Mona Baker - Routledge Encyclopedia Of Translation Studies 1u6h16

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_iii.html11/3/2007 10:34:55 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_iv.html

3DJHLY )LUVWSXEOLVKHGE\5RXWOHGJH1HZ)HWWHU/DQH/RQGRQ(&3(( 6LPXOWDQHRXVO\SXEOLVKHGLQWKH86$DQG&DQDGDE\5RXWOHGJH:HVWWK6WUHHW1HZ < )LUVWSXEOLVKHGLQSDSHUEDFN 5RXWOHGJHLVDQLPSULQWRIWKH7D\ORU )UDQFLV*URXS 7KLVHGLWLRQSXEOLVKHGLQWKH7D\ORU )UDQFLVH/LEUDU\ 7RSXUFKDVH\RXURZQFRS\RIWKLVRUDQ\RI7D\ORU )UDQFLVRU5RXWOHGJH¶VFROOHFWLRQRIWKRXVDQGVRIH%RRNVSOHDVH JRWRZZZH%RRNVWRUHWDQGIFRXN ‹0RQD%DNHU $OOULJKWVUHVHUYHG1RSDUWRIWKLVERRNPD\EHUHSULQWHGRUUHSURGXFHGRUXWLOL]HGLQDQ\IRUPRUE\DQ\HOHFWURQLF PHFKDQLFDORURWKHUPHDQVQRZNQRZQRUKHUHDIWHULQYHQWHGLQFOXGLQJSKRWRFRS\LQJDQGUHFRUGLQJRULQDQ\ LQIRUPDWLRQVWRUDJHRUUHWULHYDOV\VWHPZLWKRXWSHUPLVVLRQLQZULWLQJIURPWKHSXEOLVKHUV %ULWLVK/LEUDU\&DWDORJXLQJLQ3XEOLFDWLRQ'DWD$FDWDORJXHUHFRUGIRUWKLVERRNLVDYDLODEOHIURPWKH%ULWLVK/LEUDU\ /LEUDU\RI&RQJUHVV&DWDORJLQJLQ3XEOLFDWLRQ'DWD5RXWOHGJHHQF\FORSHGLDRIWUDQVODWLRQVWXGLHVHGLWHGE\0RQD %DNHU,QFOXGHVELEOLRJUDSKLFDOUHIHUHQFHVDQGLQGH[7UDQVODWLQJDQGLQWHUSUHWLQJ²(QF\FORSHGLDV,%DNHU0RQD 3(¶¶²GF±&,3 ,6%10DVWHUHERRN,6%1

,6%12(%)RUPDW ,6%1KEN ,6%1SEN

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_iv.html11/3/2007 10:34:56 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_v.html

3DJHY

&RQWHQWV /LVWRIILJXUHVDQGWDEOHV

YLLL

/LVWRIFRQVXOWDQWHGLWRUV

L[

/LVWRIFRQWULEXWRUV

[

,QWURGXFWLRQ

[LLL

3HUPLVVLRQVDFNQRZOHGJHPHQWV

[L[

3DUW,*HQHUDO $FWLRQWKHRU\RIµWUDQVODWRULDODFWLRQ¶ &KULVWLQD6FKlIIQHU

$GDSWDWLRQ*HRUJHV/%DVWLQ

$QDO\WLFDOSKLORVRSK\DQGWUDQVODWLRQ.LUVWHQ0DOPNM U

$QWKRORJLHVRIWUDQVODWLRQ$UPLQ3DXO)UDQN

$VVRFLDWLRQLQWHUQDWLRQDOHGHVLQWHUSUqWHVGHFRQIHUHQFH$,,& -DQHW$OWPDQ

$XWRWUDQVODWLRQ5DLQLHU*UXWPDQ

%DEHOWRZHURI'RXJODV5RELQVRQ

%LEOHWUDQVODWLRQ(XJHQH$1LGD

&RPPXQLFDWLYHIXQFWLRQDODSSURDFKHV,DQ0DVRQ

&RPPXQLW\LQWHUSUHWLQJ&HFLOLD:DGHQVM|

&RPSHQVDWLRQ.HLWK+DUYH\

&RQIHUHQFHDQGVLPXOWDQHRXVLQWHUSUHWLQJ'DQLHO*LOH

&RQWUDVWLYHDQDO\VLVDQGWUDQVODWLRQ0LFKDHO+RH\DQG'LDQH+RXJKWRQ

&RUSRUDLQWUDQVODWLRQVWXGLHV'RURWK\.HQQ\

&RXUWLQWHUSUHWLQJ0XKDPPDG*DPDO

'HFLVLRQPDNLQJLQWUDQVODWLRQ:ROIUDP:LOVV

'LGDFWLFVRIWUDQVODWLRQ+DQV-9HUPHHU

'LUHFWLRQRIWUDQVODWLRQGLUHFWLRQDOLW\ $OOLVRQ%HHE\/RQVGDOH

'LVFRXUVHDQDO\VLVDQGWUDQVODWLRQ%DVLO+DWLP

'UDPDWUDQVODWLRQ*XQLOOD$QGHUPDQ

'XEELQJ0RQD%DNHUDQG%UDĖR+RFKHO

(TXLYDOHQFH'RURWK\.HQQ\

([SOLFLWDWLRQ.LQJD.ODXG\

)pGpUDWLRQLQWHUQDWLRQDOHGHVWUDGXFWHXUV),7 -HDQ)UDQoRLV-RO\

)UHHWUDQVODWLRQ'RXJODV5RELQVRQ

*DPHWKHRU\DQGWUDQVODWLRQ0LFKDHO&URQLQ

*HQGHUPHWDSKRULFVLQWUDQVODWLRQ/RUL&KDPEHUODLQ

+HUPHQHXWLFPRWLRQ'RXJODV5RELQVRQ

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_v.html11/3/2007 10:34:57 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_vi.html

3DJHYL

+LVWRU\RIWUDQVODWLRQ-XGLWK:RRGVZRUWK

,GHRORJ\DQGWUDQVODWLRQ3HWHU)DZFHWW

,PLWDWLRQ'RXJODV5RELQVRQ

,QWHUSUHWLYHDSSURDFK0\ULDP6DODPD&DUU

,QWHUWHPSRUDOWUDQVODWLRQ'RXJODV5RELQVRQ

/DQJXDJHWHDFKLQJXVHRIWUDQVODWLRQLQ*X\&RRN

/LQJXLVWLFDSSURDFKHV3HWHU)DZFHWW

/LWHUDODSSURDFKHV'RXJODV5RELQVRQ

/LWHUDU\WUDQVODWLRQSUDFWLFHV3HWHU%XVK

/LWHUDU\WUDQVODWLRQUHVHDUFKLVVXHV-RVp/DPEHUW

0DFKLQHDLGHGWUDQVODWLRQ.DUO+HLQ])UHLJDQJ

0DFKLQHWUDQVODWLRQDSSOLFDWLRQV+DUROG/6RPHUV

0DFKLQHWUDQVODWLRQKLVWRU\+DUROG/6RPHUV

0DFKLQHWUDQVODWLRQPHWKRGRORJ\+DUROG/6RPHUV

0HWDSKRURIWUDQVODWLRQ5XWK(YDQV

0HWDSKUDVH'RXJODV5RELQVRQ

0RGHOVRIWUDQVODWLRQ7KHR+HUPDQV

0XOWLOLQJXDOLVPDQGWUDQVODWLRQ5DLQLHU*UXWPDQ

1RUPDWLYHPRGHO'RXJODV5RELQVRQ

1RUPV0RQD%DNHU

3DUDSKUDVH'RXJODV5RELQVRQ

3RHWLFVRIWUDQVODWLRQ(GZLQ*HQW]OHU

3RHWU\WUDQVODWLRQ'DYLG&RQQROO\

3RO\V\VWHPWKHRU\0DUN6KXWWOHZRUWK

3UDJPDWLFVDQGWUDQVODWLRQ%DVLO+DWLP

3VHXGRWUDQVODWLRQ'RXJODV5RELQVRQ

3V\FKROLQJXLVWLFFRJQLWLYHDSSURDFKHV5RJHU7%HOO

3XEOLVKLQJVWUDWHJLHV7HUU\+DOH

3XUHODQJXDJH3HWHU%XVK

4XDOLW\RIWUDQVODWLRQ-XOLDQH+RXVH

4XU¶ƗQ.RUDQ WUDQVODWLRQ+DVVDQ0XVWDSKD

5HYLHZLQJDQGFULWLFLVP&DURO0DLHU

6FULSWLQWUDQVODWLRQ*RUGRQ%URWKHUVWRQ

6HPLRWLFDSSURDFKHV8PEHUWR(FRDQG6LUL1HUJDDUG

6KDNHVSHDUHWUDQVODWLRQ'LUN'HODEDVWLWD

6KLIWVRIWUDQVODWLRQ0DWWKLMV%DNNHU&HHV.RVWHUDQG.LWW\YDQ/HXYHQ=ZDUW

6LJQHGODQJXDJHLQWHUSUHWLQJ:LOOLDP3,VKDP

6NRSRVWKHRU\&KULVWLQD6FKlIIQHU

6SHFXODWLYHDSSURDFKHV0DULO\Q*DGGLV5RVH

6WUDWHJLHVRIWUDQVODWLRQ/DZUHQFH9HQXWL

6XEWLWOLQJ+HQULN*RWWOLHE

7HUPEDQNV%ODLVH1NZHQWL$]HK

7HUPLQRORJ\DSSOLFDWLRQV-XDQ&6DJHU

7HUPLQRORJ\VWDQGDUGL]DWLRQ-XDQ&6DJHU

7HUPLQRORJ\WKHRU\-XDQ&6DJHU

7H[WOLQJXLVWLFVDQGWUDQVODWLRQ%DVLO+DWLP

7KLQNDORXGSURWRFROV5LLWWD-llVNHOlLQHQ

7RUDKWUDQVODWLRQ0LFKDHO$OSHUW

7UDQVODWDELOLW\$QWKRQ\3\PDQG+RUVW7XUN

7UDQVODWLRQVWXGLHV0RQD%DNHU

7UDQVODWRUWUDLQLQJLQVWLWXWLRQV0RQLTXH&DPLQDGHDQG$QWKRQ\3\P

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_vi.html11/3/2007 10:34:58 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_vii.html

3DJHYLL

8QLWRIWUDQVODWLRQ.LUVWHQ0DOPNM U

8QLYHUVDOVRIWUDQVODWLRQ6DUD/DYLRVD%UDLWKZDLWH

3DUW,,+LVWRU\DQG7UDGLWLRQV $IULFDQWUDGLWLRQ3DXO%DQGLD

$PHULFDQWUDGLWLRQ/DZUHQFH9HQXWL

$UDELFWUDGLWLRQ0RQD%DNHU

%UD]LOLDQWUDGLWLRQ+HORLVD*RQoDOYHV%DUERVDDQG/LD:\OHU

%ULWLVKWUDGLWLRQ5RJHU(OOLVDQG/L]2DNOH\%URZQ

%XOJDULDQWUDGLWLRQ$QQD/LORYD

&DQDGLDQWUDGLWLRQ-HDQ'HOLVOH

&KLQHVHWUDGLWLRQ(YD+XQJDQG'DYLG3ROODUG

&]HFKWUDGLWLRQ=ODWD.XIQHURYiDQG(ZDOG2VHUV

'DQLVKDQG1RUZHJLDQWUDGLWLRQV9LJJR+M¡UQDJHU3HGHUVHQDQG3HU4YDOH

'XWFKWUDGLWLRQ7KHR+HUPDQV

)LQQLVKWUDGLWLRQ$QGUHZ&KHVWHUPDQ

)UHQFKWUDGLWLRQ0\ULDP6DODPD&DUU

*HUPDQWUDGLWLRQ+DUDOG.LWWHODQG$QGUHDV3ROWHUPDQQ

*UHHNWUDGLWLRQ'DYLG&RQQROO\DQG$OLNL%DFRSRXORX+DOOV

+HEUHZWUDGLWLRQ*LGHRQ7RXU\

+XQJDULDQWUDGLWLRQ*\|UJ\5DGy

,FHODQGLFWUDGLWLRQ.HQHYD.XQ]

,QGLDQWUDGLWLRQ5DPHVK.ULVKQDPXUWK\

,WDOLDQWUDGLWLRQ5LFFDUGR'XUDQWL

-DSDQHVHWUDGLWLRQ0DVDRPL.RQGRDQG-XG\:DNDED\DVKL

/DWLQWUDGLWLRQ/RXLV*.HOO\

/DWLQ$PHULFDQWUDGLWLRQ*HRUJHV/%DVWLQ

3HUVLDQWUDGLWLRQ$KPDG.DULPL+DNNDN

3ROLVKWUDGLWLRQ(OĪELHWD7DEDNRZVND

5RPDQLDQWUDGLWLRQ-iQRV.RKQ

5XVVLDQWUDGLWLRQ9LOHQ1.RPLVVDURY

6ORYDNWUDGLWLRQ=ODWD.XIQHURYi(ZDOG2VHUVDQG%UDĖR+RFKHO

6SDQLVKWUDGLWLRQ$QWKRQ\3\P

6ZHGLVKWUDGLWLRQ/DUV:ROOLQ

7XUNLVKWUDGLWLRQ6DOLKD3DNHU

%LEOLRJUDSK\

,QGH[

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_vii.html11/3/2007 10:35:00 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_viii.html

3DJHYLLL

/LVWRIILJXUHVDQGWDEOHV )LJXUHV

)LJXUH Informal graph showing the history of machine translation

)LJXUH The pyramid diagram, probably first used by Vauquois (1968)

)LJXUH ‘A framework for mechanical translation’ from Yngve (1957)

)LJXUH Two possible linguistic representations for the sentence The machine should be turned on

)LJXUH Hieroglyphic forms of humans and animals on Stela D at Copan, Honduras

)LJXUH ‘La Colombe poignardée et le jet d’eau’ by Guillaume Apollinaire

)LJXUH ‘Il pleut’ by Guillaume Apollinaire

)LJXUH Terminology

)LJXUH Holmes’ map of translation studies

)LJXUH Toury’s map of the relation between translation studies and its applied extensions

)LJXUH Translator-training institutions: frequency of creation over five-year periods

7DEOHV

7DEOH Typology of translation

7DEOH Translated works published in Iceland

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_viii.html11/3/2007 10:35:01 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_ix.html

3DJHL[

&RQVXOWDQWHGLWRUV (XJHQH$1LGD &RQVXOWDQWWR$PHULFDQ%LEOH6RFLHW\3HQQV\OYDQLD86$ 0DULO\Q*DGGLV5RVH 'LVWLQJXLVKHG6HUYLFH3URIHVVRU&HQWUHIRU5HVHDUFKLQ7UDQVODWLRQ6WDWH8QLYHUVLW\RI1HZ
file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_ix.html11/3/2007 10:35:03 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_x.html

3DJH[

&RQWULEXWRUV 0LFKDHO$OSHUW 8QLYHUVLW\RI:HVWPLQVWHU/RQGRQ8. -DQHW$OWPDQ &RQIHUHQFHLQWHUSUHWHU8. *XQLOOD$QGHUPDQ 8QLYHUVLW\RI6XUUH\8. $OLNL%DFRSRXORX+DOOV 8QLYHUVLW\RI$WKHQV*UHHFH 0RQD%DNHU 80,670DQFKHVWHU8. 0DWWKLMV%DNNHU 8QLYHUVLWHLWYDQ$PVWHUGDP7KH1HWKHUODQGV 3DXO%DQGLD 0DUWLQLTXH +HORLVD*RQoDOYHV%DUERVD )HGHUDO8QLYHUVLW\RI5LRGH-DQHLUR%UD]LO *HRUJHV/%DVWLQ 8QLYHUVLWpGH0RQWUHDO4XHEHF&DQDGD $OOLVRQ%HHE\/RQVGDOH 8QLYHUVLWDW$XWRQzPDGH%DUFHORQD 5RJHU,%HOO 8QLYHUVLW\RI/DQFDVWHU8. *RUGRQ%URWKHUVWRQ 8QLYHUVLW\RI(VVH[8.DQG ,QGLDQD8QLYHUVLW\%ORRPLQJWRQ86$ 3HWHU%XVK 0LGGOHVH[8QLYHUVLW\8. 0RQLTXH&DPLQDGH &DODFHLWH6SDLQ /RUL&KDPEHUODLQ &DOLIRUQLD86$ $QGUHZ&KHVWHUPDQ 8QLYHUVLW\RI+HOVLQNL)LQODQG 'DYLG&RQQROO\ ,RQLDQ8QLYHUVLW\&RUIX*UHHFH *X\&RRN ,QVWLWXWHRI(GXFDWLRQ 8QLYHUVLW\RI/RQGRQ8. 0LFKDHO&URQLQ 'XEOLQ&LW\8QLYHUVLW\,UHODQG 'LUN'HODEDVWLWD )DFXOWpV8QLYHUVLWDLUHV1RWUH'DPHGHOD3DL[1DPXU%HOJLXP -HDQ'HOLVOH 8QLYHUVLWpG¶2WWDZD&DQDGD 5LFFDUGR'XUDQWL 8QLYHUVLWjGL5RPDµ/D6DSLHQ]D¶,WDO\ 8PEHUWR(FR 8QLYHUVLW\RI%RORJQD,WDO\ 5RJHU(OOLV 8QLYHUVLW\RI:DOHV&DUGLII8. 5XWK(YDQV 8QLYHUVLW\RI:DOHV&DUGLII8. 3HWHU)DZFHWW 8QLYHUVLW\RI%UDGIRUG8. $UPLQ3DXO)UDQN *HRUJ$XJXVW8QLYHUVLWlW*|WWLQJHQ*HUPDQ\

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_x.html11/3/2007 10:35:04 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xi.html

3DJH[L

.DUO+HLQ])UHLJDQJ 8QLYHUVLWlWGHV6DDUODQGHV6DDUEUFNHQ*HUPDQ\ 0DULO\Q*DGGLV5RVH 6WDWH8QLYHUVLW\RI1HZ
file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xi.html11/3/2007 10:35:05 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xii.html

3DJH[LL

&DURO0DLHU .HQW6WDWH8QLYHUVLW\86$ .LUVWHQ0DOPNM U 8QLYHUVLW\RI&DPEULGJH8. ,DQ0DVRQ +HULRW:DWW8QLYHUVLW\(GLQEXUJK8. +DVVDQ0XVWDSKD 6XOWDQ4DERRV8QLYHUVLW\2PDQDQG8QLYHUVLW\RI6DOIRUG8. 6LUL1HUJDDUG %RORJQD,WDO\ (XJHQH$1LGD $PHULFDQ%LEOH6RFLHW\3HQQV\OYDQLD86$ %ODLVH1NZHQWL$]HK 80,670DQFKHVWHU8. /L]2DNOH\%URZQ 8QLYHUVLW\RI:DOHV&DUGLII8. (ZDOG2VHUV /LWHUDU\WUDQVODWRU5HDGLQJ8. 6DOLKD3DNHU %R÷D]LoL8QLYHUVLW\,VWDQEXO7XUNH\ 9LJJR+M¡UQDJHU3HGHUVHQ 8QLYHUVLW\RI&RSHQKDJHQ'HQPDUN 'DYLG3ROODUG 7KH&KLQHVH8QLYHUVLW\RI+RQJ.RQJ +RQJ.RQJ $QGUHDV3ROWHUPDQQ *HRUJ$XJXVW8QLYHUVLWlW*|WWLQJHQ*HUPDQ\ $QWKRQ\3\P 8QLYHUVLWDW5RYLUDL9LUJLOL7DUUDJRQD6SDLQ 3HU4YDOH /LWHUDU\WUDQVODWRU1RUZD\ ‚*\|UJ\5DGy +XQJDU\ 'RXJODV5RELQVRQ 8QLYHUVLW\RI0LVVLVVLSSL86$ -XDQ&6DJHU 80,670DQFKHVWHU8. 0\ULDP6DODPD&DUU 8QLYHUVLW\RI6DOIRUG8. &KULVWLQD6FKlIIQHU $VWRQ8QLYHUVLW\8. 0DUN6KXWWOHZRUWK 8QLYHUVLW\RI/HHGV8. +DUROG/6RPHUV 80,670DQFKHVWHU8. (OĪELHWD7DEDNRZVND .UDNRZ3RODQG *LGHRQ7RXU\ 7HO$YLY8QLYHUVLW\,VUDHO +RUVW7XUN *HRUJ$XJXVW8QLYHUVLWlW*|WWLQJHQ*HUPDQ\ .LWW\YDQ/HXYHQ=ZDUW 8QLYHUVLWHLWYDQ$PVWHUGDP7KH1HWKHUODQGV /DZUHQFH9HQXWL 7HPSOH8QLYHUVLW\3KLODGHOSKLD86$ +DQV-9HUPHHU ,QVWLWXWIUhEHUVHW]HQXQG'ROPHWVFKHQ +HLGHOEHUJ*HUPDQ\ &HFLOLD:DGHQVM| /LQN|SLQJ8QLYHUVLW\6ZHGHQ -XG\:DNDED\DVKL 7KH8QLYHUVLW\RI4XHHQVODQG$XVWUDOLD :ROIUDP:LOVV 8QLYHUVLWlWGHV6DDUODQGHV6DDUEUFNHQ*HUPDQ\ /DUV:ROOLQ ,QVWLWXWLRQHQIRUQRUGLVNDVSUnN8SSVDOD6ZHGHQ -XGLWK:RRGVZRUWK &RQFRUGLD8QLYHUVLW\0RQWUHDO&DQDGD /LD:\OHU 8QLYHUVLGDGHGH6mR3DXOR%UD]LO

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xii.html11/3/2007 10:35:06 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xiii.html

3DJH[LLL

,QWURGXFWLRQ ,Q0D\,UHFHLYHGDSKRQHFDOOIURP6LPRQ%HOOIRUPHU/DQJXDJH5HIHUHQFH(GLWRUDW5RXWOHGJHZKR ZDQWHGWRNQRZLI,KDGDQ\VXJJHVWLRQVIRUDUHIHUHQFHZRUNRQWUDQVODWLRQVWXGLHVSRVVLEO\DGLFWLRQDU\ 6LPRQDPRQJPDQ\RWKHUVKDGEHJXQWRVHHWUDQVODWLRQVWXGLHVDVDQH[FLWLQJQHZGLVFLSOLQHSHUKDSVWKH GLVFLSOLQHRIWKHV$QGLQGHHGWUDQVODWLRQVWXGLHVKDVQRWRQO\IXOILOOHGRXUH[SHFWDWLRQVEXWJUHDWO\ H[FHHGHGWKHP:HQHHGRQO\WKLQNRIRQHDUHDLQZKLFKWUDQVODWLRQVWXGLHVKDVIORXULVKHGEH\RQGDQ\RQH¶V H[SHFWDWLRQVQDPHO\WKHDFDGHPLFL]DWLRQRIWUDQVODWRUDQGLQWHUSUHWHUWUDLQLQJWRDSSUHFLDWHWKHSKHQRPHQDO VSHHGZLWKZKLFKWKHGLVFLSOLQHDVDZKROHKDVHVWDEOLVKHGLWVHOILQWKHV7KHHQWU\RQ7UDQVODWRUWUDLQLQJ LQVWLWXWLRQVE\&DPLQDGHDQG3\PWKLVYROXPH GRFXPHQWVWKHGUDPDWLFULVHLQWKHQXPEHURIXQLYHUVLW\OHYHO LQVWLWXWLRQVZKLFKRIIHUGHJUHHVLQWUDQVODWLRQDQGRULQWHUSUHWLQJµ)URPLQWKHQLQWKH JOREDOQXPEHUKDGULVHQWRDWOHDVWLQ¶ 1HZGLVFLSOLQHVGLVFLSOLQHVµLQWKHPDNLQJ¶DVLWZHUHDUHSDUWLFXODUO\H[FLWLQJIRUWKHULFKUHVHDUFKSRWHQWLDO WKH\KROGDQGWKHVKHHULQWHOOHFWXDOHQHUJ\WKH\DUHFDSDEOHRIJHQHUDWLQJ7KLVLQWHOOHFWXDOHQHUJ\FDQDWWUDFW² DVLWKDVGRQHLQWKHFDVHRIWUDQVODWLRQVWXGLHV²WKHLQWHUHVWRIVFKRODUVZRUNLQJZLWKLQPRUHWUDGLWLRQDO GLVFLSOLQHVEHFDXVHLWFDQUHYLWDOL]HDVWDLGIUDPHZRUNZLWKQHZFKDOOHQJHVQHZDYHQXHVRIHQTXLU\DQGQHZ SHUVSHFWLYHVRQSXUVXLQJVXFKHQTXLU\+HQFHWKHFXUUHQWLQWHUHVWLQWUDQVODWLRQDFURVVDYDULHW\RIGLVFLSOLQHV IURPOLQJXLVWLFVWRHWKQRJUDSK\DQGIURPFXOWXUDOVWXGLHVWRSV\FKRORJ\WRQDPHRQO\DIHZ 7KHYLYDFLW\DQGGLYHUVLW\WKDWZHILQGVRDWWUDFWLYHLQQHZGLVFLSOLQHVDUHDFRQVHTXHQFHRIWKHIDFWWKDWWKHLU SRWHQWLDOLVDV\HWXQUHDOL]HGRULVLQWKHSURFHVVRIEHLQJUHDOL]HG$QGWKLVLVSUHFLVHO\ZK\WKHµVWDWHRIWKH DUW¶RIDQHPHUJLQJGLVFLSOLQHVXFKDVWUDQVODWLRQVWXGLHVLVQRWRULRXVO\GLIILFXOWWRFDSWXUHLQDZRUNRI UHIHUHQFH$OOHQF\FORSHGLDVWKLVRQHLQFOXGHGDUHLQHYLWDEO\RXWRIGDWHEHIRUHWKH\KLWWKHSUHVV²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

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xiii.html11/3/2007 10:35:08 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xiv.html

3DJH[LY

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µWUDQVODWLRQ¶DQGWKHNLQGVRIFRQWH[WVLQZKLFKWUDQVODWRUVDQGLQWHUSUHWHUVKDYHVRPHWLPHV KDGWRRSHUDWH7KHVHµJOREDO¶LQVLJKWVZRXOGEHGLIILFXOWLIQRWLPSRVVLEOHWRGUDZIURPDVPDOOQXPEHURI PRUHGHWDLOHGKLVWRULHV$EULHIRXWOLQHRIDQXPEHURIWKHVHJOREDOSDWWHUQVPD\EHXVHIXODWWKLVSRLQW

3URILOHRIWUDQVODWRUVDQGLQWHUSUHWHUV 2QHRIWKHPRVWLQWHUHVWLQJDQGSRWHQWLDOO\SURGXFWLYHDUHDVRIUHVHDUFKWRHPHUJHIURPWKHKLVWRULFDOVHFWLRQ RIWKLVHQF\FORSHGLDFRQFHUQVWKHNLQGRIVRFLDORUHWKQLFJURXSVWKDWWUDQVODWRUVDQGLQWHUSUHWHUVKDYHW\SLFDOO\ EHORQJHGWRGXULQJYDULRXVSHULRGV 7UDQVODWRUVDQGLQWHUSUHWHUVRQWKHZKROHVHHPWRKDYHKLVWRULFDOO\EHORQJHGWRPLQRULW\JURXSVRIRQHW\SH RUDQRWKHU)RUH[DPSOHPDQ\LQWHUSUHWHUVLQWKH1HZ:RUOGGXULQJWKHHDUO\H[SHGLWLRQVZHUHQDWLYH LQGLDQVRIWHQVHUYDQWVDQGWKHOLNHDPLQRULW\JURXSQRWLQWHUPVRIQXPEHUVDWWKLVVWDJHEXWLQWHUPVRI SROLWLFDODQGHFRQRPLFSRZHU,QIDFWWKHILUVWJHQHUDWLRQRILQWHUSUHWHUVLQWKH1HZ:RUOGZHUHODUJHO\ QDWLYHVZKRZHUHFDSWXUHGDQGWUDLQHGDVLQWHUSUHWHUVE\H[SORUHUVVXFKDV-DFTXHV&DUWLHULQ&DQDGDDQG &KULVWRSKHU&ROXPEXVLQ/DWLQ$PHULFD,QWKH8QLWHG6WDWHV6TXDQWR²DSURPLQHQWLQGLDQLQWHUSUHWHU²ZDV LQLWLDOO\FDSWXUHGE\DQ(QJOLVKFDSWDLQDQGWDNHQWR(QJODQG$VLPLODUSDWWHUQH[LVWVRXWVLGHWKH1HZ:RUOG LQERWK(XURSHDQDQGQRQ(XURSHDQFRXQWULHV,Q7XUNH\GXULQJWKHILIWHHQWKDQGVL[WHHQWKFHQWXULHV WUDQVODWRUVDQGLQWHUSUHWHUVZHUHFKRVHQIURP*UHHN,WDOLDQ*HUPDQ+XQJDULDQDQG3ROLVKFRQYHUWVWR,VODP ,Q(J\SWLQWKHHDUO\QLQHWHHQWKFHQWXU\WKHEHVWNQRZQOLWHUDU\WUDQVODWRUVZHUH&KULVWLDQVRIRQH GHQRPLQDWLRQRUDQRWKHU3URWHVWDQW2UWKRGR[0DURQLWH DQGRIWHQRI/HEDQHVHRU6\ULDQRULJLQ,QWKH VDQGVLQ&]HFKRVORYDNLDVLPXOWDQHRXVLQWHUSUHWLQJZDVSURYLGHGE\ZDUWLPHpPLJUpVLQWKHFDVH RI(QJOLVK E\-HZLVKVXUYLYRUVRIFRQFHQWUDWLRQFDPSVLQWKHFDVHRI*HUPDQ DQGE\VHFRQGJHQHUDWLRQ 5XVVLDQpPLJUpVLQWKHFDVHRI5XVVLDQ 7KHVHDUHDOOPLQRULW\JURXSVDQGPLJUDQWV,WLVTXLWHSRVVLEOHWKDWD VLPLODUSURILOHH[LVWVIRUFRPPXQLW\DQGFRXUWLQWHUSUHWHUVWRGD\LQFRXQWULHVVXFKDV%ULWDLQ6ZHGHQWKH86 DQG$XVWUDOLDWKHPDMRULW\PD\ZHOOSURYHWREHVHFRQGJHQHUDWLRQLPPLJUDQWVEHORQJLQJWRHWKQLFPLQRULW\ JURXSV

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xiv.html11/3/2007 10:35:09 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xv.html

3DJH[Y

7KHSDWWHUQLVQRWWRWDOO\FRQVLVWHQWRIFRXUVHEXWWKHQSDWWHUQVQHYHUDUH,Q$IULFDIRULQVWDQFHLQYHU\HDUO\ WLPHVLQWHUSUHWLQJZDVDKHUHGLWDU\DQGKLJKO\UHYHUHGSURIHVVLRQSHUIRUPHGE\µZLVHPHQ¶ERUQWRRWKHU µZLVHPHQ¶,Q&KLQDWKHPRVWDFWLYHDQGSURPLQHQWWUDQVODWRUVLQHDUO\WLPHVZHUHPDLQO\%XGGKLVWPRQNV 7KHVHJURXSVFDQQRWEHWKRXJKWRIDVPLQRULWLHVLQWKHSROLWLFDORUHFRQRPLFVHQVHQRULQWHUPVRISRZHU$QG RIFRXUVHEHLQJPHPEHUVRIPLQRULW\JURXSVGRHVQRWQHFHVVDULO\PHDQWKDWWUDQVODWRUVDQGLQWHUSUHWHUVGLGQRW DFKLHYHDKLJKVWDWXV,Q7XUNH\IRULQVWDQFHµGUDJRPDQV¶ZHUHKHOGLQKLJKHVWHHPDQGHDUQHGYHU\KLJK LQFRPHVEHWZHHQWKHILIWHHQWKDQGQLQHWHHWKFHQWXULHVWKHUHZDVHYHQD7UDQVODWRUV¶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²LQ/DWLQ$PHULFD&DQDGDDQGWKH8QLWHG6WDWHVERWKDUH SURPLQHQW7KHUROHRIQDWLYHLQWHUSUHWHUVLVRIFRXUVHVRFLDOO\DQGSV\FKRORJLFDOO\PRUHFRPSOH[DQGPDQ\ ZHUHRIWHQEUDQGHGDVWUDLWRUVE\WKHLUSHRSOH0DOLQFKLVWDLVDWHUPRIDEXVHLQ0H[LFRDQGDPRQJWKH &KLFDQRFRPPXQLW\LQ$PHULFDLWLVXVHGWRUHIHUWRVRPHRQHZKRVHOOVRXWRUEHWUD\VDFDXVHEHFDXVH 0DOLQFKH'RxD0DULQD ZKRLQWHUSUHWHGIRU+HUQiQ&RUWpVLQWKHHDUO\VL[WHHQWKFHQWXU\ZDVKHDYLO\ LPSOLFDWHGLQKLVFRORQLDOVFKHPHVDFWLQJDVKLVLQIRUPDQWDQGZDUQLQJKLPRIDPEXVKHVE\KHUSHRSOH7KH VWDWXVRIQDWLYHLQWHUSUHWHUVLQWKHVHFRQWH[WVZDVQRWSDUWLFXODUO\KLJKXQOLNHWKHLUFRORQLDOFRXQWHUSDUWVDQG ZHVHHLQ$IULFDIRULQVWDQFHDGLVWLQFWGHWHULRUDWLRQLQVWDWXVZLWKWKHDUULYDORIFRORQLDOLVP :RPHQDQLPSRUWDQWPLQRULW\JURXSZHUHRIWHQQRWDOORZHGWRZRUNDVWUDQVODWRUVIRUH[DPSOHWKH SURIHVVLRQRIVZRUQWUDQVODWRULQ%UD]LOZDVUHJXODWHGE\5R\DO'HFUHHLQDQGZRPHQZHUHH[SOLFLWO\ EDUUHGIURPWKHSURIHVVLRQ

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µZLVHPHQ¶LQWKHRUDOWUDGLWLRQRI$IULFDZKRSDVVHGRQWKHLU VNLOOVWRWKHLUVRQV2WKHUH[DPSOHVLQFOXGHWKHWVXMLLVLQ-DSDQZKRH[HUFLVHGIDPLO\PRQRSROLHVRQ LQWHUSUHWLQJLQWKLVDUHDIURPWKHVHYHQWHHQWKFHQWXU\XQWLOWKHHQGRI-DSDQ¶VLVRODWLRQLQWKHVHFRQGKDOIRIWKH QLQHWHHQWKFHQWXU\7KHUHDUHDOVRWKH*UHHN3KDQDULRWVLQ7XUNH\LQWKHVHYHQWHHQWKDQGHLJKWHHQWKFHQWXULHV ZKRVLPLODUO\KDGVROHFRQWURORIWKHSURIHVVLRQ$OOWKHVHJURXSVZHUHKLJKO\UHJDUGHGE\WKHLUFRPPXQLWLHV DQGHDUQHGDYHU\UHVSHFWDEOHOLYLQJ

:RUNLQJFRQWH[WV $QRWKHULQWHUHVWLQJDUHDZRUWKLQYHVWLJDWLQJ

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xv.html11/3/2007 10:35:10 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xvi.html

3DJH[YL

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µRQIRRW¶ ,Q&KLQDLQWKHHDUO\FHQWXULHV$'LQWHUSUHWHUVSOD\HGDQLPSRUWDQWUROHLQ%XGGKLVWWUDQVODWLRQIRUXPVZKLFK ZHUHERWKLQWHQVLYHVHPLQDUVRQ%XGGKLVWVXWUDVDQGDOVRPHDQWWRSURGXFH%XGGKLVWWH[WVLQ&KLQHVH WUDQVODWLRQ,QWHUSUHWHUVDFWHGDVLQWHUPHGLDULHVEHWZHHQDµ&KLHI7UDQVODWRU¶ZKRRIWHQNQHZQR&KLQHVHEXW ZKRZDVD%XGGKLVWPRQNDQGSURYLGHGH[SODQDWLRQVRIWKH%XGGKLVWWH[WVDQGD&KLQHVHµ5HFRUGHU¶ZKR ZDVWKHSHUVRQUHVSRQVLEOHIRUSURGXFLQJDWUDQVODWLRQRQWKHEDVLVRIWKHPRQN¶VH[SODQDWLRQ ,Q7XUNH\GUDJRPDQVZHUHXVHGLQLQVWLWXWLRQVVXFKDVWKH6FKRRORI0LOLWDU\(QJLQHHULQJLQWKHHLJKWHHQWK FHQWXU\WRLQWHUSUHWIRUIRUHLJQLQVWUXFWRUVZKRGLGQRWVSHDN7XUNLVK$QGWKHVDPHKDSSHQHGLQ(J\SWDURXQG WKHPLGQLQHWHHQWKFHQWXU\ZKHQWKHYDULRXVVFKRROVVHWXSE\0XKDPPHG$OLUHOLHGRQIRUHLJQLQVWUXFWRUV ZKRKDGWRKDYHLQWHUSUHWHUVLQWKHFODVVURRPWRFRPPXQLFDWHZLWKWKHLUVWXGHQWV

,QFHQWLYHVIRUWUDQVODWLRQDFWLYLW\ 7KHLQFHQWLYHVZKLFKJDYHULVHWRSHULRGVRILQWHQVLYHWUDQVODWLRQDFWLYLW\LQGLIIHUHQWSDUWVRIWKHZRUOGKDYH YDULHGDJUHDWGHDORYHUWKHFHQWXULHV2QHVXFKLQFHQWLYHZDVWKHVSUHDGRI%XGGKLVPLQ&KLQDWKHQHHGWR WUDQVODWH%XGGKLVWVXWUDVLQWR&KLQHVHVWDUWLQJDURXQGWKHPLGVHFRQGFHQWXU\VXSSRUWHGDPDVVLYHWUDQVODWLRQ PRYHPHQWRIWHQVSRQVRUHGE\WKHJRYHUQPHQWODVWLQJIRUVRPHQLQHFHQWXULHV2WKHULQFHQWLYHVLQFOXGHWKH PDVVLYHFDPSDLJQVWRWUDQVODWHWKH%LEOHLQPRVWRI(XURSHDVZHOODV*UHHNFODVVLFVDQGOHDUQLQJLQJHQHUDO LQWKH,VODPLF:RUOGDQGODWHULQ(XURSH7KH4XU¶ƗQXQOLNHWKH%LEOHKDVQHYHUVXSSRUWHGDVHULRXV WUDQVODWLRQPRYHPHQWDQ\ZKHUHLQWKHZRUOGEHFDXVHRIWKHEHOLHILQLWVXQWUDQVODWDELOLW\VHH485¶Ɩ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²QDPHO\WKHWUDQVODWLRQRIDQFLHQW*UHHNWH[WVDQGRIWKH1HZ7HVWDPHQW ²ZHUHQRWSUHVHQWLQ*UHHFHVLQFHWKHRULJLQDOWH[WVUHPDLQHGUHODWLYHO\DFFHVVLEOHWR*UHHNUHDGHUVIRUD ORQJWLPH $QRWKHUPDMRULQFHQWLYHIRUPDVVLYHWUDQVODWLRQDFWLYLW\PRUHW\SLFDORIWKHQLQHWHHQWKDQGWZHQWLHWK FHQWXULHVLVWKHHVWDEOLVKPHQWRIRIILFLDOELOLQJXDOLVPLQFRXQWULHVVXFKDV&DQDGD)LQODQGDQG%HOJLXP ZKLFKWHQGVWRVXSSRUWODUJHVFDOHSURJUDPPHVRIDGPLQLVWUDWLYHDQGOHJDOWUDQVODWLRQUDWKHUWKDQWUDQVODWLRQ RIUHOLJLRXVRUDFDGHPLFWH[WV DQGRIFRXUVHVLPXOWDQHRXVLQWHUSUHWLQJLQVXFKFRQWH[WVDVSDUOLDPHQWDU\ VHVVLRQV$QGOLQNHGWRWKLVW\SHRILQFHQWLYHLVWKHRIILFLDOUHFRJQLWLRQRIWKHULJKWVRIOLQJXLVWLFDQGHWKQLF PLQRULWLHVWREHSURYLGHGZLWKLQWHUSUHWHUVLQFRXUWVDQGVLPLODUVLWXDWLRQVDVZHOODVRIILFLDOGRFXPHQWVLQ WKHLURZQODQJXDJHV7RGD\LWZRXOGVHHPWKHPDLQLPSHWXVIRUWUDQVODWLRQLVQRORQJHUVSHFLILFUHOLJLRXV PRYHPHQWVRU

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xvi.html11/3/2007 10:35:12 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xvii.html

3DJH[YLL

LQWHUHVWLQWKHFODVVLFVEXWUDWKHURIILFLDOSROLFLHVZKLFKUHFRJQL]HDQGVXSSRUWOLQJXLVWLFKHWHURJHQHLW\ LQFOXGLQJRIILFLDOELOLQJXDOLVPUHFRJQLWLRQRIPLQRULW\ULJKWVWKHHVWDEOLVKPHQWRISROLWLFDODQGHFRQRPLF XQLRQVVXFKDVWKH(8 DQGVRRQ$JDLQWKLVNLQGRIVWDWHPHQWVHHPVUDWKHUEDQDOXQWLORQHSODFHVLWDJDLQVW WKHEDFNGURSRIRWKHULQFHQWLYHVGXULQJGLIIHUHQWKLVWRULFDOSHULRGV

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¶VZKLFKDOHUWXVWRWKH SRVVLELOLW\RIVXFKWKLQJVDVLQWHUVHPLRWLFDQGLQWUDOLQJXDOWUDQVODWLRQEXWZHGRQRWPDNHDQ\JHQXLQHXVHRI VXFKFODVVLILFDWLRQVLQRXUUHVHDUFK $QLQJHQLRXVDQQRWDWLRQV\VWHPZDVXVHGLQ-DSDQDURXQGWKHQLQWKFHQWXU\WKLVZDVNQRZQDVNDPEXQ NXQGRNXRULQWHUSUHWLYHUHDGLQJRI&KLQHVH7KHV\VWHPZDVXVHGWRHQDEOHWKH-DSDQHVHWRUHDG&KLQHVHWH[WV ZLWKRXWµWUDQVODWLRQ¶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²HTXDOO\LPSRUWDQW²WKDWWKHDFWLYLWLHVRIWUDQVODWLRQDQGLQWHUSUHWLQJKDYHWDNHQ VXFKDZLGHYDULHW\RIIRUPVDQGKDYHRFFXUUHGLQVXFKDPXOWLWXGHRIFRQWH[WVRYHUWKH\HDUVWKDWZHDUH REOLJHGWRORRNDWWKHKLVWRULFDOIDFWVEHIRUHZHFDQHYHQEHJLQWRGHYHORSWKHRUHWLFDODFFRXQWVIRUWKLV FRPSOH[SKHQRPHQRQ

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p6DUDK)RXONHVDQG6DUDK+DOODOOKHOSHGDW YDULRXVVWDJHVRIWKHSURMHFWDQGKDYHEHHQDSOHDVXUHWRZRUNZLWK ,DPJUDWHIXOWRDQXPEHURIFROOHDJXHVIRUYDOXDEOHDGYLFHRQVRPHRIWKHOHVVµWUDGLWLRQDO¶WRSLFVWKDWZHUH HYHQWXDOO\LQFOXGHGLQ3DUW,DQGIRUSXWWLQJPHLQWRXFKZLWKVXLWDEOHFRQWULEXWRUVIRUHQWULHVLQERWK3DUW, DQG3DUW,,LQSDUWLFXODU,ZLVKWRDFNQRZOHGJHP\GHEWWR/DZUHQFH9HQXWL'RXJODV5RELQVRQ$QWKRQ\ 3\P'LUN'HODEDVWLWD7KHR+HUPDQV0DULO\Q*DGGLV5RVHDQG6XVDQ%DVVQHWW'LUN'HODEDVWLWDNLQGO\ VSHQWPDQ\KRXUVFKHFNLQJWKHELEOLRJUDSK\IRUPLVVLQJDFFHQWVDQGRWKHUHUURUV7KHR+HUPDQV&OLYH+ROHV 0\ULDP6DODPD&DUU0DHYH2ORKDQ3HWHU)DZFHWWDQG3DXO

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xvii.html11/3/2007 10:35:13 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xviii.html

3DJH[YLLL

%HQQHWWWRRNRQWKHGLIILFXOWWDVNRIµHGLWLQJWKHHGLWRU¶SURYLGLQJGHWDLOHGFRPPHQWVRQP\RZQ FRQWULEXWLRQVWRWKLVYROXPHDQGVDYLQJPHVRPHSRWHQWLDOHPEDUUDVVPHQWLQWKHSURFHVV .LQJD.ODXG\UHYLVHGWKHILQDOVHFWLRQRIWKHHQWU\RQWKH+XQJDULDQWUDGLWLRQWREULQJLWXSWRGDWHIROORZLQJ WKHXQIRUWXQDWHGHDWKRI'U*\|UJ\5DGyLQ6DUD/DYLRVD%UDLWKZDLWHSURYLGHGLQYDOXDEOHVXSSRUWDVP\ 5HVHDUFK$VVLVWDQWIRUSUDFWLFDOO\WKHZKROHRI-XDQ6DJHUKHOSHGPHHGLWDQXPEHURIHQWULHVZKHQ, VWDUWHGWRUXQRXWRIHQHUJ\LQWKHVXPPHURIDQG.LUVWHQ0DOPNM UVWHSSHGLQODWHUWKDWVXPPHUWRJLYH WKHHGLWLQJDILQDOSXVK (YHQZLWKVRPXFKJRRGZLOODQGJHQHURXVDVVLVWDQFHIURPDODUJHQXPEHURISHRSOHWKHUHDUHERXQGWREH VRPHHUURUVDQGLQIHOLFLWLHVOHIWLQWKLVYROXPHJLYHQWKHVFRSHRIWKHHQWHUSULVH)RUWKHVH,KDYHWRWDNHIXOO UHVSRQVLELOLW\ 021$%$.(5$35,/

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xviii.html11/3/2007 10:35:14 PM

file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xix.html

3DJH[L[

3HUPLVVLRQVDFNQRZOHGJHPHQWV ([WUDFWRQSIURPµ$.QLJKW:DVZLWK+LV/DG\)RQGO\/\LQJ¶WUDQV1RUPDQ56KDSLURIURPWKH 0RGHUQ/LEUDU\FROOHFWLRQ$Q$QWKRORJ\RI0HGLHYDO/\ULFVHG$)ORUHV1HZ
file:///e|//www.netlibrary.com/nlreader/nlReader.dll@BookID=97284&FileName=page_xix.html11/3/2007 10:35:16 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xx.html

3DJH[[

7KLVSDJHLQWHQWLRQDOO\OHIWEODQN

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_xx.html11/3/2007 10:35:17 PM

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_1.html

3DJH

3$57,*(1(5$/

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_1.html11/3/2007 10:18:30 PM


3DJH




3DJH

$ $FWLRQ WKHRU\RIµWUDQVODWRULDODFWLRQ¶ 7KHWKHRU\RIµWUDQVODWRULDODFWLRQ¶WUDQVODWRULVFKHV+DQGHOQ ZKLFKUHSUHVHQWVDIXQFWLRQRULHQWHGDSSURDFK WRWKHWKHRU\DQGSUDFWLFHRIWUDQVODWLRQZDVGHYHORSHGE\-XVWD+RO]0lQWWlUL 7UDQVODWLRQLVKHUH FRQFHLYHGSULPDULO\DVDSURFHVVRILQWHUFXOWXUDOFRPPXQLFDWLRQZKRVHHQGSURGXFWLVDWH[WZKLFKLVFDSDEOH RIIXQFWLRQLQJDSSURSULDWHO\LQVSHFLILFVLWXDWLRQVDQGFRQWH[WVRIXVH,QWKLVFRQFHSWLRQQHLWKHUVRXUFHDQG WDUJHWWH[WFRPSDULVRQQRUOLQJXLVWLFVKDVDQ\VLJQLILFDQWUROHWRSOD\DQGWUDQVODWLRQLVVLWXDWHGZLWKLQWKH ZLGHUFRQWH[WRIFRRSHUDWLYHLQWHUDFWLRQEHWZHHQSURIHVVLRQDOVH[SHUWV DQGFOLHQWV +RO]0lQWWlUL¶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lQWWlUL GHYHORSVLQ*HUPDQDGLVWLQFWLYHDQGKLJKO\DEVWUDFWWHUPLQRORJ\DWWLPHVHVFKHZLQJHYHQWKHWHUP µWUDQVODWLRQ¶hEHUVHW]XQJ LQRUGHUWRDYRLGWKHFRQQRWDWLRQVDQGH[SHFWDWLRQVWUDGLWLRQDOO\DWWDFKHGWRWKDW WHUP6KHDUJXHVWKDWEHFDXVHWKHYHUEµWUDQVODWH¶EHUVHW]HQ UHTXLUHVDJUDPPDWLFDOREMHFWLWWHQGVWRGLUHFW DWWHQWLRQEDFNWRZDUGVWKHWH[WWKDWLVWREHWUDQVODWHGWRWKHGHWULPHQWRIWKHWH[WWKDWLVWREHSURGXFHGDQ RULHQWDWLRQZKLFKVKHILQGVSDUWLFXODUO\XQKHOSIXO+RO]0lQWWlUL ,QKHUPRGHOVRXUFHWH[W DQDO\VLVLVUHGXFHGWRDQµDQDO\VLVRIFRQVWUXFWLRQDQGIXQFWLRQ¶II LQZKLFKWKHDFWXDOSDUWSOD\HG E\WKHVRXUFHWH[WLVH[WUHPHO\OLPLWHG7KHVRXUFHWH[WLVYLHZHGDVDPHUHWRROIRUWKHUHDOL]DWLRQRI FRPPXQLFDWLYHIXQFWLRQVLWLVWRWDOO\VXERUGLQDWHWRLWVSXUSRVHLVDIIRUGHGQRLQWULQVLFYDOXHDQGPD\ XQGHUJRUDGLFDOPRGLILFDWLRQLQWKHLQWHUHVWRIWKHWDUJHWUHDGHU7KHWUDQVODWRULVXQLODWHUDOO\FRPPLWWHGWRWKH WDUJHWVLWXDWLRQEHFDXVHLWLVSULPDULO\WKHPHVVDJHDQGWKHFRPPLVVLRQUDWKHUWKDQWKHWH[WLWVHOIWKDWKDYHWR EHUHQGHUHGIRUWKHFOLHQW,WLVPDLQO\EHFDXVHWKHVRXUFHWH[WPD\EHWKXVµGHWKURQHG¶1HZPDUNE WKDW+RO]0lQWWlUL¶VWKHRU\KDVPHWZLWKREMHFWLRQVRUUHVHUYDWLRQVHYHQE\WKHRULVWVZKRWKHPVHOYHVDSSO\D IXQFWLRQDODSSURDFKWRWUDQVODWLRQVHHIRUH[DPSOH1RUGD 1HZPDUNDOVRILQGVIDXOWZLWKWKH µPRGHUQLVWLFDEVWUDFWMDUJRQRIFRQWHPSRUDU\3XEOLF5HODWLRQV¶DQGWKHµEXVLQHVVOLNHPDQQHURIZULWLQJ¶ ZKLFKKHEHOLHYHVREVFXUHµWKHUHDOLVVXHVLQWUDQVODWLRQ¶E +RZHYHULQ+RO]0lQWWlUL¶VPRGHO WUDQVODWLRQDQGRWKHUIRUPVRIIRUHLJQODQJXDJH WH[WSURGXFWLRQDUHFRQFHLYHGDVSDUWRIUDWKHUWKDQ FRQVWLWXWLYHRIWUDQVODWRULDODFWLRQ2QHSXUSRVHRIWKHWUDQVODWRULDOWH[WRSHUDWLRQVLVWRHVWDEOLVKZKHWKHUWKH FRQWHQWDQGIRUPFRPSRQHQWVRIWKHVRXUFHWH[WDUHIXQFWLRQDOO\VXLWDEOHIRUWKHWDUJHWWH[W,QPDNLQJWKLV GHFLVLRQWKHWUDQVODWRUFDQQRWEHJXLGHGE\WKHVRXUFHWH[WDORQHEXWPXVWUHVHDUFKLQDGGLWLRQWKHWDUJHW FXOWXUH¶VFRQFHSWLRQRIWKHVXEMHFWPDWWHURIWH[W



3DJH

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lQWWlULII 7KLVKDVFOHDUFRQVHTXHQFHVIRUWKHWUDLQLQJ RIWUDQVODWRUV +RO]0lQWWlUL¶VPDLQDLPLVWRVSHFLI\WKHIDFWRUVWKDWJXLGHWUDQVODWRULDODFWLRQFRQFHLYHGDVSURIHVVLRQDOWH[W SURGXFWLRQ$QDFWLRQLVGHWHUPLQHGE\LWVIXQFWLRQDQGSXUSRVHDQGLWVRXWFRPHWRRPXVWEHMXGJHGE\WKHVH FULWHULD7KHSXUSRVHRIWKHWUDQVODWRULDODFWLRQSURFHVVLVWRSURGXFHDPHVVDJHWUDQVPLWWHU%RWVFKDIWVWUlJHU WKDWFDQEHXWLOL]HGLQVXSHURUGLQDWHFRQILJXUDWLRQVRIDFWLRQV+DQGOXQJVJHIJH ZKRVHIXQFWLRQLVWRJXLGH DQGFRRUGLQDWHFRPPXQLFDWLYHFRRSHUDWLYHDFWLRQ+RO]0lQWWlUL ,QWKHSURFHVVRIWUDQVODWRULDODFWLRQWH[WVDFWDVPHVVDJHWUDQVPLWWHUFRPSRXQGV%RWVFKDIWVWUlJHULP 9HUEXQG RIFRQWHQW7HNWRQLN VWUXFWXUHGDFFRUGLQJWRIXQFWLRQDQGUHSUHVHQWHGE\IRUPDOHOHPHQWV7H[WXU $VRXUFHWH[WLVDWH[WWRZKLFKDWUDQVODWLRQLQLWLDWRUDFOLHQWKDVDVVLJQHGSULPDULO\RUVHFRQGDULO\WKH IXQFWLRQRIVHUYLQJDVVRXUFHPDWHULDOIRUWUDQVODWRULDODFWLRQ$WDUJHWWH[WWREHXVHGHLWKHUE\WKHWUDQVODWLRQ LQLWLDWRURUE\VRPHRWKHUXVHULVWKHRXWFRPHRIDWUDQVODWLRQH[SHUW¶VWUDQVODWRULDODFWLRQ 7KHQRWLRQRIIXQFWLRQLVFHQWUDOLQWZRUHVSHFWV2QWKHRQHKDQGLWIRUFHVWKHWUDQVODWRUWRHPEHGWKHSURGXFW RIWUDQVODWRULDODFWLRQLQDFRPSOH[VLWXDWLRQRIKXPDQQHHGV2QWKHRWKHUKDQGLWIRUFHVWKHWUDQVODWRUWR HPEHGWUDQVODWRULDODFWLRQLQWKHVRFLDORUGHULHLQDVRFLHW\RUJDQL]HGE\DGLYLVLRQRIODERXU7KHPDLQUROHV LQDWUDQVODWLRQSURFHVVDUHSOD\HGE\RQHRUPRUHSHUVRQVRULQVWLWXWLRQV7KHUROHVLQFOXGHWKHLQLWLDWRUWKH FRPPLVVLRQHUWKHWH[WSURGXFHUWKHWUDQVODWRUWKHWDUJHWWH[WµDSSOLFDWRU¶DQGWKHUHFHSWRUDQGHDFKUROHLV KLJKO\FRPSOH[ 7KHWUDQVODWRULVWKHH[SHUWZKRVHWDVNLWLVWRSURGXFHPHVVDJHWUDQVPLWWHUVIRUXVHLQWUDQVFXOWXUDOPHVVDJH WUDQVIHU7RGRWKLVWKHWUDQVODWRUPXVWDWDSDUWLFXODUSODFHDQGDWDSDUWLFXODUWLPHSURGXFHDSDUWLFXODU SURGXFWIRUDSDUWLFXODUSXUSRVH7KHWUDQVODWRU¶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¶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



3DJH

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lQWWlUL¶VFRQFHSWRIWUDQVODWRULDODFWLRQLVFRQVLGHUHGUHOHYDQWIRUDOOW\SHVRIWUDQVODWLRQDQGWKHWKHRU\ LVKHOGWRSURYLGHJXLGHOLQHVIRUHYHU\GHFLVLRQWREHWDNHQE\WKHWUDQVODWRU7UDQVODWRULDODFWLRQLVLQLWLDWHG H[WHUQDOO\DQGLWVFRQGLWLRQVDUHDWOHDVWSDUWO\GHWHUPLQHGE\SXUSRVHVDQGDLPVWKDWDUHSHFXOLDUWRHDFK LQGLYLGXDOFDVHRIWUDQVODWLRQ 6HHDOVR &20081,&$7,9()81&7,21$/$3352$&+(66.23267+(25<

)XUWKHUUHDGLQJ +RO]0lQWWlUL1HZPDUNE1RUGD

&+5,67,1$6&+b))1(5

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µDQG\RXZLOOQRWUHQGHUZRUGIRUZRUG>OLNHD@IDLWKIXOWUDQVODWRU¶ ²LUUHVSHFWLYHRIZKHWKHUWKH\ZHUHIRURU DJDLQVWWKHZRUGIRUZRUGSUHFHSW²HIIHFWLYHO\UHSURGXFHGWKHORJLFE\ZKLFKDGDSWDWLRQVFRXOGEH UHFRJQL]HG 7KHJROGHQDJHRIDGDSWDWLRQZDVLQWKHVHYHQWHHQWKDQGHLJKWHHQWKFHQWXULHVWKHHSRFKRIWKHEHOOHVLQILGqOHV ZKLFKVWDUWHGLQ)UDQFHDQGWKHQVSUHDGWRWKHUHVWRIWKHZRUOGVHH)5(1&+75$',7,21 7KHYHU\IUHH WUDQVODWLRQVFDUULHGRXWGXULQJWKLVSHULRGZHUHMXVWLILHGLQWHUPVRIWKHQHHGIRUIRUHLJQWH[WV



3DJH

WREHDGDSWHGWRWKHWDVWHVDQGKDELWVRIWKHWDUJHWFXOWXUHUHJDUGOHVVRIWKHGDPDJHGRQHWRWKHRULJLQDO7KH QLQHWHHQWKFHQWXU\ZLWQHVVHGDUHDFWLRQWRWKLVµLQILGHOLW\¶VHH*(50$175$',7,21 EXWDGDSWDWLRQV FRQWLQXHGWRSUHGRPLQDWHLQWKHWKHDWUH,QWKHWZHQWLHWKFHQWXU\WKHSUROLIHUDWLRQRIWHFKQLFDOVFLHQWLILFDQG FRPPHUFLDOGRFXPHQWVKDVJLYHQULVHWRDSUHIHUHQFHIRUWUDQVSDUHQF\LQWUDQVODWLRQZLWKDQHPSKDVLVRQ HIILFLHQWFRPPXQLFDWLRQWKLVFRXOGEHVHHQDVOLFHQVLQJDIRUPRIDGDSWDWLRQZKLFKLQYROYHVUHZULWLQJDWH[W IRUDQHZUHDGHUVKLS *HQHUDOO\VSHDNLQJKLVWRULDQVDQGVFKRODUVRIWUDQVODWLRQWDNHDQHJDWLYHYLHZRIDGDSWDWLRQGLVPLVVLQJWKH SKHQRPHQRQDVGLVWRUWLRQIDOVLILFDWLRQRUFHQVRUVKLSEXWLWLVUDUHWRILQGFOHDUGHILQLWLRQVRIWKHWHUPLQRORJ\ XVHGLQGLVFXVVLQJWKLVFRQWURYHUVLDOFRQFHSW

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µUHWHUULWRULDOL]DWLRQ¶RIWKHRULJLQDOZRUNDQGDQµDQQH[DWLRQ¶ LQWKHQDPHRIWKHDXGLHQFHRIWKHQHZYHUVLRQ6DQWR\R VLPLODUO\GHILQHVDGDSWDWLRQDVDIRUPRI µQDWXUDOL]LQJ¶WKHSOD\IRUDQHZPLOLHXWKHDLPEHLQJWRDFKLHYHWKHVDPHHIIHFWWKDWWKHZRUNRULJLQDOO\KDG EXWZLWKDQDXGLHQFHIURPDGLIIHUHQWFXOWXUDOEDFNJURXQG $GDSWDWLRQLVDOVRDVVRFLDWHGZLWKWKHJHQUHVRIDGYHUWLVLQJDQG68%7,7/,1*7KHHPSKDVLVKHUHLVRQ SUHVHUYLQJWKHFKDUDFWHUDQGIXQFWLRQRIWKHRULJLQDOWH[WLQSUHIHUHQFHWRSUHVHUYLQJWKHIRUPRUHYHQWKH VHPDQWLFPHDQLQJHVSHFLDOO\ZKHUHDFRXVWLFDQGRUYLVXDOIDFWRUVKDYHWREHWDNHQLQWRDFFRXQW2WKHUJHQUHV VXFKDVFKLOGUHQ¶VOLWHUDWXUHUHTXLUHWKHUHFUHDWLRQRIWKHPHVVDJHDFFRUGLQJWRWKHVRFLROLQJXLVWLFQHHGVRID GLIIHUHQWUHDGHUVKLS3XXUWLQHQ 7KHPDLQIHDWXUHVRIWKLVW\SHRIDGDSWDWLRQDUHWKHXVHRIVXPPDUL]LQJ WHFKQLTXHVSDUDSKUDVHDQGRPLVVLRQ $GDSWDWLRQLVSHUKDSVPRVWHDVLO\MXVWLILHGZKHQWKHRULJLQDOWH[WLVRIDPHWDOLQJXLVWLFQDWXUHWKDWLVZKHQ WKHVXEMHFWPDWWHURIWKHWH[WLVODQJXDJHLWVHOI7KLVLVHVSHFLDOO\VRZLWKGLGDFWLFZRUNVRQODQJXDJH JHQHUDOO\RURQVSHFLILFODQJXDJHV1HZPDUN SRLQWVRXWWKDWLQWKHVHFDVHVWKHDGDSWDWLRQKDVWREH EDVHGRQWKHWUDQVODWRU¶VMXGJHPHQWDERXWKLVKHUUHDGHUV¶NQRZOHGJH&RVHULX DUJXHVWKDWWKLVNLQGRI DGDSWDWLRQJLYHVSUHFHGHQFHWRWKHIXQFWLRQRYHUWKHIRUPZLWKDYLHZWRSURGXFLQJWKHVDPHHIIHFWDVWKH RULJLQDOWH[W+RZHYHUZKLOHVXFKZULWHUVVWDUWIURPWKHSULQFLSOHWKDWQRWKLQJLVXQWUDQVODWDEOHRWKHUVOLNH %HUPDQ FODLPWKDWWKHDGDSWDWLRQRIPHWDODQJXDJHLVDQXQQHFHVVDU\IRUPRIH[RWLFLVP 'HILQLWLRQVRIDGDSWDWLRQUHIOHFWZLGHO\YDU\LQJYLHZVDERXWWKHFRQFHSWYLVjYLVWKHLVVXHRIUHPDLQLQJ µIDLWKIXO¶WRWKHRULJLQDOWH[W6RPHDUJXHWKDWDGDSWDWLRQLVQHFHVVDU\SUHFLVHO\LQRUGHUWRNHHSWKHPHVVDJH LQWDFWDWOHDVWRQWKHJOREDOOHYHO ZKLOHRWKHUVVHHLWDVDEHWUD\DORIWKHRULJLQDODXWKRU)RUWKHIRUPHUWKH UHIXVDOWRDGDSWFRQILQHVWKHUHDGHUWRDQDUWLILFLDOZRUOGRIµIRUHLJQQHVV¶IRUWKHODWWHUDGDSWDWLRQLV WDQWDPRXQWWRWKHGHVWUXFWLRQDQGYLRODWLRQRIWKHRULJLQDOWH[W(YHQWKRVHZKRUHFRJQL]HWKHQHHGIRU DGDSWDWLRQLQFHUWDLQFLUFXPVWDQFHVDUHREOLJHGWRDGPLWWKDWLIUHPDLQLQJIDLWKIXOWRWKHWH[WLVDVLQHTXDQRQ RIWUDQVODWLRQWKHQWKHUHLVDSRLQWDWZKLFKDGDSWDWLRQFHDVHVWREHWUDQVODWLRQDWDOO

0RGHVFRQGLWLRQVDQGUHVWULFWLRQV %\FRPSDULQJDGDSWDWLRQVZLWKWKHWH[WVRQZKLFKWKH\DUHEDVHGLWLVSRVVLEOHWRHODERUDWH



3DJH

DSURYLVLRQDOOLVWRIWKHZD\VRUPRGHV LQZKLFKDGDSWDWLRQVDUHFDUULHGRXWWKHPRWLYDWLRQVRUFRQGLWLRQV IRUWKHGHFLVLRQWRDGDSWDQGWKHOLPLWDWLRQVRUUHVWULFWLRQV RQWKHZRUNRIWKHDGDSWHU ,QWHUPVRIPRGHRIDGDSWDWLRQWKHSURFHGXUHVXVHGE\WKHDGDSWHUFDQEHFODVVLILHGDVIROORZV ƇWUDQVFULSWLRQRIWKHRULJLQDOZRUGIRUZRUGUHSURGXFWLRQRISDUWRIWKHWH[WLQWKHRULJLQDOODQJXDJH XVXDOO\DFFRPSDQLHGE\DOLWHUDOWUDQVODWLRQ ƇRPLVVLRQWKHHOLPLQDWLRQRUUHGXFWLRQRISDUWRIWKHWH[W ƇH[SDQVLRQPDNLQJH[SOLFLWLQIRUPDWLRQWKDWLVLPSOLFLWLQWKHRULJLQDOHLWKHULQWKHPDLQERG\RULQ IRRWQRWHVRUDJORVVDU\ ƇH[RWLFLVPWKHVXEVWLWXWLRQRIVWUHWFKHVRIVODQJGLDOHFWQRQVHQVHZRUGVHWFLQWKHRULJLQDOWH[WE\URXJK HTXLYDOHQWVLQWKHWDUJHWODQJXDJHVRPHWLPHVPDUNHGE\LWDOLFVRUXQGHUOLQLQJ ƇXSGDWLQJWKHUHSODFHPHQWRIRXWGDWHGRUREVFXUHLQIRUPDWLRQE\PRGHUQHTXLYDOHQWV ƇVLWXDWLRQDOHTXLYDOHQFHWKHLQVHUWLRQRIDPRUHIDPLOLDUFRQWH[WWKDQWKHRQHXVHGLQWKHRULJLQDO ƇFUHDWLRQDPRUHJOREDOUHSODFHPHQWRIWKHRULJLQDOWH[WZLWKDWH[WWKDWSUHVHUYHVRQO\WKHHVVHQWLDO PHVVDJHLGHDVIXQFWLRQVRIWKHRULJLQDO 7KHPRVWFRPPRQIDFWRUVLHFRQGLWLRQV ZKLFKFDXVHWUDQVODWRUVWRUHVRUWWRDGDSWDWLRQDUH ƇFURVVFRGHEUHDNGRZQZKHUHWKHUHDUHVLPSO\QROH[LFDOHTXLYDOHQWVLQWKHWDUJHWODQJXDJHHVSHFLDOO\ FRPPRQLQWKHFDVHRIWUDQVODWLQJPHWDODQJXDJH ƇVLWXDWLRQDOLQDGHTXDF\ZKHUHWKHFRQWH[WUHIHUUHGWRLQWKHRULJLQDOWH[WGRHVQRWH[LVWLQWKHWDUJHW FXOWXUH ƇJHQUHVZLWFKLQJDFKDQJHIURPRQHGLVFRXUVHW\SHWRDQRWKHUHJIURPDGXOWWRFKLOGUHQ¶VOLWHUDWXUH RIWHQHQWDLOVDJOREDOUHFUHDWLRQRIWKHRULJLQDOWH[W Ƈ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µLQWULQVLF¶DGDSWDWLRQLV HVVHQWLDOO\DWUDQVODWLRQSURFHGXUHZKLFKLVJXLGHGE\SULQFLSOHVRIHIIHFWLYHQHVVDQGHIILFLHQF\DQGVHHNVWR DFKLHYHDEDODQFHEHWZHHQZKDWLVWREHWUDQVIRUPHGDQGKLJKOLJKWHGDQGZKDWLVWREHOHIWXQFKDQJHG $VDJOREDOSURFHGXUHDGDSWDWLRQPD\EHDSSOLHGWRWKHWH[WDVDZKROH7KHGHFLVLRQWRFDUU\RXWDJOREDO DGDSWDWLRQPD\EHWDNHQE\WKHWUDQVODWRUKLPKHUVHOIRUPD\EHLPSRVHGE\H[WHUQDOIRUFHVIRUH[DPSOHD SXEOLVKHU¶VHGLWRULDOSROLF\ ,QHLWKHUFDVHJOREDODGDSWDWLRQFRQVWLWXWHVDJHQHUDOVWUDWHJ\ZKLFKDLPVWR UHFRQVWUXFWWKHSXUSRVHIXQFWLRQRULPSDFWRIWKHRULJLQDOWH[W7KHLQWHUYHQWLRQRIWKHWUDQVODWRULVV\VWHPDWLF DQGVKHPD\VDFULILFHIRUPDOHOHPHQWVDQGHYHQVHPDQWLFPHDQLQJLQRUGHUWRUHSURGXFHWKHIXQFWLRQRIWKH RULJLQDO $VLQWKHFDVHRIWUDQVODWLRQDGDSWDWLRQLVFDUULHGRXWXQGHUFHUWDLQUHVWULFWLRQVWKHPRVWREYLRXVRIZKLFKDUH ƇWKHNQRZOHGJHDQGH[SHFWDWLRQVRIWKHWDUJHWUHDGHUWKHDGDSWHUKDVWRHYDOXDWHWKHH[WHQWWRZKLFKWKH FRQWHQWRIWKHRULJLQDOWH[WFRQVWLWXWHVQHZRUVKDUHGLQIRUPDWLRQIRUWKHSRWHQWLDODXGLHQFH ƇWKHWDUJHWODQJXDJHWKHDGDSWHUPXVWILQGDQDSSURSULDWHPDWFKLQWKHWDUJHWODQJXDJHIRUWKHGLVFRXUVH VW\OHRIWKHRULJLQDOWH[WDQGORRNIRUFRKHUHQFHRIDGDSWLQJPRGHV



3DJH

ƇWKHPHDQLQJDQGSXUSRVHV RIWKHRULJLQDODQGWDUJHWWH[WV

7KHRUHWLFDOERXQGDULHVEHWZHHQDGDSWDWLRQDQGWUDQVODWLRQ 6RPHVFKRODUVSUHIHUQRWWRXVHWKHWHUPµDGDSWDWLRQ¶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µIHWLVKL]DWLRQ¶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²RUZKDWLVWUDGLWLRQDOO\XQGHUVWRRGE\WKHWHUPWUDQVODWLRQ²VWD\V EDVLFDOO\DWWKHOHYHORIPHDQLQJDGDSWDWLRQVHHNVWRWUDQVPLWWKHSXUSRVHRIWKHRULJLQDOWH[WDQGH[HJHVLV DWWHPSWVWRVSHOORXWWKHLQWHQWLRQVRIWKHDXWKRU7KLVNLQGRIDQDO\VLVZLOOLQHYLWDEO\OHDGWUDQVODWLRQVWXGLHV WRFRQVLGHUWKHLQIHUHQWLDOFRPPXQLFDWLRQSDWWHUQ6SHUEHUDQG:LOVRQ UDWKHUWKDQWKHWUDGLWLRQDOFRGH PRGHODVWKHPRVWDSSURSULDWHIUDPHRIUHIHUHQFHIRUWKHGLVFLSOLQHVHH&20081,&$7,9( )81&7,21$/$3352$&+(6 $GDSWDWLRQKDVDOZD\VEHHQGHILQHGLQUHODWLRQWRVRPHWKLQJHOVH²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

)XUWKHUUHDGLQJ %DVWLQ%ULVVHW'HOLVOH'RQDLUHHWDO)DUJKDO)R]*DLOOLDUG*DPELHU 0HULQR1RUGD6DQWR\R

7UDQVODWHGIURP6SDQLVKE\0DUN*UHJVRQ

*(25*(6/%$67,1

$QDO\WLFDOSKLORVRSK\DQGWUDQVODWLRQ 7KHSKHQRPHQRQRIWUDQVODWLRQDQGHVSHFLDOO\WKHQRWLRQRILQGHWHUPLQDF\KDYHEHFRPHLPSRUWDQWIRFDO SRLQWVIRUGLVFXVVLRQLQWKHSKLORVRSK\RIODQJXDJHGXULQJWKHVHFRQGKDOIRIWKHWZHQWLHWKFHQWXU\0DMRU SDUWLFLSDQWVLQWKHGHEDWHLQFOXGH:LOODUGYDQ2UPDQ4XLQHDQG'RQDOG'DYLGVRQDUHSUHVHQWDWLYHVDPSOHRI ZRUNE\RWKHUSKLORVRSKHUVFDQEHIRXQGLQ*XHQWKQHUDQG*XHQWKQHU5HXWWHU 6HHDOVR+DDV 6WLFK DQG6FKLFN 4XLQH¶VSRVLWLRQZDVRULJLQDOO\SUHVHQWHGLQWKHSKLORVRSKLFDOOLWHUDWXUHLQ4XLQH±



3DJH

EXWKDGE\WKHIROORZLQJ\HDU4XLQH IRXQGLWVZD\LQWROLWHUDWXUHGHYRWHGWRWUDQVODWLRQ%URZHU +HUHLWHQJHQGHUHGVXFKFRQVWHUQDWLRQDPRQJVRPHVFKRODUVWKDWLWZDVIRXQGQHFHVVDU\WRH[FOXGH ORJLFLDQVDQGµPHWDOLQJXLVWV¶IURPDWOHDVWRQHFRQIHUHQFHµIRUWKHVDNHRIJRRGFRQYHUVDWLRQDQGVHOI FRQILGHQFH¶$UURZVPLWKDQG6KDWWXFN)RUHZRUG +RZHYHU4XLQH¶VVXJJHVWLRQWKDWWUDQVODWLRQLV UDGLFDOO\LQGHWHUPLQDWHFRQWLQXHVWRH[FLWHVRPHZULWHUVRQWUDQVODWLRQIRULQVWDQFH%HQMDPLQ +MRUW 0DOPNM U DQG*HRUJH6WHLQHU ²QRWVXUSULVLQJO\LQYLHZRILWVSRWHQWLDO FRQVHTXHQFHVIRURXUHQWHUSULVH $FFRUGLQJWR4XLQH µLWLVRQO\UHODWLYHWRDQLQODUJHSDUWDUELWUDU\PDQXDORIWUDQVODWLRQWKDWPRVW IRUHLJQVHQWHQFHVPD\EHVDLGWRVKDUHWKHPHDQLQJRI(QJOLVKVHQWHQFHVDQGWKHQRQO\LQDYHU\SDURFKLDO VHQVHRIPHDQLQJYL]XVHLQ(QJOLVK¶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¶VSRVLWLRQLVPRVWIXOO\HODERUDWHGLQ&KDSWHU,,RI:RUGDQG2EMHFW4XLQH ZKHUHKHH[SODLQV WKDWKHLVFRQFHUQHGZLWKUDGLFDOWUDQVODWLRQµWUDQVODWLRQRIWKHODQJXDJHRIDKLWKHUWRXQWRXFKHG SHRSOH¶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¶WUHDWPHQWVXJJHVWVWUDQVODWLRQGLIIHUVRQO\LQGHJUHHDQGQRWLQNLQGIURPQRQ WUDQVODWLRQDOIRUPVRIOLQJXLVWLFLQWHUDFWLRQWKHQWKHUHVXOWVRIWKHSKLORVRSKLFDOLQYHVWLJDWLRQRIPHDQLQJZLOO EHHTXDOO\UHOHYDQWWRERWK ,QIDFWVHYHUDOSKLORVRSKLFDOSHUVSHFWLYHVRQPHDQLQJKDYHH[HUWHGLQIOXHQFHVRQWUDQVODWLRQVFKRODUV0RVWRI WKHSHUVSHFWLYHVKDYHVLQFHDURXQGEHHQµSUDJPDWLF¶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



3DJH

UHODWLYHPHULWVRIUDEELWVDQGGRJVRUFKDONDQGFKHHVHRUDERXWZKDWZHDVVRFLDWHZLWKWKHPDQGIHHODERXW WKHP $FHQWUDOGLIILFXOW\LQSURYLGLQJDWKHRU\RIHYHQVXFKEDVLFPHDQLQJLVWKLV,QWKHSURFHVVRIDUULYLQJDWDQ XQGHUVWDQGLQJRIDVSHDNHU¶VXWWHUDQFHDKHDUHULQHYLWDEO\DWWULEXWHVWRWKHVSHDNHUKLJKO\FRPSOH[VHWVRI EHOLHIVDQGLQWHQWLRQV7RXVH'DYLGVRQ¶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¶V PHQWDOVWDWHVZHFDQQRWDOVRXVHRXUDVVXPSWLRQVDERXW.XUW¶VPHQWDOVWDWHVWRDFFRXQWIRURXUXQGHUVWDQGLQJ RIWKHXWWHUDQFH7RGRVRZRXOGPDNHRXUDUJXPHQWFLUFXODU 6RZKDWRWKHUHYLGHQFHPLJKWZHUHO\RQ"$FFRUGLQJWR4XLQH ZHPLJKWWU\VHQVRU\HYLGHQFH)RU µVXUIDFHLUULWDWLRQVJHQHUDWHWKURXJKODQJXDJHRQH¶VNQRZOHGJHRIWKHZRUOG2QHLVWDXJKWVRWRDVVRFLDWH ZRUGVZLWKZRUGVDQGRWKHUVWLPXODWLRQVWKDWWKHUHHPHUJHVVRPHWKLQJUHFRJQL]DEOHDVWDONRIWKLQJVDQGQRW WREHGLVWLQJXLVKHGIURPWUXWKDERXWWKHZRUOG¶+LVSURMHFWLVWRµFRQVLGHUKRZPXFKRIODQJXDJHFDQEHPDGH VHQVHRILQWHUPVRILWVVWLPXOXVFRQGLWLRQVDQGZKDWVFRSHWKLVOHDYHVIRUHPSLULFDOO\XQFRQGLWLRQHGYDULDWLRQ LQRQH¶VFRQFHSWXDOVFKHPH¶LELG %\µHPSLULFDOO\XQFRQGLWLRQHGYDULDWLRQ¶4XLQHPHDQVYDULDWLRQ ZKLFKFDQQRWEHH[SODLQHGZLWKUHIHUHQFHWRYDULDWLRQLQVHQVRU\HYLGHQFH7KHDQVZHUWRWKHILUVWTXHVWLRQLV µQRWPXFK¶DQGWRWKHVHFRQGµYHU\PXFK¶DVKLVFRPPHQWVRQWKHVLWXDWLRQGHVFULEHGLQWKHIROORZLQJ DQHFGRWHPDNHFOHDU ,PDJLQHDOLQJXLVWHQJDJHGLQUDGLFDOWUDQVODWLRQLHWUDQVODWLRQRIDODQJXDJHKLWKHUWRXQNQRZQµ$UDEELW VFXUULHVE\WKHQDWLYHVD\Vµ*DYDJDL¶DQGWKHOLQJXLVWQRWHVGRZQWKHVHQWHQFHµ5DEELW¶RUµ/RDUDEELW¶ DV WHQWDWLYHWUDQVODWLRQVXEMHFWWRWHVWLQJLQIXUWKHUFDVHV¶LELG 4XLQH¶VVFHSWLFLVPLVGLUHFWHGDWWKHQRWLRQ WKDWWKHUHFDQEHDQ\WHVWZKLFKFDQVKRZZKDWVHQVHWKHQDWLYH¶VXWWHUDQFHKDV:HFDQKHDUWKHXWWHUDQFHZH FDQHVWDEOLVKWKHRFFDVLRQVRQZKLFKWKHQDWLYHZLOODVVHQWWRDQGGLVVHQWIURP*DYDJDLEXWZHFDQQHYHUEH VXUHKRZWKHQDWLYHFRQFHSWXDOL]HVWKHVHRFFDVLRQV 4XLQHFRQVLGHUVDOOWKRVHRFFDVLRQVZKLFKZRXOGSURPSWWKHQDWLYHWRDVVHQWWR*DYDJDLWREHWKHSRVLWLYH VWLPXOXVPHDQLQJRIWKHWHUPDQGDOOWKRVHRFFDVLRQVZKLFKZRXOGSURPSWWKHQDWLYHWRGLVVHQWIURP*DYDJDL WREHWKHWHUP¶VQHJDWLYHVWLPXOXVPHDQLQJ7KHVXPRIWKHWZRLVWKHWHUP¶VVWLPXOXVPHDQLQJ7KHOLQJXLVW ZLOOWHVWIRUVWLPXOXVPHDQLQJIRU*DYDJDLE\DVNLQJ*DYDJDLLQµVLWXDWLRQVGHVLJQHGSHUKDSVWRHOLPLQDWH ³:KLWH´DQG³$QLPDO´DVDOWHUQDWLYHWUDQVODWLRQVDQGZLOOKHQFHIRUWKVHWWOHXSRQ³5DEELW´DVWUDQVODWLRQ¶DW OHDVWXQWLOIDFHGZLWKFRQWUDU\HYLGHQFHLELG 7KHUHLVQRDYDLODEOHWHVWKRZHYHUIRUVDPHQHVVRI RQWRORJLFDOFRPPLWPHQWEHWZHHQWKHOLQJXLVWDQGWKHLQIRUPDQW )RUFRQVLGHUµJDYDJDL¶:KRNQRZVEXWZKDWWKHREMHFWVWRZKLFKWKLVWHUPDSSOLHVDUHQRWUDEELWV DIWHUDOOEXWPHUHVWDJHVRUEULHIWHPSRUDOVHJPHQWVRIUDEELWV",QHLWKHUHYHQWWKHVWLPXOXV VLWXDWLRQVWKDWSURPSWDVVHQWWRµ*DYDJDL¶ZRXOGEHWKHVDPHDVIRUµ5DEELW¶2USHUKDSVWKH REMHFWVWRZKLFKµJDYDJDL¶DSSOLHVDUHDOODQGVXQGU\XQGHWDFKHGSDUWVRIUDEELWVDJDLQWKH VWLPXOXVPHDQLQJZRXOGUHJLVWHUQRGLIIHUHQFH:KHQIURPWKHVDPHQHVVRIVWLPXOXVPHDQLQJVRI µ*DYDJDL¶DQGµ5DEELW¶WKHOLQJXLVWOHDSVWRWKHFRQFOXVLRQWKDWDJDYDJDLLVDZKROHHQGXULQJ UDEELWKHLVMXVWWDNLQJIRUJUDQWHGWKDWWKHQDWLYHLVHQRXJKOLNHXVWRKDYHDEULHIJHQHUDOWHUPIRU UDEELWVDQGQREULHIJHQHUDOWHUPIRUUDEELWVWDJHVRUSDUWV LELG± 7KHVWLPXOXVPHDQLQJIRUµ7KHUHLVDUDEELW¶LVWKHVDPHDVIRUD µ$QXQGHWDFKHGSDUWRID



3DJH

UDEELWLVRYHUWKHUH¶E µ5DEELWKRRGLVLQVWDQWLDWHGRYHUWKHUH¶F µ$VWDJHLQWKHKLVWRU\RIDUDEELWLVRYHU WKHUH¶G µ7KDWVSRWLVRQHPLOHWRWKHOHIWRIDQDUHDRIVSDFHRQHPLOHWRWKHULJKWRIDUDEELW¶+RRNZD\ 7KHSRWHQWLDOVSHDNHUVRIWKHVHSRWHQWLDOXWWHUDQFHVZRXOGKDYHGLIIHUHQWRQWRORJLFDOFRPPLWPHQWV WRUDEELWSDUWVLQWKHFDVHRID WRWKHXQLYHUVDOUDEELWKRRGLQE WRVWDJHVLQWKHKLVWRU\RIUDEELWVLQWKHFDVH RIF DQGWRDUHDVRIVSDFHLQWKHFDVHRIG LELG $QGQRWKLQJLQVSHDNHUV¶XWWHUDQFHVFRXOGHYHUWHOOXV ZKDWWKHLURQWRORJLFDOFRPPLWPHQWLV)URPWKHIDFWWKDWVSHDNHUVRQO\SUHGLFDWH5DEELWRIWKHLUH[SHULHQFH ZKHQUDEELWVDUHSUHVHQWLWGRHVQRWIROORZWKDWIRUWKHVHVSHDNHUVWKHUHIHUHQFHIRU5DEELWLVWKHZKROH HQGXULQJUDEELW 7KHLQGHWHUPLQDF\RIWUDQVODWLRQLVWKXVJURXQGHGQRWLQWKHWUDQVLWLRQIURPRQHODQJXDJHWRDQRWKHUEXWLQ WKHOLQNEHWZHHQH[SUHVVLRQDQGFRQFHSWXDOL]DWLRQ,WLVSHUIHFWO\SRVVLEOHRQ4XLQH¶VYLHZWRDUJXHWKDW SHUVLVWHQWREVHUYDWLRQRIWKHOLQJXLVWLFEHKDYLRXURIPHPEHUVRIWZRVSHHFKFRPPXQLWLHVMXVWLILHVWKHFODLP WKDWRIWKHWZR(QJOLVKZRUGVFKDONDQGFKHHVHFKHHVHLVWKHEHWWHUWUDQVODWLRQHTXLYDOHQWIRUWKH)UHQFKZRUG IURPDJH6XFKREVHUYDWLRQVKRZHYHUFDQQHYHUMXVWLI\WKHFODLPWKDWDQ\WZRH[SUHVVLRQVPHDQWKHVDPH 7KHPHDQLQJVRIH[SUHVVLRQVGHULYHSDUWO\IURPWKHLUUHODWLRQVKLSWRWKHLUUHIHUHQFHVWKHQRQOLQJXLVWLF SKHQRPHQDZKHWKHUFRQFUHWHRUDEVWUDFWZKLFKWKH\GHQRWH+RZHYHUPHDQLQJVDOVRGHULYHLQSDUWIURP ZKDW)UHJHWHUPHGVHQVHµZKHUHLQWKHPRGHRISUHVHQWDWLRQLVFRQWDLQHG¶ 8QGHUVWDQGLQJ PHDQLQJWKHUHIRUHPHDQVERWKXQGHUVWDQGLQJZKDWDQH[SUHVVLRQLVXVHGWRUHIHUWRRQDSDUWLFXODURFFDVLRQ DQGXQGHUVWDQGLQJWKHPRGHRISUHVHQWDWLRQRUFRQFHSWXDOL]DWLRQRIWKHUHIHUHQWZKLFKLWH[SUHVVHV)UHJH WRRNIRUJUDQWHGWKDWERWKVHQVHDQGUHIHUHQFHZHUHPDGHSXEOLFO\DYDLODEOHE\OLQJXLVWLFH[SUHVVLRQVDQGWKDW µWKHVDPHVHQVHKDVGLIIHUHQWH[SUHVVLRQVLQGLIIHUHQWODQJXDJHVRUHYHQLQWKHVDPHODQJXDJH¶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µRLOWKHZKHHOVRIWKHWKHRU\RI PHDQLQJ¶ ,QVWHDGJLYHQWKHFHQWUDOLW\LQWKHWKHRU\RIWKHQRWLRQRIPHQWDOVWDWHVLHEHOLHIV DQGLQWHQWLRQVKHDWWHPSWVWRHVWDEOLVKDPHQWDOVWDWHZKLFKZHPLJKWEHMXVWLILHGLQDWWULEXWLQJWRDVSHDNHU LQGHSHQGHQWO\RIDQ\DVVXPSWLRQVDERXWZKDWWKHVSHDNHU¶VXWWHUDQFHVPHDQ$OLNHO\FDQGLGDWHPLJKWEHWKH PHQWDOVWDWHRIKROGLQJDQ\JLYHQXWWHUDQFHWUXHDWWKHWLPHRIXWWHULQJIRUZHµPD\NQRZWKDWDSHUVRQLQWHQGV WRH[SUHVVDWUXWKLQXWWHULQJDVHQWHQFHZLWKRXWKDYLQJDQ\LGHDZKDWWUXWK¶ ,WLVKRZHYHUDUJXHGRQRFFDVLRQWKDWWKHSRVVLELOLW\RIGLIIHUHQWRQWRORJLFDOFRPPLWPHQWVH[WHQGVWRWKH QRWLRQRIKROGLQJWUXH)RUH[DPSOH/DNRIIDQG-RKQVRQ KDYHVXJJHVWHGWKDWµSHRSOHZLWKYHU\ GLIIHUHQWFRQFHSWXDOV\VWHPVWKDQRXURZQ«PD\KDYHGLIIHUHQWFULWHULDIRUWUXWKDQGUHDOLW\¶,IWKDWLVWKH FDVHWKHQWKHUHLVQRPRUHKRSHIRUWKHQRWLRQRIWUXWKLQVHWWLQJXSDWKHRU\RIPHDQLQJWKDQIRUWKHQRWLRQRI PHDQLQJLWVHOI%XWLWLVLQIDFWYHU\GLIILFXOWWRDVFULEHWRRWKHUVSHDNHUVDQDWWLWXGHRIKROGLQJWUXHZKLFKLV UDGLFDOO\GLIIHUHQWIURPRXURZQZKLOHUHWDLQLQJDJULSRQWKRVHVSHDNHUVµDVUDWLRQDODVKDYLQJEHOLHIVRUDV VD\LQJDQ\WKLQJ¶'DYLGVRQ 7KLVLVEHFDXVHLWLVLPSRVVLEOHWRUHWDLQWKHEDUHQRWLRQRIµD VSHDNHU¶ZLWKRXWDWWULEXWLQJWRWKDWVSHDNHUVRPHVHWRIEHOLHIV7KHVHGHWHUPLQHZKDWWKHVSHDNHUKROGVWUXH DQGZHPD\UHIHUWRWKHPDVDFRQFHSWXDOVFKHPHDQGDVVRFLDWHWKHODWWHUZLWKWKHVSHDNHU¶VODQJXDJH7R DUJXHWKDWVXFKDVSHDNHU¶VODQJXDJHPLJKWQRWEHWUDQVODWDEOHLQWRRXURZQZRXOGWKHQEHWRDUJXHWKDWWKH ODQJXDJHZDVWUXHEXWQRWWUDQVODWDEOH%XWDV7DUVNL VKRZVLWLVQRWSRVVLEOHWRPDNHVHQVHRIHLWKHU RIWKHVHQRWLRQV



3DJH

LQGHSHQGHQWO\RIWKHRWKHU'DYLGVRQ± DFFRUGLQJWR7DUVNL¶V&RQYHQWLRQ7DVDWLVIDFWRU\WKHRU\RIWUXWKIRUDODQJXDJH/PXVWHQWDLOIRU HYHU\VHQWHQFHVRI/DWKHRUHPRIWKHIRUPµVLVWUXHLIDQGRQO\LIS¶ZKHUHµV¶LVUHSODFHGE\D GHVFULSWLRQRIVDQGµS¶E\VLWVHOILI/LV(QJOLVKDQGE\DWUDQVODWLRQRIVLQWR(QJOLVKLI/LVQRW (QJOLVK7KLVLVQ¶WRIFRXUVHDGHILQLWLRQRIWUXWKDQGLWGRHVQ¶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¶VEHKDYLRXUWREH V\PEROLFRUVHPLRWLFLQDQ\VHQVHZKDWVRHYHULQYROYHVWKHDVVXPSWLRQWKDWWKHEHKDYLRXUH[SUHVVHVVRPH PHQWDOVWDWHRURWKHU7RFRQVLGHUOLQJXLVWLFEHKDYLRXURVWHQVLYHWKDWLVWRFRQVLGHUWKDWLWGLVSOD\VWKH FUHDWXUH¶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¶VRVWHQVLYHEHKDYLRXUDQGWKHTXHVWLRQRIWUDQVODWLRQ ZRXOGQHYHUDULVH $FFRUGLQJWRDVRPHZKDWOHVVH[WUHPHVFHQDULRZHPLJKWJUDQWWKDWWKHFUHDWXUHVKDUHVRXUQRWLRQRIKROGLQJ WUXHEXWJUDQWDOVRWKDWWKHUHVWRIWKHFUHDWXUH¶VFRQFHSWXDOV\VWHPLVVRGLIIHUHQWIURPRXUVWKDWZKDWLWKROGV WUXHLVLQFRPSDWLEOHZLWKZKDWZHKROGWUXH7KLVUHTXLUHVWZRXQDFFHSWDEOHVHSDUDWLRQV7KHILUVWLVWKH VHSDUDWLRQRIWUXWKDQGWUDQVODWLRQGLVFXVVHGDERYH7KHVHFRQGLVDµGXDOLVPRIVFKHPHDQGFRQWHQWRI RUJDQL]LQJV\VWHPDQGVRPHWKLQJZDLWLQJWREHRUJDQL]HG¶'DYLGVRQ 7KLVGXDOLVPFDQQRW EHVXVWDLQHGEHFDXVHWKHLGHDRIDFRQFHSWXDOVFKHPHDQGLWVDVVRFLDWHGODQJXDJHRUJDQL]LQJRUILWWLQJ H[SHULHQFHDGGVQRWKLQJWRWKHFRQFHSWRIWKHVFKHPHODQJXDJHEHLQJKHOGWUXH:HDUHWKHUHIRUHIDFHGDJDLQ ZLWKWKHQRWLRQRIDWUXHEXWXQWUDQVODWDEOHODQJXDJHZKLFKUHTXLUHVWKHXQDFFHSWDEOHVHSDUDWLRQRIWUXWKDQG WUDQVODWLRQ :HDUHQRZIUHHWRPRYHIURP.XUW¶VXWWHUDQFH(VUHJQHWYLDREVHUYDWLRQRIRWKHUVSHDNHUVWRSRVWXODWHWKDW µ³(VUHJQHW´LVD7UXH*HUPDQVHQWHQFHXWWHUHGE\6DWWLPHWLIDQGRQO\LILWLVUDLQLQJQHDU6DWW¶+RRNZD\ FI'DYLGVRQ 2U4XLQH¶VOLQJXLVWLVIUHHWRPRYHIURPREVHUYDWLRQRILQIRUPDQWV WRSRVWXODWHWKDWµ³*DYDJDL´LVD7UXHDOLHQVHQWHQFHXWWHUHGE\6DWWLPHWLIDQGRQO\LIWKHUHLVDUDEELWQHDU 6DWW¶+RRNZD\ ,WPXVWEHVWUHVVHGDWWKLVSRLQWWKDWERWK4XLQHDQG'DYLGVRQVHHNDWKHRU\ ZKLFKLVKROLVWLF(YQLQH EHLQJDEOHWRLQWHUSUHWDVHQWHQFHLVQRWVLPSO\NQRZLQJWKHDSSURSULDWH7VHQWHQFHLWLVNQRZLQJWKDWVRPH VHQWHQFHLVWUXHLII>LIDQGRQO\LI@VRPHFRQGLWLRQREWDLQVDQGWKDWWKDWVHQWHQFHLVFRPSRVHGRXWRISDUWV ZKLFKIHDWXUHLQ



3DJH

RWKHUVHQWHQFHVZKLFKDUHWUXHLIIRWKHUVSHFLILHGFRQGLWLRQVREWDLQ 8VHLQWKLVDFFRXQWFDQVHUYHWRVXSSO\LQIRUPDWLRQDERXWPHDQLQJEHFDXVHKDYLQJGLVSRVHGRIWKH SRVVLELOLW\RIUDGLFDOO\GLIIHUHQWRQWRORJLFDOFRPPLWPHQWV²RIH[WUHPHFXOWXUDOUHODWLYLVP²VSHDNHUV¶XVHRI VHQWHQFHVFDQVHUYHDVHYLGHQFHIRUZKDWWKH\KROGWUXHDQGWKHQRWLRQRIKROGLQJWUXHLVDOOZHQHHGWRVHWRXU WKHRU\LQPRWLRQ$FFRUGLQJWRWKHWKHRU\WRVD\WKDW(VUHJQHWPHDQVµLWLVUDLQLQJ¶LVWRVD\WKDWZLWKLQD WKHRU\ZKLFKPDNHVWKHEHVWRYHUDOOVHQVHRIWKHJHQHUDOEHKDYLRXURIWKHPHPEHUVRIDVSHHFKFRPPXQLW\ ZHKDYHHVWDEOLVKHGWKDW(VUHJQHWLVKHOGWUXHZKHQXWWHUHGE\6DWWLPHWLIDQGRQO\LILWLVUDLQLQJQHDU6DW W 1RWLFHWKDWWKLVDFFRXQWGRHVQRWVHSDUDWHSUDJPDWLFVIURPVHPDQWLFVLQWKHWUDGLWLRQDOPDQQHU)HDWXUHVRIWKH HQYLURQPHQWDUHEXLOWLQWRWKHDFFRXQWDQGWUXWKLVUHODWLYL]HGWRDWOHDVWDWLPHDVSHDNHUDQGDSODFH 0HDQLQJLVQRWFRQFHLYHGDVVRPHVRUWRISURSHUW\RUFKDUDFWHULVWLFZKLFKVHQWHQFHVµKDYH¶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

)XUWKHUUHDGLQJ %HQMDPLQ'DYLGVRQ(YQLQH+RRNZD\0DOPNM U4XLQH5DPEHUJ

.,567(10$/0.-5

$QWKRORJLHVRIWUDQVODWLRQ $WUDQVODWLRQDQWKRORJ\LVDFROOHFWLRQRIWUDQVODWHGWH[WVRIWHQOLWHUDU\7UDQVODWLRQDQWKRORJLHVDUHYHU\ FRPPRQLQPDQ\FRXQWULHVDQGLQGLVSHQVDEOHLQWKHVWXG\RIWUDQVODWLRQDQGOLWHUDU\FXOWXUHHYHQLQFRXQWULHV ZKHUHWKH\DUHOHVVLQHYLGHQFH,QVSLWHRIWKLVWUDQVODWLRQDQWKRORJLHVZHUHXQWLOTXLWHUHFHQWO\SDUWRID µVKDGRZFXOWXUH¶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¶VLPDJHRIWKHZRUOG¶VEHVWSRHWU\RURIWKHSRHWU\PRVWFKDUDFWHULVWLFRI HDFKFRXQWU\UHSUHVHQWHGLQWKHDQWKRORJ\$QGWKRXJKWKHVHOHFWLRQLVSDUWO\GHWHUPLQHGE\WKHDYDLODELOLW\RI WUDQVODWLRQVLQWKHODQJXDJHRIWKHDQWKRORJ\LWWHQGVWRVWDELOL]HIRUDZKLOHWKHVHQVHDPRQJWKHUHFHSWRU FRXQWU\¶VLQWHUHVWHGUHDGHUVRIZKDWFRQVWLWXWHVWKHUHOHYDQWSRHWU\RIWKHZRUOG :KHQDVVHVVLQJDQWKRORJLVWV¶DFKLHYHPHQWVDGLVWLQFWLRQPXVWEHGUDZQEHWZHHQDQHGLWRU¶VDQWKRORJ\ZKHUH WKHUDQJHRIVHOHFWLRQLVOLPLWHGWRWUDQVODWLRQVWKDWDOUHDG\H[LVWDQGDWUDQVODWRU¶VDQWKRORJ\ZKHUHWKHUDQJH RIVHOHFWLRQLVOLPLWHGWRWUDQVODWLRQVWKHWUDQVODWRULVRUKDVEHHQDEOHWRPDNH$OWKRXJKH[DPSOHVRIWKHWZR W\SHVRIDQWKRORJ\PD\ORRNYHU\VLPLODUWKH\PD\LQIDFWVHUYH



3DJH

TXLWHGLIIHUHQWSXUSRVHVLQWKHLQWHURULQWUDOLWHUDU\G\QDPLFV$QHGLWRU¶VDQWKRORJ\UHVHPEOHVDQDUW H[KLELWLRQSUHVHQWLQJDVLWGRHVDFRQILJXUDWHGVHOHFWLRQIURPWKHWRWDOUHVHUYRLURISHUWLQHQWWH[WVLQD ODQJXDJHZKHWKHUWUDQVODWHGRUQRWZKHUHDVDWUDQVODWRU¶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µZRUOGOLWHUDWXUH¶²WKHPXOWLODWHUDODQWKRORJ\ZLWKWKHZLGHVWSRVVLEOHUDQJH²REYLRXVO\KDV QRFRXQWHUSDUWDPRQJDQWKRORJLHVRIQRQWUDQVODWHGOLWHUDWXUH%XWHYHQDELODWHUDODQWKRORJ\²RQHWKDW FRQWDLQVWUDQVODWLRQVIURPDVLQJOHIRUHLJQOLWHUDWXUHLVFOHDUO\µEURDGHU¶WKDQDQ\PRQROLWHUDU\DQWKRORJ\LQ VRIDUDVLWH[WHQGVDQLQYLWDWLRQDWOHDVWWRWKHLQIRUPHGUHDGHUZKRNQRZVWKHIRUHLJQODQJXDJHWRPDNH FRPSDULVRQV,QDGGLWLRQWKHPRWLYHVDQGFULWHULDIRUDQWKRORJL]LQJRQH¶VRZQOLWHUDWXUHXVXDOO\GLIIHUIURP WKRVHIRUDQWKRORJL]LQJDIRUHLJQOLWHUDWXUHZKHWKHULQWUDQVODWLRQRUQRW$QGWKHSHUFHLYHGUHODWLRQVKLS EHWZHHQOLWHUDWXUHVLVDVDUXOHPRUHJUDSKLFDOO\UHSUHVHQWHGLQDQWKRORJLHVWKDQLQWKHFRQWLQXRXVWH[WRI OLWHUDU\KLVWRULHV :KHQHYHUWUDQVODWLRQDQWKRORJLHVDUHLQUHODWLYHO\ZLGHFLUFXODWLRQLQDJLYHQFRXQWU\FRPSDUHGWRLWVHQWLUH UHVHUYRLURIWUDQVODWLRQVWKHFXOWXUDOFULWLFRUWUDQVODWLRQKLVWRULDQKDVDSDUWLFXODUO\JRRGRSSRUWXQLW\WRVWXG\ DQLPSRUWDQWDVSHFWRIWKHFRXQWU\¶VWUDQVODWLRQFXOWXUH%\PRQLWRULQJFKDQJHVLQWKHEDODQFHEHWZHHQWKH LQFUHDVLQJWRWDOUHVHUYRLUDQGHDFKLQGLYLGXDOUHSHUWRU\LWLVSRVVLEOHWRDVVHVVWKHFKDQJLQJSRVLWLRQVDVFULEHG WRLQGLYLGXDOOLWHUDWXUHVDXWKRUVDQGZRUNVLQUHODWLRQWRWKHOLWHUDWXUHVRIWKHZRUOG6XFKDFRPSDULVRQ UHTXLUHVGLIIHUHQWDSSURDFKHVGHSHQGLQJRQZKHWKHUDQDQWKRORJ\RIµZRUOGSRHWU\¶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¶VYDOXHVRUSHUFHSWLRQVRUWRDWUDQVODWRUDQWKRORJLVW¶VVNLOOVEXWWR FRQGLWLRQVRIFRS\ULJKWDYDLODEOHIXQGVLQWHUIHUHQFHIURPWKHSXEOLVKHURUSROLWLFDOFHQVRUVKLS%XWZKHWKHU VXFKLQVLGHLQIRUPDWLRQLVDYDLODEOHRUQRW²DQGLWLVSDUWLFXODUO\KDUGWRREWDLQLQWKHILHOGRIROGHUWUDQVODWLRQ DQWKRORJLHV²WKHUHVHDUFKHUFDQDOZD\V



3DJH

GHOLQHDWHWKHLPDJHRIRQHRUVHYHUDOOLWHUDWXUHVFRQFHQWUDWLQJHLWKHURQHDFKOLWHUDWXUHLQLVRODWLRQRURQWKH UHODWLRQVKLSVLQZKLFKWKH\VWDQGWRHDFKRWKHUDQGWRWKHWDUJHWOLWHUDWXUH $QWKRORJLHVPRVWO\RIQRQWUDQVODWHGOLWHUDWXUHDUHDPDLQVWD\RIGHEDWHDERXWWKHFDQRQ&RQFOXVLRQVDUH QRUPDOO\GUDZQIURPWKHSDUVSURWRWRµSDUWWRZKROH¶ UHODWLRQVKLSEHWZHHQVHOHFWHGFRUSXVDQGWRWDO UHOHYDQWFRUSXVZLWKRXWUHJDUGWRWKHUHODWLRQVKLSEHWZHHQWKHVHOHFWHGFRUSXVDQGWKHUHPDLQLQJSDUW7KLV UHODWLRQVKLSKRZHYHUPD\EHRIRQHRIWKUHHW\SHVIURPZKLFKFRQFOXVLRQVPD\DOVREHGUDZQWKHVHOHFWHG FRUSXVLVPHDQWWRVXSSODQWWKHUHPDLQGHU²SDUVFRQWUDUHVLGXXPµWKHSDUWDJDLQVWWKHUHVW¶ WKHVHOHFWHGSDUW LVPHDQWWROHDGWKHUHDGHUWRDQHQMR\PHQWRIWKHUHPDLQGHU²SDUVDGUHVLGXXPµWKHSDUWWRZDUGVWKHUHVW¶ WKHUHODWLRQVKLSEHWZHHQWKHVHOHFWHGSDUWDQGWKHUHPDLQGHUKDVQRWEHHQIL[HGDSULRUL$WWHQWLRQWRWKHODWWHU WKUHHUHODWLRQVKLSVKHOSVWRGLVWLQJXLVKDQWKRORJL]LQJIURPGLIIHUHQWWKRXJKUHODWHGDFWLYLWLHVDVIROORZV 7KHµSDUWDJDLQVWWKHUHVW¶UHODWLRQFKDUDFWHUL]HVWKHWUXHFDQRQ7KHFULWHULRQIRULQFOXVLRQLVDXWKHQWLF LQVSLUDWLRQRIZKDWHYHUNLQG7KHGLVWLQFWLRQLVQRWEDVHGRQDVOLGLQJVFDOHRIEHWWHUDQGEHVWRUOHVVDQGPRUH UHSUHVHQWDWLYHEXWRQDFOHDUFXW\HVRUQRGHFLVLRQLQVXFKILHOGVDVUHOLJLRQWH[WXDOFULWLFLVPDQGIRONORUH DOWKRXJKWKH+RO\%LEOHORRNVOLNHDQDQWKRORJ\RIZULWLQJVE\VHYHUDOKDQGVSURGXFHGDWYDULRXVWLPHVLWLVD FDQRQRIZULWLQJVGLVWLQJXLVKHGIURPWKRVHQRWLQFOXGHGE\WKHFULWHULRQRIWUXHLQVSLUDWLRQ$OWKRXJKWKH ELEOLFDOFDQRQYDULHVVOLJKWO\LQWLPHDQGEHWZHHQGHQRPLQDWLRQVWKHUHLVQRTXHVWLRQWKDWLWFRQWDLQVDOO ZULWLQJVWKRXJKWWREHWKHDXWKHQWLF:RUGRI*RG%\DQDORJ\WKHDXWKHQWLFZRUNRIDVHFXODUDXWKRULVFDOOHG IRUH[DPSOHµWKH6KDNHVSHDUHFDQRQ¶DQGW\SLFDOO\LQFOXGHVDZULWHU¶VFRPSOHWHZRUNV,QDUHODWHGVHQVH WKHUHLVWKHµIRONORUHFDQRQ¶FRPSULVLQJDOOZRUNVFRQVLGHUHGWREHRIDXWKHQWLFIRONLQVSLUDWLRQ,QWKLV SDUWLFXODUFDVHLWLVLQWHUHVWLQJWRQRWHWKDWWKHHDUO\IRONORUHDQWKRORJLVWVWKH3HUF\VDQG+HUGHUVIRU H[DPSOHZHUHFOHULFV 'LIIHUHQWLQIRUPDWLRQEXWVLPLODULQUHVXOWLVWKHVRFDOOHG$OH[DQGULQLDQFDQRQWKHVHOHFWLRQRIµFODVVLFDO¶ ZRUNVLQWHQGHGWRWUDLQWKHUHDGHU¶VWDVWHDQGWRGHOLPLWWKHILHOGRIOHJLWLPDWHOLWHUDWXUH+LVWRU\KDVVKRZQ WKDWLWWDNHVDQHIILFLHQWDJHQF\²DQDFDGHP\RUDVWDWHERDUG²WRSROLFHWKHFDQRQRIOLWHUDU\UXOHV6XFKµSDUW DJDLQVWWKHUHVW¶UHVWULFWLRQVDOVRDSSO\E\DQGODUJHWRWUDQVODWLRQ DQWKRORJLHVXQGHUWRWDOLWDULDQLVP,Q WRWDOLWDULDQUHJLPHVDQGXQGHUDXWKRULWDULDQHGXFDWLRQDOV\VWHPVWKHUHVWULFWLRQVDUHH[WHQGHGWRFROOHFWLRQVRI PRGHOWUDQVODWLRQVDQGWRDQWKRORJLHVIRUXVHLQVFKRROVDQGFROOHJHV2WKHUZLVHHGXFDWLRQDODQWKRORJLHVIRUP DSVHXGRFDQRQGXHWRWKHOLPLWHGUHDGLQJWKDWLVSRVVLEOHGXULQJDVHVVLRQDQGWKHLQVWUXFWRULVOLNHO\WRXVH WKHDQWKRORJ\LQZD\VZKLFKZLOOZKHWWKHVWXGHQWV¶DSSHWLWHIRUWKHZRUNVWKDWGRQRWIRUPSDUWRIWKH VHOHFWLRQWKXVDSSO\LQJWKHSULQFLSOHRIµSDUWWRZDUGVWKHUHVW¶ 7KHODWWHUSULQFLSOHKDVEHHQH[SOLFLWO\VXEVFULEHGWRE\VRPHWUDQVODWLRQ DQWKRORJLVWV7KHVHOHFWHGIORZHUV WKH\VD\DUHLQWHQGHGWROHDGWKHUHDGHUWRWKHJDUGHQZKHUHWKH\KDYHEHHQFXOOHG2WKHUVVHHPWRKDYH DGKHUHGWRLWLPSOLFLWO\8QOHVVWKHUHLVHYLGHQFHWRWKHFRQWUDU\UHVHDUFKHUVDUHZLVHWRDVVXPHDQRSHQ UHODWLRQVKLSEHWZHHQWKHVHOHFWHGFRUSXVDQGWKHUHPDLQGHU²DUHODWLRQVKLSWKDWPD\FKDQJHIURPRQHHGLWLRQ WRWKHQH[W )LQGLQJVIURPWKHGRPDLQZKLFKKDVVRIDUEHHQPRVWWKRURXJKO\UHVHDUFKHGPXOWLODWHUDODQWKRORJLHVRIYHUVH WUDQVODWLRQVLQ*HUPDQ± IXUWKHULQFOXGHWKHIDFWWKDWWKHW\SHDQGLQWHQVLW\RIDQWKRORJL]LQJ GHSHQGRQWKHTXDOLW\DQGVWDELOLW\RILQWHUQDWLRQDOFRQWDFWVDVZHOODVRQFURVVFXOWXUDOSHUFHSWLRQVDQG H[SHFWDWLRQV,PSRUWDQWIDFWRUVLQFOXGHWKHUHFRJQLWLRQRIWKHOHDGLQJUROHRIDFRXQWU\LQOLWHUDWXUHDQGFXOWXUH LWVSROLWLFDODQGHFRQRPLFZHLJKWVKDUHGSHUFHSWLRQRIHWKQLFFORVHQHVVRUGLIIHUHQFHSROLWLFDOFRRSHUDWLRQRU ULYDOU\UHOLJLRXVDIILQLWLHVRUGLVOLNHVDQGDQDQWKRORJLVW¶VOLQJXLVWLFDQGFXOWXUDOFRPSHWHQFH&RPSLOHUVRI DQWKRORJLHVLQFOXGHVFKRODUVSURIHVVLRQDODQWKRORJLVWVWUDQVODWRUVDQGSRHWVPRVWO\IRUELODWHUDODQWKRORJLHV WUDYHOOHUVLPPLJUDQWVVSHDNHUVRI*HUPDQOLYLQJDEURDGPRVWO\EXWQRWH[FOXVLYHO\PDOH 7KHGLYHUVLW\RIIDFWRUVDQGLQGLYLGXDOVDFFRXQWVIRUWKHIDFWWKDWZKHUHDVORQJUDQJHUHJXODULWLHV GHYHORSPHQWSURJUHVV GRQRW



3DJH

H[LVWLWLVSRVVLEOHWRGLVFHUQGLVWLQFWWHQGHQFLHVEDVHGIRUWKHPRVWSDUWRQELODWHUDOFXOWXUDOSDWWHUQV)RU H[DPSOHE\WKHIDPLOLDULW\RI*HUPDQUHDGHUVZLWK%ULWLVKSRHWU\ZDVVXFKDVWRSHUPLWDQWKRORJLVWVWR UHIOHFWLQWKHLUFKRLFHVDQGDUUDQJHPHQWVWKHSRHWV¶LQGLYLGXDOFDUHHUVZKHUHDVDQWKRORJL]LQJRI 6FDQGLQDYLDQDQG+XQJDULDQSRHWU\ZDVSURPSWHGE\GLIIHUHQWLPDJRORJLFDOSHUFHSWLRQV6WDXQFKO\ 3URWHVWDQWDQWKRORJLVWVKDYHEHHQIRXQGWRGHQRXQFHSRHWU\LQ5RPDQFHODQJXDJHVIRULWV&DWKROLF EDFNZDUGQHVVDQGWRUHVWULFWVHOHFWLRQVWRWKHPLQLPXPUHTXLUHGE\KLVWRULFDOGRFXPHQWDWLRQ,WLVZRUWK QRWLQJWKDWVXFKGLYHUVHPRWLIVFDQFRRFFXULQDVLQJOHDQWKRORJ\¶VµGHHSVWUXFWXUH¶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¶V%LOGHUVDDOGHU:HOWOLWHUDWXU3LFWXUH*DOOHU\RI:RUOG/LWHUDWXUH RI UGUHYHGQ± LWVJHRJUDSKLFDODUUDQJHPHQWH[RULHQWHSRHVLDµSRHWU\IURPWKH(DVW¶ ZDVLPLWDWHG E\WKHQXPHURXVRWKHUDQWKRORJLVWVZKRRUJDQL]HGWKHLUVHOHFWLRQVE\JHRJUDSKLFDOSULQFLSOHV $OWKRXJKWKHVHILQGLQJVDUHEDVHGRQDFRUSXVRIVHYHUDOKXQGUHGDQWKRORJLHVVRPHRIWKHPELODWHUDOWKH\ VKRXOGQRWEHJHQHUDOL]HGXQFULWLFDOO\7KH\FDQKRZHYHUOHJLWLPDWHO\VHUYHDVDVRXUFHRIK\SRWKHVHVIRU RWKHUGRPDLQV

)XUWKHU5HDGLQJ (VVPDQQ(VVPDQQDQG)UDQN(VVPDQQDQG6FK°QLQJ)UDQNDQG(VVPDQQ*|VNH *XO\DDQG/RVVDX.LWWHO/HIHYHUHD±

$50,13$8/)5$1.

$VVRFLDWLRQLQWHUQDWLRQDOHGHVLQWHUSUqWHVGH FRQIHUHQFH$,,& 7KHKXJHSUROLIHUDWLRQRIFRQIHUHQFHVDQGKHQFHLQWHUSUHWHUVGXULQJWKH\HDUVLPPHGLDWHO\IROORZLQJ:RUOG :DU7ZRSURPSWHGFDOOVIURPSUDFWLWLRQHUVIRUDQRUJDQL]DWLRQWRUHJXODWHWKHLQWHUSUHWLQJSURIHVVLRQ &RQVHTXHQWO\LQ$,,&WKH$VVRFLDWLRQLQWHUQDWLRQDOHGHVLQWHUSUqWHVGHFRQIHUHQFHRU,QWHUQDWLRQDO $VVRFLDWLRQRI&RQIHUHQFH,QWHUSUHWHUV ZDVIRXQGHGLQ3DULVLWVKHDGTXDUWHUVKDYHVLQFHPRYHGWR*HQHYD 7KHSXUSRVHRI$,,&DVVWDWHGLQLWV6WDWXWHVLVµWRGHILQHDQGUHSUHVHQWWKHSURIHVVLRQRIFRQIHUHQFH LQWHUSUHWHUWRLPSURYHLWHVSHFLDOO\E\HQFRXUDJLQJWUDLQLQJDQGUHVHDUFKWRVDIHJXDUGWKHLQWHUHVWVRILWV PHPEHUVDQGWRVHUYHLQWHUQDWLRQDOFRRSHUDWLRQE\GHPDQGLQJKLJKSURIHVVLRQDOVWDQGDUGVRIWKHP¶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



3DJH

FRXQWULHV
$XWRWUDQVODWLRQ 7KHWHUPVDXWRWUDQVODWLRQDQGVHOIWUDQVODWLRQUHIHUWRWKHDFWRIWUDQVODWLQJRQH¶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µELOLQJXDOVIUHTXHQWO\ VKLIWODQJXDJHV



3DJH

ZLWKRXWPDNLQJDFRQVFLRXVGHFLVLRQWRGRVRSRO\JORWDQGELOLQJXDOZULWHUVPXVWGHOLEHUDWHO\GHFLGHZKLFK ODQJXDJHWRXVHLQDJLYHQLQVWDQFH¶ 6HOIWUDQVODWLRQLQYROYHVDQHTXDOO\LPSRUWDQWGHFLVLRQZKLFK LVZK\LWSURYHVXVHIXOWRFRQVLGHULQDGGLWLRQWRWKHDFWXDOXVHDXWKRUVPDNHRIWKHLUODQJXDJHVWKHDWWLWXGHV DQGIHHOLQJVWKH\GHYHORSWRZDUGVWKHP

/DQJXDJHXVHDQGDWWLWXGH $VIDUDVWKHGLVWULEXWLRQRIWKHUHVSHFWLYHODQJXDJHVLVFRQFHUQHGDIHZTXHVWLRQVPD\KHOSWRIOHVKRXWWKH SRUWUDLWRIDSDUWLFXODUVHOIWUDQVODWRURUJURXSRIVHOIWUDQVODWRUV,VWKHSUDFWLFHV\VWHPDWLFRUOLPLWHGWRD VLQJOHH[SHULHQFH"$UHWKHDXWKRUVFRQVWDQWLQWKHLUFKRLFHRIVRXUFHDQGWDUJHWODQJXDJHVDVZLWKµUHJLRQDO¶ ZULWHUVZKRWUDQVODWHWKHLUZRUNLQRUGHUWRUHDFKDODUJHUDXGLHQFH RUGRWKH\IUHHO\VZLWFKGLUHFWLRQV",VWKH QDWLYHWRQJXHXVHGIRUWUDQVODWLRQVLQFRPSOLDQFHZLWKLQWHUQDWLRQDOFRQYHQWLRQVIRUWKHWUDLQLQJRIWUDQVODWRUV VHH',5(&7,212)75$16/$7,21 "2ULVLWUDWKHUUHVWULFWHGWRWKHZULWLQJRIRULJLQDOWH[WVDVUHTXLUHG E\URPDQWLFLGHRORJ\ "'RHVWKHUHDSSHDUWREHDGLYLVLRQRIODERXUEHWZHHQODQJXDJHVRQHSUHGRPLQDQWO\ EHLQJXVHGIRUµKLJKOLWHUDWXUH¶WKHRWKHUIRUSRSXODUJHQUHV"$WZKLFKSRLQWLQWKHLUFDUHHUVGRZULWHUVWXUQWR WKHSURFHVVRIDXWRWUDQVODWLRQ"$UHVHFRQGYHUVLRQVSURGXFHGDORQJWLPH DIWHUWKHILUVWYHUVLRQVKDYHEHHQ SXEOLVKHGRUDUHWKH\RQDQHTXDOIRRWLQJIURPDFKURQRORJLFDOSRLQWRIYLHZLHLVWKHLUGHYHORSPHQWPRUHRU OHVVVLPXOWDQHRXV" +DYLQJGHWHUPLQHGKRZWZRRUPRUHODQJXDJHVUHODWHWRHDFKRWKHUWKHWULFNLHVWTXHVWLRQUHPDLQVWREH WDFNOHGZK\GRVRPHZULWHUVUHSHDWLQDVHFRQGODQJXDJHZKDWKDVDOUHDG\EHHQVDLGLQWKHLUSUHYLRXVZRUN" 'LVVDWLVIDFWLRQDORQHZLWKH[LVWLQJWUDQVODWLRQVKDUGO\H[SODLQVDFKRLFHWKDWWRVRPHDWOHDVWVHHPVDVDEVXUG DVµUHGRLQJDSDLQWLQJLQDGLIIHUHQWVKDGH¶'HYDUULHX[ $SDUWIURPPDWHULDOFRQGLWLRQVH[LOH PDUULDJHILQDQFLDOJDLQ WKHUHPXVWEHVRPHXOWHULRUPRWLYHWKDWKHOSVZULWHUVWRRYHUFRPHWKHLULQLWLDO UHOXFWDQFH)RUQHLWKHU9ODGLPLU1DERNRYQRU6DPXHO%HFNHWWORRNHGIRUZDUGWRZKDWWKHIRUPHUGHVFULEHGDV µVRUWLQJWKURXJKRQH¶VRZQLQQDUGVDQGWKHQWU\LQJWKHPRQIRUVL]HOLNHDSDLURIJORYHV¶%HDXMRXU WKHODWWHUDVWKHµZDVWHVDQGZLOGVRIVHOIWUDQVODWLRQ¶&RKQ %LOLQJXDOZULWHUVHQJDJHGLQWKLV SURFHVVDUHGHDOLQJZLWKPRUHWKDQDEVWUDFWOLQJXLVWLFV\VWHPVRIWHQWKH\DUHWU\LQJWRMXJJOHWZRWUDGLWLRQV ZKLFKLVSUHFLVHO\ZK\WKH\RIIHUVXFKDIHOLFLWRXVVRXUFHIRUWKHGLVFRYHU\RIOLWHUDU\QRUPV,Q0HQDNKHP 3HUU\¶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µWRIRUPWKHLUSRHWLFGLFWLRQLQWKHYHUQDFXODU¶)RUVWHU 7KHEHVWNQRZQ 5HQDLVVDQFHDXWKRUWRLQGXOJHLQDXWRWUDQVODWLRQZDV-RDFKLPGX%HOOD\'HPHUVRQ DIRXQGLQJ PHPEHURIWKH)UHQFK3OpLDGHVFKRRO)RUVWHU± PHQWLRQVWKHLQWHUHVWLQJFDVHRI$QWZHUSERUQ-DQ YDQGHU1RRWZKRVH2O\PSLD DSSHDUHGLQDELOLQJXDOHGLWLRQZLWK)UHQFKDQG'XWFKWH[WVVLGHE\VLGH WKHODWWHUDIUHHUHQGHULQJRIZKDWZDVDOUHDG\DQµLPLWDWLRQ¶RI3LHUUHGH5RQVDUG7KHIDFWWKDWWKHVHSRHPV ZHUHLQYDULDEO\WUDQVODWHGLQWRWKHPRWKHUWRQJXHIURPPRGHOVGLUHFWO\FRPSRVHGLQDQDFTXLUHGODQJXDJH VKRZVKRZPXFKODQJXDJHDWWLWXGHVKDYHFKDQJHGRYHUWKHFHQWXULHV,QPRUHUHFHQWWLPHVGHVSLWHWKH SDUDGLJPVKLIWFDXVHGE\URPDQWLFLVP)OHPLVKZULWHUVKDYHFRQWLQXHGWREHOLHPDQ\DVVXPSWLRQVDERXWWKH LPSRVVLELOLW\RIWUDQVODWLQJDQGFUHDWLQJLQDµIRUHLJQ¶ODQJXDJH$WUDGLWLRQDOO\IHUWLOHJURXQGIRU'XWFK² )UHQFK



3DJH

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²WKH\GRQRWLPSO\DQ\UHDOFKDQJHLQDXGLHQFH² DVKLJKOLJKWH[LVWLQJµLQWUDV\VWHPLF¶UHODWLRQV/DPEHUW ,WLVWKXVSRVVLEOHWRH[WUDSRODWHIURP %HDXMRXU¶V YLHZRIVHOIWUDQVODWLRQDV DULWHRISDVVDJHHQGXUHGE\DOPRVWDOOZULWHUVZKRXOWLPDWHO\ZRUNLQDODQJXDJHRWKHUWKDQWKH RQHLQZKLFKWKH\KDYHILUVWGHILQHGWKHPVHOYHVDVZULWHUV6HOIWUDQVODWLRQLVWKHSLYRWDOSRLQWLQD WUDMHFWRU\VKDUHGE\PRVWELOLQJXDOZULWHUV +HUFRUSXVVHHPVVRPHZKDWH[FHSWLRQDOLQWKDWLWFRQVLVWVRIZULWHUVVXFKDV(OVD7ULROHWDQG9ODGLPLU 1DERNRYZKRFKDQJHGWHUULWRULHVERWKKDYLQJIOHGWKH6RYLHW8QLRQDURXQGDQGIHOWREOLJHGWRDGRSW WKHODQJXDJHRIWKHLUQHZFRXQWU\)RUWKRVHELOLQJXDOVZKRFDQVZLWFKODQJXDJHVZLWKRXWQHFHVVDULO\ µFKDQJLQJSODFHV¶LQERWKDOLWHUDODQGDILJXUDWLYHVHQVH DXWRWUDQVODWLRQQHHGQRWEHDSRLQWRIQRUHWXUQ

7H[WXDOUHODWLRQV +RZGRHVDVHOIWUDQVODWLRQUHODWHDVDWH[WWRµQRUPDO¶WUDQVODWLRQV"&DQLWEHVDLGWRSRVVHVVLWVRZQ GLVWLQFWLYHFKDUDFWHU",QDQHVVD\RQ-DPHV-R\FH¶VRZQ,WDOLDQL]LQJRIWZRSDVVDJHVIURPKLV:RUNLQ 3URJUHVVWKHIXWXUH)LQQHJDQV:DNH -DFTXHOLQH5LVVHWDQVZHUVLQWKHDIILUPDWLYH8QOLNHWUDQVODWLRQVµLQWKH XVXDOVHQVHRIWKHZRUG¶ VKHDUJXHV-R\FH¶VWH[WVDUHµQRSXUVXLWRIK\SRWKHWLFDOHTXLYDOHQWVRIWKH RULJLQDOWH[WDVJLYHQGHILQLWLYH EXWDVDODWHUHODERUDWLRQUHSUHVHQWLQJ«DNLQGRIH[WHQVLRQDQHZVWDJHD PRUHGDULQJYDULDWLRQRQWKHWH[WLQSURFHVV¶ 7KLVDOORZVKHUWRRSSRVH-R\FH¶VDXWRWUDQVODWLRQWR WKHµILGHOLW\DQGXQLQYHQWLYHQHVV¶ WKDWFKDUDFWHUL]HGWKH)UHQFKWUDQVODWLRQRIWKHVDPHSDVVDJHVE\D WHDPWKDWLQFOXGHGQROHVVWKDQ3KLOLSSH6RXSDXOW


3DJH

ZKLFKERWKWH[WVDUHUHIHUUHGWRDVµYDULDQWV¶RUµYHUVLRQV¶RIHTXDOVWDWXV)LWFK± ,WVKRXOGEHUHPHPEHUHGKRZHYHUWKDW)LWFK¶VUHPDUNVZHUHIRUPXODWHGLQDERRNOHQJWKVWXG\RI6DPXHO %HFNHWW¶VELOLQJXDOZRUN7KRXJKKHSUREDEO\LVWKHVLQJOHDXWRWUDQVODWRUWKDWKDVUHFHLYHGWKHPRVWFULWLFDO DWWHQWLRQ&RKQ+DQQD6LPSVRQ)HGHUPDQ%HDXMRXU± %HFNHWW¶VFDVHLV QRWWKHUXOH+DYLQJHODERUDWHGRYHUWKH\HDUVWZLQZRUNVLQWZRODQJXDJHVKHLVPRUHRUOHVVLQDOHDJXHRI KLVRZQHYHQDPRQJVHOIWUDQVODWRUV&OHDUO\%HFNHWW¶VFURVVOLQJXLVWLFFUHDWLRQZKHUH)UHQFKDQG(QJOLVK YHUVLRQVIROORZHDFKRWKHULQDQLQFUHDVLQJWHPSRLVQRWWKHRQO\ZD\RIWUDQVODWLQJRQH¶VRZQZULWLQJV7KHUH DSSHDUVWREHDIXQGDPHQWDOGLIIHUHQFHEHWZHHQZKDWFRXOGEHODEHOOHGVLPXOWDQHRXVDXWRWUDQVODWLRQVWKDW DUHH[HFXWHGZKLOHWKHILUVWYHUVLRQLVVWLOOLQSURFHVV DQGGHOD\HGDXWRWUDQVODWLRQVSXEOLVKHGDIWHU FRPSOHWLRQRUHYHQSXEOLFDWLRQRIWKHRULJLQDOPDQXVFULSW $VDPDWWHURIIDFW%HFNHWWKLPVHOIUHVRUWHGWR ERWKPRGHVRIVHOIWUDQVODWLRQDWGLIIHUHQWVWDJHVLQKLVFDUHHU+HVWDUWHGRXWE\WUDQVODWLQJZLWKWKHKHOSRI KLVIULHQG$OIUHG3pURQDILQLVKHGZRUNOLNH0XUSK\DQRYHOWKDWKDGEHHQSXEOLVKHGLQ(QJOLVKEHIRUH:RUOG :DU7ZREXWZKRVH)UHQFKHTXLYDOHQWZDVWRDSSHDURQO\DGHFDGHODWHU,QWKLVFDVHWKH(QJOLVKWH[WKDG DOUHDG\OHGDQDXWRQRPRXVH[LVWHQFHWKHUHE\OLPLWLQJWKHSRVVLELOLWLHVRILQQRYDWLRQµ%\DQGODUJHWKH WUDQVODWLRQIROORZVWKHRULJLQDORIZKLFKREYLRXVO\QRRQHFRXOGKDYHPRUHLQWLPDWHNQRZOHGJHWKDQLWV DXWKRUWUDQVODWRU¶&RKQ 6RRQDIWHU%HFNHWWZRXOGLQLWLDWHWKHRIWHQ(QJOLVK UHZULWLQJZKLOHVWLOO ZRUNLQJRQWKHPRVWO\)UHQFK YHUVLRQLQWKHSURFHVVRIFRPSOHWLQJ3LQJIRULQVWDQFHKHGRHVQRWµZRUN VLPSO\IURPWKHILQDOYHUVLRQRI>%LQJ@EXWRQRFFDVLRQWDNHVDVKLVVRXUFHWKHHDUOLHUGUDIWVRIWKHRULJLQDO PDQXVFULSW¶)LWFK 7KHODWWHUSUDFWLFHFDQEHPRVWDSWO\GHVFULEHGDVDNLQGRIELOLQJXDOFUHDWLRQWKDW GHYHORSVDORQJSDUDOOHOOLQHVLQVWHDGRIPHUJLQJLQWRELEOLFDOFRQIXVLRQRUODQJXDJHEOHQGLQJ,WLVQRWHZRUWK\ LQWKLVUHJDUGWKDW%HFNHWWQRWXQOLNHRWKHUELOLQJXDOZULWHUV%HDXMRXU+HLQHPDQQ WHQGV WRDYRLGWH[WXDOPXOWLOLQJXDOLVPVHH08/7,/,1*8$/,60$1'75$16/$7,21 7KXVWKRXJKKLV LQGLYLGXDOWH[WVDUHQRWELOLQJXDO%HFNHWW¶VZRUNWDNHQDVDZKROHGHILQLWLYHO\LVIRUHDFKPRQROLQJXDOSDUW FDOOVIRULWVFRXQWHUSDUWLQWKHRWKHUODQJXDJHµ2QHPLJKWVD\WKDWZKLOHWKHILUVWYHUVLRQLVQRPRUHWKDQD UHKHDUVDOIRUZKDWLV\HWWRFRPHWKHVHFRQGLVEXWDUHSHWLWLRQRIZKDWKDVJRQHEHIRUHWKHWZRFRQFHSWV FRPLQJWRJHWKHULQWKHRQH)UHQFKZRUGUpSpWLWLRQ¶)LWFK

)XUWKHUUHDGLQJ %URZQ'DGD]KDQRYD)LWFK*UHHQ*UXWPDQ.XUH-HQVHQ/DPSLQJ 0F*XLUH3DODFLR

5$,1,(5*5870$1



3DJH

% %DEHOWRZHURI 7KHELEOLFDOVWRU\RIWKHWRZHURI%DEHO*HQHVLV± KDVORQJIDVFLQDWHGWUDQVODWRUVDQGVWXGHQWVRI WUDQVODWLRQ,WFRQWDLQVWKH2OG7HVWDPHQWVWRU\RIWKHIDOOLQWROLQJXLVWLFGLYHUVLW\ZKLFKKDVRIWHQEHHQUHDG DVDP\WKRIWKHRULJLQRIWUDQVODWLRQ 1RZWKHZKROHHDUWKKDGRQHODQJXDJHDQGIHZZRUGV$QGDVPHQPLJUDWHGIURPWKHHDVWWKH\ IRXQGDSODLQLQWKHODQGRI6KLQDUDQGVHWWOHGWKHUH$QGWKH\VDLGWRRQHDQRWKHU³&RPHOHWXV PDNHEULFNVDQGEXUQWKHPWKRURXJKO\´$QGWKH\KDGEULFNIRUVWRQHDQGELWXPHQIRUPRUWDU 7KHQWKH\VDLG³&RPHOHWXVEXLOGRXUVHOYHVDFLW\DQGDWRZHUZLWKLWVWRSLQWKHKHDYHQVDQGOHW XVPDNHDQDPHIRURXUVHOYHVOHVWZHEHVFDWWHUHGDEURDGXSRQWKHIDFHRIWKHZKROHHDUWK´$QG WKH/25'VDLG³%HKROGWKH\DUHRQHSHRSOHDQGWKH\KDYHDOORQHODQJXDJHDQGWKLVLVRQO\WKH EHJLQQLQJRIZKDWWKH\ZLOOGRDQGQRWKLQJWKDWWKH\SURSRVHWRGRZLOOQRZEHLPSRVVLEOHIRU WKHP&RPHOHWXVJRGRZQDQGWKHUHFRQIXVHWKHLUODQJXDJHWKDWWKH\PD\QRWXQGHUVWDQGRQH DQRWKHU¶VVSHHFK´6RWKH/25'VFDWWHUHGWKHPDEURDGIURPWKHUHRYHUWKHIDFHRIDOOWKHHDUWK DQGWKH\OHIWRIIEXLOGLQJWKHFLW\7KHUHIRUHLWVQDPHZDVFDOOHG%DEHO>PHDQLQJµFRQIXVLRQ¶@ EHFDXVHWKHUHWKH/25'FRQIXVHGWKHODQJXDJHRIDOOWKHHDUWKDQGIURPWKHUHWKH/25'VFDWWHUHG WKHPDEURDGRYHUWKHIDFHRIDOOWKHHDUWK5HYLVHG6WDQGDUG9HUVLRQ ([LWWKH/25'RUWKDWJURXSRIJRGVWKDWWKH2OG7HVWDPHQWFDOOVWKH(ORKLPµOHWXVJRGRZQ¶²QRWDUR\DO RUDGLYLQHµZH¶EXWDJURXS H[LWDOVRWKHSHRSOHGZHOOLQJLQWKHODQGRI6KLQDU²DQGHQWHUWKHWUDQVODWRUWKH RQO\SHUVRQFDSDEOHRIUHPHG\LQJHYHQVOLJKWO\WKHVFDWWHULQJRIWRQJXHVDW%DEHO+HQFHWKHWLWOHRI),7¶6 MRXUQDO%DEHOKHQFHWKHWLWOHRI*HRUJH6WHLQHU¶VERRNRQWUDQVODWLRQ$IWHU%DEHO KHQFHWKHWLWOHRI -DFTXHV'HUULGD¶VGHFRQVWUXFWLRQRI:DOWHU%HQMDPLQµ'HV7RXUVGH%DEHO¶ ²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µVFLHQWLILFDOO\¶LQWKHPLGQLQHWHHQWKFHQWXU\E\$XJXVW6FKOHLFKHU± XQGHUWKHLQVSLUDWLRQRIWKH*HUPDQ5RPDQWLFVLVWKDWRIDQRULJLQDO,QGR(XURSHDQSHRSOHZKRVSRNHD VLQJOHSXUHSULPRUGLDOODQJXDJHRU8UVSUDFKHFDOOHG3URWR,QGR(XURSHDQ$V6FKOHLFKHUDQGDOORIKLV SKLORORJLFDOIROORZHUVVLQFHUHFRJQL]HWKHUHLVQRHYLGHQFHWKDWVXFKDODQJXDJHHYHUH[LVWHGDQGWKHLGHDLV UDWKHUIDUIHWFKHGWKDWDOORIWKHPRGHUQODQJXDJHVIURP(XURSHWR,QGLDGHYHORSHGIURPDVLQJOHODQJXDJH WKDWWKLQJVZHUHRQFHVLPSOHSXUHXQLILHGEXWQRZDUHFRPSOH[PL[HGGLYHUVH6WLOOKDYLQJDGPLWWHGWKDW WKHZKROHQRWLRQRIDQ



3DJH

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²LPSOLFLWO\ELDVHG WRZDUGDFRQFHSWLRQRIODQJXDJHDVKDYLQJGHJHQHUDWHGIURPDSULPHYDOSXULW\DQGWKXVLQQHHGRIUHVWRUDWLRQ WRWKDWSXULW\7KHSDUDOOHOVDPRQJWKH,QGLDQDQG(XURSHDQODQJXDJHVDUHREMHFWLYHIDFWVZKLFKPLJKWEH H[SODLQHGDQ\QXPEHURIZD\VWKHK\SRWKHVLVRIDQRULJLQDO,QGR(XURSHDQODQJXDJHWKDWZDVVFDWWHUHGDFURVV WZRFRQWLQHQWVLVDQH[SODQDWRU\P\WKDQGRQO\RQHVXFKP\WKDQGRQHZLWKGLVWXUELQJLPSOLFDWLRQV 7KHVWRU\RIWKHWRZHURI%DEHOLVDOVRIDUIURPDGLYLQHPDQGDWHIRUWUDQVODWRUV7KHJRGVGRQRWVD\µ/HWXV FRQIXVHWKHLUODQJXDJHWKDWWKHUHPD\EHWUDQVODWLRQ¶7KH\VD\µ/HWXV«FRQIXVHWKHLUODQJXDJHWKDWWKH\PD\ QRWXQGHUVWDQGRQHDQRWKHU¶VVSHHFK¶ZKLFKLVTXLWHDGLIIHUHQWPDWWHU²RQHWKDWVHHPVDOPRVWWREDQ WUDQVODWLRQDORQJZLWKDQ\RWKHUPHDQVRIFRPPXQLFDWLQJDFURVVOLQJXLVWLFEDUULHUVLQFOXGLQJRQHVXSSRVHV IRUHLJQODQJXDJHOHDUQLQJ DQGWKXVRIRQFHDJDLQWKUHDWHQLQJWKHVHFXULW\RIWKHJRGVRQKLJK7KHVWRU\ FRQFHLYHVOLQJXLVWLFXQLW\DQGWKXVKXPDQEHLQJV¶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µVFDWWHU¶RUµFRQIXVH¶WKHLU6SDQLVKFLWL]HQVE\IRUFLQJWKHPWROHDUQ (QJOLVK %XWWKHLURQ\LQWKLVLVRQO\VXSHUILFLDOIRUXOWLPDWHO\WKHWRZHURI%DEHOP\WKLVLWVHOIDQDWWDFNRQOLQJXLVWLF GLYHUVLW\,QLWOLQJXLVWLFXQLW\LVH[SOLFLWO\SRUWUD\HGDVWKHGDQJHUEXWRQO\IURPWKHJRGV¶SRLQWRIYLHZDQG WKHVWRU\WDFLWO\HQFRXUDJHVUHDGHUVWRLGHQWLI\ZLWKWKHSHRSOHGZHOOLQJLQWKHODQGRI6KLQDUWKHEXLOGHUVDW %DEHOZKRVHXQLWDU\ODQJXDJHZDVVFDWWHUHGDQGFRQIXVHG(YHU\RQHRQFHVSRNHDVLQJOHODQJXDJHLVWKH VWRU\¶VVXEWH[WDQGHYHU\RQHVKRXOGVSHDNDVLQJOHODQJXDJHDJDLQ²VD\(VSHUDQWRRU(QJOLVKRUZKDWHYHU WKHQH[WOLQJXDIUDQFDPD\EH&RPSDUHGZLWKWKLVQRVWDOJLFORQJLQJDOOWUDQVODWLRQHIIRUWVZLOOVHHP SDWKHWLFDOO\LQDGHTXDWHWUDGXWWRUHWUDGLWRUHWKHWUDQVODWRULVDWUDGXFHUEHFDXVHVKHIDLOVWRUHVWRUHXVWRD SULVWLQHVWDWHEHIRUHWUDQVODWLRQZDVQHFHVVDU\ 6HHDOVR 08/7,/,1*8$/,60$1'75$16/$7,21385(/$1*8$*(6(0,27,&$3352$&+(6 75$16/$7$%,/,7<

)XUWKHUUHDGLQJ %DURQ%XUNH'HUULGDE+DUULVDQG7D\ORU*HRUJH6WHLQHU

'28*/$652%,1621

%LEOHWUDQVODWLRQ 7KH%LEOHLVWKHKRO\ERRNRI&KULVWLDQLW\,WFRQVLVWVRIWKHIROORZLQJ D WKH2OG7HVWDPHQWDFROOHFWLRQRIERRNVFRQVWLWXWLQJWKHVDFUHGVFULSWXUHVRI-XGDLVPDQGZULWWHQ SULPDULO\LQ+HEUHZZLWKDIHZSRUWLRQVLQ$UDPDLF E WKH1HZ7HVWDPHQWERRNVRULJLQDOO\ZULWWHQLQ*UHHNEHWZHHQ$'DQG F WKH$SRFU\SKDERRNVWDNHQRYHUE\WKHHDUO\&KULVWLDQ&KXUFKIURPWKH*UHHN



3DJH

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¶VSRSXODWLRQ

+LVWRU\RI%LEOHWUDQVODWLRQ 7KHKLVWRU\RI%LEOHWUDQVODWLRQPD\EHGLYLGHGLQWRWKUHHSULQFLSDOSHULRGVWKH*UHFR5RPDQ%&WR$' WKH5HIRUPDWLRQVL[WHHQWKDQGVHYHQWHHQWKFHQWXULHV DQGWKHPRGHUQSHULRGZKLFKFRYHUVSULPDULO\WKH QLQHWHHQWKDQGWZHQWLHWKFHQWXULHVRUZKDWDUHRIWHQVSRNHQRIDVµWKHPLVVLRQDU\FHQWXULHV¶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¶VWUDQVODWLRQRIWKH%LEOHLQWR*HUPDQDQGKLVVPDOOERRNGHIHQGLQJKLV SULQFLSOHVRIWUDQVODWLRQLQWURGXFHGVLJQLILFDQWQHZYLHZVDERXWWUDQVODWLRQDOHTXLYDOHQFHLQWKH6FULSWXUHV,Q (QJOLVKWKHPDMRUFUHDWLYHFRQWULEXWLRQZDVPDGHE\:LOOLDP7<1'$/(VHH%5,7,6+75$',7,21 ZKRVHWUDQVODWLRQRIWKH1HZ7HVWDPHQWIRUPHGWKHSULPDU\EDVLVIRUWKHODWHUGHYHORSPHQWRIWKH.LQJ-DPHV 9HUVLRQNQRZQDVWKHµ$XWKRUL]HG9HUVLRQ¶ZKLFKKDGVXFKDJUHDWLQIOXHQFHRQKXQGUHGVRIWUDQVODWLRQVLQ WKHPLVVLRQDU\ZRUOG 7KHPRGHUQSHULRG 7KHPRGHPSHULRGFDQEHGLYLGHGLQWRWZRPDLQSKDVHV7KHILUVWSKDVHVDZWKHSURGXFWLRQRIUHYLVLRQVDQG QHZWUDQVODWLRQVLQWRDQXPEHURIPDMRU(XURSHDQODQJXDJHVSULPDULO\LQUHVSRQVHWRQHZGLVFRYHULHVDQG LQVLJKWVFRPLQJIURPDUFKDHRORJ\DQGWKHVWXG\RI%LEOHPDQXVFULSWV'XULQJWKHVHFRQGSKDVHQXPHURXV WUDQVODWLRQVZHUHPDGHE\PLVVLRQDULHVLQWRODQJXDJHVRIWKHµWKLUGZRUOG¶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



3DJH

IROORZHGE\7RGD\¶V(QJOLVK9HUVLRQ DQG7KH/LYLQJ%LEOH ZKLFKZDVPXFK DSSUHFLDWHGIRULWVVW\OHEXWVHYHUHO\FULWLFL]HGIRULWVH[HJHVLV 7UDQVODWLRQVIRUWKHµPLVVLRQDU\ZRUOG¶FDQOLNHZLVHEHGLYLGHGLQWRWZRLPSRUWDQWSKDVHV3KDVHRQHLQFOXGHG %LEOHWUDQVODWLRQVE\HDUO\PLVVLRQDULHVVXFKDV$GRQLUDP-XGVRQIRU%XUPHVH5REHUW0RUULVRQIRU&KLQHVH :LOOLDP&DUH\DQGKLVFROOHDJXHVIRUDQXPEHURIODQJXDJHVLQ,QGLDDQG+HQU\0DUW\QIRU8UGX3HUVLDQ DQG$UDELF3KDVHWZRVDZKXQGUHGVRIWUDQVODWLRQVLQWRRWKHUODQJXDJHVPDGHE\PLVVLRQDULHVVHQWRXWE\ GHQRPLQDWLRQDOPLVVLRQVE\VRFDOOHGµ)DLWK0LVVLRQV¶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¶VSRSXODWLRQ$WSUHVHQWWKH8QLWHG%LEOH6RFLHWLHVDUHVSRQVRULQJDQGSURYLGLQJJXLGDQFHWRWUDQVODWRUV LQPRUHWKDQODQJXDJHV

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µIDLWK¶DQGµWUXVW¶DVµKDQJLQJRQWR*RGZLWKWKHKHDUW¶DSKUDVHEDVHGRQWKHPDQQHULQZKLFK PDVVLYHYLQHVFOLQJWRKXJHMXQJOHWUHHV$QGD.DUUHWULEHVPDQLQ:HVW$IULFDPD\VSHDNRIWKH3DUDFOHWH WKH+RO\6SLULWDVFRPIRUWHURUDGYRFDWH DVµWKHRQHZKRIDOOVGRZQEHVLGHXV¶DWLWOHEDVHGRQWKHDFWLRQRI DPHUFLIXOWUDYHOOHUUHVFXLQJVRPHRQHZKRKDVFROODSVHGDORQJDVDYDQQDKWUDLO (IIHFWLYHWUDQVODWLRQVDUHUDUHO\ZRUGIRUZRUGEHFDXVHOLWHUDOUHQGHULQJVDUHRIWHQVHULRXVO\PLVOHDGLQJ)RU H[DPSOHWKHLGLRPJLYHJORU\WR*RG-RKQ UHDOO\PHDQVµWRVZHDUWRWHOOWKHWUXWK¶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

6RFLROLQJXLVWLFLVVXHVLQ%LEOHWUDQVODWLRQ :KLOHOLQJXLVWLFVIRFXVHVRQWKHVWUXFWXUHVRIODQJXDJHVVRFLROLQJXLVWLFVLVFRQFHUQHGZLWKWKHZD\VLQZKLFK SHRSOHXVHODQJXDJHWRDFFRPSOLVKYDULRXVSXUSRVHV7KHDWWLWXGHVDQGYDOXHVDVVRFLDWHGZLWKWKHVHXVHV EHFRPHFULWLFDOEHFDXVHWKRVHIRUZKRP%LEOHWUDQVODWLRQVDUHPDGHDUHVRHPRWLRQDOO\LQYROYHGLQERWKWKH IRUPDQGFRQWHQWRIDQ\%LEOHWH[W$QXPEHURIPDWWHUVWKDWPLJKWVHHPXQFRQWURYHUVLDOLQDVHFXODUFRQWH[W WDNHRQJUHDWVRFLROLQJXLVWLFLPSRUWDQFHLQDELEOLFDOFRQWH[WHVSHFLDOO\LQPDWWHUVRIFDQRQLFLW\


file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_5F25.html

3DJH

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µFKDQJHWKH ZRUGRIWKH/RUG¶ 7H[WXDOUHOLDELOLW\ 7H[WXDOUHOLDELOLW\LVDPDMRULVVXHLQWKHFKRLFHRIWKHEHVWUHDGLQJVLQ+HEUHZRU*UHHNWH[WVWRVHUYHDVWKH EDVLVIRUWUDQVODWLRQVLQWRRWKHUODQJXDJHV)RUH[DPSOHLQ0DUNWKHEHVW*UHHNPDQXVFULSWVUHDGµDVLW VD\VLQ,VDLDK¶EXWWKHQH[WZRUGVFRPHIURP0DODFKLDQGRQO\WKHVHFRQGSDUWRIWKHTXRWDWLRQLVIURP,VDLDK &HUWDLQVFULEHVQRGRXEWQRWHGWKHLQDFFXUDF\DQGFKDQJHGWKHWH[WWRUHDGµDVLWVD\VLQWKHSURSKHWV¶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µFRPSRVLWHYHUVLRQ¶ZKLFKLVDQDPDOJDPRIGLIIHUHQWGLDOHFWVE\ VHOHFWLQJYRFDEXODU\DQGJUDPPDUIRUPVRQWKHEDVLVRIWKHLUGLVWULEXWLRQLQWKHGLIIHUHQWGLDOHFWV7KLV PHWKRGKRZHYHUUXQVWKHULVNRISURGXFLQJDWH[WWKDWLVGLIIHUHQWIURPWKHZD\DQ\RQHDFWXDOO\VSHDNV $FFRUGLQJO\VXFKDWH[WLVOLNHO\WREHUHMHFWHGE\DOPRVWHYHU\RQH 9HUWLFDOGLDOHFWVDUHJHQHUDOO\RIWKUHHW\SHVWUDGLWLRQDODQGOLWHUDU\FRPPRQDQGVXEVWDQGDUG7KHWUDGLWLRQDO ²OLWHUDU\GLDOHFWLVQRUPDOO\WKHODQJXDJHRIVFKRROVEHWWHUERRNVDQGWKHPRUHHGXFDWHGSHRSOH7KH

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_5F25.html11/3/2007 10:19:08 PM


3DJH

FRPPRQODQJXDJHGLDOHFWLVHVVHQWLDOO\WKHRYHUODSODQJXDJHEHWZHHQWKHOLWHUDU\DQGFROORTXLDOOHYHOV,WLV WKHW\SHRIGLDOHFWHPSOR\HGE\DERVVWDONLQJWRHPSOR\HHVDQGE\DPDWURQWDONLQJZLWKDPDLG7KLV UHODWLYHO\QDUURZEDQGLVWKHEDVLVIRUWUDQVODWLRQVRIWKH6FULSWXUHVLQWRPRUHWKDQODQJXDJHVLQYDULRXV SDUWVRIWKHZRUOGDQGWKHQXPEHURIVXFKWUDQVODWLRQVLVJURZLQJUDSLGO\%XWWUDQVODWLRQVRISDUWVRIWKH %LEOHLQWRVXEVWDQGDUGGLDOHFWVKDYHDOPRVWDOZD\VEHHQUHMHFWHGE\WKHYHU\SHUVRQVZKRQRUPDOO\XVHVXFKD GLDOHFW7KH\UHIXVHWRDFFHSWWKHZHOOPHDQLQJHIIRUWVRIWKRVHSURGXFLQJVXFKWH[WVEHFDXVHWKH\UHJDUGWKLV W\SHRISXEOLFDWLRQDVDSDWHUQDOL]LQJLQVXOW 6RFLRUHOLJLRXVGLDOHFWVUHSUHVHQWW\SLFDOZD\VLQZKLFKUHOLJLRXVFRQVWLWXHQFLHVHPSOR\LQJURXSODQJXDJH,Q (QJOLVKVRPHSHRSOHPXFKSUHIHUWKHWKRXWKHHWHUPLQRORJ\HVSHFLDOO\LQSUD\HUVDQGELEOLFDOSRHWU\DQGWKH\ PD\HYHQSUHVHUYHWKHVHGLVWLQFWLRQVLQVRFLDOUHODWLRQVDPRQJFKXUFKPHPEHUV6RPHRIWKHVDPHW\SHVRI GLVWLQFWLRQVRFFXUZLWKVHFRQGSHUVRQVLQJXODUSURQRXQVLQ*HUPDQ)UHQFKDQG6SDQLVK%LEOHWUDQVODWLRQV PDGHLQVRFDOOHGJHQGHUQHXWUDOODQJXDJHDOVRFRQVWLWXWHDNLQGRIVRFLRUHOLJLRXVGLDOHFWZLWKYHU\KHDY\ WKHRORJLFDOLPSOLFDWLRQVEHFDXVHWKRVHZKRLQVLVWRQVXFKODQJXDJHWHQGWREHWKHRORJLFDOO\OLEHUDO7KHXVHRI FHUWDLQNH\WKHRORJLFDOWHUPLQRORJ\LVDOVRDFUXFLDOHOHPHQWLQVRFLRUHOLJLRXVGLDOHFWVIRUH[DPSOHHXFKDULVW YV/RUG¶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¶VFUHDWLYLW\DQGREVWUXFWVDUHDGHU¶VFRPSUHKHQVLRQ)RUH[DPSOH PRVW(QJOLVKVSHDNHUVKDYHQRLGHDZKDW+DOORZHGEHWK\QDPHWKHILUVWSHWLWLRQRIWKH/RUG¶V3UD\HU 0DWWKHZ UHDOO\PHDQV7KH*UHHNWH[WFDQEHWUDQVODWHGOLWHUDOO\DVµ6DQFWLILHGEHWK\QDPH¶LQZKLFK µQDPH¶LVD6HPLWLFZD\RIDYRLGLQJDGLUHFWUHIHUHQFHWR*RGDQGµVDQFWLILHG¶PXVWUHIHUQRWWRWKHFKDUDFWHU RI*RGEXWWRWKHPDQQHULQZKLFK+HLVUHFRJQL]HGE\SHRSOHDVEHLQJWUXO\*RG$FFRUGLQJO\LWLVPRUH UHOHYDQWO\UHQGHUHGDV0D\DOOSHRSOHUHDOL]HWKDW\RXDUH*RGRU+HOSXVWRKRQRXU\RXDV*RGRUHYHQDV +HOSXVWRKRQRXU\RXUQDPH 'LIIHUHQFHVLQIRUPDW ,WVHHPVDOPRVWLQFUHGLEOHWKDWGLIIHUHQFHVRIIRUPDWLQWKHSXEOLFDWLRQRIWKH%LEOHFRXOGEHFRPHFUXFLDO VRFLROLQJXLVWLFLVVXHVEXWGLVWLQFWLRQVRIWKLVW\SHDUHWKHRUWKRJUDSKLFHTXLYDOHQWRIVXFKSDUDOLQJXLVWLFRUDO IHDWXUHV



3DJH

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¶WULXPSKDQWHQWU\LQWR-HUXVDOHP",VDWUDQVODWRUWRFKDQJHWKHVWRU\ DQGKDYH-HVXV¶IROORZHUVJRDKHDGRIKLPVZHHSLQJWKHSDWK"2IFRXUVHQRW,QWKHWH[WDWUDQVODWRUPXVW DGKHUHWRWKHKLVWRULFDOHYHQWEXWLQDIRRWQRWHWKHPHDQLQJRIZKDWWRRNSODFHFDQEHH[SODLQHGWRUHDGHUVLQ :HVW$IULFD ,QWURGXFWLRQVWRELEOLFDOERRNVDQGJURXSVRIVXFKERRNVDUHSDUWLFXODUO\KHOSIXOIRUPRVWUHDGHUVEHFDXVHWKH\ FDQSURYLGHWKHKLVWRULFDODQGFXOWXUDOLQIRUPDWLRQWKDWLVVRHVVHQWLDOIRUFRUUHFWFRPSUHKHQVLRQ:K\IRU H[DPSOHZRXOGWKH-HZVKDYHWRJRWRWKHLUHQHPLHVWKH3KLOLVWLQHVLQRUGHUWRKDYHWKHLUSORXJKVDQGVLFNOHV VKDUSHQHG"5HDGHUVQHHGWRNQRZWKDWWKH3KLOLVWLQHV¶FXOWXUHZDVLQPDQ\UHVSHFWVVXSHULRUWRWKDWRIWKH ,VUDHOLWHVZKRZHUHVWLOOLQWKH%URQ]H$JHZKLOHWKH3KLOLVWLQHVKDGDOUHDG\DFTXLUHG,URQ$JHWHFKQRORJ\

3ULQFLSOHVDQGSURFHGXUHVRIWUDQVODWLRQ $OO%LEOHWUDQVODWRUVZKHWKHUWKH\DUHZRUNLQJDORQHRULQDFRPPLWWHHIROORZDVHULHVRILPSOLFLWRUH[SOLFLW SULQFLSOHVJRYHUQLQJPDWWHUVRIWH[WH[HJHVLVILJXUDWLYHODQJXDJHGLUHFWYVLQGLUHFWGLVFRXUVHSDUDJUDSKLQJ VHQWHQFHOHQJWKDQGVRRQ,QFUHDVLQJO\WUDQVODWRUVWHQGWRDJUHHRQWKHIROORZLQJPDMRUSULQFLSOHV D WKHXVHRIVFKRODUO\*UHHNDQG+HEUHZWH[WV E LQWHUSUHWDWLRQVEDVHGRQWKHEHVWVFKRODUO\MXGJHPHQW



3DJH

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¶Ɩ1.25$1 75$16/$7,21725$+75$16/$7,21

)XUWKHUUHDGLQJ %HHNPDQDQG&DOORZ%UXFH&DOORZ.QR[/DUVRQ1LGD1LGDDQG7DEHUGH :DDUGDQG1LGD

(8*(1($1,'$



3DJH

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¶GHFLVLRQVVHH6.23267+(25<

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¶VQRWLRQRIµFRQWH[WRIVLWXDWLRQ¶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µIUDPHZRUNRI



3DJH

FDWHJRULHVIRUWKHFODVVLILFDWLRQRIVXEODQJXDJHVRUYDULHWLHVZLWKLQDWRWDOODQJXDJH¶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µLV«WKHQRUPDJDLQVWZKLFKWKHTXDOLW\RIWKHWUDQVODWLRQWH[WLVWREH PHDVXUHG¶ )URPWKLVLWIROORZVWKDWµWKHGHJUHHWRZKLFK«WKH>77@WH[WXDOSURILOHGRHVQRWPDWFK WKH67¶VSURILOHLVWKHGHJUHHWRZKLFKWKDW77LVLQDGHTXDWHLQTXDOLW\¶LELG 7KHDGGLWLRQRIWKHSUDJPDWLF GLPHQVLRQKHUHLVLPSRUWDQWDV+RXVHSRLQWVRXWWKHEUHDNLQJGRZQRIDWH[WLQWRFRQVWLWXHQWHOHPHQWV ZLWKRXWFRQVLGHUDWLRQRIWKHG\QDPLFVRIWH[WLVDWEHVWDWRPLVWLF7KLVSRLQWLVFHQWUDOWR+DWLPDQG0DVRQ ZKRDGGSUDJPDWLFDQGVHPLRWLFGLPHQVLRQVWRWKHLUFKDUDFWHUL]DWLRQRIWKHFRPPXQLFDWLYHGRPDLQRI FRQWH[W/LNHZLVH*XWW± FULWLFL]HVWKHGHVFULSWLYHFODVVLILFDWRU\DSSURDFKWRWUDQVODWLRQVWXGLHV ZLWKLWVµSUROLIHUDWLRQRIFODVVLILFDWRU\IUDPHZRUNV¶%XWWKHFRPPXQLFDWLYHSHUVSHFWLYHUHPDLQVDFRQVWDQWLQ WKHVHDQGRWKHUUHFHQWZRUNVIRUH[DPSOH1RUG DOOVKDUHDYLHZRIWUDQVODWLRQDVFRPPXQLFDWLRQ DQGWKHUHIRUHEDVHWKHLUYLHZRIWKHWUDQVODWLQJSURFHVVRQDQXQGHUO\LQJWKHRU\RIFRPPXQLFDWLRQ

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¶VMRELVWR FRPSHQVDWHIRUWKHORZHUOHYHORISUHGLFWDELOLW\ZKHQDPHVVDJHLVWUDQVIHUUHGDFURVVOLQJXLVWLFERXQGDULHV 7KHUHDVRQVIRUWKLVORZHUOHYHORISUHGLFWDELOLW\PD\EHOLQJXLVWLFIRUH[DPSOHXQIDPLOLDUZRUGRUGHUXVHRI ZRUGVZLWKORZHUIUHTXHQF\RIRFFXUUHQFHXQIDPLOLDUFROORFDWLRQV RUFXOWXUDOLQFOXGLQJXQIDPLOLDULW\ZLWK WKHVHWWLQJRIWKHVRXUFHWH[W&203(16$7,21LVHIIHFWHGE\EXLOGLQJUHGXQGDQF\LQWRWKHWDUJHWWH[WLQ RUGHUWRDYRLGZKDW1LGDFDOOVFRPPXQLFDWLRQµRYHUORDG¶*HQHUDOO\VSHDNLQJWKLVLQYROYHVOHQJWKHQLQJWKH PHVVDJHWRVSUHDGWKHLQIRUPDWLRQORDG7KHQRWLRQRIµFXOWXUDOUHGXQGDQF\¶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µ:KRVD\VZKDWLQ ZKLFKFKDQQHOWRZKRPZLWKZKDWHIIHFW"¶TXRWHGLQ1RUG /DWHUUHILQHPHQWVWRWKHIRUPXODLQFOXGH WKHDGGLWLRQRIZKHQ"ZKHUH"ZK\"KRZ"WRHQFRPSDVVWKHIXOOUDQJHRIIDFWRUVDIIHFWLQJODQJXDJHLQXVH 5HLVV DQG1RUG DUHDPRQJWKRVHZKRVLWXDWHWKHHYHQWRIWUDQVODWLQJLQWKLVFRPPXQLFDWLYH IUDPHZRUN7KHDSSURDFKLQVXUHVDJDLQVWWUHDWLQJWKHWH[WDVDQHQWLW\LQLWVHOIGLYRUFHGIURPWKH FLUFXPVWDQFHVRILWVSURGXFWLRQDQGUHFHSWLRQDWHQGHQF\ZKLFKLVVWLOODSSDUHQWLQVRPHXVHVRIWUDQVODWLRQLQ



3DJH

ODQJXDJHWHDFKLQJ7KHVLPLODULW\RIWKH/DVVZHOOIRUPXODWRWKHXVHDQGXVHUYDULDEOHVRIUHJLVWHUDQDO\VLVLV HYLGHQW$VDOLHQWGLIIHUHQFHRIHPSKDVLVKRZHYHUOLHVLQWKHVSHFLILFRULHQWDWLRQWRZDUGVWKHSXUSRVHVRIWKH HQGXVHUZK\"WRZKDWHIIHFW" &RQFHUQZLWKWKHFRPPXQLFDWLYHIXQFWLRQRIWUDQVODWLRQLVDFRQVWDQWLQUHFHQW ZRUNRQWUDQVODWLRQLQ*HUPDQ\LQFOXGLQJ+|QLJDQG.XVVPDXO +RO]0lQWWlUL 5HLVVDQG 9HUPHHU DQG1RUG $UHODWHGDSSURDFKLVWKDWZKLFKVHHVWKHWUDQVODWRUDVDVRFLDOEHLQJDQGFRQVLGHUVKLVKHUFRPSHWHQFHDVD UHFHLYHUDQGSURGXFHURIWH[WV7KHQRWLRQRIFRPPXQLFDWLYHFRPSHWHQFHLVRULJLQDOO\DWWULEXWDEOHWR'HOO +\PHV ZKRLQWURGXFHGLWWRFRXQWHUDFWWKHFRPSHWHQFHSHUIRUPDQFHGLFKRWRP\RI&KRPVN\DQ OLQJXLVWLFV,QSODFHRIWKHµLGHDOVSHDNHUOLVWHQHU«XQDIIHFWHGE\VXFKJUDPPDWLFDOO\LUUHOHYDQWFRQGLWLRQVDV PHPRU\OLPLWDWLRQVGLVWUDFWLRQVVKLIWVRIDWWHQWLRQDQGLQWHUHVWDQGHUURUV¶&KRPVN\ +\PHVZDV LQWHUHVWHGLQQDWXUDOO\RFFXUULQJFXOWXUDOEHKDYLRXUDQGLQZKDWLVSRVVLEOHIHDVLEOHDQGDSSURSULDWHLQJLYHQ VRFLDOFLUFXPVWDQFHV)RUWKHSXUSRVHVRIVWXG\LQJWKHWUDQVODWRU¶VFRPPXQLFDWLYHFRPSHWHQFHZHPD\DGDSW WKHIRXUSDUWFODVVLILFDWLRQSURSRVHGE\&DQDOH WRDFFRXQWIRUWKHµXQGHUO\LQJV\VWHPVRINQRZOHGJH DQGVNLOOUHTXLUHGIRUFRPPXQLFDWLRQ¶DVIROORZV D *UDPPDWLFDOFRPSHWHQFHLQWKHWUDQVODWRU¶VFDVHWKLVHQWDLOVSDVVLYHFRPPDQGRIRQHDQGDFWLYH FRPPDQGRIDQRWKHUODQJXDJHV\VWHPLQWKHVHQVHRISRVVHVVLQJWKHNQRZOHGJHDQGVNLOOUHTXLUHGWR XQGHUVWDQGDQGH[SUHVVDFFXUDWHO\WKHOLWHUDOPHDQLQJRIXWWHUDQFHV E 6RFLROLQJXLVWLFFRPSHWHQFHWKHWUDQVODWRU¶VDELOLW\WRMXGJHWKHDSSURSULDWHQHVVRIXWWHUDQFHVWRD FRQWH[WLQWHUPVRIVXFKIDFWRUVDVWKHVWDWXVRISDUWLFLSDQWVSXUSRVHVRIWKHLQWHUDFWLRQDQGQRUPVDQG FRQYHQWLRQVRILQWHUDFWLRQ F 'LVFRXUVHFRPSHWHQFHWKHWUDQVODWRU¶VDELOLW\WRSHUFHLYHDQGSURGXFHFRKHVLYHDQGFRKHUHQWWH[WLQ GLIIHUHQWJHQUHVDQGGLVFRXUVHV+DWLPDQG0DVRQ G 6WUDWHJLFFRPSHWHQFHWKHWUDQVODWRU¶VDELOLW\WRUHSDLUSRWHQWLDOEUHDNGRZQVLQFRPPXQLFDWLRQDQGWR HQKDQFHWKHHIIHFWLYHQHVVRIFRPPXQLFDWLRQEHWZHHQVRXUFHWH[WSURGXFHUDQGWDUJHWWH[WUHFHLYHU%HOO ± 7KHIROORZLQJWH[WLVSDUWRID(XURSHDQ8QLRQGLUHFWLYHFRQFHUQLQJWKHGLVWULEXWLRQRISKDUPDFHXWLFDO SURGXFWV $UWLFOH /HV(WDWVPHPEUHVSUHQQHQWWRXWHPHVXUHXWLOHSRXUTXHQHVRLHQWGLVWULEXpVVXUOHXUWHUULWRLUHTXH GHVPpGLFDPHQWVSRXUOHVTXHOVXQHDXWRULVDWLRQGHPLVHVXUOHPDUFKpFRQIRUPHDXGURLW FRPPXQDXWDLUHDpWpGpOLYUp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µLQVWUXFWLRQ ZLWKRXWRSWLRQ¶ G JLYHQWKHFRPPXQLFDWLYHVHWWLQJWKHJHQUHDQGWKHGLVFRXUVHDVVSHFLILHGLQE DQGF VHHNLQJDERYH DOOIURPDVWUDWHJLFSRLQWRIYLHZWRUHVROYHDQ\SRWHQWLDODPELJXLW\HQVXUHFRPPXQLFDWLRQLVH[SOLFLWDQG DGPLWVRIQROHJDOORRSKROHV (DFKRIWKHVHVHWVRIVNLOOVDQGNQRZOHGJHLVGHSOR\HGE\WKHWUDQVODWRULQRUGHUWRUHIOHFWWKHLQWHQWLRQVRIWKH VRXUFHWH[WSURGXFHUEXWLWLVKHUHWKDWDVLJQLILFDQWSUREOHPDULVHV



3DJH

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²DERXWHDFKRWKHU¶VDVVXPSWLRQVDQGDERXWWKHFRJQLWLYHHQYLURQPHQWZKLFKSURGXFHUVDQG UHFHLYHUVVKDUH7KLVLVVLPLODUWRWKHPRGHORIFRPPXQLFDWLRQXSRQZKLFK*XWW IROORZLQJ6SHUEHUDQG :LOVRQ EDVHVKLVµUHOHYDQFHWKHRUHWLF¶DFFRXQWRIWUDQVODWLRQDVLQWHUSUHWLYHXVHVHH35$*0$7,&6 $1'75$16/$7,21 ,QFRPPXQLFDWLRQWKHUHLVDOZD\VDQH[SHFWDWLRQRIRSWLPDOUHOHYDQFHGHILQHGDV DGHTXDWHFRQWH[WXDOHIIHFWVDWPLQLPDOSURFHVVLQJFRVW$FFRUGLQJWR*XWWWKLVLVKRZKHDUHUVLQIHUZKDWWKH LQWHQGHGLQWHUSUHWDWLRQRUPHDQLQJRIDQXWWHUDQFHLVµLWLVWKHLQWHUSUHWDWLRQWKDWLVPRVWFRQVLVWHQWZLWKWKH SULQFLSOHRIUHOHYDQFHDQGWKHUHLVQHYHUPRUHWKDQRQHLQWHUSUHWDWLRQWKDWIXOILOVWKLVFRQGLWLRQ¶LELG 7KHWUDQVODWRUWKHQLVHQJDJHGLQµLQWHUOLQJXDOLQWHUSUHWLYHXVH¶OLQNLQJKLVKHUFRPPXQLFDWLYHLQWHQWLRQWR WKHLQWHQGHGLQWHUSUHWDWLRQRIWKHVRXUFHWH[WDQGHQVXULQJWKDWWKHWDUJHWWH[WUHVHPEOHVLWLQWHUSUHWLYHO\

/DQJXDJHIXQFWLRQWH[WIXQFWLRQWUDQVODWLRQIXQFWLRQ 7KHUHKDYHEHHQPDQ\DWWHPSWVWRFODVVLI\WKHIXQFWLRQVRIODQJXDJH$PRQJWKHPRVWLQIOXHQWLDOIRUPXODWLRQV DUHWKRVHRI%KOHU -DNREVRQ DQG+DOOLGD\ %KOHU¶V'DUVWHOOXQJVIXQNWLRQ $XVGUXFNIXQNWLRQDQG$SSHOIXQNWLRQUHIHUUHVSHFWLYHO\WRWKHUHSUHVHQWDWLRQRIREMHFWVDQGSKHQRPHQDWKH DWWLWXGHRIWKHWH[WSURGXFHUWRZDUGVVXFKSKHQRPHQDDQGWKHDSSHDOWRWKHWH[WUHFHLYHU7KHVHWKUHH IXQFWLRQVFRUUHVSRQGEURDGO\WR-DNREVRQ¶V5HIHUHQWLDO([SUHVVLYHDQG&RQDWLYHIXQFWLRQVDOWKRXJKWKHODWWHU DGGLWLRQDOO\GLVWLQJXLVKHV3KDWLFWKHXVHRIODQJXDJHWRFUHDWHDQGPDLQWDLQVRFLDOFRQWDFW 0HWDOLQJXDODQG 3RHWLFIXQFWLRQV+DOOLGD\GLVWLQJXLVKHVWKUHHPDFURIXQFWLRQVWKHLGHDWLRQDOUHSUHVHQWDWLRQRIH[SHULHQFH WKHLQWHUSHUVRQDOWKHVSHDNHU¶VLQWHUYHQWLRQLQWKHXVHRIODQJXDJHDQGWKHH[SUHVVLRQRIDWWLWXGH DQGWKH WH[WXDOWKHVSHDNHU¶VSRWHQWLDOIRUFRQVWUXFWLQJFRKHUHQWWH[W 7KHUHLVWKHQDGHJUHHRIFRQVHQVXVDPRQJ WKHVHDOWHUQDWLYHIRUPXODWLRQV,WLVRQWKHEDVLVRI%KOHU¶VW\SRORJ\WKDW5HLVVHJ GLVWLQJXLVKHV EHWZHHQWKHLQIRUPDWLYHWH[WWKHH[SUHVVLYHWH[WDQGWKHRSHUDWLYHWH[WHDFKFDOOLQJIRUSDUWLFXODUVHWVRIVNLOOV DQGVWUDWHJLHVRQWKHSDUWRIWKHWUDQVODWRU7KHUHFDQEHQRGRXEWWKDWODQJXDJHIXQFWLRQVLPSLQJHVLJQLILFDQWO\ RQWKHWUDQVODWRU¶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¶GHFLVLRQV,QWKLVIXQFWLRQDOYLHZRI WUDQVODWLRQDQ\QRWLRQRIHTXLYDOHQFHEHWZHHQDVRXUFHWH[WDQGDWDUJHWWH[WLVVXERUGLQDWHWRWKHVNRSRVRU SXUSRVHZKLFKWKHWDUJHWWH[WLVLQWHQGHGWRIXOILO$GHTXDF\ZLWKUHJDUGWRVNRSRVWKHQUHSODFHV (48,9$/(1&(DVWKHVWDQGDUGIRUMXGJLQJWUDQVODWLRQV,QD



3DJH

VLPLODUYHLQ+RO]0lQWWl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¶VFKDLQRI FRPPXQLFDWLRQ7KXVWKHFRPPXQLFDWLYHIXQFWLRQDOSHUVSHFWLYHFDQEHVHHQDVDQDSSURDFKZKLFKUHODWHVWKH FLUFXPVWDQFHVRIWKHSURGXFWLRQRIWKHVRXUFHWH[WDVDFRPPXQLFDWLYHHYHQWWRWKHVRFLDOFLUFXPVWDQFHVRIWKH DFWRIWUDQVODWLQJDQGWKHJRDOVZKLFKLWDLPVWRDFKLHYH

)XUWKHUUHDGLQJ *XWW+DWLPDQG0DVRQ+RO]0lQWWlUL+RXVH1RUG5HLVV5HLVVDQG 9HUPHHU5REHUWV

,$10$621

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µPHGLFDOLQWHUSUHWLQJ¶µPHQWDOKHDOWKLQWHUSUHWLQJ¶µHGXFDWLRQDOLQWHUSUHWLQJ¶ DQGµOHJDOLQWHUSUHWLQJ¶WKHODWWHULQFOXGLQJ&2857,17(535(7,1*
&RPPXQLW\LQWHUSUHWLQJYVRWKHUW\SHVRILQWHUSUHWLQJ 7KHUROHRIWKHFRPPXQLW\LQWHUSUHWHULVDVYLWDOWRVXFFHVVIXOFRPPXQLFDWLRQDVWKDWRIDQ\RWKHUW\SHRI LQWHUSUHWHU,QDGGLWLRQLQYROYHPHQWLQIDFHWRIDFHLQWHUDFWLRQHPSKDVL]HVWKHFRPPXQLW\LQWHUSUHWHU¶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



3DJH

JHQHUDOO\H[SHFWHGQRWWRVLGHZLWKHLWKHUSDUW\ 7KHSULQFLSOHRIQHXWUDOLW\DQGGHWDFKPHQWZKLFKLVSHUKDSVWDNHQIRUJUDQWHGLQ&2857,17(535(7,1* KDVEHHQDPDMRULVVXHRIGHEDWHDPRQJSURIHVVLRQDOFRPPXQLW\LQWHUSUHWHUVDQGWKRVHZKRWUDLQWKHP $WWHPSWVWRGHILQHWKHDSSURSULDWHOHYHORILQYROYHPHQWYVGHWDFKPHQWRQWKHSDUWRIWKHFRPPXQLW\ LQWHUSUHWHUDUHIUDXJKWZLWKGLIILFXOWLHV,QSUDFWLFHDFRPPXQLW\LQWHUSUHWHURIWHQKDVWRVXIIHUWKHGLOHPPDRI EHLQJVLPXOWDQHRXVO\VHHQDVWKHLPPLJUDQW¶VDGYRFDWHDQGWKHRIILFLDO¶VµWRRO¶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

3URIHVVLRQDOWUDLQLQJSURJUDPPHVDQRYHUYLHZ 3URIHVVLRQDOWUDLQLQJIRUFRPPXQLW\LQWHUSUHWHUVLVUHODWLYHO\ZHOOHVWDEOLVKHGLQFRXQWULHVZKHUHWKHQHHGIRU UHOLDEOHLQWHUSUHWLQJLVUHFRJQL]HGE\WKHVRFLHW\DWODUJHUDWKHUWKDQMXVWE\PHPEHUVRIWKHOLQJXLVWLF PLQRULWLHV,QVRPHFRXQWULHVWUDLQLQJLVVXSSRUWHGDWQDWLRQDOOHYHO7KLVKDVORQJEHHQWKHFDVHLQWKH1RUGLF FRXQWULHV$XVWUDOLD1HZ=HDODQGDQGLQWKH&DQDGLDQ1RUWKZHVWWHUULWRULHVIRU(QJOLVKYLVjYLVDERULJLQDO ODQJXDJHV (OVHZKHUHIRULQVWDQFHWKH8QLWHG6WDWHVVHH)ULVKEHUJ SXEOLFUHFRJQLWLRQRIDQGVXSSRUW IRU6,*1('/$1*8$*(,17(535(7,1*LVUHODWLYHO\VWURQJZKLOHFRPPXQLW\LQWHUSUHWLQJUHPDLQV ODUJHO\GHSHQGHQWRQXQWUDLQHGDQGXQFHUWLILHGYROXQWHHUV*HQHUDOO\VSHDNLQJWKHOHYHORISXEOLFVXSSRUWLQ PRVWFRXQWULHVWHQGVWRIOXFWXDWHLQUHVSRQVHWRWKHJHQHUDOSROLWLFDOFOLPDWHZKLFKGHWHUPLQHVWKHOHYHORI IXQGLQJDYDLODEOHIRUWUDLQLQJSURJUDPPHVDQGIRUSD\PHQWRIFRPPXQLW\LQWHUSUHWHUV¶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²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



3DJH

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h%XQGGHU'ROPHWVFKHUXQGh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± OLVWVGLIIHUHQWFROOHJHVZKLFKUXQVKRUWWHUPFRXUVHVGHVLJQHGWRSUHSDUHVWXGHQWVWRVLWWKHH[DP IRUWKH'LSORPDLQ3XEOLF6HUYLFH,QWHUSUHWLQJ,QWHUSUHWHUVFDQVSHFLDOL]HLQHLWKHU/RFDO*RYHUQPHQW+HDOWK RU/DZ$1DWLRQDO5HJLVWHURI3XEOLF6HUYLFH,QWHUSUHWHUVZDVVHWXSE\WKH1XIILHOG)RXQGDWLRQLQ7KH /RQGRQ,QWHUSUHWLQJ3URMHFW/,3 DOVRRIIHUVDYDULHW\RIVKRUWWHUPFRXUVHVIRUFRPPXQLW\LQWHUSUHWHUV 6DQGHUV 0RUHDGYDQFHGWUDLQLQJLVDYDLODEOHLQPDQ\SDUWVRI6FDQGLQDYLD6ZHGHQZDVDPRQJWKHILUVWWRRUJDQL]H SURIHVVLRQDOWUDLQLQJIRUFRPPXQLW\LQWHUSUHWHUVVWDUWLQJDVHDUO\DVDWDWLPHZKHQDODUJHQXPEHURI LPPLJUDQWZRUNHUVZHUHUHFUXLWHGIURPDEURDGE\6ZHGLVKFRPSDQLHV1DWLRQDODFFUHGLWDWLRQIRUFRPPXQLW\ LQWHUSUHWHUVKDVDOVREHHQDYDLODEOHVLQFH7UDLQLQJODUJHO\RIIHUHGDWFROOHJHVDQGVLPLODULQVWLWXWLRQVLQ WKHIRUPRIVKRUWWHUPFRXUVHVLVDYDLODEOHLQVRPHGLIIHUHQWODQJXDJHV/RQJHUDQGPRUHDGYDQFHGFRXUVHV DUHDOVRRIIHUHGDW6ZHGLVKXQLYHUVLWLHVLQYDULRXVODQJXDJHFRPELQDWLRQV6LQFHWKH,QVWLWXWHIRU ,QWHUSUHWDWLRQDQG7UDQVODWLRQ6WXGLHV7g, DW6WRFNKROP8QLYHUVLW\KDVEHHQWKHPDLQSURYLGHURIDGYDQFHG WUDLQLQJIRUWUDQVODWRUVDQGLQWHUSUHWHUV(OVHZKHUHLQ6FDQGLQDYLDDVLPLODUSDWWHUQH[LVWV)RULQVWDQFHWKH 8QLYHUVLW\RI2VORLQ1RUZD\KDVEHHQUXQQLQJFRXUVHVLQFRPPXQLW\LQWHUSUHWLQJVLQFH'XULQJWKH VWKHXQLYHUVLW\DOVRGHYHORSHGVSHFLDOL]HGFRXUVHVIRULQWHUSUHWLQJLQWKHFRQWH[WRIKHDOWKFDUHDQG PHQWDOKHDOWKFDUH,QWKH$UFWLF.DXWRNHLQRWKHVWDWHIXQGHG/DSSKLJKVFKRROUXQVSDUWWLPHLQWHUSUHWLQJ FRXUVHVLQ/DSSLVK

&RQWHQWDQGDLPVRIWUDLQLQJSURJUDPPHV 7UDLQLQJSURJUDPPHVIRUFRPPXQLW\LQWHUSUHWHUVYDU\LQERWKVFRSHDQGDLPV$JHQHUDO



3DJH

JRDOLVRIFRXUVHWRHQVXUHDKLJKOHYHORIDFFXUDF\E\LPSURYLQJVWXGHQWV¶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¶VFRQYHQWLRQVRISROLWHQHVVDQGFRUUHFWQHVV2SLQLRQV WKHUHIRUHYDU\DPRQJWUDLQHUVFRQFHUQLQJWKHUROHRIWKHFRPPXQLW\LQWHUSUHWHUDQGWKHQRWLRQRIHIILFLHQF\LQ WKHLQWHUSUHWLQJFRQWH[W8OWLPDWHO\HIILFLHQF\FDQRQO\EHPHDVXUHGDJDLQVWDSDUWLFXODUJRDODQGJRDOVRI FRXUVHPD\GLIIHUFRLQFLGHDQGEHQHJRWLDWHGLQDIDFHWRIDFHLQWHUDFWLRQ 6RPHVFKRODUVFRQVLGHULWWKHFRPPXQLW\LQWHUSUHWHU¶VSURIHVVLRQDOGXW\WRLQIRUPHDFKRURQH RIWKHSDUWLHV DERXWZKDWLVFRQVLGHUHGDSSURSULDWHQRUPDOUDWLRQDODQGDFFHSWDEOHE\WKHRWKHUSDUW\6KDFNPDQZULWHV DERXWWKH8. FRPPXQLW\LQWHUSUHWHUWKDWµVKHLVUHVSRQVLEOHIRUHQDEOLQJWKHSURIHVVLRQDODQGFOLHQWZLWK YHU\GLIIHUHQWEDFNJURXQGVDQGSHUFHSWLRQVDQGLQDQXQHTXDOUHODWLRQVKLSRISRZHUDQGNQRZOHGJHWR FRPPXQLFDWHWRWKHLUPXWXDOVDWLVIDFWLRQ¶ 6DQGHUV DOVRVXJJHVWVWKDWLWLVWKHLQWHUSUHWHU¶V GXW\µWREULGJHDSRZHUJDSDVZHOODVDODQJXDJHDQGFXOWXUHJDS¶(PSLULFDOUHVHDUFK/LQHOOHWDO :DGHQVM| KDVVKRZQWKDWLQWHUSUHWHUVDUHLQFOLQHGWRIROORZWKLVSULQFLSOHLQSUDFWLFHLUUHVSHFWLYH RIWKHIDFWWKDWRIILFLDOFRGHVRIHWKLFVPDNHQRPHQWLRQRIµPXWXDOVDWLVIDFWLRQ¶RUµHTXDOLW\¶EXWUDWKHU HPSKDVL]HWKHLQWHUSUHWHU¶VUROHDVDQHXWUDOGHYLFHIRUWUDQVIHUULQJPHVVDJHV(PSLULFDOUHVHDUFKKDVDOVR SURYHGWKDWLQWHUSUHWHUVWHQGWRJLYHKLJKHUSULRULW\WRWKHLUUROHDVFRRUGLQDWRUVUDWKHUWKDQWUDQVODWRUVLQWKH VHQVHWKDWWKH\GHYRWHPXFKHIIRUWWRVXVWDLQLQJLQWHUDFWLRQVRPHWLPHVDWWKHFRVWRIDFFXUDF\LQUHQGHULQJ LQWHUORFXWRUV¶XWWHUDQFHV7KLVVLWXDWLRQGRHVKDYHLWVGDQJHUVLQDVVXPLQJWKHSRVLWLRQRIWKHµH[SHUW¶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¶VZRUN$VDUXOHPRVWWUDLQLQJDLPVWRHQVXUHWKH LQWHUSUHWHU¶VFRPPLWPHQWWRDSURIHVVLRQDOFRGHRIHWKLFVDQGJXLGHWRJRRGSUDFWLFHWKDWLVWRVXSSRUWH[LVWLQJ VWDQGDUGVFRQFHUQLQJKRZWKHPRQROLQJXDOSDUWLHV¶QHHGVDQGH[SHFWDWLRQVVKRXOGEHPHW 0RVWSURJUDPPHVSURYLGHWUDLQLQJLQFRQVHFXWLYHDQGVLPXOWDQHRXVLQWHUSUHWLQJ7KH\SD\YDU\LQJGHJUHHVRI DWWHQWLRQWRQRWHWDNLQJWHFKQLTXHVDQGGHYHORSLQJWKHUHOHYDQWVNLOOVIRUVLJKWWUDQVODWLRQDVZHOODVIRU ZULWWHQWUDQVODWLRQ7KH\JHQHUDOO\DOVRLQFOXGHDFRPSRQHQWRQLQWHUSUHWLQJWKHRU\LQDGGLWLRQWRSUDFWLFDO H[HUFLVHVDQGOLQJXLVWLFDQGWHUPLQRORJ\WUDLQLQJLQWKHODQJXDJHVLQTXHVWLRQ3UDFWLFDOH[HUFLVHVLQYROYH ODQJXDJHODERUDWRU\ZRUNDQDO\VLVRIRQH¶VRZQDQGRWKHUVWXGHQWV¶UHFRUGLQJVDQGUROHSOD\ *XLGHOLQHVLQVWUXFWLQJSXEOLFVHUYLFHRIILFLDOVDQGRWKHUVRQKRZWRFRPPXQLFDWHWKURXJKFRPPXQLW\ LQWHUSUHWHUVDUHSURYLGHGE\YDULRXVLQVWLWXWLRQVVXFKDV1$$7,LQ$XVWUDOLDWKH(WKQLF$IIDLUV6HUYLFHLQ 1HZ



3DJH

=HDODQGWKH,QVWLWXWHRI/LQJXLVWVLQWKH8.DQG7g,DW6WRFNKROP8QLYHUVLW\LQ6ZHGHQ7KHVHJXLGHOLQHV LQFOXGHIRULQVWDQFHDGYLVLQJRIILFLDOVWRVSHDNGLUHFWO\WRWKHRWKHUSDUW\UDWKHUWKDQVD\LQJWRWKH FRPPXQLW\LQWHUSUHWHUµWHOOKLPWR«¶HWF6XFKJXLGHOLQHVDUHERWKLQIOXHQFHGE\DQGUHIOHFWHGLQH[LVWLQJ WUDLQLQJSURJUDPPHVZKHUHFRPPXQLW\LQWHUSUHWHUVDUHLQVWUXFWHGWRVSHDNLQWKHILUVWSHUVRQ8VHUVRI FRPPXQLW\LQWHUSUHWLQJVHUYLFHVDUHDOVRDGYLVHGWRSDXVHIUHTXHQWO\VRDVQRWWRWD[WKHLQWHUSUHWHU¶VPHPRU\ WRSODQDKHDGIRULQWHUYLHZVLQZKLFKWKHDVVLVWDQFHRIDQLQWHUSUHWHULVUHTXLUHGWRDYRLGGLVFXVVLQJLVVXHV GLUHFWO\ZLWKWKHLQWHUSUHWHULQRUGHUQRWWRH[FOXGHWKHRWKHUSDUW\DQGRIFRXUVHWRKLUHDFFUHGLWHGFRPPXQLW\ LQWHUSUHWHUVZKHUHYHUSRVVLEOH

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¶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µJRRGEXWXQVNLOIXO6DPDULWDQVVHOIDSSRLQWHGH[SHUWVDQGXQVFUXSXORXVIL[HUVZKRRIWHQIRUD IDWIHH³KHOSHG´>RUFRQWLQXHWR³KHOS´@WKHLUOHVVOLQJXLVWLFDOO\JLIWHGFRPSDWULRWV¶1LVND 6HHDOVR &21)(5(1&($1'6,08/7$1(286,17(535(7,1*&2857,17(535(7,1*6,*1(' /$1*8$*(,17(535(7,1*

)XUWKHUUHDGLQJ $86,7%DUVN\%RZHQDQG%RZHQ'RZQLQJDQG+HOPV7LOODU\'RZQLQJDQG6ZDEH\ )ULVKEHUJ*HQWLOHHWDO/LQHOOHWDO1LVND6DQGHUV6KDFNPDQ6FKZHGD 1LFKROVRQ7HEEOH:DGHQVM|

&(&,/,$:$'(16-g

&RPSHQVDWLRQ &RPSHQVDWLRQLVDWHFKQLTXHZKLFKLQYROYHVPDNLQJXSIRUWKHORVVRIDVRXUFHWH[WHIIHFWE\UHFUHDWLQJD VLPLODUHIIHFWLQWKHWDUJHWWH[WWKURXJKPHDQVWKDWDUHVSHFLILFWRWKHWDUJHWODQJXDJHDQGRUWH[W([DPSOHV FLWHGLQWKHOLWHUDWXUHRIWHQLQYROYHWKHWUDQVODWLRQRISXQV)RULQVWDQFHLQDGLVFXVVLRQRIWKHWUDQVODWLRQVRI WKH)UHQFKFRPLFVWULS$VWpUL[*RVFLQQ\DQG8GHU]R +DWLPDQG0DVRQFRQFOXGHWKDWµ7KHWUDQVODWRUV DEDQGRQWKHDWWHPSWWRUHOD\WKHSXQVDVVXFKDQGLQVWHDGFRPSHQVDWHE\LQVHUWLQJ(QJOLVKSXQVRIWKHLURZQ ZKLFKDUHQRWSDUWRIWKHVRXUFHWH[W%XWHTXLYDOHQFHRILQWHQWLRQKDVEHHQPDLQWDLQHG¶ +HUHWKH VDPHOLQJXLVWLFGHYLFHLVHPSOR\HGLQERWKVRXUFHDQGWDUJHWWH[WVWRDFKLHYHDVLPLODUKXPRURXVHIIHFW



3DJH

0RVWZULWHUVRQWKHVXEMHFWQRWHWKDWFRPSHQVDWLRQUHTXLUHVFDUHIXOVWUDWHJLFDSSOLFDWLRQ*LYHQWKDWWKH WUDQVIHURIPHDQLQJVIURPRQHODQJXDJHWRDQRWKHUFRQWLQXDOO\LQYROYHVVRPHGHJUHHRIORVVWKHWUDQVODWRU PXVWGHFLGHLIDQGZKHQFRPSHQVDWLRQLVZDUUDQWHG1HZPDUN VXJJHVWVWKDWµSXQVDOOLWHUDWLRQ UK\PHVODQJPHWDSKRUSUHJQDQWZRUGV²DOOWKHVHFDQEHFRPSHQVDWHGLIWKHJDPHLVZRUWKWKHFDQGOH² VRPHWLPHVLWLVQ¶W¶,QDVLPLODUYHLQ+HUYH\DQG+LJJLQV DVVHUWWKDWµZKLOHFRPSHQVDWLRQH[HUFLVHV WKHWUDQVODWRU¶VLQJHQXLW\WKHHIIRUWLWUHTXLUHVVKRXOGQRWEHZDVWHGRQWH[WXDOO\XQLPSRUWDQWIHDWXUHV¶

'HILQLQJFRPSHQVDWLRQ 7KURXJKRXWWKHVDQGVFRPSHQVDWLRQFRPSHQVDWRU\DQGFRPSHQVDWHIRUZHUHXVHGORRVHO\DVVHPL WHFKQLFDOWHUPVLQWKHOLWHUDWXUH1LGDDQG7DEHU IRUH[DPSOHDGYRFDWHWKHLQWURGXFWLRQRILGLRPVLQWR DWDUJHWWH[WDVDQDGKRFUHVSRQVHWRWUDQVODWLRQORVV,QDIRRWQRWHWKH\VXJJHVWWKDWµ:KDWRQHPXVWJLYHXS WRFRPPXQLFDWHHIIHFWLYHO\FDQKRZHYHUEHFRPSHQVDWHGIRUDWOHDVWLQSDUWE\WKHLQWURGXFWLRQRIILWWLQJ LGLRPV¶LELG 7KH\PDNHQRDWWHPSWKRZHYHUWRUHODWHDVSHFLILFLQVWDQFHRIORVVZLWKDQRSSRUWXQLW\ IRUFRPSHQVDWLRQQRUWRFRQVLGHUWKHPRGDOLWLHVRIVXFKDWHFKQLTXH:LOVVXVHVWKHWHUPVSRUDGLFDOO\WRUHIHU WRWHFKQLTXHVIRUGHDOLQJZLWKµVWUXFWXUDOGLYHUJHQFHVRQWKHLQWUDDQGH[WUDOLQJXLVWLFOHYHO¶ 7KH ODWWHULQFOXGHWKHNLQGRIFXOWXUDOXQWUDQVODWDELOLW\ZKLFKRFFXUVµZKHQVRFLRFXOWXUDOIDFWRUVFRYHUDGLIIHUHQW UDQJHRIH[SHULHQFH¶LQWKHVRXUFHDQGWDUJHWODQJXDJHVLELG /DWHUKHPHQWLRQVLQVWDQFHVZKHUHµD OH[LFDOE\SDVVVWUDWHJ\VXFKDVSDUDSKUDVLQJRUH[SODQDWRU\WUDQVODWLRQ¶LVµWKHRQO\FRPSHQVDWRU\ZD\RXW RSHQWRWKHWUDQVODWRU¶LELG )HZZULWHUVWRGD\ZRXOGLQFOXGHSDUDSKUDVLQJRUH[SODQDWRU\WUDQVODWLRQDV FRPSHQVDWRU\WHFKQLTXHV7KH\ZRXOGDOVREHOHVVOLNHO\WRLQFOXGHPLVPDWFKHVEHWZHHQVRXUFHDQGWDUJHW FXOWXUHVZLWKLQWKHUDQJHRIWUDQVODWLRQSUREOHPVWKDWFRPSHQVDWLRQLVDEOHWRGHDOZLWK 6LQFHWKHODWHVWUDQVODWLRQVFKRODUVKDYHDWWHPSWHGWRGHILQHFRPSHQVDWLRQPRUHULJRURXVO\1RWDEOH DPRQJWKHVHDUH+HUYH\DQG+LJJLQV DQG+DUYH\ +HUYH\DQG+LJJLQV±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¶VYLHZWKLVLVVLPSO\WKH FRQVHTXHQFHRIDV\VWHPLFIHDWXUHRIWKHGLVWLQFWOH[LFDOXQLYHUVHVRI)UHQFKDQG(QJOLVKDQGQRWWKHVRUWRI VW\OLVWLFWH[WVSHFLILFIHDWXUHWKDWKHZLVKHVWRUHVHUYHIRUFRPSHQVDWLRQ /LQJXLVWLFGHYLFHV ,WZDVQRWHGZLWKWKHH[DPSOHRISXQVWKDWFRPSHQVDWLRQFDQLQYROYHHPSOR\LQJWKHVDPHOLQJXLVWLFGHYLFHVDV WKHVRXUFHWH[WWRDFKLHYHDVLPLODUHIIHFWLQWKHWDUJHWWH[W+HUYH\DQG+LJJLQVJLYHDQRWKHUH[DPSOHRIWKLV ZKHUHVRXQGLVH[SORLWHGIRUUKHWRULFDOHIIHFWLQWKHVRXUFHWH[Wµ9RLOjFHTXHYHXOHQWGLUHOHVYLULOHV DFFODPDWLRQVGHQRVYLOOHVHWGHQRVYLOODJHVSXUJHVHQILQGHO¶HQQHPL¶ 7KHWDUJHWWH[WFRPSHQVDWHV IRUWKHORVVRIWKLVHIIHFWE\H[SORLWLQJDGLIIHUHQWVHTXHQFHRIVRXQGVµ7KLVLVZKDWWKHFKHHULQJPHDQV UHVRXQGLQJWKURXJKRXUWRZQVDQGYLOODJHVFOHDQVHGDWODVWRIWKHHQHP\¶LELG +RZHYHUFRPSHQVDWLRQFDQLQYROYHWKHXVHRIGLIIHUHQWOLQJXLVWLFGHYLFHVLQWKHWDUJHWWH[WLIWKH\DUHMXGJHG WRUHSURGXFHDVLPLODUHIIHFWWRWKDWDFKLHYHGLQWKHVRXUFHWH[W7KLV



3DJH

FRUUHVSRQGVWR+HUYH\DQG+LJJLQV¶VHFRQGGHVFULSWLYHFDWHJRU\FRPSHQVDWLRQLQNLQG7RLOOXVWUDWHWKLVWKH\ GLVFXVVD)UHQFKQDUUDWLYHWKDWDFKLHYHVDVWURQJVW\OLVWLFHIIHFWWKURXJKWKHLQWHUSOD\RIVLPSOHDQGSDVW FRPSRVHGWHQVHV$QDFFRXQWRIWKHOLIHRIDVFKRROWHDFKHULQWKH)UHQFK5HVLVWDQFHPDNHVVWUDWHJLFXVHRIWKH FRPSOHWHGWHQVHWRFRQYH\VKRFNDQGLPPHGLDF\RYHUWKHPDQQHURIKHUGHDWKLELG 4XHOTXHVMRXUVDSUqVOD/LEpUDWLRQRQUHWURXYDVRQFRUSVGDQVXQFKDUQLHU(OOHDpWpIXVLOOpHOH MXLOOHWjO¶kJHGHDQV (OOHIXWXQHPLOLWDQWHH[HPSODLUH 7KH(QJOLVKWHQVHV\VWHPFDQQRWUHSURGXFHWKHHIIHFWVDFKLHYHGE\WKLVLQWHUSOD\RIWHQVHV&RQVHTXHQWO\IRU WKHODVWWZRVHQWHQFHV+HUYH\DQG+LJJLQVVXJJHVWWKHIROORZLQJWDUJHWWH[WLELG 7KLVJLUOZDVVKRWRQ-XO\DWWKHDJHRI6KHZDVDQH[HPSODU\UpVLVWDQWH +HUHWKHGHPRQVWUDWLYH7KLVWKHXVHRIWKHQRXQJLUOUDWKHUWKDQWKHSURQRXQ(OOHLQWKHVRXUFHWH[W WKH VWUDWHJLFSODFLQJRIWKHUKHWRULFDOFRPPDDIWHUDQGWKHFXOWXUDOERUURZLQJRIUpVLVWDQWHDUHDOOLQWHQGHG WRFRQWULEXWHWRFRPSHQVDWLQJIRUWKHORVVRIHIIHFWREWDLQHGE\WKHLQWHUSOD\RIWHQVHVLQWKHVRXUFHWH[W /RFDWLRQ 'LIIHUHQFHVRIRSLQLRQDUHDSSDUHQWDPRQJVFKRODUVZKHQLWFRPHVWRORFDWLQJDQLQVWDQFHRIFRPSHQVDWLRQLQ UHODWLRQWRDFRUUHVSRQGLQJORVV+DWLPDQG0DVRQ¶VYLHZLVWKDWµ,WPDWWHUVOHVVZKHUHH[DFWO\WKHLPSUHVVLRQ LVFRQYH\HGWKDQWKDWLWLVFRQYH\HGWRDQHTXLYDOHQWH[WHQW¶ 1HZPDUN¶VGHILQLWLRQLVPRUH VSHFLILFDQGVXJJHVWVWKDWFRPSHQVDWLRQRFFXUVQHDUWKHSRLQWRIORVVµ7KLV>FRPSHQVDWLRQ@LVVDLGWRRFFXU ZKHQORVVRIPHDQLQJVRXQGHIIHFWPHWDSKRURUSUDJPDWLFHIIHFWLQRQHSDUWRIDVHQWHQFHLVFRPSHQVDWHGLQ DQRWKHUSDUWRULQDFRQWLJXRXVVHQWHQFH¶ %DNHURQWKHRWKHUKDQGJLYHVFRPSHQVDWLRQDGLVWLQFWO\ GLVSODFHGFKDUDFWHUZKHQVKHVWDWHVµWKLV>FRPSHQVDWLRQ@PHDQVWKDWRQHPD\HLWKHURPLWRUSOD\GRZQD IHDWXUHVXFKDVLGLRPDWLFLW\DWWKHSRLQWZKHUHLWRFFXUVLQWKHVRXUFHWH[WDQGLQWURGXFHLWHOVHZKHUHLQWKH WDUJHWWH[W¶ +DUYH\ DWWHPSWVWREULQJWRJHWKHUWKHVHYDULRXVHPSKDVHVSXWWLQJIRUZDUGDGHVFULSWLYHIUDPHZRUN ZKLFKLGHQWLILHVWKUHHSRLQWVRQDVSHFWUXPRISRVVLELOLWLHV7KXVFRPSHQVDWLRQFDQEHSDUDOOHOFRQWLJXRXVRU GLVSODFHGLQUHODWLRQWRDJLYHQLQVWDQFHRIORVV,WLVQRWHGKRZHYHUWKDWLQVWDQFHVRIWKHµGLVSODFHG¶FDWHJRU\ DUHQRWDOZD\VHDV\WRGLVWLQJXLVKIURPDPRUHµJHQHUDOL]HG¶W\SHRIFRPSHQVDWLRQ+HUHVW\OLVWLFIHDWXUHVDUH XVHGLQWKHWDUJHWWH[WLQDQDWWHPSWWRµQDWXUDOL]HWKHWH[WIRUWKHWDUJHWUHDGHU«ZLWKRXWWKHVH>IHDWXUHV@EHLQJ WLHGWRDQ\VSHFLILFLQVWDQFHVRIVRXUFHWH[WORVV¶+DUYH\ 7KHTXHVWLRQRIHTXLYDOHQWHIIHFW 7KHQRWLRQRIHTXLYDOHQWHIIHFWZKLFKXQGHUOLHVWKHGHILQLWLRQRIFRPSHQVDWLRQLVQRWRIFRXUVH XQSUREOHPDWLF*XWW UDLVHVWKLVLVVXHLQWKHGLVFXVVLRQRIDWDUJHWWH[WWKDWIDLOHGWRUHSURGXFHWKHHIIHFW RIIODWWHU\RILWVUHDGHUV¶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¶VRZQUHDFWLRQVWRWKHWH[WVVKHLVUHDGLQJVRXUFH DQGZULWLQJWDUJHW /DWHULQWKHVDPHSDVVDJH KHZRQGHUVZKDWVFRSHLVOHIWIRUFRPSHQVDWLRQDWDOOLILWLVGHHPHGWKDWWKHSUDJPDWLFHIIHFWVRIWKHVRXUFH WH[WµDUHQRWVRFLDOO\DFFHSWDEOHLQWKHWDUJHWFXOWXUH"¶LELG



3DJH

&RPSHQVDWLRQDQGWKHXQLWRIWUDQVODWLRQ *XWWDOVRWRXFKHVLQWKHVDPHSDVVDJHRQWKHLPSRUWDQWLPSOLFDWLRQVWKDWWKHQRWLRQRIFRPSHQVDWLRQKDVIRU HVWDEOLVKLQJWKH81,72)75$16/$7,21*LYHQWKDWFRPSHQVDWLRQIRUDORVWVRXUFHWH[WHIIHFWFDQEH GLVSHUVHGRUGLVSODFHGWRDGLIIHUHQWSDUWRIWKHWDUJHWWH[WFRPSHQVDWLRQVKLIWVHPSKDVLVDZD\IURP HVWDEOLVKLQJFRUUHVSRQGHQFHEHWZHHQZRUGVDQGVHQWHQFHVWRWKHFRQVLGHUDWLRQRIODUJHUVWUHWFKHVRIWH[W7KLV WH[WKROLVWLFFRQFHSWLRQRIWKHWUDQVODWLRQXQLWLQIRUPV.QRZOVRQ¶VUHPDUNRQWKHUROHRIFRPSHQVDWLRQLQ %HFNHWW¶V$87275$16/$7,21VLH%HFNHWW¶VWUDQVODWLRQVRIKLVRZQZRUNV 7KHQRWLRQRIFRPSHQVDWLRQVHHPVYDOLGHQRXJKLQDSSURDFKLQJ%HFNHWW¶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¶VRZQFUHDWLYLW\KHOSWRXQGHUPLQHWKHWUDGLWLRQDOLGHRORJLFDO KLHUDUFK\RIVRXUFHDQGWDUJHWWH[WVDXWKRUL]LQJWKHODWWHUWRGHYHORSLWVRZQHFRQRP\RIPHDQLQJVDQGHIIHFWV 6HHDOVR $'$37$7,21

)XUWKHUUHDGLQJ &ULVDIXOOL*XWW+DUYH\+DWLPDQG0DVRQ+HUYH\DQG+LJJLQV1HZPDUN

.(,7++$59(<

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

7\SHVDQGPRGHVRILQWHUSUHWLQJ &RQIHUHQFHLQWHUSUHWLQJZDVERUQGXULQJ:RUOG:DU2QH8QWLOWKHQLPSRUWDQWLQWHUQDWLRQDOPHHWLQJVZHUH KHOGLQ)UHQFKWKHLQWHUQDWLRQDOODQJXDJHDWWKHWLPH'XULQJ:RUOG:DU2QHVRPHKLJKUDQNLQJ$PHULFDQ DQG%ULWLVKQHJRWLDWRUVGLGQRWVSHDN)UHQFKZKLFKPDGHLWQHFHVVDU\WRUHVRUWWRLQWHUSUHWHUV+HUEHUW :LWKWKHDGYHQWRIVLPXOWDQHRXVLQWHUSUHWLQJDQGHVSHFLDOO\DIWHUWKH1XUHPEHUJWULDOV± DQG7RN\R WULDOV± FRQIHUHQFHLQWHUSUHWLQJEHFDPHPRUHZLGHVSUHDG,WLVQRZXVHGZLGHO\QRWRQO\DW LQWHUQDWLRQDOFRQIHUHQFHVEXWDOVRLQUDGLRDQG79SURJUDPPHVYDULRXV



3DJH

FRXUVHVDQGOHFWXUHVDQGGXULQJ6WDWHYLVLWVZKLFKPDNHVWKHWHUPµFRQIHUHQFHLQWHUSUHWLQJ¶DPLVQRPHU :KDWQRZGLVWLQJXLVKHVFRQIHUHQFHLQWHUSUHWLQJIURPRWKHUIRUPVRILQWHUSUHWLQJDUHLWVPRGHVFRQVHFXWLYH DQGVLPXOWDQHRXV DQGLWVKLJKSHUIRUPDQFHOHYHO 0RVWFRQIHUHQFHLQWHUSUHWHUVRQO\KDYHWZRRUWKUHHZRUNLQJODQJXDJHVGLYLGHGDVIROORZV Ƈ$ODQJXDJHV WKHQDWLYHWRQJXHV RIWKHLQWHUSUHWHURUODQJXDJHV RIZKLFKVKHKDVQDWLYHRUQHDU QDWLYHFRPPDQG,QWHUSUHWHUVZRUNLQWRDVZHOODVRXWRIWKHLU$ODQJXDJHV Ƈ%ODQJXDJHV QRQQDWLYHODQJXDJHV RIZKLFKWKHLQWHUSUHWHUKDVVXIILFLHQWFRPPDQGEXWQRWWRWKH VDPHOHYHODVDQ$ODQJXDJH,QWHUSUHWHUVZRUNLQWRDVZHOODVRXWRIWKHLU%ODQJXDJHV Ƈ&ODQJXDJHV WKHVHDUHSDVVLYHODQJXDJHV,QWHUSUHWHUVZRUNIURPD&ODQJXDJHLQWRWKHLU$RU% ODQJXDJHEXWWKH\GRQRWLQWHUSUHWLQWRD&ODQJXDJH ,QFRQVHFXWLYHLQWHUSUHWLQJWKHLQWHUSUHWHUOLVWHQVWRDVSHHFKVHJPHQWIRUDIHZPLQXWHVRUVRWDNHVQRWHV DQGWKHQGHOLYHUVWKHZKROHVHJPHQWLQWKHWDUJHWODQJXDJHWKHQWKHVSHDNHUUHVXPHVIRUDIHZPLQXWHVWKH LQWHUSUHWHUGHOLYHUVWKHQH[WVHJPHQWDQGWKHSURFHVVFRQWLQXHVXQWLOWKHHQGRIWKHVSHHFK7KHµVHQWHQFHE\ VHQWHQFH¶LQWHUSUHWLQJRIWHQIRXQGLQOLDLVRQDQGFRPPXQLW\LQWHUSUHWLQJLVQRWUHJDUGHGE\FRQIHUHQFH LQWHUSUHWHUVDVµWUXHFRQVHFXWLYH¶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¶VHDUV 1RQHRIWKHVHPRGHVRILQWHUSUHWLQJLVUHVWULFWHGWRWKHFRQIHUHQFHVHWWLQJ6LPXOWDQHRXVLQWHUSUHWLQJIRU LQVWDQFHKDVEHHQXVHGLQODUJHPXOWLOLQJXDOWULDOVDQGZKLVSHUHGLQWHUSUHWLQJPD\EHXVHGLQDEXVLQHVV PHHWLQJ

'LIIHUHQFHVEHWZHHQWUDQVODWLRQDQGLQWHUSUHWLQJ :KLOHPRVWVFKRODUVVWUHVVWKDWWUDQVODWLRQDQGLQWHUSUHWLQJHVVHQWLDOO\IXOILOWKHVDPHIXQFWLRQPDQ\² HVSHFLDOO\LQWHUSUHWHUV²FRQVLGHUWKDWWKHWZRDUHYHU\GLIIHUHQWHYHQLQFRPSDWLEOHSURIHVVLRQV7KLVDVVHUWLRQ DVZHOODVDOOHJHGSHUVRQDOLW\GLIIHUHQFHVEHWZHHQWUDQVODWRUVDQGLQWHUSUHWHUV+HQGHUVRQ KDYHQRWEHHQ FOHDUO\GRFXPHQWHGLQWKHOLWHUDWXUH+RZHYHUDVUHJDUGVDFWXDOWUDQVODWLRQDQGLQWHUSUHWLQJSUDFWLFHVRPH GLIIHUHQFHVDUHQRWFRQWURYHUVLDO7KHPRVWREYLRXVRIWKHVHDULVHIURPWKHIDFWWKDWWUDQVODWRUVGHDOZLWK ZULWWHQODQJXDJHDQGKDYHWLPHWRSROLVKWKHLUZRUNZKLOHLQWHUSUHWHUVGHDOZLWKRUDOODQJXDJHDQGKDYHQR WLPHWRUHILQHWKHLURXWSXW7KHLPSOLFDWLRQVDUH ƇWUDQVODWRUVQHHGWREHIDPLOLDUZLWKWKHUXOHVRIZULWWHQODQJXDJHDQGEHFRPSHWHQWZULWHUVLQWKHWDUJHW ODQJXDJHLQWHUSUHWHUVQHHGWRPDVWHUWKHIHDWXUHVRIRUDOODQJXDJHDQGEHJRRGVSHDNHUVZKLFKLQFOXGHV XVLQJWKHLUYRLFHHIIHFWLYHO\DQGGHYHORSLQJDµPLFURSKRQHSHUVRQDOLW\¶ ƇDQ\VXSSOHPHQWDU\NQRZOHGJHIRUH[DPSOHWHUPLQRORJLFDORUZRUOGNQRZOHGJHFDQEHDFTXLUHGGXULQJ ZULWWHQWUDQVODWLRQEXWKDVWREHDFTXLUHGSULRUWRLQWHUSUHWLQJ ƇLQWHUSUHWHUVKDYHWRPDNHGHFLVLRQVPXFKIDVWHUWKDQWUDQVODWRUV $VXEWOHUOHYHORIDQDO\VLVRIWKHVNLOOVUHTXLUHGLQWUDQVODWLRQDQGLQWHUSUHWLQJPXVWDZDLWDGYDQFHVLQ SV\FKROLQJXLVWLFVDQGFRJQLWLYHSV\FKRORJ\8QOLNHWUDQVODWLRQLQWHUSUHWLQJUHTXLUHVDWWHQWLRQVKDULQJDQG LQYROYHVVHYHUHWLPHFRQVWUDLQWV0DQ\UHFXUUHQWLQWHUSUHWLQJHUURUVPD\ZHOOSURYHWREHWKHUHVXOWRIHLWKHU VDWXUDWLRQLQRULPSURSHUPDQDJHPHQWRIWKHLQWHUSUHWHU¶VSURFHVVLQJFDSDFLW\VHHEHORZ $GHWDLOHG GLVFXVVLRQRIGLIIHUHQFHVDQG



3DJH

VLPLODULWLHVEHWZHHQWUDQVODWLRQDQGLQWHUSUHWLQJDQGRIWKHLULPSOLFDWLRQVIRUWUDLQLQJFDQEHIRXQGLQ*LOH E 6HHDOVR36<&+2/,1*8,67,&&2*1,7,9($3352$&+(6

+LVWRU\RIUHVHDUFKLQFRQIHUHQFHLQWHUSUHWLQJ +LVWRULFDOO\UHVHDUFKLQFRQIHUHQFHLQWHUSUHWLQJFDQEHEURNHQGRZQLQWRIRXUSHULRGV*LOH HDUO\ ZULWLQJVWKHH[SHULPHQWDOSHULRGWKHSUDFWLWLRQHU¶VSHULRGDQGWKHUHQHZDOSHULRG 7KHHDUO\ZULWLQJVSHULRGFRYHUVWKHVDQGHDUO\V'XULQJWKLVSHULRGVRPHLQWHUSUHWHUVDQG LQWHUSUHWLQJWHDFKHUVLQ*HQHYD+HUEHUW5R]DQ,OJ DQG%UXVVHOVYDQ+RRI VWDUWHG WKLQNLQJDQGZULWLQJDERXWWKHLUSURIHVVLRQ7KHVHZHUHLQWXLWLYHDQGSHUVRQDOSXEOLFDWLRQVZLWKSUDFWLFDO GLGDFWLFDQGSURIHVVLRQDODLPVEXWWKH\GLGLGHQWLI\PRVWRIWKHIXQGDPHQWDOLVVXHVWKDWDUHVWLOOGHEDWHG WRGD\7KHILUVWDFDGHPLFVWXG\RQLQWHUSUHWLQJDQLQWURVSHFWLYH0$WKHVLVE\(YD3DQHWKZDVGHIHQGHGDWWKH 8QLYHUVLW\RI/RQGRQLQ 'XULQJWKHH[SHULPHQWDOSHULRGLQWKHVDQGHDUO\V DIHZSV\FKRORJLVWVDQGSV\FKROLQJXLVWVVXFK DV7UHLVPDQ2OpURQDQG1DQSRQ*ROGPDQ(LVOHU*HUYHUDQG%DULNVHH*HUYHU EHFDPHLQWHUHVWHGLQ LQWHUSUHWLQJ7KH\XQGHUWRRNDQXPEHURIH[SHULPHQWDOVWXGLHVRQVSHFLILFSV\FKRORJLFDODQGSV\FKROLQJXLVWLF DVSHFWVRIVLPXOWDQHRXVLQWHUSUHWLQJDQGVWXGLHGWKHHIIHFWRQSHUIRUPDQFHRIYDULDEOHVVXFKDVVRXUFH ODQJXDJHVSHHGRIGHOLYHU\HDUYRLFHVSDQLHWKHLQWHUYDOEHWZHHQWKHPRPHQWDSLHFHRILQIRUPDWLRQLV SHUFHLYHGDQGWKHPRPHQWLWLVUHIRUPXODWHGLQWKH7/ QRLVHSDXVHVLQVSHHFKGHOLYHU\HWF3UDFWLWLRQHUV UHMHFWHGERWKWKHPHWKRGVDQGWKHUHVXOWVRIVXFKVWXGLHV 'XULQJWKHSUDFWLWLRQHU¶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eFROH6XSpULHXUHG¶,QWHUSUqWHVHWGH7UDGXFWHXUV LQ 3DULVZRUNHGLQUHODWLYHLVRODWLRQ,QSDUWLFXODUUHODWLRQVZLWKWKHVFLHQWLILFFRPPXQLW\RIOLQJXLVWV SV\FKROLQJXLVWVDQGFRJQLWLYHSV\FKRORJLVWVZHUHYLUWXDOO\QRQH[LVWHQWSRVVLEO\PRUHEHFDXVHRIWKH LQWHUSUHWHUV¶GHIHQVLYHDWWLWXGHWKDQEHFDXVHRIDODFNRILQWHUHVWIURPQRQLQWHUSUHWHUV*LOHD*HUYHUDQG 6LQDLNR 7KLVSHULRGDOVRVDZWKHVRFDOOHGWKpRULHGXVHQVVHH,17(535(7,9($3352$&+ EHFRPHGRPLQDQW 7KLVµWKHRU\RIVHQVH¶ZDVQRWQHZ3|FKKDFNHU EXWLWZDVDGRSWHGLQ3DULVDQGVWURQJO\SURPRWHG E\(6,7GXULQJWKHVDQGV,WVEDVLFWHQHWLVWKDWWUDQVODWLRQDQGLQWHUSUHWLQJDUHEDVHGRQPHDQLQJ OHVHQV DVRSSRVHGWRODQJXDJHWKDWWKH\SURFHHGE\µH[WUDFWLQJ¶WKHPHDQLQJIURPWKHVRXUFHWH[WRU XWWHUDQFHGHOLEHUDWHO\JHWWLQJULGRIWKHOLQJXLVWLFIRUPRIWKHRULJLQDODQGHYHQWXDOO\UHSURGXFLQJDWDUJHWWH[W RUXWWHUDQFHRQWKHEDVLVRIWKHµGHYHUEDOL]HGPHVVDJH¶3URSRQHQWVRIWKLVWKHRU\DVVHUWWKDWWUDQVODWLRQDQG LQWHUSUHWLQJDUHODQJXDJHLQGHSHQGHQWLQWKDWWH[WFRPSUHKHQVLRQDQGSURGXFWLRQDUHVSRQWDQHRXVDQG DXWRPDWLFZKDWHYHUWKHODQJXDJHVLQYROYHGSURYLGHGWKHWUDQVODWRULQWHUSUHWHUKDVWKHQHFHVVDU\FRPPDQGRI WKHVRXUFHDQGWDUJHWODQJXDJHVDQGWKHUHOHYDQWZRUOGNQRZOHGJH 7KHUHQHZDOSHULRGEHJDQLQWKHPLGVDQGLVVWLOOLQHYLGHQFHWRGD\7RZDUGVWKHPLGVDQHZ JHQHUDWLRQRISUDFWLWLRQHUVEHJDQWRTXHVWLRQWKHLGHDOL]HGYLHZRILQWHUSUHWLQJSRVWXODWHGE\WKHWKpRULHGX VHQVDQGWRFDOOIRUDPRUHVFLHQWLILFVWXG\RILQWHUSUHWLQJJLYLQJULVHWRDQLQWHUGLVFLSOLQDU\DSSURDFKWRWKH VXEMHFW'XULQJDVHPLQDURQWKHWHDFKLQJRIWUDQVODWLRQDQGLQWHUSUHWLQJKHOGE\WKH8QLYHUVLW\RI7ULHVWH ,WDO\ LQ1RYHPEHU*UDQDQG'RGGV WKHSUHYDLOLQJGRJPDZDVFKDOOHQJHGLQIDYRXURI



3DJH

WKHQHZSDUDGLJP0RVHU0HUFHU 7KLVQHZSDUDGLJPKDVVLQFHFRQWLQXHGWRJDLQJURXQG5HVHDUFKLV VWLOOODUJHO\XQGHUWDNHQE\SUDFWLVLQJLQWHUSUHWHUVEXWWKH\LQFUHDVLQJO\GUDZRQILQGLQJVDQGLGHDVIURPRWKHU GLVFLSOLQHVLQSDUWLFXODUQHXUROLQJXLVWLFVVHH/DPEHUWDQG0RVHU0HUFHU 7KHUHDUHPRUHDQGPRUH HPSLULFDOVWXGLHVEHLQJFRQGXFWHGDOWKRXJKWKHLUSURSRUWLRQUHPDLQVYHU\ORZLIFRPSDUHGWRWKHWRWDOQXPEHU RISXEOLFDWLRQVRQLQWHUSUHWLQJ$QGILQDOO\FRPPXQLFDWLRQEHWZHHQUHVHDUFKHUVLVLPSURYLQJLQSDUWLFXODU WKURXJKWKH7KH,QWHUSUHWHU¶V1HZVOHWWHUSXEOLVKHGE\WKH6FXROD6XSHULRUHGL/LQJXH0RGHUQHSHU,QWHUSUHWL H7UDGXWWRULDWWKH8QLYHUVLW\RI7ULHVWH DQGWKH%XOOHWLQRI,57,1WKHLQWHUQDWLRQDO,QWHUSUHWLQJ5HVHDUFKDQG 7KHRU\,QIRUPDWLRQ1HWZRUNEDVHGDW,6,7,QVWLWXW6XSpULHXUG¶,QWHUSUpWDWLRQHWGH7UDGXFWLRQ LQ3DULV 7KHVHWUHQGVKDYHDOVRPDWHULDOL]HGLQDFRQIHUHQFHKHOGLQ7XUNX)LQODQGLQ$XJXVWRUJDQL]HGE\WKH 8QLYHUVLW\RI7XUNXWKH66/0,7RI7ULHVWHDQG,6,7LQ3DULV

7KHRUHWLFDOLVVXHV 0RVWVWXGLHVRQLQWHUSUHWLQJKDYHVRIDUIRFXVHGRQWKHFHQWUDOSURFHVVHVRIVLPXOWDQHRXVLQWHUSUHWLQJ$Q LPSRUWDQWTXHVWLRQIRUHDUO\LQYHVWLJDWRUVZDVZKHWKHUVLPXOWDQHRXVLQWHUSUHWHUVDFWXDOO\WUDQVODWHG VLPXOWDQHRXVO\WKDWLVZKHWKHUWKH\DFWXDOO\OLVWHQHGDQGVSRNHDWWKHVDPHWLPH6RPHFRQWHQGHGWKDWWKLV RQO\RFFXUUHGUDUHO\DQGWKDWPRVWRIWKHLQWHUSUHWHU¶VVSHHFKSURGXFWLRQZDVGRQHGXULQJWKHVSHDNHU¶V SDXVHV9DULRXVHPSLULFDOVWXGLHVKRZHYHUKDYHVKRZQWKDWWKLVLVQRWWKHFDVH*HUYHU 7KHQH[WLPSRUWDQWTXHVWLRQSHUWDLQHGWRWKHQDWXUHRIWKHPHQWDODFWLYLWLHVZKLFKWDNHSODFHGXULQJ VLPXOWDQHRXVLQWHUSUHWLQJ:KLOHDOOUHVHDUFKHUVDJUHHWKDWVSHHFKSHUFHSWLRQDQGSURGXFWLRQDUHSDUWRIWKH SURFHVVOLWWOHZRUNKDVEHHQGRQHRQRWKHUDFWLYLWLHVZKLFKDUHDVVXPHGRUNQRZQWRWDNHSODFHDQGOLWWOHLV NQRZQDERXWWKHVLPLODULWLHVDQGGLIIHUHQFHVEHWZHHQVSHHFKSURGXFWLRQDQGVSHHFKFRPSUHKHQVLRQLQ LQWHUSUHWLQJYVRWKHUFRQWH[WV)RUSURSRQHQWVRIWKHWKpRULHGXVHQVLQSDUWLFXODU6HOHVNRYLWFKDQG/HGHUHURI (6,7WKHUHDUHQRVXFKGLIIHUHQFHV*HUYHU¶V DQG0RVHU¶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µQHXWUDO¶VHQWHQFHEHJLQQLQJVWKDWDOORZWKHLQWHUSUHWHUWRVWHHUWKHVHQWHQFHPRUH HDVLO\WRZDUGVWKHVSHDNHU¶VFRQFOXVLRQRQFHWKDWFRQFOXVLRQKDVEHHQJUDVSHG2WKHUVVWUHVVWKDWLQWHUSUHWHUV KDYHWRUHVLVWFRQVWDQWOLQJXLVWLFLQWHUIHUHQFHIURPWKHVRXUFHODQJXDJHVRPHWLPHVE\DYRLGLQJ7/ZRUGVDQG VWUXFWXUHVWKDWDUHWRRVLPLODUWRWKRVHXVHGLQWKHVRXUFHODQJXDJHVSHHFK:LWKUHVSHFWWRVSHHFK FRPSUHKHQVLRQPDQ\SRLQWRXWWKDWWKHLQWHUSUHWHU¶VNQRZOHGJHRIWKHVXEMHFWDQGWKHVLWXDWLRQLVLQIHULRUWR WKDWRIWKHRWKHUSDUWLFLSDQWVDQGWKDWVKHVWLOOKDVWRDFKLHYHFRPSUHKHQVLRQEH\RQGWKHOHYHOJHQHUDOO\ H[SHFWHGIURPOLVWHQHUVQRWFRQYHUVDQWZLWKWKHVXEMHFW*LOH 2WKHUSRWHQWLDOGLIIHUHQFHVDUHWKRXJKWWR H[LVWEXWKDYHQRWEHHQLQYHVWLJDWHGV\VWHPDWLFDOO\$QRWKHULPSRUWDQWDVSHFWRIWKHLQWHUSUHWHU¶VPHQWDO DFWLYLW\FRQFHUQVFULVLVPDQDJHPHQWWKDWLVFRSLQJWDFWLFVWKDWDUHVHOHFWHGDQGLPSOHPHQWHGZKHQLQWHUSUHWHUV IDFHFRPSUHKHQVLRQSURGXFWLRQDQGRWKHUGLIILFXOWLHV*LOHDE ,QFRQVHFXWLYHPRGH DQLPSRUWDQWSDUWRIWKHLQWHUSUHWHU¶VPHQWDODFWLYLW\LVUHODWHGWRQRWHWDNLQJWKDWLVVHOHFWLQJWKHLQIRUPDWLRQ WREHQRWHGDQGWKHPRGHRIQRWDWLRQDVZHOODVWKHZD\WKHQRWHVDUHXVHGGXULQJWKHUHIRUPXODWLRQSKDVH

3URFHVVLQJFDSDFLW\DQGWKHµ(IIRUW¶PRGHOV 2YHUWKHSDVWIHZ\HDUVUHVHDUFKHUVKDYHEHHQIRFXVLQJRQWKHLQWHUSUHWHU¶VSURFHVVLQJFDSDFLW\DQGLWVUROHLQ LQWHUSUHWLQJ&RJQLWLYH



3DJH

SV\FKRORJLVWVKDYHNQRZQIRUVRPHWLPHWKDWZKLOHVRPHRSHUDWLRQVDUHµDXWRPDWLF¶LQWKHVHQVHWKDWWKH\ UHTXLUHQRSURFHVVLQJFDSDFLW\RWKHUVDUHµQRQDXWRPDWLF¶DQGWDNHXSSURFHVVLQJFDSDFLW\ZKLFKLVDYDLODEOH LQDILQLWHDPRXQW,QWKH(IIRUWPRGHOVRILQWHUSUHWLQJGHYHORSHGLQDQDWWHPSWWRH[SODLQWKHUHFXUUHQWDQG YHU\IUHTXHQWHUURUVDQGRPLVVLRQVIRXQGLQWKHSHUIRUPDQFHRIEHJLQQHUVDQGVHDVRQHGLQWHUSUHWHUVDOLNH*LOH DUJXHVWKDWWKHPDLQFRPSRQHQWVRIWKHLQWHUSUHWLQJSURFHVVDUHQRQDXWRPDWLF6LPXOWDQHRXV LQWHUSUHWLQJLVGLYLGHGLQWRWKUHHVHWVRIµ(IIRUWV¶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¶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¶VOLQJXLVWLF NQRZOHGJHPXVWEHKLJKO\µDYDLODEOH¶7KLVUHTXLUHPHQWLVFULWLFDOLQLQWHUSUHWHUVDVRSSRVHGWRWUDQVODWRUV ZKRGRQRWKDYHWRVKDUHDWWHQWLRQDQGZKRFDQGHYRWHPLQXWHVKRXUVRUPRUHWRWKHFRPSUHKHQVLRQRIWH[W VHJPHQWVRUWRWKHUHWULHYDORIZRUGVRUOLQJXLVWLFUXOHVIRUXVHLQWKHLUWDUJHWWH[W 7KHFRQFHSWRIµSURFHVVLQJFDSDFLW\¶FDQVKHGVRPHOLJKWRQWKHPXFKGHEDWHGLVVXHRIWKHGHVLUDELOLW\RI ZRUNLQJIURPDQ$LQWRD%ODQJXDJHRUYLFHYHUVD0DQ\:HVW(XURSHDQLQWHUSUHWHUVFODLPWKDWWKHRQO\ ODQJXDJHPDVWHUHGZHOOHQRXJKWRSURGXFHDFFHSWDEOHWDUJHWODQJXDJHXWWHUDQFHVLVDQ$ODQJXDJHDQGWKDW LQWHUSUHWHUVVKRXOGWKHUHIRUHRQO\ZRUNLQWRWKHLU$ODQJXDJH2QWKHRWKHUKDQGPDQ\LQWHUSUHWHUVIURPWKH IRUPHU(DVWHUQEORFNVXJJHVWWKHRSSRVLWHQDPHO\WKDWDQLQWHUSUHWHU



3DJH

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¶VFRPPDQGRIWKHODQJXDJHVLQYROYHGKLVKHUIOH[LELOLW\LQDGDSWLQJ WKHVWUXFWXUHRIWKHRXWSXWWRDFFRPPRGDWHWKHLQFRPLQJLQSXWGHVSLWHDQWLFLSDWLRQGLIILFXOWLHVDQGDQ\OH[LFDO RUJUDPPDWLFDOSHFXOLDULWLHVRIWKHVRXUFHRUWDUJHWODQJXDJHVZKLFKPLJKWLQIOXHQFHHDVHRUGLIILFXOW\RI FRPSUHKHQVLRQIRUH[DPSOHWKHOHYHORIUHGXQGDQF\ 7KHLVVXHRIVRXUFHWDUJHWODQJXDJHµSHFXOLDULWLHV¶UDLVHVWKHTXHVWLRQRIZKHWKHULQWHUSUHWLQJLVODQJXDJH VSHFLILFWKDWLVZKHWKHULQWHUSUHWLQJEHWZHHQWZRVSHFLILFODQJXDJHVLVPRUHGLIILFXOWRULQYROYHVGLIIHUHQW SURFHVVHVDQGRUVWUDWHJLHVIURPWKRVHXVHGLQRWKHUODQJXDJHFRPELQDWLRQV3URSRQHQWVRIWKHWKpRULHGXVHQV DVVHUWWKDWWKLVLVQRWWKHFDVHEXWRWKHUVFKRODUVKDYHSRLQWHGWRDQXPEHURIVSHFLILFOLQJXLVWLFIHDWXUHVWKDW GRRUPD\LQIOXHQFHWKHOHYHORIGLIILFXOW\LQLQWHUSUHWLQJ)RULQVWDQFHSURGXFWLRQPD\EHPRUHRUOHVV GLIILFXOWGHSHQGLQJRQWKHOH[LFDOULFKQHVVDQGV\QWDFWLFIOH[LELOLW\RIWKH7/(DVHDQGUHOLDELOLW\RIUHFHSWLRQ PD\EHLQIOXHQFHGE\LQWHUQDOJUDPPDWLFDODQGOH[LFDOUHGXQGDQF\VKRUWRUORQJZRUGVJUDPPDWLFDO LQGLFDWRUV ,QODQJXDJHVVXFKDV-DSDQHVHDQG&KLQHVHKRPRSKRQ\PD\DOVRLQFUHDVHWKHDPRXQWRI SURFHVVLQJFDSDFLW\DQGRUWLPHUHTXLUHGIRUGHFRGLQJ6\QWDFWLFGLIIHUHQFHVEHWZHHQVRXUFHDQGWDUJHW ODQJXDJHVPD\DOVRLQFUHDVHWKHOHYHORIGLIILFXOW\PDLQO\GXHWRWKHPDQGDWRU\VWRUDJHRIDODUJHUDPRXQWRI LQIRUPDWLRQEHWZHHQFRPSUHKHQVLRQDQGSURGXFWLRQLQIRUPDWLRQQHHGHGWRSURFHHGZLWKIRUPXODWLQJWKH7/ VHQWHQFHPD\RQO\EHJLYHQLQWKH6/VHQWHQFHDIWHURWKHULQIRUPDWLRQZKLFKZRXOGW\SLFDOO\EHUHIRUPXODWHG DWDODWHUVWDJHLQWKH7/7KHVHK\SRWKHVHVKRZHYHUDZDLWHPSLULFDOWHVWLQJE\PHDQVRIOLQJXLVWLFDQG SV\FKROLQJXLVWLFVWXGLHVLQWKHIXWXUH 6HHDOVR &20081,7<,17(535(7,1*&2857,17(535(7,1*36<&+2/,1*8,67,&&2*1,7,9( $3352$&+(66,*1('/$1*8$*(,17(535(7,1*

)XUWKHUUHDGLQJ 'LOOLQJHU*LOHDE*UDQDQG'RGGV/DPEHUWDQG0RVHU0HUFHU3|FKKDFNHU 7DUJHW 7RPPROD

'$1,(/*,/)

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



3DJH

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µIDPLO\¶UHODWLRQVKLSV &RQWUDVWLYHDQDO\VLVDWLWVVWURQJHVWKRZHYHUEHJDQWRGHYHORSLQWKHVDQGWKH$PHULFDQOLQJXLVW %HQMDPLQ/HH:KRUI IRUHVDZLWVSODFHDVDVXFFHVVRUWRWKHFRPSDUDWLYHVWXG\RIODQJXDJHV 0XFKSURJUHVVKDVEHHQPDGHLQFODVVLI\LQJWKHODQJXDJHVRIWKHHDUWKLQWRJHQHWLFIDPLOLHVHDFK KDYLQJGHVFHQWIURPDVLQJOHSUHFXUVRUDQGLQWUDFLQJVXFKGHYHORSPHQWVWKURXJKWLPH7KHUHVXOW LVFDOOHG³FRPSDUDWLYHOLQJXLVWLFV´2IHYHQJUHDWHULPSRUWDQFHIRUWKHIXWXUHWHFKQRORJ\RIWKRXJKW LVZKDWPLJKWEHFDOOHG³FRQWUDVWLYHOLQJXLVWLFV´7KLVSORWVWKHRXWVWDQGLQJGLIIHUHQFHVDPRQJ WRQJXHV²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

7KHUHOHYDQFHRI&$WRWUDQVODWLRQ 7KHHPSKDVLVRIPXFKRIWKHZRUNRQ&$RQWHDFKLQJDQGODQJXDJHOHDUQLQJUDLVHV



3DJH

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µWKHXQGHUO\LQJPHDQLQJRIWKHFORVHVWDSSUR[LPDWLRQVWRZHOOIRUPHGZRUGIRUZRUG WUDQVODWLRQV¶DVDWHUWLXPFRPSDUDWLRQLVEXWKLVFRQFHUQLVZLWKWKHXVHRIVSHFLILFSLHFHVRIWUDQVODWHGWH[WDV GDWDIRU&$FIIRUH[DPSOH*OHDVRQ-DPHV UDWKHUWKDQZLWKWKHXVHRI&$DVDZD\RI H[SODLQLQJGLIILFXOWLHVLQWUDQVODWLRQRUDWUDQVODWRU¶VVWUDWHJLHVIRURYHUFRPLQJWKHVHGLIILFXOWLHVFIIRU H[DPSOH1LGD%HHNPDQDQG&DOORZ


3DJH

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²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¶GHFLVLRQV 6LJQLILFDQWO\LWZRXOGDSSHDUWREHLQWKHDUHDRIFRQWUDVWLYHWH[WOLQJXLVWLFVDQGFRQWUDVWLYHUKHWRULFWKDWWKH FRQIOLFWEHWZHHQ&$DQGDSURFHVVRULHQWDWLRQLVOHDVWIHOW.DSODQ FRPPHQWVWKDWµZKLOH FRQWUDVWLYHUKHWRULFLVIRFXVHGRQWKHILQLVKHGWH[W²WKHSURGXFW²RURQVRPHSURGXFWDORQJWKHZD\EHWZHHQ LGHDDQGILQLVKHGWH[WLWGRHVQRWFDQQRWLJQRUHWKHSURFHVVRIFRPSRVLQJ¶:KLOHKRZHYHUFRQWUDVWLYH UKHWRULFFDQVKHGOLJKWRQFRPSRVLWLRQVWUDWHJLHVLQGLIIHUHQWODQJXDJHVLWVDWWHQWLRQWRPDWWHUVRIJOREDO RUJDQL]DWLRQPDNHVUHOHYDQFHWRWUDQVODWLRQFRQWHQWLRXVVLQFHPDQ\WUDQVODWRUVZRXOGUHDGLO\UHRUGHUZRUGVRU HYHQFODXVHVLQDQDWWHPSWWRSURGXFHDQDWXUDOWDUJHWWH[WEXWVHHPWREDXONDWUHRUGHULQJODUJHUXQLWVRIWH[WWR DFFRPPRGDWHWKHUKHWRULFDOQHHGVRIWKHWDUJHWDXGLHQFH:KHUHRQWKHRWKHUKDQGUHRUGHULQJLVUHVLVWHGWKH RULJLQDOPD\DWWUDFWFULWLFLVPLQVWHDG&O\QH±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



3DJH

DOVRIRUPUHODWLRQVKLSVZLWKRWKHUWH[WV,QWUDQVODWLQJIURP6/WR7/DWUDQVODWRULVHQFRXUDJHGWRWDNH DFFRXQWRIWKHWDUJHWUHDGHUVKLS¶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

7KHUHODWLRQVKLSEHWZHHQFRQWUDVWLYHDQDO\VLVDQGWUDQVODWLRQ 7KHUHODWLRQVKLSEHWZHHQ&$DQGWUDQVODWLRQLVELGLUHFWLRQDO2QWKHRQHKDQGWKHWUDQVODWLRQRIVSHFLILF SLHFHVRIWH[WPD\SURYLGHWKHGDWDIRU&$DVLQ*OHDVRQ .U]HV]RZVNL DQG-DPHV 2Q WKHRWKHU&$PD\SURYLGHH[SODQDWLRQVRIGLIILFXOWLHVHQFRXQWHUHGLQWUDQVODWLRQHJ1LGD%HHNPDQ DQG&DOORZ DOWKRXJK@DWH[WLVDVHPDQWLFXQLWQRWDJUDPPDWLFDORQHPHDQLQJVDUHUHDOL]HGWKURXJKZRUGLQJVDQG ZLWKRXWDWKHRU\RIZRUGLQJ²WKDWLVDJUDPPDU²WKHUHLVQRZD\RIPDNLQJH[SOLFLWRQH¶VLQWHUSUHWDWLRQRI WKHPHDQLQJRIWKHWH[W¶LELG %DNHU FLWHVWKHODWWHUFRPPHQWZLWKDSSURYDOLQDERRNWKDWLVLWVHOIDQ LQGLFDWLRQRIWKHFRQWLQXHGYLWDOLW\RI&$DVDQDLGWRWUDQVODWLRQ ,QRQHUHVSHFWKRZHYHU+DOOLGD\¶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p¶V 7LQWLQWR6FLHQWLILF$PHULFDQ PHDQVWKDWWKHSURMHFWLVFHUWDLQWRSURYLGHYDOXDEOHHYLGHQFHIRUWUDQVODWRUVRQ WKHWUDQVIHUDELOLW\RIFHUWDLQFROORFDWLRQVDQGFROOLJDWLRQVIURPRQHODQJXDJHWRDQRWKHU7KHIXWXUHRI&$¶V XVHLQWUDQVODWLRQPD\ZHOOOLHLQSURMHFWVVXFKDVWKLVZKLFKDUHFDSDEOHRISURYLGLQJZLWKHTXDOIDFLOLW\ H[SODQDWLRQVRISDVWWUDQVODWLQJGHFLVLRQVDQGJXLGDQFHDVWRSURVSHFWLYHRQHV

)XUWKHUUHDGLQJ %DNHU%HHNPDQDQG&DOORZ%HOO&O\QH(QNYLVW+DWLPDQG0DVRQ

0,&+$(/+2(<$1'',$1(+28*+721



3DJH

&RUSRUDLQWUDQVODWLRQVWXGLHV &RUSXVOLQJXLVWLFVLVWKHEUDQFKRIOLQJXLVWLFVWKDWVWXGLHVODQJXDJHRQWKHEDVLVRIFRUSRUDLHµERGLHVRI WH[WVDVVHPEOHGLQDSULQFLSOHGZD\¶-RKDQVVRQ $WH[WLQWXUQFDQEHGHILQHGDVµDQLQVWDQFHRI ODQJXDJHLQXVHHLWKHUVSRNHQRUZULWWHQDSLHFHRIODQJXDJHEHKDYLRXUZKLFKKDVRFFXUUHGQDWXUDOO\ZLWKRXW WKHLQWHUYHQWLRQRIWKHOLQJXLVW¶6WXEEV &RUSXVOLQJXLVWVWKXVWDNHDQHPSLULFDODSSURDFKWRWKH GHVFULSWLRQRIODQJXDJHWKH\LQVLVWXSRQWKHSULPDF\RIDXWKHQWLFDWWHVWHGLQVWDQFHVRIXVHDQDSSURDFKZKLFK KDVEHHQPLUURUHGLQUHFHQW\HDUVE\GHYHORSPHQWVLQGHVFULSWLYHWUDQVODWLRQVWXGLHV)RUH[DPSOHVFKRODUV VXFKDV+ROPHV KDYHH[SUHVVHGGLVVDWLVIDFWLRQZLWKWKHXVHRILQWURVSHFWLRQE\WUDQVODWLRQ WKHRULVWVDQG7RXU\D±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µVWULFWVWDWLVWLFDOPHWKRGV IRUGHDOLQJZLWKWUDQVODWLRQDOQRUPVRUHYHQWRVXSSO\VDPSOLQJUXOHVIRUDFWXDOUHVHDUFK¶LQWKHPLGV PXFKKDVEHHQDFKLHYHGLQFRUSXVOLQJXLVWLFVVLQFHWKHQDQGWKHRULVWVVXFKDV%DNHU KDYH EHHQLQVWUXPHQWDOQRWRQO\LQLQFRUSRUDWLQJWKHPHWKRGVDQGWRROVRIFRUSXVOLQJXLVWLFVLQWRGHVFULSWLYH WUDQVODWLRQVWXGLHVEXWDOVRLQKLJKOLJKWLQJWKHSDUWLFXODUFKDOOHQJHVWKDWWUDQVODWLRQSRVHVIRUFRUSXVVWXGLHV %HIRUHPRYLQJRQWRWKHVSHFLILFGHWDLOVRIFRUSXVEDVHGWUDQVODWLRQVWXGLHVKRZHYHULWLVZRUWKPHQWLRQLQJ VRPHLVVXHVRILQWHUHVWWRERWKWUDQVODWLRQRULHQWHGDQGJHQHUDOFRUSXVVWXGLHV

&RUSXVGHVLJQDQGEDVLFSURFHVVLQJ :LWKLQFRUSXVOLQJXLVWLFVJHQHUDOO\WKHWHUPFRUSXVLVXVXDOO\XVHGWRPHDQµDQ\FROOHFWLRQRIUXQQLQJWH[WV« KHOGLQHOHFWURQLFIRUPDQGDQDO\VDEOHDXWRPDWLFDOO\RUVHPLDXWRPDWLFDOO\UDWKHUWKDQPDQXDOO\ ¶%DNHU 7KHIDFWWKDWFRUSRUDDUHKHOGHOHFWURQLFDOO\WKDWLVLQDIRUPDFFHVVLEOHWRFRPSXWHUVPHDQVWKDW KXJHTXDQWLWLHVRIWH[WFDQEHVWRUHGFRQWHPSRUDU\PRQROLQJXDOFRUSRUDVXFKDVWKH%ULWLVK1DWLRQDO&RUSXV %1& DQGWKH&REXLOG%DQNRI(QJOLVKIRULQVWDQFHUXQWRPLOOLRQDQGPLOOLRQZRUGVUHVSHFWLYHO\ %ULWLVK1DWLRQDO&RUSXV6WXEEV[YLLL &RUSRUDGLIIHUIURPRWKHUODUJHFROOHFWLRQVRIPDFKLQH UHDGDEOHWH[WIRUH[DPSOHDUFKLYHVRUHOHFWURQLFWH[WOLEUDULHV LQWKDWWKH\DUHEXLOWµDFFRUGLQJWRH[SOLFLW GHVLJQFULWHULDIRUDVSHFLILFSXUSRVH¶$WNLQVHWDO 'HVLJQFULWHULDFUXFLDOO\GHSHQGRQWKHHQYLVDJHG XVHRIWKHFRUSXVDQGFHQWUHRQWKHLGHDWKDWFRUSRUDVKRXOGEHVRPHKRZµUHSUHVHQWDWLYH¶RIDSDUWLFXODUW\SH RIODQJXDJHSURGXFWLRQDQGRUUHFHSWLRQ'HVLJQFULWHULDW\SLFDOO\LQYROYHGHFLVLRQVVXFKDVZKHWKHUVSRNHQ DQGZULWWHQODQJXDJHDUHWREHLQFOXGHGZKDWWH[WW\SHVVKRXOGEHDFFRXQWHGIRUZKDWSHULRGRIWH[W SURGXFWLRQLVWREHFRYHUHGDQGZKHWKHUWH[WVDPSOHVRUIXOOWH[WVDUHWREHLQFOXGHG$WNLQVHWDO%DNHU ±6LQFODLU 2QFHDVXLWDEOHEUHDNGRZQRIWH[WW\SHVDXWKRUSURILOHVHWFKDVEHHQGHFLGHG XSRQWKHDFWXDOWH[WVFKRVHQIRULQFOXVLRQLQDFRUSXVFDQEHVHOHFWHGUDQGRPO\$OWHUQDWLYHO\DFRUSXV EXLOGHUFDQLQWHUYHQHPRUHGHOLEHUDWHO\LQWKHVHOHFWLRQRIDFWXDOWH[WVFKRRVLQJWH[WVDFFRUGLQJWR LQFUHDVLQJO\VSHFLILFFULWHULD7KHWZRDSSURDFKHVDUHH[HPSOLILHGE\WKH%ULWLVK1DWLRQDO&RUSXV DQG (QJZDOO )LQDOO\FRUSXVEXLOGHUVPXVWVHFXUHSHUPLVVLRQIURPFRS\ULJKWKROGHUVLQRUGHUWRVWRUHWH[WV LQHOHFWURQLFIRUPDQGWRXVHWKHPLQVXEVHTXHQWUHVHDUFK%DNHU DQG$WNLQVHWDO GLVFXVV WKHRIWHQWKRUQ\LVVXHRIFRS\ULJKW 2QFHWH[WVKDYHEHHQVHOHFWHGIRULQFOXVLRQLQDFRUSXVDGHFLVLRQKDVWREHPDGHDVWR



3DJH

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

&RUSRUDLQWUDQVODWLRQVWXGLHV 0RVWRIWKHFRUSRUDPHQWLRQHGVRIDUDUHPRQROLQJXDODQGVHUYHWKHQHHGVRIOLQJXLVWVLQJHQHUDO7UDQVODWLRQ VFKRODUVKRZHYHUPD\KDYHGLIIHUHQWQHHGVIRUH[DPSOHIRUFRUSRUDWKDWFRQWDLQGDWDIURPPRUHWKDQRQH ODQJXDJHDOWKRXJKWKLVLVQRWQHFHVVDULO\WKHFDVHIDPLOLDUPRQROLQJXDOFRUSRUDHVSHFLDOO\WKRVHFRQWDLQLQJ VSHFLDOL]HGWH[WVFDQEHXVHGLQWUDQVODWLRQSHGDJRJ\WRUHLQIRUFHVWXGHQWV¶NQRZOHGJHRIQRUPDOWDUJHW ODQJXDJHSDWWHUQVRULQWHUPLQRORJ\H[WUDFWLRQ3HDUVRQIRUWKFRPLQJ6DJHU %DNHU GHVFULEHVYDULRXVW\SHVRIHOHFWURQLFFRUSRUDWKDWDUHRIVSHFLILFLQWHUHVWWRWUDQVODWLRQVFKRODUV ,Q%DNHU¶VWHUPLQRORJ\DSDUDOOHOFRUSXVFRQVLVWVRIWH[WVRULJLQDOO\ZULWWHQLQDODQJXDJH$DORQJVLGHWKHLU WUDQVODWLRQVLQWRDODQJXDJH%3DUDOOHOFRUSRUDKDYHDOUHDG\EHHQFRPSLOHGIRUVHYHUDOODQJXDJHSDLUV LQFOXGLQJ(QJOLVK)UHQFK6DONLHDQGVHHDOVR&KXUFKDQG*DOHZKRXVHWKH&DQDGLDQ+DQVDUG FRUSXVRISDUOLDPHQWDU\SURFHHGLQJV (QJOLVK,WDOLDQ0DULQDLHWDO (QJOLVK²1RUZHJLDQ-RKDQVVRQ DQG+RIODQG-RKDQVVRQHWDO DQG(QJOLVK*HUPDQ6FKPLHGDQG6FKl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lIIOHU 7\SLFDODSSOLFDWLRQVRISDUDOOHOFRUSRUDLQFOXGH WUDQVODWRUWUDLQLQJELOLQJXDOOH[LFRJUDSK\DQGPDFKLQHWUDQVODWLRQ0DOPNM U KDVDOVRVXJJHVWHGWKDW SDUDOOHOFRUSRUDWKDWLQFOXGHDSSURSULDWHLQIRUPDWLRQDERXWWUDQVODWRUV¶EDFNJURXQGVFRXOGVXSSO\XVHIXOGDWD IRUSV\FKROLQJXLVWVLQYHVWLJDWLQJWKHGLIIHUHQFHVEHWZHHQILUVWDQGVHFRQGODQJXDJHDFTXLVLWLRQ



3DJH

%DNHU XVHVWKHWHUPPXOWLOLQJXDOFRUSXVWRUHIHUWRµVHWVRIWZRRUPRUHPRQROLQJXDOFRUSRUDLQ GLIIHUHQWODQJXDJHVEXLOWXSLQHLWKHUWKHVDPHRUGLIIHUHQWLQVWLWXWLRQVRQWKHEDVLVRIVLPLODUGHVLJQFULWHULD¶ $PXOWLOLQJXDOFRUSXVWKHUHIRUHFRQVLVWVRIWH[WVWKDWKDYHQRWEHHQWUDQVODWHGUDWKHUWKH\DUHDOORULJLQDOVLQ WKHLUUHVSHFWLYHODQJXDJHV$VDQH[DPSOHRIDPXOWLOLQJXDOFRUSXV%DNHUJLYHVWKHFRUSXVFRPSLOHGE\WKH &RXQFLORI(XURSH0XOWLOLQJXDO/H[LFRJUDSK\3URMHFW$PXOWLOLQJXDOFRUSXVFDQEHXVHGIRUFRQWUDVWLYH OLQJXLVWLFZRUN$LMPHUDQG$OWHQEHUJ LQFOXGLQJELOLQJXDOOH[LFRJUDSK\%DNHU KRZHYHU KDVH[SUHVVHGUHVHUYDWLRQVDERXWWKHXVHIXOQHVVRIPXOWLOLQJXDOFRUSRUDLQWKHRUHWLFDOWUDQVODWLRQVWXGLHV FODLPLQJWKDWZRUNXVLQJPXOWLOLQJXDOFRUSRUDLVEDVHGRQWKHHUURQHRXVDVVXPSWLRQWKDWµWKHUHLVDQDWXUDO ZD\RIVD\LQJDQ\WKLQJLQDQ\ODQJXDJHDQGWKDWDOOZHQHHGWRGRLVWRILQGRXWKRZWRVD\VRPHWKLQJ QDWXUDOO\LQODQJXDJH$DQGODQJXDJH%¶(YHQLQFRQWUDVWLYHOLQJXLVWLFVPXOWLOLQJXDOFRUSRUDFDQSUHVHQW SUDFWLFDOSUREOHPVLIWKHWH[WVLQWKHGLIIHUHQWODQJXDJHVDUHQRWZHOOPDWFKHGLQWHUPVRIJHQUHDQGVLWXDWLRQDO IDFWRUV$LMPHUDQG$OWHQEHUJ %DNHU¶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± RXWOLQHVWKHIROORZLQJ K\SRWKHVHVZKRVHXQLYHUVDOVWDWXVFRXOGEHLQYHVWLJDWHGXVLQJFRPSDUDEOHFRUSRUDWUDQVODWHGWH[WVWHQGWREH PRUHH[SOLFLWXQDPELJXRXVDQGJUDPPDWLFDOO\FRQYHQWLRQDOWKDQWKHLUVRXUFHWH[WVRURWKHUWH[WVSURGXFHGLQ WKHWDUJHWODQJXDJHWKH\DOVRWHQGWRDYRLGUHSHWLWLRQVWKDWRFFXULQWKHVRXUFHWH[WDQGWRH[DJJHUDWHIHDWXUHV RIWKHWDUJHWODQJXDJH%DNHU DOVRVXJJHVWVWKDWWUDQVODWLRQPD\LQYROYHVRPHNLQGRIµOHYHOOLQJRXW¶E\ JUDYLWDWLQJWRZDUGVWKHFHQWUHRIFRQWLQXDVXFKDVWKDWEHWZHHQRUDOLW\DQGOLWHUDF\6KOHVLQJHUE 6RPHRIWKHVHK\SRWKHVHVKDYHDOUHDG\EHHQLQYHVWLJDWHGRQDOLPLWHGVFDOHE\UHVHDUFKHUVVXFKDV6KDPD¶DLQ %DNHU 7RXU\DII DQG3XXUWLQHQ DOWKRXJKWKHVHDQDO\VHVZHUHGRQHPDQXDOO\ &RUSXVOLQJXLVWLFWHFKQLTXHVDOORZPXFKPRUHSRZHUIXOJHQHUDOL]DWLRQVWREHPDGHDERXWWUDQVODWLRQ KRZHYHU,IIRUH[DPSOHWUDQVODWLRQVZHUHWRGLVSOD\DKLJKW\SHWRNHQUDWLRORZOH[LFDOGHQVLW\DQGORZ VHQWHQFHOHQJWKZKLFKFDQDOOEHFDOFXODWHGDXWRPDWLFDOO\XVLQJVRIWZDUHOLNH6FRWW¶V:RUG6PLWK7RROV YLVjYLVRWKHUWH[WVLQWKHVDPHODQJXDJHWKHQWKLVZRXOGVXSSRUWWKHµVLPSOLILFDWLRQK\SRWKHVLV¶IRUH[DPSOH 7KLVLVWKHOLQHSXUVXHGE\/DYLRVD%UDLWKZDLWH LQKHUUHVHDUFKXVLQJDQ(QJOLVKFRPSDUDEOHFRUSXV /LNHZLVHLQFUHDVHGWH[WOHQJWKDQGDGLVSURSRUWLRQDWHQXPEHURIH[SODQDWRU\YRFDEXODU\ZRUGVDQG FRQMXQFWLRQVFRXOGVXSSRUWWKHµ(;3/,&,7$7,21K\SRWKHVLV¶%DNHU± 7KHDWWHVWHGIUHTXHQF\RI FHUWDLQYRFDEXODU\LWHPVPD\SRLQWWRZDUGVJUHDWHUVWDQGDUGL]DWLRQLQWUDQVODWHGWH[WVWKDQLQRULJLQDOWH[WVD ILQGLQJVXJJHVWHGE\*HOOHUVWDP¶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



3DJH

KDYHKRZHYHUVRXQGHGDQRWHRIFDXWLRQ0DOPNM UIRUWKFRPLQJ ZDUQVWKDWWKHEXONRIVWDWLVWLFDOHYLGHQFH SURYLGHGE\FRUSRUDPD\OHDGVFKRODUVWRµWUHDWDVPDUJLQDOLIQRWH[DFWO\LJQRUHSUREOHPDWLFFDVHV¶ 0DOPNM UDOVRDUJXHVWKDWWKHVHOHFWLRQRIWUDQVODWHGWH[WVIRULQFOXVLRQLQDSDUDOOHOFRUSXVFDQDIIHFWZKDWWKH REVHUYHUQRWLFHVWRDQXQGHVLUDEOHGHJUHHDQGWKDWµDSDUDOOHOFRUSXVVWLOORQO\SURYLGHVIRUHDFKLQVWDQFHWKH UHVXOWRIRQHLQGLYLGXDO¶VLQWURVSHFWLRQDOEHLWFRQWH[WXDOO\DQGFRWH[WXDOO\LQIRUPHG¶LELG WKXVPDNLQJD FDVHIRUFRUSRUDWKDWFRQWDLQVHYHUDOWUDQVODWLRQVRIDVLQJOHVRXUFHWH[W)LQDOO\0DOPNM UVWUHVVHVWKDWµLQ RUGHUWREHDEOHWRSURYLGHDQ\NLQGVRIH[SODQDWLRQRIWKHGDWDSURYLGHGE\WKHFRUSXVUDWKHUWKDQPHUH VWDWLVWLFVDQDO\VWVUHDOO\QHHGVXEVWDQWLDOO\PRUHFRQWH[WWKDQFRPSXWHUVWHQGWRVHDUFKDQGGLVSOD\¶LELG &RPSDUDEOHFRUSRUDWRRKDYHWKHLUSUREOHPVLWLVLQWKHYHU\QDWXUHRIWUDQVODWLRQWKDWQHZJHQUHVDUH LQWURGXFHGIURPRQHOLWHUDWXUHWRDQRWKHUDQGWKHUHPD\EHQRWKLQJµFRPSDUDEOH¶LQWKHKRVWOLWHUDWXUHWRDWH[W LQWURGXFHGWRLWWKURXJKWUDQVODWLRQIURPDQRWKHUWH[WXDOWUDGLWLRQ7KLVGLIILFXOW\LVVLPLODUWRRQHIDFHGE\ VFKRODUVZRUNLQJZLWKOHVVHUXVHGODQJXDJHVWKHRQO\H[HPSODUVRIPDQ\QRQOLWHUDU\ WH[WW\SHVLQ,ULVK *DHOLFIRULQVWDQFHDUHWUDQVODWLRQVPDLQO\IURP(QJOLVKWKHUHDUHQRµQDWLYH¶WH[WVZLWKZKLFKWRFRPSDUH WUDQVODWLRQV7KHHIIHFWVRIWKHHFRQRP\RIWUDQVODWLRQKDYHDOVREHHQIHOWE\-RKDQVVRQDQG+RIODQG ZKRVHFKRLFHRIWH[WVIRUVHOHFWLRQLQWKHLU(QJOLVK1RUZHJLDQELGLUHFWLRQDOSDUDOOHOFRUSXVKDV EHHQOLPLWHGE\WKHIDFWWKDWµDODUJHQXPEHUDQGDZLGHUDQJHRIWH[WVKDYHEHHQWUDQVODWHGLQWR1RUZHJLDQ EXWIDUOHVVLQWKHRWKHUGLUHFWLRQ¶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

)XUWKHUUHDGLQJ $WNLQVHWDO%DNHU/HHFK6LQFODLU6WXEEV

'2527+<.(11<

&RXUWLQWHUSUHWLQJ 7KHWHUPµFRXUWLQWHUSUHWLQJ¶LVZLGHO\XVHGWRUHIHUWRDQ\NLQGRIOHJDOLQWHUSUHWLQJEXWWKHFRXUWURRPLVLQ IDFWRQO\RQHRIVHYHUDOFRQWH[WVLQZKLFKOHJDOLQWHUSUHWLQJPD\WDNHSODFH1RQFRXUWURRPFRQWH[WVLQFOXGH LQWHUYLHZVLQSROLFHGHSDUWPHQWVFXVWRPVRIILFHVLPPLJUDWLRQDXWKRULWLHVDQGEDUULVWHU¶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µHUV¶DQGµXPV¶XWWHUHGE\ WKHZLWQHVV7KHDUJXPHQWKHUHLVWKDWZKDWLVDWLVVXHLVDKXPDQEHLQJ¶VOLIHDQGOLEHUW\DQGWKHFRXUWMXGJHV WKHFUHGLELOLW\DQGYHUDFLW\RIDQLQGLYLGXDOE\KLVKHUGHPHDQRXUWRDODUJHH[WHQW



3DJH

)RULQVWDQFH*RQ]iOH]HWDO DQG2¶7RROD KDYHREVHUYHGWKDWSURVRGLFHOHPHQWVDQG SDUDOLQJXLVWLFIHDWXUHVDUHIUHTXHQWO\OHIWXQLQWHUSUHWHGDQGWKDWDZLWQHVV¶VWHVWLPRQ\VXIIHUVDFFRUGLQJO\ 6KOHVLQJHU VLPLODUO\UHSRUWVDJHQHUDOWHQGHQF\RQWKHSDUWRIFRXUWLQWHUSUHWHUVWRµJUDPPDWLFL]H¶ XQJUDPPDWLFDOXWWHUDQFHVDQGREVHUYHVWKDWµWKHRYHUULGLQJWHQGHQF\RIWKHLQWHUSUHWHUWRGHOHWHDIDOVHVWDUW PD\LQIDFWOHDGWRWKHRPLVVLRQRIDVHOIFRUUHFWLRQZKLFKLWZRXOGVHHPZDVH[SUHVVO\LQWHQWLRQDO¶LELG 0RGHUQFRXUWLQWHUSUHWLQJKDVPDGHOLPLWHGSURJUHVVLQLWVEULHIKLVWRU\7KLVLVSULPDULO\GXHWRWKHFRPSOH[ QDWXUHRIOHJDOLQWHUSUHWLQJDQGWKHMXGLFLDU\¶VDPELYDOHQWDWWLWXGHWRLQWHUSUHWHUVLQWKHFRXUWURRP2QWKHRQH KDQGWKHODZLVUHOXFWDQWWRDFFHSWLQWHUSUHWHUVDVSURIHVVLRQDOVFDSDEOHRIUHQGHULQJOLQJXLVWLFPHVVDJHV HIILFLHQWO\2¶7RROE DQGWKHUHIRUHDVRIILFHUVRIWKHODZ0RUULV 2QWKHRWKHUKDQGLWLQVLVWVRQ WUHDWLQJWKHSURGXFWRIFRXUWLQWHUSUHWLQJDVDOHJDOO\YDOLGHTXLYDOHQWRIWKHRULJLQDOXWWHUDQFH0RUULVLELG UHSRUWVWKDWLQWKH(QJOLVKVSHDNLQJZRUOGµ7DSHUHFRUGLQJVRIQRQ(QJOLVKXWWHUDQFHVSURGXFHGLQWKH FRXUWURRPKDUGO\HYHUH[LVWZULWWHQWUDQVFULSWVDUHDOPRVWQHYHUSURYLGHG¶

7KHSURYLVLRQRIFRXUWLQWHUSUHWLQJDVDOHJDOULJKW )RUMXVWLFHWREHGRQHWKHOHJDOV\VWHPDGPLQLVWHULQJLWKDVWREHVHHQWREHIDLU2QHRIWKHHVVHQWLDOWHQHWVRI DIDLUWULDOLVWKHOHJDOSUHVHQFHRIWKHDFFXVHGGXULQJWKHWULDO7KHFRQFHSWRIµOHJDOSUHVHQFH¶LQFOXGHV µOLQJXLVWLFSUHVHQFH¶*RQ]i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µ7KHQRWLRQRI DGYDQWDJHGHULYLQJIURPWKHXVHRIDQLQWHUSUHWHUDULVHVRXWRIDIXQGDPHQWDOPLVXQGHUVWDQGLQJRIWKHQDWXUHRI LQWHUSUHWLQJ¶DQGWKDWµWKHUHLVQRHYLGHQFHWKDW«DQ\DGYDQWDJHLVDFWXDOO\VHFXUHG¶0XOWLFXOWXUDOLVPDQGWKH /DZ 7KHMXGLFLDU\KDVORQJIDLOHGWRUHFRJQL]HWKHFRPSOH[LW\RIOHJDOLQWHUSUHWLQJDQGKDVFRQVHTXHQWO\H[SHFWHG WKHFRXUWLQWHUSUHWHUWRDFWDVDFRQGXLWWUDQVPLWWLQJPHVVDJHVEHWZHHQWKHDFFXVHGZLWQHVVHVDQGPHPEHUVRI WKHFRXUWZLWKRXWDQ\LQWHUYHQWLRQDQGLUUHVSHFWLYHRIOLQJXLVWLFDQGFXOWXUDOGLIIHUHQFHVDPRQJSDUWLFLSDQWV $OWDQR6RIWLF0RUULV 7KLVVLWXDWLRQKDVEHHQIXUWKHUH[DFHUEDWHGE\DODFNRIDGHTXDWH WUDLQLQJLQWKHWHFKQLTXHVRIFRXUWLQWHUSUHWLQJDQGDJHQHUDOODFNRIGHILQLWLRQRIWKHFRXUWLQWHUSUHWHU¶VUROH OHDGLQJWRGHILFLHQWLQWHUSUHWLQJLQPDQ\FDVHV



3DJH

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± WRUHQGHUWKHHQWLUHSURFHHGLQJVLQWR8NUDLQLDQIRUWKHGHIHQGDQW &RXUWZRUNDOVRLQFOXGHVVLJKWWUDQVODWLRQRIGRFXPHQWVSURGXFHGLQFRXUW0RUHRYHULWLVQRWXQFRPPRQIRU WKHEHQFKWRDVNWKHLQWHUSUHWHURYHUDVKRUWUHFHVVWRSURGXFHDZULWWHQWUDQVODWLRQRIDQH[KLELWDWUDQVFULSW RIDWHOHSKRQHFRQYHUVDWLRQRUVXEWLWOHVIRUDYLGHRUHFRUGLQJ 7KHYDULRXVPHWKRGVRILQWHUSUHWLQJXVHGLQWKHFRXUWURRPDOOKDYHWKHLUVKRUWFRPLQJV)RULQVWDQFH2¶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¶rWUHRIFRXUWLQWHUSUHWLQJSODFHVDVSHFLDOFRQVWUDLQWRQWKHFRXUW LQWHUSUHWHUZKRKDVWRGLVWDQFHKLPKHUVHOIIURPZLWQHVVHVDQGWKHLULPPHGLDWHIDPLOLHVHYHQZKHQWKH\ WKHPVHOYHVDUHLQQHHGRIWKHLQWHUSUHWHU¶VVHUYLFHV7KHWDVNLVPDGHPRUHGLIILFXOWE\WKHIDFWWKDWMXGLFLDO FRQFHUQIRUJXDUDQWHHLQJWKHLPSDUWLDOLW\RIWKHLQWHUSUHWHUKDVJLYHQULVHWRWKHSULQFLSOHRIH[FOXGLQJWKH LQWHUSUHWHUIURPSUHWULDOFRQIHUHQFHVDQGWKHYLHZLQJRIUHOHYDQWGRFXPHQWVSULRUWRWKHFRPPHQFHPHQWRID WULDO*RQ]iOH]HWDO 7KHMXGLFLDOYLHZWKDWSULRUNQRZOHGJHRIWKHFDVHFRXOGDIIHFWWKH LQWHUSUHWHU¶VLPSDUWLDOLW\LVWRVRPHH[WHQWXQGHUVWDQGDEOH+RZHYHULWVHHPVXQUHDOLVWLFWRH[SHFWDQ LQWHUSUHWHUWRZDONLQWRDFRXUWURRPZLWKRXWDQ\NQRZOHGJHRIWKHWRSLFWHUPLQRORJ\RUFKURQRORJ\RIWKH FDVHDQGVWLOOEHDEOHWRSHUIRUPHIILFLHQWO\HVSHFLDOO\JLYHQWKHIDFWWKDWEDFNWUDFNLQJDQGUHTXHVWVIRU FODULILFDWLRQRQWKHSDUWRIWKH



3DJH

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µ+RZWRZRUNZLWK,QWHUSUHWHUV¶WKHVHDLPWRHGXFDWH WKHSXEOLFWRPDNHWKHEHVWXVHRILQWHUSUHWHUV 7KHUHDUHYLUWXDOO\QRDFDGHPLFLQVWLWXWLRQVWKDWSURYLGHWUDLQLQJLQFRXUWLQWHUSUHWLQJVSHFLILFDOO\+RZHYHU VRPHFROOHJHVSDUWLFXODUO\LQWKH8QLWHG6WDWHVDQG&DQDGDRIIHUVKRUWFRXUVHVVSHFLILFDOO\GHVLJQHGIRUFRXUW LQWHUSUHWHUV:LWKWKHHPHUJHQFHRIWUDQVODWLRQVWXGLHVDVDIXOO\IOHGJHGDFDGHPLFGLVFLSOLQHPRUHDWWHQWLRQLV QRZEHLQJSDLGWRWKHQHHGWRSURYLGHIXOODFDGHPLFWUDLQLQJLQFRXUWLQWHUSUHWLQJ/DVWHUDQG7D\ORU ,Q DQDWWHPSWWREULGJHWKHJDSEHWZHHQµJHQHUDOLVW¶DFDGHPLFWUDLQLQJLQLQWHUSUHWLQJDQGWKHVSHFLILFVWDQGDUGV DQGVNLOOVUHTXLUHGLQWKHSURIHVVLRQDOZRUOGVHULRXVVWHSVKDYHDOVREHHQWDNHQLQ$XVWUDOLDWKH8QLWHG6WDWHV DQGHOVHZKHUHWRSURYLGHFHUWLILFDWLRQRIFRXUWLQWHUSUHWHUV 6HHDOVR &20081,7<,17(535(7,1*&21)(5(1&($1'6,08/7$1(286,17(535(7,1*6,*1(' /$1*8$*(,17(535(7,1*

)XUWKHUUHDGLQJ $OWDQR%HUN6HOLJVRQ%URZQ&ROLQDQG0RUULVGH-RQJK(GZDUGV*RQ]iOH]HW DO/DVWHUDQG7D\ORU0RUULV5RELQVRQ6KOHVLQJHU

08+$00$'*$0$/



3DJH

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

'HFLVLRQPDNLQJDQRYHUYLHZ $GHFLVLRQSUREOHPRFFXUVZKHQRQHLVIDFHGZLWKDQLVVXHZKLFKGHPDQGVVRPHIRUPRIFKRLFH$Q\QRQ WULYLDOFKRLFHFRQWDLQVDQHOHPHQWRIULVNEHFDXVHPRVWGHFLVLRQSUREOHPVFDQQRWEHUHGXFHGWRKDUGDQGIDVW UXOHVLQYROYLQJµLIWKHQ¶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µ'HULYHG¶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ê WRDSSO\*$0(7+(25< WRGHFLVLRQPDNLQJLQWUDQVODWLRQ/HYêVWDWHVWKDWHYHU\PRYHµLVLQIOXHQFHGE\WKHNQRZOHGJHRISUHYLRXV GHFLVLRQVDQGE\WKHVLWXDWLRQZKLFKUHVXOWHGIURPWKHP¶



3DJH

6LPLODUDUJXPHQWVFDQEHIRXQGLQ*RUOpH DQG&URQLQ

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

0RGHOVRIGHFLVLRQPDNLQJDQGWKHLUDSSOLFDELOLW\WRWUDQVODWLRQ ,QLWVHDUO\VWDJHVWKHVWXG\RIGHFLVLRQPDNLQJFRQFHQWUDWHGRQWKHGHYHORSPHQWRIIRUPDOPRGHOVFXUUHQWO\ XVHGLQRSHUDWLRQVUHVHDUFK$JRRGH[DPSOHRIDIRUPDOLVWDSSURDFKWRGHFLVLRQPDNLQJLVSUHVHQWHGLQDQ DUWLFOHE\5DFKOLQHWDO ZKRFRPSDUHDFRJQLWLYHPRGHODQGDEHKDYLRXUDOPRGHORIGHFLVLRQPDNLQJ DQGFRPHWRWKHFRQFOXVLRQWKDWERWKDSSURDFKHVDUHµMXVWWZRFRPSHWLQJGHVFULSWLRQVRIDVLQJOHIXQGDPHQWDO SURFHVV¶ 7KHLUDUJXPHQWVXJJHVWVDWOHDVWLPSOLFLWO\WKDWIRUPDOLVWPRGHOVRIGHFLVLRQPDNLQJDUH QRWDSSOLFDEOHWRWUDQVODWRUSHUIRUPDQFHWKLVLVLQFLGHQWDOO\WKHVDPHH[SODQDWLRQJLYHQIRUWKHIDLOXUHRI IXOO\DXWRPDWLFKLJKTXDOLW\WUDQVODWLRQLQ%DU+LOOHO¶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



3DJH

:DOOVWHQZKRVHFROOHFWLRQRIDUWLFOHVRQWKHQDWXUHRIGHFLVLRQPDNLQJKDVPXFKWRRIIHUWRWUDQVODWLRQ VWXGLHVKDVVKRZQWKDWWKHRXWFRPHVDQGFRQWLQJHQFLHVDVVRFLDWHGZLWKDSDUWLFXODUFKRLFHFDQEHUHIHUUHGWRD GHFLVLRQµIUDPH¶DQGWKDWLWLVRIWHQSRVVLEOHWRIUDPHDJLYHQGHFLVLRQSUREOHPLQPRUHWKDQRQHZD\ 7KHILQDOGHFLVLRQGHSHQGVRQDKRVWRIIDFWRUVVXFKDVDGHTXDWHNQRZOHGJHEDVHVDVXIILFLHQWO\GHWDLOHG FKDUDFWHUL]DWLRQRIWKHSUREOHPUHTXLULQJGHFLVLRQPDNLQJVWUDWHJLHVDQGWKHLQGLYLGXDO¶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µGHYRWHPRUHDWWHQWLRQWR H[SHULPHQWDOVLWXDWLRQVLQZKLFKWKHFKRLFHDOWHUQDWLYHVDUHQRWZHOOGHILQHGLQZKLFKPHPRU\IRULQIRUPDWLRQ FDQEHDVVHVVHGDQGLQZKLFKLQGLYLGXDOGLIIHUHQFHVFDQEHV\VWHPDWLFDOO\H[SORUHG¶:DOOVWHQ[LLL :KDWZHQHHGLVLQIRUPDWLRQQRWRQO\RQKRZWUDQVODWRUVSHUIRUPLQJHQHUDOEXWDOVRRQKRZWKH\SHUIRUPLQD VSHFLILFWUDQVODWLRQVLWXDWLRQZLWKDOOLWVLQKHUHQWDUUD\RIFRPSOH[IDFWRUV ,QRUGHUWRFRPHWRWHUPVZLWKWKLVLVVXH7+,1.$/28'35272&2/6KDYHEHHQHPSOR\HGSDUWLFXODUO\ ZLWKVWXGHQWVRIWUDQVODWLRQDQGPD\ZHOOSURYHXVHIXOLQGXHFRXUVH7KH\KDYHEHFRPHUDWKHUSRSXODULQ UHFHQW\HDUV.ULQJV/|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

3UHGHFLVLRQPRYHVDQGFKRLFHEHKDYLRXU 7KHLVVXHRILPSURYLQJDWUDQVODWRU¶VGHFLVLRQPDNLQJSRWHQWLDOUDLVHVDQXPEHURITXHVWLRQV



3DJH

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ƇSUREOHPLGHQWLILFDWLRQ ƇSUREOHPFODULILFDWLRQGHVFULSWLRQ ƇLQIRUPDWLRQFROOHFWLRQ ƇGHOLEHUDWLRQRQKRZWRSURFHHG ƇPRPHQWRIFKRLFH ƇSRVWFKRLFHEHKDYLRXUHYDOXDWLRQRIWUDQVODWLRQUHVXOWV 2EVWUXFWLRQPD\RFFXUDWDOPRVWDQ\RIWKHVHVWDJHVKDOWLQJRUGHOD\LQJWKHGHFLVLRQPDNLQJSURFHGXUH UDLVLQJWKHTXHVWLRQRIVWDJHERXQGDULHVRUVWDJHRYHUODSSLQJ6XFKERXQGDULHVDUHGLIILFXOWWRSLQGRZQLQ WUDQVODWLRQDIDFWWKDWPD\OHDGWRZKDWLQGHFLVLRQWKHRU\KDVEHHQFDOOHGµQRWFKRRVLQJEHKDYLRU¶&RUELQ µ1RWFKRRVLQJEHKDYLRU¶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¶VFRJQLWLYHV\VWHPKLV KHUNQRZOHGJHEDVHVWDVNVSHFLILFDWLRQVDQGODVWEXWQRWOHDVWWKHµSUREOHPVSDFH¶ZKLFKSOD\VDGHFLVLYH UROHLQGHWHUPLQLQJGHFLVLRQPDNLQJEHKDYLRXU$OOIRXUIDFWRUVSURIRXQGO\LQIOXHQFHGHFLVLRQPDNLQJ SHUIRUPDQFHLQWUDQVODWLRQDQGUHTXLUHFRQVLGHUDEO\PRUHDWWHQWLRQWKDQZHKDYHJLYHQWKHPVRIDU 6HHDOVR *$0(7+(25<$1'75$16/$7,2136<&+2/,1*8,67,&&2*1,7,9($3352$&+(6 7+,1.$/28'35272&2/6

)XUWKHUUHDGLQJ .ULQJV/HYê/|UVFKHU7LUNNRQHQ&RQGLW:LOVV

:2/)5$0:,/66

'LGDFWLFVRIWUDQVODWLRQ )RUPDQ\SHRSOHWUDQVODWLQJVWLOOPHDQVUHQGHULQJDWH[WIURPRQHODQJXDJHLQWRDQRWKHUFIWKHWLWOHRIGH :DDUGDQG1LGD)URP2QH/DQJXDJHWR$QRWKHU 7UDQVODWLRQLQWKLVYLHZLVGHSHQGHQWRQNQRZOHGJH RIWZRODQJXDJHVVRXUFHDQGWDUJHWDQGWUDQVODWLRQWHDFKLQJDQGOHDUQLQJKDYHWKHUHIRUHWUDGLWLRQDOO\UHOLHGRQ WKHROGPHWKRGVRIODQJXDJHWHDFKLQJDQGOHDUQLQJ)RUDORQJWLPH



3DJH

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µHTXLYDOHQW¶WDUJHWWH[W IRUPVWKHFRQWHQWLVFRQVLGHUHGWKHLQYDULDEOHLQWKLVRSHUDWLRQDQGHTXLYDOHQFHLVURXJKO\HTXDWHGZLWKFR WH[WERXQGGLFWLRQDU\µPHDQLQJV¶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¶VWDVNWKHQHQGVZLWKWKHOLQJXLVWLF SURGXFWLRQRIDWDUJHWWH[W7UDQVODWLRQDOVNLOOLVDFTXLUHGE\H[HUFLVHVEDVHGRQOLQJXLVWLFHTXLYDOHQFHUXOHVRI WKHW\SHµWUDQVODWH*HUPDQDGYHUEVE\D6SDQLVKILQDOYHUETXHFRQVWUXFWLRQDQGYLFHYHUVDKRIIHQWOLFK NRPPWHU!HVSHURTXHYHQJD ¶7KHVDPHVNLOOLVWDXJKWRYHUDQGRYHUDJDLQXSWRHLJKWWLPHVSHUGLSORPD FRXUVH²DSUDFWLFHVWLOOIROORZHGLQDWOHDVWVRPH*HUPDQLQVWLWXWLRQV 6RPXFKIRUWKHWUDGLWLRQDODSSURDFKWRWUDQVODWLRQWHDFKLQJ)RUWKHSDVW\HDUVRUVR-XVWD+RO]0lQWWlUL FI DQGRWKHUVKDYHEHHQHODERUDWLQJDIXQFWLRQDODSSURDFKWRWUDQVODWLRQZKLFKKDVKDGGLUHFWDQGIDU UHDFKLQJLPSOLFDWLRQVIRUWKHWHDFKLQJRIWUDQVODWLRQ$FFRUGLQJWRWKLVDSSURDFKDWH[WLVSURGXFHGIRUVSHFLILF UHFLSLHQWVLQDVSHFLILFFRQWH[WZLWKLQDQµDFWLRQIUDPH¶+DQGOXQJVUDKPHQ ZKLFKFRQVLVWVRIDQXPEHURI LQWHUGHSHQGHQWIDFWRUVVXFKDVVLWXDWLRQFRPPXQLFDWLYHWH[WIXQFWLRQ6NRSRVFI9HUPHHUE FRPPLVVLRQHUSURGXFHUUHFLSLHQWV DQGVRRQVHH$&7,217+(25<2)µ75$16/$725,$/ $&7,21¶ 6.23267+(25< 6LWXDWLRQLVVSOLWLQWRWKHDFWXDOFLUFXPVWDQFHVRIFRPPLVVLRQWH[W SURGXFWLRQDQGUHFHSWLRQDVZHOODVWKHYDULRXVDVSHFWVRIWKHFXOWXUDOHQYLURQPHQWLQZKLFKDOOWKLVLV HPEHGGHG7UDQVODWLRQWKXVDFTXLUHVDFRPSOH[PHDQLQJLWLVQRORQJHUWKHPHUHWUDQVIRUPDWLRQRIDWH[WIURP RQHODQJXDJHWRDQRWKHUEXWUDWKHUWKHSURGXFWLRQRIDWDUJHWWH[WWKDWFDQIXQFWLRQZLWKLQDGLIIHUHQWFRQWH[W IRUUHFLSLHQWVIURPDGLIIHUHQWFXOWXUH

7KHIXQFWLRQDODSSURDFKDQGWKHGLGDFWLFVRIWUDQVODWLRQ )URPWKHSRLQWRIYLHZRIWUDQVODWLRQWHDFKLQJWKHFRQVHTXHQFHVRIWKHGHYHORSPHQWRIWKHIXQFWLRQDO DSSURDFKVHHPREYLRXV)LUVWYLHZHGDVDQDFWRILQWHUFXOWXUDOFRPPXQLFDWLRQUDWKHUWKDQDVNLOOLQ WUDQVIHUULQJPLQLPDOOLQJXLVWLFXQLWVDFURVVODQJXDJHERXQGDULHVWUDQVODWLRQFRXOGQRORQJHUEHWDXJKWOHDUQW RQWKHEDVLVRIOLQJXLVWLFH[HUFLVHV1RRQHGHQLHVWKDWOLQJXLVWLFVNLOOVDUHQHFHVVDU\DVDVWDUWLQJSRLQW:LOVV EXWIXQFWLRQDOLVWVDUJXHWKDWWKHVHVNLOOVDUHSDUWRIDPRUHEDVLFFXOWXUDOFRPSHWHQFHLQKDQGOLQJVRXUFH DQGWDUJHWFRPPXQLFDWLYHFRQWH[WV:LWWHD 6HFRQGWKHIXQFWLRQDODSSURDFKWRWUDQVODWLRQDQGLWVWHDFKLQJLVQRWSHUFHLYHGDVEHLQJERXQGWRVSHFLILF ODQJXDJHSDLUVRWKHUZLVHWKHGLGDFWLFVRIWUDQVODWLRQZRXOGEHFRPHTXLWHFRPSOH[ZLWKLQWKLVIUDPHZRUN,WLV LQWURGXFHGDQGH[HPSOLILHGE\VWDUWLQJIURPJHQHUDOSURFHGXUHVRIWH[WUHFHSWLRQDQGSURGXFWLRQLQDSULPDU\ FXOWXUHDQGLWVODQJXDJHVXFKSURFHGXUHVWHQGWREHDSSOLHGLQDVXEOLPLQDOPDQQHUDQGKDYHWREHEURXJKWWR FRQVFLRXVQHVVLQRUGHUIRUWKHLUIXQFWLRQVWREHUHDOL]HG:LWWH &XOWXUDOFRPSHWHQFHFRPSULVHVWKH ZKROHUDQJHRIHYHU\GD\



3DJH

LQWHUDFWLRQDVZHOODVW\SHVRIVSHFLILFSURIHVVLRQDOEHKDYLRXUZLWKZKLFKDWUDQVODWRUKDVWREHFRPHIDPLOLDU &XOWXUDOFRPSHWHQFHDFTXLUHGDVSDUWRIWUDQVODWRUWUDLQLQJPD\HYHQOHDGWRDQHZSURIHVVLRQWKH µLQWHUFXOWXUDOPDQDJHPHQWDVVLVWDQW¶RUµFRQVXOWDQW¶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lQWWlULRQµWH[WGHVLJQ¶ 2QFHWH[WXDOFRPSHWHQFHKDVEHHQDFTXLUHGIRUDQXPEHURIWH[WW\SHVVXFKDVEXVLQHVVOHWWHUVLQWURGXFLQJD JXHVWZULWLQJUHSRUWVDQGVRRQ:LWWHE1RUGD DQGVRXUFHDQGWDUJHWWH[WVKDYHEHHQ FRPSDUHGFRPSUHKHQVLRQDQGSURGXFWLRQH[HUFLVHVµIURPRQHFXOWXUHWRDQRWKHU¶PD\IROORZ7KLVPD\EH GRQHIRUH[DPSOHE\VSHFLI\LQJDWDVNLQRQHFXOWXUHDQGSURGXFLQJDFRUUHVSRQGLQJWH[WLQDQRWKHU7KHDLP RIVXFKH[HUFLVHVLVWRHQDEOHVWXGHQWVWRDFTXLUHDWUDQVODWLRQDOFRPSHWHQFHWKDWZRXOGDOORZWKHPWR UHSURGXFHDWH[WPHDQLQJ)UHQFKVHQV6HOHVNRYLWFKDQG/HGHUHUVHH,17(535(7,9($3352$&+ ILUVWRUDOO\DQGWKHQLQZULWLQJDQGODWHULPSURYHWKHSURGXFWE\PHDQVRIUHSHDWHGDWWHPSWVDWµFRUUHFWLQJ¶LW $WWKLVSRLQWWKHYHU\WHUPµWUDQVODWLRQ¶EHJLQVWRSRVHDSV\FKRORJLFDOEDUULHU7RXU\ DQGPD\EH VXEVWLWXWHGE\OHVVUHVWULFWLYHGHVLJQDWLRQVVXFKDVµWHFKQLFDOZULWLQJ¶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¶FKRVHQILHOGVDPRQJRWKHUV 7KHXOWLPDWHDLPRIDWUDQVODWLRQDVWDXJKWZLWKLQWKLVIUDPHZRUNLVWRIXOILODIXQFWLRQDOWDVN7KHWDVNLV SURYLGHGE\DFRPPLVVLRQHU$XIWUDJJHEHU 7KHWUDQVODWRULVDVVXPHGWREHDQH[SHUWLQLQWHUFXOWXUDO FRPPXQLFDWLRQVKHDQDO\VHVWKHFRPPLVVLRQHU¶VDLPVH[SHFWDWLRQVDQGZRUNLQJFRQGLWLRQV1RUG DQG DFWVDVDFXOWXUDOFRQVXOWDQW7KLVW\SHRILQWHUDFWLRQLVVLPXODWHGLQWKHFODVVURRPHQYLURQPHQW

7UDLQLQJOLWHUDU\WUDQVODWRUV 7KHIXQFWLRQDODSSURDFKZKLFKKDVLQIOXHQFHGWKHZD\WUDQVODWLRQFRXUVHVKDYHEHHQGHVLJQHG



3DJH

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µDVFORVHO\DVSRVVLEOH¶WKHVXUIDFHVWUXFWXUHRIWKHVRXUFH WH[W6WXGHQWVRIOLWHUDU\WUDQVODWLRQKDYHWRXQGHUVWDQGWKHRULJLQDOWH[WDSSUHFLDWHWKHVW\OHRIWKHRULJLQDO DXWKRUDQGSURGXFHDWH[WWKDWFDQIXQFWLRQLQWKHWDUJHWFXOWXUH7RDFKLHYHWKLVWKH\KDYHWROHDUQDERXWWKH VRXUFHDQGWDUJHWFXOWXUHVDQGODQJXDJHVLQFOXGLQJWH[WXDODQGOLWHUDU\QRUPV 7UDQVODWLRQFULWLFLVPZKLFKLVSDUWLFXODUO\LPSRUWDQWLQWKHFRQWH[WRIOLWHUDU\WUDQVODWLRQSURFHHGVLQWKLV PRGHOIURPDZLOOLQJQHVVWRUHVSHFWWKHWDUJHWSURGXFWLRQDVDWH[WLQLWVRZQULJKW+RO]0lQWWl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µ75$16/$725,$/$&7,21¶ 6.23267+(25<75$16/$72575$,1,1* ,167,787,216

)XUWKHUUHDGLQJ $PPDQQDQG9HUPHHU)UHLKRII*RXDGHFIRUWKFRPLQJ+RO]0lQWWlUL.LUDO\.XVVPDXO 1RUGE3\P9LHQQH:LWWH

+$16-9(50((5

'LUHFWLRQRIWUDQVODWLRQGLUHFWLRQDOLW\ 'LUHFWLRQDOLW\LQWUDQVODWLRQVWXGLHVXVXDOO\UHIHUVWRZKHWKHUWUDQVODWRUVDUHZRUNLQJIURP



3DJH

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µNQRZV¶6SDQLVKDQG(QJOLVKVKRXOGEHDEOHWR WUDQVODWHLQERWKGLUHFWLRQV 7UDQVODWRUVRQWKHRWKHUKDQGNQRZWKDWOLQJXLVWLFFRPSHWHQFHLVUDUHO\V\PPHWULFDODQGGLVFXVVLRQWHQGVWR FHQWUHRQWUDQVODWLRQLQWRWKHPRWKHUWRQJXH,QIDFW.HOO\ PDLQWDLQVWKDWVLQFH-RKDQ*RWWOLHE +HUGHU WKHDVVXPSWLRQKDVEHHQWKDWWUDQVODWLRQDZD\IURPRQH¶VRZQODQJXDJHZDVQRWZRUWK GLVFXVVLQJH[FHSWWRVWUHVVWKHGLIILFXOWLHVLQYROYHG)RUH[DPSOH/DGPLUDO± UHFRJQL]HV WUDQVODWLRQLQWRWKHIRUHLJQODQJXDJHRQO\DVDSHGDJRJLFDOH[HUFLVHWRWHVWSHUIRUPDQFHLQWKDWODQJXDJHIURP DSURIHVVLRQDOSRLQWRIYLHZKHFRQVLGHUVLWDQDEVXUGUHTXLUHPHQWDQGDKRSHOHVVWDVN6LPLODUO\1HZPDUN EHOLHYHVWKDWµ7UDQVODWLQJLQWR\RXUODQJXDJHRIKDELWXDOXVHLVWKHRQO\ZD\\RXFDQWUDQVODWH QDWXUDOO\DQGDFFXUDWHO\DQGZLWKPD[LPXPHIIHFWLYHQHVV¶ 7KLVRSLQLRQLVVRZLGHO\KHOGLQ(XURSHWKDWWKHXQPDUNHGGLUHFWLRQRIWUDQVODWLRQLVLQWRWKHPRWKHUWRQJXH DQGWKLVLVWKHGLUHFWLRQWUDQVODWRUVDUHH[SHFWHGWRZRUNLQWRE\WKHLQWHUQDWLRQDORUJDQL]DWLRQV7KLVLVPDGH H[SOLFLWLQ81(6&2¶V5HFRPPHQGDWLRQVRQWKHOHJDOSURWHFWLRQRIWUDQVODWRUVDQGWUDQVODWLRQVDQGWKH SUDFWLFDOPHDQVWRLPSURYHWKHVWDWXVRIWUDQVODWRUVµ$WUDQVODWRUVKRXOGDVIDUDVSRVVLEOHWUDQVODWHLQWRKLV RUKHUPRWKHUWRQJXHRULQWRDODQJXDJHRIZKLFKKHRUVKHKDVDPDVWHU\HTXDOWRWKDWRIKLVRUKHUPRWKHU WRQJXH¶3LFNHQ 7KHDVVXPSWLRQWKDWGLUHFWWUDQVODWLRQLVWKHRQO\YLDEOHSURIHVVLRQDORSWLRQLVSDUWLFXODUO\GRPLQDQWLQ(QJOLVK VSHDNLQJFRXQWULHVµWKHFRQYHQWLRQLQWKH8.LVWKDWWUDQVODWLRQLVXQGHUWDNHQLQWRWKHODQJXDJHRIKDELWXDOXVH WKHWHUPLQFUHDVLQJO\SUHIHUUHGWRWKHUDWKHUXQVDWLVIDFWRU\RQH³PRWKHUWRQJXH´ ¶.HLWK 7KH EHOLHILVUHIOHFWHGLQWKHSUDFWLFHRISURIHVVLRQDORUJDQL]DWLRQV)RUH[DPSOH7KH,QVWLWXWHRI/LQJXLVWV¶,R/ 'LSORPDLQ7UDQVODWLRQRQO\WHVWVWUDQVODWLRQLQWRWKHFDQGLGDWH¶VPRWKHUWRQJXHRUODQJXDJHRIKDELWXDOXVH 7KHXQPDUNHGXVHRIµWUDQVODWLRQ¶WRPHDQµWUDQVODWLRQLQWRWKHPRWKHUWRQJXH¶LVVRFRPPRQLQ(QJOLVKWKDW WKHUHLVQRRWKHUVSHFLILFWHUPDQGWKHUHLVQRDJUHHPHQWDVWRWKHWHUPLQRORJ\IRUWUDQVODWLRQLQWRWKHIRUHLJQ ODQJXDJH7KHWUDGLWLRQDOWHUPSURVHWUDQVODWLRQKDVIDOOHQLQWRGLVXVHDQGLVDVVRFLDWHGZLWKWKHDFDGHPLF H[HUFLVHRIPDNLQJVFKRROFKLOGUHQWUDQVODWHLQWR/DWLQRU*UHHN2WKHUWHUPVDUHLQYHUVHWUDQVODWLRQDQG VHUYLFHWUDQVODWLRQ ,Q)UHQFKSURVHWUDQVODWLRQLVWKqPHDQGLVDOVRDVVRFLDWHGZLWKWKHDFDGHPLFH[HUFLVH$SDUWLFXODUO\JLIWHG VWXGHQWXVHGWREHFDOOHGµXQpOqYHIRUWHQWKHPH¶EHFDXVHWKqPHZDVFRQVLGHUHGPXFKPRUHGLIILFXOWWKDQ YHUVLRQZKLFKLVWUDQVODWLRQLQWRWKHPRWKHUWRQJXH%RWKWHUPVDUHVWLOOFRPPRQO\XVHGE\SURIHVVLRQDO WUDQVODWRUV5XVVLDQ*HUPDQDQG-DSDQHVHKDYHQRVSHFLILFWHUPLQRORJ\IRUGLUHFWLRQDOLW\ZKHUHDVLQ6SDQLVK ,WDOLDQ3RUWXJXHVH$UDELFDQG&KLQHVHGLUHFWLRQDOLW\LVGHVFULEHGLQWHUPVRIDWUDQVODWLRQEHLQJGLUHFWRU LQYHUVH5HFHQWO\WKLVWHUPLQRORJ\KDVDOVREHHQXVHGLQ(QJOLVKWKRXJK1HZPDUN VXJJHVWVWKH WHUPµVHUYLFHWUDQVODWLRQ¶IRUµWUDQVODWLRQIURPRQH¶VODQJXDJHRIKDELWXDOXVHLQWRDQRWKHUODQJXDJH¶

+LVWRULFDOEDFNJURXQG $WWKHEHJLQQLQJRIWKH&KULVWLDQHUDGLUHFWLRQDOLW\ZDVQRWDQLVVXHLQ(XURSHVLQFHPRVWWUDQVODWLRQVZHUH LQWR/DWLQWKHODQJXDJHRIRIILFLDOGRPUHOLJLRQDQGOHDUQLQJVHH/$7,175$',7,21 ,WZDVRQO\ZLWKWKH ULVHRIWKH



3DJH

QDWLRQVWDWHVWKH5HIRUPDWLRQDQGWKHGHYHORSPHQWRIWKHYHUQDFXODUVWKDWWKHLGHDRIWKHVXSHULRULW\RIGLUHFW WUDQVODWLRQDSSHDUHG 7KHILUVW&KULVWLDQWUDQVODWRUVLQWR/DWLQZHUHSUREDEO\*UHHNDQGHYHQ/DWLQVSHDNHUVOLNH6W+LODU\RU6W -(520(VHH/$7,175$',7,21 GLGQRWKDYH/DWLQDVWKHLUPRWKHUWRQJXH,QVRPHFDVHVLWLVQRWNQRZQ ZKHWKHUWKHRULJLQDOWH[WZDV/DWLQRU*UHHN.HOO\ ,Q&KLQDLQWKHVHFRQGFHQWXU\$'WKHILUVWWUDQVODWLRQVRIWKH%XGGKLVWVDFUHGWH[WVIURP6DQVNULWWR&KLQHVH ZHUHE\IRUHLJQPLVVLRQDULHVRIZKRP$Q6KLKNDRD3DUWKLDQDQG&KLKORXFKLDFK¶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± VHH*(50$175$',7,21 ZDVSHUKDSVWKHILUVWWRDVVXPHWKDWWKHEHVW WUDQVODWLRQVZHUHDOZD\VLQWRWKHPRWKHUWRQJXH6FKZDU] DQGIURPWKHVL[WHHQWKFHQWXU\RQLQYHUVH WUDQVODWLRQEHJDQWREHUHJDUGHGRQO\DVDSHGDJRJLFDOH[HUFLVHE\WUDQVODWLRQWKHRULVWV+RZHYHUWKHUHZHUH LPSRUWDQWH[FHSWLRQVLQVFLHQFHUHOLJLRQDQGOLWHUDWXUH6FLHQWLILFWUHDWLVHVFRQWLQXHGWREHWUDQVODWHGLQWR/DWLQ XQWLOWKHHQGRIWKHHLJKWHHQWKFHQWXU\DQG7KH:HDOWKRI1DWLRQVE\$GDP6PLWK± ZDVSUREDEO\ WKHILUVWLPSRUWDQWZRUNQRWWREHWUDQVODWHGLQWR/DWLQ7KHWUDQVODWLRQRIWKH(DVWHUQ)DWKHUVE\WKH %HQHGLFWLQHVZDVUHSULQWHGLQWKHQLQHWHHQWKFHQWXU\E\WKH$EEp0LJQH.HOO\ DQGHYHQLQWKH WZHQWLHWKFHQWXU\/DWLQFRQWLQXHGWREHWKHODQJXDJHRIWKH5RPDQ&DWKROLF&KXUFK ,QOLWHUDWXUHWKHLGHDSHUVLVWHGLQVRPHTXDUWHUVWKDWZULWLQJLQWKHYHUQDFXODUVZDVOLNHZULWLQJLQVDQG ZKHUHDVZULWLQJLQ/DWLQRU*UHHNZDVOLNHZRUNLQJLQPDUEOH%HFDXVHYHUQDFXODUODQJXDJHVOLNH(QJOLVK ZHUHFRQVWDQWO\FKDQJLQJDQGKDGDOLPLWHGQXPEHURIUHDGHUVVRPHZRUNVZHUHWUDQVODWHGLQWR/DWLQWRUHDFK DZLGHUDXGLHQFH)RUH[DPSOH0LOWRQ¶V3DUDGLVH/RVWZDVWUDQVODWHGLQWR/DWLQE\7KRPDV3RZHU LQ RUGHUWRUHYHDO0LOWRQWRWKHZRUOGDVDJUHDWSRHW

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µSXULVWV¶ZKRRQO\WUDQVODWHGLQWRWKHLUPRWKHUWRQJXHZDV PXFKKLJKHULQ%ULWDLQSHUFHQW WKDQLQWKHRWKHU(XURSHDQFRXQWULHVFRYHUHGE\WKHVXUYH\,Q*HUPDQ\LW ZDVRQO\SHUFHQW 0F$OLVWHU H[SODLQVWKDWLQ)LQODQGWKHYROXPHRIWUDQVODWLRQVLQWR(QJOLVKLVWRRJUHDWIRUWKHQXPEHURI (QJOLVKWUDQVODWRUVDYDLODEOH+HTXRWHV%HWFNH¶V VXUYH\RILQYHUVHWUDQVODWLRQLQ)LQODQGZKLFKZDV EDVHGRQDTXHVWLRQQDLUHVHQWRXWWRWUDQVODWLRQDJHQFLHV$FFRUGLQJWRWKLVVXUYH\EHWZHHQSHUFHQWDQG SHUFHQWRIWKHWH[W



3DJH

W\SHVLQWKHTXHVWLRQQDLUHZHUHWUDQVODWHGRUFRPSRVHGGLUHFWO\LQWRIRUHLJQODQJXDJHV2QO\SHUFHQWRIWKH PHPEHUVRIWKH)LQQLVK7UDQVODWRUVDQG,QWHUSUHWHUV$VVRFLDWLRQGLGQRWKDYH)LQQLVKRU6ZHGLVKDVWKHLU PRWKHUWRQJXHVRPRVW)LQQLVKWUDQVODWRUVZRUNKDELWXDOO\LQWRDIRUHLJQODQJXDJH7KHVLWXDWLRQLQ)LQODQGLV QRWXQXVXDODV1HZPDUN SRLQWVRXWµWKHSUDFWLFH>RIWUDQVODWLQJIURPRQH¶VODQJXDJHRIKDELWXDO XVHLQWRDQRWKHUODQJXDJH@LVQHFHVVDU\LQPRVWFRXQWULHV¶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µWUDQVPLWWKHLQWHQGHGPHVVDJHLQDODQJXDJHZKLFKLVFOHDUDQGVXIILFLHQWO\FRUUHFW QRWWRFRQWDLQXQLQWHQGHGFRPLFHIIHFWRUWRVWUDLQWKHUHDGHU¶VSDWLHQFHXQGXO\¶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µ,QVSHFLDOLVHGILHOGVLWPLJKWDOVREHIRXQGWKDWLWZDVPRUHVXLWDEOHWRXVHDVXEMHFW VSHFLDOLVWZLWKNQRZOHGJHRIWKHVRXUFHODQJXDJHWKDQDPRWKHUWRQJXHWUDQVODWRUHVSHFLDOO\LIWKHWH[WLV VXEVHTXHQWO\WREHHGLWHG¶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



3DJH

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

)XUWKHUUHDGLQJ %HHE\&RQJUDW%XWODU*ULQGURG.HLWK.HOO\/DGPLUDO0F$OLVWHU 1HZPDUN3LFNHQ3\PF

$//,621%((%</216'$/(

'LVFRXUVHDQDO\VLVDQGWUDQVODWLRQ 6LQFHLWZDVILUVWXVHGE\=HOOLJ+DUULVLQWKHWHUPGLVFRXUVHDQDO\VLVKDVFRPHWRPHDQGLIIHUHQWWKLQJV WRGLIIHUHQWSHRSOH7KDWZKDWLVLQYROYHGLVWKHVWXG\RIODQJXDJHEH\RQGWKHOHYHORIWKHVHQWHQFHPD\LQIDFW EHMXVWDERXWWKHRQO\WKLQJWKDWXQLWHVDEURDGDUUD\RIGLVSDUDWHDSSURDFKHVDOORIZKLFKZRXOGEHY\LQJIRU WKHODEHOµGLVFRXUVHDQDO\VLV¶)RUH[DPSOHWRVRPHUHVHDUFKHUVWKHWHUPGLVFRXUVHLQFOXGHVDOOIRUPVRI ZULWLQJDQGVSHDNLQJ*LOEHUWDQG0XOND\ ZKLOHWRRWKHUVLWFRYHUVRQO\WKHZD\WDONLVµSXW WRJHWKHU¶6LQFODLUDQG&RXOWKDUG 7UDQVODWLRQVWXGLHVKDVQRWEHHQOHVVLQGHWHUPLQDWHDQGWUDQVODWLRQ RULHQWHGPRGHOVRIGLVFRXUVHKDYHEHHQWDNLQJVKDSHDORQJWKHVHYDULHGDQGGLYHUVHOLQHVRYHUWKHODVW\HDUV RUVR )URPDQDSSOLHGOLQJXLVWLFSHUVSHFWLYHLWKDVEHHQIRXQGXVHIXOWRGLVWLQJXLVKWZREDVLFNLQGVRIGLVFRXUVH DQDO\VLVHPDQDWLQJIURPWZRGLIIHUHQWVHQVHVRIWKHWHUPµGLVFRXUVH¶LWVHOI7KHILUVWRIWKHVHLVFRQFHUQHGZLWK WKHZD\WH[WVDUHSXWWRJHWKHULQWHUPVRISURGXFWDQGIRUPVHTXHQWLDOUHODWLRQVKLSVLQWHUVHQWHQWLDOVWUXFWXUH DQGRUJDQL]DWLRQDQGPDSSLQJ7KHVHFRQGEDVLFVHQVHRIGLVFRXUVHLVWKDWZKLFKFRQFHUQVWKHZD\WH[WVKDQJ WRJHWKHULQWHUPVRIQHJRWLDWLYHSURFHGXUHVLQWHUSUHWDWLRQRIVHTXHQFHDQGVWUXFWXUHDQGWKHVRFLDO



3DJH

UHODWLRQVKLSVHPDQDWLQJIURPLQWHUDFWLRQVHH&DQGOLQ¶VSUHIDFHWR&RXOWKDUG *LYHQWKDWLQDFWXDO SUDFWLFHWKHFRPSOHPHQWDULW\RIWKHYDULRXVDSSURDFKHVWRGLVFRXUVHLVLQHYLWDEOHWUDQVODWLRQDOPRGHOVRI GLVFRXUVHKDYHEHHQQHFHVVDULO\HFOHFWLF:LWKLQWKLVHFOHFWLFLVPKRZHYHURQHFDQGHWHFWDFHUWDLQWHQGHQF\ WRRSWIRUWKHODWWHUPRUHSURFHGXUDOVHQVHRIµGLVFRXUVH¶VHHIRUH[DPSOH+RXVHDQG%OXP.XOND *DPELHUDQG7RPPROD 6QHOO+RUQE\3|FKKDFNHUDQG.DLQGO DQG'ROOHUXSDQG/RGGHUJDDUG

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µKLMDFNV¶DQRWKHUGLVFRXUVH%DNKWLQ¶VµGRXEOHYRLFLQJ¶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¶VOH[LFRQIRUIDPLO\UHODWLRQVKLSVLVDOLPLWHGRQH7KHVHDUH WKHWHUPVUHOHYDQWWRLPPLJUDQWVDQGWKHLUFKLOGUHQWRJHWKHUZLWKWKHLUIUHTXHQF\RIXVHLQWKHVSHHFK LPPLJUDQWVDQGWKHLURIIVSULQJ WKHRIIVSULQJRILPPLJUDQWV LPPLJUDQWRIIVSULQJ LPPLJUDQWDQGLPPLJUDQWGHVFHQGHG SRSXODWLRQ ,QWKLVSDUWLFXODUGRPDLQRIIDPLO\UHODWLRQVKLSVH[SUHVVLRQVZKLFKFRXOGKDYHEHHQXVHGEXWZHUHQRW LQFOXGHKXVEDQGVZLYHVPRWKHUVIDWKHUVSDUHQWVVRQVGDXJKWHUV



