRQDO MXGJHV QHYHU DSSO\ LQWHUQDWLRQDO ODZ RQO\ LQWHUQDWLRQDO ODZ WKDW KDVEHHQWUDQVODWHGLQWRQDWLRQDOODZ´ :.KKK  7KHVH WZR FRQWUDVWLYH JXLGLQJ SULQFLSOHV DUH DOVR VXPPDUL]HG LQ 7DEOH  LQ FRQMXQFWLRQ ZLWK RWKHU RQHV LQ WKH FRQWH[W RI LQWHUQDWLRQDO ODZLQLWVPXOWLIDFHWHGFODVVLILFDWLRQ

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





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³PDQ\ YLRODWLRQV RI LQWHUQDWLRQDO ODZ REOLJDWLRQV DUH RYHUORRNHG´IRUWKHEHQHILWVRIWKHPDMRUSRZHUV :.II  2I FRXUVH WKHUH DUH VRPH PHFKDQLVPV ZKLFK FDQ EH XVHG WR SXW SUHVVXUH RQ QDWLRQVWDWHV WR FRPSO\ E\ LQWHUQDWLRQDO SXEOLF ODZ )RU H[DPSOH ³VWDWHV WU\ WR DYRLG WKH DSSHDUDQFH RI KDYLQJ GLVUHJDUGHG LQWHUQDWLRQDO REOLJDWLRQV 6WDWHV PD\ DOVR XQLODWHUDOO\ DGRSW VDQFWLRQV DJDLQVWRQHDQRWKHUVXFKDVWKHVHYHUDQFHRIHFRQRPLFRUGLSORPDWLFWLHV RU WKURXJK UHFLSURFDO DFWLRQ ,Q VRPH FDVHV GRPHVWLF FRXUWV PD\ UHQGHU MXGJPHQWDJDLQVWDIRUHLJQVWDWH WKHUHDOPRISULYDWHLQWHUQDWLRQDOODZ IRU DQLQMXU\WKRXJKWKLVLVDFRPSOLFDWHGDUHDRIODZZKHUHLQWHUQDWLRQDOODZ LQWHUVHFWVZLWKGRPHVWLFODZ´ :.II  %XW WKHVH PHFKDQLVPV RIWHQ GR QRW ZRUN HIIHFWLYHO\ DJDLQVW PDMRU SRZHUV LQ D GLVSXWH &RQVLGHU DV DQ LOOXVWUDWLRQ KHUHDIWHU WKH KLVWRU\ RI WKH,QWHUQDWLRQDO&ULPLQDO&RXUW DVDFDVHVWXG\  7KH7UDYHVW\RI-XVWLFHDQGWKH,QWHUQDWLRQDO&ULPLQDO&RXUW 7KHFDVHFRQFHUQLQJWKHFUHDWLRQRIWKH,QWHUQDWLRQDO&ULPLQDO&RXUW ,&& LQVSHDNVYROXPHVRIWKHWUDYHVW\RIMXVWLFHLQWKHFRQWH[WRI LQWHUQDWLRQDOODZ D 7KH,QWHUQDWLRQDO&RXUWRI-XVWLFH 7R VWDUW WKHUH ZDV ILUVW ³WKH ,QWHUQDWLRQDO &RXUW RI -XVWLFH >,&-@ ORFDWHG LQ 7KH +DJXH 1HWKHUODQGV´ ZKLFK ³ZDV FUHDWHG IURP WKH 3HUPDQHQW&RXUWRI,QWHUQDWLRQDO-XVWLFHLQ´ :.II  6LQFHLWVLQFHSWLRQWKHUHKDYHEHHQURXJKO\FDVHVEURXJKWWRLWV DWWHQWLRQ EHFDXVH ³WKH &RXUW PD\ JLYH DQ DGYLVRU\ RSLQLRQ RQ DQ\ OHJDO TXHVWLRQ DW WKH UHTXHVW RI ZKDWHYHU ERG\ PD\ EH DXWKRUL]HG E\ RU LQ DFFRUGDQFH ZLWK WKH &KDUWHU RI WKH 8QLWHG 1DWLRQV WR PDNH VXFK D UHTXHVW´ :.II  +RZHYHUDOWKRXJK³>W@KHMXGJPHQWVJLYHQE\WKH&RXUWLQWKHVHFDVHV DUH ELQGLQJ«LW SRVVHVVHV QR PHDQV WR HQIRUFH LWV UXOLQJV´ PRUHRYHU TXLWHDQXPEHURI³WKHDGYLVRU\FDVHVEURXJKWEHIRUHWKHFRXUWKDYHEHHQ



7KH)XWXUHRI3RVW+XPDQ/DZ 



FRQWURYHUVLDO ZLWK UHVSHFW WR WKH FRXUW V FRPSHWHQFH DQG MXULVGLFWLRQ´ :.II  ,QDGGLWLRQ³>R@IWHQHQRUPRXVO\FRPSOLFDWHGPDWWHUV,&-FDVHV«FDQ VWUHWFKRQIRU\HDUVDQGJHQHUDOO\LQYROYHWKRXVDQGVRISDJHVRISOHDGLQJV HYLGHQFHDQGWKHZRUOG VOHDGLQJVSHFLDOLVWSXEOLFLQWHUQDWLRQDOODZ\HUV´ :.II  E 7KH,QWHUQDWLRQDO&ULPLQDO&RXUW 7KHVH SUREOHPV RI WKH 8&- SHUVLVW HYHQ ZKHQ DQRWKHU LQWHUQDWLRQDO FRXUW WKLV WLPH WKH ,QWHUQDWLRQDO &ULPLQDO &RXUW ,&&  ZDV FUHDWHG LQ  ZKHQ ³LWV IRXQGLQJ WUHDW\ WKH 5RPH 6WDWXWH RI WKH ,QWHUQDWLRQDO &ULPLQDO&RXUWHQWHUHGLQWRIRUFH´ :.JJ81$,  7KHRIILFDOVHDWRIWKH,&&LVDOVRORFDWHGLQ7KH+DJXH1HWKHUODQGV EXW³LWVSURFHHGLQJVPD\WDNHSODFHDQ\ZKHUH´ :.JJ  8QOLNH ,&-²WKH ,&& LV D SHUPDQHQW WULEXQDO VSHFLILFDOO\ FUHDWHG WR KDYH ³MXULVGLFWLRQ RYHU IRXU JURXSV RI FULPHV ZKLFK LW UHIHUV WR DV WKH

PRVW VHULRXV FULPHV RI FRQFHUQ WR WKH LQWHUQDWLRQDO FRPPXQLW\ DV D ZKROH ´ DQG WKH\ DUH QDPHO\ L  ³WKH FULPH RI JHQRFLGH´ LL  ³FULPHV DJDLQVWKXPDQLW\´ LLL ³ZDUFULPHV´DQG LY ³WKHFULPHRIDJJUHVVLRQ´ :.JJ  7KH VWDWXH FRQFHUQLQJ WKH FULPH RI DJUHVVLRQ LQ LY  LV FXUUHQWO\ SUREOHPDWLFKRZHYHUEHFDXVHWKH,&&GRHV³QRWH[HUFLVHLWVMXULVGLFWLRQ RYHUWKHFULPHRIDJJUHVVLRQXQWLOVXFKWLPHDVWKHVWDWHVSDUWLHVDJUHHRQD GHILQLWLRQ RI WKH FULPH DQG VHW RXW WKH FRQGLWLRQV XQGHU ZKLFK LW PD\ EH SURVHFXWHG´ :.JJ81  :LWK WKLV FODULILFDWLRQ DVLGH²WKH ,&& DW WKH RXWVHW LV OLPLWHG LQ LWV MXULVGLFWLRQLQIRXUGLVWLQFWLYHZD\VDVVKRZQEHORZIRULOOXVWUDWLRQ :. JJ   ‡ ³ZKHUH WKH SHUVRQ DFFXVHG RI FRPPLWWLQJ D FULPH LV D QDWLRQDO RI D VWDWHSDUW\ RUZKHUHWKHSHUVRQ VVWDWHKDVDFFHSWHGWKHMXULVGLFWLRQRI WKHFRXUW ´ ‡ ³ZKHUH WKH DOOHJHG FULPH ZDV FRPPLWWHG RQ WKH WHUULWRU\ RI D VWDWH SDUW\ RUZKHUHWKHVWDWHRQZKRVHWHUULWRU\WKHFULPHZDVFRPPLWWHG KDVDFFHSWHGWKHMXULVGLFWLRQRIWKHFRXUW ´ ‡ ³ZKHUH D VLWXDWLRQ LV UHIHUUHG WR WKH FRXUW E\ WKH 81 6HFXULW\ &RXQFLO´ ‡ZKHUHWKHDOOHJHGFULPHZDV³FRPPLWWHGRQRUDIWHU«>WKH@GDWH´RILWV FUHDWLRQWKDWLVLQ  7KHVH OLPLWHG FLUFXPVWDQFHV ZHUH QRW UDQGRPO\ VSHFLILHG EXW ZHUH FDUHIXOO\ DUJXHG IRU E\ GRPLQDQW SRZHUV HVSHFLDOO\ WKH 8QLWHG 6WDWHV 

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





³GXULQJWKHQHJRWLDWLRQVWKDWOHGWRWKH5RPH6WDWXWH´VRWKDWWKHFRXUWLV QRWDOORZHGWR³H[HUFLVHXQLYHUVDOMXULVGLFWLRQ´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³D VWDWH SDUW\´ )RU LQVWDQFH ³&KLQD 5XVVLD ,QGLD DQG WKH 8QLWHG 6WDWHV«DUHFULWLFDORIWKHFRXUWDQGKDYHQRWMRLQHG´ :.JJ  ,QIDFWHYHQWKRVHZKRVLJQDQGMRLQWKH,&&FDQXQVLJQDQGXQMRLQLW ODWHU )RU H[DPSOH ODWHU LQ  ³WZR RI WKHVH VWDWHV WKH 8QLWHG 6WDWHV DQG ,VUDHO XQVLJQHG  WKH 5RPH 6WDWXWH LQGLFDWLQJ WKDW WKH\ QR ORQJHU LQWHQGWREHFRPHVWDWHVSDUWLHVDQGDVVXFKWKH\KDYHQROHJDOREOLJDWLRQV DULVLQJ IURP WKHLU VLJQDWXUH RI WKH VWDWXWH´ :. JJ 81  - %ROWRQ6%UHWW  ,W LV QR ZRQGHU WKHUHIRUH WKDW WKH ,&& KDV VR IDU ³RSHQHG LQYHVWLJDWLRQVLQWR«VLWXDWLRQV´WKDWLQYROYHZHDNVWDWHV HJLQWKHQRQ :HVW DQGDUHRIWHQVSRQVRUHGE\PDMRU:HVWHUQSRZHUVIRUSURVHFXWLRQ )RULQVWDQFHWKH,&&KDVLQYHVWLJDWHGFDVHVFRQFHUQLQJZHDN$IULFDQ FRXQWULHVOLNH³1RUWKHUQ8JDQGDWKH'HPRFUDWLF5HSXEOLFRIWKH&RQJR WKH&HQWUDO$IULFDQ5HSXEOLFDQG'DUIXU7KHFRXUWKDVLQGLFWHGIRXUWHHQ SHRSOH VHYHQ RI ZKRP UHPDLQ IUHH WZR KDYH GLHG DQG ILYH DUH LQ FXVWRG\´ :.JJ,&&  %XW WKH ,&& KDV WXUQHG D EOLQG H\H WR WKH ZDU FULPHV FRPPLWWHG E\ SRZHUIXO VWDWHV OLNH WKH 86 DQG WKH 8. LQ ,UDT DQG $IJKDQLVWDQ DQG ,VUDHO LQ 3DOHVWLQH IRU H[DPSOH EHFDXVH RI WKH PDQLSXODWLRQ RI OHJDO WHFKQLFDOLW\DVGHVFULEHGDERYH 7KHUHIRUH³FULWLFVRIWKHFRXUWDUJXHWKDWWKHUHDUH LQVXIILFLHQWFKHFNV DQG EDODQFHV RQ WKH DXWKRULW\ RI WKH ,&& SURVHFXWRU DQG MXGJHV  DQG

LQVXIILFLHQW SURWHFWLRQ DJDLQVW SROLWLFL]HG SURVHFXWLRQV RU RWKHU DEXVHV ´ :.JJ86'6  F 7KH3RZHU3ROLWLFVRIWKH3URVHFXWLRQRI&ULPHVDJDLQVW+XPDQLW\ 7KH WUDYHVW\ RI MXVWLFH WR IDYRU WKH PDMRU SRZHUV RU WKH YLFWRULRXV SRZHUV DQGWRJRDIWHUWKHZHDNRQHV RUWKHGHIHDWHGSRZHUV LVDOOWKH PRUHUHYHDOHGLIRQHORRNVDWDOOWKHFDVHVLQZKLFKSHRSOHZHUHFRQYLFWHG



7KH)XWXUHRI3RVW+XPDQ/DZ 



RI FULPHV DJDLQVW KXPDQLW\ E\ GLIIHUHQW LQWHUQDWLRQDO FRXUWV LQ WKH SDVW FHQWXU\RUVR +HUHDIWHU DUH WKH WKH ZHOONQRZQ FDVHV RI QDWLRQDOV LQ GHIHDWHG RU ZHDN SRZHUVFRQYLFWHGRIFULPHVDJDLQVWKXPDQLW\LQWKHSDVWFHQWXU\RU VR :.KK   ‡$JDLQVW1D]L)DVFLVWDQGRWKHUFRPSDUDEOHRQHVDIWHU::,, ±*HUPDQ\ ±-DSDQ ±$XVWULD ±)UDQFH ±&KLOH ±$UJHQWLQD ‡$JDLQVWZHDN$IULFDQVWDWHV ±6LHUUD/HRQH ±5ZDQGD ±(WKLRSLD ‡$JDLQVWWKHGHIHDWHGORVHUVLQIRUPHURI DJJUHVVLRQ@´ DQG RI D FOHDU IRUPXODWLRQRI³WKHFRQGLWLRQVXQGHUZKLFKLWPD\EHSURVHFXWHG´  ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJ WKH VLPSOH EXW SRSXODU YLHZ WKDW WKH ,&& ZDV VHW XS WR LPSDUWLDOO\ SURYLGH MXVWLFH DJDLQVW WKRVH ZKR FRPPLW WKH ³PRVW VHULRXV FULPHV RI FRQFHUQ WR WKH LQWHUQDWLRQDO FRPPXQLW\´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

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





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³VWDWHV WU\ WR DYRLG WKH DSSHDUDQFH RI KDYLQJ GLVUHJDUGHG LQWHUQDWLRQDO REOLJDWLRQV´ EXW ZKHQ LQWHUQDWLRQDO FRXUWV GR QRWH[LVWRUDUHZHDNVWDWHVPD\QRWHYHQERWKHUDERXWWKHDSSHDUDQFHDV LQ EOXQW FRORQLDOLVP DQG VODYHU\ SUDFWLFHG E\ PDMRU SRZHUV LQ WKH ROGHU GD\V 

&RQVWLWXWLRQDO/DZDQGWKH%DODQFHRI3RZHU 7KH FRQFHUQ ZLWK LQWHUQDWLRQDO ODZ LQ WKH SUHYLRXV VHFWLRQ  HVSHFLDOO\LQUHODWLRQWRFULPLQDOODZLQWKHLQWHUQDWLRQDODUHQDLVZLWKRXW GRXEWLPSRUWDQWLQGHHG ZKLFK@PD\EHUHTXLUHGWRDOWHUWKHFRQVWLWXWLRQ,QELFDPHUDOOHJLVODWXUHV WKHUHPD\EHDSURFHVVODLGRXWIRUVHFRQGRUWKLUGUHDGLQJVRIELOOVEHIRUH D QHZ ODZ FDQ HQWHU LQWR IRUFH $OWHUQDWLYHO\ WKHUH PD\ IXUWKHU EH UHTXLUHPHQWV IRU PD[LPXP WHUPV WKDW D JRYHUQPHQW FDQ NHHS SRZHU EHIRUHKROGLQJDQHOHFWLRQ´ :.]]  $QG LQ SDUOLDPHQWDU\ SROLWLFV HYHQ ZKHQ WKHUH H[LVWV QR FOHDU PDMRULW\WKHFRQVWLWXWLRQDOORZV³WKHSUDJPDWLFPHFKDQLVPH[HUFLVHGE\D PLQRU SROLWLFDO SDUW\ RU RWKHU JURXSLQJ ZKRVH JXDUDQWHHG VXSSRUW PD\



7KH)XWXUHRI3RVW+XPDQ/DZ 



HQDEOHDQRWKHUZLVH PLQRULW\JRYHUQPHQWWRREWDLQDQG KROGRIILFH7KLV FDQEHDFKLHYHGHLWKHUE\WKHIRUPDWLRQRIDFRDOLWLRQJRYHUQPHQWRUE\DQ DVVXUDQFH WKDW DQ\ PRWLRQ RI QR FRQILGHQFH LQ WKH JRYHUQPHQW ZRXOG EH GHIHDWHG´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¶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¶V FRQVWLWXWLRQDO SUHIHUFHQFH WKLV WLPH LQ UHJDUG WR WKH VSHFLILF IRUP RI WKH SULQFLSOH RI WKH EDODQFH RI SRZHU 

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





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



7KH)XWXUHRI3RVW+XPDQ/DZ 



IRUWKRVHJRYHUQPHQWVZKLFKGRQRWKDYHDZULWWHQFRQVWLWXWLRQ WKHUHLV YDJXHQHVV HJWKHODFNRIFOHDUIRUPXODWLRQRIZKLFKVSHFLILFVRXUFHVRI WKHODZRIWKHODQGLVJRRGIRUZKLFKVSHFLILFIRUPRIJRYHUQPHQWXQGHU ZKLFKVSHFLILFFLUFXPVWDQFHV  ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHDQDO\VLV HJWKHVLPSOHDQDO\VLVRIWKH$PHULFDQFRQVWLWXWLRQRQ WKH EDVLV RI WKH EDODQFH RI SRZHU DPRQJ WKH WKUHH EUDQFKHV RI JRYHUQPHQW  WKHUH LV FRPSOLFDWHG FRXQWHUSDUW WRR HJ WKH PRUH FRPSOLFDWHG DQDO\VLV RI WKH $PHULFDQ FRQVWLWXWLRQ LQ UHODWLRQ WR RWKHU GLIIHUHQW IRUPV RI FRQVWLWXWLRQ VR DV WR KDYH D PRUH FRPSDUDWLYH XQGHUVWDQGLQJRIGLIIHUHQWSRVVLEOHFRQVWLWXWLRQDOODZV  ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJ WKH RSHQ H[SORUDWLRQ LQ WKH $PHULFDQ FRQVWLWXWLRQ RI WKH YLUWXH RI WKHEDODQFHRISRZHUIRUWKHFKHFNDQGEDODQFHDPRQJWKHWKUHHEUDQFKHV RIJRYHUQPHQW WKHUHLVKLGGHQQHVV HJWKHKLGGHQELDVRIWKHSULQFLSOH RI WKH EDODQFH RI SRZHU ZLWKLQ WKH 86 &RQVWLWXWLRQ LQ QRW LQFOXGLQJ DOWHUQDWLYHSULQFLSOHVOLNHWKHIXVLRQRISRZHU  ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI WKH SULQFLSOH RI WKH IXVLRQ RI SRZHU LQ SDUOLPHQWDU\ IRUPV RI FRQVWLWXWLRQDO ODZ OLNH WKH %ULWLVK RQH  WKHUH LV HPSWLQHVV HJ WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQRIWKHSULQFLSOHRIWKHIXVLRQRISRZHULQSUHVLGHQWLDOIRUPV RIFRQVWLWXWLRQDOODZOLNHWKH$PHULFDQRQH  ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHO\EHWWHUGHYHORSHGPHFKDQLVPVLQSDUOLPHQWDU\V\VWHPV OLNH WKH %ULWLVK RQH WR DOORZ ³VRPH PHPEHUV RI SDUOLDPHQWV´ WR ³KROG FDELQHWSRVLWLRQV´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

