The Future of Post-human Waste: Towards a New Theory of Uselessness and Usefulness 1443841900, 9781443841900


243 86 4MB

English Pages [633] Year 2012

Report DMCA / Copyright

DOWNLOAD PDF FILE

Table of contents :
BOOKS ALSO BY PETER BAOFU
CONTENTS
TABLES
ACKNOWLEDGMENTS
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 Waste: Towards a New Theory of Uselessness and Usefulness
 1443841900, 9781443841900

  • 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:DVWH 

7KH)XWXUHRI 3RVW+XPDQ:DVWH

7RZDUGVD1HZ7KHRU\ RI8VHOHVVQHVVDQG8VHIXOQHVV     %\ 

3HWHU%DRIX  



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

     7KH)XWXUHRI3RVW+XPDQ:DVWH7RZDUGVD1HZ7KHRU\RI8VHOHVVQHVVDQG8VHIXOQHVVE\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:RUOGEH\RQG8VHOHVVQHVVDQG8VHIXOQHVV                                     

        

 



BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB %22.6$/62%RU ³PHGLFDO ZDVWH´@ GHSHQGV RQ GLIIHUHQW GHILQLWLRQV DQG KDV FUXFLDO LPSOLFDWLRQV LQ SUDFWLFHHWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJWKHDEVROXWHYLHZRIWKRVH³SULYDWHZDVWHFRQWUDFWRUVWR GXPS LOOHJDOO\ WR DYRLG KLJK IHHV´ LQ WKH V DIRUHFLWHG  WKHUH LV

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





UHODWLYHQHVV HJ ZKDW LV ULJKW IRU  WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV WR GXPS LOOHJDOO\ WR DYRLG KLJK IHHV´ LQ WKH V DIRUHFLWHG LV QRW QHFHVVDULO\VRIRUWKHIHGHUDOJRYHUQPHQWWRHQIRUFHSURSHUFOLQLFDOZDVWH GLVSRVDOXQGHUWKHODZ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKH SDUWLDO YLHZ RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV WR GXPS LOOHJDOO\ WR DYRLGKLJK IHHV´ LQWKHVDIRUHFLWHG WKHUHLVWRWDOLW\ HJWKH PRUH KROLVWLFYLHZRIFOLQLFDOZDVWHGLVSRVDOVXFKWKDWWKHZKROHLVQRWWKHVXP RILWVSDUWVWKDWLVLWFDQQRWEHUHGXFHGWRWKHVXPRIRSSRVLQJYLHZVRI WKRVH³SULYDWHZDVWHFRQWUDFWRUV´WRGXPSLOOHJDOO\WRDYRLGKLJKIHHV´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³WKH VSUHDG RI LQIHFWLRXV GLVHDVH´  WKHUH LV LQH[SOLFDELOLW\ HJ WKH ODFN RI VXIILFLHQW H[SODQDWLRQE\WKHDGYRFDWHVRIWKH0:7$RIZK\SURSHUFOLQLFDOZDVWH GLVSRVDO LV QHFHVVDULO\ GHVLUDEOH VLQFH LQ WKH V ³WKH KLJK FRVW >aWRQ@ DVVRFLDWHG ZLWK WKH OHJDO GLVSRVDO RI WKH ZDVWH´ JDYH LQFHQWLYHV WR ³SULYDWH ZDVWH FRQWUDFWRUV WR GXPS LOOHJDOO\ WR DYRLG KLJK IHHV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDODVSHFWRIWKH0:7$LQVRIDUDV³WKH$FWZDVUHSHDOHGLQ´ EHFDXVH WKH IHGHUDO JRYHUQPHQW ZDV QR ORQJHU GHHPHG QHFHVVDU\ WR HQIRUFH SURSSHU FOLQLFDO ZDVWH GLVSRVDO VR WKH HQIRUFHPHQW ZDV WKHQ SDVVHGWRWKHVWDWHVLQVWHDG WKHUHLVUHDOLW\ HJWKHUHDOLVWLFDVSHFWRIWKH 0:7$LQVRIDUDVWKH$FWZDVLQIRUFHEHWZHHQDQG $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJ WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI FOLQFDO ZDVWH OLNH ³QHHGOHV´ ³VFDOSHOV´ ³ODQFHWV´ ³LGHQWLILDEOH ERG\ SDUWV´ HWF  WKHUH LV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WUDQVILQLWHQHVV HJWKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYLGXDO³QHHGOHV´ ³VFDOSHOV´³ODQFHWV´³LGHQWLILDEOHERG\SDUWV´HWFWKDWKDYHHYHUH[LVWHG RUSURGXFHGLQKLVWRU\ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI WKUHH PHWKRGV RI FOLQLFDO ZDVWH GLVSRVDO LQ WKH DUWLFOH DIRUHFLWHG  WKHUH LV YDJXHQHVV HJ WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH WKUHH PHWKRGV RI FOLQLFDO ZDVWH GLVSRVDO LQ WKH DUWLFOH DIRUHFLWHG VLQFH LW LV QRW FOHDU ZK\ WKHUH PXVW EH RQO\QRWDQGVRRQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJ WKH UHODWLYHO\ VLPSOH DQDO\VLV RI SURSHU FOLQLFDO ZDVWH GLVSRVDO E\ WKH DGYRFDWHV  WKHUH LV FRPSOLFDWHGQHVV HJ WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI SURSHU FOLQLFDO ZDVWH GLVSRVDO E\ FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHG RXWE\WKHFULWLFVDVFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJ WKH RSHQ H[SORUDWLRQ RI ZKDW FRQVWLWXWHV FOLQLFDO ZDVWH E\ D JLYHQ GHILQLWLRQ WKHUHLVKLGGHQQHVV HJWKHKLGGHQELDVLQHDFKGHILQLWLRQRI FOLQLFDO ZDVWH EHFDXVH ³GHILQLQJ ZKDW REMHFWV ZHUH WR EH FODVVLILHG DV PHGLFDO ZDVWHV ZDV FUXFLDO WR HQVXUH WKDW DOO PXQLFLSDOLWLHV«ZRXOG EH PRQLWRULQJ VLPLODU PDWHULDOV´ VR GLIIHUHQW GHILQLWLRQV HQG XS PRQLWRULQJ GLIIHUHQWPDWHULDOV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI LWHPV OLNH ³QHHGOHV´ ³VFDOSHOV´ ³ODQFHWV´ ³LGHQWLILDEOH ERG\ SDUWV´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³WKH  PLOHJDUEDJHVOLFN FRPSRVHGSULPDULO\RIPHGLFDODQGKRXVHKROGZDVWHV´

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





VSUHDGLQJ LQ ³QXPHURXV 1HZ -HUVH\ DQG 1HZ IRU FOLQLFDO ZDVWH@ WKDW KRW DLU DW  ƒ& WDNHV WZR KRXUV WR DFKLHYH´  :.Y $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHVSUHDGRIWKHXVHRI³PDQ\VXUJLFDOLQVWUXPHQWV>VXFKDV IRUFHSV QHHGOH KROGHUV DQG VFDOSHO KDQGOHV@´ ZKLFK DUH ³VLQJOH XVH«LWHPV´ QRZDGD\V  WKHUH LV FRQWUDFWLRQ HJ WKH UHODWLYH GHFOLQH RI WKH XVH RI ³VXUJLFDO LQVWUXPHQWV >VXFK DV IRUFHSV QHHGOH KROGHUV DQG VFDOSHOKDQGOHV@´ZKLFKDUH³UHXVDEOHLWHPV´QRZDGD\V  :.Y $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³LQIHFWLRXV RU ELRKD]DUGRXV´ GLVHDVH LQ PHGLFLQH WKHUHLVSUD[LV HJWKHSUDFWLFDODSSOLFDWLRQRIWKHNQRZOHGJH RI ³LQIHFWLRXV RU ELRKD]DUGRXV´ GLVHDVH LQ PHGLFLQH WR WKH ILHOG RI ZDVWH PDQDJHPHQWOLNHWKHHQIRUFHPHQWE\WKH0:7$IRUSURSHUFOLQLFDOZDVWH GLVSRVDO WR DYRLG WKH VSUHDG RI LQIHFWLRXV GLVHDVH  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJ WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ ³VXUJLFDO LQVWUXPHQWV >VXFK DV IRUFHSV QHHGOH KROGHUV DQG VFDOSHO KDQGOHV@´ ZKLFK DUH ³UHXVDEOH´ DQG ³VWHULOL]DEOH´LQWKHROGHUGD\V WKHUHLVQRYHOW\ HJWKHDOWHUQDWLYHQRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ ³UHXVDEOH´ DQG ³VWHULOL]DEOH´ VXUJLFDO LQVWUXPHQWV LQ WKH ROGHU GD\V E\ WKH QHZ LGHD RI XVLQJ ³VXUJLFDO LQVWUXPHQWV >VXFK DV IRUFHSV QHHGOH KROGHUV DQG VFDOSHO KDQGOHV@´ ZKLFK DUH ³VLQJOHXVH´ QRZDGD\V  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH ,Q UHODWLRQ WR WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH LI WKHUH LV HYROXWLRQ HJ WKH QDWXUDO HYROXWLRQ RI KXPDQV WR WKURZ DZD\ FOLQLFDO ZDVWH OLNH ³LGHQWLILDEOH ERG\ SDUWV´ LQ WKH VWDWH RI QDWXUH LQ D SULPLWLYH ZD\ WKHUHLVWUDQVIRUPDWLRQ HJWKHWHFKQLFDOWUDQVIRUPDWLRQRIKXPDQ DELOLW\ WR GLVSRVH FOLQLFDO ZDVWH E\ WKH LQYHQWLRQ RI DXWRFODYHV  :. Y $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHV\PPHWU\DV\PPHWU\SULQFLSOHLIWKHUHLVV\PPHWU\ HJWKHH[LVWHQFHRIGLIIHUHQWDFWRUVLQWKHILHOGRIFOLQLFDOZDVWHGLVSRVDO OLNH WKH IHGHUDO JRYHUQPHQW DQG ³SULYDWH ZDVWH FRQWUDFWRUV´  WKHUH LV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



DV\PPHWU\ HJ WKH IHGHUDO JRYHUQPHQW HPSRZHUHG E\ WKH 0:7$ FDQ SXQLVK WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ IRU GXPSLQJ LOOHJDOO\ ³WR DYRLG KLJKIHHV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVRIWQHVVKDUGQHVVSULQFLSOHLIWKHUHLVVRIWQHVV HJ WKH FRPSOLDQFH RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ GLVSRVH FOLQLFDOZDVWHLQDFFRUGDQFHWRWKHUHJXODWLRQVXQGHUWKH0:7$ WKHUHLV KDUGQHVV HJ WKH YLRODWLRQ RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ HQJDJH LQ GXPSLQJ LOOHJDOO\ ³WR DYRLG KLJK IHHV´  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VHULRXVQHVVSOD\IXOQHVV SULQFLSOH LI WKHUH LV VHULRXVQHVV HJWKHVHULRXV EXVLQHVVRIWKRVH WU\LQJWRGHDO ZLWKSURSHU FOLQLFDOZDVWHGLVSRVDO WKHUHLVSOD\IXOQHVV HJWKHSOD\IXOSDUWRIWKRVH WU\LQJWRGHDOZLWKSURSHUFOLQLFDOZDVWHGLVSRVDOZKHQWKH\SOD\DURXQG ZLWK GLIIHUHQW PHWKRGV RYHU WLPH OLNH ³RQVLWH WUXFN VHUYLFH DQG PDLO EDFNGLVSRVDO´HWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHDFWLYHQHVVLQDFWLYHVVSULQFLSOHLIWKHUHLVDFWLYHQHVV HJ WKH DFWLYHQHVV RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ GLVSRVHFOLQLFDO ZDVWHLQDFFRUGDQFHWRWKHUHJXODWLRQVXQGHUWKH0:7$ DQGDUHDOORZHGWRVWD\LQEXVLQHVV WKHUHLVLQDFWLYHQHVV HJWKHUHODWLYH LQDFWLYHQHVV RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ DUH IRXQG ³JXLOW\ RI NQRZLQJO\ HQGDQJHULQJ WKH OLIH RI DQRWKHU WKURXJK QRQFRPSOLDQFH«IDFH XSZDUGV RI ILIWHHQ \HDUV LPSULVRQPHQW´ DQG WKHUHIRUHFDQQRWZRUNLQWKDWSHULRGEHFDXVHRILPSULVRQPHQW  ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ LQ WKRVH³SULYDWHZDVWHFRQWUDFWRUV´ZKHQWKH\HQJDJHLQGXPSLQJLOOHJDOO\ ³WR DYRLG KLJK IHHV´  WKHUH LV RWKHUQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHGRQRWKHUVDVVKRZQLQWKRVHIHZJRRGLQGLYLGXDOVZKRJHQXLQHO\ ZRUN XQGHU WKH 0:7$ WR HQVXUH SURSHU FOLQLFDO ZDVWH GLVSRVDO IRU WKH FRPPRQJRRG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJ WKH UHJUHVVLRQ PDGH E\ WKH PHWKRGV RI FOLQLFDO ZDVWH GLVSRVDODQGWKHLUHQIRUFHPHQWDVVKRZQLQWKHSUREOHPV SRLQWHGRXWE\ WKHFULWLFV WKHUHLVSURJUHVVLRQ HJWKHSURJUHVVPDGHE\WKHPHWKRGVRI FOLQLFDOZDVWHGLVSRVDODQGWKHLUHQIRUFHPHQWDVVKRZQLQWKHFRQWULEXWLRQ WR WKH SUHYHQWLRQ RI LQIHFWLRXV GLVHDVH E\ FOLQLFDO ZDVWH DIRUHFLWHG  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVUHJDUGOHVVRIZKHWKHUWKLVEHGRQHE\ZD\RIWKRVH ³SULYDWHZDVWHFRQWUDFWRUVWRGXPSFOLQLFDOZDVWH³WRDYRLGKLJKIHHV´RU

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





E\ZD\RIWKHIHGHUDOJRYHUQPHQWXQGHUWKH0:7$IRUWKHHQIRUFHPHQW RISURSHUFOLQLFDOZDVWHGLVSRVDO WKHUHLVGLIIHUHQFHLQRXWFRPH HJWKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV IRU D UHODWLYHO\ PRUH PDUNHW RULHQWHG OLIHZRUOG²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³WKH $FW ZDV UHSHDOHG LQ ´ DQG ³VWDWHV ZHUH JLYHQ WKH UHVSRQVLELOLW\WRUHJXODWHDQGSDVVODZVFRQFHUQLQJWKHGLVSRVDORIPHGLFDO ZDVWH´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQ LQ WKH SDVVLQJ RI WKH 0:7$ LQ  WR VHUYH WKH IXQFWLRQ RI HQIRUFLQJSURSHUFOLQLFDOZDVWHGLVSRDVDOE\WKHIHGHUDOJRYHUQPHQW WKHUH LVQRQIXQFWLRQDOLW\ HJWKHUHODWLYHODFNRIDFWLRQIRUZKLFKVRPHWKLQJLV ILWWHG DV VKRZQ LQ WKH UHSHDO RI WKH 0:7$ LQ  ZKHQ WKH IHGHUDO JRYHUQPHQW ZDV QR ORQJHU GHHPHG QHFHVVDU\ WR VHUYH WKH IXQFWLRQ RI HQIRUFLQJ SURSHU FOLQLFDO ZDVWH GLVSRDVDO VR ³VWDWHV ZHUH JLYHQ WKH UHVSRQVLELOLW\WRUHJXODWHDQGSDVVODZVFRQFHUQLQJWKHGLVSRVDORIPHGLFDO ZDVWH´LQVWHDG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $QG LQ UHODWLRQ WR WKH LQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\ SULQFLSOH LI WKHUH LV LQWHQWLRQDOLW\ HJ WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQRXWFRPHDVVKRZQLQWKHHQDFWPHQWRIJRYHUQPHQWDOUHJXODWLRQIRU EHWWHUFOLQLFDOZDVWHGLVSRVDO WKHUHLVQRQLQWHQWLRQDOLW\ HJWKHUHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH VXFK WKDWWKHRXWFRPHFDQHYHQEHFRXQWHULQWHQWLRQDOLQEHLQJWKHRSSRVLWHRI ZKDWZDVRULJLQDOO\SODQQHGDVVKRZQLQWKHXQLQWHQGHGFRQVHTXHQFHVRI WKH JRYHUQPHQWDO UHJXODWLRQ IRU FOLQLFDO ZDVWH GLVSRVDO LQ WKDW LW FDQ EH FRVWO\ DQG WKXV SURGXFH LQFHQWLYHV WR YLRODWH LW DQG WKDW WKH PHWKRGV RI FOLQLFDO ZDVWH GLVSRVDO KDYH WKHLU RZQ OLPLWV  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



8VHOHVVQHVVDQG1DWXUH 8VHOHVVQHVVZKHQH[DPLQHGIURPWKHSHUVSHFWLYHRIQDWXUHFDQVKRZ XVLWVSRVVLELOLW\ RULPSRVVLELOLW\ DQGGHVLUDELOLW\ RUXQGHVLUDELOLW\ DQG WKLVFDQEHVKRZQE\ZD\RIWZRFDVHVWXGLHVQDPHO\  XVHOHVVQHVV OLWWHU DQG WKH QDWXUDO HQYLURQPHQW DQG   XVHOHVVQHVV VSDFH ZDVWH DQGWKH(DUWK¶VRUELW²WREHDGGUHVVHGLQZKDWIROORZVUHVSHFWLYHO\

8VHOHVVQHVV/LWWHUDQGWKH1DWXUDO(QYLURQPHQW $ JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHOHVVQHVV IURP WKH SHUVSHFWLYH RI QDWXUHLVWRH[SORUHXVHOHVVQHVVOLWWHUDQGWKHQDWXUDOHQYLURQPHQW 7KHWHUP³OLWWHU´UHIHUVWR³ZDVWHSURGXFWVWKDWKDYHEHHQGLVSRVHGRI LPSURSHUO\ ZLWKRXW FRQVHQW LQ DQ LQDSSURSULDWH ORFDWLRQ«:KLOH PRVW OLWWHU LV DVVRFLDWHG ZLWK FRQWDLQHUV ZUDSSHUV DQG SDSHU SURGXFW GXPSHG LWHPVPD\LQFOXGHIXUQLWXUHDSSOLDQFHV ZKLWHJRRGV ROGHOHFWURQLFV H ZDVWH DEDQGRQHGYHKLFOHVRUFRQVWUXFWLRQPDWHULDOV7KHVHFDWHJRULHVRI ZDVWHRIWHQFRQWDLQKD]DUGRXVPDWHULDOV´ :.Z  +LVWRU\RI/LWWHU +LVWRULFDOO\ ³SHRSOH KDYH GLVSRVHG RI XQZDQWHG PDWHULDOV ZLWKRXW IHDURIUHWULEXWLRQRQWRVWUHHWVURDGVLGHVLQVPDOOORFDOGXPSVRURIWHQLQ UHPRWH ORFDWLRQV 3ULRU WR UHIRUPV ZLWKLQ FLWLHV LQ WKH PLGWRODWH WK FHQWXU\ VDQLWDWLRQ ZDV QRW D JRYHUQPHQW SULRULW\ 7KH JURZLQJ SLOHV RI ZDVWHOHGWRWKHVSUHDGRIGLVHDVH´ :.Z66SDFHN  %XWZLWKWKHJURZWKRIOLWWHULQFRQWHPSRUDU\WLPHVIRULQVWDQFH³LQ WKH8QLWHG6WDWHVWKH6ROLG :DVWH'LVSRVDO $FWRIZDVHQDFWHG,Q  WKH )HGHUDO JRYHUQPHQW DPHQGHG WKH 6ROLG :DVWH 'LVSRVDO $FW FUHDWLQJ WKH 5HVRXUFH &RQVHUYDWLRQ DQG 5HFRYHU\ $FW 5&5$  ZKLFK UHTXLUHVD FUDGOHWRJUDYH DSSURDFKWRWKHSURSHUKDQGOLQJRISRWHQWLDOO\ KD]DUGRXV PDWHULDOV 5&5$ JLYHV DXWKRULW\ WR WKH (QYLURQPHQWDO 3URWHFWLRQ$JHQF\ (3$ WRUHJXODWHDQGHQIRUFHSURSHUKD]DUGRXVZDVWH GLVSRVDO´ :.Z  (OVHZKHUH ³PDQ\ FRXQWULHV QRZ KDYH ODZV WKDW UHTXLUH WKDW KRXVHKROG KD]DUGRXV ZDVWH EH GHSRVLWHG LQ D VSHFLDO ORFDWLRQ UDWKHU WKDQ VHQWWRODQGILOOV ZLWKUHJXODUUHIXVH+RXVHKROGKD]DUGRXVZDVWHLQFOXGHV SDLQWVDQGVROYHQWVFKHPLFDOVOLJKWEXOEVIOXRUHVFHQWOLJKWVVSUD\FDQV DQG \DUG SURGXFWV VXFK DV IHUWLOL]HUV SHVWLFLGHV KHUELFLGHV DQG

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





LQVHFWLFLGHV$GGLWLRQDOO\PHGLFDOZDVWHJHQHUDWHGDWKRPHLVFRQVLGHUHG DKD]DUGRXVZDVWHDQGPXVWEHGLVSRVHGRISURSHUO\´ :.Z  &DXVHVRI/LWWHU /LWWHULQJFDQKDYHGLIIHUHQWFDXVHVERWKLQWHQWLRQDODQGXQLQWHQWLRQDO )RU LQVWDQFH ³LQ DGGLWLRQ WR LQWHQWLRQDO OLWWHULQJ DOPRVW KDOIRIOLWWHU RQ 86 URDGZD\V LV QRZ D UHVXOW RI DFFLGHQWDO RU XQLQWHQWLRQDO OLWWHU XVXDOO\ GHEULV WKDW IDOOV RII RI LPSURSHUO\ VHFXUHG WUDVK UHF\FOLQJ FROOHFWLRQYHKLFOHVDQGSLFNXSWUXFNV3RSXODWLRQOHYHOVWUDIILFGHQVLW\DQG SUR[LPLW\ WR ZDVWH GLVSRVDO VLWHV DUH IDFWRUV NQRZQ WR FRUUHODWH ZLWK KLJKHU OLWWHU UDWHV *RYHUQPHQW QHJOHFW WKH LQDELOLW\ RI JRYHUQPHQWV WR UHPRYHOLWWHULQDWLPHO\PDQQHULVDOVRDUHDVRQZK\KXPDQVDUHWHPSWHG WROLWWHU´ :.Z$%&3/HLJK  ,QDGGLWLRQ³LOOHJDOO\GXPSHGKD]DUGRXVZDVWHPD\EHDIIHFWHGE\WKH FRVWVDVVRFLDWHGZLWKGURSSLQJPDWHULDOVDWGHVLJQDWHGVLWHVVRPHIDFLOLWLHV FKDUJHDIHHIRUGHSRVLWLQJKD]DUGRXVPDWHULDO$FFHVVWRQHDUE\IDFLOLWLHV WKDWDFFHSWKD]DUGRXVZDVWHPD\GHWHUXVH$GGLWLRQDOO\LJQRUDQFHRIWKH ODZV WKDW UHJXODWH WKH SURSHU GLVSRVDO RI KD]DUGRXV ZDVWH PD\ KDYH DQ LPSDFWRQSURSHUGLVSRVDO´ :.Z  ,Q RWKHU FDVHV ³QHJOLJHQW RU OHQLHQW ODZ HQIRUFHPHQW FRQWULEXWHV WR OLWWHULQJ EHKDYLRU 2WKHU FDXVHV DUH LQFRQYHQLHQFH HQWLWOHPHQW DQG HFRQRPLFFRQGLWLRQV$VXUYH\RIGXPSLQJLQ3HQQV\OYDQLDIRXQGWKDWWKH ODUJHVWQXPEHURILOOHJDOGXPSVZHUHLQWRZQVKLSVZLWKRXWPXQLFLSDOWUDVK KDXOLQJ 7KH VDPH UHSRUW DOVR FLWHV XQDYDLODELOLW\ RI FXUEVLGH WUDVK DQG UHF\FOLQJVHUYLFHVKRUWDJHRIHQIRUFHPHQWDQGKDELWDVSRVVLEOHFDXVHV´ :.Z0$UJHQWR  ,Q D VWXG\ E\ WKH 'XWFK RUJDQL]DWLRQ 9520 ³ SHUFHQW RI WKH SHRSOHFODLPWKDW HYHU\ERG\OHDYHVRIDSLHFHRISDSHUWLQRUVRPHWKLQJ RQWKHVWUHHWEHKLQG NQRZQ DV EXLWHQJHZRRQ RSVSRULQJVDPEWHQDDU RU %2$@´ ZKR ³ILQH FLWL]HQV IRU WKURZLQJ DZD\ FDQV ERWWOHV RU ZUDSSHUV RQWR WKH VWUHHW´  WKHUH LV UHODWLYHQHVV HJ ZKDW LV ULJKW IRU WKRVH ³'XWFK SROLFH DQG ORFDO VXSHUYLVRUV >NQRZQ DV EXLWHQJHZRRQ RSVSRULQJVDPEWHQDDU RU %2$@´ ZKR ³ILQH FLWL]HQV IRU WKURZLQJ DZD\ FDQV ERWWOHV RU ZUDSSHUV RQWRWKHVWUHHW´LVQRWQHFHVVDULO\VRIRUWKRVHFLWL]HQVZKRDUHILQHGEXW



7KH)XWXUHRI3RVW+XPDQ:DVWH 



GLVDJUHH DERXW WKH SXQLVKPHQW  :. Z  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKHSDUWLDOYLHZRIOLWWHUE\WKHDGYRFDWHVRI³&OHDQ8SWKH:RUOG´ZKLFK LV D ZRUOGZLGH DQWLOLWWHU FDPSDLJQ  WKHUH LV WRWDOLW\ HJ WKH PRUH KROLVWLFYLHZRIOLWWHUVXFKWKDWWKHZKROHLVQRWWKHVXPRILWVSDUWVWKDW LV LW FDQQRW EH UHGXFHG WR WKH VXP RI RSSRVLQJ YLHZV KHOG E\ WKH DGYRFDWHV RI ³&OHDQ 8S WKH :RUOG´ DQG WKHLU FULWLFV VLQFH WKHUH ZLOO HPHUJH QHZ YLHZV LQ WKH IXWXUH QRW \HW NQRZQ WRGD\ MXVW DV WKHUH DUH DOUHDG\FULWLFVDERXWERWKVLGHVQRZDGD\V $QGWKHUHYHUVHGLUHFWLRQDOVR KROGVWUXH ,Q UHODWLRQ WR WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH LI WKHUH LV SUHGLFWDELOLW\ HJWKHSUHGLFWDEOHWHQGHQF\RIWKHDGYRFDWHVRI³&OHDQ8S WKH :RUOG´ WR FDPSDLJQ DJDLQVW OLWWHU  WKHUH LV XQSUHGLFWDELOLW\ HJ WKH PRUHGLIILFXOWWDVNWRSUHGLFWH[DFWO\WKHH[WHQWWRZKLFKWKHDGYRFDWHVRI ³&OHDQ8SWKH:RUOG´ZLOOEHVXFFHVVIXOLQWKHFDPSDLJQDJDLQVWOLWWHURQ D SDUWLFXODU IXWXUH RFFDVLRQ EHFDXVH PDQ\ FDVHV RI OLWWHULQJ DUH XQLQWHQWLRQDO>ZKLFKLVVXEMHFWWRGLIIHUHQWXQFHUWDLQFLUFXPVWDQFHV@VRLW LV GLIILFXOW WR FRQWURO OLWWHULQJ EHKDYLRU  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGVWUXH ,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJWKHH[SODQDWLRQE\³'XWFKSROLFHDQGORFDOVXSHUYLVRUV >NQRZQ DV EXLWHQJHZRRQ RSVSRULQJVDPEWHQDDU RU %2$@´  ZKR ³ILQH FLWL]HQVIRUWKURZLQJDZD\FDQVERWWOHVRUZUDSSHUVRQWRWKHVWUHHW´RQWKH EDVLV RI DQWLOLWWHU HQIRUFHPHQW  WKHUH LV LQH[SOLFDELOLW\ HJ WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ ³'XWFK SROLFH DQG ORFDO VXSHUYLVRUV >NQRZQ DV EXLWHQJHZRRQRSVSRULQJVDPEWHQDDURU%2$@´RIZK\ILQLQJ³FLWL]HQVIRU WKURZLQJ DZD\ FDQV ERWWOHV RU ZUDSSHUV RQWR WKH VWUHHW´ LV QHFHVVDULO\ GHVLUDEOH EHFDXVH WKRVH FLWL]HQV ZKR DUH ILQHG FDQ GLVDJUHH ZKLFK DOVR H[SODLQVZK\WKH\OLWWHULQWKHILUVWSODFH $QGWKHUHYHUVHGLUHFWLRQDOVR KROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI DQWLOLWWHU VROXWLRQV LQVRIDU DV HDFK SURSRVHG VROXWLRQ KDV LWV RZQ GLVDGYDQWDJHV DQG GRHV QRW RIWHQ ZRUN DV FODLPHG  WKHUH LV UHDOLW\ HJ WKH UHDOLVWLF DVSHFW RI DQWLOLWWHU VROXWLRQV LQVRIDU DV HDFK SURSRVHGVROXWLRQKDVVRPHLPSDFWRQFOHDQLQJXSOLWWHU $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJ WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI OLWWHU OLNH ³FRQWDLQHUV´ ³ZUDSSHUV DQG SDSHU SURGXFW´ ³IXUQLWXUH´ ³DSSOLDQFHV´ ³ROG HOHFWURQLFV´ ³DEDQGRQHG YHKLFOHV´ DQG ³FRQVWUXFWLRQ PDWHULDOV´ 

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





WKHUH LV WUDQVILQLWHQHVV HJ WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO SLHFHV RI ³FRQWDLQHUV´ ³ZUDSSHUV DQG SDSHU SURGXFW´ ³IXUQLWXUH´ ³DSSOLDQFHV´ ³ROG HOHFWURQLFV´ ³DEDQGRQHG YHKLFOHV´ DQG ³FRQVWUXFWLRQ PDWHULDOV´ LQ KLVWRU\ WKDW KDYH HYHU EHHQ SURGXFHG  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI  VROXWLRQV WR OLWWHU LQ WKH DUWLFOH DIRUHFLWHG  WKHUH LV YDJXHQHVV HJ WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQRIWKHVROXWLRQVWROLWWHULQWKHDUWLFOHDIRUHFLWHGVLQFHLWLV QRWFOHDUZK\WKHUHPXVWEHRQO\QRWDQGVRRQ $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJ WKH UHODWLYHO\ VLPSOH DQDO\VLV RI WKH SUHYHQWLRQ RI OLWWHU E\ WKH DGYRFDWHV  WKHUH LV FRPSOLFDWHGQHVV HJ WKH UHODWLYHO\ PRUH FRPSOLFDWHGDQDO\VLVRIWKHSUHYHQWLRQRIOLWWHUE\FKDOOHQJLQJWKHFODLPV DQGDVVXPSWLRQVDVVKRZQLQWKHSUREOHPV ZLWKFRPSOLFDWHGFDXVHVDQG RWKHULVVXHVSRLQWHGRXWE\WKHFULWLFVDVFLWHG $QGWKHUHYHUVHGLUHFWLRQ DOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUH LVRSHQQHVV HJ WKH RSHQ H[SORUDWLRQ RI XVLQJ OHJLVODWLRQ WR HQIRUFH SURSHU OLWWHU GLVSRVDO WKHUHLVKLGGHQQHVV HJWKHKLGGHQELDVLQXVLQJOHJLVODWLRQWR HQIRUFH SURSHU OLWWHU GLVSRVDO VLQFH WKHUH LV QR XQLYHUVDO UHJXODWLRQ RI OLWWHULQJ EHKDYLRU DQG LQ DGGLWLRQ GLIIHUHQW FRXQWULHV DQG ORFDOLWLHV KDYH GLIIHUHQWFXVWRPVDQGOHJLVODWLRQVFRQFHUQLQJOLWWHULQJEHKDYLRU $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI OLWWHU LQ OLWWHU WUDSV  WKHUH LV HPSWLQHVV HJWKHUHODWLYHO\OHVVGHQVHRUPRUHHPSW\FRQFHQWUDWLRQRI OLWWHULQDUHDVEHQHILWHGIURPUHJXODUFOHDQXSDFWLYLWLHV $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFKDQJHFRQVWDQF\SULQFLSOHLIWKHUHLVFKDQJH HJ WKHHYHUQHZZD\VWRGHDOZLWKZDVWHDVVKRZQLQWKHVWXG\RQOLWWHUDQG WKH HQYLURQPHQW  WKHUH LV FRQVWDQF\ HJ WKH HYHU FRQVWDQW H[LVWHQFH RI GLIIHUHQWSUREOHPVLQWKHHYHUQHZ ZD\VWRGHDO ZLWK ZDVWHDVVKRZQLQ WKHSUREOHPVZLWKWKHVWXG\RQOLWWHUDQGWKHHQYLURQPHQWSRLQWHGRXWE\ WKHFULWLFV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRUGHUFKDRVSULQFLSOHLIWKHUHLVRUGHU HJWKHPRUH RUOHVVRUGHUO\DSSHDUDQFHRIFOHDQXSDUHDVLQWKHDIWHUPDWKRILQWHQVLYH DQWLOLWWHU FDPSDLJQV  WKHUH LV FKDRV HJ WKH PRUH RU OHVV FKDRWLF DSSHDUDQFH RI DEDQGRQHG DUHDV VXIIHULQJ IURP PDVVLYH OLWWHU  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJ WKH UHODWLYHO\ VORZHU VSHHG RI VRPH LWHPV RI OLWWHU OLNH ³FRQGHQVHG JODVV VW\URIRDP RU SODVWLF´ ZDVWH WR ELRGHJUDGH EHFDXVH WKH\ FDQ ³SRVVLEO\UHPDLQ«LQWKHHQYLURQPHQWIRURYHUDPLOOLRQ\HDUV´ WKHUHLV TXLFNQHVV HJWKHUHODWLYHO\TXLFNHUVSHHGRIVRPHELRGHJUDGDEOHLWHPV RI OLWWHU WR HYHQWXDOO\ GHFRPSRVH  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGV WUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJ WKH UHODWLYH VSUHDG RI WKH SUDFWLFH RI XVLQJ OLWWHU ELQV RQ WKH VWUHHWV QRZDGD\V WKHUHLVFRQWUDFWLRQ HJWKHUHODWLYHGHFOLQHRIWKHSUDFWLFHRI WKURZLQJ ³ZDVWH DQG KXPDQ ZDVWHV RXW RI WKH ZLQGRZ ZKLFK ZRXOG GHFRPSRVH LQ WKH VWUHHW´ QRZDGD\V DOWKRXJK WKLV ZDV FRPPRQ IRU (XURSHDQVLQWKHROGHUGD\V $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDODUJXPHQWDERXWWKHKDUPIXOHIIHFWVRIOLWWHURQZLOGOLIH WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI WKH NQRZOHGJH DERXW WKH KDUPIXO HIIHFWV RI OLWWHU RQ ZLOGOLIH WR WKH ILHOG RI OLWWHU WUHDWPHQW OLNH GLIIHUHQWOHJLVODWLRQVLQWKH8QLWHG6WDWHV ZKHUH ³DOOVWDWHVKDYHDQWL OLWWHUODZV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJ WKH FRQYHQWLRQDO SUDFWLFH RI WKH (XURSHDQV LQ WKH ROGHU GD\V ZKHQ WKH\ WKUHZ ³ZDVWH DQG KXPDQ ZDVWHV RXW RI WKH ZLQGRZ ZKLFK ZRXOG GHFRPSRVH LQ WKH VWUHHW´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³SROLFHDQGORFDOVXSHUYLVRUV´OLNHWKRVHNQRZQ DV ³EXLWHQJHZRRQ RSVSRULQJVDPEWHQDDU RU %2$´ FDQ ³ILQH FLWL]HQV IRU WKURZLQJDZD\FDQVERWWOHVRUZUDSSHUVRQWRWKHVWUHHW´ $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVRIWQHVVKDUGQHVVSULQFLSOHLIWKHUHLVVRIWQHVV HJ WKHFRRSHUDWLRQZLWKWKHOHJDODXWKRULWLHVIRUDQWLOLWWHUHQIRUFHPHQW WKHUH

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





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³JHW«SRLVRQHG ZLWK OLWWHU LQ WKHLU KDELWDWV´ DQG DUH ³LQ VHULRXVGLVFRPIRUW´VRWKH\FDQQRWPRYHDURXQGIUHHO\  ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶VVHOIRUJURXSDVVKRZQLQWKH OLWWHULQJ EHKDYLRU RI VRPH LQGLYLGXDOV  WKHUH LV RWKHUQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RWKHUV DV VKRZQ LQ WKH HIIRUWV RI WKH JRYHUQPHQW WR FOHDQ XS OLWWHU IRU WKH FRPPRQ JRRG  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJ WKH UHJUHVVLRQ PDGH E\ GLIIHUHQW VROXWLRQV WR OLWWHU DV VKRZQ LQ WKH GLVDGYDQWDJHV RI HDFK VROXWLRQ SRLQWHG RXW E\ WKH FULWLFV  WKHUHLVSURJUHVVLRQ HJWKHSURJUHVVPDGHE\GLIIHUHQWVROXWLRQVWROLWWHU DV VKRZQ LQ WKHLU FRQWULEXWLRQ WR DQWLOLWWHU HIIRUWV DIRUHFLWHG  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVUHJDUGOHVVRIZKHWKHUWKLVEHGRQHE\ZD\RIDQWL OLWWHUFDPSDLJQVRUE\ZD\RIWKURZLQJDZD\ZDVWHRQWKHVWUHHW WKHUHLV GLIIHUHQFHLQRXWFRPH HJWKHFRQWULEXWLRQWRWKHPROGLQJDQGFRQWURORI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI DQWLOLWWHU FDPSDLJQV IRU D UHODWLYHO\ PRUHHQYLURQPHQWFRQVFLRXVOLIHZRUOG²EXWWKHFRQWULEXWLRQWR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKURZLQJ DZD\ ZDVWH RQ WKH VWUHHW IRU D UHODWLYHO\ PRUH HQYLURQPHQW GRPLQDWHGOLIHZRUOG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKHUHODWLYHO\PRUHVWDEOHFRQGLWLRQRIXVLQJOLWWHUELQVWRGHDOZLWKOLWWHULQ WKH PRGHUQ KLVWRU\ RI DQWLOLWWHU FDPSDLJQ  WKHUH LV UHDFWLRQ HJ WKH SUDFWLFHRIXVLQJOLWWHUELQVWRGHDOZLWKOLWWHULQWKHPRGHUQKLVWRU\RIDQWL OLWWHUFDPSDLJQWKHQOHGWRIXUWKHUFKDQJHVODWHURQZKHQLWLVGLVFRYHUHG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WKDW³LIWKHELQVDUHQRWUHJXODUO\HPSWLHGWKHQRYHUILOOLQJRIELQVRFFXUV DQG FDQ LQFUHDVH OLWWHU LQGLUHFWO\´ DQG ³VRPH ORFDO DXWKRULWLHV ZLOO RQO\ WDNHUHVSRQVLELOLW\IRUUXEELVKWKDWLVSODFHGLQWKHELQVZKLFKPHDQVWKDW OLWWHUUHPDLQVDSUREOHP´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

8VHOHVVQHVV6SDFH:DVWHDQGWKH(DUWK¶V2UELW $QRWKHU JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHOHVVQHVV IURP WKH SHUVSHFWLYH RI QDWXUH LV WR H[SORUH XVHOHVVQHVV VSDFH ZDVWH RU VSDFH GHEULV  DQG  WKH (DUWK¶VRUELW 7KHWHUP³VSDFHZDVWH´ DOVRNQRZQDV³VSDFHGHEULV´³VSDFHMXQN´ DQG³RUELWDOGHEULV´ UHIHUV³WKHFROOHFWLRQRIREMHFWVLQRUELWDURXQG(DUWK WKDW ZHUH FUHDWHG E\ KXPDQV EXW QR ORQJHU VHUYH DQ\ XVHIXO SXUSRVH 7KHVHREMHFWVFRQVLVWRIHYHU\WKLQJ IURP VSHQWURFNHWVWDJHVDQGGHIXQFW VDWHOOLWHVWRHURVLRQH[SORVLRQDQGFROOLVLRQIUDJPHQWV´ :.[  ,Q JHQHUDO ³WKH YDVW PDMRULW\ RI WKH HVWLPDWHG WHQV RI PLOOLRQV RI SLHFHVRIVSDFHGHEULVDUHVPDOOSDUWLFOHVOHVVWKDQFHQWLPHWUH LQ  7KHVHLQFOXGHGXVWIURPVROLGURFNHWPRWRUVVXUIDFHGHJUDGDWLRQSURGXFWV VXFK DV SDLQW IODNHV DQG FRRODQW UHOHDVHG E\ 5256$7 QXFOHDU SRZHUHG VDWHOOLWHV´ :.[ 

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





&KDUDFWHULVWLFVRI6SDFH:DVWH 6SDFH GHEULV RU VSDFH ZDVWH  FDQ EH XQGHUVWRRG LQ WHUPV RI WKHLU PDMRUFKDUDFWHULVWLFVFRQVLGHUIRULOOXVWUDWLRQWKUHHPDMRURQHVEHORZ DV VXPPDUL]HGLQ6HF  D /DUJHYV6PDOO6SDFH'HEULV 7KH ILUVW FKDUDFWHULVWLF RI VSDFH ZDVWH RU VSDFH GHEULV  WR EH FRQVLGHUHGKHUHKDVWRGRZLWK³ODUJHYVVPDOO´W\SHV ,QUHJDUGWRODUJHVSDFHGHEULVWKHZRUG³ODUJHLVGHILQHG³QRWE\LWV VL]H VR PXFK DV WKH FXUUHQW DELOLW\ WR GHWHFW REMHFWV RI VRPH ORZHU VL]H OLPLW *HQHUDOO\ ODUJH LV WDNHQ WR EH  FHQWLPHWUHV  LQ  DFURVV RU ODUJHUZLWKW\SLFDOPDVVHVRQWKHRUGHURINLORJUDP OE /RJLFDOO\LW ZRXOGIROORZWKDWVPDOOGHEULVZRXOGEHDQ\WKLQJVPDOOHUWKDQWKDWEXWLQ IDFW WKH FXWRII LV QRUPDOO\  FHQWLPHWUH  LQ  RU VPDOOHU 'HEULV EHWZHHQWKHVHWZROLPLWVZRXOGQRUPDOO\EHFRQVLGHUHG ODUJH DVZHOOEXW JRHV XQPHDVXUHG GXH WR RXU LQDELOLW\ WR WUDFN WKHP´ :. [ 81   $QG LQ UHODWLRQ WR VPDOO VSDFH GHEULV ³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´ :.[1$6$-&DUUROO  )RUWXQDWHO\ ³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´ :.[50F.LH  E 'HEULVLQ/RZ(DUWK2UELW 7KH VHFRQG FKDUDFWHULVWLF RI VSDFH ZDVWH RU VSDFH GHEULV  WR EH FRQVLGHUHGKHUHKDVWRGRZLWK³GHEULVLQ/RZ(DUWK2UELW´ /(2 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7KLV LV LPSRUWDQW EHFDXVH ³HYHU\ VDWHOOLWH VSDFH SUREH DQG PDQQHG PLVVLRQKDVWKHSRWHQWLDOWRFUHDWHVSDFHGHEULV$Q\LPSDFWEHWZHHQWZR REMHFWV RI VL]HDEOH PDVV FDQ VSDOO RII VKUDSQHO GHEULV IURP WKH IRUFH RI FROOLVLRQ(DFKSLHFHRIVKUDSQHOKDVWKHSRWHQWLDOWRFDXVHIXUWKHUGDPDJH FUHDWLQJ HYHQ PRUH VSDFH GHEULV :LWK D ODUJH HQRXJK FROOLVLRQ VXFK DV RQH EHWZHHQ D VSDFH VWDWLRQ DQG D GHIXQFW VDWHOOLWH  WKH DPRXQW RI FDVFDGLQJ GHEULV FRXOG EH HQRXJK WR UHQGHU /RZ (DUWK 2UELW HVVHQWLDOO\ XQXVDEOH´ :.['.HVVOHU  :RUVHWKLVSUREOHPLQ/(2LV³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´ :.[0)RUG  $QG DIWHU WKH FUHDWLRQ RI D VSDFH GHEULV ³RUELWDO SHUWXUEDWLRQV PHDQ WKDWWKHRUELWDOSODQH VGLUHFWLRQZLOOFKDQJHRYHUWLPHDQGWKXVFROOLVLRQV FDQ RFFXU IURP YLUWXDOO\ DQ\ GLUHFWLRQ &ROOLVLRQV WKXV XVXDOO\ RFFXU DW YHU\KLJKUHODWLYHYHORFLWLHVW\SLFDOO\VHYHUDONLORPHWUHVSHUVHFRQG6XFK DFROOLVLRQZLOOQRUPDOO\FUHDWHODUJHQXPEHUVRIREMHFWVLQWKHFULWLFDOVL]H UDQJHDVZDVWKHFDVHLQWKHFROOLVLRQ´ :.[(6$  F 'HEULVDW+LJKHU$OWLWXGHV $QG WKH WKLUG FKDUDFWHULVWLF RI VSDFH ZDVWH RU VSDFH GHEULV  WR EH FRQVLGHUHGKHUHKDVWRGRZLWK³GHEULVLQKLJKHUDOWLWXGHV´ 8QOLNH /(2 ³DW KLJKHU DOWLWXGHV ZKHUH DWPRVSKHULF GUDJ LV OHVV VLJQLILFDQW RUELWDO GHFD\ WDNHV PXFK ORQJHU 6OLJKW DWPRVSKHULF GUDJ OXQDUSHUWXUEDWLRQVDQGVRODUUDGLDWLRQSUHVVXUHFDQJUDGXDOO\EULQJGHEULV GRZQWRORZHUDOWLWXGHVZKHUHLWGHFD\VEXWDWYHU\KLJKDOWLWXGHVWKLVFDQ WDNHPLOOHQQLD7KXV«WKHVHRUELWVDUHJHQHUDOO\OHVVXVHGWKDQ/(2DQG WKHSUREOHPRQVHWLVVORZHUDVDUHVXOW«´ :.[¶'.HVVOHU  2QWKHEULJKWVLGH³UHODWLYHYHORFLWLHVLQ*(2DUHORZFRPSDUHGZLWK WKRVH EHWZHHQ REMHFWV LQ ODUJHO\ UDQGRP ORZ HDUWK RUELWV 7KH LPSDFW YHORFLWLHVSHDNDWDERXWNLORPHWUHVSHUVHFRQG PLV 7KLVPHDQV WKDW WKH GHEULV ILHOG IURP VXFK D FROOLVLRQ LV QRW WKH VDPH DV D /(2 FROOLVLRQDQGGRHV QRWSRVHWKHVDPH VRUWRIULVNVDWOHDVWRYHUWKHVKRUW WHUP ,W ZRXOG KRZHYHU DOPRVW FHUWDLQO\ NQRFN WKH VDWHOOLWH RXW RI RSHUDWLRQ /DUJHVFDOH VWUXFWXUHV OLNH VRODU SRZHU VDWHOOLWHV ZRXOG EH DOPRVWFHUWDLQWRVXIIHUPDMRUFROOLVLRQVRYHUVKRUWSHULRGVRIWLPH´ :. [0+HFKOHU 

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





6RXUFHVRI6SDFH:DVWH 6SDFH ZDVWH RU VSDFH GHEULV  FDQ EH FDXVHG E\ GLIIHUHQW VRXUFHV &RQVLGHUIRULOOXVWUDWLRQDIHZ PDLQH[DPSOHVEHORZ DVVXPPDUL]HGLQ 6HF  D 'HDG6SDFHFUDIW 7KHILUVWVRXUFHRIVSDFHZDVWH RUVSDFHGHEULV WREHGHVFULEHGKHUH LQYROYHV³GHDGVSDFHFUDIW´ )RULQVWDQFH³LQDFDWDORJOLVWLQJNQRZQODXQFKHVXSWR-XO\WKH 8QLRQRI&RQFHUQHG6FLHQWLVWVOLVWHGRSHUDWLRQDOVDWHOOLWHV7KLVLVRXW RI D NQRZQ SRSXODWLRQ RI  ODUJH REMHFWV DQG DERXW  REMHFWV HYHU ODXQFKHG 7KXV RSHUDWLRQDO VDWHOOLWHV UHSUHVHQW D VPDOO PLQRULW\ RI WKHSRSXODWLRQRI PDQPDGH REMHFWVLQVSDFH7KHUHVWDUHE\GHILQLWLRQ GHEULV´ :.[8&6  E /RVW(TXLSPHQW 7KH VHFRQG VRXUFH RI VSDFH ZDVWH RU VSDFH GHEULV  WR EH GHVFULEHG KHUHLQYROYHV³ORVWHTXLSPHQW´ )RU LQVWDQFH ³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´ :.[ -6PLWK  F %RRVWHUV 7KHWKLUGVRXUFHRIVSDFHZDVWH RUVSDFHGHEULV WREHGHVFULEHGKHUH LQYROYHV³ERRVWHUV´ ,Q IDFW ³ERRVWHUV WKDW UHPDLQ RQ RUELW DUH D VHULRXV GHEULV SUREOHP DQGRQHRIWKHPDMRUNQRZQLPSDFWHYHQWVZDVGXHWRDQ$ULDQHERRVWHU 'XULQJ WKH LQLWLDO DWWHPSWV WR FKDUDFWHUL]H WKH VSDFH GHEULV SUREOHP LW EHFDPH HYLGHQW WKDW D JRRG SURSRUWLRQ RI DOO GHEULV ZDV GXH WR WKH EUHDNLQJ XS RI URFNHW VWDJHV $OWKRXJK 1$6$ DQG WKH 86$) TXLFNO\ PDGHHIIRUWVWRLPSURYHWKHVXUYLYDELOLW\RIWKHLUERRVWHUVRWKHUODXQFKHUV GLGQRWLPSOHPHQWVLPLODUFKDQJHV«$VRI)HEUXDU\RYHU IUDJPHQWV KDG EHHQ LGHQWLILHG´ :. [ + .OLQNUDG  .7KDQ 63$&(  



7KH)XWXUHRI3RVW+XPDQ:DVWH 



G 'HEULVIURPDQGDVD:HDSRQ $QGWKHIRXUWKVRXUFHRIVSDFHZDVWH RUVSDFHGHEULV WREHGHVFULEHG KHUHLQYROYHV³GHEULVIURPDQGDVDZHDSRQ´ )RULQVWDQFH³RQHPDMRUVRXUFHRIGHEULVLQWKHSDVWZDVWKHWHVWLQJRI DQWLVDWHOOLWHZHDSRQVFDUULHGRXWE\ERWKWKH86DQG6RYLHW8QLRQLQWKH V DQG V«7KH 86 V RQO\ DFWLYH ZHDSRQ 3URJUDP  ZDV VKXW GRZQLQ7KH86UHVWDUWHGWKHLU$6$7SURJUDPVLQWKHVZLWK WKH9RXJKW$60$6$7$WHVWGHVWUR\HGDWRQQH OE  VDWHOOLWHRUELWLQJDWNLORPHWUHV PL DOWLWXGHFUHDWLQJWKRXVDQGVRI SLHFHVRIVSDFHGHEULVODUJHUWKDQFHQWLPHWUH LQ %HFDXVHLWWRRN SODFHDWUHODWLYHO\ORZDOWLWXGHDWPRVSKHULFGUDJFDXVHGWKHYDVWPDMRULW\ RI WKH ODUJH GHEULV WR GHFD\ IURP RUELW ZLWKLQ D GHFDGH´ :. [ - 6FKHIWHU&&KXQ  7KHQLQ&KLQDFRQGXFWHGLWV³DQWLVDWHOOLWHPLVVLOHWHVWERWKIRU WKH PLOLWDU\ LPSOLFDWLRQV«2Q  )HEUXDU\  WKH 86 ODXQFKHG DQ 60 0LVVLOH IURP WKH 866 /DNH (ULH VSHFLDOO\ WR GHVWUR\ D GHIHFWLYH 86 VS\ VDWHOOLWH WKRXJKW WR EH FDUU\LQJ  SRXQGV  NJ  RI WR[LF K\GUD]LQHSURSHOODQW´ :.[/'DYLG  (IIHFWVRI6SDFH:DVWH 6SDFH ZDVWH RUVSDFHGHEULV FDQ KDYH VHULRXVHIIHFWVERWKLQ VSDFH DQG RQ (DUWK &RQVLGHU IRU LOOXVWUDWLRQ WKUHH PDLQ H[DPSOHV EHORZ DV VXPPDUL]HGLQ6HF  D 7KUHDWWR8QPDQQHG6SDFHFUDIW 7KHILUVWHIIHFWRIVSDFHZDVWH RUVSDFHGHEULV WREHLQWURGXFHGKHUH FRQFHUQV³WKUHDWWRXQPDQQHGVSDFHFUDIW´ )RULQVWDQFH³VSDFHFUDIWLQDGHEULVILHOGDUHVXEMHFWWRFRQVWDQWZHDU DVDUHVXOWRILPSDFWVZLWKVPDOOGHEULV&ULWLFDODUHDVRIDVSDFHFUDIWDUH QRUPDOO\ SURWHFWHG E\ :KLSSOH VKLHOGV HOLPLQDWLQJ PRVW GDPDJH +RZHYHUORZPDVVLPSDFWVKDYHDGLUHFWLPSDFWRQWKHOLIHWLPHRIDVSDFH PLVVLRQ LI WKH VSDFHFUDIW LV SRZHUHG E\ VRODU SDQHOV 7KHVH SDQHOV DUH GLIILFXOWWRSURWHFWEHFDXVHWKHLUIURQWIDFHKDVWREHGLUHFWO\H[SRVHGWRWKH VXQ$VDUHVXOWWKH\DUHRIWHQSXQFWXUHGE\GHEULV«,PSDFWVZLWKODUJHU GHEULVQRUPDOO\GHVWUR\WKHVSDFHFUDIW´ :.[  E 7KUHDWWR0DQQHG6SDFHFUDIW 7KH VHFRQG HIIHFW RI VSDFH ZDVWH RU VSDFH GHEULV  WR EH LQWURGXFHG KHUHFRQFHUQV³WKUHDWWRPDQQHGVSDFHFUDIW´ )RU LQVWDQFH ³WKH ,QWHUQDWLRQDO 6SDFH 6WDWLRQ ,66  XVHV H[WHQVLYH :KLSSOH VKLHOGLQJ WR SURWHFW LWVHOI IURP PLQRU GHEULV WKUHDWV +RZHYHU ODUJH SRUWLRQV RI WKH ,66 FDQQRW EH SURWHFWHG QRWDEO\ LWV ODUJH VRODU

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





SDQHOV ,Q  LW ZDV SUHGLFWHG WKDW WKH ,QWHUQDWLRQDO 6SDFH 6WDWLRQ V SDQHOVZRXOGVXIIHUDERXWGHJUDGDWLRQRYHUIRXU\HDUVZKLFKZDV GHDOW ZLWKE\RYHUGHVLJQLQJWKHSDQHOE\/LNHWKH6KXWWOHWKHRQO\ SURWHFWLRQ DJDLQVW ODUJHU GHEULV LV DYRLGDQFH 2Q WZR RFFDVLRQV WKH FUHZ KDYH EHHQ IRUFHG WR DEDQGRQ ZRUN DQG WDNH UHIXJH LQ WKH 6R\X] FDSVXOH ZKLOH WKH WKUHDW SDVVHG´ :. [ . 7KRPD  + 1DKUD  %%&   F +D]DUGRQ(DUWK $QGWKHWKLUGHIIHFWRIVSDFHZDVWH RUVSDFHGHEULV WREHLQWURGXFHG KHUHFRQFHUQV³KD]DUGRQ(DUWK´ 7KLV SUREOHP H[LVWV EHFDXVH ³DOWKRXJK PRVW GHEULV ZLOO EXUQ XS LQ WKH DWPRVSKHUH ODUJHU REMHFWV FDQ UHDFK WKH JURXQG LQWDFW DQG SUHVHQW D ULVN´ :.[  )RULQVWDQFH³LQILYHVDLORUVRQD-DSDQHVHVKLSZHUHLQMXUHGE\ VSDFH GHEULV SUREDEO\ RI 5XVVLDQ RULJLQ ,Q  DQ 2NODKRPD ZRPDQ QDPHG /RWWLH :LOOLDPV ZDV KLW LQ WKH VKRXOGHU E\ D  [  FHQWLPHWUHV  LQ  SLHFH RI EODFNHQHG ZRYHQ PHWDOOLF PDWHULDO WKDW ZDV ODWHU FRQILUPHGWREHSDUWRIWKHSURSHOODQWWDQNRID'HOWD,,URFNHWZKLFKKDG ODXQFKHGD86$LU)RUFHVDWHOOLWHLQ´ :.[27$  6ROXWLRQVWR6SDFH:DVWH %HFDXVH RI WKHVH VHULRXV QHJDWLYH HIIHFWV RI VSDFH GHEULV WKHUH DUH SURSRVHG VROXWLRQV RYHU WLPH &RQVLGHU IRU LOOXVWUDWLRQ WKUHH PDLQ RQHV EHORZ DVVXPPDUL]HGLQ6HF  D *URZWK0LWLJDWLRQ 7KH ILUVW VROXWLRQ WR VSDFH ZDVWH RU VSDFH GHEULV  WR EH FRQVLGHUHG KHUHLVDERXW³JURZWKPLWLJDWLRQ´ )RULQVWDQFH³WKHSDVVLYDWLRQRIVSHQWXSSHUVWDJHVE\WKHUHOHDVHRI UHVLGXDO SURSHOODQWV LV DLPHG DW UHGXFLQJ WKH ULVN RI RQRUELW H[SORVLRQV WKDW FRXOG JHQHUDWH WKRXVDQGV RI DGGLWLRQDO GHEULV REMHFWV 7KH PRGLILFDWLRQRIWKH'HOWDERRVWHUVDWDWLPHZKHQWKHGHEULVSUREOHPZDV ILUVWEHFRPLQJDSSDUHQWHVVHQWLDOO\HOLPLQDWHGWKHLUIXUWKHUFRQWULEXWLRQWR WKHSUREOHP´ :.[1-RKQVRQ-6FKHIWHU  E 6HOI5HPRYDO 7KHVHFRQGVROXWLRQWRVSDFHZDVWH RUVSDFHGHEULV WREHFRQVLGHUHG KHUHLVDERXW³VHOIUHPRYDO´ )RULQVWDQFH³LWLVDQ,78UHTXLUHPHQWWKDWJHRVWDWLRQDU\VDWHOOLWHVEH DEOHWRUHPRYHWKHPVHOYHVWRD JUDYH\DUGRUELW DWWKHHQGRIWKHLUOLYHV« 5RFNHW VWDJHV RU VDWHOOLWHV WKDW UHWDLQ HQRXJK SURSHOODQW FDQ SRZHU



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WKHPVHOYHVLQWRDGHFD\LQJRUELW,QFDVHV ZKHQDGLUHFW DQGFRQWUROOHG  GHRUELWZRXOGUHTXLUHWRRPXFKSURSHOODQWDVDWHOOLWHFDQEHEURXJKWWRDQ RUELWZKHUHDWPRVSKHULFGUDJZRXOGFDXVHLWWRGHRUELWDIWHUVRPH\HDUV´ :.[  F ([WHUQDO5HPRYDO $QG WKH WKLUG VROXWLRQ WR VSDFH ZDVWH RU VSDFH GHEULV  WR EH FRQVLGHUHGKHUHLVDERXW³H[WHUQDOUHPRYDO´ )RULQVWDQFH³D ZHOOVWXGLHGVROXWLRQLVWRXVHDUHPRWHO\ FRQWUROOHG YHKLFOH WR UHQGH]YRXV ZLWK GHEULV FDSWXUH LW DQG UHWXUQ WR D FHQWUDO VWDWLRQ7KHFRPPHUFLDOO\GHYHORSHG0'$6SDFH,QIUDVWUXFWXUH6HUYLFLQJ YHKLFOH LV D UHIXHOOLQJ GHSRW DQG VHUYLFH VSDFHFUDIW IRU FRPPXQLFDWLRQ VDWHOOLWHVLQJHRV\QFKURQRXVRUELWVODWHGIRUODXQFKLQ´ :.[ (&DUOVRQ&1:  7KHUH DUH DOVR DOWHUQDWLYH SURSRVDOV UDQJLQJ ³IURP IRDP\ EDOO RI DHURJHO RU VSUD\ RI ZDWHU LQIODWDEOH EDOORRQV HOHFWURG\QDPLF WHWKHUV ERRP HOHFWURDGKHVLRQ RU GHGLFDWHG LQWHUFHSWRU VDWHOOLWHV ´ :. [ ' 0LFKDHOV  *$&  67$5  - )RXVW  - 3DOPHU   3UREOHPVZLWKWKH6WXG\RI6SDFH:DVWH +RZHYHUIRUWKHFULWLFVWKLVVWXG\RIVSDFH ZDVWH RUVSDFH GHEULV  DQGWKH(DUWK¶VRUELWKDVVRPHPDMRUSUREOHPV&RQVLGHUIRULOOXVWUDWLRQD IHZH[DPSOHVEHORZ DVVXPPDUL]HGLQ6HF  )LUVWO\ RQH PDLQ FULWLFLVP RI WKH VWXG\ RI VSDFH ZDVWH RU VSDFH GHEULV DQGWKH(DUWK¶VRUELWLVWKDWWKHPHDVXUHPHQWRIVSDFHGHEULVLVQRW DQ DFFXUDWH EXVLQHVV LQ WKH ILUVW SODFH VLQFH WKH H[DFW QDWXUH RI WKH SUREOHPLVVWLOOQRWYHU\ZHOONQRZQ )RU H[DPSOH ³*(2 RUELW LV WRR GLVWDQW WR PDNH DFFXUDWH PHDVXUHPHQWVRIWKHH[LVWLQJGHEULVILHOGIRUREMHFWVXQGHUPHWUH IW LQ VRWKHSUHFLVHQDWXUHRIWKHH[LVWLQJSUREOHPLVQRWZHOONQRZQ´ :. [  6HFRQGO\DQRWKHUPDLQFULWLFLVPRIWKHVWXG\RIVSDFHZDVWH RUVSDFH GHEULV DQGWKH(DUWK¶VRUELWLVWKDWWRPLQLPL]HVSDFHGHEULVE\SUHYHQWLQJ VSDFHFROOLVLRQVLVHDVLHUVDLGWKDQGRQHWHFKQRORJLFDOO\ )RU LQVWDQFH DOWKRXJK ³WKH ,78 KDV SODFHG LQFUHDVLQJO\ VWULFW UHTXLUHPHQWVRQWKHVWDWLRQNHHSLQJDELOLW\RIQHZVDWHOOLWHVDQGGHPDQGV WKDWWKHRZQHUVJXDUDQWHHWKHLUDELOLW\WRVDIHO\PRYHWKHVDWHOOLWHVRXWRI WKHLU RUELWDO VORWV DW WKH HQG RI WKHLU OLIHWLPHV« VWXGLHV KDYH VXJJHVWHG WKDW HYHQ WKH H[LVWLQJ ,78 UHTXLUHPHQWV DUH QRW HQRXJK WR KDYH D PDMRU HIIHFWRQFROOLVLRQIUHTXHQF\´ :.[/$QVHOPR 

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





7KLUGO\ VWLOO DQRWKHU PDLQ FULWLFLVP RI WKH VWXG\ RI VSDFH ZDVWH RU VSDFHGHEULV DQGWKH(DUWK¶VRUELWLVWKDWPDQ\RIWKHSURSRVHGVROXWLRQV DUHWRRH[SHQVLYHWREHFRVWHIIHFWLYH )RULQVWDQFHIRUWKHFULWLFV³DVRIWKHFRVWRIODXQFKLQJDQ\RI WKHVH VROXWLRQV >LQ WHUPV RI H[WHUQDO UHPRYDO IRU H[DPSOH@ LV DERXW WKH VDPHDVODXQFKLQJDQ\VSDFHFUDIW´DQG³QRQHRIWKHH[LVWLQJVROXWLRQVDUH FXUUHQWO\FRVWHIIHFWLYH´ :.[6/RYJUHQ  )RXUWKO\DQDGGLWLRQDOPDLQFULWLFLVPRIWKHVWXG\RIVSDFHZDVWH RU VSDFH GHEULV  DQG WKH (DUWK¶V RUELW LV WKDW WKHUH LV QR LQWHUQDWLRQDO WUHDW\ EDQQLQJVSDFHGHEULV )RULQVWDQFHIRUWKHFULWLFV³WKHUHLVQRLQWHUQDWLRQDOWUHDW\PDQGDWLQJ EHKDYLRXU WR PLQLPL]H VSDFH GHEULV´ DOWKRXJK ³WKH 8QLWHG 1DWLRQV &RPPLWWHH RQ WKH 3HDFHIXO 8VHV RI 2XWHU 6SDFH &23826  GLG SXEOLVK YROXQWDU\JXLGHOLQHVLQ´ :.[81  $QG ILIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI WKH VWXG\ RI VSDFH ZDVWH RU VSDFH GHEULV  DQG WKH (DUWK¶V RUELW LV WKDW WKHUH DUH VLPSO\ WRR PDQ\SLHFHVRIVSDFHGHEULVWREHDEOHWRFRSHZLWKWKHPDOO RUHYHQPRVW RIWKHP  )RU LQVWDQFH LQ DFFRUGDQFH WR ³WKH PLG XSGDWH WR WKH 1$6$ GHEULV )$4«WKH QXPEHU RI«GHEULV LWHPV VPDOOHU WKDQ  FHQWLPHWUH  LQ  H[FHHGV WHQV RI PLOOLRQV´ :. [ 1$6$  - &DUUROO   2I FRXUVH WKH QXPEHU ZLOO LQFUHDVH HYHQ PRUH LI RQH ZDQWV WR LQFOXGHWKRVHGHEULVLWHPVODUJHUWKDQFHQWLPHWUH LQ  %H\RQG6SDFH:DVWH 7KHVH FULWLFLVPV RI WKH VWXG\ RQ VSDFH ZDVWH RU VSDFH GHEULV  RI FRXUVHGRQRWPHDQDWRWDOUHMHFWLRQRILWVYDOLGLW\EXWVHUYHWRVKRZXVWKH WZR RSSRVLQJ VLGHV RI WKH GHEDWH VXFK WKDW WKH SRVVLELOLW\ RU LPSRVVLELOLW\ DQGGHVLUDELOLW\ RUXQGHVLUDELOLW\ RIXVHOHVVQHVV IURPWKH SHUVSHFWLYHRIQDWXUHZLWKXVHOHVVQHVVVSDFHZDVWHDQGWKH(DUWK¶VRUELW DV D FDVH VWXG\ KHUH  DUH QRW WR WKH H[WHQW WKDW WKH UHVSHFWLYH GHIHQGHUV ZRXOGOLNHXVWREHOLHYH %HVLGHV WKH DQDO\VLV RI XVHOHVVQHVV VSDFH ZDVWH RU VSDFH GHEULV  DQGWKH(DUWK¶VRUELWFDQFDVWDEULJKWOLJKWRQWKHRQWRORJLFDOSULQFLSOHVLQ H[LVWHQWLDO GLDOHFWLFV DQG JRRG H[DPSOHV LQFOXGH WKH IRUPDOQHVV LQIRUPDOQHVV SULQFLSOH WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH WKH SDUWLDOLW\WRWDOLW\ SULQFLSOH WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH WKH ILFWLRQUHDOLW\ SULQFLSOH WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH WKH RSHQQHVVKLGGHQQHVV SULQFLSOH WKH GHQVHQHVVHPSWLQHVV SULQFLSOH WKH FKDQJHFRQVWDQF\



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³KDV SODFHG LQFUHDVLQJO\ VWULFW UHTXLUHPHQWV RQ WKH VWDWLRQNHHSLQJ DELOLW\ RI QHZ VDWHOOLWHV DQG GHPDQGV WKDW WKH RZQHUV JXDUDQWHH WKHLU DELOLW\ WR VDIHO\ PRYHWKHVDWHOOLWHVRXWRIWKHLURUELWDOVORWVDWWKHHQGRIWKHLUOLIHWLPHV´  WKHUHLVUHODWLYHQHVV HJZKDWLVULJKWIRUWKH,78LQUHJDUGWRLWV³VWULFW UHTXLUHPHQWV RQ WKH VWDWLRQNHHSLQJ DELOLW\ RI QHZ VDWHOOLWHV´ LV QRW QHFHVVDULO\ VR IRU WKH FULWLFV VLQFH ³VWXGLHV KDYH VXJJHVWHG WKDW HYHQ WKH H[LVWLQJ ,78 UHTXLUHPHQWV DUH QRW HQRXJK WR KDYH D PDMRU HIIHFW RQ FROOLVLRQIUHTXHQF\´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKH SDUWLDO YLHZ RI WKH ,78 LQ UHJDUG WR LWV ³VWULFW UHTXLUHPHQWV RQ WKH VWDWLRQNHHSLQJDELOLW\RIQHZVDWHOOLWHV´WRPDQDJHVSDFHGHEULV WKHUHLV WRWDOLW\ HJWKHPRUHKROLVWLFYLHZRIWKHIXWXUHRIVSDFHGHEULVVXFKWKDW WKH ZKROH LV QRW WKH VXP RI LWV SDUWV WKDW LV LW FDQQRW EH UHGXFHG WR WKH VXPRIWKHRSSRVLQJYLHZVRIWKH,78WKHVNHSWLFVDQGRWKHUVVLQFHWKHUH ZLOOHPHUJHQHZYLHZVLQWKHIXWXUHQRW\HWNQRZQWRGD\MXVWDVWKHUHDUH DOUHDG\ FULWLFLVPV RI WKHP DOO QRZDGD\V  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGVWUXH

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





,Q UHODWLRQ WR WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH LI WKHUH LV SUHGLFWDELOLW\ HJ WKH SUHGLFWDEOH WHQGHQF\ RI ³WKH 8QLWHG 1DWLRQV &RPPLWWHHRQWKH3HDFHIXO8VHVRI2XWHU6SDFH´RU&23826WRSURYLGH ³YROXQWDU\ JXLGHOLQHV´ IRU VSDFH GHEULV PDQDJHPHQW LQ WKH IRUHVHHDEOH IXWXUH  WKHUH LV XQSUHGLFWDELOLW\ HJ WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\WKHH[WHQWWRZKLFK&23826ZLOOEHVXFFHVVIXOLQPDQDJLQJVSDFH GHEULV RQ D SDUWLFXODU IDUWKHU IXWXUH RFFDVLRQ VLQFH ³WKHUH LV QR LQWHUQDWLRQDOWUHDW\PDQGDWLQJEHKDYLRXUWRPLQLPL]HVSDFHGHEULV´ $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJ WKH H[SODQDWLRQ E\ WKH DGYRFDWHV RI GLIIHUHQW ZD\V RI ³H[WHUQDO UHPRYDO´ WR PDQDJH VSDFH GHEULV RQ WKH EDVLV RI WKHLU WHFKQRORJLFDO IHDVLELOLW\  WKHUH LV LQH[SOLFDELOLW\ HJ WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ WKH DGYRFDWHV RI GLIIHUHQW ZD\V RI ³H[WHUQDO UHPRYDO´ WR PDQDJH VSDFH GHEULV RI ZK\ WKHVH VROXWLRQV DUH QHFHVVDULO\ GHVLUDEOH VLQFH IRU WKH FULWLFV ³DV RI  WKH FRVW RI ODXQFKLQJ DQ\ RI WKHVH VROXWLRQV >LQ WHUPV RI H[WHUQDO UHPRYDO IRU H[DPSOH@ LV DERXW WKH VDPHDVODXQFKLQJDQ\VSDFHFUDIW´DQG³QRQHRIWKHH[LVWLQJVROXWLRQVDUH FXUUHQWO\FRVWHIIHFWLYH´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDODVSHFWRIWKHPHDVXUHPHQWRIVSDFHGHEULVLQVRIDUDV³*(2RUELW LV WRR GLVWDQW WR PDNH DFFXUDWH PHDVXUHPHQWV RI WKH H[LVWLQJ GHEULV ILHOG IRUREMHFWVXQGHUPHWUH>IWLQ@VRWKHSUHFLVHQDWXUHRIWKHH[LVWLQJ SUREOHP LV QRW ZHOO NQRZQ´  WKHUH LV UHDOLW\ HJ WKH UHDOLVWLF DVSHFW RI WKH PHDVXUHPHQW RI VSDFH GHEULV LQVRIDU DV ³WKH PLG XSGDWH WR WKH 1$6$ GHEULV )$4 KDG HVWLPDWHG WKDW ³WKH QXPEHU RI«GHEULV LWHPV VPDOOHU WKDQ  FHQWLPHWUH > LQ@ H[FHHGV WHQV RI PLOOLRQV´  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJWKH ILQLWHQXPEHURI VSDFHFUDIWV ZKLFK ZHUHODQXFKHGE\ KXPDQV VR IDU DV RI   WKHUH LV WUDQVILQLWHQHVV HJ WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO VSDFH SDUWLFOHV ERWK QDWXUDO DQG PDQPDGH ZKLFKKDYHHYHUWUDYHOHGQHDURUWRWKH(DUWKLQWKHKLVWRU\RIWKHXQLYHUVH DQGFRXOGKLWDQ\VSDFHFUDIWRUDQ\REMHFWLQWKHZD\  :.[ $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJWKHSUHFLVHLGHQWLILFDWLRQRIVROXWLRQVWRVSDFHGHEULVLQ WKH DUWLFOH DIRUHFLWHG  WKHUH LV YDJXHQHVV HJ WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  VROXWLRQV WR VSDFH GHEULV LQ WKH DUWLFOH  DIRUHFLWHG VLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRWDQGVRRQ $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJ WKH UHODWLYHO\ VLPSOH DQDO\VLV RI WKH VROXWLRQV WR VSDFH GHEULVE\WKHDGYRFDWHV WKHUHLVFRPSOLFDWHGQHVV HJWKHUHODWLYHO\PRUH FRPSOLFDWHG DQDO\VLV RI WKH VROXWLRQV WR VSDFH GHEULV E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFVDVFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJWKHRSHQH[SORUDWLRQRIWKHVRFDOOHG³.HVVOHU6\QGURPH´E\'RQDOG .HVVOHUDQGODWHURWKHUUHVHDUFKHUVLQWKDW³LQVWHDGRIWKHGHQVLW\RIGHEULV EHLQJ D PHDVXUH RI WKH QXPEHU RI LWHPV ODXQFKHG LQWR RUELW LW ZDV WKDW QXPEHU SOXV DQ\ QHZ GHEULV FDXVHG ZKHQ WKH\ FROOLGHG´ VR ³LI WKH QHZ GHEULV GLG QRW GHFD\ IURP RUELW EHIRUH LPSDFWLQJ DQRWKHU REMHFW WKH QXPEHURIGHEULVLWHPVZRXOGFRQWLQXHWRJURZHYHQLIWKHUHZHUHQRQHZ ODXQFKHV´  WKHUH LV KLGGHQQHVV HJ WKH KLGGHQ QDWXUH RI WKH ³.HVVOHU 6\QGURPH´ EHFDXVH DV H[SODLQHG E\ .HVVOHU ³WKH VWDUW RI D FDVFDGH ZRXOGQRWEHREYLRXVXQWLOWKHVLWXDWLRQZDVZHOODGYDQFHGZKLFKPLJKW WDNH\HDUV´  :.['.HVVOHU-6WXSO $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI ³FROOLVLRQV«DW YHU\ KLJK UHODWLYH YHORFLWLHV W\SLFDOO\ VHYHUDO NLORPHWUHV SHU VHFRQG´ LQ WKH /(2 UHJLRQ WKHUHLVHPSWLQHVV HJWKHUHODWLYHO\OHVVGHQVHRUPRUHHPSW\ FRQFHQWUDWLRQRIPDMRUFROOLVLRQVDWKLJKHUDOWLWXGHVXQOLNHWKRVHLQ/(2 DQG³WKLVPHDQVWKDWWKHGHEULVILHOGIURPVXFKDFROOLVLRQLVQRWWKHVDPH DVD/(2FROOLVLRQDQGGRHVQRWSRVHWKHVDPHVRUWRIULVNV´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³ZLWKDORZHQRXJKGHQVLW\´RI VSDFHGHEULVVRWKDW³WKHDGGLWLRQRIGHEULVWKURXJKLPSDFWVLVVORZHUWKDQ WKHLU UDWH RI GHFD\ DQG WKH SUREOHP GRHV QRW EHFRPH VLJQLILFDQW´ VR WKLQJV GR QRW ORRN VR FKDRWLF ZLWK VR PDQ\ IHZHU FROOLVLRQV  WKHUH LV FKDRV HJ WKH PRUH RU OHVV FKDRWLF DSSHDUDQFH RI VSDFH GHEULV LQ WKRVH RUELWV FKDUDFWHUL]HG E\ D ³.HVVOHU 6\QGURPH´ LQ  WKDW ³LQVWHDG RI WKH GHQVLW\ RI GHEULV EHLQJ D PHDVXUH RI WKH QXPEHU RI LWHPV ODXQFKHG LQWR

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





RUELWLWZDVWKDWQXPEHUSOXVDQ\QHZGHEULVFDXVHGZKHQWKH\FROOLGHG´ VR ³LI WKH QHZ GHEULV GLG QRW GHFD\ IURP RUELW EHIRUH LPSDFWLQJ DQRWKHU REMHFW WKH QXPEHU RI GHEULV LWHPV ZRXOG FRQWLQXH WR JURZ HYHQ LI WKHUH ZHUH QR QHZ ODXQFKHV´ DQG PRUH FROOLVLRQV ZRXOG FRQWLQXH  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJ ³UHODWLYH YHORFLWLHV LQ *(2 DUH ORZ FRPSDUHG ZLWK WKRVH EHWZHHQ REMHFWV LQ ODUJHO\ UDQGRP ORZ HDUWK RUELWV´  WKHUH LV TXLFNQHVV HJ UHODWLYHYHORFLWLHVRI³REMHFWVLQODUJHO\UDQGRPORZHDUWKRUELWV´OLNH/(2 DUHKLJKHU $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHH[SDQVLRQRI³WKHWHVWLQJRIDQWLVDWHOOLWHZHDSRQVFDUULHG RXWE\ERWKWKH86DQG6RYLHW8QLRQLQWKHVDQGV´ WKHUHLV FRQWUDFWLRQ HJWKHUHODWLYHGHFOLQHRI$6$7WHVWLQJLQODWHVZKHQ ³WKH 86 V RQO\ DFWLYH ZHDSRQ 3URJUDP  ZDV VKXW GRZQ LQ ´  :.[&&KXQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³PLFURPHWHRULWHV´ E\ )UHG :KLSSOH DQG )OHWFKHU :DWVRQ IRU WKH VWXG\ RI ³WKH LQWHUSODQHWDU\ GXVW FORXG´ LQ FRVPRORJ\ DIWHU ::,,  WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³PLFURPHWHRULWHV´  LQ FRVPRORJ\ WR WKH ILHOGRIVSDFHUDFHIRUWKHPHDVXUHPHQWRIVSDFHGHEULV $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJWKHFRQYHQWLRQDOZLVGRPDERXWVSDFHGHEULVLQWKHROGHUGD\VZKHQ LWZDVWKRXJKWWKDW³WKHGHQVLW\RIGHEULV´LV³DPHDVXUHRIWKHQXPEHURI LWHPV ODXQFKHG LQWR RUELW´  WKHUH LV QRYHOW\ HJ WKH DOWHUQDWLYH QRYHO FKDOOHQJHWRWKHFRQYHQWLRQDOZLVGRPDERXWVSDFHGHEULVLQWKHROGHUGD\V E\WKH QHZ LGHDRI WKHVRFDOOHG³.HVVOHU6\QGURPH´E\ 'RQDOG.HVVOHU DQGODWHURWKHUUHVHDUFKHUVZKHQWKH\DUJXHGWKDW³LQVWHDGRIWKHGHQVLW\ RI GHEULV EHLQJ D PHDVXUH RI WKH QXPEHU RI LWHPV ODXQFKHG LQWR RUELW LW ZDV WKDW QXPEHU SOXV DQ\ QHZ GHEULV FDXVHG ZKHQWKH\FROOLGHG´VR³LI WKHQHZGHEULVGLGQRWGHFD\IURPRUELWEHIRUHLPSDFWLQJDQRWKHUREMHFW WKHQXPEHURIGHEULVLWHPVZRXOGFRQWLQXHWRJURZHYHQLIWKHUHZHUHQR QHZODXQFKHV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH LI WKHUH LV HYROXWLRQ HJ WKH QDWXUDO HYROXWLRQ RI KXPDQV WR OLYH RQ (DUWK LQ WKH VWDWH RI QDWXUH LQ D SULPLWLYH ZD\  WKHUH LV WUDQVIRUPDWLRQ HJ WKH WHFKQLFDO WUDQVIRUPDWLRQ RI KXPDQ DELOLW\ WR OLYH E\ WKH LQYHQWLRQ RI VSDFHFUDIWV IRU VSDFH H[SORUDWLRQ  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGV WUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³IRDP\EDOORIDHURJHORUVSUD\RI ZDWHU LQIODWDEOH EDOORRQV HOHFWURG\QDPLF WHWKHUV ERRP HOHFWURDGKHVLRQ RUGHGLFDWHG LQWHUFHSWRUVDWHOOLWHV ´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGV WUXH ,QUHODWLRQWRWKHDFWLYHQHVVLQDFWLYHVVSULQFLSOHLIWKHUHLVDFWLYHQHVV HJ WKH DFWLYHQHVV RI ³WKH 86 DQG 6RYLHW 8QLRQ LQ WKH V DQG V´ ZKHQ WKH\ UHJXODUO\ HQJDJHG LQ ³WKH WHVWLQJ RI DQWLVDWHOOLWH ZHDSRQV´ WKHUHLVLQDFWLYHQHVV HJWKHUHODWLYHLQDFWLYHQHVVRIWKH86 DQG5XVVLDODWHURQZKHQ³IROORZLQJWKH86WHVWLQWKHUHZDVD GHIDFWR PRUDWRULXP RQ VXFK WHVWV´  :. [ ' :ULJKW   $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶VVHOIRUJURXSDVVKRZQLQWKH QXPHURXVWHVWVRI³DQWLVDWHOOLWHZHDSRQV´E\WKH86DQG6RYLHW8QLRQLQ WKHVDQGV´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

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





KXQWLQJ DQG JDWKHULQJ LQ WKH ROGHU GD\V RU E\ ZD\ RI VSDFH H[SORUDWLRQ QRZDGD\V  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI KXQWLQJ DQG JDWKHULQJ LQ WKH ROGHU GD\V IRU D UHODWLYHO\ PRUH KDUPRQLRXV FR H[LVWHQFHZLWKQDWXUH²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³LQVWHDGRIWKHGHQVLW\RIGHEULVEHLQJDPHDVXUHRI WKHQXPEHURILWHPVODXQFKHGLQWRRUELWLWZDVWKDWQXPEHUSOXVDQ\QHZ GHEULV FDXVHG ZKHQ WKH\ FROOLGHG´ VR ³LI WKH QHZ GHEULV GLG QRW GHFD\ IURP RUELW EHIRUH LPSDFWLQJ DQRWKHU REMHFW WKH QXPEHU RI GHEULV LWHPV ZRXOG FRQWLQXH WR JURZ HYHQ LI WKHUH ZHUH QR QHZ ODXQFKHV´ DQG FROOLVLRQVZRXOGFRQWLQXHLQWKHFDVFDGHV $QGWKHUHYHUVHGLUHFWLRQDOVR KROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQLQWKHULYDOU\EHWZHHQ³WKH86DQG6RYLHW8QLRQLQWKHVDQG V´ ZKHQ WKH\ UHJXODUO\ HQJDJHG LQ ³WKH WHVWLQJ RI DQWLVDWHOOLWH ZHDSRQV´ WR VHUYH WKH SROLWLFDO IXQFWLRQ RI JOREDO GRPLQDWLRQ  WKHUH LV QRQIXQFWLRQDOLW\ HJ WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH GHFLVLRQ RI WKH 86 DQG  5XVVLD ODWHU RQ ZKHQ ³IROORZLQJWKH86WHVWLQWKHUHZDVDGHIDFWRPRUDWRULXPRQVXFK WHVWV´ VR ³ZLGHVSUHDG $6$7 WHVWLQJ KDG HQGHG´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



NQRZQ WKDW WR PLQLPL]H VSDFH GHEULV E\ SUHYHQWLQJ VSDFH FROOLVLRQV LV HDVLHU VDLG WKDQ GRQH WHFKQRORJLFDOO\ DQG WKDW PDQ\ RI WKH SURSRVHG VROXWLRQVDUHWRRH[SHQVLYHWREHFRVWHIIHFWLYH $QGWKHUHYHUVHGLUHFWLRQ DOVRKROGVWUXH

8VHOHVVQHVVDQG6RFLHW\ 8VHOHVVQHVV ZKHQ H[DPLQHG IURP WKH SHUVSHFWLYH RI VRFLHW\ FDQ UHYHDOLWVSRVVLELOLW\ RULPSRVVLELOLW\ DQGGHVLUDELOLW\ RUXQGHVLUDELOLW\  DQG WKLV FDQ EH VKRZQ E\ ZD\ RI WZR FDVH VWXGLHV QDPHO\   XVHOHVVQHVV KD]DUGRXV ZDVWH DQG WKH %DVHO &RQYHQWLRQ DQG   XVHOHVVQHVV ZDVWH PDQDJHPHQW DQG PLQRULWLHV²WR EH DGGUHVVHG KHUHDIWHU

8VHOHVVHVV+D]DUGRXV:DVWHDQGWKH%DVHO&RQYHQWLRQ $ JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHOHVVQHVV IURP WKH SHUVSHFWLYH RI VRFLHW\ LV WR H[SORUH XVHOHVVQHVV KD]DUGRXV ZDVWH DQG WKH %DVHO &RQYHQWLRQ 7KHWHUP³%DVHO&RQYHQWLRQ´LVDVKRUWFXWIRU³WKH%DVHO&RQYHQWLRQ RQ WKH &RQWURO RI 7UDQVERXQGDU\ 0RYHPHQWV RI +D]DUGRXV :DVWHV DQG 7KHLU'LVSRVDO´DQGUHIHUVWR³DQLQWHUQDWLRQDOWUHDW\WKDWZDVGHVLJQHGWR UHGXFH WKH PRYHPHQWV RI KD]DUGRXV ZDVWH EHWZHHQ QDWLRQV DQG VSHFLILFDOO\WRSUHYHQWWUDQVIHURIKD]DUGRXVZDVWHIURPGHYHORSHGWROHVV GHYHORSHGFRXQWULHV /'&V ´ :.\  ,Q DGGLWLRQ ³WKH &RQYHQWLRQ LV«LQWHQGHG WR PLQLPL]H WKH DPRXQW DQG WR[LFLW\ RI ZDVWHV JHQHUDWHG WR HQVXUH WKHLU HQYLURQPHQWDOO\ VRXQG PDQDJHPHQW DV FORVHO\ DV SRVVLEOH WR WKH VRXUFH RI JHQHUDWLRQ DQG WR DVVLVW/'&VLQHQYLURQPHQWDOO\VRXQG PDQDJHPHQWRIWKH KD]DUGRXVDQG RWKHUZDVWHVWKH\JHQHUDWH´ :.\  2ULJLQDOO\ ³WKH &RQYHQWLRQ ZDV RSHQHG IRU VLJQDWXUH RQ  0DUFK DQGHQWHUHGLQWRIRUFHRQ0D\´ :.\  &DXVHVRIWKH%DVHO&RQYHQWLRQ 7KHUH DUH GLIIHUHQW KLVWRULFDO UHDVRQV IRU WKH FUHDWLRQ RI WKH %DVHO &RQYHQWLRQ 2QH RIWHQ FLWHG UHDVRQ KDV WR GR ZLWK KLJK GLVSRVDO FRVWV IRU KD]DUGRXV ZDVWH LQ GHYHORSHG FRXQWULHV ZKLFK H[SHULHQFHG ³WKH WLJKWHQLQJ RI HQYLURQPHQWDO ODZV IRU H[DPSOH 5&5$ «LQ WKH

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





V«$WWKHVDPHWLPHJOREDOL]DWLRQRIVKLSSLQJPDGHWUDQVERXQGDU\ PRYHPHQWRIZDVWHPRUHDFFHVVLEOHDQGPDQ\/'&VZHUHGHVSHUDWHIRU IRUHLJQFXUUHQF\&RQVHTXHQWO\WKHWUDGHLQKD]DUGRXVZDVWHSDUWLFXODUO\ WR/'&VJUHZUDSLGO\´ :.\  )RU LQVWDQFH ³RQH RI WKH LQFLGHQWV ZKLFK OHG WR WKH FUHDWLRQ RI WKH %DVHO&RQYHQWLRQ ZDVWKH.KLDQ6HD ZDVWHGLVSRVDOLQFLGHQWLQ ZKLFKD VKLS FDUU\LQJ LQFLQHUDWRU DVK IURP WKH FLW\ RI 3KLODGHOSKLD LQ WKH 8QLWHG 6WDWHVDIWHUKDYLQJGXPSHGKDOIRILWVORDGRQDEHDFKLQ+DLWLZDVIRUFHG DZD\ ZKHUH LW VDLOHG IRU PDQ\ PRQWKV FKDQJLQJ LWV QDPH VHYHUDO WLPHV 8QDEOH WR XQORDG WKH FDUJR LQ DQ\ SRUW WKH FUHZ ZDV EHOLHYHG WR KDYH GXPSHGPXFKRILWDWVHD´ :.\  $QRWKHUH[DPSOHLV³WKH.RNRFDVHLQZKLFKVKLSVWUDQVSRUWHG EDUUHOVRIKD]DUGRXVZDVWHIURP,WDO\WRWKHVPDOOWRZQRI.RNRLQ 1LJHULDLQH[FKDQJHIRUPRQWKO\UHQWZKLFKZDVSDLGWRD1LJHULDQ IRUWKHXVHRIKLVIDUPODQG´ :.\  ,QFLGHQWV OLNH WKLV ³KDYH EHHQ GHHPHG 7R[LF &RORQLDOLVP  E\ PDQ\ GHYHORSLQJFRXQWULHV´ :.\  7R WKLQJV LQ D SURSHU SHUVSHFWLYH ³DFFRUGLQJ WR 0DXUHHQ :DOVK >@ RQO\ DURXQG  RI KD]DUGRXV ZDVWHV WKDW FRPH IURP 2(&' FRXQWULHV DUH DFWXDOO\ VKLSSHG DFURVV LQWHUQDWLRQDO ERUGHUV 7KHVH ZDVWHV LQFOXGHDPRQJRWKHUVFKHPLFDOZDVWHUDGLRDFWLYHZDVWHPXQLFLSDOVROLG ZDVWH DVEHVWRV LQFLQHUDWRU DVK DQG ROG WLUHV 2I LQWHUQDWLRQDOO\ VKLSSHG ZDVWHWKDWFRPHVIURPGHYHORSHGFRXQWULHVPRUHWKDQKDOILVVKLSSHGIRU UHFRYHU\DQGWKHUHPDLQGHUIRUILQDOGLVSRVDO´ :.\  ,QDQ\HYHQWWKH%DVHO&RQYHQWLRQFDQEHDQDO\]HGLQWHUPVRIVRPH PDMRULVVXHVIRULOOXVWUDWLRQFRQVLGHUWKUHHPDMRURQHVEHORZ 7KH,VVXHRI'HILQLWLRQ 7KHILUVWLVVXHDGGUHVVHGE\WKH%DVHO&RQYHQWLRQKDVWRGRZLWKWKH ³GHILQLWLRQ´RIKD]DUGRXVZDVWH ,Q DFFRUGDQFH WR WKH %DVHO &RQYHQWLRQ ³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´ :.\  $QG³WKHGHILQLWLRQRIWKHWHUPGLVSRVDOLVPDGHLQ$UWLFOHDODQG MXVW UHIHUV WR DQQH[ ,9 ZKLFK JLYHV D OLVW RI RSHUDWLRQV ZKLFK DUH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



XQGHUVWRRG DV GLVSRVDO RU UHFRYHU\ 7KH H[DPSOHV RI GLVSRVDO DUH EURDG DQG LQFOXGH DOVR UHFRYHU\ UHF\FOLQJ $QQH[ ,, OLVWV RWKHU ZDVWHV VXFK DV KRXVHKROG ZDVWHV DQG UHVLGXH WKDW FRPHV IURP LQFLQHUDWLQJ KRXVHKROG ZDVWH´ :.\  7KH,VVXHRI2EOLJDWLRQV 7KH VHFRQG LVVXH DGGUHVVHG E\ WKH %DVHO &RQYHQWLRQ KDV WR GR ZLWK ³REOLJDWLRQV´ )RU LQVWDQFH ³LQ DGGLWLRQ WR FRQGLWLRQV RQ WKH LPSRUW DQG H[SRUW RI WKHDERYHZDVWHVWKHUHDUHVWULQJHQWUHTXLUHPHQWVIRUQRWLFHFRQVHQWDQG WUDFNLQJIRUPRYHPHQWRI ZDVWHVDFURVVQDWLRQDOERXQGDULHV,WLVRIQRWH WKDW WKH &RQYHQWLRQ SODFHV D JHQHUDO SURKLELWLRQ RQ WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQG QRQ3DUWLHV«3DUWLHV WR WKH &RQYHQWLRQPXVWKRQRULPSRUWEDQVRIRWKHU3DUWLHV´ :.\  $OVR³$UWLFOHRIWKH%DVHO&RQYHQWLRQFDOOVIRUDQRYHUDOOUHGXFWLRQ RIZDVWHJHQHUDWLRQ%\HQFRXUDJLQJFRXQWULHVWRNHHSZDVWHVZLWKLQWKHLU ERXQGDULHVDQGDVFORVHDVSRVVLEOHWRLWVVRXUFHRIJHQHUDWLRQWKHLQWHUQDO SUHVVXUHV VKRXOG SURYLGH LQFHQWLYHV IRU ZDVWH UHGXFWLRQ DQG SROOXWLRQ SUHYHQWLRQ´ :.\  $QG³DFFRUGLQJWR$UWLFOH3DUWLHVDUHGLUHFWHGWRDGRSWDSURWRFRO WKDW HVWDEOLVKHV OLDELOLW\ UXOHV DQG SURFHGXUHV WKDW DUH DSSURSULDWH IRU GDPDJH WKDW FRPHV IURP WKH PRYHPHQW RI KD]DUGRXV ZDVWH DFURVV ERUGHUV´ :.\  7KH,VVXHRI/HVV'HYHORSHG&RXQWULHV $QGWKHWKLUGLVVXHDGGUHVVHGE\WKH%DVHO&RQYHQWLRQKDVWRGRZLWK ³OHVVGHYHORSHGFRXQWULHV´ )RU LQVWDQFH ³DIWHU WKH LQLWLDO DGRSWLRQ RI WKH &RQYHQWLRQ«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´ :.\  6R E\ WKH V ³OREE\LQJ DW WKH  %DVHO FRQIHUHQFH E\ /'&V *UHHQSHDFH DQG NH\ (XURSHDQ FRXQWULHV VXFK DV 'HQPDUN OHG WR D GHFLVLRQWRDGRSWWKH%DVHO%DQ$PHQGPHQWWRWKH%DVHO&RQYHQWLRQ1RW