3DJH

IDPLOLHV7KHUXOHJRYHUQLQJLQFOXVLRQDQGH[FOXVLRQRIWHUPVLVPRVWUHOHYDQWWRWKHWUDQVODWRUZKRKDVWR RSHUDWHZLWKLQVLPLODUFRQVWUDLQWVDQGSD\VSHFLDODWWHQWLRQWRWKHRYHUDOOHIIHFWRIWKLVNLQGRIUHVWULFWHG WH[WXUH /LQJXLVWLFIRUPVVXFKDVWKRVHIURP3RZHOO¶VVSHHFKDUHLQWHUWH[WXDOO\VHHQE\WUDQVODWRUVLQWHUPVRID DSUH GLVFRXUVDOOLQJXLVWLFQRUPLQZKLFKV\QRQ\P\FRXOGEHVDLGWRH[LVWHJRIIVSULQJ FKLOGUHQ E DQ XQPDUNHGUHJLVWHUEDVHGOHJDO(QJOLVKRIIVSULQJ OHJDO DQGF DPDUNHGLPSRUWHGGLVFRXUVHZKLFK LQYROYHVWKHKLMDFNLQJRIWKHQRUPDOGLVFRXUVHRIE ²3RZHOOLVQRWDODZ\HUEXWDSROLWLFLDQDQGWKHODZ\HU¶V GLVFRXUVHZRXOGEHDGLVFRXUVDOWRROLQWHQGHGVD\WRGHKXPDQL]H7KHFRPSHWLWLRQRIWKHYDULRXVGLVFRXUVHV FDQXOWLPDWHO\EHUHFRQFLOHGE\DUULYLQJDWDUHDGLQJZKLFKZKLOHLQVWLWXWLRQDOO\VRXQGWKHWH[WSURGXFHU FRXOGQRWEHWDNHQWRFRXUWIRUOLEHO LVLQWHUWH[WXDOO\SHUQLFLRXVLQWKHSDUWLFXODUFRQWH[WXQGHUVWXG\ 3RZHOO¶VUHPDUNVDUHUHPLQLVFHQWRIVWDWHPHQWVRIWHQKHDUGZLWKLQUDFLVWGLVFRXUVHVXFKDVµWKH\EUHHGOLNH UDEELWV¶7UDQVODWRUVZRUNZLWKWKLVLQWULFDWHQHWZRUNRIUHODWLRQVKLSVHDFKRIZKLFKZRXOGFRQVWLWXWHWKH OLPLWVRIGLVFRXUVDOH[SUHVVLRQZKLFKKDVWREHUHDFKHGEHIRUHUHDOLQWHQWLRQVDUHSURSHUO\UHOD\HG 2YHUODSSLQJGLVFRXUVHV :LWKLQDQGDFURVVFXOWXUDODQGJHRJUDSKLFDOERXQGDULHVGLIIHUHQWFXOWXUDODVVXPSWLRQVDQGZD\VRI H[SUHVVLQJWKHVHXQGHUOLHSHRSOH¶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¶VUROHGHWHUPLQHVWKHFULWHULDIRUZKDWFRQVWLWXWHVDQDGHTXDWHLQWHUSUHWDWLRQ .QDSS3RWWKRIIDQG.QDSS 7KHDQDO\VLVRIDPHGLDWLRQVHVVLRQLQDOHJDODGYLFHVHWWLQJLQYROYLQJD 7XUNLVKFOLHQWDQGD*HUPDQOHJDODGYLVHUVXJJHVWVWKDWLQVLWXDWLRQVOLNHWKHVHWZRGLVFRXUVHVUXQSDUDOOHOWR HDFKRWKHUDQGWKHPDMRUGLIILFXOW\RIWKHPHGLDWRU¶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¶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¶VOLQJXLVWLFEHKDYLRXU FRQWULEXWHWRWKHRXWFRPHRIWKHKHDULQJ":RXOGWKHLQWHUSUHWHUPDNHLWDSULRULW\RQKLVRUKHUOLVWWRPDVNWKH LQFRKHUHQFHRIDQLQFRKHUHQWGHIHQFH"3HUKDSVPRUHWRWKHSRLQWGRHVWKHLQWHUSUHWHUWUDLQ



3DJH

KLPKHUVHOIWRUHVLVWWKHWHPSWDWLRQRIVWHSSLQJLQWRKHOSDQLQFRKHUHQWGHIHQGDQW"7KHVHDUHVRPHRIWKH SUREOHPVZLWKZKLFKSUDFWLWLRQHUVDUHFRQFHUQHGDQGZKLFKKDYHUHFHQWO\EHJXQWRDWWUDFWWKHDWWHQWLRQRIWKH WUDQVODWLRQWKHRULVWVHHIRUH[DPSOH%DUVN\ DQG0RUULV 6HHDOVR&2857 ,17(535(7,1*

:RUOGYLHZDQGSHUVSHFWLYH :LWKLQFURVVFXOWXUDOFRPPXQLFDWLRQVWXGLHVZRUOGYLHZDQDO\VLVKDVIHDWXUHGSURPLQHQWO\7KLVKDVVWUHVVHG WKDWGLVFRXUVHVUHIHUµWRWKHPDQ\GLIIHUHQWZD\VRIVSHDNLQJWKDWDUHDVVRFLDWHGZLWKGLIIHUHQWVRFLDO FRQWH[WV¶/HH $GRSWLQJVXFKDYLHZDQXPEHURIWUDQVODWLRQVFKRODUVKDYHDWWHPSWHGWRWDFNOHWKH LVVXHRIVRFLRFXOWXUDOSUDFWLFHVWKHLUUROHLQGLVFRXUVHSURGXFWLRQDQGWKHZLGHULPSOLFDWLRQVWKH\KDYHIRUWKH ZRUNRIWKHWUDQVODWRUDQGLQWHUSUHWHU 2QHRIWKHPRUHLQWHUHVWLQJK\SRWKHVHVXQGHUO\LQJZRUNLQWKLVDUHDKDVEHHQWKDWZKLOHDOOOLWHUDWHODQJXDJH FRPPXQLWLHVSRVVHVVDQXPEHURIPRGHVRIWH[WGHYHORSPHQWIRULQVWDQFHDQDXUDORUDYLVXDOPRGH SDUWLFXODUSUHIHUHQFHIRUVRPHRIWKHVHDQGQRWIRURWKHUVFDQXVXDOO\EHGHWHFWHG6XFKSUHGLOHFWLRQVUHIOHFW GLIIHUHQWZRUOGYLHZVDQGDUHPRWLYDWHGE\DYDULHW\RIVRFLROLQJXLVWLFIDFWRUVLQFOXGLQJVKDUHGH[SHULHQFH UHFHLYHUH[SHFWDWLRQVDQGIHHGEDFNSRZHUVROLGDULW\SROLWHQHVVDQGVRRQ)RUH[DPSOHWKHDXUDOPRGH ZKLFKLVGUDZQXSRQKHDYLO\LQDODQJXDJHVXFKDV$UDELFLVQRUPDOO\QRWDFFHSWDEOHIRUZULWWHQSURVHLQ (QJOLVK,QWUDQVODWLRQWKHIDLOXUHWRVZLWFKPRGHVUHVXOWVLQQHJDWLYHWUDQVIHUDQGEUHDNGRZQRILQWHUDFWLRQ 6D¶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¶V DVVHVVPHQWRIWUDQVODWLRQVRI)UHXGLQWR(QJOLVKZKLFKH[KLELWDQXPEHURIGLVWLQFWLYHIHDWXUHV)LUVW WKHUHLVDWHQGHQF\WRUHSODFHWKHKXPDQLVWLFSHUVSHFWLYHLHZD\RIWKLQNLQJDQGZULWLQJ E\DFOLQLFDOTXDVL PHGLFDO*UHFR/DWLQWHUPLQRORJ\IRUH[DPSOH,FKEHFRPHV(JRDQGVRRQ6HFRQGWKHUHLVDWHQGHQF\ WRZDUGVGHSHUVRQDOL]DWLRQ²E\FKDQJLQJDFWLYHVLQWRSDVVLYHVIRULQVWDQFH)LQDOO\WKHYDULHW\RIUHJLVWHUV DQGPRELOLW\RIWRQHVDSSDUHQWLQWKHVRXUFHWH[WDUHFRQVLVWHQWO\UHSODFHGE\DXQLIRUPPHGLFDOVFLHQWLILF VW\OH,WPD\EHLQVWUXFWLYHKHUHWRUHFDOOWKHZRUGVRI$6WUDFKH\RQHRIWKHWUDQVODWRUVRI)UHXGDQGRQHRI WKHFXOSULWVDFFRUGLQJWR&ULFN µ7KHLPDJLQDU\PRGHO,KDYHNHSWEHIRUHPHLVRIWKHZULWLQJVRIVRPH (QJOLVKPDQRIVFLHQFHRIZLGHHGXFDWLRQERUQLQWKHPLGGOHRIWKHQLQHWHHQWKFHQWXU\¶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



3DJH

QHWZRUNDVLWZHUH7KHPDWLFSRHWLFOLQNVDUHHVWDEOLVKHGQRWRQO\ZLWKLQWKHVDPHVWUHWFKRIODQJXDJHVD\D SDUDJUDSKRUDVLQJOHRUDOHQFRXQWHU EXWDOVRZLWKLQPXFKZLGHUVSDQVDVLQWKHFDVHRIDVKRUWVWRU\RUQRYHO $EX/LEGHK 7KLVKDVQRWRQO\HQDEOHGWUDQVODWRUVWRVHHPHWDSKRULFH[SUHVVLRQLQDQHZOLJKWEXWLW KDVDOVRHQFRXUDJHGWUDQVODWLRQWKHRU\WRVXSSRUWDµEH\RQGWKHFRVPHWLF¶YLHZRIVRFDOOHGHPEHOOLVKPHQWV ,QSRHWU\IRUH[DPSOHDQGLQWKHPD]HRIFXOWXUDODQGLGHRORJLFDODOOXVLRQVDVSHFWVRIWKHPHVVDJHVXFKDV VRXQGV\PEROLVPUK\PHPHWUHDOOLWHUDWLRQDQGVRIRUWKDUHQRORQJHUVHHQDVGLYRUFHGIURPVHPDQWLF FRQWHQWEXWDVSDUWDQGSDUFHORIWKHRYHUDOOLPSRUWDQGHIIHFWRIWKHWH[W&DPSEHOO 6HHDOVR /,1*8,67,&$3352$&+(635$*0$7,&6$1'75$16/$7,217(;7/,1*8,67,&6$1' 75$16/$7,21

)XUWKHUUHDGLQJ %DUVN\&DPSEHOO)DUJKDO+DWLPDQG0DVRQ+RXVHDQG%OXP.XOND.QDSS 3RWWKRIIDQG.QDSS6D¶DGHGGLQ

%$6,/+$7,0

'UDPDWUDQVODWLRQ 2QO\OLPLWHGVFKRODUO\DWWHQWLRQKDVKLWKHUWREHHQGHYRWHGWRWKHWUDQVODWLRQRIGUDPDSUREDEO\RZLQJWRWKH VSHFLDOSUREOHPVFRQIURQWLQJWKHWUDQVODWRUIRUWKHVWDJH8QOLNHWKHWUDQVODWLRQRIDQRYHORUDSRHPWKH GXDOLW\LQKHUHQWLQWKHDUWRIWKHWKHDWUHUHTXLUHVODQJXDJHWRFRPELQHZLWKVSHFWDFOHPDQLIHVWHGWKURXJK YLVXDODVZHOODVDFRXVWLFLPDJHV7KHWUDQVODWRULVWKHUHIRUHIDFHGZLWKWKHFKRLFHRIHLWKHUYLHZLQJGUDPDDV OLWHUDWXUHRUDVDQLQWHJUDOSDUWRIDWKHDWULFDOSURGXFWLRQYDQGHQ%URHFN± 6KHPD\DSSURDFKWKH SOD\DVDOLWHUDU\ZRUNZKHQIRULQVWDQFHWKHWUDQVODWLRQRIWKHFRPSOHWHZRUNVRIDSDUWLFXODUSOD\ZULJKWLV XQGHUWDNHQDVLQWKHFDVHRI-DPHV0F)DUODQH¶VWUDQVODWLRQRI,EVHQ¶VFROOHFWHGZRUNV,QWKHODWWHUFDVH KRZHYHUWKHZRUGVVSRNHQRQVWDJHDUHVHHQWRFRQVWLWXWHRQO\RQHHOHPHQWLQDWKHDWUHSURGXFWLRQDORQJZLWK OLJKWLQJVHWVFRVWXPHVDQGPXVLFµGUDPDLVDSURFHVVRIWUDQVODWLRQ¶*RVWDQG +HUHEHFDXVHLW IRUPVSDUWRIDQLQWHJUDWHGZKROHJUHDWHUGHPDQGVDUHDOVRSODFHGRQWKHWUDQVODWLRQZLWKUHVSHFWWRLWV µSHUIRUPDELOLW\¶WKXVLQFUHDVLQJWKHWHQVLRQEHWZHHQWKHQHHGWRHVWDEOLVKUHODWLRQVKLSVEHWZHHQWKHWDUJHWWH[W DQGLWVVRXUFHWKHDGHTXDF\IDFWRU DQGWKHQHHGWRIRUPXODWHDWH[WLQWKHWDUJHWODQJXDJHWKHDFFHSWDELOLW\ IDFWRU 7RXU\VHH12506

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pEpFRLVPDUNHGE\D SUROHWDUL]DWLRQRIODQJXDJHKDVPDGHLWSRVVLEOHWRILQGQDWXUDOHTXLYDOHQWVIRUVRPH$QJOR$PHULFDQ VRFLROHFWVRIZULWHUVVXFKDV7HQQHVVHH:LOOLDPV(GZDUG$OEHHDQG(XJHQH2¶1HLOO%ULVVHW 2WKHUDGMXVWPHQWVZKLFKPD\QHHGWREHXQGHUWDNHQFRQFHUQVODQJDQGWHUPVRIHQGHDUPHQWRURIDEXVH ZKLFKPD\SURYLGHDQLQDSSURSULDWHDXGLHQFHUHVSRQVHZKHQUHQGHUHGWRROLWHUDOO\LQDQRWKHUODQJXDJH 7RSLFDODOOXVLRQVDOVRUHTXLUHFDUHIXOWUHDWPHQW:KLOHUHSODFHPHQWVPD\EHIRXQGLQWKH7/WKH\PD\EHRXW RIFKDUDFWHUIRUWKHZKROHZRUNLWVHOILWVVHWWLQJSHULRGRUWRQH)XUWKHUGLIILFXOWLHVDULVHLIWKHSOD\LVLQYHUVH RUDVLQWKHFDVHRIDSOD\OLNH76(OLRW¶V0XUGHULQWKH&DWKHGUDOLQDYDULHW\RIYHUVHDQGSURVHIRUPV



3DJH

6RFLRFXOWXUDOGLIIHUHQFHV &XVWRPVDQGDWWLWXGHVDOVRGLIIHUPDUNHGO\IURPRQHFXOWXUHWRDQRWKHU+DPOHW¶VGLOHPPDIRULQVWDQFH ZRXOGREYLRXVO\EHLQFRPSUHKHQVLEOHWRDQLVODQGUDFHZKRVHFXOWXUHPDNHVLWREOLJDWRU\IRUDZLGRZWR PDUU\KHUGHDGKXVEDQG¶VEURWKHU*RVWDQG 7KHXVHRILURQ\WRWDNHDQRWKHUH[DPSOHDOWKRXJK FRPPRQO\IRXQGLQSDUWVRIWKH(QJOLVKVSHDNLQJZRUOGLVQHYHUWKHOHVVQRWDXQLYHUVDOSKHQRPHQRQ,Q (XJHQH2¶1HLOO¶V/RQJ'D\¶V-RXUQH\LQWR1LJKWWKHFROORTX\EHWZHHQ(GPXQGDQGKLVIDWKHUZLWKLWVWKUXVW DQGSDUU\LVPHUHO\DJDPHWRKLGHWKHUHDOHPRWLRQDOIHHOLQJVEHWZHHQIDWKHUDQGVRQEXWWKLVPLJKW PLVWDNHQO\FDXVHFRQVWHUQDWLRQLQDQRWKHUFRXQWU\ZKHUHDQ\DPELJXLW\RIIDPLOLDOUHODWLRQVKLSVLVIRUHLJQWR DQDXGLHQFHDFFXVWRPHGWRFOHDUDQGZHOOGHILQHGUROHVLQWKHIDPLO\2RL GLVFXVVHVWKLVLVVXHZLWK UHVSHFWWRDSURGXFWLRQRI2¶1HLOO¶VSOD\LQ&KLQD (YHQLQWKHFDVHRIPRUHFORVHO\UHODWHG(XURSHDQFXOWXUHVWKHUHLVVWLOOWKHULVNRIFRQFHSWVEHLQJHLWKHU PLVLQWHUSUHWHGRUQRWIXOO\FRPSUHKHQGHGZKHQWUDQVIHUUHGIURPRQHFXOWXUHWRDQRWKHU$SURGXFWLRQRI 2¶&DVH\¶V-XQRDQGWKH3D\FRFNLQ*HUPDQ\JUDSSOHGIRUDORQJWLPHZLWKWKHSUREOHPRIFRQYH\LQJWKHLGHD RIWHQHPHQWKRXVHVWKHVHEHORQJWRWKHVOXPGLVWULFWRI'XEOLQDQGVWDQGDVDV\PEROIRUVRFLDOGHJUDGDWLRQ $OWKRXJKDQDXGLHQFHPD\EHSURYLGHGZLWKDQH[SODQDWLRQLQWKHSURJUDPPHQRWHWKHVSHFLILFHQYLURQPHQW ZKLFKFRQVWLWXWHVWKHEDFNJURXQGRIWKHPHVVDJHDQGZKLFKDVDPLFURFRVPUHSUHVHQWVWKHPDFURFRVPRI ,UHODQGRUHYHQWKHZRUOGFDQQRWEHPDLQWDLQHG9HQQHEHUJ ,QRWKHUFDVHVFXOWXUDOQRUPVRU KDELWVPD\EHNQRZQEXWIHOWWREHFRQMXULQJXSWKHZURQJDVVRFLDWLRQV:KHQ3LQWHU¶V7KH&DUHWDNHUZDV VWDJHGLQWUDQVODWLRQLQ)UDQFHD)UHQFKFULWLFUHDFWHGQHJDWLYHO\WR'DYLHVWKHWUDPSGULQNLQJWHD+HZRXOG KDYHSUHIHUUHGKLPWREHGULQNLQJZLQHVLQFHLQ)UDQFHµWHDLVDGULQNWDNHQPDLQO\E\JHQWHHOROG ODGLHV¶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

3RVLWLRQDVVXPHGE\WUDQVODWHGOLWHUDWXUH 7KHGLVWLQFWLRQEHWZHHQDWUDQVODWHGZRUNDQGDQRULJLQDOZRUNLQWHUPVRIOLWHUDU\EHKDYLRXULVDFFRUGLQJWR (YHQ=RKDUDFOHDUIXQFWLRQRIWKHSRVLWLRQDVVXPHGE\WUDQVODWHGOLWHUDWXUHDWDFHUWDLQWLPHVHH 32/<6<67(07+(25< :KHQWUDQVODWHGOLWHUDWXUHWDNHVXSDSULPDU\SRVLWLRQWKHERUGHUOLQHVEHWZHHQ WUDQVODWHGZRUNVDQGRULJLQDOZRUNVDUHGLIIXVH8QGHUVXFKFRQGLWLRQV(YHQ=RKDUVXJJHVWVµWKHFKDQFHVWKDW DWUDQVODWLRQZLOOEHFORVHWRWKHRULJLQDOLQWHUPVRIDGHTXDF\DUHJUHDWHUWKDQRWKHUZLVH¶E ,I KRZHYHUWUDQVODWHGOLWHUDWXUHRFFXSLHVDVHFRQGDU\SRVLWLRQWKHPDLQDLPRIWUDQVODWRUVµZLOOEHWRFRQFHQWUDWH XSRQILQGLQJWKHEHVWUHDG\PDGHSRHWLFPRGHOVWKURXJKZKLFKWRUHSUHVHQWWKHIRUHLJQWH[WLQWKHUHFHLYLQJ OLWHUDWXUH¶+H\OHQ &RQVLGHUHGIURPWKLVSRLQWRIYLHZWUDQVODWLRQLVQRWDSKHQRPHQRQZKRVHSDUDPHWHUVDUHIL[HGRQFHDQGIRU DOODVLVVKRZQE\+H\OHQ¶V GLVFXVVLRQRIGLIIHUHQWWUDQVODWLRQVRI+DPOHWLQWR)UHQFKWKURXJKWKHDJHV 7KHDFFHSWDELOLW\FRQVWUDLQWVWRZKLFK6KDNHVSHDUHDQWUDQVODWLRQVKDYHEHHQVXEPLWWHGDUHDOVRLOOXVWUDWHGE\ 9ROWDLUH¶V)UHQFKYHUVLRQRI-XOLXV&DHVDUFI/HIHYHUH±YDQGHQ%URHFN 8QGHUWKH LQIOXHQFHRIQHRFODVVLFDOUXOHVZLWKUHVSHFWWRWKHXQLWLHVRIDFWLRQWLPHDQGSODFH9ROWDLUHFKRVHWRRPLW WZRDQGDKDOIDFWVWKHUXOHVGLFWDWHGWKDWWKHHYHQWVUHODWHGWR%UXWXVDQGWKHUHPDLQLQJFRQVSLUDWRUVFRXOGQRW EHLQFOXGHGDQGWKHSOD\KDGWRHQGZLWK&DHVDU¶VGHDWK



3DJH

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¶VYHUVLRQRI&KHNRY¶V3ODWRQRYIRUWKH1DWLRQDO7KHDWUHDQG&KULVWRSKHU+DPSWRQ¶V GUDPDWL]DWLRQRI/DFORV¶V/HV/LDLVRQV'DQJHUHXVHVIRUWKH5R\DO6KDNHVSHDUH&RPSDQ\ZKLFKODWHUVHUYHG DVWKHEDVLVIRUWKHVFUHHQYHUVLRQ $QRWKHUHTXDOO\VXFFHVVIXODGDSWDWLRQDJDLQIRUWKH1DWLRQDO7KHDWUHZDV7RP6WRSSDUG¶VUHZRUNLQJRI -RKDQQ1HVWUR\¶VQLQHWHHQWKFHQWXU\9LHQQHVHFRPHG\(LQHQ-X[ZLOOHUVLFKPDFKHQ&UXFLDOWR1HVWUR\LQ WKHRULJLQDOLVWKHODQJXDJHLQSDUWLFXODUWKHUHPDUNDEOHJDPHVKHSOD\VZLWKWKH9LHQQHVHGLDOHFW2QWKH 5D]]OH6WRSSDUG¶VUHZULWHYHUVLRQPDNHVQRXVHRIGLDOHFWQRUGRHVLWLQFRUSRUDWHFRPLFVRQJVRIWKHW\SH 1HVWUR\OLNHGWRLQWHUSRVHEHWZHHQVFHQHFKDQJHV)RUFRPLFHIIHFWLWUHOLHVVROHO\RQ6WRSSDUG¶VRZQZLWRQ QHZO\FRLQHGSXQVDQGRWKHULQYHQWLYHZRUGJDPHV7KHHQGUHVXOWKRZHYHUZDVDKXJHWKHDWULFDOVXFFHVV 7KLVDSSURDFKWRWKHWUDQVODWLRQRIDGUDPDWLFWH[WKDVEHHQGHVFULEHGDVµXVLQJWKH6/FXOWXUDOFRQWH[WDV IUDPHWH[W¶%DVVQHWWD ,WLVXQIRUWXQDWHO\QRWZLWKRXWKD]DUGV$V%DVVQHWW0F*XLUHLELG FRPPHQWVRQDQ(QJOLVKVWDJLQJRIDQ,WDOLDQSOD\ 7KHUHVXOWRIWKLVW\SHRIWUDQVODWLRQLVWRFUHDWHDPDVVLYHLGHRORJLFDOVKLIWWKHIUDPHWHOOV%ULWLVK DXGLHQFHVWKDWWKHSOD\LVSULPDULO\DERXWµFRPLFIRUHLJQHUV¶DQGVRZKHQ'DULR)R¶V$FFLGHQWDO 'HDWKRIDQ$QDUFKLVWZDVSHUIRUPHGLQ(QJOLVKLWKDGEHFRPHDIDUFHDERXWWKHDEVXUGLWLHVRI ,WDOLDQVDQGWKHLUIRUFHVRIDXWKRULW\UDWKHUWKDQEHLQJDVDYDJHVDWLUHRQWKHFRUUXSWLRQRIWKH SROLFHDQGV\VWHPVRISRZHU $GDSWDWLRQVZKLFKWDNHWKHIRUPRIµFUHDWLYHUHZULWHV¶%LOOLQJWRQ DUHWKHUHIRUHOLNHO\WREHPRVW VXFFHVVIXOLQWKHFDVHRIPRUHUREXVWFRPHGLHVOHVVVRZLWKSOD\VFRQFHUQHGZLWKVRFLDOFULWLFLVPDQGOHDVWRI DOOZLWKSV\FKRORJLFDOGUDPD7KLVLVDFNQRZOHGJHGE\6WRSSDUGZKRSULRUWRKLV1HVWUR\DGDSWDWLRQWXUQHG 6FKQLW]OHU¶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¶V$QWLJRQHDVWKHUHVXOWRIVRPHPLQRUZHOOLQWHQWLRQHG



3DJH

DOWHUDWLRQVXQGHUWDNHQE\WKHWUDQVODWRU)HHOLQJWKDWKLVWUDQVODWLRQQHHGHGHODERUDWLRQWKHWUDQVODWRUDGGHGD FRXSOHRIJORVVHVDQGGHOHWHGDIHZOLQHV,QDVHFRQGWUDQVODWLRQRIWKHSOD\KRZHYHUQRVXFKDOWHUDWLRQV ZHUHPDGH7KHGUDPDWLFHIIHFWRIWKHXQDGDSWHGWUDQVODWLRQWXUQHGRXWWREHPDUNHGO\GLIIHUHQW:KHUHDV UHYLHZHUVRIWKH/RQGRQSURGXFWLRQEDVHGIDLWKIXOO\RQWKHSURSHUWH[WZHUHLQQRGRXEWRI$QRXLOK¶VFHQWUDO WKHPHV$PHULFDQDQG1HZ=HDODQGUHYLHZHUVH[SUHVVHGVHULRXVPLVFRQFHSWLRQVDERXWWKHWUXHQDWXUHRIWKH WUDJHG\ZKLFKWKHDGDSWHGWH[WHQJHQGHUHG5HLG

7UDQVODWLRQWKHRU\DQGWKHWUDQVODWLRQRIGUDPD µ7KHUHLV¶/HIHYHUHZURWHLQµSUDFWLFDOO\QRWKHRUHWLFDOOLWHUDWXUHRQWKHWUDQVODWLRQRIGUDPDDVDFWHG DQGSURGXFHG¶ +HZHQWRQWRDUJXHWKDWWKHDEVHQFHRIUHOHYDQWZULWLQJRQWKHVXEMHFWZDVDWWKH WLPHGXHWROLQJXLVWLFVQRWKDYLQJGLVFRYHUHGWKHFHQWUDOQRWLRQRI35$*0$7,&6DQGWROLWHUDU\DQDO\VHVRI GUDPDWLFWH[WVXVXDOO\EHLQJFRQILQHGWRZKDWZDVRQWKHSDJH6LQFHWKHQKRZHYHUFRQVLGHUDEOHSURJUHVVKDV EHHQPDGHZLWKLQWKHILHOGRISUDJPDWLFV,QFUHDVLQJO\DWWHQWLRQLVEHLQJJLYHQWRDVSHFWVRIFRPPXQLFDWLRQ WRWKHZD\VGLIIHUHQWVSHHFKFRPPXQLWLHVVWUXFWXUHVSHHFKDFWVVXFKDVDSRORJLHVUHTXHVWVFRPSODLQWVDQGVR RQ²DOODUHDVRILQWHUHVWWRWKHWUDQVODWRURIGUDPD)XUWKHUXVHIXOLQIRUPDWLRQKDVDOVRFRPHIURPWKHILHOGRI VRFLROLQJXLVWLFV,Q%URZQDQG*LOPDQSXEOLVKHGDGHWDLOHGVWXG\RIWKHSURQRXQVRIDGGUHVVLQ (XURSHDQODQJXDJHVGUDZLQJDWWHQWLRQWRWKHµ79¶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

)XUWKHUUHDGLQJ %ULVVHW%DVVQHWWD%ROWHWDO+H\OHQ-RKQVWRQ6FROQLFRYDQG+ROODQG YDQGHQ%URHFN=XEHU

*81,//$$1'(50$1

'XEELQJ 7KHEHVWNQRZQDQGPRVWZLGHVSUHDGIRUPVRIDXGLRYLVXDOWUDQVODWLRQDUH68%7,7/,1*DQGGXEELQJ 6XEWLWOLQJLVYLVXDOLQYROYLQJWKHVXSHULPSRVLWLRQRIZULWWHQWH[WRQWRWKHVFUHHQ'XEELQJRQWKHRWKHUKDQG LVRUDOLWLVRQHRIDQXPEHURIWUDQVODWLRQPHWKRGVZKLFKPDNHXVHRIWKHDFRXVWLFFKDQQHOLQVFUHHQ WUDQVODWLRQ 2UDOODQJXDJHWUDQVIHULQWKHDXGLRYLVXDOFRQWH[WIDOOVXQGHUWZRPDLQKHDGLQJVGXEELQJDQGUHYRLFLQJ 'XEELQJLQYROYHVµWKHUHSODFHPHQWRIWKHRULJLQDOVSHHFKE\DYRLFHWUDFNZKLFKDWWHPSWVWRIROORZDVFORVHO\ DV



3DJH

SRVVLEOHWKHWLPLQJSKUDVLQJDQGOLSPRYHPHQWVRIWKHRULJLQDOGLDORJXH¶/X\NHQHWDO LHLW LQYROYHVOLSV\QFKURQL]DWLRQ7KHWHUPµGXEELQJ¶LVDOVRVRPHWLPHVXVHGWRUHIHUWRUHYRLFLQJLQWKHVDPH ODQJXDJHIRUH[DPSOHZKHUHWKHRULJLQDOVFHQHLVVKRWDJDLQVWDQRLV\EDFNJURXQGDQGSRVWV\QFKURQL]DWLRQ EHFRPHVQHFHVVDU\WRUHFRUGWKHRULJLQDOGLDORJXH 5HYRLFLQJPD\WDNHWKHIRUPRIDYRLFHRYHUQDUUDWLRQRUIUHHFRPPHQWDU\QRQHRIZKLFKDWWHPSWVWRDGKHUH WRWKHFRQVWUDLQWVRIOLSV\QFKURQL]DWLRQ:KLOHWKHYDULRXVPHWKRGVRIUHYRLFLQJPD\EHSUHUHFRUGHGRU WUDQVPLWWHGOLYHGXEELQJLVDOZD\VSUHUHFRUGHG µ5HYRLFLQJ¶LVVRPHWLPHVXVHGDVDJHQHULFWHUPWRUHIHUWRDOOPHWKRGVRIRUDOODQJXDJHWUDQVIHULQFOXGLQJOLS V\QFGXEELQJ

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²WKHQHFHVVLW\WR PDLQWDLQOLSV\QFKURQL]DWLRQZKLFKSODFHVKHDY\GHPDQGVRQWKHWUDQVODWRUDQGLVDPDMRUFRQVWUDLQWLQWHUPV RIRPLWWLQJLQFRPSUHKHQVLEOHRULQVLJQLILFDQWHOHPHQWV+HUEVW± GLVFXVVHVDIXUWKHUGLVDGYDQWDJH GXEELQJGHSULYHVYLHZHUVRIWKHRSSRUWXQLW\WROLVWHQWRWKHIRUHLJQODQJXDJHDQGWKLVPD\SDUWO\H[SODLQZK\ µWKHVWDQGDUGRI(QJOLVKDVDIRUHLJQODQJXDJHLVVRPXFKKLJKHULQVXEWLWOLQJFRXQWULHVVXFKDVWKH1HWKHUODQGV RU6FDQGLQDYLDQFRXQWULHVWKDQLQ*HUPDQ\IRULQVWDQFH¶LELG 'XEEHGILOPVDQGSURJUDPPHVDOVR H[FOXGHFHUWDLQFDWHJRULHVVXFKDVWRXULVWVDQGRWKHUYLVLWRUVZKRPD\QRWVSHDNWKHORFDOODQJXDJHEXWZRXOG EHDEOHWRIROORZDVXEWLWOHGYHUVLRQRIVD\DQ(QJOLVKRU)UHQFKILOP 2QWKHSRVLWLYHVLGHGXEELQJLQYROYHVOHVVWH[WXDOUHGXFWLRQWKDQVXEWLWOLQJLVPRUHSURIHVVLRQDOL]HGGUDZV RQHVWDEOLVKHGPHWKRGVRISRVWV\QFKURQL]DWLRQµFRQVWUXFWVDPRUHKRPRJHQHRXVGLVFRXUVHLWLVDQRUDO WUDQVODWLRQRIDQRUDOVRXUFHWH[W VRWKDWWKHYLHZHUGRHVQRWKDYHWRGLYLGHKLVRUKHUDWWHQWLRQEHWZHHQWKH LPDJHVDQGWKHZULWWHQWUDQVODWLRQ¶*RULV DQGLWGRHVQRWUHTXLUHDKLJKOHYHORIOLWHUDF\IURPLWV XVHUVFKLOGUHQDQGLOOLWHUDWHYLHZHUVDUHQRWH[FOXGHGIURPWKHHQMR\PHQWRIIRUHLJQSURGXFWLRQV 0RUHRYHU WKHOLSV\QFKURQL]DWLRQFRQVWUDLQWLVQRWDVUHVWULFWLYHDVLWPLJKWDSSHDU0DWFKLQJVRXQGVWROLSPRYHPHQWVLV RQO\DQLVVXHLQFORVHXSVKRWVZKHUHWKHVSHDNHU¶VIDFHDQGOLSPRYHPHQWVDUHIXOO\YLVLEOH$QGHYHQKHUH QRWDOOVRXQGVKDYHWREHPDWFKHG2QO\ODELDOVDQGVHPLODELDOVZKHUHWKHPRXWKKDVWREHFORVHGUHTXLUH FDUHIXOPDWFKLQJRIVRXQGV 7KHDUJXPHQWVIRUDQGDJDLQVWGXEELQJDUHWKHUHIRUHHTXDOO\FRQYLQFLQJDQGZKDWVHHPVWRGHWHUPLQHWKH FKRLFHRIGXEELQJRUVXEWLWOLQJDVWKHPDLQPHWKRGRIVFUHHQWUDQVODWLRQLQDFRXQWU\LVDFRPSOH[DUUD\RI IDFWRUV7KHVHIDFWRUVLQFOXGHFRVWDYDLODELOLW\RIUHOHYDQWWHFKQRORJ\VWDQGDUGRIOLWHUDF\LQWHUHVWLQIRUHLJQ ODQJXDJHVGHJUHHRIFXOWXUDORSHQQHVVDQGWKHVWUHQJWKRIWKHORFDOILOPLQGXVWU\1RQHRIWKHVHIDFWRUVRQLWV RZQFDQDFFRXQWIRUORFDOSUHIHUHQFHV8OWLPDWHO\WKHFKRLFHRIPHWKRGVHHPVWREHGHWHUPLQHGODUJHO\E\ DXGLHQFHKDELWV9LHZHUVLQWUDGLWLRQDOO\GXEELQJFRXQWULHVWHQGWRIDYRXUGXEELQJDQGWKRVHLQWUDGLWLRQDOO\ VXEWLWOLQJFRXQWULHVILQGLWGLIILFXOWWRHQMR\DGXEEHGILOP/X\NHQHWDOII DUJXHIRUDVWURQJHUPL[ RIPHWKRGVEDVHGQRWRQQDWLRQDOKDELWVEXWRQSURJUDPPHJHQUHDQGVSHFLILFDXGLHQFHSURILOH7KHLU UHFRPPHQGDWLRQVDUHZRUWKTXRWLQJDWOHQJWK ƇWKHFORVHUWKHOLQNEHWZHHQWKHOLQJXLVWLFFRQWHQWDQGWKHFKDUDFWHURIDJLYHQSURJUDPPHWKHVWURQJHUWKH FDVHIRU



3DJH

VXEWLWOLQJSURJUDPPHVZKLFKVKRXOGEHVXEWLWOHGDUHQHZVDQGFXUUHQWDIIDLUVHGXFDWLRQDOEURDGFDVWV FHUWDLQGUDPDDQGOLIHHQWHUWDLQPHQWSURJUDPPHVPXVLFDQGRSHUDUHOD\VDQGUHOLJLRXVSURJUDPPHV,IWKH WDUJHWYLHZHUJURXSIRUWKHVHSURJUDPPHVLQFOXGHVWKHXQGHU¶VWKHEHWWHUHGXFDWHGDQGPRUHDIIOXHQW DVZHOODVVWXGHQWVDQGRWKHULQWHOOHFWXDOPLQRULWLHVWKHKDUGRIKHDULQJDQGWKRVHZLWKDQLQWHUHVWLQWKH RULJLQDOODQJXDJHRISURGXFWLRQWKHQVXEWLWOHGYHUVLRQVDUHSDUWLFXODUO\OLNHO\WREHVXFFHVVIXODPRQJWKHP ƇSURJUDPPHVIRUWKHYHU\\RXQJDQGWKHYHU\ROGFDUWRRQVDQGSXSSHWVKRZVVFLHQFHDQGDUW SURJUDPPHVVSRUWVDQGRWKHUPDMRUSXEOLFHYHQWVYDULHW\VKRZVDQGGUDPDLQZKLFKHQWHUWDLQPHQWLVWKH SUHGRPLQDQWIDFWRUDUHEHVWUHYRLFHG,IUHYRLFHGGUDPDUHTXLUHVO\SV\QFGXEELQJZKLOHRWKHU SURJUDPPHVQHHGQRWLQFXUWKLVH[SHQVH7KHFKHDSHUIRUPVRIUHYRLFLQJVXFKDVIUHHFRPPHQWDU\YRLFH RYHUDQGQDUUDWLRQWHFKQLTXHVFDQKHUHEHXVHGYHU\HIIHFWLYHO\ /X\NHQHWDO

&XOWXUDOFRQVWUDLQWVLQGXEELQJ )DZFHWW SRLQWVRXWWKDWµLQDGXEEHGILOPZHDUHFRQVWDQWO\DZDUHWKURXJKLPDJHVDQGQRQPDWFKLQJ PRXWKPRYHPHQWVRIWKHSUHVHQFHRIDIRUHLJQODQJXDJHDQGFXOWXUH¶ZKLFKVXJJHVWVWKDWGXEELQJLVDSULPH LQVWDQFHRIRYHUWWUDQVODWLRQLQ+RXVH¶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¶pWDLWjUHIDLUHDQGLWV$PHULFDQGXEEHGYHUVLRQ6HFRQG&KDQFHZKHUH LQDFODVVURRPVFHQH«DWHDFKHUXWWHUVWKHZRUGVµ+H\ZRZPDQ\RX¶UHDOODEXQFKRI PHDWKHDGV¶ZRUGVLQWHQGHGWRPDWFKWKHPRXWKVKDSHVEXW«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

)XUWKHUUHDGLQJ %DOOHVWHU&DQyV'DQDQ'ULHV)DZFHWW)RGRU*RULV/X\NHQHWDO 7UDQVODWLR

021$%$.(5DQG%5$ĕ2+2&+(/



3DJH

( (TXLYDOHQFH (TXLYDOHQFHLVDFHQWUDOFRQFHSWLQWUDQVODWLRQWKHRU\EXWLWLVDOVRDFRQWURYHUVLDORQH$SSURDFKHVWRWKH TXHVWLRQRIHTXLYDOHQFHFDQGLIIHUUDGLFDOO\VRPHWKHRULVWVGHILQHWUDQVODWLRQLQWHUPVRIHTXLYDOHQFHUHODWLRQV &DWIRUG1LGDDQG7DEHU7RXU\D3\PD.ROOHU ZKLOHRWKHUVUHMHFWWKH WKHRUHWLFDOQRWLRQRIHTXLYDOHQFHFODLPLQJLWLVHLWKHULUUHOHYDQW6QHOO+RUQE\ RUGDPDJLQJ*HQW]OHU WRWUDQVODWLRQVWXGLHV
7\SRORJLHVRIHTXLYDOHQFH $WYDULRXVOHYHOVDQGORRVHO\IROORZLQJ.ROOHU±±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



3DJH

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¶VVHPLRWLF SHUVSHFWLYHWKHLGHDWKDWPHDQLQJUHVLGHVVRPHZKHUHRXWVLGHODQJXDJHLVXQWHQDEOHµ7KHUHLVQRPHDQLQJ DSDUWIURPWKHFRGH¶KHPDLQWDLQVDGGLQJWKDWµ7KHZRUOGVDQGSRVVLEOHZRUOGVGLIIHUDQGWKHTXHVWLRQRI UHIHUHQWLVQRWHYHQWKHTXHVWLRQWRSRVH¶)UDZOH\E &DWIRUGDOVRFRPHVXQGHUFULWLFLVP²IURP 6QHOO+RUQE\ DPRQJRWKHUV²IRUXVLQJVLPSOLVWLFLQYHQWHGVHQWHQFHVWRH[HPSOLI\KLVFDWHJRULHVRI WUDQVODWLRQDOHTXLYDOHQFHDQGIRUOLPLWLQJKLVDQDO\VLVWRWKHOHYHORIWKHVHQWHQFH&DWIRUG¶VDSSURDFKPD\ KDYHEHHQFULWLFL]HGEXWIHZDOWHUQDWLYHVKDYHEHHQSXWIRUZDUG7KHSUREOHPRISLQQLQJGRZQWKHHVVHQWLDO QDWXUHRIHTXLYDOHQFHVHHPVWREHUHODWHGWRWKHSUREOHPRISLQQLQJGRZQWKHQDWXUHRIOLQJXLVWLFPHDQLQJ LWVHOI3\PD DYRLGVWKLVGLIILFXOW\E\PRYLQJDZD\IURPWKHVWULFWO\OLQJXLVWLFWRYLHZWUDQVODWLRQDVD WUDQVDFWLRQDQGHTXLYDOHQFHDVHTXDOLW\RIH[FKDQJHYDOXH(TXLYDOHQFHEHFRPHVDQHJRWLDEOHHQWLW\ZLWK WUDQVODWRUVGRLQJWKHQHJRWLDWLRQ

,QWHUOLQJXDODQGLQWHUWH[WXDOHTXLYDOHQFH ,QHDUOLHUZRUNRQHTXLYDOHQFHWKHRULVWVPDGHDGLVWLQFWLRQEHWZHHQK\SRWKHWLFDOPDSSLQJVEHWZHHQHOHPHQWV RIDEVWUDFWODQJXDJHV\VWHPVDWWKHOHYHORIODQJXH RQWKHRQHKDQGDQGDFWXDOREVHUYDEOHPDSSLQJVEHWZHHQ HOHPHQWVRIUHDO67VDQG77VDWWKHOHYHORISDUROH RQWKHRWKHU&DWIRUG XVHGWKHWHUPVIRUPDO FRUUHVSRQGHQFHDQGWH[WXDOHTXLYDOHQFHUHVSHFWLYHO\WRUHIHUWRWKHWZRFDWHJRULHV.ROOHU± PDGHDVLPLODUGLVWLQFWLRQZKHQKHGLIIHUHQWLDWHGEHWZHHQ.RUUHVSRQGHQ]IRUPDOVLPLODULW\EHWZHHQ ODQJXDJHV\VWHPVDQGbTXLYDOHQ]HTXLYDOHQFHUHODWLRQVEHWZHHQUHDOWH[WVDQGXWWHUDQFHV.ROOHUWKHQZHQW RQWRSUHVHQWbTXLYDOHQ]DVWKHUHDOREMHFWRIHQTXLU\LQWUDQVODWLRQVWXGLHV6LPLODUO\7RXU\D± FKDUWVWKHHYROXWLRQRIWKHQRWLRQRI75$16/$7$%,/,7<IURPDQLQWHUOLQJXDOSKHQRPHQRQWRDQ LQWHUWH[WXDORQH:KLOHUHODWLRQVKLSVHVWDEOLVKHGDWWKHOHYHORIODQJXHDUHQRZODUJHO\VHHQDVWKHFRQFHUQRI FRPSDUDWLYHOLQJXLVWLFVIRUPDOFRUUHVSRQGHQFHFRQWLQXHVWRKDYHSULGHRISODFHLQ0$&+,1( 75$16/$7,21ZKHUHOLQJXLVWLFNQRZOHGJHEDVHGV\VWHPVXVLQJGLUHFWRUWUDQVIHUDUFKLWHFWXUHRIWHQUHO\RQ PDSSLQJVEHWZHHQWKHIRUPDOVWUXFWXUHVRIWZRODQJXDJHV,QGHHG&DWIRUG¶VWUDQVODWLRQ6+,)76EHDUUHDO VLPLODULWLHVWRQRWLRQVRIFRPSOH[WUDQVIHULQPDFKLQHWUDQVODWLRQVHH+XWFKLQVDQG6RPHUV$UQROGHWDO 7KXVWKHJHQHUDOYLHZLQWUDQVODWLRQVWXGLHVVRRQFDPHWREHWKDWHTXLYDOHQFHZDVDUHODWLRQEHWZHHQWH[WVLQ WZRGLIIHUHQWODQJXDJHVUDWKHUWKDQEHWZHHQWKHODQJXDJHVWKHPVHOYHV7KLVVWHSOLEHUDWHGWUDQVODWLRQVWXGLHV IURPGHEDWHVRQLQWHUOLQJXDOWUDQVODWDELOLW\EDVHGRQHQWLUHODQJXDJHV\VWHPVZLWKDOOWKHLU



3DJH

XQDFWXDOL]HGPHDQLQJSRWHQWLDOVHH.ROOHU3\P± 6XFKGHEDWHVKDGFHQWUHGRQ LQFRPSDWLELOLWLHVEHWZHHQWKHZRUOGVLQKDELWHGE\VSHDNHUVRIGLIIHUHQWODQJXDJHVDQGRQWKHVWUXFWXUDO GLVVLPLODULWLHVEHWZHHQODQJXDJHV2QFHDWWHQWLRQZDVIRFXVHGRQWH[WVDQGXWWHUDQFHVPDQ\RIWKHSRWHQWLDO PXOWLSOHPHDQLQJVDQGIXQFWLRQVRIZRUGVDQGVWUXFWXUHVLQDODQJXDJHV\VWHPFRXOGEHHOLPLQDWHGE\ UHIHUHQFHWRWKHLUFRWH[WDQGFRQWH[WPDNLQJWUDQVODWLRQQRWRQO\PRUHWUDFWDEOHEXWDOVRPRUHUHDOLVWLF

(TXLYDOHQFHDVDQHPSLULFDODQGDWKHRUHWLFDOFRQFHSW 7KHQDUURZLQJGRZQRIWKHVFRSHRIWKHWHUPHTXLYDOHQFHWRDQLQWHUWH[WXDOUHODWLRQVWLOOOHIWSOHQW\RIURRPIRU FRPSHWLQJQRWLRQVRIWKHFRQFHSW7RXU\D LGHQWLILHGWZRPDLQXVHVRIWKHWHUPILUVWHTXLYDOHQFH FRXOGEHµDGHVFULSWLYHWHUPGHQRWLQJFRQFUHWHREMHFWV²DFWXDOUHODWLRQVKLSVEHWZHHQDFWXDOXWWHUDQFHVLQWZR ODQJXDJHVDQGOLWHUDWXUHV UHFRJQLVHGDV77VDQG67V²ZKLFKDUHVXEMHFWWRGLUHFWREVHUYDWLRQ¶7KLV GHILQLWLRQUHJDUGHGHTXLYDOHQFHDVDQHPSLULFDOFDWHJRU\ZKLFKFRXOGEHHVWDEOLVKHGRQO\DIWHUWKHHYHQWRI WUDQVODWLRQ7RXU\FRQWUDVWHGWKLVDSSURDFKZLWKHTXLYDOHQFHDVµDWKHRUHWLFDOWHUPGHQRWLQJDQDEVWUDFWLGHDO UHODWLRQVKLSRUFDWHJRU\RIUHODWLRQVKLSVEHWZHHQ77VDQG67VWUDQVODWLRQVDQGWKHLUVRXUFHV¶LELG 7KLVGLFKRWRP\FDQEHSUREOHPDWLFKRZHYHU)RURQHLWPD\QRWEHSV\FKRORJLFDOO\SODXVLEOH)URPWKH WUDQVODWRU¶VSRLQWRIYLHZLWLVQRWFOHDUZKHWKHUDUHDOGLVWLQFWLRQFDQEHPDGHEHWZHHQZKDWRQHLQWHQGVWR ZULWHDQGZKDWRQHDFWXDOO\ZULWHV)XUWKHUPRUHHTXLYDOHQFHDVDWKHRUHWLFDOWHUPDSURVSHFWLYHDQGRIWHQ SUHVFULSWLYHQRWLRQLVUHVSRQVLEOHIRUDFTXLULQJDEDGQDPHIRUHTXLYDOHQFHLQVRPHTXDUWHUVLQWUDQVODWLRQ VWXGLHV*HQW]OHU IRUH[DPSOHFRQWHQGVWKDWVWDQGDUGVRIWUDQVODWLRQDQDO\VLVWKDWUHO\RQHTXLYDOHQFH RUQRQHTXLYDOHQFHDQGRWKHUDVVRFLDWHGMXGJPHQWDOFULWHULDµLPSO\QRWLRQVRIVXEVWDQWLDOLVPWKDWOLPLWRWKHU SRVVLELOLWLHVRIWUDQVODWLRQSUDFWLFHPDUJLQDOL]HXQRUWKRGR[WUDQVODWLRQDQGLPSLQJHXSRQUHDOLQWHUFXOWXUDO H[FKDQJH¶1HZPDQ RQWKHRWKHUKDQGGHVFULEHVWUDQVODWLRQHTXLYDOHQFHDVµDFRPPRQVHQVH WHUPIRUGHVFULELQJWKHLGHDOUHODWLRQVKLSWKDWDUHDGHUZRXOGH[SHFWWRH[LVWEHWZHHQDQRULJLQDODQGLWV WUDQVODWLRQ¶1HZPDQ¶VHTXLYDOHQFHLVFOHDUO\SURVSHFWLYHDQGLGHDODOWKRXJKHPSLULFDODSSURDFKHVDOVR IHDWXUHLQWKHDQDO\VLV3\PDOVRVSHDNVDERXWHTXLYDOHQFHDVDµIDFWRIUHFHSWLRQ¶D DQGDERXWWKH VRFLDOO\GHWHUPLQHGµH[SHFWDWLRQ¶WKDW77VVKRXOGVWDQGLQVRPHNLQGRIHTXLYDOHQFHUHODWLRQWRWKHLU67V 7RXU\¶VHPSLULFDOFDWHJRU\RIHTXLYDOHQFHKDVPXFKLQFRPPRQZLWK&DWIRUG¶VWH[WXDOHTXLYDOHQFH$WH[WXDO HTXLYDOHQWLVGHILQHGDVµDQ\7/IRUPZKLFKLVREVHUYHGWREHWKHHTXLYDOHQWRIDJLYHQ6/IRUPWH[WRU SRUWLRQRIWH[W ¶ (TXLYDOHQWIRUPVFDQEHPDWFKHGE\DSSHDOLQJWRWKHLQWXLWLRQRIELOLQJXDO LQIRUPDQWVRUE\DSSO\LQJPRUHIRUPDOSURFHGXUHVVXFKDVFRPPXWDWLRQ&DWIRUG±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¶VYLHZRIWH[WXDOHTXLYDOHQFHPD\VD\ YHU\OLWWOHDERXWWKHQDWXUHRIHTXLYDOHQFHWKHDSSURDFKKDVIRXQGDSSOLFDWLRQLQDUHDVVXFKDVH[DPSOHDQG VWDWLVWLFVEDVHGPDFKLQHWUDQVODWLRQVHH+XWFKLQVDQG6RPHUV± DQGPRUHUHFHQWO\LQWUDQVODWLRQ PHPRU\V\VWHPVZKHUHSUHYLRXVO\WUDQVODWHG67VDQGWKHLU77VDUHVWRUHGZLWKDYLHZWRUHF\FOLQJROG WUDQVODWLRQVVKRXOGWKHV\VWHPUHFRJQL]HQHZLQSXWIRUZKLFKLWDOUHDG\KDVDQµHTXLYDOHQW¶WDUJHWUHQGHULQJ VHH0$&+,1($,'('75$16/$7,210$&+,1(75$16/$7,21$33/,&$7,2160$&+,1( 75$16/$7,210(7+2'2/2*< (TXLYDOHQFHDVDQHPSLULFDOSKHQRPHQRQKDVVHHQSHUKDSVLWVPRVWSRZHUIXOPDQLIHVWDWLRQWR



3DJH

GDWHLQ7RXU\¶VD ZRUN:KHUHDVRWKHUWKHRULVWVPLJKWDVNZKHWKHUWZRWH[WVDUHHTXLYDOHQW DFFRUGLQJWRVRPHSUHGHILQHGSUHVFULSWLYHFULWHULRQRIHTXLYDOHQFH7RXU\WUHDWVWKHH[LVWHQFHRIHTXLYDOHQFH EHWZHHQ77VDQG67VDVDJLYHQ7KLVHTXLYDOHQFHSRVWXODWHD WKHQDOORZVKLPWRVWDWHWKDWµWKH TXHVWLRQWREHDVNHGLQWKHDFWXDOVWXG\RIWUDQVODWLRQVHVSHFLDOO\LQWKHFRPSDUDWLYHDQDO\VLVRI77DQG67 LV QRWZKHWKHUWKHWZRWH[WVDUHHTXLYDOHQWIURPDFHUWDLQDVSHFW EXWZKDWW\SHDQGGHJUHHRIWUDQVODWLRQ HTXLYDOHQFHWKH\UHYHDO¶D 7RXU\¶VDSSURDFKDQGVXEVHTXHQWO\.ROOHU¶V PDNHVDSSHDO WRDKLVWRULFDOUHODWLYHQRWLRQRIHTXLYDOHQFHµ5DWKHUWKDQEHLQJDVLQJOHUHODWLRQVKLSGHQRWLQJDUHFXUULQJ W\SHRILQYDULDQWLWFRPHVWRUHIHUWRDQ\UHODWLRQZKLFKLVIRXQGWRKDYHFKDUDFWHUL]HGWUDQVODWLRQXQGHUD VSHFLILHGVHWRIFLUFXPVWDQFHV¶7RXU\ 7KH12506WKDWGHWHUPLQHWKHSDUWLFXODUFRQFHSWRI HTXLYDOHQFHSUHYDOHQWDWGLIIHUHQWVWDJHVLQKLVWRU\RUDPRQJVWGLIIHUHQWVFKRROVRIWUDQVODWRUVRUHYHQZLWKLQ WKHZRUNRIDVLQJOHWUDQVODWRUWKHQFRQVWLWXWHDYDOLGREMHFWRIHQTXLU\IRUGHVFULSWLYHWUDQVODWLRQVWXGLHV 7RXU\¶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µ(TXLYDOHQFHLVFUXFLDOWRWUDQVODWLRQEHFDXVHLWLVWKHXQLTXHLQWHUWH[WXDO UHODWLRQWKDWRQO\WUDQVODWLRQVDPRQJDOOFRQFHLYDEOHWH[WW\SHVDUHH[SHFWHGWRVKRZ¶ 6HHDOVR /,1*8,67,&$3352$&+(66+,)762)75$16/$7,2181,72)75$16/$7,21

)XUWKHUUHDGLQJ &DWIRUG.ROOHU3\P6QHOO+RUQE\7RXU\D

'2527+<.(11<

([SOLFLWDWLRQ ([SOLFLWDWLRQLVWKHWHFKQLTXHRIPDNLQJH[SOLFLWLQWKHWDUJHWWH[WLQIRUPDWLRQWKDWLVLPSOLFLWLQWKHVRXUFHWH[W ([SOLFLWDWLRQLPSOLFLWDWLRQ VWUDWHJLHVDUHJHQHUDOO\GLVFXVVHGWRJHWKHUZLWKDGGLWLRQRPLVVLRQ VWUDWHJLHV 9LQD\DQG'DUEHOQHW 6RPHVFKRODUVUHJDUGDGGLWLRQDVWKHPRUHJHQHULFDQGH[SOLFLWDWLRQDVWKHPRUH VSHFLILFFRQFHSW1LGD ZKLOHRWKHUVLQWHUSUHWH[SOLFLWDWLRQDVWKHEURDGHUFRQFHSWZKLFKLQFRUSRUDWHVWKH PRUHVSHFLILFFRQFHSWRIDGGLWLRQ6pJXLQRW6FKMROGDJHU 7KHWZRDUHKDQGOHGDVV\QRQ\PVE\ (QJOXQG'LPLWURYDZKRXVHVWKHWHUPVµDGGLWLRQH[SOLFLWDWLRQ¶DQGµRPLVVLRQLPSOLFLWDWLRQ¶(QJOXQG 'LPLWURYD

'HILQLQJH[SOLFLWDWLRQ 7KHFRQFHSWRIH[SOLFLWDWLRQZDVILUVWLQWURGXFHGE\9LQD\DQG'DUEHOQHW LQZKRVHJORVVDU\RI WUDQVODWLRQWHFKQLTXHVH[SOLFLWDWLRQLVGHILQHGDVµWKHSURFHVVRILQWURGXFLQJLQIRUPDWLRQLQWRWKHWDUJHW ODQJXDJHZKLFKLVSUHVHQWRQO\LPSOLFLWO\LQWKHVRXUFHODQJXDJHEXWZKLFKFDQEHGHULYHGIURPWKHFRQWH[WRU WKHVLWXDWLRQ¶WUDQVODWHG ,PSOLFLWDWLRQLVGHILQHGDVµWKHSURFHVVRIDOORZLQJWKHWDUJHWODQJXDJH VLWXDWLRQRUFRQWH[WWRGHILQHFHUWDLQGHWDLOVZKLFKZHUHH[SOLFLWLQWKHVRXUFHODQJXDJH¶LELG 7KHUHVXOWV RIH[SOLFLWDWLRQDQGLPSOLFLWDWLRQDUHRIWHQGLVFXVVHGLQWHUPVRIJDLQVDQGORVVHVIRUH[DPSOHEHFDXVHWKH +XQJDULDQSURQRXQV\VWHPLVQRWPDUNHGIRUJHQGHUSDUWRIWKHPHDQLQJRIWKH(QJOLVKSHUVRQDOSURQRXQVKH LVORVWLQWUDQVODWLRQLQWR+XQJDULDQ 7KHFRQFHSWVRIH[SOLFLWDWLRQDQGLPSOLFLWDWLRQKDYHEHHQIXUWKHUGHYHORSHGE\1LGD



3DJH

ZKRKRZHYHUGRHVQRWDFWXDOO\XVHWKHWHUPVµH[SOLFLWDWLRQ¶DQGµLPSOLFLWDWLRQ¶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µLPSRUWDQWVHPDQWLFHOHPHQWV FDUULHGLPSOLFLWO\LQWKHVRXUFHODQJXDJHPD\UHTXLUHH[SOLFLWLGHQWLILFDWLRQLQWKHUHFHSWRUODQJXDJH¶LELG 1LGDOLVWVVHYHUDOH[DPSOHVIURP%,%/(75$16/$7,21WRLOOXVWUDWHWKHUDQJHDQGYDULHW\RIWKLVW\SH RIDGGLWLRQ)RUH[DPSOH³µTXHHQRIWKH6RXWK´/XNH FDQEHYHU\PLVOHDGLQJZKHQQHLWKHU³TXHHQ´QRU ³6RXWK´LVIDPLOLDULQWKHUHFHSWRUODQJXDJH«$FFRUGLQJO\LQ7DUDVFDQRQHPXVWVD\³ZRPDQZKRZDVUXOLQJ LQWKHVRXWKFRXQWU\´¶LELG 7KURXJKRXWWKHVDQGVPRVWSXEOLFDWLRQVRQSDUWLDOWUDQVODWLRQ WKHRULHVHVSHFLDOO\LQWKHILHOGRIODQJXDJHUHVWULFWHGDUHDUHVWULFWHGDQGFXOWXUHUHVWULFWHGWKHRULHV+ROPHV DVHH75$16/$7,21678',(6 IROORZHG1LGD¶VH[DPSOHH[SOLFLWDWLRQDQGLPSOLFLWDWLRQZHUHVHHQ DVRQO\WZRDPRQJDYDULHW\RIPHWKRGVIRUDGGLWLRQDQGRPLVVLRQLQWUDQVODWLRQ )RUH[DPSOH%DUNKXGDURY LGHQWLILHVIRXUW\SHVRIWUDQVIRUPDWLRQLQWUDQVODWLRQSHUHVWDQRYND µWUDQVSRVLWLRQ¶ ]DPHQDµVXEVWLWXWLRQ¶ GREDYOHQL\HµDGGLWLRQ¶ DQGRSXVKFKHQL\HµRPLVVLRQ¶ ,QKLV RSLQLRQWKHPRVWLPSRUWDQWUHDVRQIRUDGGLWLRQLQWUDQVODWLRQIURP(QJOLVKLQWR5XVVLDQLVHOOLSVLVLQQRPLQDO VWUXFWXUHVLQ(QJOLVKWKDWLVWKHRPLVVLRQRIFHUWDLQVHPDQWLFFRPSRQHQWVLQ(QJOLVKVXUIDFHVWUXFWXUHZKLFK ZHUHSUHVHQWLQWKHGHHSVWUXFWXUH$VHOOLSVLVLVQRWFKDUDFWHULVWLFRI5XVVLDQWKHRPLWWHGVHPDQWLF FRPSRQHQWVDUHUHFRQVWUXFWHGLQWKH5XVVLDQVXUIDFHVWUXFWXUHSD\FODLPWKXVEHFRPHVWUHERYDQL\HSRYLVLW ]DUSODWXµGHPDQGWRUDLVHWKHSD\¶ DQGJXQOLFHQFHEHFRPHVXGRVWRYHUHQL\HQDSUDYRQRVKHQL\DRUX]KL\D µOLFHQFHIRUULJKWWRFDUU\ZHDSRQ¶ $YHU\GHWDLOHGW\SRORJ\RIOH[LFDODQGJUDPPDWLFDOWUDQVIRUPDWLRQVLQFOXGLQJJUDPPDWLFDODGGLWLRQVLQ %XOJDULDQ5XVVLDQDQG5XVVLDQ%XOJDULDQWUDQVODWLRQFDQEHIRXQGLQWKHZRUNRIWKH%XOJDULDQVFKRODU 9DVHYD ,Q9DVHYD¶VYLHZDGGLWLRQVDUHJHQHUDWHGZKHQµOLQJXLVWLFDV\PPHWU\¶QHFHVVLWDWHVH[SOLFLW H[SUHVVLRQLQWKHWDUJHWODQJXDJHRIPHDQLQJFRPSRQHQWVWKDWDUHFRQWDLQHGLPSOLFLWO\LQWKHVRXUFHODQJXDJH 6KHH[SODLQVJUDPPDWLFDODGGLWLRQVZLWKUHIHUHQFHWRVRFDOOHGµPLVVLQJFDWHJRULHV¶DQGFDWHJRULHVZLWK GLIIHUHQWIXQFWLRQV%XOJDULDQKDVDUWLFOHVZKLOH5XVVLDQKDVQRQHWKHSRVVHVVLYHSURQRXQDQGWKHFRSXODFDQ EHRPLWWHGLQ5XVVLDQEXWQRWLQ%XOJDULDQWKHGLUHFWREMHFWFDQLQFHUWDLQUDUHFDVHVEHRPLWWHGLQ5XVVLDQ EXWQHYHULQ%XOJDULDQ%HVLGHVJUDPPDWLFDODGGLWLRQV9DVHYDUHIHUVEULHIO\WRVRFDOOHGSUDJPDWLFDGGLWLRQV ZKLFKDUHPDGHZKHQFRQFHSWVJHQHUDOO\NQRZQE\WKHVRXUFHODQJXDJHDXGLHQFHPD\EHXQIDPLOLDUWRWKH WDUJHWODQJXDJHDXGLHQFHDQGWKHUHIRUHUHTXLUHH[SODQDWLRQLQWUDQVODWLRQ 1HLWKHU%DUNKXGDURYQRU9DVHYDXVHVWKHWHUPµH[SOLFLWDWLRQ¶LWVHOIWKRXJK.RPLVVDURY HPSOR\VWKH 5XVVLDQHTXLYDOHQWHNVSOLWVLURYDQL\H7KLVWHUPDQGWKHDVVRFLDWHGLPSOLWVLURYDQL\HµLPSOLFLWDWLRQ¶ EHFDPH ZLGHO\XVHGLQ5XVVLDQVWXGLHVZLWKLQWKHWH[WOLQJXLVWLFDSSURDFKWRWUDQVODWLRQ.XNKDUHQNR&KHUQRY *DN

7KHH[SOLFLWDWLRQK\SRWKHVLV 7KHVRFDOOHGH[SOLFLWDWLRQK\SRWKHVLVZDVIRUPXODWHGE\%OXP.XOND LQZKDWLVFRQVLGHUHGE\PDQ\ WREHWKHILUVWV\VWHPDWLFVWXG\RIH[SOLFLWDWLRQ'UDZLQJRQFRQFHSWVDQGGHVFULSWLYHWHUPVGHYHORSHGZLWKLQ GLVFRXUVHDQDO\VLVVKHH[SORUHVGLVFRXUVHOHYHOH[SOLFLWDWLRQWKDWLVH[SOLFLWDWLRQFRQQHFWHGZLWKVKLIWVRI FRKHVLRQDQGFRKHUHQFHRYHUWDQGFRYHUWWH[WXDOPDUNHUV LQWUDQVODWLRQ



3DJH

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³WKHH[SOLFLWDWLRQ K\SRWKHVLV´ZKLFKSRVWXODWHVDQREVHUYHGFRKHVLYHH[SOLFLWQHVVIURP6/WR7/WH[WVUHJDUGOHVVRI WKHLQFUHDVHWUDFHDEOHWRGLIIHUHQFHVEHWZHHQWKHWZROLQJXLVWLFDQGWH[WXDOV\VWHPVLQYROYHG,W IROORZVWKDWH[SOLFLWDWLRQLVYLHZHGKHUHDVLQKHUHQWLQWKHSURFHVVRIWUDQVODWLRQ $FFRUGLQJWR6pJXLQRW KRZHYHUWKLVGHILQLWLRQLVWRRQDUURZµH[SOLFLWQHVVGRHVQRWQHFHVVDULO\PHDQ UHGXQGDQF\¶ 6HFRQGO\VKHSRLQWVRXWWKDWµWKHJUHDWHUQXPEHURIZRUGVLQ)UHQFKWUDQVODWLRQIRU H[DPSOHFDQEHH[SODLQHGE\ZHOOGRFXPHQWHGGLIIHUHQFHVLQWKHVW\OLVWLFVRI(QJOLVKDQG)UHQFK¶LELG ,Q KHUYLHZWKHWHUPµH[SOLFLWDWLRQ¶VKRXOGEHUHVHUYHGIRUDGGLWLRQVZKLFKFDQQRWEHH[SODLQHGE\VWUXFWXUDO VW\OLVWLFRUUKHWRULFDOGLIIHUHQFHVEHWZHHQWKHWZRODQJXDJHVDQGDGGLWLRQLVQRWWKHRQO\GHYLFHRI H[SOLFLWDWLRQ([SOLFLWDWLRQWDNHVSODFHQRWRQO\ZKHQµVRPHWKLQJLVH[SUHVVHGLQWKHWUDQVODWLRQZKLFKZDVQRW LQWKHRULJLQDO¶LELG EXWDOVRLQFDVHVZKHUHµVRPHWKLQJZKLFKZDVLPSOLHGRUXQGHUVWRRGWKURXJK SUHVXSSRVLWLRQLQWKHVRXUFHWH[WLVRYHUWO\H[SUHVVHGLQWKHWUDQVODWLRQRUDQHOHPHQWLQWKHVRXUFHWH[WLV JLYHQDJUHDWHULPSRUWDQFHLQWKHWUDQVODWLRQWKURXJKIRFXVHPSKDVLVRUOH[LFDOFKRLFH¶LELG 6p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¶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¶VVWXG\RI '5$0$75$16/$7,21ZKLFK6XJJHVWVWKDWLPSOLFDWLQJH[SOLFDWLQJWHFKQLTXHVVKLIWµFHUWDLQHOHPHQWV IURPWKHOLQJXLVWLFWRWKHVLWXDWLRQDOOHYHODQGYLFHYHUVD¶ ,QGUDPDWUDQVODWLRQµPHDQLQJIXO HOHPHQWVDUHWUDQVIHUUHGIURPVLWXDWLRQLQWRWKHVWDJLQJWH[WVWDJHGLUHFWLRQV RULQWHJUDWHGLQWRWKHFKDUDFWHUV¶ ZRUGV¶LELG

7\SHVRIH[SOLFLWDWLRQ 2EOLJDWRU\H[SOLFLWDWLRQ 2EOLJDWRU\H[SOLFLWDWLRQLVGLFWDWHGE\GLIIHUHQFHVLQWKHV\QWDFWLFDQGVHPDQWLFVWUXFWXUHRI



3DJH

ODQJXDJHV%DUNKXGDURY9DVHYD.ODXG\(QJOXQG'LPLWURYD 6\QWDFWLFDQG VHPDQWLFH[SOLFLWDWLRQVDUHREOLJDWRU\EHFDXVHZLWKRXWWKHPWDUJHWODQJXDJHVHQWHQFHVZRXOGEH XQJUDPPDWLFDO 7KHPRVWREYLRXVFDVHVRIREOLJDWRU\H[SOLFLWDWLRQDUHFDXVHGE\WKHVRFDOOHGµPLVVLQJFDWHJRULHV¶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µLQP\JDUGHQ¶LVUHQGHUHG E\WKHVLQJOHZRUGNHUWHPEHQ+XQJDULDQYHUEVDOVRKDYHYHU\FRPSOH[FRQMXJDWLRQVWKHSHUVRQDOSURQRXQ WKHDFFXVDWLYHHQGLQJDQGVRPHWLPHVWKHDX[LOLDU\YHUEDUHDOOLQFOXGHGLQWKH+XQJDULDQYHUEIRUPVRWKH 5XVVLDQ\DO\XEO\XWHE\Dµ,ORYH\RX¶ EHFRPHVWKHVLQJOH+XQJDULDQZRUGV]HUHWOHN6LQFH(QJOLVKDQG 5XVVLDQDUHSUHGRPLQDQWO\DQDO\WLFODQJXDJHVDOO+XQJDULDQQRXQDQGYHUEIRUPVDUHGHFRPSRVHGLQWKH SURFHVVRI+XQJDULDQ(QJOLVKDQG+XQJDULDQ5XVVLDQWUDQVODWLRQDQGWKHWDUJHWWH[WZLOOFRQWDLQPDQ\ DGGLWLRQVFIWKHFRQFHSWRIµLQKHUHQWO\H[SOLFLW¶DQGµLQKHUHQWO\LPSOLFLW¶ODQJXDJHVLQ6pJXLQRW.ODXG\ :KLOHVXFKV\QWDFWLFH[SOLFLWDWLRQJHQHUDOO\PHDQVDQLQFUHDVHLQWKHQXPEHURIVHSDUDWHZRUGVLQWKHWDUJHW WH[WVHPDQWLFH[SOLFLWDWLRQFRQVLVWVRIFKRRVLQJPRUHVSHFLILFZRUGVLQWKHWDUJHWWH[W'XHWRWKHGLIIHUHQW OLQJXLVWLFVWUXFWXULQJRIUHDOLW\LQGLIIHUHQWODQJXDJHVFHUWDLQFRQFHSWVVXFKDVERG\SDUWVFRORXUVDQGNLQVKLS WHUPVPD\KDYHPRUHGHWDLOHGYRFDEXODULHVLQVRPHODQJXDJHVWKDQLQRWKHUV)RUH[DPSOHWKH(QJOLVKWHUPV µEURWKHU¶DQGµVLVWHU¶FDQQRWEHWUDQVODWHGLQWR+XQJDULDQZLWKRXWH[SOLFLWDWLRQEHFDXVH+XQJDULDQKDV GLIIHUHQWWHUPVIRUµ\RXQJHUEURWKHU¶|FV DQGµ\RXQJHUVLVWHU¶KXJ DQGIRUµROGHUEURWKHU¶EiW\ DQGµROGHU VLVWHU¶QYpU 2SWLRQDOH[SOLFLWDWLRQV 2SWLRQDOH[SOLFLWDWLRQVDUHGLFWDWHGE\GLIIHUHQFHVLQWH[WEXLOGLQJVWUDWHJLHVFI%OXP.XOND¶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µWKHULYHU0DURV¶IRU0DURVRUµ/DNH)HUW|¶IRU)HUW| 7UDQVODWLRQLQKHUHQWH[SOLFLWDWLRQV 7UDQVODWLRQLQKHUHQWH[SOLFLWDWLRQVFDQEHDWWULEXWHGWRWKHQDWXUHRIWKHWUDQVODWLRQSURFHVVLWVHOI6pJXLQRW GUDZVDGLVWLQFWLRQEHWZHHQµFKRLFHVWKDWFDQEHDFFRXQWHGIRULQWKHODQJXDJHV\VWHPDQGFKRLFHVWKDWFRPH DERXWEHFDXVHRIWKHQDWXUHRIWKHWUDQVODWLRQSURFHVV¶ 7KHODWWHUW\SHRIH[SOLFLWDWLRQLVH[SODLQHG E\RQHRIWKHPRVWSHUYDVLYHODQJXDJHLQGHSHQGHQWIHDWXUHVRIDOOWUDQVODWLRQDODFWLYLW\QDPHO\WKHQHFHVVLW\ WRIRUPXODWHLGHDVLQWKHWDUJHWODQJXDJHWKDWZHUHRULJLQDOO\FRQFHLYHGLQWKHVRXUFHODQJXDJH.ODXG\



3DJH

7KHYDOLGLW\RIWKHH[SOLFLWDWLRQK\SRWKHVLV 7KHFRQFHSWRIWUDQVODWLRQLQKHUHQWH[SOLFLWDWLRQLVUHODWHGWRWKHH[SOLFLWDWLRQK\SRWKHVLVDFFRUGLQJWRZKLFK WUDQVODWLRQVDUHDOZD\VORQJHUWKDQWKHRULJLQDOVUHJDUGOHVVRIWKHODQJXDJHVJHQUHVDQGUHJLVWHUVFRQFHUQHG %OXP.XOND6pJXLQRW 7KRXJKH[SOLFLWDWLRQVDQGLPSOLFLWDWLRQVRUDGGLWLRQVDQGRPLVVLRQVDUH LQVHSDUDEO\LQWHUWZLQHGLQWKHSURFHVVRIWUDQVODWLRQWKHWHQGHQF\WRZDUGVH[SOLFLWDWLRQLVDOZD\VVWURQJHUWKDQ WKHWHQGHQF\WRZDUGVLPSOLFLWDWLRQ7KLVK\SRWKHVLVFDQEHWHVWHGE\ODUJHVFDOHHPSLULFDOVWXGLHVRIWKH LQWHUODQJXDJHVSURGXFHGE\YDULRXVJURXSVIURPODQJXDJHOHDUQHUVWRQRQSURIHVVLRQDODQGSURIHVVLRQDO WUDQVODWRUV%OXP.XOND7RXU\E DQGE\LQWURVSHFWLYHGDWDIURPLQYHVWLJDWLRQVRIWKH WUDQVODWLRQSURFHVV.ULQJV/|UVFKHUE &UXFLDOTXDQWLWDWLYHHYLGHQFHFDQEHH[SHFWHGIURPWKHXVH RIFRPSXWHUL]HG&25325$HVSHFLDOO\SDUDOOHODQGFRPSDUDEOHFRUSRUD%DNHU 6HHDOVR &25325$,175$16/$7,21678',(66+,)762)75$16/$7,2181,9(56$/62) 75$16/$7,21

)XUWKHUUHDGLQJ %DNHU%OXP.XOND'RKHUW\(QJOXQG'LPLWURYD.ODXG\1LGD6pJXLQRW 7RXU\9HKPDV/HKWR9LQD\DQG'DUEHOQHW

.,1&$./$8'<



3DJH

) )pGpUDWLRQLQWHUQDWLRQDOHGHVWUDGXFWHXUV),7 7KH)pGpUDWLRQLQWHUQDWLRQDOHGHVWUDGXFWHXUV),7 DOVRNQRZQDVWKH,QWHUQDWLRQDO)HGHUDWLRQRI7UDQVODWRUV LVDIHGHUDWLRQRIDVVRFLDWLRQVZLWKPHPEHURUJDQL]DWLRQVVSUHDGDFURVVILYHFRQWLQHQWV,WZDVIRXQGHGLQ 3DULVLQE\3LHUUH)UDQoRLV&$,//e)5(1&+75$',7,21 DKLJKO\UHJDUGHGOLWHUDU\DQGPHGLD WUDQVODWRUDQGORQJWLPHSUHVLGHQWRIWKH6RFLpWpIUDQoDLVHGHVWUDGXFWHXUV7KHIRXQGLQJPHPEHUVZHUHVL[ LQWHUSUHWHUV¶DQGWUDQVODWRUV¶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

*RYHUQLQJERGLHVDQGIXQGLQJ ),7:RUOG&RQJUHVVHVDUHKHOGHYHU\WKUHH\HDUV7KH\LQFOXGHD6WDWXWRU\&RQJUHVVWRZKLFKDOOPHPEHU RUJDQL]DWLRQVDUHLQYLWHGWRVHQGGHOHJDWHVDQGZKLFKVHUYHVDVWKHVXSUHPHJRYHUQLQJERG\RIWKH RUJDQL]DWLRQ7KH6WDWXWRU\&RQJUHVVLVDFFRPSDQLHGE\DVFLHQWLILFFRQJUHVVRSHQWRDOOWUDQVODWRUVDURXQGWKH ZRUOG,QEHWZHHQFRQJUHVVHVDQHOHFWHG&RXQFLODQGDQ([HFXWLYH&RPPLWWHHDGPLQLVWHUWKHRUJDQL]DWLRQ 7KH&RXQFLOPHHWVRQFHD\HDUDQGWKH([HFXWLYH&RPPLWWHHIRXUWLPHVD\HDU7KH\DUHDVVLVWHGE\D



3DJH

&RXQFLORI(OGHUVZKLFKFRQVLVWVRIRXWVWDQGLQJIRUPHURIILFHUVRIWKH)HGHUDWLRQ ),7GHULYHVPRVWRILWVLQFRPHIURPIHHVSDLGE\PHPEHURUJDQL]DWLRQV6RPHDFWLYLWLHVVXFKDVWKH SXEOLFDWLRQRIWKHMRXUQDO%DEHODUHVXSSRUWHGILQDQFLDOO\E\81(6&2$QXPEHURIWKHSUL]HVDZDUGHGE\ ),7DUHIXQGHGE\EHQHIDFWRUV7KH)HGHUDWLRQKDVQRSHUPDQHQWVWDIIDQGDOOLWVRIILFHUVZRUNRQDYROXQWDU\ EDVLV

6HUYLFHVRIIHUHG 7KURXJKLWV&RXQFLOFRPPLVVLRQVDQGFRPPLWWHHV),7HQGHDYRXUVWRPHHWWKHQHHGVRIPHPEHUVWKURXJKRXW WKHZRUOGE\DGGUHVVLQJVXFKLVVXHVDVWUDLQLQJDQGSXEOLFUHFRJQLWLRQRIWKHSURIHVVLRQ7KHH[FKDQJHRI LQIRUPDWLRQRQSURIHVVLRQDOVWDWXVIRUH[DPSOHKDVFRQWULEXWHGWRVRPHORFDOEUHDNWKURXJKVLQWHUPVRI SURIHVVLRQDOUHFRJQLWLRQ,QIRUPDWLRQDERXWWUDLQLQJSURJUDPPHVSURYLGHGWRPHPEHUVDQGRWKHUVKDVKHOSHG DQXPEHURIRUJDQL]DWLRQVGHYHORSWKHLURZQFRXUVHVHVSHFLDOO\LQFRXQWULHVZKHUHQRQHH[LVWHG,QIRUPDWLRQ DERXWYDULRXVIDFHWVRISURIHVVLRQDOSUDFWLFHLVDOVREHLQJFROOHFWHGDQGGLVVHPLQDWHG ),7PDLQWDLQVOLDLVRQZLWKDQXPEHURILQWHUQDWLRQDORUJDQL]DWLRQVLQUHODWHGILHOGVLQFOXGLQJWKRVHGHDOLQJ ZLWKLQWHOOHFWXDOSURSHUW\DQGFRS\ULJKWDQGWKH$662&,$7,21,17(51$7,21$/('(6,17(535Ê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²ZKLFKLV KHOGHYHU\WKUHH\HDUVDOWHUQDWHO\LQ0H[LFRWKH8QLWHG6WDWHVDQG&DQDGD²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¶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



3DJH

OLWHUDU\WUDQVODWLRQWKH81(6&2SUL]HIRUVFLHQWLILFDQGWHFKQLFDOWUDQVODWLRQWKH$VWULG/LQGJUHQ3UL]HIRU WKHWUDQVODWLRQRIOLWHUDWXUHIRUFKLOGUHQWKH.DUHO&DSHN$ZDUGIRUOLWHUDU\WUDQVODWLRQRIZRUNVZULWWHQLQ ODQJXDJHVRIOLPLWHGGLIIXVLRQDQGWKH%HVW3HULRGLFDO$ZDUGIRUMRXUQDOVSXEOLVKHGE\),7DIILOLDWHV,Q DGGLWLRQWKH3LHUUH)UDQoRLV&DLOOp0HPRULDO0HGDODQGWKH5&1$SUL]HDUHDZDUGHGLQUHFRJQLWLRQRI FRQWULEXWLRQVE\RXWVWDQGLQJYROXQWHHUV $VZHOODVSURYLGLQJVSHFLILFVHUYLFHV),7KDVVXFFHHGHGLQEXLOGLQJDQH[WHQGHGQHWZRUNRIWUDQVODWRUV¶ RUJDQL]DWLRQVRQDSXUHO\QRQSROLWLFDOEDVLV$VVXFKLWKDVEHHQDQGUHPDLQVH[WUHPHO\XVHIXOIRUIDFLOLWDWLQJ WKHH[FKDQJHRIYLHZVDQGSHUVRQDOFRQWDFWEHWZHHQWHQVRIWKRXVDQGVRIWUDQVODWRUVVHSDUDWHGE\JHRJUDSK\ SROLWLFDOV\VWHPVDQGHFRQRPLFHQYLURQPHQWV &XUUHQWO\WKH3UHVLGHQWRI),7LV)ORUHQFH+HUEXORW)UDQFH DQGWKH6HFUHWDU\*HQHUDOLV/LHVH.DWVFKLQND $XVWULD

)XUWKHUUHDGLQJ +DHVHU\Q

-($1)5$1d2,6-2/<

)UHHWUDQVODWLRQ )UHHWUDQVODWLRQLQWKHKLVWRU\RI:HVWHUQWUDQVODWLRQWKHRU\LVDNLQGRIWD[RQRPLFDOVKLIWHUWDNLQJDYDULHW\RI GLIIHUHQWIRUPVGHSHQGLQJRQZKDWLVRSSRVHGWRLW7\SLFDOO\ZKDWLVRSSRVHGWRLWLVIDLWKIXOWUDQVODWLRQEXW ILGHOLW\LQWUDQVODWLRQKDVEHHQGHILQHGLQDQXPEHURIZD\V ,QZKDWZHPLJKWFDOOWKH&ODVVLFDO5RPDQRU&LFHURQLDQ+RUDWLDQWUDGLWLRQWKHUHDUHRQO\WZRNLQGVRI WUDQVODWLRQIDLWKIXODQGIUHH²WKRXJKQHLWKHU&,&(52±%& VHH/$7,175$',7,21 QRU+RUDFH ±%& XVHGWKHZRUGµIUHH¶RUµWUDQVODWLRQ¶WRGHVFULEHWKHLUSUHIHUUHGDSSURDFKDQGRQO\+RUDFHXVHGWKH ZRUGµIDLWKIXO¶)RUERWKZULWHUVWUDQVODWLRQZDVDPDWWHURIVODYLVKDGKHUHQFHWRHDFKZRUGLQLWV6/VHTXHQFH VODYLVKOLWHUDOLVPZKLFK&LFHURFDOOVUHQGHULQJXWLQWHUSUHVµOLNHDWUDQVODWRU¶DQG+RUDFHFDOOVUHQGHULQJOLNH DILGXVLQWHUSUHVµIDLWKIXOWUDQVODWRU¶,QODWHUDFFRXQWVWKHVHGLFWDZHUHFDOOHGH[KRUWDWLRQVWRIUHHWUDQVODWLRQ WKDWLVWRDORRVHUOHVVVODYLVKUHQGHULQJRIWKH6/WH[WOHVVERXQGWRLQGLYLGXDOZRUGVDQGWKHLUVHTXHQFLQJ ,QWHUHVWLQJO\WKLVPDGHILGHOLW\DQHJDWLYHLGHDO%2(7+,86VHH/$7,175$',7,21 ± LQKLV HDUO\VL[WKFHQWXU\FRPPHQWDU\RQKLVWUDQVODWLRQRI3RUSK\U\¶V(LVDJRJHSUHWHQGVWRDSRORJL]HIRUIORXWLQJ +RUDFH¶VGLFWXPWKXVPDNLQJLWSRVVLEOHIRUDQWLOLWHUDOLVWUHDGHUVWRTXRWHKLPRXWRIFRQWH[Wµ,IHDUWKDW, VKDOOFRPPLWWKHIDXOWRIWKHIDLWKIXOLQWHUSUHWHUZKHQ,UHQGHUHDFKZRUGE\DZRUGFRUUHVSRQGLQJWR LW¶%XUQHWW +HUHKLVPRFNIHDUWKDWKHKDVGHYLDWHGIURP+RUDFH¶VEDQRQWKHOHWWHURQOLWHUDO ILGHOLW\OHDYHVXVWKHSKUDVHQHVXELHULPILGLLQWHUSUHWLVFXOSDPRUOLWHUDOO\µOHVW,XQGHUJRWKHIDLWKIXO WUDQVODWRU¶VIDXOW¶²DFRQGLWLRQDOVHOIDGPRQLWLRQLWVHHPVHVSHFLDOO\ZKHQWDNHQRXWRIFRQWH[WGHVLJQHGWR LQVWLOWKHVDPHIHDULQODWHUWUDQVODWRUV-RKQ6FRWXV(ULJHQD±& ZLOOODWHUUHSHDW%RHWKLXV¶VHOI DGPRQLWLRQLQYHU\PXFKWKHVDPHFRQYROXWHGFRQWH[WDVKLVPRGHOµ,QGHHG,IHDUWKDW,KDYHLQFXUUHGWKH EODPHRIWKHIDLWKIXOWUDQVODWRU¶&RSHODQG 7KHIHDURIFRPPLWWLQJDIDXOWWKDW%RHWKLXVDQG-RKQ 6FRWXVDUHUHIHUULQJWRLVLPSOLFLWO\DIHDURIVLQQLQJZKLFKKDVWKHHIIHFWDJDLQLPSOLFLWO\RIDVVRFLDWLQJ ZRUGIRUZRUGWUDQVODWLRQZLWKGHYLDWLRQIURPWKHGRJPDWLFQRUPDQGWKLVZDVLQGHHGWKHGLUHFWLRQLQZKLFK WKHFKXUFKZDVKHDGHG%XWQRWHWKDWHYHQLQWKDWVDPHOLQH%RHWKLXVOLNH-RKQ6FRWXVDIWHUKLPWLHV FXOSDELOLW\WRILGHOLW\WKHIDLWKIXOWUDQVODWRULVFXOSDEOH7KH&KULVWLDQWUDQVODWRULVH[SHFWHGWREHIDLWKIXOWR *RGLQRWKHUZRUGVDQGWR*RG¶V:RUGEXWQRWWRWKHLQGLYLGXDOZRUGVRI*RG¶V:RUG" 'XULQJWKLVVDPHSHULRGKRZHYHUWKHILUVWPLOOHQQLXP$'WKHUHZDVDFRXQWHUSUHVVXUHWRWKLVWUDGLWLRQ VSHDUKHDGHGE\-(520(VHH/$7,175$',7,21 LQKLVOHWWHUWR3DPPDFKLXV$' %\DUWLFXODWLQJD QDUURZUDQJHRIWKHIUHHUDSSURDFK&LFHURRSSRVHGWRZRUGIRUZRUGWUDQVODWLRQDQGFRLQLQJIRULWWKHSKUDVH VHQVHIRUVHQVHWUDQVODWLRQ-HURPHVHWWKHVWDJHIRUWKHWKUHHWHUPWD[RQRP\WKDWKDVUHLJQHGLQPDLQVWUHDP WKLQNLQJDERXWWUDQVODWLRQVLQFHWKHODWHPHGLHYDOHDUO\PRGHUQ



3DJH

SHULRGZRUGIRUZRUGVHQVHIRUVHQVHDQGIUHHZKLFK-RKQ'5<'(1VHH%5,7,6+75$',7,21 LQ SHUKDSVWKHPRVWLQIOXHQWLDOVWDWHPHQWRIWKLVWULFKRWRP\FDOOHGUHVSHFWLYHO\ 0(7$3+5$6( 3$5$3+5$6(DQG,0,7$7,21 ,QORJLFDOWHUPVLQIDFWWKHVHWKUHHWHUPVRSHUDWHGXDOLVWLFDOO\RQWZRKLHUDUFKLFDOOHYHOVDWWKHKLJKHUOHYHO WKHUHLVDGXDOLVPEHWZHHQIDLWKIXODQGIUHHWUDQVODWLRQDQGDWWKHORZHUOHYHOIDLWKIXOWUDQVODWLRQLVGLYLGHG LQWRZRUGIRUZRUGDQGVHQVHIRUVHQVHWUDQVODWLRQ7KXV-HURPH¶VSUHIHUUHGIRUPRIIUHHWUDQVODWLRQ UHQGHULQJRQHVHQWHQFHUDWKHUWKDQRQHZRUGDWDWLPHLVVPXJJOHGDFURVVWKHERXQGDU\EHWZHHQIUHHGRPDQG ILGHOLW\EURXJKWLQWRWKHFDPSRIWKHIDLWKIXODVLVEHILWWLQJIRUD&KULVWLDQWUDQVODWLRQLGHDO²DQGOHDYLQJ IUHHGRPIUHHWUDQVODWLRQRQWKHIDUVLGHRXWVLGHWKHJDWHVRIWUXHWUDQVODWLRQ'HSHQGLQJRQZKHWKHURQHWDNHV DIUHHWUDQVODWLRQWREHDEDGWUDQVODWLRQRUQRWUDQVODWLRQDWDOOWKLVKLHUDUFK\FRXOGEHUHSUHVHQWHGLQD GLDJUDPHLWKHUOLNHWKLVLIIUHHWUDQVODWLRQLVEDGWUDQVODWLRQ

RUWKLVLIIUHHWUDQVODWLRQLVQRWUDQVODWLRQ

%XWWKHVHWUHHGLDJUDPVREVFXUH-HURPH¶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¶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²RUHYHQUHFDOOHGWR PLQG%DVLFDOO\DQ\WKLQJWKDWGRHVQ¶WILWLQWRQDUURZO\GHILQHGQRUPVIRUDFFHSWDEOHWUDQVODWLRQJHWVFDOOHG IUHHWUDQVODWLRQHYHQZKHQWKHVRFDOOHGGHYLDQWWH[WLVLQIDFWWLJKWO\ERXQGWRWKH6/WH[WQRWDWDOOIUHH$Q H[DPSOHPLJKWEHWKH(QJOLVK&DWXOOXVRI/RXLVDQG&HOLD=XNRYVN\ZKLFKSURFHHGVQHLWKHUZRUGIRUZRUG QRU



3DJH

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²VSHFLILFHSLVRGHVDQGHYHQWVLQWKHLURULJLQDOVHTXHQFHDVZHOODV ODUJHUVHJPHQWVOLNHH[SRVLWLRQULVLQJDFWLRQFOLPD[DQGGHQRXHPHQW([DPSOHVPLJKWEHUHWHOOLQJVRI OLWHUDU\FODVVLFVIRUFKLOGUHQRUIRUGLIIHUHQWPHGLD²WKH2G\VVH\LQDWHOHYLVLRQPLQLVHULHVVD\RU.ODVVLF .RPLFV7KHSULPLWLYHVWDWHRIPHWKRGRORJLFDODQGWHUPLQRORJLFDOGLVWLQFWLRQVLQWUDQVODWLRQVWXGLHVKDVXQWLO YHU\UHFHQWO\PDGHLWYHU\GLIILFXOWWRWDONDERXWFDVHVOLNHWKH=XNRYVN\V¶&DWXOOXVRU7/2G\VVH\V:KDWDUH WKH\"+RZIDLWKIXORUIUHHDUHWKH\"%HFDXVHWKH\DUHQHLWKHUILVKQRUIRZOWKH\DUHGXPSHGXQFHUHPRQLRXVO\ LQWKHFDWFKDOOFDWHJRU\RIIUHHWUDQVODWLRQDQGLJQRUHG 5RELQVRQ± DWWHPSWVWRUHILQHDQGH[SDQGWKHVHGLVWLQFWLRQVEXWSHUKDSVWKHEHVWNQRZQ UHGHILQLWLRQRIWKHWUDGLWLRQDOWHUPVLV&DWIRUG¶V ZKLFKGLVWLQJXLVKHVUDQNERXQGIURPXQERXQGHG WUDQVODWLRQVHH/,1*8,67,&$3352$&+(6 $UDQNIRU&DWIRUGLVDWH[WXDOVHJPHQWRIDFHUWDLQ VSHFLILHGOHQJWKDPRUSKHPHDZRUGDJURXSDFODXVHDVHQWHQFHDQGSUHVXPDEO\DVWRU\²WKRXJK&DWIRUG QHYHUDGGUHVVHVUDQNVWKLVKLJK $UDQNERXQGWUDQVODWLRQWKHQLVRQHWKDWUHQGHUVRQO\XQLWVDWWKHVDPH UDQNRQO\LQGLYLGXDOZRUGVVD\RULQGLYLGXDOVHQWHQFHVIXOOVWRSWRIXOOVWRS $QXQERXQGHGWUDQVODWLRQ RQWKHRWKHUKDQGLVRQHWKDWUHQGHUVXQLWVRIPL[HGUDQNVRPHLQGLYLGXDOZRUGVVRPHSKUDVHVVRPHZKROH VHQWHQFHV&DWIRUGLVPDLQO\LQWHUHVWHGLQGLVWLQJXLVKLQJWKRXJKWKHVHDUHQRWKLVWHUPV SUHFLVHIURPVORSS\ WUDQVODWLRQV²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²DQGWKHOHVVVDLGDERXWLWWKH EHWWHU%XWDUHDOOIUHHWUDQVODWLRQVWKHVDPH",VWKDWDOOZHFDQVD\DERXWDWUDQVODWLRQWKDWIORXWVRXUQRUPV WKDWLWLVIUHH",WVKRXOGEHFOHDUWKDWWKH=XNRYVN\V¶&DWXOOXVHYLQFHVDIRUPRIWUDQVODWLRQDOIUHHGRPYHU\ GLIIHUHQWIURPDWHOHYLVLRQ2G\VVH\EXWDUHDOOIUHHLPLWDWLRQVDQGYDULDWLRQVDQGWKHUHVWGRLQJURXJKO\WKH VDPHWKLQJ"'RHVDSURSDJDQGLVWLFWUDQVODWLRQUHIOHFWWKHVDPHNLQGRIIUHHGRPDVDWUDQVODWLRQWKDWVHHNVWR LPSURYHXSRQWKHRULJLQDO":KDWDERXWPRGHUQL]LQJDQGDUFKDL]LQJWUDQVODWLRQV":KDWKDSSHQVZKHQD WUDQVODWRUVHHNVWRVXEYHUWHVWDEOLVKHG7/UHDGHUUHVSRQVHWRDFODVVLFWH[WRUWRSHUYHUWRULQYHUW7/UHDGHUV¶ EHOLHILQLWVDXWKHQWLFLW\LWVWUXWKLWVUHOLDELOLW\":KDWDERXWSDURGLFWUDQVODWLRQVWKDWPDLQO\VHHNWRGLYHUW WKHLUUHDGHUV"$UHDOOWKHVHIRUPVRIWUDQVODWLRQDOIUHHGRPSDUWRIDQXQGLIIHUHQWLDWHGPDVV²DQGLIWKH\DUH VKRXOGWKH\UHPDLQWKDWZD\" 7KHYDVWFRPSOH[LWLHVRIDFWXDOWUDQVODWLRQSUDFWLFHUHPDLQWREHH[SORUHG7KHQRUPDWLYHDVVXPSWLRQWKDW WUDQVODWLRQLVHLWKHUIDLWKIXORUIUHHDQGWKDWLILW¶VIDLWKIXOLWWUDQVODWHVHLWKHULQGLYLGXDOZRUGVRULQGLYLGXDO VHQWHQFHV KDVEOLQGHGXVWRWKHIXOOUDQJHRIHYHQLQGLYLGXDOWUDQVODWRUV¶DFWXDOPHWKRGRORJLFDOUHSHUWRLUHVOHW DORQHWKHFROOHFWLYH



3DJH

UHSHUWRLUHRIDOOWUDQVODWRUVWDNHQHQPDVVH6RGHHSGRHVWKHEDQRQIUHHWUDQVODWLRQUXQWKDWLWLVGLIILFXOWHYHQ WREHJLQWRWKLQNDERXWLWLQSRVLWLYHDSSUHFLDWLYHZD\VDQGWKDWPXFKPRUHGLIILFXOWWRWUDFHLWVDVWRQLVKLQJ GLYHUVLW\ 6HHDOVR $'$37$7,21(48,9$/(1&(/,1*8,67,&$3352$&+(6/,7(5$/75$16/$7,216+,)762) 75$16/$7,2181,72)75$16/$7,21

)XUWKHUUHDGLQJ &DWIRUG5RELQVRQ*HRUJH6WHLQHU


'28*/$652%,1621


3DJH

* *DPHWKHRU\DQGWUDQVODWLRQ *DPHWKHRU\SURSRVHVWRVWXG\WKHEHKDYLRXURIWZRRUPRUHSHRSOHZLWKFRQIOLFWLQJLQWHUHVWVDVLQD FRPSHWLWLYHJDPH7KHWKHRU\ZDVLQLWLDOO\IRUPXODWHGE\WKH+XQJDULDQPDWKHPDWLFLDQ-RKQYRQ1HXPDQQ DQGLWVPRVWIDPRXVH[SUHVVLRQZDVLQWKHZRUNKHFRDXWKRUHGZLWK2VNDU0RUJHQVWHUQ7KHRU\RI*DPHVDQG (FRQRPLF%HKDYLRXU0RUJHQVWHUQDQGYRQ1HXPDQQ 7KHVLPSOHVWPRGHOLVWKHWZRSHUVRQ]HURVXP JDPHZLWKSHUIHFWLQIRUPDWLRQDQGRSWLPDOVWUDWHJ\7KLVLVDJDPHZKHUHWKHUHDUHWZRSOD\HUVWKHJDPHHQGV DIWHUDFHUWDLQQXPEHURIPRYHVKDYHEHHQPDGHWKHUHLVDOZD\VDZLQQHUDQGDORVHUDQGWKHUHLVRQHVWUDWHJ\ WKDWDOORZVWKHSOD\HUZKRPDNHVWKHILUVWPRYHWRZLQLUUHVSHFWLYHRIWKHPRYHVPDGHE\WKHRWKHUSOD\HU )RUPDOJDPHWKHRU\DOVRRSHUDWHVRQWKHDVVXPSWLRQWKDWSOD\HUVDFWUDWLRQDOO\ )HZJDPHVDQGOLIHZRUOGVLWXDWLRQVKRZHYHUDUH]HURVXPZLWKSHUIHFWLQIRUPDWLRQ0RVWSOD\HUVDQGVRFLDO DFWRUVDLPIRURSWLPDOVWUDWHJLHVRQWKHEDVLVRILPSHUIHFWLQIRUPDWLRQ3OD\HUVDUULYHDWWKLVRSWLPDOVWUDWHJ\ E\ZD\RIDSD\RIIPDWUL[DIRUPDOGHYLFHWKDWOLVWVWKHDOWHUQDWLYHVDQGVWUDWHJLHVDYDLODEOHWRSOD\HUVDQG DOORZVWKHPWRHYDOXDWHRXWFRPHVVRWKDWWKH\FDQFKRRVHWKHRSWLPDOVWUDWHJ\9RQ1HXPDQQDGYDQFHGWKH PLQLPD[WKHRUHPLQZKLFKKHSURYHGWKDWSOD\HUVFRXOGPLQLPL]HWKHPD[LPXPORVVRWKHUSOD\HUVFRXOG LQIOLFWRQWKHP7KHPRVWEDVLFIRUPXODWLRQRIWKHWKHRUHPZDVWKDWLQDILQLWHWZRSHUVRQ]HURVXPJDPHDQ DYHUDJHUHWXUQNQRZQE\WKHOHWWHU9LVDOZD\VJXDUDQWHHGIRURQHRIWKHSOD\HUVDVVXPLQJWKDWERWKSOD\HUV DUHSOD\LQJUDWLRQDOO\ 7KRXJKWKHTXHVWLRQRIRSWLPL]DWLRQZRXOGDSSHDUWREHFHQWUDOWRWKHWKHRU\DQGSUDFWLFHRIWUDQVODWLRQIHZ WUDQVODWLRQWKHRUHWLFLDQVKDYHDSSOLHGWKHLQVLJKWVRIIRUPDOJDPHWKHRU\WRWUDQVODWLRQ$QRWDEOHH[FHSWLRQLV -LĜt/(9é&=(&+75$',7,21 ZKRFRQVLGHUHGDIRUPDOPRGHOIRUWKHGHFLVLRQSURFHVVLQWUDQVODWLRQ /HYêVHH'(&,6,210$.,1*,175$16/$7,21 /HYêZDVQRWVRQDwYHDVWRWREHOLHYHWKDWDQ RSHQHQGHGSKHQRPHQRQOLNHWUDQVODWLRQZRXOGDOORZIRUWKHGHYHORSPHQWRILQIDOOLEO\RSWLPDOVWUDWHJLHVEXW KHVXJJHVWHGDQRYHODSSOLFDWLRQRIPLQLPD[VROXWLRQVWRWKHWUDQVODWRU¶VWDVN+HDUJXHGWKDWµWUDQVODWLRQ WKHRU\WHQGVWREHQRUPDWLYHWRLQVWUXFWWUDQVODWRUVRQWKH237,0$/VROXWLRQDFWXDOWUDQVODWLRQZRUN KRZHYHULVSUDJPDWLFWKHWUDQVODWRUUHVROYHVIRURQHRIWKHSRVVLEOHVROXWLRQVZKLFKSURPLVHVDPD[LPXPRI HIIHFWZLWKDPLQLPXPRIHIIRUW7KDWLVWRVD\KHLQWXLWLYHO\UHVROYHVIRUWKH0,1,0$; 675$7(*<¶ /HY\GHILQHVDWUDQVODWLRQSUREOHPDVDµVLWXDWLRQ¶+HWKHQGHILQHVDQXPEHURI LQVWUXFWLRQVIRUGHDOLQJZLWKWKHVHVLWXDWLRQV7KHUHDUHWZRW\SHVRILQVWUXFWLRQGHILQLWLRQDODQGVHOHFWLYH 'HILQLWLRQDOLQVWUXFWLRQVDUHWKHVHPDQWLFLQVWUXFWLRQVWKDWGHILQHWKHSDUDGLJPLHWKHFODVVRISRVVLEOH VROXWLRQVWRDVLWXDWLRQ)RUH[DPSOHWRWUDQVODWHWKHWLWOHRI%UHFKW¶VSOD\'HUJXWH0HQVFKYRQ6H]XDQLQWR (QJOLVKWKHILUVWLQVWUXFWLRQIRUWKHWUDQVODWLRQRI0HQVFKZRXOGEHKRPRVDSLHQV+RZHYHUDV/HY\DUJXHV WKHUHDUHWZRPHPEHUVRIWKLVFODVVµPDQ¶DQGµZRPDQ¶RWKHUWUDQVODWRUVZRXOGGLVDJUHHDQGDGGDWKLUG PHPEHUµSHRSOH¶ 7KHVHFRQGLQVWUXFWLRQZKLFKLVVHOHFWLYHGLUHFWVWKHFKRLFHDPRQJWKHDOWHUQDWLYHVWKLV LQVWUXFWLRQGHSHQGVFUXFLDOO\RQFRQWH[W7KHJDPHVWUDQVODWRUVSOD\WKHWUDQVODWLRQYDULDQWVGHSHQGRQWKH DOWHUQDWLYHVFKRVHQ±



3DJH

7KHHOHPHQWVRIDSDUDGLJPDVGHILQHGE\/HY\DUHQRWWKHUHIRUHFRPSOHWHO\HTXLYDOHQWEXWRUGHUHGDFFRUGLQJ WRGLIIHUHQWFULWHULDUHJLVWHUFRQQRWDWLRQVHPDQWLFH[WHQVLRQ WKDWDOORZFKRLFHVWREHPDGH,IWKHHOHPHQWV ZHUHDOOFRPSOHWHO\HTXLYDOHQWFKRLFHZRXOGEHLPSRVVLEOH/HY\GHVFULEHVWKHUHODWLRQVKLSEHWZHHQWKH GHILQLWLRQDODQGWKHVHOHFWLYHLQVWUXFWLRQVLQWKHIROORZLQJPDQQHUµIURPWKHVHWRIDOWHUQDWLYHVFLUFXPVFULEHG E\WKHGHILQLWLRQDOLQVWUXFWLRQDVXEVHWLVHOLPLQDWHGE\WKHVHOHFWLYHLQVWUXFWLRQZKLFKLQWXUQEHFRPHVWKH GHILQLWLRQDOLQVWUXFWLRQRIWKLVVXEVHWDQGVRRQWLOODRQHPHPEHUSDUDGLJPLVUHDFKHG¶ )LQDOO\ DV\QWD[RILQVWUXFWLRQVDOORZVWKHGLIIHUHQWLQVWUXFWLRQVWREHFRPELQHGDOWKRXJK/HYêLVQRWSDUWLFXODUO\ FOHDURQZKDWIRUPWKLVV\QWD[PLJKWWDNH 7KHVKRUWFRPLQJVRI/HYê¶VWKHRU\DUHSDUWO\WKRVHRIIRUPDOJDPHWKHRU\LWVHOI)LUVWWKHDVVXPSWLRQWKDW SOD\HUVRUWUDQVODWRUVDFWUDWLRQDOO\LVFRQVWDQWO\FRQWUDGLFWHGE\WKHDIIHFWLYHLGHRORJLFDODQGSK\VLRORJLFDO IDFWRUVWKDWGHWHUPLQHWUDQVODWLRQFKRLFHVIRUH[DPSOHWLPHVWUHVVVSHHGIDWLJXH 4XDQWLI\LQJWKHVHIDFWRUV LVDPDMRUGLIILFXOW\IRUDQ\IRUPDOJDPHWKHRU\RIWUDQVODWLRQ6HFRQG/HYê¶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²WKHOHYHORIWUDQVODWRUDVUHDGHUDQGWKHOHYHORIWUDQVODWRUDVZULWHU,I UHDGLQJWH[WVLVDGLDORJLFDODFWLYLW\ZKHUHWKHWH[WVDUHJHQHUDWHGLQSDUWE\WKHUHDGHU¶VLQWHUSUHWLYH VWUDWHJLHVWKHQZKHUHGRHVWKLVOHDYHWKHWUDQVODWRU"$UHWUDQVODWRUV²LQ(FR¶VWHUPVPRGHOUHDGHUV(FR RUDUHWKH\VSHFLDONLQGVRIUHDGHUVDQGWRZKDWH[WHQWDUHWKHLULQWHUSUHWLYHPRYHVDQWLFLSDWHGE\WKH DXWKRULDOVWUDWHJLHV"$WWKHOHYHORIWUDQVODWRUVDVZULWHUVZKDWJDPHVDUHSRVVLEOHZLWKUHDGHUVRIWUDQVODWHG WH[WV+XWFKLQVRQ "7KXVWUDQVODWLRQDVERWKDVLWHRIUHFHSWLRQDQGSURGXFWLRQLVSOD\LQJWZRWH[WXDO JDPHVFRQVHFXWLYHO\WH[WWUDQVODWLRQ RUVLPXOWDQHRXVO\LQWHUSUHWLQJ $IXUWKHUXVHRIIRUPDOJDPHWKHRU\LQWUDQVODWLRQLVVXJJHVWHGE\(OL]DEHWK%UXVV¶VZRUNRQJDPHWKHRU\DQG OLWHUDU\DQDO\VLV%UXVV 7KHJDPHVDXWKRUVSOD\ZLWKWKHLUUHDGHUVDUHFODVVLILHGLQWR]HURVXPPL[HG PRWLYHDQGFRRSHUDWLYHJDPHV,QD]HURVXPJDPHWKHDXWKRUFRRSHUDWHVRQO\PLQLPDOO\ZLWKWKHUHDGHU -R\FH¶V)LQQHJDQV:DNHZRXOGEHDJRRGH[DPSOH DQGLQDFRRSHUDWLYHJDPHFRRSHUDWLRQZLWKWKHUHDGHULV PD[LPDODVLQZHOOZULWWHQWHFKQLFDOPDQXDOV ,QPL[HGPRWLYHWH[WVERWKVWUDWHJLHVDUHFRPELQHG ([WHQGLQJ%UXVV¶VFODVVLILFDWLRQWRWUDQVODWLRQWH[WVKDVWZRGLVWLQFWDGYDQWDJHV&URQLQ± )LUVW WKHQRWLRQRIFRJQLWLYHSOHDVXUHZKLFKFDQEHGHULYHGIURPWH[WXDOUHVLVWDQFHLVFOHDUO\VLWXDWHGLQD FODVVLILFDWRU\IUDPHZRUNWKDWDOORZVWH[WVWREHGLIIHUHQWLDWHGIRUGLGDFWLFSXUSRVHV6HFRQGWKHOXGLFSRWHQWLDO RIWH[WVIURP/DWLQOXGXVPHDQLQJµSOD\¶RUµJDPH¶ FDQEHFRUUHODWHGWRWUDQVODWRUMREVDWLVIDFWLRQ7RRPDQ\ ]HURVXPWH[WVDQGWKHDSSUHQWLFHWUDQVODWRULVOLNHO\WREHFRPHSHUPDQHQWO\GLVHQFKDQWHGZLWKWKHDFWLYLW\ 6WXGHQWVRQWUDGLWLRQDOPRGHUQODQJXDJHV



3DJH

GHJUHHFRXUVHVKDGPDQ\VXFKH[SHULHQFHVLQOLWHUDU\WUDQVODWLRQFODVVHVZKHUHWKH\ZHUHDVNHGWRWUDQVODWH KLJKO\FRPSOH[OLWHUDU\WH[WVRIWHQLQGHHGRXWRIWKHLUPRWKHUWRQJXH&RQYHUVHO\WRRPDQ\FRRSHUDWLYHWH[WV DQGH[WUHPHERUHGRPFDQUHVXOW,QWKHORFDOL]DWLRQLQGXVWU\IRUH[DPSOHWUDQVODWLQJVLPLODUWH[WW\SHV HQGOHVVO\GRHVQRWDOZD\VOHDGWRDKLJKOHYHORIVDWLVIDFWLRQZLWKRQH¶VZRUN ,IWKHUHLVQRSOD\WKHJDPHRIWUDQVODWLRQLVOLNHO\WRORVHLWVDSSHDO$WKHRUHWLFLDQRISOD\OLNH5RJHU&DLOORLV ZRXOGLQGHHGDUJXHWKDWWKHQRWLRQRIRSWLPDOVWUDWHJ\LVLQFRPSDWLEOHZLWKWKHQRWLRQRIJDPHDVLWLV FRPPRQO\XQGHUVWRRG,WLVXQSUHGLFWDELOLW\WKDWPDNHVJDPHVZRUWKSOD\LQJ&DLOORLV $JDPH ZKHUHWKHUHLVDOZD\VRQHVXUHZD\RIZLQQLQJLVQRORQJHUDJDPH7KHH[LVWHQFHRIPXOWLSOH7/WUDQVODWLRQV IRURQH6/WH[WSRLQWWRWKHOXGLFRSHQHQGHGQHVVRIWUDQVODWLRQZKHUHLQ(FR¶VIDPRXVIRUPXODWLRQWKH WUDQVODWLRQDVPXFKDVWKHVRXUFHWH[WLVDQµRSHQZRUN¶(FR )RUWKLVUHDVRQWROLPLWDQDO\VHVRI WUDQVODWLRQWRWKHSHUVSHFWLYHVRIIRUPDOJDPHWKHRU\LVWRQHJOHFWRWKHUWKHRULHVRISOD\IURPGLVFLSOLQHVVXFK DVFKLOGSV\FKRORJ\SV\FKRDQDO\VLVDQGDQWKURSRORJ\WKDWVKHGLQWHUHVWLQJOLJKWRQWKHSURFHVVRIWUDQVODWLRQ %UXQHUHWDO:LQQLFRWW%DWHVRQ± &KLOGSV\FKRORJLVWVDUHSDUWLFXODUO\LQWHUHVWHGLQ WKHPHFKDQLVPVRILGHQWLILFDWLRQDQGSURMHFWLRQLQFKLOGUHQ¶VJDPHVDQGWKHUROHRISOD\LQWKHGHYHORSPHQWRI WKHFRJQLWLYHVNLOOVRIK\SRWKHWLFDOWKLQNLQJIRUHVLJKWDQGVSHFXODWLRQ3V\FKRDQDO\VWVKDYHVWUHVVHGDPRQJ RWKHUWKLQJVWKHLPSRUWDQFHRISOD\IRUWKHFRQVWUXFWLRQRIVHOIDQGLQSDUWLFXODUIRUWKHHPHUJHQFHRIWKH WUDQVLWLRQDODUHDRIFUHDWLYLW\3LFDUG ,WLVSRVVLEOHWRDUJXHWKDWSURMHFWLRQLGHQWLILFDWLRQIRUHVLJKWDQGWKHFRQVWUXFWLRQRIVHOIDUHGLPHQVLRQVERWK WRWUDQVODWLRQGLGDFWLFVDQGWRWUDQVODWLRQSUDFWLFH&URQLQ± ,QDGGLWLRQWKHQRWLRQRIGLVWDQFH ZKLFKLVLPSOLFLWLQWKHILFWLYHVHSDUDWHQDWXUHRIWKHJDPHDQGLQWKHWUDQVODWRU¶VUHODWLRQWRWKH6/DQG7/ FDQXVHIXOO\EHUHODWHGWR%DWHVRQ¶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

)XUWKHUUHDGLQJ %DWHVRQ%UXQHUHWDO%UXVV&DLOORLV&URQLQ'HODEDVWLWD(LJHQDQG :LQNOHU+HVERLV+XL]LQJD/HY\3LFDUG:LQQLFRWW

0,&+$(/&521,1

*HQGHUPHWDSKRULFVLQWUDQVODWLRQ 7KHKLVWRU\RIWUDQVODWLRQLVPDUNHGE\ZHOONQRZQGHEDWHVRYHUKRZEHVWWREHµIDLWKIXO¶,WLVQRWVXUSULVLQJ WKHUHIRUHWKDWILGHOLW\LQWUDQVODWLRQKDVEHHQFRQVLVWHQWO\GHILQHGLQWHUPVRIJHQGHUDQGVH[XDOLW\:KLOH WUDQVODWRUVDQGWKHRULVWVKDYHXVHGPDQ\PHWDSKRUVWRH[SODLQWKHWUDQVODWRU¶VZRUNIRUH[DPSOHWUDQVODWLRQLV OLNHSDLQWLQJRUFRS\LQJRUSXWWLQJRQQHZFORWKHVRUUHDGLQJRUHYHQOLNHZULWLQJLWVHOI WKRVHPHWDSKRUVWKDW UHODWHWRJHQGHUUHYHDOVRPHWKLQJRIWKHSROLWLFVRIWUDQVODWLRQ7KH\UHYHDODQDQ[LHW\DERXWRULJLQVDQG RULJLQDOLW\DQGDSRZHUVWUXJJOHRYHUWKHPHDQLQJRIGLIIHUHQFH



3DJH

)LGHOLW\WKXVLVQRWMXVWDQLVVXHRIKRZEHVWWRVKDSHWKHUHODWLRQVKLSEHWZHHQVRXUFHDQGWDUJHWWH[WVEXW DOVRDQLVVXHLQWKHµFRQWUDFW¶WKDWFKDUDFWHUL]HVPDUULDJH,QGHHGWKHGRXEOHVWDQGDUGWKDWLQPDQ\FXOWXUHV FKDUDFWHUL]HVWKDWFRQWUDFWDOVRFDSWXUHVWKHWUDGLWLRQDOZD\RIYLHZLQJWKHUHODWLRQVKLSEHWZHHQRULJLQDODQG WUDQVODWLRQMXVWDVLWLVDZRPDQ¶VQRWDPDQ¶VILGHOLW\DQGVH[XDOSXULW\WKDWPDWWHUPRVWILGHOLW\LVYLHZHG GLIIHUHQWO\GHSHQGLQJRQZKHWKHUWKHWH[WLVYLHZHGDVDPDOHRUDIHPDOH$V3LHUUH'DQLHO+XHWDGYLVHVLQKLV VHYHQWHHQWKFHQWXU\ZRUN'HLQWHUSUHWDWLRQHOLEULGXRLQ/HIHYHUHE µ:HVKRXOGIRUELGDQ\ OLFHQVHLQDWUDQVODWRUDVLQDSUHWW\DQGPRGHVWYLUJLQDVZHWU\WRVWDPSRXWLPSXGHQFHLQLQWHPSHUDWHPHQ¶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

$KLVWRULFDORYHUYLHZRIWKHPHWDSKRULFVRIJHQGHULQWUDQVODWLRQ +LVWRULFDOO\WKHJHQGHULQJRIWUDQVODWLRQRFFXUVDWOHDVWDVHDUO\DVWKHVHYHQWHHQWKFHQWXU\ZKHQWKHZHOO NQRZQWDJOHVEHOOHVLQILGqOHVZDVFRLQHGE\*LOOHV0p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¶6IDPRXVWUHDWLVHRQWUDQVODWLRQ 6HH*(50$175$',7,21675$7(*,(62)75$16/$7,21 'HEDWLQJWKHLVVXHRIZKHWKHUWKH HVVHQWLDOIRUHLJQQHVVRIWKHWH[WVKRXOGEHUHWDLQHGLQWUDQVODWLRQ6FKOHLHUPDFKHUDUWLFXODWHVZKDWLVDWVWDNHDV IROORZVµ:KRZRXOGQRWOLNHWRSHUPLWKLVPRWKHUWRQJXHWRVWDQGIRUWKHYHU\ZKHUHLQWKHPRVWXQLYHUVDOO\ DSSHDOLQJEHDXW\HDFKJHQUHLVFDSDEOHRI":KRZRXOGQRWUDWKHUVLUHFKLOGUHQZKRDUHWKHLUSDUHQWV¶SXUH HIILJ\DQGQRWEDVWDUGV"¶LQ/HIHYHUH 7UDQVODWRUVKDYHRIFRXUVHDOVRUHVLVWHGWKLVJHQGHULQJRIWKHWUDQVODWLRQRUWUDQVODWRUDVIHPDOHEXWKDYH WUDGLWLRQDOO\GRQHVRE\RSWLQJLQVWHDGIRUWKHPDVFXOLQHWHUPRIWKLVELQDU\RSSRVLWLRQ7KXVZHRFFDVLRQDOO\ VHHGLVFXVVLRQVRIWUDQVODWLRQLQZKLFKWKHWUDQVODWRULVDGYLVHGDOEHLWLQGLUHFWO\WRXVXUSWKHDXWKRU¶VSDWHUQDO UROH7KH(DUORI5RVFRPPRQDGYLVHVWKHWUDQVODWRUWRµ&KXVHDQDXWKRUDV\RXFKXVHDIULHQG¶7KURXJKWKH IULHQGVKLSWKHWUDQVODWRUEHFRPHVWKHDXWKRULQ756WHLQHU 8QLWHGE\WKLV6\PSDWKHWLFN%RQG
:KLOHWKHWUDQVODWRULVSUHVHQWHGKHUHDVWKHIDWKHUDXWKRUWKHWH[WLWVHOILVDIHPDOHZKRPXVWEHWUHDWHGZLWK SDWHUQDOFDUHLELG :LWKKRZPXFKHDVHLVD\RXQJ0XVH%HWUD\¶G+RZQLFHWKH5HSXWDWLRQRIWKH0DLG
7KHWUDQVODWRU¶VGXW\LVWKHUHIRUHWRPDLQWDLQWKHWH[W¶VFKDVWLW\DQGYLUJLQLW\ZKLFKLVVRHDVLO\µ%HWUD\¶G¶ 7KHPHWDSKRUZRUNVEHFDXVH



3DJH

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± )LUVW,KDYHQRZGRQHDVWKHSHRSOHRI*RGZHUHFRPPDQGHGWRGRZLWKWKHLUFDSWLYHZRPHQWKDW ZHUHKDQGVRPHDQGEHDXWLIXO,KDYHVKDYHGRIIKLVKDLUDQGSDUHGRIIKLVQDLOVWKDWLV,KDYH ZLSHGDZD\DOOKLVYDQLW\DQGVXSHUIOXLW\RIPDWWHU«,KDYHSLHFHGKLVUHDVRQHNHGDQGPHQGHG KLVVLPLOLWXGHVPROOLILHGKLVKDUGQHVVSURORQJHGKLVFRUWDOONLQGRIVSHHFKHVFKDQJHGDQGPXFK DOWHUHGKLVZRUGVEXWQRWKLVVHQWHQFHRUDWOHDVW,GDUHVD\ QRWKLVSXUSRVH 7KHELEOLFDOSDVVDJHWRZKLFK'UDQWUHIHUVRXWOLQHVKRZDFDSWLYHZRPDQPD\EHPDGHDZLIHµ7KHQ\RXVKDOO EULQJKHUKRPHWR\RXUKRXVHDQGVKHVKDOOVKDYHKHUKHDGDQGSDUHKHUQDLOV¶'HXW5HYLVHG6WDQGDUG 9HUVLRQ 'UDQWDFOHUJ\PDQWUDQVODWLQJDVHFXODUDXWKRUPXVWPDNH+RUDFHDVXLWDEOHµZLIH¶,QGRLQJVR 'UDQWWUDQVIRUPV+RUDFHLQWRDPHWDSKRULFIHPDOHWKHHIIHFWRIZKLFKLVJOLPSVHGLQWKHSURQRPLQDOUHIHUHQFH ZKHUHKLVVHHPVWRUHIHUWRµZRPHQ¶7KHVH[XDOYLROHQFHDOOXGHGWRLQ'UDQW¶VFRORQL]LQJPHWDSKRUVPLUURUV WKHVH[XDOYLROHQFHRIFRQTXHVWWRWKLVGD\ZKHUHUDSHLVXQIRUWXQDWHO\VWLOODSDUWRIZDU

7KHPHWDSKRULFVRIJHQGHULQPRGHUQWUDQVODWLRQVWXGLHV 0RGHUQWKHRULHVRIWUDQVODWLRQKDYHSUHVHUYHGWKHVHJHQGHUHGIHDWXUHVRIWKHWUDQVODWLRQSURFHVV7KH\DUH FOHDUIRUH[DPSOHLQ*HRUJH6WHLQHU¶V +(50(1(87,&027,21ZKHUHWKHWUDQVODWRUSHQHWUDWHV DQGFDSWXUHVDWH[WLQDQDFWH[SOLFLWO\FRPSDUHGWRHURWLFSRVVHVVLRQ7RFRPSHQVDWHIRUWKLVDSSURSULDWLYH UDSWXUHWKHWUDQVODWRUPXVWDOVRPDNHDPHQGVDWWHPSWVRPHDFWRIUHFLSURFLW\WRFRPSHQVDWHIRUWKHDFWRI HURWLFDJJUHVVLRQ6WHLQHU¶VPRGHOIRUWKLVGHULYHVIURP/HYL6WUDXVV¶V$QWKURSRORJLHVWUXFWXUDOHµZKLFK UHJDUGVVRFLDOVWUXFWXUHVDVDWWHPSWVDWG\QDPLFHTXLOLEULXPDFKLHYHGWKURXJKDQH[FKDQJHRIZRUGVZRPHQ DQGPDWHULDOJRRGV¶6WHLQHU :LWKWKHODQJXDJHRIHURWLFLVPFRLQFLGLQJZLWKWKDWRIFRORQLDOLVP 6WHLQHU¶VPHWDSKRULVQRWVRGLIIHUHQWIURPWKDWRI'UDQW ,QDQH[WHQVLRQRI6WHLQHU¶VZRUN6HUJH*DYURQVN\ DUJXHVWKDWWKH2HGLSDOPRGHOFDQH[SODLQWKH WUDQVODWRU¶VVHHPLQJO\FRQWUDGLFWRU\REOLJDWLRQVERWKWRJLYHWKHWH[WµFKDVW,QVWUXFWLRQ¶DVWKH(DUORI 5RVFRPPRQSXWVLW DQGWRUDYLVKLW,QSDWHUQDOLVWLFPRGHOVRUZKDWKHFDOOVµSLHWLVWLF¶RQHV*DYURQVN\ DUJXHVWKDWWKHWUDQVODWRUµFRQVLGHUVKLPVHOIDVWKHFKLOGRIWKHIDWKHUFUHDWRUKLVULYDOZKLOHWKHWH[WEHFRPHV WKHREMHFWRIGHVLUHWKDWZKLFKKDVEHHQFRPSOHWHO\GHILQHGE\WKHSDWHUQDOILJXUHWKHSKDOOXVSHQ¶LELG ,QFRQWUDVWWKHµFDQQLEDOLVWLF¶WUDQVODWRUFDSWXUHVDQGUDSHVWKHWH[WPXWLODWLQJLWLQ*DYURQVN\¶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



3DJH

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²DQGLPSOLFLWO\DJDLQVWDSROLWLFVRIWUDQVODWLRQWKDWGHSHQGVRQJHQGHUYLROHQFH

7UDQVODWLRQSUDFWLFHV )HPLQLVWVFKRODUVKLSKDVGUDZQDWWHQWLRQWRWKHFRQVLGHUDEOHERG\RIZULWLQJE\ZRPHQDQGKDVVRXJKWWR VXEYHUWWKHGRPLQDQWGLVFRXUVHVRIFXOWXUDOIRUPDWLRQDQGDXWKRULW\,WKDVSHUKDSVPDGHXVDEOHWROLVWHQWR WKHLQFUHDVLQJO\DXGLEOHQXPEHURIZRPHQWUDQVODWRUVZKRDUHEHJLQQLQJWRDVNDV6X]DQQH-LOO/HYLQHGRHV ZKDWLWPHDQVWREHDZRPDQWUDQVODWRULQDQGRIDPDOHWUDGLWLRQ6SHDNLQJVSHFLILFDOO\RIKHUWUDQVODWLRQRI *XLOOHUPR&DEUHUD,QIDQWH¶V/D+DEDQDSDUDXQLQIDQWHGLIXQWRDWH[WWKDWµPRFNVZRPHQDQGWKHLUZRUGV¶ VKHDVNV :KHUHGRHVWKLVOHDYHDZRPDQDVWUDQVODWRURIVXFKDERRN",VVKHQRWDGRXEOHEHWUD\HUWRSOD\ (FKRWRWKLV1DUFLVVXVUHSHDWLQJWKHDUFKHW\SHRQFHDJDLQ"$OOZKRXVHWKHPRWKHU¶VIDWKHU WRQJXHZKRHFKRWKHLGHDVDQGGLVFRXUVHRIJUHDWPHQDUHLQDVHQVHEHWUD\HUV 7KHYHU\FKRLFHRIWH[WVWRZRUNZLWKWKHQSRVHVDQLQLWLDOGLOHPPDIRUWKHIHPLQLVWWUDQVODWRUZKLOHDWH[W VXFKDV&DEUHUD,QIDQWH¶VPD\EHLGHRORJLFDOO\RIIHQVLYHQRWWRWUDQVODWHLWZRXOGFDSLWXODWHWRWKDWORJLF ZKLFKDVFULEHVDOOSRZHUWRWKHRULJLQDOIDWKHU )HPLQLVWWUDQVODWRUVKDYHWKXVDGYRFDWHGDWUDQVODWLRQRI UHVLVWDQFHWKDWJLYHVYRLFHWRDQWDJRQLVWZRUNVEXWDOVRµVSHDN>V@ZLWKWKHPDQGSODFH>V@WKHPLQDODUJHU FRQWH[W¶0DLHU (YHQVXFKDSSDUHQWO\VWUDLJKWIRUZDUGDVSHFWVRIWUDQVODWLRQDVGHFLGLQJRQWKHJHQGHU RIDSURQRXQSRVHGLOHPPDVWRWKHWUDQVODWRU,QGHHGWKHLVVXHVUHODWLQJWRJHQGHULQWKHSUDFWLFHRIWUDQVODWLRQ DUHP\ULDGYDU\LQJZLGHO\DFFRUGLQJWRWKHW\SHRIWH[WEHLQJWUDQVODWHGWKHODQJXDJHVLQYROYHGFXOWXUDO SUDFWLFHVDQGFRXQWOHVVRWKHUIDFWRUV 2WKHUDUHDVRIWKHRU\DQGSUDFWLFHDOVRSURPLVHWRH[SORUHDQGTXHVWLRQWKHJHQGHURIWUDQVODWLRQ3RVWFRORQLDO UHVHDUFKIRUH[DPSOHKDVDOUHDG\EHJXQDFULWLFDOH[DPLQDWLRQRIWKHSROLWLFVRIWUDQVODWLRQLQWKHVKDSLQJRI FXOWXUDOWUDGLWLRQV0HWDSKRUVRIFRQTXHVWVXFKDVWKHRQHUHOLHGRQE\'UDQWLQKLVH[SODQDWLRQRIKLV WUDQVODWLRQSUDFWLFHDUHLQIRUPHGQRWMXVWE\DWKHRU\RIWUDQVODWLRQEXWE\DODUJHUSROLWLFDOV\VWHPDVZHOO 6WXGLHVRIWKHWUDQVODWLRQRISRSXODUFXOWXUHDQGLQSDUWLFXODURIWKHWUDQVODWLRQRIPRYLHVDQGWHOHYLVLRQ SURJUDPPHVDOVRSURPLVHWRH[SDQGRXUNQRZOHGJHRIWKHHIIHFWRIJHQGHULQDQGRQWUDQVODWLRQ 7KHZRUNRQJHQGHUDQGWUDQVODWLRQKRZHYHUKDVUHDOO\RQO\MXVWEHJXQ0XFKUHVHDUFKUHPDLQVWREHGRQHRQ JHQGHUHGSUDFWLFHVRIWUDQVODWLRQZKDWUROHKDYHZRPHQSOD\HGDVWUDQVODWRUV"KRZKDYHZRPHQDXWKRUVIDUHG LQWUDQVODWLRQ"KRZKDVJHQGHULWVHOIEHHQWUDQVODWHG"ZKDWVSHFLDOSUREOHPVDUHUDLVHGE\WUDQVODWLQJH[SOLFLWO\ IHPLQLVWWH[WVLQWRFHUWDLQODQJXDJHV"$VZRPHQZULWHWKHLURZQPHWDSKRUVRIFXOWXUDOSURGXFWLRQLWPD\EH SRVVLEOHWRFRQVLGHUWKHDFWVRIDXWKRULQJFUHDWLQJRUOHJLWLPL]LQJDWH[WRXWVLGHRIWKHJHQGHUELQDULHVWKDW KDYHVRIDUFLUFXPVFULEHGZRPHQ¶VZRUNERWKLQVLGHDQGRXWVLGHWKHDFDGHP\ 6HHDOVR 0(7$3+252)75$16/$7,21

)XUWKHUUHDGLQJ &KDPEHUODLQ'LD]'LRFDUHW]*RGDUG+DQQD\.URQWLULV/HYLQH0DLHU 5RELQVRQ6LPRQYRQ)ORWRZ

/25,&+$0%(5/$,1



3DJH

+ +HUPHQHXWLFPRWLRQ +HUPHQHXWLFVLVDQLQWHUSUHWLYHPHWKRGGHYHORSHGE\WKH*HUPDQ5RPDQWLFVHVSHFLDOO\)ULHGULFK 6&+/(,(50$&+(5± VHH*(50$175$',7,21 DQG:LOKHOP'LOWKH\± DQG QDPHGDIWHUWKH*UHHNZRUGKHUPHQHXHLQPHDQLQJµWRXQGHUVWDQG¶,WLQYROYHVDQHPSDWKLFSURMHFWLRQRIWKH LQWHUSUHWHU¶VGHVLUHWRXQGHUVWDQGLQWRWKHDFWLYLW\VKHLVDWWHPSWLQJWRXQGHUVWDQG5DWKHUWKDQREMHFWLI\LQJWKH DFWLYLW\WKH\ZDQWWRVWXG\DQGUDWKHUWKDQWUHDWLQJLWDVDVWDEOHH[WHUQDOREMHFWWREHH[DPLQHGZLWKWKH PHWKRGVRIHPSLULFDOVFLHQFHKHUPHQHXWVLPDJLQHWKHPVHOYHVLQVLGHWKHDFWLYLW\IHHOVXEMHFWLYHO\ZKDWLW PXVWKDYHEHHQOLNHWREHRQHRIWKHZULWHUVRIWKH%LEOHWKHVXEMHFWPDWWHUWKHPHWKRGZDVRULJLQDOO\ GHYHORSHGIRU DQGDWWHPSWWRGHVFULEHZKDWWKH\ILQGIURPZLWKLQ 7KHWHUPKHUPHQHXWLFPRWLRQLV*HRUJH6WHLQHU¶VIURPKLVFKDSWHUKHDGLQJRIWKDWQDPHLQ$IWHU%DEHO ,WLVKLVDWWHPSWWRSURMHFWKLPVHOILQWRWKHDFWLYLW\RIWUDQVODWLQJDQGWRGHVFULEHLWIURPZLWKLQ²DQ DWWHPSWWKDWLVRQWKHIDFHRILWIDUHDVLHUWKDQSURMHFWLQJRQHVHOILQWRWKHH[SHULHQFHRIWKHZULWHUV RI *HQHVLVVD\VLQFH6WHLQHUKDVGRQHWUDQVODWLRQVKLPVHOI6WLOOVLQFHKHFODLPVWREHH[SORULQJQRWKLVW\SLFDO DFWRIWUDQVODWLRQEXWWKHDFWRIWUDQVODWLRQLQLWVHQWLUHW\WUDQVODWLRQDVLWKDVEHHQH[SHULHQFHGIURPZLWKLQE\ HYHU\WUDQVODWRUZKRHYHUOLYHGKLVSURMHFWLVDWOHDVWDVSUREOHPDWLFDVWKHDWWHPSWWRJHWLQVLGHDVFULSWXUDO DXWKRU¶VVNLQ2QWKHRWKHUKDQGDQHPSLULFDOVFLHQWLILFDSSURDFKWRWKHVDPHWRSLFZRXOGEHHTXDOO\ SUREOHPDWLFIRUVOLJKWO\GLIIHUHQWUHDVRQVWKHHPSLULFDOVFLHQWLVWZRXOGQRWWUXVWKLVKHURZQHPSDWKLF LQWXLWLRQVEXWZRXOGJDWKHUDUDQGRPVDPSOHRIWUDQVODWRUVDQGDWWHPSWWRJHQHUDOL]HIURPWKHLUREVHUYHG EHKDYLRXUWRµWKH¶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¶WOHDUQ IRUHLJQODQJXDJHVµ³7KLVPHDQVQRWKLQJ´DVVHUWVWKHH[DVSHUDWHGFKLOGLQIURQWRIKLV/DWLQUHDGHURUWKH EHJLQQHUDW%HUOLW]¶6WHLQHU 7KHUHDGHUZKRVWRSVDWWKLVVWDJHGRHVQ¶WWUDQVODWHWKHRULJLQDOWH[WLV WRRZRQGHUIXOWRRSHUIHFWDVLWLVHYHUWRVXEPLWWRWUDQVODWLRQ7KHWUDQVODWRUZKRVWRSVDWWKLVVWDJHSURGXFHV SDLQIXOO\OLWHUDOUHQGLWLRQVWKH6/ZRUGVLQWKHLURULJLQDOVHTXHQFLQJDUHWRRZRQGHUIXOWRIRUFHLQWR7/ KDELWDWV µ$IWHUWUXVWFRPHVDJJUHVVLRQ7KHVHFRQGPRYHRIWKHWUDQVODWRULVLQFXUVLYHDQGH[WUDFWLYH¶LELG +HUH 6WHLQHUGUDZVRQ+HJHODQG+HLGHJJHUWRH[SORUHWKHDJJUHVVLYHQDWXUHRIDOOXQGHUVWDQGLQJDOOLQWHUSUHWDWLRQ ²RIHYHU\KHUPHQHXWLF7KHWUDQVODWRUJRHVDEURDGHQWHUVWKH6/WH[WGULYHQQRORQJHUE\SDVVLYHWUXVWEXW E\WKHDFWLYHLQWHQWLRQRIWDNLQJVRPHWKLQJDZD\RIJUDEELQJXSILVWIXOVRIPHDQLQJDQGZDONLQJRIIZLWK WKHP7KHVXEPHUJHGLPSHULDOLVWWHQRURIPXFK:HVWHUQ



3DJH

WUDQVODWLRQWKHRU\EHFRPHVRSHUDWLYHKHUHIURP-(520(¶VVHH/$7,175$',7,21 WDONRIWDNLQJWKH RULJLQDOFDSWLYHWKURXJKWKH*HUPDQ5RPDQWLFV¶DWWDFNVRQ)UHQFKQHRFODVVLFLVPIRUWDNLQJ+RPHUFDSWLYH 5HFHQWVWXGLHVRIWUDQVODWLRQDVHPSLUHLQFOXGH5DIDHO &KH\ILW] 1LUDQMDQD DQG9HQXWL 6HHDOVR0(7$3+252)75$16/$7,21 7KHWKLUGVWDJHRUPRYHIRU6WHLQHULVLQFRUSRUDWLRQµ7KRXJKDOOGHFLSKHUPHQW¶KHVD\VµLVDJJUHVVLYHDQGDW RQHOHYHOGHVWUXFWLYHWKHUHDUHGLIIHUHQFHVLQWKHPRWLYHRIDSSURSULDWLRQDQGLQWKHFRQWH[WRI³WKHEULQJLQJ EDFN¶´LELG ,QWKHVHFRQGVWDJHWKHWUDQVODWRUJRHVDEURDGZLWKSOXQGHULQPLQGLQWKHWKLUGVKH UHWXUQVKRPHZLWKSOXQGHULQKDQG7KHWUDQVODWRUZKRVWRSVDWWKLVVWDJHVLQFHLWLVGLIILFXOWWRVWRSDWWKH VHFRQGZLWKRXWEULQJLQJDQ\WKLQJEDFN SURGXFHVDVVLPLODWLYHWUDQVODWLRQVWUDQVODWLRQVVRWKRURXJKO\ FRQIRUPHGWR7/QRUPVDVWREHDUQRWUDFHRIWKHLURULJLQVLQWKH6/ 7KHIRXUWKDQGILQDOPRYHLVUHVWLWXWLRQµ7KHWUDQVODWRUWKHH[HJHWLVWWKHUHDGHULVIDLWKIXOWRKLVWH[WPDNHV KLVUHVSRQVHUHVSRQVLEOHRQO\ZKHQKHHQGHDYRXUVWRUHVWRUHWKHEDODQFHRIIRUFHVRILQWHJUDOSUHVHQFHZKLFK KLVDSSURSULDWLYHFRPSUHKHQVLRQKDVGLVUXSWHG¶LELG 7KLVLV6WHLQHU¶VDWWHPSWWRVKLIWWKHJURXQGVRQ ZKLFKILGHOLW\KDVEHHQXQGHUVWRRGIURPDVWDWLFRQHWRRQHFRUUHVSRQGHQFHEHWZHHQ6/DQG7/WH[WVWRDQ HWKLFDOSURFHVVZKHUHE\SRZHUVHL]HGLVUHOLQTXLVKHGLQUHVWRUDWLYHZD\V7KHWUDQVODWRUKDVLQYDGHGWKH6/ DQGVWROHQVRPHRILWVSURSHUW\QRZVKHPDNHVUHVWLWXWLRQE\UHQGHULQJWKH6/WH[WLQWRD7/WKDWLVEDODQFHG EHWZHHQWKHGLYHUJHQWSXOOVRIWKH6/DQG7/FXOWXUDOFRQWH[WV5HVWLWXWLRQLVSUREDEO\LQIDFWDIDQF\ZD\RI UHVWDWLQJWKHROGDGDJHµDVIDLWKIXOO\DV\RXFDQDVIUHHO\DV\RXPXVW¶7KHWUDQVODWRUIRU6WHLQHUPXVWEH ZLOOLQJWRJLYHEDFNWRWKH6/DVPXFKDVVKHKDVWDNHQ²IRUH[DPSOHE\WUDQVIRUPLQJWKH7/WKURXJK SUHVVXUHIURP6/SKUDVLQJV 7DNHQDVDZKROH6WHLQHU¶VKHUPHQHXWLFPRWLRQLVDUHYLVLRQRI*RHWKH¶VWKUHHHSRFKVRIWUDQVODWLRQIURPWKH QRWHVWR:HVWgVWOLFKHU'LYDQ *RHWKH¶VILUVWHSRFKLVDSSURSULDWLYHWKHUDGLFDOGRPHVWLFDWLRQRID IRUHLJQWH[WH[HPSOLILHGE\/87+(5¶V%LEOHVHH*(50$175$',7,21 6WHLQHUH[SDQGVWKLVLQWRKLV VHFRQGDQGWKLUGVWDJHVRIWKHKHUPHQHXWLFPRWLRQDJJUHVVLRQDQGLQFRUSRUDWLRQXQGHUWKHDVVXPSWLRQ SUHVXPDEO\WKDWWKHUHLVDVLJQLILFDQWGLIIHUHQFHEHWZHHQJRLQJDEURDGZLWKWKHLQWHQWRIVHL]LQJSURSHUW\DQG DFWXDOO\EULQJLQJLWKRPHHYHQWKRXJKLWLVGLIILFXOWWRVKRZZKDWLPSDFWWKLVVXEMHFWLYHGLIIHUHQFHKDVRQ DFWXDOWUDQVODWLRQV *RHWKH¶VVHFRQGHSRFKLVIX]]\KHZDQWVLWWREHWKHDQWLWKHVLVRIDSSURSULDWLRQDQGLQIDFWLQKLVHDUOLHU IRUPXODWLRQV²DVLQ6FKOHLHUPDFKHU¶VKHUPHQHXWLFLQµ7KH'LIIHUHQW0HWKRGVRI7UDQVODWLQJ¶ ²WKH DQWLWKHVLVKDGEHHQFOHDU\RXHLWKHUEULQJWKHDXWKRUKRPHWRWKHUHDGHURU\RXWDNHWKHUHDGHUDEURDGWRPHHW WKHDXWKRU


3DJH

ZRXOGODWHULQµ7KH7DVNRIWKH7UDQVODWRU¶ SLFNXSWKLVPHVVLDQLVPDQGWDNHLWWRQHZKHLJKWVVHH 385(/$1*8$*( DQGZKLOH6WHLQHUGUDZVKHDYLO\RQERWK*RHWKHDQG%HQMDPLQWKURXJKRXWKLVERRNKH DOVRVLJQLILFDQWO\VHFXODUL]HVKLVSUHGHFHVVRUV¶P\VWLFLVPUHDGVLWDVHWKLFDOUDWKHUWKDQHVFKDWRORJLFDODV GLUHFWHGWRZDUGJRRGWUDQVODWLRQUDWKHUWKDQWKHUHGHPSWLRQRIWKHZRUOG 1XPHURXVSUREOHPVUHPDLQZLWK6WHLQHU¶VIRUPXODWLRQ2QHLVWKDWZKLOHKHH[SOLFLWO\ZDQWVWRPDNHKLV IRXUIROGPRYHPHQWDQLGHDOPRGHORIHYHU\LQGLYLGXDODFWRIWUDQVODWLRQKHDOVRZDQWVWRLOOXVWUDWHLWZLWK VSHFLILFWUDQVODWLRQVIURPWKHSDVW²DQGLQWKHFRXUVHRILOOXVWUDWLQJWKHIRXUPRYHVKHEHJLQVWRWUHDWWKHPOLNH VWDEOHFDWHJRULHVIRUWKHFODVVLILFDWLRQRIWUDQVODWLRQV7KXV/XWKHU¶V%LEOHDQG9ODGLPLU1DERNRY¶V(XJHQH 2QHJLQDUHERWKFODVVLILHGDVLQFRUSRUDWLYHWUDQVODWLRQVWKLVFODVVLILFDWLRQLVERWKWULYLDOO\DFFXUDWHLQWKDWDOO WUDQVODWLRQVE\GHILQLWLRQLQFRUSRUDWHIRUHLJQWH[WVLQWRDGRPHVWLFFRQWH[WDQGZLOGO\SUREOHPDWLFLQWKDW 1DERNRY¶VUDGLFDOOLWHUDOLVPLVIDUPRUHDJJUHVVLYHWRZDUGV(QJOLVKWKH7/WKDQLWLVWRZDUGV5XVVLDQWKH 6/,QWKDWVHQVHLWPLJKWKDYHEHHQWKRXJKWRIDVPRUHOLNHWKHPRYHRIWUXVW²H[FHSWWKDWDVIRU*RHWKHLWLV GLIILFXOWIRU6WHLQHUWRH[SODLQMXVWKRZWUXVWFDQPRWLYDWHDVLQJOHWUDQVODWLRQZLWKRXWSURFHHGLQJWRWKHRWKHU WKUHHPRYHV $QRWKHUSUREOHPLVWKDW6WHLQHUGRHVDOORZ*RHWKHDQG%HQMDPLQWRLQMHFWDOLWWOHRIWKHLUGLDOHFWLFDO PHVVLDQLVPLQWRKLVKHUPHQHXWLFPRWLRQµ7KHWUXHLQWHUOLQHDU¶KHZULWHVµLVWKHILQDOXQUHDOL]DEOHJRDORIWKH KHUPHQHXWLFDFW+LVWRULFDOO\SUDFWLFDOO\WKHLQWHUOLQHDUDQGPRWjPRWPD\LQGHHGEHDFUXGHGHYLFH%XW ULJRURXVO\FRQFHLYHGLWHPERGLHVWKDWWRWDOLW\RIXQGHUVWDQGLQJDQGUHSURGXFWLRQWKDWXWWHUWUDQVSDUHQF\ EHWZHHQODQJXDJHVZKLFKLVHPSLULFDOO\XQDWWDLQDEOHDQGZKRVHDWWDLQPHQWZRXOGVLJQDODUHWXUQWR$GDPLF XQLVRQRIKXPDQVSHHFK¶LELG &OHDUO\KHUHKHZDQWVOLWHUDOLVPWRVHUYHERWKDVDFUXGHGHYLFHDWWKH EHJLQQLQJRIWKHKHUPHQHXWLFDFWLQWKHIRUPRIWUXVWDQGDVLWVILQDOXQUHDOL]DEOHJRDOLQDQHVFDODWLRQRI UHVWLWXWLRQDQGIRUWKDWPDWWHULQLQGLYLGXDOFDVHVOLNH1DERNRY¶VWUDQVODWLRQRI3XVKNLQDVLOOXVWUDWLRQVRIWKH RWKHUWZRPRYHVDVZHOO 7KLVPLJKWKDYHZRUNHGEHWWHUKDG6WHLQHUVWXFNPRUHFORVHO\ZLWKWKHGLDOHFWLFDO IRUPRI*RHWKH¶VWKUHHHSRFKVWKHFUXGHWUXVWLQJDPDWHXUOLWHUDOLVWWKHVLV OHDUQVWRWUDQVODWHVHQVHIRUVHQVH ZKLFKWKH*HUPDQ5RPDQWLFWUDGLWLRQIURP+HUGHUWR+HLGHJJHUFRDFKHV6WHLQHUWRWKHPDWL]HDVDJJUHVVLRQ DQGLQFRUSRUDWLRQDQWLWKHVLV EXWGLVFRYHUVZKDWDQLPSRYHULVKLQJYLROHQFHWKLVGRHVWRWKH6/WH[WDQG UHWXUQVWROLWHUDOLVPZLWKDQHZFRPSOH[LW\UDLVHVOLWHUDOLVPWRDKLJKHUSRZHULQWHUOLQHDUOLWHUDOLVPDVSHUIHFW ZRUGIRUZRUGDVZHOODVVHQVHIRUVHQVHHTXLYDOHQFHEHWZHHQWZRWH[WVWKHXOWLPDWHXQDWWDLQDEOHLGHDORI :HVWHUQWUDQVODWLRQV\QWKHVLV 7KHYDJXHQHVVRI6WHLQHU¶VIRXUWKPRYHDQGRIWKHKHUPHQHXWLFPRWLRQDVD ZKROHVXUHO\KDVVRPHWKLQJWRGRZLWKKLVGHVLUHWRUHWDLQVRPHWKLQJRIWKLVURPDQWLFV\QWKHVLVDQGLWV UHGHPSWLYHSRWHQWLDO ZKLOHQRWTXLWHIDOOLQJLQWRWKHWUDSRIXQDWWDLQDELOLW\+HZDQWVKLVKHUPHQHXWLFPRWLRQ WREHERWKDQXQDWWDLQDEOHLGHDOPRGHODPDSIRUWKHDSRFDO\SWLFDFWRIWUDQVODWLRQWKDWZLOOWUDQVIRUPDOO KXPDQLW\DVWKH*HUPDQ5RPDQWLFWUDGLWLRQKDVLPDJLQHGLWWREHDQGDQHPSLULFDOWD[RQRP\LQWRZKLFKKH FDQILWLQGLYLGXDOWUDQVODWLRQVDQGKHGRHVSURYLGHQXPHURXVH[DPSOHVRIZKDWKHFDOOVUHVWLWXWLYHWUDQVODWLRQV ²ZKROO\VXFFHVVIXOWUDQVODWLRQVWKDWE\WKH5RPDQWLFV¶OLJKWVVKRXOGKDYHEHHQLPSRVVLEOH )RUDOOLWVSUREOHPVKRZHYHU6WHLQHU¶VKHUPHQHXWLFPRWLRQVWDQGVDVDVDOXWDU\DOWHUQDWLYHWRUHFHQWOLQJXLVWLF DQGVRFLRORJLFDOV\VWHPVPRGHOVGHYHORSHGIRUWKHSURFHVVRIWUDQVODWLRQVHH1250$7,9(02'(/ %\ H[SORULQJWKHJHRSROLWLFDOLGHRORJLFDODQGVRFLDOSV\FKRORJLFDODVSHFWVRIWUDQVODWLRQ6WHLQHUFRQVROLGDWHG PXFKRI*HUPDQ5RPDQWLFWUDQVODWLRQWKHRU\IRUFRQWHPSRUDU\KHUPHQHXWLFVDQGKHOSHGVHWWKHVWDJHIRU UHFHQWVWXGLHVRIWUDQVODWLRQDVLPSHULDOLVPE\5DIDHO&KH\ILW]1LUDQMDQDDQGRWKHUVVHH0(7$3+252) 75$16/$7,21

)XUWKHUUHDGLQJ %HQMDPLQ%XUNH&KDX*RHWKH+RZDUG2UPLVWRQDQG6FKULIW3DOPHU 6WHLQHU

'28*/$652%,1621



3DJH

+LVWRU\RIWUDQVODWLRQ ,QWHUHVWLQWKHKLVWRU\RIWUDQVODWLRQKDVJURZQLQUHFHQW\HDUVFRQIHUHQFHVKDYHIRFXVHGRQWKHVXEMHFW QXPHURXVERRNVKDYHDSSHDUHGDQGDPELWLRXVJURXSSURMHFWVKDYHEHHQODXQFKHG3HUKDSVPRUHVLJQLILFDQW VFKRODUVKDYHUHSHDWHGO\FDOOHGIRUHYHQPRUHZRUNWREHGRQHHPSKDVL]LQJWKHXUJHQF\RIFRQVWUXFWLQJDQHZ VXEGLVFLSOLQHZLWKDSSURSULDWHPHWKRGVDQGWKHRUHWLFDOPRGHOV 6WXG\LQJWKHKLVWRU\RIWUDQVODWLRQLVQRWDQHZHQGHDYRXU-XVWDVWUDQVODWRUVKDYHIUHTXHQWO\UHIOHFWHGRQWKHLU DUWVRKDYHWKH\RIWHQFDVWDJODQFHDWWKHKLVWRU\RIWKHLUSURIHVVLRQ,QKLVZRUNµ2QWKH%HVW:D\RI 7UDQVODWLQJ¶+XHWGLVFXVVHVWKHWUDQVODWRUVRI$QWLTXLW\VXFKDV4XLQWLOLDQDQG&LFHURDQGFRPSDUHVWKHLU LGHDVRQWUDQVODWLRQZLWKWKRVHRI6W-(520(VHH/$7,175$',7,21 (5$6086VHH'87&+ 75$',7,21 DQGRWKHUV/HIHYHUHE +XHW¶VDLPLQSUHVHQWLQJWKHYLHZVDQGDFKLHYHPHQWVRIWKHSDVW DVKLVWLWOHVXJJHVWVLVWRGHWHUPLQHKRZWRWUDQVODWH6LPLODUO\6DPXHO-RKQVRQZULWLQJLQ7KH,GOHULQ WUDFHVWKHKLVWRU\RIWUDQVODWLRQIURPDQFLHQW*UHHFHWRVHYHQWHHQWKFHQWXU\(QJODQGWRLOOXVWUDWHWKHWULXPSK RIQRQOLWHUDOWUDQVODWLRQ-RKQVRQ± :KLOHKLVWRULFDOIUDJPHQWVVXFKDVWKHVHDUHZRUWK\RIFRQVLGHUDWLRQ²DµKLVWRU\RIKLVWRULHV¶KDV\HWWREH ZULWWHQ²WKLVHQWU\ZLOOIRFXVRQWKHHIIRUWVRIFRQWHPSRUDU\VFKRODUV:KDWGLVWLQJXLVKHVWKHPRUHUHFHQW KLVWRULFDOVWXGLHVIURPSUHYLRXVRQHVLVDQDWWHPSWWRSUHVHQWDPRUHGLVLQWHUHVWHGVWUXFWXUHGRUV\VWHPDWLF YLHZRIWKHSDVW +LVWRU\LVRQWKHFXUULFXOXPLQPDQ\GLVFLSOLQHVWKHUHLVDKLVWRU\RIPXVLFPHGLFLQHVFLHQFHHYHQDKLVWRU\ RIDFFRXQWLQJVRPHWLPHVFRQVWLWXWLQJHQWLUHXQLYHUVLW\GHSDUWPHQWVRUDFDGHPLFSURJUDPPHV7UDQVODWLRQ VFKRROVDUHQRH[FHSWLRQLQ&DQDGDIRUH[DPSOHWKHILUVWFRXUVHRQWKHKLVWRU\RIWUDQVODWLRQZDVFUHDWHGE\ 3DXO+RUJXHOLQDWWKH8QLYHUVLWp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µ,WLVWLPHWRJLYHWKHKLVWRU\RI WUDQVODWLRQWKHSODFHLWGHVHUYHV¶'¶KXOVWWUDQVODWHG ,WLVQRWVXIILFLHQWWRUHFRJQL]HWKHLPSRUWDQFH RIKLVWRU\KRZHYHULWLVDOVRHVVHQWLDOWRIRUPXODWHWKHWDVNRIWKHWUDQVODWLRQKLVWRULDQLQDPRUHH[SOLFLWDQG V\VWHPDWLFPDQQHU'¶KXOVW/DPEHUWF3\PE

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



3DJH

KLVWRU\LVµWKHUHHQDFWPHQWRISDVWWKRXJKWLQWKHKLVWRULDQ¶VRZQPLQG¶&ROOLQJZRRG 6RPH WKLQNHUVKDYHFRPHWRORRNXSRQKLVWRULRJUDSK\DVDOLWHUDU\DUWHIDFWUHTXLULQJFUHDWLYLW\RQWKHSDUWRIWKH KLVWRULDQ:KLWH :KLOHWKHµREMHFWLYLW\TXHVWLRQ¶UHPDLQVXQUHVROYHG1RYLFN IUXLWIXOKLVWRULFDO HQTXLU\VHHPVSRVVLEOHQRQHWKHOHVVLWGHSHQGVQRWRQO\RQDEDODQFHGLQWHUDFWLRQEHWZHHQKLVWRULDQVDQG WKHLUIDFWVEXWDOVRRQDQDZDUHQHVVRIWKHFRPSOH[QDWXUHRIWKHµIDFWV¶WKHPVHOYHVK\EULGVEHORQJLQJWRERWK WKHµZRUOGRIWKLQJVDQGWKHZRUOGRIZRUGV¶6WDQIRUG $IXUWKHUGLVWLQFWLRQFDQEHPDGHEHWZHHQKLVWRU\XQGHUVWRRGDVWKHHYHQWVRIWKHSDVWUHFRXQWHGLQQDUUDWLYH IRUPDQGKLVWRULRJUDSK\ZKLFKLVWKHGLVFRXUVHXSRQKLVWRULFDOGDWDRUJDQL]HGDQGDQDO\VHGDORQJFHUWDLQ SULQFLSOHV7KHWHUPKLVWRULRORJ\UHIHUVWRWKHPHWKRGRORJ\RIZULWLQJKLVWRU\KRZHYHULWLVPRUHIUHTXHQWO\ UHSODFHGE\WKHWHUPKLVWRULRJUDSK\ZKLFKFDQWKXVKDYHDGRXEOHPHDQLQJ ,QFUHDVLQJO\WUDQVODWLRQVFKRODUVKDYHIHOWWKHQHHGWRUHIOHFWRQKRZWRZULWHKLVWRU\2QHRIWKHILUVW TXHVWLRQVWKDWDULVHVFRQFHUQVWKHREMHFWRIWKHKLVWRULFDOLQTXLU\+RZLVµWUDQVODWLRQ¶LWVHOIGHILQHG"'RHVWKH WHUPLQFOXGHERWKZULWWHQDQGRUDOIRUPVVXEGLVFLSOLQHVVXFKDVWHUPLQRORJ\DQGOH[LFRJUDSK\DQGUHODWHG DFWLYLWLHVVXFKDV$'$37$7,21DQG36(8'275$16/$7,21":RXOGDKLVWRU\RIµWUDQVODWLRQ¶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¶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µREMHFWLYH¶SLFWXUHRIFKDQJLQJLGHDVDERXWWUDQVODWLRQDQGWUDQVODWDELOLW\"2ULQGRFXPHQWLQJWKHFRQWULEXWLRQ PDGHE\WUDQVODWRUVWUDQVODWLRQWRLQWHOOHFWXDOKLVWRU\DUHKLVWRULDQVPRWLYDWHGE\DFRQFHUQIRULPSURYLQJWKH LPDJHRIWUDQVODWRUVDQGWUDQVODWLRQLQWKHH\HVRIRWKHUPHPEHUVRIVRFLHW\",WFRXOGEHDV-RVp/DPEHUW E KDVVXJJHVWHGWKDWWKHZULWLQJRIKLVWRU\VWHPVIURPDQHHGWROHJLWLPL]HDQHZGLVFLSOLQH,QWURGXFLQJ DKLVWRULFDOSHUVSHFWLYHLQWRWUDQVODWLRQVWXGLHVFDQDOVREULQJDERXWJUHDWHUWROHUDQFHRIWKHGLIIHUHQW DSSURDFKHVWRWUDQVODWLRQDQGFDQSURYLGHXQLW\WRWKHGLVFLSOLQH'¶KXOVW

:ULWLQJWKHKLVWRU\RIWUDQVODWLRQWKHWH[WV :LWKWKHHPHUJHQFHRIDQLQFUHDVLQJO\VHOIFRQVFLRXVGLVFLSOLQHZRUNVRQWUDQVODWLRQ



3DJH

EHJDQWRLQFOXGHKLVWRULFDOLQIRUPDWLRQDVSDUWRIDFRPSUHKHQVLYHWUHDWPHQWRIWKHVXEMHFW(DUO\H[DPSOHV LQFOXGH(GPRQG&DU\¶V/DWUDGXFWLRQGDQVOHPRQGHPRGHUQH DQG7KHRGRUH6DYRU\¶V7KH$UWRI 7UDQVODWLRQ ZKLFKSUHVHQWIDFWVDERXWWKHWUDQVODWRUVDQGWUDQVODWLRQVRIWKHSDVWDORQJZLWKWUDQVODWLRQ SULQFLSOHV7KHQRZFODVVLFZRUNVE\*HRUJH6WHLQHU$IWHU%DEHO /RXLV.HOO\7KH7UXH,QWHUSUHWHU DQG6XVDQ%DVVQHWW7UDQVODWLRQ6WXGLHV PDNHXVHRIKLVWRU\LQOD\LQJWKHIRXQGDWLRQVIRUD WKHRUHWLFDOVWXG\RIWUDQVODWLRQ2IWKHWKUHH.HOO\¶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¶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|WWLQJHQLQLWLDOO\FRQFHQWUDWHGRQGUDPDDQGWKHDWUHWUDQVODWLRQLQ*HUPDQVSHDNLQJFRXQWULHVIURP WKHODWHHLJKWHHQWKFHQWXU\RQ $QRWKHUZD\RIORRNLQJDWWKHKLVWRU\RIOLWHUDU\WUDQVODWLRQLVWRVWXG\WKHVXFFHVVLYHWUDQVODWLRQVDQG UHFHSWLRQRIJUHDWDXWKRUVVXFKDV+RPHURU6+$.(63($5(RUFHQWUDOWH[WVVXFKDV7KH$UDELDQ1LJKWV 2QHH[DPSOHRIWKLVDSSURDFKLVWKHFROOHFWLRQRIHVVD\VRQ(XURSHDQWUDQVODWLRQVRI6KDNHVSHDUHE\ 'HODEDVWLWDDQG'¶KXOVW 7KH%,%/(LVDQRWKHURIWKHVHVLJQLILFDQWZRUNVDOWKRXJKLWLVLQDFODVVRILWVRZQ,WVLPSRUWDQFHLVEDVHGRQ DSDUDGR[LWLVDFHQWUDOWH[WLQ:HVWHUQFXOWXUH\HWLWLVZULWWHQLQDODQJXDJHWKDWIHZSHRSOHFDQXQGHUVWDQG 7KHVWRU\RILWVWUDQVODWLRQWKHUHIRUHIURPWKH*UHFR5RPDQSHULRGWKURXJKWKH5HIRUPDWLRQDQGXSWRWKH PRGHUQHUDKDVEHHQWROGLQPDQ\ZD\V%LEOHWUDQVODWLRQLVFRYHUHGLQPRVWJHQHUDOZRUNVRIKLVWRU\DVZHOO DVLQVRPHVSHFLILFRQHV%UXFH6WLQH 7KHKLVWRU\RIWKHWUDQVODWLRQRIRWKHUVDFUHGWH[WVVXFKDV WKH725$+485¶Ɩ1RU.RUDQ



3DJH

DQG%KDJDYDG*LWDKDVDOVREHHQGRFXPHQWHGDOWKRXJKWRDOHVVHUH[WHQWEXWUHOLJLRXVWUDQVODWLRQLQJHQHUDO KDVUDUHO\EHHQFRQVLGHUHGIURPDFRPSDUDWLYHSHUVSHFWLYH&KDSWHURI'HOLVOHDQG:RRGVZRUWKDSS ± DWWHPSWVWRILOOWKLVJDSWKURXJKDQH[DPLQDWLRQRIWKHUROHRIWUDQVODWRUVLQWKHVSUHDGRIWKHPDMRU ZRUOGUHOLJLRQV 2WKHUW\SHVRIWUDQVODWLRQKDYHQRWUHFHLYHGDVPXFKDWWHQWLRQDVOLWHUDU\DQGUHOLJLRXVWUDQVODWLRQ6FLHQWLILF DQGWHFKQLFDOWUDQVODWLRQKDVEHHQUHIHUUHGWRE\VRPHKLVWRULDQV.HOO\ DQGUHFHQWO\H[DPLQHGIURP VSHFLILFSHUVSHFWLYHVIRUH[DPSOHLQDKLVWRU\RIWKHWUDQVODWLRQRIVFLHQWLILFGRFXPHQWVLQ&KLQD/L 'HOLVOHDQG:RRGVZRUWKD± 7KLVLVDQDUHDKRZHYHUZKLFKUHTXLUHVIXUWKHUZRUN,QWHUSUHWLQJ WRRKDVSOD\HGDFUXFLDOUROHLQWKHKLVWRU\RILQWHUQDWLRQDOUHODWLRQVEXWKDVQRWUHFHLYHGWKHWKRURXJK WUHDWPHQWLWGHVHUYHVGHVSLWHVRPHLQWHUHVWLQJPDWHULDOYDQ+RRI5RGLWL.XU] (DFKRI WKHVHWZRFDWHJRULHVRIWUDQVODWLRQDUHVXEMHFWVRIFKDSWHUVLQWKH),7KLVWRU\RIWUDQVODWLRQ'HOLVOHDQG :RRGVZRUWK *UHDWPRPHQWVLQWKHKLVWRU\RIWUDQVODWLRQ 7KHKLVWRU\RIWUDQVODWLRQKDVEHHQPDUNHGE\PRPHQWVRISDUWLFXODUSURGXFWLYLW\µVFKRROV¶RIWUDQVODWLRQWKDW KDYHFRDOHVFHGWKURXJKDFRQFXUUHQFHRISROLWLFDOFXOWXUDODQGOLQJXLVWLFFLUFXPVWDQFHVXVXDOO\XQGHUWKH SDWURQDJHRIDSDUWLFXODULQGLYLGXDO7KH%DJKGDG6FKRROZKLFKJURXSHGWRJHWKHUWUDQVODWRUVRIWKH$EEDVLG SHULRGDURXQGWKHSHUVRQRI+XQD\Q,%1,6+Ɩ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pPLHIUDQo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p /HIHYHUH DQG3DXO+RUJXHOLQ KDYHFRPSLOHGFROOHFWLRQVRIVWDWHPHQWVRQWUDQVODWLRQ/HIHYHUH¶V LVUHVWULFWHGWRWH[WVE\*HUPDQWKHRULVWVLQ(QJOLVKWUDQVODWLRQDQG+RUJXHOLQ¶VWRWKHµGRPDLQHIUDQoDLV¶ DSDUWIURPDIHZLQWURGXFWRU\VWDWHPHQWVE\/DWLQDXWKRUV6DQWR\R KDVFRPSLOHGDVLPLODUDQWKRORJ\RI 6SDQLVKWUDQVODWLRQWKHRU\DUUDQJHGFKURQRORJLFDOO$QJOLVKWUDQVODWLRQWKHRU\IURPWRLV SUHVHQWHGLQ756WHLQHU DQG)UHQFKWUDQVODWLRQWKHRU\IURP



3DJH

WRLQ'¶KXOVW &KHVWHUPDQ LVDFROOHFWLRQRIPRUHFRQWHPSRUDU\UHDGLQJVLQ WUDQVODWLRQWKHRU\6RPHDQWKRORJLHVDUHDFFRPSDQLHGE\DQDO\VLVRUH[SODQDWRU\PDWHULDOLQVRPHFDVHVWKH PDWHULDOLVSUHVHQWHGFKURQRORJLFDOO\ZKHUHDVLQRWKHUVLWLVRUJDQL]HGDFFRUGLQJWRJHQUHRUWKHPH'¶KXOVW IRUH[DPSOHGLYLGHVKLVYROXPHLQWRGLVFXUVLYHFDWHJRULHV/HIHYHUHE LVDFROOHFWLRQRIVHPLQDOWH[WV DERXWWUDQVODWLRQRULJLQDOO\ZULWWHQLQ/DWLQ)UHQFK*HUPDQDQG(QJOLVKWUDQVODWHGLQWR(QJOLVKE\WKHDXWKRU DQGFODVVLILHGDFFRUGLQJWRWRSLFWKHSRZHURISDWURQDJHWHFKQLTXHVRIWUDQVODWLQJDQGVRRQ5RELQVRQ¶V :HVWHUQ7UDQVODWLRQ7KHRU$URP+HURGRWXVWR1LHW]VFKH LVSHUKDSVWKHPRVWEURDGUDQJLQJLQVRIDU DVLWSUHVHQWVH[FHUSWVIURPRYHUDXWKRUVIURPWKHPLGILIWKFHQWXU\%&WRWKHHQGRIWKHQLQHWHHQWK FHQWXU\ZLWKDXVHIXOELRJUDSKLFDOQRWHRQHDFKDXWKRU

7RZDUGVPRUHFRPSUHKHQVLYHKLVWRULHVRIWUDQVODWLRQ 6LQFHWKHODWHVDQXPEHURIHIIRUWVKDYHEHHQPDGHWRSDLQWWKHKLVWRU\RIWUDQVODWLRQZLWKDEURDGHU EUXVK)UHGHULFN5HQHUSURSRVHVWRFRUUHFWWKHµQDUURZIRFXV¶RISUHYLRXVVWXGLHVFRQFHQWUDWLQJRQDQ LQGLYLGXDOODQJXDJHSDUWLFXODUFHQWXU\RUDVSHFLILFWUDQVODWRUDQGWRUHYHDOWKHµFRPPRQWKHRU\RIODQJXDJH DQGFRPPXQLFDWLRQ¶DQGµVKDUHGLGHDRIWUDQVODWLRQ¶XQGHUO\LQJWKHRU\DQGSUDFWLFHLQ:HVWHUQ(XURSH5HQHU ± +HQULYDQ+RRI SURYLGHVDULFKFRPSLODWLRQRIWUDQVODWRUVWUDQVODWLRQVDQGKLVWRULFDOEDFN JURXQGLQDIDLUO\EURDGKLVWRU\RIWUDQVODWLRQLQWKH:HVW0LFKHO%DOODUG FRYHUVWKHKLVWRU\RI WUDQVODWLRQIURP&LFHURWR%HQMDPLQZLWKVSHFLDOHPSKDVLVRQWKHVHDUFKIRUDWUDQVODWLRQPHWKRG 0RUHDPELWLRXVVWLOOLVWKHILYHYROXPHKLVWRU\XQGHUWDNHQE\+DQV9HUPHHUE %\PHDQVRI6NL]]HQRU VNHWFKHV9HUPHHUKLJKOLJKWVWKHEDVLFSULQFLSOHVWKDWKDYHJRYHUQHGWUDQVODWLRQDQGLQWHUSUHWDWLRQDWFHUWDLQ SHULRGVRIKLVWRU\%DVHGLQSDUWRQKLVRZQ6.23267+(25<9HUPHHU¶VKLVWRU\VHHNVWRGHWHUPLQHWKH H[WHQWWRZKLFKWUDQVODWRUVKDYHWDNHQDFFRXQWRIFXOWXUDOGLIIHUHQFHVDVZHOODVWKHH[SHFWDWLRQVDQG EHKDYLRXUDOFRQYHQWLRQVRIWKHWDUJHWDXGLHQFH$IWHUDSSUR[LPDWHO\WKHQLQWKFHQWXU\$'VSHFLDOHPSKDVLVLV SODFHGRQWUDQVODWLRQLQ*HUPDQVSHDNLQJDUHDV 7KHGLYHUVHPHWKRGVRIZULWLQJWKHKLVWRU\RIWUDQVODWLRQUHIOHFWWZRRSSRVLQJWHQGHQFLHVLQPRGHUQ KLVWRULRJUDSK\RQHFRQVLVWLQJLQVSOLWWLQJXSWKHILHOGLQWRVPDOOHUDQGVPDOOHUSORWVDVVSHFLDOL]DWLRQ LQFUHDVHVDQGWKHRWKHULQPRYLQJWRZDUGDµUHMRLQLQJRIWKHSLHFHV¶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lWLQ*|WWLQJHQVHH*(50$175$',7,21 7KH&HQWUHHPEDUNHGXSRQD FRRSHUDWLYHPXOWLGLVFLSOLQDU\SURJUDPPHWRLQYHVWLJDWHOLWHUDU\WUDQVODWLRQ7RROVZHUHGHYHORSHGIRUD KLVWRULFDOGHVFULSWLYHEUDQFKRIWUDQVODWLRQVWXGLHVLQWHQGHGWRLGHQWLI\ZKDWWUDQVODWLRQVUHDOO\ZHUHZKDW WKRXJKWZHQWLQWRWKHPDQGZKDWUROHWKH\SOD\HGLQDOLWHUDWXUHDQGFXOWXUH 7KHWHDPVHWRXWWRH[DPLQHUHSUHVHQWDWLYHWUDQVODWLRQVLQ*HUPDQVSHDNLQJFRXQWULHVLQLWLDOO\ZRUNLQJZLWK ODQJXDJHOLWHUDWXUHDQGFXOWXUHSDLUV%ULWLVK*HUPDQ6ZHGLVK*HUPDQ3ROLVK²*HUPDQHWF 7KH\GHDOW ZLWKWKHPRVWIUHTXHQWO\WUDQVODWHGZRUNVE\WKHPRVWIUHTXHQWO\WUDQVODWHGDXWKRUVVLQFHDERXWWKHHQGRIWKH HLJKWHHQWKFHQWXU\ZKHQWUDQVODWLRQEHFDPHDPDVVPDUNHWLQ*HUPDQVSHDNLQJFRXQWULHV,QDVHFRQGSKDVH DQHIIRUWZDVPDGHWRGHYHORSPXOWLODWHUDOSURMHFWV7KHEDVLFSUHPLVHLVWKDWKLVWRULFDOGHVFULSWLYHWUDQVODWLRQ VWXGLHVQHHGDWUDQVIHURULHQWHGDSSURDFKWKHKLVWRULFDOSURILOHRIDWUDQVODWLRQFDQEHVWEHZRUNHGRXWE\ FRQFHQWUDWLQJRQWKHPRVWVWULNLQJGLIIHUHQFHVEHWZHHQVRXUFHDQGWDUJHWWH[WV 7KHZRUNRIWKH*|WWLQJHQFHQWUHKDVUHVXOWHGLQQXPHURXVSXEOLFDWLRQVSULQFLSDOO\



3DJH

WKHVHULHV*|WWLQJHU%HLWUlJH]XU,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJ*|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|UWHUEXFKGHU 7UDQVODWLRQVZLVVHQVFKDIWLVDQHQF\FORSHGLFGLFWLRQDU\RIWUDQVODWLRQVWXGLHVHGLWHGE\+HLGHPDULH6DOHYVN\ %HUOLQ DQGWREHSXEOLVKHGE\-XOLXV*URRV9HUODJ,WDLPVWREULQJWRJHWKHUWUDQVODWLRQVFKRODUVKLSIURP (DVWHUQDQG:HVWHUQ(XURSH$VLJQLILFDQWSRUWLRQDSSUR[LPDWHO\SDJHVKDVEHHQVHWDVLGHWRFRYHUWKH KLVWRU\RIWUDQVODWLRQWKLVVHFWLRQLVFRRUGLQDWHGE\+DQV9HUPHHU+HLGHOEHUJ 7KH,QWHUQDWLRQDO(QF\FORSHGLDRI7UDQVODWLRQ6WXGLHVWKHPRVWDPELWLRXVWRGDWHLVWREHSXEOLVKHGE\ :DOWHUGH*UX\WHULQ±(GLWHGE\DJURXSRIVHYHQVFKRODUVLWLQFOXGHVDVHFWLRQRQ7UDQVODWLRQDQG &XOWXUDO+LVWRU\¶ZKLFKZLOOPDNHXSDERXWKDOIWKHWRWDOQXPEHURISDJHVRIWKLVSURSRVHGWKUHHYROXPH ZRUN,WZLOODOVRFRQWDLQWKHRUHWLFDODQGPHWKRGRORJLFDODUWLFOHVRQWKHWRSLFRIKLVWRULRJUDSK\7KHDLPLVWR FRYHUWKHKLVWRU\RIWUDQVODWLRQFRPSUHKHQVLYHO\IURPWKHHDUOLHVWWLPHVWRWKHSUHVHQWGD\DFURVVWKHJOREH DOWKRXJKVRPHDUHDVDQGSHULRGVZLOOUHFHLYHDPRUHGHWDLOHGWUHDWPHQWWKDQRWKHUV7KHUHDUHWKUHHGLIIHUHQW DQGFRPSOHPHQWDU\DSSURDFKHV D FRYHUDJHRIODUJHJHRJUDSKLFDOFXOWXUDOXQLWVPDLQO\(XURSHEXWDOVRWKH0LGGOH(DVW ZLWKHPSKDVLV RQSKHQRPHQDDFURVVWKHUHJLRQEURNHQGRZQLQWRWUDGLWLRQDOSHULRGVRIFXOWXUDOKLVWRU\$QWLTXLW\0LGGOH $JHV5HQDLVVDQFH0RGHUQ3HULRG E FRYHUDJHIURPUHJLRQDODQGQDWLRQDOSHUVSHFWLYHVZLWKWUDQVODWLRQLQ*HUPDQVSHDNLQJDUHDVWUHDWHGLQ GHSWKDVDµSDUDGLJPDWLFFDVH¶ F FDVHVWXGLHVRIWKHZRUOGZLGHGLVWULEXWLRQDQGWUDQVODWLRQRIVLJQLILFDQWWH[WV 7KH),7&RPPLWWHHIRUWKH+LVWRU\RI7UDQVODWLRQ 7KHLGHDRIDFRPSUHKHQVLYHKLVWRU\RIWUDQVODWLRQLQWKHZRUOGZDVILUVWSURSRVHGWRWKH)e'e5$7,21 ,17(51$7,21$/('(675$'8&7(856),7 E\WKHODWH*\|UJ\5$'ÏVHH+81*$5,$1 75$',7,21 LQ,WZDVQRWXQWLOKRZHYHUWKDWWKHSURMHFWDFWXDOO\EHJDQWRWDNHVKDSHXQGHUWKH GLUHFWLRQRIDQHZ&RPPLWWHHIRUWKH+LVWRU\RI7UDQVODWLRQ'HOLVOH 7KHKLVWRU\ZDVWREHVHOHFWLYH DQGWKHPDWLFUDWKHUWKDQFRPSUHKHQVLYHRUH[KDXVWLYH1LQHWKHPHVZHUHLGHQWLILHGDQGDUHVHDUFKWHDP KHDGHGE\DµSULQFLSDODXWKRU¶ZDVSXWWRJHWKHUIRUHDFKWKHPH7KHERRNZDVSXEOLVKHGLQ(QJOLVKDV 7UDQVODWRUV7KURXJK+LVWRU\DQGLQ)UHQFKDV/HVWUDGXFWHXUVGDQVO¶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¶V FRSXEOLVKHUV

)XUWKHUUHDGLQJ %DOODUG'HOLVOHDQG:RRGVZRUWKDE'¶KXOVW(OOLVD.HOO\/HIHYHUHE3\P E5HQHU5RELQVRQ6WDQIRUG9HUPHHUE:RRGVZRUWK

-8',7+:22'6:257+



3DJH

, ,GHRORJ\DQGWUDQVODWLRQ ,WLVSHUKDSVLURQLFWKDW1LHW]VFKHZKRFKDPSLRQHGWKHQRWLRQWKDWDOONQRZOHGJHLVSHUVSHFWLYDOLH FRQGLWLRQHGE\RQH¶VSRLQWRIYLHZ VKRXOGKDYHGHQRXQFHGWKHSUDFWLFHRISHUVSHFWLYLVPLQWUDQVODWLRQZKHQ KHEHUDWHG,PSHULDO5RPHDQG&ODVVLFDO)UDQFHIRUWKHFRPSOHWHDVVLPLODWLRQRIHDUOLHUOLWHUDWXUHVLQWKH WUDQVODWLRQSURFHVV1LHW]VFKH± +RZHYHUKLVFRPPHQWVLQWKLVUHVSHFWGHPRQVWUDWHWKDWDQ µLGHRORJLFDO¶DSSURDFKWRWUDQVODWLRQFDQEHIRXQGLQVRPHRIWKHHDUOLHVWH[DPSOHVRIWUDQVODWLRQNQRZQWRXV :LWKWKHVSUHDGRIGHFRQVWUXFWLRQDQGFXOWXUDOVWXGLHVLQWKHDFDGHP\WKHVXEMHFWRILGHRORJ\DQGPRUH VSHFLILFDOO\WKHLGHRORJ\RISRZHUUHODWLRQVEHFDPHDQLPSRUWDQWDUHDRIVWXG\DQGFODLPVDERXWLGHRORJ\ SUROLIHUDWHLQPDQ\ILHOGVWKRXJKWKH\DUHQRWDOZD\VZHOOVXEVWDQWLDWHG7KHILHOGRIWUDQVODWLRQVWXGLHV SUHVHQWVQRH[FHSWLRQWRWKLVJHQHUDOWUHQG)RUH[DPSOHWKHKDQGIXORIFDVHVWXGLHVSUHVHQWHGLQ/HIHYHUH D VFDUFHO\MXVWLI\KLVVZHHSLQJGHFODUDWLRQWKDWµRQHYHU\OHYHORIWKHWUDQVODWLRQSURFHVVLWFDQEH VKRZQWKDWLIOLQJXLVWLFFRQVLGHUDWLRQVHQWHULQWRFRQIOLFWZLWKFRQVLGHUDWLRQVRIDQLGHRORJLFDODQGRU SRHWRORJLFDOQDWXUHWKHODWWHUWHQGWRZLQRXW¶LELG 6LPLODUO\1LUDQMDQD ZULWHVWKDW µ7UDQVODWLRQ«SURGXFHVVWUDWHJLHVRIFRQWDLQPHQW%\HPSOR\LQJFHUWDLQPRGHVRIUHSUHVHQWLQJWKHRWKHU² ZKLFKLWWKHUHE\DOVREULQJVLQWREHLQJ²WUDQVODWLRQUHLQIRUFHVKHJHPRQLFYHUVLRQVRIWKHFRORQLVHG¶ +RZHYHUVKHRIIHUVQRH[DPSOHVWRGHPRQVWUDWHKHUDVVHUWLRQTXRWLQJQRWIURPWUDQVODWLRQVEXWIURPSUHIDFHV WRWUDQVODWLRQVRUIURPZRUNVZULWWHQGLUHFWO\LQ(QJOLVK)XUWKHUPRUHKHUFODLPWKDWWUDQVODWLRQIXQFWLRQVE\ µFUHDWLQJFRKHUHQWDQGWUDQVSDUHQWWH[WVWKURXJKWKHUHSUHVVLRQRIGLIIHUHQFH¶LELG QRWRQO\FRQWUDGLFWV WKHIUHTXHQWUHIHUHQFHVLQWKHSUHIDFHVIURPZKLFKVKHTXRWHVWRWKHQHJDWLYHFKDUDFWHULVWLFVZKLFKDUH VXSSRVHGSUHFLVHO\WRPDUNWKHFRORQL]HGVXEMHFWDV2WKHUEXWDOVRLJQRUHVWKHORQJWUDGLWLRQRIµH[RWLF¶ WUDQVODWLRQVZKLFKZRUNLQWKHVDPHGLUHFWLRQ1RQHWKHOHVVERWKDXWKRUVVLJQDOWKHLPSRUWDQFH²DQGWKH SUREOHPDWLFQDWXUHRIWKHVXEMHFWDQG1LUDQMDQDLVFHUWDLQO\ULJKWWKDWWUDQVODWLRQDQGWUDQVODWLRQVWXGLHVKDYH EHHQµFDXJKWLQDQLGLRPRIILGHOLW\DQGEHWUD\DOWKDWDVVXPHVDQXQSUREOHPDWLFQRWLRQRI UHSUHVHQWDWLRQ¶LELG ,QSDUWWKHSUREOHPRIGLVFXVVLQJWUDQVODWLRQDQGLGHRORJ\LVRQHRIGHILQLWLRQDQGFDWHJRU\,VDOOKXPDQ DFWLYLW\LGHRORJLFDOO\PRWLYDWHG":KHQLVVRPHWKLQJµLGHRORJ\¶UDWKHUWKDQMXVWµFXOWXUH¶":KDWLVWKH GLIIHUHQFH"&DQZHLQYRNHWKHQRWLRQRILGHRORJ\WRH[SODLQZKDWLVRQO\RXUµOLIHZRUOG¶RXUFRQFUHWHKXPDQ VLWXDWLRQ*DGDPHUTXRWHGLQ%DQGLD ":KHQWKHSXEOLVKHUVRI$QQH)UDQN¶VGLDU\UHPRYHDOOXVLRQV WRKHUVH[XDOLW\LVWKDWDV/HIHYHUHVXJJHVWVEHFDXVHWKHUHLVDQµLGHRORJLFDOO\VDQFWLRQHGLPDJHRIZKDWD IRXUWHHQ\HDUROGVKRXOGEH¶/HIHYHUHD± RULVLWVLPSO\DPDWWHURIPRGHVW\":KHQ*XW]NRZLQ SUHSDULQJ%FKQHU¶V'DQWRQV7RGIRUWKHVWDJHµGHOHWHVZKDWPD\EHWDNHQWREHRIIHQVLYHWRWKHWDVWHRIWKH PLGGOHDQGXSSHUFODVVUHDGHUV¶LELG LVWKDWDQLGHRORJLFDOPRYHRUVLPSO\DPDWWHURIWDVWH"$QGZKDW FDQZHVD\DERXW/HIHYHUH¶VRZQKLGGHQLGHRORJ\ZKLFKGHFUHHVWKDWWKHPLGGOHDQGXSSHUFODVVHVDUHD PRQROLWKDERXWZKRVHWDVWHVZHHSLQJMXGJHPHQWVPD\EHPDGH",QGHHGWKHLGHRORJLHVGULYLQJWKRVHZKR ZULWHDERXWLGHRORJ\DQG



3DJH

WUDQVODWLRQFDQVRPHWLPHVUHVXOWLQFRQWUDGLFWLRQV'RXJODV5RELQVRQ LQVXSSRUWRIKLVVRPDWLF WKHRU\RIWUDQVODWLRQSURSRVHGDVDFRXQWHUEODVWWRWKHLQWHOOHFWXDO$XJXVWLQLDQLGHRORJ\DVVHUWVWKDWµWKH PDMRULW\RIWUDQVODWRUVLQWKH:HVW«DSSHDUWREHZRPHQ¶ZKLOH3DXO6W3LHUUH LQVXSSRUWRIKLV )RXFDXOGLDQDQDO\VLVRIDSSURSULDWLRQLQWUDQVODWLRQFODLPVWKDWµZRPHQVHOGRPGR«FRQWUROWKHGLVFRXUVHV SURGXFHGHLWKHUDVDXWKRUVRUDVWUDQVODWRUV¶ $FFRUGLQJWR3HQURG µ>V@LQFHZHDUHDOZD\VUHTXLUHGZKHQWUDQVODWLQJWR³WDNHDSRVLWLRQÚHODWLYH WRRWKHUFXOWXUHVDQGODQJXDJHVZHPXVWDVZHOOUHPDLQHYHUYLJLODQWDVWRWKHQDWXUHRIWKHSRVLWLRQDVVXPHG¶ 7KLVOHDGVKHUWRLQWHUSUHWLQWHUPVRISRZHUUHODWLRQV6&+/(,(50$&+(5¶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µDORDIRIEUHDG¶FDQOD\WKHWUDQVODWRURSHQ WRGHQXQFLDWLRQVRIµVXSSUHVVLQJDQGUHSUHVVLQJWKH2WKHU¶,IRQWKHRWKHUKDQGDV5RFKHU VD\V² HFKRLQJWKHGHFRQVWUXFWLRQLVWFOLFKp²µO¶RULJLQDLUHHVWLQWURXYDEOH¶µWKHRULJLQFDQQRWEHIRXQG¶ WKHQDOO GHYLDWLRQVEHFRPHSHUPLVVLEOHQHHGLQJRQO\WKHPRWLYDWLRQRIDQLGHRORJ\WRMXVWLI\WKHPEHFDXVHWKHUHLVQR RULJLQDOWREHFRSLHGDQGEHFDXVHWKHµYLROHQWKLHUDUFK\¶ZKLFKJLYHVSULPDF\WRWKHVRXUFHWH[WFDQEH RYHUWXUQHGLQIDYRXURIWKHWDUJHWFXOWXUH 7KHFRQFHSWRI1DFKWUlJOLFKNHLWµSRVWKXPRXVQHVV¶ EHFDPHIDVKLRQDEOHDIWHUGHFRQVWUXFWLRQLVWV UHGLVFRYHUHGµ'LH$XIJDEHGHVhEHUVHW]HUV¶µ7KHWDVNRIWKHWUDQVODWRU¶ :DOWHU%HQMDPLQ¶VHVVD\ ZKLFKFDOOVWRPLQG*HRUJH6WHLQHU¶VVWDJHRIµFRPSHQVDWLRQ¶RUµUHVWLWXWLRQ¶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±TXRWHG LQ,UHODQG DQGLIZHDVVXPHWKRVHEHOLHIVHYHQZKHUHWKH\FDOOWKHPVHOYHVDHVWKHWLFUHOLJLRXVRU SRHWLFWREHSROLWLFDOLQWKHVHQVHWKDWWKHLUDSSOLFDWLRQHVWDEOLVKHVUHODWLRQVRIGRPLQDQFHWKHQZHFDQVHH KRZWKURXJKRXWWKHFHQWXULHVLQGLYLGXDOVDQGLQVWLWXWLRQVKDYHDSSOLHGWKHLUSDUWLFXODUEHOLHIVWRWKH SURGXFWLRQRIFHUWDLQHIIHFWVLQWUDQVODWLRQ7KHTXHVWLRQV1RUG DVNVDERXWDVSHFLILFWH[WWREH WUDQVODWHGFDQEHDVNHGRIWUDQVODWLRQLQJHQHUDOEXWZLWKDSRZHURULHQWDWLRQ:KDWJHWVWUDQVODWHGZKDWLV YDOXHGDQGZKDWLVH[FOXGHG ":KRGRHVWKHWUDQVODWLRQZKRFRQWUROVWKHSURGXFWLRQRIWUDQVODWLRQ ":KRLV WUDQVODWHGIRUZKRLVJLYHQDFFHVVWRIRUHLJQPDWHULDOVDQGZKRGHQLHG "+RZLVWKHPDWHULDOWUDQVODWHGZKDW LVRPLWWHGDGGHGDOWHUHGWRFRQWUROWKHPHVVDJH "



3DJH

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µVLPSOH FRPPRQXQHGXFDWHGPDQ¶+HWHOOVXVWKDWDIWHUGRLQJDWUDQVODWLRQLQWRµFRPSUHKHQVLEOH*HUPDQ¶PDQ\ SHRSOHKDGEHJJHGKLPWRFRPSOHWHWKHWDVNZKHUHDVRWKHUVFKRODUVKDGDGYLVHGKLPDJDLQVWLWRQWKHJURXQGV WKDWLWZRXOGEHDSLW\GD]\HPHUVFKDGZHUH LIWKHµSUDLVHZRUWK\DUW¶RI&LFHURDQGRWKHUVZKLFKWKH\WKHP VHOYHVKDGPDVWHUHGRQO\µZLWKZRUNDQGJUHDWGLOLJHQFH¶PLWDUEDLWYQGJURVVHPIO\VVH VKRXOGEHPDGH DFFHVVLEOHµZLWKRXWZRUN¶DQHDUEHLW WRµPDQ\XQHGXFDWHGFRPPRQOD\SHRSOH¶PDQFKHUYQJHOHUWHUJUREHU OD\H YRQ:\OH± %\FRQWUDVW1RUWRQ GHVFULEHVKRZ5HQDLVVDQFHWUDQVODWRUVPRWLYDWHGE\VSDFHORJLFDQG 5HQDLVVDQFHFRQVWUXFWLYLVWLGHRORJ\VHWRIILQVHDUFKRIDFRPSDUDEOHLQWHUSUHWDWLRQLVOH[µODZRI LQWHUSUHWDWLRQ¶ EXWIDLOHGµWKH\ZRXOGEHXQDEOHWRWXUQDZD\IURPWKHLPDJHRIIDOOHQWUDQVODWLYHPDQ FRQVLJQHGWRDIDOOHQSRVW%DEHOZRUOG¶DQGZHUHWKHUHIRUHIRUFHGEDFNRQWKHUHODWLYLVPRI-RDFKLP3pULRQ ZKLFKWUDQVODWHVDVµ7KHUHDUHDVPDQ\DQGDVYDULHGPHWKRGVRIWUDQVODWLRQDVWKHUHDUHZD\VRIVSHDNLQJ¶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µVRWKDW, PLJKWQRWRQO\EHRQDSDUZLWKWKHDXWKRU,DPWUDQVODWLQJEXWHYHQULVHDERYHKLPLQOLYHOLQHVVRI H[SRVLWLRQ¶LELGWUDQVODWHG WKHVHFRQGDSSURDFKLVFKDUDFWHUL]HGE\.RNKRYVNLLZKRFODLPVDWUDQVODWLRQDV KLVRZQZRUNEHFDXVHWKHVLPSOHIDFWRISXWWLQJWKHZRUGVLQWRDQRWKHUODQJXDJHKDVJLYHQLWDµQHZ FRORXULQJ¶LELGWUDQVODWHG 7KHFRQWLQXLQJLQIOXHQFHRIUHOLJLRXVLGHRORJ\FDQDOVREHVHHQLQ1RUWRQ¶VGHVFULSWLRQRIKRZWUDQVODWLRQZDV XVHGLQWKHEDWWOHOLQHVRIWKHRORJ\± WKHWKHRORJLDQVRI)UDQFLV,RI)UDQFHZHUHRSSRVHGWROLWHUDO WUDQVODWLRQVRIWKH2OG7HVWDPHQWEHFDXVHVXFKWUDQVODWLRQVOHQWFRPIRUWWRWKH-HZLVKWUDGLWLRQRIQRQ DOOHJRULFDOUHDGLQJVZKLFKZHQWFRXQWHUWRWKH&KULVWLDQWUDGLWLRQ7KH6RYLHWZULWHU)HGRURY ZULWLQJIURPD0DU[LVWYLHZSRLQWZDVDEOHWRGLVPLVVWKHOLWHUDOLVWWHQGHQF\RIELEOLFDOWUDQVODWLRQIRUDQRWKHU



3DJH

UHDVRQDVµDULVLQJQRWVRPXFKIURPDFRQVFLRXVWKHRUHWLFDOSRVLWLRQDVIURPVXSHUVWLWLRXVSLHW\³GHYRXW WUHPEOLQJÉHIRUHWKH%LEOLFDOWH[WV¶WUDQVODWHG 7KDWWUDQVODWLRQZDVWKHQDQGVWLOOLVGHHSO\LPSOLFDWHGLQUHOLJLRXVLGHRORJ\FDQEHVHHQQRWMXVWIURP VNLUPLVKHVRIWKHW\SHGHVFULEHGE\1RUWRQEXWDOVRIURPWKHJULVO\IDWHRIWUDQVODWRUVVXFKDV7<1'$/(LQ %ULWDLQVHH%5,7,6+75$',7,21 DQG'2/(7LQ)UDQFHVHH)5(1&+75$',7,21 ERWKEXUQWDWWKH VWDNH DIDWHPLUURUHGLQWKHWZHQWLHWKFHQWXU\E\WKHDVVDVVLQDWLRQRIWKH-DSDQHVHWUDQVODWRURI6DOPDQ 5XVKGLH¶V6DWDQLF9HUVHVDQGWKHVXEVHTXHQWUHIXVDOE\RWKHUSXEOLVKHUVWRSURGXFHDWUDQVODWLRQ$QGMXVWDV UHOLJLRQFRQWLQXHVWRJULSWUDQVODWLRQRXWSXWVRPRGHPZULWHUVFRQWLQXHWRSURMHFWFRQWHPSRUDU\LGHRORJ\RQWR HDUOLHUWH[WV7KXV1RUWRQKLPVHOIVHHPVWREDFNGDWHDGHFRQVWUXFWLRQLVWLGHRORJ\WRWKH5HQDLVVDQFHZKHQKH VD\VRI-DFTXHV3HOHWLHUGX0DQV¶GHFODUDWLRQµLWZRXOGEHQLFHLIZRUGIRUZRUGWUDQVODWLRQZHUHSRVVLEOHEXW VDGO\LWLVQ¶W¶WKDW3HOHWLHUPDNHVXVµUHOLYHWKHDJRQ\RIPRWLRQLQSODFHRIHPEDUNDWLRQWRZDUGVDQREMHFW FRQVWDQWLQLWVVHOIGHQLDO¶ ,QWKHHLJKWHHQWKFHQWXU\RQHRIWKHPRVWIDPRXVH[DPSOHVRILGHRORJLFDOLQFXUVLRQLQWUDQVODWLRQZDV 9ROWDLUH¶V WUDQVODWLRQRI+DPOHW¶VVROLORTX\QRWDVDPHGLWDWLRQRQGHDWKEXWSUHFLVHO\DVDGLDWULEH DJDLQVWUHOLJLRQµWKXVFRQVFLHQFHGRWKPDNHFRZDUGVRIXVDOO¶LVWUDQVODWHGDVOLWHUDOO\ µWXUQVDZDUULRUKHUR LQWRDWLPLG&KULVWLDQ¶2WKHUH[DPSOHVGULYHQWKLVWLPHE\FODVVLGHRORJ\DUHWREHIRXQGLQWKHVXSSUHVVLRQ RIGLDOHFWDOIHDWXUHVLQ3UpYRVW¶VWUDQVODWLRQRI6DPXHO5LFKDUGVRQZKHUHµ,WKRXJKWDVKRZLIWKHPDQZDV SD\HGE\PHEHIRUHQGKHPRXJKWSOD\WUL[¶LVUHQGHUHGLQWRXSSHUPLGGOHFODVV)UHQFKDVOLWHUDOO\ µ,GHHPHG LWLQDGYLVDEOHWRSD\KLPLQDGYDQFHLQRUGHUWREHWKHPRUHVXUHRIKLVOR\DOW\¶6WDFNHOEHUJ WUDQVODWHG 7KLVPRYHH[SUHVVHVWKHGRPLQDWLRQLQOLWHUDU\SURGXFWLRQRIDSDUWLFXODUFODVVRISHRSOHDQGWKH EHOLHIWKDWWKRVHSHRSOHDVUHDGHUVZRXOGQRWZLVKWREHRIIHQGHGE\ORZHUFODVVODQJXDJH+RZHYHUVXFK UDGLFDODSSURSULDWLRQVDVWKRVHRI9ROWDLUHDQG3UpYRVWPLJKWDOVREHDVFULEHGWRWKHXQLYHUVDOL]LQJQDWXUHRI &ODVVLFDOSRHWLFVIRULIKXPDQQDWXUHLVWKRXJKWWREHXQLYHUVDOLWEHFRPHVSHUPLVVLEOHWRVWULSDZD\ORFDO GHYLDWLRQVDVLUUHOHYDQWDFFUHWLRQV %\FRQWUDVWWKHERXUJHRLVUHYROXWLRQDU\LQGLYLGXDOLVPZLWKZKLFKQLQHWHHQWKFHQWXU\5RPDQWLFLVPFRPEDWHG WKHW\UDQQ\RINLQJVZRXOGIDYRXUOLWHUDOWUDQVODWLRQVZKLFKUHVSHFWHGLQGLYLGXDOGLIIHUHQFH&RQVLGHU 3XVKNLQ¶VFHOHEUDWLRQRI&KDWHDXEULDQG¶VOLWHUDOWUDQVODWLRQRIWKDWPRVWUHYROXWLRQDU\RISRHPV-RKQ0LOWRQ¶V 3DUDGLVH/RVWDVDQLQGLFDWLRQWKDWµDQLJQRUDQWSDVVLRQIRUQDWLRQDOLVP¶KDVJLYHQZD\WRWKHQHHGWRVHH IRUHLJQDXWKRUVµLQWKHLURZQQDWLRQDOGUHVVDQGZLWKWKHLUQDWXUDOGHIHFWV¶3XVKNLQ 7KLV LQWHUSUHWDWLRQLVLQSDUWVXSSRUWHGE\)HGRURYZKRZULWHVWKDWµ>W@KLVQHZXQGHUVWDQGLQJRIWKHSUREOHPRI WUDQVODWLRQ«ZDVSUHSDUHGE\WKHOLWHUDWXUHRIWKHUHYROXWLRQDU\ERXUJHRLVLH¶ZKLOHLQVLVWLQJWKDWLWZDVWKH UHVXOWRIµWKHJHQHUDOSURJUHVVLYHWHQGHQFLHVRIWKHHQWLUHKLVWRULFDOSHULRGDVDZKROHOLQNHGZLWKQDWLRQDO OLEHUDWLRQPRYHPHQWV¶UDWKHUWKDQEHLQJDSXUHO\5RPDQWLFDQGLQGLYLGXDOLVWLF SKHQRPHQRQ)HGRURY ±WUDQVODWHG 7KH0DU[LVWLQWHUSUHWDWLRQRIKLVWRU\LVORXGDQGVWURQJKHUH,WZLOOEHLQWHUHVWLQJWR VHHZKDWDOWHUQDWLYHLQWHUSUHWDWLRQZLOOEHSURGXFHGZKHQWKHKLVWRULFDOUHYLVLRQLVPRIWKH1HZ5LJKWZKLFK LQWKHVUHZURWHKLVWRU\WRVXSSUHVVVXFKVRFLDOLVWLQWHUSUHWDWLRQVILQDOO\UHDFKHVWKHKLVWRULRJUDSK\RI WUDQVODWLRQVWXGLHV )HGRURY¶VERRNLVSUREDEO\RQHRIWKHYHU\IHZERRNVRQWUDQVODWLRQWKHRU\WRFRQWDLQDQHQWLUHFKDSWHU GHYRWHGWRµ0DU[(QJHOV/HQLQRQ7UDQVODWLRQ¶DQGWRPDNHVXFKVWDWHPHQWVDVµ(QRUPRXVLQWHUHVWDQG H[WUHPHYDOXHIRUWKHWKHRU\RIWUDQVODWLRQDUHSUHVHQWHGE\WKHUHPDUNVRI9,/HQLQRQWUDQVODWLRQDQG ODQJXDJH¶)HGRURYWUDQVODWHG QRWWRPHQWLRQSDVVLQJRQVXFKJHPVRILQIRUPDWLRQDVWKDWWKH PDQXVFULSWRI/HQLQ¶VILUVWWUDQVODWLRQGLVDSSHDUHGLQDSROLFHUDLGLELG DQGWKDWKLVDGYLFHRQWKHEHVWZD\WR NHHSEXV\LQSULVRQZDVWRWUDQVODWHDQGWKHQEDFNWUDQVODWHHQWLUHQRYHOVLELG± 7KLVSUHVVXUHWR PHQWLRQWKHULJKWSHRSOHDWUDLWE\QRPHDQVFRQILQHGWR&RPPXQLVP LVMXVWRQHRIVHYHUDOLGHRORJLFDO SUHVVXUHVIRXQGLQ0DU[LVWRULHQWHGWUDQVODWLRQWKHRU\&RPPXQLVPKDGWRUHDFKDVPDQ\SHRSOHDVSRVVLEOH DQG



3DJH

WKHUHIRUHKDGWRDGRSWDSSURSULDWHWUDQVODWLRQVWUDWHJLHV)HGRURYVD\VRI/HQLQ¶VRZQWUDQVODWLRQPHWKRGWKDW µKHDFKLHYHVIXOODFFHVVLELOLW\RIFRQWHQWIRUWKHZLGHVWFLUFOHRIUHDGHUV¶LELGWUDQVODWHG $WWKHVDPH WLPHWKHPHWKRGVXVHGKDGWRUHIOHFW0DU[LVWLGHRORJ\ZKLFKLVZK\*DFKHFKLODG]H XVHVWHUPVQRW QRUPDOO\IRXQGLQRWKHU:HVWHUQWKHRULHVRIWUDQVODWLRQ,IWKHGRPLQDQWWKHPHRIVRFLDOLVWDUWZDVVRFLDO UHDOLVPDFKLHYHGWKURXJKDWKHRU\RIUHIOHFWLRQWKHQDWKHRU\RIUHDOLVWLFWUDQVODWLRQPXVWDOVREHSURGXFHG,Q WKLVWKHRU\WKHIUHHOLWHUDOGLVSXWHZRXOGEHUHSODFHGE\DQDSSURSULDWHO\0DU[LVWGLDOHFWLFVLQZKLFKWKHDFWXDO ZRUGVXVHGDUHVHFRQGDU\WRWKHµDUWLVWLFUHDOLW\RIWKHRULJLQDO¶DVLWLVFRJQLWLYHO\µUHYLYLILHG¶LQWKH WUDQVODWRU¶VPLQG*DFKHFKLODG]H $VLQDOOJRRGGLDOHFWLFDOSUDFWLFHWKHWKHVLVVRXUFHODQJXDJH DQG DQWLWKHVLVWDUJHWODQJXDJH DUHUHVROYHGLQWKHV\QWKHVLVRIWUDQVODWLRQLELG &RPPXQLVWLGHRORJ\ZDVQRWWKHRQO\VRXUFHRIRSWLPLVPLQWUDQVODWLRQWKHRU\,QWKHVFLHQWLILFDQG WHFKQRORJLFDODWPRVSKHUHRIWKHHDUO\DQGPLGWZHQWLHWKFHQWXU\WKHUHZDVIRUDWLPHDIHHOLQJWKDWOLQJXLVWLF WKHRU\KDGSURYLGHGDµVFLHQWLILF¶EDVLVIRUJURXQGLQJWUDQVODWLRQLQDZD\WKDWVKRXOGPDNHLGHRORJLFDO PDQLSXODWLRQDWKLQJRIWKHSDVW2QHRIWKHPDLQSURSRQHQWVRIWKLVWUHQGZDV(XJHQH1LGDZKREHOLHYHGWKDW KHKDGIRXQGDQHXWUDOSRLQWRIREVHUYDWLRQRQZKLFKWREDVHKLVFRQFHSWRIG\QDPLFHTXLYDOHQFH,WVKRXOG WKHUHIRUHFRPHDVQRVXUSULVHWKDW1LGDLVWKHSULPHWDUJHWRIGHFRQVWUXFWLRQLVWFULWLTXHVRIµFORVXUH¶ZKLFK DLPWROD\EDUHWKHLGHRORJLFDOEDVHVQRWRQO\RILQGLYLGXDODFWVRIWUDQVODWLRQEXWRIWUDQVODWLRQWKHRULHVLQ JHQHUDO0HVFKRQQLF IRUH[DPSOHDFFXVHV1LGDRIµSVHXGRSUDJPDWLVP¶DQGPDQLSXODWLYH EHKDYLRXULVPDQG*HQW]OHUSRLQWVWRWKHµQRQGLW¶RIµWKH3URWHVWDQWVXEWH[W¶LQ1LGD¶VDSSDUHQWO\OLQJXLVWLF DSSURDFK*HQW]OHU 7RZKDWH[WHQWDUHFULWLFLVPVRI1LGDWKHPVHOYHVLGHRORJLFDOO\PRWLYDWHG"2QHRIWKHPRVWIUHTXHQWFULWLFLVPV RI1LGD¶VPHWKRGRORJ\LVWKDWLWVMXVWLILFDWLRQIRUWUDQVODWLQJWKHELEOLFDOSKUDVHµWRJUHHWZLWKDKRO\NLVV¶E\ µWRJLYHDKHDUW\KDQGVKDNHDOOURXQG¶DPRXQWVWRFRPSOLFLW\RQWKHWKHRU\¶VSDUWZLWKWKHGRPLQDQWZKLWH KHWHURVH[XDOPDOH:HVWHUQ$QJOR$PHULFDQXQGHUVWDQGLQJRIZKDWLVDQDFFHSWDEOHPRGHRIJUHHWLQJ EHWZHHQPHQ <6<67(0DSSURDFK WRWUDQVODWLRQDVµZKDWHYHUWKHWDUJHWFXOWXUHFDOOVWUDQVODWLRQ¶$V6QHOO+RUQE\ VD\VRIFHUWDLQ UHFHQWWUDQVODWLRQ



3DJH

WKHRULHVµWKH\DUHDOORULHQWHGWRZDUGVWKHIXQFWLRQRIWKHWDUJHWWH[WSURVSHFWLYHWUDQVODWLRQ UDWKHUWKDQ SUHVFULSWLRQVRIWKHVRXUFHWH[WUHWURVSHFWLYHWUDQVODWLRQ ¶,QWHUPLQRORJLFDOWHUPVWKLVRIIHUVQRDGYDQFHRQ 6FKOHLHUPDFKHU¶VGLVWLQFWLRQTXRWHGDERYHEXWLQLGHRORJLFDOWHUPVLWUHYHUVHV6FKOHLHUPDFKHU¶V 5RPDQWLFL]LQJWHQGHQF\WRIDYRXUWKHGLVRULHQWLQJDQGDOLHQDWLQJVWUDWHJ\RIIRUHLJQL]LQJWUDQVODWLRQ 6FKOHLHUPDFKHULPDJLQHGUHDGHUVVRDWWXQHGWRFXOWXUDOGLYHUVLW\WKDWWKH\ZRXOGGHYHORSDQHDUIRU WUDQVODWLRQVIURPGLIIHUHQWODQJXDJHV6FKOHLHUPDFKHU DQGZRXOGZHOFRPHLQWRWKHLUODQJXDJH DOLQJXLVWLFVSDFHVHWDVLGHIRUWUDQVODWLRQLQZKLFKOLQJXLVWLFPDQLSXODWLRQLPSRVVLEOHHOVHZKHUHZRXOGEH DOORZHGLELG 7KDWWKLVGHEDWHVWLOOUDJHVLQLGHRORJLFDOWHUPVLQVSLWHRI6QHOO+RUQE\¶VVRPHZKDW WRWDOL]LQJVWDWHPHQWLVVKRZQE\%DQGLD¶V± UHDFWLRQWRKHUZRUGV7KHDXWKRUVZKRVHWUDQVODWLRQ KHGLVFXVVHV$IULFDQVZULWLQJLQ(XURSHDQODQJXDJHVUHTXLUHDVRXUFHFXOWXUHRULHQWHGDSSURDFKZKLFKWDNHV SDUWLFXODUFDUHWRDYRLGµQHJDWLYHVWHUHRW\SLQJ¶LQWKHWUDQVIHUEHWZHHQWKHODQJXDJHVRIWKHFRORQL]HUDQGWKH FRORQL]HG 6HHDOVR *(1'(50(7$3+25,&6,175$16/$7,21+(50(1(87,&027,210(7$3+252) 75$16/$7,21

)XUWKHUUHDGLQJ %DNHU%DVVQHWWDQG/HIHYHUH/HIHYHUHD1LUDQMDQD3\PE5RELQVRQ*HRUJH 6WHLQHU

3(7(5)$:&(77

,PLWDWLRQ ,QRUGLQDU\(QJOLVKLPLWDWLRQPHDQVVODYLVKFRS\LQJPLPLFNLQJPLPLQJ7KURXJKDVWUDQJHOLQJXLVWLF KLVWRU\KRZHYHUWKHZRUGKDVFRPHWRPHDQDOPRVWWKHH[DFWRSSRVLWHLQWUDQVODWLRQWKHRU\GRLQJVRPHWKLQJ WRWDOO\GLIIHUHQWIURPWKHRULJLQDODXWKRUZDQGHULQJWRRIDUDQGWRRIUHHO\IURPWKHZRUGVDQGVHQVHRIWKH6/ WH[W,QIDFWLPLWDWLRQKDVFRPHWREHYLUWXDOO\V\QRQ\PRXVZLWK)5((75$16/$7,21 ,PLWDWLRQLVWKH&ODVVLFDO/DWLQWUDQVODWLRQRIWKH*UHHNZRUGPLPHVLVZKLFKZDVXVHGLQOLWHUDU\WKHRU\IURP 3ODWRDQG$ULVWRWOHRQZDUGWRGHVFULEHWKHZULWHU¶VLPLWDWLRQRIUHDOLW\SHGDJRJLFDOO\LWZDVXVHGIRUUHYLVLRQ H[HUFLVHVLQZKLFKVWXGHQWVZHUHWDXJKWWRZULWHRURUDWHE\UHZULWLQJRUUHVSHDNLQJFODVVLFWH[WV²FKDQJLQJ WKHPLQVRPHVLJQLILFDQWZD\FKRRVLQJQHZZRUGVIRUVD\LQJWKHVDPHWKLQJ7KHWZRPRVWFRPPRQ DSSURDFKHVWRWKLVH[HUFLVHIRUPXODWHGE\4XLQWLOLDQLQWKHODWHILUVWFHQWXU\$',QVWLWXWHVRI2UDWRU\F $' IURPWHUPVFRLQHGE\3KLOR-XGDHXVLQ'HYLWD0RVLV%& ZHUH0(7$3+5$6(RUFKDQJLQJRQH ZRUGDWDWLPHDQG3$5$3+5$6(RUFKDQJLQJRQHSKUDVHDWDWLPH 7KHXVHRILPLWDWLRQLQWUDQVODWLRQWKHRU\WRPHDQIUHHWUDQVODWLRQLVPRVWSRSXODUO\HVWDEOLVKHGLQ-RKQ '5<'(1¶6VHH%5,7,6+75$'$7,21 SUHIDFHWRKLVWUDQVODWLRQRI2YLG¶V(SLVWOHVµ7KHWKLUGZD\¶ KHZULWHV²WKHILUVWDQGVHFRQGEHLQJPHWDSKUDVHRUZRUGIRUZRUGWUDQVODWLRQDQGSDUDSKUDVHRUVHQVHIRU VHQVHWUDQVODWLRQVHH)5((75$16/$7,21 µLVWKDWRILPLWDWLRQZKHUHWKHWUDQVODWRULIQRZKHKDVQRW ORVWWKDWQDPH DVVXPHVWKHOLEHUW\QRWRQO\WRYDU\IURPWKHZRUGVDQGVHQVHEXWWRIRUVDNHWKHPERWKDVKH VHHVRFFDVLRQDQGWDNLQJRQO\VRPHJHQHUDOKLQWVIURPWKHRULJLQDOWRUXQGLYLVLRQRQWKHJURXQGZRUNDVKH SOHDVHV¶$VKHODWHUUHPDUNVµLPLWDWLRQRIDQDXWKRULVWKHPRVWDGYDQWDJHRXVZD\IRUDWUDQVODWRUWRVKRZ KLPVHOIEXWWKHJUHDWHVWZURQJZKLFKFDQEHGRQHWRWKHPHPRU\DQGUHSXWDWLRQRIWKHGHDG¶ %XWKHUHDVHOVHZKHUH'U\GHQZDVRQO\SRSXODUL]LQJDVHQVHRIWKHZRUGWKDWKDGEHFRPHZHOOHVWDEOLVKHGLQ WKHWUDGLWLRQ7KHILUVWZULWHUWRXVHLPLWDWLRQLQWKLVZD\ZDV&,&(52VHH/$7,175$',7,21 ZKRQRW RQO\H[WHQGHGFODVVLFDOLPLWDWLRQIURPLQWUDOLQJXDOWRLQWHUOLQJXDOPRGHOOLQJEXWOLQNHGLWWRWKHYHUE H[SULPHUH&LFHURRUUDWKHUKLVGLDORJLFDOSHUVRQD/XFLXV&UDVVXVILQGVWKDWLPLWDWLQJ/DWLQRUDWRUVELQGVKLV YHUEDOLPDJLQDWLRQDQGVRWULHVKLVKDQGDWLPLWDWLQJ*UHHNRUDWRUVLQ/DWLQ %XWODWHU,QRWLFHGWKLVGHIHFWLQP\PHWKRGWKDWWKRVHZRUGVZKLFKEHVW



3DJH

EHILWWHGHDFKVXEMHFWDQGZHUHWKHPRVWHOHJDQWDQGLQIDFWWKHEHVWKDGEHHQDOUHDG\VHL]HGXSRQ E\(QQLXVLILWZDVRQKLVSRHWU\WKDW,ZDVSUDFWLVLQJRUE\*UDFFKXVLI,FKDQFHGWRKDYHVHW P\VHOIDVSHHFKRIKLV7KXV,VDZWKDWWRHPSOR\WKHVDPHH[SUHVVLRQVSURILWHGPHQRWKLQJZKLOH WRHPSOR\RWKHUVZDVDSRVLWLYHKLQGUDQFHLQWKDW,ZDVIRUPLQJWKHKDELWRIXVLQJWKHOHVV DSSURSULDWH$IWHUZDUGV,UHVROYHG²DQGWKLVSUDFWLFH,IROORZHGZKHQVRPHZKDWROGHU²WR WUDQVODWHIUHHO\>H[SOLFDUHP@*UHHNVSHHFKHVRIWKHPRVWHPLQHQWRUDWRUV7KHUHVXOWRIUHDGLQJ WKHVHZDVWKDWLQUHQGHULQJLQWR/DWLQZKDW,KDGUHDGLQ*UHHN,QRWRQO\IRXQGP\VHOIXVLQJWKH EHVWZRUGV²DQG\HWTXLWHIDPLOLDURQHV²EXWDOVRFRLQLQJE\DQDORJ\>H[SULPHUHPLPLWDQGR@ FHUWDLQZRUGVVXFKDVZRXOGEHQHZWRRXUSHRSOHSURYLGHGRQO\WKH\ZHUHDSSURSULDWH ([SULPHUHOLWHUDOO\PHDQVµWRVTXHH]HRXW¶²DSRZHUIXOLPDJHIRUWKHWUDQVODWLRQSURFHVVDV&LFHURGHVFULEHV LWDNLQWRJLYLQJELUWK)LJXUDWLYHO\HVSHFLDOO\LQFRQQHFWLRQZLWKLPLWDQGRH[SULPHUHPHDQVWRPRXOGRU IRUPRQHWKLQJLQLPLWDWLRQRIDQRWKHU&LFHUR¶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¶V WUDQVIRUPDWLYHUHODWLRQWRERWKIRUPVRIEHLQJERWKPRGHVRIXQGHUVWDQGLQJ7KHWUDQVODWRULVRQO\DEOHWR PHGLDWHEHWZHHQWKHPEHFDXVHVKHSOD\VDQDFWLYHFUHDWLYHUROHLQH[FKDQJLQJRQHIRUWKHRWKHU 6HHDOVR $'$37$7,21)5((75$16/$7,21/,7(5$/75$16/$7,210(7$3+5$6(3$5$3+5$6( '28*/$652%,1621

,QWHUSUHWLYHDSSURDFK 7KHLQWHUSUHWLYHDSSURDFKVRPHWLPHVUHIHUUHGWRDVWKHµLQWHUSUHWDWLYHDSSURDFK¶LVDOVRNQRZQDVWKHµWKHRU\ RIVHQVH¶,WLVDQDSSURDFKWRLQWHUSUHWLQJDQGWUDQVODWLRQDGRSWHGE\PHPEHUVRIWKH(6,7JURXSVRPHWLPHV UHIHUUHGWRDVµWKH3DULV6FKRRO¶RIµSURIHVVRUVVKDULQJWKHWKHRUHWLFDOFRQFHSWLRQVXQGHUSLQQLQJWKHWHDFKLQJ DWWKH(FROH6XSpULHXUHG¶,QWHUSUpWDULDWHWGH7UDGXFWLRQ>VLF@RI3DULV0/HGHUHU'6HOHVNRYLWFK)+HUEXORW EXWDOVR-'HOLVOHDQG03HUJQLHU¶+HZVRQDQG0DUWLQ ,QLWLDOO\GHYHORSHGLQWKHODWHVRQWKHEDVLVRIUHVHDUFKLQ&21)(5(1&(,17(535(7,1*WKH LQWHUSUHWLYHWKHRU\RIWUDQVODWLRQZDVVXEVHTXHQWO\H[WHQGHGWRWKHZULWWHQWUDQVODWLRQRIQRQOLWHUDU\RU µSUDJPDWLF¶WH[WV'HOLVOH DQGWRWKHWHDFKLQJRIWUDQVODWLRQDQGLQWHUSUHWLQJ 7KHPDLQUHSUHVHQWDWLYHRIWKH3DULV6FKRROLV'DQLFD6HOHVNRYLWFK'UDZLQJRQKHUH[WHQVLYHH[SHULHQFHRI SURIHVVLRQDOFRQIHUHQFHLQWHUSUHWLQJ6HOHVNRYLWFK GHYHORSHGDWKHRU\EDVHGRQWKHGLVWLQFWLRQEHWZHHQ OLQJXLVWLFPHDQLQJDQGQRQYHUEDOVHQVHZKHUHQRQYHUEDOVHQVHLVGHILQHGLQUHODWLRQWRDWUDQVODWLQJSURFHVV ZKLFKFRQVLVWVRIWKUHHVWDJHVLQWHUSUHWDWLRQRUH[HJHVLVRIGLVFRXUVHGHYHUEDOL]DWLRQDQGUHIRUPXODWLRQ

7KHWKHRUHWLFDOEDFNJURXQG 'UDZLQJRQH[SHULPHQWDOSV\FKRORJ\QHXURSV\FKRORJ\OLQJXLVWLFVDQG-HDQ3LDJHW¶VZRUNRQJHQHWLF SV\FKRORJ\UHVHDUFKHUVRIWKH3DULV6FKRROVWXG\FRQIHUHQFHLQWHUSUHWLQJLQUHDOVLWXDWLRQVZLWKSDUWLFXODU HPSKDVLVRQWKHPHQWDODQGFRJQLWLYHSURFHVVHVLQYROYHG7KHLUUHVHDUFKIRFXVHVRQWKHWUDQVODWLQJSURFHVV SDUWLFXODUO\RQWKHQDWXUHRIPHDQLQJDV



3DJH

VHQVH²DVRSSRVHGWROLQJXLVWLFRUYHUEDOPHDQLQJ²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µFRPSOHPHQWV¶WRYHUEDOPHDQLQJ7KHSRVVLELOLW\RI PXOWLSOHLQWHUSUHWDWLRQDULVHVLQVLWXDWLRQVLQZKLFKRQO\WKHVXUIDFHRUYHUEDOPHDQLQJRIWKHWH[WLVDYDLODEOH DQGWKHWUDQVODWRUGRHVQRWKDYHDWKLVKHUGLVSRVDODOOWKHFRJQLWLYHHOHPHQWVDQGFRPSOHPHQWDU\LQIRUPDWLRQ QHHGHGWRH[WUDFWVHQVH 3URSRQHQWVRIWKLVDSSURDFKVHHDOOWUDQVODWLRQDVDIRUPRILQWHUSUHWDWLRQDQGDFNQRZOHGJHWKHFRQWULEXWLRQ PDGHE\&DU\ DSUDFWLVLQJLQWHUSUHWHUZKREDVHGKLVGHVFULSWLRQDQGH[SODQDWLRQRIZULWWHQWUDQVODWLRQ RQµRUDO¶WUDQVODWLRQRULQWHUSUHWLQJ$OWKRXJKGLIIHUHQWLQWKHLUPRGDOLWLHVWKHWUDQVODWLRQRIZULWWHQWH[WDQGRI RUDOGLVFRXUVHDUHERWKVHHQDVFRPPXQLFDWLYHDFWVEXWWKHOLQNEHWZHHQGLVFRXUVHDQGWKHUHDOZRUOGLV WKRXJKWWREHOHVVVWURQJLQWKHFDVHRIZULWWHQWH[WV7KHOLQNEHFRPHVLQFUHDVLQJO\WHQXRXVDVZULWWHQWH[WV DJHRUZKHQ²DFFRUGLQJWRWKLVDSSURDFK²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µHTXDWHWKHH[SUHVVLRQRIVHQVHWRDFHUWDLQH[WHQWZLWKWKHOLQJXLVWLFPHDQLQJVRIWKHVRXUFH ODQJXDJH¶6HOHVNRYLWFK 6HOHVNRYLWFKGLVWLQJXLVKHVEHWZHHQWZROHYHOVRISHUFHSWLRQWKDWRIWKHOLQJXLVWLFWRROUDWKHUWUDQVLHQW DQG WKDWRIVHQVHDVDZDUHQHVVµVHQVHLVH[WHUQDOZKHQSUHHVWDEOLVKHGOLQJXLVWLFPHDQLQJPHUJHVZLWKD FRQFRPLWDQWSHUFHSWLRQRIUHDOLW\¶LELG 7KHWUDQVODWLRQSURFHVVLVVHHQQRWDVDµGLUHFWFRQYHUVLRQ¶RIWKH OLQJXLVWLFPHDQLQJRIWKHVRXUFHODQJXDJHEXWDVDµFRQYHUVLRQIURPWKHVRXUFHODQJXDJHWRVHQVHDQGWKHQDQ H[SUHVVLRQRIVHQVHLQWKHWDUJHWODQJXDJH¶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± 7KHWZRRSHUDWLRQVDUHSHUIRUPHGVLPXOWDQHRXVO\7KHVHFRQGVWDJHRI UHIRUPXODWLRQLQYROYHVUHYHUEDOL]LQJWKHFRQFHSWVRIWKHVRXUFHXWWHUDQFHE\PHDQVRIWKHVLJQLILHUVRI DQRWKHUODQJXDJHWKLVLVUHDOL]HGWKURXJKUHDVRQLQJVXFFHVVLYHDVVRFLDWLRQVRIWKRXJKWVDQGORJLFDO DVVXPSWLRQV)LQDOO\WKHWKLUGVWDJHRIYHULILFDWLRQFDQEH



3DJH

GHVFULEHGDVDSURFHVVRIEDFNWUDQVODWLRQZKLFKDOORZVWKHWUDQVODWRUWRDSSO\DTXDOLWDWLYHDQDO\VLVRIVHOHFWHG VROXWLRQVDQGHTXLYDOHQWV,WVSXUSRVHLVWRFRQILUPWKHDFFXUDF\RIWKHILQDOWUDQVODWLRQ

5HODWLRQVKLSWRRWKHUDSSURDFKHV $OWKRXJKOLQJXLVWLFVDQGDSSOLHGOLQJXLVWLFVDUHQRWFRQVLGHUHGDGHTXDWHIUDPHZRUNVIRUWKHGHVFULSWLRQRIWKH WUDQVODWLRQSURFHVVWKHLQWHUSUHWLYHDSSURDFKDFNQRZOHGJHVDGHEWWRGHYHORSPHQWVLQWH[WOLQJXLVWLFVDQG GLVFRXUVHDQDO\VLVSDUWLFXODUO\ZKHQDSSOLHGWRZULWWHQWUDQVODWLRQ 7KHµWKHRU\RIVHQVH¶PXVWQRWEHFRQIXVHGZLWK1HZPDUN¶VQRWLRQRILQWHUSUHWDWLYHWUDQVODWLRQZKLFK µUHTXLUHVDVHPDQWLFPHWKRGRIWUDQVODWLRQFRPELQHGZLWKDKLJKH[SODQDWRU\SRZHUPDLQO\LQWHUPVRIWKH6/ FXOWXUHZLWKRQO\DVLGHJODQFHDWWKH7/UHDGHU¶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

)XUWKHUUHDGLQJ &RUPLHU'HOLVOH/DURVH/HGHUHU5REHUWV6HOHVNRYLWFK 6HOHVNRYLWFKDQG/HGHUHU

0<5,$06$/$0$&$55

,QWHUWHPSRUDOWUDQVODWLRQ ,ILQWHUOLQJXDOWUDQVODWLRQLVWUDQVODWLRQEHWZHHQWZRODQJXDJHVLQWHUWHPSRUDOWUDQVODWLRQLQLWVSXUHVWIRUP ZRXOGEHWUDQVODWLRQEHWZHHQWZRIRUPVRIWKHVDPHODQJXDJHVHSDUDWHGE\WKHSDVVLQJRIWLPH$WLWVPRVW PXQGDQHOHYHOLQWHUWHPSRUDOWUDQVODWLRQPLJKWLQYROYHXSGDWLQJDSLHFHRQHZURWHD\HDURUWZRDJRQRWRQO\ LQFOXGLQJPRUHUHFHQWUHIHUHQFHVEXWEULQJLQJZRUGLQJVDQGSKUDVLQJVLQWRV\QFKZLWKRQH¶VPRVWUHFHQW WKLQNLQJ7KLVLVJHQHUDOO\WKRXJKWRIDVUHYLVLRQRUHGLWLQJEXWVRPHZKHUHEHWZHHQUHZULWLQJD\HDUROG SLHFHRIRQH¶VRZQDQGUHZULWLQJ%HRZXOILQPRGHUQ(QJOLVKWKHSURFHVVXQGHQLDEO\EHFRPHVWUDQVODWLRQ +RZROGGRHVDYHUVLRQRIRQH¶VODQJXDJHKDYHWREHEHIRUHLWLVFRQVLGHUHGDGLIIHUHQWODQJXDJH":HVSHDNRI PRGHUQL]LQJ



3DJH

6KDNHVSHDUHEXWRIWUDQVODWLQJ&KDXFHU&KDXFHU¶V0LGGOH(QJOLVKLVMXVWWKDWPXFKPRUHDOLHQWKDQ 6KDNHVSHDUH¶V(DUO\0RGHUQ(QJOLVKWKDWPXFKKDUGHUWRXQGHUVWDQGZLWKRXWVSHFLDOWUDLQLQJWKDWD PRGHUQL]DWLRQVHHPVOLNHDWUDQVODWLRQ,WDOLDQKDVFKDQJHGVROLWWOHLQVHYHQFHQWXULHVWKDW'DQWH¶V'LYLQD &RPPHGLDDFHQWXU\ROGHUWKDQ7KH&DQWHUEXU\7DOHVFDQEHUHDGE\FRQWHPSRUDU\,WDOLDQVZLWKRXW LQWHUWHPSRUDOWUDQVODWLRQ*UHHNKDVFKDQJHGVROLWWOHWKDWFRQWHPSRUDU\*UHHNVFDQUHDG+RPHUZLWKRQO\ PLQLPDOLQWHUWHPSRUDOWUDQVODWLRQ 6RPHWLPHVLQWHUOLQJXDOWUDQVODWLRQVDUHFRQVLGHUHGLPSRUWDQWHQRXJKWKDWZKHQWKH\GDWHWKH\WRRDUH VXEMHFWHGWRLQWHUWHPSRUDOWUDQVODWLRQ7KLVLVHVSHFLDOO\WUXHRIWKH%LEOH-(520(¶V9XOJDWHVHH/$7,1 75$',7,21 ZDVSDUWO\DQLQWHUWHPSRUDOWUDQVODWLRQRIROGHU/DWLQYHUVLRQVSDUWO\DQLQWHUOLQJXDOWUDQVODWLRQ IURPWKHRULJLQDO+HEUHZDQG*UHHN7KH6WDQGDUGRU.LQJ-DPHV9HUVLRQKDVEHHQPRGHUQL]HGRUWUDQVODWHG LQWHUWHPSRUDOO\VHYHUDOWLPHV²WKH5HYLVHG6WDQGDUG9HUVLRQWKH$PHULFDQ6WDQGDUG9HUVLRQWKH1HZ 5HYLVHG6WDQGDUG9HUVLRQDQGVRZDVWKH5KHLPV'RXDL%LEOHZLWKRXWWLWOHFKDQJHVEHIRUHLWZDVILQDOO\ UHSODFHGZLWKDQHQWLUHO\QHZ&DWKROLFLQWHUOLQJXDOWUDQVODWLRQLQWKH&RQIUDWHUQLW\%LEOH(YHQWKHJUHDWHVW WUDQVODWLRQVRIOLWHUDU\FODVVLFVOLNH)ORULR¶V0RQWDLJQHRU8UTXKDUW¶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¶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²EXWXOWLPDWHO\DQ\WUDQVODWLRQ²WKDWVRXQGVWRRPXFKOLNHDWUDQVODWLRQEUHDNVWKH LOOXVLRQUHPLQGVWKHUHDGHUWKDWZKDWVKHLVKHDULQJLVWKHYRLFHQRWRIWKHRULJLQDODXWKRUEXWRIWKHWUDQVODWRU ZKLFKLQWXUQXQGHUVFRUHVWKHIDFWWKDWWKHUHDGHULVUHDGLQJµMXVW¶DWUDQVODWLRQQRWWKH:RUGRI*RGQRWWKH LPPRUWDOZRUGVRIDFODVVLFDXWKRU 7RWUDQVODWRUVZKRSUHIHUWRDUFKDL]HRUPRGHUQL]HWKHLUUHQGLWLRQVRIROGWH[WVWKLVLOOXVLRQLVPIHHOVOLNHUDQN K\SRFULV\UDWKHU



3DJH

WKDQWU\LQJWRUHSUHVVWKHIDFWRIWHPSRUDOGLIIHUHQFHLQWKHLUWUDQVODWLRQVWKH\FHOHEUDWHLWKLJKOLJKWLW IRUHJURXQGLWE\ZULWLQJHLWKHULQDQLGLRPWKDWQRPRGHUQWUDQVODWRUVSHDNVQDWLYHO\DUFKDLFUHQGLWLRQV RULQ DQLGLRPWKDWWKHRULJLQDODXWKRUFRXOGQRWSRVVLEO\KDYHHPSOR\HGPRGHUQL]DWLRQV ,QVRGRLQJWKH\ZULWH IRURUSHUKDSVVHHNWRFUHDWH7/UHDGHUVZKRHQMR\WUDQVODWLRQVZKRKDYHEURNHQWKHLUDGGLFWLRQWRD ZRUVKLSSHGRULJLQDODQGWDNHSOHDVXUHLQJRRGZULWLQJRIDQ\SHULRGIURPDQ\SHQ²HVSHFLDOO\ZULWLQJWKDW PDNHVWKHPDZDUHRIWKHSUREOHPVFUHDWHGE\WHPSRUDODQGFXOWXUDOGLIIHUHQFH 6HHDOVR 675$7(*,(62)75$16/$7,21

)XUWKHUUHDGLQJ -DFREVRQ


'28*/$652%,1621


3DJH

/ /DQJXDJHWHDFKLQJ XVHRIWUDQVODWLRQLQ 'HVSLWHWKHZLGHVSUHDGSRSXODUDVVXPSWLRQWKDWWUDQVODWLRQVKRXOGSOD\DPDMRUDQGQHFHVVDU\SDUWLQWKHVWXG\ RIDIRUHLJQODQJXDJHWZHQWLHWKFHQWXU\WKHRULHVRIODQJXDJHWHDFKLQJDQGOHDUQLQJKDYHDWEHVWLJQRUHGWKH UROHRIWUDQVODWLRQDQGDWZRUVWYLOLILHGLW)URPWKHWXUQRIWKHFHQWXU\RQZDUGVDOPRVWDOOLQIOXHQWLDO WKHRUHWLFDOZRUNVRQODQJXDJHWHDFKLQJKDYHDVVXPHGZLWKRXWDUJXPHQWWKDWDQHZODQJXDJH/ VKRXOGEH WDXJKWZLWKRXWUHIHUHQFHWRWKHVWXGHQW¶VILUVWODQJXDJH/

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± 8QGHULWVLQIOXHQFHZULWWHQWUDQVODWLRQH[HUFLVHV EHFDPHWKHFHQWUDOIHDWXUHRIODQJXDJHWHDFKLQJV\OODEXVHVLQWH[WERRNVIRUVHOIVWXG\LQVFKRROVDQGLQ XQLYHUVLWLHV7KHVHH[HUFLVHVDUHUHJDUGHGDVEHLQJDWRQFHDPHDQVRILQVWUXFWLRQSUDFWLFHDQGDVVHVVPHQW/ FRPSHWHQFHLVPHDVXUHGE\WKHDFFXUDF\RIWKHOH[LFDODQGJUDPPDWLFDOHTXLYDOHQFHDWWDLQHGLQWUDQVODWLRQ

7KHGLUHFWPHWKRGDQGWKHUHMHFWLRQRIWUDQVODWLRQ *UDPPDUWUDQVODWLRQVRRQFDPHXQGHUDWWDFN$WWKHWXUQRIWKHFHQWXU\WKHVHOIVW\OHGµ5HIRUP0RYHPHQW¶ FULWLFL]HGLWIRULJQRULQJWKHVSRNHQODQJXDJHIRUHQFRXUDJLQJIDOVHQRWLRQVRIHTXLYDOHQFHDQGIRUSUHVHQWLQJ LVRODWHGVHQWHQFHVUDWKHUWKDQFRQQHFWHGWH[WV+RZDWW 7KHLQIOXHQWLDOSKRQHWLFLDQDQGODQJXDJH WHDFKLQJWKHRULVW+HQU\6ZHHW ULGLFXOHGWKHNLQGRIVHQWHQFHIRXQGLQDW\SLFDOWUDQVODWLRQ H[HUFLVHDVµDEDJLQWRZKLFKLVFUDPPHGDVPXFKJUDPPDWLFDODQGOH[LFDOLQIRUPDWLRQDVSRVVLEOH¶DQG SURGXFHGSDURGLHVLQLOOXVWUDWLRQVXFKDV 7KHPHUFKDQWLVVZLPPLQJZLWKWKHJDUGHQHU¶VVRQEXWWKH'XWFKPDQKDVWKHILQHJXQ 6ZHHW 6XFKVHQWHQFHVDVPDQ\KDYHREVHUYHGDUHKLJKO\DUWLILFLDOGLYRUFHGIURPSXUSRVHFRQWH[WDQGDFWXDOXVH IRUIXUWKHUGLVFXVVLRQVHH&RRN± 2WKHUDWWDFNVRQJUDPPDUWUDQVODWLRQKDYHFLWHGWKH GHPRWLYDWLQJGLIILFXOW\RIWUDQVODWLQJIURP/WR/WKHUHLQIRUFHPHQWRIUHOLDQFHRQSURFHVVLQJYLDWKH/ VWUHQJWKHQLQJRI/LQWHUIHUHQFHDQGDGHWULPHQWDOHIIHFWRQWKHDFTXLVLWLRQRIQDWLYHOLNHSURFHVVLQJVNLOODQG VSHHGIRUDVXPPDU\RIVXFKDUJXPHQWVVHH6WHUQ± 6XFKFULWLFLVPVKDYHEHHQGHYDVWDWLQJO\



3DJH

HIIHFWLYHLQLQIOXHQFLQJDFDGHPLFRSLQLRQDQGWUDQVODWLRQKDVQRW\HWEHHQUHLQVWDWHGDVDWKHRUHWLFDOO\ MXVWLILHGDFWLYLW\LQODQJXDJHWHDFKLQJ2SSRVLWLRQWRWKHXVHRIWUDQVODWLRQKDVOHGWRLWVUHSODFHPHQWE\WKH GLUHFWPHWKRGWKHWHDFKLQJRIDQ/XVLQJWKDWODQJXDJHDQGRQO\WKDWODQJXDJH DVDPHDQVRILQVWUXFWLRQ $WWLWXGHVWRWUDQVODWLRQKDYHYDULHGIURPDWRWDOEDQDVLQWKH%HUOLW]VFKRROV WRDQLQGXOJHQWLIUHOXFWDQW DGPLVVLRQRILWDVDQHFHVVDU\ODVWUHVRUWµDUHIXJHIRUWKHLQFRPSHWHQW¶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

3ROLWLFDODQGGHPRJUDSKLFLQIOXHQFHV ,QWKLVHQWU\DVLQDQ\GLVFXVVLRQRIODQJXDJHWHDFKLQJWKHRU\DQGSUDFWLFHLWLVLPSRUWDQWWRUHPHPEHUWKH FRQVHTXHQFHVRIWKHSRVLWLRQRI(QJOLVKDVWKHZRUOG¶VPRVWZLGHO\OHDUQHGIRUHLJQODQJXDJH4XLUNDQG :LGGRZVRQ0F&DOOHQ±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¶V/DQG/7KHJURZLQJDVFHQGDQF\RI(QJOLVKDVWKHZRUOG¶VPDLQ LQWHUQDWLRQDOODQJXDJH&U\VWDO&RXOPDV±3KLOOLSVRQ±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¶/ 0RUHRYHU(QJOLVKVSHDNLQJFRXQWULHVHVSHFLDOO\%ULWDLQKDYHSURPRWHGWKHHPSOR\PHQWRIVXFKWHDFKHUV DEURDGHYHQLQVLWXDWLRQVZKHUHVWXGHQWVVKDUHDQ/DQGWUDQVODWLRQFDQFRQVHTXHQWO\EHXVHG$KLJKO\ TXHVWLRQDEOHDVVXPSWLRQKDVGHYHORSHGWKDWWKHQDWLYHVSHDNHUWHDFKHULVQHFHVVDULO\WKHEHVWIRUGLVFXVVLRQ DQGFKDOOHQJHVWRWKLVYLHZVHH'DYLHV3DLNHGD\3KLOOLSVRQ± ,QWHUQDWLRQDOSXEOLVKHUV KDYHKDGDQLQWHUHVWLQWKHGHPLVHRIWUDQVODWLRQWRRDVPRQRJORWPDWHULDOVFDQEHGLVWULEXWHGZLWKRXWUHJDUG WRVWXGHQWV¶/

,QIOXHQFHRIVHFRQGODQJXDJHDFTXLVLWLRQWKHRU\6/$ )XUWKHURSSRVLWLRQWRWUDQVODWLRQLQODQJXDJHWHDFKLQJKDVEHHQIXHOOHGE\VXFFHVVLYHWKHRULHVRIVHFRQG ODQJXDJHDFTXLVLWLRQ6/$ ZKLFKLQWXUQGHULYHIURPWKHRULHVRIFKLOGUHQ¶VILUVWODQJXDJHDFTXLVLWLRQ)/$ LQZKLFKE\GHILQLWLRQWUDQVODWLRQKDVQRUROHWR



3DJH

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

7KHUHYLYDORIWUDQVODWLRQ 0RVWFULWLFLVPVRIWUDQVODWLRQDSSO\RQO\WRWKHOLPLWHGDQGLGLRV\QFUDWLFXVHVRIWUDQVODWLRQLQWKHJUDPPDU WUDQVODWLRQPHWKRGDQGRYHUORRNWKHIDFWWKDWWUDQVODWLRQFDQEHXVHGLQPDQ\RWKHUZD\V'XII±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


3DJH

YLOLILFDWLRQRIWKHXVHRIWUDQVODWLRQLQODQJXDJHWHDFKLQJ+RZDWW FRPPHQWVWKDWµ7KHSUDFWLFHRI WUDQVODWLRQKDVEHHQFRQGHPQHGVRVWUHQXRXVO\IRUVRORQJZLWKRXWDQ\UHDOO\FRQYLQFLQJUHDVRQVWKDWLWLV SHUKDSVWLPHWKHSURIHVVLRQWRRNDQRWKHUORRNDWLW¶$VZHDSSURDFKWKHQHZFHQWXU\LWLVWREHKRSHGWKDWWKLV SUHGLFWLRQZLOOEHUHDOL]HGLQDUHQDLVVDQFHRIWUDQVODWLRQLQODQJXDJHWHDFKLQJ

)XUWKHUUHDGLQJ %ODDVFKHWDO&RRN'XII+RZDWW.HOO\3KLOOLSVRQ5LFKDUGVDQG5RGJHUV 6WHUQ:LGGRZVRQ

*8<&22.

/LQJXLVWLFDSSURDFKHV ,Q1RDP&KRPVN\VRXQGHGDQRWHRIFDXWLRQLQUHODWLRQWRWKHLPSOLFDWLRQVRIJHQHUDWLYHJUDPPDUIRU WUDQVODWLRQµ7KHH[LVWHQFHRIGHHSVHDWHGIRUPDOXQLYHUVDOV«GRHVQRWIRUH[DPSOHLPSO\WKDWWKHUHPXVWEH VRPHUHDVRQDEOHSURFHGXUHIRUWUDQVODWLQJEHWZHHQODQJXDJHV¶ ,QWKHVDPH\HDU&DWIRUGSXEOLVKHG KLVZHOONQRZQERRN$/LQJXLVWLF7KHRU\RI7UDQVODWLRQZKLFKRSHQVZLWKWKHZRUGVµ&OHDUO\WKHQDQ\ WKHRU\RIWUDQVODWLRQPXVWGUDZXSRQDWKHRU\RIODQJXDJH²DJHQHUDOOLQJXLVWLFWKHRU\¶ 7KLV XQFHUWDLQUHODWLRQVKLSEHWZHHQOLQJXLVWLFVDQGWUDQVODWLRQWKHRU\FRQWLQXHVWREHUHIOHFWHGLQWKHOLWHUDWXUH (LJKW\HDUVODWHUZHILQG-|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

7KHUHODWLRQVKLSEHWZHHQOLQJXLVWLFVDQGWUDQVODWLRQ 7KHUHODWLRQVKLSRIOLQJXLVWLFVWRWUDQVODWLRQFDQEHWZRIROGRQHFDQDSSO\WKHILQGLQJVRIOLQJXLVWLFVWRWKH SUDFWLFHRIWUDQVODWLRQDQGRQHFDQKDYHDOLQJXLVWLFWKHRU\RIWUDQVODWLRQDVRSSRVHGVD\WRDOLWHUDU\ HFRQRPLFRUVRPDWLFWKHRU\RIWUDQVODWLRQ ,QWKHILUVWLQVWDQFHDVXEGLYLVLRQRIOLQJXLVWLFVVXFKDVVRFLROLQJXLVWLFVPD\KDYHVRPHWKLQJWRVD\DERXWWKH UHODWLRQRIODQJXDJHWRVRFLDOVLWXDWLRQDQGZKDWLWKDVWRVD\FDQFRQVHTXHQWO\EHDSSOLHGLQWKHDFWRI WUDQVODWLQJ)RUH[DPSOHLQ%DUU\+LQHV¶QRYHO.HV DQRUWKHUQ(QJOLVKGLDOHFWLVXVHGLQWKHGLDORJXH DQGWKLVVKRXOGLQWKHRU\EHWUDQVODWHGGLIIHUHQWO\IURPWKHQRQGLDOHFWDOODQJXDJHRIWKHQDUUDWLYH7KLVSRVHV DSUREOHPKRZHYHUVLQFHPDQ\FXOWXUHVHLWKHUGRQRWKDYHDGLDOHFWZKLFKKDVFRPSDUDEOHFXOWXUDOIXQFWLRQV RUFRQQRWDWLRQVRUWKH\TXLWHVLPSO\GRQRWSHUPLWWKHXVHRIGLDOHFWLQWKHZULWWHQODQJXDJH,QWKH)UHQFK WUDQVODWLRQRI.HV WKHUHJLRQDOGLDOHFWLVUHSODFHGE\DVRFLROHFWWKDWLVDGLDOHFWZKLFKLVFKDUDFWHULVWLF RIDVRFLDOUDWKHUWKDQDUHJLRQDOJURXS,Q



3DJH

RWKHUWUDQVODWLRQVWKHGLDOHFWDOIHDWXUHPD\VLPSO\GLVDSSHDUDVKDSSHQHGLQ)UDQFHLQWKHHLJKWHHQWK FHQWXU\ XQOHVVWKHWUDQVODWRULVZLOOLQJWRDVVXPHWKHULVN\UROHRIWUDLOEOD]HU/LQJXLVWLFVFDQSURYLGHVRPH EXWQRWDOORIWKHLQIRUPDWLRQRQZKLFKWREDVHWKHGHFLVLRQRIKRZWRKDQGOHGLDOHFWVDQGVLPLODUIHDWXUHVLQ WUDQVODWLRQ ,QWKHVHFRQGLQVWDQFHUDWKHUWKDQDSSO\LQJOLQJXLVWLFWKHRU\WRHOHPHQWVZLWKLQWKHWH[WWREHWUDQVODWHGRQH FDQDSSO\LWWRWKHHQWLUHFRQFHSWRIWUDQVODWLRQLWVHOI7KXVLWFDQEHVDLGWKDW(XJHQH1LGD¶VWKHRU\RI G\QDPLFHTXLYDOHQFHLVLQIDFWQRWKLQJOHVVWKDQDVRFLROLQJXLVWLFVRIWUDQVODWLRQ%\IRFXVLQJWKHWUDQVODWLRQ SURFHVVRQWKHWDUJHWWH[WUHFHLYHUZKRGLIIHUVIURPWKHVRXUFHWH[WUHFHLYHULQODQJXDJHFXOWXUHZRUOG NQRZOHGJHDQGWH[WH[SHFWDWLRQVLQWKHVDPHZD\WKDWDQRUWKHUQEOXHFROODUZRUNHUGLIIHUVIURPDVRXWKHUQ VWRFNEURNHUFRPSDWULRWZHDUHLQYLWHGWRVHHWKHWUDQVODWLRQSURFHVVDVRQHRIDGDSWLQJWKHVRXUFHODQJXDJH WH[WWRDGLIIHUHQWVRFLDOJURXSZLWKZKDWRQHPLJKWIRUWKHVDNHRIWHUPLQRORJLFDOFRPSDUDELOLW\FDOOLWVRZQ µQDWLROHFW¶ %RWKRIWKHVHDSSURDFKHVDUHIRXQGLQWKHZULWLQJVRQOLQJXLVWLFVDQGWUDQVODWLRQ$XWKRUVVXFKDV$OEUHFKW +DWLPDQG0DVRQ %HOO DQGPDQ\RWKHUVHIIHFWLYHO\OLVWWKHPDLQHOHPHQWVRIOLQJXLVWLF WKHRU\DQGVKRZKRZWKH\VXSSRVHGO\LPSDFWXSRQHOHPHQWVLQWKHWUDQVODWLRQSURFHVVDQGLWVSURGXFW7KH VHFRQGDSSURDFKLVIRXQGLQWKHZRUNVRIZULWHUVVXFKDV&DWIRUG ZKRDWWHPSWVWRGHVFULEHWUDQVODWLRQ LQWHUPVRIDVSHFLILFOLQJXLVWLFWKHRU\LQWKLVFDVH+DOOLGD\¶VUDQNVFDOHJUDPPDURI+RXVH ZKRXVHV DEDVLFGLVWLQFWLRQRIIXQFWLRQDOOLQJXLVWLFVWRGHVFULEHWKHWZRVWUDWHJLHVRIRYHUWDQGFRYHUWWUDQVODWLRQVHH 48$/,7<2)75$16/$7,21 DQGRI6KYHLWVHU ZKRGUDZVDPRQJVWRWKHUWKLQJVRQJHQHUDWLYHDQG VLWXDWLRQDOOLQJXLVWLFVWRGHVFULEHWUDQVODWLRQDVDUHZULWLQJSURFHVVZKLFKLVDOVRLQHIIHFWWKHDSSURDFK DGRSWHGLQWUDQVODWLRQWKHRULHVEDVHGRQOLQJXLVWLFDOO\IRXQGHGWD[RQRPLHVRIWUDQVODWLRQWHFKQLTXHV 7KHPRVWIDPRXVH[DPSOHRIWKHVHFRQGDSSURDFKLV&DWIRUG¶VOLQJXLVWLFWKHRU\RIWUDQVODWLRQ 7KLVLV RQWKHZKROHTXLWHGLVDSSRLQWLQJLWVPDLQZHDNQHVVEHLQJWKDW&DWIRUG¶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µHYHU\SDUWRIWKH6/WH[WLVUHSODFHGE\7/WH[W PDWHULDO¶ DQGSDUWLDOWUDQVODWLRQZKHUHµVRPHSDUWRUSDUWVRIWKH6/WH[WDUHOHIW XQWUDQVODWHG¶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µUHSODFHPHQWRI6/ JUDPPDUDQGOH[LVE\HTXLYDOHQW7/JUDPPDUDQGOH[LVZLWKFRQVHTXHQWLDOUHSODFHPHQWRI6/SKRQRORJ\ JUDSKRORJ\E\QRQHTXLYDOHQW 7/SKRQRORJ\JUDSKRORJ\¶LELG ,QUHVWULFWHGWUDQVODWLRQRQWKH RWKHUKDQGWKHUHLVµUHSODFHPHQWRI6/WH[WXDOPDWHULDOE\HTXLYDOHQW7/WH[WXDOPDWHULDODWRQO\RQH OHYHO¶LELG 7KHUHDUHWZRPDLQW\SHVRIUHVWULFWHGWUDQVODWLRQSKRQRORJLFDOWUDQVODWLRQDQG JUDSKRORJLFDOWUDQVODWLRQ5HVWULFWHGWUDQVODWLRQDWWKHJUDPPDWLFDOOHYHORUOH[LFDOOHYHORQO\LVµGLIILFXOW LIQRWLPSRVVLEOH¶EHFDXVHRIWKHLQWHUGHSHQGHQFHRIJUDPPDUDQGOH[LV



3DJH

LELG &DWIRUGDOVRVWUHVVHVWKDWWKHUHFDQEHQRUHVWULFWHGWUDQVODWLRQDWWKHLQWHUOHYHORIFRQWH[W EHFDXVHµWKHUHLVQRZD\LQZKLFKZHFDQUHSODFH6/³FRQWH[WXDOXQLWVÉ\HTXLYDOHQW7/³FRQWH[WXDO XQLWV´ZLWKRXWVLPXOWDQHRXVO\UHSODFLQJ6/JUDPPDWLFDOOH[LFDOXQLWVE\HTXLYDOHQW7/JUDPPDWLFDO OH[LFDOXQLWV¶LELG F LQWHUPVRIWKHJUDPPDWLFDORUSKRQRORJLFDOUDQNDWZKLFKWUDQVODWLRQHTXLYDOHQFHLVHVWDEOLVKHG &DWIRUGGLVWLQJXLVKHVEHWZHHQUDQNERXQGWUDQVODWLRQZKLFKLQYROYHVDGHOLEHUDWHDWWHPSWWR FRQVLVWHQWO\VHOHFW7/HTXLYDOHQWVDWWKHVDPHUDQNLQWKHKLHUDUFK\RIJUDPPDWLFDOXQLWVIRUH[DPSOHDW WKHUDQNRIPRUSKHPHZRUGJURXSFODXVHRUVHQWHQFHLELG DQGXQERXQGHGWUDQVODWLRQZKHUH HTXLYDOHQFHVµVKXQWXSDQGGRZQWKHUDQNVFDOHEXWWHQGWREHDWWKHKLJKHUUDQNV²VRPHWLPHVEHWZHHQ ODUJHUXQLWVWKDQWKHVHQWHQFH¶LELGVHHDOVR)5((75$16/$7,21

$SSO\LQJWKHILQGLQJVRIOLQJXLVWLFVWRWUDQVODWLRQ 7KHGLVHQFKDQWPHQWRIWUDQVODWLRQWKHRULVWVDQGSUDFWLWLRQHUVZLWKOLQJXLVWLFVLVVDLGWRDULVHIURPWKHUHIXVDORI $PHULFDQVWUXFWXUDOOLQJXLVWLFVWRDGGUHVVWKHSUREOHPRIPHDQLQJRQWKHJURXQGVWKDWPHDQLQJLVVFDUFHO\ VWUXFWXUHGDQGLQDQ\FDVHXQREVHUYDEOH7KLVW\SHRIOLQJXLVWLFVLVREYLRXVO\RIOLWWOHDVVLVWDQFHWRWUDQVODWLRQ VLQFHDV&DWIRUGVD\Vµ,WLVFOHDUO\QHFHVVDU\IRUWUDQVODWLRQWKHRU\WRGUDZXSRQDWKHRU\RI PHDQLQJ¶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µEUHDGDQGEXWWHU¶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²IRUH[DPSOH*HVFKZLVWHUXVXDOO\ EHFRPHVWKHPRUHFRQFUHWHDQGGLIIHUHQWLDWHGEURWKHUVDQGVLVWHUVUDWKHUWKDQVLEOLQJV



3DJH

E ORJLFDOGHULYDWLRQ²VKRUWHUZRUNLQJKRXUVZKLFKLVUHVXOWRUHIIHFWEHFRPHV6HQNXQJGHU$UEHLWV]HLW OLWHUDOO\µUHGXFWLRQLQZRUNWLPH¶ ZKLFKLVDSURFHVVRUFDXVH F DQWRQ\PLFWUDQVODWLRQ²HVWXQHYDOHXUGpMjDQFLHQQHOLWHUDOO\µLVDQDOUHDG\ROGYDOXH¶ EHFRPHVLVE\ QRPHDQVDQHZYDOXH G &203(16$7,21²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¶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µVHUYHHLWKHU DVWRROVIRUWKHVWXG\RIFRPSOHWHGWUDQVODWLRQWKHDQDO\WLFPRGH RUDVKHOSPDWHVLQWKHDFWRIWUDQVODWLRQ WKHRSHUDWLYHPRGH ¶ +RZHYHUPDQ\WUDQVODWRUVILQGOLNH/DGPLUDO WKDWOLQJXLVWLFV FDQQRWSURYLGHWUDQVODWLRQWHFKQLTXHVZKLFKFDQEHDSSOLHGLQDOLQHDUIDVKLRQWKRXJKWKLVGRHVQRWSUHYHQW /DGPLUDOKLPVHOIIURPRIIHULQJKLVRZQWUDQVODWLRQWKHRUHPVDPL[WXUHRIFRQFHSWVDQGWHFKQLTXHVVXFKDV µFRQWUHVHQVPLQLPDOGLVVLPLODWLRQLQFUpPHQWLDOLVDWLRQLQWUDGXFWLRQ¶HWF 7H[WOLQJXLVWLFDSSURDFKHV :RUGDQGSKUDVHOHYHOWD[RQRPLHVHYHQZKHUHWKH\DUHFRQWH[WVHQVLWLYHDUHLQDGHTXDWHIRUGHDOLQJZLWKDOO WKHSUREOHPVIDFHGE\WUDQVODWRUV,WLVXVXDOWKHUHIRUHWREURDGHQWKHVFRSHWRWKH7(;7/,1*8,67,&OHYHO RIUHJLVWHUDQDO\VLVWHQRUPRGHGRPDLQ ',6&2856($1$/<6,6WKHPDWLFVWUXFWXUHFRKHUHQFH FRKHVLRQ DQG35$*0$7,&DQDO\VLVVSHHFKDFWV*ULFHDQSULQFLSOHVODQJXDJHDQGWH[WIXQFWLRQV 7KLVLV PRUHRUOHVVWKHSURJUHVVLRQIROORZHGLQ+DWLPDQG0DVRQ %HOO DQG%DNHU 2QHRIWKHHDUOLHVWDSSOLFDWLRQVRIWKHFRQFHSWRIUHJLVWHUWRWUDQVODWLRQZDVSURYLGHGE\+RXVH ZKR VKRZHGKRZWKHWZRPDMRUWH[WIXQFWLRQVLGHDWLRQDOFRQYH\LQJLGHDVDQGLQWHUSHUVRQDOUHODWLQJDXWKRU WH[WDQGUHDGHU DUHVXSSRUWHGE\UHJLVWHUSDUDPHWHUVVXFKDVPHGLXPDQGVRFLDOUROHUHODWLRQVKLSDQGKRZRQ WKLVEDVLVDWUDQVODWLRQFDQEHMXGJHGQRWMXVWRQVHPDQWLFPDWFKEXWE\WKH



3DJH

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¶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



3DJH

6HHDOVR &2175$67,9($1$/<6,6$1'75$16/$7,21',6&2856($1$/<6,6$1'75$16/$7,21 35$*0$7,&6$1'75$16/$7,2148$/,7<2)75$16/$7,216(0,27,&$3352$&+(6 7(;7/,1*8,67,&6$1'75$16/$7,21

)XUWKHUUHDGLQJ %DNHU&DWIRUG+DWLPDQG0DVRQ0DORQH1LGDDQG7DEHU3HUJQLHU6QHOO +RUQE\9LQD\DQG'DUEHOQHW

3(7(5)$:&(77

/LWHUDOWUDQVODWLRQ /LWHUDOWUDQVODWLRQDOVRFDOOHGZRUGIRUZRUGWUDQVODWLRQE\&,&(52±%&VHH/$7,175$',7,21 +RUDFH±%& DQGYLUWXDOO\HYHU\RQHWKHUHDIWHUDQG0(7$3+5$6(E\-RKQ'5<'(1±VHH %5,7,6+75$',7,21 LVLGHDOO\WKHVHJPHQWDWLRQRIWKH6/WH[WLQWRLQGLYLGXDOZRUGVDQG7/UHQGHULQJRI WKRVHZRUGVHJPHQWVRQHDWDWLPH7KLVLGHDOLVRIWHQOLWHUDOO\LPSRVVLEOH²DQLQIOHFWHGZRUGLQDQ DJJOXWLQDWLYH6/IRUH[DPSOHFDQDOPRVWQHYHUEHUHSODFHGZLWKDVLQJOHZRUGLQDQLVRODWLYH7/²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²HYHQLIWKHUDQNVKLIWVZHUHEHWZHHQZRUGVDQGSKUDVHVDQGWKXVORRNHGQHDUOLWHUDO ,QKLVWHUPLQRORJ\LQIDFWOLWHUDODQGIUHHDUHVXEFDWHJRULHVRIXQERXQGHGWUDQVODWLRQWKHIRUPHUEHLQJ XQERXQGHGWUDQVODWLRQVDWWKHORZHUUDQNVZRUGVDQGSKUDVHV WKHODWWHUXQERXQGHGWUDQVODWLRQVDWWKHKLJKHU UDQNVFODXVHVDQGVHQWHQFHV 7KHHDUOLHVWWUDQVODWLRQVWKDWVXUYLYHWRGD\*UHHNWR/DWLQWUDQVODWLRQVE\*QDHXV1DHYLXVF±F%& DQG/XFLXV/LYLXV$QGURQLFXVF±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µ7KHSHUVRQZKRGHVLUHVWR WXUQDOLWHUDU\PDVWHUSLHFHLQWRDQRWKHUODQJXDJHKDVRQO\RQHGXW\WRSHUIRUPDQGWKLVLVWRUHSURGXFHZLWK DEVROXWHH[DFWLWXGHWKHZKROHWH[WDQGQRWKLQJEXWWKHWH[W7KHWHUP³OLWHUDOWUDQVODWLRQ´LVWDXWRORJLFDOVLQFH DQ\WKLQJEXWWKDWLVQRWWUXO\DWUDQVODWLRQEXWDQLPLWDWLRQDQDGDSWDWLRQRUDSDURG\¶ ,QKLVOHWWHUWR3DPPDFKLXV$' -(520(±VHH/$7,175$',7,21 ODXQFKHGD GLYHUJHQWDQGPRUHFRQIOLFWHGDWWDFNRQOLWHUDOLVPFRLQLQJWKHWHUPVHQVHIRUVHQVHWUDQVODWLRQIRUDIDLWKIXO PLGGOHJURXQGEHWZHHQWKHIDLWKIXOOLWHUDOLVP&LFHURDQG+RUDFHFHQVXUHGDQGWKHIUHHLPLWDWLRQVWKH\ GHIHQGHG²EXWDOVRSUREOHPDWLFDOO\GHIHQGLQJOLWHUDOWUDQVODWLRQVRI6FULSWXUHµZKHUHHYHQWKHZRUGRUGHU KROGVDP\VWHU\¶6LQFHKLVOHWWHULVODUJHO\DVHULHVRIH[DPSOHVLQZKLFKWKH6HSWXDJLQWWUDQVODWRUVDQGWKH HYDQJHOLVWVWUDQVODWHGSDVVDJHVIURPWKH



3DJH

+HEUHZ2OG7HVWDPHQWORRVHO\IUHHO\VHQVHIRUVHQVHLQWR*UHHNWKLVLVDVWUDQJHFODLPDQGSUREDEO\ HYLGHQFHWKDWHYHQ-HURPHGHVSLWHKLVWKRURXJKJRLQJUDGLFDOLVPKDGQRWWRWDOO\GHP\VWLILHGWKHVDFUDOLW\RI 6/ZRUGRUGHU0\VWLFDOWUDGLWLRQVERWKEHIRUHDQGWKURXJKRXWWKHKLVWRU\RI&KULVWLDQLW\KDYHW\SLFDOO\ FRQFHLYHGRIWKHLUVDFUHGWH[WVDVGLFWDWHGE\WKHLUJRGDQGWKXVDVWDERRWREHDSSURDFKHGRQO\ZLWKJUHDW UHYHUHQFHIRUWKHDFWXDOZRUGVDQGOHWWHUVDQGWKHLUVHTXHQFHV RQWKHSDJH²DQGZLWKDIHDURIFKDQJLQJHYHQ DV\OODEOH 2UWKRGR[&KULVWLDQLW\DQGWKHPDLQVWUHDPWKHRU\RIWUDQVODWLRQEXLOWRQLWE\-HURPHDQGKLVIROORZHUVKDV EHHQDQH[RWHULFDVVDXOWRQWKLVZRUVKLSRIWKH6/OHWWHUFDOOLQJLWLGRODWU\$XJXVWLQH± LQIDFWLQ2Q &KULVWLDQ'RFWULQHVWDWHGKLVSUHIHUHQFHIRUWKH6HSWXDJLQWWUDQVODWLRQRYHUWKHRULJLQDO+HEUHZDQG$UDPDLF WH[WVEHFDXVHWKH*UHHNWUDQVODWRUVDW$OH[DQGULDZHUHJXLGHGE\WKH+RO\6SLULW)RUDQHVRWHULFWKH RULJLQDOWH[WDOZD\VWDNHVSUHFHGHQFHDQGDWUDQVODWLRQPXVWFOLQJWRLWVFRQWRXUVDVFORVHO\DQGUHYHUHQWO\DV SRVVLEOHIRUWKHH[RWHULF&KULVWLDQFKXUFKDWUDQVODWLRQFRQFHLYHGDVGLYLQHO\LQVSLUHGDV-HURPH¶V9XOJDWH FDPHWREH DOZD\VWDNHVSUHFHGHQFHDQGGLYLQHLQVSLUDWLRQLVWDNHQWRPDQGDWHFRQIRUPLW\QRWWR6/ZRUG RUGHUEXWWRRUWKRGR[GRFWULQH$QH[RWHULFWUDQVODWLRQPXVWWKXVPDNHVHQVHQRWRQO\LQWKH7/EXWLQD GRJPDWLFV\VWHPWKDWLVRSHUDWLYHLQWKH7/EXWLVWDNHQWREHXQLYHUVDOSUHH[LVWLQJQRWRQO\WKHWUDQVODWLRQ EXWWKH6/WH[WDVZHOO$FRUUHFWVHQVHIRUVHQVHWUDQVODWLRQUHQGHUVZKDWWKHHFFOHVLDVWLFDOLQVWLWXWLRQWDNHVWR EHWKHDEVWUDFWWUDQVFHQGHQWDOVHQVHRIWKH6/WH[W²DVHQVHWKDWWKH6/DXWKRUKLPVHOIPD\QRWKDYHIXOO\ XQGHUVWRRGDVZKHQDXWKRUVRIERRNVRIWKH2OG7HVWDPHQWKDYHWKHJRGVUHIHUWRWKHPVHOYHVLQWKHSOXUDOWKH (ORKLPZKLFKWKHIDLWKIXOVHQVHIRUVHQVHWUDQVODWRUUHQGHUVDVWKHVLQJXODU/25' RUGRQRW\HWIXOO\ XQGHUVWDQGWKHW\SRORJLFDOVLJQLILFDQFHRIWKHLURZQZRUGVLQSRLQWLQJDKHDGWR&KULVW %XWLWZDVWREHPDQ\FHQWXULHVEHIRUHWKLVRUWKRGR[WKHRU\RIWUDQVODWLRQZDVIXOO\DVVLPLODWHGLQWRWKH XQFRQVFLRXVSUDFWLFHRIWUDQVODWRUVDQGOLWHUDOWUDQVODWLRQFRQWLQXHGWRIORXULVKWKURXJKRXWWKH0LGGOH$JHV² DQGZDVHYHQLQIOXHQWLDOO\GHIHQGHGE\%2(7+,86±VHH/$7,175$',7,21 -RKQ6FRWXV (ULJHQDF±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²FRXFKHGW\SLFDOO\LQWKHIRUPRIDVXUYH\RIGLIIHUHQW DSSURDFKHVWRWUDQVODWLRQ5HQDLVVDQFHWUDQVODWRUVOLNH/HRQDUGR%581,±VHH,7$/,$1 75$',7,21 ULGLFXOHGWKHLUSUHGHFHVVRUV¶OLWHUDOUHQGLWLRQVRIFODVVLFDOWH[WVDQGUHWUDQVODWHGWKRVHWH[WVHQ PDVVHLQWKHQHZPRGHGHYHORSHGE\-HURPHDPLOOHQQLXPHDUOLHU %XWOLWHUDOLVPGLGQ¶WGLVDSSHDUXQGHUWKLVRUWKRGR[RQVODXJKWLWRQO\ZHQWXQGHUJURXQGUHVXUIDFLQJPRVW VWULNLQJO\LQWKHZRUNRIWKH*HUPDQ5RPDQWLFVVHH*(50$175$',7,21 ZKRZHUHFDUHIXOQRWWRFDOO WKHWUDQVODWLRQVWKH\GHIHQGHGOLWHUDO)RU-RKDQQ*RWWIULHGYRQ+HUGHU± IRU$XJXVW:LOKHOPYRQ 6&+/(*(/± IRU)ULHGULFK6&+/(,(50$&+(5± IRU-RKDQQ:ROIJDQJYRQ *RHWKH± IRU:LOKHOPYRQ+XPEROGW± WKHLVVXHLQWUDQVODWLRQZDVQRORQJHU VHJPHQWDWLRQRUZKDWIRUPDOXQLWWRLVRODWHIRUWUDQVODWLRQEXWZKDWPLJKWEHFDOOHGJHRKHUPHQHXWLFVWKH SUREOHPDWLFVRILQWHUSUHWLQJWH[WVDFURVVFXOWXUDOERXQGDULHV7KHWUDQVODWRUHLWKHUDSSURSULDWHVWKHIRUHLJQWH[W EULQJVLWKRPHLQDIRUPSDODWDEOHWRWKHPRQROLQJXDO7/UHDGHU²SURGXFLQJVRPHWKLQJOLNHVHQVHIRUVHQVH WUDQVODWLRQV²RUVKHVXUUHQGHUVWRWKHDWWUDFWLRQVRIWKHIRUHLJQWH[WDQGVHHNVWRHVFRUWWKH7/UHDGHUDEURDG WRLPPHUVHWKH7/UHDGHULQWKHWH[WXUDOIHHORIWKH6/FXOWXUHSURGXFLQJVRPHWKLQJOLNHOLWHUDOWUDQVODWLRQV VHH675$7(*,(62)75$16/$7,21 ,QWKLVQHZFRQFHSWLRQRIWKHROGGXDOLVPWKH*HUPDQ5RPDQWLFV VLGHG



3DJH

ZKROHKHDUWHGO\ZLWKWKHODWWHUDWWDFNLQJWKH)UHQFKQHRFODVVLFLVWVIRUDVVLPLODWLQJWKHIRUHLJQDXWKRUVWKH\ WUDQVODWHGWR)UHQFKWDVWHVDQGIDVKLRQVDQGSUDLVLQJ*HUPDQWUDQVODWRUVOLNH-RKDQQ+HLQULFK9RVV± IRUWKHLUZLOOLQJQHVVWRUHWDLQWKHVWUDQJHQHVVRUIRUHLJQQHVVRUZKDWZRXOGFRPHE\WKHVWREH FDOOHGWKHDOWHULW\RIWKH6/WH[W ,QWKHWZHQWLHWKFHQWXU\WKLV5RPDQWLFIRUHLJQL]LQJFRQFHSWLRQRIWUDQVODWLRQKDVEHHQSLFNHGXSDQGSDVVHG RQE\DVXFFHVVLRQRIEULOOLDQWWKHRULVWVIURP:DOWHU%HQMDPLQ±µ7KH7DVNRIWKH7UDQVODWRU¶ WKURXJK0DUWLQ+HLGHJJHU±7KH3ULQFLSOHRI*URXQG WR*HRUJH6WHLQHU$IWHU%DEHO $QWRLQH%HUPDQ7KH([SHULHQFHRIWKH)RUHLJQ /DZUHQFH9HQXWL7KH7UDQVODWRU¶V ,QYLVLELOLW\ DQGRWKHUV/LNHPRVWRIWKHLU5RPDQWLFSUHFXUVRUVWKHVHODWHUWKHRULVWVW\SLFDOO\GXDOL]H WUDQVODWLRQDQGDVVLJQRYHUWO\PRUDOFKDUJHVWRWKHWZRFKRLFHVHLWKHU\RXGRPHVWLFDWHWKH6/WH[WFUDYHQO\ DVVLPLODWHLWWRWKHIODWGHQDWXUHGRUGLQDU\ODQJXDJHRI7/FXOWXUHRU\RXIRUHLJQL]HLWUHWDLQVRPHRILWV DOWHULW\WKURXJKOLWHUDOLVPDQGVRKHURLFDOO\UHVLVWWKHIODWWHQLQJSUHVVXUHVRIFRPPRGLW\FDSLWDOLVP7KHUHDUH QRRWKHUDOWHUQDWLYHVQRPLGGOHVH[FOXGHGE\WKHGXDOLVPDQGWKHPRUDOLPSHUDWLYHVEHKLQGWKHFKRLFHLIQRW DOZD\VSUDFWLFDOLQWKHUHDOZRUOGDWUDQVODWRUPLJKWEHIRUFHGWRGRPHVWLFDWHLQVRPHFLUFXPVWDQFHVWRPDNH DOLYLQJ DUHQHYHUWKHOHVVLUUHYRFDEOH 6HHDOVR )5((75$16/$7,2181,72)75$16/$7,21

)XUWKHUUHDGLQJ %HUPDQ%URFN&DWIRUG6FKZDUW]*HRUJH6WHLQHU9HQXWL

'28*/$652%,1621

/LWHUDU\WUDQVODWLRQ SUDFWLFHV /LWHUDU\WUDQVODWLRQLVWKHZRUNRIOLWHUDU\WUDQVODWRUV7KDWLVDWUXLVPZKLFKKDVWRVHUYHDVDVWDUWLQJSRLQWIRU DGHVFULSWLRQRIOLWHUDU\WUDQVODWLRQDQRULJLQDOVXEMHFWLYHDFWLYLW\DWWKHFHQWUHRIDFRPSOH[QHWZRUNRIVRFLDO DQGFXOWXUDOSUDFWLFHV7KHLPDJLQDWLYHLQWHOOHFWXDODQGLQWXLWLYHZULWLQJRIWKHWUDQVODWRUPXVWQRWEHORVWWR WKHGLVHPERGLHGDEVWUDFWLRQZKLFKLVRIWHQGHVFULEHGDVµWUDQVODWLRQ¶ /LWHUDU\WUDQVODWRUVKDYHWRFRQQLYHRUFRQWHQGZLWKWKHZHOOHVWDEOLVKHGKLHUDUFKLHVLQWKHGHILQLWLRQVRIZKDW FRQVWLWXWHVOLWHUDWXUHSRHWU\GUDPDDQGSURVH²XVXDOO\LQWKDWRUGHURIµKLJK¶FXOWXUHDVRSSRVHGWRµORZHU¶ FDWHJRULHVVXFKDVVFLHQFHILFWLRQFKLOGUHQ¶VILFWLRQDQGµSXOS¶ILFWLRQ7KHVHKLHUDUFKLHVDUHUHIOHFWHGLQ JHQHUDODVVXPSWLRQVDERXWERWKWKHUHODWLYHZRUWKDQGGLIILFXOW\RIWUDQVODWLQJWKHFRQVWLWXHQWVHFWLRQVRI OLWHUDU\SURGXFWLRQ6XFKFDWHJRUL]DWLRQVKDYHEHHQDWWDFNHGE\FXOWXUDOWKHRULVWVSRVWPRGHUQLVWVDQGVRPH WUDQVODWLRQVFKRODUVZKRKDYHSRLQWHGRXWKRZWKHFRQVWUXFWLRQRIFDQRQVKDVEHHQLQIRUPHGKLVWRULFDOO\E\ YDOXHMXGJHPHQWVUHIUDFWHGWKURXJKSUHMXGLFHVRIFODVVJHQGHUQDWLRQDQGUDFH7KHVHDWWDFNVKDYHDOVR XQGHUPLQHGFRQILGHQFHLQWKHDXWKRU¶VLQWHUSUHWDWLRQRIZKDWVKHKDVZULWWHQLQIDYRXURIWKHPXOWLSOLFLW\RI UHDGLQJVE\UHDGHUVWKHNLQJO\RUTXHHQO\DXWKRUKDVEHHQGHWKURQHGDQGUHSODFHGE\DIUDJPHQWHGUHDOPRI LQGLYLGXDOUHDGHUV9HQXWL 7KHZRUNRIOLWHUDU\WUDQVODWRUVLPSOLFLWO\DQGVRPHWLPHVH[SOLFLWO\ FKDOOHQJHVWKHDXWKRULW\RIWKHFDQRQWKHQDWLRQDOLVPRIFXOWXUHDQGWKHµGHDWK¶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¶UHSRUWVIRU SXEOLVKHUVRQERRNVVHQWE\IRUHLJQDXWKRUVRU



3DJH

WKHLUDJHQWV7KHHYHQWXDOVHOHFWLRQLPSOLHVWKHZRUNLVUHSUHVHQWDWLYH²HYHQLILWLVDQWLFDQRQLFDO²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µ$UDE¶µ(QJOLVK¶RUµ)UHQFK¶RUWRIRUHLJQWDONVHHQDVLUULWDWLQJMDEEHU /LWHUDU\WUDQVODWRUVDOVREHORQJWRDFDVKQH[XVRIUHODWLRQVKLSVDQGDWUDGLWLRQRIVRFLDOSUDFWLFHVZLWKLQWKH SXEOLVKLQJLQGXVWU\$FRQWUDFWKDVWREHVLJQHGSD\PHQWDJUHHGDQGGHFLVLRQVDERXWFRS\ULJKWDQGGHDGOLQHV IRUGHOLYHU\RIWKHPDQXVFULSWKDYHWREHUHDFKHGXVXDOO\LQWKHFRXUVHRIWKHWUDQVODWRU¶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µSURYLGLQJDODQJXDJHWKDWLV IDLWKIXOWRWKHRULJLQDO¶DQGFRPPLWWKHWUDQVODWRUWRWKHFRUUHFWLRQRISURRIV 7KHVHDUUDQJHPHQWVPD\GLIIHUIURPFRXQWU\WRFRXQWU\,QFRXQWULHVZLWKDEXR\DQWGHPDQGIRUWUDQVODWLRQVD SXEOLVKHUPD\KDYHDQLQKRXVHWHDPRIWUDQVODWRUV$FWHV6XGIRUH[DPSOHLQ)UDQFHKDYHDFRPSDQ\ZKHUH UHDGHUV¶UHSRUWVWKHFRPPLVVLRQLQJRIWUDQVODWLRQVDQGWUDQVODWRUVDQGWKHZKROHFKDLQRISURGXFWLRQLVUXQE\ OLWHUDU\WUDQVODWRUVZKRDUHSDUWRIWKHSURIHVVLRQDODGPLQLVWUDWLYHIUDPHZRUNRIWKHSXEOLVKHUV0DWWHUQ ,Q%ULWDLQDQGWKH8QLWHG6WDWHVLWLVPRUHOLNHO\WKDWSXEOLVKHUVZLOOZRUNZLWKIUHHODQFHWUDQVODWRUVWKH\ NQRZRUZLOOFRQWUDFWWKHPRQWKHEDVLVRIZRUGRIPRXWKUHFRPPHQGDWLRQWKHµIULHQGRIDIULHQG¶ SURRIRI SUHYLRXVZRUNRUE\UHIHUHQFHWRGLUHFWRULHVRIOLWHUDU\WUDQVODWRUV /LWHUDU\WUDQVODWRUVRIWHQGRQRWKDYHDQDJHQWEHFDXVHDJHQWVDUHQRWLQWHUHVWHGLQWKHVOHQGHUHDUQLQJVWREH JOHDQHGIURPUHSUHVHQWLQJOLWHUDU\WUDQVODWRUV7KHUHDUHWUDQVODWRUV¶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µUHELUWK¶RIWKHDXWKRU"7KHSURFHVVRIWUDQVODWLRQGLIIHUVVOLJKWO\IURP WUDQVODWRUWRWUDQVODWRUDQGLVLQIOXHQFHGE\WKHSDUWLFXODUZRUNWUDQVODWHG+RZHYHUZKHWKHUWKHUHLVWREH FROODERUDWLRQZLWKDOLYLQJDXWKRURUVWXG\RISUHYLRXVWUDQVODWLRQVLQWKHFDVHRIDµFODVVLF¶ZRUNWKHUHDUH FRPPRQVWDJHVDQGSUREOHPVLQWKHZRUNRIOLWHUDU\WUDQVODWRUV,WXVHGWREHWKHFDVHWKDWWUDQVODWRUVGLGQRW ZULWHDERXWWKHVHLVVXHV*HRUJH6WHLQHU EXWWKHUHDUHQRZDQXPEHURIFDVHVWXGLHVZULWWHQE\ WUDQVODWRUVDERXWWKHLUPRGHRIRSHUDWLRQIRUH[DPSOH)HOVWLQHU/HYLQH )LUVWWKHOLWHUDU\WUDQVODWRUFRQIURQWVZRUGVVHWRQWKHSDJH²LQDFHUWDLQFRQWH[WDQGZLWKSDUWLFXODU UHVRQDQFHV²E\DQDXWKRUZKRPD\EHGHDGSK\VLFDOO\RUPHWDSKRULFDOO\DQGQRZOLYHVLQWKHYDULHJDWHG UHDGLQJVE\DKRVWRIUHDGHUVRIWKHVRXUFHODQJXDJH7KHUHLVDW



3DJH

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¶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µZULWHUO\¶LQWXLWLYH PRGH3HWHUV :KDWHYHUWKHVWUDWHJ\DGRSWHGE\WKHWUDQVODWRUDQ\WUDQVODWLRQLVXOWLPDWHO\WKHSURGXFW RIPXOWLSOHUHDGLQJVDQGGUDIWVZKLFKSUHFHGHDQGGHWHUPLQHWKHVKDSHRIWKHILQDOGUDIWGHOLYHUHGWRWKH SXEOLVKHUV&RQWH[WLVFUXFLDO7KHSURFHVVPD\EHWUXQFDWHGRUDOWHUHGE\H[WHUQDOIRUFHVWKHSXEOLFDWLRQRID ERRNPD\KDYHWRFRLQFLGHZLWKWKHUHOHDVHRIDILOPDGUDPDWLFVFULSWPD\KDYHWREHKDQGHGWRSURGXFWLRQVR VWDJLQJFDQEHVWDUWHGDQGWKHWUDQVODWLRQEHFKDQJHGLQWKDWSURFHVVRULQDWUDGLWLRQXSKHOGE\/RQGRQWKHDWUH FRPSDQLHVDµOLWHUDO¶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µHGLWRUVFDQSOD\KDYRFDVWKH\WU\WRDQJOLFL]HWKHWH[W¶3RQWLHUR DQGVRPHKDYHFDOOHGIRUWKH UHWHQWLRQRIWKHODQJXDJHRIWKHWUDQVODWRU:ULJKW 7KHHGLWRU¶VUHDGLQJKRZHYHUQHHGQRWVLPSO\EHD WKUHDWHQLQJDQGVWDQGDUGL]LQJSURMHFW$IUHVKUHDGLQJEULQJVQHZLQVLJKWVDQGFDQHOLPLQDWHPLVWDNHVWKDW ZRXOGRWKHUZLVHPDUWKHILQDOYHUVLRQ &RQVFLRXVGHFLVLRQVZKLFKLQYROYHFKDQJLQJWKHWUDQVODWLRQDUHPDGHDWHYHU\VWDJHE\HGLWRUVDQGWUDQVODWRUV LQRUGHUWRFDWHUIRUWKHSHUFHLYHGQHHGVRIWKHUHFHLYLQJGRPLQDQWFXOWXUH.XKLZF]DN IRUH[DPSOH GLVFXVVHVWKHFDVHRIFXWVPDGHWR0LODQ.XQGHUD¶VQRYHO7KH-RNH,WLVDOVRZRUWKSRLQWLQJRXWWKDWPDQ\ SXEOLVKLQJKRXVHVGRQRWHPSOR\HGLWRUVZLWKDNQRZOHGJHRIWKHVRXUFHODQJXDJHDQGWKHUHLVQRWUDGLWLRQRI



3DJH

VXEFRQWUDFWLQJIUHHODQFHHGLWRUVZLWKVXFKNQRZOHGJH $SXEOLVKHGWUDQVODWLRQLVWKHIUXLWRIDVXEVWDQWLDOFUHDWLYHHIIRUWE\WKHWUDQVODWRUZKRLVWKHNH\DJHQWLQWKH VXEMHFWLYHDFWLYLW\DQGVRFLDOSUDFWLFHRIWUDQVODWLRQ:KDWHYHUWKHUHVWUDLQWVRIWKHQHWZRUNRIVRFLDODQG FXOWXUDOIDFWRUVLWLVXOWLPDWHO\WKHOLWHUDU\WUDQVODWRUZKRPDNHVWKHWKRXVDQGVRIGHFLVLRQVWKDWJLYHDOLWHUDU\ ZRUNLWVµDIWHUOLIH¶DQH[LVWHQFHLQRWKHUODQJXDJHV%HQMDPLQ 6HHDOVR '5$0$75$16/$7,21/,7(5$5<75$16/$7,215(6($5&+,668(632(7,&62) 75$16/$7,2132(75<75$16/$7,2138%/,6+,1*675$7(*,(66+$.(63($5( 75$16/$7,21675$7(*,(62)75$16/$7,21

)XUWKHUUHDGLQJ )HOVWLQHU/HYLQH3RQWLHUR

3(7(5%86+

/LWHUDU\WUDQVODWLRQ UHVHDUFKLVVXHV 0DQ\RIWKHERRNVZULWWHQRQWUDQVODWLRQWKURXJKWKHDJHVGHDOODUJHO\ZLWKOLWHUDU\WUDQVODWLRQDQGLQ SDUWLFXODUZLWKWKHGLIILFXOW\RIµWUDQVODWLQJZHOO¶DQGRIEHLQJµIDLWKIXO¶6XFKGLVFXVVLRQVDUHEDVHGRQDQ DVVXPSWLRQRIXQLYHUVDOLW\DQGRQDKLVWRULFDOFODLPVWKH\UDUHO\RIIHUDQ\VFKRODUO\LQVLJKWLQWRWKHZD\DFWXDO WUDQVODWLRQVKDYHEHHQSURGXFHGDQGXVHGWKURXJKWKHDJHV6FKRODUO\ZRUNGRHVH[LVWEXWLWLVUDWKHU KHWHURJHQHRXVPDNLQJLWGLIILFXOWWRSURYLGHDUHOLDEOHRYHUYLHZRIHLWKHUWKHKLVWRU\RUFXUUHQWWKLQNLQJDERXW OLWHUDU\WUDQVODWLRQ

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



3DJH

WDOHVDQGFKLOGUHQ¶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jYLVRWKHUW\SHVRIWUDQVODWLRQDQGRWKHUWH[WVLQWKHWDUJHWFXOWXUH,WLV UDUHO\WKHFDVHWKDWDOLWHUDU\WUDQVODWRUDQGKLVKHURZQWH[WKDYHDFTXLUHGPRUHSUHVWLJHWKDQWKHFDQRQL]HG VRXUFHWH[WDQGVRXUFHDXWKRUWUDQVODWLRQVRI9LUJLODQG6+$.(63($5(EHORQJWRWKHFRUHRIFDQRQL]HG OLWHUDU\ZULWLQJDQGWKHLUWUDQVODWRUVKDYHEHQHILWHGIURPWKLVVLWXDWLRQEXWWKH\KDUGO\YLHZLWKWKHRULJLQDO DXWKRUVLQWHUPVRISUHVWLJH([FHSWLRQVGRRFFXUDVDUJXDEO\LQWKHFDVHRI%DXGHODLUHDVWUDQVODWRURI(GJDU $OODQ3RHEXWRQO\YHU\UDUHO\

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¶VPRGHODVVXPHVWKDWWUDQVODWLRQVQHYHUIXQFWLRQDVWRWDOO\ LQGHSHQGHQWWH[WVDQGWKDWWUDQVODWRUV



3DJH

DOZD\VEHORQJLQRQHZD\RUDQRWKHUWRDOLWHUDU\DQGRUFXOWXUDOHQYLURQPHQWHYHQLIWKLVHQYLURQPHQWLV JHRJUDSKLFDOO\UHPRWHIURPWKHLUSODFHRIUHVLGHQFH7KHUHODWLRQVKLSEHWZHHQWUDQVODWLRQVDQGWKHLU HQYLURQPHQWPD\YDU\DQGPD\DWWLPHVEHQHJDWLYHEXWLWLVDOZD\VWKHUHVKDSLQJWUDQVODWLRQEHKDYLRXUDQG LQIOXHQFLQJWKHSRVLWLRQRIWUDQVODWHGOLWHUDWXUH,GHQWLI\LQJDQGGHVFULELQJWKHSRVLWLRQRIWUDQVODWRUVDQG WUDQVODWLRQVYLVj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

'HVFULSWLYHVWXGLHVRIOLWHUDU\WUDQVODWLRQ $FFRUGLQJWR(YHQ=RKDULWLVSRVVLEOHWRSUHGLFWWKHFRQGLWLRQVXQGHUZKLFKWUDQVODWLRQVPLJKWRFFXS\D FHQWUDORUSHULSKHUDOSRVLWLRQDQGPLJKWEHLQQRYDWLYHRUFRQVHUYDWLYHLQWKHVWUDWHJLHVWKH\HPSOR\ 'HVFULSWLYHVWXGLHVDUH



3DJH

UHTXLUHGWRWHVWWKHYDOLGLW\RIWKLVK\SRWKHVLVDQGWRSURYLGHDEDVLVIRUHODERUDWLQJJHQHUDOSULQFLSOHVWKDWFDQ KHOSXVSUHGLFWVXFKFRQGLWLRQVLIWKH\DUHLQGHHGSRVVLEOHWRSUHGLFW6RPHGHVFULSWLYHVWXGLHVKDYHEHHQ XQGHUWDNHQLQUHFHQW\HDUVDQGWKHWUDGLWLRQRIWUDQVODWLRQKDVEHHQVWXGLHGPRUHRUOHVVV\VWHPDWLFDOO\LQ FHUWDLQFXOWXUHVLQSDUWLFXODUWKH(XURSHDQRQHV7KH(XURSHDQ5HQDLVVDQFHSHULRGDQGLWVFRQWULEXWLRQWRWKH ELUWKRIWKHYHU\FRQFHSWRIOLWHUDU\WUDQVODWLRQ+HUPDQV )UHQFKFODVVLFLVPZLWKLWVVWURQJDQGHQGXULQJ WUDGLWLRQRIOHVEHOOHVLQILGqOHV=XEHU6WDFNHOEHUJ'¶KXOVW DQGWKHUHPDUNDEO\ULFK*HUPDQ WUDQVODWLRQFXOWXUH)UDQNHWDO KDYHEHHQFRYHUHGE\VXFKVWXGLHV6RPHUHVHDUFKKDVDOVREHGRQHRQ WKHUHFHSWLRQUDWKHUWKDQWKHWUDQVODWLRQ RI*UHHNDQG5RPDQFODVVLFV'HOFRXUW0XQG'RSFKLH DQGRI6+$.(63($5(LQ(XURSH'HODEDVWLWDDQG'¶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

)XUWKHUUHDGLQJ %DVVQHWW(YHQ=RKDUD+HUPDQV+ROPHV+ROPHVHWDO/DPEHUW /DPEHUWDQG/HIHYHUH/HIHYHUH7RXU\

-26e/$0%(57



3DJH

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¶VYLHZLVWKDWWKHODWWHUDUH LQWHQGHGDVIXOO\DXWRPDWLFWUDQVODWLRQV\VWHPVWKRXJKWKHLURXWSXWFDQRIFRXUVHEHSDVVHGRQWRDWUDQVODWRU IRUSRVWHGLWLQJ0RUHUHFHQWDSSURDFKHVWRGHILQLQJGLIIHUHQWW\SHVRIFRPSXWHUL]HGWUDQVODWLRQWDNHDVWKHLU SULQFLSDOFULWHULRQWKHGHJUHHRIDXWRPDWLRQWKDWLVµWKHUHODWLYHFRQWULEXWLRQRIWKHPDFKLQHDQGWKHKXPDQ WUDQVODWRUWRWKHWUDQVODWLRQSURFHVV¶/HKUEHUJHUDQG%RXUEHDX UHVXOWLQJLQDFODVVLILFDWLRQZKLFK GLVWLQJXLVKHVDPRQJPDFKLQHDLGHGKXPDQWUDQVODWLRQ0$+7 KXPDQDLGHGPDFKLQHWUDQVODWLRQ+$07 DQGIXOO\DXWRPDWLFPDFKLQHWUDQVODWLRQ)$07 %DONDQ PDNHVDELQDU\GLVWLQFWLRQEHWZHHQPDFKLQH WUDQVODWLRQ07 DQGPDFKLQHDVVLVWHGFRPSXWHUDVVLVWHGWUDQVODWLRQ0$7RU&$7 XVLQJPDFKLQH WUDQVODWLRQWRUHIHUWRµDQ\V\VWHPWKDWDFWXDOO\SHUIRUPVDWUDQVODWLRQ¶DQGFODVVLI\LQJµDQ\RWKHUFRPSXWHULVHG WUDQVODWRUWRROZKLFKIDOOVVKRUWRIWUDQVODWLQJDVD&$7GHYLFH¶%DONDQ ,QWKLVHQWU\WKHWHUPµPDFKLQHDLGHGWUDQVODWLRQ¶LVXVHGLQDEURDGVHQVHWRFRYHUDOONLQGVRIVRIWZDUH V\VWHPVHVSHFLDOO\GHVLJQHGDQGGHYHORSHGIRUXVHDVSDUWRIDWUDQVODWRU¶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

7DVNVLQWKHPDFKLQHDLGHGWUDQVODWLRQSURFHVV 7KHSURFHVVRIPDFKLQHDLGHGWUDQVODWLRQFDQEHURXJKO\GLYLGHGLQWRWKUHHWDVNV7KHVH



3DJH

WDVNVDUHXVXDOO\SHUIRUPHGVLPXOWDQHRXVO\RUDWOHDVWQRWLQDVWULFWFKURQRORJLFDORUGHUEXWLQYROYHGLIIHUHQW W\SHVRIRSHUDWLRQVDQGUHTXLUHGLIIHUHQWW\SHVRIWRROV7KHWDVNVLQTXHVWLRQDUH ƇHGLWLQJWKDWLVFUHDWLQJDWUDQVODWLRQHLWKHUE\RYHUZULWLQJWKHVRXUFHWH[WRUE\HQWHULQJWKHWUDQVODWLRQLQ RQHSDUWZLQGRZ RIWKHVFUHHQZKLOHKDYLQJDFFHVVWRWKHVRXUFHWH[WLQDQRWKHUSDUWRIWKHVFUHHQ ƇWHUPLQRORJ\PDQDJHPHQWORRNLQJXSDQGRUHQWHULQJWHUPVLQDPDFKLQHUHDGDEOHGLFWLRQDU\RU WHUPLQRORJ\GDWDEDVHEHIRUHGXULQJRUDIWHUWKHWUDQVODWLRQSURFHVV Ƈ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



3DJH

VHJPHQWHGDFFRUGLQJWRVLPSOHOLQJXLVWLFDOJRULWKPV$QH[DPSOHRIVXFKDV\VWHPZDVXVHGLQWKHHDUO\V DVSDUWRIDPDFKLQHDLGHGWUDQVODWLRQWRROGHYHORSHGIRUWKH(XURSHDQ&RDODQG6WHHO&RPPXQLW\LQ /X[HPERXUJ,WLVGHVFULEHGLQWKH$/3$&5HSRUW$/3$&±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µIX]]\ORJLF¶DQGPDNHXVHRIV\QWDFWLFSDUVLQJPHFKDQLVPVWRVRPHH[WHQW $VLPLODUSULQFLSOHRIµIX]]\PDWFK¶RUµFRQWUROOHGVLPLODULW\¶KDVEHHQDSSOLHGLQDUDWKHUGLIIHUHQWWUDQVODWLRQ HQYLURQPHQW$V\VWHPNQRZQDV&RPSXWHU$LGHG'LDOHFW$GDSWDWLRQ&$'$ KDVEHHQXVHGE\%LEOH WUDQVODWRUVWRFUHDWHDWUDQVODWLRQRQWKHEDVLVRIDQRWKHUWUDQVODWLRQLQDVLPLODURUUHODWHGODQJXDJHIRU H[DPSOHWRWUDQVODWHWKH6FULSWXUHVLQWRVHYHUDOGLDOHFWVRI6RXWK$PHULFDQRU$IULFDQODQJXDJHV%HDQ 6WDQIRUGDQG:DWWHUV

,QWHJUDWHGV\VWHPVIRUWKHWUDQVODWRU¶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¶VZRUNVWDWLRQRIWKHIXWXUHLVERXQGWRPDNHH[WHQVLYHXVHRIERWKNLQGVRIWHFKQRORJ\ 6HHDOVR 0$&+,1(75$16/$7,21$33/,&$7,2160$&+,1(75$16/$7,21+,6725<0$&+,1( 75$16/$7,210(7+2'2/2*<7(50%$1.67(50,12/2*<$33/,&$7,216

)XUWKHUUHDGLQJ )LVFKHUHWDO1HZWRQ6DJHU

.$5/+(,1=)5(,*$1*

0DFKLQHWUDQVODWLRQ DSSOLFDWLRQV $SSOLFDWLRQVRI0DFKLQH7UDQVODWLRQ07 FDQEHFDWHJRUL]HGLQWHUPVRIPRGHRIXVHDQGLQWHQGHGXVHU7KH IRUPHUUDQJHVIURPIXOO\DXWRPDWLFWKURXJKDXWRPDWLFZLWKSUHRUSRVWHGLWLQJWRLQWHUDFWLYH%ULHIPHQWLRQ ZLOODOVREHPDGHRIGLDORJXHDQGVSHHFKWUDQVODWLRQV\VWHPV'LIIHUHQWXVHUVLQFOXGHWKHHQGXVHULHWKH FRQVXPHURIWKHWUDQVODWLRQ DQLQWHUPHGLDWHDJHQWWKHWUDQVODWRUDQGWKHRULJLQDODXWKRURIWKHWH[WWREH WUDQVODWHG



3DJH

)XOO\DXWRPDWLF07 7KHWHUPIXOO\DXWRPDWLF07DSSOLHVWRFDVHVZKHUHWKHVRXUFHWH[WLVLQSXWWRWKHV\VWHPDQGWKHWUDQVODWLRQ LVGHOLYHUHGERWKZLWKRXWDQ\LQYROYHPHQWRIWKHXVHU*LYHQWKHFXUUHQWVWDWHRIWKHDUWRI07WKLVVFHQDULR LVRQO\VXLWDEOHZKHUHWKHLQSXWWH[WLVZULWWHQLQHLWKHUDQDWXUDOO\RFFXUULQJVXEODQJXDJHRUDQDUWLILFLDOO\ FRQWUROOHGODQJXDJHRUHOVHZKHUHDURXJKWUDQVODWLRQSRVVLEO\FRQWDLQLQJHUURUVDQGLQDFFXUDFLHVLV QHYHUWKHOHVVDFFHSWDEOH:LWKIXOO\DXWRPDWLF07WKHRQO\XVHUVDUHWKHDXWKRUVDQGFRQVXPHUV :KHUHDVXEODQJXDJHFDQEHXVHGWKHRULJLQDODXWKRURIWKHWH[WLVQRWDIIHFWHGEHFDXVHWKHVXEODQJXDJH RFFXUVQDWXUDOO\$VXEODQJXDJHLVDODQJXDJHZKLFKLVQDWXUDOO\UHVWULFWHGLQLWVYRFDEXODU\DQGUDQJHRI VWUXFWXUHV7KHVHUHVWULFWLRQVVWHPIURPERWKWKHVXEMHFWPDWWHURUGRPDLQZKHUHWKH\DUHW\SLFDOO\OH[LFDO DQGWKHWH[WW\SHZKLFKLPSRVHVVWUXFWXUDOUHVWULFWLRQV 7KLVLVRIWHQVDLGWREHWKHPRVWVXFFHVVIXOVFHQDULR IRU07FI.LWWUHGJHDQG/HKUEHUJHU LIWKHDSSOLFDWLRQLVDSSURSULDWHWKHFRQVXPHUZLOOQRWHYHQ QRWLFHWKDWWKHWUDQVODWLRQKDVEHHQGHOLYHUHGE\DFRPSXWHU7KHPRVWIDPRXVH[DPSOHRIWKLVDSSURDFKLVWKH 0e7e2Œ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µH[RWLF¶ODQJXDJHZLWKDQXQIDPLOLDUZULWLQJV\VWHPRUZKHUHWUDGLWLRQDOWUDQVODWLRQVHUYLFHVDUHOHVVUHDGLO\ DYDLODEOH7KHRULJLQDODXWKRULVUHPRWHXQNQRZQXQDYDLODEOH DQGWKHFRQVXPHUPD\EHDSHUKDSVDPDWHXU WUDQVODWRURUDVXEMHFWVSHFLDOLVW,QWKHIRUPHUFDVH07SURYLGHVDµTXLFNDQGGLUW\¶ILUVWGUDIWJXDUDQWHHLQJ FRQVLVWHQWWHUPLQRORJ\EXWODFNLQJLQVW\OH,QWKHODWWHUFDVHWKHFRQVXPHUPD\ZDQWWRNQRZZKLFKSDUWVRID IRUHLJQODQJXDJHWH[WDUHRIPRVWLQWHUHVWRUZKLFKPD\EHZRUWKWUDQVODWLQJSURSHUO\7KLVPLJKWEHWKHFDVH ZKHUHDVFLHQWLVWFRPHVDFURVVDQDUWLFOHLQDQLQDFFHVVLEOHODQJXDJHDQGZDQWVLQWKHILUVWLQVWDQFHWRNQRZ RQO\URXJKO\ZKDWWKHDUWLFOHVD\VFIYDQ6O\SH ,QGHHGWKHURXJKWUDQVODWLRQPD\RQLWVRZQEH VXIILFLHQWVLQFHVSHFLDOLVWVFDQXVH



3DJH

WKHLURZQNQRZOHGJHRIWKHGRPDLQWRPDNHVHQVHRIFOXPVLO\ZRUGHGWUDQVODWLRQV0DUWLQ.D\WHOOVDVWRU\ FLWHGLQ+XWFKLQVDQG6RPHUV IURPWKHHDUO\GD\VRI07UHVHDUFKZKHUHSK\VLFLVWVSUHIHUUHGDV µPRUHDFFXUDWH¶WKHUDZRXWSXWIURPD5XVVLDQ(QJOLVK07V\VWHPWRWKHWH[WVSURGXFHGE\KXPDQWUDQVODWRUV ZKRZHUH5XVVLDQH[SHUWVEXWNQHZQH[WWRQRWKLQJDERXWQXFOHDUSK\VLFV0RUHUHFHQWO\WKLVDSSURDFKKDV EHHQXVHGIRUH[DPSOHLQWKH75$'(;V\VWHP$XPDLWUHHWDO ZKLFKSURYLGHVURXJKWUDQVODWLRQVRI PLOLWDU\WHOH[HVEHWZHHQ(QJOLVKDQG)UHQFK

3UHDQGSRVWHGLWLQJ :KHUHWKHIXOO\DXWRPDWLFVFHQDULRLVLQDSSURSULDWHWKHSHUIRUPDQFHRIWKH07V\VWHPFDQEHPLWLJDWHGE\ WKHXVHRISUHRUSRVWHGLWLQJLHDGDSWLQJWKHLQSXWRURXWSXWWH[WWRPHHWWKHHQGXVHU¶VQHHGV 7KHUHVWULFWHGLQSXWDSSURDFKGHVFULEHGDERYHLVDIRUPRISUHHGLWLQJ2WKHUWHFKQLTXHVLQYROYHLQVHUWLQJD NLQGRIµPDUNXS¶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µUHPHPEHUHG¶E\WKHV\VWHP6RPHV\VWHPVDUHHYHQDEOHWRSUHGLFWZKHUHWKH\PD\KDYHPDGHPLVWDNHV DQGGUDZWKHSRVWHGLWRU¶VDWWHQWLRQWRWKHVHSRWHQWLDOFRUUHFWLRQVRUHYHQRIIHUDOWHUQDWLYHV,QDOOWKHVH VFHQDULRVWKHVXSSRVHGXVHULVW\SLFDOO\DWUDQVODWRUVLQFHNQRZOHGJHRIERWKWKHVRXUFHDQGWDUJHWODQJXDJHV LVUHTXLUHG7KLVEHLQJWKHFDVHVXFKV\VWHPVKDYHWRRIIHUDUHDOLPSURYHPHQWLQSHUIRUPDQFHRYHUWKHIXOO\ KXPDQHTXLYDOHQWWRMXVWLI\WKHLUXVH2QWKHRWKHUKDQGWKHV\VWHPFDQDIIRUGWRSURGXFHVOLJKWO\OHVV VRSKLVWLFDWHGWUDQVODWLRQVLQWKHILUVWSODFHVLQFHWKHSRVWHGLWRULVDOZD\VWKHUHWRFOHDQXSDIWHUZDUGV

,QWHUDFWLYH07 0HQWLRQKDVDOUHDG\EHHQPDGHRILQWHUDFWLYHSUHDQGSRVWHGLWLQJZKLFKVKRXOGEHGLVWLQJXLVKHGIURPWUXO\ LQWHUDFWLYH07,QWKLVVFHQDULRWKHV\VWHPFRQVXOWVZLWKWKHXVHUGXULQJWKHFRXUVHRISHUIRUPLQJWKH WUDQVODWLRQFODULI\LQJDPELJXLWLHVLQWKHVRXUFHWH[WFKRLFHVRIDOWHUQDWLYHWUDQVODWLRQVDQG



3DJH

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µFDQQHG¶ WH[WVWKHTXHVWLRQVWHQGWREHYHU\UHSHWLWLYHDQGRIFRXUVHWKHV\VWHPPD\DVNH[DFWO\WKHVDPHTXHVWLRQ VHYHUDOWLPHVGXULQJWKHFRXUVHRIWUDQVODWLQJDWH[WVLQFHLWFDQQRWUHDVRQDEO\EHH[SHFWHGWRNQRZZKHWKHU WKHUHVSRQVHWKHILUVWWLPHWKHTXHVWLRQLVDVNHGVKRXOGDSSO\LQDOOFDVHV6RPHV\VWHPVLQFRUSRUDWHDOHDUQLQJ PHFKDQLVPHQDEOLQJWKHXVHUWRXSGDWHWKHV\VWHP¶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

'LDORJXHDQGVSHHFK07 :HVKRXOGDOVRPHQWLRQKHUHEDVLFUHVHDUFKRQGLDORJXHEDVHGV\VWHPVLQWZRVHQVHV,QWKHILUVWVHQVH UHVHDUFKHUVDUHDLPLQJDWLQWHUDFWLYHV\VWHPVLQZKLFKWKHLQWHUDFWLRQVIRUPDQLQWHOOLJHQWGLDORJXH%RLWHW UDWKHUWKDQWKHFDQQHGWH[WVPHQWLRQHGDERYHLQWKLVFDVHWKHV\VWHPµUHPHPEHUV¶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

)XUWKHUUHDGLQJ $UQROGHWDO+XWFKLQVDQG6RPHUV/DZVRQ1HZWRQ6QHOO9DVFRQFHOORV

+$52/'/620(56



3DJH

0DFKLQHWUDQVODWLRQ KLVWRU\ $OWKRXJKWKHLGHDRIPHFKDQL]HGWUDQVODWLRQYLDDQLQWHUPHGLDWHXQLYHUVDOODQJXDJHKDVEHHQDURXQGVLQFHWKH VHYHQWHHQWKFHQWXU\WKHILUVWFRQFUHWHSURSRVDOVIRUDµWUDQVODWLRQPDFKLQH¶FDQEHGDWHGSUHFLVHO\E\WKH VLPXOWDQHRXVEXWXQFRQQHFWHGLVVXHRISDWHQWVLQWRWKH5XVVLDQ3HWU6PLUQRY7UR\DQVNLLDQGWRWKH $UPHQLDQ)UHQFKPDQ*HRUJHV$UWVURXQL7UR\DQVNLLDSSHDUVWRKDYHZRUNHGPRUHVHULRXVO\DWKLVLGHD WKRXJKKLVLGHDVZHUHODUJHO\LJQRUHGDQGLWLVQRWKHEXW:DUUHQ:HDYHUZKRLVFUHGLWHGDVWKHIRXQGLQJ IDWKHURI0DFKLQH7UDQVODWLRQ07 UHVHDUFK 2QHRIWKHSURGXFWVRI:RUOG:DU7ZRZDVWKHLQYHQWLRQRIWKHµHOHFWURQLFFRPSXWHU¶ZKLFKZDVXVHGWR FDOFXODWHEDOOLVWLFILULQJWDEOHVLQWKH8QLWHG6WDWHVDQGPRUHVLJQLILFDQWO\IRUFRGHEUHDNLQJLQ%ULWDLQ 1RQQXPHULFDSSOLFDWLRQVLQFOXGLQJWUDQVODWLQJZHUHVXJJHVWHGE\SLRQHHUVVXFKDV$ODQ7XULQJEXWLWLV :HDYHUZKRIROORZHGWKHLGHDWKURXJKQRWDEO\E\FLUFXODWLQJDPHPRUDQGXPRQWKHWRSLFWRFROOHDJXHV :HDYHU $OWKRXJK:HDYHU¶VRULJLQDOLGHDRIXVLQJVRPHRIWKHWHFKQLTXHVRIFRGHEUHDNLQJSURYHGXQSURGXFWLYHWKH JHQHUDOTXHVWLRQRIPHFKDQL]HGWUDQVODWLRQSURYHGVWLPXODWLQJHQRXJKDQGUHVHDUFKFRQVHTXHQWO\EHJDQDWD QXPEHURIFHQWUHV

)LUVWJHQHUDWLRQµGLUHFW¶V\VWHPV *RYHUQPHQWIXQGLQJEHFDPHDYDLODEOHLQWKH8QLWHG6WDWHVDQGLQ


3DJH

SRVLWLYHWKLQJVQRWRIWHQTXRWHGVXFKDVDUHFRPPHQGDWLRQIRUPDFKLQHDLGVIRUWUDQVODWRUVDQGIXQGLQJIRU PRUHEDVLFUHVHDUFKLQ&RPSXWDWLRQDO/LQJXLVWLFVVHH+XWFKLQV EXWLWLVFKLHIO\UHPHPEHUHGIRU GHDOLQJDEORZWR07IURPZKLFKLWZDVQRWWRUHFRYHUIRUDERXW\HDUV