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





FRQVWLWXWLRQDO ODZ WR ³GHILQH WKH DXWKRULW\ DQG SURFHGXUH RI SROLWLFDO ERGLHVWRH[HFXWHQHZODZVDQGUHJXODWLRQV´  ,QUHODWLRQWRWKHV\PPHWU\DV\PPHWU\SULQFLSOHLIWKHUHLVV\PPHWU\ HJWKHFRH[LVWHQFHRIGLIIHUHQWSULQFLSOHVIRUFRQVWLWXWLRQDOODZOLNHWKH EDODQFHRISRZHUDQGWKH IXVLRQRISRZHU WKHUHLVDV\PPHWU\ HJWKH SRSXODULW\ RI WKH SULQFLSOH RI WKH EDODQFH RI SRZHU LQ $PHULFDQ FRQVWLWXWLRQDO ODZ EXW WKH DFFHSWDQFH RI WKH SULQFLSOH RI WKH IXVLRQ RI SRZHULQWKH%ULWLVKWUDGLWLRQ  ,Q UHODWLRQ WR UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJ WKH GUDZEDFN LQ WKH $PHULFDQ FRQVWLWXWLRQDO ODZ WR QRW KDYH WKH EHQHILWV RI WKH %ULWLVK SDULOLPHQWDU\ DOWHUQDWLYH OLNH WKH IRUPDWLRQ RI D FRDOLWLRQJRYHUQPHQW WKHUHLVSURJUHVVLRQ HJWKHSURJUHVVPDGHIRUWKH FKHFN DQG EDODQFH DPRQJ WKH WKUHH EUDQFKHV RI JRYHUQPHQW LQ WKH $PHULFDQV\VWHP  $QGLQUHODWLRQWRWKHVDPHGLIIHUHQFHSULQFLSOHLIWKHUHLVVLPLODULW\ LQ RXWFRPH HJ WKH SURYLVLRQ RI ³DXWKRULW\ DQG SURFHGXUH RI SROLWLFDO ERGLHVWRH[HFXWHQHZODZVDQGUHJXODWLRQV´LQDZD\WRDYRLGH[FHVVLYH DEXVH RI SRZHU EH LW LQ WKH $PHULFDQ SUHVLGHQWLDO V\VWHP RU WKH %ULWLVK SDUOLPHQWDU\RQH WKHUHLVGLIIHUHQFHLQRXWFRPH HJWKHVWULFWVHSDUDWLRQ RI SRZHU LQ WKH $PHULFDQ V\VWHP EXW WKH IXVLRQ RI SRZHU LQ WKH %ULWLVK RQH 

1HFHVVLW\DQG&XOWXUH 7KHODVWSHUVSHFWLYHWREHDQDO\]HGKHUHLQWKHFRQWH[WRIODZLVIURP WKHRQHRIFXOWXUH²QRWVROHO\ IURPWKHSHUVSHFWLYHVRIWKH PLQG QDWXUH DQGVRFLHW\ DVVKRZQLQWKHSUHYLRXVWKUHHVHFWLRQV  7ZRLOOXVWUDWLYHFDVHVWXGLHVDUHLQRUGHUKHUHQDPHO\  GLYLQH ODZ PRUDOLW\ DQG OHJDO VDQFWLRQV DQG   FRPPRQ ODZ DQG WKH FXOWXUDO OHJDF\ RI WKH %ULWLVK (PSLUH²WR EH HODERUDWHG KHUHDIWHU UHVSHFWLYHO\

'LYLQH/DZ0RUDOLW\DQG/HJDO6DQFWLRQV 7KHILUVWLOOXVWUDWLRQKHUHFRQFHUQVGLYLQHODZDQGWKHUROHRIUHOLJLRQ IURPWKHSHUVSHFWLYHRIFXOWXUH %\ GHILQLWLRQ ³GLYLQH ODZ´ UHIHUV WR ³DQ\ ODZ RU UXOH  WKDW LQ WKH RSLQLRQRIEHOLHYHUVFRPHVGLUHFWO\IURPWKHZLOORI*RG RUDJRG /LNH QDWXUDO ODZ ZKLFK PD\ EH VHHQ DV D PDQLIHVWDWLRQ RI GLYLQH ODZ  LW LV LQGHSHQGHQWRIWKHZLOORIPDQZKRFDQQRWFKDQJHLW+RZHYHULWPD\EH



7KH)XWXUHRI3RVW+XPDQ/DZ 



UHYHDOHG RU QRW VR LW PD\ FKDQJH LQ KXPDQ SHUFHSWLRQ LQ WLPH WKURXJK QHZUHYHODWLRQ´ :.FF  7KHIXQFWLRQRIGLYLQHODZIRUWKHEHOLHYHUVLVLPSRUWDQWHQRXJKIRU KXPDQ VDOYDWLRQ VLQFH DV 7KRPDV $TXLQDV WKXV DUJXHG LQ  7UHDWLVH RQ /DZ ³'LYLQH /DZ DV RSSRVHG WR 1DWXUDO /DZ FRPHV RQO\ IURP UHYHODWLRQ RU VFULSWXUH KHQFH %LEOLFDO ODZ DQG LV QHFHVVDU\ IRU KXPDQ VDOYDWLRQ´ :.FF  /HJDO6DQFWLRQVDQGWKH0RUDO'LPHQVLRQRI'LYLQH/DZ 7R VWULYH IRU KXPDQ VDOYDWLRQ IRU WKH EHOLHYHUV WKH GLYLQH ODZ LV XQLYHUVDOO\ELQGLQJDQGWKHUHIRUHQHHGVWREHREH\HGHVSHFLDOO\LQUHODWLRQ WRLWVPRUDOGHPDQGV $IWHU DOO GLYLQH ODZ UHSUHVHQWV ³WKH ZLOO RI *RG´ DQG ³WKH QHZ .LQJGRPRI*RG«ZDVQRWFRQILQHGWRDVLQJOHQDWLRQ>DV@LWHPEUDFHGDOO WKHQDWLRQVRIWKHHDUWK´ &( 7KXVWKHVHPRUDOGHPDQGVDUHWREH LQFRUSRUDWHGDVWKHIRXQGDWLRQIRUWKHODZLQVRFLHW\ &RQVLGHUIRULOOXVWUDWLRQEHORZWKHPRUDODVSHFWVRIGLYLQHODZLQWKH &DWKROLFWUDGLWLRQLQWKHFRQWH[WRIWKHODZ ,Q WKH &DWKROLF WUDGLWLRQ RI LQWHUSUHWLQJ GLYLQH ODZ WKHUH LV D GLVWLQFWLRQ EHWZHHQ ³WKH 2OG /DZ FRQWDLQHG LQ WKH 3HQWDWHXFK DQG WKH 1HZ/DZZKLFKZDVUHYHDOHGE\-HVXV&KULVWDQGLVFRQWDLQHGLQWKH1HZ 7HVWDPHQW´ &(  7KH GLYLQH ODZ RI WKH 2OG 7HVWDPHQW LV DOVR NQRZQ DV ³WKH 0RVDLF /DZ´EHFDXVHIRUWKHEHOLHYHUV³0RVHVZURWHGRZQWKH/DZDWWKHGLUHFW LQVSLUDWLRQ RI *RG *RG +LPVHOI WKHQ LV WKH ODZJLYHU 0RVHV PHUHO\ DFWHG DV WKH LQWHUPHGLDU\ EHWZHHQ *RG DQG +LV SHRSOH KH PHUHO\ SURPXOJDWHG WKH /DZ ZKLFK KH KDG EHHQ LQVSLUHG WR ZULWH GRZQ´ &(   )RU LQVWDQFH RQH RI WKH PRVW DPD]LQJ DVSHFWV RI WKH 0RVDLF ODZ FRQFHUQV³WKHORYHRI*RGDQGRIRQH VQHLJKERXU´ZKLFK³ZDVWKHJUHDW SUHFHSWRIWKH/DZ´DV³WKHEDVLVRIDOOWUXHFLYLOL]DWLRQ´DQGLW³EHFDPH WKH FOHDU FHUWDLQ DQG SXEOLFO\ UHFRJQL]HG VWDQGDUG RI PRUDO FRQGXFW IRU WKH-HZLVKSHRSOHDQGWKURXJKWKHPIRU&KULVWHQGRP´ &(  +RZHYHU WKLV GRHV QRW PHDQ WKDW HYHU\WKLQJ LQ WKH 2OG 7HVWDPHQW ZDV ZULWWHQ DQG RULJLQDWHG E\ 0RVHV KLPVHOI VLQFH ³>W@KHUH LV DEXQGDQW HYLGHQFH LQ 6FULSWXUH LWVHOI WKDW PDQ\ SRUWLRQV RI WKH 0RVDLF OHJLVODWLRQ H[LVWHG DQG ZHUH SXW LQ SUDFWLFH ORQJ EHIRUH WKH WLPH RI 0RVHV´ &(   *RRG H[DPSOHV RI WKH SUDFWLFHV SULRU WR WKH WLPH RI 0RVHV LQFOXGH ³FLUFXPFLVLRQ´ ³WKH UHOLJLRXV REVHUYDQFH RI WKH VHYHQWK GD\´ DQG WKH OLNH %XW WKHVH SUDFWLFHV ZKLFK ZHUH SXW LQ WKH 2OG 7HVWDPHQW DOWKRXJK

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





WKH\ ZHUH QRW RUJLQDWHG E\ 0RVHV KLPVHOI  DUH QRW WULYLDO VLQFH WKH\ DUH ³SUHFHSWVRIWKHQDWXUDOODZZKLFKFDQEHJDWKHUHGE\UHDVRQIURPQDWXUH KHUVHOIDQGLQIDFWWKH\ZHUHNQRZQORQJEHIRUH0RVHVZURWHWKHPGRZQ DWWKHH[SUHVVFRPPDQGRI*RG´ &(  D 7KH,PSHUIHFWLRQVRIWKH0RVDLF/DZDQG7KHLU([FXVHV W@KHSUDFWLFHZDVGRXEWOHVVDOUHDG\IDPLOLDU WR WKH ,VUDHOLWHV RI WKH WLPH DV LW ZDV WR WKHLU QHLJKERXUV 7KH VODYH KLPVHOI SUREDEO\ WKRXJKW QR PRUH RI WKH RSHUDWLRQ WKDQ GRHV D 6RXWK $IULFDQEHDXW\ZKHQKHUOLSRUHDULVSLHUFHGIRUWKHOLSULQJDQGWKHHDU ULQJ ZKLFK LQ KHU HVWLPDWLRQ DUH WR DGG WR KHU FKDUPV«,W H[LVWHG HYHU\ZKHUHDQGDOWKRXJKLQSUDFWLFHLWLVDSWWROHDGWRPDQ\DEXVHVVWLOO LQ WKH PLOG IRUP LQ ZKLFK LW ZDV DOORZHG DPRQJ WKH -HZV DQG ZLWK WKH



7KH)XWXUHRI3RVW+XPDQ/DZ 



VDIHJXDUGV SUHVFULEHG E\ WKH /DZ LW FDQQRW EH VDLG ZLWK WUXWK WR EH FRQWUDU\WRVRXQGPRUDOLW\´ &(  $QG IRXUWKO\ WKH 0RVDLF ODZ MXVWLILHV LQFRQVLVWHQF\ LQ WKH HQIRUFHPHQW RI LWV PRUDO FRGHV )RU LQVWDQFH WKH FDVHV FRQFHUQLQJ WKH SUDFWLFHVRI³SRO\JDP\DQGGLYRUFH´³XVXU\´DQGWKHOLNHDWWKHWLPHSRVH ³VHULRXVGLIILFXOW\DJDLQVWWKHKROLQHVVRIWKH0RVDLF/DZ«7KHGLIILFXOW\ LVRQH ZKLFK KDVHQJDJHGWKHDWWHQWLRQRIWKH)DWKHUVDQG WKHRORJLDQVRI WKH&KXUFKIURPWKHEHJLQQLQJ´ &(  7KHH[FXVHKHUHLVWKDWLQWKHFDVHFRQFHUQLQJSRO\JDP\DQGGLYRUFH IRU LQVWDQFH ³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´ &(  7KHUHIRUHVRWKHH[FXVHV JRHV ³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´ &(   ,Q WKHVH ZRUGV ELEOLFDO KHUPHQHXWLFV ZLWK WKH KHOS RI UHDVRQ H[SODLQV HYHU\WKLQJ DZD\ ZLWK ZKDWHYHU VRSKLVWU\ WKDW UHDVRQ FDQ FRPH XS ,W LV QR ZRQGHU WKDW 0DUWLQ /XWKHU RQFH VDLG WKDW UHDVRQ LV WKH GLUW\ ZKRUH E 7KH)RXU)ROG5HSO\E\WKH&ULWLFV 1HHGOHVV WR VD\ IRU WKH FULWLFV WKHVH H[FXVHV GR QRW VWDQG DW DOO +HUHDIWHU DUH IRXU PDMRU FULWLFLVPV DJDLQVW WKH WKHRU\ RI WKH GLYLQH ODZ DOVR NQRZQ DV ³WKH GLYLQH FRPPDQG WKHRU\´ LQ WKH FXUUHQW FRQWH[W VR XQGHUVWRRG :.GGG  

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





‡)LUVWO\WKHGLYLQHFRPPDQGWKHRU\³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´ :.GGG  ‡ 6HFRQGO\WKHGLYLQHFRPPDQGWKHRU\³LPSOLHVWKDWFDOOLQJ*RGJRRG PDNHV QR VHQVH²RU DW EHVW WKDW RQH LV VLPSO\ VD\LQJ WKDW *RG LV FRQVLVWHQW *RGGRHVZKDWHYHUKHFRPPDQGV ´ :.GGG  ‡ 7KLUGO\WKHGLYLQHFRPPDQGWKHRU\³FRPPLWVWKHQDWXUDOLVWLFIDOODF\ 3URSRQHQWV RI WKLV FULWLFLVP DUJXH WKDW ZKLOH HWKLFV FDQ DQG VKRXOG VSHFLI\WKHQRQPRUDOSURSHUWLHVWKDWPDNHWKLQJVJRRGLWLVDOZD\VD PLVWDNH WR XVH QRQPRUDO WHUPV LQ JLYLQJ WKH PHDQLQJ RI WKH ZRUG

JRRG ,I,DVN ZK\,VKRXOGQ WFRPPLW PXUGHUWKHGLYLQHFRPPDQG DQVZHULV EHFDXVH*RGFRPPDQGV\RXQRWWR EXW,FDQWKHQDVNZK\ , VKRXOG GR ZKDW *RG FRPPDQGV ,I WKH DQVZHU LV WKDW *RG FUHDWHG PH,FDQDVNZK\,VKRXOGREH\P\FUHDWRUDQGVRRQ7KLVLVQRWD PDWWHU RI PRWLYDWLRQ EXW RI WKH H[SODQDWLRQ RI WKH QRUPDWLYLW\ RI PRUDOLW\´ :.GGG  ‡ )LQDOO\ WKH GLYLQH FRPPDQG WKHRU\ GRHV QRW DQVZHU ³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



7KH)XWXUHRI3RVW+XPDQ/DZ 



FKDQJHGKLVPLQGWKRXJKWKLVSRVVLELOLW\LVUXOHGRXWE\PDQ\QRWLRQV RI*RG ´ :.GGG   6XUHO\ WKHVH FRXQWHUFULWLFLVPV E\ WKH FULWLFV KDYH UDUHO\ FRQYLQFHG WKH EHOLHYHUVWRDEDQGRQWKHLUGRJPDWLFZD\RIREH\LQJWKHGLYLQHODZLQDQ\ PDMRUZD\QRPDWWHUZKDW E 7KH5HMRLQGHUE\WKH%HOLHYHUVDQG6RPH3HUVLVWDQW3UREOHPV )RULQVWDQFHWKHEHOLHYHUVZRXOGDQVZHUWKHFULWLFVE\SURYLGLQJWKH IROORZLQJ UHVSRQVHV :. GGG  +RZHYHU IRU WKH FULWLFV WKH UHVSRQVHVIDLOWRSURYHDQ\WKLQJ  ‡ )LUVWO\³PDQ\SURSRQHQWVRIGLYLQHFRPPDQGWKHRU\ ELWHWKHEXOOHW  DJUHHLQJZLWKWKHSRLQWWKHFULWLFLVPDNLQJEXWDUJXLQJWKDWLWLVQRWD SUREOHP ZLWK WKH WKHRU\ )RU H[DPSOH ZULWHUV OLNH :LOOLDP RI 2FNKDP DUJXH WKDW LI *RG KDG FRPPDQGHG PXUGHU WKHQ PXUGHU ZRXOGLQGHHGKDYHEHHQPRUDOO\REOLJDWRU\,QGHHG2FNKDPJRHVVR IDUDVWRVD\WKDW*RGFRXOGFKDQJHWKHPRUDORUGHUDWDQ\WLPH7KXV 2FNKDP HPEUDFHV GLYLQH FRPPDQG WKHRU\ ZKROHKHDUWHGO\ KLV YLHZ KDV EHHQ FKDUDFWHUL]HG DV EHLQJ WKDW *RG V FRPPDQG LV JRRG  LV DQDO\WLFDOO\ WUXH«,W LV DOVR SRVVLEOH WR ELWH WKH EXOOHW UHJDUGLQJ WKH QDWXUDOLVWLF IDOODF\ E\ DUJXLQJ WKDW GHILQLQJ PRUDOLW\ LQ QRQPRUDO WHUPVLVQRWDIDOODF\DWDOO´ :.GGG  %XWIRUWKHFULWLFVWKLV³ELWLQJWKHEXOOHW´LVTXHVWLRQEHJJLQJVLQFH LWRQO\LQVLVWVEXWGRHVQRWSURYHWKDW³*RG VFRPPDQGLVJRRG´LVLQ IDFWWUXH RWKHUWKDQWKHWULYLDOVWLSXODWLRQE\GHILQLWLRQ  ‡ 6HFRQGO\ DQRWKHU ZD\ WR GHIHQG *RG¶V FRPPDQG LV WKH DSSURDFK VXJJHVWHGE\'XQV6FRWXVZKRVXJJHVWHGWKDW³IRURQHVHWRIPRUDO YDOXHV DW OHDVW *RG FRXOG QRW KDYH FRPPDQGHG RWKHUZLVH EHFDXVH WKH\ DUH QHFHVVDU\ RPQLSRWHQFH RI FRXUVH PHDQV EHLQJ DEOH WR GR DQ\WKLQJ EXW WKH ORJLFDOO\ LPSRVVLEOH LV HVVHQWLDOO\ QRQVHQVLFDO DQG QRW SDUW RI DQ\WKLQJ  +RZHYHU WKLV ZRXOG PHDQ WKDW QHFHVVLW\ QRW *RGLVWKHVRXUFHRIREMHFWLYHPRUDOLW\*RGLVUHGXFHGWRDSDVVHURQ RI PRUDO ODZV«7KXV IRU H[DPSOH WKDW PXUGHU LV ZURQJ LV D WUXWK DQGWKRXJK*RGFRPPDQGHGXVQRWWRPXUGHUKHFRXOGQ WKDYHGRQH RWKHUZLVHQRUFDQKHUHYRNHKLVFRPPDQG«7KLVLVVLPLODUWRDPRUH UHFHQWDSSURDFKGHYHORSHGE\5LFKDUG6ZLQEXUQH´ :.GGG  %XWIRUWKHFULWLFVWKLVUHSRQVHE\6FRWXVDQG6ZLQEXUQHWKDW³*RGLV UHGXFHGWRDSDVVHURQRIPRUDOODZV´LVDOVRTXHVWLRQEHJJLQJVLQFH RQH FDQ FRQWLQXH DQG DVN :K\ DUH WKHVH PRUDO ODZV SDVVHG RQ E\ *RG QHFHVVDU\DWDOO"2QHFDQQRWVLPSO\DSSHDOWR*RGDJDLQDWWKLV

