8QLYHUVLWp)UDQoRLV5DEHODLVGH7RXUV
3UDFWLWLRQHUIURP,QVWUXPHQW 0HWRQ\P\LQ1DPHVIRU3K\VLFLDQV
LQWKH+LVWRU\RI(QJOLVK
$EVWUDFW
,IRFXVKHUHRQVHYHUDOQDPHVIRUWKHSK\VLFLDQLQWKHKLVWRU\RI(QJOLVKZKLFK,VXJ JHVWKDYHPHWRQ\PLFDOO\HYROYHGIURPQDPHVRIPHGLFDOLQVWUXPHQWV,ZLOO¿UVWEULHÀ\
GLVFXVV WKH LPSRUWDQFH RI PHWRQ\P\ LQ VHPDQWLF FKDQJH DQG LQGLFDWH WKH WKHRUHWLFDO EDFNJURXQGRIP\DQDO\VLVVHFWLRQ7KHOH[LFDOLWHPVZLOOEHUHYLHZHGDQGWKHLUXVH LQFRQWH[WH[HPSOL¿HGVHFWLRQ,ZLOOORRNLQWRWKHUHDVRQVIRUPHWRQ\PL]DWLRQDQG PDNHDFDVHIRUSHMRUDWLRQDGRZQZDUGPRYHLQHYDOXDWLYHDWWLWXGHRQWKHSDUWRIDVSHHFK FRPPXQLW\7RVXEVWDQWLDWHWKLVFODLPFXOWXUDODUJXPHQWVZLOOEHSXWIRUZDUGDQGWKH W\SHVRIFRQWH[WVZKLFK¿UVWPDGHWKHPHDQLQJµSK\VLFLDQ¶DFFHVVLEOHZLOOEHVXJJHVWHG VHFWLRQ
,QWURGXFWLRQ
0XFKVFKRODUO\ZRUNLQFOXGLQJVWXGLHVIURPDKLVWRULFDOSHUVSHFWLYHFI+XQW 7DDYLWVDLQHQ3DKWDDQG0lNLQHQ7DDYLWVDLQHQDQG3DKWDDPRQJ RWKHUVKDVDOUHDG\EHHQGHYRWHGWRPHGLFDO(QJOLVK/LQJXLVWVKDYHDOVRR൵HUHG LQGHSWKWHUPLQRORJLFDOVWXGLHV±QDPHVRIGLVHDVHVLQVWUXPHQWVPHGLFLQHVHWF )DXUH1RUUL1RUUL6\OZDQRZLF]DPRQJRWKHUV±RU WKRURXJKDQDO\VHVRISDWLHQWV¶GLVFRXUVHFI)DXUH
0\RZQDSSURDFKKHUHWRQDPHVIRUWKHSK\VLFLDQLQ(QJOLVKZLOOEHKLVWRULFDO ,ZLOOQRWEHFRQFHUQHGZLWKJLYLQJDFRPSOHWHKLVWRULFDORYHUYLHZRIWKHOH[LFDO
¿HOGLQTXHVWLRQQRUZLOO,GHVFULEHWKHULYDOU\EHWZHHQ)UHQFKDQG(QJOLVKOH[LFDO LWHPVLQ0LGGOH(QJOLVKDVWKLVSRLQWKDVDOUHDG\EHHQH[WHQVLYHO\LQYHVWLJDWHG FI6\OZDQRZLF]DPRQJRWKHUV,ZLOOIRFXVLQVWHDGRQDVXEFDWHJRU\RI QDPHVDPRQJZKLFK
DQG
WKDWZHUHVHOHFWHGEHFDXVHWKH\
DSSHDUWRKDYHDFRPPRQVHPDQWLFIHDWXUH,VXJJHVWWKH\KDYHDOOPHWRQ\PLFDOO\
HYROYHGIURPQDPHVRIPHGLFDOLQVWUXPHQWV
1DPHVIRUWKHSK\VLFLDQLQ(QJOLVKKDYHEHHQFRLQHGE\RWKHUPHWRQ\PLF
VKLIWVIURPFRQWHQWIXOWRFRQWHQWIXOPHDQLQJ
HJ
RU
7KH
JDUPHQWRUFDSLVVRFORVHO\DVVRFLDWHGZLWKWKHSHUVRQLQKLVKHUFDSDFLW\DVSK\VL FLDQWKDWWKHQDPHRIWKHIRUPHUFRPHVWRGHVLJQDWHWKHODWWHU8OOPDQQ PHQWLRQVH[DPSOHVVLPLODUWRWKHVHHJ
IRUWKHFOHUJ\
IRU 4XHHQ¶V&RXQVHORU
IRUµWRZQDQG8QLYHUVLW\¶DQGDUJXHVWKDW WKH\UHSUHVHQWDW\SHRIPRWLYDWLRQEDVHGRQVHPDQWLFIDFWRUV8QOLNHWKHJDUPHQW IRUSHUVRQW\SHRIPHWRQ\P\LWDSSHDUVWKDWWKHLQVWUXPHQWIRUSHUVRQW\SHKDV QRWEHHQLQYHVWLJDWHGZLWKUHJDUGWRSK\VLFLDQVDOWKRXJKDVL]HDEOHQXPEHURI OH[LFDOLWHPVDUHFRQFHUQHG1RWEHLQJD
W\SHRIPHWRQ\P\XQOHVV RQHFRQVLGHUVWKHLQVWUXPHQWWREHDQH[WHQVLRQRIDGRFWRU¶VDUPRUEUDLQWKH LQVWUXPHQWIRUSHUVRQW\SHRIPHWRQ\P\UDLVHVLQWHUHVWLQJDQGRULJLQDOTXHVWLRQV OLNHWKHPRWLYDWLRQIRUVXFKDVHPDQWLFVKLIW
,ZLOO¿UVWEULHÀ\VWUHVVWKHLPSRUWDQFHRIPHWRQ\P\LQVHPDQWLFFKDQJHDV VHHQLQGL൵HUHQWDSSURDFKHV8OOPDQQ7UDXJRWWDQG'DVKHU3DUDGLV WKLVZLOOSURYLGHWKHWKHRUHWLFDOEDFNJURXQGRIP\DQDO\VLVVHFWLRQ 7KHOLVWRIOH[LFDOLWHPVFRQFHUQHGIURP2(WR3'(ZLOOEHGUDZQEDVHGRQ HW\PRORJLFDODQGFKURQRORJLFDOHYLGHQFHDQGWKHLUXVHLQFRQWH[WZLOOEHH[HP SOL¿HGVHFWLRQ'HSHQGLQJRQWKHSHULRGVRURQWKHOH[LFDOLWHPVLQYROYHG P\H[DPSOHVDUHWDNHQIURPWKH
WKH
! " # $%& ' ( %) *%+ " , -.
/ ! (RUWKH
( %) *%+ " , -. +0 1 $2 ! " # $%& ' 3 4 5 6 + -7 8 & ( 1 ! 3 6$VXEVHFWLRQRIWKLVVXUYH\ZLOOEHGHYRWHGWRWKHFRQWURYHUVLDOFDVHRI
VHFWLRQRQHPD\ZRQGHUZKHWKHUWKHUHH[LVWVDUHODWLRQVKLSEHWZHHQ
µEORRGVXFNLQJZRUP¶DQG
µSK\VLFLDQGRFWRU¶DQGLIVRZKDWNLQGRI UHODWLRQVKLS,VLWSXUHDQGVLPSOHKRPRQ\P\EHWZHHQWZRWHUPVFRPLQJIURP GL൵HUHQWVRXUFHVDQGQRPHWRQ\P\VKRXOGEHDVVXPHGRULV
9: : ; <DSRO\VHPRXV QRXQFRPLQJIURPDVLQJOHHW\PRQLQZKLFKFDVHDPHWRQ\PLFGHYHORSPHQWKDV WREHDVVXPHG",ZLOOWU\WRPDNHDFDVHIRUKRPRQ\P\
7KHQRXQVVHOHFWHGDUHUHODWHGWRGL൵HUHQWSHULRGVLQWKHKLVWRU\RI(QJOLVK 2OG0LGGOHDQG0RGHUQ(QJOLVKWRGL൵HUHQWUHJLVWHUVDQGWRGL൵HUHQWVRXUFH ODQJXDJHV<HWLWZLOOEHVKRZQWKDWZLWKPRVWRIWKHPWKHFODLPWKDWDQLQVWUX PHQWIRUSHUVRQW\SHRIPHWRQ\P\LVKDVEHHQDWZRUNLVZHOOVXEVWDQWLDWHG7KLV ZLOOOHDGPHRQHVWHSIXUWKHULQWHUPVRIJHQHUDOL]DWLRQWKH¿QDOVHFWLRQVHFWLRQ ZLOOEHGHYRWHGWR¿QGLQJWKHSODXVLEOHPRWLYDWLRQVIRUDQGPHFKDQLVPVRI ZKDWDSSHDUVWREHDUHFXUULQJPHWRQ\PLFGHYHORSPHQWLQWKHKLVWRU\RI(QJOLVK
=
0HWRQ\P\DQGPHWRQ\PL]DWLRQLQWKHVHPDQWLFHYROXWLRQRIODQJXDJHV
7KLVVWXG\LVFDUULHGRXWZLWKLQWKH+LVWRULFDO3UDJPDWLFVIUDPHZRUNDQGPRUH
SUHFLVHO\ZLWKLQWKHWKHRU\RIVHPDQWLFFKDQJHH[SRXQGHGLQ7UDXJRWWDQG'DVKHU
LQZKLFKWKHFRQFHSWVRIPHWRQ\P\DQGSRO\VHP\DUHNH\:RUNVE\RWKHU
VFKRODUVKDYHSURYHGYHU\XVHIXOWRRIRUH[DPSOH8OOPDQQZLWKLQWKH
VWUXFWXUDOLVWVFKRRORIWKRXJKWDQG3DUDGLVZKRGHYRWHVDZKROHFKDSWHU
WR GH¿QLQJ PHWRQ\P\ IURP D &RJQLWLYH /LQJXLVWLFV SHUVSHFWLYH7KH ZD\ WKH ODWWHUFRQFHSWXDOL]HVOLQJXLVWLFFKDQJHVWULNHVPHDVEHLQJKLJKO\FRPSDWLEOHZLWK (OL]DEHWK7UDXJRWW¶VDQGLQWKDWUHVSHFWLWLVSUREDEO\QRFRLQFLGHQFHWKDW&DULWD 3DUDGLVWKDQNV(OL]DEHWK7UDXJRWWIRUFRPPHQWLQJRQDQHDUO\GUDIWRIKHUFKDSWHU
,QWKHDSSURDFKDGRSWHGKHUH³>W@KHUHDUHQRVWDEOHLQKHUHQWZRUGPHDQ LQJV´RQO\³XVHSRWHQWLDOV´3DUDGLVWKHZD\ZRUGVJHWWKHLUVWDELOL]HG PHDQLQJVDVZHOODVWKHZD\PHDQLQJVFKDQJHLVLQWKHLUFRQWH[WRIRFFXUUHQFH WKDWLVLQWKHFRQWH[WRIVSHDNHUDGGUHVVHHQHJRWLDWLRQRIPHDQLQJ7KLVHQWDLOV WKDWWKHPHDQLQJVRIZRUGVLQFRQWH[WDUHSUDJPDWLFDOO\PRWLYDWHG