6HFRQGJHQHUDWLRQµLQGLUHFW¶V\VWHPV ,WLVRIWHQVDLGWKDWWKRVH07JURXSVZKLFKVXUYLYHGWKH$/3$&UHSRUWSULQFLSDOO\LQ(XURSHDQG&DQDGD UHVSRQGHGWRLWE\UHYLVLQJWKHEDVLFWHFKQLTXHVWKH\KDGEHHQXVLQJDQGGHYHORSLQJWKHµLQGLUHFWPHWKRG¶VHH 0$&+,1(75$16/$7,210(7+2'2/2*< WKHWUDQVIHUDSSURDFKLQYROYLQJVWUXFWXUDODQDO\VLVRIWKH LQSXWWH[WDELOLQJXDOPDSSLQJDWDQDEVWUDFWOHYHODQGV\QWKHVLVRIWKHWDUJHWWH[WRUHOVHWKHLQWHUOLQJXD DSSURDFKLQZKLFKWKHELOLQJXDOWUDQVIHUVWDJHLVDYRLGHGE\WKHXVHRIDPRUHDEVWUDFWXQLYHUVDOUHSUHVHQWDWLRQ ,QIDFWWKHOLPLWDWLRQVRIWKHILUVWJHQHUDWLRQDSSURDFKKDGEHHQUHFRJQL]HGORQJEHIRUH$/3$&DQGWKH FODVVLFWUDQVIHUDUFKLWHFWXUHZDVGHVFULEHGE\


3DJH

RIWKHVHFRQGJHQHUDWLRQWHFKQRORJ\EHJDQWREHUHFRJQL]HGDQGUHVHDUFKHUVVWDUWHGWRH[SORUHZD\VRIJHWWLQJ URXQGWKHVHOLPLWDWLRQV$GYDQFHVLQFRPSXWHUKDUGZDUHFHUWDLQO\KDGDQHIIHFW,QSDUWLFXODUWKHPRYH WRZDUGVLQWHUDFWLYHSURJUDPVRQVPDOOHUSHUVRQDOPDFKLQHVPHDQWWKDWWKHVFHQDULR²ILUVWVXJJHVWHGE\.D\ ²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µXQGHUVWDQGLQJ¶RIDWH[WZDV QHHGHGWRWUDQVODWHLW$WWKHWLPHLWZDVWKRXJKWWKDWWKHHPHUJLQJILHOGRI$UWLILFLDO,QWHOOLJHQFH$, ZRXOG VRRQRIIHUVROXWLRQVDQGERRNVDQGDUWLFOHVRQ07DWWKHWLPHXVXDOO\FRQFOXGHGLQWKLVYHLQORRNLQJIRUZDUG WRWKHµWKLUGJHQHUDWLRQ¶RI07

07EDFNLQIDVKLRQ %\WKHHQGRIWKHV07ZDVILUPO\HVWDEOLVKHGDJDLQDVDQHQWHUSULVHZRUWK\RIVXSSRUW0DMRUSURMHFWV LQFOXGHG(XURWUDZKLFKLQYROYHGUHVHDUFKHUVLQGLIIHUHQWORFDWLRQVDFURVV(XURSHZRUNLQJRQDOO FRPELQDWLRQVRIWKHWKHQ QLQHODQJXDJHVRIWKH(&&RPSDQLHVVXFKDV3KLOLSVLQWKH1HWKHUODQGVDQG 6LHPHQVLQ0XQLFKZHUHIXQGLQJ07UHVHDUFK,Q-DSDQQHDUO\DOOWKHPDMRUHOHFWURQLFVFRPSDQLHVKDG VZLIWO\GHYHORSHGFRPPHUFLDO07V\VWHPVDQG07UHVHDUFK²QRWDEO\RQVSHHFKWUDQVODWLRQ²ZDVDOVR VXSSRUWHGE\WKHSXEOLFVHFWRU7KH-DSDQHVHIXQGHG&,&&SURMHFW&HQWHURIWKH,QWHUQDWLRQDO&RRSHUDWLRQIRU &RPSXWHUL]DWLRQ LQYROYHGILYHVRXWKHDVW$VLDQFRXQWULHVLQDFROODERUDWLYHSURMHFW,QWKH8QLWHG6WDWHV HQFRXUDJHGE\(XURSHDQLQLWLDWLYHVWKHVXGGHQUHDOL]DWLRQRIWKHVWUHQJWKRI-DSDQDQGE\VXFFHVVIXOHIIRUWV QHDUHUKRPHLQFOXGLQJWKH3DQ$PHULFDQ+HDOWK2UJDQL]DWLRQEDVHGLQ:DVKLQJWRQ'&²07UHVHDUFKDWODVW SLFNHGXSDJDLQWKRXJKVWLOOQRWDWWKHOHYHORIWKHODWHVDQGDQXPEHURISURMHFWVZHUHVWDUWHG7KH07 FRPPXQLW\E\QRZKDGLWVVSHFLDOLVWMRXUQDOVDQGFRQIHUHQFHVDQG²DWUXHVLJQRIPDWXULW\²LWVIDFWLRQVDQG DUJXPHQWV $WWKLVWLPHDOVRWKHUHZDVDVHFRQGZDYHRIFRPPHUFLDO07V\VWHPVLQFOXGLQJ6LHPHQV¶0(7$/DQG ,%0¶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

1HZWHFKQLTXHVHPHUJH $VWKHVEHJDQPDQ\07UHVHDUFKHUVZRQGHUHGZKDWWKHQH[WGHYHORSPHQWVZRXOGEH7KHVHFRQG JHQHUDWLRQSDUDGLJPKDGEHHQIDLUO\IXOO\H[SORUHGDWOHDVWLQSULQFLSOH2IFRXUVHWKHUHUHPDLQHGSUREOHPVWR EHVROYHG



3DJH

)LJXUH,QIRUPDOJUDSKVKRZLQJWKHKLVWRU\RI07DOVRVKRZQDUHWKHILYHµ(UDV RI07+LVWRU\¶LGHQWLILHGE\+XWFKLQVII

ERWKSUDFWLFDODQGWKHRUHWLFDOQRWOHDVWRIDOOQHZODQJXDJHSDLUVIRUZKLFKQHZGHPDQGVZHUHDULVLQJ7KH VZLIWJHRSROLWLFDOFKDQJHVRIWKHODVWIHZ\HDUVKDYHKDGDFHUWDLQHIIHFWRQSHUFHLYHGSULRULWLHV
)XUWKHUUHDGLQJ %XFKPDQQ+XWFKLQV1DJDR±1LUHQEXUJHWDOIRUWKFRPLQJ3XJK :DUZLFN

+$52/'/620(56

0DFKLQHWUDQVODWLRQ PHWKRGRORJ\ $VDQHQGHDYRXUWKDWVWUDGGOHVWKHILHOGVRIOLQJXLVWLFVDQGFRPSXWHUVFLHQFH07KDVLQLWV



3DJH

VKRUWKLVWRU\QRWRQO\UHIOHFWHGEXWDOVRLQIOXHQFHGFKDQJHVLQERWKWKHVHILHOGV,QOLQJXLVWLFV07KDV SURYLGHGDSRLQWRIIRFXVIRUVRPHOLQJXLVWVZKRKDYHIRXQGDSUDFWLFDODSSOLFDWLRQIRUWKHLUWKHRUHWLFDO VWXGLHV,WLVVXUHO\QRFRLQFLGHQFHWKDWWKHLQVWLJDWRURIWKHPRVWSURIRXQGUHYROXWLRQOLQJXLVWLFVFLHQFHKDV HYHUVHHQ1RDP&KRPVN\ DQGRQHRIWKHPRVWLPSRUWDQWRIWKHSLRQHHU07UHVHDUFKWHDPVZHUHORFDWHGDW WKHVDPHLQVWLWXWLRQ0,7 $OWKRXJKKHGLGQRWZRUNRQ07KLPVHOI&KRPVN\¶VLQQRYDWLYHYLHZVRQV\QWD[ DUHFOHDUO\LQIOXHQFHGE\WKHQHHGIRUULJRXUDQGIRUPDOL]DWLRQWKDWFRPSXWHUVLPSRVH,QFRPSXWHUVFLHQFH %HUQDUG9DXTXRLVRIWKH*UHQREOH07UHVHDUFKWHDPZDVDPHPEHURIWKHJURXSZKLFKLQYHQWHG$/*2/ DQGZLWKLWWKHµSURFHGXUDO¶SURJUDPPLQJVW\OHZKLFKUHYROXWLRQL]HGFRPSXWHUVFLHQFHLQWKHVZKLOHWKH QRZSRSXODUORJLFSURJUDPPLQJODQJXDJH3URORJZDVLQYHQWHGH[SOLFLWO\IRUWKHSXUSRVHVRI07,QWKH QDUURZHUGRPDLQVRI1DWXUDO/DQJXDJH3URFHVVLQJDQG$UWLILFLDO,QWHOOLJHQFHWKHLQQRYDWLRQVUHVXOWLQJIURP ZRUNRQ07DUHWRRQXPHURXVWRPHQWLRQ $VZLWKDQ\RQJRLQJHQGHDYRXUWKHUHKDYHEHHQDQXPEHURIWUHQGVHDFKQHZRQHGHYHORSLQJRXWRIRULQ UHVSRQVHWRWKHSUHYLRXVRQHV,WLVWKHUHIRUHFRQYHQLHQWWRFRQVLGHUWKHVHWUHQGVLQURXJKO\KLVWRULFDO SURJUHVVLRQ

'LUHFWV\VWHPV 7KHHDUOLHVW07V\VWHPVZHUHHVVHQWLDOO\GLFWLRQDU\EDVHGµGLUHFWUHSODFHPHQW¶V\VWHPVLHWUDQVODWLRQVZHUH GRQHRQDURXJKO\ZRUGE\ZRUGEDVLVZLWKH[FHSWLRQVDQGRWKHUQHFHVVDU\UHDGMXVWPHQWVFDSWXUHGLQWKH V\VWHPV¶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µ:HGHPDQG WKHZRUOG¶LQVWHDGRIµ:HZDQWSHDFH¶DQGPDQ\RWKHUSHUKDSVOHVVVWDUWOLQJHUURUV7KHHTXDOO\FUXGHZRUG RUGHUUXOHVPLJKWFRUUHFWO\UHDOLJQWKHQRXQDQGDGMHFWLYHWRJLYH)UHQFKXQFKDWQRLUIRUµDEODFNFDW¶EXW WKHQXQWUqVFKDWQRLULQVWHDGRIXQFKDWWUqVQRLU IRUµDYHU\EODFNFDW¶ 7KHQDwYHW\RIWKLVDSSURDFKZDVTXLFNO\UHFRJQL]HG6RPHFRPPHQWDWRUV²QRWDEO\
6HFRQGJHQHUDWLRQLQGLUHFWV\VWHPV 7KHIXQGDPHQWDOLGHDEHKLQGWKHLQGLUHFWDSSURDFKLVWKDWWKHVRXUFHWH[WLVWUDQVIRUPHGLQWRWKHWDUJHWWH[W LQGLUHFWO\YLDDQLQWHUPHGLDWHUHSUHVHQWDWLRQ7KLVPD\SXUSRUWWREHDUHSUHVHQWDWLRQRIWKHPHDQLQJRIWKH WH[WRUHOVHUDWKHUOHVVDPELWLRXVO\DUHSUHVHQWDWLRQRIWKHV\QWDFWLFVWUXFWXUHRIWKHWH[W$IXUWKHUGLVWLQFWLRQ LVZKHWKHUWKHWDUJHWWH[WLVJHQHUDWHGGLUHFWO\IURPWKHUHSUHVHQWDWLRQRI



3DJH

)LJXUH7KHS\UDPLGGLDJUDPSUREDEO\ILUVWXVHGE\9DXTXRLV WKHGHHSHU WKHDQDO\VLVWKHOHVVWUDQVIHULVQHHGHGWKHLGHDOFDVHEHLQJWKHLQWHUOLQJXDDSSURDFK ZKHUHWKHUHLVQRWUDQVIHUDWDOO

WKHVRXUFHWH[W²WKHVRFDOOHGLQWHUOLQJXDODSSURDFK²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



3DJH

OLQJXLVWVDVLQ)LJXUHD WKRXJKXVXDOO\ZLWKPRUHLQIRUPDWLRQLQWKHPDQGRIWHQPRUHDEVWUDFW)LJXUHE $QRWKHUWKHRUHWLFDOLVVXHLQWKHGHVLJQRIDQ07V\VWHPLVWKHFRPSXWDWLRQDORQHRIKRZWRFRPSXWHDQG PDQLSXODWHWKHUHSUHVHQWDWLRQVGHVFULEHGDERYH6LQFHWKHUHDUHEURDGO\WZRSUREOHPVKHUH²ZKDWWRGRDQG KRZWRGRLWWKHIRUPHUOLQJXLVWLFWKHODWWHUFRPSXWDWLRQDODWWHPSWVDUHRIWHQPDGHWRVHSDUDWHWKHWZRE\ SURYLGLQJFRPSXWDWLRQDOIRUPDOLVPVRUSURJUDPPLQJODQJXDJHVZKLFKDOLQJXLVWFDQHDVLO\OHDUQDQGZRUN ZLWK7KLVXVXDOO\PHDQVIRUPDOLVPVZKLFKDUHYHU\VLPLODUWRWKH

)LJXUHµ$IUDPHZRUNIRUPHFKDQLFDOWUDQVODWLRQ¶IURP
)LJXUH7ZRSRVVLEOHOLQJXLVWLFUHSUHVHQWDWLRQVIRUWKHVHQWHQFH7KHPDFKLQH VKRXOGEHWXUQHGRQ1RWLFHKRZE LVDµGHHSHU¶UHSUHVHQWDWLRQLQWKDWWXUQRQLV UHFRJQL]HGDVDOH[LFDOXQLWDQGWKHFRPSOH[YHUEJURXSLVUHSUHVHQWHGDVDEXQGOH RIV\QWDFWLFIHDWXUHVHWF



3DJH

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µGHFODUDWLYH¶LQIRUPDWLRQ LQGHSHQGHQWO\RIWKHSURFHGXUHVZKLFKXVHLW)XUWKHUPRUHWKHSURFHGXUHVDOOXGHGWRDERYHDUHWKHPVHOYHV YHU\JHQHUDODQGVRVKRXOGEHH[SUHVVHGLQPRUHJHQHUDOWHUPVHJµLI;WUDQVODWHVDV<DQG;¶LVWKHSOXUDO RI;WKHQWRJHWWKHWUDQVODWLRQRI;¶QRUPDOO\ WDNHWKHSOXUDORI<¶ 7KHVHLGHDVKDYHEHHQUHDOL]HGLQGLIIHUHQWZD\VLQ07V\VWHPVDQGKDYHUHIOHFWHGGHYHORSPHQWVLQFRPSXWHU VFLHQFH,QSDUWLFXODUWKHQRWLRQRIµWDVNVSHFLILF¶SURJUDPPLQJHQYLURQPHQWVKDVVWURQJO\HPHUJHGLQWKHODVW \HDUVRUVRWKHWUDGLWLRQDOYLHZRIWKHFRPSXWHUDVDPDFKLQHZKLFKVLPSO\FDUULHVRXWRQHDIWHUWKHRWKHU LQVWUXFWLRQVZKLFKKDYHWREHH[SUHVVHGGLUHFWO\LQWHUPVRIWKHEDVLFORZOHYHOFDOFXODWLRQVDQGGDWD PDQLSXODWLRQVWKHFRPSXWHULWVHOILVFDSDEOHRIKDVEHHQUHSODFHGE\WKHQRWLRQRISURJUDPPLQJODQJXDJHVDQG IRUPDOLVPVZKLFKH[SOLFLWO\VHSDUDWHWKHµZKDWWRGR¶DQGWKHµKRZWRGRLW¶DVSHFWVDQGH[SUHVVWKHVHLQD PRUHXVHUIULHQGO\PDQQHU0HQWLRQKDVDOUHDG\EHHQPDGHRIµOLQJXLVWIULHQGO\¶IRUPDOLVPVWKHPRVW ZHOONQRZQSHUKDSVEHLQJWKH'HILQLWH&ODXVH*UDPPDU'&* IRUPDWIRXQGLQWKH3URORJSURJUDPPLQJ ODQJXDJHZKHUHµUXOHV¶DUHDOPRVWLGHQWLFDOWRWKHSKUDVHVWUXFWXUHJUDPPDUUXOHVIRXQGLQVWDQGDUGOLQJXLVWLFV WH[WERRNV2WKHUIRUPDOLVPVWKDWKDYHEHHQGHYHORSHGDUHPRUHSURFHGXUDOEXWDOODLPDWUHSUHVHQWLQJLQWKH PRVWJHQHUDOZD\SRVVLEOHWKHLQIRUPDWLRQWKDWWKHFRPSXWHUQHHGVWREHDEOHWRDQDO\VHWKHLQSXWFRQYHUWLW LQWRWKHIRUHLJQODQJXDJHDQGJHQHUDWHWKHWDUJHWWH[W

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



3DJH

FRQVLGHUWKDWWKH)UHQFKZRUGVKHXUHX[DQGKHXUHXVHERWKWUDQVODWHLQWR(QJOLVKDVKDSS\LIZHUHYHUVHWKH UXOHVZKLFKVWDWHWKLVZHJHWDQDSSDUHQWDPELJXLW\VLQFHLQJRLQJIURP)UHQFKWR(QJOLVKZHµWKURZDZD\¶ WKHJHQGHUGLVWLQFWLRQVRLQWKHRSSRVLWHGLUHFWLRQZHKDYHWRJHWWKDWLQIRUPDWLRQIURPVRPHZKHUH9DULRXV V\VWHPVVHHHJ,VDEHOOHHWDO5RVHWWD KDYHDWWHPSWHGWRWDFNOHWKLVSUREOHPZKLFKLVFORVHO\ UHODWHGWRWKHTXHVWLRQRIXQLYHUVDOJUDPPDULQOLQJXLVWLFV

1HZSDUDGLJPV ,QUHFHQW\HDUVVHYHUDOLPSRUWDQWQHZDQGTXLWHGLIIHUHQWDSSURDFKHVWR07KDYHHPHUJHGWZRRIZKLFKDUH ZRUWKVXPPDUL]LQJKHUHH[DPSOHEDVHG07DQGVWDWLVWLFVEDVHG07 ,QUHFRJQLWLRQRIVRPHRIWKHSUREOHPVRIOLQJXLVWLFUXOHEDVHG07VHYHUDOUHVHDUFKHUVKDYHEHHQGHYHORSLQJ H[DPSOHEDVHGV\VWHPVEDVHGRQDTXLWHGLIIHUHQWVWUDWHJ\WUDQVODWLRQLVSURGXFHGE\FRPSDULQJWKHLQSXW ZLWKDFRUSXVRIW\SLFDOWUDQVODWHGH[DPSOHVH[WUDFWLQJWKHFORVHVWPDWFKHVDQGXVLQJWKHPDVDPRGHOIRUWKH WDUJHWWH[W7KHUHDUHWKXVWZRVWDJHVµPDWFKLQJ¶WKHLQSXWZLWKWKHH[DPSOHVDQGµUHFRPELQLQJ¶WKHWDUJHW ODQJXDJHIUDJPHQWVWKXVH[WUDFWHG7KLVDSSURDFKLVVDLGWREHPRUHOLNHWKHZD\KXPDQVJRDERXWWUDQVODWLQJ DQGLVDOVRFODLPHGWRUHVXOWLQPRUHVW\OLVKOHVVOLWHUDOWUDQVODWLRQVVLQFHLWLVQRWHVVHQWLDOO\EDVHGRQ VWUXFWXUDODQDO\VLVRIWKHLQSXW ,PSOHPHQWDWLRQVRIWKLVVWUDWHJ\YDU\LQDQXPEHURIDVSHFWV)RUH[DPSOHLQDµK\EULG¶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µIHUWLOLW\¶WKDWLVWKHFKDQFHWKDWRQH(QJOLVKZRUG FRUUHVSRQGVWRPRUHWKDQRQH)UHQFKZRUGHJLPSOHPHQWHG²PLVHQDSSOLFDWLRQ DQGWKHWDUJHWODQJXDJH ZRUGRUGHUWDNLQJLQWRDFFRXQWµGLVWRUWLRQ¶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µUHMHFWHG¶ILUVWJHQHUDWLRQDUFKLWHFWXUHWKRXJKRIWHQZLWKVRPHOLQJXLVWLFVRSKLVWLFDWLRQDQGPXFK FRPSXWDWLRQDOFOHYHUQHVV7KXVWKH\VWLOOWUDQVODWHHVVHQWLDOO\E\PHDQVRIDVPDOODPRXQWRIQRWYHU\H[DFW DQDO\VLVUHFRJQL]LQJOLNHO\QRXQDQGYHUEJURXSVFKHFNLQJIRUVXEMHFWYHUERUDGMHFWLYHQRXQDJUHHPHQWLI WKHVHQWHQFHVWUXFWXUHLVQRWWRRFRQYROXWHG DQGEDVLFDOO\ZRUGIRUZRUGGLFWLRQDU\ORRNXSZLWKPXFK SURYLVLRQIRULGLRPVLHDQ\WKLQJWKDWLVQRWOLWHUDO WKHUHVXOWLQJWUDQVODWLRQVDUHUHSRUWHGO\µZRRGHQ¶RU VWLOWHGWKRXJKQHYHUWKHOHVVDGHTXDWHIRUPDQ\DSSOLFDWLRQVRUVXLWDEOHIRUOLJKWUHYLVLRQ,WUHPDLQVWREHVHHQ ZKHWKHUVROLGWKHRU\ZLOO



3DJH

HYHQWXDOO\OHDGWREHWWHUUHVXOWVWKDQFOHYHUHQJLQHHULQJ 6HHDOVR 0$&+,1($,'('75$16/$7,210$&+,1(75$16/$7,21$33/,&$7,2160$&+,1( 75$16/$7,21+,6725<

)XUWKHUUHDGLQJ $UQROGHWDO+XWFKLQVDQG6RPHUV1LUHQEXUJHWDOIRUWKFRPLQJ

+$52/'/620(56

0HWDSKRURIWUDQVODWLRQ 7UDQVODWLRQLVPRVWFRPPRQO\WKRXJKWRIDVDSUDFWLFDODFWLYLW\WKDWLQYROYHVWXUQLQJRQHODQJXDJHLQWR DQRWKHU,WLVDOVRWKHVFHQHRIDVWULNLQJPHWDSKRULFV)RUH[DPSOHWUDQVODWRUVDQGWKHRULVWVKDYHLQYRNHG PHWDSKRUVRIILGHOLW\VHUYLOLW\EDVWDUGL]DWLRQRUXVXUSDWLRQWRILJXUHWKHUHODWLRQVKLSEHWZHHQWH[WVVHH *(1'(50(7$3+25,&6,175$16/$7,21 6RPHWLPHVWKHWUDQVODWHGWH[WLWVHOILVYLHZHGDVD PHWDSKRUIRUWKHIRUHLJQWH[WDVZKHQ*UHJRU\5DEDVVDDUJXHVWKDWµDZRUGLVQRWKLQJEXWDPHWDSKRUIRUDQ REMHFWRU«IRUDQRWKHUZRUG¶DQGWKDWWUDQVODWLRQLVµDIRUPRIDGDSWDWLRQPDNLQJWKHQHZPHWDSKRUILWWKH RULJLQDOPHWDSKRU¶± )RU5DEDVVDWUDQVODWLRQLVWKHSLHFLQJWRJHWKHURIPHWDSKRUVLQRUGHUWR FRQVWUXFWDQRWKHUHQWLW\ZKLFKLVDOVRDPHWDSKRUPHWDSKRUDVDPHWDSKRUIRUWUDQVODWLRQ$ZDUHQHVVRIWKH PHWDSKRUVWKURXJKZKLFKSUDFWLWLRQHUVDQGWKHRULVWVILJXUHWKHSUDJPDWLFVRIWUDQVODWLRQPXVWKRZHYHUEH GLVWLQJXLVKHGIURPWKHFXUUHQWZLGHVSUHDGXVHRIWUDQVODWLRQDVDPHWDSKRUWRGLVFXVVUHODWLRQVEHWZHHQREMHFWV RWKHUWKDQODQJXDJHV7KXVWRJLYHDQDFWXDODQGSHUWLQHQWH[DPSOHWKHUHLVVRPHWLPHVWDONRIµWUDQVODWLQJRQH FXOWXUHLQWRWHUPVLQWHOOLJLEOHWRDQRWKHU¶7KHGLIILFXOW\ZLWKWKLVVWDWHPHQWDVZLWK5DEDVVD¶VPLPHWLFPRGHO LVWKDWLWUHPDLQVDQRYHUVLPSOLILFDWLRQLWGHPDQGVDPRUHWKHRUHWLFDOO\ULJRURXVDQDO\VLVRIWKHUHODWLRQV LQYROYHG +RZHYHUDQXPEHURIUHFHQWSRVWFRORQLDOFULWLFVHPSOR\WUDQVODWLRQDVDPHWDSKRULQWHUPVWKDWDOORZIRU VOLSSDJHEHWZHHQDVWULFWO\SUDJPDWLFYLHZRIWUDQVODWLRQDQGRQHZKLFKOLQNVLWPRUHSUHFLVHO\WRWKHVRFLDO RUGHUDQGWKXVWRDSROLWLFDOGLPHQVLRQ7RERUURZ5DIDHO¶VZRUGVµ>W@UDQVODWLRQLQWKLVFDVHLQYROYHVQRW VLPSO\WKHDELOLW\WRVSHDNLQDODQJXDJHRWKHUWKDQRQH¶VRZQEXWWKHFDSDFLW\WRUHVKDSHRQH¶VWKRXJKWVDQG DFWLRQVLQDFFRUGDQFHZLWKDFFHSWHGIRUPV¶DSURFHVVWKDWLQYROYHVµHLWKHUDIILUPDWLRQRUHYDVLRQRIWKHVRFLDO RUGHU¶5DIDHO± 7KHZULWLQJVRI5DIDHO%KDEKD1LUDQMDQDDQG&KH\ILW]LQSDUWLFXODUVHHNWR DUWLFXODWHµWUDQVODWLRQ¶DVDFHQWUDOSUREOHPDWLFLQWKHDQDO\VLVRIHWKQLFDQGFXOWXUDOWUDQVIHUVUHIXVLQJWKH WUDGLWLRQDO(QOLJKWHQPHQWSRVLWLRQRIXQGHUVWDQGLQJWKHµ2WKHU¶EXWWU\LQJLQVWHDGWRWKLQNWKURXJKZKDW &KH\ILW]WHUPVµWKHGLIILFXOWSROLWLFVRIWUDQVODWLRQUDWKHUWKDQWKHSROLWLFVRIWUDQVODWLRQWKDWUHSUHVVHVWKLV GLIILFXOWSROLWLFV¶[L[ 5DIDHO¶VVWXG\FRQVLGHUVWKHUHODWLRQEHWZHHQ&KULVWLDQFRQYHUVLRQDQG WUDQVODWLRQLQHDUO\6SDQLVKFRORQL]DWLRQRIWKH3KLOLSSLQHV5DIDHO )RU%KDEKD WUDQVODWLRQ QDPHVDK\EULGLQWHUFXOWXUDOVSDFHZKLOHIRU1LUDQMDQDDQG&KH\ILW]LWLVDVLJQLILFDQWWHFKQRORJ\RIFRORQLDO GRPLQDWLRQLQ$QJOR,QGLDQUHODWLRQV1LUDQMDQD DQGLQ$QJOR$PHULFDQIRUHLJQDQGGRPHVWLFSROLF\ IURPWKHVL[WHHQWKFHQWXU\RQZDUGV&KH\ILW] )RUDOOWKHVHFULWLFVµWUDQVODWLRQ¶LVXQGHUVWRRGSULPDULO\ LQWHUPVRIDSRZHUUHODWLRQLWLVOLQJXLVWLFWUDQVIHULQWKHVHUYLFHRIHPSLUH


3DJH

7KH$UWHRI(QJOLVK3RHVLH GHILQHVµ0HWDSKRUD¶DVµDNLQGHRIZUHVWLQJRIDVLQJOHZRUGIURPKLVRZQ ULJKWVLJQLILFDWLRQWRDQRWKHUQRWVRQDWXUDOOEXW\HWRIVRPHDIILQLWLHRUFRQYHQLHQFLHZLWKLW¶3DUNHU HPSKDVLVDGGHG 3DUDGR[LFDOO\²EHFDXVHWUDQVODWLRQVWKHPVHOYHVDUHFRQYHQWLRQDOO\FRQVLGHUHGWR EHGLVSODFHGZRUNV²WKHOLWHUDODFWLYLW\RIWUDQVODWLRQLVVHHQDVQDWXUDODQGSURSHUZKHUHDVLWVILJXUDWLYHXVH GHVSLWHLWVDIILQLW\ZLWKWKHOLWHUDOVHQVHLVVHHQDVXQQDWXUDODQGLPSURSHU:KLOHWKHUHDUHLPSRUWDQWUHDVRQV IRUTXHVWLRQLQJLQGLVFULPLQDWHPHWDSKRULFDOXVHVRIWKHWHUPµWUDQVODWLRQ¶QRWOHDVWWKHIDFWWKDWUHODWLRQVDUH RIWHQOHIWXQVSHFLILHGLWLVFUXFLDOWRFKDOOHQJHWKHDVVXPSWLRQVWKDWXQGHUZULWHWKHSUHVHQWPRPHQW¶VKLHUDUFK\ RIVLJQLILFDWLRQ7KHIROORZLQJLVDQDWWHPSWWRDUJXHIRUWKHYDOXHRIFXUUHQWPHWDSKRULFDOXVHVRIWUDQVODWLRQ HVSHFLDOO\DVWKH\FRQFHUQUHODWLRQVRISRZHUE\GUDZLQJRQWKHYHU\VWUXFWXUHRIPHWDSKRULWVHOI $ULVWRWOH¶VIDPRXVGHILQLWLRQLQKLV3RHWLFVFODLPVWKDWµ0HWDSKRUFRQVLVWVLQJLYLQJWKHWKLQJDQDPHWKDW EHORQJVWRVRPHWKLQJHOVHWKHWUDQVIHUHQFHEHLQJHLWKHUIURPJHQXVWRVSHFLHVRUIURPVSHFLHVWRJHQXVRU IURPVSHFLHVWRVSHFLHVRURQJURXQGVRIDQDORJ\¶5LF°XU3DUNHU ,QPHWDSKRUDWHUPLV WUDQVSRUWHGIURPDIDPLOLDUWRDIRUHLJQSODFHIURPLWVVRFDOOHGSURSHUVLJQLILFDWLRQWRDILJXUDWLYHVHQVHZLWK UHVHPEODQFHJXDUDQWHHLQJWKHGHFRUXPRIVXFKDWUDQVSRUWDWLRQ&KH\ILW] (W\PRORJ\DQGKLVWRU\ ZLOOEHXVHGKHUHWREULQJRXWWKHUHVHPEODQFHEHWZHHQWKHXVHRIµWUDQVODWLRQ¶IRUWKHUHODWLRQVEHWZHHQ OLQJXLVWLFVWUXFWXUHVDQGLWVILJXUDWLYHXVHIRUUHODWLRQVRISRZHUDQGWKXVUHLQVFULEHWKHQRWLRQRIGHFRUXPDQG RIµQHZSHUWLQHQFH¶5LF°XU WKDWREWDLQVLQFODVVLFDOGHILQLWLRQVRIPHWDSKRUHYHQZKLOH DFNQRZOHGJLQJWKDWWKHFXUUHQWPHWDSKRULFDOXVHVRIWUDQVODWLRQZLWKLQWKHILHOGRIWUDQVODWLRQVWXGLHVKDYH HIIHFWHGDUXSWXUHRIWKDWGHFRUXP

7UDQVODWLRQDVPHWDSKRUKLVWRU\ILJXUHHW\PRORJ\ 6LQFHWKH/DWLQZRUGWUDQVODWLROLNHWKH*UHHNPHWDSKRUDFDQEHXVHGWRPHDQERWKPHWDSKRUDQGWUDQVODWLRQ WKLVKDVVXJJHVWHGDKLVWRULFDOLGHQWLILFDWLRQEXWVHH&RSHODQG


3DJH

LQWHUPHQW DQGHTXLYDOHQFHRIOLQJXLVWLFVWUXFWXUHV)URPWKHSRLQWRIYLHZRIDKLVWRULFDOVHPDQWLFVODWHU WKHRULHVRIWUDQVODWLRQKDYHKDGWRZUHVWWKHLUµSURSHU¶PHDQLQJVIURPWKHZLGHUVHPDQWLFUDQJHUDWKHUWKDQWKH RWKHUZD\URXQG)ROHQD H[SORUHVVRPHRIWKHZD\VLQZKLFKDWHFKQLFDOWUDQVODWLRQYRFDEXODU\HJ LQWHUSUHWDWLRLPLWDWLR GHYHORSVLQWKH,WDOLDQ5HQDLVVDQFHDVDUHVXOWRISUHVVXUHRQWKHZLGHUVHPDQWLFILHOG GHVLJQDWHGE\WUDQVIHUUH :KHUHWUDQVODWLRQLQLWVHDUOLHVWPHGLHYDOVHQVHVZDVXQGHUVWRRGGLVFXUVLYHO\LQWHUPVRIWKHWUDQVODWLRLWV VXEVHTXHQWµWUDQVODWLRQ¶LQWRDUKHWRULFDOWHUPKDVHIIDFHGWKLVHDUOLHUSROLWLFDOPHDQLQJDQGWKHSROLWLFDO UHODWLRQVKLSEHWZHHQWUDQVODWLRQDQGILJXUDWLYHODQJXDJH$ULVWRWOH¶VµIRUHLJQSROLF\¶ &ULWLFVOLNH5DIDHO 1LUDQMDQD%KDEKDDQG&KH\ILW]DUHWUDQVSRUWLQJWKHRULHVRIUKHWRULFEDFNLQWRWKHODQJXDJHRISRZHU SRUWDELOLW\DQGSODFHZKLFKµWUDQVODWLRQ¶GHVLJQDWHGKLVWRULFDOO\:LWKWKLVLQPLQGLWLVLPSRUWDQWDOVRWR DFNQRZOHGJH3DUNHU¶VFODLPWKDWµWKHPXOWLSOLFLW\RISORWVFRQWDLQHGZLWKLQPHWDSKRU²WUDQVIHUHQFHWUDQVSRUW WUDQVJUHVVLRQDOLHQDWLRQLPSURSULHW\LGHQWLW\²VXJJHVWVZK\PHWDSKRUFDQEHDWZRUNLQVRPDQ\JHQUHVQRW MXVWDVILJXUHRIVSHHFKRUUKHWRULFDORUQDPHQWEXWDVVWUXFWXULQJSULQFLSOH¶ )RUWKHSRVWFRORQLDOFULWLFVDVIRUWKHSKLORVRSKHUVRIGLIIHUHQFHZKRDUHDOVRLQWHUHVWHGLQWKHSUREOHPDWLFRI WUDQVODWLRQ%HQMDPLQ'HUULGDGH0DQ%DQQHWW :DOWHU%HQMDPLQ¶V HVVD\µ7KHWDVNRIWKHWUDQVODWRU¶KDVSURYLGHGDFRQVSLFXRXVWKHRUHWLFDOIRFXVVHH385(/$1*8$*(

µ7KHWDVNRIWKHWUDQVODWRU¶ µ7KHWDVNRIWKHWUDQVODWRU¶LVQRWRIFRXUVHPHWDSKRULFDOLQWKHVHQVHLQZKLFKWKLVHQWU\LQWHQGVVLQFHLW SUHIDFHV%HQMDPLQ¶VWUDQVODWLRQVRI%DXGHODLUHDQGLVWKXVDVWDWHPHQWRIVRPHVRUWDERXWWKHSUDJPDWLFVRI WUDQVODWLQJ6WLOOLWDUWLFXODWHVDYLHZRIWKHVLJQLI\LQJSRZHURIODQJXDJHV DQGQRWLRQVRI 75$16/$7$%,/,7<DQGXQWUDQVODWDELOLW\ZKLFKKDYHSURYHGH[WUHPHO\VXJJHVWLYHIRUSRVWVWUXFWXUDOLVW FULWLTXHVRIODQJXDJHPHDQLQJDQGUHSUHVHQWDWLRQ$FFRUGLQJWR%HQMDPLQµ(YHQZKHQDOOWKHVXUIDFHFRQWHQW KDVEHHQH[WUDFWHGDQGWUDQVPLWWHGWKHSULPDU\FRQFHUQRIWKHJHQXLQHWUDQVODWRUUHPDLQVHOXVLYH¶ 7UDQVIHUFDQQHYHUEHWRWDOEHFDXVHWKHUHLVDQHOHPHQWµWKDWGRHVQRWOHQGLWVHOIWRWUDQVODWLRQ¶LELG 8QOLNH WKHZRUGVRIWKHRULJLQDOWKLVHOHPHQWLVQRWWUDQVODWDEOHµEHFDXVHWKHUHODWLRQVKLSEHWZHHQFRQWHQWDQG ODQJXDJHLVTXLWHGLIIHUHQWLQWKHRULJLQDODQGWKHWUDQVODWLRQ¶LELG )RUWKHSRVWFRORQLDOWKHRULVWVWKLV HOHPHQWIXQFWLRQVDVDPHWDSKRUIRUWKHGLIILFXOWSROLWLFVRIFXOWXUDOWUDQVIHU)RUH[DPSOHLQ5DIDHO¶VVWXG\RI )LOLSLQR7DJDORJFXOWXUHXQGHU6SDQLVK&KULVWLDQUXOHWKLVHOHPHQWPLJKWEHFRQVWUXHGDVWKDWZKLFKDOORZVIRU DFRQIRXQGLQJRIWKHPLVVLRQDULHV¶H[SHFWDWLRQVµWKH7DJDORJV¶DWWHPSWVWRUHDGDQGDSSURSULDWH&KULVWLDQ FRORQLDOGLVFRXUVHLQWKHLURZQODQJXDJHWHQGHGWRFKDQJHWKHPHDQLQJRIWKDWGLVFRXUVHDQGKHQFHWKHYHU\ VKDSHDQGIHHORIWKHFRORQLDOOHJDF\DVDZKROH¶5DIDHO[LL &KH\ILW]DOVRLGHQWLILHVDUHVLVWDQFHWRWKH LPSHULDOLVWSURMHFWRIWUDQVODWLRLPSHULLHWVWXGLLLQ%HQMDPLQ¶VDHVWKHWLFGUHDPRIDXQLYHUVDOODQJXDJHLQVRIDU DVIRU%HQMDPLQODQJXDJHVDUHLQFRPSOHWHWKH\UHO\RQHDFKRWKHUUHVLVWLQJWKHPDVWHU\RIDXQLYHUVDO ODQJXDJH 1LUDQMDQDHQJDJHVZLWKGHFRQVWUXFWLYHUHDGLQJVRI%HQMDPLQE\'HUULGDDQGGH0DQ WR VKRZKRZWKH\VZHUYHIURPWKHFRQFHUQZLWKµKLVWRU\¶LQ%HQMDPLQ¶VWH[W%HQMDPLQ¶VFRQFHSWRIWKH WUDQVODWDELOLW\RIWKHWH[WUHSUHVHQWVIRU1LUDQMDQDDFODLPRQKXPDQNLQGWKDWFDQEHXQGHUVWRRGLQWHUPVRI KLVWRULFDOPDWHULDOLVP+LVWURSHRIWKHIUDJPHQWHGDPSKRUDIRUH[DPSOHUHYHDOVWKHLQVWDELOLW\RIRULJLQVDQG FRQWLQXXPVSDUDOOHOLQJKLVWKHRU\RIKLVWRULFLW\DQGKHOSLQJXVµWRGHFRQVWUXFWWKHWRWDOLW\RIKLVWRU\WKDW 'HUULGDVHHVDVDIRXQGLQJPHWDSKRURIORJRFHQWULVP¶ 'H0DQ¶VUHDGLQJRI%HQMDPLQ¶VHVVD\SUREOHPDWL]HVWKHYHU\QRWLRQRIWUDQVODWLRQDVPHWDSKRUE\RIIHULQJD FULWLTXHRIWKHWRWDOL]LQJSURMHFWRIUKHWRULFDOWURSHV,Q%HQMDPLQ¶VHVVD\GH0DQFODLPVWUDQVODWLRQLVQRWD PHWDSKRUIRUWKHRULJLQDOWH[WDV5DEDVVDVXJJHVWV GHVSLWHWKHFORVHHW\PRORJLFDOUHODWLRQVKLSEHWZHHQ EHUVHW]HQVHWSODFHRYHUWUDQVODWH DQG*UHHNPHWDSKRUHLQµFDUU\RYHU¶ 7UDQVODWLRQLVDPHWDSKRUWKDW GHVWDELOL]HVWKHWUDGLWLRQDOUHODWLRQVKLSEHWZHHQILJXUH



3DJH

DQGPHDQLQJWKDWLVVXSSRVHGWRLQKHUHLQWURSHRUPHWDSKRU7URSHVµDOZD\VLPSO\WRWDOL]DWLRQ¶WKH\µFRQYH\ DSLFWXUHRIWRWDOPHDQLQJRIFRPSOHWHDGHTXDF\EHWZHHQILJXUHDQGPHDQLQJDILJXUHRISHUIHFWV\QHFGRFKH LQZKLFKWKHSDUWLDOWURSHH[SUHVVHVWKHWRWDOLW\RIDPHDQLQJ¶1LUDQMDQD 7UDQVODWLRQHPHUJHVE\ WKHHQGRIGH0DQ¶VUHDGLQJQRWDVDPHWDSKRUEXWDVDQDSRULDZKLFKLWVHOIGHVWDELOL]HVWKHQRWLRQRI WUDQVODWLRQDVPHWDSKRU

3RVWFRORQLDOWUDQVODWLRQDVPHWDSKRU :KHUHDVIRU5LF°XUµPHWDSKRULVWKHUKHWRULFDOSURFHVVE\ZKLFKGLVFRXUVHXQOHDVKHVWKHSRZHUWKDWFHUWDLQ ILFWLRQVKDYHWRUHGHVFULEHUHDOLW\¶ IRUSRVWFRORQLDOWKHRULVWVWKDWUKHWRULFDOSURFHVVDQGSRZHURI UHGHVFULSWLRQDUHXQGHUVWRRGSROLWLFDOO\DORQJZLWKWKHGHFRQVWUXFWLRQRIWKHQRWLRQRIUHSUHVHQWDWLRQLPSOLFLW LQ5LF°XU¶VGHVFULSWLRQWKDWUHDOLW\LVWUDQVSDUHQW %KDEKD¶VXVHRIWUDQVODWLRQLVWKHPRVWPHWDSKRULFDORIWKH WKUHHFULWLFVEHLQJFRQFHUQHGQRWZLWKWUDQVODWHGWH[WVDQGWKHLUIXQFWLRQVEXWZLWKWKHSRVVLELOLW\RIFXOWXUDO LQWHUDUWLFXODWLRQLQUDGLFDOO\GLIIHUHQWWHUPVIURPOLEHUDOWUDGLWLRQVRIPXOWLFXOWXUDOLVP+HGHULYHVIURP %HQMDPLQ¶VHVVD\WKHQRWLRQWKDWDOOIRUPVRIFXOWXUHDUHLQVRPHZD\UHODWHGWRHDFKRWKHUEHFDXVHFXOWXUHLVD VLJQLI\LQJRUV\PEROLFDFWLYLW\)RUKLPWKHDUWLFXODWLRQRIFXOWXUHVLVSRVVLEOHQRWEHFDXVHRIWKHVLPLODULW\RI FRQWHQWVFXOWXUHVGRQRWVKDUHDQHTXLYDOHQFHRIVXEMHFWPDWWHU EXWEHFDXVHDOOFXOWXUHVDUHµV\PEROIRUPLQJ DQGVXEMHFWFRQVWLWXWLQJLQWHUSHOODWLYHSUDFWLFHV¶± %KDEKDERUURZVIURPWKHVWUXFWXUHRI PHWDSKRUWKHQRWLRQRIDµGLVSODFHPHQWRUOLPLQDOLW\¶ZKLFKµRSHQVXSWKHSRVVLELOLW\RIDUWLFXODWLQJGLIIHUHQW HYHQLQFRPPHQVXUDEOHFXOWXUDOSUDFWLFHVDQGSULRULWLHV¶VXFKDVWKHHYHQWVVXUURXQGLQJWKHSXEOLFDWLRQRI 6DOPDQ5XVKGLH¶V6DWDQLF9HUVHV± 7KHVHSURFHVVHVRIGLVSODFHPHQWDQGWUDQVIRUPDWLRQZLWKLQ DQGDFURVVFXOWXUHVSURGXFHZKDW%KDEKDFDOOVµWKHWKLUGVSDFH¶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µYLROHQFHWKDWDFFRPSDQLHVWKHFRQVWUXFWLRQRIWKHFRORQLDO VXEMHFW¶ 6KHDUJXHVIRUWUDQVODWLRQDOSUDFWLFHVWKDWZLOOLQVFULEHVXEYHUVLRQIRUVXEDOWHUQVXEMHFWV)RU 1LUDQMDQDWUDQVODWLRQLVDSUDFWLFHWKDWLVPLGZD\EHWZHHQLQWHUSUHWDWLRQDQGUHDGLQJSDUWLFLSDWLQJLQERWKDQG \HWIXOO\QHLWKHUDQGWKXV²OLNHPHWDSKRU²DIRUPRIGLVWXUEDQFHRUGLVSODFHPHQW7KHVLWXDWLRQRIWKHSRVW FRORQLDOVXEMHFWLVµLQWUDQVODWLRQ¶ &KH\ILW]ILQGVLQWKH5HQDLVVDQFHUKHWRULFDOWHUPIRUPHWDSKRUWUDQVODWLR DQDSWILJXUHIRUWKHFRORQLDOLVW LPSRVLWLRQRIRUGHURQLQGLJHQRXVFXOWXUDOµFKDRV¶DPRGHOWKDWKDVLQIRUPHG$QJOR$PHULFDQIRUHLJQDQG GRPHVWLFSROLF\IURPWKHVL[WHHQWKFHQWXU\WRWKHSUHVHQWGD\0RYLQJEHWZHHQWKH(XURSHDQFRORQL]DWLRQRI WKH1HZ:RUOGLQWKHVL[WHHQWKDQGVHYHQWHHQWKFHQWXULHVDQGFXUUHQWUHODWLRQVEHWZHHQWKH8QLWHG6WDWHVDQG 1DWLYH$PHULFDQV&KH\ILW]DQDO\VHVDQXPEHURIOLWHUDU\WH[WVIURPWKHSHULRGQRYHOVVODYHQDUUDWLYHVSOD\V LQFOXGLQJ7KH7HPSHVW )RU&KH\ILW]WUDQVODWLRQLVDQDSWPHWDSKRUIRUIRUHLJQSROLF\EHFDXVHERWK WUDQVODWLRQDQGPHWDSKRUDUHEDVHGRQWKHIRUHLJQSROLF\DUWLFXODWHGLQ$ULVWRWOH¶VGHILQLWLRQRIPHWDSKRU WKURXJKWKHILJXUHRIWKHµSURSHU¶ZKLFKUHODWHVVSHFLILFDOO\WR(XURSHDQQRWLRQVRISURSHUW\DQGLGHQWLW\ &KH\ILW]¶VDQDO\VLVRIPHWDSKRURYHUODSVWRVRPHH[WHQWZLWK1LUDQMDQD¶VEHFDXVHKHVXJJHVWVWKDWµ0HWDSKRU PDUNVWKHIURQWLHUEHWZHHQWKHGRPHVWLFDQGWKHIRUHLJQSUHFLVHO\E\EOXUULQJWKDWERXQGDU\¶ EXWKH VSHDNVIURPDYHU\GLIIHUHQWSODFH)RU&KH\ILW]ZHPXVWDOOEHLQWUDQVODWLRQEHWZHHQFXOWXUHVLIZHDUHWR XQGHUVWDQGWKHG\QDPLFVRIRXULPSHULDOLVP 3DUDOOHOFODLPVIRUWUDQVODWLRQWRIXQFWLRQDVDPHWDSKRUIRULQWHUFXOWXUDOUHODWLRQVDSSHDUWREHVXUIDFLQJLQ DUHDVRIWUDQVODWLRQVWXGLHV



3DJH

XVXDOO\UHVLVWDQWWRSKLORVRSKLFRWKHRUHWLFDODSSURDFKHV7KXV5RE\QVDGHVFULSWLYHWKHRULVWDUJXHVIRU WUDQVODWLRQDVGLVFXUVLYHµLQWHUIHUHQFH¶VKRZLQJKRZWKHPRGHVDQGPHWKRGVRIZKDWKHFDOOVµWUDQVODWLRQLQ WKHVWULFWHVWVHQVH¶DUHGHWHUPLQHGE\ZLGHUGLVFXUVLYHGRPDLQV5RE\QV ,VHUDUJXHVIRUWKHYDOXHRI XVLQJWKHFRQFHSWRIWUDQVODWDELOLW\DVµDFRXQWHUFRQFHSWWRWKHRWKHUZLVHSUHYDLOLQJLGHDRIFXOWXUDO KHJHPRQ\¶ +HHODERUDWHVDV\VWHPVWKHRU\PRGHORILQWHUFXOWXUDOXQGHUVWDQGLQJILQGLQJLQWKH QRWLRQRIWUDQVODWLRQEHWZHHQFXOWXUHVDFKDOOHQJHWRWKHDGHTXDF\RIKLVFRQFHSWRIWKHKHUPHQHXWLFFLUFOH
)XUWKHUUHDGLQJ %DQQHW%HQMDPLQ%KDEKD&KH\ILW]&RSHODQG1LUDQMDQD3DUNHU5DIDHO 5LF°XU5RELQVRQ9HQXWL

587+(9$16

0HWDSKUDVH 7KHWHUPPHWDSKUDVHXVHGIRUDQDSSURDFKWRWUDQVODWLRQLVPRVWIDPLOLDUWRXVIURP-RKQ'5<'(1¶6 SUHIDFHWRKLVWUDQVODWLRQRI2YLG¶V(SLVWOHVVHH%5,7,6+75$',7,21 KDYLQJSURPLVHGWRUHGXFHDOO WUDQVODWLRQWRWKUHHKHDGVKHILUVWPHQWLRQVµPHWDSKUDVHRUWXUQLQJDQDXWKRUZRUGE\ZRUGDQGOLQHE\OLQH IURPRQHODQJXDJHLQWRDQRWKHU¶WKHRWKHUWZRKHDGVDUH3$5$3+5$6(DQG,0,7$7,21'U\GHQ FRQVLGHUHGPHWDSKUDVHDORQJZLWKLPLWDWLRQRQHRIµWKHWZRH[WUHPHVZKLFKRXJKWWREHDYRLGHG¶DQGLQ ZDUQLQJDJDLQVWLWGHVFULEHGWKHPHWDSKUDVWRUOLWHUDOLVWIDPRXVO\DVDWLJKWURSHZDONHUZLWKERXQGIHHW ,QVKRUWWKHYHUEDOFRSLHULVHQFXPEHUHGZLWKVRPDQ\GLIILFXOWLHVDWRQFHWKDWKHFDQQHYHU GLVHQWDQJOHKLPVHOIIURPDOO+HLVWRFRQVLGHUDWWKHVDPHWLPHWKHWKRXJKWRIKLVDXWKRUDQGKLV ZRUGVDQGWRILQGRXWWKHFRXQWHUSDUWWRHDFKLQDQRWKHUODQJXDJHDQGEHVLGHVWKLVKHLVWR FRQILQHKLPVHOIWRWKHFRPSDVVRIQXPEHUVDQGWKHVODYHU\RIUK\PHµ7LVPXFKOLNHGDQFLQJRQ URSHVZLWKIHWWHUHGOHJVDPDQPD\VKXQDIDOOE\XVLQJFDXWLRQEXWWKHJUDFHIXOQHVVRIPRWLRQLV QRWWREHH[SHFWHGDQGZKHQZHKDYHVDLGWKHEHVWRILW¶WLVEXWDIRROLVKWDVNIRUQRVREHUPDQ ZRXOGSXWKLPVHOILQWRDGDQJHUIRUWKHDSSODXVHRIHVFDSLQJZLWKRXWEUHDNLQJKLVQHFN %XW'U\GHQGLGQ¶WLQYHQWWKHWHUP,WZDVILUVWXVHGE\3KLOR-XGDHXVLQ'HYLWD0RVLV%& µ PHWDSKUD]RQWD@DQGZKROHSKUDVHV>SDUDSKUD]RQWD@DQGVXLWLQJWKH H[SUHVVLRQWRWKHRFFDVLRQ"¶ 7KHVHWZRWHUPV



3DJH

PHWDSKUDVHDQGSDUDSKUDVHDUHSLFNHGXSE\4XLQWLOLDQLQ,QVWLWXWHVRI2UDWRU\$'" IRUWZRGLVWLQFW DSSURDFKHVWRWKHSHGDJRJLFDOSUDFWLFHRILPLWDWLRQUHZRUNLQJFODVVLFWH[WVE\FKDQJLQJRQHZRUGDWDWLPH PHWDSKUDVH RURQHSKUDVHDWDWLPHSDUDSKUDVH DQGODWHUE\DORQJOLVWRI5HQDLVVDQFHDQGQHRFODVVLFDO SHGDJRJXHVDQGWUDQVODWLRQWKHRULVWV)DXVWR6HEDVWLDQRLQ'HOPRGRGHORWUDGXUUHG¶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µ)DUIURPEHLQJWKHPRVW REYLRXVUXGLPHQWDU\PRGHRIWUDQVODWLRQ³OLWHUDOLVP´RUDV'U\GHQFDOOHGLWPHWDSKUDVHLVLQIDFWWKHOHDVW DWWDLQDEOH¶*HRUJH6WHLQHU

)XUWKHUUHDGLQJ 6KDGG\*HRUJH6WHLQHU

'28*/$652%,1621

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µFRQWLQJHQW¶ IHDWXUHV ,WLVSRVVLEOHWRFRQVLGHUWKHUHOHYDQFHRIPRGHOVLQWKHFRQWH[WRIWUDQVODWLRQIURPIRXU



3DJH

GLIIHUHQWDQJOHV D WKHXVHRIWKHRUHWLFDOPRGHOVDVKHXULVWLFWRROVLQWUDQVODWLRQVWXGLHV E WKHXVHRIGLDJUDPPDWLFRUDQDORJXHPRGHOVWRUHSUHVHQWFHUWDLQDVSHFWVRIWUDQVODWLRQ F WKHYLHZRIWUDQVODWLQJDVDPRGHOOLQJDFWLYLW\ G WKHUHODWLRQEHWZHHQPRGHOVDQG12506

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

$QDORJXHPRGHOV $QDORJXHPRGHOVDUHXVHGWRUHSUHVHQWWKRVHFKDUDFWHULVWLFVRIDSURWRW\SHZKLFKDUHFRQVLGHUHGUHOHYDQWLQD JLYHQFRQWH[W7KH\VHUYHDQLQWHOOHFWXDODQGSHGDJRJLFSXUSRVHLQYLVXDOO\IRUHJURXQGLQJSHUWLQHQWIHDWXUHV ZKLOHLJQRULQJRWKHUV,QWKHVWXG\RIWUDQVODWLRQIORZFKDUWVDQGRWKHUGLDJUDPPDWLFUHSUHVHQWDWLRQVDUHPRVW FRPPRQO\XVHGWRUHSUHVHQWFHUWDLQSURFHVVHVDQGUHODWLRQV 7KHFRPPXQLFDWLYHSURFHVVLQYROYLQJWUDQVODWLRQLVRIWHQUHSUHVHQWHGDVDQH[WHQVLRQRIWKHVFKHPH µVHQGHUĺPHVVDJHĺUHFHLYHU¶ZLWKWKHWUDQVODWRUILUVWDFWLQJDVDUHFHLYHUDQGWKHQDVWKHVHQGHURIDQHZ WUDQVODWHG PHVVDJHWRDQHZUHFHLYHUKHQFHµVHQGHUĺPHVVDJHĺUHFHLYHU WUDQVODWRU VHQGHU ĺPHVVDJHĺUHFHLYHU¶(ODERUDWLRQVRI



3DJH

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

0RGHOVDQGQRUPV 7RWKHH[WHQWWKDWWUDQVODWLQJLQYROYHVDSURFHVVRI'(&,6,210$.,1*ZKLFKWDNHVSODFHLQD FRPPXQLFDWLYHFRQWH[WWKHDFWLYLW\LVJRYHUQHGE\125061RUPVPD\EHUHJDUGHGDVVRFLDOUHJXODWLRQ PHFKDQLVPVZKLFKPDNHFHUWDLQFKRLFHVDQGGHFLVLRQVE\WKHWUDQVODWRUPRUHOLNHO\WKDQRWKHUV7KH\FRQVLVW RIWZRSDUWVDGLUHFWLYHDVSHFWZKLFKH[HUWVSUHVVXUHRQPHPEHUVRIDFRPPXQLW\WREHKDYHLQFHUWDLQZD\V DQGDµFRQWHQW¶ZKLFKLVDQLQWHUVXEMHFWLYHQRWLRQRIFRUUHFWQHVVLHDQRWLRQRIZKDWLVSURSHURUFRUUHFWLQ SDUWLFXODUVLWXDWLRQV%HFDXVHQRWLRQVRIFRUUHFWQHVVDUHDEVWUDFWYDOXHVPRUHFRQFUHWHPRGHOVRI



3DJH

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

)XUWKHUUHDGLQJ %DUWVFK'¶$QGUDGHDQG6WUDXVV+HUPDQV3D]XNKLQ6WDFKRZLDN

7+(2+(50$16

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¶VLGHDOUHDGHUµZKRLVIDPLOLDUZLWKWKHIRUHLJQODQJXDJH¶\HWWRZKRPµWKDW ODQJXDJHDOZD\VUHPDLQVIRUHLJQ¶TXRWHGLQ/HIHYHUHE UHPDLQVWKHH[FHSWLRQQRWWKHUXOHVHH *(50$175$',7,21 )DUIURPKDYLQJLWVRULJLQLQµDFHUWDLQDELOLW\IRULQWHUFRXUVHZLWKIRUHLJQ ODQJXDJHV«DPRQJWKHHGXFDWHGSDUWRIWKHSRSXODWLRQ¶LELG WUDQVODWLRQLVWRGD\PRUHFRPPRQO\KHOGWR FDWHUWRPRQROLQJXDOUHDGHUVE\GLVFORVLQJXQNQRZQOLWHUDWXUHVWRWKHPWKXVHIIHFWLYHO\UHVWULFWLQJELOLQJXDO FRPSHWHQFHWRWKHWUDQVODWRUVWKHPVHOYHV 7KHUHLVDQRWKHUVHQVHLQZKLFKWKHFRQFHSWFDQSURYHXVHIXOWRWUDQVODWLRQVWXGLHV,QOLWHUDU\SRHWLFV µPXOWLOLQJXDOLVP¶VWDQGVIRUWKHXVHRIWZRRUPRUHODQJXDJHVZLWKLQWKHVDPHWH[W7KRVHODQJXDJHVDUHQRW DOZD\VµIRUHLJQ¶KRZHYHU7KHPHGLHYDOKDELWRILQWHUVSHUVLQJYHUQDFXODUSRHWU\ZLWK/DWLQSKUDVHVDQGWKH FRGHVZLWFKLQJEHWZHHQ6SDQLVKDQG(QJOLVKLQUHFHQW&KLFDQRZULWLQJERWKDWWHVWWRDEOXUULQJRIOLQJXLVWLF ERXQGDULHV0HGLHYDO/DWLQWKRXJKVWULFWO\VSHDNLQJQRERG\¶VPRWKHUWRQJXHZDVPRUHWKDQDGHDGRU IRUHLJQODQJXDJH=XPWKRU±



3DJH

7DYDQL±)RUVWHU±/DQJH 6RPHWKLQJVLPLODURFFXUVLQELOLQJXDOWH[WVE\ 0H[LFDQ$PHULFDQDXWKRUVZKRSDUDGR[LFDOO\XVH(QJOLVKWKHODQJXDJHRIWKHGRPLQDQWFXOWXUHWRDVVHUW WKHLUGLIIHUHQFH.HOOHU)ORUHV$UWHDJD

3RHWLFVDQGRUSROLWLFV 7KHH[WHQWWRZKLFKODQJXDJHVKDYHEHHQSXWWRXVHLQOLWHUDWXUHYDULHVJUHDWO\:KLOHWKHSUHVHQFHRIDVLQJOH ORDQZRUGFDQWKHRUHWLFDOO\EHFRQVLGHUHGDPLQLPDOUHTXLUHPHQWIRUDWH[WWREHLGHQWLILHGDVPXOWLOLQJXDO WKHUHVHHPVWREHQRREMHFWLYHOLPLW/DXUHQFH6WHUQH¶V7ULVWUDP6KDQG\ IRULQVWDQFHFRQWDLQVVHYHUDO SDJHVRI/DWLQGLJUHVVLRQV+LVFRQWHPSRUDU\'HQLV'LGHURWLQFRUSRUDWHGHQWLUHXQWUDQVODWHGSDUDJUDSKVRI (QJOLVK6SDQLVKDQG,WDOLDQDVZHOODVRI/DWLQLQKLVEDZG\%LMRX[LQGLVFUHWV WKXVHFKRLQJ)UDQoRLV 5DEHODLV¶3DQWDJUXHO ZKRVHJORVVRODOLFFKDUDFWHU3DQXUJHUDPEOHGRQLQQROHVVWKDQWKLUWHHQWRQJXHV VRPHRIWKHPHQWLUHO\DUWLILFLDO 5HJDUGLQJWKHVHWH[WVDIHZWKLQJVFDQEHLPPHGLDWHO\SRLQWHGRXW)LUVWRIDOOWKHVWXG\RIWH[WXDO PXOWLOLQJXDOLVPGRHVQRWLQYROYHDFORVHH[DPLQDWLRQRIWKHZULWHU¶VDFWXDOODQJXDJHVNLOOVSDFHVWDWHPHQWVWR WKHHIIHFWWKDWµ>W@KHDXWKRU¶VRZQOLPLWDWLRQVQDWXUDOO\FRQVWUDLQWKHODQJXDJHRIWKHQDUUDWRUDQGWKDWRIWKH FKDUDFWHUVPRVW¶7UDXJRWW :ULWHUVKDYHEHHQNQRZQWRFRQVXOWHLWKHUWKHLUHQWRXUDJHRUDQHDUE\ OLEUDU\RUERWK DQGSKLORORJLVWVVXFKDV-557RONLHQZKRGHYLVHGDQLQJHQLRXVOLQJXLVWLFV\VWHPIRU7KH /RUGRIWKH5LQJV± WHQGWREHUDUH(YHQLIDELRJUDSKLFDOOLQNFDQEHVKRZQWRH[LVWLWLVTXHVWLRQDEOH ZKHWKHULWHQKDQFHVRXUXQGHUVWDQGLQJ'RHV&KDUORWWH%URQWs¶VVWD\LQ%UXVVHOVIRULQVWDQFHUHDOO\H[SODLQ WKHUROHRI$GqOH¶V)UHQFKLQ-DQH(\UH "6HFRQGZULWLQJWKDWPDNHVXVHRIPRUHWKDQRQHODQJXDJH GRHVQRWQHFHVVDULO\SUHVXSSRVHDSRO\JORWSXEOLFWKRXJKLWVGHFLSKHULQJPRUHRIWHQWKDQQRWUHTXLUHVVRPH LPDJLQDWLRQFRPSDUH)RUVWHU±WR%DHWHQV%HDUGVPRUHDQG6WHUQEHUJ :KLOHLW QRGRXEWDGGVWRWKHSOHDVXUHRQHQHHGQRWNQRZ5XVVLDQWRHQMR\$QWKRQ\%XUJHVV¶V$&ORFNZRUN2UDQJH RU/DWLQIRU8PEHUWR(FR¶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¶V:DYHUOH\IRUWKH (GLQEXUJK5HYLHZLQ)UDQFLV-HIIUH\FRPSODLQHGWKDWKDOIRIWKHQRYHOZDVFRPSRVHGµLQDGLDOHFW XQLQWHOOLJLEOHWRIRXUILIWKVRIWKHUHDGLQJSRSXODWLRQRIWKHFRXQWU\¶TXRWHGLQ6FRWW 6XFK FULWLFDOUHDFWLRQVVKRXOGQRWEHWDNHQDWIDFHYDOXHEXWDVLQGLFDWRUVRIJHQHULFFRQVWUDLQWVDQGDHVWKHWLFQRUPV $PRQJWKHODWWHUWKH5RPDQWLFGLVFRYHU\DQGVXEVHTXHQWIHWLVKL]LQJRIQDWLRQDOPRWKHUWRQJXHVDIIHFWHGWKH ZD\VLQZKLFKµIRUHLJQ¶ODQJXDJHVZHUHYLHZHGOHDUQHGDQGKHQFHXVHGZLWKLQWKHUHDOPRIOLWHUDWXUH,W FRXOGHYHQEHDUJXHGWKDWWKHGHJUHHRIPXOWLOLQJXDOLVPLQDJLYHQWH[WLVFRPPHQVXUDWHZLWKWKHVWDWXVRIWKH OLWHUDWXUHWKDWLWEHORQJVWRD\RXQJSRVW FRORQLDOOLWHUDWXUHRUWKDWRIDQRSSUHVVHGPLQRULW\ZRXOGVKRZ PRUHRSHQQHVVWKDQWKHILUPO\HVWDEOLVKHGFDQRQVRIWKHLPSHULDOSRZHUV,QWH[WVEHORQJLQJWRWKLVODVW FDWHJRU\WKHODQJXDJHVSUHVXPDEO\VSRNHQE\IRUHLJQFKDUDFWHUVDUHHLWKHUVDPSOHGWRSURYLGHVRPHFRPLF UHOLHIRUZRUVHGLVPLVVHGµDVDQLUUHOHYDQWLIQRWGLVWUDFWLQJUHSUHVHQWDWLRQDOIDFWRU¶6WHUQEHUJVHH *RHWVFK 7KXV6KDNHVSHDUH¶V&DOLEDQ&UXVRH¶V)ULGD\DQG



3DJH

9ROWDLUH¶V,QJpQXDOOVSHDNWKHLUPDVWHU¶VODQJXDJH6LPLODUO\WKH/RXLVLDQD&UHROHVGHSLFWHGLQ.DWH &KRSLQ¶V7KH$ZDNHQLQJ HFKR
0XOWLOLQJXDOLVPWUDQVODWHG 7UDQVODWLRQDOVWUDWHJLHVLQGHHGHQMR\DSULYLOHJHGVWDWXVLQPXOWLOLQJXDOWH[WVDNLQWRWKHPDJLFRIIDLU\WDOHV ZKHUHDQLPDOVVSHDN DQGWKHWHFKQRORJ\RIVFLHQFHILFWLRQQRYHOV*RHWVFK± :KLOHFRQIURQWLQJ UHDGHUVZLWKWKHSHFXOLDULWLHVRIIRUHLJQVSHHFKDGGHGWUDQVODWLRQVFUHDWHDEXIIHU]RQHDVLWZHUHEHWZHHQWKH µRWKHU¶ODQJXDJHDQGWKHRQHVKDUHGZLWKWKHZULWHU7KH\FDQEHIRXQGLQIRRWQRWHVEXWDUHPRUHRIWHQWDJJHG RQWRWKHTXRWHLWVHOI&RQVLGHUWKHVROXWLRQIRXQGE\6LU:DOWHU6FRWWLQ:DYHUOH\ :KHQUHTXHVWHGWR JLYHKLVRSLQLRQRQWKHRXWFRPHRIWKH-DFRELWHXSULVLQJWKHSHGDQWLF%DURQRI%UDGZDUGLQHFDOOVXSRQWKH DXWKRULW\RID5RPDQKLVWRULDQ :K\\RXNQRZ7DFLWXVVDLWKµ,QUHEXVEHOOLFLVPD[LPHGRPLQDWXU)RUWXQD¶ZKLFKLV HTXLSRQGHUDWHZLWKRXURZQYHUQDFXODUDGDJHµ/XFNFDQPDLVWLQWKHPHOOHH¶ 6FRWW :HDUHIUHHWRHLWKHUVNLSRUVWRSWRUHDGWKH/DWLQVHQWHQFH%\WKHVDPHWRNHQDWUDQVODWLRQGRHVQRWUHTXLUH ELOLQJXDOFRPSHWHQFHEXWPDLQWDLQVDGRXEOHVWDQGDUGFOHDUO\WRWKHDGYDQWDJHRIWKHPRQROLQJXDOUHDGHU,W KDVEHHQDUJXHGDFFRUGLQJO\WKDWVLPLODUµFXVKLRQLQJ¶RIIRUHLJQZRUGVDQGH[SUHVVLRQVUHGXFHVWKHPWRPHUH H[RWLFVLJQVZLWKRXWTXHVWLRQLQJWKHSRZHUUHODWLRQVEHWZHHQUHSUHVHQWLQJDQGUHSUHVHQWHGFRGHV(VSHFLDOO\LQ WKHFRQWH[WRISRVWFRORQLDOZULWLQJSXEOLVKHGLQWKHODQJXDJHRIWKHIRUPHUFRORQL]HUVµWKHIRUFHIXOSUR[LPLW\ RIERWKLWHPVUHSUHVHQWVWKHIDLOXUHWRDFKLHYHFXOWXUDOV\PELRVLV¶=DEXV ,Q6FRWW¶VQRYHOV KRZHYHUZKLFKDUHFHUWDLQO\QRWGHYRLGRILPSHULDOLVWWHQGHQFLHVLQWKHLUWUHDWPHQWRI6FRWWLVK(QJOLVKDQG *DHOLF/DWLQTXRWHVVHUYHDQRWKHUSXUSRVH7KHYLYLGSRUWUD\DORI7UR\¶VGHFD\DQGIDOOLQ9LUJLO¶V$HQHLG SURYHVWREHDQHVVHQWLDOLQWHUWH[WIRU%UDGZDUGLQH¶VUHDGLQJRIWKH6FRWWLVKGHIHDWDW&XOORGHQµ7REHVXUH¶ KHFRQILGHVWR(GZDUG:DYHUOH\µZHPD\VD\ZLWK9LUJLOLXV0DUR)XLPXV7URHV>:HDUH7URMDQVQRORQJHU@ ²DQGWKHUH¶VWKHHQGRIDQDXOGVDQJ¶6FRWW ,WWKXVDSSHDUVWKDWDFFRPSDQ\LQJWUDQVODWLRQV WKRXJKHOXFLGDWLQJWKHUHIHUHQWLDOPHDQLQJRIDQXWWHUDQFHFDQQRWHQWLUHO\GRMXVWLFHWRLWVFXOWXUDO FRQQRWDWLRQV 6RPHWZHQWLHWKFHQWXU\ZULWLQJZDVWRSDURG\RUDEDQGRQDOWRJHWKHUWKLVSUDFWLFHRI



3DJH

GHFDQWLQJFRQWHQWIURPRQHODQJXDJHWRDQRWKHU0RGHUQLVWSRHWV76(OLRW(]UD3RXQG DQGQRYHOLVWV-DPHV -R\FH DOORZHGWKHPDMRU(XURSHDQODQJXDJHVWRSOD\IXOO\LQWHUDFWZLWKHDFKRWKHUZKLOHWKHLUDYDQWJDUGH FROOHDJXHVZHQWDVIDUDVWRZULWHOLQJXLVWLFDOO\K\EULGSRHPV)RUVWHU± 0RVWLIQRWDOORIWKHVH H[SHULPHQWVEHVSHDNDJURZLQJFRQVFLRXVQHVVRIODQJXDJHDVDPDWHULDOLQDQGRILWVHOIQRWPHUHO\DPRXOG IRUWKRXJKWVRUDWUDQVSDUHQWPHDQVRIOLWHUDU\UHSUHVHQWDWLRQ'+/DZUHQFH¶V:RPHQLQ/RYH LVDFDVH LQSRLQW:KHQ8UVXOD%UDQJZHQFDOOVWKHGRPLQDQWEHKDYLRXURIDPDOHFDWµDOXVWIRUEXOO\LQJ²DUHDO:LOOH ]XU0DFKW²VREDVHVRSHWW\¶5XSHUW%LUNLQREVHUYHV/DZUHQFH ,DJUHHWKDWWKH:LOOH]XU0DFKWLVDEDVHDQGSHWW\WKLQJ%XWZLWKWKH0LQRLWLVWKHGHVLUHWR EULQJWKLVIHPDOHFDWLQWRDSXUHVWDEOHHTXLOLEULXPDWUDQVFHQGHQWDQGDELGLQJUDSSRUWZLWKWKH VLQJOHPDOH:KHUHDVZLWKRXWKLPDV\RXVHHVKHLVDPHUHVWUD\DIOXII\VSRUDGLFELWRIFKDRV,W LVDYRORQWpGHSRXYRLULI\RXOLNHDZLOOWRDELOLW\WDNLQJSRXYRLUDVDYHUE %\MRLQLQJWUDQVODWLRQVWKDWKDYHVXFKDGLIIHUHQWULQJLQ(QJOLVK\HWDUHVXSSRVHGWRPHDQWKHVDPHLQ*HUPDQ DQGLQ)UHQFKODYRORQWpGHSRXYRLUEHLQJWKHHTXLYDOHQWRI1LHW]VFKH¶VGLH:LOOH]XU0DFKW %LUNLQ¶V FRPPHQWEHFRPHVWUXO\PHWDOLQJXLVWLFLQQDWXUH:KLOHWKHKDUVK*HUPDQVRXQGVVXJJHVWYLROHQFHWKH)UHQFK ODQJXDJHFRQILUPVLWVSHQFKDQWIRUUKHWRULFDOQLFHWLHVDV8UVXODVWUHVVHVLQKHUUHSO\µ6RSKLVWULHV¶ :KDWKDSSHQVWRPXOWLOLQJXDOLVPLQWUDQVODWLRQ"$FFRUGLQJWR+HQU\6FKRJWZKRFRPSDUHG:HVWHUQ WUDQVODWLRQVRIWKH5XVVLDQFODVVLFVµDVDUXOHRQO\WKHPDLQODQJXDJHRIWKHWH[WLVUHSODFHGWKHIRUHLJQ HOHPHQWVUHPDLQLQJXQFKDQJHG¶ $QWRLQH%HUPDQE RQWKHRWKHUKDQGFODLPVWKDWPRVW WUDQVODWRUVZLOOUDWKHUUHGXFHWKHLQWHUOLQJXDOWHQVLRQIRXQGLQWKHRULJLQDO$QDGGLWLRQDOFRPSOLFDWLRQDULVHV ZKHQWKHWDUJHWODQJXDJHDFWXDOO\LVWKHHPEHGGHGIRUHLJQODQJXDJHRIWKHVRXUFHWH[W,QKLV)UHQFKYHUVLRQRI 7KRPDV0DQQ¶V7KH0DJLF0RXQWDLQ'HU=DXEHUEHUJ DIDPRXVH[DPSOHRIWH[WXDOPXOWLOLQJXDOLVP 0DXULFH%HW]VXFFHVVIXOO\PDLQWDLQHGWKHGLVWLQFWLRQEHWZHHQWKHQDUUDWRU¶V+DQV&DVWRUS¶VDQG0DGDPH &KDXFKDW¶VYRLFHVLQVSLWHRIWKHIDFWWKDWWKHODWWHUWZRDOUHDG\VSRNH)UHQFKLQWKH*HUPDQWH[W%HUPDQ E± 6XFKIHDWVDUHUDUH8VXDOO\PXOWLOLQJXDOWH[WVXQGHUJRWKHIDWHRI/DZUHQFH¶VQRYHODV EHFRPHVFOHDUIURPDFXUVRU\ORRNDWWKH)UHQFKUHQGHULQJRIWKHTXRWHGSDVVDJHIURP:RPHQLQ/RYH /DZUHQFH -HVXLVG¶DFFRUGTXHODYRORQWpGHSXLVVDQFHHVWTXHOTXHFKRVHGHYLOHWGHPHVTXLQ0DLVDYHF 0LQRXF¶HVWOHGpVLUG¶DPHQHUFHWWHIHPHOOHDXQpTXLOLEUHVWDEOHHWSDUIDLWDXQUDSSRUW WUDQVFHQGDQWHWGXUDEOHDYHFOHPkOHFpOLEDWDLUH7DQGLVTXHVDQVOXLFRPPHYRXVYR\H]HOOHHVW XQVLPSOHIUDJPHQWpJDUpXQHSDUFHOOHpERXULIIpHHWVSRUDGLTXHGXFKDRV&¶HVWXQHYRORQWpGH SRXYRLUVLYRXVYRXOH]HQSUHQDQW©SRXYRLUªSRXUXQYHUEH $OOWUDFHVRIIRUHLJQQHVVKDYHEHHQFRQYHQLHQWO\HUDVHG*RQHLV1LHW]VFKH¶V*HUPDQDQGZLWKLWWKH SKLORVRSKLFDOJLVWRIWKHFRQYHUVDWLRQ0RUHRYHUWKHVW\OLVWLFRSSRVLWLRQEHWZHHQ)UHQFKDQG(QJOLVKLV QHXWUDOL]HGZHUHLWQRWIRUDIRRWQRWHPHQWLRQLQJWKDWWKHVHFRQGSRXYRLUILJXUHGLQ)UHQFKLQWKHRULJLQDOEXW VRGLGUDSSRUWDQGWKHHDUOLHUYRORQWpGHSRXYRLU )LQDOO\RQHHDVLO\VHHVZK\LQLQVWDQFHVZKHUHWKHXVHRI DQRWKHUODQJXDJHKDVSROLWLFDORYHUWRQHVDVLQ4XHEHFLWVFRQFHDOPHQWLQWUDQVODWLRQSDUWLFLSDWHVLQZKDW .DWK\0H]HLFDOOVDµVXEWOHVXEYHUVLRQ¶ RIWKHVRXUFHFXOWXUHE\GRZQSOD\LQJWKHV\PEROLFYDOXHRI WKHRULJLQDOPXOWLOLQJXDOLVP 6HHDOVR %$%(/72:(52),'(2/2*<$1'75$16/$7,210(7$3+252)75$16/$7,21 675$7(*,(62)75$16/$7,21

)XUWKHUUHDGLQJ $OHNVpHY$VKFURIW*ULIILWKVDQG7LIILQ%DVVQHWWE(OZHUW*DXYLQDQG*UXWPDQ*LHVH *UXWPDQ+RUQ.OHLQ/DWDXGDQG:KLWILHOG.UW|VL/\RQV0DUFK 3|FNO5H\HV6DUNRQDNDQG+RGJVRQ

5$,1,(5*5870$1



3DJH

1 1RUPDWLYHPRGHO $VLWKDVEHHQFRQFHLYHGLQ:HVWHUQFXOWXUHWUDQVODWLRQWKHRU\LVQRUPDWLYH6LQFHLWVRULJLQVLQ&LFHUR¶V LQVWUXFWLRQVWRWKHRUDWRUDQG+RUDFH¶VLQVWUXFWLRQVWRWKHSRHW:HVWHUQWUDQVODWLRQWKHRU\KDVUHVWULFWLYHO\ FRQVLVWHGRILQVWUXFWLRQVWRVRPHRQHRQKRZWRWUDQVODWH&,&(52VHH/$7,175$',7,21 DQG+RUDFHWHOO WKHLUUHDGHUVQRWWRUHZRUNIRUHLJQWH[WVLQ/DWLQZRUGIRUZRUGOLNHVODYLVKWUDQVODWRUVEXWIUHHO\OLNHDQ RUDWRUDV&LFHURVD\V RUOLNHVRPHRQHFODLPLQJSULYDWHSURSHUW\LQSXEOLFJURXQGDV+RUDFHVD\V 7UDQVODWRUVLQWKRVHGD\VZHUHWKRXJKWRIDVEOLQGOLWHUDOLVWVDQGERWK&LFHURDQG+RUDFHZDQWHGWRZDUQ SHRSOHWUDQVODWLQJRUDWLRQVRUOLWHUDU\ZRUNVIURP*UHHNLQWR/DWLQDJDLQVWDFWLQJOLNHWUDQVODWRUV²QRWLQRWKHU ZRUGVWRREH\WKHLPSOLFLWWUDQVODWLRQQRUPEXWWRGHYHORSDQHZIUHHUPRUHFUHDWLYHQRUP 7KHVHLQVWUXFWLRQVZHUHSLFNHGXSE\-(520(VHH/$7,175$',7,21 LQKLVOHWWHUWR3DPPDFKLXV$' DQGIXUWKHUDUWLFXODWHGZKHUH&LFHURDQG+RUDFHKDGXUJHGIUHH,0,7$7,21UDWKHUWKDQZRUGIRUZRUG WUDQVODWLRQ-HURPHFRLQHGWKHREYLRXVSRODURSSRVLWHWRZRUGIRUZRUGVHQVHIRUVHQVHWUDQVODWLRQVHH)5(( 75$16/$7,21 DQGDUJXHGVWUHQXRXVO\IRULWVDSSURSULDWHQHVVLHQRUPDWLYHQHVV H[FHSWLQWKHFDVHRI 6FULSWXUHµZKHUHHYHQWKHZRUGRUGHUKROGVDP\VWHU\¶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¶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



3DJH

EHFRPHVWKHLPSOLFLWQRUPZKHWKHUEHFDXVHWKHWKHRULVWVKDYHDFFHSWHGSDVWQRUPVIRUKRZWUDQVODWLRQRXJKW WRSURFHHGDQGWUDQVIRUPHGWKHPLQWRPRGHOVWKDWRQO\VHHPGHVFULSWLYHRUEHFDXVHWKH\KDYHLQWURVSHFWLYHO\ WUDFHGKRZWKH\DFWXDOO\WUDQVODWHWKHPVHOYHVDQGWUDQVIRUPHGWKDWLQWRµWKH¶PRGHOIRUDOOWUDQVODWLRQ 6RPHV\VWHPVPRGHOVSHUKDSVWKHEHVWNQRZQDUHOLQJXLVWLFDQGF\EHUQHWLFDLPLQJDWWKHFUHDWLRQRID ZRUNLQJPDFKLQHWUDQVODWRUWKH\WHQGWREXLOGWKHLUPRGHOVE\LGHDOL]LQJWKHVHQVHIRUVHQVHWUDQVODWLRQRIVR FDOOHGRUGLQDU\ODQJXDJHWH[WVLHQRSRHWU\QRWKLQJPHWDSKRULFDORURWKHUZLVHGHYLDQWRUGLIILFXOWWR WUDQVODWH OLNHZHDWKHUUHSRUWV$VDUHVXOWVHQVHIRUVHQVHWUDQVODWLRQRIVXFKWH[WVEHFRPHVWKHLULPSOLFLW QRUPDQLPSOLFDWLRQWKDWEHFRPHVHYLGHQWZKHQSUHHGLWLQJRUZULWLQJ6/WH[WVVSHFLILFDOO\IRUWKHFRPSXWHU EHFRPHVQHFHVVDU\DQGLWDOPRVWDOZD\VGRHV %HFDXVHWKHFRPSXWHUFDQRQO\SURFHVVDFHUWDLQNLQGRI GLVDPELJXDWHGSURVHWKHSHRSOHZKRFUHDWHWH[WVWREHWUDQVODWHGPHFKDQLFDOO\DUHWUDLQHGWRZULWHRUHGLW WKHPIRUWKHFRPSXWHUWRPDNHWKHLUZULWLQJFRQIRUPWRDVHWRIFRQYHQWLRQVGHYHORSHGIURPQRUPDWLYH KXPDQWUDQVODWLRQIRUQRUPDWLYHFRPSXWHUWUDQVODWLRQ 2WKHUV\VWHPVPRGHOVOLNH5+%DWKJDWH¶V+DQV9HUPHHU¶VDQG-XVWD+RO]0lQWWlUL¶VDUHVRFLRORJLFDO UDWKHUWKDQF\EHUQHWLFDQGIRFXVRQWKHWRWDOVRFLDODFWRIWUDQVODWLRQLQFOXGLQJWKHVRFLDOVFHQHLQZKLFKWKH WUDQVODWLRQLVQHHGHGWKHFRPPLVVLRQZKRZDQWVLWGRQHDQGZK\DQGE\ZKHQDQGKRZPXFKWKH\ZLOOSD\ DQGKRZZKRFRQWDFWVWKHWUDQVODWRUDQGE\ZKDWFKDQQHOV²VHH6.23267+(25< WKHWUDQVODWRU¶V UHVHDUFKLQFOXGLQJWKHXVHRIUHIHUHQFHPDWHULDOVDQGSKRQHFDOOVWRH[SHUWV WKHDFWXDOSURGXFWLRQRID7/ WH[WLWVGLVVHPLQDWLRQDQGVRRQ2QFHDJDLQKRZHYHUWKHVHGHVFULSWLYHV\VWHPVDUHEDVHGRQLGHDOPRGHOV WKDWE\GHILQLWLRQUHJXODWHYDULDEOHVDQGWKXVH[FOXGHDJUHDWGHDORIDFWXDOWUDQVODWLRQSUDFWLFH²DQGWKLVLV DJDLQLPSOLFLWO\QRUPDWLYHDVLVSHUKDSVEHVWLOOXVWUDWHGZKHQWKHVHPRGHOVDUHWUDQVIRUPHGLQWRSHGDJRJLFDO SURJUDPPHV,IWKHV\VWHPVWKHRULVWGHWHUPLQHVWKDWWKHWRWDODFWRIWUDQVODWLRQLQLWVVRFLDOFRQWH[WSDVVHV WKURXJKWKHVWDJHVRIWH[WXDODQDO\VLVDQGUHVHDUFKWKHQDWUDQVODWRUWUDLQLQJSURJUDPPHEDVHGRQWKDWWKHRU\ ZLOOWHDFKDOORILWVVWXGHQWVWRGRWH[WXDODQDO\VLVDQGUHVHDUFKDQGDWUDQVODWRUZKRJUDGXDWHVIURPWKDW SURJUDPPHDQGWKHQGRHVQ¶WGRWH[WXDODQDO\VLVDQGUHVHDUFKZLOOVHHPWREHGHYLDWLQJIURPWKHQRUP 2QHRIWKHPRVWSRSXODUVFKRROVRIV\VWHPVRULHQWHGWUDQVODWLRQWKHRU\LQUHFHQWGHFDGHVKDVEHHQ 32/<6<67(07+(25<ZKLFKVHHNVWREUHDNDZD\IURPWKHQRUPDWLYHPRGHOE\VWXG\LQJWKHFRQIOLFWLQJ VRFLRLGHRORJLFDOV\VWHPVJRYHUQLQJWKHSURGXFWLRQDQGLQWHUSUHWDWLRQRIWH[WVLQWKH6/DQGWKH7/,Q FRQWUDVWZLWKWKHPRUHRYHUWO\QRUPDWLYHVWXG\RIWKHLGHRORJ\RIWUDQVODWLRQLQ5RPDQWLFDQGSRVW5RPDQWLF WKHRULHV²QRWDEO\LQWKHSDVWIHZ\HDUVWKRVHE\$QWRLQH%(50$1LQ)UDQFHVHH)5(1&+75$',7,21 /DZUHQFH9HQXWLDQG7HMDVZLQL1LUDQMDQD²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ƇWKDWLWLVUHGXFWLYHUHVWULFWLYHWKDWLWEORFNVWUDQVODWRUV¶DFFHVVWRPDQ\IUXLWIXOPRGHOVDQGDSSURDFKHV WKDWPLJKWEHXVHIXOLQDZLGHYDULHW\RIDFWXDOFDVHV ƇWKDWLWLVSDWHUQDOLVWLFEDVHGRQWKHDVVXPSWLRQWKDWWUDQVODWRUVGRQ¶WNQRZZKDWWKH\¶UHGRLQJDQGKDYH WREHWROGE\WKHRULVWV ƇWKDWLWVWUHVVHVWKHQHJDWLYHZKHUHWUDQVODWRUVZHQWZURQJJHQHUDWLQJUHYLHZVRIWUDQVODWLRQVWKDWPDLQO\ OLVWKRZOHUVDQGWUDQVODWLRQVHPLQDUVWKDWGHPRUDOL]HVWXGHQWVE\KDUSLQJRQWKHLUHUURUVUDWKHUWKDQ



3DJH

H[SORULQJWKHLQWHUSUHWLYHSURFHVVHVWKDWOHGVWXGHQWDQGSURIHVVLRQDO WUDQVODWRUVWRFKRRVHWKHZRUGVDQG SKUDVHVWKH\GLG 6WLOOWKHQRUPDWLYHPRGHOGRHVJRRQDQGHYHQWKRVHWUDQVODWRUVZKRGLVOLNHWKHRU\EHFDXVHRILWVSDWHUQDOLVP DQGQHJDWLYHQHVVFRQWLQXHWRFUDYHDGYLFHDQGLQVWUXFWLRQIURPQRUPDWLYHWKHRULVWV

)XUWKHUUHDGLQJ %DWKJDWH%HUPDQ+HUPDQV+ROPHV+RO]0lQWWlUL1LUDQMDQD9HQXWL 9HUPHHU

'28*/$652%,1621

1RUPV 7KHQRWLRQRIµQRUPV¶ZDVILUVWLQWURGXFHGE\WKH,VUDHOLVFKRODU*LGHRQ7RXU\LQWKHODWHVWRUHIHUWR UHJXODULWLHVRIWUDQVODWLRQEHKDYLRXUZLWKLQDVSHFLILFVRFLRFXOWXUDOVLWXDWLRQVHH7RXU\UHSULQWHGLQ 7RXU\D 7KHFRQFHSWSURYHGLQIOXHQWLDOGXULQJWKHVDQGVDQGKDVVXSSRUWHGWKHPRVWDFWLYH UHVHDUFKSURJUDPPHLQWUDQVODWLRQVWXGLHVWRGDWH0DQ\VWXGLHVEDVHGRQWKHLQYHVWLJDWLRQRIQRUPVKDYHEHHQ XQGHUWDNHQLQUHODWLYHO\UHFHQW\HDUVDUHSUHVHQWDWLYHVHOHFWLRQFDQEHIRXQGLQ7DUJHWWKHLQWHUQDWLRQDO MRXUQDOHGLWHGE\7RXU\DQGSXEOLVKHGVLQFHE\-RKQ%HQMDPLQV

+LVWRULFDODQGWKHRUHWLFDOEDFNJURXQG 7KHLPSHWXVIRU7RXU\¶VZRUNLQFOXGLQJKLVQRWLRQRIQRUPVFDPHIURPWKH32/<6<67(0DSSURDFK GHYHORSHGLQWKHHDUO\VE\KLVFROOHDJXH,WDPDU(YHQ=RKDU3ULRUWRWKHGHYHORSPHQWRIWKHSRO\V\VWHP DSSURDFKVWXG\LQJWUDQVODWLRQRIWHQFRQVLVWHGRIDQHYDOXDWLYHFRPSDULVRQRIVRXUFHDQGWDUJHWWH[WVLQ LVRODWLRQIURPERWKWKHVRXUFHDQGWDUJHWFRQWH[WVRIOLWHUDU\SURGXFWLRQ(YHQ=RKDU¶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¶VZRUNLQJHQHUDOZKLFKSUHSDUHG WKHJURXQGIRU7RXU\¶VFRQFHSWRIQRUPVDQGWKHUHVHDUFKPHWKRGRORJ\ZKLFKKHKDVVLQFHODXQFKHGXQGHUWKH XPEUHOODRIµ'HVFULSWLYH7UDQVODWLRQ6WXGLHV¶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µLQWHUVXEMHFWLYHO\WHVWDEOH¶7RXU\ 7RXU\¶VQRWLRQRIQRUPV SURYLGHVKLPZLWKDGHVFULSWLYHFDWHJRU\ZKLFKHQDEOHVKLPWRPDNHSUHFLVHO\VXFKQRQUDQGRPYHULILDEOH VWDWHPHQWVDERXWW\SHVRIWUDQVODWLRQEHKDYLRXU5DWKHUWKDQDWWHPSWLQJWRHYDOXDWHWUDQVODWLRQVWKHIRFXVKHUH LVRQLQYHVWLJDWLQJWKHHYDOXDWLYH\DUGVWLFNWKDWLVXVHGLQPDNLQJVWDWHPHQWVDERXWWUDQVODWLRQLQDJLYHQ VRFLRFXOWXUDOFRQWH[W

7KHQRWLRQRIQRUPV 7RXU\D SURSRVHGDWULSDUWLWHPRGHOLQZKLFKµQRUPV¶UHSUHVHQWDQ



3DJH

LQWHUPHGLDWHOHYHOEHWZHHQµFRPSHWHQFH¶DQGµSHUIRUPDQFH¶&RPSHWHQFHLVWKHOHYHORIGHVFULSWLRQZKLFK DOORZVWKHWKHRULVWWROLVWWKHLQYHQWRU\RIRSWLRQVWKDWDUHDYDLODEOHWRWUDQVODWRUVLQDJLYHQFRQWH[W 3HUIRUPDQFHFRQFHUQVWKHVXEVHWRIRSWLRQVWKDWWUDQVODWRUVDFWXDOO\VHOHFWLQUHDOOLIH$QGQRUPVLVDIXUWKHU VXEVHWRIVXFKRSWLRQVWKH\DUHWKHRSWLRQVWKDWWUDQVODWRUVLQDJLYHQVRFLRKLVWRULFDOFRQWH[WVHOHFWRQD UHJXODUEDVLV:KDW7RXU\KDVGRQHWKHQLVWRWDNHWKHGXDOLVPFRPPRQLQPDLQVWUHDPOLQJXLVWLFVDWWKHWLPH FRPSHWHQFHDQGSHUIRUPDQFHLQ1RDP&KRPVN\¶VWHUPVRUODQJXHDQGSDUROHLQ)HUGLQDQGGH6DXVVXUH¶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±± GLVFXVVHVWKUHHW\SHVRIWUDQVODWLRQDOQRUPVLQLWLDOQRUPVSUHOLPLQDU\ QRUPVDQGRSHUDWLRQDOQRUPV 7KHLQLWLDOQRUPLQWUDQVODWLRQLQYROYHVDEDVLFFKRLFHEHWZHHQDGKHULQJWRWKHQRUPVUHDOL]HGLQWKHVRXUFH WH[WZKLFKUHIOHFWWKHQRUPVRIWKHVRXUFHODQJXDJHDQGFXOWXUH DQGDGKHULQJWRWKHQRUPVSUHYDOHQWLQWKH WDUJHWFXOWXUHDQGODQJXDJH$GKHUHQFHWRVRXUFHQRUPVGHWHUPLQHVDWUDQVODWLRQ¶VDGHTXDF\ZLWKUHVSHFWWR WKHVRXUFHWH[WDGKHUHQFHWRQRUPVRULJLQDWLQJLQWKHWDUJHWFXOWXUHGHWHUPLQHVLWVDFFHSWDELOLW\ZLWKLQWKDW FXOWXUH&IWKHPRUHSROLWLFL]HGQRWLRQVRIIRUHLJQL]LQJDQGGRPHVWLFDWLQJVWUDWHJLHV675$7(*,(62) 75$16/$7,21 3UHOLPLQDU\QRUPVFRQFHUQWKHH[LVWHQFHDQGQDWXUHRIDWUDQVODWLRQSROLF\LQWHUPVRIWKHFKRLFHRIVRXUFH WH[WW\SHVLQGLYLGXDOVRXUFHWH[WVDXWKRUVVRXUFHODQJXDJHVHWF DQGWKHGLUHFWQHVVRIWUDQVODWLRQLHD SDUWLFXODUVRFLHW\¶VWROHUDQFHRULQWROHUDQFHWRZDUGVDWUDQVODWLRQEDVHGRQDWH[WLQDQLQWHUPHGLDWHODQJXDJH UDWKHUWKDQRQWKHVRXUFHODQJXDJHWH[W $QGILQDOO\RSHUDWLRQDOQRUPVFRQFHUQGHFLVLRQVPDGHGXULQJUDWKHUWKDQSULRUWRWKHDFWXDODFWRI WUDQVODWLRQ7RXU\GLVFXVVHVWZRW\SHVRIRSHUDWLRQDOQRUPVD PDWULFLDOQRUPVZKLFKKDYHWRGRZLWKWKH ZD\WH[WXDOPDWHULDOLVGLVWULEXWHGKRZPXFKRIWKHWH[WLVWUDQVODWHGDQGDQ\FKDQJHVLQVHJPHQWDWLRQIRU H[DPSOHDVDUHVXOWRIODUJHVFDOHRPLVVLRQVDQGE WH[WXDOOLQJXLVWLFQRUPVZKLFKFRQFHUQWKHVHOHFWLRQRI VSHFLILFWH[WXDOPDWHULDOWRIRUPXODWHWKHWDUJHWWH[WRUUHSODFHSDUWLFXODUVHJPHQWVRIWKHVRXUFHWH[W 7UDQVODWLRQDOQRUPVFDQEHLQYHVWLJDWHGXVLQJWZRPDLQVRXUFHVWH[WXDOVRXUFHVQDPHO\WKHWUDQVODWHGWH[WV WKHPVHOYHVDQGH[WUDWH[WXDOVRXUFHVLHWKHWKHRUHWLFDODQGFULWLFDOVWDWHPHQWVPDGHDERXWWUDQVODWLRQLQ JHQHUDORUDERXWVSHFLILFWUDQVODWLRQV

%H\RQG7RXU\¶VZRUN ,QUHFHQW\HDUVDQXPEHURIVFKRODUVKDYHDWWHPSWHGWRH[SORUHVRPHRIWKHWKHRUHWLFDODVSHFWVRIWKHQRWLRQRI QRUPVPDNLQJDGLVWLQFWLRQLQWKHILUVWLQVWDQFHEHWZHHQQRUPVDQGFRQYHQWLRQVDQGWKHQEHWZHHQFRQVWLWXWLYH DQGUHJXODWRU\QRUPV&KHVWHUPDQ+HUPDQVD1RUGE 7KHGLIIHUHQFH EHWZHHQQRUPVDQGFRQYHQWLRQVLVWKDWWKHODWWHUDUHQRWELQGLQJDQGRQO\H[SUHVVSUHIHUHQFHV,QWHUPVRIWKH GLVWLQFWLRQEHWZHHQFRQVWLWXWLYHDQGUHJXODWRU\QRUPVWKHIRUPHUFRQFHUQZKDWLVRULV



3DJH

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± ([SHFWDQF\QRUPVµDUH HVWDEOLVKHGE\WKHUHFHLYHUVRIWKHWUDQVODWLRQE\WKHLUH[SHFWDWLRQVRIZKDWDWUDQVODWLRQRIDJLYHQW\SH VKRXOGEHOLNHDQGZKDWDQDWLYHWH[WRIDJLYHQW\SH LQWKHWDUJHWODQJXDJHVKRXOGEHOLNH¶LELG ,Q DWWHPSWLQJWRFRQIRUPWRWKHH[SHFWDQF\QRUPVRSHUDWLQJLQDJLYHQFRPPXQLW\DWUDQVODWRUZLOO VLPXOWDQHRXVO\EHFRQIRUPLQJWRWKHSURIHVVLRQDOQRUPVRIWKDWFRPPXQLW\LELG 7KHFRQFHSWRIQRUPVXOWLPDWHO\JLYHVSULRULW\WRWKHWDUJHWWH[WUDWKHUWKDQWKHVRXUFHWH[WDQGKDVWKHUHIRUH HIIHFWLYHO\UHSODFHG(48,9$/(1&(DVWKHRSHUDWLYHWHUPLQWUDQVODWLRQVWXGLHV+HUPDQV 0RUH LPSRUWDQWO\WKHFRQFHSWRIQRUPVµDVVXPHVWKDWWKHSULPDU\REMHFWRIDQDO\VLVLQWUDQVODWLRQVWXGLHVLVQRWDQ LQGLYLGXDOWUDQVODWLRQEXWDFRKHUHQWFRUSXVRIWUDQVODWHGWH[WV¶%DNHU 7KLVSRVLWLRQKDVKDGIDU UHDFKLQJFRQVHTXHQFHVLQWHUPVRISURYLGLQJDQH[SOLFLWGHILQLWLRQRIWKHREMHFWRIVWXG\LQWKHGLVFLSOLQHDQG SURYLGLQJWKHEDVLVIRUDUHOHYDQWUHVHDUFKSURJUDPPH,WKDVDOVREHHQLQVWUXPHQWDOLQSUHSDULQJWKHJURXQG IRUFRUSXVEDVHGZRUNDSURPLVLQJGHYHORSPHQWZKLFKKROGVPXFKKRSHIRULQYHVWLJDWLQJ81,9(56$/62) 75$16/$7,21LQSDUWLFXODUVHH&25325$,175$16/$7,21678',(6

)XUWKHUUHDGLQJ %DNHU&KHVWHUPDQ+HUPDQVD/DPEHUWDQGYDQ*RUS7RXU\D

021$%$.(5



3DJH

3 3DUDSKUDVH ,QFRPPRQXVDJHDVDWHUPIRUORRVHUHZRUGLQJVD\LQJVRPHWKLQJLQ\RXURZQZRUGVSDUDSKUDVHLVEHVW NQRZQLQWUDQVODWLRQWKHRU\IURP-RKQ'5<'(1¶VSUHIDFHWRKLVWUDQVODWLRQRI2YLG¶V(SLVWOHVVHH %5,7,6+75$',7,21 KDYLQJSURPLVHGWRUHGXFHDOOWUDQVODWLRQWRWKUHHKHDGVDQGEHJXQZLWK 0(7$3+5$6(RUZRUGIRUZRUGWUDQVODWLRQKHPRYHVRQWRKLVVHFRQGKHDGµ7KHVHFRQGZD\LVWKDWRI SDUDSKUDVHRUWUDQVODWLRQZLWKODWLWXGHZKHUHWKHDXWKRULVNHSWLQYLHZE\WKHWUDQVODWRUVRDVQHYHUWREH ORVWEXWKLVZRUGVDUHQRWVRVWULFWO\IROORZHGDVKLVVHQVHDQGWKDWWRRLVDGPLWWHGWREHDPSOLILHGEXWQRW DOWHUHG¶7KHWKLUGKHDGLV,0,7$7,21 )RU'U\GHQPHWDSKUDVHDQGLPLWDWLRQZHUHµWKHWZRH[WUHPHVZKLFKRXJKWWREHDYRLGHG¶DQGSDUDSKUDVHWKH µPHDQEHWZL[WWKHP¶²WKHPRGHRIWUDQVODWLRQZKLFKDYRLGVWKHGDQJHUVRIERWKH[WUHPHVDQGFRPELQHVWKHLU YLUWXHVRIILGHOLW\WRWKHRULJLQDOPHWDSKUDVH DQG7/IOXHQF\LPLWDWLRQ ,QWKLVKHIROORZHGWKHRUWKRGR[ WUDGLWLRQRIWUDQVODWLRQWKHRU\VLQFH-(520(VHH/$7,175$',7,21 ZKRILUVWWKHRUL]HGVHQVHIRUVHQVH WUDQVODWLRQLQWKHPLGGOHJURXQGEHWZHHQ&LFHUR¶VH[WUHPHVVODYLVKILGHOLW\DQGWRRIUHHLPLWDWLRQVHH)5(( 75$16/$7,21 +HUHDUHVRPHRI'U\GHQ¶VUHPDUNVDERXWSDUDSKUDVH %XWVLQFHHYHU\ODQJXDJHLVVRIXOORILWVRZQSURSHUWLHVWKDWZKDWLVEHDXWLIXOLQRQHLVRIWHQ EDUEDURXVQD\VRPHWLPHVQRQVHQVHLQDQRWKHULWZRXOGEHXQUHDVRQDEOHWROLPLWDWUDQVODWRUWRWKH QDUURZFRPSDVVRIKLVDXWKRU¶VZRUGVµWLVHQRXJKLIKHFKRRVHRXWVRPHH[SUHVVLRQZKLFKGRHV QRWYLWLDWHWKHVHQVH,VXSSRVHKHPD\VWUHWFKKLVFKDLQWRVXFKDODWLWXGHEXWE\LQQRYDWLRQRI WKRXJKWVPHWKLQNVKHEUHDNVLW%\WKLVPHDQVWKHVSLULWRIDQDXWKRUPD\EHWUDQVIXVHGDQG\HW QRWORVW *LYHQWKHFXUUHQF\RISDUDSKUDVHLQRUGLQDU\(QJOLVKLWLVRIWHQXVHGLQWKHRUHWLFDOGLVFXVVLRQVRIWUDQVODWLRQ IRUORRVHRUIUHHUHQGHULQJVZLWKRXWVSHFLILFUHIHUHQFHWR'U\GHQ1RUGLG'U\GHQLQYHQWWKHWHUP,WZDVILUVW XVHGE\3KLOR-XGDHXVLQ'HYLWD0RVLV%& µ PHWDSKUD]RQWD@DQGZKROHSKUDVHV>SDUDSKUD]RQWD@DQGVXLWLQJWKHH[SUHVVLRQWRWKHRFFDVLRQ"¶ 7KHVHWZRWHUPVPHWDSKUDVHDQGSDUDSKUDVHDUHSLFNHGXSE\4XLQWLOLDQLQ,QVWLWXWHVRI2UDWRU\$'" IRU WZRGLVWLQFWDSSURDFKHVWRWKHSHGDJRJLFDOSUDFWLFHRILPLWDWLRQUHZRUNLQJFODVVLFWH[WVE\FKDQJLQJRQHZRUG DWDWLPHPHWDSKUDVH RURQHSKUDVHDWDWLPHSDUDSKUDVH DQGODWHUE\DORQJOLVWRI5HQDLVVDQFHDQG QHRFODVVLFDOSHGDJRJXHVDQGWUDQVODWLRQWKHRULVWV)DXVWR6HEDVWLDQRLQ'HOPRGRGHORWUDGXUUHG¶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



3DJH

$OHVVWHFKQLFDOXVHRIWKHWHUPµSDUDSKUDVH¶WKDWUHPDLQVLQDFFRUGZLWKLWV/DWLQGHILQLWLRQLVWRGHVFULEHD ZRUNWKDWLVQRWWUDQVODWHGGLUHFWO\IURPDIRUHLJQRULJLQDOEXWUHZRUGHGIURPDSUHYLRXVWUDQVODWLRQLQWKH VDPHODQJXDJHZKDWLVVRPHWLPHVFDOOHGDµYDULDWLRQ¶ 7KXVIRULQVWDQFHWKHDXWKRUVRI7KH/LYLQJ%LEOH GHVFULEHLWDVDµSDUDSKUDVH¶UDWKHUWKDQDWUDQVODWLRQ²ZKDWRQHPLJKWFDOODQLQWUDOLQJXDOSDUDSKUDVHDV RSSRVHGWRDQLQWHUOLQJXDOWUDQVODWLRQ%RWKXVDJHVGHULYHIURP4XLQWLOLDQ

)XUWKHUUHDGLQJ 6KDGG\*HRUJH6WHLQHU

'28*/$652%,1621

3RHWLFVRIWUDQVODWLRQ 'HULYHGIURP$ULVWRWOH¶V3RHWLFVWKHµSRHWLFVRIWUDQVODWLRQ¶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¶Vµ3UHIDFHWR2YLG¶V(SLVWOHV¶ DQG$OH[DQGHU3RSH¶V µ3UHIDFHWRWKH,OLDGRI+RPHU¶ WKURXJK$)7<7/(5¶V(VVD\RQWKH3ULQFLSOHVRI7UDQVODWLRQ VHH%5,7,6+75$',7,21 0DWWKHZ$UQROG¶Vµ2Q7UDQVODWLQJ+RPHU¶ WRPRUHPRGHUQDSSURDFKHV VXFKDV3DXO6HOYHU¶V7KH$UWRI7UDQVODWLQJ3RHWU\ DQG&'D\/HZLV¶2Q7UDQVODWLQJ3RHWU\ 6XPPDULHVRIWKHSRHWLFVRIWUDQVODWLRQLQWKH)UHQFK*HUPDQDQG(QJOLVKWUDGLWLRQVFDQEHIRXQGLQ +RUJXHOLQ /HIHYHUH DQG76WHLQHU UHVSHFWLYHO\:KLOHJUHDWO\DLGLQJRXUXQGHUVWDQGLQJ RIWKHWUDQVODWLRQSURFHVVWKHFRQWULEXWLRQRIWKHVHZULWHUVWRDSRHWLFVRIWUDQVODWLRQKDVEHHQIDUIURP FRPSUHKHQVLYH-DPHV+ROPHV¶µ7KH1DPHDQG1DWXUHRI7UDQVODWLRQ6WXGLHV¶ ZLGHO\DFFHSWHGDV WKHIRXQGLQJGRFXPHQWIRUWKHGLVFLSOLQHRIWUDQVODWLRQVWXGLHVDVSUDFWLVHGLQ3UDJXH%HOJLXP+ROODQGDQG ,VUDHOIRXQGDOOVXFKDSSURDFKHVIDLUO\QDUURZLQVFRSH 0RGHUQUHVHDUFKVXJJHVWVWKDWIHZWUDQVODWRUVDFWXDOO\IROORZSUHVFULSWLYHPRGHOVRIDQ\NLQG(YHQPRUH LPSRUWDQWLWKDVVKRZQWKDWWKHGLVWLQFWLRQEHWZHHQRULJLQDODQGWUDQVODWLRQLVQRWDVFOHDUFXWDVSUHVFULSWLYH PRGHOVWHQGWRDVVXPH:HQRZNQRZIRULQVWDQFHWKDWWUDQVODWLRQVRIWHQKLGHLQRWKHUOLWHUDU\WH[WVVXFKDV &KDXFHU¶V&DQWHUEXU\7DOHV WKDW36(8'275$16/$7,21IRUH[DPSOH+RUDFH



3DJH

:DOSROH¶V7KH&DVWOHRI2WUDQWR LVQRWXQFRPPRQWKDWLQGLUHFWWUDQVODWLRQLVPRUHSUHYDOHQWWKDQJHQHUDOO\ DVVXPHGIRUH[DPSOH/87+(5¶6²VHH*(50$175$',7,21²%LEOHLVEDVHGLQODUJHSDUWRQ (5$6086¶²YHUVLRQ²VHH'87&+75$',7,21 DQGWKDWYHUVLRQV(]UD3281'²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
$QLQYHQWRU\RISRHWLFGHYLFHV 7KHPRVWV\VWHPDWLFLQYHVWLJDWLRQRISRHWLFGHYLFHVLQODQJXDJHFDPHIURPVFKRODUVZRUNLQJLQWKHIRUPHU &]HFKRVORYDNLDDQGZKRZHUHZHOOYHUVHGLQ5XVVLDQ)RUPDOLVP5RPDQ-DNREVRQ-LĜt/(9éVHH&=(&+ 75$',7,21 )UDQWLãHN0LNRDQG$QWRQ32329,ýVHH6/29$.75$',7,21 7KH3UDJXHJURXSZDV OHVVLQWHUHVWHGLQDJHQHUDOOLWHUDU\WUDQVODWRUV¶SHUVSHFWLYHZKLFKRIWHQDVVXPHGDµSRHWLF¶LQWXLWLRQZLWK DFFHVVWRWKHVSLULWRIWKHRULJLQDODQGPRUHLQWHUHVWHGLQGHVFULELQJVXUIDFHVWUXFWXUHIHDWXUHVRIODQJXDJH HVSHFLDOO\WKRVHWKDWGHWHUPLQHGDWH[W¶VOLWHUDU\VWDWXV7KH\ZHUHSDUWLFXODUO\LQWHUHVWHGLQHVWDEOLVKLQJWKH PDQQHULQZKLFKWKHPHVDQGLGHDVZHUHH[SUHVVHGLQWH[WV7KHLUIRUPDODSSURDFKDQDO\VHGWKHLQWULQVLFDQG H[WULQVLFHOHPHQWVWKDWPDGHFHUWDLQOLWHUDU\WH[WVXQLTXHLQWKHVHQVHRIEHLQJGLIIHUHQWIURPWH[WVDOUHDG\ H[LVWLQJLQDOLWHUDU\WUDGLWLRQ%RUURZLQJWKHFRQFHSWRIWKHRVWUDQHQLHRUµGHIDPLOLDUL]DWLRQ¶GHYLFHIURP 5XVVLDQ)RUPDOLVP6KNORYVNLLWUDQV -DNREVRQDQGKLVFROOHDJXHVHPEDUNHGRQWKHPDPPRWK WDVNRILVRODWLQJDQGFDWDORJXLQJLQDYDULHW\RIODQJXDJHVWKHVSHFLILFIRUPDOIHDWXUHVWKDWGLVWLQJXLVKOLWHUDU\ H[SUHVVLRQVIURPQRUPDORQHV-DNREVRQ±/HYê0LNR3RSRYLþ 0LNRDQG3RSRYLþ )UDQWLãHN0LNR¶VDUWLFOHµ/DWKpRULHGH¶H[SUHVVLRQHWODWUDGXFWLRQ¶LVDJRRGH[DPSOHRIWKHNLQGRI UHVHDUFKFRQGXFWHGE\WKLVJURXS0LNRDWWHPSWVLQWKLVDUWLFOHWRUHODWHWKHIRUPDOIHDWXUHVRIWKHVW\OHRID SDUWLFXODUWH[WWRVLPLODUWHFKQLTXHVXVHGLQDQRWKHUOLWHUDU\WUDGLWLRQ+HVXJJHVWVWKDWKRZHYHUHPRWLRQDORU LUUDWLRQDOVXEMHFWLYHTXDOLWLHVSHUFHLYHGRQWKHEDVLVRILQWXLWLRQLQFOXGLQJVXEWOHGHYLFHVVXFKDVZRUGSOD\ DQGLURQ\FDQEHGHWHUPLQHGE\UHIHUHQFHWRWKHIRUPDOSDWWHUQLQJRIWKHWH[W$OWKRXJKDZDUHRIWKHHQRUPLW\ RIWKHWDVNDQGWKHVXEWOHW\RIWKHQXDQFHV0LNR¶VUHVHDUFKSURFHHGHGIDUHQRXJKWRJHQHUDWHDQGGHVFULEH IRUPDOO\ PDQ\HOXVLYHFDWHJRULHVVXFKDVDPELJXLW\GLVHTXLOLEULXPLUUDWLRQDOLW\DQGVWUHDPRI FRQVFLRXVQHVV+HDOVRPDGHFRQQHFWLRQVEHWZHHQIHDWXUHVFRPPRQWRERWKOLWHUDU\WH[WVZKLFK0LNR QDUURZO\GHILQHVDVµJUHDWZRUNV¶DQGRWKHUIRUPVRIGLVFRXUVHVXFKDVMRXUQDOLVPVSHHFKHVDQGSRSXODU ILFWLRQ:KLOHPDNLQJFURVVFXOWXUDOJHQHUDOL]DWLRQVDERXWWKHSRHWLFVRIWUDQVODWLRQ0LNRDOVRPDLQWDLQHGWKDW H[SUHVVLYHIHDWXUHVZHUHDOZD\V



3DJH

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¶KXOVW YDQ%UDJW 9DQGHUDXZHUD DQG+H\OHQ VXJJHVWWKDWSRHWLFHIIHFWVVXFKDVLURQ\SRO\YDOHQFHDQGKXPRXUDUHFORVHO\UHODWHGWRWKHSRHWLFDQG WUDQVODWLRQQRUPVRIWKHUHFHLYLQJFXOWXUH7KH\DOVRVXJJHVWWKDWDUDQJHRIH[WUDOLWHUDU\IDFWRUV²HFRQRPLF SUDJPDWLFDQGDXGLHQFHUHODWHG²PXVWEHWDNHQLQWRFRQVLGHUDWLRQEHIRUHDQ\VWDWHPHQWVRQWKHµSRHWLFVRI WUDQVODWLRQ¶FDQEHPDGH

7KHUROHRIWKHOLWHUDU\V\VWHPLQWKHODUJHUVRFLDOV\VWHP 32/<6<67(07+(25<DVRXWOLQHGE\WZR,VUDHOLVFKRODUV,WDPDU(YHQ=RKDUE DQG*LGHRQ 7RXU\D KDVSURYHGSDUWLFXODUO\KHOSIXOWRWUDQVODWLRQVFKRODUVLQWKHLUDWWHPSWWRDQDO\VHWKH LQIOXHQFHRIH[WUDOLWHUDU\IDFWRUVRQWKHSRHWLFGHFLVLRQVRIWKHLQGLYLGXDOWUDQVODWRU7KHWHUPSRO\V\VWHP UHIHUVWRWKHDJJUHJDWHRIOLWHUDU\IRUPVIURPLQQRYDWLYHYHUVHWRFKLOGUHQ¶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¶VZRUNRQWKHHPHUJLQJSRHWLFVRIWKHWKHQ µZHDN¶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± $VHWRIGRPLQDQWSRHWLFV PD\VHHPWRSRVLWWKHPVHOYHVDVDEVROXWHDWDFHUWDLQWLPHEXWWKHSRHWLFVRIDQ\JLYHQFXOWXUHFRQWLQXH HYROYLQJWKURXJKKLVWRU\7KHLQYHQWRULHVRIFRPSRQHQWVJRRQFKDQJLQJDQGUHVHDUFKKDVVKRZQWKDW WUDQVODWLRQVSOD\DPDMRUUROHLQWKHVWUXJJOHWRFKDQJHOLWHUDU\V\VWHPV(YHQLQFRXQWULHVZLWKORQJOLWHUDU\ WUDGLWLRQVWUDQVODWLRQVFDQLQWURGXFHQHZOLWHUDU\GHYLFHVLQWRH[LVWLQJLQYHQWRULHV(]UD3RXQGERUURZHG KHDYLO\IURP&KLQHVHLGHRJUDPVDQG-DSDQHVHKDLNXWRFKDQJHDV\VWHPKHIHOWRYHUEXUGHQHGZLWKRXWZRUQ PHWULFDOUK\WKPVDQGRUQDPHQWVDQG)HQJ&KLDOVRLQWURGXFHGWKHVRQQHWIRUPLQWRWKH&KLQHVHV\VWHPYLD WUDQVODWLRQV-RKDQ+HLQULFK9RVVLQWURGXFHGWKHKH[DPHWHULQWRWKH*HUPDQSRHWLFV\VWHPWKURXJKKLV WUDQVODWLRQRI+RPHUDQG$XJXVW:LOKHOP6&+/(*(/VHH*(50$175$',7,21 LPSRUWHGWKHYHUVHRI :LOOLDP6KDNHVSHDUHWRFKDOOHQJHWKHDXWKRULW\RI)UHQFKPRGHOV 5HVHDUFKRQWKHVXEYHUVLYHQDWXUHRIWUDQVODWLRQLVJDLQLQJPRPHQWXPLQWKHILHOGDQGLV



3DJH

ODUJHO\OHGE\DJURXSRI$QJOR$PHULFDQVFKRODUVDWWUDFWHGWRLQVLJKWVJDLQHGE\WUDQVODWRUVRISRVWVWUXFWXUDO WH[WVµ7KH7DVNRIWKH7UDQVODWRU¶:DOWHU%HQMDPLQ¶VHVVD\WKDWFDOOVIRUUDGLFDOOLWHUDOLVPVHUYHVDVD VSULQJERDUGIRUDYDULHW\RIRIWHQLQWHUGLVFLSOLQDU\HVSHFLDOO\SKLORVRSKLFDODQGSROLWLFDO LQYHVWLJDWLRQVVHH 385(/$1*8$*( 9HQXWLDQGD ERUURZVWKHWHUPDEXVLYHILGHOLW\IURP/HZLV WRVKRZ KRZWUDQVODWLRQVDUHGRXEO\DEXVLYHUHFRQVWUXFWLQJWKHVRXUFHWH[WDQGUHVLVWLQJWKHGRPLQDQWFXOWXUDOYDOXHV LQWKHWDUJHWODQJXDJH6X]DQQH-LOO/HYLQH VHHVWUDQVODWLRQLQ-RUJHV/XLV%RUJHV¶WHUPVWKDWLV DVDQRWKHUIRUPRISDURG\RQHWKDWWZLVWVZRUGVDQGUHYHDOVWKHXQVWDEOHQDWXUHRIODQJXDJH1HYHUWKHOHVV H[DPSOHVRIVXFFHVVIXOVXEYHUVLRQUHPDLQWKHH[FHSWLRQUDWKHUWKDQWKHUXOH0RVW(XURSHDQVFKRODUVDUJXH WKDWSRHWLFV\VWHPVDUHFRQVWUXFWHGWRYDOXHDQGLQYRNHHVWDEOLVKHGQRUPVDJDLQVWLPSRUWHGRQHVVHH 675$7(*,(62)75$16/$7,21 ,QWKHSUHIDFHWRKLVVRQ¶VWUDQVODWLRQVIURP6KDNHVSHDUH9LFWRU+XJR VXJJHVWVWKDWPHPEHUVRIDQDWLRQJHQHUDOO\SHUFHLYHWUDQVODWLRQDVDQDFWRIYLROHQFHDJDLQVWDOUHDG\ HVWDEOLVKHGSRHWLFFRQYHQWLRQVLLL±LY 7KH,VODPLFTDVLGDKDUJXHV/HIHYHUHKDVQRWIRXQGDVORWLQ (XUR$PHULFDQSRHWLFV\VWHPVEHFDXVHOLWHUDU\FULWLFVYLHZWKHSRHWLFVRIVRXUFHFXOWXUHVDVLQIHULRUDQ HYDOXDWLRQORDGHGZLWK:HVWHUQSUHMXGLFHD± 7RXU\ VHHPVHVSHFLDOO\LQVLVWHQWRQDUJXLQJ WKDWOLWHUDU\WUDQVODWLRQVWHQGWRFRQIRUPWRWKHWDUJHWFXOWXUH¶VSRHWLFVUDWKHUWKDQLQWURGXFHQHZDQG HVWUDQJLQJHOHPHQWVDQGLVSUHSDUHGWRRIIHUµODZV¶WRWKDWHIIHFWVHH81,9(56$/62)75$16/$7,21 :KLOHVRPHGHVFULSWLYHVFKRODUVVXFKDVYDQ/HXYHQ=ZDUW DUJXHWKDWPRUHGHVFULSWLYHZRUN QHHGVWREHGRQHEHIRUHEUDQFKLQJWRRIDURXWLQWRFXOWXUDOVWXGLHVDQGWKHRU\LWLVEHFRPLQJLQFUHDVLQJO\ GLIILFXOWWRGLYRUFHWKHVWXG\RIWKHSRHWLFVRIWUDQVODWLRQIURPH[WUDOLWHUDU\IDFWRUV6QHOO+RUQE\ %DVVQHWWDQG/HIHYHUH/HIHYHUHF )URPµLQVLGH¶DGLVFRXUVHRUV\VWHPRISRHWLFVFHUWDLQWKHPHV JHQUHVDQGVW\OLVWLFGHYLFHVDSSHDUWRWUDQVFHQGERWKWLPHDQGFXOWXUDOERXQGDULHV <6<67(07+(25<

)XUWKHUUHDGLQJ %DVVQHWW(YHQ=RKDUE*HQW]OHU+HUPDQV+ROPHV/HIHYHUHDF7RXU\ D9HQXWLD

(':,1*(17=/(5

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¶V 5XEDL\DWRI2PDU.KD\\DP DQG3RXQG¶V&DQWRV± DUHREYLRXVH[DPSOHV7KHYLHZVRQWKH VXEMHFWDUHPDQ\DQGYDULHGRIWHQDQHFGRWDODQGSHUKDSVXQDYRLGDEO\VXEMHFWLYH5REHUW)URVW¶VGHILQLWLRQRI SRHWU\DVµWKDWZKLFKLVORVWLQWUDQVODWLRQ¶LVRIWHQTXRWHGLQWKHOLWHUDWXUHWRKLJKOLJKWWKHGLIILFXOW\RIWKHWDVN \HWGLVFXVVLRQVRIWKHDFWXDOSURFHVVRIWUDQVODWLQJDQGDWWHPSWVWRGHILQHWKHSDUWLFXODUSUREOHPV



3DJH

LQYROYHGDQGWKHVWUDWHJLHVIRUGHDOLQJZLWKWKHVHDUHUHODWLYHO\IHZ

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µPXVLFDOPRGH¶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µZKDWDQ (QJOLVKRQO\UHDGHUZDQWVLVDJRRGSRHPLQ(QJOLVK¶*DOODJKHU 6LPLODUO\LWLVRIWHQVXJJHVWHG WKDWXQOLNHRWKHUIRUPVRIOLWHUDU\WUDQVODWLRQWKHWUDQVODWLRQRISRHWU\PXVWVWDQGRQLWVRZQDVDSRHWLFWH[W WRDODUJHH[WHQWXQVXSSRUWHGE\JORVVHVRUFRPPHQWDU\ZKHWKHUWKH\WDNHWKHIRUPRIIRRWQRWHVRUDUH HPERGLHGLQWKHWH[W+RZHYHU1DERNRYDILUPEHOLHYHULQWKHLPSRVVLELOLW\RISRHWLFDOWUDQVODWLRQZRXOG GLVDJUHHµ,ZDQWWUDQVODWLRQVZLWKFRSLRXVIRRWQRWHVIRRWQRWHVUHDFKLQJXSOLNHVN\VFUDSHUVWRWKHWRSRIWKLV RUWKDWSDJHVRDVWROHDYHRQO\WKHJOHDPRIRQHWH[WXDOOLQHEHWZHHQFRPPHQWDU\DQGHWHUQLW\¶1DERNRY 7KHRIWHQLQVXUPRXQWDEOHGLIILFXOWLHVLQYROYHGKDYHOHGPDQ\OLNH1DERNRYWRWKHFRQFOXVLRQWKDWSRHWU\FDQ RQO\EHUHQGHUHGOLWHUDOO\$VLPLODUYLHZLVDWWULEXWHGWR5REHUW%URZQLQJLQ6HOYHU QDPHO\WKDW SRHWU\WUDQVODWLRQµRXJKWWREHDEVROXWHO\OLWHUDOZLWK>WKH@H[DFWUHQGHULQJRI>WKH@ZRUGVDQGWKHZRUGV SODFHGLQWKHRUGHURIWKHRULJLQDO2QO\DUHQGHULQJRIWKLVVRUWJLYHVDQ\UHDOLQVLJKWLQWRWKHRULJLQDO¶5RPDQ -DNREVRQ¶VUHVROXWHEHOLHIWKDWSRHWU\LVE\GHILQLWLRQXQWUDQVODWDEOHOHGWRWKHVRPHZKDWGLIIHUHQW PHWKRGRORJLFDODSSURDFKWKDWRQO\µFUHDWLYHWUDQVSRVLWLRQ¶UDWKHUWKDQWUDQVODWLRQLVSRVVLEOHZKHUHSRHWLFDUW LVFRQFHUQHG 6KHOOH\WRREHOLHYHGHVVHQWLDOO\LQWKHLPSRVVLELOLW\RISRHWLFDOWUDQVODWLRQDQG\HW KHSURGXFHGVHYHUDOYHUVHWUDQVODWLRQVIURP*UHHN/DWLQ6SDQLVKDQG,WDOLDQSRHWU\DQGLVDJRRG UHSUHVHQWDWLYHRIHDUO\ZULWHUVRQWKHVXEMHFWZKRWHQGHGWRHPSKDVL]HWKHIXWLOLW\RIWKHXQGHUWDNLQJZKLOVW XQGHUWDNLQJLWQRQHWKHOHVV$FRQWHPSRUDU\WUDQVODWRU:LOOLDP7UDVNSHUKDSVVXPVXSWKLVDWWLWXGH VXFFLQFWO\ZKHQKHVD\VµLPSRVVLEOHRIFRXUVHWKDW¶VZK\,GRLW¶LQ+RQLJ 7KHYLHZWKDWLWLVLPSRVVLEOHWRWUDQVODWHSRHWU\UHFRJQL]HVWKDWLWLVLPSRVVLEOHWRDFFRXQWIRUDOOWKHIDFWRUV LQYROYHGDQGWRFRQYH\DOOWKHIHDWXUHVRIWKHRULJLQDOLQDODQJXDJHDQGIRUPDFFHSWDEOHWRWKHWDUJHWODQJXDJH FXOWXUHDQGWUDGLWLRQ+RZHYHUIURPWKLVVREHULQJDFFHSWDQFHRIWKHGLIILFXOW\LQYROYHGDQGRIWKHHQRUPLW\RI WKHWDVNFRPHVDVHDUFKIRUVWUDWHJLHVZKHUHE\DVPXFKDVSRVVLEOHRIWKHRULJLQDOSRHWU\PD\EHVDYHGLQWKH WUDQVODWLRQ

$SSURDFKHVSUDJPDWLFDQGWKHRUHWLFDO $SSURDFKHVWRWKHSUREOHPVLQYROYHGLQWUDQVODWLQJSRHWU\IDOOLQWRWZREDVLFFDWHJRULHVWKHSUDJPDWLFDQGWKH WKHRUHWLFDO7KHSUDJPDWLFDSSURDFKLVIDYRXUHGE\PRVWSUDFWLVLQJWUDQVODWRUVZKLOHWKHRUHWLFDOPRGHOVRIWKH SURFHVVDUHPDLQO\WKHZRUNRIOLQJXLVWV $W\SLFDOH[DPSOHRIWKHSUDJPDWLFDSSURDFKLVWKHYLHZH[SUHVVHGE\:60HUZLQLQ:HLVVERUW µ,FRQWLQXHLQWKHEHOLHI\RXNQRZWKDW,GRQ¶WNQRZKRZWRWUDQVODWHDQGWKDWQRERG\GRHV,WLVDQ LPSRVVLEOHEXWQHFHVVDU\SURFHVVWKHUHLVQRSHUIHFWZD\WRGRLWDQGPXFKRILWPXVWEHIRXQGIRUHDFK SDUWLFXODUSRHPDVZHJR¶



3DJH

7KHUHLVLQIDFWDQRWLFHDEOHUHWLFHQFHRQWKHSDUWRISUDFWLVLQJWUDQVODWRUVWRZDUGVDWWHPSWVE\OLQJXLVWVWR SURYLGHDIRUPDOEDVLVIRUZKDWKDVWUDGLWLRQDOO\EHHQFRQVLGHUHGDKLJKO\VXEMHFWLYHDQGDGKRFDFWLYLW\)RU H[DPSOH3HWHU-D\LQ:HLVVERUW ZULWHVµ,¶YHQRW\HWFRPHDFURVVDQ\WKHRUHWLFDOSUHFHSWWKDW¶V KHOSHGPHPDNHDOLQHRIDQ\WUDQVODWLRQULQJWUXH¶3UDFWLVLQJWUDQVODWRUVWHQGWRZULWHRIWKHVSHFLILFSUREOHPV WKH\HQFRXQWHULQWUDQVODWLQJDSDUWLFXODUSRHWDQGRIWKHVROXWLRQVWKH\IRXQG²RIWHQLQWKHIRUPRIDQDSRORJ\ IRUWKHWUDQVODWLRQ²RUUHIOHFWRQWKHYDULRXVVWDJHVWKH\SDVVWKURXJKLQWKHSURFHVVDVLQ%O\ 7UDQVODWRUVKRZHYHUUDUHO\NHHSQRWHVDERXWWKHSURFHVVRIWUDQVODWLQJRUDQ\UHFRUGRIWKHFKRLFHVPDGHLQ WKHSURFHVV(YHQLIWUDQVODWRUVFRXOGSURYLGHGHVFULSWLRQVRIVROXWLRQVDQGVWUDWHJLHVWKH\KDYHHPSOR\HGLQ GHDOLQJZLWKVSHFLILFWUDQVODWLRQSUREOHPVWKHTXHVWLRQUHPDLQVZKHWKHUDQH[DPLQDWLRQRIDVNLOOHG WUDQVODWRU¶VSHUVRQDOH[SHULHQFHFDQSURYLGHIRUPDOVWUDWHJLHVDQGKHQFHEHRISUDFWLFDOYDOXHWRRWKHU WUDQVODWRUV:KDWLVVWUHVVHGFRQWLQXDOO\E\SUDFWLVLQJWUDQVODWRUVRYHUDQGDERYHDQ\SDUWLFXODUDSSURDFKRU PHWKRGRORJ\LVWKHQHHGIRUFRQVWDQWUHZRUNLQJDQGUHDVVHVVPHQWRIWKHWUDQVODWHGWH[WLQDQDWWHPSWWRPDNH LWFRUUHVSRQGWRWKHRULJLQDOSRHWLFWH[WRQDOOOHYHOVRUUDWKHURQDVPDQ\OHYHOVDVSRVVLEOH +RZHYHUDOWKRXJKVNLOOHGWUDQVODWRUV¶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±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µ&HUWDLQO\WKHYHU\XQHYHQ TXDOLW\RIPXFKWUDQVODWHGSRHWU\VXJJHVWVWKHSUHVVLQJQHHGIRUPRUHGHILQLWHDQGUHJXODUSURFHGXUHV¶

7KHQDWXUHRIWKHWDVN $Q\WUDQVODWLRQRIDSRHPZLOOUHTXLUHDWWHQWLRQWRHDFKRIWKHYDULRXVOHYHOVRQZKLFKDSRHPIXQFWLRQV2Q WKHVHPDQWLFOHYHOD



3DJH

SRHPFDUULHVVRPHPHVVDJHRUVWDWHPHQWDERXWWKHUHDOZRUOGRUWKHDXWKRU¶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¶VLQWHQGHGPHDQLQJLHKRZWKHWUDQVODWRUEHOLHYHVWKH DXWKRUZRXOGKDYHH[SUHVVHGKLPKHUVHOIKDGKHRUVKHEHHQZULWLQJLQWKHWDUJHWODQJXDJH/HIHYHUH *DOODJKHU +RZHYHUWKHDXWKRU¶VLQWHQWLRQLVUDUHO\REYLRXVRULQIHUDEOHZLWKDQ\JUHDW GHJUHHRIFHUWDLQW\DQGWKHUHLVQRUHDVRQWRVXSSRVHWKDWWKHWUDQVODWRUKDVSULYLOHJHGDFFHVVWRLW2QHPLJKW VXSSRVHWKDWVHPDQWLFSUREOHPVRILQWHUSUHWDWLRQFRXOGEHGHDOWZLWKE\VLPSO\FRQVXOWLQJWKHSRHWLIKHRUVKH LVVWLOODOLYHEXWDV6RFUDWHVUHODWHVLQ7KH$SRORJ\UHDGHUVDUHRIWHQPRUHLQIRUPHGWKDQDXWKRUVDQGWKH PHDQLQJRIDSRHPOLHVQRWZLWKWKHDXWKRUEXWZLWKLQWKHWH[WLWVHOIDQGWKHUHDGHU¶VLQWHUSUHWDWLRQRILW $WKRURXJKVW\OLVWLFDQDO\VLVRIWKHWH[WLVDSUHUHTXLVLWHLQSRHWU\WUDQVODWLRQ6W\OHLVRQHRIWKHIHDWXUHVWKDW GLVWLQJXLVKHVOLWHUDU\WUDQVODWLRQ²DQGLQSDUWLFXODUSRHWLFWUDQVODWLRQ²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µWRDWWHPSW«DWUDQVODWLRQRIDO\ULFSRHPLQWRSURVHLVWKHPRVWDEVXUGRIDOOXQGHUWDNLQJVIRUWKRVHYHU\ FKDUDFWHUVRIWKHRULJLQDOZKLFKDUHHVVHQWLDOWRLWDQGZKLFKFRQVWLWXWHLWVKLJKHVWEHDXWLHVLIWUDQVIHUUHGWRD SURVHWUDQVODWLRQEHFRPHXQSDUGRQDEOHEOHPLVKHV¶7\WOHU± 6LPLODUYLHZVFRQFHUQLQJWKH QHFHVVLW\RISUHVHUYLQJDSRHP¶VIRUPDOUK\PHVDQGPHWUHDUHVWLOOKHOGE\PDQ\LQWKHWZHQWLHWKFHQWXU\ -RVHSK%URGVN\IRUH[DPSOHPDLQWDLQHGWKDWµPHWUHVLQYHUVHDUHNLQGVRIVSLULWXDOPDJQLWXGHVIRUZKLFK QRWKLQJFDQEHVXEVWLWXWHG«7KH\FDQQRWEHUHSODFHGE\HDFKRWKHUDQGHVSHFLDOO\QRWE\IUHHYHUVH¶TXRWHG LQ%RQQHIR\ 6HHDOVR5DIIHOE DQG0RIIHWLQ:HLVVERUW



3DJH

,WLVQRWRQO\WKHLQGLYLGXDOZRUGVRIDSRHPEXWDOVRLWVIRUPZKLFKDFWVDVDVLJQLILHUZLWKDVLJQLILHGWKDW FKDQJHVIURPFXOWXUHWRFXOWXUHDQGIURPDJHWRDJH,QRWKHUZRUGVWKHPHDQLQJRIDSRHWLFIRUPFKDQJHV ZLWKWKHSDVVDJHRIWLPHDQGWKHWUDQVIRUPDWLRQRIVRFLDOYDOXHVDQGPD\QRWEHHIIHFWLYHLQDQRWKHUDJHDQG FXOWXUH)RUH[DPSOHWKHVRQQHWIRUPGRHVQRWVLJQLI\IRUWKHFRQWHPSRUDU\1RUWK$PHULFDQUHDGHUZKDWLWGLG IRU3HWUDUFK¶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µWDNHRQLWVRZQXQLTXHSRHWLFVKDSHDVWKH WUDQVODWLRQGHYHORSV¶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


3DJH

LPSRVVLEOHLWIROORZVWKDWQRRQHWUDQVODWLRQLVZKROO\DGHTXDWH²DSRLQWZKLFKFRXOGSHUKDSVEHPDGHRIDOO WUDQVODWLRQWKRXJKLWLVFOHDUO\PRUHREYLRXVLQSRHWU\WUDQVODWLRQ,WDOVRIROORZVWKDWVHYHUDOWUDQVODWLRQVRI WKHVDPHSRHPZLOOEHDEOHWRDFKLHYHZKDWQRRQHWUDQVODWLRQFDQGRWKDWLVKLJKOLJKWGLIIHUHQWDVSHFWVRIWKH VDPHSRHPDQGWKHUHLVDJRRGFDVHWREHPDGHIRUPXOWLSOHWUDQVODWLRQVRIWKHVDPHSRHP*RQWFKDUHQNR :HOW7UDKDQ±+ROPHV

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µPXVWSHUIRUPVRPHEXWQRWDOO RIWKH IXQFWLRQVRIDFULWLFVRPHEXWQRWDOO RIWKHIXQFWLRQVRIDSRHWDQGVRPHIXQFWLRQVQRWQRUPDOO\UHTXLUHGRI FULWLFRUSRHW¶+ROPHV 3HUKDSVLWLVWKHVHRWKHUIXQFWLRQVUHTXLUHGRIDWUDQVODWRUSRHWWKDWH[SODLQ ZK\PDQ\SRHWWUDQVODWRUVPD\EHJUHDWSRHWVEXWQRWQHFHVVDULO\JUHDWWUDQVODWRUV0DQ\ZHOONQRZQSRHW WUDQVODWRUVWHQGWRLPSRVHWKHLURZQVW\OHVRWKRURXJKO\RQWKHWUDQVODWHGSRHPVWKDWWKHVHUHVHPEOHWKHLURZQ SRHPVUDWKHUWKDQUHIOHFWLQJWKHSDUWLFXODUFKDUDFWHULVWLFVRIWKHDXWKRU)RUH[DPSOH(]UD3281'¶V µWUDQVODWLRQV¶VHH$0(5,&$175$',7,21 DUH3RXQGDQGDUHUHDGIRUWKDWUHDVRQDQG/RZHOODGPLWWHGWR SURGXFLQJQRWµWUDQVODWLRQV¶EXWµLPLWDWLRQV¶,WLVLQWHUHVWLQJWRQRWHWKDWVRPHSRHWWUDQVODWRUVOLNH/RZHOO XVHWUDQVODWLRQDVDNLQGRIZRUNVKRSIRUSUDFWLVLQJWKHLUFUDIWZKHQWKHLURZQZRUNKDVUHDFKHGDQLPSDVVH 6LPLODUO\LWLVSRVVLEOHIRUDSRHWZKRLVLJQRUDQWRIWKHVRXUFHODQJXDJHWRSURGXFHDSRHWLFWH[WERWK DHVWKHWLFDOO\SOHDVLQJDQGLQWXLWLYHO\DFFXUDWHDVLQWKHFDVHRI3RXQG¶VWUDQVODWLRQVIURP&KLQHVH7KLVLV XVXDOO\DFFRPSOLVKHGWKURXJKWKHXVHRIDQLQWHUPHGLDU\RULQIRUPDQWVRPHRQHZLWKNQRZOHGJHRIWKH6/ ZKRSUHSDUHVDSULPDU\RUGUDIWWUDQVODWLRQVRPHWLPHVNQRZQDVFULEWUDQVODWLRQ 7KHUHKDVEHHQPXFKGLVFXVVLRQRQWKHGHPDUFDWLRQOLQHVEHWZHHQWUDQVODWLRQ$'$37$7,21DQG ,0,7$7,21DQGWKHGLIIHUHQFHVHHPVWROLHLQWKHGHJUHHRILQWHUSUHWDWLRQ$FFRUGLQJWR/HIHYHUH µ7KHWUDQVODWRUSURSHULVFRQWHQWWRUHQGHUWKHRULJLQDODXWKRU¶VLQWHUSUHWDWLRQRIDWKHPHDFFHVVLEOHWRD GLIIHUHQWDXGLHQFH7KHZULWHURIYHUVLRQVEDVLFDOO\NHHSVWKHVXEVWDQFHRIWKHVRXUFHWH[WEXWFKDQJHVLWV IRUP7KHZULWHURILPLWDWLRQVSURGXFHVWRDOOLQWHQWVDQGSXUSRVHVDSRHPRIKLVRZQZKLFKKDVRQO\WLWOH DQGSRLQWRIGHSDUWXUHLIWKRVHLQFRPPRQZLWKWKHVRXUFHWH[W¶,WLVWUXHWKDWDORWRIWKHOLWHUDWXUHRQSRHWU\ WUDQVODWLRQLVDERXWYDOXHMXGJHPHQWVEDVHGRQWKHFULWLFDOPHWKRGRIFRPSDULVRQZLWKWKHRULJLQDOZLWKWKH UHVXOWWKDWLPLWDWLRQVDQGDGDSWDWLRQVIDUHEDGO\(YDOXDWLRQPXVWKRZHYHUDOVREHEDVHGRQWKHWUDQVODWRU¶V DLPV$WUDQVODWLRQKDVWREHMXGJHGLQWHUPVRILWVFRQVLVWHQF\ZLWKWKHVHDLPVDQGQRWRQVRPHWKLQJLWZDV QHYHUPHDQWWREH,WFDQQRWVLPSO\EHDVVXPHGWKDWWKHWUDQVODWRU¶VDLPLVDOZD\VWRUHSUHVHQWWKHRULJLQDODV FRPSOHWHO\DVSRVVLEOH$OODLPVDUHYDOLGSURYLGHGWKH\DUHFOHDUO\VWDWHGDQGPRWLYDWHG:KDWLVQRW DFFHSWDEOHLVLQFRQVLVWHQF\ZLWKWKHVHDLPVPLVWDNHVLQGHFRGLQJDQGHQFRGLQJRUORVVWKDWLVGXHWR LQFRPSHWHQFHRQWKHSDUWRIWKHWUDQVODWRUVHH/HIHYHUH±IRUDILYHSRLQWLQYHQWRU\IRUDVVHVVLQJ WKHFRPSHWHQFHRIDOLWHUDU\WUDQVODWRU 7UDQVODWRUVRIWHQVWUHVVWKHQHHGIRUDVHQVHRIDIILQLW\ZLWKWKHSRHWWKH\DUHWUDQVODWLQJDQGORYHIRUWKH SRHW¶VZRUNWRJHWKHUZLWKVRPHGHJUHHRILQVSLUDWLRQDUHLPSRUWDQWIDFWRUVXVXDOO\PLVVLQJIURPPRGHOVDQG WKHRULHVRISRHWU\WUDQVODWLRQ$V2FWDYLR3D]VXJJHVWVµQHLWKHUDUHVXIILFLHQWEXWERWKDUHLQGLVSHQVDEOH¶LQ +RQLJ 3HUKDSVLWLVWKLVSURIRXQGHPRWLRQDOLQYROYHPHQWLQ



3DJH

WUDQVODWLQJSRHWU\WKDWPRWLYDWHVWUDQVODWRUVDOPRVWWRWKHSRLQWRIDGGLFWLRQWRHQJDJHLQZKDWVRPHKDYH WHUPHGµWKHDUWRIWKHLPSRVVLEOH¶ 6HHDOVR 32(7,&62)75$16/$7,216&5,37,175$16/$7,21675$7(*,(62)75$16/$7,21

)XUWKHUUHDGLQJ %DVVQHWWGH%HDXJUDQGH%RQQHIR\%URZHU)UDZOH\D+ROPHV+RQLJ -RQHV/HIHYHUH5DIIHOD:HLVVERUW

'$9,'&2112//<

3RO\V\VWHPWKHRU\ 2ULJLQDOO\DULVLQJIURPWKHZRUNRIDJURXSRI5XVVLDQOLWHUDU\WKHRULVWVWKHFRQFHSWRIWKHµSRO\V\VWHP¶KDV UHFHLYHGFRQVLGHUDEOHDWWHQWLRQLQWKHZRUNRIFHUWDLQJURXSVRIWUDQVODWLRQVFKRODUVVLQFHWKHPLGV :KLOHRIIHULQJDJHQHUDOPRGHOIRUXQGHUVWDQGLQJDQDO\VLQJDQGGHVFULELQJWKHIXQFWLRQLQJDQGHYROXWLRQRI OLWHUDU\V\VWHPVLWVVSHFLILFDSSOLFDWLRQWRWKHVWXG\RIWUDQVODWHGOLWHUDWXUH²DQDUHDIUHTXHQWO\PDUJLQDOL]HG E\OLWHUDU\WKHRU\²KDVJLYHQULVHWRPXFKXVHIXOGLVFXVVLRQDQGUHVHDUFK

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²DQGXOWLPDWHO\ HYHQWKHHQWLUHVRFLDORUGHU²DVV\VWHPVRUHYHQµV\VWHPVRIV\VWHPV¶ LQWKHLURZQULJKW)XUWKHUPRUHZLWKLQ WKHZLGHUIUDPHZRUNRIKLVZRUNRQWKHSURFHVVRIOLWHUDU\HYROXWLRQ7\QMDQRY WKHXVHRIWKHV\VWHPLF FRQFHSWOHGWRWKLVSURFHVVEHLQJYLHZHGDVDµPXWDWLRQRIV\VWHPV¶ 8VLQJWKHZRUNRI7\QMDQRYDQGRWKHU)RUPDOLVWVDVKLVVWDUWLQJSRLQW(YHQ=RKDUWRRNXSWKHV\VWHPLF DSSURDFKLQWKHHDUO\VPRUHRUOHVVIURPWKHSRLQWZKHUHWKH\KDGOHIWRII+LVLPPHGLDWHDLPDWWKHWLPH ZDVWRUHVROYHFHUWDLQSUREOHPVFRQQHFWHGZLWKWUDQVODWLRQWKHRU\DQGWKHKLVWRULFDOVWUXFWXUHRI+HEUHZ OLWHUDWXUHDQGKLVDSSOLFDWLRQRIWKH)RUPDOLVWV¶LGHDVLQWKHVHDUHDVUHVXOWHGLQWKHIRUPXODWLRQRIZKDWKH WHUPHGSRO\V\VWHPWKHRU\ ,Q(YHQ=RKDU¶VZULWLQJVWKHWHUPVV\VWHPDQGSRO\V\VWHPDUHWRDODUJHH[WHQWV\QRQ\PRXV+RZHYHUWKH ODWWHUWHUPZDVSURSRVHGLQRUGHUWRVWUHVVWKHG\QDPLFQDWXUHRIKLVFRQFHSWLRQRIWKHµV\VWHP¶DQGWRGLVWDQFH LWIURPWKHPRUHVWDWLFFRQQRWDWLRQVZKLFKWKHWHUPKDGDFTXLUHGLQWKH6DXVVXUHDQWUDGLWLRQDQDFFRXQWRIWKH SURYHQDQFHDQGUDWLRQDOHRIWKHWHUPSRO\V\VWHPFDQEHIRXQGLQ(YHQ=RKDU± ,WVKRXOGDOVREH SRLQWHGRXWWKDW(YHQ=RKDU¶VXVHRIWKHWHUPVV\VWHPDQGV\VWHPLFLVTXLWHGLVWLQFWIURPWKDWDVVRFLDWHGZLWK 0LFKDHO+DOOLGD\¶VIXQFWLRQDO²RUV\VWHPLF²JUDPPDUZKLFKIRUPVWKHWKHRUHWLFDOEDVLVRI&DWIRUG¶V PRGHORIWUDQVODWLRQ $FFRUGLQJWR(YHQ=RKDU¶VPRGHOWKHSRO\V\VWHPLVFRQFHLYHGDVDKHWHURJHQHRXVKLHUDUFKL]HGFRQJORPHUDWH RUV\VWHP RIV\VWHPVZKLFKLQWHUDFWWREULQJDERXWDQRQJRLQJG\QDPLFSURFHVVRIHYROXWLRQZLWKLQWKH SRO\V\VWHPDVDZKROH)URPWKHILUVWSDUWRIWKLVGHILQLWLRQLWIROORZVWKDWSRO\V\VWHPVFDQEHSRVWXODWHGWR DFFRXQWIRUSKHQRPHQDH[LVWLQJRQYDULRXVOHYHOVVRWKDWWKHSRO\V\VWHPRIDJLYHQQDWLRQDOOLWHUDWXUHLV YLHZHGDVRQHHOHPHQWPDNLQJXSWKHODUJHUVRFLRFXOWXUDO



3DJH

SRO\V\VWHPZKLFKLWVHOIFRPSULVHVRWKHUSRO\V\VWHPVEHVLGHVWKHOLWHUDU\VXFKDVIRUH[DPSOHWKHDUWLVWLFWKH UHOLJLRXVRUWKHSROLWLFDO)XUWKHUPRUHEHLQJSODFHGLQWKLVZD\LQDODUJHUVRFLRFXOWXUDOFRQWH[WµOLWHUDWXUH¶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µKLJK¶RUµFDQRQL]HG¶IRUPVLHµWKRVHOLWHUDU\QRUPVDQGZRUNV«ZKLFKDUHDFFHSWHG DVOHJLWLPDWHE\WKHGRPLQDQWFLUFOHVZLWKLQDFXOWXUHDQGZKRVHFRQVSLFXRXVSURGXFWVDUHSUHVHUYHGE\WKH FRPPXQLW\WREHFRPHSDUWRILWVKLVWRULFDOKHULWDJH¶(YHQ=RKDU ,WDOVRLQFOXGHVµORZ¶RUµQRQ FDQRQL]HG¶JHQUHVµWKRVHQRUPVDQGWH[WVZKLFKDUHUHMHFWHGE\WKHVHFLUFOHVDVLOOHJLWLPDWH¶LELG 7KXVWKH OLWHUDU\SRO\V\VWHPLVPDGHXSQRWRQO\RIµPDVWHUSLHFHV¶DQGUHYHUHGOLWHUDU\IRUPVVXFKDVWKHHVWDEOLVKHG YHUVHIRUPV EXWDOVRRIVXFKJHQUHVDVFKLOGUHQ¶VOLWHUDWXUHSRSXODUILFWLRQDQGWUDQVODWHGZRUNVQRQHRI ZKLFKKDYHWUDGLWLRQDOO\IDOOHQZLWKLQWKHGRPDLQRIOLWHUDU\VWXGLHV7KHQHZQRQpOLWLVWQRQSUHVFULSWLYH DSSURDFKZKLFKWKLVUHMHFWLRQRIYDOXHMXGJPHQWVKDVPDGHSRVVLEOHKDVKDGIDUUHDFKLQJFRQVHTXHQFHVIRUWKH ILHOGRIWUDQVODWLRQVWXGLHV $OWKRXJKVRFDOOHGORZIRUPVWHQGWRUHPDLQRQWKHSHULSKHU\WKHVWLPXOXVZKLFKWKH\JLYHWRWKHFDQRQL]HG IRUPVRFFXS\LQJWKHFHQWUHLVRQHRIWKHPDLQIDFWRUVZKLFKGHWHUPLQHVWKHZD\LQZKLFKWKHSRO\V\VWHP HYROYHV7KXVIRU(YHQ=RKDUOLWHUDU\HYROXWLRQLVQRWGULYHQE\DVSHFLILFJRDOEXWLVUDWKHUEURXJKWDERXWDVD FRQVHTXHQFHRIµWKHXQDYRLGDEOHFRPSHWLWLRQJHQHUDWHGE\WKHVWDWHRIKHWHURJHQHLW\¶ $QRWKHUIDFHW RIWKLVFRPSHWLWLRQFDQEHVHHQLQWKHIXUWKHUWHQVLRQZKLFKH[LVWVEHWZHHQSULPDU\LQQRYDWLYH DQG VHFRQGDU\FRQVHUYDWLYH OLWHUDU\SULQFLSOHVRQFHDSULPDU\IRUPKDVEHHQDFFHSWHGLQWRWKHFHQWUHDQGKDV PDQDJHGWRDFKLHYHFDQRQL]HGVWDWXVE\PDLQWDLQLQJLWVSRVLWLRQWKHUHIRUVRPHWLPHLWZLOOWHQGWREHFRPH LQFUHDVLQJO\FRQVHUYDWLYHDQGLQIOH[LEOHDVLWDWWHPSWVWRILJKWRIIFKDOOHQJHVIURPQHZHUHPHUJLQJOLWHUDU\ LGHDV+RZHYHULWZLOOHYHQWXDOO\²DQGLQHYLWDEO\²VXFFXPEWRDQHZHUPRGHOZKLFKZLOOXOWLPDWHO\HYLFWLW IURPLWVSULYLOHJHGSRVLWLRQDWWKHFHQWUHRIWKHSRO\V\VWHP

3RO\V\VWHPWKHRU\DQGWUDQVODWLRQ :KLOHWKHSRO\V\VWHPFRQFHSWZDVGHVLJQHGVSHFLILFDOO\LQRUGHUWRVROYHFHUWDLQSUREOHPVFRQQHFWHGZLWK WUDQVODWLRQLWLVFOHDUIURPWKHDERYHWKDWDVDWKHRU\LWDFFRXQWVIRUV\VWHPLFSKHQRPHQDRIDFRQVLGHUDEO\ PRUHJHQHUDOQDWXUH+RZHYHUPXFKRI(YHQ=RKDU¶VZULWLQJLVGHYRWHGWRDGLVFXVVLRQERWKRIWKHUROHZKLFK WUDQVODWHGOLWHUDWXUHSOD\VLQDSDUWLFXODUOLWHUDU\SRO\V\VWHPDQGDOVRRIWKHZLGHUWKHRUHWLFDOLPSOLFDWLRQV ZKLFKSRO\V\VWHPWKHRU\KDVIRUWUDQVODWLRQVWXGLHVLQJHQHUDO 5HJDUGLQJWKHILUVWRIWKHVHTXHVWLRQV(YHQ=RKDUDUJXHVIRUWKHUHFRJQLWLRQRIOLPLWHGV\VWHPLFUHODWLRQVKLSV EHWZHHQWKHVHHPLQJO\LVRODWHGWUDQVODWHGWH[WVZKLFKH[LVWLQDJLYHQOLWHUDU\SRO\V\VWHP±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± 7KHILUVWRIWKHVHLQYROYHVWKHVLWXDWLRQLQZKLFKDµ\RXQJ¶OLWHUDWXUHLQWKHSURFHVVRIEHLQJ HVWDEOLVKHGKDVQRW\HWEHHQFU\VWDOOL]HG



3DJH

LQWRDSRO\V\VWHP,QWKLVFDVHWUDQVODWHGOLWHUDWXUHEHFRPHVRQHRILWVPRVWLPSRUWDQWV\VWHPVDVWKHHPHUJLQJ OLWHUDWXUHORRNVWRRWKHUROGHUOLWHUDWXUHVIRULQLWLDOUHDG\PDGHPRGHOVIRUDZLGHYDULHW\RIWH[WW\SHV7KH VHFRQGLQVWDQFHLQZKLFKWUDQVODWHGOLWHUDWXUHPD\RFFXS\DFHQWUDOSRVLWLRQLQDJLYHQOLWHUDU\V\VWHPLVZKHQ WKHRULJLQDOOLWHUDWXUHRIWKDWV\VWHPLVµSHULSKHUDO¶RUµZHDN¶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²HLWKHU FRQIRUPLQJWRDOUHDG\H[LVWLQJPRGHOVRUHOVHLQWURGXFLQJRULJLQDOHOHPHQWVLQWRWKHV\VWHP²LWLQHYLWDEO\ IROORZVWKDWWKHZD\VLQZKLFKWUDQVODWLRQLVSUDFWLVHGLQDJLYHQFXOWXUHDUHWKHPVHOYHVGLFWDWHGE\WKH SRVLWLRQZKLFKWUDQVODWHGOLWHUDWXUHRFFXSLHVZLWKLQWKHSRO\V\VWHP7RXVH(YHQ=RKDU¶VZRUGVµWUDQVODWLRQLV QRORQJHUDSKHQRPHQRQZKRVHQDWXUHDQGERUGHUVDUHJLYHQRQFHDQGIRUDOOEXWDQDFWLYLW\GHSHQGHQWRQWKH UHODWLRQVZLWKLQDFHUWDLQFXOWXUDOV\VWHP¶ 7KLVQHZLQVLJKWLQHYLWDEO\OHDGVWRDZLGHQLQJRIWKH GHILQLWLRQRIWUDQVODWLRQLWVHOI3DVWGHILQLWLRQVKDYHIUHTXHQWO\EHHQIRUPXODWHGLQKLJKO\SUHVFULSWLYHWHUPV DQGWH[WVQRWFRQIRUPLQJWRDFFHSWHGWKHRUHWLFDOSUHFRQFHSWLRQVKDYHIUHTXHQWO\EHHQGHQLHGWKHIXOOVWDWXVRI µWUDQVODWLRQV¶LQVWHDGEHLQJGXEEHGµLPLWDWLRQV¶µDGDSWDWLRQV¶RUµYHUVLRQV¶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±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µSURFHGXUHV¶ZKLFKDUHGHWHUPLQHGE\WKHFRQGLWLRQVFXUUHQWO\SUHYDOHQWLQWKHWDUJHW SRO\V\VWHP(YHQ=RKDU±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±



3DJH

)XUWKHUGHYHORSPHQWV $QXPEHURIPLQRUSUREOHPVLQKHUHQWLQSRO\V\VWHPWKHRU\KDYHEHHQUDLVHGE\YDULRXVVFKRODUV)XUWKHU V\VWHPLFFRQFHSWVKDYHEHHQSURSRVHGWRVXSSOHPHQWWKHPRGHO/HIHYHUHE IRUH[DPSOHVXJJHVWV WKHDGGLWLRQRIQRWLRQVRISRODULW\SHULRGLFLW\DQGSDWURQDJH$QXPEHURIVFKRODUVKDYHTXHVWLRQHGWKH QHFHVVLW\RIWKHSULPDU\VHFRQGDU\GLVWLQFWLRQ/HIHYHUH*HQW]OHU *HQW]OHUIXUWKHU VXJJHVWVWKDWWKHLQIOXHQFHRI5XVVLDQ)RUPDOLVPLVWRRVWURQJDQGWKDWSRO\V\VWHPWKHRU\QHHGVWREUHDNIUHH IURPVRPHRILWVPRUHUHVWULFWLYHFRQFHSWV± +RZHYHUWKHLQIOXHQFHRI(YHQ=RKDU¶VWKLQNLQJKDV EHHQFRQVLGHUDEOHWKHQHZDSSURDFKZKLFKLWKDVHQJHQGHUHGEHLQJSDUWLFXODUO\DVVRFLDWHGZLWKJURXSVRI VFKRODUVLQ,VUDHO%HOJLXPDQGWKH1HWKHUODQGV3UREDEO\WKHPRVWVLJQLILFDQWH[WHQVLRQRIWKHPRGHOLVIRXQG LQ7RXU\D ZKHUH(YHQ=RKDU¶VWDUJHWRULHQWHGDSSURDFKLVFRQVROLGDWHGDQGWKHQRWLRQRIWUDQVODWLRQ 12506²WKHIDFWRUVDQGFRQVWUDLQWVZKLFKVKDSHVWDQGDUGWUDQVODWLRQSUDFWLFHVLQDJLYHQFXOWXUH²LV LQWURGXFHGDQGGHYHORSHG7RXU\LVDFRQWLQXDWLRQRIWKLVZRUN +HUPDQV¶ FROOHFWLRQRIODUJHO\ GHVFULSWLYHHVVD\VE\DYDULHW\RIVFKRODUVLVDQRWKHULPSRUWDQWH[SUHVVLRQRIWKLVUHODWLYHO\QHZDSSURDFK FRQWULEXWLQJLQSDUWLFXODUWKHQRWLRQRIWUDQVODWLRQDVWKHPDQLSXODWLRQRIOLWHUDWXUH (YHQ=RKDU¶VSRO\V\VWHPWKHRU\LVQRWDFRPSOHWHZDWHUWLJKWSDFNDJHEXWUDWKHUDSRLQWRIGHSDUWXUHIRU IXUWKHUZRUN$VORQJDVLWLVYLHZHGDVVXFKLWLVOLNHO\WRFRQWLQXHWRJLYHULVHWRIUXLWIXOLQYHVWLJDWLRQRI ERWKDWKHRUHWLFDODQGDGHVFULSWLYHQDWXUH$OWKRXJKLWUHPDLQVYHU\PXFKµZRUNLQSURJUHVV¶RSHQWRIXUWKHU PRGLILFDWLRQDQGUHILQHPHQWWKHFRQWULEXWLRQRISRO\V\VWHPWKHRU\WRRXUXQGHUVWDQGLQJRIWKHQDWXUHDQGUROH RIWUDQVODWLRQKDVEHHQVLJQLILFDQWDQGKLJKO\LQIOXHQWLDO

)XUWKHUUHDGLQJ (YHQ=RKDUDE*HQW]OHU+HUPDQV+ROPHVHWDO/HIHYHUHE7RXU\ D

0$5.6+877/(:257+

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µWKHVWXG\RIWKHSXUSRVHVIRUZKLFK VHQWHQFHVDUHXVHGRIWKHUHDOZRUOGFRQGLWLRQVXQGHUZKLFKDVHQWHQFHPD\EHDSSURSULDWHO\XVHGDVDQ XWWHUDQFH¶6WDOQDNHU 7KLVQHZSHUVSHFWLYHDQGVRPHRILWVPDLQILQGLQJVVRRQIRXQGWKHLUZD\ LQWRWKHOLWHUDWXUHRQWUDQVODWLRQ

6SHHFKDFWV 6SHHFKDFWVDUHWKHDFWVZHSHUIRUPZKHQIRUH[DPSOHZHPDNHDFRPSODLQWRUDUHTXHVWDSRORJL]HRUSD\ VRPHRQHDFRPSOLPHQW7KHSUDJPDWLFDQDO\VLVRIVSHHFKDFWVVHHVDOOXWWHUDQFHVLQWHUPVRIWKHGXDOIXQFWLRQ RIµVWDWLQJ¶DQGµGRLQJWKLQJV¶RIKDYLQJDPHDQLQJDQGDIRUFH$QXWWHUDQFHLQWKLVYLHZKDV D DVHQVHRUUHIHUHQFHWRVSHFLILFHYHQWVSHUVRQVRUREMHFWV E DIRUFHZKLFKPD\RYHUULGHOLWHUDOVHQVHDQGWKXVUHOD\DGGHGHIIHFWVVXFKDVWKRVHDVVRFLDWHGZLWKVD\ DUHTXHVWRUDGPRQLWLRQ F DQRYHUDOOHIIHFWRUFRQVHTXHQFHZKLFKPD\RUPD\QRWEHRIWKHNLQGFRQYHQWLRQDOO\DVVRFLDWHGZLWK WKHOLQJXLVWLFH[SUHVVLRQRUWKHIXQFWLRQDOIRUFHLQYROYHG )RUH[DPSOHVKXWWKHGRRULVLQDVHQVHDQLPSHUDWLYHWKDWFRXOGFRQFHLYDEO\FDUU\WKHIRUFHRIDUHTXHVW ZKLFKLQWXUQFRXOGEHXVHG



3DJH

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µVDPHQHVVRIPHDQLQJ¶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µ7KLVLVDPDWWHUVROHO\IRUWKH6DXGLVWRFRQVLGHU¶ 1RWDZDUHRIWKHSUDJPDWLFPHDQLQJLQYROYHGWKHLQWHUSUHWHUUHQGHUHGWKHRULJLQDO$UDELFVHQWHQFHOLWHUDOO\DV 7KLVPDWWHUFRQFHUQVWKH6DXGLV7KHVWDWHPHQWZDVREYLRXVO\LQWHQGHGWRFDUU\WKHSUDJPDWLFJORVVµ'RQRW SXUVXHWKLVOLQHRITXHVWLRQLQJDQ\IXUWKHU¶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µSURPLVLQJ¶RUµWKUHDWHQLQJ¶RQWKHRQHKDQGDQG PRUHGLIIXVHDFWVVXFKDVµVWDWLQJ¶RUµGHVFULELQJ¶RQWKHRWKHU


3DJH

JOREDOVHTXHQFHHQYHORSLQJWKHHQWLUHWH[W+RUQHU ,QDQDWWHPSWWRH[WHQGWKHDQDO\VLVEH\RQGWKHLQGLYLGXDOVSHHFKDFWWKHUHKDVEHHQDFRQVLGHUDEOHVKLIWRI IRFXVLQWKHDQDO\VLVRIWKHWUDQVODWLRQSURFHVVDQGHQWLUHWH[WIRUPDWVEHJDQWREHFRQVLGHUHGIURPWKHYLHZ SRLQWRISUDJPDWLFV)RUH[DPSOHDUJXPHQWDWLYHWH[WVKDYHEHHQIRXQGWRGLVSOD\DJOREDOSUREOHPVROYLQJ VWUXFWXUHZLWKWKHSUREOHPVHFWLRQEHLQJW\SLFDOO\µDVVHUWLYH¶LQLWVLOORFXWLRQDU\YDOXHDQGWKHVROXWLRQ VHFWLRQW\SLFDOO\µGLUHFWLYH¶6XFKJOREDOFKDUDFWHUL]DWLRQVDUHLQIRUPHGE\ERWKIXQFWLRQDODQGKLHUDUFKLFDO FULWHULDJRYHUQLQJWKHYDULRXVVSHHFKDFWVLQYROYHGDQGRXJKWWREHKHHGHGLQWKHLUJOREDOLW\E\WKHWUDQVODWRU 7LUNNRQHQ&RQGLW ,QWH[WW\SHRULHQWHGWUDQVODWLRQVWXGLHVDPDMRULVVXHDGGUHVVHGKDVEHHQWKDWRIWKHLQGHWHUPLQDF\ZKLFKD SDUWLFXODUVSHHFKDFWFDQH[KLELWDQGZKLFKFDQRQO\EHUHVROYHGE\UHIHUHQFHWRWKHJOREDORUJDQL]DWLRQRIWKH WH[W)RUH[DPSOHGHVFULELQJDJLYHQSHDFHSODQDVVOLJKWO\EHWWHUWKDQWKHSUHYLRXVRQHVFRXOGSUDJPDWLFDOO\ PHDQµRQO\VOLJKWO\DQGWKHUHIRUHQHJOLJLEO\EHWWHU¶RUµDSSUHFLDEO\EHWWHU¶GHSHQGLQJRQZKHWKHUWKHRYHUDOO VWDQFHLVSURRUDQWLSODQ7KHLQLWLDOVHTXHQFHLVLQGHWHUPLQDWHDQGLVVHWWOHGRQO\ZKHQZHVXEVHTXHQWO\UHDG WKHUHDUHUHDVRQVIRUKRSH7KHUHDUHODQJXDJHVVXFKDV$UDELFZKLFKKDYHWRPDUNVXFKGLVWLQFWLRQVDQG ZKHUHDQXPEHURIDOWHUQDWLYHOH[LFRJUDPPDWLFDOVWUXFWXUHVDUHDYDLODEOHWRFDWHUIRUWKHDOWHUQDWLYHUHDGLQJV LQYROYHG+DWLPDQG0DVRQ

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¶V2ULHQWDOLVP KDVFHUWDLQO\ORVWPXFKRILWVLURQ\LQWKH SXEOLVKHGWUDQVODWLRQLQWR$UDELF+DWLP )RUH[DPSOHLQWKHVRXUFHWH[WHOHPHQWLIWKHVHIDFWVDUH IDFWVDWOHDVWRQHPD[LPKDVEHHQIORXWHGWKDWRI4XDOLW\ZLWKWKHUHVXOWDQWLPSOLFDWXUHLQWKH



3DJH

UHOHYDQWFRQWH[WRIµZKRLV%DOIRXUNLGGLQJLWLVDSDFNRIOLHV¶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µ,PSO\LQJ¶DVRSSRVHGWRµH[SOLFLWO\VWDWLQJ¶LVSRVVLEOHHYHQZKHQDJLYHQPD[LPLVDGKHUHGWRSURYLGHGVXFK DGKHUHQFHLVRSWHGIRULQFRQWH[WVZKHUHQRQDGKHUHQFHZRXOGEHWKHH[SHFWHGQRUP2QHVXFKFRQWH[WPD\ EHLOOXVWUDWHGE\WKHIROORZLQJH[DPSOHIURP$FW,RI%HUQDUG6KDZ¶V VKRFNHG@2KGRQ¶WVD\WKDW,WPDNHVPHIHHODVLI,KDGKXUW\RXIRUWKHVDNHRIILYHVKLOOLQJV <281*/$'<>ZLWKFRROLQVROHQFH@:HOOVR\RXKDYH 7\SLFDORI'ROO\¶VEOXQWQHVVRIFKDUDFWHUWKH0D[LPRI4XDOLW\LVPHWLFXORXVO\DGKHUHGWRDQGWUXWKLVYDOXHG QRPDWWHUZKDW,WLVVSHDNLQJWKHWUXWKZKHQDZKLWHOLHZRXOGGRKRZHYHUWKDWLQLWVRZQZD\FRQVWLWXWHVD IORXWLQJRIVRPHSULQFLSOHRURWKHUJLYLQJULVHWRDQLPSOLFDWXUHDOOWKHVDPH:KDWLVEHLQJIORXWHGKHUHDUH QRUPVRISROLWHQHVVZKLFKVDQFWLRQIORXWLQJ4XDOLW\DVDQRUPDQGGHHPQRWGRLQJVRDGHYLDWLRQIURP DFFHSWDEOHVRFLDOEHKDYLRXU/HHFK 7KLVDQGVLPLODUH[DPSOHVUDLVHLPSRUWDQWTXHVWLRQVIRUDWUDQVODWLRQWKHRU\WKDWVHHNVWRFRQIURQWFURVV FXOWXUDOSUDJPDWLFVDQGDFFRXQWIRUWKHSUREOHPVWKURZQXSE\WKLVSDUWLFXODUDUHDRIODQJXDJHXVH,Q WUDQVODWLQJDSOD\OLNH6KDZ¶VLQWR$UDELFRU-DSDQHVHIRUH[DPSOHWKHK\SRWKHVLVZLGHO\DFFHSWHGLQ SUDJPDWLFDOO\RULHQWHGWKHRULHVRIWUDQVODWLRQLVWKDWWKHPRUHODQJXDJHERXQGWKHUXOHVJRYHUQLQJWKH SHUIRUPDQFHRIDQ\LQGLUHFWVSHHFKDFWWKHORZHUWKHGHJUHHRIWUDQVODWDELOLW\%OXP.XOND

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²WKDWLVWKDW RIIHUDGHTXDWHFRQWH[WXDOHIIHFWVLIZHDVNKRZWKHWUDQVODWLRQVKRXOGEHH[SUHVVHGWKHDQVZHULV LWVKRXOGEHH[SUHVVHGLQVXFKDPDQQHUWKDWLW\LHOGVWKHLQWHQGHGLQWHUSUHWDWLRQZLWKRXWSXWWLQJWKH DXGLHQFHWRXQQHFHVVDU\SURFHVVLQJHIIRUW *XWW± 6HULRXVUHVHUYDWLRQVDERXWWKHYDOXHRIUHOHYDQFHWKHRU\LQWUDQVODWLRQKDYHEHHQH[SUHVVHGE\DQXPEHURI VFKRODUVHJ7LUNNRQHQ&RQGLW0DOPNM U7KRPDV RQDQXPEHURIJURXQGVLQFOXGLQJWKH YH[HGTXHVWLRQRIKRZDQGE\ZKRPWKHYDULRXVµUDQNLQJVRIUHOHYDQFH¶DUH



3DJH

WREHGHWHUPLQHGLQSDUWLFXODUFRQWH[WVRIWUDQVODWLRQ%XWSHUKDSVDPRUHUHOHYDQWREMHFWLRQWR*XWW¶V SURSRVDOVUHODWHVWRWKHFRQWULEXWLRQRI6.23267+(25<ZKLFK*XWWVHHPVWRXQGHUYDOXH$FFRUGLQJWR WKLVWKHRU\WUDQVODWLRQVKDYHVHWVRIKLHUDUFKLFDOO\RUGHUHGSXUSRVHVVNRSRL ,WLVWKHVHSXUSRVHVRQHYDULDQW RIZKLFKPD\EHWKHLQVWUXFWLRQVDWWDFKHGWRDUHTXHVWIRUWUDQVODWLRQWKDWGHWHUPLQHWKHWUDQVODWLRQSURFHGXUHV DQGXOWLPDWHO\WKHSURFHVVLWVHOI5HLVVDQG9HUPHHU 7LUNNRQHQ&RQGLW TXHVWLRQV*XWW¶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

)XUWKHUUHDGLQJ $QGHUPDQD%OXP.XOND*XWW+DWLP+DWLPDQG0DVRQ7LUNNRQHQ &RQGLW

%$6,/+$7,0

3VHXGRWUDQVODWLRQ 3VHXGRWUDQVODWLRQLVDWHUPFXUUHQWLQWKHOLWHUDWXUHDWOHDVWVLQFH$QWRQ3RSRYLþ ZKRGHILQHGLWDVD µILFWLWLRXVWUDQVODWLRQ¶µ$QDXWKRUPD\SXEOLVKKLVRULJLQDOZRUNDVDILFWLWLRXV>RUSVHXGR@WUDQVODWLRQLQRUGHU WRZLQDZLGHSXEOLFWKXVPDNLQJXVHRIWKHUHDGHUV¶H[SHFWDWLRQV7KHDXWKRUWULHVWRXWLOL]HWKHµWUDQVODWLRQ¶ ERRPLQRUGHUWRUHDOL]HKLVRZQOLWHUDU\SURJUDP)URPWKHVWDQGSRLQWRIWH[WWKHRU\WKHILFWLWLRXVWUDQVODWLRQ PD\EHGHILQHGDVWKHVRFDOOHGTXDVLPHWDWH[WLHDWH[WWKDWLVWREHDFFHSWHGDVDPHWDWH[W7KHILFWLRQDO WUDQVODWLRQVDUHRIWHQPRWLYDWHGVXEMHFWLYHO\¶ $SVHXGRWUDQVODWLRQLVWKHUHIRUHQRWRQO\DWH[WSUHWHQGLQJRUSXUSRUWLQJRUIUHTXHQWO\WDNHQWREHD WUDQVODWLRQEXWDOVR²JLYHQWKHDPELJXLW\RIµDWH[WWKDWLVWREHDFFHSWHGDVDPHWDWH[W¶²DWUDQVODWLRQWKDWLV IUHTXHQWO\WDNHQWREHDQRULJLQDOZRUN*HQHUDOO\VSHDNLQJWKDWLVDSVHXGRWUDQVODWLRQPLJKWEHGHILQHGDVD ZRUNZKRVHVWDWXVDVµRULJLQDO¶RUµGHULYDWLYH¶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¶VWHUPLQRORJ\ZRXOGDOORZXVWRFODVVLI\LWDV DQLQWUDOLQJXDOWUDQVODWLRQVHH6(0,27,&$3352$&+(6 6RLVLWDSVHXGRWUDQVODWLRQRULVQ¶WLW" 7KHWH[WERRNFDVHRISVHXGRWUDQVODWLRQLVSUREDEO\-DPHV0DFSKHUVRQ¶V± µWUDQVODWLRQ¶RI2VVLDQLF SRHPV)UDJPHQWVRIDQFLHQWSRHWU\WUDQVODWHGIURPWKH*DHOLFRU(UVHODQJXDJH IROORZHGE\IXUWKHU 7HPRUD 2VVLDQZDVWKH$QJOLFL]HGµ2VVLDQLF¶FROOHFWLRQVLQ)LQJDO DQGQDPHSRSXODUL]HGE\ 0DFSKHUVRQ RI2LVtQDOHJHQGDU\,ULVKZDUULRUSRHWIURPWKH)HQLDQF\FOHRIKHURWDOHVWKDWUHODWHGWKH DGYHQWXUHVRI)LQQDQGKLVEDQGRIZDUULRUVWKH)LDQQD(LUDQQ7KH\RXQJ0DFSKHUVRQKDGSXEOLVKHGRULJLQDO SRHWU\WKDWDWWUDFWHGQRDWWHQWLRQLQKLVFROOHFWLRQ7KH+LJKODQGHU VKRUWO\DIWHUZDUGVKHEHJDQ FROOHFWLQJ*DHOLFPDQXVFULSWVDQGRUDOSRHPVDQGGUHZRQWKHPLQ



3DJH

ZULWLQJKLV2VVLDQSRHPVZKLFKKHFDOOHGWUDQVODWLRQVIURPDQDFWXDOWKLUGFHQWXU\*DHOLFSRHW,WZDVQRW NQRZQDWWKHWLPHQRUZRXOGLWEHIRUDQRWKHUFHQWXU\WKDWQR*DHOLFPDQXVFULSWVGDWHEDFNHDUOLHUWKDQWKH WHQWKFHQWXU\E\WKHHQGRIWKHQLQHWHHQWKFHQWXU\LWZDVILQDOO\HVWDEOLVKHGWKDWWKH*DHOLFRULJLQDOVIURP ZKLFK0DFSKHUVRQVXSSRVHGO\ZRUNHGDQGZKLFKKDGEHHQSXEOLVKHGDIWHUKLVGHDWKZHUHDFWXDOO\ 0DFSKHUVRQ¶VRZQWUDQVODWLRQVLQWREDG*DHOLFRIKLVRULJLQDO(QJOLVKSRHPV 6WLOOWKH2VVLDQSRHPVKDGDQHQRUPRXVLPSDFWRQSRHWVDQGWKLQNHUVLQ(QJODQG*HUPDQ\DQGHOVHZKHUH PDQ\RIZKRPHPEUDFHGWKHPDVWKHDXWKHQWLFRXWSRXULQJRIDSULPLWLYHIRONLPDJLQDWLRQ7KHLUDXWKHQWLFLW\ ZDVDWWHVWHGWRE\WKHLQIOXHQWLDOUKHWRULFLDQ+XJK%ODLUDQGZKLOHWKHUHZHUHPDQ\VFHSWLFV²LQFOXGLQJWKH IRUPLGDEOH'U-RKQVRQWKH\EHFDPHDNLQGRIOLWHUDU\VLJQSRVWIRUWKHPRYHPHQWWKDWZRXOGEHFRPH 5RPDQWLFLVPHYLGHQFHWKDWOLWHUDU\JUHDWQHVVGLGQRWUHTXLUHDOOWKHWUDSSLQJVRIDQDGYDQFHGFLYLOL]DWLRQ HGXFDWLRQVRSKLVWLFDWLRQFDUHIXOO\FRQWUROOHGFODVVLFDOIRUPEXWFRXOGDQGVKRXOG DULVHIURPWKHFROOHFWLYH LPDJLQDWLRQRIHDFKLQGLYLGXDOSHRSOHIURPWKHSHDVDQWU\RUFRPPRQIRON&OHDUO\WKH5RPDQWLFVKDGD YHVWHGLQWHUHVWLQWKHDXWKHQWLFLW\RIWKHVHWUDQVODWLRQVDQGZHUHSUHGLVSRVHGWREHOLHYHLQWKHPDQGZKLOHZH DUHWRGD\LQFOLQHGWRFDOO0DFSKHUVRQ¶VFROOHFWLRQVKRD[HVRUIUDXGVRUDWEHVWSVHXGRWUDQVODWLRQVLWLVHTXDOO\ FOHDUWKDWWKHLUH[DPSOHLQVSLUHGPDQ\SHRSOHDOODFURVV(XURSHDQGWKH8QLWHG6WDWHVWRVHHNRXWPRUH DXWKHQWLFVDPSOHVRIIRONSRHWU\DQGWKXVWRJLYHELUWKWRWKHGLVFLSOLQHRIIRONORULVWLFV $VLPLODUEXWPRUHSUREOHPDWLFFDVHRISVHXGRWUDQVODWLRQPLJKWEH+HQU\:DGVZRUWK/RQJIHOORZ¶V± +LDZDWKD ,QVSLUHGLQSDUWE\WKH2VVLDQSRHPV(OLDV/|QQURW± LQ)LQODQGKDGFROOHFWHGWKH IRONSRHWU\WKDWKHHGLWHGLQWRDFRKHUHQWHSLFF\FOHZKLFKKHFDOOHGWKH.DOHYDOD ,QWKH8SSHU 3HQLQVXODRI0LFKLJDQ+HQU\5RZH6FKRROFUDIW± KDGFROOHFWHGDQGZLWKKLVKDOI&KLSSHZDZLIH -DQH-RKQVWRQ6FKRROFUDIWGDXJKWHURIDIXOOEORRGHG&KLSSHZDZRPDQDQGDZKLWHWUDSSHUQDPHG-RKQ -RKQVWRQ WUDQVODWHGLQWR(QJOLVKWKH&KLSSHZDOHJHQGVWKDWKHSXEOLVKHGLQDVHULHVRIERRNVLQWKHVDQG V/RQJIHOORZZDVDSRO\JORWZKRKDGDOUHDG\OHDUQHGHQRXJKRIWKH6FDQGLQDYLDQODQJXDJHVWRUHDG DQFLHQW1RUGLFHSLFVLQWKHRULJLQDOZKHQKHGHFLGHGWROHDUQ)LQQLVKLQWKH\HDU/|QQURWSXEOLVKHGWKH ILUVWHGLWLRQRIWKH.DOHYDOD/RQJIHOORZZDVLQ6WRFNKROPWDNLQJ)LQQLVKOHVVRQVIURP/|QQURW¶VEURWKHULQ ODZDQGZRXOGFHUWDLQO\KDYHKHDUGDERXWWKH.DOHYDODIURPKLP6LQFH/RQJIHOORZQHYHUOHDUQHGHQRXJK )LQQLVKWRUHDGWKHHSLFLQWKHRULJLQDOKRZHYHUZKHQKHVDWGRZQWRZULWHDQ$PHULFDQQDWLRQDOHSLFLQWKH HDUO\VKHZRUNHGIURPVHYHUDOWUDQVODWLRQVWKH6FKRROFUDIWV¶(QJOLVKWUDQVODWLRQVRIWKH&KLSSHZD OHJHQGVDQGWKH*HUPDQDQG6ZHGLVKWUDQVODWLRQVRIWKH.DOHYDODDQGZKLOHWKHUHVXOW+LDZDWKDZDVQHYHU SUHVHQWHGDVDWUDQVODWLRQRIHLWKHU,QGLDQRU)LQQLVKRULJLQDOVLWGRHVFRQWDLQQXPHURXVSDVVLQJWUDQVODWLRQV IURPERWKWKH6FKRROFUDIWDQGWKH/|QQURWPDWHULDO$QG/RQJIHOORZ¶VRZQGHVFULSWLRQRIWKHSURMHFWKDV LQWHUHVWLQJUHVRQDQFHVZLWKUHFHQWHTXLYDOHQFHRIHIIHFWWKHRULHVRIWUDQVODWLRQµ,Q³+LDZDWKD´¶KHZURWHLQ 1RYHPEHUVKRUWO\DIWHUWKHHSLF¶VSXEOLFDWLRQµ,KDYHWULHGWRGRIRURXUROG,QGLDQOHJHQGVZKDWWKH XQNQRZQ)LQQLVKSRHWVKDGGRQHIRUWKHLUVDQGLQGRLQJWKLV,KDYHHPSOR\HGWKHVDPHPHWHUEXWRIFRXUVH KDYHQRWDGRSWHGDQ\RIWKHLUOHJHQGV¶ 7KHUHLVDOVRDJURXSRIOLWHUDU\ZRUNVHVSHFLDOO\QRYHOVWKDWXVHSVHXGRWUDQVODWLRQDVDGHOLEHUDWHO\ WUDQVSDUHQWH[WHQVLRQRIWKHµIRXQGPDQXVFULSW¶FRQFHLWHPSOR\HGE\VRPDQ\QRYHOLVWV6LQFHWKHQRYHOZDV ERUQRXWRIDVHPLMRXUQDOLVWLFVOLFHRIOLIHUHDOLVPDQGHYHQZKHQWKHPRVWIDQWDVWLFRIWHQPRFNVHULRXVO\ SUHWHQGHGWREHEDVHGRQWUXHVWRULHVDZKROHUDQJHRIOLWHUDU\GHYLFHVZDVGHYHORSHGIRUVHHPLQJWRJURXQGD SURVHQDUUDWLYHLQUHDOLW\WKHILUVWSHUVRQDFFRXQWWKHHSLVWRODU\IRUPWKHUHSRUWDJHDQGDWDIXUWKHUUHPRYH IURPWKHDFWXDOHYHQWVWKHIRXQGPDQXVFULSWZKRVHFODLPVWRDXWKHQWLFLW\FDQEHGRXEWHGE\WKHHGLWRUZKR LVDFWXDOO\WKHDXWKRU ZLWKRXWHQWLUHO\QHJDWLQJWKHWH[W¶VJURXQGHGQHVVLQDFWXDOLW\,QWKLVOLWHUDU\WUDGLWLRQD SVHXGRWUDQVODWLRQLVPHUHO\DIRXQGPDQXVFULSWWKDWKDSSHQVRULVFODLPHG WRKDYHEHHQZULWWHQLQDIRUHLJQ ODQJXDJHZKHQ0LJXHOGH&HUYDQWHV6DDYHGUD±



3DJH

IRUH[DPSOHFODLPVWKDWKLVERRN(OLQJHQLRVRKLGDOJR'RQ4XL[RWHGHOD0DQFKD ZDVD6SDQLVK WUDQVODWLRQIURPWKH$UDELFRI(O&LG%HQHJDOLKHLVQRWH[DFWO\VHWWLQJKLPVHOIXSDVDWUDQVODWRUDV-DPHV 0DFSKHUVRQKDGGRQHKHLVSOD\IXOO\SXWWLQJGLVWDQFHEHWZHHQKLPVHOIDQGKLVRZQOLWHUDU\FUHDWLRQLQRUGHU VLPXOWDQHRXVO\WRHQKDQFHDQGWRXQGHUPLQHLWVDXWKHQWLFLW\DVDUHFRUGRIIDFW ,QDQHYHQPRUHFRPSOH[VSLQRIIRIWKLVWKH$UJHQWLQLDQZULWHU-RUJH/XLV%RUJHV± ZULWHVDVWRU\ DERXWDILFWLWLRXV)UHQFKZULWHUQDPHG3LHUUH0HQDUGZKRVHWVKLPVHOIWKHJDUJDQWXDQWDVNRIµZULWLQJ¶ &HUYDQWHV¶QRYHOµ3LHUUH0HQDUG$XWKRURIWKH4XL[RWH¶ ²QRWZULWLQJD)UHQFKWUDQVODWLRQRUDGDSWDWLRQRI LWEXWUHZULWLQJLWLQ6SDQLVKE\OHDUQLQJ6SDQLVKOLYLQJDOLIHVLPLODUWRWKDWRI&HUYDQWHVDQGHYHQWXDOO\ EHLQJDEOHWRUHFUHDWHZKROHSDVVDJHVIURPWKHRULJLQDO6SDQLVKQRYHOYHUEDWLPZLWKRXWFRS\LQJ,Q%RUJHV¶V VWRU\0HQDUGDFWXDOO\VXFFHHGVZLWKDIHZVKRUWSDVVDJHVDQG%RUJHVUHYLHZVIRUXVWKHVWULNLQJGLIIHUHQFHV EHWZHHQLGHQWLFDOSDVVDJHVZULWWHQLQ6SDQLVKE\D6SDQLDUGLQWKHHDUO\VHYHQWHHQWKFHQWXU\DQGE\D )UHQFKPDQLQWKHQLQHWHHQWK²DQLURQLFFRPPHQWDU\RQWKHROGFKHVWQXWWKDWJUHDWRULJLQDOZRUNVGRQ¶WDJH EXWWUDQVODWLRQVGR,QDVHQVHZKDW3LHUUH0HQDUGVHWRXWWRGRLVWRZULWHDQLQWUDOLQJXDOWUDQVODWLRQRIWKH 4XL[RWHLQZKDWZDVIRUKLPDIRUHLJQODQJXDJHZKLFKLQYROYHGWUDQVODWLQJKLVH[SHULHQFHVIURPKLVRZQ QDWLYH)UHQFKLQWR6SDQLVK,QWHUHVWLQJO\%RUJHVZDVVRVWHHSHGLQ(QJOLVKDQG$PHULFDQOLWHUDWXUHDOO WKURXJKKLVOLIHWKDWKLV6SDQLVKLVRIWHQGHVFULEHGDVHYHU\ZKHUHVKRZLQJVLJQVRILQWHUIHUHQFHIURP(QJOLVK DVLI%RUJHV¶VRULJLQDO6SDQLVKZRUNVZHUHWUDQVODWLRQVIURP(QJOLVK 7KHFRQFHSWRISVHXGRWUDQVODWLRQLVLQWHUHVWLQJLQODUJHSDUWEHFDXVHLWFDOOVLQWRTXHVWLRQVRPHRIRXUPRVW FKHULVKHGEHOLHIVHVSHFLDOO\WKHEHOLHILQWKHDEVROXWHGLIIHUHQFHEHWZHHQDWUDQVODWLRQDQGDQRULJLQDOZRUN,Q 5KHWRULF+HUPHQHXWLFVDQG7UDQVODWLRQLQWKH0LGGOH$JHV 5LWD&RSHODQGORRNVFORVHO\DWDQXPEHU RIPHGLHYDOWH[WVWKDWH[LVWLQDVWUDQJHJUH\DUHDEHWZHHQZKDWZHWKLQNRIDVWUDQVODWLRQVDQGRULJLQDOZRUNV 7KH\LQFOXGHWKH2YLGHPRUDOLVpYDULRXV)UHQFKDQG(QJOLVKH[SDQGHGJORVVHGYHUVLRQVRI%RHWKLXV¶ &RQVRODWLRSKLORVRSKLDHWKH5RPDQGHOD5RVH*HRIIUH\&KDXFHU¶V"± /HJHQGRI*RRG:RPHQ DQG-RKQ*RZHU¶V"± &RQIHVVLRDPDQWLV7KH\FOHDUO\FRQWDLQDQGODUJHO\FRQVLVWRIWUDQVODWLRQV IURPZRUNVLQRWKHUODQJXDJHVEXWRIWHQVHYHUDOVXFKZRUNVDWRQFHWKHVHWUDQVODWHGSDVVDJHVDUHLQWHUZRYHQ ZLWKJORVVHVYDULRXVIRUPVRIFRPPHQWDU\WKDWDUHQRWW\SRJUDSKLFDOO\RURWKHUZLVHPDUNHGRIIIURPWKH WUDQVODWLRQVWKDWWKH\VXSSRVHGO\JORVVDQGWKH\DUHSUHVHQWHGWRWKHSXEOLFDVFRPPHQWDULHVRUDVRULJLQDO ZRUNVHVSHFLDOO\WKHODWHURQHVE\&KDXFHUDQG*RZHU RUPRVWLQWHUHVWLQJO\RIDOOVLPSO\SUHVHQWHGQRW GHILQHGDVFRPPHQWDULHVRUWUDQVODWLRQVRURULJLQDOZRUNV/LWHUDU\KLVWRULHVRIWKLVVRUWXQGHUVFRUHWKHH[WHQW WRZKLFKRXUFRS\ULJKWODZZKLFKGLVWLQJXLVKHVVRFOHDUO\EHWZHHQWUDQVODWLRQVDQGRULJLQDOZRUNVWUDQVODWRUV DQGDXWKRUVLVDVRFLDOILFWLRQRIUHODWLYHO\UHFHQWYHQXH²DQGVRE\FRUUHODWLRQLVWKHSDUDVLWLFFRQFHSWRI SVHXGRWUDQVODWLRQ

)XUWKHUUHDGLQJ 7RXU\

'28*/$652%,1621

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



3DJH

NQRZQDERXWKXPDQLQIRUPDWLRQSURFHVVLQJDQGPHPRU\WDNLQJPRQROLQJXDOFRPPXQLFDWLRQDVDVWDUWLQJ SRLQWZKLOHUHFRJQL]LQJWKDWWUDQVODWLRQDQGLQWHUSUHWLQJDUHVSHFLDOLQVWDQFHVRIELOLQJXDOFRPPXQLFDWLRQ,W QHHGVWRDGGUHVVLVVXHVVXFKDVWKHH[WHQWWRZKLFKWUDQVODWLRQVSHFLILFSURFHVVHVDUHHPEHGGHGZLWKLQDODUJHU PRGHORIKXPDQFRPPXQLFDWLRQKRZWKHFRQVWUDLQWVXQGHUZKLFKWUDQVODWRUVRSHUDWHGLIIHUIURPWKRVHZKLFK LQIOXHQFHRWKHUFRPPXQLFDWRUVWKHHIIHFWVWKHVHFRQVWUDLQWVDQGGLIIHUHQFHVKDYHRQWKHSURFHVVHVLQYROYHG DQGKRZZHPLJKWJDLQDFFHVVWRWKHSURFHVVHVLQTXHVWLRQLQRUGHUWRH[SODLQZKDWWUDQVODWRUVDFWXDOO\GR,Q WHUPVRIYDULHW\RIDFWLYLWLHVDQGSURFHVVHVDSV\FKROLQJXLVWLFPRGHORIWUDQVODWLRQQHHGVWRDFFRXQWIRUWKH WUDQVODWRU¶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µUHDOWLPH¶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µEHVW¶YHUVLRQWKHLQWHUSUHWHUKDVRQHFKDQFHDQGRQHRQO\7KHVH GLVWLQFWLRQVKROGJRRGIRUZULWWHQWUDQVODWLRQDQGIRUVLPXOWDQHRXVLQWHUSUHWLQJEXWIDLOWRUHFRJQL]HWKH LQWHUPHGLDWHSODFHRIFRQVHFXWLYHLQWHUSUHWLQJZKHUHWKHLQWHUSUHWHUWDNHVQRWHVDQGRQO\LQWHUSUHWVDWWKHHQG RIWKHRULJLQDOVSHDNHU¶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¶VPHVVDJHLQRUGHUWRUHVSRQGWRLWE\DJUHHLQJGLVDJUHHLQJUHSO\LQJ DQG



3DJH

VRRQ7KHWUDQVODWRURQWKHRWKHUKDQGLVHVVHQWLDOO\UHFHLYHURULHQWHGSD\LQJDWWHQWLRQWRWKHVSHDNHU ZULWHU¶VPHVVDJHLQRUGHUWRUHWUDQVPLWLWWRWKHUHFHLYHUVRIWKHWDUJHWWH[WDQGWKHUHIRUHVXSSUHVVLQJRUDW OHDVWFRQWUROOLQJSHUVRQDOUHDFWLRQVWRWKHPHVVDJH7UDQVODWRUVWHQGWREHOLHYHWKDWWKH\VKRXOGGLVFLSOLQHWKHLU XQGHUVWDQGLQJVRDVWRH[FOXGH²DVIDUDVLVSRVVLEOH²SHUVRQDOUHDFWLRQVWRZKDWLVEHLQJVDLGRUZULWWHQDQG SULYLOHJHWKHH[SHFWDWLRQVDQGDVVXPSWLRQVRIWKHFOLHQWDXGLHQFHIRUZKRPWKHLQWHUSUHWLQJRUWUDQVODWLQJLV EHLQJSURYLGHG6HOHVNRYLWFK 6RPXFKIRUWKHUHFHSWLYHDVSHFWVRILQWHUSUHWLQJDQGWUDQVODWLQJ7KHSURGXFWLYHDVSHFWVDUHDOVRVSHFLDO LQVWDQFHVRIWKHJHQHUDOSURFHVVRIKXPDQFRPPXQLFDWLRQEXWZLWKGLIIHUHQFHVZKLFKVHUYHWRGLVWLQJXLVK WUDQVODWLRQDVELOLQJXDOUDWKHUWKDQPRQROLQJXDOFRPPXQLFDWLRQ&RPSDUHIRUH[DPSOHDPRQROLQJXDOVSRNHQ GLDORJXHZLWKLQWHUSUHWLQJ,QWKHILUVWFDVHWKHµDQVZHULQJ¶WXUQZRXOGD EHLQWKHVDPHODQJXDJHDQG QRUPDOO\WKHVDPHVW\OHDVWKHSUHYLRXVVSHDNHUXVHGDQGE FRQWDLQGLIIHUHQWVHPDQWLFDQGWKHUHIRUH V\QWDFWLFDQGSUDJPDWLFFRQWHQW7KHWUDQVODWRU¶VEHKDYLRXULVWKHRSSRVLWHRQERWKFRXQWVWKHWXUQD LVWDNHQ LQDGLIIHUHQWODQJXDJH²WKDWRIWKHWDUJHWDXGLHQFHUDWKHUWKDQWKHRULJLQDOVSHDNHUZULWHUWKHODWWHUEHLQJWKH QRUPDODXGLHQFHIRUPRQROLQJXDOH[FKDQJHVDQGE FRQWDLQVWKHVDPHVHPDQWLFFRQWHQWDVWKHRULJLQDODV VWRUHG²ZLWKSRWHQWLDOPRGLILFDWLRQV²LQWKHPHQWDOUHSUHVHQWDWLRQRIWKHFODXVHLQWKHZRUNLQJPHPRU\RIWKH WUDQVODWRU $PRGHORIWKHWUDQVODWLRQSURFHVVWKHQLQHYLWDEO\UHSOLFDWHVDOOWKHFKDUDFWHULVWLFVRIDJHQHUDOPRGHORI KXPDQFRPPXQLFDWLRQZLWKWKHDGGLWLRQRIVRPHFRPSRQHQWVZKLFKDUHWUDQVODWLRQVSHFLILFSDUWLFXODUO\ FRPSRQHQWVZKLFKUHSUHVHQWSUREOHPUHFRJQLWLRQDQGWKHVWUDWHJLHVHPSOR\HGIRUSUREOHPVROYLQJ,Q GLVFXVVLQJDQ\PRGHORIWKHWUDQVODWLRQSURFHVVWHUPVOLNHQH[WPD\KDYHWREHXVHGEXWWKHVHDUHQRWWREH WDNHQOLWHUDOO\DVLQGLFDWLRQVRIDXQLGLUHFWLRQDOEDOOLVWLFSURFHVVZKLFKWDNHVWKHVRXUFHODQJXDJHWH[WDQG SXVKHVLWWKURXJKHDFKVWDJHLQDULJLGRUGHUXQWLOLWHPHUJHVDWWKHHQGDVWKHWDUJHWODQJXDJHWH[W)DUIURPLW UHYLVLRQDQGEDFNWUDFNLQJW\SLFDOO\EXWE\QRPHDQVH[FOXVLYHO\LQWUDQVODWLQJ DUHWKHQRUPUDWKHUWKDQWKH H[FHSWLRQ

6WDJHVSUREOHPVDQGVWUDWHJLHV 7KHUHDUHWZRHVVHQWLDOVWDJHVVSHFLILFWRWKHSURFHVVHVRIWUDQVODWLQJDQGLQWHUSUHWLQJDQGDIXUWKHUVWDJH DYDLODEOHRQO\WRWKHWUDQVODWRUZRUNLQJZLWKWKHZULWWHQWH[W7KHVHDUHDQDO\VLVV\QWKHVLVDQGUHYLVLRQ 'XULQJWKHDQDO\VLVVWDJHWKHWUDQVODWRUUHDGVOLVWHQVWRWKHVRXUFHWH[WGUDZLQJRQEDFNJURXQGHQF\FORSHGLF NQRZOHGJH²LQFOXGLQJVSHFLDOLVWGRPDLQNQRZOHGJHDQGNQRZOHGJHRIWH[WFRQYHQWLRQV²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¶VPHDQLQJDQGLQWHQWLRQDVLQWHUSUHWHGE\ WKHWUDQVODWRU WKHWUDQVODWRU¶VLQWHQWLRQLQWUDQVODWLQJWKHWH[WDQGWKHXVHU¶VQHHGVDVVSHFLILHGE\WKHFOLHQW DQGLQWHUSUHWHGE\WKHWUDQVODWRU 2QWKHEDVLVRIWKHVHHYDOXDWLRQVWKHGUDIWWUDQVODWLRQLVUHYLVHGHGLWHG GXULQJWKHILQDOVWDJHRIUHYLVLRQDQGVXFKWKLQJVDVFODXVHOLQNDJHDQGWKHWH[W¶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



3DJH

$WUDQVODWLRQSUREOHPLVVRPHSDUWRIWKHSURFHVVRIWUDQVIHUZKHWKHUGHULYLQJIURPWKHUHFHSWLRQRIWKH VRXUFHWH[WRUWKHSURGXFWLRQRIWKHWDUJHWWH[WZKLFKPDNHVDQDO\VLVRUV\QWKHVLVQRQDXWRPDWLF6XFK SUREOHPVPD\EHDQWLFLSDWHGDWERWKWKHPDFURDQGWKHPLFUROHYHOV2QWKHEDVLVRIWKLVGHILQLWLRQD WUDQVODWLRQVWUDWHJ\LVDSRWHQWLDOO\FRQVFLRXVSURFHGXUHIRUVROYLQJDSUREOHPIDFHGLQWUDQVODWLQJDWH[WRU DQ\VHJPHQWRILW/|UVFKHUD &OHDUO\JLYHQWKHGLVWLQFWLRQEHWZHHQPLFURDQGPDFUROHYHO SUREOHPVVWUDWHJLHVWRRFDQEHGLYLGHGEHWZHHQWKRVHZKLFKDUHORFDOGHDOLQJZLWKWH[WVHJPHQWV DQGWKRVH ZKLFKDUHJOREDOGHDOLQJZLWKZKROHWH[WV (TXDOO\ORFDODQGJOREDOVWUDWHJLHVLQWHUDFWZLWKUHOHYDQW HOHPHQWVRIWKHWUDQVODWRU¶VEDFNJURXQGNQRZOHGJHFULWLFDODZDUHQHVVRIWKHVW\OHDQGFRQWHQWRIVLPLODUWH[WV RIFRQYHQWLRQVRIVSHOOLQJSXQFWXDWLRQDQGJUDPPDURIFRPSDWLELOLW\RIHOHPHQWVGHILQLQJUHJLVWHUDQG LQWXLWLRQVDERXWZKDWFRQVWLWXWHVWKHWDUJHWODQJXDJH6p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¶VRXWSXW²DQ DFWXDOVLOHQWSDXVHRUDSRLQWDWZKLFKWKHLQWHUSUHWHULVDEOHWRSUHGLFWKRZWKHFODXVHZLOOEHFRPSOHWHGDQG WKHQWUDQVODWHRQWKHOHYHORIPHDQLQJ,VKDPDQG/DQHSURYLGHHPSLULFDOHYLGHQFHLQVXSSRUWRIWKH FODXVHDVWKHXQLWRIUHFDOO ,QWHUSUHWHUVSDUWLFXODUO\VLPXOWDQHRXVLQWHUSUHWHUVDUHHVSHFLDOO\VHQVLWLYHWRWKH LQIOXHQFHRIWKHµODJWLPH¶LHWKHGHOD\EHWZHHQLQSXWDQGRXWSXW,QVLPXOWDQHRXVLQWHUSUHWLQJWKLVLV QRUPDOO\EHWZHHQWZRDQGVL[VHFRQGVWKRXJKODJVRIXSWRVHFRQGVKDYHEHHQUHFRUGHG6KRUWODJVWHQGWR UHVXOWLQPRUHHUURUVRPLVVLRQVDGGLWLRQVFKDQJHV LQIRUPZKLOHORQJODJVWHQGWRFDXVHPRUHRPLVVLRQVRI FRQWHQWEHFDXVHWKHZRUNLQJPHPRU\LVRYHUORDGHGZLWKLQIRUPDWLRQ,VKDPDQG/DQH 7UDQVODWRUVDSSHDUWRPDNHXVHRIDWOHDVWWKUHHJOREDOVWUDWHJLHV6p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¶WNQRZKRZWRWUDQVODWHWKDWZKLOH RWKHUVDUHRVWHQVLYHDQGLQFOXGHWKHRYHUDOOUDWHRISURGXFWLRQWKHWLPLQJDQGGXUDWLRQRILQWHUUXSWLRQVWR SURGXFWLRQDVZHOODVDFWLRQVVXFK



3DJH

DVUHIHUULQJWRDGLFWLRQDU\PDUNLQJSUREOHPVLQWKHWH[WHGLWLQJFURVVLQJRXWIDOVHVWDUWVDQGFRUUHFWLQJ HUURUV2WKHUVVWLOODUHVLJQDOOHGWKURXJKWKHPDQQHURIDUWLFXODWLRQDVLQVOLSVVHOIUHSDLUVDQGVRRQ

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|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¶V ZRUNZLWK H[SHULHQFHGSXEOLFVHUYLFHWUDQVODWRUVVWDQGVRXWDVDSDUWLFXODUO\YDOXDEOHH[FHSWLRQ,WLVFOHDUWKDWGLIIHUHQW JURXSVRIELOLQJXDOVLQFOXGLQJWUDQVODWLRQVWXGHQWVDQGH[SHULHQFHGSURIHVVLRQDOWUDQVODWRUVFDQGLIIHU PDUNHGO\LQWKHVWUDWHJLHVWKH\DGRSW6LPLODUO\WKHUHDSSHDUVWREHDFRQVLGHUDEOHGLIIHUHQFHEHWZHHQWKH SUDFWLFHVRIWKHELOLQJXDOFKLOGHQJDJLQJLQLQWHUSUHWLQJDQGWKHSURIHVVLRQDOWUDQVODWRULQWHUSUHWHURQWKHRQH KDQGDQGWKHODQJXDJHVWXGHQWDQGQRQSURIHVVLRQDOWUDQVODWRURQWKHRWKHU/|UVFKHU $FFRUGLQJWR /|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µ1HLWKHUSV\FKROLQJXLVWLFVQRUQHXURORJ\FDQDV\HWSURYLGHUHOLDEOHLQIRUPDWLRQRQKRZOLQJXLVWLFGDWDDUH VWRUHGLQWKHEUDLQKRZOLQJXLVWLFPDWFKLQJSURFHGXUHVWDNHSODFHDQGZKDWPHQWDOVWUXFWXUHVDUHDFWLYHLQ UHFDOOLQJOLQJXLVWLFLQIRUPDWLRQ¶+RZHYHUDGHFDGHRUPRUHRQHQRXJKLVQRZNQRZQWREHJLQWKHWDVNRI FUHDWLQJDPRGHORIWKHSURFHVVZKLFKUHYHDOVWKHORJLFDOXQGHUSLQQLQJRIWKHDFWRIWUDQVODWLRQLWVHOIDQ DQDORJ\RIWKHVWDJHVDQGVWHSVZKLFKPXVWEHDFFRXQWHGIRULIZHDUHWRH[SODLQKRZWUDQVODWLRQLVSRVVLEOHDV DKXPDQDFWLYLW\6XFKDPRGHOFDQKHOSXVUHDFKEH\RQGWKHQRWLRQRIWUDQVODWLRQWKHRU\DVµKHOSIXOKLQWVIRU WUDQVODWRUV¶WRDUDQJHRIFRQVFLRXVQHVVUDLVLQJLQVLJKWVLQWRDSURFHVVZKLFKLVSDUDGR[LFDOO\DWRQFHERWK XQLTXH



3DJH

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

)XUWKHUUHDGLQJ %HOO'DQNV)UDVHU,VKDPDQG/DQH/|UVFKHUD6pJXLQRW6KUHYHHWDO 7LUNNRQHQ&RQGLW

52&(57%(//

3XEOLVKLQJVWUDWHJLHV 7KHWHUPµSXEOLVKLQJVWUDWHJLHV¶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¶VERRNVSHU FHQWDQGVFKRROERRNVSHUFHQW,Q%HOJLXPRQWKHRWKHUKDQGZKLFKSXEOLVKHGERRNVLQ DSSUR[LPDWHO\KDOILQ)UHQFKDQGKDOILQ)OHPLVK VFLHQFHDQGWHFKQRORJ\DFFRXQWHGIRURQO\SHUFHQWRI ERRNVSXEOLVKHGZKLOHFKLOGUHQ¶VOLWHUDWXUHUHSUHVHQWHGSHUFHQW ,QWHUPVRIWUDQVODWLRQIORZSHUFHQWRIWUDQVODWLRQVSXEOLVKHGLQ(XURSHDUHRIZRUNVRULJLQDOO\ZULWWHQLQ %ULWLVKRU$PHULFDQ(QJOLVKDIXUWKHUSHUFHQWDUHRULJLQDOO\ZULWWHQLQ)UHQFKDQGDQRWKHUSHUFHQWLQ *HUPDQ1RQHWKHOHVVLWLVSRVVLEOHWRGLVWLQJXLVKµ]RQHVRILQIOXHQFH¶VSHFLILFWR



3DJH

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²ZKLFKFRQFHDOQXPHURXVVRFLDOKLVWRULFDODQGFXOWXUDOIDFWRUV²KDYHVLJQLILFDQW FRQVHTXHQFHVDVIDUDVWKHRUJDQL]DWLRQRIWKHSXEOLVKLQJLQGXVWU\RIDFRXQWU\LVFRQFHUQHG7KHKLJK SURSRUWLRQRIFKLOGUHQ¶VERRNVSXEOLVKHGLQ%HOJLXPIRUH[DPSOHLVLQGLFDWLYHRIWKHIDFWWKDWWKHSXEOLVKLQJ LQGXVWU\WKHUHW\SLFDORIVPDOOFRXQWULHVLQODUJHUODQJXDJHDUHDV LVGRPLQDWHGE\IRUHLJQSXEOLVKLQJKRXVHV ZKLFKKDYHIRUFHGORFDOILUPVLQWRVSHFLDOL]LQJLQWKLVFDVHLQVXFKJHQUHVDVWKHFRPLFVWULS6LPLODUO\WKH ORZWUDQVODWLRQUDWHRI%ULWDLQDQGWKH8QLWHG6WDWHVKDVIUHTXHQWO\EHHQDWWULEXWHGWRWKHVHOIVXIILFLHQF\RIWKH (QJOLVKPDUNHWV

*HQHUDOWUDGHSXEOLVKHUV *LYHQWKHH[WHQWRI$QJOR$PHULFDQKHJHPRQ\QRWRQO\LQ(XURSHEXWDOVRLQ$IULFD$VLDDQG6RXWK $PHULFD LWPD\EHXVHIXOWRGLVFXVVWKHRUJDQL]DWLRQRIWKHSXEOLVKLQJLQGXVWU\LQ%ULWDLQDQGWKH8QLWHG 6WDWHVLQUHFHQW\HDUV$V)HDWKHU KDVSRLQWHGRXWWKHODVWWZRGHFDGHVKDYHEHHQFKDUDFWHUL]HGLQ ERWKFRXQWULHVE\DSDWWHUQRIFRQJORPHUL]DWLRQ,Q%ULWDLQIRUH[DPSOHWKHLQGXVWU\LVGRPLQDWHGLQWKHODWH VE\IRXUPDMRUJURXSV5DQGRP&HQWXU\FUHDWHGE\WKHDPDOJDPDWLRQRIWKH1HZ


3DJH

(QJOLVK6FKXOWH DPRQJVWRWKHUVKDVIXUWKHUVXJJHVWHGWKDWµWKHSUHVHQWDWLRQRIQHZZULWHUVLVIXUWKHU FRPSOLFDWHGE\WKHIDFWWKDWPRVWHGLWRUVDW>(QJOLVKVSHDNLQJ@SXEOLVKLQJKRXVHVDUHXQDEOHWRUHDGZRUNVLQ WKHLURULJLQDOODQJXDJH²LQFRQWUDVWWRHGLWRUVDW(XURSHDQSXEOLVKLQJKRXVHVZKRDUHLQJHQHUDOTXLWHIDPLOLDU ZLWK(QJOLVK²DQGPXVWWKHUHIRUHUHO\RQWKHDGYLFHDQGWDVWHRIRWKHUV¶6FKXOWHIXUWKHUDUJXHVWKDWVLQFH WUDQVODWRUVDUHµLQDSRVLWLRQWRLQLWLDWHWKHIORZRIZRUNVIURPRWKHUFRXQWULHVLQWR(QJOLVK¶WKH\VKRXOG EHFRPHµWKHNH\ILJXUHLQWKHHVWDEOLVKPHQWRIFURVVFXOWXUDOFRPPXQLFDWLRQ¶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

&XOWXUDODQGDFDGHPLFSUHVVHV 9HQXWL KDVVXJJHVWHGWKDWWKHVPDOOULVHLQWKHQXPEHURI(QJOLVKODQJXDJHWUDQVODWLRQVEHLQJEURXJKW RXWE\$QJOR$PHULFDQSXEOLVKHUVWRZDUGVWKHHQGRIWKHVZDVDFRQVHTXHQFHRIJHQHUDOWUDGHSXEOLVKHUV EHLQJIRUFHGµWRFRPSHWHDJDLQVWQHZWUDQVODWLRQLQLWLDWLYHVDWXQLYHUVLW\DQGVPDOOSUHVVHV¶$OWKRXJKWKHWRWDO QXPEHURIWLWOHVLVVXHGHDFK\HDUE\DFDGHPLFDQGZKDWPLJKWEHWWHUEHWHUPHGµFXOWXUDO¶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µ7KHEXUGHQRIEULQJLQJQHZLQWHUQDWLRQDOZULWHUV RQWRWKH$PHULFDQ>DQGRQHVKRXOGDOVRDGG%ULWLVK@PDUNHWIDOOVXSRQWKHVPDOOSUHVVHV¶)RUFXOWXUDO SXEOLVKHUVRIWKLVNLQGWKHVHOHFWLRQRIPDWHULDODQGWKHLGHQWLILFDWLRQRIQHZDXWKRUVSURYLGHWKHIRFXVIRU WKHLUDFWLYLWLHV+DYLQJWKHLURZQVSHFLILFFXOWXUDODJHQGDWKH\GRQRWQHFHVVDULO\UHO\RQVROLFLWLQJQHZ PDQXVFULSWVIURPWKHJHQHUDOSXEOLF,QVWHDGDVWKH\JURZWKH\GHYHORSDQLQIRUPDOWKRXJKRIWHQH[WHQVLYH QHWZRUNRIOLNHPLQGHGLQIRUPDQWVWRFRPSOHPHQWWKHHGLWRULDODFXPHQRIWKHLUIRXQGHUV



3DJH

$OWKRXJKFXOWXUDOSXEOLVKHUVDUHUHVSRQVLEOHIRURQO\DIUDFWLRQRIWKHQXPEHURIWLWOHVSURGXFHGHDFK\HDU WKH\PD\EHORRNHGWRZDUGVE\FHUWDLQJURXSVIRUDVSHFLILFNLQGRIWLWOHQRWDYDLODEOHHOVHZKHUH7KLVWRRLV KLJKO\LPSRUWDQWVLQFHWKHIRUPDWLRQRIQDWLRQDOLVWLFOLWHUDU\FDQRQVWHQGVWRGLVFULPLQDWHDJDLQVWWUDQVODWLRQ ,Q%ULWDLQIRUH[DPSOH)5/HDYLVDGYDQFHGIRUPDQ\\HDUVDKLJKO\SHUVXDVLYHWKRXJKQRZODUJHO\ GLVFUHGLWHG QRWLRQRIDQ(QJOLVKµWUDGLWLRQ¶6FKXOWHDUJXHVWKDWWHDFKHUVDQGXQLYHUVLW\OHFWXUHUVIUHTXHQWO\ SHUFHLYHGDVDOLNHO\PDUNHWIRUQHZOLWHUDU\ZRUNVLQWUDQVODWLRQWHQGWREHXQDGYHQWXURXVLQWKHLUUHDGLQJ KDELWVDQGXQOLNHO\WRLQFOXGHDSDUWLFXODUZULWHURQDFXUULFXOXPXQWLOVKHKDVDOUHDG\UHFHLYHGZLGHVSUHDG DFDGHPLFDSSURYDO $FDGHPLFSUHVVHVDUHOLNHZLVHUHODWLYHO\LPPXQHWRFRPPHUFLDOSUHVVXUHVWKRXJKVRPHJHQHUDWHFRQVLGHUDEOH UHYHQXHV2[IRUG8QLYHUVLW\3UHVVKDVDWXUQRYHURIPRUHWKDQ…PLOOLRQSHUDQQXP 7KHH[LVWHQFHRI VXFKDSUHVVEULQJVSUHVWLJHDQGFUHGLELOLW\WRWKHKRVWLQVWLWXWLRQDQGWKHPHDQVRISDUWLFLSDWLQJLQDFDGHPLF GHEDWH$OWKRXJKWKHSXEOLVKLQJRIWUDQVODWLRQVZKHWKHURIDOLWHUDU\RUVFKRODUO\QDWXUHLVQRWWKHLUPDLQ DFWLYLW\DFDGHPLFSUHVVHVGRQRQHWKHOHVVLVVXHDQXPEHURILPSRUWDQWWH[WVLQWUDQVODWLRQHYHU\\HDU(TXDOO\ VLJQLILFDQWO\WKHNXGRVRIDXQLYHUVLW\LPSULQWFDQKHOSUDLVHWKHSURILOHRIDSDUWLFXODUZULWHURUVFKRRORI WKRXJKWDQGVRSOD\DPDMRUSDUWLQWKHUHIRUPXODWLRQRIFDQRQV

6XEVLGLHVIRUOLWHUDU\WUDQVODWLRQ 'HPRFUDFLHVWHQGWRYLHZVWDWHLQWHUYHQWLRQLQSXEOLVKLQJZLWKVRPHPLVWUXVWDVFKDUDFWHULVWLFRIWRWDOLWDULDQ UHJLPHV)HDWKHU±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µEHVWVHOOHUV¶EXWDOVRZRPHQ¶VOLJKWURPDQWLF ILFWLRQDORQJWKHOLQHVRIWKDWSXEOLVKHGE\+DUOHTXLQ86 RU0LOOVDQG%RRQ8. $OWKRXJKPDQ\FRPPHQWDWRUVWHQGWRYLHZVXFKFKDQJHVZLWKGLVWUXVWWKHGLVWLQFWLRQEHWZHHQµOLWHUDU\¶DQG µSRSXODU¶ILFWLRQLVQRQHWKHOHVVQRWDOZD\VHDV\WRMXVWLI\HLWKHUFRPPHUFLDOO\RUDHVWKHWLFDOO\6RPH GLVWLQFWO\µOLWHUDU\¶DXWKRUVVXFKDV0DUJXHULWH'XUDVFRPPDQGODUJHPDUNHWVZKLOVWVRPHVRFDOOHG µSRSXODU¶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



3DJH

7UDQVODWLRQ²SHUKDSVDVDUHVXOWRIWKHJURZLQJDFFHSWDQFHRIPXOWLFXOWXUDOLVPDQGIHPLQLVPERWKRIZKLFK KDYHGRQHPXFKWRRYHUWXUQH[LVWLQJQRWLRQVRIORFDOOLWHUDU\DQGVFKRODUO\FDQRQV ²ZRXOGVHHPWREHVORZO\ JDLQLQJDFFHSWDQFHRQFHDJDLQLQ%ULWDLQDQGWRDOHVVHUH[WHQWLQWKH8QLWHG6WDWHV,IWKLVLVVRRQHPD\ KRSHWRVHHWUDQVODWRUVSOD\DPRUHSURPLQHQWUROHDVFXOWXUDOPHGLDWRUVE\EULQJLQJIRUHLJQWH[WVWRWKH DWWHQWLRQRISXEOLVKHUV7KHUHDUHKRZHYHUIHZVLJQVRIDQ\ZHDNHQLQJLQ$QJOR$PHULFDQKHJHPRQ\HYHQ LQFRXQWULHVZLWKDSRVLWLYHDWWLWXGHWRZDUGVWUDQVODWLRQIURPRWKHUFXOWXUHV 6HHDOVR /,7(5$5<75$16/$7,2135$&7,&(6675$7(*,(62)75$16/$7,21

)XUWKHUUHDGLQJ %,3(&RQVHLO)HDWKHU6FKXOWH7HEEHO9HQXWLDE

7(55<+$/(

3XUHODQJXDJH ,GHDVDERXWSXUHODQJXDJHLQWUDQVODWLRQWKHRU\GHULYHIURPWKHHVVD\E\:DOWHU%HQMDPLQµ7KH7DVNRIWKH 7UDQVODWRU¶ WKHSUHIDFHWRKLVWUDQVODWLRQRI%DXGHODLUH¶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µFHQWUDOUHFLSURFDOUHODWLRQVKLSEHWZHHQODQJXDJHV¶ DQGDV VXFKLVXQWUDQVODWDEOHDODQJXDJHWUDQVDFWLRQEXWQRWDWUDQVODWLRQLVUHTXLUHG75$16/$7$%,/,7<LVDERXW ILQGLQJDPRQJWKHUHDGHUVRIDSDUWLFXODUZRUNDQDGHTXDWHWUDQVODWRUZKRFDQDWWHPSWWRPDNHWKHKLGGHQ VLJQLILFDQFHWKHSRWHQWLDOSUHVHQFHYLVLEOH7KLVSRWHQWLDOLVWKHYLEUDWLRQRISXUHODQJXDJHZKLFKPDUNVWKH SRLQWRILQWHUUHODWLRQVKLSZKHUHODQJXDJHVFRQYHUJHDQGH[SUHVVZKDWLVEH\RQGH[SUHVVLRQDQGKLVWRU\6XFK DµNLQVKLS¶RIODQJXDJHVOLHVLQµWKHLQWHQWLRQXQGHUO\LQJDOOODQJXDJHVDVDZKROH«DQLQWHQWLRQZKLFKQR VLQJOHODQJXDJHFDQDWWDLQE\LWVHOIUHDOL]HGRQO\E\WKHWRWDOLW\RIWKHLULQWHQWLRQVVXSSOHPHQWDU\WRHDFK RWKHUSXUHODQJXDJH¶LELG 7KLV0HVVLDQLFTXHVWIRUDP\VWLFODQJXDJHDWWKHNHUQHORIDOOODQJXDJHVDQG UHDOL]HGE\WUDQVODWLRQKDVOHG*HRUJH6WHLQHU± WRDQFKRU%HQMDPLQ²ZLWKKLVQRVWDOJLDIRU WKHRQHQHVVRI:RUG*RGDQG0DWWHUEHIRUHWKH)DOOEHIRUH%$%(/²ILUPO\LQ-HZLVK.DEEDOLVWLFWUDGLWLRQ 7UDQVODWLRQWKHQLVDERXWUHYHDOLQJWKHYLEUDWLRQZLWKLQHDFKODQJXDJHWKHYLEUDWLRQWKDWVKRZVWKHODQJXDJH LVUHDFKLQJEH\RQGLWVHOIWKHPXVLFFUHDWHGE\FHUWDLQSRHWVOLNH0DOODUPpPDUNLQJRXWWKHLUFRPELQDWLRQVRI ZRUGVIURPWKHFRPPRQFXUUHQF\RIODQJXDJHRIHYHU\GD\XVDJH+RZHYHU%HQMDPLQ¶VP\VWLFDOIOLJKWVDUH WHPSHUHGE\DVHULHVRITXDVLSDUDGR[LFDOVWDWHPHQWVDERXWWKHPRYHPHQWRIODQJXDJHRYHUWLPHWKHWDVNRIWKH WUDQVODWRULVWKRURXJKO\VSLULWXDOL]HGGLIIHUHQWLDWHGIURPWKHVFULEHZLWKDGLFWLRQDU\DQGWKHQLVSDUWO\ UHLQVHUWHGLQWRDKLVWRULFDOSURFHVV



3DJH

7UDQVODWLRQIRU%HQMDPLQ¶VWUDQVODWRULVQRWDERXWVWULYLQJIRUDOLNHQHVVRIWKHRULJLQDOEHFDXVHWKHRULJLQDO XQGHUJRHVFKDQJHV:RUGVPDWXUHFKDQJHWKHLUPHDQLQJWKHVHQVHRIDZULWHU¶VVW\OHFDQEHPRGLILHGZKDW ZDVIUHVKPD\EHFRPHKDFNQH\HG/DQJXDJHLVSDUWRIDOLYLQJSURFHVV:KLOHWKHODQJXDJHRIWKHRULJLQDO FKDQJHVVRGRHVWKHPRWKHUWRQJXHRIWKHWUDQVODWRU,QWKLVGLDOHFWLFRIODQJXDJHPRYHPHQWRYHUWLPHD WUDQVODWLRQLVIDUUHPRYHGIURPEHLQJWKHFRPLQJWRJHWKHURIGHDGIRUFHVRIHQHUJLHVWKDWKDYHEHHQ HVVHQWLDOL]HG,WLVSULYLOHJHGE\%HQMDPLQZLWKµWKHVSHFLDOPLVVLRQRIZDWFKLQJRYHUWKHPDWXULQJSURFHVVRI WKHRULJLQDOODQJXDJHDQGWKHELUWKSDQJVRILWVRZQ¶ $WUDQVODWHGZRUNFDQWKXVUHQHZWKHRULJLQDO ZRUNE\JLYLQJLWP\ULDGµDIWHUOLYHV¶DQGLQVRGRLQJFUHDWHQHZOLQJXLVWLFIRUPVZLWKLQDYDULHW\RIWDUJHW ODQJXDJHVQHZDSSUR[LPDWLRQVWRWKHKLGGHQXQGHUO\LQJSXULW\RIWKHSRHWLFXQVSRNHQWKDWLVDQ DSSUR[LPDWLRQWRSXUHODQJXDJH %HQMDPLQ¶VFRQFUHWHH[DPSOHRIWKHVHWHQVLRQVDQGRSSRVLWLRQVDWWKHKHDUWRIZRUGVDUHEURWDQGSDLQEUHDG 7KHVHZRUGVPHDQGLIIHUHQWWKLQJVWRWKH)UHQFKDQG*HUPDQWKRXJKWKH\PHDQWKHVDPHLQUHODWLRQWRWKH REMHFWWKH\UHIHUWR7RGHPRQVWUDWHWKLVGLIIHUHQFHKHGLVWLQJXLVKHVEHWZHHQWKHZRUGDVDUHIHUHQFHWRD FRQFUHWHREMHFWWKHµLQWHQGHGREMHFW¶WKHZRUGILOOHGZLWKWKHLQWHQWLRQRIWKHXVHUDQGWKHSRWHQWLDOZLWKLQ WKHZRUGLQGHSHQGHQWRIXVHUDQGREMHFWDQGEHORQJLQJWRODQJXDJHWKHPRGHRILQWHQWLRQ,WLVWKHPRGHRI LQWHQWLRQWKDWWUDQVODWLRQVHHNVWRJUDVSDQGE\JUDVSLQJZKDWLVKLGGHQZLWKLQWKHXQWUDQVODWHGODQJXDJHPDNH FRQWDFWZLWKWKHSXUHODQJXDJHWKHKLGGHQµKDUPRQ\RIDOOWKHYDULRXVPRGHVRILQWHQWLRQ¶LELG :KDWLV UHPRWHLVEURXJKWFORVHWRUHYHODWLRQ,QWKLVZD\WUDQVODWLRQLVH[DOWHGDVDWHPSRUDU\WUDQVFHQGHQFHRIWKH IRUHLJQEXWLWUHPDLQVWHPSRUDU\DVDOLEHUDWLQJDQGUHVWULFWLQJYLVLRQDQGDVDUHFUHDWLRQRIWKHRULJLQDORQWKH URDGRSHQHGXSWRWKHUHDOPZKHUHODQJXDJHVZLOOEHUHFRQFLOHGZLWK/DQJXDJH3XUH/DQJXDJH7KHWUDQVODWRU IXOILOVKLVKHUPLVVLRQZKHQQRWPHUHO\FRPPXQLFDWLQJFRQWHQWEXWUHDFKLQJRXWWRµWKHHOHPHQWWKDWGRHVQRW OHQGLWVHOIWRWUDQVODWLRQ¶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µWKHHFKRRIWKHRULJLQDO¶LQWKHODQJXDJHLQWRZKLFKVKHLVWUDQVODWLQJ7UDQVODWLRQ LVPRUHLQWHOOHFWXDOUDWLRQDOL]LQJGLVWDQFHGOHVVVSRQWDQHRXVJUDSKLFDQGSULPDU\WKDQRULJLQDOZULWLQJ7KH WUDQVODWRULVHQGRZHGZLWKDWRWDOL]LQJUROHZLWKDQRYHUDOOYLHZ\HWLQWHUYHQLQJDWFUXFLDOPRPHQWVZKHQ JURZWKVSXUWVDUHSRVVLEOH %HQMDPLQ¶VDUJXPHQWVKLIWVEDFNDQGIRUWKEHFDXVHZKLOHWKLVLURQLFDOGLVWDQFLQJRIWUDQVODWLRQPD\SURYRNHD ILVVXUHEHWZHHQFRQWHQWDQGODQJXDJHLWLVFUHDWLQJDVXSSOHPHQWHGODQJXDJHWKDWLVDQHSLVRGHLQWKHJUHDW XQLI\LQJHQWHUSULVHRIµLQWHJUDWLQJPDQ\WRQJXHVLQWRRQHWUXHODQJXDJH¶7KHGRPLQRGLDOHFWLFRIRULJLQDODQG GHULYDWLYHWKURXJKWUDQVODWLRQOHDGVWRWKHODQJXDJHRIWUXWKWKHODQJXDJHRIVLOHQFHWKHSXUHODQJXDJHZKLFK NQRZVQRWHQVLRQ$QGLWLVWKLVSXUHODQJXDJHZKLFKOLHVFRQFHDOHGLQWUDQVODWLRQVµWKLVYHU\ODQJXDJHZKRVH GLYLQDWLRQDQGGHVFULSWLRQLVWKHRQO\SHUIHFWLRQDSKLORVRSKHUFDQKRSHIRU¶ +DYLQJVFDOHGWKHSLQQDFOHRISKLORVRSKLFDOWUXWK%HQMDPLQDGPLWVKHKDVPDGHWKHWDVNRIWKHWUDQVODWRUVHHP LPSHQHWUDEOHDQGWKHµSUREOHPRIULSHQLQJWKHVHHGRISXUHODQJXDJH¶LQVROXEOHLELG +HGHVFULEHVKRZWKH VHHGFDQEHULSHQHGE\PRYLQJGHFLVLYHO\DJDLQVWVSHFLRXVZRUGIRUZRUGILGHOLW\DQGUHQGHULQJRIPHDQLQJ WKHIXQFWLRQDOFRPPXQLFDWLRQRIDPHVVDJHPXVWJLYHZD\WRDQLQFRUSRUDWLRQRIIUDJPHQWVRIWKHRULJLQDOWKDW ZLOOPDNHRULJLQDODQGGHULYDWLYHDIUDJPHQWRIDJUHDWHUODQJXDJH,QWKLVZD\WKHWUDQVODWRUPXVWJRDIWHUWKH PRGHRILQWHQWLRQRIWKH



3DJH

RULJLQDODQGE\UHDFKLQJWRZDUGVWKLVLQGHILQDEOHSRHWLFUHDOPDGGWRWKHODQJXDJHZKHUHWKDWKDUPRQ\QRZ ILQGVLWVHOIH[SUHVVHG :DOWHU%HQMDPLQEHJLQVKLVSUHIDFHZLWKDGHFODUDWLRQWKDWWKHUHDGHUVKRXOGQRWEHFRQVLGHUHGLQDQ DSSUHFLDWLRQRIDZRUNRIDUW+HEHORQJVWRWKHPRGHUQLVWFDPSZKRRSSRVHQDWXUDOQHVVDQGIOXHQF\DVJRDOV RIWKHWUDQVODWRUDQGH[SOLFLWO\UHMHFWVWKHLGHDWKDWWKHKLJKHVWSUDLVHIRUDWUDQVODWRULVWRVD\WKDWWKH WUDQVODWLRQµUHDGVDVLIRULJLQDOO\ZULWWHQLQWKHWDUJHWODQJXDJH¶LELGVHH675$7(*,(62) 75$16/$7,21 6XFKSUDLVHREOLWHUDWHVWKHKLJKHUVXSSOHPHQWDU\UROHRIWUDQVODWLRQWKHZD\LWDGGVWRLWV ODQJXDJHWKHHOHPHQWRIWKHSXUHLQWKHRULJLQDOWKHSRHWLFORQJLQJDIWHUXQLW\7KHWUDQVSDUHQF\RIUHDO WUDQVODWLRQLVQRWWKDWZKLFKPDNHVWKHPHDQLQJWUDQVSDUHQWEXWRQHZKLFKGRHVQRWEORFNRXWWKHOLJKWRIWKLV SXULW\$QGWKDWLVEHVWGRQHE\DOLWHUDOUHQGHULQJRIV\QWD[DUHQGHULQJWKDWSULYLOHJHVZRUGVRYHUV\QWD[,Q DOOODQJXDJHDQGOLQJXLVWLFFUHDWLRQKHFRQWLQXHVWKHUHLVVRPHWKLQJµEH\RQGFRPPXQLFDWLRQ«TXLWHFORVH\HW LQILQLWHO\UHPRWH«VRPHWKLQJWKDWV\PEROL]HVRUVRPHWKLQJV\PEROL]HG¶LELG 7KHV\PEROL]LQJV\PEROL]HG FRQWDLQVWKDWQXFOHXVRISXUHODQJXDJHWKDWFDQRQO\EHUHFODLPHGLQWUDQVODWLRQ 6RWUXHWUDQVODWLRQRSHUDWHVZLWKWKRVHZRUNVWKDWDUHWUDQVODWDEOHE\YLUWXHRIWKHLUSRHWLFTXDOLW\ZKHUHWKHUH LVQRWDQHQRUPRXVTXDQWLW\RILQIRUPDWLRQWREHFRPPXQLFDWHG7KHWUDQVODWRURSHUDWHVLQWKHUHDOPRI OLQJXLVWLFIOX[LQWKHWUDQVODWHGZRUGVRI5XGROI3DQQZLW]LQ%HQMDPLQ µH[SDQGLQJDQGGHHSHQLQJ KLVODQJXDJHE\PHDQVRIWKHIRUHLJQODQJXDJH¶%HQMDPLQQDPHVKLVSURWRW\SHVIRUWUDQVODWLRQDV+|OGHUOLQ¶V OLWHUDOWUDQVODWLRQRI6RSKRFOHV¶WUDJHG\DQGHYHQPRUHLGHDOWKHLQWHUOLQHDUYHUVLRQRIWKH6FULSWXUHVWKH SK\VLFDOH[SUHVVLRQRIKLVYLHZWKDWµ$OOJUHDWWH[WVFRQWDLQWKHLUSRWHQWLDOWUDQVODWLRQEHWZHHQWKHOLQHV¶LELG 7KLVZRXOGVHHPWREHWKHRQO\ZD\RIVDYLQJWKHWUXHWUDQVODWRUIURPWKHDE\VVRIVLOHQFHµEHFRPLQJORVW LQWKHERWWRPOHVVGHSWKVRIODQJXDJH¶LELG DVWKHJDWHVRIODQJXDJHFORVHIRUHYHURQPHDQLQJDQGWKH WUDQVODWRUDOFKHPLVWSHULVKHVLQWKHUHDOPRISXULW\KXUWOLQJWRZDUGVWKH2QHQHVVEHIRUHWKHIDOOLQWR%$%(/ %HQMDPLQ¶VILQDOSDUDGR[LVWKDWWKHSXUHVWWUDQVODWLRQLVWKHPRVWLPSXUHWKHPRVWDZNZDUGZKHUHWKH RULJLQDOWKHIRUHLJQLVHYHUSUHVHQW :KLOHDUJXLQJIRUWKHP\VWLFDOUHOLJLRXVUROHRIWUDQVODWLRQDQGZULWLQJLQSXUVXLWRISXULW\LPSXULW\ %HQMDPLQ¶VRIWHQRSDTXHVKLIWVRIDUJXPHQWKDYHPDGHµ7KH7DVNRI7KH7UDQVODWRU¶DFRQVWDQWSURYRFDWLRQWR FRQWHPSRUDU\WUDQVODWLRQWKHRULVWVZDQWLQJWRHQOLVWKLVSRVWKXPRXVDOOHJLDQFHRUGHFU\KLVPDOHYROHQW LQIOXHQFH+LVpOLWLVPDQGHVSRXVDORIERGLOHVVODQJXDJHLVODPHQWHG5RELQVRQ KLVREVFXUH² XQWUDQVODWDEOH²GLVFXVVLRQRIWUDQVODWDELOLW\EHFRPHVDUKHWRULFDOSOD\ZLWKLQDSOD\IRU3DXOGH0DQ KLVHPSKDVLVRQWKHPRYHPHQWLQDQGEHWZHHQODQJXDJHVLVUHFRJQLWLRQRIWKHGHFRQVWUXFWLRQLVW¶VZRUOGRI OLQJXLVWLFLQVWDELOLW\DQGIOX['HUULGDE DQGDQDGYRFDF\RIIRUHLJQL]LQJWUDQVODWLRQV9HQXWL )RU1LUDQMDQD WKHLPSXULW\RIKLVSXUHODQJXDJHEHFRPHVSDUWRIDPDWHULDOLVWUHDGLQJRI ODQJXDJHDQGDFKDPSLRQLQJRIWKHK\EULGLW\RIFXOWXUHSDUWLFXODUO\ZKHQFHUWDLQWKUHDGVLQWKHHVVD\DUH LQWHUSUHWHGLQWKHOLJKWRIKLVODWHUPRUHPDWHULDOLVWOHVV0HVVLDQLFZULWLQJ 6HHDOVR %$%(/72:(52)0(7$3+252)75$16/$7,216(0,27,&$3352$&+(6675$7(*,(62) 75$16/$7,2175$16/$7$%,/,7<

)XUWKHUUHDGLQJ %HQMDPLQGH0DQ'HUULGDE1LUDQMDQD9HQXWL


3(7(5%86+


3DJH

4 4XDOLW\RIWUDQVODWLRQ 7UDQVODWLRQTXDOLW\DVVHVVPHQWSUHVXSSRVHVDWKHRU\RIWUDQVODWLRQ7KXVGLIIHUHQWYLHZVRIWUDQVODWLRQLWVHOI OHDGWRGLIIHUHQWFRQFHSWVRIWUDQVODWLRQTXDOLW\DQGGLIIHUHQWZD\VRIDVVHVVLQJLW7KHIROORZLQJGLVFXVVLRQRI YDULRXVDSSURDFKHVWRWUDQVODWLRQZLOOIRFXVRQWZRLVVXHVWKHUHODWLRQVKLSEHWZHHQVRXUFHDQGWDUJHWWH[WDQG WKHUHODWLRQVKLSEHWZHHQIHDWXUHVLQWKHWH[WLWVHOIDQGKRZWKH\DUHSHUFHLYHGE\KXPDQDJHQWV

$SSURDFKHVWRWUDQVODWLRQTXDOLW\DVVHVVPHQW $SSURDFKHVWRWUDQVODWLRQTXDOLW\DVVHVVPHQWIDOOLQWRDQXPEHURIGLVWLQFWFDWHJRULHVDQHFGRWDODQG VXEMHFWLYHLQFOXGLQJQHRKHUPHQHXWLFDSSURDFKHVUHVSRQVHRULHQWHGDSSURDFKHVWH[WEDVHGDSSURDFKHV $QHFGRWDODQGVXEMHFWLYHDSSURDFKHV $QHFGRWDODQGVXEMHFWLYHWUHDWLVHVRQWUDQVODWLRQTXDOLW\KDYHORQJEHHQRIIHUHGE\SUDFWLVLQJWUDQVODWRUV SKLORVRSKHUVSKLORORJLVWVZULWHUVDQGPDQ\RWKHUV$FHQWUDOSUREOHPLQVXFKWUHDWPHQWVLVWKH RSHUDWLRQDOL]DWLRQRIFRQFHSWVVXFKDVµIDLWKIXOQHVVWRWKHRULJLQDO¶RUµWKHQDWXUDOIORZRIWKHWUDQVODWHGWH[W¶ 6XFKLQWXLWLYHWUHDWPHQWVRIWUDQVODWLRQTXDOLW\DUHDWKHRUHWLFDOLQQDWXUHDQGWKHSRVVLELOLW\RIHVWDEOLVKLQJ JHQHUDOSULQFLSOHVIRUWUDQVODWLRQTXDOLW\LVJHQHUDOO\UHMHFWHGVHHIRUH[DPSOH&DU\DQG-XPSHOW6DYRU\ 3URSRQHQWVRIWKLVDSSURDFKWHQGWRVHHWKHTXDOLW\RIDWUDQVODWLRQDVGHSHQGHQWRQWKHWUDQVODWRUDQG KLVKHUSHUVRQDONQRZOHGJHLQWXLWLRQVDQGDUWLVWLFFRPSHWHQFH $QHTXDOO\VXEMHFWLYHDQGLQWXLWLYHWUHDWPHQWRIWUDQVODWLRQTXDOLW\KDVPRUHUHFHQWO\EHHQSURSRVHGZLWKLQWKH µQHRKHUPHQHXWLF¶DSSURDFKHJ6WRO]H ZKHUHWKHKHUPHQHXWLFLQWHUSUHWDWLRQRIWKHRULJLQDODQGWKH SURGXFWLRQRIDWUDQVODWLRQDUHLQGLYLGXDOFUHDWLYHDFWVWKDWGHI\V\VWHPDWL]DWLRQJHQHUDOL]DWLRQDQGWKH GHYHORSPHQWRIUXOHV,Q6WRO]H¶VYLHZDµJRRG¶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¶VUHDFWLRQVWRGLIIHUHQW



3DJH

WUDQVODWLRQVDUHQRWULJRURXVHQRXJKWREHFRQVLGHUHGWKHRUHWLFDOO\YDOLGRUUHOLDEOH ,QWKHVSV\FKROLQJXLVWVVXFKDV&DUUROO VXJJHVWHGWKHXVHRIEURDGFULWHULDOLNHµLQWHOOLJLELOLW\¶DQG µLQIRUPDWLYHQHVV¶IRUDVVHVVLQJWUDQVODWLRQTXDOLW\WRJHWKHUZLWKDQXPEHURIWHVWLQJPHWKRGVVXFKDVDVNLQJ WKHRSLQLRQRIFRPSHWHQWUHDGHUVHWF 7KHPDMRUZHDNQHVVRIDOOVXFKUHVSRQVHEDVHGVXJJHVWLRQVIRUHYDOXDWLQJWUDQVODWLRQTXDOLW\LVWKHVDPH ZHDNQHVVZKLFKFKDUDFWHUL]HVDOOEHKDYLRXULVWLFDSSURDFKHVWKHµEODFNER[¶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¶V WKUHHODQJXDJH IXQFWLRQVFRQWHQWRULHQWHGIRUPRULHQWHGDQGFRQDWLYH+RZHYHUH[DFWO\KRZODQJXDJHIXQFWLRQVDQGVRXUFH WH[WW\SHVFDQEHGHWHUPLQHGDQGDWZKDWOHYHORIGHOLFDF\LVOHIWXQH[SODLQHG1RULVWKHH[DFWSURFHGXUHIRU VRXUFHWH[WDQDO\VLVJLYHQLQWZRRWKHULQIOXHQWLDOSXEOLFDWLRQV7KHILUVW:LOVV VWUHVVHVWKHLPSRUWDQFH LQWH[WXDODQDO\VLVRIµQRUPVRIXVDJH¶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µWUDQVODWLRQVDUHIDFWVRIRQH V\VWHPRQO\¶7RXU\ QDPHO\WKHOLWHUDU\V\VWHPRIWKHWDUJHWFXOWXUHGHWHUPLQHVKRZWKHLVVXHRI WUDQVODWLRQTXDOLW\DVVHVVPHQWLVWREHWDFNOHGILUVWWKHWUDQVODWHGWH[WLVFULWLFL]HGZLWKRXWUHIHUHQFHWRWKH VRXUFHWH[WWKHQVSHFLILFVROXWLRQVRIWUDQVODWLRQSUREOHPVDUHDQDO\VHGE\PHDQVRIWKHµPHGLDWLQJIXQFWLRQDO UHODWLRQDOQRWLRQRIWUDQVODWLRQHTXLYDOHQFH¶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µVNRSRV¶RIWKHWUDQVODWLRQKDVEHHQ FRQVLVWHQWO\DWWHQGHGWR:KHWKHUVXFKDWHUPLQRORJLFDOGLVWLQFWLRQLVQHFHVVDU\DQGVRXQGLVRSHQWRGHEDWH 2IPRUHUHOHYDQFHKHUHLVWKHIDLOXUHRIWKHDXWKRUVWRVSHOORXWH[DFWO\KRZRQHLVWRGHWHUPLQHZKHWKHUD WUDQVODWLRQLVHLWKHUDGHTXDWHRUHTXLYDOHQWOHW



3DJH

DORQHKRZWRDVVHVVLWVVNRSRV$OVRJLYHQWKHFUXFLDOUROHDVVXPHGE\WKHSXUSRVHRUVNRSRVRIDWUDQVODWLRQ LQWKLVPRGHOLWIROORZVWKDWWKHVRXUFHWH[WLVRIVHFRQGDU\LPSRUWDQFHLQIDFWLWLVGHJUDGHGWRDPHUH µVRXUFHRILQIRUPDWLRQ¶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

5HFHQWDQGSRWHQWLDOGHYHORSPHQWV ,QVLJKWVLQWRZKDWJRHVRQLQWUDQVODWRUV¶KHDGVFDQEHXVHGERWKWRVXSSOHPHQWWUDQVODWLRQHYDOXDWLRQDQGWR YDOLGDWHK\SRWKHVHVDERXWWKHFURVVFXOWXUDOGLPHQVLRQVWKDWFKDUDFWHUL]HFXOWXUDOILOWHUV6XFKLQWURVSHFWLYH VWXGLHVRIWKHWUDQVODWLRQDOSURFHVVIRUH[DPSOH.ULQJV/|UVFKHU DUHSRWHQWLDOO\XVHIXOLQWKDW WUDQVODWRUVLQGLFDWHKRZDQGZK\WKH\FKRRVHFHUWDLQRSWLRQVRUWUDQVODWLRQDO



3DJH

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

)XUWKHUUHDGLQJ $UQW]DQG7KRPH*HU]\PLVFK$UERJDVW+RXVHIRUWKFRPLQJ.ROOHU 6FKUHLEHU

-8/,$1(+286(

4XU¶ƗQ.RUDQ WUDQVODWLRQ 7KH4XU¶ƗQLVWKHKRO\ERRNRI,VODPDQGWKHPRVWLPSRUWDQWRIWKHWKUHHVRXUFHVRIDXWKRULW\ZKLFKXQGHUSLQ GXULQJKLVOLIH 0XVOLPUHOLJLRXVOLIHWKHRWKHUWZREHLQJWKHUHYHODWLRQUHFHLYHGE\WKH3URSKHW µVD\LQJV¶ DQGWKH3URSKHW¶VRZQSUDFWLFHVXQQDµWUDGLWLRQ¶ 7KHLPSRUWDQFHDWWDFKHGWRWKH4XU¶ƗQ E\WKH VWHPVIURPWKHEHOLHIWKDWLWFRQWDLQVYHUEDWLPWKH:RUGRI*RGDVUHYHDOHGSLHFHPHDOWR $QJHO*DEULHOEHWZHHQDQG$',WLVWKHUHIRUHFRQVLGHUHGLQLPLWDEOHDQGWKLVKDVLPSRUWDQW LPSOLFDWLRQVIRUERWKWKHOHJLWLPDF\DQGWKHDXWKRUL]HG PHWKRGVRIWUDQVODWLQJLW 7KH4XU¶ƗQFRQVLVWVRIVXUDV FKDSWHUV HDFKGLYLGHGLQWRD\DV YHUVHV (DFKVXUDKDVDQDPHIRU µWKHRSHQLQJ¶DOEDTDUDµWKHFRZ¶ :LWKWKHH[FHSWLRQRI DVKRUWVXUDZKLFK H[DPSOH DOZD\VDSSHDUVILUVWLQSULQWHGHGLWLRQVWKHUHVWRIWKHVXUDV DUHXVXDOO\RUGHUHGE\OHQJWKUDWKHUWKDQ FKURQRORJLFDOO\ZLWKWKHORQJHVWDSSHDULQJDWWKHEHJLQQLQJDQGWKHVKRUWHVWDWWKHHQG7KHZRUG4XU¶ƗQ LWVHOIPHDQVµUHFLWDWLRQ¶DQGWKHVXUDV DUHLQIDFWPHDQWIRURUDOUHFLWDWLRQZLWKPDQ\ZULWWHQLQUK\PLQJ SURVH F8WKPƗQLEQF$IIƗQG WKHWKLUG*XLGHG&DOLSKZDVUHVSRQVLEOHIRURUGHULQJDJURXSRIVFKRODUVWR SURGXFHDFDQRQLFDOZULWWHQWH[WRIWKH4XU¶ƗQZKLFKKHWKHQVHQWWRDOOPDMRUFLWLHVRUGHULQJWKHPWREXUQ LQ DQ\XQDXWKRUL]HGYHUVLRQVWKH\PLJKWSRVVHVV1HYHUWKHOHVVWKHUHDUHVWLOOVHYHQOHJLWLPDWHUHDGLQJV FLUFXODWLRQZKLFKGLIIHUPDLQO\LQWKHPDQQHULQZKLFKWKHYHUVHVDUHUHFLWHGRUDOO\DQGWKHLQWHUSOD\EHWZHHQ WKHUHFLWHGDQGZULWWHQIRUPV$EXO$VZDGDO'XDO\F± DQGDO.KDOƯOLEQ$KPDGF± ZHUH UHVSRQVLEOHIRUGHWHUPLQLQJWKHH[DFWDQGQRZZLGHO\DFFHSWHGVSHOOLQJRIWKH4XU¶ƗQ'LUHFWO\RULQGLUHFWO\ WKH\DOVRKDGDVLJQLILFDQWLPSDFWRQGHWHUPLQLQJWKHSURQXQFLDWLRQRIWKHZRUGV7KHUHDUHVWLOOVRPHUHVLGXDO GLIIHUHQFHVEHWZHHQWKHUHDGLQJVLQFLUFXODWLRQPRVWO\DWZRUGOHYHOEXWWKHVHDUHPLQRUDQGWKHUHDUH WKHUHIRUHQRµYHUVLRQV¶RIWKH4XU¶ƗQLQWKHVWULFWVHQVHRIWKHZRUGDVXVHGLQWKHFRQWH[WRIWKH1HZ 7HVWDPHQW=LGDQDQG=LGDQ /LQJXLVWLFDOO\DQGVW\OLVWLFDOO\WKH4XU¶ƗQLVWKHPDVWHUSLHFHRIWKH$UDELFODQJXDJH,WVJUDPPDWLFDO VWUXFWXUHIRULQVWDQFHLVVSHFLILFWRLWDQGLQPDQ\ZD\VGLIIHUHQWIURPWKHJUDPPDWLFDOVWUXFWXUHRIQRQ 4XU¶ƗQLF$UDELF6RPXFKVRWKDWWKHUHLVIRUH[DPSOHDILHOGRIVWXG\GHGLFDWHGWR4XU¶ƗQLFJUDPPDUDQG V\QWD[,QRWKHUZRUGVWKHUHLV$UDELFDQGWKHUHLV4XU¶ƗQLF$UDELF,WLVWKLVPLUDFXORXVFKDUDFWHURIWKH OLQJXLVWLFFRPSRVLWLRQRIWKH4XU¶ƗQZKLFK0XVOLPVFLWHDVµWKHVWURQJHVWDUJXPHQWLQIDYRXURIWKH JHQXLQHQHVVRIWKHLUIDLWK¶+LWWL DQGVRPHVFKRODUVWKHUHIRUHVXJJHVWWKDWµWKHWULXPSKRI ,VODPZDVWRDFHUWDLQH[WHQWWKHWULXPSKRIDODQJXDJHPRUHSDUWLFXODUO\RIDERRN¶LELG



3DJH

7KHWUDQVODWDELOLW\DQGOHJLWLPDF\RIWUDQVODWLQJWKH4XU¶ƗQ :KHUHDV WKHVD\LQJVRIWKH3URSKHW PD\EHWUDQVODWHGDQGTXRWHGLQWUDQVODWLRQLWKDVWUDGLWLRQDOO\ EHHQFRQVLGHUHGLOOHJLWLPDWHWRWUDQVODWHWKH4XU¶ƗQ7KHTXLQWHVVHQWLDOO\GLYLQHQDWXUHRIWKH4XU¶ƗQDQGWKH FOHDUO\KXPDQFKDUDFWHURIWKH DUHEDVLFDOO\WKHUHDVRQIRUWKHVHWZRGLDJRQDOO\RSSRVHGYLHZVWRZDUGV WUDQVODWLQJWKHP7KHLVVXHRIOHJLWLPDF\LVGLIILFXOWWRVHSDUDWHIURPWKHPRUHJHQHUDOTXHVWLRQRI 75$16/$7$%,/,7<LQGLVFXVVLRQVRIWKH4XU¶ƗQ3URSRQHQWVRIWKHDEVROXWHXQWUDQVODWDELOLW\RIWKH4XU¶ƗQ ILQGH[SOLFLWVXSSRUWRIWKHLUYLHZLQD\DQXPEHURIWKHVXUDRI<XVXIµ:HKDYHVHQWLWGRZQ$VDQ$UDELF 4XU¶ƗQ¶7KH+RO\4XUƗQ¶YHUVLRQRIWKH3UHVLGHQF\RI,VODPLF5HVHDUFKHVSHPSKDVLVDGGHG (YHQWRGD\WKHUHLVVWLOODVWURQJDQGLQIOXHQWLDOVFKRRORIWKRXJKWZKLFKVXEVFULEHVWRWKHYLHZWKDWWKH 4XU¶ƗQFDQQRWEHWUDQVODWHGDQGWKDWDQ\H[LVWLQJµWUDQVODWLRQV¶RILWDUHLOOHJLWLPDWH0DQ\EHOLHYHWKDWLILWLV WREHWUDQVODWHGDWDOOWKH4XU¶ƗQFDQRQO\EHWUDQVODWHGE\D0XVOLP6RPXFKVRWKDWLQWKHFRQWH[WRIWKH 4XU¶ƗQWKHWHUPµWUDQVODWLRQ¶DQGDOOLWVGHULYDWLYHVVKRXOGEHSODFHGEHWZHHQTXRWDWLRQPDUNVRUVRPHVXFK JUDSKLFPDUNHUWRSRLQWRXWWKDWWKHWHUPLVXVHGLQDXQLTXHO\FRQWH[WVHQVLWLYHVHQVH2QHVLJQLILFDQWUHVXOWRI WKHVHYLHZVDQGWKHVWUHQJWKLQZKLFKWKH\DUHKHOGLVWKDWQRQ$UDE0XVOLPVIRUH[DPSOH,QGLDQ0XVOLPV KDYHWROHDUQWRUHDGDQGUHFLWHWKH4XU¶ƗQLQ$UDELF,IDQGZKHQXVHGWUDQVODWLRQZRXOGIXQFWLRQPHUHO\DVD FRPPHQWDU\H[SODLQLQJRUSDUDSKUDVLQJWKHVRXUFHWH[WEXWQRWUHSODFLQJLW 7KHEHOLHILQWKHLOOHJLWLPDF\RIWUDQVODWLQJWKH4XU¶ƗQKDVDOZD\VKDGLWVRSSRQHQWVKRZHYHUHYHQLQWKH HDUO\GHFDGHVRI,VODP WKH,UDTLVFKRODUDQGWKHRORJLDQF± EHOLHYHGLWZDVOHJLWLPDWHWR WUDQVODWHDOOWKHYHUVHVRIWKH4XU¶ƗQLQWRDIRUHLJQWRQJXHEXWµLWZDVQRWODZIXOWRSXWWKHZKROHWRJHWKHULQ RQHYROXPHXQOHVVWKH$UDELFWH[WZDVSODFHGRSSRVLWHWKHWUDQVODWLRQWKURXJKRXW¶3LFNWKDOO 0RUHRYHU GHFODUHGWKDWLWLVµSHUPLVVLEOHIRURQHZKRFRXOGQRWVSHDN$UDELFWRH[SUHVVWKH PHDQLQJRIWKH$UDELFZRUGVLQKLVRZQODQJXDJHZKHQUHFLWLQJWKHSUHVFULEHGSUD\HUV¶LELG %XWKH UHSRUWHGO\UHWUDFWHGWKLVUDGLFDOYLHZDWDODWHUVWDJHDQGIROORZHGWKHPRUHRUWKRGR[OLQH0RXVDDQG II DFFRUGLQJWRZKLFKDQ\0XVOLPZKRFDQQRWUHDGWKH4XU¶ƗQLQ$UDELFLVGHHPHGYLUWXDOO\ LOOLWHUDWH $Q\DWWHPSWDWWUDQVODWLQJWKH4XU¶ƗQLVHVVHQWLDOO\DIRUPRIH[HJHVLVRUDWOHDVWLVEDVHGRQDQXQGHUVWDQGLQJ RIWKHWH[WDQGFRQVHTXHQWO\SURMHFWVDFHUWDLQSRLQWRIYLHZKHQFHWKHSUHIHUHQFHJLYHQWR0XVOLPDVRSSRVHG WRQRQ0XVOLPWUDQVODWRUV7HUPVVXFKDVµH[SODQDWLRQ¶µLQWHUSUHWDWLRQ¶DQGµSDUDSKUDVH¶WDNHRQH[HJHWLF KXHVLQWKHFRQWH[WRIWUDQVODWLQJWKH4XU¶ƗQDQGWKLVKDVLPSOLFDWLRQVIRUOHJLWLPL]LQJDQ\VXFKDWWHPSW $QGDOXVERUQ,PDP F± IRUH[DPSOHEDVHGKLVYLHZWKDWWKH4XU¶ƗQLVXQWUDQVODWDEOHRQWKH SUHPLVHWKDWWKHERRNKDVµVHQVHV¶WKDWDUHH[FOXVLYHWR4XU¶ƗQLF$UDELFVRWKDWHYHQDWWHPSWLQJWRUHQGHUVXFK VHQVHVLQQRQ4XU¶ƗQLF$UDELFLVGRRPHGWRIDLOXUH0HKDQQD +HGLGQRWKRZHYHUREMHFWLQSULQFLSOH WRWUDQVODWLQJWKH4XU¶ƗQSURYLGHGVXFKWUDQVODWLRQDVPD\EHSURGXFHGLVVHHQDVDWUDQVODWLRQRIWKH µPHDQLQJV¶RIWKHERRNLHDSDUDSKUDVHRUEDVLFLQWHUSUHWDWLRQ7KLVZRUGLQJFRQWLQXHVWRIXQFWLRQDVD µFRQGLWLRQ¶DWWDFKHGWRDXWKRUL]HGWUDQVODWLRQV3LFNWKDOO UHODWHVKRZWKH5HFWRURIDO$]KDUWKH DXWKRULWDWLYHWUDGLWLRQDOFHQWUHRI,VODPLFVWXGLHVLQ&DLUR JDYHKLVFRQVHQWRQO\ZKHQKHZDVWROGWKDW 3LFNWKDOOZRXOGQRWFDOOKLVWUDQVODWLRQµ$O4XU¶ƗQ¶EXWZRXOGFDOOLWµ0DµDQLX¶O4XU¶DQL¶O 0DMLG¶7KHPHDQLQJVRIWKH*ORULRXV4XU¶ƗQ WRZKLFKKHUHSOLHGµ,IKHGRHVWKDW«WKHQWKHUHFDQEHQR REMHFWLRQ¶ 7KHGHFDGHRUVREHJLQQLQJLQDQGHQGLQJLQLQ(J\SWZLWQHVVHGVRPHSDUWLFXODUO\YLJRURXV SROHPLFVFRQFHUQLQJWKHOHJLWLPDF\RIWUDQVODWLQJWKH4XU¶ƗQ6HQLRU$]KDUSHUVRQDOLWLHVH[SUHVVHGVWURQJ YLHZVDUJXLQJIRURUDJDLQVWWKHOHJLWLPDF\RIVXFKDQHQWHUSULVH0RVWZHUHLQLWLDOO\RSSRVHGWRWKHYHU\LGHD RIWUDQVODWLQJWKH4XU¶ƗQDQGPDQ\VXSSRUWHGWKHEDQQLQJDQGEXUQLQJRIDQ(QJOLVKWUDQVODWLRQE\D0XVOLP $OLZKLFKKDGDUULYHGLQ(J\SWDWWKHWLPHWKHWUDQVODWLRQLVFLWHGYDULRXVO\DVEHLQJSXEOLVKHGLQ RU0HKDQQD 7KH



3DJH

GHFLVLRQE\WKH7XUNLVKVWDWHVPDQ.HPDO$WDWUN± WRFRPPLVVLRQDWUDQVODWLRQRIWKH4XU¶ƗQLQWR 7XUNLVKPDGHPDWWHUVZRUVHRQHYLHZKHOGDWWKHWLPHZDVWKDWWKHWUDQVODWLRQZDVGHVLJQHGWRGLVWDQFH 0XVOLP7XUNVIURPWKHLUKRO\ERRNLQLWVRULJLQDOODQJXDJH0HKDQQD ,QWKHJHQHUDOFRQWH[WRI $WDWUN¶VSROLFLHVLWZDVDOVRSHUFHLYHGDVDQDWWHPSWWRVHYHUWKHWLHVEHWZHHQ7XUNH\DQGWKH$UDELF VSHDNLQJ0XVOLPZRUOGLQRUGHUWRPRYHFORVHUWR(XURSH ,Q6KHLNK0XVWDIDDO0DUƗJKL5HFWRURIDO$]KDUIRUPDOO\DQQRXQFHGLQDOHWWHUWRWKHSULPHPLQLVWHU RIWKHWLPHWKDWUHQGHULQJWKHPHDQLQJVRIWKH4XU¶ƗQLQWRDQ\ODQJXDJHFDQQRWEHWHUPHGµ4XU¶ƗQ¶0HKDQQD LELGDO=DI]ƗI 6KHLNK0DUƗJKL¶VYLHZVHYHQWXDOO\UHVXOWHGLQDIDWZDIRUPDOOHJDORSLQLRQ WRWKH HIIHFWWKDWWUDQVODWLQJWKH4XU¶ƗQZDVDOORZHGIURPDVKDUƯFDUHOLJLRXVMXULVGLFWLRQ SRLQWRIYLHZ6KRUWHU (QF\FORSDHGLDRI,VODP 2Q$SULORIWKHVDPH\HDUWKHIDWZDZDVDSSURYHGE\WKH&RXQFLORI 0LQLVWHUV2QHRIWKHVWLSXODWLRQVDWWDFKHGWRWKLVDSSURYDOZDVWKDWDQ\VXFKWUDQVODWLRQPXVWEHFDOOHGµD WUDQVODWLRQRIDQLQWHUSUHWDWLRQRIWKH4XU¶ƗQ¶RUµDQLQWHUSUHWDWLRQRIWKH4XU¶ƗQLQODQJXDJH;¶DQGQRWµD WUDQVODWLRQRIWKH4XU¶ƗQ¶0HKDQQDDO=DI]ƗI 7RWKLVGD\ZKHQDO$]KDUDQGVLPLODUERGLHVLQ WKH$UDEZRUOGJUDQWSHUPLVVLRQIRUDWUDQVODWLRQRIWKH4XU¶ƗQWREHSXEOLVKHGLWLVH[SOLFLWO\VWDWHGWKDWWKH ZRUNFRQFHUQHGLVDWUDQVODWLRQRIWKHµPHDQLQJV¶RIWKH4XU¶ƗQ 3URQRXQFHPHQWVE\UHOLJLRXVOHDGHUVDVLGHWKHVWURQJOLQNEHWZHHQWKH4XU¶ƗQDQGWKHW\SHRI$UDELFLQZKLFK LWZDVUHYHDOHGPHDQVWKDWWKHGLIIHUHQFHEHWZHHQWKHUHYHDOHGERRNDQGRQHRILWVWUDQVODWLRQVZKHWKHU DXWKRUL]HGRUQRW KDVQHYHUJRQHXQQRWLFHG7KXVUHDGHUVRIWKH*RVSHOVLQDODQJXDJHVXFKDV(QJOLVKPD\ KDYHVRPHDZDUHQHVVWKDWWKHYHUVHVEHLQJUHDGDUHDWUDQVODWLRQRIVRPHRULJLQDOWH[WEXWWKLVDZDUHQHVV ZRXOGQRWSDUWLFXODUO\PDUWKHWH[WFRQFHUQHGRUGHWUDFWIURPLWVDXWKRULW\,QWKHH\HVRID0XVOLPE\ FRQWUDVWWKHGLIIHUHQFHEHWZHHQWKH4XU¶ƗQDQGDQ\RILWVWUDQVODWLRQVLVXOWLPDWHO\WKHGLIIHUHQFHEHWZHHQ*RG DVWKH$XWKRU$XWKRULW\DQG6RXUFHRQWKHRQHKDQGDQGPDQDVDPHUHWUDQVODWRULQWHUSUHWHURQWKHRWKHU 3LFNWKDOO DVVHUWVWKDWµ1RQRQ$UDE0XVOLPV«HYHUKDGWKHOHDVWLGHDRIHOHYDWLQJDWUDQVODWLRQRI WKH6FULSWXUH>LHWKH4XU¶ƗQ@LQWKHLUODQJXDJHWRWKHSRVLWLRQRIWKH(QJOLVKWUDQVODWLRQRIWKH%LEOHDPRQJ (QJOLVKVSHDNLQJ3URWHVWDQW&KULVWLDQV²WKDWLVWRVD\RIVXEVWLWXWLQJLWIRUWKHRULJLQDO¶$WDPRUHSUDFWLFDO OHYHOWKHUHLVE\LPSOLFDWLRQQRXQLYHUVDOO\UHFRJQL]HGVLQJOHWUDQVODWLRQRUHGLWLRQLQWUDQVODWLRQRIWKH 4XU¶ƗQ

7UDQVODWLRQVRIWKH4XU¶ƗQDKLVWRULFDORYHUYLHZ (DUO\PHVVDJHVIURPWKH3URSKHW WRSROLWLFDOUXOHUVRIWKHWLPHVXFKDV(PSHURU+HUDFOLXVF± RIWKH(DVWHUQ5RPDQ(PSLUHDQGDO0XTDZTLVKLVYLFHUR\LQ&RSWLF(J\SWJHQHUDOO\LQFOXGHGDQD\D IURPWKH4XU¶ƗQ,WFDQRQO\EHDVVXPHGWKDWWUDQVODWLRQVRIWKHVHPHVVDJHVZHUHXQGHUWDNHQE\WUDQVODWRUV HPSOR\HGE\WKHUHFHLYHUVRUDWOHDVWE\SHUVRQVIDPLOLDUZLWK$UDELFLQWKHLUFRXQWU\7KHILUVWD\DZKLFK PD\KDYHEHHQWUDQVODWHGLQWKLVIDVKLRQLVOLNHO\WREHQXPEHULQWKHVXUDRIDOF,PUƗQDO=DI]Ɨ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µWUDQVODWLRQV¶RIWKH4XU¶ƗQDSSHDUHGLQ3HUVLDQGXULQJWKHUHLJQRIWKH$EEDVLGVF± 8QGHUWDNHQE\



3DJH

3HUVLDQFRQYHUWVWR,VODPWKHVHZHUHSULPDULO\FRPPHQWDULHVEXWWKH\QRQHWKHOHVVFRQWDLQHGPXFKZRUGIRU ZRUGWUDQVODWLRQVHH3(56,$175$',7,21 7KHILUVWµSURSHU¶WUDQVODWLRQRIWKHIXOOWH[WE\5REHUWRI &KHVWHUZDVLQWR/DWLQLWZDVVSRQVRUHGLQE\3HWHUWKH9HQHUDEOH$EERWRI&OXQ\ZLWKWKHH[SOLFLW DLPRIUHIXWLQJWKHEHOLHIVRI,VODP+LWWL 6LQFHWKHQWKHERRNKDVEHHQWUDQVODWHGLQWRDOPRVW DOOWKHODQJXDJHVRIWKHZRUOGDQGPRUHWKDQRQFHLQWRPDQ\RIWKHP7KH$UDELFWH[WRIWKH4XU¶ƗQZDVILUVW SULQWHGLQ9HQLFHLQIROORZHGVKRUWO\E\WKH/DWLQWUDQVODWLRQRI5REHUWRI.HWWRQLQ%DVOHLQ:DWW DQG%HOO 7KHILUVWWUDQVODWLRQLQWR(QJOLVKZDVPDGHE\WKH6FRWVPDQ$OH[DQGHU5RVVLQ7KLVZDVDQLQGLUHFW WUDQVODWLRQEDVHGRQD)UHQFKYHUVLRQE\WKH6LHXUGX5\HU:DWWDQG%HOO+LWWL DQGOLNHWKH/DWLQWUDQVODWLRQVSRQVRUHGE\WKH$EERWRI&OXQ\KDGGXELRXVDLPVDVFDQEHVHHQIURPLWVWLWOH µ«$QGQHZO\(QJOLVKHGIRUWKHVDWLVIDFWLRQRIDOOWKDWGHVLUHWRORRNLQWRWKH7XUNLVKYDQLWLHV¶0RUHFDUHIXO DQGVFKRODUO\WUDQVODWLRQVIROORZHG1RWDEOHDPRQJWKHVHZHUHWKHWUDQVODWLRQLQWR/DWLQE\/XGRYLFL0DUUDFFL LQDQGLQWR(QJOLVKE\*HRUJH6DOHLQDQG%HOOLQ:DWWDQG%HOOLELG&KDSWHUDQG SS± %HOO¶VWUDQVODWLRQLVRISDUWLFXODULQWHUHVWVLQFHLWZDVQRWMXVWDWUDQVODWLRQEXWDOVRDµFULWLFDOUHDUUDQJHPHQWRI WKH6XUDKV¶LELG %\DQGODUJHWKHUHLVFRQVHQVXVDPRQJPRVW4XU¶ƗQLFWUDQVODWRUVWRXVHDVVRXUFHWH[W WKHµ8WKPDQLF5HFHQVLRQ¶LHWKHFDQRQLFDOYHUVLRQVDQFWLRQHGE\F8WKPƗQLEQF$IIƗQLQWKHVHYHQWKFHQWXU\ ZKLFKKDVDVHWRUGHUEDVHGPDLQO\RQWKHOHQJWKRIHDFKVXUD%HOOZDVRQHRIDVPDOOQXPEHURIWUDQVODWRUV LQFOXGLQJ5RGZHOO ZKRVDZILWWRUHDUUDQJHWKHVXUDV RIWKH4XU¶ƗQRQFKURQRORJLFDOJURXQGV0RVW WUDQVODWLRQVLQSULQWGRQRWMXVWIROORZWKHRUGHURIWKH8WKPDQLF5HFHQVLRQEXWDOVRHQVXUHWKDWWKHLQGLYLGXDO D\DV LQHDFKVXUDDUHJLYHQQXPEHUVLQWKHVDPHIDVKLRQDVWKH$UDELFWH[WVZKLFKPDNHVIRUHDVHRIFURVV UHIHUHQFLQJ5RGZHOO DQG$UEHUU\ DUHDPRQJWKRVHZKRGRQRWIROORZWKLVSUDFWLFH

6W\OHDQGVWUDWHJLHVRI4XU¶ƗQLFWUDQVODWLRQ 4XU¶Ɨ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µWUDQVODWLRQVRIWKHPHDQLQJV«VKRXOGEHSULQWHGQH[WWRWKHWH[W FRQFHUQHG¶0HKDQQDWUDQVODWHG ,QWHUPVRIVW\OH$UEHUU\¶V WUDQVODWLRQWULHVWRHPXODWHWKHTXDOLW\RIWKHRULJLQDO,WGRHVVRZLWKVRPH VXFFHVVDQGVHHPVDWOHDVWSDUWLDOO\WRKDYHLQIOXHQFHGRWKHUWUDQVODWLRQVWKDWDLPHGDWWKHVDPHHIIHFWVXFKDV WKHUHFHQWWUDQVODWLRQE\=LGDQDQG=LGDQ 5RGZHOO¶V TXDVLYHUVLILHGWUDQVODWLRQWULHVWREDODQFH DFFXUDF\ZLWKWKHQHHGWRUHSURGXFHDVLPLODUHIIHFWRQWKHWDUJHWUHDGHU3LFNWKDOO LVFRQVLGHUHG SDUWLFXODUO\VXFFHVVIXOVHHIRUH[DPSOH+LWWL VKRZLQJHUXGLWLRQDQGVHQVLWLYLW\<XVXI F$OL¶V HGLWLRQLVDQH[DPSOHRIDQDSSURDFKWKDWDWWHPSWVWREHOLWHUDODWWLPHVZKLOHWHQGLQJWRRYHU WUDQVODWHDWRWKHUV,UYLQJ[YLLII 0RVWWUDQVODWLRQVRIWKH4XU¶ƗQDUHVRXUFHRULHQWHGDFFRPPRGDWLQJWKHWDUJHWDXGLHQFHLVQRWJHQHUDOO\ 7KLVPD\ IDYRXUHGJLYHQWKDWWKH4XU¶ƗQLVWKH:RUGRI*RGUHYHDOHGLQ$UDELFWRWKH3URSKHW H[SODLQWKHH[WHQVLYHXVHRIQRWHVLQPDQ\WUDQVODWLRQVDQGWKHOHQJWK\LQWURGXFWLRQVWKDWWHQGWRSUHFHGHWKHP (YHU\WUDQVODWLRQRIWKH4XU¶ƗQKDVKDGWRFRQIURQWWKHLVVXHRILWVRZQOHJLWLPDF\DWVRPHSRLQWLQDGGLWLRQWR WKHXVXDOTXHVWLRQVRIDFFXUDF\UHOHYDQFHDQGVW\OLVWLFLPSDFW%XWWKURXJKRXWLWVORQJKLVWRU\LWKDVEHHQWKH



3DJH

TXHVWLRQRIWKHYHU\WUDQVODWDELOLW\RIWKH4XU¶ƗQZKLFKKDVPRVWGRPLQDWHGWKHGHEDWHLQWKLVSDUWLFXODU WUDQVODWLRQFRQWH[W 6HHDOVR %,%/(75$16/$7,21725$+75$16/$7,21

)XUWKHUUHDGLQJ $OLDO%XQGDT)LVFKHUDQG$EHGL0HKDQQD3LFNWKDOO:DWW:DWWDQG%HOO DO=DI]ƗI



3DJH

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¶VIDPLOLDULW\ZLWK WKHP2DWHV/HRQDUG:RROI9LUJLQLD:RROI 2QWKHRWKHUKDQGQHLWKHUWKHUHYLHZLQJ QRUWKHFULWLFLVPRIOLWHUDU\WUDQVODWLRQVKDVGHYHORSHGIXOO\DVDQDUW²XQOLNHWKHUHYLHZLQJDQGFULWLFLVPRI OLWHUDWXUH7KLVFDQEHH[SODLQHGRQO\LQSDUWE\WKHPXOWLSOHGLIILFXOWLHVSUHVHQWHGE\DQ\DWWHPSWWRDQDO\VH DQGSDVVMXGJHPHQWIDLUO\RQFUHDWLYHDFWLYLW\7KHJHQHUDOODFNRIYDOXHDVVRFLDWHGZLWKWUDQVODWLRQLQWKH :HVWKDVXQGRXEWHGO\EHHQDQDGGLWLRQDOIDFWRUDQGDQHTXDOO\GHWHUPLQDQWRQH%DVVQHWW6DQWR\R ±+ROPHV9LOLNRYVNê $V/HLJKWRQ[L±[L[II KDVLQGLFDWHGLQDQDWLRQDO FXOWXUDOFRQGLWLRQZKHUHWUDQVODWLRQLVKLJKO\HVWHHPHGDVLQWKHIRUPHU6RYLHW8QLRQWUDQVODWLRQFULWLFLVP IORXULVKHV 'HVSLWHWKHµVWXPEOLQJEORFN¶WKDWHYDOXDWLRQSUHVHQWVWUDQVODWRUVDQGWUDQVODWLRQVFKRODUVDOLNHLQFUHDVLQJO\ UHFRJQL]HLWVLPSRUWDQFH$VDµVSHFLDONLQGRIFULWLFDODFWLYLW\¶9LOLNRYVNê LWPXVWEHGLVWLQJXLVKHG IURPWKHIRUPVRIFULWLFLVPLPSOLFLWLQWKHDFWLYLW\RIWUDQVODWLRQLWVHOI%URHFN/HIHYHUHGL 6WHIDQR%HUPDQ $WOHDVWRQHVFKRODUKDVVXJJHVWHGWKDWWUDQVODWLRQFULWLFLVPEH FRQVLGHUHGDVHSDUDWHDUHDRIDSSOLHGWUDQVODWLRQVWXGLHV+ROPHV 2WKHUVKDYHVWUHVVHGLWVLPSRUWDQFH DVDµOLQN¶EHWZHHQWUDQVODWLRQWKHRU\DQGSUDFWLFH1HZPDUN DQGDµZHDSRQLQGHIHQFHRIWKH SURIHVVLRQ¶'RGGV 5HYLHZHUVRIOLWHUDU\WUDQVODWLRQKDYHDOVRLQGLFDWHGDQHHGIRUUHYLHZVWKDW GHVFULEHWKHTXDOLW\RIDWUDQVODWLRQZLWKPRUHWKDQDVLQJOHDGMHFWLYHDQGUHIUDLQIURPWUDVKLQJDWUDQVODWRU¶V ZRUNRQWKHEDVLVRILVRODWHGHUURUV'RXPD&KULVW0DLHU+HDUQH ,QWKHFDVHRIERWK UHYLHZLQJDQGFULWLFLVPDQLQWHUHVWLQDQGFRQFHUQIRUHYDOXDWLRQLVOHDGLQJWRWKHVWXG\RISDVWHYDOXDWLYH SUDFWLFHVWRGLVFXVVLRQVDERXWWKHFULWHULDDSSURSULDWHIRUWKHHYDOXDWLRQRIWUDQVODWLRQVDQGWRWKHVFUXWLQ\RI FXUUHQWWUHQGVLQUHYLHZLQJDQGFULWLFLVP 7KHVWXG\RISDVWHYDOXDWLYHSUDFWLFHVSUHVHQWVDSDUWLFXODUVHWRIFKDOOHQJHV7KHDEVHQFHRIDµXQLYHUVDOFDQRQ DFFRUGLQJWRZKLFKWH[WVPD\EHDVVHVVHG¶%DVVQHWW DQGWKHFKDQJHVWKDWRFFXUFRQWLQXDOO\LQWKH FULWHULDXVHGWRPHDVXUHWKHVXFFHVVRUYDOXHRIWUDQVODWLRQVPDNHLWGLIILFXOWWRLGHQWLI\IL[HGSDWWHUQVDQG WUHQGV-RKQ'5<'(1VHH%5,7,6+75$',7,21 PD\KDYHVSRNHQFRQILGHQWO\DERXWµJRRG¶DQGµEDG¶ OLNHQHVVHV EXWWKHGLVWLQFWLRQEHWZHHQWKHPKDVDOZD\VGHSHQGHGRQµHWKQRFHQWULFDSSURDFKHVWRWKH WDVNRIFULWLFLVP¶.HOO\ 3HUKDSVHYHQPRUHLPSRUWDQWO\PDQ\RIWKHHYDOXDWLRQVWKDWKDYHSURYHG PRVWLQIOXHQWLDODUHOLNHWUDQVODWLRQLWVHOIQRWLPPHGLDWHO\YLVLEOH)RUWKHXQZULWWHQKLVWRU\RIWUDQVODWLRQ UHYLHZLQJDQGFULWLFLVPLVFKDUDFWHUL]HGQRWRQO\E\WKHXQDFNQRZOHGJHGFRYHUWLPSOLFLWDQG



3DJH

YHUEDODFWVRIHYDOXDWLRQWKDWRFFXULQDOOHYDOXDWLYHSUDFWLFHV6PLWK± EXWHYHQWKHµKLJKO\ VSHFLDOL]HGLQVWLWXWLRQDOL]HGIRUPVRIHYDOXDWLRQ¶6PLWK IUHTXHQWO\FRQWDLQYDOXHMXGJHPHQWVPDGH ZLWKRXWUHIHUHQFHWRH[SOLFLWFULWHULD,QDGGLWLRQVXFKMXGJHPHQWVKDYHRIWHQDSSHDUHGDQGFRQWLQXHWR DSSHDULQIRUPVQRWVSHFLILFDOO\LGHQWLILHGDVHYDOXDWLYHVXFKDVWUDQVODWRUV¶SUHIDFHVDQGDQQRWDWLRQV FRPSOLPHQWDU\SRHPVDQGHVVD\VDERXWWKHZRUNRIRWKHUWUDQVODWRUVVFKRODUO\ZULWLQJDERXWWUDQVODWLRQ WKHRU\DQGSUDFWLFHDQGDSSUDLVDOVHPEHGGHGLQILFWLRQDOFRPPHQWDU\ 7UDQVODWRUV¶SUHIDFHVDQGDQQRWDWLRQVRIWHQSURYLGHLQVLJKWIXOREVHUYDWLRQVDERXWWUDQVODWLRQSUDFWLFH1HZ WUDQVODWLRQVKRZHYHUDUHIUHTXHQWO\XQGHUWDNHQZLWKWKHLQWHQWRILPSURYLQJRUHYHQUHFWLI\LQJH[LVWLQJ YHUVLRQVDQGWKHHYDOXDWLYHFRPPHQWVWKH\FRQWDLQPXVWWKHPVHOYHVEHHYDOXDWHGLQWKHOLJKWRIWKHLUSRVVLEOH UROHLQDWUDQVODWRU¶VRZQSURMHFW7KHVDPHLVWUXHRIZULWLQJE\WUDQVODWRUVDERXWWKHZRUNRIRWKHUWUDQVODWRUV 6XFKFRPPHQWDU\LVRIWHQERWKKLJKO\PHWDSKRULFDODQGKLJKO\PRWLYDWHGZLWKUHVSHFWWRDWUDQVODWRU¶VHIIRUW RUWRWKHSURIHVVLRQRIWUDQVODWLRQLWVHOI7KLVPHDQVWKDWFRPPHQWDU\PXVWEHUHDGLQWKHFRQWH[WRISUHYDLOLQJ UKHWRULFDOFRQYHQWLRQVDQGLWPDNHVWKHWDVNRIH[WUDFWLQJJHQHUDOSULQFLSOHVRIHYDOXDWLRQWUHDFKHURXVLIQRW LPSRVVLEOH7KHFRPSOLPHQWVIRXQGLQVXFK5HQDLVVDQFHSRHPVDV&RQVWDQWLMQ+X\JHQV¶VYHUVHVRQ WUDQVODWLRQVE\-DFRE:HVWHUEDHQRUWKRVHE\-DPHV:ULJKWRQ'5<'(1¶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± %\H[DPLQLQJWKHMXGJHPHQWVRIFULWLFVDQGUHYLHZHUVIURPWKHSDVWFXUUHQWWUDQVODWLRQVFKRODUVKDYHEHJXQWR GRFXPHQWWKHRIWHQFRPSOH[FRQWH[WVLQZKLFKHYDOXDWLRQRFFXUV7KLVZRUNLVEULQJLQJWROLJKWERWKWKH PRWLYDWLRQRILQGLYLGXDOFULWLFVDQGWKHIDFWWKDWWKHLUDVVHVVPHQWVZHUHRIWHQEDVHGRQLQIRUPDWLRQDSSDUHQWO\ XQUHODWHGWRWKHDFWLYLW\RIWUDQVODWLRQ&DURO\Q:LOOLDPV KDVDUJXHGWKDW$OH[DQGHU3RSH¶V FULWLFVMXGJHGKLPDVDWUDQVODWRURI+RPHULQWHUPVRIKLVµSRHWLFYLULOLW\¶XVLQJHYLGHQFHµRQO\WDQJHQWLDOO\ UHOHYDQWWRWKHLUREVHUYDWLRQV¶,QKLVVWXG\RI0DWWKHZ$UQROG¶VOHFWXUHµ2Q7UDQVODWLQJ+RPHU¶9HQXWL ± KDVVKRZQQRWRQO\WKDW$UQROG¶VDWWDFNRQ)UDQFLV1HZPDQ¶VVHH%5,7,6+75$',7,21 WUDQVODWLRQRIWKH,OLDGVHUYHGWRPDUJLQDOL]H1HZPDQ¶VZRUNEXWDOVRWKHH[WHQWWRZKLFKDSROHPLFVDERXW DFFHSWDEOHWUDQVODWLRQVWUDWHJLHVFDQEHVLPXOWDQHRXVO\RQHDERXWFXOWXUDOSROLWLFV5DFKHO0D\¶VGLVFXVVLRQ DERXW&RQVWDQFH*DUQHWWUHYHDOVWKDWWKHORQJOLYHGSRSXODULW\RI*DUQHWW¶VPDQ\WUDQVODWLRQVIURPWKH5XVVLDQ GLGQRWUHVXOWIURPFULWLFDODFFODLPEDVHGRQFDUHIXOVFUXWLQ\RIKHUZRUN5DWKHULWZDVGXHWR*DUQHWW¶VDELOLW\ WRPDNH5XVVLDQZRUNVUHDGDEOHWRWKH(QJOLVKODQJXDJHSXEOLFDQGWRWKHXQTXHVWLRQLQJDFFHSWDQFHRQWKH SDUWRIFULWLFVDQGUHDGHUVDOLNHRQFHKHUUHSXWDWLRQZDVHVWDEOLVKHG0D\± )URP$OH[DQGHU)UDVHU7<7/(5VHH%5,7,6+75$',7,21 WR*HRUJH6WHLQHUDQGRWKHUVZULWLQJHYHQ PRUHUHFHQWO\FULWLFVKDYHGHVFULEHGWUDQVODWLRQVDVµJRRG¶RUµEDG¶ZLWKRXWVHULRXVO\TXHVWLRQLQJRU TXDOLI\LQJWKRVHDGMHFWLYHVHYHQZKHQWKH\DFNQRZOHGJHGWKHUHODWLYHQDWXUHRIRSLQLRQRUWDVWH7\WOHU ±6WHLQHU $WWKHVDPHWLPHKRZHYHUWKRXJKWIXOHIIRUWVWREULQJLQFUHDVHGDWWHQWLRQWR EHDURQHYDOXDWLRQDQGWRHVWDEOLVKV\VWHPDWLFHYDOXDWLYHFULWHULDGRH[LVW7KHVHHIIRUWVDUHGLIILFXOWWR VXPPDUL]HVXFFLQFWO\EHFDXVHFULWLFVDSSURDFKWUDQVODWLRQIURPYDULHGGLVFLSOLQHVDQGSHUVSHFWLYHVDQG EHFDXVHFRQVHTXHQWO\WKH\GLVFXVVERWKWUDQVODWLRQDQGHYDOXDWLRQLQYHU\GLIIHUHQWWHUPV(YHQVRLWLV SRVVLEOHWRQRWHFHUWDLQXQDQLPLWLHVLQVSLWHRIWKHVHGLIIHUHQFHVE\IRFXVLQJRQWZRTXHVWLRQVWKDWFRQFHUQ PRVWFULWLFVZKRDGGUHVVHYDOXDWLYHSUDFWLFHVWR



3DJH

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µSXUHGHVFULSWLRQ¶'RGGV EXWPRUHIUHTXHQWDUHWKRVHZKRWHQGWRHVFKHZYDOXHMXGJHPHQWVSUHIHUULQJQRWWRSURFODLPRQH WUDQVODWLRQEHWWHUWKDQDQRWKHU+DWLPDQG0DVRQE &RQFHUQHGOHVVZLWKWUDGLWLRQDOFRQFHSWVRI TXDOLW\WKDQZLWKXQGHUVWDQGLQJWKHZD\WUDQVODWHGWH[WVZRUNYDQGHQ%URHFN± WKH\VSHDN LQVWHDGRIGHILQLQJDWUDQVODWRU¶VPHWKRGV9LOLNRYVNê DQGSXUSRVH1HZPDUN WKHVHDUH WREHGLVFXVVHGZLWKUHVSHFWWRDJLYHQWUDQVODWLRQDQGLQVRPHLQVWDQFHVDOVRWRDFULWLF¶VRZQLQGLYLGXDO SXUSRVH1HZPDUN± 7KHPDMRULW\RIFULWLFVH[SHFWWKDWERWKGHVFULSWLRQDQGFULWLFLVPZLOOLQYROYHRULJLQDOVDVZHOODVWUDQVODWHG WH[WVHYHQZKHQWKH\DGYRFDWHYDU\LQJGHJUHHVRIFRPSDULVRQVHHNWRDQVZHUGLIIHUHQWTXHVWLRQVRU GRFXPHQWWKHSRVVLELOLW\RIPRUHWKDQRQHFRPSHWHQWWUDQVODWLRQ1LGD 9LOLNRYVNê¶VPRGHOLVEDVHGRQ DQXQGHUVWDQGLQJRIWUDQVODWLRQFULWLFLVPDVµDQLQVWUXPHQWIRUGHVFULELQJWKHREVHUYDWLRQDOIDFWVRILQWHUOLWHUDU\ FRQWDFW¶ 7KLVPRGHOFRQVLVWVRIWKUHHSULQFLSDOUHODWLRQVKLSVRQHRIWKHPLVOLPLWHGWRWKHµOLWHUDU\ FRQWH[W¶RIWKHWUDQVODWLRQEXWWKHRWKHUWZRUHODWLRQVKLSVLQYROYHERWKWKHRULJLQDODQGWKHWUDQVODWLRQ²WKH UHODWLRQVKLSEHWZHHQWKHµRULJLQDODQGWKHPHWDWH[W¶DQGWKDWEHWZHHQµWKHWZROLWHUDU\FRQWH[WV¶$GHVFULSWLRQ RIWKHWUDQVODWRU¶VPHWKRGVDQGDGLVFXVVLRQRIWKHWUDQVODWLRQ¶VµGHJUHHRIDGHTXDF\¶DQGµOHYHORI HTXLYDOHQFH¶SHUWDLQWRWKHILUVWUHODWLRQVKLS 1HZPDUN¶VILYHSDUWPRGHODOVRLQFOXGHVWKH DQDO\VLVRIWKHVRXUFHODQJXDJHWH[WDFRPSDULVRQRILWDQGWKHWUDQVODWLRQDQGFRPPHQWVDERXWWKH WUDQVODWLRQ¶VSRWHQWLDOUROHDVDWUDQVODWLRQWKHFRPSDUDWLYHVWXG\LVWKHµKHDUW¶RIWKLVPRGHO 'RGGV GHVFULEHVWKHWUDQVODWLRQFULWLFDVDµWH[WDQDO\VW¶ZKRVHWKUHHIROGDQDO\VLVPXVWHQFRPSDVV WKHODQJXDJHRIWKHVRXUFHWH[WWKDWRIWKHWDUJHWWH[WDQGDFRPSDULVRQEHWZHHQWKHWZR+DWLPDQG0DVRQ E RXWOLQHDVHWRIFRPSDUDWLYHSDUDPHWHUVWKDWFDQEHXVHGWRDQDO\VHDQGFRPSDUHWUDQVODWLRQV 7KHLUSULQFLSDOLQWHUHVWOLHVLQWKHµFXOWXUDOVHPLRWLFVRIODQJXDJH¶8VLQJWKHQRWLRQVRIJHQUHGLVFRXUVHDQG WH[WWKH\IRFXVQRWRQLQGLYLGXDOZRUGVEXWRQDµWKUHDGRIGLVFRXUVHZKLFKLVVXVWDLQHGWKURXJKD FRPPXQLFDWLYHWUDQVDFWLRQ¶ 2WKHUFRPSDUDWLYHPRGHOVLQFOXGHGH%HDXJUDQGH¶VGLVFXVVLRQRIWUDQVODWLQJSRHWU\LQZKLFKWKHFULWLFLV XUJHGWRHVWDEOLVKFULWHULDIRUHYDOXDWLRQWKDWDGGUHVVWKHµSUHVXSSRVLWLRQVDQGH[SHFWDWLRQVDERXWWH[WV¶VKDUHG E\UHDGHUVDQGZULWHUVLQHDFKODQJXDJH 9DQGHQ%URHFN SRVLWVDVWKHVWDUWLQJSRLQWRI KLVGHVFULSWLRQµDFRPSDUDWLYHDQDO\VLVRIWKHVRXUFHDQGWDUJHWWH[WV¶WKDWLQFOXGHVERWKµWH[WVWUXFWXUHV¶DQG µV\VWHPVRIWH[WV¶:LOVV DUJXHVIRUDSULQFLSDOO\HPSLULFDOOLQJXLVWLFDSSURDFKWKDWUHVWVRQD FRPSDULVRQRIVRXUFHDQGWDUJHWODQJXDJHWH[WVDQG6LPSVRQ VLPLODUO\UHFRPPHQGVDOLQJXLVWLF DSSURDFKWKDWLVSULPDULO\FRPSDUDWLYH.LUNRY VXJJHVWVPRUHFRPSUHKHQVLYHµDHVWKHWLFOLQJXLVWLF FULWHULD¶EXWVWLOOFRQVLGHUVERWKWUDQVODWLRQDQGRULJLQDO$QGILQDOO\WKHVHYHQIHDWXUHVRIWH[WXDOLW\SURSRVHG E\1HXEHUWDQG6KUHYH DOVRSURYLGHDIUDPHZRUNWKDWFRXOGEHXVHGIRUFRPSDUDWLYHDQDO\VLVDQG HYDOXDWLRQDVGR0DU\6QHOO+RUQE\¶VDQDO\VHV &RPSDUDWLYHPRGHOVKRZHYHUGRQRWUHSUHVHQWWKHRQO\DSSURDFKWRWUDQVODWLRQFULWLFLVPGHVSLWHDQ LQVLVWHQFHRQWKHSDUWRIVRPHVFKRODUVWKDWWUDQVODWLRQFULWLFLVPPXVWQRWEHSHUIRUPHGZLWKRXWWDNLQJWKH RULJLQDOLQWRDFFRXQW9LOLNRYVNêGH%HDXJUDQGH 1RUDUHWKHFULWLFVZKRVWXG\RQO\WKH WUDQVODWHGWH[WDQGLWVFRQWH[WQHFHVVDULO\WKHUHYLHZHUVDQGHGLWRUVZKRRYHUORRNWKHIDFWRIWUDQVODWLRQ HQWLUHO\2QWKHFRQWUDU\/HIHYHUHE KDVH[SODLQHGWKH32/<6<67(0K\SRWKHVLVDQGLWV



3DJH

IRFXVRQWKHSURGXFWRIWUDQVODWLRQLQWKHFRQWH[WRIWKHWDUJHWFXOWXUHUDWKHUWKDQRQWKHWUDQVODWLRQSURFHVV 7RXU\¶VZRUNZLWKWUDQVODWLRQDO12506DOVRVXJJHVWVHYDOXDWLYHFULWHULDFHQWUHGRQWKHWDUJHWV\VWHPDORQH F $OWKRXJK7RXU\EHOLHYHVWKDWFRPSDUDWLYHVWXG\PLJKWKDYHVRPHUROHLQWUDQVODWLRQFULWLFLVP KHQRWHVWKDWFRPSDULVRQVEHWZHHQWUDQVODWLRQVDQGRULJLQDOVRIWHQOHDGWRDQHQXPHUDWLRQRIHUURUVDQGD UHYHUHQFHIRUWKHRULJLQDO +LVFRPPHQWVDUHHFKRHGDOEHLWLQGLIIHUHQWIUDPHZRUNVE\-RUJH/XLV %RUJHVDQG7RP&RQOH\%RUJHVSRLQWVWRWKHFULSSOLQJHIIHFWWKDWELOLQJXDOHGLWLRQVFDQKDYHRQDUHDGHU¶V DELOLW\WRUHDGDQGLPSOLFLWO\WRHYDOXDWHDWUDQVODWLRQ$OLIDQR DQG&RQOH\ VWDWHVWKDW µFULWLFVIDEULFDWHµVRPHWKLQJ>WREH@ORVWLQWUDQVODWLRQ¶DWWKHYHU\LQVWDQWWKH\SODFHWKHLUH\HVEHWZHHQWZR YHUVLRQVRIDFDQRQLFDOWH[W¶ 5HFHQWZRUNLQOLWHUDU\FULWLFLVPDQGWKHRU\OLQJXLVWLFVDQWKURSRORJ\SKLORVRSK\DQGFXOWXUDOVWXGLHVKDV GLUHFWDOEHLWDWWLPHVFRQWUDGLFWRU\LPSOLFDWLRQVIRUWKHHYDOXDWLRQRIOLWHUDU\WUDQVODWLRQV2QWKHRQHKDQGQRW RQO\WKHµGHFRQVWUXFWLRQLVWV¶HQWLUHSURMHFW¶*HQW]OHU EXWDOVRWKHHQWLUHUDQJHRIFKDOOHQJHV SUHVHQWHGE\SRVWVWUXFWXUDOLVPWRSUHYDLOLQJGHILQLWLRQVRIWH[WXDODXWKRULW\DQGLQWHJULW\KDYHUHQGHUHG FRQYHQWLRQDOHYDOXDWLYHWHUPVREVROHWH2QWKHRWKHUKDQGWKHZRUNRISRVWFRORQLDOVFKRODUVKDVGRFXPHQWHG WKHH[WHQWWRZKLFKWUDQVODWLRQVFDQJRµZURQJ¶HYHQµUHVSHFWIXOO\¶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µDEXVLYH¶/HZLV RUµGHVWUXFWLYH¶&RQOH\ ILGHOLW\,QWKLVPHDVXUHPHQWZRUGVOLNHDFFXUDWHDQGLQFRUUHFW DUHQRWUHOHYDQW,QVWHDGIDLOXUHLVDVVRFLDWHGZLWKDQLQDELOLW\WRFRQWLQXHWKHOLQJXLVWLFPRPHQWXPRIDWH[W ZLWKDQµH[FHVVRIUHYHUHQFH¶WKDWFDQPDNHLWLPSRVVLEOHIRUDWUDQVODWRUWRµWDNHWKHQHFHVVDU\GLVWDQFHIURP WKHRULJLQDO¶²ZKLFKPXVWIXQFWLRQQRWDVDQDEVROXWHEXWDVDSRLQWRIGHSDUWXUH6DUWLOLRW 7UDQVODWLRQVRISRVWVWUXFWXUDOLVWWH[WVDUHRIWHQPHDVXUHGDVZHOODJDLQVWWUDQVODWRUV¶RZQZRUGVDERXWWKHLU ZRUNRULQWHUPVRIWKHFRQWH[WLQZKLFKWKHZRUNDSSHDUV6XFKFULWLFLVPLQDGGLWLRQWRFRQFHUQLQJLWVHOIZLWK QHZWUDQVODWLRQVLPSOLHVWKHUHHYDOXDWLRQRIWUDQVODWLRQVSHUIRUPHGLQWKHSDVW&RQOH\3RUWHU ,W DOVRLPSOLHVWKHDFFHSWDQFHRIPXOWLSOHYHUVLRQVDQGWKHHYDOXDWLRQRILQGLYLGXDOYHUVLRQVZLWKUHVSHFWWRWKH SXUSRVHVIRUZKLFKHDFKYHUVLRQLVLQWHQGHGµWKHGLIIHUHQWYDOXHVEHKLQGZKDWPDNHVD³JRRG´ WUDQVODWLRQ¶&RKHQ 7KHVLPXOWDQHRXVDJHQF\DQGUHVSRQVLELOLW\DFFRUGHGWKHWUDQVODWRUE\SRVWVWUXFWXUDOLVPDOVRFKDUDFWHUL]HVWKH WUDQVODWRU¶VZRUNDVGHILQHGE\WUDQVODWRUVDQGFULWLFVZKRSRVLWLRQWKHPVHOYHVZLWKUHVSHFWWRDVSHFLILFIL[HG ORFDWLRQRULGHRORJ\)RUZKHQWUDQVODWLRQLVGHILQHGLQWHUPVRIDµVLWHIRUUDLVLQJTXHVWLRQVRIUHSUHVHQWDWLRQ SRZHUDQGKLVWRULFLW\¶1LUDQMDQD WKHH[SHFWDWLRQLVWKDWWKRVHTXHVWLRQVZLOOEHUDLVHG7KLVLVD GHILQLWLRQWKDWFKDOOHQJHVWUDQVODWRUVWRUHWKLQNWKHFRQYHQWLRQDOXVHRIHTXLYDOHQFHGLIIHUHQFHDQG FRPPXQLFDWLRQ,QWKHIDFHRIQRWPHUHO\GLIIHUHQFHEXWGHFLGHGLQHTXDOLWLHVEHWZHHQODQJXDJHVDQGFXOWXUHV LWDVNVWUDQVODWRUVWRFRQVWUXFWDµVLWH¶LQZKLFKWKHUHLVµRYHUODSZLWKRXWHTXLYDOHQFH¶%KDEKD 7UDQVODWRUVDUHXUJHGWRPDNHWKHLUZRUNQRWIOXHQWDQGUHDGDEOHEXWµWKLFN¶$SSLDK ZLWKWKHIDFWRUV WKDWFDQPDNHVPRRWK



3DJH

LQWHUDFWLRQDQLOOXVLRQRQWKHSDUWRIWKHPRUHSRZHUIXOSDUW\7KLVFDQRFFXULQWH[WVWKHPVHOYHVRULQWKH YDULRXVFRPPHQWDULHVWKDWDFFRPSDQ\WKHPDVµFRPEDWZHDSRQV¶DJDLQVWWLPH0XNKHUMHH EXWDOVR DJDLQVWWUDQVSDUHQF\RQWKHSDUWRIWKHWUDQVODWLRQ&RQVHTXHQWO\DWUDQVODWLRQPD\ZHOOEHHYDOXDWHGQRWRQ WKHEDVLVRILWVUHDGLELOLW\DQGWKHµFRPPXQLFDWLRQ¶LWPDNHVSRVVLEOH2QWKHFRQWUDU\LWPD\EHMXGJHGLQ WHUPVRIDQHZO\GHILQHGOLWHUDOLVP5RELQVRQ*DGGLV5RVH RUWKHH[WHQWWRZKLFKLW SURPSWVDFULVLVLQFRPPXQLFDWLRQHYHQWKHH[WHQWWRZKLFKWUDQVODWLRQLVZLWKKHOG6SLYDND± E 7UDQVODWRUVWKHPVHOYHVPD\EHHYDOXDWHGLQWHUPVRIWKHLUTXDOLILFDWLRQVWRUHSUHVHQWµDQRWKHU¶ LGHQWLW\QDWLRQDOLW\UDFHUHOLJLRQJHQGHU9ROGHQJ/RWELQLqUH+DUZRRG±6SLYDND ± ,QDVLPLODUZD\WUDQVODWLRQVFDQEHMXGJHGLQWHUPVRIWKHPLV UHSUHVHQWDWLRQVDQGWKHµH[RWLFDQG HVVHQWLDOL]LQJVWHUHRW\SHV¶WKH\SHUSHWXDWH3D\QH (YDOXDWLRQWKHQIRFXVHVRQSUHFLVHO\WKRVHPLV UHSUHVHQWDWLRQVDQGµEODVSKHP\¶FDQEHGHILQHGDVµDPRPHQWZKHQWKHVXEMHFWPDWWHURUWKHFRQWHQWRID FXOWXUDOWUDGLWLRQLVEHLQJRYHUZKHOPHGRUDOLHQDWHGLQWKHDFWRIWUDQVODWLRQ¶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¶VHYDOXDWLRQWKHWUDQVODWLRQLQWR (QJOLVKRIILFWLRQE\$UJHQWLQHZULWHU-XOLR&RUWi]DUZDVSULPDULO\DIHOLFLWRXVIRUHLJQL]LQJPRYHDOWKRXJK RQHUHDOL]HGWKURXJKIOXHQWGRPHVWLFDWLQJVWUDWHJLHVVHH675$7(*,(62)75$16/$7,21 LQSDUWLFXODU RQWKHSDUWRI3DXO%ODFNEXUQZKRµVPXJJOHG¶&RUWi]DU¶VZRUNLQWR1RUWK$PHULFDQOLWHUDWXUHD 3D\QHRQWKHRWKHUKDQGSUDLVHVQRVXFFHVVIXOIRUHLJQL]LQJ+HFRQVLGHUV&RUWi]DURQHRIWKH³ELJIRXU¶RIWKH /DWLQ$PHULFDQERRP¶ZKRVHZRUNKDVUHLQIRUFHGUDWKHUWKDQFKDOOHQJHG1RUWK$PHULFDQVWHUHRW\SHVDERXW /DWLQ$PHULFD± $PRUHH[WHQVLYHH[DPSOHLVSURYLGHGE\UHFHQWHYDOXDWLRQVRIWKHZRUNRI6LU:LOOLDP-21(6ZKRVH WUDQVODWLRQVLQWR(QJOLVKRI,QGLDQOLWHUDWXUHZHUHKLJKO\LQIOXHQWLDOLQWKHODWHHLJKWHHQWKFHQWXU\VHH %5,7,6+75$',7,21 $VWKHµIRUHPRVWVFKRODUZKRORFDWHGDQGWUDQVODWHGWKHOLWHUDWXUHRIWKH³2ULHQWÍRU WKH:HVW¶6HQJXSWD DQGRQHZKRµDOPRVWVLQJOHKDQGHGO\FKDQJHGWKH%ULWLVKLIQRW(XURSHDQ YLHZRI$VLDDQGHVSHFLDOO\,QGLD¶&DQQRQ -RQHV¶VWUDQVODWLRQVKDYHEHHQVWXGLHGUHFHQWO\E\ YDULRXVFULWLFV&DQQRQSUDLVHVKLVZRUNZLWKRXWTXDOLILFDWLRQSDUWLFXODUO\KLVWUDQVODWLRQRI.DOLGDVD¶V 6DNXQWDOD VWUHVVLQJ-RQHV¶VUHFRJQLWLRQRIµWKHJUHDWQHVVRIWKH*XSWDGUDPD¶DQGWKHIDFWWKDW-RQHV¶V ZRUNSURPSWHG(XURSHDQVWRKDYHDQHZUHVSHFWIRU,QGLDQOLWHUDWXUHµEULGJLQJWKHFKURQRORJLFDODQGFXOWXUDO JDSVHSDUDWLQJ6DQVNULWIURP(QJOLVK¶ )LJXHLUDLQDFRPSDUDWLYHWH[WXDOVWXG\ILQGVWKDW-RQHV¶V WUDQVODWLRQOLNHWKRVHRIRWKHUWUDQVODWRUVRIWKH6DNXQWDODZDVRIWHQµHUURQHRXV¶DQGWKDWLWJHQHUDWHG PLVUHSUHVHQWDWLRQVRIWKH,QGLDQZRUNEXWVKHDGPLUHVWUDQVODWRUVIRUµVHHN>LQJ@LQVSLUDWLRQEH\RQGWKHERXQGV RIWKHLURZQFXOWXUHDQGSURMHFW>LQJ@WKHLUFUHDWLYHHQHUJ\LQWRLW¶± 1LUDQMDQD DQG 6HQJXSWD KRZHYHURIIHUDVWULNLQJO\GLIIHUHQWHYDOXDWLRQ6HQJXSWDHPSKDVL]HVWKHRYHUVLPSOLILFDWLRQ RI.DOLGDVD¶VZRUNWKDWRFFXUUHGDV-RQHVVKDSHGDQµLPDJH¶IRULWWKDW(XURSHDQVZRXOGILQGDFFHSWDEOH ± 1LUDQMDQDGHWDLOVKLVSDUWLFLSDWLRQSULQFLSDOO\WKURXJKWKHµRXWZRUN¶RIKLVWUDQVODWLRQLQWKH FRQVWUXFWLRQRIWKH(QJOLVKODQJXDJH+LQGXFKDUDFWHUSV\FKHDQGZD\RIOLIH± ,QGLYLGXDOO\ HDFKRIWKHVHHYDOXDWLRQVSDVVHVMXGJPHQWRQ-RQHV¶V6DNXQWDODE\HPSOR\LQJDSDUWLFXODUVHWRIFULWHULD5HDG WRJHWKHUWKH\VXJJHVWWKHPDQ\ZD\VLQZKLFKUHYLHZHUVDQGFULWLFVFXUUHQWO\MXGJHWUDQVODWLRQVRIOLWHUDU\ WH[WV