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





VWDJHRIWKHDUJXPHQWEHFDXVH*RGLVDOUHDG\UHGXFHGWRDSDVVHURQ RIPRUDOODZV ‡ 7KLUGO\ DQRWKHU PRGLILHG UHVSRQVH LV E\ 50 $GDPV ZKR ³GLVWLQJXLVKHVEHWZHHQWZRPHDQLQJVRIHWKLFDOWHUPVOLNH ULJKW DQG

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´ :.GGG  $JDLQ IRU WKH FULULFV WKLV UHVSRQVH E\ $GDPV  LV DOVR TXHVWLRQ EHJJLQJEHFDXVHLWGRHVQRWH[SODLQZK\LWLVMXVWLILHGIRUDSHUVRQWR EH LQFRQVLVWHQW LQ DFFHSWLQJ WKDW PXUGHU LV ZURQJ LQ WKH HPRWLYLVW PHDQLQJEXWWRFRPPLWPXUGHUDQ\ZD\LQWKHSUHVFULSWLYLVWPHDQLQJ 7KHPRUDOVHOIWKXVEHFRPHVLQKHUHQWO\IUDJPHQWDU\ ‡ )RXUWKO\ DQRWKHU UHVSRQVH LV E\ 6DLQW 7KRPDV $TXLQDV ZKR ³FODLPHG WKDW *RG FUHDWHV PRUDO QRUPV WKDW UHIOHFW KLV RZQ HVVHQFH PHDQLQJ WKDW KLV GHPDQGV DUH QRW DUELWUDU\ ,Q WKLV FDVH LW ZRXOG EHFRPHQHFHVVDU\WRH[DPLQHWKHHVVHQFHRI*RG´ :.GGG  %XWIRUWKHFULWLFVWKLV UHVSRQVHE\ $TXLQDVLV QREHWWHUVLQFHLW LV TXHVWLRQEHJJLQJ DERXW KRZ RQH FDQ NQRZ IRU VXUH WKH HVVHQFH RI *RGDQGZK\LWLVQHFHVVDU\WRDFFHSWKLVGHPDQGVLQWKHILUVWSODFH ‡ )LQDOO\ DQRWKHU UHVSRQVH LV WKH FRQYHQWLRQDO YLHZ WKDW IRU LQVWDQFH ³IURPD&KULVWLDQYLHZSRLQWPDQDVPDGHLQ*RG VLPDJHFRQIRUP DOVRWRKLVVHQVHRIPRUDOLW\7KHUHIRUH JRRG DQG EDG DUHUHOHYDQWWR *RGDQGRXUVHQVHRIZKDWLVJRRGRUEDGFRUUHVSRQGVWR*RG VVHQVH RIJRRGDQGEDG´ :.GGG  $JDLQIRUWKHFULWLFVWKLVFRQYHQWLRQDO&KULVWLDQDQVZHULVTXHVWLRQ EHJJLQJ WRR VLQFH LW GRHV QRW SURYH WKDW ³PDQ´ LV ³PDGH LQ *RG¶V LPDJH´HVSHFLDOO\IRUWKRVHLQWKHWUDGLWLRQRIHYROXWLQDU\WKHRU\ QRW FUHDWLRQ WKHRU\  DQG DOVR GRHV QRW MXVWLI\ RU H[SODLQ ZK\ LW LV QHFHVVDU\WRFRQIRUPWR*RG¶VVHQVHRIPRUDOLW\DWDOOZKHQPDQLV QRW*RGHYHQLIPDGHLQ*RG¶VLPDJH  ,QWKHHQGWKHXQLYHUVDOLW\RIGLYLQHODZUHPDLQVSUREOHPDWLFZKHQLWLV VXEMHFW WR D FORVHU VFUXWLQ\ 6R LWV UHOHYDQFH WR OHJDO VDQFWLRQV LQ WKH FRQWH[WRIWKHOHJDOLQVWLWXWLRLQLQVRFLHW\UHPDLQVSUREOHPDWLFDWEHVW



7KH)XWXUHRI3RVW+XPDQ/DZ 



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³WKH*ROGHQ5XOH´ZKLFK³GHPDQGVWKDWRQH VDFWLRQV FRQIRUP WR RQH V RZQ VWDQGDUG´  WKHUH LV LQIRUPDOQHVV HJ WKH QRQ IRUPDO DOORZDQFH RI LQFRQVLVWHQF\ LQ WKH 0RVDLF ODZ LQ UHJDUG WR PRUDO OD[LW\LQWKHFRQWH[WRISRO\JDP\DQGGLYRUFH  :.M  ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHYLHZSRLQW HJWKHDEVROXWHFRPPDQGRI*RGLQWKH0RVDLFODZ ³WR H[WHUPLQDWH FHUWDLQ QDWLRQV DQG WKH SHUPLVVLRQ JLYHQ E\ +LP WR WKH ,VUDHOLWHVWRVSRLOWKH(J\SWLDQV´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³*RG FRXOG QRW KDYH FRPPDQGHG RWKHUZLVH´ RQ WKH EDVLV WKDW ³QHFHVVLW\ QRW *RGLVWKHVRXUFHRIREMHFWLYHPRUDOLW\´ WKHUHLVLQH[SOLFDLEOLW\ HJWKH

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





ODFN RI VXIILFLHQW H[SODQDWLRQ E\ 6FRWXV DQG 6ZLQEXUQH VLQFH RQH FDQ FRQWLQXHDQGDVN:K\DUHWKHVHPRUDOODZVSDVVHGRQE\*RGQHFHVVDU\ LQWKHILUVWSODFH"  ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI WKH FRPPDQGPHQWV WR EH REH\HGLQWKH0RVDLFODZOLNH³WKHORYHRI*RGDQGRIRQH VQHLJKERXU´  WKHUH LV YDJXHQHVV HJ WKH ODFN RI FOHDU IRUPXODWLRQ RI WKH VSHFLILF FLUFXPVWDQFHV LQ WKH 0RVDLF ODZ ZKHQ WKHVH FRPPDQGPHQWV FDQ EH REVHUYHGRUYLRODWHGIRULQVWDQFHLQUHODWLRQWRFHUWDLQQDWLRQVDQGWULEHV RURIKRZKDUVKLVKDUVKLQGHDOLQJZLWK³OLFHQWLRXVWKRXJKWVDQGFRYHWRXV GHVLUHV´  ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHDQDO\VLV HJWKHVLPSOHYLHZRIWKH0RVDLFODZDVWKH³VWDQGDUG RI PRUDO FRQGXFW IRU WKH -HZLVK SHRSOH DQG WKURXJK WKHP IRU &KULVWHQGRP´  WKHUH LV FRPSOLFDWHG FRXQWHUSDUW HJ WKH PRUH FRPSOLFDWHG DQDO\VLV RI WKH 0RVDLF ODZ LQ UHODWLRQ WR LWV KLVWRULFDO FRQWLQJHQF\DQGPXOWLIDFHWHGLPSHUIHFWLRQV  ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJWKHRSHQH[SORUDWLRQRIORYHLQWKH0RVDLFODZLQVSHFLDOUHODWLRQWR *RGDQGRQH¶VQHLJKERUV WKHUHLVKLGGHQHQVV HJWKHKLGGHQELDVLQWKH 0RVDLFODZLQUHJDUGWRLWVGDUNVLGHVZKLFKDUHWREH³H[FXVHG´E\³WKH )DWKHUVDQGWKHRORJLDQVRIWKH&KXUFKIURPWKHEHJLQQLQJ´  ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJWKHUHODWLYHO\GHQVHUFRQFHQWUDWLRQRIUHJXODWLRQVRIWKH³DFWVRIWKH SHRSOH RI *RG´ EH WKH\ ³FLYLO FHUHPRQLDO DQG PRUDO´ LQ D FRPSUHKHQVLYHZD\LQWKH0RVDLFODZ WKHUHLVDOVRHPSWLQHVV HJWKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ LQ WKH 0RVDLF ODZ RI ³WKHKXPDQLWDULDQDQGVHQWLPHQWDOFDQRQVRIWKHWZHQWLHWKFHQWXU\´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



7KH)XWXUHRI3RVW+XPDQ/DZ 



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¶VQHLJKERUV  $QGLQUHODWLRQWRWKHVDPHGLIIHUHQFHSULQFLSOHLIWKHUHLVVLPLODULW\ LQRXWFRPH HJWKHRFFXUUHQFHRIYLROHQFHDQGDEXVHLQKLVWRU\ZLWKRU ZLWKRXW WKH 0RVDLF ODZ DOEHLW LQ GLIIHUHQW ZD\V  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH VHOHFWLYH WUHDWPHQW RI FHUWDLQ QDWLRQV WULEHV DQG SHRSOHVGHSHQGLQJRQWKHPRUDOFRGHVDQGOHJDOVDQFWLRQVLQTXHVWLRQDV VKRZQ E\ WKH DOORZDQFH WR HQJDJH LQ XVXU\ ZLWK IRUHLJQHUV DPRQJ WKH ,VUDOLWHV EXW WKH GLVDOORZDQFH RI VXFK D SUDFWLFH DW DOO DPRQJ WKH &KULVWLDQV  &( 

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





&RPPRQ/DZDQGWKH&XOWXUDO/HJDF\RIWKH%ULWLVK(PSLUH $QRWKHUZD\WRLOOXVWUDWHWKHFXOWXUDOLQIOXHQFHRQWKHGHYHORSPHQWRI WKHODZLVE\ZD\RIH[WHUQDOFXOWXUDOGLIIXVLRQLQWRDFRXQWU\RYHUWLPH ,QWKHFXUUHQWFRQWH[WRIQHFHVVLW\LQUHODWLRQWRWKHODZLWLVRIWHQVDLG WKDWWKHFRPPRQODZLVJDLQLQJPRUHDFFHSWDQFHDURXQGWKHZRUOGWRWKH H[WHQW WKDW ³WKH FRPPRQ ODZ«LV FUXFLDO WR XQGHUVWDQGLQJ DOPRVW DOO LPSRUWDQWDUHDVRI ODZ´DQGWKXVHQMR\VWKHSULYLOHJHRI VRPHYHUVLRQRI XQLYHUVDOLW\ %XWWRZKDWH[WHQWLVWKLVFODLPUHDOO\WUXH" $ JRRG SRLQW RI GHSDUWXUH WR DQVZHU WKLV TXHVWLRQ LV WR EHJLQ E\ DQDO\]LQJ ZKDW WKH FRPPRQ ODZ WUDGLWLRQ LV QRW DQG ZKDW LW LV²WR EH VXPPDUL]HGLQZKDWIROORZV DQGDOVRLQ7DEOH  :KDWWKH&RPPRQ/DZ7UDGLWLRQ,V1RW 7RVWDUWWKHUHDUHGLIIHUHQWOHJDOWUDGLWLRQVDQGWZRPDMRURQHVLQWKH :HVWHUQZRUOGDUH³FRPPRQODZ´DQG³FLYLOODZ´DOWKRXJKLQWKHUHVWRI WKHZRUOGWKHUHFDQEHRWKHUVOLNH³,VODPLFODZ´³VRFLDOLVWODZ´DQGWKH UHVW 7KHWHUP³FRPPRQODZ´UHIHUVWR³ODZGHYHORSHGE\MXGJHVWKURXJK GHFLVLRQV RI FRXUWV DQG VLPLODU WULEXQDOV FDOOHG FDVH ODZ  UDWKHU WKDQ WKURXJK OHJLVODWLYH VWDWXWHV >IRU ³VWDWXWRU\ ODZ´@ RU H[HFXWLYH DFWLRQ >IRU ³UHJXODWRU\ ODZ´@ DQG WR FRUUHVSRQGLQJ OHJDO V\VWHPV WKDW UHO\ RQ SUHFHGHQWLDOFDVHODZ´ :.III  7KHUH DUH WKUHH PDLQ IHDWXUHV ZKLFK VHW WKH FRPPRQ ODZ WUDGLWLRQ DSDUWIURPRWKHUVDVVKRZQEHORZ :.III  D &RPPRQ/DZ,V1RW6WDWXWRU\/DZ5HJXODWRU\/DZHWF 7KHILUVWPDLQIHDWXUHRIWKHFRPPRQODZWUDGLWLRQLVWKDWLWVDXWKRULW\ WR SURPXOJDWH D ODZ LV QRW WKURXJK FRQJUHVVLRQDO RU SDUOLPHQWDU\ OHJLVODWLRQ DV LQ ³VWDWXWRU\ ODZ´  QRU H[HFXWLYH DFWLRQ DV LQ ³UHJXODRU\ ODZ´  EXW WKURXJK MXGLFLDU\ GHFLVLRQV LQ FRXUWV DQG RWKHU WULEXQDOV :. III%*DUQHU-6DOPRQG  7KLVGLVWLQFWLRQFDQEHIXUWKHUPDGHLQWRWZRILQHUSRLQWVQDPHO\ D  ³SXUH FRPPRQ ODZ DULVLQJ IURP WKH WUDGLWLRQDO DQG LQKHUHQW DXWKRULW\ RI FRXUWV WR VD\ ZKDW WKH ODZ LV HYHQ LQ DEVHQFH RI DQ XQGHUO\LQJ VWDWXWH´ HJ³PRVWFULPLQDOODZDQGSURFHGXUDOODZEHIRUHWKHWKFHQWXU\DQG HYHQ WRGD\ PRVW RI FRQWUDFW ODZ DQG WKH ODZ RI WRUWV´  DQG E  ³FRXUW GHFLVLRQV WKDW GHFLGH WKH ILQH ERXQGDULHV DQG GLVWLQFWLRQV LQ ODZ SURPXOJDWHG E\ RWKHU ERGLHV VXFK DV MXGLFLDO LQWHUSUHWDWLRQV RI WKH



7KH)XWXUHRI3RVW+XPDQ/DZ 



&RQVWLWXWLRQ RI VWDWXWHV DQG RI UHJXODWLRQV´ :. III % *DUQHU   E &RPPRQ/DZ,V1RW&LYLO/DZ,VODPLF/DZ6RFLDOLVW/DZHWF 7KH VHFRQG PDLQ IHDWXUH RI WKH FRPPRQ ODZ WUDGLWLRQ LV WKDW LW ³GLIIHUHQWLDWHV FRPPRQ ODZ  MXULVGLFWLRQV DQG OHJDO V\VWHPV IURP FLYLO ODZ  RU FRGH  MXULVGLFWLRQV &RPPRQ ODZ V\VWHPV SODFH JUHDW ZHLJKW RQ FRXUWGHFLVLRQVZKLFKDUHFRQVLGHUHG ODZ ZLWKWKHVDPHIRUFHRIODZDV VWDWXWHV´ :.III%*DUQHU  2QWKHRWKHUKDQG ³LQFLYLOODZMXULVGLFWLRQV WKHOHJDOWUDGLWLRQWKDW SUHYDLOV LQ RU LV FRPELQHG ZLWK FRPPRQ ODZ LQ DOPRVW DOO QRQ,VODPLF QRQFRPPRQ ODZ FRXQWULHV  MXGLFLDO SUHFHGHQW LV JLYHQ UHODWLYHO\ OHVV ZHLJKW ZKLFKPHDQVWKDWDMXGJHGHFLGLQJDJLYHQFDVHKDVPRUHIUHHGRP WRLQWHUSUHWWKHWH[WRIDVWDWXWHLQGHSHQGHQWO\DQGOHVVSUHGLFWDEO\ DQG VFKRODUO\OLWHUDWXUHLVJLYHQUHODWLYHO\PRUH´ :.III  $Q H[FHOOHQW H[DPSOH KHUH FRQFHUQV ³WKH 1DSROHRQLF FRGH´ ZKLFK ³H[SUHVVO\ IRUEDGH )UHQFK MXGJHV IURP SURQRXQFLQJ WKH ODZ $V D URXJK UXOHRIWKXPEFRPPRQODZV\VWHPVWUDFHWKHLUKLVWRU\WR(QJODQGZKLOH FLYLOODZV\VWHPVWUDFHWKHLUKLVWRU\WR5RPDQODZ´ :.III  +RZHYHUWKLVGLVWLQFWLRQEHWZHHQFRPPRQODZDQGFLYLOODZVKRXOG EHWDNHQZLWKFDUHVLQFH³WKHGLIIHUHQFHVEHWZHHQFRPPRQDQGFLYLOODZ MXULVGLFWLRQVDUHJUDGXDOO\EHFRPLQJVPDOOHUDVFRPPRQODZMXULVGLFWLRQV HQDFWVWDWXWHVWKDWFRYHUDUHDVIRUPHUO\OHIWWRWKHFRPPRQODZDQGFLYLO ODZFRXUWVJLYHLQFUHDVLQJZHLJKWWRSUHFHGHQW´ :.III  ,Q DGGLWLRQ WKHUH DUH DOVR RWKHU ODZ WUDGLWLRQV VXFK DV ,VODPLF ODZ EDVHGRQWKHGLYLQHODZDVUHYHDOHGLQWKH.RUDQ 6RFLDOLVWODZ EDVHGRQ WKH SULQFLSOH RI HTXDOLW\ DV LQ 0DU[LVP  DQG &KLQHVH ODZ EDVHG RQ WKH SULQFLSOHRIKDUPRQ\DVLQ&RQIXFLDQLVPDQGWKHSULQFLSOHRIVLPSOLFLW\DV LQ7DRLVP  F &RPPRQ/DZ,V1RW(TXLW\ $QG WKH WKLUG PDLQ IHDWXUH RI WKH FRPPRQ ODZ WUDGLWLRQ LV WKDW ³FRPPRQ ODZ´ RU ³ODZ´ LQ VKRUW  LV QRW ³HTXLW\´ :. III % *DUQHU-6DOPRQG  7KH GLVWLQFWLRQ EHWZHHQ ODZ DQG HTXLW\ FDQ EH PDGH LQ IRXU PDMRU ZD\VLQZKDWIROORZV :.HHH III  )LUVWO\ D FRXUW RI ³ODZ´ LV PRUH IRU DZDUGLQJ ³PRQH\ GDPDJHV´ ZKHUHDVDFRXUWRI³HTXLW\´LVPRUHIRULVVXLQJLQMXQFWLRQV )RU LQVWDQFH ³EHIRUH  (QJODQG KDG WZR SDUDOOHO FRXUW V\VWHPV FRXUWVRI ODZ WKDWFRXOGRQO\DZDUGPRQH\GDPDJHVDQGUHFRJQL]HGRQO\ WKH OHJDO RZQHU RI SURSHUW\ DQG FRXUWV RI HTXLW\  WKDW FRXOG LVVXH LQMXQFWLYH UHOLHI WKDW LV D FRXUW RUGHU WR D SDUW\ WR GR VRPHWKLQJ JLYH