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





\HW LQ IRUFH EXW FRQVLGHUHG PRUDOO\ ELQGLQJ E\ VLJQDWRULHV WKH $PHQGPHQW SURKLELWV WKH H[SRUW RI KD]DUGRXV ZDVWH IURP D OLVW RI GHYHORSHG PRVWO\ 2(&'  FRXQWULHV WR GHYHORSLQJ FRXQWULHV 7KH %DVHO %DQ DSSOLHV WR H[SRUW IRU DQ\ UHDVRQ LQFOXGLQJ UHF\FOLQJ $Q DUHD RI VSHFLDOFRQFHUQIRUDGYRFDWHVRIWKH$PHQGPHQWZDVWKHVDOHRIVKLSVIRU VDOYDJHVKLSEUHDNLQJ´ :.\  3UREOHPVZLWKWKH%DVHO&RQYHQWLRQ +RZHYHU IRU WKH FULWLFV WKH %DVHO &RQYHQWLRQ KDV VRPH PDMRU SUREOHPV&RQVLGHUIRULOOXVWUDWLRQDIHZH[DPSOHVEHORZ )LUVWO\ RQH PDLQ FULWLFLVP RI WKH %DVHO &RQYHQWLRQ LV WKDW ZKDW FRQVWLWXWHVKD]DUGRXVZDVWHLVVXEMHFWWRFRQWHQWLRQ )RUH[DPSOHIRUWKHFULWLFVWKHGHILQLWLRQRI KD]DUGRXV ZDVWHLQWKH %DVHO &RQYHQWLRQ LV WRR QDUURZ EHFDXVH LW GRHV QRW LQFOXGH VRPH LPSRUWDQWW\SHVRIKD]DUGRXVZDVWHOLNH³UDGLRDFWLYHZDVWH´³ZDVWHVIURP WKH QRUPDO RSHUDWLRQ RI VKLSV´ DQG FHUWDLQ ³ FRPPRGLWLHV  ZKLFK DUH QRW FRQVLGHUHGZDVWHV´HWF :.\  6HFRQGO\DQRWKHUPDLQFULWLFLVPRIWKH%DVHO&RQYHQWLRQLVWKDWWKHUH DUHTXHVWLRQDEOHUXOHVDERXW³REOLJDWLRQV´LQWKH%DVHO&RQYHQWLRQ )RULQVWDQFHIRUWKHFULWLFVDOWKRXJKWKH%DVHO&RQYHQWLRQSURKLELWV ³WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQG QRQ 3DUWLHV´LWPDNHVWKHQRWRULRXVH[FHSWLRQWRWKLVUXOHZKHQHYHU³WKHZDVWH LV VXEMHFW WR DQRWKHU WUHDW\ WKDW GRHV QRW WDNH DZD\ IURP WKH %DVHO &RQYHQWLRQ´ :.\ 7KLV QRWRULRXVH[FHSWLRQEHQHILWVVRPH PDMRU SRZHUV OLNH WKH 8QLWHG 6WDWHV ZKLFK LV ³D QRWDEOH QRQ3DUW\ WR WKH &RQYHQWLRQ DQG KDV D QXPEHU RI VXFK DJUHHPHQWV IRU DOORZLQJ WKH VKLSSLQJ RI KD]DUGRXV ZDVWHV WR %DVHO 3DUW\ FRXQWULHV´  DQG WKH 2(&' ZKLFK ³DOORZV DPRQJ RWKHU WKLQJV WKH 2(&' FRXQWULHV WR FRQWLQXH WUDGLQJ LQ ZDVWHV ZLWK FRXQWULHV OLNH WKH 8QLWHG 6WDWHV WKDW KDYH QRW UDWLILHGWKH%DVHO&RQYHQWLRQ´  :.\  7KLUGO\ VWLOO DQRWKHU PDLQ FULWLFLVP RI WKH %DVHO &RQYHQWLRQ LV WKDW WKHUHLVQRHQIRUFHPHQWSURYLVLRQVLQWKH%DVHO&RQYHQWLRQ )RU LQVWDQFH IRU  WKH FULWLFV ³WKH &RQYHQWLRQ VWDWHV WKDW LOOHJDO KD]DUGRXV ZDVWH WUDIILF LV FULPLQDO EXW FRQWDLQV QR HQIRUFHPHQW SURYLVLRQV´ :.\  $QGIRXUWKO\DQDGGLWLRQDOPDLQFULWLFLVPRIWKH%DVHO&RQYHQWLRQLV WKDWLWGRHVQRWJRIDUHQRXJKWRSURWHFWOHVVGHYHORSHGFRXQWULHVIURPWKH VSUHDGRIKD]DUGRXVZDVWH )RULQVWDQFHDOWKRXJKWKHFDOOIRUWKH³%DVHO%DQ$PHQGPHQWWRWKH %DVHO &RQYHQWLRQ´ UHSUHVHQWV D JRRG HIIRUW WR WDNH LQWR DFFRXQW WKH LQWHUHVWVRIOHVVGHYHORSHGFRXQWULHVWKHDPHQGPHQWKDVQRWEHHQUDWLILHG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



EHFDXVH ³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´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

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





DVVKRZQLQWKHFULWLFLVPVWKDWZKDWFRQVWLWXWHVKD]DUGRXVZDVWHLVVXEMHFW WRFRQWHQWLRQWKDWWKHUHDUHTXHVWLRQDEOHUXOHVDERXW ³REOLJDWLRQV´ LQWKH %DVHO &RQYHQWLRQ WKDW WKHUH LV QR HQIRUFHPHQW SURYLVLRQV LQ WKH %DVHO &RQYHQWLRQ WKDW LW GRHV QRW JR IDU HQRXJK WR SURWHFW OHVV GHYHORSHG FRXQWULHV IURP WKH VSUHDG RI KD]DUGRXV ZDVWH HWF  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJ WKH DEVROXWH YLHZ RI ³*UHHQSHDFH DQG NH\ (XURSHDQ FRXQWULHVVXFKDV'HQPDUN´IRU³WKH%DVHO%DQ$PHQGPHQWWRWKH%DVHO &RQYHQWLRQ´ WKHUHLVUHODWLYHQHVV HJZKDWLVULJKWIRU³*UHHQSHDFHDQG NH\(XURSHDQFRXQWULHVVXFKDV'HQPDUN´IRU³WKH%DVHO%DQ$PHQGPHQW WRWKH%DVHO&RQYHQWLRQ´LVQRWQHFHVVDULO\VR IRU³DQXPEHURILQGXVWU\ JURXSV DV ZHOO DV QDWLRQV LQFOXGLQJ $XVWUDOLD DQG &DQDGD´ DJDLQVW WKH DPHQGPHQW $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKH SDUWLDO YLHZ RI ³*UHHQSHDFH DQG NH\ (XURSHDQ FRXQWULHV VXFK DV 'HQPDUN´ IRU ³WKH %DVHO %DQ $PHQGPHQW WR WKH %DVHO &RQYHQWLRQ´  WKHUH LV WRWDOLW\ HJ WKH PRUH KROLVWLF YLHZ RI WKH IXWXUH RI WKH %DVHO &RQYHQWLRQ VXFK WKDW WKH ZKROH LV QRW WKH VXP RI LWV SDUWV WKDW LV LW FDQQRWEHUHGXFHGWRWKHVXPRIWKHRSSRVLQJYLHZVRIWKHSURVDQGFRQV RI³WKH%DVHO%DQ$PHQGPHQWWRWKH%DVHO&RQYHQWLRQ´VLQFHWKHUHZLOO HPHUJH QHZ YLHZV LQ WKH IXWXUH QRW \HW NQRZQ WRGD\ MXVW DV WKHUH DUH DOUHDG\ FULWLFLVPV DJDLQVW ERWK JURXSV QRZDGD\V  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH LI WKHUH LV SUHGLFWDELOLW\ HJ WKH SUHGLFWDEOH WHQGHQF\ RI WKH SDUWLHV LQ WKH %DVHO &RQYHQWLRQ WR DGYRFDWH ³D JHQHUDO SURKLELWLRQ RQ WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQG QRQ3DUWLHV´  WKHUH LV XQSUHGLFWDELOLW\ HJWKH PRUHGLIILFXOWWDVNWRSUHGLFWH[DFWO\WKHH[WHQW WR ZKLFK WKH %DVHO &RQYHQWLRQ ZLOO EH VXFFHVVIXO LQ EDQQLQJ ³WKH H[SRUWDWLRQRULPSRUWDWLRQRIZDVWHVEHWZHHQ3DUWLHVDQGQRQ3DUWLHV´RQD SDUWLFXODU IXWXUH RFFDVLRQ EHFDXVH LW ³FRQWDLQV QR HQIRUFHPHQW SURYLVLRQV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJ WKH H[SODQDWLRQ E\ WKRVH LQ ³WKH  .RNR FDVH´ LQ WKDW³VKLSVWUDQVSRUWHGEDUUHOVRIKD]DUGRXVZDVWHIURP,WDO\WRWKH VPDOOWRZQRI.RNRLQ1LJHULDLQH[FKDQJHIRUPRQWKO\UHQWZKLFK ZDV SDLG WR D 1LJHULDQ IRU WKH XVH RI KLV IDUPODQG´  WKHUH LV LQH[SOLFDELOLW\ HJWKHODFN RIVXIILFLHQWH[SODQDWLRQE\E\WKRVH LQ ³WKH .RNRFDVHRIZK\WKHWUDQVSRUWRIEDUUHOVRIKD]DUGRXVZDVWH IURP ,WDO\ WR WKH VPDOO WRZQ RI .RNR LQ 1LJHULD LV QHFHVVDULO\ GHVLUDEOH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



VLQFH IRU WKH FULWLFV LQFLGHQWV OLNH WKLV ³KDYH EHHQ GHHPHG 7R[LF &RORQLDOLVP  E\ PDQ\ GHYHORSLQJ FRXQWULHV´  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI WKH GHILQLWLRQ RI ³KD]DUGRXV ZDVWH´ LQ WKH %DVHO &RQYHQWLRQ LQVRIDU DV LW LV VXEMHFW WR FRQWHQWLRQ EHFDXVH LW GRHV QRW LQFOXGHVRPHLPSRUWDQWW\SHVRIKD]DUGRXVZDVWHOLNH³UDGLRDFWLYHZDVWH´ ³ZDVWHV IURP WKH QRUPDO RSHUDWLRQ RI VKLSV´ DQG FHUWDLQ ³ FRPPRGLWLHV  ZKLFKDUHQRWFRQVLGHUHG ZDVWHV´HWF WKHUHLVUHDOLW\ HJWKHUHDOLVWLF DVSHFW RI WKH GHILQLWLRQ RI ³KD]DUGRXV ZDVWH´ LQ WKH %DVHO &RQYHQWLRQ LQVRIDUDVLWLQFOXGHVPDQ\WKRXJKQRWDOOW\SHVRI³KD]DUGRXVZDVWH´  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJWKHILQLWHQXPEHURIWKHSURSHUWLHVRIKD]DUGRXVZDVWHOLNH ³LJQLWDELOLW\´ ³UHDFWLYLW\´ ³FRUURVLYLW\´ DQG ³WR[LFLW\´  WKHUH LV WUDQVILQLWHQHVV HJWKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYLGXDOSLHFHVRI KD]DUGRXV ZDVWH LQ KLVWRU\ WKDW KDYH HYHU H[LVWHG  :. ]  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI  SURSHUWLHV RI KD]DUGRXV ZDVWH LQ WKH %DVHO &RQYHQWLRQ QDPHO\ ³H[SORVLYH IODPPDEOH WR[LF RU FRUURVLYH´ WKHUHLVYDJXHQHVV HJWKHYDJXHQHVVLQWKHLGHQWLILFDWLRQRI WKH   SURSHUWLHV RI KD]DUGRXV ZDVWH LQ WKH %DVHO &RQYHQWLRQ QDPHO\ ³H[SORVLYHIODPPDEOHWR[LFRUFRUURVLYH´VLQFHLWLVQRWFOHDUZK\WKHUH PXVW EH RQO\  QRW    DQG VR RQ EHFDXVH IRU WKH FULWLFV WKHUH DUH RWKHU SURSHUWLHV OLNH ³UDGLRDFWLYH´ HWF  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGVWUXH ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJWKHUHODWLYHO\VLPSOHDQDO\VLVRIWKH%DVHO&RQYHQWLRQE\ WKH DGYRFDWHV  WKHUH LV FRPSOLFDWHGQHVV HJ WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI WKH %DVHO &RQYHQWLRQ E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUH LVRSHQQHVV HJWKHRSHQH[SORUDWLRQRI³DJHQHUDOSURKLELWLRQRQWKHH[SRUWDWLRQRU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQG QRQ3DUWLHV´ LQ WKH %DVHO &RQYHQWLRQ  WKHUH LV KLGGHQQHVV HJ WKH KLGGHQ ELDV LQ WKH %DVHO &RQYHQWLRQ EHFDXVH IRU WKH FULWLFV LW GRHV QRW JR IDU HQRXJK WR SURWHFW OHVV GHYHORSHG FRXQWULHV IURP WKH VSUHDG RI KD]DUGRXV ZDVWHV DQG RIWHQ IDYRUV PDMRU SRZHUV ZLWK WKRVH QRWRULRXV H[FHSWLRQDO SURYLVLRQV  $QG

WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI KD]DUGRXV ZDVWHV IURP GHYHORSHGFRXQWULHVWROHVVGHYHORSHGFRXQWULHVSULRUWRWKHFUHDWLRQRIWKH %DVHO &RQYHQWLRQ  WKHUH LV HPSWLQHVV HJ WKH UHODWLYHO\ OHVV GHQVH RU PRUHHPSW\FRQFHQWUDWLRQRIKD]DUGRXVZDVWHVIURPGHYHORSHGFRXQWULHV WROHVVGHYHORSHGFRXQWULHVXQGHUWKH%DVHO%DQ$PHQGPHQWWRWKH%DVHO &RQYHQWLRQDWOHDVWRQSDSHU $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFKDQJHFRQVWDQF\SULQFLSOHLIWKHUHLVFKDQJH HJ WKHHYHUQHZZD\VWRPDQDJHZDVWHDVVKRZQLQWKHFUHDWLRQRIWKH%DVHO &RQYHQWLRQ  WKHUH LV FRQVWDQF\ HJ WKH HYHU FRQVWDQW H[LVWHQFH RI GLIIHUHQWSUREOHPVZLWKWKHHYHUQHZZD\VWRPDQDJHZDVWHDVVKRZQLQ WKH SUREOHPV ZLWK WKH %DVHO &RQYHQWLRQ SRLQWHG RXW E\ WKH FULWLFV  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRUGHUFKDRVSULQFLSOHLIWKHUHLVRUGHU HJWKHPRUH RU OHVV RUGHUO\ DSSHDUDQFH RI KD]DUGRXV ZDVWH PDQDJHPHQW QRZDGD\V ZLWK WKH FUHDWLRQ RI WKH %DVHO &RQYHQWLRQ ZKLFK ³SODFHV D JHQHUDO SURKLELWLRQ RQ WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQGQRQ3DUWLHV´ WKHUHLVFKDRV HJWKHPRUHRUOHVVFKDRWLFDSSHDUDQFH RI KD]DUGRXV ZDVWH PDQDJHPHQW LQ WKH ROGHU GD\V EHIRUH WKH FUHDWLRQ RI WKH%DVHO&RQYHQWLRQDVVKRZQLQ³WKH.KLDQ6HDZDVWHGLVSRVDOLQFLGHQW LQ ZKLFK D VKLS FDUU\LQJ LQFLQHUDWRU DVK IURP WKH FLW\ RI 3KLODGHOSKLD LQ WKH8QLWHG6WDWHVDIWHUKDYLQJGXPSHGKDOIRILWVORDGRQDEHDFKLQ+DLWL ZDV IRUFHG DZD\ ZKHUH LW VDLOHG IRU PDQ\ PRQWKV FKDQJLQJ LWV QDPH VHYHUDOWLPHV´DQG³XQDEOHWRXQORDGWKHFDUJRLQDQ\SRUWWKHFUHZZDV EHOLHYHG WR KDYH GXPSHG PXFK RI LW DW VHD´  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH ,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJ WKH UHODWLYHO\ VORZHU VSHHG RI WKH ³%DVHO %DQ $PHQGPHQW WR WKH %DVHO&RQYHQWLRQ´WREHUDWLILHGLIWKHUHTXLUHPHQWLVWKDW³DPHQGPHQWV WRWKHFRQYHQWLRQHQWHULQWRIRUFHDIWHUUDWLILFDWLRQRI WKUHHIRXUWKVRIWKH 3DUWLHV ZKR DFFHSWHG WKHP ´  WKHUH LV TXLFNQHVV HJ WKH UHODWLYHO\ TXLFNHUVSHHGRIWKH³%DVHO%DQ$PHQGPHQWWRWKH%DVHO&RQYHQWLRQ´WR EHUDWLILHGLIWKHUHTXLUHPHQWLVWKDW³DPHQGPHQWVWRWKHFRQYHQWLRQHQWHU LQWR IRUFH DIWHU UDWLILFDWLRQ´ RI RQO\ D VPDOO QXPEHU RI WKH 3DUWLHV ZKR DFFHSWHGWKHP $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHH[SDQVLRQRIWKHW\SHVRIKD]DUGRXVZDVWHWREHLQFOXGHG IRU ³WKH SURKLELWLRQ RQ WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQG QRQ3DUWLHV´ XQGHU WKH %DVHO &RQYHQWLRQ DQG WKH ³%DVHO %DQ $PHQGPHQW QRZDGD\V  WKHUH LV FRQWUDFWLRQ HJ WKH UHODWLYH GHFOLQH RU GHFUHDVH RI WKH LQFLGHQWV OLNH WKH .KLDQ 6HD ZDVWH GLVSRVDO LQFLGHQW DQG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WKH.RNRFDVHQRZDGD\VEHFDXVHRIWKH%DVHO&RQYHQWLRQ $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI WKH SURSHUWLHV RI KD]DUGRXV ZDVWH OLNH ³LJQLWDELOLW\´ ³UHDFWLYLW\´ ³FRUURVLYLW\´ DQG ³WR[LFLW\´ LQ FKHPLVWU\  WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI WKH WKHRUHWLFDO XQGHUVWDQGLQJRI WKHSURSHUWLHVRIKD]DUGRXV ZDVWHOLNH  ³LJQLWDELOLW\´ ³UHDFWLYLW\´ ³FRUURVLYLW\´ DQG ³WR[LFLW\´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³%DVHO %DQ $PHQGPHQW WR WKH %DVHO &RQYHQWLRQ´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³KD]DUGRXV ZDVWHV WR %DVHO 3DUW\ FRXQWULHV´ DQG ³WKH 2(&' FRXQWULHV WR FRQWLQXH WUDGLQJ LQ ZDVWHV ZLWK FRXQWULHV OLNH WKH 8QLWHG 6WDWHV WKDW KDYH QRW UDWLILHG WKH %DVHO &RQYHQWLRQ´  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVRIWQHVVKDUGQHVVSULQFLSOHLIWKHUHLVVRIWQHVV HJ WKH VXSSRUW RI WKH %DVHO &RQYHQWLRQ E\ WKH DGYRFDWHV  WKHUH LV KDUGQHVV HJ WKH FULWLTXH RI WKH %DVHO &RQYHQWLRQ DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGV WUXH ,Q UHODWLRQ WR WKH VHULRXVQHVVSOD\IXOQHVV SULQFLSOH LI WKHUH LV VHULRXVQHVV HJ WKH VHULRXV EXVLQHVV RI WKRVH LQYROYHG LQ WKH %DVHO &RQYHQWLRQ WR GHDO ZLWK KD]DUGRXV ZDVWH PDQDJHPHQW  WKHUH LV

&KDSWHU8VHOHVVQHVVDQG,WV'XDO3ROHV 





SOD\IXOQHVV HJ WKH SOD\IXO SDUW RI WKRVH LQYROYHG LQ WKH %DVHO &RQYHQWLRQ WR GHDO ZLWK KD]DUGRXV ZDVWH PDQDJHPHQW ZKHQ WKH\ SOD\ DURXQG ZLWKGLIIHUHQWGHILQLWLRQVRI KD]DUGRXV ZDVWHRYHU WLPH  $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHDFWLYHQHVVLQDFWLYHVVSULQFLSOHLIWKHUHLVDFWLYHQHVV HJ WKH DFWLYHQHVV RI WKRVH LQ ³WKH  .RNR FDVH LQ ZKLFK  VKLSV WUDQVSRUWHGEDUUHOVRIKD]DUGRXVZDVWHIURP,WDO\WRWKHVPDOOWRZQ RI.RNRLQ1LJHULDLQH[FKDQJHIRUPRQWKO\UHQWZKLFKZDVSDLGWRD 1LJHULDQ IRU WKH XVH RI KLV IDUPODQG´  WKHUH LV LQDFWLYHQHVV HJ WKH UHODWLYH LQDFWLYHQHVV RI WKRVH ZKR DUH QR ORQJHU DOORZHG WR HQJDJH LQ KD]DUGRXVZDVWHGXPSLQJXQGHUWKH%DVHO&RQYHQWLRQVRWKH\KDYHWRGR VRPHWKLQJHOVHLQVWHDG  ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ LQ ³WKH  .RNR FDVH LQ ZKLFK  VKLSV WUDQVSRUWHG  EDUUHOV RI KD]DUGRXV ZDVWH IURP ,WDO\ WR WKH VPDOO WRZQ RI .RNR LQ 1LJHULD LQ H[FKDQJHIRUPRQWKO\UHQWZKLFKZDVSDLGWRD1LJHULDQIRUWKHXVH RIKLVIDUPODQG´ZKLFKLVODWHUFRQGHPQHGDV³WR[LFFRORQLDOLVP´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³WKH  .RNR FDVH RU E\ ZD\ RI WKH UHGXFWLRQ RI ³WKH PRYHPHQWV RI KD]DUGRXV ZDVWH EHWZHHQ QDWLRQV´ LQ WKH %DVHO &RQYHQWLRQ  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJDQGFRQWURORIEHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIGXPSLQJ IRU D UHODWLYHO\ PRUH PDUNHWRULHQWHG OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH UHGXFWLRQRI³WKHPRYHPHQWVRIKD]DUGRXVZDVWHEHWZHHQQDWLRQV´LQWKH %DVHO &RQYHQWLRQ IRU D UHODWLYHO\ PRUH OHJDOUHJXODWLYH OLIHZRUOG  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ RI WKH %DVHO &RQYHQWLRQ LQ LWV HDUO\ GD\V  WKHUH LV UHDFWLRQ HJ WKH %DVHO &RQYHQWLRQ LQ LWV HDUO\ GD\V WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ DV VKRZQ E\ WKH ODWHU FDPSDLJQ IRU WKH ³%DVHO %DQ $PHQGPHQW WR WKH %DVHO &RQYHQWLRQ´  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQLQ³WKH.RNRFDVHZKHQ³VKLSVWUDQVSRUWHGEDUUHOVRI KD]DUGRXV ZDVWH IURP ,WDO\ WR WKH VPDOO WRZQ RI .RNR LQ 1LJHULD LQ H[FKDQJHIRUPRQWKO\UHQWZKLFKZDVSDLGWRD1LJHULDQIRUWKHXVH RIKLVIDUPODQG´ZKLFKVHUYHGWKHIXQFWLRQRIGXPSLQJIRUWKRVHLQYROYHG DWWKHWLPH WKHUHLVQRQIXQFWLRQDOLW\ HJWKHUHODWLYHODFNRIDFWLRQIRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH FUHDWLRQ RI WKH %DVHO &RQYHQWLRQVRWKDWWKHSUDFWLFHRIGXPSLQJLQ³WKH.RNRFDVH´LVQR ORQJHUIXQFWLRQDOLQRXUWLPHDVLWLVPRUHDSSURSULDWHQRZDGD\VWRUHGXFH ³WKH PRYHPHQWV RI KD]DUGRXV ZDVWH EHWZHHQ QDWLRQV´  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH $QG LQ UHODWLRQ WR WKH LQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\ SULQFLSOH LI WKHUH LV LQWHQWLRQDOLW\ HJ WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQRXWFRPHDVVKRZQLQWKHGHVLJQRIWKH%DVHO&RQYHQWLRQWRKDQGOH KD]DUGRXV ZDVWH  WKHUH LV QRQLQWHQWLRQDOLW\ HJ WKH UHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH VXFK WKDW WKH RXWFRPHFDQHYHQEHFRXQWHULQWHQWLRQDOLQEHLQJWKHRSSRVLWHRIZKDWZDV RULJLQDOO\SODQQHGDVVKRZQLQWKHXQLQWHQGHGFRQVHTXHQFHVRIWKH%DVHO &RQYHQWLRQ LQ WKDW ZKDW FRQVWLWXWHV KD]DUGRXV ZDVWH LV VXEMHFW WR FRQWHQWLRQ WKDW WKHUH DUH TXHVWLRQDEOH UXOHV DERXW ³REOLJDWLRQV´ LQ WKH %DVHO &RQYHQWLRQ DQG WKDW LW GRHV QRW JR IDU HQRXJK WR SURWHFW OHVV GHYHORSHGFRXQWULHVIURPWKHVSUHDGRIKD]DUGRXVZDVWH $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH

8VHOHVVQHVV:DVWH0DQDJHPHQWDQG0LQRULWLHV $QRWKHU JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHOHVVQHVV IURP WKH SHUVSHFWLYH RI VRFLHW\LVWRH[SORUHXVHOHVVQHVVZDVWHPDQDJHPHQWDQGPLQRULWLHV $ PDMRU FRQWHQWLRQ KHUH LV WKDW ³ZDVWH PDQDJHPHQW LV D VLJQLILFDQW HQYLURQPHQWDO MXVWLFH LVVXH 0DQ\ RI WKH HQYLURQPHQWDO EXUGHQV«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´ :.P  0RUHVSHFLILFDOO\WKHUHDUHWKUHHPDLQJRDOVRI³WDNHEDFN´LQ(35DV VKRZQEHORZ DQGVXPPDUL]HGLQ6HF  :.P  



7KH)XWXUHRI3RVW+XPDQ:DVWH 



‡ WR ³HQFRXUDJH FRPSDQLHV WR GHVLJQ SURGXFWV IRU UHXVH UHF\FODELOLW\ DQGPDWHULDOVUHGXFWLRQ´ ‡ WR ³FRUUHFW«PDUNHW VLJQDOV WR WKH FRQVXPHU E\ LQFRUSRUDWLQJ ZDVWH PDQDJHPHQWFRVWVLQWRWKHSURGXFW¶VSULFH´ ‡WR³SURPRW>H@«LQQRYDWLRQLQUHF\FOLQJWHFKQRORJ\´  7KHVH JRDOV DUH IRU ³FUHDWLQJ LQFHQWLYHV IRU FRPSDQLHV WR UHGHVLJQ WKHLU SURGXFWV WR PLQLPL]H ZDVWH PDQDJHPHQW FRVWV E\ GHVLJQLQJ WKHLU SURGXFWV WR FRQWDLQ VDIHU PDWHULDOV VR WKH\ GR QRW QHHG WR EH PDQDJHG VHSDUDWHO\  RU GHVLJQLQJ SURGXFWV WKDW DUH HDVLHU WR UHF\FOH DQG UHXVH VR UHF\FOLQJEHFRPHVPRUHSURILWDEOH ´ :.P/5RHGHU  +LVWRULFDOO\ ³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´ :.P  $SSURDFKHVWR(35 7KHVH JRDOV RI (35 FDQ EH LPSOHPHQWHG LQ WHUPV RI WKUHH PDMRU DSSURDFKHVDVVKRZQEHORZ DQGVXPPDUL]HGLQ6HF  :.P   ‡³PDQGDWRU\´ ‡³QHJRWLDWHG´ ‡³YROXQWDU\´  7KHVH GLIIHUHQW DSSURDFKHV DUH SURGXFHUFHQWHUHG ³EHFDXVH RI WKH WHQGHQF\RIHFRQRPLFSROLF\LQPDUNHWGULYHQHFRQRPLHVQRWWRLQWHUIHUH ZLWK FRQVXPHUV¶ SUHIHUHQFHV´ VR ³WKH SURGXFHUFHQWULF UHSUHVHQWDWLRQ LV WKH GRPLQDQW IRUP RI YLHZLQJ WKH HQYLURQPHQWDO LPSDFWV RI LQGXVWULDO SURGXFWLRQ LQ VWDWLVWLFV RQ HQHUJ\ HPLVVLRQV ZDWHU HWF LPSDFWV DUH DOPRVW DOZD\V SUHVHQWHG DV DWWULEXWHV RI LQGXVWULHV RQVLWH  RU GLUHFW  DOORFDWLRQ  UDWKHU WKDQ DV DWWULEXWHV RI WKH VXSSO\ FKDLQV RI SURGXFWV IRU FRQVXPHUV 2Q D VPDOOHU VFDOH PRVW H[LVWLQJ VFKHPHV IRU FRUSRUDWH VXVWDLQDELOLW\ UHSRUWLQJ LQFOXGH RQO\ LPSDFWV WKDW DULVH RXW RI RSHUDWLRQV

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





FRQWUROOHG E\ WKH UHSRUWLQJ FRPSDQ\ DQG QRW VXSSO\FKDLQ LPSDFWV $FFRUGLQJWRWKLVZRUOGYLHZ XSVWUHDPDQGGRZQVWUHDP>HQYLURQPHQWDO@ LPSDFWV DUH«DOORFDWHG WR WKHLU LPPHGLDWH SURGXFHUV 7KH LQVWLWXWLRQDO VHWWLQJ DQG WKH GLIIHUHQW DFWRUV¶ VSKHUHV RI LQIOXHQFH DUH QRW UHIOHFWHG ´ :.P-6SDQJHQEHUJ  )RU LQVWDQFH ³WKH QH[XV FUHDWHG E\ WKH GLIIHUHQW YLHZV RQ LPSDFWV FDXVHGE\LQGXVWULDOSURGXFWLRQLVH[HPSOLILHGE\VHYHUDOFRQWULEXWLRQVWR WKH GLVFXVVLRQ DERXW SURGXFHU RU FRQVXPHU UHVSRQVLELOLW\ IRU JUHHQKRXVH JDVHPLVVLRQV(PLVVLRQVGDWDDUHUHSRUWHGWRWKH,3&&DVFRQWULEXWLRQVRI SURGXFLQJ LQGXVWULHV ORFDWHG LQ D SDUWLFXODU FRXQWU\ UDWKHU WKDQ DV HPERGLPHQWV LQ SURGXFWV FRQVXPHG E\ D SDUWLFXODU SRSXODWLRQ LUUHVSHFWLYHRISURGXFWLYHRULJLQ´ :.P  %\ WKH VDPH ORJLF EXW ³DW WKH FRPSDQ\ OHYHO ZKHQ DGRSWLQJ WKH FRQFHSWRIHFRHIILFLHQF\DQGWKHVFRSHRIDQHQYLURQPHQWDOPDQDJHPHQW V\VWHPVWDWHGLQIRUH[DPSOH,62LWLVLQVXIILFLHQWWRPHUHO\UHSRUW RQ WKH FDUERQ GLR[LGH HPLVVLRQV OLPLWHG WR WKH MXGLFLDO ERUGHUV RI WKH FRPSDQ\  &RPSDQLHV PXVW UHFRJQLVH WKHLU ZLGHU UHVSRQVLELOLW\ DQG PDQDJH WKH HQWLUH OLIHF\FOH RI WKHLU SURGXFWV«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«$VDUHVXOW(35LVJHQHUDOO\DSSOLHGWRSRVWFRQVXPHU ZDVWHV ZKLFK SODFH LQFUHDVLQJ SK\VLFDO DQG ILQDQFLDO GHPDQGV RQ PXQLFLSDO ZDVWH PDQDJHPHQW ´ :. P 3 &HULQ  3 (ULQ   $GYDQWDJHVRI(35 7KH DGYDQWDJHV RI (35 DUH REYLRXV WR VHH )RU LQVWDQFH ³ZKHQ SURGXFHUV HLWKHU IDFH D ILQDQFLDO RU SK\VLFDO EXUGHQ RI UHF\FOLQJ WKHLU HOHFWURQLFVDIWHUXVHWKH\PD\EHLQFHQWLYL]HGWRGHVLJQPRUHVXVWDLQDEOH OHVV WR[LF DQG HDVLO\ UHF\FODEOH HOHFWURQLFV 8VLQJ IHZHU PDWHULDOV DQG GHVLJQLQJSURGXFWVWRODVWORQJHUFDQGLUHFWO\UHGXFHSURGXFHUV HQGRIOLIH FRVWV7KXV([WHQGHG3URGXFHU5HVSRQVLELOLW\LVRIWHQFLWHGDVRQHZD\WR ILJKW SODQQHG REVROHVFHQFH EHFDXVH LW ILQDQFLDOO\ HQFRXUDJHV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



PDQXIDFWXUHUV WR GHVLJQ IRU UHF\FOLQJ DQG PDNH SURGXFWV ODVW ORQJHU´ :.P(35%3UDNDVK1285  3UREOHPVZLWK(35 +RZHYHUIRUWKHFULWLFV(35KDVVRPHPDMRUSUREOHPV&RQVLGHUIRU LOOXVWUDWLRQDIHZH[DPSOHVEHORZ DVVXPPDUL]HGLQ6HF  )LUVWO\ RQH PDLQ FULWLFLVP RI (35 LV WKDW LWV LPSOHPHQWDWLRQ FDQ EH OLPLWHGIRUFRPSOH[SURGXFWV )RU LQVWDQFH ³VRPH SHRSOH KDYH FRQFHUQV DERXW H[WHQGHG SURGXFHU UHVSRQVLELOLW\ SURJUDPV IRU FRPSOH[ HOHFWURQLFV WKDW FDQ EH GLIILFXOW WR VDIHO\UHF\FOHVXFKDV/LWKLXPLRQSRO\PHUEDWWHULHV´ :.P  6HFRQGO\DQRWKHUPDLQFULWLFLVPRI(35LVWKDWLWVDSSOLFDWLRQLVQRW HIIHFWLYHHYHQLQUHOHYDQWFDVHV )RULQVWDQFHVRPHFULWLFVSRLQWHGRXWWKDW³VXFKODZVFRXOGLQFUHDVH WKHFRVWRIHOHFWURQLFVEHFDXVHSURGXFHUVZRXOGEHDGGLQJUHF\FOLQJFRVWV LQWRWKHLQLWLDOSULFHWDJ´ :.P  7KLUGO\VWLOODQRWKHUPDLQFULWLFLVPRI(35LVWKDWLWIRFXVHVWRRPXFK RQSURGXFHUUHVSRQVLELOLW\QRWFRQVXPHUUHVSRQVLELOLW\ )RULQVWDQFHIRUWKHFULWLFV³DQXPEHURIVWXGLHVKDYHKLJKOLJKWHGWKDW ILQDOFRQVXPSWLRQDQGDIIOXHQFHHVSHFLDOO\LQWKHLQGXVWULDOLVHGZRUOGDUH WKHPDLQGULYHUVIRUWKHOHYHODQGJURZWKRIHQYLURQPHQWDOSUHVVXUH(YHQ WKRXJK WKHVH VWXGLHV SURYLGH D FOHDU LQFHQWLYH IRU FRPSOHPHQWLQJ SURGXFHUIRFXVHG HQYLURQPHQWDO SROLF\ ZLWK VRPH FRQVLGHUDWLRQ IRU FRQVXPSWLRQUHODWHG DVSHFWV GHPDQGVLGH PHDVXUHV WR HQYLURQPHQWDO SUREOHPVDUHUDUHO\H[SORLWHG´ :.P73ULQFHQ  )RXUWKO\DQDGGLWLRQDOPDLQFULWLFLVPRI(35LVWKDWLWVPHDVXUHPHQWV DUHQRWFRQVLVWHQWRYHUWLPH )RU LQVWDQFH IRU WKH FULWLFV ³(35 KDV UDUHO\ EHHQ FRQVLVWHQWO\ TXDQWLILHG 0RUHRYHU DSSO\LQJ FRQYHQWLRQDO OLIH F\FOH DVVHVVPHQW DQG DVVLJQLQJHQYLURQPHQWDOLPSDFWVWRSURGXFHUVDQGFRQVXPHUVFDQOHDGWR GRXEOHFRXQWLQJ 8VLQJLQSXWRXWSXWDQDO\VLVUHVHDUFKHUV KDYH DWWHPSWHG IRUGHFDGHVWRDFFRXQWIRUERWKSURGXFHUVDQGFRQVXPHUVLQDQHFRQRP\LQ DFRQVLVWHQWZD\´ :.P  )LIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI (35 LV WKDW LW FDQ EH FRXQWHUSURGXFWLYH )RU LQVWDQFH ³RUJDQL]DWLRQV DQG UHVHDUFKHUV DJDLQVW (35 FODLP WKDW WKH PDQGDWH ZRXOG VORZ WHFKQLFDO LQQRYDWLRQ DQG LPSHGH WHFKQRORJLFDO SURFHVV´EHFDXVHLWDGGVH[WUDFRVWVWRSURGXFHUV :.P  $QG VL[WKO\ VWLOO DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI (35 LV WKDW LW FDQEHPLVXVHGIRUVRPHWKLQJHOVH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





)RULQVWDQFH³RWKHUFULWLFVDUHFRQFHUQHGWKDWPDQXIDFWXUHUVPD\XVH WDNHEDFNSURJUDPVWRWDNHVHFRQGKDQGHOHFWURQLFVRIIWKHUHXVHPDUNHWE\ VKUHGGLQJ UDWKHU WKDQ UHXVLQJ RU UHSDLULQJ JRRGV WKDW FRPH LQ IRU UHF\FOLQJ´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³RWKHU FULWLFV DUH FRQFHUQHG WKDW PDQXIDFWXUHUV PD\ XVH WDNHEDFN SURJUDPV WR WDNH VHFRQGKDQG HOHFWURQLFV RII WKH UHXVH PDUNHW E\ VKUHGGLQJ UDWKHU WKDQ UHXVLQJRUUHSDLULQJJRRGVWKDWFRPHLQIRUUHF\FOLQJ´WRJHWKHUZLWKRWKHU SUREOHPVDIRUHFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI (35 LQVRIDU DV LW ³KDV UDUHO\ EHHQ FRQVLVWHQWO\ TXDQWLILHG´ WKHUHLVUHDOLW\ HJWKHUHDOLVWLFDVSHFWRI(35LQVRIDUDVLW FRQWULEXWHV WR WKH DZDUHQHVV RI SURGXFHU UHVSRQVLELOLW\  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJWKHILQLWHQXPEHURIWKHFDWHJRULHVRI ZDVWH WRIDOO XQGHU WKH MXULVGLFWLRQ RI (35 OLNH ³LQGXVWULDO ZDVWH´ ³HOHFWURQLF ZDVWH´ HWF  WKHUH LV WUDQVILQLWHQHVV HJ WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO SLHFHVRISURGXFWVLQKLVWRU\ WKDW KDYHHYHUH[LVWHGDQGFDQEHFODVVLILHG XQGHU(35 $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI  DSSURDFKHV WR (35 OLNH ³PDQGDWRU\´ ³QHJRWLDWHG´ DQG ³YROXQWDU\´ LQ WKH DUWLFOH DIRUHFLWHG  WKHUH LV YDJXHQHVV HJ WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  DSSURDFKHV WR (35 OLNH ³PDQGDWRU\´ ³QHJRWLDWHG´ DQG ³YROXQWDU\´ LQ WKHDUWLFOHDIRUHFLWHGVLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRW DQGVRRQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJWKHUHODWLYHO\VLPSOHDQDO\VLVRI(35E\WKHSURSRQHQWV  WKHUHLVFRPSOLFDWHGQHVV HJWKHUHODWLYHO\PRUHFRPSOLFDWHGDQDO\VLVRI (35 E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPVSRLQWHGRXWE\WKHFULWLFVDVFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVR KROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJWKHRSHQH[SORUDWLRQRISURGXFHUUHVSRQVLELOLW\E\WKHDGYRFDWHVRI (35  WKHUH LV KLGGHQQHVV HJ WKH KLGGHQ ELDV LQ (35 EHFDXVH LW GRHV QRWIRFXVRQFRQVXPHUUHVSRQVLELOLW\ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGV WUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJWKHUHODWLYHO\GHQVHUFRQFHQWUDWLRQRIFRQFHUQVE\WKHSURSRQHQWVRI (35 ZLWK SURGXFHU UHVSRQVLELOLW\ LQ (35  WKHUH LV HPSWLQHVV HJ WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ RI FRQFHUQV E\ WKH SURSRQHQWV RI (35 ZLWK WKH VXEVHTXHQW FRQVHTXHQFHV WKDW ³SURGXFHUV ZRXOG EH DGGLQJ UHF\FOLQJ FRVWV LQWR WKH LQLWLDO SULFH WDJ´ RU WKDW ³PDQXIDFWXUHUVPD\XVHWDNHEDFNSURJUDPVWRWDNHVHFRQGKDQGHOHFWURQLFV RIIWKHUHXVHPDUNHWE\VKUHGGLQJUDWKHUWKDQUHXVLQJRUUHSDLULQJJRRGV WKDW FRPH LQ IRU UHF\FOLQJ´ DQG RWKHU SUREOHPV DIRUHFLWHG  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFKDQJHFRQVWDQF\SULQFLSOHLIWKHUHLVFKDQJH HJ WKH HYHU QHZ ZD\V WR GHDO ZLWK ZDVWH DV VKRZQ LQ (35  WKHUH LV FRQVWDQF\ HJWKHHYHUFRQVWDQWH[LVWHQFHRIGLIIHUHQWSUREOHPVZLWKWKH HYHU QHZ ZD\V WR GHDO ZLWK ZDVWH DV VKRZQ LQ WKH SUREOHPV ZLWK (35 SRLQWHGRXWE\WKHFULWLFV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRUGHUFKDRVSULQFLSOHLIWKHUHLVRUGHU HJWKHPRUH RUOHVVRUGHUO\UHDOLW\RIZDVWHUHF\FOLQJLIORRNHGIURPWKHYDQWDJHSRLQW RI WKH WKH DGYRFDWHV RI (35 WR VROHO\ IRFXV RQ SURGXFHU UHVSRQVLELOLW\  WKHUHLVFKDRV HJ WKH PRUHRUOHVVFKDRWLFUHDOLW\RI ZDVWHUHF\FOLQJLI ORRNHGIURPWKHPXOWLSOHYDQWDJHSRLQWVRIWKHFULWLFVRI(35DVVKRZQLQ WKHQXPHURXVSUREOHPVSRLQWHGRXWE\WKHFULWLFVOLNHWKHH[DPSOHVWKDWLWV PHDVXUHPHQWV DUH QRW FRQVLVWHQW RYHU WLPH WKDW LW FDQ EH FRXQWHU



7KH)XWXUHRI3RVW+XPDQ:DVWH 



SURGXFWLYH WKDW LW FDQ EH PLVXVHG IRU VRPHWKLQJ HOVH HWF  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJ WKH UHODWLYHO\ VORZHU VSHHG RI FRPSDQLHV WR HQJDJH LQ WHFKQLFDO LQQRYDWLRQV LI UHJXODWHG E\ (35 DFFRUGLQJ WR ³RUJDQL]DWLRQV DQG UHVHDUFKHUV DJDLQVW (35´ DV WKH\ FODLP WKDW ³WKH PDQGDWH ZRXOG VORZ WHFKQLFDOLQQRYDWLRQDQGLPSHGHWHFKQRORJLFDOSURFHVV´EHFDXVHLWDGGV H[WUD FRVWV WR SURGXFHUV DQG FRQWULEXWHV WR RWKHU SUREOHPV  WKHUH LV TXLFNQHVV HJ WKH UHODWLYHO\ TXLFNHU VSHHG RI FRPSDQLHV WR HQJDJH LQ WHFKQLFDO LQQRYDWLRQV LI QRW EXUGHQHG E\ (35 DW DOO EHFDXVH ³RUJDQL]DWLRQV DQG UHVHDUFKHUV DJDLQVW (35´ FODLP WKDW ³WKH PDQGDWH >RI (35@ZRXOGVORZWHFKQLFDOLQQRYDWLRQDQGLPSHGHWHFKQRORJLFDOSURFHVV´ EHFDXVH LW DGGV H[WUD FRVWV WR SURGXFHUV DQG FRQWULEXWHV WR RWKHU SUREOHPV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJ WKH UHODWLYH H[SDQVLRQ RI ³PRUH VXVWDLQDEOH OHVV WR[LF DQG HDVLO\ UHF\FODEOH´SURGXFWVQRZDGD\VDPRQJWKRVHZKRFRPSO\ZLWK(35 WKHUH LV FRQWUDFWLRQ HJ WKH UHODWLYH GHFOLQH RI HOHFWURQLFV QRZDGD\V ZKLFK FDQQRW EH  VDIHO\ UHF\FOHG VXFK DV WKH ROGIDVKLRQHG ³/LWKLXPLRQ SRO\PHUEDWWHULHV´DQGRWKHUV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDOFRQVWUXFWLRQRI³VXVWDLQDELOLW\´LQHQYLURQPHQWDOVWXGLHV WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI WKH NQRZOHGJH RI ³VXVWDLQDELOLW\´LQHQYLURQPHQWDOVWXGLHVWRWKHILHOGRIHFRQRPLFVOLNHWKH FDOOIRU(35LQPDQXIDFWXULQJ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJ WKH FRQYHQWLRQDO ZLVGRP DERXW PDNLQJ ³FRPSOH[ HOHFWURQLFV WKDW FDQEHGLIILFXOWWRVDIHO\UHF\FOHVXFKDV/LWKLXPLRQSRO\PHUEDWWHULHV´LQ WKHROGHUGD\V WKHUHLVQRYHOW\ HJWKHDOWHUQDWLYHQRYHOFKDOOHQJHWRWKH FRQYHQWLRQDO ZLVGRP DERXW PDNLQJ ³FRPSOH[ HOHFWURQLFV WKDW FDQ EH GLIILFXOWWRVDIHO\UHF\FOH´E\WKHQHZLGHDRI(35ZKLFKVXJJHVWVWKDW ³LWILQDQFLDOO\HQFRXUDJHVPDQXIDFWXUHUVWRGHVLJQIRUUHF\FOLQJDQGPDNH SURGXFWVODVWORQJHU´  :.P $QGWKHUHYHUVHGLUHFWLRQDOVRKROGV WUXH ,Q UHODWLRQ WR WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH LI WKHUH LV HYROXWLRQ HJWKH QDWXUDOHYROXWLRQRI KXPDQV WRWKURZDZD\ ZDVWHV LQ WKH VWDWH RI QDWXUH LQ D SULPLWLYH ZD\  WKHUH LV WUDQVIRUPDWLRQ HJ WKH WHFKQLFDOWUDQVIRUPDWLRQRIKXPDQDELOLW\WRKDQGOHZDVWHE\WKHLQYHQWLRQ RI (35 IRU D V\VWHPDWLF ³LQWHJUDWLRQ RI HQYLURQPHQWDO FRVWV DVVRFLDWHG ZLWK JRRGV WKURXJKRXW WKHLU OLIH F\FOHV LQWR WKH PDUNHW SULFH RI WKH SURGXFWV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





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³UHXVH´ ³EX\EDFN´ ³UHF\FOLQJ´ RU HYHQ WKH GHOHJDWLRQ RI WKLV UHVSRQVLELOLW\ WR D WKLUG SDUW\ NQRZQDV³SURGXFHUUHVSRQVLELOLW\RUJDQL]DWLRQ´LQVWHDG $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHDFWLYHQHVVLQDFWLYHVVSULQFLSOHLIWKHUHLVDFWLYHQHVV HJ WKH DFWLYHQHVV RI WKRVH FRPSDQLHV ZKLFK DUH DEOH WR ³GHVLJQ IRU UHF\FOLQJDQGPDNHSURGXFWVODVWORQJHU´LQFRPSOLDQFHZLWK(35 WKHUH LV LQDFWLYHQHVV HJ WKH UHODWLYH LQDFWLYHQHVV RI WKRVH FRPSDQLHV ZKLFK FDQQRW FRPSO\ ZLWK (35 EHFDXVH LW LV WRR ³H[SHQVLYH LI WKH SURGXFW FRQWDLQVKD]DUGRXVPDWHULDOVDQGGRHVQRWKDYHDVFUDSYDOXHVXFKDVZLWK &57 WHOHYLVLRQV´²DOWKRXJK WKH\ FDQ VKLIW WKHLU DFWLYLWLHV WR VRPHWKLQJ HOVHLQVWHDG  :.P $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ WKRVHFDPSDQLHVLQWKHROGHUGD\VZKLFKSURGXFHGOHVVVXVWDLQDEOHPRUH WR[LF DQG KDUGO\ UHF\FODEOH HOHFWURQLFV  WKHUH LV RWKHUQHVV HJ WKH WHQGHQF\WREHPRVWO\FHQWHUHGRQRWKHUVDVVKRZQE\WKHSURSRQHQWVRI (35 ZKR DVN IRU D QHZ SROLF\ RI PDNLQJ SURGXFWV ZKLFK DUH ³PRUH VXVWDLQDEOHOHVVWR[LFDQGHDVLO\UHF\FODEOHHOHFWURQLFV´IRUWKHFRPPRQ JRRGRIVRFLHW\ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJWKHUHJUHVVLRQ PDGHE\(35DVVKRZQLQWKH SUREOHPV SRLQWHGRXWE\WKHFULWLFV WKHUHLVSURJUHVVLRQ HJWKHSURJUHVVPDGHE\ (35DVVKRZQLQLWVFRQWULEXWLRQWRZDVWHUHF\FOLQJDIRUHFLWHG $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVUHJDUGOHVVRIZKHWKHUWKLVEHGRQHE\ZD\RI(35



7KH)XWXUHRI3RVW+XPDQ:DVWH 



RU E\ ZD\ RI PDUNHWRULHQWHG UHVSRQVLELOLW\  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVE\ZD\RI(35IRUDUHODWLYHO\PRUHHQYLURQPHQW IULHQGO\ ZRUOGYLHZ²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIPDUNHWRULHQWHGUHVSRQVLELOLW\IRU D UHODWLYHO\ PRUH HQYLURQPHQWGRPLQDWHG ZRUOGYLHZ  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ RI (35 ZKHQ LW SRSXODUO\ UHTXLUHG SURGXFHU UHVSRQVLELOLW\ LQ UHFHQW WLPHV  WKHUH LV UHDFWLRQ HJ WKH LPSOHPHQWDWLRQ RI (35 WKHQ OHG WR IXUWKHU FKDQJHV RYHU WLPH DV ³SURGXFHUV ZRXOG EH DGGLQJ UHF\FOLQJ FRVWV LQWR WKH LQLWLDO SULFH WDJ´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³PRUHVXVWDLQDEOHOHVVWR[LFDQGHDVLO\UHF\FODEOHHOHFWURQLFV´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

8VHIXOQHVV'XPSVWHU'LYLQJDQGWKH:DVWH&ROOHFWLQJ+DELW $QRWKHU ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHIXOQHVV IURP WKH SHUVSHFWLYH RI WKH PLQG LV WR H[SORUH XVHIXOQHVV GXPSVWHU GLYLQJ DQG WKH ZDVWHFROOHFWLQJ KDELW 7KHWHUP³GXPSVWHUGLYLQJ´UHIHUVWR³WKHSUDFWLFHRIVLIWLQJWKURXJK FRPPHUFLDORUUHVLGHQWLDOWUDVKWRILQGLWHPVWKDWKDYHEHHQGLVFDUGHGE\

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WKHLURZQHUVEXWWKDW PD\SURYHXVHIXOWRWKHGXPSVWHUGLYHU'XPSVWHU 'LYLQJLVDOVRYLHZHGDVDQHIIHFWLYHXUEDQIRUDJLQJWHFKQLTXH'XPSVWHU GLYHUV ZLOO IRUDJH GXPSVWHUV IRU LWHPV VXFK DV FORWKLQJ IXUQLWXUH IRRG DQG RWKHU LWHPV RI WKH OLNH GHHPHG LQ JRRG ZRUNLQJ FRQGLWLRQV´ :. EE0/HZ\FND:67  1DPHVIRU'XPSVWHU'LYLQJ %XW ³GXPSVWHU GLYLQJ´ DOVR KDV GLIIHUHQW QDPHV RYHU WLPH )RU LQVWDQFHLWLVNQRZQDV ³GXPSVWHUVNLSSLQJ %ULWLVK(QJOLVK ´²DQG ³WKH GXPSVWHU GLYLQJ WHUP RULJLQDWHV IURP WKH EHVWNQRZQ PDQXIDFWXUHU RI FRPPHUFLDOWUDVKELQV'HPSVWHUZKRXVHWKHWUDGHQDPH 'XPSVWHU IRU WKHLU ELQV DQG WKH IDQFLIXO LPDJH RI VRPHRQH OHDSLQJ KHDG ILUVW LQWR D GXPSVWHUDVLILWZHUHDVZLPPLQJSRRO,QSUDFWLFHWKHVL]HDQGGHVLJQRI PRVWGXPSVWHUVPDNHVLWSRVVLEOHWRUHWULHYHPDQ\LWHPVIURPWKHRXWVLGH RIGXPSVWHUVZLWKRXWKDYLQJWR GLYH LQWRWKHP´ :.EE(0F.HDQ   ,Q DGGLWLRQ ³WKH SUDFWLFH RI GXPSVWHU GLYLQJ FDQ DGGLWLRQDOO\ EH UHIHUUHG WR DV ELQGLYLQJ FRQWDLQHULQJ 'PDUW GXPSVWHULQJ WDWWLQJ RU

UHF\FOHG  IRRG´ :. EE $ 5HQWRQ  ':  1 ' $QGUHD '&RORQ  $OVR ³WKH WHUP ELQQHU LV RIWHQ XVHG WR GHVFULEH LQGLYLGXDOV ZKR FROOHFWUHF\FODEOHPDWHULDOVIRUWKHLUGHSRVLWYDOXH´ :.EE  5HDVRQVIRU'XPSVWHU'LYLQJ 7KRVHZKRGHYHORSWKHKDELWRIZDVWHFROOHFWLQJRUEHFRPHGXPSVWHU GLYHUV KDYH QXPHURXV UHDVRQV IRU GRLQJ VR &RQVLGHU IRU LOOXVWUDWLRQ VRPHPDLQUHDVRQVEHORZ :.EE75$6+(-DFNVRQ $6DFKV&$OOLVRQ   ‡ ³,Q 9DQFRXYHU ELQQHUV RU ERWWOH FROOHFWRUV VHDUFK JDUEDJH FDQV DQG GXPSVWHUV IRU UHF\FODEOH PDWHULDOV WKDW FDQ EH UHGHHPHG IRU WKHLU GHSRVLW YDOXH 2Q DYHUDJH WKHVH ELQQHUV HDUQ DERXW  SHU GD\ IRU VHYHUDOJDUEDJHEDJVIXOORIGLVFDUGHGFRQWDLQHUV´ ‡ ³7KH NDUXQJ JXQL =DEEDOHHQ WKH UDJ DQG ERQH PDQ ZDVWH SLFNHU MXQN PDQ RU ELQ KRNHU DUH SHRSOH ZKR PDNH WKHLU OLYLQJ E\ VRUWLQJ DQGWUDGLQJWUDVK$VLPLODUSURFHVVNQRZQDVJOHDQLQJZDVSUDFWLFHG LQ UXUDO DUHDV DQG VRPH DQFLHQW DJULFXOWXUDO VRFLHWLHV ZKHUH WKH UHVLGXHIURPIDUPHUV ILHOGVZDVFROOHFWHG´



7KH)XWXUHRI3RVW+XPDQ:DVWH 



‡³6RPHGXPSVWHUGLYHUV ZKRVHOILGHQWLI\DVIUHHJDQVDLPWRUHGXFH WKHLU HFRORJLFDO IRRWSULQW E\ OLYLQJ H[FOXVLYHO\ IURP GXPSVWHU GLYHG JRRGV´ ‡ ³$UWLVWV RIWHQ XWLOL]H GLVFDUGHG PDWHULDOV UHWULHYHG IURP WUDVK UHFHSWDFOHVWRFUHDWHZRUNVRIIRXQGDUWRUDVVHPEODJH´ ‡³6WXGHQWVKDYHEHHQNQRZQWRXQGHUJRGXPSVWHUGLYLQJWRHLWKHUXVH VDOYDJHGKLJKWHFKLWHPVLQWHFKQLFDOSURMHFWVRUWRVLPSO\LQGXOJHLQ WKHLUFXULRVLW\IRUXQXVXDOLWHPV´ ‡ ³'XPSVWHU GLYLQJ FDQ DGGLWLRQDOO\ EH XVHG LQ VXSSRUW RI DFDGHPLF UHVHDUFK ,W VHUYHV DV WKH PDLQ WRRO IRU JDUERORJLVWV ZKR VWXG\ WKH VRFLRORJ\DQGDUFKHRORJ\RIWUDVKLQPRGHUQOLIH2WKHUVEHFDXVHRI WKHLU SURIHVVLRQ PD\ SUDFWLFH GXPSVWHU GLYLQJ DV D WRRO IRU SULYDWH LQYHVWLJDWLRQVWRVHHNLQIRUPDWLRQDQGPDWHULDOIRURIILFLDOSXUSRVHV´ ‡ ³%\ UHXVLQJ UHVRXUFHV GHVWLQHG IRU WKH ODQGILOO GXPSVWHU GLYLQJ EHFRPHVDQHQYLURQPHQWDOLVWHQGHDYRU DQGLVWKXVSUDFWLFHGE\PDQ\ SURJUHHQ FRPPXQLWLHV  7KH ZDVWHIXOQHVV RI FRQVXPHU VRFLHW\ DQG WKURZDZD\FXOWXUHFRPSHOV VRPHLQGLYLGXDOVWRUHVFXHXVDEOHLWHPV IRU H[DPSOH FRPSXWHUV  IURP GHVWUXFWLRQ DQG GLYHUW WKHP WR WKRVH ZKRFDQPDNHXVHRIWKHLWHPLQTXHVWLRQ´ ‡ ³,UUHJXODU EOHPLVKHG RU GDPDJHG LWHPV WKDW DUH VWLOO RWKHUZLVH IXQFWLRQDODUHUHJXODUO\WKURZQDZD\'LVFDUGHGIRRGWKDWPLJKWKDYH VOLJKWLPSHUIHFWLRQVWKDWLVQHDULWVH[SLUDWLRQGDWHRUWKDWLVVLPSO\ EHLQJUHSODFHGE\QHZHUVWRFNLVRIWHQWKURZQDZD\GHVSLWHEHLQJVWLOO HGLEOH0DQ\UHWDLOHUVDUHUHOXFWDQWWRVHOOWKLVVWRFNDWUHGXFHGSULFHV GXH WR WKH EHOLHI WKDW SHRSOH ZLOO EX\ LW LQVWHDG RI WKH KLJKHU SULFHG QHZHU VWRFN WKDW H[WUD KDQGOLQJ WLPH LV UHTXLUHG DQG WKDW WKHUH DUH OLDELOLW\ULVNV´  2IFRXUVHWKHUHFDQEHRWKHUH[DPSOHVVRWKHRQHVKHUHDUHLOOXVWUDWLYH ,WHPVRI'XPSVWHU'LYLQJ -XVW DV WKHUH DUH GLIIHUHQW UHDVRQV IRU GXPSVWHU GLYLQJ²WKHUH DUH OLNHZLVHGLIIHUHQWLWHPVRIGXPSVWHUGLYLQJZKLFKFDQFRPHLQDOOVKDSHV DQGVL]HVDVVKRZQEHORZ :.EE-+DUULVRQ   ‡³'XPSVWHUGLYLQJLVSUDFWLFHGGLIIHUHQWO\LQGHYHORSHGFRXQWULHVWKDQ LQGHYHORSLQJFRXQWULHV,QPDQ\GHYHORSLQJFRXQWULHVIRRGLVUDUHO\ WKURZQ DZD\ XQOHVV LW LV URWWHQ DV IRRG LV VFDUFH LQ FRPSDULVRQ WR GHYHORSHGQDWLRQV,QFRXQWULHVOLNHWKH8QLWHG6WDWHVZKHUH± RIIRRGLVZDVWHGWKHWUDVKFRQWDLQVDORWPRUHIRRGWRJDWKHU´

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





‡ ³,Q PDQ\ FRXQWULHV FKDULWLHV FROOHFW H[FHVV IRRG IURP VXSHUPDUNHWV DQG UHVWDXUDQWV DQG GLVWULEXWH LW WR LPSRYHULVKHG QHLJKERUKRRGV 'XPSVWHU GLYHUV .DUXQJ JXQL =DEDOHHQ DQG UDJ DQG ERQH PHQ LQ WKHVHFRXQWULHVPD\FRQFHQWUDWHRQORRNLQJIRUXVDEOHLWHPVRUVFUDS PDWHULDOVWRVHOOUDWKHUWKDQIRRGLWHPV´ ‡ ³,Q WKH 8QLWHG 6WDWHV &DQDGD DQG (XURSH VRPH EDNHULHV JURFHU\ VWRUHVRUUHVWDXUDQWV ZLOOURXWLQHO\GRQDWHIRRGDFFRUGLQJWR D*RRG 6DPDULWDQ)RRG'RQDWLRQ$FWEXWPRUHRIWHQEHFDXVHRIKHDOWKODZV RU FRPSDQ\ SROLF\ WKH\ DUH UHTXLUHG WR GLVFDUG IRRG LWHPV E\ WKH H[SLUDWLRQ GDWH EHFDXVH RI RYHUVWRFN EHLQJ RYHUO\ ULSHQHG VSRLOHG FRVPHWLFDOO\LPSHUIHFWRUEOHPLVKHG´ ‡ ³2IILFHV IDFWRULHV GHSDUWPHQW VWRUHV DQG RWKHU FRPPHUFLDO HVWDEOLVKPHQWV PD\ HTXDOO\ WKURZ RXW QRQSHULVKDEOH LWHPV WKDW DUH LUUHJXODU ZHUH UHWXUQHG KDYH PLQRU GDPDJHV RU DUH UHSODFHG E\ QHZHULQYHQWRU\0RVWLWHPVWHQGWREHLQVXFKDVWDWHRIGLVUHSDLURU FRVPHWLFDOO\IODZHGWKDWWKH\ZLOOUHTXLUHVRPHZRUNE\WKHGXPSVWHU GLYHU WR PDNH WKH LWHPV IXQFWLRQDOO\ XVDEOH )RU WKLV UHDVRQ IDFWRU\ ZRUNHUV ZLOO DW WLPHV LQWHQWLRQDOO\ GHVWUR\ WKHLU LWHPV SULRU WR EHLQJ GLVFDUGHGWRSUHYHQWWKHPIURPEHLQJUHXVHGRUUHVROG´ ‡ ³$V SURRI WR SXEOLVKLQJ KRXVHV RI XQVROG PHUFKDQGLVH ERRNVHOOHUV ZLOO URXWLQHO\ UHPRYH WKH IURQW FRYHUV RI SULQWHG PDWHULDOV WR UHQGHU WKHPGHVWUR\HGSULRUWRWRVVLQJWKHUHPDLQVLQWKHGXPSVWHU7KRXJK UHDGDEOH PDQ\ GDPDJHG SXEOLFDWLRQV KDYH GLVFODLPHUV DQG OHJDO QRWLFHVDJDLQVWWKHLUH[LVWHQFHRUVDOH´ ‡ ³6RPH FRQVXPHU HOHFWURQLFV DUH GXPSHG EHFDXVH RI WKHLU UDSLG GHSUHFLDWLRQ REVROHVFHQFH FRVW WR UHSDLU RU H[SHQVH WR XSJUDGH 2ZQHUV RI IXQFWLRQDO FRPSXWHUV PD\ ILQG LW HDVLHU WR GXPS WKHP UDWKHUWKDQGRQDWHEHFDXVHPDQ\QRQSURILWRUJDQL]DWLRQVDQGVFKRROV DUH XQDEOH RU XQZLOOLQJ WR ZRUN ZLWK XVHG HTXLSPHQW 6RPH RUJDQL]DWLRQV OLNH *HHNV ,QWR 7KH 6WUHHWV UH%227 )UHH *HHN DQG &RPSXWHUEDQN WU\ WR UHIXUELVK ROG FRPSXWHUV IRU FKDULW\ RU HGXFDWLRQDOXVH´ ‡ ³6RPHWLPHV GXPSVWHUV PD\ FRQWDLQ UHF\FODEOH PHWDOV DQG PDWHULDOV WKDW FDQ EH UHXVHG RU VROG WR UHF\FOLQJ SODQWV DQG VFUDS \DUGV 7KH PRVWFRPPRQUHF\FODEOHPHWDOVIRXQGDUHVWHHODQGWKHQDOXPLQXP´ ‡³5HVLGHQWLDOEXLOGLQJVFDQDGGLWLRQDOO\EHD JRRGVRXUFHRIFORWKLQJ IXUQLWXUHDSSOLDQFHVDQGRWKHUKRXVHZDUHV´  $JDLQWKHUHFDQEHRWKHUH[DPSOHVVRWKHRQHVKHUHDUHLOOXVWUDWLYH 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



3HUPLVVDELOLW\RI'XPSVWHU'LYLQJ 'XPSVWHU GLYLQJ LV SHUPLWWHG RU OHJDO  XQGHU FHUWDLQ FLUFXPVWDQFHV GHSHQGLQJ RQ ORFDO ODZV DOWKRXJK WKHUH DUH H[FHSWLRQV &RQVLGHU IRU LOOXVWUDWLRQVRPHH[DPSOHVEHORZ :.EE   ‡³'XPSVWHUGLYLQJSHUVHLVRIWHQOHJDOZKHQQRWVSHFLILFDOO\SURKLELWHG E\ ODZ $EDQGRQPHQW RI SURSHUW\ LV DQRWKHU SULQFLSOH RI ODZ WKDW DSSOLHVWRUHFRYHULQJPDWHULDOVYLDGXPSVWHUGLYLQJ´ ‡ ³3ROLFH VHDUFKHV RI GXPSVWHUV DV ZHOO DV VLPLODU PHWKRGV DUH DOVR JHQHUDOO\ QRW FRQVLGHUHG YLRODWLRQV HYLGHQFH VHL]HG LQ WKLV ZD\ KDV EHHQ SHUPLWWHG LQ PDQ\ FULPLQDO WULDOV 7KH GRFWULQH LV QRW DV ZHOO HVWDEOLVKHGLQUHJDUGVWRFLYLOOLWLJDWLRQ´ ‡ ³&RPSDQLHV UXQ E\ SULYDWH LQYHVWLJDWRUV VSHFLDOL]LQJ LQ GXPSVWHU GLYLQJ KDYH HPHUJHG DV D UHVXOW RI WKH QHHG IRU GLVFUHHW XQGHWHFWHG UHWULHYDO RI GRFXPHQWV DQG HYLGHQFH IRU FLYLO DQG FULPLQDO WULDOV 3ULYDWH LQYHVWLJDWRUV KDYH DOVR ZULWWHQ ERRNV RQ 3, WHFKQLTXH  LQ ZKLFKGXPSVWHUGLYLQJRULWVHTXLYDOHQW ZDVWHEDVNHWUHFRYHU\ ILJXUHV SURPLQHQWO\´ ‡³,Q,WDO\DODZLVVXHGLQGHFODUHGGXPSVWHUGLYLQJWREHOHJDO´  6XUHO\WKHUHFDQEHRWKHUH[DPSOHVVRWKHRQHVKHUHDUHLOOXVWUDWLYH 3UREOHPVZLWK'XPSVWHU'LYLQJ +RZHYHU IRU WKH FULWLFV GXPSVWHU GLYLQJ KDV VRPH PDMRUSUREOHPV &RQVLGHUIRULOOXVWUDWLRQDIHZH[DPSOHVEHORZ )LUVWO\RQHPDLQFULWLFLVPRIGXPSVWHUGLYLQJLVWKDWLWFDQEHLOOHJDO )RUH[DPSOH ³RSHQLQJD VHDOHGELQWRUHPRYHIRRGLVDOVRLOOHJDOLQ *HUPDQ\ DQG LI FDXJKW WKH GXPSVWHU GLYHU FRXOG EH FKDUJHG ZLWK WKHIW«7KLV RSWLRQ LV RIWHQ XVHG E\ VXSHUPDUNHWV ZKLFK LQ PDQ\ FDVHV VHDOWKHLUELQVRUNHHSWKHPLQHQFORVHGDUHDV´ ': ,QRWKHUFDVHV ³WKHUH DUH«FRQFHUQV DURXQG WKH OHJDOLW\ RI WDNLQJ LWHPV WKDW PD\ VWLOO WHFKQLFDOO\ EHORQJ WR WKH SHUVRQ ZKR WKUHZ WKHP DZD\ RU WR WKH ZDVWH PDQDJHPHQW RSHUDWRU  DQG ZKHWKHU WKH WDNLQJ RI VRPH LWHPV OLNH GLVFDUGHGGRFXPHQWVLVDYLRODWLRQRISULYDF\´ :.EE  6HFRQGO\ DQRWKHU PDLQ FULWLFLVP RI  GXPSVWHU GLYLQJ LV WKDW WKH SUDFWLFHRIGXPSVWHUGLYLQJLVQRW ZHOOUHVSHFWHGE\WKRVHLQ PDLQVWUHDP VRFLHW\ )RULQVWDQFHWKHUHLVWKHROGVD\LQJWKDW³RQHPDQ VUXEELVKLVDQRWKHU PDQ V WUHDVXUH´ ':   %XW WKLV VD\LQJ FDQ EH UHYHUVHG E\ DUJXLQJ WKDWZKDWLV³WUHDVXUH´IRUGXPSVWHUGLYHUVLVRIWHQUHJDUGHGDV³UXEELVK´

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





E\WKRVHLQPDLQVWUHDPVRFLHW\)RUWKLVUHDVRQGXPSVWHUGLYHUVDUHRIWHQ ORRNHGGRZQXSRQE\WKRVHLQPDLQVWUHDPVRFLHW\ 7KLUGO\ VWLOO DQRWKHU PDLQ FULWLFLVP RI GXPSVWHU GLYLQJ LV WKDW LW LV XQKHDOWK\ )RULQVWDQFH ³DUJXPHQWVDJDLQVWGXPSVWHUGLYLQJRIWHQ IRFXVRQWKH KHDOWK DQG FOHDQOLQHVV LPSOLFDWLRQV RI SHRSOH UXPPDJLQJ LQ WUDVK 7KLV H[SRVHVWKHGXPSVWHUGLYHUVWRSRWHQWLDOKHDOWKULVNVDQGHVSHFLDOO\LIWKH GXPSVWHU GLYHU GRHV QRW UHWXUQ WKH QRQXVDEOH LWHPV WR WKHLU SUHYLRXV ORFDWLRQPD\OHDYHWUDVKVFDWWHUHGDURXQG´ :.EE  )RXUWKO\DQDGGLWLRQDOPDLQFULWLFLVPRIGXPSVWHUGLYLQJLVWKDWLWLV GDQJHURXV )RU LQVWDQFH IRU WKH FULWLFV ³GLYHUV FDQ DOVR EH VHULRXVO\ LQMXUHG RU NLOOHGE\JDUEDJHFROOHFWLRQYHKLFOHV´LQDQDFFLGHQWDOZD\ :.EE  $QG ³IDXOW\ HOHFWULFDO DQG PHFKDQLFDO JRRGV FDQ EH KD]DUGRXV DQG GDQJHURXV´ :.H  $QG ILIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI GXPSVWHU GLYLQJ LV WKDWWKHLWHPVLQGXPSVWHUVDUHRILQIHULRUTXDOLW\ )RULQVWDQFHIRUWKHFULWLFVDGLVFDUGHGLWHP³LVQRORQJHULQWKHVDPH FRQGLWLRQ DV LW ZDV´ ZKHQ LW ZDV ILUVW SURGXFHGG DQG ³PD\ KDYH IDXOWV ZKLFKDUHQRWDSSDUHQWHYHQLIH[DPLQHG´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



SULQFLSOH WKH V\PPHWU\DV\PPHWU\ SULQFLSOH WKH VRIWQHVVKDUGQHVV SULQFLSOH WKH VHULRXVQHVVSOD\IXOQHVV SULQFLSOH WKH DFWLYHQHVVLQDFWLYHVV SULQFLSOH WKH VHOIQHVVRWKHUQHVV SULQFLSOH WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOHWKHVDPHGLIIHUHQFHSULQFLSOHWKHVWDELOLW\UHDFWLRQSULQFLSOHWKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH DQG WKH LQWHQWLRQDOLW\ QRQLQWHQWLRQDOLW\SULQFLSOH )RU LQVWDQFH LQ UHODWLRQ WR WKH IRUPDOQHVVLQIRUPDOQHVV SULQFLSOH LI WKHUHLVIRUPDOQHVV HJWKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQG FRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKHSUDFWLFHRIGXPSVWHUGLYLQJ  WKHUH LV LQIRUPDOQHVV HJ WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH SUDFWLFH RI GXPSVWHU GLYLQJ DV VKRZQ LQ WKH FULWLFLVPVWKDWLWFDQEHLOOHJDOWKDWWKHSUDFWLFHRIGXPSVWHUGLYLQJLVQRW ZHOOUHVSHFWHGE\WKRVHLQPDLQVWUHDPVRFLHW\WKDWLWLVXQKHDOWK\WKDWLWLV GDQJHURXV WKDW WKH LWHPV LQ GXPSVWHUV DUH RI LQIHULRU TXDOLW\ HWF  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJ WKH DEVROXWH YLHZ RI ³D ODZ LVVXHG LQ ´ LQ ,WDO\ ZKLFK³GHFODUHGGXPSVWHUGLYLQJWREHOHJDO´ WKHUHLVUHODWLYHQHVV HJ ZKDWLVULJKWIRU³DODZLVVXHGLQ´LQ,WDO\ZKLFK³GHFODUHGGXPSVWHU GLYLQJWREHOHJDO´LVQRWQHFHVVDULO\VRIRUWKHODZLQ*HUPDQ\ZKHUH³D GXPSVWHU VFRQWHQWVDUHUHJDUGHGDVWKHSURSHUW\RIWKHGXPSVWHU VRZQHU´ VR ³WDNLQJ LWHPV IURP D GXPSVWHU LV YLHZHG DV WKHIW´  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKH SDUWLDO YLHZ RI ³D ODZ LVVXHG LQ ´ LQ ,WDO\ ZKLFK ³GHFODUHG GXPSVWHUGLYLQJWREHOHJDO´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³RFFDVLRQDOO\JHWLQWURXEOHIRUWUHVSDVVLQJ´LI³GXPSVWHUVDUH«ORFDWHGRQ SULYDWHSUHPLVHV´ WKHUHLVXQSUHGLFWDELOLW\ HJWKHPRUHGLIILFXOWWDVNWR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK GXPSVWHU GLYHUV ³JHW LQ WURXEOH IRU WUHVSDVVLQJ´RQDSDUWLFXODUIXWXUHRFFDVLRQEHFDXVH³WKHODZLVHQIRUFHG ZLWK YDU\LQJ GHJUHHV RI ULJRU´ RU FDQ HYHQ EH LJQRUHG E\ SROLFH GHSHQGLQJ RQ GLIIHUHQW FLUFXPVWDQFHV  :. EE  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJ WKH H[SODQDWLRQ E\ GXPSVWHU GLYHUV WKDW GXPSVWHU GLYLQJ LV GHVLUDEOH EHFDXVH RI WKH YDOXH RI ZDVWH UHVXVH  WKHUH LV LQH[SOLFDELOLW\ HJWKHODFNRIVXIILFLHQWH[SODQDWLRQE\GXPSVWHUGLYHUV RIZK\GXPSVWHUGLYLQJLVQHFHVVDULO\GHVLUDEOHEHFDXVHIRUWKHFULWLFVLW LV XQKHDOWK\ DQG GDQJHURXV RU WKH LWHPV LQ GXPSVWHUV DUH RI LQIHULRU TXDOLW\HWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI GXPSVWHU GLYLQJ LQVRIDU DV LW LV XQKHDOWK\ DQG GDQJHURXV WKH LWHPV LQ GXPSVWHUV DUH RI LQIHULRU TXDOLW\ HWF  WKHUH LV UHDOLW\ HJWKHUHDOLVWLFDVSHFWRIGXPSVWHUGLYLQJLQVRIDUDVLWFDQVDYH E\UHXVLQJWKHGLVFDUGHGLWHPV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJ WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI GLVFDUGHG LWHPV LQ GXPSVWHUV OLNH ³EXVLQHVV ZDVWH´ ³FKHPLFDO ZDVWH´ ³FOLQLFDO ZDVWH´ ³FRPPHUFLDO ZDVWH´ HWF  WKHUH LV WUDQVILQLWHQHVV HJ WKH WUDQVILQLWH QXPEHURIDOOWKHLQGLYLGXDOLWHPVRIZDVWHVLQKLVWRU\WKDWFDQEHIRXQGLQ GXPSVWHUV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI  UHDVRQV IRU GXPSVWHU GLYLQJLQWKHDUWLFOHDIRUHFLWHG WKHUHLVYDJXHQHVV HJWKHYDJXHQHVVLQ WKH LGHQWLILFDWLRQ RI WKH  UHDVRQV IRU GXPSVWHU GLYLQJ LQ WKH DUWLFOH DIRUHFLWHG VLQFH LW LV QRW FOHDU ZK\ WKHUH PXVW EH RQO\  QRW    DQGVRRQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJWKHUHODWLYHO\VLPSOHDQDO\VLVRIGXPSVWHUGLYLQJE\WKH DGYRFDWHV WKHUHLVFRPSOLFDWHGQHVV HJWKHUHODWLYHO\PRUHFRPSOLFDWHG DQDO\VLV RI GXPSVWHU GLYLQJ E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJWKHRSHQH[SORUDWLRQRIFROOHFWLQJGLVFDUGHGLWHPVLQGXPSVWHUVIRU UHXVH WKHUHLVKLGGHQQHVV HJWKHKLGGHQQDWXUHRIWKHGLVFDUGHGLWHPV LQGXPSVWHUVEHFDXVHWKH\³PD\KDYHIDXOWVZKLFKDUHQRWDSSDUHQWHYHQ LIH[DPLQHG´RU³IXUQLWXUHPD\KDYHQRWHDVLO\VHHQEHGEXJVZKLFKPD\ FDXVH DQ LQIHVWDWLRQ´ RU ³IDXOW\ HOHFWULFDO DQG PHFKDQLFDO JRRGV FDQ EH KD]DUGRXV DQG GDQJHURXV´ HWF  :. H  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJWKHUHODWLYHO\GHQVHUFRQFHQWUDWLRQRIGLVFDUGHGLWHPVLQGXPSVWHUV  WKHUH LV HPSWLQHVV HJ WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³D ODZ LVVXHG LQ ´ LQ ,WDO\ ZKLFK ³GHFODUHG GXPSVWHU GLYLQJ WR EH OHJDO´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³ZDVWHPDQDJHPHQWEHFDPHDFULWLFDOLVVXH´GXHWR³WKH LQFUHDVH LQ SRSXODWLRQ DQG WKH PDVVLYH PLJUDWLRQ RI SHRSOH WR LQGXVWULDO WRZQVDQGFLWLHVIURPUXUDODUHDV´ WKHUHLVFRQWUDFWLRQ HJWKHUHODWLYH GHFOLQH RI SHRSOH QRZDGD\V LQ GHYHORSHG FRXQWULHV WR VLPSO\ ³WKURZ WKHLU«ZDVWHVRXWRIWKHZLQGRZZKLFKZRXOGGHFRPSRVHLQWKHVWUHHW´DV ZDV WKH FDVH IRU WKH (XURSHDQV LQ WKH ROGHU GD\V  :. D  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDOFRQVWUXFWLRQRI³VXVWDLQDELOLW\´LQHQYLURQPHQWDOVWXGLHV WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI WKH NQRZOHGJH RI ³VXVWDLQDELOLW\´ LQ HQYLURQPHQWDO VWXGLHV WR WKH ILHOG RI ZDVWH PDQDJHPHQWOLNH³GXPSVWHUGLYLQJ´ZKLFK³EHFRPHVDQHQYLURQPHQWDOLVW HQGHDYRU«DQG LV«SUDFWLFHG E\ PDQ\ SURJUHHQ FRPPXQLWLHV´  :. EE $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJWKHFRQYHQWLRQDOZLVGRPWKDW³PRVWSHRSOHZKRUHVRUWWRGXPSVWHU GLYLQJ DUH IRUFHG WR GR VR RXW RI HFRQRPLF QHFHVVLW\´  WKHUH LV QRYHOW\

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





HJ WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP WKDW ³PRVW SHRSOH ZKR UHVRUW WR GXPSVWHUGLYLQJ DUH IRUFHG WR GR VR RXW RI HFRQRPLF QHFHVVLW\´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³LQPDQ\GHYHORSLQJFRXQWULHVIRRG LVUDUHO\WKURZQDZD\XQOHVVLWLVURWWHQDVIRRGLVVFDUFHLQFRPSDULVRQWR GHYHORSHG QDWLRQV´²EXW LQ GHYHORSHG FRXQWULHV OLNH ³WKH 8QLWHG 6WDWHV ZKHUH ± RI IRRG LV ZDVWHG WKH WUDVK FRQWDLQV D ORW PRUH IRRG WR JDWKHU´  :. EE - +DUULVRQ   $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGVWUXH ,QUHODWLRQWRWKHVRIWQHVVKDUGQHVVSULQFLSOHLIWKHUHLVVRIWQHVV HJ WKH DSSUHFLDWLRQ RI GXPSVWHU GLYLQJ DV VKRZQ LQ WKH UHXVH RI ³UHVRXUFHV GHVWLQHG IRUWKHODQGILOO´E\ GXPSVWHUGLYHUV WKHUHLVKDUGQHVV HJ ³LQ *HUPDQ\ D GXPSVWHU V FRQWHQWV DUH UHJDUGHG DV WKH SURSHUW\ RI WKH GXPSVWHU V RZQHU´ DQG ³WKHUHIRUH WDNLQJ LWHPV IURP D GXPSVWHU LV YLHZHGDVWKHIW´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³D ODZ LVVXHG LQ ´ ZKLFK³GHFODUHGGXPSVWHUGLYLQJWREHOHJDO´ WKHUHLVLQDFWLYHQHVV HJ WKHUHODWLYHLQDFWLYHQHVVRIWKRVHGXPSVWHUGLYHUVLQ*HUPDQ\ZKRDUHQRW DOORZHG WR FROOHFW GLVFDUGHG LWHPV EHFDXVH ³D GXPSVWHU V FRQWHQWV DUH UHJDUGHG DV WKH SURSHUW\ RI WKH GXPSVWHU V RZQHU´ DQG ³WKHUHIRUH WDNLQJ LWHPVIURPDGXPSVWHULVYLHZHGDVWKHIW´XQGHUWKHODZDOWKRXJKWKH\FDQ GRVRPHWKLQJHOVH 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ WKRVH³SHRSOHZKRUHVRUWWRGXPSVWHUGLYLQJ´EHFDXVHWKH\³DUHIRUFHGWR GRVRRXWRIHFRQRPLFQHFHVVLW\´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²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH WKURZDZD\ SUDFWLFH RI ULFK SHRSOH IRU D UHODWLYHO\ PRUH DIIOXHQW OLIHZRUOG  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKHUHODWLYHO\PRUHVWDEOHFRQGLWLRQRIUHVWULFWLQJWKHSUDFWLFHRIGXPSVWHU GLYLQJLQ%HOJLXPLQWKHROGHUGD\VDVVKRZQLQWKHDUUHVWRI³D%HOJLDQ GXPSVWHUGLYHUDQGHFRDFWLYLVWQLFNQDPHG2OOLH´RQ)HEUXDU\WK IRU³WDNLQJIRRGIURPDGXPSVWHUDWDQ$''HOKDL]HPDUNHWLQ%UXJHV´  WKHUH LV UHDFWLRQ HJ WKH DUUHVW RI ³D %HOJLDQ GXPSVWHU GLYHU DQG HFR DFWLYLVW QLFNQDPHG 2OOLH´ LQ  WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQKLVVXEVHTXHQWWULDO³HYRNHGSURWHVWVLQ%HOJLXPDJDLQVWUHVWULFWLRQV IURP WDNLQJ GLVFDUGHG IRRG LWHPV´  :. EE  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQ LQ WKH SUDFWLFH RI WKURZLQJ DZD\ WKLQJV E\ WKRVH LQ FRQVXPHU VRFLHW\ LQ WKH ROGHU GD\V DV LW VHUYHG WKH IXQFWLRQ RI WKH ³WKURZDZD\ FXOWXUH´ DW WKH WLPH  WKHUH LV QRQIXQFWLRQDOLW\ HJ WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ GXPSVWHU GLYLQJ QRZDGD\V ZKLFK ³EHFRPHV DQ HQYLURQPHQWDOLVW HQGHDYRU«DQG LV WKXV

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





SUDFWLFHG E\ PDQ\ SURJUHHQ FRPPXQLWLHV´ DV D ZD\ WR SURWHVW ³WKH ZDVWHIXOQHVV RI FRQVXPHU VRFLHW\´ VR WKH SUDFWLFH RI WKURZLQJ DZD\ WKLQJV LQ WKH ROGHU GD\V LV QR ORQJHU IXQFWLRQDO LQ RXU WLPH IRU WKH QHZ PLQGVHW IRU D PRUH VXVWDLQDEOH HQYLURQPHQW  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH $QG LQ UHODWLRQ WR WKH LQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\ SULQFLSOH LI WKHUH LV LQWHQWLRQDOLW\ HJ WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQRXWFRPHDVVKRZQLQWKHLGHDRIGXPSVWHUGLYLQJIRUZDVWHUHXVH  WKHUHLVQRQLQWHQWLRQDOLW\ HJWKHUHODWLYHDEVHQFHRISODQQLQJRUGHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH VXFK WKDW WKH RXWFRPH FDQ HYHQ EH FRXQWHULQWHQWLRQDO LQ EHLQJ WKH RSSRVLWH RI ZKDW ZDV RULJLQDOO\ SODQQHG DV VKRZQ LQ WKH XQLQWHQGHG FRQVHTXHQFH WKDW LW FDQ FRVW WKH GXPSVWHU GLYHUHYHQPRUHLQWKHHQGEHFDXVHLWFDQEHLOOHJDOXQKHDOWK\GDQJHURXV HWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

8VHIXOQHVVDQG1DWXUH 8VHIXOQHVVZKHQH[DPLQHGIURPWKHSHUVSHFWLYHRIQDWXUHFDQVKRZ XVLWVSRVVLELOLW\ RULPSRVVLELOLW\ DQGGHVLUDELOLW\ RUXQGHVLUDELOLW\ DQG WKLVFDQEHVKRZQE\ZD\RIWZRFDVHVWXGLHVQDPHO\  XVHIXOQHVV ZDVWHWRHQHUJ\ DQG VXVWDLQDELOLW\ DQG   XVHIXOQHVV ZDVWH DQG DQLPDOSURGXFWV²WREHDGGUHVVHGLQZKDWIROORZVUHVSHFWLYHO\

8VHIXOQHVV:DVWHWR(QHUJ\DQG6XVWDLQDELOLW\ $ JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RUXQGHVLUDELOLW\ RIXVHIXOQHVVIURPWKHSHUVSHFWLYHRIQDWXUH LVWRH[SORUHXVHIXOQHVVZDVWHWRHQHUJ\DQGVXVWDLQDELOLW\ 7KH WHUP ³ZDVWHWRHQHUJ\´ LV DOVR NQRZQ DV ³HQHUJ\IURPZDVWH (I: ´DQGUHIHUV³WKHSURFHVVRIFUHDWLQJHQHUJ\LQWKHIRUPRIHOHFWULFLW\ RU KHDW IURP WKH LQFLQHUDWLRQ RI ZDVWH VRXUFH´ DQG ³PRVW :W( SURFHVVHV SURGXFHHOHFWULFLW\GLUHFWO\WKURXJKFRPEXVWLRQRUSURGXFHDFRPEXVWLEOH IXHO FRPPRGLW\ VXFK DV PHWKDQH PHWKDQRO HWKDQRO RU V\QWKHWLF IXHOV´ :.K  ,QJHQHUDO³:W(LVDIRUPRIHQHUJ\UHFRYHU\´ :.K  5HVRXUFH5HFRYHU\0HWKRGV %HFDXVH:W(LVDIRUPRI³HQHUJ\UHFRYHU\´WKHODWWHUWHUPUHIHUVWR ³WKHVHOHFWLYHH[WUDFWLRQRIGLVSRVHGPDWHULDOVIRUDVSHFLILFQH[WXVHVXFK DV UHF\FOLQJ FRPSRVWLQJ RU HQHUJ\ JHQHUDWLRQ 7KH DLP RI WKH UHVRXUFH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



UHFRYHU\LVWRH[WUDFWWKHPD[LPXPSUDFWLFDOEHQHILWVIURPSURGXFWVGHOD\ WKHFRQVXPSWLRQRIYLUJLQQDWXUDOUHVRXUFHVDQGWRJHQHUDWHWKHPLQLPXP DPRXQWRIZDVWH´ :.FF  )RULOOXVWUDWLRQFRQVLGHUWZRH[DPSOHVRIUHVRXUFHUHFRYHU\PHWKRGV EHORZ DVVXPPDUL]HGLQ6HF  D %LRORJLFDO3URFHVVLQJ 7KH ILUVW UHVRXUFH UHFRYHU\ PHWKRG WR EH FRQVLGHUHG KHUH KDV WR GR ZLWK³ELRORJLFDOSURFHVVLQJ´ $VWKHQDPHVXJJHVWV³ELRORJLFDOSURFHVVLQJ´WDUJHWVRUJDQLFZDVWHV )RULQVWDQFH³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´ :.FF  2I FRXUH WKHUH DUH GLIIHUHQW IRUPV RI ELRORJLFDO SURFHVVLQJ VXFK DV WKH ³ODUJH YDULHW\RIFRPSRVWLQJDQGGLJHVWLRQ PHWKRGVDQGWHFKQRORJLHV YDU\LQJ LQ FRPSOH[LW\ IURP VLPSOH KRPH FRPSRVW KHDSV WR VPDOO WRZQ VFDOH EDWFK GLJHVWHUV LQGXVWULDOVFDOH HQFORVHGYHVVHO GLJHVWLRQ RI PL[HG GRPHVWLF ZDVWH«0HWKRGVRIELRORJLFDOGHFRPSRVLWLRQDUHGLIIHUHQWLDWHG DVEHLQJDHURELFRUDQDHURELFPHWKRGVWKRXJKK\EULGVRIWKHWZRPHWKRGV DOVRH[LVW´ :.FF  $FWXDO H[DPSOHV RI ³UHVRXUFH UHFRYHU\ WKURXJK FRPSRVWLQJ FDQ EH IRXQGLQ6DQ)UDQFLVFRDQGWKH*UHHQ%LQ3URJUDPLQ7RURQWR&DQDGD ZKHUH 6RXUFH 6HSDUDWHG 2UJDQLFV VXFK DV NLWFKHQ VFUDSV DQG SODQW FXWWLQJV DUHFROOHFWHGLQDGHGLFDWHGFRQWDLQHUDQGWKHQFRPSRVWHG´ :. FF  E 6RXUFH6HSDUDWHG&XUEVLGH&ROOHFWLRQ $QGWKHVHFRQGUHVRXUFHUHFRYHU\PHWKRGWREHFRQVLGHUHGKHUHKDVWR GRZLWK³VRXUFHVHSDUDWHGFXUEVLGHFROOHFWLRQ´ )RULQVWDQFH³LQ$XVWUDOLDVRXUFHVHSDUDWHGFXUEVLGHFROOHFWLRQLVRQH PHWKRGRIUHVRXUFHUHFRYHU\(YHU\XUEDQGRPHVWLFKRXVHKROGLVSURYLGHG ZLWK WKUHH ELQV RQH IRU UHF\FOLQJ DQRWKHU IRU JHQHUDO ZDVWH DQG DQRWKHU IRUJDUGHQPDWHULDOV²WKLVELQLVSURYLGHGE\WKHPXQLFLSDOLW\LIUHTXHVWHG $OVRPDQ\KRXVHKROGVKDYHFRPSRVWELQVEXWWKLVLVQRWSURYLGHGE\WKH PXQLFLSDOLW\7RHQFRXUDJHUHF\FOLQJPXQLFLSDOLWLHVSURYLGHODUJHUHF\FOH ELQVZKLFKDUHODUJHUWKDQJHQHUDOZDVWHELQV´ :.FF 

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





$OVR ³PXQLFLSDO FRPPHUFLDO DQG LQGXVWULDO FRQVWUXFWLRQ DQG GHPROLWLRQGHEULVLVGXPSHGDWODQGILOOVDQGVRPHLVUHF\FOHG+RXVHKROG GLVSRVDO PDWHULDOV DUH VHJUHJDWHG UHF\FODEOHV VRUWHG DQG PDGH LQWR QHZ SURGXFWVDQGXQXVDEOHPDWHULDOLVGXPSHGLQODQGILOODUHDV$FFRUGLQJWR WKH $%6 WKH UHF\FOLQJ UDWH LV KLJK DQG LV LQFUHDVLQJ ZLWK  RI KRXVHKROGVUHSRUWLQJWKDWWKH\KDGUHF\FOHGRUUHXVHGZLWKLQWKHSDVW\HDU VXUYH\ XSIURPLQ 7KLVVXJJHVWVWKDW$XVWUDOLDQVDUHLQ IDYRXURIUHGXFHGRUQRODQGILOOLQJDQGWKHUHFRYHU\RIPDWHULDOVWKURXJK UHF\FOLQJ ,Q ±  RI PDWHULDOV IURP PXQLFLSDOLWLHV  IURP FRPPHUFLDO DQG LQGXVWULDO JHQHUDWRUV DQG  IURP FRQVWUXFWLRQ DQG GHPROLWLRQ GHEULV  ZDV UHF\FOHG (QHUJ\ LV SURGXFHG LV SDUW RI UHVRXUFH UHFRYHU\ DV ZHOO VRPH ODQGILOO JDV LV FDSWXUHG IRU IXHO RU HOHFWULFLW\ JHQHUDWLRQ DOWKRXJK WKLV LV FRQVLGHUHG WKH ODVW UHVRUW DV WKH SRLQW RI UHVRXUFH UHFRYHU\ LV DYRLGDQFH RI ODQGILOO GLVSRVDO DOWRJHWKHU´ :. FF  7KH*RDORI(QYLURQPHQWDO6XVWDLQDELOLW\ 7KH PDLQ JRDO RI UHVRXUFH UHFRYHU\ LV WR HQVXUH HQYLURQPHQWDO VXVWDLQDELOLW\ HVSHFLDOO\ ZKHQ ³FRPSDQLHV DUH HQFRXUDJHG WR LPSURYH WKHLU HQYLURQPHQWDO HIILFLHQFLHV HDFK \HDU 2QH ZD\ WR GR WKLV LV E\ FKDQJLQJ D FRPSDQ\ IURP D V\VWHP RI PDQDJLQJ ZDVWHV WR D UHVRXUFH UHFRYHU\ V\VWHP VXFK DV UHF\FOLQJ JODVV IRRG ZDVWH SDSHU DQG FDUGERDUGSODVWLFERWWOHVHWF ´ :.FF  :LWKWKLVJRDOLQPLQG³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´ :.FF 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,QIRULQVWDQFH³&1%&DLUHGWKHGRFXPHQWDU\ 7UDVK,QF7KH 6HFUHW/LIHRI*DUEDJHDERXWZDVWHZKDWKDSSHQVWRLWZKHQLW V WKURZQ DZD\ DQGLWVLPSDFWRQWKHZRUOG´ :.FF6&DUSHQWHU  7KH&DVHRI:DVWHWR(QHUJ\ $Q H[FHOOHQW LOOXVWUDWLRQ RI UHVRXUFH UHFRYHU\ IRU HQYLURQPHQWDO VXVWDLQDELOLW\LV³ZDVWHWRHQHUJ\ :W( ´LQDFWLRQ DVVXPPDUL]HGLQ6HF   D :W(0HWKRGV :DVWHWRHQHUJ\FDQEHDFKLHYHGE\GLIIHUHQWPHWKRGV $ FRPPRQ PHWKRG LV ³LQFLQHUDWLRQ´ ZKLFK LV ³WKH PRVW FRPPRQ :W(LPSOHPHQWDWLRQ $OOQHZ:W(SODQWVLQ 2(&'FRXQWULHV PXVW PHHW VWULFWHPLVVLRQVWDQGDUGVLQFOXGLQJWKRVHRQQLWURJHQR[LGHV 12 VXOSKXU GLR[LGH 62  KHDY\ PHWDOV DQG GLR[LQV +HQFH PRGHUQ LQFLQHUDWLRQ SODQWV DUH YDVWO\ GLIIHUHQW IURP WKH ROG W\SHV VRPH RI ZKLFK QHLWKHU UHFRYHUHGHQHUJ\QRUPDWHULDOV0RGHUQLQFLQHUDWRUVUHGXFHWKHYROXPHRI WKH RULJLQDO ZDVWH E\  SHUFHQW GHSHQGLQJ XSRQ FRPSRVLWLRQ DQG GHJUHHRIUHFRYHU\RIPDWHULDOVVXFKDVPHWDOVIURPWKHDVKIRUUHF\FOLQJ´ :.K  ,QJHQHUDO³LQFLQHUDWRUVKDYHHOHFWULFHIILFLHQFLHVRQWKHRUGHURI 7KHUHVWRIWKHHQHUJ\FDQEHXWLOL]HGIRUHJGLVWULFWKHDWLQJEXWLV RWKHUZLVH ORVW DV ZDVWH KHDW´ :. K '5('/   ,Q IDFW ³WKH PHWKRGRIXVLQJLQFLQHUDWLRQ WRFRQYHUW PXQLFLSDOVROLG ZDVWH 06: WR HQHUJ\ LV D UHODWLYHO\ ROG PHWKRG RI ZDVWHWRHQHUJ\ SURGXFWLRQ ,QFLQHUDWLRQJHQHUDOO\HQWDLOVEXUQLQJDQ5')WRERLOZDWHUZKLFKSRZHUV VWHDP JHQHUDWRUV WKDW PDNH HOHFWULF HQHUJ\ WR EH XVHG LQ RXU KRPHV DQG EXVLQHVVHV´ :.K  %HVLGHVLQFLQHUDWLRQ²³WKHUHDUHDQXPEHURIRWKHUQHZDQGHPHUJLQJ WHFKQRORJLHV WKDW DUH DEOH WR SURGXFH HQHUJ\ IURP ZDVWH DQG RWKHU IXHOV ZLWKRXWGLUHFWFRPEXVWLRQ0DQ\RIWKHVHWHFKQRORJLHVKDYHWKHSRWHQWLDO WRSURGXFHPRUHHOHFWULFSRZHUIURPWKHVDPHDPRXQWRIIXHOWKDQZRXOG EHSRVVLEOHE\GLUHFWFRPEXVWLRQ´DQGKHUHDIWHUDUHVRPHH[DPSOHV :. K   ‡³7KHUPDO7HFKQRORJLHV´ ±([ ³JDVLILFDWLRQ SURGXFHV FRPEXVWLEOH JDV K\GURJHQ V\QWKHWLF IXHOV ´ ±([³WKHUPDOGHSRO\PHUL]DWLRQ SURGXFHVV\QWKHWLFFUXGHRLOZKLFK FDQEHIXUWKHUUHILQHG´ ±([³S\URO\VLV SURGXFHVFRPEXVWLEOHWDUELRRLODQGFKDUV ´