3DJH

6HHDOVR 48$/,7<2)75$16/$7,21

)XUWKHUUHDGLQJ GH%HDXJUDQGHYDQGHQ%URHFN'RXPD+DWLPDQG0DVRQE+HDUQH0DLHU 1HZPDUN6PLWK9LOLNRYVNê9LUJLQLD:RROI

&$52/0$,(5



3DJH

6 6FULSWLQWUDQVODWLRQ 7KHWRSLFRIVFULSWLQWKHFRQWH[WRIWUDQVODWLRQNHHQO\UDLVHVWKHTXHVWLRQRIKRZWRGHILQHWKHQRWLRQRIVFULSW LWVHOIRIZKDWPD\SURSHUO\FRQVWLWXWHZULWLQJ([SORULQJWKHFRQFHSWRIJUDPPDWRORJ\-DFTXHV'HUULGD H[SRVHVDVWURQJ:HVWHUQSUHMXGLFHDJDLQVWVFULSWVWKDWDUHQRWSKRQHWLFRU²ZRUVH²QRWDOSKDEHWLFWKHVH RIWHQEHLQJGHQLHGWKHVWDWXVRIZULWLQJSURSHU+HGHWHFWVZKDWKHFDOOVDµSKRQRORJLVP¶WKDWSHUVLVWHQWO\ XQGHUUDWHVWKHIRUPDOUHVRXUFHVRIYLVLEOHODQJXDJH'HUULGDFI'DYLHV $QG\HWVLQFHKLV FRQFHUQVDUHPDLQO\SKLORVRSKLFDOKHSURSRVHVQRZRUNDEOHVFKHPHLQLWVVWHDG)URPDSRLQWRIYLHZWKDWLV ERWKOLWHUDU\DQGSUDFWLFDORQHWKLQJLVFHUWDLQKRZHYHUUHLILHGDQGVXEVHUYLHQWWRVSHHFKDVFULSWW\SHPD\EH 0RVWHULD LWPD\QRQHWKHOHVVDOZD\VIXQFWLRQLQLWVRZQULJKWDVDVLJQLILFDQWIDFWRULQDJLYHQWH[W DQGKHQFHLQWKHWUDQVODWLRQRILW7HFKQLFDOO\VFULSWHVWDEOLVKHVLIQRWKLQJHOVHDUHDGLQJRUGHUDQGGLUHFWLRQ ZKLFKDVLQWKHGLIIHUHQWFDVHVRI&KLQHVHGRZQZDUGV HDUO\*UHHNDOWHUQDWHO\OHIWWRULJKWDQGULJKWWROHIW RUERXVWURSKHGRQ $UDELFULJKWWROHIW DQG(QJOLVKOHIWWRULJKW PD\PXFKFRPSOLFDWHWKHWDVNRI LQWHUOLQHDURUSDUDOOHOWUDQVODWLRQ,QLGHRORJLFDOWHUPVLWPD\EHDFWLYHO\VHWDJDLQVWDQ\IRUPRIWUDQVFULSWLRQ RUWUDQVODWLRQDVLQWKHFDVHRIWKHGLYLQHO\DUUDQJHGFKDUDFWHUVRIWKH.RUDQVHH485¶Ɩ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

2OG:RUOGVFULSWVLPDJHFLSKHUDQGQDPH &KDUDFWHUDVLPDJHWKHSLFWRULDOHOHPHQW $V*DUGLQHU¶V*UDPPDUFRQILUPV(J\SWLDQKLHURJO\SKVEHLQJSKRQHWLFFDQJHQHUDOO\EHWUDQVFULEHGLQWRWKH DOSKDEHWDQGWUDQVODWHGZLWKRXWSDUWLFXODUORVV+RZHYHUHDUO\KLHUDWLF



3DJH

WH[WVXVHGE\SULHVWVLQDQFLHQW(J\SWIRUH[DPSOHWKHPXUDOVLQWKH7KHEDQWRPEVGHOLEHUDWHO\EULQJRXWWKHLU SLFWRULDORULJLQDQGTXDOLW\DVZDWHUELUGKXPDQIDFHRUILVKWRWKHGHJUHHRIVHWWLQJXSDQDOWHUQDWLYHYLVXDO UHDGLQJ*DUGLQHU )XUWKHUFHUWDLQRIWKHKLHURJO\SKVLQDQ\FDVHSULPDULO\VHUYHDVSLFWXUHVVLQFH WKRXJKIRUPDOO\LQGLVWLQJXLVKDEOHIURPWKHUHVWWKH\DUHQRWSKRQHWLFDWDOO7KHVHDUHWKHJHQHULF GHWHUPLQDWLYHVWKDWLQGLFDWHDQDUHDRIPHDQLQJIRUH[DPSOHFDQDOVRILUULJDWHGODQGPRXQWDLQVRIIRUHLJQ FRXQWU\WKHVXQWKHVDLOLQJERDWRIWKHJRGVDQGNLQJVDFXSWKHUDLVHGDUPVRIKHLJKWWKHJQDZLQJRID WRRWKRUWKHDJHRIDQROGPDQOHDQLQJRQKLVVWLFN,QWKH%RRNRIWKH'HDGWKHSLFWRULDOPHVVDJHLVVWURQJO\ UHLQIRUFHGWKURXJKWKHYLVXDOHFKRLQJRIWKHVHGHWHUPLQDWLYHVLQILJXUHVDQGRWKHUHOHPHQWVIHDWXUHGLQWKH YLJQHWWHVRUVFHQHVWKDWLQWURGXFHFKDSWHUV2YHUDOOWKHVHLPDJHVYLYLGO\FRQYH\WKHORJLFDQGEHOLHIVDVVXPHG LQDQRWKHUZLVHIRUXV UHPRWHGLDORJXHZLWKWKHZRUOGRIWKHGHDG,QKLVHGLWLRQRIWKLVZRUNIURPWKH 3DS\UXVRI$QL:DOOLV%XGJH RIIHUVERWKµDQLQWHUOLQHDUWUDQVOLWHUDWLRQDQGWUDQVODWLRQ¶ZKLFKLQFOXGHV WKHKLHURJO\SKLFRULJLQDOFRPSOHWHZLWKQRQSKRQHWLFLPDJHVDQGµDUXQQLQJWUDQVODWLRQ¶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¶VHVVD\µ7KH&KLQHVH ZULWWHQFKDUDFWHUDVDPHGLXPIRUSRHWU\¶ DQGLQKLVWUDQVODWLRQVRISRHWU\&DWKD\ DQGRI ZULWLQJVE\&RQIXFLXV$WDOOHYHQWVWKHHIIHFWRIWKH&KLQHVHH[DPSOHRQ3RXQG¶VRZQSRHWU\LVLQGLVSXWDEOH LQGHHGKLVLPDJLVWWHFKQLTXHVUDGLFDOO\WUDQVIRUPHGSRHWU\LQ(QJOLVKDQGVHYHUDORWKHUZHVWHUQODQJXDJHV


3DJH

VRXUFHRIVFULSWDQGPDWKHPDWLFVDOLNH&RRNDQG*LQVEXUJ $OWKRXJK%LEOHWUDQVODWLRQVLQWR(XURSHDQ ODQJXDJHVWKDWXVHWKH/DWLQDOSKDEHWRI:HVWHUQ&KULVWHQGRPW\SLFDOO\IDLOWRPDNHH[SOLFLWWKLVFLSKHUHG YDOXHRIWKH+HEUHZWH[WLWKDVIRXQGOLWHUDU\HFKRHV&RQVLGHUIRULQVWDQFHWKHFRQFHSWRIWKH 7HWUDJUDPPDWRQZKLFKOLWHUDOO\PHDQVµIRXUOHWWHUV¶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µ7KH5XQLF3RHP¶ WKLVGUDZVRQWKHPHDQLQJRIHDFKOHWWHU¶VQDPHREOLJLQJWKH WUDQVODWRUERWKWRUHWDLQWKHRULJLQDOQDPHDQGWRVXSSO\DWUDQVODWLRQ)HRKµZHDOWK¶ LVDFRPIRUWWRHYHU\ PDQDQGVRRQ$QGHUVRQ±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

1HZ:RUOGVFULSWV ,QGLVFXVVLQJWUDQVODWLRQZLWKUHJDUGWR1HZUDWKHUWKDQ2OG:RUOGVFULSWVWKHSULPHGLIILFXOW\LVWKDWVRIHZ RIWKHVHVFULSWVKDYHEHHQDGHTXDWHO\LGHQWLILHGRUGHVFULEHG%URWKHUVWRQ*HOE±W\SLILHVD GHPHDQLQJYLHZKHOGE\PDQ\VFKRODUV $FRQYHQLHQWVWDUWLQJSRLQWLVSURYLGHGE\WKHKLHURJO\SKLFVFULSWRI WKHORZODQG0D\DQRZPXFKEHWWHUXQGHUVWRRGDVDSKRQHWLFV\VWHPWKDQLWZDVWZRRUWKUHHGHFDGHVDJR 6FKHOHDQG0LOOHU&RH )RUWKLVYHU\UHDVRQLWKDVEHFRPHVXVFHSWLEOHWRWKHVRUWRIREVHUYDWLRQ PDGHDERYHDERXW(J\SWLDQDQG&KLQHVHVFULSW,QRWKHUZRUGVDOWKRXJKPRVWRIWKHVHJO\SKVXQGRXEWHGO\ UHJLVWHUWKHVRXQGVRI0D\DVSHHFKLQWKHVHTXHQFHFRQVRQDQWYRZHOSOXVFRQVRQDQWYRZHO RWKHUVGRQRW 7KHODWWHUQRWDEO\LQFOXGHFDOHQGULFDOVLJQVDQGWKHµHPEOHP¶JO\SKVDSSHQGHGWRWKHSURSHUQDPHVRISHRSOH DQGSODFHVZKLFKPD\VRRQHUEHUHDGDVLPDJHV0RUHRYHUWKHYLVXDOSRWHQWLDORIWKHVHQRQSKRQHWLFHOHPHQWV LVRIWHQUHLQIRUFHGE\WKHUHJXODUJULGSDWWHUQW\SLFDORIWKHKLHURJO\SKLFWH[WDVDZKROHDQGE\DFFRPSDQ\LQJ LOOXVWUDWLRQVOLNHWKRVHLQWKHWULORJ\RISDQHOVLQVFULEHGLQWKHODWHVHYHQWKFHQWXU\$'LQKRQRXURI3DFDO UXOHURIWKHFLW\RI3DOHQTXHQHDU0H[LFR¶VERUGHUZLWK*XDWHPDOD9LVXDOSRWHQWLDOLVDOVREURXJKWRXWE\ YDULDQWKLHURJO\SKLFIRUPVZKLFKSRUWUD\KXPDQDQGDQLPDOILJXUHV7KHPDMRUH[DPSOHRIWKLVODVW FRQYHQWLRQWKHWH[WLQVFULEHGRQ6WHOD'DW&RSDQLQ+RQGXUDV)LJXUH VKRZVWKHWLPHSHULRGVRIWKH FDOHQGDUDVOLYLQJFUHDWXUHVOLWHUDOO\ERUQHRUFDUULHGE\RWKHUFUHDWXUHVZKRIXQFWLRQDVWKHLUQXPHULFDOFR HIILFLHQWVIRUH[DPSOHµ\HDUV¶H[SUHVVHGDVµ¶FDUULHVWKHSHULRG\HDU:KHQDIWHUWKH(XURSHDQLQYDVLRQ WKHKLHURJO\SKLFWH[WVEHJDQWREHWUDQVFULEHGLQWRDOSKDEHWLF0D\DLQWKH&KLODP%DODPERRNVRI<XFDWDQ DQGRWKHUWH[WVVXFKIHDWXUHVRI0D\DSKLORVRSK\ZHUHRIWHQKLJKOLJKWHGE\WKHUHWHQWLRQRIFHUWDLQFDOHQGDU JO\SKV7KHJO\SKLFVWDWHPHQWRIWLPHDVDORDGKDVLQWXUQLQIRUPHG$PHULFDQZRUNVDVGLYHUVHDV/RVSDVRV SHUGLGRVE\WKH



3DJH )LJXUH+LHURJO\SKLFIRUPVRIKXPDQVDQGDQLPDOVRQ6WHOD'DW&RSDQ+RQGXUDV

&XEDQQRYHOLVW$OHMR&DUSHQWLHUDQG&KDUOHV2OVRQ¶V0D\DQ/HWWHUVERWKRI 2IWKHPDMRUYHUVLRQVRI WKH&KLODP%DODPERRNV0HGL]%ROLR¶V<XFDWHFYHUVLRQ LVSDOSDEO\PRUHVHQVLWLYHWRWKHJO\SKLF SDOLPSVHVWDQGWRWKHLGHDRI0D\DOLWHUDU\WUDGLWLRQWKDQLVWKDWRI5DOSK5R\V $JRRGWHVWRIWKH GLIIHUHQFHEHWZHHQWKHPLVWRFRPSDUHWKHLUUHVSHFWLYHDSSURDFKHVWRWKHFRQVWDQWSXQVDQGULGGOHVIRXQGLQ WKH&KLODP%DODPWH[WZKLFKLQWKHFDVHRIWKH=X\XD7KDQFKDSWHUDUHH[SOLFLWO\UHODWHGEDFNWRWKH0D\D LQWHOOHFWWKDWIRVWHUHGWKHKLHURJO\SKLFWUDGLWLRQ5R\V±0HGL]%ROLR± +LVWRULFDOO\WKH0D\DKLHURJO\SKLFV\VWHPHPHUJHGIURPWKHEURDGHU0HVRDPHULFDQEDVHWKDWLVVKDUHGE\WKH µ0L[WHF$]WHF¶RULFRQLFV\VWHPRIKLJKODQG0H[LFRWRWKHZHVW%HQVRQ%ULFNHU 7KLVVFULSWLV NQRZQDVWODFXLOROOLLQWKH$]WHFRU1DKXDWOODQJXDJH1RZRWQ\ DQGLVOLNHZLVHUHFRUGHGLQLQVFULSWLRQV DQGLQVFUHHQIROGERRNVRIVNLQDQGQDWLYHSDSHU8VHGE\VSHDNHUVRIYDULRXVODQJXDJHVDQGWLHGSKRQHWLFDOO\ WRQRQHDIDFWZKLFKJUHDWO\H[WHQGVLWVFRQFHSWXDODVRSSRVHGWRYHUEDOUDQJH7HGORFN WODFXLOROOL VFULSWGHILHV:HVWHUQGHILQLWLRQVRIZULWLQJLQWKHLQJHQXLW\ZLWKZKLFKLWIXVHVLPDJHQXPEHUDQGQDPHLQWR RQHKROLVWLF



3DJH

VWDWHPHQW%URWKHUVWRQ± 7KLVVFULSWVHUYHGKLVWRULFDOO\DVDSDOLPSVHVWRUSULRUIRUPXODWLRQIRU PDQ\WH[WVZULWWHQVXEVHTXHQWO\LQWKHDOSKDEHWE\1DKXDWODXWKRUVQRWDEO\LQWKHJHQUHVRIWKHDQQDOVDQGRI WKHULWXDOERRNV,QWKHDQQDOVWKHVFULSWFRQILUPVWLPHGHSWKWKURXJKHPEHGGHGQXPHUDF\IRUH[DPSOHD NQRWIRUWKHµW\LQJ¶RIWKH\HDUF\FOH ,QULWXDOERRNVGD]]OLQJLPDJHVRIµIORZHUVRQJ¶XQGHUOLHWKH 7ZHQW\6DFUHG+\PQVDQGWKHSRHPVFROOHFWHGLQWKH&DQWDUHVPH[LFDQRVPDQXVFULSWDPDMRUVRXUFHLQWXUQ IRUPRGHUQ0H[LFDQDQG&HQWUDO$PHULFDQZULWHUV,QSUHVHQWLQJWKH5DLQJRG7ODORFDVWKHµ-DJXDU 6QDNH¶RFHORFRDWOLQ1DKXDWO RQHRIWKH6DFUHG+\PQVJLYHVWKHNH\WRWKHLQJHQLRXVFRQVWUXFWLRQRIKLV SHUVRQDLQWODFXLOROOLWKDWLVWKHUDLQWKDWUHVXOWVIURPWKHMDJXDU¶VWKXQGHUURDUDQGVQDNHOLNHOLJKWQLQJWKH FRQVWUXFWLRQLVDOVRDULWKPHWLFDOVLQFHLQWKHVHWRI7ZHQW\6LJQVIXQGDPHQWDOWR0HVRDPHULFDQULWXDODQG FDOHQGULFV7ODORF¶VPDVNRIUDLQLV6LJQWKHVXPRI-DJXDUDQG6QDNH6LJQVDQGUHVSHFWLYHO\ %H\RQG0HVRDPHULFDWKH1HZ:RUOGQXUWXUHGRWKHUH[DPSOHVRIZULWLQJIRUWKHPRVWSDUWTXLWH XQGHUWKHRUL]HGLQ:HVWHUQVFKRODUVKLS7KHVHLQFOXGHWKHSLFWRJUDSKVIRXQGRQ$OJRQTXLQELUFKEDUNVFUROOV IURPWKH*UHDW/DNHVUHJLRQ'HZGQH\5RWKHQEHUJ± DPRQJVWDUDQJHRIWH[WVWKDWLQFOXGHV WUHDW\VLJQDWXUHVWKDWDUHDQLPDOWRWHPVDQ$OJRQTXLQZRUG $VDPSOHLVWUDQVFULEHGLQRQHRIWKHILQHU SDVVDJHVRI+LDZDWKD&DQWR +:/RQJIHOORZ¶VWHWUDPHWHUVVXFFHHGLQPDNLQJSRHWU\RXWRIWKHVH $OJRQTXLQFKDUDFWHUVE\UHFRUGLQJWKHGHWDLORIWKHLURXWOLQHDVDJHQWVRIJHQHVLVµDVDQHJJZLWKSRLQWV SURMHFWLQJ7RWKHIRXUZLQGVRIWKHKHDYHQV¶ RUDVDQFHVWUDOWRWHPVµ)LJXUHVRIWKH%HDUDQG5HLQGHHU2I WKH7XUWOH&UDQHDQG%HDYHU¶ )LQDOO\WRWKHVRXWKWKHUHLVWKHKLJKO\VRSKLVWLFDWHGNQRWWHGVWULQJVFULSWRI WKH$QGHVNQRZQDVWKHTXLSXRIZKLFKDVFKRODUUHFHQWO\VDLGµ:LWKSLHFHVRIVWULQJWKH,QFDGHYHORSHGD IRUPRIUHFRUGLQJWKDWIRUFHVDUHFRQVLGHUDWLRQRIZULWLQJDVZHJHQHUDOO\XQGHUVWDQGWKDWWHUP¶$VFKHUDQG $VFKHU 6WLOOXQGHFLSKHUHGEH\RQGFHUWDLQDULWKPHWLFDOVWDWHPHQWVWKHTXLSXLVH[SOLFLWO\QDPHGDV WKHVRXUFHRIVHYHUDOWH[WVLQWKH,QFDODQJXDJH4XHFKXDDPRQJWKHPDK\PQWR9LUDFRFKDDQGSDVVDJHVRIDQ HODERUDWHFKURQLFOHFRPSRVHGE\*XDPDQ3RPD ,QWKH4XHFKXDSOD\$SX2OODQWD\WKLVSDUWLFXODU IRUPRIOLWHUDF\LVUHIOH[LYHO\FRPPHQWHGXSRQDWWZRPRPHQWVZKHQTXLSXVDUHLQWURGXFHGLQWRWKHDFWLRQE\ EHDUHUVRIPHVVDJHVLQWKHVHFRQGWKHNQRWVDUHXQUDYHOOHGLQDOLWHUDOGHQRXHPHQW%URWKHUVWRQ± 2YHUDOOWKHVH$PHULFDQVFULSWVPDNHDVWURQJFROOHFWLYHLPSDFWLQ+RPHQDMHDORVLQGLRVDPHULFDQRV E\(UQHVWR&DUGHQDOD1LFDUDJXDQZKRDOVROHDUQHGPXFKIURP3RXQG WKHKRPDJHEHLQJDVHWRISRHPV ZKLFKUHVSRQGLQGHWDLOWRDQGHYHQWUDQVFULEHWKHSDUWLFXODUIRUPVDQGTXDOLWLHVRIWKHVHVFULSWV&DUGHQDO

&RQFUHWHSRHWU\DQGLWVDQWHFHGHQWV ,QWKH:HVWHUQWUDGLWLRQ*XLOODXPH$SROOLQDLUH¶V&DOOLJUDPPHV DQGWKH0H[LFDQ-RVp-XDQ7DEODGD¶V /L3R3D]± PDUNDWXUQLQJSRLQWLQVRIDUDVWKH\VWULYHWRUHFRYHULQDOSKDEHWLFVFULSW LWVHOIDQLPDJHYDOXHPRUHUHDGLO\DYDLODEOHLQQRQDOSKDEHWLFV\VWHPV7KURXJKVKHHUOD\RXWDQGGHSOR\PHQW RIOHWWHUVWKHVHSRHPVWUDQVODWHWKHHIIHFWRIWKHSDLQWHGFKDUDFWHUVRI&KLQHVHDQG-DSDQHVHSRHWU\,Q $SROOLQDLUH¶Vµ/DFRORPEHSRLJQDUGpHHWOHMHWG¶HDX¶)LJXUH WKH&RI&KqUHVIRUPVWKHWKURDWRIWKHELUG VHHQLQULJKWIDFLQJSURILOHLQWKLVFRQWH[WWRUHQGHU&KqUHVDV'HDUDVRQHSXEOLVKHG(QJOLVKWUDQVODWLRQ GRHVVZHOOVWKHWKURDWLQWRDJRLWUHDQGKHQFHGHIHDWVWKHSULPHYLVXDOPHVVDJHRIWKHWH[W*UHHW )RU WKHLUSDUWWKHILYHOLQHVRIWKHSRHPµ,OSOHXW¶)LJXUH UHDGGRZQZDUGVOLNHRULHQWDOFKDUDFWHUVDVWKUHDGVRI IDOOLQJUDLQ,QWKLVFDVHWKH(QJOLVKWUDQVODWLRQPXVWVWUXJJOHZLWKDJUHDWHUSUREOHPRIKRZWRFRQYH\WKH IOXLGIDOORIWKH)UHQFKKHUHHPSKDVL]HGWKURXJKWKHYHUWLFDODOLJQPHQWµLOSOHXWGHVYRL[GHIHPPHV«¶ LQ V\OODEOHVWKDWDFFXPXODWHXQYRLFHGFRQVRQDQWVDQGJORWWDOVWRSVµ,W¶VUDLQLQJZRPHQ¶VYRLFHV«¶ 7UDQVODWLQJWKLVVDPHSRHPLQWRDODQJXDJHWKDWXVHVWKH&\ULOOLFDOSKDEHWZRXOGSK\VLFDOO\GLVWRUWWKHHYHQ IDOORIWKHUDLQWKUHDGVJLYHQWKDW&\ULOOLFFKDUDFWHUVDUHOHVVFRQVWDQWLQEUHDGWK )URP&DOOLJUDPPHVDQGWKHLQWHUYHQLQJH[SHULPHQWDOSODFDUGVRIWKH6RYLHWSRHW9ODGLPLU0D\DNRYVN\LWLV EXWDVWHSWRWKH



3DJH

)LJXUHµ/DFRORPEHSRLJQDUGpHHWOHMHWG¶HDX¶



3DJH

)LJXUHµ,OSOHXW¶



3DJH

W\SHRIFRQFUHWHSRHWU\WKHRUL]HGDQGSUDFWLVHGLQWKHVE\(XJHQ*RPULQJHUD6ZLVV3HUXYLDQ LQ *HUPDQDQG$XJXVWRGH&DPSRVDQGRWKHUPHPEHUVRIWKH%UD]LOLDQ1RLJDQGUHVJURXSLQ3RUWXJXHVHDQG ODWHUE\(GZLQ0RUJDQDQG,DQ+DPLOWRQ)LQOD\LQ(QJOLVK&DPSRVHWDO&UHVSRDQG%HGDWH %DQQ ,Q)LQOD\¶VULYHUSRHPµ7HOHJUDPVIURPP\ZLQGRZ¶ URZVRIXQVSDFHGZRUGV²UHGERDW EHGERDW²IRUPVROLGEDQNVEHWZHHQZKLFKRWKHUZRUGVIUHHIORDWDVLILQDVWUHDPRIFRQVFLRXVQHVV²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

)XUWKHUUHDGLQJ $OH[DQGHU%DQQ%URWKHUVWRQ%XGJH&RH&RRNDQG*LQVEXUJ&UHVSRDQG%HGDWH +HQGHUVRQ3RXQG7HHOH:DUUHQ

*25'21%527+(56721

6HPLRWLFDSSURDFKHV 7UDQVODWLRQVWXGLHVLVLQFUHDVLQJO\DGRSWLQJDQLQWHUGLVFLSOLQDU\DSSURDFKWRWKHVWXG\RIWUDQVODWLRQDV LQWHUWH[WXDODQGLQWHUFXOWXUDOWUDQVSRVLWLRQDQGVRPHQRZDFNQRZOHGJHWKDWµDOWKRXJKWUDQVODWLRQKDVDFHQWUDO FRUHRIOLQJXLVWLFDFWLYLW\LWEHORQJVPRVWSURSHUO\WRVHPLRWLFV¶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

6WUXFWXUDOVHPLRWLFV $FFRUGLQJWRWKHVWUXFWXUDOYLHZRIODQJXDJHZKLFKKDVEHHQH[WHQGHGIURPOLQJXLVWLFVWRRWKHUVLJQV\VWHPV +MHOPVOHY%DUWKHV*UHLPDV µHDFKODQJXDJHLVUHJDUGHGDVDV\VWHPRIUHODWLRQVPRUH SUHFLVHO\DVHWRILQWHUUHODWHGV\VWHPV WKHHOHPHQWVRIZKLFK²VRXQGVZRUGVHWFKDYHQRYDOLGLW\ LQGHSHQGHQWO\RIWKHUHODWLRQVRIHTXLYDOHQFHDQGFRQWUDVWZKLFKKROGEHWZHHQWKHP¶/\RQV )RU +MHOPVOHY WKHVHVWUXFWXUDOUHODWLRQVKROGRQERWKSODQHVRI([SUHVVLRQDQG&RQWHQW(DFKSODQHVSOLWV LQWR)RUPDQG6XEVWDQFH([SUHVVLRQ)RUPDQG&RQWHQW)RUPDUHDEVWUDFWW\SHVZKLOH([SUHVVLRQ 6XEVWDQFH



3DJH

DQG&RQWHQW6XEVWDQFHDUHFRQVLGHUHGDVSDUWLFXODULQVWDQFHVRUWRNHQVSURGXFHGRQWKHEDVLVRIDJLYHQ V\VWHP6WUXFWXUDOOLQNVQRWRQO\KROGIRU([SUHVVLRQ)RUPDVLQWKHVWUXFWXUHRIDSKRQRORJLFDOV\VWHP EXW DOVRIRUWKH&RQWHQW)RUP,QWKLVVHQVHXVLQJDIDPRXVH[DPSOHE\+MHOPVOHYLELG WKHVHPDQWLFVSDFH FRYHUHGE\WKH*HUPDQWHUPV+RO]%DXPDQG:DOGGRHVQRWFRUUHVSRQGWRWKHVHPDQWLFVSDFHFRYHUHGE\ (QJOLVK:RRG7UHHDQG)RUHVWRUE\)UHQFK%RLV$UEUHDQG)RUrW)RULQVWDQFH:DOGGRHVQRWRQO\FRYHU WKHVHPDQWLFVSDFHRI)RUHVWDQG)RUr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µYRLFHV¶$XWKRU1DUUDWRU&KDUDFWHU,PSOLFLW5HDGHUDQGVRRQ -DNREVRQ KDV VKRZQKRZDVWUXFWXUDOO\RULHQWHGFORVHWH[WXDODQDO\VLVFDQDOVRDFFRXQWIRUVW\OLVWLFFKRLFHV

,QWHUSUHWDWLYHVHPLRWLFV 3HLUFH± GHVFULEHVVHPLRVLVDVµDQDFWLRQDQLQIOXHQFHZKLFKLVRULQYROYHVDFRRSHUDWLRQRIWKUHH VXEMHFWVVXFKDVDVLJQLWVREMHFWDQGLWVLQWHUSUHWDQWWKLVWKUHHUHODWLYHLQIOXHQFHQRWEHLQJLQDQ\ZD\ UHVROYDEOHLQWRDFWLRQVEHWZHHQSDLUV¶&ROOHFWHG3DSHUV $QLQWHUSUHWDQWLVDQ\VLJQZKLFKH[SODLQV RUµWUDQVODWHV¶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

6WUXFWXUDODQGLQWHUSUHWDWLYHVHPLRWLFVDQGW\SHVRIWUDQVODWLRQ $QLQWHUHVWLQJLQVWDQFHRILQWHUVHFWLRQEHWZHHQVWUXFWXUDODQGLQWHUSUHWDWLYHVHPLRWLFVZDVSURSRVHGE\ -DNREVRQ ZKRVXJJHVWHGWKDWWKHUHDUHWKUHHW\SHVRIWUDQVODWLRQLQWUDOLQJXLVWLFLQWHUOLQJXLVWLFDQG LQWHUVHPLRWLF-DNREVRQ¶VGHILQLWLRQRIWUDQVODWLRQGUDZVRQWKH3HLUFHDQLGHDRILQWHUSUHWDWLRQKHGRHVLQ



3DJH

IDFWVSHDNDERXWWKUHHNLQGVRIµLQWHUSUHWDWLRQ¶RIDOLQJXLVWLFVLJQ7KHILUVWLQWUDOLQJXLVWLFWUDQVODWLRQRU UHZRUGLQJLVµDQLQWHUSUHWDWLRQRIYHUEDOVLJQVE\PHDQVRIRWKHUVLJQVRIWKHVDPHODQJXDJH¶WKHVHFRQG LQWHUOLQJXLVWLFWUDQVODWLRQRUWUDQVODWLRQSURSHULVµDQLQWHUSUHWDWLRQRIYHUEDOVLJQVE\PHDQVRIVLJQVRI VRPHRWKHUODQJXDJH¶WKHODVWLQWHUVHPLRWLFWUDQVODWLRQRUWUDQVPXWDWLRQLVµDQLQWHUSUHWDWLRQRIYHUEDO VLJQVE\PHDQVRIVLJQVRIQRQYHUEDOVLJQV\VWHPV¶-DNREVRQ¶VGHILQLWLRQVKDYHORQJEHHQWUHDWHGDVDSRLQWRI GHSDUWXUHIRUVXEVHTXHQWGLVFXVVLRQVRIWUDQVODWLRQDOWKRXJKDIHZVFKRODUVILQGKLVSRVLWLRQWRRVWULFWO\ERXQG WRDOLQJXLVWLFSRLQWRIYLHZ/DZHQGRZVNL7RXU\E ,QRUGHUWRDFFRPPRGDWH/RWPDQ¶V GLVWLQFWLRQEHWZHHQODQJXDJHDVDSULPDU\PRGHOOLQJV\VWHPDQGFXOWXUHDVDVHFRQGDU\PRGHOOLQJV\VWHP EHFDXVHLWGHULYHVIURPODQJXDJH 7RXU\LELG SURSRVHVWRVXEVWLWXWH-DNREVRQ¶VWULDGLFGLYLVLRQZLWKD SULPDU\GLYLVLRQLQWRWZRW\SHVRIWUDQVODWLRQLQWUDVHPLRWLFDQGLQWHUVHPLRWLFZLWKLQWUDVHPLRWLFWUDQVODWLRQ EHLQJIXUWKHUVXEGLYLGHGLQWRLQWUDOLQJXLVWLFDQGLQWHUOLQJXLVWLFWUDQVODWLRQ 5HWXUQLQJWRWKHVWUXFWXUDOVHPLRWLFVRI+MHOPVOHYRQHFRXOGVD\WKDWLQLQWUDOLQJXLVWLFWUDQVODWLRQRU SDUDSKUDVHWKHFRQFHUQLVZLWKWUDQVODWLQJ&RQWHQW)RUPLQWR&RQWHQW)RUPE\SDUDSKUDVLQJGRJVDUHPDQ¶V EHVWIULHQGVDVFDQLQHDQLPDOVDUHIDLWKIXOWRWKHLUPDVWHUVDQ\WHUPWRWHUPUHODWLRQLVGLVUHJDUGHGDQGRQO\ LVVXHVRI&RQWHQWDUHWDNHQLQWRDFFRXQW%\FRQWUDVWLQWUDQVODWLQJSRHWU\IURPRQHODQJXDJHLQWRDQRWKHUQRW RQO\WKH([SUHVVLRQ)RUPEXWIUHTXHQWO\DOVRWKH([SUHVVLRQ6XEVWDQFHPXVWEHFRQVLGHUHG7RWUDQVODWH 5DFLQH¶VSRXUTXLVRQWFHVVHUSHQWVTXLVLIIOHQWVXUQRVWrWHVµSRHWLFDOO\¶RQHKDVWRSUHVHUYHWKHDOOLWHUDWLRQ ([SUHVVLRQ6XEVWDQFH ,QRWKHUFDVHVWKHWUDQVODWRUPD\GHFLGHWRGLVUHJDUGWKH([SUHVVLRQ6XEVWDQFHLQ RUGHUWRFRQYH\WKH&RQWHQW6XEVWDQFH,QWUDQVODWLQJDSKLORVRSKLFDOWH[WLWFRXOGEHDUJXHGWKHWUDQVODWRULV PRUHFRQFHUQHGZLWKWKH&RQWHQW)RUPWKDQZLWKWKH([SUHVVLRQ)RUP,QWUDQVODWLQJLQWHUVHPLRWLFDOO\IRU H[DPSOHDQRYHOLQWRDILOPPRUHDWWHQWLRQZLOOEHSDLGWRWKH&RQWHQW6XEVWDQFHRUWKH&RQWHQW)RUPUDWKHU WKDQWRWKH([SUHVVLRQ6XEVWDQFHZKLFKLVDXWRPDWLFDOO\H[FOXGHGLQWKLVFDVH RUWKH([SUHVVLRQ)RUP

6HPLRWLFVDQGWKHTXHVWLRQRIWUDQVODWDELOLW\ 2QHRYHUZKHOPLQJTXHVWLRQKDVGRPLQDWHGYDULRXVWKHRULHVRIVLJQVRYHUWKHFHQWXULHVLVWUDQVODWLRQ WKHRUHWLFDOO\SRVVLEOH"7KLVTXHVWLRQKDVIUHTXHQWO\EHHQDGGUHVVHGIURPWZRµUDGLFDO¶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¶VH[DPSOHRIZRRGWUHHIRUHVWDQGWKHLUµHTXLYDOHQWV¶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



3DJH

VFKRODUVWRVXJJHVWWKDWLQRUGHUWRWUDQVODWHIURPODQJXDJH$LQWRODQJXDJH%RQHKDVWRUHIHUWRDSHUIHFW ODQJXDJH;LQZKLFKWKHFRQFHSWVH[SUHVVHGLQERWK$DQG%FDQEHFRQYH\HGZLWKRXWDQ\DPELJXLW\%H\RQG WKDWRSLQLRQVYDU\RQWKHQDWXUHRIWKHSHUIHFWODQJXDJHLQTXHVWLRQ6RPHVHHLWDVDQDEVWUDFWLGHDO SDUDPHWHUWRZKLFKWKHWUDQVODWRUUHIHUVLQDVRUWRIP\VWLFDOZD\WKLVLVHVVHQWLDOO\WKHYLHZHPERGLHGLQ :DOWHU%HQMDPLQ¶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¶VDQG$GDP¶V $PRUHFRJHQWREMHFWLRQKRZHYHULVWKLV,ILWLVWUXHWKDWRQHQHHGVWKHPHGLDWLRQRIDODQJXDJH;WRSDVV IURPODQJXDJH$WRODQJXDJH%WKHQRQHZLOODOVRQHHGWKHPHGLDWLRQRIDODQJXDJH<WRSDVVIURP$WR; DQGVRRQDGLQILQLWXP7KXVWKHSRVWXODWHRIDSHUIHFWODQJXDJHGRHVQRWH[SODLQWUDQVODWLRQDFWLYLW\LW SUHVXSSRVHVLW7UDQVODWLRQGRHVWDNHSODFHLQVSLWHRIGLIIHUHQFHVEHWZHHQVHPLRWLFV\VWHPV7KLVHPSLULFDO HYLGHQFHLVQRWVRPHWKLQJZHQHHGWRGHPRQVWUDWHEXWVRPHWKLQJZHKDYHWRH[SODLQDQGWKLVRXJKWWREHWKH SRLQWRIGHSDUWXUHIRUDQ\VHPLRWLFUHIOHFWLRQRQWUDQVODWLRQ

7UDQVODWLRQDQGWH[WVHPLRWLFV 7UDQVODWLRQGRHVQRWLQYROYHFRPSDULQJDODQJXDJHRUDQ\RWKHUVHPLRWLFV\VWHP ZLWKDQRWKHUODQJXDJHRU VHPLRWLFV\VWHPLWLQYROYHVSDVVLQJIURPDWH[WµD¶HODERUDWHGDFFRUGLQJWRDVHPLRWLFV\VWHPµ$¶LQWRDWH[W µE¶HODERUDWHGDFFRUGLQJWRDVHPLRWLFV\VWHPµ%¶ 7KHOLWHUDWXUHRQWH[WVHPLRWLFVLVFRSLRXVDQGLVQRWKRPRJHQHRXVLQWKHVHQVHWKDWLWHQFRPSDVVHVDQXPEHU RIGLYHUVHVFKRROVRIWKRXJKWVHHIRULQVWDQFH/RWPDQ*HQHWWH3HW|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¶PJRLQJKRPHKRPHFDQQRWEHOLWHUDOO\WUDQVODWHGEXWKDVWREHLQWHUSUHWHGDVFKH]PRL $QH[SUHVVLRQDFTXLUHVDSDUWLFXODUVHQVHZKHQXWWHUHGLQDVSHFLILFVLWXDWLRQRUFLUFXPVWDQFHRI XWWHUDQFH'XFURW VXJJHVWVWKDWWKHH[SUHVVLRQMHVXLVOHURJQRQ,DPWKHNLGQH\V DSSHDUVDV VHPDQWLFDOO\LQFRQVLVWHQWH[FHSWZKHQLW



3DJH

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µWKHLPSOLFLWDQGUHTXLVLWHFRQGLWLRQVRIWKHWH[W¶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

)XUWKHUUHDGLQJ (FR*RUOpH*UHLPDV+MHOPVOHY-DNREVRQ3HLUFH± 3\P6DXVVXUH7RXU\DEE:LOVV

80%(572(&2$1'6,5,1(5*$$5'

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

1RUPDWLYHDQGGHVFULSWLYHDWWLWXGHVWRWKHWUDQVODWLRQRI6KDNHVSHDUH 0DQ\VWXGLHVRI6KDNHVSHDUHLQWUDQVODWLRQDUH1250$7,9(LQWKDWWKHLUSHUFHSWLRQRIH[LVWLQJWUDQVODWLRQV LVGHWHUPLQHGE\DSUHGHILQHGFRQFHSWRIZKDWWUDQVODWLRQLVRUVKRXOGEH7KLVQRUPDWLYHVWDQFHPD\VKRZLQ H[SOLFLWO\SUHVFULSWLYHVWDWHPHQWVRIWKHNLQGµ7KLVLVKRZWRWUDQVODWH6KDNHVSHDUHIRUWKHVWDJH¶,WPD\DOVR PDQLIHVWLWVHOIPRUHVXEWO\IRULQVWDQFHLQGLVFXVVLRQVRIWKHVRFDOOHGXQWUDQVODWDELOLW\RI6KDNHVSHDUH¶V ZRUNLQYDULRXVDWWHPSWVWRGUDZWKHERUGHUOLQHEHWZHHQ$'$37$7,21DQGWUDQVODWLRQRULQWKHPDQ\ KLVWRULFDODFFRXQWVGHVFULELQJWKHGHYHORSPHQWRI6KDNHVSHDUHLQWUDQVODWLRQLQWHUPVRIDSURJUHVVRUJURZWK IURP



3DJH

WKHFUXGHO\GLVUHVSHFWIXOILUVWDWWHPSWVWRWKHVFKRODUO\DFFXUDF\RIFRQWHPSRUDU\WUDQVODWLRQV6XFKDFFRXQWV WHQGWRIURZQXSRQRUHYHQSDVVRYHUWKRVHYHUVLRQVZKLFKVXSSRVHGO\FDXVHGDVWDJQDWLRQRUDUHODSVHLQWKH SURFHVV :KLOHLWLVTXLWHQDWXUDOIRUSHRSOHWRKDYHVWURQJYLHZVDERXW6KDNHVSHDUHRULQGHHGDERXWWUDQVODWLRQLQ JHQHUDOWKHKLVWRULFDOO\RULHQWHGVFKRODUZLOOREYLRXVO\EHQHILWIURPDPRUHGHWDFKHGDQGUHODWLYLVWLFDWWLWXGH %XWPDQ\VFKRODUVKDYHIHOWFDOOHGXSRQWRDEDQGRQWKHLUGHVFULSWLYHSRVLWLRQDQGFRPHWRWKH%DUG¶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

7UDQVODWLQJ6KDNHVSHDUHWKHWHFKQLFDOLWLHVDQGEH\RQG 7KHUDQJHRIWHFKQLFDOSUREOHPVWKDWWKHWUDQVODWRURI6KDNHVSHDUHPD\EHIDFHGZLWKLVTXLWHIRUPLGDEOH LQFOXGLQJDVWKH\GRWKHPDQ\WH[WXDOFUX[HVWKHREVFXUHFXOWXUDODOOXVLRQV6KDNHVSHDUH¶VDUFKDLVPVDQG GDULQJQHRORJLVPVKLVFRQWUDVWLYHXVHRIZRUGVRI$QJOR6D[RQDQG5RPDQFHRULJLQKLVXVHRIKRPHO\ LPDJHVRIPL[HGPHWDSKRUVDQGRILWHUDWLYHLPDJHU\WKHUHSHWLWLRQVRIWKHPDWLFNH\ZRUGVWKH SHUVRQLILFDWLRQVZKLFKLQVRPHODQJXDJHVPD\OHDGWRFRQWUDGLFWLRQVEHWZHHQQDWXUDOVH[DQGJUDPPDWLFDO JHQGHU 6KDNHVSHDUH¶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¶VLDPELFYHUVHREYLRXVO\GHSHQGVRQWKHSUHOLPLQDU\FKRLFHRIDYHUVHWUDQVODWLRQ RYHUDSURVHWUDQVODWLRQ)XUWKHUPRUHWUDQVODWRUVRI2YLGRU5DEHODLVDUHOLNHO\WRFRQILUPWKDWQRQHRIWKH SRWHQWLDOSUREOHPVOLVWHGDERYHLVOLPLWHGWRWKHFDVHRI6KDNHVSHDUH,WLVDOVRXVHIXOWREHDULQPLQGWKDW PDQ\RIWKHIHDWXUHVLQTXHVWLRQKDYHDWWLPHVGLVWXUEHG6KDNHVSHDUH¶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



3DJH

7KHLQWHUQDWLRQDOGLPHQVLRQ 7UDQVODWRUVXVXDOO\SUHIHUWRVWDUWIURPWKHFXUUHQWFULWLFDOHGLWLRQVRI6KDNHVSHDUH¶VWH[WVUDWKHUWKDQIURPWKH RULJLQDOTXDUWRVDQGIROLRV7KLVPHDQVWKDWPDQ\WUDQVODWLRQVVRPHZKDWEHODWHGO\UHIOHFWWUHQGVLQ(QJOLVK WH[WHGLWLQJ)RUH[DPSOHWZHQWLHWKFHQWXU\HGLWLRQVVXFKDVWKH$UGHQ6KDNHVSHDUHRU-RKQ'RYHU:LOVRQ¶V 1HZ&DPEULGJH6KDNHVSHDUHKDYHFHUWDLQO\EHHQLQVWUXPHQWDOLQWKHWUDQVODWRU¶VJURZLQJDZDUHQHVVRIFHUWDLQ VXEWOHWLHVRI6KDNHVSHDUH¶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oRLV 'XFLVZHUHIXUWKHUWUDQVODWHGLQWR'XWFK,WDOLDQ3ROLVK3RUWXJHVH5XVVLDQ6SDQLVKDQG7XUNLVKWKH LQFRPSOHWHSURVHWUDQVODWLRQVE\3LHUUH$QWRLQHGHOD3ODFH± IRXQGUHDGHUVDQGUHZULWHUVDOORYHU (XURSHDQGVRGLGWKHPRUHVRXUFHRULHQWHGSURVHYHUVLRQVRIDOOWKHSOD\VE\3LHUUH/H7RXUQHXU± )UDQFHKRZHYHUJUDGXDOO\ORVWLWVJULSRQWKHUHFHSWLRQRI6KDNHVSHDUHLQ(XURSHDVRSSRVLWLRQWRWKH QHRFODVVLFDOGRPLQDWLRQEHFDPHVWURQJHU:LWK*HUPDQ\KDYLQJHPHUJHGDVWKHFKDPSLRQRIDQWLFODVVLFLVP WUDQVODWRUVLQFUHDVLQJO\WXUQHGWR*HUPDQLQWHUPHGLDWHWUDQVODWLRQVRIDPRUHµIDLWKIXO¶NLQG7KHWUDQVODWLRQV E\&KULVWRSK0:LHODQG± -RKDQQ-RDFKLP(VFKHQEXUJ± )ULHGULFK/XGZLJ6FKU|GHUIRU H[DPSOH+DPOHW )ULHGULFK6FKLOOHUIRUH[DPSOH0DFEHWK DQG$XJXVW:LOKHOP6&+/(*(/ VHH*(50$175$',7,21 DQG/XGZLJ7LHFN±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¶VFRVPRSROLWDQLVPE\ GUDZLQJDWWHQWLRQWRµQRQWUDQVODWLRQ¶DVDPHDQVRIGHDOLQJZLWKWKHODQJXDJHEDUULHU7KHVWDWXVRI(QJOLVK )UHQFKDQG*HUPDQDVDOLQJXDIUDQFDLQFHUWDLQDUHDVDQGDWFHUWDLQWLPHVKDVVWURQJO\GHWHUPLQHGWKH LQWHUQDWLRQDOVSUHDGRI6KDNHVSHDUH¶VZRUNVOHDGLQJWRELOLQJXDOLVPDQGELFXOWXUDOLVPLQWKHDWULFDORUOLWHUDU\ OLIHDQGVREULQJLQJDERXWDFRPSOH[LQWHUSOD\EHWZHHQGLIIHUHQWWUDQVODWLRQWUDGLWLRQV7KHXVHRIDIRUHLJQ OLQJXDIUDQFDDORQJVLGHRUDVDVXEVWLWXWHIRUWKHORFDOYHUQDFXODULVYHU\RIWHQHQIRUFHGE\DSROLWLFDOO\ VWURQJHUDQGRUFXOWXUDOO\PRUHSUHVWLJLRXVJURXSUDWKHUWKDQEHLQJWKHRXWFRPHRIDIUHHFKRLFH7KLVODUJHO\ DFFRXQWVIRUWKHLPPHQVHZRUOGZLGHVXFFHVVRIXQWUDQVODWHG6KDNHVSHDUHQRWOHDVWLQ%ULWDLQ¶VIRUPHU FRORQLHVDQGGHSHQGHQFLHVZKHUHWKHUHODWLYHVWDELOLW\RIWKHVDFURVDQFWRULJLQDOVFDQEHXVHGWRVHUYH:HVWHUQ LPSHULDOLVPDQGDYHUWWKHGDQJHURI6KDNHVSHDUHEHLQJDSSURSULDWHGE\WKHORFDOFXOWXUHV)RUVRPHZKDW GLIIHUHQWUHDVRQVWKHSHUIRUPDQFHVE\(QJOLVKYLVLWLQJWURXSHVLQHLJKWHHQWKDQGQLQHWHHQWKFHQWXU\(XURSH ZHUHSRVLWLYHO\ZHOFRPHGDVDFDWDO\VWZKLFKFRXOGVSHHGXSWKHDOUHDG\H[LVWLQJWUHQGWRZDUGVDPRUH (OL]DEHWKDQDQGXQDGXOWHUDWHG6KDNHVSHDUH

&RQIOLFWDQGDFFXOWXUDWLRQ ,WLVDFRPPRQSODFHRIGUDPDWLFKLVWRU\WKDW6KDNHVSHDUH¶VZRUNSUHVHQWVDEOHQGRI*UHFR5RPDQDQG SRSXODUYHUQDFXODUHOHPHQWV7KLVXQGHUOLHV6KDNHVSHDUH¶VDPELYDOHQWUHODWLRQVKLS



3DJH

WRODWHUQHRFODVVLFDOSRHWLFVPDQ\RIZKRVHSULQFLSOHVKHIORXWHGWRWKHSRLQWRIH[DVSHUDWLQJLWVVXSSRUWHUV ZLWQHVVKLVMX[WDSRVLWLRQRIKLJKWUDJHG\ZLWKEURDGIDUFHDQGRISURVHZLWKYHUVHKLVLJQRUDQFHRIVRFLDO GHFRUXPKLVGLVUHVSHFWIRUWKHXQLWLHVRISODFHWLPHDQGDFWLRQWKHEORRGVKHGDQGVSHFWDFXODUHIIHFWVRQ VWDJHWKHLQGHFHQFLHVWKHZRUGSOD\WKHXQGLVFLSOLQHGLPDJHU\DQGYHUEDOREVFXULW\DQGVRRQ7KLV LQFRPSDWLELOLW\ZLWKQHRFODVVLFDOSRHWLFVKDUGO\PDWWHUHGLQWKHILUVWVWDJHRI6KDNHVSHDUH¶VUHFHSWLRQLQ (XURSH'XULQJ6KDNHVSHDUH¶VOLIHWLPHDQGWKHQH[WIHZGHFDGHVWKH(QJOLVKVWUROOLQJSOD\HUVEURXJKW VLPSOLILHGVWDJHYHUVLRQVRI6KDNHVSHDUHWRWKH&RQWLQHQWILUVWLQ(QJOLVKZLWKVWURQJGHSHQGHQFHRQERG\ ODQJXDJHDQGVSHFWDFXODUVWDJHDFWLRQDQGODWHUIROORZHGE\WUDQVODWLRQV7KHVHSOD\HUVODUJHO\RSHUDWHG RXWVLGHWKHRIILFLDOWKHDWULFDODQGOLWHUDU\FLUFXLWV 6KDNHVSHDUH¶VQDPHJUDGXDOO\EHJDQWRHPHUJHLQFDQRQL]HG(XURSHDQFXOWXUHQRWOHDVWYLDPHQWLRQVLQ WUDQVODWHG(QJOLVKVSHFWDWRULDOPDJD]LQHVDQGQRYHOVIRUH[DPSOHE\6DPXHO5LFKDUGVRQDQG+HQU\)LHOGLQJ DQGWKURXJK9ROWDLUH¶VZLGHO\LQIOXHQWLDOFULWLFLVPIRULQVWDQFHLQKLV/HWWUHVSKLORVRSKLTXHV 7KLV LQFLSLHQWLQWHUHVWLQ6KDNHVSHDUH¶VZRUNOHGWRWKHHDUOLHVWSXEOLVKHGWUDQVODWLRQVLQFOXGLQJWKRVHE\3LHUUH $QWRLQHGH/D3ODFHLQ)UDQFHDQG&:YRQ%RUFN¶V*HUPDQYHUVLRQRI-XOLXV&DHVDULQDQGZDV IXUWKHUHQFRXUDJHGE\WKHP+RZHYHUJURZLQJIDPLOLDULW\ZLWK6KDNHVSHDUH¶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¶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¶V$OPRVWLQHYLWDEO\WKLVPHDQWWKDWWKHFULWLFV¶DQGWUDQVODWRUV¶ YHUVLRQVRI6KDNHVSHDUHZHUHVHOHFWLYHDQGELDVHGLQDFFRUGDQFHZLWKSUHYDLOLQJSHUVRQDORUPRUHFROOHFWLYH FRQYLFWLRQV)RUH[DPSOHLQWKH*HUPDQFRQWH[W6KDNHVSHDUHUHDOO\EHFDPHDSDZQLQWKHVWUDWHJLHVRIWKH SURPRWRUVRIWKHGRPHVWLFWUDJHG\WKH6WXUPXQG'UDQJPRYHPHQWWKHFORVHWGUDPDWKHQRWLRQRISRSXODU SRHWU\WKH:HLPDUSURGXFWLRQVW\OHDQGVRIRUWK(YHQWKHFHOHEUDWHG6FKOHJHO²7LHFNWUDQVODWLRQVZKLFK SLRQHHUHGWKHYLHZRI6KDNHVSHDUH¶VSRHWU\EHLQJRUJDQLFDQGWKHUHIRUHUHTXLULQJIXOOWUDQVODWLRQRIIRUPVDV ZHOODVPHDQLQJVDUHQRH[FHSWLRQWRWKLVUXOHLQVRIDUDVWKH\SURYHVWURQJO\WULEXWDU\WRWKHUXOLQJVW\OLVWLF FRQYHQWLRQVRIWKH*RHWKHHUD6HFRQGQHRFODVVLFDOUHZULWHUVVXFKDV9ROWDLUHRU'XFLVZHUHQRWWKHDUFK FRQVHUYDWLYHVWKH\DUHXVXDOO\PDGHRXWWREHWKHWUXWKLV



3DJH

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

)XUWKHUUHDGLQJ %DXHUHWDO%ULVVHW'HODEDVWLWD'HODEDVWLWDDQG'¶KXOVW+H\OHQ+RIPDQQ/DUVRQ DQG6FKHOOH0RQDFR6FKDEHUW6KDNHVSHDUH7UDQVODWLRQ6WHLJHU:LOOLDPV%OLQQ DQG3DXO6FKXOW]HRIIHULQGLVSHQVDEOHELEOLRJUDSKLFDOJXLGDQFH

',5.'(/$%$67,7$

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



3DJH

WKDWµVKLIW¶LVQRWDFDWHJRU\RIFRPSHWHQFH7KHGHVFULSWLRQDQGH[SODQDWLRQRIVKLIWVLQWUDQVODWLRQDV SHUIRUPDQFHWKHUHIRUHRXJKWWREHFRQFHUQHGZLWKWKHG\QDPLFVRIFXOWXUHUDWKHUWKDQWKHVWDWLFFRQWUDVWLYH GHVFULSWLRQRIODQJXDJHVDQGFXOWXUHVZKLFKWDNHVSODFHZLWKLQWKHIUDPHZRUNRIYDULRXVFRPSDUDWLYH GLVFLSOLQHVRQWKHVHSRLQWVVHH7RXU\D±

6KLIWVDQGLQYDULDQFH 7UDQVODWLRQOLNHHYHU\WUDQVIHURSHUDWLRQLQYROYHVDQµLQYDULDQWXQGHUWUDQVIRUPDWLRQ¶FI7RXU\D 7KHWUDQVIRUPDWLRQZKLFKLVRFFDVLRQHGE\WKHWUDQVODWLRQSURFHVVFDQEHVSHFLILHGLQWHUPVRIFKDQJHVZLWK UHVSHFWWRWKHRULJLQDOFKDQJHVZKLFKDUHWHUPHGµVKLIWV¶7KHWZRFRQFHSWVRILQYDULDQWDQGVKLIWDUHWKHUHIRUH LQWHUGHSHQGHQWVXFKWKDWDQ\FODVVLILFDWLRQRUGHILQLWLRQRIVKLIWVHQWDLOVDGHILQLWLRQRIWKHLQYDULDQW%DNNHU DQG1DDLMNHQV± 'HILQLWLRQVRIWKHFRQFHSWRILQYDULDQWLHWKRVHHOHPHQWVZKLFKUHPDLQ XQFKDQJHGLQWKHSURFHVVRIWUDQVODWLRQ QHFHVVDULO\VHUYHDFHUWDLQWKHRUHWLFDOSXUSRVHZKLOHSUHVXSSRVLQJD FHUWDLQSRLQWRIYLHZ$YHU\URXJKDQGVFKHPDWLFGLYLVLRQFDQEHPDGHEHWZHHQWKRVHFRQFHSWLRQVRI LQYDULDQFHLQZKLFKWKHSRLQWRIYLHZOLHVµEHIRUH¶WUDQVODWLRQEHLWDFWXDORULGHDO DQGWKRVHLQZKLFKLWOLHV µDIWHU¶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µSULRU¶WRWUDQVODWLRQ :KHQDFHUWDLQW\SHRILQYDULDQFHLVFRQVLGHUHGDUHTXLUHPHQWIRUDSSURSULDWHWUDQVODWLRQEHKDYLRXUWKH FRUUHVSRQGLQJQRWLRQRIVKLIWLVOLNHO\WREHDQRUPDWLYHRUSUHVFULSWLYHRQH7KHGLUHFWLYHVWDWHPHQWVLQZKLFK WKLVQRWLRQLVIRXQGFDQEHFDVWHLWKHULQDQDIILUPDWLYHIRUPDVGRRULQDQHJDWLYHIRUPDVGRQ¶WYDQ/HXYHQ =ZDUWE 7KHFKRLFHRIHLWKHUWKHSRVLWLYHRUWKHQHJDWLYHIRUPXODWLRQGHSHQGVRQWKHZD\WKHLQLWLDO GLIIHUHQFHVEHWZHHQVRXUFHDQGWDUJHWFRGHVRUV\VWHPVDUHWDNHQLQWRDFFRXQW,QERWKW\SHVRIVWDWHPHQWWKH FRQFHSWRIVKLIWLVHVSHFLDOO\UHOHYDQWWRWKHDSSOLHGEUDQFKHVRIWUDQVODWLRQVWXGLHVWUDQVODWLRQ','$&7,&6 DQGFULWLFLVPVHH5(9,(:,1*$1'&5,7,&,60 ,QQHJDWLYHIRUPXODWLRQVVKLIWVDUHORRNHGXSRQDVXQZHOFRPHUHVXOWVRIWKHWUDQVODWLRQDFWDVVRPHWKLQJWREH DYRLGHGWKHLPSOLHGSHUIRUPDQFHLQVWUXFWLRQLVGRQ¶W7KHWHUPWKHQUHIHUVWRWUDQVIRUPDWLRQVRIFHUWDLQ VRXUFHWH[WYDOXHVRUSURSHUWLHVZKLFKRXJKWWRUHPDLQRUKDYHUHPDLQHGXQDOWHUHGWKHUHVXOWLVGHVFULEHGDV DQHUURURUPLVWUDQVODWLRQ6LQFHVKLIWVDUHWKXVVHHQDVXQQHFHVVDU\GHYLDWLRQVIURPWKHGXHFRXUVHRIWKH WUDQVODWLRQSURFHVVWKHFRQFHSWFRXOGEHVDLGWRRSHUDWHZLWKLQDUHVWULFWHGWKHRU\RI75$16/$7$%,/,7< FI7RXU\D±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



3DJH

RWKHUDVSHFWV:LWKWKLVQRWLRQRIVKLIWWKHIRFXVLVQRWRQGHSDUWXUHVIURPDJLYHQQRUPDWLYHFRQFHSWRI WUDQVODWDELOLW\EXWRQWKHV\VWHPLFGLIIHUHQFHVZKLFKLQWKHSURMHFWHGWUDQVODWDELOLW\PRGHOUHPDLQWREH SURYLGHGIRU,WLVWKHVHV\VWHPLFGLIIHUHQFHVZKLFKDUHUHZULWWHQLQWHUPVRISHUIRUPDQFHLQVWUXFWLRQVGR 7KHFRQFHSWRIVKLIWWKHQLVLQVWUXPHQWDOZLWKLQDVHWRIWUDQVODWLRQSURFHGXUHV([DPSOHVRIVKLIWVSRVWXODWHG DVGR¶VLQFOXGHFKDQJHVDWWKHOHYHORIIRUPDOOLQJXLVWLFPHDQVZKLFKDUHEURXJKWDERXWLQIDYRXURIIXQFWLRQDO RUWH[WSUDJPDWLFHTXLYDOHQFH)RULQVWDQFH1LGD¶VQRWLRQRIG\QDPLFHTXLYDOHQFHZKHUHµWKHIRFXVRI DWWHQWLRQLVGLUHFWHGQRWVRPXFKWRZDUGWKHVRXUFHPHVVDJHDVWRZDUGWKHUHFHSWRUUHVSRQVH¶1LGD DGRSWVDIXQFWLRQDOSUDJPDWLFFRQFHSWRILQYDULDQFHDQGSUHVXSSRVHVVKLIWVDZD\IURPVWDWLFRU IRUPDOKLHUDUFKLHVRIVRXUFHWH[WSURSHUWLHV7ZRRIWKHWUDQVODWLRQSURFHGXUHVGLVFXVVHGLQ9LQD\DQG 'DUEHOQHW SURYLGHIXUWKHUH[DPSOHVRISRVLWLYHSHUIRUPDQFHLQVWUXFWLRQVWUDQVSRVLWLRQZKHUHDQ6/ ZRUGLVUHQGHUHGE\D7/ZRUGRIDGLIIHUHQWZRUGFODVVDQGPRGXODWLRQµ>D@WUDQVODWLRQPHWKRGFRQVLVWLQJ RIFKDQJLQJDSRLQWRIYLHZDQHYRFDWLRQDQGRIWHQDFDWHJRU\RIWKRXJKW¶9LQD\DQG'DUEHOQHWWUDQV6DJHU DQG+DPHO ,QYDULDQFHGHILQHGµDIWHU¶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µEODFNER[¶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ýVHH6/29$.75$',7,21 EHWZHHQFRQVWLWXWLYHDQGLQGLYLGXDOVKLIWV VHHEHORZ EXWDFFRUGLQJWR3RSRYLþFRQVWLWXWLYHVKLIWVDUHQRWH[FOXVLYHO\OLQJXLVWLF $VIDUDVWKHSURGXFWRULHQWHGYLHZRIVKLIWVLVFRQFHUQHGWKHIROORZLQJGHILQLWLRQE\3RSRYLþ PD\ VHUYHDVDVWDUWLQJSRLQWµ$OOWKDWDSSHDUVDVQHZZLWKUHVSHFWWRWKHRULJLQDORUIDLOVWRDSSHDUZKHUHLWPLJKW KDYHEHHQH[SHFWHGPD\EHLQWHUSUHWHGDVDVKLIW¶,QWKLVGHILQLWLRQWKUHHHOHPHQWVFDQEHGLVFHUQHGD D UHODWLRQVKLSEHWZHHQWKHVRXUFHDQGWDUJHWWH[WVµQHZZLWKUHVSHFWWRWKHRULJLQDO¶ E DUHODWLRQVKLSEHWZHHQ WKHWDUJHWWH[WDQGLWVUHFHSWLRQLQWKHWDUJHWV\VWHPµZKHUHLWPLJKWKDYHEHHQH[SHFWHG¶ DQGF D GHVFULSWLYHSRLQWRIYLHZµPD\EHLQWHUSUHWHG¶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± RIWKHFODVVRIWUDQVODWLRQ7KLVTXDOLW\FDQEH



3DJH

FDXVDOO\OLQNHGWRWKHGRXEOHVWDWXVRIWKHWUDQVODWLRQDVDUHFRQVWUXFWLRQRIDQRWKHUWH[WDQGDWH[WIXQFWLRQLQJ LQLWVRZQULJKWLQWKHWDUJHWFXOWXUHVHHIRULQVWDQFH/HY\

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µDQ\7/WH[WRUSRUWLRQRIWH[WZKLFKLVREVHUYHGRQDSDUWLFXODURFFDVLRQ«WREHWKHHTXLYDOHQWRIDJLYHQ6/ WH[WRUSRUWLRQRIWH[W¶DQGDIRUPDOFRUUHVSRQGHQWµDQ\7/FDWHJRU\XQLWFODVVVWUXFWXUHHOHPHQWRI VWUXFWXUHHWF ZKLFKFDQEHVDLGWRRFFXS\DVQHDUO\DVSRVVLEOHWKH³VDPH´SODFHLQWKH³HFRQRP\´RIWKH 7/DVWKHJLYHQ6/FDWHJRU\RFFXSLHVLQWKH6/¶&DWIRUG +HOLPLWVKLVWKHRU\RIVKLIWVWRLQVWDQFHV RIWUDQVODWLRQZKLFKVDWLVI\WKHFRQGLWLRQWKDWWKHUHODWLRQVKLSEHWZHHQVRXUFHDQGWDUJHWXWWHUDQFHVFDQEH LGHQWLILHGE\DFRPSHWHQWELOLQJXDODVWH[WXDOHTXLYDOHQFH7KHLQYDULDQWRIFRPSDULVRQ&DWIRUGHPSOR\VLV IRUPDOFRUUHVSRQGHQFH6KLIWVLQKLVGHILQLWLRQDUHµGHSDUWXUHVIURPIRUPDOFRUUHVSRQGHQFHLQWKHSURFHVVRI JRLQJIURPWKH6/WRWKH7/¶LELG ,IIURPDGHVFULSWLYHSRLQWRIYLHZDJLYHQ7/LQVWDQFHLVREVHUYHG WREHDWH[WXDOHTXLYDOHQWRIDJLYHQ6/IRUPWKLVGRHVQRWHQWDLOWKDWIRUPDOFRUUHVSRQGHQFHH[LVWVEHWZHHQ WKHXQLWVXQGHUFRPSDULVRQVLQFHWKH7/FDWHJRULHVFDQQRWQHFHVVDULO\µEHVDLGWRRFFXS\DVQHDUO\DV SRVVLEOHWKH³VDPH´SODFHLQWKHHFRQRP\RIWKH7/DVWKHJLYHQ6/FDWHJRU\RFFXSLHVLQWKH6/¶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þ WKHPDLQFRQFHUQLVZLWK/,7(5$5<75$16/$7,21DQGVKLIWVDUHWKHUHIRUHGHILQHGDV DVW\OLVWLFFDWHJRU\DQGWHUPHGµVKLIWVRIH[SUHVVLRQ¶)RU3RSRYLþµDV\VWHPDWLFHYDOXDWLRQRIWKHVKLIWVRI H[SUHVVLRQWKDWRFFXULQDWUDQVODWLRQ¶DQGKHQFHµWKHREMHFWLYHFODVVLILFDWLRQRIGLIIHUHQFHVEHWZHHQWKH WUDQVODWLRQDQGLWVRULJLQDO¶LELG VKRXOGEHEDVHGRQDWKHRU\RIH[SUHVVLRQVXFKDVFDQEHIRXQGLQ 0LNR 7KHOLQJXLVWLFPHDQVHPSOR\HGLQWKHVRXUFHDQGWDUJHWWH[WVFDQQRWEHFRPSDUHGLQLVRODWLRQ EXWRQO\µLQUHODWLRQWRWKHHQWLUHV\VWHPRIH[SUHVVLRQ¶3RSRYLþ ,WLVWKLVV\VWHPRIH[SUHVVLRQ ZKLFKDOORZVXVWRGHWHUPLQHWKHH[SUHVVLYHYDOXHVRIWKHUHVSHFWLYHOLQJXLVWLFGHYLFHVDQHFHVVDU\ SUHFRQGLWLRQIRUWKHHVWDEOLVKPHQWRIVKLIWVµLQWKHVSKHUHRIVW\OH¶LELG 6W\OHIRU3RSRYLþLVD PXOWLOD\HUHGDQGKLHUDUFKLFDOO\RUJDQL]HGFRQFHSW,WLVEHFDXVHLWFRYHUVDEVWUDFWDQGJHQHUDOFDWHJRULHVDQG TXDOLWLHVDVZHOODVPRUHVSHFLILFVW\OLVWLFPHDQVWKDWLWFDQEHXVHGDVDQLQYDULDQWIRUWKHFRPSDULVRQRI VRXUFHDQGWDUJHWWH[WV)RUWKHHYDOXDWLRQRIVKLIWVLWLVQHFHVVDU\WRH[DPLQHWKHUHVSHFWLYHGLIIHUHQWLDWLRQRI VW\OLVWLFTXDOLWLHVLQWKHVRXUFHDQGWDUJHWODQJXDJHVDQGWH[WV3RSRYLþGLVWLQJXLVKHVEHWZHHQFRQVWLWXWLYH VKLIWVDQGLQGLYLGXDOVKLIWV&RQVWLWXWLYHVKLIWVDUH



3DJH

V\VWHPERXQGEXWWKHFRQFHSWLVZLGHUWKDQWKDWRIREOLJDWRU\VKLIWV3RSRYLþGHILQHVDFRQVWLWXWLYHVKLIWDV µ$QLQHYLWDEOHVKLIWWKDWWDNHVSODFHLQWKHWUDQVODWLRQDVDFRQVHTXHQFHRIGLIIHUHQFHVEHWZHHQWKHWZR ODQJXDJHVWKHWZRSRHWLFVDQGWKHWZRVW\OHVRIRULJLQDODQGWUDQVODWLRQ¶ 2QHPLJKWDOVRFRQFHLYH RIWKHVHVKLIWVDVFRQVWLWXWLYHLQWKHVHQVHWKDWWKH\DUHFRQVWLWXWLYHIRUWKHVW\OHRIWKHWUDQVODWLRQFIWKH QRWLRQRIVKLIWVDVDFDWHJRULDOTXDOLW\RIWUDQVODWLRQDERYH $FFRUGLQJWR3RSRYLþWKHVW\OHRIWKHWUDQVODWLRQ FRQFHLYHGDVWKHµLQWHJUDWLYHSULQFLSOH¶LQWKHGHYHORSPHQWRILWVVWUXFWXUH LVQHFHVVDULO\GHWHUPLQHG E\VKLIWVEHFDXVHRILWVµGXDOFKDUDFWHU¶LELG LWKDVWRFRPSO\ERWKZLWKWKHQRUPVRIWKHRULJLQDODQG ZLWKDJLYHQWDUJHWµWUDQVODWLRQLGHDO¶,QGLYLGXDOVKLIWVGLIIHUIURPFRQVWLWXWLYHVKLIWVLQWKDWWKH\DUHSURPSWHG E\WKHVW\OLVWLFSURSHQVLWLHVDQGWKHVXEMHFWLYHLGLROHFWRIWKHLQGLYLGXDOWUDQVODWRU:KHQFKDQJHVDWWKHOHYHO RIPDFURVW\OLVWLFVFDXVHWKHWUDQVODWLRQWRILWDOLWHUDU\JHQUHGLIIHUHQWIURPWKDWRIWKHRULJLQDO3RSRYLþVSHDNV RIDJHQHULFVKLIWVHHDOVRYDQGHQ%URHFN :LWKLQWKHPHWKRGRORJ\RI7RXU\D± WKHLQYDULDQWRIWKHFRPSDULVRQLVWKH$GHTXDWH 7UDQVODWLRQ$7 DQGWKHXQLWRIFRPSDULVRQLVWKHWH[WHPH$Q$GHTXDWH7UDQVODWLRQLVDUHFRQVWUXFWLRQRI VRXUFHWH[WWH[WHPHVDQGFRQVLVWVRIDQH[SOLFLWDWLRQRIWKHWH[WXDOUHODWLRQVDQGIXQFWLRQVRIWKHVRXUFHWH[W $VVXFKLWLVQRWDQDFWXDOWH[WEXWDK\SRWKHWLFDOFRQVWUXFWVHUYLQJRQO\PHWKRGRORJLFDOSXUSRVHVVHH +HUPDQV±IRUDFULWLFDODVVHVVPHQWRIWKLVFRQFHSW 7KHGHJUHHRIFRUUHVSRQGHQFHWDNHQDV LQYDULDQFHZLWKLQWKLVPHWKRGLVDGHTXDF\DWWKHWH[WHPLFOHYHODQGVKLIWVDUHGHILQHGDVGHYLDWLRQVIURP DGHTXDF\7KHSXUSRVHRIFRPSDULVRQLVWRGHWHUPLQHWKHGLVWDQFHEHWZHHQWKHµDFWXDOHTXLYDOHQFH¶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¶VWKLQNLQJ WKHDERYHSURFHGXUHEHFDPHSDUWRIDODUJHURQHLQZKLFKDQ DGGLWLRQDOXQLWRIFRPSDULVRQZDVLQWURGXFHGWKHµFRXSOHGSDLURI³SUREOHPVROXWLRQ¶´7KHQRWLRQRIVKLIW JUDGXDOO\EHFDPHOHVVFHQWUDOLQKLVPHWKRGRIGHVFULSWLRQVHHHVSHFLDOO\7RXU\ :LWKLQWKHPHWKRGRORJ\RIYDQ/HXYHQ=ZDUWD DGLVWLQFWLRQLVPDGHEHWZHHQVKLIWVDWWKH OHYHORIDWH[W¶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µVWRU\OHYHO¶DQGµIRFDOL]DWLRQ¶7KH$75KDVWREHHVWDEOLVKHGVHSDUDWHO\IRU HDFKSDLURIWUDQVHPHVWKHLQYDULDQWDWWKHPDFURVWUXFWXUDOOHYHOZLOOEHHVWDEOLVKHGDSULRUL



3DJH

(VVHQWLDOWRWKHPHWKRGRIYDQ/HXYHQ=ZDUWLVWKHSULRULW\JLYHQWRWKHFRQFHSWRIUHODWLRQ$Q\FRPSDUDWLYH GHVFULSWLRQLQYROYHVHVWDEOLVKLQJWKHUHODWLRQEHWZHHQHOHPHQWVDVZHOODVDWWULEXWLQJFHUWDLQIHDWXUHVWRWKRVH HOHPHQWV$FFRUGLQJWRYDQ/HXYHQ=ZDUWDFRPSDULVRQEDVHGRQWKHSULRUDWWULEXWLRQRIIHDWXUHVLVRQO\ D¶VHFRQGGHJUHHFRPSDULVRQ¶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¶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

)XUWKHUUHDGLQJ &DWIRUG+ROPHVE3RSRYLþ5REEHUHFKW7RXU\DYDQGHQ%URHFNYDQ /HXYHQ=ZDUWD

0$77+,-6%$..(5&((6.267(5$1'.,77<9$1/(89(1=:$57

6LJQHGODQJXDJHLQWHUSUHWLQJ 6LJQHGODQJXDJHVDUHDFODVVRIZRUOGODQJXDJHVWKDWDUHUHFHLYHGWKURXJKWKHYLVXDOPRGDOLW\DQGH[SUHVVHG WKURXJKPDQXDODQGQRQPDQXDOJHVWXUHVµ6LJQ/DQJXDJH¶LVDWHUPXVHGPRVWO\E\OD\SHRSOHWKHUHLVQR VLQJOHODQJXDJHFDOOHGµVLJQODQJXDJH¶5DWKHUWKHUHDUHDVPDQ\VLJQHGODQJXDJHVDVWKHUHDUHGLVWLQFW'HDI FRPPXQLWLHVLQWKHZRUOG)RUH[DPSOHWKHVLJQHGODQJXDJHIRXQGLQWKH8QLWHG6WDWHVDQGPXFKRI&DQDGDLV $PHULFDQ6LJQ/DQJXDJHRU$6/LWLVQRWUHDGLO\XQGHUVWDQGDEOHWRDXVHURI%6/RU%ULWLVK6LJQ/DQJXDJH 7KRVHZKRLQWHUSUHWEHWZHHQDVSRNHQDQGDVLJQHGODQJXDJHDUHW\SLFDOO\FDOOHGµVLJQODQJXDJHLQWHUSUHWHUV¶ RUµLQWHUSUHWHUVIRUWKH'HDI¶1HLWKHURIWKHVHWHUPVLVVDWLVI\LQJIRUHDFKPDNHVUHIHUHQFHWRRQO\RQH ODQJXDJHRURQHFRPPXQLW\EHLQJVHUYHG0DQ\SUDFWLWLRQHUVVLPSO\UHIHUWRWKHPVHOYHVDVµLQWHUSUHWHUV¶ ZKRVHODQJXDJHVKDSSHQWREHVD\$6/DQG(QJOLVK6XFKSUDFWLWLRQHUVVHHWKHPVHOYHVDVHVVHQWLDOO\ SHUIRUPLQJWKHVDPHWDVNDVLQWHUSUHWHUVZRUNLQJEHWZHHQWZRVSRNHQODQJXDJHV 7RDODUJHH[WHQWWKLVLVWUXH7KHJRDORILQWHUSUHWLQJUHPDLQVWKHVDPHWRUHFRGHWKH



3DJH

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¶DSSRLQWPHQWVWRVFKRROURRPVZHGGLQJVPDUULDJHFRXQVHOOLQJVHVVLRQVMRELQWHUYLHZVDQGHYHQ SV\FKRWKHUDS\VHHDOVR&20081,7<,17(535(7,1* )RUWKLVUHDVRQ6PLWK VWDWHVWKDWVLJQHG ODQJXDJHLQWHUSUHWHUVµPXVWLQWHUSUHWQRWRQO\WKHPLQGDQGLGHDVEXWWKHKHDUWDQGVRXO¶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

,QWHUSUHWLQJYVWUDQVOLWHUDWLQJWKHH[DPSOHRI$6/ $VZLWKDOOPLQRULWLHVWKHUHLVXVXDOO\DJUHDWGHDORIGLYHUVLW\DPRQJPHPEHUVRIDQ\GHDIFRPPXQLW\EXW RQHEDVLFGLVWLQFWLRQFDQEHPDGH0DQ\LQGLYLGXDOVZLWKDKHDULQJORVVVHHWKHPVHOYHVDVKDQGLFDSSHGRU GLVDEOHGDQGW\SLFDOO\FDOOWKHPVHOYHVµKHDULQJLPSDLUHG¶6XFKSHRSOHW\SLFDOO\ORVWWKHLUKHDULQJDIWHUWKH\ KDGOHDUQHGDVSRNHQODQJXDJHDQGLWLVWKHUHIRUHXQGHUVWDQGDEOHWKDWWKH\VKRXOGVHHWKHPVHOYHVDVGLVDEOHG LQWKHVHQVHWKDWWKH\KDYHORVWWKHDELOLW\WRKHDUWKHLUILUVWODQJXDJHGLUHFWO\2WKHUVKRZHYHUZHUHERUQ ZLWKRXWKHDULQJRUORVWWKHLUKHDULQJLQLQIDQF\VRPHKDYHSDUHQWVZKRDUHDOVR'HDI/LIHZLWKRXWWKH DXGLWRU\VHQVHLVQRUPDOQRVHQVHRIORVVLVH[SHULHQFHG6XFKLQGLYLGXDOVUHIHUWRWKHPVHOYHVZLWKSULGHDV µ'HDI¶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µVLJQHG(QJOLVK¶9RFDEXODU\DGRSWHG DQG



3DJH

DGDSWHGIURP$6/LVHPSOR\HGWRFRQYH\(QJOLVKZRUGVDQGGHOLYHUHGLQ(QJOLVKZRUGRUGHU,QWKLVZD\ VLJQVDUHXVHGWRDFWLYDWHWKHXVHU¶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²DQRYHUWO\IRUPEDVHG DSSURDFK²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¶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µFRPPXQLW\PHPEHU¶WRµREMHFWLYHSURIHVVLRQDO¶²DQGEDFNDJDLQKDVEHHQUHIOHFWHGLQD FRPPHQVXUDWHVKLIWLQWKHZD\WKHLQWHUSUHWHU¶VUROHKDVEHHQFRQFHSWXDOL]HG0HWDSKRUVKDYHFRPHDQGJRQH WKURXJKWKH\HDUVLQFOXGLQJµKHOSHU¶µWHOHSKRQH¶DQGµPDFKLQH¶DOODWWHPSWLQJWRFDSWXUHWKHSURSHUIXQFWLRQ RIWKHLQWHUSUHWHU0RUHUHFHQWPHWDSKRUVLQFOXGHµDGYRFDWH¶µFXOWXUDOPHGLDWRU¶DQGµDOO\¶7KHVHZRUGV UHIOHFWWKHEHOLHIE\PDQ\WKDWLQWHUSUHWHUVZRUNLQJZLWKDGLVHQIUDQFKLVHGSHRSOHVKRXOGEHLQYROYHGLQ HPSRZHULQJWKHP

7KHSURIHVVLRQ ,QWKHVHGXFDWLRQDOSURJUDPPHVIRU'HDIFKLOGUHQZHUHEHJLQQLQJWRDFFHSWVLJQLQJDVDPHGLXPRI LQVWUXFWLRQLQPDQ\FRXQWULHV7KHVHDQGRWKHUIDFWRUVOHGWRDQRUJDQL]HG



3DJH

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¶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



3DJH

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

)XUWKHUUHDGLQJ %DNHUDQG%DWWLVRQ%UHQQDQDQG%ULHQ)ULVKEHUJ,VKDP,VKDPDQG/DQH/DQH /DQHDQG*URVMHDQ

:,//,$03,6+$0

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|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



3DJH

9HUPHHU¶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¶VLHFOLHQW¶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

7KHJHQHUDOWUDQVODWLRQWKHRU\RI5HLVVDQG9HUPHHU ,QFRPELQLQJ9HUPHHU¶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lQGHUXQJFKDQJHRIIXQFWLRQ ,QFDVHVRIWKHODWWHUW\SHWKHVWDQGDUGIRUWKHWUDQVODWLRQ ZLOOQRWEHLQWHUWH[WXDOFRKHUHQFHZLWKWKHVRXUFHWH[WEXWDGHTXDF\RUDSSURSULDWHQHVVWRWKHVNRSRVZKLFK DOVRGHWHUPLQHVWKHVHOHFWLRQDQGDUUDQJHPHQWRIFRQWHQW $OWKRXJKDWUDQVODWXPLVQRWLSVRIDFWRDIDLWKIXOLPLWDWLRQRIWKHVRXUFHWH[WILGHOLW\WRWKHVRXUFHWH[WLVRQH SRVVLEOHRUOHJLWLPDWHVNRSRV6NRSRVWKHRU\VKRXOGQRWWKHUHIRUHEHXQGHUVWRRGDVSURPRWLQJH[WUHPHO\ IUHHWUDQVODWLRQLQDOORUHYHQDPDMRULW\RIFDVHV $OWKRXJKWKHWHUPVµVNRSRV¶µSXUSRVH¶DQGµIXQFWLRQ¶DUHRIWHQXVHGLQWHUFKDQJHDEO\E\



3DJH

5HLVVDQG9HUPHHU IXQFWLRQLVDOVRXVHGLQDPRUHVSHFLILFVHQVHZKLFKGHULYHVPDLQO\IURP 5HLVV,QWKLVVHQVHLWLVOLQNHGWRDVSHFWVRIJHQUH7H[WVRUWH DQGWH[WW\SH7H[WW\S 7KHVRXUFHWH[WFDQEH DVVLJQHGWRDWH[WW\SHDQGWRDJHQUHDQGLQPDNLQJWKLVDVVLJQPHQWWKHWUDQVODWRUFDQGHFLGHRQWKHKLHUDUFK\ RISRVWXODWHVZKLFKKDVWREHREVHUYHGGXULQJWDUJHWWH[WSURGXFWLRQ5HLVVDQG9HUPHHU 5HLVVDQG9HUPHHU¶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²WKDWLWKDVVRPHJRDO²EXWWKDWDQ\JLYHQJRDOLVRQO\RQHDPRQJPDQ\SRVVLEOHJRDOV7KH LPSRUWDQWSRLQWLVWKDWQRVRXUFHWH[WKDVRQO\RQHFRUUHFWRUSUHIHUDEOHWUDQVODWLRQ9HUPHHUD DQG WKDWFRQVHTXHQWO\HYHU\WUDQVODWLRQFRPPLVVLRQVKRXOGH[SOLFLWO\RULPSOLFLWO\FRQWDLQDVWDWHPHQWRIVNRSRV 7KHVNRSRVIRUWKHWDUJHWWH[WQHHGQRWEHLGHQWLFDOZLWKWKDWDWWULEXWHGWRWKHVRXUFHWH[WEXWXQOHVVWKHVNRSRV IRUWKHWDUJHWWH[WLVVSHFLILHGWUDQVODWLRQFDQQRWSURSHUO\VSHDNLQJEHFDUULHGRXWDWDOO

&ULWLFLVPRIVNRSRVWKHRU\ 2EMHFWLRQVWRVNRSRVWKHRU\PDLQO\FRQFHUQWKHGHILQLWLRQRIWUDQVODWLRQDQGWKHUHODWLRQVKLSEHWZHHQVRXUFH WH[WDQGWDUJHWWH[W ,WKDVEHHQDUJXHGWKDW5HLVVDQG9HUPHHULQWKHLUDWWHPSWWRHVWDEOLVKDWUXO\JHQHUDODQGFRPSUHKHQVLYH WUDQVODWLRQWKHRU\IRUFHWRWDOO\GLVSDUDWHFDVHVRIWH[WUHODWLRQVLQWRDIUDPHZKLFKWKH\DWWHPSWWRKROG WRJHWKHUE\PHDQVRIWKHQRWLRQRILQIRUPDWLRQRIIHU6FKUHLWPOOHU %XWWKHUHVKRXOGEHDOLPLWWR ZKDWPD\OHJLWLPDWHO\EHFDOOHGWUDQVODWLRQDVRSSRVHGWRIRUH[DPSOH$'$37$7,21,QWUDQVODWLRQSURSHU .ROOHU WKHVRXUFHWH[WLVWKH\DUGVWLFNE\ZKLFKDOOWUDQVODWLRQVPXVWEHPHDVXUHGLQGHSHQGHQWO\RIWKH SXUSRVHIRUZKLFKWKH\ZHUHSURGXFHG ,QWKLVFRQWH[WLWLVDOVRDUJXHGWKDWHYHQWKRXJKDWUDQVODWLRQPD\LQGHHGIXOILOLWVLQWHQGHGVNRSRVSHUIHFWO\ ZHOOLWPD\QHYHUWKHOHVVEHDVVHVVHGDVLQDGHTXDWHRQRWKHUFRXQWVSDUWLFXODUO\DVIDUDVOH[LFDOV\QWDFWLFRU VW\OLVWLFGHFLVLRQVRQWKHPLFUROHYHODUHFRQFHUQHGDSRLQWPDGHE\&KHVWHUPDQZKRRWKHUZLVH DFNQRZOHGJHVWKHLPSRUWDQWFRQWULEXWLRQVRIVNRSRVWKHRU\ 6XFKREMHFWLRQVFRPHPDLQO\IURPOLQJXLVWLFDOO\ RULHQWHGDSSURDFKHVWRWUDQVODWLRQWKDWIRFXVRQERWWRPXSDVSHFWVRIWH[WSURGXFWLRQDQGUHFHSWLRQ)RU H[DPSOH1HZPDUNE FULWLFL]HVWKHRYHUVLPSOLILFDWLRQWKDWLVLQKHUHQWLQIXQFWLRQDOLVPWKH HPSKDVLVRQWKHPHVVDJHDWWKHH[SHQVHRIULFKQHVVRIPHDQLQJDQGWRWKHGHWULPHQWRIWKHDXWKRULW\RIWKH VRXUFHODQJXDJHWH[W +RZHYHUSURSRQHQWVRIVNRSRVWKHRU\DUJXHIRUDZLGHGHILQLWLRQRIWUDQVODWLRQHJ5HLVV $VVRRQDV RQHDVNVIRUWKH



3DJH

SXUSRVHRIDWUDQVODWLRQVWUDWHJLHVWKDWDUHRIWHQOLVWHGXQGHUDGDSWDWLRQIRUH[DPSOHUHIRUPXODWLRQSDUDSKUDVH DQGWH[WXDOH[SOLFDWLRQZLOOFRPHLQQDWXUDOO\DVSDUWRIWUDQVODWLRQ$QGFULWLFVRIPLFUROHYHOGHFLVLRQV XVXDOO\OLIWWKHWH[WVRXWRIWKHLUUHVSHFWLYHHQYLURQPHQWVIRUFRPSDUDWLYHSXUSRVHVLJQRULQJWKHLUIXQFWLRQDO DVSHFWV 5HLVVDQG9HUPHHU¶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

)XUWKHUUHDGLQJ $PPDQQ1HZPDUNE5HLVV5HLVVDQG9HUPHHU9HUPHHU D

&+5,67,1$6&+b))1(5

6SHFXODWLYHDSSURDFKHV $QXPEHURILPSOLFLWWD[RQRPLHVLQWUDQVODWLRQFDQEHVHHQLQDQ\ZRUNRQWKHVXEMHFW:KHQIRUHJURXQGHG H[SOLFLWO\DVOLQJXLVWLFSKHQRPHQDLQLQWHUODQJXDJHWUDQVIHUWKHVHKDYHRIWHQEHHQSUHVHQWHGDVWUDQVODWLRQ WKHRU\6RPHWLPHVWKHSUHVHQWDWLRQVUHO\RQGLDFKURQLFGHVFULSWLRQIRUH[DPSOHLQWKHZRUNRIVXFKVFKRODUV DV/DPEHUWDQGWKH/HXYHQ6FKRROJHQHUDOO\ VRPHWLPHVRQV\QFKURQLFVXUYH\VHH*XWW+RXVH5HLVV ,QYDULDEO\VXFKIROORZDVFORVHO\DVSRVVLEOHWKHVWULFWXUHVRIWUDGLWLRQDOO\FRQFHLYHGSURFHGXUHVRI H[SHULPHQWDQGYDOLGDWLRQDVXVHGE\WKHSK\VLFDOVFLHQFHV7KH\DUHHPSLULFDQDO\WLFWKHRULHV%XWWKHVDPH WD[RQRPLHVFDQMXVWDVZHOOOHDGWRD TXHVWLRQLQJGDWDGHULYHGIURPTXDQWLWDWLYHµVFLHQWLILF¶SURFHGXUHVE TXDOLI\LQJWKHRULHVUHVWLQJRQVXFKGDWDDQGF PRGLI\LQJRUHYHQUHMHFWLQJSUHVFULSWLYHWUDLQLQJEDVHGRQWKH VFLHQWLILFVWXG\6XFKVNHSWLFLVPYLVjYLVWKHVFLHQWLILFPHWKRGZKLFKLVPRUHOLNH&ULWLFDO7KHRU\+DEHUPDV WKDQWUDGLWLRQDOWKHRU\OLHVDWWKHURRWRIVSHFXODWLYHDSSURDFKHVWRWUDQVODWLRQ,QVKRUWWKHGLFKRWRP\ LQDFFHVVLQJNQRZOHGJHFXUUHQWVLQFHEHIRUH.DQWEHWZHHQWKHHPSLULFDODQGWKHVSHFXODWLYHKDVLQHYLWDEO\ DIIHFWHGWUDQVODWLRQWKHRU\



3DJH

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µ+RZ¶RU WLPHDQGFXOWXUHERXQGFKDUDFWHULVWLFVZHFDQPDUVKDOHPSLULFDOVXSSRUWDIWHUWKHIDFW)RUWKHµ:K\¶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



3DJH

E $XQLWDU\WUDQVODWLRQWKHRU\LVQHLWKHUQHFHVVDU\QRUGHVLUDEOH F 7UDQVODWLRQWKHRU\LVQRWWREHMXGJHGRQLWVLPPHGLDWHDSSOLFDELOLW\WRSUDFWLFH2QWKHFRQWUDU\ LPSRVLQJDQ\FULWHULDRIXQDQLPLW\RUXQLIRUPLW\DQGDSSOLFDELOLW\FRXOGEHQHIDULRXVURXWLQL]LQJXVDJH DQGGLVFRXUDJLQJFUHDWLYLW\DWLWVZRUVWLPSRVLQJSDWWHUQVRUVWDQGDUGV G 7KHKRUL]RQRIWUDQVODWLRQWKHRU\VKRXOGEHRSHQDQGWKRVHZKRVWXG\WUDQVODWLRQVKRXOGDFFRPPRGDWH ELDVFKDQJHFXOWXUH6WXGHQWVRIWUDQVODWLRQVKRXOGREVHUYHXVDJHHYHQKHOSH[SODLQLWEXWOHJLVODWLQJ XVDJHLVRXWVLGHWKHSXUYLHZRIWUDQVODWLRQWKHRU\,QGHHGFRQVLGHULQJWKDWWKHYDVWQXPEHURIUHFRUGHGDQG VWDELOL]HGZRUOGODQJXDJHVDUHRXWVLGHWKH*UHFR5RPDQRU-XGHR&KULVWLDQWUDGLWLRQZHVKRXOGEH H[WUHPHO\ZDU\RIJXLGHVUDLVRQQpVWKDWGHULYHIURP:HVWHUQODQJXDJHV 7KHSXUYLHZRIVSHFXODWLYHWKHRUL]LQJLVQHYHUWKHOHVVH[WHQVLYH
)XUWKHUUHDGLQJ %HUPDQ3D]3HGHQ5RELQVRQ9HQXWL

0$5,/<1*$'',6526(

6WUDWHJLHVRIWUDQVODWLRQ 6WUDWHJLHVRIWUDQVODWLRQLQYROYHWKHEDVLFWDVNVRIFKRRVLQJWKHIRUHLJQWH[WWREHWUDQVODWHGDQGGHYHORSLQJD PHWKRGWRWUDQVODWHLW%RWKRIWKHVHWDVNVDUHGHWHUPLQHGE\YDULRXVIDFWRUVFXOWXUDOHFRQRPLFSROLWLFDO
'RPHVWLFDWLQJVWUDWHJLHV 'RPHVWLFDWLQJVWUDWHJLHVKDYHEHHQLPSOHPHQWHGDWOHDVWVLQFHDQFLHQW5RPHZKHQDV



3DJH

1LHW]VFKHUHPDUNHGµWUDQVODWLRQZDVDIRUPRIFRQTXHVW¶DQG/DWLQSRHWVOLNH+RUDFHDQG3URSHUWLXVWUDQVODWHG *UHHNWH[WVµLQWRWKH5RPDQSUHVHQW¶µWKH\KDGQRWLPHIRUDOOWKRVHYHU\SHUVRQDOWKLQJVDQGQDPHVDQG ZKDWHYHUPLJKWEHFRQVLGHUHGWKHFRVWXPHDQGPDVNRIDFLW\DFRDVWRUDFHQWXU\¶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¶$%/$1&2857VHH)5(1&+75$',7,21 DSUROLILF)UHQFKWUDQVODWRURI*UHHNDQG /DWLQDUJXHGWKDWWKHHOOLSWLFDOEUHYLW\RI7DFLWXV¶SURVHPXVWEHUHQGHUHGIUHHO\ZLWKWKHLQVHUWLRQRI H[SODQDWRU\SKUDVHVDQGWKHGHOHWLRQRIGLJUHVVLRQVVRDVµWRDYRLGRIIHQGLQJWKHGHOLFDF\RIRXUODQJXDJHDQG WKHFRUUHFWQHVVRIUHDVRQ¶SUHIDFHWUDQVODWHG 7KHGRPHVWLFYDOXHVWKDWVXFKDVWUDWHJ\LQVFULEHGLQWKH IRUHLJQWH[WZHUHDIILOLDWHGZLWKDQDULVWRFUDWLFOLWHUDU\FXOWXUH'¶$EODQFRXUW¶VWUDQVODWLRQZDVGHGLFDWHGWRKLV FRXUWSDWURQ&DUGLQDO5LFKHOLHX EXWWKH\ZHUHDOVRGLVWLQFWO\QDWLRQDOLVW8QGHU'¶$EODQFRXUW¶VLQIOXHQFHWKH (QJOLVKWUDQVODWRU6LU-RKQ'(1+$0VHH%5,7,6+75$',7,21 UHQGHUHG%RRNRIWKH$HQHLGLQKHURLF FRXSOHWVDVVHUWLQJWKDWµLI9LUJLOPXVWQHHGVVSHDN(QJOLVKLWZHUHILWKHVKRXOGVSHDNQRWRQO\DVDPDQRI WKLV1DWLRQEXWDVDPDQRIWKLVDJH¶$U ,QGRPHVWLFDWLQJIRUHLJQWH[WV'¶$EODQFRXUWDQG'HQKDP GLGQRWVLPSO\PRGHUQL]HWKHPERWKWUDQVODWRUVZHUHLQIDFWPDLQWDLQLQJWKHOLWHUDU\VWDQGDUGVRIWKHVRFLDO pOLWHZKLOHFRQVWUXFWLQJFXOWXUDOLGHQWLWLHVIRUWKHLUQDWLRQVRQWKHEDVLVRIDUFKDLFIRUHLJQFXOWXUHV=XEHU 9HQXWLD (FRQRPLFFRQVLGHUDWLRQVVRPHWLPHVXQGHUOLHDGRPHVWLFDWLQJVWUDWHJ\LQWUDQVODWLRQEXWWKH\DUHDOZD\V TXDOLILHGE\FXUUHQWFXOWXUDODQGSROLWLFDOGHYHORSPHQWV7KHHQRUPRXVVXFFHVVWKDWJUHHWHGWKH(QJOLVK YHUVLRQRI,WDOLDQZULWHU8PEHUWR(FR¶VQRYHO7KH1DPHRIWKH5RVH GURYH$PHULFDQSXEOLVKHUVWR SXUVXHWKHWUDQVODWLRQULJKWVIRUVLPLODUIRUHLJQWH[WVDWWKHLQWHUQDWLRQDOERRNIDLUV0F'RZHOO
)RUHLJQL]LQJVWUDWHJLHV $IRUHLJQL]LQJVWUDWHJ\LQWUDQVODWLRQZDVILUVWIRUPXODWHGLQ*HUPDQFXOWXUHGXULQJWKH



3DJH

FODVVLFDODQG5RPDQWLFSHULRGVSHUKDSVPRVWGHFLVLYHO\E\WKHSKLORVRSKHUDQGWKHRORJLDQ)ULHGULFK 6&+/(,(50$&+(5VHH*(50$175$',7,21 %HUPDQ ,QDQOHFWXUHµ2QWKH'LIIHUHQW 0HWKRGVRI7UDQVODWLQJ¶6FKOHLHUPDFKHUDUJXHGWKDWµWKHUHDUHRQO\WZR(LWKHUWKHWUDQVODWRUOHDYHVWKHDXWKRU LQSHDFHDVPXFKDVSRVVLEOHDQGPRYHVWKHUHDGHUWRZDUGKLP2UKHOHDYHVWKHUHDGHULQSHDFHDVPXFKDV SRVVLEOHDQGPRYHVWKHDXWKRUWRZDUGKLP¶TXRWHGLQ/HIHYHUHE 6FKOHLHUPDFKHUDFNQRZOHGJHG WKDWPRVWWUDQVODWLRQZDVGRPHVWLFDWLQJDQHWKQRFHQWULFUHGXFWLRQRIWKHIRUHLJQWH[WWRWDUJHWODQJXDJH FXOWXUDOYDOXHVEULQJLQJWKHDXWKRUEDFNKRPH%XWKHPXFKSUHIHUUHGDIRUHLJQL]LQJVWUDWHJ\DQHWKQRGHYLDQW SUHVVXUHRQWKRVHYDOXHVWRUHJLVWHUWKHOLQJXLVWLFDQGFXOWXUDOGLIIHUHQFHRIWKHIRUHLJQWH[WVHQGLQJWKHUHDGHU DEURDG 7KH)UHQFKWKHRULVW$QWRLQH%(50$1VHH)5(1&+75$',7,21 YLHZHG6FKOHLHUPDFKHU¶VDUJXPHQWDV DQHWKLFVRIWUDQVODWLRQFRQFHUQHGZLWKPDNLQJWKHWUDQVODWHGWH[WDVLWHZKHUHDFXOWXUDORWKHULVQRWHUDVHGEXW PDQLIHVWHG²HYHQLIWKLVRWKHUQHVVFDQQHYHUEHPDQLIHVWHGLQLWVRZQWHUPVRQO\LQWKRVHRIWKHWDUJHW ODQJXDJH± )RUZKLOHIRUHLJQL]LQJWUDQVODWLRQVHHNVWRHYRNHDVHQVHRIWKHIRUHLJQLWQHFHVVDULO\ DQVZHUVWRDGRPHVWLFVLWXDWLRQZKHUHLWPD\EHGHVLJQHGWRVHUYHDFXOWXUDODQGSROLWLFDODJHQGD 6FKOHLHUPDFKHUKLPVHOIVDZWKLVWUDQVODWLRQVWUDWHJ\DVDQLPSRUWDQWSUDFWLFHLQWKH3UXVVLDQQDWLRQDOLVW PRYHPHQWGXULQJWKH1DSROHRQLF:DUVKHIHOWWKDWLWFRXOGHQULFKWKH*HUPDQODQJXDJHE\GHYHORSLQJDQ pOLWHOLWHUDWXUHIUHHRIWKH)UHQFKLQIOXHQFHWKDWZDVWKHQGRPLQDWLQJ*HUPDQFXOWXUHZKLFKZRXOGWKXVEH DEOHWRUHDOL]HLWVKLVWRULFDOGHVWLQ\RIJOREDOGRPLQDWLRQ9HQXWL


3DJH

UHTXLUHGKLPWRGHOHWHWKHH[SOLFLWVH[XDOUHIHUHQFHVLQ&DWXOOXV¶SRHPVEHFDXVHKHIHOWWKDWµKLVWRU\VKRXOG QRWEHIDOVLILHG¶[ +LVWUDQVODWLRQSURYRNHGDPRUDOSDQLFDPRQJUHYLHZHUVZKRUHQHZHGWKHDWWDFN GHFDGHVODWHUZKHQH[SUHVVLQJWKHLUSUHIHUHQFHIRU*HRUJH/DPE¶VERZGOHUL]HG&DWXOOXV

'RPHVWLFDWLQJYVIRUHLJQL]LQJVWUDWHJLHV 'HWHUPLQLQJZKHWKHUDWUDQVODWLRQSURMHFWLVGRPHVWLFDWLQJRUIRUHLJQL]LQJFOHDUO\GHSHQGVRQDGHWDLOHG UHFRQVWUXFWLRQRIWKHFXOWXUDOIRUPDWLRQLQZKLFKWKHWUDQVODWLRQLVSURGXFHGDQGFRQVXPHGZKDWLVGRPHVWLF RUIRUHLJQFDQEHGHILQHGRQO\ZLWKUHIHUHQFHWRWKHFKDQJLQJKLHUDUFK\RIYDOXHVLQWKHWDUJHWODQJXDJHFXOWXUH )RUH[DPSOHDIRUHLJQL]LQJWUDQVODWLRQPD\FRQVWLWXWHDKLVWRULFDOLQWHUSUHWDWLRQRIWKHIRUHLJQWH[WWKDWLV RSSRVHGWRSUHYDLOLQJFULWLFDORSLQLRQ,QWKH9LFWRULDQFRQWURYHUV\WKDWSLWWHG)UDQFLV1HZPDQ¶V,OLDG DJDLQVW0DWWKHZ$UQROG¶V2[IRUGOHFWXUHV2Q7UDQVODWLQJ+RPHU ZKDWZDVIRUHLJQL]LQJDERXW 1HZPDQ¶VWUDQVODWLRQZDVQRWRQO\WKDWLWXVHGDUFKDLVPWRLQGLFDWHWKHKLVWRULFDOGLIIHUHQFHRIWKH*UHHNWH[W EXWWKDWLWSUHVHQWHG+RPHUDVDSRSXODUUDWKHUWKDQDQp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¶VWUDQVODWLRQVWUDWHJ\ZDV IRUHLJQL]LQJEHFDXVHSRSXOLVWWKHWUDQVODWLRQWKDW$UQROGSUHIHUUHGZDVGRPHVWLFDWLQJEHFDXVHpOLWLVW DVVLPLODWLQJ+RPHUWROLWHUDU\YDOXHVKRXVHGLQDXWKRULWDWLYHFXOWXUDOLQVWLWXWLRQVOLNHWKHXQLYHUVLW\ 7UDQVODWLRQVWUDWHJLHVFDQRIWHQEHGHWHUPLQHGE\FRPSDULQJFRQWHPSRUDU\YHUVLRQVRIWKHVDPHIRUHLJQWH[W ,QWKHHDUO\VIRULQVWDQFHWKH$PHULFDQWUDQVODWRUV1RUPDQ6KDSLURDQG3DXO%ODFNEXUQZHUHERWK WUDQVODWLQJ3URYHQoDOWURXEDGRXUSRHWU\&RQVLGHUWKHLUYHUVLRQVRIWKHILUVWVWDQ]DIURPDSRHPE\*DXFHOP )DLGLW 8VFDYDOLHUVVLMD]LDDEODUHTXHSOXVYROLDVRYHQEDL]DQOLGL]LD²'RXVVDUHVLHXTXH IDUDL"TXHOMRUQVYHHODQXH\W]YDLD\TX¶LHXDXJTXHOLJDLWDFULDµ9LDVXVTX¶LHXYH\OD MRUQYHQLUDSUHVO¶DOED¶ 0RX]DW

$NQLJKWZDVZLWKKLVODG\IRQGO\O\LQJ²7KHRQHKHFKHULVKHGPRVW²DQGJHQWO\VLJKLQJ$V KHNLVVHGKHUFRPSODLQHG0\ORYHWKHGD\6RRQZLOODUULYHFKDVLQJWKLVQLJKWDZD\$ODV $OUHDG\,FDQKHDUWKHZDWFKPDQFU\LQJ%HJRQH4XLFNO\EHJRQH
$NQLJKWRQFHOD\EHVLGHDQGZLWKWKHRQHKHPRVWGHVLUHGDQGLQEHWZHHQWKHLUNLVVHVVDLG ZKDWVKDOO,GRP\VZHHW" 'D\FRPHVDQGWKHNQLJKWJRHV$L$QG,KHDUWKHZDWFKHUFU\µ8S2Q\RXUZD\,VHH GD\FRPLQJRQVSURXWLQJEHKLQGWKHGDZQ¶ %ODFNEXUQ

6KDSLURDGRSWVDGRPHVWLFDWLQJVWUDWHJ\+LVOH[LFRQZKLOHLQWHOOLJLEOHWRFRQWHPSRUDU\(QJOLVKODQJXDJH UHDGHUVPDNHVXVHRIDUFKDLVPVWKDWDUHUHFRJQL]DEO\SRHWLFDOGUDZQIURPWKHWUDGLWLRQRIQLQHWHHQWKFHQWXU\ YHUVHDODVEHJRQHFKHULVKHG$OWKRXJKKLVYHUVHVWUXFWXUHERWKPHWULFDODQGUK\PLQJLVLQWHQGHGWR DSSUR[LPDWH)DLGLW¶VPXVLFDOVWDQ]D6KDSLURHIIHFWLYHO\DVVLPLODWHVWKH3URYHQoDOWH[WWRWKHWUDGLWLRQDOIRUPV IDYRXUHGE\QRWHG$PHULFDQSRHWVVXFKDV5REHUW/RZHOODQG5LFKDUG:LOEXUZKRKDG



3DJH

DFKLHYHGQDWLRQDOUHSXWDWLRQVE\WKHV3HUNLQV %ODFNEXUQDGRSWVDIRUHLJQL]LQJVWUDWHJ\+LV OH[LFRQPL[HVWKHVWDQGDUGGLDOHFWRIFXUUHQW(QJOLVKZLWKDUFKDLVPWROLHZLWKPHDQLQJµWRHQJDJHLQVH[XDO LQWHUFRXUVH¶ FROORTXLDOLVPLQEHWZHHQFRPLQJRQ DQGIRUHLJQZRUGVWKH3URYHQoDODL $OWKRXJKKLV YHUVHVWUXFWXUHERWKUK\WKPLFDODQGLQWHUPLWWHQWO\UK\PLQJDLPVWRDSSUR[LPDWHWKHPXVLFDOLW\RI)DLGLW¶V VWDQ]D%ODFNEXUQDFWXDOO\DVVLPLODWHVWKH3URYHQoDOWH[WWRWKHRSHQIRUPVIDYRXUHGE\H[SHULPHQWDOSRHWV VXFKDV5REHUW&UHHOH\DQG&KDUOHV2OVRQZKRDWWKHWLPHZHUHRQWKHIULQJHVRI$PHULFDQOLWHUDU\FXOWXUH YRQ+DOOEHUJ 6KDSLUR¶VGRPHVWLFDWLQJYHUVLRQUHOLHVRQFDQRQLFDOYDOXHVZKRVHDXWKRULW\IRVWHUVWKH LOOXVLRQWKDWLWLVDQH[DFWHTXLYDOHQWRUDWUDQVSDUHQWZLQGRZRQWR)DLGLW¶VSRHP%ODFNEXUQ¶VIRUHLJQL]LQJ YHUVLRQUHOLHVRQPDUJLQDOYDOXHVZKRVHVWUDQJHQHVVLQYLWHVWKHUHFRJQLWLRQWKDWLWLVDWUDQVODWLRQSURGXFHGLQ DGLIIHUHQWFXOWXUHDWDGLIIHUHQWSHULRG7KHGLVWLQFWLRQEHWZHHQWKHLUVWUDWHJLHVLVSDUWLFXODUO\HYLGHQWLQWKHLU DGGLWLRQVWRWKH3URYHQoDOWH[W6KDSLURPDNHVKLVYHUVLRQFRQIRUPWRWKHIDPLOLDULPDJHRIWKH\HDUQLQJ FRXUWO\ORYHUE\DGGLQJJHQWO\VLJKLQJDQGFRPSODLQHG¶%ODFNEXUQVHHNVHVWUDQJLQJHIIHFWVWKDWZRUNRQO\LQ (QJOLVKE\DGGLQJWKHSXQRQQLJKWLQ'D\FRPHVDQGWKHNQLJKWJRHVDVZHOODVWKHVXUUHDOLPDJHRIWKHVXQ VSURXWLQJ $VWKLVH[DPSOHVXJJHVWVIRUHLJQL]LQJVWUDWHJLHVKDYHEHHQLPSOHPHQWHGLQOLWHUDU\DVRSSRVHGWRWHFKQLFDO WUDQVODWLRQ7HFKQLFDOWUDQVODWLRQLVIXQGDPHQWDOO\GRPHVWLFDWLQJLQWHQGHGWRVXSSRUWVFLHQWLILFUHVHDUFK JHRSROLWLFDOQHJRWLDWLRQDQGHFRQRPLFH[FKDQJHLWLVFRQVWUDLQHGE\WKHH[LJHQFLHVRIFRPPXQLFDWLRQDQG WKHUHIRUHUHQGHUVIRUHLJQWH[WVLQVWDQGDUGGLDOHFWVDQGWHUPLQRORJLHVWRHQVXUHLPPHGLDWHLQWHOOLJLELOLW\ /,7(5$5<75$16/$7,21LQFRQWUDVWIRFXVHVRQOLQJXLVWLFHIIHFWVWKDWH[FHHGVLPSOHFRPPXQLFDWLRQ WRQHFRQQRWDWLRQSRO\VHP\LQWHUWH[WXDOLW\ DQGDUHPHDVXUHGDJDLQVWGRPHVWLFOLWHUDU\YDOXHVERWK FDQRQLFDODQGPDUJLQDO$OLWHUDU\WUDQVODWRUFDQWKXVH[SHULPHQWLQWKHFKRLFHRIIRUHLJQWH[WVDQGLQWKH GHYHORSPHQWRIWUDQVODWLRQPHWKRGVFRQVWUDLQHGSULPDULO\E\WKHFXUUHQWVLWXDWLRQLQWKHWDUJHWODQJXDJH FXOWXUH 6HHDOVR $'$37$7,21)5((75$16/$7,21,'(2/2*<$1'75$16/$7,21/,7(5$/75$16/$7,21 385(/$1*8$*(

)XUWKHUUHDGLQJ %ODQFKRW&RKHQ(EHO*UDYHV+H\OHQ/HIHYHUHD6LPRQ9HQXWLD

/$:5(1&(9(187,

6XEWLWOLQJ 6LQFHZKHQWKHILUVWVRXQGILOPVUHDFKHGDQLQWHUQDWLRQDODXGLHQFHWZRPHWKRGVRIILOPWUDQVODWLRQKDYH EHHQGRPLQDQWVXEWLWOLQJDQG'8%%,1*7KHODWWHULVVRPHWLPHVUHIHUUHGWRDVSRVWV\FKURQL]DWLRQ $VIDUDVILOP79DQGYLGHRWUDQVODWLRQDUHFRQFHUQHGWKHZRUOGLVGLYLGHGLQWRIRXUEORFNV D 6RXUFHODQJXDJHFRXQWULHV(QJOLVKVSHDNLQJZLWKKDUGO\DQ\QRQ$QJORSKRQHLPSRUWV)HZDVWKH\ PD\EHLPSRUWHGILOPVWHQGWREHVXEWLWOHGUDWKHUWKDQGXEEHG7KH\DUHRIWHQµDUW¶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

7KHSURFHVVRIVXEWLWOLQJ 6XEWLWOHVVRPHWLPHVUHIHUUHGWRDVFDSWLRQVDUHWUDQVFULSWLRQVRIILOPRU79GLDORJXH



3DJH

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¶VHQGSURGXFWLVDIORSS\GLVNUHDG\IRUEURDGFDVW

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²RUVHWRIFKDQQHOV²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¶


3DJH 7DEOH7\SRORJ\RIWUDQVODWLRQ

Semiotic composition

Time-defined categorization

Synchronous

Non-synchronous

Distemporal

0RQRDQGLVRVHPLRWLF

6SHHFK

±±±

5DGLRLQWHUSUHWLQJ

±±±

:ULWLQJ

±±±

±±±

:ULWWHQWUDQVODWLRQ

0RQRDQGGLDVHPLRWLF

6SHHFK

±±±

±±±

%RRNWUDQVODWLRQRQ DXGLRWDSH

:ULWLQJ

±±±

,QWHUSUHWLQJIRUIRUWKH'HDI 0LQXWHVIURPDPHHWLQJ

3RO\DQGLVRVHPLRWLF

:ULWLQJ,PDJH

7UDQVODWLRQRIFRPLFERRNV DQGDGYHUWLVHPHQWV

±±±

±±±

6SHHFK,PDJH

±±±

6LPXOWDQHRXVLQWHUSUHWLQJ

±±±

6SHHFK,PDJH0XVLFDQG 'XEELQJ (IIHFWV

79YRLFHRYHU79 FRPPHQWDU\

'UDPDWUDQVODWLRQVWDJH SHUIRUPDQFH

3RO\DQGGLDVHPLRWLF

6LPXOWDQHRXVVXEWLWOLQJ

±±±

6SHHFK,PDJH0XVLFDQG 6XEWLWOLQJ (IIHFWV:ULWLQJ

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²WRXVHD PRUHFRPPRQWHUPUHYRLFLQJ,QDWHOHYLVLRQSURJUDPPHZLWKYRLFHRYHUDQDUUDWRULQWHUSUHWVWKHHQWLUH GLDORJXHRYHUWKHRULJLQDOVRXQGWUDFNZKLFKLVWXUQHGGRZQLQYROXPHZKLOHVKHLVVSHDNLQJ,QGXEELQJDQG VXEWLWOLQJFRXQWULHVWKHXVHRI



3DJH

YRLFHRYHULVUHVWULFWHGWRQHZVDQGFKLOGUHQ¶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±FKDUDFWHUVWRVWD\RQWKH VFUHHQIRU±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

7\SHVRIVXEWLWOLQJ /LQJXLVWLFDOO\WZRW\SHVRIVXEWLWOLQJFDQEHGLVWLQJXLVKHG D ,QWUDOLQJXDOVXEWLWOLQJLQWKHRULJLQDOODQJXDJH 7KLVLQFOXGHV ƇVXEWLWOLQJRIGRPHVWLFSURJUDPPHVIRUWKH'HDIDQGKDUGRIKHDULQJ ƇVXEWLWOLQJRIIRUHLJQODQJXDJHSURJUDPPHVIRUODQJXDJHOHDUQHUV ,QWUDOLQJXDOVXEWLWOLQJLVYHUWLFDOLQWKHVHQVHWKDWLWLQYROYHVWDNLQJVSHHFKGRZQLQZULWLQJFKDQJLQJPRGH EXWQRWODQJXDJH E ,QWHUOLQJXDOVXEWLWOLQJ7KLVW\SHLVGLDJRQDOLQWKHVHQVHWKDWWKHVXEWLWOHUFURVVHVRYHUIURPVSHHFKLQ RQHODQJXDJHWRZULWLQJLQDQRWKHUWKXVFKDQJLQJPRGHDQGODQJXDJH $QRWKHUGLVWLQFWLRQFDQEHGUDZQRQWKHEDVLVRIWHFKQLFDOUDWKHUWKDQOLQJXLVWLFSURFHVVHVRIVXEWLWOLQJ D 2SHQVXEWLWOHVQRWRSWLRQDO 7KHVHLQFOXGH ƇFLQHPDVXEWLWOHVZKLFKDUHHLWKHUDSK\VLFDOSDUWRIWKHILOPDVLQILOPVIRUSXEOLFYLHZLQJ RU WUDQVPLWWHGVHSDUDWHO\IRUH[DPSOHDWIHVWLYDOVFUHHQLQJV ƇLQWHUOLQJXDOWHOHYLVLRQVXEWLWOHVWUDQVPLWWHGWHUUHVWULDOO\DQGEURDGFDVWDVSDUWRIWKHWHOHYLVLRQSLFWXUH E &ORVHGVXEWLWOLQJRSWLRQDOWUDQVPLWWHGDVWHOHWH[W 7KLVW\SHLQFOXGHV ƇWHOHYLVLRQVXEWLWOHVIRUWKH'HDIDQGKDUGRIKHDULQJVHOHFWHGE\WKHLQGLYLGXDOYLHZHURQDUHPRWH FRQWUROXQLWDQGJHQHUDWHGE\DGHFRGHULQWKHWHOHYLVLRQVHW ƇLQWHUOLQJXDOWHOHYLVLRQVXEWLWOHVWUDQVPLWWHGE\VDWHOOLWHDOORZLQJGLIIHUHQWVSHHFKFRPPXQLWLHVWR UHFHLYHGLIIHUHQWYHUVLRQVRIWKHVDPHSURJUDPPHVLPXOWDQHRXVO\

7KHIXWXUHRIVXEWLWOLQJ :LWKWKHFRPLQJRIGLJLWDOWHOHYLVLRQWHOHWH[WJHQHUDWHGLQWHUOLQJXDOVXEWLWOHVZLOOILQGWKHLUZD\IURPVDWHOOLWH WRWHUUHVWULDOEURDGFDVWLQJ+RSHIXOO\WKLVZLOOQRWEHIROORZHGE\RQHOHVVGHVLUDEOHSUDFWLFHRIVDWHOOLWH WHOHYLVLRQQDPHO\SLYRWVXEWLWOLQJ3LYRWVXEWLWOLQJXVXDOO\ZRUNVDVIROORZV$WHOHYLVLRQILOPLVVXEWLWOHG IURPODQJXDJH$W\SLFDOO\(QJOLVK



3DJH

LQWRODQJXDJH%VD\6ZHGLVK 7KHVXEWLWOHVDUHVWRUHGZLWKWLPHFRGHVLQVHUWHGRQDIORSS\GLVN7KLV PDVWHUGLVNLVWKHQXVHGIRUFUHDWLQJFKHDSVSLQRIIYHUVLRQVLQDQXPEHURIWDUJHWODQJXDJHVUHODWHGWR ODQJXDJH%IRUH[DPSOH'DQLVKDQG1RUZHJLDQ 7KHPDLQSUREOHPLVWKDWE\XVLQJWKHWLPHFRGHVDQG GLDORJXHVWUXFWXUHRIWKHSLYRWVXEWLWOHVHUURUVLQWKHSLYRWWUDQVODWLRQPD\EHWUDQVIHUUHGWRWDUJHWODQJXDJH YHUVLRQVZKLFKPD\DOVRFRQWDLQXQDFFHSWDEOHSLYRWODQJXDJHIHDWXUHVRUVXEWLWOHVHJPHQWDWLRQSUDFWLFHV $QLQWUDOLQJXDODQGWKXVOHVVSUREOHPDWLFYDULDQWRISLYRWVXEWLWOLQJDSSHDUHGLQWKHPLGVZKHQDPDMRU PHGLDFRUSRUDWLRQVWDUWHGH[SRUWLQJROG$PHULFDQIHDWXUHILOPVWR6RXWK(DVW$VLDFRPSOHWHZLWKGLVNV FRQWDLQLQJVXEWLWOHVLQ(QJOLVKSURGXFHGDQGWLPHFXHGLQ'HQPDUN7UDQVODWRUVLQ7KDLODQGDQG&KLQDFRXOG WKHQWXUQWKH(QJOLVKOLQHVRQWKHVFUHHQLQWR7KDLDQG0DQGDULQVXEWLWOHVZLWKRXWKDYLQJWRDWWHQGWRWKH GLDORJXHLWVHOIRUWRZRUU\DERXWWLPHFXHLQJ7RFRPSOHWHWKHSLFWXUHWKH(QJOLVKSLYRWVXEWLWOHVDUHWKHQ UHXVHGLQYLGHRVDLPHGDWWKH'HDIDQGKDUGRIKHDULQJLQ$PHULFD %XWMXVWDVWHOHWH[WWHFKQRORJ\JLYHVRZQHUVRIFRPPHUFLDOWHOHYLVLRQVWDWLRQVWKHRSSRUWXQLW\WREX\FOXVWHUV RIVXEWLWOHVDWEDUJDLQSULFHVLWDOVRRSHQVXSWKHSRWHQWLDOIRUDGLIIHUHQWVFHQDULRQDPHO\SHUVRQDO VXEWLWOLQJ+HUHIRUWKHILUVWWLPHWKHYLHZHUFDQFKRRVHQRWMXVWEHWZHHQGLIIHUHQWWDUJHWODQJXDJHVEXWDOVR EHWZHHQGLIIHUHQWVW\OHVRUOHYHOVRIVXEWLWOLQJ7RZDWFKDIRUHLJQODQJXDJHSURJUDPPHHDFKYLHZHUPD\ VHOHFWIRULQVWDQFHRQHRIWKHIROORZLQJRSWLRQV D DQRVXEWLWOLQJRSWLRQ E IDVWXQFRQGHQVHGVXEWLWOLQJ F QRUPDOVSHHGVXEWLWOLQJ G VXEWLWOLQJIRUVORZUHDGHUV H SLFWRJUDPVXSSRUWHGVXEWLWOLQJIRUWKH'HDIDQGKDUGRIKHDULQJ I VXEWLWOLQJLQDGRPHVWLFPLQRULW\ODQJXDJH J IRUHLJQOHDUQHUVXEWLWOLQJLQWKHVRXUFHODQJXDJH 'HSHQGLQJRQWKHLQGLYLGXDOSURJUDPPHDQGLWVH[SHFWHGWDUJHWDXGLHQFHGLIIHUHQWFOXVWHUVRIRSWLRQVFRXOG EHRIIHUHGVKRXOGWHOHYLVLRQFRPSDQLHVFRQVLGHUILYHRUVL[YHUVLRQVSHUSURJUDPPHWRRFRVWO\$QGJLYHQWKDW '8%%,1*LVWLPHVDVH[SHQVLYHDVVXEWLWOLQJ/X\NHQHWDO HYHQWKHIXOOUDQJHRIRSWLRQV FRXOGEHRIIHUHGIRUMXVWRYHURQHWKLUGRIWRGD\¶VGXEELQJEXGJHW $SDUWIURPVKHHUFRQVHUYDWLVPWKHRQO\REVWDFOHWRFKDQJLQJWKHSUHVHQWVLWXDWLRQ²ZLWKPDMRUVSHHFK FRPPXQLWLHVUHYRLFLQJDOOIRUHLJQODQJXDJHSURJUDPPHVDQGPLQRUFRXQWULHVXVLQJµRQHVL]HILWVDOO¶VXEWLWOHV ²LVWKHIDFWWKDWHYHQWRGD\DOPRVWKDOIRIWKHH[LVWLQJWHOHYLVLRQVHWVDUHQRWHTXLSSHGZLWKWKHWHOHWH[W IDFLOLWLHVQHFHVVDU\IRUUHFHLYLQJWDLORUHGVXEWLWOHV%XWWKLVLVMXVWDPDWWHURIWLPHDWOHDVWLQWKH:HVWHUQ ZRUOGZKHUHH[FHSWIRUSRUWDEOHVDOOWHOHYLVLRQVHWVVROGWRGD\FRPHZLWKWHOHWH[WDVDVWDQGDUGIHDWXUH$QG ZLWKQHZKLJKUHVROXWLRQFKDUDFWHUJHQHUDWRUVIXWXUHWHOHYLVLRQVXEWLWOHVZLOOKDYHDOHWWHUTXDOLW\DQGD ULFKQHVVLQIRQWVQRWIRXQGLQWRGD\¶VVXEWLWOLQJ+RSHIXOO\ZLWKLPSURYHGWHOHWH[WWHFKQRORJ\SHUVRQDO VXEWLWOLQJZLOOVHWQHZVWDQGDUGVRIODQJXDJHWUDQVIHULQIXWXUHWHOHYLVLRQ 6HHDOVR '8%%,1*

)XUWKHUUHDGLQJ %DNHUHWDO'HODEDVWLWD*DPELHU*RWWOLHEDE*|W]DQG+HUEVW +HUEVW,YDUVVRQ/X\NHQHWDO0X\ODHUW1HGHUJDDUG/DUVHQ1LU3UDHWHWDO 5HLGG¶

+(15,.*277/,(%



3DJH

7 7HUPEDQNV 7KHGHVLJQDWLRQµWHUPLQRORJLFDOGDWDEDQN¶RULWVPRUHSRSXODUUHGXFHGIRUPµWHUPEDQN¶EURDGO\DSSOLHVWR DQ\V\VWHPZKLFKVWRUHVVSHFLDOL]HGYRFDEXODULHVLQHOHFWURQLFIRUP

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¶VFROOHFWLRQVRI WHUPLQRORJ\

&KDUDFWHULVWLFVRIWHUPEDQNV 7KHUHDVRQVIRUWKHFUHDWLRQRILQGLYLGXDOWHUPEDQNVDUHDVGLYHUVHDVWKHLQWHUOLQJXDODQGWHFKQLFDO FRPPXQLFDWLRQUHTXLUHPHQWVRIXVHUJURXSVDQGOLQJXLVWLFFRPPXQLWLHV7KHVHUHTXLUHPHQWVQDWXUDOO\ LQIOXHQFHWKHGHVLJQRILQGLYLGXDOWHUPEDQNV+RZHYHUIURPWKHSRLQWRIYLHZRIWKHUHSUHVHQWDWLRQRIGDWD ZHFDQFODVVLI\WHUPEDQNVXQGHUWKHIROORZLQJEURDGD[HV D ODQJXDJHRULHQWDWLRQPRQROLQJXDOELOLQJXDOPXOWLOLQJXDO



3DJH

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²VXFKDVWKH QHDUHVWIRUHLJQODQJXDJHHTXLYDOHQWZKHUHQRHTXLYDOHQWH[LVWVLQWKHGDWDEDVH 7KHFROOHFWLRQGHVFULSWLRQDQGVWRUDJHRIWHUPVLVQRZQRORQJHUPHUHO\DQLQVWDQFHRIVFLHQWLILFDQGWHFKQLFDO OH[LFRJUDSK\EXWDQLQWHJUDOSDUWRIDQHZDFWLYLW\NQRZQDVWHUPLQRJUDSK\7KDWLVLQVWHDGRIGRFXPHQWLQJ SUREOHPWHUPVDQGSKUDVHVLQDQDGKRFZD\DVWKH\DUHHQFRXQWHUHGLQWH[WWKHWUHQGQRZLVWRZDUGVWKHPDWLF DQDO\VLVRIDFRKHVLYHFRUSXVRIGRFXPHQWVZLWKDYLHZWRRXWOLQLQJDFRKHUHQWV\VWHPRIWHUPVDQGFRQFHSWV 7KHGHILQLWLRQRIZKDWFRQVWLWXWHVDQLGHDOWHUPEDQNIRUPXODWHGE\6DJHUDQG0F1DXJKWE HQFDSVXODWHVWKHSRWHQWLDORIWKLVUHVRXUFH$WHUPEDQNWKH\VXJJHVWLV DFROOHFWLRQRIDXWRPDWHGVSHFLDOLVHGYRFDEXODULHVLQFOXGLQJQRPHQFODWXUHVVWDQGDUGLVHGWHUPV DQGSKUDVHVWRJHWKHUZLWKLQIRUPDWLRQUHTXLUHGIRUWKHLULGHQWLILFDWLRQZKLFKFDQEHXVHGDVD PRQRRUPXOWLOLQJXDOGLFWLRQDU\IRU



3DJH

GLUHFWFRQVXOWDWLRQDVDEDVLVIRUGLFWLRQDU\SURGXFWLRQDVDFRQWUROLQVWUXPHQWIRUFRQVLVWHQF\RI XVDJHDQGWHUPFUHDWLRQDQGDVDQDQFLOODU\WRROLQLQIRUPDWLRQDQGGRFXPHQWDWLRQ 7KHIXQFWLRQVRIWHUPEDQNVFDQWKHUHIRUHEHPXFKZLGHUWKDQWKRVHRIDQ\RIWKHLUFXUUHQWLPSOHPHQWDWLRQV 6HHDOVR 0$&+,1($,'('75$16/$7,217(50,12/2*<$33/,&$7,2167(50,12/2*< 67$1'$5',=$7,217(50,12/2*<7+(25<

)XUWKHUUHDGLQJ &DEUp+YDONRI6DJHU6DJHUDQG0F1DXJKWDE6QHOO-RXUQDOV7HUPLQRORJ\ SXEOLVKHGE\-RKQ%HQMDPLQV

%/$,6(1.:(17,$=(+

7HUPLQRORJ\ DSSOLFDWLRQV )URPWKHSRLQWRIYLHZRIWUDQVODWLRQWKHPRVW relevant applications of terminology are: ƇWKHUHSUHVHQWDWLRQRIWHUPLQRORJ\LQDXWRPDWHGV\VWHPV ƇWKHVWUXFWXULQJRIWHUPVLQVSHFLDOVXEMHFWILHOGV ƇWHUPFUHDWLRQ ƇWHUPVWDQGDUGL]DWLRQ 7KHILUVWWKUHHDSSOLFDWLRQVDUHGLVFXVVHGLQWKLVHQWU\)RUDQRYHUYLHZRIWHUPVWDQGDUGL]DWLRQVHH 7(50,12/2*<67$1'$5',=$7,21

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



3DJH

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



3DJH

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



3DJH

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ƇWHUPVVKRXOGFRQVLVWHQWO\UHIOHFWVRPHNH\IHDWXUHVRIWKHFRQFHSWVWKH\DUHOLQNHGWRLQRUGHUWRIDFLOLWDWH SUHFLVHUHIHUHQFH$W



3DJH

WKHVDPHWLPHWKH\VKRXOGEHDVHFRQRPLFDODVSRVVLEOHZLWKRXWJLYLQJULVHWRKRPRQ\P\ ƇWHUPVVKRXOGEHOH[LFDOO\V\VWHPDWLFDQGVKRXOGFRQIRUPWRWKHSKRQRORJLFDODQGPRUSKRORJLFDOUXOHVRI WKHODQJXDJH ƇWHUPVPXVWFRQIRUPWRWKHJHQHUDOUXOHVRIZRUGIRUPDWLRQRIWKHODQJXDJHWKDWLVWKH\VKRXOGDOORZ FRPSRVLWLRQDQGGHULYDWLRQZKHUHDSSURSULDWH ƇWKHPHDQLQJRIDWHUPVKRXOGEHUHFRJQL]DEOHLQGHSHQGHQWO\RIDQ\VSHFLILFFRQWH[W ,QDGGLWLRQWRWKHW\SHRIDGYLFHVXPPDUL]HGDERYHHIIRUWVDUHDOVREHLQJPDGHQRZWRSURYLGHJXLGHOLQHVIRU WKHKLJKO\VSHFLDOL]HGDQGUHODWLYHO\UDUHRFFXUUHQFHRIQDPLQJLQWHUQDWLRQDOO\DJUHHGFRQFHSWV 6HHDOVR 7(50%$1.67(50,12/2*<67$1'$5',=$7,217(50,12/2*<7+(25<

)XUWKHUUHDGLQJ $UQW]DQG3LFKW&DEUp,625RQGHDX6DJHU6RQQHYHOGDQG/RHQLQJ

-8$1&6$*(5

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

0RWLYDWLRQ 7KHLPPHGLDWHPRWLYDWLRQIRUVWDQGDUGL]DWLRQPD\FRPHIURPDOOPDQQHURIFRPPHUFLDOUHDVRQVRUEHWKH UHVXOWRIVHFXULW\DQGVDIHW\FRQVLGHUDWLRQV,WLVJHQHUDOO\LQWURGXFHGZKHQWKHUHLVDQHHGIRULWIRUH[DPSOH ZKHQDFRQIOLFWDULVHVDERXWFRH[LVWLQJQDPHVLQVXFK



3DJH

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ƇHFRQRP\RQHRIWKHFRPSHWLQJWHUPVPD\EHQRWLFHDEO\VKRUWHUDQGHDVLHUWRZULWHDQGUHPHPEHU FRUUHFWO\ ƇSUHFLVLRQRQHWHUPPD\EHPRUHWUDQVSDUHQWDQGOHVVDPELJXRXVLQLWVUHIHUHQFHWKDQDQRWKHU Ƈ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Ƈ7KHGHYHORSPHQWRIQHZLGHDVRUREMHFWVHVSHFLDOO\LQDQLQGXVWULDOHQYLURQPHQWXVXDOO\RFFXUVLQPRUH WKDQRQHSODFHDQGPD\WKHUHIRUHOHDGWRSDUDOOHOGHVLJQDWLRQVIRUZKDWODWHUWXUQVRXWWREHWKHVDPH FRQFHSWRUREMHFW Ƈ7KHGHYHORSPHQWRIQHZREMHFWVLVDQRQJRLQJSURFHVV7KLVPDNHVLWGLIILFXOWWRGHILQHWKHLU FKDUDFWHULVWLFVLQRUGHUWRIL[DVXLWDEOHQDPHXQWLOWKH\KDYHEHHQIXOO\HYROYHGZKLFKLQSUDFWLFHPHDQV WKDWWKH\DUHFRPPHUFLDOO\GHVLJQHGWULHGWHVWHGDQGVRPHWLPHVHYHQPDUNHWHG%\WKDWWLPHSURYLVLRQDO QDPHVKDYHXVXDOO\EHFRPHHVWDEOLVKHGDQGRQO\WKHLQWHUYHQWLRQRIRXWVLGHERGLHVFDQHIIHFWDFKDQJHRI QDPH Ƈ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



3DJH

FRPPXQLW\DQGUHJXODUO\XSGDWHVWKHPLQRUGHUWRNHHSWKHPLQOLQHZLWKPRGHUQDXWRPDWHGPHWKRGV,Q DGGLWLRQQDWLRQDOVWDQGDUGL]DWLRQERGLHVUHJXODUO\LVVXHJORVVDULHVRIWHUPV+RZHYHUWKHUHLVVWLOO FRQVLGHUDEOHGLYHUVLW\LQWKHYLVLEOHHQGSURGXFWRIWKLVODERXUZKLFKGHPRQVWUDWHVWKHGLIILFXOW\RIXQLI\LQJ WKHPHWKRGVRIFRPSLODWLRQQRWWRPHQWLRQFRLQLQJWHUPLQRORJ\

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ƇWHUPVGHILQHGLGHQWLFDOO\LQDJLYHQVWDQGDUGDQGLWVDVVRFLDWHGJORVVDU\ ƇWHUPVGHILQHGLQWKHJORVVDU\RIDVWDQGDUGEXWQRWLQWKHVWDQGDUGLWVHOI ƇWHUPVZKLFKDUHGHILQHGPRUHQDUURZO\LQDVWDQGDUGWKDQLQLWVDVVRFLDWHGJORVVDU\ Ƈ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¶VVWDQGDUGVRUJDQL]DWLRQZKLFKPD\LQWURGXFHPLQRUFKDQJHV6HFRQGWKH WHUPLQRORJ\RIVXFKVWDQGDUGVLVRQO\,62(QJOLVK)UHQFKRU5XVVLDQDQGKDVWREHDGRSWHGE\HDFKFRXQWU\ XVLQJWKLVODQJXDJHEHIRUHLWFDQEHFRQVLGHUHGDXWKHQWLF7KHUHPD\WKXVEHGLIIHUHQW,62DSSURYHGVWDQGDUG WHUPVLQ%ULWLVK(QJOLVK$XVWUDOLDQ(QJOLVKDQG$PHULFDQ(QJOLVKHWF

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



3DJH

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

)XUWKHUUHDGLQJ %6&DEUp,QWHUUDQWHDQG+H\PDQQ,626DJHU6WUHKORZ

-8$1&6$*(5

7HUPLQRORJ\ WKHRU\ 7KHLPSRUWDQFHIRUWUDQVODWRUVRIXQGHUVWDQGLQJWKHEDVLFSULQFLSOHVRIDWKHRU\RIWHUPLQRORJ\LVWZRIROG )LUVWDWKHRU\RIWHUPLQRORJ\DWWHPSWVWRH[SODLQWKHEHKDYLRXURIWHUPVLQVRIDUDVLWGLIIHUVIURPWKH EHKDYLRXURIZRUGVDQGSURSHUQDPHVZLWKUHVSHFWERWKWRNQRZOHGJHDQGXQGHUVWDQGLQJDQGWRWKHXVHRI VXFKWHUPVLQVSHFLDORU



3DJH

)LJXUH7HUPLQRORJ\

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² ERWKLQVLGHWKHOLQJXLVWLFV\VWHPDQGLQWKHUHDOZRUOG6DXVVXUH WHUPVUHIHUGHOLEHUDWHO\WRVSHFLILF FRQFHSWVZLWKLQSDUWLFXODUVXEMHFWILHOGVDQGWKHUHIRUHFRQVWLWXWHDVXEV\VWHPRINQRZOHGJH/H[LFDOLWHPVFDQ EHVWXGLHGHLWKHUDVSXUHO\OLQJXLVWLFHQWLWLHVIRUH[DPSOHLQWHUPVRIPRUSKRORJ\DQGVHQVHUHODWLRQVRUDV UHIHUHQWLDOHQWLWLHV7HUPVE\FRQWUDVWDUHDOZD\VVWXGLHGLQUHODWLRQWRWKHFRQFHSWXDOV\VWHPWRZKLFKWKH\ EHORQJDQGLQZKLFKWKH\IXQFWLRQDVGHSRVLWRULHVRINQRZOHGJH

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

&RQFHSWVGHILQLWLRQVDQGWHUPV 7KHWKHRU\RIWHUPLQRORJ\LVFRQFHUQHGZLWKFRQFHSWVWKHLUGHILQLWLRQVDQGWKHLUOLQJXLVWLFUHDOL]DWLRQDVWHUPV &RQFHSWV ,QWKH,QWHUQDWLRQDO6WDQGDUG,62 FRQFHSWVDUHGHILQHGDVXQLWVRIWKRXJKWXVHGWRVWUXFWXUHWKH NQRZOHGJHDQGSHUFHSWLRQVRI



3DJH

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



3DJH

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¶VSRLQWRIYLHZDUH ƇWKHGLVWLQFWLRQEHWZHHQWHUPLQRORJLFDOOLQJXLVWLFVWUXFWXUHDQGFRQFHSWXDOVWUXFWXUH ƇWKHFRH[LVWHQFHRISDUDOOHOFRQFHSWXDOVWUXFWXUHVZKLFKDUHVRPHWLPHVFXOWXUHDQGODQJXDJHFRQGLWLRQHG DQGVRPHWLPHVRFFXUZLWKLQWKHVDPHODQJXDJHJURXS ƇWKHFRPSOHWHGHSHQGHQFHRQGHILQLWLRQVDVWKHRQO\DFFHVVSRLQWDQGEULGJHEHWZHHQFRQFHSWDQGWHUP



3DJH

2WKHUDVSHFWVRIWHUPLQRORJ\ZRUNZKLFKDUHRISDUWLFXODULQWHUHVWWRWUDQVODWRUVLQFOXGHDSSOLFDWLRQVRI WHUPLQRORJ\LQWKHIRUPRIVXFKWRROVDVGLFWLRQDULHVJORVVDULHVDQG7(50%$1.6PHWKRGVRI GRFXPHQWDWLRQPHWKRGRORJLFDOLVVXHVLQWHUPLQRORJLFDOSUREOHPVROYLQJDQGILQDOO\WKHTXHVWLRQRIREMHFW DQGODQJXDJHVWDQGDUGL]DWLRQ 6HHDOVR 7(50%$1.67(50,12/2*<$33/,&$7,2167(50,12/2*<67$1'$5',=$7,21

)XUWKHUUHDGLQJ $UQW]DQG3LFKW%6&DEUp)HOEHUDQG%XGLQ,625H\5RQGHDX 5RQGHDXDQG)HOEHU6DJHU6DJHUHWDO:VWHU

-8$1&6$*(5

7H[WOLQJXLVWLFVDQGWUDQVODWLRQ $OWKRXJKLQYDULDEO\OXPSHGWRJHWKHUXQGHUWKHKHDGLQJµGLVFRXUVHDQDO\VLV¶DFRQVLGHUDEOHQXPEHURI DSSURDFKHVWRWKHDQDO\VLVRIODQJXDJHEH\RQGWKHVHQWHQFHZRXOGEHPRUHDSSURSULDWHO\YLHZHGDVµWH[W DQDO\VLV¶,QWHUPVRIWKHGLVWLQFWLRQEHWZHHQWH[WDQGGLVFRXUVHDGRSWHGKHUHWH[WDQDO\VLVLVHVVHQWLDOO\ FRQFHUQHGZLWKWKHRUJDQL]DWLRQDQGPDSSLQJRIWH[WVUDWKHUWKDQZLWKVRFLDOUHODWLRQVKLSVDQGLQWHUDFWLRQ WKURXJKWH[WVWKHODWWHUEHLQJVWULFWO\VSHDNLQJDGLVFRXUVHDQDO\WLFDLP$GLIIHUHQWGLVWLQFWLRQLVVRPHWLPHV PDGHEHWZHHQGLVFRXUVHDQDO\VLVDVWKHVWXG\RIVSRNHQLQWHUDFWLRQDQGWH[WOLQJXLVWLFVDVWKHVWXG\RIZULWWHQ LQWHUDFWLRQEXWWKLVGLVWLQFWLRQLVQRWDGRSWHGKHUH

5HJLVWHUDQDO\VLVLQWUDQVODWLRQVWXGLHV 7H[WDQDO\VLVKDVODUJHO\EHHQPRUHFRQFHUQHGZLWKFKDUDFWHUL]LQJWKDQZLWKH[SODLQLQJPHDQLQJ7KLVLVFOHDU LQDQLQIOXHQWLDOWUHQGLQDSSOLHGWH[WOLQJXLVWLFVZKLFKKDVIRXQGLWVZD\LQWRWKHOLWHUDWXUHRQWUDQVODWLRQ7KH VWXG\RIODQJXDJHYDULDWLRQRUZKDWKDVFRPHWREHNQRZQDVUHJLVWHUDQDO\VLVPD\EHWUDFHGEDFNWR +DOOLGD\0F,QWRVKDQG6WUHYHQV¶GHILQLWLRQRIUHJLVWHU µ/DQJXDJHYDULHVDVLWVIXQFWLRQYDULHVLW GLIIHUVLQGLIIHUHQWVLWXDWLRQV7KHQDPHJLYHQWRDYDULHW\RIDODQJXDJHGLVWLQJXLVKHGDFFRUGLQJWRXVHLV ³UHJLVWHU´¶$\HDUODWHU&DWIRUG VHWWKHWRQHIRUWKHYDULDWLRQGHEDWHLQWUDQVODWLRQVWXGLHV 7KHFRQFHSWRIDµZKROHODQJXDJH¶LVVRYDVWDQGKHWHURJHQHRXVWKDWLWLVQRWRSHUDWLRQDOO\XVHIXO IRUPDQ\OLQJXLVWLFSXUSRVHVGHVFULSWLYHFRPSDUDWLYHDQGSHGDJRJLFDO,WLVWKHUHIRUHGHVLUDEOHWR KDYHDIUDPHZRUNRIFDWHJRULHVIRUWKHFODVVLILFDWLRQRIµVXEODQJXDJHV¶RUYDULHWLHVZLWKLQDWRWDO ODQJXDJH 'HVSLWHWKHXVXDOWLPHODJIRUWKHRULHVRIOLQJXLVWLFVWREHILUVWDFFHSWHGLQDSSOLHGOLQJXLVWLFVDQGRQO\WKHQ UHFRJQL]HGLQWUDQVODWLRQVWXGLHV&KDX WUDQVODWLRQWKHRULVWVORVWQRWLPHLQPDNLQJXVHRILQVLJKWV \LHOGHGE\UHJLVWHUDQDO\VLV$QXPEHURIVWXGLHVVRRQDSSHDUHGUHSUHVHQWLQJZKDWWXUQHGRXWWREHLPSRUWDQW ODQGPDUNVLQWKHGHYHORSPHQWRIDµVFLHQFH¶RIWUDQVODWLRQ*UHJRU\DQG&DUUROO*UHJRU\ ,QWKH SURFHVVWKLVQHZWUHQGLQIRUPHGDQXPEHURIWH[WERRNVDQGPDQXDOVLQDFWLYHXVHXQWLOWRGD\LQPDQ\D WUDQVODWRUWUDLQLQJSURJUDPPHDURXQGWKHZRUOGHJ1HXEHUW1RUG 7KHPRGHORIODQJXDJHYDULDWLRQWRZKLFKWKLVSDUWLFXODUWUHQGLQWUDQVODWLRQWKHRU\VXEVFULEHVIRFXVHVRQWZR EDVLFGLPHQVLRQVRQHKDVWRGRZLWKWKHµXVHU¶JLYLQJULVHWRDQHPSKDVLVRQGLDOHFWDOPHDQLQJDQGWKHRWKHU ZLWKµXVH¶RIODQJXDJHOHDGLQJWRDQHPSKDVLVRQUHJLVWHUVVHH48$/,7<2)75$16/$7,21 8VHU UHODWHGYDULDWLRQLQFOXGHVVXFKIDFWRUVDVWKHJHRJUDSKLFDOKLVWRULFDODQGVRFLDOSURYHQDQFHRIWKHVSHDNHUWKH VWDQGDUGODQJXDJHYDULDEOHDVZHOODVLGLROHFWDOPHDQLQJ8VHUHODWHGYDULDWLRQVXEVXPHVDVSHFWVRIPHVVDJH FRQVWUXFWLRQVXFKDVILHOGRUVXEMHFWPDWWHUWHQRURUOHYHORIIRUPDOLW\DQGPRGHRUWKHEDVLFGLVWLQFWLRQ EHWZHHQVSHHFKDQGZULWLQJ7H[WDQDO\VLVKDVVSHFLILFDOO\DWWHQGHGWRWKHFKDUDFWHUL]DWLRQRIDOHYHORI PHDQLQJWKDWLVORFDWHGZLWKLQWKHODWWHUW\SHRIYDULDWLRQDQG



3DJH

WUDQVODWLRQWKHRULVWVIROORZHGVXLW,QGHHGGHILQLQJWKHUHJLVWHUPHPEHUVKLSRIWKHWH[WFDPHWREHFRQVLGHUHG DSUHUHTXLVLWHWRVXFFHVVIXOWUDQVODWLRQ)RUH[DPSOHDQDSSUHFLDWLRQRIUHJLVWHULVLPSRUWDQWLQWUDQVODWLQJDQG RULQWHUSUHWLQJDQXWWHUDQFHVXFKDVµ6KHLVVHFWLRQHG>LQDKRVSLWDO@IRUGD\VDQGEHFDPHRQHRIWKRVHFDOOHG VSHFLDOOHGZKLFKPHDQV\RXKDYHDQXUVHIROORZLQJ\RXHYHU\ZKHUH\RXJR¶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¶GHFLVLRQVDQGIRUPLQJWKHWKHRUHWLFDOEDFNJURXQGRIPDQ\D SURJUDPPHLQWUDQVODWRUWUDLQLQJWRQDPHEXWRQHDUHDRIDSSOLHGWUDQVODWLRQVWXGLHV $QRWKHUWUHQGLQWH[WW\SHUHVHDUFKKDVWDNHQGRPDLQDVWKHEDVLVIRUGHYHORSLQJDGLIIHUHQWFODVVLILFDWLRQRI WH[WVLQWRW\SHVVXFKDVOLWHUDU\SRHWLFDQGGLGDFWLF%HDXJUDQGHDQG'UHVVOHU 7H[WW\SHVLGHQWLILHGLQ WKLVDSSURDFKKRZHYHUKDYHH[KLELWHGDQRGGPL[WXUHRIFDWHJRULHVIOXFWXDWLQJEHWZHHQµILHOG¶LQWKHVHQVHRI VXEMHFWPDWWHUDQGµGLVFRXUVH¶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µGHJUHHRIWUDQVODWDELOLW\¶*XOLFKDQG5DLEOH EXWWKH PDMRULW\DGRSWDWKUHHZD\GLVWLQFWLRQEHWZHHQH[SUHVVLYHLQIRUPDWLYHDQGYRFDWLYHWH[WVHJ1HZPDUN 5REHUWV 7KHVHSRLQWVRIRULHQWDWLRQOLQNXSZLWK%XKOHU¶VRUJDQRQWKHRU\LQZKLFKODQJXDJHLV WDNHQWREHDWRRO



3DJH

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

+LHUDUFKLFDOWH[WVWUXFWXUH ,WKDVEHHQDUJXHGWKDWDQLPSRUWDQWSDUWRIDQDO\VLVHVSHFLDOO\IRUWKHSXUSRVHRIWUDQVODWLRQLQYROYHVWKH GHVFULSWLRQRIWKHVXSUDVHQWHQWLDOVWUXFWXUHRIWKHWH[WRUVRFLDOWUDQVDFWLRQ=\GDWLVV7LUNNRQQHQ&RQGLW 6D¶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¶DGHGGLQ DQGLQ WHUPVRIPDFURLOORFXWLRQDU\IRUFH7LUNNRQHQ&RQGLW

7H[WXUH $QRWKHUGRPDLQRIWH[WOLQJXLVWLFVZKLFKKDVDWWUDFWHGPXFKDWWHQWLRQLVWH[WXUHRUVWUXFWXUHLQGHWDLO:RUN RQWH[WXUHKDVRFFXSLHGDSURPLQHQWSODFHLQWH[WOLQJXLVWLFUHVHDUFKDQGKDVWKXVDOEHLWJUDGXDOO\IRXQGLWV ZD\LQWRWUDQVODWLRQVWXGLHVIRFXVLQJLQSDUWLFXODURQWZRDUHDVFRKHVLRQDQGWKHPHUKHPHDQDO\VLV &RKHVLRQ )URPWKHSHUVSHFWLYHRIWH[WDQDO\VLVZRUNRQFRKHVLRQKDVEHHQWKHVLQJOHPRVWLPSRUWDQW



3DJH

DUHDWRDWWUDFWWKHDWWHQWLRQQRWRQO\RIOLQJXLVWVIURPDYDULHW\RISHUVXDVLRQVEXWDOVRRIWKHRULVWVDQG SUDFWLWLRQHUVLQWKHILHOGRIWUDQVODWLRQVHHIRUH[DPSOH%OXP.XOND1HZPDUN%DNHU 7KHSULQFLSOHRQZKLFKFRKHVLRQVWXGLHVDUHIRXQGHGLVDVLPSOHRQHHDFKVHQWHQFHDIWHUWKHILUVWLVOLQNHGWR WKHFRQWHQWDQGRUIRUPRIRQHRUPRUHSUHFHGLQJVHQWHQFHVE\DWOHDVWRQHµWLH¶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µWKHFKRLFHDQGRUGHULQJRIXWWHUDQFHWKHPHVWKHLUPXWXDO FRQFDWHQDWLRQDQGKLHUDUFK\DVZHOODVWKHLUUHODWLRQVKLSWRK\SHUWKHPHVRIWKHVXSHULRUWH[WXQLWVVXFKDVWKH SDUDJUDSKFKDSWHU«WRWKHZKROHWH[WDQGWRWKHVLWXDWLRQ¶'DQHã 7H[WVKDYHEHHQIRXQGWR H[KLELWLQWHUHVWLQJSDWWHUQVVXFKDVDVLPSOHOLQHDUSURJUHVVLRQZKHUH7KHPHUHGHSOR\V5KHPHRUD SURJUHVVLRQZKHUHDFRQWLQXRXVWKHPHLVGHSOR\HGLHZKHUHWKHVDPHWKHPHLVSLFNHGXSDJDLQDQGDJDLQ $WUHQGRIWKHPHUKHPHDQDO\VLVLQLWLDWHGE\UHVHDUFKHUVOLNH'H\HV KDVVXFFHVVIXOO\SRLQWHG WUDQVODWLRQWKHRULVWVLQWKHGLUHFWLRQRIDPXFKPRUHIUXLWIXOOLQHRIHQTXLU\7KLVLQYROYHVJUDIWLQJWH[W W\SRORJLFDOFRQVLGHUDWLRQVRQWRSDWWHUQVRIWKHPDWLFSURJUHVVLRQDVWKHVHXQIROG7KXVLWKDVEHHQDUJXHGWKDW DVRFDOOHGµVLPSOH73¶ZKHUHUKHPHEHFRPHVWKHPHLQVXEVHTXHQWGLVFRXUVH LVLQIDFWDKLJKO\WXUEXOHQW VWUXFWXUHFKDUDFWHULVWLFRIDUJXPHQWDWLYHWH[WV&RQWLQXRXVWKHPHVRQWKHRWKHUKDQGDUHW\SLFDORI VWUDLJKWIRUZDUGH[SRVLWLRQDVLQWKHFDVHRIQHZVUHSRUWLQJ+DWLPDQG0DVRQ+DWLP 6HHDOVR ',6&2856($1$/<6,6$1'75$16/$7,21/,1*8,67,&$3352$&+(635$*0$7,&6$1' 75$16/$7,21

)XUWKHUUHDGLQJ %DNHUGH%HDXJUDQGH%OXP.XOND*UHJRU\+DWLP+DWLPDQG0DVRQ 1HXEHUW1RUG5REHUWV6D¶DGHGGLQ7LUNNRQHQ&RQGLW=\GDWLVV

%$6,/+$7,0

7KLQNDORXGSURWRFROV ,QWHUHVWLQWKHµEODFNER[¶RIWUDQVODWLRQLHWKHWKRXJKWSURFHVVHVZKLFKWDNHSODFHZKHQVRPHRQHLV WUDQVODWLQJDWH[WLVSUREDEO\DVROGDVWUDQVODWLQJLWVHOI7UDQVODWRUVKDYHDOVR



3DJH

DQDO\VHGWKHLURZQWUDQVODWLRQPHWKRGVIRUH[DPSOHWKHSUREOHPVWKH\HQFRXQWHUZKLOHWUDQVODWLQJDSDUWLFXODU OLWHUDU\ WH[WDQGKRZWKH\VROYHWKHPVHHIRUH[DPSOH%O\5D\:HDYHU ,QWKHV H[SHULPHQWDOPHWKRGVEHJDQWREHERUURZHGIURPSV\FKRORJ\WRJDLQDFFHVVWRZKDWJRHVRQLQWKH WUDQVODWRU¶VPLQG7KHPRVWSRSXODURIWKHVHKDVEHHQWKHµWKLQNDORXG¶RUµWKLQNLQJDORXG¶ PHWKRGZKLFK LQYROYHVDVNLQJDWUDQVODWRUWRWUDQVODWHDWH[WDQGDWWKHVDPHWLPHWRYHUEDOL]HDVPXFKRIKLVRUKHUWKRXJKWV DVSRVVLEOH6XEMHFWVLQYROYHGLQVXFKH[SHULPHQWVQHHGVSHFLDOWUDLQLQJWRHQDEOHWKHPWRYHUEDOL]HIUHHO\ LQVWHDGRIDQDO\VLQJDQGFRPPHQWLQJRQWKHLUWKRXJKWSURFHVVHV6XEMHFWV¶SHUIRUPDQFHVDUHJHQHUDOO\ UHFRUGHGRQDXGLRRUYLGHRWDSHWKHWHUPWKLQNDORXGSURWRFROVRU7$3VIRUVKRUWUHIHUVWRWKHZULWWHQ WUDQVFULSWVRIVXFKUHFRUGLQJV $WWKHPRVWJHQHUDOOHYHOWKHSXUSRVHRI7$3VWXGLHVLVWRJDLQDEHWWHUXQGHUVWDQGLQJRIWKHSV\FKRORJLFDO DQGOLQJXLVWLFPHFKDQLVPVLQYROYHGLQWKHDFWLYLW\RIWUDQVODWLQJ0RUHVSHFLILFDUHDVRIUHVHDUFKKDYH LQFOXGHGIRUH[DPSOHSUREOHPVROYLQJVWUDWHJLHV.ULQJV/|UVFKHU FULWHULDIRUGHFLVLRQPDNLQJ 7LUNNRQHQ&RQGLW DQGFUHDWLYLW\LQWUDQVODWLRQ.XVVPDXO $WWKHHDUO\VWDJHVRISURFHVV RULHQWHGHPSLULFDOUHVHDUFKWKHHPSKDVLVWHQGHGWREHRQIRUPXODWLQJWHVWLQJDQGUHILQLQJK\SRWKHVHVDERXW ZKDWJRHVRQLQWKHµEODFNER[¶

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²DQGLIVRZKLFK²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²WKHODWWHUFRPSULVLQJIRU LQVWDQFHSULRUH[SHULHQFHVIRFXVRIDWWHQWLRQDWDQ\JLYHQPRPHQWDWWLWXGHVHPRWLRQVDQG



3DJH

SODQV1LVEHWWDQG:LOVRQ ²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± +RZHYHULQWKH DEVHQFHRIDQ\PHWKRGRORJLFDOVXUYH\VRIWKHHIIHFWVRIYHUEDOL]DWLRQRQWUDQVODWLRQSURFHVVHVLQSDUWLFXODU UDWKHUWKDQWKRXJKWSURFHVVHVLQJHQHUDO LWLVGLIILFXOWWRGHWHUPLQHZKHWKHUDVLPLODUGHJUHHRIRSWLPLVPFDQ EHMXVWLILHGZLWKLQWUDQVODWLRQVWXGLHV8QWLOPRUHUHVHDUFKRQPHWKRGRORJLFDOLVVXHVLVFDUULHGRXWZHKDYHWR UHO\²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µEODFNER[¶

2YHUYLHZRI7$3VWXGLHV 7$3VWXGLHVRIWUDQVODWLRQRIIHUDQH[FHOOHQWH[DPSOHRIWKHLQWHUGLVFLSOLQDU\QDWXUHRIWUDQVODWLRQUHVHDUFK 'DWDFROOHFWLRQPHWKRGVZHUHERUURZHGIURPSV\FKRORJ\DQGWKHPHWKRGVXVHGWRGHVFULEHDQGDQDO\VH7$3 GDWDFDPHIURPDYDULHW\RIGLVFLSOLQHVVXFKDVSV\FKROLQJXLVWLFVWUDQVODWLRQVWXGLHVDQGFRJQLWLYHDQGVRFLDO SV\FKRORJ\,QIDFWEHFDXVHPHWKRGVRIDQDO\VLVXVXDOO\KDYHWREHPRGLILHG²HYHQWRWKHH[WHQWRIEHLQJ WDLORUPDGH²WRGHVFULEHDSDUWLFXODUERG\RIGDWD7$3VWXGLHVKDYHFRPHWRUHSUHVHQWVXFKDZLGHVSHFWUXP RIUHVHDUFKWUDGLWLRQVWKDWLQVWHDGRIIRUPLQJDFOHDUO\XQLIRUPDSSURDFKZLWKLQWUDQVODWLRQVWXGLHVPDQ\RI WKHPVHHPWRVKDUHQRPRUHWKDQWKHEDVLFPHWKRGRORJ\RIHOLFLWLQJGDWD 7KXVIRULQVWDQFHWKHVRXUFHDQGWDUJHWODQJXDJHVKDYHYDULHGDVKDVWKHGLUHFWLRQRIWUDQVODWLRQLQWRRURXW RIWKHPRWKHUWRQJXH 8VXDOO\VXEMHFWVKDYHSURGXFHGDZULWWHQWUDQVODWLRQRIDZULWWHQVRXUFHWH[WH[FHSWLQ /|UVFKHU¶VVWXG\D LQZKLFKIRUHLJQODQJXDJHVWXGHQWVSURGXFHGDQRUDOWUDQVODWLRQRIDZULWWHQWH[W 7KHVRXUFHWH[WVKDYHUHSUHVHQWHGGLIIHUHQWJHQUHVUDQJLQJIURPWUDYHO



3DJH

EURFKXUHVWRSROLWLFDOVDWLUHDQGIURPSRSXODUL]HGVFLHQFHWRJRYHUQPHQWGRFXPHQWV$FFHVVWRUHIHUHQFH PDWHULDOKDVVRPHWLPHVEHHQDOORZHGDQGVRPHWLPHVGHQLHGLQWKHODWWHUFDVHLQRUGHUWRHOLFLWULFKHU LQIHUHQFLQJVWUDWHJLHVDVIRULQVWDQFHLQ*HUORII 6XEMHFWVLQWXUQKDYHUHSUHVHQWHGYDULRXVOHYHOVRI OLQJXLVWLFDQGWUDQVODWLRQDOFRPSHWHQFHDQGKDYHLQFOXGHGIRUH[DPSOHIRUHLJQODQJXDJHOHDUQHUVWUDQVODWLRQ VWXGHQWVFRPSHWHQWELOLQJXDOVDVZHOODVSURIHVVLRQDOWUDQVODWRUV7KHWUDQVODWLRQSURFHVVHVRIODQJXDJH OHDUQHUVFDQRIFRXUVHEHGLVPLVVHGDVQRWEHLQJUHSUHVHQWDWLYHRISURIHVVLRQDOWUDQVODWLRQRQWKHRWKHUKDQGLW LVXVHIXOWRKDYHFRQWUROJURXSVIRUFRPSDULVRQRWKHUZLVHLWZRXOGEHLPSRVVLEOHWRGHWHUPLQHZKDW FRQVWLWXWHVSURIHVVLRQDOEHKDYLRXULQWUDQVODWLRQ0RUHLPSRUWDQWO\7$3UHVHDUFKHUVVHHPWRGHILQHWKHYHU\ QRWLRQRIµWUDQVODWLRQ¶LQGLIIHUHQWZD\V)RUVRPHµWKHWDVNRIWUDQVODWLQJE\GHILQLWLRQGHPDQGVDYHUVLRQDV FORVHWRWKHRULJLQDODVSRVVLEOH¶+|OVFKHUDQG0|KOH ZKHUHDVRWKHUVKDYHDGRSWHGDEURDGHU IXQFWLRQDOGHILQLWLRQZKLFKDOORZVGHYLDWLQJIURPWKHRULJLQDOLIQHFHVVDU\VHHIRUH[DPSOH-llVNHOlLQHQ 7LUNNRQHQ&RQGLW.XVVPDXO 7KHGHILQLWLRQRIµWUDQVODWLRQ¶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|UVFKHU ZKHUHDVSURIHVVLRQDOWUDQVODWRUV IRFXVRQVW\OHDQGWKHQHHGVRIWKHWDUJHWDXGLHQFH-llVNHOlLQHQ7LUNNRQHQ&RQGLW 7$3VWXGLHV KDYHDOVRRIIHUHGDIHZVXUSULVHV)RUH[DPSOHRQHFRPPRQDVVXPSWLRQKDVEHHQWKDWIRUSURIHVVLRQDO WUDQVODWRUVWKHWUDQVODWLRQSURFHVVLVKLJKO\DXWRPDWL]HGZLWKIHZSUREOHPVDQGOLWWOHFRQVFLRXVGHFLVLRQ PDNLQJ%|UVFK.ULQJV 6pJXLQRW¶VFDVHVWXG\ RID&DQDGLDQJRYHUQPHQWWUDQVODWRU VXSSRUWHGWKLVK\SRWKHVLV+RZHYHUIXUWKHUUHVHDUFKKDVVKRZQWKDWSURIHVVLRQDOWUDQVODWRUVRIWHQLGHQWLI\ PRUHSUREOHPVDQGVSHQGPRUHWLPHDQGHQHUJ\RQVROYLQJWKHPWKDQODQJXDJHOHDUQHUV.ULQJV -llVNHOlLQHQ 2QWKHEDVLVRIWKHVHILQGLQJVWKHDXWRPDWLFLW\K\SRWKHVLVKDVEHHQUHILQHGDVIROORZV ODQJXDJHOHDUQHUVDUHXQDZDUHRISRWHQWLDOSUREOHPVLQWUDQVODWLRQDQGDKLJKHUOHYHORIFRPSHWHQFHOHDGVWR KHLJKWHQHGDZDUHQHVVRISUREOHPVDPRQJSURIHVVLRQDOWUDQVODWRUV-llVNHOlLQHQDQG7LUNNRQHQ&RQGLW )XUWKHUPRUHSURIHVVLRQDOWUDQVODWRUVFDQVKLIWEHWZHHQDXWRPDWL]HGSURFHVVLQJLQURXWLQHWDVNVDVLQ6pJXLQRW DQGFRQVFLRXVSURFHVVLQJLQQRYHOVLWXDWLRQV.ULQJV-llVNHOlLQHQ/DXNNDQHQ )LQDOO\VSHFLDODWWHQWLRQLVLQFUHDVLQJO\EHLQJSDLGWRWKHUROHRIDIIHFWLYHIDFWRUVVXFKDVDWWLWXGHDQG PRWLYDWLRQ.XVVPDXO)UDVHU 3UHOLPLQDU\UHVXOWVVHHPWRLPSO\WKDWDSRVLWLYHDWWLWXGHDQGDKLJK OHYHORIPRWLYDWLRQIRUPSDUWRISURIHVVLRQDOFRPSHWHQFHDQGPD\HYHQFRQWULEXWHWRHQKDQFLQJWKHTXDOLW\RI WUDQVODWLRQ7KHVHILQGLQJVDUHVXSSRUWHGE\SV\FKRORJLFDOUHVHDUFKRQH[SHU



3DJH

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

)XUWKHUUHDGLQJ (ULFVVRQDQG6LPRQ)DHUFKDQG.DVSHU)UDVHU+XEHUDQG0DQGO.ULQJV/|UVFKHU

5,,77$-bb6.(/b,1(1

7RUDKWUDQVODWLRQ 7KHUHLVDORQJ-HZLVKWUDGLWLRQWKDW7RUDKWDNHQKHUHDVJHQHUDOO\HTXLYDOHQWWRZKDW&KULVWLDQVFDOO2OG 7HVWDPHQWZDVZULWWHQIRUKXPDQVWRXQGHUVWDQGWKRXJKLWFRQWDLQVGLYLQHWUXWKV,WPXVWWKHUHIRUHEH WUDQVODWHGDQGLQWHUSUHWHGIRUWKRVHZKRGRQRWXQGHUVWDQG+HEUHZ 7KHILUVWKLVWRULFDOUHSRUWRIWUDQVODWLRQFRPHVLQWKH%LEOHLWVHOI:KHQWKH-HZLVKH[LOHVPDQ\RIZKRPQR ORQJHUXQGHUVWRRG+HEUHZUHWXUQHGIURP%DE\ORQLQWKHVL[WKFHQWXU\%&µWKH\UHDGIURPWKHERRNRIWKH ODZRI*RGFOHDUO\PDGHLWVVHQVHSODLQDQGJDYHLQVWUXFWLRQLQZKDWZDVUHDG¶1HKHPLDK1HZ(QJOLVK %LEOH 7KDWLVWRVD\WKH\UHDGWKH7RUDKZLWKWUDQVODWLRQDQGFRPPHQWDU\7KHHDUOLHVWZULWWHQ WUDQVODWLRQKRZHYHULVWKH6HSWXDJLQWSUHSDUHGLQWKLUGFHQWXU\%&(J\SWSUREDEO\IRU*UHHNVSHDNLQJ-HZV ZKRQRORQJHUNQHZ+HEUHZ7KHWUDQVODWLRQZDVQHYHUFRQVLGHUHGVDWLVIDFWRU\LQWKH-HZLVKYLHZSDUWO\ EHFDXVHWKHWUDQVODWRUVKDGQRWZRUNHGIURPDVWDQGDUGRULJLQDOPDQXVFULSWDQGHYHQIUHHO\SDUDSKUDVHGVRPH ERRNVEXWPDLQO\EHFDXVHLWZDVXVHGE\PRVW-HZVLQWKH*UHHNDQG5RPDQGLDVSRUDLQVWHDGRIWKHRULJLQDO +HEUHZUDWKHUWKDQDVDQDGMXQFWWRLW ,QWKHVHFRQGFHQWXU\$'$TXLODSURGXFHGDWUDQVODWLRQZKLFKZDVKLJKO\UDWHGE\-HZVZKLOH7KHRGRWLRQ DQG6\PPDFKXVUHYLVHGWKH6HSWXDJLQW7KHVHWH[WVVXUYLYHLQ2ULJHQ¶V+H[DSODFRPSOHWHGLQ$'ZLWK SDUDOOHOFROXPQVRIWH[WDQGWUDQVODWLRQV 7KH$UDPDLFWUDQVODWLRQVNQRZQDV7DUJXPSOXUDO7DUJXPLPPHDQLQJµWUDQVODWLRQ¶RUµLQWHUSUHWDWLRQ¶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¶VIRXUWKFHQWXU\/DWLQWUDQVODWLRQNQRZQDVWKH9XOJDWHVHH/$7,175$',7,21 VHUYHGDVD VRXUFHWH[WIRU:HVWHUQ&KULVWLDQWUDQVODWLRQVIRUVHYHUDOFHQWXULHV$OWKRXJKKHVWXGLHGXQGHU-HZLVKPDVWHUV RI+HEUHZDQG%LEOHH[HJHVLV-HURPHVWLOOWUDQVODWHGDOPDKLQ,VDLDK DVYLUJLQUDWKHUWKDQ\RXQJ ZRPDQ6LPLODUO\LQ([RGXVKHWUDQVODWHGWKH+HEUHZPHWDSKRUTDUDQµRUOLWHUDOO\µVHQWIRUWKKRUQVRI OLJKW¶ DVLI0RVHVKDGUHWXUQHGIURP0RXQW6LQDLZLWKKRUQVRQKLVKHDG7KLVPLVWUDQVODWLRQH[SODLQV 0LFKHODQJHOR¶VVWDWXHRI0RVHVDQGPD\



3DJH

DFFRXQWIRUWKHFRPPRQVXSHUVWLWLRQWKDW-HZVKDGKRUQVJURZLQJRXWRIWKHLUKHDGV %,%/(75$16/$7,21LVGLIILFXOWWRVHSDUDWHIURPH[HJHVLV-XVWDVWKH7DUJXPLQFOXGHVH[HJHWLFDODQG SDUDSKUDVWLFPDWHULDOVRGRHVWKHHDUOLHVW-HZLVKWUDQVODWLRQLQWR$UDELFE\6DDGLD± 6DDGLDDPDVWHU RI+HEUHZJUDPPDUDQGOH[LVHOLPLQDWHGDQWKURSRPRUSKLVPVDQGFODULILHGGRXEWVRQWKHEDVLVRIFRJQDWH $UDELFZRUGV+HVWURYHWRSURGXFHDQHOHJDQWDQGUHDGDEOHYHUVLRQRIWKH7RUDK+LVWUDQVODWLRQLVVWLOOXVHG E\
/DWHU-HZLVKWUDQVODWLRQV 7KHUHQDLVVDQFHRI+HEUHZVWXGLHVDPRQJ&KULVWLDQVWRJHWKHUZLWKWKHSXEOLFDWLRQRISULQWHGYHUVLRQVRIWKH PDVRUHWLFWH[WRIWKH+HEUHZ6FULSWXUHVIDFLOLWDWHGDGYDQFHVLQWKH&KULVWLDQWUDQVODWLRQVRI/87+(5VHH *(50$175$',7,21 =ZLQJOL7<1'$/(&RYHUGDOHDQGWKHIDPRXV$XWKRUL]HG9HUVLRQRIVHH %5,7,6+75$',7,21 7KHIXOODSSDUDWXVRI-HZLVKFRPPHQWDU\EHFDPHDYDLODEOHZLWKWKH9HQLFH 5DEELQLFDO%LEOH± DQGWKH3RO\JORW&RPSOXWHQVLVIURP$OFDOiGH+HQDUHVRI6SDLQ 7KHODWWHU FROODWHGWKH+HEUHZWKH6HSWXDJLQWWKH9XOJDWHDQGWKH7DUJXP 7KHWUDQVODWRUVRIWKH$XWKRUL]HG9HUVLRQZHUHFRPSHWHQW+HEUDLVWVZKRPDGHXVHRIWKH-HZLVK FRPPHQWDULHVLQSURGXFLQJWKHLUWUDQVODWLRQV+RZHYHUWKHUHZHUHQR-HZVWREHFRQVXOWHGLQ(QJODQGDWWKH WLPH²DWOHDVWQRWRIILFLDOO\,Q6SDLQE\FRQWUDVWWKH-HZVRFFXSLHGDQLPSRUWDQWSRVLWLRQLQVRFLHW\DQG PDQ\6SDQLVKWUDQVODWLRQVZHUHSURGXFHGE\-HZV7KHPRVWLPSRUWDQWRIWKHVHZDVE\5DEEL0RVHV$UUDJHO LQ$IWHUWKHH[SXOVLRQRIWKH6SDQLVK-HZVLQWUDQVODWLRQVZHUHSURGXFHGE\-HZLVKVFKRODUVIRU WKHEHQHILWRI-HZVZKRKDYLQJEHHQEDSWL]HGLQ6SDLQOHIWDQGMRLQHG-HZLVKFRPPXQLWLHVLQ,WDO\RUWKH 1HWKHUODQGV7KHPRVWIDPRXVZDV$EUDKDP8VTXH¶V)HUUDUD%LEOHRIZLWKVHSDUDWHHGLWLRQVIRU-HZV DQG&KULVWLDQV/DWHUYHUVLRQVZHUHSXEOLVKHGLQ-XGDHR6SDQLVK7UDQVODWLRQVLQWR


3DJH

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±WUDQVODWLRQRIWKH-HZLVK3XEOLFDWLRQ6RFLHW\RI$PHULFD-36$QHZYHUVLRQ

-HZLVKDQG&KULVWLDQLQWHUSUHWDWLRQVRIWKH+HEUHZ%LEOH 7KHJURZLQJVL]HDQGLPSRUWDQFHRIWKH$PHULFDQ-HZLVKFRPPXQLW\LQWKHWZHQWLHWKFHQWXU\PHDQWWKDWD WUDQVODWLRQVXFKDV-36$ FRXOGEHLQIOXHQWLDOHQRXJKWREULQJVRPHFRQWURYHUVLDO&KULVWLDQWUDQVODWLRQV LQWRTXHVWLRQ:RUGVDQGSKUDVHVZKLFKFDPHXQGHUSDUWLFXODUVFUXWLQ\ZHUHRQHVZKLFKZHUHLQWHUSUHWHGLQ VXFKDZD\DVWRVXJJHVWWKDWWKH2OG7HVWDPHQWSUHVDJHGWKH1HZ7HVWDPHQW 7KHLQWHUSUHWDWLRQRIZRUGV 7KHLQWHUSUHWDWLRQRIµ«XQWLO6KLORKFRPH¶LQ*HQHVLV KLQJHVRQZKHWKHUWKHZRUGLVUHDGDVWKHSODFH 6KLORKRUWKH+HEUHZZRUGVKHORPHDQLQJµKLV¶7KHODWWHULVWKH-HZLVKLQWHUSUHWDWLRQDQGH[SODLQVWKHYHUVH DVPHDQLQJµ7KHVFHSWUHVKDOOQRWGHSDUWIURP-XGDKXQWLOWKDWZKLFKZDVUHVHUYHGIRUKLPKDVEHHQIXOILOOHG¶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µDQRLQWHGRQH¶LVQRW GLVSXWHGIRU-HZVLWUHIHUVWRDQRQGLYLQHSHUVRQVWLOOWRFRPHUDWKHUWKDQWKH&KULVWLDQLQWHUSUHWDWLRQRIWKH UHMHFWHGGLYLQHEHLQJ6LPLODUO\*R¶HOLVIUHTXHQWO\WUDQVODWHGDVUHGHHPHUDQGLVXVHGLQWKH+HEUHZOLWXUJ\ IRUDKXPDQVHQWE\*RG,WGRHVQRWEHDUWKH&KULVWLDQXQGHUVWDQGLQJRIDUHGHHPHUIURPVLQ$VXVHGIRU LQVWDQFHLQ5XWKWKHJR¶HOZDVWKHQHDUNLQVPDQ$XWKRUL]HG9HUVLRQ RUQH[WRINLQ1HZ(QJOLVK %LEOH +RZHYHUWKHZRUGDOVRFDUULHVWKHPHDQLQJRIDSHUVRQREOLJHGWRUHGHHPWKHSURSHUW\RIDGLVWUHVVHG PHPEHURIWKHVDPHIDPLO\ 7KHWUDQVODWLRQRIQDPHV 1DPHVRIWHQKDYHPHDQLQJLQWKH7RUDK7KXVZKHQWZLQVZHUHERUQWR5HEHFFD*HQHVLV WKH\RXQJHU ZDVKROGLQJWKHHOGHUE\WKHKHHODQGZDVWKHUHIRUHQDPHG


3DJH

-DFREZKRZDVUHQDPHG,VUDHO&KLOGUHQSDUWLFXODUO\LQ(QJOLVKKDVWKHPHDQLQJRIµPLQRUV¶LQDGGLWLRQWR µRIIVSULQJ¶7RDYRLGWKLV1(%DQG-36$ WUDQVODWHWKHSKUDVHDV,VUDHOLWHV 7KHQDPHRI*RG 3HUKDSVWKHPRVWFRQWURYHUVLDOLVVXHLQ%LEOHWUDQVODWLRQLVWKHUHQGHULQJRIWKH+HEUHZQDPHRIWKH'HLW\WKH 7HWUDJUDPPDWRQRUIRXUOHWWHUV


3DJH

WUDQVODWLRQIRUH[LOHG6SDQLVK-HZVUHDGVµ6LDXQYLYHPLSDGUH"¶µ%XWLVP\IDWKHUVWLOODOLYH"¶ 7KHODWWHU VXFFHVVIXOO\H[SUHVVHVDVWRQLVKPHQWUDWKHUWKDQDPHUHTXHVWLRQ 2QWKHZKROHWKH+HEUHZ6FULSWXUHVSRVHRXWVWDQGLQJFKDOOHQJHVWRWUDQVODWRUVQRWRQO\EHFDXVHVRPXFK GHSHQGVRQWKHLQWHUSUHWDWLRQRILQGLYLGXDOZRUGVEXWDOVREHFDXVHWKHUHLVQRVXUYLYLQJ+HEUHZOLWHUDWXUH FRQWHPSRUDU\ZLWKWKH6FULSWXUHV:KHQD+DSD[/RJRPHQRQRUVLQJOHH[DPSOHRIDZRUGRFFXUVDQGFDQQRW EHXQGHUVWRRGIURPWKHFRQWH[WRUE\UHIHUHQFHWRFRJQDWHZRUGVWKHUHPD\ZHOOEHVFRSHIRUGLIIHUHQW WUDQVODWLRQVRUHYHQGRXEWDPRQJWKH-HZLVKFRPPHQWDWRUVWKHPVHOYHV$WRWKHUWLPHVDOWKRXJKWKHPDVRUHWLF WH[WDVZULWWHQLQWKHVFUROORU6HIHU7RUDKPXVWQRWEHDOWHUHGWKHSULQWHGWH[WVDUHSURYLGHGZLWKIRRWQRWHV IRUH[DPSOHWKRVHZKLFKVWDUWZLWK.HULµUHDG¶ LQVWUXFWLQJWKHUHDGHUWRSURQRXQFHWKHZRUGLQDSDUWLFXODU ZD\,WLVVRPHWLPHVDUJXHGWKHUHIRUHWKDWDUHDGLQJRIWKH7RUDKLQDWUDQVODWLRQXQDFFRPSDQLHGE\D FRPPHQWDU\UXQVWKHULVNRIPLVXQGHUVWDQGLQJPXFKRIWKHWH[W 6HHDOVR %,%/(75$16/$7,21+(%5(:75$',7,21485¶Ɩ1.25$1 75$16/$7,21

)XUWKHUUHDGLQJ $OEUHNWVRQ+DPPRQG0DUJROLV2UOLQVN\6DPHO\6FKZDU]

0,&+$(/$/3(57

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

:KDWLVWUDQVODWDEOH" 7UDQVODWDELOLW\LVPRVWO\XQGHUVWRRGDVWKHFDSDFLW\IRUVRPHNLQGRIPHDQLQJWREHWUDQVIHUUHGIURPRQH ODQJXDJHWRDQRWKHUZLWKRXWXQGHUJRLQJUDGLFDOFKDQJH'HEDWHVHQVXHZKHQRQHWULHVWRVSHFLI\ZKDWNLQGRI µPHDQLQJ¶LVLQYROYHG)HZWKHRULHVFODLPWKDWDOOPHDQLQJVDUHDOZD\VWUDQVODWDEOH 7KHEDVLFSUREOHPLQPRVWWKHRULHVHLWKHUIRURUDJDLQVWWUDQVODWDELOLW\LVWKHUHODWLRQEHWZHHQVRXUFHWH[W µH[SUHVVLRQV¶LQWKHEURDGVHQVHRIDUWLFXODWHGORFXWLRQDU\DFWV DQGµPHDQLQJV¶RUµVHQVHV¶WKDWDUHVRPHKRZ KHOGLQWKHVRXUFHODQJXDJHDQGDUHSRWHQWLDOO\VXEMHFWWRPHGLDWLRQZLWKWKHKHOSRIUHDVRQLQJRU XQGHUVWDQGLQJ6HHQLQWKHVHWHUPVWKHFRQFHSWRIWUDQVODWDELOLW\PD\RSHUDWHLQDWOHDVWWKUHHZD\V D )RUWKHUDWLRQDOLVWPHDQLQJVµLGHDV¶RUVRPHWLPHVµVWUXFWXUHV¶ DUHXQLYHUVDODQGDUHWKXVJHQHUDOO\ WUDQVODWDEOHLQWRWKHLUYDULRXVODQJXDJHVSHFLILFUHSUHVHQWDWLRQV7KHUHODWLRQEHWZHHQWKLQNLQJPHDQLQJV DVLGHDV DQGVSHDNLQJWKHUHSUHVHQWDWLRQRIPHDQLQJV LVWKXVKHOGWREHORRVH E )RUWKHUHODWLYLVWWKLQNLQJDQGVSHDNLQJDUHPRUHWLJKWO\ERXQGWRJHWKHU:LOKHOPYRQ+XPEROGWIRU H[DPSOHVDZHDFKODQJXDJHDVHPERG\LQJDZD\RIWKLQNLQJ



3DJH

DOOWUDQVODWLQJWKXVVHHPHGWREHµDQDWWHPSWDWVROYLQJDQLPSRVVLEOHWDVN¶WUDQVODWRUVZRXOGDOZD\VKDYH WRµUXQDJURXQGRQRQHRIWZRURFNVHLWKHUFOLQJLQJWRRFORVHO\WRWKHRULJLQDODWWKHH[SHQVHRIWKHWDVWH DQGODQJXDJHRIWKHLUQDWLRQRUFOLQJLQJWRRFORVHO\WRWKHVSHFLILFLW\RIWKHLUQDWLRQDWWKHH[SHQVHRIWKH RULJLQDO¶+XPEROGWYLFIII F $WKLUGDSSURDFKLVWRDFNQRZOHGJHWKDWDOWKRXJKDOOODQJXDJHVKDYHDFODLPWRLQGLYLGXDOLW\WH[WV VKRXOGVWLOOEHWUDQVODWDEOHRXWRIWKHP6&+/(,(50$&+(5DQGWKH*HUPDQ5RPDQWLFVLQJHQHUDO SRVLWHGDPHGLDWLRQEHWZHHQWKLQNLQJDQGVSHDNLQJPHDQLQJDQGH[SUHVVLRQVHH*(50$1 75$',7,21 0HDQLQJLVQHLWKHULQGLIIHUHQWWRH[SUHVVLRQQRULQVXUPRXQWDEO\WLHGWRLWPHDQLQJLV DFFHVVLEOHZLWKWKHKHOSRIPRGHVRIXQGHUVWDQGLQJWKDWZHPLJKWFDOOµVHQVH¶,QDOORZLQJWKHVHQVHWR DIIHFWµWKHV\VWHPRIFRQFHSWVDQGWKHLUVLJQVLQWKHODQJXDJH¶6FKOHLHUPDFKHU WKH WUDQVODWRUJLYHVXVDJOLPSVHRIWKHµLQFRPPHQVXUDELOLW\¶RIODQJXDJHVZKLFKLVDWRQFHFRQILUPHGDQG VROYHGLQWKHDFWRIWUDQVODWLRQ)RU6FKOHLHUPDFKHUWUDQVODWRUVDQGLQWHUSUHWHUVH[SUHVVQRWRQO\WKHVHQVH EXWDOVRWKHLUµXQGHUVWDQGLQJ¶RILWZKLFKPHDQVWKDWWKH\WDNHXSDµUHODWLRQVKLSWRODQJXDJHZKLFKLVQRW RQO\QRWFRPPRQSODFHEXWZKLFKDOORZVRQHWRH[SHULHQFHWKDWLWLVQRWHQWLUHO\IUHHO\JURZQEXWUDWKHU KDVEHHQEHQWDFURVVWRZDUGVDQXQIDPLOLDUVLPLODULW\¶LELG 7KHWUDQVODWRUWKXVLQGLFDWHVWKDWWKH VXEPLWWHGWH[WLVDWUDQVODWLRQ7KLVDSSURDFKLVFOHDUO\SHUWLQHQWIRUWKHWUDQVODWDELOLW\RIUHOLJLRXV SKLORVRSKLFDODQGOLWHUDU\WH[WV $VPXFKDVWKLVODVWFRPSDWLELOLVWKHUPHQHXWLFPLJKWVHHPWRDIILUPWUDQVODWDELOLW\LWIDLOVWRDGGUHVVFDVHVRI VHOIUHIHUHQWLDOLW\ZKHUHWKHFRQWHQWLVODQJXDJHLWVHOIDWWKHOHYHORIVWUXFWXUHDQGH[SUHVVLRQ2QHPLJKWIRU H[DPSOHPHHWDQDSSDUHQWFDVHRIXQWUDQVODWDELOLW\ZKHQDWWHPSWLQJD)UHQFKYHUVLRQRIWKHXWWHUDQFHµ7KH ILUVWZRUGRIWKLVYHU\VHQWHQFHKDVWKUHHOHWWHUV¶VLQFHWKHILUVWZRUGZLOOKDYHRQO\WZROHWWHUVLQWUDQVODWLRQ µOHSUHPLHUPRW«¶ 'HDOLQJDQDO\WLFDOO\ZLWKH[DPSOHVRIWKLVNLQG%XUJHFODLPVWKDWµWUDQVODWLRQSUHVHUYHV VHOIUHIHUHQFHLIDQGRQO\LILWGRHVQRWSUHVHUYHUHIHUHQFH¶ 7UDQVODWLRQZRXOGWKXVKDYHWRDGRSW WKHSULQFLSOHRIQHFHVVDU\VDFULILFHQRWHYHU\WKLQJLVWUDQVODWDEOH $VWKLVH[DPSOHVKRZVWKHLVVXHRIWUDQVODWDELOLW\QHHGEHEDVHGQHLWKHUXSRQVXSSRVHGXQLYHUVDOVQRUXSRQ DQ\UHIHUHQFHRUPHDQLQJFRQVLGHUHGLQGHSHQGHQWRIODQJXDJH,QKHUPHQHXWLFWHUPVLWFDQHTXDOO\UHVWXSRQ WKHJUDPPDWLFDOVWUXFWXUHDQGWKHLQYHQWRU\RIH[SUHVVLRQVWKDWFRQVWLWXWHZKDW:DOWHU%HQMDPLQ WHUPHGWKHµPRGHRILQWHQWLRQ¶$UWGHV0HLQHQV DVRSSRVHGWRµZKDWLVLQWHQGHG¶GDV*HPHLQWHV DQGWRWKH DFWRILQWHQWLRQ0HLQHQ VHH385(/$1*8$*( 2EYLRXVO\WUDQVODWLRQZLOOIRFXVVWURQJO\RQWKH V\PEROL]LQJEHFDXVHZKDWVHOIUHIHUHQWLDOWH[WVGRLVWRWXUQWKHV\PEROL]LQJLQWRWKHV\PEROL]HG ,QDVLPLODUO\FRPSDWLELOLVWDSSURDFKWKHSULQFLSOHRIWUDQVODWDELOLW\PD\EHDGYRFDWHGE\PDNLQJRXUVWDUWLQJ SRLQWWKHDQDO\VLVRIWH[WVRUVSHHFKSDUROH UDWKHUWKDQODQJXDJHV\VWHPVODQJXHV VHH.ROOHU± 7UDQVODWLRQGHSHQGVWRDFHUWDLQGHJUHHRQWKHLQFRPPHQVXUDELOLW\EHWZHHQWZRODQJXDJHVDVLWVFRQGLWLRQQRW RQO\DVLWVSUREOHP&RVHULXUHFRJQL]HVWKLVLQVWHDGRIGLVFXVVLQJWUDQVODWDELOLW\PHUHO\RQWKHOHYHORIWKH VLJQLILFDWLRQV%HGHXWXQJHQ IRXQGLQRQHODQJXDJHDQGQRWLQWKHRWKHUDVLVRIWHQGRQHKHORRNVDWWKH UHIHUHQFHV%H]HLFKQXQJHQ DQGVHQVH6LQQ GHWHUPLQHGE\SDUWLFXODUWH[WV,QDWH[WRQVZLPPLQJIRU H[DPSOHWKH(QJOLVKSKUDVHµ,¶PRXWRIP\GHSWK¶FDQKDYHWKHVDPHUHIHUHQFHDVWKH)UHQFKµ-¶DLSHUGX SLHG¶µ,¶YHORVWP\IRRWLQJ¶ GHVSLWHWKHYHU\GLIIHUHQWODQJXDJHVSHFLILFVLJQLILFDWLRQV)XUWKHULQDWH[WRQ LQWHOOHFWXDOLQDGHTXDF\UDWKHUWKDQVZLPPLQJWKH(QJOLVKSKUDVHPD\DFWXDOO\KDYHWKHVHQVHRIµ,GRQ¶W XQGHUVWDQGDWKLQJ¶ZKLFKFRXOGEHUHQGHUHGLQWR)UHQFKDVµ&¶HVWDXGHVVXVGHPHVIRUFHV¶µ,W¶VEH\RQG PH¶ RUHYHQµ-HQDJH¶µ,¶PVZLPPLQJLW¶VWRRELJIRUPH¶ )RU&RVHULXWKHWDVNRIDWUDQVODWLRQLVµWR UHSURGXFHWKHVDPHUHIHUHQFHDQGWKHVDPHVHQVHZLWKWKHPHDQVSURSHUO\VSHDNLQJZLWKWKHVLJQLILFDWLRQV RIDQRWKHUODQJXDJH¶WUDQVODWHG 7KLVPLJKWHIIHFWLYHO\VROYHWKHSUREOHPRIODQJXDJHVSHFLILF FRQWHQWWKH



3DJH

REMHFWVRIWUDQVODWLRQDUHQRWODQJXDJHVSHFLILFEXWWH[WXDOLELG :KDWUHPDLQVGLVSXWDEOHWKRXJKLV ZKHWKHUWH[WXDOFRQWHQWLQDOOFDVHVKDVWREHRIDW\SHWKDWPHUHO\XVHVVLJQLILFDWLRQVWRFRPPXQLFDWH UHIHUHQFHDQGVHQVH5HOLJLRXVPHWDSK\VLFDODQGSRHWLFWH[WVVHHPWRWDONDERXWVLJQLILFDWLRQVE\PHDQVRI UHIHUHQFHVRUDERXWVHQVHE\PHDQVRIVLJQLILFDWLRQVSHUKDSVQRWGLVPLVVLQJDVJUDWXLWRXVWKHLGHDWKDWRQHFDQ VRPHKRZSRVVHVVDGHSWKLQ(QJOLVKRUWKDWVZLPPLQJFDQLPSO\DODFNRIFRQWUROLQ)UHQFK8QGHUVXFK FLUFXPVWDQFHVWKHSUREOHPRIODQJXDJHVSHFLILFFRQWHQWGRHVLQGHHGFRPHWRWKHIRUH 7KHLVVXHVRIUHIHUHQFHDQGVHQVHPD\WKXVEHXVHGWRUDLVHREMHFWLRQVWRWKHQRWLRQRIWUDQVODWDELOLW\,IRQH IROORZV4XLQH LQFKRRVLQJDEHKDYLRXULVWIUDPHZRUNLQWKHHPSLULFLVWWUDGLWLRQWKHLGHDWKDWUHIHUHQFH DQGVHQVHLQQDWXUDOODQJXDJHVDUHVXIILFLHQWO\ZHOOGHILQHGE\WKHPHDQLQJKHUHXQGHUVWRRGDVVWLPXOXV PHDQLQJVHH$1$/<7,&$/3+,/2623+<$1'75$16/$7,21 GRHVQRWJXDUDQWHHLQYDULDQFHRIWKH FRQWHQWLQWUDQVODWLRQ$FFRUGLQJWR4XLQHWKHPRVWZHFDQFODLPLVWKDWRFFDVLRQVHQWHQFHV²VHQWHQFHV SURGXFHGXQGHUWKHVDPHVLWXDWLRQDOFRQGLWLRQVDQGFLUFXPVWDQFHVZLWKRXWµFROODWHUDOLQIRUPDWLRQ¶²FDQEH WUDQVODWHGZLWKUHODWLYHUHOLDELOLW\VWDQGLQJVHQWHQFHVVHQWHQFHVHPEHGGHGLQDQGGHSHQGLQJRQDVSHFLILF VLWXDWLRQ RQWKHRWKHUKDQGRQO\VHHPWUDQVODWDEOHGXHWRFRQWLQJHQWKLVWRULFDOFLUFXPVWDQFHVRIILOLDWLRQDQG FRQWDFWEHWZHHQODQJXDJHVREVHUYDWLRQVHQWHQFHVOLHEHWZHHQWKHVHWZRH[WUHPHVZKLOHRQO\ORJLFDO FRQQHFWLYHVDUHZLWKRXWDQ\GRXEWWUDQVODWDEOHLELG± ,IZHIROORZ4XLQHLQLQWHUSUHWLQJ µLQGHWHUPLQDF\¶DVXQGHUGHWHUPLQDWLRQLELGII ZHZRXOGKDYHWRTXHVWLRQWKHQRWLRQRIWUDQVODWDELOLW\ UDGLFDOO\+RZHYHURQHPLJKWDOVRDVNLIODQJXDJHVXIIHUVQRWIURPXQGHUGHWHUPLQDWLRQEXWIURP RYHUGHWHUPLQDWLRQSDUWLFXODUO\LQWKH)UHXGLDQVHQVHRIFRQGHQVDWLRQRUDPELJXL]DWLRQ7KHODWWHUSHUVSHFWLYH RSHQVXSSUREOHPVWKDWDQDO\WLFDODSSURDFKHVKDYH\HWWRUHODWHWRWUDQVODWDELOLW\LQDQ\FOHDUZD\

7UDQVODWDELOLW\DVDG\QDPLFFDWHJRU\ ,QVWHDGRIDVNLQJZKDWLVWUDQVODWDEOHRQHPLJKWDOVRDVNZKDWNLQGRIWUDQVODWLRQVDWLVILHVFULWHULDRI WUDQVODWDELOLW\5RPDQ-DNREVRQ LVODUJHO\LQIDYRXURIWUDQVODWDELOLW\EHFDXVHKHVHHVWUDQVODWLRQDV RSHUDWLQJZLWKLQODQJXDJHVDVZHOODVEHWZHHQWKHPDQGEHWZHHQGLIIHUHQWVHPLRWLFV\VWHPV µHTXLYDOHQFHLQ GLIIHUHQFH¶LVWKXVGHVFULEHGDVWKHEDVLFSUREOHPµRIHYHU\ODQJXDJH¶LELG 7RDGDSWWKHVLPSOHVWRI -DNREVRQ¶VH[DPSOHVWKHWHUPFKHHVHZRXOGVHHPWREHXQWUDQVODWDEOHLQWRDFXOWXUHWKDWKDVKDGQR H[SHULHQFHRIFKHHVH\HWDV-DNREVRQSRLQWVRXWWKHWHUPFDQEHUHQGHUHGDVµFRDJXODWHGPLONFXUGV¶WKXV H[SODLQLQJWKHPHDQLQJDQGSHUKDSVDOORZLQJFKHHVHWREHSURGXFHG7UDQVODWLRQEHWZHHQODQJXDJHVGUDZVRQ WKHVDPHSURFHGXUHVWKDWDUHXVHGLQWUDOLQJXDOO\DQGLQWHUVHPLRWLFDOO\IRUH[DPSOHWRSURFHHGIURPOHVVWR PRUHGHYHORSHGH[SUHVVLRQVWRILOOJDSVLQWKHOH[LFDOLQYHQWRU\RULQWKHJUDPPDWLFDOVWUXFWXUHRUWRGHOLYHU LQIRUPDWLRQWKDWLVPDGHREOLJDWRU\E\WKHJUDPPDURIDSDUWLFXODUODQJXDJHVHH6(0,27,&$3352$&+(6 6LQFHLWFOHDUO\DGPLWVSDUDSKUDVHDVDOHJLWLPDWHSURFHGXUH-DNREVRQ¶VG\QDPLFWUDQVODWDELOLW\UHTXLUHVD ORRVHUDWKHUWKDQVWULFWQRWLRQRIµWUDQVODWLRQ¶ZKHUHDVVWDWLFWUDQVODWDELOLW\WXUQVRQORRVHDQGVWULFWUHODWLRQV EHWZHHQPHDQLQJDQGH[SUHVVLRQ ,WDOVRKLQJHVRQDG\QDPLFYLHZRIQDWXUDOODQJXDJHVDVHYROYLQJHQWLWLHV IRU-DNREVRQµODQJXDJHVGLIIHUHVVHQWLDOO\LQZKDWWKH\PXVWFRQYH\DQGQRWLQZKDWWKH\FDQFRQYH\¶LELG 2WKHUVKDYHDUJXHGDORQJWKHVDPHOLQHV+MHOPVOHYSURSRVHVWKDWµDODQJXDJHLVDVHPLRWLFLQWRZKLFK DOORWKHUVHPLRWLFVPD\EHWUDQVODWHG¶VLQFHµLQDODQJXDJHDQGRQO\LQDODQJXDJHFDQZH³ZRUNRYHUWKH LQH[SUHVVLEOHXQWLOLWLVH[SUHVVHG¶´ 7KHLGHDPD\DOVREHDSSOLHGWRFHUWDLQOHYHOVRI ODQJXDJH7DUVNLVWDWHVWKDWµDFKDUDFWHULVWLFIHDWXUHRIFROORTXLDOODQJXDJHLQFRQWUDVWWRYDULRXVVFLHQWLILF ODQJXDJHV LVLWVXQLYHUVDOLW\LWZRXOGQRWEHLQKDUPRQ\ZLWKWKHVSLULWRIWKLVODQJXDJHLILQVRPHRWKHU ODQJXDJHDZRUGRFFXUUHGZKLFKFRXOGQRWEHWUDQVODWHGLQWRLW¶ 3HUKDSVWKHVLPSOHVWH[SUHVVLRQRI WKLVWKRXJKWLV.DW]¶VµSULQFLSOHRIHIIDELOLW\¶ZKLFKVWDWHVWKDWµHDFKSURSRVLWLRQFDQEHH[SUHVVHGE\VRPH VHQWHQFHLQDQ\QDWXUDOODQJXDJH¶ 1RWVXUSULVLQJO\.DW]GHVFULEHVWUDQVODWLRQLQWHUPVRIµSDUWLDO V\QRQ\P\¶ZKLFKLQFOXGHVSDUDSKUDVHDQGGRHV



3DJH

QRWUHFRJQL]HDQ\UHVWULFWLRQRQWDUJHWWH[WOHQJWKLELG± $OOWKHVHIRUPXODWLRQVXVHWKHPRGDOFDQWKH\VHHWUDQVODWLRQLQWHUPVRIZKDWLVDEVROXWHO\SRVVLEOHRU LPSRVVLEOH)URPWKLVSHUVSHFWLYHLIVRPHWKLQJLVQRWWUDQVODWDEOHKHUHDQGQRZLQWKHSDUWLFXODUWUDQVODWLRQ VLWXDWLRQZHDUHORRNLQJDWLWPD\QHYHUWKHOHVVEHTXLWHWUDQVODWDEOHLQDQRWKHUWLPHDQGSODFHLQDSDVWRU IXWXUHVWDWHRIWKHWDUJHWODQJXDJHDQGFXOWXUH7KHWHUPFKHHVHZLOOEHHQWLUHO\WUDQVODWDEOHZKHQWKHWDUJHW FXOWXUHKDVSDUDSKUDVHGWKHWH[WVDQGOHDUQHGWKHWHFKQRORJ\IRUPDNLQJFKHHVHWKHXWWHUDQFHµ7KHILUVWZRUG RIWKLVYHU\VHQWHQFHKDVWKUHHOHWWHUV¶PD\EHWUDQVODWHGDVµ/HSUHPLHUPRWGHFHWWHSKUDVHDGHX[ OHWWUHV¶«µKDVWZROHWWHUV¶ LQRQHVLWXDWLRQDQGDVµ/HSUHPLHUPRWGHODSKUDVHHQDQJODLVDWURLV OHWWUHV¶«µRIWKHVHQWHQFHLQ(QJOLVKKDVWKUHHOHWWHUV¶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µZRUN RYHUWKHLQH[SUHVVLEOHXQWLOLWLVH[SUHVVHG¶$V.HHQDQSRLQWVRXWLQKLVFULWLTXHRI.DW]¶VSULQFLSOHRI HIIDELOLW\DWDUJHWODQJXDJHLQZKLFKHYHU\VHQWHQFHZHUHDWULOOLRQZRUGVFRXOGVDWLVI\WKHSULQFLSOHEXWZRXOG QRWVDWLVI\HIILFLHQWKXPDQEHKDYLRXU .HHQDQDUJXHVWKDWQDWXUDOODQJXDJHVDUHHIILFLHQWLQWKDW WKH\DUHLPSUHFLVHDQGWKDWDQ\WUDQVODWLRQKRSLQJWREHHIILFLHQWLQSUDJPDWLFWHUPVPXVWEHDFFRUGLQJO\ LPSUHFLVH2QFHDJDLQWKHNH\WRWKHGHEDWHLVWKHUHODWLYHORRVHQHVVZLWKZKLFKWKHFRQFHSWRIWUDQVODWLRQLV XVHG ,QPRUHFRPSOH[WH[WVWKHQRWLRQRIWUDQVODWDELOLW\FDQQRWEHVHSDUDWHGLQWRQHDWVWUDWHJLHVVXFKDV µGRFXPHQWDO¶RUµLQVWUXPHQWDO¶µSUHFLVLRQ¶RUµHIILFLHQF\¶ <7,&$/3+,/2623+<$1'75$16/$7,216(0,27,&$3352$&+(6

)XUWKHUUHDGLQJ %XUJH%X]]RQL&RVHULX+XQWHPDQQ-DNREVRQ.DW]



3DJH 0DOSDV6|OO7XUN

$17+21<3<0$1'+2567785.

7UDQVODWLRQVWXGLHV 7KHDFDGHPLFGLVFLSOLQHZKLFKFRQFHUQVLWVHOIZLWKWKHVWXG\RIWUDQVODWLRQKDVEHHQNQRZQE\GLIIHUHQWQDPHV DWGLIIHUHQWWLPHV6RPHVFKRODUVKDYHSURSRVHGWRUHIHUWRLWDVWKHµVFLHQFHRIWUDQVODWLRQ¶1LGD:LOVV RWKHUVDVµWUDQVODWRORJ\¶²RUµWUDGXFWRORJLH¶LQ)UHQFK*RIILQ EXWWKHPRVWZLGHO\XVHG GHVLJQDWLRQWRGD\LVµWUDQVODWLRQVWXGLHV¶,QKLVVHPLQDODUWLFOHµ7KH1DPHDQG1DWXUHRI7UDQVODWLRQ6WXGLHV¶ -DPHV+ROPHVDUJXHGIRUWKHDGRSWLRQRIµWUDQVODWLRQVWXGLHV¶µDVWKHVWDQGDUGWHUPIRUWKHGLVFLSOLQHDVD ZKROH¶ DQGRWKHUVFKRODUVKDYHVLQFHIROORZHGVXLW$WRQHWLPHWKHWHUPµWUDQVODWLRQVWXGLHV¶ LPSOLHGPRUHHPSKDVLVRQOLWHUDU\WUDQVODWLRQDQGOHVVRQRWKHUIRUPVRIWUDQVODWLRQLQFOXGLQJLQWHUSUHWLQJDV ZHOODVDODFNRILQWHUHVWLQSUDFWLFDOLVVXHVVXFKDVSHGDJRJ\EXWWKLVLVQRORQJHUWKHFDVHµ7UDQVODWLRQ VWXGLHV¶LVQRZXQGHUVWRRGWRUHIHUWRWKHDFDGHPLFGLVFLSOLQHFRQFHUQHGZLWKWKHVWXG\RIWUDQVODWLRQDWODUJH LQFOXGLQJOLWHUDU\DQGQRQOLWHUDU\WUDQVODWLRQYDULRXVIRUPVRIRUDOLQWHUSUHWLQJDVZHOODV'8%%,1*DQG 68%7,7/,1*7KHWHUPVµWUDQVODWLRQ¶DQGµWUDQVODWRUV¶DUHXVHGLQWKLVJHQHULFVHQVHWKURXJKRXWWKLVHQWU\ µ7UDQVODWLRQVWXGLHV¶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



3DJH

WH[WVIURPDQROGHUSHULRGDVRSSRVHGWRFRQWHPSRUDU\WH[WV RUSUREOHPUHVWULFWHGIRUH[DPSOHWKHRULHV GHDOLQJZLWKWKHWUDQVODWLRQRIPHWDSKRURULGLRPV $SSOLHGWUDQVODWLRQVWXGLHVWKHVHFRQGPDMRUGLYLVLRQSURSRVHGE\+ROPHVFRYHUVDFWLYLWLHVZKLFKDGGUHVV VSHFLILFSUDFWLFDODSSOLFDWLRQVPRVWQRWDEO\WUDQVODWRUWUDLQLQJWUDQVODWLRQDLGVVXFKDVGLFWLRQDULHVDQGWHUP EDQNVWUDQVODWLRQSROLF\ZKLFKLQYROYHV

)LJXUH+ROPHV¶PDSRIWUDQVODWLRQVWXGLHV

)LJXUH7RXU\¶VPDSRIWKHUHODWLRQEHWZHHQWUDQVODWLRQVWXGLHVDQGLWVDSSOLHG H[WHQVLRQV



3DJH

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µWKRXJKWKHQHHGVRIDJLYHQPRPHQWPD\YDU\DWWHQWLRQ WRDOOWKUHHEUDQFKHVLVUHTXLUHGLIWKHGLVFLSOLQHLVWRJURZDQGIORXULVK¶± ,WLVLQWHUHVWLQJWR FRPSDUHWKLVSRVLWLRQZLWKWKDWRI7RXU\ ZKHUHLWLVFOHDUWKDWDSSOLHGDFWLYLWLHVVXFKDVWUDQVODWRU WUDLQLQJDQGWUDQVODWLRQFULWLFLVPDUHQRWVHHQDVDFHQWUDOFRPSRQHQWRIWUDQVODWLRQVWXGLHVEXWUDWKHUDV µH[WHQVLRQV¶RIWKHGLVFLSOLQHVHH)LJXUH 0RUHRYHUE\FRQWUDVWWR+ROPHV¶LQVLVWHQFHRQWKHGLDOHFWLFDO UHODWLRQVKLSEHWZHHQDOOWKUHHDUHDV7RXU\VHHPVWRVHHWKHUHODWLRQVKLSEHWZHHQWKHRUHWLFDODQGGHVFULSWLYH WUDQVODWLRQVWXGLHVRQWKHRQHKDQGDQGZKDWKHFDOOVWKHµ$SSOLHG([WHQVLRQV¶RIWKHGLVFLSOLQHRQWKHRWKHUDV VWULFWO\XQLGLUHFWLRQDO

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



3DJH

WLRQ7KLVLVSDUWLFXODUO\HYLGHQWLQWKHFDVHRIDSSURDFKHVLQIRUPHGE\FXOWXUDOVWXGLHVDQGWKRVHLQIRUPHGE\ WKHZHOOHVWDEOLVKHGEXWE\QRPHDQVIODZOHVVPRGHOVGHULYHGIURPOLQJXLVWLFVVHH%DNHU ,QUHFHQW \HDUVDQXPEHURIVFKRODUVEHJDQWRWDONDERXWµWKHFXOWXUDOWXUQLQWUDQVODWLRQVWXGLHV¶%DVVQHWWDQG/HIHYHUH DQGWRDUJXHWKDWDQDSSURDFKGHULYHGIURPFXOWXUDOVWXGLHVDQGVWUHVVLQJWKHUROHRILGHRORJ\PXVW UHSODFHWKHWUDGLWLRQDOOLQJXLVWLFDOO\GHULYHGPRGHOV6XFKGLVFXVVLRQVRIWHQPLVUHSUHVHQWDQGFDULFDWXUHWKH SDUDGLJPVWKH\DWWDFNLQDZD\WKDWLVQRWQHFHVVDULO\LQWKHLQWHUHVWRIWKHGLVFLSOLQHDVDZKROH OLQJXLVWVKDYHPRYHGIURPZRUGWRWH[WDVDXQLWEXWQRWEH\RQG«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

)XUWKHUUHDGLQJ %DNHU+ROPHV7RXU\9HQXWL

021$%$.(5

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µJHQHUDWLRQV¶RILQVWLWXWLRQV 7KHIROORZLQJVXUYH\DGRSWVDQLQWHUQDWLRQDOSHUVSHFWLYHIRFXVLQJRQWKHJHQHUDWLRQVRIWUDQVODWRUWUDLQLQJ LQVWLWXWLRQVDQGDQDO\VLQJWKHGUDPDWLFULVHLQWKHLUQXPEHUVLQFHWKHPLGWZHQWLHWKFHQWXU\%ULHI FRQVLGHUDWLRQZLOODOVREHJLYHQWRWKHLQVWLWXWLRQDOORFDWLRQRIFHUWDLQSHGDJRJLFDOWUDQVODWLRQWKHRULHV

+LVWRULFDOEDFNJURXQG 7KHLQVWLWXWLRQDOWUDLQLQJRIWUDQVODWRUVDQGLQWHUSUHWHUVLVDUHODWLYHO\QHZSKHQRPHQRQDQGWDONRIKLVWRULFDO µVFKRROV¶RIWUDQVODWLRQ



3DJH

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
5LVHLQWKHPLGWZHQWLHWKFHQWXU\ $PRUHJHQHUDOLVWDSSURDFKZRXOGDSSHDUWRGDWHIURPVHYHUDO:HVWHUQ(XURSHDQLQVWLWXWLRQVWKDWZHUHPDLQO\ IRFXVHGRQLQWHUSUHWHUWUDLQLQJDQGHQMR\HGDODUJHGHJUHHRILQGHSHQGHQFHZLWKUHVSHFWWRQRQYRFDWLRQDO XQLYHUVLW\VWUXFWXUHV6XFKLQVWLWXWHVZHUH



3DJH

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e'e5$7,21 ,17(51$7,21$/('(675$'8&7(856),7 LQ3DULVLQWKHeFROH6XSpULHXUHG¶,QWHUSUqWHVHWGH 7UDGXFWHXUV(6,7 DQGWKH,QVWLWXW6XSpULHXUG¶,QWHUSUpWDWLRQHWGH7UDGXFWLRQ,6,7 ZHUHERWKVHWXSLQ3DULV LQ7KHVHLQVWLWXWHVSULYLOHJHGLQWHUSUHWLQJSDUWLFXODUO\FRQIHUHQFHLQWHUSUHWLQJZKLFKZDVWKHKLJK SURILOHIDFHRIWKHSURIHVVLRQ 1RWZKROO\E\FKDQFHWKH)UHQFKODQJXDJHWKHQGRPLQDWHGWKHILUVWLQWHUQDWLRQDOQHWZRUNRILQVWLWXWLRQVWKH &RQIpUHQFH,QWHUQDWLRQDOHGHV,QVWLWXWV8QLYHUVLWDLUHVGH7UDGXFWHXUVHW,QWHUSUqWHV&,87, ZKLFKPHW LQIRUPDOO\IURPDQGZDVHVWDEOLVKHGRIILFLDOO\LQDWWKHLQLWLDWLYHRIWKHLQVWLWXWLRQVLQ*HQHYD +HLGHOEHUJ*HUPHUVKHLP3DULV(6,7 6DDUEUFNHQ7ULHVWHDQG9LHQQD7KHRVWHQVLEOHDLPRIWKH&,87, ZDVWRHQVXUHWKHTXDOLW\RIJUDGXDWHVIURPLWVPHPEHULQVWLWXWLRQV


3DJH

GHSDUWPHQWV7KHUHVXOWKDVEHHQFRQVLGHUDEOHWKHRUHWLFDOGHEDWHDQGRFFDVLRQDOEDODQFLQJDFWVEHWZHHQWKH WHFKQLFDOOLQJXLVWLFWUDGLWLRQDQGDSXUSRVHRULHQWHGSUDJPDWLVP2QHRXWFRPHZRXOGDSSHDUWREHWKH*HUPDQ WKHRULHVWKDWQRZHQYLVDJHDQH[WHQVLRQRIWKHWUDQVODWRU¶VUROHLQWRJHQHUDOLQWHUFXOWXUDOH[SHUWLVHRU FRQVXOWLQJIXQFWLRQVVHH$&7,217+(25<2)µ75$16/$725,$/$&7,21¶ VLQFHWKLVLVDQHIIHFWLYH ZD\RIMXVWLI\LQJDIRXU\HDUVWUXFWXUHWKDWRVWHQVLEO\H[FOXGHVODQJXDJHOHDUQLQJ7KHSUHVWLJLRXV)UHQFK LQVWLWXWLRQVZKLFKVWLOOKDYHVHFRQGF\FOHSURJUDPPHVFRQWLQXHWRSURPRWHDPRUHUHVWULFWLYHYLVLRQRIWKH LQWHUSUHWHUWUDQVODWRU¶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¶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



3DJH

)LJXUH7UDQVODWRUWUDLQLQJLQVWLWXWLRQVIUHTXHQF\RIFUHDWLRQRYHUILYH\HDU SHULRGVVDPSOHRILQVWLWXWLRQVIURPDOOFRXQWULHV

WUDQVODWLRQVWXGLHVRFFDVLRQDOO\DVVRFLDWHGZLWKXQLYHUVLW\GHSDUWPHQWVRIOLQJXLVWLFVRUFRPSDUDWLYHOLWHUDWXUH 7KHYHU\GLVFLSOLQHVWKDWKDGEHHQGLVWDQFHGLQWKHKHURLFGD\VRIWUDQVODWRUWUDLQLQJQRZWHQGWREHLQWHJUDWHG LQWRDOOHPEUDFLQJWKHRULHVDQGSHGDJRJLFDODSSURDFKHVWKHRULVWVWKXVVWUHVVWKHYDULHW\RISHUVSHFWLYHVWKDW FDQEHEURXJKWWREHDURQWUDQVODWRUWUDLQLQJ 7KHUDSLGLQVWLWXWLRQDOH[SDQVLRQLQWUDQVODWRUWUDLQLQJKDVSURYLGHGDGHPDQGIRUSXEOLFDWLRQVDQGDFDGHPLF MREVDWDWLPHRIUHODWLYHVWDJQDWLRQZLWKLQRWKHUXQLYHUVLW\GHSDUWPHQWVHVSHFLDOO\WKRVHRIFRPSDUDWLYH OLWHUDWXUH9DULRXVOLWHUDU\WKHRULVWVKDYHFRQVHTXHQWO\WDNHQDFXOWXUDOWXUQWRZDUGVWUDQVODWLRQVRPHWLPHV ZLWKWKHSUHWHQFHRIOLEHUDWLQJWUDQVODWRUVIURPH[SORLWLYHLGHRORJLHVPRUHRIWHQFODLPLQJWKDWWUDQVODWLRQ VWXGLHVVKRXOGKDYHURRPIRUWKHPWRR,QLQVWLWXWLRQDOWHUPVWKHSULPDU\FKDQJHKDVQHYHUWKHOHVVEHHQWKH PDVVLYHJURZWKLQWUDQVODWRUWUDLQLQJUDWKHUWKDQLQWUDQVODWLRQWKHRU\ 7KHODUJHHVWDEOLVKHGWUDQVODWRUWUDLQLQJLQVWLWXWLRQVKDYHRFFDVLRQDOO\DGDSWHGWRWKHVHFKDQJHV,QVHHNLQJD JUHDWHUGHJUHHRIPRGXODUL]DWLRQEDVLFDOO\E\EUHDNLQJORQJGHJUHHSURJUDPPHVLQWRVKRUWHUGLSORPD SURJUDPPHV VRPHKDYHFRXQWHUHGWKHULJLGLW\DQGKLJKDWWULWLRQUDWHVWKDWHQVXHIURPKDYLQJYDVWQXPEHUVRI VWXGHQWVXQGHUWDNHIRXU\HDUEORFNV,QHIIHFWVXFKPRGXODUL]DWLRQPD\KDYHKHOSHGWKHODUJHLQVWLWXWLRQV IXQFWLRQOLNHWKHVPDOOHUDQGVKRUWHUSURJUDPPHVW\SLFDORIWKHHDUO\V 7KHUHUHPDLQVKRZHYHUDVHULRXVFRQFHUQZLWKSURIHVVLRQDOVWDQGDUGV,QRUGHUWRSURWHFWWKHTXDOLW\RIWKHLU JUDGXDWHVHVWDEOLVKHGLQVWLWXWLRQVWHQGWRDVVRFLDWHWKHQHZHUSURJUDPPHVZLWKDFHUWDLQODFNRIFRPSHWHQFH RFFDVLRQDOO\DFFXVLQJWKHPRIWHDFKLQJODQJXDJHVLQVWHDGRIWUDQVODWLRQRIHQJDJLQJLQLGOHWKHRU\RURI VLPSO\IROORZLQJIDVKLRQ$OWKRXJKVRPHRIWKHVHDFFXVDWLRQVDUHXQGRXEWHGO\WUXHWKHTXHVWLRQRIVWDQGDUGV LVE\QRPHDQVFOHDUFXW)URPWKH&RQIHUHQFH,QWHUSUHWLQJ6HUYLFHRIWKH(XURSHDQ&RPPLVVLRQKDV EHHQWUDLQLQJLWVRZQLQWHUSUHWHUVDQGSURIHVVLRQDOWUDQVODWRUVDQGLQWHUSUHWHUVFDQVWLOOHDVLO\JHWE\ZLWKRXW DQ\GHJUHHLQWUDQVODWLRQ)XUWKHUTXDOLW\FRQWUROLQVWLWXWLRQVKDYHPRUHUHFHQWO\EHHQFUHDWHGRQ



3DJH

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¶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oRQ)UDQFH 3HUWK$XVWUDOLD 5XWJHUV0LVVRXULDQG'HODZDUHWKH8QLWHG6WDWHV DV ZHOODVWKHDEROLWLRQRIQRQYRFDWLRQDOWUDQVODWLRQVWXGLHVLQ$PVWHUGDPDQGVHULRXVWKUHDWVWRWKH6DDUEUFNHQ LQVWLWXWH0RUHVLJQLILFDQWO\GHWDLOHGDQDO\VLVVXJJHVWVWKDWWKHJOREDOH[SDQVLRQRIWKHODWHVPD\KDYH SHDNHGLQ±7KHERRPFRXOGKDYHEHHQEDVHGRQDHXSKRULFSURMHFWLRQRIPDUNHWGHPDQGVUDWKHUWKDQ RQWKHUHDOFUHDWLRQRIORQJWHUPIXOOWLPHHPSOR\PHQWIRUWUDQVODWRUVDQGLQWHUSUHWHUV 6HHDOVR ','$&7,&62)75$16/$7,21

)XUWKHUUHDGLQJ $UMRQD7VHQJ&DPLQDGHDQG3\P'HOLVOHDQG:RRGZRUWKDE*LOHE*ROG+DUULV IRUWKFRPLQJ3DUN6,,76XUYH\VRILQGLYLGXDOSURJUDPPHVDSSHDUUHJXODUO\LQWKHMRXUQDOV/DQJXDJH ,QWHUQDWLRQDODQG7KH7UDQVODWRU

021,48(&$0,1$'($1'$17+21<3<0



3DJH

8 8QLWRIWUDQVODWLRQ &RQVLGHUHGIURPDSURFHVVRULHQWHGSRLQWRIYLHZWKHXQLWRIWUDQVODWLRQLVWKHVWUHWFKRIVRXUFHWH[WRQZKLFK WKHWUDQVODWRUIRFXVHVDWWHQWLRQLQRUGHUWRUHSUHVHQWLWDVDZKROHLQWKHWDUJHWODQJXDJH/|UVFKHU ,W LVSRVVLEOHWRLVRODWHVXFKXQLWVXVLQJVHOIUHSRUWVE\WUDQVODWLQJVXEMHFWVVRFDOOHG7+,1.$/28' 35272&2/6(ULFVVRQDQG6LPRQ 8VLQJWKLVPHWKRG/|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µVHQVHIRUVHQVH¶LVPRVWOLNHO\WRUHODWHWRWUDQVODWLRQµVWUXFWXUHE\VWUXFWXUH¶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¶V(QJOLVKWUDQVODWLRQ JLYHVµ,ZRXOG UDWKHUEHWUXO\LOOWKDQVXIIHUIURPDWULIOLQJFROGOLNHWKLV(YHQWKHPRVWSHUVLVWHQWOLWHUDOLVWZRXOGEHXQOLNHO\ WRDGYRFDWHWKHSURGXFWLRQRIWH[WVZKLFKZRXOGSUHVHQWUHDGHUVZLWKVXFKVHYHUHGLIILFXOWLHVDVWKRVH LOOXVWUDWHGE\7DLUD¶VZRUGIRUZRUGUHQGHULQJEHORZ7KHGHEDWHLVUDWKHUEHWZHHQWUDQVODWLRQZKLFK UHSURGXFHVDV



3DJH -DSDQHVH67

7DLE\RR

ZD

LL

JD

FKRWWRVKLWD

:RUGIRUZRUG

VHULRXVLOOQHVV

7+(0(

ILQH

EXW

WULIOLQJ

-DSDQHVH67

ND]HQDGR

ZD

NDHWWH

L\DQD

PRQR

:RUGIRUZRUG

FROGHWF

7+(0(

LQVWHDG

GLVDJUHHDEOH

WKLQJ

-DSDQHVH67

GHVX

QH

:RUGIRUZRUG

$8;,/,$5<

6(17(1&(),1$/3$57,&/(

FORVHO\DVSRVVLEOHWKHOLWHUDOVXUIDFHPHDQLQJRIWKHRULJLQDODQGWUDQVODWLRQZKLFKLVIUHHULQWKHVHQVHWKDW WKHWUDQVODWRULQWHUSUHWVWKHVRXUFHWH[WDQGUHQGHUVFHUWDLQDVSHFWVRIKLVRUKHULQWHUSUHWDWLRQLQWKHWDUJHWWH[W LQDGGLWLRQWRRULQVWHDGRIWKHOLWHUDOVXUIDFHPHDQLQJVHH)5((75$16/$7,21/,7(5$/ 75$16/$7,21 +RZHYHURQH¶VVWDQFHRQWKHOLWHUDOIUHHWUDQVODWLRQGHEDWHZLOOQRWPDWHULDOO\DIIHFWWKHXQLWRIWUDQVODWLRQDV GHILQHGDERYHEHFDXVHWKHQHHGWRVHOHFWDUHDVRQDEO\VL]HGSRUWLRQRIWKHWH[WIRUDWWHQWLRQDOIRFXVDWDQ\RQH WLPHLVWKHVDPHZKHWKHURQHFRQVLGHUVWKLVSRUWLRQDVWUXFWXUHDQGFDOOVLWIRULQVWDQFHDFODXVHRUZKHWKHU RQHFRQVLGHUVLWDVHQVHXQLWDQGFDOOVLWIRULQVWDQFHDSURSRVLWLRQDQLGHDXQLWRUDVHQVHXQLW7KHSRLQWLV WKDWµPHDQLQJ¶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µJRRG GD\¶YHQOLJKLOVHQµIULHQGO\JUHHWLQJ¶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



3DJH

)LQDOO\LWQHHGVWREHVWUHVVHGWKDWPRPHQWDU\DWWHQWLRQWRXQLWVRIIDLUO\IL[HGVL]HVGXULQJWUDQVODWLQJDQG GXULQJFRPSDULVRQRIVRXUFHDQGWDUJHWWH[WVGRHVQRWSUHFOXGHWKHWUDQVODWRURUDQDO\VWIURPFRQVLGHULQJWKH WH[WDVDZKROH7KHWUDQVODWRUZLOOEHLQIOXHQFHGE\KLVRUKHUIDPLOLDULW\ZLWKWKHWH[WDVDZKROHDVZHOODV ZLWKODQJXDJHVDQGFXOWXUHVJHQUHFRQYHQWLRQVDQGSHUKDSVRWKHUZRUNVE\WKHVRXUFHWH[WZULWHULQPDNLQJ GHFLVLRQVDERXWHTXLYDOHQFHZLWKLQWKHXQLWVVKHLVWUDQVODWLQJHYHQWKRXJKLQWKHDFWXDOWUDQVODWLQJSURFHVV WKHVHXQLWVDUHFRQVLGHUHGRQHDWDWLPH6HOHFWLYHDWWHQWLRQGRHVQRWPHDQDWWHQWLRQWRXQLWVLQLVRODWLRQIURP WKHUHVWRIWKHOLQJXLVWLFFXOWXUDORUWH[WXDOZRUOGLQZKLFKWKHXQLWVDUHVLWXDWHG 6HHDOVR 6+,)762)75$16/$7,21

)XUWKHUUHDGLQJ &DWIRUG,VKDPDQG/DQH/|UVFKHUD7RXU\

.,567(10$/0.-5

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

6LPSOLILFDWLRQDQGDYRLGDQFHRIUHSHWLWLRQVSUHVHQWLQWKHVRXUFHWH[W 7KUHHW\SHVRIVLPSOLILFDWLRQKDYHEHHQLGHQWLILHGLQWUDQVODWHGWH[WOH[LFDOV\QWDFWLFDQGVW\OLVWLF %OXP.XONDDQG/HYHQVWRQGHILQHOH[LFDOVLPSOLILFDWLRQDVµWKHSURFHVVDQGRUUHVXOWRIPDNLQJGRZLWKOHVV ZRUGV¶ 'UDZLQJRQHYLGHQFHIURPVWXGLHVRIWUDQVODWLRQVIURP+HEUHZLQWR(QJOLVKDQG LQYHVWLJDWLRQVRIRWKHUW\SHVRIODQJXDJHPHGLDWLRQLQYROYLQJWKHVHODQJXDJHV'DJXW5DELQ :RQGHUO\ WKH\VXJJHVWWKDWOH[LFDOVLPSOLILFDWLRQRSHUDWHVDFFRUGLQJWRVL[SULQFLSOHVRUVWUDWHJLHV ZKLFKGHULYHIURPWKHLQGLYLGXDO¶VVHPDQWLFFRPSHWHQFHLQKLVKHUPRWKHUWRQJXH7KHVHSULQFLSOHVDUHXVHRI VXSHURUGLQDWHWHUPVZKHQWKHUHDUHQRHTXLYDOHQWK\SRQ\PVLQWKHWDUJHWODQJXDJHDSSUR[LPDWLRQRIWKH FRQFHSWVH[SUHVVHGLQWKHVRXUFHODQJXDJHWH[WXVHRIµFRPPRQOHYHO¶RUµIDPLOLDU¶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± VLPLODUO\PHQWLRQVWKHXVHRIPRGHUQFROORTXLDO VLPSOHDQGFRQILGHQWLDOV\QRQ\PVYLVjYLVROGIRUPDODIIHFWHGDQGKLJKOHYHOZRUGVLQWKHVRXUFHWH[WV 7RXU\SURYLGHVDQH[DPSOHRIWKHW\SHRIWUDQVIHUQRWHGE\%OXP.XONDDQG/HYHQVWRQZKHQKHGLVFXVVHVWKH FDVHRIWKHZRUGQD¶DUDZKLFKLQ+HEUHZUHIHUVPDLQO\WRDWHHQDJHUEXWZKLFKLQ+HEUHZWUDQVODWLRQVIURP (QJOLVKKDVDFTXLUHGVRPHRIWKHIXQFWLRQVRIWKHZRUGJLUO7RXU\± :LWKUHJDUGWRV\QWDFWLFVLPSOLILFDWLRQ9DQGHUDXZHUD ILQGVVHYHUDOLQVWDQFHVZKHUHFRPSOH[V\QWD[LV VLPSOLILHGE\UHSODFLQJQRQILQLWHFODXVHVZLWKILQLWHRQHVDQGE\VXSSUHVVLQJVXVSHQGHGSHULRGV6KHDOVR SURYLGHVVXEVWDQWLDOHYLGHQFHIRUYDULRXVIRUPVRIVW\OLVWLFVLPSOLILFDWLRQWKHPRVWFRPPRQ



3DJH

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µRQHRIWKHPRVWSHUVLVWHQWXQEHQGLQJQRUPVLQWUDQVODWLRQLQDOOODQJXDJHVVWXGLHGVRIDU¶

([SOLFLWDWLRQ ,QKHUVWXG\RISURIHVVLRQDODQGQRQSURIHVVLRQDOWUDQVODWLRQVIURP(QJOLVKLQWR)UHQFKDQGYLFHYHUVD%OXP .XOND QRWHVWKDWVKLIWVRFFXULQWKHW\SHVRIFRKHVLRQPDUNHUVXVHGLQWKHWDUJHWWH[WVDQGUHFRUGV LQVWDQFHVZKHUHWKHWUDQVODWRUH[SDQGVWKHWDUJHWWH[WE\LQVHUWLQJDGGLWLRQDOZRUGV6KHQRWHVWKDWERWK SKHQRPHQDKDYHWKHHIIHFWRIUDLVLQJWKHWDUJHWWH[W¶VOHYHORIH[SOLFLWQHVVFRPSDUHGWRWKHFRUUHVSRQGLQJ VRXUFHWH[W%OXP.XONDVXJJHVWVWKDWWKHVHWUDQVODWLRQDOIHDWXUHVPD\QRWEHODQJXDJHSDLUVSHFLILFEXWPD\ UDWKHUUHVXOWIURPWKHSURFHVVRILQWHUSUHWDWLRQRIWKHVRXUFHWH[W2QWKHEDVLVRIKHURZQVWXG\DQGUHVHDUFK LQWRWKHLQWHUODQJXDJHRIOHDUQHUVRI(QJOLVK%HUPDQ6WHPPHU %OXP.XOND SXWV IRUZDUGµWKHH[SOLFLWDWLRQK\SRWKHVLV¶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¶VREVHUYDWLRQV9DQGHUDXZHUD SRLQWVWRQXPHURXVLQVWDQFHVZKHUHWKH WUDQVODWRUDSSOLHVH[SOLFLWDWLRQWHFKQLTXHV7KHPDLQSURFHGXUHVVKHUHFRUGVDUHWKHXVHRILQWHUMHFWLRQVWR H[SUHVVPRUHFOHDUO\WKHSURJUHVVLRQRIWKHFKDUDFWHUV¶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± DQGIURP(QJOLVKLQWR+HEUHZ6KOHVLQJHU $FFRUGLQJWR6KOHVLQJHUWKHVHILQGLQJVVXJJHVW WKDWµWKHPHGLXP²VLPXOWDQHRXVLQWHUSUHWLQJ²PD\H[HUWDVWURQJHUHIIHFWWKDQWKHVW\OLVWLFSUHIHUHQFHVW\SLFDO RIWKHODQJXDJHVFRQFHUQHG¶DQGWKDWWKHH[SOLFLWDWLRQK\SRWKHVLVPD\DSSO\WRRUDODVZHOODVZULWWHQ WUDQVODWLRQVVRWKDWµUHJDUGOHVVRIWKHODQJXDJHVFRQFHUQHGWKHLQWHUSUHWHUWHQGVWRUHQGHULPSOLFLWIRUPVPRUH H[SOLFLWO\¶6KOHVLQJHU

1RUPDOL]DWLRQ ,QKHUFRUSXVRIQRYHOVWUDQVODWHGLQWR(QJOLVKIURP'XWFK9DQGHUDXZHUD ILQGVH[WHQVLYHHYLGHQFHRI VKLIWVLQSXQFWXDWLRQOH[LFDOFKRLFHVW\OHVHQWHQFHVWUXFWXUHDQGWH[WXDORUJDQL]DWLRQDOORIZKLFKVKH FRQVLGHUVDVPDQLIHVWDWLRQVRIDJHQHUDOµWHQGHQF\WRZDUGVWH[WXDOFRQYHQWLRQDOLW\¶DSSDUHQWO\DSSURYHGRIE\ WKHWDUJHWDXGLHQFH



3DJH

6RPHRIWKHDGMXVWPHQWVIRXQGDWZRUGOHYHOLQFOXGHDGDSWDWLRQVRI'XWFKQDPHVDQGFXOWXUHVSHFLILF UHIHUHQFHVDQGWKHPLQLPL]DWLRQRIWKHWUDQVIHURIIRUHLJQODQJXDJHH[SUHVVLRQVIRXQGLQWKHVRXUFHWH[W 8QXVXDOSXQFWXDWLRQLVVWDQGDUGL]HGE\UHVWRULQJPLVVLQJTXRWDWLRQPDUNVRUE\UHSODFLQJFRPPDVZLWKVHPL FRORQVDQGIXOOVWRSVWRVHSDUDWHLQGHSHQGHQWFODXVHV6HQWHQFHVOHIWXQILQLVKHGLQWKHVRXUFHWH[WDUH FRPSOHWHGDQGFOXPV\RULGLRV\QFUDWLFVHQWHQFHVWUXFWXUHVDUHUHSODFHGE\VLPSOHUV\QWD[7KHSUHVHQWWHQVH DQGWKHKLVWRULFSUHVHQWDUHVXEVWLWXWHGZLWKWKHSDVWWHQVHZKLFKLVPRUHIUHTXHQWO\XVHGLQZULWWHQ(QJOLVK QDUUDWLYH6HQWHQFHVSDUDJUDSKVQDUUDWLYHVHTXHQFHVDQGFKDSWHUVDUHRUGHUHGPRUHORJLFDOO\7KH UHSUHVHQWDWLRQRIVSRNHQODQJXDJHLQWKHVRXUFHWH[WLVDGMXVWHGWRZDUGVWKHQRUPVRIZULWWHQSURVHRQWKH RWKHUKDQGIRUPDOGLDORJXHVDUHUHQGHUHGDVLQWLPDWHDQGFROORTXLDOFRQYHUVDWLRQV2OGIDVKLRQHGH[SUHVVLRQV DUHUHSODFHGE\PRGHUQRQHVDQGH[SHULPHQWDOQDUUDWLYHLVUHZULWWHQLQDPRUHIDPLOLDUPRGH)LQDOO\ XQW\SLFDODQGDIIHFWHGLPDJHU\ZKLFKLVUHDOL]HGE\FUHDWLYHFROORFDWLRQVLVWUDQVODWHGZLWKPRUHQRUPDO H[SUHVVLRQV $FFRUGLQJWR9DQGHUDXZHUDDOOWKHVHPDQLSXODWLRQVKDYHWKHHIIHFWRIFUHDWLQJDWH[WZKLFKLVPRUHUHDGDEOH PRUHLGLRPDWLFPRUHIDPLOLDUDQGPRUHFRKHUHQWO\RUJDQL]HGWKDQWKHRULJLQDO6KHREVHUYHVWKDWWKHVH DGMXVWPHQWVRFFXUQRWRQO\LQWKRVHWUDQVODWLRQVZKLFKDUHH[SOLFLWO\WDUJHWRULHQWHGEXWDOVRLQWKRVHZKRVH GHFODUHGDLPLVWRPDNH'XWFKOLWHUDWXUHNQRZQWRIRUHLJQFXOWXUHVDQGZKLFKPLJKWWKHUHIRUHEHH[SHFWHGWR DGKHUHPRUHFORVHO\WRWKHVRXUFHWH[W9DQGHUDXZHUDH[SODLQVWH[WXDOFRQYHQWLRQDOLW\LQWHUPVRIWKH WUDQVODWRU¶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µLQWUDQVODWLRQVRXUFHWH[WWH[WHPHVWHQGWREHFRQYHUWHGLQWRWDUJHW ODQJXDJHRUWDUJHWFXOWXUH UHSHUWRUHPHV¶7RXU\±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µWKHPRUHSHULSKHUDO>WKHVWDWXVRIWKHWUDQVODWLRQLQDSDUWLFXODUFXOWXUH@ WKHPRUHWUDQVODWLRQZLOODFFRPPRGDWHLWVHOIWRHVWDEOLVKHGPRGHOVDQGUHSHUWRLUHV¶7RXU\ 7KH QXPHURXVLQVWDQFHVRIQRUPDOL]DWLRQIRXQGE\9DQGHUDXZHUD LQWKH(QJOLVKWUDQVODWLRQVRI'XWFK OLWHUDU\ZRUNVH[HPSOLI\DQGVXEVWDQWLDWHWKHRSHUDWLRQRIWKLVUXOH

'LVFRXUVHWUDQVIHUDQGWKHODZRILQWHUIHUHQFH 7RXU\D LGHQWLILHVDIXUWKHUXQLYHUVDORIWUDQVODWLRQWUDQVODWRUVKHVXJJHVWVWHQGWRSURGXFHD WUDQVODWHGXWWHUDQFHQRWE\UHWULHYLQJWKHWDUJHWODQJXDJHYLDWKHLURZQ



3DJH

OLQJXLVWLFNQRZOHGJHEXWGLUHFWO\IURPWKHVRXUFHXWWHUDQFHLWVHOI7KHXQLYHUVDOLW\RIGLVFRXUVHWUDQVIHULV H[SUHVVHGWKURXJKDQRWKHUWUDQVODWLRQDOODZWKHODZRILQWHUIHUHQFHµLQWUDQVODWLRQSKHQRPHQDSHUWDLQLQJWR WKHPDNHXSRIWKHVRXUFHWH[WWHQGWREHWUDQVIHUUHGWRWKHWDUJHWWH[W¶7RXU\ $FFRUGLQJWR7RXU\GLVFRXUVHWUDQVIHUERWKQHJDWLYHDQGSRVLWLYHLVLQKHUHQWLQWKHPHQWDOSURFHVVHV LQYROYHGLQWUDQVODWLRQ)URPDSV\FKROLQJXLVWLFSHUVSHFWLYHWKHRSHUDWLRQRIWKLVODZGHSHQGVRQWKH SDUWLFXODUPDQQHULQZKLFKWKHVRXUFHWH[WLVSURFHVVHGVRWKDWµWKHPRUHWKHPDNHXSRIDWH[WLVWDNHQDVD IDFWRULQWKHIRUPXODWLRQRILWVWUDQVODWLRQWKHPRUHWKHWDUJHWWH[WFDQEHH[SHFWHGWRVKRZWUDFHVRI LQWHUIHUHQFH¶7RXU\ 7KHH[WHQWWRZKLFKLQWHUIHUHQFHLVDFWXDOO\UHDOL]HGGHSHQGVDOVRRQWKH SURIHVVLRQDOH[SHULHQFHRIWKHWUDQVODWRUDQGRQWKHVRFLRFXOWXUDOFRQGLWLRQVLQZKLFKDWUDQVODWLRQLVSURGXFHG DQGFRQVXPHG7KHVHWZRIDFWRUVDUHEXLOWLQWRWKHODZRILQWHUIHUHQFHDVFRQGLWLRQVVXJJHVWLQJWKDWµHYHQ ZKHQWDNLQJWKHVRXUFHWH[WDVDFUXFLDOIDFWRULQWKHIRUPXODWLRQRILWVWUDQVODWLRQDFFRPSOLVKHGWUDQVODWRUV ZRXOGEHOHVVDIIHFWHGE\LWVDFWXDOPDNHXS¶LELG DQGµWROHUDQFHRILQWHUIHUHQFH²DQGKHQFHWKH HQGXUDQFHRILWVPDQLIHVWDWLRQV²WHQGWRLQFUHDVHZKHQWUDQVODWLRQLVFDUULHGRXWIURPDµPDMRU¶RUKLJKO\ SUHVWLJLRXVODQJXDJHFXOWXUHHVSHFLDOO\LIWKHWDUJHWODQJXDJHFXOWXUHLVµPLQRU¶RUµZHDN¶LQDQ\RWKHU VHQVH¶LELG

'LVWLQFWLYHGLVWULEXWLRQRIWDUJHWODQJXDJHLWHPV 6KDPD¶D±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

)XUWKHUUHDGLQJ %DNHU%OXP.XOND%OXP.XONDDQG/HYHQVWRQ6KOHVLQJHU7RXU\D 9DQGHUDXZHUD

6$5$/$9,26$%5$,7+:$,7(



3DJH




3DJH

3$57,,+,6725<$1'75$',7,216



3DJH




3DJH

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

7KHSUHFRORQLDOHUD 5HVHDUFKLQRUDOKLVWRU\SDUWLFXODUO\WKHZRUNVRIRUDOWUDGLWLRQKLVWRULDQVVXFKDV9DQVLQD%DVFRP)LQQHJDQ DQG2NSHZKRKDVEHHQLQVWUXPHQWDOLQXQFRYHULQJLQIRUPDWLRQFRQFHUQLQJWKHKLVWRU\RIWUDQVODWLRQLQ SUHFRORQLDO$IULFD$OVRRIJUHDWKHOSKDVEHHQWKHZRUNRIVRPH(XURSHDQPLVVLRQDULHVDQGH[SORUHUVZKR PDQDJHGWRUHFRUGDVSHFWVRI$IULFDQRUDOWUDGLWLRQLQZULWLQJGXULQJWKHSHULRGIROORZLQJWKHLQLWLDOFRQWDFWV EHWZHHQ(XURSHDQG$IULFD 7KHDQFLHQWKLVWRU\RI$IULFDZDVPDLQO\UHFRUGHGLQRUDOOLWHUDWXUHDQGKDQGHGGRZQE\ZRUGRIPRXWKIURP JHQHUDWLRQWRJHQHUDWLRQ,QWKLVRUDOWUDGLWLRQWKHFORVHVWWKLQJWRWRGD\¶VWUDQVODWRULQWHUSUHWHULVZKDWVRPH VFKRODUVKDYHUHIHUUHGWRDVWKHµSURIHVVLRQDOOLQJXLVW¶VRPHWKLQJOLNHDQRIILFLDOVSRNHVSHUVRQIRUDYLOODJHRU DQHWKQLFJURXSZKRZDVEHOLHYHGWREHHQGRZHGZLWKVSHFLDOWDOHQWVWRUHFRUGDQGQDUUDWHWKHKLVWRU\DQG FXOWXUHRIKLVSHRSOH,QPRVW$IULFDQVRFLHWLHVWKHµSURIHVVLRQDOOLQJXLVW¶EHORQJHGWRDORQJOLQHRIVXFK JLIWHGOLQJXLVWVRIWKHVDPHIDPLO\0DQ\ZRUNHGLQWKHFRXUWVRIJUHDWNLQJVRIDQFLHQW$IULFDQNLQJGRPV VXFKDVWKH0DOL=LPEDEZHDQDQG*KDQDLDQNLQJGRPV7KHVHOLQJXLVWVZHUHRIWHQJUHDWRUDWRUVDQG VSRNHVPHQIRUNLQJVDQGFKLHIVDQGFRQVHTXHQWO\KDGDSULYLOHJHGSRVLWLRQLQVRFLHW\DQGZLHOGHG FRQVLGHUDEOHSROLWLFDOSRZHU5HIHUULQJWRWKH$VKDQWLµOLQJXLVWV¶'DQTXDK SRLQWVRXWWKDWµQRWRQO\ ZHUHWKH\FKDUJHGZLWKUHSHDWLQJWKHZRUGVRIWKHLUSDWURQDIWHUKLPDFWLQJDVKHUDOGWRPDNHLWFOHDUWRDOOKLV DXGLHQFHDQGWRDGGWRKLVXWWHUDQFHVWKHH[WUDDXWKRULW\RIUHPRWHQHVVEXWWKH\ZHUHDOVRH[SHFWHGWRµSHUIHFW¶ WKHVSHHFKRIDFKLHIZKRZDVQRWVXIILFLHQWO\HORTXHQWDQGWRHODERUDWHKLVWKHPHIRUKLP¶+RZHYHUWKH µOLQJXLVW¶ZDVQRWH[SHFWHGWRµDGGDQ\QHZVXEMHFWPDWWHUEXW«KHPD\H[WHQGWKHSKUDVHVDQGUHFRQVWUXFW WKHVHQWHQFHVDQGLQWHUVSHUVHWKHVSHHFKZLWKVRPHRIWKHFHOHEUDWHGZLWW\DQGSKLORVRSKLFDOUHIOHFWLRQVIRU ZKLFKWKH\DUHMXVWO\FHOHEUDWHGWRWKHFUHGLWRIERWKKLPVHOIDQGKLVFKLHI¶LELG ,Q)UHQFKVSHDNLQJ$IULFD OLQJXLVWVZHUHNQRZQDV*5,27V7KHJULRWVZHUHNQRZQIRUWKHLUSURILFLHQF\LQVHYHUDOODQJXDJHVDQG WKDQNVWRWKHLUUROHDVµLQWHUSUHWHUV¶WKHSRHWU\RIDFHUWDLQFXOWXUHFRXOGEHFRPHGLIIXVHGRYHUDZLGHDUHD UHDFKLQJGLIIHUHQWVXEFXOWXUHVDQGODQJXDJHV0XFKRIWKH$IULFDQHSLFWUDGLWLRQZDVNHSWDOLYHE\WKHJULRWV 7KHKLJKO\HVRWHULFODQJXDJHXVHGE\UXOHUVDQGHOGHUVLQWUDGLWLRQDO$IULFDRIWHQUHTXLUHGWKHPHGLDWLRQRIDQ µLQWHUSUHWHU¶WRIDFLOLWDWHFRPPXQLFDWLRQZLWKWKHFRPPRQSHRSOH6RPHWLPHVLQWHUSUHWHUVZRXOGEHQHHGHGWR VLPSOLI\WKHODQJXDJHXVHGE\PHPEHUVRIDVHFUHWVRFLHW\RUWRJORVVVSHHFKHVPDGHGXULQJSXEOLFRFFDVLRQV VXFKDVUHOLJLRXV



3DJH

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µWUDQVODWLRQ¶SUHYDOHQWLQPDQ\SUHFRORQLDO$IULFDQVRFLHWLHVLVWKDWDVVRFLDWHGZLWKµGUXP ODQJXDJH¶$IULFDQGUXPOLWHUDWXUHLVDIRUPRIFRPPXQLFDWLRQZKLFKLQYROYHVXVLQJLQVWUXPHQWVWR FRPPXQLFDWHWKURXJKGLUHFWUHSUHVHQWDWLRQVRIWKHVSRNHQZRUG7KHLQVWUXPHQWVVLPXODWHWKHWRQHDQGUK\WKP RIDFWXDOVSHHFK7KLVW\SHRIFRPPXQLFDWLRQLVOLQJXLVWLFVLQFHWKHPHVVDJHFDQEHµWUDQVODWHG¶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pLQ&DPHURRQDPRQJWKH%DPLOHNHDQGWKH%DPRXQDQGLQ =DLUHDPRQJWKH%DOXEDDQGWKH%DNXED7KH$PKDULFODQJXDJHVLQ(WKLRSLDDQGWKHKLHURJO\SKLFVLQ(J\SW DUHEHOLHYHGWRKDYHH[LVWHGLQZULWWHQIRUPORQJEHIRUHWKHDUULYDORIIRUHLJQHUV

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



3DJH

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¶VILUVWWUDQVODWRUWHUPLQRORJLVWV-RDTXLQ'LDV &25'(,52'$0$77$ZKRZURWH3KLORVRSKLDSRSXODUHPSURYHUELRVDQJRODQRV3RSXODU3KLORVRSK\LQ $QJRODQ3URYHUEV DFROOHFWLRQRI.LPEXQGXSURYHUEVDQGULGGOHVLQ3RUWXJXHVH'D0DWWDDOVRSXEOLVKHGD .LPEXQGX²3RUWXJXHVHGLFWLRQDU\ZKLFKLVFRQVLGHUHGDµPRQXPHQWRIVFKRODUVKLS¶+DPLOWRQ 7KHVHOLQJXLVWLFHQGHDYRXUVRIWKHHDUO\&DWKROLFPLVVLRQDULHVZKLFKFRXOGKDYHODLGWKHJURXQGZRUNIRU WKULYLQJ$IULFDQOLWHUDWXUHVZHUHWKZDUWHGE\WKH3RUWXJXHVHDXWKRULWLHV¶HWKQRFHQWULFTXHVWWRDVVLPLODWHWKH QDWLYHV $IHZ$IULFDQVZKRZHUHHQVODYHGDQGWKHQHGXFDWHGSURGXFHGZRUNVLQ/DWLQWKDWZHUHJHQHUDOO\WKRXJKWWR EHWUDQVODWLRQVIURPWKHLUUHVSHFWLYHRUDOWUDGLWLRQV2QHVXFKFDVHZDVWKDWRI-XDQ/$7,12D1HJURVODYH ZKRHQWHUHGWKHVHUYLFHRID6SDQLVKJHQHUDOLQDQGZHQWRQWREHFRPHDSURIHVVRURI/DWLQDWWKH 8QLYHUVLW\RI*UDQDGD7KHSDQHJ\ULFSRHWU\WKDW/DWLQRSURGXFHGLVWKRXJKWWRKDYHEHHQEDVHGRQPHUHO\ µWUDQVSRVLQJ¶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pJpRID*HUPDQQREOHPDQDQGZDVVHQWWRXQLYHUVLW\WR VWXG\XQGHU&KULVWLDQ:ROIIDZHOONQRZQGLVFLSOHRI/HLEQL]7KLV$IULFDQVODYHWKXVEHFDPHDKLJKO\ HUXGLWHVFKRODUDQGSKLORVRSKHUDQGLVVDLGWRKDYHEHHQIDPLOLDUZLWK'XWFK*HUPDQ)UHQFK/DWLQ*UHHN DQG+HEUHZ$IWHUWHDFKLQJDWWKHXQLYHUVLWLHVRI:LWWHQEHUJDQG-HQDDQGVHUYLQJDVDFRXUWFRXQFLOORUIRU )UHGHULF,,RI3UXVVLDKHUHWXUQHGWRKLVQDWLYH$IULFD $SDUWIURPZRUNVSURGXFHGE\$IULFDQVLQQRQ$IULFDQODQJXDJHV*pUDUG DOVRPHQWLRQVDQ$IULFDQ DOSKDEHWDQGDVHFUHWODQJXDJHLQYHQWHGE\6XOWDQ1MR\D± RIWKH%DPXQSHRSOHRI&DPHURRQ7KH VXOWDQKDGIRXQGRXWDERXW$UDELFVFULSWWKURXJK+DXVDWUDGHUVDQG)XODQLHPLUDWHVRIDQHLJKERXULQJ WHUULWRU\:KHQWKH*HUPDQVDUULYHGLQ1MR\DQRWLFHGWKDWWKH(XURSHDQVXVHGDGLIIHUHQWNLQGRI ZULWLQJ)XOORIDGPLUDWLRQIRUWKLVPRGHRIFRPPXQLFDWLRQKHLQVWUXFWHGVRPHRIKLVFRXQFLOORUVWRFUHDWHDQ LFRQRJUDSKLFVFULSW%\KXQGUHGVRIRULJLQDOVLJQVKDGEHHQVXFFHVVIXOO\WULPPHGDQGJLYHQSKRQHWLF VLJQLILFDQFH8QGHU1MR\D¶VVXSHUYLVLRQD



3DJH

SDJHPDQXVFULSWRQWKHKLVWRU\DQGFXVWRPVRIWKH%DPXQZDVZULWWHQXVLQJWKLVV\VWHP+RZHYHU6XOWDQ 1MR\DOLNHPRVWUXOHUVLQWUDGLWLRQDO$IULFDFUDYHGIRUDVHFUHWODQJXDJHWKDWZRXOGEHFRPSOHWHO\HVRWHULFWR WKHSHRSOH+DYLQJOHDUQWDIHZ*HUPDQ)UHQFKDQG(QJOLVKZRUGVIURP*HUPDQPLVVLRQDULHVRIWKH%DVHO PLVVLRQKHFUHDWHGDQHZODQJXDJHE\DVFULELQJHQWLUHO\DUELWUDU\PHDQLQJVWRWKHZRUGVPL[LQJWKHPZLWK ORFDO%DPXQZRUGVZKRVHPHDQLQJVKDGDOVREHHQGLVWRUWHG7KHPDQXVFULSWRQWKHKLVWRU\DQGFXVWRPVRIWKH %DPXQZDVWKHQWUDQVODWHGLQWRWKLVµSULYDWH¶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¶Ɩ1LQWRVRPH$IULFDQODQJXDJHV)RU LQVWDQFHWKH4XU¶ƗQDQGRWKHUUHOLJLRXVWH[WVKDYHEHHQWUDQVODWHGLQWR+DXVDDQG


3DJH

FRORQLDOH[SHGLWLRQWRµWUDQVODWH¶PHGLDWHDQGDGYLVHWKHFRORQLDOLVWV+HZDVH[SHFWHGWRKDYHDWKRURXJK NQRZOHGJHRIWKHWHUULWRU\DQGWRKDYHWKHSK\VLFDOHQGXUDQFHWRVXVWDLQORQJWHGLRXVDQGRIWHQGDQJHURXV MRXUQH\V7KRXJKKHVWLOOHQMR\HGVRPHUHVSHFWEHFDXVHRIKLVDVVRFLDWLRQZLWKWKH(XURSHDQFRORQLDOLVWVDQG KLVUXGLPHQWDU\ NQRZOHGJHRID(XURSHDQODQJXDJHWKHSURIHVVLRQDOOLQJXLVWZDVRIWHQGHVSLVHGE\WKHORFDO SRSXODWLRQDQGFRQVLGHUHGDµWUDLWRU¶IRUVKRZLQJFRORQLDOLVWVDURXQGDQGKHOSLQJWKHPJDLQDFFHVVWRWKHWULEDO ORUHDQGVHFUHWVRIWKHSHRSOH,QGHHGWKHSURIHVVLRQDOOLQJXLVWKDGEHFRPHQRWKLQJPRUHWKDQWKHVHUYDQWRI WKH(XURSHDQFRORQLDOLVWDQGKHZDVJHQHUDOO\GLVSRVHGRIDVVRRQDVKLVWDVNZDVFRPSOHWHGWREHFDOOHG EDFNRQO\LIDQGZKHQKHZDVQHHGHG 'XULQJWKHODWHQLQHWHHQWKDQGHDUO\WZHQWLHWKFHQWXULHVDZDYHRIµOLEHUDO5RPDQWLFLVP¶DQGDIDVFLQDWLRQ ZLWKDOOIRUPVRIV\PEROLVPVZHSWDFURVV(XURSHUHVXOWLQJLQLQFUHDVHGLQWHUHVWLQWKHRUDOWUDGLWLRQVRIQRQ :HVWHUQFXOWXUHV+RUWRQ $IULFDOLNHPRVWSUHLQGXVWULDOL]HGVRFLHWLHVUHFHLYHGZDYHDIWHUZDYHRI :HVWHUQVFKRODUVLQWHUHVWHGLQVWXG\LQJLWVIRONORUH+RZHYHUWKHVHVFKRODUVRIWHQUHOLHGRQLQDGHTXDWHVHFRQG KDQGVRXUFHVDVWKH\FROOHFWHGSLHFHVRI$IULFDQRUDOWUDGLWLRQ:LWKQRDFFHVVWRWRGD\¶VUHFRUGLQJ WHFKQRORJ\WKH\KDGWRUHO\RQZULWWHQUHFRUGVRIWKHRUDOOLWHUDWXUHWKH\QHHGHGWRFROOHFW7KHVHUHFRUGVZHUH OHVVWKDQDGHTXDWHDVWKH\ZHUHXQUHOLDEOHWUDQVODWLRQVFDUULHGRXWE\VFKRROFKLOGUHQDQGRWKHU$IULFDQV ZRUNLQJIRU(XURSHDQVZLWKKDUGO\DQ\VNLOOLQWKHDUWLVWU\RIWKHRUDOQDUUDWLYH4XLWHRIWHQWKHWUDQVODWLRQV DQGWUDQVFULSWLRQVZHUHVXEMHFWHGWRDJUHDWGHDORIDGDSWDWLRQWRVXLWWKHH[RWLFWDVWHVRI:HVWHUQDXGLHQFHV,W ZDVQRWXQWLOWKHODWWHU\HDUVRIWKHFRORQLDOHUDWKDW$IULFDQRUDOQDUUDWLYHZDVPDGHDYDLODEOHWRWKHSXEOLFE\ DJURXSRI$IULFDQZULWHUVZKRKDGWKHDGYDQWDJHRIEHLQJELOLQJXDODQGELFXOWXUDO

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²ZKRLVKLJKO\UHSXWHGIRUWUDQVODWLQJWKH%LEOHLQWR ,JERDQG


3DJH

%LUDJR'LRSWKH6HQHJDOHVHSRHWIDPRXVIRUKLVFROOHFWLRQRIVKRUWVWRULHVHQWLWOHG1RXYHDX[&RQWHV G¶$PDGRX.RXPED7KH1HZ7DOHVRI$PDGRX.RXPED DQG%HUQDUG'DGLpWKH,YRLULDQNQRZQIRU KLV/pJHQGHV$IULFDLQHV$IULFDQ/HJHQGV $VLPLODUSKHQRPHQRQWRRNSODFHLQ$QJORSKRQH$IULFD,Q :HVW$IULFD$PRV7XWXROD¶V7KH3DOP:LQH'ULQNDUGDQGKLV'HDG3DOP:LQH7DSVWHULQWKH'HDG¶V7RZQ ZDVDPRQJWKHILUVWRIVXFK$IULFDQZRUNVRIILFWLRQWRDSSHDUGULQNDUGLVDPRGLILHGIRUPRI GUXQNDUGPHDQWWRPLPLFWKHODQJXDJHRIDVHPLOLWHUDWHGUXQNDUG$OOWKHVHZRUNVE\)UDQFRSKRQHDQG $QJORSKRQHZULWHUVDUHHVVHQWLDOO\OLEHUDOWUDQVODWLRQVRI$IULFDQRUDOWH[WV7XWXRODIRUH[DPSOHOLWHUDOO\ WUDQVODWHGVRPH


3DJH

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

7KHSUHVHQWGD\ 6LQFHLQGHSHQGHQFHPDQ\HFRQRPLFDQGLQWHUQDWLRQDORUJDQL]DWLRQVKDYHEHHQIRUPHGWRHQKDQFHFRRSHUDWLRQ DPRQJ$IULFDQVWDWHVWKXVVWUHQJWKHQLQJWKHQHHGIRU(XURSHDQODQJXDJHWUDQVODWRUV:KHQWKH2UJDQL]DWLRQ RI$IULFDQ8QLW\2$8 ZDVIRXQGHGLQ(QJOLVK)UHQFK3RUWXJXHVH6SDQLVKDQG²RQDVPDOOHUVFDOH²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


3DJH

81&7$'µRQWKHQHHGIRUDVXEUHJLRQDOWUDQVODWLRQLQWHUSUHWDWLRQDQGVWDIIODQJXDJHWUDLQLQJVXSSRUWVHUYLFH DQGWRDVVHVVWKHIHDVLELOLW\RIVHWWLQJXSVXFKDVHUYLFHLILWWXUQHGRXWWREHQHHGHG¶$PRQJWKH UHFRPPHQGDWLRQVPDGHLVWKHFUHDWLRQRIDVXEUHJLRQDO7UDQVODWLRQDQG,QWHUSUHWDWLRQ6FKRRO 5HFHQWSROLWLFDOFKDQJHVLQ6RXWK$IULFDKDYHEURXJKWDERXWWKHQHHGIRUDPDVVLYHRYHUKDXORIWUDQVODWLRQ WUDLQLQJSURJUDPPHV7KH$1&¶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¶VWUDQVODWRULVRIWHQ SHUFHLYHGDVDGLVHQFKDQWHGFLYLOVHUYDQWZKRWRLOVDZD\ZLWKRXWUHFHLYLQJDQ\UHFRJQLWLRQLQKLVFRXQWU\¶V SXEOLFVHUYLFH7KHRQO\ODQJXDJHVSHFLDOLVWVZKRVHHPVDWLVILHGZLWKWKHLUORWDUHFRQIHUHQFHLQWHUSUHWHUVZKR HQMR\WKHJODPRXURIFULVVFURVVLQJWKHFRQWLQHQWWRDWWHQGLQWHUQDWLRQDOFRQIHUHQFHV7UDQVODWRUVLUUHVSHFWLYH RIFRXQWU\FRPSODLQDERXWWKHORZVWDWXVDWWULEXWHGWRWKHLUSURIHVVLRQ,KHQDFKR FLWHVWKHFDVHLQ 1LJHULDZKHUHWKHSRVWVRIWUDQVODWRUVDQGLQWHUSUHWHUVDWWKH0LQLVWU\RI([WHUQDO$IIDLUVKDYHEHHQDEROLVKHG VXFKSUDFWLWLRQHUVVHHPWRSUHIHUWREHUHIHUUHGWRDV)RUHLJQ$IIDLUV2IILFHUVEHFDXVHRIILFHUVDWWKH0LQLVWU\ ZKRDUHµPHUH¶WUDQVODWRUVRULQWHUSUHWHUVDUHORRNHGGRZQXSRQ ,Q6RXWK$IULFDSURIHVVLRQDOWUDQVODWRUVRIWHQUHIHUUHGWRDVµODQJXDJHZRUNHUV¶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



3DJH

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p7RJRZLWKWKHDLPRIH[SORULQJSURIHVVLRQDOSUREOHPVLQ$IULFD7KLVPHHWLQJWRRNSODFHVL[\HDUV DIWHUWKDWRIWKH$IULFDQ0LQLVWHUVRI(GXFDWLRQKHOGLQ1DLURELLQZKHUHVRPHUHFRPPHQGDWLRQVZHUH PDGHUHJDUGLQJWKHRUJDQL]DWLRQRIWKHWUDQVODWLRQSURIHVVLRQWUDQVODWRUWUDLQLQJDQGTXHVWLRQVRIWHUPLQRORJ\ LQ$IULFDDIXOOOLVWRIWKHUHFRPPHQGDWLRQVFDQEHIRXQGLQ6LPSVRQ± 7KHVHPHHWLQJVKDGWKH SRVLWLYHHIIHFWRIFDWDSXOWLQJWKHWUDQVODWLRQSURIHVVLRQWRDKLJKHUVSKHUHE\JHWWLQJYDULRXV$IULFDQ JRYHUQPHQWVDQGSURIHVVLRQDOWUDQVODWRUVLQYROYHGLQHVWDEOLVKLQJDJHQXLQHSURIHVVLRQDOVWDWXVIRUWUDQVODWLRQ ,WZDVUHFRPPHQGHGDPRQJRWKHUWKLQJVµWKDWHQFRXUDJHPHQWVKRXOGEHJLYHQWRWKHFUHDWLRQRIDVVRFLDWLRQV RIWUDQVODWRUVZKLFKVKRXOGFRPELQHWRIRUPUHJLRQDOVWUXFWXUHVVRDVWRLQWHQVLI\WKHLUDFWLRQ¶DQGWKDW µJRYHUQPHQWVJUDQWWUDQVODWRUVWKHOHJDOVWDWXVDQGSURWHFWLRQSURYLGHGIRULQWKH«1DLURELUHFRPPHQGDWLRQ¶ (YHUVLQFHWKHPHHWLQJWUDQVODWLRQKDVVHHQLWVORWLPSURYHVLJQLILFDQWO\LQ$IULFDHYHQWKRXJKWKH QXPEHURIYLDEOHSURIHVVLRQDOERGLHVLVVWLOOµIDUIURPEHLQJDWUXHUHIOHFWLRQRIWKHµVWDWHRIWKHDUW¶DQGWKH YROXPHRIZRUNFDUULHGRXWLQ$IULFD¶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¶VPRVWDPELWLRXVWHUPLQRORJ\SURMHFWV7KHSURMHFWLVDMRLQW YHQWXUHEHWZHHQWKH6ZDKLOL5HVHDUFK&HQWUHDWWKH8QLYHUVLW\RI'DUHV6DODDPDQGWKH1DWLRQDO6ZDKLOL &RXQFLO%DUD]DOD.LVZDKLOLOD7DLID LQ7DQ]DQLD$OWKRXJKWKHSURMHFWDOVRGHDOVZLWKPDWWHUVRIJUDPPDU LWVPDLQJRDOLVWRGHYHORS6ZDKLOLDVDODQJXDJHRILQGXVWU\DQGWHFKQRORJ\$&RPPLWWHHRIWKH1DWLRQDO 6ZDKLOL&RXQFLOLVUHVSRQVLEOHIRUWKHXQLILFDWLRQDQGVWDQGDUGL]DWLRQRIWHUPLQRORJLHVDQGJUDPPDUDQGWKHLU UHFRPPHQGDWLRQVDUHSXEOLVKHGLQ7DIVLUL6DQLIXWKH&RXQFLO¶VPDLQSXEOLFDWLRQ%JR\D±



3DJH

)XUWKHUUHDGLQJ %JR\D'LRS)LQQHJDQ*pUDUG+DPLOWRQ,KHQDFKR0KLQD0YHQJ 1DPD2NSHZKR6LPSVRQ

3$8/%$1',$

%LRJUDSKLHV &25'(,52'$0$77$-RDTXLQ'LDV±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pOL&KkWHODLQ&RUGHLURGD0DWWDDOVRSXEOLVKHGD.LPEXQGX JUDPPDUDQGD.LPEXQGX3RUWXJXHVHGLFWLRQDU\LQDQGUHVSHFWLYHO\ ',23&KHLNK$QWD± $IULFD¶VPRVWUHQRZQHGVFKRODURIWKHWZHQWLHWKFHQWXU\%RUQLQ6HQHJDOKH UHFHLYHGKLVGRFWRUDWHIURPWKH8QLYHUVLW\RI3DULVDQGE\ZDVRQWKHVWDIIRI,)$1,QVWLWXW )RQGDPHQWDOGHO¶$IULTXH1RLUH)XQGDPHQWDO,QVWLWXWHRI%ODFN$IULFD LQ'DNDUZKHUHKHGLUHFWHGWKH UDGLRFDUERQODERUDWRU\ZKLFKKHIRXQGHG&KHLNK$QWD'LRSZDVDKLVWRULDQSK\VLFLVWDQGSKLORVRSKHU KRZHYHUKHZDVEHVWNQRZQDV$IULFD¶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µSURIHVVLRQDOOLQJXLVWV¶PDQ\FHQWXULHVDJR 8QIRUWXQDWHO\KDUGO\DQ\JULRWZDVLGHQWLILHGE\QDPHE\WKRVHZKREHQHILWHGIURPWKHLUNQRZOHGJH7KH JULRWVDUHJHQHUDOO\NQRZQDVWUDGLWLRQDOEDUGVZLWKDJUHDWWDOHQWIRUVWRULQJDQGUHFRXQWLQJWKHRUDOWUDGLWLRQ RIWKHLUSHRSOHDQGRIWHQEHORQJHGWRDORQJOLQHRIJLIWHGEDUGVZKRKDQGHGGRZQWKHLUNQRZOHGJHDQG H[SHUWLVHIURPJHQHUDWLRQWRJHQHUDWLRQ0DQ\ZRUNHGLQWKHFRXUWVRI$IULFDQNLQJVZLWQHVVLQJWKHHYHQWV WKDWPDUNHGWKHULVHDQGIDOORIWKHLUUXOHUV7KHJULRWVZHUHJLIWHGOLQJXLVWVZKRRIWHQWUDQVODWHGWKHNLQJ¶V HVRWHULFODQJXDJHIRUWKHFRQVXPSWLRQRIWKHJHQHUDOSXEOLFHPEHOOLVKLQJDQGSHUIHFWLQJWKHNLQJ¶VVSHHFKLQ WKHSURFHVV7KH\ZHUHUHVSHFWHGEHFDXVHRIWKHLUSURILFLHQF\LQVHYHUDOODQJXDJHVDQGRIWHQDFWHGDV LQWHUSUHWHUVGXULQJHQFRXQWHUVEHWZHHQWKHNLQJGRPDQGIRUHLJQQDWLRQV:LHOGLQJDJUHDWGHDORISROLWLFDO SRZHUEHFDXVHRIWKHLUUROHDVVSRNHVSHUVRQVIRUWKHNLQJWKH\ZHUHDWRQFHIHDUHGUHVSHFWHGDQGGLVOLNHGE\ RWKHUPHPEHUVRIVRFLHW\ /$7,12-XDQ± -XDQ/DWLQRZDVWDNHQDVD1HJURVODYHWR%DHQDKDOIZD\EHWZHHQ&RUGREDDQG *UDQDGDDURXQGZKHQKHZDVDERXW\HDUVROG+HZRUNHGIRURQHRI6SDLQ¶VEHVWNQRZQJHQHUDOV *RQ]DOR)HUQDQGH]µHO*UDQ&DSLWDQ¶ $VVLJQHGWRVHUYHDVDSOD\PDWHDQGDFRPSDQLRQWRWKH*UDQ &DSLWDQ¶VJUDQGVRQWKHWKLUGGXNHRI6HVD-XDQ/DWLQRDFFRPSDQLHGKLV\RXQJ



3DJH

PDVWHUWRVFKRRODQGILQDOO\WRWKH8QLYHUVLW\RI*UDQDGDZKHUHKHZDVHYHQWXDOO\DSSRLQWHGSURIHVVRU$W XQLYHUVLW\KHSURYHGEULJKWHUDQGPRUHPRWLYDWHGWKDQWKHWKLUGGXNHDFKLHYLQJVXFKDKLJKOHYHORI SURILFLHQF\LQ/DWLQDQG*UHHNWKDWKHZDVIUHHGDQGHQFRXUDJHGWRSXUVXHKLVVWXGLHV+HUHFHLYHGKLV EDFKHORU¶VGHJUHHLQWKHWLWOHRI/LFHQVLDGRLQDQGZDVDSSRLQWHGWRWKHFKDLURI/DWLQ*UDPPDULQ -XDQ/DWLQRZURWHPDLQO\SDQHJ\ULFSRHWU\IRUH[DPSOH(SULJUDPPDWXP/LEHU DQRGHWRFHOHEUDWHWKH ELUWKRI3KLOLS,,RI6SDLQ¶VVRQ+LVSHQFKDQWIRUSDQHJ\ULFSRHWU\LVEHOLHYHGWRKDYHEHHQLQVSLUHGE\KLV $IULFDQRULJLQDQGKHLVWKRXJKWWRKDYHPHUHO\µWUDQVODWHG¶RUµWUDQVIHUUHG¶WKHPRGHORI$IULFDQSUDLVHSRHPV WRD(XURSHDQVHWWLQJ7KHGHDWKRI/DWLQRLQPDUNHGWKHHQGRIDWUDGLWLRQRI$IULFDQZULWLQJLQ/DWLQ %\WKHHQGRIWKHVL[WHHQWKFHQWXU\WKHV\VWHPRIVODYHU\KDGEHFRPHHYHQPRUHUXWKOHVVDQGKDGFRPSOHWHO\ UXOHGRXWDQ\RSSRUWXQLWLHVRID/DWLQHGXFDWLRQIRU1HJURVODYHV 1-2<$6XOWDQ±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

$PHULFDQWUDGLWLRQ 7UDQVODWLRQSOD\HGDQHVVHQWLDOUROHLQWKHRULJLQVDQGGHYHORSPHQWRIWKH8QLWHG6WDWHVDQGLWFRQWLQXHVWRGR VRJLYHQWKHOLQJXLVWLFDQGFXOWXUDOGLYHUVLW\RIWKHFRXQWU\¶VPRUHWKDQPLOOLRQLQKDELWDQWV(QJOLVKLVWKH GRPLQDQWODQJXDJHEXWLWLVRQO\RQHRIWKHPDQ\ODQJXDJHVWKDWKDYHEHHQVSRNHQLQ1RUWK$PHULFD7KH VSHHFKRIWKHQDWLYH,QGLDQWULEHVZDVILUVWHQFRXQWHUHGGXULQJWKHVL[WHHQWKFHQWXU\E\6SDQLVKDQG)UHQFK H[SORUHUVLQSUHVHQWGD\)ORULGDDQG/RXLVLDQD(QJOLVKH[SHGLWLRQVWR9LUJLQLDDQG0DVVDFKXVHWWVEHJDQLQ HDUQHVWGXULQJWKHHDUO\VHYHQWHHQWKFHQWXU\UHTXLULQJDIDPLOLDULW\ZLWK,QGLDQODQJXDJHVWKDWKHOSHGWR LQFUHDVHWKHFRORQLVWV¶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



3DJH

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

&RORQL]DWLRQH[SDQVLRQLPPLJUDWLRQ± $PRQJWKHILUVW$PHULFDQWUDQVODWRUVZHUHQDWLYH,QGLDQVZKRDFWHGDVLQWHUSUHWHUVDQGDVVLVWDQWVWRWKH (QJOLVKFRORQLVWVVWUXJJOLQJWRHVWDEOLVKDYLDEOHH[LVWHQFHLQWKH1RUWK$PHULFDQZLOGHUQHVV:LOOLDP %UDGIRUGRQHRIWKHILUVWJRYHUQRUVRIWKH0DVVDFKXVHWWV%D\&RORQ\GHVFULEHGWKH3XULWDQVHWWOHUV¶PHHWLQJ ZLWK6DPRVHWDQ$OJRQTXLDQIURP0DLQHµZKHUHVRPH(QJOLVKVKLSVFDPHWRILVK«DPRQJVWZKRPKHKDG JRWKLVODQJXDJH¶%UDGIRUG $OWKRXJK6DPRVHWVSRNHµEURNHQ(QJOLVK¶%UDGIRUGREVHUYHGWKDWµKH EHFDPHSURILWDEOHWRWKHPLQDFTXDLQWLQJWKHPZLWKPDQ\WKLQJVFRQFHUQLQJWKHVWDWHRIWKHFRXQWU\¶LELG %UDGIRUGIHOWWKDW6TXDQWRDQRWKHU,QGLDQLQWHUSUHWHUµFRXOGVSHDNEHWWHU(QJOLVKWKDQKLPVHOI¶EHFDXVHKHKDG EHHQNLGQDSSHGE\DQ(QJOLVKFDSWDLQDQGµHQWHUWDLQHGE\DPHUFKDQWLQ/RQGRQ¶LELG± 7RWKH SLOJULPVZKRODQGHGDW3O\PRXWKLQ6TXDQWRZDVHVVHQWLDOIRUVXUYLYDOKHWDXJKWWKHPKRZWRJURZ FRUQDQGZKHUHWRILVKDQGKHQHJRWLDWHGDSHDFHWUHDW\EHWZHHQWKHFRORQLVWVDQGWKH:DPSDQRDJ,QGLDQV ZKHUHE\WKH\DJUHHGWRGHIHQGHDFKRWKHUIURPZDUULQJWULEHV $OWKRXJKWKHVHUHODWLRQVEHQHILWHGERWKFRORQLVWVDQG,QGLDQVWKH\ZHUHKDUGO\V\PPHWULFDODQGWUDQVODWLRQ TXLFNO\EHFDPHDSUDFWLFHE\ZKLFKWKH(QJOLVKVRXJKWWRDOWHUDQ,QGLDQFXOWXUHZKLFKWKH\MXGJHGWREH LQIHULRUEHFDXVHLWZDVSDJDQ7KHUR\DOFKDUWHULVVXHGWRWKH0DVVDFKXVHWWV%D\&RPSDQ\LQDVVHUWHG WKDWµWKHSULQFLSDOOHQGHRIWKLVSODQWDWLRQ>ZDV@WRZ\QQDQGLQFLWHWKHQDWLYHVRI>WKH@FRXQWU\WRWKH NQRZOHGJDQGREHGLHQFHRIWKHRQOLHWUXH*RGDQG6DYRLURIPDQNLQGHDQGWKH&KULVWLDQID\WK¶0RUJDQ $VDUHVXOWWKHILUVW$PHULFDQWUDQVODWRUVLQFOXGHG3XULWDQPLQLVWHUVZKROHDUQHG,QGLDQODQJXDJHV WRFRQYHUWWKHQDWLYHV:LWKWKHKHOSRIDQ,QGLDQLQIRUPDQWµDSUHJQDQWZLWWHG\RXQJPDQZKRKDGEHHQD 6HUYDQWLQDQ(QJOLVKKRXVH¶WKHPLQLVWHU-RKQ(/,27± ZURWH$&DWHFKLVPLQWKH,QGLDQ/DQJXDJH DQGWKHQWUDQVODWHGWKH%LEOHDQGVHYHUDOKRPLOHWLFWUDFWVLQWR$OJRQTXLDQ(OLRW &RQYHUVLRQZHQWKDQGLQKDQGZLWKFRQTXHVWVRWKDWWUDQVODWLRQDOVRIDFLOLWDWHGWKHH[SURSULDWLRQRI,QGLDQ ODQGV+HUHWUDQVODWRUVDQGLQWHUSUHWHUVPHGLDWHGEHWZHHQVLJQLILFDQWFXOWXUDOGLIIHUHQFHVWKDWZHUHLQVFULEHGLQ WKHWUDQVODWLQJODQJXDJHV0RVWRIWKH$OJRQTXLDQSODFHQDPHVIRULQVWDQFHµUHODWHGQRWWRSRVVHVVLRQEXWWR XVH¶ZKLOHWKH(QJOLVKFRORQLVWVµPRVWIUHTXHQWO\FUHDWHGDUELWUDU\SODFHQDPHVZKLFKHLWKHUUHFDOOHGORFDOLWLHV LQWKHLUKRPHODQGRUJDYHDSODFHWKHQDPHRILWVRZQHU¶&URQRQ ,QWKHWUDQVODWLQJWKDWHQDEOHG WKHFRORQLVWVWRSXUFKDVHODQGIURPWKH,QGLDQVWKH(QJOLVKFRQFHSWRISULYDWHSURSHUW\GLVSODFHGWKH,QGLDQ XQGHUVWDQGLQJRIFRPPXQDORZQHUVKLS&KH\ILW] 7KHFRORQLVWVUHFRJQL]HGVXFKGLIIHUHQFHVIURPWKH VWDUW WKH@RFFDVLRQEHHHLWKHURI7UDYHOO'LVFRXUVH7UDGLQJ F¶LELG 'XULQJWKHHLJKWHHQWKFHQWXU\WUDQVODWLRQFRQWLQXHGWREHDFUXFLDOFXOWXUDOSUDFWLFHLQ



3DJH

VXEPLWWLQJWKH,QGLDQVWRWKHFRORQLVWV¶LQWHUHVWV&RQUDG:HLVHU± D*HUPDQLPPLJUDQW¶VVRQZKR OLYHGZLWKWKH0RKDZNVIRU\HDUVVHUYHGDVWKHRIILFLDOLQWHUSUHWHURI3HQQV\OYDQLDDUUDQJLQJFRQIHUHQFHV LQZKLFK,QGLDQODQGVZHUHGHHGHGWRWKHSURYLQFLDOJRYHUQPHQWDQG,QGLDQWUDGHZDVH[WHQGHGWRWKH 0LVVLVVLSSL5LYHU6LPRQ*LUW\± DQ,ULVKLPPLJUDQW¶VVRQZKRZDVNLGQDSSHGDVDER\DQG DGRSWHGE\WKH6HQHFDVOHDUQHGDYDULHW\RI,QGLDQODQJXDJHVZKLFKKHXVHGLQWKHVHUYLFHRIWKH%ULWLVK GXULQJWKH5HYROXWLRQDU\:DUSHULRG)RURYHU\HDUV*LUW\LQWHUSUHWHGIRU%ULWLVKPLOLWDU\FRPPDQGHUVDQG HQOLVWHG,QGLDQWULEHVLQUDLGVRQVHWWOHPHQWVLQ3HQQV\OYDQLD2KLR.HQWXFN\DQG'HWURLWJDLQLQJD UHSXWDWLRQDVDµUHQHJDGH¶DQGDµZKLWHVDYDJH¶7KUDSS,,±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µWKHPRVWGLUHFWDQGSUDFWLFDEOH ZDWHUFRPPXQLFDWLRQ«IRUWKHSXUSRVHVRIFRPPHUFH¶%HUJRQ[[LY /HZLVDQG&ODUNUHOLHGKHDYLO\RQ LQWHUSUHWHUVERWKWRQDYLJDWHWKHZLOGHUQHVVDQGWRGHOLYHUVSHHFKHVWKDWVWUHVVHG$PHULFDQVRYHUHLJQW\ LQWHUWULEDOSHDFHDQGWUDGH5RQGD 7KHVHLQWHUSUHWHUVLQFOXGHGIRUHLJQWUDGHUVDQG,QGLDQVZKROLYHG LQWKHZHVWHUQWHUULWRULHV/HZLVDQG&ODUN¶VMRXUQDOVIUHTXHQWO\PHQWLRQ7RXLVVDLQW&KDUERQQHDXF± F D&DQDGLDQHPSOR\HGE\WKH1RUWK:HVW&RPSDQ\DQGKLVZLIH6DFDMDZHDF±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¶OLQJXLVWLFSURILFLHQF\/DZUHQFH7DOLDIHUUR± DQDJHQWDW6DLQW3HWHU¶VLQ0LQQHVRWDVSRNH RYHUDGR]HQ,QGLDQODQJXDJHVLELG 7KHGLVSODFHPHQWDQGGLVSRVVHVVLRQRIWKH,QGLDQVLQHYLWDEO\FDXVHGFRQIOLFWVERWKDPRQJWKHGLIIHUHQWWULEHV DQGZLWKWKH8QLWHG6WDWHV


3DJH

6FDQGDQDYLDQFRXQWULHVDQG%ULWDLQ$SSUR[LPDWHO\LPPLJUDQWVSHUGD\SDVVHGWKURXJK(OOLV,VODQGLQ 1HZ
%XLOGLQJDQDWLRQDOFXOWXUH±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± H[SODLQHGWKDWWKHOLWHUDOVWUDWHJ\FRQIRUPHGWRD3XULWDQDHVWKHWLFµ,I WKHUHIRUHWKHYHUVHVDUHQRWDOZD\VVRVPRRWKHDQGHOHJDQWDVVRPHPD\GHVLUHRUH[SHFWOHWWKHPFRQVLGHU WKDW*RG¶V$OWDUQHHGVQRWRXUSROLVKLQJV¶+DUDV]DWL$Y 7KHUHOLJLRXVYDOXHVRIWKHWUDQVODWLRQ FDUULHGSROLWLFDOLPSOLFDWLRQV7KH%D\3VDOP%RRNH[SUHVVHGWKH3XULWDQV¶GLVVHQWIURPWKHOLWXUJ\RIWKH $QJOLFDQ&KXUFKDQGWKHOLWHUDWXUHRIWKHUR\DOFRXUW7KHDYRZHGO\µSODLQ¶ODQJXDJHUHMHFWHGWKHµSRHWLFDO OLFHQVH¶WKDWFKDUDFWHUL]HG7KRPDV6WHUQKROGDQG-RKQ+RSNLQV¶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± $QGGXULQJWKHSROLWLFDOFULVLVWKDWSUHFLSLWDWHGWKH5HYROXWLRQDU\:DU SDPSKOHWHHUVXVHGWKHLURZQDQGRWKHUV¶WUDQVODWLRQVWRGLVVHPLQDWH(QOLJKWHQPHQWWKLQNLQJDQGWRVZD\ SXEOLFVHQWLPHQWDJDLQVW(QJODQG,Q7KH5LJKWVRIWKH%ULWLVK&RORQLHV$VVHUWHGDQG3URYHG -DPHV 2WLVRIIHUHGDGHPRFUDWLFFULWLTXHRIWKH%ULWLVKPRQDUFK\WKDWTXRWHGKLVRZQUHQGHULQJVIURP5RXVVHDX¶V 6RFLDO&RQWUDFW%DLO\Q,, :KLOHWKH8QLWHG6WDWHVZDVHPHUJLQJDVDQLQWHUQDWLRQDOSROLWLFDOSRZHUWUDQVODWLRQZDVHQOLVWHGLQ QDWLRQDOLVWSURMHFWVWRGHYHORSDQ$PHULFDQFXOWXUHWKDWFRXOGYLHZLWK(XURSH3HUKDSVWKHPRVWDPELWLRXVRI WKHVHSURMHFWVZDV6SHFLPHQVRI)RUHLJQ6WDQGDUG/LWHUDWXUHDYROXPHDQWKRORJ\RIWUDQVODWLRQVHGLWHGE\ *HRUJH5,3/(<± 7KHILUVWWZRYROXPHVFRQVLVWHGRI5LSOH\¶VRZQWUDQVODWLRQVRIVHYHUDO)UHQFK SKLORVRSKHUV%HQMDPLQ&RQVWDQW7KHRGRUH-RXIIUR\DQG9LFWRU&RXVLQ,QVXEVHTXHQWYROXPHVKHUHOLHGRQ WKHWUDQVODWLQJVNLOOVRIWKH1HZ(QJODQG7UDQVFHQGHQWDOLVWVLQWHOOHFWXDOVOLNH0DUJDUHW)XOOHU± DQG -RKQ6XOOLYDQ



3DJH

'ZLJKW± ZKRKDGEHHQLQVSLUHGE\)UHQFKDQG*HUPDQOLWHUDWXUHDQGZKRVHWUDQVODWLRQVLQWXUQ LQVSLUHGRWKHUVQRWDEO\WKHTXLQWHVVHQWLDO$PHULFDQSKLORVRSKHU5DOSK:DOGR(PHUVRQ 5LSOH\IHOWWKDWWUDQVODWLRQFRXOGFRQWULEXWHWRWKHFUHDWLRQRIDQDWLRQDOFXOWXUHWKDWUHVSHFWHGGHPRFUDWLF SULQFLSOHVµ7KHEHVWSURGXFWLRQVRIIRUHLJQJHQLXVDQGVWXG\¶KHDUJXHGµVKRXOGQRWEHFRQILQHGWRWKHIHZ ZKRKDYHDFFHVVWRWKHRULJLQDOODQJXDJHVEXWVKRXOGEHGLIIXVHGDPRQJHQOLJKWHQHGUHDGHUVRIHYHU\FODVV DQGFRQGLWLRQ¶5LSOH\[L


3DJH

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¶VH[SHULPHQWDOLVPIRUDOLQJXLVWLFKRPRJHQHLW\WKDWSURGXFHGDQLOOXVRU\HIIHFWRI WUDQVSDUHQF\ZKHUHE\WKHWUDQVODWLRQVHHPVWREHQRWDWUDQVODWLRQEXWWKHIRUHLJQRULJLQDO9HQXWL 7KH WUDQVSDUHQF\KRZHYHUDFWXDOO\FRQFHDOVDWKRURXJKJRLQJGRPHVWLFDWLRQLQZKLFKWKHIRUHLJQWH[WLVLQVFULEHG ZLWKFXOWXUDOYDOXHVWKDWSUHYDLOLQFRQWHPSRUDU\$PHULFD7KXV'XGOH\),776± ZKRHVWDEOLVKHGD UHSXWDWLRQDVDOHDGLQJWUDQVODWRURIDQFLHQW*UHHNSRHWU\DQGGUDPDDGPLWWHGWKDWKLVPRGHUQYHUVLRQVRI *UHHNSRHPVµULVNHGDVSXULRXVDWPRVSKHUHRIPRQRWKHLVPE\ZULWLQJ³*RGÍRUµ=HXV¶´)LWWV[YLLL

$PHULFDQJOREDOKHJHPRQ\VLQFH:RUOG:DU7ZR 7UDQVODWLQJDQGLQWHUSUHWLQJKDYHVHUYHG$PHULFDQSROLWLFDODQGHFRQRPLFLQWHUHVWVRYHUWKHSDVWVHYHUDO GHFDGHVHQDEOLQJWKH8QLWHG6WDWHVWRDFKLHYHDQGPDLQWDLQLWVSUHHPLQHQFHLQZRUOGDIIDLUV7KH)RUHLJQ 6HUYLFHLQWKH6WDWH'HSDUWPHQWKDVORQJFRQWDLQHGDODQJXDJHVHFWLRQWRUHYLHZWUDQVODWLRQVRIGLSORPDWLF GRFXPHQWVDQGWRSURYLGHIRULQWHUSUHWLQJDWLQWHUQDWLRQDOFRQIHUHQFHV%\WKHPLGVWKLV/DQJXDJH 6HUYLFHV'LYLVLRQZDVSURYLGLQJDQDQQXDOWRWDORIPLOOLRQLQWUDQVODWLQJDQGLQWHUSUHWLQJIRUYDULRXV JRYHUQPHQWDJHQFLHV2EVWDQG&OLQH ,QWKH6WDWH'HSDUWPHQWWUDQVODWLRQKDVDOVRSHUIRUPHG H[SOLFLWO\LGHRORJLFDOIXQFWLRQV7KURXJKRXWWKH&ROG:DUWKH8QLWHG6WDWHV,QIRUPDWLRQ$JHQF\RSHUDWHGWKH 9RLFHRI$PHULFDUDGLREURDGFDVWVLQODQJXDJHVZKLOHLVVXLQJSURSDJDQGLVWLFPDWHULDOVLQSULQWDQG HOHFWURQLFPHGLD5RODQG $PHULFDQEXVLQHVVHVKDYHLQFUHDVLQJO\WXUQHGWRWUDQVODWLRQDVDZD\RIGHYHORSLQJRYHUVHDVPDUNHWVUHO\LQJ RQILUPVWKDWVSHFLDOL]HLQWUDQVODWLQJFRQWUDFWVLQVWUXFWLRQPDQXDOVDQGWHFKQLFDOLQIRUPDWLRQ7KHVHILUPV KDYHLQWXUQJURZQDQGPXOWLSOLHGFUHDWLQJDWUDQVODWLRQLQGXVWU\WKDWZDVUHFHQWO\YDOXHGDWELOOLRQ/HY\ ) )RUH[DPSOH$OO/DQJXDJH6HUYLFHVDSULYDWHO\RZQHGFRPSDQ\IRXQGHGLQZLWKILYH WUDQVODWRUVQRZHPSOR\VZRUNLQJLQODQJXDJHV6LQFHWKHVWKHWUDQVODWLRQGLYLVLRQRI%HUOLW] ,QWHUQDWLRQDODVXEVLGLDU\RIWKHSXEOLVKHU0DFPLOODQKDVDFTXLUHGVL[WUDQVODWLRQFRPSDQLHVLQWKH8QLWHG 6WDWHVDQG(XURSH\LHOGLQJDQQXDOUHYHQXHVRIPLOOLRQ 7KH$PHULFDQSXEOLVKLQJLQGXVWU\KDVEHHQUHODWLYHO\OHVVLQWHUHVWHGLQLQYHVWLQJLQWUDQVODWLRQ$OWKRXJKERRN SURGXFWLRQKDVLQFUHDVHGIRXUIROGVLQFHWKHVWKHQXPEHURIWUDQVODWLRQVKDVJHQHUDOO\UHPDLQHGEHWZHHQ DQGSHUFHQWRIWKHDQQXDOWRWDOLQFRQWUDVWWRVLJQLILFDQWO\KLJKHUSHUFHQWDJHVLQRWKHUFRXQWULHVVHH 9HQXWL±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



3DJH

DOOLHVRUDQWDJRQLVWVDVZHOODVUHDGHURSWLPLVPWKDWFXOWXUDOH[FKDQJHZRXOGIDFLOLWDWHEHWWHULQWHUQDWLRQDO XQGHUVWDQGLQJDQGPRUHSHDFHIXOSROLWLFDOUHODWLRQV6LQFH:RUOG:DU7ZRWKHODQJXDJHVPRVWIUHTXHQWO\ WUDQVODWHGLQWR(QJOLVKKDYHEHHQ)UHQFK*HUPDQ5XVVLDQ,WDOLDQDQG6SDQLVK:LWK5XVVLDQOLWHUDWXUH SXEOLVKHUVDSSHDOHGWR$PHULFDQDQWL&RPPXQLVWVHQWLPHQWE\IRFXVLQJRQZRUNVWKDWFULWLFL]HG0DU[LVPRU WKH6RYLHWJRYHUQPHQWQRYHOVOLNH%RULV3DVWHUQDN¶V'RFWRU=KLYDJR DQG$OH[DQGHU6RO]KHQLWV\Q¶V 2QH'D\LQWKH/LIHRI,YDQ'HQLVRYLFK ERWKRIZKLFKEHFDPHEHVWVHOOHUVLQWUDQVODWLRQ,QFRQWUDVW µWUDQVODWLRQVRI6RYLHWWKDWLVQRQGLVVLGHQW SURVHRIWKHV±VDUHUHODWLYHO\IHZDQGIDU EHWZHHQ¶0D\ 6LPLODUSDWWHUQVRIDGPLVVLRQDQGH[FOXVLRQKDYHRFFXUUHGZLWKOHVVIUHTXHQWO\WUDQVODWHGOLWHUDWXUHV,QWKH GHFDGHVDIWHU:RUOG:DU7ZR$PHULFDQSXEOLVKHUVHPSKDVL]HGDIHZPRGHUQ-DSDQHVHQRYHOLVWVPDLQO\ -XQLFKLUR7DQL]DNL


3DJH

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µWLHLQV¶ILOPRUWKHDWUH DGDSWDWLRQVWKDWHQVXUHZLGHUUHDGHUUHFRJQLWLRQDQGJUHDWHUVDOHV7KLVSXEOLVKLQJVWUDWHJ\KDVZRUNHGTXLWH ZHOOZLWKFODVVLFIRUHLJQQRYHOVWXUQHGLQWR%URDGZD\PXVLFDOV$IWHU%ULWLVKFRPSRVHU$QGUHZ/OR\G :HEEHUVXFFHVVIXOO\DGDSWHG7KH3KDQWRPRIWKH2SHUDWRWKHPXVLFDOWKHDWUH$PHULFDQSXEOLVKHUV VFUDPEOHGWREULQJRXWWUDQVODWLRQVRIWKHRULJLQDO *DVWRQ/HURX[QRYHO:KHQWKHVKRZRSHQHGLQ1HZ


3DJH

DVNHGWRSHUIRUPDQRUDOWUDQVODWLRQ/HFRPWHGX1R\ %HFDXVHRIWKHFXOWXUDOPDUJLQDOLW\RIWUDQVODWLRQLQWKH8QLWHG6WDWHVSURIHVVLRQDORUJDQL]DWLRQVKDYHEHHQ VORZWRHPHUJH1RQHWKHOHVVWKHIHZWKDWGRH[LVWKDYHKDGDVLJQLILFDQWLIYDU\LQJLPSDFWRQWKHWUDQVODWRU¶V VWDWXVDQGZRUNLQJFRQGLWLRQV)RXQGHGLQWKH$PHULFDQ7UDQVODWRUV$VVRFLDWLRQ$7$ FXUUHQWO\KDV PRUHWKDQPHPEHUV,WDGPLQLVWHUVDQDFFUHGLWDWLRQSURJUDPPHLQYROYLQJZULWWHQH[DPLQDWLRQVLQ ODQJXDJHSDLUVRIIHUVDGYLFHRQILQDQFLDOGHDOLQJVDQGRUJDQL]HVDQDQQXDOFRQIHUHQFH1HZPDQ 7KH $7$¶VSXEOLFDWLRQVLQFOXGHDGLUHFWRU\RIDFFUHGLWHGPHPEHUVZKLFKOLVWVWKHLUODQJXDJHVDQGDUHDVRI VSHFLDOL]DWLRQDQGDQDQQXDOFROOHFWLRQRIFRQIHUHQFHSURFHHGLQJV 7KH\HDUDOVRVDZWKHIRXQGLQJRIWKH7UDQVODWLRQ&RPPLWWHHRIWKH3(1$PHULFDQ&HQWHULQ1HZ


3DJH

)RUHLJQODQJXDJHGHSDUWPHQWVLQXQLYHUVLWLHVKDYHORQJRIIHUHGLQGLYLGXDOFRXUVHVLQWUDQVODWLQJDQG LQWHUSUHWLQJEXWFXUULFXODWRWUDLQWUDQVODWRUVHPHUJHGLQWKHZDNHRI:RUOG:DU7ZR7KH'LYLVLRQRI ,QWHUSUHWDWLRQDQG7UDQVODWLRQDW*HRUJHWRZQ8QLYHUVLW\ZDVFUHDWHGLQDIWHUWKH1XUHPEHUJ7ULDOV GHPRQVWUDWHGWKHXUJHQWQHHGIRULQWHUSUHWHUVLQLQWHUQDWLRQDODIIDLUV,QDIWHURIIHULQJFRXUVHVLQIRUHLJQ ODQJXDJHVDQGFXOWXUHVIRUPRUHWKDQDGHFDGHWKH0RQWHUH\,QVWLWXWHRI,QWHUQDWLRQDO6WXGLHVLQVWLWXWHG PDVWHU¶VSURJUDPPHVWKDWHQDEOHGVWXGHQWVWRVSHFLDOL]HLQFRQIHUHQFHLQWHUSUHWLQJDQGWKHWUDQVODWLRQRIQRQ ILFWLRQWH[WV7UDLQLQJLQOLWHUDU\WUDQVODWLRQKDVWDNHQWKHIRUPRIZRUNVKRSVLQSRVWJUDGXDWHFUHDWLYHZULWLQJ SURJUDPPHV,QWKH8QLYHUVLW\RI,RZDEHJDQDOORZLQJFUHDWLYHZULWLQJVWXGHQWVWRFKRRVHWUDQVODWLRQDV DQDUHDRIVSHFLDOLW\DQGWUDQVODWLRQZRUNVKRSVVRRQDSSHDUHGLQZULWLQJSURJUDPPHVDWVXFKRWKHU XQLYHUVLWLHVDV&ROXPELD3ULQFHWRQ


3DJH

7KHFKDQJHLQWKHGLUHFWLRQRIUHVHDUFKFDQEHJOLPSVHGLQ7UDQVODWLRQ3HUVSHFWLYHVDVHULHVRIRFFDVLRQDO SDSHUVSXEOLVKHGVLQFHE\WKH7UDQVODWLRQ5HVHDUFKDQG,QVWUXFWLRQ3URJUDPDW681<%LQJKDPWRQDQG HGLWHGE\0DULO\Q*DGGLV5RVH$ZDWHUVKHGYROXPHZKLFKDOVRRULJLQDWHGLQDFRQIHUHQFHDW%LQJKDPWRQLV *UDKDP ZKLFKUHSUHVHQWVSRVWVWUXFWXUDOLVWVW\OHVRIWKLQNLQJ ,QWKHVDVWUDQVODWLRQEHJLQVWRHPHUJHDVDVFKRODUO\GLVFLSOLQHLQLWVRZQULJKWWZRUDWKHUGLIIHUHQW SDUDGLJPVDSSHDUWREHGULYLQJUHVHDUFK2QWKHRQHKDQGLVDQDSSURDFKWKDWFDQJHQHUDOO\EHFDOOHGWH[W OLQJXLVWLFVLQZKLFKQRWLRQVRIHTXLYDOHQFHDUHJURXQGHGRQWKHFODVVLILFDWLRQRIWH[WW\SHVDQGIXQFWLRQV2Q WKHRWKHUKDQGLVDQDSSURDFKWKDWFDQJHQHUDOO\EHFDOOHGFXOWXUDOVWXGLHVZKLFKLVFRQFHUQHGZLWKKRZ YDOXHVLGHRORJLHVDQGLQVWLWXWLRQVVKDSHSUDFWLFHVGLIIHUHQWO\LQGLIIHUHQWKLVWRULFDOSHULRGV7KHVHUHVHDUFK SDUDGLJPVDUHYLVLEOHLQWKHILUVWWZRERRNVLQ7UDQVODWLRQ6WXGLHVDVHULHVSXEOLVKHGE\.HQW6WDWH8QLYHUVLW\ 3UHVVDQGHGLWHGE\$OEUHFKW1HXEHUWDQG*UHJRU\6KUHYH1HXEHUWDQG6KUHYH.DGLVKDQG0DVVDUGLHU .HQQH\ 2WKHUUHFHQWSXEOLFDWLRQVLQGLFDWHWKDWFXOWXUDOVWXGLHVLVOLNHO\WRGRPLQDWHWUDQVODWLRQUHVHDUFK LQWKH8QLWHG6WDWHV,WLVWKLVDSSURDFKWKDWVHHPVWREHVWLPXODWLQJWKHPRVWLQWHUHVWDWWUDFWLQJVFKRODUVIURP GLVFLSOLQHVWKDWKDYHKLWKHUWRQHJOHFWHGWUDQVODWLRQ²GHVSLWHLWVLPSRUWDQFHLQ$PHULFDQFXOWXUDODQGSROLWLFDO KLVWRU\

)XUWKHUUHDGLQJ $SWHU%DNHU%DUQVWRQH%RZHQ&KH\ILW]&XQQLQJKDPGH6XD)RZOHU *HQW]OHU/HFRPWHGX1R\/HIHYHUHDF0D\1HXEHUWDQG6KUHYH 2EVWDQG&OLQH3D\QH3RFKPDQQ9DQGHUDXZHUD9HQXWLD

/$:5(1&(9(187,

%LRJUDSKLHV (/,27-RKQ±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µ,QGLDQ$SRVWOH¶+HHVWDEOLVKHGPDQ\VHWWOHPHQWVRI,QGLDQVZKRPKHQRW RQO\FRQYHUWHGWR&KULVWLDQLW\EXWLQWURGXFHGWR(QJOLVKFXOWXUDODQGVRFLDOSUDFWLFHV,Q(OLRWEHJDQWR ZULWHLQWKH$OJRQTXLDQODQJXDJHSURGXFLQJDFDWHFKLVPDQGDWUDQVODWLRQRIWKH%LEOH+HDOVRSXEOLVKHG PDQXDOVRI$OJRQTXLDQVXFKDV7KH,QGLDQJUDPPDU%HJXQ ZKLFKZHUHGHVLJQHGIRUPLVVLRQDULHVDV ZHOODVQDWLYHFRQYHUWV ),776'XGOH\± $PHULFDQSRHWFULWLFDQGWUDQVODWRU%RUQLQ%RVWRQDQGHGXFDWHGDW+DUYDUG 8QLYHUVLW\)LWWVWDXJKWIRUPDQ\\HDUVDWSULYDWHVFKRROVLQ1HZ(QJODQGILUVW&KRDWHDQGWKHQ3KLOLSV $FDGHP\)URPWKHODWHVRQZDUGKHJDLQHGDGLVWLQJXLVKHGUHSXWDWLRQDVDWUDQVODWRURIFODVVLFDO OLWHUDWXUHPRVWO\GUDPDE\$ULVWRSKDQHVDQG6RSKRFOHVEXWDOVR*UHHNDQG/DWLQHSLJUDPV,Q)LWWV HGLWHGDQGFRQWULEXWHGWUDQVODWLRQVWRDSLRQHHULQJDQWKRORJ\RIFRQWHPSRUDU\/DWLQ$PHULFDQSRHWU\,Q KHSXEOLVKHGDQHVVD\RQWUDQVODWLRQHQWLWOHGµ7KH3RHWLF1XDQFH¶LQZKLFKKHDUJXHGWKDWDSRHWU\WUDQVODWLRQ VKRXOGEHMXGJHGDVDQDXWRQRPRXVOLWHUDU\WH[W)LWWV¶VWUDQVODWLRQVZHUHIUHHVRPHWLPHVYHUJLQJRQ SDUDSKUDVHDQGXVXDOO\FDVWLQWKHVWDQGDUGGLDOHFWRI$PHULFDQ(QJOLVK+HZDVDQLQIOXHQWLDOFULWLFRISRHWU\ DQGWUDQVODWLRQVZKRVHUHYLHZVDSSHDUHGLQQXPHURXVSHULRGLFDOVERWKPDVVDQGVPDOOFLUFXODWLRQ 3281'(]UD± $PHULFDQSRHWFULWLFDQGWUDQVODWRU%RUQLQ,GDKRDQG



3DJH

HGXFDWHGDW+DPLOWRQ&ROOHJHDQGWKH8QLYHUVLW\RI3HQQV\OYDQLD3RXQGZDVRQHRIWKHPRVWLQIOXHQWLDO ILJXUHVLQWKHPRGHUQLVWOLWHUDU\PRYHPHQW,QDIWHUSXUVXLQJJUDGXDWHVWXG\LQ5RPDQFHODQJXDJHVDQG OLWHUDWXUHVKHOHIWIRU(XURSHOLYLQJILUVWLQ/RQGRQ± DQGWKHQLQ3DULV± EHIRUHVHWWOLQJLQ ,WDO\DW5DSDOOR3RXQG¶VVSHFXODWLRQVRQWKHUHODWLRQVKLSEHWZHHQFXOWXUHHFRQRPLFVDQGSROLWLFVOHGKLPWR VXSSRUW0XVVROLQLGXULQJ:RUOG:DU7ZR8SRQKLVUHWXUQWRWKH8QLWHG6WDWHVLQKHZDVDUUHVWHGIRU WUHDVRQDQGFRPPLWWHGWR6W(OL]DEHWK¶V+RVSLWDOIRUWKH&ULPLQDOO\,QVDQHLQ:DVKLQJWRQ'&IURPZKHUHKH ZDVUHOHDVHGLQDQGUHWXUQHGWR,WDO\3RXQGYLHZHGWUDQVODWLRQDVDNH\SUDFWLFHLQPRGHUQLVWSRHWLFVKH ZURWHSRHPVWKDWLQFRUSRUDWHGDGDSWDWLRQVDQGWUDQVODWLRQVOLNH+RPDJHWR6H[WXV3URSHUWLXV DQGWKH YROXPLQRXV&DQWRVEHJXQLQ EXWKHDOVRSURGXFHGPDQ\WUDQVODWLRQVRISRHPVDQGSURVHIURP$QJOR 6D[RQ3URYHQoDO,WDOLDQ&KLQHVHDQG)UHQFK3RXQG¶VZRUNDVDWUDQVODWRUZDVH[SHULPHQWDODQGLQQRYDWLYH GUDZLQJXSRQDUDQJHRI(QJOLVKGLDOHFWVDQGGLVFRXUVHVDQGSURGXFLQJXQXVXDOWUDQVODWLRQHIIHFWV+H UDWLRQDOL]HGKLVFKRLFHRIIRUHLJQWH[WVWRWUDQVODWHDQGKLVWUDQVODWLRQVWUDWHJLHVLQDQXPEHURIHVVD\VDQG SUHIDFHV 5,3/(<*HRUJH±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
$UDELFWUDGLWLRQ $UDELFLVDVHPLWLFODQJXDJH,WRULJLQDWHGLQWKH$UDELDQSHQLQVXODEXWVSUHDGIDUEH\RQGWKHFRQILQHVRILWV ELUWKSODFHZLWKWKHULVHRI,VODPLQWKHVHYHQWKFHQWXU\ 3ULRUWRWKHULVHRI,VODPDQGWKHFRQVROLGDWLRQRIWKHµ$UDEQDWLRQ¶WKHYDULRXVSHRSOHVZKRLQKDELWHG GLIIHUHQWSDUWVRIWKHWHUULWRU\QRZNQRZQDVWKH$UDE:RUOGZHUHLQPDQ\FDVHVELOLQJXDOVSHDNLQJ$UDELFLQ HYHU\GD\



3DJH

FRQWH[WVDQGXVLQJDYDULHW\RIODQJXDJHVVXFKDV6\ULDFDQG$UDPDLFIRUWUDGHDQGOHDUQLQJ+LWWLII HVSHFLDOO\DV$UDELFGLGQRWGHYHORSDZULWLQJV\VWHPXQWLODOPRVWWKHULVHRI,VODP7KH\ZHUHRIGLIIHUHQW HWKQLFEDFNJURXQGVDQGIROORZHGYHU\GLIIHUHQWZD\VRIOLIHYDU\LQJEHWZHHQDQRPDGLFWULEDOH[LVWHQFHLQ WKHSHQLQVXODSUHVHQWGD\6DXGL$UDELD
7UDQVODWLRQLQWKH$UDE,VODPLF(PSLUHVHYHQWKWRWKLUWHHQWKFHQWXULHV 6RPHWUDQVODWLRQDFWLYLW\VHHPVWRKDYHWDNHQSODFHRQDVPDOOVFDOHSULRUWRWKHULVHRI,VODP$PDQXVFULSW GDWLQJEDFNWR$'DQGZULWWHQLQ*UHHN6\ULDFDQG$UDELFZDVIRXQGQHDU$OHSSR,WOLVWVDPRQJRWKHU WKLQJVWKHQDPHVRIPHQLQYROYHGLQEXLOGLQJWKHFKXUFKZKHUHWKHPDQXVFULSWZDVIRXQG$OL 6RPHWUDQVODWLRQDQGLQWHUSUHWLQJDFWLYLWLHVPXVWKDYHDOVRH[LVWHGLQWKHYHU\HDUO\GD\VRI,VODPWKRXJKZH KDYHYHU\IHZ



3DJH

UHFRUGVRIVXFKDFWLYLW\:HGRNQRZKRZHYHUWKDWWKH3URSKHWVHQWPHVVDJHVWRYDULRXVSROLWLFDOUXOHUVVXFK DVWKH9LFHUR\RI(J\SWXUJLQJWKHPWRDGRSWWKHQHZUHOLJLRQVHH485¶Ɩ175$16/$7,21 7KLVW\SHRI H[FKDQJHEHWZHHQWKH3URSKHWDQGQRQ$UDEUXOHUVFRXOGQRWKDYHWDNHQSODFHZLWKRXWVRPHIRUPRIOLQJXLVWLF PHGLDWLRQ0RUHRYHUWKH4XU¶Ɨ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¶Ɨ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± DQGUHDFKHGLWV]HQLWKXQGHUWKH$EEDVLGV± SDUWLFXODUO\GXULQJWKHUHLJQRIDO0D¶PǌQ± NQRZQDVWKH*ROGHQ(UDRIWUDQVODWLRQ7KH FHQWUHRIWKLVDFWLYLW\ZDV%DJKGDGDIDEXORXVFLW\EXLOWE\WKH$EEDVLGFDOLSKDO0DQVǌUDQGWKHVFHQHRI PDQ\HSLVRGHVLQWKHIDPRXV7KRXVDQGDQG2QH1LJKWV 7KLVXQSUHFHGHQWHGFRPPLWPHQWWRWUDQVODWLRQFDQEHGLVWLQJXLVKHGIURPDQ\WUDQVODWLRQDFWLYLW\WKHZRUOGKDG NQRZQEHIRUHLQWHUPVRIWKUHHIDFWRUVDO.Kǌ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ǌUWKHVHFRQG$EEDVLGFDOLSK± DQGH[SDQGHGFRQVLGHUDEO\E\DO 5DVKƯG± DQGDO0D¶PǌQ± 7KH8PD\\DG3HULRG 7KHILUVWKDOIRIWKHHLJKWKFHQWXU\ZLWQHVVHGDQXPEHURIGHYHORSPHQWVZKLFKODLGWKHORQJWHUPIRXQGDWLRQV RIWKH(PSLUHWKHGHYHORSPHQWRIDSRVWDOVHUYLFH$UDELFFRLQDJHDQGPRVWLPSRUWDQWO\WKHHVWDEOLVKPHQWRI $UDELFDVWKHRIILFLDOODQJXDJHRIDGPLQLVWUDWLRQUHSODFLQJ*UHHNLQ'DPDVFXV3DKODYLLQ,UDTDQGWKH (DVWHUQSURYLQFHVDQG&RSWLFLQ(J\SW