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





VRPHWKLQJWRVRPHRQHRUVWRSGRLQJVRPHWKLQJ DQGUHFRJQL]HGWUXVWVRI SURSHUW\ 7KLV VSOLW SURSDJDWHG WR PDQ\ RI WKH FRORQLHV LQFOXGLQJ WKH 8QLWHG6WDWHV´ :.III  +RZHYHU WKLV GLVWLQFWLRQ LV LQFUHDVLQJO\ EOXUUHG EHFDXVH FRQWHPSRUDU\ OHJDO V\VWHPV WHQG WR PHUJH WKHP LQWR RQH )RU LQVWDQFH ³PRVW MXULVGLFWLRQV LQFOXGLQJ WKH 86 IHGHUDO V\VWHP DQG PRVW VWDWHV KDYHPHUJHGWKHWZRFRXUWV$GGLWLRQDOO\HYHQEHIRUHWKHVHSDUDWHFRXUWV ZHUHPHUJHGWRJHWKHUPRVWFRXUWVZHUHSHUPLWWHGWRDSSO\ERWKODZDQG HTXLW\ WKRXJK XQGHU SRWHQWLDOO\ GLIIHUHQW SURFHGXUDO ODZ´ :.III 0)ULHGPDQ  (YHQ WKHQ KRZHYHU ³WKH KLVWRULFDO GLVWLQFWLRQ EHWZHHQ ODZ  DQG

HTXLW\ UHPDLQVLPSRUWDQWWRGD\´ :.III  6HFRQGO\ D ³OHJDO´ WLWOH LV PRUH DERXW RZQHUVKLS ZKHUHDV DQ ³HTXLWDEOH´WLWOHLVPRUHDERXWWUXVW )RU LQVWDQFH WKLV GLVWLQFWLRQ LV LPSRUWDQW LQ SURSHUW\ ODZ WUXVW ODZ DQG RWKHUV EHFDXVH ³WKH VDPH DUWLFOH RI SURSHUW\ RIWHQ KDV D OHJDO WLWOH  DQGDQ HTXLWDEOHWLWOH DQGWKHVHWZR JURXSVRIRZQHUVKLSULJKWV PD\EH KHOGE\GLIIHUHQWSHRSOH´ :.III  7KLUGO\DFRXUWRI³ODZ´LVPRUHOLNHO\WRKDYHD³MXU\WULDO´ZKHUHDV DFRXUWRI³HTXLW\´LVPRUHOLNHO\WRKDYHD³MXGJHWULDO´ )RU LQVWDQFH LQ WKH 8QLWHG 6WDWHV LW LV ³WKH 6HYHQWK $PHQGPHQW´ ZKLFKSURYLGHVWKH³ULJKWWRDMXU\WULDO´DQGWKHGHWHUPLQDWLRQRIWKLVIDFW LV³QHFHVVDU\WRUHVROXWLRQRID FRPPRQODZ FODLP´RWKHUZLVH³WKHLVVXH ZLOO EH GHFLGHG E\ D MXGJH´ LQ UHODWLRQ WR ³ZKDW WKH ODZ LV´ DQG WR ³HTXLW\´ :.III  $QGIRXUWKO\LQFDVHVRI³ODZ´WKHUHLV³WKHVWDQGDUGRIUHYLHZDQG GHJUHH RI GHIHUHQFH JLYHQ E\ DQ DSSHOODWH WULEXQDO WR WKH GHFLVLRQ RI WKH ORZHUWULEXQDOXQGHUUHYLHZ´RQDGHQRYREDVLVWKDWLV³ DVLIQHZ IURP VFUDWFK E\ WKH DSSHOODWH WULEXQDO´²ZKHUHDV LQ FDVHV RI ³HTXLW\´  WKH VWDQGDUG RI UHYLHZ LV RQ WKH EDVLV RI DQ\ ³DEXVH RI GLVFUHWLRQ´ :. III  7KLVLVWUXHHYHQWKRXJKWKHXVHRI³GLVFUHWLRQ´LVRIWHQFRQVLGHUGDV DQ DGYDQWDJH RI ³HTXLW\´ RYHU ³FRPPRQ ODZ´ EHFDXVH LW LV WR ³PLWLJDWH WKHULJRURIFRPPRQODZ´E\³DOORZLQJFRXUWVWRXVHWKHLUGLVFUHWLRQDQG DSSO\ MXVWLFH IDLUO\ LQ DFFRUGDQFH ZLWK QDWXUDO ODZ´ IRU LQVWDQFH :. HHH  :KDWWKH&RPPRQ/DZ7UDGLWLRQ,V %XW WR VD\ ZKDW WKH FRPPRQ ODZ WUDGLWLRQ LV QRW LV QRW WKH VDPH DV VD\LQJZKDWLWLV



7KH)XWXUHRI3RVW+XPDQ/DZ 



7KHUH DUH ILYH PDLQ IHDWXUHV ZKLFK FKDUDFWHUL]H WKH FRPPRQ ODZ WUDGLWLRQ D 7KH&RPPRQ/DZ,V6ORZLQ$GMXGLFDWLRQ )LUVWO\ WKH SURFHGXUH RI D FRPPRQ ODZ DGMXGLFDWLRQ LV VORZ UHODWLYHO\VSHDNLQJ ,Q RWKHU ZRUGV ³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´ :.III  E 7KH&RPPRQ/DZ,V,QFUHPHQWDOLQ&KDQJH 6HFRQGO\ WKH FRPPRQ ODZ WUDGLWLRQ LV LQFUHPHQWDO LQ FKDQJH UHODWLYHO\VSHDNLQJ²DQGWKHUHIRUHFRQVHUYDWLYHE\FRPSDULVRQ 7KHUH DUH WZR JRRG UHDVRQV IRU WKH LQFUHPHQWDO PDOOHDELOLW\ RI WKH FRPPRQODZ :.III 7KHILUVWUHDVRQLVWKDW³FRPPRQODZFRXUWV DUHQRWDEVROXWHO\ERXQGE\SUHFHGHQWEXWFDQ ZKHQH[WUDRUGLQDULO\JRRG UHDVRQ LV VKRZQ  UHLQWHUSUHW DQG UHYLVH WKH ODZ ZLWKRXW OHJLVODWLYH LQWHUYHQWLRQ WR DGDSW WR QHZ WUHQGV LQ SROLWLFDO OHJDO DQG VRFLDO SKLORVRSK\´ :. III  $QG WKH VHFRQG UHDVRQ LV WKDW  ³WKH FRPPRQ ODZHYROYHVWKURXJKDVHULHVRIJUDGXDOVWHSVWKDWJUDGXDOO\ZRUNVRXWDOO WKHGHWDLOVVRWKDWRYHUDGHFDGHRUPRUHWKHODZFDQFKDQJHVXEVWDQWLDOO\ EXW ZLWKRXW D VKDUS EUHDN WKHUHE\ UHGXFLQJ GLVUXSWLYH HIIHFWV´ :. III  ,Q FRQWUDVW LQ VWDWXWRU\ ODZ IRU LQVWDQFH ³WKH OHJLVODWLYH SURFHVV LV YHU\ GLIILFXOW WR JHW VWDUWHG DV OHJLVODWXUHV WHQG WR GHOD\ DFWLRQ XQWLO D VLWXDWLRQLVWRWDOO\LQWROHUDEOH)RUWKHVHUHDVRQVOHJLVODWLYHFKDQJHVWHQG WR EH ODUJH MDUULQJ DQG GLVUXSWLYH VRPHWLPHV SRVLWLYHO\ VRPHWLPHV QHJDWLYHO\DQGVRPHWLPHVZLWKXQLQWHQGHGFRQVHTXHQFHV ´ :.III  F 7KH&RPPRQ/DZ,V,PSRUWDQWLQ0DQ\,PSRUWDQW$UHDVRI/DZ 7KLUGO\ WKH FRPPRQ ODZ LV LPSRUWDQW LQ PDQ\ ³LPSRUWDQW DUHDV RI ODZ´ :.III  )RULQVWDQFH³LQ(QJODQGDQG:DOHVDQGLQPRVWVWDWHVRIWKH8QLWHG 6WDWHVWKHEDVLFODZRIFRQWUDFWVWRUWVDQGSURSHUW\GRQRWH[LVWLQVWDWXWH EXW RQO\ LQ FRPPRQ ODZ WKRXJK WKHUH PD\ EH LVRODWHG PRGLILFDWLRQV HQDFWHGE\VWDWXWH ,QDOPRVWDOODUHDVRIWKHODZ HYHQWKRVHZKHUHWKHUH

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





LV D VWDWXWRU\ IUDPHZRUN VXFK DV FRQWUDFWV IRU WKH VDOH RI JRRGV RU WKH FULPLQDO ODZ  OHJLVODWXUHHQDFWHG VWDWXWHV JHQHUDOO\ JLYH RQO\ WHUVH VWDWHPHQWV RI JHQHUDO SULQFLSOH DQG WKH ILQH ERXQGDULHV DQG GHILQLWLRQV H[LVWRQO\LQWKHFRPPRQODZ´ :.III  7KHUHIRUH ³WR ILQG RXW ZKDW WKH SUHFLVH ODZ LV WKDW DSSOLHV WR D SDUWLFXODUVHWRIIDFWVRQHKDVWRORFDWHSUHFHGHQWLDOGHFLVLRQVRQWKHWRSLF DQGUHDVRQIURPWKRVHGHFLVLRQVE\DQDORJ\7RFRQVLGHUEXWRQHH[DPSOH WKH )LUVW $PHQGPHQW WR WKH 8QLWHG 6WDWHV &RQVWLWXWLRQ VWDWHV &RQJUHVV VKDOO PDNHQRODZUHVSHFWLQJDQHVWDEOLVKPHQWRIUHOLJLRQRUSURKLELWLQJ WKHIUHHH[HUFLVHWKHUHRI ²EXWLQWHUSUHWDWLRQ WKDWLVGHWHUPLQLQJWKHILQH ERXQGDULHVDQGUHVROYLQJWKHWHQVLRQEHWZHHQWKH HVWDEOLVKPHQW DQG IUHH H[HUFLVH FODXVHV RIHDFKRIWKHLPSRUWDQWWHUPVZDVGHOHJDWHGE\$UWLFOH ,,, RI WKH &RQVWLWXWLRQ WR WKH MXGLFLDO EUDQFK VR WKDW WKH FXUUHQW OHJDO ERXQGDULHVRIWKH&RQVWLWXWLRQDOWH[WFDQRQO\EHGHWHUPLQHGE\FRQVXOWLQJ WKHFRPPRQODZ´ :.III*+XJKHV  G 7KH&RPPRQ/DZ9DOXHV/HVV/HJDO7UHDWLVHV$FDGHPLF:RUNV )RXUWKO\WKHFRPPRQODZWUDGWLRQSXWVOHVVHPSKDVLVRQWKHUROHRI ³OHJDOWUHDWLVHV´DQG³DFDGHPLFZULWLQJV´ 7KLVUHODWLYHGLVPLVVDOLQWKHFRPPRQODZWUDGLWLRQLVDWRGGVZLWKWKH JUHDWHU DWWHQWLRQ WR ³OHJDO WUHDWLVHV´ DQG ³DFDGHPLF ZULWLQJV´ LQ WKH FLYLO ODZWUDGLWLRQ ,QRWKHUZRUGV³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´ :.III  ,Q FRQWUDVW WKH FLYLO ODZ WUDGLWLRQ SXWV PRUH YDOXH RQ OHJDO WUHDWLVHV DQG DFDGHPLF ZULWLQJV LQ WKDW ³WKH ZULWLQJV RI ODZ SURIHVVRUV DUH JLYHQ VLJQLILFDQW ZHLJKW E\ FRXUWV ,Q SDUW WKLV LV EHFDXVH FLYLO ODZ GHFLVLRQV WUDGLWLRQDOO\ZHUHYHU\EULHIVRPHWLPHVQRPRUHWKDQDSDUDJUDSKVWDWLQJ ZKRZLQVDQGZKRORVHV7KHUDWLRQDOHKDVWRFRPHIURPVRPHZKHUHHOVH DQGWKHDFDGHP\RIWHQILOOHGWKDWUROH$VFLYLOODZFRXUWGHFLVLRQVPRYH LQWKHGLUHFWLRQRIFRPPRQODZUHDVRQLQJLWLVSRVVLEOHWKDWWKLVEDODQFH PD\VKLIW´ :.III 



7KH)XWXUHRI3RVW+XPDQ/DZ 



H 7KH&RPPRQ/DZ,V3UHFLVHDQG5HOLDEOH $QGILIWKO\WKHFRPPRQODZWHQGVWREHSUHFLVH DQGWKHUHIRUHVHUYHV DV³DIRXQGDWLRQIRUFRPPHUFLDOHFRQRPLHV´  :.III  7KH UHDVRQ LV WKDW ³WKHUH LV FRPPRQ ODZ WR JLYH UHDVRQDEO\ SUHFLVH JXLGDQFH RQ DOPRVW HYHU\ LVVXH´ VR ³SDUWLHV HVSHFLDOO\ FRPPHUFLDO SDUWLHV  FDQ SUHGLFW ZKHWKHU D SURSRVHG FRXUVH RI DFWLRQ LV OLNHO\ WR EH ODZIXORUXQODZIXO´ :.III  $V DQ LOOXVWUDWLRQ ³PDQ\ FRPPHUFLDO FRQWUDFWV DUH PRUH HFRQRPLFDOO\HIILFLHQWDQGFUHDWHJUHDWHUZHDOWKEHFDXVHWKHSDUWLHVNQRZ DKHDGRIWLPHWKDWWKHSURSRVHGDUUDQJHPHQWWKRXJKSHUKDSVFORVHWRWKH OLQH LV DOPRVW FHUWDLQO\ OHJDO 1HZVSDSHUV WD[SD\HUIXQGHG HQWLWLHV ZLWK VRPH UHOLJLRXV DIILOLDWLRQ DQG SROLWLFDO SDUWLHV FDQ REWDLQ IDLUO\ FOHDU JXLGDQFH RQ WKH ERXQGDULHV ZLWKLQ ZKLFK WKHLU IUHHGRP RI H[SUHVVLRQ ULJKWVDSSO\´ :.III0D@PLGWKH JHQHUDO OD[LW\ ZLWK UHJDUG WR PDUULDJH ZKLFK H[LVWHG DPRQJ WKH 6HPLWLFWULEHVLWZRXOGKDYHEHHQGLIILFXOWWRSUHVHUYHWKHVWULFWODZ >RIPRQRJDP\DQGPDUULDJHXQWLOGHDWK@7KHLPSRUWDQFHRIDUDSLG LQFUHDVH DPRQJ WKH FKRVHQ SHRSOH RI *RG VR DV WR HQDEOH WKHP WR GHIHQG WKHPVHOYHV IURP WKHLU QHLJKERXUV DQG WR IXOILO WKHLU DSSRLQWHGGHVWLQ\VHHPHGWRIDYRXUUHOD[DWLRQ´ &(  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH          



7KH)XWXUHRI3RVW+XPDQ/DZ 



7DEOH7KH'HEDWHRQWKH'LYLQH/DZ 7KHFDVHRIWKH0RVDLF/DZ 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH&ULWLLTXHRI,WV:HDNQHVVHV ±([WKHGLYLQHFRPPDQGWKHRU\³LPSOLHVWKDWPRUDOLW\LVDUELWUDU\,I GLYLQHFRPPDQGWKHRU\LVWUXHPRUDOLW\LVEDVHGPHUHO\XSRQ*RG V ZKLP´ :.GGG  ±([ WKH GLYLQH FRPPDQG WKHRU\ ³LPSOLHV WKDW FDOOLQJ *RG JRRG PDNHV QRVHQVH²RUDWEHVW WKDWRQHLVVLPSO\ VD\LQJWKDW*RGLV FRQVLVWHQW *RGGRHVZKDWHYHUKHFRPPDQGV ´ :.GGG  ±([ WKH GLYLQH FRPPDQG WKHRU\ ³FRPPLWV WKH QDWXUDOLVWLF IDOODF\ 3URSRQHQWVRIWKLVFULWLFLVPDUJXHWKDWZKLOHHWKLFVFDQDQGVKRXOG VSHFLI\WKHQRQPRUDOSURSHUWLHVWKDWPDNHWKLQJVJRRGLWLVDOZD\V DPLVWDNHWRXVHQRQPRUDOWHUPVLQJLYLQJWKHPHDQLQJRIWKHZRUG

JRRG ´ :.GGG  ±([ WKH  GLYLQH  FRPPDQG  WKHRU\  GRHV  QRW  DQVZHU  ³WKH HSLVWHPRORJLFDO TXHVWLRQ RI KRZ RQH FRPHV WR NQRZ WKH ZLOO RI *RG 0RVW UHOLJLRQV SRLQW WR WKHLU VFULSWXUHV IRU DQVZHUV EXW LW LV VWLOOSRVVLEOHWRTXHVWLRQZKHWKHUWKHVHUHDOO\VWDWHWKHZLOORI*RG´ :.GGG  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ WKH FDWHJRULHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH FRPSDULVRQ LV UHODWLYH QRW DEVROXWH  QRU DUH WKH\ QHFHVVDULO\ PXWXDOO\ H[FOXVLYH $QG VRPH FDQ EH HDVLO\ UHFODVVLILHG HOVHZKHUH$VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFH)URP6HFRI)3+/$:             