3DUDGLV FRQVLGHUV PHWRQ\PL]DWLRQ DV RQH RI WKH FRQVWUXDOV RSHUDWLQJRQWKHXVHSRWHQWLDORIZRUGVWKXVSUR¿OLQJWKHLUPHDQLQJLQFRQWH[W +HUHLVWKHGH¿QLWLRQVKHJLYHVRIWKHSURFHVV³0HWRQ\PL]DWLRQLQYROYHV WKHXVHRIDOH[LFDOLWHPWRHYRNHWKHVHQVHRIVRPHWKLQJWKDWLVQRWFRQYHQWLRQ DOO\ OLQNHG WR WKDW SDUWLFXODU OH[LFDO LWHP 3DUDGLV ,W LV D൵HFWHG
³RQOLQH´DQGLVDQLPSOLHGFRQWLQJHQWUHODWLRQWKDW SUHFHGHVFKDQJH´3DUDGLV 6KH DOVR XQGHUOLQHV WKH ZHOONQRZQ OLQN EHWZHHQ PHWRQ\P\ DQG SRO\VHP\ RQ WKDW WRSLF FI 8OOPDQQ WRR ³>0@HWRQ\PL]DWLRQ SURSHULVDSRO\VHP\SKHQRPHQRQDQGFRQFHUQVGL൵HUHQWVHQVHVZKHUHRQHRIWKH VHQVHVLVFRQYHQWLRQDOO\DVVRFLDWHGZLWKWKHOH[LFDOLWHPXVHGZKHUHDVWKHRWKHU VHQVHLVLQIHUUHG´3DUDGLVZKHUHE\WKHOLQJXLVWUHIHUVWRSUDJPDWLF LQIHUHQFLQJ
$VFDQEHUHDGDERYHPHWRQ\PL]DWLRQLVVKLIWEXWQRW\HWFKDQJHFKDQJH LVH൵HFWLYHZKHQFRQYHQWLRQDOL]DWLRQ LHVHPDQWLFL]DWLRQLQ7UDXJRWWDQG'DVKHU KDV WDNHQ SODFH DV HYLGHQFHG E\ WKH FUHDWLRQ RI D QHZ IRUPPHDQLQJ SDLULQJ &RQYHQWLRQDOL]DWLRQ LV D VRFLRFRJQLWLYH SKHQRPHQRQ ZKLFK LPSOLHV FRUUHFW UHFRJQLWLRQLQWHUSUHWDWLRQ RI WKH VHPDQWLF LQQRYDWLRQ E\ WKH DGGUHVVHH DQGWKHQLWVDFFHSWDQFHE\WKHVSHHFKFRPPXQLW\,QZKDWIROORZV,ZLOOXVHWKH WHFKQLFDOWHUPV
> ? @A BC > DE F @DA BWRUHIHUWRWKHSURFHVVDQG
> ? @A BC > CWRGHVLJQDWH LWVUHVXOW
$VWKHPHWRQ\PL]DWLRQSURFHVVGLVFXVVHGKHUHLQYROYHVQDPHVRIPHGLFDO LQVWUXPHQWVWKHQRQWHFKQLFDOWHUP
GKDVWREHGH¿QHGWRRLWZLOOEH XQGHUVWRRG DV UHIHUULQJ WR D LQVWUXPHQWV XVHG LQ DVVHVVLQJ D SDWLHQW¶V FRQGL WLRQDQGGHWHFWLQJDGLVHDVHHJWKHXULQDOLQPHGLHYDOPHGLFLQHEPHDVXULQJ LQVWUXPHQWVHJWKHWKHUPRPHWHURUFFXUDWLYHV±UHPHGLDOPHGLFLQHVDQGRWKHU PDWHULDODJHQWV±XVHGLQ¿JKWLQJDGLVHDVHVXFKDVGUXJVVDOYHVRUOHHFKHV
H
7KHOH[LFDOLWHPVFRQFHUQHGHYLGHQFHDQGH[HPSOL¿FDWLRQ
$FFRUGLQJWRWKH
I I(QJOLVKKDVKDG
GL൵HUHQWZRUGVRUSKUDVHVVRIDUWRGHVLJQDWHWKHSK\VLFLDQ
J K L M N
1DPHVIRUWKHSK\VLFLDQLQWKHKLVWRU\RI(QJOLVKVRXUFH
I7KHUHDUHZRUGVDWWKLVOHYHO
ODFQ\VWUH
O PPHGLF ±
OHHFKO FH 2(±QRZDUFK MRF SK\VLFVWHU
ZRUXOGO FH
O PPHGLFR ±QRZVODQJ MRF
KHDOHU F± QLPJLPPHU DVODQJ
SK\VLFLDQ D SLOOPRQJHU ±
ÀHVKOHHFK F 0' 'LFW±FROORT
*DOHQ F± SK\VLFLDQHU ±GLDO
OHHFKHU F WKHUDSHXWLVW ±
PHGLFLQHU F±FKLHÀ\
6FRWVDUFK SK\VLFNHU
SUDFWLVHU ± PHGLFDO ±FROORT
PLUL F PHGLFDOPDQ
GRFWRU F± SLOOSHGGOHU ±
PHGLFLQH D± WKHUDSHXWLF
SUDFWLRQHU ± VTXLUW VODQJ
PLQLVWHU ± SLOOV VODQJ
PHGLFLDQHU D6FRWV WKHUDSLVW
SK\VLRQSKLVLRQ F± GRVHU FRQWHPS
OHHFKPDQ ±
0HGLFLQH2EVWHWULFV 'LFW
PHGLFLQHPDQ ±FROORTDOVRWUDQVI
DUWLVW ± GRF D±FROORT
SLVVSRW ± LQWHUQLVW ±86
PHGLFLDQ SLOOSXVKHU ±VODQJ
$HVFXODSLXV ± ZKLWHFRDW ±
YHOYHWFDS SLOOUROOHU ±VODQJ
SK\VLQHU GLDO EXWFK FROORT
FO\VWHU TXDFN ±RULJ$XV 1=
FO\VWHUSLSH ±D YHW ±VODQJ
SUDFWLFDQW ± SLOOVKRRWHU ±VODQJ
KDNHHPKDNLP ±
%XWLQDFWXDOIDFWSK\VLFLDQQDPHVLVRQO\DPLQLPXP7DEOHFRQWDLQV
DGGLWLRQDOLWHPVWKDW,KDYHFRPHDFURVV±ZKLFKRQO\WHQGVWRVKRZWKDWWKHUH
DUHSUREDEO\PRUHWREHIRXQG
J K L M N =
$GGLWLRQDOLWHPVQRWLQFOXGHGLQWKHOLVWJLYHQE\
IVRXUFH
/H[LFDOLWHPLQWKH
Q R S$GGLWLRQDOLWHPV
SLVVSRW SLVVSURSKHW
XULQHPRQJHUXULQHSURSKHWXULQHFDVWHU XULQHGRFWRUXULQHLQVSHFWRU ZDWHUFDVWHUZDWHUPRQJHUZDWHURORJHU
TXDFN
µDPHGLFDOLPSRVWRU¶
µDSK\VLFLDQDVXUJHRQ¶
TXDFNVDOYHUTXDFNGRFWRUTXDFNSK\VL FLDQ QRDGGLWLRQDOLWHPVFRUUHVSRQGLQJWKHQRQGHURJDWRU\
PHDQLQJ
FURDNHUVODQJµDGRFWRUSK\VLFLDQHVSDSULVRQGRFWRU¶
1RZFKLHÀ\86FURFXVVODQJµDTXDFNGRFWRU¶
VDZERQHV
T U V W XY Z [µDVXUJHRQ¶
V \] ^\_ Z Y `a _b c d e ` \] Y Z f XY Z [³DQ\SK\VLFLDQRUPHGL FDOGRFWRU´
7KHOLVWJLYHQE\WKH
g h iLVRUJDQL]HGFKURQRORJLFDOO\)LUVWO\LWLVLPSRUWDQW WREHDULQPLQGWKDWWKHFKURQRORJLFDOLQIRUPDWLRQJLYHQE\WKH
I±RUDQ\
RWKHUDXWKRULW\±UHSUHVHQWVQRODWHUWKDQGDWHVDZRUGPD\ZHOOKDYHEHHQXVHG IRUGHFDGHVEHIRUHLWPDGHLWV¿UVWDSSHDUDQFHLQZULWWHQIRUPWKXVPDNLQJLW SRVVLEOHIRUKLVWRULDQVRIWKHODQJXDJHWRUHFRUGLWVXVH6HFRQGO\WKHOLVWLQFOXGHV TXLWH GL൵HUHQW LWHPV LQ SDUWLFXODU DV UHJDUGV UHJLVWHU HJ VODQJ DQG VWDQGDUG ZRUGVOLNH
DQG
LQ3'(DQGYDULHW\RI(QJOLVKHJ
GXVHGRQO\LQ0XVOLPFRXQWULHVDQGLQ,QGLDRU
jZKRVHQRQGHSUHFLDWLYH XVHVHHPVOLPLWHGWR$XVWUDOLDDQG1HZ=HDODQG+DYLQJORRNHGXSDOORIWKHVH LWHPVLQWKH
DQG
,FDQVDIHO\VD\WKDWDWOHDVWKDOIRIWKHPEHORQJWR HYHU\GD\ODQJXDJHDQGDUHVHPDQWLFDOO\YHU\FORVHWR3'(
G,ZLOOIRFXVRQDVXEFDWHJRU\RIQDPHVZKLFK,VXJJHVWKDYHPHWRQ\PLFDOO\
HYROYHGIURPQDPHVRIPHGLFDOLQVWUXPHQWV,WLQFOXGHV
Gk lmmnop
k lo ok q rrs tu v k t w rlxDQG
y w v x z,ZLOOLJQRUHFRPSRXQGVRIWKH1 >LQVWUXPHQW@ 9
W\SHHJ
DVZHOODVGHULYDWLYHVRIWKH1 >LQVWUXPHQW@
W\SHHJ
G
RURIWKH9
W\SHGLVSOD\LQJ1 >LQVWUXPHQW@ !9FRQYHUVLRQHJ
7KHQRXQVVHOHFWHGDUHUHODWHGWRGL൵HUHQWUHJLVWHUVDQGVRXUFHODQJXDJHV,W
LVVKHHUFRLQFLGHQFHWKDWWKH\DUHDOVRUHSUHVHQWDWLYHRIWKHPDLQSHULRGVLQWKH
KLVWRU\RI(QJOLVK,QVWULFWO\HW\PRORJLFDOWHUPV
UHSUHVHQWVWKH*HUPDQLF
SHULRG2OG(QJOLVKZKLOH
GDQG
DUHOLQNHGWRWKHSHULRG
RIJUHDWHVW)UHQFKLQÀXHQFHLQ(QJODQG0LGGOH(QJOLVK
{| } ~ } {LVUHSUHVHQWD
WLYHRI³(QJOLVKLQWKHVFLHQWL¿FDJH´%DUEHUZLWKLWVWDVWHIRUOHDUQHG
ZRUGVRI/DWLQRU*UHHNRULJLQZKLFKFRXOGEHUDWKHUREVFXUHRUSHGDQWLFODVWO\
j
UHSUHVHQWVWKHVWDJHRIH[SDQVLRQRI(QJOLVKRXWVLGHWKH%ULWLVK,VOHVDQG LQWRWKH6RXWKHUQKHPLVSKHUHLQRWKHUZRUGV