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





±([ ³SODVPD DUF JDVLILFDWLRQ 3*3 RU SODVPD JDVLILFDWLRQ SURFHVV SURGXFHV ULFK V\QJDV LQFOXGLQJ K\GURJHQ DQG FDUERQ PRQR[LGH XVDEOH IRU IXHO FHOOV RU JHQHUDWLQJ HOHFWULFLW\ WR GULYH WKH SODVPD DUFKXVDEOHYLWULILHGVLOLFDWHDQGPHWDOLQJRWVVDOWDQGVXOSKXU ´ ‡³1RQ7KHUPDO7HFKQRORJLHV´ ±([³DQDHURELFGLJHVWLRQ ELRJDVULFKLQPHWKDQH ´ ±([ ³IHUPHQWDWLRQ SURGXFWLRQ H[DPSOHV DUH HWKDQRO ODFWLF DFLG K\GURJHQ ´ ±([³PHFKDQLFDOELRORJLFDOWUHDWPHQW 0%7 ´  6XUHO\WKHUHFDQEHRWKHUH[DPSOHVVRWKHRQHVDERYHDUHLOOXVWUDWLYH E *OREDO:W('HYHORSPHQWV :W( EHFRPHV PRUH SRSXODU LQ RXU WLPH IRU LQVWDQFH ³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¶V JUHHQ KRXVH JDVHV DQG LWV GHSHQGHQF\RQIRVVLOIXHO´ :.K&2/  3UREOHPVZLWK:DVWHWR(QHUJ\ +RZHYHU IRU WKH FULWLFV ZDVWHWRHQHUJ\ KDV VRPH PDMRU SUREOHPV &RQVLGHU IRU LOOXVWUDWLRQ D IHZ H[DPSOHV EHORZ DV VXPPDUL]HG LQ 6HF   )LUVWO\ RQH PDLQ FULWLFLVP RI ZDVWHWRHQHUJ\ LV WKDW LW FDQ EH SROOXWLQJ )RU H[DPSOH IRU WKH FULWLFV ³FRQFHUQV UHJDUGLQJ WKH RSHUDWLRQ RI LQFLQHUDWRUV LQFOXGH ILQH SDUWLFXODWH KHDY\ PHWDOV WUDFH GLR[LQ DQG DFLG JDV HPLVVLRQV HYHQ WKRXJK WKHVH HPLVVLRQV DUH UHODWLYHO\ ORZ IURP PRGHUQLQFLQHUDWRUV2WKHUFRQFHUQVLQFOXGHWR[LFIO\DVKDQGLQFLQHUDWRU ERWWRPDVK ,%$ PDQDJHPHQW´ :.K'5('/ 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



6HFRQGO\DQRWKHUPDLQFULWLFLVPRIZDVWHWRHQHUJ\LVWKDWLWFDQXVH XSYDOXDEOHUHVRXUFHV )RU LQVWDQFH IRU WKH FULWLFV ³GLVFXVVLRQV UHJDUGLQJ ZDVWH UHVRXUFH HWKLFV LQFOXGH WKH RSLQLRQ WKDW LQFLQHUDWRUV GHVWUR\ YDOXDEOH UHVRXUFHV´ :.K'5('/  7KLUGO\ VWLOO DQRWKHU PDLQ FULWLFLVP RI ZDVWHWRHQHUJ\ LV WKDW LQFLQHUDWLRQFRPSHWHVZLWKRWKHUZDVWHWUHDWPHQWDFWLYLWLHV )RULQVWDQFHIRUWKHFULWLFVWKHUHLV³WKHIHDUWKDWWKH\>LQFLQHUDWRUV@ PD\ UHGXFH WKH LQFHQWLYHV IRU UHF\FOLQJ DQG ZDVWH PLQLPL]DWLRQ DFWLYLWLHV´ :.K'5('/  )RXUWKO\DQDGGLWLRQDOPDLQFULWLFLVPRIZDVWHWRHQHUJ\LVWKDWHDFK :W( PHWKRG KDV LWV RZQ FRVWV DQG EHQHILWV RU DGYDQWDJHV DQG GLVDGYDQWDJHV  )RU LQVWDQFH ³HVWHULILFDWLRQ FDQ DOVR EH GRQH XVLQJ ZDVWH WR HQHUJ\ WHFKQRORJLHV DQG WKH UHVXOW RI WKLV SURFHVV LV ELRGLHVHO 7KH FRVW HIIHFWLYHQHVVRIHVWHULILFDWLRQZLOOGHSHQGRQWKHIHHGVWRFNEHLQJXVHGDQG DOOWKHRWKHUUHOHYDQWIDFWRUVVXFKDVWUDQVSRUWDWLRQGLVWDQFHDPRXQWRIRLO SUHVHQWLQWKHIHHGVWRFNDQGRWKHUV´ :.K%,2  $QG ILIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI ZDVWHWRHQHUJ\ LV WKDWHQHUJ\HIILFLHQF\KDVLWVOLPLWV )RU LQVWDQFH LQ WKHUPRG\QDPLFV  ³WKHUPDO HIILFLHQF\´ LV OLPLWHG E\ WKHIDFWWKDW³UHDOHQJLQHVKDYHPDQ\GHSDUWXUHVIURPLGHDOEHKDYLRUWKDW ZDVWHHQHUJ\UHGXFLQJDFWXDOHIILFLHQFLHVIDUEHORZWKHWKHRUHWLFDOYDOXHV´ ZKLFKDUHSRVVLEOHRQO\LQLGHDOVLWXDWLRQV DQGJRRGH[DPSOHVRIWKHVH OHVVWKDQLGHDOVLWXDWLRQVLQFOXGH :.GG   ‡([³IULFWLRQRIPRYLQJSDUWV´ ‡([³LQHIILFLHQWFRPEXVWLRQ´ ‡([³KHDWORVVIURPWKHFRPEXVWLRQFKDPEHU´ ‡([³DHURG\QDPLFGUDJRIDLUPRYLQJWKURXJKWKHHQJLQH´ ‡([³HQHUJ\XVHGE\DX[LOLDU\HTXLSPHQWOLNHRLODQGZDWHUSXPSV´ ‡([³LQHIILFLHQWFRPSUHVVRUVDQGWXUELQHV´ ‡([³LPSHUIHFWYDOYHWLPLQJ´ ‡ ([ ³HQJLQHV PXVW EH RSWLPL]HG IRU RWKHU JRDOV EHVLGHV HIILFLHQF\´ OLNH³ORZSROOXWLRQ´ RU³ORZHPLVVLRQV´ ³DGHTXDWHDFFHOHUDWLRQIDVW VWDUWLQJ OLJKW ZHLJKW ORZ QRLVH HWF´ VR WKHVH DGGLWLRQDO UHTXLUHPHQWVIXUWKHUUHGXFHHIILFLHQF\  6XUHO\WKHUHFDQEHRWKHUH[DPSOHVVRWKHRQHVKHUHDUHLOOXVWUDWLYH 

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





%H\RQG:DVWHWR(QHUJ\ 7KHVH FULWLFLVPV RI ZDVWHWRHQHUJ\ KRZHYHU GR QRW VXJJHVW D WRWDO UHMHFWLRQRILWVYDOLGLW\EXWVHUYHWRVKRZXVWKHWZRRSSRVLQJVLGHVRIWKH GHEDWH VXFK WKDW WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHIXOQHVV IURP WKH SHUVSHFWLYH RI QDWXUH ZLWK XVHIXOQHVV ZDVWHWRHQHUJ\ DQG VXVWDLQDELOLW\ DV D FDVH VWXG\ KHUH  DUH QRWWRWKHH[WHQWWKDWWKHUHVSHFWLYHGHIHQGHUVZRXOGOLNHXVWREHOLHYH %HVLGHV WKH DQDO\VLV RI XVHIXOQHVV ZDVWHWRHQHUJ\ DQG VXVWDLQDELOLW\ FRQVWLWXWHV D JRRG GLGDFWLF DERXW WKH RQWRORJLFDO SULQFLSOHV LQ H[LVWHQWLDO GLDOHFWLFV DQG JRRG H[DPSOHV LQFOXGH WKH IRUPDOQHVV LQIRUPDOQHVV SULQFLSOH WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH WKH SDUWLDOLW\WRWDOLW\ SULQFLSOH WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH WKH ILFWLRQUHDOLW\ SULQFLSOH WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH WKH RSHQQHVVKLGGHQQHVV SULQFLSOH WKH GHQVHQHVVHPSWLQHVV SULQFLSOH WKH FKDQJHFRQVWDQF\ SULQFLSOHWKHRUGHUFKDRVSULQFLSOHWKHVORZQHVVTXLFNQHVVSULQFLSOHWKH H[SDQVLRQFRQWUDFWLRQ SULQFLSOH WKH WKHRU\SUD[LV SULQFLSOH WKH FRQYHQWLRQQRYHOW\ SULQFLSOH WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH WKH V\PPHWU\DV\PPHWU\ SULQFLSOH WKH VRIWQHVVKDUGQHVV SULQFLSOH WKH VHULRXVQHVVSOD\IXOQHVV SULQFLSOH WKH DFWLYHQHVVLQDFWLYHVV SULQFLSOH WKH VHOIQHVVRWKHUQHVV SULQFLSOH WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH WKH VDPHGLIIHUHQFH SULQFLSOH WKH VWDELOLW\UHDFWLRQ SULQFLSOH WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH DQG WKH LQWHQWLRQDOLW\ QRQLQWHQWLRQDOLW\SULQFLSOH )RU LQVWDQFH LQ UHODWLRQ WR WKH IRUPDOQHVVLQIRUPDOQHVV SULQFLSOH LI WKHUHLVIRUPDOQHVV HJWKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQG FRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH LGHD RI :W(  WKHUH LV LQIRUPDOQHVV HJ WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVVLQWKHLGHDRI:W(DVVKRZQLQWKHFULWLFLVPVWKDWLWFDQEH SROOXWLQJWKDWLWFDQXVHXSYDOXDEOHUHVRXUFHVWKDWLQFLQHUDWLRQFRPSHWHV ZLWK RWKHU ZDVWHWUHDWLQJ DFWLYLWLHV WKDW HDFK :W( PHWKRG KDV LWV RZQ FRVWV DQG EHQHILWV WKDW HQHUJ\ HIILFLHQF\ KDV LWV OLPLWV HWF  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJ WKH DEVROXWH YLHZ RI WKRVH ZKR IDYRU LQFLQHUDWLRQ  WKHUH LV UHODWLYHQHVV HJ ZKDW LV ULJKW IRU WKRVH ZKR IDYRU LQFLQHUDWLRQ LV QRWQHFHVVDULO\ VRIRU WKH FULWLFV ZKRDUHFRQFHUQHGWKDW³LQFLQHUDWRUV GHVWUR\ YDOXDEOH UHVRXUFHV´ DQG WKDW ³WKH\ PD\ UHGXFH WKH LQFHQWLYHV IRU UHF\FOLQJ DQG ZDVWH PLQLPL]DWLRQ DFWLYLWLHV´  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKH SDUWLDO YLHZ RI WKH DGYRFDWHV RI HDFK :W( PHWKRG  WKHUH LV WRWDOLW\ HJWKHPRUHKROLVWLFYLHZRI:W(VXFKWKDWWKHZKROHLVQRWWKHVXPRI LWVSDUWVWKDWLVLWFDQQRWEHUHGXFHGWRWKHVXPRIRSSRVLQJYLHZVRIWKH GLIIHUHQWDGYRFDWHVRIGLIIHUHQW:W(PHWKRGVDQGWKHLUFULWLFVVLQFHWKHUH ZLOOHPHUJHQHZYLHZVLQWKHIXWXUHQRW\HWNQRZQWRGD\MXVWDVWKHUHDUH DOUHDG\ FULWLFLVPV DJDLQVW HDFK RI WKHP QRZDGD\V  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH LI WKHUH LV SUHGLFWDELOLW\ HJ WKH SUHGLFWDEOH WHQGHQF\ RI ³LQFLQHUDWLRQ´ WR EH ³WKH PRVW FRPPRQ :W( LPSOHPHQWDWLRQ´ LQ WKH IRUHVHHDEOH IXWXUH  WKHUH LV XQSUHGLFWDELOLW\ HJWKH PRUHGLIILFXOWWDVNWRSUHGLFWH[DFWO\WKHH[WHQW WR ZKLFK ³LQFLQHUDWLRQ´ ZLOO UHPDLQ ³WKH PRVW FRPPRQ :W( LPSOHPHQWDWLRQ´ LQ D SDUWLFXODU PRUH GLVWDQW IXWXUH KLVWRULFDO HUD VLQFH WKHUHDUHDOUHDG\FRPSHWLQJWHFKQRORJLHVDQGZDVWHWUHDWPHQWDOWHUQDWLYHV QRZDGD\V $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJWKHH[SODQDWLRQE\WKHDGYRFDWHVRILQFLQHUDWLRQWKDWLW LV GHVLUDEOH EHFDXVH RI LWV HQHUJ\ FUHDWLRQ  WKHUH LV LQH[SOLFDELOLW\ HJ WKHODFNRIVXIILFLHQWH[SODQDWLRQE\WKHDGYRFDWHVRILQFLQHUDWLRQRIZK\ LW LV QHFHVVDULO\ GHVLUDEOH VLQFH IRU WKH FULWLFV ³LQFLQHUDWRUV GHVWUR\ YDOXDEOHUHVRXUFHV´DQG³WKH\PD\UHGXFHWKHLQFHQWLYHVIRUUHF\FOLQJDQG ZDVWH PLQLPL]DWLRQ DFWLYLWLHV´ EHVLGHV RWKHU SUREOHPV  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI LQFLQHUDWLRQ DV D VDIH :W( PHWKRG LQVRIDU DV LWV SURSRQHQWV WULHG WR GRZQSOD\ WKH SUREOHP ³DVVRFLDWHG ZLWK LQFLQHUDWLQJ 06:WRPDNHHOHFWULFDOHQHUJ\´EHFDXVHRI³WKHSRWHQWLDOIRUSROOXWDQWV WR HQWHU WKH DWPRVSKHUH ZLWK WKH IOXH JDVHV IURP WKH ERLOHU´ DQG ³WKHVH SROOXWDQWV FDQ EH DFLGLF DQG LQ WKH V ZHUH UHSRUWHG WR FDXVH HQYLURQPHQWDO GDPDJH E\ WXUQLQJ UDLQ LQWR DFLG UDLQ´  WKHUH LV UHDOLW\ HJWKHUHDOLVWLFDVSHFWRILQFLQHUDWLRQDVDVDIH:W(PHWKRGLQVRIDUDVLW KDV FRQWULEXWHG WR WKH FUHDWLRQ RI HOHFWULFDO HQHUJ\  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJ WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI SROOXWDQWV E\ LQFLQHUDWRUVOLNH³ILQHSDUWLFXODWHKHDY\PHWDOVWUDFHGLR[LQDQGDFLGJDV HPLVVLRQV´ WKHUHLVWUDQVILQLWHQHVV HJWKHWUDQVILQLWHQXPEHURIDOOWKH LQGLYLGXDOSLHFHVRI³ILQHSDUWLFXODWHKHDY\PHWDOVWUDFHGLR[LQDQGDFLG JDV HPLVVLRQV´ DQG VR RQ LQ KLVWRU\ WKDW KDYH HYHU EHHQ LQ WKH HQYLURQPHQW $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





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´ EHFDXVH RI ³WKH SRWHQWLDO IRU SROOXWDQWV WR HQWHU WKH DWPRVSKHUH ZLWK WKH IOXH JDVHV IURP WKH ERLOHU´ DQG ³WKHVH SROOXWDQWV FDQ EH DFLGLF DQG LQ WKH V ZHUH UHSRUWHG WR FDXVH HQYLURQPHQWDOGDPDJHE\WXUQLQJUDLQLQWRDFLGUDLQ´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³PXQLFLSDO VROLG ZDVWHV´ WR



7KH)XWXUHRI3RVW+XPDQ:DVWH 



GHFRPSRVHQDWXUDOO\ WKHUHLVTXLFNQHVV HJWKHUHODWLYHO\TXLFNHUVSHHG RI³PXQLFLSDOVROLGZDVWHV´WREHGHDOWZLWKE\LQFLQHUDWRUVLQVWHDG $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHH[SDQVLRQRIWKHXVHRIVRPHQHZW\SHVRILQFLQHUDWRUV QRZDGD\V ZKLFK³UHGXFHWKHYROXPHRIWKHRULJLQDOZDVWHE\´  WKHUH LV FRQWUDFWLRQ HJ WKH UHODWLYH GHFOLQH QRZDGD\V RI WKH XVH RI WKH ROGHU W\SHV RI ³LQFLQHUDWLRQ SODQWV ZKLFK QHLWKHU UHFRYHUHG HQHUJ\ QRU PDWHULDOV´  :.K $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDOFRQVWUXFWLRQRI³WKHUPDOHIILFLHQF\´LQWKHUPRG\QDPLFV WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI ³WKHUPDO HIILFLHQF\´ LQ WKHUPRG\QDPLFV WR WKH ILHOG RI ZDVWH WUHDWPHQW IRU :W( EXW ³WKHUPDO HIILFLHQF\´ LV OLPLWHG LQ UHDO OLIH EHFDXVH ³UHDO HQJLQHV KDYH PDQ\ GHSDUWXUHV IURP LGHDO EHKDYLRU WKDW ZDVWH HQHUJ\ UHGXFLQJ DFWXDO HIILFLHQFLHV IDU EHORZ WKH WKHRUHWLFDO YDOXHV´ ZKLFK DUH SRVVLEOH RQO\ LQ LGHDOVLWXDWLRQV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJ WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ LQFLQHUDWLRQ IRU :W(  WKHUH LV QRYHOW\ HJ WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ LQFLQHUDWLRQ IRU :W( E\ WKH QHZ LGHD RI XVLQJ DOWHUQDWLYH WHFKQRORJLHV IRU :W( OLNH ³WKHUPDO GHSRO\PHUL]DWLRQ´ DQG ³SODVPD DUF JDVLILFDWLRQ´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³LQFLQHUDWLRQ«LV WKH PRVW FRPPRQ :W( LPSOHPHQWDWLRQ´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

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WKH OLVW RI :W( WHFKQRORJLHV DIRUHFLWHG  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGVWUXH ,QUHODWLRQWRWKHDFWLYHQHVVLQDFWLYHVVSULQFLSOHLIWKHUHLVDFWLYHQHVV HJWKHDFWLYHQHVVRIWKRVHZDVWHVZKLFKFDQEHUHF\FOHGRUFRQYHUWHGWR HQHUJ\  WKHUH LV LQDFWLYHQHVV HJ WKH UHODWLYH LQDFWLYHQHVV RI WKRVH ZDVWHV ZKLFK FDQQRW EH UHXVHG UHF\FOHG RU FRQYHUWHG WR HQHUJ\ VLQFH ³XQXVDEOHPDWHULDO´LVRIWHQ³GXPSHGLQODQGILOODUHDV´LQVWHDG  ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ WKRVHILUPVZKLFKIRXQGLWSURILWDEOHWRXVHWKHROGHUW\SHVRILQFLQHUDWRUV HYHQZKHQWKH\UHOHDVHGSROOXWDQWV WKHUHLVRWKHUQHVV HJWKHWHQGHQF\ WREHPRVWO\FHQWHUHGRQRWKHUVDVVKRZQE\WKRVHLQDFDGHPLFUHVHDUFK VWXGLHV QRZDGD\V ZKR UHYHDO WKH SROOXWLQJ HIIHFWV RI WKH ROGHU W\SHV RI LQFLQHUDWRUV IRU DQ DGYDQFHPHQW RI WKH XQGHUVWDQGLQJ RI HQYLURQPHQWDO VXVWDLQDELOLW\ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJ WKH UHJUHVVLRQ PDGH E\ :W( PHWKRGV DV VKRZQ LQ WKH SUREOHPVSRLQWHGRXWE\WKHFULWLFV WKHUHLVSURJUHVVLRQ HJWKHSURJUHVV PDGH E\ :W( PHWKRGV DV VKRZQ LQ WKHLU FRQWULEXWLRQ WR FRQYHUWLQJ ZDVWHVLQWRHQHUJ\DIRUHFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVUHJDUGOHVVRIZKHWKHUWKLVEHGRQHE\ZD\RIOHWWLQJ RUJDQLFZDVWHVWRGHFRPSRVHQDWXUDOO\RUE\ZD\RIXVLQJLQFLQHUDWRUVWR FRQYHUW ZDVWHV LQWR HQHUJ\  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI OHWWLQJ RUJDQLF ZDVWHV WR GHFRPSRVH QDWXUDOO\ IRU D UHODWLYHO\ PRUH QDWXUDOLVWLF OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI XVLQJ LQFLQHUDWRUV WR FRQYHUW ZDVWHV LQWR HQHUJ\ IRU D UHODWLYHO\ PRUH WHFKQRSKLOLF OLIHZRUOG  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKHUHODWLYHO\PRUHVWDEOHSUDFWLFHRIXVLQJWKHROGW\SHVRILQFLQHUDWRUVLQ WKH ROGHU GD\V DOWKRXJK ³WKH\ UHOHDVHG DFLGLF SROOXWDQWV DQG DW WLPHV ³QHLWKHUUHFRYHUHGHQHUJ\QRUPDWHULDOV´ WKHUHLVUHDFWLRQ HJWKHXVHRI WKH ROG W\SHV RI LQFLQHUDWRUV WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ QRZDGD\V WKH LQGXVWU\ GHSHQGV RQ PRUH HQYLURQPHQWIULHQGO\ LQFLQHUDWRUVZKLFKXVH³OLPHVFUXEEHUVDQGHOHFWURVWDWLFSUHFLSLWDWRUVRQ VPRNHVWDFNV´VRWKDW ³E\SDVVLQJWKHVPRNHWKURXJKWKHOLPHVFUXEEHUV DQ\DFLGVWKDWPD\EHLQWKHVPRNHDUHQHXWUDOL]HGZKLFKSUHYHQWVWKHDFLG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



IURP UHDFKLQJ WKH DWPRVSKHUH DQG KXUWLQJ RXU HQYLURQPHQW´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

8VHIXOQHVV:DVWHDQG$QLPDO3URGXFWV $QRWKHU JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RUXQGHVLUDELOLW\ RIXVHIXOQHVVIURPWKHSHUVSHFWLYHRIQDWXUH LVWRH[SORUHXVHIXOQHVVZDVWHDQGDQLPDOSURGXFWV 7KHWHUP³DQLPDOSURGXFW´UHIHUV³DQ\PDWHULDOGHULYHGIURPWKHERG\ RI D QRQKXPDQ DQLPDO ([DPSOHV DUH IDW IOHVK EORRG PLON HJJV DQG OHVVHU NQRZQ SURGXFWV VXFK DV LVLQJODVV DQG UHQQHW´ :. HH 1 8QNOHVED\  $ UHODWHG WKRXJK QRW LGHQWLFDO  WHUP LV ³DQLPDO E\SURGXFW´ ZKLFK UHIHUV WR ³DQLPDO FDUFDVVHV DQG SDUWV RI FDUFDVVHV IURP VODXJKWHUKRXVHV DQLPDOVKHOWHUV]RRVDQGYHWHULQDULDQVDQGSURGXFWVRIDQLPDORULJLQQRW LQWHQGHGIRUKXPDQFRQVXPSWLRQLQFOXGLQJFDWHULQJZDVWH DOOZDVWHIRRG IURPUHVWDXUDQWVFDWHULQJ IDFLOLWLHVFHQWUDONLWFKHQVVODXJKWHUKRXVHVDQG KRXVHKROG NLWFKHQV  7KHVH SURGXFWV JR WKURXJK D SURFHVV NQRZQ DV

UHQGHULQJ  WR EH PDGH LQWR KXPDQ DQG QRQKXPDQ IRRGVWXIIV IDWV DQG

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





RWKHU PDWHULDO WKDW FDQ EH VROG WR PDNH FRPPHUFLDO SURGXFWV VXFK DV FRVPHWLFVSDLQWFOHDQHUVSROLVKHVJOXHVRDSDQGLQN´ :.HH  +RZHYHU WKHVH WZR WHUPV DUH QRW ³DSSOLHG WR SURGXFWV PDGH IURP IRVVLOL]HG RU GHFRPSRVHG DQLPDOV VXFK DV SHWUROHXP ZKLFK LV IRUPHG IURPWKHDQFLHQWUHPDLQVRIPDULQHDQLPDOV&URSVJURZQLQVRLOIHUWLOL]HG ZLWK DQLPDO UHPDLQV DUH UDUHO\ FKDUDFWHUL]HG DV DQLPDO SURGXFWV´ :. HH  8VHRI0HDWE\3URGXFWV 2QH ZD\ WR XVH DQLPDO SURGXFWV RU DQLPDOE\SURGXFWV LV WR PDNH JRRGXVHRI³PHDWE\SURGXFWV´HVSHFLDOO\IRUDQLPDOIRRG OLNHSHWIRRG  ³0HDWE\SURGXFWV´ KHUHDUH ³SDUWVRI VODXJKWHUHGDQLPDOVWKDWGRQ W LQFOXGH PHDW 7KHVH LQFOXGH OXQJV VSOHHQ NLGQH\V EUDLQ OLYHU EORRG ERQH DQG VWRPDFK DQG LQWHVWLQHV IUHHG RI WKHLU FRQWHQWV ,W GRHV QRW LQFOXGHKDLUKRUQVWHHWKRUKRRYHV´ :.HH  ,QDFFRUGDQFHWRWKH$VVRFLDWLRQRI$PHULFDQ)HHG&RQWURO2IILFLDOV $$)&2  ³PHDW E\SURGXFWV´ DUH ³WKH QRQUHQGHUHG FOHDQ SDUWV RWKHU WKDQ PHDW GHULYHG IURP VODXJKWHUHG PDPPDOV ,W LQFOXGHV EXW LV QRW OLPLWHG WR OXQJV VSOHHQ NLGQH\V EUDLQ OLYHUV EORRG ERQH SDUWLDOO\ GHIDWWHGORZWHPSHUDWXUHIDWW\WLVVXHDQGVWRPDFKVDQGLQWHVWLQHVIUHHGRI WKHLUFRQWHQWV,WGRHVQRWLQFOXGHKDLUKRUQVWHHWKDQGKRRIV,WVKDOOEH VXLWDEOHIRUXVHLQDQLPDOIRRG´ :.HH  +RZHYHUWKHUHDUHVRPHQHZW\SHVRISHWIRRGZKLFKGRQRWLQFOXGH PHDW E\SURGXFWV DV WKH\ FODLP ³WKH XVH RI KXPDQJUDGH PHDW VRXUFHV RQO\ZLWKQRDQLPDOPHDWE\SURGXFWV´ :.HH  %XW³$$)&2KDVGHFODUHGWKDWXVLQJWKHWHUP KXPDQJUDGH LV IDOVH DQG PLVOHDGLQJ  WR TXRWH $$)&2 LQ D OHWWHU VHQW WR SHW IRRG PDQXIDFWXUHUV LQ 0DUFK  ´ IRU LQVWDQFH LQ ³6HFWLRQ ,9±3HW )RRG /DEHO &ODLPV´ $$)&2 VWDWHG WKDW ³FODLPV WKDW D SURGXFW FRQWDLQV RU LV PDGH IURP LQJUHGLHQWV WKDW DUH KXPDQ JUDGH  KXPDQ TXDOLW\  SHRSOH IRRGV  LQJUHGLHQWV \RX WKH SXUFKDVHU  ZRXOG HDW  IRRG V  WKDW \RX WKH SXUFKDVHU  ZRXOG IHHG \RXU IDPLO\  RU VLPLODU FODLPV DUH IDOVH DQG PLVOHDGLQJ«´ :.HH  8VHRI6ODXJKWHU:DVWH $QRWKHUZD\WRXVHDQLPDOSURGXFWVRUDQLPDOE\SURGXFWVLVWRPDNH JRRGXVHRI³FDUFDVVHV´HVSHFLDOO\WKH³VROLGRXSXWV´ OLNH³FRPSRVW´DQG ³GLJHVWDWH´ IURP³FRPSRVWLQJDQGELRJDVSODQWV DQDHURELFGLJHVWHUV ´DV ³DIHUWLOL]HUDQGVRLODPHQGPHQW´ :.II 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



$ JRRG H[DPSOH LV ³VODXJKWHUKRXVH ZDVWH´ ZKLFK UHIHUV WR ³DQLPDO ERG\ SDUWV FXW RII LQ WKH SUHSDUDWLRQ RI FDUFDVVHV IRU XVH DV IRRG 7KLV ZDVWH FDQ FRPH IURP VHYHUDO VRXUFHV LQFOXGLQJ VODXJKWHUKRXVHV UHVWDXUDQWVVWRUHVDQGIDUPV«,QWKH8.VODXJKWHUKRXVHZDVWHLVFODVVHG DVFDWHJRU\ULVNZDVWHLQWKH$QLPDO%\3URGXFWV5HJXODWLRQVZLWKWKH H[FHSWLRQRIFRQGHPQHG PHDW ZKLFKLVFODVVHGDVFDWHJRU\ULVN´ :. HH  7KHVH ³$QLPDO %\3URGXFWV 5HJXODWLRQV 1R   6,  ´ SHUPLW ³WKH WUHDWPHQW RI VRPH DQLPDO E\SURGXFWV LQ FRPSRVWLQJ DQG ELRJDV SODQWV DQDHURELF GLJHVWHUV ´ DQG ³GHVFULEH«SURFHGXUHVUHTXLUHGWRDOORZVROLGRXWSXWV FRPSRVWGLJHVWDWH  IURP FRPSRVWLQJ SODQWV DQG DQDHURELF GLJHVWHUV RQWR ODQG LQ WKH 8QLWHG .LQJGRP´ :.II  7\SHVRI)RRG ,QJHQHUDODQLPDOSURGXFWV DQGDQLPDOE\SURGXFWV FDQEHXVHGIRU GLIIHUHQWW\SHVRIIRRGDVVKRZQEHORZ :.HH   ‡([³EORRGHVSHFLDOO\LQWKHIRUPRIEORRGVDXVDJH´ ‡([³ERQHLQFOXGLQJERQHFKDUERQHPHDOHWF´ ‡([³FDUPLQHDOVRNQRZQDVFRFKLQHDO IRRGG\H ´ ‡([³FDVHLQ IRXQGLQPLONDQGFKHHVH ´ ‡([³FLYHWRLO IRRGIODYRULQJDGGLWLYH ´ ‡([³GDLU\SURGXFWV HJPLONFKHHVH\RJXUWHWF ´ ‡([³HJJV´ ‡([³KRQH\´ ‡([³KRQH\GHZ VHFUHWLRQ ´ ‡([³ODUG´ ‡([³PHDW LQFOXGLQJILVKSRXOWU\DQGJDPH ´ ‡([³UHQQHW FRPPRQO\XVHGLQWKHSURGXFWLRQRIFKHHVH ´ ‡([³VZLIWOHW VQHVW PDGHRIVDOLYD ´ ‡([³ZKH\ IRXQGLQFKHHVHDQGDGGHGWRPDQ\RWKHUSURGXFWV ´ ‡ ([ ³EURWKV DQG VWRFNV DUH RIWHQ FUHDWHG ZLWK DQLPDO IDW ERQH DQG FRQQHFWLYHWLVVXH´ ‡([³/F\VWHLQHIURPKXPDQKDLUDQGSLJEULVWOHV XVHGLQWKH SURGXFWLRQRIELVFXLWVDQGEUHDG ´  6XUHO\WKHUHFDQEHRWKHUH[DPSOHVVRWKHRQHVDERYHDUHLOOXVWUDWLYH 

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





7\SHVRI1RQ)RRGVWXII %HVLGHVIRRGVWXIIDQLPDOSURGXFWV DQGDQLPDOE\SURGXFWV FDQDOVR EH XVHG IRU GLIIHUHQW W\SHV RI QRQIRRGVWXII DV VKRZQ EHORZ :. HH   ‡([³DQLPDOILEHU´ ‡([³EHHVZD[´ ‡([³HMDFXODWH XVHGLQDUWLILFLDOLQVHPLQDWLRQ ´ ‡([³IHDWKHUV´ ‡([³IXU´ ‡([³JDOOVWRQHV IURPOLYHVWRFNIRU7UDGLWLRQDO&KLQHVH0HGLFLQH ´ ‡([³KRUQLQFOXGLQJDQWOHUVLYRU\WXVNVHWF´ ‡([³LYRU\´ ‡([³OHDWKHU´ ‡([³PDQXUH´ ‡([³SHDUORUPRWKHURISHDUO´ ‡([³VLON´ ‡([³VSRQJHV´ ‡([³WRUWRLVHVKHOO´ ‡([³XULQH´ ‡([³YHQRP XVHGWRSURGXFHKXPDQDQGYHWHULQDU\DQWLYHQLQ ´ ‡([³ZRRO´ ‡([³EORRGDQGVRPHEORRGVXEVWLWXWHV EORRGXVHGIRUWUDQVIXVLRQVLV DOZD\VKXPDQLQRULJLQWKRXJKVRPHEORRGVXEVWLWXWHVDUHPDGHIURP DQLPDOVRXUFHV0DQ\GLDJQRVWLFODERUDWRU\WHVWVXVHDQLPDORUKXPDQ VRXUFHGUHDJHQWV ´ ‡ ([ ³FDVHLQ XVHG LQ SODVWLFV FORWKLQJ FRVPHWLFV DGKHVLYHV DQG SDLQW ´ ‡([³FDVWRUHXP VHFUHWLRQRIWKHEHDYHUXVHGLQSHUIXPHVDQGSRVVLEO\ LQIRRGIODYRULQJ ´  $JDLQWKHUHFDQEHRWKHUH[DPSOHVVRWKHRQHVDERYHDUHLOOXVWUDWLYH 3UREOHPVZLWK$QLPDO3URGXFWV +RZHYHU IRU WKH FULWLFV DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV  KDYH VRPH PDMRU SUREOHPV &RQVLGHU IRU LOOXVWUDWLRQ D IHZ H[DPSOHV EHORZ )LUVWO\ RQH PDLQ FULWLFLVP RI DQLPDO SURGXFWV DQG DQLPDO E\ SURGXFWV  LV WKDW WKH XVH RI DQLPDO SURGXFWV IDFH FRPSHWLWLRQ IURP DOWHUQDWLYHVRXUFHV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



)RUH[DPSOHLQWKHFDVHRIDQLPDOE\SURGXFWVWKHLUVDOHE\WKHPHDW LQGXVWU\ IDFHV HFRQRPLF FRPSHWLWLRQ IURP ³LQGXVWULHV VHOOLQJ VRXUFHV RI YHJHWDEOHSURWHLQ´ :.HH+2FNHUPDQ  6HFRQGO\DQRWKHUPDLQFULWLFLVPRIDQLPDOSURGXFWV DQGDQLPDOE\ SURGXFWV  LV WKDW WKHLU XVH LV SURKLELWHG E\ FHUWDLQ JURXSV IRU GLIIHUHQW PRUDOUHOLJLRXVDQGVHFXODUUHDVRQV )RULQVWDQFH³VHYHUDOKXPDQGLHWVSURKLELWWKHLQFOXVLRQRIVRPHQRQ KXPDQ DQLPDO SURGXFWV LQFOXGLQJ YHJHWDULDQ NRVKHU DQG KDODDO 2WKHU GLHWV VXFK DV YHJDQLVP DQG WKH UDZ YHJDQ GLHW H[FOXGH DQ\ PDWHULDO RI QRQKXPDQDQLPDORULJLQ´ :.HH-6WHSDQLDN  $QG WKLUGO\ VWLOO DQRWKHU PDLQ FULWLFLVP RI DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV  LV WKDW WKHLU XVH LV DOVR QRW UHFRPPHQGHG IRU KHDOWK UHDVRQ )RU LQVWDQFH QRZDGD\V ³D QHZ FDWHJRU\ RI SHW IRRG W\SLFDOO\ PDUNHWHG DV KROLVWLF ZHOOQHVV RUJDQLF XOWUD KHDOWK\ DQGRU VLPSO\ SUHPLXPSHWIRRGRIWHQHPSKDVL]HVWKHXVHRIKXPDQJUDGHPHDWVRXUFHV RQO\ZLWKQRDQLPDOPHDWE\SURGXFWV´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

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





VDPHGLIIHUHQFH SULQFLSOH WKH VWDELOLW\UHDFWLRQ SULQFLSOH WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH DQG WKH LQWHQWLRQDOLW\ QRQLQWHQWLRQDOLW\SULQFLSOH )RU LQVWDQFH LQ UHODWLRQ WR WKH IRUPDOQHVVLQIRUPDOQHVV SULQFLSOH LI WKHUHLVIRUPDOQHVV HJWKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQG FRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH XVH RI DQLPDO SURGXFWV DQG DQLPDOE\SURGXFWV WKHUHLVLQIRUPDOQHVV HJWKHQRQIRUPDOH[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH XVH RI DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV DV VKRZQ LQ WKH FULWLFLVPV WKDW WKH XVH RI DQLPDO SURGXFWV IDFH FRPSHWLWLRQ IURP DOWHUQDWLYH VRXUFHV WKDW WKHLU XVH LV SURKLELWHGE\FHUWDLQJURXSVIRUGLIIHUHQWPRUDODQGUHOLJLRXVUHDVRQVWKDW WKHLUXVHLVDOVRQRWUHFRPPHQGHGIRUKHDOWKUHDVRQHWF $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJ WKH DEVROXWH YLHZ RI FHUWDLQ JURXSV IRU YHJHWDULDQ NRVKHUDQGKDODDOGLHWVDJDLQVWWKHLQFOXVLRQRIVRPH QRQKXPDQDQLPDO SURGXFWV  WKHUH LV UHODWLYHQHVV HJ ZKDW LV ULJKW IRU FHUWDLQ JURXSV OLNH WKRVHIRUYHJHWDULDQNRVKHUDQGKDODDOGLHWVLQUHJDUGWRWKHLUSURKLELWLRQ RIWKHLQFOXVLRQRIVRPHQRQKXPDQDQLPDOSURGXFWVLVQRWQHFHVVDULO\VR IRURWKHUVZKRFRQVXPHUIRRGVEDVHGRQDQLPDOSURGXFWVDQGDQLPDOE\ SURGXFWV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKHSDUWLDOYLHZRIFHUWDLQ JURXSVIRUYHJHWDULDQNRVKHUDQGKDODDOGLHWV DJDLQVWWKHLQFOXVLRQRIVRPHQRQKXPDQDQLPDOSURGXFWV WKHUHLVWRWDOLW\ HJWKHPRUHKROLVWLFYLHZRIWKHIXWXUHRIQRQKXPDQDQLPDOSURGXFWV VXFKWKDWWKHZKROHLVQRWWKHVXPRILWVSDUWVWKDWLVLWFDQQRWEHUHGXFHG WRWKHVXPRIRSSRVLQJYLHZVRIFHUWDLQJURXSVIRUYHJHWDULDQNRVKHUDQG KDODDO GLHWV DQG WKRVH IRU WKH LQFOXVLRQ RI VRPH QRQKXPDQ DQLPDO SURGXFWVVLQFHWKHUH ZLOOHPHUJHQHZ YLHZVLQWKH IXWXUH QRW \HWNQRZQ WRGD\MXVWDVWKHUHDUHDOUHDG\WKRVHQRZDGD\VZKRGRQRWVLGHZLWKHLWKHU VLGHFRPSOHWHO\ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH LI WKHUH LV SUHGLFWDELOLW\ HJ WKH SUHGLFWDEOH WHQGHQF\ RI $$)&2 WR FODLP WKDW ³XVLQJWKHWHUP KXPDQJUDGH LV IDOVHDQGPLVOHDGLQJ ´LQWKHIRUHVHHDEOH IXWXUH  WKHUH LV XQSUHGLFWDELOLW\ HJ WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\WKHH[WHQWWRZKLFKWKHWHUP³KXPDQJUDGH´ZLOOQRWEHXVHG³RQ ZHEVLWHVRURWKHUDGYHUWLVLQJ´EHFDXVH³WKH$$)&2RQO\JRYHUQVWKHSHW IRRG SDFNDJLQJ DQG KDV QR DXWKRULW\ RYHU ZHEVLWHV RU DGYHUWLVLQJ´ DOWKRXJK WKLQJV PD\ FKDQJH ODWHU  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGV WUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJ WKH H[SODQDWLRQ E\ WKH DGYRFDWHV RI DQLPDO SURGXFWV WKDWWKH\DUHGHVLUDEOHIRUIRRGFRQVXPSWLRQ WKHUHLVLQH[SOLFDELOLW\ HJ WKHODFNRIVXIILFLHQWH[SODQDWLRQE\WKHDGYRFDWHVRIDQLPDOSURGXFWVRI ZK\ WKH\ DUH QHFHVVDULO\ GHVLUDEOH EHFDXVH IRU WKH FULWLFV WKHLU XVH LV SURKLELWHGE\FHUWDLQJURXSVIRUGLIIHUHQWPRUDODQGUHOLJLRXVUHDVRQVOLNH WKRVH IRU YHJHWDULDQ NRVKHU DQG KDODDO GLHWV RQO\  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDODVSHFWRIFHUWDLQQHZW\SHVRISHWIRRG ZKLFKFODLP ³WKHXVHRI KXPDQJUDGH PHDW VRXUFHV RQO\ ZLWK QR DQLPDO PHDW E\SURGXFWV´ EHFDXVH³$$)&2KDVGHFODUHGWKDWXVLQJWKHWHUP KXPDQJUDGH LV IDOVH DQGPLVOHDGLQJ ´ WKHUHLVUHDOLW\ HJWKHUHDOLVWLFDVSHFWRIFHUWDLQQHZ W\SHVRISHWIRRGLQVRIDUDVWKH\DUHXVHIXOIRUWKHDGYRFDWHVRISHWIRRG FRQVXPSWLRQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJWKHILQLWHQXPEHURIWKHFDWHJRULHVRIIRRGVWXIIVDQGQRQ IRRGVWXIIVIURPDQLPDOSURGXFWVDQGDQLPDOE\SURGXFWVDVOLVWHGHDUOLHU  WKHUH LV WUDQVILQLWHQHVV HJ WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO SLHFHVRIIRRGVWXIIVDQGQRQIRRGVWXIIVIURPDQLPDOSURGXFWVDQGDQLPDO E\SURGXFWV LQ KLVWRU\ WKDW KDYH HYHU H[LVWHG  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI  PDMRU XVHV RI DQLPDO SURGXFWVDQGDQLPDOE\SURGXFWVQDPHO\SHWIRRGDQGVRLODPHQGPHQWLQ WKH DUWLFOH DIRUHFLWHG  WKHUH LV YDJXHQHVV HJ WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  PDMRU XVHV RI DQLPDO SURGXFWV DQG DQLPDO E\ SURGXFWV QDPHO\ SHW IRRG DQG VRLO DPHQGPHQW LQ WKH DUWLFOH DIRUHFLWHG VLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRWDQGVRRQ $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJ WKH UHODWLYHO\ VLPSOH DQDO\VLV RI DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV WR EH XVHG IRU IRRGVWXIIV DQG QRQIRRGVWXIIV E\ WKH DGYRFDWHV WKHUHLVFRPSOLFDWHGQHVV HJWKHUHODWLYHO\PRUHFRPSOLFDWHG DQDO\VLV RI DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV WR EH XVHG IRU IRRGVWXIIVDQGQRQIRRGVWXIIVE\FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJ WKH RSHQ H[SORUDWLRQ RI VHOOLQJ DQLPDO SURGXFWV DQG DQLPDO E\ SURGXFWVE\WKHPHDWLQGXVWU\ WKHUHLVKLGGHQQHVV HJWKHKLGGHQELDVLQ

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WKHVDOHRIDQLPDOSURGXFWVDQGDQLPDOE\SURGXFWVE\WKHPHDWLQGXVWU\ EHFDXVHWKHLUVDOHE\WKHPHDWLQGXVWU\JLYHVLWDQDGYDQWDJH³WRFRPSHWH HFRQRPLFDOO\ ZLWK LQGXVWULHV VHOOLQJ VRXUFHV RI YHJHWDEOH SURWHLQ´  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI IRRGVWXIIV IURP DQLPDO SURGXFWVDPRQJWKRVHLQPDLQVWUHDPVRFLHW\ZKRGRQRWPLQGWRFRQVXPH QRQKXPDQDQLPDOGLHWV WKHUHLVHPSWLQHVV HJWKHUHODWLYHO\OHVVGHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ RI IRRGVWXIIV IURP DQLPDO SURGXFWV DPRQJ WKRVH IRU YHJHWDULDQ NRVKHU DQG KDODDO GLHWV RQO\  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFKDQJHFRQVWDQF\SULQFLSOHLIWKHUHLVFKDQJH HJ WKH HYHU QHZ ZD\V WR GHDO ZLWK ZDVWH DV VKRZQ LQ WKH XVH RI DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV  WKHUH LV FRQVWDQF\ HJ WKH HYHU FRQVWDQW H[LVWHQFH RI GLIIHUHQW SUREOHPV LQ WKH HYHU QHZ ZD\V WR GHDO ZDVWH DV VKRZQ LQ WKH SUREOHPV ZLWK WKH XVH RI DQLPDO SURGXFWV DQG DQLPDOE\SURGXFWVSRLQWHGRXWE\WKHFULWLFVDIRUHFLWHG $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRUGHUFKDRVSULQFLSOHLIWKHUHLVRUGHU HJWKHPRUH RUOHVVRUGHUO\DSSHDUDQFHRIDQLPDOSURGXFWVDQGDQLPDO E\SURGXFWVLI ORRNHG RQO\ IURP WKH YDQWDJH SRLQW RI WKHLU DGYRFDWHV IRU IRRG FRQVXPSWLRQ WKHUHLVFKDRV HJWKHPRUHRUOHVVFKDRWLFDSSHDUDQFHRI DQLPDOSURGXFWVDQGDQLPDOE\SURGXFWVLIORRNHGIURPWKHPXOWLSOHRIWHQ FRQIOLFWLQJ YDQWDJH SRLQWV RI GLIIHUHQW JURXSV LQ UHJDUG WR WKH SURV DQG FRQVRIXVLQJWKHPIRUIRRGFRQVXPSWLRQDVZHOODVWKHGLIIHUHQWXVHVIRU IRRGVWXIIV DQG QRQIRRGVWXIIV DIRUHGLVFXVVHG  $QG WKH UHYHUVH GLUHFWLRQ DOVRKROGVWUXH ,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJ WKH UHODWLYHO\ VORZHU VSHHG RI DQLPDO E\SURGXFWV WR EH XVHG IRU IRRGVWXIIV EHFDXVH WKH\ KDYH WR JR WKURXJK WKH SURFHVV RI ³UHQGHULQJ´ ZKLFK LV WLPHFRQVXPLQJ  WKHUH LV TXLFNQHVV HJ WKH UHODWLYHO\ TXLFNHU VSHHG RI DQLPDO SURGXFWV WR EH XVHG IRU IRRGVWXIIV EHFDXVH WKH\ GR QRW QHHGWRJRWKURXJKWKHSURFHVVRI³UHQGHULQJ´DVPXFK $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHVSUHDGRIWKHXVHRIIRRGSDFNDJLQJQRZDGD\VDVVKRZQ E\ WKH $$)&2 UHJXODWLRQV LQ UHJDUG WR SHW IRRG SDFNDJLQJ  WKHUH LV FRQWUDFWLRQ HJWKHUHODWLYHGHFOLQHRIWKHSUDFWLFHRISURGXFLQJSURGXFWV ZLWKRXW D ORW RI GHWDLOHG LQIR DERXW WKHP LQ DQWLTXLW\  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³KHDWLQJ´ DQG ³GU\LQJ´ LQ SK\VLFV DQG FKHPLVWU\  WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI WKH XQGHUVWDQGLQJ RI ³KHDWLQJ´ DQG ³GU\LQJ´ LQ SK\VLFV DQG FKHPLVWU\ WR WKH ILHOGRIPHDWLQGXVWU\OLNHWKHSURFHVVRI³UHQGHULQJ´  :.JJ $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJ WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ DQLPDO SURGXFWV DQG DQLPDO E\ SURGXFWVDVSHWIRRG WKHUHLVQRYHOW\ HJWKHDOWHUQDWLYHQRYHOFKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ DQLPDO SURGXFWV DQG DQLPDO E\ SURGXFWV DV SHW IRRG E\ WKH QHZ LGHD RI PDNLQJ D QHZ FDWHJRU\ RI SHW IRRGZKLFK³HPSKDVL]HVWKHXVHRIKXPDQJUDGHPHDWVRXUFHVRQO\ZLWK QR DQLPDO PHDW E\SURGXFWV´ DOWKRXJK $$)&2 IRXQG WKLV FODLP PLVOHDGLQJ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH LI WKHUH LV HYROXWLRQ HJ WKH QDWXUDO HYROXWLRQ RI KXPDQV WR FRQVXPH DQLPDO SURGXFWVDQGDQLPDOE\SURGXFWVLQWKHVWDWHRIQDWXUHLQDSULPLWLYHZD\ OLNHIRUDJLQJ WKHUHLVWUDQVIRUPDWLRQ HJWKHWHFKQLFDOWUDQVIRUPDWLRQRI KXPDQDELOLW\WRGHDOZLWKDQLPDOSURGXFWVDQGDQLPDOE\SURGXFWVE\WKH LQYHQWLRQ RI ³UHQGHULQJ´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

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





DQLPDO E\SURGXFWV LQWR IRRGVWXIIV DQG QRQIRRGVWXIV  WKHUH LV LQDFWLYHQHVV HJ WKH UHODWLYH LQDFWLYHQHVV RI WKRVH ZKR FDQQRW FRQYHUW FHUWDLQ DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV LQWR IRRGVWXIIV DQG QRQ IRRGVWXIVDOWKRXJKWKH\FDQGRVRPHWKLQJHOVHDOWRJHWKHU  ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶VVHOIRUJURXSDVVKRZQLQWKH VDOH RI DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV E\ WKH PHDW LQGXVWU\ ZKLFK³DOORZVWKHPHDWLQGXVWU\WRFRPSHWHHFRQRPLFDOO\ZLWKLQGXVWULHV VHOOLQJVRXUFHVRIYHJHWDEOHSURWHLQ´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²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVE\ ZD\RIWKHPDLQVWUHDPQRQKXPDQDQLPDOGLHWV IRU D UHODWLYHO\ PRUH  VHFXODU OLIHZRUOG  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ RI WKH SUDFWLFH RI XVLQJ DQLPDO E\ SURGXFWVIRUSHWIRRGLQWKHROGHUGD\V WKHUHLVUHDFWLRQ HJWKHSUDFWLFH RI XVLQJ DQLPDO E\SURGXFWV IRU SHW IRRG LQ WKH ROGHU GD\V WKHQ OHG WR IXUWKHUFKDQJHVODWHURQZKHQQRZDGD\VWKHUHDUH³DQHZFDWHJRU\RISHW IRRG´ ZKLFK ³RIWHQ HPSKDVL]HV WKH XVH RI KXPDQJUDGH PHDW VRXUFHV RQO\ ZLWK QR DQLPDO PHDW E\SURGXFWV´  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQ LQ WKH XVH RI DQLPDO SURGXFWV IRU IRRGVWXIIV VLQFH WKLV VHUYHV WKH YLWDO IXQFWLRQ RI IRRG FRQVXPSWLRQ IRU WKRVH LQYROYHG  WKHUH LV QRQIXQFWLRQDOLW\ HJ WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH SURKLELWLRQ RI XVLQJ ³VRPH QRQKXPDQ DQLPDO SURGXFWV´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

8VHIXOQHVVDQG6RFLHW\ 8VHIXOQHVV ZKHQ H[DPLQHG IURP WKH SHUVSHFWLYH RI VRFLHW\ FDQ UHYHDO WR XV LWV SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\ DQGWKLVFDQEHVKRZQE\ZD\RIWZRFDVHVWXGLHVQDPHO\  XVHIXOQHVVZDVWHUHF\FOHDQGWKHFRVWEHQHILWDQDO\VLVDQG   XVHIXOQHVV WKH ZDVWH FRQYHUWHU DQG WHFKQRORJ\²WR EH DGGUHVVHG KHUHDIWHU

8VHIXOQHVV:DVWH5HF\FOHDQGWKH&RVW%HQHILW$QDO\VLV $ JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHIXOQHVV IURP WKH SHUVSHFWLYH RI VRFLHW\ LV WR H[SORUH XVHIXOQHVV ZDVWH UHF\FOH DQG WKH FRVWEHQHILW DQDO\VLV 7KH WHUP ³UHF\FOH´ UHIHUV WR WKH ³SURFHVVLQJ´ RI ³XVHG PDWHULDOV ZDVWH LQWRQHZSURGXFWVWRSUHYHQWZDVWHRISRWHQWLDOO\XVHIXOPDWHULDOV UHGXFH WKH FRQVXPSWLRQ RI IUHVK UDZ PDWHULDOV UHGXFH HQHUJ\ XVDJH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





UHGXFH DLU SROOXWLRQ IURP LQFLQHUDWLRQ  DQG ZDWHU SROOXWLRQ IURP ODQGILOOLQJ  E\ UHGXFLQJ WKH QHHG IRU FRQYHQWLRQDO  ZDVWH GLVSRVDO DQG ORZHUJUHHQKRXVHJDVHPLVVLRQVDVFRPSDUHGWRYLUJLQSURGXFWLRQ´ :. J  +RZHYHU WKH EXVLQHVV RI ZDVWH UHF\FOH LV QRW ZLWKRXW FRQWURYHUV\ EHFDXVHWKHUHLVWKHFRVWEHQHILWGHEDWHRYHUZKHWKHUWKHUHDUHPRUHFRVWV WKDQ EHQHILWV RU PRUH EHQHILWV WKDQ FRVWV  LQ ZDVWH UHF\FOH²RU VLPSO\ ³ZKHWKHUUHF\FOLQJLVHFRQRPLFDOO\HIILFLHQW´ :.J  &RQVLGHU IRU LOOXVWUDWLRQ VRPH PDLQ DUHDV RI GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWH UHF\FOH EHORZ DV VXPPDUL]HG LQ 6HF  VW'LVDJUHHPHQW5HF\FOLQJYV2WKHU0HWKRGV 7KH ILUVW GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWHUHF\FOHKDVWRGRZLWKUHF\FOLQJYVRWKHUPHWKRGV 2Q WKH SRVLWLYH VLGH ³PXQLFLSDOLWLHV RIWHQ VHH ILVFDO EHQHILWV IURP LPSOHPHQWLQJ UHF\FOLQJ SURJUDPV ODUJHO\ GXH WR WKH UHGXFHG ODQGILOO FRVWV $ VWXG\FRQGXFWHGE\ WKH7HFKQLFDO8QLYHUVLW\RI 'HQPDUN IRXQG WKDW LQ  SHUFHQW RI FDVHV UHF\FOLQJ LV WKH PRVW HIILFLHQW PHWKRG WR GLVSRVHRI KRXVHKROG ZDVWH´ :.J' /DYHH(&2  D  $QG RQ WKH QHJDWLYH VLGH ³D  DVVHVVPHQW E\ WKH 'DQLVK (QYLURQPHQWDO $VVHVVPHQW ,QVWLWXWH FRQFOXGHG WKDW LQFLQHUDWLRQ ZDV WKH PRVWHIIHFWLYH PHWKRGIRUGLVSRVLQJRIGULQNFRQWDLQHUVHYHQDOXPLQLXP RQHV´ :.J'9LJVR  QG'LVDJUHHPHQW(FRQRPLFYV)LVFDO0HDVXUHPHQW 7KH VHFRQG GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWHUHF\FOHKDVWRGRZLWKHFRQRPLFYVILVFDOPHDVXUHPHQW )LVFDO PHDVXUHPHQW GRHV QRW UHYHDO ³QHJDWLYH H[WHUQDOLWLHV´ OLNH SROOXWLRQ EXW HFRQRPLF PHDVXUHPHQW GRHV ,Q RWKHU ZRUGV ³HFRQRPLF DQDO\VLV RI UHF\FOLQJ LQFOXGHV ZKDW HFRQRPLVWV FDOO H[WHUQDOLWLHV ZKLFK DUHXQSULFHGFRVWVDQGEHQHILWVWKDWDFFUXHWRLQGLYLGXDOVRXWVLGHRISULYDWH WUDQVDFWLRQV´ :.J  *RRGH[DPSOHVRIQRQILVFDOEHQHILWVDUH³GHFUHDVHGDLUSROOXWLRQDQG JUHHQKRXVH JDVHV IURP LQFLQHUDWLRQ UHGXFHG KD]DUGRXV ZDVWH OHDFKLQJ IURP ODQGILOOV UHGXFHG HQHUJ\ FRQVXPSWLRQ DQG UHGXFHG ZDVWH DQG UHVRXUFH FRQVXPSWLRQ ZKLFK OHDGV WR D UHGXFWLRQ LQ HQYLURQPHQWDOO\ GDPDJLQJPLQLQJDQGWLPEHUDFWLYLW\$ERXWPLQHUDOVDUHNQRZQRI WKHVHRQO\DIHZKXQGUHGPLQHUDOVLQWKHZRUOGDUHUHODWLYHO\FRPPRQ$W



7KH)XWXUHRI3RVW+XPDQ:DVWH 



FXUUHQWUDWHVFXUUHQWNQRZQUHVHUYHVRISKRVSKRUXVZLOOEHGHSOHWHGLQWKH QH[W  WR  \HDUV :LWKRXW PHFKDQLVPV VXFK DV WD[HV RU VXEVLGLHV WR LQWHUQDOL]H H[WHUQDOLWLHV EXVLQHVVHV ZLOO LJQRUH WKHP GHVSLWH WKH FRVWV LPSRVHGRQVRFLHW\´ :.J80/6&,$5($6  ,Q IDFW ³WR PDNH VXFK QRQILVFDO EHQHILWV HFRQRPLFDOO\ UHOHYDQW DGYRFDWHV KDYH SXVKHG IRU OHJLVODWLYH DFWLRQ WR LQFUHDVH WKH GHPDQG IRU UHF\FOHG PDWHULDOV 7KH 8QLWHG 6WDWHV (QYLURQPHQWDO 3URWHFWLRQ $JHQF\ (3$  KDV FRQFOXGHG LQ IDYRU RI UHF\FOLQJ VD\LQJ WKDW UHF\FOLQJ HIIRUWV UHGXFHGWKHFRXQWU\ VFDUERQHPLVVLRQVE\DQHWPLOOLRQPHWULFWRQQHV LQ  ,Q WKH 8QLWHG .LQJGRP WKH :DVWH DQG 5HVRXUFHV $FWLRQ 3URJUDPPH VWDWHG WKDW *UHDW %ULWDLQ V UHF\FOLQJ HIIRUWV UHGXFH &2 HPLVVLRQVE\±PLOOLRQWRQQHVD \HDU5HF\FOLQJLV PRUHHIILFLHQWLQ GHQVHO\SRSXODWHGDUHDVDVWKHUHDUHHFRQRPLHVRIVFDOHLQYROYHG´ :. J/($*(&2  UG'LVDJUHHPHQW7KH$PRXQWRI(QHUJ\6DYHG 7KH WKLUG GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWH UHF\FOH KDV WR GR ZLWK ZKHWKHU WKH DPRXQW RI HQHUJ\ VDYHG LQ UHF\FOLQJLVPRUHWKDQWKHDPRXQWRIHQHUJ\VSHQWLQWKHSURFHVV ,Q JHQHUDO ³WKH DPRXQW RI HQHUJ\ VDYHG WKURXJK UHF\FOLQJ GHSHQGV XSRQWKHPDWHULDOEHLQJUHF\FOHGDQGWKHW\SHRIHQHUJ\DFFRXQWLQJWKDWLV XVHG (PHUJ\ VSHOOHG ZLWK DQ 0  DQDO\VLV IRU H[DPSOH EXGJHWV IRU WKH DPRXQW RI HQHUJ\ RI RQH NLQG H[HUJ\  WKDW LV UHTXLUHG WR PDNH RU WUDQVIRUPWKLQJVLQWRDQRWKHUNLQGRISURGXFWRUVHUYLFH´ :.J  )RU LQVWDQFH ³RQH HPHUJ\ OLIHF\FOH DQDO\VLV UHYHDOHG WKDW IO\ DVK DOXPLQXP UHF\FOHG FRQFUHWH DJJUHJDWH UHF\FOHG SODVWLF DQG VWHHO \LHOG KLJKHU HIILFLHQF\ UDWLRV ZKHUHDV WKH UHF\FOLQJ RI OXPEHU JHQHUDWHV WKH ORZHVW UHF\FOH EHQHILW UDWLR +HQFH WKH VSHFLILF QDWXUH RI WKH UHF\FOLQJ SURFHVV WKH PHWKRGV XVHG WR DQDO\VH WKH SURFHVV DQG WKH SURGXFWV LQYROYHG HIIHFWV WKH HQHUJ\ VDYLQJV EXGJHWV´ :. J 0 %URZQ   7R PDNH WKH PDWWHU ZRUVH ³LW LV GLIILFXOW WR GHWHUPLQH WKH H[DFW DPRXQWRIHQHUJ\FRQVXPHGRUSURGXFHGLQZDVWHGLVSRVDOSURFHVVHV+RZ PXFKHQHUJ\LVXVHGLQUHF\FOLQJGHSHQGVODUJHO\RQWKHW\SHRIPDWHULDO EHLQJUHF\FOHGDQGWKHSURFHVVXVHGWRGRVR´ :.J  WK'LVDJUHHPHQW7KH$PRXQWRI0RQH\6DYHG 7KH IRXUWK GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWHUHF\FOHKDVWRGRZLWKWKHDPRXQWRIPRQH\VDYHG

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





,Q JHQHUDO ³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´ :.J  +RZHYHU LQ RWKHU FDVHV ³WKH FRVW RI UHF\FODEOH PDWHULDOV DOVR H[FHHGVWKHFRVWRIUDZPDWHULDOV9LUJLQSODVWLFUHVLQFRVWVSHUFHQWOHVV WKDQ UHF\FOHG UHVLQ $GGLWLRQDOO\ D 8QLWHG 6WDWHV (QYLURQPHQWDO 3URWHFWLRQ$JHQF\ (3$ VWXG\WKDWWUDFNHGWKHSULFHRIFOHDUJODVVIURP -XO\WR$XJXVWIRXQGWKDWWKHDYHUDJHFRVWSHUWRQUDQJHGIURP WRZKLOHD86*6UHSRUWVKRZVWKDWWKHFRVWSHUWRQRIUDZVLOLFD VDQG IURP \HDUV  WR  IHOO EHWZHHQ  DQG ´ :. J  ,Q  -RKQ 7LHUQH\   DUJXHG WKDW ³LW FRVWV PRUH PRQH\ WR UHF\FOH WKH WUDVK RI 1HZ @DXWKRURIDSDSHU HQWLWOHG :K\ , $P 1RW DQ (QYLURQPHQWDOLVW  KDV FODLPHG WKDW SDSHU UHF\FOLQJDFWXDOO\UHGXFHVWUHHSRSXODWLRQV+HDUJXHVWKDWEHFDXVHSDSHU FRPSDQLHV KDYH LQFHQWLYHV WR UHSOHQLVK WKH IRUHVWV WKH\ RZQ ODUJH GHPDQGV IRUSDSHUOHDGWRODUJHIRUHVWV&RQYHUVHO\UHGXFHGGHPDQGIRU SDSHUOHDGVWRIHZHU IDUPHG IRUHVWV6LPLODUDUJXPHQWVZHUHH[SUHVVHGLQ DDUWLFOHIRU7KH)UHH0DUNHW´ :.J  +RZHYHU RQ WKH RWKHU VLGH RI WKH GHEDWH ³PDQ\ HQYLURQPHQWDOLVWV SRLQW RXW«WKDW IDUPHG  IRUHVWV DUH LQIHULRU WR YLUJLQ IRUHVWV LQ VHYHUDO ZD\V )DUPHG IRUHVWV DUH QRW DEOH WR IL[ WKH VRLO DV TXLFNO\ DV YLUJLQ IRUHVWVFDXVLQJZLGHVSUHDGVRLOHURVLRQDQGRIWHQUHTXLULQJODUJHDPRXQWV RI IHUWLOL]HU WR PDLQWDLQ ZKLOH FRQWDLQLQJ OLWWOH WUHH DQG ZLOGOLIH ELRGLYHUVLW\FRPSDUHGWRYLUJLQIRUHVWV$OVRWKHQHZWUHHVSODQWHGDUHQRW DVELJDVWKHWUHHVWKDWZHUHFXWGRZQDQGWKHDUJXPHQWWKDWWKHUHZLOOEH

PRUHWUHHV LVQRWFRPSHOOLQJWRIRUHVWU\DGYRFDWHVZKHQWKH\DUHFRXQWLQJ VDSOLQJV´ :.J&%DLUG  WK'LVDJUHHPHQW,QFRPH/RVVDQG6RFLDO&RVWV 7KH VHYHQWK GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWHUHF\FOHKDVWRGRZLWKLQFRPHORVVDQGVRFLDOFRVWV )RULQVWDQFH³LQVRPHSURVSHURXVDQGPDQ\OHVVSURVSHURXVFRXQWULHV LQ WKH ZRUOG WKH WUDGLWLRQDO MRE RI UHF\FOLQJ LV SHUIRUPHG E\ WKH HQWUHSUHQHXULDOSRRUVXFKDVWKHNDUXQJJXQL=DEDOHHQWKHUDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ :LWK WKH FUHDWLRQ RI ODUJH UHF\FOLQJ RUJDQL]DWLRQVWKDWPD\EHSURILWDEOHHLWKHUE\ODZRUHFRQRPLHVRIVFDOH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WKH SRRU DUH PRUH OLNHO\ WR EH GULYHQ RXW RI WKH UHF\FOLQJ DQG WKH UHPDQXIDFWXULQJPDUNHW´ :.J15'&  7KXV ³WR FRPSHQVDWH IRU WKLV ORVV RI LQFRPH WR WKH SRRU D VRFLHW\ PD\ QHHGWRFUHDWHDGGLWLRQDOIRUPVRIVRFLHWDOSURJUDPVWRKHOSVXSSRUW WKHSRRU/LNHWKHSDUDEOHRIWKHEURNHQZLQGRZWKHUHLVDQHWORVVWRWKH SRRU DQG SRVVLEO\ WKH ZKROH RI D VRFLHW\ WR PDNH UHF\FOLQJ DUWLILFLDOO\ SURILWDEOH WKURXJK ODZ +RZHYHU DV VHHQ LQ %UD]LO DQG $UJHQWLQD ZDVWH SLFNHUVLQIRUPDO UHF\FOHUV DUH DEOH WR ZRUN DORQJVLGH JRYHUQPHQWV LQ VHPL IXQGHG FRRSHUDWLYHV DOORZLQJ LQIRUPDO UHF\FOLQJ WR EH OHJLWLPL]HG DVDSD\LQJJRYHUQPHQWMRE´ :.J3%600HGLQD  7KLV WKHQ VXJJHVWV WKDW ³EHFDXVH WKH VRFLDO VXSSRUW RI D FRXQWU\ LV OLNHO\ OHVVWKDQWKHORVVRILQFRPHWRWKHSRRUGRLQJUHF\FOLQJWKHUHLVD JUHDWHUFKDQFHWKDWWKHSRRUZLOOFRPHLQFRQIOLFWZLWKWKHODUJHUHF\FOLQJ RUJDQL]DWLRQV´ :.J5*RQ]DOHV  ,Q IDFW ³RQH ODERULQWHQVLYH XQGHUXVHG ZDVWH LV HOHFWURQLF DQG FRPSXWHU ZDVWH %HFDXVH WKLV ZDVWH PD\ VWLOO EH IXQFWLRQDO DQG ZDQWHG PRVWO\E\WKHSRRUWKHSRRUPD\VHOORUXVHLWDWDJUHDWHUHIILFLHQF\WKDQ ODUJHUHF\FOHUV´ :.J  WK'LVDJUHHPHQW3XEOLF3DUWLFLSDWLRQLQ5HF\FOLQJ3URJUDPPHV $QG WKH HLJKWK GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWH UHF\FOH KDV WR GR ZLWK ³SXEOLF SDUWLFLSDWLRQ LQ UHF\FOLQJ SURJUDPPHV´ )RULQVWDQFH³EHWZHHQDQGWKHZRUOGSURGXFWLRQRISODVWLF UHVLQV LQFUHDVHG IROG ZKLOH UHFRYHU\ RI WKH PDWHULDO UHPDLQHG EHORZ ´²DQG ³PDQ\ VWXGLHV KDYH DGGUHVVHG UHF\FOLQJ EHKDYLRXU DQG VWUDWHJLHV WR HQFRXUDJH FRPPXQLW\ LQYROYHPHQW LQ UHF\FOLQJ SURJUDPPHV´ :.J&0RRUH  %XW IRU WKH FULWLFV ³UHF\FOLQJ EHKDYLRXU LV QRW QDWXUDO EHFDXVH LW UHTXLUHVDIRFXVDQGDSSUHFLDWLRQIRUORQJWHUPSODQQLQJZKHUHDVKXPDQV KDYH HYROYHG WR EH VHQVLWLYH WR VKRUW WHUP VXUYLYDO JRDOV DQG WKDW WR RYHUFRPH WKLV LQQDWH SUHGLVSRVLWLRQ WKH EHVW VROXWLRQ ZRXOG EH WR XVH VRFLDO SUHVVXUH WR FRPSHO SDUWLFLSDWLRQ LQ UHF\FOLQJ SURJUDPPHV´ :. J76FKDFNHOIRUG  @ LW ZDV IRXQG WKDW SHUVRQDO FRQWDFW ZLWK LQGLYLGXDOV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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¶WKDYH IULHQGVDQGQHLJKERUVWKDWUHF\FOHG´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

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





FRQVLVWHQF\DQGFRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKHGHEDWHRQWKH FRVWEHQHILWDQDO\VLVRIZDVWHUHF\FOH WKHUHLVLQIRUPDOQHVV HJWKHQRQ IRUPDO H[LVWHQFH RI XQVRXQGQHVV LQFRQVLVWHQF\ DQG LQFRPSOHWHQHVV LQ WKH GHEDWH RQ WKH FRVWEHQHILW DQDO\VLV RI ZDVWH UHF\FOH DV VKRZQ LQ WKH FULWLFLVPVE\WKHFULWLFVLQUHJDUGWRWKHLVVXHVDIRUHGLVFXVVHG $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJWKHDEVROXWHYLHZRIWKRVH³EXVLQHVVHV´ZKLFK³LJQRUH WKHP>QHJDWLYHH[WHUQDOLWLHV@GHVSLWHWKHFRVWVLPSRVHGRQVRFLHW\´ WKHUH LV UHODWLYHQHVV HJ ZKDW LV JRRG IRU WKRVH ³EXVLQHVVHV´ ZKLFK ³LJQRUH WKHP>QHJDWLYHH[WHUQDOLWLHV@ GHVSLWHWKHFRVWVLPSRVHGRQ VRFLHW\´LV QRW QHFHVVDULO\ VR IRU WKH FULWLFV ZKR ³WR PDNH VXFK QRQILVFDO EHQHILWV HFRQRPLFDOO\UHOHYDQW«KDYHSXVKHGIRUOHJLVODWLYHDFWLRQWRLQFUHDVHWKH GHPDQGIRUUHF\FOHGPDWHULDOV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKH SDUWLDO YLHZ RI WKRVH ³EXVLQHVVHV´ ZKLFK ³LJQRUH WKHP >QHJDWLYH H[WHUQDOLWLHV@GHVSLWHWKHFRVWVLPSRVHGRQVRFLHW\´ WKHUHLVWRWDOLW\ HJ WKHPRUHKROLVWLFYLHZRIZDVWHUHF\FOHVXFKWKDWWKHZKROHLVQRWWKHVXP RILWVSDUWVWKDWLVLWFDQQRWEHUHGXFHGWRWKHVXPRIRSSRVLQJYLHZVRI WKRVH EXVLQHVVHV ZKR LJQRUH QHJDWLYH H[WHUQDOLWLHV DQG WKHLU FULWLFV IRU ZDVWH UHF\FOH VLQFH WKHUH ZLOO HPHUJH QHZ YLHZV LQ WKH IXWXUH QRW \HW NQRZQWRGD\MXVWDVWKHUHDUHDOUHDG\RWKHUYLHZVZKLFKGRQRWVLGHZLWK WKHRSSRVLQJVLGHVQRZDGD\V $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH LI WKHUH LV SUHGLFWDELOLW\ HJ WKH SUHGLFWDEOH WHQGHQF\ RI  WKRVH LQ ³WKH VWXG\ FRQGXFWHGE\WKH7HFKQLFDO 8QLYHUVLW\RI 'HQPDUN´ WRDUJXH WKDW ³LQ SHUFHQW RI FDVHV UHF\FOLQJ LV WKH PRVW HIILFLHQW PHWKRG WR GLVSRVH RI KRXVHKROGZDVWH´ WKHUHLVXQSUHGLFWDELOLW\ HJWKHPRUHGLIILFXOWWDVNWR SUHGLFWH[DFWO\WKHH[WHQWWRZKLFKUHF\FOLQJLVWKHPRVWHIILFLHQWPHWKRG RQ D SDUWLFXODU IXWXUH RFFDVLRQ VLQFH LQ DQRWKHU VWXG\ LQ  E\ ³WKH 'DQLVK (QYLURQPHQWDO $VVHVVPHQW ,QVWLWXWH´ ZKLFK ³FRQFOXGHG WKDW LQFLQHUDWLRQ ZDV WKH PRVW HIIHFWLYH PHWKRG IRU GLVSRVLQJ RI GULQN FRQWDLQHUVHYHQDOXPLQLXPRQHV´LQVWHDG $QGWKHUHYHUVHGLUHFWLRQDOVR KROGVWUXH ,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJWKHH[SODQDWLRQE\WKHDGYRFDWHVRIZDVWHUHF\FOHWKDWLW LVGHVLUDEOHIRUHQYLURQPHQWDOVXVWDLQDELOLW\ WKHUHLVLQH[SOLFDELOLW\ HJ WKH ODFN RI VXIILFLHQW H[SODQDWLRQ  E\ WKH DGYRFDWHV RI ZDVWH UHF\FOH RI ZK\LWLVQHFHVVDULO\GHVLUDEOHVLQFHIRUWKHFULWLFV³WKHUHLVDQHWORVVWR WKHSRRUDQGSRVVLEO\WKHZKROHRIDVRFLHW\´EHFDXVH³WUDGLWLRQDOMRERI UHF\FOLQJ LV SHUIRUPHG E\ WKH HQWUHSUHQHXULDO SRRU VXFK DV WKH NDUXQJ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



JXQL =DEDOHHQ WKH UDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´ VR ³ZLWK WKH FUHDWLRQ RI ODUJH UHF\FOLQJ RUJDQL]DWLRQV WKDW PD\ EH SURILWDEOH«WKHSRRUDUHPRUHOLNHO\WREHGULYHQRXWRIWKHUHF\FOLQJDQG WKHUHPDQXIDFWXULQJPDUNHW´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI WKH ILVFDO PHDVXUHPHQW RI ZDVWH UHF\FOH LQVRIDU DV LW LJQRUHV ³QHJDWLYH H[WHUQDOLWLHV´ OLNH SROOXWLRQ  WKHUH LV UHDOLW\ HJ WKH UHDOLVWLF DVSHFW RI WKH ILVFDO PHDVXUHPHQW RI ZDVWH UHF\FOH LQVRIDU DV LW LQFOXGHVWKHFRVWVDQGEHQHILWVRIZDVWHUHF\FOHIRUDQLQGLYLGXDOEXVLQHVV EXWQRWVRFLHW\ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJ WKH ILQLWH QXPEHU RI  WKH FDWHJRULHV RI ³KLJKO\ GLVSHUVHG ZDVWHV´ WR EH UHF\FOHG OLNH ³FKORULQDWHG RUJDQLF K\GURFDUERQV WKDW KDYH ELRDFFXPXODWHGLQDQLPDODQGKXPDQWLVVXHVDFURVVWKHJOREHWKHFRSSHU GLVSHUVHG LQ IXQJLFLGHV WKH OHDG LQ ZLGHO\ DSSOLHG SDLQWV RU WKH ]LQF R[LGHVSUHVHQWLQWKHILQHO\GLVSHUVHGUXEEHUSRZGHUWKDWLVDEUDGHGIURP DXWRPRELOHWLUHV´ WKHUH LV WUDQVILQLWHQHVV HJWKHWUDQVILQLWH QXPEHURI DOOWKHLQGLYLGXDOSLHFHVRI³KLJKO\GLVSHUVHGZDVWHV´LQKLVWRU\WKDWKDYH HYHU H[LVWHG OLNH ³FKORULQDWHG RUJDQLF K\GURFDUERQV WKDW KDYH ELRDFFXPXODWHGLQDQLPDODQGKXPDQWLVVXHVDFURVVWKHJOREHWKHFRSSHU GLVSHUVHG LQ IXQJLFLGHV WKH OHDG LQ ZLGHO\ DSSOLHG SDLQWV RU WKH ]LQF R[LGHVSUHVHQWLQWKHILQHO\GLVSHUVHGUXEEHUSRZGHUWKDWLVDEUDGHGIURP DXWRPRELOH WLUHV´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

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





HJ WKH KLGGHQ ELDV LQ ILVFDO PHDVXUHPHQW RI ZDVWH UHF\FOH EHFDXVH LW LJQRUHVQHJDWLYHH[WHUQDOLWLHV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI ³WKH WUDGLWLRQDO MRE RI UHF\FOLQJ´ DPRQJ ³WKH HQWUHSUHQHXULDO SRRU VXFK DV WKH NDUXQJ JXQL =DEDOHHQ WKH UDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´  WKHUH LV HPSWLQHVV HJWKHUHODWLYHO\OHVVGHQVHRUPRUHHPSW\FRQFHQWUDWLRQRI ³WKH WUDGLWLRQDO MRE RI UHF\FOLQJ´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³KLJKO\GLVSHUVHGZDVWHV´OLNH³FKORULQDWHGRUJDQLFK\GURFDUERQV WKDWKDYHELRDFFXPXODWHGLQDQLPDODQGKXPDQWLVVXHVDFURVVWKHJOREH´ HWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJWKHUHODWLYHO\VORZHUVSHHGRIZDVWHVWREHUHF\FOHGLIWKH\VSUHDGRXW DOO RYHU WKH JOREH LQ ³KLJKO\ GLVSHUVHG´ DQG ³GLOXWHG´ IRUPV  WKHUH LV TXLFNQHVV HJ WKH UHODWLYHO\ TXLFNHU VSHHG RI ZDVWHV WR EH UHF\FOHG LI WKH\FRQFHQWUDWHLQDODQGILOO $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHVSUHDGRIRI³ODUJHUHF\FOLQJRUJDQL]DWLRQV´WRGRZDVWH UHF\FOH LQ GHYHORSHG FRXQWULHV QRZDGD\V  WKHUH LV FRQWUDFWLRQ HJ WKH UHODWLYH GHFOLQH RI ³WKH HQWUHSUHQHXULDO SRRU VXFK DV WKH NDUXQJ JXQL =DEDOHHQWKHUDJDQGERQHPDQZDVWHSLFNHUDQGMXQNPDQ´WRGRZDVWH UHF\FOHLQGHYHORSHGFRXQWULHVQRZDGD\V  ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³HQYLURQPHQWDO GHVLJQ´ WR UHVROYH ZDVWHV OLNHZDVWHUHF\FOH WKHUHLVSUD[LV HJZKDWLVFRQFHSWXDODQGWKHRUHWLFDO LV QRW QHFHVVDULO\ SUDFWLFDO EHFDXVH ³FRPSOHWH UHF\FOLQJ LV LPSUDFWLFDEOH DV KLJKO\ GLVSHUVHG ZDVWHV EHFRPH VR GLOXWHG WKDW WKH HQHUJ\ QHHGHG IRU WKHLU UHFRYHU\ EHFRPHV LQFUHDVLQJO\ H[FHVVLYH  :. J 0 +XHVHPDQQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJ WKH FRQYHQWLRQDO ZLVGRP DERXW ZDVWH UHF\FOH WR EH JRRG IRU WKH HQYLURQPHQW WKHUHLVQRYHOW\ HJWKHDOWHUQDWLYHQRYHOFKDOOHQJHWRWKH FRQYHQWLRQDOZLVGRPDERXWZDVWHUHF\FOHWREHJRRGIRUWKHHQYLURQPHQW E\ WKH QHZ LGHD RI 6WHYHQ /DQGVEXUJ ZKR DUJXHG LQVWHDG WKDW ³SDSHU UHF\FOLQJ DFWXDOO\ UHGXFHV WUHH SRSXODWLRQV´ DQG LV WKXV EDG IRU WKH HQYLURQPHQW $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH LI WKHUH LV HYROXWLRQ HJ WKH QDWXUDO HYROXWLRQ RI KXPDQV LQ WKDW ³KXPDQV KDYH HYROYHG WR EH VHQVLWLYH WR VKRUW WHUP VXUYLYDO JRDOV´  WKHUH LV WUDQVIRUPDWLRQ HJWKHWHFKQLFDOWUDQVIRUPDWLRQRIKXPDQDELOLW\WRGHDO ZLWK VXUYLYDO JRDOV E\ WKH LQYHQWLRQ RI ³UHF\FOLQJ EHKDYLRXU´ ZKLFK ³LV QRW QDWXUDO EHFDXVH LW UHTXLUHV D IRFXV DQG DSSUHFLDWLRQ IRU ORQJ WHUP SODQQLQJ´  :.J $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHV\PPHWU\DV\PPHWU\SULQFLSOHLIWKHUHLVV\PPHWU\ HJWKHH[LVWHQFHRIGLIIHUHQWVRFLDOFODVVHV WKHUHLVDV\PPHWU\ HJWKH SRRUOLNH³WKHNDUXQJJXQL=DEDOHHQWKHUDJDQGERQHPDQZDVWHSLFNHU DQGMXQNPDQ´GRPRUHZDVWHUHF\FOHRQWKHVWUHHWVWKDQWKHULFK $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVRIWQHVVKDUGQHVVSULQFLSOHLIWKHUHLVVRIWQHVV HJ WKH DSSUHFLDWLRQ RI WKH FRVWEHQHILW DQDO\VLV RI ZDVWH UHF\FOH E\ WKH DGYRFDWHV WKHUHLVKDUGQHVV HJWKHFULWLTXHRIWKHFRVWEHQHILWDQDO\VLV RI ZDVWHUHF\FOHE\WKHDGYRFDWHVDVVKRZQLQWKHSUREOHPVSRLQWHGRXW E\WKHFULWLFVDVFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VHULRXVQHVVSOD\IXOQHVV SULQFLSOH LI WKHUH LV VHULRXVQHVV HJ WKH VHULRXV EXVLQHVV RI WKRVH ZKR FULWLFL]H WKH FRVW EHQHILW DQDO\VLV RI ZDVWH UHF\FOH  WKHUH LV SOD\IXOQHVV HJ WKH SOD\IXO SDUWRIWKRVHZKRFULWLFL]HWKHFRVWEHQHILWDQDO\VLVRIZDVWHUHF\FOHZKHQ WKH\ SOD\ DURXQG ZLWK GLIIHUHQW ZD\V WR XQGHUPLQH WKH FRVWEHQHILW DQDO\VLV RYHU WLPH DV VKRZQ LQ WKH  GLVDJUHHPHQWV RYHU WKH \HDUV DIRUHFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHDFWLYHQHVVLQDFWLYHVVSULQFLSOHLIWKHUHLVDFWLYHQHVV HJWKHDFWLYHQHVVRIWKRVHLQ³ODUJHUHF\FOLQJRUJDQL]DWLRQV´WRGRZDVWH UHF\OH LQ GHYHORSHG FRXQWULHV QRZDGD\V  WKHUH LV LQDFWLYHQHVV HJ WKH UHODWLYHLQDFWLYHQHVVRIWKRVHOLNH³WKHNDUXQJJXQL=DEDOHHQWKHUDJDQG ERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´ ZKR DUH ³GULYHQ RXW RI WKH UHF\FOLQJ DQG WKH UHPDQXIDFWXULQJ PDUNHW´ LQ GHYHORSHG FRXQWULHV QRZDGD\VDQGFDQQRWGRZDVWHUHF\FOLQJPXFK $QGWKHUHYHUVHGLUHFWLRQ DOVRKROGVWUXH ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ LQ

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WKRVH ³EXVLQHVVHV´ ZKLFK ³LJQRUH«>QHJDWLYH H[WHUQDOLWLHV@ GHVSLWH WKH FRVWV LPSRVHG RQ VRFLHW\´  WKHUH LV RWKHUQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RWKHUV DV VKRZQ E\ WKRVH HFRQRPLVWV ZKR LQFOXGH ³QHJDWLYHH[WHUQDOLWLHV´WRVRFLHW\LQWKH³HFRQRPLFDQDO\VLVRIUHF\FOLQJ´ VRDVWRJLYHDEHWWHUXQGHUVWDQGLQJRIWKHHFRQRPLFPHDVXUHPHQWRIZDVWH UHF\FOHIRUWKHHQKDQFHPHQWRIVRFLDOZHOIDUH $QGWKHUHYHUVHGLUHFWLRQ DOVRKROGVWUXH ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJWKHUHJUHVVLRQPDGHE\WKHFRVWEHQHILWDQDO\VLVRIZDVWH UHF\FOH DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV  WKHUH LV SURJUHVVLRQ HJWKHSURJUHVVPDGHE\WKHFRVWEHQHILWDQDO\VLVRIZDVWH UHF\FOHDVVKRZQLQLWVFRQWULEXWLRQWRDEHWWHUXQGHUVWDQGLQJRIHIILFLHQF\ DIRUHFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV UHJDUGOHVV RI ZKHWKHU WKLV EH GRQH E\ ZD\ RI WKH ILVFDO DQDO\VLV RI ZDVWH UHF\FOH RU E\ ZD\ RI WKH HFRQRPLF DQDO\VLV RI ZDVWHUHF\FOH WKHUHLVGLIIHUHQFHLQRXWFRPH HJWKHFRQWULEXWLRQWRWKH PROGLQJDQGFRQWURORIEHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIWKHILVFDO DQDO\VLVRI ZDVWHUHF\FOHIRU DUHODWLYHO\ PRUH PDUNHWRULHQWHGHFRQRPLF OLIH²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH HFRQRPLF DQDO\VLV RI ZDVWH UHF\FOH IRU D UHODWLYHO\ PRUH JRYHUQPHQWUHJXODWHG HFRQRPLF OLIH  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ RI ³WKH WUDGLWLRQDO MRE RI UHF\FOLQJ´ ZKLFK³LVSHUIRUPHGE\WKHHQWUHSUHQHXULDOSRRUVXFKDVWKHNDUXQJJXQL =DEDOHHQWKHUDJDQGERQHPDQZDVWHSLFNHUDQGMXQNPDQ´LQWKHROGHU GD\V WKHUHLVUHDFWLRQ HJ³WKHWUDGLWLRQDOMRERIUHF\FOLQJ«SHUIRUPHG E\ WKH HQWUHSUHQHXULDO SRRU´ WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ ³ODUJH UHF\FOLQJ RUJDQL]DWLRQV´ DUH GRLQJ D ORW RI ZDVWH UHF\FOH LQ GHYHORSHGFRXQWULHVQRZDGD\V $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQ LQ ³WKH WUDGLWLRQDO MRE RI UHF\FOLQJ«SHUIRUPHG E\ WKH HQWUHSUHQHXULDOSRRUVXFKDVWKHNDUXQJJXQL=DEDOHHQWKHUDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´ LQ PDQ\ XQGHUGHYHORSHG RU SRRU FRXQWULHV DV WKH\ VHUYH WKH HVVHQWLDO IXQFWLRQ RI ZDVWH UHF\FOH  WKHUH LV QRQIXQFWLRQDOLW\ HJ WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHGDVVKRZQLQ³WKHFUHDWLRQRIODUJHUHF\FOLQJRUJDQL]DWLRQVWKDWPD\ EHSURILWDEOHHLWKHUE\ODZRUHFRQRPLHVRIVFDOH´LQVXFKDZD\WKDW³WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



SRRUDUH«GULYHQRXWRIWKHUHF\FOLQJDQGWKHUHPDQXIDFWXULQJPDUNHW´VR WKDWWKHVHSRRUSHRSOHFDQQRORQJHUVHUYHWKHHVVHQWLDOIXQFWLRQRIZDVWH UHF\FOHLQPDQ\ULFKGHYHORSHGFRXQWULHVQRZDGD\VDVWKH\FRXOGLQWKH ROGHUGD\V $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $QG LQ UHODWLRQ WR WKH LQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\ SULQFLSOH LI WKHUH LV LQWHQWLRQDOLW\ HJ WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH DV VKRZQ LQ WKH GHVLJQ RI ZDVWH UHF\FOH IRU D PRUH SRVLWLYHHQYLURQPHQWDOLPSDFW WKHUHLVQRQLQWHQWLRQDOLW\ HJWKHUHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH VXFK WKDWWKHRXWFRPHFDQHYHQEHFRXQWHULQWHQWLRQDOLQEHLQJWKHRSSRVLWHRI ZKDWZDVRULJLQDOO\SODQQHGDVVKRZQE\WKHZRUNE\6WHYHQ/DQGVEXUJ ZKR VKRZHG WKDW IRU LQVWDQFH ³SDSHU UHF\FOLQJ DFWXDOO\ UHGXFHV WUHH SRSXODWLRQV´DQGLVWKXVEDGIRUWKHHQYLURQPHQWLQVWHDG $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH

8VHIXOQHVVWKH:DVWH&RQYHUWHUDQG7HFKQRORJ\ $QRWKHU JRRG ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHIXOQHVV IURP WKH SHUVSHFWLYH RI VRFLHW\LVWRH[SORUHXVHIXOQHVVZDVWHFRQYHUWHUDQGWHFKQRORJ\ $PDMRUDUJXPHQWKHUHLVWKDWZLWKWKHKHOSRIWHFKQRORJ\³GLVFDUGV DUH VHSDUDWHG LQWR PDWHULDOV WKDW PD\ EH LQFRUSRUDWHG LQWR QHZ SURGXFWV 7KLVLVGLIIHUHQWIURP5HXVHLQWKDWHQHUJ\LVXVHGWRFKDQJHWKHSK\VLFDO SURSHUWLHVRIWKHPDWHULDO´ :.G  $ JRRGH[DPSOHLVWKHLQYHQWLRQRIWKH ³ZDVWHFRQYHUWHU´ ZKLFKLV ³DPDFKLQHXVHGIRUWKHWUHDWPHQWDQGUHF\FOLQJRIVROLGDQGOLTXLGUHIXVH PDWHULDO$FRQYHUWHULVDVHOIFRQWDLQHGV\VWHPFDSDEOHRISHUIRUPLQJWKH IROORZLQJ IXQFWLRQV SDVWHXUL]DWLRQ RI RUJDQLF ZDVWH VWHULOL]DWLRQ RI SDWKRJHQLF RU ELRKD]DUG ZDVWH JULQGLQJ DQG SXOYHUL]DWLRQ RI UHIXVH LQWR XQUHFRJQL]DEOHRXWSXWWUDVKFRPSDFWLRQGHK\GUDWLRQ´ :.S  :DVWH&RQYHUWHUYV$XWRFODYH +RZHYHU D ³ZDVWH FRQYHUWHU´ VKRXOG QRW EH FRQIXVHG ZLWK DQ ³DXWRFODYH´²DOWKRXJK ³WKH FRQYHUWHU LV DQ HYROXWLRQ RI WKH DXWRFODYH LQYHQWHG E\ 6LU &KDUOHV &KDPEHUODQG LQ  EXW GLIIHUV IURP D ZDVWH DXWRFODYHLQVHYHUDONH\FKDUDFWHULVWLFV´ :.S  )RU LQVWDQFH ³ZKLOH WKH DXWRFODYH UHOLHV RQ KLJK WHPSHUDWXUH DQG SUHVVXUHWRDFKLHYHPRLVWKHDWVWHULOL]DWLRQRIZDVWHDFRQYHUWHURSHUDWHV LQ WKH DWPRVSKHULF SUHVVXUH UDQJH 6XSHUKHDWLQJ FRQGLWLRQV DQG VWHDP JHQHUDWLRQ DUH DFKLHYHG E\ YDULDEOH SUHVVXUH FRQWURO ZKLFK F\FOHV EHWZHHQ DPELHQW DQG QHJDWLYH SUHVVXUH ZLWKLQ WKH VWHULOL]DWLRQ FHOO 7KH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