&KDSWHU1HFHVVLW\DQG,WV'LVSHQVDELOLW\ 





7DEOH0DLQ&KDUDFWHULVWLFVRIWKH&RPPRQ/DZ7UDGLWLRQ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡:KDWWKH&RPPRQ/DZ7UDGLWLRQ,V1RW ²([FRPPRQODZLVQRWVWDWXWRU\ODZUHJXODWRU\ODZHWF ²([FRPPRQODZLVQRWFLYLOODZ,VODPLFODZ6RFLDOLVWODZHWF ²([FRPPRQODZLVQRWHTXLW\  ‡:KDWWKH&RPPRQ/DZ7UDGLWLRQ,V ²([WKHFRPPRQODZLVVORZLQDGMXGLFDWLRQ ²([WKHFRPPRQODZLVLQFUHPHQWDOLQFKDQJH ²([WKHFRPPRQODZLVLPSRUWDQWLQPDQ\LPSRUWDQWDUHDVRIODZ ²([WKHFRPPRQODZYDOXHVOHVVOHJDOWUHDWLVHVDFDGHPLFZRUNV ²([WKHFRPPRQODZLVYHU\SUHFLVHDQGUHOLDEOH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH H[DPSOHV LQ WKH FDWHJRULHV DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  DQG WKH FRPSDULVRQ LV UHODWLYH QRW DEVROXWH  QRU DUH WKH\ QHFHVVDULO\ PXWXDOO\ H[FOXVLYH $QG VRPH FDQ EH HDVLO\ UHFODVVLILHG HOVHZKHUH$VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFH)URP6HFRI)3+/$:   

 

‡3$577+5((‡ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  &RQWLQJHQF\                              



 

 &+$37(5 &217,1*(1&RI@WKHODZRIWRUW´ :.PPP  )RU LQVWDQFH LQ ³7KH $LPV RI WKH /DZ RI 7RUW´   ³*ODQYLOOH :LOOLDPV VDZ IRXU SRVVLEOH EDVHV RQ ZKLFK GLIIHUHQW WRUWV UHVWHG DSSHDVHPHQWMXVWLFHGHWHUUHQFHDQGFRPSHQVDWLRQ´ :.PPP  2WKHUVFKRODUVKRZHYHUOLNH³DJURXSRIOHJDOO\RULHQWHGHFRQRPLVWV DQGHFRQRPLFDOO\RULHQWHGODZ\HUVHPSKDVL]HGLQFHQWLYHVDQGGHWHUUHQFH DQG LGHQWLILHG WKH DLP RI WRUW DV EHLQJ WKH HIILFLHQW GLVWULEXWLRQ RI ULVN 7KH\ DUH RIWHQ GHVFULEHG DV WKH ODZ DQG HFRQRPLFV PRYHPHQW 5RQDOG &RDVH RQH RI WKH PRYHPHQW V SULQFLSDO SURSRQHQWV VXEPLWWHG LQ KLV DUWLFOH7KH3UREOHPRI6RFLDO&RVW  WKDWWKHDLPRIWRUWVKRXOGEHWR UHIOHFW DV FORVHO\ DV SRVVLEOH OLDELOLW\ ZKHUH WUDQVDFWLRQ FRVWV VKRXOG EH PLQLPL]HG´ :.PPP  ,W LV WKHUHIRUH QR ZRQGHU WKDW GLIIHUHQW VFKRODUV LQ GLIIHUHQW OHJDO FRPPXQLWLHVFDOOIRUDUHIRUPRIWRUWODZLQGLIIHUHQWZD\VZKLFKUHIOHFW



7KH)XWXUHRI3RVW+XPDQ/DZ 



LQDZD\WKHGLVDJUHHPHQWDPRQJOHJDOVFKRODUVRQWKHIXQGDPHQWDODLPV RIWRUWODZ )RU LQVWDQFH VRPH OHJDO VFKRODUV LQ 1HZ =HDODQG ³FDOO«IRU UHIRUP >DQG@VWUHVVWKHGLIILFXOWLHVHQFRXQWHUHGE\SRWHQWLDOFODLPDQWV%HFDXVHRI DOO SHRSOH ZKR KDYH DFFLGHQWV RQO\ VRPH FDQ ILQG VROYHQW GHIHQGDQWV IURPZKLFKWRUHFRYHUGDPDJHVLQWKHFRXUWV36$WL\DKKDVFDOOHGWKH VLWXDWLRQ D GDPDJHV ORWWHU\  &RQVHTXHQWO\ LQ 1HZ =HDODQG WKH JRYHUQPHQW LQ WKH ¶V HVWDEOLVKHG D QRIDXOW V\VWHP RI VWDWH FRPSHQVDWLRQ IRU DFFLGHQWV 6LPLODU SURSRVDOV KDYH EHHQ WKH VXEMHFW RI &RPPDQG 3DSHUV LQ WKH 8. DQG PXFK DFDGHPLF GHEDWH´ :. PPP  2QWKHRWKHUKDQGLQWKH8QLWHG6WDWHVWKHFDOOIRUUHIRUPWHQGVWREH PRUH PLQLPDOLVW LQ WKDW LWV SURSRQHQWV ³KDYH WHQGHG WR EH IRU GUDVWLF OLPLWDWLRQ RQ WKH VFRSH RI WRUW ODZ >IRU@ D PLQLPLVDWLRQ SURFHVV RQ WKH OLQHV RI HFRQRPLF DQDO\VLV $QWLWUXVW GDPDJHV KDYH FRPH XQGHU VSHFLDO VFUXWLQ\ DQG PDQ\ SHRSOH EHOLHYH WKH DYDLODELOLW\ RI SXQLWLYH GDPDJHV JHQHUDOO\DUHDVWUDLQRQWKHOHJDOV\VWHP´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³QRIDXOWV\VWHPRIVWDWHFRPSHQVDWLRQIRUDFFLGHQWV´ZKLFK WKH FRXQWU\ SUHIHUV DV RSSRVHG WR RWKHU RQHV  WKHUH LV UHODWLYH RQH WRR HJZKDWLVLPSRUWDQWIRUWKHOHJDOUHIRUPLQ1HZ=HDODQGLQUHJDUGWR WKH³QRIDXOWV\VWHPRIVWDWHFRPSHQVDWLRQIRUDFFLGHQWV´LVQRWVRIRUWKH

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





OHJDOUHIRUPLQWKH86LQUHJDUGWRD³GUDVWLFOLPLWDWLRQRQWKHVFRSHRI WRUWODZ´  ,Q UHODWLRQ WR WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH LI WKHUH LV SUHGLFWDELOLW\ HJ WKH SUHGLFWDEOH WHQGHQF\ RI XQLQWHQWLRQDO WRUW ODZ WR IRFXV RQ WKH SULQFLSOH RI FDUH LQ UHODWLRQ WR QHJOLJHQFH  WKHUH LV XQSUHGLFWDELOLW\ HJ WKH PRUH GLIILFXOW WDVN WR SUHGLFW WKH RXWFRPH RI D JLYHQ XQLQWHQWLRQDO WRUW FDVH VLQFH LQ QHJOLJHQFH ³WKH HYHQW LV XQXVXDO DQGXQSUHGLFWDEOH´  ,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJWKHH[SODQDWLRQE\5RQDOG&RDVHRIWKHDLPRIWRUWODZ RQWKHEDVLVRIWKHPLQLPL]DWLRQRIWUDQVDFWLRQFRVWVLQOLDELOLW\ WKHUHLV LQH[SOLFDELOLW\ HJWKHODFNRIVXIILFLHQWH[SODQDWLRQLQ&RDVH¶VDUJXPHQW RIZK\WKHIXQGDPHQWDODVVXPSWLRQVLQWKHH[SODQDWLRQQDPHO\SURSHUW\ ULJKWV HIILFLHQW DQG LGHQWLFDO XVH RI UHVRXUFHV WUDQVDFWLRQ FRVWV LQ EDUJDLQLQJ SHUIHFW FRPSHWLWLRQ DQG LQIRUPDWLRQ DQG ZHDOWK DQG LQFRPH HIIHFWVDUHYDOLGDVFULWLFDOO\SRLQWHGRXWE\6WHYH.DQJDV  :.6 .DQJDV  ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SUQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI WKH ILYH HOHPHQWV RI ³QHJOLJHQFH´  WKHUH LV YDJXHQHVV HJ WKH YDJXH IRUPXODWLRQ RI ZKDW H[DFWO\ WKHVH ILYH HOHPHQWV DUH WR PHDQ DV WKHUH DUH YDULRXV FRXUW LQWHUSUHWDWLRQVDERXWWKHP  ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJWKH VLPSOH OLVWLQJRIGLIIHUHQWDLPVRIWRUW ODZ WKHUHLV FRPSOLFDWHGQHVV HJ WKH PRUH FRPSOLFDWHG DFFRXQW RI WKH DLPV RI WRUW ODZ RQ WKH EDVLV RI FRQIOLFWLQJ FODLPV DPRQJ GLIIHUHQW VFKRODUV DQG RI GLIIHUHQWFDOOVIRUUHIRUPVLQGLIIHUHQWFRXQWULHV  ,Q UHODWLRQ WR WKH RSHQQHVKLGGHQQHVV SULQFLSOH LI WKHUH LV RSHQQHVV HJ WKH RSHQ H[SORUDWLRQ RI WKH UROH RI WUDQVDFWLRQ FRVWV LQ FDVHV FRQFHUQLQJ QXLVDQFH LQ SURSHUW\ WRUWV E\ 5RQDOG &RDVH  WKHUH LV KLGGHQQHVV HJ WKH KLGGHQ ELDV RI &RDVH¶V DUJXPHQW ZKLFK UHSUHVHQWV WKH UHFXUUHQW FRQVHUYDWLYH LGHRORJ\ RI IUHH PDUNHW DV DGYRFDWHG E\ ³HFRQRPLVWVDQGODZ\HUVLQFOXGLQJ0LOWRQ)ULHGPDQDQG*DU\%HFNHU´LQ WKHLU YRFDO FDOO IRU ³GHUHJXODWLRQ DQG SULYDWLVDWLRQ´ DJDLQVW ³VWDWH UHJXODWLRQ RU ZKDW WKH\ VHH DV UHVWULFWLRQV RQ WKH RSHUDWLRQ RI IUHH PDUNHW´  :.6-DNRE\  ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI FRQFHUQV ZLWK WUDQVDFWLRQ FRVWVE\VFKRODUVZKRDUHLQWKHODZDQGHFRQRPLFVPRYHPHQW WKHUHLV HPSWLQHVV HJWKHUHODWLYHO\OHVVGHQVHRUPRUHHPSW\FRQFHQWUDWLRQRI



7KH)XWXUHRI3RVW+XPDQ/DZ 



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³QRIDXOWV\VWHPRIVWDWHFRPSHQVDWLRQIRUDFFLGHQWV´LQWKHFDVHRI1HZ =HDODQGEXWWKHFRQFHUQZLWK³GUDVWLFOLPLWDWLRQRQWKHVFRSHRIWRUWODZ >IRU@ D PLQLPLVDWLRQ SURFHVV RQ WKH OLQHV RI HFRQRPLF DQDO\VLV´ LQ WKH 86 

&RQWLQJHQF\DQG1DWXUH 7KH LVVXH RI FRQWLQJHQF\ FDQ DOVR EH DQDO\]HG IURP D GLIIHUHQW SHUVSHFWLYHWKLVWLPHLQUHODWLRQWRQDWXUHVRDVWRIXUWKHUXQGHUVWDQGLWV OLPLWDWLRQV

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





$Q LOOXPLQDWLQJ FDVH VWXG\ KHUH FRQFHUQV WKH SKHRQRPHQRQ RI WKH ZLOOWRSRZHU DIIHFWLQJ PDQ\OLYLQJVSHFLHVLQ QDWXUH DQGLWVLPSDFWRQ WKHODZ²WREHH[DPLQHGEHORZ

7KH:LOOWR3RZHULQ1DWXUHDQGWKH/DZ 7KHLGHDDERXWWKHZLOOWRSRZHULQQDWXUHKDVEHHQFORVHO\VWXGLHGE\ GLIIHUHQWVFKRODUVRYHUWLPH &RQVLGHUILUVWVRPHH[DPSOHVEHORZ ZKLFKDUHVXPPDUL]HGLQ7DEOH   7KH9DULHWLHVRIWKH:LOOWR3RZHU )LUVWO\ $UWKXU 6FKRSHQKDXHU SURSRVHG ZKDW KH FDOOHG WKH ³ZLOO WR OLYH´LQRUGHUWRH[SODLQZK\³WKHXQLYHUVHDQGHYHU\WKLQJLQLWLVGULYHQ E\DSULPRUGLDOZLOOWROLYHZKLFKUHVXOWVLQDOOOLYLQJFUHDWXUHV GHVLUHWR DYRLG GHDWK DQG SURFUHDWH )RU 6FKRSHQKDXHU WKLV ZLOO LV WKH PRVW IXQGDPHQWDODVSHFWRIUHDOL\´ :.RRR  6HFRQGO\ 5RJHU-RVHSK%RVFRYLFK VXJJHVWHGWKHLGHDRI ³FHQWHUVRI IRUFH´LQKLVUHMHFWLRQRIWKHLGHDRI³PDWHULDOLVWLFDWRPLVP´LQRUGHUWR H[SODLQWKDWWKHUHDUHGLIIHUHQWFHQWHUVRIIRUFHLQQDWXUHZLWKHDFKRIWKHP ILJKWLQJIRULWVH[LVWHQFH :.RRR*:KLWORFN  ,Q IDFW ³%RVFRYLFK V WKHRU\ RI FHQWHUV RI IRUFH ZDV SURPLQHQW LQ *HUPDQ\ DW WKH WLPH %RVFRYLFK¶V WKHRU\ LV HFKRHG LQ ,PPDQXHO .DQW¶V 0HWDSK\VLFDO )RXQGDWLRQV RI 1DWXUDO 6FLHQFH ZKLFK UHGXFHV PDWWHU WR IRUFHDOWRJHWKHU.DQW¶VYLHZLQWXUQEHFDPHYHU\LQIOXHQWLDOLQ*HUPDQ SK\VLFVWKURXJKWKHZRUNRI+HUPDQQYRQ+HOPKROW]DQGKLVIROORZHUV´ :.RRR/$QGHUVRQ  7KLUGO\:LOKHOP5RX[SURSRVHGWKHLGHDRI³WKHVWUXJJOHRISDUWVLQ WKH RUJDQLVP´ LQ  LQ KLV FULWLFDO UHVSRQVH WR FODVVLFDO 'DUZLQLDQ WKHRU\ :.RRR  ,QIOXHQFHG E\ (UQVW +DHFNHO 5RX[ DUJXHG IRU WKH LGHD RI ³LQWHUQDO VWUXJJOH´RU³WKHVWUXJJOHIRUH[LVWHQFHRFFXUUHGDWWKHFHOOXODUOHYHO´LQ WKDW³WKHYDULRXVFHOOVDQGWLVVXHVWUXJJOHIRUILQLWHUHVRXUFHVVRWKDWRQO\ WKH VWURQJHVW VXUYLYH 7KURXJK WKLV PHFKDQLVP WKH ERG\ JURZV VWURQJHU DQG EHWWHU DGDSWHG´ :. RRR * 0RRUH  : 0OOHU/DXWHU   )RXUWKO\/pRQ'XPRQWVXJJHVWHGLQWKHLGHDRI³SOHDVXUHLQWKH H[SDQVLRQ RI SRZHU´ LQ WKDW ³SOHDVXUH LV UHODWHG WR LQFUHDVHV LQ IRUFH´ HVSHFLDOO\LQUHODWLRQWR ³LQWHOOHFWXDOEHLQJVVLQFHDFFRUGLQJ WR'XPRQW SDLQ DQG SOHDVXUH UHTXLUH D FRPLQJ WR FRQVFLRXVQHVV DQG QRW MXVW D VHQVLQJ´ :.RRR56PDOO 



7KH)XWXUHRI3RVW+XPDQ/DZ 



)LIWKO\ :LOOLDP 5ROSK LQ  DGYDQFHG WKH LGHD RI ³LQVDWLDELOLW\ DQG DVVLPLODWLRQ´ IRU OLIH H[SDQVLRQ DV DQ DOWHUQDWLYH WR WKH 'DUZLQLDQ LGHD RI WKH VWUXJJOH IRU H[LVWHQFH  LQ WKDW ³DOO OLIH VHHNV SULPDULO\ WR H[SDQG LWVHOI 2UJDQLVPV IXOILOO WKLV QHHG WKURXJK DVVLPLODWLRQ WU\LQJ WR PDNHDV PXFKRI ZKDWLV IRXQGDURXQGWKHP LQWRSDUWRIWKHPVHOYHVIRU H[DPSOH E\ VHHNLQJ WR LQFUHDVH LQWDNH DQG QXWULPHQW /LIH IRUPV DUH QDWXUDOO\LQVDWLDEOHLQWKLVZD\´ :.RRR7%UREMHU  $QG VL[WKO\ .DUO :LOKHOP YRQ 1lJHOL LQ  DUJXHG IRU WKH ³SHUIHFWLRQ SULQFLSOH´ RU WKH ³GULYH WRZDUGV FRPSOH[LW\´ LQ WKDW OLIH LQ QDWXUHWHQGVWR³JUHDWHUFRPSOH[LW\´RYHUWLPHVXFKWKDW³ZLWKDPLOLWDU\ PHWDSKRU«D PRUH FRPSOH[ FRPSOLFDWHGO\ RUGHUHG LGLRSODVPD ZRXOG XVXDOO\ GHIHDW D VLPSOHU ULYDO ,Q RWKHU ZRUGV KH LV DOVR DUJXLQJ IRU LQWHUQDOHYROXWLRQVLPLODUWR5RX[H[FHSWHPSKDVL]LQJFRPSOH[LW\DVWKH PDLQIDFWRULQVWHDGRIVWUHQJWK´ :.RRR$+RUQ  1LHW]VFKH¶V,GHDRIWKH:LOOWR3RZHU 7KHVH LOOXVWUDWLYH H[DPSOHV RI VFKRODUV ZKR KDG SURSRVHG GLIIHUHQW YHUVLRQVRIWKHZLOOWRSRZHULQQDWXUHDUHLPSRUWDQWIRUWKHXQGHUVWDQGLQJ RI)ULHGULFK1LHW]VFKH¶VLGHDRIWKHZLOOWRSRZHU ,QIDFWWKHVFKRODUV DVLQWURGXFHGDERYH KDGLQIOXHQFHG1LHW]VFKH¶V WKLQNLQJRQWKHZLOOWRSRZHULQRQHZD\RUWKHRWKHU )RULQVWDQFH³'XPRQW¶VSOHDVXUHLQWKHH[SDQVLRQRISRZHU5RX[¶V LQWHUQDO VWUXJJOH 1lJHOL¶V GULYH WRZDUGV FRPSOH[LW\ DQG 5ROSK¶V SULQFLSOH RI LQVDWLDELOLW\ DQG DVVLPLODWLRQ DUH IXVHG WRJHWKHU LQWR WKH ELRORJLFDOVLGHRI1LHW]VFKH¶VWKHRU\RIZLOOWRSRZHUZKLFKLVGHYHORSHG LQDQXPEHURISODFHVLQKLVSXEOLVKHGZULWLQJV´ :.RRR*0RRUH   7KXV ³>K@DYLQJ GHULYHG WKH ZLOO WR SRZHU  IURP WKUHH DQWL'DUZLQ HYROXWLRQLVWVDV ZHOODV'XPRQWLWVHHPVDSSURSULDWHWKDW>1LHW]VFKH@« VKRXOG XVH KLV ZLOO WR SRZHU  DV DQ DQWL'DUZLQLDQ H[SODQDWLRQ RI HYROXWLRQ+HH[SUHVVHVDQXPEHURIWLPHV>DVLQ%H\RQG*RRGDQG(YLO † 7KH *D\ 6FLHQFH † DQG 7KH *HQHDORJ\ RI 0RUDOLW\ ,,@ WKH LGHDWKDWDGDSWDWLRQDQGWKHVWUXJJOHWRVXUYLYHLVDVHFRQGDU\GULYHLQWKH HYROXWLRQRIDQLPDOVEHKLQGWKHGHVLUHWRH[SDQGRQH¶VSRZHU²WKHZLOOWR SRZHU´ :.RRR  ,Q DGGLWLRQ ³>L@QIOXHQFHG E\ KLV HDUOLHU UHDGLQJV RI %RVFRYLFK«>1LHW]VFKH@EHJDQWRGHYHORSDSK\VLFVRIWKH:LOOWR3RZHU 7KHLGHDRIPDWWHUDVFHQWHUVRIIRUFHLVWUDQVODWHGLQWRPDWWHUDVFHQWHUVRI ZLOOWRSRZHU1LHW]VFKHZDQWHGWRVORXJKRIIWKHWKHRU\RIPDWWHUZKLFK KHYLHZHGDVDUHOLFRIWKH PHWDSK\VLFVRIVXEVWDQFH´ :.RRR/ :LOOLDPV*:KLWORFN 