DQG
jDUHDVVRFL DWHGWRODWH0RGHUQ(QJOLVK,SURSRVHUHDGLQJWKDWKLVWRU\EDFNZDUGVDQGZLOO EHJLQZLWK
jDVWKHPRVWUHFHQWLWHP
H
µSK\VLFLDQ¶
M K N K 7KH ZHOONQRZQ PHDQLQJ RI
µD PHGLFDO LPSRVWRU¶ LV LUUHOHYDQW KHUH ,FRQVLGHURQO\WKHQRQGHSUHFLDWLYHXVHRI
DVIRXQGLQ$XVWUDOLDQDQG1HZ
=HDODQG(QJOLVK³$GRFWRUZLWKQRLPSOLFDWLRQWKDWKHRUVKHLVXQTXDOL¿HG DSK\VLFLDQDVXUJHRQ0LODPHGLFDOR൶FHU´
VY
jQ
,¶OOJHWWKHTXDFNDWWKH%XVK+RVSLWDOWRKDYHDORRNDWLWLQWKHPRUQLQJ -,JJXOGHQ
G G G
LVDFOLSSHGIRUPRI
¡ ¢ £7KHPLVFRQFHSWLRQWKDW
¡ ¢ £LVDYDULDQWIRUPRI
¤ ¥ ¦§ ¨ © ¦ª« ¬ ¿UVWOHGPHWRWDNH
¤ ¥ ® § ¨LQWRFRQVLGHUDWLRQ
¤ ¥ ¦§ ¨ ¯° ±²³ ´ µ
LWVHOIFDQEHPHWRQ\PLFDOO\DVVRFLDWHGZLWK
¶· ´µ ¸ ¹ ¸ ´ ¶´ µ º » µ ° ¼º µ ¹ ¼¶¹ ¶¹W\SH RIPHWRQ\P\DQGWKHQIXUWKHUZLWK
½ ¾ ¿ À ÁµSK\VLFLDQ¶LQVWUXPHQWIRUSHUVRQW\SH RIPHWRQ\P\E\DQDORJ\ZLWKWKHRWKHULWHPVLQWKHOLVW%XWWKLVZDVEDVHGRQ SRSXODUHW\PRORJ\
jEHLQJRULJLQDOO\D'XWFKZRUGZLWKFRJQDWHVLQ VHYHUDORWKHU*HUPDQLFODQJXDJHV³HDUO\PRGHUQ'XWFK
Â Ã Ä ÅÆ Ç Ä ÈÉ Ê ËSHUVRQZKR FXUHVZLWKKRPHUHPHGLHV'XWFK
Ì´
VY
j7KHIXUWKHUHW\PRORJ\RIWKLVZRUGUHPDLQVXQFHUWDLQEXWWKHJHQHUDOLGHDLVWKXV VXPPHGXSE\.OHLQ³RQHZKRTXDFNVRUSDWWHUVDERXWKLVVDOYHVLQWU\LQJ WRVHOOWKHP´
PHDQLQJµRLQWPHQW¶$FFRUGLQJWR2QLRQV
jDV DVKRUWIRUPRI
jGDWHVEDFNWRWKH WK FHQWXU\ZKLFKWLHVLQZLWKWKH GLVFRYHU\RI$XVWUDOLDE\D'XWFKVDLORULQDQGZLWKWKHSODQWLQJRI1HZ
=HDODQGE\(XURSHDQVHWWOHUVFRPLQJIURP$XVWUDOLDLQWKHV
:LWK QR DOORPRUSKLF UHODWLRQ EHWZHHQ
Í Î ÏÐ Ñ Ò ÏÓÔ Õ ÖDQG
Í Î × Ð Ñ Ò × ÓÔ Õ ÖD PHWRQ\PLF VKLIW IURP WKH LQVWUXPHQW FDOOHG
ØÙ Õ Ö Ú Û Ú Õ ØÕ ÖWR D SK\VLFLDQ QDPH KDV WR EH UXOHG RXW<HW DQRWKHU PHWRQ\PLF GHYHORSPHQW LV SODXVLEOH LI ZH IROORZ RQH RI WKH DOWHUQDWLYH K\SRWKHVHV IRU WKH HW\PRORJ\ RI
Ü Ý Þ ß à á
PHQWLRQHGE\WKH
³
ÌWRXVHRUVHOOIDOVHFXUHV
â ã ä å ã æ å çè
VDOYH XVHG DV D KRPH UHPHG\´ 6KRXOG WKLV K\SRWKHVLV EH FRUUHFW
LWZRXOGLQGHHGLQYROYHDPHWRQ\PLFVKLIWIURPWKHFXUDWLYHFDOOHG³VDOYH´WR
DSK\VLFLDQQDPH
H = é êëë
ì
µSK\VLFLDQ¶
M K N K 7KLVZRUGFRPHVIURP/DWLQ
7KHVKRUWHQHGIRUPRIWKH(QJOLVKQRXQ LVDQLQGLFDWLRQWKDWLWV³LPPHGLDWHWUDQVPLVVLRQLQWR(QJOLVKLVXQFHUWDLQ´
í î ïVY
Q DQGHW\PRORJLFDOGLFWLRQDULHVPHQWLRQSRVVLEOHLQWHUPHGLDWHVRXUFH ODQJXDJHV VXFK DV 0LGGOH )UHQFK 0LGGOH 'XWFK RU 0LGGOH /RZ DQG 0LGGOH +LJK*HUPDQ
7KHZRUGLV¿UVWDWWHVWHGLQ(QJOLVKLQWKHHDUO\ WK FHQWXU\ZLWKWKHPHDQLQJ
³D VPDOO FRPSUHVVHG EDOO RU JOREXODU PDVV FRQWDLQLQJ D PHGLFLQDO VXEVWDQFH´
VY
Q
+HVFKDORIWHEHSXUJLGZLìSLOOLV>/
ð ñòó òñô@FRFKLHUDVLVëDWLVìHEHVWH ìLQJOD[DWLIìDWPDLEHIRUL܌HQDWU/DQIUDQF
õ ö$VKP ± >µ+HPXVWRIWHQEHSXUJHGZLWK
SLOOVWKDWLVWKHEHVWOD[DWLYH
WKDWPD\EHJLYHQ¶@
4XLWH D ORQJ WLPH HODSVHV EHIRUH WKH VODQJ FKLHÀ\ PLOLWDU\ PHDQLQJ RI
³DGRFWRUDVXUJHRQDPHGLFDOR൶FHURURUGHUO\´LVIRXQGDWOHDVWLQZULWWHQ GRFXPHQWV+HUHLVWKHHDUOLHVWRFFXUUHQFHZKLFKGDWHVIURPWKH¿UVWKDOIRIWKH WK FHQWXU\
3LOOV ZK\GRQW\RXEX\PRUHYHJHWDEOHV"
õ ÷ ø õ ù -DQ
,QWKLVVHQVHDQGUHJLVWHUWKHLWHPLVIUHTXHQWO\XVHGLQWKHSOXUDODVDIRUP RIDGGUHVV
VY
Q ,IFRQVLGHUHGLQLVRODWLRQWKLVIDFWPLJKWVXJJHVW DGHYHORSPHQWIURPWKHRWKHUVODQJPHDQLQJRIWKHSOXUDO
LHµWHVWLFOHV¶
PD\EH ZLWK DQ LPSOLFDWLRQ RI YLULOLW\ DW D WLPH ZKHQ PHGLFDO R൶FHUV LQ WKH 5R\DO$UP\0HGLFDO&RUSVRUDQ\RWKHUZHUHPDOHVRQO\<HWWKHIDFWWKDW
DVDVLQJXODUIRUPFDQDOVRGHVLJQDWHµDGRFWRU¶DVLQ
D 7KHµSLOO¶RIWKHUHJLPHQWKDGFRPHRXWWRLQVSHFWWKHPHQ 0:LOOLDPV
ú ú,LLL
LVDQDUJXPHQWLQIDYRXURIPHWRQ\PL]DWLRQLHDPHWRQ\PLFVKLIWIURPFXUD WLYHDJHQWWRGRFWRUUHVXOWLQJLQ±RUUDWKHUKHUHLQFUHDVLQJ±WKHSRO\VHP\RIWKH OH[LFDOLWHP
7KHUHH[LVWWHVWVSURYLGLQJWKHHYLGHQFHIRUGLVWLQFWPHDQLQJVFI3DUDGLV ZKR XVHV WKRVH WHVWV DQG SXWV KHU FRQFOXVLRQ LQ WHUPV RI ³ERXQGDULHV´
EHWZHHQPHDQLQJV&RRUGLQDWLRQLVRQHVXFKWHVWELVDVHPDQWLFDOO\XQDF
FHSWDEOHVHQWHQFHLQ3'(GXHWRWKH]HXJPDWLFH൵HFWFUHDWHGE\FRRUGLQDWLQJ
û üýý
þXQGHUVWRRG ¿UVW DV µD VPDOO EDOO FRQWDLQLQJ D PHGLFLQDO VXEVWDQFH¶ DQG WKHQDVµDGRFWRU¶
E 7KHSLOOKDGOLWWOHH൵HFWRQWKHSDWLHQWDQGVRGLGWKHµSLOO¶
7KLVJRHVWRVKRZWKDWWZRGLVWLQFWPHDQLQJV±DVRSSRVHGWRWZRGL൵HUHQW IDFHWVRIWKHVDPHPHDQLQJ±DUHDVVRFLDWHGZLWK
H H ÿ ê
µSK\VLFLDQ¶
M K N K $FFRUGLQJWRWKH
UHFHQWDEVROXWHXVHRIWKHDGMHFWLYH
KDVJLYHQ ULVHWRWKHQRXQDWWHVWHGLQZLWKWKHPHDQLQJµFXUDWLYHDJHQW¶
05RFKHDFNQRZOHGJHVWKDWFROGZDWHUKDVORQJEHHQNQRZQDVD
N KSHXWLF(6$EG\WU5YRQ)DONHQVWHLQ
öDQG ZLWK WKH PHDQLQJ µGRFWRU¶ VKRUWO\ DIWHUZDUGV LQ
VY
Q
0HGLFDOVRFLHW\6RPHRIWKHWKHUDSHXWLFVZHUHWROHUDEO\JRRGFRPSDQ\
7-+RJJ
ú ,,
7KHIDFWWKDWWKHWZRHDUOLHVWZULWWHQRFFXUUHQFHVDUHVRFORVHWRHDFKRWKHULQ WLPHLQYLWHVFDXWLRQ,WLVWUXHWKDWDVORQJDVZH¿QGQRRFFXUUHQFHVRI
µGRFWRU¶DQWHGDWLQJ
µFXUDWLYHDJHQW¶LQFRUSRUDRI0RGHUQ(QJOLVKDQ LQVWUXPHQWIRUSHUVRQPHWRQ\PLFGHYHORSPHQWFDQVWLOOEHVDIHO\DVVXPHGWKLVLV UHIHUUHGWRDV
%XWLWFDQDOVREHFKDOOHQJHGZKHQWKHUHVWULF WLRQDWZRUNLQWKHVHPDQWLFHYROXWLRQRI
LVFRQVLGHUHG5HVWULFWLRQRI PHDQLQJKDSSHQVZKHQVHPDQWLFFKDQJHQDUURZVWKHUDQJHRIPHDQLQJVFRQYH\HG E\DZRUG0F0DKRQ7KHHDUOLHUKLVWRU\RI
VKRZVWKDWWKH ZRUGKDVEHHQUHVWULFWHGIURPWKHJHQHUDOLGHDRI³VHUYLQJRUDWWHQGLQJWRVRPHRQH´