DGYDQWDJH RI WKLV XSGDWHG DSSURDFK LV D VDIHU DQG OHVV FRPSOLFDWHG RSHUDWLRQWKDWGRHVQRWUHTXLUHDSUHVVXUHYHVVHO´ :.S  $OVR ³ZKLOH DXWRFODYHV UHTXLUH H[WHUQDO ZDWHU LQSXW PRGHUQ FRQYHUWHUV XWLOL]H WKH PRLVWXUH FRQWHQW DOUHDG\ SUHVHQW LQ WKH FRQYHUVLRQ FHOOWRJHQHUDWHVWHDPVWHULOL]DWLRQFRQGLWLRQV$Q\ZDWHUWKDWLVLQWURGXFHG LQWR WKH SURFHVV FDQ EH UHF\FOHG LQ D FORVHGORRS V\VWHP DV RSSRVHG WR EHLQJGXPSHGDVUXQRIIVHZDJH,QJHQHUDOWKHFRQYHUWHULVDVLPSOLILHG FOHDQHUDQGPRUHHIILFLHQWXSGDWHWR6LU&KDUOHV VLQYHQWLRQ´ :.S  $SSOLFDWLRQVRIWKH:DVWH&RQYHUWHU 7KHZDVWHFRQYHUWHUKDVEHHQDSSOLHGLQGLIIHUHQWZD\V&RQVLGHUIRU LOOXVWUDWLRQDIHZH[DPSOHVEHORZ D ,Q:DVWH7UHDWPHQW&HQWHUV ,QZDVWHWUHDWPHQWFHQWHUV³DSSOLFDWLRQRIWKHFRQYHUWHULVFRPPRQ´ ZKHUH ³ODUJH PDFKLQHV SURFHVV ZDVWH RQ DQ LQGXVWULDO VFDOH 06: 0XQLFLSDO VROLG ZDVWH  RU LQIHFWLRXV ZDVWH GHSHQGLQJ RQ WKH W\SH RI SODQW LV VWHULOL]HG DQG FRQYHUWHG LQWR D VWHULOL]HG RUJDQLF DQG LQRUJDQLF LQQRFXRXV HQGSURGXFW 0DFKLQHV XVHG LQ VXFK ODUJHVFDOH DSSOLFDWLRQV SURFHVVEHWZHHQDQGNJRIZDVWHSHUKRXU$WWKHHQGRIHDFK F\FOH ODVWLQJ DV OLWWOH DV KDOIKRXU LQ &RQYHUWHUV WKDW DUH FDSDEOH RI JULQGLQJ WKHSXOYHUL]HGVDQLWL]HGDQGGHK\GUDWHGSURGXFWLVRIIORDGHG DQG VHJUHJDWHG IRU RWKHU XVHV 6RPH RI WKH SURGXFW LV URXWHG IRU XVH LQ SXOSSURGXFWLRQFRPSRVWLQJRUUHIXVHGHULYHGIXHO´ :.S  E ,Q+RVSLWDOVDQG&OLQLFV ,Q KRVSLWDOV ³PRGHUQ FRQYHUWHUV«DOORZ«IRU WKH LPPHGLDWH WUHDWPHQW RI SRWHQWLDOO\ LQIHFWHG KD]DUGRXV ZDVWH DW LWV VRXUFH +RVSLWDOV DQGFOLQLFVHTXLSSHGWRKDYHD]HURKD]DUGRXVZDVWHIRRWSULQWRSHUDWHE\ KDYLQJDFRQYHUWHUSODFHGRQHYHU\ IORRU ZKHUHVLQJOH XVHVDQLWDU\LWHPV VXFK DV QHHGOHV VFDOSHOV EDQGDJHV DQG EORRG EDJV DUH LPPHGLDWHO\ FRQYHUWHGLQWRLQQRFXRXVSURGXFW,QDGGLWLRQWRWKHPDUNHGLPSURYHPHQW LQVDQLWDWLRQRQVLWHWUHDWPHQWRIKD]DUGRXVZDVWHDOORZVRSHUDWLRQDOFRVW VDYLQJVIRUWKHVHIDFLOLWLHV7KHJRYHUQPHQWRI7XVFDQ\,WDO\IRUH[DPSOH FDOFXODWHGDQDQQXDOILJXUHRI0LOOLRQ(XURWKDWZDVVDYHGE\WXUQLQJWR RQVLWHWUHDWPHQWRIPHGLFDOKRVSLWDOZDVWH´ :.S  F ,Q6XSHUPDUNHWV ,QVXSHUPDUNHWVDQGIRRGSURGXFHUVLQVWHDGRIGXPSLQJ³XQXVHGIRRG ZDVWH LQ PXQLFLSDO ODQGILOOV DW D UDWH WKDW LV DODUPLQJ PDQ\ FRQVHUYDWLRQLVWV´WKHUHLV³DXVHIRUFRQYHUWHUWHFKQRORJ\%\SURFHVVLQJ XQXVHG DQG GHFRPSRVLQJ IRRG PDWWHU WRJHWKHU ZLWK SDFNDJLQJ DQG RWKHU



7KH)XWXUHRI3RVW+XPDQ:DVWH 



UHIXVH RQ VLWH VXSHUPDUNHWV KDYH DFKLHYHG LPSURYHPHQWV LQ WHUPV RI ZDVWH GLVSRVDO FRVWV 7KLV LV LQ DGGLWLRQ WR LPSURYHPHQWV LQ SXEOLF SHUFHSWLRQZKLFKKDGEHHQVHULRXVO\FULWLFDORIWKHDPRXQWRIZDVWHVHQW WRODQGILOOVE\IRRGVWRUHV,QWKH8.DORQHPLOOLRQPHWULFWRQVRIIRRG ZDVWH JRHV LQWR ODQGILOOV HDFK \HDU UHVXOWLQJ LQ  PLOOLRQ PHWULF WRQV RI &2EHLQJHPLWWHG´ :.S  G ,Q)DUPVDQG6ODXJKWHUKRXVHV ,Q IDUPV DQG VODXJKWHUKRXVHV ZDVWH FRQYHUWHUV DUH XVHG IRU ³RQVLWH ZDVWHFRQYHUVLRQ/DUJHULQVWDOODWLRQVHVSHFLDOO\ZKHUHJDUEDJHKDXOLQJLV DPDMRUDQGH[SHQVLYHRSHUDWLRQFXUUHQWO\KDYHHFRQRPLFDQGOHJLVODWLYH LQFHQWLYHV WR PRYH WRZDUGV RSHUDWLQJ RZQ FRQYHUWHUV 5HFHQW GULYHV WRZDUG HQYLURQPHQWDOO\ FRQVFLRXV RU JUHHQ  WHFKQRORJLHV KDYH HYHQ SURYLGHGJRYHUQPHQWEXGJHWVIRUVXFKLQVWDOODWLRQV´ :.S  H 2Q6KLSV 2Q VKLSV OLNH ³QDYDO YHVVHOV FUXLVH OLQHUV DQG RIIVKRUH LQVWDOODWLRQV VXFK DV JDVGULOOLQJ ULJV DQG RLO SODWIRUPV´ WKHUH LV ³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´ :.S  2SHUDWLRQRIWKH:DVWH&RQYHUWHU 7KHRSHUDWLRQRIDZDVWHFRQYHUWHUFDQEHXQGHUVWRRGLQWHUPVRI³D W\SLFDO WUHDWPHQW F\FOH´ ZKLFK ³ZLOO EHJLQ ZLWK WKH ORDGLQJ RI XQVRUWHG ZDVWH PDWHULDO DQG HQG LQ WKH RIIORDG RI D GU\ SRZGHU SURGXFW  ZKLFK QRZ SRVVHVVHV QHZ FKDUDFWHULVWLFV DQG WKDW WKH LQSXW PDWHULDO GLG QRW´ :.S  1RZDGD\V ³FRQYHUWHUV DUH IXOO\ DXWRPDWLF DQG ZLOO ILQLVK WKH FRPSXWHU FRQWUROOHG F\FOH DXWRQRPRXVO\ XQOHVV D IDLOXUH RFFXUV 7KH SUHFLVH FRQGLWLRQV QHHGHG WR DFKLHYH SDVWHXUL]DWLRQ DQG VWHULOL]DWLRQ DUH FRQWUROOHG E\ D SURJUDPPDEOH ORJLF FRQWUROOHU 3/&  LQ PLOOLVHFRQG LQWHUYDOV 7KLV OHYHO RI FRQWURO LQ PRGHUQ XQLWV KDV DOORZHG IRU WKH VLPSOLILFDWLRQ RI DXWRFODYH WHFKQRORJ\ WR WKH SRLQW ZKHUH KHDY\ DQG SRWHQWLDOO\ GDQJHURXV SUHVVXUH YHVVHOV DUH QRW QHHGHG DQG VWHULOL]DWLRQ

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





FRQGLWLRQVDUHUHDFKHGE\GHSUHVVLQJWKHFRQYHUVLRQFHOODQGFRQWLQXLQJWR HYDSRUDWHPRLVWXUHIURPWKHSURGXFWXQGHUQHJDWLYHSUHVVXUH7KHUHVXOWLV DVWDWLVWLFDOO\ VDIHUDQG PRUH UHOLDEOH PDFKLQH ZKLFK LVDOVRVPDOOHUDQG OLJKWHUWKDQROGHUDXWRFODYHV´ :.S  ,QJHQHUDO³WKHFRQYHUVLRQF\FOHFRQVLVWVRIVHYHUDOVHTXHQWLDOVWHSV RUSKDVHV´DVVKRZQEHORZ :.S   ‡ ³7KH ZDVWH LV ILUVW JURXQG DQG SXOYHUL]HG WR DQ XQUHFRJQL]DEOH PL[WXUH E\ D FRPELQDWLRQ RI IL[HG DQG DFWXDWHG KDUGHQHG VWHHO EODGHV´ ‡³7KHPL[WXUHLVWKHQKHDWHGWKURXJKWKHLQMHFWLRQRIVWHDPDQGDOVRE\ WKHKHDWJHQHUDWHGE\IULFWLRQDOIRUFHVRIWKHJULQGLQJSKDVH´ ‡ ³7KHH[DFWWHPSHUDWXUHUHTXLUHGWRSDVWHXUL]HDQGLQ WKH VXEVHTXHQW SKDVHWRVWHULOL]HWKHZDVWHLVPDLQWDLQHGIRUDWLPHWKDWDOORZVIRUD  ORJ  UHGXFWLRQ LQ PLFURRUJDQLVPV ,Q RUGHU WR HOLPLQDWH WKH UHTXLUHG DPRXQW RI PLFURRUJDQLVPV UHTXLUHG E\ JRYHUQPHQW UHJXODWLRQV D FRPSOHWH VDWXUDWLRQ RI ZDVWH PDWWHU ZLWK VXSHUKHDWHG VWHDP LV UHTXLUHG IRU D PLQLPXP DPRXQW RI WLPH DOVR UHJXODWHG E\ HQYLURQPHQWDO DJHQFLHV 7KH PRGHUQ FRQYHUWHU DFKLHYHV VDWXUDWLRQ ZLWKLQ ± PLQXWHV GXH WR WKH KLJK GHJUHH RI SXOYHUL]DWLRQ SUHFHGLQJWKHVWHULOL]DWLRQSKDVHZKHUHDVROGHUPRGHOVUHTXLUHGXSWR VHYHUDOKRXUVWRVDWXUDWHDQGVWHULOL]HWKHVDPHORDG´ ‡³7KHF\FOHHQGVLQDFRROLQJSKDVHGXULQJZKLFKSURGXFWFRQWLQXHVWR EHGHK\GUDWHG8SRQUHDFKLQJWHPSHUDWXUHDWZKLFKSURGXFWLVVDIHWR KDQGOH QHDU DPELHQW WHPSHUDWXUH WKH F\FOH DXWRPDWLFDOO\ VKXWV GRZQ´ ‡³7KHHQGSURGXFWLVH[SHOOHGLQWRDWUD\WKDWFDQWKHQEHKDXOHGRIIIRU VWRUDJH 7KH HQWLUH SURFHVV DQG VWDWLVWLFV DUH UHFRUGHG DQG VWRUHG LQ FRPSXWHUPHPRU\IRUUHFRUGNHHSLQJ´  6XUHO\WKHUHPD\EHRWKHUSKDVHVVRWKHRQHVDERYHDUHLOOXVWUDWLYH (QYLURQPHQWDO,PSDFWRIWKH:DVWH&RQYHUWHU 7KH ZDVWH FRQYHUWHU LV UHJDUGHG DV ³RQH RI WKH JUHHQ WHFKQRORJLHV  DYDLODEOH WRGD\ IRU ZDVWH WUHDWPHQW´ EHFDXVH RI LWV ³FOHDU DQG GHILQLWH SRVLWLYHHQYLURQPHQWDOLPSDFWVWHPPLQJIURPWKHXVHRIZDVWHFRQYHUVLRQ LQWRELRIXHOEXLOGLQJPDWHULDODQGVRLOFRPSRVW´ :.S  )RU LQVWQDFH ³LQ  HYHULQFUHDVLQJ QXPEHUV RI ZDVWH H[SRUWHUV DURXQG WKH ZRUOG DUH ILQGLQJ LW GLIILFXOW WR ILQG EX\HUV IRU WKHLU FDUJR ,QFUHDVLQJQXPEHUVRIORFDODQGQDWLRQDOJRYHUQPHQWVDUHDOVRWXUQLQJWR UHF\FOLQJDQGFRQYHUVLRQWHFKQRORJ\WRUHOLHYHWKHSUHVVXUHRQDOUHDG\IXOO



7KH)XWXUHRI3RVW+XPDQ:DVWH 



RU RYHUILOOHG ODQGILOOV :DVWH FRQYHUVLRQ DXJPHQWHG E\ WUDGLWLRQDO UHF\FOLQJ PHWKRGV QRZ DOORZV QHDUO\  RI DOO 06: WR EH UHXVHG LQ VRPHZD\WKXVVKDUSO\UHGXFLQJWKHGHPDQGRQODQGILOOV´ :.S  %\FRQWUDVW³LQRQO\DERXWRQPXQLFLSDOVROLGZDVWHZDV UHF\FOHG DQG WKH SURGXFW FRQVLVWHG ODUJHO\ RI SDSHU DQG JODVV UHF\FOHG PDWHULDO:LWKWKHZLGHVSUHDGXVHRIDXWRFODYHVWKDWSHUFHQWDJHFOLPEHG WR D VLJQLILFDQW  E\ WKH \HDU  ZKHQ FRPSRVWLQJ DQG HQHUJ\ UHFRYHU\EHFDPHPRUHFRPPRQ:LWKWKHHYROXWLRQRIWKHDXWRFODYHDQG WKHDUULYDORIFRQYHUWHUVQHZXVHVRIFRQYHUWHGSURGXFWDUHHPHUJLQJRQDQ RQJRLQJEDVLV´ :.S  *RRGH[DPSOHVRI³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´ :. S  :DVWHFRQYHUWHUVDUHPRUH³HQYLURQPHQWDOO\FRQVFLRXV´EHFDXVHWKH\ DUH ³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´ :.S  3UREOHPVZLWKWKH8VHRI:DVWH&RQYHUWHU +RZHYHU IRU WKH FULWLFV WKH XVH RI ZDVWH FRQYHUWHU KDV VRPH PDMRU SUREOHPV&RQVLGHUIRULOOXVWUDWLRQDIHZH[DPSOHVEHORZ )LUVWO\ RQH PDLQ FULWLFLVP RI WKH XVH RI ZDVWH FRQYHUWHU LV WKDW LWV DSSOLFDWLRQLVOLPLWHG )RU LQVWDQFH IRU WKH FULWLFV ³PXFK RI WKH GLIILFXOW\ LQKHUHQW LQ UHF\FOLQJ FRPHV IURP WKH IDFW WKDW PRVW SURGXFWV DUH QRW GHVLJQHG ZLWK UHF\FOLQJLQPLQG´ :.J 

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





6HFRQGO\DQRWKHUPDLQFULWLFLVPRIWKHXVHRIZDVWHFRQYHUWHULVWKDW WKHUHDUHFRPSHWLQJWHFKQRORJLHV )RU LQVWDQFH IRU WKH FULWLFV ³ZDVWH FRQYHUWHUV GR KDYH LQGLUHFW FRPSHWLWLRQVLQFHWKHUHDUHPDQ\PRGHVRIZDVWHGLVSRVDODYDLODEOHLQWKH PDUNHW´ DQG JRRG H[DPSOHV DUH ³SODVPDDUF JDVLILFDWLRQ´ ³PLFURZDYH DQGRWKHULUUDGLDWLRQVWHULOL]DWLRQ´DQGQHZYHUVLRQVRI³DXWRFODYHV´ :. S  $QGWKLUGO\VWLOODQRWKHUPDLQFULWLFLVPRIWKHXVHRIZDVWHFRQYHUWHU LVWKDWLWLVQRWQHFHVVDULO\VDIHU )RULQVWDQFHIRUWKHFULWLFVVRPHFRQWHPSRUDU\DXWRFODYHVKDYHEHHQ VR LPSURYHG WKDW WKH\ ³HPSOR\ WKH VDPH PHWKRG RI VWHULOL]DWLRQ DV FRQYHUWHUVEXWGRVRXVLQJODUJHUDQGPRUHFRPSOH[HTXLSPHQWWKDWDOVR KDVKLJKHUVDIHW\«UHTXLUHPHQW«´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



)RU LQVWDQFH LQ UHODWLRQ WR WKH IRUPDOQHVVLQIRUPDOQHVV SULQFLSOH LI WKHUHLVIRUPDOQHVV HJWKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQG FRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH XVH RI WKH ZDVWH FRQYHUWHU  WKHUH LV LQIRUPDOQHVV HJ WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH XVH RI WKH ZDVWH FRQYHUWHU DV VKRZQ LQ WKH FULWLFLVPV WKDW LWV DSSOLFDWLRQ LV OLPLWHG WKDW WKHUH DUH FRPSHWLQJ WHFKQRORJLHV WKDW LW LV QRW QHFHVVDULO\ VDIHU HWF  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJWKHDEVROXWHYLHZRIWKRVHHQWKXVLDVWLFDGYRFDWHVRIWKH XVH RI ZDVWH FRQYHUWHUV  WKHUH LV UHODWLYHQHVV HJ ZKDW LV ULJKW IRU WKHHQWKXVLDVWLFDGYRFDWHVRIWKHXVHRIZDVWHFRQYHUWHUVLVQRWQHFHVVDULO\ VR IRU WKH FULWLFV EHFDXVH ³PXFK RI WKH GLIILFXOW\ LQKHUHQW LQ UHF\FOLQJ FRPHVIURPWKHIDFWWKDWPRVWSURGXFWVDUHQRWGHVLJQHGZLWKUHF\FOLQJLQ PLQG´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³HPSOR\ WKH VDPHPHWKRGRIVWHULOL]DWLRQDVFRQYHUWHUVEXWGRVRXVLQJODUJHUDQGPRUH FRPSOH[ HTXLSPHQW WKDW DOVR KDV KLJKHU VDIHW\« UHTXLUHPHQW«´  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI WKH ZDVWH FRQYHUWHU LQVRIDU DV ³PRVW SURGXFWV DUH QRW GHVLJQHGZLWKUHF\FOLQJLQPLQG´QRULVLWQHFHVVDULO\VDIHUWKDQDQHZO\ LPSURYHGDXWRFODYH WKHUHLVUHDOLW\ HJWKHUHDOLVWLFDVSHFWRIWKHZDVWH FRQYHUWHULQVRIDUDVLWKDVFHUWDLQSRVLWLYHHQYLURQPHQWDOLPSDFW $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJWKHILQLWHQXPEHURIWKHFDWHJRULHVRIZDVWHWREHWUHDWDEOH E\ ZDVWHFRQYHUWHUVOLNH³VROLGZDVWH´³KD]DUGRXVZDVWH´HWF WKHUHLV WUDQVILQLWHQHVV HJWKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYGLXDOSLHFHVRI ³VROLG ZDVWH´ ³KD]DUGRXV ZDVWH´ HWF LQ KLVWRU\ WKDW KDYH HYHU H[LVWHG  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJWKHSUHFLVHLGHQWLILFDWLRQRIDSSOLFDWLRQVRIWKHZDVWH FRQYHUWHULQWKHDUWLFOHDIRUHFLWHG WKHUHLVYDJXHQHVV HJWKHYDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  DSSOLFDWLRQV RI WKH ZDVWH FRQYHUWHU LQ WKH DUWLFOHDIRUHFLWHGVLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRW DQGVRRQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJ ³DSSOLFDWLRQV RXWVLGH RI ZDVWH WUHDWPHQW FHQWHUV DUH LQFUHDVLQJO\FRPPRQGXHWRWKH«VLPSOLFLW\RIPRGHUQFRQYHUWHUV´ WKHUH LVFRPSOLFDWHGQHVV HJ QRZDGD\V ³DXWRFODYHVHPSOR\WKHVDPH PHWKRG RI VWHULOL]DWLRQ DV FRQYHUWHUV EXW GR VR XVLQJ ODUJHU DQG PRUH FRPSOH[ HTXLSPHQW´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJWKHRSHQH[SORUDWLRQRIXVLQJWKHZDVWHFRQYHUWHUIRUZDVWHUHF\FOH  WKHUHLVKLGGHQQHVV HJWKHKLGGHQELDVLQWKHXVHRIWKHZDVWHFRQYHUWHU EHFDXVH ³PRVW SURGXFWV DUH QRW GHVLJQHG ZLWK UHF\FOLQJ LQ PLQG´  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJWKHUHODWLYHO\GHQVHUFRQFHQWUDWLRQRIFRQFHUQVZLWKXVLQJ³H[WHUQDO ZDWHU LQSXW´ LQ DXWRFODYHV  WKHUH LV HPSWLQHVV HJ WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ RI FRQFHUQV ZLWK XVLQJ ³H[WHUQDO ZDWHU LQSXW´ LQ PRGHUQ FRQYHUWHUV ZKLFK LQVWHDG ³XWLOL]H WKH PRLVWXUH FRQWHQW DOUHDG\ SUHVHQW LQ WKH FRQYHUVLRQ FHOO WR JHQHUDWH VWHDP VWHULOL]DWLRQFRQGLWLRQV´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFKDQJHFRQVWDQF\SULQFLSOHLIWKHUHLVFKDQJH HJ WKH HYHU QHZ ZD\V WR UHF\FOH ZDVWH DV VKRZQ LQ WKH XVH RI WKH ZDVWH FRQYHUWHU WKHUHLVFRQVWDQF\ HJWKHHYHUFRQVWDQWH[LVWHQFHRIGLIIHUHQW SUREOHPVLQWKHHYHUQHZZD\VWRUHF\FOHZDVWHDVVKRZQLQWKHSUREOHPV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



ZLWK WKH XVH RI WKH ZDVWH FRQYHUWHU SRLQWHG RXW E\ WKH FULWLFV  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRUGHUFKDRVSULQFLSOHLIWKHUHLVRUGHU HJWKHPRUH RUOHVVRUGHUO\DSSHDUDQFHRIZDVWHWUHDWPHQWLIORRNHGIURPWKHYDQWDJH SRLQW RI WKH QHDWO\ RUJDQL]HG FRQYHUVLRQ F\FOH RI WKH ZDVWH FRQYHUWHU  WKHUH LV FKDRV HJ WKH PRUH RU OHVV FKDRWLF DSSHDUDQFH RI ZDVWH WUHDWPHQW LI ORRNHG IURP WKH YDQWDJH SRLQW RI WKH GLVRUGHUO\ XQKHDOWK\ SLOHVRIZDVWHLQRYHUXVHGODQGILOOVLQXQGHUGHYHORSHGFRXQWULHV $QGWKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJ WKH UHODWLYHO\ VORZHU VSHHG RI WKH ³ROGHU PRGHOV´ RI WKH ZDVWH FRQYHUWHUZKLFK³UHTXLUHGXSWRVHYHUDOKRXUVWRVDWXUDWHDQGVWHULOL]HWKH VDPHORDG´RIZDVWH WKHUHLVTXLFNQHVV HJWKHUHODWLYHO\TXLFNHUVSHHG RI ³WKH PRGHUQ FRQYHUWHU´ ZKLFK ³DFKLHYHV VDWXUDWLRQ ZLWKLQ ± PLQXWHVGXHWRWKHKLJKGHJUHHRISXOYHUL]DWLRQSUHFHGLQJWKHVWHULOL]DWLRQ SKDVH´  :.S $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHH[SDQVLRQRIWKHXVHRIZDVWHFRQYHUWHUVQRZDGD\VOLNH ³XSF\FOLQJ´ ZKLFK LV ³WKH SURFHVV RI FRQYHUWLQJ ZDVWH PDWHULDOV RU XVHOHVVSURGXFWVLQWRQHZPDWHULDOVRUSURGXFWVRIEHWWHUTXDOLW\´DQG³KDV VKRZQ VLJQLILFDQW JURZWK DFURVV WKH 8QLWHG 6WDWHV´ LQ RXU WLPH  WKHUH LV FRQWUDFWLRQ HJWKHUHODWLYHGHFOLQHRIWKHGHPDQGRQODQGILOOVQRZDGD\V VLQFH ³ZDVWH FRQYHUVLRQ«QRZ DOORZV QHDUO\  RI DOO 06: WR EH UHXVHGLQVRPHZD\WKXVVKDUSO\UHGXFLQJWKHGHPDQGRQODQGILOOV´LQWKH 86  :.KK-:DQJ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGV WUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³SDVWHXUL]DWLRQ´ LQ PLFURELRORJ\  WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI WKH XQGHUVWDQGLQJ RI ³SDVWHXUL]DWLRQ´LQPLFURELRORJ\WRWKHILHOGRIZDVWHWUHDWPHQWDVVKRZQ LQ WKH XVH RI WKH ZDVWHU FRQYHUWHU  $QG WKH UHYHUVH GLUHFWLRQ DOVR KROGV WUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJ WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ DXWRFODYHV IRU ZDVWH WUHDWPHQW  WKHUH LV QRYHOW\ HJ WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ DXWRFODYHV IRU ZDVWH WUHDWPHQW E\ WKH QHZ LGHD RI WKH XVH RI WKH ZDVWH FRQYHUWHU LQVWHDG ZKLFK GLIIHUV IURP WKH XVH RI DXWRFODYHV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH LI WKHUH LV HYROXWLRQ HJWKH QDWXUDOHYROXWLRQRI KXPDQV WRWKURZDZD\ ZDVWHV LQ WKH VWDWH RI QDWXUH LQ D SULPLWLYH ZD\  WKHUH LV WUDQVIRUPDWLRQ HJ WKH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WHFKQLFDO WUDQVIRUPDWLRQ RI KXPDQ DELOLW\ WR GHDO ZLWK ZDVWHV E\ WKH LQYHQWLRQRIWKH PRGHUQ ZDVWHFRQYHUWHU  $QGWKHUHYHUVHGLUHFWLRQDOVR KROGVWUXH ,QUHODWLRQWRWKHV\PPHWU\DV\PPHWU\SULQFLSOHLIWKHUHLVV\PPHWU\ HJ WKH H[LVWHQFH RI GLIIHUHQW PHWKRGV RI ZDVWH WUHDWPHQW OLNH ³ZDVWH FRQYHUWHUV´ ³SODVPDDUF JDVLILFDWLRQ´ ³PLFURZDYHDQGRWKHULUUDGLDWLRQ VWHULOL]DWLRQ´ DQG ³DXWRFODYHV´  WKHUH LV DV\PPHWU\ HJ ZDVWH FRQYHUWHUVJDLQPRUHSRSXODULW\QRZDGD\VZKHQFRQWUDVWHGZLWK³SODVPD DUF JDVLILFDWLRQ´ ³PLFURZDYH DQG RWKHU LUUDGLDWLRQ VWHULOL]DWLRQ´ DQG ³DXWRFODYHV´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³HPSOR\WKHVDPHPHWKRGRI VWHULOL]DWLRQ DV FRQYHUWHUV EXW GR VR XVLQJ ODUJHU DQG PRUH FRPSOH[ HTXLSPHQW WKDW DOVR KDV KLJKHU VDIHW\« UHTXLUHPHQW«´ VR WKHVH QHZ YHUVLRQV DUH LQFUHDVLQJO\ XVHG  WKHUH LV LQDFWLYHQHVV HJ WKH UHODWLYH LQDFWLYHQHVV RI WKRVH ROGHU DXWRFODYHV QRZDGD\V ZKLFK FDQQRW FRPSHWH ZLWKZDVWHFRQYHUWHUVEHFDXVHRIWKHLUWHFKQRORJLFDOREVROHVFHQFH  ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



SURJUHVVPDGHE\ZDVWHFRQYHUWHUVDVVKRZQLQWKHLUFRQWULEXWLRQWRZDVWH GLVSRVDODIRUHFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVUHJDUGOHVVRIZKHWKHUWKLVEHGRQHE\ZD\RIZDVWH GXPSLQJLQRYHUILOOHGODQGILOOVRUE\ZD\RIWKHXVHRIZDVWHFRQYHUWHUV  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI ZDVWH GXPSLQJ LQ RYHUILOOHG ODQGILOOV IRU D UHODWLYHO\ PRUH LQGLYLGXDOPDWHULDOLVWLF OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH XVH RI ZDVWH FRQYHUWHUV IRU D UHODWLYHO\PRUHHQYLURQPHQWIULHQGO\OLIHZRUOG $QGWKHUHYHUVHGLUHFWLRQ DOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ RI WKH XVH RI ZDVWH FRQYHUWHUV LQ PRGHUQ WLPHV  WKHUH LV UHDFWLRQ HJ WKH XVH RI ZDVWH FRQYHUWHUV LQ PRGHUQWLPHVWKHQOHGWRIXUWKHUFKDQJHVODWHURQZKHQQRZDGD\VVRPH FRQWHPSRUDU\ DXWRFODYHV KDYH EHHQ VR LPSURYHG WKDW WKH\ ³HPSOR\ WKH VDPHPHWKRGRIVWHULOL]DWLRQDVFRQYHUWHUVEXWGRVRXVLQJODUJHUDQGPRUH FRPSOH[HTXLSPHQWWKDWDOVRKDVKLJKHUVDIHW\«UHTXLUHPHQW«´VRWKHVH QHZ YHUVLRQV DUH WR FRPSHWH ZLWK ZDVWH FRQYHUWHUV  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQLQWKHGXPSLQJRIZDVWHVLQRYHUXVHGODQGILOOVLQWKHROGHUGD\VDV LW VHUYHG WKH IXQFWLRQ RI ZDVWH GLVSRVDO DW WKDW WLPH  WKHUH LV QRQIXQFWLRQDOLW\ HJ WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHGDVVKRZQLQWKHXVHRIZDVWHFRQYHUWHUVQRZDGD\VVRWKDWGXPSLQJ RI ZDVWHVLQRYHUXVHGODQGILOOVFDQ QRORQJHUVHUYHWKHIXQFWLRQRI ZDVWH GLVSRVDO LQ RXU WLPH GXH WR KLJKHU VWDQGDUGV IRU SRVLWLYH HQYLURQPHQWDO LPSDFW $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $QG LQ UHODWLRQ WR WKH LQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\ SULQFLSOH LI WKHUH LV LQWHQWLRQDOLW\ HJ WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQRXWFRPHDVVKRZQLQWKHGHVLJQRIWKHZDVWHFRQYHUWHUIRUZDVWH UHF\FOH LQ PRGHUQ WLPH  WKHUH LV QRQLQWHQWLRQDOLW\ HJ WKH UHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH VXFK WKDWWKHRXWFRPHFDQHYHQEHFRXQWHULQWHQWLRQDOLQEHLQJWKHRSSRVLWHRI ZKDWZDVRULJLQDOO\SODQQHGDVVKRZQE\VRPHFRQWHPSRUDU\DXWRFODYHV ZKLFK KDYH EHHQ VR LPSURYHG WKDW WKH\ ³HPSOR\ WKH VDPH PHWKRG RI VWHULOL]DWLRQ DV FRQYHUWHUV EXW GR VR XVLQJ ODUJHU DQG PRUH FRPSOH[ HTXLSPHQW WKDW DOVR KDV KLJKHU VDIHW\« UHTXLUHPHQW´ DV DQ DOWHUQDWLYH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WHFKQRORJ\ WR FRPSHWH ZLWK WKH ZDVWH FRQYHUWHU  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH

8VHIXOQHVVDQG&XOWXUH 8VHIXOQHVVZKHQH[DPLQHGIURPWKHSHUVSHFWLYHRIFXOWXUHFDQFDVW DQ LOOXPLQDWLQJ OLJKW RQ LWV SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  DQG WKLV FDQ EH VKRZQ E\ ZD\ RI WZR FDVH VWXGLHV QDPHO\  XVHIXOQHVV]HURZDVWHDQGUHVRXUFHUHGHVLJQSKLORVRSK\ DQG  XVHIXOQHVVIUHHJDQLVPDQGWKHLGHRORJ\RIUHFODLPLQJZDVWH² WREHDGGUHVVHGKHUHDIWHULQWKDWRUGHU

8VHIXOQHVV=HUR:DVWHDQG5HVRXUFH5HGHVLJQ3KLORVRSK\ $Q H[FHOOHQW FDVH VWXG\ KHUH WR XQGHUVWDQG XVHIXOQHVV IURP WKH SHUVSHFWLYHRIFXOWXUHKDVWRGRZLWKXVHIXOQHVV]HURZDVWHDQGUHVRXUFH UHGHVLJQSKLORVRSK\ 7KHWHUP³]HURZDVWH´LV³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´ :.LL  $JRRGH[DPSOHLV³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´ :.LL 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



+RZHYHU DV RQH VKRXOG H[SHFW IURP DQ\ SKLORVRSKLFDO GLVFXVVLRQ WKHUH LV D KHDWHG GHEDWH RQ WKH YHU\ QDWXUH RI  WKH SKLORVRSK\ RI ³]HUR ZDVWH´ IRU LOOXVWUDWLRQ FRQVLGHU WKH IROORZLQJ H[DPSOHV DV VXPPDUL]HG LQ6HF  VW'LVSXWH=HUR:DVWHYV5HF\FOLQJ 7KHILUVWGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HUR ZDVWH YV UHF\FOLQJ²DV ³VRPH FODLP WKDW WKH NH\ FRPSRQHQW WR ]HUR ZDVWH LV UHF\FOLQJ ZKLOH RWKHUV UHMHFW WKDW QRWLRQ LQ IDYRU RI UHXVLQJ KLJK IXQFWLRQ´ :.LL  7R PDNH WKH GLVSXWH PRUH FRQIXVLQJ WKH LGHD RI ³UHF\FOLQJ´ LV QR ORQJHUDERXWVLPSO\³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´ :.LL  %XW ³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´ :.LL  +RZHYHU IRU WKH FULWLFV ³]HUR ZDVWH LV SRRUO\ VXSSRUWHG E\ WKH HQDFWPHQW RI JRYHUQPHQW ODZV WR HQIRUFH WKH ZDVWH KLHUDUFK\ RI UHIXVH UHGXFHUHXVHUHF\FOHDQGURW FRPSRVW ,QSUDFWLFHWKHVHODZVLQYDULDEO\

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





HPSKDVL]H GHVWUXFWLRQ DQG UHF\FOLQJ ZKLOH WKH UHXVH FRPSRQHQW LV PDUJLQDOL]HG´ :.LL  QG'LVSXWH=HUR:DVWHYV'XPS&DSDFLW\ 7KHVHFRQGGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HURZDVWHYV GXPS FDSDFLW\²DV VRPH MXVWLI\ =HUR :DVWH E\ SRLQWLQJ RXW WKDW ³PDQ\ GXPSV DUH FXUUHQWO\ H[FHHGLQJ FDUU\LQJ FDSDFLW\´ ZKHUHDV ³RWKHUV FRXQWHU E\ SRLQWLQJ RXW WKDW WKHUH DUH KXJH WUDFWV RI ODQG DYDLODEOH WKURXJKRXWWKH86$DQGRWKHUFRXQWULHVZKLFKFRXOGEHXVHGIRUGXPSV´ :.LL  2QWKHRQHKDQG³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´ :.LL  2Q WKH RWKHU KDQG WKH FULWLFV FDOO IRU WKH QHHG ³WR FRQYHUW DOO RU D ODUJH SRUWLRQ RI H[LVWLQJ JDUEDJH LQWR RLO´ RU VRPHWKLQJ HOVH DQG ³RQH VXFKSODQFDOOHG$Q\WKLQJ,QWR2LOZDVSURPRWHGE\'LVFRYHU0DJD]LQH DQG )RUWXQH 0DJD]LQH LQ ´ DQG ³=HUR :DVWH DQDO\VLV«UHFHLYHV QR VXFKSURPRWLRQE\WKHPHGLD´ :.LL  UG'LVSXWH=HUR:DVWHYV'HFRQVWUXFWLRQ 7KHWKLUGGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HURZDVWHYV GHFRQVWUXFWLRQ²DV VRPH DUJXHG WKDW ]HUR ZDVWH LV ³DERXW UHVWUXFWXULQJ SURGXFWLRQ DQG GLVWULEXWLRQ V\VWHPV WR SUHYHQW ZDVWH IURP EHLQJ PDQXIDFWXUHG LQ WKH ILUVW SODFH´ ZKHUHDV RWKHUV IDYRU LQVWHDG ³GHFRQVWUXFWLRQ´DV³FRQVWUXFWLRQLQUHYHUVH´ :.LL  2QWKHRQHKDQGWKRVHZKRSUHIHUFRQVWUXFWLRQIRU=HUR:DVWHDUJXH WKDW ³WKH PDWHULDOV WKDW DUH VWLOO UHTXLUHG LQ WKH«UHGHVLJQHG UHVRXUFH HIILFLHQW V\VWHPV ZLOO EH UHXVHG PDQ\ WLPHV DV WKH SURGXFWV WKDW LQFRUSRUDWHWKHPDUHUHXVHG«=HUR:DVWH IDYRUVWKHGHVLJQRIEXLOGLQJV DV DVVHPEODJHV RI KLJK OHYHO FRPSRQHQWV QRW WKHLU FUHDWLRQ IURP URXJK PDWHULDOVVXFKDVOXPEHUFHPHQWRUSODVWHU7KHGHWDLOVDUHQRWZRUNHGRXW \HWEXWWRWKHH[WHQWWKDWHQWLUHURRPVHQWLUHZDOOVURRIVRUIORRUVRUHQWLUH XWLOLW\ V\VWHPV FDQ EH SUHEXLOW DQG LQVWDOOHG DV FRPSOHWHG FRPSRQHQWV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WKDWZLOOEHWKHJRDORI=HUR:DVWHGHVLJQ«)RUQRZWKHODUJHVWSDUWVWKDW ZHDUHDEOHWRVDYHWHQGWREHDUFKLWHFWXUDOHOHPHQWVZLQGRZVGRRUVDQG PHWDOVPDQ\RIZKLFKDUHEHLQJVDYHGDQGUHVROGE\UHXVH\DUGVVXFKDV 8UEDQ 2UH LQ %HUNHOH\ &DOLIRUQLD 7KH PDLQ SDUWV WKDW VWLOO QHHG WR EH FUXVKHG DUH ZRRG IORRULQJ EULFN ZDOOV DQG VWUXFWXUDO WLPEHUV´ :. LL  2Q WKH RWKHU KDQG WKH SURSRQHQWV RI GHFRQVWUXFWLRQ UHJDUG LW ³DV FRQVWUXFWLRQ LQ UHYHUVH´ EHFDXVH ³LW LQYROYHV FDUHIXOO\ WDNLQJ DSDUW D EXLOGLQJ WR PD[LPL]H WKH UHXVH RI PDWHULDOV WKHUHE\ UHGXFLQJ ZDVWH DQG FRQVHUYLQJ UHVRXUFHV 'HFRQVWUXFWLRQ FDQ FDSWXUH PDWHULDOV DQG VRPH FRPSRQHQWVIURPWKHPLOOLRQVRIEXLOGLQJVWKDWDUHH[LVWLQJDQGWKDWZHUH SRRUO\GHVLJQHGIRUKLJKOHYHOUHXVH´²DQGPRUHRYHU³XQWLOEXLOGLQJVDUH EXLOWDVFRPSRQHQWVFDSDEOHRIODWHUGLVPDQWOLQJGHFRQVWUXFWLRQLVDVWRS JDS SURFHVV WKDW WKH 8QLWHG 6WDWHV FDQ XVH WR PLQLPL]H WKH ZDVWH RI EXLOGLQJPDWHULDOV´ :.LL  WK'LVSXWH=HUR:DVWHYV0DUNHW%DVHG&DPSDLJQV 7KHIRXUWKGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HURZDVWHYV PDUNHWEDVHG FDPSDLJQV²DV SHRSOH GLVDJUHH RQ WKH H[WHQW WR ZKLFK PDUNHWEDVHGFDPSDLJQVFDQKHOSWKH=HUR:DVWHPRYHPHQW 2QWKHRQHKDQG³PDUNHWEDVHGOHJLVODWLRQPHGLDWHGFDPSDLJQVOLNH ([WHQGHG 3URGXFHU 5HVSRQVLELOLW\ (35  DQG WKH 3UHFDXWLRQDU\ 3ULQFLSOH DUH DPRQJ QXPHURXV FDPSDLJQV WKDW KDYH D =HUR :DVWH VORJDQ KXQJ RQ WKHP E\ PHDQV RI FODLPV WKH\ ZLOO LQHOXFWDEO\ OHDG WR SROLFLHV RI =HUR :DVWH´ :.LL  2Q WKH RWKHU KDQG WKHUH DUH WKRVH ZKR TXHVWLRQ WKHVH PDUNHWEDVHG FDPSDLJQVVLQFHIRUWKHFULWLFV³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´ :.LL  

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





WK'LVSXWH=HUR:DVWHYV*RYHUQPHQW 7KHILIWKGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HURZDVWHYV JRYHUQPHQW²DV SHRSOH GLVDJUHH RQ WKH H[WHQW WR ZKLFK WKH VWDWH RU JRYHUQPHQW FDQKHOSWRSURPRWH=HUR:DVWH 2Q WKH RQH KDQG WKHUH DUH WKRVH ZKR VHHNV WKH KHOS RI WKH VWDWH RU JRYHUQPHQW YLDWKHHQDFWPHQWRIGLIIHUHQWODZVHVSHFLDOO\DWWKHUHJLRQDO OHYHO EHFDXVH ³SROLF\ LQFUHPHQWDOLVP UHIOHFWV SROLF\PDNHUV WHQGHQF\ WR EXLOG RQ ZKDW DOUHDG\ H[LVWV DQG LV FKDUDFWHULVHGE\ PLQLPDO GLVWXUEDQFH RIWKHFXUUHQWVWDWH´ :.LL0/DQG\3/RZH  2QWKHRWKHUKDQGWKHUHDUHWKRVHZKRDUJXHGWKDW³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´ :.LL('DYRXGL0*DQG\5 5KRGHV3*ODVEHUJHQ  WK'LVSXWH=HUR:DVWHYV1DWXUH $QGWKHVL[WKGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HURZDVWH YVQDWXUH²DVSHRSOHGLVDJUHHRQWKHH[WHQWWRZKLFKQDWXUHLVWKHPRGHO IRU]HURZDVWH 2QWKHRQHKDQGWKHUHDUHWKRVHZKRDGYRFDWH³WKHOLWHUDODSSOLFDWLRQ RI QDWXUDO SURFHVVHV´ IRU ]HUR ZDVWH LQ WKDW WKH\ ³ORRN WR QDWXUH DV DQ XOWLPDWHPRGHOIRUSURGXFWLRQDQGLQQRYDWLYHPDWHULDOV´ :.LL  2QWKHRWKHUKDQGWKHUHDUHWKRVHZKRIDYRU³WKHFUHDWLRQRILQGXVWU\ VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´ LQVWHDG LQ WKDW ³LQGXVWULDO SURGXFWVDUHLQKHUHQWO\QRQQDWXUDO VXFKDVFKHPLFDOVDQGSODVWLFVWKDWDUH PRQRPROHFXODU  DQG EHQHILW JUHDWO\ IURP LQGXVWULDO PHWKRGV RI UHXVH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



ZKLOH QDWXUDO PHWKRGV UHTXLULQJ GHJUDGDWLRQ DQG UHFRQVWLWXWLRQ DUH ZDVWHIXOLQWKDWFRQWH[W´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³LQ IDYRU RI UHXVLQJ KLJK IXQFWLRQ´  WKHUH LV UHODWLYHQHVV HJ ZKDW LV ULJKW IRU WKRVH DGYRFDWHV RI =HUR :DVWH ³LQ IDYRU RI UHXVLQJ KLJK IXQFWLRQ´ LV QRWQHFHVVDULO\VRIRURWKHUVZKRIDYRUUHF\FOLQJLQVWHDG $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





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³WKH PDWHULDOV WKDW DUH VWLOO UHTXLUHG LQ WKH«UHGHVLJQHG UHVRXUFHHIILFLHQW V\VWHPV ZLOO EH UHXVHG PDQ\ WLPHV DV WKH SURGXFWV WKDW LQFRUSRUDWH WKHP DUH UHXVHG´  WKHUH LV XQSUHGLFWDELOLW\ HJWKH PRUHGLIILFXOWWDVNWRSUHGLFWH[DFWO\WKHH[WHQW WRZKLFKWKHFRQVWUXFWLRQDUJXPHQWIRU=HUR:DVWHZLOOUHPDLQLQIOXHQWLDO LQDSDUWLFXODUIXWXUHKLVWRULFDOHUDEHFDXVHIRUWKHFULWLFV³GHFRQVWUXFWLRQ FDQFDSWXUHPDWHULDOVDQGVRPHFRPSRQHQWVIURPWKHPLOOLRQVRIEXLOGLQJV WKDWDUHH[LVWLQJDQGWKDW ZHUHSRRUO\GHVLJQHG IRUKLJKOHYHOUHXVH´DQG PRUHRYHU ³XQWLO EXLOGLQJV DUH EXLOW DV FRPSRQHQWV FDSDEOH RI ODWHU GLVPDQWOLQJ GHFRQVWUXFWLRQ LV D VWRSJDS SURFHVV WKDW WKH 8QLWHG 6WDWHV FDQ XVH WR PLQLPL]H WKH ZDVWH RI EXLOGLQJ PDWHULDOV´  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH LI WKHUH LV H[SOLFDELOLW\ HJWKHH[SODQDWLRQE\WKHDGYRFDWHVIRU=HUR:DVWHWKDWLW LVGHVLUDEOHEHFDXVHZHFDQXVHQDWXUHDVDPRGHOWREDFNLWXS WKHUHLV LQH[SOLFDELOLW\ HJWKHODFNRIVXIILFLHQWH[SODQDWLRQE\WKHDGYRFDWHVIRU =HUR:DVWHRIZK\LWLVQHFHVVDULO\GHVLUDEOHEHFDXVHWKHUHDUHWKRVHZKR IDYRU ³WKH FUHDWLRQ RI LQGXVWU\VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´ LQVWHDG LQ WKDW ³LQGXVWULDO SURGXFWV DUH LQKHUHQWO\ QRQQDWXUDO >VXFK DV FKHPLFDOVDQGSODVWLFVWKDWDUHPRQRPROHFXODU@DQGEHQHILWJUHDWO\IURP LQGXVWULDO PHWKRGV RI UHXVH ZKLOH QDWXUDO PHWKRGV UHTXLULQJ GHJUDGDWLRQ DQGUHFRQVWLWXWLRQDUHZDVWHIXOLQWKDWFRQWH[W´ $QGWKHUHYHUVHGLUHFWLRQ DOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILFWLRQUHDOLW\ SULQFLSOH LI WKHUH LV ILFWLRQ HJ WKH ILFWLRQDO DVSHFW RI PDUNHWEDVHG FDPSDLJQV  IRU =HUR :DVWH LQVRIDU DV ³PDQ\ RUJDQL]DWLRQV FLWLHV DQG FRXQWLHV KDYH HPEUDFHG D =HUR :DVWH VORJDQZKLOHSUHVVLQJIRUQRQHRIWKHNH\=HUR:DVWHFKDQJHV´ WKHUHLV UHDOLW\ HJ WKH UHDOLVWLF DVSHFW RI PDUNHWEDVHG FDPSDLJQV IRU =HUR :DVWH LQVRIDU DV ³PDUNHWEDVHG OHJLVODWLRQPHGLDWHG FDPSDLJQV OLNH ([WHQGHG 3URGXFHU 5HVSRQVLELOLW\ >(35@ DQG WKH 3UHFDXWLRQDU\ 3ULQFLSOH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



DUH DPRQJ QXPHURXV FDPSDLJQV WKDW KDYH D =HUR :DVWH VORJDQ KXQJ RQ WKHP´  :.LL $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH LI WKHUH LV ILQLWHQHVV HJ WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI PDWHULDOV XVHG LQ SURGXFWV ZKLFK FDQ EH WDUJHWHG E\ =HUR :DVWH OLNH ³VWHHO´ ³FRSSHU´ ³JODVV´DQG³SODVWLFV´LQERWWOHVFRPSXWHUVHWF WKHUHLVWUDQVILQLWHQHVV HJ WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO SLHFHV RI ³VWHHO´ ³FRSSHU´³JODVV´DQG³SODVWLFV´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³PDQ\FRPPHUFLDORULQGXVWULDOFRPSDQLHV´ OLNH ³6WDSOHV +RPH 'HSRW 7R\RWD *HQHUDO 0RWRUV DQG FRPSXWHU WDNH EDFN FDPSDLJQV´ WR ³HPEUDFH =HUR :DVWH´ LQ WKHLU PDUNHWEDVHG FDPSDLJQV WKHUHLVKLGGHQQHVV HJWKHKLGGHQELDVLQWKHPDUNHWEDVHG FDPSDLJQVE\³PDQ\FRPPHUFLDORULQGXVWULDOFRPSDQLHV´OLNH³6WDSOHV +RPH 'HSRW 7R\RWD *HQHUDO 0RWRUV DQG FRPSXWHU WDNHEDFN FDPSDLJQV´ WR ³HPEUDFH =HUR :DVWH´ EHFDXVH WKH\ ³XVXDOO\ PHDQ QR PRUHWKDQDPDMRUPDWHULDOVUHF\FOLQJHIIRUWKDYLQJQREHDULQJRQSURGXFW UHGHVLJQ´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHGHQVHQHVVHPSWLQHVVSULQFLSOHLIWKHUHLVGHQVHQHVV HJ WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI FRQFHUQV ZLWK WKH XVH RI ³JRYHUQPHQWDO DQG QRQJRYHUQPHQWDO LQVWLWXWLRQV´ E\ WKRVH ZKR IDYRU JRYHUQDQFH IRU =HUR :DVWH  WKHUH LV HPSWLQHVV HJ WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ RI FRQFHUQV ZLWK ³IRUPDO RUJDQLVDWLRQV DQG SURFHGXUHV RI WKH SXEOLF VHFWRU´ E\ WKRVH ZKR IDYRU JRYHUQDQFHIRU=HUR:DVWH $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFKDQJHFRQVWDQF\SULQFLSOHLIWKHUHLVFKDQJH HJ WKH HYHU QHZ ZD\V WR WUHDW ZDVWH DV VKRZQ LQ WKH LGHD RI =HUR :DVWH  WKHUHLVFRQVWDQF\ HJWKHHYHUFRQVWDQWH[LVWHQFHRIGLIIHUHQWSUREOHPV

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





LQWKHHYHUQHZZD\VWRWUHDWZDVWHDVVKRZQLQWKHSUREOHPVZLWK=HUR :DVWHSRLQWHGRXWE\WKHFULWLFV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRUGHUFKDRVSULQFLSOHLIWKHUHLVRUGHU HJWKHPRUH RUOHVVRUGHUO\YLHZRIZDVWHWUHDWPHQWLIORRNHGIURPWKHYDQWDJHSRLQW RI³FRQVWUXFWLRQ´ZKLFKIDYRUV³WKHGHVLJQRIEXLOGLQJVDVDVVHPEODJHVRI KLJK OHYHO FRPSRQHQWV QRW WKHLU FUHDWLRQ IURP URXJK PDWHULDOV VXFK DV OXPEHU FHPHQW RU SODVWHU´ VR WKDW ³WKHVH UHGHVLJQHG UHVRXUFHHIILFLHQW V\VWHPV ZLOOEHUHXVHG PDQ\ WLPHVDVWKHSURGXFWVWKDWLQFRUSRUDWHWKHP DUH UHXVHG´  WKHUH LV FKDRV HJ WKH PRUH RU OHVV FKDRWLF YLHZ RI ZDVWH WUHDWPHQWLIORRNHGIURPWKHYDQWDJHSRLQWRI³GHFRQVWUXFWLRQ´DVVKRZQ LQWKH³GHPROLWLRQRIWUDGLWLRQDOEXLOGLQJV´ZKLFK³KDVEHHQORQJGRQHE\ ZUHFNLQJ EDOO RU EXOOGR]HU´ LQWR P\ULDG SLHFHV  :. LL  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VORZQHVVTXLFNQHVV SULQFLSOH LI WKHUH LV VORZQHVV HJWKHUHODWLYHO\VORZHUVSHHGRI=HUR:DVWHWREHDFKLHYHGLIGRQHE\ WKH JRYHUQPHQW DORQH EHFDXVH ³WKH JRYHUQPHQW DORQH GRHV QRW KDYH WKH FRJQLWLYH EUHDGWK WR GHWHUPLQH KRZ WR UHDFK WKH XOWLPDWH WDUJHW RI =HUR :DVWH ZKLFK UHTXLUHV WKH LQYROYHPHQW RI EXVLQHVVHV 1*2V WKH SXEOLF DQGWKHVWDWHLQJRYHUQLQJ´ WKHUHLVTXLFNQHVV HJWKHUHODWLYHO\TXLFNHU VSHHGRI=HUR:DVWHWREHDFKLHYHGZLWK³WKHLQYROYHPHQWRIEXVLQHVVHV 1*2V WKH SXEOLF DQG WKH VWDWH LQ JRYHUQLQJ´ HWF  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLIWKHUHLVH[SDQVLRQ HJWKHUHODWLYHVSUHDGRIWKH=HUR:DVWHPRYHPHQWHVSHFLDOO\LQ   WKHUH LV FRQWUDFWLRQ HJ WKH UHODWLYH GHFOLQH RI WKH LGHD RI ³UHF\FOLQJ´ DV VLPSO\ ³SODFLQJ ERWWOHV DQG FDQV LQ D UHF\FOH ELQ´ HVSHFLDOO\ DIWHU WKH ULVH RI WKH =HUR :DVWH PRYHPHQW  $QG WKH UHYHUVH GLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO FRQVWUXFWLRQ RI ³'HVLJQ (IILFLHQF\´ DQG ³'HVLJQ (IIHFWLYHQHVV´ LQ WKH =HUR :DVWH ,QVWLWXWH  WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI  ³'HVLJQ (IILFLHQF\´ DQG ³'HVLJQ (IIHFWLYHQHVV´ LQWKH=HUR:DVWH,QVWLWXWHWRWKHUHDOPRISUDFWLFHDVVKRZQE\WKH=HUR :DVWH,QWHUQDWLRQDO$OOLDQFHZKLFKKHOSVDORWRI³FRPPXQLWLHVDFURVVWKH JOREH WKDW KDYH FUHDWHG SXEOLF SROLF\ WR SURPRWH ]HURZDVWH SUDFWLFHV´  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJWKHFRQYHQWLRQDOZLVGRPDERXWZDVWHUHF\FOH WKHUHLVQRYHOW\ HJ WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP DERXW ZDVWH UHF\FOH E\ WKH QHZ LGHD RI =HUR :DVWH ZKLFK LV PRUH WKDQ MXVW ZDVWH UHF\FOHEXWDOVRZDVWHUHXVH $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,Q UHODWLRQ WR WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH LI WKHUH LV HYROXWLRQ HJWKHQDWXUDOHYROXWLRQRIKXPDQVWROLYHLQFDYHVLQWKHVWDWH RI QDWXUH LQ D SULPLWLYH ZD\  WKHUH LV WUDQVIRUPDWLRQ HJ WKH WHFKQLFDO WUDQVIRUPDWLRQRIKXPDQDELOLW\WRFRSHZLWKVKHOWHUVE\WKHLQYHQWLRQRI =HUR:DVWHZKLFKLQYHQWV³WKHGHVLJQRIEXLOGLQJVDVDVVHPEODJHVRIKLJK OHYHO FRPSRQHQWV´ VR WKDW ³WKHVH UHGHVLJQHG UHVRXUFHHIILFLHQW V\VWHPV ZLOO EH UHXVHG PDQ\ WLPHV DV WKH SURGXFWV WKDW LQFRUSRUDWH WKHP DUH UHXVHG´ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHV\PPHWU\DV\PPHWU\SULQFLSOHLIWKHUHLVV\PPHWU\ HJ WKH H[LVWHQFH RI GLIIHUHQW HQWLWLHV LQ QDWXUH OLNH DQLPDOV KXPDQV PDWHULDOV HWF  WKHUH LV DV\PPHWU\ HJ  KXPDQV FDQ UHF\FOH DQG UHXVH PDWHULDOVIRXQGLQQDWXUHLQDZD\WKDWPDWHULDOVFDQQRWUHF\FOHDQGUHXVH KXPDQVDVVKRZQLQ³WKHFUHDWLRQRILQGXVWU\VSHFLILFPRUHHIILFLHQWUHXVH PRGDOLWLHV´ VXFK WKDW ³LQGXVWULDO SURGXFWV DUH LQKHUHQWO\ QRQQDWXUDO´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³WKH OLWHUDO DSSOLFDWLRQ RI QDWXUDO SURFHVVHV´ ³WKH FUHDWLRQ RI LQGXVWU\VSHFLILF PRUH HIILFLHQWUHXVHPRGDOLWLHV´HWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHDFWLYHQHVVLQDFWLYHVVSULQFLSOHLIWKHUHLVDFWLYHQHVV HJ WKH DFWLYHQHVV LQ RXU WLPH RI WKRVH ZDVWHV LQ FRQVWUXFWLRQ OLNH ³ZLQGRZVGRRUVDQG PHWDOV PDQ\RI ZKLFKDUHEHLQJVDYHGDQGUHVROG E\ UHXVH´ LQ DFFRUGDQFH WR =HUR :DVWH  WKHUH LV LQDFWLYHQHVV HJ WKH UHODWLYH LQDFWLYHQHVV LQ RXU WLPH RI WKRVH ZDVWHV LQ FRQVWUXFWLRQ OLNH ³ZRRG IORRULQJ EULFN ZDOOV DQG VWUXFWXUDO WLPEHUV´ ZKLFK FDQQRW EH UHXVHGLQDFFRUGDQFHWR=HUR:DVWH  ,QUHODWLRQWRWKHVHOIQHVVRWKHUQHVVSULQFLSOHLIWKHUHLVVHOIQHVV HJ WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ ³PDQ\ FRPPHUFLDO RU LQGXVWULDO FRPSDQLHV´ OLNH ³6WDSOHV +RPH 'HSRW 7R\RWD *HQHUDO 0RWRUV DQG FRPSXWHU WDNHEDFN FDPSDLJQV´ ZKLFK ³HPEUDFH=HUR:DVWH´EXW³XVXDOO\PHDQQRPRUHWKDQDPDMRUPDWHULDOV UHF\FOLQJ HIIRUW KDYLQJ QR EHDULQJ RQ SURGXFW UHGHVLJQ´  WKHUH LV RWKHUQHVV HJWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRWKHUVDVVKRZQLQ WKRVHDFDGHPLFZRUNVZKLFKSRLQWRXWWKHSURVDQGFRQVRIWKHGHEDWHRQ

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





=HUR :DVWH IRU DQ DGYDQFHPHQW LQ WKH NQRZOHGJH RI UHXVH  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJ WKH UHJUHVVLRQ PDGH E\ =HUR :DVWH DV VKRZQ LQ WKH GLVSXWHVSRLQWHGRXWE\WKHFULWLFV WKHUHLVSURJUHVVLRQ HJWKHSURJUHVV PDGHE\=HUR:DVWHDVVKRZQLQLWVFRQWULEXWLRQWRDPRUH³]HURZDVWH´ FRPPXQLW\DIRUHFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHVDQGEHKDYLRUVUHJDUGOHVVRIZKHWKHUWKLVEHGRQHE\ZD\RI³WKH OLWHUDO DSSOLFDWLRQ RI QDWXUDO SURFHVVHV´ RU E\ ZD\ RI ³WKH FUHDWLRQ RI LQGXVWU\VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI ³WKH OLWHUDO DSSOLFDWLRQ RI QDWXUDO SURFHVVHV´ IRU D UHODWLYHO\ PRUH QDWXUDOLVWLF OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI ³WKH FUHDWLRQ RI LQGXVWU\VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´IRUDUHODWLYHO\PRUHWHFKQRSKLOLFOLIHZRUOG $QGWKHUHYHUVH GLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ RI ZDVWH GXPSLQJ LQ WKH ROGHU GD\V ZKHQPDQ\GXPSVZHUHQRWH[FHHGLQJFDUU\LQJFDSDFLW\ WKHUHLVUHDFWLRQ HJZDVWHGXPSLQJLQWKHROGHUGD\VWKHQOHGWRIXUWKHUFKDQJHVODWHURQ ZKHQ QRZDGD\V WKHUH LV DQ LQFUHDVLQJ FDOO IRU UHXVH OLNH =HUR :DVWH EHFDXVH ³PDQ\ GXPSV DUH FXUUHQWO\ H[FHHGLQJ FDUU\LQJ FDSDFLW\´  $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQLQWKHSUDFWLFHRIZDVWHGXPSLQJLQWKHROGHUGD\VZKHQLWVHUYHG WKHIXQFWLRQRIZDVWHWUHDWPHQWDWWKHWLPH WKHUHLVQRQIXQFWLRQDOLW\ HJ WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH FDOOIRU=HUR:DVWHLQVWHDGQRZDGD\VEHFDXVH³PDQ\GXPSVDUHFXUUHQWO\ H[FHHGLQJFDUU\LQJFDSDFLW\´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



ZKDWZDVRULJLQDOO\SODQQHGDVVKRZQE\³PDQ\FRPPHUFLDORULQGXVWULDO FRPSDQLHV´ OLNH ³6WDSOHV +RPH 'HSRW 7R\RWD *HQHUDO 0RWRUV DQG FRPSXWHU WDNHEDFN FDPSDLJQV´ ZKLFK  ³HPEUDFH =HUR :DVWH´ EXW ³XVXDOO\PHDQQRPRUHWKDQDPDMRUPDWHULDOVUHF\FOLQJHIIRUWKDYLQJQR EHDULQJRQSURGXFWUHGHVLJQ´  :.LL $QGWKHUHYHUVHGLUHFWLRQDOVR KROGVWUXH

8VHIXOQHVV)UHHJDQLVPDQGWKH,GHRORJ\RI5HFODLPLQJ:DVWH $QRWKHU ZD\ WR HYDOXDWH WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\ RU XQGHVLUDELOLW\  RI XVHIXOQHVV IURP WKH SHUVSHFWLYH RI FXOWXUH FRQFHUQV XVHIXOQHVV IUHHJDQLVP DQG WKH LGHRORJ\ RI UHFODLPLQJ ZDVWH $ FRQWHQWLRQ KHUH LV WKDW ZDVWH FDQ EH UHFODLPHG E\ XVLQJ LW LQ DQ XQFRQYHQWLRQDOZD\DQGWKLVLGHRORJ\LVNQRZQDV³IUHHJDQLVP´ZKLFKLV ³WKHSUDFWLFHRIUHFODLPLQJDQGHDWLQJIRRGWKDWKDVEHHQGLVFDUGHG´ :. U  $V DQ LGHRORJ\ ³IUHHJDQLVP VWDUWHG LQ WKH PLG V RXW RI WKH DQWLJOREDOL]DWLRQ DQG HQYLURQPHQWDOLVW PRYHPHQWV 7KH PRYHPHQW DOVR KDVHOHPHQWVRI'LJJHUVDQDQDUFKLVWVWUHHWWKHDWHUJURXSEDVHGLQ+DLJKW $VKEXU\ LQ 6DQ )UDQFLVFR LQ WKH V WKDW JDYH DZD\ UHVFXHG IRRG´ :.U6.XUXW]  7KHLGHRORJ\RIIUHHJDQLVPZDVGHVFULEHGLQWKHPDQLIHVWRSDPSKOHW ³:K\)UHHJDQ´E\IRUPHU$JDLQVW0HGUXPPHU:DUUHQ2DNHVLQ 7KH LGHRORJ\ RI )UHHJDQLVP FDQ EH DQDO\]HG LQ WHUPV RI LWV PDMRU FKDUDFWHULVWLFVDVVKRZQEHORZ DQGVXPPDUL]HGLQ6HF  )RUDJLQJLQ)UHHJDQLVP 7KHILUVWFKDUDFWHULVWLFRI IUHHJDQLVPDVDQLGHRORJ\WREHDGGUHVVHG KHUHFRQFHUQV³IRUDJLQJ´ %HFDXVH RI WKLV EHOLHI LQ IRUDJLQJ ³PDQ\ IUHHJDQV JHW IUHH IRRG E\ SXOOLQJ LW RXW RI WKH WUDVK ELQV  D SUDFWLFH FRPPRQO\ QLFNQDPHG

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

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





DQLPDOULJKWV%\IRUDJLQJWKH\EHOLHYHWKH\DUHNHHSLQJSHUIHFWO\HGLEOH IRRGIURPDGGLQJWRODQGILOOFOXWWHUDQGWKDWFDQIHHGSHRSOHDQGDQLPDOV ZKRPLJKWRWKHUZLVHJRKXQJU\´ :.U7&DUOVRQ  %HVLGHV IRUDJLQJ IRU IRRG ³PDQ\ GXPSVWHU GLYHUV  VHDUFK IRU DQ\WKLQJWKDWFDQEHUHF\FOHGRUUHXVHGIURPDFFHVVRULHVWRSRZHUWRROVLQ QHHGRIVPDOOUHSDLUV6RPHGLYHUVFROOHFWDOXPLQXPFDQVZKLFKWKH\FDQ WKHQVHOOIRUDVPDOOSURILW2IWHQWKHVHSHRSOHKDYHDOOVRUWVRIHTXLSPHQW VXFKDVDORQJSROHWKDWWKH\XVHWRPRYHLWHPVLQWKHGXPSVWHUDURXQG´ :.U$%UDFH1:LOOKLWH  $OVR³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´ :.U  6KDULQJLQ)UHHJDQLVP 7KH VHFRQG FKDUDFWHULVWLF RI IUHHJDQLVP DV DQ LGHRORJ\ WR EH DGGUHVVHGKHUHFRQFHUQV³VKDULQJ´ )RU LQVWDQFH ³)RRG 1RW %RPEV UHFRYHUV IRRG WKDW ZRXOG RWKHUZLVH JRWRZDVWHWRVHUYHZDUPPHDOVRQWKHVWUHHWWRDQ\RQHZKRZDQWVWKHP 7KHJURXSSURPRWHVDQHWKLFRIVKDULQJDQGFRPPXQLW\ZKLOHZRUNLQJWR VKRZ ZKDW WKH\ FRQVLGHU WR EH WKH LQMXVWLFH RI D VRFLHW\ LQ ZKLFK WKH\ FODLP ILJKWLQJ ZDUV LV FRQVLGHUHG D KLJKHU SULRULW\ WKDQ IHHGLQJ WKH KXQJU\´ :.U  2WKHU DFWLYLWLHV OLNH ³5HDOO\ 5HDOO\ )UHH 0DUNHWV´ DUH ³IUHH VRFLDO HYHQWVLQZKLFKIUHHJDQVFDQVKDUHJRRGVLQVWHDGRIGLVFDUGLQJWKHPVKDUH VNLOOVJLYHSUHVHQWVDQGHDWIRRG$IUHHVWRUHLVDWHPSRUDU\PDUNHWZKHUH SHRSOHH[FKDQJH JRRGVDQGVHUYLFHVRXWVLGHRID PRQH\EDVHGHFRQRP\ )UHHJDQVDOVRDGYRFDWHVKDULQJWUDYHOUHVRXUFHV,QWHUQHWEDVHGULGHVKDULQJ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



UHGXFHV EXW GRHV QRW HOLPLQDWH XVH RI FDUV DQG DOO WKH UHODWHG UHVRXUFHV QHHGHGWRPDLQWDLQDQGRSHUDWHWKHP´ :.U  ,Q DGGLWLRQ ³FRPPXQLW\ ELF\FOH SURJUDPV DQG FROOHFWLYHV IDFLOLWDWH FRPPXQLW\VKDULQJRIELF\FOHVUHVWRUHIRXQGDQGEURNHQELNHVDQGWHDFK SHRSOHKRZWRGRWKHLURZQELNHUHSDLUV,QWKHSURFHVVWKH\EXLOGDFXOWXUH RIVNLOODQGUHVRXUFHVKDULQJUHXVHZDVWHGELNHVDQGELNHSDUWVDQGFUHDWH JUHDWHU DFFHVV WR JUHHQ WUDQVSRUW ,Q JHQHUDO FRRSV IXQFWLRQ WR SURYLGH WKHLU ORFDO FRPPXQLW\ ZLWK DGGLWLRQDO UHVRXUFHV WKH\ DUH DOVR W\SLFDOO\ YHJDQIULHQGO\DQGORFDOSURGXFHIULHQGO\´ :.U  6TXDWWLQJLQ)UHHJDQLVP 7KHWKLUGFKDUDFWHULVWLFRIIUHHJDQLVPDVDQLGHRORJ\WREHDGGUHVVHG KHUHFRQFHUQV³VTXDWWLQJ´ ,Q RWKHU ZRUGV WKH IUHHJDQV DOVR EHOLHYH WKDW ³SHRSOH VKRXOG QRW EH KRPHOHVVZKHQXQXVHGEXLOGLQJVDUHDYDLODEOH)UHHJDQVFRQVLGHUKRXVLQJ WR EH D ULJKW DV RSSRVHG WR DQ HFRQRPLF JRRG $V D UHVXOW RI WKLV SKLORVRSK\ PDQ\ IUHHJDQVDUHLQYROYHGLQVTXDWWLQJ6TXDWWLQJ LVWKHDFW RIVRPHRQHRFFXS\LQJDEXLOGLQJWKDWWKH\GRQRWKDYHDQ\OHJDOFODLPRU RZQHUVKLS RYHU 6TXDWWHUV WDNH D VWDQG DJDLQVW FRXQFLOV DQG ODQGORUGV ZKR ZRXOG UDWKHU NHHS SURSHUWLHV ERDUGHG XS LI WKH\ FDQQRW PDNH D VXIILFLHQWSURILWIURPWKHP )UHHJDQVVHHWKLVSUDFWLFHDVVHQVHOHVVDQGD FRXQWHUSURGXFWLYHXVHRIUHVRXUFHV´ :.U$&RUU  $OWKRXJK QR RQH NQRZV IRU VXUH ³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´ :.U$&RUU  :RUNLQJ/HVVLQ)UHHJDQLVP 7KHIRXUWKFKDUDFWHULVWLFRIIUHHJDQLVPDVDQLGHRORJ\WREHDGGUHVVHG KHUHFRQFHUQV³ZRUNLQJOHVV´ 7KHIUHHJDQVDUHNQRZQIRURSSRVLQJ³WKHQRWLRQRIZRUNLQJIRUWKH VROHSXUSRVHRIDFFXPXODWLQJPDWHULDOLWHPV7KHQHHGWRZRUNLVUHGXFHG E\ RQO\ SXUFKDVLQJ WKH EDVLF QHFHVVLWLHV IRU WKLQJV VXFK DV KRXVLQJ

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





FORWKLQJDQGIRRG1RWZRUNLQJUHVLVWVWKHLGHDWKDWMR\FDQRQO\EHIRXQG WKURXJK WKH SXUFKDVH RI PDWHULDO LWHPV :RUNLQJ LV VHHQ DV VDFULILFLQJ YDOXDEOH WLPH WR WDNH RUGHUV IURP VRPHRQH HOVH VWUHVV ERUHGRP PRQRWRQ\ DQG LQ PDQ\ FDVHV ULVNV WR SK\VLFDO DQG SV\FKRORJLFDO ZHOO EHLQJ ´ :.U  ,QVWHDGIRUWKHIUHHJDQV³WLPHFRXOGEHVSHQWYROXQWHHULQJLQVHUYLFH DFWLYLWLHV ERQGLQJ ZLWK IDPLO\ RU SDUWLFLSDWLQJ LQ D QXPEHU RI RWKHU HQGHDYRUV 7KH FRQFHSW RI YROXQWDU\ MREOHVVQHVV KDV EHHQ GHVFULEHG DV PHDQV RI FRPSOHWLQJ WDVNV RXW RI ORYH IRU RWKHUV ZKLOH QRW H[SHFWLQJ DQ\WKLQJLQUHWXUQIRURQH¶VVHUYLFHV:RUNLQJLVYLHZHGDVDFRPSRQHQW RIDV\VWHPWKDWKDVDEXVHGRXUZRUOGERWKVRFLDOO\DQGHFRORJLFDOO\,WLV UHDOL]HGWKDWQRWZRUNLQJDWDOOLVQRWDQRSWLRQIRUHYHU\RQHEXWWKDWWKHUH DUHZD\VWROLPLWWKHQHHGWRZRUNDVPXFK(PSOR\PHQWGRHVQRWQHHGWR WDNHRYHURUGHILQHRQH¶VOLIHDQGVXFKFRPSOHWHFRQWUROGRHVQRWQHHGWR EHJLYHQWRVXSHUYLVRUVDQGPDQDJHUV´ :.U1286(  9HJDQLVPLQ)UHHJDQLVP 7KHILIWKFKDUDFWHULVWLFRIIUHHJDQLVPDVDQLGHRORJ\WREHDGGUHVVHG KHUHFRQFHUQV³YHJDQLVP´ 7KHIUHHJDQVDOVRDGGUHVVWKHLVVXHRI³YHJDQLVPZKLFKFDOOVIRUWKH DYRLGDQFHRIIOHVKIRRGVGDLU\DQGHJJVDQGIXUWKHUH[WHQGVWRDYRLGWKH FRQVXPSWLRQ RU XVH RI IXUV OHDWKHU ZRRO GRZQ DQG FRVPHWLFV DQG FKHPLFDOSURGXFWVWHVWHGRQDQLPDOV9HJDQVFKRRVHWKHLUGLHWDQGOLIHVW\OH SUDFWLFHVLQDQDWWHPSWWRPDLQWDLQD FUXHOW\IUHH OLIHVW\OH7KLVOLIHVW\OHLV EDVHGRQWKHLGHDOVRISURYLGLQJ QXPHURXVEHQHILWVWRDQLPDOV¶OLYHVWRWKH HQYLURQPHQW DQG WR RXU RZQ KHDOWK  $ VWXG\ IURP WKH 8QLWHG 1DWLRQV¶ UHSRUWRQ/LYHVWRFNDQGWKH(QYLURQPHQWIRXQGWKDW DYHJDQGLHWFDQIHHG PDQ\ PRUH SHRSOH WKDQ DQ DQLPDOEDVHG GLHW  ,Q IDFW LQ  LW ZDV HVWLPDWHG WKDW WKLV SDUWLFXODU \HDU V IRRG VXSSO\ ZRXOG KDYH VXIILFHG WR IHHG DSSUR[LPDWHO\  ELOOLRQ SHRSOH RQ D SXUHO\ YHJDQ GLHW ´ :. U(-RV\Q  /HVW D PLVXQGHUVWDQGLQJ RFFXUV ³QRW DOO SHRSOH ZKR LGHQWLI\ DV IUHHJDQDUHYHJDQ7KHUHDUHVRPHEHFDXVHRIDFRQIXVLRQZLWKGXPSVWHU GLYHUWKDWFRQVXPHDQLPDOSURGXFWVRQO\LIWKRVHDQLPDOSURGXFWVZRXOG RWKHUZLVHEHZDVWHG 9HJDQVDUHSHRSOHZKRDYRLGSURGXFWVIURPDQLPDO VRXUFHV RU SURGXFWV WHVWHG RQ DQLPDOV LQ DQ HIIRUW WR DYRLG KDUPLQJ DQLPDOV)UHHJDQVWDNHWKLVDVWHSIXUWKHU ´ :.U    



7KH)XWXUHRI3RVW+XPDQ:DVWH 



+XPDQXUHLQ)UHHJDQLVP $QG WKH VL[WK FKDUDFWHULVWLF RI IUHHJDQLVP DV DQ LGHRORJ\ WR EH DGGUHVVHGKHUHFRQFHUQV³KXPDQXUH´ ,QWHUHVWLQJO\³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²DWRLOHWUHFHSWDFOHRUJDQLF FRYHU PDWHULDO DQG DQ RXWGRRU FRPSRVWLQJ ELQ´ :. U - -HQNLQV  D  $KXPDQXUHWRLOHWLVQRWH[SHQVLYHWREXLOGDQG³DQHVWLPDWHGVWDUW XSFRVWIRUDKXPDQXUHWRLOHWLVDERXWWZHQW\ILYHGROODUV7KHVHWRLOHWVFDQ DOVREHUHIHUUHGWRDVVDZGXVWWRLOHWVEHFDXVHRIWKHRUJDQLFPDWHULDOXVHG LQ WKH FRPSRVWLQJ SURFHVV 0DLQWHQDQFH FRVWV DUH DOVR PLQLPL]HG DV URWWHGVDZGXVWPDWHULDOFDQEHDFTXLUHG²LIQRWIRUIUHHIURPORFDOOXPEHU VRXUFHVWKHQDWOHDVWIRUDUHDVRQDEO\ORZSULFHZKLOHRWKHURUJDQLFVFUDS PDWHULDOFRQVLVWVRISHDWPRVVOHDIPRXOGVULFHKXOOVRUJUDVVFOLSSLQJV DOORIZKLFKDUHHDVLO\DFFHVVLEOH´ :.--HQNLQV  7KH XVH RI VDZGXVW LV LPSRUWDQW KHUH EHFDXVH ³VDZGXVW DQG RWKHU RUJDQLFVFUDSVIXQFWLRQDVDQDWXUDOELRILOWHUIRUWKHKXPDQZDVWHVDFFUXHG LQ WKH UHFHSWDFOH 2UJDQLF VFUDSV FDQ EH DGGHG DORQJ ZLWK WKH VDZGXVW DOWKRXJK LW LV UHFRPPHQGHG WR DOZD\V FRYHU H[FUHPHQW DQG VFUDSV ZLWK VDZGXVW UHJDUGOHVV RI ZKHWKHU RWKHU VFUDSV DUH XVHG 7KH VDZGXVW DOVR UHGXFHV RGRUV DQG WRJHWKHU WKHVH FRPSRQHQWV DLG LQ WKH FRPSRVWLQJ DQG GHWR[LI\LQJSURFHVV´ :.--HQNLQV  3UREOHPVZLWKWKH,GHRORJ\RI)UHHJDQLVP +RZHYHUIRUWKHFULWLFVWKHLGHRORJ\RI IUHHJDQLVP KDVVRPH PDMRU SUREOHPV &RQVLGHU IRU LOOXVWUDWLRQ D IHZ H[DPSOHV EHORZ DV VXPPDUL]HGLQ6HF  )LUVWO\ RQH PDLQ FULWLFLVP RI WKH LGHRORJ\ RI IUHHJDQLVP LV WKDW IRUDJLQJRQWKHVWUHHWLVRIWHQORRNHGGRZQXSRQLQPDLQVWUHDPVRFLHW\ )RULQVWDQFHIRUWKHFULWLFVVWUHHWIRUDJHUVRIWHQGRQRWUHFHLYHUHVSHFW IURP RWKHUV DQG DUH RIWHQ YLHZHG DV WUDVK\ OD]\ DQG OHVV LQWHOOLJHQW SHRSOHZKRFDQQRWPDNHLWLQVRFLHW\

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





6HFRQGO\DQRWKHUPDLQFULWLFLVPRIWKHLGHRORJ\RIIUHHJDQLVPLVWKDW UHFODLPHGLWHPVLQGXPSVWHUVFDQEHXQKHDOWK\DQGGDQJHURXV )RU LQVWDQFH IRU WKH FULWLFV UHFODLPHG LWHPV LQ GXPSVWHUV DUH RIWHQ XVHG GHIHFWLYH KD]DUGRXV DQG LQIHULRU LQ TXDOLW\ EHFDXVH ³ZKHQ VHDUFKLQJ IRU IRRG D IRUDJHU PD\ FRPH DFURVV IRRG ZDVWH WKDW LV QRW HQWLUHO\ VHDOHG IURP WKH XQZDQWHG ZDVWH LQ WKH VDPH UXEELVK VDFN 7KLV ORZHU TXDOLW\ IRRG LV FRPPRQO\ UHIHUUHG WR DV 6FUHH  $V EXJV URGHQWV DQG RWKHU GLVHDVH FDUULHUV DOVR IRUDJH LQ VXFK SODFHV WKHUH DUH ULVNV DVVRFLDWHGZLWKVRXUFLQJDQGHDWLQJVXFKIRRG´ :.U  7KLUGO\VWLOODQRWKHU PDLQFULWLFLVPRI WKH LGHRORJ\RI IUHHJDQLVPLV WKDWLWKDVVRPHH[WUHPLVWURRWVLQUHOLJLRQ )RULQVWDQFHOLNHPDQ\HQYLURQPHQWDOLVWVWKHIUHHJDQVEHOLHYHLQWKH LGHD RI ³UHOLJLRXV REOLJDWLRQ WR QDWXUH LQ WKH IRUP RI SROLWLFDO DFWLRQ´ EHFDXVHWKH\XSKROGWKHEHOLHIWKDW³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´ :. U 9 6FKHIIHU  $ :HLVV  )RXUWKO\ DQ DGGLWLRQDO PDLQ FULWLFLVP RI WKH LGHRORJ\ RI IUHHJDQLVP LVWKDWLWLVVRQRWSUDFWLFDODVURPDQWLFDOO\DVVXPHGE\WKHDGYRFDWHV )RULQVWDQFHIRUWKHFULWLFVLQUHVSRQVHWRWKHFDOOIRU³LQFUHDVLQJVHOI VXIILFLHQF\´LWZDVIRXQGWKDW³RQHDUJXPHQWDJDLQVWJDUGHQLQJDWKRPHLV KRZRIWHQSHRSOHEHJLQDJDUGHQDQGODWHUVWRSLW´ :.T  $QG ILIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI WKH LGHRORJ\ RI IUHHJDQLVPLVWKDWLWVSUDFWLFHFDQEHFULPLQDO )RU LQVWDQFH IRU WKH FULWLFV VTXDWWLQJ LQ PDQ\ ORFDOLWLHV DUH LOOHJDO DQGFULPLQDO LQIDFWIRUWKLVUHDVRQ³WKHFULPLQDOLW\RIVTXDWWLQJPDNHV LWKDUGWRDFFXUDWHO\WUDFNWKHQXPEHURISHRSOHLQYROYHGLQWKLVDFWLYLW\´ :.U  %H\RQGWKH,GHRORJ\RI)UHHJDQLVP 7KHVHFULWLFLVPVRIWKHLGHRORJ\RIIUHHJDQLVPKRZHYHUGRQRWLPSO\ DWRWDOUHMHFWLRQRILWVYDOLGLW\EXWVHUYHWRVKRZXVWKHWZRRSSRVLQJVLGHV RI WKH GHEDWH VXFK WKDW WKH SRVVLELOLW\ RU LPSRVVLELOLW\  DQG GHVLUDELOLW\



7KH)XWXUHRI3RVW+XPDQ:DVWH 



RU XQGHVLUDELOLW\  RI XVHIXOQHVV IURP WKH SHUVSHFWLYH RI FXOWXUH ZLWK XVHIXOQHVV IUHHJDQLVP DQG WKH LGHRORJ\ RI UHFODLPLQJ ZDVWH DV D FDVH VWXG\KHUH DUHQRWWRWKHH[WHQWWKDWWKHUHVSHFWLYHGHIHQGHUVZRXOGOLNHXV WREHOLHYH %HVLGHV WKH DQDO\VLV RI XVHIXOQHVV IUHHJDQLVP DQG WKH LGHRORJ\ RI UHFODLPLQJ ZDVWH UHYHDOV WKH ORJLF RI WKH RQWRORJLFDO SULQFLSOHV LQ H[LVWHQWLDO GLDOHFWLFV DQG JRRG H[DPSOHV LQFOXGH WKH IRUPDOQHVV LQIRUPDOQHVV SULQFLSOH WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH WKH SDUWLDOLW\WRWDOLW\ SULQFLSOH WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH WKH H[SOLFDELOLW\LQH[SOLFDELOLW\ SULQFLSOH WKH ILFWLRQUHDOLW\ SULQFLSOH WKH ILQLWHQHVVWUDQVILQLWHQHVV SULQFLSOH WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH WKH RSHQQHVVKLGGHQQHVV SULQFLSOH WKH GHQVHQHVVHPSWLQHVV SULQFLSOH WKH FKDQJHFRQVWDQF\ SULQFLSOHWKHRUGHUFKDRVSULQFLSOHWKHVORZQHVVTXLFNQHVVSULQFLSOHWKH H[SDQVLRQFRQWUDFWLRQ SULQFLSOH WKH WKHRU\SUD[LV SULQFLSOH WKH FRQYHQWLRQQRYHOW\ SULQFLSOH WKH HYROXWLRQWUDQVIRUPDWLRQ SULQFLSOH WKH V\PPHWU\DV\PPHWU\ SULQFLSOH WKH VRIWQHVVKDUGQHVV SULQFLSOH WKH VHULRXVQHVVSOD\IXOQHVV SULQFLSOH WKH DFWLYHQHVVLQDFWLYHVV SULQFLSOH WKH VHOIQHVVRWKHUQHVV SULQFLSOH WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH WKH VDPHGLIIHUHQFH SULQFLSOH WKH VWDELOLW\UHDFWLRQ SULQFLSOH WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH DQG WKH LQWHQWLRQDOLW\ QRQLQWHQWLRQDOLW\SULQFLSOH )RU LQVWDQFH LQ UHODWLRQ WR WKH IRUPDOQHVVLQIRUPDOQHVV SULQFLSOH LI WKHUHLVIRUPDOQHVV HJWKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQG FRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKHLGHRORJ\RIIUHHJDQLVP WKHUH LV LQIRUPDOQHVV HJ WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVVLQ WKHLGHRORJ\RI IUHHJDQLVPDVVKRZQLQWKHFULWLFLVPV WKDW IRUDJLQJ RQ WKH VWUHHW LV RIWHQ ORRNHG GRZQ XSRQ E\ WKRVH LQ PDLQVWUHDP VRFLHW\ WKDW UHFODLPHG LWHPV LQ GXPSVWHUV FDQ EH XQKHDOWK\ DQGGDQJHURXVWKDWLWKDVVRPHH[WUHPLVWURRWVLQUHOLJLRQWKDWLWLVQRWVR SUDFWLFDODVURPDQWLFDOO\DVVXPHGE\WKHDGYRFDWHVWKDWLWVSUDFWLFHFDQEH FULPLQDOHWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH DEVROXWHQHVVUHODWLYHQHVV SULQFLSOH LI WKHUH LV DEVROXWHQHVV HJ WKH DEVROXWH UHOLJLRXV YLHZ RI IUHHJDQLVP LQ UHJDUG WR WKHLGHDRI³UHOLJLRXVREOLJDWLRQWRQDWXUHLQWKHIRUPRISROLWLFDODFWLRQ´  WKHUHLVUHODWLYHQHVV HJZKDWLVULJKWIRUWKHUHOLJLRXVYLHZRIIUHHJDQLVP LQ UHJDUG WR WKH LGHD RI ³UHOLJLRXV REOLJDWLRQ WR QDWXUH LQ WKH IRUP RI SROLWLFDO DFWLRQ´ LV QRW QHFHVVDULO\ VR IRU WKH FULWLFV ZKR TXHVWLRQ WKHLU UHOLJLRXVIDQDWLFLVP $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHSDUWLDOLW\WRWDOLW\SULQFLSOHLIWKHUHLVSDUWLDOLW\ HJ WKHSDUWLDOYLHZRIIUHHJDQLVPRQUHFODLPLQJZDVWHV WKHUHLVWRWDOLW\ HJ

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





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³WKHFULPLQDOLW\RIVTXDWWLQJPDNHVLWKDUGWR DFFXUDWHO\WUDFNWKHQXPEHURISHRSOHLQYROYHGLQWKLVDFWLYLW\´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³VXSHUPDUNHWV JURFHU\ VWRUHV DQG UHVWDXUDQWV´ WDUJHWHG E\ GXPSVWHU GLYHUVIRUIRRGZDVWHV WKHUHLVWUDQVILQLWHQHVV HJWKHWUDQVILQLWHQXPEHU RI DOO WKH LQGLYLGXDO LWHPV RI IRRG ZDVWHV LQ KLVWRU\ WKDW KDYH HYHU EHHQ GLVFDUGHG E\ ³VXSHUPDUNHWV JURFHU\ VWRUHV DQG UHVWDXUDQWV´  $QG WKH UHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH SUHFLVHQHVVYDJXHQHVV SULQFLSOH LI WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI  FKDUDFWHULVWLFV RI IUHHJDQLVP LQ WKH DUWLFOH DIRUHFLWHG  WKHUH LV YDJXHQHVV HJ WKH YDJXHQHVVLQWKHLGHQWLILFDWLRQRIWKHFKDUDFWHULVWLFVRIIUHHJDQLVPLQWKH DUWLFOHDIRUHFLWHGVLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRW DQGVRRQ $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,Q UHODWLRQ WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH LI WKHUH LV VLPSOHQHVV HJ WKH UHODWLYHO\ VLPSOH DQDO\VLV RI WKH LGHRORJ\ RI IUHHJDQLVPE\LWVDGYRFDWHV WKHUHLVFRPSOLFDWHGQHVV HJWKHUHODWLYHO\ PRUHFRPSOLFDWHGDQDO\VLVRIWKHLGHRORJ\RI IUHHJDQLVP E\FKDOOHQJLQJ WKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHGRXWE\WKH FULWLFVDVFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHRSHQQHVVKLGGHQQHVVSULQFLSOHLIWKHUHLVRSHQQHVV HJWKHRSHQH[SORUDWLRQRIWKHSRVVLELOLW\RI³UHFODLPLQJDQGHDWLQJIRRG WKDW KDV EHHQ GLVFDUGHG´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³VXSHUPDUNHWV JURFHU\ VWRUHV DQG UHVWDXUDQWV´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

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





,Q UHODWLRQ WR WKH WKHRU\SUD[LV SULQFLSOH LI WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO FRQVWUXFWLRQ RI ³DQWLJOREDOL]DWLRQ´ ZRUOGYLHZV DJDLQVW FRUSRUDWH FDSLWDOLVP LQ FRQWHPSRUDU\ WLPHV  WKHUH LV SUD[LV HJ WKH SUDFWLFDODSSOLFDWLRQRI ³DQWLJOREDOL]DWLRQ´ ZRUOGYLHZVDJDLQVWFRUSRUDWH FDSLWDOLVP LQ FRQWHPSRUDU\ WLPHV WR WKH ILHOG RI ZDVWH WUHDWPHQW OLNH IUHHJDQLVP $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHFRQYHQWLRQQRYHOW\SULQFLSOHLIWKHUHLVFRQYHQWLRQ HJWKHFRQYHQWLRQDOZLVGRPDERXWZRUNHWKLFVIRUZRUNLQJPRUHWRHDUQ DJRRGOLYLQJ WKHUHLVQRYHOW\ HJWKHDOWHUQDWLYHQRYHOFKDOOHQJHWRWKH FRQYHQWLRQDOZLVGRPDERXWZRUNHWKLFVIRUZRUNLQJPRUHWRHDUQDJRRG OLYLQJ E\ WKH QHZ LGHD RI ³ZRUNLQJ OHVV´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¶VVHOIRUJURXSDVVKRZQLQWKH SRVVHVVLRQRISULYDWHSURSHUW\E\WKHFDSLWDOLVWV WKHUHLV RWKHUQHVV HJ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRWKHUVDVVKRZQLQWKHSUDFWLFHRI VKDULQJE\WKHIUHHJDQV $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH UHJUHVVLRQSURJUHVVLRQ SULQFLSOH LI WKHUH LV UHJUHVVLRQ HJ WKH UHJUHVVLRQ PDGH E\ IUHHJDQLVP DV VKRZQ LQ WKH SUREOHPVSRLQWHGRXWE\WKHFULWLFV WKHUHLVSURJUHVVLRQ HJWKHSURJUHVV PDGH E\ IUHHJDQLVP DV VKRZQ LQ LWV FRQWULEXWLRQ WR WKH UHFODLPLQJ RI ZDVWHVDIRUHFLWHG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH VDPHGLIIHUHQFH SULQFLSOH LI WKHUH LV VLPLODULW\ LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV UHJDUGOHVV RI ZKHWKHU WKLV EH GRQH E\ ZD\ RI IUHHJDQLVP RU E\ ZD\ RI FRUSRUDWH FDSLWDOLVP  WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI IUHHJDQLVP IRU D UHODWLYHO\ PRUH HJDOLWDULDQOLIHZRUOG²EXWWKHFRQWULEXWLRQWRWKHPROGLQJDQGFRQWURORI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI FRUSRUDWH FDSLWDOLVP IRU D UHODWLYHO\PRUHHOLWLVWOLIHZRUOG $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,QUHODWLRQWRWKHVWDELOLW\UHDFWLRQSULQFLSOHLIWKHUHLVVWDELOLW\ HJ WKHUHODWLYHO\PRUHVWDEOHFRQGLWLRQRIWKHSUDFWLFHRIFRUSRUDWHFDSLWDOLVP LQ WKH ROGHU GD\V  ZKHQ ³FRXQFLOV DQG ODQGORUGV«ZRXOG UDWKHU NHHS SURSHUWLHVERDUGHGXSLIWKH\FDQQRWPDNHDVXIILFLHQWSURILWIURPWKHP´ DQG JRRG EXLOGLQJV DUH OHIW XQXVHG ZKLOH WKHUH ZHUH KRPHOHVV RQ WKH VWUHHWV WKHUHLVUHDFWLRQ HJWKHSUDFWLFHRIFRUSRUDWHFDSLWDOLVPLQWKH ROGHU GD\V WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ DV VKRZQ LQ WKH ULVH RI IUHHJDQLVP QRZDGD\V VLQFH ³IUHHJDQV VHH WKLV SUDFWLFH >RI OHDYLQJ JRRG EXLOGLQJVXQXVHGZKHQWKHUHDUHKRPHOHVVRQWKHVWUHHWV@DVVHQVHOHVVDQG DFRXQWHUSURGXFWLYHXVHRIUHVRXUFHV´  :.U1286( $QG WKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH ,Q UHODWLRQ WR WKH IXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFLSOH LI WKHUH LV IXQFWLRQDOLW\ HJWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQ LQ WKH SUDFWLFH RI ³FRXQFLOV DQG ODQGORUGV´ LQ WKH ROGHU GD\V ZKR ³ZRXOGUDWKHUNHHSSURSHUWLHVERDUGHGXSLIWKH\FDQQRWPDNHDVXIILFLHQW SURILW IURP WKHP´ EHFDXVH WKLV VHUYHV WKH IXQFWLRQ RI SHUSHWXDWLQJ FRUSRUDWH FDSLWDOLVP DW WKH WLPH  WKHUH LV QRQIXQFWLRQDOLW\ HJ WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH SUDFWLFH RI VTXDWWLQJ E\ WKH IUHHJDQV QRZDGD\V VXFK WKDW WKH SUDFWLFH RI ³FRXQFLOV DQG ODQGORUGV´ LQ WKH ROGHU GD\V IRU OHDYLQJ JRRG EXLOGLQJV XQXVHG LV QR ORQJHU VR IXQFWLRQDO LQ RXU WLPH EHFDXVH RI GLIIHUHQW VWDQGDUGV DQG H[SHFWDWLRQV GXH WR ³WKH DQWLJOREDOL]DWLRQ PRYHPHQW´  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $QG LQ UHODWLRQ WR WKH LQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\ SULQFLSOH LI WKHUH LV LQWHQWLRQ HJ WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





RXWFRPHDVVKRZQLQWKHGHVLJQRIIUHHJDQLVPIRUDEHWWHUZRUOGEDVHGRQ UHFODLPLQJ ZDVWHV  WKHUH LV QRQLQWHQWLRQ HJ WKH UHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH VXFK WKDW WKH RXWFRPHFDQHYHQEHFRXQWHULQWHQWLRQDOLQEHLQJWKHRSSRVLWHRIZKDWZDV RULJLQDOO\ SODQQHG DV VKRZQ LQ WKH XQLQWHQGHG FRQVHTXHQFHV RI IUHHJDQLVP ZKHQ LPSOHPHQWHG LQ WKDW IRUDJHUV RQ WKH VWUHHW VXIIHU IURP GLVUHVSHFW E\ WKRVH LQ PDLQVWUHDP VRFLHW\ WKDW UHFODLPHG LWHPV LQ GXPSVWHUV FDQ EH XQKHDOWK\ DQG GDQJHURXV WKDW LW LV QRW VR SUDFWLFDO DV URPDQWLFDOO\ DVVXPHG E\ WKH DGYRFDWHV DQG WKDW LWV SUDFWLFH FDQ EH FULPLQDOHWF $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

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²DQGYLFHYHUVD ,Q DQ\ HYHQW ZKDW WKHQ FDQ QRZ EH FRQFOXGHG DERXW WKH IXWXUH RI ZDVWH DW WKH HQG RI WKLV ORQJ LQWHOOHFWXDO MRXUQH\ DERXW XVHOHVVQHVV LQ &KDSWHU7ZR DQGXVHIXOQHVV LQWKLVFKDSWHU " 7KLV LV WKH TXHVWLRQ ZKLFK WKH QH[W FKDSWHU &KDSWHU )RXU RQ WKH IXWXUHRI ZDVWHLVWRDQVZHU²VR ZH QRZWXUQWRFKDSWHUIRXUWRDGGUHVV WKLVTXHVWLRQ        