3DJH

7UDQVODWLRQDFWLYLW\DOVRVWDUWHGLQHDUQHVWGXULQJWKLVSHULRG7KHPRVWDXWKRULWDWLYHDQGFRPSUHKHQVLYH VRXUFHDERXWWUDQVODWLRQDQGZULWLQJDFWLYLWLHVLQWKH,VODPLF(PSLUHLVDO)LKULVWOLWµ7KH,QGH[¶ FRPSLOHG E\DO1DGƯPLQ$O)LKULVWFODLPVWKDWLWZDV3ULQFH.KƗOLGVRQRIWKHVHFRQG8PD\\DGFDOLSKZKR FRPPLVVLRQHGWKHILUVWWUDQVODWLRQVIURP*UHHNDQG&RSWLFDO1DGƯPLQDO.KǌU\ KDYLQJWXUQHGWR WKHSXUVXLWRINQRZOHGJHIROORZLQJKLVIDLOXUHWRDFTXLUHWKHSRVLWLRQRIFDOLSK$OWKRXJKWKHDVFULSWLRQRIWKLV DFWLYLW\WR.KƗOLGLVFRQWHVWHGLQWKHOLWHUDWXUH+LWWL WKHUHLVJHQHUDODJUHHPHQWWKDWWKHILUVW WUDQVODWLRQVZHUHFDUULHGRXWGXULQJWKLVSHULRGDQGZHUHIURP*UHHNDQG&RSWLF$O)LKULVWIXUWKHUVXJJHVWV WKDWWKHILUVWWUHDWLVHVWREHWUDQVODWHGZHUHRQDOFKHP\EHFDXVH.KƗOLGEHOLHYHGLWZDVSRVVLEOHWRWXUQ PLQHUDOVLQWRJROG$WDQ\UDWHZHGRNQRZWKDWWUDQVODWLRQVFDUULHGRXWGXULQJWKLVSHULRGLQFOXGHGWUHDWLVHV RQPHGLFLQHDVWURORJ\DQGDOFKHP\,QDGGLWLRQDUDELFL]LQJWKHDGPLQLVWUDWLRQXQGHU0DUDZƗQQDWXUDOO\ LQYROYHGDFHUWDLQDPRXQWRIWUDQVODWLRQRIRIILFLDOGRFXPHQWVLQWKHLQLWLDOVWDJHV %\]DQWLQHDQG3HUVLDQVRQJVDOVRILUVWEHJDQWRDSSHDULQWUDQVODWLRQGXULQJWKLVSHULRG7KHWUDQVODWLRQVZHUH FDUULHGRXWE\6DFƯG,EQ0LVMƗKWKHILUVW0HFFDQPXVLFLDQDQGRQHRIWKHEHVWNQRZQGXULQJWKH8PD\\DG SHULRG+LWWL $JUHDWGHDORI*UHHNJQRPRORJLDZLVGRPOLWHUDWXUH ZDVWUDQVODWHGLQWR$UDELFWRZDUGVWKHHQGRIWKH 8PD\\DGSHULRGLQFOXGLQJYLUWXDOO\DOOJQRPRORJLDFRQQHFWHGZLWK$ULVWRWOHDQG$OH[DQGHU*DWDV 7KHVHWUDQVODWLRQVZHUHWRKDYHDVWURQJLQIOXHQFHRQ$UDELFSRHWU\LQWKHQLQWKDQGWHQWK FHQWXULHV7ZRRIWKHPRVWFHOHEUDWHG$UDESRHWVRIWKHSHULRG$EXDOF$WƗKL\DDQGDO0XWDQDEELXVHG JQRPLFPDWHULDOLQWKHLUSRHPV 7KH$EEDVLG3HULRG :KHUHDVWKHpOLWHRIWKH8PD\\DG(PSLUHZDVODUJHO\$UDEHWKQLFDOO\VSHDNLQJ WKH$EEDVLG(PSLUHZDV RYHUDOOPRUHLQWHUQDWLRQDOLQFRPSRVLWLRQDQGFKDUDFWHUZLWKHWKQLF$UDEVIRUPLQJRQO\RQHSDUWRIWKHQDWLRQ DQGLWVpOLWH,QGXHFRXUVHWKHZRUGµ$UDE¶FDPHWRUHIHUWRDQ\$UDELFVSHDNLQJ0XVOLPLUUHVSHFWLYHRI UDFLDOEDFNJURXQGRUDIILOLDWLRQ7KXVLWPXVWEHERUQHLQPLQGWKDWWKHPDQ\UHIHUHQFHVWRWKHODUJHERG\RI NQRZOHGJHDFFXPXODWHGGXULQJWKLVSHULRGDVµ$UDE¶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ƗG²WKHVWRU\WHOOHU²LVD3HUVLDQQDPH WKLVLQWXUQFRQWDLQHGVHYHUDOVWRULHVRI,QGLDQRULJLQ6RPH RIWKHVWRULHVZHUHDOVRDGGHGPXFKODWHUDQGPD\KDYHEHHQLQVSLUHGE\WKHQHZFRQWH[WDQGZULWWHQLQ$UDELF $OH[DQGULDKDGEHHQFDSWXUHGLQDQGWKH$UDEVKDGEHJXQWRVDPSOHWKHULFKHVRILWVJUHDWVFKRODUO\ WUDGLWLRQ7KHILUVWFHQWUHVRIHGXFDWLRQVWDUWHGWRDSSHDULQWKHHDUO\HLJKWKFHQWXU\LQ(J\SWDQG,UDTDQG HDUO\$EEDVLGFDOLSKVVXEVHTXHQWO\EHJDQWRWDNHDQDFWLYHLQWHUHVWLQWUDQVODWLRQ7KHVHFRQG$EEDVLGFDOLSK DO0DQVǌUUHLJQHG± FRPPLVVLRQHGDQXPEHURIWUDQVODWLRQVDQGVHWXSDWUDQVODWLRQFKDPEHU$O 5DVKƯGUHLJQHG± VLPLODUO\VXSSRUWHGWUDQVODWLRQ



3DJH

DFWLYLW\DQGHQODUJHGWKHWUDQVODWLRQFKDPEHUVHWXSE\DO0DQVǌU%XWLWZDVDO0D¶PǌQZKRIRXQGHGLQ WKHPRVWLPSRUWDQWLQVWLWXWHRIKLJKHUOHDUQLQJLQ,VODPZKLFKDOVREHFDPHWKHPRVWFHOHEUDWHGFHQWUHRI +RXVHRI:LVGRP LQ%DJKGDGIXQFWLRQHGDVDQDFDGHP\ WUDQVODWLRQLQ$UDEKLVWRU\%D\WDO OLEUDU\DQGWUDQVODWLRQEXUHDXDQGKDGDSHUVRQQHORIWUDQVODWRUVZRUNLQJIURP*UHHN6\ULDF3HUVLDQ 6DQVNULWDQG$UDPDLF$O1DGƯPWHOOVXVLQDO)LKULVWWKDWLQ%D\WDO+LNPDDORQHWUDQVODWRUVZRUNHGIURP *UHHNDQG6\ULDFIURP3HUVLDQWZRIURP6DQVNULWDQGRQHIURP$UDPDLFLQ.D\D $YDVWUDQJHRIPDWHULDOZDVWUDQVODWHGXQGHUWKH$EEDVLGV3WROHP\¶V*HRJUDSK\ZDVWUDQVODWHGLQWR$UDELF VHYHUDOWLPHVPRVWQRWDEO\E\7KƗELW,EQ4XUUDKHLWKHUGLUHFWO\RUWKURXJK6\ULDF*HQHUDOO\VSHDNLQJ*UHHN PDWHULDODOUHDG\DYDLODEOHLQ6\ULDFZDVWUDQVODWHGIURP6\ULDFZKLFKVWLOOIXQFWLRQHGDVWKHOLWXUJLFDO ODQJXDJHRIWKH1HVWRULDQVZKRKHDGHGWKHWUDQVODWLRQFKDPEHUV*UHHNZRUNVZKLFKZHUHQRWDYDLODEOHLQ 6\ULDFZHUHHLWKHUUHQGHUHGGLUHFWO\LQWR$UDELFRUILUVWLQWR6\ULDFDQGWKHQLQWR$UDELF*UHHNZRUNVRQ PRUDOSKLORVRSK\VWDUWLQJZLWK$ULVWRWOH¶V(WKLFVZHUHDPRQJWKHILUVWWREHWUDQVODWHGDQGODLGWKHIRXQGDWLRQ IRUWKHLQGLJHQRXVYHUVLRQRISKLORVRSK\NQRZQDVFLOPDO$NKOƗTOLWµVFLHQFHRIPDQQHUVEHKDYLRXU¶ 7KH VFLHQWLILFVWXG\RIDVWURQRP\ZDVLQVSLUHGE\WKHWUDQVODWLRQF RIDQ,QGLDQWUHDWLVH6LQGKLQGE\ ,EQ,EUƗKƯPDO)D]DULZKRVHWUDQVODWLRQVRIWKLVDQGRWKHU+LQGXZRUNVDOVRLQWURGXFHGLQWRWKH 0XVOLP:RUOGDQGODWHU(XURSHWKH+LQGXQXPHUDOV\VWHPDQGWKHµ]HUR¶7KH2OGDQG1HZ7HVWDPHQWVRU IUDJPHQWVRIWKHPZHUHWUDQVODWHGVHYHUDOWLPHV7KHPRVWLPSRUWDQWIXOOWUDQVODWLRQRIWKH2OG7HVWDPHQW ZDVGRQHE\6DFƯGDO)D\\ǌPL± LQ(J\SW 2YHUDOOWKH$UDEVWUDQVODWHGHVVHQWLDOO\VFLHQWLILFDQGSKLORVRSKLFDOPDWHULDOIURP*UHHNDQGVKRZHGOLWWOHRU QRLQWHUHVWLQ*UHHNGUDPDDQGSRHWU\$VIDUDVOLWHUDWXUHZDVFRQFHUQHG3HUVLDQ²UDWKHUWKDQ*UHHN² SURYLGHGPRVWRIWKHVRXUFHWH[WVGXULQJWKLVSHULRG,QGLDRQWKHRWKHUKDQGZDVWKHFKLHIVRXUFHRIZLVGRP OLWHUDWXUHDQGPDWKHPDWLFVWKRXJKLWPXVWEHERUQHLQPLQGWKDWPXFKRI3HUVLDQOLWHUDWXUHFDQEHWUDFHGEDFN WR,QGLDQVRXUFHV)RUH[DPSOHDVLQWKHFDVHRIWKH7KRXVDQGDQG2QH1LJKWV.DOLODKZD'LPQDDQRWKHU LPSRUWDQWZRUNRIOLWHUDWXUHLQ$UDELF LVEDVHGRQDWUDQVODWLRQIURP0LGGOH3HUVLDQZKLFKLQWXUQLVEDVHGRQ 6DQVNULWVRXUFHV6DQVNULWZDVDOVRLPSRUWDQWDVDVRXUFHODQJXDJHIRUPHGLFDOWUHDWLVHVWKRXJKWKH WUDQVODWLRQVZHUHRIWHQFDUULHGRXWYLD3HUVLDQDVLQWKHFDVHRIWKHJUHDW,QGLDQPHGLFDOWUHDWLVH&KDUDND 6DPKLWD0H\HUKRI $ODUJHQXPEHURIWKHWUDQVODWRUVDFWLYHGXULQJWKLVSHULRGZHUH&KULVWLDQ5RVHQWKDO DQGPDQ\ZHUH VFKRODUVLQWKHLURZQULJKW7KHPRVWQRWDEOHZDV ,EQ0ƗVƗZD\K± ZKRKHDGHG%D\W F

DQGZKRZURWH'DJKDODO $\Q'LVRUGHUVRIWKH(\H WKHROGHVWV\VWHPDWLFZRUNRQRSKWKDOPRORJ\ LQ$UDELF ,%1 ZKRZDVSDLGE\DO0D¶PǌQ 2QHRIWKHPRVWRXWVWDQGLQJWUDQVODWRUVGXULQJWKLVSHULRGLV LQJROGPDWFKLQJWKHZHLJKWRIWKHERRNVKHWUDQVODWHG%HLQJVRPHZKDWJUHHG\KHZURWHLQODUJHOHWWHUVRQ WKLFNKHDY\SDSHUZLWKZLGHVSDFHVEHWZHHQOLQHVDO'LIƗFDO.KǌU\ +LVJUHHGKDG WKHXQH[SHFWHGVLGHEHQHILWRIHQVXULQJWKDWWKHPDQXVFULSWVUHPDLQHGLQWDFWDQGUHDGDEOHIRUVHYHUDOFHQWXULHV LVFUHGLWHGZLWKWUDQVODWLQJVRPHPDQXVFULSWVLQWR6\ULDFDQGLQWR$UDELFLQFOXGLQJWKH ,EQ DQGKLV ZRUNVRI$ULVWRWOH3ODWRDQG3WROHP\+HZDVDLGHGLQWKLVDPELWLRXVHQWHUSULVHE\KLVVRQ QHSKHZ $QRWKHUSUROLILFWUDQVODWRURIWKHSHULRGZDVWKH6DELDQ7KƗELW,EQ4XUUDKF± WKH6DELDQVZHUHD FRPPXQLW\RIVWDUZRUVKLSSHUVZKRQDWXUDOO\KDGDORQJVWDQGLQJLQWHUHVWLQDVWURQRP\,EQ4XUUDKDQGKLV GLVFLSOHVZHUHUHVSRQVLEOHIRUWUDQVODWLQJPRVWRIWKH*UHHNZRUNVRQDVWURQRP\DQGPDWKHPDWLFVLQFOXGLQJ RWKHUPHPEHUV WKHZRUNVRI$UFKLPHGHVDQG$SROORQLXVRI3HUJD+LWWL $VLQWKHFDVHRI,EQ RI,EQ4XUUDK¶VLPPHGLDWHIDPLO\IROORZHGLQKLVIRRWVWHSVDQGGLVWLQJXLVKHGWKHPVHOYHVDVWUDQVODWRUV LQFOXGLQJKLVVRQ6LQƗQKLVJUDQGVRQV7KƗELWDQG,EUƗKƯPDQGKLVJUHDWJUDQGVRQ$EXDO)DUDMLELG 7ZRPHWKRGVRIWUDQVODWLRQVHHPWRKDYHEHHQDGRSWHGGXULQJWKLVSHULRG5RVHQWKDO



3DJH

7KHILUVWDVVRFLDWHGZLWK ,EQDO%DWUƯTDQG,EQ1ƗFLPD ZDVKLJKO\OLWHUDODQG FRQVLVWHGRIWUDQVODWLQJHDFK*UHHNZRUGZLWKDQHTXLYDOHQW$UDELFZRUGDQGZKHUHQRQHH[LVWHGERUURZLQJ WKH*UHHNZRUGLQWR$UDELF7KLVPHWKRGZDVQRWVXFFHVVIXORYHUDOODQGPDQ\RIWKHWUDQVODWLRQVFDUULHGRXW ,EQ 7KHVHFRQGPHWKRG E\DO%DWUƯTZHUHODWHUUHYLVHGXQGHUDO0D¶PǌQPRVWQRWDEO\E\ DQGDO-DZKDULFRQVLVWHGRIWUDQVODWLQJVHQVHIRUVHQVHFUHDWLQJIOXHQWWDUJHWWH[WV DVVRFLDWHGZLWK,EQ DQGKLVIROORZHUV ZKLFKFRQYH\HGWKHPHDQLQJRIWKHRULJLQDOZLWKRXWGLVWRUWLQJWKHWDUJHWODQJXDJH,EQ WKXVJDYHSULRULW\WRWKHUHTXLUHPHQWVRIWKHWDUJHWODQJXDJHDQGWKHWDUJHWUHDGHUIURPWKHRXWVHWVWUHVVLQJ UHDGDELOLW\DQGDFFHVVLELOLW\LQDZD\ZKLFKVXJJHVWVWKDWWKHWUDQVODWLRQVZHUHFRQFHLYHGDVKDYLQJDGLGDFWLF IRULQVWDQFHH[SOLFLWO\SUDLVHGKLVRZQWUDQVODWLRQVIRUWKHLUµSOHDVDQWDQGOLPSLGVW\OH IXQFWLRQ,EQ ZKLFKFDQEHXQGHUVWRRGE\WKHQRQH[SHUWLQWKHILHOGRIPHGLFDOVFLHQFHRUE\KLPZKRGRHVQRWNQRZ DQ\WKLQJRIWKHZD\VRISKLORVRSK\¶FLWHGLQ6DODPD&DUU ,QDGGLWLRQWRFRPPHQWVFRQFHUQLQJWKHPRVWVXFFHVVIXOPHWKRGRIWUDQVODWLRQWKHUHZDVDOVRVRPHUHIOHFWLRQ GXULQJWKLVSHULRGRQVXFKLVVXHVDVZKHWKHUWUDQVODWLRQRIFHUWDLQWH[WW\SHVZDVDWDOOSRVVLEOHZKHWKHU WUDQVODWHGWH[WVLQJHQHUDORIIHUHGDUHOLDEOHVRXUFHRILQIRUPDWLRQDQGWKHHIIHFWRILQWHUIHUHQFHIURP*UHHN G RQHRIWKHEHVWNQRZQZULWHUVRIWKHSHULRGZDV DQG6\ULDFRQWKHVWUXFWXUHRI$UDELF SDUWLFXODUO\FDXVWLFLQKLVVWDWHPHQWVDERXWWUDQVODWRUVDQGWUDQVODWLRQLQVLVWLQJWKDWµWKHWUDQVODWRUFDQQHYHUGR >WKHSKLORVRSKHU@MXVWLFHRUH[SUHVVKLPZLWKILGHOLW\¶FLWHGLQ6DODPD&DUU %XWDSDUWIURPVXFK RFFDVLRQDOFULWLFLVPRIWKHLUSURIHVVLRQWUDQVODWRUVJHQHUDOO\HQMR\HGDPRVWHQYLDEOHSRVLWLRQXQGHUWKH $EEDVLGV7KHLUZRUNZDVKLJKO\YDOXHGDQGWKH\VHHPWRKDYHHQMR\HGDUDWKHUOX[XULRXVVW\OHRIOLIHDWOHDVW WKHPRUHVXFFHVVIXODPRQJWKHP$O1DGƯPFLWHGLQ+LWWL JLYHVDODYLVKGHVFULSWLRQRIWKH ,EQ KHEDWKHGUHOD[HGLQDORXQJLQJUREHHQMR\HGDOLJKWGULQNDQGDELVFXLW GDLO\URXWLQHRI KDGKLVVLHVWDDQGRQZDNLQJµEXUQHGSHUIXPHWRIXPLJDWHKLVSHUVRQ¶KDGGLQQHUZHQWEDFNWRVOHHSZRNH XSDJDLQDQGGUDQNVHYHUDOURWOV$UDELFPHDVXUHRIZHLJKW RIZLQHµWRZKLFKKHDGGHGTXLQFHVDQG6\ULDQ DSSOHVLIKHIHOWWKHGHVLUHIRUIUHVKIUXLWV¶ 7KLV*ROGHQ(UDRIWUDQVODWLRQXQGHUHDUO\$EEDVLGUXOHZDVIROORZHGE\DULFKSHULRGRIRULJLQDOZULWLQJLQ PDQ\ILHOGVLQFOXGLQJDVWURQRP\DOFKHP\JHRJUDSK\OLQJXLVWLFVWKHRORJ\DQGSKLORVRSK\+HUHDJDLQWKH PRVWRXWVWDQGLQJFRQWULEXWLRQVFDPHIURP$UDELFVSHDNLQJVXEMHFWVRIWKH(PSLUHLHQRQHWKQLF$UDEV HVSHFLDOO\3HUVLDQVVXFKDV,EQ6ƯQD$YLFHQQD DO7DEDULDQGDO5Ɨ]L5KD]HV 0XFKRIWKLVRULJLQDOZULWLQJ LQFOXGHGDVXEVWDQWLDODPRXQWRIFRPPHQWDU\RQ*UHHNVRXUFHVVXFKDV$ULVWRWOHE\ZULWHUVZKRRIWHQKDGQR NQRZOHGJHRI*UHHNDQGZKRUHOLHGRQH[LVWLQJ$UDELFWUDQVODWLRQVLQGHYHORSLQJWKHLURZQSKLORVRSKLFDO SRVLWLRQV7KLVLVWUXHIRUH[DPSOHRIWKHZRUNVRI,EQ5XVKG$YHUURsV DQGWKH-HZLVKSKLORVRSKHUDVZHOO DVDVWURQRPHUWKHRORJLDQDQGSK\VLFLDQ 0ǌVD,EQ0D\PǌQ0DLPRQLGHV $QRWKHULQWHUHVWLQJIHDWXUHRIWKH µRULJLQDOZULWLQJ¶ZKLFKIROORZHGWKH*ROGHQ(UDRIWUDQVODWLRQLVWKDWVRPHRILWWKRXJKZULWWHQLQ$UDELF ZDVHLWKHUORVWDQGODWHUIRXQGRQO\LQ+HEUHZWUDQVODWLRQVRU/DWLQWUDQVODWLRQVIURPWKH+HEUHZDVLQWKH FDVHRI,EQ5XVKG¶VFRPPHQWDULHV RUZDVZULWWHQLQ+HEUHZFKDUDFWHUVIURPWKHRXWVHWDVLQWKHFDVHRI,EQ 0D\PǌQ¶VZRUNV+LWWLII 7KHIORZHULQJRINQRZOHGJHWKDWWRRNSODFHLQWKH,VODPLF:RUOGGXULQJWKHWHQWKDQGHOHYHQWKFHQWXULHVDQG WKDWODWHUSURYLGHGWKHLPSHWXVIRUWKHGHYHORSPHQWRIDOOEUDQFKHVRINQRZOHGJHLQWKH:HVWLQFOXGLQJ QDWXUDOVFLHQFHDQGSKLORVRSK\FRXOGQRWKDYHWDNHQSODFHKDGLWQRWEHHQIRUWKHLQWHQVHSURJUDPPHRI WUDQVODWLRQFDUULHGRXWXQGHUWKH$EEDVLGV7KXVWUDQVODWLRQOD\DWWKHFHQWUHRIWKHPRVWLPSRUWDQWSHULRGRI LQWHOOHFWXDODFWLYLW\LQWKHKLVWRU\QRWRQO\RIWKH,VODPLF:RUOGEXWRIWKHZRUOGDWODUJH

7UDQVODWLRQXQGHUWKH2WWRPDQV 6WDUWLQJZLWKWKHODWHWHQWKHDUO\HOHYHQWKFHQWXU\WKH,VODPLF(PSLUHEHJDQWRH[SHULHQFHDORQJSHULRGRI JUDGXDOGLVLQWHJUDWLRQUHVXOWLQJLQWKHHVWDEOLVKPHQWRIULYDOFDOLSKDWHVLQ(J\SWDQG6SDLQDQGHQGOHVVSHWW\



3DJH

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µVFLHQWLILFH[SHGLWLRQ¶ZKLFKLQFOXGHGDQXPEHURIRULHQWDOLVWVZKRVHWXSWKHILUVW$UDELFSUHVVLQ WKHUHJLRQ,QLWLDOO\KHEURXJKWKLVRZQWUDQVODWRUVDQGLQWHUSUHWHUVZLWKKLPLQFOXGLQJVRPH0XVOLPVDLORUV ZKRPKHKDGFDSWXUHGLQ0DOWDDO6KD\\ƗO 7KHVHµIRUHLJQ¶WUDQVODWRUVSUHSDUHGWKH$UDELFFLUFXODU WKDW1DSROHRQGLVWULEXWHGRQODQGLQJLQ$OH[DQGULDDFLUFXODUGHVLJQHGWRUHDVVXUHWKH(J\SWLDQSRSXODFHDQG WRLQFLWHWKHPWRUHEHODJDLQVWWKHLUUXOHUV7KHFLUFXODUOLNHPXFKRIZKDWWKHVHIRUHLJQWUDQVODWRUVSURGXFHG ZDVJUDPPDWLFDOO\XQVRXQGDQGVW\OLVWLFDOO\SRRUDO-DEDUWLFLWHGLQDO6KD\\ƗO 7KH)UHQFKDOVR UHOLHGRQIRUHLJQLQWHUSUHWHUVIRUUHDGLQJRXWWKHLUGHFUHHVDQGHYHQIRUSDFLI\LQJDQJU\FURZGV,QDGGLWLRQ LQWHUSUHWHUVZRUNHGLQWKHGƯZƗQZKHUHWKH\LQWHUSUHWHGODZVXLWVDQGUHDGRXWOHWWHUVDQGVWDWHPHQWV$O -DEDUWLWHOOVXVWKDWWKHVHIRUHLJQLQWHUSUHWHUVRIWHQXVHG)UHQFKZRUGVZKLOHLQWHUSUHWLQJLQWR$UDELF 7UDQVODWRUVDQGLQWHUSUHWHUVGXULQJWKLVSHULRGIHOOLQWRWKUHHPDLQJURXSVD 0RURFFDQ$UDEDQG7XUNLVK VDLORUVFDSWXUHGE\WKH)UHQFKLQ0DOWDDQGUHOHDVHGWRZRUNDVWUDQVODWRUVLQ(J\SWE )UHQFKRULHQWDOLVWV ZKRDFFRPSDQLHGWKHVFLHQWLILFH[SHGLWLRQWKHEHVWNQRZQDPRQJWKHPEHLQJ9HQWXUH-DXSHUDQGO¶+RPDFD F &KULVWLDQ6\ULDQVZKRKDGDJRRGNQRZOHGJHRIERWK)UHQFKDQG$UDELFLQDGGLWLRQWRVKDULQJWKHUHOLJLRQ RIWKHLQYDGHUV6RPHRIWKHVH&KULVWLDQ6\ULDQVOHIWZLWKWKH)UHQFKLQDQGVHWWOHGLQ0DUVHLOOHVDO 6KD\\ƗOII 9HU\IHZ(J\SWLDQVZHUHLQYROYHGLQWKHWUDQVODWLRQHIIRUWGXULQJWKLVSHULRG7KHEHVW NQRZQZDV3qUH$QWǌQ5$3+ƖƮ/D&KULVWLDQSULHVWRI6\ULDQRULJLQZKREHFDPHWKHRQO\$UDEPHPEHURI 1DSROHRQ¶V(J\SWLDQ$FDGHP\RI6FLHQFH 7KHJUHDWHUSDUWRIWUDQVODWLRQDFWLYLW\XQGHUWKH)UHQFKIRFXVHGRQRIILFLDOGRFXPHQWVDQGOHJDOGHFUHHV +RZHYHUDIHZLQWHUHVWLQJWH[WVZHUHDOVRWUDQVODWHGGXULQJWKLVSHULRGDPRQJWKHPDJUDPPDURIVSRNHQ $UDELFSULQWHGLQDELOLQJXDOHGLWLRQLQDQGDWUHDWLVHRQVPDOOSR[WUDQVODWHGE\3qUH$QWǌQ5DSKƗƯ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



3DJH

DO'ƯQDVLQWHUSUHWHUVLQQHJRWLDWLRQVZLWKWKHFRXUWVRI(XURSH+RXUDQL±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¶VVSRQVRUHGVWXGHQWPLVVLRQVWR(XURSHKDG)UDQFHDVWKHLUPDLQGHVWLQDWLRQ,QSDUWLFXODUPRGHUQ$UDELF GUDPDRZHVLWVH[LVWHQFHWRWKHWUDQVODWLRQHIIRUWVRI/HEDQHVHHPLJUDQWVLQ(J\SWZKRWUDQVIHUUHGDJUHDWGHDO RI)UHQFKGUDPDLQWR$UDELFGXULQJWKLVSHULRGVHH6DGJURYH 6WDUWLQJZLWKFORVHOLWHUDOWUDQVODWLRQV WKH\HYHQWXDOO\PRYHGRQWRIDLUO\H[WHQVLYHDGDSWDWLRQZKLFKLQYROYHGHYHQFKDQJLQJWKHVHWWLQJDQGQDPHV RIFKDUDFWHUVLQ0ROLqUH¶VSOD\VDPRQJRWKHUV%XWLWZDVQRWRQO$UHQFKGUDPDWLFWH[WVWKDWZHUHWUDQVIHUUHG LQWR$UDELFWKHZKROH)UHQFKWUDGLWLRQRIGUDPDZDVLPSRUWHGZKROHVDOH0DQ\RIWKHFXUUHQWWHUPVXVHGLQ $UDELFWKHDWUHHVSHFLDOO\LQ(J\SW6\ULDDQG/HEDQRQ UHYHDOWKHLU)UHQFKRULJLQVH[DPSOHVLQFOXGHGpFRU YDXGHYLOOHDQGH[HVVRLUH ,QRQHRI0XKDPPDG$OL¶VVWXGHQWPLVVLRQVWR)UDQFHZDVDFFRPSDQLHGE\DUHOLJLRXVJXLGHD JUDGXDWHRIDO$]KDUZKRZDVWREHFRPHRQHRIWKHPRVWLPSRUWDQWILJXUHVLQWUDQVODWLRQGXULQJWKLVSHULRG DQGDOHDGLQJHGXFDWRURIKLVWLPH5LIƗFD$/7$+7Ɩ:,± VSHQWILYH\HDUVLQ3DULVZKHUHKH DFTXLUHGDQH[FHOOHQWFRPPDQGRI)UHQFK2QKLVUHWXUQKHZRUNHGDVDWUDQVODWRULQRQHRI0XKDPPDG$OL¶V QHZVSHFLDOLVWVFKRROVDQGODWHUKHDGHGDO$OVXQOLWµWKHWRQJXHV¶ RULJLQDOO\FDOOHGPDGUDVDWDOWDUMDPD VFKRRORIWUDQVODWLRQ ZKLFKZDVVHWXSE\0XKDPPDG$OLLQRQDO7DKWƗZL¶VUHFRPPHQGDWLRQ$O $OVXQVWDUWHGRXWZLWKVWXGHQWVFKRVHQE\DO7DKWƗZLKLPVHOIIURPYDULRXVUHJLRQV:LWKLQDIHZ\HDUV WKLVQXPEHUJUHZWRVRPHVWXGHQWVZKRVWXGLHG$UDELF)UHQFKDQG7XUNLVKDQGRFFDVLRQDOO\(QJOLVK LQ DGGLWLRQWRWHFKQLFDOVXEMHFWVVXFKDVJHRJUDSK\DQGPDWKHPDWLFV$O7DKWƗZLZRXOGFKRRVHDQXPEHURI ERRNVZKLFKKHWKRXJKWUHTXLUHGWUDQVODWLRQDQGGLVWULEXWHWKHPDPRQJWKHWUDQVODWLRQVWXGHQWVLQWKHVFKRRO +HZRXOGJXLGHWKHPWKURXJKWKHWUDQVODWLRQDQGWKHQUHYLVHHDFKWH[WKLPVHOIEHIRUHFRPPLWWLQJLWWRSULQW $O7DKWƗZLDQGKLVVWXGHQWWUDQVODWRUVZHUHLQVWUXPHQWDOLQPDNLQJDYDVWUDQJHRI(XURSHDQVRXUFHVDYDLODEOH LQ$UDELFFRYHULQJQXPHURXVDUHDVRINQRZOHGJH$PRQJWKHLUPRVWLPSRUWDQWWUDQVODWLRQVZHUHYDULRXV KLVWRULHVRIWKHDQFLHQWZRUOGDQGWKH0LGGOH$JHVKLVWRULHVRIYDULRXVNLQJVDQGHPSHURUV0RQWHVTXLHX¶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ƗKƯPDO<Ɨ]LML6RPHRIWKH PRVWGLVWLQJXLVKHGWUDQVODWRUVRIWKHSHULRGZKRZHUHODWHUWRIRUPWKHLQWHOOHFWXDOOHDGHUVKLSRI(J\SWDQG 6\ULDLQSDUWLFXODUZHUHLQYROYHGLQSURGXFLQJWKHVHQHZYHUVLRQV



3DJH

RIWKH%LEOH7KH\LQFOXGHG)ƗULVDO6KLG\ƗT%XWUXVDO%XVWƗQLDQG1DVƯIDO<Ɨ]LML 0XKDPPDG$OL¶VWUDQVODWLRQSURJUDPPHODVWHGDERXW\HDUV'XULQJWKLVWLPHWKHFLUFXODWLRQRIWKH WUDQVODWHGERRNVZDVUHVWULFWHGWRDVPDOOJURXSRIDFDGHPLFVHVVHQWLDOO\WKHVWXGHQWVDQGIRUPHUVWXGHQWVRI DO$OVXQDQGJRYHUQPHQWRIILFLDOVZKRQHHGHGDFFHVVWRVSHFLILFLQIRUPDWLRQ+RZHYHUWKHLPSDFWRIWKH WUDQVODWLRQZRUNGRQHGXULQJWKLVVKRUWSHULRGZDVTXLWHFRQVLGHUDEOHIRUWKHQHZLQWHOOHFWXDOOHDGHUVKLSLQ (J\SWZKLFKKDVVLQFHEHHQWKHPDMRUFXOWXUDOLQIOXHQFHLQWKH$UDE:RUOG FDPHIURPWKHUDQNVRIVWXGHQWV ZKRKDGDFFHVVWRWUDQVODWHGERRNV7KDQNVWRWKHVHVWXGHQWV(J\SWDQGZLWKLWWKHUHVWRIWKH$UDE:RUOG VWDUWHGWKHWZHQWLHWKFHQWXU\ZLWKDZHDOWKRINQRZOHGJHDQGDQLQWHOOHFWXDOFXULRVLW\WKDWKDYHDVVXUHGLWD SODFHLQWKHPRGHUQZRUOG

7KHWZHQWLHWKFHQWXU\ )UDQFH%ULWDLQDQG,WDO\KDGKDGWKHLUGHVLJQVRQYDULRXVSDUWVRIWKH$UDE:RUOGVLQFHWKHHDUO\QLQHWHHQWK FHQWXU\DQGWKH2WWRPDQ(PSLUHZDVJURZLQJWRRZHDNWRGHIHQGLWVWHUULWRULHV%\WKHHDUO\SDUWRIWKH WZHQWLHWKFHQWXU\PRVWRIWKH$UDE:RUOGZDVXQGHURFFXSDWLRQZLWKWKH%ULWLVKLQ(J\SW3DOHVWLQH6XGDQ DQG,UDTWKH)UHQFKLQ1RUWK$IULFDDQG6\ULDDQGWKH,WDOLDQVLQ/LE\D)RUWKHILUVWWLPHLQPDQ\FHQWXULHV WKH$UDE:RUOGODFNHGDFRPPRQSROLWLFDOOHDGHUVKLS7KLVDQGWKHVXEVHTXHQWULVHRILQGLYLGXDOQDWLRQVWDWHV PHDQWWKDWFXOWXUDOGHYHORSPHQWLQWKHDUHDDQGZLWKLWWUDQVODWLRQDFWLYLW\EHJDQWRGLYHUJHFRQVLGHUDEO\7KH WHUULWRU\LVVLPSO\WRRODUJHDQGWRRGLYHUVHWREHFRYHUHGLQDVKRUWH[SRVLWLRQ ,QWKLVFHQWXU\WKHUHKDYHEHHQHIIRUWVWRGHYHORSDFRKHUHQWSDQ$UDESURJUDPPHRIWUDQVODWLRQ2QHVXFK DWWHPSWWRRNSODFHLQ7XQLVLQXQGHUWKHDHJLVRIWKH$UDE2UJDQL]DWLRQIRU(GXFDWLRQ&XOWXUHDQG 6FLHQFH)LDO$GDEZDOWD¶OƯ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
)XUWKHUUHDGLQJ DO.KǌU\+LWWL&KDSWHU +RXUDQL/LQGEHUJ0H\HUKRI5RVHQWKDO 6DGJURYH6DODPD&DUU6WRFN

021$%$.(5

%LRJUDSKLHV ,EQ +81$<1± NQRZQDV-2$11,7,86LQWKH:HVW$1HVWRULDQ&KULVWLDQIURP LQ ZDVDPRQJWKHPRVWJLIWHGDQGSURGXFWLYH PRGHUQGD\,UDT QLFNQDPHGWKHµ3ULQFHRI7UDQVODWRUV¶,EQ WUDQVODWRUVGXULQJWKH$EEDVLGSHULRG%LOLQJXDOLQ$UDELFDQG6\ULDFKHVWXGLHGPHGLFLQHXQGHUWKHUHQRZQHG SK\VLFLDQDQGWUDQVODWRU LEQ0ƗVƗZD\KZHQWRQWROHDUQ*UHHNDQGWKHQEHJDQKLVFDUHHUDV WKHFHOHEUDWHGWUDQVODWLRQFKDPEHUVHWXSE\ SK\VLFLDQDQGWUDQVODWRULQ%DJKGDG+HKHDGHG%D\W KLV WKHFDOLSKDO0D¶PǌQZKHUHKHWRRNFKDUJHRIDOOVFLHQWLILFWUDQVODWLRQZRUNDQGZLWKKLVVRQ QHSKHZDQGRWKHUVWXGHQWVDQGPHPEHUVRIKLVVFKRROWUDQVODWHGLQWR6\ULDFDQG$UDELFWKHEXONRI*UHHN PHGLFDOPDWHULDONQRZQDWWKHWLPHPDQ\RI$ULVWRWOH¶VZRUNVLQFOXGLQJ&DW



3DJH

HJRULHV3K\VLFVDQG0DJQD0RUDOLD 3ODWR¶V5HSXEOLFZRUNVE\+LSSRFUDWHVYDULRXVWUHDWLVHVRQ PDWKHPDWLFVDQGSK\VLFVDVZHOODVWKH6HSWXDJLQW,QWKHFRXUVHRISURGXFLQJWKLVHQRUPRXVWUDQVODWLRQ ZDVKHOGLQYHU\KLJKUHJDUG RXWSXWKHHQULFKHG$UDELFZLWKDYHU\ODUJHQXPEHURIVFLHQWLILFWHUPV,EQ E\DO0D¶PǌQDQGHQMR\HGWKHVXSSRUWDQGVSRQVRUVKLSRI%DQX0ǌVDDZHDOWK\IDPLO\ZKLFKSDWURQL]HG OHDUQLQJGXULQJWKLVSHULRG+HDOVRHQMR\HGWKHVXSSRUWRIDO0XWDZDNNLODO0D¶PǌQ¶VVXFFHVVRUZKR QHYHUWKHOHVVVHQWKLPWRSULVRQIRUD\HDUIRUUHIXVLQJWRSUHSDUHDGHDGO\SRLVRQIRURQHRIWKHFDOLSK¶V ZDVDFRQVFLHQWLRXVDQGVRSKLVWLFDWHGWUDQVODWRUZKRWRRNJUHDWSDLQVWR HQHPLHV+LWWL ,EQ YHULI\WKHDFFXUDF\RIDVRXUFHWH[WEHIRUHSURFHHGLQJZLWKDWUDQVODWLRQ+HDOVRDGRSWHGDVHQVHIRUVHQVH DSSURDFKZKLFKGLVWLQJXLVKHGKLVZRUNIURPPDQ\FUXGHOLWHUDOWUDQVODWLRQVRIWKHWLPH 5$3+ƖƮ/3Ê5($17ǋ1E $Q(J\SWLDQ&DWKROLFSULHVWRI6\ULDQRULJLQZKREHFDPHWKHRQO\ $UDEPHPEHURIDOPDMPDFDOFLOPƯDOPDVUƯWKH(J\SWLDQ$FDGHP\RI6FLHQFHVHWXSE\1DSROHRQLQ (GXFDWHGLQ5RPHEHWZHHQWKHDJHVRIDQGKHVSHQWVRPHILYH\HDUVLQ6LGRQWUDQVODWLQJUHOLJLRXVWH[WV WKHQUHWXUQHGWR5RPHRQDUHOLJLRXVPLVVLRQZKHUHKHWUDQVODWHGEHWZHHQ$UDELFDQG,WDOLDQIRUDWLPHEHIRUH ILQDOO\UHWXUQLQJWRKLVELUWKSODFH(J\SW7KH1DSROHRQLFGHFUHHIRUHVWDEOLVKLQJWKH(J\SWLDQ$FDGHP\RI 6FLHQFHKDGVWLSXODWHGWKDWWKHUHVKRXOGEHRQH$UDEWUDQVODWRUDVDSHUPDQHQWPHPEHURIWKH$FDGHP\DQG 3qUH5DSKƗƯDLOZDVWRRFFXS\WKLVSRVLWLRQRQWKH&RPPLWWHHRI/LWHUDWXUHDQG)LQH$UWV+HWUDQVODWHGDQG LQWHUSUHWHGH[WHQVLYHO\IRUWKH)UHQFKGXULQJWKHLURFFXSDWLRQRI(J\SWDQGEHFDPHLPSRUWDQWHQRXJKWRVLJQ KLVQDPHDV&KLHI7UDQVODWRURQOHJDOGHFUHHVDQGVLPLODURIILFLDOGRFXPHQWV+HVWD\HGLQ(J\SWIRUWZR\HDUV DIWHUWKHGHSDUWXUHRIWKH)UHQFKEXWWKHQOHIWIRU3DULVZKHUHKHZDVUHZDUGHGIRUKLVVXSSRUWRI1DSROHRQLQ ZLWKDQDVVLVWDQWSURIHVVRUVKLSDWWKH2ULHQWDO,QVWLWXWHLQ3DULVDO6KD\\ƗO F

F

7$+7Ɩ:,6+(,.+5,)Ɩ $5Ɩ), ± (J\SWLDQHGXFDWRUWUDQVODWRUDQGIRXQGHURIWKHILUVW VFKRRORIWUDQVODWLRQLQ(J\SW$O7DKWƗZLVSHQWILYH\HDUVLQ3DULVZKHUHKHPDVWHUHGWKH)UHQFKODQJXDJH DQGGHYHORSHGDSDVVLRQIRU)UHQFKFXOWXUH2QKLVUHWXUQWR(J\SWKHZRUNHGDVDWUDQVODWRULQRQHRI 0XKDPPDG$OL¶VQHZVSHFLDOLVWVFKRROV,QKHZDVDSSRLQWHGKHDGRIDO$OVXQWKHSUHVWLJLRXVVFKRRO RIODQJXDJHVVHWXSRQKLVUHFRPPHQGDWLRQWRWUDLQDQHZJHQHUDWLRQRIRIILFLDOVDQGWUDQVODWRUV$O7DKWƗZL JXLGHGKLVVWXGHQWVZKLOHWKH\WUDQVODWHGERRNVRIKLVFKRLFHZKLFKKHWKHQUHYLVHGDQGKDGSULQWHG,Q DGGLWLRQWRUHYLVLQJKLVVWXGHQWV¶ZRUNKHDOVRSURGXFHGDODUJHQXPEHURIKLVRZQWUDQVODWLRQVPRVWO\LQWKH DUHDVRIPHGLFLQHDGPLQLVWUDWLRQDQGWHFKQRORJ\+HZDVVHQWWR.KDUWRXP6XGDQ LQDVDVRUWRI SXQLVKPHQWE\WKH.KHGLYH$EEDVZKRGLGQRWDSSUHFLDWHKLVLQWHOOHFWXDODQGSROLWLFDOV\PSDWKLHVHVSHFLDOO\ KLVSDVVLRQIRUWKH)UHQFKPRGHORIGHPRFUDF\:KLOHLQWKH6XGDQDO7DKWƗZLWUDQVODWHG)pQHORQ¶V/HV DYHQWXUHVGH7pOpPDTXHWKHILUVW)UHQFKQRYHOWREHWUDQVODWHGLQWR$UDELF7KHWUDQVODWLRQZDVFRPSOHWHGLQ DQGSXEOLVKHG\HDUVODWHULQ%HLUXW$O7DKWƗZLZDVODWHUDOORZHGWRUHWXUQWR(J\SWZKHUHKHDJDLQ KHDGHGDVFKRROZLWKDWUDQVODWLRQFKDPEHUDWWDFKHGWRLW7KHUHDIWHUKLVSULRULW\ZDVWRWUDQVODWHWKH)UHQFK OHJDOFRGHVLQWR$UDELF 021$%$.(5



3DJH

% %UD]LOLDQWUDGLWLRQ 7KHPLOOLRQLQKDELWDQWVRI%UD]LOWKHODUJHVWFRXQWU\LQ/DWLQ$PHULFDDUHRIPL[HGGHVFHQW%UD]LOLDQ ,QGLDQ$IULFDQ$VLDQDQG(XURSHDQ%XWWKH\VKDUHDFRPPRQODQJXDJH3RUWXJXHVHZKLFKLVWKHRIILFLDO ODQJXDJHRI%UD]LO%UD]LOLVWKHUHIRUHSDUWRIWKH/XVRSKRQHRU3RUWXJXHVHVSHDNLQJFRPPXQLW\ZKLFK LQFOXGHV3RUWXJDODQGLWVIRUPHU$IULFDQFRORQLHV$QJROD0R]DPELTXH*XLQHD%LVVDXDQGWKHLVODQGVRI 6mR7RPp&DSH9HUGHDQG3UtQFLSH

(DUO\KLVWRU\VL[WHHQWKWRHLJKWHHQWKFHQWXULHV 7KHKLVWRU\RI%UD]LOLVDKLVWRU\RIWUDQVODWLRQVDQGRIOLQJXLVWLFFKDQJH,WVGRFXPHQWDWLRQVWDUWVZLWKWKH ODQGLQJRQ%UD]LOLDQVKRUHVRIWKH3RUWXJXHVHIOHHWFRPPDQGHGE\$GPLUDO3HGURÈOYDUHV&DEUDO± F RQ$SULOWKHILUVWXQGLVSXWHGYLVLWE\(XURSHDQVWR%UD]LO+DYLQJFODLPHGWKHVHZHVWHUQ ODQGVIRUWKH3RUWXJXHVH&URZQ&DEUDOWKLQNLQJWKDWWKH\ZHUHDQLVODQGLQLWLDOO\FDOOHGWKHP,OKDGH6DQWD &UX]RUWKHµ,VODQGRIWKH+RO\&URVV¶:LWKLQDIHZ\HDUVWKHODQGKDGFRPHWREHNQRZQDV%UD]LOEHFDXVH RIWKHSDXEUDVLORUµEUD]LOZRRG¶WKDWZDVIRXQGWKHUHLQDEXQGDQFH6LQFHWKLVZRRGSURGXFHGDUHGG\H WKDWZDVGLIILFXOWWRREWDLQLQ(XURSHWKH3RUWXJXHVHVRRQVWDUWHGVHQGLQJH[SHGLWLRQVRXWWRWKHQHZFRQWLQHQW WRILQGZD\VRIH[SORLWLQJLW :KHQWKH3RUWXJXHVHDUULYHGLQ%UD]LOWKH\IRXQGDSRSXODWLRQDFFRUGLQJWRYDULRXVKLVWRULDQVRIEHWZHHQ RQHDQGILYHPLOOLRQQDWLYHVOHDGLQJDQHROLWKLFVHPLQRPDGLFOLIH/LNHWKHUHVWRIWKHLQGLJHQRXVSRSXODWLRQ RIWKH1HZ:RUOGWKHQDWLYHVRI%UD]LOZHUHFDOOHGtQGLRVE\&KULVWRSKHU&ROXPEXVZKRDSSOLHGWKLV PLVQRPHUWRWKHPEHFDXVHKHµWKRXJKWKHKDGVDLOHGVRIDUZHVWWKDWKHKDGUHDFKHG,QGLD¶3DUWULGJH ±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¶V IOHHWWRWKH3RUWXJXHVHNLQJ0DQXHO,± RQ0D\WRUHODWHWKHILQGLQJRIQHZODQGV &DPLQKD&RUWHVmR 7KHVDPHGRFXPHQWDOVRUHFRUGVDWUDQVODWLRQDFWLWGHVFULEHVKRZWKH 3RUWXJXHVHDQG,QGLDQVDWWHPSWHGWRFRPPXQLFDWHZLWKHDFKRWKHUE\PHDQVRIJHVWXUHVDQGKRZDGHSRUWHH $IRQVR5LEHLURZDVOHIWRQVKRUHZLWKWKH,QGLDQVWROHDUQWKHLUODQJXDJH,WDOVRUHSRUWVWKDWDQRWKHUGHSRUWHH DQGWZRVDLORUVGHVHUWHGWKHH[SHGLWLRQLQRUGHUWRUHPDLQZLWKWKH,QGLDQV)URPWKHQRQHYHU\H[SHGLWLRQ WKDWZHQWWR%UD]LOOHIWEHKLQGDGYHQWXUHUVDQGGHSRUWHHVZKROHDUQHGWKH,QGLDQODQJXDJHVDQGZKRWKHQDFWHG DVLQWHUSUHWHUVEHWZHHQ,QGLDQVDQG(XURSHDQV7KHVHPHQZHUHFDOOHGOtQJXDVRUµWRQJXHV¶DQGWKHLU QXPEHUVFRQWLQXHGWRJURZGXULQJHDUO\FRORQLDOWLPHV



3DJH

)RUHPRVWDPRQJVWWKHVHOtQJXDVZHUH-RmR5DPDOKRDQG'LRJRÈOYDUHV5DPDOKRG ZDVD3RUWXJXHVH ODZ\HUZKRZDVVKLSZUHFNHGRIIWKHFRDVWRI%UD]LO+HOLYHGDW3LUDWLQLQJDLQWKHKLJKODQGVQHDUPRGHUQGD\ 6mR3DXOR&LW\ZKHUHKHIRUPHGDKDOI3RUWXJXHVHKDOI,QGLDQYLOODJH+HWKHQPHW0DUWLP$IRQVRGH6RX]D F± ZKRKDGEHHQVHQWWRHVWDEOLVKWKHILUVW3RUWXJXHVHVHWWOHPHQWLQ%UD]LODQGWKHWZRPHQMRLQHG IRUFHVLQIRXQGLQJ6mR9LFHQWHLQRQWKHFRDVWRIWKH6mR3DXORSURYLQFH'LRJRÈOYDUHV± DQRWKHUVKLSZUHFNHG3RUWXJXHVHZDVQLFNQDPHG&DUDPXU~RUµILUHPDNHU¶E\WKH,QGLDQVDIWHUKHVXSSRVHGO\ VDYHGKLVRZQOLIHE\DQLPSUHVVLYHGLVSOD\RIPXVNHWU\+HUHWXUQHGWR3RUWXJDOEULHIO\ZLWKKLV,QGLDQZLIH EXWHYHQWXDOO\VHWWOHGLQ%UD]LOZKHUHKHKHOSHG7KRPpGH6RX]DF± HVWDEOLVKWKHQHZFLW\RI%DKLD LQ+LVH[SORLWVDUHFRPPHPRUDWHGLQ2&DUDPXU~DQHSLFSRHPZULWWHQE\WKH%UD]LOLDQSRHW-RVpGH 6DQWD5LWD'XUmR± LQ 7KHILUVWWUDQVODWRUV $QHZOLQJXLVWLFSKDVHEHJDQLQ%UD]LOZLWKWKHDUULYDORIWKH-HVXLWIDWKHUVLQ7KH-HVXLWVVHWRXWWR FRQYHUWWKH,QGLDQVWR&KULVWLDQLW\DQGWXUQWKHPLQWRREHGLHQWVXEMHFWVRIWKH3RUWXJXHVH&URZQ7KH,QGLDQV ZKRLQKDELWHGWKH%UD]LOLDQFRDVWEHWZHHQWKHSUHVHQWGD\VWDWHVRI$PD]RQDVLQWKHQRUWKDQG6DQWD&DWDULQD LQWKHVRXWKVSRNHDYDULHW\RIODQJXDJHVZKLFKEHORQJHGWRWKH7XS\IDPLO\DQGXVHGDOLQJXDIUDQFDZKLFK WKH\FDOOHG$EDQKHHQJDRU$EDQKpHPIRULQWHUWULEDOFRPPXQLFDWLRQ7KH-HVXLWVVDZWKHDGYDQWDJHVWREH JDLQHGIURPDGRSWLQJWKLVODQJXDJHLQWKHLUPLVVLRQDU\HIIRUWVDQGGLGHYHU\WKLQJLQWKHLUSRZHUWROHDUQLW WKH\DOVRZURWHJUDPPDUVIRULWEDVHGRQWKH/DWLQPRGHO7KLVVLPSOLILHGIRUPRIWKHODQJXDJHZDVQDPHG 1KHHQJDWXRUµEHDXWLIXOODQJXDJH¶DQGZDVXVHGIRUFRPPXQLFDWLRQEHWZHHQ,QGLDQVDQG(XURSHDQVDQG HYHQWXDOO\DPRQJVW(XURSHDQVLQ%UD]LO 7UDQVODWLRQVRIUHOLJLRXVWH[WVVRRQEHJDQWRDSSHDUZLWKWKH-HVXLWVWKXVEHFRPLQJ%UD]LO¶VILUVWWUDQVODWRUV )DWKHU$]SLFXHOWD1DYDUURG WUDQVODWHGWKH6XPPDGDGRXWULQDFULVWƗµ6XPPDU\RI&KULVWLDQ'RF WULQH¶IURP3RUWXJXHVHLQWR1KHHQJDWX8SRQ1DYDUUR¶VGHDWK)DWKHU-RVpGH$QFKLHWDF± WRRNRYHU DVWKHH[SHUWLQQDWLYHWRQJXHV+HZURWHWKH$UWHGDJUDPiWLFDQDOtQJXDPDLVXVDGDQDFRVWDGR%UDVLO$UW RIWKHJUDPPDURIWKHPRVWXVHGODQJXDJHRQWKHFRDVWRI%UD]LO LQLWLDOO\UHSURGXFHGLQPDQXVFULSWIRUPDQG ODWHUSULQWHGLQ&RLPEUD3RUWXJDOLQ,Q)DWKHU$QW{QLRGH$UD~MR± WUDQVODWHGWKH FDWHFKLVPLQWR1KHHQJDWXLWZDVSXEOLVKHGLQ/LVERQDV&DWHFLVPRQDOtQJXDEUDVtOLFDRUµ&DWHFKLVPLQWKH %UD]LOLDQODQJXDJH¶ /LQJXDHIUDQFDH ,QGLDQODQJXDJHVZHUHQRWXVHGIRUUHOLJLRXVSXUSRVHVRQO\WKH\ZHUHXVHGWRFRQTXHUDQGGRPLQDWHWKH QDWLYHVRI%UD]LO6WDUWLQJLQZKHQWKHILUVWIRUD\VLQWRWKHLQWHULRURIZKDWZDVWREHFRPHWKH%UD]LOLDQ WHUULWRU\WRRNSODFHLQWHUSUHWHUVZKRVSRNH1KHHQJDWXDQGRWKHU,QGLDQODQJXDJHVZHUHVHQWDORQJZLWKWKH H[SHGLWLRQVWKDWVHWRXWWRFDSWXUH,QGLDQVODYHVDQGILQGSUHFLRXVVWRQHV0pPGH6iF± *HQHUDO *RYHUQRURI%UD]LOEHWZHHQDQGVHQWWKH&DVWLOLDQLQWHUSUHWHU)UDQFLVFR%UX]RGH(VSLxRVRZLWK RQHVXFKH[SHGLWLRQLQ'LRJRGH&DVWURDFWHGDVLQWHUSUHWHUIRUDQRWKHUVXFKH[SHGLWLRQLQ (YHQDVWKH3RUWXJXHVHDQG%UD]LOLDQH[SORUHUVWULHGWRFRQTXHUWKH%UD]LOLDQLQWHULRU%UD]LOIDFHGLQFXUVLRQV DQGLQYDVLRQVE\)UDQFHWKH1HWKHUODQGVDQG(QJODQGIURPDVHDUO\DVDQGXQWLO7KHUHIRUH)UHQFK 'XWFK(QJOLVKDQG6SDQLVKZKLFKZDVZLGHO\XVHGLQ3RUWXJDOE\WKHHGXFDWHGFODVVHVIRU\HDUV *RQoDOYHV5RGULJXHV DOVRKHOSHGWRVWUHQJWKHQDWUDGLWLRQRIPXOWLOLQJXDOLVPDQGWUDQVODWLRQ WKURXJKRXWFRORQLDOWLPHV+RXDLVV (GXFDWLRQGXULQJWKDWSHULRGDQGXQWLOZDVELOLQJXDO$WWKH-HVXLWFROOHJHVFKLOGUHQZHUHWDXJKW 3RUWXJXHVHDQG1KHHQJDWXEXWWKHODQJXDJHRIKHDUWKDQGKRPHZDV1KHHQJDWX)ORUHQFH QRWHV WKDWµLQWKHODGLHVIURP6mR3DXORWDONHGQDWXUDOO\LQWKHOLQJXDIUDQFDRI%UD]LOZKLFKZDVWKHODQJXDJH RIIULHQGVKLSDQGGRPHVWLFOLIH¶WUDQVODWHG 6XFKZDVWKHZLGHVSUHDGXVHRI1KHHQJDWXWKDWLQWHUSUHWHUV EHWZHHQLWDQG3RUWXJXHVHZHUHQHHGHGLQFRXUWVRIODZ



3DJH

+RZHYHU6HEDVWLmR-RVp&DUYDOKRH0HOR3RPEDOWKH0DUTXLVRI3RPEDO± 3RUWXJDO¶V:DUDQG )RUHLJQ$IIDLUV0LQLVWHUGXULQJWKHUHLJQRI-RVp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¶VWURRSVVHUYHGWRFRQVROLGDWHWKHSRVLWLRQRI3RUWXJXHVHDVWKHPDMRUODQJXDJHLQWKHFRXQWU\,Q WKHSULQFHUHJHQW'RP-RmRODWHU'RP-RmR9,± HOHYDWHG%UD]LOWRWKHFDWHJRU\RI .LQJGRPRQDQHTXDOIRRWLQJZLWK3RUWXJDO0RUHLPSRUWDQWO\KHOLIWHGWKHEDQRQSULQWLQJZKLFKKDGEHHQ LQIRUFHLQWKHFRORQ\VLQFH $OWKRXJKFODQGHVWLQHSUHVVHVRSHUDWHGDWGLIIHUHQWSRLQWVDQGDWGLIIHUHQWSHULRGVRIWLPHSULQWLQJOHDIOHWVDQG VXFKOLNH WKH,PSUHVVmR5pJLDRUµ5R\DO3ULQWLQJ6KRS¶HVWDEOLVKHGE\'RP-RmRLQ5LRGH-DQHLURLQ ZDVWKHILUVWOHJDOHVWDEOLVKPHQWRILWVNLQGWREHVHWXSLQ%UD]LO,PSUHVVmR5p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¶VOHDGLQJWKLQNHUVHVSHFLDOO\WKH)UHQFK$OOWKLVSRLQWVWR WKHIDFWWKDWHGXFDWHG%UD]LOLDQVOLNHWKHLUFRXQWHUSDUWVLQ3RUWXJDOGLGQRWUHDOO\QHHGOLWHUDU\WUDQVODWLRQV SDUWLFXODUO\QRWIURP)UHQFK%\WKHODWHQLQHWHHQWKFHQWXU\WKH3RUWXJXHVHJHQWU\KDGWDNHQWRVSHDNLQJ )UHQFKDPRQJVWWKHPVHOYHVXVLQJ3RUWXJXHVHRQO\WRDGGUHVVWKHLUVHUYDQWV$WDQ\UDWHERWKLQ3RUWXJDODQG LQ%UD]LO3RUWXJXHVHZDVWKHODQJXDJHRIDGPLQLVWUDWLRQDQGWKHODQJXDJHRISULQWLQJHQHUDO +RZHYHULWZDVQRWXQWLO%UD]LOEHFDPHLQGHSHQGHQWGXULQJWKHFRQVWLWXWLRQDODVVHPEO\RI²ZKHQLW ZDVGHFLGHGWKDW3RUWXJXHVHZRXOGFRQWLQXHWREHWKHRIILFLDOODQJXDJHRIWKHQDWLRQWKDW%UD]LOLDQVIURP YDULRXVSDUWVRIWKHFRXQWU\EHJDQWRVSHDN3RUWXJXHVHWRHDFKRWKHU$QG\HW1KHHQJDWXDQGWKHRWKHU OLQJXDHIUDQFDHKDYHQRZEHHQODUJHO\IRUJRWWHQDQGWKHDYHUDJH%UD]LOLDQXVXDOO\KDVQRLGHDWKDWWKH\HYHU H[LVWHG0RVW%UD]LOLDQVDUHQRWDZDUHWKDWWKH\FRQWLQXHWRXVHPDQ\ZRUGVRI,QGLDQRULJLQRQDGD\WRGD\ EDVLVDIDFWZKLFKPDNHVWKH



3DJH

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~OLR9DUJDV± EDQQHGWKHH[FOXVLYHXVHRIIRUHLJQODQJXDJHVLQLQVWUXFWLRQDQG LPSRVHG3RUWXJXHVHDVWKHPHGLXPRIHGXFDWLRQ'XOOHV± 7KHKLVWRU\RIZULWWHQWUDQVODWLRQ 7KHKLVWRU\RIWUDQVODWLRQLQ%UD]LOLVMXVWEHJLQQLQJWREHZULWWHQ$SLRQHHULQJFRQWULEXWLRQKDVEHHQPDGHE\ -RVp3DXOR3DHVLQKLV7UDGXomRDSRQWHQHFHVViULDRUµWUDQVODWLRQWKHQHFHVVDU\EULGJH¶3DHV D UHOLDEOHSRLQWRIGHSDUWXUHIRUIXUWKHUDWWHPSWVDWGRFXPHQWLQJWKHKLVWRU\RIOLWHUDU\WUDQVODWLRQLQ%UD]LO3DHV GHWDLOVWKHDOPRVWLQVXUPRXQWDEOHGLIILFXOWLHVHQFRXQWHUHGE\UHVHDUFKHUVWKHSDXFLW\RISXEOLF OLEUDULHVLQ%UD]LOWKHUHVWULFWHGVL]HRIWKHLUFROOHFWLRQVDQGGHILFLHQWFDWDORJXLQJ7ZRIDFWRUVKDYH FRQWULEXWHGWRWKLVXQIDYRXUDEOHVWDWHRIDIIDLUV2QHLVWKDWSXEOLVKLQJKRXVHVZHUHQRWDOORZHGLQ%UD]LOXQWLO WKHHDUO\QLQHWHHQWKFHQWXU\7KHVHFRQGLVWKHODWHHVWDEOLVKPHQWRIXQLYHUVLWLHVLQ%UD]LO/DZVFKRROVZHUH HVWDEOLVKHGDW2OLQGDDQG6mR3DXORLQDPLOLWDU\DFDGHP\DW5LRGH-DQHLURLQDQGPHGLFDO VFKRROVDW5LRGH-DQHLURDQG%DKLDLQEXWWKHILUVWXQLYHUVLW\ZDVQRWVHWXSXQWLOLQ5LRGH -DQHLUR ,WLVSRVVLEOHWRHVWDEOLVKKRZHYHUWKDWSURIHVVLRQDOWUDQVODWRUVZHUHILUVWUHFRJQL]HGRIILFLDOO\LQDVVWDII PHPEHUVRI,PSUHVVmR5pJLD6HYHQW\WKUHH\HDUVODWHUIRUUHDVRQV\HWWREHGHWHUPLQHGWKHLUSRVWVZHUH HOLPLQDWHGDQGWKHLUZRUNZDVWDNHQRYHUE\PXOWLOLQJXDOFRS\ZULWHUV7KHILUVWWUDQVODWLRQSULQWHGE\ ,PSUHVVmR5pJLDZDV/HRQKDUG(XOHU¶V± (OHPHQWRVGHiOJHEUD(OHPHQWVRI$OJHEUD WUDQVODWHGE\ 0DQXHOGH$UD~MR*XLPmUHVDQGSXEOLVKHGLQ7KLVDSSHDUVWRKDYHVHWWKHWUHQGIRUWKLVSXEOLVKLQJ KRXVHPRVWRIWKHZRUNVLWSXEOLVKHGGXULQJWKH\HDUVLQZKLFKLWHQMR\HGPRQRSRO\RIWKH SXEOLVKLQJWUDGHZHUHFRPSHQGLDDQGWUHDWLVHVRQPDWKHPDWLFVHQJLQHHULQJHFRQRPLFVSXEOLFKHDOWK JHRJUDSK\DQGWUDYHODVWURQRP\DQGSKLORVRSK\DQDWWHPSWSHUKDSVWRIXOILOWKHFRXQWU\¶VWHFKQRORJLFDO QHHGVDWWKHWLPH7KHILUVWOLWHUDU\WUDQVODWLRQWREHSXEOLVKHGE\WKHVDPHSXEOLVKLQJKRXVHZDVWKDWRI $OH[DQGHU3RSH¶V(VVD\RQ&ULWLFLVPWUDQVODWHGDQGDQQRWDWHGLQE\)HUQDQGR-RVpGH3RUWXJDOWKH 0DUTXLVRI$JXLDU± $IWHULQGHSHQGHQFH,PSUHVVmR5p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±±±± WKHWD[HV OHYLHGRQLPSRUWHGSDSHUDQGFHOOXORVHZHUHSHUFHQWKLJKHUWKDQWKRVHOHYLHGRQLPSRUWHGERRNV8QWLO :RUOG:DU2QHSXEOLVKHUVWKHUHIRUHUHVWULFWHGWKHLUDFWLYLWLHVWRSULQWLQJWH[WERRNVDQGODZERRNV(YHQ PDMRU%UD]LOLDQDXWKRUVVXFKDV-RVpGH$OHQFDU± DQG-RDTXLP0DULD0DFKDGRGH$VVLV± KDGWKHLUZRUNVSXEOLVKHGLQ3DULVRU/RQGRQ



3DJH

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¶VLQFRPH OLWHUDF\DQGOHLVXUHWLPH7KHJURZLQJJDSEHWZHHQ(XURSHDQDQG%UD]LOLDQ3RUWXJXHVHDOVRHQFRXUDJHG SXEOLVKHUVWRFRPPLVVLRQQHZ%UD]LOLDQWUDQVODWLRQVLQVWHDGRIUHSULQWLQJ(XURSHDQRQHVDVWKHUHDGLQJ SXEOLFLQ%UD]LOZDVQRORQJHUVRZLOOLQJWRDFFHSW(XURSHDQ3RUWXJXHVHDVDQDOWHUQDWLYH 7ZR%UD]LOLDQZULWHUVDUHZRUWKPHQWLRQLQJKHUHIRUWKHLUDFWLYLWLHVDVWUDQVODWRUVGXULQJWKLVSHULRG-RVp %HQWR0RQWHLUR/REDWR± KDYLQJKDGGLIILFXOW\SXEOLVKLQJKLVFROOHFWLRQRIVKRUWVWRULHV8UXSrV HVWDEOLVKHGKLVRZQSXEOLVKLQJKRXVHDQGGHYRWHGKLVWLPHWRWUDQVODWLQJVHYHUDOPDMRUDXWKRUV LQFOXGLQJ.LSOLQJ-DFN/RQGRQ0HOYLOOH6DLQW([XSpU\+HPLQJZD\6KROHP$VKDQG+*:HOOV+HDOVR PRGHUQL]HGDQGDGDSWHGDQXPEHURI(XURSHDQ3RUWXJXHVHWUDQVODWLRQVWR%UD]LOLDQ3RUWXJXHVH0RQWHLUR /REDWR¶VSXEOLVKLQJKRXVHZDVODWHUERXJKWE\(GLWRUD1DFLRQDODOVRLQ6mR3DXOReULFR9HUtVVLPR± ZKRVWDUWHGWUDQVODWLQJDVDPHDQVRIFRPSOHPHQWLQJKLVLQFRPHIURPMRXUQDOLVPVRRQVXFFHHGHGLQ SHUVXDGLQJ(GLWRUD*ORERDSXEOLVKLQJKRXVHEDVHGLQ3RUWR$OHJUHLQVRXWK%UD]LOWREULQJRXWWUDQVODWLRQV RIDPRUHOLWHUDU\FKDUDFWHUWKDQWKHUXQRIWKHPLOOGHWHFWLYHQRYHOVLQZKLFKWKH\VSHFLDOL]HG+LVHIIRUWV ZHUHIUXLWIXODQGKHZDVVXEVHTXHQWO\PDGHDPHPEHURIWKHHGLWRULDOERDUGRI(GLWRUD*ORERZKHUHKH FRRUGLQDWHGWKH1REHO&ROOHFWLRQUHSXWHGO\WKHEHVWFROOHFWLRQRIIRUHLJQILFWLRQHYHUSXEOLVKHGLQ%UD]LO (GLWRUD*ORERODWHUEURXJKWRXWDQRWKHUFROOHFWLRQRIWUDQVODWLRQVRIZRUOGFODVVLFVFDOOHG%LEOLRWHFDGRV 6pFXORVRUµOLEUDU\DFURVVFHQWXULHV¶ 'XULQJWKHVDQGVWKHPDLQSXEOLVKHURIWUDQVODWLRQVZDV(GLWRUD-RVp2O\PSLRRI5LRGH-DQHLUR 1RWRQO\GLGLWSXEOLVKWKHPDMRU%UD]LOLDQZULWHUVRIWKHWLPHEXWLWDOVRFRPPLVVLRQHGWKHPWRWUDQVODWH IRUHLJQZRUNV$PRQJVXFKWUDQVODWRUVZHUH*DVWmR&UXOV0DQXHO%DQGHLUD5DTXHOGH4XHLUyV&DUORV 'UXPPRQGGH$QGUDGH-RVp/LQVGR5HJR2WiYLRGH)DULD/~FLR&DUGRVR5XEHP%UDJD*HQROLQR$PDGR DQGPDQ\RWKHUV2WKHUSXEOLVKLQJKRXVHVLQ5LRGH-DQHLURDQG6mR3DXORKDYHDOVRSXEOLVKHGWUDQVODWLRQVRQ DUHJXODUEDVLV7KH\LQFOXGH(GLWRUD&LYLOL]DomR%UDVLOHLUD3RQJHWWL0DUWLQV'LIIHO(GLWRUD1RYD)URQWHLUD DQGRWKHUV$JDLQPDMRUZULWHUVKDYHGRXEOHGDVWUDQVODWRUV*RGRIUHGR5DQJHO$JULSLQR*ULHFR6pUJLR 0LOOLHW-RUJHGH/LPD0DUFRV6DQWDUULWD$QW{QLR&DOODGR6WHOD/HRQDUGRVDQG3DXOR/HPLQVNLKDYH WUDQVODWHGILFWLRQ3RHWVDQGZULWHUVVXFKDV*XLOKHUPHGH$OPHLGD0DQXHO%DQGHLUD&HFLOLD0HLUHOHV&DUORV 1HMDU/HGR,YRDQG,YDQ-XQTXHLUDKDYHWUDQVODWHGSRHWU\5DLPXQGR0DJDOKm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



3DJH

FKLOGUHQ¶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µLQWKH\HDUVWKURXJKERRNVZHUHSXEOLVKHGXQGHUWKLVSURJUDP¶ )UDQFHZDVTXLFNWRUHDFWDQGRIIHUHGWRVXEVLGL]HWKHWUDQVODWLRQRI)UHQFKWH[WERRNVE\SD\LQJDXWKRUV¶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Ï1$,LQ,Q1RYHPEHUWKHPHPEHUVRI $%5$7(6YRWHGWRFKDQJHWKHLUDVVRFLDWLRQLQWRDXQLRQ6,175$RUWKH1DWLRQDO8QLRQRI7UDQVODWRUV 6,175$WRRNRYHU$%5$7(6¶DLPVDQGJRDOVDQGLVDIILOLDWHGWR),7WKH)e'e5$7,21 ,17(51$7,21$/('(675$'8&7(8566,175$KDVGRQHPXFKWRSURPRWHWKHSURIHVVLRQLQFOXGLQJ GHYLVLQJDVWDQGDUGFRQWUDFWIRULWVPHPEHUVVHWWLQJPLQLPXPIHHVDQGGUDIWLQJDQHWKLFDOFRGHIRUWKH SURIHVVLRQ,QDGGLWLRQLWKDVSDUWLFLSDWHGLQQHJRWLDWLRQVRQFRS\ULJKWZLWKWKHFHQWUDOJRYHUQPHQWDQGWKH %RRN,QGXVWU\1HJRWLDWLRQ&KDPEHU6LQFHWKHSUHVLGHQWDQGYLFHSUHVLGHQWRI6,175$KDYHEHHQ PHPEHUVRIWKHMXU\ZKLFKDZDUGVWKH-DEXWLWUDQVODWLRQSUL]HVSRQVRUHGE\WKH%UD]LOLDQ%RRN&KDPEHU &RQIHUHQFHLQWHUSUHWHUVKDYHWKHLURZQDVVRFLDWLRQ$3,&RUµ3URIHVVLRQDO$VVRFLDWLRQRI&RQIHUHQFH ,QWHUSUHWHUV¶IRXQGHGLQ-XO\7KHDVVRFLDWLRQLVUHFRJQL]HGE\$,,&DOWKRXJKQRWDVDPHPEHU0DQ\ RI$3,&¶VPHPEHUVDUHDOVRPHPEHUVRI$,,&LQWKHLURZQULJKW 7UDLQLQJ 8QWLOWKHODWHVQRVSHFLILFWUDLQLQJIRUWUDQVODWRUVZDVRIIHUHGLQ%UD]LO$VDUHVXOWWKHWUDQVODWRUVRI %UD]LOZHUHPDLQO\LWVUHQRZQHGZULWHUVDQGWKRVHZKRKDGOHDUQHGIRUHLJQODQJXDJHVDWVFKRRORUDEURDGRU WKRVHZKRKDGDXQLYHUVLW\ODQJXDJHGHJUHH$GHFUHHSDVVHGE\WKH0LQLVWU\RI(GXFDWLRQGXULQJWKHV HQDEOHGIDFXOWLHVRIDUWVWRH[SDQGWKHLUODQJXDJHFRXUVHVVRDVWRSURYLGHWUDLQLQJIRUWUDQVODWRUVDWXQLYHUVLW\ OHYHO7KHILUVWVXFKFRXUVHVZHUHRIIHUHGDWWKH&DWKROLF



3DJH

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Ï1$,± WKDWKDGDPDMRULPSDFWRQWKHVWXG\RIWUDQVODWLRQLQ %UD]LO(VFRODGH7UDGXWRUHV6FKRRORI7UDQVODWRUV ZDVSXEOLVKHGLQIROORZHGE\+RPHQVFRQWUD %DEHO0HQDJDLQVW%DEHO LQDQG$WUDGXoƗRYLYLGD7UDQVODWLRQ([SHULHQFHG LQ$OOWKUHHKDYH EHHQUHYLVHGHQODUJHGDQGUHSULQWHGPDQ\WLPHVWKH\KDYHDOVREHHQWUDQVODWHGDEURDGLQ*HUPDQ\DQG -DSDQIRUH[DPSOH $WDWLPHZKHQWUDQVODWLRQVWXGLHVZDVVWLOOWU\LQJWRILQGLWVIHHW5yQDLDGRSWHGD SUDFWLFDORXWORRNGHULYHGIURPKLVH[SHULHQFHDVDWUDQVODWRUEXWQHYHUFHDVHGFRQVLGHULQJWUDQVODWLRQDVDQDUW $ODUJHQXPEHURIZRUNVRQWKHWKHRU\SUDFWLFHDQGWHDFKLQJRIWUDQVODWLRQKDYHEHHQSXEOLVKHGVLQFHWKHQDV ZHOODVSDSHUVHVVD\VDQGMRXUQDOV1LQHLVVXHVRI7UDGXomR &RPXQLFDoƗR7UDQVODWLRQDQG &RPPXQLFDWLRQ DMRXUQDORIWUDQVODWLRQSXEOLVKHGE\(GLWRUDÈODPRLQFRRSHUDWLRQZLWK$%5$7(6DQGWKH ,EHUR$PHULFDQ6FKRRORI6mR3DXORDSSHDUHGEHWZHHQDQG,Q0D\&,75$7WKH ,QWHUGHSDUWPHQWDO&HQWUHIRU7UDQVODWLRQDQG7HUPLQRORJ\RIWKH8QLYHUVLW\RI6mR3DXOREURXJKWRXWWKHILUVW LVVXHRI7UDG7HUPDMRXUQDOZKLFKDLPVWRKHOSEULGJHWKHJDSEHWZHHQWUDQVODWLRQSUDFWLWLRQHUVDQGWKHRULVWV 7KHWKHRUHWLFDOUHIOHFWLRQVRIWKHEURWKHUV$XJXVWRGH&DPSRVDQG+DUROGRGH&DPSRVDE RQWKHLUWUDQVODWLRQSUDFWLFHDUHWKHFORVHVWWKLQJWRDWKHRU\RIWUDQVODWLRQLQ%UD]LO%HLQJ &RQFUHWHSRHWVWKHEURWKHUVKDYHGHYRWHGWKHPVHOYHVWRWKHWUDQVODWLRQRIDXWKRUVZKRWKH\IHHOKDYHUDGLFDOO\ WUDQVIRUPHGSRHWLFVW\OHVVXFKDV3RXQGFXPPLQJV-R\FH0DOODUPp0D\DNRYVN\9DOpU\3RH/HZLV &DUUROODQG-RKQ&DJHDPRQJRWKHUV7KHLUYLHZRIWUDQVODWLRQSULYLOHJHVIRUPRYHUFRQWHQWDQGIDYRXUVWKH LQWURGXFWLRQRIQHZIRUPVLQWRWKHWDUJHWODQJXDJH)RUWKHVHYLHZVWKH\GUDZRQ:DOWHU%HQMDPLQ5RPDQ -DNREVRQDQG(]UD3RXQG:KDWKDVFDSWXUHG:HVWHUQLPDJLQDWLRQLVDQHOHPHQWZKLFKWKH\GUDZVSHFLILFDOO\ IURP%UD]LOLDQFXOWXUH7KLVLVWKHLGHDRIµFDQQLEDOLVP¶GHULYHGIURPWKH0RGHUQLVWPRYHPHQWRIDQG WKHZULWLQJVRI2VZDOGGH$QGUDGHSDUWLFXODUO\KLVµ&DQQLEDOLVW0DQLIHVWR¶$QGUDGH%DU\ 7KH FDQQLEDOLVWPHWDSKRUIRUWKHDFWRIWUDQVODWLRQLVRQHRIWKHYHU\IHZ%UD]LOLDQFRQWULEXWLRQVWREH DFNQRZOHGJHGRXWVLGH%UD]LOVHH%DVVQHWW ,WH[SUHVVHVWKHH[SHULHQFHRIDFRORQL]HGSHRSOHZKR GHYRXUZKDWLVRIIHUHGWRWKHPE\WKHLUFRORQL]HUVEXWGRQRWVZDOORZLWZKROHTXLWHWKHRSSRVLWHWKH\VSLW RXWZKDWLVQR[LRXVWRWKHPEXWZKDWWKH\NHHSWKH\PDNHZKROO\WKHLUVE\DOWHULQJDQGFKDQJLQJLWWRVXLW WKHLUQXWULWLRQDOQHHGV

)XUWKHUUHDGLQJ %DU\%ODFN%RUGHQDYH%XUQV&DOyJHUDV'XOOHV+DOOHZHOO3XWQDP 6RX]D:\OHU

+(/2,6$*21d$/9(6%$5%26$$1'/,$:
%LRJUDSK\ 5Ï1$,3DXOR± 3DXOR5yQDLZDVERUQLQ%XGDSHVW+XQJDU\RQ$SULO



3DJH

,QKHHPLJUDWHGWR%UD]LO+LVKRVWFRXQWU\DZDUGHGKLPFLWL]HQVKLSLQUHFRJQLWLRQRIKLVFRQWULEXWLRQWR %UD]LOLDQOLWHUDWXUH+HZDV+HDGRI)UHQFK/LWHUDWXUHDW3HGUR,,8QLYHUVLW\7RJHWKHUZLWK$XUpOLR%XDUTXH GH+ROODQGDKHFROOHFWHGDQGWUDQVODWHGLQWR3RUWXJXHVHDYROXPHDQWKRORJ\RIVKRUWVWRULHVIURPDOORYHU WKHZRUOGXQGHUWKHWLWOH0DUGHKLVWyULDVµ6HDRI6WRULHV¶ KHGHYRWHG\HDUVRIKLVOLIHWRWKLVWDVN+HDOVR FRRUGLQDWHGWKHWUDQVODWLRQRIWZRPRUHFROOHFWLRQV%DO]DF¶V&RPpGLHKXPDLQHDQGWKH1REHO/LEUDU\WKH ODWWHUDFROOHFWLRQRIPDMRUOLWHUDU\ZRUNV$VHGLWRUKHEHFDPHDVFKRRORIWUDQVODWLRQLQKLVRZQULJKW WUDLQLQJQRYLFHWUDQVODWRUVDQGIRVWHULQJWKURXJKKLVGHPDQGLQJVWDQGDUGVWKHFRQFHSWWKDWWUDQVODWLRQ ZKHWKHUOLWHUDU\RUVFLHQWLILFWHFKQLFDOGHVHUYHGUHVSHFWDQGGHVHUYHGWREHGLVFXVVHGIURPDWKHRUHWLFDOSRLQW RIYLHZ 5yQDLZURWHVHYHUDOERRNVRQWUDQVODWLRQ(VFRODGHWUDGXWRUHV6FKRRORI7UDQVODWRUV ZDVWKHILUVW ERRNRQWUDQVODWLRQWREHSXEOLVKHGLQ%UD]LO,WZDVIROORZHGE\+RPHQVFRQWUD%DEHO0HQDJDLQVW%DEHO *XLDSUiWLFRGDWUDGXomRIUDQFHVD$3UDFWLFDO*XLGHWR)UHQFK7UDQVODWLRQ DQG$WUDGXomR YLYLGD7UDQVODWLRQ([SHULHQFHG +HDOVRSXEOLVKHGQXPHURXVSDSHUVDQGOHFWXUHGZLGHO\RQWKHVXEMHFW 2QHRI5yQDL¶VPDLQFRQFHUQVZDVWKHUHODWLYHDEVHQFHRIRUJDQL]HGUHSUHVHQWDWLRQRIWUDQVODWRUVDVZHOODV WKHORZSD\WKH\UHFHLYHG+HVWDUWHGFRUUHVSRQGLQJZLWKPHPEHUVRIWKHQHZO\HVWDEOLVKHG),7LQWKHV +DYLQJILQDOO\PHWWKH3UHVLGHQWRI),73LHUUH)UDQoRLV&DLOOpLQ3DULVLQ5yQDLIRXQGWKHQHFHVVDU\ LQVSLUDWLRQWRHVWDEOLVK$%5$7(6WKH%UD]LOLDQ$VVRFLDWLRQRI7UDQVODWRUVLQ+HDFWHGDV3UHVLGHQWRI $%5$7(6XQWLOKLVUHWLUHPHQWLQ +(/2,6$*21d$/9(6%$5%26$$1'/,$:
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²DVWKH\EHFDPH²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²ZLWQHVVWKHUHJXODUDFFRPPRGDWLRQVRIWKHQDWLYHWUDGLWLRQVWR WUDGLWLRQVRIFODVVLFDOOHDUQLQJ²EXWZLWKDQHTXDOO\HQHUJHWLFDQGLPSRUWDQWSDUWSOD\HGE\WUDQVODWRUVDQG WKHLUWUDQVODWLRQV,QGHHGWKHFXOWXUDOVLWXDWLRQRIWKHVHLVODQGVKDVEHHQVXFKWKDWWKRXJKWKH&HOWLFWUDGLWLRQV VWLOOVXUYLYHLQWKHIULQJHVWRZKLFKWKHLQYDGHUVFRQVLJQHGWKHPWKHLUUHFHVVLYHSRVLWLRQLVUHJUHWWDEO\D UHIOH[RIWKHGRPLQDQFHRI(QJOLVKZKLFKPD\H[SODLQWKRXJKQRWMXVWLI\WKHLUQHJOHFWLQWKLVHQWU\

,QWURGXFWLRQ 7KHWUDGLWLRQRIWUDQVODWLRQLQ%ULWDLQLVORQJDQGYDULHG&RQVHTXHQWO\LWLVGHVLUDEOHWRVXPPDUL]HDQXPEHU RILPSRUWDQWIHDWXUHVEHIRUHSURFHHGLQJWRGHVFULEHLQGLYLGXDOSHULRGVLQPRUHGHWDLO ,QWKH0LGGOH$JHVWKH&DWKROLFFKXUFKSOD\HGDFHQWUDOUROHLQWKHJHQHUDWLRQDQGDXWKRUL]DWLRQRIPHGLHYDO WUDQVODWLRQHVSHFLDOO\LQWRDQGIURP/DWLQ%XWLWVDWWLWXGHWRWUDQVODWLRQLQWRWKHYHUQDFXODUZDVQRWDVSRVLWLYH DVWKDWRIWKH2UWKRGR[FKXUFKWKHFOHUJ\RIWHQYLHZHG/DWLQDVWKHQRUPDQG



3DJH

WKHYHUQDFXODUDVFRUUXSWDQGEDUEDULF$GPLWWHGO\YHUQDFXODUDQG/DWLQZHUHPXWXDOO\VXSSRUWLYHLQWKHDUHDV RIVFLHQWLILFDQGPHGLFDOZULWLQJV9RLJWV /LNHZLVHWUDQVODWLRQLQWR/DWLQZDVDQHFHVVDU\FRQGLWLRQRI DZRUN¶VZLGHUFLUFXODWLRQDQGRUWKHWUDQVODWRU¶VFODLPWRPHPEHUVKLSRIWKHVHOHFWFOXEZKLFK/DWLQFXOWXUH UHSUHVHQWHG%XWVXFKWUDQVODWLRQJHQHUDOO\UHSUHVHQWHGDFKDOOHQJHGLUHFWRULQGLUHFWWRWKHOHDUQLQJIURP ZKLFKLWRULJLQDWHG&RSHODQG ,QWKH0LGGOH$JHVWKH5HQDLVVDQFHDQGWKHQLQHWHHQWKFHQWXU\ WUDQVODWLRQLQWRWKHYHUQDFXODUKHOSHGWRFUHDWHDQGFRQVROLGDWHDQDWLRQDOOLWHUDU\FRQVFLRXVQHVVKHQFH%LVKRS %U\DQ:DOWRQ¶VYLHZLQWKDWWKH%LEOHFRXOGVWDQGFRPSDULVRQZLWKDQ\RWKHU(XURSHDQYHUVLRQ 1RUWRQ, ,QWKH$XJXVWDQSHULRGWUDQVODWLRQKHOSHGXQGHUZULWHQDWLRQDOOLWHUDU\VHOIFRQILGHQFH IRULQVWDQFHLQ$OH[DQGHU3RSH¶V,PLWDWLRQVRI+RUDFH± /DWLQRULJLQDODQG(QJOLVKYHUVLRQRQIDFLQJ SDJHVGUDPDWL]HWKHODWWHU¶VWUDQVIRUPDWLRQVRIWKHIRUPHU 7UDQVODWLRQIURPYHUQDFXODUVLQWR(QJOLVKQHYHUHQMR\HGWKHVDPHDXWKRULW\DVIURP/DWLQEXWDKLHUDUFK\RI VRUWVRSHUDWHGLQIDYRXURI)UHQFKLQWKHODWHU0LGGOH$JHVDQGDJDLQDIWHUWKH5HVWRUDWLRQ&RQVHTXHQWO\WKH (QJOLVKVRPHWLPHVSUHIHUUHGWRXVH)UHQFKKHQFHWKH0pPRLUHV«GX&RPWHGH*UDPRQW ZHUHZULWWHQ LQ)UHQFKE\WKHH[LOHG$QWKRQ\+DPLOWRQDQGWUDQVODWHGLQWR(QJOLVK E\WKH)UHQFKpPLJUp$EHO %2<(51HDUHURXURZQWLPH2VFDU:LOGH6DORPp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sXVHG)UHQFKLQ9LOOHWWH WRVKRZKHUPRQROLQJXDO KHURLQH¶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


3DJH

HQGRIWKHQLQHWHHQWKFHQWXU\EXWFDQEHWUDFHGPXFKHDUOLHULQWKHFRPPLVVLRQLQJRIZRUNVE\DQG GHGLFDWLRQRIZRUNVWRSDWURQV,QWKHILIWHHQWKFHQWXU\QREOHKRXVHKROGVSURYLGHGLPSRUWDQWFHQWUHVRI WUDQVODWLRQDFWLYLW\6LU-RKQ+DULQJWRQSURGXFHGKLVWUDQVODWLRQRI2UODQGR)XULRVR DWWKHGLUHFWLRQRI (/,=$%(7+L-RQDWKDQ%LUFKGHGLFDWHGKLVWZRYROXPH)DXVW± WRWKH&URZQ3ULQFHDQG.LQJRI 3UXVVLD7KHSDWURQFRXOGDOVRWXUQWUDQVODWRU(DUO5LYHUVDQGWKH(DUORI:RUFHVWHUSURGXFHGWUDQVODWLRQV SULQWHGE\&$;721(OL]DEHWK,WUDQVODWLRQVIURP/DWLQDQG*UHHN 6RPHWLPHVWKHWUDQVODWRUZRUNHGDORQHPRUHRIWHQFROODERUDWLYHO\7UDQVODWLRQVRIPDMRUWH[WVOLNHWKH%LEOH RU+RPHUZHUHRIWHQVRXQGHUWDNHQ7KHUHLVQRILUPHYLGHQFHRIVFKRROVRIWUDQVODWLRQOLNHWKRVHLQVHFRQG FHQWXU\$OH[DQGULDWKH)UHQFKFRXUWRI&KDUOHV9RUWKHµIDFWRU\RIWUDQVODWLRQV¶*6WHLQHU DW 5RPHGXULQJWKHSDSDF\RI1LFKRODV97KHLQVWLWXWLRQDOL]DWLRQRIWUDQVODWLRQDVDSURIHVVLRQKDGWRZDLWWLOO WKHWZHQWLHWKFHQWXU\ 2FFDVLRQDOO\ELOLQJXDODXWKRUVWUDQVODWHGWKHPVHOYHVDVLQWKHFDVHRI&KDUOHV'XNHRI2UOpDQVLQWKHILIWHHQWK FHQWXU\2WKHUZLVHDOLYLQJDXWKRUPLJKWEHFRQVXOWHGGXULQJWKHFRXUVHRIWKHWUDQVODWLRQIRUH[DPSOH *RHWKHE\&$5/
7KH0LGGOH$JHV ,QWKH2OG(QJOLVKSHULRGF± WKRXJKWUDQVODWLRQRFFXUVERWKEHIRUHDQGDIWHU



3DJH

KLVWLPHWKHZRUNRI.LQJ$OIUHGLVRIWKHILUVWLPSRUWDQFH,QUHDFWLRQWRDSHUFHLYHGGHFOLQHLQLQWHOOHFWXDO OLIHLQ(QJODQGZKLFKKDGOHIWIHZDEOHWRUHDG(QJOLVKRUWUDQVODWH/DWLQ$OIUHGSURGXFHGDQGFRPPLVVLRQHG DQXPEHURIWUDQVODWHGZRUNV²LQFOXGLQJWKH3DVWRUDO&DUHRI3RSH*UHJRU\WKH6ROLORTXLHVRI6W$XJXVWLQH DQGWKH&RQVRODWLRQRI3KLORVRSK\E\%RHWKLXVSULQFLSDOO\IRUWKHµ\RXWKRIIUHHPHQ«>DEOH@WRGHYRWH WKHPVHOYHVWRLW¶6ZDQWRQ 0DLQODQG(XURSHSURYLGHVODWHULQVWDQFHVRIPRQDUFKVZKRLQVWLWXWHG FRPSDUDEOHWUDQVODWLRQSURMHFWVIRUH[DPSOH$/)2162;LQ6SDLQVHH63$1,6+75$',7,21 DQG &KDUOHV9LQ)UDQFH(QJODQGLIZHH[FHSWWKHFRPPLVVLRQLQJRIWKH%LEOHE\-DPHV,KDUGO\DQ\ $OIUHG¶VWUDQVODWLRQSURMHFWZDVJHDUHGWROHDGHUVRIFKXUFKDQGVWDWHDQGKDSS\WRXVH(QJOLVKWRH[SUHVV FRPSOH[LGHDV7KHRWKHUPDMRU2OG(QJOLVKWUDQVODWLRQSURMHFWZDVWKDWRIOIULFF±F $EERWRI (\QVKDPZKRSURGXFHGQXPHURXVDGDSWDWLRQVDQGWUDQVODWLRQVRIWKH2OG7HVWDPHQWDQGRWKHUUHOLJLRXV ZRUNVDQGGHVFULEHGKLVSURFHGXUHVLQKLV7UDFWRQWKH2OGDQG1HZ7HVWDPHQW%XWOIULF¶VSURMHFWZDV RULHQWDWHGGLIIHUHQWO\WRZDUGVWKHVLPSOHIDLWKIXOIURPZKRPWKHULFKHVRI/DWLQOHDUQLQJQHHGHGWREH VDIHJXDUGHG 6RPHWKLQJRIWKLVGLYLVLRQEHWZHHQWUDQVODWLRQIRUDQpOLWHDQGIRUWKHPDVVHVDQGEHWZHHQDZULWHU¶V FRQILGHQFHLQDQGGLVWUXVWRIWKHYHUQDFXODUUHVXUIDFHVUHJXODUO\WKURXJKRXWWKH0LGGOH(QJOLVKSHULRG7KXV LPPHGLDWHO\DIWHUWKH1RUPDQ&RQTXHVWWUDQVODWRUVXVH$QJOR1RUPDQE\FRQWUDVWZLWK(QJOLVKFRQILGHQWRI EHORQJLQJWRDVRFLDOpOLWH3HDUVDOO± $QJOR1RUPDQWUDQVODWLRQVDUHDVVRFLDWHGZLWKFRXUWDQG PRQDVWLFFHQWUHV6HYHUDOZHUHSURGXFHGE\ZRPHQLQFOXGLQJLQWKHWZHOIWKFHQWXU\QXQVIURP%DUNLQJ ZKHUHRQH&OHPHQFHSURGXFHGDYHUVHWUDQVODWLRQRIWKH3DVVLRRI6W.DWKHULQHRI$OH[DQGULDDQGDQ XQQDPHGQXQD/LIHRI6W(GZDUGWKH&RQIHVVRU/HJJH )RUPXFKRIWKH0LGGOH(QJOLVKSHULRGF± WKHQWZRYHUQDFXODUVZHUHDYDLODEOH$QJOR1RUPDQ DQG(QJOLVKDQGWUDQVODWLRQVFRXOGEHXQGHUWDNHQLQWRHLWKHURUIURPRQHWRWKHRWKHU$QJOR1RUPDQZDV µWKHSUHVWLJHYHUQDFXODU¶GXULQJWKHWKLUWHHQWKFHQWXU\3HDUVDOO 5REHUW*5266(7(67(DQDWLYH (QJOLVKPDQOHJLVODWHGIRUWKHODLW\¶VUHOLJLRXVLQVWUXFWLRQLQ(QJOLVKEXWPDLQO\XVHG)UHQFK:LGHO\LQXVH HDUO\LQWKHIRXUWHHQWKFHQWXU\$QJOR1RUPDQZDVVWLOOEHLQJXVHGDWFRXUWLQWKHILIWHHQWK,QVXFKDOLQJXLVWLF VLWXDWLRQWKHFKRLFHRIYHUQDFXODUIRUDWUDQVODWLRQLQHYLWDEO\UHIOHFWHGFRPSOH[VRFLDODQGSROLWLFDOSUHVVXUHV 8QWLOWKHPLGIRXUWHHQWKFHQWXU\PRVW0LGGOH(QJOLVKWUDQVODWLRQVDUHDQRQ\PRXVDQGH[FHSWIRU5LFKDUG 5ROOHG ZKRVH3VDOWHUZDVVWLOOLQXVHDKXQGUHG\HDUVDQGPRUHODWHUIHZWUDQVODWRUVVHHPWRKDYHKDG PXFKVHQVHRIFRQWULEXWLQJWRDQHYROYLQJWUDGLWLRQRUWRKDYHUHDFKHGDYHU\ZLGHUHDGHUVKLS%XWRQH SURGXFWLRQWKH$XFKLQOHFN06FFRQWDLQLQJDQRQ\PRXVWUDQVODWLRQVRI$QJOR1RUPDQURPDQFHVKDV EHHQDFFRUGHGJUHDWHULPSRUWDQFHDQGH[SODLQHGDVWKHSURGXFWRIDFRPPHUFLDOVFULSWRULXPZKHUHµDJHQHUDO ³HGLWRU´«VXSHUYLVHGWKHZRUNRIKLVWUDQVODWRUVDQGVFULEHV¶´3HDUVDOO± 7KHH[LVWHQFHRI FRPPHUFLDOVFULSWRULDFDQQRWEHFRQFOXVLYHO\SURYHQLQ(QJODQGEHIRUHWKHILIWHHQWKFHQWXU\3HDUVDOO± QHYHUWKHOHVVWUDQVODWLRQGUDPDWLFDOO\RQWKHLQFUHDVHIURPWKHODWHIRXUWHHQWKFHQWXU\RQLVLQFUHDVLQJO\ PDUNHGE\WKHSURIHVVLRQDOLVPDVVRFLDWHGZLWKWKHFRPPHUFLDOVFULSWRULXP 7ZRZULWHUVUHSUHVHQWWKHQHZSURIHVVLRQDOLVPFOHDUO\7KHILUVWLV*HRIIUH\&+$8&(5WKHFRXUWSRHW &KDXFHU¶VLPSRUWDQFHZDVDFNQRZOHGJHGE\FRQWHPSRUDULHVDWKRPHDQGDEURDG²QRWDEO\E\(XVWDFKH 'HVFKDPSVZKRFDOOHGKLPDµJUDQWWUDQVODWHXU¶²DQGE\IROORZHUVDWKRPHQRWDEOHDPRQJWKHODWWHU 7KRPDV+RFFOHYHDQG-RKQ/\GJDWH 7KHTXDQWLW\DQGUDQJHRI&KDXFHU¶VWUDQVODWHGZRUNDUHVWULNLQJ (TXDOO\LPSRUWDQWLVKLVGHFLVLRQWRSXEOLVKRQO\LQ(QJOLVKZKLFKFRQWULEXWHGSRZHUIXOO\WRWKHHVWDEOLVKPHQW RI(QJOLVKWKHUHDIWHUDVWKHSULQFLSDOOLWHUDU\ODQJXDJHRI(QJODQG 7KHSULQFLSDOWUDQVODWLRQRIWKHVHFRQGµZULWHU¶SUREDEO\VHYHUDODOODQRQ\PRXV ZDVHTXDOO\LPSRUWDQWWKH :\FOLILWH%LEOH7KLVZDVDFROODERUDWLYHYHQWXUHSDUWRIDQRQJRLQJGHEDWHDERXWYHUQDFXODUWUDQVODWLRQRIWKH %LEOH1DPHVDVVRFLDWHGZLWKLWVSURGXFWLRQKDYHLQFOXGHG-RKQ:\FOLI-RKQ3XUYH\



3DJH

1LFKRODV+HUHIRUGDQG-RKQRI75(9,6$7KHZRUNSRVVLEO\EHJXQLQWKHVVXUYLYHVLQDSSUR[LPDWHO\ PDQXVFULSWV 7KH:\FOLILWH%LEOHVXUYLYHVLQDWOHDVWWZRPDMRUYHUVLRQVWKHHDUOLHUPRUHOLWHUDOVHH/,7(5$/ 75$16/$7,21 WKDQWKHODWHUSDUWRIDFROODERUDWLYHSURMHFWRIERRNSXEOLFDWLRQGLVWULEXWLRQDQG RZQHUVKLSZHOOXQGHUZD\E\7KHQDWXUHRIWKHWUDQVODWLRQLVUHYHDOHGE\WKHVRFDOOHG*HQHUDO 3URORJXH&KDSWHUGHVFULEHVWKHSUDFWLFHVRIWKHWUDQVODWRUV DUJXHVIRUDPHDQLQJDWOHDVWµDVWUHZHDQG RSLQLQ(QJOLVKDV«LQ/DW\Q¶DSSHDOVWRKLVWRULFDOSUHFHGHQWDQGGHVFULEHVWKHFDUHIXOFROODERUDWLYHH[HUFLVH WKDWSURGXFHGWKHWUDQVODWLRQ+XGVRQ± $VLPSRUWDQWDVWKHWUDQVODWRUV¶FRQFHUQIRUWKHWUXWKDQGDFFXUDF\RIWKHLUWH[WLVWKHLUGHYHORSLQJ XQGHUVWDQGLQJRIWKHQHHGVRIWKHLUUHDGHUV+HQFHWKH\UHSODFHGWKHLUOLWHUDOWUDQVODWLRQDVOHVVµRSHQ¶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µHQULFK(QJOLVK OHWWHUV¶3HDUVDOO DERXW0DORU\FRPSOHWHGKLV0RUWH'¶$UWKXUDZRUNSDUWO\IURP)UHQFK SDUWO\IURPDQHDUOLHU(QJOLVKZRUNDQGSDUWO\RULJLQDO7KH0RUWHZDVSXEOLVKHGLQE\&$;721ZLWK ZKRVHZRUNZHGUDZWRZDUGVWKH5HQDLVVDQFH

7KHVL[WHHQWKDQGHDUO\VHYHQWHHQWKFHQWXULHV5HIRUPDWLRQDQG5HQDLVVDQFH ,I&D[WRQ¶VSUHVVHVKDGLPPHGLDWHSUDFWLFDOHIIHFWVRQWKHWUDQVPLVVLRQRIYHUQDFXODUWH[WVWKHWUDQVODWLRQVRI WKH:\FOLILWH%LEOHDQG&KDXFHUSRLQWWRWKHWZRDUHDVLQZKLFKWUDQVODWLRQDFWLYLW\UHDOO\WRRNRIILQWKH VL[WHHQWKFHQWXU\²LQSDUWLFXODUGXULQJWKHILUVWWHQ\HDUVRI(/,=$%(7+,¶VUHLJQ± ZKHQIRXU WLPHVDVPDQ\WUDQVODWLRQVZHUHSURGXFHGDVLQWKH\HDUVSUHYLRXV%DUQVWRQH WKHDUHDVRIWKH %LEOHDQGFODVVLFDOOLWHUDWXUH7KDQNVWRWKHHUUDWLFEXWSRZHUIXOVXSSRUWRIWKHPRQDUFK\WUDQVODWLRQKHOSHG IRUJHDQDWLRQDOLGHQWLW\ERWK(QJOLVKDQGUHOLJLRXVO\DQGLQWHOOHFWXDOO\ UHIRUPHG,QWKLVSURMHFW%LEOH WUDQVODWLRQPXFKRILWSXEOLVKHGDEURDGSOD\VDFUXFLDOUROH %LEOHWUDQVODWLRQV ,QWKHUXQXSWRDQGDIWHUPDWKRI+HQU\9,,,µVEUHDNZLWK5RPHWKHSUHVVXUHIRUUHOLJLRXVUHIRUPRULJLQDWLQJ RQFHPRUHLQFOHULFDOFLUFOHVOHGWRDQH[SORVLRQRI%LEOHWUDQVODWLRQV7KHILUVWDQGPRVWLPSRUWDQWZDV 7<1'$/(¶6WUDQVODWLRQRIWKH1HZ7HVWDPHQW EDVHGIRUWKHILUVWWLPHRQWKH*UHHNHGLWLRQRI 'HVLGHULXV(5$6086VHH'87&+75$',7,21 )DFHGE\WKHRQJRLQJEDQRQYHUQDFXODU%LEOH WUDQVODWLRQV7\QGDOHWUDYHOOHGWRWKH&RQWLQHQWWRSXEOLVKLW,QLWHQWHUHG(QJODQGLOOHJDOO\'DQLHOO :LWKLQDGHFDGHUHODWLRQVKDGDOWHUHGGUDPDWLFDOO\EHWZHHQ+HQU\9,,,DQGWKHSDSDF\DQGODUJHQXPEHUVRI YHUQDFXODU%LEOHVZHUHFLUFXODWLQJLQ(QJODQGLQFOXGLQJSLUDWHGHGLWLRQVRI7\QGDOH¶V1HZ7HVWDPHQWDQGKLV UHYLVLRQ0LOHV&RYHUGDOH¶VFRPSOHWH%LEOHSXEOLVKHGLQ=XULFKLQDQGLQ(QJODQGLQDQGD %LEOHLVVXHGE\-RKQ5RJHUVXQGHUWKHSVHXGRQ\PRI-RKQ0DWWKHZ$QWZHUS EDVHGRQ7\QGDOHDQG &RYHUGDOH,QDUHYLVLRQRIWKH5RJHUV¶%LEOHDSSHDUHGE\5LFKDUG7DYHUQHULQWKH\HDUWKDW7KRPDV &URPZHOO+HQU\9,,,¶V9LFDU*HQHUDODSSRLQWHG&RYHUGDOHWRRYHUVHHWKHSULQWLQJRIWKH%LEOH7KHWLWOH SDJHRI&RYHUGDOH¶VQHZHGLWLRQWKH*UHDW VKRZHG+HQU\9,,,KDQGLQJ%LEOHVWR&URPZHOODQG $UFKELVKRS&UDQPHUWRGLVWULEXWHWRDJUDWHIXOFURZG:LOVRQ



3DJH

.LQJ DFOHDUUHSUHVHQWDWLRQRIWKHLQYROYHPHQWRIWKHVWDWHLQWKHSXEOLFDWLRQRI%LEOHWUDQVODWLRQV )URPWKHQXQWLOWKHYHUVLRQDZKROHVHULHVRI%LEOHWUDQVODWLRQVZDVSURGXFHGWKHUHVXOWVRIWKHµZLVKHV DQGFRXQWHUZLVKHV¶.LWDJDNL RI+HQU\¶V3URWHVWDQWDQG&DWKROLFVXFFHVVRUV$PRQJVWWKH 3URWHVWDQWVZKRIOHGWRWKH&RQWLQHQWDIWHUWKHDFFHVVLRQRI4XHHQ0DU\LQZHUHDWHDPRIWUDQVODWRUV ZKRSURGXFHGWKH*HQHYD%LEOH7KLVWUDQVODWLRQZDVWKHPRVWZLGHO\UHDGERRNLQ(OL]DEHWKDQ(QJODQG -HQVHQ UHSULQWHGDVODWHDVDQGXVHGHYHQE\WKRVHZKRIDYRXUHGWKH%LEOH1RUWRQ DOWKRXJKHSLVFRSDORSSRVLWLRQSUHYHQWHGLWVSULQWLQJLQ(QJODQGXQWLOE\WKHQWKH%LVKRSVKDG DWWHPSWHGXQVXFFHVVIXOO\WRUHSODFHLWZLWKDQHGLWLRQRIWKHLURZQWKH%LVKRSV¶%LEOH DUHYLVLRQRIWKH *UHDW%LEOH1RUWRQ, /DVWO\.LQJ-DPHV,FRQYHQHGDFRQIHUHQFHDW+DPSWRQ&RXUWLQDWZKLFKDJUHHPHQWZDVJLYHQWRD SURSRVDOIRUWKHFUHDWLRQRIDQHZWUDQVODWLRQZKLFKZRXOGEHLQWKHZRUGVRIWKHSURSRVHU-RKQ5H\QROGV µDQVZHUDEOHWRWKHWUXWKRIWKH2ULJLQDOO¶.LWDJDNL $OWKRXJKXQOLNHWKH*UHDWDQG%LVKRSV¶%LEOHV WKLV%LEOHZDVQHYHURIILFLDOO\DXWKRUL]HG:LOVRQ WKH.LQJZLWK%LVKRS%DQFURIWJDYHDVHWRI UXOHVIRULWVPDNLQJWRVL[WHDPVRIWUDQVODWRUV,WZDVWREHDUHYLVLRQUDWKHUWKDQDQHZWUDQVODWLRQWUDGLWLRQDO UHDGLQJVSULQFLSDOO\WKRVHRIWKH%LVKRSV¶%LEOH VKRXOGEHSUHVHUYHGDVIDUDVSRVVLEOHGRFWULQDO WHQGHQWLRXVQHVVZDVWREHFKHFNHGDQGDFFXUDF\DFKLHYHGWKURXJKDPXOWLSOHFKHFNLQJV\VWHPZLWKLQDQG EHWZHHQFRPPLWWHHV7KHPRRGZDVRQHRIFRQFLOLDWLRQUDWKHUWKDQDVEHIRUHRIFRQWHVWDWLRQDQGWKH WUDQVODWRUVXVHGWKHPDQ\WUDQVODWLRQVIURP7\QGDOHRQZDUGVWRFUHDWHLQ5H\QROGV¶ZRUGVµRXWRIPDQ\JRRG >%LEOHV@«RQHSULQFLSDOOJRRGRQH¶.LWDJDNL WKH%LEOH2IFRXUVHWKHKXJHVXFFHVVRIWKLV YHUVLRQRZHVDVPXFKWRHFRQRPLFDQGSROLWLFDODVWROLWHUDU\LQWHUHVWV1RUWRQ,II 0HDQZKLOHH[LOHG&DWKROLFVKDGDOVRSURGXFHGDYHUQDFXODU%LEOHNQRZQDVWKH5KHLPV'RXDLYHUVLRQ± 7KHSUHIDFHH[SODLQVWKDWWKLVµ&DWKROLFWUDQVODWLRQ¶SUHFLVHO\IROORZVWKHµROGYXOJDUDSSURYHG /DWLQ¶-RQHV 5HYLVHGLQWKHHLJKWHHQWKFHQWXU\E\%LVKRS&KDOORQHUDQGDJDLQLQWKHQLQHWHHQWKLW UHPDLQHGWKHRIILFLDOWUDQVODWLRQIRU5RPDQ&DWKROLFVXQWLOWKHWZHQWLHWKFHQWXU\7KURXJKRXWWKDWSHULRGWKH µROGYXOJDUDSSURYHG/DWLQ¶ZDVDQLQWHJUDOSDUWRI5RPDQ&DWKROLFVHOIGHILQLWLRQLIZHH[FHSWWUDQVODWLRQV IURPWKH*UHHNLQDQGIURP*UHHNDQG+HEUHZLQ±WKH9XOJDWHUHPDLQHGWKHEDVHIRU&DWKROLF WUDQVODWLRQVXQWLOWKHDSSHDUDQFHRIWKH-HUXVDOHP%LEOHLQWKHVLWVODVWJUHDWPRQXPHQWLVWKHWUDQVODWLRQ ± RILWE\5RQDOG.QR['D\UDV± &ODVVLFDODQGRWKHUVHFXODUOLWHUDWXUH $OWKRXJKWKHWUDQVODWRU¶VGXWLHVZHUHOHVVVWULQJHQWLQUHODWLRQWRVHFXODUWKDQWRVDFUHGWH[WVWKHWUDQVODWLRQRI VHFXODUPDWHULDOGXULQJWKHVL[WHHQWKDQGHDUO\VHYHQWHHQWKFHQWXULHVUXQVEURDGO\SDUDOOHOWRWKDWRIWKH%LEOH GXULQJWKLVSHULRG/DWLQZDVVWLOOWKHPDLQODQJXDJHRIVFKRODUVKLSEXWRQHPDMRUGLIIHUHQFHEHWZHHQWKH VL[WHHQWKFHQWXU\DQGHDUOLHUSHULRGVLVWKHGLUHFWLQIOXHQFHRI*UHHNOLWHUDWXUH7UDQVODWLRQVRI'HPRVWKHQHV +RPHU,VRFUDWHVDQG3OXWDUFKRFFXUIUHTXHQWO\RIWHQE\ZD\RIDQLQWHUPHGLDWHVRXUFHWKXV6LU7KRPDV 1RUWK¶VWUDQVODWLRQRI3OXWDUFK¶V/LYHV ZDVEDVHGRQ-DFTXHV$0<27¶6)UHQFKWUDQVODWLRQVHH )5(1&+75$',7,21 $VZLWKWKH%LEOHWUDQVODWLRQVGLIIHUHQWWUDQVODWLRQVRIWKHVDPHVHFXODUWH[WZHUHIUHTXHQWO\LQFRPSHWLWLRQ ZLWKHDFKRWKHUDQHFRQRPLFULYDOU\DVVRFLDWHGZLWKWKHLQFUHDVHLQWKHSXEOLVKLQJWUDGH7KXV7KRPDV3HHQG FRPSODLQVLQWKHSUHIDFHWRKLV+HUPDSKURGLWXVDQG6DOPDFLV IURP2YLG¶V0HWDPRUSKRVHVDW$UWKXU *ROGLQJ¶VKDYLQJIRUHVWDOOHGKLPZLWKDWUDQVODWLRQRIWKHFRPSOHWHWH[W0RUHRYHUWUDQVODWRUVRIWHQGLVFXVV WKHLUZRUNLQWHUPVRIFRQWHVWDWLRQ3KLOHPRQ+ROODQGWKHµWUDQVODWRUJHQHUDO¶RIWKHDJHGHVFULEHGKLV HQWHUSULVHDVDFRQTXHVW6DPSVRQ 6HFXODUWUDQVODWLRQVZHUHRIWHQWKHVLWHRIDGHEDWHRQJRLQJDQG DQFLHQWDQGUHJXODUO\IRFXVHGE\WKHTXHVWLRQRI%LEOHWUDQVODWLRQ DERXWWKHDGHTXDF\RIWKHYHUQDFXODUWR WUDQVPLWWKHULFKHVRIFODVVLFDOOHDUQLQJZKHWKHU*UHHN/DWLQRUHYHQRIWKHRWKHU(XURSHDQYHUQDFXODUV 2WKHUVVDZWKHWUDQVODWLYHWDVNE\FRQWUDVWDVDSDWULRWLFDFWWRLPSURYHWKHFXOWXUDO



3DJH

SRVLWLRQRIWKH(QJOLVKQDWLRQ1LFKRODV*ULPDOGE\WUDQVODWLQJ&LFHUR¶V7KUH%RNHVRI'XWLHV ZDQWHG WRµGROLNHZLVHIRUP\FRXQWULPHQDV,WDOLDQV6SDQLDUGHV'XWFKPHQDQGRWKHUIRUHLQVKDYHOLEHUDOO\GRQH IRUWKH\UV¶-RQHV 1RWRQO\*UHHNDQG5RPDQDXWKRUVZHUHWUDQVODWHG1RUWKWUDQVODWHGWKH)DEOHVRI %LGSDLF IURPDQLQWHUPHGLDWH,WDOLDQYHUVLRQRIWKH$UDELF2WKHUWUDQVODWRUVWXUQHGWR(XURSHDQ ODQJXDJHV$OH[DQGHU%DUFOD\¶V6K\SRI«)RO\V ZDVWUDQVODWHGE\ZD\RI/RFKHU¶V/DWLQYHUVLRQIURP %UDQGW¶V1DUUHQVFKLII7KRPDV+RE\¶V%RRNRIWKH&RXUWLHU FDPHIURP&DVWLJOLRQH¶V,WDOLDQD6SDQLVK URPDQFHE\GH&DODKRUUDZDVWUDQVODWHGDV7KH0LUURXURI.QLJKWKRRG E\0DUJDUHW7\OHU 0RQWDLJQH¶V)UHQFK(VVD\VZHUHWUDQVODWHGE\-RKQ)ORULR &KULVWLQHGH3LVDQ¶V%RRNRIWKH&LW\RI /DGLHVLQE\%ULDQ$QVOD\WKHODVW(QJOLVKWUDQVODWLRQRIDQ\RIKHUZRUNVXQWLOODWHWKLVFHQWXU\ 7KHUHZHUHRSSRVLQJYLHZVKLQGHULQJDFFHVVWRFHUWDLQWH[WV6RPHFODLPHGWKDWWUDQVODWLQJLQWRWKHYHUQDFXODU ZRXOGKLQGHUWKHVWXG\RI/DWLQDQG*UHHN-RQHV 6FKRODUVFRQWLQXHGWRSURGXFH/DWLQWH[WVRIWHQ ODWHUWUDQVODWHGLQWR(QJOLVKIRUH[DPSOH6LU7KRPDV0RUH¶V8WRSLD DQG:LOOLDP&DPGHQ¶V%ULWDQQLD F WUDQVODWHGE\5DOSK5RELQVRQLQDQG+ROODQGLQUHVSHFWLYHO\-RKQ6NHOWRQZKRSURGXFHG DWUDQVODWLRQRI'LRGRUXV6LFXOXVIURPWKH/DWLQYHUVLRQRI3RJJLRDOVRZURWHVHYHUDOZRUNVLQ/DWLQ1RU ZHUHDOOWH[WVWKRXJKWHTXDOO\ILWIRUWUDQVODWLRQ&KULVWRSKHU0DUORZH¶VWUDQVODWLRQVRI2YLGSXEOLVKHG FODQGHVWLQHO\ZHUHEDQQHGDQGEXUQHGDVVHGLWLRXVLQE\RUGHURIWKH$UFKELVKRSRI&DQWHUEXU\8QWLO DQG(GZDUG'DFUH¶VWUDQVODWLRQRILW0DFKLDYHOOL¶V7KH3ULQFHZDVDYDLODEOHRQO\E\ZD\RIDKRVWLOH )UHQFKWH[WWKH&RQWUD0DFKLDYHO E\*HQWLOOHWWUDQVODWHGE\6LPRQ3DWHULFNHLQ(QJOLVKUHDGHUV KDGVLPLODUO\WRZDLWXQWLOIRUDFRPSOHWHWH[WRI%RFFDFFLR¶V'HFDPHURQDQGXQWLOIRUWKHZKROHRI 5DEHODLV¶*DUJDQWXDDQG3DQWDJUXHOEHJXQEHIRUHE\6LU7KRPDV8UTXKDUWFRPSOHWHGE\3HWHU 0RWWHX[ 7KRXJKDEOHWRFRPPLVVLRQDQGUHDGWUDQVODWLRQVZRPHQZHUHJHQHUDOO\DEOHDVLQWKH0LGGOH$JHVWR SDUWLFLSDWHRQO\RQWKHSLRXVIULQJHVRIWUDQVODWLRQDFWLYLW\,QJHQHUDOZRPHQWUDQVODWRUVXVXDOO\JHQWO\ERUQ OLNH0DUJDUHW0RUH5RSHUDQGWKH&RRNHVLVWHUVSURGXFHG/,7(5$/UHOLJLRXVWUDQVODWLRQV/DPE WKRXJKVHFXODUWUDQVODWLRQVZHUHSURGXFHGE\VXFKDV(/,=$%(7+,0DUJDUHW7\OHUDQG0DU\6,'1(< 'HVSLWHWKLVPDUJLQDOLW\WKHµYRLFHV¶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µQDWXUDOL]HG¶E\6KDNHVSHDUHWKHSDVWRUDOE\ZD\RI*UHHN7KHRFULWXV /DWLQ0DQWXDQ DQG9LUJLO DQG,WDOLDQ7DVVRDQG*XDULQL WDNHVURRWZLWK6LU3KLOLS6LGQH\DQG(GPXQG6SHQVHUFODVVLFDO HSLFVHVSHFLDOO\WKRVHRI9LUJLODQG+RPHUNQRZQWRWKH0LGGOH$JHVEXWQRWWUDQVODWHGLQWKHLURZQULJKW XQWLOWKHVL[WHHQWKFHQWXU\9LUJLOE\*DYLQ'RXJODVWKH(DUORI6XUUH\DQG7KRPDV3KDHU+RPHUE\ *HRUJH&+$30$1²JDYHULVHWRWKHHSLFVRI6SHQVHUDQG-RKQ0LOWRQWKHHS\OOLDRI2YLGLQIOXHQFHG 0DUORZH&KDSPDQDQG6KDNHVSHDUHWUDQVODWLRQVIURP*UHHNDQG5RPDQGUDPDFRQWULEXWHGSRZHUIXOO\WRWKH (OL]DEHWKDQDQG-DFREHDQWKHDWUH

7KHVHYHQWHHQWKDQGHLJKWHHQWKFHQWXULHV 7KLVSHULRGRIWUDQVODWLRQDFWLYLW\LVGRPLQDWHGDWWKHHQGRIWKHVHYHQWHHQWKFHQWXU\E\WZRILJXUHV'5<'(1 DQG3RSHDQGLQWKHODWHHLJKWHHQWKFHQWXU\E\WKHPRUHFRPSOH[ILJXUHRI$OH[DQGHU7<7/(5 7KHGLVWLQFWLYHHPSKDVHVRI'U\GHQDQG3RSHKRZHYHUFDQEHVHHQHDUOLHULQHPEU\R



3DJH

LQWKHSUHIDFHVWR&KDSPDQ¶V,OLDGZKLFKKDGLQFUHDVLQJO\DWWHPSWHGWRQHJRWLDWHDQGUHJXODUL]HDWKHRUHWLFDO IUDPHIRUWKHSURFHVVRIWUDQVODWLRQ$WILUVW&KDSPDQYLHZHGWUDQVODWLRQDVVWUDLJKWIRUZDUGOLQJXLVWLFPLPHVLV SUHIDFHWRWKH6HDYHQ%RRNHVRIWKH,OLDG +HWKHQPRYHGWRPRUHVRSKLVWLFDWHGGLVFXVVLRQVRIDSRHWLF DUWRIWUDQVODWLRQSUHIDFHWRWKHFRPSOHWH,OLDG +HZDVQRWDORQHLQVRGRLQJ-RQVRQ¶VZRRGHQO\OLWHUDO WUDQVODWLRQRI+RUDFH¶V$UV3RHWLFDPLJKWKDYHH[HPSOLILHGWKHILUVWDSSURDFKWKHEULOOLDQWWUDQVIRUPDWLRQVRI 5RPDQVDWLULVWVLQKLVSOD\VWKHVHFRQG &KDSPDQ¶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¶V(SLVWOHV%\6HYHUDO+DQGV µIRUIUHHLQJWUDQVODWLRQIURPVHUYLOLW\¶756WHLQHU KH DOVRGLVWDQFHGKLPVHOIIURPZKDWKHVDZDVWKHLUH[FHVVHVDQGFUHDWHGDQHZPRGHOZKLFKZRXOGVKDSHWKHRU\ DQGSUDFWLFHIRUWKHIROORZLQJFHQWXU\µWKHHDUOLHVWH[KDXVWLYHGLYLVLRQRIWUDQVODWLRQ¶LELG XQGHUWKH WKUHHKHDGVRI0(7$3+5$6(3$5$3+5$6(DQG,0,7$7,21+HUHMHFWVERWKPHWDSKUDVHOLWHUDOLVPLQ WUDQVODWLRQWKHHDUOLHURI&KDSPDQ¶VSRVLWLRQV DQGLPLWDWLRQDEDQGRQPHQWRIWKHVRXUFHWH[WWKHµH[FHVVHV¶ RI&RZOH\ LQIDYRXURIWKHYLDPHGLDRISDUDSKUDVHWUDQVODWLRQZLWKODWLWXGH +HPRGLILHGWKLVSRVLWLRQLQWKH 'HGLFDWLRQRIWKH$HQHLV ZKLFKWDONVRIµVWHHU>LQJ@EHWZL[WWKHWZRH[WUHDPHVRISDUDSKUDVHDQGOLWHUDO WUDQVODWLRQ¶XQGHUVWDQGLQJWKHVSLULWRIWKHRULJLQDODXWKRUZKLOVWDGDSWLQJWKHWUDQVODWLRQWRWKHDHVWKHWLF FDQRQVRIWKHDJH'U\GHQ¶V$HQHLGLVZLGHO\UHJDUGHGDVDPDVVLYHDFKLHYHPHQW3RSH¶VZRUNFOHDUO\UHIOHFWV 'U\GHQ¶VLQIOXHQFHWKHSUHIDFHWRKLV,OLDG± LQVLVWVRQPRGHUDWLRQDQGWKHQHHGIRUDQDFFXUDF\ ZKLFKDYRLGVOLWHUDOLVPRUSDUDSKUDVH 7UDQVODWLRQVRI+RPHUZHUHWKHQDVODWHU²WRSXWLWPLOGO\²DVLWHRIFULWLFDOFRQWHQWLRQ3RSH¶VWUDQVODWLRQ VLWXDWHVLWVHOIDGYHUVDULDOO\LQUHODWLRQWRHDUOLHU(QJOLVKYHUVLRQVE\&KDSPDQ7KRPDV+2%%(6-RKQ 2*,/%<DQG'U\GHQDQGZDVLWVHOIFULWLFL]HGE\7KRPDV%HQWOH\LQRQIRXUFRXQWVµILUVW>LWLV@LQ (QJOLVKVHFRQGO\LQ5K\PHWKLUGO\QRWIURPWKH2ULJLQDO>3RSHKDGXVHG/DWLQ)UHQFKDQG(QJOLVKVRXUFHV@ EXWIRXUWKO\IURPD)UHQFKWUDQVODWLRQDQGWKDWLQ3URVHE\DZRPDQWRR>LH0PH'$&,(5VHH)5(1&+ 75$',7,21@¶/HYLQH :LOOLDP&2:3(5DOVRFULWLFL]HGLWZKHQSURGXFLQJKLVRZQ,OLDGLQ VRWRRODWHUGLG0DWWKHZ$UQROG 7KHSDUDGR[LFDOREYHUVHRIWKLVKRVWLOLW\LVWKHIDFWWKDW3RSH¶V,OLDGZDVWRDGHJUHHDQGKLV2G\VVH\± VWLOOPRUHDFROODERUDWLYHYHQWXUHLQWKHODWWHUKHZDVDVVLVWHGE\(OLMDK)HQWRQDQG:LOOLDP%URPHRQHRI WKHWUDQVODWRUVRI0PH'$&,(5¶V+RPHU$QRWKHULQVWDQFHRIFROODERUDWLRQRFFXUUHGODWHULQWKHFHQWXU\ ZKHQ7RELDV6PROOHWWJDWKHUHGDJURXSRIWUDQVODWRUVWRJHWKHULQKLVµOLWHUDU\IDFWRU\¶6DPSVRQ LQ &KHOVHDDQGSXEOLVKHGDQHZWUDQVODWLRQRI'RQ4XL[RWH DQGDPDMRUWUDQVODWLRQRI9ROWDLUH¶VZRUNV ± LQFROODERUDWLRQZLWK7KRPDV)UDQFNOLQ 7KHWUDQVODWLRQRI0PH'$&,(5REMHFWHGWRE\%HQWOH\SRLQWVWRDQLPSRUWDQWGLIIHUHQFHEHWZHHQZRPHQ WUDQVODWRUVLQWKLVDQGWKHSUHFHGLQJSHULRGV7KRXJKQR(QJOLVKZRPDQKDG\HWYHQWXUHGWRWUDQVODWH+RPHU ZRPHQZHUHWUDQVODWLQJDJUHDWHUYDULHW\RIWH[WVWKDQSUHYLRXVO\$WWKHVWDUWRIWKHSHULRG$SKUD%HKQ SURGXFHGDYHUVLRQRI'H%ULOKDF¶VSOD\$JQHVGH&DVWUR FRQWULEXWHGWR'U\GHQ¶V2YLG¶V(SLVWOHVDQG LQWKHSUHIDFHWRKHUWUDQVODWLRQRI)RQWDQHOOH¶V'LVFRYHU\RI1HZ:RUOGV µVRXJKWWRVD\VRPHWKLQJRI >WKH@WUDQVODWLRQRISURVH¶DVXEMHFWZKLFKKDGSUHYLRXVO\UHFHLYHGOLWWOHFRPPHQW.LWDJDNL ,QWKH HLJKWHHQWKFHQWXU\



3DJH

(OL]DEHWK&$57(5WUDQVODWHGWKHFRPSOHWHZRUNVRI(SLFWHWXVIRUWKHILUVWWLPH± DQG&KDUORWWH %URRNHSXEOLVKHGWKHILUVWDQWKRORJ\RIWUDQVODWLRQVRI*DHOLFSRHWU\IURP,UHODQGLQ 7KHUHYLYDOLQ&HOWLFOLWHUDWXUHRIZKLFK%URRNH¶VZRUNZDVSDUWKDGOHGGXULQJWKHFHQWXU\WRWUDQVODWLRQV IURP:HOVKE$YDQ(YDQV DQGE\ZD\RILQWHUPHGLDWH/DWLQYHUVLRQVE\6DPXHO-RKQVRQDQG 7KRPDV*UD\LWKDGDOVRUHVXOWHGLQWKHVRFDOOHGWUDQVODWLRQVIURPWKH*DHOLFRI2VVLDQRI-DPHV 0DFSKHUVRQFVHH36(8'275$16/$7,21 7KLVUHYLYDODFFRPSDQLHGDGHYHORSLQJLQWHUHVWLQWKH WUDQVODWLRQRIRULHQWDODQG7HXWRQLFODQJXDJHV*HRUJH6DOHWUDQVODWHGWKH485¶Ɩ1LQWR(QJOLVKLQ*UD\ ZURWHWH[WVLQLPLWDWLRQRI2OG1RUVHLQ:LOOLDP-21(6WKHILUVW(QJOLVKVFKRODUWRPDVWHU6DQVNULW SURGXFHGWUDQVODWLRQVIURP3HUVLDQDQGRWKHU$VLDWLFWH[WV7KHQLQHWHHQWKFHQWXU\LQWHUHVWLQPHGLHYDOL]LQJ RULHQWDOL]LQJWUDQVODWLRQVVKRZQIRUH[DPSOHE$,7=*(5$/'DQG:LOOLDP0RUULVLVDQDWXUDO GHYHORSPHQWRIWKLVSURFHVV 7KHFHQWXU\HQGVPXFKDVLWKDGEHJXQZLWKDPDMRUZRUNRIWKHRU\7<7/(5¶6(VVD\RQWKH3ULQFLSOHVRI 7UDQVODWLRQ 7\WOHU¶VWKHRULHVUHVHPEOHWKRVHRIIHOORZ6FRW*HRUJH&DPSEHOOZKRVHSUHIDFHWRKLV WUDQVODWLRQRIWKH*RVSHOV VKDUHVPDQ\RI7\WOHU¶VFRQFOXVLRQVDERXWWKHWUDQVODWLYHSURFHVV7\WOHU¶V (VVD\ZLWKDV\VWHPDWLFDSSURDFKW\SLFDORIWKHSHULRGUHDFWVDJDLQVW'U\GHQ¶VFRQFHSWRI3$5$3+5$6( DQGWKHORRVHWUDQVODWLRQVWKDWUHVXOWHGIURPLW$FFRUGLQJWR7\WOHUWUDQVODWLRQVKRXOGJLYHDFRPSOHWH WUDQVFULSWRIWKHLGHDRIWKHRULJLQDOZRUNWKHVW\OHDQGPDQQHURIZULWLQJVKRXOGKDYHWKHVDPHFKDUDFWHUDVLQ WKHRULJLQDODQGWUDQVODWLRQVKRXOGKDYHDOOWKHHDVHRIWKHRULJLQDO*UDQWHGWKH(VVD\VWLOOXVHVHLJKWHHQWK FHQWXU\WHUPLQRORJ\µJHQLXV¶µZLW¶µWDVWH¶ DQGLWVVWDQGDUGVIRUµDVVHVVLQJVXFFHVVLQFRPSRVLWLRQDUH« HVVHQWLDOO\DHVWKHWLF¶+XQWVPDQ[OLL RUHYDOXDWLYH1HYHUWKHOHVVDVHDFKDQJHLVREVHUYDEOHLQ7\WOHU¶V FODLPWKDWWKHRULJLQDOWH[WSURYLGHVWKHXOWLPDWHSRLQWRIUHIHUHQFHDVZHOODVLQKLVSXEOLVKHGWUDQVODWLRQVIURP ,WDOLDQ3HWUDUFK DQG*HUPDQ6FKLOOHU 7\WOHULVDVSURSKHWLFDVLQWKHLUGLIIHUHQWZD\VWKH WUDQVODWLRQVRI%URRNHDQG*UD\KDGEHHQ

7KHQLQHWHHQWKFHQWXU\5RPDQWLFLVPDQGWKH9LFWRULDQHUD 5RPDQWLFLVPGLVWLQJXLVKHGLWVHOIVKDUSO\IURPWKHSUHFHGLQJDJHLQVHYHUDOLPSRUWDQWZD\V )URPWKH5HVWRUDWLRQDQGIRUPXFKRIWKHHLJKWHHQWKFHQWXU\)UHQFKKDGEHHQWKHSUHVWLJHYHUQDFXODU/DWHLQ WKHFHQWXU\WKHUHZDVDGHFLVLYHVKLIWIURP)UHQFKWRZDUGV*HUPDQ²LQSDUWLFXODUWKHZRUNVRI*RHWKH 6FKLOOHUDQG$:6&+/(*(/VHH*(50$175$',7,21 %DVVQHWW± ²RIWHQLQLWLDOO\LQ LQWHUPHGLDWH)UHQFKYHUVLRQV5RPDQWLFZULWHUVFXWWKHLUWHHWKRQWUDQVODWLRQVIURPWKH*HUPDQ6LU:DOWHU 6FRWWRQ*RHWKH¶V*RHW]YRQ%HUOLFKLQJHQ 6DPXHO7D\ORU&2/(5,'*(RQ6FKLOOHU¶V:DOOHQVWHLQ 6KHOOH\RQSDUWVRI*RHWKH¶V)DXVW:LWKLQWKUHH\HDUVRI*RHWKH¶VFRPSOHWHG)DXVW WKHUHZHUH ILYHFRPSOHWHWUDQVODWLRQV2WKHU*HUPDQZULWHUVZHUHPDGHVLPLODUO\DFFHVVLEOHWR9LFWRULDQUHDGHUVE\ *HRUJH(OLRW6DUDK$XVWLQ-&+DUHDQG%LVKRS7KLUOZDOODQG:LOOLDP:DOODFH 7KHLGHDVRIWKH*HUPDQ5RPDQWLFVZHUHFUXFLDOLQVKDSLQJDQHZVHOIXQGHUVWDQGLQJIRUWKHWUDQVODWRU *HRUJH6WHLQHU5RELQVRQ $VSUHYLRXVO\QRWHGIURPWKH5HQDLVVDQFHWRWKHHLJKWHHQWKFHQWXU\ WUDQVODWRUVKDGJHQHUDOO\LILQGLIIHUHQWZD\VµGRPHVWLFDWHG¶WKHLUZRUN1RZLQ&DUO\OH¶VZRUGVµWKHGXW\RI DWUDQVODWRU>ZDV@«WRSUHVHQWWKHZRUNH[DFWO\DV«LQWKH>RULJLQDO@¶$VKWRQ 3RSHDQG'U\GHQERWK FDPHLQIRUFULWLFLVPRQWKLVVFRUH$GPLWWHGO\UHMHFWLRQRIWKHHDUOLHUSUDFWLFHVDQGRUWKHRULHVZDVQRWWRWDO %LUFKWKRXJKWµ3RSHLVK¶SUDFWLFHLQDSSURSULDWHIRUKLV)DXVWEXWZDVZLOOLQJWRLQYRNH526&20021¶V DXWKRULW\ $WWKHVDPHWLPHWKH5RPDQWLFVZHUHDOVRUHGLVFRYHULQJWKHOLWHUDWXUHRIWKH,WDOLDQ5HQDLVVDQFHHVSHFLDOO\ 'DQWHZKRVH'LYLQD&RPPHGLDZDVDVLPSRUWDQWIRUQLQHWHHQWKFHQWXU\UHDGHUVDV)DXVW2IILUVWLPSRUWDQFH KHUHLV+HQU\)UDQFLV&$5<¶VWUDQVODWLRQRIRQHRIWKHPRVWVXFFHVVIXOWUDQVODWLRQVRIWKHFHQWXU\1RU VKRXOGZHIRUJHWKRZDUWLVWVOLNH*XVWDYH'RUpDQG-RKQ)OD[PDQPHGLDWHGWKH'DQWHVRI&DU\DQG,FKDERG :ULJKWWR(QJOLVKUHDGHUVRUKRZ:LOOLDP%ODNHXVHG&DU\DVDFULEIRUKLVRZQ



3DJH

µWUDQVODWLRQ¶WKH,OOXVWUDWLRQVWRWKH'LYLQH&RPHG\ 7KHVHFRQGKDOIRIWKHQLQHWHHQWKFHQWXU\GHYHORSVEURDGO\DORQJWKHVDPHOLQHVWKRXJKDUJXDEO\LWVRZQ µWUDQVODWLRQ¶RI5RPDQWLFWKHRU\DQGSUDFWLFHUHYHDOVDVWURQJO\µGRPHVWLFDWLQJ¶DJHQGDLQOLQHZLWKWKHRYHUDOO LPSHULDOSURMHFWVRIWKHDJH :HFDQIRFXVWKHVHJHQHUDOL]DWLRQVE\VWXG\LQJDIHZ\HDUVQRWHQWLUHO\DWUDQGRP7KXVLQ± WUDQVODWLRQVDSSHDUHGRIODUJHSDUWVRIWKH,OLDGDQGWKH2G\VVH\E\3KLOLS:RUVOH\-RVHSK'DUW-DPHV/DQGRQ DQG'HDQ+HQU\$OIRUGRI'DQWHDQGKLVFRQWHPSRUDULHVE\5266(77,RIWKHILUVWWZRSDUWVRIWKH &RPPHGLDE\0UV&+5DPVD\ RI2OG1RUVH%XUQW1MDO E\6LU*HRUJH'DVHQWRILQGLYLGXDOSRHPV LQWRDQGRXWRI*UHHNDQG/DWLQDQGRXWRI,WDOLDQDQG*HUPDQZLWKIDFLQJSDJHRULJLQDOVE\/RUG/\WWHOWRQ DQG:LOOLDP*ODGVWRQH DQGDQDXWKRUL]HGWUDQVODWLRQRI+XJR¶V/HV0LVpUDEOHVE\:UD[DOOZKRVH SXEOLVKHGWUDQVODWLRQVLQWKLVWZR\HDUSHULRGLQFOXGHWUDYHOFXPDGYHQWXUHVWRULHVWKHDXWRELRJUDSK\RID )UHQFKGHWHFWLYHDQGWZRZRUNVE\(VTXLURVZKRKDGKHOSHGZLWKWKH+XJR7KHVHSURGXFWLRQVDUH DGPLWWHGO\RIYDU\LQJVLJQLILFDQFH7KH/\WWHOWRQ*ODGVWRQHYHQWXUH²DV)UDQFLV1HZPDQQRWHGDPDWHXU ZRUNFRQVLVWLQJRIVHWSLHFHWUDQVODWLRQV²ZDVYHU\GLIIHUHQWWR:UD[DOO¶VDGYHQWXUH\DUQV$ORQJVLGH 5RVVHWWL¶VILQHO\QXDQFHGDZDUHQHVVWKDWµDWUDQVODWLRQ«UHPDLQVSHUKDSVWKHPRVWGLUHFWIRUPRI FRPPHQWDU\¶5RVVHWWL :UD[DOOZDVFXWWLQJDQREVFHQHH[SUHVVLRQµZKLFKPD\EHKLVWRULFDOEXWLV GLVJXVWLQJ¶DQGVLQFHWKHIROORZLQJFKDSWHUµFRQVLVW>HG@RIDJORULILFDWLRQRIWKLVDERPLQDEOHZRUG¶FXWWLQJ WKDWWRR :UD[DOO 0RUHRYHUWKH+RPHUWUDQVODWLRQVZHUHSDUWRIDERRPLQJLQGXVWU\DUHYLHZHURI 0RUULV¶V$HQHLG)DXONQHU QRWHGWKHUHJXODULW\RIWKHLUSXEOLFDWLRQ ,QHYLWDEO\WKHIRUHJRLQJDFFRXQWRPLWVLPSRUWDQWQDPHVDQGWH[WVWKHRULHQWDOL]HUV),7=*(5$/'5LFKDUG %85721-DPHV/HJJHZKRWUDQVODWHGIURP&KLQHVH DQG0D[0OOHUIURP6DQVNULW /DG\&KDUORWWH *XHVW0DELQRJL UHYLVLRQVRIWKHDQG5KHLPV'RXDL%LEOHVWKHPRVWLPSRUWDQWRIWKHIRUPHU± NQRZQDVWKH5HYLVHG9HUVLRQ(OHDQRU0$5;$9(/,1*DQGWKH,EVHQWUDQVODWRUV:LOOLDP$UFKHUDQG (GPXQG*RVVH ,WDOVRRPLWV$UQROG¶V2Q7UDQVODWLQJ+RPHU ZKLFKOLNH3RSHDQG&RZSHUEHIRUHKLPFULWLFL]HG VHYHUDOWUDQVODWLRQVRI+RPHULQFOXGLQJWKRVHRI:ULJKW± DQG1HZPDQ WKHODWWHUDOUHDG\ XQGHUDWWDFNIRUDWUDQVODWLRQRI+RUDFH9HQXWLD± %RWKUHSOLHGLQNLQG$UQROGUHSOLHGWRWKH ODWWHULQ/DVW:RUGV )RUDOOWKHLUGLIIHUHQFHVLELG± $UQROGDQG1HZPDQZHUHERWKFKLOGUHQ RIWKH5RPDQWLFUHYROXWLRQ%RWKVKDUHGZLWKPRVWRIWKHLUFRQWHPSRUDULHVWKH5RPDQWLFYLHZRIWKH WUDQVODWRU¶VµGXW\«WREHIDLWKIXO¶1HZPDQ WRWKHRULJLQDODVWKHWUDQVODWRUVRIWKH%LEOHKDGEHHQ $UQROG DQGRIWKHQHFHVVDU\µXQLRQRIDWUDQVODWRUZLWKKLVRULJLQDO¶LQDJRRGWUDQVODWLRQ$UQROG 7KHLU GLVDJUHHPHQWWKHQZDVOHVVDERXWHQGVWKDQDERXWPHDQV)RU$UQROGVLQFH+RPHULVDFODVVLFWKHWUDQVODWLRQ VKRXOGDGRSWWKHODQJXDJHRIWKDWXQGRXEWHGFODVVLFWKH%LEOH,WVPHWUHKRZHYHUVKRXOGUHSOLFDWHWKH RULJLQDO¶VKH[DPHWHUV1HZPDQZKRVDZ+RPHUDVSULPLWLYHDQGSRSXODUXVHGEDOODGPHWUHDQGZKDWKH FDOOHGDµ6D[R1RUPDQ¶ODQJXDJHDQGDODWHUZULWHUµ:DUGRXU6WUHHW(QJOLVK¶9HQXWLD±.HOO\ $JDLQVW$UQROG¶V%LEOLFDOPRGHO1HZPDQ¶VZDVRIWKHPLVVLRQDU\ZKRVHWUDQVODWLRQIRUWKHµ)HHMHHV¶ UHWDLQHGWKHSKUDVHµ/DPERI*RG¶DQGULVNHGXQLQWHOOLJLELOLW\ 7KLVSURWUDFWHGDQGODUJHO\SRLQWOHVVH[HUFLVHLQLURQ\DQGDFULPRQ\FDVWORQJVKDGRZV$UQROG¶VDXWKRULW\ ZDVZLGHO\DFNQRZOHGJHGLQWKHQLQHWHHQWKFHQWXU\DQGZHOOLQWRWKHWZHQWLHWK KLVUHFRPPHQGHGµ.LQJ -DPHV(QJOLVK¶ZDVDGRSWHGE\%HQMDPLQ-RZHWWDQG$QGUHZ/DQJ1HZPDQ¶VSUDFWLFHZDVODUJHO\LJQRUHG %XWDV9HQXWLD QRWHVLWUHSUHVHQWVDQLPSRUWDQWWHQGHQF\LQQLQHWHHQWKFHQWXU\WUDQVODWLRQRQH DQWLFLSDWHGE\WKHPHGLHYDOL]LQJWUDQVODWLRQVRI5REHUW6RXWKH\DQGHFKRHGLQ5REHUW%URZQLQJ¶V $JDPHPQRQ5RELQVRQ DQGWKHYHU\GLIIHUHQWZRUNRI0RUULVDQG5266(77,WRµIRUHLJQL]H¶WKH RULJLQDO9HQXWLD DQGPDNHUHDGHUVFRQVFLRXVRIWKHJDSEHWZHHQWKHLURZQFXOWXUHDQGWKH2WKHU ZKLFKWKHRULJLQDOHPERGLHV7KLVGLVWLQFWLRQEHWZHHQUHFHVVLYHµIRUHLJQL]LQJ¶DQGGRPLQDQW



3DJH

µGRPHVWLFDWLQJ¶VWUDLQVRIWUDQVODWLRQUHVHPEOHVDQRWKHUPDGHUHJXODUO\LQWKHQLQHWHHQWKFHQWXU\²LQWKH SUHIDFHVRI&$5<%LUFK0UV5DPVH\1HZPDQDQG$UQROG²EHWZHHQZKDW-RKQ%HQVRQ5RVHFDOOHG µVFKRODU¶VWUDQVODWLRQV¶*UHHN'UDPDV± DQGWKRVHGHVWLQHGIRUWKHFRPPRQUHDGHUDGLVWLQFWLRQZLWK FOHDUHFKRHVRIWKHWKHRUL]LQJVRI*HUPDQ5RPDQWLFLVP6HH675$7(*,(62)75$16/$7,21

7KHWZHQWLHWKFHQWXU\ 7KHWZHQWLHWKFHQWXU\RZHVPXFKRILWVDJHQGDLQUHVSHFWRIWUDQVODWLRQWRWKHDVVXPSWLRQVDQGSUDFWLFHRIWKH QLQHWHHQWK )RUHLJQFODVVLFVKDYHFRQWLQXHGWREHWUDQVODWHGLQSRSXODULPSULQWVDSSHDOLQJWRDQLQFUHDVLQJO\PRQROLQJXDO UHDGHUVKLSOLNH:RUOG¶V&ODVVLFV (YHU\PDQ /RHE DQG3HQJXLQ&ODVVLFV WKH ODVWQDPHGGLVWLQJXLVKHGE\LWVGHFLVLRQWRFRPPLVVLRQQHZWUDQVODWLRQVRIDOOZRUNVSXEOLVKHG,PSRUWDQW WUDQVODWLRQVKDYHEHHQSURGXFHGE\VXFKDV&RQVWDQFH*DUQHWWDQG0D[+D\ZDUG5XVVLDQFODVVLFV $UWKXU :DOH\&KLQHVHSRHWU\ +HOHQ:DGGHOOPHGLHYDO/DWLQO\ULFV :6&277021&5,())DQG(95LHX *UHHNFODVVLFV 'XULQJWKHSHULRG±OLWHUDU\WUDQVODWLRQVRIWKLVVRUWDFFRXQWHGDFFRUGLQJWRWKH,QGH[ 7UDQVODWLRQXPIRUSHUFHQWRIDOOWUDQVODWLRQVSXEOLVKHGLQ%ULWDLQ 6LPLODUO\WKHQLQHWHHQWKFHQWXU\µIRUHLJQL]LQJ¶WUDQVODWLRQVE\SURIHVVLRQDOSRHWVKDYHWKHLUHTXLYDOHQWVLQWKH WZHQWLHWKFHQWXU\DERYHDOOLQWKHWUDQVODWLRQVRIWKH$PHULFDQERUQ(]UD3281'VHH$0(5,&$1 75$',7,21 )RUHLJQL]LQJWUDQVODWLRQVLQ%ULWDLQLQFOXGHWKHDGDSWDWLRQVRI*UHHNDQG5RPDQGUDPDE\7HG +XJKHV6HQHFD¶V2HGLSXV DQG7RQ\+DUULVRQ$HVFK\OXV¶2UHVWHLD 7UDQVODWLRQLVQRZPRUHSURIHVVLRQDOO\RUJDQL]HGWKDQHYHUEHIRUH7UDQVODWLRQDJHQFLHVKDYHVSUXQJXSLQ ODUJHQXPEHUVDFDGHPLFDQGSURIHVVLRQDOFRXUVHVDQGTXDOLILFDWLRQVDUHEHFRPLQJWKHRUGHURIWKHGD\LQ %ULWDLQHVSHFLDOO\DWSRVWJUDGXDWHOHYHO3URIHVVLRQDORUJDQL]DWLRQVIRXQGHGWRUHSUHVHQWWUDQVODWRUVLQ%ULWDLQ LQFOXGHWKH,QVWLWXWHRI/LQJXLVWV WKH,QVWLWXWHRI7UDQVODWLQJDQG,QWHUSUHWLQJ DQGWKH 7UDQVODWRUV¶$VVRFLDWLRQWKHODWWHUHVWDEOLVKHGE\WKH6RFLHW\RI$XWKRUVWRUHSUHVHQWOLWHUDU\WUDQVODWRUV7KH %ULWLVK&HQWUHIRU/LWHUDU\7UDQVODWLRQZKLFKLVIXQGHGE\WKH$UWV&RXQFLORI(QJODQGSURYLGHVEXUVDULHVIRU OLWHUDU\WUDQVODWRUVDQGRUJDQL]HVYDULRXVHYHQWVDQGZRUNVKRSV %XWJUHDWHUDUJXDEO\WKDQDQ\RIWKHFKDQJHVVRIDUQRWHGLVWKHSDUDGLJPVKLIWWKDWKDVWDNHQSODFHLQWKH XQGHUVWDQGLQJRIWUDQVODWLRQLWVHOIDVDSKHQRPHQRQGXULQJWKHODVWRUVR\HDUV7HUU\(DJOHWRQ¶VUHYLHZ HVVD\7UDQVODWLRQDQG7UDQVIRUPDWLRQ¶ LOOXVWUDWHVWKLVVKLIW7KHPDLQWKUXVWRI(DJOHWRQ¶VDFFRXQWLQ WKHOLJKWRIµUHFHQWVHPLRWLFHQTXLU\¶LVWRXQGHUPLQHWKHRSSRVLWLRQRIµVRXUFH¶DQGµWDUJHW¶WH[WDQGWKH µIHWLVKRIWKHSULPDU\WH[W¶ WDNHQIRUJUDQWHGLQZULWLQJDERXWWUDQVODWLRQUHSODFLQJLWE\µWKHQRWLRQ RILQWHUWH[WXDOLW\¶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

)XUWKHUUHDGLQJ $VKWRQ%DVVQHWW%UDQG&RKHQ&RSHODQG(OOLVHWDO*RGGHQHWDO +DUJUHDYHV+HUPDQVE+XGVRQ-RQHV.HOO\.LWDJDNL/HIHYHUH D/HJJH/HYLQH0F*HUU1RUWRQ3HDUVDOO5RELQVRQ*HRUJH6WHLQHU 756WHLQHU9HQXWLD:LOVRQ

52*(5(//,6$1'/,=2$./(<%52:1



3DJH

%LRJUDSKLHV %2<(5$EHO± $)UHQFK+XJXHQRWZKRVHWWOHGLQ(QJODQGLQDQGSURGXFHGPDQ\ WUDQVODWLRQVIURP)UHQFK+HDOVRSURGXFHGIRUWKH'XNHRI*ORXFHVWHUD&RPSOHDW)UHQFK0DVWHUIRU/DGLHV DQG*HQWOHPHQUHSULQWHGWKURXJKRXWWKHHLJKWHHQWKFHQWXU\ DQGD)UHQFK(QJOLVK'LFWLRQDU\7KH +DJXH ZKLFKZHQWLQWRQXPHURXVHGLWLRQVLQERWK(QJODQGDQG)UDQFHDQGZDVUHYLVHGLQE\ %RLOHDX %857216LU5LFKDUG)UDQFLV± $Q(QJOLVKRULHQWDOLVWDQGH[SORUHU+HWUDQVODWHGWKH$UDELDQ 1LJKWVYROV± WKH.DPD6XWUD DQGµRWKHUZRUNVRI$UDELDQHURWRORJ\¶+DUYH\ DVZHOODVWKH/XVLDGVRIGH&DPRsQV DZRUNRIWHQWUDQVODWHGLQWKHQLQHWHHQWKFHQWXU\DQG&DWXOOXV :LWKKLVZLIHKHWUDQVODWHGGD6LOYD¶V0DQXHOGH0RUDHV )RUVRPHRIKLVPRUHHURWLF WUDQVODWLRQVVXFKDVWKH.DPD6XWUDDQGWKH$UDELDQ1LJKWV KHUHVRUWHGWRSULYDWHSXEOLFDWLRQLQRUGHUWR DYRLGWKHULVNRISURVHFXWLRQ &$5/


3DJH

5RPDQWLFLVPWR(QJODQG+LVWUDQVODWLRQRISDUWVRI6FKLOOHU¶V:DOOHQVWHLQ ZDVVWLOOEHLQJUHYLHZHG IDYRXUDEO\\HDUVODWHU &29(5'$/(0LOHV± (QJOLVK3URWHVWDQWUHIRUPHUDQGELEOLFDOVFKRODU,QDGGLWLRQWRKLVZRUN RQ%LEOHWUDQVODWLRQVZKLFKLQFOXGHGZRUNRQWKH*HQHYD%LEOHDQGD1HZ7HVWDPHQWWUDQVODWHGIURPWKH 9XOJDWH KHWUDQVODWHGYDULRXVWKHRORJLFDOWUDFWVDQG*HUPDQK\PQV &2:3(5:LOOLDP± (QJOLVKSRHWDQGODZ\HU+HFRQWULEXWHGWZRWUDQVODWLRQVIURP+RUDFHWRD FROOHFWLRQ± DQGZURWHDERXWWUDQVODWLQJ+RPHU +HDOVRSURGXFHGWUDQVODWLRQVRI+RPHU RI0LOWRQ¶V/DWLQDQG,WDOLDQSRHPV DQGRISRHPVIURPWKH)UHQFKRI0PHGHOD0RWWH*X\RQ '(1+$06LU-RKQ± ,ULVKSRHWERUQLQ'XEOLQDQGHGXFDWHGLQ/RQGRQDQG2[IRUG2SHUDWHG ZLWK&RZOH\DVDFLSKHUVHFUHWDU\IRUWKHH[LOHGUR\DOFRXUW+HSURGXFHGDSDUDSKUDVHRISDUWRIWKH$HQHLG +LVRWKHUQRWDEOHWUDQVODWLRQZDVRI&LFHUR¶V&DWR0DMRU 'HQKDPZURWHWKHILIWKDFWIRU0UV .DWKHULQH3KLOLSV¶VWUDQVODWLRQRI&RUQHLOOH¶V+RUDFH +HLVDOVRUHPHPEHUHGIRUKLVSRHP7R6LU 5LFKDUG)DQVKDZ8SRQ+LV7UDQVODWLRQRI3DVWRU)LGR¶ ZKLFKEHJLQVZLWKWKHOLQHV 6XFKLVRXUSULGHRXUIROO\RURXUIDWH7KDWIHZEXWVXFKDVFDQQRWZULWHWUDQVODWH%XWZKDWLQ WKHPLVZDQWRIDUWRUYRLFH,QWKHHLVHLWKHUPRGHVW\RUFKRLFH '5<'(1-RKQ± &RQVLGHUHGWKHOHDGLQJPDQRIOHWWHUVRIKLVGD\HGXFDWHGDW:HVWPLQVWHUDQG &DPEULGJHDQGHOHFWHGPHPEHURIWKH5R\DO6RFLHW\LQ'U\GHQDV6DPXHO-RKQVRQZDVWRUHPDUNZDV WKHILUVWPDMRUWKHRULVWRIWUDQVODWLRQVHH,0,7$7,210(7$3+5$6(3$5$3+5$6( DQGWKHODWHUSDUW RIKLVOLWHUDU\FDUHHUFRQFHQWUDWHGRQWKHWUDQVODWLRQRIDQFLHQWDQGPRGHUQFODVVLFV$SDUWIURP9LUJLODQG 2YLG'U\GHQDGDSWHG6KDNHVSHDUHDQGUDPDVDQGSURGXFHGYHUVLRQVRI7KHRFULWXV± 0DLPERXUJ¶V +LVWRU\RIWKH/HDJXH %RKRXU¶V/LIHRI;DYLHU -XYHQDODQG3HUVLXV DSURVHWUDQVODWLRQ RI'XIUHVQR\¶V$UWRI3DLQWLQJ DQGLQKLV)DEOHV SDUWVRI2YLG¶V0HWDPRUSKRVHVDQGWDOHV IURP&KDXFHUDQG%RFFDFFLR (/,=$%(7+,± 4XHHQRI(QJODQGDQG,UHODQG± +HUORQJUHLJQZLWQHVVHGWKH HPHUJHQFHRI(QJODQGDVDZRUOGSRZHUDQGWKHIORZHULQJRIWKH(QJOLVK5HQDLVVDQFH(OL]DEHWKSURGXFHGD QXPEHURI(QJOLVKWUDQVODWLRQVIURPFODVVLFDODXWKRUVLQFOXGLQJWKH&RQVRODWLR3KLORVRSKLDHRI%RHWKLXVLQ DQGZRUNVE\3OXWDUFK+RUDFHDQG(XULSLGHVVKHDOVRWUDQVODWHGWZR2UDWLRQVRI,VRFUDWHVLQWR/DWLQ ),7=*(5$/'(GZDUG± (QJOLVKSRHWDQGWUDQVODWRUEHVWNQRZQIRUKLVWUDQVODWLRQVIURP3HUVLDQ RIWKH5XEiL\iWRI2PDU.KD\\iPWKUHYLVHGHGLWLRQ +LVRWKHUWUDQVODWLRQVLQFOXGH0ROLqUHDQG 'HODYLJQH &DOGHUyQ DQG*UHHNWUDJHG\WKH$JDPHPQRQRI$HVFK\OXVLQDQGWKH 2HGLSXVRI6RSKRFOHVLQ *5266(7(67(5REHUWF± %LVKRSRI/LQFROQIURP+HSURGXFHGVRPHWLPHVRQKLVRZQ DQGVRPHWLPHVLQFROODERUDWLRQZLWKRWKHUVFKRODUVWUDQVODWLRQVLQWR/DWLQRIPDMRU*UHHNDXWKRUVZKLFKDV 5RJHU%DFRQQRWHGLPSURYHGFRQVLGHUDEO\XSRQH[LVWLQJWUDQVODWLRQV+HZDVFLWHGDVDQDXWKRULW\LQWKH SURORJXHWRWKH:\FOLILWH%LEOHDQGXVHGPRUHJHQHUDOO\E\:\FOLIDQGKLVIROORZHUVWKH/ROODUGVDVZHOODV E\WKHODWWHU¶VRUWKRGR[RSSRQHQWV+LVDOOHJRULFDOSRHPWKH&KkWHDXG¶DPRXULQ)UHQFKZDVWUDQVODWHGLQWR 0LGGOH(QJOLVK +2%%(67KRPDV± 2QHRIWKHIRUHPRVWSROLWLFDOWKLQNHUVRIWKHVHYHQWHHQWKFHQWXU\+HZURWH VHYHUDOZRUNVLQ/DWLQDQG



3DJH

WUDQVODWHGWKHPLQWR(QJOLVKZRUNHGZLWK6LU)UDQFLV%DFRQDQGWUDQVODWHGVRPHRIKLVHVVD\VLQWR/DWLQDQG WUDQVODWHG7KXF\GLGHV DQG+RPHU± -21(6:LOOLDP± (QJOLVKRULHQWDOVFKRODUIOXHQWLQPDQ\(XURSHDQDQG$VLDWLFODQJXDJHV+H WUDQVODWHG3HUVLDQDQGRWKHU$VLDWLFWH[WVLQFOXGLQJ+LWRSDGHVDDYHUVLRQRIWKH3DQFKDWDQWUD DQGSURGXFHG D3HUVLDQJUDPPDU ZKLFKZDVVWLOOEHLQJUHSULQWHGLQ:KLOHLQ,QGLDRQJRYHUQPHQWVHUYLFH ± KHIRXQGHGWKH%HQJDO$VLDWLFVRFLHW\LQ 0$5;$9(/,1*(OHDQRU± 'DXJKWHURI.DUO0DU[FROODERUDWHGZLWK*HRUJH0RRUHDQG (GZDUG$YHOLQJ± LQWUDQVODWLQJKHUIDWKHU¶VZRUN SURGXFHGWKHILUVWWUDQVODWLRQRI )ODXEHUW¶V0DGDPH%RYDU\ DQGKHOSHGLQWURGXFH,EVHQ¶V$'ROO¶V+RXVHWR/RQGRQUHDGHUV 1257+6LU7KRPDV"" (QJOLVKWUDQVODWRU+HSURGXFHGVHYHUDOWUDQVODWLRQVLQFOXGLQJWKH 'LDOORI3ULQFHV 7KH0RUDOO3KLORVRSKLHRI'RQL DQG3OXWDUFK¶V/LYHV WKHODVWXVHGE\ 6KDNHVSHDUHIRUKLV5RPDQSOD\VDQGH[HUWLQJµDSRZHUIXOLQIOXHQFHRQ(OL]DEHWKDQSURVH¶+DUYH\ 2*,/%<-RKQ± 6FRWWLVKWRSRJUDSKHUSULQWHUPDSPDNHUDQGWUDQVODWRU+HZDVDWRQHWLPHD GDQFLQJPDVWHUZKREHFDPHGHSXW\PDVWHURIWKHUHYHOVLQ,UHODQGEHIRUHWKH&LYLO:DU6XEVHTXHQWO\ HGXFDWHGLQFODVVLFDOODQJXDJHVDWWKH5HVWRUDWLRQKHEHFDPHSDUWRI&KDUOHV,,¶VFRXUW+HSURGXFHGODYLVK LOOXVWUDWHGYHUVLRQVRIKLVRZQWUDQVODWLRQVRI9LUJLOUHSULQWHGDQG $HVRS¶V)DEOHV DQG+RPHU 526&20021(DUORI:HQWZRUWK'LOORQ"± $QDFWLYHILJXUHLQWKHFRXUWRI&KDUOHV,,+H DWWHPSWHGWRIRXQGDOLWHUDU\DFDGHP\LQLPLWDWLRQRIWKDWDWWKH8QLYHUVLW\RI&DHQ+LVFLUFOHLQFOXGHGWKH 0DUTXLVRI+DOLID[WUDQVODWRURI7DFLWXVDQG/RUG0DLWODQGZKREHJDQDWUDQVODWLRQRI9LUJLO$VSDUWRIWKLV JURXS5RVFRPPRQZURWHµ7KH(VVD\RQ7UDQVODWHG9HUVH¶ WUDQVODWHGLQWR/DWLQE\/DXUHQFH(XVGHQ +LVWUDQVODWLRQVLQFOXGHVHYHUDOYHUVLRQVRI+RUDFH¶V$UWRI3RHWU\DQG DQGD SDUDSKUDVHRI3VDOP 5266(77,'DQWH*DEULHO± (QJOLVKSRHWSDLQWHUDQGWUDQVODWRUZKRIROORZHGKLVIDWKHUWKH ,WDOLDQpPLJUp*DEULHOH5RVVHWWLLQWKHDFWLYHGLVVHPLQDWLRQRI,WDOLDQFXOWXUHLQ(QJODQG+HZDVIRXQGHU PHPEHURIWKH3UH5DSKDHOLWH%URWKHUKRRG DQGSURGXFHGWUDQVODWLRQVRIPHGLHYDO,WDOLDQSRHWU\7KH (DUO\,WDOLDQ3RHWV DQGRIPHGLHYDODQG5RPDQWLF*HUPDQDQG)UHQFKSRHWU\VRPHSXEOLVKHG SRVWKXPRXVO\E\KLVEURWKHU:LOOLDPZKRKLPVHOIWUDQVODWHG'DQWH¶V,QIHUQRLQ 6&277021&5,()):± 3URGXFHGDQXPEHURIWUDQVODWLRQVLQFOXGLQJWKHZRUNVRI 6WHQGDKODQG3URXVWDQGWUDQVODWLRQVRIPHGLHYDOOLWHUDWXUH%HRZXOIWKH&KDQVRQGH5RODQG DVZHOODVWKH 6DW\ULFRQRI3HWURQLXV$UELWHUDQGWZRZRUNVE\3LUDQGHOOR7KH6FRWW0RQFULHII3UL]HLVDZDUGHGDQQXDOO\E\ WKH7UDQVODWRUV¶$VVRFLDWLRQIRUWKHEHVWWUDQVODWLRQIURP)UHQFK 6,'1(<0DU\"± $PHPEHURIWKHUHQRZQHG6LGQH\IDPLO\3KLOLS6LGQH\ZDVKHUEURWKHU DQG DQLPSRUWDQWOLWHUDU\SDWURQ6KHWUDQVODWHG3HWUDUFK¶Vµ7ULRQIRGHOOD0RUWH¶F DQG3KLOOLSSH'X3OHVVLV 0RUQD\¶Vµ(VVD\RQ/LIHDQG'HDWK¶DQG :LWK3KLOLSVKHSURGXFHGYHUVLRQVRIWKH3VDOPV FRPSOHWLQJWKHZRUNDIWHUKLVGHDWK 75(9,6$-RKQRI± )HOORZRIWZR2[IRUG&ROOHJHV± ZKHUHKHKDGFORVHDVVRFLDWLRQV ZLWK:\FOLIDQG+HUHIRUG$V9LFDURI%HUNHOH\KHSURGXFHGIRU



3DJH

WKH'XNHRI%HUNHOH\WUDQVODWLRQVRI+LJGHQ¶V3RO\FKURQLFRQ WKH'H3URSULHWDWLEXV5HUXPRI %DUWKRORPHZWKH(QJOLVKPDQ DQGWKH'H5HJLPLQH3ULQFLSXPRI*LOHVRI5RPH+LVWUDQVODWLRQRI +LJGHQFRQWDLQLQJSURORJXHVRQWUDQVODWLRQZDVSULQWHGE\&D[WRQRI%DUWKRORPHZE\GH:RUGH 7<1'$/(:LOOLDP± (QJOLVKWUDQVODWRURIWKH%LEOH+LVWUDQVODWLRQVZHUHEDQQHGLQ%ULWDLQ DQGKHKDGWRSXEOLVKKLVWUDQVODWLRQRIWKH1HZ7HVWDPHQWLQ&RORJQHDQG:RUPV7\QGDOHZDVILQDOO\ DUUHVWHGLQ$QWZHUSLQDQGWULHGDWWKH&DVWOHRI9LOYRUGHLQZKHUHKHZDVWRUWXUHGWKHQH[HFXWHG ,QDGGLWLRQWRKLV%LEOHWUDQVODWLRQV7\QGDOHDOVRGHEDWHGUHOLJLRXVDQGOLWHUDU\TXHVWLRQVLQSULQWZLWK6LU 7KRPDV0RUHDQGWUDQVODWHGWKH(QFKLULGLRQ0LOLWLV&KULVWLDQLRI(5$6086SULQWHGVHH'87&+ 75$',7,21 7<7/(5$OH[DQGHU)UDVHU± 6FRWWLVKODZ\HUDQG3URIHVVRURI+LVWRU\DW(GLQEXUJK 8QLYHUVLW\7KHILUVWYHUVLRQRIWKH(VVD\RQWKH3ULQFLSOHVRI7UDQVODWLRQ ZDVSUHVHQWHGLQOHFWXUHVWR WKH5R\DO6RFLHW\GXULQJDQGSXEOLVKHGDQRQ\PRXVO\7\WOHUPRYHGLQWKHVDPHVFKRODUO\FLUFOHDV *HRUJH&DPSEHOOIROORZLQJWKH(VVD\¶VSXEOLFDWLRQ&DPSEHOOZURWHWRWKHSXEOLVKHUWRDVNLI7\WOHUKDG SODJLDUL]HGPDWHULDOIURPKLVµ3UHOLPLQDU\'LVVHUWDWLRQ¶WRKLVWUDQVODWLRQRIWKH*RVSHOVDQDFWGHQLHGE\ 7\WOHU7KH(VVD\ZDVWUDQVODWHGLQWR*HUPDQ DQGUHSULQWHGLQ(QJOLVKPDQ\WLPHV+HDOVRWUDQVODWHG VHYHQVRQQHWVRI3HWUDUFK DQG6FKLOOHU¶V5REEHUV WKHODWWHUWKHPRVWVXFFHVVIXORIIRXU FRPSHWLQJYHUVLRQVLQWKHSHULRG 52*(5(//,6$1'/,=2$./(<%52:1

%XOJDULDQWUDGLWLRQ 7KHHDUOLHVWSHRSOHNQRZQWRKDYHLQKDELWHGWKH%XOJDULDQODQGVLQWKH%DONDQ3HQLQVXODZHUHWKH7KUDFLDQV DQ,QGR(XURSHDQWULEH 7KH\GHYHORSHGDULFKFXOWXUHDQGOLYHGLQFORVHFRQWDFWZLWK%\]DQWLXPDVZHOODV WKH3HUVLDRIWKH$FKDHPHQLGG\QDVW\DQGRWKHU,QGR(XURSHDQSHRSOHVLQ$VLD0LQRULQDGGLWLRQWR*UHHN WKH\XQGHUVWRRGWKHODQJXDJHVRIWKH+XQV6DUPDWHVDQG$YDUV,QWKHVL[WKFHQWXU\WKH\JUDGXDOO\PL[HG ZLWKWKHWULEHVRIWKHHDVWHUQJURXSRIVRXWKHUQ6ODYVWKH3URWREXOJDULDQVOHGE\.KDQ$VSDURXNKF± ZKRFDPHIURPWKHQRUWKDQGVHWWOHGLQSUHVHQWGD\QRUWKHDVW%XOJDULDDWWKHHQGRIWKHVL[WKFHQWXU\ 7KH\HDUVDZWKHIRXQGDWLRQRIWKHILUVW6ODYRQLF%XOJDULDQVWDWHHVWDEOLVKHGWKURXJKWKHPHUJHURI 6ODYRQLFDQG3URWREXOJDULDQWULEHVZKLFKDGRSWHGWKHQDPHµ%XOJDULDQV¶7KHSURFHVVRIWKHIRUPDWLRQDQG FRQVROLGDWLRQRIWKH%XOJDULDQSHRSOHDQGVWDWHKRRGFRQWLQXHGIURPWKHVHYHQWKWRWKHPLGGOHRIWKHQLQWK FHQWXU\,Q7VDU%RULV,±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

7KHPHGLHYDOSHULRGQLQWKWRIRXUWHHQWKFHQWXULHV 0HGLHYDO%XOJDULDQOLWHUDWXUHZDVIRXQGHGZLWKWKHWUDQVODWLRQVRI&<5,/DQG0(7+2',86LQWKHQLQWK FHQWXU\ 7KH\RXQJ6ODYRQLFVWDWHVLQWKHDUHDZHUHJUDGXDOO\FRQYHUWHGWR&KULVWLDQLW\DVWKHULYDOU\EHWZHHQ5RPH DQG&RQVWDQWLQRSOHJUHZ,QWKHQLQWKFHQWXU\WKHQHZO\HVWDEOLVKHG%XOJDULDQVWDWHIHOWWKHVSLULWXDOQHHGIRU HQOLJKWHQPHQWDZULWWHQFXOWXUHDQGDQDOSKDEHWWKLVZDVDOVRWUXHRIRWKHU6ODYRQLFSHRSOHV7KH6ODYRQLF &\ULOOLFDOSKDEHWFUHDWHGE\WKHWZREURWKHUV&\ULODQG0HWKRGLXV



3DJH

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¶GLVFLSOHVFDPHWR %XOJDULDDQGFRQWLQXHGWKHLUZRUNZLWKWKHVXSSRUWRIWKH%XOJDULDQWVDUV :HKDYHQRVXEVWDQWLDOHYLGHQFHIRUWKHH[LVWHQFHRILQWHUSUHWHUVLQ%XOJDULDGXULQJWKH0LGGOH$JHV +RZHYHUZHGRNQRZWKDW$QDVWDVLXV/LEUDULDQ$'± D5RPDQFOHUJ\PDQDQGZULWHUDFWHGDV LQWHUSUHWHUIRUWKH5RPDQ3RSHZKHQ5RPHDWWHPSWHGWRFRQYHUWWKH%XOJDULDQVWR&KULVWLDQLW\DQGZKHQ&\ULO DQG0HWKRGLXVYLVLWHGWKH3RSH,QGLUHFWHYLGHQFHIRUWKHXVHRILQWHUSUHWHUVPD\DOVREHGUDZQIURPWKH/DWLQ FOHUJ\¶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



3DJH

RIWUDQVODWLRQDQGFRQVHTXHQWO\GHYHORSHGGLIIHUHQWDWWLWXGHVWRWKH*UHHNVRXUFHWH[WV7KHWHQVLRQEHWZHHQ WKHIUHHDSSURDFKRIWKH2KULGDVFKRRODQGWKHIRUPDODSSURDFKRIWKH3UHVODYVFKRROKDGDUROHWRSOD\LQ VKDSLQJWKH2OG%XOJDULDQFXOWXUHZKLFKSURYHVWKDWDWWLWXGHVWRWUDQVODWLRQFDQJHQHUDWHGLIIHUHQWFXOWXUDODQG LGHRORJLFDOSDUDGLJPVWKDWUHIOHFWWKHZRUOGYLHZW\SLFDORIDFHUWDLQHSRFK ,QWKH2KULGDVFKRROODWHQLQWKFHQWXU\ LQWKHVRXWKZHVWRI%XOJDULDFKXUFKERRNVZHUHWUDQVODWHGIURP *UHHN7KHSUHYDOHQWDSSURDFKZDVRQHRIIUHHWUDQVODWLRQ:KLOHUHFRJQL]LQJHTXLYDOHQFHRIPHDQLQJDVWKH XOWLPDWHREMHFWLYHSUHIHUHQFHZDVJLYHQWRIUHHWUDQVODWLRQLQWHUPVRIV\QWD[DQGZRUGRUGHUDQGWKHXVHRI GHVFULSWLYHVWUDWHJLHVZDVDOORZHG7KHZRUNRI&OLPHQWRI2KULGDF± IRXQGHURIWKH2KULGDVFKRRO LOOXVWUDWHVWKLVDSSURDFK+LVWUDQVODWLRQVRI%\]DQWLQHZULWHUVVXFKDV-RKQ&KU\VRVWRPDQG-RKQ'DPDVFHQH DVZHOODVYDULRXVUHOLJLRXVWH[WVDQGVHUPRQVWRRNWKHIRUPRIµUHWHOOLQJV¶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µ+HDYHQ¶RUµ7KHRORJ\¶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±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±F %XOJDULDQSDWULDUFKZULWHUSKLORVRSKHUDQGSKLORORJLVW ZRUNHGRQµWKHUHFWLILFDWLRQRIERRNV¶WKURXJKQHZ WUDQVODWLRQVDQGHGLWLQJRI*UHHNRULJLQDOV+HLQLWLDWHGYDULRXVOLQJXLVWLFVW\OLVWLFDQGVSHOOLQJUHIRUPVZKLFK VHUYHGWKHVDPHSXUSRVH $WWHPSWVWRSXUJHWKHKRO\ERRNVRI&KULVWLDQLW\IURPKHUHVLHVDQGGLVWRUWLRQVEHJDQLQWKHWKLUWHHQWKDQG FRQWLQXHGLQWKHIRXUWHHQWKFHQWXU\SDUWLFXODUO\LQWKH7XUQRYR



3DJH

VFKRRO7UDQVODWRUVZHUHXUJHGWRUHYLHZWKHH[LVWLQJWUDQVODWLRQVRIWKHFKXUFKERRNVEXWLQRUGHUWRGRWKDW WKH\QHHGHGDµSXUH¶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¶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±$OWKRXJKQRWFRPSRVHGLQYHUVHIRUPWKHVW\OHRIWKHWUDQVODWLRQLVKLJKO\SRHWLF

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



3DJH

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

7KH%XOJDULDQUHQDLVVDQFHHLJKWHHQWKDQGQLQHWHHQWKFHQWXULHV 7KH%XOJDULDQUHQDLVVDQFHLVJHQHUDOO\WKRXJKWWRKDYHVWDUWHGZLWKWKHSXEOLFDWLRQLQRI6ODYRQLF %XOJDULDQ+LVWRU\E\3DLV\LRI&KLOHQGDU± PRQNDQGHQOLJKWHQHU7UDQVODWLRQIROORZHGWKHJHQHUDO GHYHORSPHQWRI%XOJDULDQOLWHUDWXUHGXULQJWKHHLJKWHHQWKFHQWXU\EXWZDVFKDUDFWHUL]HGE\DQXPEHURI GLVWLQFWLYHIHDWXUHV 7UDQVODWLRQGXULQJWKH%XOJDULDQUHQDLVVDQFHDVVXPHGDQHZIXQFWLRQDVPHGLDWRUEHWZHHQPHGLHYDODQG PRGHUQOLWHUDWXUH7KHUHIRUHPDQ\µQHZWUDQVODWLRQV¶DSSHDUHGIRUH[DPSOH$OH[DQGULDDKHURLFILFWLRQDOHSLF DERXW$OH[DQGHURI0DFHGRQLD DQGDFROOHFWLRQRIH[FHUSWVIURPWKH$UDELDQ1LJKWVZKLFKKDGILUVW EHHQWUDQVODWHGDIHZFHQWXULHVHDUOLHUZLWKWKHQHZWUDQVODWLRQVXSGDWHGWRUHIOHFWWKHPRGHUQLGLRP7KHVH WZRWUDQVODWLRQVSURYLGHGFRQWLQXLW\ZLWKWKHROGOLWHUDWXUHDQGDUHWKHUHIRUHFRQVLGHUHGDVPDUNLQJWKH EHJLQQLQJRIOLWHUDU\WUDQVODWLRQGXULQJWKH%XOJDULDQUHQDLVVDQFH6WRULHVDQG7KRXJKWV E\6RSKURQLXV RI9UDWVD± PDUNHGDZKROHQHZVWDJHLQWKHGHYHORSPHQWRIWUDQVODWLRQVGXULQJWKHHDUO\ UHQDLVVDQFH7KLVLVDFROOHFWLRQRIIDEOHVRI$HVRSSOXVYDULRXVQDUUDWLYHV+HUHWKHQHZPHGLDWLQJ IXQFWLRQRIWUDQVODWLRQZDVFOHDUO\XQGHUVWRRGWRLQFOXGHLQWHUSUHWLQJWKHRULJLQDODOVRWKHROGOLWHUDU\ ODQJXDJHZDVEHJLQQLQJWRXQGHUJRDIXQGDPHQWDOSURFHVVRIµGHPRFUDWL]DWLRQ¶7KLVFROOHFWLRQUHSUHVHQWVWKH ILUVWDWWHPSWWRGLIIHUHQWLDWHVW\OLVWLFOHYHOVRIWKHODQJXDJHDQGWRDGMXVWWUDQVODWLRQWRWKHVSHFLILFJHQUHRIWKH RULJLQDO %HWZHHQWKHHQGRIWKHHLJKWHHQWKDQGWKHPLGGOHRIWKHQLQHWHHQWKFHQWXU\WUDQVODWLRQZDVPDUNHGE\D JHQHUDOWHQGHQF\IRUµ%XOJDULDQL]DWLRQ¶IUHHLQWHUSUHWDWLRQDQGOLWHUDU\UHYLVLRQRIWKHRULJLQDOWRVXLW %XOJDULDQQDWLRQDOKLVWRULFDODQGSV\FKRORJLFDOVSHFLILFLWLHV 7KLVZDVDQDWXUDOUHVXOWRIWKHFXOWXUDODQG LGHRORJLFDORYHUEXUGHQLQJRIWUDQVODWLRQGXHWRWKHVORZGHYHORSPHQWRIWKH%XOJDULDQLQWHOOHFWXDOpOLWH RULJLQDOZRUNVGLGQRWEHJLQWRDSSHDUXQWLOWKHODWHVWDJHVRIWKH%XOJDULDQUHQDLVVDQFH,WZDVWUDQVODWRUVZKR ODLGWKHIRXQGDWLRQVRIPRGHUQ%XOJDULDQOLWHUDWXUHUHFXUUHQWWKHPHVLPDJHVSORWVJHQUHVYRFDEXODU\ VW\OLVWLFGLYHUVLW\HWF%XOJDULDQFXOWXUHQHHGHGWROHDUQIURPQHZPRGHOVDQGWUDQVIRUPWKHPLQWRQDWLRQDO RQHV$VSDUWRIWKHWHQGHQF\WRDGDSWWKHRULJLQDOWRWKHUHDGHU¶VWDVWHWUDQVODWRUVDOVREHFDPHVHPLDXWKRUV GHYHORSLQJWKHFRQWHQWRIWKHRULJLQDODQGDGGLQJWRWKHLURZQWH[W )UHQFK*HUPDQDQG5XVVLDQVHQWLPHQWDOOLWHUDWXUHZDVIUHTXHQWO\µ%XOJDULDQL]HG¶HVSHFLDOO\VLQFHLWSURYLGHG DVXLWDEOHFRQWH[WIRUXVLQJWKHFOLFKpVZKLFK%XOJDULDQUHDGHUVKDGOHDUQHGIURPVHUPRQVKDJLRJUDSK\DQG WKH'DPDVFHQHV 7UDQVODWLRQVLQWR%XOJDULDQZHUHRIWHQEDVHGRQLQWHUPHGLDWHYHUVLRQVLQRWKHUODQJXDJHV7KLVFDQEH H[SODLQHGLQWHUPVRIDODFNRIDSSUHFLDWLRQRIµFRS\ULJKW¶DVZHNQRZLWWRGD\DQGWKHXUJHQWQHHGWRPDNH FRQWDFWZLWKVHYHUDO(XURSHDQOLWHUDWXUHVDWWKHVDPHWLPH 7KHVHOHFWLRQRIWUDQVODWLRQVGHSHQGHGRQZKDWZDVFRQVLGHUHGXVHIXOWRWKHWDUJHWUHDGHU



3DJH

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µ%XOJDULDQL]DWLRQ¶LQHYLWDEO\FRQWLQXHGEXWLW JUDGXDOO\JDYHZD\WRRWKHUPHWKRGVRIWUDQVODWLRQ7KHJUDGXDOGHYHORSPHQWRIWKHQDWLRQDOODQJXDJHDOVR SOD\HGDSDUWLQWKLVSURFHVV2ISDUWLFXODULPSRUWDQFHZHUHWKHWUDQVODWLRQVE\WKHJUHDWHVWZULWHUVRIWKH %XOJDULDQUHQDLVVDQFHZKRVHWDOHQWVHQDEOHGWKHPWRXVHWKHIXOOSRWHQWLDORIWKHODQJXDJH356ODYHLNRY/ .DUDYHORY&%RWHY1%RQFKHYDQGRWKHUV 'LYHUVHWHQGHQFLHVGHYHORSHGLQWKHFKRLFHRIFHUWDLQIRUHLJQOLWHUDWXUHV2QWKHRQHKDQGDPXFKZLGHUUDQJH RIIRUHLJQOLWHUDU\WH[WVEHFDPHNQRZQLQ%XOJDULD)UHQFK5XVVLDQ*HUPDQ,WDOLDQ(QJOLVK$PHULFDQ 6HUELDQ*UHHNHWF2QWKHRWKHUKDQGWUDQVODWRUVKDGPRUHRSSRUWXQLWLHVWRFKRRVHRULJLQDOWH[WVGHSHQGLQJ RQWKHQHHGVRIWKHQDWLRQDOOLEHUDWLRQSURFHVV:ULWHUVRIWKH)UHQFK(QOLJKWHQPHQWIRULQVWDQFHZHUH WUDQVODWHGRQDPDVVLYHVFDOHEXWWKLVGLGQRWVWRSWKHIORZRIWUDQVODWLRQVRI)UHQFKVHQWLPHQWDOLVWV WKHVDPH DSSOLHGWR5XVVLDQOLWHUDWXUHZKLFKJUDGXDOO\DVVXPHGWKHIXQFWLRQRIPHGLDWRUEHWZHHQWKH%XOJDULDQDQG (XURSHDQFXOWXUHV7KHPRVWLPSRUWDQWWUDQVODWRUIURP5XVVLDQ356/$9(,.29± ZDVRQHRIWKH OHDGLQJILJXUHVRIWKH%XOJDULDQUHQDLVVDQFH 7UDQVODWHGDQGRULJLQDOSRHWU\EHJDQWRDSSHDUVLPXOWDQHRXVO\GXULQJWKLVSHULRG7KH%XOJDULDQSRHWLF WUDGLWLRQGHYHORSHGRXWRIWKHWHQVLRQEHWZHHQIRONORULFIRUPVDQGWKRVHRILDPELFSRHWU\$JUHDWGHDORI GLYHUVLW\H[LVWHGDQGVW\OLVWLFDQGPHWULFLQWHUSUHWDWLRQVYDULHGDFFRUGLQJWRWKHWUDQVODWRU¶VRXWORRNDQG REMHFWLYHV7KHµUHYLVHGWUDQVODWLRQV¶ZKLFKZHUHXQGHUWDNHQDWWKHWLPHZHUHLQGLFDWLYHRIWKHOLWHUDU\ DHVWKHWLFVRIWKHSHULRG 6FLHQWLILFDQGSROLWLFDOWUDQVODWLRQLQIOXHQFHGWKHGHYHORSPHQWRIQDWLRQDODZDUHQHVVDQGUHYROXWLRQDU\ LGHRORJ\,WGHYHORSHGLQUHVSRQVHWRDJURZLQJLQWHUHVWLQWKHLVVXHVRIJRYHUQDQFHODZHFRQRPLFVDQGLQ PHGLFDODQGQDWXUDOVFLHQFHV7KHILUVW%XOJDULDQVFKRROERRN7KH)LVK3ULPHUZKLFKZDVZULWWHQE\3HWHU %(521±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



3DJH

VHQWLPHQWDOLVWLPDJHU\SRSXODUHGXFDWLRQDOPDWHULDOSHGDJRJLFDOKLVWRULFDODQGVFLHQWLILFWH[WVWUDYHOQRWHV DQGSROLWLFDOZULWLQJVQRWWRPHQWLRQWKHFODVVLFVRI(XURSHDQDQGQHLJKERXULQJ%DONDQFXOWXUHV%XOJDULDQV GHYHORSHGDODVWLQJLQWHUHVWLQ5XVVLDQOLWHUDWXUHZKLFKZDVSHUFHLYHGDVERWKWKHPHGLDWLQJOLQNWR(XURSHDQ FLYLOL]DWLRQDVZHOODVWKHPDLQVWD\DQGJXDUDQWRURI%XOJDULD¶V6ODYRQLFURRWV,QDGGLWLRQWRLPSRUWLQJQHZ JHQUHVDQGLPDJHU\WUDQVODWLRQVGXULQJWKLVSHULRGDOVREHFDPHDWHVWLQJJURXQGIRUWKHQDWLRQDOOLWHUDU\ ODQJXDJHLPDJHU\JHQUHH[SHULPHQWVSRHWLFFXOWXUHDQGRWKHUPDMRUHOHPHQWVRIDUWDQGFXOWXUHLQPRGHP WLPHV

7UDQVODWLRQLQWKHSRVWOLEHUDWLRQSHULRGWRWKHSUHVHQW 7KHQHZSHUFHSWLRQRIWKHIXQFWLRQVDQGSODFHRIWUDQVODWLRQVLQWKHQDWLRQDOFXOWXUHZKLFKZDVUDGLFDOO\ GLIIHUHQWIURPHDUOLHUSHUFHSWLRQVZDVPRVWFRQYLQFLQJO\SUHVHQWHGLQWKHDUWLFOHµ&ODVVLFDO(XURSHDQZULWHUV LQWKH%XOJDULDQODQJXDJHDQGWKHEHQHILWRIVWXG\LQJWKHLUZRUNV¶ E\WKHOLWHUDU\FULWLF1HVKR %21&+(9%RQFKHYUHMHFWHGWKHLGHDRIWUDQVODWLQJLQUHVSRQVHWRQDWLRQDOQHHGVDQGFDOOHGIRUUHRULHQWLQJ WUDQVODWLRQWRZDUGVOHDUQLQJDERXWDQGDVVLPLODWLQJWKHILQHVWH[DPSOHVRIPRGHUQZRUOGOLWHUDWXUH7KLV PDUNHGDWXUQLQJSRLQWIURPXWLOLWDULDQLVPWRWKHSXUVXLWRIDUWLVWLFYDOXHV%XOJDULDQL]DWLRQQDWXUDOO\EHFDPH REVROHWHDVDWUDQVODWLRQPHWKRGLQWKLVFRQWH[W $WWKHEHJLQQLQJRIWKHWZHQWLHWKFHQWXU\DJURXSRIZULWHUVDVVRFLDWHGZLWKWKHMRXUQDO0LVXO±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±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



3DJH

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
)XUWKHUUHDGLQJ 'LQHNRY*HRUJLHY/HVNLHQ3LFFKLR3UHYRGXWL%XOJDUVNDWD.XOWXUD6WDUD%XOJDUVND /LWHUDWXUD±7URVW9DLOODQW

$11$/,/29$

7UDQVODWHGIURP%XOJDULDQE\9HUD*HRUJLHYD

%LRJUDSKLHV %$/$%$129$OH[DQGHU± %XOJDULDQFODVVLFDOSKLORORJLVWWUDQVODWRUDQGOLWHUDU\FULWLF 3URIHVVRURIDQFLHQW*UHHNOLWHUDWXUHDW6RILD8QLYHUVLW\KHWUDQVODWHGZRUNVE\$HVFK\OXV6RSKRFOHV (XULSLGHVDQG$ULVWRSKDQHVDVZHOODV$HVRS¶VIDEOHV %(5213HWHU± (QF\FORSHGLVWVFLHQWLVWSKLORVRSKHUPHGLFDOGRFWRUWHDFKHUDQGWUDQVODWRU $XWKRUFRPSLOHURIWKHILUVW%XOJDULDQVFKRROERRN7KH)LVK3ULPHUZKLFKFRQWDLQHGWUDQVODWLRQVRIHLJKWHHQ RI$HVRS¶VIDEOHVDQGYDULRXVZRUNVE\*UHHNDXWKRUV%HURQDOVRZURWHDQXPEHURIVFLHQWLILFERRNVLQ )UHQFK %21&+(91HVKR± /LWHUDU\FULWLFDQGWUDQVODWRU+HWUDQVODWHG+RPHU¶V,OLDGDQG*RJRO¶V7DUDV %XOED+LVWUDQVODWLRQRI6FKLOOHU¶VGUDPDVFRQWULEXWHGWRWKHGHYHORSPHQWRIWKH%XOJDULDQVWDJHODQJXDJHDQG WKHDWUH%RQFKHYLQLWLDWHGDSURJUDPPHIRUWUDQVODWLQJOLWHUDWXUHGXULQJWKH%XOJDULDQUHQDLVVDQFH &<5,/DQG0(7+2',86± ± %URWKHUVQDWLYHVRI7KHVVDORQLNL6ODYRQLFHQOLJKWHQHUV LQYHQWRUVRIWKH6ODYRQLF&\ULOOLFVFULSWIRXQGHUVRI6ODYRQLFDQG%XOJDULDQOLWHUDWXUHDQGFKDPSLRQVRIDQ LQGHSHQGHQW6ODYRQLFFKXUFKDQGFXOWXUH&\ULOZDVHGXFDWHGLQWKH0DJQDXU6FKRROLQ&RQVWDQWLQRSOHDQG EHFDPHDWHDFKHURISKLORVRSK\DWWKHVDPHVFKRRO+HJDYHWKHILUVWGHILQLWLRQRISKLORVRSK\LQWKH6ODYRQLF ODQJXDJHDQGZDVDQHORTXHQWVSHDNHUDQGWDOHQWHGSRHW0HWKRGLXVVHUYHGLQWKHDUP\



3DJH

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µ+HDYHQ¶RUµ7KHRORJ\¶([DUFKZDVWKHIRXQGHURIWKHILUVW6ODYRQLFWKHRU\RI WUDQVODWLRQ+LVYLHZZDVWKDWWKHWUDQVODWRUVKRXOGFRQYH\WKHPHDQLQJUDWKHUWKDQWKHPHUHµVRXQGV¶DQG VKRXOGDEVWDLQIURPDGGLQJORQJH[SODQDWLRQVWRWKHWH[W 0,/(9*HR± 3RHWDQGWUDQVODWRURI)UHQFK(QJOLVKDQG5XVVLDQOLWHUDWXUHDQGDQFLHQW*UHHN FODVVLFV+HVWXGLHGLQ*HUPDQ\DQGWRRNDFWLYHSDUWLQWKHFXOWXUDOOLIHWKHUH,QKHVWDUWHGSXEOLVKLQJWKH MRXUQDOV9H]QLDQG3ODPDNDVZHOODVWUDQVODWLQJDQWKRORJLHV+LVPDLQRULJLQDOZRUNZDVWKHSRHP6HSWHPEHU 6/$9(,.2935± %XOJDULDQSRHWMRXUQDOLVWIRONORUHUHVHDUFKHUDQGVWDWHVPDQ+LVWUDQVODWLRQV RI5XVVLDQ:HVWHUQ(XURSHDQDQG%DONDQDXWKRUVFRQWULEXWHGWRWKHPHWULFDQGSURVRGLFGHYHORSPHQWRI %XOJDULDQYHUVH+HXVHGDOOIRUPVRIWUDQVODWLRQ%XOJDULDQL]DWLRQDGDSWDWLRQZKHUHKHXVHGRWKHUDXWKRUV¶ LGHDVDQGSORWVIRUKLVRZQFUHDWLYHSXUSRVHV DQGOLWHUDOWUDQVODWLRQ 725%297VHNR± 7UDQVODWRURIVFLHQWLILFOLWHUDWXUH+HVWXGLHGODZDQGSKLORVRSK\LQ*HUPDQ\ DQGWUDQVODWHG.DQW¶VZRUNVRYHUDSHULRGRIWKLUW\\HDUV± ,Q7RUERYZRQWKH9LHQQD 8QLYHUVLW\+HUGHUDZDUGIRUKLVWUDQVODWLRQRIWKH&ULWLTXHRI3XUH5HDVRQDQGIRUKLVUHVHDUFKDFWLYLWLHVLQ JHQHUDO $11$/,/29$



3DJH

& &DQDGLDQWUDGLWLRQ 7KHPLOOLRQLQKDELWDQWVRI&DQDGDDUHPDLQO\RI)UHQFKDQG%ULWLVKGHVFHQWEXWWKHUHDUHDOVRDQXPEHURI ODUJHPLQRULWLHVZKLFKLQFOXGHWKHRULJLQDOLQKDELWDQWV,QGLDQVZKRVSHDNDYDULHW\RI+XURQ,URTXRLVDQG $OJRQTXLDQDQGWKH,QXLWZKRVSHDN,QXNWLWXW *HUPDQV,WDOLDQV&KLQHVH8NUDLQLDQVDQG'XWFK7KH H[SORUDWLRQRI&DQDGDEHJDQLQZKHQ-RKQ&DERWUHDFKHGWKHFRDVWVRI1HZIRXQGODQGDQG1RYD6FRWLD 7KHILUVWSHUPDQHQWVHWWOHPHQWVZHUHPDGHE\WKH)UHQFKDQGEHJDQLQZKHQWKH)UHQFKH[SORUHUDQG FRORQL]HU6DPXHOGH&KDPSODLQF± HVWDEOLVKHGWKHVHWWOHPHQWDW4XHEHFNQRZQDVµ1HZ)UDQFH¶ VLQFH-DFTXHV&DUWLHUJDYHLWWKHQDPHLQ,Q&DQDGDZDVFHGHGWR%ULWDLQE\WKH7UHDW\RI3DULV &XUUHQWO\DPHPEHURIWKH%ULWLVK&RPPRQZHDOWK&DQDGDDOVRSOD\VDQDFWLYHSDUWLQµ/D)UDQFRSKRQLH¶WKH RUJDQL]DWLRQZKLFKUHSUHVHQWV)UHQFKVSHDNLQJFRPPXQLWLHV7KHRIILFLDOODQJXDJHVDUH(QJOLVKDQG)UHQFK

7UDQVODWLRQXQGHU)UHQFKUXOH 7KHKLVWRU\RIWUDQVODWLRQLQ&DQDGDEHJDQZLWKDNLGQDSSLQJ:KLOHH[SORULQJWKH*XOIRI6W/DZUHQFHLQ WKH)UHQFKQDYLJDWRU-DFTXHV&DUWLHU± FDPHLQWRFRQWDFWZLWKVHYHUDO,QGLDQWULEHV,QRUGHU WRFRPPXQLFDWHZLWKWKHPKHKDGWRUHVRUWWRVLJQODQJXDJH%HIRUHVHWWLQJVDLORQFHDJDLQ&DUWLHU XQFHUHPRQLRXVO\µUHFUXLWHG¶WKHWZRVRQVRIWKH,URTXRLVFKLHIRI6WDGDFRQDSUHVHQWGD\4XpEHF&LW\ DQG WRRNWKHPWR)UDQFHZKHUHKHWDXJKWWKHPWKHUXGLPHQWVRIWKH)UHQFKODQJXDJH7KHVHWZRQDWLYHVEHFDPH WKHFRXQWU\¶VILUVWLQWHUSUHWHUV 2QKLVVHFRQGYR\DJH&DUWLHU¶VQHZLQWHUSUHWHUV'RQ$JD\DDQG7DLJQRDJQ\EHJDQWRWHDFKKLPDERXW1HZ )UDQFHLWVJHRJUDSKLFDOIHDWXUHVQDWXUDOUHVRXUFHVDQGLQKDELWDQWV7KH\HYHQVDYHG&DUWLHU¶VH[SHGLWLRQIURP FDWDVWURSKHE\WHDFKLQJWKHµSDOHIDFHV¶KRZWRWUHDWDQGFXUHVFXUY\DWHUULEOHGLVHDVHWKDWKDGGHFLPDWHG &DUWLHU¶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eWLHQQH%U€Op1LFRODV0DUVROHW-HDQ1LFROHW2OLYLHU/HWDUGLI -HDQ5LFKHU-DFTXHV+HUWHODQG)UDQoRLV0DUJXHULH 7KHOLQJXLVWLFPDSRI1HZ)UDQFHDWWKDWWLPHZDVIUDJPHQWHGZLWKQXPHURXVGLDOHFWVGHULYLQJIURPWZR ODQJXDJHIDPLOLHV$OJRQTXLDQDQG+XURQ,URTXRLV$OWKRXJKDOOWKH,QGLDQODQJXDJHVEHORQJHGWRRQHRI WKHVHWZR



3DJH

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«WRQDWLYHV ZKRKDGORVWWKHLUIDWKHUVIRUWRVSHDNRIORYHGRQHVZKRKDGGLHGZDVWRLQVXOWWKHP $IWHU&KDPSODLQ¶VGHDWK\RXQJSHRSOHFRQWLQXHGWRJRDQGOLYHZLWKWKH,QGLDQVWROHDUQWKHFKDOOHQJLQJFUDIW RILQWHUSUHWLQJ3LHUUH%RXFKHU&KDUOHV/H0R\QH*XLOODXPH&RXWXUHDQG1LFRODV3HUURWZHUHIRXUHPLQHQW LQWHUSUHWHUVRIWKLVSHULRG,QWKHZRUGVRI%DFTXHYLOOHGH/D3RWKHULHµ7KHPHUFKDQWVFRXOGKDYHRIIHUHG pFXVZRUWKRIPHUFKDQGLVHEXWWKH\ZRXOGQRWKDYHVROGHYHQDSRXQGRIWREDFFRZLWKRXWWKH DVVLVWDQFHRIWKHLULQWHUSUHWHUV¶0DUJU\WUDQVODWHG ,Q0RQWUHDOWKHFRXUWVRIWHQUHTXLUHGLQWHUSUHWHUVIRU,QGLDQODQJXDJHVDVZHOODVLQWHUSUHWHUVIRU(QJOLVKDQG 'XWFKWKHODQJXDJHVXVHGE\PHUFKDQWVLQWKHFRORQLHVWRWKHVRXWK1HZ(QJODQGDQG1HZ+ROODQG -HDQ 4XHQHW3LHUUH&RXF5HQp&XLOOHULHU)UDQoRLVH*RXSLORQHRIRQO\WZRZRPHQWRKDYHVHUYHGDVLQWHUSUHWHUV DWWKHWLPH 5REHUW3RLWLHUVGX%XLVVRQDQG/RXLV+HFWRU3LRWGH/DQJORLVHULHZHUHDPRQJWKRVHZKR LQWHUSUHWHGIRUWKHFRXUWV7KH\ZHUHHVVHQWLDOO\VHWWOHUVPLOOLQHUVWUDGHUVDQGPDQXIDFWXUHUVDQGRQO\ RFFDVLRQDOO\ZRUNHGDVLQWHUSUHWHUV7RGD\WKH\ZRXOGEHFRQVLGHUHGSDUWWLPHIUHHODQFHUV 0LOLWDU\LQWHUSUHWHUVIRUPHGDQRWKHUFDWHJRU\7KHVHPHQZHUHPHPEHUVRIWKHUHJXODUIRUFHVDQGRIWHQKHOG FRPPDQGSRVWV$PRQJWKHEHWWHUNQRZQZHUH3DXO/H0R\QHGH0DULFRXUW-RVHSK*RGHIUR\GH9LHX[3RQW DQG)UDQoRLV+HUWHO,QWKHDUP\RIWKH0DUTXLVGH0RQWFDOP± ZKLFKKDGWULHGLQYDLQWR GHIHQG4XHEHFDJDLQVWWKHWURRSVRIWKH%ULWLVK*HQHUDO-DPHV:ROIH± LQFOXGHGRYHU,QGLDQV IURPYDULRXVWULEHVDQGWHQLQWHUSUHWHUV ,QWKHJRYHUQRURI1HZ)UDQFHDQGVXFFHVVRUWR)URQWHQDF-RVHSK$QWRLQHGH/D%DUUHZURWHµ2QH W\SHRISHUVRQZKRLVLQGLVSHQVDEOHWRWKHVHUYLFHRIWKH.LQJLQWKLVFRXQWU\LVWKHLQWHUSUHWHU«¶%LURQ WUDQVODWHG %XWWKHLQWHUSUHWHU¶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µGRXEOHPDQ¶ZKLOH DQRWKHUZDVFDOOHGµWZRWLPHVDPDQ¶ZKLFKLQGLFDWHVWKHH[WHQWWRZKLFKWKHLQWHUSUHWHUVRIHDUO\&DQDGD ZHUHLQWXQHZLWKWKH,QGLDQPHQWDOLW\

7UDQVODWLRQXQGHU(QJOLVKUXOH± $IWHUWKHVXUUHQGHURI0RQWUpDOLQDQGIROORZLQJWKH7UHDW\RI3DULVZKLFKJDYHFRQWURORIWKHFRORQLHV WR%ULWDLQLQLWZDVWKHWXUQRIWKH(QJOLVKFRQTXHURUVWRRUJDQL]HWKHDGPLQLVWUDWLRQRI&DQDGDZKRVH SRSXODWLRQKDGQRZJURZQWRDSSUR[LPDWHO\%UXQHWSRLQWVRXWWKDWµDOWKRXJKWKH&RQTXHVWPLQLPL]HG WKHSURIHVVLRQDORSWLRQVIRU>)UHQFK@&DQDGLDQVWKHUHLVQRGRXEWWKDWLWSUHVHQWHGWKHPZLWKDQHZFDUHHU RSSRUWXQLW\QDPHO\



3DJH

WUDQVODWLRQ¶±WUDQVODWHG 'XULQJWKHPLOLWDU\UXOH± (QJOLVKJRYHUQRUVSRVWHGWR4XHEHF &LW\7URLV5LYLqUHVDQG0RQWUHDODSSRLQWHGVHFUHWDU\WUDQVODWRUVWRWUDQVODWHLQWR)UHQFKWKHODQJXDJHRIWKH PDMRULW\ WKHHGLFWVDQGSURFODPDWLRQVLVVXHGLQ(QJOLVK7KDQNVWRIRXU%ULWLVKRIILFHUVZKRZHUHGHVFHQGDQWV RI)UHQFK+XJXHQRWV&UDPDKpLQ4XHEHF&LW\%UX\qUHVDQG*XJ\LQ7URLV5LYLqUHVDQG0DWXULQLQ 0RQWUHDO WKH)UHQFKODQJXDJHHQMR\HGDVHPLRIILFLDOVWDWXVGXULQJWKHVHIRXUWUDQVLWLRQDO\HDUV,QWKH ILUVW\HDURIFLYLOJRYHUQPHQW7KH4XHEHF*D]HWWHPDGHLWVGpEXW,WZDVWKHILUVWELOLQJXDOQHZVSDSHULQ 1RUWK$PHULFD:ULWWHQLQ(QJOLVKDQGWUDQVODWHGLQWR)UHQFKWKLVSXEOLFDWLRQZDVXVHGH[WHQVLYHO\IRU RIILFLDOJRYHUQPHQWFRPPXQLFDWLRQV ,Q*X\&DUOHWRQ± UHSODFHG-DPHV0XUUD\DVJRYHUQRUDQGWRRNXSUHVLGHQFHLQ4XHEHF &LW\6HQVLWLYHWRWKHQHHGVRIWKH)UHQFKKHGHFLGHGWKDWLWZDVHVVHQWLDOWRKDYHWKH)UHQFKODZVDQG RUGLQDQFHVRIWKHµROGUHJLPH¶WUDQVODWHGLQWR(QJOLVKDWDVNWKH(QJOLVKPDJLVWUDWHVGHFODUHGWREHEH\RQG WKHLUDELOLWLHV0RUHRYHU&DUOHWRQQHHGHGD)UHQFKVHFUHWDU\WRWUDQVODWHWKHQHZ(QJOLVKSURFODPDWLRQVDQG RWKHURIILFLDOGRFXPHQWVLQWR)UHQFK7KHRQO\&DQDGLDQZKRVHHPHGFDSDEOHRIILOOLQJWKLVGXDOUROHZDVWKH ELOLQJXDOMXULVW)UDQoRLV-RVHSK&XJQHW± 2Q)HEUXDU\&DUOHWRQDSSRLQWHGKLPµ)UHQFK 7UDQVODWRUDQG6HFUHWDU\WRWKH*RYHUQRUDQG&RXQFLO¶WKHGD\EHIRUHWKH&RXQFLOKDGGHFLGHGWKDWµVXFKD JRRGDQGVXIILFLHQWWUDQVODWRUVKDOOKDYHDQDSSRLQWPHQWRIVKLOOLQJVVWHUOLQJSHUGD\¶)RU\HDUV&XJQHW ZDVUHVSRQVLEOHIRURIILFLDOWUDQVODWLRQLQWKH3URYLQFHRI4XHEHF:KHQKHGLHGKLVVRQ-DFTXHV)UDQoRLV ± VXFFHHGHGKLP6XEVHTXHQWO\WKHSRVWZDVILOOHGLQWXUQE\;DYLHUGH/DQDXGLqUH3KLOLSSH$XEHUW GH*DVSp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± -HDQ/¶+HXUHX[/RXLV/pYHLOOpWKH5HYHUHQG-DPHV(9$16-HUU\32776DQG3HWHU (5$6086,IWKHUHZHUHIHZEORRG\EDWWOHVEHWZHHQZKLWHPHQDQGQDWLYHVLQ:HVW&DQDGDLWZDVGXHLQ ODUJHSDUWWRWKHHIIRUWVRILQWHUSUHWHUVVXFKDV3HWHU(UDVPXVDQG-HUU\3RWWVZKRDFWHGZLWKGLSORPDF\RQ EHKDOIRIPLVVLRQDULHVH[SORUHUVVXUYH\RUVDQGODZHQIRUFHPHQWRIILFHUV ,Q8SSHUDQG/RZHU&DQDGDZHUHXQLWHG6HFWLRQRIWKH$FWRI8QLRQPDGH(QJOLVKWKHVROHRIILFLDO ODQJXDJHRIWKHXQLWHG&DQDGD7KLVZDVDFRQVHTXHQFHRI/RUG'XUKDP¶VUHSRUWRIWKHSUHYLRXV\HDUZKLFK KDGDGYRFDWHGDSROLF\RIDVVLPLODWLQJIUDQFRSKRQHVLQ/RZHU&DQDGD)UDQFRSKRQHVZHUHTXLFNWRUHDFW2Q 6HSWHPEHUWKH/HJLVODWLYH$VVHPEO\RI&DQDGDSDVVHGDELOOWDEOHGE\eWLHQQH3DUHQW± ZKLFKFRQVLVWHGRIWKUHHVHFWLRQV,WSURYLGHGIRUWKHWUDQVODWLRQLQWR)UHQFKWKHSULQWLQJDQGFLUFXODWLRQRIDOO OHJLVODWLRQE\WKHQHZ3DUOLDPHQWDQGRIDOOLPSHULDOODZVUHOHYDQWWR&DQDGLDQDIIDLUV3DUHQW¶VELOOZDV HQWLWOHG$Q$FWWRSURYLGHIRUWKHWUDQVODWLRQLQWRWKH)UHQFKODQJXDJHRIWKH/DZVRIWKLV3URYLQFHDQGIRU RWKHUSXUSRVHVFRQQHFWHGWKHUHZLWK,WZDVWKHILUVWELOOWRGHDOVSHFLILFDOO\ZLWKWUDQVODWLRQDQGWREHDGRSWHG E\DOHJLVODWLYHERG\LQ&DQDGD,QRQHRIWKHWUDQVODWRUVRIWKH/HJLVODWLYH$VVHPEO\$QWRLQH*pULQ /DMRLH± VXEPLWWHGWRWKHVSHDNHUDSODQIRUUHRUJDQL]LQJWKHDVVHPEO\¶VWUDQVODWLRQEXUHDXV7KH SODQSURYLGHGIRUWKUHHVXEGLYLVLRQVODZVGRFXPHQWVDQGYRWHVDQGSURFHHGLQJV7KLVRUJDQL]DWLRQRI SDUOLDPHQW



3DJH

DU\WUDQVODWLRQVHUYLFHVZDVWRODVWIRUDOPRVW\HDUV(XJqQH3KLOLSSH'25,21ZDVDQRWKHULPSRUWDQW ILJXUHLQRIILFLDOWUDQVODWLRQLPPHGLDWHO\EHIRUHDQGDIWHU&RQIHGHUDWLRQLQ 'XULQJ%ULWLVKUXOHRIILFLDOWUDQVODWRUVVHUYHGDVPHGLDWRUVEHWZHHQWKH(QJOLVKDQGWKH)UHQFKWKH\SURYLGHG DOLQNEHWZHHQWZRSHRSOHVZKRZHUHGHVWLQHGWRFRH[LVWLQWKHVDPHWHUULWRU\$WWKHFURVVURDGVRIWZROHJDO WUDGLWLRQVFLYLOODZDQGFRPPRQODZWKHVHWUDQVODWRUVZHUHDPRQJWKHILUVWWRWDFNOHWKHGLIILFXOWWDVNRI H[SUHVVLQJ%ULWLVKODZDQGLQVWLWXWLRQVLQ)UHQFKWHUPV

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pFKHWWH± /pRQ*pULQ± DQG3LHUUH '$9,$8/7 ,QWKH6HFUHWDU\RI6WDWH&KDUOHV+&DKDQ± WDEOHGDELOOSURYLGLQJIRUWKHFHQWUDOL]DWLRQRI IHGHUDOJRYHUQPHQWWUDQVODWLRQVHUYLFHVDQGWKHFUHDWLRQRID7UDQVODWLRQ%XUHDXWKDWZRXOGEULQJWRJHWKHU VRPHWUDQVODWRUVZRUNLQJLQYDULRXVJRYHUQPHQWGHSDUWPHQWV2YHUWKH\HDUVHVSHFLDOO\WKRVHIROORZLQJ WKH5R\DO&RPPLVVLRQRQ%LOLQJXDOLVPDQG%LFXOWXUDOLVP DQGWKHDGRSWLRQRIWKH2IILFLDO/DQJXDJHV $FW WKH%XUHDXKDVJURZQHQRUPRXVO\,QLWVILIWLHWK\HDURIVHUYLFHLWFRPSULVHGRYHUWUDQVODWRUV LQWHUSUHWHUVWHUPLQRORJLVWVDQGVXSSRUWVWDII,WVHUYHGFOLHQWERGLHVIURP2WWDZDDQGD QXPEHURIUHJLRQDORIILFHVDQGKDGDQDQQXDOEXGJHWRIRYHUPLOOLRQ7KH%XUHDXDVDZKROHWUDQVODWHG DSSUR[LPDWHO\PLOOLRQZRUGVSHU\HDU,WVPXOWLOLQJXDOGHSDUWPHQWWUDQVODWHGDSSUR[LPDWHO\PLOOLRQ ZRUGVSHU\HDUIURPDQGLQWRVRPHODQJXDJHVDQGLWFRQWUDFWHGZRUNRXWWRDSRRORIIUHHODQFHUV 7KHFRPSHWHQFHRI&DQDGLDQWHUPLQRORJLVWVKDVEHHQUHFRJQL]HGWKURXJKRXWWKHZRUOG7KH\KDYHGHYLVHGD VRXQGPHWKRGRORJ\IRUFRQGXFWLQJWHUPLQRORJLFDOUHVHDUFKDQGKDYHSURYLGHGWUDQVODWRUVDQGODQJXDJH VSHFLDOLVWVZLWKWZRLQFUHDVLQJO\HIIHFWLYHFRPSXWHUL]HGWHUPLQRORJ\EDQNVVHH7(50%$1.6 7(50,80 ZDVGHYHORSHGE\WKH6HFUHWDU\RI6WDWHDQGFRQWDLQVRYHURQHDQGDKDOIPLOOLRQWHUPV7KHRWKHUEDQNWKH %74ZDVFUHDWHGE\WKH*RXYHUQHPHQWGX4XHEHF5REHUW'XEXF0DUFHO3DUp3LHUUH$XJHU1DGD.HUSDQ DQG*X\5RQGHDXKDYHDOOSOD\HGDYLWDOUROHLQWKHHVWDEOLVKPHQWRIWKHVHWHUPLQRORJ\EDQNVDQGLQWKH JURZWKRIWKHQHZSURIHVVLRQRIWHUPLQRORJLVW/LNHZLVH4XpEHF¶V2IILFHGHODODQJXHIUDQoDLVH2/) IRXQGHGLQKDVEHHQUHVSRQVLEOHIRUFRXQWOHVVLQLWLDWLYHVLQWKHILHOGRIODQJXDJHPDQDJHPHQWLQ4XHEHF DQGWKHIUDQFL]DWLRQRIEXVLQHVVDQGLQGXVWU\LQSDUWLFXODU7KH2IILFHKDVDOVRJDLQHGUHFRJQLWLRQIRUWKH QXPHURXVJORVVDULHVLWKDVSXEOLVKHG :KLOHGHYHORSLQJ7(50,80LQWKHVWKH7UDQVODWLRQ%XUHDXEHFDPHLQWHUHVWHGLQ0$&+,1( 75$16/$7,21,QWKHPDFKLQHWUDQVODWLRQUHVHDUFKJURXSDWWKH8QLYHUVLWpGH0RQWUHDO7$80 SUHVHQWHGWKH%XUHDXZLWKWKHSURWRW\SHRI0e7e2Œ6LQFHWKHQRYHUSHUFHQWRIDOO&DQDGLDQZHDWKHU UHSRUWVKDYHEHHQWUDQVODWHGE\FRPSXWHU &DQDGD¶V7UDQVODWLRQ%XUHDXLVQRWRQO\WKHODUJHVWHPSOR\HURIWUDQVODWRUVDQGLQWHUSUHWHUVLQWKHFRXQWU\LW DOVRSOD\VDYLWDOUROHLQLPSOHPHQWLQJWKHSROLF\RIRIILFLDOELOLQJXDOLVPDQGPXOWLFXOWXUDOLVP7KHDFWLYLWLHV RIWKH%XUHDXUHIOHFWEURDGHUQDWLRQDOREMHFWLYHVUHODWHGWRWKHSURPRWLRQRIRIILFLDOODQJXDJHV,WVKRXOGEH QRWHGKRZHYHUWKDWRYHUSHUFHQWRIDOOWUDQVODWLRQXQGHUWDNHQLQ&DQDGDLVIURP(QJOLVKLQWR)UHQFK ZKLFKUDLVHVWKHVHQVLWLYHLVVXHRIWKHUHODWLYHVWDWXVRI&DQDGD¶VWZRRIILFLDOODQJXDJHV 7UDQVODWLRQLQ&DQDGDLVWUXO\DQLQGXVWU\LWSURYLGHVDOLYLQJIRUPRUHWKDQSURIHVVLRQDOWUDQVODWRUVQRW WRPHQWLRQWKHKXQGUHGVRISDUWWLPHUVZKRWUDQVODWHLQRUGHUWRHDUQH[WUDLQFRPH0RVWODUJHRUJDQL]DWLRQVLQ WKHSULYDWHDQGSXEOLFVHFWRUVKDYHLQKRXVH



3DJH

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¶ DVVRFLDWLRQZDVIRXQGHGLQWKH&HUFOHGHV7UDGXFWHXUVGHV/LYUHV%OHXV WKHWRWDOZRXOGUHDFK %HWZHHQDQGDQHZDVVRFLDWLRQRIWUDQVODWRUVLQWHUSUHWHUVRUWHUPLQRORJLVWVZDVIRUPHGRQ DYHUDJHHYHU\WZR\HDUV 7KHWZRROGHVWDQGODUJHVWWUDQVODWRUV¶DVVRFLDWLRQVLQWKHFRXQWU\DUHWKH$VVRFLDWLRQRI7UDQVODWRUVDQG ,QWHUSUHWHUVRI2QWDULR$7,2 ZKLFKZDVHVWDEOLVKHGLQDQGKDVDSSUR[LPDWHO\PHPEHUVDQGWKH 2UGUHGHV7UDGXFWHXUVHW,QWHUSUqWHV$JUHHVGX4XHEHF27,$4 ZKLFKZDVIRXQGHGLQDQGKDVVRPH PHPEHUV27,$4ZDVLQLWLDOO\NQRZQDVWKH6RFLpWpGHV7UDGXFWHXUVGH0RQWUpDOEHFDPHWKH6RFLpWp GHV7UDGXFWHXUVGX4XHEHF674 LQDQGILQDOO\27,$4LQ0DUFK,QWKH2QWDULR3URYLQFLDO /HJLVODWXUHUHFRJQL]HGWUDQVODWRUVWHUPLQRORJLVWVFRQIHUHQFHLQWHUSUHWHUVDQGFRXUWLQWHUSUHWHUVFHUWLILHGE\ $7,2DQGDOORZHGWKHPWRXVHWKHUHVHUYHGWLWOHVFHUWLILHGWUDQVODWRUFHUWLILHGLQWHUSUHWHUDQGFHUWLILHG WHUPLQRORJLVWDIWHUWKHLUQDPHV7KLVZDVDUHDOEUHDNWKURXJKZKLFKZDVLQLWLDWHGE\$QGUp6pJXLQRW-XOLHQ 0DUTXLVDQG5LFKDUG)LGOHUPHPEHUVRIWKH$7,2([HFXWLYHDWWKHWLPH DQG-HDQ3RLULHU033DQGIRUPHU WUDQVODWRU $\HDUODWHUWKH&RUSRUDWLRQRI7UDQVODWRUVDQG,QWHUSUHWHUVRI1HZ%UXQVZLFN&7,1% UHFHLYHG RIILFLDOUHFRJQLWLRQ$QGILQDOO\DIWHUPRUHWKDQ\HDUVRIKDUGZRUNWKHIRUPHU6RFLpWpGHV7UDGXFWHXUVGX 4XHEHF674 ZDVDOVRUHFRJQL]HGDQGLQ0DUFKEHFDPHWKH27,$4DSURIHVVLRQDOFRUSRUDWLRQZLWKD UHVHUYHGWLWOHIRULWVPHPEHUV 7KHUHDUHWZRUHDVRQVIRUWKHSUROLIHUDWLRQRIWUDQVODWRUV¶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¶V$VRFLDFLyQGH 7UDGXFWRUHV3URIHVLRQDOHV$73 7KHIXQFWLRQRI&7,&LVWRFRRUGLQDWHWKHDFWLYLWLHVRIWKHPHPEHUVRFLHWLHV DQGWRVHWVWDQGDUGVIRUJRYHUQLQJWKHSUDFWLFHRIWUDQVODWLRQ)RUH[DPSOH&7,&LVUHVSRQVLEOHIRURUJDQL]LQJ WKHQDWLRQDOFHUWLILFDWLRQH[DPIRUWUDQVODWRUVFRQIHUHQFHLQWHUSUHWHUVFRXUWLQWHUSUHWHUVDQGWHUPLQRORJLVWV$W WKH),7:RUOG&RQJUHVVZKLFKZDVKHOGLQ%HOJUDGH-HDQ)UDQoRLV-RO\D&DQDGLDQZKRKDGVHUYHGDV SUHVLGHQWRI&7,&IURPWRZDVHOHFWHGSUHVLGHQWRIWKHZRUOGZLGHIHGHUDWLRQ 7KHVHFRQGUHDVRQIRUWKHSUROLIHUDWLRQRIWUDQVODWRUV¶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



3DJH

3XEOLFDWLRQV &DQDGDLVQRWRQO\WKHSURPLVHGODQGLQWHUPVRISURIHVVLRQDODVVRFLDWLRQVLWLVDOVRDFRXQWU\ZKHUH SXEOLFDWLRQVRQWUDQVODWLRQDERXQG6LQFHDQHZWUDQVODWLRQLQWHUSUHWLQJRUWHUPLQRORJ\SHULRGLFDOKDV EHHQODXQFKHGRQDYHUDJHHYHU\WZR\HDUV:HOONQRZQVFKRODUO\SHULRGLFDOVLQFOXGH0HWD ZKLFKLV SXEOLVKHGE\WKH3UHVVHVGHO¶8QLYHUVLWpGH0RQWUpDODQG775 WKHRIILFLDOMRXUQDORI&$766RPH H[DPSOHVRISURIHVVLRQDORUOLWHUDU\SHULRGLFDOVLQFOXGH7HUPLQRORJ\8SGDWH (OOLSVH WKH 2/)¶V7HUPLQRJUDPPH DQG27,$4¶VPDJD]LQH&LUFXLW ,Q&LUFXLWZDVDZDUGHGWKH ),7SUL]HIRUWKHEHVWSHULRGLFDOSXEOLVKHGE\D),7PHPEHUDVVRFLDWLRQ 6RMXVWDVWUDQVODWRUV¶DVVRFLDWLRQVKDYHEHFRPHLQFUHDVLQJO\VSHFLDOL]HGVRWRRKDYHWUDQVODWLRQSXEOLFDWLRQV 7KLVLVWUXHQRWRQO\RISHULRGLFDOVEXWDOVRRIERRNV8QWLOWKHVWUDQVODWRUVVXFKDV6\OYD&ODSLQ/pRQ *pULQ/pRQ/RUUDLQ3LHUUH'$9,$8/7DQG+HFWRU&DUERQQHDXSURGXFHGJORVVDULHVYRFDEXODULHVELOLQJXDO GLFWLRQDULHVDQGZRUNVRQXVDJH)URPRQZDUGVDGLIIHUHQWW\SHRIERRNDSSHDUHGRQWKHPDUNHWWKH WHUPLQRORJ\DQGWUDQVODWLRQWH[WERRN7KHWLWOHVWKDWIROORZDUHMXVWDIHZH[DPSOHVRIERRNVRIWKLVW\SH,UqQH GH%XLVVHUHW*XLGHGXWUDGXFWHXUUHYLVHGDQGUHSULQWHGLQDV'HX[ODQJXHVVL[LGLRPHV *HRIIUH\9LWDOH0LFKHO6SDUHUDQG5REHUW/DURVH*XLGHGHODWUDGXFWLRQDSSOLTXpH,,, 5REHUW'XEXF0DQXHOSUDWLTXHGHWHUPLQRORJLH -HDQ'HOLVOH/¶$QDO\VHGXGLVFRXUVFRPPHPpWKRGH GHWUDGXFWLRQ/D7UDGXFWLRQUDLVRQQpH *X\5RQGHDX,QWURGXFWLRQjODWHUPLQRORJLH &ODXGH%pGDUG/D7UDGXFWLRQWHFKQLTXH 5REHUW/DURVH7KHRULHVFRQWHPSRUDLQHVGHODWUDGXFWLRQ 7KHKLVWRU\RIWUDQVODWLRQLVDQRWKHUILHOGWKDWVHHPVWRDWWUDFW&DQDGLDQWUDQVODWLRQVFKRODUVDV HYLGHQFHGE\WKHIROORZLQJWLWOHV/RXLV*.HOO\7KH7UXH,QWHUSUHWHU 3DXO$+RUJXHOLQ$QWKRORJLH GHODPDQLqUHGHWUDGXLUH -HDQ'HOLVOH%ULGJLQJWKH/DQJXDJH6ROLWXGHV7UDQVODWLRQLQ &DQDGD±7KH/DQJXDJH$OFKHPLVWV $QQLH%ULVVHW6RFLRFULWLTXHGHODWUDGXFWLRQ 7KpkWUHHWDOWpULWpDX4XHEHF± 7KHSUHGRPLQDQFHRIERRNVRQWUDQVODWLRQSHGDJRJ\LQWKH DERYHOLVWLQGLFDWHVWKHLPSRUWDQFHWKDWWUDQVODWRUWUDLQLQJKDVDVVXPHGLQ&DQDGDVLQFHWKHODWHV 7UDLQLQJ 3URIHVVLRQDOWUDQVODWLRQKDVEHHQWDXJKWDWWKH8QLYHUVLW\RI2WWDZDVLQFHDW0F*LOO8QLYHUVLW\LQ 0RQWUHDOVLQFHDQGDWWKH8QLYHUVLWpGH0RQWUpDOVLQFH :LWKWKHSXEOLFDWLRQRIWKHLUUHQRZQHG6W\OLVWLTXHFRPSDUpHGXIUDQoDLVHWGHO¶DQJODLVLQ-HDQ '$5%(/1(7± DQG-HDQ3DXO9LQD\ PDGHDVXEVWDQWLDOFRQWULEXWLRQWRWUDQVODWLRQ SHGDJRJ\DQGKDYHORQJVLQFHDFKLHYHGLQWHUQDWLRQDOUHFRJQLWLRQIRUWKHLUZRUN7KH\ODLGWKHJURXQGZRUNIRU ZKDW9LQD\KLPVHOIFDOOHGWKHµ&DQDGLDQVFKRRORIWUDQVODWLRQ¶9LQD\ 7UDQVODWRUVDQG WHUPLQRORJLVWVEHORQJLQJWRWKLVVFKRROKDYHVKDUHGDFRPPRQWHQGHQF\WRIRFXVRQWKHFRQFUHWHUHDOLW\RI ODQJXDJHUDWKHUWKDQRQDEVWUDFWSULQFLSOHVDQGEHOLHYHWKDWµWKHSULPDU\JRDORIDQDGHTXDWHWUDQVODWLRQ WKHRU\LVWRIDFLOLWDWHWKHDFWRIWUDQVODWLQJ¶9LQD\WUDQVODWHG ,QWKHWUDQVODWLRQVHFWLRQRIWKHOLQJXLVWLFVGHSDUWPHQWDWWKH8QLYHUVLWpGH0RQWUpDOFKDLUHGDWWKHWLPH E\$QGUp&ODVRIIHUHGWKHILUVWIXOOWLPHWKUHH\HDUSURJUDPPHOHDGLQJWRDGHJUHHLQWUDQVODWLRQ6RRQDIWHU WKHGHJUHHEHFDPHNQRZQDVD%$6SHFLDOL]DWLRQVLPLODUWRDQ+RQRXU¶V'HJUHH 7UDQVODWLRQSHGDJRJ\ IORXULVKHGLQWKHV5LJKWDFURVVWKHFRXQWU\EXWHVSHFLDOO\LQ4XpEHFDQG2QWDULRXQLYHUVLWLHVEHJDQWR RIIHUWUDQVODWRUWUDLQLQJSURJUDPPHV%HWZHHQDQGDQHZWUDQVODWLRQSURJUDPPHRIRQHNLQGRU DQRWKHUZDVODXQFKHGHYHU\\HDUDQHZEDFKHORU¶VSURJUDPPHHYHU\WZR\HDUVDQGDQHZPDVWHU¶V SURJUDPPHHYHU\IRXU\HDUV7KHUHDUHQRZRYHUVWXGHQWVHQUROOHGRQWUDQVODWLRQSURJUDPPHVDFURVVWKH FRXQWU\ 7KHUDSLGJURZWKRIWUDQVODWRUWUDLQLQJVLQFHWKHODWHVLVUHIOHFWHGLQQXPHURXVSXEOLFDWLRQVRQWHDFKLQJ PHWKRGVDVZHOODVDVLJQLILFDQWQXPEHURIFRQIHUHQFHVGHYRWHGZKROO\RULQSDUWWRWKLVWRSLF2Q 1RYHPEHU&DQDGLDQWUDQVODWRUVKHOGWKHLUILUVWJHQHUDOPHHWLQJLQ0RQWUpDO6LQFH



3DJH

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µOLWHUDU\WUDQVODWLRQ¶WRUHIHUQRW RQO\WRQRYHOVSRHWU\HVVD\VDQGGUDPDEXWDOVRWRZRUNVLQWKHKXPDQLWLHVDQGVRFLDOVFLHQFHV /LWHUDU\WUDQVODWLRQDVDJHQUHPDGHLWVGpEXWDURXQGµ%HIRUHQRVLJQLILFDQWQRYHOZDV WUDQVODWHG¶6WUDWIRUGY 3ULRUWRWKDWWLPH&DQDGDKDGSURGXFHGQRPRUHWKDQRGGWLWOHVPDLQO\ DFFRXQWVRI)UHQFKH[SORUHUVDQGYR\DJHUV KDOIRIZKLFKZHUHWUDQVODWHGDQGSXEOLVKHGHOVHZKHUHLQ (QJODQG)UDQFHRUWKH8QLWHG6WDWHV7KHUHODWLYHVXFFHVVRIOLWHUDU\WUDQVODWLRQVLQFHWKHVFDQEH DWWULEXWHGWRWKHLQWURGXFWLRQRIWKH&DQDGD&RXQFLO¶V7UDQVODWLRQ*UDQWV3URJUDPPHLQWKHLQFUHDVHLQ WKHQXPEHURI4XHEHFDQG(QJOLVK&DQDGLDQSXEOLVKLQJKRXVHVDQGWKHIRXQGDWLRQLQRIWKH$VVRFLDWLRQ RI/LWHUDU\7UDQVODWRUVZKLFKJDYHOLWHUDU\WUDQVODWRUVZKDW3KLOLS6WUDWIRUGFDOOHGDµFROOHFWLYHVHQVHRI LGHQWLW\¶YLLL )HZWUDQVODWRUVDUHDEOHWRPDNHDOLYLQJRXWRIOLWHUDU\WUDQVODWLRQDORQHHYHQWRGD\ 0RVWDUHDFDGHPLFVFLYLOVHUYDQWVMRXUQDOLVWVVDODULHGWUDQVODWRUVZLWKLQFRUSRUDWLRQVRUIUHHODQFHUV2QH H[FHSWLRQZRUWK\RIPHQWLRQLV6KHLOD)LVFKPDQ ZKRKDVWUDQVODWHGRYHUERRNVLQWR(QJOLVKRYHU WKHFRXUVHRI\HDUV7KHVHLQFOXGHGZRUNVE\VRPHRIWKHEHVWNQRZQ4XHEHFDXWKRUVVXFKDV$QQH +pEHUW0DULH&ODLUH%ODLV0LFKHO7UHPEOD\-DFTXHV3RXOLQ9LFWRU/pY\%HDXOLHX


3DJH

&KDUORWWH0HODQoRQ-HDQ$QWRQLQ%LOODUG$UOHWWH)UDQFLqUHDQG.DWK\0H]HL 2QO\WZR(QJOLVK&DQDGLDQSOD\VZHUHWUDQVODWHGSULRUWRDQGYHU\IHZKDYHEHHQWUDQVODWHGVLQFHWKHQ 7KLVFDQEHH[SODLQHGE\WKHDFWLYLW\RI4XHEHFSOD\ZULJKWVZKRVHZRUNVDUHSURPSWO\WUDQVODWHGLQWR (QJOLVKDQGDOVRE\WKHSUHIHUHQFHZLWKLQ4XHEHFWKHDWUHFLUFOHVIRU$PHULFDQ%ULWLVK5XVVLDQRU,WDOLDQ SOD\V,QIOXHQFHGE\WKHQHZVW\OHRIGUDPDLQWURGXFHGE\0LFKHO7UHPEOD\LQJURZLQJQDWLRQDOLVW VHQWLPHQWDQGWKHHQKDQFHGVWDWXVRIDW\SLFDOO\4XpEHFRLVODQJXDJHWUDQVODWRUVZKRDGDSWZRUNVIRUWKH WKHDWUHEHJDQWRQDWXUDOL]HIRUHLJQSOD\V7KHFKDUDFWHUVRI6KDNHVSHDUH&KHNKRY2¶1HLOO/RUFD%UHFKWRU *ROGRQLZHUHPDGHWRVSHDN4Xp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pRUHW0DGHOHLQH*DJQRQDQG-RYHWWH 0DUFKHVVDXOWDUHWUDQVODWHGE\WKHLU(QJOLVK&DQDGLDQFRXQWHUSDUWV6XVDQQHGH/RWELQLqUH+DUZRRG %DUEDUD*RGDUG.DWK\0H]HL0DUOHQH:LOGHPDQ)LRQD6WUDFKDQ
)XUWKHUUHDGLQJ %ULVVHW'HOLVOH(OOLSVH(UDVPXV)DUG\,QXNWLWXW/D%RVVLqUH /RWELQLqUH+DUZRRG0F/HDQ0HWD6KLSOH\6LPRQ6WUDWIRUG7R\H

-($1'(/,6/(

7UDQVODWHGIURP)UHQFKE\6DUDK&/RWW

%LRJUDSKLHV '$5%(/1(7-HDQ/± %RUQLQ3DULVDQGHGXFDWHGDWWKH/\FpH&DUQRWDQGWKH6RUERQQH 'DUEHOQHWEHJDQKLVDFDGHPLFFDUHHULQ%ULWDLQDVDUHDGHULQ(QJOLVKDWWKH



3DJH

XQLYHUVLWLHVRI:DOHV(GLQEXUJKDQG0DQFKHVWHU,QKHZHQWWR$PHULFDZKHUHKHEHFDPHDQLQVWUXFWRU LQ)UHQFKDW+DUYDUG8QLYHUVLW\± ,QKHPRYHGWR&DQDGDZKHUHKHZDVWRVSHQGWKHUHVWRIKLV OLIHDQGWRGHYHORSDQLQWHUQDWLRQDOUHSXWDWLRQDVDWUDQVODWLRQVFKRODU+HWDXJKWILUVWDW0F*LOO8QLYHUVLW\ ± ZKHUHKHVHWXSDWKUHH\HDUSURJUDPPHRIQLJKWFODVVHVLQWUDQVODWLRQWKHQDW%RZGRLQ&ROOHJH ± DQGILQDOO\DW/DYDO8QLYHUVLW\± ZKHUHKHFRQWLQXHGDV3URIHVVRU(PHULWXVDIWHUKLV UHWLUHPHQW'DUEHOQHWLVEHVWNQRZQIRUKLVVHPLQDOZRUNRQWUDQVODWLRQSHGDJRJ\6W\OLVWLTXHFRPSDUpHGX IUDQoDLVHWGHO¶DQJODLVZKLFKKHFRDXWKRUHGZLWK-HDQ3DXO9LQD\DQGSXEOLVKHGLQ '$9,$8/73LHUUH± &DQDGLDQWUDQVODWRUMRXUQDOLVWVFKRODUDQGDSLRQHHULQWKHILHOGRI WUDQVODWRUWUDLQLQJ:KLOHZRUNLQJDVDWUDQVODWRUIRUSDUOLDPHQWKHSURSRVHGWRWKHUHFWRURIWKH8QLYHUVLW\RI 2WWDZDWKDWDFRXUVHLQSURIHVVLRQDOWUDQVODWLRQVKRXOGEHRIIHUHGKHWKHQSURFHHGHGWRWHDFKWKDWYHU\FRXUVH IRU\HDUV$QH[SHUWWUDQVODWRUDQG6XSHULQWHQGHQWRIWKH7UDQVODWLRQ%XUHDXIURPWR'DYLDXOW DOVRSURGXFHGQXPHURXVSXEOLFDWLRQVRQWUDQVODWLRQKLVWRU\DQGOH[LFRJUDSK\IRUH[DPSOH/DQJDJHHW WUDGXFWLRQ '25,21(XJqQH3KLOLSSH± &DQDGLDQODZ\HUWUDQVODWRUDQGVFKRODU$SSRLQWHGWUDQVODWRULQWKH $VVHPEO\RIWKH3URYLQFHRI&DQDGDLQ'RULRQZDVFDOOHGXSRQWRKHDGLWV)UHQFKWUDQVODWRUV¶EXUHDXLQ DSRVWWKDWKHKHOGVXEVHTXHQWO\ZLWKWKH+RXVHRI&RPPRQVLQ2WWDZDXQWLO+LVFRQWHPSRUDULHV VSRNHKLJKO\RIKLVNQRZOHGJHRIFODVVLFDOODQJXDJHVDVZHOODVRI(QJOLVK)UHQFKDQGVRPH,QGLDQ ODQJXDJHV+HLVEHOLHYHGWRKDYHLPSURYHGWKHVW\OLVWLFTXDOLW\RIOHJLVODWLRQWUDQVODWHGLQWR)UHQFK (9$16-DPHV±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µWKHPDQ ZKRPDGHELUFKEDUNWDON¶EHFDXVHKHXVHGELUFKEDUNLQVWHDGRISDSHUDQGWUDQVFULEHGWKHFKDUDFWHUVRIKLV V\OODELFVFULSWRQLWZLWKVRRW3URWHVWDQWDQG5RPDQ&DWKROLFPLVVLRQDULHVDOLNHDGRSWHGKLVV\OODELFV\VWHPWR KHOSWKHPFDUU\RXWWKHLUHYDQJHOLFDOZRUNZLWKWKH,QGLDQV(YDQVOHIWEHKLQGQXPHURXVWUDQVODWLRQVRI UHOLJLRXVWH[WVZKLFKKHKDGSULQWHGKLPVHOIRQDPDNHVKLIWSUHVV,Q\HDUVDIWHUKLVGHDWKWKH%ULWLVK DQG)RUHLJQ%LEOH6RFLHW\LQ/RQGRQSURGXFHGWKHHQWLUH%LEOHLQ&UHHV\OODELFV (YDQV¶V\OODELFV\VWHPZDVODWHUDGDSWHGWR,QXNWLWXWE\WZRPLVVLRQDULHV-RKQ+RUGHQDQG($:DWNLQV 7KHLUHIIRUWVHQDEOHG(GPXQG3HFNWRWUDQVODWHPDQ\ELEOLFDOZRUNVLQWRV\OODELFVDWDVNKHEHJDQLQ +DUSHU (5$60863HWHU± $QDWLYHRI5HG5LYHU0DQLWRED3HWHU(UDVPXVZDVWKHVRQRID'DQLVK PDQDQGD0HWLVZRPDQDQGDOHJHQGDU\ILJXUHLQWKH&DQDGLDQ:HVW2YHUWKHFRXUVHRIKLVORQJOLIHKH VHUYHGDVLQWHUSUHWHUWUDQVODWRUJXLGHH[SORUHUPDSSHU¶VDVVLVWDQWSURVSHFWRUIDUPHUIXUWUDGHUJRYHUQPHQW HPSOR\HHDQGWHDFKHU+HKHOSHGEULQJSHDFHDQG&KULVWLDQLW\WRQXPHURXV,QGLDQWULEHVLQWHUSUHWHGKXQGUHGV RIVHUPRQVDQGWUDQVODWHGORQJH[FHUSWVIURPWKH%LEOHDQGIURPSUD\HUERRNVLQWR&UHH+HWUDQVFULEHG&UHH XVLQJWKH/DWLQDOSKDEHWKHPXVWKDYHEHHQXQDZDUHRIWKHV\OODELFZULWLQJIRUPWKDW-DPHV(9$16KDG GHYHORSHG /LNH-HUU\32776DQG&KDPSODLQ¶VLQWHUSUHWHUVKHVSHQWVHYHUDO\HDUVDVDUHVLGHQWLQWHUSUHWHU,Q DGGLWLRQWR(QJOLVK(UDVPXVVSRNH&UHH2MLEZD\DQG



3DJH

%ODFNIRRWKHFRXOGHYHQUHDG*UHHN7KURXJKKLVRZQSHUVRQDOHIIRUWVQXPHURXVWUHDWLHVZHUHVLJQHG LQFOXGLQJDZHOONQRZQWUHDW\ZKLFKZDVQHJRWLDWHGLQE\WKHOLHXWHQDQWJRYHUQRURI0DQLWREDDQGWKH 1RUWKZHVW7HUULWRULHV$OH[DQGHU0RUULV&KLHI$KWXNDNXS6WDU%ODQNHW WROGWKHPHPEHUVRIKLV%DQG &RXQFLOµ3HWHU(UDVPXVLVOHDUQHGLQWKHODQJXDJHWKH*RYHUQRUVSHDNV>«@+HLVKHUHWRRSHQRXUH\HVDQG HDUVWRWKHZRUGVWKDW\RXDQG,FDQQRWXQGHUVWDQG¶(UDVPXV :KHQWKHQHJRWLDWLRQVZHUH FRPSOHWHGWKHOLHXWHQDQWJRYHUQRUWROG(UDVPXVµ
&KLQHVHWUDGLWLRQ &KLQHVHD6LQR7LEHWDQODQJXDJHLVDQRIILFLDOODQJXDJHRIWKH8QLWHG1DWLRQVDQGLVVSRNHQE\PRUHSHRSOH WKDQDQ\RWKHUODQJXDJHLQWKHZRUOG,WLVWKHRIILFLDOODQJXDJHRIWKH3HRSOH¶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



3DJH

KLVWRULFDOZRUNVVXFKDVWKHILUVWFHQWXU\%&5HFRUGVRIWKH*UDQG+LVWRULDQFRQWDLQPDQ\UHIHUHQFHVWR WUDQVODWLRQLQWKHFRQWH[WRIGLSORPDF\DQGFRPPHUFH$VHDUO\DVWKH=KRX'\QDVW\LQWKHQLQWKFHQWXU\%& WKHUHZHUHVSHFLDOJRYHUQPHQWRIILFLDOVLQFKDUJHRILQWHUSUHWLQJDQGWUDQVODWLRQZRUNWKHLUWLWOHVYDULHG DFFRUGLQJWRWKHJURXSRIODQJXDJHVWKH\FRYHUHG$QLQWHJUDOSDUWRISURWRFROWKH\ZHUHDOZD\VSUHVHQWDW PHHWLQJVZLWKIRUHLJQHPLVVDULHV7KHWHUPIRUDJRYHUQPHQWLQWHUSUHWHURIWKLVSHULRGZDVVKHUHQOLWHUDOO\ µWRQJXHVPDQ¶7KHFXUUHQW&KLQHVHZRUGIRUµWUDQVODWLRQ¶\LIRUPVWKHEDVLVIRUWKHRIILFLDOWLWOHDGRSWHG VLQFHWKH+DQ'\QDVW\%&$' \LJXDQRU\LVKLOLWHUDOO\µWUDQVODWLRQRIILFLDO¶+LVWRULFDOUHFRUGVDOVR VKRZWKDWGXULQJWKH+DQ'\QDVW\WUDQVODWRUVLQWHUSUHWHUV\L]KDQJ ZHUHURXWLQHO\HPSOR\HGE\PHUFKDQWVRQ WKHLUORQJWULSVWR6RXWK(DVW$VLDDQG,QGLDWKH\ZHUHDOVRSUHVHQWLQWKHPHUFKDQWFDUDYDQVERXQGIRUVWDWHV VXFKDV%DFWULDWRWKHQRUWKZHVWRI&KLQD'XULQJWKH7DQJ'\QDVW\± DSHULRGLQZKLFKFXOWXUDO H[FKDQJHVEHWZHHQ&KLQDDQGKHUQHLJKERXULQJVWDWHVUHDFKHGQHZKHLJKWVDFRQVLGHUDEOHQXPEHURI IRUHLJQHUVZKROLYHGLQ&KLQDZHUHHPSOR\HGDVJRYHUQPHQWLQWHUSUHWHUVDQGZHUHDOORZHGWRDFFRPSDQ\ &KLQHVHRIILFLDOVRQGLSORPDWLFPLVVLRQV ,QWKH\HDUVIURPWKH=KRX'\QDVW\WRWKHSUHVHQWWKHEUHDGDQGEXWWHURIWKH&KLQHVHWUDQVODWRU¶VZRUN KDVDOZD\VEHHQLQJRYHUQPHQWDQGFRPPHUFH7KHUHDUHH[WDQWSRHWU\WUDQVODWLRQVGDWLQJEDFNWRDWOHDVWWKH IRXUWKFHQWXU\%&EXWWKHVHHDUO\OLWHUDU\WUDQVODWLRQVZHUHPRVWO\UHFRUGHGDVSDUWRIWKHH[SHULHQFHRI YDULRXVGLSORPDWLFPLVVLRQV7KHUHKDYHEHHQSHULRGVKRZHYHUZKHQWUDQVODWLRQSOD\HGDFUXFLDOUROHLQ &KLQD¶VFXOWXUDODQGVRFLDOGHYHORSPHQWJRLQJIDUEH\RQGWKHFRQILQHVRIJRYHUQPHQWDQGFRPPHUFH7KH PRVWVLJQLILFDQWRIWKHVHSHULRGVUHODWHWRWKHWUDQVODWLRQRI%XGGKLVWVFULSWXUHVWKHZRUNRI&KULVWLDQ PLVVLRQDULHVWKHSROLWLFDODQGFXOWXUDOHYHQWVOHDGLQJWRWKH0D\)RXUWK0RYHPHQWDQGWKHHPHUJHQFHRIWKH 3HRSOH¶V5HSXEOLFRI&KLQDDQGVXEVHTXHQWFRQWDFWZLWK(XURSHDQFRXQWULHV%XWWUDQVODWLRQDQGLQWHUSUHWLQJ KDYHDOVRKDGDUROHWRSOD\LQ&KLQDRXWVLGHRIVXFKSHDNSHULRGVDQGDSDUWIURPWKHPDMRUODQJXDJHV LQYROYHGLQWKRVHSHULRGVDVLJQLILFDQWQXPEHURI&KLQHVHERRNVKDYHEHHQWUDQVODWHGIURPWKHHOHYHQWK FHQWXU\RQZDUGVLQWRVXFKODQJXDJHVDV0RQJROLDQ:HVWHUQ;LD0DQFKXULDQDQG-DSDQHVH

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± -LQ'\QDVW\DQGWKH1RUWKHUQDQG 6RXWKHUQ'\QDVWLHVF± DQG6XL'\QDVW\7DQJ'\QDVW\DQG1RUWKHUQ6RQJ'\QDVW\F±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¶VPRWKHUWRQJXH 7KHHDUO\WUDQVODWLRQPHWKRGUHIOHFWHGWKHVWUHQJWKDQGZHDNQHVVRIWKHVHWUDQVODWRUVDVZHOODVWKHHPSKDVLV SODFHGRQWKHRORJLFDO



3DJH

DFFXUDF\7UDQVODWLRQ)RUXPVRU\LFKDQJZHUHVHWXSZLWKDKLJKO\UHYHUHG%XGGKLVWPRQNDV&KLHI 7UDQVODWRU\L]KX 7KHIRUHLJQPRQN¶VWDVNZDVWKDWRIH[SODLQLQJLQGHWDLOWKHSUHFLVHPHDQLQJRIWKHWH[WV 8QGHUWKHIRUHLJQPRQNZHUHRQHRUPRUH,QWHUSUHWHUVGX\XRUFKXDQ\X FRQYHUVDQWZLWKWKHPRQN¶V ODQJXDJHWKHLUWDVNZDVWRLQWHUSUHWWKHPRQN¶VH[SOLFDWLRQLQWR&KLQHVH,QWKHDXGLHQFHZHUHVFRUHV VRPHWLPHVKXQGUHGVRI&KLQHVHPRQNVDQGOD\VFKRODUVZKRUHFRUGHGLQQRWHIRUPWKHIRUHLJQPRQN¶V H[SOLFDWLRQ7KH&KLQHVHWUDQVODWLRQZDVWKHQFRPSLOHGE\WKH5HFRUGHUELVKRX ²WKHSHUVRQUHVSRQVLEOHIRU ZULWLQJGRZQWKH,QWHUSUHWHU¶VZRUGVLQ&KLQHVH7KHSURFHVVLQYROYHGFRQVXOWLQJQRWMXVWWKH5HFRUGHU¶VRZQ QRWHVEXWDOVRQRWHVWDNHQE\RWKHUVLQWKHDXGLHQFH7KHWKUHHVWHSVRILQWHUSUHWLQJUHFRUGLQJDQGFKHFNLQJ ZHUHWKHEDVLVIRUDOO7UDQVODWLRQ)RUXPZRUN,WLVREYLRXVWKDWWKHIRUXPVZHUHQRWRQO\PHDQWWRSURGXFH %XGGKLVWWH[WVLQ&KLQHVHEXWZHUHDOVRDNLQGRILQWHQVLYHVHPLQDURQ%XGGKLVWVXWUDVDQGLWZDVQRWXQXVXDO IRUWKH&KLQHVHWH[WDQGDGHWDLOHGDQQRWDWLRQWREHSURGXFHGVLPXOWDQHRXVO\%HFDXVHRIWKHVWURQJ WKHRORJLFDOHPSKDVLVWKHIRUHLJQPRQN²GHVSLWHKLVODFNRINQRZOHGJHRIWKHWDUJHWODQJXDJH²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±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²QRUPDOO\QRPRUHWKDQWKUHHGR]HQPRQNVZHUHLQYROYHG7KLVLVWUXHRIDOOIRUXPVKHOGIURP WKHODWHVL[WKFHQWXU\RQZDUGVLQFOXGLQJWKRVHSUHVLGHGRYHUE\WKHPRVWSUROLILFPRQNWUDQVODWRULQ&KLQHVH KLVWRU\;8$1=DQJ$'±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



3DJH

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

0LVVLRQDULHVDQGWUDQVODWLRQLQ&KLQD 7KHVHFRQGZDYHRIWUDQVODWLRQDFWLYLWLHVZDVDOVRUHODWHGWRUHOLJLRXVDFWLYLWLHVLQSDUWLFXODUWKRVHRI-HVXLW PLVVLRQDULHVZKRDUULYHGLQ&KLQDLQWKHODWHVL[WHHQWKFHQWXU\7KH-HVXLWVQRWDEO\0DWWHR5,&&,± GHFLGHGWKDWWKHEHVWZD\WRVSUHDGWKHJRVSHOVZDVWRFXOWLYDWH&KLQD¶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± DQG-DFREXV5KR± IRUWKH0LQJJRYHUQPHQWZKLFKZDVLQWKHSURFHVVRI UHYDPSLQJWKH&KLQHVHFDOHQGDU7KLUGFROODERUDWLRQEHWZHHQPLVVLRQDULHVDQG&KLQHVHJRYHUQPHQWRIILFLDOV ZDVFRPPRQPDQ\ZRUNVZHUHFRWUDQVODWLRQV6RPH-HVXLWVHQMR\HGDSDUWLFXODUO\FORVHUHODWLRQVKLSZLWKD QXPEHURIFRQYHUWHG0LQJ'\QDVW\&KLQHVHRIILFLDOVVXFKDV;X*XDQJTL±


3DJH

WKHQHZFDOHQGDUZDVWKHPRVWSUROLILFWUDQVODWRULQWKLVFDWHJRU\ F *HRJUDSK\PRVWO\LQWKHIRUPRIDQQRWDWHGPDSV,QGLYLGXDOZRUNVRQPLQHUDOUHVRXUFHVDQGPLQLQJ ZHUHDOVRWUDQVODWHGQRWDEO\$JULFROD¶V'HUHPHWDOOLFD G 3K\VLFVLQFOXGLQJVXFKWRSLFVDVK\GUDXOLFPHFKDQLFDODQGFLYLOHQJLQHHULQJ7KHEHVWNQRZQWLWOHLV 4LTLWXVKRX,OOXVWUDWHG%RRNRI0LUDFXORXV(TXLSPHQWV DQDPDOJDPDWLRQRIPDWHULDOVJOHDQHGIURP YDULRXV(XURSHDQSXEOLFDWLRQV H 5HOLJLRQWKHILUVWH[WDQWWUDQVODWLRQRIVHFWLRQVRIWKH%LEOHZDVE\-HDQ%DVVHWW± 7KHILUVW WUDQVODWLRQRIWKH2OGDQG1HZ7HVWDPHQWVLQWRYHUQDFXODU0DQGDULQZDVGRQHE\WKH-HVXLW3/'H3RLURW ± 7KHUHZHUHDOVRVHYHUDOWUDQVODWLRQVRIWKH,PLWDWLR&KULVWLDVZHOODVWUDQVODWLRQVRI&DWKROLF FDWHFKLVPV $IWHUWKH3DSDOVXSSUHVVLRQRIWKH6RFLHW\RI-HVXVPDQ\-HVXLWVVWD\HGRQLQ&KLQD(YHQZKHQWKH JRYHUQPHQWWXUQHGDJDLQVWWKHPWKH\ZHUHSURWHFWHGE\RIILFLDOVDQG&KLQHVHFRQYHUWVDQGZHUHJHQHUDOO\ DEOHWRFRQWLQXHZLWKWKHLUWUDQVODWLRQDQGPLVVLRQDU\ZRUNDQXPEHURIWKHPFRQWLQXHGWRVHUYHWKH4LQJ JRYHUQPHQW-HDQ)UDQoRLV*HUELOORQ± DQG7KRPDV3HUHLUD± IRUH[DPSOHZHUH DSSRLQWHGVSHFLDO/DWLQLQWHUSUHWHUVWRDGLSORPDWLFPLVVLRQWR1HUFKLQVN5XVVLDLQ 7KH-HVXLWVDQGODWHURWKHUPLVVLRQDULHVGLGQRWHQJDJHLQRQHZD\WUDQVODWLRQEXWZHUHDOVRLQVWUXPHQWDOLQ EULQJLQJWKH&KLQHVHFODVVLFVDQGWKHUHIRUH&KLQHVHSKLORVRSK\WR(XURSH5LFFLWUDQVODWHGWKHµ)RXU %RRNV¶*UHDW/HDUQLQJ'RFWULQHRIWKH0HDQ&RQIXFLDQ$QDOHFWVDQG0HQFLXV LQWR/DWLQZKLOH1LFRODV 7ULJDXOW± WUDQVODWHGWKHµ)LYH&ODVVLFV¶%RRNRI6RQJV%RRNRI'RFXPHQWV%RRNRI&KDQJHV %RRNRI5LWHVDQG7KH6SULQJDQG$XWXPQ$QQDOV DOVRLQWR/DWLQ6RPHRIWKHWLWOHVLQWKHµ%RRNV¶DQG µ&ODVVLFV¶ZHUHODWHUUHWUDQVODWHGE\PLVVLRQDULHVDFWLYHLQWKH4LQJ'\QDVW\7KLVOHGWRKHLJKWHQHGLQWHUHVW LQ(XURSHLQDOOWKLQJV&KLQHVHSDUWLFXODUO\LQWKHVHYHQWHHQWKFHQWXU\

7KHHQGRIHPSLUH ,QWKHHDUO\QLQHWHHQWKFHQWXU\WKHWUDGLQJLQFXUVLRQVRIWKH(XURSHDQSRZHUVEDFNHGE\PLOLWDU\PLJKWJUHZ WRRLQVLVWHQWWREHLJQRUHGE\WKH3HNLQJJRYHUQPHQWDQG/LQ=H[X± ZDVGHVSDWFKHGWR&DQWRQLQ WRSXWWKHIRUHLJQHUVLQWKHLUSODFH,WZDVKLVLQVLJKWWKDWµLQRUGHUWRFRQWUROWKHIRUHLJQHUVZHKDYHWR PDVWHUWKHLUDUWV¶WKDWSURPSWHGWKHILUVWRIILFLDOWHDPRIWUDQVODWRUVIRXUPHQVFKRROHGDEURDG WRWDFNOHWKH (QJOLVKODQJXDJH7KH\WUDQVODWHGH[FHUSWVIURPWKHORFDOIRUHLJQSUHVVVXFKDVWKH&DQWRQ5HJLVWHUVWDUWHG DQG&DQWRQ3UHVVVWDUWHG DQGYDULRXV(QJOLVKSDPSKOHWVRQ&KLQHVHPDWWHUVDQGLQWHUQDWLRQDO ODZ7KHLUPDLQDFKLHYHPHQWZDV+DLJXRWX]KL*HRJUDSK\RIWKH0DULWLPH1DWLRQV SXEOLVKHGLQDQG EDVHGRQ0XUUD\¶V(QF\FORSDHGLDRI*HRJUDSK\ /LQ¶VPLVVLRQHYHQWXDOO\SURYHGDIDLOXUHDQGDIWHUDVHULHVRIPLOLWDU\GHIHDWVWKH0DQFKXUXOHUVDJUHHGWR IRXQGD&ROOHJHRI/DQJXDJHV7RQJZHQJXDQ LQ3HNLQJLQ6WXGHQWVILUVWDGPLWWHGLQIROORZHG DQHLJKW\HDUFRXUVHLQODQJXDJHV²LQLWLDOO\(QJOLVKWKHQ)UHQFK5XVVLDQDQG*HUPDQDQGQDWXUDODQGVRFLDO VFLHQFHV7KHLUSULPDU\UROHZDVLQWKHILHOGRIGLSORPDF\EXWWKH&ROOHJHDOVRWUDQVODWHGDQGSXEOLVKHGERRNV RQODZSROLWLFVDQGQDWXUDOVFLHQFHV7KHLUHIIRUWVLQWKHILHOGRIODZZHUHWKHPRVWVXEVWDQWLDOODZERRNV WUDQVODWHGLQFOXGHG:KHDWRQ¶V,QWHUQDWLRQDO/DZWKH&RGH1DSROHRQDQG%OXQWVFKOL¶V,QWHUQDWLRQDO/DZ ,QWKHVRXWKWKH-LDQJQDQ$UVHQDOVHWXSLWVRZQWUDQVODWLRQEXUHDXLQ6KDQJKDLLQ,WERWKFRPSOHPHQWHG DQGULYDOOHGWKH3HNLQJ7RQJZHQJXDQFRQFHQWUDWLQJRQWHFKQLFDOPDQXDOVEXWDOVRH[WHQGLQJLWVVFRSHWR HPEUDFHDEURDGVSHFWUXPRI:HVWHUQVFLHQFHV7KHEXUHDXZDVUHVSRQVLEOHIRU&KLQHVHWUDQVODWLRQVRI VWDQGDUG:HVWHUQZRUNVOLNH+HUVFKHO¶V2XWOLQHRI$VWRQRP\-''DQD¶V6\VWHPRI0LQHURORJ\ DQG &KDUOHV/\HOO¶V3ULQFLSOHVRI*HRORJ\ %RWKWKH3HNLQJDQG6KDQJKDLEXUHDXVHPSOR\HGIRUHLJQ H[SHUWVZKRKDGOHDUQHGVRPH&KLQHVHDQGVHYHUDORIWKHPEHFDPHNQRZQLQWKHLURZQFRXQWULHVDVµ&KLQD KDQGV¶7KHQRUPDOWUDQVODWLRQSURFHGXUHZDVIRUWKHIRUHLJQ



3DJH

H[SHUWVWRWUDQVODWHDQGH[SODLQYHUEDOO\WR&KLQHVHFROODERUDWRUVZKRWRRNWKHLUZRUGVGRZQDQGPDGHDGUDIW YHUVLRQ7KHLUPDQXVFULSWVZHUHWKHQSROLVKHGDQGLPSURYHGVW\OLVWLFDOO\E\RIWHQPRQROLQJXDO&KLQHVH VFKRODUVZLWKRXWIXUWKHUUHIHUHQFHWRWKHRULJLQDO$QXPEHURI&KLQHVHWUDQVODWRUVHPSOR\HGE\WKHEXUHDXV VXFKDV/L6KDQODQ±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µQRXULVKLQJJDV¶IRUR[\JHQRUµOLJKWJDV¶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¶VODFNRIH[SHUWLVHDQGKLV&KLQHVHFROODERUDWRU¶VODFNRIXQGHUVWDQGLQJ DQGWKHPDMRULW\RIWKHPZHUHGLVPLVVHGE\0D-LDQ]KRQJ± WKHHPLQHQW&KLQHVHOLQJXLVWDV XQUHDGDEOHRUXQLQWHOOLJLEOH 7KHWKLUGIRUFHLQWKHWUDQVODWLRQRI:HVWHUQZRUNVZDVQHLWKHURIILFLDOQRUIRUHLJQ,WHPHUJHGLQWKHV DQGZDVFRPSRVHGRIQDWLYHLQWHOOHFWXDOVDQGVSHDUKHDGHGE\SROLWLFDOUHIRUPLVWVWKHEHVWNQRZQRIWKHP EHLQJ.DQJ


3DJH

WKHHGXFDWHGZRUOGE\VWRUPDQGEHFDXVH


3DJH

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

7KHWZHQWLHWKFHQWXU\ 7KH0D\)RXUWK0RYHPHQWZLWKLWVDJHQGDRIµLQVWDOOLQJ¶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¶VWRSWUDQVODWRUVZHUHUHFUXLWHGDQG XQGHUWKHJHQHUDOHGLWRUVKLSRI=KHQJ=KHQGXR± LQ6KDQJKDLWKH/LEUDU\SXEOLVKHGLQ± RYHUFODVVLFVIURPDGR]HQGLIIHUHQWFRXQWULHV,WLVLPSRUWDQWWRVWUHVVWKDWPRVWRIWKHEHVWFUHDWLYHZULWHUV RIWKHDJHOHQWWKHLUVNLOOVWRWUDQVODWLRQDIDFWWKDWPDGHIRUDWOHDVWYHU\UHDGDEOHSURGXFWV ,QWKHVWKHGHEDWHRYHUWUDQVODWLRQSULQFLSOHVWKDWKDGEHJXQLQWKHVUXPEOHGRQWKHSROHVRI FRQWHQWLRQDVHYHUEHLQJµILGHOLW\¶YVµOLFHQFH¶,QDGGLWLRQWRWKHVWDQGDUGDUJXPHQWLQVXSSRUWRIILGHOLW\ QDPHO\WKDWWKHQDWLYHIHDWXUHVRIWKHVRXUFHWH[WRXJKWWREHUHWDLQHGWKHUHQRZHPHUJHGWKHDGGLWLRQDOWDUJHW RULHQWHGREMHFWLYHRIDSSURSULDWLQJIURP(XURSHDQODQJXDJHVWKURXJKWUDQVODWLRQZRUGLQJDQGJUDPPDWLFDO GHYLFHVWKDWWKH&KLQHVHODQJXDJHZDVVDLGWREHLQQHHGRI7KLVYLHZZDVIDYRXUHGE\OHIWLVWVZKRKDGWKH MDUJRQRI6RYLHWLGHRORJXHVWRFRQWHQGZLWKZLWKLQWHOOLJHQWUHSKUDVLQJEHLQJIRUPLGDEO\GLIILFXOWWKH\ZHUH² QRWVXUSULVLQJO\²LQFOLQHGWRPLUURUWKHRULJLQDOZRUGLQJ7KHPDMRULW\KRZHYHUJDYHPRUHZHLJKWWRWKH DHVWKHWLFVRIWKH&KLQHVHODQJXDJH$PRQJWKRVHZKRDUJXHGWKHFDVHIRUDHVWKHWLFOLFHQFHZDV/LQ<XWDQJ ± ZKRWUDQVODWHGPRUHIURP&KLQHVHLQWR(QJOLVKWKDQWKHRWKHUZD\URXQG7KHUHKDGEHHQDIHZ SLRQHHUVRI&KLQHVH(QJOLVKWUDQVODWLRQDURXQGWKHWXUQRIWKH



3DJH

FHQWXU\OLNH6X0DQVKX± DQG*X+RQJPLQJ± EXWLWZDVQRWXQWLOWKHVWKDWWKH WUDIILFLQWKLVGLUHFWLRQZDVRIDQ\FRQVHTXHQFH 7KHZDUZLWK-DSDQZKLFKEURNHRXWLQGLVUXSWHGODUJHSURMHFWVOLNHWKH:RUOG/LEUDU\EXWLQGLYLGXDO HIIRUWVZHUHVWLOOYHU\IUXLWIXO0DQ\QLQHWHHQWKFHQWXU\(XURSHDQQRYHOVZHUHDEO\WUDQVODWHGRUUHWUDQVODWHG EXWSHUKDSVWKHQREOHVWHIIRUWRIWKHZDUSHULRGZDVWKDWRI=+86KHQJKDR± ZKROLWHUDOO\JDYHKLV OLIHWRWUDQVODWLQJWKHFRPSOHWHSOD\VRI6KDNHVSHDUH+HILQLVKHGSOD\VEHIRUHKHGLHGVWDUWLQJZLWK7KH 7HPSHVWLQ=KX¶VWUDQVODWLRQVZHUHLQSURVHKLVJRDOZDVLQWHOOLJLELOLW\ZLWKRXWVLPSOLILFDWLRQDQG DERYHDOOVSHDNDELOLW\+LV&RPSOHWH3OD\VZDVSXEOLVKHGDVDVHWLQDQGUHLVVXHGZLWKVXSSOHPHQWVDV 7KH&RPSOHWH:RUNVRI6KDNHVSHDUHLQ)ROORZLQJLQKLVIRRWVWHSV/,$1*6KLTLX± DOVR WUDQVODWHGWKHFRPSOHWHZRUNVRI6KDNHVSHDUHVLQJOHKDQGHGLQ7DLZDQLQDPRUHVFKRODUO\YHLQ$QRWKHU GHGLFDWHGWUDQVODWRUZDV)X/HL± EHVWNQRZQIRUKLVWUDQVODWLRQVRI%DO]DFLQWRULFKDQGYLEUDQW &KLQHVH 8QGHUWKH3HRSOH¶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


3DJH

WUDQVODWLRQLQWHUSUHWLQJKDVQRW\HWHPHUJHGDVDQDFDGHPLFGLVFLSOLQHLQ&KLQDWKRXJKVRPHWUDQVODWLRQ FRXUVHVDUHRIIHUHGDVSDUWRIIRUHLJQODQJXDJHGHJUHHV,Q+RQJ.RQJWKHWUDLQLQJRIVLPXOWDQHRXV LQWHUSUHWHUVEHJDQLQWKHPLGVWRFDWHUIRUWKHJRYHUQPHQW¶VELOLQJXDOFRQIHUHQFHQHHGV7UDLQLQJLVDJDLQ LQVHUYLFHDQGSURYLGHGE\WKHJRYHUQPHQW+RZHYHUVRPHEDVLFWUDLQLQJLQFRQIHUHQFHLQWHUSUHWLQJKDVEHHQ PDGHDYDLODEOHWRXQLYHUVLW\VWXGHQWVLQ+RQJ.RQJVLQFHWKHPLGV 7KHILUVWXQLYHUVLW\GHJUHHFRXUVHLQWUDQVODWLRQRIIHUHGE\D&KLQHVHFRPPXQLW\ZDVWKH%$LQ7UDQVODWLRQ VWDUWHGLQE\WKH8QLYHUVLW\RI+RQJ.RQJ%\XQGHUJUDGXDWHDQGSRVWJUDGXDWHGHJUHHVLQ WUDQVODWLRQZHUHEHLQJRIIHUHGE\ILYHXQLYHUVLWLHVLQ+RQJ.RQJDQGDQ0$FRXUVHLQ7UDQVODWLRQ ,QWHUSUHWLQJKDVEHHQUXQQLQJDW*,7,6)XMHQ8QLYHUVLW\LQ7DLZDQVLQFH

)XUWKHUUHDGLQJ &DR6KLEDQJ&KHQJ<XJDQJ+XQJ-LDQJ:HKDQ0D=X\L&KDQDQG3ROODUG ;LRQJ<XH]KL

(9$+81*$1''$9,'32//$5'

%LRJUDSKLHV .85$0$-,9$± .XUDPDMLYDEHFDPHDPRQNDWWKHDJHRIVHYHQZKHQKLVPRWKHUDQ,QGLDQ SULQFHVVGHFLGHGWRWDNHWKHPRQDVWLFYRZ$WKHZDVDUHQRZQHGWHDFKHURIWKH/DUJHU9HKLFOHVFKRRORI %XGGKLVP$VDUHVXOWRIKLVIDPH.XUDPDMLYDZDVFDSWXUHGE\WKH&KLQHVHDUP\ZKLFKLQYDGHGKLVFRXQWU\ DQGKHOHDUQHG&KLQHVHDVDFDSWLYH+HZDVDVVLJQHGWKHWDVNRIWUDQVODWLQJ%XGGKLVWVXWUDVDVVLVWHGE\VRPH PRQNVDQGSURGXFHGRYHUYROXPHV /(**(-DPHV± $6FRWWLVKPLVVLRQDU\/HJJHZDVVHQWWRKHDGWKH$QJOR&KLQHVH&ROOHJHLQ 0DODFFDLQDQGPRYHGWR+RQJ.RQJZLWKWKHFROOHJHLQ'XULQJKLV\HDUVWD\LQ+RQJ.RQJ KHXQGHUWRRNWKHWUDQVODWLRQRIWKH&KLQHVHFDQRQLFDOZRUNV7KH)RXU%RRNVDQG7KH)LYH&ODVVLFVZLWKWKH KHOSRIWKH&KLQHVHVFKRODU:DQJ7DR7KHWUDQVODWLRQVZHUHSXEOLVKHGLQYROXPHVXQGHUWKHFROOHFWLYHWLWOH 7KH&KLQHVH&ODVVLFVLQWKHV/HJJHUHWXUQHGWR%ULWDLQLQZKHUHKHEHFDPH3URIHVVRURI&KLQHVH DW2[IRUG8QLYHUVLW\ /,$1*6KLTLX±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± %RUQWRDSRRUIDUPLQJIDPLO\LQWKH)XMLDQSURYLQFHLQVRXWKHUQ&KLQDDQGHGXFDWHG E\ORFDOWXWRUV/LQ6KXSDVVHGWKHVHFRQGGHJUHHRIWKH,PSHULDOFLYLOH[DPLQDWLRQVEXWQHYHUPDQDJHGWR PDNHWKHWKLUGGHJUHHDQGZDVWKXVGHQLHGDQRIILFLDOFDUHHU/LNHVRPDQ\\RXQJPHQRIWKHWLPHKHZDV GHHSO\FRQFHUQHGDERXWWKHIRUHLJQHQFURDFKPHQWRQ&KLQDDQGWZLFHSHWLWLRQHGKLJKUDQNLQJRIILFLDOVRQWKH PDWWHU,QDWWKHVXJJHVWLRQRI:DQJ6KRXFKDQJ/LQVWDUWHGKLVILUVWWUDQVODWLRQRID:HVWHUQQRYHOLQWR &KLQHVH6LQFH/LQGLGQRWNQRZDQ\IRUHLJQODQJXDJHV:DQJZKRNQHZ)UHQFKZDVKLVFROODERUDWRU7Kơ UHVXOWDQWWUDQVODWLRQRI/D'DPHDX[FDPpOLDVUHQGHUHGLQHOHJDQWFODVVLFDO&KLQHVHZDVDQRYHUQLJKWVXFFHVV DQGPDUNHGWKHEHJLQQLQJRI/LQ¶V\HDUFDUHHUDV&KLQD¶VPRVWSUROLILF²DQGDUJXDEO\PRVWLQIOXHQWLDO² OLWHUDU\WUDQVODWRURIIRUHLJQOLWHUDWXUHV/LQFRWUDQVODWHGZLWKRYHUDGR]HQFROODERUDWRUVWKHPRVWQRWDEOH DPRQJWKHPEHLQJ:DQJ6KRXFKDQJ)UHQFK :HL



3DJH

(QJOLVKLQFOXGLQJILYH'LFNHQVLDQQRYHOV DQG&KHQ-LDOLQ(QJOLVK /LQ¶VWUDQVODWLRQVUDQJHGIURPVKRUW VWRULHVWRIXOOOHQJWKQRYHOVIURPURPDQFHVWRFODVVLFVRI(QJOLVK)UHQFKDQG5XVVLDQOLWHUDWXUH+LVNQRZQ WUDQVODWLRQVDPRXQWWRQHDUO\0DQ\RIWKHJUHDWZULWHUVRIHDUO\WZHQWLHWKFHQWXU\&KLQDZHUHLQWURGXFHG WRIRUHLJQOLWHUDWXUHVWKURXJKWKHZRUNVRI/LQ6KX 5,&&,0DWWHR± 5LFFLHQWHUHGKLVQRYLWLDWHLQLQ5RPHDQGZDVRUGDLQHGLQLQ*RD ,QKHZDVVHQWWR0DFDRZKHUHKHOHDUQHG&KLQHVHDQGD\HDUODWHUZLWKWKHKHOSRIORFDORIILFLDOVLQ &DQWRQKHVHWXSWKHILUVWPLVVLRQVWDWLRQLQPDLQODQG&KLQD5LFFLLQLWLDOO\DGRSWHGWKHDWWLUHRI%XGGKLVW PRQNVRQO\WRH[FKDQJHLWIRUWKDWRI&RQIXFLDQVFKRODUVRQFHKHGLVFRYHUHGWKHORZVRFLDOVWDQGLQJRIWKH IRUPHU7KH&KLQHVHWHUPVLQVWLJDWHGE\5LFFLIRUWKH&DWKROLFSULHVWGXULQJWKLVSHULRG²VKHQIXDQGVLGXR² DUHVWLOOLQXVHWRGD\,WZDV5LFFL¶VDPELWLRQWRSUHDFKLQWKH&KLQHVHFDSLWDO3HNLQJDQGLQKLVVHFRQG DWWHPSW KHVXFFHHGHGLQREWDLQLQJLPSHULDOVDQFWLRQIRUKLVPLVVLRQDU\ZRUNDQGZDVJUDQWHGDPRQWKO\ VWLSHQG,Q±KHVWDUWHGFROODERUDWLQJZLWKWKH+DQOLQ$FDGHPLFLDQ;X*XDQJTLZKRPKHILUVWPHWLQ 1DQMLQJLQRQWKHWUDQVODWLRQRI(XFOLG¶V(OHPHQWV+HDOVRSOD\HGDQLPSRUWDQWSDUWLQWKHWUDQVODWLRQRU FRPSLODWLRQRIIRXURWKHUZRUNVRQDULWKPHWLFDQGDVWURQRP\1RRWKHUPLVVLRQDU\DFKLHYHGDVWDWXV FRPSDUDEOHWR5LFFL¶VDPRQJWKH&KLQHVHOLWHUDWL 6&+$//YRQ%HOO-RKDQQ$GDP± (QWHUHGWKH6RFLHW\RI-HVXVLQDQGYROXQWHHUHGIRU PLVVLRQDU\ZRUNLQ&KLQDDUULYLQJLQ3HNLQJLQZKHUHKHTXLFNO\HVWDEOLVKHGKLPVHOIDVDQDXWKRULW\RQ DVWURQRP\,QKHZDVDVVLJQHGWRZRUNLQWKH&KLQHVHJRYHUQPHQW¶VFDOHQGULFDOEXUHDXKHDGHGE\;X *XDQJTLDQGLQFROODERUDWLRQZLWK5KRDQGDQXPEHURI&KLQHVHDVVLVWDQWVWUDQVODWHGDQGFRPSLOHGDODUJH QXPEHURIEDVLFZRUNVRQDVWURQRP\DQGPDWKHPDWLFV%HVLGHVKLVFRQWULEXWLRQWRZDUGVWKHQHZFDOHQGDU 6FKDOODOVRWUDQVODWHG$JULFROD¶V'HUHPHWDOOLFDDQGFRPSRVHGDERRNRQWKHPDNLQJDQGXVHRIFDQQRQV 6FKDOOVWD\HGLQ3HNLQJDIWHUWKHIDOORIWKH0LQJG\QDVW\LQDQGWKH0DQFKXJRYHUQPHQWVSHHGLO\ DSSRLQWHGKLPKHDGRIWKHDVWURQRPLFDOEXUHDX,QKHZDVJLYHQWKHWLWOHRIDQKRQRUDU\)LUVW5DQN 2IILFLDOWKHKLJKHVWDIRUHLJQHUKDGHYHUDFKLHYHGLQUHFRUGHG&KLQHVHKLVWRU\$SUROLILFWUDQVODWRUDQG FRPSLOHURIZRUNVRQDVWURQRP\PDWKHPDWLFVDQGFDOHQGULFDOZRUN6FKDOODOVRZURWHDQXPEHURIWUHDWLVHV IRU&KLQHVHFRQYHUWV+LVORQJHVWZRUNZULWWHQLQD(XURSHDQODQJXDJHZDVKLVPHPRLUV :$/(<$UWKXU± $UJXDEO\WKHPRVWIDPRXV(QJOLVKWUDQVODWRURI&KLQHVHDQG-DSDQHVH OLWHUDWXUH:DOH\ZRQDVFKRODUVKLSWR.LQJ¶V&ROOHJH&DPEULGJHDWWKHDJHRIEXWZDVIRUFHGWRGURSRXW RIXQLYHUVLW\EHFDXVHRIEDGH\HVLJKW+HMRLQHGWKH%ULWLVK0XVHXPLQDQGWDXJKWKLPVHOI&KLQHVHDQG -DSDQHVHLQRUGHUWRFDWDORJXHSDLQWLQJVLQWKH%ULWLVK0XVHXPFROOHFWLRQZKLFKRIWHQFDPHFRPSOHWHZLWK SRHPV+LVILUVWWUDQVODWLRQVRI&KLQHVHSRHWU\ZHUHSXEOLVKHGLQWKH%XOOHWLQRI/RQGRQ8QLYHUVLW\¶VQHZO\ HVWDEOLVKHG6FKRRORI2ULHQWDO6WXGLHVWKHQFROOHFWHGDV$+XQGUHGDQG6HYHQW\&KLQHVH3RHPV 7KH\ ZHUHVRRQIROORZHGE\DFROOHFWLRQRI-DSDQHVHSRHPV 7KXVEHJDQDOLIHORQJFDUHHULQWKHWUDQVODWLRQ RIRULHQWDOOLWHUDWXUHWRZKLFK:DOH\GHYRWHGKLPVHOIDVDSULYDWHVFKRODUDIWHUKHUHVLJQHGIURPWKH%ULWLVK 0XVHXPLQ$UHVSHFWHGSRHWLQKLVRZQULJKW:DOH\ZLOOEHUHPHPEHUHGRQWKH&KLQHVHVLGHIRUKLV WUDQVODWLRQVDQGVWXGLHVRIFODVVLFDOSRHWU\IURPWKHHDUOLHVWH[DPSOHVGRZQWRWKHHLJKWHHQWKFHQWXU\EXWKH DOVRWUDQVODWHGYHUQDFXODUOLWHUDWXUHLQFOXGLQJ0RQNH\ RQHRIWKHZRUOG¶VJUHDWHVWFRPLFQRYHOV ;8$1=DQJ± 2ULJLQDOQDPH&KHQ:HLWKH\RXQJHVWVRQRIDUHWLUHGJRYHUQPHQWRIILFLDORIWKH6LX G\QDVW\+HEHFDPHDPRQNDWWKHDJHRIDQGVWDUWHGSUHDFKLQJVRRQDIWHUZDUGV'XULQJWKH\HDUVRI G\QDVWLFFKDQJHWKH7DQJG\QDVW\UHSODFHGWKH6XLLQ ;XDQ=DQJWUDYHOOHGWKURXJKVHYHUDO



3DJH

SURYLQFHVSUHDFKLQJDQGOHDUQLQJVXWUDV$WWKDWWLPHWKHVXWUDVZHUHRSHQWRH[WUHPHO\GLYHUVHLQWHUSUHWDWLRQV DQG;XDQ=DQJYRZHGWKDWKHZRXOGWUDYHOWRZKHUH%XGGKLVPRULJLQDWHGWROHDUQWKHWUXWK+HOHIWWKH &KLQHVHFDSLWDO&KDQJ¶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µ+HDUW6XWUD¶DUHVWLOOXVHGE\&KLQHVH%XGGKLVWVWRGD\;XDQ=DQJLVFRQVLGHUHGWKHIRXQGHURIWKH/DUJHU 9HKLFOHID[LDQJVFKRRORI&KLQHVH%XGGKLVP <$1)X±
&]HFKWUDGLWLRQ &]HFKLVD:HVW6ODYRQLFODQJXDJH7\SRORJLFDOO\LWLVDQLQIOHFWLQJODQJXDJHZKRVHZRUGHQGLQJVSHUIRUPD YDULHW\RIIXQFWLRQVDQGLQZKLFKZRUGRUGHUXVXDOO\SOD\VDJUDPPDWLFDOUROH7KHVHFKDUDFWHULVWLFVDUHVKDUHG E\WKH



3DJH

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iþHãWLQDRUµFRPPRQ&]HFK¶7KHVSRNHQIRUPRIOLWHUDU\&]HFKKDVQRZDGRSWHGVRPHRIWKHIHDWXUHV RIREHFQiþHãWLQDDQGLVFRQVHTXHQWO\VKRZLQJJUHDWHUIOH[LELOLW\WKDQVWDQGDUGOLWHUDU\&]HFK

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µKHOO QRYHOV¶DERXWWKHVWUXJJOHEHWZHHQWKH'HYLODQG*RG7URMiQVNiNURQLND7KH7URMDQ&KURQLFOH D&]HFK WUDQVODWLRQDQGDGDSWDWLRQRIWKH/DWLQ+LVWRULD7URLDQDE\4XLGRGH&ROXPQDZDVWKHILUVWSULQWHGERRNLQ &]HFKF 7KHPRVWLPSRUWDQW&]HFKWUDQVODWRURIWKHVHFRQGKDOIRIWKHIRXUWHHQWKFHQWXU\ZDV7RPiã âWtWQê]HâWtWQpKRF± ZKRWUDQVODWHGUHOLJLRXVDQGSKLORVRSKLFDOOLWHUDWXUHIURP/DWLQ

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



3DJH

VW\OHFKDUDFWHULVWLFRIVRPHOHJHQGDU\DFFRXQWVIRUH[DPSOHWKHOHJHQGRI6W3URFRSLXVDQGRQWKHRWKHUD FOHDUHFKRRIFRXUWO\SRHWU\DSDVVLRQDWHO\ULFLVPDQGDEOHQGRIZRUOGO\HURWLFLVPDQGP\VWLFDOHFVWDV\DV FDQEHVHHQLQDFFRXQWVRIWKHOHJHQGRI6W&DWKHULQHRI$OH[DQGULD$SDUWIURPOHJHQGVDQGELEOLFDOWH[WVWKH &]HFK+XPDQLVWVDOVRWUDQVODWHGWKHZRUNVRI(5$6086RI5RWWHUGDPVHH'87&+75$',7,21 WKH /DWLQFODVVLFV*UHHNDXWKRUVDQGWKHZULWLQJVRIWKH)DWKHUVRIWKH&KXUFK2QHLPSRUWDQWWUDQVODWRURIWKH SHULRG9LNWRULQ.RUQHO]H9ãHKUG± DGYRFDWHGWKHFODVVLFDOSULQFLSOHRIVHQVXPGHVHQVXJLYLQJ SULRULW\WRSURGXFLQJDIXQFWLRQDOWUDQVODWLRQLQWKHVSLULWRIWKHWDUJHWODQJXDJH=LNPXQG+UXEê]-HOHQtDOVR NQRZQDV*HOHQLXV± DERRNSXEOLVKHUEURXJKWRXWLQDQGDFRPSDUDWLYH/DWLQ*UHHN *HUPDQ&]HFKGLFWLRQDU\E\WKHWLWOH/H[LFRQV\PSKRQXP 7KHVHFRQGKDOIRIWKHVL[WHHQWKFHQWXU\ZLWQHVVHGDIORXULVKLQJRI&]HFKOLWHUDWXUHDPRQJWKHXUEDQ PHUFDQWLOHFODVV7UDQVODWLRQVRIFODVVLFDODQGFRQWHPSRUDU\OLWHUDWXUHZHUHXQGHUWDNHQDVZHOODVWUDQVODWLRQV RIPRUHVSHFLDOL]HGPDWHULDOIURPWKHQDWXUDOVFLHQFHVDQGWKHKXPDQLWLHV7KHVRXUFHODQJXDJHVZHUH SUHGRPLQDQWO\/DWLQDQG*HUPDQ9DOXDEOHDLGVWRWUDQVODWLRQZHUHDOVRSURGXFHGLQFOXGLQJVXFK OH[LFRJUDSKLFDOZRUNVDVWKH/DWLQ²&]HFK²*HUPDQ1RPHQFODWRUWULEXVOLQJXLV DQGWKH&]HFK/DWLQ ²*UHHN²*HUPDQ6LOYD4XDGULOLQJXLV ERWKFRPSLOHGE\WKH&]HFK+XPDQLVW'DQLHO$GDP] 9HOHVODYtQD± $PDMRUQHZYHUVLRQRIWKH%LEOHNQRZQDVWKH.UDOLFH%LEOHZDVSXEOLVKHGEHWZHHQ DQG 'XULQJWKH&RXQWHU5HIRUPDWLRQIURPWKHVHFRQGTXDUWHURIWKHVHYHQWHHQWKFHQWXU\ WKHPDMRULW\RI WUDQVODWLRQVZHUHRIKDJLRJUDSKLFDOOLWHUDWXUHZULWWHQE\WKH-HVXLWVWRFRQVROLGDWHWKHLQIOXHQFHRIWKH&DWKROLF &KXUFK7KH\LQFOXGHGWUDQVODWLRQVRIYDULRXVZULWLQJVRQWKHFXOWRIWKH9LUJLQ0DU\2QHRIWKHPRVWSRSXODU WUDQVODWLRQVRIWKDWSHULRGUHSULQWHGPDQ\WLPHVGXULQJWKHVHYHQWHHQWKDQGHLJKWHHQWKFHQWXULHVZDVDERRN RIK\PQVUHQGHUHGPHWULFDOO\E\-LĜt7ĜDQRYVNê± IURP*HUPDQVSLULWXDOVRQJVE\0DUWLQ /87+(5VHH*(50$175$',7,21

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q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± RQHRIWKHOHDGLQJUHSUHVHQWDWLYHVRIWKH&]HFKPRYHPHQWRI1DWLRQDO5HYLYDO+H WUDQVODWHGIURP(QJOLVK)UHQFK*HUPDQDQG5XVVLDQ)URP*HUPDQKHWUDQVODWHGPDLQO\*RHWKHDQG 6FKLOOHUDQGIURP5XVVLDQWKHDQRQ\PRXVPHGLHYDOHSLF7KH/D\RI3ULQFH,JRU-XQJPDQQ¶VILYHYROXPH &]HFK*HUPDQ'LFWLRQDU\± ZDVDOVRDYDOXDEOHFRQWULEXWLRQWRWUDQVODWLRQSUDFWLFH+HLVKRZHYHU EHVWUHPHPEHUHGIRUSURGXFLQJWKHILUVW&]HFKYHUVLRQRI0LOWRQ¶V3DUDGLVH/RVWSXEOLVKHG ,Q KLVWUDQVODWLRQV-XQJPDQQHQULFKHGWKH&]HFKODQJXDJHE\KLVXVHRIQHRORJLVPVDUFKDLVPVDQGERUURZLQJV IURPRWKHU6ODYODQJXDJHV+LVWUDQVODWLRQRI&KDWHDXEULDQG¶V$WDOD GHPRQVWUDWHGWKHSRWHQWLDORI PRGHUQSRHWLF&]HFKLQDZD\WKDWKDGQRWEHHQGHPRQVWUDWHGEHIRUH



3DJH

$WWKHEHJLQQLQJRIWKHQLQHWHHQWKFHQWXU\WUDQVODWLRQOD\DWWKHFHQWUHRIDQXPEHURIGLVSXWHVHVSHFLDOO\ WKRVHFRQFHUQLQJWKHOHJLWLPDF\RIROGIDVKLRQHGOH[LFDOHOHPHQWVLQWURGXFHGE\+XPDQLVWVDQGWKHVFDOHRI OH[LFDOERUURZLQJVIURP3ROLVKDQGIURPWKHVRXWKHUQDQGHDVWHUQ6ODYRQLFODQJXDJHV$QRWKHUWRSLFRI GLVSXWHZDVSURVRG\7KHOHDGLQJ&]HFKOLQJXLVWRIWKHGD\-RVHI'REURYVNê± GHPRQVWUDWHGWKH XQVXLWDELOLW\RITXDQWLWDWLYHPHWUHIRUSRHWLFDOZULWLQJLQ&]HFKQHYHUWKHOHVVWKLVVXUYLYHGLQWUDQVODWLRQVIURP /DWLQDQG*UHHNSRHWU\WRWKHHQGRIWKHODVWFHQWXU\ 7KHVHFRQGKDOIRIWKHQLQHWHHQWKFHQWXU\ZLWQHVVHGDUDSLGGHYHORSPHQWRI&]HFKOLWHUDU\DQGFXOWXUDOOLIH LQFOXGLQJOLWHUDU\WUDQVODWLRQ$QHZDWWLWXGHWRIRUHLJQOLWHUDWXUHVZDVFKDPSLRQHGE\WKHµ0D\¶JURXSQDPHG DIWHUWKHDOPDQDF0D\ ZKRVHPHPEHUVEHOLHYHGLQDGHPRFUDWLFVRPHWLPHVUDGLFDOGHPRFUDWLFDSSURDFKWR SURJUHVV7UDQVODWLRQVEHJDQWRDFFRXQWIRUDJURZLQJSURSRUWLRQRIWKHOLWHUDU\RXWSXW,QDGGLWLRQWRDQFLHQW OLWHUDWXUHWUDQVODWLRQVQRZFRYHUHGFRQWHPSRUDU\ZULWLQJLQDOOPDMRUODQJXDJHVZRUNVE\*RJRO3XVKNLQ 9LFWRU+XJR&HUYDQWHV5REHUW%XUQV%\URQ6KHOOH\0LFNLHZLF]+HLQH3HW{ILDQGPDQ\PRUHZHUH WUDQVODWHGLQWR&]HFK7KH0D\JURXSIRFXVHGRQOLWHUDWXUHZKLFKZDVDWWUDFWLYHLQIRUPDQGVXEMHFWWKH\ WKHUHIRUHWHQGHGWRGLVUHJDUGPDQ\LPSRUWDQWSRHWVDQGSURVHZULWHUVVXFKDV/DPDUWLQH$OIUHGGH9LJQ\DQG $OIUHGGH0XVVHW7KH\DOVRGHOLEHUDWHO\DYRLGHGWUDQVODWLQJIURP*HUPDQVRXUFHVLQDQDWWHPSWWRIUHH&]HFK OLWHUDWXUHIURPLWVHQWUDSPHQWLQWKH*HUPDQFXOWXUDOVSKHUH$WDQ\UDWHHGXFDWHG&]HFKVZHUHDEOHWRUHDG *HUPDQOLWHUDWXUHLQWKHRULJLQDO ,QWKHODVWTXDUWHURIWKHQLQHWHHQWKFHQWXU\NQRZQDVWKHµ/XPtUSHULRG¶DIWHUWKHSHULRGLFDO/XPtUOLWHUDU\ WUDQVODWLRQIORXULVKHGDVQHYHUEHIRUH7KHZULWHUVJURXSHGDURXQGWKHSHULRGLFDOZHUHFRVPRSROLWDQVDQGZHUH SDUWLFXODUO\DFWLYHLQWUDQVODWLQJSRHWU\0RVWSURPLQHQWDPRQJWKHPZHUHWKHSRHWV-DURVODY9UFKOLFNê± DQG-RVHI96OiGHN± ,Q9UFKOLFNê¶VFRORVVDO°XYUHDVDWUDQVODWRUWKH5RPDQFHOLWHUDWXUHV SUHGRPLQDWHGHVSHFLDOO\)UHQFKDQG,WDOLDQOLWHUDWXUH+HDOVRWUDQVODWHGIURP(QJOLVKDQG*HUPDQEXWKLV WUDQVODWLRQVRI(QJOLVKSRHWU\ZHUHOLPLWHGFRPSDUHGWRWKRVHGRQHE\6OiGHNZKRVHIDYRXULWHSRHWZDV 5REHUW%XUQV,QDGGLWLRQWR(QJOLVKSRHWU\6OiGHN¶VJUHDWHVWDFKLHYHPHQWZDVWKDWKHWUDQVODWHGSOD\VE\ 6KDNHVSHDUHDQGWKHUHE\HQULFKHGWKH&]HFKVWDJHHQRUPRXVO\%HWZHHQWKHPWKHYDULRXVWUDQVODWRUVRIWKH /XPtUJURXSSURYLGHG&]HFKUHDGHUVZLWKDULFKSLFWXUHRIFRQWHPSRUDU\OLWHUDWXUHLQWKHPDMRUODQJXDJHVRI (XURSH&]HFKWUDQVODWLRQVRI%DO]DF'LFNHQV'RVWR\HYVN\)ODXEHUW*RQFKDURY0DXSDVVDQWGH0XVVHW :DOWHU6FRWW7KDFNHUD\GH9LJQ\=RODDQGPDQ\RWKHUVDSSHDUHGYHU\VKRUWO\DIWHUWKHSXEOLFDWLRQRIWKH RULJLQDOV$WWKHVDPHWLPHZRUNVIURPOHVVZLGHVSUHDG(XURSHDQODQJXDJHVVXFKDVWKRVHE\,EVHQDQG 3UHãHUHQ DQGIURPRULHQWDOODQJXDJHVZHUHDOVRWUDQVODWHGLQWR&]HFK 7RZDUGVWKHHQGRIWKHQLQHWHHQWKFHQWXU\VHYHUDOVFKRODUVEHJDQWRH[SUHVVWKHLUPLVJLYLQJVDERXW 9UFKOLFNê¶VPHWKRGRIOLWHUDOWUDQVODWLRQLWZDVIHOWWKDWSRHWU\WUDQVODWLRQQHHGHGWRIUHHLWVHOIIURPDVODYLVK GHSHQGHQFHRQWKHIRUPRIWKHRULJLQDO$JUHDWHUIUHHGRPLQWKLVUHVSHFWFDQEHIRXQGLQWKHZRUNRI-XOLXV =H\HU± ZKRWUDQVODWHGIURPDYDULHW\RIODQJXDJHV7KHGHEDWHRQOLWHUDU\WUDQVODWLRQLQLWLDWHGE\ WKH0RGHUQLVWPRYHPHQWLQWKHVFRQWLQXHGZLWKPLQRULQWHUUXSWLRQVHYHQDIWHU:RUOG:DU2QHSHUKDSV XQWLOWKHODWHVZLWKPDQ\RXWVWDQGLQJZULWHUVWUDQVODWRUVDQGOLWHUDU\VFKRODUVWDNLQJSDUWLQLW

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µSUHVWDWLVWLFDO¶



3DJH

WKHRU\RISRHWLFODQJXDJH'HPDQGVE\PHPEHUVRIWKH3UDJXH6FKRRODURXQGIRUHODERUDWLQJWKH SULQFLSOHVRIDV\QFKURQLFGHVFULSWLRQRISRHWLFODQJXDJHDQDUHDWKH\FODLPHGZDVVWLOOQHJOHFWHGE\ OLQJXLVWLFVZHUHDOUHDG\EHLQJDGGUHVVHGLQDQXPEHURILPSRUWDQWSXEOLFDWLRQVE\5RPDQ-DNREVRQ± LQFOXGLQJ2FKHVKVNRPVWLNKHµ2Q&]HFK9HUVH¶ DQG=iNODG\þHVNpKRYHUãH)RXQGDWLRQVRI &]HFK9HUVH DVZHOODVVRPHVWXGLHVE\-DQ0XNDĜRYVNê± ,QWKHV0XNDĜRYVNê SXEOLVKHGDQXPEHURIVWXGLHVRQWKHVWUXFWXUDOFKDUDFWHULVWLFVRIVSHFLILFIHDWXUHVRISRHWLFODQJXDJH+HDOVR GHYHORSHGDWKHRU\RISRHWLFQDPLQJZKLFKGRHVQRWFRQILQHLWVHOIWRPHWDSKRUEXWDWWHPSWVWRDFFRXQWIRUD FRQWLQXRXVWUDQVLWLRQEHWZHHQWKHWZRFDWHJRULHVRIGHVFULSWLYHDQGPHWDSKRULFDOQDPLQJ*HQHUDOO\VSHDNLQJ 0XNDĜRYVNê¶VWKHRU\RISRHWU\PDUNHGWKHEHJLQQLQJRIDGHSDUWXUHIURPWKHHPSKDVLVRQIRUPDOLVPDQGRQD VWDWLFXQGHUVWDQGLQJRIWKHVHSDUDWHFRPSRQHQWVRIWKHSRHWLFWH[W7KLVLVSDUWLFXODUO\HYLGHQWLQ.DSLWRO\] þHVNpSRHWLN\&KDSWHUVIURP&]HFK3RHWLFV0XNDĜRYVNê ,QSDUDOOHOZLWKWKHGHYHORSPHQWRIDVWUXFWXUDOWKHRU\RISRHWLFODQJXDJHDWWHPSWVZHUHDOVRPDGHWRGHYHORS DWKHRU\RIWKHWUDQVODWLRQRISRHWU\7KHVWLPXOXVIRUDIXQFWLRQDOXQGHUVWDQGLQJRIWUDQVODWLRQFDPHIURPWKH IRXQGHURIWKH3UDJXH6WUXFWXUDOLVW6FKRRO9LOpP0DWKHVLXV± LQKLVDUWLFOHµ2SUREOpPHFK þHVNpKRSĜHNODGDWHOVWYt¶2QWKHSUREOHPVRI&]HFKWUDQVODWLRQ $PRQJRWKHUVLJQLILFDQWVWXGLHVLQWKLV DUHDPHQWLRQVKRXOGEHPDGHRI-DNREVRQ¶VHVVD\µ2SĜHNODGXYHUãĤ¶2Q9HUVH7UDQVODWLRQ -DNREVRQ GLVFXVVHVGLIIHUHQFHVLQWKHVHPDQWLFLPSRUWRILDPELFVLQ&]HFKDQG5XVVLDQDQGDGYRFDWHVWKHQHHG IRUDIXQFWLRQDOUHVKDSLQJRIWKHPHWUHRIWKHWUDQVODWHGWH[W7KLVHPSKDVLVRQWKHIXQFWLRQDOUROHRIOLQJXLVWLF HOHPHQWVLQWKHWUDQVODWHGWH[WSURYHGKLJKO\LQIOXHQWLDODQGZDVDGRSWHGLQWKHVDQGVE\WKHOHDGLQJ SUDFWLWLRQHUVRIWUDQVODWLRQUHVXOWLQJLQPDQ\ILQHUHQGHULQJVRIPDMRUZRUNV2WRNDU)LVFKHU± WUDQVODWHGIURP*HUPDQ(QJOLVKDQG)UHQFKDQGH[SUHVVHGKLVEHOLHILQWKH)XQFWLRQDOLVWDSSURDFKLQKLVVWXG\ µ2SĜHNOiGiQtEiVQLFNêFKGƟO¶2Q7UDQVODWLQJ:RUNVRI3RHWU\ )LVFKHU¶VILUVWPDMRUWUDQVODWLRQZDVRI VRPHRIWKHZULWLQJVRI)ULHGULFK1LHW]VFKH $PRQJKLVQXPHURXVWUDQVODWLRQVDVSHFLDOSODFHLVKHOG E\KLVHSRFKPDNLQJWUDQVODWLRQRI*RHWKH¶V)DXVW DQGKLVVHOHFWLRQVIURPWKHZRUNRIWKH)UHQFKSRHW )UDQoRLV9LOORQ $QRWKHUPLOHVWRQHLQWKHWUDQVODWLRQRISRHWU\ZDVWKHWUDQVODWLRQRI$SROOLQDLUH¶V =RQHE\.DUHOýDSHN± EHWWHUNQRZQDVDGUDPDWLVWDQGSURVHZULWHU,QIDFWVLQFHWKHVDQG ULJKWXSWRWKHSUHVHQWGD\PDQ\RXWVWDQGLQJ&]HFKSRHWVKDYHFRQWLQXHGWRGHYRWHWKHPVHOYHVWRWKH WUDQVODWLRQRI)UHQFKSRHWU\LQSDUWLFXODU0RGHUQWUDQVODWLRQVRIWKHSRHWVRIDQWLTXLW\KDYHDOVRFRQWLQXHGWR EHXQGHUWDNHQIRUH[DPSOHE\FODVVLFDOVFKRODUVVXFKDV2WPDU9DĖRUQê± 2WDNDU-LUiQL± DQG)HUGLQDQG6WLHELW]± 7KHVWUXFWXUDOLVWWKHRU\RISRHWLFODQJXDJHSURYHGYDOXDEOHQRWRQO\LQSURYLGLQJDIUDPHZRUNIRUGHYHORSLQJ DWKHRU\RISRHWU\WUDQVODWLRQEXWDOVRLQJXLGLQJWKHSUDFWLFHRIWUDQVODWLRQLQJHQHUDODQGWKHWUDQVODWLRQRI SRHWU\LQSDUWLFXODU$SSOLHGWRELOLQJXDOFRPPXQLFDWLRQWKHIXQFWLRQDOYLHZRIODQJXDJHOHGWRDQHPSKDVLV RQµIXQFWLRQDOHTXLYDOHQFH¶VWUHVVLQJWKHUHODWLRQVKLSRIWKHWUDQVODWHGWH[WWRLWVUHFHSWRUV,QWKHWUDQVODWLRQRI SRHWU\LWPDUNHGWKHHQGRIWKHPHFKDQLFDOFRS\LQJRIWKHIRUPDOIHDWXUHVRIWKHRULJLQDO,QDGGLWLRQWKH GHYHORSPHQWRIH[DFWPHWKRGVIRUWKHDQDO\VLVRISRHWLFODQJXDJHPHDQWWKDWWUDQVODWLRQLQWXUQEHJDQWREH XQGHUVWRRGLQWHUPVRILQWHUSUHWLQJFRPSOH[YHUEDOVLJQVLQVSHFLILFFRPPXQLFDWLYHFRQWH[WVDQGWKLVOHGWRD PRYHDZD\IURPLUUDWLRQDODQGVXEMHFWLYHDSSURDFKHV 7KHVVDZDUHYLYDORILQWHUHVWLQWUDQVODWLRQWKHRU\HVSHFLDOO\LQWKHZRUNRI-LĜt/(9<± SXEOLVKHGLQERRNIRUPDV8PČQtSĜHNODGX7KH$UWRI7UDQVODWLRQ LQ$OWKRXJKKLVPHWKRGRIDQDO\VLV LVXVXDOO\GHVFULEHGDVOLWHUDU\/HY\VXFFHHGHGLQLQFOXGLQJLQLWDQGXWLOL]LQJWKHILQGLQJVRITXDQWLWDWLYH DQDO\VLVDQG²LQWKHFRQWH[WRIFRQWHPSRUDU\ZHVWHUQWKHRU\²IXOO\OLQNLQJXSZLWKWKH3UDJXH6FKRRO-LĜt /HYê¶VPDMRUFRQWULEXWLRQWRWKHPRGHUQWKHRU\RISRHWU\WUDQVODWLRQZDVKLVDSSOLFDWLRQRIWKHPHWKRGVRIWKH H[DFWVFLHQFHV:LWKUHPDUNDEOHDFXLW\



3DJH

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iEUDQD± 0RGHUQ&]HFKWUDQVODWLRQWKHRU\SURFHHGVIURPWKHZRUNRI-LĜt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¶1HLOO,QWKHVDQJORSKRQHOLWHUDWXUH ZDVWUDQVODWHGE\WKHGLVFLSOHVRIWKH3UDJXH6FKRROOLQJXLVW9LOpP0DWKHVLXV$OR\V6NRXPDO±DQG =GHQČN9DQþXUD± DQGWKRVHRI2WRNDU)LVFKHULQFOXGLQJ(ULN$6DXGHN±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


3DJH

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¶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¶VSRHPµ7KH5DYHQ¶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± PHPEHUVRIHWKQLFPLQRULWLHVKDGWKHULJKWWRSOHDGLQORZHUFRXUWVLQWKHLU RZQODQJXDJH2IILFLDORUDXWKRUL]HG LQWHUSUHWHUVZHUHWKHUHIRUHQHHGHGLQWKHVHDQGVLPLODULQVWLWXWLRQV WKRXJKWKH\ZHUHQRWDWWKHWLPHVWULFWO\µSURIHVVLRQDO¶QRUDVDUXOHIXOOWLPHLQWHUSUHWHUV,QWHUSUHWHUVZHUH DOVRXVHGDWWKHGLSORPDWLFDQGJRYHUQPHQWDOOHYHOV$IWHU:RUOG:DU7ZRLQWKHVDQGV VLPXOWDQHRXVLQWHUSUHWLQJZDVSURYLGHGSULPDULO\E\WKHIROORZLQJFDWHJRULHVZDUWLPHpPLJUpV(QJOLVK -HZLVKVXUYLYRUVRIWKHFRQFHQWUDWLRQFDPSV*HUPDQ VHFRQGJHQHUDWLRQ5XVVLDQpPLJUpV5XVVLDQ HGXFDWHG&]HFKVIURPWKHSUHZDU)UDQFRSKLOHHQYLURQPHQW)UHQFK )HZRIWKHVHKDGDQ\OLQJXLVWLFWUDLQLQJ $ODUJHQXPEHURIDGKRFLQWHUSUHWHUVZHUHDQGVWLOODUHDOVRXVHGDVµJXLGHLQWHUSUHWHUV¶IRUIRUHLJQYLVLWRUV WKH3UDJXH,QIRUPDWLRQ6HUYLFHKDGVRPHJXLGHLQWHUSUHWHUVRQLWVOLVWLQ$YHU\VPDOOQXPEHURI WKHPRUHKLJKO\TXDOLILHGFRQIHUHQFHLQWHUSUHWHUVZHUHDUHPHPEHUVRI$,,&

)XUWKHUUHDGLQJ $FWD8QLYHUVLWDWLV&DUROLQDH7UDQVODWRORJLFD3UDJHQVLD *DODQ.XIQHURYiHWDO/HYê 0iQHN

=/$7$.8)1(529È$1'(:$/'26(56

%LRJUDSK\ /(9é-LĜt± &]HFKWKHRULVWDQGKLVWRULDQRIOLWHUDWXUHEHVWNQRZQLQWKHILHOGRIWUDQVODWLRQIRUKLV ZRUNRQGHFLVLRQPDNLQJVHH'(&,6,210$.,1*,175$16/$7,21*$0(7+(25<$1' 75$16/$7,21 ,QGLVFXVVLQJLVVXHVLQWUDQVODWLRQDQGOLWHUDWXUHKHGUHZRQWKHILQGLQJVRIDZLGHUDQJHRI GLVFLSOLQHVLQFOXGLQJVHPLRWLFVOLQJXLVWLFVLQIRUPDWLRQWKHRU\DQGVWDWLVWLFV+HZDVSDUWLFXODUO\LQIOXHQFHG E\WKH3UDJXH6FKRRODQGDWWHPSWHGWRHODERUDWHWKHQRWLRQRIIXQFWLRQDOHTXLYDOHQFH



3DJH

LQWUDQVODWLRQ+LVEHVWNQRZQZRUNLQWUDQVODWLRQWKHRU\LV8PČQLSĜHNODGX7KH$UWRI7UDQVODWLRQ WUDQVODWHGLQWR*HUPDQLQDV'LHOLWHUDULVFKHhEHUVHW]XQJ7KHRULHHLQHU.XQVWJDWWXQJDQGLQWR5XVVLDQ LQDV,VNXVVWYRSHUHYRGD+LVDUWLFOHµ7UDQVODWLRQDVD'HFLVLRQ0DNLQJ3URFHVV¶LVDOVRRIWHQ TXRWHGLQWKHOLWHUDWXUH =/$7$.8)1(529È