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





(YHQ PRUH GDULQJO\ 1LHW]VFKH ZHQW IXUWKHU DQG ³GHYHORSHG DQ HTXDOO\ HOXVLYH WKHRU\ RI WKH HWHUQDO UHFXUUHQFH RI WKH VDPH  DQG PXFK VSHFXODWLRQRQWKHSK\VLFDOSRVVLELOLW\RIWKLVLGHDDQGWKHPHFKDQLFVRILWV DFWXDOL]DWLRQ UHFXU LQ KLV ODWHU QRWHERRNV ZKLFK EHFRPHV WLHG ZLWK KLV WKHRU\RI ZLOOWRSRZHUDVDSRWHQWLDOSK\VLFVLQWHJUDWHG ZLWKWKH HWHUQDO UHFXUUHQFHRIWKHVDPH 1LHW]VFKHDSSHDUHGWRLPDJLQHDSK\VLFDOXQLYHUVH RISHUSHWXDOVWUXJJOHDQGIRUFHZKLFKVXFFHVVLYHO\FRPSOHWHVLWVF\FOHDQG UHWXUQVWRWKHEHJLQQLQJDJDLQDQGDJDLQ´ :.RRR  7KH3UREOHPRI,QWHUSUHWDWLRQ5HYLVLWHG W@KH SUREOHP ZLWK PDQ\ 1LHW]VFKH LQWHUSUHWDWLRQV«LV VHOHFWLYH PLVTXRWLQJ´ -/LQDUHOOL  RI@VRPHWKLQJLVVHHQDVMXVWLILHGVLPSO\E\ VRPHRQHVHL]LQJVRPHWKLQJEHIRUHVRPHRQHHOVHGRHV´ :.TTT* 2SS\  -HDQ-DFTXHV5RXVVHDX  RQFHFULWLFL]HGWKLVWKHRU\DVQDLYHLQD IDPRXVSDVVDJH³7KHILUVWPDQZKRKDYLQJIHQFHGLQDSLHFHRIODQGVDLG

7KLV LV PLQH  DQG IRXQG SHRSOH QDLYH HQRXJK WR EHOLHYH KLP WKDW PDQ ZDV WKH WUXH IRXQGHU RI FLYLO VRFLHW\ )URP KRZ PDQ\ FULPHV ZDUV DQG PXUGHUVIURPKRZPDQ\KRUURUVDQGPLVIRUWXQHVPLJKWQRWDQ\RQHKDYH VDYHGPDQNLQGE\SXOOLQJXSWKHVWDNHVRUILOOLQJXSWKHGLWFKDQGFU\LQJ WRKLVIHOORZV%HZDUHRIOLVWHQLQJWRWKLVLPSRVWRU\RXDUHXQGRQHLI\RX RQFHIRUJHWWKDWWKHIUXLWVRIWKHHDUWKEHORQJWRXVDOODQGWKHHDUWKLWVHOI WRQRERG\´ :.YYY  D 6HFRQGO\WKHUHLV³WKHODERUWKHRU\RISURSHUW\´ZKLFKVXJJHVWV WKDW ³\RX RZQ \RXU RZQ OLIH DQG LW IROORZV WKDW \RX PXVW RZQ WKH

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





SURGXFWVRIWKDWOLIHDQGWKDWWKRVHSURGXFWVFDQEHWUDGHGLQIUHHH[FKDQJH ZLWKRWKHUV´ :.TTT  )RU LQVWDQFH $\Q 5DQG   LQ $WODV 6KUXJJHG YRFDOO\ ZURWH LQ GHIHQVH RI SULYDWH RZQHUVKLS XQGHU WKH ODZ ³-XVW DV PDQ FDQ W H[LVW ZLWKRXWKLVERG\VRQRULJKWVFDQH[LVWZLWKRXWWKHULJKWWRWUDQVODWHRQH V ULJKWVLQWRUHDOLW\WRWKLQNWRZRUNDQGNHHSWKHUHVXOWVZKLFKPHDQVWKH ULJKWRISURSHUW\´ :.TTT  -RKQ/RFNH  LQ7KH6HFRQG7UHDWLVHRQ&LYLO*RYHUQPHQWWKXV ZURWH³(YHU\ PDQKDVDSURSHUW\LQKLVRZQSHUVRQ7KLVQRERG\KDVD ULJKW WR EXW KLPVHOI´ :. TTT  $QG WKLV LV VR ³ZKHQ RQH PL[HV RQH¶V ODERU ZLWK QDWXUH RQH JDLQV RZQHUVKLS RI WKDW SDUW RI QDWXUH ZLWK ZKLFK WKH ODERU LV PL[HG VXEMHFW WR WKH OLPLWDWLRQ WKDW WKHUH VKRXOG EH

HQRXJK DQG DV JRRG OHIW LQ FRPPRQ IRU RWKHUV ´ :. TTT :1   )UpGpULF %DVWLDW   LQ 7KH /DZ DUJXHG WKDW ³>O@LIH OLEHUW\ DQG SURSHUW\GRQRWH[LVWEHFDXVHPHQKDYHPDGHODZV2QWKHFRQWUDU\LWZDV WKHIDFWWKDWOLIHOLEHUW\DQGSURSHUW\H[LVWHGEHIRUHKDQGWKDWFDXVHGPHQ WRPDNHODZVLQWKHILUVWSODFH´ :.TTT  $GDP 6PLWK   LQ :HDOWK RI 1DWLRQV DUJXHG WKDW ³WKH H[SHFWDWLRQ RI SURILW IURP LPSURYLQJ RQH V VWRFN RI FDSLWDO  UHVWV RQ SULYDWH SURSHUW\ ULJKWV ,W LV D EHOLHI FHQWUDO WR FDSLWDOLVP WKDW SURSHUW\ ULJKWV HQFRXUDJH WKH SURSHUW\ KROGHUV WR GHYHORS WKH SURSHUW\ JHQHUDWH ZHDOWK DQG HIILFLHQWO\ DOORFDWH UHVRXUFHV EDVHG RQ WKH RSHUDWLRQ RI WKH PDUNHW )URP WKLV HYROYHG WKH PRGHUQ FRQFHSWLRQ RI SURSHUW\ DV D ULJKW ZKLFK LV HQIRUFHG E\ SRVLWLYH ODZ LQ WKH H[SHFWDWLRQ WKDW WKLV ZRXOG SURGXFHPRUHZHDOWKDQGEHWWHUVWDQGDUGVRIOLYLQJ´ :.TTT  D  $QG WKLUGO\ WKHUH LV WKH ³FXVWRPV DQG FRQYHQWLRQ´ WKHRU\ RI SURSHUW\LQWKDW³WKHUHDUHSURSHUW\ULJKWVEHFDXVHRIDQGWRWKHH[WHQWWKDW WKH H[LVWLQJ ODZ VXSSRUWHG E\ VRFLDO FXVWRPV VHFXUH WKHP´ :. TTT  'DYLG+XPHIRULQVWDQFHEHOLHYHGWKDW³H[LVWLQJFXVWRPVVKRXOGQRW OLJKWO\ EH GLVUHJDUGHG EHFDXVH WKH\ KDYH FRPH WR EH ZKDW WKH\ DUH DV D UHVXOWRIKXPDQQDWXUH´ :.TTT  2WKHU VFKRODUV HVSHFLDOO\ WKRVH LQ DQWKURSRORJ\ KDG VWXGLHG ³RZQHUVKLS DQG SRVVHVVLRQ´ LQ GLIIHUHQW FXOWXUHV RQ WKH EDVLV RI WKH ³FXVWRP DQG UHJXODWLRQ´ LQ ZKLFK FRQWH[W ³>SURSHUW\@ ODZ«FDQ PHDQLQJIXOO\EHDSSOLHG´ )RU LQVWDQFH E\ FXVWRPV DQG FRQYHQWLRQ ³>P@DQ\ ^&KHURNHH@ WULEDO FXOWXUHVEDODQFHLQGLYLGXDORZQHUVKLSZLWKWKHODZVRIFROOHFWLYHJURXSV WULEHV IDPLOLHV DVVRFLDWLRQV DQG QDWLRQV´ :. TTT  $QG ³KLVWRULFDOO\ DOO SURSHUW\ ZDV RZQHG E\ WKH PRQDUFK DQG LW GHYROYHG



7KH)XWXUHRI3RVW+XPDQ/DZ 



WKURXJKIHXGDOODQGWHQXUHRURWKHUIHXGDOV\VWHPVRIOR\DOW\DQGIHDOW\´ :.SSS  E 7KH/HIW:LQJRIWKH,GHRORJLFDO6SHFWUXP ,Q WKLV JURXS WKHUH DUH DOVR GLIIHUHQW WKLQNHUV WREH LQWURGXFHG/LNH WKRVHLQWKHULJKWZLQJRIWKHLGHRORJLFDOVSHFWUXPWKH\GRQRWVKDUHWKH VDPHYLHZVRQDOODVSHFWVRISURSHUW\RZQHUVKLS %XW XQOLNH WKRVH LQ WKH ULJKWZLQJ RI WKH LGHRORJLFDO VSHFWUXP WKH\ DUHFULWLFDOWRWKHSULYDWHRZQHUVKLSRISURSHUW\DOEHLWLQGLIIHUHQWGHJUHHV &RQVLGHU IRU LOOXVWUDWLRQ WKUHH H[DPSOHV EHORZ QDPHO\ E  WKH ³OLEHUWDULDQ VRFLDOLVW´ WKHRU\ RI SURSHUW\ E  WKH ³VRFLDOLVW´ WKHRU\ RI SURSHUW\DQG E WKH³FRPPXQLVW´WKHRU\RISURSHUW\ E  )LUVWO\ WKHUH LV WKH ³OLEHUWDULDQ VRFLDOLVW´ WKHRU\ RI SURSHUW\ LQ WKDWWKH³OLEHUWDULDQVRFLDOLVWVJHQHUDOO\DFFHSWVSURSHUW\ULJKWVEXWZLWKD VKRUWDEDQGRQPHQWWLPHSHULRG,QRWKHUZRUGVDSHUVRQPXVWPDNH PRUH RUOHVV FRQWLQXRXVXVHRIWKHLWHPRUHOVHKHORVHVRZQHUVKLSULJKWV7KLV LV XVXDOO\ UHIHUUHG WR DV SRVVHVVLRQ SURSHUW\  RU XVXIUXFW  7KXV LQ WKLV XVXIUXFWV\VWHPDEVHQWHHRZQHUVKLSLVLOOHJLWLPDWHDQGZRUNHUVRZQWKH PDFKLQHVWKH\ZRUNZLWK´ :.TTT  E  6HFRQGO\ WKHUH LV WKH ³VRFLDOLVW´ WKHRU\ RI SURSHUW\ LQ WKDW WKH ³VRFLDOLVWV´²XQOLNHWKHOLEHUWDULDQVRFLDOLVWV²LQJHQHUDODUHFULWLFDOWRWKH YHU\ LGHDRISULYDWHRZQHUVKLSRISURSHUW\ ³VWDWLQJDPRQJRWKHUWKLQJV WKDWWKHFRVWRIGHIHQGLQJSURSHUW\LVKLJKHUWKDQWKHUHWXUQVIURPSULYDWH SURSHUW\ RZQHUVKLS DQG WKDW HYHQ ZKHQ SURSHUW\ ULJKWV HQFRXUDJH WKH SURSHUW\KROGHUWRGHYHORSKLVSURSHUW\JHQHUDWHZHDOWKHWFKHZLOORQO\ GRVRIRUKLVRZQEHQHILWZKLFKPD\QRWFRLQFLGHZLWKWKHEHQHILWRIRWKHU SHRSOHRUVRFLHW\DWODUJH´ :.TTT  E  $QG WKLUGO\ WKHUH LV WKH ³FRPPXQLVW´ YLHZ RI SURSHUW\ LQ WKDW WKH ³FRPPXQLVWV´ JR HYHQ IXUWKHU DQG DGYRFDWH WKDW ³RQO\ FROOHFWLYH RZQHUVKLS RI WKH PHDQV RI SURGXFWLRQ WKURXJK D SROLW\ WKRXJK QRW QHFHVVDULO\ D VWDWH  ZLOO DVVXUH WKH PLQLPL]DWLRQ RI XQHTXDO RU XQMXVW RXWFRPHV DQG WKH PD[LPL]DWLRQ RI EHQHILWV DQG WKDW WKHUHIRUH SULYDWH SURSHUW\ ZKLFK LQ FRPPXQLVW WKHRU\ LV OLPLWHG WR FDSLWDO  VKRXOG EH DEROLVKHG´ :.TTT  .DUO 0DU[   DQG KLV IROORZHUV DUJXHG IRU LQVWDQFH WKDW ³WKH FUHDWLRQ RI SULYDWH SURSHUW\ ZLOO DOZD\V EHQHILW RQH FODVV RYHU DQRWKHU JLYLQJ ZD\ WR GRPLQDWLRQ WKURXJK WKH XVH RI WKLV SULYDWH SURSHUW\ &RPPXQLVWV DUH QDWXUDOO\ QRW RSSRVHG WR SHUVRQDO SURSHUW\ ZKLFK LV

>K@DUGZRQ VHOIDFTXLUHG VHOIHDUQHG  >DV VWDWHG LQ WKH &RPPXQLVW 0DQLIHVWR@«E\PHPEHUVRIWKHSUROHWDULDW´ :.TTT  6XUHO\WKHFRPPXQLVWYLHZLVQRWZLWKRXWSUREOHPV$JRRGFULWLTXH FRPHVIURP$ULVWRWOH  ZKRLQ3ROLWLFVH[SRVHGWKH³WUDJHG\RIWKH

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





FRPPRQV´ ZKHQ KH ZURWH WKDW ³WKDW ZKLFK LV FRPPRQ WR WKH JUHDWHVW QXPEHUKDVWKHOHDVWFDUHEHVWRZHGXSRQLW(YHU\RQHWKLQNVFKLHIO\RIKLV RZQ KDUGO\ DW DOO RI WKH FRPPRQ LQWHUHVW DQG RQO\ ZKHQ KH LV KLPVHOI FRQFHUQHGDVDQLQGLYLGXDO«,IWKH\GRQRWVKDUHHTXDOO\HQMR\PHQWVDQG WRLOV WKRVH ZKR ODERU PXFK DQG JHW OLWWOH ZLOO QHFHVVDULO\ FRPSODLQ RI WKRVH ZKR ODERU OLWWOH DQG UHFHLYH RU FRQVXPH PXFK %XW LQGHHG WKHUH LV DOZD\VDGLIILFXOW\LQPHQOLYLQJWRJHWKHUDQGKDYLQJDOOKXPDQUHODWLRQV LQ FRPPRQ EXW HVSHFLDOO\ LQ WKHLU KDYLQJ FRPPRQ SURSHUW\´ :. TTT  7KH&RQWURYHUVLDO$SSOLFDWLRQRI3URSHUW\/DZIRU&RS\ULJKW9LRODWLRQ 7KH XQVHWWOHG WKHRUHWLFDO GHEDWH RQ RZQHUVKLS IRU WKH IRXQGDWLRQ IRU SURSHUW\ ODZ FDQ EH VHHQ PRUH FOHDUO\ ZKHQ H[DPLQHG LQ D FDVH VWXG\ FRQFHUQLQJ WKH FRQWURYHULVDO XVH RI SURSHUW\ ODZ WR GHDO ZLWK FRS\ULJKW YLRODWLRQ 7KH WHUP ³FRS\ULJKW LQIULQJHPHQW RU FRS\ULJKW YLRODWLRQ ´ UHIHUV WR ³WKH XQDXWKRUL]HG XVH RI PDWHULDO WKDW LV FRYHUHG E\ FRS\ULJKW ODZ LQ D PDQQHUWKDWYLRODWHVRQHRIWKHFRS\ULJKWRZQHU VH[FOXVLYHULJKWVVXFKDV WKH ULJKW WR UHSURGXFH RU SHUIRUP WKH FRS\ULJKWHG ZRUN RU WR PDNH GHULYDWLYHZRUNV´ :.VVV  ,Q WKH 8QLWHG 6WDWHV IRU LQVWDQFH LW LV WKH ³8QLWHG 6WDWHV FRS\ULJKW ODZ´ZKLFKGHWHUPLQHVZKDWFRQVWLWXWHVFRS\ULJKWYLRODWLRQ :.WWW  D )RXU'HIHQVHVWR&RS\ULJKW9LRODWLRQ 8QGHU WKH 86 FRS\ULJKW ODZ WKHUH DUH VHYHUDO JXLGHOLQHV ZKLFK DOORZGHIHQVHVWRFRS\ULJKWYLRODWLRQ :.VVV  &RQVLGHU WKH IROORZLQJ H[DPSOHV RI GHIHQVHV WR FRS\ULJKW YLRODWLRQ IRULOOXVWUDWLRQ :.VVV   ‡,QGHSHQGHQW&UHDWLRQ ³$GHIHQGDQWLQDQLQIULQJHPHQWDFWLRQPD\UHEXWWKHSUHVXPSWLRQRI FRS\LQJ E\ D VKRZLQJ RI LQGHSHQGHQW FUHDWLRQ ,W LV SRVVLEOH IRU DQ DXWKRU WR FUHDWH D ZRUN LQGHSHQGHQWO\ ZKLOH EHDULQJ VLPLODULWLHV WR DQRWKHU,IDFFHVVLVQRWHVWDEOLVKHGWKHUHLVQRFRS\LQJHYHQLIWKHUH LV D VWULNLQJ VLPLODULW\ EHWZHHQ WKH WZR ZRUNV )RU WKLV UHDVRQ FRUSRUDWLRQV ZLOOGHVWUR\RUUHWXUQ XQVROLFLWHG PDLOLQJVIURPDXWKRUV DVDSROLF\´ ‡7ULYLDO8VH ³7KH OHJDO GRFWULQH RI GH PLQLPLV QRQ FXUDW OH[ WKH ODZ GRHV QRW FDUH DERXW WULYLDO WKLQJV  SURYLGHV D GH PLQLPLV FRS\LQJ GHIHQVH