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH8VHIXOQHVVDQG,WV'RXEOH6LGHV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡8VHIXOQHVVDQGWKH0LQG ²([XVHIXOQHVV(35DQGWKHZDVWHUHF\FOLQJDWWLWXGH ²([XVHIXOQHVVGXPSVWHUGLYLQJDQGWKHZDVWHFROOHFWLQJKDELW  ‡8VHIXOQHVVDQG1DWXUH ²([XVHIXOQHVVZDVWHWRHQHUJ\DQGVXVWDLQDELOLW\ ²([XVHIXOQHVVZDVWHDQGDQLPDOSURGXFWV  ‡8VHIXOQHVVDQG6RFLHW\ ²([XVHIXOQHVVZDVWHUHF\FOHDQGWKHFRVWEHQHILWDQDO\VLV ²([XVHIXOQHVVWKHZDVWHFRQYHUWHUDQGWHFKQRORJ\  ‡8VHIXOQHVVDQG&XOWXUH ²([XVHIXOQHVV]HURZDVWHDQGUHVRXUFHUHGHVLJQSKLORVRSK\ ²([XVHIXOQHVVIUHHJDQLVPDQGWKHLGHRORJ\RIUHFODLPLQJZDVWH 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$VXPPDU\RI&KRI)3+:                 

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





7DEOH8VHIXOQHVV(35DQGWKH:DVWH5HF\FOLQJ$WWLWXGH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡*RDOVRI(35 ²([ WR ³HQFRXUDJH FRPSDQLHV WR GHVLJQ SURGXFWV IRU UHXVH UHF\FODELOLW\DQGPDWHULDOVUHGXFWLRQ´ ²([ WR ³FRUUHFW«PDUNHW VLJQDOV WR WKH FRQVXPHU E\ LQFRUSRUDWLQJ ZDVWHPDQDJHPHQWFRVWVLQWRWKHSURGXFW¶VSULFH´ ²([WR³SURPRW>H@«LQQRYDWLRQLQUHF\FOLQJWHFKQRORJ\´  ‡$SSURDFKHVWR(35 ²([³PDQGDWRU\´ ²([³QHJRWLDWHG´ ²([³YROXQWDU\´  ‡3UREOHPVZLWK(35 ²)LUVWO\RQH PDLQFULWLFLVPRI(35LV WKDWLWVLPSOHPHQWDWLRQFDQEH OLPLWHGIRUFRPSOH[SURGXFWV ²6HFRQGO\DQRWKHUPDLQFULWLFLVPRI(35LVWKDWLWVDSSOLFDWLRQLVQRW HIIHFWLYHHYHQLQUHOHYDQWFDVHV ²7KLUGO\ VWLOO DQRWKHU PDLQ FULWLFLVP RI (35 LV WKDW LW IRFXVHV WRR PXFKRQSURGXFHUUHVSRQVLELOLW\QRWFRQVXPHUUHVSRQVLELOLW\ ²)RXUWKO\ DQ DGGLWLRQDO PDLQ FULWLFLVP RI (35 LV WKDW LWV PHDVXUHPHQWVDUHQRWFRQVLVWHQWRYHUWLPH ²)LIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI (35 LV WKDW LW FDQ EH FRXQWHUSURGXFWLYH ²$QG VL[WKO\ VWLOO DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI (35 LV WKDW LW FDQEHPLVXVHGIRUVRPHWKLQJHOVH 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+:6HHERRNIRUFLWDWLRQV       



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH8VHIXOQHVV:DVWHWR(QHUJ\DQG6XVWDLQDELOLW\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡5HVRXUFH5HFRYHU\0HWKRGV ²([³ELRORJLFDOSURFHVVLQJ´ ²([³VRXUFHVHSDUDWHGFXUEVLGHFROOHFWLRQ´  ‡7KH&DVHRI:DVWHWR(QHUJ\ ²([³:W(PHWKRGV´ ²([³JOREDO:W(GHYHORSPHQWV´  ‡3UREOHPVZLWK:DVWHWR(QHUJ\ ²)LUVWO\ RQH PDLQ FULWLFLVP RI ZDVWHWRHQHUJ\ LV WKDW LW FDQ EH SROOXWLQJ ²6HFRQGO\DQRWKHUPDLQFULWLFLVPRIZDVWHWRHQHUJ\LVWKDWLWFDQXVH XSYDOXDEOHUHVRXUFHV ²7KLUGO\ VWLOO DQRWKHU PDLQ FULWLFLVP RI ZDVWHWRHQHUJ\ LV WKDW LQFLQHUDWLRQFRPSHWHVZLWKRWKHUZDVWHWUHDWPHQWDFWLYLWLHV ²)RXUWKO\DQDGGLWLRQDOPDLQFULWLFLVPRIZDVWHWRHQHUJ\LVWKDWHDFK :W( PHWKRG KDV LWV RZQ FRVWV DQG EHQHILWV RU DGYDQWDJHV DQG GLVDGYDQWDJHV  ²$QG ILIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI ZDVWHWRHQHUJ\ LV WKDWHQHUJ\HIILFLHQF\KDVLWVOLPLWV 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 )URP 6HF  RI )3+: 6HH ERRN IRU PRUH GHWDLOV DQG FLWDWLRQV           

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





7DEOH8VHIXOQHVV:DVWH5HF\FOHDQGWKH&RVW%HQHILW$QDO\VLV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB ‡ 7KHILUVWGLVDJUHHPHQWEHWZHHQWKHSURSRQHQWVDQGRSSRQHQWVRI ZDVWH UHF\FOHKDVWRGRZLWKUHF\FOLQJYVRWKHUPHWKRGV  ‡ 7KH VHFRQG GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWHUHF\FOHKDVWRGRZLWKHFRQRPLFYVILVFDOPHDVXUHPHQW  ‡7KHWKLUGGLVDJUHHPHQWEHWZHHQWKHSURSRQHQWVDQGRSSRQHQWVRIZDVWH UHF\FOHKDVWRGRZLWKZKHWKHUWKHDPRXQWRIHQHUJ\VDYHGLQUHF\FOLQJLV PRUHWKDQWKHDPRXQWRIHQHUJ\VSHQWLQWKHSURFHVV  ‡7KHIRXUWKGLVDJUHHPHQWEHWZHHQWKHSURSRQHQWVDQGRSSRQHQWVRIZDVWH UHF\FOHKDVWRGRZLWKWKHDPRXQWRIPRQH\VDYHG  ‡ 7KHILIWKGLVDJUHHPHQWEHWZHHQWKHSURSRQHQWVDQGRSSRQHQWVRI ZDVWH UHF\FOHKDVWRGRZLWKZRUNLQJFRQGLWLRQV  ‡7KHVL[WKGLVDJUHHPHQWEHWZHHQWKHSURSRQHQWVDQGRSSRQHQWVRIZDVWH UHF\FOHKDVWRGRZLWKHQYLURQPHQWDOLPSDFW  ‡ 7KH VHYHQWK GLVDJUHHPHQW EHWZHHQ WKH SURSRQHQWV DQG RSSRQHQWV RI ZDVWHUHF\FOHKDVWRGRZLWKLQFRPHORVVDQGVRFLDOFRVWV  ‡ $QGWKHHLJKWKGLVDJUHHPHQWEHWZHHQWKHSURSRQHQWVDQGRSSRQHQWVRI ZDVWH UHF\FOH KDV WR GR ZLWK ³SXEOLF SDUWLFLSDWLRQ LQ UHF\FOLQJ SURJUDPPHV´ 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 )URP 6HF  RI )3+: 6HH ERRN IRU PRUH GHWDLOV DQG FLWDWLRQV      



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH8VHIXOQHVV=HUR:DVWHDQG5HVRXUFH5HGHVLJQ3KLORVRSK\ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡ 7KH ILUVW GLVSXWH WR EH LQWURGXFHG KHUH KDV WR GR ZLWK ]HUR ZDVWH YV UHF\FOLQJ²DV ³VRPH FODLP WKDW WKH NH\ FRPSRQHQW WR ]HUR ZDVWH LV UHF\FOLQJ ZKLOH RWKHUV UHMHFW WKDW QRWLRQ LQ IDYRU RI UHXVLQJ KLJK IXQFWLRQ´ :.LL   ‡7KHVHFRQGGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HURZDVWHYV GXPS FDSDFLW\²DV VRPH MXVWLI\ =HUR :DVWH E\ SRLQWLQJ RXW WKDW ³PDQ\ GXPSV DUH FXUUHQWO\ H[FHHGLQJ FDUU\LQJ FDSDFLW\´ ZKHUHDV ³RWKHUV FRXQWHU E\ SRLQWLQJ RXW WKDW WKHUH DUH KXJH WUDFWV RI ODQG DYDLODEOH WKURXJKRXWWKH86$DQGRWKHUFRXQWULHVZKLFKFRXOGEHXVHGIRUGXPSV´ :.LL   ‡ 7KH WKLUG GLVSXWH WR EH LQWURGXFHG KHUH KDV WR GR ZLWK ]HUR ZDVWH YV GHFRQVWUXFWLRQ²DV VRPH DUJXHG WKDW ]HUR ZDVWH LV ³DERXW UHVWUXFWXULQJ SURGXFWLRQ DQG GLVWULEXWLRQ V\VWHPV WR SUHYHQW ZDVWH IURP EHLQJ PDQXIDFWXUHG LQ WKH ILUVW SODFH´ ZKHUHDV RWKHUV IDYRU LQVWHDG ³GHFRQVWUXFWLRQ´DV³FRQVWUXFWLRQLQUHYHUVH´ :.LL   ‡ 7KH IRXUWK GLVSXWH WR EH LQWURGXFHG KHUH KDV WR GR ZLWK ]HUR ZDVWH YV PDUNHWEDVHG FDPSDLJQV²DV SHRSOH GLVDJUHH RQ WKH H[WHQW WR ZKLFK PDUNHWEDVHGFDPSDLJQVFDQKHOSWKH=HUR:DVWHPRYHPHQW  ‡ 7KH ILIWK GLVSXWH WR EH LQWURGXFHG KHUH KDV WR GR ZLWK ]HUR ZDVWH YV JRYHUQPHQW²DV SHRSOH GLVDJUHH RQ WKH H[WHQW WR ZKLFK WKH VWDWH RU JRYHUQPHQW FDQKHOSWRSURPRWH=HUR:DVWH  ‡$QGWKHVL[WKGLVSXWHWREHLQWURGXFHGKHUHKDVWRGRZLWK]HURZDVWHYV QDWXUH²DVSHRSOHGLVDJUHHRQWKHH[WHQWWRZKLFKQDWXUHLVWKHPRGHOIRU ]HURZDVWH 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 )URP 6HF  RI )3+: 6HH ERRN IRU PRUH GHWDLOV DQG FLWDWLRQV  

&KDSWHU8VHIXOQHVVDQG,WV'RXEOH6LGHV 





7DEOH8VHIXOQHVV)UHHJDQLVPDQGWKH,GHRORJ\ RI5HFODLPLQJ:DVWH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡0DLQ&KDUDFWHULVWLFVRI)UHHJDQLVP ²([³IRUDJLQJ´ ²([³VKDULQJ´ ²([³VTXDWWLQJ´ ²([³ZRUNLQJOHVV´ ²([³YHJDQLVP´ ²([³KXPDQXUH´  ‡3UREOHPVZLWKWKH,GHRORJ\RI)UHHJDQLVP ²)LUVWO\ RQH PDLQ FULWLFLVP RI WKH LGHRORJ\ RI IUHHJDQLVP LV WKDW IRUDJLQJ RQ WKH VWUHHW LV RIWHQ ORRNHG GRZQ XSRQ LQ PDLQVWUHDP VRFLHW\ ²6HFRQGO\DQRWKHUPDLQFULWLFLVPRIWKHLGHRORJ\RIIUHHJDQLVPLVWKDW UHFODLPHGLWHPVLQGXPSVWHUVFDQEHXQKHDOWK\DQGGDQJHURXV ²7KLUGO\VWLOODQRWKHUPDLQFULWLFLVPRIWKHLGHRORJ\RIIUHHJDQLVPLV WKDWLWKDVVRPHH[WUHPLVWURRWVLQUHOLJLRQ ²)RXUWKO\DQDGGLWLRQDOPDLQFULWLFLVPRIWKHLGHRORJ\RI IUHHJDQLVP LVWKDWLWLVVRQRWSUDFWLFDODVURPDQWLFDOO\DVVXPHGE\WKHDGYRFDWHV ²$QG ILIWKO\ DQRWKHU DGGLWLRQDO PDLQ FULWLFLVP RI WKH LGHRORJ\ RI IUHHJDQLVPLVWKDWLWVSUDFWLFHFDQEHFULPLQDO 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 )URP 6HF  RI )3+: 6HH ERRN IRU PRUH GHWDLOV DQG FLWDWLRQV  

‡3$57)285‡ BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  &RQFOXVLRQ                                

  





&+$37(5 &21&/86,21²7+()8785(2):$67( BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  3HVVLPLVPLVDZDVWHRIWLPH BB1RUPDQ&RXVLQV %5$ 



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²ZKLOHOHDUQLQJIURPGLIIHUHQWDSSURDFKHVLQWKHOLWHUDWXUHEXW ZLWKRXWIDYRULQJDQ\RQHRIWKHP QRULQWHJUDWLQJWKHPVLQFHWKH\DUHQRW QHFHVVDULO\FRPSDWLEOHZLWKHDFKRWKHU  0RUH VSHFLILFDOO\ WKLV ERRN RIIHUV D QHZ WKHRU\ WKDW LV WKH WUDQVILJXUDWLYHWKHRU\RIZDVWH WRJREH\RQGWKHH[LVWLQJDSSURDFKHVLQD QRYHOZD\ $VDUHFDSIURP&KDSWHU2QHP\WUDQVILJXUDWLYHWKHRU\RIZDVWHKDV IRXUPDMRUGLVWLQFWIHDWXUHV )LUVWO\P\WKHRU\PDNHVJRRGXVHRIDOOWKHRUHWLFDODSSURDFKHVWRWKH VWXG\RIZDVWHLQUHODWLRQWRXVHOHVVQHVVDQGXVHIXOQHVVEHWKH\DERXWWKH PHQWDO DUJXPHQW WKH QDWXUDO DUJXPHQW WKH VRFLHWDO DUJXPHQW RU WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



FXOWXUDO DUJXPHQW²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²WR EH HODERUDWHG LQ WKH UHVW RI WKH ERRN ZLWKDVXPPDU\LQWKHFRQFOXGLQJFKDSWHU %HFDXVH RI WKH ODVW WKHVLV RQ ³WKH SRVWKXPDQ WUDQVILJXUDWLRQ´ WKH ZRUG³WUDQVILJXUDWLYH´LQWKHWLWOHRIP\WKHRU\DUHVXJJHVWLYHEHFDXVHLW UHIHUV WR WKH VWULNLQJ FKDQJHV RI ZDVWH RYHU WLPH²ZKLFK WKHQ UHTXLUH D PXOWLIDFHWHGH[SORUDWLRQRIWKHGLDOHFWLFUHODWLRQVEHWZHHQXVHOHVVQHVVDQG XVHIXOQHVV DV ZHOO DV DQ XQGHUVWDQGLQJ RI WKH GLIIHUHQW YLHZV UHJDUGLQJ

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WKHVHGLDOHFWLFUHODWLRQVLQWKHVWXG\RIZDVWH WRJHWKHUZLWKRWKHUGHEDWHV DVZLOOEHGLVFXVVHGLQWKHUHVWRIWKHERRN ²DQGLQWKHHQGLWFDOOVIRUD QHHGWRWUDQVFHQGWKHPE\IXWXUHDGYDQFHGKXPDQVDQGODWHUSRVWKXPDQV LQWKHFRQWH[WRIWKHJUHDWWUDQVIRUPDWLRQVRIZDVWHLQWKHIXWXUHZRUOG DV ZLOOEHGLVFXVVHGLQWKHUHVWRIWKLVFKDSWHU  :LWK WKLV FODULILFDWLRQ LQ PLQG²WKH VHPLQDO SURMHFW KHUH LI VXFFHVVIXO ZLOO IXQGDPHQWDOO\ FKDQJH WKH ZD\ WKDW ZH WKLQN DERXW XVHOHVVQHVV DQG XVHIXOQHVV LQ WKH VWXG\ RI ZDVWH WRJHWKHU ZLWK RWKHU GHEDWHV DV DOUHDG\ GLVFXVVHG LQ WKH UHVW RI WKH ERRN  IURP WKH FRPELQHG SHUVSHFWLYHV RI WKH PLQG QDWXUH VRFLHW\ DQG FXOWXUH ZLWK HQRUPRXV LPSOLFDWLRQV IRU WKH KXPDQ IXWXUH DQG ZKDW , RULJLQDOO\ FDOOHG LWV ³SRVW KXPDQ´IDWH

,Q5HODWLRQWR0HWKRG 7KHILUVWVL[WKHVHVDUHLQUHODWLRQWRPHWKRGLQH[LVWHQWLDOGLDOHFWLFV DVVKRZQEHORZ

VW7KHVLV7KH)RUPDOQHVV,QIRUPDOQHVV3ULQFLSOH 7KHILUVWWKHVLVUHIHUVWRWKHIRUPDOQHVVLQIRUPDOQHVVSULQFLSOH RQWKH IRUPDO UHTXLUHPHQWV RI ORJLFDO V\VWHPV  LQ WKH FDWHJRU\ RI ³PHWKRG´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²DQGYLFHYHUVD )RULOOXVWUDWLRQH[LVWHQWLDOGLDOHFWLFVFDQ PDNHXVHRIERWKFODVVLFDO ORJLFV XQGHU FHUWDLQ FRQGLWLRQV HJ HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ ZKHQ WKH\ DUH FOHDUFXW HWF  DQG QRQFODVVLFDO ORJLFV XQGHU DOWHUQDWLYH FRQGLWLRQV HVSHFLDOO\WKRXJKQRWH[FOXVLYHO\ZKHQWKH\DUH³XQNQRZQ´ ³LUUHOHYDQW´ ³DPELJXRXV´ ³SRVVLEOH´ ZLWK ³GLIIHUHQW GHJUHHV RI WUXWK´ HPSLULFDOO\LQFRQVLVWHQWLQDGHVLUDEOHZD\HWF  :.X 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



)RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV IRUPDOQHVV HJ WKH IRUPDO ORJLFDO UHTXLUHPHQW RI VRXQGQHVV DQG FRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH VWXG\ RI ELRGHJUDGDEOH ZDVWH DQG HSLGHPLFV LQ 6HF  WKH IRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVFRQVLVWHQF\DQGFRPSOHWHQHVVLQ D V\VWHP RI LGHDV DV LQ WKH VWXG\ RQ FOLQLFDO ZDVWH DQG GLVHDVHV LQ 6HF WKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQGFRPSOHWHQHVVLQD V\VWHPRILGHDVDVLQWKHVWXG\RQOLWWHUDQGWKHHQYLURQPHQWLQ6HF WKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQGFRPSOHWHQHVVLQDV\VWHP RILGHDVDVLQWKHVWXG\RQVSDFHGHEULVLQ6HFWKHIRUPDOORJLFDO UHTXLUHPHQWRIVRXQGQHVVDQGFRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKH FUHDWLRQ RI WKH %DVHO &RQYHQWLRQ LQ 6HF  WKH IRUPDO ORJLFDO UHTXLUHPHQWRIVRXQGQHVVDQGFRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKH ODXQFK RI WKH HQYLURQPHQWDO MXVWLFH PRYHPHQW LQ 6HF  WKH IRUPDO ORJLFDO UHTXLUHPHQW RI VRXQGQHVV FRQVLVWHQF\ DQG FRPSOHWHQHVV LQ D V\VWHPRILGHDVDVLQHWKFDOFRQVXPHULVPLQ6HFWKHIRUPDOORJLFDO UHTXLUHPHQW RI VRXQGQHVV FRPSOHWHQHVV DQG FRQVLVWHQF\ LQ D V\VWHP RI LGHDVDVLQWKHVLPSOHOLYLQJ PRYHPHQWLQ6HFWKHIRUPDOORJLFDO UHTXLUHPHQW RI VRXQGQHVV FRPSOHWHQHVV DQG FRQVLVWHQF\ LQ D V\VWHP RI LGHDV DV LQ (35 LQ 6HF  WKH IRUPDO ORJLFDO UHTXLUHPHQW RI VRXQGQHVV DQG FRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH SUDFWLFH RI GXPSVWHU GLYLQJ LQ 6HF  WKH IRUPDO ORJLFDO UHTXLUHPHQW RI VRXQGQHVVDQGFRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKHLGHDRI:W(LQ 6HFWKHIRUPDOORJLFDOUHTXLUHPHQWRIVRXQGQHVVDQGFRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH XVH RI DQLPDO SURGXFWV DQG DQLPDO E\ SURGXFWV LQ 6HF  WKH IRUPDO ORJLFDO UHTXLUHPHQW RI VRXQGQHVV FRQVLVWHQF\DQGFRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKHGHEDWHRQWKH FRVWEHQHILW DQDO\VLV RI ZDVWH UHF\FOH LQ 6HF  WKH IRUPDO ORJLFDO UHTXLUHPHQWRIVRXQGQHVVDQGFRPSOHWHQHVVLQDV\VWHPRILGHDVDVLQWKH XVHRIWKHZDVWHFRQYHUWHULQ6HFWKHIRUPDOORJLFDOUHTXLUHPHQWRI VRXQGQHVV FRQVLVWHQF\ DQG FRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH FDOO IRU =HUR :DVWH LQ 6HF  DQG WKH IRUPDO ORJLFDO UHTXLUHPHQW RI VRXQGQHVV DQG FRPSOHWHQHVV LQ D V\VWHP RI LGHDV DV LQ WKH LGHRORJ\ RI IUHHJDQLVPLQ6HF  2Q WKH RWKHU KDQG WKHUH LV DOVR LQIRUPDOQHVV HJ WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH VWXG\ RI ELRGHJUDGDEOH ZDVWH DQG HSLGHPLFV DV VKRZQ LQ WKH FULWLFLVPV WKDW HSLGHPLFV FDQ SURGXFH GHVLUDEOH HIIHFWV LQVWHDG WKDW HSLGHPLFV FDQ EH VWRSSHG RU SUHYHQWHG WKDW LW LV QRW FOHDU WR ZKDW H[WHQW H[DFWO\ ELRGHJUDGDEOHZDVWHDQGELRZDVWHKDYHUHDOO\FDXVHGHSLGHPLFVLQKLVWRU\ HWFLQ6HFWKHQRQIRUPDOH[LVWHQFHRIXQVRXQGQHVVLQFRQVLVWHQF\ DQGLQFRPSOHWHQHVVLQWKHVWXG\RQFOLQLFDOZDVWHDQGGLVHDVHVDVVKRZQ

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





LQWKHFULWLFLVPVWKDWWKHJRYHUQPHQWDOUHJXODWLRQRIFOLQLFDOZDVWHGLVSRVDO FDQ EH FRVWO\ DQG WKXV SURGXFH LQFHQWLYHV WR YLRODWH LW WKDW WKHUH DUH QR XQLYHUVDO DJUHHPHQW DERXW LWV HQIRUFHPHQW WKDW WKH PHWKRGV RI FOLQLFDO ZDVWHGLVSRVDOKDYHWKHLURZQOLPLWVWKDWZKDWFRQVWLWXWHV³FOLQLFDOZDVWH´ >RU ³PHGLFDO ZDVWH´@ GHSHQGV RQ GLIIHUHQW GHILQLWLRQV DQG KDV FUXFLDO LPSOLFDWLRQV LQ SUDFWLFH HWF LQ 6HF  WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH VWXG\ RQ OLWWHU DQG WKH HQYLURQPHQWDVVKRZQLQWKHFULWLFLVPVWKDWWKHSUHYHQWLRQRIOLWWHULQJLV WRRFRPSOLFDWHGLQSUDFWLFHWKDWPDQ\FDVHVRIOLWWHULQJDUHXQLQWHQWLRQDO >ZKLFKLVVXEMHFWWRGLIIHUHQWXQFHUWDLQFLUFXPVWDQFHV@WKDWHDFKSURSRVHG VROXWLRQKDVLWVRZQGLVDGYDQWDJHVWKDWWKHUHLVQRXQLYHUVDOUHJXODWLRQRI OLWWHULQJ EHKDYLRU HWF LQ 6HF  WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVVDQGLQFRPSOHWHQHVVLQWKHVWXG\RQVSDFHGHEULVDVVKRZQLQ WKH FULWLFLVPV WKDW WKH PHDVXUHPHQW RI VSDFH GHEULV LV QRW DQ DFFXUDWH EXVLQHVV LQ WKH ILUVW SODFH WKDW WR PLQLPL]H VSDFH GHEULV E\ SUHYHQWLQJ VSDFHFROOLVLRQVLVHDVLHUVDLGWKDQGRQHWHFKQRORJLFDOO\WKDWPDQ\RIWKH SURSRVHGVROXWLRQVDUHWRRH[SHQVLYHWREHFRVWHIIHFWLYHWKDWWKHUHLVQR LQWHUQDWLRQDO WUHDW\ EDQQLQJ VSDFH GHEULV WKDW WKHUH DUH VLPSO\ WRR PDQ\ SLHFHV RI VSDFH GHEULV WR EH DEOH WR FRSH ZLWK WKHP DOO RU HYHQ PRVW RI WKHP HWF LQ 6HF  WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH FUHDWLRQ RI WKH %DVHO &RQYHQWLRQ DV VKRZQ LQ WKH FULWLFLVPV WKDW ZKDW FRQVWLWXWHV KD]DUGRXV ZDVWH LV VXEMHFW WR FRQWHQWLRQ WKDW WKHUH DUH TXHVWLRQDEOH UXOHV DERXW ³REOLJDWLRQV´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³HQYLURQPHQWDOMXVWLFH´DQG³HQYLURQPHQWDO LQMXVWLFH´ HWF LQ 6HF  WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV LQFRQVLVWHQF\DQGLQFRPSOHWHQHVVLQHWKLFDOFRQVXPHULVPDVVKRZQLQWKH FULWLFLVPV WKDW WKH DFWXDO HIIHFW RI HWKLFDO FRQVXPHULVP LV OLPLWHG WKDW PRUDOER\FRWWFDQEHEDVHGRQLQFRUUHFWRUOLPLWHGLQIRUPDWLRQWKDWLWGRHV QRWJLYHVXIILFLHQWDWWHQWLRQWRWKHSRZHUVWUXFWXUHRIVRFLHW\WKDWLWFDQEH FRXQWHUSURGXFWLYH LQ HQFRXUDJLQJ LPPRUDO EHKDYLRU LQVWHDG WKDW HWKLFDO FRQVXPHULVP LV D PLVWDNH LQ WKLQNLQJ WKDW WKHUH DUH LQFRQVLVWHQW GHILQLWLRQVRIZKDWFRQVWLWXWHVVRPHWKLQJ³PRUDO´LQWKHILUVWSODFHHWFLQ 6HFWKHQRQIRUPDOH[LVWHQFHRIXQVRXQGQHVVLQFRPSOHWHQHVVDQG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



LQFRQVLVWHQF\ LQ WKH VLPSOH OLYLQJ PRYHPHQW DV VKRZQ LQ WKH FULWLFLVPV WKDWVLPSOHOLYLQJFDQEHGHFDGHQWWKDWVLPSOHOLYLQJLVQRWSRVVLEOHIRU HYHU\RQH WKDW LW LV LGHRORJLFDO LQ WKDW VLPSOH OLIHVW\OH KDV EHHQ XVHG E\ GLIIHUHQW JURXSV IRU WKHLU XOWHULRU SXUSRVHV WKDW LW LV QRW VR SUDFWLFDO DV URPDQWLFDOO\ DVVXPHG E\ WKH DGYRFDWHV WKDW GLIIHUHQW DUJXPHQWV E\ GLIIHUHQW DGYRFDWHV LQ WKH PRYHPHQW FDQ EH PXWXDOO\ LQFRQVLVWHQW RU FRQWUDGLFWRU\HWFLQ6HFWKHQRQIRUPDOH[LVWHQFHRIXQVRXQGQHVV LQFRPSOHWHQHVVDQGLQFRQVLVWHQF\LQ(35DVVKRZQLQWKHFULWLFLVPVWKDW LWVLPSOHPHQWDWLRQFDQEHOLPLWHGIRUFRPSOH[HOHFWURQLFSURGXFWVWKDWLWV DSSOLFDWLRQ LV QRW HIIHFWLYH WKDW LW IRFXVHV WRR PXFK RQ SURGXFHU UHVSRQVLELOLW\ WKDW LWV PHDVXUHPHQWV DUH QRW FRQVLVWHQW RYHU WLPH WKDW LW FDQEHFRXQWHUSURGXFWLYHWKDWLWFDQEHPLVXVHGIRUVRPHWKLQJHOVHHWF LQ6HFWKHQRQIRUPDOH[LVWHQFHRIXQVRXQGQHVVDQGLQFRPSOHWHQHVV LQWKHSUDFWLFHRIGXPSVWHUGLYLQJDVVKRZQLQWKHFULWLFLVPVWKDWLWFDQEH LOOHJDOWKDWWKHSUDFWLFHRIGXPSVWHUGLYLQJLVQRWZHOOUHVSHFWHGE\WKRVH LQ PDLQVWUHDP VRFLHW\ WKDW LW LV XQKHDOWK\ WKDW LW LV GDQJHURXV WKDW WKH LWHPV LQ GXPSVWHUV DUH RI LQIHULRU TXDOLW\ HWF LQ 6HF  WKH QRQ IRUPDOH[LVWHQFHRIXQVRXQGQHVVDQGLQFRPSOHWHQHVVLQWKHLGHDRI:W( DV VKRZQ LQ WKH FULWLFLVPV WKDW LW FDQ EH SROOXWLQJ WKDW LW FDQ XVH XS YDOXDEOH UHVRXUFHV WKDW LQFLQHUDWLRQ FRPSHWHV ZLWK RWKHU ZDVWHWUHDWLQJ DFWLYLWLHV WKDW HDFK :W( PHWKRG KDV LWV RZQ FRVWV DQG EHQHILWV WKDW HQHUJ\ HIILFLHQF\ KDV LWV OLPLWV HWF LQ 6HF  WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH XVH RI DQLPDO SURGXFWVDQGDQLPDOE\SURGXFWVDVVKRZQLQWKHFULWLFLVPVWKDWWKHXVHRI DQLPDOSURGXFWVIDFHFRPSHWLWLRQIURPDOWHUQDWLYHVRXUFHVWKDWWKHLUXVHLV SURKLELWHGE\FHUWDLQJURXSVIRUGLIIHUHQWPRUDODQGUHOLJLRXVUHDVRQVWKDW WKHLUXVHLVDOVRQRWUHFRPPHQGHGIRUKHDOWKUHDVRQHWFLQ6HFWKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV LQFRQVLVWHQF\ DQG LQFRPSOHWHQHVV LQWKHGHEDWHRQWKHFRVWEHQHILWDQDO\VLVRIZDVWHUHF\FOHDVVKRZQLQWKH FULWLFLVPV E\ WKH FULWLFV LQ UHJDUG WR WKH  LVVXHV DIRUHGLVFXVVHG LQ 6HF WKHQRQIRUPDOH[LVWHQFHRIXQVRXQGQHVVDQGLQFRPSOHWHQHVVLQWKH XVHRIWKHZDVWHFRQYHUWHUDVVKRZQLQWKHFULWLFLVPVWKDWLWVDSSOLFDWLRQLV OLPLWHG WKDW WKHUH DUH FRPSHWLQJ WHFKQRORJLHV WKDW LW LV QRW QHFHVVDULO\ VDIHU HWF LQ 6HF  WKH QRQIRUPDO H[LVWHQFH RI XQVRXQGQHVV LQFRQVLVWHQF\DQGLQFRPSOHWHQHVVLQWKHFDOOIRU=HUR:DVWHDVVKRZQLQ WKH  GLVSXWHV DERXW =HUR :DVWH DIRUHFLWHG LQ 6HF  DQG WKH QRQ IRUPDO H[LVWHQFH RI XQVRXQGQHVV DQG LQFRPSOHWHQHVV LQ WKH LGHRORJ\ RI IUHHJDQLVPDVVKRZQLQWKHFULWLFLVPVWKDWIRUDJLQJRQWKHVWUHHWLVRIWHQ ORRNHGGRZQXSRQE\WKRVHLQPDLQVWUHDPVRFLHW\WKDWUHFODLPHGLWHPVLQ GXPSVWHUV FDQ EH XQKHDOWK\ DQG GDQJHURXV WKDW LW KDV VRPH H[WUHPLVW

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





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

QG7KHVLV7KH$EVROXWHQHVV5HODWLYHQHVV3ULQFLSOH 7KHVHFRQGWKHVLVUHIHUVWRWKHDEVROXWHQHVVUHODWLYHQHVVSULQFLSOH RQ WKH PXOWLSOLFLW\ RI WKLQJV  LQ WKH FDWHJRU\ RI ³PHWKRG´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK ZDV ILUVW SURSRVHG LQ )3+. LQ WKDW WKHUH LV WKH PXOWLSOLFLW\ RI WKLQJV LQ UHDOLW\ EH WKH\ DERXW HQWLWLHV TXDOLWLHV RU SURSHUWLHV  DQG UHODWLRQVKLSV ,I WKHUH LV VRPHWKLQJ DEVROXWH WKHUH LV OLNHZLVH VRPHWKLQJ  UHODWLYH $QG WKHUH LV QR DEVROXWHQHVV ZLWKRXW UHODWLYHQHVV²DQGYLFHYHUVD %RWKDEVROXWHQHVVDQGUHODWLYHQHVVKHUHDUHDOVRUHOHYDQWWRGLIIHUHQW PRGDOLWLHV RIWHQ FLWHG LQ WKH OLWHUDWXUH RQ RQWRORJ\ VXFK DV SRVVLELOLW\ HJ VRPHWKLQJ ³FDQ´ KDSSHQ  DQG LWV RSSRVLWH HJ LPSRVVLELOLW\  SUREDELOLW\ HJ VRPHWKLQJ ³ZLOO´ KDSSHQ  DQG LWV RSSRVLWH HJ LPSUREDELOLW\  DQG QHFHVVLW\ HJ VRPHWKLQJ ³VKRXOG´ KDSSHQ  DQG LWV RSSRVLWH HJFRQWLQJHQF\  )RULQVWDQFHRQWKHRQHKDQGWKHUHLVDEVROXWHQHVV HJWKHDEVROXWH YLHZ RI WKH ,PSHULDO -DSDQHVH $UP\ $LU 6HUYLFH ZKHQ ERPELQJ 1LQJER ZLWKIOHDVFDUU\LQJWKHEXERQLFSODJXHLQLQ6HFWKHDEVROXWH YLHZ RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV WR GXPS LOOHJDOO\ WR DYRLG KLJK IHHV´ LQ WKH V DIRUHFLWHG LQ 6HF  WKH DEVROXWH YLHZ RI WKRVH ³'XWFK SROLFH DQG ORFDO VXSHUYLVRUV >NQRZQ DV EXLWHQJHZRRQ RSVSRULQJVDPEWHQDDU RU %2$@´ ZKR ³ILQH FLWL]HQV IRU WKURZLQJ DZD\ FDQVERWWOHVRUZUDSSHUVRQWRWKHVWUHHW´LQ6HFWKHDEVROXWHYLHZ RI WKH ,78 ZKLFK ³KDV SODFHG LQFUHDVLQJO\ VWULFW UHTXLUHPHQWV RQ WKH VWDWLRQNHHSLQJ DELOLW\ RI QHZ VDWHOOLWHV DQG GHPDQGV WKDW WKH RZQHUV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



JXDUDQWHHWKHLUDELOLW\WRVDIHO\PRYHWKHVDWHOOLWHVRXWRIWKHLURUELWDOVORWV DW WKH HQG RI WKHLU OLIHWLPHV´ LQ 6HF  WKH DEVROXWH YLHZ RI ³*UHHQSHDFHDQGNH\(XURSHDQFRXQWULHVVXFKDV'HQPDUN´IRU³WKH%DVHO %DQ $PHQGPHQW WR WKH %DVHO &RQYHQWLRQ´ LQ 6HF  WKH DEVROXWH YLHZ RI WKH DGYRFDWHV RI WKH (QYLURQPHQWDO -XVWLFH PRYHPHQW DQG WKH &LYLO5LJKWV0RYHPHQWIRU³VRFLDOMXVWLFHHTXDOSURWHFWLRQDQGDQHQGWR LQVWLWXWLRQDO GLVFULPLQDWLRQ´ LQ 6HF  WKH DEVROXWH YLHZ RI WKH DGYRFDWHV RI HWKLFDO FRQVXPHULVP LQ UHJDUG WR WKH PRUDO EDVLV LQ 6HF  WKH DEVROXWH YLHZ RI WKRVH SHRSOH LQ WKH VLPSOH OLYLQJ PRYHPHQW ZKR ³HVFKHZ DOO WHFKQRORJ\´ DQG ³DUH RIWHQ UHIHUUHG WR DV«QHR /XGGLWHV´LQ6HFWKHDEVROXWHYLHZRI(35LQWHUPVRIIRFXVLQJRQ SURGXFHUUHVSRQVLELOLW\LQ6HFWKHDEVROXWHYLHZRI³DODZLVVXHGLQ ´LQ,WDO\ZKLFK³GHFODUHGGXPSVWHUGLYLQJWREHOHJDO´LQ6HF WKH DEVROXWH YLHZ RI WKRVH ZKR IDYRU LQFLQHUDWLRQ LQ 6HF  WKH DEVROXWH YLHZ RI FHUWDLQ JURXSV IRU YHJHWDULDQ NRVKHU DQG KDODDO GLHWV DJDLQVW WKH LQFOXVLRQ RI VRPH QRQKXPDQ DQLPDO SURGXFWV LQ 6HF  WKH DEVROXWH YLHZ RI WKRVH ³EXVLQHVVHV´ ZKLFK ³LJQRUH WKHP >QHJDWLYH H[WHUQDOLWLHV@ GHVSLWH WKH FRVWV LPSRVHG RQ VRFLHW\´ LQ 6HF  WKH DEVROXWH YLHZ RI WKRVH HQWKXVLDVWLF DGYRFDWHV RI WKH XVH RI ZDVWH FRQYHUWHUV LQ 6HF  WKH DEVROXWH YLHZ RI WKRVH DGYRFDWHV RI =HUR :DVWH³LQIDYRURIUHXVLQJKLJKIXQFWLRQ´LQ6HFDQGWKHDEVROXWH UHOLJLRXVYLHZRIIUHHJDQLVPLQUHJDUGWRWKHLGHDRI³UHOLJLRXVREOLJDWLRQ WRQDWXUHLQWKHIRUPRISROLWLFDODFWLRQ´LQ6HF  2Q WKH RWKHU KDQG WKHUH LV UHODWLYHQHVV HJ ZKDW LV ULJKW IRU WKH ,PSHULDO-DSDQHVH$UP\$LU6HUYLFHWRERPE1LQJERZLWKIOHDVFDUU\LQJ WKH EXERQLF SODJXH LQ  LV QRW QHFHVVDULO\ VR IRU WKH &KLQHVH YLFWLPV DQGWKHLU IDPLO\ PHPEHUVLQ6HFZKDWLVULJKW IRU WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV WR GXPS LOOHJDOO\ WR DYRLG KLJK IHHV´ LQ WKH V DIRUHFLWHG LV QRW QHFHVVDULO\ VR IRU WKH IHGHUDO JRYHUQPHQW WR HQIRUFH SURSHUFOLQLFDOZDVWHGLVSRVDOXQGHUWKHODZLQ6HFZKDWLVULJKWIRU WKRVH ³'XWFK SROLFH DQG ORFDO VXSHUYLVRUV >NQRZQ DV EXLWHQJHZRRQ RSVSRULQJVDPEWHQDDU RU %2$@´ ZKR ³ILQH FLWL]HQV IRU WKURZLQJ DZD\ FDQV ERWWOHV RU ZUDSSHUV RQWR WKH VWUHHW´ LV QRW QHFHVVDULO\ VR IRU WKRVH FLWL]HQV ZKR DUH ILQHG EXW GLVDJUHH DERXW WKH SXQLVKPHQW LQ 6HF  ZKDWLVULJKWIRUWKH,78LQUHJDUGWRLWV³VWULFWUHTXLUHPHQWVRQWKHVWDWLRQ NHHSLQJDELOLW\RIQHZVDWHOOLWHV´LVQRWQHFHVVDULO\VRIRUWKHFULWLFVVLQFH ³VWXGLHV KDYH VXJJHVWHG WKDW HYHQ WKH H[LVWLQJ ,78 UHTXLUHPHQWV DUH QRW HQRXJKWRKDYHDPDMRUHIIHFWRQFROOLVLRQIUHTXHQF\´LQ6HFZKDW LVULJKWIRU³*UHHQSHDFHDQGNH\(XURSHDQFRXQWULHVVXFKDV'HQPDUN´IRU ³WKH%DVHO%DQ$PHQGPHQWWRWKH%DVHO&RQYHQWLRQ´LVQRWQHFHVVDULO\VR IRU ³D QXPEHU RI LQGXVWU\ JURXSV DV ZHOO DV QDWLRQV LQFOXGLQJ $XVWUDOLD

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





DQG &DQDGD´ DJDLQVW WKH DPHQGPHQW LQ 6HF  ZKDW LV ULJKW IRU WKH DGYRFDWHV RI WKH (QYLURQPHQWDO -XVWLFH PRYHPHQW DQG WKH &LYLO 5LJKWV 0RYHPHQW LQ UHJDUG WR ³VRFLDO MXVWLFH HTXDO SURWHFWLRQ DQG DQ HQG WR LQVWLWXWLRQDO GLVFULPLQDWLRQ´ LV QRW QHFHVVDULO\ VR IRU WKH RSSRQHQWV OLNH VRPHFRQVHUYDWLYHLQGXVWU\JURXSVZKLWHVXSUHPDFLVWVHWFLQ6HF ZKDW LV ULJKW IRU WKH DGYRFDWHV RI HWKLFDO FRQVXPHULVP LQ UHJDUG WR WKH PRUDO EDVLV LV QRW QHFHVVDULO\ VR IRU WKH FULWLFV ZKR DUJXHG WKDW PRUDO ER\FRWW FDQ EH EDVHG RQ LQFRUUHFW RU OLPLWHG LQIRUPDWLRQ  WKDW LW FDQ EH FRXQWHUSURGXFWLYH LQ HQFRXUDJLQJ LPPRUDO EHKDYLRU LQVWHDG WKDW HWKLFDO FRQVXPHULVPLVDPLVWDNHLQWKLQNLQJHWFLQ6HFZKDWLVULJKWIRU WKRVHSHRSOHLQWKHVLPSOHOLYLQJPRYHPHQWZKR³HVFKHZDOOWHFKQRORJ\´ DQG ³DUH RIWHQ UHIHUUHG WR DV«QHR/XGGLWHV´ LV QRW QHFHVVDULO\ VR IRU RWKHUVLQWKHPRYHPHQWZKRKDYHWKHRSSRVLWHLQWHUSUHWDWLRQLQWKDWWKH\ ³VHHFXWWLQJHGJHWHFKQRORJLHVDVDZD\WRPDNHDVLPSOHOLIHVW\OHZLWKLQ PDLQVWUHDP FXOWXUH HDVLHU DQG PRUH VXVWDLQDEOH´ LQ 6HF  ZKDW LV ULJKW IRU WKRVH LQ (35 WR IRFXV RQ SURGXFHU UHVSRQVLELOLW\ LV QRW QHFHVVDULO\ VR IRU WKH FULWLFV ZKR DVN IRU D IRFXV RQ FRQVXPHU UHVSRQVLELOLW\WRRLQ6HFZKDWLVULJKWIRU³DODZLVVXHGLQ´LQ ,WDO\ZKLFK³GHFODUHGGXPSVWHUGLYLQJWREHOHJDO´LVQRWQHFHVVDULO\VRIRU WKH ODZ LQ *HUPDQ\ ZKHUH ³D GXPSVWHU V FRQWHQWV DUH UHJDUGHG DV WKH SURSHUW\ RI WKH GXPSVWHU V RZQHU´ VR ³WDNLQJ LWHPV IURP D GXPSVWHU LV YLHZHG DV WKHIW´ LQ 6HF  ZKDW LV ULJKW IRU WKRVH ZKR IDYRU LQFLQHUDWLRQ LV QRW QHFHVVDULO\ VR IRU  WKH FULWLFV ZKR DUH FRQFHUQHG WKDW ³LQFLQHUDWRUV GHVWUR\ YDOXDEOH UHVRXUFHV´ DQG WKDW ³WKH\ PD\ UHGXFH WKH LQFHQWLYHVIRUUHF\FOLQJDQGZDVWHPLQLPL]DWLRQDFWLYLWLHV´LQ6HF ZKDW LV ULJKW IRU FHUWDLQ JURXSV OLNH WKRVH IRU YHJHWDULDQ NRVKHU DQG KDODDO GLHWV LQ UHJDUG WR WKHLU SURKLELWLRQ RI WKH LQFOXVLRQ RI VRPH QRQ KXPDQ DQLPDO SURGXFWV LV QRW QHFHVVDULO\ VR IRU RWKHUV ZKR FRQVXPHU IRRGV EDVHG RQ DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV LQ 6HF  ZKDW LV JRRG IRU WKRVH ³EXVLQHVVHV´ ZKLFK ³LJQRUH WKHP >QHJDWLYH H[WHUQDOLWLHV@ GHVSLWH WKH FRVWV LPSRVHG RQ VRFLHW\´ LV QRW QHFHVVDULO\ VR IRU WKH FULWLFV ZKR ³WR PDNH VXFK QRQILVFDO EHQHILWV HFRQRPLFDOO\ UHOHYDQW«KDYH SXVKHG IRU OHJLVODWLYH DFWLRQ WR LQFUHDVH WKH GHPDQG IRU UHF\FOHG PDWHULDOV´ LQ 6HF  ZKDW LV ULJKW IRU WKH HQWKXVLDVWLF DGYRFDWHV RI WKH XVH RI ZDVWH FRQYHUWHUV LV QRW QHFHVVDULO\ VR IRU WKH FULWLFVEHFDXVH ³PXFKRIWKHGLIILFXOW\LQKHUHQWLQUHF\FOLQJFRPHV IURP WKH IDFW WKDW PRVW SURGXFWV DUH QRW GHVLJQHG ZLWK UHF\FOLQJ LQ PLQG´ LQ 6HF  ZKDW LV ULJKW IRU WKRVH DGYRFDWHV RI =HUR :DVWH ³LQ IDYRU RI UHXVLQJKLJKIXQFWLRQ´LVQRWQHFHVVDULO\VRIRURWKHUVZKRIDYRUUHF\FOLQJ LQVWHDG LQ 6HF  DQG ZKDW LV ULJKW IRU WKH UHOLJLRXV YLHZ RI IUHHJDQLVP LQ UHJDUG WR WKH LGHD RI ³UHOLJLRXV REOLJDWLRQ WR QDWXUH LQ WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



IRUPRISROLWLFDODFWLRQ´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

UG7KHVLV7KH3DUWLDOLW\7RWDOLW\3ULQFLSOH 7KH WKLUG WKHVLV UHIHUV WR WKH SDUWLDOLW\WRWDOLW\ SULQFLSOH RQ WKH UHODWLRQVKLSV EHWZHHQ ZKROH DQG SDUWV  LQ WKH FDWHJRU\ RI ³PHWKRG´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³UHGXFWLRQLVP´DQGLWVRSSRVLWH³UHYHUVH UHGXFWLRQLVP´ ZKLFK FDQ WDNH IRXU PDMRU IRUPV LQ UHODWLRQ WR FRQFHSW WKHRU\PHWKRGRORJ\DQGRQWRORJ\ DVVXPPDUL]HGLQ6HF  7KXVUHGXFWLRQLVPDQGUHYHUVHUHGXFWLRQLVPFDQEH L FRQFHSWXDO LL WKHRUHWLFDO LLL PHWKRGRORJLFDODQG LY RQWRORJLFDO$QGWKHZKROHLV QRW WKH VXP RI LWV SDUWV DQG WKHUH LV QR SDUWLDOLW\ ZLWKRXW WRWDOLW\²DQG YLFHYHUVD :RUNV RQ HPHUJHQFH DV LQ )&  JHVWDOW SV\FKRORJ\ DV LQ )3+*(2/  DQG WKH KHUPHQHXWLF FLUFOH DV LQ )3+'$  MXVW WR QDPH D IHZRIWKHPKDYHFRQWULEXWHGWRWKHXQGHUVWDQGLQJRIZKROHDQGSDUWV

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





)RULQVWDQFHRQWKHRQHKDQGWKHUHLVSDUWLDOLW\ HJWKHSDUWLDOYLHZ RI WKH EXERQLF SODJXH DV D ELRORJLFDO ZHDSRQ E\ WKH ,PSHULDO -DSDQHVH $UP\$LU6HUYLFHZKHQERPELQJ1LQJERZLWKIOHDVFDUU\LQJWKHEXERQLF SODJXH LQ  LQ 6HF  WKH SDUWLDO YLHZ RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUVWRGXPSLOOHJDOO\WRDYRLGKLJKIHHV´LQWKHVDIRUHFLWHGLQ 6HF  WKH SDUWLDO YLHZ RI OLWWHU E\ WKH DGYRFDWHV RI ³&OHDQ 8S WKH :RUOG´ ZKLFK LV D ZRUOGZLGH DQWLOLWWHU FDPSDLJQ LQ 6HF  WKH SDUWLDOYLHZRIWKH,78LQUHJDUGWRLWV³VWULFWUHTXLUHPHQWVRQWKHVWDWLRQ NHHSLQJ DELOLW\ RI QHZ VDWHOOLWHV´  WR PDQDJH VSDFH GHEULV LQ 6HF  WKH SDUWLDO YLHZ RI ³*UHHQSHDFH DQG NH\ (XURSHDQ FRXQWULHV VXFK DV 'HQPDUN´ IRU ³WKH %DVHO %DQ $PHQGPHQW WR WKH %DVHO &RQYHQWLRQ´ LQ 6HFWKHSDUWLDOYLHZRIWKHDGYRFDWHVRIWKH(QYLURQPHQWDO-XVWLFH PRYHPHQW DQG WKH &LYLO 5LJKWV 0RYHPHQW IRU ³VRFLDO MXVWLFH HTXDO SURWHFWLRQ DQG DQ HQG WR LQVWLWXWLRQDO GLVFULPLQDWLRQ´ LQ 6HF  WKH SDUWLDOYLHZRIWKHDGYRFDWHVRIHWKLFDOFRQVXPHULVPLQUHJDUGWRWKHPRUDO EDVLV LQ 6HF  WKH SDUWLDO YLHZ RI WKRVH SHRSOH LQ WKH VLPSOH OLYLQJ PRYHPHQW ZKR ³HVFKHZ DOO WHFKQRORJ\´ DQG ³DUH RIWHQ UHIHUUHG WR DV«QHR/XGGLWHV´ LQ 6HF  WKH SDUWLDO YLHZ RI (35 LQ WHUPV RI LWV IRFXV RQ WKH SURGXFHU VLGH IRU ZDVWH UHF\FOLQJ LQ 6HF  WKH SDUWLDO YLHZRI³DODZLVVXHGLQ´LQ,WDO\ZKLFK³GHFODUHGGXPSVWHUGLYLQJWR EH OHJDO´ LQ 6HF  WKH SDUWLDO YLHZ RI WKH DGYRFDWHV RI HDFK :W( PHWKRG LQ 6HF  WKH SDUWLDO YLHZ RI FHUWDLQ JURXSV IRU YHJHWDULDQ NRVKHUDQGKDODDOGLHWVDJDLQVWWKHLQFOXVLRQRIVRPH QRQKXPDQDQLPDO SURGXFWV LQ 6HF  WKH SDUWLDO YLHZ RI WKRVH ³EXVLQHVVHV´ ZKLFK ³LJQRUH WKHP >QHJDWLYH H[WHUQDOLWLHV@ GHVSLWH WKH FRVWV LPSRVHG RQ VRFLHW\´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³SULYDWH ZDVWH FRQWUDFWRUV´ WR GXPS LOOHJDOO\ WR DYRLGKLJKIHHV´LQWKHVWKHIHGHUDOJRYHUQPHQWHWFVLQFHWKHUHZLOO HPHUJH QHZ YLHZV LQ WKH IXWXUH QRW \HW NQRZQ WRGD\ MXVW DV WKHUH DUH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



DOUHDG\FULWLFLVPVDJDLQVWWKHWZRVLGHVQRZDGD\VLQ6HFWKHPRUH KROLVWLFYLHZRIOLWWHUVXFKWKDWWKHZKROHLVQRWWKHVXPRILWVSDUWVWKDW LV LW FDQQRW EH UHGXFHG WR WKH VXP RI RSSRVLQJ YLHZV KHOG E\ WKH DGYRFDWHV RI ³&OHDQ 8S WKH :RUOG´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³WKH%DVHO%DQ$PHQGPHQWWRWKH%DVHO&RQYHQWLRQ´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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



$OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH LQGLYLGXDOLVWLFQHVVKROLVWLFQHVV SDUWQHVVZKROHQHVV DQDO\VLVV\QWKHVLV DQGWKHOLNH

WK7KHVLV7KH3UHGLFWDELOLW\8QSUHGLFWDELOLW\3ULQFLSOH 7KHIRXUWKWKHVLVLVFDOOHGWKHSUHGLFWDELOLW\XQSUHGLFWDELOLW\SULQFLSOH RQ WKH RFFXUUHQFH RI HYHQWV  LQ WKH FDWHJRU\ RI ³PHWKRG´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFKZDVILUVWSURSRVHGLQ)&DQGODWHURWKHUERRNVRIPLQH  LQWKDWERWKSUHGLFWDELOLW\DQGXQSUHGLFWDELOLW\KDYHDPDMRUUROHWRSOD\LQ WKH RFFXUUHQFH RI WKLQJV VR WKDW QHLWKHU GHWHUPLQLVP QRU LQGHWHUPLQLVP ZLQV WKH FHQWXULHVROG ILJKW 7KHUH LV QR SUHGLFWDELOLW\ ZLWKRXW XQSUHGLFWDELOLW\²DQGYLFHYHUVD 7KHUHDUHHYHQWVZKLFKDUHSUHGLFWDEOHMXVWDVWKHUHDUHWKRVHZKLFK DUHQRW2UZKDWLVUHJDUGHGDVXQSUHGLFWDEOHDWRQHSRLQWLQWLPHPD\WXUQ RXWWREHSUHGLFWDEOHODWHUDQGFRQYHUVHO\ZKDWLVGHHPHGDVSUHGLFWDEOH PD\WXUQRXWWRQRWEHVRSUHGLFWDEOH(YHQLQSUHGLFWDELOLW\RXWFRPHVDUH VXEMHFWWRXQFHUWDLQW\WKHGHJUHHRIZKLFKYDULHVIURPFDVHWRFDVH :RUNV RQ FRPSOH[LW\ WKHRU\ DV LQ )&  TXDQWXP PHFKDQLFV DV LQ )3+67 DQG )3+*  IUHTXHQF\ SUREDELOLW\ VXEMHFWLYH RU %D\HVLDQ  SUREDELOLW\DQG³VSHFLDOFDXVHV´ DVLQ)3+*$0 MXVWWRQDPHDIHZRI WKHPKDYHFRQWULEXWHGWRWKHXQGHUVWDQGLQJRIXQFHUWDLQLW\ )RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV SUHGLFWDELOLW\ HJ WKH SUHGLFWDEOHWHQGHQF\RIVFLHQWLVWVWRXVHDQWLELRWLFVOLNH³VWUHSWRP\FLQ´ ³JHQWDPLFLQ´DQG ³WHWUDF\FOLQHV´ IRUWKHWUHDWPHQWRIEXERQLFSODJXHLQ 6HFWKHSUHGLFWDEOHWHQGHQF\RIWKH IHGHUDOJRYHUQPHQWWRHQIRUFH SURSHU FOLQLFDO ZDVWH GLVSRVDO XQGHU D SDUWLFXODU ODZ OLNH WKH 0:7$ LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI WKH DGYRFDWHV RI ³&OHDQ 8S WKH :RUOG´WRFDPSDLJQDJDLQVWOLWWHULQ6HFWKHSUHGLFWDEOHWHQGHQF\ RI³WKH8QLWHG1DWLRQV&RPPLWWHHRQWKH3HDFHIXO8VHVRI2XWHU6SDFH´ RU &23826 WR SURYLGH ³YROXQWDU\ JXLGHOLQHV´ IRU VSDFH GHEULV PDQDJHPHQW LQ WKH IRUHVHHDEOH IXWXUH LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI WKH SDUWLHV LQ WKH %DVHO &RQYHQWLRQ WR DGYRFDWH ³D JHQHUDO SURKLELWLRQ RQ WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQG QRQ3DUWLHV´ LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI WKH (QYLURQPHQWDO -XVWLFH PRYHPHQW QRZDGD\V WR HQFRXUDJH WKH SRRU WR SDUWLFLSDWH LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI WKH SURSRQHQWV RI

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





HWKLFDO FRQVXPHULVP WR DGYRFDWH PRUDO RU SRVLWLYH EX\LQJ LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI WKRVH LQ WKH VLPSOH OLYLQJ PRYHPHQW WR DGYRFDWHVLPSOHOLIHVW\OHLQ6HFWKHSUHGLFWDEOHWHQGHQF\RIWKRVH IRU(35WRDGYRFDWHSURGXFHUUHVSRQVLELOLW\LQ6HFWKHSUHGLFWDEOH WHQGHQF\ RI GXPSVWHU GLYHUV WR ³RFFDVLRQDOO\ JHW LQ WURXEOH IRU WUHVSDVVLQJ´ LI ³GXPSVWHUV DUH«ORFDWHG RQ SULYDWH SUHPLVHV´ LQ 6HF WKHSUHGLFWDEOHWHQGHQF\RI³LQFLQHUDWLRQ´WREH³WKHPRVWFRPPRQ :W( LPSOHPHQWDWLRQ´ LQ WKH IRUHVHHDEOH IXWXUH LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI $$)&2 WR FODLP WKDW  ³XVLQJ WKH WHUP KXPDQ JUDGH LV IDOVHDQGPLVOHDGLQJ ´LQWKHIRUHVHHDEOHIXWXUHLQ6HFWKH SUHGLFWDEOH WHQGHQF\ RI  WKRVH LQ ³WKH VWXG\ FRQGXFWHG E\ WKH 7HFKQLFDO 8QLYHUVLW\RI'HQPDUN´WRDUJXHWKDW³LQSHUFHQWRIFDVHVUHF\FOLQJLV WKH PRVW HIILFLHQW PHWKRG WR GLVSRVH RI KRXVHKROG ZDVWH´ LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI WKRVH HQWKXVLDVWLF DGYRFDWHV RI ZDVWH FRQYHUWHUV WR IDYRU WKHLU XVH LQ 6HF  WKH SUHGLFWDEOH WHQGHQF\ RI WKRVHZKRSUHIHUFRQVWUXFWLRQIRU=HUR:DVWHWRDUJXHWKDW³WKHPDWHULDOV WKDWDUH VWLOOUHTXLUHGLQ WKH«UHGHVLJQHGUHVRXUFHHIILFLHQWV\VWHPV ZLOO EHUHXVHGPDQ\WLPHVDVWKHSURGXFWVWKDWLQFRUSRUDWHWKHPDUHUHXVHG´LQ 6HF  DQG WKH SUHGLFWDEOH WHQGHQF\ RI WKH IUHHJDQV WR SUDFWLFH VTXDWWLQJLQ6HF  2Q WKH RWKHU KDQG WKHUH LV XQSUHGLFWDELOLW\ HJ WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK WKH XVH RI DQWLELRWLFV OLNH ³VWUHSWRP\FLQ´³JHQWDPLFLQ´DQG³WHWUDF\FOLQHV´ZLOOEHVXFFHVVIXORQD SDUWLFXODUIXWXUHRFFDVLRQRISODJXHRFFXUUHQFHVLQFHWKH\DUHQRWWRWDOO\ HIIHFWLYH DV ³PRUWDOLW\ DVVRFLDWHG ZLWK WUHDWHG FDVHV RI EXERQLF SODJXH´ VWLOO KDSSHQV LQ 6HF  WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK WKH IHGHUDO JRYHUQPHQW ZLOO EH VXFFHVVIXO LQ HQIRUFLQJ SURSHUFOLQLFDOZDVWHGLVSRVDOXQGHUDSDUWLFXODUODZLQDSDUWLFXODUIXWXUH HUDVLQFHGLIIHUHQWODZVOLNHWKH0:7$DUHSDVVHGDQGWKHQUHSHDOHGRU UHYLVHGRYHUWLPHLQKLVWRU\LQ6HFWKHPRUHGLIILFXOWWDVNWRSUHGLFW H[DFWO\WKHH[WHQWWRZKLFKWKHDGYRFDWHVRI³&OHDQ8SWKH:RUOG´ZLOOEH VXFFHVVIXO LQ WKH FDPSDLJQ DJDLQVW OLWWHU RQ D SDUWLFXODU IXWXUH RFFDVLRQ EHFDXVH PDQ\ FDVHV RI OLWWHULQJ DUH XQLQWHQWLRQDO >ZKLFK LV VXEMHFW WR GLIIHUHQW XQFHUWDLQ FLUFXPVWDQFHV@ VR LW LV GLIILFXOW WR FRQWURO OLWWHULQJ EHKDYLRULQ6HFWKHPRUHGLIILFXOWWDVNWRSUHGLFWH[DFWO\WKHH[WHQW WR ZKLFK &23826 ZLOO EH VXFFHVVIXO LQ PDQDJLQJ VSDFH GHEULV RQ D SDUWLFXODU IDUWKHU IXWXUH RFFDVLRQ VLQFH  ³WKHUH LV QR LQWHUQDWLRQDO WUHDW\ PDQGDWLQJ EHKDYLRXU WR PLQLPL]H VSDFH GHEULV´ LQ 6HF  WKH PRUH GLIILFXOWWDVNWRSUHGLFWH[DFWO\WKHH[WHQWWR ZKLFKWKH%DVHO&RQYHQWLRQ ZLOO EH VXFFHVVIXO LQ EDQQLQJ ³WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ3DUWLHVDQGQRQ3DUWLHV´RQDSDUWLFXODUIXWXUHRFFDVLRQEHFDXVH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



LW ³FRQWDLQV QR HQIRUFHPHQW SURYLVLRQV´ LQ 6HF  WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK WKH (QYLURQPHQWDO -XVWLFH 0RYHPHQW QRZDGD\V ZLOO EH VXFFHVVIXO LQ HQFRXUDJLQJ WKH SRRU WR SDUWLFLSDWHLQDSDUWLFXODUIXWXUHKLVWRULFDOHUDEHFDXVHRIWKHSUREOHPVWKDW LW KDV EHHQ SODJXHG ZLWK ³WKUHH GLIIHUHQW IRUPV´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³JHWLQWURXEOHIRUWUHVSDVVLQJ´ RQDSDUWLFXODUIXWXUHRFFDVLRQEHFDXVH³WKHODZLVHQIRUFHGZLWKYDU\LQJ GHJUHHVRIULJRU´RUFDQHYHQEHLJQRUHGE\SROLFHGHSHQGLQJRQGLIIHUHQW FLUFXPVWDQFHVLQ6HFWKHPRUHGLIILFXOWWDVNWRSUHGLFWH[DFWO\WKH H[WHQW WR ZKLFK ³LQFLQHUDWLRQ´ ZLOO UHPDLQ ³WKH PRVW FRPPRQ :W( LPSOHPHQWDWLRQ´ LQ D SDUWLFXODU PRUH GLVWDQW IXWXUH KLVWRULFDO HUD VLQFH WKHUHDUHDOUHDG\FRPSHWLQJWHFKQRORJLHVDQGZDVWHWUHDWPHQWDOWHUQDWLYHV QRZDGD\V LQ 6HF  WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQWWRZKLFKWKHWHUP³KXPDQJUDGH´ZLOOQRWEHXVHG³RQZHEVLWHVRU RWKHU DGYHUWLVLQJ´ EHFDXVH ³WKH $$)&2 RQO\ JRYHUQV WKH SHW IRRG SDFNDJLQJ DQG KDV QR DXWKRULW\ RYHU ZHEVLWHV RU DGYHUWLVLQJ´ DOWKRXJK WKLQJV PD\ FKDQJH ODWHU LQ 6HF  WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK UHF\FOLQJ LV WKH PRVW HIILFLHQW PHWKRG RQ D SDUWLFXODUIXWXUHRFFDVLRQVLQFHLQDQRWKHUVWXG\LQE\³WKH'DQLVK (QYLURQPHQWDO $VVHVVPHQW ,QVWLWXWH´ ZKLFK ³FRQFOXGHG WKDW LQFLQHUDWLRQ ZDV WKH PRVW HIIHFWLYH PHWKRG IRU GLVSRVLQJ RI GULQN FRQWDLQHUV HYHQ DOXPLQLXP RQHV´ LQVWHDG LQ 6HF  WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK WKH XVH RI ZDVWH FRQYHUWHUV ZLOO UHPDLQ LQIOXHQWLDO LQ D SDUWLFXODU IXWXUH KLVWRULFDO HUD VLQFH WKHUH DUH DOUHDG\ FRPSHWLQJ WHFKQRORJLHV WR FKDOOHQJH ZDVWH FRQYHUWHUV DIRUHFLWHG LQ 6HF  WKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK WKH FRQVWUXFWLRQ DUJXPHQW IRU =HUR :DVWH ZLOO UHPDLQ LQIOXHQWLDO LQ D SDUWLFXODUIXWXUHKLVWRULFDOHUDEHFDXVHIRUWKHFULWLFV³GHFRQVWUXFWLRQFDQ FDSWXUHPDWHULDOVDQGVRPHFRPSRQHQWVIURPWKHPLOOLRQVRIEXLOGLQJVWKDW DUH H[LVWLQJ DQG WKDW ZHUH SRRUO\ GHVLJQHG IRU KLJK OHYHO UHXVH´ DQG

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





PRUHRYHU ³XQWLO EXLOGLQJV DUH EXLOW DV FRPSRQHQWV FDSDEOH RI ODWHU GLVPDQWOLQJ GHFRQVWUXFWLRQ LV D VWRSJDS SURFHVV WKDW WKH 8QLWHG 6WDWHV FDQXVHWRPLQLPL]HWKHZDVWHRIEXLOGLQJPDWHULDOV´LQ6HFDQGWKH PRUH GLIILFXOW WDVN WR SUHGLFW H[DFWO\ WKH H[WHQW WR ZKLFK VTXDWWLQJ LV SHUYDVLYHRQDSDUWLFXODUIXWXUHRFFDVLRQVLQFHIRUWKHFULWLFVVTXDWWLQJLQ PDQ\ORFDOLWLHVDUHLOOHJDODQGFULPLQDOVRIRUWKLVUHDVRQ³WKHFULPLQDOLW\ RI VTXDWWLQJ PDNHV LW KDUG WR DFFXUDWHO\ WUDFN WKH QXPEHU RI SHRSOH LQYROYHGLQWKLVDFWLYLW\´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

WK7KHVLV7KH([SOLFDELOLW\,QH[SOLFDELOLW\3ULQFLSOH 7KHILIWKWKHVLVLVFDOOHGWKHH[SOLFDELOLW\LQH[SOLFDELOLW\SULQFLSOH RQ WKH XQGHUO\LQJ PHFKDQLVPV RI WKLQJV  LQ WKH FDWHJRU\ RI ³PHWKRG´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK ZDV SURSRVHG LQ )3+8 DQG RWKHU ERRNV RI PLQH  LQ WKDW ERWK H[SOLFDELOLW\ DQG LQH[SOLFDELOLW\ DUH SDUW RI WKH XQGHUVWDQGLQJRIWKLQJV7KHUHLVQRH[SOLFDELOLW\ZLWKRXWLQH[SOLFDELOLW\² DQGYLFHYHUVD 7KLVSULQFLSOHWHOOVXVWKHGXDOQDWXUHRIWKHUHVHDUFKGLOHPPDLQWKDW LIUHDOLW\FDQEHH[SODLQHGLQVRPHZD\VLWDOVRKDVLWVRWKHUZD\VZKLFK DUHQRWTXLWHH[SODLQDEOHDWDJLYHQSRLQWLQWLPH )RULQVWDQFHRQWKHRQHKDQGWKHUHLVH[SOLFDELOLW\ HJWKHH[SODQDWLRQ E\ WKH ,PSHULDO -DSDQHVH $UP\ $LU 6HUYLFH WR ERPE 1LQJER ZLWK IOHDV FDUU\LQJ WKH EXERQLF SODJXH LQ  EHFDXVH LW LV DQ HIIHFWLYH ELRORJLFDO ZHDSRQLQ6HFWKHH[SODQDWLRQE\WKHDGYRFDWHVRIWKH0:7$WKDW SURSHU FOLQLFDO ZDVWH GLVSRVDO LV LPSRUWDQW WR DYRLG ³WKH VSUHDG RI LQIHFWLRXV GLVHDVH´ LQ 6HF  WKH H[SODQDWLRQ E\ ³'XWFK SROLFH DQG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



ORFDO VXSHUYLVRUV >NQRZQ DV EXLWHQJHZRRQ RSVSRULQJVDPEWHQDDU RU %2$@´  ZKR ³ILQH FLWL]HQV IRU WKURZLQJ DZD\ FDQV ERWWOHV RU ZUDSSHUV RQWR WKH VWUHHW´ RQ WKH EDVLV RI DQWLOLWWHU HQIRUFHPHQW LQ 6HF  WKH H[SODQDWLRQ E\ WKH DGYRFDWHV RI GLIIHUHQW ZD\V RI ³H[WHUQDO UHPRYDO´ WR PDQDJHVSDFHGHEULVRQWKHEDVLVRIWKHLUWHFKQRORJLFDOIHDVLELOLW\LQ6HF WKHH[SODQDWLRQE\WKRVHLQ³WKH.RNRFDVH´LQWKDW³ VKLSV WUDQVSRUWHGEDUUHOVRIKD]DUGRXVZDVWHIURP,WDO\WRWKHVPDOOWRZQ RI.RNRLQ1LJHULDLQH[FKDQJHIRUPRQWKO\UHQWZKLFKZDVSDLGWRD 1LJHULDQIRUWKHXVHRIKLVIDUPODQG´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³WKH KLJK FRVW >aWRQ@ DVVRFLDWHGZLWKWKHOHJDOGLVSRVDORIWKHZDVWH´JDYHLQFHQWLYHVWR³SULYDWH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





ZDVWHFRQWUDFWRUVWRGXPSLOOHJDOO\WRDYRLGKLJKIHHV´LQ6HFWKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ ³'XWFK SROLFH DQG ORFDO VXSHUYLVRUV >NQRZQ DV EXLWHQJHZRRQRSVSRULQJVDPEWHQDDU RU%2$@´ RI ZK\ ILQLQJ ³FLWL]HQV IRU WKURZLQJ DZD\ FDQV ERWWOHV RU ZUDSSHUV RQWR WKH VWUHHW´ LV QHFHVVDULO\ GHVLUDEOH EHFDXVH WKRVH FLWL]HQV ZKR DUH ILQHG FDQ GLVDJUHH ZKLFKDOVRH[SODLQVZK\WKH\OLWWHULQWKHILUVWSODFHLQ6HFWKHODFN RIVXIILFLHQWH[SODQDWLRQE\WKHDGYRFDWHVRIGLIIHUHQW ZD\VRI ³H[WHUQDO UHPRYDO´ WR PDQDJH VSDFH GHEULV RI ZK\ WKHVH VROXWLRQV DUH QHFHVVDULO\ GHVLUDEOH VLQFH IRU WKH FULWLFV ³DV RI  WKH FRVW RI ODXQFKLQJ DQ\ RI WKHVH VROXWLRQV >LQ WHUPV RI H[WHUQDO UHPRYDO IRU H[DPSOH@ LV DERXW WKH VDPHDVODXQFKLQJDQ\VSDFHFUDIW´DQG³QRQHRIWKHH[LVWLQJVROXWLRQVDUH FXUUHQWO\FRVWHIIHFWLYH´LQ6HFWKHODFNRIVXIILFLHQWH[SODQDWLRQE\ E\WKRVHLQ³WKH.RNRFDVHRIZK\WKHWUDQVSRUWRIEDUUHOVRI KD]DUGRXV ZDVWH IURP ,WDO\ WR WKH VPDOO WRZQ RI .RNR LQ 1LJHULD LV QHFHVVDULO\ GHVLUDEOH VLQFH IRU WKH FULWLFV LQFLGHQWV OLNH WKLV ³KDYH EHHQ GHHPHG 7R[LF&RORQLDOLVP E\PDQ\GHYHORSLQJFRXQWULHV´LQ6HF WKHODFNRIVXIILFLHQWH[SODQDWLRQE\WKHDGYRFDWHVRIWKH (QYLURQPHQWDO -XVWLFH0RYHPHQWRIZK\LWVFDPSDLJQLVQHFHVVDULO\GHVLUDEOHVLQFHIRU WKHFULWLFVLWKDVEHHQSODJXHGZLWK³WKUHHGLIIHUHQWIRUPV´RIHOLWLVPZLWK RSSRVLWH HIIHFWV LQ 6HF  WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ WKH DGYRFDWHV RI HWKLFDO FRQVXPHULVP RI ZK\ LW LV QHFHVVDULO\ GHVLUDEOH EHFDXVH IRU WKH FULWLFV LW FDQ EH FRXQWHUSURGXFWLYH LQ HQFRXUDJLQJ LPPRUDO EHKDYLRU LQVWHDG DQG VR RQ LQ 6HF  WKH ODFN RI VXIILFLHQW H[SODQDWLRQE\WKRVHLQWKH-XGHR&KULVWLDQWUDGLWLRQRIZK\VLPSOHOLYLQJ LV QHFHVVDULO\ GHVLUDEOH EHFDXVH IRU WKH FULWLFV OLNH )ULHGULFK 1LHW]VFKH DVFHWLFLVP LQ WKH -XGHR&KULVWLDQ WUDGLWLRQ LV HVVHQWLDOO\ OLIHGHQ\LQJ LQ 6HFWKHODFNRIVXIILFLHQWH[SODQDWLRQE\WKHSURSRQHQWVRI(35RI ZK\ LW LV QHFHVVDULO\ GHVLUDEOH EHFDXVH ³RWKHU FULWLFV DUH FRQFHUQHG WKDW PDQXIDFWXUHUVPD\XVHWDNHEDFNSURJUDPVWRWDNHVHFRQGKDQGHOHFWURQLFV RIIWKHUHXVHPDUNHWE\VKUHGGLQJUDWKHUWKDQUHXVLQJRUUHSDLULQJJRRGV WKDW FRPH LQ IRU UHF\FOLQJ´ WRJHWKHU ZLWK RWKHU SUREOHPV DIRUHFLWHG LQ 6HF  WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ GXPSVWHU GLYHUV RI ZK\ GXPSVWHU GLYLQJ LV QHFHVVDULO\ GHVLUDEOH EHFDXVH IRU WKH FULWLFV LW LV XQKHDOWK\DQGGDQJHURXVRUWKHLWHPVLQGXPSVWHUVDUHRILQIHULRUTXDOLW\ HWF LQ 6HF  WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ WKH DGYRFDWHV RI LQFLQHUDWLRQ RI ZK\ LW LV QHFHVVDULO\ GHVLUDEOH VLQFH IRU WKH FULWLFV ³LQFLQHUDWRUV GHVWUR\ YDOXDEOH UHVRXUFHV´ DQG ³WKH\ PD\ UHGXFH WKH LQFHQWLYHVIRUUHF\FOLQJDQGZDVWH PLQLPL]DWLRQDFWLYLWLHV´EHVLGHVRWKHU SUREOHPVLQ6HFWKHODFNRIVXIILFLHQWH[SODQDWLRQE\WKHDGYRFDWHV RIDQLPDOSURGXFWVRIZK\WKH\DUHQHFHVVDULO\GHVLUDEOHEHFDXVHIRUWKH FULWLFV WKHLU XVH LV SURKLELWHG E\ FHUWDLQ JURXSV IRU GLIIHUHQW PRUDO DQG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



UHOLJLRXVUHDVRQVOLNHWKRVH IRUYHJHWDULDQNRVKHUDQGKDODDOGLHWVRQO\ LQ6HFWKHODFNRIVXIILFLHQWH[SODQDWLRQE\WKHDGYRFDWHVRIZDVWH UHF\FOHRIZK\LWLVQHFHVVDULO\GHVLUDEOHVLQFHIRUWKHFULWLFV³WKHUHLVD QHW ORVV WR WKH SRRU DQG SRVVLEO\ WKH ZKROH RI D VRFLHW\´ EHFDXVH ³WUDGLWLRQDOMRERIUHF\FOLQJLVSHUIRUPHGE\WKHHQWUHSUHQHXULDOSRRUVXFK DV WKH NDUXQJ JXQL =DEDOHHQ WKH UDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQNPDQ´VR³ZLWKWKHFUHDWLRQRIODUJHUHF\FOLQJRUJDQL]DWLRQVWKDWPD\ EHSURILWDEOH«WKHSRRUDUHPRUHOLNHO\WREHGULYHQRXWRIWKHUHF\FOLQJ DQG WKH UHPDQXIDFWXULQJ PDUNHW´ LQ 6HF  WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ WKH DGYRFDWHV RI WKH ZDVWH FRQYHUWHU RI ZK\ LW LV QHFHVVDULO\GHVLUDEOHEHFDXVHVRPHFRQWHPSRUDU\DXWRFODYHVKDYHEHHQVR LPSURYHG WKDW WKH\ ³HPSOR\ WKH VDPH PHWKRG RI VWHULOL]DWLRQ DV FRQYHUWHUVEXWGRVRXVLQJODUJHUDQGPRUHFRPSOH[HTXLSPHQWWKDWDOVR KDV KLJKHU VDIHW\« UHTXLUHPHQW«´ LQ 6HF  WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ WKH DGYRFDWHV IRU =HUR :DVWH RI ZK\ LW LV QHFHVVDULO\ GHVLUDEOH EHFDXVH WKHUH DUH WKRVH ZKR IDYRU ³WKH FUHDWLRQ RI LQGXVWU\ VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´ LQVWHDG LQ WKDW ³LQGXVWULDO SURGXFWVDUHLQKHUHQWO\QRQQDWXUDO>VXFKDVFKHPLFDOVDQGSODVWLFVWKDWDUH PRQRPROHFXODU@ DQG EHQHILW JUHDWO\ IURP LQGXVWULDO PHWKRGV RI UHXVH ZKLOH QDWXUDO PHWKRGV UHTXLULQJ GHJUDGDWLRQ DQG UHFRQVWLWXWLRQ DUH ZDVWHIXO LQ WKDW FRQWH[W´ LQ 6HF  DQG WKH ODFN RI VXIILFLHQW H[SODQDWLRQ E\ WKH DGYRFDWHV RI IUHHJDQLVP RI ZK\ LW LV QHFHVVDULO\ GHVLUDEOH EHFDXVH UHFODLPHG LWHPV LQ GXPSVWHUV FDQ EH XQKHDOWK\ DQG GDQJHURXVLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH 2QFH PRUH LW VKRXOG EH VWUHVVHG KRZHYHU WKDW WKHUH DUH GLIIHUHQW VKDGHVRIJUD\ RUGLIIHUHQWGHJUHHVRIWUXWK LQWKHWZRRSSRVLWHVDQGWKH FODVVLILFDWLRQ LV QRW QHFHVVDULO\ PXWXDOO\ H[FOXVLYH HLWKHU ,Q IDFW HYHQ ZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQG XSVKDULQJWKH VDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH $OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH XQGHUO\LQJQHVVUHJXODUQHVV FDXVDWLRQUHJXODULW\ FDXVDWLRQFRUUHODWLRQ H[SODQDWLRQGHVFULSWLRQ H[SODQDWLRQQDUUDWLRQ H[SODQDWLRQLQWHUSUHWDWLRQ DQGVRIRUWK

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WK7KHVLV7KH)LFWLRQ5HDOLW\3ULQFLSOH 7KHVL[WKWKHVLVLVFDOOHGWKHILFWLRQUHDOLW\SULQFLSOH RQWKHGLIIHUHQW IDFHV RI UHDOLW\  LQ WKH FDWHJRU\ RI ³PHWKRG´ LQ H[LVWHQWLDO GLDOHFWLFV DV ILUVWSURSRVHGLQ)3+/,7 LQWKDWERWKILFWLRQDQGUHDOLW\FRH[LVW7KHUH LVQRUHDOLW\ZLWKRXWILFWLRQ²DQGYLFHYHUVD 7KLV SULQFLSOH WHOOV XV WKH GLIIHUHQW FDWHJRULHV RI UHDOLW\ LQ WKDW LI WKHUHLVUHDOLW\WKHUHLVDOVRVRPHILFWLRQLQLW²MXVWDVLIWKHUHLVILFWLRQ WKHUHLVDOVRVRPHUHDOLW\LQLW )RULQVWDQFHRQWKHRQHKDQGWKHUHLVILFWLRQ HJWKHILFWLRQDODVSHFW RI WKH FRQYHQWLRQDO YLHZ DERXW WKH EXERQLF SODJXH LQVRIDU DV LW LV UHJDUGHGDVXQGHVLUDEOHDVTXHVWLRQHGE\WKH,PSHULDO-DSDQHVH$UP\$LU 6HUYLFHLQLQWKHGHFLVLRQWRXVHLWDVDQHIIHFWLYHELRORJLFDOZHDSRQ LQVWHDG LQ 6HF  WKH ILFWLRQDO DVSHFW RI WKH 0:7$ LQVRIDU DV ³WKH $FWZDVUHSHDOHGLQ´EHFDXVHWKHIHGHUDOJRYHUQPHQWZDVQRORQJHU GHHPHG QHFHVVDU\ WR HQIRUFH SURSSHU FOLQLFDO ZDVWH GLVSRVDO VR WKH HQIRUFHPHQW ZDV WKHQ SDVVHG WR WKH VWDWHV LQVWHDG LQ 6HF  WKH ILFWLRQDO DVSHFW RI DQWLOLWWHU VROXWLRQV LQVRIDU DV HDFK SURSRVHG VROXWLRQ KDV LWV RZQ GLVDGYDQWDJHV DQG GRHV QRW RIWHQ ZRUN DV FODLPHG LQ 6HF  WKH ILFWLRQDO DVSHFW RI WKH PHDVXUHPHQW RI VSDFH GHEULV LQVRIDU DV ³*(2RUELWLVWRRGLVWDQWWR PDNHDFFXUDWH PHDVXUHPHQWV RIWKHH[LVWLQJ GHEULVILHOGIRUREMHFWVXQGHUPHWUH>IWLQ@VRWKHSUHFLVHQDWXUHRI WKHH[LVWLQJSUREOHPLVQRWZHOONQRZQ´LQ6HFWKHILFWLRQDODVSHFW RIWKHGHILQLWLRQRI³KD]DUGRXVZDVWH´LQWKH%DVHO&RQYHQWLRQLQVRIDUDV LW LV VXEMHFW WR FRQWHQWLRQ EHFDXVH LW GRHV QRW LQFOXGH VRPH LPSRUWDQW W\SHV RI KD]DUGRXV ZDVWH OLNH ³UDGLRDFWLYH ZDVWH´ ³ZDVWHV IURP WKH QRUPDO RSHUDWLRQ RI VKLSV´ DQG FHUWDLQ ³ FRPPRGLWLHV  ZKLFK DUH QRW FRQVLGHUHG ZDVWHV´ HWF LQ 6HF  WKH ILFWLRQDO DVSHFW RI WKH (QYLURQPHQWDO -XVWLFH 0RYHPHQW LQVRIDU DV LW KDV EHHQ SODJXHG ZLWK ³WKUHHGLIIHUHQWIRUPV´RIHOLWLVPZLWKRSSRVLWHHIIHFWVLQ6HFWKH ILFWLRQDODVSHFWRIHWKLFDOFRQVXPHULVPLQVRIDUDVLWFDQEH³DFDWDVWURSKLF PLVWDNH´ DV SRLQWHG RXW E\ *HRUJH 0RQELRW LQ 6HF  WKH ILFWLRQDO DVSHFWRI ³DGYHUWLVLQJ´LQVRIDUDVLW PLVOHDGLQJO\ JORULILHVRUHQFRXUDJHV ³D FRQVXPHULVW PHQWDOLW\´ LQ 6HF  WKH ILFWLRQDO DVSHFW RI (35 LQVRIDU DV LW ³KDV UDUHO\ EHHQ FRQVLVWHQWO\ TXDQWLILHG´ LQ 6HF  WKH ILFWLRQDO DVSHFW RI GXPSVWHU GLYLQJ LQVRIDU DV LW LV XQKHDOWK\ DQG GDQJHURXV WKH LWHPV LQ GXPSVWHUV DUH RI LQIHULRU TXDOLW\ HWF LQ 6HF WKHILFWLRQDODVSHFWRILQFLQHUDWLRQDVDVDIH:W(PHWKRGLQVRIDUDV LWVSURSRQHQWVWULHGWRGRZQSOD\WKHSUREOHP³DVVRFLDWHGZLWKLQFLQHUDWLQJ 06:WRPDNHHOHFWULFDOHQHUJ\´EHFDXVHRI³WKHSRWHQWLDOIRUSROOXWDQWV WR HQWHU WKH DWPRVSKHUH ZLWK WKH IOXH JDVHV IURP WKH ERLOHU´ DQG ³WKHVH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



SROOXWDQWV FDQ EH DFLGLF DQG LQ WKH V ZHUH UHSRUWHG WR FDXVH HQYLURQPHQWDO GDPDJH E\ WXUQLQJ UDLQ LQWR DFLG UDLQ´ LQ 6HF  WKH ILFWLRQDODVSHFWRIFHUWDLQQHZW\SHVRISHWIRRG ZKLFKFODLP ³WKHXVHRI KXPDQJUDGH PHDW VRXUFHV RQO\ ZLWK QR DQLPDO PHDW E\SURGXFWV´ EHFDXVH³$$)&2KDVGHFODUHGWKDWXVLQJWKHWHUP KXPDQJUDGH LV IDOVH DQG PLVOHDGLQJ ´ LQ 6HF  WKH ILFWLRQDO DVSHFW RI WKH ILVFDO PHDVXUHPHQW RI ZDVWH UHF\FOH LQVRIDU DV LW LJQRUHV ³QHJDWLYH H[WHUQDOLWLHV´OLNHSROOXWLRQLQ6HFWKHILFWLRQDODVSHFWRIWKHZDVWH FRQYHUWHU LQVRIDU DV ³PRVW SURGXFWV DUH QRW GHVLJQHG ZLWK UHF\FOLQJ LQ PLQG´QRULVLWQHFHVVDULO\VDIHUWKDQDQHZO\LPSURYHGDXWRFODYHLQ6HF  WKH ILFWLRQDO DVSHFW RI PDUNHWEDVHG FDPSDLJQV  IRU =HUR :DVWH LQVRIDUDV³PDQ\RUJDQL]DWLRQVFLWLHVDQGFRXQWLHVKDYHHPEUDFHGD=HUR :DVWHVORJDQZKLOHSUHVVLQJIRUQRQHRIWKHNH\=HUR:DVWHFKDQJHV´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³WKH PLGXSGDWHWRWKH1$6$GHEULV)$4 KDGHVWLPDWHGWKDW³WKHQXPEHURI«GHEULVLWHPVVPDOOHUWKDQFHQWLPHWUH >LQ@H[FHHGVWHQVRIPLOOLRQV´LQ6HFWKHUHDOLVWLFDVSHFWRIWKH GHILQLWLRQ RI ³KD]DUGRXV ZDVWH´ LQ WKH %DVHO &RQYHQWLRQ LQVRIDU DV  LW LQFOXGHV PDQ\WKRXJK QRWDOOW\SHVRI ³KD]DUGRXV ZDVWH´LQ 6HF WKH UHDOLVWLF DVSHFW RI WKH (QYLURQPHQWDO -XVWLFH 0RYHPHQW LQVRIDU DV LW KDV UHFHLYHG KHOS IURP WKH &LYLO 5LJKWV 0RYHPHQW LQ 6HF  WKH UHDOLVWLFDVSHFWRIHWKLFDOFRQVXPHULVPLQVRIDUDVLWFDQFRQWULEXWHWRWKH EX\LQJ RI HWKLFDO SURGXFWV LQ 6HF  WKH UHDOLVWLF DVSHFW RI ³DGYHUWLVLQJ´LQVRIDUDVLWFRQWULEXWHVWRWKHDZDUHQHVVRIVRPHSURGXFWV RQVDOHLQ6HFWKHUHDOLVWLFDVSHFWRI(35LQVRIDUDVLWFRQWULEXWHV WR WKH DZDUHQHVV RI SURGXFHU UHVSRQVLELOLW\ LQ 6HF  WKH UHDOLVWLF DVSHFWRIGXPSVWHUGLYLQJLQVRIDUDVLWFDQVDYHE\UHXVLQJWKHGLVFDUGHG LWHPV LQ 6HF  WKH UHDOLVWLF DVSHFW RI LQFLQHUDWLRQ DV D VDIH :W( PHWKRGLQVRIDUDVLWKDVFRQWULEXWHGWRWKHFUHDWLRQRIHOHFWULFDOHQHUJ\LQ 6HFWKHUHDOLVWLFDVSHFWRIFHUWDLQQHZW\SHVRISHWIRRGLQVRIDUDV WKH\ DUH XVHIXO IRU WKH DGYRFDWHV RI SHW IRRG FRQVXPSWLRQ LQ 6HF  WKHUHDOLVWLFDVSHFWRIWKHILVFDOPHDVXUHPHQWRIZDVWHUHF\FOHLQVRIDUDVLW

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





LQFOXGHVWKHFRVWVDQGEHQHILWVRIZDVWHUHF\FOHIRUDQLQGLYLGXDOEXVLQHVV EXW QRW VRFLHW\ LQ 6HF  WKH UHDOLVWLF DVSHFW RI WKH ZDVWH FRQYHUWHU LQVRIDU DV LW KDV FHUWDLQ SRVLWLYH HQYLURQPHQWDO LPSDFW LQ 6HF  WKH UHDOLVWLF DVSHFW RI PDUNHWEDVHG FDPSDLJQV IRU =HUR :DVWH LQVRIDU DV ³PDUNHWEDVHG OHJLVODWLRQPHGLDWHG FDPSDLJQV OLNH ([WHQGHG 3URGXFHU 5HVSRQVLELOLW\>(35@DQGWKH3UHFDXWLRQDU\3ULQFLSOHDUHDPRQJQXPHURXV FDPSDLJQV WKDW KDYH D =HUR :DVWH VORJDQ KXQJ RQ WKHP´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

,Q5HODWLRQWR6WUXFWXUH 7KH QH[W ILYH WKHVHV DUH LQ UHODWLRQ WR VWUXFWXUH LQ H[LVWHQWLDO GLDOHFWLFVDVVKRZQEHORZ

WK7KHVLV7KH)LQLWHQHVV7UDQVILQLWHQHVV3ULQFLSOH 7KHVHYHQWKWKHVLVLVFDOOHGWKHILQLWHQHVVWUDQVILQLWHQHVVSULQFLSOH RQ WKH QDWXUH RI QXPEHUV  LQ WKH FDWHJRU\ RI ³VWUXFWXUH´ LQ H[LVWHQWLDO GLDOHFWLFV DV ILUVW SURSRVHG LQ )3+*  LQ WKDW LI WKHUH DUH ILQLWH WKLQJV WKHUHDUHOLNHZLVHWUDQVILQLWHRQHV²DQGYLFHYHUVD 7R DYRLG FRQIXVLRQ P\ XVDJH RI WKH ZRUG ³WUDQVILQLWH´ KHUH GLIIHUV UDGLFDOO\ IURP WKH RQH XVHG E\ &DQWRU DQG RWKHU PDWKHPDWLFLDQV  IRU ³UHODWLYH´ LQILQLW\²DQG LV PRUH OLPLWHG LQ OLJKW RI WKH SUREOHPV FRQIURQWLQJ DQ\ DWWHPSW WR XQGHUVWDQG WKH LGHD RI LQILQLW\ EH LW E\ LQWXLWLRQLPDJLQDWLRQDQGFRQFHSWLRQ DVGHWDLOHGO\DQDO\]HGLQ6HF RI)3+* 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



,QVWHDG E\ ³WUDQVILQLW\´ , 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 LGHD RI LQILQLW\DWDOO ZKLFKPD\QRWH[LVW  2IFRXUVHWKHUHPD\EHVRPHERUGHUOLQHFDVHVLQZKLFKLWLVQRWFOHDU ZKHWKHU WKH QXPEHU LQ TXHVWLRQ LV WUDQVILQLWH LQ P\ XVDJH  RU VLPSO\ D PDWKHPDWLFDO FRQYHQLHQFH $ JRRG H[DPSOH RI D ERUGHUOLQH FDVH LV WKH 3ODQFNXQLWRIOHQJWKIRU³WKHVPDOOHVWVSDFHSRVVLEO\PHDVXUHGLQQDWXUH´ ZKLFK LV ³OHVV WKDQ ELOOLRQWKV RI WULOOLRQWKV RI WULOOLRQWKV RI DQ LQFK´ RU VRPHWKLQJ OLNH  î í PHWHUV  3 %DRIX D 1 0F$OHHU  :.9'&RUEHWWD  7KDW VDLG²P\ XVDJH RI ³WUDQVILQLW\´ FDQ DOVR UHVROYH RU EHWWHU GLVVROYH DQDJHROGSUREOHPLQSKLORVRSK\NQRZQDV³=HQR VSDUDGR[HV´ DVDOUHDG\H[SODLQHGLQ6HFRI)3+*  ,QDQ\HYHQWLQUHODWLRQWRWKHILQLWHQHVVWUDQVILQLWHQHVVSULQFLSOHRQ WKHRWKHUKDQGWKHUHLVILQLWHQHVV HJWKHILQLWHQXPEHURIWKHFDWHJRULHV RI HSLGHPLFV ZKLFK ZHUH SHUSXHWXDWHG E\ ]RRQRWLF GLVHDVHV ³FLUFXODWLQJ PDLQO\ DPRQJ VPDOO URGHQWV DQG WKHLU IOHDV´ OLNH ³WKH %XERQLF 3ODJXH FKROHUD DQG W\SKRLG IHYHU´ LQ KLVWRU\ LQ 6HF  WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI FOLQFDO ZDVWH OLNH ³QHHGOHV´ ³VFDOSHOV´ ³ODQFHWV´ ³LGHQWLILDEOH ERG\ SDUWV´ HWF LQ 6HF  WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI OLWWHU OLNH ³FRQWDLQHUV´ ³ZUDSSHUV DQG SDSHU SURGXFW´ ³IXUQLWXUH´ ³DSSOLDQFHV´ ³ROG HOHFWURQLFV´ ³DEDQGRQHG YHKLFOHV´ DQG ³FRQVWUXFWLRQ PDWHULDOV´ LQ 6HF  WKH ILQLWH QXPEHU RI VSDFHFUDIWV ZKLFKZHUHODQXFKHGE\KXPDQVVRIDUDVRILQ6HFWKHILQLWH QXPEHU RI WKH SURSHUWLHV RI KD]DUGRXV ZDVWH OLNH ³LJQLWDELOLW\´ ³UHDFWLYLW\´³FRUURVLYLW\´DQG³WR[LFLW\´LQ6HFWKHILQLWHQXPEHU RI ³GLIIHUHQW NLQGV RI VLWHV´ ZKHUH HQYLURQPHQWDO GLVFULPLQDWLRQ KDV KLVWRULFDOO\ RFFXUUHG OLNH ³ZDVWH GLVSRVDO´ ³PDQXIDFWXULQJ´ ³HQHUJ\ SURGXFWLRQ´ ³KLJKZD\V´ ³SRUWV´ DQG ³DLUSRUWV´ LQ 6HF  WKH ILQLWH QXPEHURIWKHFDWHJRULHVRIPRUDOFRQFHUQVE\HWKLFDOFRQVXPHUVOLNH³WKH HQYLURQPHQW´ ³SHRSOH´ ³DQLPDOV´ ³SROLWLFV´  DQG ³SURGXFW´ LQ 6HF WKHILQLWHQXPEHURIWKHFDWHJRULHVRIWKRVHSHRSOHZKR³HVFKHZDOO WHFKQRORJ\´ RU WHFKQRORJLFDO SURGXFWV OLNH WKH  FDWHJRULHV NQRZQ DV ³/XGGLWHV´ DQG ³QHR/XGGLWHV´ LQ 6HF  WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI ZDVWH WR IDOO XQGHU WKH MXULVGLFWLRQ RI (35 OLNH ³LQGXVWULDO ZDVWH´ ³HOHFWURQLF ZDVWH´ HWF LQ 6HF  WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI GLVFDUGHG LWHPV LQ GXPSVWHUV OLNH ³EXVLQHVV ZDVWH´ ³FKHPLFDOZDVWH´³FOLQLFDOZDVWH´³FRPPHUFLDOZDVWH´HWFLQ6HF WKHILQLWHQXPEHURIWKHFDWHJRULHVRISROOXWDQWVE\LQFLQHUDWRUVOLNH³ILQH SDUWLFXODWH KHDY\ PHWDOV WUDFH GLR[LQ DQG DFLG JDV HPLVVLRQV´ LQ 6HF