3DJH

' 'DQLVKDQG1RUZHJLDQWUDGLWLRQV 'DQLVKDQG1RUZHJLDQDUHERWK,QGR(XURSHDQODQJXDJHVKLVWRULFDOO\DQGVWUXFWXUDOO\UHODWHGWR'XWFK (QJOLVKDQG*HUPDQ:LWKWKHH[FHSWLRQRI)LQQLVKWKH6FDQGLQDYLDQODQJXDJHVFRQVWLWXWHWKHVXEJURXS WHUPHGµ1RUGLF¶EXW'DQLVKDQG1RUZHJLDQEHORQJWRGLIIHUHQWVXEW\SHV'DQLVKZLWK6ZHGLVK EHORQJVWR WKH(DVW1RUGLFJURXS1RUZHJLDQZLWK,FHODQGLFDQG)DURHVH WRWKH:HVW1RUGLF+RZHYHUWKHODQJXDJH VLWXDWLRQLQ1RUZD\LVFRPSOLFDWHGE\WKHIDFWWKDWIRURYHU\HDUV± 'HQPDUNDQG1RUZD\ IRUPHGRQHVWDWHWRZKLFKDOVREHORQJHG6FKOHVZLJ+ROVWHLQ,FHODQGWKH)DURH,VODQGVDQGDIWHULWV UHGLVFRYHU\LQWKHHLJKWHHQWKFHQWXU\*UHHQODQG &RSHQKDJHQLQ'HQPDUNZDVWKHFDSLWDODQGDGPLQLVWUDWLYHFHQWUHRIWKHUHDOPDQG'DQLVKFRQVHTXHQWO\WKH ODQJXDJHRIDGPLQLVWUDWLRQDQGRIWKHDGPLQLVWUDWRUV$VDUHVXOWDOLWHUDU\ODQJXDJHEDUHO\GLVWLQJXLVKDEOH IURPVWDQGDUG'DQLVKGHYHORSHGLQWKHWRZQVRIVRXWKHUQ1RUZD\VRWKDWLQWKHODWHQLQHWHHQWKFHQWXU\ORQJ DIWHUWKHVHYHUDQFHRIWKHXQLRQWKHSOD\VRI+HQULN,EVHQFRXOGEHSHUIRUPHGLQWKHLURULJLQDOYHUVLRQVDWWKH 5R\DO7KHDWUHLQ&RSHQKDJHQ %XWORQJEHIRUHWKDWDPRYHPHQWKDGEHHQODXQFKHGWRFUHDWHDQHZVWDQGDUG1RUZHJLDQODQJXDJH1\QRUVN 1HZ1RUZHJLDQ RQWKHEDVLVRIWKHGLDOHFWVRIUXUDODUHDVXQFRQWDPLQDWHGE\'DQLVKLQIOXHQFH7KLV UHVXOWHGLQDVLWXDWLRQZLWKWZRRIILFLDOODQJXDJHVDQGDPRYHPHQWDZD\IURP'DQLVKHYHQIRUWKHWUDGLWLRQDO OLWHUDU\PHGLXPWKHQHDU'DQLVK5LNVPnORU%RNPnOERRNODQJXDJH RIWKHVRXWK 7KLVHQWU\WUHDWV'HQPDUNDQG1RUZD\DVRQHDUHDLQWKHSHULRGXSWRDQGDVVHSDUDWHDUHDVIRUWKH PRGHUQSHULRG $VWKH6FDQGLQDYLDQODQJXDJHFRPPXQLWLHVDUHVPDOOWKHLUQHHGIRUWUDQVODWLRQLVHYHQJUHDWHUWKDQLVWKHFDVH IRUWKHODQJXDJHVRIODUJHUFRXQWULHV7KHUHKDVRIFRXUVHEHHQDFRQVLGHUDEOHDPRXQWRIPXWXDOWUDQVODWLRQ EHWZHHQ6FDQGLQDYLDQODQJXDJHVWKRXJKWKHXUJHWRFRPPXQLFDWHKDVVRPHWLPHVEHHQTXHOOHGE\PXWXDO DQLPRVLW\DVDIWHUWKH'DQLVK6ZHGLVKZDUVLQWKHVHYHQWHHQWKFHQWXU\DQG1RUZD\¶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



3DJH

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

7KH5HQDLVVDQFHDQGDIWHU 'DQLVKYHUQDFXODUOLWHUDWXUHGHYHORSHGVORZO\DQG'HQPDUNWKHUHIRUHUHWDLQHGDWUDGLWLRQRIRULJLQDOZULWLQJ LQ/DWLQUDWKHUORQJHUWKDQWKHODUJHU(XURSHDQFRXQWULHV&RQVHTXHQWO\PDQ\WUDQVODWLRQVIURPWKH 5HQDLVVDQFHWRWKHEHJLQQLQJRIWKHQLQHWHHQWKFHQWXU\ZHUHLQWRDQGIURP/DWLQ0DQ\FDPHIDLUO\ODWH /XGYLJ+ROEHUJ¶V1LFRODL&OLPLL,WHU6XEWHUUDQHXP DQLQWHUQDWLRQDOEHVWVHOOHULQVSLUHGE\7KRPDV 0RUH¶V8WRSLDZDVWUDQVODWHGLQWR'DQLVKIRUWKHILUVWWLPHE\WKHSRHW-HQV%DJJHVHQLQ7KHPDLQ WUDQVODWLRQHYHQWIRU'HQPDUNDQG1RUZD\SULRUWRWKH(QOLJKWHQPHQWZDVXQGRXEWHGO\&KULVWLHP3HGHUVHQ¶V WUDQVODWLRQRIWKH%LEOHLQIOXHQFHGE\/XWKHU¶V%LEOHDQGNQRZQDV&KU,,,¶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¶VWUDQVODWLRQRI)UDQFLV 4XDUOHV¶V(QFKLULGLRQ'DQLVKWUDQVODWLRQ DQGWKDWZDVVWLOOH[FHSWLRQDOXQWLOZHOOLQWRWKH QLQHWHHQWKFHQWXU\PRVWWUDQVODWLRQRI(QJOLVKOLWHUDWXUHZDVYLD*HUPDQ ,QRWKHUUHVSHFWV&ROOLQV¶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¶V3HGHU3DDUV± ZKLFKHFKRHVSDVVDJHVIURP%RLOHDX¶V/H/XWULQEXWZKLFKLVQRWD WUDQVODWLRQ+ROEHUJ¶VFRPHGLHVZHUHLQIOXHQFHGE\0ROLqUHVRPHRIZKRVHSOD\VZHUHDFWXDOO\WUDQVODWHGIRU WKHµ'DQLVK6WDJH¶IURPLWVRSHQLQJLQ2QHRIWKHILUVWODUJHVFDOHWUDQVODWRUVIURP)UHQFK6SDQLVKDQG RWKHUODQJXDJHVZDV'RURWKHD%,(+/± ZKRDPRQJRWKHUWKLQJVWUDQVODWHG'RQ4XL[RWH± DQGDGDSWHG)UHQFKSOD\VIRUWKH'DQLVKVWDJH

7KHQLQHWHHQWKFHQWXU\5RPDQWLFWUDQVODWLRQV ,QWKHQLQHWHHQWKFHQWXU\WUDQVODWLRQVEHFDPHPRUHIUHTXHQWWKDQEHIRUH7KHGRPLQDQWVRXUFHODQJXDJHZDV VWLOO*HUPDQEXWGLUHFWWUDQVODWLRQVIURP(QJOLVKDQGWKH5RPDQFHODQJXDJHVZHUHDOVRIRXQGHVSHFLDOO\DIWHU WKHPLGGOHRIWKHFHQWXU\:RUNVE\DOOPDMRU(XURSHDQSRHWVGUDPDWLVWVDQGSURVHZULWHUVZHUHWUDQVODWHGDW VRPHSRLQWRURWKHUDQGLQDGGLWLRQZKROHQHZJHQUHVZHUHLQWURGXFHGPDLQO\RZLQJWRWUDQVODWLRQ7KLVLV WUXHRIFKLOGUHQ¶VOLWHUDWXUHZKLFKFDPHLQWRH[LVWHQFHLQ'HQPDUNUDWKHUODWHUWKDQLQWKHODUJHU(XURSHDQ FRXQWULHVDQGLQWKHEHJLQQLQJZDVKHDYLO\GHSHQGHQWRQWUDQVODWLRQ+M¡UQDJHU



3DJH

3HGHUVHQDQG6KLQH DQGLWZRXOGDOVREHIDLUWRVD\WKDWWKHGHYHORSPHQWRIWKH'DQLVKQRYHOZDVPXFK LQIOXHQFHGE\WUDQVODWLRQVQRWDEO\RI:DOWHU6FRWW&KDUOHV'LFNHQVZDVWUDQVODWHGE\/0ROWNHZKREURXJKW RXWDQDOPRVWFRPSOHWH'LFNHQVHGLWLRQWKHODWHUYROXPHVRIZKLFKDSSHDUHGDOPRVWVLPXOWDQHRXVO\ZLWKWKH (QJOLVKERRNYHUVLRQVRIWKHSUHYLRXVO\VHULDOL]HGQRYHOV7KLVWUDQVODWLRQZDVRQO\VXSSODQWHGLQWKHFRXUVH RIWKHVE\(YD+HPPHU+DQVHQ¶V'LFNHQV 7RZDUGVWKHHQGRIWKHHLJKWHHQWKFHQWXU\GUDPDWLFLQVSLUDWLRQFDPHPDLQO\IURP*HUPDQ\DQG*HUPDQ LQIOXHQFHFRQWLQXHGLQWRWKHQLQHWHHQWKFHQWXU\ZLWKWUDQVODWLRQVDQGLPLWDWLRQVRI*HUPDQ5RPDQWLFGUDPD /DWHU)UHQFKLQIOXHQFHZDVUHHVWDEOLVKHG(XJqQH6FULEHF± EHLQJRQHRIWKHPRVWSRSXODU GUDPDWLVWV+RZHYHUIURPWKHEHJLQQLQJRIWKHFHQWXU\WKHUHZDVDOVRLQWHUHVWLQ6KDNHVSHDUH6LOOH%H\HU ± DQGWKHDFWRU3HWHU)RHUVRPEHLQJWZRRIWKHPRVWLPSRUWDQWWUDQVODWRUVDQGDGDSWRUVSULRUWR (GYDUG/(0%&.(:KHUHDV)RHUVRPIURPWKHEHJLQQLQJZLWK+DPOHW3ULQGVDI'DQPDUN ZDV SDUWLFXODUO\LQWHUHVWHGLQWKHWUDJHGLHVZKLFKKHWUDQVODWHGZLWKUHVSHFWIRU6KDNHVSHDUH¶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lJHU WUDQVODWHG*HUPDQIDLU\WDOHV DQGWKHSRHWDQGSKLORVRSKHU1)6*581'79,*WUDQVODWHG%HRZXOI +DQV&KULVWLDQ$QGHUVHQWUDQVODWHGQXPHURXVSOD\VIRUWKH5R\DO7KHDWUHDQGWKHSRHW+ROJHU 'UDFKPDQQSURGXFHGDVSLULWHGYHUVLRQRI%\URQ¶V'RQ-XDQ3DUW,LQDQG3DUW,,LQ

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



3DJH

,WLVLPSRVVLEOHWRPHQWLRQPRUHWKDQDIHZRIWKHPDQ\OLWHUDU\WUDQVODWRUVZKRKDYHEHHQDFWLYHLQWKH WZHQWLHWKFHQWXU\.DL)ULLV0¡OOHU± ZDVDJRRGWUDQVODWRURISRHWU\DVZDVWKHSRHWDQGFULWLF 7RP.ULVWHQVHQ± 2QHRIWKHPRVWSURGXFWLYHWUDQVODWRUVRIDOOWLPHVZDV0RJHQV%2,6(1 $PRQJUHFHQWWUDQVODWRUVDUH1LHOV%UXQVHDQG7KRPDV+DUGHU 2UJDQL]DWLRQRIWKHSURIHVVLRQ 7KHRUJDQL]DWLRQIRU'DQLVKOLWHUDU\WUDQVODWRUVLV'DQVN2YHUV WWHUIRUEXQGDVXEVHFWLRQRIWKH'DQLVK ZULWHUV¶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…DQGWZRVPDOOHU RQHVRQHQDPHGDIWHU:LOVWHUWKHQLQHWHHQWKFHQWXU\WUDQVODWRURI+RPHUDQGRQHDIWHU.(OIHOWDWZHQWLHWK FHQWXU\WUDQVODWRURI$OLFHLQ:RQGHUODQG $WWKHPRPHQWFRPPHUFLDOWUDQVODWRUVPD\FKRRVHEHWZHHQDQXPEHURIXQLRQV7UDQVODW¡UIRUHQLQJHQWKHROG XQLRQIRUVZRUQWUDQVODWRUVQRZFRRSHUDWHVZLWK(UKYHUYVVSURJOLJW)RUEXQGVHHEHORZ ,WLVRSHQWRDOO VZRUQWUDQVODWRUVZKLFKPHDQVWKDWVRPHPHPEHUVDUHSDUWWLPHRUUHWLUHG6RPHIXOOWLPHSURIHVVLRQDOVKDYH IRXQGWKLVVLWXDWLRQXQVDWLVIDFWRU\DQGWKLVLVRQHUHDVRQIRUWKHHVWDEOLVKPHQWLQ RIDQHZ RUJDQL]DWLRQ'DQVN7UDQVODW¡UIRUEXQGWKDWOLNHZLVHUHSUHVHQWVVZRUQWUDQVODWRUVDQGLQWHUSUHWHUV (UKYHUYVVSURJOLJW)RUEXQGLVDXQLRQERWKIRUODQJXDJHVHFUHWDULHVZLWKWZRWRWKUHH\HDUVRIWHUWLDU\ HGXFDWLRQDQGIRUJUDGXDWHVIURPWKH&RSHQKDJHQDQGcUKXV%XVLQHVV6FKRROVZLWKIURPWR\HDUVRI WHUWLDU\HGXFDWLRQ:LWKPRUHWKDQPHPEHUVLWLVE\IDUWKHODUJHVWWUDQVODWRUV¶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µWUDQVODW¡UH[DPLQDWLRQ¶ZKLFKFRQVLVWHGRI WUDQVODWLRQVIURPDQGLQWRDIRUHLJQODQJXDJHDQGDQRUDOWHVWZKLFKLQFOXGHGLQWHUSUHWLQJIRUSDUWLFLSDQWVDWD PHHWLQJ7KLVWHVWKDVQRZEHHQUHSODFHGE\DQ0$GHJUHHLQDIRUHLJQODQJXDJHIURPWKHc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¶FRXUVHLQ'HQPDUN2QWKH RWKHUKDQG7KH&RSHQKDJHQ%XVLQHVV6FKRROLQFRRSHUDWLRQZLWKWKH(XURSHDQ



3DJH

&RPPLVVLRQRUJDQL]HVDVL[PRQWKFRXUVHIURPZKLFKLQWHUSUHWHUVIRU7KH(XURSHDQ8QLRQDUHRIWHQ UHFUXLWHG 5HVHDUFKDQGSXEOLFDWLRQV ,QWHUHVWLQWUDQVODWLRQWKHRU\GLGQRWH[LVWDVVXFKEHIRUHDOWKRXJKLVRODWHGUHPDUNVFDQEHJDWKHUHGIURP WKHLQWURGXFWLRQVWRYDULRXVWUDQVODWLRQVUDQJLQJIURP$6¡UHQVHQ9HGHOZKRLQWKHSUHIDFHWRKLVWUDQVODWLRQ RI6D[R¶V*HVWD'DQRUXP FRPSODLQVDERXW6D[R¶VµGDUNDQGGLIILFXOW/DWLQ¶WRWKHPRUHFRQVLGHUHG DQGOHQJWKLHUFRQWULEXWLRQVRIIDPRXVQLQHWHHQWKFHQWXU\WUDQVODWRUVOLNH(GYDUG/(0%&.(6KDNHVSHDUH DQG&KULVWLDQ:,/67(5+RPHU /HPEFNHLVW\SLFDORIKLVDJHLQWKDWKHKDVOLWWOHWRVD\DERXWWKHSUREOHPVRIWUDQVODWLRQEXWGHPRQVWUDWHVKLV DZDUHQHVVRIWKHGLIILFXOWLHVWKURXJKKLVDQDO\VLVRIWKHSHFXOLDULWLHVRI6KDNHVSHDUH¶VVXEMHFWPDWWHUDQG GLFWLRQ:LOVWHUZKRLVPRUHRXWVSRNHQDGRSWVDSRVLWLRQYHU\VLPLODUWRWKDWRI5266(77,VHH%5,7,6+ 75$',7,21 WKDWWKHWUDQVODWRUVKRXOGFRPELQHILGHOLW\ZLWKDUHDVRQDEOHDPRXQWRIIUHHGRPKHLVDOVR YHU\PXFKDZDUHRIWKHGLIILFXOWLHVLQKHUHQWLQUHQGHULQJDFODVVLFDOPHWUHLQDPRGHUQODQJXDJH 7UDQVODWLRQVWXGLHVLQWKHWZHQWLHWKFHQWXU\EHJDQZLWKWKHZRUNRI3DXO5XERZ3URIHVVRURI&RPSDUDWLYH /LWHUDWXUHDWWKH8QLYHUVLW\RI&RSHQKDJHQZKRZURWHDOLWWOHERRNRQµRULJLQDOVDQGWUDQVODWLRQV¶ DQG DQXPEHURIRWKHUVWXGLHVRILQGLYLGXDOWUDQVODWRUVRUWUDQVODWLRQV(ULF-DFREVHQ¶V7UDQVODWLRQ$7UDGLWLRQDO &UDIW ZDVDPDMRUFRQWULEXWLRQWRLQWHUQDWLRQDOWUDQVODWLRQVFKRODUVKLSDOWKRXJKLWH[SUHVVO\GLVVRFLDWHG LWVHOIIURPWKHEXGGLQJGLVFLSOLQHRIWUDQVODWLRQWKHRU\,WLVDVWXG\RI0DUORZH¶VWUDQVODWLRQVRI2YLG¶V HOHJLHVYLHZHGDJDLQVWWKHEDFNJURXQGRI0DUORZH¶VHGXFDWLRQDQGODQJXDJHWUDLQLQJ$FRPELQDWLRQRI OLWHUDU\LQWHUHVWDQGFODVVLFDOVFKRODUVKLSLVDOVRFKDUDFWHULVWLFRI.QXG6¡UHQVHQ¶V7KRPDV/RGJH¶V 7UDQVODWLRQRI6HQHFD¶V'HEHQHILFLLV&RPSDUHGZLWK$UWKXU*ROGLQJ¶V9HUVLRQ 7UDQVODWLRQWKHRU\SURSHUGUDZLQJRQWKHWUDGLWLRQRI/HYêZDVLQWURGXFHGLQWR'HQPDUNLQ//$OEHUWVHQ¶V /LWWHU URYHUV°WWHOVH/LWHUDU\7UDQVODWLRQ ZKLFKPDLQWDLQVWKHLPSRUWDQFHRIWKHWUDQVODWLRQRYHUWKDW RIWKHRULJLQDO)URPWKHEHJLQQLQJRIWKHVDQXPEHURIWKHVHVKDYHEHHQZULWWHQRQYDULRXVDVSHFWVRI WUDQVODWLRQEXWPRVWRIWKHVHUHPDLQXQSXEOLVKHG2QHH[FHSWLRQLV9LJJR+M¡UQDJHU3HGHUVHQ¶V 2YHUV°WWHOVHVWHRUL7UDQVODWLRQ7KHRU\ WKHWKLUGUHYLVHGHGLWLRQRIZKLFK LVWKHVWDQGDUG 'DQLVKLQWURGXFWLRQWRWUDQVODWLRQVWXGLHV*DG LVFRPSOHWHO\DWKHRUHWLFDOEXWDQWLFLSDWHVWKHZRUNRI WKHPDQLSXODWRUVLQFRQFHQWUDWLQJRQWKHKLVWRULFDODQGFXOWXUDOEDFNJURXQGIRU6LOOH%H\HU¶VDGDSWDWLRQVRI 6KDNHVSHDUH0¡OOHU1LHOVHQ LVDVFKRODUO\VWXG\RI'DQLVKWUDQVODWLRQVRI+RPHUEXWLVZHDNLQ JHQHUDOWUDQVODWLRQWKHRU\0XQFK3HWHUVHQ LVDPDLQO\ELEOLRJUDSKLFDODFFRXQWRIQLQHWHHQWKFHQWXU\ SURVHILFWLRQWUDQVODWHGLQWR'DQLVK/RUHQWVHQHWDO GLVFXVVHVWUDQVODWLRQDQGQHZWHFKQRORJ\ZKHUHDV %DDULQJ JLYHVDQLQWURGXFWLRQWRLQWHUSUHWLQJ,QUHFHQW\HDUVDQXPEHURIQHZFRQWULEXWLRQVKDYH DSSHDUHGEXWPRVWRIWKHVHDUHDUWLFOHVDQGWKHPDMRULW\DUHZULWWHQLQ(QJOLVKRURWKHUPDMRU(XURSHDQ ODQJXDJHV0HQWLRQVKRXOGEHPDGHRI'UDVNDX +M¡UQDJHU3HGHUVHQ -DNREVHQ DQG *RWWOLHEF 'HQPDUNLVWRRVPDOODFRXQWU\WRKDYHEHHQDWWKHIRUHIURQWRIDFDSLWDOLQWHQVLYHDUHDOLNH0$&+,1( 75$16/$7,21+RZHYHULPSRUWDQWZRUNZLWKLQWKHILHOGKDVEHHQGRQHZLWKLQWKHIUDPHZRUNRIWKH(8 ILQDQFHG(85275$SURJUDPPHDQG,%0'HQPDUNKDYHGHYHORSHGDPDFKLQHDVVLVWHGWUDQVODWLRQ SURJUDPPH7KHPRVWRULJLQDOFRQWULEXWLRQLQWKHILHOGKDVSUREDEO\EHHQPDGHE\WKHVPDOO:,1*(5 FRPSDQ\ZKRKDYHFRQVLVWHQWO\GHYHORSHGWUDQVODWLRQSURJUDPPHVIRU3&V'XQEDUDQG+M¡UQDJHU3HGHUVHQ 'XQEDUDQG$QGHUVHQ 8QLYHUVLWLHVDQGRWKHULQVWLWXWLRQVRIIXUWKHUHGXFDWLRQWRJHWKHUZLWKDVVRFLDWLRQVRIWUDQVODWRUVDQGSULYDWH ERGLHVLVVXHDQXPEHURIVHULHVDQGMRXUQDOVGHYRWHGWRWUDQVODWLRQ'$2LVDPRQRJUDSKVHULHVLQ'DQLVKRQ WUDQVODWLRQVWXGLHV6XEMHFWVUDQJHIURPJHQHUDOWUDQVODWLRQWKHRU\WRVXEWLWOLQJDQGPDFKLQHWUDQVODWLRQRQ 3&V7KHVHULHVLVLVVXHGE\WKH&HQWUHIRU7UDQVODWLRQ6WXGLHVDW&RSHQKDJHQ8QLYHUVLW\ZKLFKDOVRHGLWVD PRQRJUDSKVHULHVLQ(QJOLVK&RSHQKDJHQ6WXGLHVLQ7UDQVODWLRQDQGDQLQWHUQDWLRQDO



3DJH

MRXUQDO3HUVSHFWLYHVLQ7UDQVODWRORJ\$5.LVVXHGE\WKH&RSHQKDJHQ%XVLQHVV6FKRROLVDPRQRJUDSK VHULHVVHYHUDOYROXPHVRIZKLFKKDYHGHDOWZLWKWUDQVODWLRQ&(%$/OLNHZLVHIURPWKH&RSHQKDJHQ%XVLQHVV 6FKRROZDVWKHIRUHUXQQHURIWKHVDPHLQVWLWXWLRQ¶V&RSHQKDJHQ6WXGLHVLQ/DQJXDJH8QGHUERWKQDPHVWKLV SXEOLFDWLRQKDVSULQWHGPDQ\DUWLFOHVRQWUDQVODWLRQ+HUPHVLVDSHULRGLFDORQOLQJXLVWLFVIURPWKHcUKXV %XVLQHVV6FKRRORIWHQZLWKDUWLFOHVRQWUDQVODWLRQDQGOH[LFRJUDSK\7UDQVODW¡UHQWKHPDJD]LQHRIWKH 7UDQVODW¡UIRUHQLQJHQDQG6SURJRJHUKYHUYWKHPDJD]LQHRI(UKYHUYVVSURJOLJW)RUEXQGFRQWDLQDQXPEHURI DUWLFOHVRQWUDQVODWLRQDQGLQWHUSUHWLQJDQGUHYLHZUHOHYDQWSXEOLFDWLRQVSDUWLFXODUO\GLFWLRQDULHV

7KHVLWXDWLRQLQ1RUZD\ (YHQEHIRUHLQGHSHQGHQW1RUZHJLDQWUDQVODWLRQVKDGEHJXQWRDSSHDU7KXV6KDNHVSHDUHWUDQVODWLRQ EHJDQLQ1LOV5RVHQIHOGW¶VWUDQVODWLRQLQFRPSULVLQJVHYHQFHQWUDOZRUNVDQG-RKDQ6WRUP0XQFK WUDQVODWHG6FKLOOHU¶V'RQ&DUORVLQ7UDQVODWLRQVIURP5DFLQH*RHWKH0DGDPHGH6WDsO9LFWRU+XJR DQGRWKHUVIROORZHGUDSLGO\+RZHYHUPDQ\ZRUNVRI*HUPDQ)UHQFKRU(QJOLVKRULJLQZHUHVWLOOUHDGLQ 'DQLVKWUDQVODWLRQZKHUHDVLQGHSHQGHQWWUDQVODWLRQVRIWKH2OG,FHODQGLFVDJDVEHJDQZLWK-DFRE$DOO¶V /D[G¡ODVDJD± 7KHILUVWWUDQVODWLRQLQWRµUXUDO1RUZHJLDQ¶ZDV+DQV+DQVHQ¶VWUDQVODWLRQRI+RUDFH± +RZHYHU LWZDVWKHSLRQHHURI1RUZHJLDQDVDQLQGHSHQGHQWODQJXDJH,YDU$DVHQZKRUHDOO\GUHZDWWHQWLRQWRWKH SRVVLELOLWLHVRIWKLVPHGLXPZLWKKLVWUDQVODWLRQRISRHPVDQGSURVHH[WUDFWVIURP6KDNHVSHDUH &HUYDQWHV/XWKHU6FKLOOHUDQG%\URQLQWRODQGVPnOWKHIRUHUXQQHURI1\QRUVN$DVHQDOVRSODQQHGD%LEOH LQ1\QRUVNDQGWKH1HZ7HVWDPHQWWUDQVODWHGE\(OLDV%OL[DSSHDUHGLQ7KHFRPSOHWH%LEOHKRZHYHU RQO\DSSHDUHGLQZKHUHDVWKH6DPLDQVRI1RUWKHUQ1RUZD\KDGKDGWKHLURZQ1HZ7HVWDPHQW WUDQVODWHGE\1LHOV6WRFNIOHWKVLQFHDQGWKH*UHHQODQG,QXLWVWKHLU%LEOHWUDQVODWHGE\3DXO(JHGH VLQFH 7KHDGKHUHQWVRI1\QRUVNGHOLEHUDWHO\WULHGWRHQULFKWKHQHZODQJXDJHDQGWRJLYHLWSUHVWLJHWKURXJK WUDQVODWLRQVIURPWKHFODVVLFV7KLVLVWKHEDFNJURXQGIRUWUDQVODWLRQVOLNH$UQH*DUERUJDQG2ODY0DGVKXV¶V 6KDNHVSHDUHWUDQVODWLRQV0DFEHWKLQDQG.DXSPDQQHQL9HQHWLDLQ 7KHILUVWGHFDGHVRIWKHWZHQWLHWKFHQWXU\ZHUHFKDUDFWHUL]HGE\PDQ\WUDQVODWLRQVIURP(QJOLVK)UHQFKDQG *HUPDQVRWKDWPRVWPDMRUZULWHUVZHUHUHSUHVHQWHGLQ1RUZHJLDQEHIRUH:RUOG:DU7ZR0HQWLRQPXVWEH PDGHRI1LHOV.M UDQG0DJQXV*U¡QYROG¶VWUDQVODWLRQRI'RQ4L[RWH DQGWUDQVODWLRQVRIWKHFODVVLFV DIUHHYHUVLRQRIWKH2G\VVH\E\$UQH*DUERUJLQIROORZHGE\3‘VWE\H¶V,OLDG DQG2G\VVH\ ‘VWE\HDOVRWUDQVODWHG*UHHNWUDJHGLHVE\6RSKRFOHV $HVFK\OXV DQG(XULSLGHV ,QWKHVDSSHDUHGWKHVHULHV.ODVVLVNHERNY°UNWLWOHVLQDOOFRQWDLQLQJWUDQVODWLRQVRIWKHFODVVLFV IROORZHGLQWKHVE\%RNYHUNIUnPLOORPDOGHUHQZLWKPHGLHYDOFODVVLFVOLNHWKH5RODQGVNYDGHW&KDQVRQ GH5RODQG WUDQVODWHGE\$'DKOH7KHVDOVRVDZDQHZWUDQVODWLRQRI6KDNHVSHDUHDQSOD\VE\ +HQULN5\WWHU± DQGWZRPRUHSOD\VIROORZHGLQ6KDNHVSHDUHZDVDOVRWUDQVODWHGLQWRWKH 5LNVPnOZLWKZRUNVE\YDULRXVWUDQVODWRUVGXULQJ±DQGDQHZFROOHFWLRQRISOD\VWUDQVODWHGE\$ %MHUNH± 0RVWUHQRZQHGLQWKLVFDWHJRU\KRZHYHUDUH+DUWYLJ.LUDQ¶V0DFEHWK DQG+DPOHW 7KURXJKRXWWKHWZHQWLHWKFHQWXU\WKHUHKDYHEHHQPDQ\WUDQVODWLRQVIURPWKH5XVVLDQ7KXV&ULPHDQG 3XQLVKPHQWKDVDSSHDUHGLQQROHVVWKDQVL[GLIIHUHQWWUDQVODWLRQVDQGDFRPSOHWHQHZHGLWLRQRI'RVWR\HYVN\ ZDVSXEOLVKHGLQ (QJOLVKLVWKHGRPLQDQWODQJXDJHIRUWUDQVODWLRQVLQWR1RUZHJLDQIROORZHGE\*HUPDQ6ZHGLVK)UHQFK 'DQLVK5XVVLDQDQG6SDQLVK7KHEHVWVROGWUDQVODWLRQHYHULVDQ$VWULG/LQGJUHQFKLOGUHQ¶VERRN FRSLHV IROORZHGE\ILYHGHWHFWLYHVWRULHVE\,DQ0DF/HDQ±FRSLHV $OWKRXJK(QJOLVKLVWKH GRPLQDQWODQJXDJHWKLVLVOHVVVRWKDQLQ'HQPDUNDQG6ZHGHQ :HOONQRZQFRQWHPSRUDU\WUDQVODWRUVLQFOXGH$QQD/LVD$PDGRXIDPRXVIRUKHUWUDQVODWLRQRI3URXVW± 2OH0LFKDHO



3DJH

6HOEHUJZKRWUDQVODWHG0XVLO± 2ODY$QJHOOZKRWUDQVODWHG-R\FH¶V8O\VVHV DQG.DULDQG .MHOO5LVYLNIDPRXVIRUWKHLUWUDQVODWLRQVIURPODQJXDJHV $VIRUWUDQVODWLRQVIURP1RUZHJLDQLWLVZRUWKPHQWLRQLQJWKDW7KRU+H\HUGDKO¶VERRNVKDYHEHHQWUDQVODWHG LQWRQROHVVWKDQODQJXDJHV,EVHQ¶VSOD\VLQWRDQGFKLOGUHQ¶VERRNVE\$LPp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¶XQLRQV1RUVN2YHUVHWWHUIRUHQLQJ 12 IRUOLWHUDU\WUDQVODWRUVDQG1RUVNIDJOLWWHU UIRUIDWWHU²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²QRVRFLDOEHQHILWVRUWD[GHGXFWLRQIRUH[SHQVHVLQFXUUHGLQ FRQQHFWLRQZLWKWKHLUZRUN²DQGWKHUHDUHUHODWLYHO\IHZVWDWHEXUVDULHVDOWKRXJKWKH0LQLVWU\RI&XOWXUH VHHPVZLOOLQJWRFRQWULEXWHWRPDLQWDLQLQJDKLJKOHYHORIFRPSHWHQFHDPRQJWUDQVODWRUV$OVRSXEOLVKHUV¶ IHHVZKLFKUHPDLQHGYLUWXDOO\XQFKDQJHGIRUQHDUO\\HDUVDUHVWLOOGLVJUDFHIXOO\ORZWKRXJKQRWTXLWHVR EDGDVLQ'HQPDUN,QDIXOOWLPHOLWHUDU\WUDQVODWRUFRXOGW\SLFDOO\HDUQDQDQQXDOLQFRPHRIVRPH …ZKLFKSODFHVWUDQVODWRUVDPRQJWKHORZHVWSDLGPHPEHUVRIVRFLHW\&RQWUDFWVZLWKWKHDWUHVDQGERRN FOXEVDUHVRPHZKDWPRUHOXFUDWLYHEXWWKLVLVDVPDOOPDUNHW 7KHVLWXDWLRQRIFRPPHUFLDOWUDQVODWRUVLVGLIIHUHQWWKHLUUDWHSHUSDJHZRUNVRXWDWPRUHWKDQWKUHHWLPHVWKDW RIDOLWHUDU\WUDQVODWRU7KH6WDWVDXWRULVHUWH7UDQVODW¡UHUV)RUHQLQJ67) IRXQGHGLQKDVDERXW PHPEHUVZKREHWZHHQWKHPFRYHUODQJXDJHV7RTXDOLI\IRUPHPEHUVKLSWUDQVODWRUVPXVWSDVVDGLIILFXOW DQGLQWHUQDWLRQDOO\UHFRJQL]HGH[DPLQZKLFKVSHFLDODWWHQWLRQLVSDLGWRWHFKQLFDOOHJDOPHUFDQWLOH HFRQRPLFDQGDGPLQLVWUDWLYHODQJXDJH7KHRUJDQL]DWLRQRILQWHUSUHWHUV1RUVN7RONHIRUEXQGKDVDERXW PHPEHUVZKHUHDVWKHILYHRUVL[FRQIHUHQFHLQWHUSUHWHUVZKRH[LVWLQ1RUZD\EHORQJWR$,,& 7KH12DQGWKH1))FRRSHUDWHZLWKRWKHU1RUZHJLDQZULWHUV¶XQLRQVDQGDUHDIILOLDWHGWR.RSLQRUDQG 1RUZDFRZKLFKDUHµFROOHFWLQJVRFLHWLHV¶IRUFRS\LQJDQGFDEOHWHOHYLVLRQULJKWVUHVSHFWLYHO\7KH\DUHDOVR DIILOLDWHGWRWKH1RUGLF:ULWHUV¶&RXQFLODQGWKH(XURSHDQ:ULWHUV¶&RQJUHVVWKHRQO\LQWHUQDWLRQDO RUJDQL]DWLRQZLWKDOONLQGVRIZULWHUVDQGWUDQVODWRUVDVPHPEHUV$OO1RUZHJLDQWUDQVODWRUV¶DQGLQWHUSUHWHUV¶ XQLRQVDUHDOVRPHPEHUVRIWKH)e'e5$7,21,17(51$7,21$/('(675$'8&7(856),7 12LV DOVRUHSUHVHQWHGLQWKH$UWLVWV¶&RXQFLORI1RUZD\WKH&RXQFLOIRU%RRNV5HDGLQJDQG:ULWLQJWKH 1RUZHJLDQ/DQJXDJH&RXQFLODQGWKH(XURSHDQXQLRQRIOLWHUDU\WUDQVODWRUV²WKH&RQVHLO(XURSpHQGHV $VVRFLDWLRQVGH7UDGXFWHXUV/LWWpUDLUHV&($7/ 7KHPDLQSUL]HIRUOLWHUDU\WUDQVODWLRQLVWKHDQQXDO%DVWLDQSUL]HDEURQ]HVFXOSWXUHDQG1.5 DSSUR[LPDWHO\… IRUWKHEHVWµDGXOW¶WUDQVODWLRQDQGWKHVDPHVFXOSWXUHDQGDPRXQWIRUWKHEHVW WUDQVODWLRQIRUFKLOGUHQDQGDGROHVFHQWV)URPWRWKHUHZDV



3DJH

DSUL]HIURPWKH&RXQFLOIRU&XOWXUHIRUDGLVWLQJXLVKHGWUDQVODWRU7KH0LQLVWU\RI&XOWXUHKDVDQDQQXDOSUL]H ZKLFKIDOOVLQWRYDULRXVFDWHJRULHVDQGWKHFRQVHUYDWLYH5LNVPnOVIRUEXQGHWKDVDYHU\SUHVWLJLRXVSUL]HIRU WUDQVODWLRQLQWRJRRG5LNVPnO²DGHILQLWLRQZKLFKKDVUHFHQWO\EHHQH[WHQGHGVRDVWRLQFOXGHGLDOHFWDQG DYDQWJDUGHODQJXDJH 5HVHDUFKDQGSXEOLFDWLRQV 6RIDUWKHUHLVQRWPXFKWREHIRXQGLQWKLVFDWHJRU\7KHILUVWVFKRODUO\LQWURGXFWLRQWRWKHDUHDZDV6\OIHVW /RPKHLP¶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

)XUWKHUUHDGLQJ -DNREVHQ/RPKHLP0XQFK3HWHUVHQ+M¡UQDJHU3HGHUVHQ+M¡UQDJHU3HGHUVHQDQG6KLQH 4YDOH

9,**2+-‘51$*(53('(56(1$1'3(549$/(

%LRJUDSKLHV %,(+/&KDUORWWD'RURWKHD± 'DQLVKZULWHUDQGWUDQVODWRUWKHILUVWZRPDQLQ'HQPDUNWRPDNHD OLYLQJDVDZULWHU$VKHUIDWKHUGLGQRWEHOLHYHLQHGXFDWLRQIRUZRPHQ%LHKOZDVODUJHO\VHOIWDXJKWEXWVKH PDQDJHGWRDFTXLUHDQXPEHURI(XURSHDQODQJXDJHV6KHWUDQVODWHGDQGDGDSWHG)UHQFK*HUPDQDQG,WDOLDQ SOD\VIRUWKHVWDJHEXWVKHLVEHVWUHPHPEHUHGIRUKHUFHOHEUDWHGWUDQVODWLRQRI&HUYDQWHV¶'RQ4XL[RWH± %2,6(10RJHQV± 'DQLVKWUDQVODWRURIPRUHWKDQERRNVPDLQO\IURP(QJOLVK*HUPDQDQG )UHQFK%RLVHQZDVDQDUP\RIILFHUKHZURWHERRNVRQPLOLWDU\PDWWHUVDQGZDVPDGHOLHXWHQDQWFRORQHOLQ %\WKHQKRZHYHUKHKDGDOUHDG\VWDUWHGWUDQVODWLQJ$PRQJKLVEHVWNQRZQWUDQVODWLRQVDUH0HOYLOOH¶V 0RE\'LFN 7KRPDV0DQQ¶V'U)DXVWXV DQGHVSHFLDOO\-R\FH¶V8O\VVHVZKLFKKHILUVWEURXJKW RXWLQEXWNHSWUHYLVLQJWLOOKHSXEOLVKHGDWKLUGHGLWLRQLQ *581'79,*1LFRODL)UHGHULN6HYHULQ± 'DQLVKWKHRORJLDQSKLORVRSKHUDQGSRHWZKRDOVR GHVHUYHVFUHGLWIRUKLVYHU\ILQHWUDQVODWLRQVFKLHIO\RIPHGLHYDOSRHWU\*UXQGWYLJZURWHDJUHDWPDQ\K\PQV VRPHRIZKLFKDUHIUHHWUDQVODWLRQVRIPHGLHYDO/DWLQRU*HUPDQ5HIRUPDWLRQSRHPVDQGKHEURXJKWRXWD IUHHEXWVSLULWHGYHUVHWUDQVODWLRQRI%HRZXOI%MRYXOI +HDOVRWUDQVODWHG6D[R¶V*HVWD'DQRUXP 'DQPDUNV5LJHV.U¡QQLNH± LQWRDFRORXUIXO'DQLVKFKDUDFWHUL]HGE\DUFKDLVPVDQGPDQ\ORDQ ZRUGVIURPUXUDOGLDOHFWV /(0%&.(&KULVWLDQ/XGYLJ(GYDUG± 'DQLVKSRHWDQGWUDQVODWRU/HPEFNHKHOGGHJUHHVLQ GLYLQLW\DQGWKHDUWVDQGVSHQWPRVWRIKLVOLIHDVVFKRROPDVWHUDWYDULRXVVWDWHJUDPPDUVFKRROV+HWUDQVODWHG VHYHUDO%ULWLVKSRHWVLQFOXGLQJ%\URQDQG6ZLQEXUQHEXWKLVUHSXWDWLRQUHVWVRQKLV6KDNHVSHDUHWUDQVODWLRQV ± +HLQLWLDOO\EHJDQDVDUHYLVHURIDQHDUOLHUWUDQVODWLRQRISDUWRIWKHFDQRQEXWWKHPDMRUSDUWRIWKH WUDQVODWLRQLVHQWLUHO\KLVRZQZRUN+HPDQDJHGWRFRPELQHPDVWHU\RIWKHEODQNYHUVHIRUPZLWKQDWXUDO 'DQLVKFRORXUHGE\WKHGLFWLRQRIWKHJUHDW5RPDQWLFSRHWV+LVPDLQZHDNQHVVIURPDPRGHUQSRLQWRIYLHZ ZDVDWHQGHQF\WRWRQHGRZQYLROHQWDQGEDZG\HOHPHQWVLQ6KDNHVSHDUH :,/67(5&KULVWLDQ)UHGHULN± 'DQLVKWUDQVODWRURI+RPHUDQG(XULSLGHVOHFWXUHUDW6RU¡ $FDGHP\DQGDPLQRU5RPDQWLFSRHW:LOVWHULVEHVWNQRZQ



3DJH

IRUKLVWUDQVODWLRQVRIWKH,OLDGDQG2G\VVH\± ZKLFKDUHERWKVRXQG²IURPDVFKRODUO\SRLQWRIYLHZ² DQGLQVSLUHGDVSRHWLFFUHDWLRQ3UHYLRXVWUDQVODWLRQVRI+RPHUZHUHDYDLODEOHLQ'DQLVKZKHQKHVWDUWHGKLV ZRUNEXWKHIHOWWKDWWKHPDLQWKLQJKHFRXOGOHDUQIURPKLVSUHGHFHVVRUVZDVµZKDWQRWWRGR¶,QVWHDGRI XVLQJH[LVWLQJWUDQVODWLRQVDVDPRGHOKHORRNHGWRWKHOHDGLQJ'DQLVK5RPDQWLFSRHW$GDP2HKOHQVFKOlJHU IRULQVSLUDWLRQ+HSURGXFHGWZRKH[DPHWHUWUDQVODWLRQVWKHVHZHUHRXWVWDQGLQJLQWHUPVRIOLQJXLVWLF FUHDWLYLW\DVZHOODVVHQVLWLYLW\WRHXSKRQ\DQGUK\WKP 9,**2+-‘51$&(53('(56(1

'XWFKWUDGLWLRQ 7KH'XWFKODQJXDJHDUHDFRPSULVHVWKH1HWKHUODQGVDQG)ODQGHUVURXJKO\WKHQRUWKHUQKDOIRIWKHIHGHUDO VWDWHRI%HOJLXP7RGD\WKHUHDUHDURXQGPLOOLRQVSHDNHUVRI'XWFKPLOOLRQLQWKH1HWKHUODQGVDQGVL[ PLOOLRQLQ)ODQGHUV ,QWKHPHGLHYDOSHULRGWKHDUHDZDVSROLWLFDOO\GLYLGHGZLWKVRPHSDUWVRZLQJDOOHJLDQFHWR)UDQFHDQGRWKHUV WRWKH*HUPDQ +RO\5RPDQ(PSLUH,QWKHILIWHHQWKDQGVL[WHHQWKFHQWXULHVWKHYDULRXVGXFKLHVDQGFRXQWLHV RIWKH/RZ&RXQWULHVZHUHJUDGXDOO\XQLWHGXQGHUWKH%XUJXQGLDQDQGWKHQWKH+DEVEXUJG\QDVWLHV7KH (LJKW\
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



3DJH

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±ZDV EDVHGRQD/DWLQYLWDIURPDKXQGUHG\HDUVHDUOLHU+LV$HQHLGDOVRLQUK\PLQJFRXSOHWVZDVDOWRJHWKHUPRUH LQQRYDWLYHDVLWZHQWEDFNWR)UHQFKVHFXODUVRXUFHVEDVHGRQWKH$QJOR1RUPDQ5RPDQG¶(QHDVIURP DURXQGLWLQWURGXFHGWKHFRXUWO\HSLFLQWRERWK'XWFKDQG*HUPDQOLWHUDWXUHIRUDOWKRXJKYDQ9HOGHNH SUREDEO\EHJDQKLV$HQHLGLQ'XWFKKHHYHQWXDOO\ILQLVKHGLWLQ7KXULQJLDLQDODQJXDJHWKDWFRXOGUHDGLO\EH XQGHUVWRRGERWKE\'XWFKDQGE\+LJK*HUPDQVSHDNLQJDXGLHQFHV9DQ9HOGHNH¶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pWLHQGH7UR\HVZURWHKLV&RQWHGX*UDDOIRUWKH)OHPLVK&RXQW3KLOLSRI$OVDFH ,WLVQRWVXUSULVLQJWKHQWKDWPXFKVHFXODUDQGILFWLRQDOZULWLQJLQ0LGGOH'XWFKLVEDVHGRQ)UHQFKPRGHOV $PRQJWKHSUHFRXUWO\FKDQVRQVGHJHVWHLHWKH&DUROLQJLDQRU)UDQNLVKURPDQFHVFHQWUHGDURXQGWKHILJXUH RI&KDUOHPDJQHWKH0LGGOH'XWFKYHUVLRQHDUO\WKLUWHHQWKFHQWXU\ RIWKH)UHQFK5HQDXGGH0RQWDXEDQ JLYHVDJRRGLGHDRIWKHZD\WKHµPDWWHURI)UDQFH¶ZDVDGDSWHG$OWKRXJKLQDIHZSODFHVWKH)UHQFKLV IROORZHGDOPRVWZRUGIRUZRUGWKH'XWFKWH[WFDQQRWEHWUDFHGEDFNWRRQHLGHQWLILDEOH)UHQFKPDQXVFULSWEXW HFKRHVGLIIHUHQW)UHQFKYHUVLRQV0DQ\HSLVRGHVKDYHEHHQYHU\VXEVWDQWLDOO\DOWHUHGDQGWKH\GRQRWDOZD\V RFFXULQWKHVDPHRUGHU7KHPRVWSUREDEOHH[SODQDWLRQIRUVXFKGLYHUJHQFLHVLVWKDWWKH\UHIOHFWDQRUDO WUDGLWLRQDQGWKDWWKHZULWWHQYHUVLRQZDVFRPSRVHGRQWKHEDVLVRIPHPRUL]HGHSLVRGHV²DVLVDOVRVXJJHVWHG E\WKHODUJHVWRUHRIIRUPXODLFSKUDVHVDQGWKHZD\LQZKLFKVRPHHSLVRGHVDUHDSSDUHQWO\VKDSHGDVVHOI FRQWDLQHGHQWLWLHV 7KHFRXUWO\$UWKXULDQURPDQFHVDOVRUHDFKHGWKH/RZ&RXQWULHVYLD)UDQFH7KHWHFKQLTXHVRIUDGLFDO UHPDQLHPHQWUHVKDSLQJ DQGHQWUHODFHPHQWLQWHUZHDYLQJ DQGWKHFRPSOH[WH[WXDOUHODWLRQVEHWZHHQ RULJLQDOVDQGDGDSWDWLRQVZKLFKUHVXOWIURPWKLVFDQEHLOOXVWUDWHGZLWKUHIHUHQFHWRWKHPDVVLYH/DQFHORW FRPSLODWLRQ²VRPHYHUVHVLQDOO²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



3DJH

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µ%UHWKUHQRIWKH&RPPRQ/LIH¶ LQWKH1RUWKHUQ1HWKHUODQGVLQWKH ODWHIRXUWHHQWKDQGILIWHHQWKFHQWXULHVPRUDOL]LQJDQGGLGDFWLFZRUNVZHUHZULWWHQLQERWK/DWLQDQG'XWFKRU WUDQVODWHGYHU\VRRQDIWHUWKHLUILUVWDSSHDUDQFH,QKLV'HOLEULVWHXWRQLFDOLEXV2QERRNVLQ'XWFK *HUDUG =HUEROGRI=XWSKHQGLHG DUJXHGWKDWLWZDVLPPDWHULDOZKHWKHUERRNVZHUHUHDGLQ/DWLQRUWKH YHUQDFXODUDVORQJDVWKH\ZHUHHGLI\LQJDQGZLWKLQWKHUHDGHU¶VLQWHOOHFWXDOJUDVS$WWKHVDPHWLPHWKH HPHUJHQFHRIDQLQFUHDVLQJO\SRZHUIXOPHUFKDQWFODVVLQWKHWRZQVFUHDWHGDGHPDQGIRUELOLQJXDODQGHYHQ PXOWLOLQJXDOSKUDVHERRNVRIZKLFKWKHIRXUWHHQWKFHQWXU\'XWFK)UHQFK/LYUHGHVPHVWLHUV%RRNRIWUDGHV LVWKHILUVWDWWHVWHGVSHFLPHQ

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²E\QRZWKHPDLQHFRQRPLFDQGSRSXODWLRQFHQWUHDQGDFXOWXUDOPHWURSROLV EHFDPHWKHPRVWLPSRUWDQWSXEOLVKLQJFHQWUHLQWKH/RZ&RXQWULHV+HUHERRNVFRXOGEHSULQWHGIRU LQWHUQDWLRQDOPDUNHWVLQDUDQJHRIODQJXDJHVDQGRIWHQLQPXOWLOLQJXDOIRUP,WZDVKHUHDOVRWKDWIURPDURXQG WKHPLGGOHRIWKHVL[WHHQWKFHQWXU\WKH(XURSHDQ5HQDLVVDQFHZRXOGEHWUDQVODWHGLQWR'XWFK7KHPRGHUQ 'XWFKYHUEYHUWDOHQLVILUVWDWWHVWHGLQLWVFXUUHQWPHDQLQJWRWUDQVODWH LQWKLVSHULRG



3DJH

7KHUROHRIWUDQVODWLRQDURXQGWKHEHJLQQLQJRIWKHFHQWXU\PD\EHJDXJHGIURPWKHDFWLYLW\RIDSXEOLVKHUOLNH 7KRPDVYDQGHU1RRWZKRZDVEDVHGPDLQO\LQ%UXVVHOVUDWKHUWKDQLQ$QWZHUSDQGZKRZDVWKHILUVW/RZ &RXQWULHVSULQWHUWRUHTXHVWDQGREWDLQLQFRS\ULJKWSHUPLVVLRQWRSURWHFWKLVSURGXFWV%HWZHHQ DQGYDQGHU1RRWEURXJKWRXWVRPHWH[WVLQDSSUR[LPDWHO\SULQWLQJV+LVHDUO\SURGXFWLRQUDQJHG IURPVDLQWV¶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¶QDPHV /DWHULQWKHVL[WHHQWKFHQWXU\PXFKRIWKHWUDQVODWLRQDFWLYLW\DVVRFLDWHGZLWKWKHEUHDNWKURXJKRIWKH 5HQDLVVDQFHLQYHUQDFXODUFXOWXUHZDVLQWHQGHGIRUWKHVDPHW\SHRIDXGLHQFH:KHUHDVWKH+XPDQLVW LQWHOOHFWXDOpOLWHXVHG/DWLQDVLWVPHGLXPDQGYDULRXVSRSXODUL]LQJDQGFKDSERRNYHUVLRQVLQ'XWFKDSSHDOHG WRDPRUHWUDGLWLRQDOSXEOLFWKHWUDQVODWLRQVIURPWKH&ODVVLFVZKLFKEHJDQWRDSSHDULQ$QWZHUSDURXQGWKH PLGGOHRIWKHFHQWXU\ZHUHDLPHGDWDSURVSHURXVDQGFXOWXUDOO\SURJUHVVLYHXUEDQpOLWH7KHILUVWPDMRU WUDQVODWRURIWKHFODVVLFVLQWR'XWFKZDVWKH$QWZHUS5KHWRULFLDQ&RUQHOLV9$1*+,67(/(F± ZKRLQWKHVDQGVSURGXFHGFRPPHUFLDOO\VXFFHVVIXOUHQGHULQJVRIZRUNVE\2YLG9LUJLO7HUHQFH DQG+RUDFHDVZHOODVRI(5$6086DQG²YLDD/DWLQYHUVLRQ²6RSKRFOHV,QKLVSUHIDFHVYDQ*KLVWHOH FKLGHGWKH+XPDQLVWVIRUZULWLQJRQO\LQ/DWLQDQGDWWKHRWKHUHQGRIWKHVFDOHYRLFHGKLVFRQWHPSWIRU µZRUWKOHVV¶PHGLHYDOURPDQFHVDQGRWKHUHQWHUWDLQPHQWOLWHUDWXUH+HMXVWLILHGKLVRZQZRUNE\SRLQWLQJQRW RQO\WRWKHLQWULQVLFPHULWRIKLVRULJLQDOVEXWDOVRWRWUDQVODWLRQVEHLQJSXEOLVKHGLQRWKHUPRGHUQODQJXDJHV 7\SLFDORIWKHHDUO\5HQDLVVDQFHWUDQVODWRUZDVKLVDFXWHDZDUHQHVVRIWKHLPSHUIHFWLRQRIWKHPRWKHUWRQJXH FRPSDUHGZLWKWKHSXULW\IOH[LELOLW\DQGDEXQGDQFHRIWKHFODVVLFDOODQJXDJHV :KHUHDVYDQ*KLVWHOHVWXFNPRVWO\WRDXWKRUVZKRZHUHRQWKH/DWLQVFKRROFXUULFXOXPWKHRWKHUPDMRU WUDQVODWRURIWKHSHULRG'LUN9RONHUWV]RRQ&RRUQKHUW±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¶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¶6*HUPDQ%LEOHVHH*(50$175$',7,21 ZDV FRPPRQO\XVHG)URPWKHVRQZDUGVWKHVRFDOOHGµ7ZR$FHV¶%LEOHZDVZLGHO\UHDG7KLVZDVDK\EULG SURGXFWLQZKLFKWKH2OG7HVWDPHQWZDVEDVHGRQ/XWKHUDQGWKH1HZ7HVWDPHQWKDGEHHQWUDQVODWHGRQYHU\ GLIIHUHQWSULQFLSOHVIURPWKHRULJLQDO*UHHN$



3DJH

VWDQGDUGYHUVLRQGLGQRWFRPHDERXWXQWLOWKHVHYHQWHHQWKFHQWXU\ZKHQWKH'XWFK6WDWHV*HQHUDO FRPPLVVLRQHGDQHQWLUHO\QHZWUDQVODWLRQZKLFKZDVWREHFDUULHGRXWDORQJOLQHVVLPLODUWRWKH(QJOLVK $XWKRUL]HG9HUVLRQLHSUHSDUHGE\DFROOHFWLYHDQGDVFORVHWRWKHVRXUFHWH[WVDVWKHUHFLSLHQWODQJXDJH ZRXOGSHUPLW7KH'XWFKµ6WDWHV%LEOH¶DSSHDUHGLQ,WZDVKXJHO\LQIOXHQWLDODVDOLQJXLVWLFDQGFXOWXUDO SRLQWRIUHIHUHQFHDQGUHPDLQHGWKHVWDQGDUG'XWFK%LEOHXQWLOWKHWZHQWLHWKFHQWXU\ %\WKHWLPHWKHµ6WDWHV%LEOH¶DSSHDUHGWKH(LJKW\


3DJH

IURPDQXPEHURIWUDQVODWLRQVLQFOXGLQJ+RUDFH¶VSRHPVDQG2YLG¶V+HURLGHVGRQHSXUHO\DVSULYDWHH[HUFLVHV KHDOVRUHQGHUHGDOORI9LUJLOLQWR'XWFKILUVWLQSURVH DQGWKHQLQYHUVH EHIRUHJRLQJRQWR ZULWHKLVRZQ&KULVWLDQHSLF-RKQWKH%DSWLVW +LVSOD\-HSWKD DQHPXODWLRQRI*HRUJH %XFKDQDQ¶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±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±WRDURXQGSHUFHQWLQWKHHDUO\QLQHWHHQWKFHQWXU\ 7UDQVODWLRQVIURP(QJOLVKUHPDLQHGLQVLJQLILFDQWXQWLODURXQGWKHQHVWDEOLVKHGDFRQVWDQWSUHVHQFHIRU PRVWRIWKHFHQWXU\DQGGHFOLQHGRQO\WRZDUGVWKHHQGRIWKHSHULRG²ZKHQ)UHQFKUHYROXWLRQDU\DUPLHVKDG RYHUUXQWKH1HWKHUODQGV7UDQVODWLRQVIURPWKH*HUPDQKDUGO\SOD\HGDSDUWDWDOOXQWLODURXQGEXWE\ WKHHQGRIWKHFHQWXU\*HUPDQKDGEHFRPHIDUDQGDZD\WKHPRVWLPSRUWDQWVRXUFHODQJXDJH7KHSDWWHUQ ZRXOGUHPDLQWKHVDPHIRUDJRRGZKLOHRIDOOWKHQRYHOVSULQWHGLQ+ROODQGLQ



3DJH

WKHVDQGVRYHUSHUFHQWZHUHWUDQVODWLRQVDQGRIWKHVHDURXQGSHUFHQWZHUHEDVHGRQ*HUPDQ RULJLQDOV,QWKHHDUO\QLQHWHHQWKFHQWXU\'XWFKWKHDWUHWRRZHOORYHUKDOIWKHSOD\VZHUHWUDQVODWLRQV$PRQJ WKHPRVWSRSXODUDXWKRUVIRUWKHVWDJHZHUHSUROLILFZULWHUVOLNH$:,IIODQGDQG$XJXVWYRQ.RW]HEXH %HWZHHQDQGDURXQGRI,IIODQG¶VDQGQRIHZHUWKDQRI.RW]HEXH¶VSOD\VZHUHWUDQVODWHGLQWR 'XWFK ,QWKHHDUO\HLJKWHHQWKFHQWXU\(QJOLVKPRGHOVDQGWUDQVODWLRQVIURP(QJOLVKSURYHGLQIOXHQWLDOLQODXQFKLQJ VSHFWDWRULDOZULWLQJVLQWKH1HWKHUODQGV$GGLVRQDQG6WHHOH¶V(QJOLVK6SHFWDWRUZDVUHQGHUHGLQWR'XWFKLQLWV HQWLUHW\LQ±-XVWXVYDQ(IIHQ± ZKRKDGDOUHDG\WULHGKLVKDQGDWD)UHQFKODQJXDJH µ6SHFWDWRU¶DQGWUDQVODWHG'HIRH¶V5RELQVRQ&UXVRHDQG6ZLIW¶V$7DOHRID7XELQWR)UHQFKVWDUWHGDYHU\ VXFFHVVIXO'XWFK6SHFWDWRULQ,WZRXOGUXQWRLVVXHVXQWLODQGZDVIROORZHGE\DKRVWRI VLPLODUSHULRGLFDOVLQZKLFKHYHU\VXEMHFWXQGHUWKHVXQZDVGLVFXVVHG,QDOOWKHHLJKWHHQWKFHQWXU\VDZVRPH VSHFWDWRULDOVHULHVERWKWUDQVODWHGDQGRULJLQDOLQ+ROODQGDORQH7KHRWKHUQHZSURVHJHQUHDQGRQHZLWK DORQJHUIXWXUHZDVWKHQRYHO+HUH(QJOLVKDQG*HUPDQPRGHOV/DXUHQFH6WHUQH¶V6HQWLPHQWDO-RXUQH\DQG *RHWKH¶V:HUWKHUDPRQJWKHPFRPELQHGWRJLYHULVHWRD'XWFKZDYHRIVHQWLPHQWDOQRYHOVDWWKHHQGRIWKH HLJKWHHQWKFHQWXU\7KHHSLVWRODU\JHQUHLQZKLFK(QJOLVKH[DPSOHVSUHGRPLQDWHGOHQWLWVHOISDUWLFXODUO\ZHOO WRDSRUWUD\DORIERXUJHRLVYDOXHVDQGYLUWXHV7KHERRNQRZJHQHUDOO\UHJDUGHGDVWKHILUVWPRGHUQQRYHOLQ 'XWFK6DUD%XUJHUKDUW E\%HWMH:ROIIDQG$DJMH'HNHQFDQKDUGO\EHLPDJLQHGZLWKRXW 5LFKDUGVRQ¶VHSLVWRODU\ZRUNVDVSUHGHFHVVRUV%HWMH:ROIIKHUVHOIZKRSURGXFHGVRPHWLWOHVSXEOLVKHG WUDQVODWLRQVIURP(QJOLVK)UHQFKDQG*HUPDQ 7KHWLWOHSDJHRI6DUD%XUJHUKDUWERUHWKHSURXGLQVFULSWLRQµ1RW7UDQVODWHG¶&RQVLGHULQJWKHODUJHQXPEHUV RIWUDQVODWLRQVFRPLQJRQWRWKHPDUNHWDWWKHWLPHWKHQRWHRIGHILDQFHLQWKHLQVFULSWLRQZDVXQPLVWDNDEOH 7KHUHZHUHRWKHUUHDFWLRQVDVZHOO2QHFULWLFFRPSODLQHGWRZDUGVWKHHQGRIWKHFHQWXU\DERXWWKHµDOO HQJXOILQJRFHDQRIWUDQVODWLRQV¶DQGLQDQRWKHUZULWHUUHPDUNHGWKDW'XWFKWUDQVODWRUVZHUHµDV QXPHURXVDVORFXVWVLQ(J\SWDVLQGHIDWLJDEOHDQGSUREDEO\DVKDUPIXO¶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



3DJH

OHDGLQJFODVVHVLH)UHQFK2YHUWKHQH[W\HDUVRUVRWKHJUDGXDOHPDQFLSDWLRQRIWKH'XWFKVSHDNLQJ SRSXODWLRQRI)ODQGHUVPHDQWWKDWWUDQVODWLRQDFTXLUHGDQDOWRJHWKHUQHZGLPHQVLRQ)ROORZLQJWKH(TXDOLW\ /DZRIZKLFKUHFRJQL]HG'XWFKDORQJVLGH)UHQFKDVWKHFRXQWU\¶VRIILFLDOODQJXDJHDPDVVLYHHIIRUWRI OHJDODQGDGPLQLVWUDWLYHWUDQVODWLRQZDVVHWLQPRWLRQDQGFRQWLQXHVWRWKLVGD\$OOQDWLRQDOODZVDUH LPPHGLDWHO\WUDQVODWHGLQWRWKHRWKHUODQJXDJHDQGWKHQDWLRQDO3DUOLDPHQWKDVLWVVLPXOWDQHRXVLQWHUSUHWDWLRQ VHUYLFH:KHUHDV'XWFKVSHDNLQJ)ODQGHUVDQG)UHQFKVSHDNLQJ:DOORQLDDUHQRZPRQROLQJXDOWHUULWRULHVLQ WKHELOLQJXDODUHDRIWKHFDSLWDO%UXVVHOVDOORIILFLDOGRFXPHQWVDSSHDULQERWKODQJXDJHV 7KHVKHHUYROXPHRISURIHVVLRQDOWUDQVODWLQJLQWKH1HWKHUODQGVDQG)ODQGHUVDOVROHGWRWUDQVODWRUV¶ RUJDQL]DWLRQVEHLQJHVWDEOLVKHG,Q+ROODQGDQDVVRFLDWLRQZDVILUVWVHWXSDVHDUO\DV7KHSUHVHQW'XWFK 6RFLHW\RI7UDQVODWRUVZDVIRXQGHGLQ'XWFKOLWHUDU\WUDQVODWRUVKDYHWKHLURZQVHFWLRQLQWKH6RFLHW\RI $XWKRUV7KHµ%HOJLDQ&KDPEHUIRU7UDQVODWRUV,QWHUSUHWHUVDQG3KLORORJLVWV¶ZLWK)OHPLVKDQG)UDQFRSKRQH VXEGLYLVLRQVFDPHLQWREHLQJLQ7KH'XWFKDQGWKH%HOJLDQDVVRFLDWLRQVHDFKKDYHWKHLURZQ SXEOLFDWLRQVDQGERWKDUHDIILOLDWHGWRWKH)e'e5$7,21,17(51$7,21$/('(675$'8&7(856),7 ,QWKH1HWKHUODQGVWKHSUHVWLJLRXV0DUWLQXV1LMKRII3UL]HIRUOLWHUDU\WUDQVODWLRQZDVHVWDEOLVKHGLQDQG VHYHUDO'XWFKFRPSDQLHVKDYHGHYHORSHGDQGPDUNHWHGPDFKLQHWUDQVODWLRQV\VWHPV6LQFHWKHVDQG VDQXPEHURIKLJKHUHGXFDWLRQLQVWLWXWHVIRUWKHWUDLQLQJRIWUDQVODWRUVKDYHEHHQVHWXSLQERWKFRXQWULHV 7KHODVWWZRGHFDGHVDOVRZLWQHVVHGDUHPDUNDEOHIORXULVKLQJRIWKHQHZGLVFLSOLQHRIWUDQVODWLRQVWXGLHVLQWKH /RZ&RXQWULHV

)XUWKHUUHDGLQJ 'H5\QFNDQG:HONHQKX\VHQ+HUPDQVEF.RUSHODYDQ+RRI

7+(2+(50$16

%LRJUDSKLHV (5$6086RI5RWWHUGDP'HVLGHULXV± WKHJUHDWFRVPRSROLWDQ+XPDQLVWGLGQRWEHJLQWROHDUQ *UHHNXQWLOKHZDVDURXQG$PRQJKLVPRVWVXFFHVVIXOHDUO\WUDQVODWLRQVIURP*UHHNLQWR/DWLQZHUHWKH VDWLULFDOGLDORJXHVRI/XFLDQRI6DPRVDWHEHJXQLQDSOD\IXOFRQWHVWZLWK7KRPDV0RUHILUVWSXEOLVKHGLQ DQGDSRSXODUVFKRROERRNWH[WLQLWVUHYLVHGDQGHQODUJHGHGLWLRQ+LVWUDQVODWLRQVRI(XULSLGHV +HFXEDDQG,SKLJHQLDLQ$XOLV DOVRDSSHDUHGLQDQGKHWDFNOHGDQXPEHURIVKRUWHUWUDQVODWLRQVDVZHOO /LEDQLXV,VRFUDWHVHLJKWRI3OXWDUFK¶V0RUDOLDHVVD\V (UDVPXV¶VXSUHPHDFKLHYHPHQWKRZHYHUZDVWKH PRQXPHQWDODQGFRQWURYHUVLDOZRUNRQWKH1HZ7HVWDPHQW,QWKHVXPPHURIKHKDGGLVFRYHUHGD PDQXVFULSWFRS\RI/RUHQ]R9DOOD¶VSKLORORJLFDOFULWLTXHZULWWHQDURXQG RIWKH/DWLQYHUVLRQRIWKH 1HZ7HVWDPHQWLQ-(520(¶69XOJDWHVHH/$7,175$',7,21 (UDVPXVVDZLWLQWRSULQWOHVVWKDQD\HDU ODWHUDQGFRQWLQXHG9DOOD¶VSLRQHHULQJZRUN+HFROODWHGDQGFULWLFDOO\FRPSDUHGHDUO\*UHHNPDQXVFULSW YHUVLRQVRIWKH1HZ7HVWDPHQWVRDVWRHVWDEOLVKDUHOLDEOHVRXUFHWH[WDQGVHWRXWWRSURGXFHKLVRZQ FRSLRXVO\DQQRWDWHGWUDQVODWLRQLQWHQGHGDVDFRUUHFWLRQ²QRWDUHSODFHPHQW²RI-HURPH¶VWH[W7KHERRN ZKLFKDSSHDUHGLQFRQWDLQHGWKHILUVW*UHHN1HZ7HVWDPHQWHYHUSXEOLVKHGWKRXJKQRWWKHILUVWHYHU SULQWHG WRJHWKHUZLWK(UDVPXV¶/DWLQWUDQVODWLRQDVZHOODVDQQRWDWLRQVFULWLFDOFRPPHQWDU\DQDSRORJLDIRU WKH*UHHNDQG/DWLQWH[WVDQGDPHWKRGRORJLFDOLQWURGXFWLRQ$PDQLQDKXUU\(UDVPXVVWDUWHGUHYLVLQJDQG H[SDQGLQJWKHERRNDVVRRQDVWKHLQNZDVGU\WKHGHILQLWLYHILIWKHGLWLRQRIWKH1RYXP7HVWDPHQWXPZKLFK UDQWRSDJHVDSSHDUHGLQ */$=(0$.(5-DQ+HQGULNV]± PD\EHUHJDUGHGDVWKHILUVWSURIHVVLRQDOWUDQVODWRULQWR 'XWFK+HWUDQVODWHGQHDUO\ERRNVPRVWO\IURP)UHQFKDQG/DWLQ7KH\LQFOXGHILFWLRQDQGQRQILFWLRQ FODVVLFV/LY\6HQHFD+RPHU3OXWDUFK²WKHODWWHUWZRYLD/DWLQYHUVLRQV DVZHOODVPRGHUQV(5$6086 0RQWDLJQH3XJHWGHOD6HUUHHWF +LVWUDQVODWLRQRIWKH.RUDQZDVEDVHGRQD)UHQFKYHUVLRQ*OD]HPDNHU PDGHDPDMRUFRQWULEXWLRQWRWKHLQWHOOHFWXDOGHEDWHVRIKLVGD\WKURXJKKLVWUDQVODWLRQVRIWKHKLJKO\ FRQWURYHUVLDOSKLORVRSKLFDOZRUNVRI6SLQR]D



3DJH

DQG'HVFDUWHV,QWUDQVODWLQJ'HVFDUWHVIURPRQZDUGV KHWRRNJUHDWSDLQVWRZRUNIURPDOODYDLODEOH YHUVLRQVLQ/DWLQDQG)UHQFKDQGWRGHYLVHSXULVW'XWFKWHUPVIRUSKLORVRSKLFDOFRQFHSWV /()(9(5($QGUp± 7UDQVODWRUDQGWUDQVODWLRQVFKRODU+DYLQJUHDG*HUPDQLFODQJXDJHVLQKLV QDWLYH*KHQW%HOJLXP DQGOLWHUDU\WUDQVODWLRQDW(VVH[%ULWDLQ KHPDGHWUDQVODWLRQWKHRU\DQGKLVWRU\KLV PDLQUHVHDUFKILHOGZKLOHWHDFKLQJDWWKHXQLYHUVLWLHVRI+RQJ.RQJ$QWZHUSDQGILQDOO\$XVWLQ7H[DV+LV 7UDQVODWLQJ/LWHUDWXUH RSHQHGXSWKHKLVWRU\RIWUDQVODWLRQWKHRU\IRUWKH$QJORSKRQHZRUOG)URPWKH PLGVRQZDUGVKHZDVDVVRFLDWHGZLWKWKHGHVFULSWLYHDQGWDUJHWRULHQWHGDSSURDFKWRWKHVWXG\RI WUDQVODWLRQ*LGHRQ7RXU\-RVp/DPEHUWHWDO IRUZKLFKKHEHFDPHDQHIIHFWLYHDGYRFDWH,QWKHVKH HODERUDWHGKLVRZQWKHRUHWLFDOIUDPHZRUNIRUVWXG\LQJHVSHFLDOO\OLWHUDU\WUDQVODWLRQVHHLQJWUDQVODWLRQDVRQH IRUPRIµUHZULWLQJ¶DPRQJRWKHUVVWUHVVLQJFXOWXUDOUDWKHUWKDQOLQJXLVWLFDVSHFWVDQGGLVFXVVLQJWUDQVODWLRQ KLVWRU\LQWHUPVRISRHWLFVLGHRORJ\SDWURQDJHDQGµXQLYHUVHRIGLVFRXUVH¶+HDSSOLHGWKHVHFRQFHSWVWR YDULRXVKLVWRULFDOFDVHV/HIHYHUHD DQGWRWUDQVODWLRQWHDFKLQJF 9$1'(1921'(/-RRVW± WKHPDMRUSRHWDQGSOD\ZULJKWRIWKH'XWFK*ROGHQ$JHZDVDOVR DSUROLILFWUDQVODWRU+LVHDUO\UHQGHULQJVZHUHGRQHIURP)UHQFKDQG,WDOLDQ,QWKHVKHSURGXFHGWKHILUVW LQWHJUDOWUDQVODWLRQVLQWR'XWFKRIWZRSOD\VE\6HQHFDDQGZHQWRQWRWUDQVODWHE\ZD\RIH[HUFLVHDOORI +RUDFHLQWRSURVH DQG2YLG¶V+HURLGHV7KLVSUHSDUHGKLPIRUKLVGRXEOHWUDQVODWLRQRIWKHFRPSOHWH9LUJLO ILUVWLQSURVH WKHQLQYHUVH $VKHH[FKDQJHGWKH6HQHFDQPRGHOIRUDQ$ULVWRWHOLDQFRQFHSWLRQ RIWUDJHG\LQKLVRZQGUDPDWLFZULWLQJKHWUDQVODWHG6RSKRFOHV¶(OHFWUDLQDQGDQRWKHUIRXUSOD\VE\ 6RSKRFOHVDQG(XULSLGHVLQWKHV²WKHILUVWVXEVWDQWLDOERG\RIDQFLHQW*UHHNGUDPDWREHUHQGHUHGLQWR 'XWFK 9$1*+,67(/(&RUQHOLVF± ZURWHLQ$QWZHUSDVDPHPEHURIWKHORFDOµ&KDPEHURI5KHWRULF¶ DWDWLPHZKHQWKHFLW\ZDVDFRVPRSROLWDQFHQWUHRIFXOWXUHDQGFRPPHUFH7KHILUVW5HQDLVVDQFHWUDQVODWRU LQWR'XWFKKHUHQGHUHG2YLG¶V+HURLGHV 9LUJLO¶V$HQHLG WKHFRPHGLHVRI7HUHQFH DQG+RUDFH¶V6DWLUHV LQWRWKHWKHQSUHYDOHQWYHUVHIRUPVIRUDQLQWHOOHFWXDOO\SURJUHVVLYHXUEDQ pOLWH+LVYHUVLRQRI6RSKRFOHV¶$QWLJRQH EDVHGRQD/DWLQFULEZDVWKHILUVWWUDQVODWLRQRID*UHHN WUDJHG\LQWR'XWFKOHVVDFFRPPRGDWLQJWKDQKLVRWKHUWUDQVODWLRQVLWSURYHGWREHYDQ*KLVWHOH¶VRQO\ FRPPHUFLDOIDLOXUH 9$10$(5/$17-DFREF±F WKHµIDWKHURIDOO'XWFKODQJXDJHSRHWV¶ZDVERUQQHDU%UXJHVDQG ZRUNHGERWKLQ)ODQGHUVDQGIRUWKH&RXQWVRI+ROODQG2QHRIWKHPRVWSURGLJLRXVYHUQDFXODUZULWHUVRI PHGLHYDO(XURSHKHSURGXFHGVRPHYHUVHV PRVWRIKLVRHXYUHLVEDVHGRQIRUHLJQODQJXDJHVRXUFHV 0XFKRIKLVHDUO\ZRUNIROORZHG)UHQFK$UWKXULDQURPDQFHVEXWDVKHWXUQHGDZD\IURPILFWLRQWRERRNVWKDW ZRXOGEHµLQVWUXFWLYHDQGWUXH¶KHEHJDQWRZRUNIURP/DWLQFRYHULQJDOOILHOGVRIPHGLHYDOOHDUQLQJH[FHSW ODZ7KHIDFWWKDWKHUHQGHUHGKLVVRXUFHVFRQVLVWHQWO\LQWRYHUVHVXJJHVWVDQDXGLHQFHXVHGWRUHFLWDWLRQUDWKHU WKDQUHDGLQJ 7+(2+(50$16



3DJH

) )LQQLVKWUDGLWLRQ )LQODQGKDVVKDSHGLWVRZQLGHQWLW\LQWKHVSDFHEHWZHHQPDMRUFXOWXUHV6XFFHVVLYHSKDVHVRIFXOWXUDODQG OLQJXLVWLFLQIOXHQFHKDYHFUHDWHGDVRFLHW\LQZKLFKPXOWLRUELOLQJXDOLVPDQGWUDQVODWLRQKDYHSOD\HGD VLJQLILFDQWUROH )URPWKHWKLUWHHQWKFHQWXU\RQZDUGVWKHGRPLQDQWFXOWXUDOLQIOXHQFHLQ)LQODQGFDPHIURP6ZHGHQIRUILYH FHQWXULHV)LQODQGZDVSDUWRIWKH6ZHGLVKUHDOPDQGVKDUHGLQ6ZHGHQ¶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pOLWHVHUYHGLQWKHQLQHWHHQWKFHQWXU\DVDFKDQQHOIRU(XURSHDQLQIOXHQFHVZKLFKIHGLQWR WKHULVHRI)LQQLVKQDWLRQDOLVPRQWKHRWKHUKDQGWKHORQJFHQWXULHVRI6ZHGLVKUXOHKDGSUHYLRXVO\REVWUXFWHG WKHHPHUJHQFHRI)LQQLVKDVDQDWLRQDOODQJXDJH )LQODQG¶VKLVWRULFDOO\SUHFDULRXVSRVLWLRQEHWZHHQ(DVWDQG:HVWLVPDWFKHGE\WKHUHODWLYHLVRODWLRQRIWKH )LQQLVKODQJXDJH)LQQLVKLVD)LQQR8JULDQODQJXDJHQRWSDUWRIWKH,QGR(XURSHDQIDPLO\LWLVWKXV XQUHODWHGWRWKH*HUPDQLFODQJXDJHVWRWKHZHVWDQGWKH6ODYRQLFRQHVWRWKHHDVW$VWURQJO\DJJOXWLQDWLQJ ODQJXDJHLWLVFORVHO\UHODWHGWR(VWRQLDQDQGGLVWDQWO\WR+XQJDULDQ)LQQLVKLVWKHQDWLYHODQJXDJHRIDERXW SHUFHQWRIWKHFRXQWU\¶VFXUUHQWSRSXODWLRQRIILYHPLOOLRQ7KHUHDUHDERXW6ZHGLVKVSHDNLQJ )LQQV

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|QV%XGGHZKRWUDQVODWHGSDUWVRIWKH%LEOHLQWR6ZHGLVK 7UDQVODWLRQLQWR)LQQLVKEHJDQWRDFTXLUH



3DJH

KLVWRULFDOLPSRUWDQFHZLWKWKHZRUNRI0LNDHO$*5,&2/$F± D/XWKHUDQUHIRUPHUDQGIRXQGHURI OLWHUDU\)LQQLVK+LVWUDQVODWLRQRIWKH1HZ7HVWDPHQWDSSHDUHGLQIROORZHGE\DERXWDTXDUWHURIWKH 2OG7HVWDPHQWLQ±$IRUPHUVWXGHQWRI/XWKHU$JULFRODWUDQVODWHGZLWKDFOHDUVHQVHRIUHOLJLRXV PLVVLRQLQWKHEHOLHIWKDWWKH'LYLQH:RUGVKRXOGEHPDGHDFFHVVLEOHWRDOOSHRSOH,QKLVSUHIDFHWRWKH1HZ 7HVWDPHQWKHZULWHVWKDWWKH:RUGVKRXOGEHµSXEOLFFRPSUHKHQVLEOHWRDOOPHQDQGFRQFHDOHGIURPQR RQH¶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cER LQ6ZHGLVK ZKLFKZDVWKHFXOWXUDOFHQWUHRI6ZHGHQ¶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¶FRPPLWWHHXQGHU(VNLO3HWUDHXVEXLOWRQWKHHDUOLHUZRUN RI$JULFRODDQGRWKHUVEXWZRUNHGGLUHFWO\IURPWKHRULJLQDOODQJXDJHV$OOWKHFRVWVRIWUDQVODWLQJDQG SULQWLQJZHUHFRYHUHGE\WKHVWDWH²DQLQGLFDWLRQRIWKHLPSRUWDQFHDWWDFKHGWRWKHZRUN7KLVWUDQVODWLRQRI WKH%LEOHUHPDLQHGWKHVWDQGDUGYHUVLRQLQ)LQODQGXQWLOWKHV,WSOD\HGDQHQRUPRXVUROHLQVWDQGDUGL]LQJ )LQQLVKVSHOOLQJDQGV\QWD[DQGWKHLQIOXHQFHRILWVVW\OHFDQEHVHHQLQWKHZRUNRIPDQ\ZULWHUVDQGSRHWV DQGHYHQRFFDVLRQDOO\LQWKHSUHVVVHH-llVNHOl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pQ)RUVHHQ DQRIILFLDO WUDQVODWRULQWKH6WRFNKROPDGPLQLVWUDWLRQEXWWKH)LQQLVKKHXVHGZDVDOUHDG\DUFKDLF7KURXJKRXW)LQQLVK KLVWRU\OHJDOWH[WVKDYHEHHQVLJQLILFDQWO\LQIOXHQFHGE\WUDQVODWLRQVDQGE\FRQFHSWVERUURZHGIURPRWKHU ODQJXDJHVILUVW6ZHGLVKDQGODWHU5XVVLDQ 7UDQVODWLRQVRIRWKHUW\SHVRIDGPLQLVWUDWLYHWH[WGXULQJWKLVSHULRG²VWDWXWHVUR\DOGHFUHHVHWF²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



3DJH

VRXUFHWH[WIRUPVDQGZHUHOHVVLQWHUHVWHGLQDFKLHYLQJQDWXUDOQHVVLQWKHWDUJHWODQJXDJH 7KHRIILFLDO)LQQLVKWUDQVODWRU¶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¶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²DQGWKHUHIRUHDOVR)LQQLVK²GHFOLQHGZLWKLQ WKH6ZHGLVKVWDWHDQGLQ)LQODQGLWVHOIELOLQJXDOLVPEHFDPHOHVVFRPPRQZLWKWKHXSSHUDQGPLGGOHFODVVHV UHWUHDWLQJPDLQO\WR6ZHGLVK7UDQVODWLRQZDVWKXVDZD\RIFRXQWHUDFWLQJWKLVWUHQG 'XULQJWKH6ZHGLVKSHULRGDVDZKROHWUDQVODWRUVRIWHQKDGDUDWKHUDSRORJHWLFDQGGHIHQVLYHDWWLWXGHWRWKHLU WDUJHWWH[WV7KHWUDQVODWRU¶VZRUNZDVQRWKLJKO\UHJDUGHGFULWLFLVPZDVVHYHUHDQGWKHWUDQVODWRU¶VQDPHZDV RIWHQQRWPHQWLRQHGLQWKHSXEOLVKHGZRUN$WWKHEHJLQQLQJRIWKHSHULRGWUDQVODWLRQKDGQHYHUWKHOHVVEHHQ VHHQLQSRVLWLYHWHUPVDVDZD\RIHQULFKLQJWKH)LQQLVKODQJXDJHDQGHGXFDWLQJWKHSHRSOHE\WKHHQGRILW WUDQVODWLRQKDGEHFRPHPHUHO\DPHDQVRIGHIHQGLQJWKHODQJXDJHDQGVORZLQJGRZQLWVGHFOLQH

7KH5XVVLDQSHULRG± )LQQVKDGORQJEHHQLQYROYHGLQ6ZHGHQ¶VZDUVZLWK5XVVLD7KHILQDOGHIHDWRI6ZHGHQLQPHDQWWKDW )LQODQGEHFDPHSDUWRIWKH5XVVLDQ(PSLUHEXWWKURXJKRXWWKHIROORZLQJFHQWXU\)LQODQGDFTXLUHGDODUJH GHJUHHRIOHJLVODWLYHDQGFXOWXUDODXWRQRP\ ,QWKHPLGQLQHWHHQWKFHQWXU\(OLDV/g11527±FRPSLOHURIWKH)LQQLVKQDWLRQDOHSLF.DOHYDOD VHW DERXWUHYLVLQJDQGXSGDWLQJWKH)LQQLVKOHJDOODQJXDJHDQGUHWUDQVODWLQJVRPHRIWKHPDLQOHJDOWH[WV+H PRGHUQL]HGWKHODQJXDJHDQGDWWHPSWHGWRPDNHLWVRXQGPRUHQDWXUDOWUDQVODWHGDMXULGLFDOPDQXDODQGDGGHG WRLWDOLVWRIDERXWQHZOHJDOWHUPVDQGDFWHGDVODQJXDJHUHYLVHUIRU*XVWDI&DQQHOLQ¶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± ,QWKHODWH VKHSURSRVHGWKDWDQHZMRXUQDOEHIRXQGHGWRSXEOLVK)LQQLVKWUDQVODWLRQVRIOLWHUDU\FODVVLFVIURPRWKHU FXOWXUHVIRUDUWLVWLFSDWULRWLFDQGHGXFDWLRQDOUHDVRQV7KHLGHDZDVVXSSRUWHGE$OLDV/|QQURWDQGDOVRE\ WKH)LQQLVK/LWHUDWXUH6RFLHW\IRXQGHGLQ ZKLFKZDVDZDUHRIWKHQHHGWRLQWURGXFHOLWHUDU\PRGHOV LQWR)LQQLVKLQRUGHUWRVWLPXODWHWKHFRXQWU\¶VRZQOLWHUDU\FXOWXUH$IWHUVRPHGHOD\SDUWO\IRUSROLWLFDO UHDVRQVDQGSDUWO\EHFDXVHRIWKHSUHYDLOLQJDQWLOLWHUDWXUH



3DJH

DWWLWXGHVDPRQJWKHUHOLJLRXVUHYLYDOLVWPRYHPHQWV WKHSODQFDPHWRIUXLWLRQLQWKHODVWGHFDGHVRIWKH FHQWXU\VDZDVLJQLILFDQWERRPLQOLWHUDU\WUDQVODWLRQ ,QDQDQQXDOFRPSHWLWLRQZDVVHWXSE\6QHOOPDQZKRZDVQRZFKDLUPDQRIWKH/LWHUDWXUH6RFLHW\7KH 6RFLHW\HYHQGUHZXSDOLVWRIZULWHUVDQGZRUNVWREHWUDQVODWHGFRQWDLQLQJQRWRQO\OLWHUDU\HJ 6KDNHVSHDUH'LFNHQV0ROLq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pOLWHDQGIRUDUWLVWVZKRZRXOGEHLQVSLUHGE\WKHWUDQVODWLRQVWR SURGXFHWKHLURZQZRUNVRIDUW²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¶V0DFEHWKKDGDSSHDUHGLQDQGRI%XQ\DQ¶V HGLI\LQJ3LOJULP¶V3URJUHVVHYHQHDUOLHU 6FRWWDQG'LFNHQVDQGRIFRXUVHPRUH6KDNHVSHDUHVHH 3DDYR&$-$1'(5 FDPHODWHU7UDQVODWLRQVIURP)UHQFKVWDUWHGZLWKWKHZRUNVRI'XPDVSqUH7KHILUVW )LQQLVKWUDQVODWLRQVIURP5XVVLDQGDWHIURPWKHV7XUJHQHYDQG7ROVWR\ZHUHSDUWLFXODUO\SRSXODU 6FDQGLQDYLDQFODVVLFVZHUHWUDQVODWHGGXULQJWKHVDPHSHULRGSDUWLFXODUO\LQIOXHQWLDOZHUHWKHWUDQVODWLRQVRI &0%HOOPDQ¶V6ZHGLVKVRQJVZKLFKWRJHWKHUZLWKWKRVHRI6FKLOOHU¶VO\ULFV FRQWULEXWHGWRWKHZHDNHQLQJ RIWKHWUDGLWLRQDOVWURSKHVWUXFWXUHLQ)LQQLVKO\ULFSRHWU\DQGWKHULVHRIIUHHUPHWUHVDQGUK\WKPVWRZDUGVWKH HQGRIWKHFHQWXU\7UDQVODWLRQVRIWKH*UHHNDQG/DWLQFODVVLFVJRWXQGHUZD\LQWKHVWUDQVODWRUVZHUH RIWHQVFKRROWHDFKHUVWUDQVODWLQJVSHFLILFDOO\IRUVFKRROXVHDQGWKHUHZDVVRPHFULWLFLVPRIWUDQVODWLRQVWKDW ZHUHUHJDUGHGDVµWRRVHQVXDO¶,WDOLDQOLWHUDWXUHDUULYHGODWHUVWDUWLQJZLWKWKHVWKHZULWHU-RHO/HKWRQHQ ZDVDPRQJWKRVHZKRWUDQVODWHGIURP,WDOLDQ 7KHWUDQVODWLRQRIOLWHUDWXUHIRUFKLOGUHQDQG\RXQJSHRSOHDOVRVWDUWVLQWKHPLGQLQHWHHQWKFHQWXU\2OOLNDLQHQ %HIRUHWKLVPRVWRIWKHIHZERRNVDYDLODEOHIRUFKLOGUHQKDGEHHQUHOLJLRXVDQGGLGDFWLFDERXWKDOIRI WKHVHZHUHWUDQVODWLRQVPRVWO\IURP*HUPDQHLWKHUGLUHFWO\RUYLD6ZHGLVK,QWKUHHLQIOXHQWLDO WUDQVODWLRQVDSSHDUHGDFROOHFWLRQRI(VWRQLDQIRONWDOHVDQGWZRQRYHOV2IWKHODWWHURQHZDVWKHSRHW$QWWL 5lW\¶VWUDQVODWLRQRIWKHXSOLIWLQJVWRU\RIWKHVXIIHULQJVRI*HQRYHYDE\WKH*HUPDQWKHRORJLDQ&KULVWRSK YRQ6FKPLGWKLVEHFDPHH[WUHPHO\SRSXODULQ)LQODQGDQGZHQWLQWRVHYHUDOUHSULQWV7KHRWKHUZDV SRVWPDVWHU2WWR7DQGHIHOW¶VDEULGJHGDGDSWDWLRQEDVHGRQ*H\JHU¶V



3DJH

*HUPDQDGDSWDWLRQRI'HIRH¶V5RELQVRQ&UXVRH7KHUHIROORZHGWUDQVODWLRQVIURP$QGHUVHQWKH*ULPP EURWKHUVDQGWKH)LQODQG6ZHGH=DFKULV7RSHOLXVWKHIDWKHUILJXUHRI)LQQLVKFKLOGUHQ¶VOLWHUDWXUH 'XULQJWKHODWWHUKDOIRIWKHQLQHWHHQWKFHQWXU\DERXWKDOIRIDOOWUDQVODWLRQVRIFKLOGUHQ¶VOLWHUDWXUHZHUHRI *HUPDQRULJLQDOVGLUHFWO\RULQGLUHFWO\ DQGDTXDUWHURI(QJOLVKVRXUFHWH[WV7KHH[FLWLQJEXWRYHUWO\ PRUDOL]LQJZRUNVRI)UDQ]+RIIPDQQZHUHSRSXODUDVZHUH-RKDQQD6S\UL¶V+HLGLERRNV7KHVDQG VVDZDQ(QJOLVKLQYDVLRQRIFKLOGUHQ¶VOLWHUDWXUHSHUKDSVSDUWO\LQIOXHQFHGE\WKHQHHGIHOWE\%DSWLVW DQG0HWKRGLVWPLVVLRQDULHVIRUDSSURSULDWH6XQGD\6FKRROPDWHULDO

$IWHULQGHSHQGHQFHRQZDUGV )LQODQGJDLQHGLWVLQGHSHQGHQFHLQIROORZLQJWKH5XVVLDQ5HYROXWLRQ,QGHSHQGHQFHVSDUNHGRIIDQHZ ZDYHRIOLWHUDU\WUDQVODWLRQDIRXQGDWLRQZDVVHWXSWRSURYLGHJUDQWVIRUERWKZULWLQJDQGWUDQVODWLQJZRUNVRI OLWHUDWXUH/LWHUDU\WUDQVODWLRQQRZH[WHQGHGWRPRUHGLVWDQWFXOWXUHV&HUYDQWHV¶'RQ4XL[RWHZDVWUDQVODWHG LQ±VHH-$+2//2 EXW/DWLQ$PHULFDQOLWHUDWXUHGLGQRWDUULYHRQWKHVFHQHXQWLOWKHVWKH SRHW3HQWWL6DDULWVDKDVEHHQRQHRIWKHPDLQWUDQVODWRUVRIWKLVOLWHUDWXUHHVSHFLDOO\WKHZRUNVRI1HUXGD &KLQHVHOLWHUDWXUHDQGSKLORVRSK\ZHUHILUVWWUDQVODWHGLQWKHVZLWKDVHFRQGSHDNRILQWHUHVWLQWKH VPRVWWUDQVODWLRQVZHUHGRQHYLD*HUPDQRU(QJOLVKEXW3HQWWL1LHPLQHQIRUH[DPSOHFRQWLQXHVWR ZRUNIURP&KLQHVHRULJLQDOVGLUHFWO\7UDQVODWLRQVRI-DSDQHVHSRHWU\E\7XRPDV$QKDYDDQGODWHU.DL 1LHPLQHQ DQG-DSDQHVHGUDPDVWDUWHGWRIORXULVKLQWKHV7UDQVODWLRQVIURP$IULFDQFXOWXUHVDUHHYHQ PRUHUHFHQW 7KURXJKRXWWKHKLVWRU\RIOLWHUDU\WUDQVODWLRQLQ)LQODQGWZRWUDGLWLRQVKDYHKHOGVZD\,QRQHDSSO\LQJWR WUDQVODWLRQVIURPFODVVLFDODQWLTXLW\DQGWROHJDODQGELEOLFDOWUDQVODWLRQWKHWHQGHQF\KDVEHHQWRWUDQVODWH UDWKHUOLWHUDOO\LQWKHILUVWLQVWDQFHZLWKDQH\HWRWKHHGXFDWLRQDOSXUSRVHRIWKHWH[WVLQTXHVWLRQODWHU YHUVLRQVRIWKHVDPHWH[WVZRXOGWKHQEHSURGXFHGJLYLQJSULRULW\WRDPRUHQDWXUDO)LQQLVK,PDJLQDWLYH ILFWLRQRQWKHRWKHUKDQGZDVRIWHQUHQGHUHGILUVWLQWKHIRUPRI$'$37$7,210DFEHWKILUVWDSSHDUVDVD )LQQLQD)LQQLVKVHWWLQJ ODWHUWUDQVODWLRQVWHQGHGWRVKRZPRUHUHVSHFWWRWKHVRXUFHWH[W)RULQVWDQFH 0RGHUQLVWWHFKQLTXHVVXFKDVVWUHDPRIFRQVFLRXVQHVVSURYHGGLIILFXOWWRWUDQVODWHDWILUVWLQWKHV WUDQVODWRUVZHUHVWLOOXQKDSS\ZLWKDQLQGLUHFWIUHHVW\OHDQGWHQGHGWRSUHIHUDPRUHµQDWXUDO¶GLUHFWRULQGLUHFW VSHHFK/DWHUWUDQVODWLRQVVXFKDVWKRVHE\WKHSRHW3HQWWL6$$5,.26.,RIIRUH[DPSOH-R\FHDQG6DOLQJHU ZHUHDEOHWRH[SORLWDQGVWUHWFK)LQQLVKPRUHIUHHO\WRDFFRPPRGDWHWKHSDWWHUQVRIWKHVRXUFHWH[W 2WKHULQIOXHQWLDOOLWHUDU\WUDQVODWRUVRIWKHWZHQWLHWKFHQWXU\LQFOXGHWKHSRHWV2WWR0$11,1(1(LQR/HLQR DQG
7UDQVODWRUWUDLQLQJ 7UDQVODWRUWUDLQLQJDVDNLQGRIPDVWHUDSSUHQWLFHDUUDQJHPHQWEHJDQZLWKWKH)LQQLVK/LWHUDWXUH)XQG DOUHDG\PHQWLRQHG/HKWR 7KH)XQG¶VFRPPLWWHHZKLFKFRQVLVWHGRISURIHVVRUVDQGRWKHUH[SHUWVWRRN SDLQVWRVHOHFWDQGWUDLQFRPSHWHQWWUDQVODWRUV6DPSOHYHUVLRQVKDGWREHVXEPLWWHGDQG



3DJH

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²6ZHGLVKRU)LQQLVK(QJOLVK7KHUHDUHSODQVWRVHWXSDQDWLRQDO *UDGXDWH6FKRRORI7UDQVODWLRQ6WXGLHV$QDWLRQDOFHQWUHIRUFRRUGLQDWLQJFRQIHUHQFHLQWHUSUHWHUWUDLQLQJKDV EHHQVHWXSDWWKH7XUNX6FKRROZKLFKKRVWHGDQLQWHUQDWLRQDOFRQIHUHQFHRQLQWHUSUHWDWLRQLQ$XJXVW $/LFHQVHG7UDQVODWRU([DPLQDWLRQLVUXQE\DQDWLRQDOERDUGVXFFHVVLQWKLVH[DPLQDWLRQJUDQWVWKHVWDWXVRI DFHUWLILHGWUDQVODWRUGHHPHGFRPSHWHQWWRWUDQVODWHRIILFLDOGRFXPHQWVDQGFHUWLILFDWHV

2UJDQL]DWLRQRIWKHSURIHVVLRQ 7KHSURIHVVLRQRIWUDQVODWLQJDQGLQWHUSUHWLQJKDVJURZQHQRUPRXVO\LQ)LQODQGVLQFH:RUOG:DU7ZR7KLV KDVOHGWRLPSURYHPHQWVLQVWDQGDUGVDQGLQWKHOHJDOULJKWVRIWUDQVODWRUVDQGLQWHUSUHWHUV 1RUGLFFRRSHUDWLRQKDVOHGWRDMRLQWDJUHHPHQWLQIRUFHVLQFH RQFLWL]HQV¶ULJKWVWRKDYHDFFHVVWRDQ LQWHUSUHWHULQFHUWDLQFRQWH[WVDWSXEOLFH[SHQVH$OO1RUGLFFRXQWULHVVHHNWRHQVXUHWKDW1RUGLFFLWL]HQVFDQ XVHWKHLURZQQDWLYHODQJXDJHLQWKHLUGHDOLQJVZLWKWKHDXWKRULWLHV:LWKWKHJURZWKLQLPPLJUDWLRQOHYHOV &20081,7<,17(535(7,1*LVQRZDIHDWXUHRIHYHU\GD\OLIHEXWPXFKRILWLVVWLOOGRQHRQDQDPDWHXU EDVLV 7KH)LQQLVK$VVRFLDWLRQRI7UDQVODWRUVDQG,QWHUSUHWHUV6.7/ ZDVIRXQGHGLQDQGKDVEHHQDPHPEHU ,17(51$7,21$/('(675$'8&7(856),7 VLQFH,WLVDOVRDPHPEHURIWKH RIWKH &RQVHLO(XURSpHQGHV$VVRFLDWLRQVGH7UDGXFWHXUV/LWWpUDLUHV,WPDLQWDLQVFORVHOLQNVZLWKRWKHU1RUGLF DVVRFLDWLRQVDQGLVLQWKHSURFHVVRIHVWDEOLVKLQJPRUHOLQNVZLWKWKH%DOWLFVWDWHV7KH6.7/KDVILYH GLYLVLRQVOLWHUDU\WUDQVODWLRQQRQILFWLRQGRFXPHQW WUDQVODWLRQDXGLRYLVXDOPHGLDWUDQVODWLRQLQWHUSUHWLQJ DQGUHVHDUFKDQGWHDFKLQJ&XUUHQWPHPEHUVKLSLVDURXQGE\IDUWKHODUJHVWGLYLVLRQLVWKHQRQILFWLRQ RQHZKLFKLQFOXGHVVFLHQWLILFEXVLQHVVDQGWHFKQLFDOWUDQVODWRUV0HPEHUVKLSLVEDVHGRQDSSOLFDWLRQDQG UHFRPPHQGDWLRQ



3DJH

7KH6.7/SXEOLVKHVWKHMRXUQDO.llQWlMlgYHUVlWWDUHQWHQWLPHVD\HDUWKHELOLQJXDOWLWOHFRQVLVWVRIWKH )LQQLVKDQG6ZHGLVKZRUGVIRUµWUDQVODWRUWKHWUDQVODWRU¶ 7KLVLVPRVWO\LQ)LQQLVKEXWRFFDVLRQDOO\FDUULHV DUWLFOHVLQRWKHUODQJXDJHV,WZDVDZDUGHGWKH),7-RXUQDO3UL]HIRU±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¶UR\DOWLHVIURPWKH)LQQLVK%URDGFDVWLQJ&RPSDQ\WRFRYHUDOO EURDGFDVWFRS\ULJKWWUDQVODWLRQV )LQODQGDOVRKDVDSURIHVVLRQDODVVRFLDWLRQIRUWUDQVODWLRQDJHQFLHVDQGDWUDGHXQLRQDVVRFLDWLRQIRUWUDQVODWRUV 0DQ\WUDQVODWRUVZRUNIUHHODQFHDQGPDQ\SDUWWLPHRQO\,QVSLWHRIDQDPSOHVXSSO\RISURIHVVLRQDOV WUDQVODWLRQVFRQWLQXHWREHFRPPLVVLRQHGDOVRIURPQRQSURIHVVLRQDOVRQDQDGKRFEDVLV%HFDXVHWKHUHDUH QRWHQRXJKQDWLYHVSHDNHUVRIVSHFLILFWDUJHWODQJXDJHV²RWKHUWKDQ6ZHGLVK²ZRUNLQJIURP)LQQLVK)LQQV RIWHQQHHGWRWUDQVODWHLQWRDIRUHLJQODQJXDJHVHH',5(&7,212)75$16/$7,21 3URIHVVLRQDOWUDQVODWRUVLQ)LQODQGKDYHSKRQHDQGFRPSXWHUDFFHVVWRDQDWLRQDOWHUPLQRORJ\VHUYLFHZLWKD GDWDEDVHZKLFKVSHFLDOL]HVLQWHFKQRORJ\EXWDOVRFRYHUVRWKHUDUHDVLQFRPPHUFHDGPLQLVWUDWLRQDQG OHJLVODWLRQ

5HVHDUFKDQGSXEOLFDWLRQV %HIRUHWKHVFKRROVRIWUDQVODWLRQVWXGLHVZHUHIRXQGHGUHVHDUFKRQWUDQVODWLRQZDVVSRUDGLFPRVWO\ XQGHUWDNHQDVDQRIIVKRRWDFWLYLW\RIGHSDUWPHQWVRIOLWHUDWXUHRUSKLORORJ\DQGGHDOLQJDOPRVWH[FOXVLYHO\ ZLWKOLWHUDU\WUDQVODWLRQ2YHUWKHSDVWILIWHHQ\HDUVKRZHYHUPRUHGLYHUVHDUHDVRIUHVHDUFKKDYHVWDUWHGWR IORXULVKLQWKHVFKRROVRIWUDQVODWLRQ$UHDVRIVSHFLDOL]DWLRQLQFOXGHLQWHUSUHWLQJDQGFRJQLWLYHSURFHVVLQJ 7XUNX JHQHUDOWKHRU\WHUPLQRORJ\DQGFKLOGUHQ¶VOLWHUDWXUH7DPSHUH 7+,1.$/28'35272&2/6 VWXGLHVDQGDVVHVVPHQW6DYRQOLQQD FRQWLQXLQJWUDLQLQJDQGDVVHVVPHQW.RXYROD 7KHVFKRROVRIWUDQVODWLRQVWXGLHVUXQWKHLURZQSXEOLFDWLRQVHULHV7KH)DFXOW\RI+XPDQLWLHVDWWKH 8QLYHUVLW\RI9DDVDSXEOLVKHVDVHULHVEDVHGRQLWVDQQXDOVHPLQDUVRQODQJXDJHIRUVSHFLDOSXUSRVHVDQG WKHRU\RIWUDQVODWLRQ7KH/LWHUDWXUH'HSDUWPHQWRIWKH8QLYHUVLW\RI-\YlVN\Ol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



3DJH

OLFHQVHGE\1RNLD7HOHFRPPXQLFDWLRQVDQGWKHSURMHFWKDVDOVRSURGXFHGDQXPEHURIKDQGKHOGHOHFWURQLF GLFWLRQDULHV%UDFH

)XUWKHUUHDGLQJ $DOWRQHQ/HKWR.RYDOD0DMDPDD2OOLNDLQHQDQG3XODNND6DQGEDFND6RUYDOL

$1'5(:&+(67(50$1

%LRJUDSKLHV $*5,&2/$0LNDHOF± /XWKHUDQUHIRUPHUKXPDQLVWDQGIRXQGHURIOLWHUDU\)LQQLVKZKLFKKH YLUWXDOO\FUHDWHGDVKHWUDQVODWHG+HZDVVHQWWR:LWWHQEHUJLQWRVWXG\XQGHU/87+(5VHH*(50$1 75$',7,21 DQG0HODQFKWKRQWKHUHKHEHJDQKLV)LQQLVKWUDQVODWLRQRIWKH1HZ7HVWDPHQWZLWKWKHDLPRI H[SUHVVLQJWKHELEOLFDOPHVVDJHLQWKHHYHU\GD\ODQJXDJHRIRUGLQDU\)LQQV+HODWHUUHWXUQHGWRWHDFKLQJDQG HFFOHVLDVWLFDOSRVWVLQ7XUNXDQGZDVDSSRLQWHGELVKRSRI7XUNXLQ$JULFROD¶VWUDQVODWLRQRIWKH1HZ 7HVWDPHQWZDVSXEOLVKHGLQKHZRUNHGIURPWKH*UHHNEXWDOVRZLWKWKHKHOSRIWUDQVODWLRQVLQ*HUPDQ DQG6ZHGLVK+HDOVRWUDQVODWHGSDUWRIWKH2OG7HVWDPHQW &$-$1'(53DDYR(PLO± 3RHWXQLYHUVLW\OHFWXUHUDQGWUDQVODWRUIURP6ZHGLVK5XQHEHUJ DQG(QJOLVK,QVSLUHGE\WKHRSHQLQJRIWKH)LQQLVK1DWLRQDO7KHDWUHLQ+HOVLQNLLQWKHV&DMDQGHUVSHQW KLVOLIHWUDQVODWLQJDOO6KDNHVSHDUH¶VSOD\VH[FHSW3HULFOHV LQWR)LQQLVK+LVWUDQVODWLRQVKDYHKDGJUHDW LQIOXHQFHRQ)LQQLVKWKHDWUHDQGOLWHUDWXUHWKH\DUHVWLOOWKHRQO\RQHVDYDLODEOHIRUPDQ\RI6KDNHVSHDUH¶V SOD\V +2//2-XKR$XJXVW± 3URIHVVRURIHGXFDWLRQ8QLYHUVLW\RI+HOVLQNLDQGDSRO\JORW+ROOR VWXGLHGIRUILYH\HDUVLQ9LHQQDDQG/HLS]LJZKLOHVXSSRUWLQJKLPVHOIE\WUDQVODWLQJ+HODWHUWUDQVODWHGDQ HQRUPRXVDPRXQWRYHUWLWOHV ERWKOLWHUDU\DQGQRQILFWLRQDORQJVLGHKLVPDLQDFDGHPLFRFFXSDWLRQDQG DIWHUUHWLULQJ+HWUDQVODWHGIURPPDQ\ODQJXDJHV(XURSHDQDQGQRQ(XURSHDQLQFOXGLQJ$UDELFDQG6HUER &URDWLDQ+HVWDUWHGZLWK:LOOLDP-DPHV¶VVSHHFKHVWKHQZHQWRQWRHGXFDWLRQDOFODVVLFV3HVWDOR]]L 0RQWHVVRUL SKLORVRSK\%HUJVRQ6QHOOPDQ5XVVHOO'HVFDUWHV3ODWR1LHW]VFKH DQGOLWHUDWXUHKHDOVR SRSXODUL]HGZRUNVIRUWKHJHQHUDOSXEOLF+ROORKDGVXFKDUHSXWDWLRQZLWKSXEOLVKHUVWKDWKHFRXOGKLPVHOI VXJJHVWZRUNVWKDWQHHGHGWREHWUDQVODWHGIRUH[DPSOH'RVWR\HYVN\*RHWKH7DJRUH)UDQFH +HKDG FRQVLGHUDEOHFXOWXUDOLQIOXHQFHDVDWUDQVODWRU /g11527(OLDV± /HDGLQJILJXUHRIWKH)LQQLVKQDWLRQDOLVWPRYHPHQWPHGLFDOGRFWRUIRONORULVW ZULWHUFRPSLOHURIWKH)LQQLVKQDWLRQDOHSLF.DOHYDODDQGSURIHVVRURI)LQQLVKOLWHUDWXUHDQGODQJXDJH +HOVLQNL /|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²6ZHGLVKGLFWLRQDU\DQGFKDLUHGWKH FRPPLWWHHZRUNLQJRQWKH)LQQLVKK\PQERRN 0$11,1(12WWR± /HFWXUHULQ)LQQLVK8QLYHUVLW\RI+HOVLQNLDQGSRHW+HWUDQVODWHGDZLGH UDQJHRISRHWU\DQGGUDPDRYHUOLQHV LQFOXGLQJ5XQHEHUJDQG7RSHOLXVIURP6ZHGLVK+HLQHDQG *RHWKHIURP*HUPDQ0ROLqUHIURP)UHQFK3HW{ILIURP+XQJDULDQDQG+RPHU6RSKRFOHVDQG(XULSLGHVIURP *UHHN+HZDVDOVRODQJXDJHUHYLVHUIRUWKH%LEOHWUDQVODWLRQFRPPLWWHH



3DJH

± +LVWUDQVODWLRQVRI+HLQHKHOSHGWRLQWURGXFHIUHHUPHWUHVLQWR)LQQLVKSRHWU\,QKLVWUDQVODWLRQV IURP0ROLqUHKHFUHDWHGKLVRZQHTXLYDOHQWRIWKHDOH[DQGULQHNQRZQDVµ0DQQLQHQ¶VDOH[DQGULQH¶ZKLFK UHVHPEOHGEODQNYHUVHEXWUHWDLQHGUK\PHDQGYDULHGWKHFDHVXUDDQGV\OODEOHQXPEHU+LVWUDQVODWLRQVKDYH EHFRPH)LQQLVKFODVVLFVLQWKHLURZQULJKW 6$$5,.26.,3HQWWL± :ULWHUSRHWWUDQVODWRU6DDULNRVNLEHFDPHDOHJHQGLQKLVWLPHDVD FXOWXUDOUDGLFDODQGDOHDGLQJILJXUHRI)LQQLVKPRGHUQLVP$ORQJVLGHKLVRZQZULWLQJKHSURGXFHGPDQ\ WUDQVODWLRQVRI*UHHNFODVVLFVQRWDEO\+RPHU¶V2G\VVH\ DQGPRGHUQSURVHIRUH[DPSOH6DOLQJHU-R\FH %HOORZ0LOOHU +LVWUDQVODWLRQRI6DOLQJHU¶V&DWFKHULQWKH5\HLQWR+HOVLQNLVODQJZDVDVHQVDWLRQDOVXFFHVV 6RPHRIKLVWUDQVODWLRQVUHIOHFWWKHQRUPEUHDNLQJLGHDVRI(]UD3281'VHH$0(5,&$175$',7,21 ZKRZDVDPDMRULQIOXHQFHRQ6DDULNRVNL¶VZRUN $1'5(:&+(67(50$1

)UHQFKWUDGLWLRQ 3ULRUWRWKHODWH0LGGOH$JHVWUDQVODWLRQLQ)UDQFHFDQQRWEHVHHQLQLVRODWLRQIURPWKH/$7,175$',7,21 RI:HVWHUQ(XURSH7KRXJKWUDQVODWLRQLQWRYHUQDFXODUODQJXDJHVEHJDQLQWKHHOHYHQWKFHQWXU\LQ(XURSHWKH ILUVWWUDQVODWLRQVLQWR2OG)UHQFKGLGQRWDSSHDUXQWLOWKHWKLUWHHQWKFHQWXU\%HIRUHWKHQWUDQVODWLRQZDV FDUULHGRXWLQWR/DWLQDQGZDVXVXDOO\XQGHUWDNHQLQPRQDVWHULHV'XULQJWKHHOHYHQWKDQGWZHOIWKFHQWXULHV WUDQVODWLRQ²ERWKLQWR/DWLQDQGLQWRWKHYHUQDFXODU²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¶V5RPDQGHOD5RVHF LQFOXGHVWUDQVODWLRQVRI/DWLQWH[WVDQG9LUJLO¶V$HQHLGZDV DOVRWUDQVODWHGLQWR2OG)UHQFKLQWKHWKLUWHHQWKFHQWXU\/DWLQWUDQVODWLRQVRI$UDELFPHGLFDOWUHDWLVHVZHUH WKHPVHOYHVSXWLQWR2OG)UHQFKDVZHUHDQXPEHURIFKURQLFOHVRI)UHQFKKLVWRU\ZKLFKKDGEHHQZULWWHQLQ /DWLQIRUH[DPSOH+LVWRULFD)UDQFRUXPE\*UpJRLUHGH7RXUVZKLFKGDWHVIURPWKHVL[WKFHQWXU\DQGWKH WKLUWHHQWKFHQWXU\ZRUN+LVWRULD5HJXP)UDQFRUXP 8QGHUWKHUHLJQRI.LQJ&KDUOHV9± WUDQVODWLRQRIFODVVLFDOZRUNVZDVDFWLYHO\HQFRXUDJHG/DWLQ YHUVLRQVRI$ULVWRWOH¶VZRUNVZHUHUHWUDQVODWHGLQWR)UHQFKE\1LFRODV25(60(±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¶V'HFDPHURQ 7LWXV/LYLXV¶'HFDGHV &LFHUR¶V'H2IILFLV WRJHWKHUZLWKDVPDOOQXPEHURIVFLHQWLILFZRUNVLQ/DWLQDQG,WDOLDQ7RWKHVHFDQ EHDGGHGVRPHWUDQVODWLRQVIURPRWKHU(XURSHDQYHUQDFXODUODQJXDJHV



3DJH

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± RQWKHEDVLVRIWKH,WDOLDQWUDGXFHUHDQGWKHKXPDQLVWeWLHQQH '2/(7± ZDVUHVSRQVLEOHIRULQWURGXFLQJWUDGXFWLRQWUDQVODWLRQ DQGWUDGXFWHXUWUDQVODWRU 'ROHW LVDKLJKO\V\PEROLFILJXUHLQ:HVWHUQWUDQVODWLRQKLVWRU\KDYLQJEHHQDFFXVHGRIµPLVWUDQVODWLQJ¶RQHRI 3ODWR¶VZRUNVDQGEHHQEXUQWDWWKHVWDNH+HLVFUHGLWHGZLWKWKHILUVWIRUPXODWLRQRIWUDQVODWLRQWKHRU\LQ/D PDQLqUHGHELHQWUDGXLUHG¶XQHODQJXHHQO¶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pELOOHW-HDQ/DOHPDQW$QWRLQH+pURHWDQG'HOD%RpWLH7UDQVODWLRQLQWR/DWLQRIWHQFRQVWLWXWHGDQ LQWHUPHGLDU\VWDJHEHIRUHD)UHQFKYHUVLRQFRXOGEHSURGXFHGDVLQWKHFDVHRI-HDQ/D[DU\RU/DVFDULV ± DQG&ODXGHGH6H\VVHOG ZKRZRUNHGDVDWHDP$PRQJWKHLUYDULRXVMRLQWHIIRUWV /D[DU\WUDQVODWHG;HQRSKRQ¶V*UHHNWH[W$QDEDVLVIRXUWKFHQWXU\%& LQWR/DWLQDQG'H6H\VVHOWKHQ WUDQVODWHG/D[DU\¶V/DWLQYHUVLRQLQWR)UHQFK 'XULQJWKLVSHULRGWKHXVHRI/DWLQWKHODQJXDJHRIWKH&KXUFKZDVILUPO\HVWDEOLVKHGLQVFLHQFHDQG WKHRORJ\DQG/DWLQZDVFRQVHTXHQWO\WKHWDUJHWODQJXDJHIRUPDQ\WUDQVODWLRQVHVSHFLDOO\WKRVHIURPRWKHU 5RPDQFHODQJXDJHV*UHHN6\ULDFDQG+HEUHZ+RZHYHU3OXWDUFK¶VZULWLQJVDQG+RPHU¶V,OLDGZHUHDPRQJ WKHIHZVL[WHHQWKFHQWXU\WUDQVODWLRQVZKLFKZHUHPDGHLQWRYHUQDFXODU)UHQFK6HYHUDOWUDQVODWLRQVRI &LFHUR¶VZRUNVZHUHDOVRXQGHUWDNHQLQWR)UHQFKE\$QWRLQH0DFDXOWLQDQGDJDLQLQ 3LHUUH 6DOLRW -HKDQ&ROLQ DQGeWLHQQH'2/(7F 7KHUHZHUHDOVRQXPHURXVWUDQVODWLRQVIURP,WDOLDQGXULQJWKLVSHULRG%RWK0DURWLQ DQG3HOHWLHULQ WUDQVODWHG3HWUDUFK¶V6RQQHWV7UDQVODWLRQVIURPODQJXDJHVRWKHUWKDQFODVVLFDODQG5RPDQFHODQJXDJHV ZHUHUHVWULFWHGWR(QJOLVKDQG*HUPDQLFZRUNVSHUKDSVWKHPRVWLPSRUWDQWEHLQJ)UDQoRLV%DXGRLQ¶V WUDQVODWLRQRI)UDQFLV%DFRQ¶V(VVD\V 7UDQVODWLRQZDVSDUWO\SHUFHLYHGDVDPHDQVRIGLVVHPLQDWLQJNQRZOHGJHWRDZLGHUDXGLHQFHDQGLQWKLV UHVSHFWWUDQVODWRUVDVVXPHGWZRDVVRFLDWHGWDVNV7KH\KDGWRPDNHFODVVLFDOZULWLQJVPRUHDFFHVVLEOHWRD ZLGHUUHDGHUVKLSDQGLQRUGHUWRIDFLOLWDWHWKLVWDVNWKH\KDGWRWDNHSDUWLQGHYHORSLQJWKHQDVFHQW)UHQFK ODQJXDJH 2QHRIWKHEHVWNQRZQ)UHQFKWUDQVODWRUVRIWKHSHULRG-DFTXHV$0<27± LQWURGXFHGVHYHUDO*UHHN ZRUNVWR)UHQFKUHDGHUVLQFOXGLQJ3OXWDUFK¶V/LYHVDQG/RQJXV¶'DSKQLVDQG&KORHWKHODWWHUIURPWKHWKLUG FHQWXU\%&$OWKRXJKKLVWUDQVODWLRQVZHUHWREHFULWLFL]HGE\VXEVHTXHQWWUDQVODWRUVIRUEHLQJWRROLWHUDOWKH WH[WVZHUHZULWWHQZLWKWKH)UHQFKUHDGHULQPLQG$P\RWSURYLGHGJORVVHVDQGGHILQLWLRQVZKLFKGLGQRWH[LVW LQWKHVRXUFHWH[W+LVWUDQVODWLRQRI/RQJXV¶ZRUNZKLFKZDVUHYLVHGLQWKHQLQHWHHQWKFHQWXU\E\3DXO/RXLV &RXULHULVVDLGWREHEHWWHUNQRZQWKDQ/RQJXV¶RULJLQDOZRUN,QSDUDOOHOZLWKDWWHPSWVDWDFKLHYLQJFODULW\RI H[SUHVVLRQWKHXVHRIDPSOLILFDWLRQDVDUKHWRULFDOGHYLFHLVDOVRHYLGHQWLQWUDQVODWLRQVGDWLQJIURPWKLVWLPH DVFDQEHVHHQLQ0LFKHOGH7RXUV¶YHUVH



3DJH

WUDQVODWLRQRI9LUJLO¶V3DVWRUDO3RHPV ZKLFKLVORQJHUWKDQLWVVRXUFHWH[W 7KHKLVWRULFDODQGFXOWXUDOFRQWH[WLQZKLFKWUDQVODWLRQZDVSUDFWLVHGDQGYLHZHGLQWKHVL[WHHQWKFHQWXU\LV FUXFLDOWRDQXQGHUVWDQGLQJRILWVGHYHORSPHQW,QDUR\DORUGLQDQFHKDGGHFUHHG)UHQFKWREHWKH RIILFLDOODQJXDJHRIWKHVWDWHDQGWKHOLWHUDU\FLUFOHNQRZQDVWKH3OpLDGHDGYRFDWHGWKHLPSRVLWLRQRI)UHQFK DQGWKURXJKFXOWLYDWLQJLWVXVHLWVHVWDEOLVKPHQWDVDODQJXDJHRIHTXDOVWDWXVWR/DWLQ,QWKHSRHWDQG /DWLQLVW-RDFKLPGX%HOOD\± ZURWH'pIHQVHHWLOOXVWUDWLRQGHODODQJXHIUDQoDLVHDSDPSKOHWZKLFK KDVEHHQGHVFULEHGDVµDQDQWKRORJ\RIDOODUJXPHQWVDJDLQVWWUDQVODWLRQ¶0RXQLQWUDQVODWHG 7UDQVODWLRQLQRWKHUZRUGVZDVVHHQDVDQREVWDFOHWRFUHDWLYLW\LQWKHYHUQDFXODU%\FRQWUDVWWKHVWXG\DQG LPLWDWLRQLQ)UHQFKRIFODVVLFDOWH[WVZDVUHJDUGHGDVDOLWHUDU\JHQUHDQGDVSRHWU\ZDVWKHGRPLQDQWOLWHUDU\ IRUPPDQ\YHUVHWUDQVODWLRQVZHUHSURGXFHGLQWKDWYHLQ'X%HOOD\KLPVHOIDWUDQVODWRURI9LUJLO GLVWLQJXLVKHGEHWZHHQSRHWLFDODQGQRQOLWHUDU\WH[WVDQGFRQVLGHUHGWKHIRUPHUXQWUDQVODWDEOH7KHWUDQVODWHG WH[WZDVVHHQDVXQDEOHWRSURYLGHµWKHJUDFHDQGHOHJDQFHRIWKHRULJLQDO¶WKHLQWURGXFWLRQLQWR)UHQFKRIDQ DOLHQODQJXDJHIRUPEHLQJDQXQVXUPRXQWDEOHREVWDFOH'X%HOOD\¶VFULWLFLVPRIWUDQVODWLRQZDVQRWZLWKRXW FRQVHTXHQFHVDVZULWHUVGXULQJWKLVSHULRGWHQGHGWRGLVWDQFHWKHPVHOYHVIURPWUDQVODWLRQ7KHWUDQVODWLRQV SHUIRUPHGE\WKH3OpLDGHFDQEHGHVFULEHGDVDFRPELQDWLRQRIOLWHUDOLVPDQGLQQRYDWLRQZLWKFRQVLGHUDEOH FRLQDJHRIQHRORJLVPVGHULYHGIURP/DWLQDQG*UHHN $V\QWKHVLVRIVL[WHHQWKFHQWXU\WKRXJKWRQWUDQVODWLRQFDQEHIRXQGLQ0LFKHOGH0RQWDLJQH¶V(VVD\V± 0RQWDLJQHWDONVDERXWDKLHUDUFKLFDOUHODWLRQVKLSEHWZHHQODQJXDJHVZLWKWKHYHUQDFXODUEHLQJVHHQDV WKHZHDNHULGLRP+HDOVRGUDZVDGLVWLQFWLRQEHWZHHQDHVWKHWLFDQGLQIRUPDWLYHWH[WVDQGVHHVWKHODWWHUDV EHLQJOHVVSUREOHPDWLFIRUWKHWUDQVODWRU7KHFRQFHSWRIDKLHUDUFK\RIODQJXDJHVZLWKFODVVLFDOODQJXDJHVDW WKHWRSDQGYHUQDFXODUODQJXDJHVDWWKHERWWRPGRPLQDWHGVL[WHHQWKFHQWXU\WKRXJKWDQGµYXOJDU¶YHUQDFXODU ODQJXDJHVZHUHFRQVHTXHQWO\UHJDUGHGDVXQVXLWDEOHPHGLXPVIRUWKHGLVVHPLQDWLRQRIFXOWXUH 7UDQVODWLRQDFWLYLW\SULRUWRFHQWUHGRQFODVVLFDOOLWHUDU\WH[WV+RZHYHUWKHWUDQVODWLRQRIVFLHQWLILFWH[WV LQFUHDVHGFRQVLGHUDEO\GXULQJWKLVSHULRGWKLVDVSHFWRIWUDQVODWLRQQRWEHLQJDIIHFWHGE\WKHOLWHUDU\GHEDWHV HSLWRPL]HGE\WKH3OpLDGH,WLVDOVRZRUWKQRWLQJWKDWPDQ\FODVVLFDOZRUNVZHUHWUDQVODWHGLQWKHILHOGVRI DUFKLWHFWXUHDJULFXOWXUHQDWXUDOKLVWRU\DQGPHGLFLQHWRQDPHEXWDIHZ$VZHOODVZRUNVE\3OLQ\*DOHQ DQG+LSSRFUDWHVWUDQVODWLRQVZHUHPDGHRI/DWLQYHUVLRQVRI$UDELFZRUNVDQGRIFRQWHPSRUDU\VFLHQWLILF WH[WV2YHUDOOWUDQVODWLRQIXQFWLRQHGDVDPHDQVRIVSUHDGLQJNQRZOHGJHDPRQJWKHPDVVHVDQGRIHQULFKLQJ WKH)UHQFKODQJXDJH

7KHVHYHQWHHQWKDQGHLJKWHHQWKFHQWXULHVOHV%HOOHV,QILGqOHV 7KHHDUO\SDUWRIWKHVHYHQWHHQWKFHQWXU\ZDVWKHJUHDWDJHRI)UHQFK&ODVVLFLVPEXWWUDQVODWLRQVZHUH LQFUHDVLQJO\H[SHFWHGWRFRQIRUPWRWKHOLWHUDU\FDQRQVRIWKHGD\7KHIUHHG\QDPLFWUDQVODWLRQVNQRZQDV/HV %HOOHV,QILGqOHVDLPHGWRSURYLGHWDUJHWWH[WVZKLFKDUHSOHDVDQWWRUHDGDQGWKLVFRQWLQXHGWREHDGRPLQDQW IHDWXUHRIWUDQVODWLRQLQWR)UHQFKZHOOLQWRWKHHLJKWHHQWKFHQWXU\&ODVVLFDODXWKRUVZHUHUHSURGXFHGLQDIRUP ZKLFKZDVGLFWDWHGE\FXUUHQW)UHQFKOLWHUDU\IDVKLRQDQGPRUDOLW\2QHRIWKHPDLQILJXUHVWRDGRSWWKLV DSSURDFKZDV1LFRODV3HUURW'¶$%/$1&2857± ZKRDGDSWHGFODVVLFDOWH[WVWRFXUUHQWFDQRQVDQG JHQUHVWKURXJKRPLVVLRQVDQGµLPSURYHPHQWV¶ WRVXFKDQH[WHQWWKDWVRPHRIKLVWUDQVODWLRQVDUHFRQVLGHUHG WUDYHVWLHVRIWKHLURULJLQDOV'¶$EODQFRXUWWUDQVODWHGPDQ\*UHHNDQG/DWLQDXWKRUVLQFOXGLQJ&LFHUR7DFLWXV DQG7KXF\GLGHV2WKHUWUDQVODWRUVZKRDGRSWHGWKLVDSSURDFKRIµLPSURYLQJ¶WKHVRXUFHWH[WE\GRFWRULQJLWWR VXLWFXUUHQWVHQVLELOLWLHVLQFOXGH/RXLV*LU\± %HQVHUDGH± 3LHUUH3HUULQ± 3DXO 3HOOLVRQ± DQG-HDQ6HJUDLQ± ,Q0RQVLHXUGHOD9DOWHULHSXEOLVKHGDSURVH WUDQVODWLRQRI+RPHULFYHUVHLQDFRPPHQWDU\DFFRPSDQ\LQJWKHWUDQVODWLRQKHMXVWLILHGKLV$'$37$7,21 RIDQFLHQWFXVWRPVLQWHUPVRISURSULHW\DQGSDUDGR[LFDOO\IDLWKIXOQHVVWRWKHDXWKRUµZKRGLGQRWLQWHQGWR RIIHQGWKHUHDGHU¶TXRWHGLQ0RXQLQ 6HYHUDOHVVD\VRQWKH



3DJH

SULQFLSOHVRIWUDQVODWLRQZHUHZULWWHQLQMXVWLILFDWLRQRIWKLVDSSURDFKLQFOXGLQJ'LVFRXUVVXUODWUDGXFWLRQE\ *DVSDUG%DFKHWGH0p]LULDF± 'H0p]LULDFFULWLFL]HGWKHXQIDLWKIXOQHVVRI$0<27ZKRDGGHG RUGHOHWHGPDWHULDOLQKLVWUDQVODWLRQV,Q'HODWUDGXFWLRQRXUqJOHVSRXUELHQDSSUHQGUHDWUDGXLUH*DVSDUG GH7HQGH± IRUPXODWHGWKHILUVWJHQXLQHWUHDWLVHRQWUDQVODWLRQIURP/DWLQLQWR)UHQFK%DOODUG 5HVHUYDWLRQVUHJDUGLQJWKHLPDJHVXVHGLQWKH+RPHULFWH[WVDUHH[SUHVVHGE\VXEVHTXHQW WUDQVODWRUVVXFKDV$QQH0DULH'$&,(5ZKRZDVQHYHUWKHOHVVDFKDPSLRQRIIDLWKIXOWUDQVODWLRQ LQWKH LQWURGXFWLRQWRKHUWUDQVODWLRQRIWKH,OLDG DQGDOVRE\$QWRLQHGHOD0RWWH+RXGDU± 'HVSLWHWKHIDFWWKDWWUDQVODWRUVRIWKHODWHVHYHQWHHQWKFHQWXU\SDLGPRUHDWWHQWLRQWRWKHTXHVWLRQRI IDLWKIXOQHVVWRWKHVRXUFHWKHLUPDLQSULRULW\FRQWLQXHGWREHSURYLGLQJWH[WVZKLFKPD\DSSHDOWRWKH)UHQFK UHDGHU +RZHYHUDVSRLQWHGRXWE\%DOODUG WKH%HOOHV,QILGqOHVDSSURDFKZDVQRWXQLYHUVDOO\DFFHSWHG,Q SDUDOOHOZLWKWKHOLWHUDU\WUHQGRIWKH%HOOHV,QILGqOHVPRUHOLWHUDODSSURDFKHVZHUHSXWIRUZDUGE\/HPDLVWUH GH6DF\± ZKRWUDQVODWHGD/DWLQYHUVLRQRIWKH%LEOHLQWR)UHQFKDQG3LHUUH'DQLHO+XHW± ZKRLQ'H,QWHUSUHWDWLRQH XUJHGWKHWUDQVODWRUWRVKRZKXPLOLW\WRZDUGVWKHVRXUFHWH[W 0HPEHUVRIWKH$EEH\RI3RUW5R\DOQHDU3DULVVWULYHGIRUILGHOLW\LQWKHLUPDQ\WUDQVODWLRQVDQG UHWUDQVODWLRQVRIUHOLJLRXVWH[WVLQFOXGLQJ$QGUp'X5\HU¶VWUDQVODWLRQRIWKH485¶Ɩ1LQ $VZHOODVDQFLHQWWH[WVRQDUFKLWHFWXUHLQ/DWLQFRQWHPSRUDU\ZRUNVRQPHGLFLQHDQGSKDUPDFRORJ\DQGWH[WV LQ)OHPLVKDQG3RUWXJXHVHZHUHWUDQVODWHG$JURZLQJQXPEHURI6SDQLVK,WDOLDQDQG(QJOLVKZRUNVLQERWK WKHOLWHUDU\DQGQRQOLWHUDU\GRPDLQVZHUHDOVRWUDQVODWHGGXULQJWKHVHYHQWHHQWKFHQWXU\7KH\LQFOXGHG &HUYDQWHV¶'RQ4XL[RWH0DULQR¶V$GRQLVDQG5REHUW*UHHQ¶V3DQGLVWR7UDQVODWLRQVRI0DFKLDYHOOL¶V 'LVFRXUVH)UDQFLV%DFRQ¶V0RUDO(VVD\VDQG-RKQ/RFNH¶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± ZDVHVSHFLDOO\NHHQRQ(QJOLVK OLWHUDWXUHDQGSURGXFHGDQLPLWDWLRQRI6DPXHO5LFKDUGVRQ¶V3DPHOD9ROWDLUH± ZDVLQVWUXPHQWDO LQGHYHORSLQJDSDVVLRQDWHLQWHUHVWLQ(QJOLVKWKRXJKWDQGOLWHUDWXUHLQ)UDQFH7KHGUDPDWLVW-HDQ)UDQoRLV 'XFLV± DGDSWHG6KDNHVSHDULDQWUDJHGLHVIRUWKH)UHQFKVWDJHSURYLGLQJDQDOWHUQDWLYHHQGLQJWR 2WKHOOR7KLVLQWHUHVWFXOPLQDWHGLQWKHZLGHVSUHDGWUDQVODWLRQRI(QJOLVK*RWKLFQRYHOVGXULQJWKH*RWKLF UHYLYDODWWKHHQGRIWKHFHQWXU\ 7UDQVODWLRQVRIWH[WVWKDWZHUHDOPRVWFRQWHPSRUDU\IURPWKHVHYHQWHHQWKFHQWXU\ LQFOXGHG'DQLHO'HIRH¶V 5RELQVRQ&UXVRH-RQDWKDQ6ZLIW¶V*XOOLYHU¶V7UDYHOV+HQU\)LHOGLQJ¶V7RP-RQHV-RKQ0LOWRQ¶V3DUDGLVH /RVWDQGVRPHRI$OH[DQGHU3RSH¶V(VVD\V3LHUUHOH7RXUQHXU± WUDQVODWHGWKHFRPSOHWHZRUNVRI :LOOLDP6KDNHVSHDUH$WWKHVDPHWLPH)UHQFKYHUVLRQVRIZRUNVE\:DOSROH&ODUD5HHYHDQG:LOOLDP *RGZLQZHUHDOVRKXJHO\SRSXODU*RLQJEH\RQG(XURSHIRUKLVVRXUFHV$QWRLQH*DOODQG± WUDQVODWHGWKH$UDELDQ1LJKWVFRPELQLQJILGHOLW\WRWKHG\QDPLFVRIWKHVRXUFHWH[WZLWKWKHREVHUYDQFHRI FXUUHQWOLWHUDU\FRQYHQWLRQV 7KURXJKRXWWKHHLJKWHHQWKFHQWXU\WUDQVODWLRQVIURP(QJOLVKRXWQXPEHUHGWKRVHIURPDQ\RWKHUODQJXDJH +RZơYHUWKHUHZHUHVRPHWUDQVODWLRQVRI*HUPDQDQG,WDOLDQZRUNVIRUH[DPSOH$QWRLQHGH5LYDURO WUDQVODWHG'DQWH¶V'LYLQH&RPHG\LQ 7KHRUHWLFDOGLVFXVVLRQVRIWUDQVODWLRQFRQWLQXHGGXULQJWKHHLJKWHHQWKFHQWXU\-HDQOH5RQGG¶$OHPEHUW ± ZKRFROODERUDWHGZLWK'LGHURWRQWKHFRPSLODWLRQRI/¶(QF\FORSpGLHFRPPHQWHGH[WHQVLYHO\RQ



3DJH

WUDQVODWLRQGLIILFXOWLHVVHHLQJLPLWDWLRQUDWKHUWKDQWUDQVFULSWLRQDVDVXLWDEOHEDVLVIRUWKHDFWRIWUDQVODWLRQ $'$37$7,21ZDVQRWVHHQDVEHWUD\DOEXWUDWKHUDVDPHDQVRIDGMXVWLQJWKHIRUHLJQZRUNWRVXLW FRQWHPSRUDU\WDVWHV&KDUOHV%DWWHX[± VWUHVVHGWKHQHHGIRUJUDPPDWLFDOUHVWUXFWXULQJLQWUDQVODWLRQ 7UDQVODWLRQZDVDOVRFORVHO\DVVRFLDWHGZLWKWKHGLGDFWLFIXQFWLRQRIOLWHUDWXUHGXULQJWKLVSHULRG2QWKH ZKROHKRZHYHUWKLVZDVDSHULRGRIWUDQVLWLRQGXULQJZKLFKWUDQVODWLRQWKHRU\ZDVJHWWLQJUHDG\WROHDYHWKH DJHRIFODVVLFLVPEHKLQGDQGSUHSDUHWKHJURXQGIRUWKH5RPDQWLFLQVLVWHQFHRQOLWHUDOLVP

7KH5RPDQWLFHUD 7KH5RPDQWLFVEURXJKWOLWHUDOLVPEDFNLQWRIDVKLRQLQWKHQLQHWHHQWKFHQWXU\XQGHUWKHLQIOXHQFHRI*HUPDQ SKLORVRSK\VHH*(50$175$',7,21 7KH\VRXJKWWRµWUDQVIHUWKHFUHDWLYHSRZHURIJUHDWZULWHUVRIRWKHU ODQJXDJHVLQWRWKHLURZQ¶.HOO\ DQGHPSLULFLVPJDYHZD\WRDPRUHSKLORVRSKLFDODSSURDFK$PRQJ QLQHWHHQWKFHQWXU\WUDQVODWRUV-DFTXHV'HOOLOH± 3DXO/RXLV&RXULHU± /HFRQWHGH /LVOH± &KDUOHV1RGLHU± $OIUHGGH9LJQ\± $OH[DQGUH'XPDV± DQG)UDQoRLV9LFWRU+XJR± ZHUHSDUWLFXODUO\ZHOONQRZQ ,QWKHILUVWKDOIRIWKHQLQHWHHQWKFHQWXU\WKHFKRLFHRIWUDQVODWLRQVWUDWHJ\GHSHQGHGRQZKHWKHUWKHVRXUFH WH[WZDVDFODVVLFDORUDUHFHQWZRUN)RUH[DPSOH/LWWUpWUDQVODWHGWKHILUVWSDUWRI7KH,OLDGLQPHGLHYDOYHUVH LQKHGHOLEHUDWHO\XVHGDIRUPRIODQJXDJHZKLFKSUHGDWHGWKHFRGLILFDWLRQRI)UHQFKLQWKHVHYHQWHHQWK FHQWXU\ ,Q'HO¶(VSULWGHVWUDGXFWLRQVSXEOLVKHGLQ WKHZULWHUFULWLFDQGWUDQVODWRU0DGDPHGH6WDsO± VWUHVVHGWKHOLWHUDU\IXQFWLRQRIWUDQVODWLRQDQGLWVXVHIXOQHVVLQWKHUHQHZDORIWKHWDUJHWFXOWXUH 7KHSUHIDFHWR/HFRQWHGH/LVOH¶VWUDQVODWLRQRIWKH,OLDGDQQRXQFHGWKDWWKHHUDRIWKH%HOOHV,QILGqOHVZDV RYHUZKLOVW&KDWHDXEULDQGGHVFULEHGKLVWUDQVODWLRQRI0LOWRQ¶V3DUDGLVH/RVWDVµWUDFHG¶FDOTXp XVLQJ UHVRXUFHVRIWKHWDUJHWODQJXDJHWKDWZHUHFORVHVWWRWKRVHRIWKHVRXUFHODQJXDJH7KHµSOHDVLQJ¶IRUPRIWKH )UHQFKWH[WZDVQRZUHJDUGHGDVVHFRQGDU\WRWKHFORVHUHSURGXFWLRQRIWKHVW\OHRIWKHVRXUFHWH[WWKH 5RPDQWLFDJHZDVORRNLQJIRUIRUHLJQQHVV7UDQVODWLRQZDVRQFHPRUHUHJDUGHGDVDQDFFHSWDEOHOLWHUDU\ DFWLYLW\DQGPDQ\FODVVLFDOZRUNVZHUHUHWUDQVODWHGLQDVSLULWRIKLVWRULFDOUHVWLWXWLRQZKLFKUHSUHVHQWHGD FOHDUVSOLWZLWKWKHWUDGLWLRQRIWKH%HOOHV,QILGqOHV$PRQJVWWKHPDQ\ZRUNVZKLFKZHUHUHWUDQVODWHGZHUH 9LUJLO¶V(FORJXHVKLV3DVWRUDO3RHPVDQGWKH$HQHLG+RPHU¶V(SLFVDQG$ULVWRWOH¶V0HWDSK\VLFV3ROLWLFV DQG/RJLF $FRQVLGHUDEOHQXPEHURI(QJOLVKSRHWVDQGZULWHUVZHUHWUDQVODWHGGXULQJWKLVSHULRGZLWKQXPHURXV WUDQVODWLRQVRI6KDNHVSHDULDQWH[WVEHLQJPDGH0LOWRQ¶V3DUDGLVH/RVWZDVWUDQVODWHGE\'HOOLOHDQG &KDWHDXEULDQG± 7UDQVODWLRQVRI%\URQ&ROHULGJH6FRWWDQG'LFNHQVIRXQGDQHDJHUPDUNHWDV GLGWKRVHRI$PHULFDQOLWHUDWXUH&KDUOHV%DXGHODLUH± ZDVDIHUYHQWWUDQVODWRURIWKHZRUNVRI(GJDU $OODQ3RH 7KHUHZDVDOVRDJURZLQJLQWHUHVWLQVFLHQFHZLWKWKHSKLORVRSKHU3DXOePLOH/LWWUp±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

7UDQVODWLRQLQWKHWZHQWLHWKFHQWXU\ 7KH5RPDQWLFVHDUFKIRULQQRYDWLRQWKURXJKWKHXVHRIWUDQVODWLRQZDVSXUVXHGZHOOLQWRWKHWZHQWLHWKFHQWXU\ DQGLQWHQVHWUDQVODWLRQDFWLYLW\E\QXPHURXVDXWKRUWUDQVODWRUVFKDUDFWHUL]HGWKHILUVWGHFDGHV 7KHQXPEHURIDXWKRUWUDQVODWRUVZKRSURGXFHG)UHQFKYHUVLRQVRIIRUHLJQZRUNVRUUHWUDQVODWHGWKHFODVVLFV GXULQJWKLVSHULRGLVFRQVLGHUDEOH$PRQJWKHP$QGUp*LGH± WUDQVODWHG6KDNHVSHDUH9DOpU\



3DJH

/$5%$8'± WUDQVODWHG6DPXHO%XWOHUDQGPRUHUHFHQWO\0DUJXHULWH


3DJH

IRXQGHGLQDQGSXEOLVKHVLWVRZQMRXUQDO7UDGXLUH8QWLOWKHHDUO\VZKHQWKH$7/$VVRFLDWLRQ GHVWUDGXFWHXUVOLWWpUDLUHVGH)UDQFH²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µSURIHVVLRQDOV¶6LQFHWUDQVODWRUV¶ULJKWVKDYHEHHQFRYHUHGE\OHJLVODWLRQ ZKLFKSXWVWKHPRQDQHTXDOSDUZLWKZULWHUVDVUHJDUGVFRS\ULJKWDQGVRFLDOLQVXUDQFH7KH0LQLVWU\RI &XOWXUHKDVDWWHPSWHGVLQFHWKHVWRLPSURYHWKHVLWXDWLRQDQGVWDWXVRIWUDQVODWRUVE\PHDQVRI OHJLVODWLRQZKLOVWWKH&1/&HQWUHQDWLRQDOGHV/HWWUHV SURYLGHVJUDQWVWRKHOSZLWKWKHWUDQVODWLRQRIFHUWDLQ IRUHLJQZRUNV$VPDOOQXPEHURIEXUVDULHVDUHDOVRDZDUGHGWRWUDQVODWRUVWRDFNQRZOHGJHRXWVWDQGLQJ WUDQVODWLRQZRUNRUWRIDFLOLWDWHWKHWUDQVODWLRQRIZRUNVZKLFKDUHXQOLNHO\WRDWWUDFWDZLGHUHDGHUVKLS

)XUWKHUUHDGLQJ %DOODUG&DU\'¶KXOVW+RUJXHOLQ.HOO\/DUEDXG/HIHYUHE0RXQLQ *HRUJH6WHLQHUYDQ+RRI

0<5,$06$/$0$&$55

%LRJUDSKLHV $0<27-DFTXHV± )UHQFK+XPDQLVWDQGWUDQVODWRU:KLOVW3URIHVVRURI*UHHNDQG/DWLQDW %RXUJHV$P\RWWUDQVODWHG7KpDJqQHHW&KDULFOpH WKHWKLUGFHQWXU\*UHHNZRUNRI+HOLRGRURVIRU ZKLFKKHZDVUHZDUGHGE\.LQJ)UDQFLV,ZLWKWKHDEEH\RI%HOOR]DQH+LVWUDQVODWLRQRI/LYHV± ZDV IROORZHGE\IXUWKHUUR\DOWXWHODJHDQGVXEVHTXHQWO\E\WKHELVKRSULFRI$X[HUUH+HWUDQVODWHGVHYHQERRNVRI 'LRGRUXV /RQJXV¶'DSKQLVDQG&KORH DQG3OXWDUFK¶V2SHUD0RUDOLD +LVOLYHO\DQG LGLRPDWLFYHUVLRQRI3OXWDUFK¶V9LHVGHVKRPPHVLOOXVWUHVZDVWRSURYLGH6KDNHVSHDUHZLWKPDWHULDOIRUKLV 5RPDQSOD\VDQG6LU7KRPDV1RUWKDOVREDVHGKLV(QJOLVKWUDQVODWLRQRQLW$P\RWWRRNJUHDWSDLQVWRILQG DQGLQWHUSUHWWKHEHVWDXWKRULWLHV7KHVLPSOLFLW\DQGSXULW\RIKLVODQJXDJHZRQWKHSUDLVHRI0LFKHOGH 0RQWDLJQHDQG$P\RWDFKLHYHGLPPHQVHSRSXODULW\H[HUFLVLQJJUHDWLQIOXHQFHRYHUVXFFHVVLYHJHQHUDWLRQVRI )UHQFKZULWHUV %(50$1$QWRLQH± )UHQFKWKHRULVWDQGWUDQVODWRURI/DWLQ$PHULFDQOLWHUDWXUHDQG*HUPDQ SKLORVRSK\%HUPDQLVZHOONQRZQIRUKLVSKLORVRSKLFDOVWDQFHRQWUDQVODWLRQZKLFKOHGKLPWRUHMHFWDQ HWKQRFHQWULVWDSSURDFKWRWUDQVODWLRQDVUHSUHVHQWHGE\WUDQVIRUPDWLRQDQG$'$37$7,21+LVEHVWNQRZQ WKHRUHWLFDOZRUNLV/¶eSUHXYHGHO¶eWUDQJHUIRUZKLFKDQ(QJOLVKWUDQVODWLRQLVDYDLODEOH%HUPDQ +LV ZRUNLQJHQHUDOKDVEHHQKLJKO\LQIOXHQWLDODQGKDVLQVSLUHGFXUUHQWWKHRULVWVVXFKDV/DZUHQFH9HQXWLVHH 675$7(*,(62)75$16/$7,21 2QHRIWKHVWUHQJWKVRI%HUPDQ¶VZRUNLVWKDWKHOLQNVKLVSKLORVRSKLFDO WKRXJKWWRVSHFLILFFDVHVWXGLHVRIWUDQVODWLRQ &$,//e3LHUUH)UDQoRLV± :KLOVWZRUNLQJDVDQLQVXUDQFHFOHUNLQ3DULV&DLOOpVWXGLHGSDUWWLPH DQGREWDLQHGDGRFWRUDWHLQSROLWLFDOHFRQRP\+LVFRPPDQGRI(QJOLVKODWHUDOORZHGKLPWRHVWDEOLVKKLPVHOI DVDSURIHVVLRQDOWUDQVODWRUDQGLQKLVWUDQVODWLRQRI0DUJDUHW0LWFKHOO¶V*RQH:LWKWKH:LQGZRQILUVW SUL]HLQWKH6RFLpWpGHVJHQVGHOHWWUHV$QLQMXU\VXVWDLQHGGXULQJKLVFKLOGKRRGPHDQWWKDWKHZDVQRW FRQVFULSWHGGXULQJ:RUOG:DU7ZRDQGKHVSHQWWKH\HDUVIURPWRWUDQVODWLQJ$QJOR$PHULFDQ FODVVLFVDQGSXUVXLQJUHVHDUFKRQVL[WHHQWKFHQWXU\(QJOLVKWKHDWUH,QWKH\HDUVIROORZLQJWKH:DUKHZRUNHG WLUHOHVVO\WRSURPRWHLQWHUQDWLRQDOXQGHUVWDQGLQJ+HIRXQGHGWKH%LEOLRWKqTXHLQWHUQDWLRQDOHDQG



3DJH

ZLWKDQXPEHURIIULHQGVIRXQGHGWKH6RFLpWpIUDQoDLVHGHVWUDGXFWHXUVLQWKHRUJDQL]DWLRQZKLFK UHSUHVHQWV)UHQFKWUDQVODWRUVDQGRIZKLFKKHZDVSUHVLGHQWIURPWR+HZDVDOVRRQHRIWKH IRXQGHUVRI),7WKH)pGpUDWLRQLQWHUQDWLRQDOHGHVWUDGXFWHXUVLQDQGZDVUHVSRQVLEOHIRUHVWDEOLVKLQJLWV MRXUQDO%DEHOLQ:LWKKLVH[WHQVLYHZRUNIRU81(6&2DQGKLVSDVVLRQDWHSURPRWLRQRIFRPPXQLFDWLRQ DFURVVLQWHUQDWLRQDODQGSROLWLFDOERXQGDULHV&DLOOpZDVDVWURQJDGYRFDWHIRUWKHSURIHVVLRQVRIWUDQVODWLQJ DQGZULWLQJZRUOGZLGH '¶$%/$1&28571LFRODV3HUURW± 6WURQJO\LQIOXHQFHGE\/DWLQFXOWXUHG¶$EODQFRXUWZDVD OHDGLQJUHSUHVHQWDWLYHRIWKH%HOOHV,QILGqOHVKHDGYRFDWHGDQDSSURDFKLQZKLFKWRSSULRULW\ZDVJLYHQWR HOHJDQFHRIH[SUHVVLRQLQWKHWDUJHWODQJXDJH+HVDZWUDQVODWLRQDVDSURFHVVRI$'$37$7,21DQG FRQVLGHUHGLWIHDVLEOHDQGDFFHSWDEOHWRLQWURGXFHµLPSURYHPHQWV¶LQWKHWDUJHWWH[W'¶$EODQFRXUWWUDQVODWHG PDLQO\KLVWRULFDOUKHWRULFDODQGPRUDOWH[WVLQFOXGLQJ2FWDYLXV WKH2UDWLRVE\&LFHURDQGWKHZRUNV RI7DFLWXVDQG;HQRSKRQ+HQRWRQO\µFHQVRUHG¶WKHVHZRUNVLQWKHFRXUVHRIWUDQVODWLQJWKHPEXWDOVR µFRUUHFWHG¶DQ\IDFWXDOHUURUVKHHQFRXQWHUHGDQGJHQHUDOO\DLPHGWRµLPSURYH¶RQWKHVRXUFHWH[WZKHQHYHUKH GHHPHGLWQHFHVVDU\ '$&,(5$QQH0DULH± )UHQFKWUDQVODWRURI$ULVWRWOH3ODWR3OXWDUFKDQG+RUDFHDPRQJPDQ\ RWKHUV6KHZRQJUHDWDFFODLPIRUKHUWUDQVODWLRQVZKLFKZDVXQFRPPRQIRUDZRPDQRIKHUGD\,QWKH SUHIDFHWRKHUWUDQVODWLRQRIWKH,OLDGVKHH[SODLQHGWKDWVKHZDVQRWWUDQVODWLQJIRUWKRVHZKRFDQUHDGWKH RULJLQDODQGGLVWLQJXLVKHGEHWZHHQµVHUYLOH¶ZRUGIRUZRUG WUDQVODWLRQDQGµQREOH¶RUVHQVHIRUVHQVH WUDQVODWLRQ '2/(7eWLHQQH± $)UHQFKSULQWHUDQGSXEOLVKHUZKREHFDPHZHOONQRZQIRUKLVWUDQVODWLRQVRI WKHFODVVLFV%RUQLQ2UOpDQVKHVWXGLHGLQ3DULVDQGODWHULQ3DGXD,WDO\7KHUHKHGHYHORSHGDQLQWHUHVWLQ UKHWRULFDQGLQWKHZRUNVRI&LFHURLQSDUWLFXODUJUDGXDOO\EHFRPLQJLQYROYHGZLWKWKHNLQGRISKLORVRSKLFDO WKLQNLQJWRZKLFKWKHFKXUFKZDVRSSRVHG,QKHEHFDPHVHFUHWDU\WRWKH%LVKRSRI/LPRJHVZKRZDV )UHQFKDPEDVVDGRUWRWKH5HSXEOLFRI9HQLFH2Q'ROHW¶VUHWXUQWR3DULV)UDQFLV,DZDUGHGKLPWKHSULYLOHJH IRU\HDUVRISULQWLQJDQ\ZRUNVRI/DWLQ*UHHN,WDOLDQRU)UHQFKRULJLQZKLFKZHUHWKHSURGXFWRIKLVRZQ SHQRUZHUHXQGHUWDNHQXQGHUKLVVXSHUYLVLRQ+LVSXEOLFDWLRQVLQFOXGHGERWKDQFLHQWDQGPRGHUQWH[WV UDQJLQJIURPWKH1HZ7HVWDPHQWLQ/DWLQWR5DEHODLVLQ)UHQFK 'ROHWLVFUHGLWHGZLWKWKHILUVWIRUPXODWLRQRIWUDQVODWLRQWKHRU\LQ/DPDQLqUHGHELHQWUDGXLUHG¶XQHODQJXH HQO¶DXWUH+RZWRWUDQVODWHZHOOIURPRQHODQJXDJHLQWRDQRWKHU ZKLFKKHSXEOLVKHGLQ7KLVV\QWKHVLV RIWUDQVODWLRQSUREOHPVUHMHFWHGZRUGIRUZRUGWUDQVODWLRQGHVFULELQJWKHVWDJHVRIWKHWUDQVODWLRQSURFHVVDQG DOVRWKHREOLJDWLRQVWKDWWUDQVODWRUVKDGWRZDUGVWKHLUZRUN+HLVDKLJKO\V\PEROLFILJXUHLQ)UDQFHEHFDXVH KHORVWKLVOLIHGXHWRDQDOOHJHGDGGLWLRQWRD3ODWRQLFWH[WZKLFKFDVWGRXEWRQWKHH[LVWHQFHRIHWHUQDOOLIH 'ROHWZDVEXUQWDWWKHVWDNHZLWKKLVERRNVLQ /$5%$8'9DOpU\± )UHQFKSRHWQRYHOLVWDQGFULWLFZKRZDVZHOONQRZQGXULQJWKHILUVWKDOI RIWKHWZHQWLHWKFHQWXU\+LV¯XYUHVFRPSOHWHV&RPSOHWHZRUNV FRQVLVWVRIYROXPHV/DUEDXGKDGDQ H[WHQVLYHNQRZOHGJHRIIRUHLJQOLWHUDWXUHDQGWUDQVODWHGZLGHO\KLVVRXUFHVHPEUDFLQJZRUNVE\:KLWPDQ )DXONQHU-DPHV-R\FH*.&KHVWHUWRQDQG6DPXHO%XWOHUDPRQJPDQ\RWKHUV/DUEDXG¶VVHULHVRIHVVD\VRQ WUDQVODWLRQ6RXVO¶LQYRFDWLRQGH6DLQW-pU{PHSXEOLVKHGLQFHOHEUDWHVDQGHPSKDVL]HVWKHFRPSOH[LW\RI WUDQVODWLRQ 0281,1*HRUJHV± 0RGHUQ)UHQFKWKHRULVWDQGDSUROLILFWUDQVODWRURI,WDOLDQOLWHUDWXUHLQFOXGLQJ ZRUNVE\-DFRSRQHGD7RGL'DQWH6DQ)UDQFHVFR*XLODPR1LFFROz0DFKLDYHOOL9HUGD0RQWDOHDQG 6DOYDWRUH4XDVLPRGR0RXQLQZURWHH[WHQVLYHO\RQWUDQVODWLRQKLVZLGHH[SHULHQFH



3DJH

FXOPLQDWLQJLQWKHSXEOLFDWLRQRIKLVVHPLQDOZRUN3UREOqPHVWKpRULTXHVGHODWUDGXFWLRQ ZKLFKODLGD WKHRUHWLFDOIUDPHZRUNIRUWKHVWXG\RIWUDQVODWLRQSUDFWLFH 25(60(1LFRODV± 2QHRIWKHSULQFLSDOWUDQVODWRUVDWWKHFRXUWRI&KDUOHV92UHVPHFDQEH GHVFULEHGDVDSLRQHHURIWUDQVODWLRQLQWRWKHYHUQDFXODUZLWKKLVLQWURGXFWLRQRI$ULVWRWHOLDQWH[WVLQWR)UHQFK DIWHUKHKDGILUVWWUDQVODWHGWKHPIURPWKHRULJLQDOLQWR/DWLQ2UHVPHDOVRZURWHKLVRZQWUHDWLVHVZLWK YHUVLRQVERWKLQ/DWLQDQGLQ)UHQFKDQGFRPPHQWHGLQWKHSUHIDFHVWRKLVWUDQVODWLRQVRQVXFKLVVXHVDVWKH WDVNRIWKHWUDQVODWRUWKHQHHGIRUDFFXUDF\DQGWKHLQWURGXFWLRQRIQHZWHUPVLQWRWKHWDUJHWODQJXDJH 0<5,$06$/$0$&$55



3DJH

* *HUPDQWUDGLWLRQ ,QWKH(XURSHDQFRQWH[WWKHWHUPGHXWVFK*HUPDQ LVXQXVXDOLQDVIDUDVLWLVQRWGHULYHGIURPDQROGHUQDPH IRUDFRXQWU\RUDWULEH,QLWLDOO\LWLQGLFDWHGDFRPPRQYHUQDFXODUDQGHYHQWRGD\OLQJXLVWLFDQGFXOWXUDO FRQQRWDWLRQVRIWKHWHUPGHXWVFKDUHZLGHUWKDQSUHVHQWGD\SROLWLFDODQGJHRJUDSKLFUHDOLWLHVVXJJHVW,QWKH HLJKWKFHQWXU\WKHXGLVNDQGWKH/DWLQDWHWKHRGLVFXVUHIHUUHGWRWKHGLDOHFWVVSRNHQE\WKH*HUPDQLFWULEHV ZLWKLQ&KDUOHPDJQH¶VUHDOP$OHPDQQLF)UDQFRQLDQ6D[RQ7KXULQJLDQDQG%DYDULDQ7KHUHJLRQDOYDULDQWV RIWKHYHUQDFXODUSURYLGHGWKHOLQJXLVWLFPDWUL[IRUWKHJUDGXDOGHYHORSPHQWRI*HUPDQDVDOLWHUDU\ODQJXDJH DQGHYHQWXDOO\RIPRGHUQ+LJK*HUPDQ+RFKGHXWVFK 7KHSROLWLFDOERUGHUV²H[WHUQDODVZHOODVLQWHUQDO²RI WKH*HUPDQVSHDNLQJVWDWHVKDUGO\HYHUFRLQFLGHGZLWKWKHOLQJXLVWLFERUGHUVHYHQWRGD\WKHVDPHGLDOHFWLV VSRNHQRQERWKVLGHVRIWKH*HUPDQ²'XWFKERUGHULQ/X[HPERXUJDVLQWKH(LIHOLQ)UHQFK/RUUDLQHDVLQ WKH6RXWKHUQ5KLQHODQGLQ)UHQFK$OVDFHDVDFURVVWKH5KLQHLQ1RUWKHUQ6ZLW]HUODQGDVLQ6RXWKHUQ%DGHQ LQ$XVWULDQ7\URO6DO]EXUJDQGXSSHU$XVWULDDVLQ%DYDULD:KLOHPRGHUQ+LJK*HUPDQLVWKHOLWHUDU\ ODQJXDJHXVHGE\$XVWULDQV*HUPDQVDQG*HUPDQ 6ZLVVDOLNH*HUPDQOLWHUDWXUHSDUDGR[LFDOO\UHIOHFWV ERWKWKHLUFRPPRQFXOWXUDOKHULWDJHDVZHOODVWKHLUFXOWXUDOSOXUDOLW\

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µIUHH¶RUUHODWLYHO\µIUHH¶WUDQVODWLRQVVXFKDVWKH2OG+LJK*HUPDQ,VLGRUDQG127.(5¶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²ZKLFKKDGQROLWHUDU\WUDGLWLRQ²PDLQO\VHUYHGGLGDFWLFSXUSRVHV JORVVDULHVZRUGIRUZRUGWUDQVODWLRQVDQGLQWHUOLQHDUYHUVLRQVVXFKDVWKH2OG+LJK*HUPDQ%HQHGLFWLQH5XOH ZHUHXVHGLQPRQDVWHULHVLQWKHWHDFKLQJRI/DWLQ+RZHYHUWKHUHZHUHVRPHQRWDEOHH[FHSWLRQVIURPWKLV VRXUFHWH[WRULHQWHGGLGDFWLFLVP/RFDWHGDWGLIIHUHQWSRLQWVRIWKHW\SRORJLFDOVSHFWUXPDQGIXOILOOLQJTXLWH GLVWLQFWIXQFWLRQVWH[WVVXFKDVWKH,VLGRUWUDQVODWLRQF 2WIULGYRQ:HLVVHQEXUJ¶VWUDQVODWLRQRIWKHOLEHU HYDQJHOLDUXPF± DQGODWHU:LOOLUDPYRQ(EHUVEHUJ¶VSDUDSKUDVHRI



3DJH

WKH6RQJRI6RQJVF EULOOLDQWO\PHWWKHFRPPXQLFDWLYHFKDOOHQJHSRVHGE\/DWLQE\&KULVWLDQGRFWULQH DQGFODVVLFDOFXOWXUH127.(5YRQ6W*DOOHQF± ZDVXQLTXHDPRQJWUDQVODWRUVLQWKH2OG+LJK *HUPDQSHULRGZLWKUHJDUGWRERWKWKHYDULHW\RIWH[WVKHWUDQVODWHGDQGKLVPRGHRIWUDQVODWLRQ$SDUWIURP &KULVWLDQWKHRORJLFDOOLWHUDWXUHKHWXUQHGKLVDWWHQWLRQWRSKLORVRSKLFDODQGSRHWLFWH[WVVXFKDV%2(7+,86¶ 3KLORVRSKLDH&RQVRODWLRVHH/$7,175$',7,21 DQG9LUJLO¶V%XFROLFDUHVSHFWLYHO\'UDZLQJRQWKH HIIRUWVOLQJXLVWLFDQGSKLORVRSKLFDORISUHYLRXVJHQHUDWLRQVRIWUDQVODWRUVDQG*HUPDQDXWKRUVKHHIIHFWLYHO\ WUDQVIHUUHGWKHPRVWFRPSOH[LGHDVDQGVXEWOHQRWLRQVIURP/DWLQLQWRLQQRYDWLYH\HWLQWHOOLJLEOH*HUPDQ$W WKHVDPHWLPHKHZRUNHGZLWKLQWKHGLGDFWLFWUDGLWLRQRIWKHSHULRGWUDQVODWLQJIRUKLVVWXGHQWV¶VDNH

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¶V0HWDPRUSKRVHVLQWR*HUPDQKHDOVRWUDQVSRVHGWKHPLQWRWKHFRQWHPSRUDU\LGHDOL]HGZRUOG RIFRXUWO\JDOODQWU\0LGGOH+LJK*HUPDQWUDQVODWLRQVRI7KRPDV$TXLQDV¶DQG0HLVWHU(FNKDUW¶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jYLVSUHVXPHG)UHQFK VRXUFHVLVGLIILFXOWWRDVFHUWDLQ)RULQVWDQFHVFKRODUVDUHXQFHUWDLQZKHWKHUWKHGHYLDWLRQVRI+DUWPDQQYRQ $XH¶V(UHFIURP&KUpWLHQGH7UR\HV¶(UHFHW(QLGHDUHGXHWR+DUWPDQQH[HUFLVLQJ



3DJH

FRQVLGHUDEOHSRHWLFOLFHQFHRUZKHWKHUKHGUHZRQDQXQNQRZQ)UHQFKVRXUFHWH[WRUHYHQRQDQLQWHUPHGLDWH 'XWFKYHUVLRQ,QWKHLUKDQGOLQJRI)UHQFKPDWHULDO*HUPDQSRHWVWHQGHGWRH[HUFLVHFRQVLGHUDEOHIUHHGRP DGDSWLQJDEULGJLQJRUH[SDQGLQJDQGHPEHOOLVKLQJWKHLUPDWHULDOVRPHWLPHVDGGLQJFRPPHQWDULHV)RU KLVWRULFDODQGV\VWHPDWLFUHDVRQVLWZRXOGEHPLVOHDGLQJDQGLQDSSURSULDWHWRMXGJHWKHUHODWLRQVKLSVEHWZHHQ 0LGGOH+LJK*HUPDQWH[WVDQGWKHLUNQRZQRUSUHVXPHG)UHQFKVRXUFHVE\UHGXFWLYHVRXUFHWH[WRULHQWHG VWDQGDUGV

7KHHDUO\PRGHUQ+LJK*HUPDQSHULRG ,QWKHILIWHHQWKDQGVL[WHHQWKFHQWXULHVWKHSURFHVVRI*HUPDQGHYHORSLQJLQWRDOLWHUDU\ODQJXDJHJDWKHUHG PRPHQWXP'LVWLQJXLVKHGE\WKHLUFRQILGHQWKDQGOLQJRIVW\OHWKHILIWHHQWKFHQWXU\WUDQVODWLRQVRI)UHQFK QRYHOVE\(OLVDEHWKYRQ1DVVDX6DDUEUFNHQ(OHRQRUHYRQg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pOLWH*HUPDQZDVWKHODQJXDJHRIWKHSHRSOHDQGRI SRSXODUSRHWU\(YHQWXDOO\LQWKHVHYHQWHHQWKFHQWXU\WKLVWHQVLRQEHWZHHQ/DWLQDQG*HUPDQEHWZHHQµKLJK¶ DQGµORZ¶ZDVUHVROYHGLQWKHSRHWU\RI0DUWLQ23,7=$VIDUDVWKHKLVWRU\RIWUDQVODWLRQLQWR*HUPDQDQG WKHKLVWRU\RI*HUPDQDVDOLWHUDU\ODQJXDJHDUHFRQFHUQHG2SLW]¶VSRHWU\PDUNVWKHWUDQVLWLRQWRWKHPRGHUQ +LJK*HUPDQSHULRG ,QWKHHDUO\PRGHUQ+LJK*HUPDQSHULRGWUDQVODWLRQFRQFHSWVDQGSULQFLSOHVRIWUDQVODWLRQZHUHDFHQWUDOWRSLF RIGLVFXVVLRQHYHQEHIRUHWKHVHH[SOLFLWGLVFRXUVHVUHDFKHGWKHLUFOLPD[LQ/XWKHU¶V6HQGEULHIYRP 'ROPHWVFKHQ )RULQVWDQFHWKHWUDQVODWLRQVRIWKHVRFDOOHGµ9LHQQHVH6FKRRO¶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± ZKRZDVFRQYLQFHGRIWKHLQKHUHQWSULPDF\DVZHOODVWKHOLQJXLVWLFDQGVW\OLVWLF VXSHULRULW\RIKLV/DWLQVRXUFHVVWURYHWRWUDQVODWHWKHPLQWR*HUPDQDVOLWHUDOO\DVSRVVLEOH:KHWKHUKLVWH[WV ZRXOGEHLQWHOOLJLEOHWRWKHFRPPRQUHDGHUZDVRIQRFRQFHUQWRKLP1RWVXUSULVLQJO\WKHPRUHSUDJPDWLF WDUJHWRULHQWHGWUDQVODWLRQPHWKRGSUDFWLVHGDQGSURSDJDWHGE\WKHKXPDQLVWV$OEUHFKWYRQ(\E± DQG +HLQULFK6WHLQKRHZHO± SURYHGWREHPRUHSRSXODU$V$OEUHFKWZDVSDUWLFXODUO\FRQFHUQHGZLWKWKH LQWHOOLJLELOLW\RIKLVWUDQVODWLRQVKHDGDSWHGWKHODQJXDJHDQGVXEMHFWPDWWHURI3ODXWXV¶VFRPHGLHVWRILIWHHQWK FHQWXU\*HUPDQSRSXODUFXOWXUHDQGPLOLHXDVZHOODVWRWKHDWULFDOFRQYHQWLRQV6WHLQKRHZHOIROORZHGVLPLODU WUDQVODWRULDOSULQFLSOHV,QKLVH[SDQVLYHWUDQVODWLRQRI$HVRSKHLQWURGXFHGQXPHURXVSURYHUEVUK\PHGYHUVHV DQGDOOXVLRQVWRWRSLFDOHYHQWV7KLVLQWHUSUHWDWLYHPHWKRGRIDGDSWLYHDQGUHFUHDWLYHWUDQVODWLRQ6WHLQKRHZHO MXVWLILHGZLWKUHIHUHQFHWR+RUDFH¶VWRSRVDVIRUPXODWHGLQ'HDUWHSRHWLFDDQGWR-(520(¶VSULQFLSOHVVHH /$7,175$',7,21 0XUQHU¶V*HUPDQYHUVLRQRI9LUJLO¶V$HQHLG LVDQRWKHUH[DPSOHRIWKLV µQDWXUDOL]LQJ¶WUDQVODWLRQPHWKRGKHPDNHVQRDWWHPSWDWLPLWDWLQJ/DWLQSDUWLFLSOHFRQVWUXFWLRQVDQWLTXLW\LV WUDQVSRVHGWRVL[WHHQWKFHQWXU\*HUPDQ\UHIOHFWLQJKHUFXVWRPVWUDGLWLRQVDQGLGHDV:KLOH0XUQHULVTXLWH DZDUHRIWKHTXDOLWDWLYHGLIIHUHQFHEHWZHHQ/DWLQYHUVHDQG*HUPDQGRJJHUHOKHLVQHYHUWKHOHVVSURXGWRKDYH EHHQLQVWUXPHQWDOLQWKHUHVXUUHFWLRQRI9LUJLO¶VHSLFIURP/DWLQGHDWKWR*HUPDQOLIH



3DJH

$Q\DFFRXQWRIWKHKLVWRU\DQGWKHWKHRU\RIWUDQVODWLRQLQWR*HUPDQZRXOGEHLQFRPSOHWHZLWKRXW0DUWLQ 23,7=± DQG-XVWXV*HRUJ6FKRWWHO±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

/XWKHUDQG%LEOHWUDQVODWLRQ 7KHKLVWRU\RIWKH*HUPDQODQJXDJHVLQFHWKH0LGGOH$JHVLVFORVHO\DVVRFLDWHGZLWKWUDQVODWLRQVRIWKH %,%/(2YHUDSHULRGRI\HDUVWKHVHWUDQVODWLRQVKDYHIRUPHGDFRPSUHKHQVLYHFRUSXVRIWH[WVZKLFKLV UHSUHVHQWDWLYHWRDFRQVLGHUDEOHGHJUHHRI*HUPDQWUDQVODWLRQFXOWXUHDQGLWVGHYHORSPHQWWKURXJKWKHDJHV %LEOHWUDQVODWLRQVKDYHQRWRQO\LQIOXHQFHGWKHIRUPDWLRQRI&KULVWLDQHFFOHVLDVWLFWHUPLQRORJ\DQGWKH ODQJXDJHRIHWKLFV/87+(5¶6WUDQVODWLRQLQSDUWLFXODUKDVKDGDIRUPDWLYHDQGQRUPDWLYHHIIHFWRQPRGHUQ +LJK*HUPDQ7KHHQRUPRXVVXFFHVVRI/XWKHU¶V%LEOHWUDQVODWLRQPD\EHDWWULEXWHGWRKLVFUHDWLYHXVHRIWKH *HUPDQYHUQDFXODUDQGWRKLVSULQFLSOHVRIWUDQVODWLRQEXWDOVRWRWKHPDVVFLUFXODWLRQRIKLVZULWLQJVPDGH SRVVLEOHE\PRGHUQSULQWLQJWHFKQLTXHVDQGWRWKHKLVWRULFDOG\QDPLFVUHOLJLRXVVRFLDOSROLWLFDODQG HFRQRPLF²RIWKH5HIRUPDWLRQSHULRG/XWKHUFKRVHWRPHHWDGDXQWLQJFKDOOHQJHKRZWRH[SUHVVWKH:RUGRI *RGDVFRGLILHGLQWKH%LEOHLQWKHODQJXDJHRIWKHFRPPRQSHRSOHZKRZHUHXQDEOHWRUHDG/DWLQ*UHHNRU +HEUHZ$VDUXOHIRU/XWKHUH[SUHVVLQJWKHELEOLFDOPHVVDJHLQ*HUPDQPHDQWWUDQVODWLQJµIUHHO\¶VHH)5(( 75$16/$7,21 JLYLQJWKHµOHWWHUVWKHLUIUHHGRP¶DVLWZHUH+RZHYHUZKHQHVVHQWLDOWKHRORJLFDOµWUXWKV¶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¶VWH[W ,QGHHGVLQFHWKHVHFRQGTXDUWHURIWKHVL[WHHQWKFHQWXU\/XWKHU¶VLQIOXHQFHKDVSHUYDGHGWKHHQWLUH*HUPDQ WUDGLWLRQRI%LEOHWUDQVODWLRQLUUHVSHFWLYHRIUHJLRQDORUGHQRPLQDWLRQDODIILOLDWLRQV

7KHPRGHUQ+LJK*HUPDQSHULRG 2ULJLQDWLQJLQWKH*HUPDQ(QOLJKWHQPHQWSHULRGWKHGLIIHUHQWVWUDQGVRIWUDQVODWLRQWKHRU\FXUUHQWLQWKHSDVW WZRFHQWXULHVPD\EHWUDFHGEDFNWR-RKDQQ&KULVWRSK*2776&+('± DQGKLV/HLS]LJFLUFOH VWDXQFKGHIHQGHUVRI(QOLJKWQHPHQWYDOXHVDQGWRWKHLU6ZLVVDQWDJRQLVWV-RKDQQ-DNRE%2'0(5± DQG-RKDQQ-DNRE%5(,7,1*(5± UHVSHFWLYHO\*RWWVFKHG¶VDQG%UHLWLQJHU¶VRSSRVHGYLHZV RQWUDQVODWLRQZKLFKFODVKHGRYHU%RGPHU¶VWUDQVODWLRQRI0LOWRQ¶V3DUDGLVH/RVW UHIOHFWWKHLUGLVWLQFW VWDQFHRQSRHWLFVDHVWKHWLFVDQGOLWHUDU\ODQJXDJH%RWKVXEVFULEHGWRWKHUDWLRQDOLVWYLHZDFFRUGLQJWRZKLFK WKHUHLVDQHVVHQWLDOUHVHPEODQFHEHWZHHQODQJXDJHVDQGWKH\DUHWKHUHIRUHWUDQVODWDEOH²DWOHDVWLQSULQFLSOH %RWKDJUHHGWKDWGLIIHUHQWODQJXDJHVDUHQRWPLUURULPDJHVRIHDFKRWKHU7KHUHZDVDGLIIHUHQFHRIRSLQLRQDV WRZKHWKHUDWUDQVODWLRQVKRXOGEHSHUPLWWHGWRHPXODWHOLQJXLVWLFVW\OLVWLFDQGIRUPDOIHDWXUHVRIWKHVRXUFH WH[WDQGWKHUHE\YLRODWHWDUJHWVLGHQRUPV*RWWVFKHGPDLQWDLQHGWKDWDJRRGWUDQVODWLRQKDGWREHLQDJUHHPHQW ZLWKWKHSULQFLSOHVRI



3DJH

HQOLJKWHQHGQRUPDWLYHSRHWLFV,IWKHRULJLQDORUVRXUFHWH[WGLGQRWFRQIRUPZLWKWKHVHUXOHVWKHWUDQVODWRU ZDVGXW\ERXQGWRLPSURYHH[SDQGRUDEULGJH7KHWUDQVODWLRQKDGWREHD*HUPDQWH[WWKURXJKDQGWKURXJK %UHLWLQJHULQFRQWUDVWPDLQWDLQHGWKDWWKHUHZHUHQRVXSHUIOXRXVZRUGVLQOLWHUDU\ZRUNVRIDUW$QWLFLSDWLQJ +HUGHUDQG+XPEROGWKHDUJXHGWKDWWKHPHQWDOLWLHVRIGLIIHUHQWQDWLRQVDUHUHIOHFWHGLQWKHSHFXOLDULWLHVRI WKHLUUHVSHFWLYHODQJXDJHV7KHUHIRUHDWUDQVODWLRQPXVWQRWYLRODWHWKHµWKRXJKWV¶*HGDQFNHQ RIWKHRULJLQDO RUGHYLDWHIURPLWVVRXUFHLQDQ\RWKHUZD\2QWKHWKHRUHWLFDOOHYHO%UHLWLQJHU¶VLGHDVZHUHGHYHORSHGE\ )ULHGULFK*RWWOLHE.ORSVWRFN± DQG-RKDQQ*RWWIULHG+HUGHU± ZKRLQYHVWHGWKHµVSLULW¶ RIWKHRULJLQDOZLWKWKHXOWLPDWHDXWKRULW\7KLVFRQFHSWZDVSXWWRWKHSUDFWLFDOWHVWE\-RKDQQ+HLQULFK9RVV ± LQKLVWUDQVODWLRQVRI+RPHU 7KHWUDQVODWLRQVRI'DQWHDQG6KDNHVSHDUHE\$XJXVW :LOKHOP6&+/(*(/± RI5DEHODLVE\*RWWOLHE5HJLVRI$ULRVWRE\-RKDQQ*ULHVDQGRI &HUYDQWHVE\/XGZLJ7LHFN±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q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µDQRPDOLHV¶RI6KDNHVSHDUH¶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µELUWK¶RIWKHPRGHUQ*HUPDQQRYHO:LHODQG¶V'RQ6\OYLRYRQ5RVDOYD DQG ZLWK%ODQNHQEXUJ¶VHVVD\RQWKHQRYHO9HUVXFKEHUGHQ5RPDQ



3DJH

$VIDUDVGUDPDZDVFRQFHUQHG)UDQFHSURYLGHGPXFKRIWKHPDWHULDODVZHOODVWKHWKHDWULFDOPRGHOVVHYHUDO *HUPDQWUDQVODWLRQVRI(QJOLVKSOD\VZHUHEDVHGRQLQWHUPHGLDWH)UHQFKYHUVLRQV6+$.(63($5(KRZHYHU EHLQJWKHGUDPDWLFDQWLGRWHWRWKHUXOHVDQGFRQYHQWLRQVRIFODVVLFLVW)UHQFKGUDPDZDVHLWKHUUHDGLQ)UHQFK WUDQVODWLRQHJE\9ROWDLUH LQLWVRULJLQDO(QJOLVKHJ3RSH¶VHGLWLRQ RUKHZDVWUDQVODWHGGLUHFWO\IURP (QJOLVKLQWR*HUPDQ:KHQLQ&DVSDU:LOKHOPYRQ%RUFNSXEOLVKHGKLVWUDQVODWLRQRI-XOLXV&DHVDU -RKDQQ&KULVWRSK*2776&+('LPPHGLDWHO\FRQGHPQHGERWKWKHWUDQVODWLRQDVZHOODVWKHEDUEDULF(QJOLVK RULJLQDO%RWKUDQFRXQWHUWRKLVVWUDWHJ\RIUHIRUPLQJWKH*HUPDQWKHDWUH*RWWVFKHGIDYRXUHGSOD\VPDLQO\ RI)UHQFKRULJLQZKLFKFDPHFORVHVWWRUHDOL]LQJKLVLGHDORIRUGHUE\REVHUYLQJWKH$ULVWRWHOLDQUXOHVDQGE\ H[HUFLVLQJPRGHUDWLRQERWKZLWKUHJDUGWRDFWLRQDQGWRWKHXVHRIODQJXDJH:KHQ(GZDUG


3DJH

E\WKHPFRDOHVFHRQDKLJKHUSODQH7KLVFDXVHVJUDYHSUREOHPVIRUWUDQVODWRUVEHFDXVHLQWKHFRXUVHRIWLPH WKHODQJXDJHRIVXFKWH[WVKDVFRPHWREHDVVRFLDWHGZLWKVSHFLILFFXOWXUHERXQGFRQFHSWVFRQYHQWLRQV DWWLWXGHVDQGIHHOLQJV%HFDXVHWKHDVVRFLDWLYHFRPSOH[HVGLIIHUIURPODQJXDJHWRODQJXDJHDQGIURPFXOWXUH WRFXOWXUHWUDQVIHUFDQRQO\EHDFFRPSOLVKHGE\HPSOR\LQJWKHµDOLHQDWLQJ¶PHWKRGRIWUDQVODWLRQWKH WUDQVODWRUWDNHVKLVEHDULQJVIURPWKHXQLW\RIIRUPDQGFRQWHQWRIWKHVRXUFHWH[WDQGIURPWKHVRXUFH ODQJXDJH6FKOHLHUPDFKHUDGYRFDWHGWKHXVHRIDSURSHUODQJXDJHIRUWUDQVODWLRQZKLFKLQHYLWDEO\HQWDLOHG ODQJXDJHFKDQJH$IWHUDOORQO\E\GHYLDWLQJIURPHVWDEOLVKHGQRUPVFRXOGWKHDOLHQRUIRUHLJQLQFUHPHQWEH YLVXDOL]HGLQWKHWDUJHWODQJXDJH0RVWLPSRUWDQWWKRXJK6FKOHLHUPDFKHUZDVFRQYLQFHGRIWKHLQQRYDWLYH EXWDOVRRIWKHUHJHQHUDWLYHSRZHUVRIWUDQVODWLRQ 3UDFWLFDOO\HYHU\PRGHUQWUDQVODWLRQWKHRU\²DWOHDVWLQWKH*HUPDQODQJXDJHDUHD²UHVSRQGVLQRQHZD\RU DQRWKHUWR6FKOHLHUPDFKHU¶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²LQFOXGLQJ QRQ(XURSHDQRQHV²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


3DJH

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¶VSURJUDPPHVDQGGRFXPHQWDULHVLVYHU\KLJK'8%%,1*LVJHQHUDOO\SUHIHUUHGWR 68%7,7/,1* 2UJDQL]DWLRQRIWKHSURIHVVLRQDQGWUDQVODWRUWUDLQLQJ 7KHUHDUHWZRSURIHVVLRQDODVVRFLDWLRQVIRUWUDQVODWRUVLQ*HUPDQ\%XQGHVYHUEDQGGHU'ROPHWVFKHUXQG hEHUVHW]HUH9%'h DQG9HUEDQGGHXWVFKVSUDFKLJHUhEHUVHW]HUOLWHUDULVFKHUXQGZLVVHQVFKDIWOLFKHU:HUNH H99'h ERWKDUHPHPEHUVRFLHWLHVRI),7 'LSORPDFRXUVHVIRUWUDQVODWRUVDQGRULQWHUSUHWHUVDUHEHLQJRIIHUHGE\PDQ\*HUPDQXQLYHUVLWLHV SRO\WHFKQLFVDQGYRFDWLRQDODFDGHPLHVLQ%HUOLQ+XPEROGW %RQQRQO\IRUWUDQVODWRUVVSHFLDOL]LQJLQ 2ULHQWDOODQJXDJHV 'VVHOGRUIOLWHUDU\WUDQVODWRUVRQO\ )OHQVEXUJ+HLGHOEHUJ+LOGHVKHLP.|OQ/HLS]LJ 0DLQ]0QFKHQDQG6DDUEUFNHQDPRQJRWKHUSODFHV,QDGGLWLRQQXPHURXVRWKHULQVWLWXWHVERWKSXEOLFDQG SULYDWHRIIHUWUDLQLQJIRUWUDQVODWRUVDQGLQWHUSUHWHUV([DPLQDWLRQVDGPLQLVWHUHGRXWVLGHWKHDFDGHPLF HVWDEOLVKPHQWVDUHVXSHUYLVHGE\WKHUHJLRQDO&KDPEHUVRI&RPPHUFHDQGRUE\UHJLRQDOJRYHUQPHQWV$VWKH FXUULFXODDUHQRWVWDQGDUGL]HGWKHTXDOLW\RIWUDLQLQJDQGWKHSURILFLHQF\RIJUDGXDWHVYDU\FRQVLGHUDEO\,QWKH DEVHQFHRIOHJDOUHTXLUHPHQWVDQ\RQHPD\XVHWKHGHVLJQDWLRQµLQWHUSUHWHU¶RUµWUDQVODWRU¶ 7KH(XURSlLVFKHVhEHUVHW]HU.ROOHJLXPDW6WUl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²SRVWJUDGXDWHVWXGHQWVDQGHVWDEOLVKHGVFKRODUVDOLNH7KH&HQWUHIRUWKH6WXG\RI/LWHUDU\ 7UDQVODWLRQ6RQGHUIRUVFKXQJVEHUHLFKIUGLHOLWHUDULVFKHhEHUVHW]XQJ MRLQWO\VSRQVRUHGE\WKH*HUPDQ 5HVHDUFK&RXQFLO'HXWVFKH)RUVFKXQJVJHPHLQVFKDIW DQG*|WWLQJHQ8QLYHUVLW\LVDVSHFLDOFDVH6LQFHLWV EHJLQQLQJVLQVHYHUDOGR]HQVFKRODUVVSHFLDOL]LQJLQGLIIHUHQWQDWLRQDOSKLORORJLHVKDYHFRRSHUDWHGLQDQ LQWHUGLVFLSOLQDU\UHVHDUFKSURJUDPPH7KH\KDYHVHWWKHPVHOYHVWKHWDVNRIH[SORULQJVHOHFWHGDUHDVDQG DVSHFWVRIOLWHUDU\WUDQVODWLRQLQWR*HUPDQVLQFHWKHEHJLQQLQJRIWKHHLJKWHHQWKFHQWXU\ZLWKD



3DJH

YLHZWRGUDIWLQJDQRXWOLQHKLVWRU\RIWUDQVODWLRQFXOWXUHLQWKH*HUPDQVSHDNLQJFRXQWULHVGXULQJWKHSDVWWKUHH FHQWXULHV %RWKSURIHVVLRQDORUJDQL]DWLRQVWKH%'hDQG9'hSXEOLVKWKHLURZQMRXUQDOV/HEHQGH6SUDFKHQ%'h LV HGLWHGE\)ULHGULFK.UROOPDQQDQG*QWKHU+DHQVFKDQGSXEOLVKHGE\/DQJHQVFKHLGW0LWWHLOXQJVEODWWIU 'ROPHWVFKHUXQGhEHUVHW]HULVWKHRIILFLDORUJDQRIWKH%'hLQ%RQQ'HUhEHUVHW]HU9'h LVHGLWHGE\ +HOJD3DHWVFKLQ+HLGHOEHUJ $SDUWIURPWKHMRXUQDOVRISURIHVVLRQDORUJDQL]DWLRQVWKHUHDUHDQXPEHURIRWKHUMRXUQDOVWKHEHVWNQRZQRI ZKLFKLV7(;7FRQ7(;77UDQVODWLRQ7KHRULH'LGDNWLN3UD[LVZKLFKLVHGLWHGE\-XVWD+RO]0lQWWlULDQG +DQV9HUPHHUDQGSXEOLVKHGE\-XOLXV*URRV9HUODJ *HUPDQVFKRODUVKDYHEHHQDPRQJWKHPRVWDFWLYHLQWKHILHOGRIWUDQVODWLRQVWXGLHVDQGKDYHSURGXFHGDYHU\ ODUJHDQGLQIOXHQWLDOERG\RIOLWHUDWXUHRQWKHVXEMHFW6RPHRIWKHEHVWNQRZQQDPHVLQFOXGH.DWKDULQD5HLVV +DQV9HUPHHU:ROIUDP:LOVV$OEUHFKW1HXEHUWDQG&KULVWLDQH1RUGDPRQJPDQ\RWKHUV$SDUWIURP LQGLYLGXDOSXEOLFDWLRQVE\VXFKVFKRODUVWKUHHVHULHVDUHZRUWKPHQWLRQLQJ7KH*|WWLQJHU%HLWUlJH]XU ,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJLVSXEOLVKHGE\(ULFK6FKPLGW9HUODJLQ%HUOLQDQGHGLWHGE\ PHPEHUVRIWKH*|WWLQJHQ&HQWUHIRUWKH6WXG\RI/LWHUDU\7UDQVODWLRQWKHVHULHVVWDUWHGLQDQGLV GHYRWHGWRLQWHUQDWLRQDOUHVHDUFKLQOLWHUDU\WUDQVODWLRQ$OWKRXJKQRWGHYRWHGWRWUDQVODWLRQWKHVHULHV)RUXP 0RGHUQHV7KHDWHUZKLFKLVSXEOLVKHGE\*QWHU1DUULQ7ELQJHQDOVRLQFOXGHVVHYHUDOYROXPHVRQGUDPD WUDQVODWLRQHGLWHGE\PHPEHUVRIWKH*|WWLQJHQ&HQWUHWKHVHYROXPHVDUHVSHFLILFDOO\GHYRWHGWRWKH WUDQVODWLRQRI(XURSHDQGUDPDLQWR*HUPDQVLQFHWKHHLJKWHHQWKFHQWXU\7KHVHULHV7UDQVIHUSXEOLVKHGE\ *XQWHU1DUUZDVODXQFKHGLQE\PHPEHUVRI'VVHOGRUI8QLYHUVLW\ZLWKWKHVSHFLILFDLPRINHHSLQJ LQWHUHVWHGPHPEHUVRIWKHSXEOLFLQIRUPHGDERXWWKHWUDLQLQJRIOLWHUDU\WUDQVODWRUVDW'VVHOGRUIFXUULFXODU PDWWHUVDQGUHODWHGUHVHDUFK

)XUWKHUUHDGLQJ $SHO%HQMDPLQ%UHLWLQJHU(VVPDQQ(VVPDQQDQG6FKRHQLQJ*HEKDUGW +DHQW]VFKHO+RQHPDQQ+XEHU.LWWHO.LWWHODQG)UDQN1RUGPH\HU 3ROWHUPDQQ6FKDGHZDOGW6FKRHQGRUI6FKURHEOHU6FKZDU]6HQJHU6RQGHUHJJHU 6SULQJHU

+$5$/'.,77(/$1'$1'5($632/7(50$11

%LRJUDSKLHV %2'0(5-RKDQQ-DNRE± $6ZLVVSRHWOLWHUDU\FULWLFDQGWUDQVODWRUZKRLQPDQ\RIKLV ZULWLQJVIRXJKWDJDLQVWWKH(QOLJKWHQPHQWLGHDOVSURSDJDWHGE\*2776&+('DQGKLVIROORZHUV7RJHWKHU ZLWKKLVIULHQG%5(,7,1*(5%RGPHUDGYRFDWHGWKHSULPDF\RIWKHLPDJLQDWLRQ9RQGHP(LQIOXVVXQG *HEUDXFKGHU(LQELOGXQJVNUDIW +LVWUDQVODWLRQRI0LOWRQ¶V3DUDGLVH/RVW DQGKLVVXEVHTXHQW .ULWLVFKH$EKDQGOXQJYRP:XQGHUEDUHQLQGHU3RHVLH EHDUZLWQHVVWRKLVODVWLQJEHOLHILQWKH YLVLRQDU\QDWXUHRIWUXHDUW %5(,7,1*(5-RKDQQ-DNRE±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µWKRXJKWV¶*HGDQFNHQ RIWKHRULJLQDORUGHYLDWHIURPLWVVRXUFHLQDQ\RWKHUZD\ *2776&+('-RKDQQ&KULVWRSK± %RUQLQ(DVWHUQ3UXVVLD$VSURIHVVRURISRHWU\LQ/HLS]LJ SOD\ZULJKWDQGWUDQVODWRUKH



3DJH

DGYRFDWHG)UHQFKUDWLRQDOLVPDQGSRHWLFV9HUVXFKHLQHUNULWLVFKHQ'LFKWNXQVW 2QHRIWKHWZRPDMRU VWUDQGVRIWUDQVODWLRQWKHRU\FXUUHQWLQWKHSDVWWZRFHQWXULHVPD\EHWUDFHGEDFNWR*RWWVFKHGDQGKLV/HLS]LJ FLUFOHVWDXQFKGHIHQGHUVRI(QOLJKWHQPHQWYDOXHV+LVPDLQDQWDJRQLVWVZHUHWKH6ZLVV-RKDQQ-DNRE %2'0(5DQG-RKDQQ-DNRE%5(,7,1*(5*RWWVFKHG¶VYLHZVRQWUDQVODWLRQIRUFHIXOO\H[SUHVVHGLQ FRQQHFWLRQZLWK%RGPHU¶VWUDQVODWLRQRI0LOWRQ¶V3DUDGLVH/RVW UHIOHFWKLVJHQHUDOVWDQFHRQSRHWLFV DHVWKHWLFVDQGOLWHUDU\ODQJXDJH*RWWVFKHGPDLQWDLQHGWKDWDJRRGWUDQVODWLRQKDGWREHLQDJUHHPHQWZLWKWKH SULQFLSOHVRIHQOLJKWHQHGQRUPDWLYHSRHWLFV,IWKHRULJLQDORUVRXUFHWH[WGLGQRWFRQIRUPZLWKWKHVHUXOHVWKH WUDQVODWRUZDVGXW\ERXQGWRLPSURYHH[SDQGRUDEULGJH7KHWUDQVODWLRQKDGWREHD*HUPDQWH[WWKURXJKDQG WKURXJK /87+(50DUWLQ± 5HOLJLRXVUHIRUPHUDQGIRXQGHURI3URWHVWDQWLVP/XWKHUZDVDPLQHU¶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¶VWUDQVODWLRQRIWKH%LEOHKDVKDGDIRUPDWLYHDQGQRUPDWLYHHIIHFWRQWKH GHYHORSPHQWRIPRGHUQ+LJK*HUPDQ,QWKHVL[WHHQWKFHQWXU\H[SOLFLWGLVFRXUVHVRQWUDQVODWLRQFRQFHSWVDQG SULQFLSOHVRIWUDQVODWLRQUHDFKHGWKHLUFOLPD[LQ/XWKHU¶V6HQGEULHIYRP'ROPHWVFKHQ 127.(5,,,1RWNHU/DEHRRU7HXWRQLFXVF± $PRQNDQGWHDFKHUDWWKH%HQHGLFWLQH PRQDVWHU\RI6W*DOOHQ6ZLW]HUODQG 1RWNHUZDVXQLTXHDPRQJWUDQVODWRUVLQWKH2OG+LJK*HUPDQSHULRG ZLWKUHJDUGWRERWKWKHYDULHW\RIWH[WVKHWUDQVODWHGLQWRWKHYHUQDFXODUDQGKLVPRGHRIWUDQVODWLRQ$SDUW IURPELEOLFDOWH[WVDQG&KULVWLDQWKHRORJLFDOOLWHUDWXUHKHDOVRWXUQHGKLVDWWHQWLRQWRSKLORVRSKLFDODQGSRHWLF WH[WVVXFKDV%RHWKLXV¶3KLORVRSKLDH&RQVRODWLRDQG9LUJLO¶V%XFROLFDUHVSHFWLYHO\'UDZLQJRQWKHHIIRUWV OLQJXLVWLFDQGSKLORVRSKLFDORISUHYLRXVJHQHUDWLRQVRIWUDQVODWRUVDQG*HUPDQDXWKRUVKHHIIHFWLYHO\ WUDQVIHUUHGWKHPRVWFRPSOH[LGHDVDQGVXEWOHQRWLRQVIURP/DWLQLQWRLQQRYDWLYH\HWLQWHOOLJLEOH*HUPDQ :RUNLQJLQWKHGLGDFWLFWUDGLWLRQRIWKHSHULRG1RWNHU²DFFRUGLQJWRKLVEULOOLDQWSXSLO(NNHKDUG,9² H[SRXQGHGERRNVLQ*HUPDQIRUKLVVWXGHQWV¶VDNH 23,7=0DUWLQ±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± 6RQRIDPLQLVWHUDQGEURWKHURI)ULHGULFK6FKOHJHO± ERUQLQ+DQRYHU+DYLQJVWDUWHGKLVOLWHUDU\FDUHHULQ*|WWLQJHQKHZDVDSSRLQWHGSURIHVVRUDW-HQD DQGDW%RQQ ,QKHEHFDPHVHFUHWDU\WR0PHGH6WDsOZKRPKHDFFRPSDQLHGRQPRVWRI KHUWUDYHOVWKURXJK(XURSHXQWLOKHUGHDWKLQ$VDOLWHUDU\HGLWRUFULWLFOHFWXUHUDQGWUDQVODWRU6FKOHJHO SUHSDUHGWKHZD\IRU5RPDQWLFLVPLQ*HUPDQ\



3DJH

DQGHOVHZKHUH+RZHYHUWKHWUDQVODWLRQRI6KDNHVSHDUHLQWR*HUPDQLV6FKOHJHO¶VPRVWODVWLQJOLWHUDU\ DFKLHYHPHQW 6FKOHJHOFRQVLGHUHGHYHU\OLWHUDU\ZRUNRIDUWDVDQHQWLW\FRPSULVLQJIRUPDQGFRQWHQW,QKLVWUDQVODWLRQVKH WULHGWRFRPELQHWKHµREMHFWLYH¶DQGWKHµVXEMHFWLYH¶DVSHFWVRIWUDQVODWLRQILGHOLW\WRWKHVRXUFHWH[WRQWKHRQH KDQGDQGFUHDWLYHWUDQVIRUPDWLRQDQGQDWXUDOL]DWLRQLQDFFRUGDQFHZLWKWKHUHTXLUHPHQWVRIWKHWDUJHW ODQJXDJHDQGUHDGHUVKLSRQWKHRWKHU 6&+/(,(50$&+(5)ULHGULFK± $WKHRORJLDQUHOLJLRXVUHIRUPHUSUHDFKHUDQGWUDQVODWRU RI3ODWR 7KH5RPDQWLFFRQFHSWRIWUDQVODWLRQPDQLIHVWLQ$:6FKOHJHO¶VWKHRU\DQGSUDFWLFHRI 6KDNHVSHDUHWUDQVODWLRQZDVV\VWHPDWLFDOO\DQDO\VHGE\)ULHGULFK6FKOHLHUPDFKHU,QKLVWUHDWLVHhEHUGLH YHUVFKLHGHQHQ0HWKRGHQGHVhEHUVHW]HQV 6FKOHLHUPDFKHUFRQWUDVWHGWKHWUDQVODWRULDOPHWKRGVRI µDOLHQDWLRQ¶DQGµQDWXUDOL]DWLRQ¶7KLVGLVWLQFWLRQKDVSURYHGKLJKO\LQIOXHQWLDOLQWUDQVODWLRQVWXGLHVDQG IHDWXUHVSURPLQHQWO\LQFRQWHPSRUDU\WKHRUHWLFDOVWDWHPHQWVRQWUDQVODWLRQVHH675$7(*,(62) 75$16/$7,21 +$5$/'.,77(/$1'$1'5($632/7(50$11

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±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± DUHWRYDU\LQJ GHJUHHVVWLOODFFHVVLEOHWR*UHHNVWRGD\LQDZD\WKDW$QJOR6D[RQRUHYHQ0LGGOH(QJOLVKLVQRWDFFHVVLEOHWR VSHDNHUVRIPRGHUQ(QJOLVK:LWKWKHELUWKRIWKHPRGHUQQDWLRQDQGWKHJURZWKRIDQDWLRQDOFRQVFLRXVQHVV WKHTXHVWLRQRIODQJXDJHEHFDPHDQDWLRQDOLVVXH:KDWEHFDPHNQRZQDVWKHµ/DQJXDJH4XHVWLRQ¶LQPRGHUQ *UHHFHZDVSULPDULO\DGHEDWHDERXWWKHFRUUHFWRUGHVLUDEOHIRUPRIWKHZULWWHQODQJXDJH7KLVGHEDWH GHYHORSHGLQWRDFRQWHVWEHWZHHQWKHSRSXODUVSRNHQODQJXDJHGHPRWLF DQGLWVDGKHUHQWVGHPRWLFLVWV RQWKH RQHKDQGDQGWKRVHZKRDGYRFDWHGDµSXULILHG¶IRUPRIWKHODQJXDJHNDWKDUHYRXVD RQWKHRWKHU7KHODWWHULV DODQJXDJHFOHDQVHGRIIRUHLJQPDLQO\7XUNLVK ZRUGVDQGFRQVWLWXWHGDFRPSURPLVHEHWZHHQGHPRWLFDQG DQFLHQW$WWLF*UHHN7KLVVWUDQJHµGLJORVVLD¶WKHFRH[LVWHQFHRIWZROHYHOVRIODQJXDJH EHFDPHDQDWLRQDODQG SROLWLFDOLVVXHDQGFXWDFURVVHGXFDWLRQOLWHUDWXUHDQGQRWOHDVWWKHTXHVWLRQRIWUDQVODWLRQRIWHQOHDGLQJWR YLROHQW



3DJH

FRQIURQWDWLRQVEHWZHHQWKHRSSRQHQWVRIHDFKJURXS,WZDVQRWXQWLOWKDWGHPRWLFZDVILQDOO\HVWDEOLVKHG DVWKHRIILFLDOODQJXDJHRIHGXFDWLRQDQGFRQVHTXHQWO\RIWKH6WDWH

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± WKHDQFLHQW*UHHNVZHUHUDWKHUOLNHWKH(QJOLVKRIVRPH\HDUV DJRWKH\GLGQRWOHDUQIRUHLJQODQJXDJHVEXWH[SHFWHGRWKHUVWROHDUQWKHLUVQRUGLGWKH\ZDQWWRDOORZIRUHLJQ OLQJXLVWLFHOHPHQWVWRLQIOXHQFHWKHRUJDQLFGHYHORSPHQWRIWKH*UHHNODQJXDJHDQGFXOWXUH7KLVVLWXDWLRQ FRQWLQXHGLQWKH+HOOHQLVWLFSHULRGZKHQWKHQHHGIRUWUDQVODWLRQZDVDJDLQPLQLPL]HGE\WKHIDFWWKDW*UHHN ZDVWKHOLQJXDIUDQFDRIWKHWKHQFLYLOL]HGZRUOG6LPLODUO\LQWKHILUVWFHQWXULHV$'WKHWZRPDLQLQFHQWLYHV WRHDUO\WKLQNLQJRQWUDQVODWLRQLQRWKHUFRXQWULHV²QDPHO\WKHWUDQVODWLRQRIDQFLHQW*UHHNWH[WVDQGRIWKH 1HZ7HVWDPHQW²ZHUHQRWSUHVHQWLQ*UHHFHVLQFHWKHRULJLQDOWH[WVZHUHVWLOODFFHVVLEOHWR*UHHNUHDGHUVDW WKDWVWDJH 7KHILUVWUHIHUHQFHVWRWUDQVODWLRQLQWKH*UHHNFRQWH[WFRPHIURPWKHHDUO\%\]DQWLQHSHULRGDQGFRQFHUQWKH WUDQVODWLRQRIOHJDOWH[WV7URLDQRVDQG9HOLVVDURSRXORX.DUDNRVWD± 7KHGLYLVLRQRIWKH5RPDQ (PSLUHE\'LRFOHWLDQ±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µRQIRRW¶ DQGZDVIROORZHGE\RWKHUDFWLYLWLHVGHVLJQHGWRHQVXUHIXOOFRPSUHKHQVLRQRIWKHWH[W7KH ZRUNRIWKHDQWLNLQVRUHVLVNQRZQWRXVRQO\IURPWKHLUVWXGHQWV¶QRWHVWKH\WKHPVHOYHVOHIWQRZULWWHQWH[WV RQWKHLUPHWKRGV,WZDVIURPWKHVHDQQRWDWLRQVE\VWXGHQWVLQWKHPDUJLQVRUEHWZHHQWKHOLQHVRIWH[WVWKDW WKHILUVWOHJDOGLFWLRQDULHVFDPHLQWREHLQJ7KHLPSDFWRIWKHQHZOHJDOWHUPLQRORJ\ZKLFKZDVIRUPXODWHGLQ *UHHNFRXOGEHIHOWEH\RQGWKH%\]DQWLQHDUHDDQGWKHWUDQVODWLRQRIWKHVHWH[WVLQWR6ODYLFODQJXDJHVKDG FRQVLGHUDEOHLQIOXHQFHWKURXJKRXWWKHUHJLRQ7KXVWKHWH[WVLQWHUSUHWHGE\WKHDQWLNLQVRUHVDQGDQQRWDWHGE\ WKHLUVWXGHQWVHQDEOHGWKHVSUHDGRIYDULRXVFRQFHSWVERWKOHJDODQGSROLWLFDOIDUEH\RQGWKHFRQILQHVRIWKH 1HZ5RPH (YLGHQFHRIVXVWDLQHGVHULRXVLQWHUHVWLQWUDQVODWLRQDQGRULQWHUSUHWLQJKRZHYHUGRHVQRWHPHUJHXQWLOWKH EHJLQQLQJRIWKH*UHHN(QOLJKWHQPHQWSHULRGDQGWKHJURZWKRIDQDWLRQDOFRQVFLRXVQHVVLQWKH\HDUVOHDGLQJ XSWRWKH:DURI,QGHSHQGHQFHDJDLQVWWKH7XUNVLQ$QGHYHQWKHQWKLVLQWHUHVWUHPDLQHGVWULFWO\ZLWKLQ WKHFRQILQHVRIODUJHUQDWLRQDOLVVXHVFRQFHUQLQJWKHODQJXDJHDQGHGXFDWLRQRIWKH*UHHNSHRSOHLQWKHFRQWH[W RIWKHQHZ*UHHN6WDWH ,QWUDOLQJXDOWUDQVODWLRQ %LEOHWUDQVODWLRQQDWXUDOO\EHFDPHDQLVVXHLQ*UHHFHPXFKODWHUWKDQLWGLGLQWKHUHVWRI



3DJH

(XURSH,WZDVQRWXQWLOWKHQLQHWHHQWKFHQWXU\WKDWWKHQHHGZDVUHFRJQL]HGIRUDWUDQVODWLRQRIWKH.RLQH *UHHNRIWKH1HZ7HVWDPHQWLQWRWKHPRGHUQ*UHHNYHUQDFXODU,QDGGLWLRQWRWKHXVXDOWKHRORJLFDODQG WUDQVODWLRQUHODWHGSUREOHPVWKHTXHVWLRQRIWUDQVODWLQJWKH%LEOHWRRNRQZLGHUOLQJXLVWLFDQGQDWLRQDO GLPHQVLRQVLQWKHFRQWH[WRIWKHHVWDEOLVKPHQWRIWKHQHZ*UHHN6WDWHIROORZLQJWKH:DURI,QGHSHQGHQFHLQ 7ZRGLDPHWULFDOO\RSSRVHGDSSURDFKHVWRWKHVXEMHFWDUHUHSUHVHQWHGE\1HRSK\WRV9DPYDV± RQHRIWKHWUDQVODWRUVRIWKH2OGDQG1HZ7HVWDPHQWVDQG&RQVWDQWLQRV(FRQRPRV± (FRQRPRVEHOLHYHGWKDWLWZDVERWKLPSRVVLEOHDQGSRLQWOHVVWRWUDQVODWHWKH%LEOHLQWRPRGHUQ*UHHN+H LQVLVWHGWKDWWKH*UHHNVFDQXQGHUVWDQGWKHODQJXDJHRIWKHLUIRUHIDWKHUVDQGWKDWWKHLURZQODQJXDJHLV FRPPRQYXOJDUDQGGHEDVHVWKHORIW\VHQVHRIWKHRULJLQDOPRUHRYHULIWKHVFULSWXUHVFDQEHUHDGE\ HYHU\RQHWKLVZLOOOHDGWRKHUHV\DQGIDOVHLQWHUSUHWDWLRQ9DPYDVRQKLVSDUWPDLQWDLQHGWKDWLIDWUDQVODWLRQ LVLQWHQGHGWRWHDFKWKHQLWVGLFWLRQDQGVW\OHPXVWEHVLPSOHDQGJLYHQ(FRQRPRV¶FULWLFLVPVRIPRGHUQ *UHHNKHGLVWLQJXLVKHGEHWZHHQVLPSOHODQJXDJHDQGYXOJDUODQJXDJH7KHVHZHUHPDWWHUVLQZKLFKTXHVWLRQV RIWUDQVODWDELOLW\WKHPRGHUQ*UHHNODQJXDJHDQGQDWLRQDOLGHQWLW\DOOEHFDPHHPEURLOHG7KHGLVSXWH FRQWLQXHGWRHVFDODWHFXOPLQDWLQJLQWKH(YDQJHOLND*RVSHO5LRWV LQIROORZLQJWKHWUDQVODWLRQRIWKH *RVSHOVLQWRPRGHUQ*UHHNE\$OH[DQGURV3$//,66LPLODUULRWVNQRZQDVWKH2UHVWLDNDZHUHSURYRNHGE\ WKHSHUIRUPDQFHRI$HVFK\OXV¶WUDJHG\LQDPRGHUQGHPRWLFWUDQVODWLRQLQ ,Q*UHHFHWUDQVODWLRQSUDFWLFHDQGWKHRU\KDYHIRFXVHGWRDODUJHH[WHQWRQLQWUDOLQJXDOWUDQVODWLRQ² WUDQVODWLRQWKDWLVRIDQFLHQWWH[WVLQWRWKHPRGHUQLGLRP7KHJUHDWHPSKDVLVJLYHQWRLQWUDOLQJXDOWUDQVODWLRQ ZDVLQSDUWPHDQWWRVKRZWKHFRQWLQXLW\RIWKH*UHHNODQJXDJHUDWKHUWKDQWRSURGXFHDQHZ*UHHNWH[WDQGWR VKRZWKHFDSDFLW\RIWKHPRGHUQLGLRPWRDFWDVDYHKLFOHIRUWKHORIW\LGHDVRIWKHSDVW7DONLQJDWWKHOLWHUDU\ UHPHPEUDQFHVHUYLFHIRU$OH[DQGURV3DOOLVLQ0DQROLV75,$1'$)


3DJH

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qUH7KHVHDUHIROORZHGLQWKHQLQHWHHQWKFHQWXU\E\ 9ROWDLUH$OILHULDQG5DFLQH)URPRQZDUGVLWLVWKHQRYHOWKDWSUHGRPLQDWHVJUDGXDOO\FRPLQJWR DFFRXQWIRUSHUFHQWRIWKHWRWDOOLWHUDWXUHWUDQVODWHGZLWKWUDQVODWLRQVLQWR*UHHNRI'XPDV6DQGDQG 0HULPp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¶1HLOODQG(OLRWEXWLWDOVRVDZPDQ\WUDQVODWLRQVRI5XVVLDQ6FDQGLQDYLDQ *HUPDQDQG,WDOLDQZULWHUVLQFOXGLQJ7ROVWR\'RVWR\HYVN\&KHNKRY*RJRO7XUJHQHY+DPVXQ,EVHQ 6WULQGEHUJ+DXSWPDQQ1LHW]VFKH'¶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

7UDQVODWLRQWKHRU\DQGWUDQVODWLRQPHWKRGV .$.5,',6 DVVHUWVWKDWWKHKLVWRU\RIWUDQVODWLRQWKHRU\LQ*UHHFHEHJLQVZLWK1LNRODRV62),$126 ZKROLYHGDQGGLHGLQ9HQLFHLQWKHILUVWKDOIRIWKHVL[WHHQWKFHQWXU\



3DJH

6RILDQRVZDVWKHILUVWVFKRODUWRWUDQVODWHDQGZULWHDERXWWUDQVODWLRQLQWRPRGHUQ*UHHNDQGWKHILUVWWRZULWHD JUDPPDURIWKHFRPPRQODQJXDJHRIWKH*UHHNVWKRXJKWKLVZDVQRWSXEOLVKHGXQWLO,QKLVSURORJXH GHGLFDWLRQWR'LRQ\VLRV%LVKRSRI0\ORSRWDPRVDQG+HUVRQHVRVZKLFKSUHIDFHVKLVWUDQVODWLRQRI3VHXGR 3OXWDUFK¶V2QWKH(GXFDWLRQRI&KLOGUHQSULQWHGLQ9HQLFHLQ 6RILDQRVUDLVHGIRUWKHILUVWWLPHLQWKH *UHHNFRQWH[WZKDW.RXWVLYLWLV UHIHUVWRDVWKHµKRZDQGZK\¶RIWUDQVODWLRQ+LVSULPHFRQFHUQZDV ZLWKWUDQVODWLRQDVDPHDQVRIHGXFDWLRQDQGFRQVHTXHQWO\ZLWKWKHXVHRIDODQJXDJHZKHUHWKHHPSKDVLV ZRXOGEHRQWKHQDWXUDOQHVVRIWKHWDUJHWLGLRPDQGRQIDFLOLWDWLQJWKHUHDGHU¶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¶ZULWLQJRQWUDQVODWLRQLVWKDWKHWRRNKLV H[DPSOHVIURPWKHVXFFHVVIXOWUDQVODWLRQVRIRWKHUVUDWKHUWKDQIURPKLVRZQWUDQVODWLRQV+HRSWHGIRU SUHVHUYLQJWKHVHQVHRIWKHRULJLQDOWH[WDQGHQVXULQJWKHQDWXUDOQHVVRIWKHWDUJHWODQJXDJHDVKLVWZRSULPH FRQFHUQV2QO\LQWKLVZD\KHVXJJHVWHGGRHVWKHWUDQVODWLRQIXOILOLWVPLVVLRQLQWKDWLWFDQWKXVEHFRPSDUHG WRWKHRULJLQDODQGDOVRVWDQGDVDQLQGHSHQGHQWWH[W7KHVHFRQGTXHVWLRQKHGLVFXVVHGZDVWKHIRUPRI*UHHN WREHXVHGDVWKHWDUJHWODQJXDJHDTXHVWLRQWKDWHYHU\*UHHNZULWHUDQGWUDQVODWRUIHOWREOLJHGWRFRQVLGHU .DWDUW]LV¶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µFDQULJKWO\EH VHHQDVWKH\HDULQZKLFKWUDQVODWRORJ\ZDVERUQLQPRGHUQ*UHHFH¶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µPHDQV¶ZKLFKUDLVHGIRUWKHILUVWWLPHLQWKH*UHHNFRQWH[WTXHVWLRQVUHODWLQJWRLQWHQWLRQDOLW\DQGWKH VXEWH[W.RUDLVDOVRVWUHVVHGWKHYDOXHRI



3DJH

WUDQVODWLRQLQWHUPVRIHQULFKLQJWKHWDUJHWODQJXDJH/LNH.RUDLV5,*$63KHUUDLRV¶VLQWHUHVWLQWUDQVODWLRQ UHIOHFWHGKLVFRQFHUQZLWKODQJXDJHDQGHGXFDWLRQ+HLQWURGXFHGWKHLGHDRIWUDQVODWLRQDVDFUHDWLYHZRUN SDUWLFXODUO\EHQHILFLDOWRERWKWUDQVODWRUDQGUHDGHUSURYLGHGWKDWLWFRQYH\VIDLWKIXOO\WKHVHQVHRIWKHRULJLQDO DQGUHVSHFWVWKHSHFXOLDULWLHVRIWKHWDUJHWODQJXDJH6RORPRV± WKH*UHHNQDWLRQDOSRHWDQG .DOYRV± KLVFRQWHPSRUDU\KDGYHU\VLPLODUDSSURDFKHV%RWKVDZWKHWUDQVODWLRQSURFHVVDVDQ H[HUFLVHDQGSUHSDUDWLRQIRURULJLQDOZRUNWKURXJKDVVLPLODWLQJDQGUHIDVKLRQLQJLQWKHLURZQZD\YDULRXV HOHPHQWVIURPWKHLUVRXUFHV 'XULQJWKHVHFRQGKDOIRIWKHQLQHWHHQWKFHQWXU\YDULRXVVWDWHPHQWVRQWUDQVODWLRQPHWKRGVVSHFLILFDOO\² UDWKHUWKDQWKHUROHRIWUDQVODWLRQLQWKHZLGHUFRQWH[W²EHJDQWRDSSHDUIUHTXHQWO\LQSURORJXHVWRWUDQVODWLRQV DQGLQDUWLFOHVLQSHULRGLFDOVDQGQHZVSDSHUV,QIOXHQWLDOLQWKLVJHQHUDOGHEDWHZHUHWKHYLHZVRI(PPDQXHO 5RLGLV± ZKRLQWKHSURORJXHWRKLVWUDQVODWLRQRI&KDWHDXEULDQG¶V,WLQp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¶V1DQDE\,RDQQLV.DPERXURJORX± SXEOLVKHGLQ 3DUWLFXODUO\LPSRUWDQWDQGLQQRYDWLYHIRUWKHWLPHZHUHWKHYLHZVKHH[SUHVVHGLQWKHSURORJXHWRWKLV WUDQVODWLRQZKHUHKHDWWHPSWHGWRWUDQVFHQGERWKWKHOLQJXLVWLFDQGWUDQVODWLRQGLOHPPDVE\DUJXLQJWKDWKLV SULPHFRQFHUQZDVWRDFKLHYHDQHTXLYDOHQWHIIHFWRQWKH*UHHNUHDGHUDQGWKDWKLVFKRLFHRIOLQJXLVWLFLGLRP ZDVGLFWDWHGE\WKLVFRQVLGHUDWLRQDORQH,QDVLPLODUYHLQ/RUHQ]RV0DYLOLV± EHOLHYHGWKDWD WUDQVODWLRQVKRXOGQRWEHHYDOXDWHGRQWKHEDVLVRIDFRPSDULVRQZLWKWKHRULJLQDOEXWLQWHUPVRILWVRZQ FRQFHSWXDOFRKHUHQFHDQGIRUPDODSSURSULDWHQHVV/LNHPRVWRWKHUZULWHUVRQWUDQVODWLRQKHQRWHGWKH LQIOXHQFHRIWUDQVODWHGZRUNVRQWKHQDWLRQ¶VOLWHUDWXUHDQGRQWKHGHYHORSPHQWRIWKHQDWLRQDOODQJXDJH&RVWLV 3DODPDV±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µWUDQVODWLRQ¶DQGFRQFOXGHGZLWKDUHDOLVWLFDIILUPDWLRQRI LWVGLIILFXOW\,QKLVYLHZDQ\SRHWU\WUDQVODWLRQVKRXOGUHWDLQWRVRPHH[WHQWLWVIRUHLJQFKDUDFWHUDQGWKH µSDUIXPpWUDQJHU¶RILWVRULJLQ7KHVHFRQGPDLQTXHVWLRQWKDW9DOYLVDWWHPSWHGWRDGGUHVVZDVZKHWKHUSRHWU\ VKRXOGEHWUDQVODWHGLQWRPHWULFDOYHUVHRUSURVHDQGIRUDHVWKHWLFUHDVRQVKHH[SUHVVHGKLVSUHIHUHQFHIRUWKH IRUPHU9DOYLVDOVRGLVFXVVHGYDULRXVW\SHVRIWUDQVODWLRQ²IUHHZRUGIRUZRUGDQGVHQVHIRUVHQVH²DQG VXJJHVWHGWKDWWKHPRGHORI/HV%HOOHV,QILGqOHVVKRXOGEHDYRLGHGVLQFHLWVHUYHVWKHSXUSRVHVRIWKHWUDQVODWRU UDWKHUWKDQWKHRULJLQDOZULWHU+HFRQVLGHUHGOLWHUDOWUDQVODWLRQWKHEHVWDOEHLWWKHPRVWGHPDQGLQJIRUPRI WUDQVODWLRQDQGFRQFOXGHGE\UHFRPPHQGLQJVHQVHIRUVHQVHZKLFKUHSUHVHQWVWKHPLGGOHJURXQGEHWZHHQ IUHHDQGOLWHUDOWUDQVODWLRQ 7KH1REHOSRHW*HRUJH6()(5,6VWUHVVHGWKDWWKHPDLQDLPLQKLVWUDQVODWLRQVZDVWKDWµWKH>*UHHN@ ODQJXDJHEHFOHDQVHGDQGHQULFKHGVRDVWREHFRPHIXQFWLRQDODQGDEOHWR³EHDU´DWH[WFRPLQJHLWKHUIURPWKH



3DJH

OLWHUDWXUHRIWKH:HVWRUIURPWKHROGHUOLWHUDWXUHRIRXUODQG¶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¶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¶VDLPPXVWVLPSO\EHWRDFKLHYHWKHEHVWSRVVLEOH UHVXOW/LNH6HIHULV(O\WLVLQWURGXFHVQHZWHUPVWRGHVFULEHKLVWUDQVODWLRQSUDFWLFHKHUHIHUUHGWRLQWHUOLQJXDO WUDQVODWLRQDVDGHIWHULJUDSKLVHFRQGZULWLQJ DQGLQWUDOLQJXDOWUDQVODWLRQDVDPRGHUQ*UHHNPRUSKLIRUP

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µDSSHDUHGWKLVLVDMRXUQDORQOLWHUDU\ WUDQVODWLRQPDLQO\)UHQFK*UHHN SXEOLVKHGE\IRUPHUVWXGHQWVRIWKH&HQWUHGH7UDGXFWLRQ/LWWpUDLUHDWWKH )UHQFK,QVWLWXWHLQ$WKHQV &XUUHQWUHVHDUFKSURJUDPPHVLQFOXGHDELEOLRJUDSK\RIWUDQVODWLRQVLQWR*UHHNRIIRUHLJQOLWHUDWXUHLQWKH QLQHWHHQWKDQGWZHQWLHWKFHQWXULHV5HVHDUFKEHJDQVHYHUDO\HDUVDJRDVSDUWRIWKH2SHUDWLRQDO3URJUDPPHRI 5HVHDUFKDQG7HFKQRORJ\IXQGHGE\WKH(XURSHDQ8QLRQ7KHDLPLVWRSXEOLVKWKHELEOLRJUDSK\LQILYH YROXPHVDQGLQHOHFWURQLFIRUPDQGWRFUHDWHDQHOHFWURQLFFRUSXVRI



3DJH

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¶VLPPLQHQWDFFHVVLRQWRWKH(XURSHDQ&RPPXQLW\DQGZLWK*UHHNEHFRPLQJRQH RIWKH&RPPXQLW\¶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¶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



3DJH

UHIOHFWVDJURZLQJDZDUHQHVVLQ*UHHFHRIWKHQHHGIRUSURIHVVLRQDOWUDQVODWRUVDQGLVKHOSLQJWRUDLVHWKH SURILOHRIWKHSURIHVVLRQZKLFKQHYHUWKHOHVVUHPDLQVODFNLQJLQSUHVWLJHDQGUHPXQHUDWLRQ7KRVHHQJDJHGLQ WKHSURIHVVLRQDUHEHJLQQLQJWRUHDOL]HWKHQHHGIRUFROODERUDWLRQDQGFRRSHUDWLRQDQGIRUDSURIHVVLRQDOERG\ WKDWZRXOGEHUHVSRQVLEOHIRUVHWWLQJVWDQGDUGVDQGSURPRWLQJWKHSURIHVVLRQ0RYHVDUHDOUHDG\EHLQJPDGHLQ WKLVGLUHFWLRQ

)XUWKHUUHDGLQJ %DWVDOLDDQG6HOOD.DNULGLV.RXWVLYLWLV3ROLWLV9D\HQDV

'$9,'&2112//<$1'$/,.,%$&2328/28+$//6

%LRJUDSKLHV (/<7,62G\VVHXV± 5HDOQDPH2G\VVHXV$OHSRXGKHOOLVERUQLQ&UHWHRISDUHQWVIURP/HVERV (O\WLVSXEOLVKHGKLVILUVWSRHPVLQDQGHVWDEOLVKHGKLPVHOIDVRQHRIWKHOHDGLQJILJXUHVRIWKHVRFDOOHG µ7KLUWLHV¶*HQHUDWLRQ¶ZKLFKDOVRLQFOXGHG6()(5,6'XULQJWKHSRVWZDU\HDUVKHOLYHGLQ)UDQFHIRU H[WHQGHGSHULRGVDQGDVVRFLDWHGZLWKWKHOHDGLQJSRHWVDQGDUWLVWVRIKLVJHQHUDWLRQKHDOVRWUDYHOOHGZLGHO\ RXWVLGH)UDQFHDQG*UHHFH+HSXEOLVKHGFROOHFWLRQVRISRHWU\DQGWZRODUJHYROXPHVRIFULWLFDOHVVD\VDQG WUDQVODWHGZRUNVE\5LPEDXGWKHFRPWHGH/DXWUpDPRQW-RXYH8QJDUHWWL/RUFD0D\DNRYVN\*HQHWDQG² IURPDQFLHQW*UHHN²6DSSKR&ULQDJRUDVDQGWKH5HYHODWLRQVRI6W-RKQ+HZDVDZDUGHGWKH1REHO3UL]HIRU /LWHUDWXUHLQ .$.5,',6,RDQQLV± &ODVVLFDOVFKRODUDQGSURIHVVRUDWWKH8QLYHUVLW\RI7KHVVDORQLNLDQGODWHU $WKHQV+HLVNQRZQIRUKLVWUDQVODWLRQVRIWKH,OLDGDQG2G\VVH\LQWRPRGHUQ*UHHNLQFROODERUDWLRQZLWK 1LNRV.D]DQW]DNLV.DNULGLVZDVFHQVXUHGE\DGLVFLSOLQDU\FRXQFLORIWKH8QLYHUVLW\RI$WKHQVGXULQJWKH *HUPDQRFFXSDWLRQ IRUDZRUNKHSXEOLVKHGLQGHPRWLF*UHHNZLWKRXWDFFHQWVDQGFRQVHTXHQWO\ORVWKLV SRVLWLRQDWWKH8QLYHUVLW\ .$7$57=,6'LPLWULRVF± .DWDUW]LVSOD\HGDFHQWUDOUROHLQWKHGHEDWHRQWKH*UHHNODQJXDJH TXHVWLRQ0RVWRIKLVZRUNUHPDLQHGXQSULQWHGEXWRQHZRUNZDVSULQWHGDIWHUEHLQJµWUDQVODWHG¶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±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¶VVSRNHQ ODQJXDJHDQGWKLUGWKDWWKHZD\WREUHDNWKLVYLFLRXVFLUFOHLVWRWDNHWKHPRGHUQVSRNHQ ODQJXDJH



3DJH

DVWKHEDVLVDQGVRIDUDVSUDFWLFDEOHWRµFRUUHFW¶LWLQRUGHUWRPLQLPL]HWKRVHHOHPHQWVZKLFKPRVWGLVWLQJXLVK LWIURPLWVDQFLHQWSUHGHFHVVRU%HDWRQ 3$//,6$OH[DQGURV± %RUQLQ3LUDHXVDQGVWXGLHGSKLORORJ\LQ$WKHQV3DOOLVZHQWDEURDG ZKLOHVWLOO\RXQJDQGGHYRWHGKLPVHOIWRDFRPPHUFLDOFDUHHU+HZURWHSRHWU\EXWDERYHDOOXVHGKLVOLWHUDU\ WDOHQWLQWUDQVODWLRQ+HWUDQVODWHG(XULSLGHV6KDNHVSHDUH7KXF\GLGHVDQGHYHQ.DQWWRGHPRQVWUDWHWKH SRVVLELOLW\RIXVLQJGHPRWLF*UHHNIRUVRGLIILFXOWDWH[W+LVJUHDWHVWDFKLHYHPHQWVZHUHWKHWUDQVODWLRQVRIWKH *RVSHOVDQGWKH,OLDG 32/


3DJH

PRGHUQ*UHHNWRQJXHDQGLQWKHHGXFDWLRQRIKLVVXEMXJDWHGSHRSOH:RUNLQJLQ9HQLFH6RILDQRVZURWHD JUDPPDURIWKHPRGHUQ*UHHNODQJXDJHZKLFKZDVQRWSULQWHGDWWKHWLPH DQGWUDQVODWHGWKH3VHXGR 3OXWDUFKDQWUHDWLVHRQ7KH(GXFDWLRQRI&KLOGUHQSXEOLVKHGXQGHUWKHWLWOH3HGDJRJXHLQ+LV WUDQVODWLRQVUHIOHFWKLVFRQFHUQZLWKWKHHGXFDWLRQRIWKH*UHHNQDWLRQ+HEHOLHYHGWKDWWKLVHGXFDWLRQZRXOG EHEHVWDFFRPSOLVKHGLIWKH*UHHNVFRXOGUHDGDQGVWXG\WKHERRNVOHIWE\WKHLUDQFHVWRUV 75,$1'$)


3DJH

+ +HEUHZWUDGLWLRQ +HEUHZLVDPHPEHURIWKHQRUWKZHVWHUQEUDQFKRIWKH6HPLWLFIDPLO\RIODQJXDJHV,WVWDUWHGDVRQHRIPDQ\ &DQDDQLWHGLDOHFWVEXWLWVEHJLQQLQJVDVDODQJXDJHLQLWVRZQULJKWFDQEHLGHQWLILHGZLWKWKHDGRSWLRQRIWKDW GLDOHFWE\WKH,VUDHOLWHVZKRVHWWOHGLQWKH/DQGRI,VUDHOLQF%&DQGZKRFRQWLQXHGWRXVHLWGXULQJWKHLU SHULRGVRIQDWLRQDOLQGHSHQGHQFHF%&%&DQG%&$' 2XWVLGHWKRVHSHULRGVRIQDWLRQDO LQGHSHQGHQFHVSRNHQ+HEUHZZDVUHSODFHGILUVWE\$UDPDLFDQG*UHHNWKHQ²ZKHQWKH-HZVZHUHIRUFHGWR OHDYHWKHLUODQG²E\WKHYDULRXVODQJXDJHVDPRQJVWZKRVHVSHDNHUVWKH\VHWWOHG$WWKHVDPHWLPHZKHUHYHU -HZLVKLGHQWLW\ZDVQRWORVW+HEUHZFRQWLQXHGWREHXVHGDVWKHODQJXDJHRIUHOLJLRXVULWHVDQGUHWDLQHGWKH SUHVWLJHWKDWJRHVZLWKLWVVWDWXVDVWKHµ+RO\7RQJXH¶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

7UDQVODWLRQGXULQJDQWLTXLW\ 7KH+HEUHZ%LEOHLQFOXGHVFOHDUUHIHUHQFHVWRWUDQVODWLRQLQFOXGLQJOLDLVRQLQWHUSUHWLQJHJ*HQHVLV $OVRVHYHUDOSDVVDJHVUHYHDOWUDFHVRIDFWXDOWUDQVODWLRQHJ(]UD±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²ILUVWRUDOO\WKHQLQZULWLQJ7KHPDLQREMHFWLYHRIWKLVWUDQVODWLRQDOHIIRUW ZDVWRUHQGHUWKH6FULSWXUHVDFFHVVLEOHWRWKHOHVVOHDUQHGVRDVWRHQDEOHWKHPWRIROORZWKHVHUYLFHV6HH 725$+75$16/$7,21 0LVKQDLFOLWHUDWXUHDOVRFRQWDLQVPDQ\LPSRUWDQWREVHUYDWLRQVRQWKHQDWXUHRI WUDQVODWLRQDQGWKHSURSHUZD\VLQZKLFKLWVKRXOGEHSHUIRUPHGDVZHOODVRQWKH



3DJH

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µVORWV¶ZHUHILOOHGPDLQO\VRPHWLPHVH[FOXVLYHO\E\WUDQVODWLRQV,QVRPH LQVWDQFHVDVLQWKHFDVHRIWKHPHGLHYDOPDTƗPƗWDQGPRGHUQIDEOHVWUDQVODWLQJVHUYHGDVDPHDQVRI H[SHULPHQWLQJZLWKDQGODWHULQWURGXFLQJLQRULJLQDOFRPSRVLWLRQWH[WW\SHVZKLFKZHUHKLWKHUWRXQNQRZQLQ +HEUHZ

7KH0LGGOH$JHV )ROORZLQJDORQJLQWHUYDOWUDQVODWLRQLQWR+HEUHZUHVXPHGLQPHGLHYDO(XURSHDQGZDVLQIXOOVZLQJE\WKH HQGRIWKHWZHOIWKFHQWXU\0RVWRIWKHWH[WVWUDQVODWHGZHUHQRZµZRUNVRIZLVGRP¶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µFRPPLVVLRQHUV¶RU IURPWKHORFDOFRQJUHJDWLRQLQZKLFKWKHFRPPLVVLRQHUVRIWHQRFFXSLHGNH\SRVLWLRQV$PRQJWKHPRVW LQIOXHQWLDOWUDQVODWLRQVRI-HZLVKµZRUNVRIZLVGRP¶FRPSOHWHGGXULQJWKLVSHULRGDUH LEQ3DTXGD¶V KD/HYDYRW'XWLHVRIWKH+HDUW 0DLPRQLGHV¶0RUHK1HYXNKLP*XLGHRIWKH3HUSOH[HG DQG-XGDK +DOHYL¶V6HIHUKD.X]DUL ,QWHUHVWLQVFKRODUVKLSVRRQVSUHDGWRQRQ-HZLVKERRNVDQGWKHPHVOHDGLQJWRQXPHURXVWUDQVODWLRQVLQWR +HEUHZRIZRUNVRISKLORVRSK\ORJLFJUDPPDUDVWURQRP\PHGLFLQHSK\VLFVDQGYDULRXVRWKHUPHGLHYDO VFLHQFHV+HUH$UDELFZDVRIWHQDPHGLDWLQJODQJXDJHRQO\HVSHFLDOO\LQWKHFDVHRI*UHHNDQG/DWLQ LQFOXGLQJPDQ\RI$ULVWRWOH¶VZRUNV2WKHUVRXUFHODQJXDJHVZHUHODWHUDGGHGWRWKHOLVW7KHPRVW FRPSUHKHQVLYHSUHVHQWDWLRQRI+HEUHZWUDQVODWLRQVLQWKH0LGGOH$JHVDQGWKH5HQDLVVDQFHSHULRGDVZHOODV WKHUROHRI-HZVDVFXOWXUDOPHGLDWRUVEHWZHHQ(DVWDQG:HVWLVVWLOO6WHLQVFKQHLGHU PRVWRIWKHWH[WV PHQWLRQHGWKURXJKRXWWKLVSDJHYROXPHDUHVWLOOEXULHGLQPDQXVFULSWV $OWKRXJKWKHWUDQVODWLRQRIPHGLHYDOµZRUNVRIEHDXW\¶KDVKDGPXFKOHVVLPSDFWRQWKH-HZLVKWUDGLWLRQLW ZDVQRGRXEWDORWPRUHFRPPRQWKDQZHKDYHFRPHWRWKLQNGXHWRDORQJWUDGLWLRQRIGHYRWLQJVFKRODUO\ DWWHQWLRQWRµVHULRXV¶WH[WVRQO\7UXHµOLWHUDU\¶WUDQVODWLRQZDVFRQVLGHUHGLQKHUHQWO\LQIHULRUDWEHVWRQWKH WKUHVKROGRIOHJLWLPDF\DQG-HZVLQGXOJHGLQLWZLWKVRPHUHOXFWDQFH²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



3DJH

-XGDLFVWXGLHVLWZDVDJDLQILUVWDQGIRUHPRVWµVFLHQWLILF¶ZULWLQJVZKLFKZHUHWDNHQLQWRFRQVLGHUDWLRQDQGUH SULQWHG ,WL¶HOWKH+HEUHZWUDQVODWLRQE\-XGDK RI $VLJQLILFDQWH[FHSWLRQWRWKLVUXOHZDV 0DTƗPƗWLQ$UDELF XQGHUWRRNWKHWUDQVODWLRQDVDSUHSDUDWRU\H[HUFLVHIRUZULWLQJKLVRZQFROOHFWLRQ 3UREDEO\DVDUHVXOWRIWKHFDQRQL]DWLRQRIWKHPDTƗPƗWLQ$UDELFOLWHUDWXUH RIPDTƗPƗWHQWLWOHG RZQSUHVWLJH FDPHWREHKHOGLQKLJKHVWHHPLQ-HZLVKFXOWXUH2WKHUOLWHUDU\ DVZHOODV WUDQVODWLRQVZKLFKHQMR\HGFRQVLGHUDEOHSUHVWLJHDQGGLVWULEXWLRQLQFOXGH$EUDKDPLEQ+DVGDL¶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¶VIRUJLYHQHVVIRULQGXOJLQJLQWKHDFWRIWUDQVODWLQJHVSHFLDOO\LIWKH WUDQVODWLRQZDVLQLWLDWHGE\WKHWUDQVODWRUKLPVHOI0DQ\IHOWREOLJHGWRDSRORJL]HIRUWDFNOLQJWKHSDUWLFXODU WH[WWKH\XQGHUWRRNWRWUDQVODWHLQWKHFDVHRIµZRUNVRIZLVGRP¶PDLQO\EHFDXVHRIWKHLUOLPLWHGIDPLOLDULW\ ZLWKWKHVXEMHFWPDWWHULQWKHFDVHRIµZRUNVRIEHDXW\¶WKHDSRORJ\UHIOHFWHGZLGHVSUHDGDSSUHKHQVLRQ UHJDUGLQJµLGOHWDON¶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µLPSRUWDQW¶ZRUNV²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²VRPHWLPHVWKHYHU\VDPH SHUVRQV²VWXFNPXFKFORVHUWRGRPHVWLFPRGHOVHVSHFLDOO\WKRVHRIIHUHGE\WKHTXDVLELEOLFDOODQJXDJHXVHG LQ+HEUHZPHGLHYDOSRHWU\7KHWZRVWUDWHJLHVFDQEHVHHQPRVWFOHDUO\LQWH[WVZKLFKDUHERWKVFKRODUO\DQG OLWHUDU\LQQDWXUHIRUH[DPSOH6HIHUKD.X]DUL7KHVHZHUHVRPHWLPHVWUDQVODWHGDVLIWKH\ZHUHSXUHVFLHQFH DQGVRPHWLPHVDVLIWKH\ZHUHEDVLFDOO\OLWHUDWXUH ,QUHWURVSHFWWKHVWUDWHJ\DGRSWHGE\WUDQVODWRUVRIVFLHQWLILFWH[WVSURYHGWUXO\LQQRYDWLYH2ULJLQDOO\DFOHDU FDVHRIWUDQVODWLRQHVHWKH



3DJH

UHVXOWLQJVWUXFWXUHVDQGYRFDEXODU\ZHUHJUDGXDOO\DVVLPLODWHGLQWRWKHODQJXDJHDWODUJH:KDWFDPHWREH NQRZQDV7LEERQLG+HEUHZ¶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µ-XGDL]LQJ¶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±DFODLPZDVPDGH LQWKHILUVWSUHSHULRGLFDORIWKH+DVNDODWRWKHHIIHFWWKDWZKHUHDVµZRUGVRIZLVGRP¶ZHUHLQGHHG XQWUDQVODWDEOH+HEUHZFRXOGKDUGO\EHULYDOOHGZKHQLWFDPHWRWKHWUDQVODWLRQRIµZRUGVRIEHDXW\¶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µSXUH¶+HEUHZZDVWRSURWHFWWKH HPHUJLQJQHZFXOWXUHIURPEHLQJVXEPHUJHGXQGHUWKHZHLJKWRIDKXJHYROXPHRILPSRUWHGWH[WV 7KHPRGHOZLWKLQZKLFKDWUDQVODWRUOLNHDQ\ZULWHUZDVREOLJHGWRPDQRHXYUHZDVLQIDFWPXFKQDUURZHU WKDQWKHVXPWRWDORI+HEUHZUHVRXUFHVEHFDXVHRQO\WKHODQJXDJHGRFXPHQWHGLQWKH2OG7HVWDPHQWZDV PDGHDYDLODEOHIRUDFWXDOXVH7KHGHFLVLRQWRUHVWULFW



3DJH

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¶RSWLRQV HYHQIXUWKHUZKLFKPLJKWH[SODLQWKHKLJKOHYHORIXQLIRUPLW\LQWKHWH[WVSURGXFHGWKURXJKRXWWKLVSHULRG 9HU\RIWHQWH[WVZHUHQRWLGHQWLILHGDVWUDQVODWLRQVDWDQ\UDWHLWZDVFRPPRQSUDFWLFHWRDVVLJQDWUDQVODWHG WH[WILUVWDQGIRUHPRVWWRLWVWUDQVODWRU7KHUDQJHRIDFWLYLWLHVVWUDWHJLHVDQGWH[WVDVVRFLDWHGZLWKWUDQVODWLRQ ZDVWKXVERWKEURDGDQGKLJKO\GLIIXVHHVSHFLDOO\DVPDQ\FRPSRVLWLRQVZKLFKGLGQRWGUDZGLUHFWO\RQ LQGLYLGXDOIRUHLJQWH[WVZHUHVWLOOEDVHGRQLPSRUWHGPRGHOV *LYHQWKDW+HEUHZ(QOLJKWHQPHQWPDGHLWVGp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²DJDLQTXLWHDZKLOHDIWHUWKH*HUPDQPRGHOFXOWXUHKDGFRPHWRUHJDUGLWDV QRORQJHUDSSURSULDWH²ZDVUHIOHFWHGLQDSUROLIHUDWLRQRIVHFRQGKDQGWUDQVODWLRQVVWDUWLQJZLWKWKHYHU\ILUVW PRGHUQWUDQVODWLRQLQWR+HEUHZDIUDJPHQWRI(GZDUG


3DJH

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¶VIDWHLQ+HEUHZ $OPDJRU E\WKHEHJLQQLQJRIWKHQLQHWHHQWKFHQWXU\WKH+HEUHZFXOWXUDOPLOLHXKDGFRPHWRUHJDUG WKH%DUGZLWKZKRPLWZDVDFTXDLQWHGPDLQO\YLD*HUPDQDVDPDMRUILJXUHRIZRUOGOLWHUDWXUH+RZHYHU WKLVDSSUHFLDWLRQLQUHDOLW\DPRXQWHGWRQRWKLQJPRUHWKDQSD\LQJOLSVHUYLFHWR6KDNHVSHDUH¶VLPSRUWDQFHLQ DQDWWHPSWWRHPXODWHµPRGHUQ¶FXOWXUHVDQGIRUDORQJWLPH6KDNHVSHDUH¶VSRVLWLRQYLVjYLV+HEUHZ OLWHUDWXUHLWVHOIUHPDLQHGPDUJLQDO,WZDVQRWXQWLOWKDWWKHILUVWNQRZQH[FHUSWRID6KDNHVSHDUHDQWH[W ZDVSXEOLVKHG%HIRUHZKHQWKHILUVWSOD\2WKHOOR ZDVWUDQVODWHGLQLWVHQWLUHW\DQGIURPWKHRULJLQDO RQO\PRQRORJXHVDQGRWKHUVKRUWSDVVDJHVIURPKLVWUDJHGLHVZHUHWUDQVODWHGDQGHYHU\VLQJOHRQHLVOLNHO\WR KDYHEHHQPHGLDWHG7KHVHIUDJPHQWVZHUHQRUPDOO\SUHVHQWHGDQGDFFHSWHGDVLQVWDQFHVRISRHWU\$WWKH VDPHWLPHQRVRQQHW²WKH6KDNHVSHDUHDQVKRUWSRHPSDUH[FHOOHQFH²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²WH[WVDQGPRGHOVDOLNHKDGDQHQRUPRXVLPSDFWRQLWVFRXUVH7KHPRVWRXWVWDQGLQJ GRPDLQLQWKLVUHVSHFWLVQRGRXEWFKLOGUHQ¶VOLWHUDWXUHWKHOLNHRIZKLFK+HEUHZKDGQHYHUKDGDQGZKLFKZDV PRGHOOHGDOPRVWH[FOXVLYHO\RQWKH*HUPDQH[DPSOH6KDYLW ,QVSLWHRIWKHUHODWLYHEUHYLW\RI FORVHFRQWDFWEHWZHHQWKHWZRFXOWXUHVWUDFHVRI*HUPDQLQIOXHQFHFDQVWLOOEHVHHQLQVRPHDUHDVRI+HEUHZ FXOWXUHDQGODQJXDJHWRWKLVGD\

7KH5HYLYDOSHULRG 'XULQJWKHQLQHWHHQWKFHQWXU\WKHFXOWXUDOFHQWUHJUDGXDOO\PRYHGIXUWKHUHDVWILUVWZLWKLQWKH*HUPDQ FXOWXUDOGRPDLQLWVHOIDQGWKHQRXWRILWDQGLQWRWKH6ODYLFUHJLRQ6XEVHTXHQWJHQHUDWLRQVZLWQHVVHGIUHTXHQW FKDQJHVRIDWWLWXGHDQGEHKDYLRXUEXWQRQHHGZDVQRZIHOWIRUDEUDQGQHZEHJLQQLQJ(YROXWLRQZDVQRZ SURFHHGLQJPRUHHYHQO\DQGWUDQVODWLRQDOQRUPVFDPHFORVHUDQGFORVHUWRWKRVHZKLFKRSHUDWHGLQRWKHU :HVWHUQFXOWXUHV 7KHJUDGXDOVKLIWHDVWZDUGVLQHYLWDEO\EURXJKW+HEUHZZULWHUVLQWRFRQWDFWZLWKHYHUQHZFXOWXUHV7KHVH FRQWDFWVKDGWZRFRPSOHPHQWDU\HIIHFWVZLWKWKHQHZV\VWHPVLQWKHEDFNJURXQGQHZJDSVZHUHEHLQJ LGHQWLILHGDQGDWWKHVDPHWLPHYDULRXVRSWLRQVIRUILOOLQJWKHPDOVRSUHVHQWHGWKHPVHOYHV1RUZHUHWKHJDSV QRZFRQILQHGWRWKHUHDOPRIWH[WW\SHWKHPHDQGFRPSRVLWLRQDVWKH\KDGEHHQEHIRUH5DWKHUWKH\ PDQLIHVWHGWKHPVHOYHVRQWKHODQJXDJHSODQHDVZHOO,QYLHZRIWKHQHZWDVNVLWKDGWRSHUIRUPWKHFXUUHQW IRUPRI+HEUHZFRXOGQRORQJHUEHUHJDUGHGDVDGHTXDWHQRWHYHQE\ZD\RILGHRORJLFDOO\PRWLYDWHGZLVKIXO WKLQNLQJ,WVRRQEHFDPHFOHDUWKDWPDQ\LQVWLWXWLRQDOL]HGPRGHVRIEHKDYLRXULQFOXGLQJWKRVHLPSRUWHGIURP *HUPDQDIHZGHFDGHVEDFNFRXOGQRWIXOILOWKHQHZSXUSRVHVDQGKDGWREHUHSODFHG6WDUWLQJLQWKHV 5XVVLDQKDGJUDGXDOO\EHFRPHWKHFORVHVWDYDLODEOHV\VWHPDQGLWZDVWKLVFXOWXUHZKLFKZRXOGQRZSUHVHQW +HEUHZZLWKPRVWRILWVQHZFKDOOHQJHVDQGSURYLGHPRVWRIWKHRSWLRQVIRUPHHWLQJWKHP5XVVLDQDOVR EHFDPHWKHPDLQVRXUFHRIWH[WV



3DJH

IRUWUDQVODWLRQERWKRULJLQDODQGPHGLDWHG,QGLUHFWWUDQVODWLRQZDVVWLOOFRPPRQDQGDWOHDVWRQHLPSRUWDQW OLWHUDU\FRPSOH[6FDQGLQDYLDQZULWLQJRIWKHHQGRIWKHFHQWXU\ZDVLPSRUWHGLQWR+HEUHZDOPRVW H[FOXVLYHO\LQDPHGLDWHGIRUP5RNHP 7KHEHKDYLRXURI+HEUHZLQUHODWLRQWR5XVVLDQGXULQJWKLVSHULRGZKLFKKDVFRPHWREHNQRZQLQ+HEUHZ KLVWRULRJUDSK\DVWKH5HYLYDOSHULRGLQYROYHGPXFKPRUHWKDQDVLPSOHUHFRJQLWLRQRIWKHODWWHU¶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



3DJH

ODWHUPRYHGWR3DOHVWLQHE\ZKLFKWLPHWKHORFDOVFHQHZDVUHDG\WRDEVRUEWKHPDVWKHODQJXDJHRIWKH%ULWLVK PDQGDWHRYHU3DOHVWLQH± KDGEHFRPHFXUUHQWLQWKHFRXQWU\(QJOLVKVRRQEHFDPHWKHPDLQVRXUFH ODQJXDJHLQWUDQVODWLRQEXW(QJOLVKWH[WVZHUHVWLOOWUDQVODWHGLQWKHROGIDVKLRQDVLIWKH\ZHUHZULWWHQLQ 5XVVLDQ,QWKHVDQGVDVWUXJJOHIRUGRPLQDWLRQHQVXHGEHWZHHQWKHROG5XVVLILHGPRGHOVDQGVRPH QHZRSWLRQVDVVRFLDWHGZLWK$QJOR$PHULFDQSUDFWLFHVLWZDVILQDOO\VHWWOHGLQIDYRXURIWKHODWWHU 7REHVXUHWKHVXSUHPDF\RIWKH3DOHVWLQLDQFHQWUHZDVQRWHVWDEOLVKHGXQWLOWKHGHVWUXFWLRQRI-HZLVKFXOWXUH LQERWK+HEUHZDQG


3DJH

GLVVHUWDWLRQVZHUHFRPSOHWHG,WDPDU(YHQ=RKDU 0HQDFKHP'DJXW DQG*LGHRQ7RXU\ 7RXU\¶VDSSURDFKKDVLQVSLUHGDQXPEHURIGRFWRUDOGLVVHUWDWLRQVDQG0$WKHVHVPRVWO\ GHVFULSWLYHVWXGLHVRQDVSHFWVRIOLWHUDU\WUDQVODWLRQLQWR+HEUHZ,QWHUHVWLQJZRUNLQWUDQVODWLRQWKHRU\ZDV DOVRGRQHE\
)XUWKHUUHDGLQJ +DONLQ6KDYLWDQG6KDYLW7RXU\

*,'(217285<

%LRJUDSKLHV 6$/.,162+1


3DJH

DQGWKH5XVVLDQHSLF7KH6RQJRI,JRU¶V&DPSDLJQ

*,'(217285<

+XQJDULDQWUDGLWLRQ 7KHPLJUDWLRQRIWKH+XQJDULDQWULEHVEHJDQLQWKH9ROJD.DPDUHJLRQDURXQGWKHVL[WKFHQWXU\$'DQG FRQWLQXHGXQWLOWKH\FRQTXHUHGWKHEDVLQRIWKH&DUSDWKLDQ0RXQWDLQVZKHUHWKH\VHWWOHGLQ$'7KH RULJLQRIVRPHRIWKHZRUGVZKLFKEHFDPHDVVLPLODWHGLQWRWKHODQJXDJHJLYHVDQLQGLFDWLRQRIWKHSHRSOHV WKH\PHWDQGSDUWO\DEVRUEHGGXULQJWKHLUWUDYHOV)RUH[DPSOHVDMWFKHHVH LV9ROJD7XUNLVKLQRULJLQ DVV]RQ\ZRPDQ ZDVERUURZHGIURPWKH,UDQLDQVLQWKH1RUWK&DXFDVXVDQGEDUiWPRQN LVRULJLQDOO\ 5XVVLDQ 7KH+XQJDULDQVFDOOWKHLUODQJXDJH0DJ\DU,WLVWKHPRVWLPSRUWDQWODQJXDJHRIWKH8JULFEUDQFKRIWKH)LQQR 8JULFIDPLO\RIODQJXDJHVDQGLVVSRNHQE\WKHSHRSOHVRI+XQJDU\DVZHOODVE\VRPHPLQRULWLHVLQ QHLJKERXULQJFRXQWULHVPDLQO\5RPDQLDWKHIRUPHU&]HFKRVORYDNLDDQGWKHIRUPHU<XJRVODYLD

7KH0LGGOH$JHV 6W6WHSKHQ,RU6]W,VWYiQ,DVKHLVNQRZQLQ+XQJDU\ZDVWKHILUVWNLQJRIWKH0DJ\DUV± ,QRUGHU WRVDYHKLVFRXQWU\IURPKDYLQJWRGHSHQGRQWKH:HVWHUQSRZHUV*HUPDQDQG5RPDQ RU(DVWHUQSRZHUV WKH%\]DQWLQH(PSLUH KHWRRNWKH&KXUFKDVKLVDOO\DQGZDVFURZQHGRQ&KULVWPDV'D\LQWKH\HDU ZLWKDFURZQVHQWE\3RSH6\OYHVWHU,,6WHSKHQ¶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±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iVSiU.iUROLF± D3URWHVWDQWDQGWKHVHFRQGLQE\*\|UJ\.iOGL F± D&DWKROLF%RWKKDYHEHHQUHYLVHGDQGUHSXEOLVKHGPDQ\WLPHV7RGD\WUDQVODWLRQVEDVHGRQ WKH+HEUHZDQG*UHHNRULJLQDOVDUHDYDLODEOH$WUDQVODWLRQRIWKH+HEUHZYHUVLRQRIWKH3HQWDWHXFKDQGWKH +DIWDURWKZDVLVVXHGLQDQGUHSULQWHGLQ 6RPHUHOLJLRXVWH[WVWUDQVODWHGIURP/DWLQLQWR+XQJDULDQIRUWKHEHQHILWRIQXQVZHUHIRXQGLQWKHILIWHHQWK DQGVL[WHHQWKFHQWXULHV$PRQJWKHVHWKHeUG\&RGH[ VWDQGVRXWDVWKHULFKHVWFROOHFWLRQRI FRQWHPSRUDQHRXV+XQJDULDQOHJHQGV



3DJH

7KHVL[WHHQWKDQGVHYHQWHHQWKFHQWXULHV 7KH.LQJGRPRI+XQJDU\UHPDLQHGDJUHDWSRZHUZLWKLWVRZQULFKDQGUHFHSWLYHFXOWXUHXQWLOWKHHQGRIWKH ILIWHHQWKFHQWXU\+DYLQJFRQTXHUHG&RQVWDQWLQRSOHLQWKH2WWRPDQVLQYDGHGWKH%DONDQSHQLQVXODDQG ILQDOO\LQWKH\GHIHDWHGWKH+XQJDULDQVDQG%RKHPLDQVDWWKH%DWWOHRI0RKi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¶V)DEOHVWUDQVODWHGE\*iERU3HVWLLQ DQGE\*iVSiU+HOWDLLQ6RSKRFOHV¶(OHFWUDDGDSWHGE\3pWHU%RUQHPLV]DLQ&DVWHOOHWL¶V $PDULOOLDGDSWHGE\%iOLQW%DODVVLIURP,WDOLDQLQDQG*HRUJH%XFKDQDQ¶V-HSKWHDOVRDGDSWHGE\ %DODVVLIURPD/DWLQYHUVLRQLQ$QRXWVWDQGLQJYHUVLRQRI0DUWLQ/87+(5¶6VHH*(50$1 75$',7,21 IDPRXV+\PQWUDQVODWHGLQWR+XQJDULDQE\DQXQNQRZQ3URWHVWDQWSRHWDOVRDSSHDUHGLQWKH VL[WHHQWKFHQWXU\7KH3VDOPVZHUHUHQGHUHGLQWRYHUVHWUDQVODWLRQVE\,VWYiQ6]pNHO\ DQG$OEHUW 6]HQFL0ROQiU WKHODWWHUIURPWKH)UHQFKWH[WVE\&OpPHQW0DURWDQGWKH6ZLVV7KHRGRUHGH%q]H2Q WKH&DWKROLFVLGH&DUGLQDO3pWHU3È=0È1<ZDVRQHRIWKHOHDGLQJUHIRUPHUVRI+XQJDULDQVW\OH

7KH(QOLJKWHQPHQW 0DULD7KHUHVD± UHLJQHGDV(PSUHVVRI+XQJDU\RUUDWKHUµ.LQJRI+XQJDU\¶DVVKHZDVFURZQHG DFFRUGLQJWRWKHFRQVWLWXWLRQ DQG$UFKGXFKHVVRI$XVWULD± DQGHVWDEOLVKHGDUHJLPHQWRI5R\DO *XDUGVZKLFKFRQVLVWHGRI\RXQJ+XQJDULDQQREOHPHQ7KLVZDVDQLPSRUWDQWSHULRGRI(XUR$PHULFDQ KLVWRU\WKHDJHRIWKH1RUWK$PHULFDQ'HFODUDWLRQRI,QGHSHQGHQFHWKHDJHZKLFKDQWLFLSDWHGWKH'HFODUDWLRQ RI+XPDQDQG&LYLO5LJKWVLQ)UDQFHDQGZKLFKZLWQHVVHGWKHUHSODFHPHQWRIDXWKRULWDULDQEHOLHIVE\UDWLRQDO VFLHQWLILFHQTXLU\LQYDULRXVILHOGVRINQRZOHGJH 6HYHUDOPHPEHUVRI0DULD7KHUHVD¶V5R\DO*XDUGZHUHSRHWVZLWKDJRRGFRPPDQGRIIRUHLJQODQJXDJHVDQG DNHHQHQWKXVLDVPIRUWKHLGHDOVRIWKH(QOLJKWHQPHQW7KH\WULHGWRSURPRWHWKHVHLGHDOVLQ+XQJDU\E\ WUDQVODWLQJ:HVWHUQOLWHUDWXUH7UDQVODWLRQWKHUHIRUHDFTXLUHGDQHZYRFDWLRQIRUWKH+XQJDULDQVDQGWKH GLIIHUHQWLGHDVDQGVW\OHVRIWKHWUDQVODWHGZRUNVKHOSHGWRHQULFKWKHLURZQQDWLYHOLWHUDWXUH ,QWKHKLVWRU\RI+XQJDULDQOLWHUDWXUHWKH\HDULVFRQVLGHUHGWKHEHJLQQLQJRIWKH1HZ$JH7KLVLVWKH \HDUZKLFKVDZWKHSXEOLFDWLRQRI*\|UJ\%HVVHQ\HL¶V7UDJHG\RI$JLVDGDSWHGIURPDQXQNQRZQ)UHQFK GUDPDDFFRUGLQJWRWKHSULQFLSOHVRI$OH[DQGHU3RSH¶V(VVD\RQ0DQZKLFK%HVVHQ\HLKDGUHDGLQ)UHQFK 7KLVZRUNSOXVWKHYHUVLRQRI-HDQ)UDQoRLV0DUPRQWHO¶V6WRULHVZKLFKDSSHDUHGE\6iQGRU%iUyF]L DQGYDULRXVRWKHUZRUNVVRPHRIZKLFKZHUHDOVRZULWWHQRUWUDQVODWHGE\PHPEHUVRIWKH5R\DO*XDUG IRUPHGWKHFRUHRIZKDWEHFDPHNQRZQDVWKH)UHQFK6FKRRO-y]VHI3pF]HOL± D&DOYLQLVWSULHVWDOVR WUDQVODWHGDYDULHW\RIDXWKRUVDQGZRUNVIURP)UHQFKLQFOXGLQJ9ROWDLUHIRUH[DPSOH=DLUHLQDQG +HQULDGHLQ DQG(GZDUG


3DJH

2XU+RUDFH ZKLFKDSSHDUHGLQHGLWHGE\,PUH7UHQFVpQ\L:DOGDSIHO7KH\DUHDOVRGRFXPHQWHGLQ 2SHUD2PQLD7KH&RPSOHWH:RUNVRI+RUDFH HGLWHGE\*iERU'(9(&6(5,LQ2WKHUZHOONQRZQ WUDQVODWRUVRIWKH/DWLQ6FKRROLQFOXGH0LNOyV5pYDLDQG-y]VHI5iMQLV $VIDUDV*HUPDQLVFRQFHUQHGZHOONQRZQZRUNVRIWKDWHUDVXFKDV$OR\V%OXPDXHU¶V$HLQHLGWUDYHVW\DQG $XJXVWYRQ.RW]HEXH¶VSOD\VZHUHDGDSWHGUDWKHUWKDQWUDQVODWHGLQWR+XQJDULDQ)HUHQF.$=,1&=<ZDV RQHRIWKHPRVWLPSRUWDQWWUDQVODWRUVRI*HUPDQOLWHUDWXUHGXULQJWKDWSHULRG 7KHWUDQVODWLRQRI6KDNHVSHDUH 7KHJROGHQHUDRI6KDNHVSHDUHLQ+XQJDU\EHJDQZLWKWKHZRUNRI)HUHQF.$6,1&=<ZKRWUDQVODWHG+DPOHW IURP*HUPDQLQ$IWHU.DVLQF]\DIHZWUDQVODWRUVPDGHVRPHIHHEOHDWWHPSWVDWUHQGHULQJRWKHUPDMRU WLWOHVEXWLWZDV6iQGRU3HW|IL± 0LKiO\9|U|VPDUW\± DQG-iQRV$UDQ\± ZKR WRJHWKHUSODQQHGWRHQULFK+XQJDULDQOLWHUDWXUHE\WUDQVODWLQJDOOWKHSOD\VRI6KDNHVSHDUH7KLVSODQIHOO WKURXJKZKHQ3HW|ILKDYLQJRQO\WUDQVODWHG&RULRODQXVLQGLHGRQWKHEDWWOHILHOGLQGXULQJWKHZDU RILQGHSHQGHQFH9|U|VPDUW\DQRXWVWDQGLQJILJXUHRI+XQJDULDQQDWLRQDO5RPDQWLFLVPZHQWRQWRWUDQVODWH -XOLXV&DHVDUDQGSDUWVRI5RPHRDQG-XOLHWDQG.LQJ/HDU$UDQ\WUDQVODWHG+DPOHW$0LGVXPPHU1LJKW¶V 'UHDPDQG7KH/LIHDQG'HDWKRI.LQJ-RKQ 7KHHIIRUWWRSURYLGHPRUHDQGEHWWHUWUDQVODWLRQVRI6KDNHVSHDUHLQ+XQJDULDQFRQWLQXHGDIWHUWKHJUHDWWULDG 3HW|IL9|U|VPDUW\DQG$UDQ\'XULQJWKHILUVWKDOIRIWKHWZHQWLHWKFHQWXU\DQHZJURXSRIUHQRZQHGSRHW WUDQVODWRUVZKRSXEOLVKHGLQWKHUHYLHZ1\XJDW:HVW XQGHUWRRNWRSURYLGHWKHPRGHUQSXEOLFZLWK WUDQVODWLRQVRIWKHFRPSOHWHZRUNVRI6KDNHVSHDUHLQFOXGLQJKLV6RQQHWV6LQFH:RUOG:DU7ZRVHYHUDO VHULHVKDYHEHHQSXEOLVKHGRIWKHFRPSOHWHZRUNVRI6KDNHVSHDUHLQ+XQJDULDQ

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iQ\RV*\MWHPpQ\6FLHQWLILF &ROOHFWLRQ± SXEOLVKHGDUWLFOHVRQOLWHUDU\FULWLFLVPDQGKLVWRULFDOVWXGLHVWKH+XQJDULDQ$FDGHP\RI 6FLHQFHDFWLYHVLQFHLVVXHGWKHUHYLHZ7XGRPiQ\WiU6FLHQWLILF6WRUH ZKLFKFRYHUHGDYDULHW\RI WHFKQLFDOILHOGVQDWXUDODQGSK\VLFDOVFLHQFHVPHGLFLQHJHRJUDSK\



3DJH

KLVWRU\VRFLRORJ\DQGVRRQ0RVWRIWKHDUWLFOHVLQWKLVMRXUQDOZHUHWUDQVODWLRQVPDLQO\IURP(QJOLVK )UHQFKDQG*HUPDQ*UDGXDOO\RWKHUWHFKQLFDOMRXUQDOVEHJDQWRDSSHDULQ+XQJDULDQ7KHVHLQFOXGHDKLVWRU\ MRXUQDO6]i]DGRN&HQWXULHV DQGWKHTXDUWHUO\(WKQRJUDSKLD 7KHVHMRXUQDOVWHQGWRFRQWDLQ PDQ\WUDQVODWHGDUWLFOHV )LQQR8JULFUHODWLRQVDQGWKHWUDQVODWLRQRIIRONORULFWH[WV 7KH+XQJDULDQODQJXDJHGLIIHUVVXEVWDQWLDOO\IURPRWKHUODQJXDJHVLQWKHUHJLRQDQGZDVJHQHUDOO\FRQVLGHUHG WREHRIREVFXUHRULJLQ$QXPEHURIVFKRODUVWULHGWRWUDFHLWEDFNWRDYDULHW\RIRULHQWDOODQJXDJHVLQFOXGLQJ ELEOLFDO+HEUHZ,Q-i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iQ )iELiQLQWKHILUVWFRPSOHWHWUDQVODWLRQRIWKHWH[WE\)HUGLQiQG%DUQDDSSHDUHGLQ7KHPRVW SRSXODUYHUVLRQRI.DOHYDODE\%pOD9LNiUDSSHDUHGLQDQGKDVVLQFHEHHQUHSXEOLVKHGVHYHUDOWLPHV 7KH(VWRQLDQHSLF.DOHYLSRHJZDVWUDQVODWHGE\$ODGiU%iQLQ 7KLVVSHFLDOLQWHUHVWLQWKHOLWHUDWXUHRIWKH%DOWLFQDWLRQVVXUYLYHGLQWRWKHWZHQWLHWKFHQWXU\7UDQVODWLRQVRID VHULHVRIZRUNVE\(VWRQLDQQRYHOLVWVZHUHSXEOLVKHGLQWKHV7KHPRVWSRSXODU)LQQDXWKRUVLQ+XQJDU\ WRGD\DUH0LND:DOWDULDQG9lLQ|/LQQDDQGWKHEHVWNQRZQ(VWRQLDQDXWKRULV-DDQ.URVV'XULQJWKHIRXU GHFDGHVRI&RPPXQLVWUXOHLQ+XQJDU\UHDGHUVDOVREHFDPHDFTXDLQWHGZLWKPDQ\ROGHUDQGPRGHUQDXWKRUV RIWKHYDULRXVQDWLRQVRIWKHIRUPHU6RYLHW8QLRQDQGPRVWRIWKHVHDXWKRUVZHUHWUDQVODWHGLQWR+XQJDULDQ YLD5XVVLDQ 7KHEHJLQQLQJVRIWUDQVODWLRQWKHRU\ 7KHRUHWLFDOVWDWHPHQWVDERXWWUDQVODWLRQEHJDQWRDSSHDULQ+XQJDU\DVHDUO\DVWKHVHYHQWHHQWKFHQWXU\ZKHQ &DUGLQDO3HWHU3È=0È1<DGYRFDWHGLGLRPDWLFWDUJHWODQJXDJHRULHQWHGWUDQVODWLRQ2YHUDFHQWXU\ODWHUDQG DWWKHVDPHWLPHWKDW)HUHQF9(56(*+<¶VWUDQVODWLRQRI/D0DUVHLOODLVHDSSHDUHG DQRWKHUDGPLUHURI WKH)UHQFKUHYROXWLRQ-iQRV%$76È1<,DWWHPSWHGWRRIIHUDJHQHUDOWKHRU\RIWUDQVODWLRQLQZKLFKKH FRQFHQWUDWHGRQWKHROGSDUDGR[RIµ/HV%HOOHV,QILGqOHV¶VHH)5(1&+75$',7,21 2WKHUVFKRODUVDGYRFDWHGDYDULHW\RISULQFLSOHV7KHVHQWLPHQWDOLVW-y]VHI.iUPiQ± REMHFWHGWKDW WRRPXFKZDVWUDQVODWHG-y]VHI3pF]HOL± UHMHFWHGWKHFRQFHSWRIIUHHGRPLQWUDQVODWLRQDQG*iERU '|EUHQWHL± ZDVPRUHFRQFHUQHGZLWKKRZ6KDNHVSHDUHZRXOGKDYHZULWWHQKDGKHZULWWHQLQ +XQJDULDQ 7RZDUGWKHPLGQLQHWHHQWKFHQWXU\)HUHQF7ROG\± ZKRLVFRQVLGHUHGWKHIDWKHURI+XQJDULDQ OLWHUDU\KLVWRU\GLVWLQJXLVKHGEHWZHHQILGHOLW\WRFRQWHQWDQGILGHOLW\WRIRUPDQGGHQLHGWKHSRVVLEOH FRH[LVWHQFHRIWKHWZRW\SHV.iURO\6]iV]± RQWKHRWKHUKDQGRSSRVHGWKLVYLHZDQGVXFFHHGHG LQWUDQVODWLQJJUHDWHSLFSRHPVIURPVHYHUDOODQJXDJHVDQGLQWURGXFLQJWKHPWRWKH+XQJDULDQUHDGHU $VXPPDU\RIWKHVHYLHZVFDQEHIRXQGLQ5DGy $QWDO5DGy± ZDVDWUDQVODWRURI,WDOLDQ SRHWU\ZKRDOVRZURWHDWKHRUHWLFDOZRUNRQWKHDUWRIWUDQVODWLRQ5DGy

)URPWKHQLQHWHHQWKWRWKHWZHQWLHWKFHQWXU\ 7UDQVODWRUVRIWKHODWHQLQHWHHQWKDQGWZHQWLHWKFHQWXU\LQWURGXFHG+XQJDULDQUHDGHUVWRDZLGHUDQJHRI IRUHLJQOLWHUDWXUHV1HDUO\DOOWKHZRUNVRI*RHWKH6FKLOOHU'LFNHQV%DO]DF9HUQH'XPDV+XJR=ROD ,EVHQDQG3RH



3DJH

DSSHDUHGLQ+XQJDULDQ7KH$UDELDQ1LJKWVZDVWUDQVODWHGIURP)UHQFK$OPRVWHYHU\GHFDGHIURP RQZDUGVZLWQHVVHGWKHWUDQVODWLRQRIDQRWKHUIDPRXV5XVVLDQQRYHOLVW7XUJHQHYLQWKHV7ROVWR\LQWKH V'RVWR\HYVNLLQWKHV&KHNKRYLQWKHVDQG*RUN\LQWKHILUVWGHFDGHRIWKHWZHQWLHWKFHQWXU\ 7KUHHRXWVWDQGLQJDFKLHYHPHQWVRIWKLVSHULRGGHVHUYHVSHFLDOPHQWLRQ.iURO\%pUF]\EHJDQWRWUDQVODWH 3XVKNLQ¶V


3DJH

.RPRUyF]\6iQGRU5iNRVDQG6iQGRU:H|UHVZHUHDPRQJWKRVHZKRWUDQVODWHGROGHUZRUNVRIOLWHUDWXUH VXFKDV6XPHULDQO\ULFVDQGWKH*LOJDPHVK(SLF,VWYiQ0pV]iURVDQG*UiFLD.HUpQ\LDWUDQVODWHGDUDQJHRI FODVVLFDODQGPRGHUQ3ROLVKZRUNVRISURVHDQGSRHWU\UHVSHFWLYHO\$QXPEHURI6RXWK$PHULFDQDQG &DULEEHDQDXWKRUVZHUHDOVRWUDQVODWHGGXULQJWKLVSHULRG,Q=ROWiQ&VXNDZDVDZDUGHGWKH LQWHUQDWLRQDO),71DWKKRUVW3UL]HIRUKLVWUDQVODWLRQVIURP6HUELDQ&URDWLDQ6ORYHQLDQ0DFHGRQLDQDQG %XOJDULDQ ,QWKHPRQWKO\SHULRGLFDO1DJ\YLOiJ:LGH:RUOG DSSHDUHGLWFRQWLQXHVWRSXEOLVKWUDQVODWLRQVDUWLFOHV DQGUHYLHZVRIIRUHLJQOLWHUDWXUHLQSULQW*\|UJ\6RPO\yWUDQVODWRURI)UHQFKDQG6SDQLVKSRHWU\HGLWHGD UHJXODUDOPDQDF$ULRQZKLFKFRQWDLQHGWUDQVODWLRQVLQWRDQGIURP+XQJDULDQ7KHORQJVWDQGLQJVHULHV/\UD 0XQGL/\ULFRIWKH:RUOG LVSXEOLVKHGE$XUySDDQGWKHVHULHV$YLOiJLURGDORPJ\|QJ\V]HPHL7KH3HDUOV RI:RUOG/LWHUDWXUH LVSXEOLVKHGE\0yUDERWKVHULHVFRQVLVWRIWUDQVODWLRQVRIZRUOGSRHWU\ 7KH7UDQVODWRUV¶6HFWLRQRIWKH+XQJDULDQ:ULWHUV¶8QLRQEHFDPHDPHPEHURIWKH)e'e5$7,21 ,17(51$7,21$/('(675$'8&7(856LQ7KH),7MRXUQDO%DEHOZDVSXEOLVKHGIURPWR LQ%XGDSHVWDQGHGLWHGIURPWRE\WKH+XQJDULDQWUDQVODWRU*\|UJ\5DGy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|UJ\*|P|ULLQ:DVKLQJWRQLQ 5RPDQ5H]HNSXEOLVKHGKLVWUDQVODWLRQVRIZRUNVE\WKH)UHQFK&DWKROLFSKLORVRSKHU7HLOKDUGGH&KDUGLQLQ %UD]LOGXULQJWKHV :KHQWKH&RPPXQLVWSROLWLFDOV\VWHPLQ+XQJDU\FROODSVHGLQ±LWVGHPDQGVLQWHUPVRIERRN SXEOLVKLQJEHJDQWRGLVDSSHDU7KHREOLJDWRU\WUDQVODWLRQRI&RPPXQLVWOLWHUDWXUHFHDVHGDQGVRPHDXWKRUV DQGWUDQVODWRUVZKRKDGHPLJUDWHGWRWKH:HVWUHWXUQHG ,Q/|UiQG7DUQ|F]LSXEOLVKHG7KH7UDQVODWRU¶V+DQGERRN7KHRU\DQG3UDFWLFHRI6SHFLDO/LWHUDWXUH 7KLVLVDFRPSHQGLXPRIJHQHUDONQRZOHGJHDQGLQIRUPDWLRQIRUQRQOLWHUDU\WUDQVODWRUV$FROOHFWLRQRIHVVD\V E\OHDGLQJWUDQVODWRUV$PIRUGtWiVPD7UDQVODWLRQ7RGD\ ZDVSXEOLVKHGLQ 7UDQVODWRUWUDLQLQJ ,QWKH7UDLQLQJ&HQWUHIRU7UDQVODWRUVDQG,QWHUSUHWHUV7&7, ZDVHVWDEOLVKHGDWWKH8QLYHUVLW\RI %XGDSHVW$\HDUODWHULQDQXPEHURIRWKHU+XQJDULDQXQLYHUVLWLHVEHJDQWRLQWURGXFHWUDLQLQJ SURJUDPPHVIRUWUDQVODWRUVDQGWRGD\WKHVHSURJUDPPHVDUHRIIHUHGE\DZLGHUDQJHRIDFDGHPLFLQVWLWXWLRQV LQ²DPRQJRWKHUSODFHV²%XGDSHVW'HEUHFHQDQG3pFV 7UDQVODWLRQWKHRU\LVQRZWDXJKWLQYDULRXVLQVWLWXWLRQVERWKIURPDOLQJXLVWLFDQGDOLWHUDU\SHUVSHFWLYH,Q DGGLWLRQWRWKHYDULRXVXQLYHUVLWLHVWKHVHLQVWLWXWLRQVLQFOXGHWKH/LWHUDU\7UDQVODWRUV¶6HFWLRQRIWKH6RFLHW\RI 0RGHUQ3KLORORJ\DQGWKH+XQJDULDQ$FDGHP\RI6FLHQFHV¶:RUNLQJ&RPPLWWHHIRU7UDQVODWLRQ7KHRU\7KH ILUVWLQWHUQDWLRQDOFRQIHUHQFHRQWUDQVODWLRQVWXGLHVWREHKHOGLQ+XQJDU\WRRNSODFHLQ1RYHPEHUDQG WKHVHFRQGLQ6HSWHPEHU ,QDSURIHVVLRQDOWUDQVODWRURI(QJOLVKOLWHUDWXUHWKHSOD\ZULJKWÈUSiG*|QF]ZDVHOHFWHG3UHVLGHQWRI WKH5HSXEOLF $V\HWLQWHUSUHWHUVKDYHQRRUJDQL]DWLRQWRUHSUHVHQWWKHPLQ+XQJDU\

)XUWKHUUHDGLQJ %DUW5iNRV%D\HU.RKQDQG.ODXG\.XUXF]6]|UpQ\L/HQNHL5iED5DGy$ 5DGy*\5iNRV5|QD\6]DEy7H]OD

* <5$'Ï



3DJH

%LRJUDSKLHV %$%,760LKiO\± /HDGLQJDXWKRUDQGHGLWRURIWKH+XQJDULDQOLWHUDU\UHYLHZ1\XJDW:HVW PHPEHURIWKH+XQJDULDQ$FDGHP\RI6FLHQFHSRHWQRYHOLVWFULWLFDQGDXWKRURI$]HXUySDLLURGDORP W|UWpQHWH7KH+LVWRU\RI(XURSHDQ/LWHUDWXUH 9ROXPHV,DQG,,± %DELWVZDVDSDFLILVWDQGKLVZHOO NQRZQVD\LQJµLQWKHPLGVWRIWKHJXLOW\WKHVLOHQWPDQLVDQDFFRPSOLFH¶IURPKLV-yQiVN|Q\YH%RRNRI -RQDK KDVEHFRPHDQDGDJH:LWKKLVYROXPHRIWUDQVODWHGSRHWU\3iYDWROODN3HDFRFN)HDWKHUV DQGKLVELOLQJXDODQWKRORJLHV(UDWR DQG$PRU6DQFWXV/DWLQK\PQVRIWKH0LGGOH$JHV %DELWV LQVSLUHGWKHPRGHUQSRHWLFPRYHPHQWLQ+XQJDU\ %$76È1<,-iQRV± 3RHWDQGHQWKXVLDVWRIWKH)UHQFK5HYROXWLRQLPSULVRQHGIURPWR DVDPHPEHURID-DFRELQVRFLHW\%DWViQ\LLVWKRXJKWWREHWKHWUDQVODWRURI1DSROHRQ¶VDSSHDOWRWKH +XQJDULDQVLQWRMRLQKLPDJDLQVW$XVWULD+HOHIW+XQJDU\ZLWKWKH)UHQFKDUP\LQDQGOLYHGLQ 3DULVXQWLOZKHQKHZDVDUUHVWHGE\WKHRFFXS\LQJ$XVWULDQIRUFHVDQGWDNHQWRSULVRQLQ$XVWULD )ROORZLQJWKHLQWHUYHQWLRQRIKLVZLIHWKH$XVWULDQSRHWHVV*DEULHOH%DXPEHUJKHZDVUHOHDVHGDQGEDQLVKHG WR/LQ]ZKHUHKHVSHQWWKHUHVWRIKLVOLIH%DWViQ\LWUDQVODWHGWKHSRHPVDWWULEXWHGWR2VVLDQWKHWKLUGFHQWXU\ OHJHQGDU\,ULVKSRHWE\WKH6FRWVSRHW-DPHV0DFSKHUVRQZKRFODLPHGWRKDYHGLVFRYHUHGUHPDLQVRI 2VVLDQ¶VSRHWU\DQGSXEOLVKHGKLVVRFDOOHGWUDQVODWLRQVIURPWKH*DHOLFEHWZHHQDQG%DWViQ\L¶V VWXG\$IRUGuWiVUyO$ERXW7UDQVODWLRQSXEOLVKHGLQWKHUHYLHZ0DJ\DU0XVDLQ LVDGLVFXVVLRQRI FHQWUDOLVVXHVLQWUDQVODWLRQWKHRU\SDUWLFXODUO\WKHXVXDOSDUDGR[RIIDLWKIXOQHVVYVQDWXUDOQHVV %(1('(.0DUFHOO± $XWKRUFULWLFOH[LFRJUDSKHUDQGKLVWRULDQRIOLWHUDWXUH:LWKDERXW SXEOLVKHGYROXPHVWRKLVQDPHPRVWO\WUDQVODWLRQVIURPPRGHUQ(QJOLVK)UHQFKDQG*HUPDQOLWHUDWXUH %HQHGHNZDVWKHPRVWSUROLILFWUDQVODWRULQ+XQJDU\GXULQJWKHVVDQGVRIWKLVFHQWXU\ '(9(&6(5,*iERU± $ZHOONQRZQSRHWDQGHVVD\LVWLQKLVRZQULJKWSDUWLFXODUO\UHQRZQHGIRU KLVSRHPµ'LUJHIRUD%XOO¶ 'HYHFVHULZDVDOVRRQHRIWKHPRVWWDOHQWHGWUDQVODWRUVRISRHWU\LQ +XQJDU\GXULQJWKHVDQGXSWRWKHV+HLVEHVWNQRZQIRUKLVWUDQVODWLRQVRIDQFLHQW*UHHNDQG /DWLQSRHWU\LQSDUWLFXODUKLVWUDQVODWLRQVRIWKHFRPSOHWHZRUNVRI&DWXOOXV DQG+RPHU¶V2G\VVH\ DQG,OLDG 'HYHFVHULDOVRHGLWHGWKHFRPSOHWHZRUNVRI+RUDFHWKH2SHUD2PQLDLQ .$=,1&=<)HUHQF± 5HIRUPHURIWKH+XQJDULDQODQJXDJH.D]LQF]\ZDVDOVRDFHQWUDOILJXUH RQWKHQDWLRQDOOLWHUDU\VFHQHIRUKDOIDFHQWXU\+HEHJDQKLVFDUHHULQE\WUDQVODWLQJWKHLG\OOVRIWKH 6ZLVVSRHW6DORPRQ*HVQHU%\WKHWLPHKHZDVDUUHVWHGLQDVDPHPEHURID-DFRELQVRFLHW\KHKDG DOUHDG\WUDQVODWHGSOD\VDQGYDULRXVZRUNVE\/HVVLQJDQG*RHWKH+LVPDLQDFKLHYHPHQWKRZHYHUZDV WKDWKHLQWURGXFHG6KDNHVSHDUH¶VWKHDWUHLQWRWKH+XQJDULDQQDWLRQDOVFHQH7KLVKHGLGLQZLWKDQ LQGLUHFWWUDQVODWLRQRI+DPOHWIURP*HUPDQ .26=72/È1<,'H]Vy± 3RHWQRYHOLVWUHYLHZHUDQGZHOONQRZQUHSUHVHQWDWLYHRIWKH V\PEROLVWPRYHPHQWLQ+XQJDULDQSRHWU\$SDUWIURPKLVRZQYROXPH$V]HJpQ\NLVJ\HUPHNSDQDV]DL /DPHQWRIWKH3RRU/LWWOH&KLOG .RV]WROiQ\LEHJDQKLVOLWHUDU\FDUHHUZLWKDFROOHFWLRQRIYHUVH WUDQVODWLRQV0RGHUQN|OWyN0RGHUQ3RHWV ,QWKHSUHIDFHWRWKLVFROOHFWLRQKHGHVFULEHGOLWHUDU\ WUDQVODWLRQDVDQDWWHPSWµWRGDQFHZLWKIHWWHUV¶.RV]WROiQ\LDOVRWUDQVODWHGSOD\VE\6KDNHVSHDUH$QWRQ &KHNKRYDQGYDULRXVRWKHUZULWHUV 3È=0È1<3HWHU± &DUGLQDOSUHDFKHUDXWKRUWUDQVODWRUDQGDQRXWVWDQGLQJILJXUHRIWKH &RXQWHU5HIRUPDWLRQLQ+XQJDU\



3DJH

+HWUDQVODWHG7KRPDVD.HPSLV¶,PLWDWLR&KULVWL,PLWDWLRQRI&KULVW LQ3i]PiQ\DWWHPSWHGWRUHIRUP WKH+XQJDULDQSURVHVW\OHDQGKLVJXLGLQJSULQFLSOHZDVWKDWLQDWUDQVODWLRQWKHZRUGVVKRXOGIORZDV VPRRWKO\DVLIWKH\ZHUHZULWWHQE\D+XQJDULDQLQWKH+XQJDULDQODQJXDJH 6=ƿ//ƿ6<.OiUD± $QRXWVWDQGLQJ+XQJDULDQWUDQVODWRURIOLWHUDU\SURVHVKHLVEHVWNQRZQIRU KHUYHUVLRQRI7KH0DVWHUDQG0DUJDULWD E\0LNKDLO%XOJDNRYKHUWUDQVODWLRQVRI$QWRQ&KHNKRY¶V VKRUWVWRULHVIURP5XVVLDQ7KRPDV0DQQ¶VQRYHOVIURP*HUPDQDQGYDULRXVZRUNVE\FRQWHPSRUDU\ $PHULFDQDXWKRUV6]ǀOOǀV\DOVRSXEOLVKHGDQXPEHURIERRNVGHVFULELQJKHUSHUVRQDOH[SHULHQFHVDVD WUDQVODWRU 7Ï7+ÈUSiG± +XQJDULDQSRHW,QKLVWUDQVODWLRQIURP)UHQFKRI&KDQVRQG¶DXWRPQH$XWXPQ 6RQJ E\3DXO9HUODLQHKHDFKLHYHGSRHWLFILGHOLW\E\PHUHO\UHSURGXFLQJWKHPXVLFDOHIIHFWRIWKHZRUGV Verlaine:

Tóth:

/HVVDQJORWVORQJV

gV]K~UMD]VRQJ

'HVYLRORQV

-DMRQJEXVRQJ

'HO¶DXWRPQH

$WiMRQ

%OHVVHQWPRQF°XU

6RQWPRQRWRQ

'¶XQHODQJXHXU

%XWNRQRNRQ

0RQRWRQH

eVIiMyQ

,WKDVRIWHQEHHQVXJJHVWHGWKDW7yWK¶VWUDQVODWLRQRIWKHµ2GHWRWKH:HVW:LQG¶E\6KHOOH\LVWKHILQHVWSRHP HYHUZULWWHQLQ+XQJDULDQ 9(56(*+<)HUHQF± +XQJDULDQSRHWWUDQVODWRUDQG&DWKROLFSULHVW$VDIUHHWKLQNHUKH V\PSDWKL]HGZLWKWKH+XQJDULDQ-DFRELQV,Q9HUVHJK\WUDQVODWHG/D0DUVHLOODLVHWKH)UHQFKQDWLRQDO DQWKHPZKLFKZDVWDNHQXSE\DJURXSRI5HSXEOLFDQVROGLHUVDQGDGRSWHGDVWKHUHYROXWLRQDU\DQWKHP+H ZDVDUUHVWHGDQGFRQGHPQHGWRGHDWKEXWQRWH[HFXWHG+HUHPDLQHGLQMDLOXQWLO * <5$'Ï 7KHIROORZLQJHQWU\ZDVZULWWHQE\(ZDOG2VHUVVKRUWO\DIWHUWKHGHDWKRI'U5DGy 5$'Ï*\|UJ\± +XQJDULDQWUDQVODWRUDQGVFKRODURIWUDQVODWLRQ*\|UJ\5DGyZDVNHHQO\ LQWHUHVWHGLQODQJXDJHVDQGWKHLUOLWHUDWXUHV+HVSRNH+XQJDULDQDQG*HUPDQIURPFKLOGKRRGOHDUQW/DWLQ DQG*UHHNDWVFKRRODVZHOODV)UHQFKDQG(QJOLVKIURPSULYDWHWXWRUVVWXGLHG,WDOLDQLQ3HUXJLDDQGODWHU WDXJKWKLPVHOI3ROLVKDQGMXVWEHIRUH:RUOG:DU7ZR5XVVLDQ$OWKRXJKKLVHDUO\WUDLQLQJDQGKLV GRFWRUDWH ZDVLQODZDQGKLVHDUO\FDUHHULQWKHFLYLODQGGLSORPDWLFVHUYLFHDQGLQWKH+XQJDULDQ$FDGHP\ RI6FLHQFHVKHUHJDUGHGWUDQVODWLRQDVKLVµUHDOILHOGRIDFWLYLW\¶+HUHSUHVHQWHG+XQJDULDQWUDQVODWRUVDW HYHU\FRQJUHVVRI),7IURPWRZDV9LFH3UHVLGHQWRI),7IURPWRDQG(GLWRULQ&KLHI RIWKHMRXUQDO%DEHOIRU\HDUV+LVSULQFLSDOFRQWULEXWLRQWRWUDQVODWLRQVWXGLHVZDVKLVµ2XWOLQHRID 6\VWHPDWLF7UDQVODWRORJ\¶SXEOLVKHGLQ%DEHOLQDQGVXEVHTXHQWO\WUDQVODWHGLQWRPDQ\ODQJXDJHVDQG SXEOLVKHGLQVHYHUDOFRXQWULHV+LVEHVWNQRZQYROXPHWKHIUXLWRIVRPHILIW\\HDUV¶ZRUNLV6]HUHOPHV 6]HPEHVtWpV/RYLQJ(QFRXQWHUV DFROOHFWLRQRIWUDQVODWHGSRHWU\IURPODQJXDJHV7KHGLIILFXOWLHV FRQIURQWLQJ+XQJDULDQSXEOLVKLQJDIWHUWKHIDOORI&RPPXQLVPDQGWKHFRQVHTXHQWORVVRIVWDWHVXEVLGLHVKDYH VRIDUSUHYHQWHGWKHSXEOLFDWLRQRIKLV&RQIHVVLRQVRID(XURSHDQDQG+LVWRU\RIWKH5HFHSWLRQRI+XQJDULDQ /LWHUDWXUHWKURXJKRXWWKH:RUOGDVZHOODVKLVQXPHURXVSRHPV*\|UJ\5DGy¶VKRQRXUVLQFOXGHWKH 1DWKKRUVW3UL]HIRU/LWHUDU\7UDQVODWLRQ WKH),7*ROGHQ3LQRI+RQRXU DQGDQ+RQRUDU\ )HOORZVKLSRIWKH,QVWLWXWHRI7UDQVODWLRQDQG,QWHUSUHWLQJLQ*UHDW%ULWDLQ (:$/'26(56



3DJH

, ,FHODQGLFWUDGLWLRQ ,WLVQRWZLWKRXWUHDVRQWKDW,FHODQGLVVRPHWLPHVGHVFULEHGDVDODQGRIFRQWUDVWVERWKQDWXUDODQGVRFLDO 7KRXJKVLWXDWHGLQWKH1RUWK$WODQWLFRQWKHHGJHRIWKH$UFWLFFLUFOHWKHLVODQGLVZDUPHGE\WKH*XOI 6WUHDPWKXVHQMR\LQJDPXFKPLOGHUFOLPDWHWKDQRQHZRXOGH[SHFWDWVXFKDQRUWKHUO\ODWLWXGH7KH0LG $WODQWLFULGJHUXQVIURPQRUWKWRVRXWKWKURXJKWKHPLGGOHRI,FHODQGDQGPDUNVWKHMXQFWXUHRIWZRWHFWRQLF SODWHVRIWKHHDUWK¶VFUXVW7KLVULGJHLVJHRORJLFDOO\XQVWDEOHDQGKDVEHHQWKHVLWHRIIUHTXHQWYROFDQLF RXWEXUVWVFDXVLQJWKHKLJKHVWGHQVLW\RIWKHUPDODFWLYLW\WREHIRXQGLQDQ\FRXQWU\RIWKHZRUOG%XWGHVSLWH WKHVHILHU\IRUFHVEHQHDWKLWVVXUIDFHWKHLVODQGUHPDLQVFDSSHGE\(XURSH¶VODUJHVWJODFLHUV /LNHWKHQDWXUDOHQYLURQPHQWLQZKLFKWKH\OLYHWKH,FHODQGLFSHRSOHDUHIXOORIFRQWUDVWV,FHODQGILUVWEHFDPH LQKDELWHGLQWKHODWHQLQWKFHQWXU\ZKHQ1RUZHJLDQDQG&HOWLFLPPLJUDQWVEHJDQWRH[SDQGWKHLUVHWWOHPHQWV ZHVWZDUGDFURVVWKH1RUWK$WODQWLFLVODQGV7KH,FHODQGHUVIRUPHGRQHRI(XURSH¶VODVWWULEDOVRFLHWLHVUXOHG E\VHYHUDOGR]HQJRèDURUORFDOFKLHIWDLQVZLWKDQDQQXDODVVHPEO\FDOOHGWKH$OWKLQJ7KLVFRPPRQZHDOWK ODVWHGIRUDOPRVWIRXUFHQWXULHVEHIRUHVXEPLWWLQJWRWKH1RUZHJLDQ&URZQLQ7RJHWKHUZLWK1RUZD\ ,FHODQGODWHUFDPHXQGHUWKHFRQWURORIWKH'DQLVK&URZQLQ,QZLWKQRPRUHWKDQ LQKDELWDQWV,FHODQGRQFHPRUHEHFDPHDQLQGHSHQGHQWUHSXEOLF /LYLQJLQWKLVµPLFURVWDWH¶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µ6DJD,VODQG¶LVZHOOGHVHUYHGWRRQRWRQO\KDVPXFKRIZKDWZH NQRZDERXWWKHOLWHUDU\WUDGLWLRQRIQRUWKHUQ(XURSHGXULQJWKHHDUO\0LGGOH$JHVEHHQSUHVHUYHGLQ,FHODQGLF PDQXVFULSWVEXWWKHUHDUHDOVRIHZFRXQWULHVZKHUHOHDUQLQJDQGZULWLQJDUHKHOGLQKLJKHUHVWHHP7KLVLVD FRXQWU\ZKHUHHYHU\WZHQWLHWKSHUVRQKDVZULWWHQSRHWU\DOPRVWHYHU\RQHQHDULQJUHWLUHPHQWDJHKDVZULWWHQ KLVKHUDXWRELRJUDSK\DQGDEVROXWHO\HYHU\RQHKDVDQRSLQLRQRQKRZWRVD\WKLQJVLQSURSHU,FHODQGLF:KLFK FDQRIWHQPDNHOLIHUDWKHUGLIILFXOWIRUWKHWUDQVODWRU

7UDQVODWLRQLQWKH0LGGOH$JHV 6WUDQJHDVLWPD\VHHPWKHPHGLHYDOQRUWKHUQHUVZKRLQKDELWHG,FHODQGGRQRWDSSHDUWRKDYHKDGPXFKQHHG IRUWUDQVODWRUVRULQWHUSUHWHUV,QVSLWHRIWKHIDFWWKDWWKH\URDPHGIURPWKH$UFWLFWRWKH9DWLFDQDQGHYHQ IXUWKHURQO\RQHPHGLHYDOVDJDPDNHVPXFKPHQWLRQRIRUGLQDU\SHRSOHWKDWLVSHRSOHRWKHUWKDQWKHKLJK FKXUFKRIILFLDOVWKDWSRSXODWHWKH%LVKRSV¶6DJDV ZKRVSRNHRWKHUµLQFRPSUHKHQVLEOH¶ODQJXDJHV,Q,QJYDUV VDJDYLèI|UODWKHµ6DJDRI,QJYDUWKH)DUWUDYHOOHG¶ZKLFKUHFRXQWV1RUVHYR\DJHVRI



3DJH

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µWUDQVODWLRQVRIKRO\ZRUNV¶H[LVWHGLQ,FHODQGDWWKHWLPH7RMXGJHIURPH[LVWLQJIUDJPHQWVDQGWKHHDUOLHVW H[WDQWZRUNVWKHVHZRXOGKDYHSULPDULO\EHHQH[SRVLWLRQVDQGRWKHULQWHUSUHWDWLYHZULWLQJVUDWKHUWKDQDFWXDO WUDQVODWLRQVLQWKHPRGHUQVHQVH,WLVDOVRSRVVLEOHWKDWDFFRXQWVRIWKHOLYHVRIVRPHVDLQWVH[LVWHGLQ,FHODQGLF E\ 7KHROGHVW,FHODQGLFERRNRIKRPLOLHVQRZSUHVHUYHGLQWKH5R\DO/LEUDU\LQ6WRFNKROP GDWHVIURPDURXQG DQGFRQWDLQVDFROOHFWLRQRIVHUPRQVKDOIRIZKLFKDWOHDVWDUHEDVHGRQIRUHLJQPRGHOV7KHVHZRUNV KDYHVHOGRPEHHQµWUDQVODWHG¶GLUHFWO\WKH\DUHPRVWO\UHWHOOLQJVRUHYHQFRPELQDWLRQVRIVHYHUDOZRUNVLQ RQH,QWHUHVWLQJO\HQRXJKRQHRIWKHWH[WVLQWKH,FHODQGLFERRNRIKRPLOLHVDGGUHVVHVWKHOLVWHQHUVGLUHFWO\DQG ELGVWKHPPDNHDOORZDQFHVIRUWKHSULHVWVZKRKDGGLIILFXOW\LQH[SUHVVLQJWKHPVHOYHVLQ,FHODQGLF ,WLVZRUWKSRLQWLQJRXWWKDWWKHYHUEDGSêèDQRZXVHGWRPHDQµWRWUDQVODWH¶ZDVQRWXVHGLQWKLVVHQVHLQ PHGLHYDOWLPHV,WPHDQWDVDUXOHµWRREOLJH¶RUµWRREH\¶ZKLOHWKHYHUEPRVWFRPPRQO\XVHGIRUWKH SURFHVVRIWUDQVODWLRQZDVLWVHHPVDèVQ~DZKLFKOLWHUDOO\PHDQVµWRWXUQ¶,QWKHODUJHFRUSXVRIZULWWHQ ,FHODQGLFFROOHFWHGDQGH[FHUSWHGRYHUVHYHUDOGHFDGHVE\WKH8QLYHUVLW\RI,FHODQG'LFWLRQDU\3URMHFW H[DPSOHVRIWKHXVHRIWKHYHUEDGSêèDWRPHDQµWUDQVODWH¶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¶V/HJHQGDDXUHDDQG*UHJRU\¶V 'LDORJXHV ,QKLVDXWKRULWDWLYHZRUN7KH2ULJLQVRI,FHODQGLF/LWHUDWXUH7XUYLOOH3HWUH PDLQWDLQVWKDWHDUO\ UHOLJLRXVZULWLQJVWDXJKW,FHODQGHUVOHVVRQVWKDWWKH\ODWHUSXWWRXVHLQZULWLQJVHFXODUVDJDV/LNHWKH KRPLOLHVWKHHDUOLHVWWUDQVODWHGDFFRXQWVRIWKHOLYHVRIVDLQWVVKRZYHU\OLWWOHLQIOXHQFHRI/DWLQV\QWD[DQG FRQWDLQQRPRUHWKDQDIHZORDQZRUGVIURPWKDWODQJXDJH(YHQWKH*UHHNDQG5RPDQJRGVDUHUHSODFHGE\ 1RUVHRQHVÏèLQQIRU0HUFXU\3yUUIRU-XSLWHUDQG)ULJJIRU9HQXV7KHLUOLYHO\FKDWW\VW\OHKDUGO\GLIIHUV IURPWKHVW\OHRI,FHODQGLFZRUNVVXFKDVWKH6DJDVRI.LQJVRURI,FHODQGHUV7KLVVLWXDWLRQGLGQRWHQGXUH KRZHYHUDQGIURPWKHPLGWKLUWHHQWKWRWKHILIWHHQWKFHQWXU\PDQ\DFFRXQWVRIWKHOLYHVRIVDLQWVZHUHZULWWHQ LQDPRUHRUQDWHIORULGVW\OHZKLFKFRQVFLRXVO\LPLWDWHG/DWLQDQGRIWHQWUDQVODWHG/DWLQFRQVWUXFWLRQVOLWHUDOO\ ,QDGGLWLRQWRSURYLGLQJWKHFRPPRQSHRSOHZLWKSURSHUH[DPSOHVWRIROORZLQWKHIRUPRI



3DJH

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¶VZRUNLVWKHSRHP0HUOtQXVVSiDUDUHH[DPSOHRIDYHUVH UHQGHULQJRIDSURVHWH[WWKHRULJLQDOEHLQJ*HRIIUH\¶V0HUOLQ¶V3URSKHF\(YHQPRUHVWULNLQJLVWKHIDFWWKDW LQWKH,FHODQGLFYHUVLRQWKHWZRVHFWLRQVRIWKHSRHPDUHLQUHYHUVHRUGHUEULQJLQJWKHSRHPLQWRFORVHU FRUUHVSRQGHQFHZLWKWKHDQFLHQW,FHODQGLFHVFKDWRORJLFDOSRHP9|OXVSiRU7KH6\ELO¶V3URSKHF\WRZKLFKWKH WUDQVODWLRQKDVEHHQFRPSDUHGDQGZKLFKLWGRHVUHVHPEOH,WFRXOGEHDUJXHGWKDWWKLVLVDQHDUO\*HUPDQLF H[DPSOHRIWKHUHZRUNLQJRIDVRXUFHWH[WWRILWDNQRZQSDWWHUQLQWKHOLWHUDU\32/<6<67(0RIWKHWDUJHW FXOWXUH $OOVHFXODUWUDQVODWLRQVLQWR,FHODQGLFGXULQJWKHPHGLHYDOSHULRGVKRZDWHQGHQF\WRZDUGVH[WHQVLYH UHZRUNLQJRIWKHVRXUFHWH[W7KHVRFDOOHGULGGDUDV|JXURUµFRXUWO\URPDQFHV¶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y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¶RSLQLRQZDVFOHDUO\VWDWHGWKHWUDQVODWRUIUHTXHQWO\ DGGHGDFRPPHQWWRWKHHIIHFWWKDWWKRVHZRUGVZHUHQRWKLVRZQEXWWKRVHRI*DOWHUXV $QRWKHUSRSXODUHQWHUWDLQPHQWGXULQJWKHODWH0LGGOH$JHVLQ,FHODQGZDVWKHVDJQDGDQVDUPHDQLQJ µIRONVRQJV¶RUµEDOODGV¶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



3DJH

,FHODQGLFFRQMXJDWLRQV\VWHP7KLVRIWHQSUHVHQWHGDGLIILFXOWSUREOHPZKHQUK\PHDQGUK\WKPZHUHWREH PDLQWDLQHGZLWKRXWPDMRUDOWHUDWLRQWRWKHEDOODGV7\SLFDOIHDWXUHVRIRULJLQDO2OG,FHODQGLFHSLFVUK\PHG DQGXQUK\PHGKDUGO\HYHURFFXULQWKHVHEDOODGV6XFKIHDWXUHVLQFOXGHWKHFRQYROXWHGZRUGRUGHURIVNDOGLF SRHWU\LWVNHQQLQJVLHH[SUHVVLRQVZKLFKZRUNOLNHULGGOHVIRUH[DPSOHµWKHKRUVHRIWKHZDYHV¶ µVKLS¶ DQGWKHXVHRIDUFKDLFSRHWLFQDPHVIRUFRPPRQQRXQV ,Q,FHODQGDVHOVHZKHUHLQ(XURSHWKHLQIOXHQFHRIWKHSUHDFKLQJIULDUVLQWKHODWH0LGGOH$JHVOHGWRWKH LQFUHDVHGSRSXODULW\RIWKHH[HPSOXP7KLVZDVDVKRUWWDOHZKLFKZDVRIWHQLQVHUWHGLQDVHUPRQRUWH[WIRU H[SODQDWRU\SXUSRVHVRUDVDQH[DPSOHRIDVLWXDWLRQRUPRUDOJRRGRUEDG([HPSODZHUHXVHGE\RULHQWDODQG FODVVLFDOZULWHUVDVZHOODVWKHHDUO\IDWKHUVRIWKH&KULVWLDQ&KXUFK([DPSOHVRIWKLVJHQUHLQFOXGHWKH 'LDORJXHVRI3RSH*UHJRU\WKH*UHDWZKLFKDUHSUHVHUYHGLQDQ,FHODQGLFPDQXVFULSWGDWLQJVKRUWO\DIWHU $QRWKHUFROOHFWLRQRIH[HPSODZDVWUDQVODWHGIURP(QJOLVKLQWKHODWHILIWHHQWKFHQWXU\7KHEDVLFWDOH FRXOGEHGUDZQIURPKLVWRU\OHJHQGWKH%LEOHWKHOLYHVRIVDLQWVFODVVLFDOOLWHUDWXUHIRONWDOHVDQGHYHQIURP IDEOHVDQLPDOWDOHVDQGSURYHUEV2YHUGLIIHUHQWVWRULHVKDYHEHHQIRXQGDQGHGLWHGLQ,FHODQGLF WUDQVODWLRQ7KH\DSSHDUWRKDYHEHHQWKRXJKWTXLWHGLIIHUHQWIURPWKHQDWLYHJHQUHRIìiWWUDVKRUWWDOHZKLFK IRFXVHGRQORFDOKHURHVDQGZKLFKZDVILUPO\URRWHGLQWKH*HUPDQLFZDUULRUWUDGLWLRQ7KHFKDUDFWHUVLQWKH H[HPSODZHUHIRUHLJQHUV²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¡GQHE¡


3DJH

K\SRWD[LVZDVZLGHO\DGRSWHGDVDUHVXOWRULJLQDOZULWWHQZRUNVIURPWKHVHYHQWHHQWKDQGHLJKWHHQWK FHQWXULHVUHPDLQDPRQJWKHPRVWGLIILFXOW,FHODQGLFWH[WVIRUPRGHUQUHDGHUVWRXQGHUVWDQG

7KH5HIRUPDWLRQDQGSRVW5HIRUPDWLRQWKHWUDQVODWLRQRIUHOLJLRXVWH[WV 7KHSHULRGIROORZLQJWKH5HIRUPDWLRQZDVDOPRVWH[FOXVLYHO\GHYRWHGWRWKHWUDQVODWLRQRIUHOLJLRXVZRUNVLQ ,FHODQG7KHQDWLRQDO/XWKHUDQ&KXUFKZKLFKFRQWUROOHGWKHSULQWLQJSUHVVLQWKHFRXQWU\QHHGHGPDWHULDOIRU LWVVHUYLFHVLQWKHYHUQDFXODULQFOXGLQJVHUPRQVVFULSWXUDOWH[WVDQGK\PQV7KHILUVW&KXUFKRUGLQDQFHVIURP WKH'DQLVKNLQJ.ULVWLDQ,,,± DQDUGHQW/XWKHUDQSURYLGHGIRUWKHHQWLUHFKXUFKVHUYLFHWREHKHOGLQ WKHYHUQDFXODUZLWKWKHH[FHSWLRQRIDYHU\VPDOOQXPEHURI/DWLQK\PQVZKLFKZHUHGHFUHHGWREH DFFHSWDEOH)XUWKHUPRUHWKHSXEOLVKLQJHIIRUWVRIWKH&KXUFKZHUHDLPHGDWSUHDFKLQJDQGHQFRXUDJLQJWKH VSUHDGRIµSURSHU¶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yUQF DWWULEXWHGWRDSULHVWRIWKHFRXUWRI.LQJ+iNRQ0DJQ~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tPXURUUK\PHGHSLFVZKLFKIORXULVKHG IURPWKHVHYHQWHHQWKWRWKHQLQHWHHQWKFHQWXU\



3DJH

/LWHUDU\WUDQVODWLRQLQ,FHODQG 7KHODWHHLJKWHHQWKDQGHDUO\QLQHWHHQWKFHQWXULHVLQ,FHODQGVDZDUHQHZHGLQWHUHVWLQWKHWUDQVODWLRQRI*UHHN DQG5RPDQFODVVLFV6YHLQEM|UQ(*,/6621± ZDVWKHKHDGPDVWHURIWKHRQO\UHDOVFKRROLQ ,FHODQGDWWKHWLPHZKLFKZDVWUDQVIHUUHGIURPWKHIRUPHU*RYHUQRU¶VUHVLGHQFHDW%HVVDVWDèLUWR5H\NMDYtN +HWUDQVODWHGDQXPEHURIVXFKZRUNVLQWR,FHODQGLFRIWHQFRQVFLRXVO\LPLWDWLQJWKHVW\OHRIFODVVLFDOLH PHGLHYDO,FHODQGLF 2WKHUWUDQVODWRUVRIWKLVHUDWXUQHGWRPRGHUQ(XURSHDQODQJXDJHVIRUWKHLUVRXUFHWH[WV%HQHGLNW*U|QGDOWKH (OGHU± WUDQVODWHG3RSHLQWRWKH,FHODQGLFPHWUHIRUQ\UèLVODJWKLVLVWKHPHWUHLQZKLFKPDQ\RI WKHDQFLHQW(GGLFSRHPVZHUHZULWWHQ-yQëRUOiNVVRQ± IROORZHGKLVOHDGLQWUDQVODWLQJ3RSH 0LOWRQDQG.ORSVWRFNDPRQJRWKHUV7KHVHZHUHWKHILUVW,FHODQGLFWUDQVODWRUVZKRZHUHQRWSULPDULO\FOHULFV DOWKRXJK-yQ3RUOiNVVRQDGPLWWHGO\VWDUWHGRXWDVDPLQLVWHUKHZDVGHIURFNHGIRUDSHULRGDQGZDVREYLRXVO\ PRUHLQWHUHVWHGLQOLWHUDWXUHWKDQLQSULHVWKRRG)URPWKLVWLPHRQZDUGVPRVWWUDQVODWRUVZHUHHGXFDWHGDEURDG DOPRVWDOZD\VDWWKH8QLYHUVLW\LQ&RSHQKDJHQ DQGZHUHKLJKO\LQIOXHQFHGE\FRQWHPSRUDU\WUHQGVLQ (XURSHDQOLWHUDWXUH7KLVFOHDUO\SOD\HGDUROHLQVKDSLQJWKHLUYLHZVRQWUDQVODWLRQDVZHOO7KH\DLPHGWR EULQJWKHEHVWDQGPRVWHGLI\LQJRIIRUHLJQOLWHUDWXUHWR,FHODQGHUVLQWKHLURZQODQJXDJH 7KHILUVWSRHWVRIWKH5RPDQWLFSHULRG%MDUQL7KRUDUHQVHQ± DQG-yQDV+DOOJUtPVVRQ± WUDQVODWHGDQXPEHURISRHPVE\6FKLOOHU2HKOHQVFKOlJHUDQG+HLQHLQWKHIUHHVW\OHW\SLFDORIWKDWSHULRG 7KHIROORZLQJJHQHUDWLRQRISRHWVGLVFRYHUHG*RHWKHDQGWKH(QJOLVK5RPDQWLFSRHWV%\URQ6KHOOH\DQG %XUQV$PRQJWKHPRVWSURGXFWLYHWUDQVODWRUVRIWKHQLQHWHHQWKFHQWXU\ZHUH6WHLQJUtPXU7+2567(,16621 ± DQG0DWWKtDV-RFKXPVVRQ± 7KRUVWHLQVVRQHQFRXUDJHGWKH\RXQJ-RFKXPVVRQDIHZ \HDUVKLVMXQLRUZKRKDGRULJLQDOO\VDLOHGIRU&RSHQKDJHQWROHDUQFRPPHUFH-RFKXPVVRQHYHQWXDOO\ UHWXUQHGWR,FHODQGZKHUHKHEHFDPHDPLQLVWHUWKHQQHZVSDSHUHGLWRUDQGHYHQWXDOO\ZHQWEDFNWRWKH PLQLVWU\$JUHDWWUDYHOOHUKHZDVDOVRDQHDJHUFRUUHVSRQGHQWDQGRQHRIWKHPRVWSURGXFWLYHRIDOO,FHODQGLF SRHWV,QDGGLWLRQWRFRPSRVLQJSRHWU\IRUHYHU\RFFDVLRQDQGLQJUHDWTXDQWLW\KHZURWHDQXPEHURISRSXODU GUDPDVDQGWUDQVODWHGWKHEHVWNQRZQZRUNVRI6KDNHVSHDUH-RFKXPVVRQ¶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