WR³DWWHQGLQJWRVRPHRQH¶VKHDOWK´DQGIURP³LQFOLQHGWRWDNHFDUHRI´WR³DEOH WRFXUH´WKHSDUDSKUDVHVDUHPLQHEDVHGRQ6NHDWVY
7ZR IHDWXUHVFDQEHREVHUYHGWRUHPDLQVWDEOHWKURXJKWKHUHVWULFWLRQSURFHVVQDPHO\
>KXPDQDQLPDWH@DQG>DJHQWLYLW\@ZKLFKPDNHVLWTXLWHSRVVLEOHWRDVVXPH WKDWDPHWRQ\PLFVKLIWRFFXUUHGEXWWKHRWKHUZD\URXQG±WKHFXUDWLYHDJHQW PLJKWZHOOKDYHJRWLWVQDPHIURPWKHSK\VLFLDQQDPHUDWKHUWKDQYLFHYHUVD
)XUWKHULQYHVWLJDWLRQLQWRWKHVHPDQWLFGHYHORSPHQWRI
!" # $ %& # ' !()ZRXOGEH UHTXLUHGWRUHDFKDPRUHUREXVWFRQFOXVLRQ,WVKRXOGEHSRLQWHGRXWKRZHYHUWKDW WKHUHLVQRURRPIRUGRXEWDVUHJDUGVWKHWZRYHU\FORVHLWHPV
DQG
FI7DEOHDQLQVWUXPHQWIRUSHUVRQPHWRQ\PLFGHYHORSPHQWFDQQRW
EHDVVXPHGDVWKHVHZRUGVQHYHUGHVLJQDWHGDQ\NLQGRIPHGLFDOLQVWUXPHQWDW DQ\WLPHLQ(QJOLVK
H * + ë, ì
µSK\VLFLDQ¶
M K N K 7KLVQRXQFRPHVHLWKHUIURP2)
-DWWHVWHGLQWKH WK FHQWXU\RUIURP /DWLQ
. /0 1 23 4LWVHOIERUURZHGIURP*UHHNțȜȣıIJȒȡµDFO\VWHUSLSHV\ULQJHFO\VWHU¶
,WDSSHDUVLQ(QJOLVKLQWKHODWH WK FHQWXU\¿UVWZLWKWKHPHDQLQJ³DPHGLFLQH LQMHFWHGLQWRWKHUHFWXPWRHPSW\RUFOHDQVHWKHERZHOV´WKHQGHQRWLQJ
³WKHSLSHRUV\ULQJHXVHGLQLQMHFWLRQ´DFFRUGLQJWR1RUULHG7KH IROORZLQJSDVVDJHFRQWDLQV
DYDULDQWIRUPRI
6DZJHVRGHQLQZ\QDQGGURQNHQRUK\OGLQE\D FO\VWHU\HSURXRNHì PHQVWUXHD$UGHUQHY
>µ6DJHVRGGHQZLWKZLQHDQGGUXQNRUKHOGLQE\DFO\VWHUSURYRNHVPHQ VWUXDWLRQ¶@
5 67 8 9:;
LVDWWHVWHGDV³DFRQWHPSWXRXVQDPHIRUDPHGLFDOSUDFWLWLRQHU´
< = >VY
QRQO\RQHFHQWXU\ODWHU7KDWRFFXUUHQFHLVWREHIRXQGLQ LQDYDULDQWIRUPZLWKDQLQLWLDOYRLFHGFRQVRQDQW
:KDW¶VWKDWWR\RXRUDQ\<HHGRVVH\RXSRZGHUHGSLJVERQHVUXEDUEHJOLV
N
"-)OHWFKHUHWDO
õLLVLJ%Y
>µ:KDWFRQFHUQRI\RXUVRURIDQ\ERG\¶VLVWKDW\RXGRVH\RXSRZGHUHG SLJVERQHVELWWHUFO\VWHU"¶@
7ZRRWKHUOH[LFDOLWHPVKDYHKDGVWULFWO\SDUDOOHOVHPDQWLFGHYHORSPHQWV L
ZKRVH¿UVWUHFRUGHGPHDQLQJLV³DWXEHRUSLSHIRUDGPLQLVWHULQJ FO\VWHUV´DFFRUGLQJWR1RUULHGDQGZKLFKWKHQEHFRPHV³DFRQWHPS WXRXVQDPHIRUDGRFWRU´
? @ AVY
B CD E FG H IJ KJ GLLPRUHUHFHQWO\
E L M KH FZKRVHVXFFHVVLYHPHDQLQJVDUH³DVPDOOWXEXODULQVWUXPHQWE\ZKLFKZDWHUPD\
EHVTXLUWHGDIRUPRIV\ULQJH´DDFFRUGLQJWR1RUULHGDQG³GRFWRU RUFKHPLVW´WKHODWWHUEHLQJUHVWULFWHGWRVODQJXVH
VY
jQ
H N é êì ì O
µSK\VLFLDQ¶
M K N K 7KH¿UVWHOHPHQWLQWKLVFRPSRXQGLVDGHYHUEDOQRXQERUURZHGIURP$QJOR
1RUPDQKHUHDIWHU$1DQG2)ZKLOHWKHVHFRQGQRXQFRPHVIURP2OG)UHQFK
KHUHDIWHU2)EXWLVSUREDEO\D/DWLQORDQZRUG
ODWHUUHLQIRUFHGE\WKH
HTXLYDOHQWZRUGVLQ$1DQG2)
P
LV¿UVWDWWHVWHGZLWKWKHPHDQLQJ³DFKDPEHUSRWRURWKHUSRWIRU KROGLQJ XULQH´ ,WV HDUOLHVW RFFXUUHQFH LV LQ
QR S T U V W X QV U YZ W T [ U \ Z ]V U Z WDQ (QJOLVKWR/DWLQGLFWLRQDU\FRPSOHWHGDERXWWKH\HDUZKHUHLWLVVLPSO\
MX[WDSRVHGWRLWV/DWLQHTXLYDOHQWV
^ _ ` a b c _ d e b a f ggb e b a _ gb _ ` c bDQGIXUWKHU RQJORVVHGDV³S\VV\QJHYHVVHO´,KDYHVHOHFWHGDQ WK FHQWXU\LQVWDQFHRIWKLV XVHLQFRQWH[W
7KH\KROGD3LVVSRWRYHUWKH:RPHQV+HDGVZKLOVWLQ/DERXUWKLQNLQJLW WRSURPRWHKDVW\'HOLYHU\
P h i j k l5R\DO 6RF
,QWKHODWH WK FHQWXU\WKDWLVWRVD\DFHQWXU\DQGDKDOIDIWHULWV¿UVW DSSHDUDQFHLQZULWLQJ
LVIRXQGWRGHVLJQDWHDOVRµDSK\VLFLDQ¶
+DG3KLVLWLRQ,RKQOLX¶GDVLQRGHRI3LVSRWVZRXOGKDXHFRQFOXGHGWKDW 3LHUFH3HQQLOHVVHVKRXOGEHFRQIRXQGHGZLWKRXWUHSULXH71DVKH
ø
VLJ*Y
>µ,I3K\VLFLDQ-RKQKDGOLYHGDQDVVHPEO\RISLVVSRWVZRXOGKDYHFRQ FOXGHGWKDW3LHUFH3HQQLOHVVHVKRXOGEHVLOHQFHGZLWKRXWGHOD\¶@
0HWRQ\P\XQGRXEWHGO\DFFRXQWVIRUWKHVHPDQWLFHYROXWLRQREVHUYHGDQG WKHSRO\VHP\WKXVFUHDWHG0RUHSUHFLVHO\LWLVDQLQVWUXPHQWIRUSHUVRQW\SHRI PHWRQ\P\EHFDXVHLWZDVFRPPRQSUDFWLFHIRUSK\VLFLDQVDWWKHWLPHWRDVVHVV WKHLUSDWLHQWV¶FRQGLWLRQDQGGHWHFWDGLVHDVHE\H[DPLQLQJWKHLUXULQH³0DQ\
0HGLHYDOGRFWRUVFDUULHGZLWKWKHPD YDGHPHFXP>@ERRNRIGLDJQRVHVDQG DXULQHFKDUW8VXDOO\WKH\H[DPLQHGWKHFRORXUVPHOODQGWDVWHRIWKHSDWLHQW¶V XULQHDQGPDGHDQRQWKHVSRWJXHVVDVWRZKDWWKH\PLJKWEHVX൵HULQJIURP´
VRXUFH%%&ZHEVLWHFI5HIHUHQFHV7KHDXWKRURIWKHHQWU\IRU
LQWKH
VHHPVWREHRIWKHVDPHRSLQLRQVLQFHWKHGHSUHFLDWLYHPHDQLQJµDSK\VL FLDQ¶LVWKXVMXVWL¿HG³3UREIURPWKHIRUPHUSUDFWLFHRIGLDJQRVLQJLOOQHVVE\
LQVSHFWLQJDSDWLHQW¶VXULQH&IඉංඌඌඉඋඈඉඁൾඍQ´
H m n o ê êp
µSK\VLFLDQ¶
M K N K 2QWKHRQHKDQGZHKDYH
G,DGRSWKHUHWKHQXPEHULQJRIWKHLWHPVLQ WKH
q r sWRZKRVHHQWULHV,DPUHIHUULQJDJDLQLWLVDQRXQPHDQLQJ³DVXEVWDQFH RUSUHSDUDWLRQXVHGLQWKHWUHDWPHQWRILOOQHVV´,WFRPHVIURP$12)DQG0LGGOH )UHQFKKHUHDIWHU0)
t u v wx wy uµPHGLFLQHPHGLFDPHQWUHPHG\¶¿UVWKDOIRIWKH WK FHQWXU\µWKHDUWRIPHGLFLQH¶ODWH WK FHQWXU\DQGWKH)UHQFKWHUPVWKHPVHOYHV JREDFNWRFODVVLFDO/DWLQ
z 42 %) %" , / 4 2 %) %" 4¿UVWDSSHDUVLQZULWLQJLQWKH
{ " ) - 4" 4|
F
ëXVHLVWìHWQLVQDQQHRGPHGLFLQH"FŹ"D
} ~ ~ &OHR&YL
>µ<RXVD\WKDWWKHUHLVQRQHHGRIPHGLFLQH>V@¶@
2QWKHRWKHUKDQGZHKDYH
GDQRXQGHQRWLQJµDPHGLFDOSUDFWL WLRQHU¶,WFRPHVIURP0)
G GFZKLFKLVSUREDEO\DGHYHUEDO QRXQGHULYHGIURPWKH2)YHUE
G GLVDWWHVWHGWZR FHQWXULHVDIWHU
GLQ,QWKHIROORZLQJH[DPSOHZHKDYH
GWKHSOXUDOIRUPRI
GLQFRRUGLQDWLRQZLWKWKHQRXQ
ZKLOHWKH VHFRQGRFFXUUHQFHRI
GFRRUGLQDWHGZLWK
LVWKHLQ¿QLWLYHIRUPRI WKHYHUE
6KHKDGGHKHUPHGLFLQHV>)U¿VLFLHQV@DQGVXUJHQVIRUHWRKHOHDQGPHGLFLQH DOOVXFKHDVZHUHQHGHIXOO"FWU%N.QLJKWRI/D7RXU/DQGU\