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WKHILQLWHQXPEHURIWKHFDWHJRULHVRIIRRGVWXIIVDQGQRQIRRGVWXIIV IURP DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV DV OLVWHG HDUOLHU LQ 6HF WKHILQLWHQXPEHURIWKHFDWHJRULHVRI³KLJKO\GLVSHUVHGZDVWHV´WR EH UHF\FOHG OLNH ³FKORULQDWHG RUJDQLF K\GURFDUERQV WKDW KDYH ELRDFFXPXODWHGLQDQLPDODQGKXPDQWLVVXHVDFURVVWKHJOREHWKHFRSSHU GLVSHUVHG LQ IXQJLFLGHV WKH OHDG LQ ZLGHO\ DSSOLHG SDLQWV RU WKH ]LQF R[LGHVSUHVHQWLQWKHILQHO\GLVSHUVHGUXEEHUSRZGHUWKDWLVDEUDGHGIURP DXWRPRELOH WLUHV´ LQ 6HF  WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI ZDVWH WR EH WUHDWDEOHE\ ZDVWH FRQYHUWHUV OLNH ³VROLG ZDVWH´ ³KD]DUGRXV ZDVWH´HWFLQ6HFWKHILQLWHQXPEHURIWKHFDWHJRULHVRIPDWHULDOV XVHG LQ SURGXFWV ZKLFK FDQ EH WDUJHWHG E\ =HUR :DVWH OLNH ³VWHHO´ ³FRSSHU´³JODVV´DQG³SODVWLFV´LQERWWOHVFRPSXWHUVHWFLQ6HF DQG WKH ILQLWH QXPEHU RI WKH FDWHJRULHV RI IRRG VXSSOLHUV OLNH ³VXSHUPDUNHWV JURFHU\ VWRUHV DQG UHVWDXUDQWV´ WDUJHWHG E\ GXPSVWHU GLYHUVIRUIRRGZDVWHVLQ6HF  2QWKHRWKHUKDQGWKHUHLVWUDQVILQLWW\ HJWKHWUDQVILQLWHQXPEHURI DOOWKHLQGLYLGLXDOUDWVDQGIOHDVZKLFKKDYHHYHUH[LVWHGLQKLVWRU\LQ6HF  WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO ³QHHGOHV´ ³VFDOSHOV´ ³ODQFHWV´³LGHQWLILDEOHERG\SDUWV´HWFWKDWKDYHHYHUH[LVWHGRUSURGXFHG LQKLVWRU\LQ6HFWKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYLGXDOSLHFHV RI ³FRQWDLQHUV´ ³ZUDSSHUVDQGSDSHUSURGXFW´³IXUQLWXUH´³DSSOLDQFHV´ ³ROG HOHFWURQLFV´ ³DEDQGRQHG YHKLFOHV´ DQG ³FRQVWUXFWLRQ PDWHULDOV´ LQ KLVWRU\WKDWKDYHHYHUEHHQSURGXFHGLQ6HFWKHWUDQVILQLWHQXPEHU RI DOO WKH LQGLYLGXDO VSDFH SDUWLFOHV ERWK QDWXUDO DQG PDQPDGH ZKLFK KDYHHYHUWUDYHOHGQHDURUWRWKH(DUWKLQWKH KLVWRU\RIWKHXQLYHUVHDQG FRXOG KLW DQ\ VSDFHFUDIW RU DQ\ REMHFW LQ WKH ZD\ LQ 6HF  WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO SLHFHV RI KD]DUGRXV ZDVWH LQ KLVWRU\WKDW KDYHHYHUH[LVWHGLQ6HFWKHWUDQVILQLWHQXPEHURIDOO WKH LQGLYLGXDO ZDVWH LWHPV LQ DOO WKH VLWHV RI ³ZDVWH GLVSRVDO´ ³PDQXIDFWXULQJ´ ³HQHUJ\ SURGXFWLRQ´ ³KLJKZD\V´ ³SRUWV´ DQG ³DLUSRUWV´ LQ KLVWRU\ WKDW KDYH DIIHFWHG PLQRULWLHV LQ 6HF  WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO WKLQJV LQ ³WKH HQYLURQPHQW´ ³SHRSOH´ ³DQLPDOV´ ³SROLWLFV´  DQG ³SURGXFW´ WKDW KDYH HYHU H[LVWHG LQ KLVWRU\LQ6HFWKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYLGXDOSLHFHVRI WHFKQRORJLFDO SURGXFWV LQ KLVWRU\ WKDW KDYH HYHU EHHQ SURGXFHG LQ 6HF  WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO SLHFHV RI SURGXFWV LQ KLVWRU\ WKDW KDYH HYHU H[LVWHG DQG FDQ EH FODVVLILHG XQGHU (35 LQ 6HF WKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYLGXDOLWHPVRIZDVWHVLQKLVWRU\ WKDWFDQEHIRXQGLQGXPSVWHUVLQ6HFWKHWUDQVILQLWHQXPEHURIDOO WKH LQGLYLGXDO SLHFHV RI ³ILQH SDUWLFXODWH KHDY\ PHWDOV WUDFH GLR[LQ DQG DFLG JDV HPLVVLRQV´ DQG VR RQ LQ KLVWRU\ WKDW KDYH HYHU EHHQ LQ WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



HQYLURQPHQW LQ 6HF  WKH WUDQVILQLWH QXPEHU RI DOO WKH LQGLYLGXDO SLHFHVRIIRRGVWXIIVDQGQRQIRRGVWXIIVIURPDQLPDOSURGXFWVDQGDQLPDO E\SURGXFWVLQKLVWRU\WKDWKDYHHYHUH[LVWHGLQ6HFWKHWUDQVILQLWH QXPEHURIDOOWKHLQGLYLGXDOSLHFHVRI³KLJKO\GLVSHUVHGZDVWHV´LQKLVWRU\ WKDW KDYH HYHU H[LVWHG OLNH ³FKORULQDWHG RUJDQLF K\GURFDUERQV WKDW KDYH ELRDFFXPXODWHGLQDQLPDODQGKXPDQWLVVXHVDFURVVWKHJOREHWKHFRSSHU GLVSHUVHG LQ IXQJLFLGHV WKH OHDG LQ ZLGHO\ DSSOLHG SDLQWV RU WKH ]LQF R[LGHVSUHVHQWLQWKHILQHO\GLVSHUVHGUXEEHUSRZGHUWKDWLVDEUDGHGIURP DXWRPRELOHWLUHV´LQ6HFWKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYGLXDO SLHFHVRI³VROLGZDVWH´³KD]DUGRXVZDVWH´HWFLQKLVWRU\WKDWKDYHHYHU H[LVWHGLQ6HFWKHWUDQVILQLWHQXPEHURIDOOWKHLQGLYLGXDOSLHFHVRI ³VWHHO´ ³FRSSHU´ ³JODVV´ DQG ³SODVWLFV´ LQ ERWWOHV FRPSXWHUV HWF LQ KLVWRU\ WKDW FDQ EH WDUJHWHG E\ =HUR :DVWH LQ 6HF  DQG WKH WUDQVILQLWHQXPEHURIDOOWKHLQGLYLGXDOLWHPVRIIRRGZDVWHVLQKLVWRU\WKDW KDYH HYHU EHHQ GLVFDUGHG E\ ³VXSHUPDUNHWV JURFHU\ VWRUHV DQG UHVWDXUDQWV´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

WK7KHVLV7KH3UHFLVHQHVV9DJXHQHVV3ULQFLSOH 7KHHLJKWKWKHVLVLVFDOOHGWKHSUHFLVHQHVVYDJXHQHVVSULQFLSOH RQWKH UHILQHPHQWRIWKLQJV LQWKHFDWHJRU\RI³VWUXFWXUH´LQH[LVWHQWLDOGLDOHFWLFV ZKLFK ZDV ILUVW RXW ZRUNHG RXW LQ ),$  LQ WKDW ERWK SUHFLVHQHVV DQG YDJXHQHVVDUHLPSRUWDQWQRWWKDWRQHLVEHWWHUWKDQWKHRWKHUEXWWKDWERWK DUH XVHG LQ GLIIHUHQW GHJUHHV RI SUHIHUHQFH LQ DFFRUGDQFH WR WKH FRQWH[WXDO DSSOLFDWLRQ IURP WKH SHUVSHFWLYHV RI QDWXUH WKH PLQG FXOWXUH DQGVRFLHW\7KHUHLVQRSUHFLVHQHVVZLWKRXWYDJXHQHVV²DQGYLFHYHUVD )RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV SUHFLVHQHVV HJ WKH SUHFLVH LGHQWLILFDWLRQ RI  WKH WKUHH HSLGHPLFV OLNH ³WKH %XERQLF 3ODJXH FKROHUD

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





DQG W\SKRLG IHYHU´ LQ WKH DUWLFOH DIRUHFLWHG LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQ RI WKUHH PHWKRGV RI FOLQLFDO ZDVWH GLVSRVDO LQ WKH DUWLFOH DIRUHFLWHGLQ6HFWKHSUHFLVHLGHQWLILFDWLRQRIVROXWLRQVWROLWWHULQ WKHDUWLFOHDIRUHFLWHGLQ6HFWKHSUHFLVHLGHQWLILFDWLRQRIVROXWLRQV WR VSDFH GHEULV LQ WKH DUWLFOH DIRUHFLWHG LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQRISURSHUWLHVRIKD]DUGRXVZDVWHLQWKH%DVHO&RQYHQWLRQ QDPHO\ ³H[SORVLYH IODPPDEOH WR[LF RU FRUURVLYH´ LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQ RI  EDUULHUV WR PLQRULW\ SDUWLFLSDWLRQ LQ WKH HQYLURQPHQWDOMXVWLFHPRYHPHQWLQWKHDUWLFOHDIRUHFLWHGLQ6HFWKH SUHFLVHLGHQWLILFDWLRQRIW\SHVRI³SURGXFWV´WKDWDUHWDUJHWHGE\HKWLFDO FRQVXPHUVLQWKHDUWLFOHDIRUHFLWHGLQ6HFWKHSUHFLVHLGHQWLILFDWLRQ RI   PDMRU WUDGLWLRQV RI VLPSOH OLIHVW\OH LQ WKH DUWLFOH DIRUHFLWHG LQ 6HF WKHSUHFLVHLGHQWLILFDWLRQRIDSSURDFKHVWR(35OLNH³PDQGDWRU\´ ³QHJRWLDWHG´ DQG ³YROXQWDU\´ LQ WKH DUWLFOH DIRUHFLWHG LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQ RI  UHDVRQV IRU GXPSVWHU GLYLQJ LQ WKH DUWLFOH DIRUHFLWHG LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQ RI  :W( PHWKRGV LQFOXGLQJ LQFLQHUDWLRQ LQ WKH DUWLFOH DIRUHFLWHG LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQRIPDMRUXVHVRIDQLPDOSURGXFWVDQGDQLPDOE\SURGXFWV QDPHO\ SHW IRRG DQG VRLO DPHQGPHQW LQ WKH DUWLFOH DIRUHFLWHG LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQ RI  PDMRU GLVDJUHHPHQWV RQ WKH FRVW EHQHILWDQDO\VLVRIZDVWHUHF\FOHLQWKHDUWLFOHDIRUHFLWHGLQ6HFWKH SUHFLVHLGHQWLILFDWLRQRIDSSOLFDWLRQVRIWKHZDVWHFRQYHUWHULQWKHDUWLFOH DIRUHFLWHG LQ 6HF  WKH SUHFLVH LGHQWLILFDWLRQ RI  GLVSXWHV LQ WKH GHEDWHRQ]HURZDVWHLQWKHDUWLFOHDIRUHFLWHGLQ6HFDQGWKHSUHFLVH LGHQWLILFDWLRQRIFKDUDFWHULVWLFVRIIUHHJDQLVPLQWKHDUWLFOHDIRUHFLWHGLQ 6HF  2Q WKH RWKHU KDQG WKHUH LV YDJXHQHVV HJ WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQRIWKHWKUHHHSLGHPLFVOLNH³WKH%XERQLF3ODJXHFKROHUDDQG W\SKRLGIHYHU´LQWKHDUWLFOHDIRUHFLWHGVLQFHLWLVQRWFOHDUZK\WKHUHPXVW EHRQO\WKUHHQRWDQGVRRQLQ6HFWKHYDJXHQHVVLQ WKH LGHQWLILFDWLRQ RI WKH WKUHH PHWKRGV RI FOLQLFDO ZDVWH GLVSRVDO LQ WKH DUWLFOHDIRUHFLWHGVLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRW  DQG VR RQ LQ 6HF  WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  VROXWLRQV WR OLWWHU LQ WKH DUWLFOH DIRUHFLWHG VLQFH LW LV QRW FOHDU ZK\ WKHUH PXVWEHRQO\QRWDQGVRRQLQ6HFWKHYDJXHQHVVLQWKH LGHQWLILFDWLRQ RI WKH  VROXWLRQV WR VSDFH GHEULV LQ WKH DUWLFOH  DIRUHFLWHG VLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRWDQGVRRQLQ6HF WKHYDJXHQHVVLQWKHLGHQWLILFDWLRQRIWKHSURSHUWLHVRIKD]DUGRXV ZDVWH LQ WKH %DVHO &RQYHQWLRQ QDPHO\ ³H[SORVLYH IODPPDEOH WR[LF RU FRUURVLYH´VLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRWDQG VRRQEHFDXVHIRUWKHFULWLFVWKHUHDUHRWKHUSURSHUWLHVOLNH³UDGLRDFWLYH´



7KH)XWXUHRI3RVW+XPDQ:DVWH 



HWF LQ 6HF  WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  EDUULHUV WR PLQRULW\SDUWLFLSDWLRQLQWKHHQYLURQPHQWDOMXVWLFHPRYHPHQWLQWKHDUWLFOH DIRUHFLWHGVLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRWDQGVR RQ LQ 6HF  WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  W\SHV RI ³SURGXFWV´WKDWDUHWDUJHWHGE\HKWLFDOFRQVXPHUVLQWKHDUWLFOHDIRUHFLWHG VLQFHLWLVQRWFOHDUZK\WKHUHPXVWEHRQO\QRWDQGVRRQLQ6HF  WKH YDJXHQHVV LQ WKH LGHQWLILFDWLRQ RI WKH  PDMRU WUDGLWLRQV RI VLPSOH OLIHVW\OH LQ WKH DUWLFOH DIRUHFLWHG VLQFH LW LV QRW FOHDU ZK\ WKHUH PXVWEHRQO\QRWDQGVRRQLQ6HFWKHYDJXHQHVVLQWKH LGHQWLILFDWLRQRIWKHDSSURDFKHVWR(35OLNH³PDQGDWRU\´³QHJRWLDWHG´ DQG ³YROXQWDU\´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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





*RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH FODULW\DPELJXLW\GLUHFWQHVVLQGLUHFWQHVVTXDQWLWDWLYHQHVVTXDOLWDWLYHQHVV VSHFLILFLW\REVFXULW\ WKLFNQHVVWKLQQHVV GHVFULEDELOLW\QRQGHVFULEDELOLW\ FRQFUHWQHVVDEVWUDFWQHVV WUDQVODWDELOLW\XQWUDQVODWDELOLW\ VSHFLILFLW\ JHQHUDOLW\FOHDUFXWQHVVWUDQVLWLRQDOQHVVDQGWKHOLNH

WK7KHVLV7KH6LPSOHQHVV&RPSOLFDWHGQHVV3ULQFLSOH 7KH QLQWK WKHVLV UHIHUV WR WKH VLPSOHQHVVFRPSOLFDWHGQHVV SULQFLSOH RQ WKH LQWHUFRQQHFWLRQ DPRQJ WKLQJV  LQ WKH FDWHJRU\ RI ³VWUXFWXUH´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK ZDV ILUVW RXW ZRUNHG RXW LQ ),$  LQ WKDW ERWKVLPSOHQHVVDQGFRPSOLFDWHGQHVVDUHYLWDOZLWKRXWIDYRULQJRQHRYHU WKHRWKHUDQGHDFKLVXWLOL]HGGHSHQGLQJRQWKHEDVLVRIWKHSHUVSHFWLYHV RI QDWXUH WKH PLQG FXOWXUH DQG VRFLHW\ 7KHUH LV QR VLPSOHQHVV ZLWKRXW FRPSOLFDWHGQHVV²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³DSSOLFDWLRQV RXWVLGH RI ZDVWHWUHDWPHQWFHQWHUVDUHLQFUHDVLQJO\FRPPRQGXHWRWKH«VLPSOLFLW\RI PRGHUQ FRQYHUWHUV´ LQ 6HF  WKH UHODWLYHO\ VLPSOH DQDO\VLV RI =HUR :DVWHE\WKHDGYRFDWHVLQ6HFDQGWKHUHODWLYHO\VLPSOHDQDO\VLVRI WKHLGHRORJ\RIIUHHJDQLVPE\LWVDGYRFDWHVLQ6HF  2QWKHRWKHUKDQGWKHUHLVFRPSOLFDWHGQHVV HJWKHUHODWLYHO\PRUH FRPSOLFDWHG DQDO\VLV RI   WKH EXERQLF SODJXH DV D ELRORJLFDO ZHDSRQ E\ FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI SURSHU FOLQLFDO ZDVWH GLVSRVDO E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHGRXWE\WKHFULWLFVDVFLWHG LQ6HFWKHUHODWLYHO\PRUHFRPSOLFDWHGDQDO\VLVRIWKHSUHYHQWLRQRI OLWWHU E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV ZLWK FRPSOLFDWHG FDXVHV DQG RWKHU LVVXHV SRLQWHG RXW E\ WKH FULWLFVDVFLWHGLQ 6HFWKHUHODWLYHO\ PRUHFRPSOLFDWHGDQDO\VLVRI WKHVROXWLRQVWRVSDFHGHEULVE\FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQV DVVKRZQLQWKHSUREOHPVSRLQWHGRXWE\WKHFULWLFVDVFLWHGLQ6HF WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI WKH %DVHO &RQYHQWLRQ E\ FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHG RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLVRIWKHHQYLURQPHQWDOMXVWLFHPRYHPHQWE\FKDOOHQJLQJWKHFODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI HWKLFDO FRQVXPHULVPE\FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  WKH UHODWLYHO\ PRUHFRPSOLFDWHGDQDO\VLVRIVLPSOHOLYLQJE\FKDOOHQJLQJWKHFODLPVDQG DVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHGRXWE\WKHFULWLFVDVFLWHG LQ 6HF  WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI (35 E\ FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHG RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI GXPSVWHU GLYLQJ E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DVVKRZQLQWKHSUREOHPVSRLQWHGRXWE\WKHFULWLFVDVFLWHGLQ6HF WKHUHODWLYHO\PRUHFRPSOLFDWHGDQDO\VLVRI:W(PHWKRGVE\FKDOOHQJLQJ WKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHGRXWE\WKH FULWLFVDVFLWHGLQ 6HFWKHUHODWLYHO\ PRUHFRPSOLFDWHGDQDO\VLVRI DQLPDOSURGXFWVDQGDQLPDOE\SURGXFWVWREHXVHGIRUIRRGVWXIIVDQGQRQ IRRGVWXIIV E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  WKH UHODWLYHO\ PRUH FRPSOLFDWHG DQDO\VLV RI ZDVWH UHF\FOH ZLWK WKH WRRO RI FRVWEHQHILW DQDO\VLV E\ FKDOOHQJLQJ WKH FODLPV DQG DVVXPSWLRQV DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  QRZDGD\V ³DXWRFODYHVHPSOR\WKHVDPHPHWKRGRIVWHULOL]DWLRQDVFRQYHUWHUVEXWGR VRXVLQJODUJHUDQGPRUHFRPSOH[HTXLSPHQW´LQ6HFWKHUHODWLYHO\ PRUHFRPSOLFDWHGDQDO\VLVRI=HUR:DVWHE\FKDOOHQJLQJ WKHFODLPVDQG DVVXPSWLRQVDVVKRZQLQWKHSUREOHPVSRLQWHGRXWE\WKHFULWLFVDVFLWHG LQ6HFDQGWKHUHODWLYHO\PRUHFRPSOLFDWHGDQDO\VLVRIWKHLGHRORJ\ RIIUHHJDQLVPE\FKDOOHQJLQJWKHFODLPVDQGDVVXPSWLRQVDVVKRZQLQWKH SUREOHPVSRLQWHGRXWE\WKHFULWLFVDVFLWHGLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





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

WK7KHVLV7KH2SHQQHVV+LGGHQQHVV3ULQFLSOH 7KH WHQWK WKHVLV UHIHUV WR WKH RSHQQHVVKLGGHQHQVV SULQFLSOH RQ WKH GHWHFWLRQRIWKLQJV LQWKHFDWHJRU\RI ³VWUXFWXUH´LQH[LVWHQWLDOGLDOHFWLFV ZKLFK ZDV DOUHDG\ ZRUNHG RXW LQ P\ SUHYLRXV ERRNV HVSHFLDOO\ LQ )3+8 LQWKDWUHDOLW\KDVLWVKLGGHQIDFHMXVWDVLWLVRSHQWRRXWVLGHYLHZ LQ VRPHRWKHU ZD\V7KHUHLVQRRSHQQHVV ZLWKRXW KLGGHQQHVV²DQGYLFH YHUVD )RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV RSHQQHVV HJ WKH RSHQ H[SORUDWLRQRIWKHXVHRIWKHEXERQLFSODJXHDVDELRORJLFDOZHDSRQE\WKH ,PSHULDO -DSDQHVH $UP\ $LU 6HUYLFH LQ  LQ 6HF  WKH RSHQ H[SORUDWLRQRIZKDWFRQVWLWXWHVFOLQLFDOZDVWHE\DJLYHQGHILQLWLRQLQ6HF  WKH RSHQ H[SORUDWLRQ RI XVLQJ OHJLVODWLRQ WR HQIRUFH SURSHU OLWWHU GLVSRVDO LQ 6HF  WKH RSHQ H[SORUDWLRQ RI WKH VRFDOOHG ³.HVVOHU 6\QGURPH´E\'RQDOG.HVVOHUDQGODWHURWKHUUHVHDUFKHUVLQWKDW³LQVWHDG RIWKHGHQVLW\RIGHEULVEHLQJDPHDVXUHRIWKHQXPEHURILWHPVODXQFKHG LQWR RUELW LW ZDV WKDW QXPEHU SOXV DQ\ QHZ GHEULV FDXVHG ZKHQ WKH\ FROOLGHG´VR³LIWKHQHZGHEULVGLGQRWGHFD\IURPRUELWEHIRUHLPSDFWLQJ DQRWKHUREMHFWWKHQXPEHURIGHEULVLWHPVZRXOGFRQWLQXHWRJURZHYHQLI WKHUH ZHUH QR QHZ ODXQFKHV´ LQ 6HF  WKH RSHQ H[SORUDWLRQ RI ³D JHQHUDO SURKLELWLRQ RQ WKH H[SRUWDWLRQ RU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHVDQG QRQ3DUWLHV´LQWKH%DVHO &RQYHQWLRQLQ6HFWKHRSHQ H[SORUDWLRQ RI XVLQJ WKH HQYLURQPHQWDO MXVWLFH PRYHPHQW WR HQG HQYLURQPHQWDO GLVFULPLQDWLRQ DJDLQVW PLQRULWLHV LQ 6HF  WKH RSHQ H[SORUDWLRQ E\ HWKLFDO FRQVXPHUV RI EX\LQJ ³HWKLFDO SURGXFWV´ LQ 6HF WKHRSHQH[SORUDWLRQRIVLPSOHOLYLQJE\WKRVHLQWKH-XGHR&KULVWLDQ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³PDQ\ FRPPHUFLDO RU LQGXVWULDOFRPSDQLHV´OLNH³6WDSOHV+RPH'HSRW7R\RWD*HQHUDO0RWRUV DQG FRPSXWHU WDNHEDFN FDPSDLJQV´ WR ³HPEUDFH =HUR :DVWH´ LQ WKHLU PDUNHWEDVHG FDPSDLJQV LQ 6HF  DQG WKH RSHQ H[SORUDWLRQ RI WKH SRVVLELOLW\RI³UHFODLPLQJDQGHDWLQJIRRGWKDWKDVEHHQGLVFDUGHG´E\WKH IUHHJDQVLQ6HF  2Q WKH RWKHU KDQG WKHUH LV KLGGHQQHVV HJ WKH KLGGHQ ELDV LQ WKH YLHZRIXVLQJWKHEXERQLFSODJXHDVDELRORJLFDOZHDSRQE\WKH,PSHULDO -DSDQHVH$UP\$LU6HUYLFHLQEHFDXVHWKH&KLQHVHYLFWLPVDQGWKHLU IDPLO\ PHPEHUV FRQVLGHUHG LWV XVH DV LPPRUDO DQG LQKXPDQH LQ 6HF  WKH KLGGHQ ELDV LQ HDFK GHILQLWLRQ RI FOLQLFDO ZDVWH EHFDXVH ³GHILQLQJZKDWREMHFWVZHUHWREHFODVVLILHGDVPHGLFDOZDVWHVZDVFUXFLDO WRHQVXUHWKDWDOOPXQLFLSDOLWLHV«ZRXOGEHPRQLWRULQJVLPLODUPDWHULDOV´ VR GLIIHUHQW GHILQLWLRQV HQG XS PRQLWRULQJ GLIIHUHQW PDWHULDOV LQ 6HF WKHKLGGHQELDVLQXVLQJOHJLVODWLRQWRHQIRUFHSURSHUOLWWHUGLVSRVDO VLQFHWKHUHLVQRXQLYHUVDOUHJXODWLRQRIOLWWHULQJEHKDYLRUDQGLQDGGLWLRQ GLIIHUHQW FRXQWULHV DQG ORFDOLWLHV KDYH GLIIHUHQW FXVWRPV DQG OHJLVODWLRQV FRQFHUQLQJ OLWWHULQJ EHKDYLRU LQ 6HF  WKH KLGGHQ QDWXUH RI WKH ³.HVVOHU 6\QGURPH´ EHFDXVH DV H[SODLQHG E\ .HVVOHU ³WKH VWDUW RI D FDVFDGHZRXOGQRWEHREYLRXVXQWLOWKHVLWXDWLRQZDVZHOODGYDQFHGZKLFK PLJKWWDNH\HDUV´LQ6HFWKHKLGGHQELDVLQWKH%DVHO&RQYHQWLRQ EHFDXVHIRUWKHFULWLFVLWGRHVQRWJRIDUHQRXJKWRSURWHFWOHVVGHYHORSHG FRXQWULHV IURP WKH VSUHDG RI KD]DUGRXV ZDVWHV DQG RIWHQ IDYRUV PDMRU SRZHUV ZLWK WKRVH QRWRULRXV H[FHSWLRQDO SURYLVLRQV LQ 6HF  WKH KLGGHQ ELDV LQ WKH (QYLURQPHQWDO -XVWLFH 0RYHPHQW EHFDXVH IRU WKH FULWLFV LW KDV EHHQ SODJXHG ZLWK ³WKUHH GLIIHUHQW IRUPV´ RI HOLWLVP ZLWK RSSRVLWH HIIHFWV LQ 6HF  WKH KLGGHQ ELDV LQ HWKLFDO FRQVXPHULVP EHFDXVH IRU WKH FULWLFV LW FDQ EH FRXQWHUSURGXFWLYH LQ HQFRXUDJLQJ LPPRUDO EHKDYLRU LQVWHDG WKDW HWKLFDO FRQVXPHULVP LV D PLVWDNH LQ WKLQNLQJHWFLQ6HFWKHKLGGHQELDVLQWKHVLPSOHOLYLQJE\WKRVHLQ WKH -XGHR&KULVWLDQ WUDGLWLRQ EHFDXVH IRU WKH FULWLFV OLNH )ULHGULFK 1LHW]VFKH DVFHWLFLVP LQ WKH -XGHR&KULVWLDQ WUDGLWLRQ LV HVVHQWLDOO\ OLIH GHQ\LQJLQ6HFWKHKLGGHQELDVLQ(35EHFDXVHLWGRHVQRWIRFXV

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





RQ FRQVXPHU UHVSRQVLELOLW\ LQ 6HF  WKH KLGGHQ QDWXUH RI WKH GLVFDUGHGLWHPVLQGXPSVWHUVEHFDXVHWKH\³PD\KDYHIDXOWVZKLFKDUHQRW DSSDUHQW HYHQ LI H[DPLQHG´ RU ³IXUQLWXUH PD\ KDYH QRW HDVLO\ VHHQ EHGEXJV ZKLFK PD\ FDXVH DQ LQIHVWDWLRQ´ RU ³IDXOW\ HOHFWULFDO DQG PHFKDQLFDOJRRGVFDQEHKD]DUGRXVDQGGDQJHURXV´HWFLQ6HFWKH KLGGHQ ELDV LQ WKH XVH RI LQFLQHUDWRUV WR FRQYHUW ZDVWH LQWR HQHUJ\´ EHFDXVH RI ³WKH SRWHQWLDO IRU SROOXWDQWV WR HQWHU WKH DWPRVSKHUH ZLWK WKH IOXHJDVHVIURPWKHERLOHU´DQG³WKHVHSROOXWDQWVFDQEHDFLGLFDQGLQWKH VZHUHUHSRUWHGWRFDXVHHQYLURQPHQWDOGDPDJHE\ WXUQLQJUDLQLQWR DFLGUDLQ´WRJHWKHUZLWKRWKHUSUREOHPVRYHUWKH\HDUVLQ6HFWKH KLGGHQELDVLQWKHVDOHRIDQLPDOSURGXFWVDQGDQLPDOE\SURGXFWVE\WKH PHDW LQGXVWU\ EHFDXVH WKHLU VDOH E\ WKH PHDW LQGXVWU\ JLYHV LW DQ DGYDQWDJH ³WR FRPSHWH HFRQRPLFDOO\ ZLWK LQGXVWULHV VHOOLQJ VRXUFHV RI YHJHWDEOHSURWHLQ´LQ6HFWKHKLGGHQELDVLQILVFDOPHDVXUHPHQWRI ZDVWHUHF\FOHEHFDXVHLWLJQRUHVQHJDWLYHH[WHUQDOLWLHV LQ6HFWKH KLGGHQELDVLQWKHXVHRIWKHZDVWHFRQYHUWHUEHFDXVH³PRVWSURGXFWVDUH QRWGHVLJQHGZLWKUHF\FOLQJLQPLQG´LQ6HFWKHKLGGHQELDVLQWKH PDUNHWEDVHGFDPSDLJQVE\³PDQ\FRPPHUFLDORULQGXVWULDOFRPSDQLHV´ OLNH ³6WDSOHV +RPH 'HSRW 7R\RWD *HQHUDO 0RWRUV DQG FRPSXWHU WDNH EDFN FDPSDLJQV´ WR ³HPEUDFH =HUR :DVWH´ EHFDXVH WKH\ ³XVXDOO\ PHDQ QR PRUH WKDQ D PDMRU PDWHULDOV UHF\FOLQJ HIIRUW KDYLQJ QR EHDULQJ RQ SURGXFW UHGHVLJQ´ LQ 6HF  DQG WKH KLGGHQ ELDV LQ IUHHJDQLVP EHFDXVHRILWVKLGGHQH[WUHPLVWURRWVLQUHOLJLRQLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $JDLQLWVKRXOGEHVWUHVVHG KRZHYHUWKDWWKHUHDUHGLIIHUHQWVKDGHV RI JUD\  RU GLIIHUHQW GHJUHHV RI WUXWK  LQ WKH WZR RSSRVLWHV DQG WKH FODVVLILFDWLRQ LV QRW QHFHVVDULO\ PXWXDOO\ H[FOXVLYH HLWKHU ,Q IDFW HYHQ ZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQG XSVKDULQJWKH VDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH $OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH RYHUWQHVVFRYHUWQHVV SDUWLFLSDWLRQREVWUXFWLRQ SXEOLFQHVVSULYDWHQHVV RSHQQHVVFORVHGQHVV VXUIDFHGHSWK WUDQVSDUHQF\VHFUHF\ RSHQQHVV ELDVHGQHVVH[SRVLWLRQLOOXVLRQDQGVRRQ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WK7KHVLV7KH'HQVHQHVV(PSWLQHVV3ULQFLSOH 7KH HOHYHQWK WKHVLV FRQFHUQV WKH GHQVHQHVVHPSWLQHVV SULQFLSOH RQ WKH GLVWULEXWLRQ RI HQWLWLHV LQ VSDFH  LQ WKH FDWHJRU\ RI ³VWUXFWXUH´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK LV ILUVW SURSRVHG LQ )3+83 LQ WKDW ERWK GHQVLW\ DQG YRLG DUH QHHGHGLQ UHODWLRQ WR WKH PLQG QDWXUH FXOWXUH DQG VRFLHW\ DOEHLW LQ GLIIHUHQW ZD\V 7KHUH LV QR GHQVHQHVV ZLWKRXW HPSWLQHVV²DQGYLFHYHUVD /HVWDQ\PLVXQGHUVWDQGLQJRFFXUVWKHWHUP³YRLG´LVXVHGKHUHRQO\ DVDQDSSUR[LPDWLRQRIHPSWLQHVV GHSHQGLQJRQWKHGHJUHHRIWKHODFNRI GHQVLW\  VLQFH LQ SK\VLFV LW LV ZHOO NQRZQ WKDW ³HPSW\´ VSDFH LV QRW UHDOO\ HPSW\ DOO WKH ZD\ EHFDXVH LW FDQ EH IXOO RI HQHUJ\ HJ UDQGRP TXDQWXP IOXFWXDWLRQV DW WKH VXEDWRPLF OHYHO DQG IRU WKDW PDWWHU GDUN HQHUJ\LQ WKHXQLYHUVH DQG PDWWHU HJGLIIHUHQW YHUVLRQVRIVXEDWRPLF SDUWLFOHV DQG IRU WKDW PDWWHU GDUN PDWWHU LQ WKH XQLYHUVH  ) :LOF]HN   )RULQVWDQFHRQWKHRQHKDQGWKHUHLVGHQVHQHVV HJWKH UHODWLYHO\ GHQVHUFRQFHQWUDWLRQRISDWLHQWV ZKRGLHGIURPWKHEXERQLFSODJXHZKHQ XQWUHDWHG ZLWK DQWLELRWLFV OLNH ³VWUHSWRP\FLQ DQG JHQWDPLFLQ WHWUDF\FOLQHV´ DQG VR RQ DV VKRZQ LQ WKH ³PRUWDOLW\ UDWH RI  LQ XQWUHDWHGFDVHV´LQ6HFWKHUHODWLYHO\GHQVHUFRQFHQWUDWLRQRILWHPV OLNH³QHHGOHV´³VFDOSHOV´³ODQFHWV´³LGHQWLILDEOHERG\SDUWV´HWFWRIDOO XQGHU WKH MXUVLGLFWLRQ RI WKH 0:7$ LQ 6HF  WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI OLWWHU LQ OLWWHU WUDSV LQ 6HF  WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI ³FROOLVLRQV«DW YHU\ KLJK UHODWLYH YHORFLWLHV W\SLFDOO\ VHYHUDO NLORPHWUHV SHU VHFRQG´ LQ WKH /(2 UHJLRQ LQ 6HF  WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI KD]DUGRXV ZDVWHV IURP GHYHORSHG FRXQWULHV WR OHVV GHYHORSHG FRXQWULHV SULRU WR WKH FUHDWLRQ RI WKH %DVHO &RQYHQWLRQLQ6HFWKHUHODWLYHO\GHQVHUFRQFHQWUDWLRQRIPLQRULWLHV DQG ZRUNLQJ FODVV SHRSOH LQ WKH HQYLURQPHQWDO MXVWLFH PRYHPHQW QRZDGD\V LQ 6HF  WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI FRQFHUQV ZLWKPRUDOLVVXHVE\HWKLFDOFRQVXPHUVLQ6HFWKHUHODWLYHO\GHQVHU FRQFHQWUDWLRQ RI ³YHJDQ GLHWV´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³WKHWUDGLWLRQDOMRERI

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





UHF\FOLQJ´ DPRQJ ³WKH HQWUHSUHQHXULDO SRRU VXFK DV WKH NDUXQJ JXQL =DEDOHHQ WKH UDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´ LQ 6HF WKHUHODWLYHO\GHQVHUFRQFHQWUDWLRQRIFRQFHUQVZLWKXVLQJ³H[WHUQDO ZDWHU LQSXW´ LQ DXWRFODYHV LQ 6HF  WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI FRQFHUQV ZLWK WKH XVH RI ³JRYHUQPHQWDO DQG QRQ JRYHUQPHQWDOLQVWLWXWLRQV´E\WKRVHZKRIDYRUJRYHUQDQFHIRU=HUR:DVWH LQ 6HF  DQG WKH UHODWLYHO\ GHQVHU FRQFHQWUDWLRQ RI FRQFHUQV ZLWK ZRUNLQJDQGFRQVXPLQJOHVVDPRQJWKHIUHHJDQVLQ6HF  2QWKHRWKHUKDQGWKHUHLVHPSWLQHVV HJWKHUHODWLYHO\OHVVGHQVHRU PRUHHPSW\FRQFHQWUDWLRQRISDWLHQWVZKRGLHGIURPWKHEXERQLFSODJXH ZKHQ WUHDWHG ZLWK DQWLELRWLFV OLNH ³VWUHSWRP\FLQ DQG JHQWDPLFLQ WHWUDF\FOLQHV´DQGVRRQDVVKRZQLQWKHPRUWDOLW\UDWHRIRQO\³DERXW ´ LQ 6HF  WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQRIVSDFHGHEULVWRIDOOXQGHUWKHMXUVLGLFWLRQRIWKH0:7$ LQ 6HF  WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ RI OLWWHULQDUHDVEHQHILWHGIURPUHJXODUFOHDQXSDFWLYLWLHVLQ6HFWKH UHODWLYHO\ OHVVGHQVHRUPRUHHPSW\FRQFHQWUDWLRQRI PDMRUFROOLVLRQVDW KLJKHUDOWLWXGHVXQOLNHWKRVHLQ/(2DQG³WKLVPHDQVWKDWWKHGHEULVILHOG IURPVXFKDFROOLVLRQLVQRWWKHVDPHDVD/(2FROOLVLRQDQGGRHVQRWSRVH WKH VDPH VRUW RI ULVNV´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³YHJDQ GLHWV´ DPRQJ WKRVH LQ PDLQVWUHDP VRFLHW\ ZKR FRQVXPHDQLPDOSURGXFWVLQVWHDGLQ6HFWKHUHODWLYHO\OHVVGHQVH RUPRUHHPSW\FRQFHQWUDWLRQRIFRQFHUQVE\WKHSURSRQHQWVRI(35ZLWK WKH VXEVHTXHQW FRQVHTXHQFHV WKDW ³SURGXFHUV ZRXOG EH DGGLQJ UHF\FOLQJ FRVWV LQWR WKH LQLWLDO SULFH WDJ´ RU WKDW ³PDQXIDFWXUHUV PD\ XVH WDNHEDFN SURJUDPV WR WDNH VHFRQGKDQG HOHFWURQLFV RII WKH UHXVH PDUNHW E\ VKUHGGLQJ UDWKHU WKDQ UHXVLQJ RU UHSDLULQJ JRRGV WKDW FRPH LQ IRU UHF\FOLQJ´DQGRWKHUSUREOHPVDIRUHFLWHGLQ6HFWKHUHODWLYHO\OHVV GHQVHRUPRUHHPSW\FRQFHQWUDWLRQRIGLVFDUGHGLWHPVLQUHIULJHUDWRUVLQ 6HFWKHUHODWLYHO\OHVVGHQVHRUPRUHHPSW\FRQFHQWUDWLRQRIXVLQJ DOWHUQDWLYH:W( PHWKRGVRWKHUWKDQLQFLQHUDWLRQQRZDGD\VLQ6HF WKHUHODWLYHO\OHVVGHQVHRUPRUHHPSW\FRQFHQWUDWLRQRIIRRGVWXIIVIURP DQLPDOSURGXFWVDPRQJWKRVHIRUYHJHWDULDQNRVKHUDQGKDODDOGLHWVRQO\



7KH)XWXUHRI3RVW+XPDQ:DVWH 



LQ 6HF  WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ RI ³WKH WUDGLWLRQDO MRE RI UHF\FOLQJ´ DPRQJ WKH ULFK LQ 6HF  WKH UHODWLYHO\OHVVGHQVHRUPRUHHPSW\FRQFHQWUDWLRQRIFRQFHUQVZLWKXVLQJ ³H[WHUQDO ZDWHU LQSXW´ LQ PRGHUQ FRQYHUWHUV ZKLFK LQVWHDG ³XWLOL]H WKH PRLVWXUHFRQWHQWDOUHDG\SUHVHQWLQWKHFRQYHUVLRQFHOOWRJHQHUDWHVWHDP VWHULOL]DWLRQ FRQGLWLRQV´ LQ 6HF  WKH UHODWLYHO\ OHVV GHQVH RU PRUH HPSW\ FRQFHQWUDWLRQ RI FRQFHUQV ZLWK ³IRUPDO RUJDQLVDWLRQV DQG SURFHGXUHVRIWKHSXEOLFVHFWRU´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

,Q5HODWLRQWR3URFHVV 7KHQH[WIRXUWKHVHVDUHLQUHODWLRQWRSURFHVVLQH[LVWHQWLDOGLDOHFWLFV DVVKRZQEHORZ

WK7KHVLV7KH&KDQJH&RQVWDQF\3ULQFLSOH 7KH WZHOIWK WKHVLV FRQFHUQV WKH FKDQJHFRQVWDQF\ SULQFLSOH RQ WKH DOWHUDWLRQ RI WKLQJV  LQ WKH FDWHJRU\ RI ³SURFHVV´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK LV ILUVW QDPHG LQ %&3& DQG ZHUH ZRUNHG RXW LQ P\ ERRNV OLNH )+& )&' DQG )3+&  LQ WKDW FKDQJH RFFXUV RYHU WLPH DOWKRXJK FRQVWDQF\LVDOVRDOORZHG

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





2OGSOD\HUVIDGHDZD\DQGQHZRQHVHPHUJHVZLWKHYHUQHZFDXVHV DQGHYHUQHZIRUPV²DQGDV\PPHWU\XQGHUJRHVFKDQJHVRYHUWLPHWRRVR GRHVV\PPHWU\7KHUHLVQRFKDQJHZLWKRXWFRQVWDQF\²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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WK7KHVLV7KH2UGHU&KDRV3ULQFLSOH 7KH WKLUWHHQWK WKHVLV LV FDOOHG WKH WKH RUGHUFKDRV SULQFLSOH RQ WKH SDWWHUQRIWKLQJV LQWKHFDWHJRU\RI³SURFHVV´LQH[LVWHQWLDOGLDOHFWLFV DV ILUVW ZRUNHG RXW LQ )&  LQ WKDW ERWK RUGHU DQG FKDRV DUH YLWDO LQ WKH SURFHVVRIFKDQJHLQWKHZRUOG 7KH SUHIHUHQFH IRU RUGHU LV ELDVHG VLQFH LW GRHV QRW JLYH VXIILFLHQW DWWHQWLRQ WR WKH YLWDO UROH RI FKDRV LQ WKH WUDQVIRUPDWLRQ RI WKH ZRUOG ZLWKRXWVRPHKRZUHGXFLQJLWIRUWKHXQGHUVWDQGLQJRIRUGHU 7KHUHLVQR RUGHUZLWKRXWFKDRV²DQGYLFHYHUVD 7KHVFLHQWLILFVHDUFKIRURUGHULQWKHZRUOGLVRIWHQDKLGGHQELDVLQLWV RQWRORJLFDOREVHVVLRQZLWKRUGHUVLQFHFKDRVLVRIWHQWUHDWHGDVWKH³EDG´ JX\ZLWKRUGHUDVWKH³JRRG´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³ZLWKDORZHQRXJKGHQVLW\´RIVSDFHGHEULVVRWKDW³WKHDGGLWLRQRI GHEULVWKURXJKLPSDFWVLVVORZHUWKDQWKHLUUDWHRIGHFD\DQGWKHSUREOHP GRHV QRW EHFRPH VLJQLILFDQW´ VR WKLQJV GR QRW ORRN VR FKDRWLF ZLWK VR PDQ\ IHZHUFROOLVLRQVLQ6HFWKHPRUHRUOHVVRUGHUO\DSSHDUDQFH RIKD]DUGRXVZDVWHPDQDJHPHQWQRZDGD\VZLWKWKHFUHDWLRQRIWKH%DVHO &RQYHQWLRQ ZKLFK ³SODFHV D JHQHUDO SURKLELWLRQ RQ WKH H[SRUWDWLRQ RU LPSRUWDWLRQRIZDVWHVEHWZHHQ3DUWLHVDQGQRQ3DUWLHV´LQ6HFWKH PRUH RU OHVV RUGHUO\ YLHZ RI WKH HQYLURQPHQWDO MXVWLFH PRYHPHQW LI ORRNHGIURPWKHYDQWDJHSRLQWRIWKHWKUHHFOHDUFRQWULEXWLRQVRIWKH&LYLO 5LJKWV0RYHPHQWWRWKHPRYHPHQWLQ6HFWKHPRUHRUOHVVRUGHUO\ DSSHDUDQFHRIHWKLFDOFRQVXPHULVPLIORRNHGIURPWKHYDQWDJHSRLQWRID VLQJOH GHILQLWLRQ RI ZKDW FRQVWLWXWHV ³PRUDO´ DV LQ WKH ³-XGHR&KULVWLDQ VFULSWXUHV´ ZKLFK ³GLUHFW IROORZHUV WRZDUGV SUDFWLVLQJ JRRG VWHZDUGVKLS RIWKH(DUWKXQGHUDQREOLJDWLRQWRD*RGZKRLVEHOLHYHGWRKDYHFUHDWHG WKHSODQHWIRUXVWRVKDUHZLWKRWKHUFUHDWXUHV´LQ6HFWKHPRUHRU OHVV RUGHUO\ YLHZ RI WKH VLPSOH OLYLQJ PRYHPHQW LI ORRNHG IURP WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



YDQWDJH SRLQW RI LWV IRFXV RQ ³YROXQWDU\ SUDFWLFHV WR VLPSOLI\ RQH V OLIHVW\OH´LQ6HFWKHPRUHRUOHVVRUGHUO\UHDOLW\RIZDVWHUHF\FOLQJ LI ORRNHG IURP WKH YDQWDJH SRLQW RI WKH WKH DGYRFDWHV RI (35 WR VROHO\ IRFXV RQ SURGXFHU UHVSRQVLELOLW\ LQ 6HF  WKH PRUH RU OHVV RUGHUO\ DSSHDUDQFH RI WKH SHUPLVVDELOLW\ RI GXPSVWHU GLYLQJ LI ORRNHG RQO\ IURP WKH YDQWDJH  SRLQW RI ³D ODZ LVVXHG LQ ´ LQ ,WDO\ ZKLFK ³GHFODUHG GXPSVWHU GLYLQJ WR EH OHJDO´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³FRQVWUXFWLRQ´ ZKLFK IDYRUV ³WKH GHVLJQ RI EXLOGLQJV DV DVVHPEODJHV RI KLJK OHYHO FRPSRQHQWV QRW WKHLU FUHDWLRQ IURP URXJK PDWHULDOV VXFK DV OXPEHU FHPHQW RU SODVWHU´ VR WKDW ³WKHVH UHGHVLJQHG UHVRXUFHHIILFLHQW V\VWHPV ZLOOEHUHXVHG PDQ\ WLPHVDVWKHSURGXFWVWKDWLQFRUSRUDWHWKHP DUHUHXVHG´LQ6HFDQGWKHPRUHRUOHVVRUGHUO\DSSHDUDQFHRIIRRG ZDVWHV LI ORRNHG IURP WKH YDQWDJH SRLQW RI WKHP EHLQJ FRQWDLQHG LQVLGH GXPSVWHUV RI  IRRG VXSSOLHUV OLNH ³VXSHUPDUNHWV JURFHU\ VWRUHV DQG UHVWDXUDQWV´LQ6HF  2QWKHRWKHUKDQGWKHUHLVFKDRV HJWKHPRUHRUOHVVFKDRWLFYLHZ RI WKH VWUHHWV LQ )UHQFK FLWLHV LQ WKH WK FHQWXU\ DQG EHIRUH ZKLFK ZHUH RIWHQ ILOOHG ZLWK ³JUHDWSLOHV RIUHIXVHDQGH[FUHPHQWGRZQWKHFHQWUHRI WKH VWUHHWV´ DQG ³FKROHUD RXWEUHDNV ZHUH FRPPRQ DQG UDYDJHG WKH SRSXODWLRQ´LQ6HFWKHPRUHRUOHVVFKDRWLFDSSHDUDQFHRIFOLQLFDO ZDVWH LI ORRNHG IURP WKH YDQWDJH SRLQW RI ³WKH PLOH JDUEDJH VOLFN  FRPSRVHG SULPDULO\ RI PHGLFDO DQG KRXVHKROG ZDVWHV´ VSUHDGLQJ LQ ³QXPHURXV 1HZ -HUVH\ DQG 1HZ IRUFOLQLFDOZDVWH@WKDWKRWDLUDWƒ& WDNHVWZRKRXUVWRDFKLHYH´LQ6HFWKHUHODWLYHO\TXLFNHUVSHHGRI VRPHELRGHJUDGDEOHLWHPVRIOLWWHUWRHYHQWXDOO\GHFRPSRVHLQ6HF UHODWLYHYHORFLWLHVRI³REMHFWVLQODUJHO\UDQGRPORZHDUWKRUELWV´OLNH/(2 DUH KLJKHU LQ 6HF  WKH UHODWLYHO\ TXLFNHU VSHHG RI WKH ³%DVHO %DQ $PHQGPHQWWRWKH%DVHO&RQYHQWLRQ´WREHUDWLILHGLIWKHUHTXLUHPHQWLV WKDW ³DPHQGPHQWVWRWKHFRQYHQWLRQHQWHULQWRIRUFHDIWHU UDWLILFDWLRQ´RI RQO\DVPDOOQXPEHURIWKH3DUWLHVZKRDFFHSWHGWKHPLQ6HFWKH UHODWLYHO\TXLFNHUVSHHGRIWKHHQYLURQPHQWDOMXVWLFHPRYHPHQWQRZDGD\V WR ILJKW IRU HQYLURQPHQWDO MXVWLFH ZKHQ LW UHFHLYHV KHOS IURP WKH &LYLO 5LJKWV0RYHPHQWLQ6HFWKHUHODWLYHO\TXLFNHUVSHHGRIWKHIDOORI WKH$SDUWKHLGUHJLPHEHFDXVHRIWKHFRQWULEXWLRQE\³FRQVXPHUER\FRWWV RI6RXWK$IULFDRYHUDSDUWKHLG´LQ6HFWKHUHODWLYHO\TXLFNHUVSHHG RI JHWWLQJ EURFFROL LI RQH EX\V EURFFROL DW D VXSHUPDUNHW DQG JHWV LW LQVWDQWO\ZLWKRXWZDLWLQJIRUGD\VLQ6HFWKHUHODWLYHO\TXLFNHU VSHHGRIFRPSDQLHVWRHQJDJHLQWHFKQLFDOLQQRYDWLRQVLIQRWEXUGHQHGE\ (35 DW DOO EHFDXVH ³RUJDQL]DWLRQV DQG UHVHDUFKHUV DJDLQVW (35´ FODLP WKDW ³WKH PDQGDWH>RI(35@ ZRXOGVORZWHFKQLFDOLQQRYDWLRQDQGLPSHGH WHFKQRORJLFDO SURFHVV´ EHFDXVH LW DGGV H[WUD FRVWV WR SURGXFHUV DQG FRQWULEXWHVWRRWKHUSUREOHPVLQ6HFWKHUHODWLYHO\TXLFNHUVSHHGRI DGLVFDUGHGLWHPOHIWLQSXEOLFGXPSVWHUVWREHWKHWDUJHWRIFROOHFWLRQE\ GXPSVWHUGLYHUVLQ6HFWKHUHODWLYHO\TXLFNHUVSHHGRI³PXQLFLSDO VROLG ZDVWHV´ WR EH GHDOW ZLWK E\ LQFLQHUDWRUV LQVWHDG LQ 6HF  WKH UHODWLYHO\ TXLFNHU VSHHG RI DQLPDO SURGXFWV WR EH XVHG IRU IRRGVWXIIV EHFDXVH WKH\ GR QRW QHHG WR JR WKURXJK WKH SURFHVV RI ³UHQGHULQJ´ DV PXFKLQ6HFWKHUHODWLYHO\TXLFNHUVSHHGRIZDVWHVWREHUHF\FOHGLI WKH\FRQFHQWUDWHLQDODQGILOOLQ6HFWKHUHODWLYHO\TXLFNHUVSHHGRI ³WKHPRGHUQFRQYHUWHU´ZKLFK³DFKLHYHVVDWXUDWLRQZLWKLQ±PLQXWHV GXHWRWKHKLJKGHJUHHRISXOYHUL]DWLRQSUHFHGLQJWKHVWHULOL]DWLRQSKDVH´ LQ 6HF  WKH UHODWLYHO\ TXLFNHU VSHHG RI =HUR :DVWH WR EH DFKLHYHG ZLWK ³WKH LQYROYHPHQW RI EXVLQHVVHV 1*2V WKH SXEOLF DQG WKH VWDWH LQ JRYHUQLQJ´HWFLQ6HFDQGWKHUHODWLYHO\TXLFNHUVSHHGRIXQXVHG EXLOGLQJV WR EH RFFXSLHG LI EDVHG RQ DQ DOWHUQDWLYH SUDFWLFH NQRZQ DV VTXDWWLQJLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $JDLQLWVKRXOGEHVWUHVVHG KRZHYHUWKDWWKHUHDUHGLIIHUHQWVKDGHV RI JUD\  RU GLIIHUHQW GHJUHHV RI WUXWK  LQ WKH WZR RSSRVLWHV DQG WKH FODVVLILFDWLRQ LV QRW QHFHVVDULO\ PXWXDOO\ H[FOXVLYH HLWKHU ,Q IDFW HYHQ ZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQG XSVKDULQJWKH VDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





$OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH LQFRQYHQLHQFHFRQYHQLHQFH SDVVLYHQHVVDFWLYHQHVVQHVV JUDGXDOQHVV DEUXSWQHVVGHFHOHUDWLRQDFFHOHUDWLRQGLIILFXOW\HDVHDQGWKHOLNH

WK7KHVLV7KH([SDQVLRQ&RQWUDFWLRQ3ULQFLSOH 7KHILIWHHQWKWKHVLVLVFDOOHGWKHH[SDQVLRQFRQWUDFWLRQSULQFLSOHLQWKH FDWHJRU\RI³SURFHVV´LQH[LVWHQWLDOGLDOHFWLFVLQWKDWHQWLWLHVLQWKHZRUOG FDQERWKH[SDQGLQVRPHZD\VDQGFRQWUDFWLQRWKHURQHVDVSDUWRIWKHLU QDWXUH7KHUHLVQRH[SDQVLRQZLWKRXWFRQWUDFWLRQ²DQGYLFHYHUVD 7KLVSULQFLSOHDOWKRXJK QRWVRH[SOLFLWO\FDOOHG ZDVDOUHDG\ XVHGLQ P\ SUHYLRXV ZRUNV RQ GLIIHUHQW WRSLFV HJ WKH WKHRU\ RI IORDWLQJ FRQVFLRXVQHVVLQ)&'DQG)3+&WKHXQLRQRIWKHXQLRQVLQ%:7DQGWKH F\FOLFDOSURJUHVVLRQRIV\VWHPIUDJPHQWDWLRQDQGLQWHJUDWLRQLQ)&'  )RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV H[SDQVLRQ HJ WKH UHODWLYH VSUHDG RI FLWLHV ZLWK VHZHU V\VWHPV QRZDGD\V LQ 6HF  WKH UHODWLYH VSUHDGRIWKHXVHRI³PDQ\VXUJLFDOLQVWUXPHQWV>VXFKDVIRUFHSVQHHGOH KROGHUV DQG VFDOSHO KDQGOHV@´ ZKLFK DUH ³VLQJOHXVH«LWHPV´ QRZDGD\V LQ6HFWKHUHODWLYHVSUHDGRIWKHSUDFWLFHRIXVLQJOLWWHUELQVRQWKH VWUHHWV QRZDGD\V LQ 6HF  WKH UHODWLYH H[SDQVLRQ RI ³WKH WHVWLQJ RI DQWLVDWHOOLWHZHDSRQVFDUULHGRXWE\ERWKWKH86DQG6RYLHW8QLRQLQWKH V DQG V´ LQ 6HF  WKH UHODWLYH H[SDQVLRQ RI WKH W\SHV RI KD]DUGRXVZDVWHWREHLQFOXGHGIRU³WKHSURKLELWLRQRQWKHH[SRUWDWLRQRU LPSRUWDWLRQ RI ZDVWHV EHWZHHQ 3DUWLHV DQG QRQ3DUWLHV´ XQGHU WKH %DVHO &RQYHQWLRQDQGWKH³%DVHO%DQ$PHQGPHQWQRZDGD\VLQ6HFWKH UHODWLYHVSUHDGRIWKHHQYLURQPHQWDOMXVWLFH PRYHPHQWQRZDGD\VLQ6HF  WKH UHODWLYH VSUHDG RI HWKLFDO FRQVXPHULVP LQ GHYHORSHG FRXQWULHV QRZDGD\VLQ6HFWKHUHODWLYHULVHRIPDWHULDOLVWFDSLWDOLVWFXOWXUHLQ RXU WLPH LQ 6HF  WKH UHODWLYH H[SDQVLRQ RI ³PRUH VXVWDLQDEOH OHVV WR[LFDQGHDVLO\UHF\FODEOH´SURGXFWVQRZDGD\VDPRQJWKRVHZKRFRPSO\ ZLWK(35LQ6HFWKHUHODWLYHH[SDQVLRQRIGXPSVWHUVQRZDGD\VLQ GHYHORSHG FRXQWULHV VLQFH ³ZDVWH PDQDJHPHQW EHFDPH D FULWLFDO LVVXH´ GXHWR³WKHLQFUHDVHLQSRSXODWLRQDQGWKHPDVVLYHPLJUDWLRQRISHRSOHWR LQGXVWULDO WRZQV DQG FLWLHV IURP UXUDO DUHDV´ LQ 6HF  WKH UHODWLYH H[SDQVLRQRIWKHXVHRIVRPHQHZW\SHVRILQFLQHUDWRUVQRZDGD\VZKLFK ³UHGXFH WKH YROXPH RI WKH RULJLQDO ZDVWH E\ ´ LQ 6HF  WKH UHODWLYH VSUHDG RI WKH XVH RI IRRG SDFNDJLQJ QRZDGD\V DV VKRZQ E\ WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



$$)&2 UHJXODWLRQV LQ UHJDUG WR SHW IRRG SDFNDJLQJ LQ 6HF  WKH UHODWLYHVSUHDGRIRI³ODUJHUHF\FOLQJRUJDQL]DWLRQV´WRGRZDVWHUHF\FOHLQ GHYHORSHGFRXQWULHVQRZDGD\VLQ6HFWKHUHODWLYHH[SDQVLRQRIWKH XVHRIZDVWHFRQYHUWHUVQRZDGD\VOLNH³XSF\FOLQJ´ZKLFKLV³WKHSURFHVV RI FRQYHUWLQJ ZDVWH PDWHULDOV RU XVHOHVV SURGXFWV LQWR QHZ PDWHULDOV RU SURGXFWV RI EHWWHU TXDOLW\´ DQG ³KDV VKRZQ VLJQLILFDQW JURZWK DFURVV WKH 8QLWHG6WDWHV´LQRXUWLPHLQ6HFWKHUHODWLYH VSUHDGRIWKH =HUR :DVWHPRYHPHQWHVSHFLDOO\LQLQ6HFDQGWKHUHODWLYH VSUHDGRIWKHSUDFWLFHRIIUHHJDQLVPLQWKHGHYHORSHGZRUOGQRZDGD\VLQ 6HF  2QWKHRWKHU KDQG WKHUH LVFRQWUDFWLRQ HJWKHUHODWLYHGHFUHDVHRI FLWLHVZLWKRXWDQ\VHZHUV\VWHPVQRZDGD\VZKHUHWKHVWUHHWVFDQEHILOOHG ZLWK³JUHDWSLOHVRIUHIXVHDQGH[FUHPHQWGRZQWKHFHQWUHRIWKHVWUHHWV´ LQ6HFWKHUHODWLYHGHFOLQHRIWKHXVHRI³VXUJLFDOLQVWUXPHQWV>VXFK DV IRUFHSV QHHGOH KROGHUV DQG VFDOSHO KDQGOHV@´ ZKLFK DUH ³UHXVDEOH LWHPV´ QRZDGD\V LQ 6HF  WKH UHODWLYH GHFOLQH RI WKH SUDFWLFH RI WKURZLQJ ³ZDVWH DQG KXPDQ ZDVWHV RXW RI WKH ZLQGRZ ZKLFK ZRXOG GHFRPSRVH LQ WKH VWUHHW´ QRZDGD\V DOWKRXJK WKLV ZDV FRPPRQ IRU (XURSHDQV LQ WKH ROGHU GD\V LQ 6HF  WKH UHODWLYH GHFOLQH RI $6$7 WHVWLQJLQODWHVZKHQ³WKH86 VRQO\DFWLYHZHDSRQ3URJUDP ZDVVKXWGRZQLQ´LQ6HFWKHUHODWLYHGHFOLQHRUGHFUHDVHRI WKH LQFLGHQWV OLNH WKH .KLDQ 6HD ZDVWH GLVSRVDO LQFLGHQW DQG WKH  .RNRFDVHQRZDGD\VEHFDXVHRIWKH%DVHO&RQYHQWLRQLQ6HFWKH UHODWLYHGHFUHDVHRIPDUNHWRULHQWHGZDVWHPDQDJHPHQWQRZDGD\VLQ6HF  WKH UHODWLYH GHFOLQH RI FRUSRUDWLRQV ZKLFK VWLOO HQJDJH LQ XQHWKLFDO EHKDYLRU QRZDGD\V LQ GHYHORSHG FRXQWULHV LQ 6HF  WKH UHODWLYH GHFOLQHRI-XGHR&KULVWLDQDVFHWLFLVPLQRXUWLPHLQ6HFWKHUHODWLYH GHFOLQHRIHOHFWURQLFVQRZDGD\VZKLFKFDQQRWEHVDIHO\UHF\FOHGVXFKDV WKH ROGIDVKLRQHG ³/LWKLXPLRQ SRO\PHU EDWWHULHV´ DQG RWKHUV LQ 6HF  WKH UHODWLYH GHFOLQH RI SHRSOH QRZDGD\V LQ GHYHORSHG FRXQWULHV WR VLPSO\³WKURZWKHLU«ZDVWHVRXWRIWKH ZLQGRZZKLFKZRXOGGHFRPSRVH LQWKHVWUHHW´DVZDVWKHFDVHIRUWKH(XURSHDQVLQWKHROGHUGD\VLQ6HF  WKH UHODWLYH GHFOLQH QRZDGD\V RI WKH XVH RI WKH ROGHU W\SHV RI ³LQFLQHUDWLRQ SODQWV ZKLFK QHLWKHU UHFRYHUHG HQHUJ\ QRU PDWHULDOV´ LQ 6HF  WKH UHODWLYH GHFOLQH RI WKH SUDFWLFH RI SURGXFLQJ SURGXFWV ZLWKRXW D ORW RI GHWDLOHG LQIR DERXW WKHP LQ DQWLTXLW\ LQ 6HF  WKH UHODWLYH GHFOLQH RI ³WKH HQWUHSUHQHXULDO SRRU VXFK DV WKH NDUXQJ JXQL =DEDOHHQWKHUDJDQGERQHPDQZDVWHSLFNHUDQGMXQNPDQ´WRGRZDVWH UHF\FOHLQGHYHORSHGFRXQWULHVQRZDGD\VLQ6HFWKHUHODWLYHGHFOLQH RI WKH GHPDQG RQ ODQGILOOV QRZDGD\V VLQFH ³ZDVWH FRQYHUVLRQ«QRZ DOORZV QHDUO\  RI DOO 06: WR EH UHXVHG LQ VRPH ZD\ WKXV VKDUSO\

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





UHGXFLQJ WKH GHPDQG RQ ODQGILOOV´ LQ WKH 86 LQ 6HF  WKH UHODWLYH GHFOLQHRIWKHLGHDRI³UHF\FOLQJ´DVVLPSO\³SODFLQJERWWOHVDQGFDQVLQD UHF\FOHELQ´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

,Q5HODWLRQWR$JHQF\ 7KHQH[WHLJKWWKHVHVDUHLQUHODWLRQWRDJHQF\LQH[LVWHQWLDOGLDOHFWLFV DVVKRZQEHORZ

WK7KHVLV7KH7KHRU\3UD[LV3ULQFLSOH 7KH VL[WHHQWK WKHVLV LV WKH WKHRU\SUD[LV SULQFLSOH RQ WKH GXDOLW\ RI NQRZOHGJH  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK ZDVILUVWZRUNHGRXWLQ)3+( LQWKDWLIWKHUHLVWKHRUHWLFDOFRQVWUXFWLRQ WKHUH LV OLNHZLVH LWV SUDFWLFDO DSSOLFDWLRQ ERWK WHFKQLFDO DQG QRUPDWLYH 7KHUHLVQRWKHRU\ZLWKRXWSUD[LV²DQGYLFHYHUVD )RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV WKHRU\ HJ WKH WKHRUHWLFDO FRQVWUXFWLRQ RI GLIIHUHQW DQWLEDFWHULDO FRPSRXQGV LQ FKHPLVWU\ LQ 6HF  WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³LQIHFWLRXV RU ELRKD]DUGRXV´ GLVHDVH LQ PHGLFLQH LQ 6HF  WKH WKHRUHWLFDO DUJXPHQW DERXW WKH KDUPIXO HIIHFWV RI OLWWHU RQ ZLOGOLIH LQ 6HF  WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³PLFURPHWHRULWHV´ E\ )UHG :KLSSOH DQG )OHWFKHU :DWVRQIRUWKHVWXG\RI³WKHLQWHUSODQHWDU\GXVWFORXG´LQFRVPRORJ\DIWHU ::,, LQ 6HF  WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI WKH SURSHUWLHV RI



7KH)XWXUHRI3RVW+XPDQ:DVWH 



KD]DUGRXV ZDVWH OLNH ³LJQLWDELOLW\´ ³UHDFWLYLW\´ ³FRUURVLYLW\´ DQG ³WR[LFLW\´LQFKHPLVWU\LQ6HFWKHWKHRUHWLFDOLQGRFWULQDWLRQRIWKH &LYLO5LJKWV0RYHPHQWLQUHJDUGWR³VRFLDOMXVWLFHHTXDO SURWHFWLRQDQG DQ HQG WR LQVWLWXWLRQDO GLVFULPLQDWLRQ´ LQ 6HF  WKH WKHRUHWLFDO FRQVWUXFWLRQ RI WKH ³JRRG VWHZDUGVKLS RI WKH (DUWK´ LQ ³-XGHR&KULVWLDQ VFULSWXUHV´LQ6HFWKHWKHRUHWLFDOFRQVWUXFWLRQRIHQYLURQPHQWDOLVP LQ HQYLURQPHQWDO VWXGLHV LQ 6HF  WKH WKHRUHWLFDO FRQVWUXFWLRQ RI ³VXVWDLQDELOLW\´ LQ HQYLURQPHQWDO VWXGLHV LQ 6HF  WKH WKHRUHWLFDO FRQVWUXFWLRQRI³VXVWDLQDELOLW\´LQHQYLURQPHQWDOVWXGLHVLQ6HFWKH WKHRUHWLFDOFRQVWUXFWLRQRI³WKHUPDOHIILFLHQF\´LQWKHUPRG\QDPLFVLQ6HF  WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³KHDWLQJ´ DQG ³GU\LQJ´ LQ SK\VLFV DQG FKHPLVWU\ LQ 6HF  WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI ³HQYLURQPHQWDOGHVLJQ´WRUHVROYHZDVWHVOLNHZDVWHUHF\FOHLQ6HF WKHWKHRUHWLFDOXQGHUVWDQGLQJRI³SDVWHXUL]DWLRQ´LQ PLFURELRORJ\LQ6HF  WKH WKHRUHWLFDO FRQVWUXFWLRQ RI ³'HVLJQ (IILFLHQF\´ DQG ³'HVLJQ (IIHFWLYHQHVV´ LQ WKH =HUR :DVWH ,QVWLWXWH LQ 6HF  DQG WKH WKHRUHWLFDO FRQVWUXFWLRQ RI ³DQWLJOREDOL]DWLRQ´ ZRUOGYLHZV DJDLQVW FRUSRUDWHFDSLWDOLVPLQFRQWHPSRUDU\WLPHVLQ6HF  2Q WKH RWKHU KDQG WKHUH LV SUD[LV HJ WKH SUDFWLFDO DSSOLFDWLRQ RI GLIIHUHQW DQWLEDFWHULDO FRPSRXQGV LQ FKHPLVWU\ WR WKH ILHOG RI PHGLFLQH OLNH WKH XVH RI ³VWUHSWRP\FLQ´ ³JHQWDPLFLQ´ ³WHWUDF\FOLQHV´ HWF IRU WKH WUHDWPHQWRIEXERQLFSODJXHLQ6HFWKHSUDFWLFDODSSOLFDWLRQRIWKH NQRZOHGJHRI³LQIHFWLRXVRUELRKD]DUGRXV´GLVHDVHLQPHGLFLQHWRWKHILHOG RI ZDVWH PDQDJHPHQW OLNH WKH HQIRUFHPHQW E\ WKH 0:7$ IRU SURSHU FOLQLFDO ZDVWH GLVSRVDO WR DYRLG WKH VSUHDG RI LQIHFWLRXV GLVHDVH LQ 6HF WKHSUDFWLFDODSSOLFDWLRQRIWKHNQRZOHGJHDERXWWKHKDUPIXOHIIHFWV RIOLWWHURQZLOGOLIHWRWKHILHOGRIOLWWHUWUHDWPHQWOLNHGLIIHUHQWOHJLVODWLRQV LQ WKH 8QLWHG 6WDWHV ZKHUH ³DOO  VWDWHV KDYH DQWLOLWWHU ODZV´ LQ 6HF WKHSUDFWLFDODSSOLFDWLRQRIWKHWKHRUHWLFDOXQGHUVWDQGLQJRI³PLFUR PHWHRULWHV´LQFRVPRORJ\WRWKHILHOGRIVSDFHUDFHIRUWKHPHDVXUHPHQWRI VSDFH GHEULV LQ 6HF  WKH SUDFWLFDO DSSOLFDWLRQ RI WKH WKHRUHWLFDO XQGHUVWDQGLQJ RI WKH SURSHUWLHV RI KD]DUGRXV ZDVWH OLNH ³LJQLWDELOLW\´ ³UHDFWLYLW\´ ³FRUURVLYLW\´ DQG ³WR[LFLW\´ LQ FKHPLVWU\ WR WKH ILHOG RI KD]DUGRXV ZDVWH PDQDJHPHQW OLNH WKH FUHDWLRQ RI WKH %DVHO &RQYHQWLRQ LQ6HFWKHSUDFWLFDODSSOLFDWLRQRIWKHWKHRUHWLFDOLQGRFWULQDWLRQRI WKH &LYLO 5LJKWV 0RYHPHQW LQ UHJDUG WR ³VRFLDO MXVWLFH HTXDO SURWHFWLRQ DQG DQ HQG WR LQVWLWXWLRQDO GLVFULPLQDWLRQ´ WR WKH ILHOG RI HQYLURQPHQWDO MXVWLFHOLNHLWVSUDFWLFDOLQIOXHQFHRQWKHHQYLURQPHQWDOMXVWLFHPRYHPHQW LQ6HFWKHSUDFWLFDODSSOLFDWLRQRIWKHWKHRUHWLFDOFRQVWUXFWLRQRIWKH ³JRRG VWHZDUGVKLS RI WKH (DUWK´ LQ ³-XGHR&KULVWLDQ VFULSWXUHV´ WR WKH ILHOG RI HWKLFV IRU HWKLFDO FRQVXPHULVP LQ 6HF  WKH SUDFWLFDO

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





DSSOLFDWLRQ RI HQYLURQPHQWDOLVP LQ HQYLURQPHQWDO VWXGLHV WR WKH ILHOG RI VSLULWXDOVWXGLHVOLNHWKHVLPSOHOLYLQJPRYHPHQWIRUZDVWHUHGXFWLRQDQG DPRUHVXVWDLQDEOHHQYLURQPHQWLQ6HFWKHSUDFWLFDODSSOLFDWLRQRI WKHNQRZOHGJHRI³VXVWDLQDELOLW\´LQHQYLURQPHQWDOVWXGLHVWRWKHILHOGRI HFRQRPLFV OLNH WKH FDOO IRU (35 LQ PDQXIDFWXULQJ LQ 6HF  WKH SUDFWLFDODSSOLFDWLRQRIWKHNQRZOHGJHRI³VXVWDLQDELOLW\´LQHQYLURQPHQWDO VWXGLHV WR WKH ILHOG RI ZDVWH PDQDJHPHQW OLNH ³GXPSVWHU GLYLQJ´ ZKLFK ³EHFRPHVDQHQYLURQPHQWDOLVWHQGHDYRU«DQGLV«SUDFWLFHGE\PDQ\SUR JUHHQ FRPPXQLWLHV´ LQ 6HF  WKH SUDFWLFDO DSSOLFDWLRQ RI ³WKHUPDO HIILFLHQF\´LQWKHUPRG\QDPLFVWRWKHILHOGRIZDVWHWUHDWPHQWIRU:W(EXW ³WKHUPDO HIILFLHQF\´ LV OLPLWHG LQ UHDO OLIH EHFDXVH ³UHDO HQJLQHV KDYH PDQ\ GHSDUWXUHV IURP LGHDO EHKDYLRU WKDW ZDVWH HQHUJ\ UHGXFLQJ DFWXDO HIILFLHQFLHV IDU EHORZ WKH WKHRUHWLFDO YDOXHV´ ZKLFK DUH SRVVLEOH RQO\ LQ LGHDO VLWXDWLRQV LQ 6HF  WKH SUDFWLFDO DSSOLFDWLRQ RI WKH XQGHUVWDQGLQJ RI ³KHDWLQJ´ DQG ³GU\LQJ´ LQ SK\VLFV DQG FKHPLVWU\ WR WKH ILHOGRIPHDWLQGXVWU\OLNHWKHSURFHVVRI³UHQGHULQJ´LQ6HFZKDW LV FRQFHSWXDO DQG WKHRUHWLFDO LV QRW QHFHVVDULO\ SUDFWLFDO EHFDXVH ³FRPSOHWHUHF\FOLQJLVLPSUDFWLFDEOHDVKLJKO\GLVSHUVHGZDVWHVEHFRPHVR GLOXWHG WKDW WKH HQHUJ\ QHHGHG IRU WKHLU UHFRYHU\ EHFRPHV LQFUHDVLQJO\ H[FHVVLYH LQ 6HF  WKH SUDFWLFDO DSSOLFDWLRQ RI WKH XQGHUVWDQGLQJ RI ³SDVWHXUL]DWLRQ´LQPLFURELRORJ\WRWKHILHOGRIZDVWHWUHDWPHQWDVVKRZQ LQWKHXVHRIWKHZDVWHUFRQYHUWHULQ6HFWKHSUDFWLFDODSSOLFDWLRQRI ³'HVLJQ (IILFLHQF\´ DQG ³'HVLJQ (IIHFWLYHQHVV´ LQ WKH =HUR :DVWH ,QVWLWXWHWRWKHUHDOPRISUDFWLFHDVVKRZQE\WKH=HUR:DVWH,QWHUQDWLRQDO $OOLDQFH ZKLFK KHOSV D ORW RI ³FRPPXQLWLHV DFURVV WKH JOREH WKDW KDYH FUHDWHGSXEOLFSROLF\WRSURPRWH]HURZDVWHSUDFWLFHV´LQ6HFDQG WKH SUDFWLFDO DSSOLFDWLRQ RI ³DQWLJOREDOL]DWLRQ´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



LQWHQWLRQDOLW\ GLVFRXUVHDFWLRQ NQRZOHGJHLQWHUHVW PRWLYDWLRQXQLYHUVDOLW\SDUWLFXODULW\DQGVRIRUWK

NQRZOHGJH

WK7KHVLV7KH&RQYHQWLRQ1RYHOW\3ULQFLSOH 7KH VHYHQWHHQWK WKHVLV LV WKH FRQYHQWLRQQRYHOW\ SULQFLSOH RQ WKH QDWXUH RI FUHDWLYH WKLQNLQJ  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK ZDV ILUVW ZRUNHG RXW LQ )3+&7  LQ WKDW LI WKHUH LV FRQYHQWLRQDOZLVGRPWKHUHLVOLNHZLVHQRYHOFKDOOHQJHWRWKHH[WHQWWKDW ERWK FRQYHUJHQW DQG GLYHUJHQW WKLQNLQJ DUH SDUW RI OLIH 7KHUH LV QR FRQYHQWLRQZLWKRXWQRYHOW\²DQGYLFHYHUVD $V VUXPPDUL]HG IURP )3+&7 DOPRVW YHUEDWLP KHUH  WKHUH DUH D  ³FUHDWLYH WHFKQLTXHV´ DQG E  ³FUHDWLYH WUDLWV´ ZKLFK ZKHQ VDWLVILHG²LQ UHODWLRQWRWKHODUJHUFRQWH[WRIWKHPLQGQDWXUHVRFLHW\DQGFXOWXUH²FDQ EHXVHGWRHQKDQFHFUHDWLYHZRUNV ,Q DGGLWLRQ FUHDWLYH WKLQNLQJ KDV LWV RZQ SRVVLELOLWLHV DQG OLPLWV LQ UHODWLRQ WR LQYHQWLRQ  MXVW DV LW KDV LWV RZQ SURPLVHV DQG SLWIDOOV LQ UHODWLRQWRLQQRYDWLRQ ²DVDOUHDG\DQDO\]HGLQ)3+&7  ,QWKHHQGFUHDWLYHWKLQNLQJKDVLWVRZQGHVLUDELOLW\DQGGDUNVLGHV DV DOVRDOUHDG\DQDO\]HGLQ)3+&7  :LWKWKHVHFODULILFDWLRQVLQPLQG²WKHUHDUHJRRGHPSLULFDOH[DPSOHV IRUWKHFRQYHQWLRQQRYHOW\SULQFSOH )RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV FRQYHQWLRQ HJ WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ DQWLELRWLFV WR ILJKW WKH EXERQLF SODJXH LQ 6HFWKHFRQYHQWLRQDO ZLVGRPRI XVLQJ ³VXUJLFDOLQVWUXPHQWV>VXFK DVIRUFHSVQHHGOHKROGHUVDQGVFDOSHOKDQGOHV@´ZKLFKDUH³UHXVDEOH´DQG ³VWHULOL]DEOH´LQWKHROGHUGD\VLQ6HFWKHFRQYHQWLRQDOSUDFWLFHRI WKH (XURSHDQV LQ WKH ROGHU GD\V ZKHQ WKH\ WKUHZ ³ZDVWH DQG KXPDQ ZDVWHVRXWRIWKH ZLQGRZ ZKLFK ZRXOGGHFRPSRVHLQWKHVWUHHW´LQ6HF WKHFRQYHQWLRQDOZLVGRPDERXWVSDFHGHEULVLQWKHROGHUGD\VZKHQ LWZDVWKRXJKWWKDW³WKHGHQVLW\RIGHEULV´LV³DPHDVXUHRIWKHQXPEHURI LWHPVODXQFKHGLQWRRUELW´LQ6HFWKHFRQYHQWLRQDO ZLVGRPRI WKH %DVHO&RQYHQWLRQLQWKHROGHUGD\VLQUHJDUGWRLWVH[FOXVLRQRIUDGLRDFWLYH ZDVWH LQ WKH RULJLQDO GHILQLWLRQ RI KD]DURXGV ZDVWH LQ 6HF  WKH FRQYHQWLRQDO ZLVGRP RI WKH HDUO\ HQYLURQPHQWDO PRYHPHQW WR IRFXV RQ ³ZLOGHUQHVV SURWHFWLRQ DQG ZLOGOLIH SUHVHUYDWLRQ´ LQ 6HF  WKH FRQYHQWLRQDOFXVWRPRIVRPHFRUSRUDWLRQVZKLFKLQYHVW³DSRUWLRQRIWKHLU SURILWVLQIRUH[DPSOHWKHDUPVLQGXVWU\´LQWKHROGHUGD\VLQ6HF WKH FRQYHQWLRQDO ZLVGRP DERXW ³FRQVXPHULVW PHQWDOLW\´ LQ PRGHUQ FDSLWDOLVW FXOWXUH LQ 6HF  WKH FRQYHQWLRQDO ZLVGRP DERXW PDNLQJ ³FRPSOH[ HOHFWURQLFV WKDW FDQ EH GLIILFXOW WR VDIHO\ UHF\FOH VXFK DV

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





/LWKLXPLRQ SRO\PHU EDWWHULHV´ LQ WKH ROGHU GD\V LQ 6HF  WKH FRQYHQWLRQDOZLVGRPWKDW³PRVWSHRSOHZKRUHVRUWWRGXPSVWHUGLYLQJDUH IRUFHGWRGRVRRXWRIHFRQRPLFQHFHVVLW\´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³UHXVDEOH´ DQG ³VWHULOL]DEOH´ VXUJLFDO LQVWUXPHQWV LQ WKH ROGHU GD\V E\ WKH QHZ LGHD RI XVLQJ ³VXUJLFDO LQVWUXPHQWV >VXFK DV IRUFHSV QHHGOHKROGHUVDQGVFDOSHOKDQGOHV@´ZKLFKDUH³VLQJOHXVH´QRZDGD\VLQ 6HFWKHDOWHUQDWLYHQRYHOFKDOOHQJHWRWKHFRQYHQWLRQDOSUDFWLFHRI WKH(XURSHDQVLQWKHROGHUGD\VWRWKURZ ZDVWHRQWKHVWUHHWE\WKH QHZ LGHD RI GLIIHUHQW VROXWLRQV WR OLWWHU QRZDGD\V OLNH WKH XVH RI OLWWHU ELQV OLWWHU WUDSV HWF LQ 6HF  WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDOZLVGRPDERXWVSDFHGHEULVLQWKHROGHUGD\VE\WKHQHZLGHD RI WKH VRFDOOHG ³.HVVOHU 6\QGURPH´ E\ 'RQDOG .HVVOHU DQG ODWHU RWKHU UHVHDUFKHUVZKHQWKH\DUJXHGWKDW³LQVWHDGRIWKHGHQVLW\RIGHEULVEHLQJ DPHDVXUHRIWKHQXPEHURILWHPVODXQFKHGLQWRRUELWLWZDVWKDWQXPEHU SOXVDQ\QHZGHEULVFDXVHGZKHQWKH\FROOLGHG´VR³LIWKHQHZGHEULVGLG QRWGHFD\IURPRUELWEHIRUHLPSDFWLQJDQRWKHUREMHFWWKHQXPEHURIGHEULV LWHPVZRXOGFRQWLQXHWRJURZHYHQLIWKHUHZHUHQRQHZODXQFKHV´LQ6HF  WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP DERXW WKH H[FOXVLRQ RI UDGLRDFWLYH ZDVWH LQ WKH RULJLQDO GHILQLWLRQ RI KD]DURXGV ZDVWH LQ WKH %DVHO &RQYHQWLRQ LQ WKH ROGHU GD\V E\ WKH QHZ LGHD RI WKH ³%DVHO%DQ$PHQGPHQWWRWKH%DVHO&RQYHQWLRQ´QRZDGD\VZKLFKVHHNV D EURDGHU GHILQLWLRQ LQ 6HF  WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP RI WKH HDUO\ HQYLURQPHQWDO PRYHPHQW WR IRFXV RQ ³ZLOGHUQHVV SURWHFWLRQ DQG ZLOGOLIH SUHVHUYDWLRQ E\ WKH QHZ LGHD QRZDGD\VRIWKHHQYLURQPHQWDOPRYHPHQWWRIRFXVPRUHRQ³ORZLQFRPH PLQRULWLHV´ WR EDQ HQYLURQPHQWDO GLVFULPLQDWLRQ LQ 6HF  WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO FXVWRP RI VRPH FRUSRUDWLRQV ZKLFK LQYHVW ³D SRUWLRQ RI WKHLU SURILWV LQ IRU H[DPSOH WKH DUPVLQGXVWU\´LQWKHROGHUGD\VE\WKHQHZLGHDRIHWKLFDOFRQVXPHULVP



7KH)XWXUHRI3RVW+XPDQ:DVWH 



WRER\FRWWWKHVHFRUSRUDWLRQVLQ6HFWKHDOWHUQDWLYHQRYHOFKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP DERXW ³FRQVXPHULVW PHQWDOLW\´ LQ PRGHUQ FDSLWDOLVWFXOWXUHE\WKHQHZLGHDRIDQHZHFRQRPLFVEDVHGRQWKHVLPSOH OLYLQJ PRYHPHQW IRU ³VLPSOH SURVSHULW\´ E\ 'DYLG :DQQ LQ 6HF  WKHDOWHUQDWLYHQRYHOFKDOOHQJHWRWKHFRQYHQWLRQDOZLVGRPDERXWPDNLQJ ³FRPSOH[ HOHFWURQLFV WKDW FDQ EH GLIILFXOW WR VDIHO\ UHF\FOH´ E\ WKH QHZ LGHDRI(35ZKLFKVXJJHVWVWKDW³LWILQDQFLDOO\HQFRXUDJHVPDQXIDFWXUHUV WRGHVLJQ IRUUHF\FOLQJDQG PDNHSURGXFWVODVWORQJHU´LQ 6HFWKH DOWHUQDWLYHQRYHOFKDOOHQJHWRWKHFRQYHQWLRQDOZLVGRPWKDW³PRVWSHRSOH ZKR UHVRUW WR GXPSVWHUGLYLQJ DUH IRUFHG WR GR VR RXW RI HFRQRPLF QHFHVVLW\´ E\ WKH QHZ LGHD QRZDGD\V WKDW GLVFDUGHG LWHPV LQ GXPSVWHU FDQ EH XVHG IRU SROLFH LQYHVWLJDWLRQ WKH FUHDWLRQ RI DUW ZRUNV DFDGHPLF UHVHDUFK HWF LQ 6HF  WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ LQFLQHUDWLRQ IRU :W( E\ WKH QHZ LGHD RI XVLQJ DOWHUQDWLYH WHFKQRORJLHV IRU :W( OLNH ³WKHUPDO GHSRO\PHUL]DWLRQ´ DQG³SODVPDDUFJDVLILFDWLRQ´LQ6HFWKHDOWHUQDWLYHQRYHOFKDOOHQJH WR WKH FRQYHQWLRQDO ZLVGRP RI XVLQJ DQLPDO SURGXFWV DQG DQLPDO E\ SURGXFWV DV SHW IRRG E\ WKH QHZ LGHD RI PDNLQJ D QHZ FDWHJRU\ RI SHW IRRGZKLFK³HPSKDVL]HVWKHXVHRIKXPDQJUDGHPHDWVRXUFHVRQO\ZLWK QR DQLPDO PHDW E\SURGXFWV´ DOWKRXJK $$)&2 IRXQG WKLV FODLP PLVOHDGLQJ LQ 6HF  WKH DOWHUQDWLYH QRYHO FKDOOHQJH WR WKH FRQYHQWLRQDOZLVGRPDERXWZDVWHUHF\FOHWREHJRRGIRUWKHHQYLURQPHQW E\ WKH QHZ LGHD RI 6WHYHQ /DQGVEXUJ ZKR DUJXHG LQVWHDG WKDW ³SDSHU UHF\FOLQJ DFWXDOO\ UHGXFHV WUHH SRSXODWLRQV´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³ZRUNLQJ OHVV´ LQVWHDG LQ IUHHJDQLVP IRU WKH DQWLFDSLWDOLVW PRYHPHQW LQ 6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $JDLQLWVKRXOGEHVWUHVVHG KRZHYHUWKDWWKHUHDUHGLIIHUHQWVKDGHV RI JUD\  RU GLIIHUHQW GHJUHHV RI WUXWK  LQ WKH WZR RSSRVLWHV DQG WKH FODVVLILFDWLRQ LV QRW QHFHVVDULO\ PXWXDOO\ H[FOXVLYH HLWKHU ,Q IDFW HYHQ ZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQG XSVKDULQJWKH VDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





$OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH FRQYHUJHQFHGLYHUJHQFH RU FRQYHUJHQW WKLQNLQJ YV GLYHUJHQW WKLQNLQJ  QRUPDOQHVVQRQQRUPDOQHVV FRQIRUPLW\QRQFRQIRUPLW\ IDPLOLDULW\ IUHVKQHVVLQHUWLDQHZQHVVDQGVRRQ

WK7KHVLV7KH(YROXWLRQ7UDQVIRUPDWLRQ3ULQFLSOH 7KHHLJKWHHQWKWKHVLVUHIHUVWRWKHHYROXWLRQWUDQVIRUPDWLRQSULQFLSOH RQ WKH PXOWLSOH NLQGV RI DJHQF\  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDOGLDOHFWLFV ZKLFKZDVILUVWZRUNHGRXWLQ)$(DQGWKHQLQRWKHU ERRNVRIPLQH  7KLV SULQFLSOH²DQG WKH V\PPHWU\DV\PPHWU\ SULQFLSOH IRU LQVWDQFH²DUHERWKDERXWDJHQF\0RUHSUHFLVHO\WKHZRUG³DJHQF\´LQD IRUPDO GHILQLWLRQ UHIHUV WR ³D SHUVRQ RU WKLQJ WKURXJK ZKLFK SRZHU LV H[HUWHGRUDQHQGLVDFKLHYHG´ 0:' ,WWKHUHIRUHGRHVQRWKDYHWR QHFHVVDULO\LQYROYHDQLQWHOOLJHQWOLIHIRUP %HFDXVHRIWKLVGXDOPHDQLQJLQDJHQF\WKHHYROXWLRQWUDQVIRUPDWLRQ SULQFLSOHLVPRUHFRQFHUQHGZLWKWKHNLQGRIDJHQF\WKDWLVERWKDERXWWKH HYROXWLRQLQWKHVWDWHRIQDWXUH HJDQREMHFWRIQDWXUDOEHDXW\ DQGWKH WUDQVIRUPDWLRQ LQ WKH ZRUOG RI LQWHOOLJHQW OLIHIRUPV HJ D ZRUN RI DUW  7KHUHLVQRHYROXWLRQZLWKRXWWUDQVIRUPDWLRQ²DQGYLFHYHUVD ,Q FODVVLFDO 'DUZLQLDQ HYROXWLRQDU\ WKHRU\ DV PRUH GHWDLOHGO\ DQDO\]HG LQ %11  HYROXWLRQ LV ³EOLQG´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³LGHQWLILDEOHERG\SDUWV´LQWKHVWDWHRIQDWXUHLQD SULPLWLYH ZD\ LQ 6HF  WKH QDWXUDO HYROXWLRQ RI KXPDQV WR WKURZ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³KXPDQVKDYHHYROYHGWREHVHQVLWLYHWRVKRUWWHUPVXUYLYDOJRDOV´LQ6HF WKHQDWXUDOHYROXWLRQRIKXPDQVWRWKURZDZD\ZDVWHVLQWKHVWDWHRI QDWXUHLQDSULPLWLYHZD\´LQ6HFWKHQDWXUDOHYROXWLRQRIKXPDQV WROLYHLQFDYHVLQWKHVWDWHRIQDWXUHLQDSULPLWLYHZD\LQ6HFDQG WKHQDWXUDOHYROXWLRQRIKXPDQVWROLYHLQFDYHVLQWKHVWDWHRIQDWXUHLQD SULPLWLYHZD\LQ6HF  2Q WKH RWKHU KDQG WKHUH LV WUDQVIRUPDWLRQ HJ WKH WHFKQLFDO WUDQVIRUPDWLRQRIKXPDQDELOLW\WRGHDOZLWKLQIHFWLRQE\WKHLQYHQWLRQRI DQWLELRWLFVOLNH ³VWUHSWRP\FLQ´³JHQWDPLFLQ´ ³WHWUDF\FOLQHV´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³FDUERQQHXWUDO ]RQH´ LQ 6HF  WKH WHFKQLFDO WUDQVIRUPDWLRQ RI KXPDQDELOLW\ WROLYHE\WKH LQYHQWLRQRIWKHLGHRORJ\RI ³VLPSOHOLYLQJ´ IRU D PRUH VXVWDLQDEOH HQYLURQPHQW LQ 6HF  WKH WHFKQLFDO

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WUDQVIRUPDWLRQRIKXPDQDELOLW\WRKDQGOHZDVWHE\WKHLQYHQWLRQRI(35 IRUDV\VWHPDWLF³LQWHJUDWLRQRIHQYLURQPHQWDOFRVWVDVVRFLDWHGZLWKJRRGV WKURXJKRXWWKHLUOLIHF\FOHVLQWRWKHPDUNHWSULFHRIWKHSURGXFWV´LQ6HF WKHWHFKQLFDOWUDQVIRUPDWLRQRIKXPDQDELOLW\WRGHDOZLWKZDVWHVE\ WKH LQYHQWLRQ RI GXPSVWHUV QRZDGD\V LQ 6HF  WKH WHFKQLFDO WUDQVIRUPDWLRQ RI ZDVWHV E\ WKH PDQPDGH LQYHQWLRQ RI :W( PHWKRGV WR GHFRPSRVH ZDVWHV IRU HQHUJ\ FUHDWLRQ LQ 6HF  WKH WHFKQLFDO WUDQVIRUPDWLRQRI KXPDQDELOLW\WRGHDO ZLWKDQLPDOSURGXFWVDQGDQLPDO E\SURGXFWV E\ WKH LQYHQWLRQ RI ³UHQGHULQJ´ LQ 6HF  WKH WHFKQLFDO WUDQVIRUPDWLRQ RI KXPDQ DELOLW\ WR GHDO ZLWK VXUYLYDO JRDOV E\ WKH LQYHQWLRQ RI ³UHF\FOLQJ EHKDYLRXU´ ZKLFK ³LV QRW QDWXUDO EHFDXVH LW UHTXLUHV D IRFXV DQG DSSUHFLDWLRQ IRU ORQJ WHUP SODQQLQJ´ LQ 6HF  WKH WHFKQLFDO WUDQVIRUPDWLRQ RI KXPDQ DELOLW\ WR GHDO ZLWK ZDVWHV E\ WKH LQYHQWLRQ RI WKH PRGHUQ ZDVWH FRQYHUWHU LQ 6HF  WKH WHFKQLFDO WUDQVIRUPDWLRQRIKXPDQDELOLW\WRFRSHZLWKVKHOWHUVE\WKHLQYHQWLRQRI =HUR:DVWHZKLFKLQYHQWV³WKHGHVLJQRIEXLOGLQJVDVDVVHPEODJHVRIKLJK OHYHO FRPSRQHQWV´ VR WKDW ³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

WK7KHVLV7KH6\PPHWU\$V\PPHWU\3ULQFLSOH 7KHQLQHWHHQWKWKHVLVLVODEHOHGDVWKHV\PPHWU\DV\PPHWU\SULQFLSOH RQ WKH UHODWLRQVKLSV DPRQJ H[LVWHQWV  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDOGLDOHFWLFV ZKLFK ZDVDOVRDOUHDG\ ZRUNHGRXW LQ P\SUHYLRXV ERRNV LQWKDWWKHUHLVQRDV\PPHWU\ZLWKRXWV\PPHWU\²DQGYLFHYHUVD