Decade

1900–9

1910–19

1920–9

1930–9

1940–9

1950–9

RULJLQDOSRHWU\

RULJLQDOILFWLRQ

WUDQVODWHGILFWLRQ

6RXUFH3iOVVRQ



3DJH

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tPXU-yQVVRQNQRZQDVµWKHOHDUQHG¶LQ ,WZDVLQWHQGHGWRUHIXWHZLGHVSUHDGOLHVDQGPLVFRQFHSWLRQVDERXW,FHODQG:LWKWKHSDVVDJHRIWLPH WKHSROHPLFVRI-yQVVRQ¶VZRUNEHFDPHLUUHOHYDQWEXWWKHEULHISDVVDJHVZKLFKKHWUDQVODWHGRUUHWROGIURP ,FHODQGLFPHGLHYDOPDQXVFULSWVLQWKLVZRUNDQGKLVVXEVHTXHQWFROOHFWLRQ&U\PRJDHDVXFFHHGHGLQDURXVLQJ WKHLQWHUHVWRIVFKRODUVLQH[SORULQJWKHVHSUHYLRXVO\XQNQRZQWUHDVXUHV 7KHIROORZLQJFHQWXULHVZLWQHVVHGDQLQFUHDVHGOHYHORIDFWLYLW\LQFROOHFWLQJHGLWLQJDQGWUDQVODWLQJWKHVH PDQXVFULSWV7KHODUJHVWFROOHFWLRQZDVSXWWRJHWKHULQ&RSHQKDJHQXQGHUWKHDXVSLFHVRI,FHODQGHUÈUQL 0DJQ~VVRQ± 0DJQ~VVRQVHUYHGDV5R\DO$UFKLYLVWLQ&RSHQKDJHQDQGXQGHUWRRNQXPHURXV DVVLJQPHQWVIRUWKH'DQLVKJRYHUQPHQWLQ,FHODQG+HWUDYHOOHGH[WHQVLYHO\LQ,FHODQGLQVHDUFKRI PDQXVFULSWVDQGPDQDJHGWRILQGDQGKLUH,FHODQGLFVWXGHQWVRUJUDPPDULDQVWRUHFRUGFRS\LQGH[DQG SURFHVVWKHPDWHULDOLQYDULRXVZD\V$QHVWLPDWHGWZRWKLUGVRIWKHPDQXVFULSWVLQ0DJQ~VVRQ¶VFROOHFWLRQ ZHUHGHVWUR\HGE\ILUHLQEXWWKH$UQDPDJQHDQ&ROOHFWLRQDQG,QVWLWXWHKDVEHHQWKHFHQWUHRI,FHODQGLF PHGLHYDOVFKRODUVKLSIRUFHQWXULHV $FRQVLGHUDEOHSDUWRIWKHDFWLYLW\LQYROYLQJWKHVHPDQXVFULSWVLQFOXGHGPDNLQJWKHPDWHULDODYDLODEOHLQ WUDQVODWLRQVILUVWLQ/DWLQWKHQ'DQLVK6YHLQEM|UQ(*,/6621WUDQVODWHGPRVWRIWKH6DJDVRI.LQJVDQGWKH HQWLUHFRUSXVRIVNDOGLFSRHWU\LQWR/DWLQKHDOVRFRPSLOHGDOH[LFRQRIWKHODQJXDJHRIWKHVNDOGV:LWKWKH ULVHRI5RPDQWLFLVPLQ(XURSHERWKVFKRODUVDQGSRHWVIRXQGLQVSLUDWLRQLQWKH,FHODQGLFPDWHULDOHVSHFLDOO\ LQ*HUPDQ\DQG(QJODQG:LOOLDP0RUULVIRUH[DPSOHFRPSRVHGQXPHURXVSRHPVEDVHGRQ,FHODQGLFVDJDV DQGKHURLFSRHWU\KHDOVRWUDQVODWHGPDQ\,FHODQGLFZRUNVLQWR(QJOLVK $SDUWIURPPHGLHYDO,FHODQGLFZRUNVWKH+\PQVRIWKH3DVVLRQE\WKHSRHWDQGFOHULF+DOOJUtPXU3pWXUVVRQ ± LVSUREDEO\WKHRQO\ROGHUZRUNLQ,FHODQGLFWRKDYHEHHQH[WHQVLYHO\WUDQVODWHGLQWRRWKHU ODQJXDJHV:ULWWHQLQ±WKHK\PQVGHVFULEHLQH[FHSWLRQDOO\ILJXUDWLYHDQGO\ULFDODQG\HWHDVLO\ XQGHUVWRRGODQJXDJHKRZWKHSRHWLGHQWLILHVZLWKWKHVXIIHULQJVRI-HVXVDQGRIPDQNLQG'XULQJWKHQH[W FHQWXU\DQGDKDOIQRIHZHUWKDQWKUHHGLIIHUHQW/DWLQWUDQVODWLRQVZHUHSULQWHGRIWKHSRHPVLQIXOORULQSDUW LQ&RSHQKDJHQ2QH&KLQHVHRQH+XQJDULDQDQGVHYHUDO(QJOLVKWUDQVODWLRQVKDYHVLQFHEHHQSXEOLVKHG,Q DGGLWLRQWRWKH+\PQVRIWKH3DVVLRQRWKHULQGLYLGXDOSRHPVE\3pWXUVVRQKDYHDOVREHHQWUDQVODWHGLQWR 'DQLVK ,QWKHQRYHOLVW+DOOGy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



3DJH

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

7KHSUHVHQWWLPH ,QWRGD\¶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µOHJDOO\DSSURYHGGRFXPHQWWUDQVODWRUVDQGFRXUW LQWHUSUHWHUV¶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

)XUWKHUUHDGLQJ (LQDUVVRQ.XOWXUKLVWRULVNOHNVLNRQIRUQRUGLVNPLGGHODOGHUIUDYLNLQJHWLGWLOUHIRUPDWLRQVWLG3XOVLDQRDQG :ROI6HHORZ=XFN

.(1(9$.81=

%LRJUDSKLHV È6*(,566210DJQXV± $IWHUVWXG\LQJ,FHODQGLFDWWKH8QLYHUVLW\RI,FHODQGLQ5H\NMDYtN ÈVJHLUVVRQEHFDPHDMRXUQDOLVWDQGWUDQVODWRUDQGLVFRQVLGHUHGWKHIRUHPRVWWUDQVODWRURISRHWU\GXULQJWKDW SHULRG+HSXEOLVKHGVL[YROXPHVHQWLWOHG3êGGOMyè3RHWU\LQWUDQVODWLRQ EHWZHHQDQG0RVWRI KLVWUDQVODWLRQVDUHRIZRUNVE\6FDQGLQDYLDQHVSHFLDOO\6ZHGLVKSRHWVDVZHOODV$PHULFDQ*HUPDQDQG (QJOLVKZRUNV (*,/66216YHLQEM|UQ± (JLOVVRQVWXGLHGWKHRORJ\LQ&RSHQKDJHQEHIRUHEHFRPLQJWHDFKHURI FODVVLFVDQGVXEVHTXHQWO\KHDGPDVWHURIWKH/DWLQVFKRROLQ



3DJH

5H\NMDYLN+HWUDQVODWHGRUDVVLVWHGLQWUDQVODWLQJPHGLHYDO,FHODQGLFZRUNVLQWR/DWLQLQFOXGLQJ .RQXQJDV|JXU6DJDVRI.LQJV DQG6QRUUD(GGDWKH3URVH(GGD DQGKHLVDOVRWKHDXWKRURIDGLFWLRQDU\RI VNDOGLFSRHWU\/H[LFRQSRHWLFXPDQWLTXDHOLQJXDHVHSWHQWULRQDOLV+LVSULQFLSDOFRQWULEXWLRQVWR,FHODQGLF OLWHUDWXUHZHUHKLVWUDQVODWLRQVRIDQXPEHURIFODVVLFDODXWKRUVLQWR,FHODQGLFLQFOXGLQJ+RPHU(JLOVVRQRIWHQ FRQVFLRXVO\LPLWDWHGWKHVW\OHRIFODVVLFDOLHPHGLHYDO,FHODQGLFDQGUHMHFWHGWKH'DQLVKDQG*HUPDQPRGHOV RIODWHUFHQWXULHV+LVSURVHWUDQVODWLRQVZHUHDQGVWLOODUH FRQVLGHUHGDPLOHVWRQHLQ,FHODQGLFOLWHUDWXUHDQG SRLQWHGWKHZD\IRURWKHUVWRIROORZKLVWUDQVODWLRQVRIWKH,OLDGDQGWKH2G\VVH\ZHUHUHSULQWHGDVODWHDV ± 7+2567(,166216WHLQJUtPXU± $PRQJWKHPRVWSURGXFWLYH,FHODQGLFWUDQVODWRUVRIWKH QLQHWHHQWKFHQWXU\7KRUVWHLQVVRQZDVUHIHUUHGWRE\WKHFULWLFVRIWKHWLPHDVD.XOWXUEULQJHU+HVWXGLHG SKLORVRSK\DVZHOODVFODVVLFDODQGPRGHUQODQJXDJHVLQ&RSHQKDJHQDQGZRUNHGWKHUHIRUDQRWKHUWHQ\HDUV DVDIUHHODQFHSRHWDQGWUDQVODWRU+LVWUDQVODWLRQVZKLFKLQFOXGH7KH$UDELDQ1LJKWV.LQJ/HDU5RELQVRQ &UXVRHDQG+&$QGHUVHQ¶V)DLU\7DOHVDUHFKDUDFWHUL]HGE\DILQHFODVVLFDO,FHODQGLFVW\OHRIWHQPRUHKLV RZQWKDQWKDWRIWKHRULJLQDODXWKRU¶V6XUSULVLQJO\OLWWOHGLIIHUHQFHLVIRXQGEHWZHHQIRULQVWDQFHWKHIDQWDVWLF WDOHVRIWKH$UDELDQ1LJKWVDQGWKHFDUHIXOO\ZRUGHGIDEOHVRI$QGHUVHQ .(1(9$.81=

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

7KHDQFLHQWSHULRGF±%& 7KHILUVWQHHGIRULQWHUODQJXDJHFRPPXQLFDWLRQLQWKHVXEFRQWLQHQWSUREDEO\DURVHWKURXJKWUDGH7KHROGHVW OLQJXLVWLFHYLGHQFHLVWREHIRXQGLQWKHFKDUDFWHUVLQVFULEHGRQVWHDWLWHVHDOVIRXQGLQWKH,QGXVYDOOH\LQWKH QRUWKZHVW7KHVHDUHVDLGWRGDWHIURP±%&EXWXQIRUWXQDWHO\WKHVFULSW



3DJH

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µK\PQVRIZLVGRP¶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

7KHSUHFODVVLFDOSHULRGF%&$' )URPDERXW%&RQZDUGVWKH$U\DQVEHJDQWRVSUHDGRXWIURPWKH,QGXVUHJLRQHDVWZDUGVLQWRWKH*DQJHV YDOOH\DQGVRXWKWRZDUGVWKH'HFFDQDQGWKH3HUVLDQ$FKDHPHQLG(PSLUHWRRNFRQWURORIWKH,QGXV$U\DQV DOVREHJDQWRJREH\RQGWKHLUWULEDOWHUULWRULHVVWXGHQWVDQGWUDGHUVWUDYHOOHGWR7D[LODLQWKHNLQJGRPRI *DQGKDUDLQWKHQRUWKZHVWVROGLHUVPRXQWHGRQHOHSKDQWVDSSDUHQWO\IRXJKWLQWKH$FKDHPHQLGDUP\DJDLQVW WKH*UHHNV $VWKH$U\DQVEHJDQWRGLVSHUVHVHYHUDOPDMRUGHYHORSPHQWVWRRNSODFH$PRUHVFLHQWLILFDWWLWXGHEHFDPH HYLGHQWLQWKHLUFXOWXUHDQG6DQVNULWWH[WVZHUHFRPSRVHGRQODZDVWURQRP\DVWURORJ\DQGHVSHFLDOO\ OLQJXLVWLFVXEMHFWVVXFKDVHW\PRORJ\PHWULFVSURVRG\DQGJUDPPDU$WWKHVDPHWLPHWKH$U\DQODQJXDJH VWDUWHGWRIUDJPHQWLQWRGLDOHFWDORUUHJLRQDOIRUPVNQRZQDV3UDNULWV3DQLQL¶VZHOONQRZQJUDPPDULV UHJDUGHGE\VRPHDVDUHVSRQVHWRWKH$U\DQGLDVSRUDDQDWWHPSWWRIL[WKHIRUPRI6DQVNULWEHIRUHLW GLVLQWHJUDWHGLQWRPXWXDOO\XQLQWHOOLJLEOHGLDOHFWV7KHGLVLQWHJUDWLRQSURFHVVZDVUHLQIRUFHGE\WKHJUHDW UHOLJLRXVUHIRUPHUVRIWKHVL[WKFHQWXU\%&HVSHFLDOO\WKH%XGGKDDQG0DKDYLUDIRXQGHURI-DLQLVP ZKR SURSDJDWHGYHUQDFXODUODQJXDJHVLQRUGHUWRPDNHWKHLUWHDFKLQJVDFFHVVLEOHWRWKHPDVVHV3DQLQL¶VJUDPPDU PD\WKHUHIRUHDOVRUHSUHVHQWSDUWRIWKHRUWKRGR[UHOLJLRXVEDFNODVKDJDLQVWWKHVHDQWL9HGLFPRYHPHQWV .DXWLO\DWKHPLQLVWHURIWKHIRXUWKFHQWXU\%&,QGLDQHPSHURU&DQGUDJXSWD0DXU\DZURWHDWUHDWLVHRQ VWDWHFUDIWRIWHQFRPSDUHGWRWKHZRUNRIWKHVL[WHHQWKFHQWXU\,WDOLDQ0DFKLDYHOOL ZKLFKJLYHVXVVRPH LQGLFDWLRQRIWKHVWDWXVWKDWDWUDQVODWRUPLJKWKDYHKDGGXULQJWKLVSHULRG$OWKRXJKWKHWHUPµWUDQVODWRU¶LVQRW XVHG.DXWLO\DPHQWLRQVµVFULEHV¶WRZDUGVWKHHQGRIDORQJOLVWRIRFFXSDWLRQVDQGVDODULHVWKHNLQJ¶VFKLHI SULHVWRWKHUKLJKSULHVWVWKHSULPHPLQLVWHUPLOLWDU\FRPPDQGHUDQGPHPEHUVRIWKHUR\DOIDPLO\ SDQDV FKLHIVRISROLFHKDUHPDUPRXU\SULVRQUHYHQXHDQGWUHDVXU\SDQDV OHVVHUUR\DOVWKHFKLHI RILQGXVWU\FRXQVHOORUVSDQDV JXLOGPDVWHUVUHJLPHQWDOKHDGVFKDULRWFRPPDQGHUVSK\VLFLDQV IRUWXQHWHOOHUVEDUGVSURIHVVRUVDQGVSLHV±SDQDV LQIDQWU\PHQVFULEHVDQGDFFRXQWDQWV SDQDV ,QWKHYHU\ODVWUDQNDUHFUDIWVPHQVHUYDQWVPHGLFDODVVLVWDQWVDQGFRZKHUGVZLWKQRWLRQDOILJXUHVIRU VODYHVHOHSKDQWVKRUVHVDQGR[HQ



3DJH

,QWKHIRXUWKFHQWXU\%&FRQWDFWVZLWKWKHVXEFRQWLQHQWDUHH[WHUQDOO\DWWHVWHGZHNQRZWKDW$OH[DQGHUWKH *UHDWRI0DFHGRQUHDFKHGWKH,QGXVLQ%&DQGWKDWWKH*UHHNFKURQLFOHU0HJDVWKHQHVZDVWKH DPEDVVDGRURI6HOHXFXV$OH[DQGHU¶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µNLQJ RINLQJV¶FIVKDKLQVKDK RUIURPWKH&KLQHVHIRUH[DPSOHGDLYDSXWUDRUµVRQRIKHDYHQ¶7KH.XVKDQD NLQJ.DQLVKNDF$'±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¶VSLOODUVDQGWKH\QDPH6\ULDQ(J\SWLDQDQG0DFHGRQLDQNLQJV )URPDERXW%&RQZDUGV%XGGKLVWPLVVLRQVZHUHVHQWVRXWKDQGZHVWDQGZLWKQRWDEOHVXFFHVVWR6UL /DQND7KH%XGGKLVWFDQRQLQ3DOLRQHRIWKH3UDNULWV ZDVSUREDEO\ZULWWHQLQ6UL/DQNDLQWKHILUVWFHQWXU\ %&DERXW\HDUVDIWHU%XGGKD¶VGHDWK+RZHYHUDVZHOODVEHLQJZULWWHQLQYHUQDFXODUODQJXDJHV %XGGKLVWWH[WVDOVREHJDQWREHZULWWHQLQ6DQVNULW7UDQVODWLRQWKHUHIRUHEHFDPHDQLPSRUWDQWSDUWRIWKH WUDQVPLVVLRQRIWKH%XGGKD¶VWHDFKLQJV,QVRPHFDVHVHVVHQWLDOO\WKHVDPHWH[WVVXFKDVWKH-DWDNDVVWRULHV RIWKH%XGGKD¶VSDVWOLYHVSUREDEO\FRPSRVHGEHWZHHQWKHILUVWFHQWXU\%&DQGWKHILUVWFHQWXU\$' DUH DYDLODEOHLQ6DQVNULWDQG3DOLWKRXJKWKH\PD\QRWVWULFWO\VSHDNLQJEHWUDQVODWLRQVEXWSDUDOOHOWH[WVZLWKD FRPPRQVRXUFH ,QGLDQ%XGGKLVWVFKRODUVWUDYHOOHGWR&KLQDLQWKHILUVWFHQWXU\$'DQGZHUHQRGRXEWUHVSRQVLEOHIRUVRPHRI WKHHDUOLHVWWUDQVODWLRQVRI%XGGKLVWWH[WVLQWR&KLQHVH$VKYDJKRVKD¶VSRHP%XGGKDFDULWDWKHµOLIHRI %XGGKD¶UHSUHVHQWVWKHHDUOLHVWVXUYLYLQJ&ODVVLFDO6DQVNULWSRHWU\FILUVWFHQWXU\$' EXWWKHPDQXVFULSWVRI LWIRXQGDW7XUIDQLQ*RELDUHD&KLQHVHWUDQVODWLRQE\DQ,QGLDQVFKRODU

7KHFODVVLFDOSHULRGF± 7KH+LQGX(SLFVWZRRIWKHPRVWLPSRUWDQWVRXUFHWH[WVIRUVXEVHTXHQWWUDQVODWLRQKLVWRU\ZHUHFRQVROLGDWHG GXULQJWKLVSHULRG7KH0DKDEKDUDWDF%&WR$' WHOOVWKHVWRU\RIDPDMRUZDUSUREDEO\ UHSUHVHQWLQJWKH$U\DQV¶HDVWZDUGH[SDQVLRQDORQJWKH*DQJHVYDOOH\7KH5DPD\DQDF%&WR$' LVDERXWWKHDEGXFWLRQRI3ULQFH5DPD¶VZLIHE\WKHNLQJRI/DQND6UL/DQND DQGKHUVXEVHTXHQWUHVFXH SUREDEO\HFKRLQJWKH$U\DQV¶VRXWKZDUGPRYHPHQW7KHVHWH[WVFDQDOVREHVDLGWRUHSUHVHQWWKHEHJLQQLQJRI +LQGXWKHLVPDVWKHKHURHVDUHJUDGXDOO\HOHYDWHGWRGLYLQHVWDWXVDVLQFDUQDWLRQVRIWKHJRG9LVKQX ,WLVRIWHQGLIILFXOWWRWHOOZKLFKODQJXDJHDWH[WZDVRULJLQDOO\LQDVRSSRVHGWRWKHODQJXDJHRIWKHH[WDQW YHUVLRQ+RZHYHUVPDOOSRLQWVRIJUDPPDUDQGPHWUHLQWKHVH(SLFVVXJJHVWWKDWWKHH[WDQW6DQVNULWYHUVLRQV PD\KDYHEHHQWUDQVODWHGIURPRULJLQDO3UDNULWYHUVLRQVRUWKDWDWOHDVWWKHH[WDQWYHUVLRQVPD\UHSUHVHQW DWWHPSWVWRµ6DQVNULWL]H¶WKH3UDNULWYHUVLRQV6LPLODUSURFHVVHVDUHFHUWDLQO\HYLGHQWLQWKHUHZULWLQJRIWKH YHUQDFXODU3XUDQDVRUµ$QFLHQW6WRULHV¶FROOHFWLRQV



3DJH

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µJORVV¶ZDVVWLOOSURYLGHGLQ6DQVNULWIRUWKH3UDNULWVSHHFKHVLQWKHSOD\V $QRWKHUOLWHUDU\JHQUHSDUWLFXODUO\LPSRUWDQWWRWUDQVODWLRQKLVWRU\LVWKHIDEOH7KLVEHFRPHVSRSXODUZLWKWKH 3DOL-DWDNDVDQGRIWHQLQYROYHVWDONLQJDQLPDOV6RPHVFKRODUVDJDLQVHH*UHHNLQIOXHQFHEHKLQGWKLV GHYHORSPHQWEXWLWLVPRUHOLNHO\WKDWVWRU\WHOOLQJWUDGLWLRQVIURPWKH0LGGOH(DVWWKURXJKWR&KLQDH[FKDQJHG SORWVDQGFKDUDFWHUV2QHFROOHFWLRQRIDQLPDOIDEOHVLQSDUWLFXODUWKH3DQFDWDQWUDRUµ)LYH7UHDWLVHV¶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± SURGXFHGWUDQVODWLRQVRI6DQVNULWWH[WVRQDVWURQRP\PHGLFLQHDQGPDWKHPDWLFVQRWDEO\$U\DEKDWD¶VILIWK FHQWXU\6DQVNULWWUHDWLVH LQWURGXFLQJWKHQXPHUDOV\VWHPRI,QGLDQRULJLQLQWR(XURSHDVZHOODVYDULRXVRWKHU ,QGLDQDOJHEUDLFJHRPHWULFDODQGDVWURQRPLFDOFRQFHSWV+DUXQDO5DVKLG± DQGDO0D¶PǌQ± FRQWLQXHGWKHWUDQVODWLRQZRUNLQWRWKHQLQWKFHQWXU\EXWLWFHDVHGWKHUHDIWHUDV%DJKGDGEHJDQWRORVHLWV SROLWLFDOSRZHUVHH$5$%,&75$',7,21 6RXWKHUQ,QGLDDQGWKH'UDYLGLDQODQJXDJHV 7KHHDUOLHVWOLWHUDWXUHRIWKHVRXWKXQOLNHWKH5LJYHGDLVQRWSDUWLFXODUO\UHOLJLRXVLQFRQWHQW7UDGLWLRQWHOOVXV RIWKUHHVDQJDPVFRPSHWLWLYHSRHWLFµDVVHPEOLHV¶DW0DGXUDL1RWH[WVVXUYLYHIURPWKHILUVWWKH7DPLO JUDPPDU7RONDSSL\DPLVVXSSRVHGO\DSURGXFWRIWKHVHFRQGDQGWKHHLJKWDQWKRORJLHVRI6DQJDPSRHWU\ RYHUSRHPV DUHIURPWKHWKLUG7UDGLWLRQDOVRDWWULEXWHVWKHLQWURGXFWLRQRI$U\DQFXOWXUHLQWRWKHVRXWK WRWKH



3DJH

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¶VYHUVLRQRIWKH5DPD\DQDLVZULWWHQLQ KLJKO\YLJRURXV7DPLO 7DPLO7HOXJXDQG.DQQDGDKDGDFTXLUHGPXFKYRFDEXODU\IURP6DQVNULWEXWWKHFRQQHFWLRQVZHUHEHFRPLQJ ORRVHU6DQVNULWZRUNVVXFKDVWKRVHRI.DOLGDVDDQGWKH(SLFVZHUHDGDSWHGWR7HOXJXDQGPDGHDYDLODEOHWR SRSXODUDXGLHQFHV.DQQDGDKDGEHHQIDYRXUHGE\-DLQSDWURQDJHLQ0\VRUHEXWDJDLQWKHILUVWZULWWHQ .DQQDGDWH[WVDUHDGDSWDWLRQVRI6DQVNULWRULJLQDOV0DUDWKLDOWKRXJK,QGR(XURSHDQ GHYHORSHGVLPLODUO\ WKURXJKSDWURQDJHIURP


3DJH

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

7KHPHGLHYDOSHULRGF± %DJKGDG¶VGHFOLQHIURPWKHWHQWKFHQWXU\RQZDUGVDOORZHGWKH7XUNLFUXOHUVRI$IJKDQLVWDQWRJURZLQVHOI FRQILGHQFHDQGWKH\EHJDQWRPRXQWUDLGVLQWRQRUWKHUQ,QGLD0DKPXGRI*KD]QLPDGHVXFKUDLGVLQWKH QRUWKZHVWEHWZHHQDQGGHVWUR\LQJSDODFHVWHPSOHVDQGOLEUDULHV,QWKHWZHOIWKFHQWXU\ 0RKDPPHGRI*KRUDQQH[HG*KD]QLDQGLWVSRVVHVVLRQVLQ,QGLDDQGKLVJHQHUDOVHPXODWHG0DKPXGE\ GHVWUR\LQJEXLOGLQJVLPDJHVDQGWH[WVDVIDUDV%HQJDO+RZHYHU0RKDPPHG¶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¶V7HOXJX %DVDYD ,QWKHIRXUWHHQWKFHQWXU\WKLVZRUNZDVDGDSWHGLQWR.DQQDGDE\6XPDWLEKLPDRU %KLPDFDQGUD.DYL 3XUDQDVµDQFLHQWVWRULHV¶ ZHUHFRPSRVHGLQ.DQQDGDE\9LVKQXZRUVKLSSHUVDVZHOODVE\IROORZHUVRI %DVDYDDQGWKH6DQVNULW%KDJDYDWD3XUDQDZDVWUDQVODWHGLQWR.DQQDGDLQWKHVL[WHHQWKFHQWXU\6LQFHWKHQ PRVWRIWKHRWKHUPDMRU3XUDQDVKDYHEHHQWUDQVODWHGLQWR.DQQDGD+DVWLPDOOD¶V$GL3XUDQDLVD-DLQWH[WLQ .DQQDGDSURVHEXWHDFKRILWVVHFWLRQVEHJLQVZLWKD6DQVNULWYHUVHLGHQWLFDOZLWKWKHRSHQLQJYHUVHVRI -LQDVHQD¶V6DQVNULWYHUVLRQ7KH7DPLO3XUDQDVDUHRIWHQIDUPRUHFRPSOH[DQGVRSKLVWLFDWHGWKDQWKHLU 6DQVNULWFRXQWHUSDUWV7KH%DJDYDGDPD7DPLOYHUVLRQRIWKH%KDJDYDWD3XUDQDZDVWUDQVODWHGLQWR)UHQFK DWDQHDUO\GDWH7HOXJXYHUVLRQVRIWKH3XUDQDVGDWHEDFNWRWKHWKLUWHHQWKFHQWXU\+RZHYHU6DQVNULW UHWDLQHGLWVSODFHDWUR\DOFRXUWVDQGDPRQJRUWKRGR[+LQGXVFKRODUV0DMRUFRPPHQWDULHVZHUHZULWWHQRQ WKH'KDUPDVDVWUDV+LQGX/DZ E\+HPDGULLQWKHWKLUWHHQWKFHQWXU\NHHSLQJYHU\FORVHWRWKHQRUWKHUQ YHUVLRQV DQGRQWKH9HGDVE\6D\DQDLQWKHIRXUWHHQWKFHQWXU\$OWKRXJKUHJLRQDOODQJXDJHVZHUHGLYHUJLQJ DQGIORXULVKLQJWKHSRSXODWLRQRIWKHVXEFRQWLQHQWZDVEHJLQQLQJWRVKDUHDFRQVLGHUDEOHGHJUHHRIFXOWXUDO KRPRJHQHLW\ ,QWKHPDMRUVRXWKHUQNLQJGRPRI9LMD\DQDJDUDZDVIRXQGHGDQGUDSLGO\GRPLQDWHGWKHVRXWK,WVKRRN RIIERWKWKH'HOKL



3DJH

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± LQFRUSRUDWHG%KDNWLLQWRDQHZUHOLJLRQ6LNKLVP 2UWKRGR[,VODPZLWKGUHZLQWRDQLQWHOOHFWXDOpOLWHEXWWKH6XILVVKDUHGWKHSRSXODUVWDJHZLWK%KDNWL3HUVLDQ VWLOOGRPLQDWHGWKHFRXUWV 7KH0RJKXO(PSLUH ,Q%DEXUDGHVFHQGDQWRI7DPHUODQHZKRVHFODLPVWRNLQVKLSZLWKWKH0RQJRO*HQJKLV.KDQDUHWKH EDVLVIRUWKHWHUP0RJKXOHVWDEOLVKHGKLPVHOILQ$IJKDQLVWDQDQGDIWHUDIHZLQLWLDOUDLGVFRQTXHUHG'HOKLLQ +LVPHPRLUVZHUHODWHUWUDQVODWHGIURP7XUNLLQWR3HUVLDQDQGWKHQLQWR(QJOLVK%DEXU¶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± WRRNWKHUHYROXWLRQDU\VWHSRI WUDQVODWLQJWKH4X¶UƗ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¶VH[SUHVVFRPPDQG3HUVLDQDOVRJDYHULVHWR8UGXZKLFKLQIOXHQFHGERWK+LQGXVWDQLWKHYHUQDFXODU ODQJXDJHRIWKHQRUWKDQG+LQGL

7KH(XURSHDQSHULRGF± 7KH(XURSHDQVKDGJUDGXDOO\EHJXQWRYLHZLWKWKH$UDEVIRUWUDGHGRPLQDQFHE\WKHWKLUWHHQWKFHQWXU\ 0DUFR3RORYLVLWHGWKHVRXWKHUQ3DQG\DQNLQJGRPV1LFROR&RQWL$WKDQDVLXV1LNLWLQDQG'XDUWH%DUERVD WUDYHOOHGRYHUODQGWR$VLDDQG9DVFRGD*DPDRSHQHGWKHVHDURXWHLQ,QDGGLWLRQWRWKHVHWUDGHUV &DWKROLFPLVVLRQDULHVDUULYHGHVSHFLDOO\WKH3RUWXJXHVHZKRVRRQWUDQVODWHGWKH1HZ7HVWDPHQWLQWR3HUVLDQ ,QWKH%ULWLVK(DVW,QGLD&RPSDQ\ZDVLQFRUSRUDWHG²HVVHQWLDOO\WRWUDGHLQ(DVW,QGLDQVSLFHV²EXWLW VRRQFDPHWRH[HUFLVHFRQVLGHUDEOHSROLWLFDOSRZHULQ,QGLDDVDZKROH7KHQHHGIRUWUDQVODWLRQVRI,QGLDQ WH[WVZDVUHFRJQL]HGHDUO\RQE\&RPSDQ\DGPLQLVWUDWRUV0XVOLPODZKDGDOUHDG\EHHQVXPPDUL]HGLQD GLJHVWDWWKHRUGHURIWKH0RJKXOHPSHURU$XUDQJ]HE± DQGZDVXQLYHUVDOO\DFNQRZOHGJHGE\ ,QGLDQFRXUWV+LQGXODZDOWKRXJKPXFKROGHUKDGQHYHUEHHQV\VWHPDWLFDOO\FRGLILHG:DUUHQ



3DJH

+DVWLQJVWKH(DVW,QGLD&RPSDQ\¶V*RYHUQRU*HQHUDORI%HQJDOJDWKHUHGWRJHWKHUHPLQHQW+LQGXSXQGLWV DQGFRPPLVVLRQHGWKHPWRSUHSDUHDGLJHVWRI+LQGXODZIRUWKHFRXUWV7KLVKDGILUVWWREHWUDQVODWHGIURP 6DQVNULWLQWR3HUVLDQDQGWKHQIURP3HUVLDQLQWR(QJOLVKEHFDXVHQR(QJOLVKSHUVRQDV\HWNQHZ6DQVNULW ,QGLDQVFKRODUVZHUHLQLWLDOO\UHOXFWDQWWRWHDFK6DQVNULWWRWKH(XURSHDQV6LU:LOOLDP-21(6DMXGJHRIWKH 6XSUHPH&RXUWLQ&DOFXWWDHYHQWXDOO\PDQDJHGWRILQGDQRQ%UDKPLQPHGLFDOSUDFWLWLRQHUZKRDJUHHGWR WHDFKKLPEXWRQO\XQGHUWKHPRVWVWULQJHQWFRQGLWLRQV-RQHV¶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²UDWKHUWKDQFODVVLFDO*UHHNRU/DWLQPRGHOVZKLFKZRXOGKDYHEHHQDPRUH DSSURSULDWHEDVLVIRUFRPSDULVRQ²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…DQQXDOO\WRµWKHUHYLYDODQG LPSURYHPHQWRIOLWHUDWXUHDQGWKHHQFRXUDJHPHQWRIWKHOHDUQHG1DWLYHVRI,QGLDDQGIRUWKHLQWURGXFWLRQDQG SURPRWLRQRIDNQRZOHGJHRIWKHVFLHQFHVDPRQJWKHLQKDELWDQWVRIWKH%ULWLVK7HUULWRULHVLQ,QGLD¶6SHDU $WILUVWXQGHUWKHLQIOXHQFHRI%ULWLVKRULHQWDOLVWVWKLVOHGWRWKHSULQWLQJRIFODVVLFVDQGWKH WUDQVODWLRQRIPRGHUQZRUNVLQWR6DQVNULW+RZHYHULQWKH*RYHUQRU*HQHUDO%HQWLQFNLVVXHGD UHVROXWLRQGHFODULQJWKDWWKHIXQGVVKRXOGWKHUHDIWHUEHXVHGWRLPSDUWµNQRZOHGJHRI(QJOLVKOLWHUDWXUHDQG VFLHQFHWKURXJKWKHPHGLXPRIWKH(QJOLVKODQJXDJH¶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¶VHGXFDWLRQFKLOGPDUULDJHZLGRZUHPDUULDJHDQGFDVWH5DP0RKDQ52<SULQWHGWKHILUVW,QGLDQ QHZVSDSHUDQGDELOLQJXDO(QJOLVK%HQJDOLPDJD]LQH,QGLDQUHOLJLRQVDOVRUHJDLQHGFRQILGHQFHDQG 5DPDNULVKQDDVXFFHVVRUWRWKH%KDNWLWUDGLWLRQ LQVSLUHGKLVGLVFLSOH9LYHNDQDQGDWRIRXQGWKH5DPDNULVKQD 0LVVLRQZKLFKEHJDQWRSOD\DQLPSRUWDQWSDUWLQSXEOLVKLQJ+LQGXWH[WVLQ6DQVNULWZLWK(QJOLVKJORVVHV DQGGLVWULEXWLQJWKHPLQ,QGLDDQGDEURDGHVSHFLDOO\LQWKH8QLWHG6WDWHV3XUDQDVDQG8SDQLVKDGVZHUHDOVR WUDQVODWHGIRUH[DPSOHE\'XUJDSUDVDGLQWR+LQGL9HUVLRQVRI



3DJH

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

7KHPRGHUQSHULRGWRWKHSUHVHQW *RQGD¶VYROXPH+LVWRU\RI,QGLDQ/LWHUDWXUH FRQWDLQVLQQXPHUDEOHUHIHUHQFHVWRWUDQVODWLRQV EHWZHHQ,QGLDQODQJXDJHVDQGEHWZHHQWKHPDQG(QJOLVK:RUNVWUDQVODWHGLQFOXGH9HGLFWH[WVWKH+LQGX (SLFV3XUDQDVDQG8SDQLVKDGVDQGFODVVLFDO6DQVNULWGUDPD(QJOLVKSRHWU\E\.HDWVDQG7HQQ\VRQ 6KDNHVSHDUH¶VSOD\VDQGSRHPV%HQJDOLSOD\VSRHWU\DQGQRYHOV+LQGLDQG8UGXILFWLRQWKH*RVSHOVDQG RWKHU&KULVWLDQWH[WV$PHULFDQOLWHUDWXUHHVSHFLDOO\VKRUWVWRULHVDQGGUDPD(XURSHDQOLWHUDWXUH&HUYDQWHV 7ROVWR\,EVHQ²PRVWO\YLD(QJOLVKWUDQVODWLRQV +LQGL8UGXDQGPRUHUHFHQWO\3XQMDELDUHEHFRPLQJLPSRUWDQWLQWHUPHGLDULHVLQWKHWUDQVODWLRQSURFHVVERWK IURP(QJOLVKDQGRWKHU(XURSHDQODQJXDJHVDQGIURPWKHOHVVZLGHVSUHDGORFDOODQJXDJHV7KHGHDUWKRI FKLOGUHQ¶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¶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µWKHVLWXDWLRQLVMXVWWKHUHYHUVH7UDQVODWLRQDQG7UDQVODWLRQ6WXGLHVKLWKHUWRKDYHUHPDLQHGD PDUJLQDOLVHGDIIDLU¶$OWKRXJKWKHJHQHUDOVLWXDWLRQLVDV0RKDQW\GHVFULEHVLWWKHUHDUHVRPHUHDVRQVIRU FKHHU7KH6FKRROIRU7UDQVODWLRQ6WXGLHVDWWKH8QLYHUVLW\RI+\GHUDEDGQRZKDVDWUDLQLQJSURJUDPPHIRU WUDQVODWRUVDQGWKH&HQWUDO,QVWLWXWHRI(QJOLVKDQG)RUHLJQ/DQJXDJHVLQ+\GHUDEDGDQQRXQFHGWKDWLWZDV VHWWLQJXSD&HQWUHIRU7UDQVODWLRQDQG,QWHUSUHWDWLRQLQ$&HQWUHIRU/LWHUDU\7UDQVODWLRQZDVVHWXSLQ 1HZ'HOKLZLWKDQDFDGHPLFFDPSXVLQ*RDLQ



3DJH

$QXYDGDMRXUQDOSXEOLVKHGLQ1HZ'HOKLLVGHGLFDWHGWRWKHVWXG\RIWUDQVODWLRQ 7KH,QGLDQ6FLHQWLILF7UDQVODWRUV$VVRFLDWLRQEDVHGLQ1HZ'HOKLLVDPHPEHURI),7WKH,QWHUQDWLRQDO )HGHUDWLRQRI7UDQVODWRUV7KH6DKLW\D$NDGHPLDOVRLQ'HOKLKDVSXEOLVKHGDGLUHFWRU\RIWUDQVODWRUV

)XUWKHUUHDGLQJ 'DVJXSWD'LPRFN'XGOH\DQG/DQJ*RQGD+XPSKUH\V-HVXGDVDQ0XNKHUMHH 1LUDQMDQD

5$0(6+.5,6+1$0857+<

%LRJUDSKLHV &$5(<:LOOLDP± %RUQLQ1RUWKDPSWRQVKLUH(QJODQG&DUH\WXUQHG%DSWLVWLQDQGVHUYHG IRUVHYHUDO\HDUVDVDSDVWRULQDGGLWLRQWRWHDFKLQJLQWKHORFDOVFKRRODQGSUDFWLVLQJKLVVKRHPDNLQJWUDGH 0RYLQJWR/HLFHVWHULQKHSXEOLVKHGDSDPSKOHWRQWKHHYDQJHOLFDOREOLJDWLRQVRI&KULVWLDQVZKLFKOHG KLPZLWKRWKHUVWRIRXQGWKH(QJOLVK%DSWLVW0LVVLRQDU\6RFLHW\+HKLPVHOIEHFDPHRQHRIWKH6RFLHW\¶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± %RUQRI:HOVKSDUHQWV6LU:LOOLDP-RQHVVWXGLHGDW+DUURZDQG2[IRUG ± DQGOHDUQHG/DWLQ*UHHN+HEUHZ$UDELFDQG3HUVLDQ%\KLVGHDWKKHKDGOHDUQHGODQJXDJHV LQFOXGLQJ&KLQHVH$IWHUVHYHUDO\HDUVLQWUDQVODWLRQDQGDFDGHPLFZRUNILQDQFLDOQHFHVVLW\OHGKLPWRWKH VWXG\RIODZDQGKHZDVFDOOHGWRWKHEDULQ+HDOVRFRQWLQXHGKLVRULHQWDOVWXGLHVDQGZURWHKLV3HUVLDQ *UDPPDULQ,QKHWUDQVODWHGVHYHQSUH,VODPLFRGHV0X¶DOODTDDWIURP$UDELF+HZDVNQLJKWHG LQDQGVHQWWR&DOFXWWDDVMXGJHRIWKHVXSUHPHFRXUW,QKHIRXQGHGWKH$VLDWLF6RFLHW\RI%HQJDO WRHQFRXUDJH2ULHQWDOVWXGLHV+HOHDUQHG6DQVNULWLQRUGHUWRSUHSDUHDGLJHVWRI+LQGXDQG0XVOLPODZ ZKLFKZDVQHYHUFRPSOHWHG+RZHYHUKHSXEOLVKHGKLV,QVWLWXWHVRI+LQGX/DZLQDQGWKH 0XKDPPDGDQ/DZRI,QKHULWDQFHLQ,QKLVSUHVLGHQWLDOVSHHFKWRWKH$VLDWLF6RFLHW\FRQWDLQHGKLV VSHFXODWLRQVRQWKHFRPPRQDQFHVWU\RI6DQVNULWDQG*UHHNRQHRIWKHHDUOLHVWDQGPRVWLQIOXHQWLDOWH[WVRQ FRPSDUDWLYHOLQJXLVWLFV .85$0$-,9$$'± $VWXGHQWRI+LQD\DQD%XGGKLVPDW.DVKJDULQ&KLQD.XUDPDMLYDZDV RUGDLQHGDVDPRQNDWWKHDJHRI+HODWHUFRQYHUWHGWR0DKD\DQD%XGGKLVPLPSUHVVHGWKHLPSHULDOIDPLO\ ZLWKKLVOHDUQLQJDQGZDVHQWUXVWHGZLWKKHDGLQJDIDPRXVVFKRRORIWUDQVODWRUV:HOONQRZQIRUKLV HQF\FORSHGLFNQRZOHGJHRI+LQGXDQG%XGGKLVWSKLORVRSK\LQSDUWLFXODUKHWUDQVODWHGWKH/LIHRI1DJDUMXQD WKH%XGGKLVWSKLORVRSKHU DPRQJRWKHUWH[WVDQGZDVODUJHO\UHVSRQVLEOHIRUWKHSURSDJDWLRQRI%XGGKLVW LGHDVLQ&KLQD 52<5DP0RKDQ± %RUQLQD%HQJDODOUHDG\XQGHU%ULWLVKUXOH5DP0RKDQ5R\FDPHRID SURVSHURXV%UDKPLQIDPLO\+LVWUDYHOVRXWVLGH%HQJDOHQFRXUDJHGKLPWROHDUQ6DQVNULW3HUVLDQDQG$UDELF WRZKLFKKHODWHUDGGHG+HEUHZ*UHHNDQG(QJOLVK%HQJDOLDQG+LQGLZHUHKLVQDWLYHODQJXDJHV+LV UHOLJLRXVVWXGLHVOHGKLPWRFULWLFL]H+LQGXVHFWDULDQLVPDQGVXSHUVWLWLRQXUJLQJDUHWXUQWRDPRQRWKHLVP EDVHGRQWKH9HGDVDQG8SDQLVKDGVZKLFKKHWUDQVODWHGIURP6DQVNULWLQWR+LQGL%HQJDOLDQG(QJOLVK7KH WUDQVODWLRQVDQJHUHGWKHRUWKRGR[WUDGLWLRQEXWOHGWRKLPEHLQJHOHFWHGWRKRQRUDU\



3DJH

PHPEHUVKLSRIWKH6RFLpWp$VLDWLTXHLQ+HDOVRSXEOLVKHGVRPHZRUNVRQWKHWHDFKLQJVRI&KULVW$V IRXQGHUDQGHGLWRURIWZRRI,QGLD¶VHDUOLHVWQHZVSDSHUVKHXUJHGWKHJRYHUQPHQWWREDQVXWWHHZKLFKLWGLGLQ ,QKHIRXQGHGWKH$QJOR+LQGX6FKRRODQGLQWKH9HGDQWD&ROOHJHEXWRSSRVHGDWWHPSWVWR HQIRUFHWKH6DQVNULWWUDGLWLRQSUHIHUULQJWRHVSRXVHDPRUH:HVWHUQFXUULFXOXP 6+$+:$/,$//$+',+/$:,±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¶V ZLVKHV:DOL$OODKPDGHWKHGDQJHURXVSLOJULPDJHWRWKH+RO\&LWLHVRI0HFFDDQG0HGLQDEHWZHHQDQG ZKHUHKHUHFHLYHGWHDFKLQJVDQGLQVWUXFWLRQZKLFKRSHQHGKLVH\HVWRWKHGLYHUVLW\RI,VODPLFRSLQLRQV 'XULQJKLVVWD\LQWKH+RO\&LWLHVKHWUDQVODWHGD3HUVLDQWH[Wµ5HIXWDWLRQRIWKH6KL¶LWHV¶ LQWR$UDELF+LV DQQRWDWHG3HUVLDQYHUVLRQRIWKH4XU¶ƗQZDVEHJXQEHIRUHDQGZDVQRWFRPSOHWHGXQWLO+HODWHU FRPSLOHGDVHWRILQVWUXFWLRQVLQ3HUVLDQIRUVFKRODUVDWWHPSWLQJWRWUDQVODWHWKH4XU¶ƗQ+HDOVRWUDQVODWHGDQ $UDELFJUDPPDULQWR3HUVLDQYHUVHF± IRUWKHEHQHILWRIRQHRIKLVVRQV8QWLOUHFHQWO\KLV FRQWULEXWLRQWR,VODPLFWKRXJKWKDGEHHQXQGHUHVWLPDWHGE\ERWK:HVWHUQDQG,VODPLFVFKRODUVZKRWHQGHGWR SD\IDUPRUHDWWHQWLRQWRKLVSROLWLFDOYLHZV 7$*25(5DELQGUDQDWK±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± WUDQVODWHGLQWR(QJOLVKLQ+HZDVDOVRD FRPSRVHUVHWWLQJPDQ\RIKLVSRHPVWRPXVLFDQGDSDLQWHURIWDOHQW,QKHIRXQGHGDVFKRRODW 6DQWLQLNHWDQZKHUHKLVIDWKHUKDGLQLWLDWHGDQHGXFDWLRQFHQWUHLQDQGDOVRLQDXJXUDWHGWKH9LVYD %KDUDWL8QLYHUVLW\WKHUHLQ+LVVRQJµ2XUJROGHQ%HQJDO¶KDVEHFRPHWKHQDWLRQDODQWKHPRI %DQJODGHVK :DOL$OODK'LKODZL6HH6+$+:$/,$//$+',+/$:, 5$0(6+.5,6+1$0857+<

,WDOLDQWUDGLWLRQ $VDODQJXDJHGLUHFWO\GHYHORSHGIURP/DWLQ,WDOLDQKDVKDGWRVWULYHIRUPDQ\FHQWXULHVLQ



3DJH

RUGHUWRDFTXLUHDQDXWRQRPRXVVWDWXV7KHSURFHVVRILGHQWLILFDWLRQFDUULHGRXWLQSDUDOOHOZLWKRWKHU (XURSHDQODQJXDJHVWRRNVHYHUDOFHQWXULHV7KHJHRJUDSKLFDOIHDWXUHVDQGWKHSROLWLFDOYLFLVVLWXGHVRIWKH FRXQWU\IRVWHUHGDIUDJPHQWDWLRQRIUHJLRQDOGLDOHFWVZLWKGLVWLQFWLYHSKRQHWLFDQGOH[LFDOWUDLWVJURZLQJRXW IURPDFRPPRQURRWVRFDOOHG9XOJDU/DWLQ,WZDVQRWXQWLOWKHVL[WHHQWKFHQWXU\WKDWDQLGHQWLILDEOH,WDOLDQ ODQJXDJHILQDOO\HPHUJHGDQGZDVVDQFWLRQHGDVDQRIILFLDODFFHSWHGVWDQGDUG

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¶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± LQKLV$PPDHVWUDPHQWLGHJOL$QWLFKL7HDFKLQJVRIWKH$QFLHQWV OLVWVLPSRUWDQWH[DPSOHVIURPFODVVLFDO UHOLJLRXVDXWKRUVLQRUGHUWRUHLQIRUFHKLVWHQHWWKDWµLQOLVWHQLQJDQGLQUHDGLQJZHVKDOODWWHQGPRUHWRWKH PHDQLQJWKDQWRWKHZRUGV¶/DSXFFL±WUDQVODWHG 7KLVWUDGLWLRQWKULYHGWKURXJKRXWWKHIRXUWHHQWK DQGILIWHHQWKFHQWXULHVDQGFRQWULEXWHGWRZLGHQLQJWKHVSHFWUXPRIFODVVLFDOWH[WVWUDQVODWHGEHVLGHVWKH SKLORVRSKLFDOKLVWRULFDOMXULGLFDODQGUKHWRULFDOZRUNVWKHUHZDVLQWKLVSHULRGDGHILQLWHHPSKDVLVRQ UHOLJLRXVWUDQVODWLRQV 7KHTXDOLW\RIWKHZRUNSURGXFHGKRZHYHUGHWHULRUDWHGVWHDGLO\EHFDXVHODWHU WUDQVODWRUVRIWHQSODJLDUL]HGRUWDPSHUHGZLWKHDUOLHUUHQGLWLRQVWKXVEUHDNLQJWKHVW\OLVWLFXQLW\RIWKHZRUNV $QRWDEOHH[FHSWLRQLVDVHULHVRIWUDQVODWLRQVRIWKH%LEOHLQFHQWUDO,WDOLDQYHUQDFXODUPDGHE\DQRQ\PRXV PRQNVDPRQJZKRPZDV)UD'RPHQLFR&DYDOFD± 6XFKLVWKHTXDOLW\RIWKHLUIRXUWHHQWKFHQWXU\ WH[WVWKDWZKHQ1LFFROz0DOHUPLZDVHGLWLQJWKHILUVWSULQWHG%LEOHLQ,WDOLDQLQKHFROOHFWHGDQGUHIHUUHG WRWKHVHWH[WVHYHQWKRXJKWKH\ZHUHDOUHDG\PRUHWKDQDFHQWXU\ROG $URXQG5DLPEDXWGH9DTXHLUDVD3URYHQoDOWURXEDGRUZURWHDSRHPLQZKLFKD*HQRHVHODG\DQVZHUV LQKHURZQYHUQDFXODUWRWKHSOHDVRIKHU3URYHQoDOVXLWRU7KLVPD\EHFRQVLGHUHGWKHILUVWRFFXUUHQFHRIDQ ,WDOLDQGLDOHFWLQSRHWU\7UDQVODWLRQSOD\HGDFUXFLDOUROHLQHVWDEOLVKLQJDSRHWLFDOWUDGLWLRQLQ



3DJH

VHYHUDOSDUWVRI,WDO\-DFRSRGD/HQWLQLILUVWKDOIRIWKHWKLUWHHQWKFHQWXU\ LVDPRQJWKHHDUOLHVWUHFRUGHG ,WDOLDQPRUHSUHFLVHO\6LFLOLDQ SRHWVDQGRQHRIKLVILUVWFRPSRVLWLRQVµ0DGRQQDGLUYLYRJOLR¶ LVD WUDQVODWLRQIURP)ROTXHWGH0DUVHLOODIRXQGLQJDWUDGLWLRQWKDWVWRRGILUPIRURYHUDFHQWXU\ 'DQWH$OLJKLHUL± IROORZLQJWKHDFFHSWHGPHGLHYDOQRWLRQVWURQJO\DVVHUWHGWKHLPSRVVLELOLW\RI SRHWLFDOWUDQVODWLRQ+LV&RQYLYLR± FRQWDLQVWKHILUVW,WDOLDQUHIHUHQFHWRWKHWKHRU\RIWUDQVODWLRQ µ$Q\WKLQJKDUPRQL]HGWKURXJKWKHERQGRIWKH0XVHVFDQQRWEHWUDQVPXWHGIURPLWVLGLRPLQWRDQRWKHU ZLWKRXWORVLQJDOOLWVVZHHWQHVVDQGKDUPRQ\¶WUDQVODWHG 'HVSLWHWKHFDWHJRULFDOWRQHRIWKLVVWDWHPHQW 'DQWHKLPVHOIRIWHQWULHGKLVKDQGDWWKHDOOHJHGO\LPSRVVLEOHWDVNRIWUDQVODWLQJ/DWLQRU3URYHQoDOSRHWVLQWR WKH)ORUHQWLQHGLDOHFWIRULQFOXVLRQLQKLVZRUNV7KHVDPHSUDFWLFHZDVIROORZHGE\%RFFDFFLRDQG3HWUDUFK

+XPDQLVPDQGWKH5HQDLVVDQFH±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



3DJH

SHRSOH7KLVLVH[HPSOLILHGLQWKHWLWOHSDJHRIWKHILUVWZRUNRQPDWKHPDWLFVWUDQVODWHGLQ,WDO\E\WKHZHOO NQRZQPDWKHPDWLFLDQ1LFFROz7DUWDJOLDDOLDV1LFFROz)RQWDQD± µWUDQVODWHGIRUFRPPRQ FRQYHQLHQFHDQGXVHIXOQHVV,WLVVRFOHDUWKDWHYHU\DYHUDJHXQLQIRUPHGDQGLQH[SHUWPLQGZLOOEHDEOHWR XQGHUVWDQGLW¶7DUWDJOLDWUDQVODWHG 7KLVDWWLWXGHZDVYHU\ZLGHVSUHDGDQGZHILQGVLPLODUVWDWHPHQWV LQ0DHVWUR3LHWUR0DULQRGD)ROLJQR¶VSUHIDFHWRKLVWUDQVODWLRQ RIWKHZRUNE\µ3DOODGLXVZRUWK\DQG DQFLHQWZULWHURQDJULFXOWXUHWUDQVODWHGLQWRWKHYHUQDFXODUVRWKDWWKRVHZKRGRQ¶WNQRZ/DWLQPD\EHQHILW HQMR\DQGJDLQXVHIXOLQIRUPDWLRQIURPKLVZRUN¶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¶VGLVFXVVLRQGHDOWZLWKWUDQVODWLRQVIURP*UHHNLQWR/DWLQLWZDVUHOHYDQWDOVRWRWKHYHUQDFXODUDQG JUHDWO\LQIOXHQFHGVXEVHTXHQWJHQHUDWLRQVRIWUDQVODWRUV7KHPDLQWKUXVWRIKLVWKHVLVZDVWKDWWKHRULJLQDO ZRUNPXVWEHSURSHUO\XQGHUVWRRG7KHWUDQVODWRUKDGWRKDYHSHUIHFWNQRZOHGJHRIERWKWKHVRXUFHODQJXDJH DQGWKHWDUJHWODQJXDJHQRWRQO\DVUHJDUGVWKHLUV\QWD[DQGOH[LVEXWDOVRWKHLUUKHWRULFDOSDWWHUQV,QGHHGWKH DXWKRU¶VDFWXDOVW\OHZDVWREHUHSURGXFHGWRJHWKHUZLWKWKHUK\WKPRIWKHVHQWHQFH)ROHQD 7KLV LQWHUHVWLQWUDQVODWLRQDQGWKHWKHRUHWLFDOLVVXHVLWUDLVHGEHFDPHDQLQFUHDVLQJO\LPSRUWDQWWRSLFLQ5HQDLVVDQFH ZULWLQJVZKLFKOHGWRJUHDWHUVRSKLVWLFDWLRQDOVRLQWUDQVODWLRQFULWLFLVP

/DWH5HQDLVVDQFHDQGEDURTXH± (DUO\+XPDQLVPGLVWLQFWO\/DWLQRSKLOHLQQDWXUHJDYHZD\HYHQWXDOO\WRZKDWFRXOGEHFDOOHGYXOJDU +XPDQLVP7KHGLJQLW\RIWKHYXOJDUWRQJXHZDVDOPRVWXQLYHUVDOO\UHFRJQL]HGE\WKH,WDOLDQLQWHOOHFWXDOVDQG VFLHQWLVWVRIWKHWLPHWKDQNVDOVRWRWKHLQIOXHQFHRI%HPER¶VZRUN3URVHGHOODYROJDUOLQJXD /DWLQ KRZHYHUZDVQRWGLVFDUGHGE\WKH5RPDQ&KXUFKZKLFKLQGLFDWHGDFRQVHUYDWLYHDWWLWXGHLQDFKDQJLQJ ZRUOG7KHRXWFRPHRIWKH&RXQFLORI7UHQW± ZKRVHLQIOXHQFHZDVIHOWIRUPDQ\GHFDGHVLQ,WDO\ ZDVDILHUFHGHWHUPLQDWLRQWRGHIHQG&KXUFKLGHRORJ\WKH+RO\,QTXLVLWLRQSURYLGLQJWKHPHDQVE\ZKLFKWKH &KXUFKZDVDEOHWRFRQWUROWKHVSUHDGRILGHDV 'XULQJWKLVWLPHSULQWLQJIORXULVKHGE\QRPDMRUWRZQLQ,WDO\ZDVZLWKRXWLWVSULQWHUV3ULRUWR SXEOLFDWLRQKRZHYHUHYHU\ERRNZDVVXEMHFWWRDSSURYDOE\WKHUHOLJLRXVDXWKRULWLHV,IFRQVLGHUHGXQVXLWDEOH IRUSXEOLFDWLRQLWZDVSODFHGRQDOLVWNQRZQDVWKHµ,QGH[RIEDQQHGERRNV¶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



3DJH

RI1DYLJD]LRQLHYLDJJLDODUJHFROOHFWLRQRISDSHUVE\6SDQLVKDQG3RUWXJXHVHWUDYHOOHUVWUDQVODWHGE\ *LRYDQQL%DWWLVWD5DPXVLRRI7UHYLVR± 0DQ\FODVVLFDODXWKRUVZHUHDOVRWUDQVODWHGRQHRIWKH PRVWSUROLILFWUDQVODWRUVRIZRUNVIRUWKHWKHDWUHGXULQJWKHSHULRGZDV/RGRYLFR'ROFHIURP9HQLFH± $QHZIHDWXUHRIWUDQVODWLRQZDVWKHFRQVLGHUDEOHDUWLVWLFHIIRUWLQYROYHG,QRUGHUWRUHILQHWKHLUOLWHUDU\VNLOOV WUDQVODWRUVIUHTXHQWO\FRPSHWHGDJDLQVWWKHRULJLQDOZKLFKQDWXUDOO\PHDQWPRYLQJDZD\IURPWKHPRGHORI WUDQVODWLRQIROORZHGE\WKH+XPDQLVWSKLORORJLVWVRIWKHHDUOLHUSHULRG7KHUHZHUHH[SHULPHQWDODUWLVWLF WUDQVODWLRQVLQXQUK\PHGKHQGHFDV\OODEOHVLQWHU]DULPDLQRFWDYHHWFILUVWIROORZLQJ3HWUDUFKDQVW\OLVWLF PRGHOVDQGODWHUEDURTXHDQGPDQQHULVWRQHV %HWZHHQDQG9LUJLO¶V$HQHLGZDVWUDQVODWHGE\WKHIDPRXVPDQRIOHWWHUV$QQLEDO&DUR± EHFRPLQJZKDWPD\EHFRQVLGHUHGWKHILUVWJUHDWZRUNRIWUDQVODWLRQSURGXFHGLQ,WDO\,WLVVWLOOVWXGLHGDW VFKRROWRGD\DQGLVLQPDQ\ZD\VDQXQULYDOOHGFODVVLF&DUR¶V(QHLGHZKLOHH[FHOOHQWIURPDSRHWLF VWDQGSRLQWLVOLNHDOOWKHZRUNVRILWVWLPHIDUUHPRYHGIURPWKHRULJLQDO7KHYLHZVRIWUDQVODWRUSRHWVVXFK DV&DURIRUZKRPWUDQVODWLRQPHDQWWKHFUHDWLRQRIDWH[WZLWKWKHVDPHYDOXHDVWKHRULJLQDOWKRXJKGLVWDQW IURPLWEHFDPHWKHQRUPIRUSRHWLFWUDQVODWLRQXQWLO5RPDQWLFLVPWKHVHYLHZVDUHVWLOOKHOGWRGD\E\VRPH SUDFWLWLRQHUV 2QHZRUNZKLFKVWDQGVRXWDVDFODVVLFRIQRQOLWHUDU\WUDQVODWLRQLV7DFLWXV¶$QQDOHVWUDQVODWHGE\WKH )ORUHQWLQHVFKRODU%HUQDUGR'DYDQ]DWL±

)URPEDURTXHWRWKH$JHRI(QOLJKWHQPHQW±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q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pQHORQDIWHU WKHUHZHUHGR]HQVRIUHSULQWVRI/HDYYHQWXUHGL7HOHPDFRILJOLRORG¶8OLVVH2WKHUIDYRXULWHVLQFOXGHG $UQDXG3UpYRVW5LFFRERQL/HVDJH0DUPRQWHO5RXVVHDX/D3ODFH)ORULDQDQG9ROWDLUH7KHVH)UHQFK DXWKRUVRIWHQWKHPVHOYHVWUDQVODWRUVIURP(QJOLVKSURYLGHGDQLPSRUWDQWOLQNEHWZHHQ,WDOLDQDQGDQJORSKRQH FXOWXUH/D3ODFHIRUH[DPSOHZDVUHVSRQVLEOHIRUEULQJLQJ)LHOGLQJ¶V7RP-RQHVDQG-RVHSK$QGUHZVWR ,WDO\DQG5LFFRERQLKLV$PHOLDZKLOH3UpYRVWEURXJKW5LFKDUGVRQ¶VIDPRXVHSLVWRODU\QRYHOV3DPHOD &ODULVVDDQG6LU7KRPDV*UDQGLVRQ 'XULQJWKHODWWHUKDOIRIWKHHLJKWHHQWKFHQWXU\)UHQFKFXOWXUHZDVVSUHDGIXUWKHUE\WKHWUDQVODWLRQRIZRUNV RQSKLORVRSK\VFLHQFHHFRQRPLFVDQGSROLWLFVIRXUDUHDVZKLFKZHUHRIFRXUVHLQVHSDUDEOHLQWKHZULWLQJVRI WKH)UHQFKSKLORVRSKHV7KHPDQ\WUDQVODWLRQVXQGHUWDNHQILUVWIURP9ROWDLUH¶VZRUNVDQGODWHUIURPWKRVHRI 'LGHURWDQG'¶$OHPEHUW



3DJH

KDGDSURIRXQGHIIHFWRQODWHHLJKWHHQWKFHQWXU\,WDO\VLJQLILFDQWO\EURDGHQLQJWKHFRXQWU\¶VFXOWXUDOKRUL]RQV 7KHWUDQVODWRULQ,WDO\QRZKDGOLWWOHLQFRPPRQZLWKWKHVFKRODUFOHUJ\PDQILJXUHRIWKHSUHYLRXVHUDDWOHDVW DVIDUDVWUDQVODWLRQIURP)UHQFKZDVFRQFHUQHG$V)HUUDULSRLQWVRXWZLWKUHIHUHQFHWRWUDQVODWLRQRI)UHQFK WUDJLFWKHDWUHµ(YHU\RQHWUDQVODWHGUHQRZQHGDXWKRUVDQGXQNQRZQGLOHWWDQWHVZULWHUVRIWUDJHG\RIFRPHG\ DQGRIRSHUDOLEUHWWRVO\ULFSRHWVGLGDFWLFSRHWVDQGGLDOHFWSRHWVSULQWHUVDQGMRXUQDOLVWVXQLYHUVLW\ SURIHVVRUVVHPLQDU\WHDFKHUVDQGVFKRROWHDFKHUVZRPHQQREOHVDQGGLSORPDWVWKHRORJLDQVOLEUDULDQVFLYLO VHUYDQWVDGYHQWXUHUVHYHQGRFWRUVDQGVROGLHUV$QGWKLVOLVWLQFOXGHVRQO\WKHWUDQVODWRUVZKRVHZRUNZDV SULQWHG,IPDQXVFULSWVDQGELEOLRJUDSKLFDOUHIHUHQFHVZHUHDOVRWDNHQLQWRDFFRXQWRWKHUQDPHVZRXOGEH DGGHGVXFKDVWKDWRIWKHLQIDPRXV&DVDQRYD¶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²JHQHUDOO\IDPRXVPHQRIOHWWHUVDQGDFDGHP\PHPEHUVXQOLNHWKRVHZRUNLQJIURP)UHQFK WHQGHGWRKDYHVLPLODUEDFNJURXQGV,QGHHGWKHLUWDVWHVDQGDPELWLRQVUHIOHFWHGWKHLGHDORIWKHVL[WHHQWK FHQWXU\UHOLJLRXVLQWHOOHFWXDO1RQHWKHOHVVWKHLUDWWLWXGHWRZDUGVWKHVRXUFHWH[WGLIIHUHGVRPHZKDWIURPWKDW RIHDUOLHUWUDQVODWRUV$FFRUGLQJWR)HUUDULµ7KHXQOLPLWHGIUHHGRPRIWKHVHYHQWHHQWKFHQWXU\WUDQVODWRUVZDV FULWLFL]HGSDUWLFXODUO\$QQLEDO&DURIRUKLVIDPRXVWUDQVODWLRQRI7KH$HQHLG5HVSHFWIRUWKHVRXUFHWH[W EHJDQWREHFRPHWKHQRUPYHUVHWUDQVODWLRQEHLQJSUHIHUUHGRYHUSURVHWUDQVODWLRQ)URPRQHVSHFLDOO\ OLWHUDU\WUDQVODWLRQPRYHGFORVHUWRWKHRULJLQDO¶)HUUDUL[LLWUDQVODWHG 7KHWUDQVLWLRQWRZDUGVDPRUHPRGHUQDSSURDFKWRWUDQVODWLRQDQGWUDQVODWLRQWKHRU\LVZHOOUHSUHVHQWHGE\ 0HOFKLRUUH&(6$5277,± ZKRSURGXFHGWZRYHUVLRQVRI+RPHU¶V,OLDGRQHLQYHUVHDQGRQHLQ SURVHµRQHWROHWSHRSOHHQMR\+RPHURQHWROHWWKHPJHWWRNQRZKLP¶&HVDURWWLWUDQVODWHG +H ZURWHDORQJHVVD\WRMXVWLI\KLVFKRLFHDQGDQRWKHURQHWRJRZLWKKLVWUDQVODWLRQVRI'HPRVWKHQHV¶ZRUNVLQ ZKLFKKHHPSKDVL]HGWKHWHQVLRQLPSOLHGLQWUDQVODWLRQZRUNDQGWKHFULWLFDODQGDUWLVWLFVRSKLVWLFDWLRQDQG DJLOLW\UHTXLUHGRIDWUDQVODWRULQRUGHUWRµUHVSHFWWKH*HQLXVRIKLVODQJXDJHDQGOHWLWZDONDVLWZHUHQLPEO\ DQGIUXLWIXOO\RQDJHRPHWULFOLQHEULGJLQJWZRFOLIIV¶&HVDURWWLWUDQVODWHG

)URP5RPDQWLFLVPWRQHRSRVLWLYLVP±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sOSXEOLVKHGLQ%LEOLRWHFD,WDOLDQDLQ-DQXDU\ XQGHUWKHWLWOHµ6XOODPDQLHUDHO¶XWLOLWjGHOOHWUDGX]LRQL¶2QWKH



3DJH

PDQQHUDQGXVHIXOQHVVRIWUDQVODWLRQV ,QWKLVDUWLFOHZKLFKSUDLVHG9LQFHQ]R0RQWL¶VWUDQVODWLRQRIWKH,OLDG DQGWKHH[SUHVVLYHQHVVRIWKH,WDOLDQODQJXDJHVKHXUJHG,WDOLDQVWRXQGHUWDNHWKHWUDQVODWLRQRIZRUNVRI PRGHUQ(XURSHDQOLWHUDWXUH(YHU\GD\ODQJXDJHVKHFODLPHGZDVIDUVXSHULRUWRWKDWOHDUQHGIURPERRNV RSHQLQJXSWRQHZODQJXDJHVPHDQWHQULFKLQJWKHH[LVWLQJYRFDEXODU\,Q0DGDPHGH6WDsO¶VYLHZLPLWDWLRQ RIWKHFODVVLFVVKRXOGQRWEHVXEVWLWXWHGZLWKLPLWDWLRQVRIFRQWHPSRUDU\ZRUNVFRQWDFWEHWZHHQOLWHUDWXUHV DQGFXOWXUHVZDVXVHIXODERYHDOOIRUEURDGHQLQJPLQGVDQGGHYHORSLQJNQRZOHGJH7KHDUWLFOHDOVRFULWLFL]HG WKH,WDOLDQFXOWXUHRIWKHWLPHDVEHLQJWRWDOO\GHYRLGRIPRGHUQLW\GRPLQDWHGDVLWZDVE\REVWLQDWHQRVWDOJLFV RUE\PHQRIOHWWHUVZKRFDUHGRQO\IRUWKHVRXQGVRIZRUGVDQGQRWWKHLGHDVWKH\FRQWDLQHG 7KHUHDFWLRQWRWKLVDUWLFOHSDUWLFXODUO\WRLWVFULWLFLVPRI,WDO\¶VPHQRIOHWWHUVPHUHO\VHUYHGWRILUHWKHDJH ROGGHEDWHRQWKHVXSHULRULW\RIWKHFODVVLFVRYHUPRGHUQZULWLQJLPLWDWLRQRYHURULJLQDOLW\ODERUOLPDHRYHU DUWLVWLFJHQLXVDGHEDWHZKLFKKHOG,WDOLDQLQWHOOHFWXDOV¶DWWHQWLRQIUXLWOHVVO\IRUGHFDGHVWRFRPH0DGDPHGH 6WDsO¶VDUWLFOHGLGQRWVLJQLILFDQWO\DIIHFWWKHTXDQWLW\RIWUDQVODWLRQRXWSXWFRPSDUHIRUH[DPSOHWKHSRHWU\ FROOHFWLRQ3DUQDVR6WUDQLHURRIDQGWKDWRIQLQHWHQWKVRIWKHWRWDOQXPEHURISDJHVWUDQVODWHGDUH VWLOOGHGLFDWHGWR*UHHN/DWLQDQG+HEUHZ 7KHVXEVHTXHQWLQFUHDVHZDVGXHWRWKHSURIRXQGFKDQJHVWKDWKDG WDNHQSODFHGXULQJWKHSUHYLRXVSHULRGQDPHO\WKHJURZWKLQUHDGHUVKLSDQGWKHLQFUHDVLQJLPSRUWDQFHRI (XURSHDQQDWLRQDOODQJXDJHVLQDOODUHDVRIOLIH 6RPHRULJLQDOLGHDVDERXWWUDQVODWLRQLQWKLVSHULRGUXQQLQJDJDLQVWWKHJUDLQRI0DGDPHGH6WDsO¶VDUJXPHQW ZHUHH[SUHVVHGE\*LDFRPR/HRSDUGL±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µDGG EHDXW\¶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± SRHW DQGSDWULRWZDVWKHILUVWDQGSHUKDSVWKHJUHDWHVWWUDQVODWRURI6KDNHVSHDUHLQKLVFHQWXU\'XUDQWL 7KHHDUO\DQGVXFFHVVIXOWUDQVODWLRQVE\'RPHQLFR&HWWL± RIVRPHRI1LNRODL.DUDP]LQ¶VSRHWU\ DQGSURVHWRJHWKHUZLWKWKH6DJJLRGLSRHVLHUXVVHFRQGXHRGLWHGHVFDHLQJOHVH E\WKH*HQRHVH QREOHPDQ*LURODPR2UWL± VLJQDOOHGWKHVWDUWRIGLUHFWWUDQVODWLRQIURP5XVVLDQZLWKRXW)UHQFKDV DPHGLDWLQJODQJXDJH)RUPRUHWKDQKDOIDFHQWXU\KRZHYHUWKHVHSLRQHHUVZHUHWKHRQO\RQHVZRUNLQJLQ WKLVDUHD :KLOHWUDQVODWLRQVIURP)UHQFKFRQWLQXHGWKURXJKRXWWKHQLQHWHHQWKFHQWXU\YHU\PXFKDVEHIRUHWKHUHZDV FRQVLGHUDEO\OHVVWUDQVODWLRQIURPHLWKHU*HUPDQRU6SDQLVK1RQHWKHOHVVDSDJHYROXPHRIWKH3DUQDVR 6WUDQLHURRIGHDOVZLWKWUDQVODWLRQIURP6SDQLVK



3DJH

7KUHHJUHDWWUDQVODWLRQVRIWKHWLPHGHVHUYHDVSHFLDOPHQWLRQ,SSROLWR3LQGHPRQWH¶VWUDQVODWLRQRI7KH 2G\VVH\± 9LQFHQ]R0RQWL¶VWUDQVODWLRQRI7KH,OLDGFRPSOHWHGLQ DQG8JR)RVFROR¶V WUDQVODWLRQRI/DXUHQFH6WHUQH¶V$6HQWLPHQWDO-RXUQH\±EXWUHZRUNHGDQGSXEOLVKHGLQ $OO WKUHHDUHVWLOOUHDGDQGVWXGLHGLQ,WDO\WRGD\ $QLQWHUHVWLQJTXDUUHODURVHEHWZHHQ0RQWLDQG)RVFRORXSRQWKHSXEOLFDWLRQRI0RQWL¶VWUDQVODWLRQRI7KH ,OLDG,QDYHQHPRXVHSLJUDP)RVFRORDFFXVHG0RQWLZKRKDGUHIHUUHGWRRWKHU,WDOLDQDQG/DWLQWUDQVODWLRQV IRUKLVRZQYHUVLRQ RIEHLQJDµJUHDWWUDQVODWRURIWKHWUDQVODWRUVRI+RPHU¶)RVFROR¶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± ZKRIROORZLQJ'DQWHGLVPLVVHGWUDQVODWLRQDVD ORJLFDOO\LPSRVVLEOHWDVNVHH&URFH $QDQDORJRXVDWWLWXGHDOWKRXJKZLWKDIHZGLIIHUHQFHVRI HPSKDVLVZDVDGRSWHGE\*LRYDQQL*HQWLOH DQGWKHQHRLGHDOLVWLFVFKRRORIWKRXJKWKHUHSUHVHQWHG%\ FRQWUDVW$QWRQLR*UDPVFL± LQYHVWHGWUDQVODWLRQZLWKDPRUHSRVLWLYHDQGQHFHVVDU\UROH HPSKDVL]LQJLWVDELOLW\WREULGJHWKHJDSVEHWZHHQGLIIHUHQWODQJXDJHVFRQQHFWLQJFRQFHSWVRQDVXSHU VWUXFWXUDOKLVWRULFDOO\DQGFXOWXUDOO\GHWHUPLQHGOHYHOVHH*UDPVFL (YHQWKRXJKKLVWKHRUHWLFDO FRQVLGHUDWLRQVRQWKHVXEMHFWDORQJZLWKWKHWUDQVODWLRQVKHGLGZKLOHLQMDLO ZHUHFRQILQHGWRKLVQRWHERRNV DQGZHUHQRWDYDLODEOHWRWKHSXEOLFXQWLOPXFKODWHU*UDPVFL¶VSRVLWLRQVKRZVDQDFWLYHLQWHUHVWLQWUDQVODWLRQ RQWKHSDUWRI0DU[LVWLQWHOOHFWXDOV 7KHPRVWLQWHUHVWLQJ,WDOLDQFRQWULEXWLRQVWRWUDQVODWLRQVWXGLHVFRPHIURPSKLORORJLVWVDQGOLQJXLVWVVXFKDV %HQYHQXWR7HUUDFLQL± DQG*LDQIUDQFR)ROHQD± 7KHLUEDODQFHGDQGZHOOLQIRUPHG DFFRXQWRIWUDQVODWLRQLVJURXQGHGRQD



3DJH

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µFRQWDPLQDWLQJ¶WKHSXULW\RI WKHQDWLRQDOLGLRPE\H[SRVLQJDXGLHQFHVWRPDVVLYHGRVHVRIIRUHLJQODQJXDJHV$WWKHHQGRIWKHZDUWKH VHFRQGPRWLYDWLRQDOOEXWGLVDSSHDUHGEXWWKHILUVWZDVUHWDLQHGHVVHQWLDOO\EHFDXVH+ROO\ZRRGH[HFXWLYHVGLG QRWZDQWREVWDFOHVWRWKHQHZPDUNHWWKDWZDVRSHQLQJDIWHU0XVVROLQL¶VLVRODWLRQLVP7KHLUSRZHUIXOOREE\ HYHQPDQDJHGWRKDYHDFODXVHDGGHGWRWKHSHDFHWUHDW\VLJQHGZLWKWKH$OOLHVLQ±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¶V6DWDQLF9HUVHVZKROXFNLO\VXUYLYHGVWDEELQJE\DIXQGDPHQWDOLVWWHUURULVW 7KH\UHIHUWRWKHORZHVWHHPLQZKLFKWKHLUZRUNLVKHOGWRWKHORZHDUQLQJVLW\LHOGVWRWKHVKRUWWLPHWKH\ DUHDOORZHGWRFRPSOHWHSURMHFWVWRWKHODFNRIDVWHDG\IORZRIMREVDQGWKHODFNRIFRQWUROWKH\KDYHRQWKH ILQLVKHGSURGXFW(YHQWKRXJKZRUNLQJFRQGLWLRQVKDYHJHQHUDOO\LPSURYHGGXULQJWKHODVWFRXSOHRIGHFDGHV WKHEDVLFSUREOHPRIDYHU\XQEDODQFHGUHODWLRQVKLSEHWZHHQWUDQVODWRUVDQGSXEOLVKHUVVWLOOH[LVWV 7KHPDMRUIDFWRUVDSSLQJWKHWUDQVODWRUV¶EDUJDLQLQJSRZHULVRIFRXUVHWKHH[LVWHQFHRI



3DJH

DYLUWXDOO\LPPHQVHUHVHUYHSRRORIZRXOGEHWUDQVODWRUVIURPZKLFKWKHSXEOLVKHUVFDQGUDZWKHQH[W FDQGLGDWHIRUDMRE²VKRXOGRQHUHIXVHWKHLUFRQGLWLRQVUHJDUGOHVVRIH[SHULHQFHDQGWHFKQLFDORUOLWHUDU\ VSHFLDOL]DWLRQ7KHUHLVQRQHHGWRHPSKDVL]HWKDWWKHPDLQYLFWLPRIWKLVV\VWHPEHVLGHVWKHSURIHVVLRQDO WUDQVODWRULVWKHRYHUDOOTXDOLW\RIPRVWZRUNDVVLJQHGDVLWLVRQWKHVKHHUEDVLVRIVDYLQJFRVW )RUGHFDGHVQRZWKHWZRPDLQWUDQVODWRUV¶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µKDUPRQL]DWLRQ¶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¶Vµ/D6DSLHQ]D¶9HQLFH%RORJQD6LHQD9LWHUER %XW ,WDOLDQDFDGHPLFVWUXFWXUHVGRQRWVHHPIOH[LEOHHQRXJKWRDGMXVWWRWKHQHHGVRIVXFKFRXUVHVZKLFKUHTXLUHD FDUHIXOO\EDODQFHGPL[WXUHRIWKHRU\DQGSUDFWLFHDEOHQGLQJRIWHFKQLFDODQGFUHDWLYHHOHPHQWV$PRUH LQWHUHVWLQJH[SHULPHQWKDVEHHQDWWHPSWHGE\WKH6FXROD(XURSHDGL7UDGX]LRQH/HWWHUDULD6(7/ HVWDEOLVKHG LQ7XULQE\DFRQVRUWLXPRISULYDWHDQGSXEOLFRUJDQL]DWLRQVDQGSXEOLVKHUVZLWKWKHILQDQFLDODVVLVWDQFHRI WKH(XURSHDQ8QLRQ

)XUWKHUUHDGLQJ $WWLGHOFRQYHJQRµ,QGLIHVDGHLWUDVORFDWRULGLSDUROH(GLWRULHWUDGXWWRULDFRQIURQWR¶%HUQDVFRQH&DULQL 'XUDQWL)HUUDUL)ROHQD/DSXFFL0DIIHL6DQWDQJHORDQG9LQWL 7HUUDFLQL=DPERQ

5,&&$5'2'85$17,

%LRJUDSKLHV %$572/20(2'$6$1&21&25',2± 6FKRODUWHDFKHUDQGPRUDOLVWERUQLQ3LVD+H ZURWHWUHDWLVHVRQHWKLFVPHWDSK\VLFVORJLFJUDPPDUDQGSURVRG\2QO\WZRRIKLVZRUNVDUHLQWKH YHUQDFXODUDQGWKH\DUHERWKWUDQVODWLRQVIURP6DOOXVWLXVDQGIURP'RFXPHQWD$QWLTXRUXPDQDQWKRORJ\KH FRPSLOHGFKRRVLQJPRUDOPD[LPVZDUQLQJVDQGUXOHVRIFRUUHFWOLYLQJ,WLVLQIDFWLQWKLVZRUNWUDQVODWHGDV $PPDHVWUDPHQWLGHJOL$QWLFKLWKDWZHILQGKLVHVVD\RQWUDQVODWLRQ,QWKHQLQWKRIWKHSDUWVLQZKLFKWKH WH[WLVGLYLGHGXQGHUWKHIRXUWKKHDGLQJZKLFKEHDUVWKHWLWOHµ'LFXUDUHSLGHOORµQWHQGLPHQWRFKHGHOOH SDUROH¶2QFDULQJPRUHDERXWPHDQLQJWKDQDERXWZRUGV KHFROOHFWHGTXRWDWLRQVDERXWWUDQVOD



3DJH

WLRQWKDWUHIOHFWHGDOVRKLVRZQWKRXJKWVRQWKHVXEMHFW %581,/HRQDUGR± +XPDQLVWDQGSROLWLFLDQERUQLQ$UH]]R+HZRUNHGDV$SRVWROLF6HFUHWDU\ LQ5RPHDQGDV&KDQFHOORULQWKH)ORUHQWLQH5HSXEOLF%UXQLWUDQVODWHG'HPRVWKHQHV;HQRSKRQ3OXWDUFK 3ODWRDQG$ULVWRWOHIURP*UHHNLQWR/DWLQ+HGHIHQGHGWKHXVHRIYHUQDFXODU,WDOLDQLQKLVGLDORJXHV$G 3HWUXP+LVWUXPDQGZURWHWZRLPSRUWDQWELRJUDSKLHVRI'DQWHDQG3HWUDUFK+LVYHUQDFXODUZRUNVLQFOXGH VSHHFKHVDQGPLQRUHVVD\V$VDKLVWRULDQEHVLGHUHZRUNLQJVLQ/DWLQRI*UHHNFKURQLFOHVKHZURWH5HUXP VXRWHPSRUHJHVWDUXP&RPPHQWDULD± DQG+LVWRULDUXPIORUHQWLQLSRSXOLOLEUL;,,± &(6$5277,0HOFKLRUUH± %RUQLQ3DGXD&HVDURWWLWDXJKWLQLWVVHPLQDU\DQGWXWRUHGVHYHUDO QREOHPHQIURPWKHEHVWIDPLOLHVLQ9HQLFH)URPRQZDUGVKHZDVDSURIHVVRURI*UHHNDQG+HEUHZ /LWHUDWXUHDWWKH8QLYHUVLW\RI3DGXD)DVFLQDWHGE\WKH)UHQFK(QF\FORSHGLVWVKHZURWHSROLWLFDOSDPSKOHWVLQ IDYRXURIWKH5HYROXWLRQ:KHQ1DSROHRQDUULYHGLQ9HQLFH&HVDURWWLFRPSRVHGDEDOOHW3URQHDLQKLV KRQRXU+LVPRVWLPSRUWDQWZRUNLVFRQVLGHUHGWKHWUDQVODWLRQRI2VVLDQ¶V6RQJV+LV6DJJLRVXOODILORVRILD GHOOH/LQJXH LQZKLFKKHFODLPHGWKHULJKWIRUZULWHUVWREXLOGXSWKHLURZQYRFDEXODU\LVDOVR FRQVLGHUHGYHU\LPSRUWDQW 5,&&$5'2'85$17,



3DJH

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¶VSUR[LPLW\WR$VLDDQGGLVWDQFHIURP:HVWHUQFRXQWULHVKDYHFRPELQHGZLWKKLVWRULFDOIDFWRUVWRVKDSH ERWKWKHSUDFWLFHRIDQGDWWLWXGHVWRZDUGVWUDQVODWLQJDQGLQWHUSUHWLQJLQWKHDUHD7KURXJKRXWPXFKRI-DSDQ¶V KLVWRU\WKHPRWLYDWLRQEHKLQGWUDQVODWLRQDQGLQWHUSUHWLQJKDVEHHQWKHQHHGIRULQIRUPDWLRQZLWKLQWHUHVWLQ IRUHLJQFLYLOL]DWLRQIRULWVRZQVDNHEHLQJRIVHFRQGDU\LPSRUWDQFH
&KLQHVH-DSDQHVHµWUDQVODWLRQ¶LQSUHPRGHUQWLPHV &RQWDFWEHWZHHQ-DSDQDQG&KLQDGDWHVEDFNDWOHDVWDVIDUDVWKHILUVWUHFRUGHGRIILFLDOFRQWDFWVLQ$',Q WKHWKLUGDQGIRXUWKFHQWXULHV.RUHDQVFULEHVLQWURGXFHGWKH&KLQHVHVFULSWWR-DSDQZKLFKODFNHGDVFULSWRI LWVRZQDQGE\WKHVL[WKRUVHYHQWKFHQWXULHVWKLVZDVZLGHO\XVHGDPRQJVWWKHpOLWH6RPHWLPHVWKHVRXQGVRI WKH&KLQHVHFKDUDFWHUVZHUHXVHGSKRQHWLFDOO\WRZULWH-DSDQHVHZRUGVDQGVRPHWLPHVWKHPHDQLQJVZHUH ERUURZHGLQVWHDG$OWKRXJKWZRLQGLJHQRXVSKRQHWLFVFULSWVZHUHGHYHORSHGE\WKHHLJKWKFHQWXU\HQDEOLQJ -DSDQHVHWREHZULWWHQZLWKRXWUHFRXUVHWR&KLQHVHFKDUDFWHUVWKHODWWHUKDYHUHPDLQHGLQXVHWRWKHSUHVHQW GD\EHFDXVHRIWKHLUFRQFLVHQHVVIRUPDOLW\DQGJUHDWHUSUHVWLJH7ZLQH &KLQDKDGDJUHDWLPSDFWRQ-DSDQ¶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



3DJH

WUDGLWLRQVUHVXOWLQJLQDIRUPRIµ-DSDQL]HG¶&KLQHVHDVZHOODVWKHVLQLFL]DWLRQRI-DSDQHVH ,QWKHVKRJXQ7RNXJDZD,H\DVXHQFRXUDJHG&KLQHVHPHUFKDQWVWRWUDGHLQ1DJDVDNLLQVRXWKZHVWHUQ -DSDQOHDGLQJWRDGHPDQGIRULQWHUSUHWHUVRI7DQJ&KLQHVHDQGDQLQIOX[RI&KLQHVHERRNV,WZDVDOVRDERXW WKLVWLPHWKDWWKHILUVWWUXHWUDQVODWLRQVIURPFODVVLFDODQGFROORTXLDO&KLQHVHZHUHSURGXFHGSDUWLFXODUO\ FROORTXLDOILFWLRQIURPWKH0LQJG\QDVW\±F :KHUHDVVXFKZULWHUVDV$VDL5\ǀL" RIWHQ IROORZHGWKHRULJLQDOWH[WOLQHE\OLQH.HHQH 2J\X6RUDL± ZKRVHDSSURDFKWR WUDQVODWLRQLVRXWOLQHGLQKLVLQWURGXFWLRQWR
3UHPRGHUQFRQWDFWVZLWKWKH:HVW 7KHVHFRQGZDYHRIIRUHLJQODQJXDJHVUHDFKHGWKHVKRUHVRI-DSDQZLWKWKHDUULYDORIWKH3RUWXJXHVHLQWKH VL[WHHQWKDQGWKH'XWFKLQWKHHDUO\VHYHQWHHQWKFHQWXU\7KHSUDFWLFHRINDPEXQNXQGRNXPHDQWWKDWWKHUH ZDVDOUHDG\DSUHFHGHQWIRUDGDSWLQJ-DSDQHVHWRWKHIRUHLJQODQJXDJHUDWKHUWKDQUHTXLULQJWKHQHZFRPHUWR FRQIRUPWRQDWXUDO-DSDQHVHXVDJH 3RUWXJXHVH 7KHGHVLUHWRSUHDFK&KULVWLDQLW\²FRPELQHGZLWKWKHQHHGIRUWUDGH²OHGWKH3RUWXJXHVHWRWUDYHOWKHZRUOG DQGLQD3RUWXJXHVHVKLSZUHFNEURXJKW-DSDQLQWRFRQWDFWZLWKWKH:HVWIRUWKHILUVWWLPH$QRWKHU 3RUWXJXHVHVKLSYLVLWHG-DSDQLQDQGFDUULHG$QMLUǀDIXJLWLYHVDPXUDLEDFNWR0DODFFDZKHUHKHZDV LQWURGXFHGWR)UDQFLV;DYLHURIWKHQHZO\IRXQGHG6RFLHW\RI-HVXV;DYLHUZDVLQVSLUHGE\$QMLUǀ¶VDFFRXQWV RI-DSDQWRFRPPHQFHPLVVLRQDU\DFWLYLWLHVWKHUH$QMLUǀZKRFRXOGDOUHDG\VSHDNEURNHQ3RUWXJXHVHDQG ZKRKDGEHFRPHWKHILUVW-DSDQHVH&KULVWLDQZDVVHQWWRWKH&ROOHJHRI6W3DXOLQ*RD,QGLDWRVWXG\ &KULVWLDQLW\DQG3RUWXJXHVH7KHUHKHWUDQVODWHG&KULVWLDQPDWHULDOVVXFKDVWKHFDWHFKLVPLQWR-DSDQHVH 6FKXUKDPPHU ;DYLHUDUULYHGLQ.DJRVKLPDLQDFFRPSDQLHGE\$QMLUǀDVKLVLQWHUSUHWHUDQGWUDQVODWRU*UDGXDOO\WKH SULHVWVPDVWHUHG-DSDQHVHDQGZLWKWKHKHOSRIFRQYHUWVWUDQVODWHGYDULRXV&KULVWLDQZRUNVLQWR-DSDQHVH 7KLVSUHVHQWHGDPDMRUSUREOHPLQWHUPVRIILQGLQJZRUGVWRH[SUHVVQHZFRQFHSWVVXFKDVµ*RG¶µDQJHO¶ µKHDYHQ¶DQGµFURVV¶DQGOHGWRLQHYLWDEOHGLVFUHSDQFLHVLQPHDQLQJ2QHLQWHUSUHWHUZRUWK\RISDUWLFXODUQRWH ZDVWKH3RUWXJXHVHPLVVLRQDU\-RmR5RGULJXHVF± ZKRDUULYHGLQ-DSDQLQ$IWHUVWXG\LQJ -DSDQHVH5RGULJXHVDFWHGDVWKHPLVVLRQ¶VFKLHILQWHUSUHWHUDQGLQWHUSUHWHGDWWDONVZLWKWKHVKRJXQ +LGH\RVKLLQ+HDOVRFRPSLOHGWKH$UWHGD/LQJRDGH,DSDPDJUDPPDURI-DSDQHVHLQZKLFKKH GLVFXVVHG&KLQHVHSRHWU\WUDQVODWHGLQWR-DSDQHVHDQGWKHGLIILFXOW\RIWUDQVODWLQJ3RUWXJXHVHLQWR-DSDQHVH DQGUHFRPPHQGHGWUDQVODWLQJWKHVHQVHUDWKHUWKDQJLYLQJDOLWHUDOUHQGLWLRQ&RRSHU $SDUWLDOWUDQVODWLRQRI$HVRS¶V)DEOHVZDVSURGXFHGLQURPDQL]HGVFULSWLQDQGZDVSUREDEO\WKHILUVW WUDQVODWLRQRID:HVWHUQZRUNDSDUWIURPSURVHO\WL]LQJPDWHULDOV7KLVZDVTXLWHIUHHDQGFROORTXLDODQG VXEVWLWXWHGWKHQHDUHVW-DSDQHVHHTXLYDOHQWVIRUXQIDPLOLDU(XURSHDQREMHFWV3DUWLDOWUDQVODWLRQVRI,PLWDWLR &KULVWL DQG/XLVGH*UDQDGD¶V*XLDGR3HFDGRU DOVRDSSHDUHGEXWWKHUHZDVOLWWOHDWWHPSWWR WUDQVODWH3RUWXJXHVHZRUNVRWKHUWKDQ&KULVWLDQOLWHUDWXUH %\WKH7RNXJDZDVKRJXQDWHKDGLVVXHGDVHULHVRIVHFOXVLRQRUGHUVFORVLQJWKHFRXQWU\RIIIURP µGHVWDELOL]LQJ¶RXWVLGHLQIOXHQFHV7UDGHUVDQGPLVVLRQDULHVZHUHEDQQHGDVZDV&KULVWLDQLW\LWVHOI2QO\WKH 'XWFKZKRKDGDUULYHGLQDQGEHHQRUGHUHGWRUHVLGHLQWKHWRZQRI+LUDGRLQ.\XVKXZHUHDOORZHGWR VWD\EHFDXVHWKH\PDGHQRDWWHPSWDWSURVHO\WL]LQJ7KH&KLQHVHZHUHUHVWULFWHGWR1DJDVDNLDQGWKH.RUHDQV SHUPLWWHGWRWUDGHRQO\LQ7VXVKLPD7KLVPRYHEURXJKWWKHDOUHDG\PLQLPDOWUDQVODWLRQRI:HVWHUQOLWHUDWXUH WRDYLUWXDOKDOW 'XWFK 6RPHPHUFKDQWVRIILFLDOVDQGVDPXUDLFRXOGVSHDNIRUHLJQODQJXDJHVEXWZKHQWKH'XWFK



3DJH

ZHUHRUGHUHGLQWRPRYHWR'HMLPDDQDUWLILFLDOLVODQGLQ1DJDVDNLWUDQVODWLQJDQGLQWHUSUHWLQJEHFDPH WKHVROHSURYLQFHRIJRYHUQPHQWRIILFLDOVNQRZQDV2UDQGDWVǌML'XWFKLQWHUSUHWHUV ZKRDOVRDFWHGDV FXVWRPVRIILFLDOV7KHSRVLWLRQRIWVǌMLZDVDKHUHGLWDU\RQHDOWKRXJKRIWHQLWZDVLQKHULWHGE\DGRSWHGVRQV 7KRXJKSDLGZHOOWKHWVǌMLGLGQRWDOZD\VKDYHDJRRGUHSXWDWLRQVRPHWLPHVVWHDOLQJIRUHLJQJRRGV VRPHWLPHVEHLQJFULWLFL]HGIRUWKHLUSRRUOLQJXLVWLFDELOLWLHVDQGVRPHWLPHVHYHQEHLQJDUUHVWHGIRU PLVWUDQVODWLRQV%\WKHODWHHLJKWHHQWKFHQWXU\KRZHYHUWKHUHZDVDIDLUO\JRRGV\VWHPRIWUDLQLQJWVǌML7KH\ FRPPHQFHGVWXG\LQJ'XWFKDWDERXWWKHDJHRIDQGKDGWRSDVVDQH[DPLQDWLRQWRTXDOLI\DVWUDLQHHWVǌML IURPZKHUHWKH\PRYHGXSWKHWVǌMLKLHUDUFK\6XJLPRWR 7KHUHZHUHXVXDOO\DERXWWVǌMLDWDQ\RQHWLPHDQGHYHU\\HDUWZRVHQLRUWVǌMLDFFRPSDQLHGWKHKHDGRIWKH 'XWFKVHWWOHPHQWWRWKHFDSLWDO(GRWRPHHWWKHVKRJXQDQGSUHVHQWDUHSRUWRQRYHUVHDVDIIDLUVWUDQVODWHGE\ WKHWVǌML7KH\ZRXOGLQWHUSUHWDWWDONVZLWKWKHVKRJXQDQGZLWKLQWHOOHFWXDOVWKLUVW\IRUNQRZOHGJHDERXWWKH RXWVLGHZRUOGDQGWKLVSUDFWLFHVSUHDGµ'XWFKOHDUQLQJ¶WRWKHFDSLWDO 7KHWH[WVWUDQVODWHGE\WKHWVǌMLZHUHRYHUZKHOPLQJO\RIDQRQOLWHUDU\QDWXUH$SDUWIURPWUDGHUHODWHG GRFXPHQWVWKHILUVWZRUNVWUDQVODWHGZHUHPHGLFDOWH[WV7KH'XWFKYHUVLRQRID/DWLQDQDWRPLFDOZRUNZDV WUDQVODWHGE\0RWRNL5\ǀL± LQDOWKRXJKWKLVLVOHVVZHOONQRZQWKDQWKHODWHUWUDQVODWLRQRI DQRWKHUDQDWRPLFDOZRUN.DLWDL6KLQVKRSXEOLVKHGLQ0DQ\WVǌMLEHFDPHVRZHOOYHUVHGLQWKHILHOG WKDWWKH\VZLWFKHGWRIXOOWLPHPHGLFDOFDUHHUV0HGLFDOWH[WVZHUHIROORZHGE\ZRUNVLQWKHQDWXUDOVFLHQFHV DQGPLOLWDU\VFLHQFHZLWKWUDQVODWLRQLQWKHILHOGRIKXPDQLWLHVFRPLQJODVW7KHWUDQVODWLRQVZHUHXQGHUWDNHQ LQWRFODVVLFDO&KLQHVH7KHWVǌMLIUHTXHQWO\KDGWRFRLQHTXLYDOHQWVWRH[SUHVVQHZFRQFHSWVDQGDFRPPRQ PHWKRGRIGRLQJWKLVZDVWRXVHH[LVWLQJ&KLQHVHZRUGVZKHUHSRVVLEOH 7KHPRUHVFKRODUO\RIWKHWVǌMLSOD\HGDQLPSRUWDQWUROHLQWHDFKLQJ'XWFKDQGLQWURGXFLQJ:HVWHUQ NQRZOHGJHDQGFXOWXUH0272.,


3DJH

,QDQLQFLGHQWLQYROYLQJWKH%ULWLVKVKLS3KDHWRQSURPSWHGWKHVKRJXQDWHWRRUGHUWKHWVǌMLWRVWXG\ (QJOLVKZKLFKWKH\LQLWLDOO\OHDUQWIURPWKH'XWFK,QFUHDVLQJFRQWDFWVZLWK5XVVLDKLJKOLJKWHGWKHQHHGWR OHDUQ5XVVLDQDQGVHYHUDOWVǌMLZHUHEDVHGLQ0DWVXPDHLQQRUWKHUQ+RNNDLGR%DEDDOVRVWXGLHG5XVVLDQDQG LQZKHQVPDOOSR[ZDVDVHYHUHSUREOHPLQ-DSDQKHWUDQVODWHGD5XVVLDQERRNRQ-HQQHULDQYDFFLQDWLRQ %DEDHDUQHGDUHSXWDWLRQDVWKHILUVW5XVVLDQOLQJXLVWLQ-DSDQDQGZDVWKHILUVWWUDQVODWRUWRLQWURGXFH5XVVLDQ OLWHUDWXUHWRWKHDUHD6LQFHPDQ\5XVVLDQGRFXPHQWVRIWKHWLPHZHUHZULWWHQLQ)UHQFKLQWKH DXWKRULWLHVRUGHUHGWKHWVǌ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¶VLQWHUSUHWHUVZHUH'U6::LOOLDPVD3URWHVWDQW PLVVLRQDU\ZKRKDGWULHGWRWUDQVODWHWKH%LEOHLQWR-DSDQHVHLQ&KLQD'U%HWWHOKHLPDQRWKHUPLVVLRQDU\DQG WKH'XWFKVSHDNLQJ$PHULFDQGLSORPDW$QWRQ3RUWPDQ2QWKH-DSDQHVHVLGH1DNDKDPD0DQMLUǀ± DVKLSZUHFNHGILVKHUPDQZKRKDGEHHQSLFNHGXSE\WKH$PHULFDQVDQGVSHQWVHYHUDO\HDUVLQWKH8QLWHG 6WDWHVZDVXVHGDVDEHKLQGWKHVFHQHVWUDQVODWRUZKLOHWKHLQWHUSUHWLQJZDVGRQHE\WKHWVǌML+RUL 7DWVXQRVXNHDQG+DWVKLVXNR7RNXVKXPR,QWKHVHFRQGURXQGRIWDONVLQ+RULDQG+DWVKLVXNRZHUH MRLQHGE\WKHWVǌML0RUL\DPD(LQRVXNH :KHQWKHILUVW$PHULFDQFRQVXOLQ-DSDQPHWZLWKWKH-DSDQHVHRIILFLDOVKLV(QJOLVKZDVLQWHUSUHWHGLQWR 'XWFKE\D'XWFKVSHDNLQJ$PHULFDQDQGWKHQUHOD\HGLQWR-DSDQHVH$QRWKHUSURPLQHQWLQWHUSUHWHUDWWKH WLPHZDVWKH(QJOLVKPDQ6LU(UQHVW6DWRZZKRKDGVWXGLHG-DSDQHVHWKHUHE\HOLPLQDWLQJWKHQHHGWRXVH 'XWFKDVWKHFRPPRQPHGLXP7KXVWKHHQGRI-DSDQ¶VLVRODWLRQDOVRVSHOOHGWKHHQGRIWKHWVǌML¶VPRQRSRO\ RQLQWHUSUHWLQJDQGWUDQVODWLQJ

0HLML3HULRG± $QRWKHUPDMRUFKDQJHWRRNSODFHZLWKWKH0HLML5HVWRUDWLRQRIZKLFKVDZWKHHQGRIWKHVKRJXQDWHDQG WKHUHVWRUDWLRQRIWKHHPSHURUWRSRZHUDQGXVKHUHG-DSDQLQWRWKHPRGHUQDJH7KHRSHQLQJXSRI-DSDQ PHDQWWKDWPRUH-DSDQHVHZHUHDEOHWRVWXG\IRUHLJQODQJXDJHVLQ-DSDQRUWUDYHODEURDGVRWKDWWKHUHZDVD JURZLQJVXSSO\RISHRSOHFDSDEOHRIDFWLQJDVLQWHUSUHWHUVWRPHHW-DSDQ¶VGLSORPDWLFFRPPHUFLDODQGFXOWXUDO QHHGVGXULQJWKLVSHULRG7KHRSHQLQJRIWKHFRXQWU\DOVROHGWRDIORRGRILPSRUWHG(QJOLVK)UHQFK5XVVLDQ DQG*HUPDQZRUNVLQDQDWWHPSWWROHDUQIURPWKH:HVWDQGWKHDLPRIPDQ\WUDQVODWLRQVLQWKHILUVWGHFDGHRI WKH0HLMLSHULRGZDVHGXFDWLRQDOUDWKHUWKDQDHVWKHWLF7KHWUDQVODWLRQVE\WKHUHQRZQHGHGXFDWRU)XNX]DZD <XNLFKL± ZKRDFWHGDVDQLQWHUSUHWHURQWKHILUVWJRYHUQPHQWPLVVLRQVWRWKH8QLWHG6WDWHVDQG (XURSHZHUHSDUWLFXODUO\LPSRUWDQWEHFDXVHWKH\LQWURGXFHGWKHWKRXJKWDQGLQVWLWXWLRQVRIWKH:HVWFRLQHG PDQ\ZRUGVWRH[SUHVVIRUHLJQFRQFHSWVDQGODLGWKHJURXQGZRUNIRUWKHWUDQVLWLRQIURPWKHGLIILFXOW&KLQHVH VW\OHWRDPRUHDFFHVVLEOHYHUQDFXODUVW\OH


3DJH

ZRUGRUGHUSXQFWXDWLRQSURQRXQVDQGUHODWLYHSURQRXQVRIWKHRULJLQDODQGWKLVKHOSHGFUHDWHDQHZVW\OHRI WUDQVODWLRQ2WKHULPSRUWDQWQRQILFWLRQWUDQVODWLRQVLQFOXGHG1DNDPXUD¶VWUDQVODWLRQRI-RKQ6WXDUW0LOO¶V2Q /LEHUW\LQDQGDQWUDQVODWLRQE\1DNDH&KǀPLQ± RI5RXVVHDX¶V6RFLDO&RQWUDFW6XFK ZRUNVFRQWDLQHGPDQ\XQIDPLOLDUFRQFHSWVDQG0HLMLWUDQVODWRUVIROORZHGWKHLU(GRSUHGHFHVVRUVLQXVLQJ WKHLUNQRZOHGJHRI&KLQHVHWRFRLQQHZWHUPVRUWRXVHH[LVWLQJWHUPVLQDQHZVHQVH,QHYLWDEO\KRZHYHU WKLVUHVXOWHGLQVRPHGLVWRUWLRQVDQGDFHUWDLQGHJUHHRILQFRPSUHKHQVLELOLW\ 5HIOHFWLQJWKLVWLPHRIVRFLDODQGSROLWLFDOXSKHDYDOWKH±SHULRGVDZQXPHURXVWUDQVODWLRQVRISROLWLFDO QRYHOVPDQ\RIWKHVHWUDQVODWLRQVWRRNJUHDWOLEHUWLHVZLWKWKHRULJLQDOZRUNDQGIRFXVHGRQLWVFRQWHQWUDWKHU WKDQRQFRQYH\LQJLWVOLWHUDU\IODYRXU%XOZHU/\WWRQ¶V(UQHVW0DOWUDYHUVZKLFKDSSHDUHGLQXQGHUWKH WLWOH.DU\ǌ6KXQZD$6SULQJWLPH7DOHRI%ORVVRPVDQG:LOORZV ZDVWUDQVODWHGE\2GD1LZD -XQ¶LFKLUǀ ± ZKRDGGHGH[SODQDWRU\QRWHVDQGRPLWWHGSDVVDJHVZKLFKKHFRQVLGHUHGRIOLWWOHLQWHUHVWWRKLV UHDGHUV$OVRQRWDEOHZHUHDVHYHUHO\DEULGJHGYHUVLRQRI'LVUDHOL¶V&RQLQJVE\6KXQ¶ǀWHQ7KH&KLUSLQJRI 6SULQJ:DUEOHUV DQGWKHWUDQVODWLRQRI%XOZHU/\WWRQ¶V5LHQ]LWKH/DVWRIWKH5RPDQ7ULEXQHVE\ 7VXERXFKL6Kǀ\ǀ± 7KHVHZRUNVLQVSLUHG-DSDQHVHZULWHUVWRSURGXFHWKHLUILUVWSROLWLFDOQRYHOV 7KH0HLML3HULRGDOVRZLWQHVVHGWKHDGYHQWRIDJROGHQDJHRIOLWHUDU\WUDQVODWLRQDOWKRXJKLQWKHILUVWGHFDGH WKHFKRLFHRIZRUNVWUDQVODWHGZDVVRPHZKDWLQGLVFULPLQDWH7KHILUVWWUDQVODWLRQRID:HVWHUQOLWHUDU\ZRUN KDGEHHQPDGHEDFNLQWKH(GR3HULRG IURPD'XWFKUHQGLWLRQRI5RELQVRQ&UXVRH¶V5HFRUGRI :DQGHULQJVDOWKRXJKDQRWKHUYHUVLRQDSSHDUHGLQEHIRUHWKLVZDVSXEOLVKHG


3DJH

5HQGH]YRXV¶IURP$6SRUWVPDQ¶V6NHWFKHV ZDVSXEOLVKHGDV$LELNLLQ+HWULHGWRUHSURGXFHWKH RULJLQDODVH[DFWO\DVSRVVLEOHHYHQGRZQWRWKHQXPEHURIZRUGVDQGWKHSXQFWXDWLRQEXWKLVXVHRI FROORTXLDOODQJXDJHRSHQHGQHZDYHQXHVRIOLWHUDU\H[SUHVVLRQDQGKHUDLVHGWKHWDVNRIWUDQVODWLRQWRWKHOHYHO RIDQDUW *UDGXDOO\WKHUHHPHUJHGDQLQWHUHVWLQIRUHLJQOLWHUDWXUHIRULWVRZQVDNHDQGDVDUHIOHFWLRQRIWKHIHHOLQJVRI (XURSHDQV:HVWHUQSOD\VSDUWLFXODUO\6KDNHVSHDUH¶VZRUNVEURXJKWKRPHWKHOLWHUDU\SRWHQWLDORIGUDPD /LWHUDU\SHULRGLFDOVLQWURGXFHG(XURSHDQOLWHUDWXUHLQWUDQVODWLRQDQGWUDQVODWHGOLWHUDWXUHZDVUHJDUGHGDV EHLQJRQDQHTXDOIRRWLQJZLWKRULJLQDOZRUNV0DQ\WUDQVODWRUVZHUHZULWHUVWKHPVHOYHV:ULWHUWUDQVODWRUV VXFKDV)ǌWDEDWHL6KLPHL7VXERXFKL6Kǀ\ǀ025,ƿJDL± DQG8('$%LQ± WXUQHG WUDQVODWLRQLQWRDQDUWLVWLFIRUPDLPHGDWUHSURGXFLQJWKHIODYRXURI:HVWHUQOLWHUDU\ZRUNV7KHLUVWUXJJOHZLWK WKHSUREOHPRIVNHZLQJEHWZHHQWKHVRXUFHDQGWDUJHWWH[WVVKRRNWUDGLWLRQDO-DSDQHVHOLWHUDWXUHDQGOHGWR QHZIRUPVRIOLWHUDU\H[SUHVVLRQ7KLVPHDQWKRZHYHUPRYLQJIXUWKHUDZD\IURPWKH-DSDQHVHODQJXDJHDQG OLWHUDU\WUDGLWLRQV,QDQHVVD\HQWLWOHGµ+RQ\DNXQRNRNRURH¶+LQWVRQ7UDQVODWLQJ 0RULWD6KLNHQ ± WKHUHQRZQHGWUDQVODWRURIPDQ\RI9LFWRU+XJR¶VQRYHOVGLVFXVVHGKRZIDUWUDQVODWRUVVKRXOGJR LQDVVLPLODWLQJWKHRULJLQDOZRUNLQWRUHDGDEOH-DSDQHVH+HDGYRFDWHGOLWHUDOWUDQVODWLRQDQGOHWWLQJWKH -DSDQHVHODQJXDJHEHDFWLYHO\LQIOXHQFHGE\IRUHLJQVW\OH+LVUHWUDQVODWLRQIURPWKH(QJOLVKYHUVLRQRI-XOHV 9HUQH¶V'HX[$QVGH9DFDQFHV-ǌJR6KǀQHQ ZDVKLJKO\LQIOXHQWLDO 7KH\HDUVDZWKHSXEOLFDWLRQRI2PRNDJH9HVWLJHV DQDQWKRORJ\RI*HUPDQSRHWU\WUDQVODWHGE\WKH ZULWHU0RULƿJDLDQGVRPHFROOHDJXHV$OWKRXJKWKLVXVHGPDQ\WUDGLWLRQDOHOHJDQWZRUGVDQGLGHDVLWPRYHG EH\RQGWUDGLWLRQDOOLWHUDWXUHE\XVLQJDZLGHUDQJHRIWUDQVODWLRQPHWKRGVIURPPHUHO\FRQYH\LQJWKHVHQVHWR WU\LQJWRFRQYH\WKHVHQVHDQGWKHQXPEHURIV\OODEOHVSHUOLQHRUWKHUK\PLQJRUWKHZRUGLQJ.DPHL ,WZDVVXFFHVVIXODVSRHWU\ERWKLQIRUPDQGLQFRQFHSWDQGZDVDVRXUFHRILQVSLUDWLRQIRUWKH -DSDQHVH5RPDQWLFPRYHPHQWMXVWDVWKHWUDQVODWLRQRI=ROD¶V1DQDE\1DJDL.DIǌ± VSXUUHGWKH1DWXUDOLVWPRYHPHQWLQ-DSDQ %LEOHWUDQVODWLRQKDVEHHQRQHRIWKHNH\WUDQVODWLRQHQWHUSULVHVLQ-DSDQHYHUVLQFH;DYLHU¶VDUULYDOZLWK GLIIHUHQWYHUVLRQVRISDUWVRIWKH%LEOHEHLQJWUDQVODWHGE\ERWK3URWHVWDQWVDQG&DWKROLFV7KHWUDQVODWRUVZHUH JHQHUDOO\$PHULFDQPLVVLRQDULHVXVXDOO\ZRUNLQJDVDFRPPLWWHHDLGHGE\-DSDQHVHWUDQVODWRUV%\WKH ILUVWWUDQVODWLRQRIWKH%LEOHZDVFRPSOHWHEXWWKH1HZ7HVWDPHQWZDVUHSODFHGLQE\DYHUVLRQZKLFK EHFDPHVWDQGDUGXQWLODFROORTXLDO%LEOHZDVSXEOLVKHGLQIROORZHGE\DQHZMRLQW3URWHVWDQW&DWKROLF WUDQVODWLRQLQ


3DJH

+RULJXFKLXVHGFROORTXLDOODQJXDJHWRH[SUHVVWKHLPDJHVLQWKHRULJLQDOSRHPVUDWKHUWKDQIRUFLQJ WKHPWRILWWKHWUDGLWLRQDO-DSDQHVHPRXOG

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²DQGWKHSXEOLFDWLRQRIEHVWVHOOHUWUDQVODWLRQVRID ELRJUDSK\RI0XVVROLQLLQDQGDQH[SXUJDWHGYHUVLRQRI+LWOHU¶V0HLQ.DPSILQ²FRPELQHGZLWK WKHHYHQWVOHDGLQJXSWR:RUOG:DU7ZRPHDQWWKDW$PHULFDQOLWHUDWXUHGHFOLQHGLQSRSXODULW\ &KLQHVHSRHWU\FRQWLQXHGWREHWUDQVODWHGZLWK6DWǀ+DUXR± EHLQJWKHSLRQHHULQWKLVILHOG6DWǀ ZKRLQWUDQVODWHG6KDMLQVKǌDQDQWKRORJ\RISRHPVE\IHPDOH&KLQHVHSRHWVZDVGLVVDWLVILHGZLWK WKHWUDGLWLRQDODSSURDFKRIUHDGLQJ&KLQHVHSRHWU\LQ-DSDQHVH,QVWHDGKHWUDQVODWHGFUHDWLYHO\FDSWXULQJWKH IODYRXURIWKHRULJLQDOSRHPVDPHWKRGZKLFKVXEVHTXHQWO\EHFDPHSRSXODUDPRQJVWWUDQVODWRUV(YHQVR 6DWǀFRQWLQXHGWRXVHWKHIL[HGIRUPRIYHUVHZKHUHDV+LQDWVX.ǀQRVXNH¶V± FROORTXLDOYHUVLRQV UHQGHUHG&KLQHVHSRHWU\LQWRPRGHUQSRHWU\IRFXVLQJRQWKHFRQWHQWZLWKRXWEHLQJFRQVWUDLQHGE\WKHIRUP DQGIL[HGUK\WKP.DMLPD -DSDQ¶VGHIHDWLQ:RUOG:DU7ZREURXJKWWKH$OOLHG2FFXSDWLRQIRUFHVWRLWVVKRUHVZLWKDFRQFRPLWDQWQHHG IRULQWHUSUHWHUVDQGWUDQVODWRUV*HQHUDO'RXJODV0DF$UWKXU¶VFKLHILQWHUSUHWHUZDV&RORQHO6LGQH\0DVKELU DQG0DWVXL$NLUDVHUYHGDVLQWHUSUHWHUDWVRPHRIWKHPHHWLQJVEHWZHHQWKH(PSHURUDQG0DF$UWKXUDQGDWWKH (PSHURU¶VPHHWLQJVZLWKVSHFLDO$PHULFDQHQYR\-RKQ)RVWHU'XOOHVDQG0DF$UWKXU¶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ǀ 'XULQJWKHZDUWKH-DSDQHVHDXWKRULWLHV KDGEDQQHGIRUHLJQERRNVDQGSHULRGLFDOVPDQ\RIZKLFKUHSRUWHGRQ&KLQHVHUHVLVWDQFHWRWKH -DSDQHVH%HVWVHOOLQJWUDQVODWLRQVLQFOXGHG7HQ


3DJH

,QWKHWUDQVODWRU,Wǀ6HLDQGWKHSXEOLVKHURI'+/DZUHQFH¶V/DG\&KDWWHUOH\¶V/RYHUZHUHFKDUJHGIRU WUDQVODWLQJSXEOLVKLQJDQGGLVWULEXWLQJWKLVZRUNZKLFKZDVDOOHJHGWRFRQWDLQREVFHQHSDVVDJHV$VLPLODU VLWXDWLRQRFFXUUHGZLWKWKH0DUTXLVGH6DGH¶V-XOLHWWH7KHVDOVRVDZWKHWUDQVODWLRQRIXUEDQ$PHULFDQ -HZLVKOLWHUDWXUHDQGEODFNOLWHUDWXUHDOWKRXJKLQWHUHVWLQWUDQVODWHGOLWHUDWXUHZDQHGVRPHZKDWWREHUHSODFHG WRDODUJHH[WHQWLQWKHVE\WUDQVODWLRQVRIµKRZWR¶ERRNVDQGQRQILFWLRQZRUNVDERXW$PHULFDQ PDQDJHPHQWPHWKRGVRUDERXW-DSDQDQGLWVULVHDVDOHDGLQJHFRQRP\:LONLQVRQ 6HYHUDOµFRPSOHWH ZRUNV¶WUDQVODWLRQVDVZHOODVWUDQVODWLRQVLQWKHILHOGRISRSXODUHQWHUWDLQPHQWVXFKDVWKH+D\DNDZD P\VWHU\DQGVFLHQFHILFWLRQVHULHVDOVREHJDQWRDSSHDU 1RZDGD\VEHVWVHOOHUOLVWVLQ-DSDQDOPRVWDOZD\VLQFOXGHVRPHWUDQVODWLRQVDQGWUDQVODWHGERRNVPRVWO\ IURP(QJOLVK)UHQFKRU*HUPDQ DFFRXQWIRUPRUHWKDQSHUFHQWRIDOOERRNVSXEOLVKHGHDFK\HDU2WKHU JHQUHVLQZKLFKWUDQVODWLRQKDVSOD\HGDPDMRUUROHLQFOXGHILOPGXEELQJDQGVXEWLWOLQJWKHWUDQVODWLRQRI O\ULFVDQGFKLOGUHQ¶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ǀ± DGYRFDWHGDµPRQRFKURPDWLF¶DSSURDFKZKHUHE\QRSDUWLFXODUDWWHPSWLV PDGHWRUHSURGXFHWKHWRQHDQGVW\OHRIWKHRULJLQDO+HVXJJHVWHGWKDWWUDQVODWLRQVVKRXOGVRXQGIRUHLJQVRDV WRLQWURGXFHIUHVKH[SUHVVLRQVDQGIRUPVLQWRWKHODQJXDJH1RJDPLDOVRHPSKDVL]HGWKHLPSRUWDQFHRI FKRRVLQJZKDWWRWUDQVODWHEDVHGRQZKHWKHURUQRWLWZRXOGFRQWULEXWHWR-DSDQHVHFXOWXUH²DUHFXUULQJWKHPH ZLWKPDQ\-DSDQHVHZULWHUVRQWUDQVODWLRQ2WKHUDGYRFDWHVRIµIRUHLJQL]LQJ¶WUDQVODWLRQVVHH675$7(*,(6 2)75$16/$7,21 LQFOXGH,NXWD&KǀNǀ± LQKLV\RXWK.RPL\D7R\RWDND± DQG .DZDPRUL


3DJH

7RGD\WKHOLWHUDODSSURDFKVHHPVWREHWKHPRUHSRSXODUIRUPLQ-DSDQDQGIUHHWUDQVODWLRQLVJHQHUDOO\ FRQVLGHUHGLQDUDWKHUQHJDWLYHOLJKW+RZHYHUXQOLNHWKHµQHROLWHUDOLVP¶RIVXFKWUDQVODWRUVDV1RJDPL ZKLFKDLPHGDWHQULFKLQJWKH-DSDQHVHODQJXDJHWKHDSSURDFKDGRSWHGE\PDQ\FRQWHPSRUDU\WUDQVODWRUVZKR DUHZLOOLQJWRVDFULILFHQDWXUDO-DSDQHVHIRUµILGHOLW\¶WRWKHRULJLQDOLVEDVHGVLPSO\RQWKHEHOLHIWKDWOLWHUDO WUDQVODWLRQHTXDWHVZLWKIDLWKIXOWUDQVODWLRQ7KHUHLVDOVRFRQVLGHUDEOHWROHUDQFHRIOLWHUDOWUDQVODWLRQRQWKH SDUWRIUHDGHUVZKRKDYHORQJEHHQDFFXVWRPHGWRDIRUPRI-DSDQHVHZKLFKLVKHDYLO\LQIOXHQFHGE\&KLQHVH DQGZKRH[SHFWWUDQVODWLRQVWREHXQLGLRPDWLF$IXUWKHUIDFWRULVWKHSUDFWLFHLQ-DSDQHVHVFKRROVRIXVLQJ OLWHUDOWUDQVODWLRQDVDPHDQVRIOHDUQLQJ(QJOLVKJUDPPDUDKDELWZKLFKLVFDUULHGWKURXJKLQWRWKH SURIHVVLRQDOOLIHRIWUDQVODWRUV %RRNVRQWUDQVODWLRQLQ-DSDQIDOOLQWRWZREURDGFDWHJRULHVDFDGHPLFZRUNVWKDWDGRSWDQDSSURDFKEDVHGRQ FRPSDUDWLYHOLWHUDWXUHDQGPRUHSRSXODUZRUNVVXFKDVµKRZWR¶ERRNVDQGH[DPLQDWLRQVRIPLVWUDQVODWLRQV 0DQ\ZRUNVKDYHVWURQJVRFLROLQJXLVWLFRYHUWRQHVIRFXVLQJRQFXOWXUDOGLIIHUHQFHVEHWZHHQ-DSDQDQGWKH :HVWDVPDQLIHVWLQODQJXDJH/LQJXLVWLFVFKRODUVLQ-DSDQKDYHSDLGVFDQWDWWHQWLRQWRWUDQVODWLRQDQG WUDQVODWLRQWKHRU\LVQRWUHJDUGHGDVDGLVFLSOLQHLQLWVRZQULJKW 2QWKHLQWHUSUHWLQJVLGHWKHVKDYHZLWQHVVHGWKHILUVWWHQWDWLYHEXWSURPLVLQJUHVHDUFKLQWRLQWHUSUHWLQJLQ -DSDQSDUWLFXODUO\WKHFRJQLWLYHDVSHFWV²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¶ RUJDQL]DWLRQVWUDLQLQJLQVWLWXWLRQVDQGMRXUQDOVDLPHGDWDVSLULQJWUDQVODWRUVDQGLQWHUSUHWHUV7KH-DSDQ 6RFLHW\RI7UDQVODWRUVZDVIRXQGHGLQDQGFRPSULVHVPRVWO\OLWHUDU\DQGDFDGHPLFWUDQVODWRUV7KH-DSDQ 7UDQVODWLRQ$VVRFLDWLRQLQFRUSRUDWHGLQFRQVLVWVRIERWKFRUSRUDWHDQGLQGLYLGXDOPHPEHUVDVGRHVWKH -DSDQ7UDQVODWLRQ)HGHUDWLRQIRUPHGLQ7KH1DWLRQDO7UDQVODWLRQ,QVWLWXWHRI6FLHQFHDQG7HFKQRORJ\ ZKLFKZDVIRXQGHGLQKDGDERXWPHPEHUVLQDGPLWWHGRQWKHEDVLVRIVXFFHVVLQWKH /LFHQVHG7HFKQLFDO7UDQVODWRUV¶4XDOLILFDWLRQWHVW7KH-DSDQHVHDUHDPRQJVWWKHZRUOG¶VOHDGHUVLQ GHYHORSLQJPDFKLQHWUDQVODWLRQ 7ZRHYHQWVWKDWV\PEROL]HGWKHµFRPLQJRIDJH¶RILQWHUSUHWLQJLQ-DSDQZHUHLQWHUSUHWLQJGXULQJWKH 7RN\R2O\PSLFVDQGWKHVLPXOWDQHRXVLQWHUSUHWLQJRQWHOHYLVLRQGXULQJWKHODQGLQJRQWKHPRRQE\$PHULFDQ DVWURQDXWV,QWHUSUHWLQJLQ-DSDQWRGD\LVDKLJKO\VSHFLDOL]HGSURIHVVLRQZLWKVSHFLDOLVWLQWHUSUHWHUVLQWKH ZKROHVSHFWUXPRILQWHUSUHWLQJWDVNVIURPWRXUJXLGHLQWHUSUHWLQJWROLDLVRQLQWHUSUHWLQJEURDGFDVWLQWHUSUHWLQJ DQGFRQIHUHQFHLQWHUSUHWLQJ

)XUWKHUUHDGLQJ %HNNX*RRGPDQ.DPHL.DWǀDE.DZDPXUD.HHQH5RODQG 6XJLPRWR7DNHGD

0$6$20,.21'2$1'-8'<:$.$%$<$6+,

%LRJUDSKLHV %$%$6DMǌUǀ± ,QZKLOHVWLOOD\RXQJWUDLQHH%DEDEHFDPHWKHILUVW'XWFKWUDQVODWRU LQWHUSUHWHULQ-DSDQWREHEDVHGLQWKHFDSLWDO(GRSUHVHQWGD\7RN\R UDWKHUWKDQLQ1DJDVDNL2QHRIWKH PRVWJLIWHGOLQJXLVWVRIWKHWLPHVSHDNLQJERWK'XWFKDQG5XVVLDQKHZDVWKHNH\ILJXUHLQ(GRLQWUDQVODWLQJ VFLHQWLILFZRUNVLQWHUSUHWLQJLQGLSORPDWLFQHJRWLDWLRQVDQGWHDFKLQJIRUHLJQODQJXDJHV%DEDZDVLQFKDUJHRI WKH



3DJH

QHZO\HVWDEOLVKHGQDWLRQDOLQVWLWXWLRQIRUWUDQVODWLRQDQGSOD\HGDOHDGLQJUROHLQWUDQVODWLQJWKH.ǀVHLVKLPSHQ 1HZ9ROXPHVIRUWKH3XEOLF:HOIDUH HQF\FORSHGLD 025,2JDL± JHQHUDOO\NQRZQDV2JDL1RYHOLVWFULWLFDQGSULQFLSDOWUDQVODWRURI2PRNDJH 9HVWLJHV DQDQWKRORJ\RIPRVWO\*HUPDQSRHWU\UHJDUGHGDVWKHPDLQLQVSLUDWLRQIRUWKH-DSDQHVH 5RPDQWLFPRYHPHQW2JDLZDVDOVRWKHILUVWWRLQWURGXFHWKH,PSUHVVLRQLVWVWR-DSDQWKURXJKWUDQVODWLRQ+LV WUDQVODWLRQRI+DQV&KULVWLDQ$QGHUVHQ¶V,PSURYLVDWRUHQSXEOLVKHGVHULDOO\EHWZHHQDQGXQGHUWKH WLWOH6RNN\ǀVKLMLQLVUHJDUGHGDVHYHQEHWWHUWKDQWKHRULJLQDO2JDLIRFXVHGRQFRQYH\LQJWKHPHDQLQJ DFFXUDWHO\LQJRRG-DSDQHVHDQGDGGHGZRUGVDQGUHPRYHGVHFWLRQVRIWKHRULJLQDOWRLQFUHDVHWKHLPSDFWRU DFKLHYHDFRQFLVHVW\OH 0272.,


3DJH

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

5RPHWKLUGFHQWXU\%&WRILIWKFHQWXU\$' &ODVVLFDO5RPH 'XULQJWKHWKLUGFHQWXU\%&5RPDQVROGLHUVZKRZHUHUHSDWULDWHGDIWHUJDUULVRQGXW\LQWKH*UHHN(DVWZHUH FRPLQJEDFNWR5RPHZLWKDWDVWHIRU*UHHNDPXVHPHQWVSDUWLFXODUO\WKHDWUH(QWHUSULVLQJZULWHUVDGGUHVVHG WKLVQHHGE\XVLQJIUHHWUDQVODWLRQDQGDGDSWDWLRQIURP*UHHNVRXUFHV7KHILUVWRIWKHVHWUDQVODWRUVZDV /,9,86$1'521,&86F±%& ZLWKD/DWLQYHUVLRQRIWKH2G\VVH\%& DQGDQXPEHURISOD\V FRPPLVVLRQHGIRUWKH5RPDQ*DPHVRI%&*QDHXV1DHYLXVF±F%& WUDQVODWHGVHYHUDO*UHHN SOD\VDERXWWKH7URMDQ:DUSXEOLFL]LQJWKHOHJHQGWKDWWKH5RPDQVZHUHGHVFHQGHGIURPWKH7URMDQVZKRIOHG ZLWK$HQHDV7KHIDWKHURI/DWLQOLWHUDWXUH4XLQWXV(QQLXV±%& WKRXJKPRVWIDPRXVIRUKLV $QQDOHVDOVRWUDQVODWHGIRUWKHWKHDWUH:KHUH/LYLXVKDGZRUNHGRQFRPPLVVLRQ(QQLXVZRUNHGXQGHUWKH SDWURQDJHRI6FLSLR$IULFDQXVWKH(OGHUZKRKDGFRQTXHUHG&DUWKDJHDQG0DUFXV&DWRNQRZQDVµWKH &HQVRU¶7KHWUDGLWLRQRIWUDQVODWLRQIURP*UHHNWKHDWUHZDVFRQWLQXHGE\(QQLXV¶VQHSKHZ3DFXYLXVF± %& ZKRSOD\HGDOHDGLQJUROHLQWXUQLQJ/DWLQLQWRDOLWHUDU\ODQJXDJHDQGE\&DHFLOLXV6WDWLXVG %& UHJDUGHGDVWKHJUHDWHVWFRPLFZULWHURIKLVWLPH:LOOLDPV± $OWKRXJKWKHPDMRULW\RIHDUO\ZRUNKDVEHHQORVWZHGRKDYHDFRQVLGHUDEOHERG\RISOD\VIURPWKHWZRPRVW IDPRXVRIWKHVHHDUO\GUDPDWLVWV3ODXWXVG%& DQG3XEOLXV7HUHQWLXV$IHUNQRZQDV7HUHQFH"±" %& 3ODXWXVDQG7HUHQFHDUHSUREDEO\WKHZRUOG¶VILUVWFRPPHUFLDOOLWHUDU\WUDQVODWRUV7HUHQFH¶V SURGXFWLRQVZHUHEDVHGRQWKH*UHHNSOD\VRI0HQDQGHUDQG$SROORGRUXVRI&DU\VWXV+HZDVDVRPHZKDW PRUHUDGLFDOIRUHUXQQHURIWKHVHYHQWHHQWKFHQWXU\%HOOHV,QILGq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±%& DQG+RUDFH±%& DQGWKHVWDWHVPDQDQGMXULVW &,&(52±%&



3DJH

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¶VSKLORVRSKLFDOZULWLQJVWKHPRVWLPSRUWDQWEHLQJWKHGLVFXVVLRQVRI(SLFXUHDQLVPLQWKH'HILQLEXV ERQRUXPHWPDORUXP7KH(QGVRI*RRGDQG(YLO ,,LY±Y2IHTXDOLPSRUWDQFHWRWKHGHYHORSPHQWRI WUDQVODWLRQLV+RUDFHZKRVHGLVFXVVLRQRIOLWHUDU\LPLWDWLRQLQWKH$UV3RHWLFD7KH$UWRI3RHWU\ KDVKDGDQ LQIOXHQFHRQWUDQVODWLRQRXWRIDOOSURSRUWLRQWRKLVLQWHQW7KHWUDGLWLRQDOWKHPHRIWUDQVODWRUDVULYDOWRWKH DXWKRULVGLVFXVVHGDWOHQJWKLQ(SLVWOH9,,L[RI3OLQ\WKH


3DJH

DQG*UHHNGRFWULQDOWH[WVWUDQVODWHGLQWR/DWLQLQFUHDVHGDQGWKHVHZHUHRIWHQDQRQ\PRXV7KHODWHIRXUWK FHQWXU\DQGWKHHDUO\ILIWKDUHLQPDQ\ZD\V5RPH¶VVHFRQGFODVVLFDOSHULRGFHQWUHGRQ5RPHDQG1RUWK $IULFD,WVHHPVIDLUO\FHUWDLQWKDWWKH,PSHULDO7UDQVODWLRQ2IILFHIRXQGHGE\(PSHURU$XJXVWXVZDVVWLOOLQ RSHUDWLRQDQGVRPHWKLQJVLPLODUZDVWDNLQJVKDSHLQWKH3DSDODGPLQLVWUDWLRQ)URPWKHHDUO\IRXUWKFHQWXU\ DYHU\VNLOOHGEDQGRIWUDQVODWRUVZDVFHQWUHGRQ5RPHDQGLWVVFKRROV7KH\ZHUHSKLORVRSKHUVDQG WKHRORJLDQVZKRWRRNWUDQVODWLRQIURPZKDWZDVJRLQJRQLQ*UHHNDVQHFHVVDU\WRWKHLUHQWHUSULVH$PRQJWKH PRVWLPSRUWDQWRIWKHVHDUHWKHSKLORVRSKHU0DULXV9LFWRULQXVF± 5XILQXV"± ²DQ HQWKXVLDVWIRU2ULJHQZKRKDGDIDPRXVTXDUUHOZLWK-HURPHWKHSKLORVRSKHU0DULXV0HUFDWRUF± DQGDODUJHQXPEHURIDQRQ\PRXVFKXUFKPHQ 7KH&KULVWLDQWUDGLWLRQFXOPLQDWHVLQWKHZRUNRI6W-(520(±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¶VZDUQLQJVDERXWUHOLJLRXV LQQRYDWLRQDQGSDVWRUDOGLIILFXOWLHVFDXVHGE\µFKDQJLQJ¶IDPLOLDUWH[WV7RWKLV-HURPHUHSOLHVWKDW*RGLVRQ WKHVLGHRIWKHVFKRODU.HOO\ 5RPDQWUDQVODWLRQFRPHVWRDQHQGDQGPHGLHYDOWUDQVODWLRQEHJLQVZLWK0DQOLXV$QLFLXV6HYHULQXV %2(7+,86$'±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¶VLGHDOVRIWUXWK LQWUDQVODWLRQKHKDUNVEDFNWRWKHPHGLFDOWUDQVODWRUVRIWKHWLPHRI&LFHUR7KHLUOLWHUDOLW\KDGEHHQ FRQGHPQHGE\&LFHURDQGKLVNLQGEXWWKHLUUKHWRULFDOWUDLQLQJKDGPDGHWKHPDZDUHWKDWGLIIHUHQWWRSLFV GHPDQGHGGLIIHUHQWVW\OHVDQGWKDWWKLVVSLOOHGRYHULQWRWUDQVODWLRQ&KDGZLFN±

7KH0LGGOH$JHVILIWKWRILIWHHQWKFHQWXULHV 3ULQFLSOHVRI/DWLQWUDQVODWLRQ ,QSUDFWLFH-HURPH¶VPHWKRGRIWUDQVODWLQJWKH%LEOHSURYHGPRUHLQIOXHQWLDOWKDQWKHPHWKRGVKHXVHGDQG DGYRFDWHGLQRWKHUW\SHVRIWUDQVODWLRQ7RJHWKHUZLWK%RHWKLXVKHVHWWKHWRQHIRUWUDQVODWLRQLQWR/DWLQ /LWHUDU\WUDQVODWLRQZLWKLWVUKHWRULFDOSRHWLFLPSHUDWLYHVKDGGLVDSSHDUHGDQGWUDQVODWLRQZDVQRZLQWKH KDQGVRISKLORVRSKHUVDQGWKHRORJLDQV$QGDVVFLHQWLILFODQJXDJHOHQGVLWVHOIQDWXUDOO\WR3ODWRQLVWLGHDOVWKH JRDOVRRQEHFDPHWUXWKLQ6HQHFD¶VVHQVHFRQIRUPLW\EHWZHHQODQJXDJHFRQFHSWDQGWKLQJ/LWHUDOWUDQVODWLRQ ZDVJHQHUDOO\VHHQDVWKHZD\WRWUXWKWKRXJKWKHUHZHUHDIHZSURWHVWVIURPWKRVHWUDLQHGLQDQFLHQWUKHWRULF IRUH[DPSOH3RSH*UHJRU\WKH*UHDW $VWKH:HVWHUQ5RPDQ(PSLUHFUXPEOHGWKHVHQVHRIXUJHQF\LQWKHZRUNRI%RHWKLXVFRQWLQXHGWRJURZ &DVVLRGRUXV"±" D5RPDQVHQDWRUIRXQGHGWKH9LYDULXPDPRQDVWHU\VSHFLDOL]LQJLQSKLORVRSKLFDO DQG



3DJH

WKHRORJLFDOWUDQVODWLRQIURP*UHHN+HLQWHQGHGWRFDUU\RQ%RHWKLXV¶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± ZKRWUDQVODWHG*UHJRU\WKH*UHDWLQWR*UHHNDQG-RKQ6FRWXV (ULJHQDF±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±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±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± 7KHEHVWNQRZQWUDQVODWRUVRIWKLVJURXSZRUNHGXQGHU5D\PRQG¶VVXFFHVVRU$UFKELVKRS-RKQIRUH[DPSOH



3DJH

'RPLQLFXV*XQGLVDOYL-RKQRI6HYLOOH*(5$5'2)&5(021$F± 3HWHURI7ROHGRDOORIZKRP WUDQVODWHG$ULVWRWOHDQGWKH$UDEFRPPHQWDWRUV$YHUURHVDQG$YLFHQQDVHH63$1,6+75$',7,21 7KHUH ZHUHPDQ\WUDQVODWRUVZRUNLQJRXWVLGH7ROHGRIRUH[DPSOH+(50$112)&$5,17+,$3ODWRRI7LYROL $GHODUGRI%DWKDQG0LFKDHO6FRWWKHODWWHUZDVZRUNLQJDVODWHDV$FRXSOHRI/DWLQYHUVLRQVRIWKH 4X¶UƗQZHUHDOVRSUHSDUHGGXULQJWKLVSHULRG $ULVWRWOHDQGRWKHU*UHHNSKLORVRSKHUVZHUHLQWURGXFHGLQWRWKHXQLYHUVLWLHVRIWKHWZHOIWKDQGWKLUWHHQWK FHQWXULHVWKURXJK/DWLQYHUVLRQVRIWKH$UDELFWUDQVODWLRQV-RXUGDLQ JLYHVDIXOOOLVW,QHYLWDEO\WKH LQFXUVLRQRI$ULVWRWOHLQ$UDEGUHVVFDXVHGLQWHQVHGLVTXLHWLQRUWKRGR[FLUFOHVDQG$ULVWRWOHZDVEDQQHGLQ VHYHUDOPDMRUSODFHVDVDSDJDQLQIOXHQFH$ULVWRWHOLDQVUHSOLHGE\WUDQVODWLQJGLUHFWO\IURPWKH*UHHNWH[WV 7KHJUHDWHVWRIWKHWZHOIWKFHQWXU\WUDQVODWRUVIURPWKH*UHHNZDV-DPHVRI9HQLFHIO± +HZDV UHVSRQVLEOHIRUFRPSOHWLQJWKH/DWLQYHUVLRQRI$ULVWRWOH¶V2UJDQRQWKH3K\VLFV0HWDSK\VLFV'H$QLPDDQG 3DUYD1DWXUDOLD7KHRQO\/DWLQYHUVLRQVRI3ODWRFDPHIURP+HQULFXV$ULVWLSSXVZKRVH0HQRDQG3KDHGR DSSHDUHGLQWKHODWHV 7ZRQRUWKHUQHUVVWDQGRXWDVLPSRUWDQWWUDQVODWRUVRIWKLVSHULRG5REHUW*URVVHWHVWHELVKRSRI/LQFROQDQG SUREDEO\ILUVWFKDQFHOORURI2[IRUGWUDQVODWHGWKH1LFRPDFKHDQ(WKLFV" DQGWKH'H&DHOR+HDOVR WUDQVODWHGDQXPEHURI*UHHNFRPPHQWDULHVRQ$ULVWRWOHSDUWLFXODUO\WKRVHRI6LPSOLFLXV(YHQPRUH LPSRUWDQWZDVWKH)OHPLVK'RPLQLFDQ:,//,$02)02(5%(.("± ZKRUHYLVHGDQXPEHURIWKH NQRZQWUDQVODWLRQVRI$ULVWRWOHDQGDGGHGWRWKH/DWLQFDQRQWKH3ROLWLFVDQGWKH3RHWLFV$PRQJWKH*UHHN FRPPHQWDULHVRI$ULVWRWOHKHWUDQVODWHG$OH[DQGHURQWKH0HWHRURORJ\DQGWKH'HVHQVX$PPRQLXVRQWKH 'HLQWHUSUHWDWLRQH6LPSOLFLXVRQWKH&DWHJRULHVDQGWKH'H&DHORDQG7KHPLVWLXVRQWKH'H$QLPD,QWKH 'RPLQLFDQVFKRROVRISKLORVRSK\DQGWKHRORJ\WKH0RHUEHNHYHUVLRQVUHSODFHGPRVWRWKHUV'¶$OYHUQ\

7KH5HQDLVVDQFHIRXUWHHQWKWRVL[WHHQWKFHQWXULHV ,QWUDQVODWLRQDVLQRWKHUPDWWHUVUHODWLQJWRFODVVLFDOWUDGLWLRQVWKH5HQDLVVDQFHZDVDWLPHRIUHWKLQNLQJQRWD WLPHRIGLVFRYHU\RIWKHSDVW%HFDXVHOLWHUDWXUHZDVµSKLORVRSK\MRLQHGWRHORTXHQFH¶DV&LFHURKDGWDXJKW 5HQDLVVDQFHWUDQVODWLRQWKHRU\IROORZHG&LFHURQLDQQRUPVDQG+RUDFH¶V$UV3RHWLFD± VXIIHUHGD UDGLFDOUHUHDGLQJFI%HQ-RQVRQ¶VWUDQVODWLRQ )RUEHLQJDSRHWWKRXPDLVWIHLJQHFUHDWH1RWFDUHDVWKRXZRXOGVWIDLWKIXOO\WUDQVODWH7RUHQGHU ZRUGIRUZRUG ,QSULQFLSOHOLWHUDOLW\KHUHSUHFOXGHVILGHOLW\LQ+RUDFH¶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± LQ)ORUHQFH %HFDXVHVXFKVFKRROVZHUHHVVHQWLDOO\SKLORVRSK\VFKRROVZLWKKLJKUHVSHFWIRUUKHWRULFWKHWUDQVODWRUV FRPLQJIURPWKHPZHUHEDVLFDOO\SKLORVRSKHUV7KHILUVW+XPDQLVWYHUVLRQRI$ULVWRWOHZDVE\/HRQDUGR %UXQL$UHWLQR± ZKRVHYHUVLRQZDVSUHIDFHGE\DSXJQDFLRXVXSGDWLQJRI&LFHUR¶V WUDQVODWLRQSULQFLSOHV.HOO\ ,WZDVILUVWSULQWHGLQ+HDOVRWUDQVODWHGVRPH3ODWRWKHKLVWRU\RI ;HQRSKRQDQGWKHVHUPRQVRI%DVLOWKH*UHDW,QWKHV0DUVLOLR),&,12± PDGHZKDWZDVWR UHPDLQWKHEDVLF+XPDQLVW/DWLQYHUVLRQRI3ODWR,WZDVILUVWSULQWHGLQ2WKHUWUDQVODWRUVRI3ODWRDQG $ULVWRWOHLQFOXGHG*HRUJLR9DOOD± 7KHRGRUH*D]D± DQG$QJHOR3ROL]LDQR± 7UDQVODWRUVRISKLORVRSK\DOVRWUDQVODWHGPHGLFLQHDQGVFLHQFHRIWHQSULQWLQJ/DWLQDQG*UHHNRQIDFLQJ SDJHV%RWK*DOHQDQG+LSSRFUDWHVZHUHWUDQVODWHGE\1LFRORGD5HJJLR± $VWKH+XPDQLVW PRYHPHQW



3DJH

VSUHDGRXWVLGH,WDO\VRGLGWUDQVODWLRQIURP*UHHN2QHRIWKHEHVWNQRZQWUDQVODWRUVRIWKLVHDUO\SHULRGZDV WKH(QJOLVKPDQ7KRPDV/LQDFUH± ZKRVSHFLDOL]HGLQ*DOHQDQGSUHSDUHGWKHJURXQGIRUPHGLFDO WUDLQLQJLQ(QJODQG 7HFKQLFDODQGOLWHUDU\WUDQVODWRUVZHUHRIWHQWKHVDPHSHRSOHDVVW\OLVWLFWUDLQLQJGLGQRWSULYLOHJHRQHJHQUH RYHUDQRWKHU$VZHOODVWKHSKLORVRSKLFDODQGUHOLJLRXVWH[WVPHQWLRQHGDERYH/HRQDUGR%UXQL$UHWLQRIRU H[DPSOHDOVRWUDQVODWHG+RPHULQWR/DWLQ$PRQJWKLVILUVWZDYHRI+XPDQLVWVZHUH/RUHQ]R9$//$ F± *HRUJLXV7UDSH]XQWLXV± DQG3ROL]LDQRDOORIZKRPWUDQVODWHGKLVWRU\OLWHUDWXUHDQG WKH*UHHN)DWKHUV *UDPPDUDQGOLWHUDU\WKHRU\ZHUHRILQWHQVHLQWHUHVW/RQJLQXV¶2QWKH6XEOLPHZDVIUHTXHQWO\WUDQVODWHG :HLQEHUJ&RVWD ,WLVHVVHQWLDOWRUHPHPEHUWKDWDWILUVW/DWLQWUDQVODWLRQZDVHPEHGGHGLQWKH 0LGGOH$JHV%\WKHVWKHVWDQGDUGRI/DWLQKDGEHFRPHOHVVUHPLQLVFHQWRIWKHODWHPHGLHYDOVW\OHIRXQG LQSHRSOHOLNH/LQDFUHRU7KRPDV0RUH± 0RVWRIWKHJUHDWYHUQDFXODUWUDQVODWRUVOLNHeWLHQQH 'ROHW± DQG0HODQFKWKRQ± SURGXFHG&LFHURQLDQ/DWLQYHUVLRQVRI*UHHNZRUNV 3XEOLVKHUVOLNH)UREHQRI$QWZHUSDQGWKH(VWLHQQHIDPLO\RI3DULVIORXULVKHGDVHGLWRUVDQGHYHQGLGVRPH WUDQVODWLRQRIWKHLURZQ 7KLVVHFRQGZDYHRIWUDQVODWRUVGLGQRWLJQRUHVFLHQFH1RUZHUHWKH\DQ\PRUHVSHFLDOL]HGWKDQWKHLU SUHGHFHVVRUV7\SLFDORIWKHVH+XPDQLVWVFLHQWLVWVZDV-RKDQQ+DJHQEXW-RDQQHV&251$5,86± 'HDQRI0HGLFLQHDW-HQD+HZDVDSUROLILFWUDQVODWRUIURPWKH*UHHN&RUQDULXVLVPRVWIDPRXVDVDPHGLFDO ZULWHUKLVWUDQVODWLRQRI+LSSRFUDWHV EHLQJKLVEHVWNQRZQ$PRQJKLVYHUVLRQVDUHWKHFRPSOHWHZRUNV RI%DVLOWKH*UHDW VRPH3ODWRVRPH*DOHQDQGVRPH6\QHVLXV,QPDWKHPDWLFVWKH%2(7+,86 WUDQVODWLRQRI(XFOLG¶V(OHPHQWVKDGVHYHUDOPRGHUQYHUVLRQVWRFRPSHWHZLWK7KHPRVWLPSRUWDQWRIWKHVH ZDVWKDWE\)HGHULFR&RPPDQGLQR± UHWUDQVODWHGPDQ\WLPHVLQWRPRGHUQODQJXDJHV &RPPDQGLQR¶VZRUNVFRYHUWKHZKROHUDQJHRI*UHHNPDWKHPDWLFVLQFOXGLQJWKH&RQLFVRI$SROORQLXVRI 3HUJH VRPH$UFKLPHGHVDQGVRPH3WROHP\$QRWKHULQIOXHQWLDOWUDQVODWRURIPDWKHPDWLFVZDVWKH *HUPDQ-HVXLW&KULVWRSKH&ODYLXV± +LV(XFOLGDSSHDUHGLQDQGZDVIROORZHGE\YDULRXV ERRNVRQFDOHQGDUUHIRUP%\SUDFWLFDOO\WKHZKROHRI*UHHNVFLHQFHDQGPHGLFLQHKDGEHHQWUDQVODWHG LQWR/DWLQ $WDWLPHZKHQPRVWSRHWVZHUHSRHWDHXWULXVTXHOLQJXDHµSRHWVRIERWKODQJXDJHV¶ WUDQVODWLRQEHWZHHQWKH YHUQDFXODUVDQG/DWLQEHFDPHYHU\FRPPRQ,WEHJDQLQWKHWLPHRI)UDQFHVFR3HWUDUFK± KLPVHOI ERWKWUDQVODWRUDQGWUDQVODWHG$V,WDO\ZDVWKHFHQWUHRI(XURSHDQFXOWXUHWKLVVRUWRIWUDQVODWLRQFDPHDERXW SUHWW\FDVXDOO\DVDFRPSOLPHQWSDLGE\RQHZULWHUWRDQRWKHU/HRQDUGR%UXQL$UHWLQRIRULQVWDQFHWUDQVODWHG %RFFDFFLR¶V'HFDPHURQLQWR/DWLQLQDERXW3UREDEO\WKHPRVWLQIOXHQWLDOWUDQVODWLRQVZHUHWKRVHRI 0DFKLDYHOOLGRQHLQWKHVE\6\OYHVWUR7HJOLIO ,Q(QJODQG%DUWKRORPHZ&OHUNH"± WUDQVODWHG&DVWLJOLRQH¶V,O&RUWHJLDQRLQWR/DWLQZLWKDVHULHV RISUHIDFHVLOOXVWUDWLQJKRZ(QJODQGKDGFRPHRIDJH$WWKDWWLPHKDUGO\DQ\(QJOLVKOLWHUDWXUHKDGEHHQ WUDQVODWHGLQWR/DWLQDSDUWIURPUHOLJLRXVOLWHUDWXUHWKHUHZDVVRPH&KDXFHUWUDQVODWHGE\6LU)UDQFLV .\QDVWRQ7KHUHLVDIXOOGLVFXVVLRQRIWKLVLVVXHLQ%LQQV)UDQFHKRZHYHUWUDQVODWHGLWVSRHWVIUHHO\LQ SDUWLFXODUWKHSRHWVRIWKH3OpLDGH0RVWRIWKHWUDQVODWRUVUHPDLQDQRQ\PRXV7KHUHZDVOLWWOHDFWLYLW\RIWKLV W\SHHOVHZKHUHLQ(XURSH%ULHVHPHLVWHU 7KH%LEOH 2IPRUHLPPHGLDWHLQWHUHVWEHFDXVHRILWVSROHPLFDOYDOXHZDV%LEOHWUDQVODWLRQ7KH+XPDQLVWVGLGKDYH FRQVLGHUDEOHTXDOPVDERXWWKHTXDOLW\RIWKH/DWLQLQWKH9XOJDWHDQGWKHUHZHUHZHOOIRXQGHGGRXEWVDERXW WKH*UHHNWH[W(UDVPXVF± SXEOLVKHGD*UHHNWH[WRIWKH1HZ7HVWDPHQWZLWKKLVRZQ/DWLQ YHUVLRQLQ7KHUHIROORZHGD/DWLQYHUVLRQE\6DQWL3DJQLQL ZKLFKUHPDLQHGVWXGLRXVO\QHXWUDO DQGOLWHUDO+LV2OG7HVWDPHQWZDVGRQHIURPWKH+HEUHZQRWWKH*UHHN7KHQH[W/DWLQYHUVLRQRIWKH%LEOH E\6HEDVWLDQ0QVWHURI%DVOH ZDVLQEHWWHU/DWLQKHWRRNWKH2OG7HVWDPHQWIURP



3DJH

WKH+HEUHZDQGUHSULQWHGWKH(UDVPXV1HZ7HVWDPHQW7KHVHOLWHUDOELEOHVORVWJURXQGEHIRUHWKH=XULFKELEOH RIDVTXDUHO\3URWHVWDQWYHUVLRQHGLWHGE\/HR-XG,QDQRWKHU5HIRUPHU6HEDVWLDQ&DVWHOOLR SURGXFHGDELEOHLQDOPRVWFODVVLFDO/DWLQ7KHPRVWLPSRUWDQWRIWKH/DWLQELEOHVZDVE\7KHRGRUHGH%q]H VXFFHVVRUWR&DOYLQ7KRXJKDELEOHRILPPHQVHVFKRODUVKLSLWVRRQDFTXLUHGDUHSXWDWLRQIRUWZLVWLQJWKH ELEOLFDOWH[WWRWKHGLFWDWHVRI&DOYLQLVP7KHODVWRIWKH5HIRUPDWLRQ/DWLQELEOHVZDVWKDWRI7UHPHOOLXVDQG -XQLXV $PRQJ/DWLQYHUVLRQVRIPLQRULQWHUHVWLVWKH1HZ7HVWDPHQWLQYHUVHE\-RKQ%ULGJHV%LVKRS RI2[IRUG

7KH$JHRI5HDVRQ± ,QJHQHUDO+XPDQLVWQRUPVRIWUDQVODWLRQUHPDLQHGLQYRJXHDQGWUDQVODWLRQLQWR/DWLQZDVVSDUHGWKH H[FHVVHVRIWKHIUHHWUDQVODWLRQVFXUUHQWLQ)UDQFHDQG(QJODQG7KLVSHULRGLVDOVRQRWDEOHIRUWKHDSSHDUDQFH RIELOLQJXDO/DWLQGLFWLRQDULHV,Q(QJODQGRQHRIWKHPRVWH[WHQVLYHZDVE\$GDP/LWWOHWRQZKLFKLQFOXGHG DQ(QJOLVK/DWLQVHFWLRQ6LPLODUGLFWLRQDULHVFDPHRXWLQRWKHU(XURSHDQFRXQWULHV7KHUHZHUHDOVRDVHULHV RIYHUVHGLFWLRQDULHVIROORZLQJLQWKHWUDGLWLRQRIWKH+XPDQLVWVW\OLVWLFKDQGERRNVRU(OHJDQWLDH7KH\ FXOPLQDWHGLQ)UDQoRLV1RsO¶V*UDGXVDG3DUQDVVXP 7HFKQLFDOWUDQVODWLRQ 7RDODUJHH[WHQWWKHDQFLHQW*UHHNZULWHUVZHUHVWLOOUHOHYDQW(XFOLG¶V*HRPHWU\ZDVWUDQVODWHGVHYHUDO WLPHVLQ(QJODQGLQE\,VDDF%DUURZ3URIHVVRURI*UHHNDQGWKHQ0DWKHPDWLFVDW&DPEULGJHDQGLQ E\'DYLG*UHJRU\DPHPEHURI1HZWRQ¶VFLUFOH-RKQ:DOOLVDPHPEHURIWKH5R\DO6RFLHW\WUDQVODWHG $UFKLPHGHVLQ7KHUHZHUHPDQ\YHUVLRQVRI+LSSRFUDWHVPRVWRIWKHPDQRQ\PRXV7KHEHVWNQRZQ ZDVPDGHLQE\-RKQ)UHLQGD5R\DOSK\VLFLDQSODLQO\IRUWKHLQVWUXFWLRQRIPHGLFDOVWXGHQWV $VDQLPSRUWDQWFHQWUHRISXEOLFDWLRQIUHHRIFHQVRUVKLS$PVWHUGDPKDGLWVRZQJURXSRIMREELQJWUDQVODWRUV 7KHVHZHUHQRWERXQGE\DQ\ODZRIFRS\ULJKWDQGWUDQVODWHGDOOWKHODWHVWZRUNLQDOOGLVFLSOLQHV*HQHYD VHHPVWRKDYHKDGDVLPLODUJURXSRIVFLHQWLILFWUDQVODWRUVDQGWKHUHZDVDOZD\VWKHXQHPSOR\HGXQLYHUVLW\ JUDGXDWHZLOOLQJWRIUHHODQFHDQRQ\PRXVO\%XWWKHPRVWLPSRUWDQWWUDQVODWLRQVFDPHIURPSUDFWLWLRQHUVZKR VDZWUDQVODWLRQDVSDUWRIWKHLUMRERISXEOLFL]LQJWKHODWHVWWKHRULHVDQGUHVHDUFK)UDQVYDQ6FKRRWHQZKR WUDQVODWHG'HVFDUWHV¶*pRPpWULHLVDJRRGH[DPSOH $VYHUQDFXODUODQJXDJHVEHJDQWRFRPSHWHZLWK/DWLQWUDQVODWLRQLQWR/DWLQWRRNRQDUDWKHUGHVSHUDWH LPSRUWDQFH7KHUHLVDZKROHUDQJHRILQQRYDWLYHZRUNVLQDOFKHP\IRUH[DPSOHWKHZRUNVRIWKHP\WKLFDO µ%DVLO9DOHQWLQH¶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¶VWUDQVODWRUZDVDSXSLO6DPXHO&ODUNH ZKRLVDOVRQRWDEOHIRUDQLPSRUWDQW/DWLQYHUVLRQRI5RKDXOW¶V/DSK\VLTXH ZKLFKEHFDPHWKH SUHVFULEHGWH[WIRUSK\VLFVDW&DPEULGJH $IWHUVFLHQWLILFWUDQVODWLRQLQWR/DWLQEHFDPHVSRUDGLF$WWLPHVLWZDVQHFHVVDU\DQG/HHXZHQKRHN¶V 'XWFKERRNVRQWKHPLFURVFRSHZHUHWUDQVODWHGIRUWKHLQWHUQDWLRQDOPDUNHWDVZHUHERRNVRQGLHWE\WKH 6FRWWLVKSK\VLFLDQ*HRUJH&KH\QH7UDQVODWLRQRIVFLHQWLILFPDWHULDOLQWR/DWLQFHDVHGDERXW



3DJH

5HOLJLRXVWUDQVODWLRQ :KDWUHOLJLRXVWUDQVODWLRQWKHUHZDVGXULQJWKDWSHULRGWHQGHGWRUHPDLQWHFKQLFDO7UXHWKHUHZHUHYHUVLRQVRI WKH$QJOLFDQ%RRNRI&RPPRQ3UD\HUDQGRIWKH/XWKHUDQ6HUYLFHDQG/DWLQYHUVLRQVRIYHUQDFXODUVSLULWXDO ZULWLQJIRXQGWKHLUZD\LQWRWKH&DWKROLFEUHYLDULHV%XWPRUHW\SLFDORIWKHSHULRGZDVWKHLPPHQVH2OG 7HVWDPHQWZLWKD/DWLQWUDQVODWLRQIDFLQJWKH+HEUHZWH[WE\&KDUOHV+RXELJDQW± )UDQFH¶VILQHVW +HEUDLVW 7KLVLVDVWXG\DLGIRUWKH2OG7HVWDPHQWFRQWDLQLQJFRPPHQWDU\WUDQVODWLRQDQGD MXVWLILFDWLRQRI+RXELJDQW¶VPHWKRGV /LWHUDU\WUDQVODWLRQ 7KHEXONRIWUDQVODWLRQLQWR/DWLQZDVLQYHUVHIROORZLQJVWULFWO\FODVVLFDOQRUPVDQGVRPHYHU\ILQHZRUNZDV FDUULHGRXW7KHUHZHUHIHZ/DWLQLVWVRIDQ\QRWHZKRVSHFLDOL]HGLQWUDQVODWLRQDQGPRVWUHFRJQL]HGSRHWV WULHGWKHLUKDQGDW/DWLQYHUVH )UDQFHLVUHODWLYHO\W\SLFDORIWKH&RQWLQHQWDOSDWWHUQ7UDLQLQJLQ/DWLQFRPSRVLWLRQDQGWUDQVODWLRQZDVLQWKH KDQGVRIWKH2UDWRULDQVWKH-HVXLWVDQGWKHXQLYHUVLWLHV$IDYRXULWHDXWKRUZDV/D)RQWDLQHZKRVH)DEOHV ZHUHWUDQVODWHGLQIXOOE\WKH2UDWRULDQV0RGHVWH9LQRW± 3LHUUH7LVVDUG± DQG-HDQ %DSWLVWH*LUDXG± 7LVVDUGDQG9LQRWDOVRWUDQVODWHG0DOKHUEH¶V2GHRQ/RXLV;,,,¶VVLHJHRI/D 5RFKHOOH/DOOHPDQG %HWZHHQDQGWKHUHZDVDVWHDG\VWUHDPRI/DWLQYHUVLRQVRI1LFKRODV %RLOHDX'HVSUHDX[¶VVDWLUHVDQGOHWWHUV1RWDEOHDPRQJWKHRWKHUZLVHREVFXUHEXQFKRIWUDQVODWRUVDUH&KDUOHV 52//,1± DQG0LFKHO*RGHDX± ZKRKDGERWKEHHQUHFWRUVRIWKH6RUERQQH )pQHORQ¶V7pOpPDTXHZDVWUDQVODWHGVHYHUDOWLPHVLQWR/DWLQODWHLQWKHVHYHQWHHQWKFHQWXU\WKHPRVWIDPRXV YHUVLRQEHLQJWKDWRI(WLHQQH9LHO±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¶VPDMRUSRHWU\LQWR/DWLQLQWKHVDQGV7KLVLQFOXGHG3DUDGLVH/RVW&RPXV /\FLGDV2WKHUWUDQVODWRUVRI0LOWRQLQFOXGHG7KRPDV3RZHU²DPDWKHPDWLFVGRQDW7ULQLW\&ROOHJHLQ &DPEULGJHDWUDQVODWRUNQRZQRQO\DV-&DQGD0U%ROG-RKQ'U\GHQ¶V$OH[DQGHU¶V)HDVWZDVWUDQVODWHG E\*HRUJH%DOO\LQDQGKLV$EVDORPDQG$FKLWRSKHOZDVWUDQVODWHGE\*HRUJH$WWHUEXU\ODWHU%LVKRSRI 5RFKHVWHUDQG)UDQFLV+LFNPDQLQDQGE\:LOOLDP&RZDUGDVRPHZKDWQRWRULRXVSK\VLFLDQLQ 'XULQJWKHHLJKWHHQWKFHQWXU\$OH[DQGHU3RSHZDVZLGHO\WUDQVODWHGKLV(VVD\RQ0DQDQG(VVD\RQ &ULWLFLVPDSSHDULQJLQVHYHUDOYHUVLRQV$PRQJWKHWUDQVODWRUVRIWKDWSHULRGDUHWKHSRHW&KULVWRSKHU6PDUW ZKRWUDQVODWHG2GHIRU0XVLFRQ6W&HFLOLD¶V'D\LQDQG8VKHU*DKDJDQDFODVVLFLVWZKRZHQWLQWR FRLQLQJLHFDVWLQJFRXQWHUIHLWFRLQVRIXQFHUWDLQZHLJKW DIWHUWUDQVODWLQJWKH(VVD\RQ&ULWLFLVPLQDQG ²EHWZHHQKLVFRQYLFWLRQDQGH[HFXWLRQ²WUDQVODWHG3RSH¶V7HPSOHRI)DPHDQG0HVVLDKLQ1HZJDWH3ULVRQ $PRQJFRQWLQHQWDOWUDQVODWRUVLVWKH'XWFKFODVVLFLVW*RWOLHE$P(QGHZKRWUDQVODWHGWKH(VVD\RQ0DQ 0LOWRQUHPDLQHGSRSXODUZHOOLQWRWKHHLJKWHHQWKFHQWXU\DQGZDVWUDQVODWHGLQE\-RVHSK7UDSSZKR KDGPDGHKLVQDPHLQWUDQVODWLRQVIURPFODVVLFDOODQJXDJHVDQGE\:LOOLDP'REVRQZKRVH3DUDGLVH/RVW FDPHRXWLQ

WRWKHSUHVHQW 3DUDGR[LFDOO\DV/DWLQFHDVHGWREHDQLQWHUQDWLRQDOODQJXDJHDQGEHFDPHDOHDUQHGUHFUHDWLRQFODVVLFLVWV FDPHWRNQRZPRUHDERXW5RPDQFRPSRVLWLRQWHFKQLTXHV7KXVDVLQFODVVLFDOWLPHVWUDQVODWLRQLQWR/DWLQ ZDV



3DJH

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± )URPWKHXQLYHUVLWLHVWKH $QWKRORJLDR[RQLHQVLV FRQWDLQHGDYHU\ODUJHSURSRUWLRQRIWUDQVODWLRQVWKHODVWQLQHWHHQWKFHQWXU\ HGLWLRQ ZDVDOPRVWHQWLUHO\WUDQVODWLRQV,WV&DPEULGJHFRXQWHUSDUW$UXQGLQHV&DPL FRQVLVWLQJ HQWLUHO\RIWUDQVODWLRQVZHQWWKURXJKVL[HGLWLRQVLQ\HDUV7KHSUHIDFHVRIWKHVHDQWKRORJLHVDUHLPSRUWDQW VWDWHPHQWVRISULQFLSOH0RVWFODVVLFLVWVRIDQ\LPSRUWDQFHFDQEHIRXQGDPRQJWKHWUDQVODWRUVSXEOLVKHG 3HUKDSVWKHJUHDWHVWRIQLQHWHHQWKFHQWXU\(QJOLVKWUDQVODWRUVLQWR/DWLQZDV*HRUJH/\WWHOWRQ)RXUWK%DURQ RI)UDQNOH\± NQRZQIRUWUDQVODWLRQVFRYHULQJPRVW(QJOLVKSRHWVRIWKHVHYHQWHHQWKDQGHLJKWHHQWK FHQWXULHV7KH)UHQFK/DWLQLVWV¶IDVFLQDWLRQZLWK%RLOHDXODVWHGXQWLOZHOOLQWRWKHQLQHWHHQWKFHQWXU\ZLWK YHUVLRQVRIWKH$UWSRpWLTXHEHLQJSXEOLVKHGLQE\-$&KDPERQQHWDQGLQE\--/DYDODQG YHUVLRQVRI/H/XWULQLQE\'DOLGRXDQGLQE\/DYDO ,QWKHWZHQWLHWKFHQWXU\WUDQVODWLRQLQWR/DWLQKDVEHFRPHPRUHDQGPRUHRIDOHDUQHGJDPHW\SLILHGE\WKH /LEHUTXLQWXV2GDUXP4+RUDWL)ODFFL+RUDFH2GHV9 WUDQVODWHGE\$(*RGOH\5RQDOG.QR[5XG\DUG .LSOLQJDQGRWKHUVLQ7KLVLVDFROOHFWLRQRI/DWLQYHUVLRQVRISRHPVE\.LSOLQJZLWKDSUHIDFH VDWLUL]LQJWKHFODVVLFDOSURIHVVLRQ2WKHUQRWHZRUWK\WUDQVODWLRQVRIWKLVW\SHDUH$OH[DQGHU/HQDUG¶V:LQQLH LOOH3XIURPWKH(QJOLVKRULJLQDOE\$$0LOQHWUDQVODWHG &DUUXWKHUV¶$OLFLDLQ7HUUD0LUDELOL WUDQVODWHG DQG'RPXVLQ$QJXOR3XLIURPWKH(QJOLVKRULJLQDOE\/HZLV&DUUROO DQG/*.HOO\¶V 3URUVXV7DOLWHUIURPWKH(QJOLVKRULJLQDOE\.LSOLQJWUDQVODWHG 2QWKHFRQWLQHQW$XJXVWH+DXU\¶V H[FHOOHQW/DWLQYHUVLRQRI6W([XSpU\¶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

)XUWKHUUHDGLQJ '¶$OYHUQ\%HUVFKLQ%LQQV%UDGQHU&DPEULGJH+LVWRU\RIWKH%LEOH&KDGZLFN -RXUGDLQ.HOO\-1'.HOO\/*2[IRUG&ODVVLFDO'LFWLRQDU\9LVVDF:DUGPDQ :HLVV:LOOLDPV

/28,6*.(//<

%LRJUDSKLHV %2(7+,860DQOLXV$QLFLXV6HYHULQXVF± FDPHIURPDVHQDWRULDOIDPLO\



3DJH

WKDWKDGEHFRPH&KULVWLDQTXLWHHDUO\)ROORZLQJDGLVWLQJXLVKHGSXEOLFFDUHHUXQGHUWKH2VWURJRWKLFHPSHURU 7KHRGRULF%RHWKLXVZDVLPSULVRQHGRQWUXPSHGXSFKDUJHVDQGGLHGXQGHUWRUWXUHLQ7KHLQWHOOHFWXDO FOLPDWHRIWKH0LGGOH$JHVFDQEHVDLGWRKDYHEHHQERUQRIKLV/DWLQWUDQVODWLRQRI$ULVWRWOHEHJXQHDUO\LQ KLVFDUHHU+LVZHOONQRZQWUDQVODWLRQVLQFOXGHPRVWRI$ULVWRWOH¶V2UJDQRQ3RUSK\U\¶V,VDJRJHDQGWKH *HRPHWULDDUDWKHUIUHHWUDQVODWLRQRI(XFOLG¶V(OHPHQWV &,&(520DUFXV7XOOLXV±%& ZDVERUQDW$USLQXPWRWKHVRXWKHDVWRI5RPH+HZDVNQRZQDV RQHRI5RPH¶VILQHVWODZ\HUVDQGURVHWRWKHSRVWRIFRQVXOEXWZDVPXUGHUHGLQ%&RQWKHRUGHUVRIWKH )LUVW7ULXPYLUDWHWKHSROLWLFDODOOLDQFHRI&DHVDU&UDVVXVDQG3RPSH\ &LFHURLVRQHRIWKHIHZ5RPDQ DXWKRUVZKRVHZRUNLVDOPRVWHQWLUHO\SUHVHUYHG$OWKRXJKRQO\DIHZRIKLVWUDQVODWLRQVIURP*UHHNUHPDLQ KLVGLVFXVVLRQRIWUDQVODWLRQLQ'HILQLEXVKRQRUXPHW0DORUXPDQGLQWKH'HRSWLPRJHQHUHRUDWRUXPKDGD IRUPDWLYHLQIOXHQFHRQWUDQVODWLRQSUDFWLFHIRUWKHQH[W\HDUV &251$5,86-RDQQHV-RKDQQ+DJHQEXW± &RUQDULXVVWXGLHG*UHHNDQG/DWLQXQGHU0RVHOODQXV DQGTXDOLILHGLQPHGLFLQHDW:LWWHQEHUJLQ+HVSHQWWKHQH[WIHZ\HDUVORFDWLQJDQFLHQWPHGLFDOERRNV &RUQDULXVEHFDPH3URIHVVRURI0HGLFLQHDW0DUEDU\DQGWKHQDW-HQDEXWKHLVEHVWNQRZQDVWKHWUDQVODWRURI +LSSRFUDWHVDQG*DOHQ ),&,120DUVLOLR± ZDVERUQQHDU)ORUHQFHDQGEHFDPHOHDGHURIWKH3ODWRQLVW$FDGHP\LQ )ORUHQFH+HZDVRUGDLQHGSULHVWLQ)LFLQRDWWHPSWHGWRKDUPRQL]H*UHHNSKLORVRSK\DQG&KULVWLDQLW\ DQGWUDQVODWHG+HVLRG3ODWR3ORWLQXV3RUSK\U\3URFOXVDQG3VHXGR'LRQ\VLXV +(50$112)&$5,17+,$WZHOIWKFHQWXU\ 3UREDEO\WKHPRVWLPSRUWDQWWUDQVODWRUIURP$UDELFLQWR /DWLQGXULQJWKDWSHULRG+HVWXGLHGDW3DULVRU&KDUWUHVWKHQOHDUQW$UDELFLQ6SDLQDQGLVPRVWQRWHGIRUKLV WUDQVODWLRQVRIDVWURQRP\DQGPDWKHPDWLFV 6W-(520((XVHELXV6RSKURQLXV+LHURQ\PXVF±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± DQGWKH9XOJDWH± 7KHODWWHU SDUWO\DUHYLVLRQRIWKH9HWXV/DWLQDSDUWO\DUHWUDQVODWLRQIURPWKH+HEUHZSDUWVRIWKH*UHHN6HSWXDJLQWKH FRQVLGHUHGXQFULWLFDODQGXQVDWLVIDFWRU\ZDVXQGHUWDNHQDWWKHGLUHFWRUGHURI3RSH'DPDVXV /,9,86$1'521,&86"±%& D*UHHNIURP7DUHQWXPLQWKHVRXWKRI,WDO\ZDVEURXJKWWR5RPH DVDVODYHLQ%&:KHQKHZDVIUHHGIURPVODYHU\KHVHWXSDVDWHDFKHU,QDERXW%&KHPDGHD /DWLQYHUVLRQRI+RPHU¶V2G\VVH\ZKLFKZDVVWLOOEHLQJXVHGDVDWH[WERRNDFRXSOHRIFHQWXULHVODWHU)RUWKH 5RPDQ*DPHVRI%&FHOHEUDWLQJWKHHQGRIWKHZDUZLWK&DUWKDJHKHFRPSRVHGWKHILUVW/DWLQFRPHG\ DQGWUDJHG\E\OLIWLQJKLVPDWHULDOIURPIDPRXV*UHHNGUDPDV 52//,1&KDUOHV± ZDVNQRZQSULPDULO\DVDQHGLWRURIFODVVLFDOWH[WVLQSDUWLFXODU4XLQWLOLDQ +HZDVDSSRLQWHG&KDLURI5KHWRULFDWWKH&ROOHJHGX3OHVVLVLQ



3DJH

DQGLQWRRNXSWKH&KDLURI5KHWRULFDWWKH&ROOHJHUR\DOGH)UDQFH5ROOLQTXLFNO\EHFDPHNQRZQDVD VXSSRUWHURIWKH-DQVHQLVWV7KH-HVXLWVEORFNHGKLVDSSRLQWPHQWWRWKH6RUERQQHXQWLO+HZDVDSSRLQWHG UHFWRULQ+LVPRVWIDPRXVZRUNLV7UDLWpGHVeWXGHVSXEOLVKHGLQDQGKHZDVNQRZQIRUKLV/DWLQ WUDQVODWLRQVRIFRQWHPSRUDU\SRHWV 9$//$/RUHQ]RF± ZDVERUQDW3LDFHQ]D$ZDQGHULQJVFKRODUZKRILQDOO\VHWWOHGGRZQDV3DSDO VHFUHWDU\FDQRQRIWKH/DWHUDQ%DVLOLFDDQGSURIHVVRUDWWKH8QLYHUVLW\RI5RPHKHWUDQVODWHGDZLGHUDQJHRI *UHHNDXWKRUVLQWR/DWLQDQGZURWHDQXPEHURILPSRUWDQWELEOLFDOFRPPHQWDULHV+HLVSDUWLFXODUO\LPSRUWDQW IRUKLVUHVHDUFKLQWR/DWLQVW\OH :,//,$02)02(5%(.(F±F ZDVERUQDW0RHUEHNHLQSUHVHQWGD\%HOJLXP+HMRLQHG WKH'RPLQLFDQVDQGVSHQWVRPHFRQVLGHUDEOHWLPHLQ*UHHFH$WWKHUHTXHVWRI7KRPDV$TXLQDVKHWUDQVODWHG WKHPDMRUZRUNVRI$ULVWRWOHDQGKLVFRPPHQWDWRUVLQWR/DWLQ+HLVDOVRUHSXWHGWRKDYHWUDQVODWHGVRPH 3URFOXV+LSSRFUDWHV*DOHQDQG*UHHNPDWKHPDWLFLDQV /28,6*.(//<

/DWLQ$PHULFDQWUDGLWLRQ /LNH/DWLQ$PHULFDLWVHOIWKHKLVWRU\RIWUDQVODWLRQLQWKHVXEFRQWLQHQWLVERWKXQLIRUPDQGGLYHUVH7KLVLVD UHIOHFWLRQRIWKHEDVLFFXOWXUDOXQLW\ZKLFKJUHZRXWRIWKDWSDUDGR[LFDOPHUJLQJRIWKH+LVSDQLFZLWKWKH LQGLJHQRXV,QGHHGWKHPRVWUHSUHVHQWDWLYHILJXUHLQ/DWLQ$PHULFDQWUDQVODWLRQ0DOLQDOOL7HQpSDOLVD YHULWDEOHV\PERORIWKLVFXOWXUDOPL[%HWWHUNQRZQDV0$/,1&+(WKLVFRQWURYHUVLDO$]WHFZRPDQZDV DPRQJWKHILUVWLQWHUSUHWHUVRQWKH$PHULFDQFRQWLQHQWWRFRQWULEXWHWRWKHSURFHVVWKURXJKZKLFKWKHSHRSOHV RIWKHVRFDOOHG1HZ:RUOGHQULFKHGWKHNQRZOHGJHDQGLGHDVRIWKH2OG

'LVFRYHU\DQGFRQTXHVW±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¶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²QRWVXUSULVLQJO\²UHOLJLRXVZRUNVLQ0H[LFR%UHYH\PiVHQMXQGLRVDGRFWULQD FULVWLDQDHQOHQJXDPH[LFDQD\



3DJH

FDVWHOODQD¶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iFHUHVDQGD\RXQJER\IURP*XDQDKDQLWKH%DKDPDV ZKRZDVJLYHQWKHQDPH'LHJR&ROyQ 6XEVHTXHQWH[SHGLWLRQVIROORZHGWKHVDPHSDWWHUQ,Q$ORQVRGH2MHGD-XDQGHOD&RVDDQG$PHULJR 9HVSXFFLRWRRNFDSWLYHVWRVHUYHDVOHQJXDVOLWHUDOO\µWRQJXHV¶ 2MHGDDFWXDOO\PDUULHGKLVQDWLYHLQWHUSUHWHU DQGJXLGH,VDEHO,Q-XDQ*ULMDOEDWRRNWZRQDWLYHVWR<XFDWiQDVLQWHUSUHWHUV-XOLDQLOORDQG0HOFKRUHMR ZKRKDGEHHQFDSWXUHGWKHSUHYLRXV\HDUE\&DSWDLQ)UDQFLVFR+HUQiQGH]GH&yUGRED0HOFKRUHMRDOVR DFFRPSDQLHG&RUWpVRQKLVILUVWYLVLWWR<XFDWDQDORQJZLWKDQRWKHUQDWLYHFDOOHG)UDQFLVFR1DWLYHVZHUH FDSWXUHGDORQJWKH9HQH]XHODQFRDVWE\$GPLUDO9LFHQWH


3DJH

EHFDPH+HUQiQGH6RWR¶VLQWHUSUHWHULQWKH)ORULGDDQG7H[DVFDPSDLJQVXSWR(VWHYDQFLRWKHILUVW NQRZQEODFNLQWHUSUHWHULQWKH6SDQLVKVSHDNLQJZRUOGVDLOHGIURP&XEDIRU)ORULGDLQZLWK3iQILORGH 1DUYiH] 3HUXDQGWKHUHVWRI6RXWK$PHULFD ,QFRPSDULVRQZLWKWKH0H[LFDQFDPSDLJQVLQWHUSUHWHUVGLGQRWPDNHVXFKDGHHSLPSUHVVLRQRQWKH3HUXYLDQ FRQTXHVW7KH\GLGKRZHYHUSOD\DYLWDOUROHLQWKHQHJRWLDWLRQVEHWZHHQWKH,QFD$WDKXDOSDDQGKLV FRXQVHOORUVRQWKHRQHKDQGDQGWKH6SDQLDUGV)UDQFLVFR3L]DUUR+HUQiQGH6RWR'LHJRGH$OPDJURDQG FRPSDQ\RQWKHRWKHUQHJRWLDWLRQVZKLFKOHGWRWKH&DMDPDUFDDPEXVKLQDQGWKHH[HFXWLRQRIWKH,QFD FKLHID\HDUODWHU$PRQJWKHLQWHUSUHWHUVDERXWZKRPFRQFUHWHLQIRUPDWLRQH[LVWVSULGHRISODFHJRHVWR )HOLSLOORRU)HOLSH DQG0DUWLQHOORWZR\RXQJQDWLYHVZKRDFFRPSDQLHG3L]DUURDQG$OPDJURRQWKHLU YDULRXVH[SHGLWLRQVWR3HUX%RUQRQWKHLVODQGRI3XQi)HOLSLOOROHDUQW4XHFKXDLQ7~PEH]IURPQDWLYHVZKR VSRNHLWDVDVHFRQGODQJXDJHSLFNHGXS6SDQLVKIURPOLVWHQLQJWRVROGLHUVDQGZDVWKHQWDNHQ²DORQJZLWK 0DUWLQHOOR²WR3DQDPDE\3L]DUUR$OOKLVWRULDQVDJUHHWKDWWKHLQWHUSUHWLQJSURYLGHGE\)HOLSLOORRIWKH FRQGLWLRQVGHPDQGHGRI$WDKXDOSDUHFRJQLWLRQRIWKH&KXUFKWKH3RSHDQGWKH6SDQLVKPRQDUFKV ZDVIDU IURPIDLWKIXOLQGHHGWKHPHVVDJHZDVGHOLEHUDWHO\UHQGHUHGLQDPDQQHURIIHQVLYHWRWKH,QFDNLQJEHFDXVH )HOLSLOOREHORQJHGWRDULYDOWULEHDQGZDVKDYLQJDQDIIDLUZLWKRQHRI$WDKXDOSD¶VFRQFXELQHV $QRWKHUFRORXUIXOFKDUDFWHUZDVD6SDQLVKVROGLHUFDOOHG%DUULHQWRVDURJXHDQGDWKLHIZKRZDVFRQGHPQHG E\3L]DUURWREHZKLSSHGDQGKDYHKLVHDUVFXWRII'LVILJXUHGKHIOHGVRXWKZDUGVWRQRUWKHUQ&KLOHZKLFK ZDVWKHQSDUWRIWKH&X]FRHPSLUHZKHUHKHOLYHGZLWKWKHQDWLYHV'LHJRGH$OPDJUR¶VH[SHGLWLRQIRXQGKLP WUDQVIRUPHGLQWRDEHDUGHGQDWLYHDQGXVHGKLPDVDQLQWHUSUHWHUDQGLQWHUPHGLDU\ (TXDOO\LQWHUHVWLQJZDV)UDQFLVFRGHO3XHUWRNQRZQDV3DTXLOORWKHILUVWZKLWHLQWHUSUHWHULQWKH5LYHU3ODWH DUHDZKHUHKHDUULYHGLQZLWKWKHH[SORUHU-XDQ'tD]GH6ROtV+HVSHQWWHQ\HDUVDVDSULVRQHURIWKH QDWLYHVEHIRUHEHLQJFRPPLVVLRQHGDVDJXLGHDQGLQWHUSUHWHUIRU6HEDVWLDQ&DERWR,QKHIHOORXWZLWK *RQ]DOR1~xH]GH%DOERDDQGE\ZD\RIUHYHQJHWRJHWKHUZLWKWKHQDWLYHVSUHSDUHGDQDPEXVKLQZKLFK VHYHUDO6SDQLDUGVZHUHNLOOHG $PRQJ3RUWXJXHVHLQWHUSUHWHUVWKHPRVWIDPRXVILJXUHLVWKHDGYHQWXUHU*RQ]DORGH$FRVWDERUQLQ3RUWXJDO LQ+HSDUWLFLSDWHGIURPWKHEHJLQQLQJLQWKHGLVFRYHU\DQGFRQTXHVWRIWKH5LYHU3ODWHDUHDDQGDFWHGDV LQWHUSUHWHUIRU$OYDU1XxH]&DEH]DGH9DFDDQG3HGURGH0HQGR]D 1RWDJUHDWGHDOLVNQRZQDERXWRWKHULQWHUSUHWHUVLQWKHVRXWKHUQSDUWRIWKHVXEFRQWLQHQWGXULQJWKLVSHULRG EXW$UQDXG PHQWLRQV$QWRQLR7RPiV(QULTXH0RQWHV0HOFKRU5DPtUH]DQG-HUyQLPR5RPHURDV LQWHUSUHWHUVZKRZHUHDFWLYHLQWKHUHJLRQVDURXQGZKDWDUHQRZ%XHQRV$LUHV0RQWHYLGHRDQG$VXQFLyQ

7KHFRORQLDOSHULRGVL[WHHQWKWRHLJKWHHQWKFHQWXULHV 2QFHWKHYDULRXV1DWLYH$PHULFDQNLQJGRPVKDGEHHQFRQTXHUHGRQHRIWKHPDLQREVWDFOHVWRHYDQJHOL]DWLRQ ZDVWKHGLYHUVLW\RIODQJXDJHVLQ/DWLQ$PHULFD&DWKROLFFOHUJ\PHQEHFDPHDZDUHRIWKHQHHGIRUDOLQJXD IUDQFDZKLFKFRXOGIXQFWLRQDVDQLQWHUPHGLDU\EHWZHHQ6SDQLVKDQGWKHPXOWLWXGHRIQDWLYHODQJXDJHV%\ ZD\RIVROXWLRQPLVVLRQDULHVEHJDQWRSURSDJDWHWKHXVHRIµJHQHUDOODQJXDJHV¶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



3DJH

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yQGH/H\HVGHORV5H\QRVGHODV,QGLDV%RRN,,6HFWLRQ ;;,;GLVFXVVHGLQ*DUJDWDJOL EHWZHHQDQGWKHUHZHUHGHFUHHVUHODWLQJWRLQWHUSUHWHUV VLJQHGE\&DUORV93KLOLS,,DQG3KLOLS,,,7KHILUVWRIWKHVHLQFODVVLILHGLQWHUSUHWHUVDVDVVLVWDQWVRI JRYHUQRUVDQGMXGJHVDQGSURKLELWHGWKHPIURPUHTXHVWLQJRUUHFHLYLQJMHZHOOHU\FORWKHVRUIRRGIURPWKH QDWLYHV$ODZDXWKRUL]HGQDWLYHVWREHDFFRPSDQLHGE\µD&KULVWLDQDFTXDLQWDQFH¶IRUWKHSXUSRVHRI YHULI\LQJWKHDFFXUDF\RILQWHUSUHWDWLRQV3URIHVVLRQDOVWDWXVZDVDFKLHYHGWKURXJKWKHODZVZKLFKIL[HG DVDODU\DFFRUGLQJWRWKHQXPEHURITXHVWLRQVLQWHUSUHWHGGHWHUPLQHGZRUNLQJGD\VDQGKRXUVDQGHVWDEOLVKHG KRZPDQ\LQWHUSUHWHUVVKRXOGEHDOORFDWHGWRHDFKFRXUW,QDGGLWLRQLQWHUSUHWHUV¶REOLJDWLRQVZHUHVSHFLILHGLQ WKHIRUPRIDQRDWKWKH\KDGWRWDNHµWRLQWHUSUHWFOHDUO\DQGRSHQO\ZLWKRXWRPLVVLRQRUDGGLWLRQZLWKRXW ELDV¶5HFRSLODFLyQGH/H\HVGHORV5H\QRVGHODV,QGLDVLQ*DUJDWDJOL )DLOXUHWRIXOILOVXFKREOLJDWLRQV PHDQWWKDWDQLQWHUSUHWHUFRXOGEHDFFXVHGRISHUMXU\DQGILQHG 6LPLODUO\&REDUUXYLDV¶V3ULPHU'LFFLRQDULRGHOD/HQJXD RIIHUVDIDLUO\GHWDLOHG²LIVRPHZKDW LGHDOLVWLF²GHILQLWLRQRIWKHLQWHUSUHWHUH[SHFWLQJQRWRQO\DFFXUDF\EXWDOVRµ&KULVWLDQLW\DQGJRRGQHVV¶ 7UDQVODWLRQV $FFRUGLQJWR/HDO LQWKHFRORQLDOSHULRGµSHRSOHUHDGHYHU\WKLQJWKH\FRXOGOD\WKHLUKDQGVRQ¶ *LYHQWKLVDSSHWLWHIRUUHDGLQJLWZDVQRWOLNHO\WKDWWKHFLUFXODWLRQRIERRNVZRXOGEHJUHDWO\DIIHFWHGE\ FHQVRUVKLSRUWKHDFWLYLWLHVRIWKH,QTXLVLWLRQ$UR\DOGHFUHHLQIRUEDGHWKHH[SRUWDWLRQWRWKH$PHULFDQ FRQWLQHQWRIILFWLRQDOZRUNVDQGRIDQ\WH[WWKDWLPSLQJHGRQWKHPRQDUFK¶VSUHURJDWLYHVRUWKDWZDVRQWKH ,QTXLVLWLRQ¶VEODFNOLVW7KH&URZQZDVSDUWLFXODUO\NHHQWREDQERRNVWKDWGHDOWZLWKWKH1HZ:RUOGDQGPRVW HVSHFLDOO\WKRVHZULWWHQE\IRUHLJQHUV$PRQJWKHPRVWSHUVHFXWHGZHUHWKHVL[YROXPHVRIWKH+LVWRLUH 3KLORVRSKLTXHHW3ROLWLTXHGHVpWDEOLVVHPHQWVHWGXFRPPHUFHGHV(XURSpHQVGDQVOHVGHX[,QGHVE\ *XLOODXPH5D\QDOSXEOLVKHGLQ$PVWHUGDPLQ%XWGHVSLWHFHQVRUVKLSWKLVERRNDSSHDUHGLQHGLWLRQV EHIRUHDQGFLUFXODWHGIURP0H[LFRWRWKH5LYHU3ODWHERWKLQWKH)UHQFKRULJLQDODQGLQWKH6SDQLVK DGDSWDWLRQE\$OPRGy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



3DJH

DVZKHQWKH)LUVW&RXQFLORI0H[LFRRUGHUHGWKHFRQILVFDWLRQRIDOOERRNVRIVHUPRQVLQQDWLYHODQJXDJHVRQ WKHJURXQGVWKDWWKH\FRQWDLQHGWUDQVODWLRQHUURUVRUZKHQJUDPPDUVDQGGLFWLRQDULHVZHUHLQFOXGHGLQWKH OLVWVRISURKLELWHGWH[WV $WWKHVRXWKHUQWLSRIWKHFRQWLQHQWWKH-HVXLWVFDUULHGRXWLQWHQVHLQWHOOHFWXDODFWLYLW\LQZKLFKWUDQVODWLRQ DOZD\VSOD\HGDSUHHPLQHQWUROH7ZRZRUNV31LHUHPEHUJ¶V'LIHUHQFLDHQWUHORWHPSRUDO\ORHWHUQRDQG3 5LYDGHQHLUD¶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~QSURGXFHGLQ1DKXDWODQG6SDQLVKWKH/LEURVGHORV&RORTXLRVRU3OiWLFDVZKLFKGHDOWZLWKD VHULHVRIUHOLJLRXVGLVFXVVLRQVEHWZHHQ)UDQFLVFDQPRQNVDQG$]WHFVDJHV7KHVDPHDXWKRUOHGDWHDPWKDW ZURWHLQ1DKXDWOWKH+LVWRULDGHODV&RVDVGH1XHYD(VSDxDZKLFKZDVEDVHGRQWKHDFFRXQWVRIWKHROG SHRSOHLQ7ODWHOROFRDQGZKLFK6DKDJ~QKLPVHOIWKHQWUDQVODWHGLQWR6SDQLVK²DZRUNWKDWWRRNDWRWDORI \HDUVWRFRPSOHWHDQGUDQLQWRYROXPHV$VLPLODUWUDQVODWLRQE\)UD'LHJRGH'XUiQ+LVWRULDGHODV,QGLDV GH1XHYD(VSDxD\,VODVGH7LHUUD)LUPHZDVOLWHUDOO\FDUULHGRXWIURPWKH5DPtUH]&RGH[6XFKWUDQVODWLRQV SURYLGH$PHULFDQLVWVZLWKPDWHULDODVYDOXDEOHDVWKH5RVHWWDVWRQHEHFDXVHWKH\IDFLOLWDWHWKHUHFRQVWUXFWLRQ RIDQDOPRVWFRPSOHWHO\REOLWHUDWHGSDVW 7KHUHDUHQRUHFRUGVRIDQ\WUDQVODWLRQVFDUULHGRXWEHWZHHQ1DWLYH$PHULFDQODQJXDJHVGXULQJWKLVSHULRG

,QGHSHQGHQFHDQGDIWHU± 7KHQLQHWHHQWKDQGILUVWKDOIRIWKHWZHQWLHWKFHQWXULHVZDVDSURGLJLRXVSHULRGIRULQWHOOHFWXDODFWLYLW\ WKURXJKRXW/DWLQ$PHULFD$WILUVWKDYLQJVKDNHQRIIWKHVKDFNOHVRIWKH6SDQLVKFRORQLVWVQLQHWHHQWKFHQWXU\ ZULWHUVDQGDUWLVWVZHUHVHDUFKLQJIRUDQHZLGHQWLW\DQGWHQGHGWRORRNWRQRQ+LVSDQLF (XURSHDQG1RUWK $PHULFDIRUPRGHOVWRLPLWDWH7KHSROLWLFDODQGLQWHOOHFWXDOOHDGHUVRIWKHHPHUJLQJQDWLRQVRQWKH VXEFRQWLQHQWJHQHUDOO\KDGWKHRSSRUWXQLW\WRWUDYHODEURDGLQWKHLUIRUPDWLYH\HDUVDQGZHUHDFFXVWRPHGWR VKDULQJWKHLULGHDVZLWKWKHLUFRXQWHUSDUWVIURPRWKHUFXOWXUHVDQGODQJXDJHV*LYHQWKLVFRQWH[WRIFXOWXUDO LQWHUFKDQJHLWLVQRWVXUSULVLQJWKDWWUDQVODWLRQZDVYLUWXDOO\DQHFHVVLW\LQSRVWLQGHSHQGHQFH/DWLQ$PHULFDQ VRFLHW\DIDFWERUQHRXWE\WKHYROXPHRIWUDQVODWLRQVDQGWKHVWDWXVDFTXLUHGE\VRPHWUDQVODWRUV :LWKVRPHQRWDEOHH[FHSWLRQVWUDQVODWLRQVGXULQJWKLVSHULRGUHIOHFWPRUHWKHJHQLXVRIWKHRULJLQDOZULWHU WKDQWKHFUHDWLYLW\RIWKHWUDQVODWRULQRWKHUZRUGVWKH\WHQGHGWRDGKHUHFORVHO\WRWKHVRXUFHWH[W7KH SUHGRPLQDQWWKHPHVRIWKHWUDQVODWHGWH[WVDUHUHODWHGWRSROLWLFVHGXFDWLRQWKHWKHDWUHDQGOLWHUDU\PDWWHUV WKRXJKUHOLJLRXVDQGPLOLWDU\WRSLFVDOVRIHDWXUHWRVRPHH[WHQW7UDQVODWLRQDFWLYLW\ZDVJUHDWO\VWLPXODWHGE\ WKHHVWDEOLVKPHQWRIQHZVSDSHUVOLWHUDU\MRXUQDOVSXEOLVKLQJKRXVHVDQGXQLYHUVLWLHV)UHQFKZDVWKHPRVW FRPPRQO\WUDQVODWHGODQJXDJHDWWKHEHJLQQLQJRIWKHQLQHWHHQWKFHQWXU\ZLWK(QJOLVKJDLQLQJLQLPSRUWDQFH ODWHURQ,WDOLDQDQG*HUPDQDOVRUHFHLYHGDWWHQWLRQEXWIHZHUWUDQVODWLRQVZHUHFDUULHGRXWIURP/DWLQDQG *UHHNWH[WV :KLOHWKHDERYHPHQWLRQHGFKDUDFWHULVWLFVDUHWRVRPHH[WHQWVKDUHGE\DOOWKHFRXQWULHVLQWKHUHJLRQWKHWUXH IODYRXURIWKHSHULRGFDQRQO\EHIXOO\DSSUHFLDWHGE\ORRNLQJDWVRPHVSHFLILFFDVHVLQPRUHGHWDLO D ,Q$UJHQWLQDYDULRXVOLWHUDU\DQGGUDPDVRFLHWLHVVXFKDVWKH6RFLHGDGGHO%XHQ*XVWRGHO7HDWUR IRXQGHGLQ WUDQVODWHGDQGSHUIRUPHG(XURSHDQZRUNV7ZRRIWKHUHSXEOLF¶VSUHVLGHQWVWRRN PHDVXUHVZKLFKKDGDGLUHFWLPSDFWRQWUDQVODWLRQDFWLYLW\LQWKHHDUO\SDUWRIWKHQLQHWHHQWKFHQWXU\ 0RUHQRRUGHUHGVFKRROVWRWHDFKDQH[SXUJDWHGYHUVLRQRI5RXVVHDX¶V6RFLDO&RQWUDFWZLWKWKHUHOLJLRXV SRLQWRIYLHZHOLPLQDWHG DQG



3DJH

ODWHURQ6DUPLHQWRLPSRUWHG1RUWK$PHULFDQWHDFKHUWUDLQHUVDORQJZLWKDSDFNDJHRIGLGDFWLFPDWHULDOV $VLQRWKHUFRXQWULHVRQWKHVXEFRQWLQHQWWKHUHMHFWLRQRIHYHU\WKLQJ6SDQLVKOHGWRLQFUHDVHGLQWHUHVWLQ RWKHUFXOWXUHVZKLFKLQWXUQVWLPXODWHGWUDQVODWLRQ,QDGGLWLRQWKHZDYHVRILPPLJUDQWVDUULYLQJRQ $UJHQWLQHVKRUHVWHQGHGWRSURPRWHFXOWXUDOLQWHUFKDQJHDQGFRQVHTXHQWO\WUDQVODWLRQDFWLYLWLHV7KH PDMRUILJXUHVLQWUDQVODWLRQLQ$UJHQWLQDGXULQJWKLVSHULRGLQFOXGH%DUWRORPp0LWUH/HRSROGR/XJRQHV 0DQXHO*DOYHV5LFDUGR5RMDVDQG-RUJH/XLV%RUJHV0LWUHDQG%RUJHVDUHDOVRLPSRUWDQWIRUWKHLU WKHRUHWLFDOUHIOHFWLRQVRQWUDQVODWLRQ E ,Q&KLOHWKHKLVWRU\RIWUDQVODWLRQJRHVKDQGLQKDQGZLWKWKDWRISXEOLVKLQJ7KHILUVWQHZVSDSHUWREH IRXQGHGLQWKHFRXQWU\/D$XURUDGH&KLOH GLVVHPLQDWHGWKHLGHDVRI5RXVVHDXDQGRWKHUIRUHLJQ SKLORVRSKHUV*RYHUQPHQWDFWLRQVXFKDVWKHFUHDWLRQRIWKH8QLYHUVLW\RI&KLOHLQZDVDOVRFUXFLDO LQWKHSURPRWLRQRIWUDQVODWLRQ,WZDVTXLWHFRPPRQWKDWWH[WVGHVWLQHGIRUSHGDJRJLFDOXVHZRXOGEH DGDSWHGWRWKH&KLOHDQFRQWH[WUDWKHUWKDQWUDQVODWHGOLWHUDOO\,QWKHILUVWKDOIRIWKLVSHULRG)UHQFKZDVWKH VRXUFHODQJXDJHRIWKHYDVWPDMRULW\RIWH[WVWUDQVODWHGSDUWO\EHFDXVHRIWKHHQRUPRXVLQIOXHQFHRI DXWKRUVOLNH9ROWDLUH5RXVVHDX'LGHURWDQG$EERW5D\QDORQWKHSURFHVVHVRIHPDQFLSDWLRQDQGIRUPDWLRQ RIWKHQHZQDWLRQ7KHSULQFLSDOILJXUHVLQWKHILHOGRIWUDQVODWLRQLQ&KLOHLQFOXGH9DOHQWtQ/HWHOLHUDQG -RUJH/DJDUULJXHDVZHOODV$QGUpV%(//2ZKRWKRXJK9HQH]XHODQFDUULHGRXWPRVWRIKLVLQWHOOHFWXDO DFWLYLW\LQ&KLOH6SHFLDOPHQWLRQVKRXOGDOVREHPDGHRI3DEOR1HUXGDIRUKLVWUDQVODWLRQRIOLWHUDU\ ZRUNVLQFOXGLQJKLVH[FHOOHQWYHUVLRQRI5RPHRDQG-XOLHW F ,Q&XEDWKLVHSRFKUHDOO\VWDUWVDWWKHHQGRIWKHHLJKWHHQWKFHQWXU\ZLWKWKHFUHDWLRQRIWKH3DSHO 3HULyGLFRGH/D+DEDQDLQZKLFKDWUDQVODWLRQRI3RSHDSSHDUHG7KLVZDVIROORZHGE\DVWULQJRI WUDQVODWLRQVRIWKHOHDGLQJZRUNVRIWKHFRQWHPSRUDU\SKLORVRSKLFDODQGOLWHUDU\VFKRROVWUDQVODWLRQVZKLFK VRRQEHJDQWRDFTXLUHDVSHFLDO&XEDQIODYRXU7KHOLVWRIGLVWLQJXLVKHG&XEDQWUDQVODWRUVLVKHDGHGE\ -RVp0DUtD+HUHGLD\+HUHGLDZKRZDVERUQLQ0H[LFRLQDQGZKRWUDQVODWHG6LU:DOWHU6FRWW 7KRPDV0RRUH0DULH$QGUp&KpQLHU9LWWRULR$OILHUL-HDQ)UDQoRLV'XFLV9ROWDLUH5RFKDQG7\WOHU DOZD\VHQKDQFLQJWKHRULJLQDOWH[WZLWKKLVRZQFUHDWLYLW\,QDVLPLODUYHLQ*HUWUXGLV*RPH]'H $YHOODQHGD± WUDQVODWHGWKHZRUNVRI9LFWRU+XJR/RUG%\URQ/DPDUWLQHDQG$XJXVWRGH/LPD LQWR6SDQLVK2WKHUQRWDEOHIHPDOHWUDQVODWRUVLQQLQHWHHQWKFHQWXU\&XEDLQFOXGH$XUHOLD&DVWLOOR'H *RQ]DOH]DQG0HUFHGHV0DWDPRURVZKRVHWUDQVODWLRQVLQFOXGHG%\URQ&KpQLHU0RRUH*RHWKHDQG 6FKLOOHU,QWKHILHOGVRIHGXFDWLRQDQGVFLHQFHWKHPDMRUILJXUHVZHUHWKHEURWKHUV$QWRQLRDQG(XVHELR *XLWHUDV)RQW(VWHEDQ%RUUHUR(FKHYDUULDDQG-RVp'HO3HURMRZKRZDVWKHILUVWWRWUDQVODWH.DQWDQG )LVFKHUGLUHFWO\IURP*HUPDQWR6SDQLVK )LQDOO\WKDWPDMRUILJXUHLQXQLYHUVDOOHWWHUV-RVp0DUWL± ZDVDOVRDQRWHZRUWK\WUDQVODWRU G ,Q9HQH]XHODWKHVDPHSDWWHUQVFDQEHGHWHFWHGWKHSUHGRPLQDQFHRIOLWHUDU\WUDQVODWLRQWKH LPSRUWDQFHRISKLORVRSKLFDOWH[WVUHODWHGWRWKHHPDQFLSDWLRQSURFHVVWKHFRQQHFWLRQEHWZHHQWUDQVODWLRQ DQGWKHSHGDJRJLFDOWDVNRIWKHHPHUJLQJXQLYHUVLWLHVDQGWKHFUHDWLYHIUHHGRPRIWKHWUDQVODWRU7KHEHVW UHSUHVHQWDWLYHRIDOOWKHVHWUDLWVZDVXQGRXEWHGO\WKHZULWHUHGXFDWRUDQGGLSORPDW$QGUpV%(//2ZKRVH SRHWU\WUDQVODWLRQVKDYHUHFHLYHGXQLYHUVDODFFODLPIRUWKHLUEHDXW\DQGRULJLQDOLW\%HOORWUDQVODWHG DPRQJRWKHUV )ORULDQ%\URQ3ODXWXV9LFWRU+XJR'XPDV%R\DUGRDQG9LUJLOKLVWUDQVODWLRQRI +XJR¶V/DSULqUHSRXUWRXVGHVHUYHVVSHFLDOPHQWLRQ7KHSRHW-XDQ$QWRQLR3HUH]%RQDOGH± ZDVUHVSRQVLEOHIRUSRSXODUL]LQJ+HLQHDQG3RHLQ/DWLQ$PHULFDKLV6SDQLVKWUDQVODWLRQRI+HLQH¶V'DV %XFKGHU/LHGHUKDV\HWWREHVXUSDVVHG)LQDOO\/LVDQGUR$OYDUDGR± WUDQVODWHGWKHFKURQLFOHV RI1LFKRODV)HGHUPDQ



3DJH

DQG²PRVWLPSRUWDQWO\²$OH[DQGHUYRQ+XPEROGW¶V9LDMHDODVUHJLRQHVHTXLQRFFLDOHVGHO1XHYR &RQWLQHQWH

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y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yQHQ7UDGXFFLy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¶VFRQWULEXWLRQWRWKHILHOGRIWUDQVODWLRQVWXGLHVKDV EHHQUDWKHUPRGHVW+RZHYHUWKHUHJLRQLVQRWZLWKRXWLWVWKHRULVWVLWLVTXLWHFRPPRQIRUH[DPSOHWRILQGD WKHRUHWLFDOMXVWLILFDWLRQIRUWKHDSSURDFKDGRSWHGWRDSDUWLFXODUZRUNLQWKHSURORJXHWRLWVWUDQVODWLRQ0RUH RIWHQWKDQQRWVXFKFRQWULEXWLRQVKDYHJRQHXQQRWLFHGEXW6DQWR\R GRHVDFNQRZOHGJHVRPHRIWKHVH HIIRUWV7KHPRVWZLGHO\UHFRJQL]HG/DWLQ$PHULFDQWKHRULVWVDUH0LJXHO7HXUEH7RORQIURP&XED± ZKRZDVSUREDEO\WKHILUVWWRZULWHDGLGDFWLFZRUNRQWUDQVODWLRQ²7KH(OHPHQWDU\6SDQLVK5HDGHUDQG 7UDQVODWRU1HZ


3DJH

SURFHVVVHH*DUJDWDJOLDQG*XL[ $WWKHULVNRIRYHUJHQHUDOL]LQJDOOWKHVHZULWHUVVHHPWRHPSKDVL]H PDLQO\WKHFUHDWLYHIUHHGRPRIWKHWUDQVODWRUSDUWLFXODUO\ZLWKUHIHUHQFHWROLWHUDU\WUDQVODWLRQV 7KHUHDUHQRZTXLWHDIHZMRXUQDOVGHGLFDWHGZKROO\RUSDUWO\WRWUDQVODWLRQPDWWHUVLQ/DWLQ$PHULFD7KHVH SXEOLFDWLRQVDUHXVXDOO\SURGXFHGE\WKHXQLYHUVLWLHVDVLVWKHFDVHRI7DOOHUGH/HWUDV3RQWLILFLD8QLYHUVLGDG &DWyOLFDGH&KLOH 1XFOHR8QLYHUVLGDG&HQWUDOGH9HQH]XHOD 3XHQWH8QLYHUVLGDG)HPLQLQDGHO6DJUDGR &RUD]yQLQ/LPD &XDGHUQRV8QLYHUVLGDGGH3XHUWR5LFR DQG,6,7¶V%ROHWtQLQIRUPDWLYRLQ0H[LFR7KH 6,,7GLVWULEXWHV,QIRUPDFLRQHV6,,7WKUHHWLPHVD\HDU,QDGGLWLRQ/DWLQ$PHULFDQVSHFLDOLVWVDUHQRZ FRQWULEXWLQJPRUHUHJXODUO\WRLQWHUQDWLRQDOSXEOLFDWLRQVIRUH[DPSOHWRWKHMRXUQDO0HWDVHHHVSHFLDOO\YRO 7UDQVODWLRQLQWKH6SDQLVKDQG3RUWXJXHVHZRUOG 0RVWWUDQVODWRUV¶DVVRFLDWLRQVDOVRLVVXH UHJXODUEXOOHWLQV

)XUWKHUUHDGLQJ $UHQFLELD$UQDXG%RZHQ&DEUHUDGHOD&XHVWD'HOLVOHDQG:RRGVZRUWK)RVVD *DUJDWDJOL*DUJDWDJOLDQG*XL[5RVHQEODW6DQWR\R6,,76RODQR9HJD

*(25*(6/%$67,1

7UDQVODWHGIURP6SDQLVKE\0DUN*UHJVRQ

%LRJUDSKLHV %(//2$QGUpV±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tYDU+HVWD\HG\HDUVLQ/RQGRQZKHUHKHSXEOLVKHGSRHPVDUWLFOHV DQGWUDQVODWLRQV,QKHPRYHGWR6DQWLDJRZKHUHKHZRUNHGIRUWKH&KLOHDQ0LQLVWU\RI)RUHLJQ$IIDLUV +HIRXQGHGWKH8QLYHUVLW\RI&KLOHRIZKLFKKHZDVUHFWRUXQWLOKLVGHDWK %HOORLVUHJDUGHGDVRQHRIWKHPRVWSURPLQHQWILJXUHVRI/DWLQ$PHULFDQMXULVSUXGHQFHHGXFDWLRQDQG OLWHUDWXUH+HLVEHVWUHPHPEHUHGDVWKHDXWKRURIWKH*UDPiWLFDGHODOHQJXDFDVWHOODQD DQGRISRHPV VXFKDV6LOYDVDPHULFDQDVDQGSRHWLFDOLPLWDWLRQVVXFKDV9LFWRU+XJR¶V/DSULqUHSRXUWRXV+LVWUDQVODWLRQV LQJHQHUDORI%HUQL%\URQ/RFNH9ROWDLUH%R\DUGRDQG'XPDVDPRQJRWKHUV DUHRXWVWDQGLQJ 0$/,1&+(0DOLQDOOL7HQpSDODOVRNQRZQDV0DOLQW]LQDQG'RxD0DULQD F±F :HOO NQRZQ$]WHFWUDQVODWRURI+HUQiQ&RUWpVRQHRIWKHOHDGHUVRIWKH6SDQLVK&RQTXHVWRI/DWLQ$PHULFD 0DOLQFKHZDVRQHRI\RXQJZRPHQZKRZHUHJLYHQWR&RUWpVRQKLVDUULYDOLQZKDWLVQRZNQRZQDV 0H[LFR6KHTXLFNO\SURYHGKHUVHOILQGLVSHQVDEOHLQDYDULHW\RIZD\VVKHLQWHUSUHWHGIRU&RUWpVDFWHGDV LQIRUPDQWZDUQLQJKLPRIDPEXVKHVE\WKHORFDOWULEHV EHFDPHKLVPLVWUHVVDQGERUHKLPDFKLOG,WLV ZLGHO\WKRXJKWZKHWKHUFRUUHFWO\RUQRWWKDWZLWKRXWKHUDLG&RUWpVPD\QRWKDYHEHHQDEOHWRDFFRPSOLVK KLVPLVVLRQRIFRQTXHULQJ0H[LFR7RWKLVGD\WKHWHUPPDOLQFKLVWDLVXVHGLQ0H[LFRWRGHQRWHVRPHRQHZKR VHOOVRXWRURWKHUZLVHEHWUD\VDFDXVH *(25*(6/%$67,1



3DJH

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²DQGJURZLQJ²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

$QFLHQW3HUVLDQ(PSLUH 7RWKHEHVWRIRXUNQRZOHGJH2OG3HUVLDQZDVEURXJKWLQWRWKH,UDQLDQSODWHDXLQWKHVHFRQGPLOOHQQLXP%& E\ZDYHDIWHUZDYHRILQYDGLQJWULEHVIURPWKH(XUDVLDQVWHSSHV,QWLPHLWEHFDPHWKHODQJXDJHRIWKH $FKDPHQLDQV±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± DQGWKHULVHRI0LGGOH3HUVLDQDOVR NQRZQDV3DKODYLZHEHJLQWRJDLQVXIILFLHQWLQIRUPDWLRQDERXWLQWHUFXOWXUDOH[FKDQJHWRDIIRUGVXEVWDQWLYH GLVFXVVLRQV:HKDYH0LGGOH3HUVLDQWUDQVODWLRQVRISDUWVRIWKH$YHVWDDOEHLWLQOLWHUDOUHQGLWLRQVZKLFKDW WLPHVPDNHWKHPHDQLQJ



3DJH

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¶VFRQTXHVWLQ%&ZDV UHJDLQHGLQWKLVZD\7KH6DVDQLDQPRQDUFK6KDSXU,FRPPLVVLRQHGPDQ\WUDQVODWLRQVIURP*UHHNDQG,QGLDQ ZRUNVWREHLQFRUSRUDWHGLQWRFROOHFWLRQVRIUHOLJLRXVWH[WVDQG6KDSXU,,ODLGFODLPWRSDUWVRIWKH5RPDQ (PSLUHRQWKHEDVLVRIGHVFULSWLRQVSURYLGHGE\*UHHNKLVWRULDQV 0RUHLPSRUWDQWO\WKHZLGHFXUUHQF\RI*UHHNSKLORVRSK\DQGVFLHQFHVLQ,UDQMXVWEHIRUHWKHDGYHQWRI,VODP PD\EHDWWULEXWHGSULQFLSDOO\WRWUDQVODWLRQVZKLFKKDYHQRZEHHQODUJHO\ORVW(DUO\LQWKHVL[WKFHQWXU\$' .LQJ.KRVURZWKH)LUVWNQRZQDV$QXVKLUYDQµWKHLPPRUWDOVRXO¶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

0HGLHYDO3HUVLD ,QWKHVHFRQGKDOIRIWKHVHYHQWKFHQWXU\,VODPEHJDQWRVSUHDGRYHUWKH,UDQLDQSODWHDXJUDGXDOO\EXWVWHDGLO\ 7KLVPDUNVDXQLTXHWXUQLQJSRLQWLQWKHOLIHRIWKH,UDQLDQVQRWRQO\UHOLJLRXVO\EXWFXOWXUDOO\DQG OLQJXLVWLFDOO\DVZHOO7KH3HUVLDQODQJXDJHFRQVWLWXWHVWKHPRVWFRQFUHWHOLQNEHWZHHQ,VODPLFDQGSUH,VODPLF ,UDQLDQFXOWXUHV,WLVWUXHWKDWWKHDEDQGRQLQJRIWKH3DKODYLVFULSW²LQIDYRXURIWKH$UDELFVFULSW²UHVXOWHGLQ VLJQLILFDQWOLQJXLVWLFFKDQJHV6WLOOWKHQHZVFULSWZDVIDUVLPSOHUDQGPRUHDGYDQFHG,QDGGLWLRQZKHUHWKH $UDELFVFULSWODFNHGHVVHQWLDOO\3HUVLDQFRQVRQDQWVWKHVHZHUHDGGHGWRLW,QVKRUWWKHDGRSWLRQRIWKH$UDELF VFULSWIRU3HUVLDQGLGQRWJLYHULVHWRUXSWXUHVDVVLJQLILFDQWDVFHUWDLQPRGHUQLVWUHIRUPHUVKDYHDVVXPHGLWGLG ,QWKHWZRFHQWXULHVWKDWIROORZHGDVXFFHVVLRQRIFXOWXUHG3HUVLDQVVSHDUKHDGHGDWUDQVODWLRQHIIRUWDLPHGDW SUHVHUYLQJSUH,VODPLF,UDQLDQWH[WV7KH\WUDQVODWHGWKHPRVWVLJQLILFDQW0LGGOH3HUVLDQGRFXPHQWV²OLWHUDU\ UHOLJLRXVRURWKHUZLVH²LQWR$UDELFKRSLQJWRSUHVHUYHWKHROGFRQWHQWLQWKHRQO\JDUEOLNHO\WRVXUYLYH F

5R]YHKRU5X]EHKEHWWHUNQRZQE\KLV0XVOLPQDPHF$EGROOƗK(%1$/024$))$ H[HFXWHGDERXW WUDQVODWHG7KH3DQFKDWDQWUDDQG.KRWD\QDPDNDFROOHFWLRQRIP\WKLFDOOHJHQGVRI3HUVLDQNLQJVDQG KHURHV LQWR$UDELF,QDOOOLNHOLKRRGKHLVDOVRUHVSRQVLEOHIRUWKHWUDQVODWLRQLQWR$UDELFRIDFFRXQWVRIWKH VL[WKFHQWXU\UHIRUPLVWSURSKHW0D]GDNDQGWKDWRIKLVIROORZHUV 6XFKWH[WVODWHUWUDQVODWHGIURP$UDELFEDFNLQWR1HZ3HUVLDQIRUPHGWKHEDVLVIRUPXFKRIRXULQIRUPDWLRQ DERXWSUH,VODPLF,UDQLDQFXOWXUHSDUWLFXODUO\LWVWH[WXDOWUDGLWLRQ$PRQJWKHH[WDQW3HUVLDQWH[WVWKH HOHYHQWKFHQWXU\6LƗVDW1ƗPHK%RRNRQ6WDWHFUDIW DQGWKHWZHOIWKFHQWXU\)DUV1ƗPHK%RRNDERXW)DUV JLYHDFOHDULPSUHVVLRQRIEHLQJUHQGLWLRQVRIHDUOLHUZRUNVLQ3HUVLDQRU$UDELF7KRVHHDUOLHVWWH[WVQRZ ODUJHO\ORVWZHUHWKHPVHOYHVSUREDEO\WUDQVODWLRQVIURP0LGGOH3HUVLDQ7KXVWKURXJKRXWWKHHLJKWKDQGQLQWK FHQWXULHVZKLFKZDVWKH



3DJH

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±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¶Ɩ1$VWKHZRUGRI*RGWKH4XU¶ƗQZDVFRQVLGHUHG XQWUDQVODWDEOH3HUVLDQVSHDNLQJ0XVOLPVWKHUHIRUHSURGXFHGLPSRUWDQWWH[WVWRSURSDJDWH*RG¶VPHVVDJHWR EHOLHYHUVZKRGLGQRWXQGHUVWDQG$UDELF:KLOHWHFKQLFDOO\FRQFHLYHGDVFRPPHQWDULHVVXFKWH[WVQRQHWKH OHVVFRQWDLQHGPXFKZRUGIRUZRUGWUDQVODWLRQ0XVOLPFRPPHQWDWRUVE\DQGODUJHNHSWWKHVHQWHQFHVWUXFWXUH DQGV\QWD[RI4XU¶Ɨ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

ƖODP)URQWLHUVRIWKH:RUOG DQH[WUHPHO\LPSRUWDQWHDUO\3HUVLDQERRNRIXQNQRZQDXWKRUVKLSLVD WUDQVODWLRQRISDUWVRI7DEDUL¶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ƗVƗ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¶ƗQDQGRWKHU,VODPLFWH[WV$VDUHVXOW WZRUDWKHUGLFKRWRPRXVDSSURDFKHVWRWUDQVODWLRQJDLQHGFXUUHQF\RQHFRQVLGHUHGDSSURSULDWHWRUHOLJLRXVDQG SKLORVRSKLFGLVFRXUVHWKHRWKHUIUHHUDSSURDFKWKRXJKWVXLWDEOHIRUVFLHQWLILFWUDQVODWLRQ



3DJH

([DPSOHVRIWKHODWWHUDSSURDFKDUHWRRPDQ\WRHQXPHUDWHEXWWZRDUHZRUWKPHQWLRQLQJKHUH,QWKHV 0RKDPPDGE0DQVXURI*RUJƗQNQRZQDV=DUULQGDVWFRPSRVHGD3HUVLDQPDQXDORIRSKWKDOPRORJ\HQWLWOHG F

1XUDO 2\XQ/LJKWRI(\HV RQWKHEDVLVRIWKH$UDELFZRUN7D]NHUDWDO.DKKƗOƯQ$GYLFHWR2FXOLVWV E\D VFLHQWLVWNQRZQWRXVDVF$OLEF,VƗ,QRUGHUWRPDNHLWPRUHXVHIXOWRKLVORFDOUHDGHUVWKH3HUVLDQWUDQVODWRU UHFDVWWKH$UDELFZRUNLQWKHIRUPRITXHVWLRQDQGDQVZHU+HDOVRDGGHGPXFKLQIRUPDWLRQWKDWFDPHIURP KLVRZQSUDFWLFHLQWKHILHOGRIRSKWKDOPLFRSHUDWLRQV6LPLODUO\ZKHQWKHWZHOIWKFHQWXU\VFKRODU$EX1DVU $KPDGDO4REDYLZDVWXUQLQJDO1DUVKDNKL¶VWHQWKFHQWXU\+LVWRU\RI%XNKDUDLQWR3HUVLDQKHXSGDWHGWKH ZRUNZLWKDVHTXHO%RWKZRUNVKDYHVXEVHTXHQWO\EHHQORVWRQO\DQH[WUDFWIURPWKHODWWHULQFRUSRUDWHGLQWR DQRWKHUZRUNVRPH\HDUVDIWHUWKHDXWKRU¶VGHDWKVXUYLYHV 7KLVDSSURDFKWRWUDQVODWLRQPDGHDJUHDWGHDORIVFLHQWLILFNQRZOHGJHDYDLODEOHWRPHGLHYDO3HUVLD3HUKDSV WKHEHVWH[DPSOHLV'ƗQHVKQƗPHK\Hµ$OƗ¶LDQHQF\FORSHGLFZRUNEHJXQE\WKHIDPRXVSK\VLFLDQ$YLFHQQD DQGFRPSOHWHGE\KLVVWXGHQW-X]MDQL,WLVDFRPSHQGLXPRIGLVFLSOLQHVPRUHKHDYLO\WLOWHGWRZDUGVWKH VFLHQFHVWKDQWRZDUGVOLWHUDWXUHDQGWKHDUWV,QDPRUHRUOHVVV\VWHPDWLFZD\LWDGGUHVVHVHYHU\LPDJLQDEOH VSKHUHRIKXPDQDFWLYLW\IURPDVWURQRP\DQGLWVYDULRXVRIIVKRRWVWRSKLORVRSK\WKHRORJ\HWKLFVDQG P\VWLFLVPDVZHOODVLQIRUPDWLRQDERXWWKHSURSHUWLHVRIKXPDQDQGDQLPDOERGLHVSODQWVDQGPLQHUDOV SRLVRQVDQGDQWLGRWHVDQGQXPHURXVGLYLQDWLRQVDQGFXULRVLWLHV+LVWRULFDOO\'ƗQHVKQƗPHK\Hµ$OƗ¶LLVWKH ILUVWRIPDQ\HQF\FORSHGLF3HUVLDQZRUNVZKLFKDWWHPSWWRV\QWKHVL]HH[LVWLQJNQRZOHGJHERWKVSHFXODWLYH DQGXWLOLWDULDQ:LWKRXWDWUDQVODWLRQWUDGLWLRQIUHHIURPWKHFRQVWUDLQWVRIDWWULEXWLRQDQGSURSULHW\VXFKZRUNV PD\QRWKDYHEHHQSRVVLEOH $VHOVHZKHUHLQWKH0XVOLPZRUOGLQPHGLHYDO3HUVLD$UDELFZDVWKHOLQJXDIUDQFD$OPRVWDOO3HUVLDQZULWHUV DQGVFKRODUVZHUHELOLQJXDODQGDQH[WUDRUGLQDU\QXPEHURIVFLHQWLVWVDQGSKLORVRSKHUVFRQWLQXHGWRZULWH HQWLUHO\RUSULPDULO\LQ$UDELF,QDGGLWLRQWRWKHKLVWRULDQ7DEDULDQGSK\VLFLDQDQGSKLORVRSKHU$YLFHQQD WKUHHRIWKHJUHDWHVW,VODPLFWKHRORJLDQV²WKH6KL¶LWH0RKDPPDG7XVLG WKH6XQQLUHIRUPLVW 0RKDPPDGDO*KD]ƗOLG DQGWKH0R¶WD]HOLWH=DPDNKVKDULG ²ZKRZDVDOVRDJUHDW JUDPPDULDQDQGOH[LFRJUDSKHU²FDQEHFRXQWHGDPRQJWKHVHDVFDQWKHMXULVWDQGSKLORVRSKHU)DNKUDO'LQ 5Ɨ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¶V(OHPHQWVDQG 7KHRGRVLXV¶6SKHULFDLQWR$UDELFDQGWKHDVWURORJLFDOMXGJHPHQWVRI3WROHP\IURP$UDELFLQWR3HUVLDQ,Q HDFK



3DJH

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ƗJXLQWKLUWHHQWKFHQWXU\$]HUEDLMDQRUXQGHUWKHWXWHODJHRI2ORJKED\JWKHVFKRODUO\UXOHU RI6DPDUNDQGLQWKHILIWHHQWKFHQWXU\7KHLPSRUWDQFHRIWKLVWUHQGLQWKHHYROXWLRQRIWUDQVODWLRQDFWLYLW\RQ WKH,QGLDQVXEFRQWLQHQWFDQQRWEHRYHUHPSKDVL]HG

7KHSRVW0RQJROHUD %\WKHWKLUWHHQWKFHQWXU\3HUVLDQZDVEHFRPLQJZHOOHVWDEOLVKHGLQ,QGLDDVWKHODQJXDJHRIUHOLJLRXVOLWHUDU\ DQGOHJDOOHDUQLQJDQGFRPPXQLFDWLRQ$QXPEHURILPSRUWDQWWUDQVODWLRQVEHJDQWREHPDGHIURP6DQVNULW DQGRWKHU,QGLDQODQJXDJHVLQWR3HUVLDQ&HQWXULHVRI%ULWLVKFRORQLDOUXOHLQ,QGLDDQGWKHDVFHQGDQF\RI PRGHUQLVPDQGQDWLRQDOLVWLGHRORJLHVLQ,UDQDQGHOVHZKHUHLQWKH3HUVLDQVSHDNLQJZRUOGKDYHREVFXUHGWKH LPSRUWDQFHRIWKHVHZRUNV6WLOOVRPHRIWKHPRUHLPSRUWDQWWUDQVODWLRQVRIWKLVNLQGDUHNQRZQWRXV7KH\ LQFOXGHµ$EGROµ$]L]1XUL'HKODYL¶VIRXUWHHQWKFHQWXU\WUDQVODWLRQRIDQDVWURQRPLFDOZRUNE\9DUDKUD 0HKHUDG DWUDQVODWLRQRI/LODYDWLDWUHDWLVHRQDULWKPHWLFDQGJHRPHWU\E\WKHWZHOIWKFHQWXU\ ,QGLDQVFLHQWLVW%KDVNDUD DQGDWUHDWLVHRQDOJHEUDHQWLWOHG9LMD*DQLWDZKLFKZDVWUDQVODWHGLQ 6FRUHVRIOHVVLPSRUWDQWWUDQVODWLRQVPD\DOVREHPHQWLRQHGWKHEHVWNQRZQEHLQJ1DMPDO'LQ.DNXUDYL¶V 5HVDOHKGDU-DEUYD0RTƗEHOHK7UHDWLVHRQ$OJHEUDDQG5HFLSURFLW\ $Q,QGLDQKXERIWUDQVODWLRQDFWLYLW\FDQEHIRXQGDWWKHFRXUWRI(PSHURU$NEDUWKH*UHDWLQWKHODWWHUSDUWRI WKHVL[WHHQWKFHQWXU\,Q$NEDU¶VPLQLVWHU7RGDU0DOLVVXHGDGHFUHHPDNLQJ3HUVLDQWKHRIILFLDO JRYHUQPHQWODQJXDJHRIWKH0RJKXOHPSLUH$VDUHVXOW3HUVLDQFDPHWRGRPLQDWHWKH,QGLDQVXEFRQWLQHQWDOO WKHZD\WR%HQJDODQGDJUHDWYDULHW\RIZRUNVRI6DQVNULWOLWHUDWXUHZHUHWUDQVODWHGLQWRLW&KLHIDPRQJWKHVH ZHUH$EGRO4ƗGHU%DGƗ¶XQL¶VWUDQVODWLRQVRIWKH0DKDEKDUDWDDQGWKH5DPD\DQDLQWKHV,QWLPH VHYHUDOVLJQLILFDQWWUDQVODWLRQVZHUHDOVRPDGHIURP(QJOLVKPDNLQJ3HUVLDQWKHJDWHZD\WR(XURSHDQ VFLHQFHVDVZHOO )RUDQXPEHURIUHDVRQV3HUVLDQFXOWXUDOFHQWUHVRXWVLGH,UDQEHFDPHHYHQPRUHLPSRUWDQWEHWZHHQWKH VL[WHHQWKDQGQLQHWHHQWKFHQWXULHV7KHRIILFLDWLQJRI6KL¶LVPLQ,UDQLQWKHVL[WHHQWKFHQWXU\VKLIWHGWKH HPSKDVLVLQWUDQVODWLRQEDFNWRUHOLJLRXVWH[WVSDUWLFXODUO\WKRVHRIWKHSURSKHWLFWUDGLWLRQDQGWKHVD\LQJVRI WKH,PDPVFROOHFWLYHO\NQRZQDV+DGLWK,QSDUWLFXODU1DKMDO%DOƗJKHKDFRPSLODWLRQRIDSKRULVPVDQG ZLVHVD\LQJVDWWULEXWHGWR,PDPF$OL(EQ$EX7ƗOHEFRXVLQDQGVRQLQODZWRWKHSURSKHWDQGWKHILUVW,PDP RIWKH6KL¶LWHVHPHUJHGDVDQHPERGLPHQWRIWKHLGHDORIHORTXHQFH7KHVD\LQJVFRQWDLQDYDULHW\RI UKHWRULFDOGHYLFHVYHU\GLIILFXOWWRPDLQWDLQLQWUDQVODWLRQ,QWKHH[SDQGLQJQHWZRUNRI6KL¶LWHVHPLQDULHVDW 4RP,VIDKDQDQGRWKHUXUEDQFHQWUHVRI,UDQWUDQVODWLQJWKLVDQGVLPLODU6KL¶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¶LVPLQ,UDQKDVDOUHDG\EHHQ



3DJH

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¶V ERUGHUV&RXSOHGZLWKWKHIDFWWKDWLQWKHODVWFHQWXU\RUVRQRLPSRUWDQWWUDQVODWLRQPRYHPHQWKDVWDNHQVKDSH LQ$IJKDQLVWDQRULQ3HUVLDQVSHDNLQJ&HQWUDO$VLDWKHIDWHRI3HUVLDQDVDQLQWHUQDWLRQDOODQJXDJHFDQEHVDLG WRVWDQGDWDFULWLFDOMXQFWXUHDWWKHHQGRIWKHWZHQWLHWKFHQWXU\

7KHPRGHUQSHULRGLQ,UDQ $QXPEHURIGHYHORSPHQWVUHVXOWHGLQDUHQDLVVDQFHRIWUDQVODWLRQDFWLYLW\LQ,UDQLQWKHODWWHUSDUWRIWKH QLQHWHHQWKFHQWXU\$IWHUDFHQWXU\DQGDKDOIRISROLWLFDOLQVWDELOLW\WKH4DMDUG\QDVW\ZKLFKUXOHG±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ǌQ+RXVHRI 7HFKQLTXHV WKLVLQVWLWXWLRQSOD\HGDFUXFLDOSDUWLQPRGHUQL]LQJ,UDQ(XURSHDQWHDFKHUVZHUHKLUHGWRWHDFKD YDULHW\RIVXEMHFWVRIWHQZLWK,UDQLDQVDVWKHLUDVVLVWDQWVDQGLQWHUSUHWHUV7KH\DOVRSUHSDUHGDQXPEHURI WH[WERRNVLQYDULRXVVFLHQFHVZKLFKZHUHEDVHGODUJHO\RQ(XURSHDQVFLHQWLILFZRUNV7KXVWUDQVODWLRQDQG LQWHUSUHWLQJEHJDQWRSOD\DFUXFLDOSDUWLQWKHHYROXWLRQRISHGDJRJLFDOSURFHVVHVLQPRGHUQ,UDQ 0DQ\HDUO\,UDQLDQWUDQVODWRUVRI(XURSHDQZRUNVZHUHJUDGXDWHVRI'DUDO)RQǌQ&KLHIDPRQJWKHPZDV 0RKDPPDG+DVDQ.KƗQEHWWHUNQRZQDV(FWHPƗGDO6DOWDQHKWKHODVWWLWOHWKHFRXUWEHVWRZHGRQKLP)URP WR(FWHPƗGDO6DOWDQHKKHDGHGDQHZJRYHUQPHQWRIILFHFDOOHG'DUDO7DUMRPHK+RXVHRI 7UDQVODWLRQ GHVLJQHGWRFRRUGLQDWHJRYHUQPHQWVSRQVRUHGWUDQVODWLRQDQGLQWHUSUHWLQJDFWLYLWLHV7KHRIILFH ZDVFKDUJHGZLWKVXSHUYLVLQJDOOVWDWHVSRQVRUHGWUDQVODWLRQDFWLYLWLHV8QGHU(FWHPƗGDO6DOWDQHK¶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



3DJH

JHQHUDWHG$PRQJWKHPL[RIZRUNVWUDQVODWHGLQWR3HUVLDQLQWKHODVWGHFDGHVRIWKHQLQHWHHQWKFHQWXU\RQH FDQQDPH9ROWDLUH¶VKLVWRULFDOQDUUDWLYHVRQ$OH[DQGHUWKH*UHDW3HWHUWKH*UHDWDQG&KDUOHV;,,0ROLqUH¶V /H0LVDQWKURSHDQG/H0pGHFLQPDOJUpOXL-RKQ0DOFROP¶V+LVWRU\RI3HUVLDDVZHOODVZRUNVE\VRPHRI WKHEHVWNQRZQ(XURSHDQDXWKRUVRIWKHWLPHLQFOXGLQJ'XPDVWKH(OGHU)pQHORQ/H6DJH%HUQDUGLQGH 6DLQW3LHUUH-XOHV9HUQHDQG'DQLHO'HIRH7KHDYDLODELOLW\RIVXFKZRUNVEHJDQWRDIIHFWDOODVSHFWVRI ,UDQLDQFXOWXUHIURPZULWLQJVW\OHWRWKHSRVLWLRQRIZRPHQLQVRFLHW\ )URPWKHSHUVSHFWLYHRIRYHUDFHQWXU\ODWHQLQHWHHQWKFHQWXU\WUDQVODWLRQVLQWR3HUVLDQDSSHDUOLNHDFXULRXV PL[RILGHRORJ\DQGIDQWDV\RIILFWLRQDQGKLVWRU\+RZHYHULIZHEHJLQWRWKLQNRIWKHSKHQRPHQRQLQWHUPV RI,UDQ¶VQHHGIRUUHVWUXFWXULQJDQGUHIRUPZHPD\EHLQDEHWWHUSRVLWLRQWRJDXJHWKHSDUWVXFKZRUNVKDYH SOD\HGKLVWRULFDOO\7KH\PDGH,UDQLDQVVRUHO\DZDUHRIWKHLUEDFNZDUGQHVVVXEPLWWHGWKHFXOWXUH¶V DVVXPSWLRQVDQGFDWHJRULHVWRXQSUHFHGHQWHGVFUXWLQ\DQGLQWHQVLILHGQDWLRQDOGHVLUHIRUDOLJQPHQWZLWKWKH :HVW7KXV3HUVLDQWUDQVODWLRQVRIWKHQLQHWHHQWKFHQWXU\PD\EHVDLGWRKDYHSOD\HGDXQLTXHDQGVLJQLILFDQW SDUWLQ,UDQ¶VGULYHWRZDUGPRGHUQL]DWLRQ ,QWHUPVRIDHVWKHWLFTXDOLW\RQHZRUNVWDQGVRXWIURPDPRQJDOOWKHQLQHWHHQWKFHQWXU\WUDQVODWLRQV0LU]Ɨ +DELE(6)$+Ɩ1,¶6WUDQVODWLRQRI-DPHV0RULHU¶V7KH$GYHQWXUHVRI+DML%DEDRI(VIDKDQ:ULWWHQLQ 0RULHU¶VERRNZDVELWWHUO\FULWLFDORI,UDQLDQVRFLHW\DQGKDVQHYHUEHHQTXLWHDFFHSWHGE\,UDQLDQVDVWKH UHDOLVWLFZRUNLWLV(VIDKƗQL¶VWUDQVODWLRQIURP)UHQFKLVXQLTXHLQPDQ\UHVSHFWV,WDWWHPSWVWR LQGLJHQL]HWKHZRUNWKURXJKDYDULHW\RIWHFKQLTXHVFROORTXLDOLVPWKHXVHRIDIDLUO\KHDY\GRVHRI3HUVLDQ SURYHUEVDQGLQWHUVSHUVLQJWKHZRUNZLWK3HUVLDQYHUVHDQGKXPRXU7KHVWUDWHJ\ZDVVRVXFFHVVIXOWKDWLW VRRQJDYHULVHWRDWKHRU\WKDW0RULHU¶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± DQG WKH3HUVLDQWUDQVODWLRQRIWKH%HOJLDQFRQVWLWXWLRQRIVHUYHGDVDGUDIWGRFXPHQWIRUWKH,UDQLDQ &RQVWLWXWLRQUDWLILHGLQ7KURXJKRXWWKHSDVW\HDUVYDULRXVWUDQVODWHGWH[WVRI(XURSHDQDQG$PHULFDQ RULJLQ²IURPWKHODZVRIQDWXUHDQGUXOHVRIHWLTXHWWHWROHJDOFRGHVSROLWLFDOGRFXPHQWVDQGEXUHDXFUDWLF UHJXODWLRQV²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



3DJH

ILHOGVVXFKDVOLWHUDWXUHRUWKHVRFLDOVFLHQFHV,QVWHDGWKHLPSXOVHWRWUDQVODWHVHHPVWRIROORZWKHVHDUFKIRU UHOHYDQFHRUWKHSHUFHLYHGQHHGWREXWWUHVVRUMXVWLI\RQH¶VRZQSRVLWLRQSROLWLFDOO\SKLORVRSKLFDOO\RU DHVWKHWLFDOO\ 6WLOODGLVWLQFWLRQFDQEHPDGHEHWZHHQHDUOLHUWUDQVODWLRQDFWLYLWLHVDQGWKRVHSUHYDLOLQJVLQFH:RUOG:DU 7ZR,QWKHHDUOLHUSHULRGWUDQVODWLRQZDVFRQVLGHUHGWKHEHVWZD\WRLQIRUP,UDQLDQVDERXWWKH:HVW 7\SLFDOO\WUDQVODWRUVFRQFHLYHGRIWUDQVODWLRQDVDYHKLFOHWRVSHHGXS,UDQ¶VGULYHWRZDUGPRGHUQL]DWLRQ :KHWKHUOLWHUDU\SKLORVRSKLFDORUKLVWRULFDOWKH\HQYLVLRQHGWUDQVODWLRQDVDYHKLFOHIRUVRFLDORUFXOWXUDO FKDQJH,QWKHLUKDQGVWUDQVODWLRQZDVXVHGSULPDULO\DVDPHDQVRIHGXFDWLRQDQGDWRROIRUQDWLRQEXLOGLQJ DQGFXOWXUDOLQWHJUDWLRQ $OPRVWDOOWKHPDMRUWUDQVODWRUVRIWKHWLPH²<XVRI(F7(6Ɩ0$/02/.0RKDPPDGF$OL)RUXTLµ$EEƗV (TEƗO$VKWLƗQL6D¶LG1DILVLDPRQJPDQ\RWKHUV²ZHUHFRQFHUQHGHVVHQWLDOO\ZLWKVHUYLQJWKH,UDQLDQFXOWXUH WKURXJKLQWURGXFLQJ(XURSHDQFXOWXUDODFKLHYHPHQWVWR,UDQLDQUHDGHUV$OPRVWDOOIRUXPVIRUGLVVHPLQDWLQJ LGHDV²WKHERRNLQGXVWU\OLWHUDU\DQGSROLWLFDOSHULRGLFDOVDVZHOODVWKHLQVWLWXWLRQVRIKLJKHUHGXFDWLRQDWD ODWHUVWDJH²LQFOXGHGWUDQVODWLRQUHODWHGDFWLYLWLHVDVSDUWRIWKHLUDJHQGDIRUDFFXOWXUDWLQJDQGHQOLJKWHQLQJ OLWHUDWH,UDQLDQV7RJLYHRQO\RQHH[DPSOH,UDQLDQMRXUQDOV²%DKƗU'ƗQHVKNDGHK(UPDJKƗQ9DIƗDQG Ɩ\DQGHKDPRQJQXPHURXVRWKHUV²UHOLHGRQWUDQVODWLRQWRLQIRUP,UDQLDQVDERXWWKHKLVWRU\SROLWLFVDQG FXUUHQWDIIDLUVRI(XURSHDQQDWLRQVZLWKWKHH[SUHVVGHVLUHWRSURSDJDWHWKHPDVPRGHOVIRU,UDQLDQVWRIROORZ ,QGRLQJVRWKH\KHOSHGWREULQJDERXWDQHZZULWLQJVW\OHQHZPHDQVDQGPHWKRGVRIFRPPXQLFDWLRQDQG HYHQWXDOO\DQHZOLWHUDU\WUDGLWLRQ )ROORZLQJ:RUOG:DU7ZR(QJOLVKJUDGXDOO\UHSODFHG)UHQFKDVWKHPDLQ(XURSHDQODQJXDJHWDXJKWDW,UDQ¶V VHFRQGDU\VFKRROVDQGXQLYHUVLWLHVDVZHOODVWKHSULQFLSDOPHGLXPIRUWUDQVODWLRQ$WWKHVDPHWLPHWKURXJK DWUDQVODWLRQHIIRUWVSHDUKHDGHGE\WKHSUR6RYLHW7XGHK3DUW\RI,UDQ0DU[LVWLGHDVSDUWLFXODUO\LQWKHLU 6WDOLQLVWLQWHUSUHWDWLRQVEHJDQWRJDLQFXUUHQF\LQ,UDQ6RRQWKH$PHULFDQVKDYLQJZUHQFKHGFRQWURORI,UDQ IURPWKH%ULWLVKHQWHUHGWKHVFHQHDVZHOO%\WKHVWUDQVODWLRQDFWLYLW\KDGHQWHUHGDQHZSKDVHDV FRPSHWLQJSROLWLFDOIRUFHVDGYDQFHGWKHLUVHSDUDWHDJHQGDVLQSDUWWKURXJKWUDQVODWLRQ ,Q7KH,QVWLWXWHIRU7UDQVODWLRQDQG3XEOLFDWLRQRI%RRNV%RQJƗKH7DUMRPHKYD1DVKUH.HWƗE ZDV IRXQGHGLQ7HKUDQRQWKHLQLWLDWLYHRID\RXQJ:HVWHUQHGXFDWHG,UDQLDQVFKRODUQDPHG(KVDQ


3DJH

DQGVKRUWFRPLQJV,WDOVRDLPHGWRLQVWLODVHQVHRIWKHFRPSDUDWLYHJUDPPDUVRIWKHODQJXDJHVDQGWH[WV LQYROYHG([WHQVLYHGLVFXVVLRQVRIWKHVW\OHGLFWLRQDQGFRQWH[WRIHDFKWH[WUHSODFHGWKHUHTXLUHPHQWRIWH[W SURGXFWLRQ,PSRUWDQWDVLWLVWUDQVODWLRQSHGDJRJ\KDVQHYHUEHHQVWXGLHGLQ,UDQDVDFUXFLDOFRPSRQHQWRI WUDQVODWLRQDFWLYLW\ (DUO\LQWKHVDVSDUWRIWKH,VODPLF5HSXEOLFDQ6WDWH¶VHIIRUWVWRUHGLUHFW,UDQ¶VHGXFDWLRQDOV\VWHP WRZDUGLWVLGHRORJ\D&RPPLWWHHIRU7UDQVODWLRQ&RPSRVLWLRQDQG(GLWLQJZDVHVWDEOLVKHGDWWKH +HDGTXDUWHUVIRUWKH&XOWXUDO5HYROXWLRQ7KLVFRPPLWWHHVHL]HGWKHRFFDVLRQSURYLGHGE\WKHWHPSRUDU\ FORVXUHRIWKHFRXQWU\¶VV\VWHPRIKLJKHUHGXFDWLRQWRSUHSDUHWH[WERRNVWKDWZRXOGEHWWHUUHIOHFWWKHVWDWH LGHRORJ\$UHDVRINQRZOHGJHZHUHGLYLGHGLQWRVRPHGLIIHUHQWILHOGVDQGXQLYHUVLW\WH[WERRNVRIWHQ WUDQVODWHGIURP(QJOLVKRU)UHQFKZHUHSUHSDUHGIRUHDFKILHOG,QWKLVZD\DVHULHVRIWH[WERRNVHVVHQWLDOO\ WUDQVODWLRQVDQGFROODWLRQVRI:HVWHUQZRUNVZHUHSURGXFHG7KHVHKDYHVLQFHEHHQXSGDWHGDQGDUHVWLOOLQ XVHLQ,UDQ¶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

)XUWKHUUHDGLQJ %DOD\DQG&X\SHUV%URZQH±)RXFKHFRXU+XVDLQ.DULPL+DNNDN5\SND 6WRUH\±

$+0$'.$5,0,+$..$.

%LRJUDSKLHV (%1$/024$))$FF$EGROOƗKG$' DOVRNQRZQDV5R]YHKRU5X]EHKVRQRI'ƗGX\HK$PRVW UHPDUNDEOHWUDQVODWRURI0LGGOH3HUVLDQWH[WVLQWR$UDELF(EQDO0RTDIIDFZDVDOVRDKLVWRULDQRIODQJXDJHV ZKRVHVXUYH\VRIWKH,UDQLDQODQJXDJHVRIKLVWLPHZKLFKVXUYLYHGLQ$UDELFFRQVWLWXWHRXUVROHVRXUFHRI NQRZOHGJHRQWKHWRSLF,WLVRZLQJWRKLVZRUNIRUH[DPSOHWKDWZHNQRZWKDWDFHQWXU\DIWHU,VODP3DKODYL ZDVVWLOOWKHODQJXDJHVSRNHQLQ0HGLDDQG$]HUEDLMDQZKLOH)DUVLZDVVSRNHQLQ)DUVDQG'DULLQWKHHDVWHUQ SDUWVRIWKH3HUVLDQHPSLUH (EQDO0RTDIIDFZDVWKHSULQFLSDOILJXUHDPRQJDJURXSRI,UDQLDQ=RURDVWULDQVRU0DQLFKHDQVDQGRWKHU GXDOLVWVIUHHWKLQNHUVDQGVXSSRUWHUVRIYDULRXVEHOLHIVXQLWHGLQWKHLUKRVWLOLW\WRWKHRIILFLDOVWDWHGRFWULQH &ROOHFWLYHO\WKH\ZHUHNQRZQDVWKH]DQGLTV7KHVSLULWRIIUHHGRPWKDWUHLJQHGDPRQJWKHJURXSFRQWULEXWHG WRDWUDQVODWLRQPRYHPHQWPRWLYDWHGLQDOOOLNHOLKRRGE\WKHGHVLUHWRVDYHWKHPRVWLPSRUWDQW3HUVLDQWH[WVRI SUH,VODPLFWLPHV 7KHWUDQVODWLRQVDWWULEXWHGWR(EQDO0RTDIIDFDUHPDQ\DOPRVWDOOIURP0LGGOH3HUVLDQLQWR$UDELF 8QIRUWXQDWHO\WKH\KDYHDOOEHHQORVW7KHPRVWLPSRUWDQWLVKLVWUDQVODWLRQRIWKHIDPRXV.KRWƗ\QƗPDND YDVWZRUNRQWKHKLVWRU\RI,UDQIURPP\WKLFDOWLPHVWRWKHGHDWKRI.KRVURZ,,LQ+LVWUDQVODWLRQ WUDQVODWHGEDFNLQWR3HUVLDQDOPRVW\HDUVODWHUSRVVLEO\E\DIHZVXUYLYLQJ=RURDVWULDQVIRUPHGWKHEDVLV IRUWKH3HUVLDQSRHW$EROTƗVHP)HUGRZVL¶V6KƗKQƗPHK%RRNRIWKH.LQJV $OPRVWDOORI(EQDO0RTDIIDF¶VRWKHUWUDQVODWLRQVKDYHKDGVLPLODUIDWHV+LVWUDQVODWLRQRI



3DJH

WKH3DQFKDWDQWUDDQGDQRWKHUFROOHFWLRQRI,QGLDQIDEOHVNQRZQDV%LGSƗLIRUPHGWKHEDVLVIRU.DOLOHKYD 'HPQHK+LVWUDQVODWLRQRIƖ\HQQƗPDN%RRNRI&XVWRPV LQWR$UDELFDQGKLVLQWHUSUHWDWLRQRI7ƗMQƗPDN %RRNRIWKH&URZQ ZKLFKFRQVLVWHGRIWUHDWLVHVRQUR\DOGRFXPHQWVRUGLQDQFHVDQGHGLFWVKDYHERWKJLYHQ ULVHWRODWHUWH[WVWKDWLQIRUPXVDERXWSUH,VODPLF,UDQLDQFLYLOL]DWLRQDQGFXOWXUH$PRQJ(EQDO0RTDIIDF¶V WUDQVODWLRQV7KH/HWWHURIWKH0DJLDQ3ULHVW7DQVDUWRWKH.LQJRI7DEDUHVWDQGHVHUYHVDVSHFLDOPHQWLRQ,WLV RXUFKLHIVRXUFHRILQIRUPDWLRQRQWKHNLQGVRIFRXQVHOJLYHQE\=RURDVWULDQVDJHVWRWKHUXOHUVRIWKHLUWLPH ,URQLFDOO\VXFKWUDQVODWLRQVZKLOHXQGHUWDNHQLQWKHVSLULWRI,UDQLDQQDWLRQDOSULGHPD\KDYHHQDEOHGWKH $UDERYHUORUGVWRPDVWHUWKHDUWRIVWDWHFUDIW (EQDO0RTDIIDFZDVH[HFXWHGLQ$'RUSRVVLEO\IRUKLVKHUHWLFDOEHOLHIV (6)$+Ɩ1,0LU]Ɨ+DELE± $QLQHWHHQWKFHQWXU\,UDQLDQSRHWEHVWNQRZQIRUKLVWUDQVODWLRQLQWR 3HUVLDQRI-DPHV0RULHU¶VQRYHORIOLIHLQ4DMDU,UDQ(VIDKƗQLZDVERUQLQDYLOODJHQHDU(VIDKƗQDQG VWXGLHG,VODPLFWKHRORJ\DQG3HUVLDQOLWHUDWXUHLQ(VIDKƗQDQG7HKUDQ,QKLV\RXWKKHDOVRVSHQWIRXU\HDUVLQ %DJKGDGUHWXUQLQJWR7HKUDQVRPHWLPHLQWKHHDUO\V+HUHKHZDVDFFXVHGRIDWKHLVPSRVVLEO\IRU KDYLQJVDWLUL]HGD4DMDUSULQFHLQDSRHP+HIOHGWR,VWDQEXOLQZKHUHKHMRLQHGVHYHUDORWKHU,UDQLDQ LQWHOOHFWXDOVDQGVRFLDOUHIRUPHUV+HOLYHGWKHUHDQGHDUQHGDOLYLQJDVDWHDFKHURI3HUVLDQDQG$UDELFXQWLO 7KHQEHFDXVHRIKLVSRRUKHDOWKKHWUDYHOOHGWRWKHPLQHUDOZDWHUVLQ%UXVVLDLQWKH&DXFDVXVZKHUHKH GLHGLQ (VIDKƗQLLVXQLTXHDPRQJHDUO\,UDQLDQLQWHOOHFWXDOVLQKDYLQJPDGHKLVUHSXWDWLRQVROHO\WKURXJKDVLQJOH ZRUNRIWUDQVODWLRQ7KHUHDVRQVIRUWKLVDUHQRWIDUWRVHHN,QWUDQVODWLQJ7KH$GYHQWXUHVRI+DML%DEDKHKDG LPEXHGWKHZRUNZLWKKLVRZQRSLQLRQVDQGELDVHVLQUHOLJLRXVVRFLDODQGSROLWLFDOPDWWHUV7KH3HUVLDQZRUN WKXVILWYHU\ZHOOZLWKLQWKHHPHUJLQJDJHQGDRI,UDQLDQPRGHUQL]DWLRQ:KDWDGGHGWRWKHERRN¶VDSSHDODQG KDVHQVXUHGLWVVXFFHVVHYHUVLQFHLV(VIDKƗQL¶VDSSURDFKWRWUDQVODWLRQDQGKLVVW\OHRIZULWLQJ+HKDG DSSURSULDWHG0RULHU¶VZRUNLQDZD\ZKLFKVHWWKHWRQHIRUJHQHUDWLRQVRIWUDQVODWRUVWRIROORZDQGKLVVLPSOH HOHJDQWSURVHLQWURGXFHG,UDQLDQVWRDYHKLFOHZHOOVXLWHGWRUHDOLVWLFQDUUDWLRQ (VIDKƗQL¶VFRQWHPSRUDULHVKDYHUHIHUUHGWRKLPDVDQH[WUHPHO\HUXGLWHVFKRODUDQGDUHVROXWHDGYRFDWHRI OLEHUDODQGGHPRFUDWLFLGHDV7KHVHLGHDVPD\ZHOOKDYHPRWLYDWHGKLPLQKLVSRHWU\DVZHOODVLQWKHZRUN ZKLFKKDVVHFXUHGKLVIDPH+LVZRUNVRQWKHJUDPPDURI3HUVLDQPD\KDYHEHHQDQRIIVKRRWRIKLVWHDFKLQJ FDUHHUEXWKLVWUDQVODWLRQRI0ROLqUH¶V/H0LVDQWKURSHZDVGRXEWOHVVXQGHUWDNHQZLWKDYLHZWRPDNLQJ VRFLDOFULWLFLVPSDUWRI,UDQLDQOLWHUDU\GLVFRXUVH(VIDKƗQL¶VDSSURDFKWRWUDQVODWLRQLVQRGLIIHUHQWKHUHIURP KLVWUDQVODWLRQRI+DML%DED,QKLVSRHWLF'LYDQWRRKHUHSHDWHGO\ODPHQWVWKHEDFNZDUGVWDWHRIDIIDLUV LQKLVKRPHODQG F

( 7(6Ɩ0$/02/.<XVRI± ,UDQLDQMRXUQDOLVWDQGDGYRFDWHRIZRPHQ¶VULJKWVSRVVLEO\WKH PRVWLPSRUWDQWILJXUHLQ3HUVLDQWUDQVODWLRQKLVWRU\LQWKHILUVWSDUWRIWKHWZHQWLHWKFHQWXU\,QPDQ\ZD\V (FWHVƗPW\SLILHV,UDQLDQWUDQVODWRUVRIWKHHDUO\WZHQWLHWKFHQWXU\+HUHFHLYHGKLVWUDGLWLRQDOHGXFDWLRQLQ ,VODPLFV$UDELFDQG3HUVLDQOLWHUDWXUHLQKLVELUWKSODFH7DEUL]DQGKDGZULWWHQWZRFRPPHQWDULHVRQWKH PHGLHYDO,VODPLFOLWHUDWXUHRIPRUDOLDE\WKHWXUQRIWKHFHQWXU\+HKDGDOVRKHOSHGWRHVWDEOLVKDPRGHUQ SULQWLQJSUHVVLQ7DEUL]7KHUHKHSXEOLVKHGKLVERRNRQWKHULJKWVRIZRPHQHQWLWOHG7DUELDWH1HVYƗQ :RPHQ¶V8SEULQJLQJ LQIDFWDWUDQVODWLRQIURP$UDELF7KLVZDVWKHILUVWSXEOLFDWLRQRQWKHVXEMHFWLQ,UDQ DQGLVJHQHUDOO\YLHZHGDVKDYLQJDFRQVLGHUDEOHLPSDFWRQ,UDQLDQVRFLHW\%\ZKHQKHEHJDQ SXEOLVKLQJWKHPRQWKO\MRXUQDO%DKƗU(FWHVƗPZDVSURILFLHQWLQ)UHQFKDVZHOODV3HUVLDQ$UDELFDQG 7XUNLVK ,QWKHSDJHVRI%DKƗU(FWHVƗPRIIHUHGEULOOLDQWWUDQVODWLRQVRI(XURSHDQSRHWU\DQGSURVHSULPDULO\IURP )UHQFK7KHVHLQFOXGHGIDEOHVIURP/D)RQWDLQHSRHPVE\9LFWRU+XJR/HUPRQWRY¶V'HPRQSDVVDJHVIURP 6KDNHVSHDUH¶V+HQU\,96FKLOOHU¶VDQG7ROVWR\¶VELRJUDSKLHVDVZHOODVVHOHFWHGHVVD\V



3DJH

RIWKH$PHULFDQMRXUQDOLVW$UWKXU%ULVEDQHDQGRWKHUV6RPHRIWKHVHWUDQVODWLRQVZHUHODWHUFRPSOHWHGDQG SXEOLVKHGLQERRNIRUPDVZHUHVHYHUDO5RPDQWLFDFFRXQWVRIWKHOLIHRI1DSROHRQDWWKHWLPHDIDYRXULWH (XURSHDQKHURZLWK,UDQLDQV,QPDQ\FDVHVZHGRQRWNQRZIRUFHUWDLQZKHWKHUKLVWUDQVODWLRQVZHUHGRQH GLUHFWO\IURPWKHRULJLQDO)UHQFKDQGLQDIHZFDVHV(QJOLVK RUIURPSUHYLRXVWUDQVODWLRQVLQWR7XUNLVKRU $UDELF7KLVLVFHUWDLQO\WKHFDVHZLWKVRPHRI(FWHVƗP¶VPRVWLPSRUWDQWWUDQVODWLRQVVXFKDVKLVWUDQVODWLRQV IURP6KDNHVSHDUHRUWKHILUVWYROXPHRI+XJR¶V/HV0LVpUDEOHV 7KHVWDJJHULQJGLYHUVLW\RI(FWHVƗP¶VWUDQVODWLRQVWHVWLILHVDVPXFKWRWKHQHHGIRUOLWHUDU\PRGHOVWREH HPXODWHGDVWRWKHHFOHFWLFQDWXUHRIWUDQVODWLRQDFWLYLW\LQPRGHUQ,UDQ,WDOVRSRLQWVWRWKHIDFWWKDW WKURXJKRXWWKHWZHQWLHWKFHQWXU\WUDQVODWLRQUHPDLQVDPDMRUPHDQVRIFRPPXQLFDWLRQ²DHVWKHWLFKLVWRULFDO DQGVRFLRSROLWLFDO²LQFRQWHPSRUDU\,UDQLDQFXOWXUH 786,1DVLUDO'LQ± $SUROLILFZULWHUDQGWUDQVODWRUFKLHIO\RI*UHHNVFLHQWLILFZRUNVSDUWLFXODUO\ LQPDWKHPDWLFVDQGJHRPHWU\(XFOLG¶V(OHPHQWVDQG7KHRGRVLXV¶6SKHULFDDUHDPRQJWKHPRVWLPSRUWDQW VFLHQWLILFZRUNVKHWUDQVODWHGLQWR$UDELFZKLOHWKHDVWURORJLFDOMXGJHPHQWVRI3WROHP\LVKLVSULQFLSDO WUDQVODWLRQLQWR3HUVLDQ+HDGGHGKLVRZQFRPPHQWVWRDOOWKHVHZRUNV0DQ\RI7XVL¶V$UDELFWUDQVODWLRQV ZHUHODWHUHLWKHUWUDQVODWHGLQWR3HUVLDQRUIRUPHGWKHEDVLVIRUODWHUZRUNVLQWKDWODQJXDJH 7XVLZDVD6KL¶LWHWKHRORJLDQDQGDQLQIOXHQWLDOZULWHULQKLVRZQULJKW+LV$NKOƗTH1ƗVHUL1DVHULDQ(WKLFV LVDQLPSUHVVLYHFRPSLODWLRQDQGGHPRQVWUDWLRQRI*UHHNOLWHUDWXUHRQHWKLFV+LVFRPPHQWDU\RQ$YLFHQQD¶V (VKƗUƗW$OOXVLRQV DVWRU\RI*UHHNRULJLQIRUPHGWKHEDVLVIRU-ƗPL¶VP\WKLFDODOOHJRU\6DOƗPƗQYD$EVƗO 6DODPDQDQG$EVDO +LVRWKHUZULWLQJVLQFOXGHWUHDWLVHVLQWKHRORJ\P\VWLFLVPDQGORJLF 7XVLZDVDOVRDVWDWHVPDQ$Q,VPƗ¶LOLE\ELUWKDQGXSEULQJLQJKHPD\KDYHKDGOLQNVZLWKWKH$VVDVVLQVD VHFUHWRUJDQL]DWLRQRIWHUURULVWVDLPHGDWVDERWDJLQJWKHULVHRIWKH6DOMXT7XUNVWRSRZHU:KHQWKH,O.KDQ HPSHURU+XOƗJXLQYDGHG,UDQ7XVLHQWHUHGKLVVHUYLFHSRVVLEO\WRVDYHLQQRFHQWOLYHVLQWKHWXUEXOHQWWLPHV WKDWIROORZHG+HVHUYHGDVFKLHIPLQLVWHUDQGFRXQVHOORUWR+XOƗJXDQGHQFRXUDJHGKLPWREXLOGDQ REVHUYDWRU\LQWKHWRZQRI0DUƗJKHKLQQRUWKZHVWHUQ,UDQ7KHDVWURQRPLFDOWDEOHVWKDWEHDUKLVQDPHDQG ZHUHPDGHIDPRXVLQ(XURSHWKURXJKDQHDUO\WUDQVODWLRQE\2[IRUGSURIHVVRU-RKQ*UHDYHVZHUHODWHU DQQRWDWHGDQGH[SDQGHGVHYHUDOWLPHV7KH\ZHUHDOVRWUDQVODWHGLQWR$UDELF $+0$'.$5,0,+$..$.

3ROLVKWUDGLWLRQ 3ROLVKLVD:HVW6ODYRQLFODQJXDJHFORVHO\UHODWHGWR&]HFKDQG6ORYDNDQGXOWLPDWHO\WUDFHDEOHWRDQDQFLHQW ODQJXDJHNQRZQDV3URWRVODY7KHGLDOHFWVWKDWJDYHULVHWRPRGHUQ3ROLVKFDQQRWEHDFFXUDWHO\GHVFULEHGDV QRZULWWHQUHFRUGVH[LVWSULRUWRWKHWZHOIWKFHQWXU\7KHHDUOLHVWH[WDQWZRUNZULWWHQLQ3ROLVKLVWKHUHOLJLRXV K\PQ%RJXURG]LFDµWKHRQHWKDWJDYHELUWKWR*RG¶ ZKLFKGDWHVEDFNWRWKHHOHYHQWKFHQWXU\%XWZKLOH PRVWPHGLHYDOK\PQVDUHWUDQVODWLRQVIURP/DWLQQRVRXUFHWH[WKDVEHHQIRXQGIRU%RJXURG]LFD ,QWHUHVWLQJO\KRZHYHUWKHWLWOHRIWKHK\PQLVLWVHOIDWUDQVODWLRQRIWKH2OG&KXUFK6ODYRQLFERJRURGLFD ZKLFKLQWXUQLVDWUDQVODWLRQRIWKH*UHHN7KHRWRNRVPHDQLQJµ*RGEHDULQJ¶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



3DJH

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± XVHG,WDOLDQDODQJXDJHZKLFKZDVIDPLOLDUWRWKH3ROLVKVRFLDOpOLWHZKRKDGVWXGLHGLQ3DGXD .LQJ=\JPXQW,,,± EHORQJHGWRWKH6ZHGLVK+RXVHRI9DVDDQGKLVFRXUWFRQVHTXHQWO\VSRNH *HUPDQ,QWKHVHYHQWHHQWKFHQWXU\)UHQFKHVWDEOLVKHGLWVHOIDVWKHODQJXDJHRIGLSORPDF\DQGVRRQEHFDPH WKHRIILFLDOODQJXDJHRIWKH)UDQFRSKLOHFRXUWRI.LQJ-RKQ6RELHVNL± 7KHVXEVHTXHQWULVHRIWKH 6D[RQ+RXVHRI:HWWLQWRZDUGVWKHHQGRIWKHVHYHQWHHQWKFHQWXU\EURXJKWWR3RODQGDODUJHQXPEHURI 6D[RQVZKLOHWKHHOHFWLRQRIWKHODVW3ROLVKNLQJ6WDQLVáDZ$XJXVW3RQLDWRZVNL±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± 7KHLQVWDELOLW\RIIURQWLHUVDQGWKHODUJHVFDOHIRUFHGUHORFDWLRQRIWKHSRSXODWLRQDIWHU:RUOG:DU7ZRUHVXOWHG LQWKHHVWDEOLVKPHQWRIDQHWKQLFVWDWHZLWKDIHZVPDOOPLQRULWLHV*HUPDQLQWKHZHVW/LWKXDQLDQLQWKHHDVW DQG8NUDLQLDQLQWKHVRXWK 7RGD\3ROLVKLVSUDFWLFDOO\WKHRQO\ODQJXDJHVSRNHQLQWKHFRXQWU\,Q LQWHUDFWLQJZLWKRWKHUPHPEHUVRIWKHLQWHUQDWLRQDOFRPPXQLW\WKHQHHGWRUHO\RQWUDQVODWLRQLQWKHQHZ 3ROLVKVWDWHLVDVJUHDWQRZDVLWHYHUZDVLQWKHSDVW

/DQJXDJHVDQGWH[WVLQWUDQVODWLRQ 7KH0LGGOH$JHV /LWWOHHYLGHQFHUHPDLQVRIWUDQVODWLRQDODQGRWKHUDFWLYLWLHVLQWKHHDUO\0LGGOH$JHVEXWWKHGRPLQDWLRQRI /DWLQFXOWXUHLVZHOOGRFXPHQWHG$OWKRXJKWKH\DUHQRWWUDQVODWLRQVDVVXFKWKHHDUOLHVWZRUNVKLVWRULFDO FKURQLFOHVZULWWHQLQ/DWLQ VKRZWKHVWURQJLQIOXHQFHRIWKH2OG)UHQFKHSLFSRHWU\NQRZQDVFKDQVRQVGH JHVWH7KHILUVWNQRZQWUDQVODWLRQVDUH3VDáWHU]IORULDĔVNL6W)ORULDQ¶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µH[SOLFDWH/DWLQDXWKRUVWRWKHER\VLQWKH3ROLVKODQJXDJH¶6WĊSLHĔDQG :LONRĔ, WUDQVODWHG /HVVWKDQDFHQWXU\ODWHULQDPHHWLQJZDVKHOGLQ.UDNRZDQGDWWHQGHG E\VHYHUDOPRQDUFKVRIPHGLHYDO(XURSH7KHJXHVWRIKRQRXUZDVWKH.LQJRI&\SUXV3LHUUHGH/XVLJQDQ ZKRZDVYLVLWLQJWKHFRXUWVRI(XURSHLQWKHKRSHRIILQGLQJVXSSRUWIRUDFUXVDGHKHFOHDUO\QHHGHG LQWHUSUHWHUVWRFRPPXQLFDWHZLWKWKHNLQJVDQGGXNHVZKRJDWKHUHGDWWKH3ROLVKUR\DOFRXUW 7KH5HQDLVVDQFHILIWHHQWKWRVL[WHHQWKFHQWXULHV 7KHGHYHORSPHQWRIWKH3ROLVK+XPDQLVWWUDGLWLRQEHJDQLQWKHODWHILIWHHQWKFHQWXU\



3DJH

EXWLWVUHDOFUDGOHZDVWKHFRVPRSROLWDQFRXUWRI.LQJ=\JPXQW,± DQGKLV,WDOLDQ4XHHQ%RQD 6IRU]D±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¶V7UHDWLVHVZHUH DQRQ\PRXV2WKHUVZHUHGRQHE\IDPRXVSKLORORJLVWVZKRFRPELQHGDSURIRXQGLQWHUHVWLQWKHUHOHYDQW ODQJXDJHVZLWKVFKRODUO\H[SHUWLVHLQWKHVRXUFHPDWHULDO2QHRIWKHPRVWSURPLQHQWWUDQVODWRUVRIWKHWLPH ZDV6HEDVWLDQ3(75<&<DSK\VLFLDQSRHWDQGSKLORVRSKHUEHVWNQRZQDVDWUDQVODWRUDQGFRPPHQWDWRURI $ULVWRWOH+LVFRQWHPSRUDU\6]\PRQ%LUNRZVNL± SURIHVVRURISK\VLFVDQGPHGLFLQHDWWKHIDPRXV $FDGHP\RI=DPRĞü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± SXEOLVKHGĩ\ZRW\ ILOR]RIyZ7KH/LYHVRI3KLORVRSKHUV 7KLVZDVDWUDQVODWLRQRID&]HFKYHUVLRQRI:DOWHU%XUOHXV¶V'HYLWDHW PRULEXVSKLORVRSKRUXPHWSRHWDUXPDFRPSHQGLXPRINQRZOHGJHDERXWWKHDQFLHQWZRUOG,WZDVUHSULQWHG VHYHUDOWLPHVWKHODVWUHSULQWDSSHDUHGDURXQGWKHPLGGOHRIWKHVL[WHHQWKFHQWXU\ DQGWUDQVODWHGLQWRD QXPEHURIWKHYHUQDFXODUODQJXDJHVRI3RODQG (DJHUWRFDWHUIRUDJURZLQJUHDGHUVKLS5HQDLVVDQFHHGLWRUVVDZDQRSSRUWXQLW\WRH[SDQGWKHERRNPDUNHWE\ HQFRXUDJLQJDQGVXSSRUWLQJWUDQVODWRUVZKRPWKH\UHFUXLWHGPDLQO\IURPWKHDFDGHPLFFRPPXQLW\DW .UDNy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ĩ\ZRW$HVRSD)U\JD7KH/LIHRI$HVRSRI)ULJLD SXEOLVKHGLQE\%LHUQDWRI/XEOLQF±F 7KLVZDVDQDGDSWDWLRQRID/DWLQWUDQVODWLRQRID *UHHNVWRU\DERXWDFOHYHUVODYHZKRRXWZLWWHGKLVPDVWHUQRZVHWLQWKH3ROLVKFRQWH[W7KHVDPHSURWDJRQLVW DSSHDUVLQWZRPRUHDGDSWDWLRQVZKLFKFRXQWDPRQJWKHILQHVWWUDQVODWLRQDFKLHYHPHQWVRIWKHWLPHWKHSRHP 5R]PRZ\NWyUHPLDáNUyO6DORPRQ ]0DUFKRáWHPJUXE\PDVSURĞQ\P&RQYHUVDWLRQVEHWZHHQ.LQJ 6RORPRQWKH:LVHDQGWKHIDWDQGOHZG0DUFKROW WUDQVODWHGE\-DQRI.RV]\F]NLGDWHXQNQRZQ DQG WKHDQRQ\PRXV6RZLĪU]DáNURWRFKZLOQ\LĞPLHV]Q\7KH:LWW\DQG)XQQ\6RZLĪU]DáF 7KHODWWHUZDV WKHILUVW3ROLVKWUDQVODWLRQRIWKHDGYHQWXUHVRI7LOO(XOHQVSLHJHODFKDUDFWHUIURPIRONWDOHW\SH*HUPDQ URPDQFHVRIWKH0LGGOH$JHV



3DJH

7KHVHWKUHHWUDQVODWLRQVLOOXVWUDWHZKDWZDVWREHFRPHWKHJHQHUDOSUDFWLFHRIWKHWLPHWKDWRIDSSURSULDWLQJ RULJLQDOZRUNV7KHLGHDRIFRS\ULJKWZDVHQWLUHO\DOLHQWR5HQDLVVDQFHDXWKRUVZKRWUHDWHGWKHZRUNVRI IRUHLJQFROOHDJXHVDVFRPPRQSURSHUW\7KLVDSSURDFKZDVDGYRFDWHGH[SOLFLWO\E\WKHILUVW3ROLVKWKHRULVWRI WUDQVODWLRQàXNDV]*Ï51,&.,*yUQLFNL¶VSOHDIRUWKHXVHRIIUHHSDUDSKUDVHZDVWREHFRPHWKHJXLGLQJ SULQFLSOHIRU3ROLVKWUDQVODWRUVRYHUWKHQH[WWZRFHQWXULHV=LRPHN ,QGHHGLWZDVIXOO\DFNQRZOHGJHG LQWKH*ROGHQ$JHRIWKH3ROLVK5HQDLVVDQFH6HYHUDOZRUNVE\0LNRODM5HM± NQRZQDVWKHµIDWKHU RI3ROLVKOLWHUDWXUH¶GUDZKHDYLO\RQIRUHLJQVRXUFHVDPRQJWKHP3DOLJHQLXVD/XWKHUDQDXWKRUE\WKHQDPH RI7KRPDV1DRJHRUJDQGWKH'XWFK+XPDQLVWDQGZULWHU&RUQHOLXV&URFXV7KHVDPHSULQFLSOHLVDGRSWHGLQ WKHZRUNRIWKHJUHDWHVWSRHWRIWKH3ROLVK5HQDLVVDQFH-DQ.RFKDQRZVNL± (GXFDWHGDWWKH 8QLYHUVLW\RI3DGXDZHOOWUDYHOOHGDQGIXOO\FRQYHUVDQWZLWK/DWLQDQG*UHHN.RFKDQRZVNLERUURZHGIUHHO\ IURPYDULRXVIRUHLJQVRXUFHV+LVIDPRXV3LHĞQL6RQJVSXEOLVKHGLQ FRQVLVWVPRVWO\RIDGDSWDWLRQVRI +RUDFH+LVJUHDWHVWDFKLHYHPHQWLQWKHILHOGRIWUDQVODWLRQLV3VDáWHU]'DZLGyZ'DYLG¶V3VDOWHU 7KLV LVDSRHWLFDGDSWDWLRQRIWKH3VDOPVRI'DYLGEXWEDVHGRQYDULRXVVRXUFHWH[WVDSDUWIURPWKH9XOJDWH .RFKDQRZVNLXVHGWKH+HEUHZRULJLQDODQGDVDVRXUFHRILQVSLUDWLRQ/DWLQSRHPVE\WKH6FRWWLVKKXPDQLVW *HRUJH%XFKDQDQ 7KHILUVWWUDQVODWLRQVRIGUDPDDSSHDUHGDURXQGWKHHQGRIWKHVL[WHHQWKFHQWXU\*Ï51,&.,SURGXFHGDQ DGDSWDWLRQRI6HQHFD¶V7URDVLQLQDQDGDSWDWLRQRI3ODXWXV¶7ULQXPXVZDVVKRZQDWWKHFRXUWRID 3ROLVKQREOHPDQDQGLQ-DQ$QGU]HM0RUV]W\Q± SXEOLVKHGKLVWUDQVODWLRQRI&RUQHLOOH¶V/H &LG$VIDUDVSRHWU\LVFRQFHUQHGIUHHYHUVHZDVILUVWLQWURGXFHGLQWR3ROLVKLQE\.U]\V]WRI1LHPLU\F] DPLQRUSRHWLQDWUDQVODWLRQRI/D)RQWDLQH¶V)DEOHV 7KHZRUNVRI3ROLVKDXWKRUVZKRZURWHLQ/DWLQZHUHIUHTXHQWO\WUDQVODWHGLQWRYHUQDFXODUODQJXDJHVGXULQJ WKLVSHULRGWKRXJKVRPHZHUHQRWWUDQVODWHGLQWR3ROLVKXQWLOWKHWZHQWLHWKFHQWXU\0DQ\WH[WVE\3ROLVK DXWKRUVZHUHSULQWHGRXWVLGH3RODQGHLWKHULQWKHRULJLQDO/DWLQRULQWUDQVODWLRQ$ZHOONQRZQH[DPSOHLV'H RSWLPRVHQDWRUHDSROLWLFDOWUHDWLVHE\:DZU]\QLHF*RĞOLFNLZKLFKZDVSXEOLVKHGLQ9HQLFHLQLWZDV ODWHUWUDQVODWHGLQH[WHQVRLQWR(QJOLVKDQGGHGLFDWHGWR6LU5REHUW:DOSROHLQDVRQHRIWKHEHVWERRNVRI LWVNLQG 7KH%LEOH 5HQDLVVDQFHWUDQVODWLRQVRIWKH%LEOHGHVHUYHDVHSDUDWHFKDSWHULQWKHKLVWRU\RIWUDQVODWLRQLQ3RODQG0RUH WUDQVODWLRQVRIWKH6FULSWXUHVZHUHSURGXFHGLQWKLVSHULRGWKDQLQDQ\RWKHUDQGWKLVIOXUU\RIDFWLYLW\ FRLQFLGHGZLWKWKHGHYHORSLQJUROHRIWUDQVODWLRQDVDSRZHUIXOWRROIRUSURPRWLQJWKH3ROLVKODQJXDJH 7KHHDUOLHVW%LEOHWUDQVODWLRQSULQWHGLQ3UDJXHDQG9LOQLXV±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ĔVNWUDQVODWHGE\'DQLHO0LNRáDMHZVNL



3DJH

7KRXJKEDVHGHVVHQWLDOO\RQWKH9XOJDWHPRVWODWHUWUDQVODWLRQVPDGHVRPHUHIHUHQFHWRWKH*UHHNDQG +HEUHZRULJLQDOV)UDQNRZVNL &RQWURYHUVLHVRYHUWKHWUDQVODWLRQRIWKH%LEOHJDYHULVHWRWKHHDUOLHVW3ROLVKIRUPRIWUDQVODWLRQVWXGLHVDV FULWLFLVPGLUHFWHGDWWKHUHSUHVHQWDWLYHVRIULYDOGHQRPLQDWLRQVJUDGXDOO\GHYHORSHGLQWRWKHRUHWLFDOWUHDWLVHV 7KH(QOLJKWHQPHQWVHYHQWHHQWKWRHLJKWHHQWKFHQWXULHV ,QWKHVHYHQWHHQWKFHQWXU\WKHZRUNRI3LRWU.RFKDQRZVNL± GHVHUYHVVSHFLDOPHQWLRQ .RFKDQRZVNLDGDSWHGIRUWKH3ROLVKUHDGHUWZRPDVWHUSLHFHVRI,WDOLDQSRVW5HQDLVVDQFHOLWHUDWXUH7DVVR¶V -HUXVDOHP'HOLYHUHGDQG$ULRVWR¶V2UODQGR)XULRVR7KHIRUPHUEHFDPHH[WUHPHO\SRSXODULWZDVILUVW SULQWHGLQ.UDNRZLQDQGWKHODVWUHSULQWDSSHDUHGLQ ,QGLSORPDF\FRQWDFWZLWKWKH:HVWZDVHDV\WRPDLQWDLQDWOHDVWIRUWKHVRFLDOpOLWHYHUVHGLQ/DWLQ)UHQFK ,WDOLDQRU*HUPDQ%\FRQWUDVWLQWHUSUHWLQJVHUYLFHVZHUHUHTXLUHGWRPDLQWDLQFRPPXQLFDWLRQZLWKWKH(DVW ,QWUDQVDFWLRQVLQYROYLQJ5XVVLDQVDQG7DUWDUVIRULQVWDQFHHDFKSDUW\XVHGWKHLURZQQDWLYHWRQJXHDQG IRUPDOGRFXPHQWVZHUHLVVXHGLQWKHWZRODQJXDJHV7KHODQJXDJHVDGRSWHGLQGHDOLQJZLWKWKH7XUNV GHSHQGHGRQWKHH[SHUWLVHRIWKRVHLQWHUSUHWHUVZKRKDSSHQHGWREHDYDLODEOHDWWKHWLPHRIWHQ3ROLVKH[ FDSWLYHV 7KHILUVWTXDOLILHGLQWHUSUHWHURQUHFRUGZDVSUREDEO\WKHVHFUHWDU\RI.LQJ=\JPXQW$XJXVW,, ±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µEHDXWLILFDWLRQ¶RIRULJLQDOZRUNVZDVFRQVLGHUHGDPHULWGUDVWLFFKDQJHVWR WKHEDVLFJHQUHRIWKHRULJLQDODVLQWUDQVODWLQJSRHWU\LQWRSURVH ZHUHPDGHDVDPDWWHURIFRXUVHDQG LQGLUHFWWUDQVODWLRQWKDWLVWUDQVODWLRQEDVHGRQRWKHUWUDQVODWLRQVZDVWKHQRUP7KHHPLQHQW3ROLVKWUDQVODWRU RIWKHWLPH)UDQFLV]HN.VDZHU\'PRFKRZVNL± WUDQVODWHGWKHSRHPVRI(GZDUG


3DJH

DFWLYLW\-DQ3RWRFNL± D3ROLVKVROGLHUZULWHUDQGWUDYHOOHUZURWHKLV0DQXVFULWWURXYpj 6DUDJRVVHLQ)UHQFKLWZDVSXEOLVKHGLQ6W3HWHUVEXUJLQDQGWKHQWUDQVODWHGLQWR3ROLVKE\D3ROLVK pPLJUpLQ7KHWZHQWLHWKFHQWXU\SURYLGHVDVLPLODUH[DPSOHWKHOLWHUDU\RXWSXWRIWKHJUHDW-RVHSK &RQUDG± D3ROHZKRZURWHLQ(QJOLVKKDGWREHWUDQVODWHGLQWR3ROLVK$QRWKHUXQXVXDOFDVHLV WKHWUDQVODWLRQRI-DQ.RFKDQRZVNL¶V3ROLVKSRHPVLQWR/DWLQSXEOLVKHGE\RQHRIWKH3ROLVKELOLQJXDOSRHWV RIWKH(QOLJKWHQPHQW)UDQFLV]HN'LRQL]\.QLDĨQLQLQDFROOHFWLRQRISRHPVE\WKHWLWOH&DUPLQD 7KHHDUOLHVWWUDQVODWLRQVIURP(QJOLVKZHUHPDGHGXULQJWKLVSHULRGE\-DQ8UV\Q1LHPFHZLF]± D SURPLQHQWSRHWZKRVSHQWSDUWRIKLVOLIHLQWKH8QLWHG6WDWHVDQGWUDQVODWHG*UH\DQG%\URQ$WURXJKO\WKH VDPHWLPHWKHILUVW(QJOLVKWUDQVODWLRQVRI3ROLVKSRHWU\EHJDQWRDSSHDU0DFLHM.D]LPLHU]6DUELHZVNL±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± WUDQVODWHG+RUDFH+RPHU'DQWH%XRQDURWWL%p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± ZHUHWUDQVODWHGLQWR5XVVLDQDQG0LFNLHZLF]KLPVHOIWUDQVODWHGLQWR3ROLVK VHYHUDOSRHPVE\KLV5XVVLDQIULHQG$OHNVDQGU3XVKNLQ )ROORZLQJWKHIDLOXUHRIWKH-DQXDU\8SULVLQJDJDLQVWWKH5XVVLDQVLQOLWHUDWXUHEHJDQWRUHIOHFWDQ RYHUDOOVKLIWIURPURPDQWLFIDQWDV\WRSRVLWLYLVWUDWLRQDOLVP7KHXSULVLQJDQGWKHHQVXLQJHYHQWVKDGFKDQJHG ERWKWKHVRFLDODQGHFRQRPLFVLWXDWLRQRI3RODQGDVDVLJQLILFDQWQXPEHURILQWHOOHFWXDOVDQGVRPHPHPEHUVRI WKHZHDOWK\p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± DUHSUHVHQWDWLYHRI3ROLVK 0RGHUQLVPNQRZQDVµ0LULDP¶ 7KHPRVWSURPLQHQWWUDQVODWRURIWKHWLPHZDVXQGRXEWHGO\7DGHXV]ĩHOHĔVNLNQRZQDVµ%R\¶± $SK\VLFLDQE\SURIHVVLRQDQGDJUHDWDGPLUHUDQGFRQQRLVVHXURI)UHQFKOLWHUDWXUHKHSXEOLVKHG WUDQVODWHGYROXPHV$SDUWIURPWKHJUHDW)UHQFK



3DJH

QRYHOLVWVRIKLVWLPHKHWUDQVODWHG0ROLqUH3DVFDO5DEHODLV5RXVVHDX9LOORQDQG9ROWDLUHĩHOHĔVNLZDV NLOOHGE\WKH1D]LVLQOHDYLQJXQFRPSOHWHGKLVWUDQVODWLRQRI3URXVW,WLVODUJHO\GXHWRKLVHIIRUWVWKDW IRUHLJQOLWHUDWXUHRFFXSLHVLWVSUHVHQWSUHVWLJLRXVSRVLWLRQLQWKHOLWHUDU\FDQRQRI3RODQG(TXDOO\LPSRUWDQW DUHWKHWUDQVODWLRQVRIWKH5XVVLDQ5RPDQWLFSRHWVVXFKDV3XVKNLQDQG/HUPRQWRY DQG6\PEROLVWVVXFKDV %DOPRQW%ORNDQG%ULXVRY E\RQHRIWKHJUHDWHVW3ROLVKSRHWVRIWKHSHULRG-XOLDQ7XZLP± 7XZLP¶VZHOONQRZQHVVD\7UDGXWWRUHWUDGLWRUH¶SXEOLVKHGLQFDVWLJDWHGLQFRPSHWHQWWUDQVODWRUVDQG SXWIRUZDUGDSURSRVDOIRURUJDQL]LQJUHJXODUGLSORPDFRXUVHVIRUWUDQVODWRUV7XZLPVXJJHVWHGWKDW FDQGLGDWHVVKRXOGSDVVDVHULHVRIH[DPLQDWLRQVRQODQJXDJHVW\OLVWLFVDQGFXOWXUHRQO\WKRVHZKR VXFFHVVIXOO\FRPSOHWHGWKHFRXUVHZRXOGWKHQEHDOORZHGWRSXEOLVKWKHLUZRUN ,QWKHILUVWGHFDGHVRIWKHWZHQWLHWKFHQWXU\3ROLVKEHFDPHDVRXUFHODQJXDJHIRUWUDQVODWLRQ3ROLVKQRYHOLVWV RIWKHWLPHFRQWULEXWHGVLJQLILFDQWO\WRWKHZRUOGOLWHUDU\FDQRQ4XRYDGLVZKLFKHDUQHG+HQU\N6LHQNLHZLF] ± WKH1REHO3UL]HLQZDVWUDQVODWHGLQWRPDQ\ODQJXDJHVLWUHPDLQHGRQWKHOLVWRI)UHQFK EHVWVHOOHUVXQWLOTXLWHUHFHQWO\$PRGHUQ$PHULFDQWUDQVODWLRQRI6LHQNLHZLF]¶VWKUHHYROXPHKLVWRULFDOVDJD DERXWVHYHQWHHQWKFHQWXU\3RODQG2JQLHPLPLHF]HP3RWRS3DQ:RáRG\MRZVNLWUDQVODWHGE\6.XQLF]DNDV :LWK)LUHDQG6ZRUG7KH'HOXJH)LUHLQWKH6WHSSH DSSHDUHGLQWKH8QLWHG6WDWHVLQ±DQG LPPHGLDWHO\JDLQHGFRQVLGHUDEOHSRSXODULW\%\WKHQXPEHURIWUDQVODWLRQVRIQRYHOVE\6LHQNLHZLF]¶V FRQWHPSRUDU\(OL]D2U]HV]NRZD± KDGH[FHHGHGLQ5XVVLDDORQH9DULRXVQRYHOVE\DQRWKHU 3ROLVK1REHOSUL]HZLQQHU:áDG\VáDZ5H\PRQW± ZHUHWUDQVODWHGLQWRVHYHUDOODQJXDJHV 7KHSUHVHQWWLPH $VLQHDUOLHUSHULRGVWKHFKRLFHRIWH[WVDQGODQJXDJHVIRUWUDQVODWLRQLQFRQWHPSRUDU\3RODQGKDVEHHQ FRQGLWLRQHGE\WKHSROLWLFDOVLWXDWLRQ7KHUHYLYDORIFXOWXUDOOLIHDIWHU:RUOG:DU7ZRXQGHU5XVVLDQ GRPLQDQFHUHVXOWHGLQSULRULWL]LQJWKHWUDQVODWLRQDQGUHSULQWLQJRIZRUNVZKLFKZHUHVHHQWREHµSROLWLFDOO\ FRUUHFW¶,QODERXUULRWVLQWKHFLW\RI3R]QDĔZHUHUXWKOHVVO\VXSSUHVVHGUHVXOWLQJLQWKHGHDWKRIVRPH SHRSOH,QWKHZDNHRIWKHVHHYHQWVDSHULRGRISROLWLFDOµWKDZ¶EHJDQZKLFKVWLPXODWHGDQLQIOX[RIZRUNV E\VXFKZULWHUVDV6DUWUH6DLQW([XSpU\DQG&DPXV3ROLVKWUDQVODWLRQVRI)DXONQHU6WHLQEHFNDQG +HPLQJZD\KDGDJUHDWLPSDFWRQ3ROLVKUHDGHUVZKRDOVRVKRZHGDJURZLQJLQWHUHVWLQERWKFODVVLFDODQG PRGHUQGUDPDLQFOXGLQJ6KDNHVSHDUH0ROLqUH/RSHGH9HJD&DOGHUyQ*ROGRQL*RHWKH6FKLOOHU*HRUJH %HUQDUG6KDZ%UHFKW,RQHVFR%HFNHWW'UUHQPDWWDQG*HQHW,Q0DFLHM6áRPF]\QVNL SXEOLVKHGKLVWUDQVODWLRQRI-DPHV-R\FH¶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¶V3OD\JURXQGE\1RUPDQ'DYLHV3ROLVKHGLWLRQ DQGWKHRWKHURI7KH+LVWRU\RI3ROLVK/LWHUDWXUHE\&]HVáDZ0LáRV]3ROLVKHGLWLRQ 0LáRV]DZULWHUSRHWDQG1REHO3UL]HZLQQHULVD3ROLVKpPLJUpZKRRULJLQDOO\ZURWHWKHERRNIRUKLV $PHULFDQVWXGHQWV 7RGD\$PHULFDQ (QJOLVKLVE\IDUWKHPRVWLPSRUWDQWVRXUFHODQJXDJHLQOLWHUDU\DVZHOODVQRQOLWHUDU\ WUDQVODWLRQ7KHQXPEHURISURIHVVLRQDOWUDQVODWRUVDQGLQWHUSUHWHUVZKRRIWHQVSHFLDOL]HLQWHUPVRI WUDQVODWLQJDVLQJOH



3DJH

DXWKRURUWUDQVODWLQJZLWKLQDVLQJOHILHOGRINQRZOHGJHFRQWLQXHVWRJURZWRPHHWWKHGHPDQGVRIDQ H[SDQGLQJERRNPDUNHWDQGDIUHHPDUNHWHFRQRP\ 7KHOLVWRI3ROLVKZULWHUVZKRVHZRUNVKDYHEHHQWUDQVODWHGLQWRRWKHUODQJXDJHVKDVDOVRJURZQFRQVLGHUDEO\ 5HDGHUVLQ(XURSHQRZKDYHDFFHVVWRZRUNVE\FRQWHPSRUDU\3ROLVKSRHWVVXFKDV+HUEHUWDQG6]\PERUVND GUDPDWLVWVVXFKDV0URĪHNDQG5yĪHZLF]DQGQRYHOLVWVVXFKDV$QGU]HMHZVNLDQG.RQZLFNL,QWKHDFDGHPLF ILHOGZRUNVE\3ROLVKVFKRODUVKDYHDOVREHJXQWRDSSHDULQWUDQVODWLRQ*URZLQJLQWHUHVWLQ3RODQGDVSDUWRI WKHQHZXQLWHG(XURSHKDVVWLPXODWHGWKHSURGXFWLRQRIRWKHUW\SHVRISXEOLFDWLRQVVXFKDVPXOWLOLQJXDO PDQXDOVWRXULVWJXLGHERRNVDQGKLVWRULFDOVXUYH\VLQDYDULHW\RIODQJXDJHV

7KHRULHVDQGPRGHOV 7KHHDUOLHVWUHFRUGHGDWWHPSWE\D3ROLVKVFKRODUWRIRUPXODWHDWKHRU\RIWUDQVODWLRQGDWHVEDFNWRWKHV ,QDQLQWURGXFWLRQWRDWUHDWLVHRQVSHOOLQJDQDQRQ\PRXVZULWHUVXJJHVWVWKDWµZHPD\WUDQVODWHWKHVDPH H[SUHVVLRQDVPHDQLQJRQHWKLQJRUDQRWKHUGHSHQGLQJRQWKHFRQWH[W¶WUDQVODWHGIURPDTXRWHLQ%DOFHU]DQ 7KH3ROLVKYHUEWáXPDF]\üLVDPELJXRXVLWFDQPHDQµH[SOLFDWH¶RUµWUDQVODWH¶7KLVGXDO LQWHUSUHWDWLRQSDUWO\H[SODLQVWKHWZRFRQIOLFWLQJSULQFLSOHVRIWUDQVODWLRQLQWKH3ROLVKWUDGLWLRQQDPHO\WKH SULQFLSOHRIµDSSURSULDWLQJIRUHLJQLGHDVDQGLPDJHVVRWKDWDIRUHLJQZRUNLVWDLORUHGDIWHURXURZQ SDWWHUQV¶%DOFHU]DQWUDQVODWHG YHUVXVWKHSRVWXODWHWKDWDIRUHLJQWH[WPXVWQRWEHVWULSSHGRIµWKH IHDWXUHVWKURXJKZKLFKLWFDQEHUHFRJQL]HGDVEHLQJIRUHLJQ¶%DOFHU]DQWUDQVODWHG 7KHSULQFLSOHRI DGDSWDWLRQRUµ3RORQL]DWLRQ¶GRPLQDWHGWUDQVODWLRQSUDFWLFHPDLQO\GXULQJWKH5HQDLVVDQFHDQGWKH (QOLJKWHQPHQWEXWLWFRQWLQXHGWRIHDWXUHLQ0RGHUQLVWGLVSXWHVEHWZHHQWKRVHZKRZDQWHGWRSUHVHUYHWKH RULJLQDOORFDOFRORXULQWKHLUWUDQVODWLRQVRIIRUHLJQSRHWU\DQGWKRVHZKRLQVLVWHGWKDWWKHIRUHLJQWH[WVKRXOG EHGRPHVWLFDWHGVHH675$7(*,(62)75$16/$7,21 +RZHYHUWKHPRUHVFLHQWLILFDOO\RULHQWHG SKLORORJLFDODQGRUFULWLFDODSSURDFKWRWUDQVODWLRQZKLFKGHYHORSHGRYHUWKHSDVWIHZGHFDGHVKDVUHVXOWHGLQD KLJKHUOHYHORIUHVSHFWIRUWKHLQWHJULW\RIWKHRULJLQDOZRUN)LGHOLW\LQWUDQVODWLRQLVQRZXQGHUVWRRGWRPHDQ SUHVHUYLQJWKHRULJLQDOWH[WUDWKHUWKDQUHFRQVWUXFWLQJLW ,QFRQWHPSRUDU\WKRXJKWWKHROGRSSRVLWLRQLVUHZRUGHGLQWHUPVRIDGLVWLQFWLRQEHWZHHQVDPRLVWQHRUµVHOI VXIILFLHQW¶DQG RUµLQWHJUDWHG¶WUDQVODWLRQVZKLOHWKHIRUPHUFRPHWRH[LVWDVLQGHSHQGHQWWH[WV LQWHUSUHWDWLRQVRIWKHODWWHUDUHDFKLHYHGWKURXJKFRQIURQWDWLRQZLWKRULJLQDOZRUNVDQGWKHLUHDUOLHU WUDQVODWLRQV7KHGLVWLQFWLRQZDVILUVWIRUPDOO\SURSRVHGE\6WDQLVáDZ%DUDĔF]DN DSRHWDQGRQHRIWKH EHVWFRQWHPSRUDU\WUDQVODWRUVRISRHWU\ZKRFRPELQHVWKHWDOHQWRIDSRHWZLWKWKHH[WHQVLYHNQRZOHGJHRID OLWHUDU\FULWLF$VDWKHRULVW%DUDĔF]DNUHSUHVHQWVWKHOLWHUDU\EUDQFKRI3ROLVKWUDQVODWLRQVWXGLHV%DUDĔF]DN ,QJHQHUDOOLWHUDU\WUDQVODWLRQWKHRU\LQ3RODQGKDVWUDGLWLRQDOO\WDNHQWKHVKDSHRILQGLYLGXDO FDVHVWXGLHVLQZKLFKSUDFWLVLQJWUDQVODWRUVGLVFXVVWKHLURZQZRUNRUWKHZRUNGRQHE\WKHLUFROOHDJXHV $OWKRXJKRIWHQLQWHUHVWLQJVXFKHVVD\VUDUHO\RIIHUDQ\WKLQJPRUHWKDQSDVVLQJREVHUYDWLRQVDQGIUDJPHQWHG FRPPHQWV 0RUHWKHRU\RULHQWDWHGFRQWULEXWLRQVFDPHIURPVXFKVFKRODUVDV:DFáDZ%252:<DQG(GZDUG%DOFHU]DQ WKHODWWHUDVSHFLDOLVWLQOLWHUDU\WUDQVODWLRQWKHRU\ZKRDVDXQLYHUVLW\SURIHVVRUVXSHUYLVHGPDQ\ VFKRODUO\GLVVHUWDWLRQVRQWUDQVODWLRQVWXGLHV7KHRUHWLFDODVSHFWVRIWUDQVODWLRQKDYHEHHQGLVFXVVHGDWOHQJWK E\3ROLVKSKLORVRSKHUVRIODQJXDJHIRUH[DPSOHLQHVVD\VRQWKHQDWXUHRIOLWHUDU\ZRUNE\5RPDQ,QJDUGHQ ± DQGE\OLQJXLVWVPRVWQRWDEO\=HQRQ.OHPHQVLHZLF]± 7KHOLQJXLVWLFEUDQFKRI 3ROLVKWUDQVODWLRQVWXGLHVLVKRZHYHUDUHODWLYHO\\RXQJILHOG2QHRIWKHPRVWFRPSUHKHQVLYHHDUO\DWWHPSWV DWFRQVWUXFWLQJDIRUPDOOLQJXLVWLFPRGHORIWUDQVODWLRQZDVRIIHUHGE\2OJLHUG:RMWDVLHZLF] ZKR VDZWUDQVODWLRQDVDSURFHVVFRQVLVWLQJRIWZRVWDJHVDWWKHLQLWLDOVWDJHWKHVXUIDFHVWUXFWXUHRIWKHWH[WVKRXOG EHDQDO\VHGDQGPDWFKHGZLWKDGHHSVWUXFWXUHDWWKHVHFRQGVWDJHVXFKDGDSWDWLRQVDVPLJKWIROORZIURPDQ DQDO\VLVRIWKHFRQWH[WVKRXOGEHLQWURGXFHG'XULQJWKH



3DJH

VWKHIORXULVKLQJRIFRQWUDVWLYHOLQJXLVWLFVWXGLHVPDLQO\3ROLVK(QJOLVK JDYHULVHWRZRUNVZKLFK GHILQHGWUDQVODWLRQHTXLYDOHQFHZLWKLQWKHIUDPHZRUNRIWUDQVIRUPDWLRQDO²JHQHUDWLYHJUDPPDU0DUWRQ .U]HV]RZVNL ,QNHHSLQJZLWKGHYHORSPHQWVHOVHZKHUHWKHDSSURDFKWRWUDQVODWLRQFKDQJHGLQUHFHQW \HDUVWRUHIOHFWGHYHORSPHQWVLQWKHILHOGRISUDJPDWLFVDQGWKHSRSXODULW\RIWKHFRJQLWLYHVFKRROLQ OLQJXLVWLFV(TXLYDOHQFHLQWUDQVODWLRQKDVEHHQUHGHILQHGLQWHUPVRIIXQFWLRQDOUDWKHUWKDQIRUPDOFULWHULDDQG LWLVQRZZLGHO\UHFRJQL]HGWKDWHTXLYDOHQFHLVFRQGLWLRQHGE\FRJQLWLYHDQGSUDJPDWLFIDFWRUV.U]HV]RZVNL $VIDUDVOLWHUDU\WUDQVODWLRQLVFRQFHUQHGWKHQHZPRGHOKDVWKHDGYDQWDJHRIEULGJLQJWKHWUDGLWLRQDO JDSEHWZHHQOLWHUDU\DQGOLQJXLVWLFVWXGLHV7DEDNRZVND WKRXJKWKHRUHWLFDOZRUNVRQQRQOLWHUDU\ WUDQVODWLRQUHPDLQKHDYLO\ZHLJKWHGWRZDUGVOLQJXLVWLFDOO\EDVHGPRGHOV.RSF]\ĔVNL3LVDUVND

7KHLGHQWLW\DQGVWDWXVRIWUDQVODWRUV 'XULQJHDUOLHUSHULRGVRIKLVWRU\WUDQVODWRUVZHUHUHFRJQL]HGDVFUHDWRUVRIOLWHUDWXUHDQGZHUHDFFRUGLQJO\ JUDQWHGULJKWVHTXDOWRWKRVHRIRULJLQDODXWKRUV7KHJUDGXDOSURIHVVLRQDOL]DWLRQRIWKHMREKRZHYHUEURXJKW DERXWDUDGLFDOFKDQJHLQWKHVWDWXVRIWUDQVODWRUV$VHDUO\DV,JQDF\.UDVLFNLIHOWREOLJHGWRPDNHDSOHD LQ8ZDJLRWáXPDF]HQLX 2Q7UDQVODWLQJ%RRNV IRUWKHLPSRUWDQFHDQGSUHVWLJHRIWKHSURIHVVLRQWREH UHFRJQL]HG7RGD\WKHWUDQVODWRULVQRORQJHUVHHQDVDPHGLDWRUQRUWUDQVODWLRQDJXLGHWRRULJLQDOOLWHUDWXUH WKHWUDQVODWRULVVLPSO\DSURIHVVLRQDOHQJDJHGLQDVSHFLILFIRUPRIFRPPXQLFDWLRQ$IHZWUDQVODWRUV FRQWLQXHWRIROORZWKHROGWUDGLWLRQPDNLQJWKHLUQDPHVPDLQO\DVZULWHUVSRHWVRUOLWHUDU\FULWLFV 7UDQVODWLRQDVDSURIHVVLRQDODFWLYLW\LQ3RODQGZDVILUVWLQVWLWXWLRQDOL]HGZLWKWKHIRXQGLQJRIWKH7UDQVODWRUV¶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¶VLQLWLDWLYHWKDWWKHOLVWRI,QWHUQDWLRQDO 6FLHQWLILF7HUPV²ZKLFKDSSHDUHGDVDUHJXODUFROXPQLQ%DEHOIURPWR²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Ĕ LQ2WKHUXQLYHUVLWLHVRIIHURFFDVLRQDOVSHFLDOL]HGFRXUVHVLQWUDQVODWLRQ5HFHQWSXEOLFDWLRQVLQFOXGHD GLVFXVVLRQRISUDFWLFDODVSHFWVRIOLWHUDU\WUDQVODWLRQ:DZU]\QLDN DQGDVXUYH\RIPDMRUPRGHOVRI WUDQVODWLRQ.LHODU

)XUWKHUUHDGLQJ %DOFHU]DQ)UDQNRZVNL.RSF]\ĔVNL.U]HV]RZVNL0LáRV]3LVDUVND 3ROODN5XVLQHN7DEDNRZVND=LĊWDUVND=LRPHN

(/ĩ%,(7$7$%$.2:6.$

%LRJUDSKLHV %252:<:DFáHZ± 3ROLVKKLVWRULDQDQGOLWHUDU\FULWLF$QH[SHUWRQ3ROLVK5RPDQWLFSRHWU\ KHZDVDOVRLQWHUHVWHGLQ3ROLVKWUDQVODWLRQVRI6KDNHVSHDUH(OLRW



3DJH

&KHVWHUWRQDQG&RQUDG$SDUWIURPKLVFULWLFDOHVVD\VRQYDULRXVDVSHFWVRIOLWHUDU\WUDQVODWLRQ%RURZ\ SURGXFHGQXPHURXVSXEOLFDWLRQVRQWKHKLVWRU\RIWUDQVODWLRQDQGKLVHVVD\VRQWKHHDUO\WKHRULVWVRI WUDQVODWLRQDUHWKRXJKWWREHDPRQJWKHPRVWVLJQLILFDQWFRQWULEXWLRQVWR3ROLVKWUDQVODWLRQVWXGLHV+LVHVVD\V RQWUDQVODWLRQDUHFROOHFWHGLQ6WXGLDLUR]SUDZ\6WXGLHVDQG'LVVHUWDWLRQV DWZRYROXPHDQWKRORJ\ SXEOLVKHGSRVWKXPRXVO\E\%RURZ\¶VFROOHDJXHVDQGVWXGHQWV *Ï51,&.,àXNDV]± 3ROLVKSRHWDQGSROLWLFDOZULWHU(GXFDWHGLQ3DGXDKHVSHQWKLVPDWXUH \HDUVDWWKHUR\DOFRXUWDVDVHFUHWDU\DQGOLEUDULDQRI.LQJ=\JPXQW$XJXVW0RVWRI*yUQLFNL¶VRULJLQDO OLWHUDU\RXWSXWLVORVWDQGKHLVWKHUHIRUHUHPHPEHUHGPDLQO\DVWKHWUDQVODWRURI%DOGDVVDUUH&DVWLJOLRQH¶V,O OLEURGHOFRUWHJLDQR,QKLVYHUVLRQ'ZRU]DQLQSROVNL7KH3ROLVK&RXUWLHU *yUQLFNLUHSODFHGWKHFRXUW RIDQ,WDOLDQSULQFHZKLFKLVWKHVHWWLQJRIWKHRULJLQDOVWRU\ZLWKWKHFRXUWRID3ROLVKELVKRSDQGLQVWHDGRI ,WDOLDQQREOHPHQDQGQREOHZRPHQKHLQWURGXFHGORFDOFKDUDFWHUV,QWKHLQWURGXFWLRQWRKLVYHUVLRQ*yUQLFNL DVNVµ:K\LVLWWKDW,GLIIHUIURPJURI%DOFHU.DVWLOLRQ"¶,QDQVZHUWRWKLVTXHVWLRQKHGHWDLOVKLVUHDVRQVIRU FKDQJLQJVXFKHOHPHQWVRIWKHRULJLQDOFXOWXUDOVHWWLQJDVKHMXGJHGDOLHQRIIHQVLYHRUGLIILFXOWWRXQGHUVWDQG IRUD3ROLVKUHDGHU7KLVH[SODQDWLRQHDUQHGKLPWKHSRVLWLRQRIWKHIRXQGLQJIDWKHURIZKDWFDPHWREHNQRZQ DVWKHµPHWKRGRI3RORQL]HGDGDSWDWLRQ¶WRZKLFK3ROLVKWUDQVODWRUVZHUHWRDGKHUHIRUWKHQH[WFRXSOHRI FHQWXULHV 3(75<&<6HEDVWLDQRI3LO]QR± 3ROLVKSKLORVRSKHUSK\VLFLDQSRHWDQGWUDQVODWRU,QKH ZDVDSSRLQWHGOHFWXUHULQOLWHUDU\SRHWLFVDWWKH8QLYHUVLW\RI.UDNyZ3HWU\F\ZDVNQRZQDVDQDXWKRURIERWK PHGLFDOWUHDWLVHVDQGO\ULFVLQVSLUHGE\+RUDFH+LVDQQRWDWHGWUDQVODWLRQVRI$ULVWRWOH¶V3ROLWLFVDQG (FRQRPLFVGHGLFDWHGWR.LQJ=\JPXQW,,,ZHUHSXEOLVKHGLQ.UDNyZLQDQGUHVSHFWLYHO\,QWKH LQWURGXFWLRQWRERWKZRUNVKHH[SODLQHGWRWKH3ROLVKUHDGHUKLVWUDQVODWLRQVWUDWHJ\RIµWXUQLQJWKHIRUHLJQ LQWRRXURZQ¶E\µVRIWHQLQJWKHKDUGVLOHQFLQJWKHVKDPHIXOILOOLQJLQWKHJDSV¶WUDQVODWHG 3HWU\F\LV FRQVLGHUHGRQHRIWKHHDUOLHVWWKHRULVWVRIWUDQVODWLRQLQ3RODQG (/ĩ%,(7$7$%$.2:6.$