>µ6KHKDGKHUSK\VLFLDQVDQGVXUJHRQVJLYHPHGLFDODWWHQWLRQWRDOOWKRVH ZKRZHUHLQQHHGRIKHOS¶@
7KHGL൶FXOW\LQWKLVFDVHLVWRFKHFNWKHHW\PRORJLFDOGDWDSURYLGHGE\WKH
DJDLQVWRWKHUVRXUFHV$V
GLVQRORQJHUSDUWRIWKH(QJOLVKZRUG VWRFNFI7DEOHWKHRWKHUHW\PRORJLFDOGLFWLRQDULHVFRQVXOWHGFI5HIHUHQFHV FRQWDLQQRLQIRUPDWLRQRQWKHZRUGWKHLUHQWULHVFRQFHUQLQJPDLQO\H[WDQWLWHPV DQGPHDQLQJV
,ILQGHHG
DQG
DUHWZRKRPRSKRQHVWKHH[DPSOHVVXUYH\HG VRIDUHVSHFLDOO\WKRVHLQYROYLQJDFXUDWLYHIRUSHUVRQW\SHRIPHWRQ\P\LH
DQG
OHDGPHRQHVWHSIXUWKHU,ZRXOGOLNHWRVXJJHVWWKDWWKHVH KRPRSKRQHVPD\ZHOOKDYHEHHQUHLQWHUSUHWHGWKHUHLQWHUSUHWDWLRQJLYLQJULVHWR SRO\VHP\WKURXJKSRSXODUHW\PRORJ\7RWKHEHVWRIP\NQRZOHGJHWKLVSURFHVV ZDV¿UVWGHVFULEHGE\%ORRP¿HOGZKRLVTXRWHGE\8OOPDQQ 3RO\VHP\FDQDOVRDULVHWKURXJKDVSHFLDOIRUPRISRSXODUHW\PRORJ\
:KHQWZRZRUGVDUHLGHQWLFDOLQVRXQGDQGWKHGL൵HUHQFHLQPHDQLQJLVQRW YHU\JUHDWZHDUHDSWWRUHJDUGWKHPDVRQHZRUGZLWKWZRVHQVHV+LVWRUL FDOO\WKHVHDUHFDVHVRIKRPRQ\P\VLQFHWKHWZRWHUPVFRPHIURPGL൵HUHQW VRXUFHVEXWWKHPRGHUQVSHDNHUXQDZDUHRIHW\PRORJLHVZLOOHVWDEOLVKDOLQN EHWZHHQWKHPRQSXUHO\SV\FKRORJLFDOJURXQG
7KLVW\SHRISRO\VHP\LVYHU\UDUHDQGPRVWRIWKHH[DPSOHVDUHGRXEWIXOVLQFH DV%ORRP¿HOGULJKWO\SRLQWVRXWµWKHGHJUHHRIQHDUQHVVRIWKHPHDQLQJVLQ QRWVXEMHFWWRSUHFLVHPHDVXUHPHQW¶
úS
,IWKLVK\SRWKHVLVLVFRUUHFWWKHQ
GKDVQRWEHHQVXEMHFWWRDPHWR
Q\PLF GHYHORSPHQW SURSHUO\ VSHDNLQJ EXW WKH UHLQWHUSUHWDWLRQ SURFHVV RI WKH
KRPRSKRQHV KDV UHVXOWHG LQ SRO\VHP\ MXVW DV PHWRQ\PL]DWLRQ ZRXOG KDYH 2QWKHRWKHUKDQG
GDQG
GPD\QRWEHKRPRSKRQHVLQZKLFK FDVHWKHPHDQLQJµDPHGLFDOSUDFWLWLRQHU¶ZRXOGRULJLQDWHLQDPHWRQ\PL]DWLRQ SURFHVV*LYHQWKHHVWDEOLVKHGLQWHUQDWLRQDOUHSXWDWLRQRIWKH
RQWKHRQH KDQGJLYHQWKHDEVHQFHRILQIRUPDWLRQLQRWKHUVRXUFHV,ZLOORSWIRUDUHLQWHU SUHWDWLRQRIDSDLURIKRPRSKRQHV
H
µSK\VLFLDQ¶
M K N K ú
LVDUHÀH[RI2(
µGRFWRUSK\VLFLDQ¶
VY
,
+LPVWRGVWLQFHQGHVWHDPRIìDPPXìHVZDì WHDUIRèOLFH QLJ
M NKLP PLKWHJHQHDO FDQ&OHPRHV3$0
¡ ö I G ¢
((76VV>@
>µ6PHOO\VWHDPFDPHIURPKLVPRXWKPDNLQJLWGL൶FXOWIRUDQ\GRFWRUWR GUDZQHDUWRKLP¶@
7KHVDPHZRUGH[DFWO\ZLWKWKHVDPHORQJۘYRZHODQGWKHVDPHVSHOOLQJ LQWKHODWH:HVW6D[RQVWDQGDUGUHIHUUHGWRWKHµEORRGVXFNLQJZRUP¶LQ2(,W LVIRXQGIRULQVWDQFHLQOIULF¶V*ORVVDU\LQWKH
ø G £ GVHFWLRQ 6DQJXLVXJD
¤ ¥ ¦ §4XLQQ--µ7KH0LQRU/DWLQ2OG(QJOLVK*ORVVDULHV
LQ06&RWWRQ&OHRSDWUD$,,,¶
¨ ¨ ¨ G>@
0HGLHYDOPHGLFLQHPDGHH[WHQVLYHXVHRIOHHFKHV³WKHLGHDEHLQJWKDWWKH ZRUPZRXOGFRQVXPHFRUUXSWLQJVXEVWDQFHVIURPDQLQÀDPHGOHVLRQ´6\OZDQR ZLF])RUWKLVUHDVRQOHHFKHVFDQEHFRQVLGHUHGDW\SLFDOLQVWUXPHQW DFXUDWLYHDJHQWHPSOR\HGE\PHGLHYDOSK\VLFLDQV
)URPDOH[LFDOSRLQWRIYLHZWZRFRPSHWLQJK\SRWKHVHVKDYHWREHGLVFXVVHG KHUHDVZLWK
GEHIRUHL
ZDVDSRO\VHPRXVZRUGLQ2(LL
µSK\VLFLDQ¶DQG
©ª ª « ¬ µEORRGVXFNLQJZRUP¶ZHUHDSDLURIKRPRSKRQHVLQ2(
/RJLFDOO\HQRXJKZHVKRXOGH[SHFWWKHGLFWLRQDULHVVXSSRUWLQJK\SRWKHVLVLWR KDYHRQHOH[LFDOHQWU\RQO\ZKLOHK\SRWKHVLVLLPDNHVLWQHFHVVDU\IRUGLFWLRQDULHV WRKDYHWZRGLVWLQFWHQWULHV$VZHVKDOOVHHQRZQRVXFKORJLFDODUUDQJHPHQWRI WKHOH[LFDOPDWHULDOLVWREHIRXQGWKHUHLVRYHUDOODGH¿QLWHDPRXQWRIFRQIXVLRQ ZKLFK,LQWHUSUHWDVDVXUHVLJQRIKRZFRPSOH[WKHSUREOHPLV
+\SRWKHVLV L
® ¯ ¯ ° ±KDG EHFRPH D SRO\VHPRXV ZRUG LQ 2( WKDQNV WR
DPHWRQ\PLFDOGHYHORSPHQWIURPµEORRGVXFNLQJZRUP¶WRµSK\VLFLDQ¶RQDFFRXQW
RIWKHIDFWWKDWPHGLHYDOSK\VLFLDQVPDGHH[WHQVLYHXVHRIOHHFKHVDQGWKDWERWK
KDGFXUDWLYHIDFXOWLHV7KLVLVWKHSRVLWLRQLPSOLFLWO\DGRSWHGLQWKH%RVZRUWKDQG
7ROOHU¶V
² ³ ² ³ ´ µ¶ ·¸ ¹ º ¶ ³ » ¼½ ¾¼¶ ³ ¹ ¿À Á  ¸ZKLFKFRQWDLQVRQHHQWU\IRU
µÃ à ½ Ä,WDOVRVHHPVWREHWKHLPSOLFLWRSLQLRQRIWKHDXWKRUVRIWKH
Â Ä Ã Å ¹ Æ ¿ Æ Å ¶Ç È µÉÊ Ë Ì ÍÎÏ Ð
5REHUWV .D\ DQG *UXQG\ DV µSDUDVLWH¶ DQG µSK\VLFLDQ¶ DUH JURXSHG WRJHWKHU LQ WKHLU LQGH[ %RUGHQ PDNHV D VLPLODU GHFLVLRQ ZLWK D VLQJOH HQWU\\HWDGGVDQREVFXUHUHPDUNLQLWFRQFHUQLQJVHQVH³RULJLQDOO\GLVWLQFW IURPEXWDVVRFLDWHGZLWKLW´,IZHQRZWXUQWRHW\PRORJLFDOGLFWLRQDULHV.OHLQ VHHPVWREHWKHRQO\DXWKRUFOHDUO\VXSSRUWLQJWKHSRO\VHP\K\SRWKHVLV 6NHDW RSWV IRU WZR GLVWLQFW HQWULHV EXW SDUDGR[LFDOO\ ZULWHV ³WKH VDPH ZRUGDVWKHDERYH´LQWKHVHFRQGHQWU\ZKLFKLVTXLWHFRQIXVLQJIRUWKHUHDGHU
+\SRWKHVLVLL
Ñ Ã Ã ½ ĵSK\VLFLDQ¶DQG
µÃ à ½ ĵEORRGVXFNLQJZRUP¶ZHUH DSDLURIKRPRSKRQHVLQ2(7KLVLVWKHSRVLWLRQDGRSWHGE\2QLRQVZKR
\HWPDNHVDUDWKHUSX]]OLQJUHPDUNRQ
µÃ à ½ ijRULJLQDOO\GLVWLQFWIURPSUHFEXW DVVLPLODWHGWRLW´FI%RUGHQDERYH7KH
È Ò »WRRFRQWDLQVWZRVHSDUDWH HQWULHV EXW LWV SRVLWLRQ RQ KRPRQ\P\ LV PRUH H[SOLFLW DQG EHWWHU DUJXHG WKH IROORZLQJFRPPHQWEHLQJDGGXFHGLQWKHHQWU\IRU
µÃ à ½ ij&RPPRQO\UHJDUGHG DVDWUDQVIXVHRIඅൾൾർඁQ WKLVLVSODXVLEOHEXWWKHIRUPV2OG(QJOLVK
ÓÔ Õ ÖHDUO\
0LGGOH(QJOLVK
µ¼½ Ä Ã0LGGOH'XWFK
µ¼Ã× ÃVXJJHVWWKDWWKHZRUGZDVRULJLQDOO\
GLVWLQFWEXWDVVLPLODWHGWROǙFHඅൾൾർඁQ WKURXJKSRSXODUHW\PRORJ\´%DUQKDUW 6WHLQPHW]ZKRDOVRSRVLWKRPRQ\P\DQGWUDQVIHURIPHDQLQJWKURXJK SRSXODUHW\PRORJ\FODLPWKDW
µÃ à ½ ÄZDVDVVLPLODWHGWR
µÃ à ½ ÄWKHLUVLVMXVWWKH UHYHUVHK\SRWKHVLVRIWKH
È Ò »¶V
:DWNLQV¶DYLHZ PLJKWEHYHU\KHOSIXOLQUHDFKLQJDFRQFOXVLRQRQVXFK DFRPSOH[VXEMHFW7KLVVFKRODUUHODWHV
µÃ à ½ ÄWRWKH3,(URRW
µÃ ´µWRFROOHFW¶
ZLWKGHULYDWLYHPHDQLQJµWRVSHDN¶FI/DWLQ