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³SULYDWHZDVWHFRQWUDFWRUV´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³ZDVWH FRQYHUWHUV´ ³SODVPDDUF JDVLILFDWLRQ´ ³PLFURZDYH DQG RWKHU LUUDGLDWLRQ VWHULOL]DWLRQ´ DQG ³DXWRFODYHV´LQ6HFWKHH[LVWHQFHRIGLIIHUHQWHQWLWLHVLQQDWXUHOLNH DQLPDOV KXPDQV PDWHULDOV HWF LQ 6HF  DQG WKH H[LVWHQFH RI GLIIHUHQWVRFLDOFODVVHVOLNHWKHSRRUDQGWKHULFKLQ6HF  2QWKHRWKHUKDQGWKHUHLVDV\PPHWU\ HJKXPDQVFDQNLOOEDFWHULD E\DQWLELRWLFVPRUHWKDQEDFWHULDFDQNLOOKXPDQVE\LQIHFWLRQDWOHDVWLQ DEVROXWHQXPEHUVLQ6HFWKHIHGHUDOJRYHUQPHQWHPSRZHUHGE\WKH 0:7$FDQSXQLVKWKRVH³SULYDWHZDVWHFRQWUDFWRUV´IRUGXPSLQJLOOHJDOO\ ³WR DYRLG KLJK IHHV´ LQ 6HF  ³SROLFH DQG ORFDO VXSHUYLVRUV´ OLNH WKRVHNQRZQDV³EXLWHQJHZRRQRSVSRULQJVDPEWHQDDURU%2$´FDQ³ILQH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





FLWL]HQV IRU WKURZLQJ DZD\ FDQV ERWWOHV RU ZUDSSHUV RQWR WKH VWUHHW´ LQ 6HFRQO\VRPHFRXQWULHVOLNHWKH8665LQWKHROGHUGD\VRU5XVVLD QRZDGD\V WKH 86 DQG QRZ &KLQD FDQ VHQG PDQQHG VSDFHFUDIWV IRU VSDFH H[SORUDWLRQ LQ 6HF  PDMRU SRZHUV FDQ VHHN H[FHSWLRQDO WUHDWPHQWV ZLWKLQ WKH %DVHO &RQYHQWLRQ ZKLFK WKHQ DOORZV WKH 8QLWHG 6WDWHV IRU LQVWDQFH WR VKLS ³KD]DUGRXV ZDVWHV WR %DVHO 3DUW\ FRXQWULHV´ DQG³WKH2(&'FRXQWULHVWRFRQWLQXHWUDGLQJLQZDVWHVZLWKFRXQWULHVOLNH WKH 8QLWHG 6WDWHV WKDW KDYH QRW UDWLILHG WKH %DVHO &RQYHQWLRQ´ LQ 6HF ³PLQRULWLHVDQGZRUNLQJFODVVSHRSOH´DUHOHVVUHSUHVHQWHGWKDQ³WKH PLGGOH DQG XSSHU FODVV´ LQ WKH HQYLURQPHQWDO MXVWLFH PRYHPHQW LQ 6HF  ³FULWLFV KDYH«DUJXHG WKDW WKH XQHYHQ GLVWULEXWLRQ RI ZHDOWK SUHYHQWVFRQVXPHULVPHWKLFDORURWKHUZLVHIURPIXOILOOLQJLWVGHPRFUDWLF SRWHQWLDO´ LQ 6HF  FRQVSLFXRXV FRQVXPSWLRQ LQ PRGHUQ FDSLWDOLVW PDLQVWUHDPFXOWXUHLVPRUHGRPLQDQWWKDQVLPSOHOLYLQJLQWKHVXEFXOWXUH RI WKH VLPSOH OLYLQJ PRYHPHQW LQ 6HF  SURGXFHU UHVSRQVLELOLW\ LV PRUH GRPLQDQW WKDQ FRQVXPHU UHVSRQVLELOLW\ XQGHU WKH SROLF\ RI (35 QRZDGD\V LQ 6HF  ³LQ PDQ\ GHYHORSLQJ FRXQWULHV IRRG LV UDUHO\ WKURZQ DZD\ XQOHVV LW LV URWWHQ DV IRRG LV VFDUFH LQ FRPSDULVRQ WR GHYHORSHG QDWLRQV´²EXW LQ GHYHORSHG FRXQWULHV OLNH ³WKH 8QLWHG 6WDWHV ZKHUH ± RI IRRG LV ZDVWHG WKH WUDVK FRQWDLQV D ORW PRUH IRRG WR JDWKHU´ LQ 6HF  ³LQFLQHUDWLRQ«LV WKH PRVW FRPPRQ :W( LPSOHPHQWDWLRQ´ LQ 6HF  KXPDQV FDQ XVH DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV IRU IRRGVWXIIV DQG QRQIRRGVWXIIV LQ D ZD\ WKDW DQLPDOVFDQQRWGRWKHVDPHWRKXPDQVDWOHDVWQRWWRWKHVDPHH[WHQWLQ 6HF  WKH SRRU OLNH ³WKH NDUXQJ JXQL =DEDOHHQ WKH UDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´ GR PRUH ZDVWH UHF\FOH RQ WKH VWUHHWV WKDQ WKH ULFK LQ 6HF  ZDVWH FRQYHUWHUV JDLQ PRUH SRSXODULW\ QRZDGD\V ZKHQ FRQWUDVWHG ZLWK³SODVPDDUF JDVLILFDWLRQ´ ³PLFURZDYH DQGRWKHULUUDGLDWLRQVWHULOL]DWLRQ´DQG³DXWRFODYHV´LQ6HFKXPDQV FDQ UHF\FOH DQG UHXVH PDWHULDOV IRXQG LQ QDWXUH LQ D ZD\ WKDW PDWHULDOV FDQQRW UHF\FOH DQG UHXVH KXPDQV DV VKRZQ LQ ³WKH FUHDWLRQ RI LQGXVWU\ VSHFLILFPRUHHIILFLHQWUHXVHPRGDOLWLHV´VXFKWKDW³LQGXVWULDOSURGXFWVDUH LQKHUHQWO\QRQQDWXUDO´LQ6HFDQGWKHIUHHJDQVOLYHE\UHFODLPLQJ ZDVWHVEXWWKHULFKOLYHE\ZDVWHIXOO\FRQVXPLQJUHVRXUFHVLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $JDLQIRUWKHODVWWLPHLWVKRXOGEHVWUHVVHGKRZHYHUWKDWWKHUHDUH GLIIHUHQWVKDGHVRIJUD\ RUGLIIHUHQWGHJUHHVRIWUXWK LQWKHWZRRSSRVLWHV DQGWKHFODVVLILFDWLRQLVQRWQHFHVVDULO\PXWXDOO\H[FOXVLYHHLWKHU,QIDFW HYHQZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQGXSVKDULQJ WKHVDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



$OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH EDODQFHH[WUHPLW\ UHIOH[LYHQHVVXQUHIOH[LYHQHVV HTXDOLW\LQHTXDOLW\ KDUPRQLRXVQHVVXQKDUUPRQLRXVQHVV FHQWHUSHULSKHU\ FRPSDWLELOLW\ LQFRPSDWLELOLW\ SURSRUWLRQGLVSURSRUWLRQ EDODQFHXQEDODQFH DQG VRPHWKLQJOLNHWKDW

WK7KHVLV7KH6RIWQHVV+DUGQHVV3ULQFLSOH 7KH WZHQWLHWK WKHVLV UHIHUV WR WKH VRIWQHVVKDUGQHVV SULQFLSOH RQ WKH IRUFH RI FKDQJH  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFKZDVILUVWZRUNHGRXWLQ$/' LQWKDWDQ\FKDQJHE\DQDJHQWEHLW RUJDQLF OLNHKXPDQV RUQRQRUJDQLF OLNHQDWXUDOREMHFWV FDQRFFXULQD IRUFHIXO DJJUHVVLYH RUJHQWOH SDFLILF ZD\ZKLFKFDQFRPHLQDOOVKDSHV DQG VL]HV RI FRXUVH 7KHUH LV QR VRIWQHVV ZLWKRXW KDUGQHVV²DQG YLFH YHUVD )RU LQVWDQFH RQ WKH RQH KDQG WKHUH LV VRIWQHVV HJ WKH XVH RI DQWLELRWLFVWRVDYHKXPDQOLIHDJDLQVWWKHEXERQLFSODJXHLQ6HFWKH FRPSOLDQFH RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ GLVSRVH FOLQLFDO ZDVWHLQDFFRUGDQFHWRWKHUHJXODWLRQVXQGHUWKH0:7$LQ6HF WKHFRRSHUDWLRQZLWKWKHOHJDODXWKRULWLHVIRUDQWLOLWWHUHQIRUFHPHQW LQ6HFWKHFRRSHUDWLRQE\5XVVLDDQG$PHULFDIRUWKH,QWHUQDWLRQDO 6SDFH 6WDWLRQ QRZDGD\V LQ 6HF  WKH VXSSRUW RI WKH %DVHO &RQYHQWLRQ E\ WKH DGYRFDWHV LQ 6HF  WKH LQFOXVLRQ RI ³WKH PLGGOH DQG XSSHU FODVV´ LQ WKH HDUO\ HQYLURQPHQWDO MXVWLFH PRYHPHQW LQ 6HF  WKH HQGRUVHPHQW RI HWKLFDO FRQVXPHULVP E\ LWV DGYRFDWHV LQ 6HF  WKH DSSUHFLDWLRQ RI VLPSOH OLIHVW\OH E\ LWV DGYRFDWHV LQ 6HF  WKH SUDLVH RI (35 E\ LWV SURSRQHQWV LQ 6HF  WKH DSSUHFLDWLRQ RI GXPSVWHU GLYLQJ DV VKRZQ LQ WKH UHXVH RI ³UHVRXUFHV GHVWLQHG IRU WKH ODQGILOO´E\GXPSVWHUGLYHUVLQ6HFDSSUHFLDWLRQRILQFLQHUDWLRQE\ LWV SURSRQHQWV LQ 6HF  WKH DSSUHFLDWLRQ RI DQLPDO SURGXFWV DQG DQLPDOE\SURGXFWVE\WKHDGYRFDWHVRIWKHLU XVH IRUIRRGVWXIIVDQG QRQ IRRGVWXIIV LQ 6HF  WKH DSSUHFLDWLRQ RI WKH FRVWEHQHILW DQDO\VLV RI ZDVWHUHF\FOHE\WKHDGYRFDWHVLQ6HFWKHDSSOLFDWLRQRIWKHZDVWHU FRQYHUWHULQKRVSLWDOVLQ6HFWKHDSSUHFLDWLRQRI=HUR:DVWHE\LWV DGYRFDWHVLQ6HFDQGWKHDSSUHFLDWLRQRIHQYLURQPHQWDOLVPE\WKH IUHHJDQVLQ6HF 

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





2Q WKH RWKHU KDQG WKHUH LV KDUGQHVV HJ WKH XVH RI WKH EXERQLF SODJXHDVDELRORJLFDOZHDSRQE\WKH,PSHULDO-DSDQHVH$UP\$LU6HUYLFH LQ6HFWKHYLRODWLRQRIWKRVH³SULYDWHZDVWHFRQWUDFWRUV´ZKHQWKH\ HQJDJH LQ GXPSLQJ LOOHJDOO\ ³WR DYRLG KLJK IHHV´ LQ 6HF  WKH SXQLVKPHQW RI WKRVH ZKR OLWWHU RQ WKH VWUHHW LQ 6HF  WKH ULYDOU\ EHWZHHQ 5XVVLD DQG $PHULFD LQ LQWHUQDWLRQDO SROLWLFV QRZDGD\V LQ 6HF  WKH FULWLTXH RI WKH %DVHO &RQYHQWLRQ DV VKRZQ LQ WKH SUREOHPV SRLQWHG RXW E\ WKH FULWLFV DV FLWHG LQ 6HF  WKH H[FOXVLRQ RI ³PLQRULWLHV DQG ZRUNLQJ FODVV SHRSOH´ LQ WKH HDUO\ HQYLURQPHQWDO MXVWLFH PRYHPHQW LQ 6HF  WKH UHMHFWLRQ RI HWKFLDO FRQVXPHULVP E\ LWV FULWLFVLQ6HFWKHFULWLTXHRIVLPSOHOLIHVW\OHE\LWVFULWLFVDVVKRZQ LQWKHSUREOHPVDIRUHFLWHGLQ6HFWKHFULWLTXHRI(35E\LWVFULWLFV DV VKRZQ LQ WKH SUREOHPV DV FLWHG LQ 6HF  ³LQ *HUPDQ\ D GXPSVWHU VFRQWHQWVDUHUHJDUGHGDVWKHSURSHUW\RIWKHGXPSVWHU VRZQHU´ DQG³WKHUHIRUHWDNLQJLWHPV IURPDGXPSVWHULV YLHZHGDV WKHIW´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



VW7KHVLV7KH6HULRXVQHVV3OD\IXOQHVV3ULQFLSOH 7KHWZHQW\ILUVWWKHVLVUHIHUV WRWKHVHULRXVQHVVSOD\IXOQHVVSULQFLSOH RQ WKH H[WHQW RI VHULRXVQHVV  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK LV ILUVW ZRUNHG RXW LQ )3++  LQ WKDW LI WKHUH LV VHULRXVQHVVWKHUHLVDOVRSOD\IXOQHVVHVSHFLDOO\ IRUDQ\DJHQW ZLWK VRPH NLQG RI LQWHOOLJHQFH OLIH EH LW DERXW KXPDQV DQLPDOV RU ODWHU SRVW KXPDQV7KHUHLVQRVHULRXVQHVVZLWKRXWSOD\IXOQHVV²DQGYLFHYHUVD /HVWDQ\PLVXQGHUVWDQGLQJRFFXUVWKHZRUG³SOD\IXOQHVV´KHUHVKRXOG QRW EH FRQIXVHG ZLWK RWKHU WHUPV OLNH ³ODXJKWHU´ ³VPLOH´ ³MRNH´ ³WLFNOHQHVV´DQG³ODXJKOLNHYRFDOL]DWLRQ´ LQVRPHDQLPDOV IRULQVWDQFH %HLQJ SOD\IXO FDQ FRPH LQ DOO VKDSHV DQG VL]HV DQG WKHUHIRUH LV QRW QHFHVVDULO\WLHGXSZLWKDQ\RIWKHVHWHUPVDOKRXJKLWFDQUHVXOWIURPDQ\ RIWKHPRUDFRPELQDWLRQRIWKHPRUVRPHWKLQJHOVHDOWRJHWKHU 7KLVSULQFLSOHWRJHWKHUZLWKVRPHRWKHUSULQFLSOHV HVSHFLDOO\WKRXJK QRW H[FOXVLYHO\ OLNH WKH IRUPDOQHVVLQIRUPDOQHVV SULQFLSOH  KDYH LPSRUWDQW LPSOLFDWLRQV IRU ZKDW FRQVWLWXWHV UDWLRQDOLW\ EH LW DERXW ³UDWLRQDOLW\ RI DSSOLFDWLRQ´ DW WKH SUDFWLFDO OHYHO RU  ³UDWLRQDOLW\ RI NQRZOHGJH´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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





PRYHPHQW LQ 6HF  DQG WKH VHULRXV EXVLQHVV RI WKRVH ZKR SUDFWLFH IUHHJDQLVPLQ6HF  2QWKHRWKHUKDQGWKHUHLVSOD\IXOQHVV HJWKHSOD\IXOSDUWRIWKRVH LQ KLVWRU\ ZKR WULHG WR ILQG WUHDWPHQWV DJDLQVW WKH EXERQLF SODJXH ZKHQ WKH\ SOD\HG DURXQG ZLWK GLIIHUHQW VROXWLRQV RYHU WKH DJHV OLNH VRPH ³HWKQRPHGLFDO EHOLHIV RI SUHYHQWLRQ PHWKRGV´ E\ ³ZDONLQJ DURXQG ZLWK IORZHUVLQRUDURXQGWKHLUQRVH´FDUYLQJ³WKHV\PERORIWKHFURVVRQWRWKH IURQWGRRURIDKRXVHZLWKWKHZRUGV /RUGKDYHPHUF\RQXV QHDULW´HWF LQ 6HF  WKH SOD\IXO SDUW RI WKRVH WU\LQJ WR GHDO ZLWK SURSHU FOLQLFDO ZDVWHGLVSRVDO ZKHQWKH\SOD\DURXQG ZLWKGLIIHUHQW PHWKRGVRYHUWLPH OLNH³RQVLWHWUXFNVHUYLFHDQGPDLOEDFNGLVSRVDO´HWFLQ6HFWKH SOD\IXOSDUWRIWKRVHZKRWU\WRFOHDQXSOLWWHUZKHQWKH\SOD\DURXQGZLWK GLIIHUHQWVROXWLRQVRYHUWLPHOLNHWKHXVHRIOLWWHUELQVOLWWHUWUDSVSLFNLQJ XS PRQLWHULQJ VLWHV OHJLVODWLRQ DQG ILQHV HWF LQ 6HF  WKH SOD\IXO SDUWRIWKRVHZKRWU\WRSURSRVHVROXWLRQVWRVSDFHGHEULVZKHQWKH\SOD\ DURXQGZLWKGLIIHUHQWSURSRVDOVRYHUWLPHOLNH³IRDP\EDOORIDHURJHORU VSUD\ RI ZDWHU LQIODWDEOH EDOORRQV HOHFWURG\QDPLF WHWKHUV ERRP HOHFWURDGKHVLRQ RU GHGLFDWHG LQWHUFHSWRU VDWHOOLWHV ´ LQ 6HF  WKH SOD\IXO SDUW RI WKRVH LQYROYHG LQ WKH %DVHO &RQYHQWLRQ WR GHDO ZLWK KD]DUGRXV ZDVWH PDQDJHPHQW ZKHQ WKH\ SOD\ DURXQG ZLWK GLIIHUHQW GHILQLWLRQVRIKD]DUGRXVZDVWHRYHUWLPHLQ6HFWKHSOD\IXOSDUWRI WKRVH ILJKWLQJ IRU HQYLURQPHQWDO MXVWLFH ZKHQ WKH\ SOD\ DURXQG ZLWK GLIIHUHQWJRDOVDQGWDFWLFVRYHUWLPHDVVKRZQLQWKHFRQWURYHUVLDOKLVWRU\ RILWVHYROXWLRQLQ6HFWKHSOD\IXOSDUWRIWKHDGYRFDWHVRIHWKLFDO FRQVXPHULVP ZKHQ WKH\ SOD\ DURXQG ZLWK GLIIHUHQW GHILQLWLRQV RI ZKDW FRQVWLWXWHV VRPHWKLQJ ³PRUDO´ LQ WKH ILUVW SODFH DV ³WKH GHILQLWLRQ KDV EHFRPH ZLGHU DQG PHDQV GLIIHUHQW WKLQJV WR GLIIHUHQW JURXSV RI SHRSOH´ RYHU WLPH LQ 6HF  WKH SOD\IXO SDUW RI WKRVH LQ WKH VLPSOH OLYLQJ PRYHPHQW ZKHQ WKH\ SOD\ DURXQG ZLWK GLIIHUQHW VROXWLRQV DV GLIIHUHQW JURXSVLQWKHPRYHPHQWDGYRFDWHGLIIHUHQWYHUVLRQVRIVLPSOHOLYLQJRYHU WLPH OLNH UHGXFLQJ FRQVXPSWLRQ UHFRQVLGHULQJ WHFKQRORJ\ LQFUHDVLQJ VHOIVXIILFLHQF\DQGVLPSOLI\LQJGLHWVLQ6HFWKHSOD\IXOSDUWRIWKH SURSRQHQWVRI(35DERXWSURGXFHUUHVSRQVLELOLW\ZKHQWKH\SOD\DURXPG ZLWK GLIIHUHQW IRUPV RI HQIRUFHPHQW RYHU WLPH OLNH ³UHXVH´ ³EX\EDFN´ ³UHF\FOLQJ´ RU HYHQ WKH GHOHJDWLRQ RI WKLV UHVSRQVLELOLW\ WR D WKLUG SDUW\ NQRZQDV³SURGXFHUUHVSRQVLELOLW\RUJDQL]DWLRQ´LQVWHDGLQ6HFWKH SOD\IXO SDUW RI WKRVH ZKR HQJDJH LQ GXPSVWHU GLYLQJ ZKHQ WKH\ SOD\ DURXQG ZLWK GLVFDGHG LWHPV IRU GLIIHUHQW SXUSRVHV RYHU WLPH OLNH WKH FUHDWLRQ RI DUW ZRUNV FULPLQDO LQYHVWLJDWLRQ ZDVWH UHXVH DFDGHPLF UHVHDUFKHWFLQ6HFWKHSOD\IXOSDUWRIWKRVHZKRWUHDWZDVWHVE\ :W(ZKHQWKH\SOD\DURXQGZLWKGLIIHUHQWRSWLRQVRYHUWLPHDVVKRZQLQ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³WKH OLWHUDO DSSOLFDWLRQ RI QDWXUDO SURFHVVHV´ ³WKH FUHDWLRQ RI LQGXVWU\ VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´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

QG7KHVLV7KH$FWLYHQHVV,QDFWLYHQHVV3ULQFLSOH 7KH WZHQW\VHFRQG WKHVLV UHIHUV WR WKH DFWLYHQHVVLQDFWLYHQHVV SULQFLSOH RQ WKH H[WHQW RI DFWLYHQHVV  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDOGLDOHFWLFV ZKLFKZDVILUVWZRUNHGRXWLQ)3+75$1 LQWKDWLI WKHUH LV DFWLYHQHVV WKHUH LV DOVR LQDFWLYHQHVV HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ IRUDQ\DJHQWZLWKVRPHNLQGRILQWHOOLJHQFHOLIHEHLWDERXW KXPDQV DQLPDOV RU ODWHU SRVWKXPDQV 7KHUH LV QR DFWLYHQHVV ZLWKRXW LQDFWLYHQHVV²DQGYLFHYHUVD

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





%HLQJDFWLYHFDQFRPHLQDOOVKDSHVDQGVL]HVMXVWDVDSHUVRQ RUDQ DQLPDO FDQEHLQDFWLYHEHFDXVHKH RULW LVWLUHGROGLQMXUHGVLFNVOHHS\ RUKLEHUQDWLQJ XQLQWHUHVWHGLQDVWDWHRISDVVLYHLQHUWLD RUGLVSRVLWLRQ  HWF²DQG DQ REMHFW FDQ EH LQDFWLYH EHFDXVH LW LV DW UHVW RXW RI ZRUN RU RUGHU HWF 7KLVSULQFLSOHWRJHWKHUZLWKVRPHRWKHUSULQFLSOHV HVSHFLDOO\WKRXJK QRW H[FOXVLYHO\ OLNH WKH IRUPDOQHVVLQIRUPDOQHVV SULQFLSOH DQG VHULRXVQHVVSOD\IXOQHVV SULQFLSOH  KDYH LPSRUWDQW LPSOLFDWLRQV IRU ZKDW FRQVWLWXWHV UDWLRQDOLW\ EH LW DERXW ³UDWLRQDOLW\ RI DSSOLFDWLRQ´ DW WKH SUDFWLFDOOHYHORU³UDWLRQDOLW\RINQRZOHGJH´DWWKHPHWDWKHRUHWLFDOOHYHO DVVXPPDUL]HGLQ6HFRI)3++  )RULQVWDQFHRQWKHRQHKDQGWKHUHLVDFWLYHQHVV HJWKHDOHUWQHVVRI WKRVH ZKR DUH QRW LQIHFWHG ZLWK GLVHDVHV DQG UHPDLQ KHDOWK\ WR DFWLYHO\ ZRUN LQ 6HF  WKH DFWLYHQHVV RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ GLVSRVH FOLQLFDO ZDVWH LQ DFFRUGDQFH WR WKH UHJXODWLRQV XQGHU WKH 0:7$ DQG DUH DOORZHG WR VWD\ LQ EXVLQHVV LQ 6HF  WKH DFWLYHQHVV RI WKRVH DQLPDOV ZKLFK DUH IRUWXQDWH HQRXJK WR OLYH LQ DUHDV ZLWKRXWPXFKOLWWHUVRWKH\GRQRWVXIIHUIURPDQ\VLFNQHVVRUSDLQGXHWR LWLQ6HFWKHDFWLYHQHVVRI³WKH86DQG6RYLHW8QLRQLQWKHV DQG V´ ZKHQ WKH\ UHJXODUO\ HQJDJHG LQ ³WKH WHVWLQJ RI DQWLVDWHOOLWH ZHDSRQV´LQ6HFWKHDFWLYHQHVVRIWKRVHLQ³WKH.RNRFDVHLQ ZKLFKVKLSV WUDQVSRUWHGEDUUHOVRIKD]DUGRXV ZDVWHIURP,WDO\ WR WKH VPDOO WRZQ RI .RNR LQ 1LJHULD LQ H[FKDQJH IRU  PRQWKO\ UHQW ZKLFK ZDVSDLGWRD1LJHULDQIRUWKH XVHRI KLV IDUPODQG´LQ6HF WKH DFWLYHQHVV RI WKRVH IURP ³WKH PLGGOH DQG XSSHU FODVV´ LQ WKH HDUO\ HQYLURQPHQWDO MXVWLFH PRYHPHQW LQ 6HF  WKH DFWLYHQHVV RI WKRVH HWKLFDOFRQVXPHUVZKREX\³HWKLFDOSURGXFWV´ZKLFK³DUHIDYRUHG´LQ6HF WKHDFWLYHQHVVRIWKRVHZKRZRUNDORWWRHDUQPRQH\IRUZKDWWKH\ ZDQWLQWKHPRGHUQFDSLWDOLVWFXOWXUHLQ6HFWKHDFWLYHQHVVRIWKRVH FRPSDQLHVZKLFKDUHDEOHWR³GHVLJQIRUUHF\FOLQJDQGPDNHSURGXFWVODVW ORQJHU´ LQ FRPSOLDQFH ZLWK (35 LQ 6HF  WKH DFWLYHQHVV RI WKRVH GXPSVWHU GLYHUV LQ ,WDO\ ZKR DUH DOORZHG WR FROOHFW GLVFDUGHG LWHPV LQ GXPSVWHUV EHFDXVH RI ³D ODZ LVVXHG LQ ´ ZKLFK ³GHFODUHG GXPSVWHU GLYLQJWREHOHJDO´LQ6HFWKHDFWLYHQHVVRIWKRVHZDVWHVZKLFKFDQ EHUHF\FOHGRUFRQYHUWHGWRHQHUJ\LQ6HFWKHDFWLYHQHVVRIWKRVH ZKR FDQ FRQYHUW FHUWDLQ DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV LQWR IRRGVWXIIV DQG QRQIRRGVWXIV LQ 6HF  WKH DFWLYHQHVV RI WKRVH LQ ³ODUJHUHF\FOLQJRUJDQL]DWLRQV´WRGRZDVWHUHF\OHLQGHYHORSHGFRXQWULHV QRZDGD\V LQ 6HF  WKH UHODWLYH DFWLYHQHVV RI WKRVH QHZ DXWRFODYHV QRZDGD\V ZKLFK FDQ FRPSHWH ZLWK ZDVWH FRQYHUWHUV EHFDXVH WKH\ ³HPSOR\ WKH VDPH PHWKRG RI VWHULOL]DWLRQ DV FRQYHUWHUV EXW GR VR XVLQJ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



ODUJHU DQG PRUH FRPSOH[ HTXLSPHQW WKDW DOVR KDV KLJKHU VDIHW\« UHTXLUHPHQW«´VRWKHVHQHZYHUVLRQVDUHLQFUHDVLQJO\XVHGLQ6HF WKHDFWLYHQHVVLQRXUWLPHRIWKRVHZDVWHVLQFRQVWUXFWLRQOLNH³ZLQGRZV GRRUVDQGPHWDOVPDQ\RIZKLFKDUHEHLQJVDYHGDQGUHVROGE\UHXVH´LQ DFFRUGDQFHWR=HUR:DVWHLQ6HFDQGWKHDFWLYHQHVVRIWKRVHLQWKH FRUSRUDWHFDSLWDOLVWZRUOGZKRDUHGULYHQWRZRUNZRUNDQGZRUNIRUD JRRGOLYLQJLQ6HF  2QWKHRWKHUKDQGWKHUHLVLQDFWLYHQHVV HJWKHUHODWLYHLQDFWLYHQHVV RIWKRVHZKRJHWVLFNEHFDXVHRILQIHFWLRQZLWKEDFWHULDDQGWKHUHIRUHKDYH WR UHVW XQWLO UHFRYHU\ LQ 6HF  WKH UHODWLYH LQDFWLYHQHVV RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ DUH IRXQG ³JXLOW\ RI NQRZLQJO\ HQGDQJHULQJWKHOLIHRIDQRWKHUWKURXJKQRQFRPSOLDQFH«IDFHXSZDUGVRI ILIWHHQ \HDUV LPSULVRQPHQW´ DQG WKHUHIRUH FDQQRW ZRUN LQ WKDW SHULRG EHFDXVHRI LPSULVRQPHQW LQ 6HFWKHUHODWLYHLQDFWLYHQHVVRIWKRVH DQLPDOV ZKLFK ³JHW«SRLVRQHG ZLWK OLWWHU LQ WKHLU KDELWDWV´ DQG DUH ³LQ VHULRXVGLVFRPIRUW´VRWKH\FDQQRWPRYHDURXQGIUHHO\LQ6HFWKH UHODWLYHLQDFWLYHQHVVRIWKH86DQG5XVVLDODWHURQZKHQ³IROORZLQJWKH 86WHVWLQWKHUHZDVDGHIDFWRPRUDWRULXPRQVXFKWHVWV´LQ6HF  WKH UHODWLYH LQDFWLYHQHVV RI WKRVH ZKR DUH QR ORQJHU DOORZHG WR HQJDJHLQKD]DUGRXVZDVWHGXPSLQJXQGHUWKH%DVHO&RQYHQWLRQVRWKH\ KDYHWRGRVRPHWKLQJHOVHLQVWHDGLQ 6HFWKHUHODWLYHLQDFWLYHQHVV RIWKRVH³PLQRULWLHVDQGZRUNLQJFODVVSHRSOH´LQWKHHDUO\KLVWRU\RIWKH HQYLURQPHQWDO MXVWLFH PRYHPHQW EHFDXVH WKHUH ZHUH H[FOXGHG LQ 6HF  WKH UHODWLYH LQDFWLYHQHVV RI WKRVH HWKLFDO FRQVXPHUV ZKR UHIXVH WR EX\³SURGXFWV´ ZKLFKYLRODWHWKHLUPRUDOEDVLVLQ6HFWKHUHODWLYH LQDFWLYHQHVV RI WKRVH ZKR DUH KDSS\ ZLWK ZKDW WKH\ QHHG QRW ZKDW WKH\ ZDQWDQGWKHUHIRUHGHFLGHWRZRUNPXFKOHVVDQGHDUQOHVVLQWKHVLPSOH OLYLQJPRYHPHQWDOWKRXJKWKH\PD\VSHQGPRUHWLPHRQVRPHWKLQJHOVH PRUHVSLULWXDOLQ6HFWKHUHODWLYHLQDFWLYHQHVVRIWKRVHFRPSDQLHV ZKLFKFDQQRWFRPSO\ZLWK(35EHFDXVHLWLVWRR³H[SHQVLYHLIWKHSURGXFW FRQWDLQVKD]DUGRXVPDWHULDOVDQGGRHVQRWKDYHDVFUDSYDOXHVXFKDVZLWK &57 WHOHYLVLRQV´²DOWKRXJK WKH\ FDQ VKLIW WKHLU DFWLYLWLHV WR VRPHWKLQJ HOVH LQVWHDG LQ 6HF  WKH UHODWLYH LQDFWLYHQHVV RI WKRVH GXPSVWHU GLYHUVLQ*HUPDQ\ZKRDUHQRWDOORZHGWRFROOHFWGLVFDUGHGLWHPVEHFDXVH ³D GXPSVWHU V FRQWHQWV DUH UHJDUGHG DV WKH SURSHUW\ RI WKH GXPSVWHU V RZQHU´ DQG ³WKHUHIRUH WDNLQJ LWHPV IURP D GXPSVWHU LV YLHZHG DV WKHIW´ XQGHU WKH ODZ DOWKRXJK WKH\ FDQ GR VRPHWKLQJ HOVH LQ 6HF  WKH UHODWLYHLQDFWLYHQHVVRIWKRVHZDVWHVZKLFKFDQQRWEHUHXVHGUHF\FOHGRU FRQYHUWHGWRHQHUJ\VLQFH³XQXVDEOHPDWHULDO´LVRIWHQ³GXPSHGLQODQGILOO DUHDV´LQVWHDGLQ6HFWKHUHODWLYHLQDFWLYHQHVVRIWKRVHZKRFDQQRW FRQYHUW FHUWDLQ DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV LQWR IRRGVWXIIV

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





DQGQRQIRRGVWXIVDOWKRXJKWKH\FDQGRVRPHWKLQJHOVHDOWRJHWKHULQ6HF  WKH UHODWLYH LQDFWLYHQHVV RI WKRVH OLNH ³WKH NDUXQJ JXQL =DEDOHHQ WKHUDJDQGERQHPDQZDVWHSLFNHUDQGMXQNPDQ´ZKRDUH³GULYHQRXWRI WKH UHF\FOLQJ DQG WKH UHPDQXIDFWXULQJ PDUNHW´ LQ GHYHORSHG FRXQWULHV QRZDGD\VDQGFDQQRWGRZDVWHUHF\FOLQJPXFKLQ6HFWKHUHODWLYH LQDFWLYHQHVV RI WKRVH ROGHU DXWRFODYHV QRZDGD\V ZKLFK FDQQRW FRPSHWH ZLWKZDVWHFRQYHUWHUVEHFDXVHRIWKHLUWHFKQRORJLFDOREVROHVFHQFHLQ6HF WKHUHODWLYHLQDFWLYHQHVVLQRXUWLPHRIWKRVHZDVWHVLQFRQVWUXFWLRQ OLNH³ZRRGIORRULQJEULFNZDOOVDQGVWUXFWXUDOWLPEHUV´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

UG7KHVLV7KH6HOIQHVV2WKHUQHVV3ULQFLSOH 7KH WZHQW\WKLUG WKHVLV UHIHUV WR WKH VHOIQHVVRWKHUQHVV SULQFLSOH RQ WKH PDJQLWXGH RI VHOIFHQWHUHGQHVV  LQ WKH FDWHJRU\ RI ³DJHQF\´ LQ H[LVWHQWLDOGLDOHFWLFV ZKLFKLVILUVWZRUNHGRXWLQ)3+&$ LQWKDWLIWKHUH LV WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS WKHUH LV OLNHZLVHWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRWKHUVHVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\  IRU DQ\ DJHQW ZLWK VRPH NLQG RI LQWHOOLJHQFH OLIH EH LW DERXW KXPDQV DQLPDOV RU ODWHU SRVWKXPDQV 7KHUH LV QR VHOIQHVV ZLWKRXWRWKHUQHVV²DQGYLFHYHUVD %HLQJ VHOIFHQWHUHG DQG EHLQJ RWKHUFHQWHUHG GR QRW KDYH WR EH PXWXDOO\ H[FOXVLYH DV WKH WZR FDQ FRPH LQ DOO VKDSHV DQG VL]HV RU LQ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



GLIIHUHQWGHJUHHV$QGRWKHUFHQWHUHGQHVVGRHVQRWHQWDLOGHVLUDELOLW\DQ\ PRUHWKDQVHOIFHQWHUHGQHVVLPSOLHVQRQGHVLUDELOLW\DVERWKFDQJRHLWKHU ZD\ ,Q DGGLWLRQ ZKHWKHU VHOIFHQWHUHGQHVV FRQVWLWXWHV D PRUDO DOWHUQDWLYH RU FRQYHUVHO\ DQ DOWHUQDWLYH WR PRUDOLW\ LV RI FRXUVH GHEDWDEOH DV DGGUHVVHGLQP\RWKHUERRNWLWOHG%H\RQG(WKLFVWR3RVW(WKLFV  )RULQVWDQFHRQWKHRQHKDQGWKHUHLVVHOIQHVV HJWKHWHQGHQF\WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ LQ WKH XVH RI WKH EXERQLFSODJXHDVDELRORJLFDOZHDSRQE\WKH,PSHULDO-DSDQHVH$UP\$LU 6HUYLFHLQLQ6HFWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶V VHOI RU JURXS DV VKRZQ LQ WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV´ ZKHQ WKH\ HQJDJH LQ GXPSLQJ LOOHJDOO\ ³WR DYRLG KLJK IHHV´ LQ 6HF  WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ LQ WKH OLWWHULQJ EHKDYLRU RI VRPH LQGLYLGXDOV LQ 6HF  WKH WHQGHQF\ WR EH PRVWO\FHQWHUHGRQRQH¶VVHOIRUJURXSDVVKRZQLQWKHQXPHURXVWHVWVRI ³DQWLVDWHOOLWH ZHDSRQV´ E\ WKH 86 DQG 6RYLHW 8QLRQ LQ WKH V DQG V´ IRU JOREDO GRPLQDWLRQ LQ 6HF  WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHGRQRQH¶VVHOIRUJURXSDVVKRZQLQ³WKH.RNRFDVHLQZKLFK  VKLSV WUDQVSRUWHG  EDUUHOV RI KD]DUGRXV ZDVWH IURP ,WDO\ WR WKH VPDOOWRZQRI.RNRLQ1LJHULDLQH[FKDQJHIRUPRQWKO\UHQWZKLFK ZDV SDLG WR D 1LJHULDQ IRU WKH XVH RI KLV IDUPODQG´ ZKLFK LV ODWHU FRQGHPQHG DV ³WR[LF FRORQLDOLVP´ E\ WKH FULWLFV LQ 6HF  WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ LQ WKH VXSSRUWHUVRIHFRQRPLFJURZWKZLWKRXWFDULQJIRUHQYLURQPHQWDOMXVWLFHLQ WKHROGHUGD\VLQ6HFWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶V VHOI RU JURXS DV VKRZQ LQ XQHWKLFDO EHKDYLRU RI WKRVH PDUNHWRULHQWHG FDSLWDOLVWV ZKR ZHUH QRW HQYLURQPHQWIULHQGO\ LQ WKH ROGHU GD\V LQ 6HF WKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶VVHOIRUJURXSDVVKRZQ E\ WKRVH ZKR HQJDJH LQ FRQVSLFXRXV FRQVXPSWLRQ LQ PRGHUQ FDSLWDOLVW FXOWXUHWRVDWLVI\ZKDWWKH\ZDQWQRWZKDWWKH\QHHGDV³PRUHLVEHWWHU´ IRUWKHPLQ6HFWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶VVHOIRU JURXSDVVKRZQE\WKRVHFDPSDQLHVLQWKHROGHUGD\VZKLFKSURGXFHGOHVV VXVWDLQDEOH PRUH WR[LF DQG KDUGO\ UHF\FODEOH HOHFWURQLFV LQ 6HF  WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ WKRVH³SHRSOHZKRUHVRUWWRGXPSVWHUGLYLQJ´EHFDXVHWKH\³DUHIRUFHGWR GRVRRXWRIHFRQRPLFQHFHVVLW\´LQ6HFWKHWHQGHQF\WREHPRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ WKRVH ILUPV ZKLFK IRXQG LW SURILWDEOHWRXVHWKHROGHUW\SHVRILQFLQHUDWRUVHYHQ ZKHQWKH\UHOHDVHG SROOXWDQWVLQ6HFWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶VVHOI RUJURXSDVVKRZQLQWKHVDOHRIDQLPDOSURGXFWVDQGDQLPDOE\SURGXFWV E\ WKH PHDW LQGXVWU\ ZKLFK ³DOORZV WKH PHDW LQGXVWU\ WR FRPSHWH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





HFRQRPLFDOO\ZLWKLQGXVWULHVVHOOLQJVRXUFHVRIYHJHWDEOHSURWHLQ´LQ6HF WKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRQH¶VVHOIRUJURXSDVVKRZQ LQ WKRVH ³EXVLQHVVHV´ ZKLFK ³LJQRUH«>QHJDWLYH H[WHUQDOLWLHV@ GHVSLWH WKH FRVWV LPSRVHG RQ VRFLHW\´ LQ 6HF  WKH WHQGHQF\ WR EH PRVWO\ FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ GLIIHUHQW SURSRQHQWV RI FRPSHWLQJWHFKQRORJLHVIRUZDVWHWUHDWPHQWVLQFHHDFKRIWKHPDGYRFDWHV KLVRZQSUHIHUUHGW\SHLQ6HFWKHWHQGHQF\WREHPRVWO\FHQWHUHG RQ RQH¶V VHOI RU JURXS DV VKRZQ E\ ³PDQ\ FRPPHUFLDO RU LQGXVWULDO FRPSDQLHV´ OLNH ³6WDSOHV +RPH 'HSRW 7R\RWD *HQHUDO 0RWRUV DQG FRPSXWHU WDNHEDFN FDPSDLJQV´ ZKLFK  ³HPEUDFH =HUR :DVWH´ EXW ³XVXDOO\PHDQQRPRUHWKDQDPDMRUPDWHULDOVUHF\FOLQJHIIRUWKDYLQJQR EHDULQJRQSURGXFWUHGHVLJQ´LQ6HFDQGWKHWHQGHQF\WREHPRVWO\ FHQWHUHG RQ RQH¶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³SHRSOHDFW PRUHDOWUXLVWLFDOO\DIWHU«H[SRVXUHWR JUHHQWKDQ FRQYHQWLRQDOSURGXFWV´DOWKRXJKWKHUHLVWKHGDQJHURIXQHWKLFDOEHKDYLRU WRRLQ6HFWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRWKHUVDVVKRZQ E\ WKRVH LQ WKH VLPSOH OLYLQJ PRYHPHQW ZKHQ WKH\ ZRUN OHVV DQG VSHQG ³WKHWLPHVDYHG«WRKHOS«RUYROXQWHHU´IRUWKRVHZKRDUHKRPHOHVVDQG SRRULQ6HFWKHWHQGHQF\WREHPRVWO\FHQWHUHGRQRWKHUVDVVKRZQ E\ WKH SURSRQHQWV RI (35 ZKR DVN IRU D QHZ SROLF\ RI PDNLQJ SURGXFWV ZKLFKDUH³PRUHVXVWDLQDEOHOHVVWR[LFDQGHDVLO\UHF\FODEOHHOHFWURQLFV´ IRUWKHFRPPRQJRRGRIVRFLHW\LQ6HFWKHWHQGHQF\WREHPRVWO\ FHQWHUHGRQRWKHUVDVVKRZQLQWKRVHDFDGHPLFUHVHDUFKHUVZKRSRLQWRXW



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³QHJDWLYH H[WHUQDOLWLHV´WRVRFLHW\LQWKH³HFRQRPLFDQDO\VLVRIUHF\FOLQJ´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

,Q5HODWLRQWR2XWFRPH 7KH QH[W IRXU WKHVHV DUH LQ UHODWLRQ WR RXWFRPH LQ H[LVWHQWLDO GLDOHFWLFVDVVKRZQEHORZ

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WK7KHVLV7KH5HJUHVVLRQ3URJUHVVLRQ3ULQFLSOH 7KHWZHQW\IRXUWKWKHVLVLVFDOOHGWKHUHJUHVVLRQSURJUHVVLRQSULQFSOH RQ WKH GLUHFWLRQ RI KLVWRU\  LQ WKH FDWHJRU\ RI ³RXWFRPH´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFK ZDVDOVRDOUHDG\ ZRUNHGRXW LQ P\SUHYLRXVERRNV LQ WKDW QHLWKHU WKH F\FOLFDO QRU WKH OLQHDU YLHZV DUH DGHTXDWH IRU H[SODLQLQJ PDQ\ SKHQRPHQD DW DOO OHYHOV 7KHUH LV QR UHJUHVVLRQ ZLWKRXW SURJUHVVLRQ²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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³]HURZDVWH´FRPPXQLW\DIRUHFLWHGLQ 6HF  DQG WKH SURJUHVV PDGH E\ IUHHJDQLVP DV VKRZQ LQ LWV FRQWULEXWLRQWRWKHUHFODLPLQJRIZDVWHVDIRUHFLWHGLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $JDLQLWVKRXOGEHVWUHVVHG KRZHYHUWKDWWKHUHDUHGLIIHUHQWVKDGHV RI JUD\  RU GLIIHUHQW GHJUHHV RI WUXWK  LQ WKH WZR RSSRVLWHV DQG WKH FODVVLILFDWLRQ LV QRW QHFHVVDULO\ PXWXDOO\ H[FOXVLYH HLWKHU ,Q IDFW HYHQ ZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQG XSVKDULQJWKH VDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH $OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





*RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH XQGHVLUDELOLW\GHVLUDELOLW\ ULVNRSSRUWXQLW\ EDGQHVVJRRGQHVV FRVW EHQHILWG\VIXQFWLRQDOLW\IXQFWLRQDOLW\F\FOLFLW\OLQHDULW\DQGVRRQ

WK7KHVLV7KH6DPH'LIIHUHQFH3ULQFLSOH 7KHWZHQW\ILIWKWKHVLVUHIHUVWRWKHVDPHGLIIHUHQFHSULQFLSOH RQWKH PHWDPRUSKRVLV RI FKDQJH  LQ WKH FDWHJRU\ RI ³RXWFRPH´ LQ H[LVWHQWLDO GLDOHFWLFV ZKLFKZDVZRUNHGRXWLQ$/'DQGRWKHUERRNVRIPLQH LQWKDW DQHQWLW\DVLWHYROYHVRYHUWLPHFDQEHERWKGLIIHUHQWIURPDQGVLPLODUWR LWV RSSRVLQJ DOWHUQDWLYHV DQG GRHV QRW KDYH WR EH VROHO\ PRUH GLIIHUHQW IURPWKHPRYHUWLPH7KHUHLVQRVLPLODULW\ZLWKRXWGLIIHUHQFH²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³WKH V\PERO RI WKH FURVV RQWR WKH IURQWGRRURIDKRXVHZLWKWKHZRUGV /RUGKDYHPHUF\RQXV QHDULW´HWF LQ6HFWKHFRQWULEXWLRQWRWKHPROGLQJDQGFRQWURORIEHOLHIVYDOXHV DQGEHKDYLRUVUHJDUGOHVVRIZKHWKHUWKLVEHGRQHE\ZD\RIWKRVH³SULYDWH ZDVWHFRQWUDFWRUVWRGXPSFOLQLFDOZDVWH³WRDYRLGKLJKIHHV´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³WKH  .RNR FDVH RU E\ ZD\ RI WKH UHGXFWLRQ RI ³WKH PRYHPHQWVRIKD]DUGRXVZDVWHEHWZHHQQDWLRQV´LQWKH%DVHO&RQYHQWLRQ LQ6HFWKHFRQWULEXWLRQWRWKHPROGLQJDQGFRQWURORIEHOLHIVYDOXHV



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³WKH OLWHUDO DSSOLFDWLRQRIQDWXUDOSURFHVVHV´RUE\ ZD\RI³WKHFUHDWLRQRILQGXVWU\ VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´ LQ 6HF  DQG WKH FRQWULEXWLRQWRWKHPROGLQJDQGFRQWURORIEHOLHIVYDOXHVDQGEHKDYLRUV UHJDUGOHVV RI ZKHWKHU WKLV EH GRQH E\ ZD\ RI IUHHJDQLVP RU E\ ZD\ RI FRUSRUDWHFDSLWDOLVPLQ6HF  2Q WKH RWKHU KDQG WKHUH LV GLIIHUHQFH LQ RXWFRPH HJ WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI XVLQJ DQWLELRWLFV WR ILJKW WKH EXERQLF SODJXH IRU D UHODWLYHO\ PRUHVFLHQWLILFOLIHZRUOG²EXWWKHFRQWULEXWLRQWRWKHPROGLQJDQGFRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI FDUYLQJ ³WKH V\PERO RI WKH FURVVRQWRWKHIURQWGRRURIDKRXVHZLWKWKHZRUGV /RUGKDYH PHUF\RQ XV  QHDU LW´ HWF IRU D UHODWLYHO\ PRUH VDFUDO OLIHZRUOG LQ 6HF  WKH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKRVH ³SULYDWH ZDVWH FRQWUDFWRUV IRU D UHODWLYHO\ PRUH PDUNHW RULHQWHG OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIWKHIHGHUDOJRYHUQPHQWXQGHUWKH 0:7$ IRU D UHODWLYHO\ PRUH VWDWHUHJXODWHG OLIHZRUOG LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI DQWLOLWWHU FDPSDLJQV IRU D UHODWLYHO\ PRUH HQYLURQPHQW FRQVFLRXV OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIWKURZLQJDZD\ZDVWHRQWKHVWUHHW IRUDUHODWLYHO\ PRUHHQYLURQPHQWGRPLQDWHGOLIHZRUOGLQ6HFWKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI KXQWLQJ DQG JDWKHULQJ LQ WKH ROGHU GD\V IRU D UHODWLYHO\ PRUH KDUPRQLRXVFRH[LVWHQFHZLWKQDWXUH²EXWWKHFRQWULEXWLRQWRWKHPROGLQJ DQGFRQWURORIEHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIVSDFHH[SORUDWLRQ QRZDGD\V IRU D UHODWLYHO\ PRUH GRPLQDWLYH FRQTXHVW RI QDWXUH LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI GXPSLQJ IRU D UHODWLYHO\ PRUH PDUNHWRULHQWHG OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH UHGXFWLRQ RI ³WKH PRYHPHQWV RI KD]DUGRXVZDVWHEHWZHHQQDWLRQV´LQWKH%DVHO&RQYHQWLRQIRUDUHODWLYHO\ PRUH OHJDOUHJXODWLYH OLIHZRUOG LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI PDUNHW RULHQWHG HFRQRPLF JURZWK IRU D UHODWLYHO\ PRUH FRPSHWLWLYH OLIHZRUOG² EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUVE\ZD\RIHQYLURQPHQWDOMXVWLFHIRUDUHODWLYHO\PRUHHJDOLWDULDQ OLIHZRUOG LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI HWKLFDO FRQVXPHULVP IRU D UHODWLYHO\ PRUH PRUDOLVWLFOLIHZRUOG²EXWWKHFRQWULEXWLRQWRWKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI PDUNHWRULHQWHG FDSLWDOLVP IRU D UHODWLYHO\ PRUH DPRUDO OLIHZRUOG LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ZD\RIVLPSOHOLIHVW\OHIRUDUHODWLYHO\PRUHVSLULWXDOOLIHZRUOG²EXWWKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI FRQVSLFXRXV FRQVXPSWLRQ IRU D UHODWLYHO\ PRUH PDWHULDOLVWLF OLIHZRUOG LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI (35 IRU D UHODWLYHO\ PRUH HQYLURQPHQWIULHQGO\ZRUOGYLHZ²EXWWKHFRQWULEXWLRQWRWKHPROGLQJDQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI PDUNHWRULHQWHG UHVSRQVLELOLW\IRUDUHODWLYHO\PRUHHQYLURQPHQWGRPLQDWHGZRUOGYLHZLQ 6HFWKHFRQWULEXWLRQ WRWKH PROGLQJDQGFRQWURORIEHOLHIVYDOXHV DQGEHKDYLRUVE\ZD\RIWKHKDELWRIGXPSVWHUGLYLQJE\SRRUSHRSOHIRUD



7KH)XWXUHRI3RVW+XPDQ:DVWH 



UHODWLYHO\ PRUH LPSRYHULVKHG OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJDQGFRQWURORIEHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIWKHWKURZ DZD\ SUDFWLFH RI ULFK SHRSOH IRU D UHODWLYHO\ PRUH DIIOXHQW OLIHZRUOG LQ 6HFWKHFRQWULEXWLRQ WRWKH PROGLQJDQGFRQWURORIEHOLHIVYDOXHV DQGEHKDYLRUVE\ZD\RIOHWWLQJRUJDQLFZDVWHVWRGHFRPSRVHQDWXUDOO\IRU D UHODWLYHO\ PRUH QDWXUDOLVWLF OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI XVLQJ LQFLQHUDWRUV WR FRQYHUW ZDVWHV LQWR HQHUJ\ IRU D UHODWLYHO\ PRUH WHFKQRSKLOLF OLIHZRUOG LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURORIEHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIWKHYHJHWDULDQNRVKHU DQG KDODDO  GLHWV IRU D UHODWLYHO\ PRUH VSLULWXDO OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH PDLQVWUHDP QRQKXPDQ DQLPDO GLHWV IRU D UHODWLYHO\ PRUH VHFXODUOLIHZRUOGLQ6HFWKHFRQWULEXWLRQWRWKHPROGLQJDQGFRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH ILVFDO DQDO\VLV RI ZDVWH UHF\FOH IRU D UHODWLYHO\ PRUH PDUNHWRULHQWHG HFRQRPLF OLIH²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI WKH HFRQRPLF DQDO\VLV RI ZDVWH UHF\FOH IRU D UHODWLYHO\ PRUH JRYHUQPHQWUHJXODWHGHFRQRPLFOLIHLQ6HFWKHFRQWULEXWLRQWRWKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI ZDVWH GXPSLQJ LQ RYHUILOOHG ODQGILOOV IRU D UHODWLYHO\ PRUH LQGLYLGXDO PDWHULDOLVWLFOLIHZRUOG²EXWWKHFRQWULEXWLRQWRWKHPROGLQJDQGFRQWURORI EHOLHIVYDOXHVDQGEHKDYLRUVE\ZD\RIWKHXVHRIZDVWHFRQYHUWHUVIRUD UHODWLYHO\ PRUH HQYLURQPHQWIULHQGO\ OLIHZRUOG LQ 6HF  WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI ³WKH OLWHUDO DSSOLFDWLRQ RI QDWXUDO SURFHVVHV´ IRU D UHODWLYHO\ PRUH QDWXUDOLVWLF OLIHZRUOG²EXW WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI ³WKH FUHDWLRQ RI LQGXVWU\VSHFLILF PRUH HIILFLHQW UHXVH PRGDOLWLHV´ IRU D UHODWLYHO\ PRUH WHFKQRSKLOLF OLIHZRUOG LQ 6HF  DQG WKH FRQWULEXWLRQ WR WKH PROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI IUHHJDQLVP IRU D UHODWLYHO\PRUHHJDOLWDULDQOLIHZRUOG²EXWWKHFRQWULEXWLRQWRWKHPROGLQJ DQG FRQWURO RI EHOLHIV YDOXHV DQG EHKDYLRUV E\ ZD\ RI FRUSRUDWH FDSLWDOLVPIRUDUHODWLYHO\PRUHHOLWLVWOLIHZRUOGLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $JDLQLWVKRXOGEHVWUHVVHG KRZHYHUWKDWWKHUHDUHGLIIHUHQWVKDGHV RI JUD\  RU GLIIHUHQW GHJUHHV RI WUXWK  LQ WKH WZR RSSRVLWHV DQG WKH FODVVLILFDWLRQ LV QRW QHFHVVDULO\ PXWXDOO\ H[FOXVLYH HLWKHU ,Q IDFW HYHQ ZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQG XSVKDULQJWKH VDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





$OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH KRPRJHQHLW\KHWHURJHQHLW\ZHWKH\VLPLODULW\FRQWUDVWDQGVRIRUWK

WK7KHVLV7KH6WDELOLW\5HDFWLRQ3ULQFLSOH 7KHWZHQW\VL[WKWKHVLVLVFDOOHGWKHVWDELOLW\UHDFWLRQSULQFSOH RQWKH IHHGEDFNPHFKDQLVPIRUIXUWKHUFKDQJHV LQWKHFDWHJRU\RI³RXWFRPH´LQ H[LVWHQWLDOGLDOHFWLFV ZKLFK ZDV ILUVW ZRUNHGRXWLQ)3+&+(0 LQWKDW RQFHDQRXWFRPHEHFRPHVVWDELOL]HGRYHUWLPH ZKLFKYDULHVIURPFDVHWR FDVH LWZLOOXQGHUJRIXUWKHUFKDQJHVLQLWVPXOWLIDFHWHGLQWHUDFWLRQVZLWK WKHRXWVLGHZRUOG HJZLWKRWKHUHQWLWLHVHQHUJ\VSDFHDQGVRRQ  7KHUH LV QR VWDELOLW\ ZLWKRXW UHDFWLRQ IRU IXUWKHU FKDQJHV²DQG YLFH YHUVD )RULQVWDQFHRQWKHRQHKDQGWKHUHLVVWDELOLW\LQRXWFRPH HJWKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ LQ WKH ROGHU GD\V RI DSSHDOLQJ WR IRONORULFDQGUHOLJLRXVPHWKRGVWRILJKWWKHEXERQLFSODJXHOLNH³ZDONLQJ DURXQG ZLWKIORZHUVLQRUDURXQGWKHLUQRVH´DQGFDUYLQJ³WKHV\PERORI WKHFURVVRQWRWKHIURQWGRRURIDKRXVHZLWKWKHZRUGV /RUGKDYHPHUF\ RQ XV  QHDU LW´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³GXULQJ WKH ILUVW KDOI RI WKH WK FHQWXU\WKHIRFXVZDVZLOGHUQHVVSURWHFWLRQDQGZLOGOLIHSUHVHUYDWLRQ´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



GLYLQJLQ%HOJLXPLQWKHROGHUGD\VDVVKRZQLQWKHDUUHVWRI³D%HOJLDQ GXPSVWHUGLYHUDQGHFRDFWLYLVWQLFNQDPHG2OOLH´RQ)HEUXDU\WK IRU³WDNLQJIRRGIURPDGXPSVWHUDWDQ$''HOKDL]HPDUNHWLQ%UXJHV´LQ 6HF  WKH UHODWLYHO\ PRUH VWDEOH SUDFWLFH RI XVLQJ WKH ROG W\SHV RI LQFLQHUDWRUV LQ WKH ROGHU GD\V DOWKRXJK ³WKH\ UHOHDVHG DFLGLF SROOXWDQWV DQG DW WLPHV ³QHLWKHU UHFRYHUHG HQHUJ\ QRU PDWHULDOV´ LQ 6HF  WKH UHODWLYHO\ PRUH VWDEOH FRQGLWLRQ RI WKH SUDFWLFH RI XVLQJ DQLPDO E\ SURGXFWVIRUSHWIRRGLQWKHROGHUGD\VLQ6HFWKHUHODWLYHO\ PRUH VWDEOHFRQGLWLRQRI³WKHWUDGLWLRQDOMRERIUHF\FOLQJ´ZKLFK³LVSHUIRUPHG E\ WKH HQWUHSUHQHXULDO SRRU VXFK DV WKH NDUXQJ JXQL =DEDOHHQ WKH UDJ DQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´ LQ WKH ROGHU GD\V LQ 6HF WKHUHODWLYHO\PRUHVWDEOHFRQGLWLRQRIWKHXVHRIZDVWHFRQYHUWHUVLQ PRGHUQWLPHVLQ6HFWKHUHODWLYHO\PRUHVWDEOHFRQGLWLRQRIZDVWH GXPSLQJ LQ WKH ROGHU GD\V ZKHQ PDQ\ GXPSV ZHUH QRW H[FHHGLQJ FDUU\LQJFDSDFLW\LQ6HFDQGWKHUHODWLYHO\PRUHVWDEOHFRQGLWLRQRI WKHSUDFWLFHRIFRUSRUDWHFDSLWDOLVPLQWKHROGHUGD\VZKHQ³FRXQFLOVDQG ODQGORUGV«ZRXOGUDWKHUNHHSSURSHUWLHVERDUGHGXSLIWKH\FDQQRWPDNHD VXIILFLHQW SURILW IURP WKHP´ DQG JRRG EXLOGLQJV DUH OHIW XQXVHG ZKLOH WKHUHZHUHKRPHOHVVRQWKHVWUHHWVLQ6HF  2Q WKH RWKHU KDQG WKHUH LV UHDFWLRQ LQ RXWFRPH HJ WKH ROG IDVKLRQHGIRONORULFDQGUHOLJLRXVPHWKRGVWRILJKWWKHEXERQLFSODJXHWKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ QRZDGD\V DQWLELRWLFV DUH URXWLQHO\ XVHGLQVWHDGWRILJKWWKHEXERQLFSODJXHLQ6HFWKHHQIRUFHPHQWRI SURSHUFOLQLFDO ZDVWHGLVSRVDOEHWZHHQDQGXQGHUWKH0:7$ WKHQOHGWRIXUWKHUFKDQJHVODWHURQZKHQ³WKH$FWZDVUHSHDOHGLQ´ DQG ³VWDWHV ZHUH JLYHQ WKH UHVSRQVLELOLW\ WR UHJXODWH DQG SDVV ODZV FRQFHUQLQJ WKH GLVSRVDO RI PHGLFDO ZDVWH´ LQ 6HF  WKH SUDFWLFH RI XVLQJ OLWWHU ELQV WR GHDO ZLWK OLWWHU LQ WKH PRGHUQ KLVWRU\ RI DQWLOLWWHU FDPSDLJQ WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ LW LV GLVFRYHUHG WKDW ³LIWKHELQVDUHQRWUHJXODUO\HPSWLHGWKHQRYHUILOOLQJRIELQVRFFXUVDQG FDQ LQFUHDVH OLWWHU LQGLUHFWO\´ DQG ³VRPH ORFDO DXWKRULWLHV ZLOO RQO\ WDNH UHVSRQVLELOLW\IRUUXEELVKWKDWLVSODFHGLQWKHELQVZKLFKPHDQVWKDWOLWWHU UHPDLQVDSUREOHP´LQ6HFWKHODXQFKHVRIVSDFHFUDIWVWKHQOHGWR IXUWKHU FKDQJHV ODWHU RQ LQ WKDW LQ DFFRUGDQFH WR WKH .HVVOHU 6\QGURPH ³LQVWHDGRIWKHGHQVLW\RIGHEULVEHLQJDPHDVXUHRIWKHQXPEHURILWHPV ODXQFKHGLQWRRUELWLWZDVWKDWQXPEHUSOXVDQ\QHZGHEULVFDXVHGZKHQ WKH\ FROOLGHG´ VR ³LI WKH QHZ GHEULV GLG QRW GHFD\ IURP RUELW EHIRUH LPSDFWLQJ DQRWKHU REMHFW WKH QXPEHU RI GHEULV LWHPV ZRXOG FRQWLQXH WR JURZHYHQLIWKHUHZHUHQRQHZODXQFKHV´DQGFROOLVLRQVZRXOGFRQWLQXH LQWKHFDVFDGHVLQ6HFWKH%DVHO&RQYHQWLRQLQLWVHDUO\GD\VWKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ DV VKRZQ E\ WKH ODWHU FDPSDLJQ IRU WKH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





³%DVHO%DQ$PHQGPHQWWRWKH%DVHO&RQYHQWLRQ´LQ6HFWKHHDUO\ IRFXV RI WKH HQYLURQPHQWDO PRYHPHQW GXULQJ WKH ILUVW KDOI RI WKH WK FHQWXU\WKHQOHGWRIXUWKHUFKDQJHVODWHURQZKHQQRZDGD\VLWSD\VPRUH DWWHQWLRQWRWKHLVVXHVDIIHFWLQJ³PLQRULWLHVDQGZRUNLQJFODVVSHRSOH´OLNH WKH RQH FRQFHUQLQJ HQYLURQPHQWDO GLVFULPLQDWLRQ LQ 6HF  PDUNHW RULHQWHGFDSLWDOLVPLQWKHROGHUGD\VWKHQWKHQWRIXUWKHUFKDQJHVODWHURQ ZKHQPRUDOEDVLVLVJLYHQPRUHDWWHQWLRQLQFDSLWDOLVPRIRXUWLPHLQ6HF  FRQVSLFXRXV FRQVXPSWLRQ LQ PRGHUQ WLPHV WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ ³D QHZ HFRQRPLFV PRYHPHQW KDV EHHQ EXLOGLQJ VLQFH WKH 81 FRQIHUHQFH RQ WKH HQYLURQPHQW LQ ´ IRU ³VLPSOH SURVSHULW\´LQVWHDGLQ6HFWKHLPSOHPHQWDWLRQRI(35WKHQOHGWR IXUWKHUFKDQJHVRYHUWLPHDV³SURGXFHUVZRXOGEHDGGLQJUHF\FOLQJFRVWV LQWRWKHLQLWLDOSULFHWDJ´LQ6HFWKHDUUHVWRI³D%HOJLDQGXPSVWHU GLYHU DQG HFRDFWLYLVW QLFNQDPHG 2OOLH´ LQ  WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ KLV VXEVHTXHQW WULDO ³HYRNHG SURWHVWV LQ %HOJLXP DJDLQVW UHVWULFWLRQV IURP WDNLQJ GLVFDUGHG IRRG LWHPV´ LQ 6HF  RQ ZKHQ QRZDGD\V WKH LQGXVWU\ GHSHQGV RQ PRUH HQYLURQPHQWIULHQGO\ LQFLQHUDWRUVZKLFKXVH³OLPHVFUXEEHUVDQGHOHFWURVWDWLFSUHFLSLWDWRUVRQ VPRNHVWDFNV´VRWKDW ³E\SDVVLQJWKHVPRNHWKURXJKWKHOLPHVFUXEEHUV DQ\DFLGVWKDWPD\EHLQWKHVPRNHDUHQHXWUDOL]HGZKLFKSUHYHQWVWKHDFLG IURPUHDFKLQJWKHDWPRVSKHUHDQGKXUWLQJRXUHQYLURQPHQW´LQ6HF WKHSUDFWLFHRIXVLQJDQLPDOE\SURGXFWVIRUSHWIRRGLQWKHROGHUGD\VWKHQ OHGWRIXUWKHUFKDQJHVODWHURQZKHQQRZDGD\VWKHUHDUH³DQHZFDWHJRU\ RI SHW IRRG´ ZKLFK ³RIWHQ HPSKDVL]HV WKH XVH RI KXPDQJUDGH PHDW VRXUFHV RQO\ ZLWK QR DQLPDO PHDW E\SURGXFWV´ LQ 6HF  ³WKH WUDGLWLRQDOMRERIUHF\FOLQJ«SHUIRUPHGE\WKHHQWUHSUHQHXULDOSRRU´WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ ³ODUJH UHF\FOLQJ RUJDQL]DWLRQV´ DUH GRLQJ D ORW RI ZDVWH UHF\FOH LQ GHYHORSHG FRXQWULHV QRZDGD\V LQ 6HF  WKH XVH RI ZDVWH FRQYHUWHUV LQ PRGHUQ WLPHV WKHQ OHG WR IXUWKHU FKDQJHV ODWHU RQ ZKHQ QRZDGD\V VRPH FRQWHPSRUDU\ DXWRFODYHV KDYH EHHQ VR LPSURYHG WKDW WKH\ ³HPSOR\ WKH VDPH PHWKRG RI VWHULOL]DWLRQ DV FRQYHUWHUVEXWGRVRXVLQJODUJHUDQGPRUHFRPSOH[HTXLSPHQWWKDWDOVR KDVKLJKHUVDIHW\«UHTXLUHPHQW«´VRWKHVHQHZYHUVLRQVDUHWRFRPSHWH ZLWKZDVWHFRQYHUWHUVLQ6HFZDVWHGXPSLQJLQWKHROGHUGD\VWKHQ OHGWRIXUWKHUFKDQJHVODWHURQZKHQQRZDGD\VWKHUHLVDQLQFUHDVLQJFDOO IRUUHXVHOLNH=HUR:DVWHEHFDXVH³PDQ\GXPSVDUHFXUUHQWO\H[FHHGLQJ FDUU\LQJFDSDFLW\´LQ6HFDQGWKHSUDFWLFHRIFRUSRUDWHFDSLWDOLVP LQWKHROGHUGD\VWKHQOHGWRIXUWKHUFKDQJHVODWHURQDVVKRZQLQWKHULVH RIIUHHJDQLVPQRZDGD\VVLQFH³IUHHJDQVVHHWKLVSUDFWLFH>RIOHDYLQJJRRG EXLOGLQJVXQXVHGZKHQWKHUHDUHKRPHOHVVRQWKHVWUHHWV@DVVHQVHOHVVDQG DFRXQWHUSURGXFWLYHXVHRIUHVRXUFHV´LQ6HF 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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

WK7KHVLV7KH)XQFWLRQDOLW\1RQIXQFWLRQDOLW\3ULQFLSOH 7KHWZHQW\VHYHQWKWKHVLVLVFDOOHGWKHIXQFWLRQDOLW\QRQIXQFWLRQDOLW\ SULQFSOH RQ WKH SUHVHQFH RI IXQFWLRQ  LQ WKH FDWHJRU\ RI ³RXWFRPH´ LQ H[LVWHQWLDOGLDOHFWLFV ZKLFKLVILUVWZRUNHGRXWLQ)3+&$ LQWKDWLIWKHUH LVWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJRUVRPHRQHLVILWWHGWKHUHLV OLNHZLVH WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ RU VRPHRQH LV ILWWHG7KHUHLVQRIXQFWLRQDOLW\ZLWKRXWQRQIXQFWLRQDOOLW\²DQGYLFHYHUVD $IXQFWLRQVKRXOGQRWEHFRQIXVHGZLWKDQDOWHUQDWLYHIXQFWLRQZKLFK LVMXVWDQRWKHUNLQGRIIXQFWLRQMXVWDVQRQIXQFWLRQVKRXOGQRWEHFRQIXVHG ZLWK G\VIXQFWLRQ ZKLFK KDV PRUH WR GR ZLWK PDOIXQFWLRQ DQG LV WKXV UHODWHGPRUHWRWKHUHJUHVVLRQSURJUHVVLRQSULQFLSOH  ,Q DGGLWLRQ EHLQJ IXQFWLRQDO RU XVHIXO  DQG EHLQJ QRQIXQFWLRQDO RU XVHOHVV GRQRWKDYHWREHPXWXDOO\H[FOXVLYHDVWKHWZRFDQFRPHLQDOO VKDSHV DQG VL]HV RU LQ GLIIHUHQW GHJUHHV $QG ZKDW LV IXQFWLRQDO DW RQH WLPHPD\EHFRPHQRQIXQFWLRQDODWDQRWKHUWLPHDQGYLFHYHUVD )RULQVWDQFHRQWKHRQHKDQGWKHUHLVIXQFWLRQDOLW\LQRXWFRPH HJ WKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDVVKRZQE\³ZDONLQJ DURXQG ZLWK IORZHUV LQ RU DURXQG WKHLU QRVH´ ZKLFK VHUYHG WKH HWKQR PHGLFDOIXQFWLRQLQWKHROGHUGD\VDVDZD\WRILJKWWKHEXERQLFSODJXHLQ 6HFWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDVVKRZQ LQ WKH SDVVLQJ RI WKH 0:7$ LQ  WR VHUYH WKH IXQFWLRQ RI HQIRUFLQJ SURSHU FOLQLFDO ZDVWH GLVSRDVDO E\ WKH IHGHUDO JRYHUQPHQW LQ 6HF  WKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDVVKRZQLQWKHKDELW RI VRPH (XURSHDQV LQ WKH WK FHQWXU\ DQG EHIRUH WR WKURZ ZDVWH RQ WKH VWUHHW ZKLFK VHUYHG WKH IXQFWLRQ WR GHDO ZLWK ZDVWH DW WKH WLPH LQ 6HF

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDVVKRZQLQWKH ULYDOU\EHWZHHQ³WKH86DQG6RYLHW8QLRQLQWKHVDQGV´ZKHQ WKH\ UHJXODUO\ HQJDJHG LQ ³WKH WHVWLQJ RI DQWLVDWHOOLWH ZHDSRQV´ WR VHUYH WKHSROLWLFDO IXQFWLRQRI JOREDOGRPLQDWLRQLQ6HFWKHSUHVHQFHRI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ ³WKH  .RNR FDVH ZKHQ³VKLSVWUDQVSRUWHGEDUUHOVRIKD]DUGRXVZDVWHIURP,WDO\WR WKH VPDOO WRZQ RI .RNR LQ 1LJHULD LQ H[FKDQJH IRU  PRQWKO\ UHQW ZKLFK ZDVSDLGWRD1LJHULDQIRUWKH XVHRIKLV IDUPODQG´ ZKLFKVHUYHG WKHIXQFWLRQRIGXPSLQJIRUWKRVHLQYROYHGDWWKHWLPHLQ6HFWKH SUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDVVKRZQLQWKHIRFXVRQ ³ZLOGHUQHVV SURWHFWLRQ DQG ZLOGOLIH SUHVHUYDWLRQ´ LQ WKH HDUO\ HQYLURQPHQWDOPRYHPHQWGXULQJWKHILUVWKDOIRIWKHWKFHQWXU\EHFDXVH LWVHUYHGWKHIXQFWLRQRIUHIOHFWLQJWKHLQWHUHVWVRI ³WKH PLGGOHDQGXSSHU FODVV´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³WKURZDZD\ FXOWXUH´ DW WKH WLPHLQ6HFWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQ LQ WKH XVH RI WKH ROG W\SHV RI LQFLQHUDWRUV LQ WKH ROGHU GD\V HYHQ WKRXJK WKH\ ZHUH SROOXWLQJ WKH HQYLURQPHQW EHFDXVH WKH\ VHUYHG WKH IXQFWLRQ RI EHLQJ D WHFKQRORJLFDO VROXWLRQ IRU :W( DW WKH WLPH LQ 6HF WKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDVVKRZQLQWKH XVHRIDQLPDOSURGXFWVIRUIRRGVWXIIVVLQFHWKLVVHUYHVWKHYLWDOIXQFWLRQRI IRRGFRQVXPSWLRQIRUWKRVHLQYROYHGLQ6HFWKHSUHVHQFHRIDFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ ³WKH WUDGLWLRQDO MRE RI UHF\FOLQJ«SHUIRUPHGE\WKHHQWUHSUHQHXULDOSRRUVXFKDVWKHNDUXQJJXQL =DEDOHHQ WKH UDJDQGERQH PDQ ZDVWH SLFNHU DQG MXQN PDQ´ LQ PDQ\ XQGHUGHYHORSHG RU SRRU FRXQWULHV DV WKH\ VHUYH WKH HVVHQWLDO IXQFWLRQ RI ZDVWHUHF\FOHLQ6HFWKHSUHVHQFHRIDFWLRQIRUZKLFKVRPHWKLQJLV ILWWHGDVVKRZQLQWKHGXPSLQJRIZDVWHVLQRYHUXVHGODQGILOOVLQWKHROGHU GD\VDVLWVHUYHGWKHIXQFWLRQRIZDVWHGLVSRVDODWWKDWWLPHLQ6HF WKH SUHVHQFH RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



SUDFWLFHRIZDVWHGXPSLQJLQWKHROGHUGD\VZKHQLWVHUYHGWKHIXQFWLRQRI ZDVWH WUHDWPHQW DW WKH WLPH LQ 6HF  DQG WKH SUHVHQFH RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH SUDFWLFH RI ³FRXQFLOV DQG ODQGORUGV´LQWKHROGHUGD\VZKR³ZRXOGUDWKHUNHHSSURSHUWLHVERDUGHGXS LIWKH\FDQQRWPDNHDVXIILFLHQWSURILWIURPWKHP´EHFDXVHWKLVVHUYHVWKH IXQFWLRQRISHUSHWXDWLQJFRUSRUDWHFDSLWDOLVPDWWKHWLPHLQ6HF  2Q WKH RWKHU KDQG WKHUH LV QRQIXQFWLRQDOLW\ LQ RXWFRPH HJ WKH UHODWLYHODFNRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDVVKRZQLQWKHXVHRI DQWLELRWLFV WR ILJKW WKH EXERQLF SODJXH QRZDGD\V VXFK WKDW WKH HWKQR PHGLFDOPHWKRGRI³ZDONLQJDURXQGZLWKIORZHUVLQRUDURXQGWKHLUQRVH´ LVQRORQJHUIXQFWLRQDOLQWKHEDWWOHDJDLQVWWKHEXERQLFSODJXHLQRXUWLPH LQ6HFWKHUHODWLYHODFNRIDFWLRQIRUZKLFKVRPHWKLQJLVILWWHGDV VKRZQLQWKHUHSHDORIWKH0:7$LQZKHQWKHIHGHUDOJRYHUQPHQW ZDVQRORQJHUGHHPHGQHFHVVDU\WRVHUYHWKHIXQFWLRQRIHQIRUFLQJSURSHU FOLQLFDO ZDVWH GLVSRDVDO VR ³VWDWHV ZHUH JLYHQ WKH UHVSRQVLELOLW\ WR UHJXODWHDQGSDVVODZVFRQFHUQLQJWKHGLVSRVDORIPHGLFDOZDVWH´LQVWHDG LQ6HFWKHUHODWLYHODFNRIDFWLRQ IRU ZKLFKVRPHWKLQJLV ILWWHGDV VKRZQ LQ WKH ZLGHU XVH RI OLWWHU ELQV FRQWDLQHU GHSRVLW VFKHPHV OLWWHU WUDSVHWFQRZDGD\V VRWKDW WKHROGHU KDELWRI VRPH(XURSHDQVWRWKURZ ZDVWH RQ WKH VWUHHW LV QR ORQJHU IXQFWLRQDO LQ RXU WLPH LQ 6HF  WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH GHFLVLRQRIWKH86DQG5XVVLDODWHURQZKHQ³IROORZLQJWKH86WHVWLQ  WKHUH ZDV D GHIDFWR PRUDWRULXP RQ VXFK WHVWV´ VR ³ZLGHVSUHDG $6$7 WHVWLQJ KDG HQGHG´ DQG LW QR ORQJHU VHUYHV WKH IXQFWLRQ RI JOREDO GRPLQDWLRQ LQ WKH SRVW&ROG :DU HUD VLQFH WKH DWWHQWLRQ LV QRZ SDLG WR RWKHU WKLQJV LQVWHDG LQ 6HF  WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJLV ILWWHGDVVKRZQLQWKHFUHDWLRQRIWKH%DVHO&RQYHQWLRQVR WKDW WKH SUDFWLFH RI GXPSLQJ LQ ³WKH  .RNR FDVH´ LV QR ORQJHU IXQFWLRQDOLQRXUWLPHDVLWLVPRUHDSSURSULDWHQRZDGD\VWRUHGXFH³WKH PRYHPHQWV RI KD]DUGRXV ZDVWH EHWZHHQ QDWLRQV´ LQ 6HF  WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH LQFOXVLRQRIWKHLQWHUHVWVRI ³PLQRULWLHVDQG ZRUNLQJFODVV SHRSOH´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´ QRZDGD\V VXFK WKDW FRQVSLFXRXV

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





FRQVXPSWLRQFDQQRORQJHUVDWLVI\WKRVHVHJPHQWVRIWKH SRSXODWLRQ ZKR \HDUQ IRU VLPSOH OLYLQJ IRU D PRUH VSLULWXDO DQG HQYLURQPHQWDO OLIHZRUOG LQVWHDG LQ 6HF  WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHGDVVKRZQLQWKHFDOOIRU(35QRZDGD\VVRWKHROGIDVKLRLQHGZD\ RIPDQXIDFWXULQJFDQQRORQJHUVHUYHWKHIXQFWLRQRIPDQXIDFWXULQJLQRXU WLPH ZKLFK PXVW EH ³PRUH VXVWDLQDEOH OHVV WR[LF DQG HDVLO\ UHF\FODEOH HOHFWURQLFV´LQ6HFWKHUHODWLYHODFNRIDFWLRQIRUZKLFKVRPHWKLQJ LV ILWWHG DV VKRZQ LQ GXPSVWHU GLYLQJ QRZDGD\V ZKLFK ³EHFRPHV DQ HQYLURQPHQWDOLVW HQGHDYRU«DQG LV WKXV SUDFWLFHG E\ PDQ\ SURJUHHQ FRPPXQLWLHV´DVDZD\WRSURWHVW³WKHZDVWHIXOQHVVRIFRQVXPHUVRFLHW\´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³VRPHQRQKXPDQDQLPDOSURGXFWV´E\WKRVHIRUYHJHWDULDQNRVKHU DQG KDODDO GLHWV VR WKDW WKHVH QRQKXPDQ DQLPDO SURGXFWV FDQ QR ORQJHU VHUYHWKHIXQFWLRQRIIRRGFRQVXPSWLRQIRUWKHVHRWKHUJURXSVEHFDXVHRI WKHLU GLIIHUHQW VWDQGDUGV DQG H[SHFWDWLRQV PRVWO\ IRU VSLULWXDO DQG UHOLJLRXV UHDVRQV LQ 6HF  WKH UHODWLYH ODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ ³WKH FUHDWLRQ RI ODUJH UHF\FOLQJ RUJDQL]DWLRQVWKDWPD\EHSURILWDEOHHLWKHUE\ODZRUHFRQRPLHVRIVFDOH´ LQ VXFK D ZD\ WKDW ³WKH SRRU DUH«GULYHQ RXW RI WKH UHF\FOLQJ DQG WKH UHPDQXIDFWXULQJPDUNHW´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³PDQ\GXPSVDUHFXUUHQWO\H[FHHGLQJFDUU\LQJ FDSDFLW\´VRZDVWHGXPSLQJLVQRORQJHUGRPLQDQWLQVHUYLQJWKHHVVHQWLDO IXQFWLRQRIZDVWHWUHDWPHQWLQRXUWLPHLQ6HFDQGWKHUHODWLYHODFN RI DFWLRQ IRU ZKLFK VRPHWKLQJ LV ILWWHG DV VKRZQ LQ WKH SUDFWLFH RI VTXDWWLQJ E\ WKH IUHHJDQV QRZDGD\V VXFK WKDW WKH SUDFWLFH RI ³FRXQFLOV DQGODQGORUGV´LQWKHROGHUGD\V IRUOHDYLQJ JRRGEXLOGLQJVXQXVHGLV QR



7KH)XWXUHRI3RVW+XPDQ:DVWH 



ORQJHU VR IXQFWLRQDO LQ RXU WLPH EHFDXVH RI GLIIHUHQW VWDQGDUGV DQG H[SHFWDWLRQVGXHWR³WKHDQWLJOREDOL]DWLRQPRYHPHQW´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

WK7KHVLV7KH,QWHQWLRQDOLW\1RQLQWHQWLRQDOLW\3ULQFLSOH 7KHWZHQW\HLJKWK WKHVLVLVFDOOHGWKHLQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\ SULQFSOH RQ WKH SODQQLQJ IRU RXWFRPHV  LQ WKH FDWHJRU\ RI ³RXWFRPH´ LQ H[LVWHQWLDOGLDOHFWLFV ZKLFKLVILUVWZRUNHGRXWLQ)3+: LQWKDWLIWKHUH LV WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH WKHUH LV OLNHZLVH WKH UHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH 7KHUH LV QR LQWHQWLRQDOLW\ ZLWKRXW QRQLQWHQWLRQDOOLW\²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³, PXVW EH FUXHORQO\WREHNLQG´ ,QDQ\HYHQWRQWKHRQHKDQGWKHUHLVLQWHQWLRQDOLW\LQRXWFRPH HJ WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH DV VKRZQ LQ VRPH (XURSHDQ ³DUPLHV RI WKH WK FHQWXU\´ ZKLFK ³ZHUH UHFRUGHG FDWDSXOWLQJGLVHDVHGFRUSVHVRYHUWKHZDOOVRIWRZQVDQGYLOODJHVLQRUGHU WRVSUHDGWKHSHVWLOHQFH´LQWKHKLVWRU\RI%ODFN 'HDWKLQ6HFWKH

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH DV VKRZQ LQ WKH HQDFWPHQWRIJRYHUQPHQWDOUHJXODWLRQIRUEHWWHUFOLQLFDOZDVWHGLVSRVDOLQ 6HFWKHSODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPHDV VKRZQ LQ WKH HIIRUW WR SUHYHQW OLWWHULQJ LQ 6HF  WKH SODQQLQJ RU GHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPHDVVKRZQLQWKHHIIRUWVWRJHW ULGRIVSDFHGHEULVLQ6HFWKHSODQQLQJRUGHVLJQRIVRPHWKLQJIRUD FHUWDLQRXWFRPHDVVKRZQLQWKHGHVLJQRIWKH%DVHO&RQYHQWLRQWRKDQGOH KD]DUGRXVZDVWHLQ6HFWKHSODQQLQJRUGHVLJQRIVRPHWKLQJIRUD FHUWDLQ RXWFRPH DV VKRZQ LQ WKH IRXQGLQJ RI WKH HQYLURQPHQW MXVWLFH PRYHPHQWWRSURWHFWPLQRULWLHVIURPHQYLURQPHQWDOGLVFULPLQDWLRQLQ6HF WKHSODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPHDVVKRZQ LQWKHFUHDWLRQRIHWKLFDOFRQVXPHULVP IRU ZDVWHUHGXFWLRQLQ6HF WKHSODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPHDVVKRZQLQWKH SUDFWLFHRIVLPSOHOLYLQJIRUZDVWHUHGXFWLRQLQ6HFWKHSODQQLQJRU GHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPHDVVKRZQLQWKHGHVLJQRI(35 IRU PRUHSURGXFHUUHVSRQVLELOLW\LQ6HFWKHSODQQLQJRUGHVLJQRI VRPHWKLQJIRUDFHUWDLQRXWFRPHDVVKRZQLQWKHLGHDRIGXPSVWHUGLYLQJ IRU ZDVWH UHXVH LQ 6HF  WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH DV VKRZQ LQ WKH GHVLJQ RI :W( IRU HQHUJ\ UHFRYHU\ LQ 6HFWKHSODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPHDV VKRZQ LQ WKH GHVLJQ RI DQLPDO SURGXFWV DQG DQLPDO E\SURGXFWV WR PDNH EHWWHU XVH RI DQLPDO ZDVWHV LQ 6HF  WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJIRUDFHUWDLQRXWFRPHDVVKRZQLQWKHGHVLJQRIZDVWHUHF\FOH IRU D PRUH SRVLWLYH HQYLURQPHQWDO LPSDFW LQ 6HF  WKH SODQQLQJ RU GHVLJQRIVRPHWKLQJ IRUDFHUWDLQRXWFRPHDVVKRZQLQWKHGHVLJQRIWKH ZDVWH FRQYHUWHU IRU ZDVWH UHF\FOH LQ PRGHUQ WLPH LQ 6HF  WKH SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ RXWFRPH DV VKRZQ LQ WKH GHVLJQRI=HUR:DVWHIRUPRUHUHXVHHVSHFLDOO\GXULQJLQ6HF DQGWKHSODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPHDV VKRZQLQWKHGHVLJQRIIUHHJDQLVPIRUDEHWWHUZRUOGEDVHGRQUHFODLPLQJ ZDVWHVLQ6HF  2Q WKH RWKHU KDQG WKHUH LV QRQLQWHQWLRQDOLW\ LQ RXWFRPH HJ WKH UHODWLYHDEVHQFHRISODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPH VXFK WKDW WKH RXWFRPH FDQ HYHQ EH FRXQWHULQWHQWLRQDO LQ EHLQJ WKH RSSRVLWH RI ZKDW ZDV RULJLQDOO\ SODQQHG DV VKRZQ LQ WKH XQLQWHQGHG FRQVHTXHQFH RI WKH %XERQLF SODJXH ZKLFK FDXVHG ³WKH %ODFN 'HDWK WKDW VZHSW WKURXJK (XURSH LQ WKH WK FHQWXU\´ LQ WKDW ³WKH SODJXH NLOOHG VR PDQ\ RI WKH ZRUNLQJ SRSXODWLRQ >WKDW@ ZDJHV URVH DQG VRPH KLVWRULDQV KDYHVHHQWKLVDVDWXUQLQJSRLQWLQ(XURSHDQHFRQRPLFGHYHORSPHQW´LQ 6HF  WKH UHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQRXWFRPHVXFKWKDWWKHRXWFRPHFDQHYHQEHFRXQWHULQWHQWLRQDOLQ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³REOLJDWLRQV´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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





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³SDSHU UHF\FOLQJ DFWXDOO\ UHGXFHV WUHH SRSXODWLRQV´DQGLVWKXVEDGIRUWKHHQYLURQPHQWLQVWHDGLQ6HFWKH UHODWLYHDEVHQFHRISODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPH VXFK WKDW WKH RXWFRPH FDQ HYHQ EH FRXQWHULQWHQWLRQDO LQ EHLQJ WKH RSSRVLWHRIZKDWZDVRULJLQDOO\SODQQHGDVVKRZQE\VRPHFRQWHPSRUDU\ DXWRFODYHV ZKLFK KDYH EHHQ VR LPSURYHG WKDW WKH\ ³HPSOR\ WKH VDPH PHWKRG RI VWHULOL]DWLRQ DV FRQYHUWHUV EXW GR VR XVLQJ ODUJHU DQG PRUH FRPSOH[ HTXLSPHQW WKDW DOVR KDV KLJKHU VDIHW\« UHTXLUHPHQW´ DV DQ DOWHUQDWLYHWHFKQRORJ\WRFRPSHWHZLWKWKHZDVWHFRQYHUWHULQ6HF WKH UHODWLYH DEVHQFH RI SODQQLQJ RU GHVLJQ RI VRPHWKLQJ IRU D FHUWDLQ



7KH)XWXUHRI3RVW+XPDQ:DVWH 



RXWFRPH VXFK WKDWWKHRXWFRPHFDQHYHQEHFRXQWHULQWHQWLRQDOLQEHLQJ WKH RSSRVLWH RI ZKDW ZDV RULJLQDOO\ SODQQHG DV VKRZQ E\ ³PDQ\ FRPPHUFLDORULQGXVWULDOFRPSDQLHV´OLNH³6WDSOHV+RPH'HSRW7R\RWD *HQHUDO 0RWRUV DQG FRPSXWHU WDNHEDFN FDPSDLJQV´ ZKLFK  ³HPEUDFH =HUR:DVWH´EXW³XVXDOO\PHDQQRPRUHWKDQDPDMRUPDWHULDOVUHF\FOLQJ HIIRUW KDYLQJ QR EHDULQJ RQ SURGXFW UHGHVLJQ´ LQ 6HF  DQG WKH UHODWLYHDEVHQFHRISODQQLQJRUGHVLJQRIVRPHWKLQJIRUDFHUWDLQRXWFRPH VXFK WKDW WKH RXWFRPH FDQ HYHQ EH FRXQWHULQWHQWLRQDO LQ EHLQJ WKH RSSRVLWH RI ZKDW ZDV RULJLQDOO\ SODQQHG DV VKRZQ LQ WKH XQLQWHQGHG FRQVHTXHQFHV RI IUHHJDQLVP ZKHQ LPSOHPHQWHG LQ WKDW IRUDJHUV RQ WKH VWUHHWVXIIHUIURPGLVUHVSHFWE\WKRVHLQPDLQVWUHDPVRFLHW\WKDWUHFODLPHG LWHPV LQ GXPSVWHUV FDQ EH XQKHDOWK\ DQG GDQJHURXV WKDW LW LV QRW VR SUDFWLFDO DV URPDQWLFDOO\ DVVXPHG E\ WKH DGYRFDWHV DQG WKDW LWV SUDFWLFH FDQEHFULPLQDOHWFLQ6HF  $QGWKHUHYHUVHGLUHFWLRQDOVRKROGVWUXH $JDLQLWVKRXOGEHVWUHVVHG KRZHYHUWKDWWKHUHDUHGLIIHUHQWVKDGHV RI JUD\  RU GLIIHUHQW GHJUHHV RI WUXWK  LQ WKH WZR RSSRVLWHV DQG WKH FODVVLILFDWLRQ LV QRW QHFHVVDULO\ PXWXDOO\ H[FOXVLYH HLWKHU ,Q IDFW HYHQ ZKHQVRPHFRPELQDWLRQVRIWKHWZRRFFXUWKH\RQO\HQG XSVKDULQJWKH VDPHGLDOHFWLFUHODWLRQVKLSEXWLQDGLIIHUHQWGHJUHH $OVR WKHUH DUH VRPH RWKHU UHODWLRQVKLSV DV D NLQG RI IDPLO\ UHVHPEODQFH  ZKLFK KDYH VRPHWKLQJ LQ FRPPRQ ZLWK WKH SULQFLSOH EXW WKH\ DUH QRW H[DFWO\ WKH VDPH EXW RQO\ PRUH RU OHVV FRPSDUDEOH ZKLFK YDULHVIURPFDVHWRFDVH *RRGH[DPSOHVRIIDPLO\UHVHPEODQFHLQUHODWLRQWRWKHSULQFLSOHDUH SXUSRVLYHQHVVQRQSXUSRVLYHQHVV LQWHQWLRQDFFLGHQWDOQHVV GHVLJQ UDQGRPQHVVHWF

WK7KHVLV7KH3RVW+XPDQ7UDQVILJXUDWLRQ $QGWKHWZHQW\QLQWKWKHVLVLVDERXWWKHUROHRI³SRVWKXPDQV´ZKLFK , RULJLQDOO\ SURSRVHG LQ P\ SUHYLRXV ERRNV VWDUWLQJ ZLWK WKH ILUVW ERRN WLWOHG7KH)XWXUHRI+XPDQ&LYLOL]DWLRQLQDQGDOORWKHUVDIWHUZDUGV $V DOUHDG\ SRLQWHG RXW LQ 6HF  , QHHG WR HPSKDVL]H DV WKLV LV VRPHWKLQJWKDW,XVHGWRUHSHDW DOPRVWYHUEDWLP IURPP\SUHYLRXVERRNV WZRFODULILFDWLRQVKHUHDERXWWKHWHUP³SRVWKXPDQ´DVDQHRORJLVPLQP\ ZRUNV )LUVWO\ WKH ZRUG ³SRVWKXPDQ´ KHUH VKRXOG QRW EH FRQIXVHG ZLWK DQRWKHUWHUPZKLFKORRNVVLPLODUEXWKDVDWRWDOO\GLIIHUHQWPHDQLQJLQWKH OLWHUDWXUH RI SRVWPRGHUQLVP QDPHO\ ³SRVWKXPDQLVP´²ZKLFK FRQVWLWXWHVDFULWLTXHRI³KXPDQLVP´DVWUDGLRQDOO\XQGHUVWRRG HVSHFLDOO\

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





WKRXJK QRW H[FOXVLYHO\ LQ UHODWLRQ WR WKH LGHD RI SURJUHVV LQ VFLHQFH DQG UHDVRQLQWKH(QOLJKWHQPHQWSURMHFW  :.  0\ ZRUNV UHMHFW WKH SURMHFW RI ³SRVWPRGHUQLVP´ DQG SURSRVH WKH IXWXUHZRUOGRIZKDW,RULJQDOO\FDOOHG³DIWHUSRVWPRGHUQLW\´LQ)+&DQG )&'IRULQVWDQFH $QG VHFRQGO\ WKH ZRUG ³SRVWKXPDQ´ KHUH VKRXOG DOVR QRW EH FRQIXVHG ZLWK D VLPLODU WHUP ZKLFK LV XVHG WR FKDPSLRQ WKH LGHRORJ\ RI WHFKQRORJ\ IRU WKH IXWXUH FRH[LVWHQFH EHWZHHQ KXPDQV DQG F\ERUJV LQ ³WUDQVKXPDQLVP´ :.D  ,QVWHDG P\ WHUP ³SRVWKXPDQ´ LQ UHODWLRQ WR ³SRVWKXPDQLVP´ DOVR UHMHFWV³WUDQVKXPDQLVP´ HVSHFLDOO\WKRXJKQRWH[FOXVLYHO\LQUHODWLRQWR WKH SURPLVHV RI WHFKQRORJ\  DQG UHIHUV WR VRPHWKLQJ HOVH DOWRJHWKHU WKDW LVWKHIXWXUHH[WLQFWLRQRIKXPDQVDQGLWVSRVWKXPDQVXFFHVVRUVLQGHHS VSDFHDQGEH\RQGXQWRPXOWLYHUVHV 0\ FULWLTXH RI ³WUDQVKXPDQLVP´ ZDV PRUH H[WHQVLYHO\ HODEURDWHG LQ 6HFRI%(3(²MXVWDVP\FULWLTXHRIGLIIHUHQWIXWXULVWLFVFHQDULRVRI ILFWLRQDODUWLILFLDOLQWHOOLJHQFHLQVFLHQFHILFWLRQZDVJLYHQLQ6HFRI )3+&20 :LWK WKHVH WZR FODULILFDWLRQV LQ PLQG DV VXPPDUL]HG LQ 7DEOH  ²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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