7KH)XWXUHRI3RVW+XPDQ/DZ 



DJDLQVWLQIULQJHPHQW:KHQWKHSODLQWLIIHVWDEOLVKHVRQO\DWULYLDOXVH RIWKHFRS\ULJKWHGZRUNE\WKHGHIHQGDQWWKHUHLVQRLQIULQJHPHQW´ ‡6DOH'RFWULQH ³7KHILUVWVDOHGRFWULQHLVDGHIHQVHWRLQIULQJHPHQWRIWKHGLVWULEXWLRQ ULJKW,WSHUPLWVDODZIXOSXUFKDVHURIDFRS\ULJKWHGZRUNWRUHVHOORU RWKHUZLVH GLVSRVH RI LW 7KLV KRZHYHU LV QRW D GHIHQVH WR WKH UHSURGXFWLRQULJKW´ ‡)DLU8VH ³)DLU XVH LV DQ DIILUPDWLYH GHIHQVH EXW LWV DSSOLFDWLRQ ZLOO YDU\ JUHDWO\GHSHQGLQJRQWKHIDFWVDQGFLUFXPVWDQFHVRIWKHFDVH&RXUWV DSSO\DIRXUSDUWEDODQFLQJWHVWH[DPLQLQJWKHVFRSHRILQIULQJHPHQW WKHHIIHFWRQWKHFRS\ULJKWRZQHU VULJKWV HJKLVRUKHUDELOLW\WRVHOO WKH ZRUN  WKH DPRXQW RI WKH ZRUN FRSLHG DQG WKH SXUSRVH RI WKH LQIULQJHPHQW´  (YHQWKHQWKHVHGHIHQVHVWRFRS\ULJKWYLRODWLRQFDQDOVREHLQWHUSUHWHGLQ GLIIHUHQWZD\V ZKLFKYDU\IURPRQHSDUWLFXODUFDVHWRDQRWKHUIURPRQH OHJDO V\VWHP WR DQRWKHU DQG IURP RQH KLVWRULFDO HUD WR DQRWKHU²DV H[SODLQHGEHORZ E 7KH&RQWLQJHQW1DWXUHRI/HJDO,QWHUSUHWDWLRQ )RULQVWDQFHLQUHODWLRQWRGLIIHUHQWFDVHV³>F@RXUWV>LQWKH86@KDYH KHOG WKDW D QRQFRPPHUFLDO XVH LV QRW IDLU XVH ZKHQ LW KDV D VXEVWDQWLDO PDUNHW HIIHFW´ LQ RWKHU ZRUGV ³FRXUWV DUH PRUH UHFHSWLYH WR DUJXPHQWV UHJDUGLQJWKHHIIHFWRQWKHFRS\ULJKWRZQHU VPDUNHWRUSRWHQWLDOPDUNHW´ ZKHQDSDUWLFXODUFDVHKDV ³DVPDOOVFDOHLPSDFW´WKDQDODUJHRQH :. VVV  ,QUHODWLRQWRGLIIHUHQWOHJDOWUDGLWLRQVZKLOH³IDLUXVHLVXVHGPDLQO\ LQWKH8QLWHG6WDWHV«>R@WKHUFRPPRQODZMXULVGLFWLRQV>XQOLNHWKHRQHLQ WKH 86@ KDYH WKH PRUH ULJLGO\ GHILQHG GHIHQFH RI IDLU GHDOLQJ´ :. VVV  $QG LQ UHODWLRQ WR GLIIHUHQW KLVWRULFDO HUDV ³WKH SDVVDJH RI WKH 1R (OHFWURQLF7KHIW$FW 1(7$FW ´LQFKDQJHGWKH³86FRS\ULJKWODZ «WR DOORZ IRU WKH FLYLO DQG FULPLQDO SURVHFXWLRQ RI SHUVRQV DOOHJHGO\ HQJDJHGLQFRS\LQJRIFRS\ULJKWHGZRUNVZLWKRXWSHUPLVVLRQWKDWGLGQRW UHVXOWLQSHUVRQDOILQDQFLDOJDLQ´ :.VVV  7KLVFKDQJHLVKLVWRULFVLQFHLWXVHGWREHWKHFDVHWKDW³WKHFULPLQDO FRS\ULJKWODZUHTXLUHGLQIULQJHPHQWWREHIRUILQDQFLDOJDLQ$PRQJRWKHU WKLQJV WKH 1(7 $FW DOWHUHG WKH GHILQLWLRQ RI ILQDQFLDO JDLQ WR LQFOXGH EDUWHULQJ DQG WUDGLQJ ,Q DGGLWLRQ XQGHU WKLV 86 ODZ PHPEHUV RI VRIWZDUH SLUDF\ JURXSV FRXOG DOVR EH SURVHFXWHG IRU SDUWLFLSDWLRQ LQ D FULPLQDOHQWHUSULVH´ :.VVV 

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





F 7KH&RQWURYHUVLDO&DVHDJDLQVWI@UDXG LQ LQGXFHPHQW IRFXVHV RQ PLVUHSUHVHQWDWLRQ DWWHPSWLQJ WR JHW WKH SDUW\ WR HQWHU LQWR WKH FRQWUDFW 0LVUHSUHVHQWDWLRQRIDPDWHULDOIDFW LIWKHSDUW\NQHZWKHWUXWKWKDWSDUW\ ZRXOGQRWKDYHHQWHUHGLQWRWKHFRQWUDFW PDNHVDFRQWUDFWYRLGDEOH´ :. DDDD  6HFRQGO\ PLVUHSUHVHQWDWLRQ FDQ EH HLWKHU ³E\ ZRUGV´ RU ³E\ FRQGXFW´ :.DDDD 

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





)RULQVWDQFHLQ³*RUGRQY6HOLFR´WKLVGLVWLQFWLRQLVPDGHLQWKDWD PLVUHSUHVHQWDWLRQ FDQ EH ³HLWKHU E\ ZRUGV RU E\ FRQGXFW DOWKRXJK QRW HYHU\WKLQJ VDLG RU GRQH LV FDSDEOH RI FRQVWLWXWLQJ D PLVUHSUHVHQWDWLRQ *HQHUDOO\VWDWHPHQWVRIRSLQLRQRULQWHQWLRQDUHQRWVWDWHPHQWVRIIDFWLQ WKHFRQWH[WRIPLVUHSUHVHQWDWLRQ,IRQHSDUW\FODLPVVSHFLDOLVWNQRZOHGJH RQ WKH WRSLF GLVFXVVHG WKHQ LW LV PRUH OLNHO\ IRU WKH FRXUWV WR KROG D VWDWHPHQWRIRSLQLRQE\WKDWSDUW\DVDVWDWHPHQWRIIDFW´ :.DDDD  ,Q DQ\ HYHQW D FRQVHTXHQFH RI ³PLVUHSUHVHQWDWLRQ DOORZV IRU D UHPHG\ RI UHVFLVVLRQ DQG VRPHWLPHV GDPDJHV GHSHQGLQJ RQ WKH W\SH RI PLVUHSUHVHQWDWLRQ´ :.DDDD  F 0LVWDNH 7KH VHFRQG FRQGLWLRQ IRU FKDOOHQJLQJ D FRQWUDFW LV DERXW ³PLVWDNH´ ZKLFK PHDQV ³DQ LQFRUUHFW XQGHUVWDQGLQJ E\ RQH RU PRUH SDUWLHV WR D FRQWUDFW DQG PD\ EH XVHG DV JURXQGV WR LQYDOLGDWH WKH DJUHHPHQW´ :. DDDD  ,Q WKH FRPPRQ ODZ WUDGLWLRQ WKHUH DUH WKUHH W\SHV RI PLVWDNH LQ FRQWUDFW QDPHO\ L  XQLODWHUDO PLVWDNH LL  PXWXDO PLVWDNH DQG LLL  FRPPRQPLVWDNH :.DDDD  L ,QD³XQLODWHUDO PLVWDNH´²RQO\RQHSDUW\ PDNHVD PLVWDNH ³DVWR WKHWHUPVRUVXEMHFWPDWWHU7KHFRXUWVZLOOXSKROGVXFKDFRQWUDFWXQOHVV LW ZDV GHWHUPLQHG WKDW WKH QRQPLVWDNHQ SDUW\ ZDV DZDUH RI WKH PLVWDNH DQGWULHGWRWDNHDGYDQWDJHRIWKHPLVWDNH,WLVDOVRSRVVLEOHIRUDFRQWUDFW WREHYRLGLIWKHUH ZDVD PLVWDNHLQWKHLGHQWLW\RIWKHFRQWUDFWLQJSDUW\ $QH[DPSOHLVLQ /HZLVY $YHU\ ZKHUH/RUG'HQQLQJ05KHOGWKDWWKH FRQWUDFWFDQRQO\EHDYRLGHGLIWKHSODLQWLIIFDQVKRZWKDWDWWKHWLPHRI DJUHHPHQW WKH SODLQWLII EHOLHYHG WKH RWKHU SDUW\ V LGHQWLW\ ZDV RI YLWDO LPSRUWDQFH´ :.DDDD  LL  ,Q D ³PXWXDO PLVWDNH´²ERWK ERWK SDUWLHV PDNH D PLVWDNH ³DV WR WKH WHUPV´ RI WKH FRQWUDFW EXW LQ D GLIIHUHQW ZD\ IRU LQVWDQFH ³>H@DFK EHOLHYHV WKH\ DUH FRQWUDFWLQJ WR VRPHWKLQJ GLIIHUHQW 7KH FRXUW XVXDOO\ WULHV WR XSKROG VXFK D PLVWDNH LI D UHDVRQDEOH LQWHUSUHWDWLRQ RI WKH WHUPV FDQ EH IRXQG +RZHYHU D FRQWUDFW EDVHG RQ D PXWXDO PLVWDNH LQ MXGJHPHQWGRHVQRWFDXVHWKHFRQWUDFWWREHYRLGDEOHE\WKHSDUW\WKDWLV DGYHUVHO\DIIHFWHG´ :.DDDD  LLL  $QG LQ D ³FRPPRQ PLVWDNH´²ERWK SDUWLHV PDNH WKH VDPH PLVWDNHDERXW³WKHIDFWV7KLVLVGHPRQVWUDWHGLQWKHFDVHRI%HOOY/HYHU %URWKHUV /WG ZKLFK HVWDEOLVKHG WKDW FRPPRQ PLVWDNH FDQ RQO\ YRLG D FRQWUDFWLIWKHPLVWDNHRIWKHVXEMHFWPDWWHUZDVVXIILFLHQWO\IXQGDPHQWDO WR UHQGHU LWV LGHQWLW\ GLIIHUHQW IURP ZKDW ZDV FRQWUDFWHG PDNLQJ WKH SHUIRUPDQFHRIWKHFRQWUDFWLPSRVVLEOH´ :.DDDD 



7KH)XWXUHRI3RVW+XPDQ/DZ 



F 'XUHVVDQG8QGXH,QIOXHQFH 7KHWKLUGFRQGLWLRQIRUFKDOOHQJLQJDFRQWUDFWLVDERXW L ³GXUHVV´DQG LL ³XQGXHLQIOXHQFH´ :.DDD  L ,Q³GXUHVV´²WKHVLWXDWLRQKHUHUHIHUVWRD³WKUHDWRIKDUPPDGHWR FRPSHODSHUVRQWRGRVRPHWKLQJDJDLQVWKLVRUKHUZLOORUMXGJPHQWHVS D ZURQJIXO WKUHDW PDGH E\ RQH SHUVRQ WR FRPSHO D PDQLIHVWDWLRQ RI VHHPLQJDVVHQWE\DQRWKHUSHUVRQWRDWUDQVDFWLRQZLWKRXWUHDOYROLWLRQ´ )RU LQVWDQFH WKH FDVH RI ³%DUWRQ Y $UPVWURQJ´ LV DERXW GXUHVV EHFDXVH³$UPVWURQJWKUHDWHQHGWRNLOO%DUWRQLIKHGLGQRWVLJQDFRQWUDFW VRWKHFRXUWVHWWKHFRQWUDFWDVLGH´ :.DDDD  7KHUHIRUH ³>DQ@ LQQRFHQW SDUW\ ZLVKLQJ WR VHW DVLGH D FRQWUDFW IRU GXUHVVWRWKHSHUVRQQHHGRQO\WRSURYHWKDWWKHWKUHDWZDVPDGHDQGWKDWLW ZDVDUHDVRQIRUHQWU\LQWRWKHFRQWUDFWWKHEXUGHQRISURRIWKHQVKLIWVWR WKHRWKHUSDUW\WRSURYHWKDWWKHWKUHDWKDGQRHIIHFWLQFDXVLQJWKHSDUW\WR HQWHULQWRWKHFRQWUDFW7KHUHFDQDOVREHGXUHVVWRJRRGVDQGVRPHWLPHV WKH FRQFHSW RI HFRQRPLF GXUHVV  LV XVHG WR YLWLDWH FRQWUDFWV´ :. DDDD  LL  ,Q ³XQGXH LQIOXHQFH´²WKH VLWXDWLRQ KHUH UHIHUV WR ³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´ :.DDDD  F ,QFDSDFLW\ 7KHIRXUWKFRQGLWLRQIRUFKDOOHQJLQJDFRQWUDFWLVDERXW³LQFDSDFLW\´ LQWKDW³WKHFDSDFLW\RIHLWKHUQDWXUDORUDUWLILFLDOSHUVRQVWRHLWKHUHQIRUFH FRQWUDFWV RU KDYH FRQWUDFWV HQIRUFHG DJDLQVW WKHP LV UHVWULFWHG´ :. DDDD  7KUHH FRPPRQ H[DPSOHV RI LQFDSDFLW\ DUH QDPHO\ L  ³YHU\ VPDOO FKLOGUHQ PD\ QRWEHKHOGWREDUJDLQVWKH\ KDYH PDGHRQWKHDVVXPSWLRQ WKDWWKH\ODFNWKHPDWXULW\WRXQGHUVWDQGZKDWWKH\DUHGRLQJ´ LL ³HUUDQW HPSOR\HHV RU GLUHFWRUV PD\ EH SUHYHQWHG IURP FRQWUDFWLQJ IRU WKHLU FRPSDQ\EHFDXVHWKH\KDYHDFWHGXOWUDYLUHV EH\RQGWKHLUSRZHU ´DQG LLL  ³SHRSOH ZKR DUH PHQWDOO\ LQFDSDFLWDWHG HLWKHU E\ GLVDELOLW\ RU GUXQNHQQHVV´ :.DDDD  ,QFDVHVRILQFDSDFLW\OLNHWKLV³WKHODZOLPLWVRUEDUVDSHUVRQIURP HQJDJLQJ LQ VSHFLILHG DFWLYLWLHV´ DQG ³DQ\ DJUHHPHQWV RU FRQWUDFWV WR GR VRDUHHLWKHUYRLGDEOHRUYRLGIRULQFDSDFLW\7KHODZRQFDSDFLW\FDQVHUYH

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





HLWKHUDSURWHFWLYHIXQFWLRQRUFDQEHDZD\RIUHVWUDLQLQJSHRSOHZKRDFW DVDJHQWVIRURWKHUV´ :.DDDD  F ,OOHJDOLW\ $QGWKHILIWKFRQGLWLRQIRUFKDOOHQJLQJDFRQWUDFWLVDERXW³LOOHJDOLW\´ LQWKDWD³FRQWUDFWLVYRLGLILWLVEDVHGRQDQLOOHJDOSXUSRVHRUFRQWUDU\WR´ WKHODZRUSXEOLFSROLF\LQTXHVWLRQ :.DDDD  )RU LQVWDQFH LQ WKH FDVH RI ³5R\DO %DQN RI &DQDGD Y 1HZHOO´ WKH FRQWUDFWRIDKXVEDQGZLWKDEDQNZDVYRLGHGZKHQKLVZLIH³IRUJHGKHU KXVEDQG V VLJQDWXUH RQ  FKHFNV WRWDOLQJ RYHU  7R SURWHFW KHU IURP SURVHFXWLRQ KHU KXVEDQG VLJQHG D OHWWHU RI LQWHQW SUHSDUHG E\ WKH EDQNLQZKLFKKHDJUHHGWRDVVXPH DOOOLDELOLW\DQGUHVSRQVLELOLW\ IRUWKH IRUJHG FKHFNV +RZHYHU WKH DJUHHPHQW ZDV XQHQIRUFHDEOH DQG VWUXFN GRZQ E\ WKH FRXUWV EHFDXVH RI LWV HVVHQWLDO JRDO ZKLFK ZDV WR VWLIOH D FULPLQDO SURVHFXWLRQ  %HFDXVH RI WKH FRQWUDFW V LOOHJDOLW\ DQG DV D UHVXOW YRLGHG VWDWXV WKH EDQN ZDV IRUFHG WR UHWXUQ WKH SD\PHQWV PDGH E\ WKH KXVEDQG´ :.DDDD  7KHUHDUHRWKHU FRPSDUDEOH FDVHVZKLFK³LQFOXGHFRQWUDFWVDJUHHLQJ WRZRUNIRUOHVVWKDQPLQLPXPZDJHDQGIRUIHLWLQJWKHULJKWWRZRUNPDQ V FRPSHQVDWLRQ LQ FDVHV ZKHUH ZRUNPDQ V FRPSHQVDWLRQ LV GXH´ :. DDDD  +RZHYHU WKHUH DUH DOVR ERUGHUOLQH FDVHV IRU LOOXVWUDWLRQ ³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´ :.DDDD  7KUHH6SHFLDO&LUFXPVWDQFHVFRQFHUQLQJD&RQWUDFW +RZHYHUWKHVHILYHSRVVLEOHFRQGLWLRQVIRUFKDOOHQJLQJDFRQWUDFWGR QRW FRYHU VRPH VSHFLDO FLUFXPVWDQFHV FRQFHUQQJ D FRQWUDFW DQG WKUHH JRRG H[DPSOHV LQFOXGH G  XQFHUWDLQW\ G  LQFRPSOHWHQHVV DQG G  VHYHUDQFH²WREHVXPPDUL]HGEHORZ 8QGHUWKHODZ³DQDJUHHPHQWWRDJUHHGRHVQRWFRQVWLWXWHDFRQWUDFW´ EHFDXVH WKHUH FDQ EH VSHFLDO FLUFXPVWDQFHV ZKHQ WKH DJUHHPHQW FRQWDLQV FODXVHV ZKLFK DUH ³XQFHUWDLQ´ DQG ³LQFRPSOHWH´ HVSHFLDOO\ ZKHQ WKH