µÃ ´ à ¿ ÃKHQFHWKH3URWR*HUPDQLF URRW
ØÙ ÚÛ Ü ÝµHQFKDQWHUVSHDNHURIPDJLFDQGKHDOLQJZRUGV¶%XWKHWUDFHV
ØÙ Ù Þ ß àWRDQDOWRJHWKHUGL൵HUHQWURRW
µÃ ¼´µWRELQG¶FI/DWLQ
µ¼´ ¹ ¿Ã%DVLQJ P\ GHFLVLRQ PDLQO\ RQ WKH FULWHULRQ RI WKH 3,( URRW , ZLOO DGRSW WKHKRPRQ\P\K\SRWKHVLVDQGVXJJHVWWKHIROORZLQJFKDLQRIOLQJXLVWLFHYHQWV DQRULJLQDOKRPRQ\P\EHWZHHQ
µÃ à ½ ÄDQG
µÃ à ½ Ä áLQ2(JDYHULVHWRDWZRZD\
WUDQVIHURIPHDQLQJWKURXJKSRSXODUHW\PRORJ\HYHQWXDOO\UHVXOWLQJLQSRO\VHP\
,QRWKHUZRUGVLWZRXOGKDYHEHHQWKHVDPHSURFHVVDVZLWK
â Ã É ¼½ ¼³ ÃH[FHSW WKDW WKH UHLQWHUSUHWDWLRQ RSHUDWHG
ã ä åæ ç èé êUHVXOWLQJ LQ PHUJHU FI 2QLRQ¶V DVVLPLODWLRQ%RWKOH[LFDOLWHPVWKHQGHYHORSHGDIRUPRISRO\VHP\
µÃ à ½ Ä áWKXV EHFDPHµWKHKHDOHU¶+DXEULFKTXRWHGLQ6\OZDQRZLF]DQG FRQYHUVHO\
µÃ à ½ ÄWRRNRQWKHPHDQLQJRIµEORRGVXFNHU¶IURPWKH WK FHQWXU\
RQZDUGV6\OZDQRZLF] 7KHYDOXHDVVLJQHGWRWKHZRUG
µÃ à ½ ÄFDQ WKXVEHVDLGWRKDYHPRYHGGRZQZDUGRYHUWKHFHQWXULHVDVWKHDWWLWXGHRIWKH VSHHFKFRPPXQLW\WRSK\VLFLDQVWKHUHIHUHQWRI
µÃ à ½ ÄDOWHUHGQHJDWLYHO\7KLV VHPDQWLFSURFHVVLVNQRZQDVSHMRUDWLRQ0F0DKRQ
Ñ Ã Ã ½ Ä
µGRFWRU¶ZDVHYHQWXDOO\ORVWLQ(QJOLVKLWVUHSODFHPHQWE\
ë ÄÀ Å ¼½ ¼¹ ³EHLQJFRPSOHWHGDWWKHWXUQRIWKH WK FHQWXU\6\OZDQRZLF]
, YHQWXUH WKDWSHMRUDWLRQ EURXJKW DERXW D VLWXDWLRQWKDWZDV LQFRPSDWLEOHZLWK
WKHQHZSUHVWLJHJDLQHGE\SK\VLFLDQVDVSDUWRIWKHLUXQLYHUVLW\HGXFDWLRQPRUH DERXWWKLVLQWKHQH[WVHFWLRQWKHUHE\ZHDNHQLQJWKHSRVLWLRQRI
µÃ à ½ ÄLQWKH (QJOLVKZRUGVWRFNWRDJUHDWHUH[WHQWFI6\OZDQRZLF]IRURWKHUFDXVHV
)URPDPRUHJHQHUDOSHUVSHFWLYH,WKLQNWKDWSHMRUDWLRQLVWKHPHFKDQLVP XQGHUO\LQJ WKH W\SH RI PHWRQ\P\ GLVFXVVHG KHUH ZKLFK QRZ OHDGV PH WR WKH ODVWVHFWLRQ
ì í
3HMRUDWLRQ
/HWXVOHDYH
î Æ ¹ ½× â Ã É ¼½ ¼³ ÃDQG
µÃ à ½ ÄRXWIRUWKHUHDVRQVVWDWHGDERYHZHDUH OHIWZLWKIRXUQDPHVRIWKHSK\VLFLDQLQ(QJOLVKZKLFKLWLVUHDVRQDEOHWRDVVXPH KDYHPHWRQ\PLFDOO\HYROYHGIURPQDPHVRIPHGLFDOLQVWUXPHQWV,QFKURQRORJLFDO RUGHUWKHVHDUH
ë ¼Å Åë ¶ ¾½ µÀ Å ¾Ã ¿ ¾Ä à ¿ ¹ë Ã Æ ¾¼½ ÅDQG
ë ¼µµÅ,IZHSRVLWWKDWVRPHNLQGRIDQDORJ\KDVEHHQDWZRUNEHWZHHQWKHPWKHQ DSUREOHPDULVHVDQDORJ\LVHVVHQWLDOO\DV\QFKURQLFSURFHVVZKLOHWKHVHOH[HPHV EHORQJWRGL൵HUHQWSHULRGVLQWKHKLVWRU\RI(QJOLVK7KHUHLVHYHQDWZRFHQWXU\
WLPHJDSEHWZHHQ
½ µÀ Å ¾Ã ¿DQG
¾Ä à ¿ ¹ë Ã Æ ¾¼½ ÅZKLFKPHDQVWKDW
½ µÀ Å ¾Ã ¿µSK\VLFLDQ¶
YHU\OLNHO\KDGIDOOHQLQWRGLVXVHDWWKHWLPH
¾Ä à ¿ ¹ ë Ã Æ ¾¼½ ÅZDVGHYHORSLQJLWVRZQ SRO\VHP\
,I DQDORJ\ KDV WR EH UXOHG RXW WKHQ ZH PXVW EH GHDOLQJ ZLWK D VHULHV RI LQGHSHQGHQWFKDQJHVZKLFKEHDURQLQGLYLGXDOLWHPVEXWWHVWLI\WRWKHUHJXODULW\
RI VHPDQWLF FKDQJH , VXJJHVW WKDW DW GL൵HUHQW WLPHV DQG IRU YDULRXV UHDVRQV VRFLHWDODWWLWXGHVWRSK\VLFLDQVKDYHGHWHULRUDWHGLQ(QJODQGWKLVWULJJHUHGWKH PHWRQ\PL]DWLRQSURFHVVGLVFXVVHGKHUHDQGLQWXUQWKHHPHUJHQFHRIQHZRIWHQ VWURQJO\QHJDWLYHZRUGVGHQRWLQJSK\VLFLDQV,ZLOOQRZH[DPLQHZKDWOLQJXLVWLF HYLGHQFHRISHMRUDWLRQZHKDYHLWVFXOWXUDOUHDVRQVDQGWKHZD\PHWRQ\PL]D WLRQPLJKWKDYHEHHQ³D൵HFWHGRQOLQH´FI3DUDGLVLQWKHFRQWH[WRI VSHDNHUDGGUHVVHHQHJRWLDWLRQRIPHDQLQJ
ì íï í
/LQJXLVWLFHYLGHQFHRISHMRUDWLRQ
)RUODFNRIVSDFH,KDYHUHVWULFWHGP\VHOIWRWKHHYLGHQFHIRXQGLQWKH
ð ñ òIURP ZKRVHHQWULHV,TXRWHEHORZEXWVLPLODULQGLFDWLRQVFDQEHIRXQGLQQXPHURXV RWKHUGLFWLRQDULHV
,IZHWDNHWKHFDVHRI
ë ¼Å Åë ¶ ¾FOHDUO\WKHPHWRQ\PLFVKLIWJRHVKDQGLQKDQG ZLWKSHMRUDWLRQDVWKHGLFWLRQDU\ODEHOVWKHPHDQLQJ³SK\VLFLDQ´DV³GHSUHFLDWLYH´
ZKLOHWKHH[WHQGHGXVHRIWKHV\QRQ\PRXVFRPSRXQG
ó ôõ õ öó ÷ ø ó ù ú ûLVSDUDSKUDVHG DV ³D TXDFN GRFWRU´
ü ý þ ÿDQG LWV RULJLQDO IRUP
ý þ ÿ þDV KDV DOUHDG\
EHHQPHQWLRQHGFDUU\YHU\GHURJDWRU\FRQQRWDWLRQVLQWKHYDULHWLHVRI(QJOLVK
RWKHUWKDQ$XVWUDOLDQDQG1HZ=HDODQG(QJOLVKEHLQJDVVRFLDWHGZLWKWKHLGHD
RIFKDUODWDQLVPDTXDFNLV³DSHUVRQZKRGLVKRQHVWO\FODLPVWRKDYHPHGLFDO RUVXUJLFDOVNLOORUZKRDGYHUWLVHVIDOVHRUIDNHUHPHGLHVDPHGLFDOLPSRVWRU´
DORQJWKHVDPHOLQHVDTXDFNVDOYHULV³DSHGODURIIDOVHFXUHV´
DQG
ë ¼ë Ã
DUHERWKGHVFULEHGDV³DFRQWHPSWXRXVQDPHIRUDPHGLFDOSUDFWLWLRQHU´,Q WKHVHQVHRI³DGRFWRURUFKHPLVW´WKHQRXQ
Å î Æ ¼¿ ¾EULHÀ\PHQWLRQHGKHUHDIWHU
½ µÀ Å ¾Ã ¿
LVFRQVLGHUHGVODQJ7KHVDPHJRHVIRU
ë ¼µµÅDQGIRUWKHZKROHVHULHVRI FRPSRXQGV
ë ¼µµ·â ¶ ³ ´ à ¿ ë ¼µµ ë Ã É É µÃ ¿ ë ¼µµ ë Æ Å Ä Ã ¿ ë ¼µµ·¿ ¶ µµÃ ¿ ë ¼µµ Å Ä ¶ ¶ ¾Ã ¿±
ë ¼µµÅLWVHOIEHLQJFKLHÀ\DPLOLWDU\VODQJZRUG
)LQDOO\QRWUDFHRISHMRUDWLRQFDQEHIRXQG UHJDUGLQJ
±ZKLFKVKRXOG EHDQDGGLWLRQDODUJXPHQWIRUOHDYLQJWKHZRUGRXWRIWKHOLVWDVVXJJHVWHGHDUOLHU
&XOWXUDOUHDVRQVIRUSHMRUDWLRQ
)LUVW,ZLOOORRNIRUWKHFXOWXUDOUHDVRQVIRUSHMRUDWLRQLQWKHUHSUHVHQWDWLRQVRI WKHPHGLFDOSURIHVVLRQLQPHGLHYDO(XURSHEHWZHHQWKH WK DQGWKH WK FHQWXULHV DQGLQSDUWLFXODULQWKHGHYHORSPHQWVWKDWIROORZHGWKHLQVWLWXWLRQRIXQLYHUVLW\
HGXFDWLRQ,ZLOOWKHQFRQVLGHUSRVW WK FHQWXU\UHSUHVHQWDWLRQVPRUHEULHÀ\
0HGLHYDO SK\VLFLDQV ZHUH DXWKRULW\ ¿JXUHV DQG DSSHDU SURQH WR LPSRVH XQSOHDVDQW DGYLFH SUHVFULSWLRQV DQG FRQVWUDLQWV RQ WKHLU SDWLHQWV ZKRVH RZQ H[SHULHQFHDQGUHSUHVHQWDWLRQVRILOOKHDOWKPLJKWKDYHFODVKHGZLWKWKHLUSK\VL FLDQ¶V ± QRW WR PHQWLRQ SUHYHQWLYH SUHVFULSWLRQV LPSRVHG RQ WKRVH ZKR IHOW KHDOWK\1LFRXG3'(H[SUHVVLRQVFRQWDLQLQJ
VXFKDV
Å ! ¹ µµ¶ !