VRPH XSGDWHV ,DOUHDG\ ZRUNHGRXWLQ P\ QXPHURXVERRNV ZKDW WKHVH QHZ FKDOOHQJHV ZLOO EH DQG SURYLGH GLIIHUHQW RULJLQDO YLVLRQV WR PHHW WKHP²HVSHFLDOO\LQUHJDUGWRWKHIXWXUHHYROXWLRQVRIWKHPLQG HJ³WKH VXSHUVHVVLRQ FRPSXWLQJ´ ³PHWDPRUSKLF KXPRU´ ³WKH FRQWUDULDQ SHUVRQDOLW\´³WKHK\SHUPDUWLDOERG\´³WKHK\SHUVH[XDOERG\´³IORDWLQJ FRQVFLRXVQHVV´ ³K\SHUVSDWLDO FRQVFLRXVQHVV´ ³WKLQNLQJ PDFKLQHV´ ³XQIROGLQJ XQFRQVFLRXVQHVV´ ³WKLQNLQJ URERWV´ ³JHQHWLFDOO\ DOWHUHG VXSHULRUEHLQJV´³F\ERUJV´DQGRWKHUV RIQDWXUH HJ³WUDQVGLVFLSOLQDU\ DUFKLWHFWXUH´ ³FUHDWLRQDO FKHPLVWU\´ ³PXOWLODWHUDO VRXQG´ ³UHVHWWOHPHQW JHRORJ\´ ³SRVWFRVPRORJ\´ ³WKHDOWHUDWLRQRI VSDFHWLPH´³WKHFUHDWLRQ RI QHZ PDWWHUHQHUJ\´ ³VHOHFWLYH JHRPHWU\´ DQG WKH OLNH  RI VRFLHW\ HJ ³SDQRUDPLF WUDQVSRUWDWLRQ´ ³F\FOLFDOSURJUHVVLYH PLJUDWLRQ´ ³UHIOHFWLYH FULPLQRORJ\´ ³LQWHUYHQWLYHUHVKDSLQJ JHRJUDSK\´ ³GHWDFKHG JDPEOLQJ´³KHWHURGR[HGXFDWLRQ´³PXOWLIDFHWHGZDUDQGSHDFH´³YLUWXDO RUJDQL]DWLRQV´ GLIIHUHQW YHUVLRQV RI ³SRVWFDSLWDOLVP´ DQG ³SRVW GHPRFUDF\´WKHPRYHPHQWRI³F\FOLFDOSURJUHVVLRQ´DWERWKVWUXFWXUDODQG V\VWHPLF OHYHOV ³DPELYDOHQW WHFKQRORJ\´ DQG VR IRUWK  DQG RI FXOWXUH HJ³LQTXLVLWLYHFXOLQDU\DUW´³LQWHUDFWLYHVHPDQWLFV´³WUDQVGLVFLSOLQDU\ SHUIRUPLQJ DUWV´ ³FRPSDUDWLYHLPSDUWLDO OLWHUDWXUH´ ³SRVWKXPDQ PLQG JDPHV´ ³FRPSDUDWLYHVXEVWLWXWLYH UHOLJLRQ´ ³SRVWHWKLFV´ ³SRVW FLYLOL]DWLRQ´ ³WUDQVIRUPDWLYH DHVWKHWLF H[SHULHQFH´ ³FRQWUDVWLYH PDWKHPDWLFDOORJLF´DQGWKHZKDWQRW LQKLVWRU\ HJ³PXOWLIROGKLVWRU\´ WKH DJH RI ³DIWHUSRVWPRGHUQLW\´  LQ WKH FRQWH[W RI P\ DSSURDFKHV LQ UHODWLRQ WR PHWKRGRORJ\ HJ ³VRSKLVWLFDWHG PHWKRGRORJLDO KROLVP´ ³FULWLFDOGLDOHFWLF IRUPDO VFLHQFH´ ³FRPSOH[ GDWD DQDO\VLV´ HWF  DQG RQWRORJ\ HJ³H[LVWHQWLDOGLDOHFWLFV´³FRQWUDVWLYHUDWLRQDOLW\´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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7RZDUGVWKH3RVW+XPDQ7UDQVILJXUDWLRQ 7KLV³SRVWKXPDQ´WUDQVILJXUDWLRQLQWKHVWXG\RI ZDVWHWRWUDQVFHQG ERWKXVHOHVVQHVVDQGXVHIXOQHVVFDQEHXQGHUVWRRGLQWHUPVRIQLQHJUHDW IXWXUH WUDQVIRUPDWLRQV RI ZDVWH LQ UHODWLRQ WR WKH PLQG QDWXUH VRFLHW\ DQGFXOWXUH²DVH[SODLQHGEHORZ DQGVXPPDUL]HGLQ7DEOH 

1LQH*UHDW)XWXUH7UDQVIRUPDWLRQVRI:DVWH 7KH QLQH JUHDW IXWXUH WUDQVIRUPDWLRQV RI ZDVWH LQ UHODWLRQ WR WKH PLQG QDWXUH VRFLHW\ DQG FXOWXUH  FDQ EH H[SODLQHG KHUHDIWHU ZLWK WKH FDYHDWKRZHYHUWKDWWKHFODVVLILFDWLRQLQWHUPVRIQLQHLVVROHO\DHVWKHWLF DQG XWLOLWDULDQ LOOXVWUDWLYH  DV WKHUH LV QR REMHFWLYH EDVLV WKDW LW PXVW EH FODVVLILHG LQ WHUP RI QLQH DV WKLV LV VRPHWKLQJ WKDW , RIWHQ VWUHVVHG DQG UHSHDWHGLQP\SUHYLRXVERRNVDOEHLWLQWKHFRQWH[WRIGLIIHUHQWWRSLFV  7KH)LUVW*UHDW)XWXUH7UDQVIRUPDWLRQRI:DVWH 7KH ILUVW JUHDW IXWXUH WUDQVIRUPDWLRQ RI ZDVWH LQ WKH SRVWKXPDQ HUD FRQFHUQVZKDW,RULJLQDOO\FDOOQHZJRDOVLQUHODWLRQWRWKHPLQG 7KLV VHDUFK IRU ³QHZ JRDOV´ ZLOO JLYH IXWXUH DGYDQFHG KXPDQV DQG ODWHU WKHLU VXFFHVVRUV QDPHO\ WKH SRVWKXPDQV WKH FDSDFLW\ WR EH PRWLYDWHGWRFRSHZLWKZDVWHLQDZD\WKDWFXUUHQWKXPDQVFDQQRW 7KHUHDUHDOUHDG\VRPHLQGLFDWLRQVWKDWWKHIXWXUHRIZDVWHLVPRYLQJ WRZDUGWKLVGLUHFWLRQ &RQVLGHUIRULOOXVWUDWLRQWKH GLIIHUHQW³JRDOV´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³SRVWKXPDQ´ VXSHUVHVVLRQ RI WKH KXPDQ PLQG IURP WKH FRPELQHG SHUVSHFWLYHV RI WKH PLQG QDWXUH VRFLHW\ DQG FXOWXUH²ZLWK JRRG H[DPSOHV OLNH ³WKH



7KH)XWXUHRI3RVW+XPDQ:DVWH 



VXSHUVHVVLRQ FRPSXWLQJ´ ³PHWDPRUSKLF KXPRU´ ³WKH FRQWUDULDQ SHUVRQDOLW\´³WKHK\SHUPDUWLDOERG\´³WKHK\SHUVH[XDOERG\´³IORDWLQJ FRQVFLRXVQHVV´ ³K\SHUVSDWLDO FRQVFLRXVQHVV´ ³WKLQNLQJ PDFKLQHV´ ³XQIROGLQJ XQFRQVFLRXVQHVV´ ³WKLQNLQJ URERWV´ ³JHQHWLFDOO\ DOWHUHG VXSHULRUEHLQJV´³F\ERUJV´DQGRWKHUV )RU LQVWDQFH PRVW DGYDQFHG IRUPV RI IXWXUH LQWHOOLJHQW OLIH LQ GHHS VSDFHXQWLOPXOWLYHUVHV HJ³IORDWLQJFRQVFLRXVQHVV´ GRQRWQHHGWRKDYH WKH SK\VLFDO ERGLHV WKDW FXUUHQW KXPDQV KDYH DQG WKHUHIRUH GR QRW QHFHVVDULO\SURGXFHWKHNLQGVRIZDVWHWKDWFXUUHQWKXPDQVGR ,QDQ\HYHQWDOOWKHVHDUHMXVWVRPHLOOXVWUDWLYH UHODWLYHO\SULPLWLYH  H[DPSOHVLQRXUWLPHRIFRXUVHEXWWKHLPSRUWDQWSRLQWWRUHPHPEHUKHUH LVWKDWWKHVHDUFKIRUGLIIHUHQWQHZJRDOVZLOOIXUWKHUWUDQVIRUPWKHVWXG\RI ZDVWHDWWKHPRUHDGYDQFHGOHYHOLQWKHSRVWKXPDQIXWXUHWKDWWKHKXPDQ ZRUOGKDVQHYHUNQRZQ 7KH6HFRQG*UHDW)XWXUH7UDQVIRUPDWLRQRI:DVWH 7KHVHFRQGJUHDWIXWXUHWUDQVIRUPDWLRQRIZDVWHLQWKHSRVWKXPDQHUD FRQFHUQVZKDW,RULJLQDOO\FDOOQHZPHDQVLQUHODWLRQWRWKHPLQG 7KLV TXHVW IRU ³QHZ PHDQV´ ZLOO JLYH IXWXUH DGYDQFHG KXPDQV DQG ODWHUWKHLUVXFFHVVRUVQDPHO\WKHSRVWKXPDQVWKHFDSDFLW\WRILQGQRYHO RSWLRQV WR DFKLHYH WKH JRDOV RI ZDVWH WUHDWPHQW LQ D ZD\ WKDW FXUUHQW KXPDQVFDQQRW 7KHUHDUHDOUHDG\VRPHLQGLFDWLRQVWKDWWKHIXWXUHRIZDVWHLVPRYLQJ WRZDUGWKLVGLUHFWLRQ &RQVLGHUIRULOOXVWUDWLRQWKHGLIIHUHQW³PHDQV´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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





VHDUFKIRUGLIIHUHQWQHZPHDQVZLOOIXUWKHUWUDQVIRUPWKHVWXG\RIZDVWHDW WKH PRUH DGYDQFHG OHYHO LQ WKH SRVWKXPDQ IXWXUH WKDW WKH KXPDQ ZRUOG KDVQHYHUNQRZQ 7KH7KLUG*UHDW)XWXUH7UDQVIRUPDWLRQRI:DVWH 7KHWKLUGJUHDWIXWXUHWUDQVIRUPDWLRQRI ZDVWHLQWKHSRVWKXPDQHUD FRQFHUQVZKDW,RULJLQDOO\FDOOQHZFRPSDULVRQVLQUHODWLRQWRQDWXUH 7KLVVHDUFKIRU³QHZFRPSDULVRQV´ZLOOJLYHIXWXUHDGYDQFHGKXPDQV DQG ODWHU WKHLU VXFFHVVRUV QDPHO\ WKH SRVWKXPDQV WKH DELOLW\ WR OHDUQ IURPDQLPDOVSODQWVDQG WKHXQLYHUVHWKURXJKFRPSDULVRQDQGFRQWUDVW DERXWWKHVWXG\RIZDVWHLQDZD\WKDWFXUUHQWKXPDQVFDQQRW 7KHUHDUHDOUHDG\VRPHLQGLFDWLRQVWKDWWKHIXWXUHRIZDVWHLVPRYLQJ WRZDUGWKLVGLUHFWLRQ &RQVLGHU IRU LOOXVWUDWLRQ WKH GLIIHUHQW IRUPV RI FRPSDULVRQ DQG FRQWUDVW VXFK DV DV DOUHDG\ VHHQ LQ WKH KLVWRU\ RI ZDVWH VXFK DV WKH FRPSDULVRQ DQG FRQWUDVW EHWZHHQ KXPDQV DQG URGHQWV LQ FRQWDFW ZLWK LQIHFWHGIOHDV 6HF WKHHIIHFWVRIOLWWHURQERWKKXPDQDQGQDWXUDO HQYLURQPHQWV 6HF   WKH FRPSDULVRQ DQG FRQWUDVW EHWZHHQ XVHG VSDFHFUDIW IUDJPHQWV DQG VPDOO QDWXUDO SDUWLFOHV LQ WKH (DUWK¶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³QHZLQWHJUDWLRQV´ZLOOJLYHIXWXUHDGYDQFHGKXPDQV DQGODWHUWKHLUVXFFHVVRUVQDPHO\WKHSRVWKXPDQVWKHDELOLW\WROLYHDQG



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³SRVW KXPDQ´ DGYHQWXUHV LQWR GLIIHUHQW GLPHQVLRQV RI VSDFHWLPH XQWR PXOWLYHUVHV IURP WKH FRPELQHG SHUVSHFWLYHV RI WKH PLQG QDWXUH VRFLHW\ DQG FXOWXUH²ZLWK JRRG H[DPSOHV OLNH ³WKH DOWHUDWLRQ RI VSDFHWLPH´ 7DEOH  DQG 7DEOH   ³PXOWLYHUVHV´ 7DEOH  DQG 7DEOH   ³K\SHUVSDFH´ 7DEOH  DQG 7DEOH   ³WLPH WUDYHO´ 7DEOH  DQG 7DEOH DQGRWKHUV ,Q DGGLWLRQ LQ P\ SUHYLRXV ERRN WLWOHG 7KH )XWXUH RI 3RVW+XPDQ *HRORJ\  ,DOUHDG\HQYLVLRQHGWKHWKUHHJUHDWIXWXUHWUDQVIRUPDWLRQV RI JHRORJ\ QDPHO\ ³VRODU JHRORJ\´ ³JDODFWLF JHRORJ\´ DQG ³FRVPLF JHRORJ\´ LQ WKH FRQWH[W RI P\ ³UHVHWWOHPHQW WKHRU\ RI JHRORJ\´ LQ WKDW KXPDQV DQG ODWHU SRVWKXPDQV ZLOO H[SORUH DQG PLJUDWH WR RWKHU SODQHWV VRODUV\VWHPVJDOD[LHVDQGFRVPRVLQWKHORQJKDXO 7KHQ LQ DQRWKHU ERRN RI PLQH WLWOHG 7KH )XWXUH RI 3RVW+XPDQ *HRJUDSK\   , OLQNHG WKH WZR ERRNV WRJHWKHU VLQFH JHRJUDSK\ KDV PXFKWROHDUQIURPJHRORJ\ DVLQ³SK\VLFDOJHRJUDSK\´ZKLFKDVDOUHDG\ LQWURGXFHGLQ6HFRI)3+*(2*UHOLHVKHDYLO\RQWKHHDUWKVFLHQFHV  DQGGLVFXVVHGWKHVHDUFKIRU³QHZH[SORUDWLRQV´LQWKHFRQWH[WRIWKHWKUHH IRUPVRIHQYLURQPHQWVRXWVLGHWKHSODQHW(DUWKQDPHO\ZKDW,RULJLQDOO\ FDOOHG ³VRODU JHRJUDSK\´ ³JDODFWLF JHRJUDSK\´ DQG ³FRVPLF JHRJUDSK\´²DV D IXUWKHU HODERUDWLRQ RI WKH WKUHH JUHDW IXWXUH WUDQVIRUPDWLRQVRIJHRORJ\ LQ)3+*(2/  /DWHULQVWLOODQRWKHUERRNRIPLQHWLWOHG7KH)XWXUHRI3RVW+XPDQ 0LJUDWLRQ   , HQYLVLRQHG WKH IXWXUH LQWHJUDWLRQV LQ GLIIHUHQW IRUPV

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





QDPHO\ ZKDW , RULJLQDOO\ FDOOHG ³VRODU PLJUDWLRQ´ ³JDODFWLF PLJUDWLRQ´ ³FOXVWHU\PLJUDWLRQ´³FRVPLFPLJUDWLRQ´DQG³PXOWLYHUVDOPLJUDWLRQ´ $QG WKHQ LQ DQ DGGLWLRQDO ERRN RI PLQH WLWOHG 7KH )XWXUH RI 3RVW +XPDQ 7UDQVSRUWDWLRQ   , HQYLVLRQHG WKH IXWXUH LQWHJUDWLRQV LQ GLIIHUHQW IRUPV QDPHO\ ZKDW , RULJLQDOO\ FDOOHG ³VRODU WUDQVSRUWDWLRQ´ ³JDODFWLF WUDQVSRUWDWLRQ´ ³FOXVWHU\ WUDQVSRUWDWLRQ´ ³FRVPLF WUDQVSRUWDWLRQ´DQG³PXOWLYHUVDOWUDQVSRUWDWLRQ´ 7KLVH[WHQVLRQLVFRQVLVWHQWZLWKP\RWKHUWKHRU\QDPHO\³WKHWKHRU\ RI WKH F\FOLFDO SURJUHVVLRQ RI V\VWHP LQWHJUDWLRQ DQG IUDJPHQWDWLRQ´ LQ )&'  ²DWWKHVRFLDOV\VWHPLFOHYHO DVDOUHDG\FODULILHGLQ6HF DQGVKRZQEHORZ   /RFDOĺ5HJLRQDOĺ*OREDOĺ6RODUĺ *DODFWLFĺ&OXVWHU\«ĺ0XOWLYHUVDO  $OO WKHVH DUH MXVW VRPH LOOXVWUDWLYH UHODWLYHO\ SULPLWLYH  H[DPSOHV LQ RXU WLPH RI FRXUVH EXW WKH LPSRUWDQW SRLQW WR UHPHPEHU KHUH LV WKDW WKH VHDUFK IRU GLIIHUHQW QHZ LQWHJUDWLRQV ZLOO IXUWKHU WUDQVIRUP ZDVWH DW WKH PRUH DGYDQFHG OHYHO LQ WKH SRVWKXPDQ IXWXUH WKDW WKH KXPDQ ZRUOG KDV QHYHUNQRZQ )RU LQVWDQFH PRVW DGYDQFHG IRUPV RI IXWXUH LQWHOOLJHQW OLIH LQ GHHS VSDFH XQWLO PXOWLYHUVHV HJ ³IORDWLQJ FRQVFLRXVQHVV´ ³K\SHUVSDWLDO FRQVFLRXVQHVV´ ³XQIROGLQJ XQFRQVFLRXVQHVV´ HWF  ZLOO QHHG WR DGDSW WR GLIIHUHQW HQYLURQPHQWV ZLWK WKH VXEVHTXHQW LPSDFWV RQ WKH XVHOHVVQHVV DQGXVHIXOQHVVRIWKHLURZQYHUVLRQVRIZDVWHLQWKHGLVWDQWIXWXUH 7KH)LIWK*UHDW)XWXUH7UDQVIRUPDWLRQRI:DVWH 7KH ILIWK JUHDW IXWXUH WUDQVIRUPDWLRQ RI ZDVWH LQ WKH SRVWKXPDQ HUD FRQFHUQVZKDW,RULJLQDOO\FDOOQHZSUD[HVLQUHODWLRQWRVRFLHW\ 7KLV VHDUFK IRU ³QHZ SUD[HV´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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



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³QHZWHFKQRORJLHV´ZLOOJLYHIXWXUHDGYDQFHGKXPDQV DQGODWHUWKHLUVXFFHVVRUVQDPHO\WKHSRVWKXPDQVWKHDELOLW\WRFRPHXS ZLWK GLIIHUHQW WHFKQLTXHV PDWHULDOV DQG H[SHULPHQWV IRU WKH VWXG\ RI ZDVWHLQDZD\WKDWFXUUHQWKXPDQVFDQQRW 7KHUHDUHDOUHDG\VRPHLQGLFDWLRQVWKDWWKHIXWXUHRIZDVWHLVPRYLQJ WRZDUGWKLVGLUHFWLRQ &RQVLGHUIRULOOXVWUDWLRQWKHXVHRIGLIIHUHQWWHFKQRORJLHVDVDOUHDG\ VHHQLQWKHKLVWRU\RIZDVWHVXFKDVWKHLQYHQWLRQRIDQWLELRWLFVDJDLQVWWKH EXERQLF SODJXH 6HF   WKH WHFKQLTXH RI ³PDLOEDFN PHGLFDO ZDVWH GLVSRVDO´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

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





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³QHZ VWUDWLILFDWLRQV´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¶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



7KH)XWXUHRI3RVW+XPDQ:DVWH 



$OO WKHVH DUH MXVW VRPH LOOXVWUDWLYH UHODWLYHO\ SULPLWLYH  H[DPSOHV LQ RXU WLPH RI FRXUVH EXW WKH LPSRUWDQW SRLQW WR UHPHPEHU KHUH LV WKDW WKH HPHUJHQFHRIQHZVWUDWLILFDWLRQVZLOOIXUWKHUWUDQVIRUPWKHVWXG\RIZDVWH DWWKHPRUHDGYDQFHGOHYHOLQWKHSRVWKXPDQIXWXUHWKDWWKHKXPDQZRUOG KDVQHYHUNQRZQ 7KH(LJKWK*UHDW)XWXUH7UDQVIRUPDWLRQRI:DVWH 7KHHLJKWKJUHDWIXWXUHWUDQVIRUPDWLRQRIZDVWHLQWKHSRVWKXPDQHUD FRQFHUQVZKDW,RULJLQDOO\FDOOQHZVXEILHOGVLQUHODWLRQWRFXOWXUH 7KLV VHDUFK IRU ³QHZ VXEILHOGV´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³QHZ LQWHUSUHWDWLRQV´ ZLOO JLYH IXWXUH DGYDQFHG KXPDQVDQGODWHUWKHLUVXFFHVVRUVQDPHO\WKHSRVWKXPDQVWKHDELOLW\WR FRPHXSZLWKGLIIHUHQWHYDOXDWLRQVDQGYLHZVDERXWWKHVWXG\RIZDVWHLQD ZD\WKDWFXUUHQWKXPDQVFDQQRW

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7KHUHDUHDOUHDG\VRPHLQGLFDWLRQVWKDWWKHIXWXUHRIZDVWHLVPRYLQJ WRZDUGWKLVGLUHFWLRQ &RQVLGHUIRULOOXVWUDWLRQWKHGLIIHUHQWLQWHUSUHWDWLRQVDVDOUHDG\VHHQ LQ WKH KLVWRU\ RI ZDVWH VXFK DV WKH YLHZ DERXW WKH EXERQLF SODJXH DV D ELRORJLFDO ZHDSRQ 6HF   WKH YLHZ RI FOLQLFDO ZDVWH GLVSRVDO DV DQ HQYLURQPHQWDOFRQFHUQ 6HF WKHYLHZRILPSRVLQJILQHVRQOLWWHULQJ LQGLYLGXDOV 6HF   WKH YLHZ RI VSDFH GHEULV WR EH FOHDQHG XS 6HF   GLIIHUHQW FRQWHQWLRXV YLHZV DERXW WKH GHILQLWLRQ RI ³KD]DUGRXV´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

(QRUPRXV,PSOLFDWLRQV 7KHVH QLQH JUHDW IXWXUH WUDQVIRUPDWLRQV RI WKH VWXG\ RI ZDVWH KDYH HQRUPRXV LPSOLFDWLRQV IRU VRPH VRXOVHDUFKLQJ TXHVWLRQV ZKLFK KDYH FKDOOHQJHGVRPHRIWKHEHVWPLQGVLQWKHKLVWRU\RIZDVWH )RU LOOXVWUDWLRQ FRQVLGHU WKH IROORZLQJ IXQGDPHQWDO TXHVWLRQV LQ WKH VWXG\RIZDVWH  ‡ ([ WR ZKDW H[WHQW DUH ZDVWH PLQLPL]DWLRQ DQG ZDVWH GLVSRVDO UHDOO\ IHDVLEOHDQGGHVLUDEOH LQWKHFRQWH[WRIXVHIOHVVQHVV " ‡([WRZKDWH[WHQWDUHZDVWHUHXVHZDVWHUHF\FOHDQGZDVWHWRHQHUJ\ UHDOO\IHDVLEOHDQGGHVLUDEOH LQWKHFRQWH[WRIXVHIXOQHVV " ‡([KRZH[DFWO\ZLOOWKHXVHOHVVHQVVDQGXVHIXOQHVVRIZDVWHEH WUDQVILJXUHG LQ IXWXUH KLVWRU\ IURP WKH SHUVSHFWLYHV RI WKH PLQG QDWXUHVRFLHW\DQGFXOWXUH"



7KH)XWXUHRI3RVW+XPDQ:DVWH 



4XHVWLRQV DQG GLVDJUHHPHQWV OLNH WKLV ZLOO UHFHLYH QHZ DQVZHUV LQ WKH IXWXUHKLVWRU\RIDGYDQFHGKXPDQDQGODWHUSRVWKXPDQZDVWHDWOHDVWLQ WZRIXQGDPHQWDOZD\V 7KH ILUVW IXQGDPHQWDO ZD\ LV WR H[DPLQH WKH UHODWLRQVKLSV EHWZHHQ XVHOHVVQHVV DQG XVHIXOQHVV²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³IORDWLQJFRQVFLRXVQHVV´³K\SHUVSDWLDOFRQVFLRXVQHVV´³XQIROGLQJ XQFRQVFLRXVQHVV´ HWF  GR QRW QHHG WR KDYH WKH SK\VLFDO ERGLHV WKDW FXUUHQWKXPDQVKDYHDQGWKHUHIRUHGRQRWSURGXFHWKHNLQGVRIZDVWHWKDW FXUUHQW KXPDQV GR $QG WKH VHFRQG LV WKDW WKHVH DGYDQFHG IRUPV RI LQWHOOLJHQWOLIHZLOODOVRQHHGWRDGDSWWRGLIIHUHQWDOLHQHQYLURQPHQWVZLWK WKH VXEVHTXHQW LPSDFWV RQ WKH XVHOHVVQHVV DQG XVHIXOQHVV RI WKHLU RZQ YHUVLRQVRIZDVWHLQWKHGLVWDQWIXWXUH ,Q IDFW WKH FXUUHQW SURGXFWLRQ RI VSDFH GHEULV RU VSDFH ZDVWH  IRU VSDFH H[SORUDWLRQ LQ WKH (DUWK µV RUELW DQG D ELW EH\RQG DV GHVFULEHG LQ 6HF LVRQO\DVPDOOVWHSLQWKHGLUHFWLRQRIWKHODUJHUIXWXUHRIZDVWH LQ UDGLFDOO\ GLIIHUHQW HQYLURQPHQWV LQ RXWHU VSDFH DQG EH\RQG XQWR PXOWLYHUVHVWKDWWKH(DUWKOLQJVKDYHQHYHUNQRZQ /HVWDQ\PLVXQGHUVWDQGLQJRFFXUVRQHPXVWUHPHPEHUWKDWWKHVHQLQH JUHDWIXWXUHWUDQVIRUPDWLRQVRIWKHVWXG\RIZDVWHZLOOEULQJQHLWKHUXWRSLD QRUG\VWRSLDUHJDUGOHVVRIWKHFXUUHQWSURJUHVVDERXWGLIIHUHQWVROXWLRQVWR VSDFHGHEULV LQ6HF ²DVWKLVLVVRPHWKLQJWKDW,KDYHZDUQHGWLPH DQGDJDLQLQDOORIP\SUHYLRXVERRNVDOPRVWYHUEDWLP

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





,QDQ\HYHQWDV,VRRIWHQVWUHVVHGLQP\SUHYLRXVERRNVLWLVQRWXS WRXVFXUUHQWKXPDQVWRGHFLGHZKHWKHURUQRWRUWRZKDWH[WHQWWKHSRVW KXPDQIXWXUHRIZDVWHZLOOEHIRUEHWWHUDQGIRUZRUVHEHFDXVHLWZLOOEH MXGJHG E\ WKH YDOXHV DQG EHOLHIV RI IXWXUH SRVWKXPDQV RQ HDUWK DQG LQ GHHSVSDFHXQWRPXOWLYHUVHV²LQDZD\WKDWWKHHQWLUHKLVWRU\RIWKHKXPDQ ZRUOGKDVQHYHUNQRZQ 7KXVLVWKHIXWXUHRIZDVWH²DQGRILWVSRVWKXPDQIDWH                                 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH6RSKLVWLFDWHG0HWKRGRORJLFDO+ROLVP 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡ ³0\ PHWKRGRORJLFDO KROLVP LPSOLHV WKH SDUWLDOLW\WRWDOLW\ SULQFLSOH LQ WKHRQWRORJ\RIH[LVWHQWLDOGLDOHFWLFV VHHWKHWDEOHRQWKHSDUWLDOLW\WRWDOLW\ SULQFLSOHIRUVXPPDU\ ZKLFKLVDJDLQVWWKHYDULHWLHVRI D UHGXFWLRQLVP DQG E  UHYHUVHUHGXFWLRQLVP LQ UHODWLRQ WR L  FRQFHSW LL  WKHRU\ LLL  PHWKRGRORJ\DQG LY RQWRORJ\´ )&   ‡ ³>0@\ PHWKRGRORJLFDO KROLVP KHUH LV QRW RSSRVHG WR PHWKRGRORJLFDO LQGLYLGXDOLVP EXW LQFOXGHV LW DQG IRU WKDW PDWWHU RWKHU  PHWKRGRORJLHV WRR «´ )3+&  )RU WKLV UHDVRQ DQG RWKHUV WRR DV VXPPDUL]HG KHUHDIWHU  P\ YHUVLRQ RI PHWKRGRORJLFDO KROLVP LV VRSKLVWLFDWHG²QRW YXOJDUDVVRPHWLPHVXVHGE\LQDSWVFKRODUVXVLQJWKHVDPHWHUP )&   ‡³>0@\PHWKRGRORJLFDOKROLVPGRHVQRWGHPRFUDWLFDOO\SUHVXPHWKDWDOO OHYHOVDUHHTXDOO\YDOLGDVDOOOHYHOVDUHQRWFUHDWHGHTXDO,QRWKHUZRUGV LQUHODWLRQ WRLVVXH;OHYHO $ PD\EH PRUHUHOHYDQWWKDQOHYHO%EXWLQ UHODWLRQWR0@\PHWKRGRORJLFDOKROLVPGRHVQRWPDNHDQ\DSULRULSRVWXODWLRQWKDW WKHUHPXVWEHDGHILQLWH DQGIRUWKDWPDWWHULQGHILQLWH QXPEHURIOHYHOV´ LQDQ\DQDO\VLV )3+& 1RUGRHVLWGRJPDWLFDOO\UHTXLUHWKDWWKHUHPXVW EHDFHUWDLQFRPELQDWLRQRIOHYHOVRIDQDO\VLVLQDJLYHQLQTXLU\ )&   ‡ ³>0@HWKRGRORJLFDO KROLVP LQ P\ XVDJH GRHV QRW DVVXPH WKDW DOO OHYHOV«FDQ QHFHVVDULO\EHLQWHJUDWHGVLQFH PHWKRGRORJLFDOKROLVPLVQRW DLPHGWRVHDUFKIRUWKHKRO\JUDLORI DQLQWHJUDOWKHRU\«  DVLVWKHFDVH IRU :LOEHU  ,Q RWKHU ZRUGV LW DOORZV WKDW VRPHWLPHV VRPH OHYHOV PD\ H[SHULHQFH LUUHGXFLEOH JDSV EHWZHHQ WKHP WR EH XQGHUVWRRG DW EHVW DV HPSLULFDOFRUUHODWLRQVQRWDVFDXVDOUHODWLRQV«´ )3+&   ‡ ³>'@LIIHUHQW OHYHOV PD\ RYHUODS DQG HYHQ LQWHUDFW ZLWK HDFK RWKHU LQ D JLYHQFRQWH[W EXWVRPHWLPHVPD\QRW DQGWKHIDFWWKDW,HYHQSURSRVHG GLIIHUHQW ZD\V RI UHFODVVLI\LQJ WKH OHYHOV ZKHQHYHU QHHGHG  LQ )'& UHLQIRUFHV WKLV SRLQW«7KH GXDO GDQJHU KHUH LV HLWKHU IRUFHIXOO\ PDNLQJ GLIIHUHQW OHYHOV LQWHUDFW ZKHQ WKH\ DUH MXVW GLIIHUHQW RU PHWDSKRULFDOO\ VSHDNLQJ DSSOHV DQG RUDQJHV  RU  LQDSSURSULDWHO\ LJQRULQJ WKHLU LQWHUDFWLRQVZKHQVRPHVLWXDWLRQVLQVWHDGUHTXLUHWKHP´ )3+&   ‡ ³>7@R XQGHUVWDQG GLIIHUHQW OHYHOV IURP WKHLU RZQ XQLTXH  SHUVSHFWLYHV DV UHTXLUHG E\ P\ PHWKRGRORJLFDO KROLVP  LV QRW WKH VDPH DV WU\LQJ  WR UHGXFH WKHP WR D SUHIHUUHG OHYHO LQ WKH SURFHVV RI OHDUQLQJ IURP RWKHU OHYHOV7KLVVHFRQGNLQGRIPXOWLGLVFLSOLQDU\ZRUNLVQRWJHQXLQHDQGGRHV QR MXVWLFH WR WKH XQLTXH FRPSOH[LWLHV DQG PHULWV LQKHUHQW DW HDFK OHYHO´ )3+&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH          



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH6RSKLVWLFDWHG0HWKRGRORJLFDO+ROLVP 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡ ³>0\@ PHWKRGRORJLFDO KROLVP ZDONV D ILQH OLQH EHWZHHQ WKH DUWLILFLDO FODVVLILFDWLRQ VHSDUDWLRQ RIOHYHOVDQGWKHVLPXOWDQHRXVLQFRUSRUDWLRQRI WKHP LI RQO\ IRU WKH VDNH RI KXPDQ VFKRODUO\ HQGHDYRU ,W VKRXOG EH UHPLQGHG WKDW QDWXUH GRHV QRW LPSRVH XSRQ  LWVHOI WKH DFDGHPLF FODVVLILFDWLRQ RI WKH OHYHOV RI DQDO\VLV DV KXPDQV KDYH 7KH HQWHUSULVH RI FODVVLILFDWLRQLVWKHUHIRUHDQWKURSRFHQWULF´ )3+&   ‡ ³>0@\ PHWKRGRORJLFDO KROLVP DGYRFDWHV QHLWKHU HSLVWHPLF VXEMHFWLYLVP QRU HSLVWHPLF QRQVXEMHFWLYLVP HJ UHDOLVP LGHDOLVP DQG KLVWRULFLVP  QHLWKHUHSLVWHPLFUHODWLYLVP HJVXEMHFWLYLVPKLVWRULFLVP QRUHSLVWHPLF DEVROXWLVP HJ UHDOLVP SRVLWLYLVP  QHLWKHU HSLVWHPLF UHGXFWLRQLVP QRU HSLVWHPLF HPHUJHQFLVP DQG QHLWKHU HSLVWHPLF REMHFWLYLVP HJ UHDOLVP LGHDOLVP  QRU HSLVWHPLF KLVWRULFLVP«1HLWKHU GRHV PHWKRGRORJLFDO KROLVPLQP\XVDJHDFFHSWWKHIDOVHPHWDFRQFHSWXDOGLFKRWRP\EHWZHHQ QRPLQDOLVP DQG UHDOLVP«7KHVH IDOVH GLFKRWRPLHV«DUH WR EH WUDQVFHQGHG,QRWKHUZRUGVPHWKRGRORJLFDOKROLVPGRHVQRWIXOO\DFFHSW HSLVWHPLFUHDOLVPSRVLWLYLVP DIRUPRIHSLVWHPLFLGHDOLVP KLVWRULFLVP VXEMHFWLYLVPDQGUHGXFWLRQLVPLQHSLVWHPRORJ\DQGSKLORVRSK\RIVFLHQFH EXW OHDUQV IURP WKH VWUHQJWKV DQG ZHDNQHVVHV RI DOO RI WKH RSSRVLQJ DSSURDFKHVZLWKRXWVLGLQJZLWKDQ\RIWKHP«´ )3+&   ‡ ³6RSKLVWLFDWHG PHWKRGRORJLFDO KROLVP LV VXEMHFW WR WKH FRQVWUDLQWV DV LPSRVHGE\WKHV\QWD[RIH[LVWHQWLDOGLDOHFWLFV HJWKHSDUWLDOLW\WRWDOLW\ SULQFLSOH DQG WKH SUHGLFWDELOLW\XQSUHGLFWDELOLW\ SULQFLSOH  (YHQ LQ SUHGLFWDELOLW\ RXWFRPHV DUH VXEMHFW WR XQFHUWDLQW\ WKH GHJUHH RI ZKLFK YDULHVIURPFDVHWRFDVH´ )&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH          

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH6RSKLVWLFDWHG0HWKRGRORJLFDO+ROLVP 3DUW,9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡³6RSKLVWLFDWHGPHWKRGRORJLFDOKROLVP²ZKHQDSSOLHGHVSHFLDOO\WKRXJK QRW H[FOXVLYHO\ DV LOOXVWUDWHG LQ P\ QXPHURXV ZRUNV²FDQ HQULFK WKH XQGHUVWDQGLQJRIUHDOLW\LQVRPHGLVWLQFWLYHZD\V+HUHDUHWKUHHH[DPSOHV DVUHYHDOHGLQHDFKRIP\ERRNV ´ )3+&7)3+/  ²³)LUVWO\ LW SURYLGHV D FRPSUHKHQVLYH DQDO\VLV RI D VXEMHFW PDWWHU IURP ZKLFK PXFK FDQ EH OHDUQHG DERXW UHDOLW\´ ³ERWK LQ UHODWLRQ WR WKHSHUVSHFWLYHVRIWKH PLQG QDWXUH VRFLHW\DQGFXOWXUHDQG DOVRLQ UHODWLRQWRDQHZFODVVLILFDWLRQRIWKHVXEMHFWPDWWHU´ ²³6HFRQGO\ LW VXJJHVWV VRPH YLVLRQV RI WKH IXWXUH LQ UHODWLRQ WR WKH VXEMHFWPDWWHULQTXHVWLRQ´ ²³$QG WKLUGO\ LW SURSRVHV VRPH LQVLJKWV RQ PHWDWKHRU\ HJ PHWKRGRORJ\DQGRQWRORJ\ LQJHQHUDO²ZLWKWKHFOHDUXQGHUVWDQGLQJ KRZHYHURIWKHGLOHPPDRIVSHFLILFYVJHQHUDORQWRORJ\ DVVKRZQLQ WKH WDEOH RQ WKH V\QWD[ RI H[LVWHQWLDO GLDOHFWLFV LQ WKH FRQWH[W RI WKH GLOHPPD RI RQWRORJ\  )RU WKLV YHU\ UHDVRQ DOO RI WKHVH ZD\V DUH LPSRUWDQWZLWKRXWUHGXFLQJRQHLQWRWKHDQDO\VLVRIDQRWKHU´  ‡ ³,QWKHHQG P\ PHWDWKHRU\ ERWKVRSKLVWLFDWHG PHWKRGRORJLFDOKROLVP DQG H[LVWHQWLDO GLDOHFWLFV  VHUYHV DV D IRXQGDWLRQ WR XQLI\ DOO GRPDLQV RI NQRZOHGJH LQWR DQ XQLILHG WKHRU\ RI HYHU\WKLQJ E\ ZD\ RI VRPH RQWRORJLFDO SULQFLSOHV DQG WKH FRPSUHKHQVLYH SHUVSHFWLYHV RI WKH PLQG QDWXUH VRFLHW\ DQG FXOWXUH  7KLV LV VR ZLWKRXW FRPPLWLQJ WKH VLQV RI UHGXFWLRQLVP DQG UHYHUVHUHGXFWLRQLVP DV RIWHQ VHHQ LQ PDQ\ KROLVWLF DSSURDFKHVZLWKWKHIDGRIV\VHPVDSSURDFK²EHLWDERXWV\VWHPVWKHRU\ FKDRV WKHRU\ FRPSOH[LW\ WKHRU\ RU HOVH²DV D PRVW UHFHQW QRWRULRXV H[DPSOH ZKLFK,GHEXQNHGLQ7KH)XWXUHRI&RPSOH[LW\DQGDOVRLQ7KH )XWXUH RI 3RVW+XPDQ )RUPDO 6FLHQFH  0\ GLVWLQFWLYH DSSURDFK PDNHV JRRGXVHRIGLIIHUHQWVFKRROVRIWKRXJKWZLWKRXWIDYRULQJDQ\RIWKHPQRU WU\LQJWRLQWHJUDWHWKHP DVWKH\DUHQRWQHFHVVDULO\FRPSDWLEOHZLWKHDFK RWKHU VRDVWRDGMXVWIRUVXEMHFWLYLW\GLYHUVLW\FRQIOLFWDQGFRPSOH[LW\ IRU H[DPSOH ,Q WKLV VHQVH WKH ZRUG ³XQLILHG´ GRHV QRW KDYH WR PHDQ LQWHJUDWLYHDSSURDFKLQDQDUURZVHQVHQRUV\VWHPVDSSURDFKLQDEURDG RQHERWKRIZKLFK,UHMHFWZKLOHOHDUQLQJIURPWKHP´ )3+)6)3+6  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFHV $ VXPPDU\ RI 6HF LQ )3+&²DQG DOVR IURP %11 )3+67 $/')&)3+&7DQGWKHUHVWRIDOORWKHUERRNVRIPLQH6HHWKHERRNV IRUPRUHGHWDLO



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KH3DUWLDOLW\7RWDOLW\3ULQFLSOH ²7KHSDUWLDOLW\WRWDOLW\SULQFLSOHLQWKHRQWRORJ\RIH[LVWHQWLDOGLDOHFWLFV WDUJHWVDJDLQVWWKHYDULHWLHVRIUHGXFWLRQLVPDQGUHYHUVHUHGXFWLRQLVP DVDOUHDG\ZRUNHGRXWLQP\SUHYLRXVERRNV 

 ‡$JDLQVWWKH9DULHWLHVRI5HGXFWLRQLVP ²&RQFHSWXDO5HGXFWLRQLVP ‡ 6RPH LOOXVWUDWLYH LQVWDQFHV LQYROYH P\ULDG GXDOLWLHV OLNH PLQG YV ERG\ VHOI YV ZRUOG GHPRFUDF\ YV QRQGHPRFUDF\ DQG WKH OLNH DVDOUHDG\DGGUHVVHGLQ)+&)3+&DQG%'3'IRULQVWDQFH  ²7KHRUHWLFDO5HGXFWLRQLVP ‡ $ IDVFLQDWLQJ FDVH VWXG\ FRQFHUQV ZKDW , RULJLQDOO\ FDOOHG ³WKH IRXQGDWLRQ IDOODF\´ LQ )3+67 LQ DQ\ DWWHPSW WR QDLYHO\ XQGHUVWDQG VSDFHWLPH IURP WKH SK\VLFDO SHUVSHFWLYH DV WKH IRXQGDWLRQ DQG FRQVHTXHQWO\ WR GDQJHURXVO\ GLVPLVV RWKHU SHUVSHFWLYHV ‡ ,Q )$( , HODERUDWHG IXUWKHU WKHVH YHUVLRQV RI UHGXFWLRQLVP LQ WKH OLWHUDWXUH RQ DHVWKHWLFV HJ IRUP YV FRQWHQW UHSUHVHQWDWLRQ YV H[SUHVVLRQFULWLFVYVDUWLVWVDQGH[WHUQDOLVPYVLQWHUQDOLVP  ‡ ,Q ),$ , UHYHDOHG RWKHU IRUPV RI UHGXFWLRQLVP LQ WKH OLWHUDWXUH RQ LQIRUPDWLRQDUFKLWHFWXUH HJWKHFRQVWUXFWLYLVWDUJXPHQW  ‡,Q)3+8,VKRZHGWKHSHUVLVWHQWOHJDF\RIUHGXFWLRQLVPWKLVWLPH LQWKHOLWHUDWXUHRQDQRPDORXVH[SHULHQFH HJWKHREVHVVLRQZLWK SK\VLFV FKHPLVWU\ DQG ELRORJ\ IRU H[SODLQLQJ DQRPDORXV H[SHULHQFH  ‡,Q)3+(,H[DPLQHGDQRWKHUFDVHRIUHGXFWLRQLVPLQDFWLRQLQWKH FRQWH[W RI HQJLQHHULQJ HJ WHFKQLFDO FRQVWUDLQWV YV QRUPDWLYH FRQVWUDLQWV  ‡ ,Q )3+00 , HODERUDWHG RQH PRUH YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQ WR WKH WKUHH GRPDLQV RI FRPPXQLFDWLRQ HJ WKH FRPSHWLQJYLHZVRQVHQGLQJFRQQHFWLQJDQGUHFHLYLQJ  ‡,Q)3+&7,H[SORUHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR LQYHQWLRQDQGLQQRYDWLRQ HJWKHELRSV\FKRORJLFDODUJXPHQWYV WKHVRFLRFXOWXUDODUJXPHQWV  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH  

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$JDLQVWWKH9DULHWLHVRI5HGXFWLRQLVP FRQW G  ²7KHRUHWLFDO5HGXFWLRQLVP FRQW¶G  ‡,Q)3+*,LGHQWLI\DQRWKHUYHUVLRQRIUHGXFWLRQLVPLQ UHODWLRQWR LQILQLW\ V\PPHWU\ DQG GLPHQVLRQDOLW\ HJ WKH (XFOLGHDQ DUJXPHQWYVWKHQRQ(XFOLGHDQDUJXPHQWV  ‡,Q)3+83,DQDO\]HGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR GHQVLW\ DQG YRLG HJ WKH HQJLQHHULQJ DUJXPHQW DQG WKH HFRORJ\ DUJXPHQW  ‡,Q)3+/,H[DPLQHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR VWUXFWXUH DQG FRQWH[W HJ WKH VWUXFWXUDOLVW DUJXPHQW DQG WKH FRQWH[WXDOLVWDUJXPHQW  ‡,Q3)+2,H[SORUHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR FRPPXQFDWLRQGHFLVLRQPDNLQJDQGOHDGHUVKLS HJWKHUDWLRQDO V\VWHPDUJXPHQWYVWKHQDWXUDOV\VWHPDUJXPHQW  ‡,Q3)+0$,UHYHDOHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR WKH PDUWLDO ERG\ DQG VSLULW HJ WKH VSLULWXDO DUJXPHQW YV WKH PDWHULDOLVWDUJXPHQWYVWKHGHIHQVLYHDUJXPHQW  ‡,Q3)+6,DQDO\]HGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR WKH VH[XDO ERG\ DQG VSLULW HJ WKH QDWXUDOLVW DUJXPHQW YV WKH FRQVWUXFWLYLVWDUJXPHQW  ‡,Q3)+/$:,H[DPLQHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WRODZ HJWKHQHFHVVLW\DUJXPHQWYVWKHFRQWHQJHQF\DUJXPHQW  ‡,Q)3+:3,VKRZHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR ZDU DQG SHDFH HJ WKH DJJUHVVLYLVW DUJXPHQW YV WKH SDFLILVW DUJXPHQW  ‡,Q%(3(,DQDO\]HGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR PRUDOLW\DQGLPPRUDOLW\ HJWKHREMHFWLYLVWDUJXPHQWYVWKHQRQ REMHFWLYLVWDUJXPHQWYVWKHVNHSWLFDODUJXPHQW  ‡,Q%&26,H[DPLQHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR WKHFRQWHVWHGEHJLQQLQJVDQGVSHFXODWLYHHQGVRIWKHXQLYHUVH HJ WKH VFLHQWLILFDUJXPHQW YVWKHUHOLJLRXVDUJXPHQWYVWKH HVRWHULF DUJXPHQWYVWKHPHWDSK\VLFDODUJXPHQW  ‡ ,Q )3+3 , VKRZ DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQ WR QRUPDOLW\DQGDEQRUPDOLW\ HJWKHQDWXUDODUJXPHQWYVWKHVRFLDO DUJXPHQWYVWKHFXOWXUDODUJXPHQWYVWKHPHQWDODUJXPHQW  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$JDLQVWWKH9DULHWLHVRI5HGXFWLRQLVP FRQW G  ²7KHRUHWLFDO5HGXFWLRQLVP FRQW¶G  ‡ ,Q )3+*(2/ , VFUXWLQL]HG DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQWRVWDWLFVDQGG\QDPLFV HJWKHFDWDVWURSKHDUJXPHQWYV WKHXQLIRUPLW\DUJXPHQWYVWKHUHYLVLRQDUJXPHQW  ‡ ,Q )3+&+(66 , VKRZHG DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQ WR WDFWLFV DQG VWUDWHJ\ HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡,Q)3+5,UHYHDOHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR VHFXODUQHVV DQG VDFUHGQHVV HJ WKH FULWLFDO DUJXPHQW YV WKH VNHSWLFDODUJXPHQWYVWKHWKHLVWDUJXPHQW  ‡,Q)3+('8,H[DPLQHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WR WHDFKLQJ DQG OHDUQLQJ HJ WKH WHDFKHUFHQWHUHG DUJXPHQW YV WKHVWXGHQWFHQWHUHGDUJXPHQWYVWKHEDODQFHGDUJXPHQW  ‡,Q)3++,H[SORUHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR MRNLQJ DQG ODXJKLQJ HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQWYVWKHFXOWXUDODUJXPHQWYVWKHPHQWDODUJXPHQW  ‡,Q)3+$,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR VRXQG DQG VLOHQFH HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQWYVWKHFXOWXUDODUJXPHQWYVWKHPHQWDODUJXPHQW  ‡,Q)3+*$0,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WR ULVN DQG FDXWLRQ HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQWYVWKHFXOWXUDODUJXPHQWYVWKHPHQWDODUJXPHQW  ‡ ,Q )3+&20 , ZRUNHG RXW DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQ WR KDUGZDUH DQG VRIWZDUH HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡,Q)3+/,7,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WRILFWLRQDQGQRQILFWLRQ HJWKHQDWXUDODUJXPHQWYVWKHVRFLDO DUJXPHQWYVWKHFXOWXUDODUJXPHQWYVWKHPHQWDODUJXPHQW  ‡ ,Q )3+&+(0 , SURSRVHG DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQWRVXEVWDQFHVDQGWKHLUFKDQJHV HJWKHQDWXUDODUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH 

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW,9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$JDLQVWWKH9DULHWLHVRI5HGXFWLRQLVP FRQW G  ²7KHRUHWLFDO5HGXFWLRQLVP FRQW¶G  ‡,Q)3+'$,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WRTXDQWLWDWLYHDQGTXDOLWDWLYHUHVHDUFK HJWKHQDWXUDODUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡ ,Q )3+*(2* , SURSRVHG DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQ WR HQYLURQPHQWV DQG WKHLU LQWHUDFWLRQV HJ WKH QDWXUDO DUJXPHQWYVWKHVRFLDODUJXPHQWYVWKHFXOWXUDODUJXPHQWYVWKH PHQWDODUJXPHQW  ‡,Q)3+3$,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQWR WKHERG\DQGLWVSUHVHQFH HJWKHQDWXUDODUJXPHQWYVWKHVRFLDO DUJXPHQWYVWKHFXOWXUDODUJXPHQWYVWKHPHQWDODUJXPHQW  ‡,Q)3+6(0,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WR LQWHUQDOLW\ DQG H[WHUQDOLW\ HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡ ,Q )3+$5&+ , SURSRVHG DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQ WR IRUP DQG IXQFWLRQ HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡ ,Q )3+&5,0 , SURSRVHG DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQ WR KHURHV DQG YLOODLQV HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡,Q)3++,67,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WR XQLYHUVDOLW\ DQG UHODWLYLW\ HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡,Q)3+0,*,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WR6DPHQHVV2WKHUQHVVDQGLGHQWLW\ HJWKHQDWXUDODUJXPHQWYV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH   



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$JDLQVWWKH9DULHWLHVRI5HGXFWLRQLVP FRQW G  ²7KHRUHWLFDO5HGXFWLRQLVP FRQW¶G  ‡ ,Q )3+75$1 , SURSRVHG DQRWKHU YHUVLRQ RI UHGXFWLRQLVP LQ UHODWLRQWRQHWZRUNVDQGRSHUDWLRQV HJWKHQDWXUDODUJXPHQWYV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡,Q)3+&$,SURSRVHGDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WR LQJUHGLHQWV DQG WHFKQLTXHV HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ‡$QGLQ)3+:,SURSRVHDQRWKHUYHUVLRQRIUHGXFWLRQLVPLQUHODWLRQ WR XVHOHVVQHVV DQG XVHIXOQHVV HJ WKH QDWXUDO DUJXPHQW YV WKH VRFLDO DUJXPHQW YV WKH FXOWXUDO DUJXPHQW YV WKH PHQWDO DUJXPHQW  ²0HWKRGRORJLFDO5HGXFWLRQLVP ‡ $ JRRG LQVWDQFH FRQFHUQV WKH GHEDWH EHWZHHQ GLIIHUHQW YHUVLRQV RI TXDOLWDWLYH DQG TXDQWLWDWLYH PHWKRGV DV DOUHDG\ DQDO\]HG LQ )& DQGDOVR)+& ,Q)3+0/,H[DPLQHGVLPLODUUHGXFWLRQLVPWKLV WLPH LQ WKH OLWHUDWXUH RQ PDWKHPDWLFDO ORJLF HJ WKH REVHVVLRQ ZLWKFRQVLVWHQF\VRXQGQHVVDQGFRPSOHWHQHVV $QGLQ)3+)6, DOVR H[SORUHG WKH SUREOHPV RI UHGXFWLRQLVP LQ WKH FRQWH[W RI IRUPDOVFLHQFH HJWKHDQDO\WLFDODUJXPHQW  ²2QWRORJLFDO5HGXFWLRQLVP ‡ $Q H[FHOOHQW H[DPSOH LV WKH GHEDWH EHWZHHQ HPHUJHQWLVP DQG UHGXFWLRQLVP LQ FRPSOH[LW\ WKHRU\ DQG DOVR LQ SV\FKRORJ\ DV HODERUDWHGLQ)3+&LQWKHFRQWH[WRI%HLQJDQG%HFRPLQJ   ‡$JDLQVWWKH9DULHWLHVRI5HYHUVH5HGXFWLRQLVP ²&RQFHSWXDO5HYHUVH5HGXFWLRQLVP ‡$Q\FRQFHSWRI³DUW´ HJILQHDUWFDYHDUWRXWVLGHUDUWMXQNDUW LV GHHPHG DFFHSWDEOH LQ SRVWPRGHUQLVP DV DOUHDG\ DGGUHVVHG LQ &KRI)+&  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH    

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH2Q5HGXFWLRQLVPDQG5HYHUVH5HGXFWLRQLVP 3DUW9,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$JDLQVWWKH9DULHWLHVRI5HYHUVH5HGXFWLRQLVP FRQW G  ²7KHRUHWLFDO5HYHUVH5HGXFWLRQLVP ‡7KHUHDUHQXPHURXVDUWDQGOLWHUDU\WKHRULHVFRH[LVW7DNHWKHFDVH RIOLWHUDU\VWXGLHVDVWKHUHDUHQRZ/LWHUDU\6WUXFWXUDOLVP0DU[LVW /LWHUDU\&ULWLFLVP1HZ&ULWLFLVP3KHQRPHQRORJ\+HUPHQHXWLFV /DQJXDJH*DPH /LWHUDU\ &ULWLFLVP )HPLQLVW /LWHUDU\ &ULWLFLVP 5HFHSWLRQ 7KHRU\ 5HDGHU 5HVSRQVH &ULWLFLVP 3RVWVWUXFWXUDOLVP 6HPLRWLFV 3\VFKRDQDO\WLF /LWHUDU\ &ULWLFLVP MXVW WR FLWH VRPH ZHOONQRZQ RQHV ZLWK QR RQH EHLQJ VDLG WR EH EHWWHU WKDQ DQ\ RWKHUV DVGHWDLOHGO\DQDO\]HGLQ &KRI)+&  6 5DPDQ  ,Q %11 , HYHQ LQWURGXFHG ³WKH FRPSURPLVH IDOODF\´ DV DQRWKHU JRRG LOOXVWUDWLRQ RI WKHRUHWLFDO UHYHUVHUHGXFWLRQLVP LQ PLVOHDGLQJO\ WUHDWLQJ ERWK JHQHWLF DQG HQYLURQPHQWDO DSSURDFKHV DVHTXDOO\YDOLG ²0HWKRGRORJLFDO5HYHUVH5HGXFWLRQLVP ‡ 7KHUH LV WKH ³DQ\WKLQJJRHV´ PHQWDOLW\ LQ SRVWPRGHUQLVP HJ GRLQJ DUW ZLWKRXW SUD[LV GRLQJ DUW ZLWK SUD[LV DQG GRLQJ DUW E\ VXEODWLRQ  DV DQDO\]HG LQ &K RI )+& $QG LQ )3+)6 , DOVR H[SRVHG WKH SUREOHPV RI UHYHUVHUHGXFWLRQLVP LQ WKH FRQWH[W RI IRUPDOVFLHQFHLQUHODWLRQWRV\VWHPVWKHRU\ ²2QWRORJLFDO5HYHUVH5HGXFWLRQLVP ‡7KHUHDUHOLNHZLVHQRSULYLOHJHGRQWRORJ\DQGWKHGRRULVRSHQIRU DQ\WKLQJLQSRVWPRGHUQLVP HJWKHHTXDOVWDWXVRIWKHRQWRORJ\ RI %HLQJ YV WKDW RI %HFRPLQJ DV DOUHDG\ DGGUHVVHG LQ &K RI )+&²DQG  DOVR LQ )3+&  ,Q )$( , DOVR LQWURGXFHG DQRWKHU YHUVLRQ RI UHYHUVHUHGXFWLRQLVP WKDW LV ³WKH SOXUDOLVW IDOODF\´ LQ WKH FRQWH[W RI XQGHUVWDQGLQJ DHVWKHWLF H[SHULHQFH IRU LQVWDQFH² DOWKRXJK WKLV IDOODF\ KDV EHHQ FRPPLWWHG QRW H[FOXVLYHO\ LQ UHODWLRQ WR WKH RQWRORJLFDO OHYHO EXW DOVR DW WKH FRQFHSWXDO WKHRUHWLFDODQGPHWKRGRORJLFDORQHV  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 6RXUFHV)URPP\SUHYLRXVERRNV    



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH&RQFHSWRQRI([LVWHQWLDO'LDOHFWLFV 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡6HWVDQG(OHPHQWV ²6HWV ‡([WKH6DPH ‡([WKH2WKHUV ²(OHPHQWV ‡([ZKLWHVLQWKFHQWXU\$PHULFD LQWKHVHWRI³WKH6DPH´  ‡([,UDTGXULQJWKH86LQYDVLRQLQ LQWKHVHWRI³WKH 2WKHUV´   ‡5HODWLRQV2SHUDWLRQV)XQFWLRQV ²5HODWLRQV HJ³EHORQJV´³HTXDOVWR´³LVJUHDWHUWKDQ´  ‡([V\PPHWULFLQWHUDFWLRQVZLWKLQWKH6DPH RUWKH2WKHUV  ‡([DV\PPHWULFLQWHUDFWLRQVEHWZHHQWKH6DPHDQGWKH2WKHUV ²2SHUDWLRQV HJ³DQG´³RU´³QRW´³LI«WKHQ´  ‡([LIWKH6DPHRSSUHVVHVWKH2WKHUVLWZLOODOVRRSSUHVVLWVHOI ‡([WKH6DPHLVQRWWKH2WKHUV ²)XQFWLRQV HJJRDOV  ‡([WKH6DPHLVKHJHPRQLFLQUHODWLRQWRWKH2WKHUV  ‡7UXWK9DOXHV ²³´LI7UXH LQ6\PEROLF/RJLF  ‡([WKHSURSRVLWLRQWKDWLPSHULDO-DSDQZDVKHJHPRQLFWR&KLQD GXULQJ::,, ²³´LI)DOVH LQ6\PEROLF/RJLF  ‡([WKHSURSRVLWLRQWKDW*UHQDGDLQYDGHG)UDQFHLQ ²³´ ³´LI%RWK7UXHDQG)DOVH LQ'LDOHFWLF/RJLF  ‡([WKHSURSRVLWLRQWKDWWKHUDEELWGXFNSLFWXUHUHIHUVWRDGXFN ²³a´ ³a´LI1HLWKHU7UXH1RU)DOVH RU1$LQ'LDOHFWLF/RJLF  ‡([WKHSURSRVLWLRQWKDW*RGUHDOO\H[LVWV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH       

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH&RQFHSWLRQRI([LVWHQWLDO'LDOHFWLFV 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡$[LRPVDQG3RVWXODWHV ²$[LRPV ‡([WKHUHIOH[LYHD[LRP²³DQ\TXDQWLW\LVHTXDOWRLWVHOI´ ²3RVWXODWHV ‡ ([ WKH 666 SRVWXODWH²³LI WKH WKUHH VLGHV RI D WULDQJOH DUH FRQJUXHQWWRWKHLUFRUUHVSRQGLQJSDUWVWKHQWKHWULDQJOHVDUH FRQJUXHQW´  ‡7KHRUHPVDQG3ULQFLSOHV ²7KHRUHPV DQG3ULQFLSOHV LQ([LVWHQWLDO'LDOHFWLFV ‡,Q5HODWLRQWR0HWKRG ±7KHIRUPDOQHVVLQIRUPDOQHVVSULQFLSOH ±7KHDEVROXWHQHVVUHODWLYHQHVVSULQFLSOH ±7KHSDUWLDOLW\WRWDOLW\SULQFLSOH ±7KHSUHGLFWDELOLW\XQSUHGLFWDELOLW\SULQFLSOH ±7KHH[SOLFDELOLW\LQH[SOLFDELOLW\SULQFLSOH ±7KHILFWLRQUHDOLW\SULQFLSOH ‡,Q5HODWLRQWR6WUXFWXUH ±7KHILQLWHQHVVWUDQVILQLWHQHVVSULQFLSOH ±7KHSUHFLVHQHVVYDJXHQHVVSULQFLSOH ±7KHVLPSOHQHVVFRPSOLFDWHGQHVVSULQFLSOH ±7KHRSHQQHVVKLGGHQQHVVSULQFLSOH ±7KHGHQVHQHVVHPSWLQHVVSULQFLSOH ‡,Q5HODWLRQWR3URFHVV ±7KHFKDQJHFRQVWDQF\SULQFLSOH ±7KHRUGHUFKDRVSULQFLSOH ±7KHVORZQHVVTXLFNQHVVSULQFLSOH ±7KHH[SDQVLRQFRQWUDFWLRQSULQFLSOH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH        



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH&RQFHSWLRQRI([LVWHQWLDO'LDOHFWLFV 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡7KHRUHPVDQG3ULQFLSOHV FRQW¶G  ²7KHRUHPV DQG3ULQFLSOHV LQ([LVWHQWLDO'LDOHFWLFV ‡,Q5HODWLRQWR$JHQF\ ±7KHWKHRU\SUD[LVSULQFLSOH ±7KHFRQYHQWLRQQRYHOW\SULQFLSOH ±7KHHYROXWLRQWUDQVIRUPDWLRQSULQFLSOH ±7KHV\PPHWU\DV\PPHWU\SULQFLSOH ±7KHVRIWQHVVKDUGQHVVSULQFLSOH ±7KHVHULRXVQHVVSOD\IXOQHVVSULQFLSOH ±7KHDFWLYHQHVVLQDFWLYHQHVVSULQFLSOH ±7KHVHOIQHVVRWKHUQHVVSULQFLSOH ‡,Q5HODWLRQWR2XWFRPH ±7KHUHJUHVVLRQSURJUHVVLRQSULQFLSOH ±7KHVDPHGLIIHUHQFHSULQFLSOH ±7KHVWDELOLW\UHDFWLRQSULQFLSOH ±7KHIXQFWLRQDOLW\QRQIXQFWLRQDOLW\SULQFLSOH ±7KHLQWHQWLRQDOLW\QRQLQWHQWLRQDOLW\SULQFLSOH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 1RWHV 7KH FDWHJRULHV DQG H[DPSOHV LQ HDFK DUH VROHO\ LOOXVWUDWLYH QRW H[KDXVWLYH  7KH FRPSDULVRQ LV DOVR UHODWLYH QRW DEVROXWH  QRU DUH WKH\ PXWXDOO\H[FOXVLYH$VJHQHUDOLWLHVWKH\DOORZH[FHSWLRQV 6RXUFHV6WDUWLQJIURP&KRI%&3&DQGDOVRIURPRWKHUERRNVRIPLQH               

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR0HWKRG ²7KH)RUPDOQHVV,QIRUPDOQHVV3ULQFLSOH  2QWKH)RUPDO5HTXLUHPHQWVRI/RJLFDO6\VWHPV  ‡7KHIRUPDOUHTXLUHPHQWVRIDORJLFDOV\VWHP HJFRQVLVWHQF\ VRXQGQHVV DQG FRPSOHWHQHVV  KDYH ERWK XVHIXOQHVV DQG QRQ XVHIXOQHVV WR WKH H[WHQW WKDW LI WKHUH DUH IRUPDO V\VWHPV UHTXLULQJ WKHP WKHUH DUH DOWHUQDWLYH RQHV ZKLFK GR QRW 7KXV LW GRHV QRW H[FOXGHFODVVLFDOORJLFVEXWVLPSO\JRHVEH\RQGERWKFODVVLFDODQG QRQFODVVLFDO ORJLFV ZKLOH OHDUQLQJ VRPHWKLQJ IURP HDFK 7KHUH LV QRIRUPDOQHVVZLWKRXWLQIRUPDOQHVV²DQGYLFHYHUVD ‡ )RU  LQVWDQFH H[LVWHQWLDO GLDOHFWLFV FDQ PDNH XVH RI ERWK FODVVLFDO ORJLFV XQGHU FHUWDLQ FRQGLWLRQV HJ HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ ZKHQ WKH\ DUH FOHDUFXW HWF  DQG QRQFODVVLFDO ORJLFV XQGHU DOWHUQDWLYH FRQGLWLRQV HVSHFLDOO\ WKRXJK QRW H[FOXVLYHO\ ZKHQ WKH\ DUH ³XQNQRZQ´ ³LUUHOHYDQW´ ³DPELJXRXV´ ³SRVVLEOH´ ZLWK ³GLIIHUHQW GHJUHHV RI WUXWK´ HPSLULFDOO\ LQFRQVLVWHQW LQ D GHVLUDEOHZD\HWF  :.X  ‡ )DPLO\ UHVHPEODQFH HJ ORJLFDOQHVVQRQORJLFDOQHVV UDWLRQDOLW\ QRQUDWLRQDOLW\HWF ‡6RXUFHV)URP)3+0/)3++)3+*$0)3+6(0DQGP\ODWHU ERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH              



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR0HWKRG FRQW¶G  ²7KH$EVROXWHQHVV5HODWLYHQHVV3ULQFLSOH  2QWKH0XOWLSOLFLW\RI7KLQJV  ‡ 7KHUH LV WKH PXOWLSOLFLW\ RI WKLQJV LQ UHDOLW\ EH WKH\ DERXW HQWLWLHV TXDOLWLHV RU SURSHUWLHV  DQG UHODWLRQVKLSV VXFK WKDW ZKDW LV DFFHSWDEOH IURP RQH VWDQGSRLQW PD\ QRW EH VR IURP DQRWKHU )RU LQVWDQFHLIWKHUHLVVRPHWKLQJDEVROXWHWKHUHLVOLNHZLVHVRPHWKLQJ UHODWLYH 7KHUH LV QR DEVROXWHQHVV ZLWKRXW UHODWLYHQHVV²DQG YLFH YHUVD ‡%RWKDEVROXWHQHVVDQGUHODWLYHQHVVKHUHDUHDOVRUHOHYDQWWRGLIIHUHQW PRGDOLWLHV RIWHQ FLWHG LQ WKH OLWHUDWXUH RQ RQWRORJ\ VXFK DV SRVVLELOLW\ HJ VRPHWKLQJ ³FDQ´ KDSSHQ  DQG LWV RSSRVLWH HJ LPSRVVLELOLW\  SUREDELOLW\ HJ VRPHWKLQJ ³ZLOO´ KDSSHQ  DQG LWV RSSRVLWH HJ LPSUREDELOLW\  DQG QHFHVVLW\ HJ VRPHWKLQJ ³VKRXOG´KDSSHQ DQGLWVRSSRVLWH HJFRQWLQJHQF\  ‡)DPLO\UHVHPEODQFHHJLQGHSHQGHQFHGHSHQGHQFHLVRODWHGQHVV LQWHUFRQQHFWLYHQHVV XQLYHUVDOQHVVUHODWLYHQHVV LPPDQHQFH WUDQVFHQGHQFH DXWRQRP\LQWHUGHSHQGHQF\ LQWHUQDOQHVV H[WHUQDOQHVVHWF ‡6RXUFHV)URP)3+.6HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH   

           

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR0HWKRG FRQW¶G  ²7KH3DUWLDOLW\7RWDOLW\3ULQFLSOH  2QWKH5HODWLRQVKLSVEHWZHHQ:KROHDQG3DUWV  ‡7KHZKROHLVQRWWKHVXPRIWKHSDUWV7KHUHLVQRSDUWLDOLW\ZLWKRXW WRWDOLW\²DQGYLFHYHUVD ‡$Q\LQTXLU\DERXWDSKHQRPHQRQLQWKHZRUNLVWRJXDUGDJDLQVWWKH YDULHWLHVRI D UHGXFWLRQLVPDQG E UHYHUVHUHGXFWLRQLVP ‡5HGXFWLRQLVPDQGUHYHUVHUHGXFWLRQLVPFDQEH L FRQFHSWXDO LL  WKHRUHWLFDO LLL PHWKRGRORJLFDODQG LY RQWRORJLFDO ‡ :RUNV RQ HPHUJHQFH DV LQ )&  JHVWDOW SV\FKRORJ\ DV LQ )3+*(2/  WKH KHUPHQHXWLF FLUFOH DV LQ )3+'$  DQG PHQWDO ODQJXDJH DV LQ )3+6(0  WR QDPH MXVW D IHZ RI WKHP KDYH FRQWULEXWHGWRWKHXQGHUVWDQGLQJRIZKROHDQGSDUWV ‡ )DPLO\ UHVHPEODQFH HJ LQGLYLGXDOLVWLFQHVVKROLVWLFQHVV SDUWQHVV ZKROHQHVVDQDO\VLVV\QWKHVLVHWF ‡6RXUFHV(VSHFLDOO\IURP)& )3+*(2/6HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH                   



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW,9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR0HWKRG FRQW¶G  ²7KH3UHGLFWDELOLW\8QSUHGLFWDELOLW\3ULQFLSOH  2QWKH2FFXUUHQFHRI(YHQWV  ‡%RWKSUHGLFWDELOLW\DQGXQSUHGLFWDELOLW\KDYHDPDMRUUROHWRSOD\LQ WKH RFFXUUHQFH RI WKLQJV VR WKDW QHLWKHU GHWHUPLQLVP QRU LQGHWHUPLQLVP ZLQV WKH FHQWXULHVROG ILJKW 7KHUH LV QR SUHGLFWDELOLW\ZLWKRXWXQSUHGLFWDELOLW\²DQGYLFHYHUVD ‡7KHUHDUHHYHQWVZKLFKDUHSUHGLFWDEOHMXVWDVWKHUHDUHWKRVHZKLFK DUH QRW 2U ZKDW LV UHJDUGHG DV XQSUHGLFWDEOH DW RQH SRLQW LQ WLPH PD\ WXUQ RXW WR EH SUHGLFWDEOH ODWHU DQG FRQYHUVHO\ ZKDW LV GHHPHGDVSUHGLFWDEOHPD\WXUQRXWWRQRWEHVRSUHGLFWDEOH(YHQLQ SUHGLFWDELOLW\ RXWFRPHV DUH VXEMHFW WR XQFHUWDLQW\ WKH GHJUHH RI ZKLFKYDULHVIURPFDVHWRFDVH ‡ :RUNV RQ FRPSOH[LW\ WKHRU\ DV LQ )&  TXDQWXP PHFKDQLFV DV LQ )3+67DQG)3+* IUHTXHQF\SUREDELOLW\VXEMHFWLYH RU%D\HVLDQ  SUREDELOLW\ DQG ³VSHFLDO FDXVHV´ DV LQ )3+*$0  MXVW WR QDPH D IHZRIWKHPKDYHFRQWULEXWHGWRWKHXQGHUVWDQGLQJRIXQFHUWDLQLW\ ‡ )DPLO\ UHVHPEODQFH HJ VXUHQHVVDUELWUDULQHVV FHUWDLQW\ XQFHUWDLQW\ GHWHUPLQLVWLFQHVVLQGHWHUPLQLVWLFQHVV VXUHQHVV GRXEWIXOQHVV OLNHOLQHVVULVNLQHVV GHWHUPLQLVWLFQHVVUDQGRPQHVV HWF ‡6RXUFHV(VSHFLDOO\IURP)& )3+*$06HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH             

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR0HWKRG FRQW¶G  ²7KH([SOLFDELOLW\,QH[SOLFDELOLW\3ULQFLSOH  2QWKH8QGHUO\LQJ0HFKDQLVPVRI7KLQJV  ‡%RWKH[SOLFDELOLW\DQGLQH[SOLFDELOLW\DUHSDUWRIWKHXQGHUVWDQGLQJRI WKLQJV 7KHUH LV QR H[SOLFDELOLW\ ZLWKRXW LQH[SOLFDELOLW\²DQG YLFH YHUVD ‡7KLVSULQFLSOHWHOOVXVWKHGXDOLW\RIWKHUHVHDUFKGLOHPPDLQWKDWLI UHDOLW\ FDQ EH H[SODLQHG LQ VRPH ZD\V LW DOVR KDV LWV RWKHU ZD\V ZKLFKDUHQRWTXLWHH[SODLQDEOHDWDJLYHQSRLQWLQWLPH ‡ )DPLO\ UHVHPEODQFH HJ XQGHUO\LQJQHVVUHJXODUQHVV FDXVDWLRQ UHJXODUQHVV FDXVDWLRQFRUUHODWLRQ H[SODQDWLRQGHVFULSWLRQ H[SODQDWLRQQDUUDWLRQH[SODQDWLRQLQWHUSUHWDWLRQHWF ‡6RXUFHV(VSHFLDOO\IURP)3+8²DQGDOVR)3+&6HHDOVRP\ODWHU ERRNV  ²7KH)LFWLRQ5HDOLW\3ULQFLSOH  2QWKHGLIIHUHQWIDFHVRI5HDOLW\  ‡,IWKHUHLVUHDOLW\WKHUHLVDOVRILFWLRQHVSHFLDOO\IRUDQ\DJHQWZLWK VRPH NLQG RI LQWHOOLJHQFH OLIH EH LW DERXW KXPDQV DQLPDOV RU ODWHU SRVWKXPDQV 7KHUH LV QR UHDOLW\ ZLWKRXW ILFWLRQ²DQG YLFH YHUVD ‡ 7KH GLVWLQFWLRQ EHWZHHQ UHDOLW\ DQG ILFWLRQ LV QRW DEVROXWH VLQFH WKHUH FDQ EH D PL[WXUH RI ERWK )LFWLRQ FDQ KDYH QRQILFWLRQDO HOHPHQWV MXVW DV QRQILFWLRQ FDQ KDYH ILFWLRQDO RQHV  6R WKH GLVWLQFWLRQLVLQGHJUHHQRWLQNLQG ‡ )DPLO\ UHVHPEODQFH HJ ILFWLRQQRQILFWLRQ ILFWLRQIDFW LPDJLQDWLRQIDFW VXEMHFWLYLW\REMHFWLYLW\ LPDJLQDWLRQQRQILFWLRQ HWF ‡6RXUFHV)LUVWIURP)3+/,7 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH       



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW9,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR6WUXFWXUH ²7KH)LQLWHQHVV7UDQVILQLWHQHVV3ULQFLSOH  2QWKH1DWXUHRI1XPEHUV  ‡,IWKHUHDUHILQLWHWKLQJVWKHUHDUHOLNHZLVHWUDQVILQLWHRQHV7KHUHLV QRILQLWHQHVVZLWKRXWWUDQVILQLWHQHVV²DQGYLFHYHUVD ‡7RDYRLGFRQIXVLRQ P\ XVDJHRIWKH ZRUG ³WUDQVILQLWH´KHUHGLIIHUV UDGLFDOO\ IURP WKH RQH XVHG E\ &DQWRU DQG RWKHU PDWKHPDWLFLDQV  IRU³UHODWLYH´LQILQLW\²DQGLVPRUHOLPLWHGLQOLJKWRIWKHSUREOHPV FRQIURQWLQJDQ\DWWHPSWWRXQGHUVWDQGWKHLGHDRILQILQLW\ EHLWE\ LQWXLWLRQ LPDJLQDWLRQ DQG FRQFHSWLRQ DV GHWDLOHGO\ DQDO\]HG LQ 6HFRI)3+*  ‡,QVWHDGE\³WUDQVILQLW\´,DOORZQXPEHUVZKLFKFDQEHPDQ\WLPHV ODUJHU²RU VPDOOHU IRU WKDW PDWWHU²WKDQ WKH ILQLWH WKLQJV WKDW ZH HQFRXQWHULQGDLO\OLIHEXWWKH\GRQRWKDYHWREHUHODWHGWRWKHLGHD RILQILQLW\DWDOO ZKLFKPD\QRWH[LVW  ‡ 2I FRXUVH WKHUH PD\ EH VRPH ERUGHUOLQH FDVHV LQ ZKLFK LW LV QRW FOHDUZKHWKHUWKHQXPEHULQTXHVWLRQLVWUDQVILQLWH LQP\XVDJH RU VLPSO\ D PDWKHPDWLFDO FRQYHQLHQFH $ JRRG H[DPSOH RI D ERUGHUOLQHFDVHLVWKH3ODQFN XQLWRIOHQJWK IRU ³WKHVPDOOHVWVSDFH SRVVLEO\ PHDVXUHG LQ QDWXUH´ ZKLFK LV ³OHVV WKDQ ELOOLRQWKV RI WULOOLRQWKV RI WULOOLRQWKV RI DQ LQFK´ RU VRPHWKLQJ OLNH  î í PHWHUV  ‡ 7KDW  VDLG²P\  XVDJH RI ³WUDQVILQLW\´ FDQ DOVR UHVROYH RU EHWWHU GLVVROYH  DQ DJHROG SUREOHP LQ SKLORVRSK\ NQRZQ DV ³=HQR V SDUDGR[HV´ DVDOUHDG\H[SODLQHGLQ6HFRI)3+*  ‡ )DPLO\  UHVHPEODQFH HJ ERXQGHGQHVVTXDVLXQERXQGHGQHVV VPDOOQHVVODUJHQHVVERXQGHGQHVVXQERXQGHGQHVVHWF ‡6RXUFH)URP)3+*6HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH       

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW9,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR6WUXFWXUH FRQW¶G  ²7KH3UHFLVHQHVV9DJXHQHVV3ULQFLSOH  2QWKH5HILQHPHQWRI7KLQJV  ‡%RWKSUHFLVHQHVVDQGYDJXHQHVVDUHLPSRUWDQWQRWWKDWRQHLVEHWWHU WKDQ WKH RWKHU EXW WKDW ERWK DUH XVHG LQ GLIIHUHQW GHJUHHV RI SUHIHUHQFH LQ DFFRUGDQFH WR WKH FRQWH[WXDO DSSOLFDWLRQ IURP WKH SHUVSHFWLYHV RI QDWXUH WKH PLQG FXOWXUH DQG VRFLHW\ (YHQ ZKHQ ERWKDUHXVHGLQDFRPELQDWLRQWKHGLOHPPDLVVKLIWHGLQVWHDGWRRQH RI FRPELQDWLRQDO FRQFHUQ 7KHUH LV QR SUHFLVHQHVV ZLWKRXW YDJXHQHVV²DQGYLFHYHUVD ‡,QUHODWLRQWRWD[RQRP\SUHFLVHQHVVKDVLWVWD[RQRPLFFODULW\MXVWDV YDJXHQHVV KDV LWV FODVVLILFDWRU\ IOH[LELOLW\ IRU LQVWDQFH $QG LQ UHODWLRQ WR QHWZRUN YDJXHQHVV KDV LWV H[SORUDWLYH OLEHUW\ MXVW DV SUHFLVHQHVVKDVLWVFRQFHSWXDOGHILQLWLYHQHVVIRULQVWDQFH ‡ )DPLO\ UHVHPEODQFH HJ FODULW\DPELJXLW\ GLUHFWQHVVLQGLUHFWQHVV TXDQWLWDWLYHQHVVTXDOLWDWLYHQHVV GHVFULEDELOLW\QRQGHVFULEDELOLW\ VSHFLILFLW\REVFXULW\ VSHFLILFLW\JHQHUDOLW\ WKLFNQHVVWKLQQHVV WUDQVODWDELOLW\XQWUDQVODWDELOLW\ FOHDUFXWQHVVWUDQVLWLRQDOQHVV FRQFUHWHQHVVDEVWUDFWQHVVHWF ‡6RXUFHV(VSHFLDOO\IURP),$6HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH                 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW9,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR6WUXFWXUH FRQW¶G  ²7KH6LPSOHQHVV&RPSOLFDWHGQHVV3ULQFLSOH  2QWKH,QWHUFRQQHFWLRQDPRQJ7KLQJV  ‡%RWKVLPSOHQHVVDQGFRPSOLFDWHGQHVVDUHYLWDOZLWKRXWIDYRULQJRQH RYHUWKHRWKHULQWKDWHDFKLVXWLOL]HGGHSHQGLQJRQWKHEDVLVRIWKH SHUVSHFWLYHV RI QDWXUH WKH PLQG FXOWXUH DQG VRFLHW\ $QG HYHQ ZKHQ D FRPELQDWLRQ RI WKHP LV SUHIHUUHG WKH GLOHPPD LV RQO\ VKLIWHGWRDFRPELQDWLRQDOGHJUHHRIFRQFHUQ7KHUHLVQRVLPSOHQHVV ZLWKRXWFRPSOLFDWHGQHVV²DQGYLFHYHUVD ‡,QUHODWLRQWRWD[RQRP\VLPSOHQHVVKDVLWVKHXULVWLFXVHIXOQHVVMXVW DVFRPSOLFDWHGQHVVKDVLWVUHDOLVWLFUHSUHVHQWDWLRQIRULQVWDQFH$QG LQUHODWLRQWRQHWZRUNVLPSOHQHVVKDVLWVHFRQRPLFDODWWUDFWLYHQHVV MXVWDVFRPSOLFDWHGQHVVKDVLWVSUDFWLFDOUHOLDELOLW\IRULQVWDQFH ‡ )DPLO\  UHVHPEODQFH HJ  LQIOH[LELOLW\IOH[LELOLW\ VWDQGDUGL]DWLRQ VSHFLDOL]DWLRQ LPSHUIHFWQHVVSHUIHFWQHVV VXSHUILFLDOLW\GHSWK VKDOORZQHVVGHHSQHVV HFRQRPLFDOQHVVHODERUDWHGQHVV SODLQQHVV FLUFXPVSHFWLRQ RQHVLGHGQHVVPXOWLVLGHGQHVV VXFFLQFWQHVV GXSOLFDWHGQHVVHWF ‡6RXUFHV(VSHFLDOO\IURP),$6HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH                

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW,;  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR6WUXFWXUH FRQW¶G  ²7KH2SHQQHVV+LGGHQQHVV3ULQFLSOH  2QWKH'HWHFWLRQRI7KLQJV  ‡5HDOLW\KDVLWVKLGGHQIDFHMXVWDVLWLVRSHQWRRXWVLGHYLHZLQVRPH RWKHU ZD\V 7KHUH LV QR RSHQQHVV ZLWKRXW KLGGHQQHVV²DQG YLFH YHUVD ‡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‡ )DPLO\  UHVHPEODQFH  HJ  RYHUWQHVVFRYHUWQHVV  SXEOLFQHVV SULYDWHQHVV RSHQQHVVFORVHGQHVV WUDQVSDUHQF\VHFUHF\ RSHQQHVV ELDVHGQHVV SDUWLFLSDWLRQREVWUXFWLRQ H[SRVLWLRQLOOXVLRQ VXUIDFH GHSWKHWF ‡6RXUFHV(VSHFLDOO\IURP)3+86HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH               



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW;  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR6WUXFWXUH FRQW¶G  ²7KH'HQVHQHVV(PSWLQHVV3ULQFLSOH  2QWKH'LVWULEXWLRQRI(QWLWLHVLQ6SDFH  ‡ %RWK GHQVLW\ DQG YRLG DUH QHHGHG LQ UHODWLRQ WR WKH PLQG QDWXUH FXOWXUHDQGVRFLHW\DOEHLWLQGLIIHUHQWZD\V7KHUHLVQRGHQVHQHVV ZLWKRXWHPSWLQHVV²DQGYLFHYHUVD ‡)RUFODULW\WKHWHUP³YRLG´LVXVHGKHUHRQO\DVDQDSSUR[LPDWLRQRI HPSWLQHVV GHSHQGLQJRQWKHGHJUHHRIWKHODFNRIGHQVLW\ VLQFHLQ SK\VLFVLWLVZHOONQRZQWKDW³HPSW\´VSDFHLVQRWUHDOO\HPSW\DOO WKH ZD\ EHFDXVH LW FDQ EH IXOO RI HQHUJ\ HJ UDQGRP TXDQWXP IOXFWXDWLRQVDWWKHVXEDWRPLFOHYHODQGIRUWKDWPDWWHUGDUNHQHUJ\ LQ WKH XQLYHUVH  DQG PDWWHU HJ GLIIHUHQW YHUVLRQV RI VXEDWRPLF SDUWLFOHVDQGIRUWKDWPDWWHUGDUNPDWWHULQWKHXQLYHUVH  ‡ )DPLO\ UHVHPEODQFH HJ IXOOQHVVYRLGQHVV QHDUQHVVIDUQHVV FRQFHQWUDWLRQGLVSHUVLRQ GHQVHQHVVQRWKLQJQHVV SUHVHQFHDEVHQFH IRFXVXQIRFXV VROLGQHVVYRLG VRPHWKLQJQRWKLQJ KHDYLQHVV OLJKWQHVVFRPSRVLWLRQHPSWLQHVVHPSKDVLVGLVHPSKDVLVHWF ‡6RXUFHV)LUVWZRUNHGRXWLQ)3+836HHDOVRP\ODWHUERRNV  ‡,Q5HODWLRQWR3URFHVV ²7KH&KDQJH&RQVWDQF\3ULQFLSOH  2QWKH$OWHUDWLRQRI7KLQJV  ‡&KDQJHRFFXUVRYHUWLPHDOWKRXJKFRQVWDQF\LVDOVRDOORZHG7KHUH LVQRFKDQJHZLWKRXWFRQVWDQF\²DQGYLFHYHUVD ‡$V\PPHWU\XQGHUJRHVFKDQJHVRYHUWLPHVRGRHVV\PPHWU\ ‡2OGSOD\HUVIDGHDZD\DQGQHZRQHVHPHUJHVZLWKHYHUQHZFDXVHV DQGHYHUQHZIRUPV ‡ )DPLO\ UHVHPEODQFH HJ G\QDPLFQHVVVWDWLFQHVV LQVWDELOLW\ VWDELOLW\HWF ‡6RXUFHV)LUVWQDPHGLQ%&3&(VSHFLDOO\IURP)+&)&'DQG )3+&6HHDOVRRWKHUERRNVRIPLQH IURPWKDWSRLQWRQ  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH   

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW;,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR3URFHVV FRQW¶G  ²7KH2UGHU&KDRV3ULQFLSOH  2QWKH3DWWHUQRI7KLQJV  ‡%RWKRUGHUDQGFKDRVDUHYLWDOLQWKHSURFHVVRIFKDQJHLQWKHZRUOG 7KHSUHIHUHQFHIRURUGHULVELDVHGVLQFHLWGRHVQRWJLYHVXIILFLHQW DWWHQWLRQWRWKHYLWDOUROHRIFKDRVLQWKHWUDQVIRUPDWLRQRIWKHZRUOG ZLWKRXWVRPHKRZUHGXFLQJLWIRUWKHXQGHUVWDQGLQJRIRUGHU 7KHUH LVQRRUGHUZLWKRXWFKDRV²DQGYLFHYHUVD ‡7KHVFLHQWLILFVHDUFKIRURUGHULQWKHZRUOGLVRIWHQDKLGGHQELDVLQ LWVRQWRORJLFDOREVHVVLRQZLWKRUGHUVLQFHFKDRVLVRIWHQWUHDWHGDV WKH ³EDG´ JX\ ZLWK RUGHU DV WKH ³JRRG´ JX\ IRU WKH HQG JRDO RI VFLHQFH  ‡1HLWKHURUGHUQRUFKDRVLVWKHILQDOHQGRIWKHZRUOGDQGRQHLVQRWWR EHWUHDWHGDVWKHPHDQVIRUWKHRWKHULQWKHWUDQVIRUPDWLRQRIWKLQJV %RWKDUHIXQGDPHQWDOLQWKHLUUHFXUUHQWGLDOHFWLFDOLQWHUDFWLRQVZLWK HDFKRWKHURYHUWLPHZLWKRXWUHGXFLQJRQHIRUWKHRWKHU ‡ )DPLO\ UHVHPEODQFH HJ ODZIXOQHVVGLVRUGHU RUGHUGLVRUGHU OLQHDULW\QRQOLQHDULW\ OLQHDULW\LUUHYHUVDOQHVV SDWWHUQFKDRV XQLW\ GLVXQLW\HWF ‡6RXUFHV(VSHFLDOO\IURP)&6HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH               



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW;,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR3URFHVV FRQW¶G  ²7KH6ORZQHVV4XLFNQHVV3ULQFLSOH  2QWKH6SHHGRI&KDQJH  ‡ %RWK VORZQHVV DQG TXLFNQHVV FRH[LVW ZLWK WKHLU RZQ LQWHUQDO WHQVLRQWRWKHH[WHQWWKDWHDFKILJKWVIRULWVRZQUHOHYDQFHZLWKWKH RWKHULQDFFRUGDQFHWRWKHSHUVSHFWLYHVRIQDWXUHWKHPLQGFXOWXUH DQG VRFLHW\ ZLWKRXW RQH EHLQJ WKH YLFWRU DQG WKH RWKHU EHLQJ WKH YDQTXLVKHG LQ WKH ORQJ KDXO (YHQ ZKHQ ERWK DUH FKRVHQ LQ RWKHU FDVHV WKLV GLOHPPD LV RQO\ WUDQVIHUUHG LQWR VRPHWKLQJ HOVH ZLWK D FRPELQDWLRQDOFKDUDFWHU7KHUHLVQRVORZQHVVZLWKRXWTXLFNQHVV² DQGYLFHYHUVD ‡,QUHODWLRQWRWD[RQRP\TXLFNQHVV KDVLWVHIILFLHQW XVDELOLW\MXVWDV VORZQHVV KDV LWV DHVWKHWLF DSSHDO IRU LQVWDQFH $QG LQ UHODWLRQ WR QHWZRUN TXLFNQHVV KDV LWV DGYHQWXURXV UHDGLQHVV MXVW DV VORZQHVV KDVLWVULVNDGYHUVHFRQYHQLHQFHIRULQVWDQFH ‡ )DPLO\ UHVHPEODQFH HJ LQFRQYHQLHQFHFRQYHQLHQFH SDVVLYHQHVV DFWLYHQHVVQHVV JUDGXDOQHVVDEUXSWQHVV GHFHOHUDWLRQDFFHOHUDWLRQ GLIILFXOW\HDVHHWF ‡6RXUFHV(VSHFLDOO\IURP),$6HHDOVRP\ODWHUERRNV  ²7KH([SDQVLRQ&RQWUDFWLRQ3ULQFLSOH  2QWKH*URZWKRI7KLQJV  ‡(QWLWLHVLQWKH ZRUOGFDQERWKH[SDQGLQVRPH ZD\VDQGFRQWUDFWLQ RWKHU RQHV DV SDUW RI WKHLU QDWXUH 7KHUH LV QR H[SDQVLRQ ZLWKRXW FRQWUDFWLRQ²DQGYLFHYHUVD ‡)RULQVWDQFHLQWKHFRQWH[WRIDQRPDORXVH[SHULHQFHRQHRILWVPRVW IDVFLQDWLQJ H[SUHVVLRQV LV QRQH RWKHU WKDQ WKH DQDO\VLV RI GLIIHUHQW FDXVHVRIWKHVORZEXWVWHDG\H[SDQVLRQ DQGIXUWKHUPRUHLISXWLQ DGLIIHUHQWZD\XQIROGLQJ RIXQFRQVFLRXVQHVV ‡ )DPLO\ UHVHPEODQFH HJ FRQTXHVWDXWDUN\ ULVHIDOO VSUHDGVKULQN H[WHQGLQJQHVVVKRUWHQLQJQHVV ZLGHQLQJQDUURZLQJ H[SDQVLRQ GHVWUXFWLRQ H[SDQVLRQGHFOLQH FRQVWUXFWLRQGHPROLWLRQ FUHDWLRQ GHVWUXFWLRQFRQVWUXFWLRQGHFRQVWUXFWLRQHWF ‡6RXUFHV(VSHFLDOO\IURP)3+86HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH 

&KDSWHU&RQFOXVLRQ²7KH)XWXUHRI:DVWH 





7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW;,,,  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  ‡,Q5HODWLRQWR$JHQF\ ²7KH7KHRU\3UD[LV3ULQFLSOH  2QWKH'XDOLW\RI.QRZOHGJH  ‡ 7KLV  KDV WR  GR  ZLWK  WKH  GXDOLW\ RI NQRZOHGJH LQ H[LVWHQWLDO GLDOHFWLFV LQ WKDW LI WKHUH LV WKHRUHWLFDO FRQVWUXFWLRQ WKHUH LV OLNHZLVH LWV SUDFWLFDO DSSOLFDWLRQ ERWK WHFKQLFDO DQG QRUPDWLYH 7KHUHLVQRWKHRU\ZLWKRXWSUD[LV²DQGYLFHYHUVD ‡ )DPLO\ UHVHPEODQFH HJ GLVFRYHU\DSSOLFDWLRQ  NQRZOHGJHDFWLRQ LQYHQWLRQLQQRYDWLRQ NQRZOHGJHPRWLYDWLRQ WKHRU\LQWHQWLRQDOLW\ XQLYHUVDOLW\SDUWLFXODULW\GLVFRXUVHDFWLRQNQRZOHGJHLQWHUHVWHWF ‡6RXUFH(VSHFLDOO\IURP)3+(6HHDOVRP\ODWHUERRNV BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB  FRQWLQXHGRQQH[WSDJH  

                 



7KH)XWXUHRI3RVW+XPDQ:DVWH 



7DEOH7KH6\QWD[RI([LVWHQWLDO'LDOHFWLFV, 7KH3ULQFLSOHV 3DUW;,9  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB

 ‡,Q5HODWLRQWR$JHQF\ FRQW¶G  ²7KH&RQYHQWLRQ1RYHOW\3ULQFLSOH  2QWKH1DWXUHRI&UHDWLYH7KLQNLQJ  ‡,IWKHUHLVFRQYHQWLRQDOZLVGRPWKHUHLVOLNHZLVHQRYHOFKDOOHQJHWR WKHH[WHQWWKDWERWKFRQYHUJHQWDQGGLYHUJHQWWKLQNLQJDUHSDUWRI OLIH7KHUHLVQRFRQYHQWLRQZLWKRXWQRYHOW\²DQGYLFHYHUVD ‡,QDGGLWLRQLQWKLVFRQWH[WRIWKHFRQYHQWLRQQRYHOW\SULQFLSOHWKHUH DUHLQWKHDEVHQFHRIEHWWHUZRUGVZKDW,ZDQWWRFDOO D FUHDWLYH WHFKQLTXHV DQG E  FUHDWLYH WUDLWV ZKLFK ZKHQ VDWLVILHG²LQ UHODWLRQ WR WKH ODUJHU FRQWH[W RI WKH PLQG QDWXUH VRFLHW\ DQG FXOWXUH²FDQ EH XVHG WR HQKDQFH FUHDWLYH ZRUNV 7KH OLVW RI FUHDWLYH WHFKQLTXHV DQG WUDLWV DV VXPPDUL]HG LQ 7DEOH  RI )3+&7  DUH QRW H[KDXVWLYH RI FRXUVH EXW WKH H[DPSOHV KHUH FRQVWLWXWH D JUHDW EHJLQQLQJ RI XQGHUVWDQGLQJ WKH VWUXFWXUH RI FUHDWLYHWKLQNLQJ ‡