7KH)XWXUHRI3RVW+XPDQ/DZ 



SDUWLHV LQ TXHVWLRQ FDQQRW ³DJUHH RQ NH\ LVVXHV ZKLFK PD\ LQFOXGH VXFK WKLQJVDVSULFHRUVDIHW\´DQGRWKHUFRQWHQWLRXVLVVXHV :.DDDD  +RZHYHU LQ VSHFLDO FLUFXPVWDQFHV OLNH WKLV ³D FRXUW ZLOO DWWHPSW WR JLYH HIIHFW WR FRPPHUFLDO FRQWUDFWV ZKHUH SRVVLEOH E\ FRQVWUXLQJ D UHDVRQDEOHFRQVWUXFWLRQRIWKHFRQWUDFW´ :.DDDD  )RU LQVWDQFH ³>F@RXUWV PD\«ORRN WR H[WHUQDO VWDQGDUGV ZKLFK DUH HLWKHUPHQWLRQHGH[SOLFLWO\LQWKHFRQWUDFWRULPSOLHGE\FRPPRQSUDFWLFH LQDFHUWDLQILHOG,QDGGLWLRQWKHFRXUWPD\DOVRLPSO\DWHUPLISULFHLV H[FOXGHG WKH FRXUW PD\ LPSO\ D UHDVRQDEOH SULFH ZLWK WKH H[FHSWLRQ RI ODQGDQGVHFRQGKDQGJRRGVZKLFKDUHXQLTXH´ :.DDDD  $QGHYHQLQWKHZRUVWFDVHVFHQDULRVZKHQ³DOORSWLRQVLQUHVROYLQJ LWVWUXHPHDQLQJ>RIDQXQFHUWDLQDQGLQFRPSOHWHDJUHHPHQW@KDYHIDLOHGLW PD\EHSRVVLEOHWRVHYHUDQGYRLGMXVWWKRVHDIIHFWHGFODXVHVLIWKHFRQWUDFW LQFOXGHVDVHYHUDELOLW\FODXVH7KHWHVWRIZKHWKHUDFODXVHLVVHYHUDEOHLV DQ REMHFWLYH WHVW²ZKHWKHU D UHDVRQDEOH SHUVRQ ZRXOG VHH WKH FRQWUDFW VWDQGLQJHYHQZLWKRXWWKHFODXVHV´ :.DDDD  7KH7KHRUHWLFDO'HEDWHRQWKH%DVLVRI&RQWUDFW/DZ W@D[DWLRQ GHFLVLRQV DUH WKH GHFLVLRQV EDVHG RQ DGPLQLVWUDWLYH ODZ WKDW DUH PRVW RIWHQ FRQWHVWHG LQ FRXUWV´ DQG ³WKH DJULFXOWXUDOVHFWRULVRQHRIWKHPRVWKHDYLO\UHJXODWHGVHFWRUVLQWKH86 HFRQRP\ DV LW LV UHJXODWHG LQ YDULRXV ZD\V DW WKH LQWHUQDWLRQDO IHGHUDO VWDWHDQGORFDOOHYHOV´ :.FFFF  ,WLVQRZRQGHUWKDWIRULQVWDQFH³DGPLQLVWUDWLYHODZLVDVLJQLILFDQW FRPSRQHQW RI WKH GLVFLSOLQH RI $JULFXOWXUDO /DZ´ LQ WKH 86 DQG ³WKH 8QLWHG6WDWHV'HSDUWPHQWRI$JULFXOWXUHDQGLWV P\ULDGDJHQFLHVVXFKDV WKH $JULFXOWXUDO 0DUNHWLQJ 6HUYLFH DUH WKH SULPDU\ VRXUFHV RI UHJXODWRU\ DFWLYLW\«$Q H[WHQVLYH WUHDWPHQW RI WKH DGPLQLVWUDWLYH ODZV DQG UHJXODWLRQV SHUWDLQLQJ WR WKH DJULFXOWXUDO VHFWRU LV SURYLGHG E\ WKH 7KH

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





1DWLRQDO $JULFXOWXUDO /DZ &HQWHU LQ LWV $GPLQLVWUDWLYH /DZ 5HDGLQJ 5RRP´ :.FFFF  %\FRQWUDVWLQWKH(XURSHDQOHJDOWUDGLWLRQWKLQJVDUHDELWGLIIHUHQW )RULQVWDQFHLQWKH(XURSHDQ8QLRQWKHPRVWRIWHQFRQWHVWHGGHFLVLRQVLQ FRXUWV FRQFHUQLQJ DGPLQLVWUDWLYH ODZ KDYH WR GR ZLWK VXFK LVVXHV DV ³GLVSHQVDWLRQ RI PRQHWDU\ EHQHILWV´ ³HQYLURQPHQWDO OLFHQVHV´ ³EXLOGLQJ LQVSHFWLRQ´ ³WD[DWLRQ´  ³FKLOG FXVWRG\´  ³LQYROXQWDU\ FRPPLWPHQW´ ³LPPLJUDWLRQGHFLVLRQV´DQG³VXPPDU\SXEOLFSD\PHQWV RWKHUWKDQILQHV LPSRVHGE\JHQHUDOFRXUWV ´ :.GGGG  7KHUHIRUH DGPLQLVWUDWLYH ODZ LQ WKH (XURSHDQ 8QLRQ KDV D GLIIHUHQW IRFXVZKLFKGLIIHUVIURPWKHRQHLQWKH8QLWHG6WDWHV $GPLQLVWUDWLYH3RZHUV 7KLV FRQWUDVWLYH IRFXV RI DGPLQLVWUDWLYH ODZ DVLGH²DGPLQLVWUDWLYH ODZDOVRVSHFLILHVWKHDGPLQLVWUDWLYHSRZHUVRIWKHDGPLQLVWUDWLYHDJHQFLHV RIJRYHUQPHQW ,Q WKH 8QLWHG 6WDWHV WKHVH SRZHUV DUH JUDQWHG RQ WKH EDVLV RI WKH ³VWDWXWHV HQDFWHG E\ WKH &RQJUHVV WKDW H[LVW RXWVLGH RI WKH IHGHUDO H[HFXWLYHGHSDUWPHQWVEXWDUHVWLOOSDUWRIWKHH[HFXWLYHEUDQFK&RQJUHVV KDVDOVRFUHDWHGVRPHVSHFLDOMXGLFLDOERGLHVNQRZQDV$UWLFOH,WULEXQDOV WR KDQGOH VRPH DUHDV RI DGPLQLVWUDWLYH ODZ´ :. FFFF  7KHVH VWDWXWHV PXVW EH FRQVLVWHQW ZLWK WKH 86 &RQVWLWXWLRQ RI FRXUVH :. HHHH  )RU LQVWDQFH LQ WKH 8QLWHG 6WDWHV WKH WKUHH PRVW LPSRUWDQW DGPLQLVWUDWLYH SRZHUV DOORZHG XQGHU DGPLQLVWUDWLYH ODZ DUH E  HQIRUFHPHQW E DGMXGLFDWLRQDQG E UXOHPDNLQJ RUOHJLVODWLRQ  E (QIRUFHPHQW 7KHILUVWSRZHUJUDQWHGWRDGPLQLVWUDWLYHDJHQFLHVLVWR ³HQIRUFH´RU ³ H[HFXWH  DGPLQLVWUDWLYH JRDOV WKURXJK DJHQF\ HQIRUFHPHQW SHUVRQQHO ´ :.FFFF  ,Q RUGHU WR SUHYHQW DQ\ DEXVH RI SRZHU EHFDXVH ³WKH 8QLWHG 6WDWHV &RQVWLWXWLRQ VHWV QR OLPLWV RQ WKLV WULSDUWLWH DXWKRULW\ RI DGPLQLVWUDWLYH DJHQFLHV &RQJUHVV HQDFWHG WKH $3$ WR HVWDEOLVK IDLU DGPLQLVWUDWLYH ODZ SURFHGXUHV WR FRPSO\ ZLWK WKH FRQVWLWXWLRQDO UHTXLUHPHQWV RI GXH SURFHVV´ :.FFFF  E $GMXGLFDWLRQ 7KH VHFRQG SRZHU JUDQWHG WR DGPLQLVWUDWLYH DJHQFLHV KDV WR GR ZLWK DGMXGLFDWLRQ 7KH QDWXUH RI ³DGMXGLFDWLRQ´ GLIIHUV IURP WKDW RI ³UXOHPDNLQJ´ RU ³OHJLVODWLQJ´ DV ZLOO EH GLVFXVVHG LQ WKH QH[W VHFWLRQ  EHFDXVH E\



7KH)XWXUHRI3RVW+XPDQ/DZ 



GHILQLWLRQ XQGHU DGPLQLVWUDWLYH ODZ ³DGMXGLFDWLRQ´ UHIHUV WR ³DQ DJHQF\ SURFHVV IRU WKH IRUPXODWLRQ RI DQ RUGHU´ DQG WKH ZRUG ³RUGHU´ PHDQV ³WKH ZKROH RU SDUWRI D ILQDO GLVSRVLWLRQ«RI DQ DJHQF\ LQ D PDWWHU RWKHU WKDQUXOHPDNLQJEXWLQFOXGLQJOLFHQVLQJ´ :.HHHH  $FFRUGLQJ WR WKH /RQGRQHU%LPHWDOOLF GHILQLWLRQ DGMXGLFDWLRQ WHQGV WRKDYHWKHIROORZLQJWKUHHFKDUDFWHULVWLFV :.HHHH   ‡³,QYROYLQJDVPDOOQXPEHURISHRSOH´ ‡³,QGLYLGXDOVLQYROYHGDUHVSHFLDOO\DIIHFWHGE\WKHDFW´ ‡³'HFLVLRQEDVHGRQWKHIDFWVRIDQLQGLYLGXDOFDVHUDWKHUWKDQSROLF\ FRQFHUQV´  )RU LQVWDQFH LQ WKH FDVH RI ³/RQGRQHU Y &LW\ DQG &RXQW\ RI 'HQYHU´ WKHUH ZDV DQ DGMXGLFDWLRQ ³LQYROYLQJ D WD[ OHYLHG RQ UHVLGHQWV RI D SDUWLFXODU VWUHHW ZLWKRXW DIIRUGLQJ WKHP WKH RSSRUWXQLW\ WR KDYH WKHLU REMHFWLRQVKHDUGLQSHUVRQ´ :.HHHH  %XW LQ WKH FDVH RI ³%L0HWDOOLF ,QYHVWPHQW &R Y 6WDWH %RDUG RI (TXDOL]DWLRQ´ WKHUH ZDV WKH UXOHPDNLQJ ³LQYROYLQJ D WD[ OHYLHG RQ WKH HQWLUHFLW\RI'HQYHU´ :.HHHH   :LWKWKLVGLVWLQFWLRQEHWZHHQDGMXGLFDWLRQDQGUXOHPDNLQJLQPLQG² XQGHU DGPLQLVWUDWLYH ODZ LQ WKH 86 ³>W@KHUH DUH WZR ZD\V WKDW DQ LQGLYLGXDOFDQDWWDLQWKHULJKWWRDKHDULQJLQDQDGMXGLFDWLYHSURFHHGLQJ )LUVWWKH'XH3URFHVVFODXVHRIWKHWK$PHQGPHQWRUWK$PHQGPHQW FDQUHTXLUHWKDWDKHDULQJEHKHOGLIWKHLQWHUHVWWKDWLVEHLQJDGMXGLFDWHGLV VXIILFLHQWO\LPSRUWDQWRULIZLWKRXWDKHDULQJWKHUHLVDVWURQJFKDQFHWKDW WKHSHWLWLRQHUZLOOEHHUURQHRXVO\GHQLHGWKDWLQWHUHVW$KHDULQJFDQDOVR EH UHTXLUHG LI D VWDWXWH VRPHKRZ PDQGDWHV WKH DJHQF\ WR KROG IRUPDO KHDULQJVZKHQDGMXGLFDWLQJFHUWDLQLVVXHV´ :.HHHH  E 5XOHPDNLQJ RU/HJLVODWLQJ  $QG WKH WKLUG SRZHU JUDQWHG WR DGPLQLVWUDWLYH DJHQFLHV LV WR ³PDNH UXOHV´RU³SURPXOJDWHUXOHVWKDWKDYHWKHHIIHFWRIVXEVWDQWLYHODZ´ :. HHHH  7KLV SRZHU RI UXOHPDNLQJ ³VWHPV IURP WKH DJHQF\ V RUJDQLF VWDWXWH DQG H[WHQGV WR DOO UHJXODWLRQV QHFHVVDU\ WR FDUU\ RXW WKH SXUSRVHV RI WKH $FWUDWKHUWKDQEHLQJOLPLWHGWRSRZHUVH[SUHVVO\JUDQWHGE\WKHVWDWXWH 7KHSRZHUH[WHQGVWRVXEVWDQWLYHUXOHVDVZHOODVSURFHGXUDOUXOHV´ :. HHHH  7KHUH DUH WKUHH W\SHV RI UXOHPDNLQJ WR UHPHPEHU DV VKRZQ EHORZ :.HHHH   

&KDSWHU&RQWLQJHQF\DQG,WV0RUWDOLW\ 





‡ ³)RUPDO5XOHPDNLQJ´ 7KLV³LVUXOHPDNLQJ IRU ZKLFKWKHRUJDQLFVWDWXWHUHTXLUHVWKDWUXOHV EH PDGHRQWKHUHFRUGDIWHUDJHQF\RSSRUWXQLW\IRUKHDULQJ DQGIRU ZKLFK WKH $3$ SUHVFULEHV SDUWLFXODU SURFHGXUHV WKH SKUDVH LV UHTXLUHG IRU IRUPDO UXOHPDNLQJ VLPSO\ UHTXLULQJ WKDW UXOHV EH PDGH

DIWHU D KHDULQJ  GRHV QRW WULJJHU WKH UHTXLUHPHQWV RI IRUPDO UXOHPDNLQJ´ ‡ ³,QIRUPDO5XOHPDNLQJ´ 7KLV ³LV UXOHPDNLQJ IRU ZKLFK QR SURFHGXUDO UHTXLUHPHQWV DUH SUHVFULEHG LQ WKH RUJDQLF VWDWXWH DQG IRU ZKLFK WKH $3$ UHTXLUHV QRWLFHDQGFRPPHQW´ ‡ ³+\EULG5XOHPDNLQJ´ 7KLV ³LV UXOHPDNLQJ IRU ZKLFK SDUWLFXODU SURFHGXUDO UHTXLUHPHQWV EH\RQGQRWLFHDQGFRPPHQW>DUHQHHGHG@EXWQRWULVLQJWRWKHOHYHORI IRUPDOUXOHPDNLQJ´  +RZHYHUUXOHPDNLQJLVQRWXQOLPLWHGDVWKHUHDUHFRQWLQJHQWFRQVWUDLQWV RQLW&RQVLGHUWKHIROORZLQJH[DPSOHV )LUVWO\UXOHPDNLQJLVVXEMHFWWRGLIIHUHQWDOORZDQFHLQGLIIHUHQWVWDWHV )RU LQVWDQFH ³PDQ\ VWDWHV VXFK DV .HQWXFN\ KDYH EHHQ OHVV ZLOOLQJ WR DOORZ WKHLU DJHQFLHV WR SURPXOJDWH UXOHV ZLWK WKH HIIHFW RI VXEVWDQWLYH ODZ´ :.HHHH  6HFRQGO\ ³DJHQFLHV PD\ QRW SURPXOJDWH UHWURDFWLYH UXOHV XQOHVV H[SUHVVO\JUDQWHGVXFKSRZHUE\WKHRUJDQLFVWDWXWH´DVVKRZQLQWKHFDVH RI ³%RZHQ Y *HRUJHWRZQ 8QLYHUVLW\ +RVSLWDO  86   ´ :.HHHH  7KLUGO\³>W@KHFKRLFHRIZKHWKHUWRSURPXOJDWHUXOHVRUSURFHHGZLWK DGKRFDGMXGLFDWLYHGHFLVLRQVUHVWVLQWKHLQIRUPHGGLVFUHWLRQRIDJHQFLHV´ DV VKRZQ LQ WKH FDVH RI ³6(& Y &KHQHU\ &RUS  86   ´ :.HHHH  )RXUWKO\ ³WKH UXOHV WKHPVHOYHV DUH QRW DUELWUDU\ RU FDSULFLRXV´ DV VKRZQLQ WKHFDVHRI ³+HFNOHUY &DPSEHOO86  ´ :. HHHH  $QG ILIWKO\ ³>D@JHQFLHV PXVW DELGH E\ WKHLU RZQ UXOHV DQG UHJXODWLRQV´DV VKRZQLQWKHFDVHRI³$FFDUGLY6KDXJKQHVV\86   ´ :.HHHH  $GPLQLVWUDWLYH3ULQFLSOHV 7KHVH FRQWLQJHQW FRQVWUDLQWV FRQFHUQLQJ ³DUELWDULQHVV´ RU ³FRQVLVWHQWF\´ WKHQ EULQJ XV WR WKH IXQGDPHQWDO LVVXH FRQFHUQLQJ WKH DGPLQLVWUDWLYHSULQFLSOHVJRYHUQLQJDGPLQLVWUDWLYHODZ



7KH)XWXUHRI3RVW+XPDQ/DZ 



,Q JHQHUDO ³DGPLQLVWUDWLYH GHFLVLRQPDNLQJ ERGLHV DUH RIWHQ FRQWUROOHG E\ ODUJHU JRYHUQPHQWDO XQLWV´ DQG ³WKHLU GHFLVLRQV FRXOG EH UHYLHZHGE\DFRXUWRIJHQHUDOMXULVGLFWLRQXQGHUVRPHSULQFLSOHRIMXGLFLDO UHYLHZ´ :.HHHH  7RVWDUW³MXGLFLDOUHYLHZ´VKRXOGQRWEHFRQIXVHGZLWKDQ³DSSHDO´,Q D MXGLFLDO UHYLHZ ³WKH &RXUW ZLOO RQO\ ORRN DW WKH PHWKRG LQ ZKLFK WKH GHFLVLRQZDVDUULYHGDW´EXWLQDQDSSHDO³WKHFRUUHFWQHVVRIWKHGHFLVLRQ LWVHOI ZLOO EH XQGHU TXHVWLRQ 7KLV GLIIHUHQFH LV YLWDO LQ DSSUHFLDWLQJ DGPLQLVWUDWLYHODZLQFRPPRQODZFRXQWULHV´ :.HHHH