RU
¾Ä ¹ ¾ × ¼É ¼Å ¹ ¿ à ¹ µ ë ¼µµDQGWKHPHDQLQJRIWKHQRXQEHDUWHVWLPRQ\WR WKLVHYHQLQWKLVGD\DQGDJH³DUHPHG\RUVROXWLRQHVSRQHZKLFKLVXQSOHDVDQW EXWQHFHVVDU\PRUHJHQHUDOO\VRPHWKLQJXQSOHDVDQWZKLFKKDVWREHDFFHSWHG RUHQGXUHG´
È Ò »VY
ë ¼µµ,WLVDOVRUHOHYDQWWRWDNHLQWRDFFRXQWWKHSK\VLFLDQV¶QHZSUHVWLJHJDLQHGDV SDUWRIWKHLUXQLYHUVLW\HGXFDWLRQ,Q(QJODQGWKH¿UVWPHGLFDOIDFXOWLHVZHUHVHW XSLQ2[IRUGLQWKHODWH WK FHQWXU\DQGLQ&DPEULGJHDFHQWXU\ODWHU8QLYHU VLW\HGXFDWLRQUHLQIRUFHGWKHGLYLGHEHWZHHQVXUJHRQVDQGVXUJHRQEDUEHUVZKR GHDOWZLWK ZRXQGV DQG RSHUDWHGRQ SDWLHQWVDQG SK\VLFLDQV ZKR ZHUH WDXJKW WRORRNGRZQRQPDQXDOSUDFWLFHDVDORZHUIRUPRIPHGLFLQH3K\VLFLDQVWKHQ LQFUHDVLQJO\DSSHDUHGDVPHQRIERRNLVKOHDUQLQJWUDSSHGLQVWHULOHDUJXPHQWV 'DUULFDX/XJDWDQGWKHLUREVFXUHDQGOHDUQHGMDUJRQKDVVLQFHEHHQ DSRSXODUVWDQGLQJMHVW-DFTXDUWDQG7KRPDVVHW
7KH GHYHORSPHQW RI XQLYHUVLW\ HGXFDWLRQ JDYH ULVH WR D GHHSO\ XQHTXDO DQGKLHUDUFKLFDOO\RUJDQL]HGERG\RISHRSOHQRWRQO\GLGSK\VLFLDQVLQVLVWRQ EHLQJGLVWLQJXLVKHGIURPVXUJHRQVEXWDOVRFRXUWSK\VLFLDQVGLGQRWZDQWWREH FRQIXVHG ZLWK WRZQ RU KRVSLWDO SK\VLFLDQV )URP RQZDUGV WKH PHGLFDO SURIHVVLRQEHFDPHLQFUHDVLQJO\XUEDQDQGLWVVHUYLFHVFRXOGEHD൵RUGHGPDLQO\
E\ZHOOR൵SDWLHQWVZKLOHORZHUXUEDQFODVVHVDQGFRXQWU\SHRSOHKDGWRUHVRUWWR
VXUJHRQVVRPHSK\VLFLDQVHYHQEHFDPHQRWRULRXVIRUWKHLUJUHHG'DUULFDX/XJDW /HWXVQRZFRQVLGHULVVXHVRIFRPSHWHQFH(YHQWKRXJKWKHYDOXHRIPHGLHYDO PHGLFLQHKDVWREHDVVHVVHGLQWKHFRQWH[WRILWVWLPHDQGSODFHFI&DPHURQ WKHUHLVQRGHQ\LQJWKDWFRQIURQWHGZLWKDVHULRXVFDVHRUDQHSLGHPLF PRUHRIWHQWKDQQRWPHGLHYDOSK\VLFLDQVZRXOGEHRXWRIWKHLUGHSWKRUHYHQKHOS OHVV7KLVPD\KDYHUHLQIRUFHGWKHSRSXODUWHQGHQF\WRULGLFXOHWKHP±RUVRPH FKDUDFWHULVWLFRIWKHLUVOLNHWKHLUWHFKQLFDOODQJXDJH(YHQZKHQWKHLUDELOLW\ZDV QRWGLUHFWO\FDOOHGLQWRTXHVWLRQPHGLHYDOSK\VLFLDQVKDGWRFRQVWDQWO\KHHGWKH SRWHQWLDOO\KDUPIXOFRQVHTXHQFHVRIWKHLUGHFLVLRQVDQGSUHVFULSWLRQV1HJDWLYH FRQVHTXHQFHVQHYHUIDLOHGWREULQJDERXWVRFLDOGLVDSSUREDWLRQRUFRQGHPQDWLRQ DQGKLVWRULDQVWHOOXVWKDWSK\VLFLDQVZHUHQRWVDIHIURPLQVXOWVDQGDJJUHVVLRQ HLWKHU'DUULFDX/XJDW
7KHODWH0LGGOH$JHVLVDOVRWKHWLPHZKHQSK\VLFLDQVZHUHTXLWHVHULRXVO\
SXWWRWKHWHVWE\WKHSODJXHHSLGHPLFDQGLWVVXEVHTXHQWHQGHPLFHSLVRGHV SUHVVHGE\WKHORFDODXWKRULWLHVIRUWKHUDSHXWLFDQGSURSK\ODFWLFPHDVXUHVWKH\
RUDWOHDVWDVXEVWDQWLDOQXPEHURIWKHPZHUHWHPSWHGWRFRPHXSZLWKPDJLFR DVWURORJLFDOH[SODQDWLRQVDQGWUHDWPHQWV1LFRXG7KHDUJXPHQWWKDWWKH VWXG\RIFRVPLFF\FOHVZDVSDUWRIGLDJQRVLVDQGWUHDWPHQWVRRQOHGSK\VLFLDQV IURPPHGLFDOWRQRQPHGLFDOKRURVFRSHVDQGSURPSWHGWKHPWRWXUQWRDVWURORJ\
DVWKHLUQHZSURIHVVLRQ6XFKDGULIWVXJJHVWVWKDWWKHERXQGDU\EHWZHHQPHGLFDO SUDFWLWLRQHUVDQGLPSRVWRUVZDVVRPHZKDWEOXUUHG'DUULFDX/XJDWDOO WKHPRUHVRDVWKHSURIHVVLRQIRXQGLWGL൶FXOWWRUHVWULFWPHGLFDOSUDFWLFHWRWKH GXO\DXWKRUL]HGDVWKHZRUG
â Ã É ¼½ Æ ÅZLWKQRDFFRPSDQ\LQJDFDGHPLFWLWOHGLG QRWPDNHLWSRVVLEOHWRWHOODQDXWKRUL]HGPHGLFDOSUDFWLWLRQHUIURPDFKDUODWDQ DFFHVVWRWKHPHGLFDOSURIHVVLRQEHFDPHLQFUHDVLQJO\PRQLWRUHGIURPWKH WK FHQWXU\RQZDUGV,WLVGL൶FXOWWRYLHZWKHVHHOHPHQWVDVHQWLUHO\GLVFRQQHFWHG IURPWKHSDUWLFXODUXVHRIWKHYHUE
É ¶ ½ ¾¶ ¿³ZKLFKLPSOLHVFUDIWDQGGLVKRQHVW\´
'LUFN[FIDOVR
È Ò »VYGRFWRU
" #
7RVXPXSWKHRYHUDOOSLFWXUHEHWZHHQWKH WK DQGWKH WK FHQWXULHVLVWKDW RI D XQLYHUVLW\WUDLQHG SURIHVVLRQ ZLWK QHZO\ JDLQHG SUHVWLJH D GLVUHJDUG IRU DQ\NLQGRIPDQXDOSUDFWLFHDVDORZHUIRUPRIPHGLFLQHDQGDOHDUQHGMDUJRQ ZKLFKZDVWKHREMHFWRISRSXODUMHVW$FFHVVWRWKHSURIHVVLRQZDVQRWDVVWULFWO\
FRQWUROOHGDVLWLVWRGD\DQGWKHVWXG\RIDVWURORJ\LQZKLFKWKH\HQJDJHGIXUWKHU EOXUUHGWKHERUGHUOLQHEHWZHHQWKHPHGLFDOVFLHQFHRIWKHWLPHDQGFKDUODWDQLVP SURSHU3HMRUDWLRQFDQEHVDLGWR¿WLQTXLWHZHOOZLWKVXFKDGHVFULSWLRQ
,IZHQRZFRQVLGHUWKHODWHUSHULRGFRUUHVSRQGLQJWRHDUO\DQGODWH0RGHUQ (QJOLVKZHKDYHFRQWLQXHGHYLGHQFHRIYHU\QHJDWLYHYLHZVDQGUHSUHVHQWDWLRQV RIGRFWRUVLQ*UHDW%ULWDLQDVLQVRPHRWKHU(XURSHDQFRXQWULHV$QXPEHURI SRSXODUSOD\VHQJUDYLQJVDQGFDULFDWXUHVSRUWUD\WKHSURIHVVLRQZLWKDQXPEHU RILGHQWLI\LQJIHDWXUHVDPRQJZKLFKJUHHG LVSUREDEO\WKHPRVWLPSRUWDQWRQH
$FDULFDWXUHE\5LFKDUG'LJKWRQLQ³7KUHHD൷XHQWGRFWRUVFRQJUDWXODWLQJ
WKHPVHOYHV WKHLU SURIHVVLRQ´ FDQ EH PHQWLRQHG KHUH LWV FDSWLRQ UHDGV ³+RZ PHUULO\ZHOLYHWKDWGRFWRUVEH:HKXPEXJWKHSXEOLFDQGSRFNHWWKHIHH´
$QRWKHULGHQWLI\LQJIHDWXUHLVVPXJFRQ¿GHQFHDQGVXSHU¿FLDOQHVVDFRQFHUQ ZLWKORRNLQJZHDOWK\DQGIDVKLRQDEOHV\PEROL]HGE\WKHVL]HRIWKHZLJDVLQ +HQU\)LHOGLQJ¶VIDUFLFDOFRPHG\
Â Ä Ã $ ¶ ½ × » ¶ ½ ¾¶ ¿¿UVWVWDJHGLQ³IRU DSK\VLFLDQFDQQRPRUHSUHVFULEHZLWKRXWDIXOOZLJWKDQZLWKRXWDIHH´
$ FDULFDWXUH E\7KRPDV 5RZODQGVRQ FDOOHG ³0HGLFDO 'LVSDWFK 'RFWRU 'RXEOHGRVH .LOOLQJ7ZR %LUGV ZLWK 2QH 6WRQH´ UHSUHVHQWV D GRFWRU SUHWHQGLQJWRH[DPLQHDQROGDQGXQDWWUDFWLYHODG\SUREDEO\IRUDQLPSRUWDQW IHHZKLOHWDNLQJDGYDQWDJHRIWKHODG\¶V\RXQJDQGSUHWW\VHUYDQW6XFKDFDUL FDWXUHWHOOVXVSODLQO\WKDWJUHHGDQGKLJKOLYLQJRIWHQZHQWKDQGDQGKDQGZLWK ODVFLYLRXVQHVV
*HQHUDOLQFRPSHWHQFHDQGODFNRIFDUHIRUWKHLUSDWLHQWVLVHORTXHQWO\VKRZQLQ DVDWLULFDOHQJUDYLQJE\:LOOLDP+RJDUWK³7KH&RPSDQ\RI8QGHUWDNHUV´
³7KH\>GRFWRUV@DUHHLWKHULQLWIRUWKHPRQH\RUPRUHLQWHUHVWHGLQDUJXLQJZLWK WKHLUSHHUVDERXWGLDJQRVHVDQGSUHVFULSWLRQV)URP:LOOLDP+RJDUWKWR7KRPDV 5RZODQGVRQZH¿QGUHSUHVHQWDWLRQVRIGLVSXWDWLRXVGRFWRUVLJQRULQJWKHLUG\LQJ SDWLHQWV´KWWSVZZZWKHJXDUGLDQFRPVFLHQFHWKHKZRUGIHEKRZWR VSRWGRFWRUEHIRUHVWHWKRVFRSHKLVWRU\PHGLFLQH3K\VLFLDQVPD\HYHQEHUHSUH VHQWHGDVGHOLEHUDWHO\VSUHDGLQJGHDWKDVLQDVDWLULFDOHQJUDYLQJE\,VDDF
&UXLNVKDQN³9DFFLQDWLRQDJDLQVW6PDOOSR[0HUFHQDU\ 0HUFLOHVV6SUHDGHUV RI'HDWK 'HYDVWDWLRQ'ULYHQRXWRI6RFLHW\´
³>0RUHUHFHQWO\@GRFWRUVFRQWLQXHGWRPDNHPRQH\IURPWKHLUSDWLHQWVDQGWR R൵HULQH൵HFWLYHWUHDWPHQW6XVSLFLRQRIWKHPDQGWKHLUPRWLYHVGLGQRWJRDZD\
WKLQN>RI@'U)UDQNHQVWHLQ'U0RUHDXRUHYHQWKHPHGLFDO¿JXUHVLQ7KH6LPSVRQV
± FKXFNOLQJ 'U +LEEHUW DQG TXDFN 'U 1LFN´ KWWSVZZZWKHJXDUGLDQFRP VFLHQFHWKHKZRUGIHEKRZWRVSRWGRFWRUEHIRUHVWHWKRVFRSHKLVWRU\
PHGLFLQH7KHUHIRUHZHKDYHDPSOHHYLGHQFHLQWKHSRVW WK FHQWXU\SHULRGRI DFRQWLQXHGWUDGLWLRQRIPRFNLQJDQGULGLFXOLQJGRFWRUVZKLFKLVQRWWRVD\WKDW LWLVWKHLU
¶ ³ µÀUHSUHVHQWDWLRQ DQGRIFRQWLQXHGSHMRUDWLRQ
0HWRQ\PL]DWLRQ
,IP\FODLPFRQFHUQLQJSHMRUDWLRQLQGXFHGPHWRQ\P\LVFRUUHFWWKHQZKDWKDV WDNHQSODFHZLWK
ë ¼Å Åë ¶ ¾½ µÀ Å ¾Ã ¿ ¾Ä à ¿ ¹ë Ã Æ ¾¼½ ÅDQG
ë ¼µµÅLVDWKUHHVWDJHSURFHVV OHDGLQJIURPPHWRQ\P\WKURXJKSRO\VHP\WRVHPDQWLFL]DWLRQ
/HWXVWDNH
% &' ( )*+IRULQVWDQFH:LWKUHIHUHQFHWR7UDXJRWW¶VWKHRU\RIVHPDQWLF FKDQJHFI7UDXJRWWDQG'DVKHU±WKHLQLWLDOVWDJHLLVZKHQWKDW OH[LFDOLWHPUHIHUVWRDPHGLFDOLQVWUXPHQWDQGDFFRUGLQJO\LWVFRGHGPHDQLQJLV
³DSLSHRUV\ULQJHXVHGLQLQMHFWLRQ´VHHDERYH7KHQDWVWDJHLLDSUDJPDWLF
PHDQLQJDULVHVLQWKHFRQWH[WRIVSHDNHUDGGUHVVHHLQWHUDFWLRQDQGQHJRWLDWLRQRI
PHDQLQJWKDWRIµPHGLFDOSUDFWLWLRQHUSK\VLFLDQ¶WKHSUDJPDWLFPHDQLQJGRHVQRW GLVSODFHWKHLQLWLDORQHEXWUDWKHULVVXSHULPSRVHGRQLW$WVWDJHLLLFRQWH[WV FDQEHIRXQGZKHUHWKHLQLWLDOPHDQLQJLVQRORQJHUDFFHVVLEOHµSK\VLFLDQ¶WKHQ FDQEHVDLGWRKDYHEHFRPHDQHQFRGHGPHDQLQJRI
½ µÀ Å ¾Ã ¿DQGWKHZRUG
, -. / 01 2WRKDYHEHFRPHSRO\VHPRXV6WDJHLLLLVUHIHUUHGWRDV
/ 1 3 4 5 06, 67 4 068 5DQGDV
, 8 5 9 1 5 068 5 4 -67 4 068 5
LQ3DUDGLVLWUHTXLUHVWKHQHZPHDQLQJVWREHFRQYHQ WLRQDOO\FRGHGE\WKHIRUPVUHVXOWLQJLQQHZIRUPPHDQLQJSDLUVHJWKHIRUP
, -. / 01 2
±PHDQLQJµSK\VLFLDQ¶!SDLU
&RQVWUXFWLRQVKDYHEHHQVKRZQWRSOD\DQLPSRUWDQWSDUWLQIRVWHULQJFKDQJH FI3DUDGLVDPRQJRWKHUVVROHWXVQRZWXUQWRWKHFRQWH[WVIDYRXULQJ WKHLQIHUHQFHRIWKHSUDJPDWLFPHDQLQJµSK\VLFLDQ¶,WKLQNWKH\DUHWKRVHFRQVWUXF WLRQVLQZKLFKWKHOH[LFDOLWHPVDUHXVHGDVIRUPVRIDGGUHVVDVLQZKLFK LVWKHHDUOLHVWNQRZQRFFXUUHQFHRI
, -. / 01 2 :; 6; 1ZLWKWKHPHDQLQJµSK\VLFLDQ¶
7KRXVWLQNLQJ*OLVWHUSLSHZKHUH¶VWKHJRGRIUHVW7K\3LOOVDQGEDVH$SRWK HFDU\GUXJJHV7KUHDWQHGWREULQJYQWRPH7'HNNHU 30DVVLQJHU
< 62= 65 > 4 2 062
LYVLJ+Y
/HWXVFRQVLGHUWKH¿UVWSDUWRIWKHXWWHUDQFHRQO\
? @ A B C DEF G EF H I JEC DK L MN EN K OP Q 1 2 1 R/ 0Q 1 = 8 S 8T 2 1 / 0
DVPLJKWKDYHEHHQXWWHUHGE\DQLUULWDWHGSDWLHQWDIWHU UHFHLYLQJWUHDWPHQW,WGRHVQRWVHHPLQDQ\ZD\IDUIHWFKHGRULPSODXVLEOHWRVD\
WKDWWKHPHDQLQJRI
, -. / 01 2 :; 6; 1KHUHFRXOGEHWKHRQHFRQYHQWLRQDOO\DVVRFLDWHG ZLWKLWDWWKHWLPHLHµDSLSHRUV\ULQJHXVHGLQLQMHFWLRQ¶%XWLIZHQRZWDNH WKHRWKHUKDOIRIWKHXWWHUDQFH
U VW X YZZ[ \ ] ^ _ ` ] [ a b c d eV a f ] gW _ g h i i a [ U V g a ] e^ a _08 j 2 65 = 9 5 08 3 1
WKHPHDQLQJµSK\VLFLDQ¶LVLQIHUUHGDULVLQJSUDJPDWLFDOO\LQWKH FRQWH[WRIVSHDNHUSDWLHQW±DGGUHVVHHGRFWRUQHJRWLDWLRQRIPHDQLQJ,QWKHR UHWLFDOWHUPVLWLVDQ³LQYLWHGLQIHUHQFH´7KHFRGHGPHDQLQJµDSLSHRUV\ULQJH XVHGLQLQMHFWLRQ¶EHLQJVWLOODFFHVVLEOHLQWKHFRQWH[WLWIROORZVTXLWHQDWXUDOO\
WKDWWKHSUDJPDWLFPHDQLQJµSK\VLFLDQ¶LVODGHQZLWKQHJDWLYHFRQQRWDWLRQV $VDZRUNLQJSULQFLSOHDVORQJDVWKHRULJLQDOFRGHGPHDQLQJLVDFFHVVLEOH
ZHVKRXOGDVVXPHWKDWWKHLQYLWHGLQIHUHQFHLVMXVWWKDWDPHDQLQJGHULYDEOH IURPWKHVHPDQWLFVLQFRPELQDWLRQZLWKWKHGLVFRXUVHFRQWH[W,QZULWWHQUH FRUGVFOHDUHYLGHQFHRIVHPDQWLFL]DWLRQRIDSRO\VHP\W\SLFDOO\FRPHVIURP WKHDSSHDUDQFHRIDQLWHPLQD³QHZ´FRQWH[WLQZKLFKWKHHDUOLHUPHDQLQJV RIWKHLWHPZRXOGQRWPDNHVHQVH7UDXJRWWDQG'DVKHU
([DPSOHUHSUHVHQWVWKHVHPDQWLFL]DWLRQVWDJHRIWKH SRO\VHP\RI
; 6--/7KH\VHL]HGWKH<RXQJ'RFWRUZKRZDVDVPDOOPDQDQGGHSRVLWHGKLPRQ
WKHGHFNµ&RXOGQ¶W\RXVHH,ZDVDVOHHS3LOOV"¶GHPDQGHGWKHRWKHU
µ%DUWLPHXV¶
k 4 -- l Q 6;L[
)LQDOO\H[DPSOHDOUHDG\TXRWHGDERYHLVRIVSHFLDOLQWHUHVW¿UVWEHFDXVH LWUHSUHVHQWVWKHVHPDQWLFL]DWLRQVWDJHRI
, -. / 01 2¶VSRO\VHP\
:KDW¶VWKDWWR\RXRUDQ\<HHGRVVH\RXSRZGHUHGSLJVERQHVUXEDUEHJOLV
m n o
"-)OHWFKHUHWDO
k 2 4 = p 8T k Q 61 2 2.LLVLJ%Y
>µ:KDWFRQFHUQRI\RXUVRURIDQ\ERG\¶VLVWKDW\RXGRVH\RXSRZGHUHG SLJVERQHVELWWHUFO\VWHU"¶@
7KHQWKHVWULFWV\QWDFWLFSDUDOOHOLVPEHWZHHQWKHWKUHH13VXVHGDVIRUPV RIDGGUHVVYL]> 13
q 1 1 S 8 / / 113 @
r> 13
. 8 s ; 8 P S 1 2 1 S ; 6= / j 8 5 1 /13 @
r> 13
2 s j 4 2 j 1= -6/ 01 2
13 @VWURQJO\VXJJHVWV WKDWWKHQRXQ
S 8 / 1WRRRIZKLFK
S 8 / / 1LVDYDULDQW IRUPPHDQVµGRFWRU¶DQGKDVJRQHWKURXJKWKHWKUHHVWDJHSURFHVVPHWRQ\P\
SRO\VHP\VHPDQWLFL]DWLRQWKHSRO\VHP\EHLQJ³DTXDQWLW\RIDPHGLFLQHSUHVFULEHG WREHJLYHQDWRQHWLPH´³GRFWRU´6XFKVHPDQWLFFKDQJHLVDWWHVWHGIRU
t u v w xLQ EXWKDVQHYHUEHHQGHVFULEHGIRU
y z { |DVIDUDV,NQRZ6RLIWKLVK\SRWKHVLV SURYHVWREHFRUUHFWWKLVLVQHZOH[LFRJUDSKLFDOLQIRUPDWLRQ
} ~
&RQFOXVLRQ
7RWKHEHVWRIP\NQRZOHGJHWKHLQVWUXPHQWIRUSHUVRQW\SHRIPHWRQ\P\LQ WKH¿HOGRIPHGLFDO(QJOLVKKDVQHYHUEHHQVWXGLHGLQLWVRZQULJKWDOWKRXJKLW FRQFHUQVPRUHLWHPVWKDQWKHJDUPHQWIRUSHUVRQW\SH%RWKLQYROYHDVKLIWIURP FRQWHQWIXO WR FRQWHQWIXO PHDQLQJ ,W LV P\ FRQWHQWLRQ WKDW WKH IRUPHU W\SH RI PHWRQ\P\LVUHVSRQVLEOHIRUWKHVHPDQWLFHYROXWLRQRIIRXUOH[LFDOLWHPV
, -. / 01 2
0Q 1 2 4 ; 1 s 06,/DQG
; 6--/UHVXOWLQJLQSRO\VHP\DQGWKHQZLWKVHPDQWLFL ]DWLRQLQWKHFUHDWLRQRIQHZQDPHVIRUWKHSK\VLFLDQ$VZHKDYHVHHQ
s 4 ,3 1 S 6, 65 1