3DJH

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

(DUO\WUDQVODWLRQV ,QFRPPRQZLWKPDQ\RWKHUODQJXDJHVWKHILUVWWUDQVODWLRQVLQWR5RPDQLDQZHUHRIDUHOLJLRXVQDWXUHDQG PRWLYDWLRQ7KHEDVLF&KULVWLDQWHUPLQRORJ\LVRI/DWLQRULJLQIRUH[DPSOH'XPQH]HXIURP'RPLQH'HR µ/RUG¶ ERWH]DIURPEDSWLVDUHµEDSWL]H¶ DQGFUXFHIURPFUX[µFURVV¶ 6RPHWLPHEHWZHHQWKHWHQWKDQG WKLUWHHQWKFHQWXULHVWKHODQJXDJHDQGWKHRUJDQL]DWLRQDOVWUXFWXUHVRIWKH6ODYRQLFFKXUFKZHUHRIILFLDOO\ DGRSWHGLQ5RPDQLDVLJQDOOLQJWKHLQFRUSRUDWLRQRI5RPDQLDQWHUULWRU\LQWRWKH%\]DQWLQHVSKHUHRILQIOXHQFH 7KLVGHYHORSPHQWSOD\HGDPDMRUUROHLQVKDSLQJ5RPDQLDQFXOWXUHLQVXEVHTXHQWFHQWXULHVDQGLVFRPSDUDEOH WRWKHDGRSWLRQRI&DWKROLFLVPDQG/DWLQE\WKH3ROHVDQGWKH&URDWLDQVRI6ODYRULJLQLQWKHWHQWKFHQWXU\ ,YDúFX 7KHFXOWXUDOEDFNJURXQGZKLFKJDYHULVHWRWKHHDUOLHVW5RPDQLDQWUDQVODWLRQVZDV GRPLQDWHGE\WKHPHUJLQJRIWZRWUDGLWLRQVWKH%\]DQWLQHWUDGLWLRQLQWKHVRXWKDQGWKHRFFLGHQWDOWUDGLWLRQLQ WKHHDVW7KHILUVWUHFRUGHG5RPDQLDQPDQXVFULSWLVDWUDQVODWLRQSUREDEO\IURPWKHILUVWKDOIRIWKHVL[WHHQWK FHQWXU\RID6ODYRQLF$FWVRIWKH$SRVWOHVIURPWKHILIWHHQWKFHQWXU\LWZDVGLVFRYHUHGDWWKHPRQDVWHU\RI 9RURQHĠLQ%XFRYLQD7KHUHLVQRLQGLFDWLRQRIZKHQRUZKHUHLWZDVFRPSOHWHG7KHUHDUHKRZHYHUFXOWXUDO DQGOLQJXLVWLFDUJXPHQWVZKLFKVXSSRUWSODFLQJLWLQWKHQRUWKRI7UDQV\OYDQLDIRULQVWDQFHWKHIDFWWKDWLW FRQWDLQVDODUJHQXPEHURI+XQJDULDQHOHPHQWVVXFKDVIXJOXIURP+XQJDULDQIRJRO\PHDQLQJµFDSWLYH¶ DQG IHOHOXLIURP+XQJDULDQIHOHOQLPHDQLQJµWRDQVZHU¶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úRYVRRQUHDOL]HGWKHEHQHILWVRIEHLQJDEOHWR GLVWULEXWHERRNVLQ5RPDQLDQRQDODUJHVFDOH



3DJH

DQGEHJDQWRXVHWKHH[LVWLQJSDSHUPLOODQGSULQWLQJVKRSPRUHH[WHQVLYHO\7KH\KLUHG'HDFRQ&RUHVLZKR SURYHGWREHH[WUHPHO\DFWLYH,QKHSXEOLVKHGÌQWUHEDUHFUHúWLQHDVFă7KH&KULVWLDQ,QTXLU\ WKHILUVW SULQWHG5RPDQLDQWUDQVODWLRQRQUHFRUGLQKHSXEOLVKHGD5RPDQLDQ*RVSHODQGLQD5RPDQLDQ 3VDOWHUDQGD5RPDQLDQPLVVDO7KHVHWUDQVODWLRQVHQMR\HGWKHVXSSRUWRIWKHDXWKRULWLHV3ULQFH=iSRO\DRI 7UDQV\OYDQLDIRULQVWDQFHSHUVRQDOO\FRPPLVVLRQHGWKHUHSODFHPHQWRI6ODYRQLFERRNVE\5RPDQLDQRQHV /LNHWKH/XWKHUDQVWKH&DOYLQLVWVDOVRXVHGWUDQVODWLRQVLQWR5RPDQLDQWRSURPRWHWKHLUIDLWK$ERRNRI SVDOPVZDVWUDQVODWHGIURP+XQJDULDQLQDQGSULQWHGZLWK/DWLQFKDUDFWHUVLQ2UDGHDRU&OXM%LVKRS0 7RUGiVLWUDQVODWHGWKHERRNVRI*HQHVLVDQG([RGXVIURPWKH+XQJDULDQ%LEOHRI*iVSiU+HOWDLZKLFK DSSHDUHGLQ&OXMLQDQGSXEOLVKHGWKHPLQ2UăúWLHLQ6XFKODUJHVFDOHGLVWULEXWLRQRISULQWHG WUDQVODWLRQVWKURXJKRXWWKHUHJLRQSOD\HGDGHFLVLYHUROHLQGHYHORSLQJDQGVKDSLQJWKH5RPDQLDQOLWHUDU\ ODQJXDJH ,QWKHZKROHRIWKH1HZ7HVWDPHQWZDVWUDQVODWHGLQ$OED,XOLDXQGHUWKHVXSHUYLVLRQRI0HWURSROLWDQ 6LPLRQùWHIDQ$URXQGWKHVDPHWLPHDQGLQWKHVDPHUHJLRQWKH$SRFU\SKDWKHIRXUWHHQERRNVDSSHQGHGWR WKH2OG7HVWDPHQWLQWKH6HSWXDJLQWDQGWKH9XOJDWH ZHUHWUDQVODWHGIURP6ODYRQLF

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± VWDWHVPDQDQGKLVWRULDQWUDQVODWHG$QWRQLRGH*XHYDUD¶VIDPRXVERRNRQ 0DUFXV$QWRQLXV5HOR[GH3ULQFLSHV IURP/DWLQ6SDWKDUXV0LOHVFX± GLSORPDWDQGJUHDW VFKRODUZDVWKHILUVWWRWUDQVODWHGLUHFWO\IURPD*UHHNRULJLQDOKHSXEOLVKHGKLVWUDQVODWLRQRIWKH%RRNZLWK 0DQ\4XHVWLRQVE\$WKDQDVLXVRI$OH[DQGULDLQ0LOHVFXDOVRSXEOLVKHGWKHILUVWWUDQVODWLRQRID SKLORVRSKLFDOWH[W2Q3UHYDLOLQJ5HDVRQ DWWULEXWHGWR)ODYLXV-RVHSKXV%XW0LOHVFX¶VPRVWLPSRUWDQW FRQWULEXWLRQZDVWUDQVODWLQJWKH2OG7HVWDPHQWLQIXOOIURPDYHUVLRQRIWKH6HSWXDJLQWZKLFKZDVSXEOLVKHGLQ )UDQNIXUWLQ7KHWUDQVODWLRQDSSHDUHGLQXQGHUWKHWLWOH%LEOLDGHOD%XFXUHVWL7KH%LEOHIURP %XFKDUHVW DQGDOO5RPDQLDQYHUVLRQVRIWKH6HSWXDJLQWKDYHVLQFHEHHQEDVHGRQLW 7KHILUVWSRHWWUDQVODWRULQWKH5RPDQLDQWUDGLWLRQZDV'262)7(,± WKH0HWURSROLWDQRI0ROGDYLD +LVYHUVHYHUVLRQRIWKH3VDOWHU UHPDLQVRQHRIWKHPRVWKLJKO\YDOXHGWUDQVODWLRQVRIWKH3VDOPVRI 'DYLGFRPSDUDEOHLQWHUPVRILWVLQIOXHQFHWRIDPRXVYHUVLRQVVXFKDVWKRVHE\-DQ.RFKDQRZVNLDQG &OpPHQW0DURW7KLVZDVWKHILUVWWLPHWKDWKLJKTXDOLW\SRHWU\DSSHDUHGLQWKH5RPDQLDQODQJXDJH7KH DHVWKHWLFTXDOLW\RI'RVRIWHL¶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ÌPSăUăWHúWL7KH,PSHULDO%RG\RI/DZ WUDQVODWHGE\(XVWUDWLH IURP*UHHNDQG/DWLQVRXUFHVDQGSXEOLVKHGLQ0ROGDYLDLQ%RWKDUHDPRQJWKHHDUOLHVWVWDWHPHQWVRI OHJDOFRGHV



3DJH

ZULWWHQGRZQLQDQ\QDWLRQDOODQJXDJHLQ(XURSH7KHILUVWELOLQJXDOGLFWLRQDU\ZLWK5RPDQLDQDVWKHVRXUFH ODQJXDJHZDV'LFWLRQDUXPYDODFKLFRODWLQXP,WFRQWDLQHGKHDGZRUGVDQGZDVFRPSLOHGE\0LKDL+DOLFL IURPWKHWRZQRI&DUDQVHEHúLQ /H[LFRJUDSKLFDFWLYLW\FRPELQHGZLWKLQFUHDVHGLQYROYHPHQWLQWKHSUDFWLFDOSUREOHPVRIWUDQVODWLRQ VWLPXODWHGWKLQNLQJLQWKLVDUHD7KHODFNRISHUIHFWFRUUHVSRQGHQFHEHWZHHQWKHZRUGVRIWZRODQJXDJHVEHJDQ WREHQRWHGDQGGLVFXVVHG:KLOHWUDQVODWLQJWKH&DUWHGHSUDYLOH%RRNRI/DZV IRULQVWDQFH,%'HOHDQX REVHUYHGWKDWWKHUHZDVQRH[DFW5RPDQLDQWHUPIRUWKH*HUPDQ9HUEUHFKHQDQGQRWHGWKDWWKHODFNRI DSSURSULDWHWHUPLQRORJ\SRVHGDVHULRXVGLIILFXOW\IRUWKHDQRQ\PRXVDXWKRURI5HWRULFD%XGD 7KLV FORVHOLQNEHWZHHQSUDFWLFHDQGWKHRU\KDVUHPDLQHGWKHGULYLQJIRUFHEHKLQGWUDQVODWLRQVWXGLHVLQ5RPDQLD GRZQWRWKHSUHVHQWGD\

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ăFăUHVFXDQG ,RUGDFKH*ROHVFXRU*UHHNVFKRODUVEURXJKWLQE\WKHQHZUXOHUVWRWHDFKDWWKHUR\DODFDGHPLHVLQ,DúLDQG %XFKDUHVW ,WLVWR7UDQV\OYDQLD¶VFUHGLWWRKDYHFUHDWHGWKHPRGHUQ5RPDQLDQHGXFDWLRQV\VWHPGXULQJWKLVSHULRG 1XPHURXV*UHHNKDQGERRNVRQDYDULHW\RIVXEMHFWVVXFKDVORJLFHWKLFVDQGPHWDSK\VLFVZHUHWUDQVODWHGWR FDWHUIRUWKHGHPDQGVRIWKHQHZV\VWHP(XJHQ9XOJDULV¶VWUDQVODWLRQVRIWKH)UHQFKZULWHU)RQWHQHOOHOHG 5RPDQLDQVWREHOLHYHWKDWWKHVXQZDVWKHFHQWUHRIWKHXQLYHUVH)RONWDOHVZHUHDOVRUHWUDQVODWHGRQWKHEDVLV RI*UHHNPRGHOVVXFKDV+DOLPDWKH2G\VVH\DQG$HVRS¶V)DEOHV6DPXLO0LFXRQHRIWKHUHSUHVHQWDWLYHVRI DPRYHPHQWNQRZQDVùFRDOD$UGHOHDQD7KH7UDQV\OYDQLDQ6FKRRO WUDQVODWHG%DXPHLVWHU¶V(OHPHQWD 3KLORVRSKLDHXQGHUWKHWLWOH/RJLFD%XGD WKLVZDVWKHILUVWDQGPRVWLPSRUWDQWFRQWULEXWLRQWRWKH FUHDWLRQRID5RPDQLDQSKLORVRSKLFDOODQJXDJH 'XULQJWKHODVWTXDUWHURIWKHHLJKWHHQWKFHQWXU\DQGWKHILUVWTXDUWHURIWKHQLQHWHHQWKFHQWXU\5RPDQLDQV EHFDPHSDUWLFXODUO\UHFHSWLYHWR(XURSHDQVFLHQFHDQGSKLORVRSK\LQWKHSULQFLSDOLWLHVDQG7UDQV\OYDQLD DFWLYHO\DVVLPLODWLQJ:HVWHUQOLWHUDWXUHDQGLQWHJUDWLQJLWLQWRWKHLQGLJHQRXVFXOWXUH'XĠX )UHH DGDSWDWLRQZDVWKHRUGHURIWKHGD\ZLWKµIDLWKIXO¶WUDQVODWLRQVEHLQJWKHH[FHSWLRQUDWKHUWKDQWKHQRUP7KH DGDSWDWLRQVDUHERWKHQWHUWDLQLQJDQGLQVWUXFWLYH6DSSKR$QDFUHRQ3HWUDUFK5RQVDUG0HWDVWDVLRDQGRWKHU UHSUHVHQWDWLYHVRIWKHJUHDW(XURSHDQWUDGLWLRQLQO\ULFDOSRHWU\ZHUHWUDQVODWHGRIWHQIURPLQWHUPHGLDU\ YHUVLRQV*UHHNLQWKHSULQFLSDOLWLHV+XQJDULDQLQ7UDQV\OYDQLD $GDSWDWLRQVRI)pQHORQ¶V$GYHQWXUHVRI 7pOpPDTXHE\30DLRULQDQG*U3OHúRLDQXLQHQMR\HGJUHDWSRSXODULW\,RQ%DUDFSXEOLVKHGWKH ILUVW5RPDQLDQ2G\VVH\LQYHUVHIRUPLQDVZHOODVWKHILUVW+DPOHWF 9$DURQWUDQVODWHG2YLG¶V 0HWDPRUSKRVHVLQ±DQG,%'HOHDQXWUDQVODWHG7KHPLVWRFOHVE\WKH,WDOLDQSRHW0HWDVWDVLRLQ 7UDQVODWLRQVRUUDWKHUDGDSWDWLRQVRIZRUNVE\5RXVVHDX0RQWHVTXLHXG¶$UQDXG0DUPRQWHO3RSHDQG



3DJH

)ORULDQSRUWUD\HGPDQDVDFRPSOH[EHLQJWKHSUH5RPDQWLFKHURJUDGXDOO\IRXQGKLVZD\LQWR5RPDQLDQ OLWHUDWXUH7KHDWULFDOSHUIRUPDQFHVJLYHQLQWKHSULQFLSDOLWLHVE\QXPHURXV)UHQFK,WDOLDQ*HUPDQDQG 5XVVLDQWRXULQJWURXSHVSURYLGHGIXUWKHUFRQWDFWZLWK(XURSHDQOLWHUDWXUH7KHSHUIRUPDQFHVZHUHKRVWHGE\ WKHFXOWXUHGPHPEHUVRIWKHUR\DOIDPLO\WKHER\DUVZKRWUDQVODWHGWKHSOD\VLQWR*UHHNDVZHOODV 5RPDQLDQ7KHRUJDQL]HURIWKHILUVWSHUIRUPDQFHLQWKHFLW\RI,DúLZDV*KHRUJKH$6$&+,ZKRDGDSWHG 0LUWKLODQG&KORHE\)ORULDQLQDQGODWHU$O]LUHE\9ROWDLUHLQ,DQFX9ăFăUHVFXWUDQVODWHG*RHWKH DIUDJPHQWIURP)DXVW 5DFLQH%ULWDQQLFXV DQGWKH*HUPDQSOD\ULJKW.RW]HEXH7KH(YHQLQJ+RXU

%H\RQGWKH(QOLJKWHQPHQWWKHQLQHWHHQWKFHQWXU\ 'XULQJWKHVDQGVWUDQVODWLRQDFWLYLW\FRQWLQXHGWRUHIOHFWWKH5RPDQLDQQHHGIRULQWHJUDWLRQZLWK (XURSHDQFXOWXUHDQGOLWHUDWXUH)UHQFKFRQWLQXHGWREHWKHGRPLQDQWVRXUFHODQJXDJHZLWKWKHWKUHHJHQUHVRI GUDPDHSLFSRHWU\DQGWKHO\ULFEHLQJZHOOUHSUHVHQWHG:RUNVWUDQVODWHGGXULQJWKLVSHULRGLQFOXGH3KqGUH DQG$WKDOLHE\5DFLQH+RUDFHE\&RUQHLOOH/H0LVDQWKURSHDQG/HV3UpFLHXVHVULGLFXOHVE\0ROLqUH$O]LUH DQG0pURSHE\9ROWDLUHDQG0DULH7XGRUE\9LFWRU+XJR$SDUWIURPGUDPD5RPDQWLFSRHWVVXFKDV+XJR DQG/DPDUWLQHUHFHLYHGVSHFLDODWWHQWLRQEXWWKHUHZHUHDOVRVHYHUDOWUDQVODWLRQVRISURVHZULWHUVVXFKDV /HVDJH3UpYRVW*HRUJH6DQG'XPDV(XJqQH6XHDQG%DO]DF7KHSRSXODULW\RI)UHQFKFXOWXUHDOVR HQFRXUDJHGWKHWUDQVODWLRQRIDJUHDWQXPEHURIJUDPPDUVDQGRWKHUW\SHVRIKDQGERRNV ,QDGGLWLRQWR)UHQFKOLWHUDWXUHZRUNVE\,WDOLDQZULWHUVVXFKDV'DQWH$ULRVWR7DVVRDQG$OILHULZHUHDOVR WUDQVODWHG(QJOLVKZULWHUVVXFKDV


3DJH

DGPLUHURI(QJODQGDVDµPRGHORISROLWLFDOIUHHGRP¶%DULĠLX DQGRQHRIWKHILUVWWUDQVODWRUVRI 6KDNHVSHDUH,QKHSXEOLVKHGH[WUDFWVIURP-XOLXV&DHVDUDQG7KH0HUFKDQWRI9HQLFH¶WKHVHZHUH WUDQVODWHGIURP*HUPDQYHUVLRQVDVZHUHKLVODWHUH[WUDFWVIURPZRUNVE\'LFNHQV +HSXEOLVKHGWKHIXOOWH[W RI-XOLXV&DHVDULQWKLVZDVWKHILUVWFRPSOHWHWUDQVODWLRQRID6KDNHVSHDUHDQSOD\WRDSSHDULQ5RPDQLD +LVWUDQVODWLRQVRI6FKLOOHU¶V'RQ&DUORV0DULD6WXDUWDQG)LHVNRDSSHDUHGLQ ,QWKHSHULRGKHUDOGLQJWKHULVHRIWKHUHYROXWLRQDU\PRYHPHQWZKLFKVZHSWPXFKRI(XURSHLQFOXGLQJ 5RPDQLDDURXQGWKHPLGGOHRIWKHQLQHWHHQWKFHQWXU\%\URQ¶VSHUVRQDOLW\DQGKLVILHU\SRHPVEHFDPHYHU\ SRSXODUDQG(QJOLVKOLWHUDWXUHZKLFKE\DQGODUJHKDGEHHQLJQRUHGXQWLOWKHQEHJDQWRDWWUDFWPRUH DWWHQWLRQ7KHILUVWGLUHFWWUDQVODWLRQIURP(QJOLVKZDVSUREDEO\%\URQ¶V0DQIUHGWUDQVODWHGLQE\WKH 5RPDQLDQUHYROXWLRQDU\DQGZULWHU&$5RVHWWL7KH%\URQLFKHURZLWKKLVURPDQWLFDQGUHEHOOLRXVDWWLWXGH EHFDPHDGLVWLQFWLYHIHDWXUHHYHQDPRGHORI5RPDQLDQFXOWXUDOOLIH7KHILUVW(QJOLVKQRYHOWREHWUDQVODWHG ZDVDOVRWREHFRPHRQHRIWKHPRVWSRSXODUWKLVZDV'HIRH¶V5RELQVRQ&UXVRHWUDQVODWHGDQGSXEOLVKHGE\9 'UăJKLFLLQWKHFLW\RI,DúLLQ%XOZHU/\WWRQ¶V7KH/DVW'D\VRI3RPSHLLSXEOLVKHGLQ/RQGRQLQ ZDVVHULDOL]HGLQ5RPDQLDQPDJD]LQHVLQ:DOWHU6FRWW¶VKLVWRULFDOQRYHOVZHUHZHOONQRZQWRWKH 5RPDQLDQSXEOLFIURPWKHPLGVRQZDUGV 5RPDQLDQPDJD]LQHVDOVRFDUULHGWKHILUVWQHZVDERXWWKH1HZ:RUOGGXULQJWKLVSHULRGDQGWUDQVODWLRQVRI $PHULFDQOLWHUDWXUHVRRQEHJDQWRDSSHDU:DVKLQJWRQ,UYLQJZDVWKHILUVWDXWKRUWREHWUDQVODWHGLQWR 5RPDQLDQLQIROORZHGE\%HQMDPLQ)UDQNOLQ)HQLPRUH&RRSHU(GJDU$OODQ3RHDQG0DUN7ZDLQ +DUULHW%HHFKHU6WRZH¶V8QFOH7RP¶V&DELQSXEOLVKHGLQZDVWUDQVODWHGLQ,Dú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± ZDVVLPLODUO\LQIOXHQFHGE\*HUPDQ5RPDQWLFLVP+LV H[FHOOHQWWUDQVODWLRQVRIWKH$XVWULDQSRHW/HQDX%LWWH5HTXHVW DQG'DVGUUH%ODWW7KH:LWKHUHG/HDI ZHUHSXEOLVKHGLQ&RQYRUELULOLWHUDUHLQ(PLQHVFXFUHDWHGDKLJKO\H[SUHVVLYHSRHWLFODQJXDJHDQGLQ VRGRLQJPDGHLWSRVVLEOHIRUWUDQVODWLRQVLQWR5RPDQLDQWRVWDQGLQWKHLURZQULJKWDVHTXDOVRIWKHLU(XURSHDQ DQG$PHULFDQRULJLQDOV 7KHODVWTXDUWHURIWKHQLQHWHHQWKFHQWXU\ZLWQHVVHGDQHPSKDVLVRQWUDQVODWLQJZRUNVZKLFKIRFXVRQVRFLDO LVVXHV7KHVHLQFOXGHG*RJRO¶V7KH,QVSHFWRU*HQHUDOSXEOLVKHGLQ7XUJHQHY¶V7KH1HVWRI*HQWOHIRON 'RVWR\HYVN\¶V&ULPHDQG3XQLVKPHQW DQG&KHNKRY¶V0RWOH\6WRULHV )UDJPHQWVRI 'LFNHQV¶7KH2OG&XULRVLW\6KRSZHUHSXEOLVKHGLQWKHPDJD]LQH&RQWHPSRUDQXO7KH&RQWHPSRUDU\ LQ DQGWKHWH[WDSSHDUHGLQIXOOLQ(GJDU$OODQ3RH¶V7KH0XUGHUVLQWKH5XH0RUJXHDSSHDUHGLQ WUDQVODWLRQLQDQG(PLOH=ROD¶V7KH'UH\IXV$IIDLULQ

7KHWZHQWLHWKFHQWXU\ 7UDQVODWLRQEHIRUH:RUOG:DU7ZR 'XULQJWKHILUVWKDOIRIWKHWZHQWLHWKFHQWXU\DQXPEHURIH[FHOOHQWWUDQVODWLRQVZHUHSXEOLVKHGE\VFKRODUV ZKRZHUHHVWDEOLVKHGSRHWVLQWKHLURZQULJKW7KH7UDQV\OYDQLDQSRHW*HRUJH&2ù%8&WUDQVODWHGIURP *HUPDQDVZHOODVDQXPEHURIRWKHUODQJXDJHVLQFOXGLQJ*UHHN+RPHU¶V2G\VVH\ /DWLQ9LUJLO¶V$HQHLG DQG*HRUJLFV 6DQVNULW5LJ9HGD.DOLGDVD¶V6iNXQWDOD5DPD\DQDDQG0DKDEKDUDWD DQG



3DJH

,WDOLDQ+LVWUDQVODWLRQRI'DQWH¶V7KH'LYLQH&RPHG\ZDVFRQVLGHUHGRQHRIWKHEHVWH[LVWLQJYHUVLRQVE\& 7DJOLDYLQLDZHOONQRZQ,WDOLDQVFKRODUZKRKDGDVSHFLDOLQWHUHVWLQ5RPDQLDQ$QRWKHU7UDQV\OYDQLDQùW2 ,RVLI± ZDVFRQVLGHUHGRQHRIWKHEHVWWUDQVODWRUVRI*HUPDQSRHWU\GXULQJKLVWLPH+HWUDQVODWHG +HLQH*RHWKH6FKLOOHU%XUJHUDQG/HQDX+HDOVRWUDQVODWHGZRUNE\WKH+XQJDULDQSRHW3HW{IL7KH $SRVWOH DVZHOODV6KDNHVSHDUH¶V5RPHRDQG-XOLHWDQG$0LGVXPPHU1LJKW¶V'UHDP7KH,OLDGDQG2G\VVH\ ZHUHWUDQVODWHGLQSHUIHFWKH[DPHWHUVE\*0XUQX2WKHUZULWHUVWUDQVODWHGRUUHWUDQVODWHGGXULQJWKLVSHULRG LQFOXGH-XOHV9HUQH2VFDU:LOGH0LNKDLO/HUPRQWRY,YDQ*RQFKDURY5DLQHU5LONH(XJHQH2¶1HLOO )UDQo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iQGRU3HW{ILFDUULHGPXFKWKHVDPHPHVVDJHDVWKDWGHULYHGE\+XQJDULDQVIURPWKHSRHWU\ RIWKH5RPDQLDQZULWHU*HRUJH&2ù%8&7KLVVWLPXODWHGWUDQVODWLRQDFWLYLW\EHWZHHQWKHWZRODQJXDJHVDW WLPHVHYHQDJDLQVWRIILFLDOSROLWLFDOWUHQGV/LEHUDOO\PLQGHGLQWHOOHFWXDOVZHUHFRQVFLRXVRIWKHFRQWULEXWLRQ PDGHE\WUDQVODWLRQVLQWHUPVRIDFKLHYLQJEHWWHUXQGHUVWDQGLQJDQGKDUPRQ\EHWZHHQWKHWZRSHRSOHV HVSHFLDOO\DJDLQVWJURZLQJIDVFLVPLQERWKFRXQWULHV,QIRULQVWDQFH*0RúRLX/RUG0D\RURI2UDGHD RIIHUHGDWUDQVODWLRQSUL]HDVDZD\RISURPRWLQJPXWXDOXQGHUVWDQGLQJEHWZHHQ5RPDQLDQVDQG+XQJDULDQV 2QHRIWKHPRVWVXFFHVVIXOWUDQVODWRUVIURP+XQJDULDQGXULQJWKLVSHULRGZDVWKH7UDQV\OYDQLDQSRHW2FWDYLDQ *2*$+LVYHUVLRQVRI3HW{IL$G\DQG0DGi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± &KHNKRY± DQG7XUJHQHY± 7KHRQO\QRQ5XVVLDQDXWKRUZKRVHZRUNV ZHUHWUDQVODWHGDQGSXEOLVKHGLQDFRPSOHWHHGLWLRQZDV6KDNHVSHDUH±LQH[FHOOHQWYROXPHVE\/ /HYLĠFKLDQG''XĠHVFX 7KHHDUO\VEURXJKWDJUDGXDOUHDSSUDLVDORI5RPDQLDQDQGIRUHLJQOLWHUDWXUH+LJKTXDOLW\WUDQVODWLRQV DSSHDUHGRIRXWVWDQGLQJZRUNVRIOLWHUDWXUHIURPDOORYHUWKHZRUOG7KHPDJD]LQH6HFROXO;;7KH7ZHQWLHWK &HQWXU\ DQGWKH(GLWXUDSHQWUX/LWHUDWXUă8QLYHUVDOă3XEOLVKLQJ+RXVHIRU:RUOG/LWHUDWXUHODWHUNQRZQDV 8QLYHUV SOD\HGDQLPSRUWDQWUROHLQWKLVSURFHVV%HWZHHQDQG8QLYHUVSXEOLVKHGWLWOHVE\ GLIIHUHQWDXWKRUV,QWKHIROORZLQJ\HDUVQXPHURXVRWKHUSXEOLVKLQJKRXVHVZHUHVHWXSIRUH[DPSOH 0LQHUYD$OEDWURVDQG7KH5RPDQLDQ%RRN7KHVHWRJHWKHUZLWKVSHFLDOL]HGMRXUQDOVVXFKDV)DPLOLD7KH /LWHUDU\5RPDQLD+RUL]RQDQGPDQ\RWKHUVHQVXUHGWKDWDOOWKHFODVVLFVIURPHYHU\FRXQWU\DQGHSRFKZHUH WUDQVODWHG7KHUHLVKDUGO\DQLQWHUQDWLRQDOZULWHUZKRKDVQRWEHHQWUDQVODWHGLQWR5RPDQLDQDWOHDVWRQFHD IDFWRIWHQ



3DJH

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úHVFXZKRZDVHOHFWHG3UHVLGHQWRIWKH6WDWH&RXQFLOLQDQGHYHQWXDOO\ 3UHVLGHQWRI5RPDQLDLQWUDQVODWLQJZDVUHJDUGHGDVDQHWKLFDOO\VRXQGDFWLYLW\ZKHUHDVRULJLQDOOLWHUDU\ ZRUNVZHUHVXEMHFWWRFHQVRUVKLSDQGFRXOGRQO\EHSXEOLVKHGLIWKH\JORULILHGWKHWRWDOLWDULDQUHJLPH7KLV IXUWKHUVWLPXODWHGWUDQVODWLRQDFWLYLW\DQGLPSRUWDQWZRUNVIURPDOOODQJXDJHVFRQWLQXHGWREHWUDQVODWHGDQG UHWUDQVODWHGLQWR5RPDQLDQ,QDGGLWLRQWRLQGLYLGXDOZRUNVDODUJHQXPEHURIDQWKRORJLHVZHUHDOVRSXEOLVKHG LQWKHVDQGV7KHVHLQFOXGHG$QWRORJLH6KDNHVSHDUHELOLQJYă$%LOLQJXDO$QWKRORJ\RI 6KDNHVSHDUH $QWRORJLDOLWHUDWXULLPDJKLDUH,±,,,$QWKRORJ\RI+XQJDULDQ/LWHUDWXUH,±,,,± $QWRORJLDSRH]LHLURPDQWLFHJHUPDQH$QWKRORJ\RI*HUPDQ5RPDQWLF3RHWU\ 6RQHWXOLWDOLDQ7KH ,WDOLDQ6RQQHW $QWRORJLHELOLQJYăGHSRH]LHLIUDQFH]ă%LOLQJXDO$QWKRORJ\RI)UHQFK3RHWU\ DQG3RHĠLDLH[SUHVLRQLVPXOXL7KH3RHWU\RI([SUHVVLRQLVP $FRPSUHKHQVLYHRYHUYLHZRIWKH OLWHUDWXUHRIWKHILUVWKDOIRIWKHFHQWXU\LVJLYHQE\$(%DFRQVN\LQKLV3DQRUDPDSRH]LHXQLYHUVDOH ZKLFKFRYHUVSRHWVIURP$G\WR


3DJH

µ1RWHVRID7UDQVODWRU¶'RLQDúE DQGµ2QWKH)DLWKIXO7UDQVODWLRQRI3RHWU\¶'RLQDúE DUH JRRGH[DPSOHVRIWKHRUHWLFDOVWXGLHVZKLFKDUHJURXQGHGLQJHQXLQHWUDQVODWLRQWDVNV,QWKHPDJD]LQH 6HFROXO;;ZKLFKKDVSXEOLVKHGZRUNVE\WKHRULVWVVXFKDV*HRUJH6WHLQHU-LĜt/HY\DQG2UWHJD\*DVVHWRQ DUHJXODUEDVLVRUJDQL]HGDGHEDWHRQ*HRUJHV0RXQLQ¶V/HVSUREOqPHVWKpRULTXHVGHODWUDGXFWLRQWRZKLFK PDQ\ZHOONQRZQWUDQVODWRUVFRQWULEXWHG$YDULHW\RIOLQJXLVWLFDHVWKHWLFDQGFXOWXUDOLVVXHVZHUHGLVFXVVHG ,QWKHWLWOHRIKLVFRQWULEXWLRQWRWKLVGHEDWHùW$XJ'RLQDú H[SUHVVHGWKHYLHZKHOGE\DJHQHUDWLRQ RI5RPDQLDQWUDQVODWRUVµ'LIILFXOW5LVN\EXWQRW,PSRVVLEOH¶ ,QWHUHVWLQWUDQVODWLRQWKHRU\LVDOVRVWLPXODWHGE\WKHQHHGWRWUDLQWUDQVODWRUVDQGLQWHUSUHWHUV9DULRXV PDQXDOVDQGKDQGERRNVKDYHEHHQSXEOLVKHGDVZHOODVDQXPEHURIWUDQVODWLRQRULHQWHGOLQJXLVWLFVWXGLHV 'RFWRUDOGLVVHUWDWLRQVRQWKHVXEMHFWKDYHEHHQSUHVHQWHGDWWKHXQLYHUVLWLHVRI%XFKDUHVW7LPLúRDUDDQG&OXM 2YHUDOOKRZHYHUWKHQXPEHURISXEOLVKHGERRNVRQWUDQVODWLRQUHPDLQVUHODWLYHO\VPDOO 7KHRUJDQL]DWLRQRIWKHSURIHVVLRQ 7KHUHDUHFXUUHQWO\WZRDVVRFLDWLRQVZKLFKUHSUHVHQWWUDQVODWRUVDQGLQWHUSUHWHUVLQ5RPDQLD7KHROGHURIWKH WZRLVWKH7UDQVODWLRQVDQG:RUOG/LWHUDWXUH6HFWLRQRIWKH:ULWHUV¶8QLRQDPHPEHURI),7 7KH 3URIHVVLRQDO8QLRQRI,QWHUSUHWHUVDQG7UDQVODWRUV83,7 ZDVHVWDEOLVKHGLQDQGLVUHVSRQVLEOHIRU SURWHFWLQJWKHULJKWVRIDXWKRUVDQGSURPRWLQJWKHSURIHVVLRQDOVWDWXVRIWUDQVODWRUVDQGLQWHUSUHWHUV

)XUWKHUUHDGLQJ %DULĠLX&RUQHD'XĠX,YDúFX.RKQ5RVHWWL

-È126.2+1

%LRJUDSKLHV $6$&+,*KHRUJKH± 5RPDQLDQZULWHUVFKRODUDQGWUDQVODWRU$VDFKLSOD\HGDPDMRUUROHLQ IRXQGLQJWKH$FDGHPLD0LKăLOHDQDLQ,DúLZKHUHKHWDXJKWPDWKHPDWLFVDQGDUFKLWHFWXUH+HDOVRIRXQGHGWKH ILUVWOLWHUDU\MRXUQDOVLQ0ROGDYLD$ELQD5RPkQHDVFă7KH5RPDQLDQ%HH DQG$OăXWD5RPkQHDVFă 7KH5RPDQLDQ)OXWH +LVOLWHUDU\DQGWUDQVODWLRQDFWLYLWLHVVSDQQHGDZLGHUDQJHRIJHQUHVEXWKHZDV SDUWLFXODUO\GUDZQWRFODVVLFDODQG:HVWHUQZRUNV$PRQJRWKHUZRUNVKHDGDSWHG0LUWKLODQG&KORHE\ )ORULDQDQG$O]LUHE\9ROWDLUH7RJHWKHUZLWKWKH:DOODFKLDQ+HOLDGH5iGXOHVFXDQGWKH7UDQV\OYDQLDQ* %DULĠLX$VDFKLSOD\HGDPDMRUUROHLQHQFRXUDJLQJWKH5RPDQLDQSXEOLFWRUHDGWKHPDVWHUSLHFHVRIYDULRXV FXOWXUHVDQGWRDGRSWWKHPRUDOYDOXHVHVSRXVHGLQWKHP &2ù%8&*HRUJH± 2QHRIWKHJUHDWHVWSRHWVLQWKHKLVWRU\RI5RPDQLDQOLWHUDWXUHRIWHQUHIHUUHG WRDVµWKHSRHWRIWKHSHDVDQWV¶DVZHOODVDQRXWVWDQGLQJWUDQVODWRURISRHWU\+HZDVSURIRXQGO\LQIOXHQFHGE\ *HUPDQQHRFODVVLFDOOLWHUDWXUHDQG5RPDQLDQIRONORUH&RúEXFWUDQVODWHGIURPDYDULHW\RIODQJXDJHV LQFOXGLQJ*UHHN/DWLQ*HUPDQ,WDOLDQDQG6DQVNULW '262)7(,UHDOQDPH'XPLWUX%ăULOă± 0ROGDYLDQ0HWURSROLWDQWUDQVODWRUDQGRQHRIWKHILUVW 5RPDQLDQSRHWVRQUHFRUG+HZDVHOHFWHG$UFKELVKRSRI,DúLLQEXWZDVODWHUSURVHFXWHGIRUSROLWLFDO UHDVRQV'RVRIWHL¶VYHUVLRQVRIWKH3VDOWHU3VDOPVRI'DYLGDQGRWKHUUHOLJLRXVPDWHULDOLQFOXGLQJDSUD\HU ERRNDQGDPLVVDOZHUHKLJKO\H[SUHVVLYHDQGEHFDPHH[WUHPHO\SRSXODULQ0ROGDYLDDQGWKHSULQFLSDOLWLHV PDNLQJLWSRVVLEOHWRVWDUWFRQGXFWLQJFKXUFKVHUYLFHVLQ5RPDQLDQIRUWKHILUVWWLPH *2*$2FWDYLDQ± 5RPDQLDQSRHWSROLWLFLDQDQGWUDQVODWRURIYDULRXVSRHWVLQFOXGLQJ3HW{IL $G\DQG0DGiFK+HVWXGLHGSKLORORJ\LQ%XGDSHVW%HUOLQDQG3DULV*RJD¶VRXWVSRNHQYLHZVRQWKH XQLILFDWLRQRI7UDQV\OYDQLDDQG5RPDQLDOHGWRKLVLPSULVRQPHQWLQWKHFLW\RI6]HJHGEXWIROORZLQJ XQLILFDWLRQLQKHKHOGVHYHUDOPLQLVWHULDOSRVWVDQGHYHQWXDOO\EHFDPH3ULPH0LQLVWHULQ



3DJH

+HZDVDZDUGHGWKH1DWLRQDO3UL]HIRU/LWHUDWXUHLQDQGKLVWUDQVODWLRQRI0DGiFK¶V7UDJHG\RI 0DQLVVWLOOFRQVLGHUHGRQHRIWKHEHVWLQH[LVWHQFH -È126.2+1

5XVVLDQWUDGLWLRQ 5XVVLDQLVSDUWRIWKH(DVW6ODYRQLFIDPLO\RIODQJXDJHVDQGRQHRIWKHVL[RIILFLDOODQJXDJHVRIWKH8QLWHG 1DWLRQV7KHKLVWRU\RIPRGHUQ5XVVLDGDWHVEDFNWRWKHQLQWKFHQWXU\$'ZKHQDQXPEHURI(DVW6ODYRQLF WULEHVXQLWHGWRIRUPDQHZVWDWHNQRZQDV.LHYDQ5XVDIWHUWKHQDPHRILWVFDSLWDO/DWHUWKHFRXQWU\¶V SROLWLFDOFHQWUHPRYHGWR0RVFRZZKLFKEHFDPHWKHFDSLWDORIDXQLWHG5XVVLDXQGHU,YDQWKH*UHDWLQWKH ILIWHHQWKFHQWXU\&RQWDFWZLWK:HVWHUQ(XURSHZDVLQLWLDWHGLQWKHVHYHQWHHQWKFHQWXU\E\3HWHUWKH*UHDW ZKRHVWDEOLVKHGWKHHGXFDWLRQDOV\VWHPDQGEXLOWDQHZFDSLWDO6W3HWHUVEXUJODWHUWREHFRPHNQRZQDV /HQLQJUDG 3ROLWLFDOXQUHVWXQGHUWKHWVDUVFXOPLQDWHGLQDSHULRGRIFLYLOZDU± DIWHUZKLFKWKH &RPPXQLVWVHVWDEOLVKHGFRQWURORIWKHFRXQWU\7KHHQGRI:RUOG:DU7ZRVDZWKHULVHRIWKH6RYLHW8QLRQ DVRQHRIWKHWZRPDMRUZRUOGSRZHUV7KHPLGVVDZWKHEHJLQQLQJRIDSHULRGRIVRFLDODQGSROLWLFDO UHIRUPNQRZQLQWKH:HVWDVSHUHVWURLNDDQGWKHSURJUHVVLYHGLVHQJDJHPHQWRI5XVVLDIURP(DVWHUQ(XURSH 7KHUHFRUGHGKLVWRU\RIWUDQVODWLRQLQ5XVVLDLVDVORQJDQGULFKLQHYHQWV7KHIROORZLQJLVDEULHIRYHUYLHZRI WKHPDLQWUHQGVHYLGHQWGXULQJGLIIHUHQWKLVWRULFDOSHULRGV

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¶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¶7KH-XGDLF:DULQZKLFKWKH WUDQVODWRUVXFFHVVIXOO\DYRLGHGPDQ\SLWIDOOVRIOLWHUDOQHVV ,QWKLVHDUO\SHULRGWKHWUDQVODWRU¶VQDPHZDVQRWPHQWLRQHGDVDUXOHDQGLWZDVRIWHQLPSRVVLEOHWRVD\ ZKHWKHUDWUDQVODWLRQZDVPDGHZLWKLQWKHFRXQWU\RUEH\RQGLWVERUGHUV 'XULQJWKHWUDJLF\HDUVRIWKH0RQJROLQYDVLRQ±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¶VYHUQDFXODU+RZHYHUUHOLJLRXVWH[WVFRQWLQXHGWREHWUDQVODWHG



3DJH

LQWR2OG&KXUFK6ODYRQLFZKLFKQRERG\VSRNHRXWVLGHFKXUFKVHUYLFHV$WWKHVDPHWLPHFRQWDFWZLWKRWKHU FRXQWULHVUHTXLUHGWKHWUDQVODWLRQRISROLWLFDODQGEXVLQHVVGRFXPHQWDWLRQDQGKHUHWKHQHZ5XVVLDQODQJXDJH EHJDQWRJDLQJURXQG$SDUWIURPWUDQVODWLRQVRULJLQDOWH[WVGXULQJWKLVSHULRGZHUHWKHPVHOYHVDOVRZULWWHQLQ DPL[WXUHRI6ODYRQLFDQG5XVVLDQ

7UDQVODWLRQLQWKHVL[WHHQWKDQGVHYHQWHHQWKFHQWXULHV )URPWKHVL[WHHQWKFHQWXU\RQZDUGV0RVFRZEHJDQWRHPHUJHDVWKHSROLWLFDODVZHOODVWKHWUDQVODWLRQFHQWUH RIWKHFRXQWU\,PSRUWDQWWUDQVODWLRQVZHUHQRORQJHUDQRQ\PRXVDQGWKHLUFRQWULEXWLRQWRWKHFRXQWU\¶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



3DJH

7UDQVODWLRQLQWKHHLJKWHHQWKFHQWXU\ 7KHHLJKWHHQWKFHQWXU\SURYHGGHFLVLYHLQWKHGHYHORSPHQWRIWUDQVODWLRQLQ5XVVLD3HWHUWKH*UHDW¶VSROLWLFDO UHIRUPVJUHDWO\H[SDQGHG5XVVLD¶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¶VZRUNDQGLWVFUHDWLYHQDWXUH $QHZVWDJHLQWUDQVODWLRQDFWLYLW\EHJDQWRGHYHORSLQWKUHHGLUHFWLRQV)LUVWWUDQVODWLRQEHJDQWREH LQVWLWXWLRQDOL]HGZLWKQHZVWUXFWXUHVHPHUJLQJWRRUJDQL]HDQGVXSHUYLVHWKHZRUN$JURXSRIWUDQVODWRUV ZHUHDVVHPEOHGLQ7VDU3HWHU¶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µODQJXDJHVDQGVFLHQFHV¶DEURDG([DPLQDWLRQV ZHUHKHOGWRDVVHVVWKHSURIHVVLRQDOSHUIRUPDQFHRIWUDQVODWRUV7KH$FDGHP\DOVRWULHGWRVWLPXODWHSXEOLF LQWHUHVWLQWUDQVODWLRQ,QLWV3UHVLGHQWDQQRXQFHGDQRUGHUIURPWKH7VDULQD(OLVDEHWKWRVWHSXSWKH WUDQVODWLRQRIQRQUHOLJLRXVVHFXODU ERRNV/DWHUWKH$FDGHP\&KDQFHU\SXEOLVKHGDQDSSHDOWRWKH µJHQWOHIRONDQGSHRSOHRIRWKHUUDQNV¶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²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



3DJH

WKHWKLUGFKDUDFWHULVWLFIHDWXUHRIWKHSHULRG7UDQVODWLRQZDVQRZFRQVLGHUHGDNLQGRIFUHDWLYHZULWLQJQROHVV ZRUWK\RIUHVSHFWWKHQRULJLQDOOLWHUDWXUH7KHWUDQVODWRUZDVUHJDUGHGDVDULYDORIWKHVRXUFHWH[WDXWKRUZLWK WKHWUDQVODWHGWH[WEHLQJH[SHFWHGWRDVSLUHWRKLJKHUVWDQGDUGVDQGHYHQWRVXUSDVVWKHVRXUFHWH[WLQWHUPVRI DUWLVWLFTXDOLW\ 7KHHLJKWHHQWKFHQWXU\DOVRZLWQHVVHGWKHHPHUJHQFHRISRHWU\WUDQVODWLRQLQ5XVVLDZKLFKODWHUGHYHORSHG LQWRDKLJKO\HVWHHPHGDFWLYLW\75(',$.296.<IRULQVWDQFHPDGHKLVUHSXWDWLRQIURPKLVWUDQVODWLRQRI3 7DOPDQ¶V9R\DJHDO¶vOHG¶DPRXUZKLFKLQFOXGHGPDQ\YHUVHVWKDWZHUHVXFFHVVIXOO\UHQGHUHGLQ5XVVLDQ UK\PH/HVVNQRZQEXWQROHVVUHPDUNDEOHZDV$.DQWHPLU¶VWUDQVODWLRQRI+RUDFH¶V(SLVWOHVDQGRWKHUSLHFHV RISRHWU\IURP/DWLQDQG)UHQFK(VSHFLDOO\QXPHURXVDQGYDULHGZHUH/20212629¶6WUDQVODWLRQVIURP /DWLQ*HUPDQ)UHQFKDQG*UHHNLQZKLFKKHVKRZHGUHPDUNDEOHVNLOOERWKLQUK\PHGDQGIUHHYHUVH+H SDLGPXFKDWWHQWLRQWRUHSURGXFLQJWKHUK\PLQJVFKHPHRIWKHVRXUFHWH[WXVLQJYDULRXVIRUPVRIFKRUHHDQG LDPEXVWRUHQGHUWKHDOH[DQGULQHRI)UHQFKHSLFVDQGWKHKH[DPHWHURI*UHHNWUDJHGLHV$V5XVVLDQSRHWU\RI WKHWLPHZDVQRWKLJKO\GHYHORSHGDQGZDVVWLOOEDVHGRQWKHGLVWULEXWLRQRIV\OODEOHV/RPRQRVRY¶V LQQRYDWLRQVKHOSHGWRHQULFKLWDQGWRHVWDEOLVKQHZIRUPVDQGWUDGLWLRQVLQWKHJHQUHVDQGPHWUHVRI5XVVLDQ YHUVH

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¶VVW\OHDVZHOODVDQLQYDOXDEOH VRXUFHRILQIRUPDWLRQXQGHUWDNHQIRUWKHVDNHRIFXULRVLW\IRUHVWDEOLVKLQJKLVWRULFDOIDFWVIRUHQWHUWDLQLQJ ZRPHQWRSURYLGHPDWHULDOIRUQHZPDJD]LQHVRUWRDFTXDLQW5XVVLDQUHDGHUVZLWKERRNVWKDWKDYHQRW\HW EHFRPHZHOONQRZQ.DUDP]LQ¶VWUDQVODWLRQDFWLYLW\FRYHUHGDQLPSUHVVLYHUDQJHRIJHQUHVDQGODQJXDJHVKH WUDQVODWHGWKHZRUNVRIFODVVLFDODQGFRQWHPSRUDU\DXWKRUVIURP*UHHN)UHQFK/DWLQ*HUPDQ(QJOLVK ,WDOLDQDQGVRPHRULHQWDOODQJXDJHV 3XVKNLQUHIHUUHGWR=+8.296.<DVµWKHJHQLXVRIWUDQVODWLRQ¶=KXNRYVN\ZDVDWDOHQWHG5XVVLDQSRHWEXW WUDQVODWLRQVDFFRXQWHGIRUDFRQVLGHUDEOHSDUWRIKLVRXWSXW+HWUDQVODWHGIURP(QJOLVK)UHQFK2OG5XVVLDQ /DWLQDQG*HUPDQ7KDQNVWRKLP5XVVLDQUHDGHUVJDLQHGDFFHVVWRPDQ\ZRUNVRI6FKLOOHU*RHWKH%\URQ :DOWHU6FRWWDQGRWKHUJLDQWVRIZRUOGOLWHUDWXUH7KHUDQJHRIKLVFUHDWLYHWUDQVODWLRQDFWLYLW\ZDVVWDJJHULQJ FRYHULQJDPRQJRWKHUWKLQJVWUDQVODWLRQVRIIDLU\WDOHVE\&KDUOHV3HUUDXOWDQGWKH*ULPPEURWKHUVD FRPSOHWHWUDQVODWLRQRI+RPHU¶V2G\VVH\DQGDWUDQVODWLRQRIWKHIDPRXV2OG5XVVLDQHSLF6ORYRRSRONX ,JRUHYH7KH7DOHRI,JRU¶V+RVW =KXNRYVN\LVRQHRIWKHOHDGLQJQDPHVLQWKHKLVWRU\RIWUDQVODWLRQLQ 5XVVLD /LNH.DUDP]LQ=KXNRYVN\DGYRFDWHGIUHHWUDQVODWLRQZKLFKVRPHWLPHVUHVXOWHGLQDSDUDSKUDVHRUHYHQD QHZVWRU\RQWKHVXEMHFWRIWKHVRXUFHWH[W+HZRXOGRFFDVLRQDOO\WUDQVIHUWKHVHWWLQJWR5XVVLDJLYHWKH VRXUFHWH[WFKDUDFWHUV5XVVLDQQDPHVDQGVRRQ+LVRXWVWDQGLQJWDOHQWKRZHYHUHQDEOHGKLPWRUHSURGXFH WKHVW\OHUK\WKPDQGWRQHRIWKHRULJLQDOSRHWU\DQGKLVEHVWWUDQVODWLRQVZHUHUHPDUNDEO\IDLWKIXOWRWKHLU VRXUFHV7KH5XVVLDQVFKRRORIWUDQVODWLRQRZHVPXFKWR=KXNRYVN\¶VOHJDF\ 7KHSUDFWLFHRIWDNLQJOLEHUWLHVZLWKWKHVRXUFHWH[WZDVDOVRFKDUDFWHULVWLFRISURVHWUDQVODWLRQVRIWKHSHULRG ,ULQDUNK9YHGHQVN\DWDOHQWHGDQGYHU\SRSXODUWUDQVODWRURIPDQ\QRYHOVE\&KDUOHV'LFNHQVDQG:LOOLDP 0DNHSHDFH7KDFNHUD\ZRXOGW\SLFDOO\DGGVHYHUDOSDJHVZKLFKKDGQRWKLQJWRGRZLWKWKHVRXUFHWH[W,QKLV WUDQVODWLRQRI'LFNHQV¶V'DYLG&RSSHUILHOGIRUH[DPSOHKHLQWURGXFHGKLVRZQWH[WVDWWKHHQGRIWKHVHFRQG FKDSWHUDWWKHEHJLQQLQJRIWKHVL[WKFKDSWHU



3DJH

DQGLQVRPHRWKHUSDUWVRIWKHQRYHO$QGKHMXVWLILHGVXFKFRQWULEXWLRQVE\WKHGHVLUHWRSOHDVHWKHUHDGHU FODLPLQJWKDWWKHWUDQVODWRUKDGWKHULJKWWRIUHHO\UHFUHDWHWKHVSLULWRIWKHVRXUFHWH[WWRJLYHDQHZOLIHWRWKH LGHDVRIWKHDXWKRULQDQHZVLWXDWLRQ²µXQGHUDQRWKHUVN\¶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¶VOLWHUDU\VW\OHZDVDSRVLWLYHLQIOXHQFHRQWKHEHVW5XVVLDQWUDQVODWRUVRIWKHQLQHWHHQWKDQG WZHQWLHWKFHQWXULHV $OWKRXJKWKHPDMRULW\RIWUDQVODWRUVGXULQJWKLVSHULRGDGYRFDWHGDQGSUDFWLVHGIUHHWUDQVODWLRQDIHZLQVLVWHG RQFRPSOHWHIDLWKIXOQHVVWRWKHVRXUFHWH[WRQOLWHUDOLVPHYHQWRWKHGHWULPHQWRIVHQVHDQGFODULW\$PRQJ WKHPZHUHVXFKSURPLQHQWPHQRIOHWWHUVDV3$9\D]HPVN\1,*QHGLFKDQG$$)HWDOORIZKRP WUDQVODWHGIURPDQXPEHURIGLIIHUHQWODQJXDJHV+RZHYHUWKH\GLGQRWDOZD\VSUDFWLFHZKDWWKH\SUHDFKHG 6RPHWLPHVWKHWUDQVODWRU¶VDUWLVWLFLQWXLWLRQDQGWDOHQWEURNHWKURXJKWKHEDUULHURIOLWHUDOLVP9\D]HPVN\¶V WUDQVODWLRQVRIZRUNVE\%HQMDPLQ&RQVWDQWDQG$GDP0LFNLHZLF]IRULQVWDQFHZHUHQRWGHYRLGRIOLWHUDU\ YDOXHDQG*QHGLFK¶VWUDQVODWLRQVHVSHFLDOO\RI+RPHU¶V,OLDGZHUHKLJKO\DSSUHFLDWHGE\3XVKNLQ)HW¶V H[WUHPHOLWHUDOLVPDGYHUVHO\DIIHFWHGWKHTXDOLW\RIPRVWRIKLVWUDQVODWLRQVEXWKHGLGFRPHXSZLWK VXFFHVVIXOVROXWLRQVVRPHWLPHV )UHHWUDQVODWLRQZDVVRPHWLPHVSUDFWLVHGDVDPHDQVRISURPRWLQJGHPRFUDWLFLGHDVZKLFKZRXOGQRWKDYH HVFDSHGRIILFLDOFHQVRUVKLSLQRULJLQDOZRUNV7UDQVODWRUVVXFKDV9.XURFKNLQ'0LQDHYDQG00LNKDLORY DPRQJRWKHUVDFKLHYHGWKLVE\FKRRVLQJVXLWDEOHVRXUFHWH[WVDQGRUE\LQWURGXFLQJLQWKHLUWUDQVODWLRQVVXEWOH FKDQJHVZKLFKWULJJHUHGDVVRFLDWLRQVZLWKWKH5XVVLDQFRQWH[W,WZDVGXULQJWKLVSHULRGWKHQWKDWXVLQJ WUDQVODWLRQDVDYHKLFOHRIGLVVHQWEHFDPHSDUWRIWKH5XVVLDQWUDGLWLRQ

7KH6RYLHWSHULRG 7KH\HDUVIROORZLQJWKH5HYROXWLRQVDZDQHZXSVXUJHLQWUDQVODWLRQDFWLYLW\2Q0D[LP*RUN\¶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¶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



3DJH

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

7UDQVODWLRQWKHRU\LQ5XVVLD $VDQLPSRUWDQWDVSHFWRIWKHQDWLRQ¶VFXOWXUHWUDQVODWLRQKDVEHHQWKHREMHFWRIVFKRODUO\GLVFXVVLRQLQ5XVVLD WKURXJKRXWLWVORQJKLVWRU\,WZDVQRWKRZHYHUXQWLOWKHVHFRQGKDOIRIWKHWZHQWLHWKFHQWXU\WKDWWKH WKRXJKWSURYRNLQJEXWRIWHQVXEMHFWLYHLGHDVRIFULWLFV



3DJH

DXWKRUVDQGPHPEHUVRIWKHSURIHVVLRQZHUHVXSSOHPHQWHGE\DWWHPSWVWRGHYHORSDFRKHUHQWWKHRU\RI WUDQVODWLRQ6LQFHWKHQWKHOHYHORIJURZWKLQWUDQVODWLRQDFWLYLW\KDVEHHQPDWFKHGE\QXPHURXVSXEOLFDWLRQV RQWKHRUHWLFDODVSHFWVRIWUDQVODWLRQ 7UDQVODWLRQUHVHDUFKLQ5XVVLDVWHPVIURPGLIIHUHQWVFKRROVRIWKRXJKWUHIOHFWVGLIIHUHQWDUHDVRILQWHUHVWDQG H[SUHVVHVRSSRVLQJYLHZV1HYHUWKHOHVVVRPHFRPPRQIHDWXUHVFDQEHVLQJOHGRXWWRLGHQWLI\ZKDWFDQEH GHVFULEHGDVWKH5XVVLDQVFKRRORIWUDQVODWLRQWKHRU\ 5XVVLDQWUDQVODWLRQWKHRULHVDUHODUJHO\EDVHGRQWKHDVVXPSWLRQWKDWWUDQVODWLRQLVDSKHQRPHQRQWKDWFDQEH VWXGLHGDQGGHVFULEHGLQDQREMHFWLYHDQGFRQVLVWHQWZD\XVLQJYDULRXVPHWKRGVRIREVHUYDWLRQDQGDQDO\VLV 7KHWUDQVODWRU¶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²LWVOLQJXLVWLFFRJQLWLYHDQGSV\FKRORJLFDOGLPHQVLRQV²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

)XUWKHUUHDGLQJ %DUNKXGDURY&KHUQ\DNKRYVND\D&KXNRYVN\)\GRURY



3DJH *DFKHFKLODG]H.RPLVVDURY.RSDQHY/DW\VKHY0LQ¶\DU%HORUXFKHY 5HWVNHU5HY]LQ6HPHQHWVDQG3DQDV¶HY6KYHLWVHU

9,/(11.20,66$529

%LRJUDSKLHV /202126290LNKDLO9DVLOLHYLHFK± 2XWVWDQGLQJ5XVVLDQVFLHQWLVWKLVWRULDQDQGSRHWIRXQGHU RI0RVFRZ8QLYHUVLW\+LVILHOGRIDFWLYLW\ZDVDVWRQLVKLQJO\ZLGH+HPDGHUHPDUNDEOHFRQWULEXWLRQVLQ SK\VLFVFKHPLVWU\PHWDOOXUJ\DQGPDQ\RWKHUEUDQFKHVRIVFLHQFH,QDGGLWLRQKHZDVLQVWUXPHQWDOLQOD\LQJ GRZQWKHIRXQGDWLRQVRIWKH5XVVLDQOLWHUDU\ODQJXDJHZDVDSURPLQHQWHGXFDWRUSKLORVRSKHUDQGSOD\ZULJKW 7UDQVODWLRQHVSHFLDOO\RISRHWU\RFFXSLHGQRVPDOOVSDFHDPRQJKLVQXPHURXVDFKLHYHPHQWV+HWUDQVODWHGD ODUJHQXPEHURISRHWLFWH[WVIURP/DWLQDVZHOODVIURP*HUPDQ)UHQFKDQG*UHHNPRVWQRWDEO\+RUDFH¶V 2GHV+RPHU¶V,OLDGDQG9LUJLO¶V$HQHLG/RPRQRVRYZDVDJUHDWUHIRUPHURIWKH5XVVLDQSRHWLFODQJXDJH H[SDQGLQJLWVUK\PHDQGUK\WKPSRWHQWLDO+HGLGPXFKWRSURPRWHWUDQVODWLRQLQ5XVVLDKHWRRNSDUWLQWKH 5XVVLDQ$VVHPEO\WKHILUVWSURIHVVLRQDORUJDQL]DWLRQRIWUDQVODWRUVUHFRPPHQGHGERRNVIRUWUDQVODWLRQDQG ZURWHFULWLFDOUHYLHZV+LVYDULRXVDFWLYLWLHVLQWKHILHOGDQGKLVZULWLQJVRQWKHUROHDQGPHWKRGVRIWUDQVODWLRQ KDYHSOD\HGDPDMRUSDUWLQHQKDQFLQJWKHVRFLDOVWDWXVRIWUDQVODWRUVLQ5XVVLD 0$;,07+(*5((.QLFNQDPHRI0LNKDLO7UHYROHV± $FRQWURYHUVLDOUHOLJLRXVZULWHUDQGD SUROLILFWUDQVODWRU(GXFDWHGLQ,WDO\DQG*UHHFHKHZHQWWR0RVFRZLQDWWKHLQYLWDWLRQRI%DVLO,,,WR ZRUNRQWUDQVODWLRQVRIUHOLJLRXVWH[WVDQGFRQVHTXHQWO\SURGXFHGPDQ\QHZWUDQVODWLRQVDQGFRUUHFWHG SUHYLRXVO\WUDQVODWHGWH[WV+LVDFWLYHSDUWLFLSDWLRQLQ5XVVLD¶VSROLWLFDODQGLGHRORJLFDOVWUXJJOHVEURXJKWKLP FRQGHPQDWLRQIURPWKH&KXUFKDQGKHVSHQWPDQ\\HDUVLQH[LOH0D[LPDQQRWDWHGKLVWUDQVODWLRQVKHDYLO\ ZLWKWKHRORJLFDODQGSKLORORJLFDOFRPPHQWDULHV+LVZULWLQJVLQFOXGHGPDQ\UHIOHFWLRQVRQZKDWFRQVWLWXWHVD JRRGWUDQVODWLRQWKHPRVWLPSRUWDQWLQWKLVUHVSHFWZDVKLVFRPPHQWDU\RQKLVWUDQVODWLRQRI7RONRYD\D 3VDOW\UL([SODQDWRU\3VDOWHU ZKLFKKHHQWLWOHG3RVODQLHNYHOLNRPXNQ\D]\X9DVLOL\X,YDQRYLFKX$0HVVDJH WRWKH*UDQG3ULQFH%DVLO 0D[LP¶VUHIOHFWLRQVRQODQJXDJHSDUWLFXODUO\JUDPPDUZHUHDOVRLPSRUWDQWIRUWKH GHYHORSPHQWRISKLORORJ\LQ5XVVLD+HLVWKHDXWKRURIWKH*UHHN6ODYRQLF'LFWLRQDU\7RONRYDQLHLPHQDPSR DOIDYLWX1DPHV,QWHUSUHWHGLQ$OSKDEHWLF2UGHU 75(',$.296.<9DVLOL\.LULORYLFK± 5XVVLDQZULWHUDQGWUDQVODWRU,QKHSXEOLVKHGKLV WUDQVODWLRQRI37DOPDQ¶V9R\DJHjO¶vOHG¶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¶V/¶$UWSRpWLTXH DQG)pQHORQ¶V/HV$YHQWXUHVGH7pOpPDTXH 7UHGLDNRYVN\ZDVWKHILUVW5XVVLDQWUDQVODWRUWRSD\SDUWLFXODUDWWHQWLRQWRWKHWKHRUHWLFDODVSHFWVRI WUDQVODWLRQ+HGLVFXVVHGPDQ\LQWHUHVWLQJLVVXHVVXFKDVVW\OLVWLFSUREOHPVW\SHVRIWUDQVODWLRQDQGWKHLPSDFW RIWKHWDUJHWODQJXDJHRQWKHWUDQVODWLQJSURFHVVDPRQJRWKHUV =+8.296.<9DVLOL\$QGUHHYLFK± 5XVVLDQSRHWDQGWUDQVODWRU(GXFDWHGLQDQDULVWRFUDWLF ERDUGLQJVFKRROKHMRLQHGWKH5XVVLDQDUP\LQWKHZDUDJDLQVW1DSROHRQDQGZDVODWHUDSSRLQWHGWXWRU RIWKH7VDU¶VVRQ=KXNRYVN\¶VVHQWLPHQWDOSRHWU\



3DJH

HQMR\HGJUHDWSRSXODULW\EXWKHZDVHTXDOO\IDPRXVIRUWKHTXDOLW\RIKLVWUDQVODWLRQV(VSHFLDOO\VXFFHVVIXO ZHUHKLVUHQGHULQJVRI5RPDQWLFDXWKRUVKLVSRHPVQRWRQO\FRQYH\HGWKHVW\OHFRQWHQWDQGDWPRVSKHUHRI WKHVRXUFHWH[WVIDLWKIXOO\EXWZHUHDOVRUHPDUNDEOHH[DPSOHVRI5XVVLDQYHUVHLQWKHLURZQULJKW$PRQJKLV PDVWHUSLHFHVDUHWUDQVODWLRQVRIEDOODGVE\6FKLOOHUDQG*RHWKH6FKLOOHU¶VGUDPD-XQJIUDXYRQ2UOHDQV +RPHU¶V2G\VVH\DQG)LUGDXVL¶V6KDK1DPD7KRXJKRIWHQUHPDUNDEO\IDLWKIXOWRWKHVRXUFHWH[WDXWKRUKH DGYRFDWHGIUHHWUDQVODWLRQDQGVDZWKHWUDQVODWRUDVDSRHWLQKLVKHURZQULJKWFRPSHWLQJZLWKWKHDXWKRULQ WHUPVRISRHWLFH[FHOOHQFH 9,/(11.20,66$529



3DJH

6 6ORYDNWUDGLWLRQ 6ORYDNLVD:HVW6ODYRQLFODQJXDJHW\SRORJLFDOO\FORVHWR&]HFK,WKDVDOLWHUDU\IRUPXVHGLQRIILFLDO FRPPXQLFDWLRQVLQOLWHUDWXUHDQGLQWKHPHGLDDQGYDULRXVGLDOHFWV7KHOLWHUDU\IRUPLVEDVHGRQWKH&HQWUDO 6ORYDNGLDOHFWVDQGKDVEHHQWDNLQJVKDSHVLQFHWKHPLGGOHRIWKHQLQHWHHQWKFHQWXU\8QWLOWKHQ&]HFKZLWK DQRFFDVLRQDODGPL[WXUHRI6ORYDNOH[LFDOHOHPHQWV ZDVXVHGDVWKHOLWHUDU\ODQJXDJHRIWKHWHUULWRU\RIZKDW LVQRZ6ORYDNLD7RZDUGVWKHHQGRIWKHHLJKWHHQWKFHQWXU\$QWRQ%HUQROiN± DWWHPSWHGWRFUHDWH DOLWHUDU\6ORYDNODQJXDJHRQWKHEDVLVRIZHVWHUQ6ORYDNQRZNQRZQDV%HUQROiNãWLQDLH%HUQROiN ODQJXDJH EXWLWZDV/XGRYtWâW~U± ZKRODLGWKHVROLGIRXQGDWLRQVRIOLWHUDU\6ORYDN)XOOVW\OLVWLF GHYHORSPHQWGLGQRWEHJLQXQWLODIWHUZLWKWKHHVWDEOLVKPHQWRIWKH)LUVW&]HFKRVORYDN5HSXEOLFWKH ILUVW6ORYDNRUWKRJUDSKLFDOVWDQGDUGVZHUHODLGGRZQLQ DQGPRUHHVSHFLDOO\DIWHUZLWKWKH HVWDEOLVKPHQWRIWKH6HFRQG&]HFKRVORYDN5HSXEOLF

%HJLQQLQJVRI6ORYDNWUDQVODWLRQ 8QWLOWKHWXUQRIWKHHLJKWHHQWKDQGQLQHWHHQWKFHQWXULHVWUDQVODWLRQLQWKH6ORYDNVSHDNLQJWHUULWRULHVZDV PDLQO\LQWR&]HFKWKRXJKWKHUHZHUHVSRUDGLFDWWHPSWVDWWUDQVODWLRQLQWRVSRNHQ6ORYDN6RPHDQFLHQW*UHHN WH[WVZHUHWUDQVODWHGLQWR/DWLQH[FOXVLYHO\IRUHGXFDWHGUHDGHUV7RZDUGVWKHHQGRIWKHHLJKWHHQWKFHQWXU\D IHZWUDQVODWLRQVZHUHPDGHIURP*HUPDQLQWRµ%HUQROiN6ORYDN¶7KHWUDQVODWRUVZHUHJHQHUDOO\&DWKROLF SULHVWV7KHPRVWLPSRUWDQWILJXUHRIWKDWSHULRGZDV-iQ+ROOê± DSULHVWDQGSRHWZKRVHZRUN PDUNHGDQHZHSRFKRIWUDQVODWLRQKHWUDQVODWHGWKH*UHHNDQG/DWLQSRHWVLQWRµ%HUQROiN6ORYDN¶LQFOXGLQJ 9LUJLO¶VFRPSOHWH$HQHLG %RKXVODY7DEOLF± D3URWHVWDQWFOHUJ\PDQSRHWHQOLJKWHQHUDQG RUJDQL]HURIFXOWXUDOOLIHLQWKH6ORYDNUHJLRQWUDQVODWHG*HUPDQDQG(QJOLVKSRHWU\IRUH[DPSOH$QJOLFNp P~]\YþHVNRVORYHQVNpPRGČYX7KH(QJOLVK0XVHVLQ&]HFK6ORYDN*DUE 6KDNHVSHDUH5DFLQH0ROLqUH 9ROWDLUH5RXVVHDX*RHWKH3XVKNLQ0LFNLHZLF]DQGRWKHUVZHUHDOVRWUDQVODWHGLQWRWKHQHZO\FUHDWHG 6ORYDNOLWHUDU\ODQJXDJHGXULQJWKLVSHULRG $QRXWVWDQGLQJILJXUHLQWUDQVODWLRQDWWKHHQGRIWKHQLQHWHHQWKFHQWXU\ZDVWKHSRHWDQGGUDPDWLVW3DYRO 2UV]iJK+YLH]GRVODY± ZKRWUDQVODWHGIURP(QJOLVK+XQJDULDQ*HUPDQ3ROLVKDQG5XVVLDQ +YLH]GRVODYWRJHWKHUZLWKWKHIROORZHUVRI/XGRYtWâW~UWUDQVPLWWHGWKHJUHDWOLWHUDU\ZRUNVRIWKH 5HQDLVVDQFHQHRFODVVLFDODQG5RPDQWLFDJHWRWKH6ORYDNUHDGLQJSXEOLF

7UDQVODWLRQLQWKHWZHQWLHWKFHQWXU\ $IWHU:RUOG:DU2QHDQGWKHHVWDEOLVKPHQWRI&]HFKRVORYDNLDWKHUHZDVDQLQFUHDVHLQWUDQVODWLRQDFWLYLW\LQ 6ORYDNLDEXWFRPSOHWHHPDQFLSDWLRQIURP&]HFKZDVQRW\HWDFKLHYHG)RURQHWKLQJ&]HFKWUDQVODWLRQVRI WKHZRUOGFODVVLFVKDGWRFRPSHQVDWHIRUWKHVKRUWDJHRIQDWLYH6ORYDNWUDQVODWLRQVDQGIRUDQRWKHUWKHVH WUDQVODWLRQVDOORIWKHPHDUOLHUWKDQ6ORYDNWUDQVODWLRQVIUHTXHQWO\SURYHGWREHWKH6ORYDNWUDQVODWRUV¶PRVW LPSRUWDQWZRUNLQJDLGLQWKHDEVHQFHRIDQDWLYHWUDGLWLRQRIOLWHUDU\WUDQVODWLRQ 1RWXQWLODIWHU:RUOG:DU7ZRGLG6ORYDNWUDQVODWLRQHPDQFLSDWHLWVHOIIURP&]HFKPRGHOVDVDQHZ JHQHUDWLRQRIHGXFDWHGWUDQVODWRUVFDPHWRWKHIRUH)URPWKHV



3DJH

RQZDUGWKHJURZLQJLQGHSHQGHQFHRI6ORYDNOLWHUDU\WUDQVODWLRQZDVUHIOHFWHGLQWKHIDFWWKDWQRWRQO\IRUHLJQ EXWDOVR&]HFKOLWHUDWXUHZDVWUDQVODWHGLQWR6ORYDN ,QSDUDOOHOZLWKWUDQVODWLRQSUDFWLFHWKRXJKPRUHVORZO\D6ORYDNWKHRU\RIWUDQVODWLRQFDPHLQWREHLQJ7KLV ZDVEDVHGQRWRQO\RQWKHH[SHULHQFHRIWKHOHDGLQJSUDFWLWLRQHUVRIPRGHUQOLWHUDU\WUDQVODWLRQEXWDOVRRQWKH ZRUNRIVRPHWKHRUHWLFLDQVSULQFLSDOO\WKRVHRIZKDWKDVFRPHWREHNQRZQDVWKH1LWUD6FKRRO3URFHHGLQJ IURPWKHZRUNRI-LĜt/HY\6ORYDNVFKRODUVHODERUDWHGDVFLHQWLILFGHILQLWLRQRIWUDQVODWLRQDVDPHWDWH[WZLWKLQ WKHV\VWHPRIOLWHUDU\FRPPXQLFDWLRQ7KHIRXQGHURIWKLVVFKRRORIWKRXJKWZDV$QWRQ32329,ý± +HDUULYHGLQ1LWUDLQDQGFRIRXQGHGZLWK)UDQWLãHN0LNRWKH&HQWUHIRU/LWHUDU\&RPPXQLFDWLRQDQG ([SHULPHQWDO0HWKRGRORJ\ZLWKWKHREMHFWLYHRIGHYHORSLQJDWKHRU\RIOLWHUDU\FRPPXQLFDWLRQDQGZLWKLW DOVRDFRPPXQLFDWLYHWKHRU\RIOLWHUDU\WUDQVODWLRQ3RSRYLþRXWOLQHGKLVWKHRU\LQDQXPEHURISXEOLFDWLRQV QDPHO\3RHWLNDXPHOHFNpKRSUHNODGX3RHWLFVRIOLWHUDU\WUDQVODWLRQ DQG8PHOHFNêSUHNODGYý665 /LWHUDU\WUDQVODWLRQLQ&]HFKRVORYDNLD DQGHYHQWXDOO\IRUPXODWHGLWPRUHIXOO\LQKLVPRQRJUDSK 7HyULDXPHOHFNpKRSUHNODGX7KHRU\RIOLWHUDU\WUDQVODWLRQ +HDOVRHGLWHGWKHYROXPH2ULJLQiO 3UHNODG,QWHUSUHWDþQiWHUPLQROyJLD2ULJLQDO7UDQVODWLRQ,QWHUSUHWDWLRQDOWHUPLQRORJ\ LQ $QXQGHVLUDEOHDVSHFWLQWKHVDQGVZDV²MXVWDVLQWKH&]HFK/DQGVDQGHOVHZKHUHLQWKH6RYLHW VSKHUHRILQIOXHQFHWKHZLGHVSUHDGSUDFWLFHRIWKHWUDQVODWLRQRISRHWU\ZLWKWKHDLGRIµLQWHUOLQHDUWUDQVODWLRQV¶ 7KLVZDVWKHRUHWLFDOO\MXVWLILHGE\WKHDUJXPHQWWKDWSRHWU\FRXOGRQO\EHWUDQVODWHGE\DSRHW7KHUHDOUHDVRQ KRZHYHUZDVSROLWLFDOUDWKHUWKDQOLWHUDU\LQWKDWWKH6ORYDNSRHWVZHUHVLPSO\FRS\LQJWKHSUDFWLFHSUHYDOHQW LQWKH6RYLHW8QLRQ$OWKRXJKRQRFFDVLRQVWKHFRRSHUDWLRQEHWZHHQDOLQJXLVWDQGDSRHWXQGRXEWHGO\ UHVXOWHGLQILQHWUDQVODWLRQVLQPRVWLQVWDQFHVLWIDLOHGWRHQULFKWKHVWRUHKRXVHRI6ORYDNOLWHUDU\WUDQVODWLRQ %HFDXVHRIWKHODFNRITXDOLILHGH[SHUWVQRQOLWHUDU\WUDQVODWLRQSULRUWRWKHVPXFKDVOLWHUDU\WUDQVODWLRQ ²ODUJHO\UHOLHGRQ&]HFKWUDQVODWLRQV(PDQFLSDWLRQIURP&]HFKDVDQLQWHUPHGLDU\ODQJXDJHEHJDQRQO\DIWHU :RUOG:DU7ZR7KHVZLWQHVVHGWKHEHJLQQLQJRIDPDMRUWUDQVODWLRQGULYHIURPPDQ\ODQJXDJHVD SURFHVVZKLFKKDVFRQWLQXHGWRJDWKHUPRPHQWXPXQGHUWKHLQGHSHQGHQW6ORYDN5HSXEOLF :KLOHWKHUHPXVWKDYHEHHQVRPHLQWHUSUHWLQJDWGLSORPDWLFDQGJRYHUQPHQWDOOHYHOGXULQJ6ORYDNLD¶VEULHI ZDUWLPHµLQGHSHQGHQFH¶DVD*HUPDQFOLHQWVWDWHSURIHVVLRQDOLQWHUSUHWLQJGLGQRWEHJLQLQHDUQHVWXQWLODIWHU :RUOG:DU7ZR

3URIHVVLRQDORUJDQL]DWLRQVDQGWUDQVODWRUWUDLQLQJ $VLQWKH&]HFK/DQGVOLWHUDU\WUDQVODWRUVLQ6ORYDNLDDIWHU:RUOG:DU7ZRZHUHRUJDQL]HGDVDVHFWLRQRIWKH 6ORYDN:ULWHUV¶8QLRQWKLVEHFDPHDPHPEHURI),7LQ2ZLQJWRDOHVVGUDVWLFSURFHVVRISROLWLFDO µQRUPDOL]DWLRQ¶LQ6ORYDNLDWKH6ORYDN:ULWHUV¶8QLRQZDVQRWGLVVROYHGDQGWKH6ORYDNWUDQVODWRUV¶ PHPEHUVKLSLQ),7WKHUHIRUHFRQWLQXHGXQLQWHUUXSWHG)RULQWHUQDOSXUSRVHVKRZHYHUWKHUHH[LVWHGIURPWKH VDQRUJDQL]DWLRQXQGHUWKH6ORYDN/LWHUDU\)XQGFDOOHGWKH6ORYDN7UDQVODWRUV¶&HQWUHXQOLNHLWV&]HFK SDUDOOHORUJDQL]DWLRQWKLVLQFOXGHGERWKOLWHUDU\DQGQRQOLWHUDU\WUDQVODWRUV$WSUHVHQWWKHIROORZLQJ LQGHSHQGHQWRUJDQL]DWLRQVH[LVWLQWKH6ORYDN5HSXEOLFWKH6ORYDN6RFLHW\RI/LWHUDU\7UDQVODWRUV6ORYHQVNi

XPHOHFNHMOLWHUDW~U\ WKH6ORYDN6RFLHW\RI7HFKQLFDO7UDQVODWRUV6ORYHQVNi

RGERUQHMOLWHUDW~U\ DQGWKH8QLRQRI,QWHUSUHWHUVDQG7UDQVODWRUV-HGQRWDWOPRþQtNRY

D 8QLYHUVLW\OHYHOWHDFKLQJRIWUDQVODWLRQLQ6ORYDNLDEHJDQLQLQ%UDWLVODYDIROORZHGLQE\WKH HVWDEOLVKPHQWLQ1LWUDRIDSRVWJUDGXDWHFRXUVHIRUWUDQVODWRUVOHDGLQJWRDGHJUHHWKHVLVDQGLWVGHIHQFH 7KDQNVWRWKHSLRQHHUZRUNRI$QWRQ32329,ýWKHGHSDUWPHQWLQ1LWUDKDVJDLQHGLQWHUQDWLRQDOUHQRZQIRU LWVUHVHDUFKDQGSXEOLFDWLRQV

)XUWKHUUHDGLQJ )HUHQþtN+RFKHO.RFKRO0LNR9LOLNRYVNê

=/$7$.8)1(529È$1'(:$/'26(56



3DJH

%LRJUDSK\ 32329,ý$QWRQ± 6ORYDNOLWHUDU\VFKRODUDQGOHDGLQJILJXUHRIWUDQVODWLRQVWXGLHVLQ(DVWDQG &HQWUDO(XURSHGXULQJWKHVDQGV&RIRXQGHUZLWK)UDQWLãHN0LNRRIWKH&HQWUHIRU/LWHUDU\ &RPPXQLFDWLRQDQG([SHULPHQWDO0HWKRGLFVLQ1LWUD DQGWKH6XPPHU6FKRRORI7UDQVODWLRQ6WXGLHVLQ 6ORYDNLD $VDGLVFLSOHRI-LĜt/(9<VHH&=(&+75$',7,21 KHFRQWLQXHGWKH&]HFKDQG6ORYDN VWUXFWXUDOWUDGLWLRQSXEOLVKLQJâWUXNWXUDOL]PXVYVORYHQVNHMYHGH±6WUXFWXUDOLVPLQ6ORYDN6FLHQFH ²± LQ+HODWHUGHYHORSHGKLVWKHRU\RIOLWHUDU\FRPPXQLFDWLRQDQGPHWDFRPPXQLFDWLRQLQ 3UREOpP\OLWHUiUQHMPHWDNRPXQLNiFLH7HyULDPHWDWH[WX3UREOHPVRI/LWHUDU\0HWDFRPPXQLFDWLRQ7KH 7KHRU\RI0HWDWH[WV LQ+LVPRVWLPSRUWDQWZRUNVLQFOXGH3UHNODGDYêUD]7UDQVODWLRQDQG([SUHVVLRQ 3RHWLNDXPHOHFNpKRSUHNODGX3RHWLFVRI/LWHUDU\7UDQVODWLRQ 8PHOHFNêSUHNODGYý665 /LWHUDU\7UDQVODWLRQLQ&]HFKRVORYDNLD 7HyULDXPHOHFNpKRSUHNODGX7KH7KHRU\RI/LWHUDU\ 7UDQVODWLRQWUDQVODWHGLQWR+XQJDULDQ5XVVLDQDQG6HUER&URDWLDQ DQG'LFWLRQDU\IRUWKH$QDO\VLVRI /LWHUDU\7UDQVODWLRQ 3RSRYLþ¶VFRQWULEXWLRQWRWUDQVODWLRQVWXGLHVLVDQDO\VHGLQ*HQW]OHU %5$ĕ2+2&+(/

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µUHFRQTXHUHG¶WKHSHQLQVXODIURP,VODPLFUXOH7KHV\VWHPDWLF SULYLOHJLQJRI&DVWLOLDQDVDWDUJHWODQJXDJHFDQWKHQEHGDWHGUDWKHUDUELWUDULO\IURPLQLWLDWLQJDORQJ SHULRGRIUHSUHVVLRQRILQWHUQDOGLYHUVLW\WKDWODVWHGDWOHDVWWKURXJKWRWKHGHDWKRI)UDQFRLQ$FHUWDLQ FXOWXUDOSOXUDOLW\LVQHYHUWKHOHVVEHLQJUHGLVFRYHUHGLQSUHVHQWGD\6SDLQ

7KH5HFRQTXLVWD± 0DMRUSDUWVRI6SDLQZHUHXQGHU,VODPLFUXOHIURPXQWLOWKHWKLUWHHQWKFHQWXU\DOWKRXJK*UDQDGDUHPDLQHG ,VODPLFXQWLO7KHFHQWXULHVRIWKH5HFRQTXLVWDLQFOXGHGORQJSHULRGVRIFRH[LVWHQFHDQGLQIOXHQFHPDGH SRVVLEOHE\WKHHIIRUWVRILQWHUFXOWXUDOJURXSVDEOHWRPHGLDWHEHWZHHQWKH$UDELFDQG5RPDQFHODQJXDJHV 0HGLHYDOWUDQVODWRUVLQ6SDLQZHUHRIWHQ-HZV&RQYHUVRV-HZVSXEOLFO\FRQYHUWHGWR&KULVWLDQLW\ RU 0R]DUDEV&KULVWLDQVZKRKDGOLYHGXQGHU,VODPLFUXOH 7KHUHZDVDOVRDULFKYDULHW\RILQWHUQDWLRQDOVFKRODUV ZKRWUDQVODWHGLQWR/DWLQ/LNH6LFLO\DQG&RQVWDQWLQRSOH6SDLQZDVDPXOWLFXOWXUDOUHJLRQEHWZHHQWKH &KULVWLDQDQG,VODPLFZRUOGV ,VODPLF6SDLQKDGWKHPRVWDGYDQFHGVFLHQWLILFNQRZOHGJHRIWKHWLPHODUJHO\WKDQNVWRWKH*UHHNWH[WV WUDQVODWHGLQWR$UDELFLQWKHQLQWKFHQWXU\VHH$5$%,&75$',7,21 5HJXODUWUDQVODWLRQHIIRUWVIURP $UDELFLQWR/DWLQGDWHIURPWKHHDUO\WZHOIWKFHQWXU\ZKHQ$GHODUGRI%DWKDQGWKH&RQYHUVR3HWUXV $OSKRQVXVEURXJKWNQRZOHGJHRI$UDELFDVWURQRP\WR(QJODQGDQG%LVKRS0LFKDHORI7DUD]RQDLQWKHQRUWK RI6SDLQVSRQVRUHGWKHWUDQVODWLRQRISURWRVFLHQWLILFWH[WVIURP$UDELFLQWR/DWLQTXLWHSUREDEO\WRPHHWD )UHQFKGHPDQG7KLVQRUWKZDUGIORZZDV



3DJH

%LRJUDSK\ 32329,ý$QWRQ± 6ORYDNOLWHUDU\VFKRODUDQGOHDGLQJILJXUHRIWUDQVODWLRQVWXGLHVLQ(DVWDQG &HQWUDO(XURSHGXULQJWKHVDQGV&RIRXQGHUZLWK)UDQWLãHN0LNRRIWKH&HQWUHIRU/LWHUDU\ &RPPXQLFDWLRQDQG([SHULPHQWDO0HWKRGLFVLQ1LWUD DQGWKH6XPPHU6FKRRORI7UDQVODWLRQ6WXGLHVLQ 6ORYDNLD $VDGLVFLSOHRI-LĜt/(9<VHH&=(&+75$',7,21 KHFRQWLQXHGWKH&]HFKDQG6ORYDN VWUXFWXUDOWUDGLWLRQSXEOLVKLQJâWUXNWXUDOL]PXVYVORYHQVNHMYHGH±6WUXFWXUDOLVPLQ6ORYDN6FLHQFH ²± LQ+HODWHUGHYHORSHGKLVWKHRU\RIOLWHUDU\FRPPXQLFDWLRQDQGPHWDFRPPXQLFDWLRQLQ 3UREOpP\OLWHUiUQHMPHWDNRPXQLNiFLH7HyULDPHWDWH[WX3UREOHPVRI/LWHUDU\0HWDFRPPXQLFDWLRQ7KH 7KHRU\RI0HWDWH[WV LQ+LVPRVWLPSRUWDQWZRUNVLQFOXGH3UHNODGDYêUD]7UDQVODWLRQDQG([SUHVVLRQ 3RHWLNDXPHOHFNpKRSUHNODGX3RHWLFVRI/LWHUDU\7UDQVODWLRQ 8PHOHFNêSUHNODGYý665 /LWHUDU\7UDQVODWLRQLQ&]HFKRVORYDNLD 7HyULDXPHOHFNpKRSUHNODGX7KH7KHRU\RI/LWHUDU\ 7UDQVODWLRQWUDQVODWHGLQWR+XQJDULDQ5XVVLDQDQG6HUER&URDWLDQ DQG'LFWLRQDU\IRUWKH$QDO\VLVRI /LWHUDU\7UDQVODWLRQ 3RSRYLþ¶VFRQWULEXWLRQWRWUDQVODWLRQVWXGLHVLVDQDO\VHGLQ*HQW]OHU %5$ĕ2+2&+(/

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µUHFRQTXHUHG¶WKHSHQLQVXODIURP,VODPLFUXOH7KHV\VWHPDWLF SULYLOHJLQJRI&DVWLOLDQDVDWDUJHWODQJXDJHFDQWKHQEHGDWHGUDWKHUDUELWUDULO\IURPLQLWLDWLQJDORQJ SHULRGRIUHSUHVVLRQRILQWHUQDOGLYHUVLW\WKDWODVWHGDWOHDVWWKURXJKWRWKHGHDWKRI)UDQFRLQ$FHUWDLQ FXOWXUDOSOXUDOLW\LVQHYHUWKHOHVVEHLQJUHGLVFRYHUHGLQSUHVHQWGD\6SDLQ

7KH5HFRQTXLVWD±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



3DJH

DERXWZKHQ&ROXFFLR6DOXWWDWLZURWHWR-XDQ)HUQi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± %LVKRSRI%XUJRVFULWLFL]HG/HRQDUGR%581,VHH,7$/,$1 75$',7,21 IRUSULYLOHJLQJWDUJHWODQJXDJHHORTXHQFH&DUWDJHQDLQVLVWHGRQXQDGRUQHGVRXUFHWH[WILGHOLW\ DUJXLQJWKDWHORTXHQFHUHVLGHGLQVXEVWDQFHLQVWHDGRIVW\OH$OWKRXJKRSSRVLQJ+XPDQLVWHORTXHQFH &DUWDJHQDZDVQRWFDOOLQJIRUZRUGIRUZRUGOLWHUDOLVP+HLQVWHDGUHFRJQL]HGWKDWµHDFKODQJXDJHKDVLWVRZQ ZD\RIVSHDNLQJ¶DQGWKDWWH[WVVKRXOGEHDGDSWHGWRWKHVHGLIIHUHQFHVH[FHSWLQWKHFDVHRIµGRFWULQHVZKRVH YDOXHGHULYHVIURPWKHDXWKRULW\RIWKHSHUVRQZKRSURQRXQFHGWKHP¶6DQWR\R 7KLVUHVWULFWLRQRI FRXUVHKDUNVEDFNWR-(520(VHH/$7,175$',7,21 DQGZRXOGEHSLFNHGXSLQDERXWE\$OIRQVR GH0$'5,*$/F± ZKRLQVLVWHGRQZRUGIRUZRUGPHWKRGVLQWHUSUHWDFLyQ IRUVXFKFDVHVEXWWKHQ MXVWLILHGWKHXVHRIµH[SRVLWLRQFRPPHQWDU\RUJORVVHV¶IRURWKHUWH[WW\SHV1RUWRQ±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± ZKROHGWKHQREOHVDJDLQVWWKHNLQJZDVD SDUWLFXODUO\DFWLYHVSRQVRUUHFHLYLQJ/DWLQYHUVLRQVGLUHFWO\IURP,WDO\DQGKDYLQJ9LUJLO2YLGDQG6HQHFD UHQGHUHGLQWR&DVWLOLDQ$)UHQFKPLOLWDU\ERRNFRXOGWKXVEHWUDQVODWHGLQWR&DVWLOLDQWZLFHLQWKHVDPH\HDU RQFHIRU6DQWLOODQDDQGDJDLQIRUKLVDUFKSROLWLFDOULYDO$OYDUDQG*yPH]0RUHQR 6LPLODUO\FRJQDWH ODQJXDJHVKDGWKHLURZQYHUVLRQVRIFHUWDLQWH[WV3DXOR2URVLRWUDQVODWHG$ULVWRWOH¶V(WKLFVIURP$UDJRQHVH LQWR&DVWLOLDQDQGWKHWH[WDOVRH[LVWHGLQ&DWDODQ(QULTXHGH9LOOHQDWUDQVODWHGKLVRZQ&DWDODQLQWR &DVWLOLDQ2WKHUZRUNVIURPWKLVSHULRGLQFOXGH3HUR'LD]GH7ROHGR¶V&DVWLOLDQYHUVLRQRI3ODWR¶V3KDHGR WUDQVODWHGIURP/HRQDUGR%UXQL¶V/DWLQYHUVLRQLQ0DQ\RIWKHVHWUDQVODWRUVLQFOXGLQJWKH%LVKRSRI %XUJRVZHUHIURP&RQYHUVRIDPLOLHVZKLFKIRUPHGDWUDGLQJDQGLQWHOOHFWXDOFODVVLQWKHVHUYLFHRIWKH YDULRXVSROLWLFDOSRZHUV ,Q±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

7KHWULXPSKRI&DVWLOLDQ± 7KH\HDUPDUNVDPRQJPDQ\RWKHUWKLQJVWKHILUVWZULWWHQJUDPPDURIDYHUQDFXODUODQJXDJH&DVWLOLDQ ZULWWHQE\$QWRQLRGH1HEULMDEHFDXVHDVKHUHSRUWHGO\H[SODLQHGWR4XHHQ,VDEHOµODQJXDJHDFFRPSDQLHV HPSLUH¶6SDLQEHFDPHWKHGRPLQDQWSROLWLFDOIRUFHLQ



3DJH

(XURSHLQWKHVL[WHHQWKDQGHDUO\VHYHQWHHQWKFHQWXULHVWKDQNVQRWRQO\WRLWVFRORQLDOHPSLUHEXWDOVRWR &KDUOHV9¶VVWDWXVDV+RO\5RPDQ(PSHURU± NLQJRI%XUJXQG\DQGWKH1HWKHUODQGV± DQG DV&DUORV,NLQJRI6SDLQ±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µWKHLQVWUXPHQWE\ZKLFKMXVWLFHLVGRQHWKHQDWLYHVDUHJRYHUQHGDQG WKHLQMXULHVGRQHWRWKHQDWLYHVDUHFRUUHFWHG¶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iQ¶VWUDQVODWLRQ RI&DVWLJOLRQH¶V,O&RUWHJLDQRZKHUHWKHWUDQVODWRUQRWHVWKDWµWRWUDQVODWHWUDGXFLU WKLVERRNLVQRWUHDOO\WR SXWLWLQWR5RPDQFHURPDQ]DOOH EXWWRPRYHLWIURPRQHYHUQDFXODULQWRDQRWKHUWKDWLVSHUKDSVMXVWDV JRRG¶6DQWR\R 7KHQHZFRQILGHQFHZDVQRWUHVWULFWHGWRZRUNIURP,WDOLDQ,Q)HUQiQ3pUH]GH2OLYDF±F DGDSWHG6RSKRFOHVSUREDEO\IURPD/DWLQYHUVLRQµWRVKRZWKDWFODVVLFDOLGHDVFRXOGEHH[SUHVVHGLQ &DVWLOLDQ¶'XULQJWKHVDPHSHULRG-XDQ/XLV9,9(6± WKHRUL]HGDSDWKEHWZHHQVHQVXVDQGYHUED DVWKHREMHFWVRIWKHWUDQVODWRU¶VILGHOLW\JHQHUDOO\DOORZLQJWKDWWKHVWUXFWXUHVRIRQHODQJXDJHVKRXOGQRWEH H[SUHVVHGLQDQRWKHU6XFKDWKLUGDOWHUQDWLYHZRXOGKDYHEHHQXQWKLQNDEOHZLWKRXWFRQILGHQFHLQWKH YHUQDFXODU 6RPHH[FHVVHVZHUHSHUKDSVLQHYLWDEOH,Q3HUR)HUQiQGH]GH9LOOHJDVFODLPHGWRKDYHLPSURYHGQRW RQO\WKHVW\OHEXWDOVRWKHFRQWHQWRIWKH'LYLQD&RPPHGLD,Q$ORQVR)HUQiQGH]GH0DGULGDPSOLILHG (UDVPXV¶V(QFKRULGLRQWRDERXWWZLFHLWVRULJLQDOOHQJWKRPLWWLQJSDVVDJHVDQGDGRSWLQJDSUHDFKLQJWRQHQRW WREHIRXQGLQWKHRULJLQDO$OWKRXJKQRWW\SLFDORIWKHSHULRGVXFKWUDQVODWLRQVH[WHQGHGWKHQRWLRQVRI µH[SRVLWLRQFRPPHQWDU\RUJORVVHV¶GHIHQGHGE\0$'5,*$/


3DJH

7KH&RXQWHU5HIRUPDWLRQWKDWSXWDQHQGWReWLHQQH'2/(7VHH)5(1&+75$',7,21 LQZRXOG PDNHOLIHGLIILFXOWIRUPDQ\6SDQLVKWUDQVODWRUVDVZHOO-XDQ/XLV9,9(6LVVDLGWRKDYHOHIW6SDLQLQRUGHUWR DYRLGWKH,QTXLVLWLRQ7KH(UDVPLDQVZKRWKHQZHQWLQWRH[LOHLQWKHPLGVL[WHHQWKFHQWXU\LQFOXGHGWKH%LEOH WUDQVODWRUV-XDQGH9DOGpV)UDQFLVFRGH(1=,1$6LPSULVRQHGLQ%UXVVHOVLQDIWHUGHGLFDWLQJKLV &DVWLOLDQ1HZ7HVWDPHQWWR(PSHURU&KDUOHV9 -XDQ3pUH]GH3LQHGDDUUHVWHGE\WKH,QTXLVLWLRQLQ &DVLRGRURGH5(,1$EXUQWLQHIILJ\LQ DQG&LSULDQRGH9DOHUDZKRUHYLVHG&DVLRGRUR¶V%LEOHDQG ZHQWXQSXQLVKHG $IXUWKHU3URWHVWDQWFKDOOHQJHWRRUWKRGR[\ZDV-RKDQQHV/HL]DUUDJD¶VWUDQVODWLRQRIWKH 1HZ7HVWDPHQWLQWR%DVTXHFDUULHGRXWDWWKHUHTXHVWRIWKH&DOYLQLVWV\QRGRI3DX)UDQFHLQ ,QWKHVHVDPH\HDUV)UD\/XLVGH/HyQF± ZDVLPSULVRQHGSDUWO\EHFDXVHRIHURWLFLVPLQKLV WUDQVODWLRQRIWKH6RQJRI6RQJV)UD\/XLVDQGWKH3URWHVWDQWWUDQVODWRUVVKDUHGDQLQVLVWHQFHRQZRUNIURP WKHRULJLQDOWRQJXHV7KLVSULQFLSOHQRZDSSOLHGEH\RQGWKHUHOLJLRXVVSKHUHDQGZDVHVSRXVHGE\WKHOLNHVRI 'LHJR*UDFLiQRIILFLDOVHFUHWDU\DQGµLQWHUSUHWHURIODQJXDJHV¶WR.LQJ&KDUOHV9DQG)HOLSH,,*UDFLiQ RVWHQVLEO\UHQGHUHGFODVVLFDOWH[WVIURP*UHHNWRZKLFKKHFODLPHG&DVWLOLDQZDVFORVHUWKDQDQ\RWKHU ODQJXDJH EXWKLV3OXWDUFKZDVFDOTXHGRQD)UHQFKYHUVLRQDQGVRPHRIKLVRWKHUWUDQVODWLRQVIURP*UHHN ZHUHPHGLDWHGE\(UDVPXV¶V/DWLQYHUVLRQV7KH3URWHVWDQWVDQGSKLORORJLVWVWHQGHGQRWWREHVRWUXVWIXORI LQWHUPHGLDU\WUDQVODWLRQV $PDMRUPRYHWRZDUGV&DVWLOLDQSXULW\FDPHLQ±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i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¶VWUDQVODWLRQRIWZRO\ULFDOWH[WVIURP 4XHFKXDQLQDQGWKHZRUOG¶VPRVWIDPRXV36(8'275$16/$7,21&HUYDQWHV¶'RQ4XL[RWHWKHILUVW SDUWRIZKLFKZDVSXEOLVKHGLQ$V)UDQFHEHFDPHWKHGRPLQDQWSROLWLFDODQGFXOWXUDOSRZHU)UHQFKZDV LQFUHDVLQJO\WKHLQWHUPHGLDU\ODQJXDJHIRUWH[WVIURP(QJOLVK*HUPDQDQGWKH/RZ&RXQWULHV7KLVSDWWHUQ ZRXOGSUHYDLOIRUVRPHWZRFHQWXULHV%\WKHEHJLQQLQJRIWKHHLJKWHHQWKFHQWXU\)UHQFKZDVZLGHO\UHDGLQ 6SDLQ,Q%HQLWR-HUyQLPR)HLMyRFRPSODLQHGWKDWDOWKRXJKPDQ\6SDQLDUGVFRXOGUHDGDQGXQGHUVWDQG )UHQFKIHZRIWKHPFRXOGWUDQVODWHZHOO6DQWR\R )LWWLQJO\DPDQXDOIRUWUDQVODWLRQIURP)UHQFK LQWR&DVWLOLDQZDVZULWWHQE\$QWRQLRGH&DSPDQ\LQ $OOWKLVWLPHKRZHYHUWKHUHZDVDPLQRUEXWGLUHFWIORZIURP,WDOLDQDQG/DWLQDGLUHFWLRQDOLW\WKDWZDV EULHIO\HQKDQFHGE\WKHRUVR-HVXLWVH[LOHGLQ,WDO\IURP7KHWUDQVODWRUVDPRQJWKLVJURXS LQFOXGHG-RVp)UDQFLVFR,VOD&DUORV$QGUpVZKRWUDQVODWHGWKHKLVWRU\RIZRUOGOLWHUDWXUHWKDWKLVEURWKHU-XDQ KDGZULWWHQLQ,WDOLDQDQG3HGUR0RQWHQJyQZKRWUDQVODWHG2VVLDQIURPDQ,WDOLDQYHUVLRQ


3DJH

ZLWKDSUHIDFHWKDWDWWDFNHGWKH,QTXLVLWLRQXSRQZKLFKWKHWUDQVODWRUHQWHUHGWKHGLSORPDWLFFRUSVDQGZDV VHQWWR/RQGRQIRUKLVRZQJRRG'HVSLWHWKHLGHRORJLFDOWHQVLRQV6SDLQQHYHUWKHOHVVWUDQVODWHG SUHGRPLQDQWO\IURP)UHQFKSDUWLFXODUO\IRUWKHVWDJH$WWKHEHJLQQLQJRIWKHQLQHWHHQWKFHQWXU\RIWKH SOD\VSXEOLVKHGLQWKH7HDWUR1XHYR(VSDxRORVWHQVLEO\WKHµ1HZ6SDQLVK7KHDWUH¶ZHUHWUDQVODWLRQVRU DGDSWDWLRQV$SURPLQHQWH[DPSOHRIWKLVWHQGHQF\ZDV7RPiV*DUFtD6XHOWR¶VWUDQVODWLRQRI/H&LG SHUIRUPHGVXFFHVVIXOO\LQ0DGULGLQ%XWWHQ\HDUVODWHUWKHVDPH*DUFtD6XHOWRKDGWROHDYH6SDLQ WRJHWKHUZLWKWKHRUVRDIUDQFHVDGRVµ)UHQFKLILHG6SDQLDUGV¶ ZKRKDGVXSSRUWHGWKH1DSROHRQLF LQYDVLRQRIWKHLUFRXQWU\7KLVJURXSRIH[LOHVLQFOXGHG)UDQFLVFR-DYLHUGH%XUJRV± ZKRPDGH +RUDFHPRUHµQREOH¶WKURXJKRPLVVLRQVDQGVXEVWLWXWLRQV-XDQ0DUtD0DXU\± ZKRSXEOLVKHGLQ 3DULVDQLQIOXHQWLDOELOLQJXDOKLVWRULFDODQWKRORJ\RI&DVWLOLDQSRHWU\DQG)UDQFLVFR0DUWtQH]GHOD5RVD ± ZKRVHKLVWRULFDOGUDPD$EHQ+XPH\DZDVZULWWHQLQ)UHQFKDQGWUDQVODWHGLQWR&DVWLOLDQ $UHWXUQWRDEVROXWLVPLQOHGWRDIXUWKHUH[SXOVLRQWKLVWLPHRIWKHOLEHUDO5RPDQWLFVZKRHPLJUDWHGWR (QJODQG)UDQFHDQGWKH$PHULFDV%HWZHHQDQG/RQGRQZDVDFHQWUHRI6SDQLVKLQWHOOHFWXDOOLIH ODUJHO\WKDQNVWRWKH*HUPDQSXEOLVKHU5XGROSK$FNHUPDQQ¶VGLVWULEXWLRQRIRULJLQDOWH[WVDQGWUDQVODWLRQV WKURXJKRXW6SDQLVK$PHULFD$PRQJWKHWUDQVODWRUVH[LOHGLQ/RQGRQZDV-RVp-RDTXtQGH0RUDZKR WUDQVODWHG:DOWHU6FRWWLQ,Q6SDLQWKHLQWHOOHFWXDOFORVXUHZDVVXFKWKDWZKHQ)p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p/DUUDGHFODUHGWKDWWKHFRUUHFW WUDQVODWLRQRIFRPHGLHVIURP)UHQFKVKRXOGEHµWRVHHNHTXLYDOHQFHVQRWRIWKHZRUGVEXWRIWKHVLWXDWLRQV¶ DGRSWLQJµWKHFXVWRPVRIWKHFRXQWU\LQWRZKLFKRQHLVWUDQVODWLQJ¶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iQ6DQ]GHO5LRIURPRQZDUGVWUDQVIRUPHGWKHLGHDVRIWKH +HLGHOEHUJSKLORVRSKHU.&).UDXVHLQWRDSHFXOLDUO\6SDQLVKOLEHUDOUDWLRQDOLVPWKDWFRPELQHGSRSXOLVW HOHPHQWVZLWKLQWHOOHFWXDOpOLWLVP7KURXJKWKHLUVWUXJJOHVDJDLQVWYDULRXVDXWKRULWLHVDQGWKHLULQVLVWHQFHRQ WKHUROHRIHGXFDWLRQWKH.UDXVLVWVLQWURGXFHGDPRUH(XURSHDQLQWHOOHFWXDOYLVLRQWKDWZRXOGVXUYLYHZHOOLQWR WKHWZHQWLHWKFHQWXU\2SSRVHGWRWKHPZDVWKHQDWLRQDOLVPRI0DUFHOLQR0HQpQGH]\3HOD\R± D VFKRODUZKRVRXJKWWREDVH&DVWLOLDQSXULW\RQ5RPDQ&KULVWLDQIRXQGDWLRQV+LVZRUNKDGDIDUPRUHGLUHFW LQIOXHQFHRQWUDQVODWLRQV ,QRUGHUWRGHILQH&DVWLOLDQSXULW\LQ±0HQpQGH]\3HOD\RSXEOLVKHGKLVKLVWRU\RI6SDQLVKKHWHURGR[RV RUµGLVVLGHQWV¶PDQ\RIZKRPZHUHJUHDWWUDQVODWRUV$VVRFLDWHGZLWKWKLVSURMHFWZHUHQRWHVRQVRPH 6SDQLVKWUDQVODWRUVFRQVWLWXWLQJDPDMRUVRXUFHRILQIRUPDWLRQDQGPLVLQIRUPDWLRQRQ



3DJH

WUDQVODWLRQLQ6SDLQ0HQpQGH]\3HOD\RJHQHUDOO\VDZWUDQVODWLRQIURPFODVVLFDOVRXUFHVDVXSOLIWLQJIRUERWK QDWLRQDQGODQJXDJHEXWUHJDUGHGPDQ\RWKHUVRXUFHVDVPRUDOO\VXVSHFW,QKLVSUHIDFHWRDWUDQVODWLRQRI %\URQZKLFKEURNHZLWKWKHSUHYLRXVGRPLQDQFHRISURVHKHFODLPHGWKDWSURVHWUDQVODWLRQVRIYHUVHZHUH VLPSO\WKHUHVXOWRI6SDQLDUGVFRS\LQJWKHZHDNQHVVHVRIWKH)UHQFKODQJXDJH6DQWR\R± $OWKRXJKWKLVSRVLWLRQZDVPRGLILHGLQZKHQKHSUDLVHG/XLV6HJDOi\(VWDOHOOD¶VSURVHYHUVLRQRIWKH ,OLDG0HQpQGH]\3HOD\R¶VSUHIHUHQFHVKDGDSURIRXQGLQIOXHQFHRQ6SDQLVKSKLORORJ\ &XOWXUDOQDWLRQDOLVPZDVEULHIO\RSSRVHGE\YDULRXVFRVPRSROLWDQVZKRKHOGDOOHJLDQFHQHLWKHUWR6SDLQQRUWR &DVWLOLDQYHUVH,QWKH*XDWHPDODQ(QULTXH*yPH]&DUULOORSUHIDFLQJ0DQXHO0DFKDGR¶VSURVH YHUVLRQVRI9HUODLQHFODLPHGWKDWYHUVHVKRXOGEHWUDQVODWHGLQVLPSOHSURVHDV0DOODUPpKDGGRQHZLWK3RH $OPRVWDOOVXEVHTXHQWYHUVLRQVRI)UHQFKSRHWU\ZHUHQHYHUWKHOHVVLQYHUVHODUJHO\EHFDXVH6\PEROLVWSRHWU\ ZDVUHDGLQ)UHQFKLQ6SDLQWXUQLQJWKHWUDQVODWLRQVLQWRPHUHVW\OLVWLFH[HUFLVHV(XURSHDQ1DWXUDOLVPRQWKH RWKHUKDQGZDVPDVVLYHO\WUDQVODWHGIURP)UHQFKDIWHUZLWK=RODJHQHUDOO\EHLQJWUDQVODWHGLQWKHVDPH \HDUDVWKH)UHQFKRULJLQDOVZHUHSXEOLVKHG(QJOLVKDQG*HUPDQDXWKRUVDOVRHQWHUHG&DVWLOLDQDIWHUWKHLU DFFHSWDQFHLQ)UDQFHDOWKRXJKWKHWUDQVODWLRQVZHUHLQFUHDVLQJO\IURPWKHRULJLQDOODQJXDJHV6FKRSHQKDXHU ZDVWUDQVODWHGLQWR)UHQFKLQLQWR&DVWLOLDQLQ5XVNLQUHDFKHG)UHQFKLQQRWDEO\WKURXJK 3URXVWWKHQ&DVWLOLDQWKHVDPH\HDU 7KHWZHQWLHWKFHQWXU\ 6HULRXVWUDQVODWLRQVIURPQRQ)UHQFKVRXUFHVGHYHORSHGDVWKHWZHQWLHWKFHQWXU\SURJUHVVHG/XLV$VWUDQD 0DUtQ± WUDQVODWHG6KDNHVSHDUH¶VFRPSOHWHZRUNVSXEOLVKHGLQ2QWKHOHYHORIWKHRU\-RVp 257(*$<*$66(7± SXEOLVKHGKLVIDPRXVHVVD\µ0LVHU\DQG6SOHQGRXURI7UDQVODWLRQ¶LQ $OWKRXJKKHGHIHQGHGWKHLGHDOVRI*HUPDQLQVSLUHGOLWHUDOLVP2UWHJDSHUKDSVKDGPRUHLQPLQG+LV GXDOLVWYLVLRQRIWUDQVODWLRQRIQDWLRQDOLVWDQGLQWHUQDWLRQDOLVWFXOWXUDOVWUDWHJLHVZDVIRUPXODWHGGXULQJWKH 6SDQLVKFLYLOZDU± 7KHH[LOHRI5HSXEOLFDQVLQZHQWEH\RQGWKHZHOOZRUQSDWWHUQGLVSHUVLQJPDMRU6SDQLVKLQWHOOHFWXDOV WKURXJKRXW(XURSHDQGWKH$PHULFDV0DQ\RIWKHH[LOHGZULWHUVWUDQVODWHGRIWHQWRHDUQDOLYLQJEXWUDUHO\DV DIXOOWLPHSURIHVVLRQ7KHVHWUDQVODWRUVZHUHPRVWO\WHDFKHUVRUMRXUQDOLVWVDVRSSRVHGWRSUHYLRXV JHQHUDWLRQVWKDWKDGRIWHQFRPELQHGSDUWWLPHWUDQVODWLRQZLWKPHGLXPRUKLJKSRVLWLRQVZLWKLQWKHVWDWH VWUXFWXUH'LFWDWRUVKLSQRZVHSDUDWHGWKHH[WHUQDOWUDQVODWRUVIURPHDV\JRYHUQPHQWMREV$QGWKLVWLPHWKH UXSWXUHRIH[LOHZDVQRPRPHQWDU\DIIDLU )UDQFR¶V6SDLQODVWHGWKURXJKWRLPSRVLQJYDU\LQJGHJUHHVRIFHQVRUVKLS)DPRXVH[DPSOHVLQFOXGHWKH PRUDOLVWLF'8%%,1*RIILOPVZKHUHPLVWUHVVHVZRXOGEHFKDQJHGLQWRDXQWVRUVLVWHUV0RUHLPSRUWDQWWKLV UHODWLYHFORVXUHUHSUHVVHG6SDLQ¶VORQJVWDQGLQJGLYHUVLW\,QWHUQDOO\WUDQVODWLRQLQWRODQJXDJHVRWKHUWKDQ &DVWLOLDQZDVIRUPDQ\\HDUVLOOHJDO([WHUQDOO\WUDQVODWLRQKDGWREHLQWR&DVWLOLDQLILWZDVJRLQJWRILQGD PDUNHWHLWKHUDPRQJH[LOHVRULQ6SDQLVK$PHULFD&DVWLOLDQZDVWKXVSULYLOHJHGRQERWKIURQWV6SDLQ¶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¶VRWKHUODQJXDJHVHQFRXUDJLQJWUDQVODWLRQLQWRWKHP7KHUHVHHPHGWREHDIORRGRIWUDQVODWLRQV RQDOOIURQWVPDQ\LQJUHDWKDVWH$QG\HWWKHVWDWLVWLFVIRUERRNSXEOLFDWLRQLQGLFDWHDIDLUO\FRQVWDQWJURZWK LQWUDQVODWLRQVIURPWKHVRQZDUGV,IWKHVWDWLVWLFVFDQEHEHOLHYHGKLJKOHYHOVRIWUDQVODWLRQKDGIRUVRPH WLPHEHHQSUHSDULQJWKH6SDLQWKDWIURPZRXOGEHFRPHRQHRIWKH(XURSHDQ8QLRQ¶VPRVWHQWKXVLDVWLF PHPEHUV



3DJH

7KHSUHVHQWGD\ 7KH,QGH[7UDQVODWLRQXPIRU±VKRZV6SDLQDVDPRQJWKHWKUHHRUIRXUFRXQWULHVWKDWWUDQVODWHWKH PRVWZLWKLWVIDLUO\FRQVWDQWULVHLQWUDQVODWLRQVNHHSLQJVOLJKWO\DERYHWKHLQWHUQDWLRQDODYHUDJH0RUHUHFHQW ILJXUHV*DQQHDQG0LQRQ VKRZWKDWWUDQVODWHGWLWOHVZHUHSHUFHQWRIWKH6SDQLVKWRWDOLQDQG SHUFHQWLQZHOODERYHWKHSHUFHQWDJHIRUDOOODUJHU(XURSHDQFRXQWULHVH[FHSW,WDO\SHUFHQWDQG SHUFHQWUHVSHFWLYHO\ 0RVWERRNWUDQVODWLRQVDUHLQWKHILHOGVRIJHQHUDOOLWHUDWXUHSHUFHQWRIDOOWLWOHV DQGFKLOGUHQ¶VOLWHUDWXUHSHUFHQW SUHGRPLQDQWO\IURP)UHQFKDQG(QJOLVK ,QDGGLWLRQWRERRNSXEOLFDWLRQWUDQVODWRUVDQGLQWHUSUHWHUVDUHHPSOR\HGLQQXPHURXVDVSHFWVRIVRFLDOOLIHLQ WKHFRXUWVDWFRQIHUHQFHVLQWKHPLOLWDU\DQGLQWRXULVPZKLFKLVRQHRI6SDLQ¶VPDMRULQGXVWULHV6SDQLVK WHOHYLVLRQKDVDJHQHUDOO\KLJKFRQWHQWRIIRUHLJQSURJUDPPLQJZLWKDPDUNHGSUHIHUHQFHIRU'8%%,1* 5HJLRQDOWHOHYLVLRQFKDQQHOVWUDQVPLWLQ&DWDODQ%DVTXHDQG*DOLFLDQPRVWO\LQGXEEHGYHUVLRQVRIIRUHLJQ SURJUDPPHV6RPHSURJUDPPHVRQ%DVTXHWHOHYLVLRQDUHGXEEHGLQ%DVTXHDQGVXEWLWOHGLQ&DVWLOLDQ :LWKLQWKHSURIHVVLRQUHFHQWWUHQGVVXJJHVWDPRYHDZD\IURPSUDFWLFHVOLNH+LVSDQL]LQJIRUHLJQSURSHU QDPHVDVLQµ&DUORV0DU[¶ RUWKHRQFHFRPPRQXVHRITXLWHULJLGOLWHUDOLVPLQOHJDOWUDQVODWLRQV&HUWDLQ XQXVXDOQDPHVOLNHµ3RXFKNLQH¶KDYHLQPRVWFDVHVEHHQ+LVSDQL]HGHIIDFLQJWKHIDFWWKDWWKHVHDXWKRUV RULJLQDOO\UHDFKHG&DVWLOLDQWKURXJK)UHQFK 2UJDQL]DWLRQRIWKHSURIHVVLRQ 7KHPDLQSURIHVVLRQDODVVRFLDWLRQIRUWKHZKROHRI6SDLQLV$3(7,3URIHVVLRQDO$VVRFLDWLRQRI7UDQVODWRUV DQG,QWHUSUHWHUV IRXQGHGLQ5HJLRQDODVVRFLDWLRQVH[LVWLQ&DWDORQLDWKH%DOHDULF,VODQGV*DOLFLDDQG WKH%DVTXH&RXQWU\DQGWKHRIILFLDODVVRFLDWLRQRIZULWHUV$VRFLDFLyQ&ROHJLDOGH(VFULWRUHV KDVDVHFWLRQ IRUWUDQVODWRUV)XUWKHUDVVRFLDWLRQVKDYHUHFHQWO\EHHQVHWXSIRUVZRUQWUDQVODWRUVDQGLQWHUSUHWHUVDQGWKHUH LVDUHJLRQDOVRFLHW\RIWKH%ULWLVK,QVWLWXWHRI/LQJXLVWV'HVSLWHWKHVHRUJDQL]DWLRQVPDQ\WUDQVODWRUVVWLOO VXIIHUIURPDODFNRIVRFLDOSUHVWLJHDQGUHPXQHUDWLRQ 6ZRUQWUDQVODWRUVFDOOHGLQWpUSUHWHVMXUDGRV KDYHWRSDVVDSXEOLFH[DPRUJDQL]HGE\WKHFHQWUDO0LQLVWU\RI )RUHLJQ$IIDLUV7KLVH[DPKDVQRFRQQHFWLRQZLWK6SDLQ¶VWUDQVODWRUWUDLQLQJLQVWLWXWHVZKLFKFRPHXQGHUWKH 0LQLVWU\RI(GXFDWLRQDQG6FLHQFH(IIRUWVWRHQKDQFHWKHSUHVWLJHRIWUDQVODWRUVDUHDOVRPDGHE\WKH0LQLVWU\ RI&XOWXUH,QDGGLWLRQWRWKHVHWKUHHVHSDUDWHPLQLVWULHV6SDLQ¶VUHJLRQDOJRYHUQPHQWVPD\DOVRXQGHUWDNH LQLWLDWLYHVLQWKLVDUHD 7KH6SDQLVK0LQLVWU\RI&XOWXUHSURPRWHVWUDQVODWLRQLQVHYHUDOZD\V1DWLRQDOSUL]HVDUHDZDUGHGHDFK\HDU IRUWKHEHVWWUDQVODWLRQVSXEOLVKHGDQGIRUDWUDQVODWRU¶VOLIHWLPH¶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jULDGH7UDGXFWRUVL,QWHUSUHWVDWWKH$XWRQRPRXV8QLYHUVLW\RI%DUFHORQD$OWKRXJKIRXQGHG LQLWVSURJUDPPHZDVQRWIRUPDOO\UHFRJQL]HGE\WKH6SDQLVK0LQLVWU\RI(GXFDWLRQXQWLOSHUKDSV LQGLFDWLQJVRPHUHVLVWDQFHWRLWVXVHRI&DWDODQDVZHOODV&DVWLOLDQDVDKRPHODQJXDJH6LPLODUSURIHVVLRQ RULHQWHGSURJUDPPHVZHUHHVWDEOLVKHGLQ*UDQDGDLQDQGLQ/DV3DOPDVLQWKH&DQDU\,VODQGVLQ 7KHVHXQLYHUVLW\VFKRROVKDGWKUHH\HDUSURJUDPPHVXQWLO±ZKHQDQHZIRXU\HDUGHJUHHVWUXFWXUHZDV SKDVHGLQDQGWKHVFKRROVEHFDPHIDFXOWLHV1RWDFKLHYHGZLWKRXWFRQIOLFWWKHQHZVWUXFWXUHUHIOHFWHG HQKDQFHGRIILFLDOUHFRJQLWLRQRIWUDQVODWLRQDVDQDFDGHPLFGLVFLSOLQH,QOLQHZLWKWKLVWUHQGWKH0DGULG LQVWLWXWHFKDQJHGLWVSURJUDPPHWRRIIHUDPRUHJHQHUDOSURIHVVLRQDOWUDLQLQJIRUWUDQVODWRUVLQ7KHUH ZDVWKHQUDSLGH[SDQVLRQ



3DJH

LQWKHILHOG)RXU\HDUSURJUDPPHVZHUHVHWXSLQ0iODJDDQG9LJRLQLQ6DODPDQFDDQG%DUFHORQD 3RPSHX)DEUD8QLYHUVLW\ LQLQ9LFDQG0DGULG&RPLOODV8QLYHUVLW\ LQDQGLQ&DVWHOOyQDQG 0DGULG$OIRQVR;8QLYHUVLW\ LQ3RVWJUDGXDWHFRXUVHVLQWUDQVODWLRQVWXGLHVDUHRUJDQL]HGLQ%DUFHORQD $XWRQRPRXV8QLYHUVLW\ /HyQ0DGULG&RPSOXWHQVH DQG6DQWDQGHU&DQWDEULD 6SHFLDOL]HGPDVWHUV SURJUDPPHVDUHDOVRDYDLODEOHLQ$OLFDQWH%DUFHORQD$XWRQRPRXV8QLYHUVLW\ %LOEDR'HXVWR 0DGULG &RPSOXWHQVH 9DOHQFLDDQG9LWRULDDQGD0DVWHUVLQ&RQIHUHQFH,QWHUSUHWLQJLVRIIHUHGE\WKH8QLYHUVLW\RI /D/DJXQDLQWKH&DQDU\,VODQGV&RXUVHVLQ6SDQLVK(QJOLVKWUDQVODWLRQKDYHEHHQWDXJKWDWWKH'LVWDQFH 7HDFKLQJ8QLYHUVLW\LQ0DGULGVLQFH7KH7ROHGR7UDQVODWRUV¶6FKRROIRXQGHGLQRUJDQL]HV FRQIHUHQFHVDQGFRXUVHVRQWUDQVODWLRQEHWZHHQ(XURSHDQDQG6HPLWLFODQJXDJHV7KHYDULRXVXQLYHUVLW\ FHQWUHVDQGGHSDUWPHQWVRIWUDQVODWLRQIRUPHGDQDVVRFLDWLRQ&RQIHUHQFLD LQ 5HVHDUFKDQGSXEOLFDWLRQV $OWKRXJKPRVWO\DEVHQWIURPWKHLQWHUQDWLRQDOOLVWVVRPH6SDQLVKDQG6SDQLVK$PHULFDQERRNVDQG DUWLFOHVRQWUDQVODWLRQDUHOLVWHGLQ6DQWR\R¶VELEOLRJUDSK\7KHFXUUHQWUHVHDUFKLVPRVWO\RQOLQJXLVWLF DQGSHGDJRJLFDODVSHFWVVOLJKWO\OHVVRQKLVWRULFDOVXEMHFWVDQGRQO\RFFDVLRQDOO\RQSUREOHPVRIEDVLF WKHRU\7KLVWUHQGLVJHQHUDOO\ERUQHRXWE\WKHVSHFLDOL]HGMRXUQDOVQRWDEO\WKH4XDGHUQVGH7UDGXFFLyL ,QWHUSUHWDFLy$XWRQRPRXV8QLYHUVLW\RI%DUFHORQDIURP 6HQGHEDU8QLYHUVLW\RI*UDQDGDIURP /LYLXV8QLYHUVLW\RI/HyQIURP *DFHWDGHODWUDGXFFLyQ$3(7,IURP %ROHWtQGH (VWXGLRVGH7UDGXFFLyQ9LWRULDDQG/HRQIURP± +LHURQLPXV&RPSOXWHQVLV&RPSOXWHQVHLQ0DGULG IURP DQG9LFHYHUVD8QLYHUVLW\RI9LJRDOVRIURP 7KHSULPHPRYHUEHKLQGUHFHQWKLVWRULFDOUHVHDUFKKDVEHHQ-XOLR&pVDU6DQWR\RZKRVHPDQ\ZRUNVRQ WUDQVODWLRQLQFOXGHELEOLRJUDSKLHVRI(QJOLVKWUDQVODWLRQVRI6SDQLVKOLWHUDU\FODVVLFVDVZHOODVDQH[WUHPHO\ XVHIXOKLVWRULFDODQWKRORJ\RI6SDQLVKWUDQVODWLRQWKHRU\DQGFULWLFLVP +HKDVDOVRRUJDQL]HG FRQIHUHQFHVRQWUDQVODWLRQKLVWRU\DWWKH8QLYHUVLW\RI/HyQLQDQGWKHSURFHHGLQJVRI WKHILUVWRIZKLFKZHUHSXEOLVKHGLQ2WKHUUHVHDUFKSURMHFWVLQFOXGH)UDQFLVFR/DIDUJD¶VFDWDORJXHRI HLJKWHHQWKFHQWXU\WKHDWUHWUDQVODWLRQVIURP)UHQFK DQGWKH0DGULG,QVWLWXWH¶V+XPEROWLDQDFDWDORJXHV RI6SDQLVKUHFHSWLRQVRI*HUPDQFXOWXUHVLQFH :RUNRQWKHPRUHSUDFWLFDODVSHFWVRIWUDQVODWLRQKDVEHHQVWURQJO\LQIOXHQFHGE\9DOHQWtQ*DUFtD
)XUWKHUUHDGLQJ G¶$OYHUQ\*DUFtD
$17+21<3<0

%LRJUDSKLHV $/)2162;± .LQJRI&DVWLOH6SDLQ IURPDVSLUDQWWRWKHSRVLWLRQRI+RO\5RPDQ (PSHURU$OIRQVR;LVNQRZQDVHO6DELRµWKH:LVH¶ PRUHIRUKLVVSRQVRUVKLSRIOHDUQLQJWKDQIRUKLV GLVDVWURXVSROLWLFDODQGHFRQRPLFPDQDJHPHQWRI&DVWLOH+HZDVDQµDFWLYHJHQHUDOHGLWRU¶3URFWRU IRUQXPHURXVWUDQVODWLRQVIURP$UDELFPRVWO\LQWR&DVWLOLDQDQGPRVWO\LQWKHILHOGRIDVWURQRP\7KH $OSKRQVLQHWUDQVODWRUVVKRXOGQRWEHFRQIXVHGZLWKWKHWZHOIWKFHQWXU\FKXUFKVSRQVRUHGWUDQVODWRUVVRPHWLPHV GHVFULEHGDVWKHµ6FKRRORI7ROHGR¶ &$57$*(1$$ORQVRGH± %LVKRSRI%XUJRV6SDLQIURPWUDQVODWLRQWKHRULVW+LV FULWLTXHRI/HRQDUGR%581O¶V



3DJH

VHH,7$/,$175$',7,21 /DWLQYHUVLRQRI$ULVWRWOH¶V(WKLFVDWWUDFWHGDWWHQWLRQLQ,WDO\LQ±DQGOHG WRDGHEDWH,Q'HLQWHUSUHWDWLRQHUHFWD%UXQLKDGSULYLOHJHGWDUJHWODQJXDJHHORTXHQFH&DUWDJHQDLQVLVWHGRQ XQDGRUQHGVRXUFHWH[WILGHOLW\DUJXLQJWKDWHORTXHQFHUHVLGHGLQVXEVWDQFHDQGQRWVW\OH6LQFH&DUWDJHQDGLG QRWNQRZ*UHHNKHZDVLQIDFWGHIHQGLQJVFKRODVWLFWUDQVODWLRQVRI$ULVWRWOH%UXQL¶VSDUDGLJPZRQRXW DQQRXQFLQJDPDMRU5HQDLVVDQFHPRYHWRZDUGV/HV%HOOHV,QILGqOHVVHH)5(1&+75$',7,21 %UXQLDQG &DUWDJHQDQHYHUWKHOHVVFRUUHVSRQGHGDPLFDEO\IURPRQZDUGV$VDWUDQVODWRU&DUWDJHQDSURGXFHG &DVWLOLDQYHUVLRQVRI6HQHFDDQG&LFHUR (1=,1$6)UDQFLVFRGHDOVRSXEOLVKHGSVHXGRQ\PRXVO\XQGHUWKHQDPHV'U\DQGHU'XFKHVQH9DQ(LFN (LFKPDQQ ± 6SDQLVK3URWHVWDQWVFKRODUDQG%LEOHWUDQVODWRU,QIOXHQFHGE\3URWHVWDQWWKRXJKWZKLOH LQ/HXYHQLQKHPRYHGWR:LWWHQEHUJZKHUHKHEHJDQD&DVWLOLDQYHUVLRQRIWKH1HZ7HVWDPHQW SXEOLVKHGLQ$QWZHUSLQ$ZDUHWKDW(PSHURU&KDUOHV9KDGRUGHUHGDOOFRSLHVWREHVHL]HG(Q]LQDV SURPSWO\GHGLFDWHGWKHWUDQVODWLRQWRKLPDQGZHQWWR%UXVVHOVWRJLYHKLPWKHILUVWFRS\:KHQWKHHPSHURU DVNHGLIKHZDVWKHDXWKRU(Q]LQDVUHSOLHGµ1RWKH+RO\6SLULWLVWKHDXWKRU«,DPRQO\LWVIDLWKIXOVHUYDQW DQGZHDNLQVWUXPHQW¶0HQpQGH]\3HOD\R 7KHWLWOHRIWKHWUDQVODWLRQGRHVLQGHHGVSHFLI\+DEOD 'LRVµ*RG6SHDNV¶ 7KHWUDQVODWLRQZDVQHYHUWKHOHVVSURVFULEHGDQG(Q]LQDVZDVLPSULVRQHGLQ%UXVVHOV SRVVLEO\WRSURWHFWKLPIURPEHLQJVHQWWRWKH,QTXLVLWLRQLQ6SDLQ+HKDGQRWURXEOHHVFDSLQJDQGZHQWWR $QWZHUS:LWWHQEHUJ6WUDVERXUJ&RQVWDQFH%DVOHDQGWKHQ(QJODQGZKHUHKHEHFDPH3URIHVVRURI*UHHNDW &DPEULGJH(Q]LQDVDOVRWUDQVODWHG3OXWDUFK/XFLDQDQG/LY\LQWR&DVWLOLDQDOWKRXJKKLVXVHRISURWHFWLYH SVHXGRQ\PVDQGDQRQ\PLW\PDNHVWKHDWWULEXWLRQVXQFHUWDLQ *(5$5'2)&5(021$*LUDUGXV&UHPRQHQVLV F± ,WDOLDQWUDQVODWRURI$UDELFVFLHQFHLQWR /DWLQWKHPDLQILJXUHMXVWLI\LQJWDONRIDµ6FKRRORI7ROHGR¶5RVH DQGµSHUKDSVWKHJUHDWHVWWUDQVODWRU RIDOOWLPH¶YDQ+RRI $FFRUGLQJWRWKH9LWDZULWWHQE\KLVDVVRFLDWHVRUVRFLL*HUDUGZHQWWR 7ROHGRLQ6SDLQIRUORYHRI3WROHP\¶V$OPDJHVWZKLFKKHFRXOGQRWILQGDPRQJWKH/DWLQV+HOHDUQHG$UDELF DW7ROHGRDQGDFFRUGLQJWRWKH9LWDWUDQVODWHGVRPHWH[WVIURP$UDELFLQWR/DWLQPRVWO\LQWKHILHOGVRI PDWKHPDWLFVDVWURQRP\SKLORVRSK\DQGPHGLFLQH$OWKRXJKKHSUREDEO\FRRUGLQDWHGVRPHNLQGRI WHDPZRUN*HUDUG¶VWUDQVODWLRQVKDYHDUHFRJQL]DEOHVW\OH,QWKHZRUGVRIWKH9LWD7RWKHHQGRIKLVOLIHKH FRQWLQXHGWRWUDQVPLWWRWKH/DWLQZRUOGDVLIWRKLVRZQEHORYHGKHLUZKDWHYHUERRNVKHWKRXJKWILQHVWLQ PDQ\VXEMHFWVDVDFFXUDWHO\DQGDVSODLQO\DVKHFRXOG¶TXRWHGLQWUDQVODWLRQLQ0F9DXJK /23(='($<$/$3HUR±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± 6SDQLVKVFKRODVWLFWKHRORJLDQSUHVHQWDWWKH&RXQFLORI %DVOHODWHULQWKHVHUYLFHRI-XDQ,,RI&DVWLOHDQGELVKRSRI$YLODIURP,QDERXWKHWUDQVODWHG /LEURGHODV&URQLFDVRWLHQSRVGH(XVHELR&HVDULHQVHIURP/DWLQLQWR&DVWLOLDQ,QWKHFRPPHQWDU\ DFFRPSDQ\LQJWKHWH[W0DGULJDOUHPDUNVWKDWZKHQWUDQVODWLQJIURP/DWLQZRUGIRUZRUGPHWKRGV LQWHUSUHWDFLyQ DUHGLIILFXOWDQGFDQJLYHZD\WRµH[SRVLWLRQFRPPHQWDU\RUJORVVHV¶+HWKXVGLVWLQJXLVKHV WZRNLQGVRIWUDQVODWLRQIRUWZRNLQGV



3DJH

RIVLWXDWLRQ)XUWKHUWKHIUHHURIWKHPHWKRGVLVVXSSRUWHGE\WKHEHOLHIWKDWµWKHUHLVQRWKLQJWKDWLVVLJQLILHG E\WKHZRUGVRIRQHODQJXDJHWKDWFDQQRWEHVLJQLILHGE\WKHZRUGVRIDQRWKHU¶5XVVHOO 7KLVWKHRU\ RXWOLQHGDFRUUHFWLRQRI-(520(VHH/$7,175$',7,21 VLQFHVSHFLDOFRQGLWLRQVZHUHWRDSSO\WR WUDQVODWLRQVLQWRWKHYHUQDFXODU 257(*$<*$66(7-RVp± 6SDQLVKSKLORVRSKHUZULWHUSROLWLFLDQDQGVRPHWLPHWUDQVODWLRQ WKHRULVW$IWHUVWXG\LQJLQ6SDLQDQG*HUPDQ\KHEHFDPHSURIHVVRURI0HWDSK\VLFVDW0DGULG,QLWLDOO\ QHR.DQWLDQKHFDOOHGIRUDUHYLWDOL]DWLRQRI6SDLQEDVHGRQLQGLYLGXDOLVPDQGpOLWLVP+LVHVVD\µ0LVHU\DQG 6SOHQGRXURI7UDQVODWLRQ¶ZDVSXEOLVKHGDVDVHULHVRIDUWLFOHVLQWKH%XHQRV$LUHVQHZVSDSHU/D1DFLyQLQ 2QHRIWKHYHU\IHZQRQ*HUPDQVWRKDYHUHVXUUHFWHG6&+/(,(50$&+(5¶VDUJXPHQWVLQIDYRXURI OLWHUDOLVPVHH*(50$175$',7,21 2UWHJDVDZWKHWUDQVODWRUDVDQLGHDOLVWZKRVKRXOGHQDEOHWKHUHDGHU WRH[SHULHQFHWKHVWUDQJHQHVVRIIRUHLJQZRUNV+LVGXDOLVWUHIOHFWLRQVRQWKHWZRFODVVLFDOO\RSSRVHGPHWKRGV RIWUDQVODWLRQFDQEHUHODWHGQRWMXVWWRKLVSKLORVRSKLFDOFULWLTXHVRIPDVVFXOWXUHEXWDOVRWRWKHFRQWH[WRIWKH 6SDQLVKFLYLOZDU± +HOLYHGLQYROXQWDU\H[LOHIURPWR 5$<021'$UFKELVKRSRI7ROHGR5D\PRQGGHOD6DXYHWDW5DLPXQGXV7KROHWDQXV DUFKELVKRSIURP WR%RUQLQ)UDQFHDQGIDOVHO\GHVFULEHGDVWKHIRXQGHURIDFROOHJHRIWUDQVODWRUVDW7ROHGR -RXUGDLQ $FFRUGLQJWR*RQ]iOH]3DOHQFLD 5D\PRQG¶VSULPHLQWHUHVWZDVWKHDFFXPXODWLRQ RIZHDOWKDQGWKHJDLQLQJRISRZHURYHUWKHUHFHQWO\FRQTXHUHGODQGV+HPHW3HWHUWKH9HQHUDEOHLQ 6DODPDQFDLQDQGZDVSUHVXPDEO\DZDUHRIWKHODWWHU¶VSURMHFWWRKDYHWKH4XU¶ƗQWUDQVODWHGLQWR/DWLQ 7KLVPLJKWKDYHLQVSLUHGKLPWRVSRQVRU-RKQRI6SDLQ¶VWUDQVODWLRQRI&RVWDEHQ/XFD¶V'HGLIIHUHQWLD VSLULWXVHWDQLP WKHRQO\WUDQVODWLRQLQZKLFKKHLVFOHDUO\QDPHGDVDSDWURQG¶$OYHUQ\ 5(,1$&DVLRGRURGHF±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xLJR/ySH]GH0HQGR]D± 6SDQLVKSROLWLFLDQSRHW+XPDQLVWDQG VSRQVRURIWUDQVODWLRQV+HOHGWKHQREOHVLQDZDUDJDLQVW.LQJ-XDQRI&DVWLOHDQGZDJHGFDPSDLJQVDJDLQVW WKH0XVOLPV$OWKRXJKVDLGWRKDYHVSRNHQ)UHQFK,WDOLDQ*DOLFLDQ&DWDODQDQGVRPH/DWLQKHKDG9LUJLO 2YLGDQG6HQHFDWUDQVODWHGLQWR&DVWLOLDQEHFDXVHKLV/DWLQZDVZHDNDVKHKLPVHOIDGPLWWHGµ6LQFHZH FDQQRWKDYHZKDWZHZDQWOHWXVZDQWZKDWZHFDQKDYH¶6DQWR\R 9,9(6-XDQ/XLV-RKDQQHV/XGRYLFR ± 6SDQLVK+XPDQLVWSKLORVRSKHUDQGHGXFDWLRQDOLVW ZKRGHYHORSHGDWUDQVODWLRQWKHRU\RIKLVRZQ$IWHUVWXG\LQJLQ9DOHQFLDDQG3DULVKHOLYHGLQ%UXJHVDQG /HXYHQWKHQ(QJODQGZKHUHKLVRSSRVLWLRQWR+HQU\9,,,¶VGLYRUFHIURP&DWKHULQHRI$UDJRQHDUQHGKLPVL[ PRQWKVLQWKH7RZHURI/RQGRQ,QWKHFKDSWHUµ9HUVLRQHVVHXLQWHUSUHWDWLRQHV¶RI'HUDWLRQHGLFHQGL SXEOLVKHGLQ/HXYHQLQ9LYHVGLVWLQJXLVKHVEHWZHHQWKUHHNLQGVRIWUDQVODWLRQIROORZLQJVHQVXV IROORZLQJYHUEDRUFRPELQLQJERWKVXFKWKDWµZRUGVEULQJSRZHUDQGHOHJDQFHWRWKHVHQVHV¶7KLVODVWRSWLRQ PLJKWEHVHHQDVDQDGYDQFHRQ



3DJH

FODVVLFDOELQDU\RSSRVLWLRQV9LYHVUHFRPPHQGVWKDWWKHWUDQVODWRUVHOHFWDPHWKRGLQDFFRUGDQFHZLWKWH[W W\SHDQGKHJHQHUDOO\DOORZVWKDWWKHILJXUHVDQGSDWWHUQVRIRQHODQJXDJHVKRXOGQRWEHH[SUHVVHGOLWHUDOO\LQ DQRWKHU+LVPDQ\RWKHUZRUNVHODERUDWHDFULWLFDOHPSLULFLVWSKLORVRSK\DQGLQFOXGH'HGLVFLSOLQLVOLEUL[[LQ ZKLFKKHDGYRFDWHVWKHXVHRIWKHYHUQDFXODULQVFKRROVDQGWKHHGXFDWLRQRIZRPHQ:KLOHDW2[IRUGLQ KHWUDQVODWHG,VRFUDWHVIURP*UHHNLQWR/DWLQ $17+21<3<0

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²DQGWKHYDVWPDMRULW\RIWKHPGRKDYH²DUHDVRQDEOH FRPPDQGRI6ZHGLVK 6ZHGLVKLVWKHODUJHVWRIWKHVL[1RUGLFODQJXDJHVLQWHUPVRIQXPEHURIVSHDNHUVWKHRWKHUODQJXDJHVVSRNHQ LQ1RUGLFFRXQWULHVDUH)LQQLVK'DQLVK1RUZHJLDQ,FHODQGLFDQG)DURHVH2IWKHVHWKHWKUHH6FDQGLQDYLDQ ODQJXDJHVQDPHO\6ZHGLVK'DQLVKDQG1RUZHJLDQ²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µERRNV¶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

7KHSHULRGRIFKLYDOU\HDUO\WKLUWHHQWKWRODWHIRXUWHHQWKFHQWXU\ ,Q6ZHGHQDGDSWDWLRQUDWKHUWKDQWUDQVODWLRQPD\KDYHSOD\HGWKHPDLQUROHLQLQLWLDWLQJWKHGHYHORSPHQWRI YHUQDFXODUOLWHUDWXUH/HDYLQJDVLGHWKHUXQLFLQVFULSWLRQVWKHGRPHVWLFZULWWHQWUDGLWLRQVHHPVWRKDYH RULJLQDWHGZLWK



3DJH

SDUDSKUDVHVLQWKHYHUQDFXODUODQJXDJHRIFRQWHPSRUDU\ZULWLQJLQ:HVW1RUVH0LGGOH/RZ*HUPDQ2OG )UHQFKDQG/DWLQ7KLVLVSDUWRIDJHQHUDOSDWWHUQLQ6ZHGLVKOLWHUDU\FUHDWLRQLQWKH+LJK0LGGOH$JHVDQ HSRFKRIWHQUHIHUUHGWRDVWKHJROGHQDJHRI(DVW1RUVHOLWHUDWXUH7KHWUDQVODWHGOLWHUDWXUHRI:HVW1RUVH 0LGGOH/RZ*HUPDQDQG2OG)UHQFKLVFORVHO\UHODWHGWRµFKLYDOU\¶WKHFXOWXUDODQGLGHRORJLFDOWUDGLWLRQ SUHYDLOLQJLQ:HVWHUQ(XURSHDWWKDWWLPH 7KHLGHRORJ\RIFKLYDOU\ZDVWUDQVPLWWHGWRWKHXSSHUFODVVHVYLDµFKLYDOULF¶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µ6ZHGLILFDWLRQ¶RI/RZ*HUPDQ)UHQFKDQG/DWLQ RULJLQDOVJHQHUDOO\PHDQWYHU\IUHHUHVKDSLQJVHOGRPUHVWULFWHGWRUHPRXOGLQJWKHOLQJXLVWLFDQGVW\OLVWLFIRUP 7KHWUDQVODWRUVRIWKDWSHULRGWRRNWKHOLEHUW\RIDGDSWLQJWKHRULJLQDOWH[WE\FKDQJLQJLWVFRQWHQWDGGLQJ SUXQLQJDQGWUDQVSRVLQJPDWHULDODVWKH\VDZILWDQGLQPDQ\FDVHVVXEVWDQWLDOO\DOWHULQJWKHPHVVDJHLQWKH SURFHVV,QIDFWZHKDYHQRHYLGHQFHDWWKLVHDUO\SHULRGRIDQ\WKLQJOLNHµWUDQVODWLRQ¶LQWRGD\¶VVWULFWVHQVHRI WKHZRUG

7KHPRQDVWLFSHULRGODWHIRXUWHHQWKWRHDUO\VL[WHHQWKFHQWXULHV 7KH0RQDVWHU\RI9DGVWHQDLVDUJXDEO\WKHFUDGOHRI6ZHGLVKWUDQVODWLRQ7KLVIDPRXVLQVWLWXWLRQRIODWH PHGLHYDO6FDQGLQDYLDZDVFUHDWHGE\6W%ULGJHWDQGSRVWKXPRXVO\IRXQGHGLQDFFRUGDQFHZLWKKHURZQYHU\ H[DFWLQVWUXFWLRQV 2QHRIWKHILUVWJUHDWHQWHUSULVHVRIWKHQHZ%ULGJHWLQHFRQJUHJDWLRQFRQVLVWHGRIUHWUDQVODWLQJWKHIRXQGUHVV¶V HQWLUHFROOHFWLRQRI5HYHODWLRQHVEDFNIURPWKH/DWLQ²LQWRZKLFKWKH\KDGEHHQUHQGHUHGE\KHUFRQIHVVRUV² LQWRKHURZQ6ZHGLVKPRWKHUWRQJXH7KLVPDMRUWDVNVHHPVWRKDYHEHHQSHUIRUPHGLQFRQQHFWLRQZLWKWKH LQDXJXUDWLRQRIWKH0RQDVWHU\LQ7KHSULQWHGHGLWLRQDYDLODEOHWRGD\RFFXSLHVRYHUSDJHVDQGLV ZULWWHQLQJRRGVW\OLVWLFDOO\DGHTXDWH2OG6ZHGLVK 7KLVWUDQVODWLRQLVVXEVWDQWLDOO\GLIIHUHQWIURPWKHIUHHSDUDSKUDVHVRIROGHUPHGLHYDOSHULRGVVRWKDWWKH %ULGJHWLQHWH[WPD\EHUHJDUGHGDVWKHILUVWWUDQVODWLRQ²LQWKHVWULFWVHQVHRIWKHZRUG²HYHUXQGHUWDNHQIURP DIRUHLJQODQJXDJHLQWR6ZHGLVK,QIDFWLWLVSRVVLEOHWRIROORZWKHWUDQVODWRUDOPRVWZRUGIRUZRUGDVKH SURFHHGVWKURXJKWKHHLJKWERRNVRI5HYHODWLRQV7KLVPRQNWUDQVODWRUFOHDUO\DLPHGDWOLQJXLVWLFHTXLYDOHQFH WKURXJKRXW²DWWKHOHYHORIZRUGSKUDVHDQGFODXVH²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



3DJH

9DGVWHQDWUDQVODWRUVDUHPRVWO\DQRQ\PRXVZHNQRZRQO\DIHZRIWKHPE\QDPHWKHEHVWNQRZQEHLQJWKH LQGXVWULRXV-y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¶VFRQWHPSRUDU\+LJK *HUPDQWUDQVODWLRQ%RWK6ZHGLVKWUDQVODWLRQVDUHFROOHFWLYHXQGHUWDNLQJVDQGZHGRQRWNQRZIRUFHUWDLQ ZKLFKLQGLYLGXDOWUDQVODWRUVZHUHUHVSRQVLEOHIRUSDUWLFXODUVHFWLRQVRIWKHWZRWH[WV+RZHYHUWKHUHLV FRQYLQFLQJHYLGHQFHWKDWWKHOHDGHUVRIWKH6ZHGLVK5HIRUPDWLRQWKHFKDQFHOORU/DXUHQWLXV$QGU WKHUR\DO VHFUHWDU\2ODXV3HWULDQG$UFKELVKRS/DXUHQWLXV3HWUL²ZHUHLQYROYHGDWGLIIHUHQWVWDJHVRIWKHZRUN$ SULQWHGFRS\RIWKLVWH[WZDVGLVWULEXWHGWRHDFKSDULVKWKURXJKRXWWKHFRXQWU\,WZDVH[SHFWHGWREH XQGHUVWRRGDGHTXDWHO\HYHU\ZKHUHLUUHVSHFWLYHRIGLDOHFWDQGLQGLYLGXDOORFDOFRQWH[W7RIXOILOWKLVSXUSRVHD FHUWDLQXQLIRUPLW\LQOLQJXLVWLFH[SUHVVLRQZDVVHHQDVDSUHUHTXLVLWH 7KLVVL[WHHQWKFHQWXU\YHUVLRQZDVWREHFRPHWKHRIILFLDOELEOHRIWKH6ZHGLVK6WDWHFKXUFKXQWLOZKHQLW ZDVUHSODFHGE\DQHZRIILFLDOWUDQVODWLRQFXUUHQWO\DOVRLQWKHSURFHVVRIEHLQJUHSODFHG7KH9DVD%LEOH KROGVDXQLTXHSRVLWLRQLQ6ZHGHQ¶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



3DJH

FHQWUDOL]DWLRQ3ULQWLQJZKLFKZDVLQWURGXFHGGXULQJWKH5HIRUPDWLRQDOVRSOD\HGDUROHLQIL[LQJWKHIRUPRI ZULWWHQODQJXDJH+RZHYHULQVSLWHRIWKHIDFWWKDWSULQWLQJPDGHWKHWH[WVSURGXFHGE\5HIRUPDWLRQZULWHUV DQGWUDQVODWRUVDYDLODEOHRQDODUJHVFDOHDQGQRWZLWKVWDQGLQJWKHYHU\UHDODFKLHYHPHQWVRIELEOHWUDQVODWRUV WKHOLWHUDU\FXOWXUHRI6ZHGHQGXULQJWKH5HIRUPDWLRQSHULRGZDVZHDN 6ZHGHQHPHUJHGIURPWKH7KLUW\
7KHDFDGHPLFSHULRGHDUO\HLJKWHHQWKFHQWXU\WRF ,QWKHFHQWXULHVLPPHGLDWHO\IROORZLQJWKH5HIRUPDWLRQZULWWHQ6ZHGLVKKDGVORZO\EXWVWHDGLO\VWUHQJWKHQHG LWVSRVLWLRQDVDFLYLOL]HG(XURSHDQODQJXDJH7KHSRVLWLRQRI6ZHGHQDVDPDMRU(XURSHDQSRZHUZDV XQGHUPLQHGE\WKH*UHDW1RUWKHUQ:DU± DQGWKHGHDWKRI.LQJ&KDUOHV;,,LQPDUNHGDQ LPSRUWDQWWUDQVLWLRQWRDQHZHUD6ZHGHQZDVQRZIRUFHGWRJLYHXSLWVDPELWLRQVDVDJUHDWSRZHUDQGEHJDQ DGMXVWLQJWRLWVQHZUROHDVDVPDOOSHDFHIXOIULQJHVWDWHLQQRUWKHUQ(XURSH7KHQDWLRQDOODQJXDJHFRXOGQRZ SHDFHIXOO\DQGVWHDGLO\GHYHORSDQGEHUHILQHGWRDFFRPPRGDWHDOOW\SHVRIWH[WDQGVHUYHWKHQHHGVRIPRVW OLWHUDU\JHQUHV7KHHGXFDWHGFODVVHVEHJDQWRGHYHORSDPRUHLQWHUQDWLRQDORXWORRNDQGWKHLQIOXHQFHRI )UHQFKRQ6ZHGLVKFXOWXUHUHDFKHGLWVSHDNXQGHUWKHUHLJQRI.LQJ*XVWDYXV,,,± 6HULRXVGLVFUHSDQFLHVLQWKHKLVWRULFDOUHFRUGVRIWKHSHULRGXQIRUWXQDWHO\PHDQWKDWZHNQRZYHU\OLWWOHDERXW WUDQVODWLQJDFWLYLWLHVLQJHQHUDODQGHYHQOHVVDERXWLQGLYLGXDOWUDQVODWLQJDFKLHYHPHQWVLQHLJKWHHQWKDQG HDUO\QLQHWHHQWKFHQWXU\6ZHGHQ$V\HWQRVWDWLVWLFDOLQIRUPDWLRQLVDYDLODEOH:KDWZHGRNQRZFDQEH VXPPDUL]HGLQDIHZJHQHUDOVWDWHPHQWV 7KHFUHDWLRQRIWZROHDUQHGDFDGHPLHVLQ6ZHGHQWKH$FDGHP\RI6FLHQFHVLQDQG



3DJH

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²DVLWZDVGXULQJWKH VHYHQWHHQWKFHQWXU\²DQGWKLVZDVWRUHPDLQWKHFDVHXQWLOWKHODVWGHFDGHVRIWKHHLJKWHHQWKFHQWXU\ZKHQ WZRQHZJHQUHVRIOLWHUDU\WUDQVODWLRQHPHUJHG7KHILUVWZDVVSRQVRUHGE\.LQJ*XVWDYXV,,,KLPVHOI8QGHU KLVSURWHFWLRQWKHWKHDWUHH[SDQGHGUDSLGO\DQGWKLVOHGWRDVWURQJGHPDQGIRUWKHWUDQVODWLRQRISOD\V7KH VHFRQGFRQGLWLRQHGE\SROLWLFDODQGHFRQRPLFIDFWRUVZDVWKDWRISURVHILFWLRQLQWHQGHGIRUFXOWLYDWHG HQWHUWDLQPHQWRIWKHERXUJHRLVPLGGOHFODVVWKDWKDGJURZQLQWKHHLJKWHHQWKFHQWXU\0RVWLIQRWDOORIWKLVj ODPRGHOLWHUDWXUHFRQVLVWHGRIFRPPHUFLDOWUDQVODWLRQVE\VHOIHPSOR\HGSURIHVVLRQDOV)UHQFKVHHPVWRKDYH EHHQWKHGRPLQDQWVRXUFHODQJXDJHDWWKHEHJLQQLQJEXWZDVODWHUFKDOOHQJHGE\*HUPDQDQGDWWKHYHU\HQG RIWKHSHULRG(QJOLVK7KHGLVVHPLQDWLRQRIERRNVZDVGHSHQGHQWWRDODUJHH[WHQWRQPRELOHOLEUDULHVWKHUH ZDVDKDQGIXORIWKHPLQ6WRFNKROPDWWKHWXUQRIWKHFHQWXU\%M|UNPDQ 7KHVXUUHQGHURI)LQODQGWR5XVVLDLQIROORZLQJDFDWDVWURSKLFZDUGHHSO\DIIHFWHGWKH6ZHGLVKQDWLRQ DQGKDGVLJQLILFDQWLPSOLFDWLRQVIRUOLWHUDU\FXOWXUHLQ6ZHGHQLQFOXGLQJWUDQVODWLRQ+RZHYHUVRPHRIWKH GHYHORSPHQWVWKDWWRRNSODFHGXULQJWKH*XVWDYLDQHUDSDUWLFXODUO\WKHWUDQVODWLRQRISURVHILFWLRQVXUYLYHG WKURXJKWRPRGHUQWLPHV

7KHLQGXVWULDOSHULRGFWRWKHSUHVHQW 6ZHGLVKVRFLHW\KDVXQGHUJRQHVRPHPDMRUFKDQJHVVLQFHWKHEHJLQQLQJRIWKHQLQHWHHQWKFHQWXU\LQFOXGLQJ LQGXVWULDOL]DWLRQYDULRXVSRSXODUPRYHPHQWVHPLJUDWLRQWKHDUULYDORIGHPRFUDF\DQG²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µZKLWHFROODUSUROHWDULDQ¶ ZRUNLQJXQGHUGLIILFXOWFRQGLWLRQV$FRQVLGHUDEOHQXPEHURIWUDQVODWRUVGXULQJWKLVSHULRGZHUHZRPHQ +MHOP0LOF]\Q $VZLWKWKHVHYHQWHHQWKFHQWXU\DFRQVLGHUDEOHDPRXQWRILQWHUHVWLQJVWDWLVWLFDOHYLGHQFHLVDYDLODEOHWRGD\IRU OLWHUDU\ERRNSURGXFWLRQERWKRULJLQDODQGWUDQVODWLRQ LQQLQHWHHQWKDQGWZHQWLHWKFHQWXU\6ZHGHQ:H NQRZIRULQVWDQFHWKDWWLWOHVRISURVHILFWLRQWUDQVODWHGLQWR6ZHGLVKIURPYDULRXVODQJXDJHVZHUH SXEOLVKHGEHWZHHQDQG7RUJHUVVRQ 6L[W\\HDUVODWHUEHWZHHQDQGWKH FRUUHVSRQGLQJILJXUHZDVWLWOHV$IWHUDQRWKHU\HDUVLQ±WKLVILJXUHURVHWRDSSUR[LPDWHO\ WLWOHV:ROOLQIRUWKFRPLQJ 7KHILJXUHVIRURULJLQDO6ZHGLVKSURVHILFWLRQSXEOLVKHGGXULQJWKHVDPH WKUHHSHULRGVDUHDQGDSSUR[LPDWHO\WLWOHVUHVSHFWLYHO\,W



3DJH

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±DUHWLWOHVIURP*HUPDQIURP)UHQFKDQGIURP(QJOLVK)RUWKHSHULRG ±WKHILJXUHVDUHDQGUHVSHFWLYHO\IRU±WKHDSSUR[LPDWH ILJXUHVDUH DQGQROHVVWKDQ$PHULFDQ(QJOLVKKDVJUDGXDOO\JDLQHGJURXQGDWWKHH[SHQVHRI%ULWLVKVWDUWLQJZLWK DOPRVWQRVKDUHRIWKH(QJOLVKILJXUHVLQWKHVWRURXJKO\DTXDUWHULQWKHVDQGFRQVLGHUDEO\PRUH WKDQDKDOILQWKHV 7KLVJURZLQJ$QJOR$PHULFDQGRPLQDQFHLVSDUWO\FRXQWHUEDODQFHGE\DSDUDOOHOLQFUHDVHLQWKHUDQJHRIRWKHU VRXUFHODQJXDJHV)RUH[DPSOHLQWKHSHULRG±VRXUFHODQJXDJHVLQFOXGHG1RUZHJLDQWLWOHV 'DQLVK 5XVVLDQ DQG,WDOLDQWLWOHV SOXVIHZHUWLWOHVIURP6SDQLVK+XQJDULDQ'XWFK3ROLVKDQG DGR]HQRWKHUVRXUFHODQJXDJHVSUDFWLFDOO\DOO(XURSHDQ)RU±WKHOLVWLVVLPLODUWKRXJKQRZVOLJKWO\ HQULFKHGE\DIHZWLWOHVIURPPDMRUQRQRFFLGHQWDOODQJXDJHVVXFKDV$UDELF&KLQHVHDQG-DSDQHVH6SDQLVK SDUWLFXODUO\WKH/DWLQ$PHULFDQYDULHW\QRZUDQNVIRXUWKZLWKWLWOHVWKLVPD\EHSDUWO\GXHWRWKHVSHFLDO SUHIHUHQFHVRIWKH6ZHGLVK$FDGHP\¶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µTXDOLW\¶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¶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



3DJH

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¶VUHFHQW PHPEHUVKLSRIWKH(XURSHDQ&RPPXQLW\PD\KRZHYHUXOWLPDWHO\FKDQJHWKLVSLFWXUH 3URIHVVLRQDORUJDQL]DWLRQV 7KHQXPEHURISHRSOHZKRWUDQVODWHZULWWHQGRFXPHQWVIURPRQHODQJXDJHWRDQRWKHULQ6ZHGHQZDV HVWLPDWHGLQDWWKHPDMRULW\KRZHYHUGRQRWZRUNIXOOWLPH6OLJKWO\PRUHWKDQDUH DXWKRUL]HGSURIHVVLRQDOWUDQVODWRUV0RVWWUDQVODWRUVZRUNLQODUJHFLWLHVPDLQO\6WRFNKROP*|WHERUJDQG 0DOP|/XQG /LWHUDU\WUDQVODWRUVWKHPDMRULW\ DQGWUDQVODWRUVRIERRNVLQJHQHUDOKDYHEHHQRUJDQL]HGVLQFHWKH 7UDQVODWRUV¶VHFWLRQRIWKH6ZHGLVK:ULWHUV¶8QLRQKDGDERXWPHPEHUVLQ7KHPDMRULW\RIWKRVHDUH QRWIXOOWLPHWUDQVODWRUV6RPHWKHDWUHDQGRSHUDWUDQVODWRUVDUHUHSUHVHQWHGE\WKH6YHQVND GUDPDWLNHUI|UEXQGHWZKLOHDSSUR[LPDWHO\VFUHHQWUDQVODWRUVEHORQJWRWKH6YHQVNDWHDWHUI|UEXQGHW7KH 6ZHGLVK$VVRFLDWLRQRI3URIHVVLRQDO7UDQVODWRUVZLWKVRPHPHPEHUVLQUHSUHVHQWVWUDQVODWRUVRI SURIHVVLRQDODQGVFLHQWLILFWH[WVWKHPDMRULW\RIZKRPZRUNIXOOWLPHIRUFOLHQWVLQWUDGHDQGLQGXVWU\0DQ\ DUHDOVRPHPEHUVRI7KH)HGHUDWLRQRI$XWKRUL]HG7UDQVODWRUVPHPEHUVRIWKLVRUJDQL]DWLRQLQ DUH DXWKRUL]HGE\WKH.DPPDUNROOHJLHWµ1DWLRQDO-XGLFLDO%RDUGIRU3XEOLF/DQGVDQG)XQGV¶ $XWKRUL]HG FRPPXQLW\LQWHUSUHWHUVDUHUHSUHVHQWHGE\DPDMRURUJDQL]DWLRQ6YHULJHVWRONI|UEXQG672) ZLWKVRPH PHPEHUV 7KH,QVWLWXWHIRU,QWHUSUHWDWLRQDQG7UDQVODWLRQ6WXGLHV,,76 DW6WRFNKROP8QLYHUVLW\ZDVIRXQGHGLQ ZLWKUHVSRQVLELOLW\IRUWKHFRRUGLQDWLRQRIUHVHDUFKWUDLQLQJDQGLQIRUPDWLRQDFWLYLWLHVDVZHOODVIRU 6FDQGLQDYLDQFRRSHUDWLRQZLWKLQWKHILHOGVRILQWHUSUHWDWLRQDQGWUDQVODWLRQLQ6ZHGHQ 7KHPRVWLPSRUWDQW6ZHGLVKSHULRGLFDOLQWKHILHOGLVWKHTXDUWHUO\7RONQLQJVSHUVSHNWLYZKLFKKDVEHHQ FORVHO\DVVRFLDWHGZLWKWKH,,7VVLQFH

)XUWKHUUHDGLQJ $QGHUVVRQ%M|UNPDQ+DQVVRQ+MHOP0LOF]\Q7RUJHUVRQ:ROOLQDE IRUWKFRPLQJ

/$56:2//,1

%LRJUDSKLHV %8''(-yQVDOVRNQRZQDV-|QV5°NRU5°FNF²DIWHU 0RQNDWWKH%ULGJHWLQH0RQDVWHU\RI 1nGHQGDOQHDU7XUNXcERLQ)LQODQGDGDXJKWHUKRXVHRIWKHPRQDVWHU\RI9DGVWHQDLQ6ZHGHQ%XGGHZDV WKHPRVWLQGXVWULRXVWUDQVODWRURIWKH9DGVWHQDPRQDVWLFWUDGLWLRQDQGKHQFHRIPHGLHYDO6FDQGLQDYLD+H WUDQVODWHGVRPHPDMRUZRUNVRIGLIIHUHQWUHOLJLRXVJHQUHVLQWR2OG6ZHGLVK6LJQLILFDQWLWHPVRQKLVUHFRUG



3DJH

LQFOXGHDQXPEHURIERRNVIURPWKH2OG7HVWDPHQWVRPHRIWKHP$SRFU\SKDWKHERRNVRI-XGLWK(VWKHU 5XWKDQGWKH0DFFDEHHV ERRNVRISURPLQHQWP\VWLFVVXFKDV0HFKWLOGRI+DFNHERUQ/LEHUVSHFLDOLVJUDFL° DQG6XVR+RURORJLXPGLYLQ°6DSLHQWL° DVZHOODVWKHDQRQ\PRXV&ODXVWUXPDQLP +HIXUWKHUWUDQVODWHGD QXPEHURIZRUNVRIHGLILFDWLRQ&ORVHVWXG\RIKLVWH[WVUHYHDOVWKDW%XGGHZDVDVNLOIXOWUDQVODWRUDVZHOODV DQLQVSLUHGSUHDFKHU+LVZRUNZDVVLJQLILFDQWLQWHUPVRIWKHGHYHORSPHQWDQGUHILQHPHQWRIOLWHUDU\6ZHGLVK LQWKHODWH0LGGOH$JHV +$*%(5*&DUO$XJXVW± 7UDQVODWRURISRHWU\3URIHVVRURI$HVWKHWLFVDQG0RGHUQ/DQJXDJHVDW /XQG± DQGRI6FDQGLQDYLDQ3KLORORJ\IURP7KHVRQRIDFOHUJ\PDQZLWKOLWHUDU\DPELWLRQV +DJEHUJZDVLQWURGXFHGWRWKHFODVVLFDO*UHHNDXWKRUVDVDFKLOG)ROORZLQJDGLVWLQJXLVKHGDFDGHPLFFDUHHU DQGD(XURSHDQJUDQGWRXULQ±KHGHYRWHGVRPH\HDUVWRKLVOLWHUDU\PDJQXPRSXVWKH FRPSUHKHQVLYH6ZHGLVKFRUSXVRIWKHSOD\VRI6KDNHVSHDUHSXEOLVKHGEHWZHHQDQGLQYROXPHV XQGHUWKHWLWOH6KDNHVSHDUH¶VGUDPDWLVNDDUEHWHQ6KDNHVSHDUH¶VGUDPDWLFZRUNV 7KLVWUDQVODWLRQVHFXUHGIRU +DJEHUJDVZHOODV6KDNHVSHDUHDSURPLQHQWDQGHQGXULQJSRVLWLRQLQ6ZHGLVKOLWHUDWXUH+DJEHUJ¶VYHUVLRQV RI6KDNHVSHDUH¶VSOD\VDUHZULWWHQLQHOHJDQWEODQNYHUVHDQGZLWWLO\UHSURGXFHWKHSXQVDQGLPDJLQDWLYHVW\OH RIWKHRULJLQDOV+DYLQJDSSHDUHGLQPDQ\HGLWLRQVDQGUHSULQWVRYHUWKH\HDUVWKHWUDQVODWLRQVKDYHEHFRPHD VRXUFHRIFRXQWOHVVIDPLOLDUTXRWDWLRQVZKLFKDUHVWLOODFWLYHO\XVHGWRGD\LQWKLVVHQVHWKHLPSDFWRI +DJEHUJ¶VWH[WVDVWUDQVODWLRQVLVRQO\FRPSDUDEOHWRWKDWRIWKH5HIRUPDWLRQ%LEOH$WWKHVDPHWLPH +DJEHUJ¶VWH[WWKRXJKEULOOLDQWLVGLVWLQFWO\ROGIDVKLRQHGDQGWKLVWHQGVWRPDNHPRGHUQSURGXFWLRQVRI 6KDNHVSHDUHRQWKH6ZHGLVKVWDJHVRPHZKDWSUREOHPDWLFIURPDOLQJXLVWLFSRLQWRIYLHZWKHSOD\VFDQDOVR LPSUHVVWKHDXGLHQFHDVDFDWDORJXHRIZHOONQRZQTXRWDWLRQVZLWKDQXQPLVWDNDEOHQLQHWHHQWKFHQWXU\ IODYRXUZKLFKLVXQVXLWDEOHIRUWKHVWDJH /$*(5/g)(UODQG± 7UDQVODWRURIDQFLHQWFODVVLFDOSRHWU\SDUWLFXODUO\+RPHU5HDGHURI 3KLORVRSK\DWWKH8QLYHUVLW\RI/XQGLQ6ZHGHQ± DQGODWHUVHQLRUPDVWHUDW9lVWHUnV$IWHUVRPH H[FHOOHQWUHQGHULQJVRI7KHRFULWXVDQG-XYHQDOLQWKHVDQGV/DJHUO|I¶V2G\VVpHQDSSHDUHGLQ DQGKLV,OLDGHQLQLQIDLWKIXOO\UHSURGXFHGKH[DPHWHUV:RUNLQJZLWKLQWKH6ZHGLVKSRHWLFWUDGLWLRQRI 6WLHUQKLHOP7HJQpU6WDJQHOLXVDQG5XQHEHUJKHQHYHUWKHOHVVVXFFHHGHGLQLQWURGXFLQJDQDXWKHQWLFYHUVLRQ RIWKH+RPHULFHSLFVW\OHWRWKH6ZHGLVKOLWHUDU\FXOWXUH7RGD\/DJHUO|I¶V+RPHUPD\DSSHDUVRPHZKDW DQWLTXDWHGLQYRFDEXODU\DQGSKUDVHRORJ\EXWQRPRGHUQYHUVLRQKDV\HWVXUSDVVHGLWLQTXDOLW\ 6&+52'(586(ULNF± 3ULQWHUDXWKRUDQGWUDQVODWRU+HDGPDVWHUDW1\N|SLQJ6ZHGHQVLQFH DQGODWHUDSSRLQWHGUHYLVHUDWWKH5R\DODQG6WDWHSULQWLQJRIILFHLQ$URXQGWKHVDPHSHULRGKH ZDVFRPPLVVLRQHGE\.LQJ*XVWDYXV,,$GROSKXVµWRWUDQVODWHFRQWHPSRUDU\PDWHULDO¶,QDGGLWLRQWRWKLV UR\DOVDODULHGSRVLWLRQZKLFKKHKHOGIRUVRPHGHFDGHV6FKURGHUXVVWDUWHGKLVRZQSULQWLQJEXVLQHVVLQ DQGVLPXOWDQHRXVO\KHOGWKHSRVWRIFHQVRURIDOOSULQWHGPDWWHUSXEOLVKHGLQ6WRFNKROP7KRXJKDQDXWKRULQ KLVRZQULJKW6FKURGHUXV¶VUROHDVWKHWUDQVODWRUUHJQLZDVIDUPRUHVLJQLILFDQW+HSURGXFHGDVHULHVRIODUJH VFDOHWUDQVODWLRQVSULPDULO\IURPWKH/DWLQ%HVWNQRZQDUHKLVUHQGHULQJVRI-RKDQQHV0DJQXV¶+LVWRU\RI 6ZHGHQ RI/LY\¶V5RPDQ+LVWRU\ 2VLDQGHU¶V&KXUFK+LVWRU\ DQGIURPWKH*HUPDQ $UQGW¶V3DUDGLVH*DUGHQ 6FKURGHUXVZDVWKHDUFKHW\SDOµRIILFLDO¶WUDQVODWRUKLVZRUNPDGHD VLJQLILFDQWFRQWULEXWLRQWRWKHGHYHORSPHQWRIWKHOLWHUDU\FXOWXUHRI6ZHGHQ /$56:2//,1



3DJH

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

2YHUYLHZRIWKHSUH2WWRPDQDQG2WWRPDQSHULRGVWKLUWHHQWKWRQLQHWHHQWK FHQWXULHV ,QWKH6HOMXNVWDWHZLWK.RQ\DDVLWVFDSLWDOWKHRIILFLDOLQWHUSUHWHUWUDQVODWRUZDVNQRZQDVWHUFPDQIURP $UDELFWXUMXPDQRI$UDPDLFRULJLQ 7KHWHUFPDQRUµGUDJRPDQ¶LQ(QJOLVKZDVDSSRLQWHGE\UR\DOGHFUHH DQGKHOGLQKLJKHVWHHP'UDJRPDQVZHUHLQFKDUJHRIFRUUHVSRQGHQFHZLWKIRUHLJQVWDWHVDQGDFWHGDV LQWHUPHGLDULHVIRUIRUHLJQHUVDQGQDWLYHVLQFRXUWFDVHVLQWHUSUHWLQJIRUSODLQWLIIVDQGGHIHQGDQWVDQGUHIHUULQJ WKHPWRWKHLUVSHFLDOFOHUNV$WWKHWLPHRI$ODHGGLQ.H\NXEDGG WKHUHZHUHWZRVXFKDSSRLQWHG GUDJRPDQVDQGWZRVSHFLDOWUDQVODWRUV¶FOHUNV 7KHILUVWLPSHULDOGUDJRPDQPHQWLRQHGLQ2WWRPDQUHFRUGVLV/XWIL%H\ZKRZDVVHQWDVHPLVVDU\WR9HQLFH LQWRGHOLYHUDWUHDW\7KHSRVLWLRQRIWKHRIILFLDOGUDJRPDQLQWKH2WWRPDQVWDWHLVWKHUHIRUHWKRXJKWWR KDYHEHHQHVWDEOLVKHGE\0HKPHG,,±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



3DJH

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¶2KVVRQWKH$UPHQLDQGUDJRPDQRIWKH6ZHGLVK(PEDVV\LQ,VWDQEXOZDVRQHRIWKHWZR &KULVWLDQVLQWKHFRPPLWWHHRIGLJQLWDULHVDVNHGE\6HOLP,,,± LQWRJLYHWKHLURSLQLRQ RQWKHUHDVRQVIRUWKHGHFOLQHRI2WWRPDQSRZHU,QWKHHLJKWHHQWKFHQWXU\WKH)UHQFK(PEDVV\VWDUWHGD VFKRROWRWUDLQLQWHUSUHWHUVIRULWVRZQXVH$WWKHWLPHRI0DKPXW,,± WKHUHZHUHFRQVXODU GUDJRPDQVZLWKVSHFLDOZDUUDQWVPRVWRIZKRPZHUH*UHHNVDQGVRPHZHDOWK\HQRXJKWRSXUFKDVH WKHSRVLWLRQ,QWKHILQDO\HDUVRIWKH(PSLUHIRUHLJQPLVVLRQVDSSRLQWHGWKHLURZQVXEMHFWVDVGUDJRPDQV :LWKLQWKHDERYHKLHUDUFK\WKHPRVWLPSRUWDQWSRVWZDVQDWXUDOO\WKDWRIWKHGUDJRPDQWRWKH,PSHULDO &KDQFHU\'UDJRPDQVZHUHLQLWLDOO\FKRVHQIURP*UHHN,WDOLDQ*HUPDQ+XQJDULDQDQG3ROLVKFRQYHUWVWR ,VODP$WWKHWLPHRI6OH\PDQWKH0DJQLILFHQW± <XQXV%H\RI*UHHNRULJLQLVNQRZQWRKDYH EHHQLQIOXHQWLDOLQIRUHLJQSROLF\DQGZDVHQWUXVWHGWZLFHZLWKWDNLQJWUHDWLHVWR9HQLFH7KDWKHZDVKHOGLQ KLJKHVWHHPLVVKRZQE\WKHIDFWWKDWD7UDQVODWRUV¶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¶VWHUPRIRIILFHEHFDPHUHJXODUSUDFWLFHDIWHUWKDW$V WKHSULQFLSDOGXWLHVRIWKH&KLHI'UDJRPDQZHUHWRLQWHUSUHWIRUWKH*UDQG9H]LUZKHQKHUHFHLYHGIRUHLJQ PLVVLRQVDQGWRWUDQVODWHDOOGRFXPHQWVRWKHUWKDQWKRVHLQ$UDELFKHZDVSULY\WRVWDWHVHFUHWVDQGDOOGHWDLOV UHJDUGLQJIRUHLJQSROLF\



3DJH

,QWKHVHFRQGKDOIRIWKHHLJKWHHQWKFHQWXU\LWZDVIHOWWKDWWKLVSRVLWLRQRIUHVSRQVLELOLW\ZDVEHJLQQLQJWREH DEXVHGE\GUDJRPDQVLQWKHLUUHODWLRQVZLWKWKH)UHQFK%ULWLVKDQG5XVVLDQVHDFKULYDOOLQJWKHRWKHULQWKHLU DWWHPSWVWRJDLQPRUHLQIOXHQFHLQWKHDIIDLUVRIWKH(PSLUH ,QWKH3KDQDULRW&KLHI'UDJRPDQZDVH[HFXWHGRQVXVSLFLRQRIEHLQJLQYROYHGZLWK*UHHN UHYROXWLRQDULHV
7KH$UDE3HUVLDQSKDVHSUHGRPLQDQFHRI,VODPLFVRXUFHV /LWHUDU\ZRUNVEHJDQWRDSSHDULQWKHWKLUWHHQWKFHQWXU\DQGLQFUHDVHGLQQXPEHULQWKHIRXUWHHQWKFHQWXU\ ZKHQWH[WVWUDQVODWHGIURP3HUVLDQDQG$UDELFSOD\HGDYLWDOUROHLQWKHGHYHORSPHQWRIWKH7XUNLVKODQJXDJH $WWKDWVWDJHWKHVHOHFWLRQRIWH[WVVHHPVWRKDYHEHHQPDGHRQDXWLOLWDULDQEDVLVLQWHUPVRIZKDWZDV WKRXJKWWREHLQVWUXFWLYHDQGXVHIXO6DFUHGWH[WVDQGUHOLJLRXVZULWLQJWKHUHIRUHKHOGDYHU\SURPLQHQWSODFH LQWKHJURZLQJFRUSXVRIWUDQVODWLRQVGXULQJWKLVSHULRG+RZHYHUWKH485¶Ɩ1ZULWWHQLQ$UDELF ZDVKHOG VDFURVDQFWVRPXFKVRLQIDFWWKDWZKHQWKH-HZVZKRVHWWOHGLQWKH2WWRPDQ(PSLUHDIWHUWKHLUH[SXOVLRQ IURP6SDLQILUVWLQWURGXFHGWKHSULQWLQJSUHVVLQWKHVL[WHHQWKFHQWXU\WKHPHUHSRVVLELOLW\RISULQWLQJLQ $UDELFOHWWHUVZDVUXOHGRXWE\WKHFKLHIUHOLJLRXVGLJQLWDU\ 7KH4XU¶ƗQZDVHYHQWXDOO\FRQVLGHUHGWUDQVODWDEOHEXWRQO\RQDZRUGIRUZRUGEDVLV7KHHDUOLHVWNQRZQ LQWHUOLQHDUPDQXVFULSWWUDQVODWLRQVRIWKH4XU¶ƗQLQWR$QDWROLDQ7XUNLVKGDWHEDFNWRWKHIRXUWHHQWKFHQWXU\ (DUOLHUWUDQVODWLRQVLQWR(DVWHUQ7XUNLFIROORZLQJWKHPDVVFRQYHUVLRQRI&HQWUDO$VLDQ7XUNVWR,VODPLQWKH WHQWKFHQWXU\DUHPDLQO\RIWZRNLQGVD LQWHUOLQHDUZKHUHµHDFK7XUNLFZRUGRUSKUDVHLVZULWWHQLQVPDOOHU FKDUDFWHUVDWDQDQJOHRIGHJUHHVEHQHDWKHDFK$UDELFZRUG¶DSUDFWLFHZKLFKUHIOHFWVWKHRUDOVWDJHLQWKH WUDQVODWLRQRIWKHKRO\WH[WDQGE DQQRWDWHGZKHUHµHDFKORJLFDOJURXSRI$UDELFZRUGVJHQHUDOO\RYHUOLQHG LQPDQXVFULSWVLQUHGLQN LVWUDQVODWHGHQEORFE\DJURXSRI7XUNLFZRUGVIRUPLQJVHQWHQFHVZKLFKXVHWKH JUDPPDWLFDOV\QWDFWLFDODQGOLWHUDU\QRUPVRIZULWWHQ7XUNLF¶%LUQEDXP± 7KHVDPHWUDGLWLRQ ZDVIROORZHGLQ$QDWROLDQ7XUNLVKYHUVLRQVZKLOHDWKLUGW\SHRIWUDQVODWLRQFRPELQHGWKHWZRPRGHV 7KRXJKYHU\UDUHWKHUHZHUHDOVRVRPHIRXUWHHQWKDQGILIWHHQWKFHQWXU\WULOLQJXDOYHUVLRQVLQ$UDELF3HUVLDQ DQG$QDWROLDQ7XUNLVKZKHUHWKHODWWHUZDVZULWWHQEHORZWKH3HUVLDQWKHILUVWODQJXDJHLQWRZKLFKWKH4XU¶ƗQ ZDVWUDQVODWHGLQWKHWHQWKFHQWXU\ 7KHVHOHFWLRQRIWH[WVIRUOLWHUDU\WUDQVODWLRQIURP,VODPLFVRXUFHVLVZRUWKH[DPLQLQJLQVRPHGHWDLOEHFDXVH PDQ\KDYHORQJEHHQ



3DJH

DSSURSULDWHGE\WKH2WWRPDQ7XUNLVKOLWHUDU\WUDGLWLRQDVRULJLQDOZRUNV*XOúHKUL¶VIRXUWHHQWKFHQWXU\ WUDQVODWLRQRIWKH3HUVLDQSRHW)HULGGGLQL$WWDU¶VPDVWHUSLHFH0DQWLNX¶W7D\U7KH/DQJXDJHRI%LUGVDQ DOOHJRULFDOWDOHZLWKLQDWDOHRIELUGVLQVHDUFKRIP\VWLFXQLRQ LVDFDVHLQSRLQWWKLVYHUVLRQLVVDLGWRRZHLWV H[FHOOHQFHDQGµRULJLQDOLW\¶WRZKDWWKHWUDQVODWRUFRQWULEXWHGWRWKHRULJLQDOLQWKHIRUPRIWDOHVIURPRWKHU VRXUFHVDQGPDWHULDORIKLVRZQFRPSRVLWLRQDQGWKLVKHGLGZLWKRXWGDPDJLQJWKHXQLW\RI$WWDU¶VZRUN ZKLFKLWVHOIZDVDSRHWLFµHODERUDWLRQ¶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¶Ɩ1E\(EX¶O/H\VL6HPHUNDQGLIROORZHGE\DQDQQRWDWHGWUDQVODWLRQRI $\HWXONXUVLWKHWKYHUVHRIWKHVHFRQG6XUDRIWKH4XU¶ƗQ ZKLFKLQFOXGHGDJORVVDU\KDJLRJUDSKLHVDQG PRUDOLW\WDOHVRI'DL¶VFKRLFHDQGFRPSRVLWLRQ2WKHUVZHUHWUDQVODWLRQVRI2QH+XQGUHG+DGLWKVKRO\ VD\LQJV RIWKH3URSKHW0XKDPPHGDQG7LEELQHEHYv7KH3URSKHW¶V0HGLFDO$GYLFH DFROOHFWLRQRIKLV VD\LQJVRQK\JLHQHDQGGLVHDVH7KHODVWZDVDSDUWWUDQVODWLRQRI(EX1DLP+DIL]L,VIDKDQL¶V.LWDEX¶úúLID ILDKDGLVL¶O0XVWDID7KH%RRNRI5HPHGLHV ZKLFKLWVHOIZDVEDVHGRQWKH3HUVLDQVXPPDU\YHUVLRQE\,PDP $KPHGE<XVXIHW7LIDVL $KPHGL'DL¶VGLVFXVVLRQVRIWKHVWUDWHJLHVKHXVHGDUHKLJKO\LQIRUPDWLYHDQGUHYHDOLQJ,QKLVSUHIDFHWR 0LIWDKX¶OFHQQHW.H\WR+HDYHQDJXLGHWRYLUWXRXV,VODPLFOLYLQJ 'DLFODLPHGWRKDYHµFRPSRVHG>WKHWH[W@ LQHLJKWVHFWLRQV¶7HNLQ±WUDQVODWHG LHJLYHQLWDGLIIHUHQWIRUPIURPWKDWRIWKH$UDELFRULJLQDO (OVHZKHUHLQWKHSUHIDFHWRKLVWUDQVODWLRQRI)HULGGGLQL$WWDU¶V7H]NLUHWX¶OHYOL\D%LRJUDSKLHVRIWKH(YOL\D ²0XVOLPVDLQWV KHVWDWHGWKDWKHKDGµOLNHG>WKHZRUN@VRPXFKWKDW>KH@FRXOGQRWKHOSWUDQVODWLQJLW¶LELG DOWKRXJKLWKDGDOUHDG\EHHQUHQGHUHGIURP3HUVLDQLQWR7XUNLVK'DLZDVWKXVHQJDJHGLQVRPHIRUPRI µUHZULWLQJ¶DQHVWDEOLVKHGSUDFWLFHZKLFKKDGORQJEHHQSRSXODULQ(DVWHUQFXOWXUHV%XW'DLUHIHUVWRDOOWKHVH ZRUNVDVµWUDQVODWLRQV¶LQFOXGLQJDQRWKHUWZRµWUDQVODWLRQV¶KHXQGHUWRRNRQHIURP3HUVLDQ1DVLUL7XVL¶V 5LVDOHLVLIDVOµ%RRNRI7KLUW\&KDSWHUV¶DWUHDWLVHRQDVWURORJ\DQGWKHFDOHQGDU DQG(EX%HNUELQ $EGXOODKHO9DVLWL¶V.LWDEX¶WWD¶ELUQDPHµ%RRNRI,QWHUSUHWDWLRQV¶RIGUHDPV RULJLQDOO\LQ$UDELF,QKLV SUHIDFHVVRPHRIZKLFKZHUHZULWWHQLQYHUVHKHLQGLFDWHGWKHVRXUFHWH[WVDQGDQ\RWKHUWH[WVKHXVHGZK\ KHWUDQVODWHGWKHPJDYHKLVQDPHRUSVHXGRQ\PDQGJHQHUDOO\QDPHGKLVSDWURQVWKHSULQFHVZKR FRPPLVVLRQHGWKHPRUWRZKRPWKH\ZHUHGHGLFDWHG 2IWKHWUDQVODWLRQVWKDW'DLSURGXFHGHQWLUHO\LQYHUVHWKHPRVWLQWHUHVWLQJLVKLVUK\PLQJ$UDELF3HUVLDQ GLFWLRQDU\LQFRXSOHWV7KLVLVDVKRUWHUYHUVLRQRI5HúLGGGLQL9DWYDW¶VµXNXGX¶OFHYDKLU6WULQJVRI -HZHOV ZKLFKLQVRPHPDQXVFULSWVKDGWKH7XUNLVKHTXLYDOHQWVZULWWHQLQLQWHUOLQHDUIRUP7KHGLFWLRQDU\ ZDVGHVLJQHGWRKHOSWHDFK'DL¶V\RXQJSXSLO3ULQFH0XUDWDQGVHUYHGQRWRQO\DVDOH[LFRQEXWDJXLGHWR WKH7XUNLVKIRUPVRIWKHFODVVLFDO$UDELF3HUVLDQ DUX]PHWUH'DL¶VPRVWLPSRUWDQWYHUVHWUDQVODWLRQLV dHQJQDPH7KH%RRNRIdHQJ/\UHDQDOOHJRULFDOVWRU\RIWKH2ULHQWDOO\UH ZKLFKDVKHH[SODLQHGZDV SDUWO\DWUDQVODWLRQRIWKH3HUVLDQSRHW6DGL¶VPHVQHYLQRZORVW E\WKHVDPHWLWOHH[SDQGHGZLWKYHUVHVE\ 'DLKLPVHOI+LVWUDQVODWLRQRI&DPDVEQDPH7KH%RRNRI-DPDVE E\1DVLUL7XVLDOVRD3HUVLDQSRHWZDV LQWKHJHQUHRIµ0LUURUIRU3ULQFHV¶PRUDOLW\WDOHVZULWWHQDVFRXQVHOIRUUXOHUV)URPWKHIRXUWHHQWKFHQWXU\ RQZDUGWKHLQFUHDVLQJSRSXODULW\RIµ0LUURUIRU3ULQFHV¶DQGRIWKHQDUUDWLYHPHVQHYLIRUPLQUK\PLQJ FRXSOHWVOHGWRPRUHWUDQVODWLRQVLQWKHVDPHJHQUH 2WKHUZHOONQRZQH[DPSOHVIURPWKHIRXUWHHQWKDQGILIWHHQWKFHQWXULHVLQFOXGH.XO0HVXG¶VPDLQO\SURVH WUDQVODWLRQRI.HOLOHYH'LPQH.HOLOHDQG'LPQHDQLPDOIDEOHV



3DJH

WUDQVODWHGIURPWKH$UDELFYHUVLRQLWVHOIDWUDQVODWLRQIURP3HUVLDQRULJLQDOO\ZULWWHQLQ6DQVNULW ùH\KR÷OX¶V 0DU]XEDQQDPH7KH%RRNRI0DU]XEDQ²*RYHUQRUDFROOHFWLRQRI3HUVLDQDQLPDOIDEOHVFRPELQHGZLWK WDOHVRINLQJVDQGSKLORVRSKHUV DQG0HUFLPHN$KPHG¶V.DEXVQDPH7KH%RRNRI.DEXVDKLJKO\SRSXODU µ0LUURUIRU3ULQFHV¶E\WKH3HUVLDQNLQJ.H\NDYXV FRPPLVVLRQHGIRU6XOWDQ0XUDG,,±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¶V%RRNRI3DUWLFXODUV +DYDVVXOHGYL\H%HVW.QRZQ5HPHGLHV .DPLOVVLQDD3HUIHFW$UWV $Q HPLQHQWGRFWRURIWKDWDJH&HODOHGGLQ+L]LUNQRZQDV+DFL3DVKD ZURWHSULQFLSDOO\LQ$UDELFEXWDOVR SURGXFHGWZR7XUNLVKYHUVLRQVRIKLVRZQZRUNDIXOOWUDQVODWLRQ0QWDKDEúúLID6HOHFWHG5HPHGLHV DQG DVKRUWHUYHUVLRQRPLWWLQJWKHRUHWLFDOFKDSWHUV7HVKLOXúúLID)DFLOLWDWLQJ+HDOLQJ LQWKHSUHIDFHRIZKLFKKH DSRORJL]HGIRUZULWLQJLQ7XUNLVKIRUHYHU\RQHWRXQGHUVWDQG0RVWWUDQVODWLRQVRIWKLVNLQGZHUH FRPPLVVLRQHGE\8PXU%H\DQG,VD%H\SULQFHVRI$\GLQ0XNELO]DGH0PLQ¶V=DKLUHL0XUDGL\H 'LVHDVHVRIWKH%RG\ ZKLFKZDVGHGLFDWHGWR0XUDW,,± FRQVLVWHGRIWUDQVODWLRQV²FRPSLOHGIURP $UDELFDQG3HUVLDQVRXUFHV²LQZKLFK7XUNLVKWHUPVZHUHXVHGDORQJZLWKWKHLUHTXLYDOHQWVLQWKHVRXUFH ODQJXDJHVREYLRXVO\LQDQDWWHPSWWRGHYHORSPHGLFDOWHUPLQRORJ\LQWKHWDUJHWODQJXDJH,WKDVDOVREHHQ GLVFRYHUHGWKDWDPRQJERRNVRQVXUJHU\RQHE\6DEXQFXRJOXULFKLQ7XUNLVKWHUPVDQGFODLPHGWREHDQ RULJLQDOZRUNE\WKHDXWKRUZDVLQIDFWDWUDQVODWLRQIURPWKH$UDELFNQRZQLQ(XURSHEXWQRWLQ$QDWROLD )URPWKHWLPHRI0HKPHG,± DJURZLQJLQWHUHVWLQHQF\FORSHGLFZRUNVSURPSWHGWKHZULWLQJDQG WUDQVODWLRQRIPDQ\ERRNVRQWKHµZRQGHUVRIWKHZRUOG¶VXFKDV=HNHUL\DHO.D]YLQL¶VIDPRXV$FDLEO PDKOXNkW6WUDQJH&UHDWXUHV LQ$UDELFWUDQVODWHGHLJKWWLPHVRYHUWKHFHQWXULHV ZKLFKIHDWXUHGLQSDUWLFXODU QDWXUDODQGVXSHUQDWXUDOSODQWVDQGDQLPDOVDIDYRXULWHWRSLFZLWKVRPHRIWKH2WWRPDQVXOWDQV

&RQWDFWZLWKQRQ,VODPLFFXOWXUHV 7KHLQWHUHVWVRI0HKPHG,,±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¶V*HRJUDSK\DPRQJVRPH%\]DQWLQHPDQXVFULSWVLQ KHKDGLWWUDQVODWHGLQWR$UDELFUDWKHUWKDQ7XUNLVK E\*HRUJLRV$PLUXNLVDUHQRZQHG3RQWLF*UHHNVFKRODU ZKROLYHGLQ0HKPHG,,¶VFRXUWIURPWLOOKLVGHDWKLQ+HDOVRKDGWZRWUHDWLVHVE\$OL.XVFXRQ PDWKHPDWLFVDQGDVWURQRP\WUDQVODWHGIURP3HUVLDQLQWR$UDELF



3DJH

7KUHHWUDQVODWLRQVLQWR7XUNLVKIURPWKLVSHULRGDUHZRUWKPHQWLRQLQJ7KHILUVWLV3OXWDUFK¶V/LYHVZKLFK *LEERQLQ$GLYDU± FODLPHGZDVWUDQVODWHGIURP*UHHNRQWKH6XOWDQ¶VRUGHUV7KHVHFRQGLVWKH OLIHDQGGHHGVRI8]XQ+DVDQWKH.LQJRI3HUVLDIURPWKH,WDOLDQRULJLQDOE\*LRYDQQL0DULD$QJLROHOORZKR WRRNSDUWLQWKHH[SHGLWLRQZLWKWKH6XOWDQ¶VVRQ7KHWKLUGWH[WLVRISDUWLFXODULQWHUHVWVLQFHLWZDVD WUDQVODWLRQRIDGHWDLOHGH[SRVLWLRQRIWKH&KULVWLDQFUHHGE\WKH*UHHN2UWKRGR[3DWULDUFK*HQQDGLRV 6FKRODULRVZKRVRRQDIWHUWKHFRQTXHVWRI&RQVWDQWLQRSOHZDVFDOOHGLQWRDGHEDWHZLWKWKH6XOWDQWKH GHEDWHWRRNSODFHWKURXJKDQLQWHUSUHWHUZKRZDVDVNHGWRUHFRUGLWLQZULWLQJ7KHLPSRUWDQFHRIWKLV GRFXPHQWLVVXFKWKDWYDULRXVWUDQVODWRUVRYHUWKHFHQWXULHVZHUHDVNHGWRLPSURYHRQLW7KHWH[WZDV SDUWSXEOLVKHGLQWKH0HFPXDL(EX]]L\D-RXUQDORI(EX]]L\D LQ,VWDQEXOLQ 7KHVFLHQWLILFUHQDLVVDQFHLQLWLDWHGXQGHUWKHSDWURQDJHRI0HKPHG,,GLGQRWFRQWLQXHXQGHUKLVVXFFHVVRUV 2WWRPDQVFLHQFHDQGPHGLFLQHUHPDLQHGJHQHUDOO\FRQILQHGWRWKHZRUNVRIDQGFRPPHQWDULHVRQ$ULVWRWOH 3WROHP\*DOHQDQG$YLFHQQDLQ$UDELFDQGLQWHUHVWLQRWKHUFXOWXUHVZDVQRWUHNLQGOHGXQWLOWKHHLJKWHHQWK FHQWXU\ 7UDQVODWLRQVIURP(XURSHDQVRXUFHVLQWKHHLJKWHHQWKFHQWXU\ 7KHOLEHUDODQGDHVWKHWLFRXWORRNFKDUDFWHULVWLFRIWKHUHLJQRI$KPHG,,,LQWKHHLJKWHHQWKFHQWXU\EURXJKW DERXWDUHDZDNHQLQJRILQWHUHVWLQ:HVWHUQ(XURSH%XWWKLVLQWHUHVWZDVPDLQO\LQQRQOLWHUDU\ZRUNV7KH RQO\(XURSHDQOLWHUDU\ZRUNWREHWUDQVODWHGZLWKDGGLWLRQV EHIRUHWKH7DQ]LPDWWKHUHIRUPVLQLWLDWHGLQWKH PLGQLQHWHHQWKFHQWXU\ ZDV$OL$]L](IHQGL¶V0XKD\\HODW)DQWDVLHV± DYHUVLRQRI3HWLVGHOD &URL[¶V/HV0LOOHHWXQMRXUV ,QDFRPPLWWHHRIZDVDSSRLQWHGE\*UDQG9H]LU,EUDKLP3DVKDWRWUDQVODWHIURP(XURSHDQDVZHOODV 2ULHQWDOODQJXDJHV2IWKLVJURXS(VDG(IHQGLWUDQVODWHG$ULVWRWOH¶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± 2WKHUZRUNVWUDQVODWHGIRUWKHILUVWWLPHLQFOXGH%HUQKDUGXV9DUHQLXV¶*HRJUDSKLD *HQHUDOLV +HUPDQ%RHUKDDYH¶V$SKRULVPL ZKLFKLQWURGXFHG+DUYH\¶VDQDWRPLFDOWUHDWLVHRQ EORRGFLUFXODWLRQWR2WWRPDQPHGLFLQHDQG,EUDKLP0WHIHUULND¶VYHUVLRQV RIWZRVFLHQWLILFZRUNVLQ /DWLQGLVFXVVLQJ*DOLOHR¶VDQG'HVFDUWHV¶WKHRULHVPDJQHWLVPDQGWKHFRPSDVV $PDMRUQRQPLOLWDU\LQQRYDWLRQLQWKHILUVWKDOIRIWKHHLJKWHHQWKFHQWXU\ZKLFKDOVRKDGDEHDULQJRQ WUDQVODWLRQVZDVWKHVHWWLQJXSRIWKHSULQWLQJSUHVVLQE\,EUDKLP0WHIHUULNDDFRQYHUWRI+XQJDULDQ RULJLQ-HZLVK± $UPHQLDQ DQG*UHHN SULQWLQJSUHVVHVKDGEHHQHVWDEOLVKHGLQ,VWDQEXO ORQJEHIRUHVSHFLDOSHUPLVVLRQFRXOGEHREWDLQHGIRUD7XUNLVKSUHVVWRSULQWERRNVRQQRQUHOLJLRXVVXEMHFWVL HH[FOXGLQJWKH4XU¶ƗQDQGFRPPHQWDULHVKRO\WUDGLWLRQVWKHRORJ\DQGKRO\ODZ/HZLV $PRQJ WKHILUVWERRNVWREHSXEOLVKHGE\WKH0XWHIHUULNDSUHVVVWDUWLQJLQZHUHWKH9DQNXOX/XJDWL7KH 9DQNXOL'LFWLRQDU\UHSULQWHGLQ± ZKLFKZDVµWUDQVODWHG¶LHUHQGHUHGELOLQJXDO IURPWKH$UDELFLQ WKHVL[WHHQWKFHQWXU\*UDPPDLUH7XUTXHD7XUNLVKJUDPPDULQ)UHQFK0XWHIHUULND¶VWUHDWLVHV DQG KLVH[SDQGHGYHUVLRQRI&LKDQQPD6KRZLQJWKH:RUOG DJHRJUDSKLFDOZRUNEDVHGRQ(XURSHDQVRXUFHV E\.kWLSdHOHELDOVRNQRZQDV+DFL+DOLIH dHOHELZDVWKHWUDQVODWRURI0HUFDWRU¶V$WODV0LQRU± DQGDVFLHQWLILFWKLQNHUIDPRXVIRUKLVDWWHPSWVWREUHDNGRZQWKHEDUULHUVEHWZHHQ(DVWHUQDQG:HVWHUQ VFLHQFHLQWKHVHYHQWHHQWKFHQWXU\ 7KHVHFRQGSULQWLQJSUHVVVHWXSDWWKH6FKRRORI0LOLWDU\(QJLQHHULQJLQDOVR



3DJH

FKRVHDGLFWLRQDU\DVLWVILUVWERRNSULQWHGLQ WKLVZDV%XUKDQL.DDWL&RQYLQFLQJ3URRI µWUDQVODWHG¶ LQWRDELOLQJXDOYHUVLRQIURPWKH3HUVLDQDQGFRPSLOHGE\$VLP(IHQGLNQRZQDV0WHUFLP7UDQVODWRU $VLP 7KH7DQ]LPDWSHULRGµ(QOLJKWHQPHQW¶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ú HVWDEOLVKHGLQDQGVXEVLGL]HGE\WKHJRYHUQPHQWDQGWKH2WWRPDQ6FLHQWLILF6RFLHW\&HPL\HWL ,OPL\H\L2VPDQL\H IRXQGHGLQE\0QLI3DVKDDQHPLQHQWPHPEHURIWKH7UDQVODWLRQ&KDPEHUZKR ZDVHGXFDWHGLQ(J\SW$WWKHVHFHQWUHVZKLFKLQFOXGHGQRQ0XVOLPPHPEHUVWUDQVODWLRQDFWLYLW\IURP (XURSHDQVRXUFHVZDVRUJDQL]HGWRSURYLGHWHDFKLQJPDWHULDOVIRUDSURVSHFWLYHXQLYHUVLW\DQGWRLQWURGXFH DQGSURPRWHVFLHQWLILFDQGVFKRODUO\ZRUN$WUDQVODWLRQRI-%6D\¶V&DWpFKLVPHG¶eFRQRPLH3ROLWLTXH DQGDELRJUDSKLFDOGLFWLRQDU\RIHPLQHQW(XURSHDQVWDWHVPHQERWKE\$EUR6DKDN(IHQGLZHUHDPRQJ WKHILUVWZRUNVWREHSXEOLVKHGE\WKH$FDGHP\6HYHUDOKLVWRULHVZHUHDOVRZULWWHQRUWUDQVODWHGE\WKH PHPEHUVRIWKH$FDGHP\EXWUHPDLQHGLQGUDIWIRUPDQGZHUHQHYHUSXEOLVKHGWKH\LQFOXGHG$KPHG $÷ULER]L¶VKLVWRU\RI$QFLHQW*UHHFH7RGRUDNL(IHQGL¶VWUDQVODWLRQRIDKLVWRU\RI(XURSHDQG$OHNR(IHQGL¶V ERRNRQWKHODVW1DSROHRQLFFDPSDLJQV7KHILUVWKLVWRU\RI*UHHNSKLORVRSK\LQ7XUNLVK$EUpJpGHOD9LHGHV 3OXV,OOXVWUHV3KLORVRSKHVGHO¶$QWLTXLWp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pQHORQDQG)RQWHQHOOHXQGHUWKHWLWOH0XKDYHUDWL+LNHPL\H 3KLORVRSKLFDO'LDORJXHV 7KLVZRUNLVKLJKO\VLJQLILFDQWJLYHQWKDWLWZDVWKHILUVWWRLQWURGXFHWKH EDVLFWHQHWVRI(XURSHDQ(QOLJKWHQPHQWLQ7XUNLVKDQGLQDQHQYLURQPHQWZKHUHµSKLORVRSKLFDOVSHFXODWLRQ GLYRUFHGIURPWKHRORJ\ZDVFRQVLGHUHGKHUHWLFDO¶0DUGLQ 7ZRRWKHUWUDQVODWLRQVDSSHDUHGLQWKHVDPH\HDUDQGPDUNHGWKHDZDNHQLQJRILQWHUHVWLQ(XURSHDQFODVVLFV WKH\WRRZHUHWRKDYHDODVWLQJLQIOXHQFHRQIRUPVDQGLGHDVWKDWVKDSHGPRGHUQ7XUNLVKOLWHUDWXUH7HUFHPHL 7HOHPDNZDVDYHUVLRQRI$EEp)pQHORQ¶V/HV$YHQWXUHVGH7pOpPDTXHDSROLWLFDOSKLORVRSKLFDOQRYHOEXW DOVRDµPLUURUIRUSULQFHV¶ZKLFKZDVPRUHUHDGLO\DFFHSWDEOHLQWKH2WWRPDQWUDGLWLRQWKDWIDYRXUHG(DVWHUQ H[DPSOHVRIWKLVJHQUH7pOpPDNZDVILUVWFLUFXODWHGLQPDQXVFULSWDQGZDVQRWSXEOLVKHGXQWLO7KH WUDQVODWRUZDVWKH*UDQG9H]LU<XVXI.DPLO3DVKDZKRKDGVHUYHGLQ(J\SWZKHUHWKHZRUNKDGDOUHDG\ EHHQWUDQVODWHGLQWR$UDELFDQGZDVZHOOUHFHLYHG7HUFXPHL0DQ]XPHZDVDFROOHFWLRQRIYHUVHE\/D )RQWDLQH/DPDUWLQH*LOEHUWDQG5DFLQHWUDQVODWHGE\,EUDKLPùLQDVLWRLQWURGXFH(XURSHDQSRHWU\LQ WUDGLWLRQDODUX]YHUVH



3DJH

DGDSWHGIURPFODVVLFDO$UDELFDQG3HUVLDQ WRIDFLOLWDWHLWVUHFHSWLRQ 7KHILUVWOLWHUDU\WUDQVODWRUVKDGWKXVVHUYHGWRLQWURGXFHWKUHHQHZOLWHUDU\JHQUHV:HVWHUQSRHWU\ SKLORVRSKLFDOGLDORJXHDQGWKHQRYHO$\HDUODWHULQ,EUDKLPùLQDVLZURWHWKHILUVW7XUNLVKGRPHVWLF FRPHG\DQGVHULDOL]HGLWLQWKHQHZVSDSHU7HUFPDQL$KYDO,QWHUSUHWHURI&RQGLWLRQV LQùLQDVLZKR KDGWUDLQHGDWRQHRIWKHGHSDUWPHQWDOWUDQVODWLRQFKDPEHUVDQGKDGYLVLWHG)UDQFHZDVDOVRWKHIRXQGHUDQG FKLHIHGLWRURI7DVYLUL(INk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¶V/HV0LVpUDEOHVZDVVHULDOL]HGLQIROORZHGLQVXEVHTXHQW\HDUVE\&KDWHDXEULDQG¶V$WDOD GH6DLQW3LHUUH¶V3DXOHW9LUJLQLH 9ROWDLUH¶V0LFURPpJDV DQG'XPDVSqUH¶V/H&RPWH GH0RQWH&ULVWR 7KHVWUDWHJLHVIROORZHGLQVXFKWUDQVODWLRQVRIILFWLRQPRVWRIZKLFKZHUHODWHU SXEOLVKHGLQERRNIRUPFUHDWHGDJHQHUDODZDUHQHVVRIWKHWUDQVODWRUV¶QRUPVDQGRIWKHSUREOHPVWKH\IDFHG ,QKLVSUHIDFHWR$WDODSXEOLVKHGLQERRNIRUPLQ 5HFDL]DGH(NUHPGUHZDWWHQWLRQWRWKHLQDGHTXDF\RI FRQWHPSRUDU\7XUNLVKSURVHIRUWKHSXUSRVHVRIWUDQVODWLRQ7RLPSURYHRQWKHILUVWVHULDOL]HGYHUVLRQV 0LFURPpJDV DQGWKHILUVWHLJKWFKDSWHUVRI/HV0LVpUDEOHV ZHUHUHWUDQVODWHGE\$KPHG9HILN 3DVKDDQGùHPVHGGLQ6DPLUHVSHFWLYHO\$KPHG9HILN3DVKDDUHQRZQHGOH[LFRJUDSKHUOLNHùHPVHGGLQ6DPL DOVRUHWUDQVODWHG/HV$YHQWXUHVGH7pOpPDTXH ,QFRQWUDVWWR<XVXI.DPLO3DVKD¶VHDUOLHUWUDQVODWLRQLQ WKHWUDGLWLRQDOJUDQGVW\OHKLVYHUVLRQXVHGVLPSOHUYRFDEXODU\DQGV\QWD[LQWHQGHGWREHOLWHUDODQGDFFXUDWH DVZHOODVSOHDVLQJIRUWKHUHDGHUùHPVHGGLQ6DPLFULWLFL]HGIRUEHLQJWRROLWHUDOLQKLVYHUVLRQRI/HV 0LVpUDEOHVGHIHQGHGKLVVWUDWHJ\LQKLVSUHIDFHWRKLVWUDQVODWLRQRI5RELQVRQ&UXVRH DUJXLQJWKDWQHZ LGHDVFRXOGQRWEHFRQYH\HGLQWKHFRQYHQWLRQDO2WWRPDQVW\OHDQGWKDWFORVHDGKHUHQFHWRWKHVRXUFHWH[WDQG WKHXVHRIVLPSOHSURVHZHUHFRQVFLRXVPRYHVWRXVHWKHIXOOSRWHQWLDORIWKH7XUNLVKODQJXDJH7KHLU FRQWHPSRUDU\$KPHG0LGKDW(IHQGLRQWKHRWKHUKDQGSXUVXHGQRWRQHEXWDYDULHW\RIUHZULWLQJVWUDWHJLHV LQKLVQXPHURXVYHUVLRQVRIFODVVLFVDQGSRSXODUERRNVUHQGHUHGIURP)UHQFK,QKLVSUHIDFHVKHIUHTXHQWO\ H[SUHVVHGKLVDYHUVLRQIRUµOLWHUDO¶WUDQVODWLRQEHFDXVHWKHUHVXOWGLGQRWUHDGOLNHDQRULJLQDOKHFRQWULEXWHGWR WKHHODERUDWLRQRIDFULWLFDOWKHRUHWLFDOGLVFRXUVHZKLFKH[SORUHGGLVWLQFWLRQVEHWZHHQFRQFHSWVVXFKDV µWUDQVODWLRQ¶µLQWHUSUHWDWLRQ¶DQGµDSSURSULDWLRQ¶ 7KH\HDUV±ZHUHWKHPRVWSURGXFWLYHIRUWKHZULWHUVWUDQVODWRUVRIWKH7DQ]LPDW6XEVHTXHQWO\ FHQVRUVKLSLQ$EGOKDPLG,,¶VUHLJQOHGPDLQO\WRWKHWUDQVODWLRQRISRSXODU)UHQFKILFWLRQ7KH&RQVWLWXWLRQDO 5HYROXWLRQRIDQGWKHGHSRVLWLRQRI$EGOKDPLG,,ZHUHIROORZHGE\DVLJQLILFDQWUHYLYDORIWUDQVODWLRQV RIFDQRQL]HGZRUNVLQKLVWRU\SKLORVRSK\DQGWKHVRFLDOVFLHQFHVDVZHOODV(QJOLVK*HUPDQDQG5XVVLDQ OLWHUDWXUH$EGXOODK&HYGHWZKRWUDQVODWHG6KDNHVSHDUHDQGMRXUQDOLVWV+VH\LQ&DKLWDQG+D\GDU5LIDWZHUH WKHPRVWDFWLYHDQGFRPPLWWHGWUDQVODWRUVRIWKHSHULRG

7UDQVODWLRQLQWKH5HSXEOLFWRWKHSUHVHQW $VLQWKHQLQHWHHQWKFHQWXU\WUDQVODWLRQLQWKHHDUO\WZHQWLHWKFHQWXU\ZDVLQVWUXPHQWDOLQLQLWLDWLQJWKH FXOWXUDOUHYROXWLRQZKLFKVXSSRUWHGWKH:HVWHUQL]LQJSURJUDPPHRIWKHVHFXODUUHSXEOLFRI7XUNH\IRXQGHG E\0XVWDID.HPDO$WDWUN LQ,Q5HP]L.LWDEHYLDSULYDWHSXEOLVKLQJFRPSDQ\VWDUWHGLWVVHULHV 7UDQVODWLRQVIURP:RUOG$XWKRUV,QWKHVDPH\HDUD&RPPLVVLRQIRU2ULJLQDODQG7UDQVODWHG:RUNVZDV IRUPHGE\WKH0LQLVWU\RI(GXFDWLRQWRSURGXFHSXEOLFDWLRQVIRUHGXFDWLRQDOSXUSRVHV,QWKH5RPDQ VFULSWZDVRIILFLDOO\DGRSWHG



3DJH

WRUHSODFH$UDELFOHWWHUV7KHILUVW7XUNLVKWUDQVODWLRQRIWKH4XU¶ƗQLQWKH5RPDQDOSKDEHWDSSHDUHGLQ 7KHPRYHPHQWIRUVLPSOH7XUNLVKWKDWKDGEHJXQLQWKHQLQHWHHQWKFHQWXU\XOWLPDWHO\UHVXOWHGLQWKH VWDWHVSRQVRUHGUDGLFDOODQJXDJHUHIRUPRIWKHUHSXEOLFLQWKHVZKHUHE\7XUNLVKZDVDOVRWREHµSXULILHG¶ RI$UDELFDQG3HUVLDQLQIOXHQFH 7KHUHYROXWLRQDU\PRYHPDGHE\+DVDQÆOL<FHO0LQLVWHURI(GXFDWLRQLQVHWWLQJXSD7UDQVODWLRQ &RPPLWWHHLQDQGD7UDQVODWLRQ2IILFHLQZDVLQWHQGHGWRUHLQIRUFHWKHQHZODQJXDJHSROLFLHVDQG WRRUJDQL]HDSURJUDPPHIRUFXOWXUDOUHYLYDO7KH2IILFHFRPSRVHGODUJHO\RIDFDGHPLFVDQGSURPLQHQWPHQ RIOHWWHUVZDVWRVHOHFWDQGWUDQVODWHµZRUOGFODVVLFV¶EHJLQQLQJZLWK$QFLHQW*UHHNSKLORVRSK\DQGOLWHUDWXUH 6XFKNH\WH[WVZHUHDOVRHVVHQWLDOIRULQVWUXFWLRQLQWKHQHZKXPDQLWLHVGHSDUWPHQWVRIWKHXQLYHUVLWLHVLQ ,VWDQEXODQG$QNDUD7KHJHQHUDODLPZDVWRµJHQHUDWH¶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± ZKLFKZDVKLJKO\LQIOXHQWLDO QRWRQO\LQWHUPVRIGUDZLQJDWWHQWLRQWRWKHDFWLYLWLHVRIWKH2IILFHEXWDOVRLQWHUPVRIFUHDWLQJDFULWLFDO IRUXPIRUWKHGLVFXVVLRQRIOLWHUDU\WUDQVODWLRQ7ZRSUHVWLJLRXVWUDQVODWLRQMRXUQDOV


3DJH

,QUHVSRQVHWRDJURZLQJGHPDQGIRUFRPSHWHQWSURIHVVLRQDOWUDQVODWRUVDQGFRQIHUHQFHLQWHUSUHWHUVLQ(QJOLVK GHSDUWPHQWVRIWUDQVODWLRQDQGLQWHUSUHWLQJZHUHVHWXSLQ±LQWZRXQLYHUVLWLHV%R÷D]LoL,VWDQEXO DQG +DFHWWHSH$QNDUD $SDUWIURPIRXU\HDUGHJUHHFRXUVHVWKHVHGHSDUWPHQWVDOVRRIIHU0$DQG3K'GHJUHHV LQWUDQVODWLRQVWXGLHV7KH3K'SURJUDPPHDW%R÷D]LoL8QLYHUVLW\ZDVWKHILUVWWRRIIHUDFRXUVHRQWKHKLVWRU\ RIWUDQVODWLRQLQ2WWRPDQ7XUNLVKVRFLHW\ZLWKWKHDLPRIIRUHJURXQGLQJWKHOLQNVEHWZHHQWUDQVODWLRQDQG OLWHUDU\FXOWXUDOKLVWRU\ <6<67(07+(25<WUDGLWLRQ/LQJXLVWLFDQGSHGDJRJLFDOVWXGLHVKDYHEHHQDFWLYHO\SXUVXHGE\ +DFHWWHSH8QLYHUVLW\ZKLFKKDVSXEOLVKHGdHYLULELOLPYH8\JXODPDODUL6WXGLHVLQ7UDQVODWRORJ\ VLQFH ,Q720(5%XUVDODXQFKHGWKHILUVWERRNLQWKHVHULHVdHYLULELOLP7UDQVODWRORJ\ 'HVSLWHWKHYHU\ODUJHQXPEHURIWHFKQLFDOOLWHUDU\WUDQVODWRUVDQGWUDQVODWLRQDJHQFLHVWKHUHLVQR SURIHVVLRQDORUJDQL]DWLRQZKLFKUHSUHVHQWVWUDQVODWRUVLQ7XUNH\,QWHUSUHWHUVDUHUHSUHVHQWHGE\WKH $VVRFLDWLRQRI&RQIHUHQFH,QWHUSUHWHUVIRXQGHGLQZLWKWKHDLPRISURPRWLQJWKHSURIHVVLRQDQG HVWDEOLVKLQJSULQFLSOHVWKDWFRQIRUPZLWKWKHLQWHUQDWLRQDOVWDQGDUGVRIWKH$662&,$7,21 ,17(51$7,21$/('(6,17(535Ê7(6'(&21)(5(1&($,,& ,QWKH$VVRFLDWLRQKDG DSSUR[LPDWHO\PHPEHUVZRUNLQJLQVLPXOWDQHRXVFRQVHFXWLYHDQGELODWHUDOLQWHUSUHWLQJDVZHOODVZULWWHQ WUDQVODWLRQ

)XUWKHUUHDGLQJ $GLYDU.XW0DUGLQ2UKRQOX3DNHU3DNHUHWDO3DNHUDQG7RVNDIRUWKFRPLQJ 6WUDXVV7HNLQ

6$/,+$3$.(5

%LRJUDSKLHV $7$d1XUDOODK± /LWHUDU\FULWLFDQGWUDQVODWRUDQGVRQRI$WD%H\G ZKRLVUHQRZQHG IRUKLVWUDQVODWLRQRI+DPPHU¶V2WWRPDQ+LVWRU\1XUDOODK$WDoZDVDSSRLQWHGE\WKH0LQLVWU\RI(GXFDWLRQ DVKHDGRIWKH7UDQVODWLRQ2IILFHLQ±WRVXSHUYLVHWKHWHDPRIGLVWLQJXLVKHGWUDQVODWRUVZKRDVSLUHGWR EULQJDERXWWKHµUHQDLVVDQFH¶RI7XUNLVKFXOWXUHWKURXJKWKHWUDQVODWLRQRI:HVWHUQFODVVLFV+HWUDQVODWHGIURP )UHQFKDQGZDVDFRQWURYHUVLDOOLWHUDU\FULWLFDQGDVW\OLVWLFLDQLQKLVRZQULJKWDSXULVWLQKLVXVHRIODQJXDJH ZKRKDGDSRZHUIXOLPSDFWRQPRGHUQ7XUNLVKSURVH &(9'(7$EGXOODK± 0HGLFDOGRFWRUSRHWZULWHUSXEOLVKHUDQGWUDQVODWRU$QLGHRORJLFDO OHDGHURIWKH


3DJH

(5+$7$]UD± (VVD\LVWDQGWUDQVODWRU(GXFDWHGLQ%HOJLXP(UKDWZDVRQHRIWKHILUVW7XUNLVK FODVVLFLVWV6KHOHFWXUHGDW$QNDUD8QLYHUVLW\EXWZDVGLVPLVVHGLQIRUKHUOHIWZLQJYLHZV6KHZDVDOVR DPHPEHURIWKH7UDQVODWLRQ2IILFHIRUZKLFKVKHWUDQVODWHG6RSKRFOHV(XULSLGHV$ULVWRSKDQHVDQG3ODWR +HUWUDQVODWLRQVZLWKWKHSRHW$.DGLU RIWKH,OLDGDQGWKH2G\VVH\LQIUHHYHUVHKDYHORQJEHHQUHFRJQL]HG DVPDVWHUSLHFHV (


3DJH

SXULILFDWLRQRI7XUNLVKIURP3HUVLDQDQG$UDELFLQIOXHQFH 9(),.3$6+$$KPHG± 6WDWHVPDQGLSORPDWWUDQVODWRUDQGOH[LFRJUDSKHU/LNHPDQ\VWDWHVPHQ RIKLVWLPH9HILN3DVKDEHJDQKLVFDUHHULQWKH7UDQVODWLRQ&KDPEHUDWWKH6XEOLPH3RUWH+HZDVWKH JUDQGVRQRI


3DJH

%LEOLRJUDSK\ $DOWRQHQ+ µ6XRPHQWDPLVHQYDUKDLVYDLKHLWD¶>(DUO\6WDJHVRI7UDQVODWLRQLQWR)LQQLVK@LQ-3HWHULHWDOHGV YXRWLVMXKODMXONDLVX>WK$QQLYHUVDU\)HVWVFKULIWIRUWKH7XUNX%UDQFKRIWKH)LQQLVK$VVRFLDWLRQRI7UDQVODWRUV DQG,QWHUSUHWHUV@7XUNX6XRPHQNllQWlMLHQMDWXONNLHQOLLWWR7XUXQSDLNDOOLVRVDVWR $DOWRQHQ6 $FFXOWXUDWLRQRIWKH2WKHU,ULVK0LOLHX[LQ)LQQLVK'UDPD7UDQVODWLRQ-RHQVXX-RHQVXX 8QLYHUVLW\3UHVV $EX/LEGHK$ µ$'LVFRXUVH3HUVSHFWLYHRQ)LJXUDWLYH([SUHVVLRQLQ/LWHUDU\:RUNVZLWK5HIHUHQFHWR (QJOLVK$UDELF7UDQVODWLRQ¶8QSXEOLVKHG3K'WKHVLV(GLQEXUJK+HULRW:DWW8QLYHUVLW\ $FFHVVWR,QWHUSUHWHUVLQWKH$XVWUDOLDQ/HJDO6\VWHP 5HSRUWE\WKH&RPPRQZHDOWK$WWRUQH\*HQHUDO¶V 'HSDUWPHQW&DQEHUUD$*36$XVWUDOLDQ*RYHUQPHQW3XEOLFDWLRQ6HUYLFH $FWD8QLYHUVLWDWLV&DUROLQDH7UDQVODWRORJLFD3UDJHQVLD± 3UDJXH&KDUOHV8QLYHUVLW\ $GLYDU$$GQDQ 2VPDQOL7XUNOHULQGH,OLP>6FLHQFHLQ2WWRPDQ7XUNH\@5HP]L.LWDEHYL,VWDQEXO $(&0$ $*XLGHIRUWKH3UHSDUDWLRQRI$LUFUDIW0DLQWHQDQFH'RFXPHQWDWLRQLQWKH$HURVSDFH0DLQWHQDQFH /DQJXDJH$(&0$6LPSOLILHG(QJOLVK$(&0$'RFXPHQW36&±,VVVXH%UXVVHOV $LMPHU.DQG%$OWHQEHUJ ,QWURGXFWLRQLQ.$LMPHU%$OWHQEHUJDQG0-RKDQVVRQHGV /DQJXDJHVLQ &RQWUDVW3DSHUVIURPD6\PSRVLXPRQ7H[WEDVHG&URVVOLQJXLVWLF6WXGLHV/XQG±0DUFK/XQG/XQG 8QLYHUVLW\3UHVV $OEHUWVHQ// /LWWHU URYHUV°WWHOVH>/LWHUDU\7UDQVODWLRQ@&RSHQKDJHQ $OEUHFKW- /LQJXLVWLNXQGhEHUVHW]XQJ7ELQJHQ1LHPH\HU9HUODJ $OEUHNWVRQ% µ7KH6ZHGLVK2OG7HVWDPHQW7UDQVODWLRQ3URMHFW¶LQ.RUOLQ*UlKVDQG%0DOPEHUJHGV 7KHRU\DQG3UDFWLFHRI7UDQVODWLRQ6WRFNKROP1REHO6\PSRVLXP $OHNVpHY0LNKDwO3DYORYLF µ/HSOXULOLQJXLVPHHWODFUHDWLRQOLWWpUDLUH¶3URFHHGLQJVRIWKH9,WK,&/$ &RQJUHVV6WXWWJDUW%LHEHU± $OH[DQGHU0- µ2OG(QJOLVK3RHWU\LQWR0RGHUQ(QJOLVK9HUVH¶7UDQVODWLRQDQG/LWHUDWXUH $OH[DQGHU0LFKDHOHG 7KH(DUOLHVW(QJOLVK3RHPV+DUPRQGVZRUWK3HQJXLQ F$OL-DZƗG $O0XIDVVDOIL7ƗUƯNKDOF$UDE4DEODDO,VOƗP>$'HWDLOHG+LVWRU\RIWKH$UDEV3ULRUWRWKH5LVH RI,VODP@YRO%HLUXW'DUDOF,OPOLO0DOƗ\ƯQDQG%DJKGDG0DNWDEDWDO1DKGD F$OL6ƗOHK6ƗOLP µ0LVUHSUHVHQWDWLRQRI6RPH(OOLSWHG6WUXFWXUHVLQWKH7UDQVODWLRQRIWKH4XUƗ¶Q¶0HWD ± $OLIDQR5REHUWR 7ZHQW\)RXU&RQYHUVDWLRQVZLWK%RUJHV,QFOXGLQJD6HOHFWLRQRI3RHPV,QWHUYLHZVE\ 5REHUWR$OLIDQR± +RXVDWRQLF0$/DVFDX[3XEOLVKHUV $ONVQLV,YDUV µ7KH+D]DUGVRI7UDQVODWLRQ¶3DUDOOqOHV±±±*HQHYD(7, $OPDJRU'DQ µ6KDNHVSHDUHEDVLIUXWKDLYULWELWNXIDWKDKDVNDODXELWNXIDWKDW[L\D6NLUDELEOL\RJUDILWX ELEOL\RJUDI\D¶>6KDNHVSHDUHLQ+HEUHZ/LWHUDWXUHRIWKH(QOLJKWHQPHQWDQG5HYLYDO3HULRGV$%LEOLRJUDSKLFDO 6XUYH\DQGD%LEOLRJUDSK\@LQ%RD]6KDKHYLWFKDQG0HQDKHP3HUU\HGV 6HIHUKD\RYHOOH6KLP¶RQ+DONLQ>6LPRQ +DONLQ-XELOHH9ROXPH@-HUXVDOHP5XELQ0DVV± $/3$& /DQJXDJHDQG0DFKLQHV&RPSXWHUVLQ7UDQVODWLRQDQG/LQJXLVWLFVDUHSRUWE\WKH$XWRPDWLF /DQJXDJH3URFHVVLQJ$GYLVRU\&RPPLWWHH'LYLVLRQRI%HKDYLRUDO6FLHQFHV1DWLRQDO5HVHDUFK&RXQFLO:DVKLQJWRQ '&1DWLRQDO$FDGHP\RI6FLHQFHV $OWDQR:% µ7KH,QWULFDWH:LWQHVV,QWHUSUHWHU5HODWLRQVKLS¶LQ'DQG0%RZHQHGV $OWPDQ-DQHWHG 7HDFKLQJ,QWHUSUHWLQJ6WXG\DQG3UDFWLFH/RQGRQ&HQWUHIRULQIRUPDWLRQRQ/DQJXDJH 7HDFKLQJDQG5HVHDUFK $OYDU&DUORVDQG$QJHO*yPH] µ7UDGXFFLRQHVIUDQFHVDVHQHOVLJOR;9¶LQ-&6DQWR\RHWDOHGV YRO ± G¶$OYHUQ\0DULH7KpUqVH µ$YHQGDXWK"¶+RPHQDMHD0LOOiV9DOOLFURV%DUFHORQD&RQVHMR6XSHULRUGH ,QYHVWLJDFLRQHV&LHQWtILFDV



3DJH ²² µ7UDQVODWLRQDQG7UDQVODWRUV¶LQ5REHUW/%HQVRQDQG*LOHV&RQVWDEOHHGV 5HQDLVVDQFHDQG5HQHZDOLQ WKH7ZHOIWK&HQWXU\±&DPEULGJH0$+DUYDUG8QLYHUVLW\3UHVV ²² µ/HVWUDGXFWHXUVDGHX[LQWHUSUqWHVG¶DUDEHHQODQJXHYHUQDFXODLUHHWGHODQJXHYHUQDFXODLUHHQODWLQ¶LQ 7UDGXFWLRQHWWUDGXFWHXUVDX0R\HQ$JHSURFHHGLQJVRID&156LQWHUQDWLRQDOFRQIHUHQFHKHOG±0D\ 3DULVeGLWLRQVGX&HQWUH1DWLRQDOGHOD5HFKHUFKH6FLHQWLILTXH $PHV5RJHU&KDQ6LQ:DLDQG1J0DXVDQJHGV ,QWHUSUHWLQJ&XOWXUHWKURXJK7UDQVODWLRQ+RQJ.RQJ &KLQHVH8QLYHUVLW\3UHVV $PPDQQ0DUJUHW *UXQGODJHQGHUPRGHUQHQ7UDQVODWLRQVWKHRULH²HLQ/HLWIDGHQIU6WXGLHUHQGH 7UDQVODWRULVFKHV+DQGHOQ +HLGHOEHUJ8QLYHUVLWlW ²² µ$QPHUNXQJHQ]XHLQHU7KHRULHGHUhEHUVHW]XQJVNULWLNXQGLKUHUSUDNWLVFKHQ$QZHQGXQJ¶ 7(;7FRQ7(;7± ²²DQG+DQV-9HUPHHU (QWZXUIHLQHV&XUULFXOXPVIUHLQHQ6WXGLHQJDQJ7UDQVODWRORJLHXQG7UDQVODWRULN 7UDQVODWRULVFKHV+DQGHOQ +HLGHOEHUJ-*URRV $PRV) (DUO\7KHRULHVRI7UDQVODWLRQ1HZ 7KH0LGGOH$JHVLQ6ZHGHQIURPWKH3HUVSHFWLYH RI2OG6ZHGLVK@LQ*'DKOElFNHG 6YHQVNPHGHOWLGVIRUVNQLQJLGDJ(QIRUVNQLQJV|YHUVLNW>0RGHUQ6ZHGLVK 5HVHDUFKLQWRWKH0HGLHYDO3HULRG$6XUYH\@8SSVDOD+XPDQLVWLVNVDPKlOOVYHWHQVNDSOLJDIRUVNQLQJVUnGHW± $QGUDGH2GH 'RSDXEUDVLODDQWURSRIDJLDHjVXWRSLDV0DQLIHVWRVWHVHVGHFRQFXUVRVHHQVDLRV5LRGH -DQHLUR(GLWRUD&LYLOL]DomR%UDVLOHLUD $QJHQRW0-%HVVLqUH')RNNHPDDQG(.XVKQHUHGV 7KpRULHOLWWpUDLUH3DULV38) $RNL7DPRWVX µ=XUhEHUVHW]EDUNHLWYRQ.XOWXU¶WUDQV6KLQJR6KLPDGDLQ-0DWWKHVHG =ZLVFKHQGHQ .XOWXUHQ"'LH6R]LDOZLVVHQVFKDIWHQYRUGHP3UREOHPGHV.XOWXUYHUJOHLFKV*|WWLQJHQ2WWR6FKZDUW]DQG&R± $SHO)ULHGPDU 6SUDFKEHZHJXQJ(LQHKLVWRULVFKSRHWRORJLVFKH8QWHUVXFKXQJ]XP3UREOHPGHVhEHUVHW]HQV +HLGHOEHUJ&DUO:LQWHU $SROOLQDLUH*XLOODXPH &DOOLJUDPPHVWUDQV$QQH+\GH*UHHW%HUNHOH\8QLYHUVLW\RI&DOLIRUQLD3UHVV $SSLDK.ZDPH$QWKRQ\ µ7KLFN7UDQVODWLRQ¶&DOODORR ± $SWHU5 'LJJLQJIRUWKH7UHDVXUH7UDQVODWLRQDIWHU3RXQG1HZ $ERXWWKHµ)DLWKIXO%HDXWLHV¶@6HFROXO[[± $ULVWRWOH 3RHWLFVLQ+D]DUG$GDPVHG &ULWLFDO7KHRU\6LQFH3ODWR1HZ


3DJH $UURMR5RVHPDU\ 7UDGXomRGHVFRQVWUXomRHSVLFDQiOLVH5LRGH-DQHLUR,PDJR $UURZVPLWK:LOOLDPDQG5RJHU6KDWWXFNHGV 7KH&UDIWDQG&RQWH[WRI7UDQVODWLRQ+XPDQLWLHV5HVHDUFK &HQWUH$XVWLQ7;8QLYHUVLW\RI7H[DV3UHVV5HSULQWHG1HZ ,QWHUSUHWDWLRQ²:KHUHDQG+RZ@&RSHQKDJHQ %DEDN+DVDQ µ7DUMRPHKYD7D¶VLUHDQGDU=DEDQYD$GDEH3DUVL¶>7UDQVODWLRQDQGLWV,QIOXHQFHRQWKH 3HUVLDQ/DQJXDJHDQG/LWHUDWXUH@LQ6RNKDQUDQLKD\H'RYYRPLQ'RZUHK\H-DOHVDWH6RNKDQUDQLYD%DKVGDUEDUHK \H=DEDQH)DUVL>7KH6HFRQG5RXQGRI/HFWXUHVLQ/HFWXUHDQG'LVFXVVLRQ6HULHVRQWKH3HUVLDQ/DQJXDJH@7HKUDQ (GDUHKH.ROOH1DJDUHVKH9H]DUDWH)DUKDQJYD+RQDU± %DELQLRWLV* *ORVVRORJLDNH/RJRWHFKQLD>/LQJXLVWLFVDQG/LWHUDWXUH@$WKHQV'HVSLQD0DYURPPDWL %DEOHU2) µ3RH¶V³5DYHQ´DQGWKH7UDQVODWLRQRI3RHWU\¶LQ+ROPHVGH+DDQDQG3RSRYLþHGV %DHWHQV%HDUGVPRUH+XJR µ3RO\JORW/LWHUDWXUHDQG/LQJXLVWLF)LFWLRQ¶,QWHUQDWLRQDO-RXUQDORIWKH6RFLRORJ\ RI/DQJXDJH± %DLO\Q%HG 3DPSKOHWVRIWKH$PHULFDQ5HYROXWLRQ±&DPEULGJH0$+DUYDUG8QLYHUVLW\3UHVV %DNHU&DQG5%DWWLVRQHGV 6LJQ/DQJXDJHDQGWKH'HDI&RPPXQLW\(VVD\VLQ+RQRURI:LOOLDP& 6WRNRH6LOYHU6SULQJ0'1DWLRQDO$VVRFLDWLRQRIWKH'HDI ²²DQG'&RNHO\ $PHULFDQ6LJQ/DQJXDJH$7HDFKHU¶V5HVRXUFH7H[WRQ*UDPPDUDQG&XOWXUH6LOYHU 6SULQJ0'7-3XEOLVKHUV %DNHU0RQD ,Q2WKHU:RUGV$&RXUVHERRNRQ7UDQVODWLRQ/RQGRQDQG1HZ 7KH3RHWLFVRI/LWHUDU\7UDQVODWLRQ@LQ2SUyF]JáRVX6]NLFH KLVWRU\F]QROLWHUDFNLH>$SDUWIURPWKH9RLFH6WXGLHVLQ/LWHUDU\&ULWLFLVP&ROOHFWHG:RUNVRI(%DOFHU]DQ@:DUVDZ 3DĔVWZRZ\,QVW\WXW:\GDZQLF]\



3DJH ²² 3LVDU]HSROVF\RV]WXFHSU]HNáDGX±$QWRORJLD>3ROLVK$XWKRUVRQWKH$UWRI7UDQVODWLRQ± $Q$QWKRORJ\@3R]QDĔ:\GDZQLFWZR3R]QDĔVNLH ²² µ3HUHYRGNDNWYRUFKHVWYR¶>7UDQVODWLRQDV&UHDWLYLW\@%DEHO ²²HG :LHORMH]\F]QRĞüOLWHUDWXU\LSUREOHP\SU]HNáDGXDUW\VW\F]QHJR>3OXULOLQJXDOLVPLQ/LWHUDWXUHDQGWKH 3UREOHPVRI/LWHUDU\7UDQVODWLRQ@:URFáDZ2VVROLQHXP ²²HG 0LHMVFDZVSyOQH6]NLFHRNRPXQLNDFMLOLWHUDFNLHMLDUW\VW\F]QHM>&RPPRQ$UHDV6WXGLHVLQ/LWHUDU\ DQG$UWLVWLF&RPPXQLFDWLRQ@:DUVDZ3DĔVWZRZH:\GDZQLFWZR1DXNRZH %DOGLFN& 7KH6RFLDO0LVVLRQRI(QJOLVK&ULWLFLVP±2[IRUG2[IRUG8QLYHUVLW\3UHVV %DOGLQL*DEULHOH /DIRUWXQDGL6KDNHVSHDUH0LODQ,,6DJJLDWRUH %DONDQ/ µ7UDQVODWLRQ7RROV¶0HWD ± %DOODUG0LFKHOHG /DWUDGXFWLRQGHODWKpRULHjODGLGDFWLTXH/LOOH8QLYHUVLWpGH/LOOH,,, ²² 'H&LFpURQj%HQMDPLQ7UDGXFWHXUVWUDGXFWLRQVUHIOH[LRQV/LOOH3UHVVHV8QLYHUVLWDLUHVGH/LOOH ²²HG 5HODWLRQV'LVFXUVLYHVHW7UDGXFWLRQeWXGHVGHOD7UDGXFWLRQ /LOOH3UHVVHV8QLYHUVLWDLUHVGH/LOOH %DOOHVWHU$QD µ7KH3ROLWLFVRI'XEELQJ6SDLQD&DVH6WXG\¶LQ3HWHU-DQVHQHG 7UDQVODWLRQDQGWKH 0DQLSXODWLRQRI'LVFRXUVH/HXYHQ&(75$WKH/HXYHQ5HVHDUFK&HQWHUIRU7UDQVODWLRQ&RPPXQLFDWLRQDQG &XOWXUHV± %DQGLD3DXO) µ7UDQVODWLRQDV&XOWXUDO7UDQVIHU(YLGHQFHIURP$IULFDQ&UHDWLYH:ULWLQJ¶7757UDGXFWLRQ 7HUPLQRORJLH5HGDFWLRQ %DQQ6WHSKHQ ,DQ+DPLOWRQ)LQOD\/RQGRQ$UWV&RXQFLO %DQQHW(YH7DYRU µ7KH6FHQHRI7UDQVODWLRQDIWHU-DNREVRQ%HQMDPLQGH0DQDQG'HUULGD¶1HZ/LWHUDU\ +LVWRU\± %DQWDú$D µ$QDOL]DWH[WXOXLúLWUDGXFHULOH¶>7H[W$QDO\VLVDQG7UDQVODWLRQV@6WXGLLúLFHUFHWăULOLQJYLVWLFH ± ²²E µ$)HZ3HFXODULWLHVRI&RQVHFXWLYH7UDQVODWLRQ¶LQ$%DQWDúHG (QJOLVKDQG&RQWUDVWLYH6WXGLHV %XFKDUHVW%XFKDUHVW8QLYHUVLW\3UHVV ²² µ$VSHFWVRI$SSOLHG6HPDQWLFVIRU0RGHUQL]LQJ%LOLQJXDO'LFWLRQDULHV¶5HYXH5RXPDLQHGHOLQJXLVWLTXH ± ²² µ7UDQVODWLRQRULHQWHG7H[W$QDO\VLV727$¶5HYXH5RXPDLQHGH/LQJXLVWLTXHDSSOLTXpH ± ²² µ5HOHYDQFHRI'\QDPLFFRQWH[WXDO$QDO\VLVWRWKH7KHRU\DQG,PSURYHPHQWRI7UDQVODWLRQV¶3DSHU SUHVHQWHGDWWKH6HFRQG,6$3/&RQJUHVV.DVVHO-XO\ ²² µ6\QRQ\PVLQ7HUPVRI/H[LFRJUDSK\DQG7UDQVODWLRQV¶8QSXEOLVKHGPDQXVFULSW8QLYHUVLW\RI 7LPLúRDUD ²² µ$)HZ+\SRWKHVHVRQ7UDQVODWHG3RHWU\¶5HYXH5RXPDLQHGH/LQJXLVWLTXH ± ²²DQG&0DQHD µ3URSHU1DPHVDQG1LFNQDPHV&KDOOHQJHVIRU7UDQVODWRUVDQG/H[LFRJUDSKHUV¶5HYXH 5RXPDLQHGH/LQJXLVWLTXH ± ²² µ$VSHFWVRIWKH:RUG&RQWH[W5HODWLRQ,PSURYLQJ6\QRQ\PLF2SWLRQLQWKH7UDQVODWLRQ3URFHVV¶ 5DVVHJQD,WDOLDQDGL/LQJXLVWLFD$SSOLFDWD ± ²² µ3URSHUDQG*HRJUDSKLFDO1DPHV%\QDPHVDQG2WKHU&KDOOHQJHVWR7UDQVODWRUV¶5DVVHJQD,WDOLDQDGL /LQJXLVWLFD$SSOLFDWD ± ²² µ1DPHV1LFNQDPHVDQG7LWOHVLQ7UDQVODWLRQ¶3HUVSHFWLYHV6WXGLHVLQ7UDQVODWRORJ\± %DQWLQJ3DPHOD %RG\,QF$7KHRU\RI7UDQVODWLRQ3RHWLFV:LQQLSHJ&DQDGD7XUQVWRQH3UHVV %DUDĔF]DN6 µ3U]HNáDGMDNR³VDPRLVWQ\´L RELHNWLQWHUSUHWDFMLQDPDUJLQHVLHQLHNWyU\FKSROVNLFK WáXPDF]HĔ*RWWIULHGD%HQQD ¶>7KH7UDQVODWLRQDVDµ6HOIVXIILFLHQW¶DQGµ,QWHJUDWHG¶2EMHFWRI,QWHUSUHWDWLRQ6RPH 3ROLVK7UDQVODWLRQVRI*RWWIULHG%HQQ@LQ-%DOXFKHG =WHRULLLKLVWRULLSU]HNáGDGXDUW\VW\F]QHJR>6WXGLHVLQWKH 7KHRU\DQG+LVWRU\[email protected]:\GDZQLFWZR8QLZHUV\WHWX-DJLHOORĔVNLHJR ²² 2FDORQHZWáXPDF]HQLX>6DYHGGXULQJWKH7UDQVODWLRQ@3R]QDĔ:\GDZQLFWZR %DUERXU3/HG 7KH-DPHVWRZQ9R\DJHV8QGHUWKH)LUVW&KDUWHU±YROV/RQGRQ7KH+DNOX\W 6RFLHW\ %DU+LOOHO< µ7KH3UHVHQW6WDWXVRI$XWRPDWLF7UDQVODWLRQRI/DQJXDJHV¶$GYDQFHVLQ&RPSXWHUV± %DULĠLX* µ&ODVLFLL¶>7KH&ODVVLFV@)RDLHSHQWUXPLQWHLQLPăVLOLWHUDWXUă ± %DUNKXGDURY/6 /DQJXDJHDQG7UDQVODWLRQ@0RVFRZ0H]KGXQDURGQ\HRWQRVKHQL\D %DUQVWRQH: µ3UHIHUHQFHVLQ7UDQVODWLQJ3RHWU\¶LQ)UDZOH\HG D ²² 7KH3RHWLFVRI7UDQVODWLRQ+LVWRU\7KHRU\3UDFWLFH1HZ+DYHQDQG/RQGRQ


3DJH 7UDGXFWLRQ7HUPLQRORJLH5HGDFWLRQ ± ²² µ7KH,QWHUSUHWHUDV,QWHUFXOWXUDO$JHQWLQ&RQYHQWLRQ5HIXJHH+HDULQJV¶7KH7UDQVODWRU ± %DUW,DQG65iNRVHGV $PIRUGtWiVPD>/LWHUDU\7UDQVODWLRQ7RGD\@%XGDSHVW*RQGRODW %DUWKHV5 (VVDLVFULWLTXHV3DULV6HXLOWUDQVDV&ULWLFDO(VVD\V(YDQVWRQ1RUWKZHVWHUQ8QLYHUVLW\ 3UHVV ²² (OHPHQWVGHVpPLRORJLH3DULV*RQWKLHUWUDQVDV(OHPHQWVRI6HPLRORJ\%RVWRQ%HDFRQ3UHVV %DUWVFK5 1RUPVRI/DQJXDJH7KHRUHWLFDODQG3UDFWLFDO$VSHFWV/RQGRQ/RQJPDQ %DUXFKVRQ6KLIUD 6IDULPYHNRU¶LPWDUEXWKDNUL¶DVKHO\HKXGHLWDO\DEHVKLOKHKDUHQHVDQV>%RRNVDQG 5HDGHUV7KH5HDGLQJ,QWHUHVWVRI,WDOLDQ-HZVDWWKH&ORVHRIWKH5HQDLVVDQFH@5DPDW*DQ%DU,ODQ8QLYHUVLW\3UHVV %DU\/ µ2VZDOGGH$QGUDGH¶V³&DQQLEDOLVW0DQLIHVWR¶´/DWLQ$PHULFDQ/LWHUDU\5HYLHZ ± %DVFRP:5 µ)RONORUH5HVHDUFKLQ$IULFD¶-RXUQDORI$PHULFDQ)RONORUH ± ²² µ7KH)RUPVRI)RONORUH3URVH1DUUDWLYHV¶-RXUQDORI$PHULFDQ)RONORUH %DVKDP$/ 7KH:RQGHUWKDWZDV,QGLD/RQGRQ6LGJZLFNDQG-DFNVRQ %DVVQHWW6XVDQ 7UDQVODWLRQ6WXGLHV/RQGRQDQG1HZ /LQJXLVWLF $SSURDFKWRWKH7KHRU\DQG7HDFKLQJRI7UDQVODWLRQ@&RUIX,RQLDQ8QLYHUVLW\ %DXHU50GH*UDDWDQG-:HUWKHLPHUHGV 'DV6KDNHVSHDUH%LOGLQ(XURSD]ZLVFKHQ$XINOlUXQJXQG 5RPDQWLN%HUQ3HWHU/DQJ %DXJK$&HG $/LWHUDU\+LVWRU\RI(QJODQGQGHGQ/RQGRQ5RXWOHGJHDQG.HJDQ3DXO %D\HU- 6KDNHVSHDUHGUiPiKKD]iQNEDQ,,,>7KH'UDPDVRI6KDNHVSHDUHLQRXU&RXQWU\@%XGDSHVW )UDQNOLQ %HDO6DPXHO QHZHGQ7KH/LIHRI+LXHQWVLHQJ/RQGRQ7UXEHU %HDQ0 µ&RPSXWHUDVVLVWHG'LDOHFW$GDSWDWLRQZLWKD0XOWLGLDOHFW7UDQVODWLRQ&RPPLWWHH¶1RWHVRQ 7UDQVODWLRQ ± %HDWRQ5 $Q,QWURGXFWLRQWR0RGHUQ*UHHN/LWHUDWXUH2[IRUG&ODUHQGRQ3UHVV %HDXMRXU(OL]DEHWK.ORVW\ $OLHQ7RQJXHV%LOLQJXDO5XVVLDQ:ULWHUVRIWKHµ)LUVW¶(PLJUDWLRQ,WKDFD&RUQHOO 8QLYHUVLW\3UHVV %HHE\$OOLVRQ µ'HOLPLWLQJ'LIILFXOWLHVDQG(VWDEOLVKLQJ3URJUHVVLRQLQ7HDFKLQJ7UDQVODWLRQIURP6SDQLVK $ /DQJXDJHWR(QJOLVK% /DQJXDJH¶LQ0DVRQDQG3DJQRXOOHHGV ²² 7HDFKLQJ3URVH7UDQVODWLRQIURP6SDQLVKWR(QJOLVK2WWDZD8QLYHUVLW\RI2WWDZD3UHVV %HHNPDQ-RKQDQG-RKQ&DOORZ 7UDQVODWLQJWKH:RUGRI*RG'DOODV6XPPHU,QVWLWXWHRI/LQJXLVWLFV %HHU-HG 0HGLHYDO7UDQVODWRUVDQG7KHLU&UDIW6WXGLHVLQ0HGLHYDO&XOWXUH;;9 .DODPD]RR0, :HVWHUQ0LFKLJDQ8QLYHUVLW\ %HMEOtN$ORLV µýHVNpSĜHNODG\+DYUDQD¶>&]HFKWUDQVODWLRQVRIµ7KH5DYHQ¶@LQ$ORLV%HMEOtNHG (GJDU $OODQ3RH+DYUDQâHVWQiFW=HVN\FKSĜHNODGĤ3UDJXH2GHRQ± %HNNX6 1LKRQQRPHL]XLKLWVXEHNNDQ+RQ\DNX>&HOHEUDWHG-DSDQHVH(VVD\VYRO7UDQVODWLRQ@ 7RN\R6DNXKLQVKD %HOO5RJHU µ0RGHOOLQJWKH7UDQVODWLRQ3URFHVV$0DMRU7DVNIRU7UDQVODWLRQ7KHRU\¶LQ3URFHHGLQJVRI &RQIHUHQFHRQ7UDQVODWLRQ7RGD\+RQJ.RQJ ²² 7UDQVODWLRQDQG7UDQVODWLQJ7KHRU\DQG3UDFWLFH/RQGRQDQG1HZ


3DJH %HQ6KDKDU5LQD µ7UDQVODWLQJ/LWHUDU\'LDORJXH$3UREOHPDQG,WV,PSOLFDWLRQVIRU7UDQVODWLRQLQWR +HEUHZ¶7DUJHW ± %HQGDYLG$EED /HVKRQPLNUDXOHVKRQ[D[DPLP>%LEOLFDO+HEUHZDQG0LVKQDLF+HEUHZ@,±,,7HO $YLY'YLU %HQHGLNWVVRQ- +XJW|NRJKHLWLLEyNPHQQWDIU°èL>*ORVVDU\RI7HUPVLQ/LWHUDU\7KHRU\@5H\NMDYLN0iORJ 0HQQLQJ %HQJL,VLQ µ7KH(ORTXHQW0HGLDWRU$KPHG0LGKDW(IHQGL¶LQ'RXZH)RNNHPDHG 3URFHHGLQJVRIWKH ;,,,WK&RQJUHVVRIWKH,QWHUQDWLRQDO&RPSDUDWLYH/LWHUDWXUH$VVRFLDWLRQYRO6SDFHDQG%RXQGDULHV0XQLFK ,XGLFLXP9HUODJ± %HQMDPLQ$QGUHZ 7UDQVODWLRQDQGWKH1DWXUHRI3KLORVRSK\$1HZ7KHRU\RI:RUGV/RQGRQDQG1HZ 7KH-R\RI5HDGLQJ &LUFXODWLQJ/LEUDULHVLQ6WRFNKROP±@8SSVDOD$YGHOQLQJHQIRUOLWWHUDWXUVRFLRORJLYLG /LWWHUDWXUYHWHQVNDSOLJDLQVWLWXWLRQHQ %ODDVFK:3&KDL[DQG$0DODPDK7KRPDVHGV 7ULDQJOH7KH5ROHRI7UDQVODWLRQLQ)RUHLJQ /DQJXDJH7HDFKLQJ3URFHHGLQJVRIWKH7HQWK%ULWLVK&RXQFLO*RHWKH,QVWLWXWH(QV&UHGLI7ULDQJOH&ROORTXLXP 3DULV'LGLHU



3DJH %ODFN-. 8QLWHG6WDWHV3HQHWUDWLRQRI%UD]LO0DQFKHVWHU0DQFKHVWHU8QLYHUVLW\3UHVV %ODFNEXUQ3HGDQGWUDQV 3URHQVD$Q$QWKRORJ\RI7URXEDGRXU3RHWU\%HUNHOH\DQG/RV$QJHOHV 8QLYHUVLW\RI&DOLIRUQLD3UHVV %ODJD/ µ&XPDPWUDGXVSH)DXVW¶>+RZ,7UDQVODWHG)DXVW@6WHDXD± %ODQFKRW0 µ7UDGXLUH¶LQ/¶$PLWLp3DULV*DOOLPDUGWUDQV5LFKDUG6LHEXUWKDVµ7UDQVODWLQJ¶6XOIXU ± %ODWW$.+)UHLJDQJ.'6FKPLW]DQG*7KRPH &RPSXWHUXQGhEHUVHW]HQ(LQH(LQIKUXQJ+LOGHVKHLP *HRUJ2OPV9HUODJ %OLQQ+HG 7KH*HUPDQ6KDNHVSHDUH$Q$QQRWDWHG%LEOLRJUDSK\RIWKH6KDNHVSHDUH5HFHSWLRQLQ*HUPDQ VSHDNLQJ&RXQWULHV%HUOLQ(ULFK6FKPLGW %ORRP$ 7KH/LQJXLVWLF6KDSLQJRI7KRXJKW$6WXG\LQWKH,PSDFWRI/DQJXDJHLQ&KLQDDQGWKH:HVW /DZUHQFH(UOEDXP$VVRFLDWHV %OXP.XOND6KRVKDQD µ7KH6WXG\RI7UDQVODWLRQLQ9LHZRI1HZ'HYHORSPHQWVLQ'LVFRXUVH$QDO\VLV7KH 3UREOHPRI,QGLUHFW6SHHFK$FWV¶3RHWLFV7RGD\ ± ²² µ6KLIWVRI&RKHVLRQDQG&RKHUHQFHLQ7UDQVODWLRQ¶LQ+RXVHDQG%OXP.XONDHGV ± ²²DQG(GGLH$/HYHQVWRQ µ8QLYHUVDOVRI/H[LFDO6LPSOLILFDWLRQ¶LQ&ODXV)DHUFKDQG*DEULHOH.DVSHUHGV 6WUDWHJLHVLQ,QWHUODQJXDJH&RPPXQLFDWLRQ/RQGRQDQG1HZ 6WXGLHVDQG'LVVHUWDWLRQV@YROV±:URFáDZ2VVROLQHXP %|UVFK6 µ,QWURVSHFWLYH0HWKRGVLQ5HVHDUFKRQ,QWHUOLQJXDODQG,QWHUFXOWXUDO&RPPXQLFDWLRQ¶LQ+RXVHDQG %OXP.XONDHGV %RZHQ'DYLGDQG0DUJDUHWD%RZHQHGV ,QWHUSUHWLQJ < 6WDWH8QLYHUVLW\RI1HZ


3DJH ²² $6RFLRFULWLTXHRI7UDQVODWLRQ7KHDWUHDQG$OWHULW\LQ4XHEHF7RURQWR8QLYHUVLW\RI7RURQWR3UHVV %ULWLVK1DWLRQDO&RUSXV 8VHU5HIHUHQFH*XLGH9HUVLRQ2[IRUG2[IRUG8QLYHUVLW\&RPSXWLQJ6HUYLFHV %URFN6HEDVWLDQ µ$VSHFWVRI7UDQVODWLRQ7HFKQLTXHLQ$QWLTXLW\¶*UHHN5RPDQDQG%\]DQWLQH6WXGLHV ± %URRPKDOO0DUVKDOO 7KH%LEOHLQ&KLQD6DQ)UDQFLVFR&KLQHVH0DWHULDOV&HQWHU,QF %URWKHUVWRQ*RUGRQ %RRNRIWKH)RXUWK:RUOG5HDGLQJWKH1DWLYH$PHULFDVWKURXJKWKHLU/LWHUDWXUH &DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV %URZHU5$HG 2Q7UDQVODWLRQ&DPEULGJH0$+DUYDUG8QLYHUVLW\3UHVV1HZ 7KH6WDWHQELMEHODQGLWV3UHGHFHVVRUV@/HLGHQ6LMWKRII %UXQHU-6$-ROO\DQG.6\OYDHGV 3OD\,WV5ROHLQ'HYHORSPHQWDQG(YROXWLRQ+DUPRQGVZRUWK3HQJXLQ %UXQHW0 /HV&DQDGLHQVDSUqVOD&RQTXrWH± YRO,'HOD5HYROXWLRQFDQDGLHQQHjOD 5HYROXWLRQDPpULFDLQH0RQWUHDO)LGHV %UXQL/HRQDUGR µ2QWKH&RUUHFW:D\WR7UDQVODWH¶LQ*RUGRQ*ULIILWKV-DPHV+DQNLQVDQG'DYLG7KRPSVRQ WUDQVDQGHGV 7KH+XPDQLVPRI/HRQDUGR%UXQL6HOHFWHG7H[WV%LQJKDPWRQ1<&HQWHUIRU0HGLHYDODQG(DUO\ 5HQDLVVDQFH6WXGLHV± %UXVV( µ7KH*DPHRI/LWHUDWXUHDQGVRPH/LWHUDU\*DPHV¶1HZ/LWHUDU\+LVWRU\ ± %U\DQW:&WUDQV 7KH,OLDGRI+RPHU%RVWRQ-52VJRRG %6 5HFRPPHQGDWLRQVIRUWKH6HOHFWLRQ)RUPDWLRQDQG'HILQLWLRQRI7HFKQLFDO7HUPV/RQGRQ%ULWLVK 6WDQGDUGV,QVWLWXWH %XFKPDQQ% µ(DUO\+LVWRU\RI0DFKLQH7UDQVODWLRQ¶LQ0.LQJHG 0DFKLQH7UDQVODWLRQ7RGD\7KH6WDWH RIWKH$UW(GLQEXUJK(GLQEXUJK8QLYHUVLW\3UHVV %XGJH($:DOOLV 7KH%RRNRIWKH'HDG7KH3DS\UXVRI$QL1HZ 7KH2ULHQWDOLVWVDQGWKH 7UDQVODWLRQRIWKH+RO\4XU¶ƗQ@%HLUXW'DUDO$IƗTDO-DGƯGD %XUJH7\OHU µ6HOI5HIHUHQFHDQG7UDQVODWLRQ¶LQ*XHQWKQHUDQG*XHQWKQHU5HXWWHUHGV ± %XUNH.HQQHWK µ$ERYHWKH2YHUWRZHULQJ%DEEOH¶0LFKLJDQ4XDUWHUO\5HYLHZ± %XUQHWW&KDUOHV6) µ7UDQVODWLRQVDQG7UDQVODWRUV:HVWHUQ(XURSHDQ¶LQ-RVHSK56WUD\HUHG 'LFWLRQDU\ RIWKH0LGGOH$JHVYRO1HZ


3DJH &DOPRQ3 +LVWyULDGR%UDVLO5LRGH-DQHLUR2O\PSLR &DOyJHUDV-3 $+LVWRU\RI%UD]LO3$0DUWLQWUDQVDQGHG VWSXELQVWUHLVVXH1HZ &ROOHFWHG(VVD\VRQ&KLQHVH%XGGKLVW6XWUD7UDQVODWLRQV@ 7DLSHL'RQJFKX3XE&R &DSSHU& 0DUJDUHW)XOOHU$Q$PHULFDQ5RPDQWLF/LIH1HZ $1HZ3URMHFWRI6WDWLVWLFDO$QDO\VLVRI 9HUVH@ýHVNiOLWHUDWXUD± &HVDURWWL0HOFKLRUUH /¶,OLDGHGµ2PHURUHFDWDSRHWLFDPHQWHLQYHUVRVFLROWRLWDOLDQR3LVD0ROLQL/DQGL ²² /HRSHUHGL'HPRVWHQHWUDGRWWHHLOOXVWUDWH)ORUHQFH0ROLQL/DQGL &KDGZLFN+HQU\ %RHWKLXV2[IRUG2[IRUG8QLYHUVLW\3UHVV



3DJH &KDPEHUODLQ/RUL µ*HQGHUDQGWKH0HWDSKRULFVRI7UDQVODWLRQ¶6LJQV± &KDQ6LQZDLDQG'DYLG3ROODUGHGV $Q(QF\FORSHGLDRI7UDQVODWLRQ&KLQHVH(QJOLVK(QJOLVK&KLQHVH +RQJ.RQJ&KLQHVH8QLYHUVLW\3UHVV &KDQGLRX[- µDQVGH0e7e20' ¶UHSULQ$$EERXHG /D7UDGXFWLRQ$VVLVWpHSDU2UGLQDWHXU 3HUVSHFWLYHVWHFKQRORJLTXHVLQGXVWULHOOHVHWpFRQRPLTXHVHQYLVDJHDEOHVjO¶KRUL]RQ3DULV'$,&$',) ²² µ0e7e20LOOLRQ:RUGV/DWHU¶LQ'/+DPPRQGHG $PHULFDQ7UDQVODWRUV$VVRFLDWLRQ &RQIHUHQFH&RPLQJRI$JH0HGIRUG1-/HDUQHG,QIRUPDWLRQ &KDSPDQ5& µ+RZ$PHULFDQ&RXUWV9LHZ'HIHQGDQWV¶5LJKWV7R,QWHUSUHWHUV¶LQ$7$YRO,9 %LQJKDPWRQ1<6WDWH8QLYHUVLW\RI1HZ +LVWRU\RI&KLQHVH/LWHUDU\7UDQVODWLRQ@%HLMLQJ =KRQJJXRGXLZDLIDQ\L3XE&R &KHUQRY*9 7HRUL\DLSUDNWLNDVLQNKURQQRJRSHUHYRGD>7KH7KHRU\DQG3UDFWLFHRI6LPXOWDQHRXV ,QWHUSUHWLQJ@0RVFRZ0H]KGXQDURGQ\HRWQRVKHQL\D ²² 2VQRY\VLQNKURQQRJRSHUHYRGD>)XQGDPHQWDOVRI6LPXOWDQHRXV,QWHUSUHWLQJ@0RVFRZ9\VVKD\DVKNROD ²² µ.RQWHNVWQRVYRERGQD\DLNRQWHNVWQRVY\D]DQQD\DLPSOLNDWLYQRVWLSUREOHPLSHUHYRGD¶>&RQWH[WIUHH DQG&RQWH[WOLQNHG,PSOLFDWLRQDQG3UREOHPVRI7UDQVODWLRQ@LQ$'6KYHLWVHUHG 7HNVWLSHUHYRG>7H[WDQG 7UDQVODWLRQ@0RVFRZ1DXND± &KHUQ\DNKRYVND\D/$ 3HUHYRGLVP\VORYD\DVWUXNWXUD>7UDQVODWLRQDQG6HPDQWLF6WUXFWXUH@0RVFRZ 0H]KGXQDURGQ\HRWQRVKHQL\D &KHVWHUPDQ$QGUHZHG 5HDGLQJVLQ7UDQVODWLRQ7KHRU\+HOVLQNL2\)LQQ/HFWXUD$E ²² µ)URP³,V´WR³2XJKW´/DZV1RUPVDQG6WUDWHJLHVLQ7UDQVODWLRQ6WXGLHV¶7DUJHW ± ²² µ4XDQWLWDWLYH$VSHFWVRI7UDQVODWLRQ4XDOLW\¶/HEHQGH6SUDFKHQ ± &KH\ILW](ULF 7KH3RHWLFVRI,PSHULDOLVP7UDQVODWLRQDQG&RORQL]DWLRQIURP7KH7HPSHVWWR7DU]DQ1HZ +LJK$UW@0RVFRZ,VNXVVWYR &KXUFK.:DQG(++RY\ µ*RRG$SSOLFDWLRQVIRU&UXPP\0DFKLQH7UDQVODWLRQ¶0DFKLQH7UDQVODWLRQ ± &KXUFK.HQQHWKDQG:LOOLDP*DOH µ&RQFRUGDQFHVIRU3DUDOOHO7H[W¶8VLQJ&RUSRUD3URFHHGLQJVRIWKH 6HYHQWK$QQXDO&RQIHUHQFHRIWKH8:&HQWUHIRUWKH1HZ2('DQG7H[W5HVHDUFK2[IRUG6W&DWKHULQH¶V&ROOHJH &LFHUR'HRUDWRUH2QWKH2UDWRU WUDQV(:6XWWRQDQG+5DFNKDPYRORI&LFHURLQ7ZHQW\HLJKW 9ROXPHV/RQGRQ+HLQHPDQQ &/$: 3URFHHGLQJVRIWKH)LUVW,QWHUQDWLRQDO:RUNVKRSRQ&RQWUROOHG/DQJXDJH$SSOLFDWLRQV/HXYHQ &OHDU-HUHP\ µ)URP)LUWK3ULQFLSOHV&RPSXWDWLRQDO7RROVIRUWKH6WXG\RI&ROORFDWLRQ¶LQ0RQD%DNHU*LOO )UDQFLVDQG(OHQD7RJQLQL%RQHOOLHGV 7H[WDQG7HFKQRORJ\,Q+RQRXURI-RKQ6LQFODLU$PVWHUGDPDQG 3KLODGHOSKLD-RKQ%HQMDPLQV &OX\VHQDDU$QQH ,QWURGXFWLRQWR/LWHUDU\6W\OLVWLFV/RQGRQ%7%DWVIRUG &O\QH8 µ'LVFRXUVH6WUXFWXUHVDQG'LVFRXUVH([SHFWDWLRQV,PSOLFDWLRQVIRU$QJOR*HUPDQ$FDGHPLF &RPPXQLFDWLRQLQ(QJOLVK¶LQ/(6PLWKHG 'LVFRXUVH$FURVV&XOWXUHV6WUDWHJLHVLQ:RUOG(QJOLVKHV3UHQWLFH +DOO± &RH0LFKDHO %UHDNLQJWKH0D\D&RGH/RQGRQ7KDPHVDQG+XGVRQ &RKHQ,VUDHO


3DJH &ROLQ-RDQDQG5XWK0RUULV ,QWHUSUHWHUVDQGWKH/HJDO3URFHVV:LQFKHVWHU:DWHUVLGH3UHVV &ROOLQJZRRG5* 7KH,GHDRI+LVWRU\2[IRUG&ODUHQGRQ3UHVV &RQGH3DULOOD0$ /RVSDVDM¶HVREVFHQRVGH0ROO\%ORRPHQHVSDxRO$OEDFHWH(GLFLRQHVGHOD'LSXWDFLyQ GH$OEDFHWH &RQJUDW%XOWDU6HG 7UDQVODWLRQDQG7UDQVODWRUVDQ,QWHUQDWLRQDO'LUHFWRU\DQG*XLGH1HZ µ&RPPDQG¶DQGµ6XSSO\¶LQ'HWHUPLQDWLRQRIWKH3URILOHRI7UDQVODWLRQVDWWKH0LGGOHRIWKH/DVW&HQWXU\@LQ $O'LPD,&&KLĠLPLD01RYLFRY3&RUQHD69HOHDDQG(3RSHDQJăHGV 3UREOHPHGHOLWHUDWXUăFRPSDUDWăúL VRFLRORJLHOLWHUDUă%XFKDUHVW3XEOLVKLQJ+RXVHRIWKH5RPDQLDQ$FDGHP\ &RUWHVmR- $FDUWDGH3rUR9D]GH&DPLQKD/LVERQ3RUWXJiOLD(GLWRUD &RVHULX(XJHQLR (OKRPEUH\VXOHQJXDMH0DGULG*UHGRV ²² µ)DOVFKHXQGULFKWLJH)UDJHVWHOOXQJHQLQGHUhEHUVHW]XQJVWKHRULH¶LQ/*UlKV*.RUOpQDQG%0DOPEHUJ HGV 7KHRU\DQG3UDFWLFHRI7UDQVODWLRQ1REHO6\PSRVLXP%HUQDQG)UDQNIXUWDP0DLQ3HWHU/DQJ± &RVWD* µ7KH/DWLQ7UDQVODWLRQVRI/RQJLQXV¶VʌİSt LQ5HQDLVVDQFH,WDO\LQ56FKRHFNHG $FWD &RQYHQWXVQHRODWLQL%RQRQLHQVLV%LQJKDPWRQ1<0HGLHYDODQG5HQDLVVDQFH7H[WVDQG6WXGLHV± &RXOOLQJ6 0DWWKHZ$UQROGDQG+LV&ULWLFV$WKHQV2KLR2KLR8QLYHUVLW\3UHVV &RXOPDV) /DQJXDJHDQG(FRQRP\2[IRUG%ODFNZHOO &RXOWKDUG0DOFROP $Q,QWURGXFWLRQWR'LVFRXUVH$QDO\VLV/RQGRQ/RQJPDQ &UDQ])(GZDUG $%LEOLRJUDSK\RI$ULVWRWOH(GLWLRQV± QGHGQ%DGHQ%DGHQ.RHUQHU &UHVSR$QJHODQG3LODU*RPH]%HGDWH 6LWXDFLyQGHODSRHVLDFRQFUHWD0DGULG5HYLVWDGHFXOWXUDEUDVLOHQD &ULFN-R\FH µ0LVUHDGLQJ)UHXG¶7LPHV+LJKHU(GXFDWLRQ6XSSOHPHQW6HSWHPEHU &ULVDIXOOL(GRDUGR µ'DQWH¶V3XQVLQ(QJOLVKDQGWKH4XHVWLRQRI&RPSHQVDWLRQ¶7KH7UDQVODWRU ± &URFH%HQHGHWWR (VWHWLFDFRPHVFLHQ]DGHOO¶HVSUHVVLRQHHOLQJXLVWLFDJHQHUDOH%DUL/DWHU]D &URPELH: 3URFHVVDQG5HODWLRQLQ'LVFRXUVHDQG/DQJXDJH/HDUQLQJ2[IRUG2[IRUG8QLYHUVLW\3UHVV &URQLQ0LFKDHO µ/HVMHX[VRQWGpIDLWVWUDGXFWLRQHWOXGLFLWpFKH]5pMHDQ'XFKDUPHHW*pUDUG%HVVHWWH¶ 4XHEHF6WXGLHV± ²² µ.HHSLQJ2QH¶V'LVWDQFH7UDQVODWLRQDQGWKH3OD\RI3RVVLELOLW\¶775 ± ²² 7UDQVODWLQJ,UHODQG&RUN&RUN8QLYHUVLW\3UHVV &URQRQ: &KDQJHVLQWKH/DQG,QGLDQV&RORQLVWVDQGWKH(FRORJ\RI1HZ(QJODQG1HZ


3DJH &XUWLXV(5 (XURSlLVFKH/LWHUDWXUXQGODWHLQLVFKHV0LWWHODOWHU%HUQ)UDQFNHWUDQV:LOODUG57UDVN DV(XURSHDQ/LWHUDWXUHDQGWKH/DWLQ0LGGOH$JHVUHSU/RQGRQDQG+HQOH\5RXWOHGJHDQG.HJDQ3DXO &XVKLQJ*) µ%RRNVDQG5HDGHUVLQ;9,,,WK&HQWXU\+XQJDU\¶7KH6ODYRQLFDQG(DVW(XURSHDQ5HYLHZ ± &]HUQLDZVNL$ µ7UDQVODWLQJ3RHWU\7KHRU\DQG3UDFWLFH¶DIWHUZRUGWR&\SULDQ.DPLO1RUZLG3RHPVWUDQV $&]HUQLDZVNL.UDNRZ:\GDZQLFWZR/LWHUDFNLH &]LJDQ\/ 7KH2[IRUG+LVWRU\RI+XQJDULDQ/LWHUDWXUH2[IRUG&ODUHQGRQ '¶$EODQFRXUW13HUURW /HV$QQDOHVGH7DFLWH3UHPLHUH3DUWLH&RQWHQDQWODYLHGH7LEqUH3DULV-HDQ &DPXVDW 'DGD]KDQRYD0XQDYYDUNKRQ µ%RWKDUH3ULPDU\$Q³$XWKRU¶V7UDQVODWLRQ´LVD&UHDWLYH5HFUHDWLRQ¶6RYLHW 6WXGLHVLQ/LWHUDWXUH ± 'DJXW0HQDFKHP% µ$/LQJXLVWLF$QDO\VLVRI6RPH6HPDQWLF3UREOHPVRI+HEUHZ(QJOLVK7UDQVODWLRQ¶ 8QSXEOLVKHG3K'-HUXVDOHP7KH+HEUHZ8QLYHUVLW\ ²² +HEUHZ(QJOLVK7UDQVODWLRQ$/LQJXLVWLF$QDO\VLVRI6RPH6HPDQWLF3UREOHPV+DLID7KH8QLYHUVLW\RI +DLID 'DLFKHV' 7KH.LQJ-DPHV9HUVLRQRIWKH(QJOLVK%LEOH&KLFDJR8QLYHUVLW\RI&KLFDJR 'DQDQ0DUWLQH µ'XEELQJDVDQ([SUHVVLRQRI1DWLRQDOLVP¶0HWD ± '¶$QGUDGH5DQG&6WUDXVVHGV +XPDQ0RWLYHVDQG&XOWXUDO0RGHOV&DPEULGJH&DPEULGJH8QLYHUVLW\ 3UHVV 'DQHã) µ)XQFWLRQDO6HQWHQFH3HUVSHFWLYHDQGWKH2UJDQL]DWLRQRIWKH7H[W¶LQ)'DQHãHG 3DSHUVRQ )XQFWLRQDO6HQWHQFH3HUVSHFWLYH3UDJXH$FDGHPLD 'DQLHOO'DYLG :LOOLDP7\QGDOH$%LRJUDSK\1HZ+DYHQDQG/RQGRQ &ODVVLFDO$QWLTXLW\LQ'XWFK5HSHUWRU\DQG %LEOLRJUDSKLFDO*XLGHIRU7UDQVODWLRQVRI*UHHNDQG/DWLQ$XWKRUVDQG:ULWLQJV@%DDUQ$PER GH6XD:- 'DQWHLQWR(QJOLVK$6WXG\RIWKH7UDQVODWLRQRIWKH'LYLQH&RPHG\LQ%ULWDLQDQG$PHULFD &KDSHO+LOO8QLYHUVLW\RI1RUWK&DUROLQD3UHVV 'HODEDVWLWD'LUN µ7UDQVODWLRQDQG0DVV&RPPXQLFDWLRQ)LOPDQG797UDQVODWLRQDV(YLGHQFHRI&XOWXUDO '\QDPLFV¶%DEHO ± ²² µ7UDQVODWLRQDQGWKH0DVV0HGLD¶LQ%DVVQHWWDQG/HIHYHUHHGV ± ²² 7KHUH¶VD'RXEOH7RQJXH$Q,QYHVWLJDWLRQLQWRWKH7UDQVODWLRQRI6KDNHVSHDUH¶V



3DJH :RUGSOD\ZLWK6SHFLDO5HIHUHQFHWRµ+DPOHW¶$PVWHUGDPDQG$WODQWD*$5RGRSL ²²DQG/'¶KXOVWHGV (XURSHDQ6KDNHVSHDUHV7UDQVODWLQJ6KDNHVSHDUHLQWKH5RPDQWLF$JH$PVWHUGDP DQG3KLODGHOSKLD-RKQ%HQMDPLQV ²²DQG-RVp/DPEHUW µ/D7UDGXFWLRQGHVWH[WHVDXGLRYLVXHOVPRGHVHWHQMHX[FXOWXUHOV¶LQ*DPELHUHG 'HOFRXUW0 eWXGHVVXUOHVWUDGXFWLRQVGHVWUDJLTXHVJUHFVHWODWLQVHQ)UDQFHGHSXLVOD5HQDLVVDQFH %UXVVHOV/DPHUWLQ 'HOLVOH-HDQ /¶$QDO\VHGXGLVFRXUVFRPPHPpWKRGHGHWUDGXFWLRQ2WWDZD8QLYHUVLW\RI2WWDZD3UHVV ²² $XF°XUGXWULDORJXHFDQDGLHQ%ULGJLQJWKH/DQJXDJH6ROLWXGHV+LVWRULTXHGHO¶pYROXWLRQGX%XUHDX IHGHUDOGHVWUDGXFWLRQV±2WWDZD0LQLVWqUHGHV$SSURYLVLRQQHPHQWVHW6HUYLFHV ²² µ'DQVOHVFRXOLVVHVGHO¶WKpkWUDOH¶&LUFXLW± ²² /DWUDGXFWLRQDX&DQDGD7UDQVODWLRQLQ&DQDGD±2WWDZD/HV3UHVVHVGHO¶8QLYHUVLWpG¶ 2WWDZD ²² 7UDQVODWLRQ$Q,QWHUSUHWLYH$SSURDFKWUDQVODWLRQRI3DUW,RI/¶$QDO\VHGXGLVFRXUVFRPPHPpWKRGHGH WUDGXFWLRQWUDQV3DWULFLD/RJDQDQG0RQLFD&UHHU\2WWDZD8QLYHUVLW\RI2WWDZD3UHVV ²² /HVDOFKLPLVWHVGHVODQJXHV7KH/DQJXDJH$OFKHPLVWV6RFLpWpGHVWUDGXFWHXUVGX4XHEHF± 2WWDZD8QLYHUVLW\RI2WWDZD3UHVV ²² µ3URMHWG¶KLVWRLUHWKpPDWLTXHGHODWUDGXFWLRQ¶LQ0ODGHQ-RYDQRYLFHG 7UDQVODWLRQD&UHDWLYH 3URIHVVLRQ3URFHHGLQJVRI;,WK:RUOG&RQJUHVVRI),7%HOJUDGH%HOJUDGH3UHYRGLODF± ²² /DWUDGXFWLRQUDLVRQQpH0DQXHOGµLQLWLDWLRQDODWUDGXFWLRQSURIHVVLRQQHOOHGHO¶DQJODLVYHUVOHIUDQoDLV &ROOHFWLRQ3pGDJRJLHGHODWUDGXFWLRQ 2WWDZD3UHVVHVGHO¶8QLYHUVLWpGµ2WWDZD ²²DQG-XGLWK:RRGVZRUWKHGV D 7UDQVODWRUVWKURXJK+LVWRU\$PVWHUGDPDQG3KLODGHOSKLD-RKQ %HQMDPLQV ²²DQG-XGLWK:RRGVZRUWKHGV E /HVWUDGXFWHXUVGDQVO¶KLVWRLUH2WWDZD/HV3UHVVHVGHO¶8QLYHUVLWp G¶2WWDZDeGLWLRQV81(6&2 'HPHUVRQ*HQHYLqYH µ-RDFKLP'X%HOOD\WUDGXFWHXUGHOXLPrPH¶LQ*UDKDPH&DVWRUDQG7HUHQFH&DYH HGV 1HR/DWLQDQGWKH9HUQDFXODULQ5HQDLVVDQFH)UDQFH2[IRUG&ODUHQGRQ3UHVV± 'HQKDP-RKQ 7KH'HVWUXFWLRQRI7UR\/RQGRQ+XPSKUH\0RVHOH\ 'HUULGD-DFTXHV 2I*UDPPDWRORJ\WUDQV*D\DWUL&KDNUDYRUW\6SLYDN%DOWLPRUH-RKQV+RSNLQV 8QLYHUVLW\3UHVV ²² µ/LYLQJ2Q%RUGHU/LQHV¶WUDQV-+XOEHUWLQ+DUROG%ORRP-DFTXHV'HUULGD*HRIIUH\++DUWPDQDQG- +LOOLV0LOOHU'HFRQVWUXFWLRQDQG&ULWLFLVP/RQGRQDQG+HQOH\5RXWOHGJHDQG.HJDQ3DXO± ²²D 7KH(DURIWKH2WKHU2WRELRJUDSK\7UDQVIHUHQFH7UDQVODWLRQHG &0F'RQDOGWUDQV3.DPXI /LQFROQ1(DQG/RQGRQ8QLYHUVLW\RI1HEUDVND3UHVV ²²>@E µ'HV7RXUVGH%DEHO¶LQ-RVHSK*UDKDPHG 'LIIHUHQFHLQ7UDQVODWLRQ,WKDFD&RUQHOO 8QLYHUVLW\3UHVV± 'HYDUULHX[&ODLUH µ*DOODQW3DULVHVWXQMRXHW¶/LEHUDWLRQKRUVVpULHOHVOLYUHVGHO¶DQQpH 0DUFK± 'HZGQH\6HOZ\Q 7KH6DFUHG6FUROOVRIWKH6RXWKHUQ2MLEZD\7RURQWR8QLYHUVLW\RI7RURQWR3UHVV 'H\HV$) µ7RZDUGVD/LQJXLVWLF'HILQLWLRQRI)XQFWLRQDO9DULHWLHVRI:ULWWHQ(QJOLVK¶,5$/ ± '¶KXOVW/LHYHQ µ7KH&RQIOLFWRI7UDQVODWLRQ0RGHOVLQ)UDQFH(QGRIWK%HJLQQLQJRIWK&HQWXULHV ¶LQ $/HIHYHUHDQG.'-DFNVRQHGV 7KH$UWDQG6FLHQFHRI7UDQVODWLRQ'LVSRVLWLR± ± ²² /¶eYROXWLRQGHODSRpVLHHQ)UDQFH± /HXYHQ/HXYHQ8QLYHUVLW\3UHVV ²² µ6XUODSRpVLHWUDGXLWHHWVHVHQMHX[DX;,;HVLqFOHOHGRVVLHUGHVWUDGXFWLRQVIUDQoDLVHVGHOD³/HQRUH´GH %XUJHU¶/LQJXLVWLFD$QWYHUSLHQVLD± ²² &HQWDQVGHWKpRULHIUDQoDLVHGHODWUDGXFWLRQ'H%DWWHX[j/LWWUp± /LOOH3UHVVHV 8QLYHUVLWDLUHVGH/LOOH ²² µ3RXUTXRLHWFRPPHQWpFULUHO¶KLVWRLUHGHVWKHRULHVGHODWUDGXFWLRQ"¶LQ0ODGHQ-RYDQRYLFHG 7UDQVODWLRQD&UHDWLYH3URIHVVLRQ3URFHHGLQJVRI;,WK:RUOG&RQJUHVVRI),7%HOJUDGH%HOJUDGH 3UHYRGLODF± ²² µ(QVHLJQHUODWUDGXFWRORJLH¶0HWD ± GL3LHWUR5- /DQJXDJH6WUXFWXUHVLQ&RQWUDVW1HZEXU\+RXVH3XEOLVKHUV GL6WHIDQRDQG%)ROONDUW µ7UDQVODWLRQDV/LWHUDU\&ULWLFLVP¶0HWD ± 'LDYD]R6SHFLDO,VVXHRQ7UDQVODWLRQQR$WKHQV'HFHPEHU 'LD]'LRFDUHW]0 7UDQVODWLQJ3RHWLF'LVFRXUVH4XHVWLRQVRQ)HPLQLVW6WUDWHJLHVLQ$GULHQQH5LFK $PVWHUGDP-RKQ%HQMDPLQV 'LONH2$: µ/DWLQ,QWHUSUHWDWLRQVRI3WROHP\¶V*HRJUDSKLD¶LQ$'DO]HOO&KDUOHV)DQWD]]LDQG5LFKDUG- 6KRHFNHGV $FWD&RQYHQWXVQHRODWLQL7RURQWRQHQVLV%LQJKDPWRQ1<0HGLHYDODQG5HQDLVVDQFH7H[WVDQG 6WXGLHV± DO'LIƗFF$OLF$EG$OODK µ,VWLFUƗG$O7XUƗWKDOFOOPƯDOF$UDELDO,VOƗPƯ¶>$6XUYH\RIWKH,VODPLF$UDELF 6FLHQWLILF+HULWDJH@$ZUƗT-DGƯGD>1HZ'RFXPHQWV@YROVDQG± 'LOOLQJHU0LNH µ&RPSRQHQW3URFHVVHVRI6LPXOWDQHRXV,QWHUSUHWDWLRQ¶8QSXEOLVKHG3K'



3DJH WKHVLV'HSDUWPHQWRI(GXFDWLRQDO3V\FKRORJ\0F*LOO8QLYHUVLW\0RQWUHDO 'LPRFN(GZDUG& 7KH/LWHUDWXUHVRI,QGLD&KLFDJR8QLYHUVLW\RI&KLFDJR3UHVV 'LQHNRY3 µhEHUGLH$XIHLQJHGHUEXOJDULVFKHQ/LWHUDWXU¶,QWHUQDWLRQDO-RXUQDORI6ODYLF/LQJXLVWLFVDQG 3RHWLFVYRO,,, 'LQJZDQH\$QXUDGKDDQG&DURO0DLHUHGV %HWZHHQ/DQJXDJHVDQG&XOWXUHV7UDQVODWLRQDQG&URVV FXOWXUDO7H[WV3LWWVEXUJK8QLYHUVLW\RI3LWWVEXUJK3UHVV 'LRS&KHLNK$QWD 1DWLRQVQqJUHVHWFXOWXUH3DULV3UpVHQFH$IULFDLQH ²² 7KH$IULFDQ2ULJLQRI&LYLOL]DWLRQ0\WKRU5HDOLW\"1HZ 'LIILFXOW5LVN\EXWQRW,PSRVVLEOH@6HFROXO[[± ²²D µ&URQLFDWUDGXFHULORU¶>$&RPPHQWDU\RQ7UDQVODWLRQV@LQùW$XJ'RLQDúHG 3RH]LHúLPRGăSRHWLFă %XFKDUHVW(PLQHVFX3XEOLVKLQJ+RXVH± ²²E µÌQVHPQDULOHXQXLWUDGXFDWRU¶>1RWHVRID7UDQVODWRU@LQùW$XJ'RLQDúHG 3RH]LHúLPRGăSRHWLFă %XFKDUHVW(PLQHVFX3XEOLVKLQJ+RXVH± ²²D $WODVXOGHVXQHWHIXQGDPHQWDOH>$WODVRI)XQGDPHQWDO6RXQGV@%XFKDUHVW8QLYHUV3XEOLVKLQJ+RXVH ²²E µ'HVSUHWUDGXFHUHDILGHOăDSRH]LHL¶>2QWKH)DLWKIXO7UDQVODWLRQRI3RHWU\@LQùW$XJ'RLQDú$WODVXOGH VXQHWHIXQGDPHQWDOH%XFKDUHVW8QLYHUV3XEOLVKLQJ+RXVH± 'ROHåHO/XERPtU µ3UDåVNiãNRODDVWDWLVWLFNiWHRULHEiVQLFNpKRMD]\ND¶>7KH3UDJXH6FKRRODQGWKH6WDWLVWLFDO 7KHRU\RI3RHWLF/DQJXDJH@ýHVNiOLWHUDWXUD± 'ROOHUXS&D\DQG9LEHNH$SSHOHGV 7HDFKLQJ7UDQVODWLRQDQG,QWHUSUHWLQJ1HZ+RUL]RQV3DSHUVIURP WKH7KLUG/DQJXDJH,QWHUQDWLRQDO&RQIHUHQFH$PVWHUGDPDQG3KLODGHOSKLD-RKQ%HQMDPLQV ²²DQG$QQH/RGGHUJDDUGHGV 7HDFKLQJ7UDQVODWLRQDQG,QWHUSUHWLQJ7UDLQLQJ7DOHQWDQG([SHULHQFH $PVWHUGDPDQG3KLODGHOSKLD-RKQ%HQMDPLQV ²²DQG²²HGV 7HDFKLQJWUDQVODWLRQDQG,QWHUSUHWLQJ,QVLJKWV$LPV9LVLRQV$PVWHUGDPDQG 3KLODGHOSKLD-RKQ%HQMDPLQV 'RQDLUH0/DQG)/DIDUJDHGV 7UDGXFFLyQ\DGDSWDFLyQFXOWXUDO(VSDxD)UDQFLD8QLYHUVLGDGGH 2YLHGR6HUYLFLRGH3XEOLFDFLRQHV 'RXPD)pOL[ µ5HYLHZLQJD7UDQVODWLRQ$3UDFWLFDO3UREOHPLQ/LWHUDU\&ULWLFLVP¶0HWD ± 'RZQLQJ%DQG.+HOPV7LOODU\ 3URIHVVLRQDO7UDLQLQJIRU&RPPXQLW\,QWHUSUHWHUV$5HSRUWRQ0RGHOVRI ,QWHUSUHWHU7UDLQLQJDQGWKH9DOXHRI7UDLQLQJ0LQQHDSROLV&HQWHUIRU8UEDQDQG5HJLRQDO$IIDLUV8QLYHUVLW\RI 0LQQHVRWD ²²DQG/6ZDEH\ $0XOWLOLQJXDO0RGHOIRU7UDLQLQJ+HDOWK&DUH,QWHUSUHWHUV3DSHUSUHVHQWHGDW1DWLRQDO &RQIHUHQFHRQ+HDOWKDQG0HQWDO+HDOWKRI6RYLHW5HIXJHHVKHOGLQ&KLFDJR,OOLQRLV86$RQ'HFHPEHU± 'UDQW7 $0HGLFLQDEOH0RUDOWKDWLVWKH7ZR%RRNVRI+RUDFH+LV6DWLUHV(QJOLVKHG$FFRUGLQJWRWKH 3UHVFULSWLRQRI6W+LHURPHFLWHGLQ$PRV>@ 'UDVNDX- 7KH4XHVWIRU(TXLYDOHQFH2Q7UDQVODWLQJ9LOORQ&RSHQKDJHQ$WKHQHXP 'ULHV-RVHSKLQH 'XEELQJDQG6XEWLWOLQJ*XLGHOLQHVIRU3URGXFWLRQDQG'LVWULEXWLRQ'VVHOGRUI(XURSHDQ ,QVWLWXWHIRUWKH0HGLD 'U\GHQ-RKQ>@ µ3UHIDFHWR2YLG¶V(SLVWOHV7UDQVODWHGE\6HYHUDO+DQGV¶LQ:3.HUHG (VVD\VRI -RKQ'U\GHQ1HZ @ µ3UHIDFHWR6\OYDHRUWKH6HFRQG3DUWRI3RHWLFDO0LVFHOODQLHV¶LQ*HRUJH:DWVRQHG -RKQ 'U\GHQµ2I'UDPDWLF3RHV\¶DQG2WKHU&ULWLFDO(VVD\VYRO/RQGRQ'HQW 'U]HZLFND$ =]DJDGQLHĔWHFKQLNLWáXPDF]HQLDSRH]ML>[email protected] :\GDZQLFWZR8QLYHUV\WHWX-DJLHOORĔVNLHJR 'XFURW2 'LUHHWQHSDVGLUH3DULV+HUPDQQ 'XGOH\'5DQG'0/DQJHGV 3HQJXLQ&RPSDQLRQWR/LWHUDWXUHYRO&ODVVLFDODQG%\]DQWLQH2ULHQWDO DQG$IULFDQ/LWHUDWXUH+DUPRQGVZRUWK3HQJXLQ 'XII$ODQ 7UDQVODWLRQ2[IRUG2[IRUG8QLYHUVLW\3UHVV 'XOOHV-:) µ7KH&RQWULEXWLRQRI*HW~OLR9DUJDVWRWKH0RGHUQL]DWLRQRI%UD]LO¶LQ(1%ODNDQRIIHG 7KH6KDSLQJRI0RGHUQ%UD]LO%DWRQ5RXJH/6/RXLVLDQD6WDWH8QLYHUVLW\3UHVV± 'XQEDU+DQG9+M¡UQDJHU3HGHUVHQ µ&RPSXWHU$LGHG7UDQVODWLRQ¶7KH'ROSKLQcUKXV ± ²²DQG.$QGHUVHQ :,1*(55DSSRUWRPHWRYHUV°WWHOVHVSURJUDPVXGYLNOLQJ>:LQJHU5HSRUWRQWKH 'HYHORSPHQWRID7UDQVODWLRQ3URJUDPPH@'$2 &RSHQKDJHQ&HQWUHIRU7UDQVODWLRQ6WXGLHV&RSHQKDJHQ 8QLYHUVLW\ 'XQORS'0 µ7KH:RUNRI7UDQVODWLRQDW7ROHGR¶%DEHO ± 'XUDQWL5LFFDUGR µ/DGRSSLDPHGLD]LRQHGL&DUFDQR¶LQ/DXUD&DUHWWLHG ,OWHDWURGHO



3DJH SHUVRQDJJLR6KDNHVSHDUHVXOODVFHQDLWDOLDQDGHOO¶5RPH%XO]RQL 'XULHX[& )RQGHPHQWGLGDFWLTXHGHODWUDGXFWLRQWHFKQLTXH3DULV'LGLHUeUXGLWLRQ 'XĠX$O µ7UDGXFHUHúLPRGHODUHLQFXOWXUDURPkQăGLQSHULRDGDOXPLQLORU¶>7UDQVODWLRQDQG0RGHOOLQJLQWKH 5RPDQLDQ&XOWXUHLQWKH3HULRGRI(QOLJKWHQPHQW@LQ$O'LPD,&&KLĠLPLD01RYLFRY3&RUQHD69HOHDDQG( 3RSHDQJăHGV 3UREOHPHGHOLWHUDWXUăFRPSDUDWăúLVRFLRORJLHOLWHUDUă%XFKDUHVW3XEOLVKLQJ+RXVHRIWKH 5RPDQLDQ$FDGHP\± 'ZLJKW-6HGDQGWUDQV 6HOHFW0LQRU3RHPVRI*RHWKHDQG6FKLOOHUYRO,,,RI6SHFLPHQVRI)RUHLJQ 6WDQGDUG/LWHUDWXUH%RVWRQ+LOOLDUG*UD\DQG&RPSDQ\ (DJOHWRQ7 µ7UDQVODWLRQDQG7UDQVIRUPDWLRQ¶6WDQG ± (EHO- µ7UDQVODWLRQDQG&XOWXUDO1DWLRQDOLVPLQWKH5HLJQRI(OL]DEHWK¶-RXUQDORIWKH+LVWRU\RI,GHDV ± (FR8 /¶2SHUDDSHUWD0LODQ%RPSLDQL ²² $7KHRU\RI6HPLRWLFV%ORRPLQJWRQ,1,QGLDQD8QLYHUVLW\3UHVV ²² 7KH5ROHRIWKH5HDGHU([SORUDWLRQVLQWKH6HPLRWLFVRI7H[WV%ORRPLQJWRQ,1,QGLDQD8QLYHUVLW\ 3UHVV ²² 6HPLRWLFVDQGWKH3KLORVRSK\RI/DQJXDJH%ORRPLQJWRQ,1,QGLDQD8QLYHUVLW\3UHVV ²² 7KH/LPLWVRI,QWHUSUHWDWLRQ%ORRPLQJWRQ,1,QGLDQD8QLYHUVLW\3UHVV ²² /DULFHUFDGHOODOLQJXDSHUIHWWD%DUL/DWHU]D ²² 6L[:DONVLQWKH)LFWLRQDO:RRGV&DPEULGJH+DUYDUG8QLYHUVLW\3UHVV (FRQRPRX*DQG*$QJHOLQDUDV %LEOLRJUDSK\RI0RGHUQ*UHHN9HUVH7UDQVODWLRQRI$QFLHQW*UHHN3RHWU\ $WKHQV8QLYHUVLW\RI$WKHQV (GZDUGV$OLFLD 7KH3UDFWLFHRI&RXUW,QWHUSUHWLQJ$PVWHUGDPDQG3KLODGHOSKLD-RKQ%HQMDPLQV (LJHQ0DQG5:LQNOHU 1DWXUJHVHW]HVWHXHUQGHQ=XIDOO0XQLFK3LSHUWUDQV5DQG5.LPEHUDV/DZVRI WKH*DPH+DUPRQGVZRUWK3HQJXLQ (LQDUVVRQ6 ËVOHQVNEyNPHQQWDVDJD>+LVWRU\RI,FHODQGLF/LWHUDWXUH@5H\NMDYLN6Q EM|UQ-yQVVyQDQG&R (LQKRUQ+- µ/HDUQLQJIURP([SHULHQFHDQG6XERSWLPDO5XOHVLQ'HFLVLRQPDNLQJ¶LQ67:DOOVWHQHG &RJQLWLYH3URFHVVHVLQ&KRLFHDQG'HFLVLRQ%HKDYLRU+LOOVGDOH1-/DZUHQFH(UOEDXP$VVRFLDWHV± (LV* µ0LWWHOKRFKGHXWVFKH/LWHUDWXU)DFKSURVD¶LQ/(6FKPLWWHG .XU]HU*UXQGULVVGHUJHUPDQLVFKHQ 3KLORORJLHELVYRO%HUOLQGH*UX\WHU± (OLRW- 7KH,QGLDQ*UDPPDU%HJXQRU$Q(VVD\WR%ULQJWKH,QGLDQ/DQJXDJHLQWR5XOHV)RUWKH+HOSRI 6XFKDV'HVLUHWR/HDUQWKH6DPHIRUWKH)XUWKHUDQFHRIWKH*RVSHO$PRQJ7KHP&DPEULGJH0$0DUPDGXNH -RKQVRQ (OOLRW$ µ7UDQVODWLQJ3RHWLF)RUPV¶7UDQVODWLRQDQG/LWHUDWXUH (OOLSVH 6SHFLDO,VVXH µ7KH7UDQVODWLRQRI3RHWU\¶ (OOLV5RJHUHG D 7KH0HGLHYDO7UDQVODWRU:HVWILHOG3XEOLFDWLRQVLQ0HGLHYDO6WXGLHV/RQGRQ&HQWUHIRU 0HGLHYDO6WXGLHV4XHHQ0DU\DQG:HVWILHOG&ROOHJH8QLYHUVLW\RI/RQGRQ ²²HG E µ7UDQVODWLRQLQWKH0LGGOH$JHV¶1HZ&RPSDULVRQ ²²DQG5XWK(YDQVHGV 7KH0HGLHYDO7UDQVODWRU([HWHU8QLYHUVLW\RI([HWHU3UHVV ²²DQG57L[LHUHGV 7KH0HGLHYDO7UDQVODWRU7XUQKRXW%UHSROV -:RJDQ%URZQH60HGFDOIDQG30HUHGLWKHGV 7KH0HGLHYDO7UDQVODWRU&DPEULGJH'6%UHZHU (OOLVWRQ-6* µ&RPSXWHUDLGHG7UDQVODWLRQ$%XVLQHVV9LHZSRLQW¶LQ%06QHOOHG 7UDQVODWLQJDQGWKH &RPSXWHU$PVWHUGDP1RUWK+ROODQG (OZHUW:LOKHOP7KHRGRU µ/¶HPSORLGHODQJXHVpWUDQJqUHVFRPPHSURFpGpVW\OLVWLTXH¶5HYXHGH/LWWpUDWXUH &RPSDUpH ± (O\WLV2 'HIWHUL*UDSKL>6HFRQG:ULWLQJ@$WKHQV,NDURV (QF\FORSDHGLD-XGDLFD $UWLFOHRQWKH%LEOH-HUXVDOHP.HWHU (QF\FORSHGLF'LFWLRQDU\RI5HOLJLRQ HG3DXO.HYLQ0HDJKHU7KRPDV&2¶%ULHQDQG6LVWHU&RQVXHOR0DULD $KHUQH:DVKLQJWRQ'&&RUSXV3XEOLFDWLRQV (QJOXQG'LPLWURYD% µ1lUWYnVDPWDODUJHQRPHQWUHGMH,QWHUDNWLRQRFKLFNHYHUEDONRPPXQLNDWLRQL PHGLFLQVNDP|WHQPHGWRON¶5DSSRUWHURPWYnVSUnNLJKHW1R6WRFNKROP6WRFNKROP8QLYHUVLW\&HQWUHIRU 5HVHDUFKRQ%LOLQJXDOLVP ²² µ6HPDQWLF&KDQJHLQ7UDQVODWLRQ$&RJQLWLYH3HUVSHFWLYH¶LQ*DPELHUDQG7RPPRODHGV IRUWKFRPLQJ µ2PLVVLRQVLQ&RQVHFXWLYH,QWHUSUHWDWLRQ(YLGHQFHRID'HFLVLRQ&RPSRQHQW¶LQ3URIHVVRU$QGHUV 6M|EHUJLQPHPRULDP6WRFNKROP,QVWLWXWHRI6ODYRQLFDQG%DOWLF/DQJXDJHV6WRFNKROP8QLYHUVLW\ (QJZDOO* µ1RW&KDQFHEXW&KRLFH&ULWHULDLQ&RUSXV&UHDWLRQ¶LQ%76$WNLQVDQG$=DPSROOLHGV &RPSXWDWLRQDO$SSURDFKHVWRWKH/H[LFRQ2[IRUG2[IRUG8QLYHUVLW\3UHVV (QNYLVW1( /LQJXLVWLF6W\OLVWLFV7KH+DJXH0RXWRQ ²² µ&RQWUDVWLYH7H[W/LQJXLVWLFVDQG7UDQVODWLRQ¶LQ/*UDKV*.RUOpQDQG%0DOPEHUJHGV 7KHRU\DQG 3UDFWLFHRI7UDQVODWLRQ%HUQH3HWHU/DQJ (UDVPXV3 %XIIDOR'D\VDQG1LJKWV$VWROGWR+HQU\7KRPSVRQ,QWURGXFWLRQE\,UHQH6SU\&DOJDU\ *OHQERZ$OEHUWD,QVWLWXWH



3DJH (ULFVVRQ.DQG+6LPRQ 3URWRFRO$QDO\VLV9HUEDO5HSRUWVDV'DWD&DPEULGJH0$0,73UHVV ²² µ9HUEDO5HSRUWVRQ7KLQNLQJ¶LQ)DHUFKDQG.DVSHUHGV (VFDUSLW5 µ/D'pILQLWLRQGXWHUPH/LWWpUDWXUH¶LQ3URFHHGLQJVRIWKH7KLUG&RQJUHVVRIWKH,&/$7KH +DJXH0RXWRQ± (VVPDQQ+ hEHUVHW]XQJVDQWKRORJLHQ(LQH7\SRORJLHXQGHLQH8QWHUVXFKXQJDP%HLVSLHOGHU DPHULNDQLVFKHQ9HUVGLFKWXQJLQGHXWVFKVSUDFKLJHQ$QWKRORJLHQ±1HXH6WXGLHQ]XU$QJOLVWLNXQG $PHULNDQLVWLN )UDQNIXUW3HWHU/DQJ ²²DQG$UPLQ3DXO)UDQN µ7UDQVODWLRQ$QWKRORJLHV$Q,QYLWDWLRQWRWKH&XULRXVDQGD&DVH6WXG\¶7DUJHW ± ²²DQG86FKRHQLQJHGV :HOWOLWHUDWXULQGHXWVFKHQ9HUVDQWKRORJLHQGHV-DKUKXQGHUWV*|WWLQJHU %HLWUlJH]XU,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJ %HUOLQ(ULFK6FKPLGW (YHQ=RKDU,WDPDU µ0DYROHWHRU\DVKHOKDWLUJXPKDVLIUXWL¶>,QWURGXFWLRQWRD7KHRU\RI/LWHUDU\ 7UDQVODWLRQ@8QSXEOLVKHG3K'7HO$YLY7HO$YLY8QLYHUVLW\ ²²D µ7KH3RVLWLRQRI7UDQVODWHG/LWHUDWXUH:LWKLQWKH/LWHUDU\3RO\V\VWHP¶LQ+ROPHV/DPEHUWDQGYDQGHQ %URHFNHGV ²²E 3DSHUVLQ+LVWRULFDO3RHWLFV3DSHUVRQ3RHWLFVDQG6HPLRWLFV 7HO$YLY3RUWHU,QVWLWXWHIRU3RHWLFV DQG6HPLRWLFV ²² 3RO\V\VWHP6WXGLHV7HO$YLY7KH3RUWHU,QVWLWXWHIRU3RHWLFVDQG6HPLRWLFV'XUKDP1&'XNH 8QLYHUVLW\3UHVVVSHFLDOLVVXHRI3RHWLFV7RGD\ ²²DQG*LGHRQ7RXU\HGV 7UDQVODWLRQ7KHRU\DQG,QWHUFXOWXUDO5HODWLRQVVSHFLDOLVVXHRI3RHWLFV7RGD\ (YQLQH6 'RQDOG'DYLGVRQ2[IRUG3ROLW\3UHVV )DHUFK.DQG*.DVSHUHGV ,QWURVSHFWLRQLQ6HFRQG/DQJXDJH5HVHDUFK&OHYHGRQ0XOWLOLQJXDO0DWWHUV )DQJ+DR =KRQJ[LMLDRWRQJVKL>+LVWRU\RI,QWHUUHODWLRQVEHWZHHQ&KLQDDQGWKH:HVWHUQ:RUOG@YROV 7DLSHL=KRQJKXDZHQKXDFKXEDQVKL\HVKH )DTLK0DV¶XG µ7DUMRPHKYD3D\GD¶L\H7H¶DWUGDU,UDQ¶>7UDQVODWLRQDQGWKH(PHUJHQFHRIWKH7KHDWUHLQ ,UDQ@)DUKDQJYD=HQGHJL± )DUG\%' -HUU\3RWWV3DODGLQRIWKH3ODLQV/DQJOH\0U3DSHUEDFN )DUJKDO0 µ0DQDJLQJLQ7UDQVODWLRQ$7KHRUHWLFDO0RGHO¶0HWD ± )DXONQHU3HG :LOOLDP0RUULV7KH&ULWLFDO+HULWDJH/RQGRQDQG%RVWRQ5RXWOHGJHDQG.HJDQ3DXO )DZFHWW3HWHU µ7UDQVODWLRQDQG3RZHU3OD\¶7KH7UDQVODWRU ± ²²DQG2ZHQ+HDWKFRWHHGV 7UDQVODWLRQLQ3HUIRUPDQFH3DSHUVRQWKH7KHRU\DQG3UDFWLFHRI 7UDQVODWLRQ%UDGIRUG8QLYHUVLW\RI%UDGIRUG )HDWKHU-RKQ µ%RRNSXEOLVKLQJLQ%ULWDLQ$Q2YHUYLHZ¶0HGLD&XOWXUHDQG6RFLHW\± )HGHULFL)RUWXQDWR 'HJOLVFULWWRULJUHFLHGHOOHLWDOLDQHYHUVLRQLGHOOHORURRSHUH3DGXD6RF7LSGHOOD 0LQHUYD )HGHUPDQ5D\PRQG µ7KH:ULWHUDV6HOIWUDQVODWRU¶LQ$ODQ:DUUHQ)ULHGPDQ&KDUOHV5RVVPDQDQG'LQD 6KHU]HUHGV %HFNHWW7UDQVODWLQJ7UDQVODWLQJ%HFNHWW8QLYHUVLW\3DUN3$DQG/RQGRQ3HQQV\OYDQLD6WDWH 8QLYHUVLW\3UHVV± )HGRURY$9 9YHGHQLHEWHRULXSHUHYRGD>,QWURGXFWLRQWRWKH7KHRU\RI7UDQVODWLRQ@0RVFRZ/LWHUDWXU\QD LQRVWUDQQL[\D]LND[UGHGQ2VQRY\REVKFKHLWHRULLSHUHYRGD>)RXQGDWLRQVRID*HQHUDO7KHRU\RI 7UDQVODWLRQ@0RVFRZ9\VVKD\DVKNROD ²² 9YHGHQLHEWHRUL\XSHUHYRGD>,QWURGXFWLRQWRWKH7KHRU\RI7UDQVODWLRQ@QGUHYHGQ0RVFRZ /LWHUDWXUHLQ)RUHLJQ/DQJXDJHVUGHGQSXEOLVKHGDV2VQRYLREVKFKRLWHURLLSHUHYRGD>)RXQGDWLRQVRID*HQHUDO 7KHRU\RI7UDQVODWLRQ@0RVFRZ+LJK6FKRRO )HOEHU+DQG*%XGLQ 7HUPLQRORJLHLQ7KHRULHXQG3UD[LV7ELQJHQ1DUU )HOGPDQ* µ*RLQJ*OREDO¶3XEOLVKHUV:HHNO\'HFHPEHU± )HOVWLQHU- 7UDQVODWLQJ1HUXGD7KH:D\WR0DFFKX3LFFKX6WDQIRUG6WDQIRUG8QLYHUVLW\3UHVV )HUHQþtN-iQ .RQWH[W\SUHNODGX%UDWLVODYD6ORYHQVNêVSLVRYDWHĎ )HUUDUD$ µ$SSURSULDWHQHVV&RQGLWLRQVIRU(QWLUH6HTXHQFHVRI6SHHFK$FWV¶-RXUQDORI3UDJPDWLFV± )HUUDUL/XLJL /HWUDGX]LRQLLWDOLDQHGHOWHDWURWUDJLFRIUDQFHVHQHLVHFROL;9,,H;9,,,3DULV/LEUDLULH $QFLHQQH(GRXDUG&KDPSLRQ )HVW$ µ0HGLHYDO&RQWDFWVEHWZHHQ(QJODQGDQG+XQJDU\¶+XQJDULDQ4XDUWHUO\± ²² µ$QJOR+XQJDULDQ+LVWRULFDODQG&XOWXUDO5HODWLRQV¶$QJRO)LOROyJLDL7DQXOPiQ\RN± F

)LDO$GDEZDO7D¶OƯIZDOWDUMDPDILDOULZƗ\DDO DUDEL\\D %HLUXWDO0X¶DVDVVDDOFDUDEL\\DOLO'LUDVƗWZD O1DVKU )LJXHLUD'RURWK\0DWLOGD 7UDQVODWLQJWKH2ULHQW7KH5HFHSWLRQRIµ6DNXQWOD¶LQ1LQHWHHQWKFHQWXU\(XURSH $OEDQ\6WDWH8QLYHUVLW\RI1HZ


3DJH )LVFKHU/.+)UHLJDQJ)0D\HUDQG85HLQNHHGV 6SUDFKGDWHQYHUDUEHLWXQJIUhEHUVHW]HUXQG 'ROPHWVFKHU$NWHQGHV6\PSRVLXPV]XP$EVFKOXȕGHV6DDUEUFNHU0RGHOOYHUVXFKV6HSWHPEHU +LOGHVKHLP*HRUJ2OPV9HUODJ )LVFKHU0LFKDHO0-DQG0HKGL$EHGL µ7UDQVODWLQJ4XU¶DQLF'LDORJLFV,VODPLF3RHWLFVDQG3ROLWLFVIRU 0XVOLPVDQGIRU8V¶+HUPHQHXWLFVDQGWKH3RHWLF0RWLRQ7UDQVODWLRQ3HUVSHFWLYHV9 %LQJKDPWRQ1<6WDWH 8QLYHUVLW\RI1HZ 2QWKH7UDQVODWLRQRI3RHWLF:RUNV@'XãHDVORYR± ),7&RPPLWWHHIRU7UDQVODWLRQ&ULWLFLVP 0LVFHOODQ\RQ7UDQVODWLRQ&ULWLFLVP3UDJXH)DFXOW\RI$UWV&KDUOHV 8QLYHUVLW\ )LWFK%ULDQ7 µ/¶LQWUDLQWHUWH[WXDOLWpLQWHUOLQJXLVWLTXHGH%HFNHWWODSUREOpPDWLTXHGHODWUDGXFWLRQGHVRL¶ 7H[WH± ²² µ7KH6WDWXVRI6HOIWUDQVODWLRQ¶7H[WH± ²² %HFNHWWDQG%DEHO$Q,QYHVWLJDWLRQLQWRWKH6WDWXVRIWKH%LOLQJXDO:RUN7RURQWR%XIIDORDQG/RQGRQ 8QLYHUVLW\RI7RURQWR3UHVV )LWWV' µ7KH7HD6KRS$XUD¶7KH1HZ5HSXEOLF-DQXDU\± HGDQGWUDQV 3RHPVIURPWKH*UHHN$QWKRORJ\1HZ )DOVH7UHDWLVHIRUWKH8VHRI7UDQVODWRUV@(FKLQR[± ²² µ/DXWUpDPRQWLQWăOPăFLUHGXEOă¶>/DXWUpDPRQWLQ'RXEOH7UDQVODWLRQ@2UL]RQW± )RGRU,VWYiQ )LOP'XEELQJ3KRQHWLF6HPLRWLF$HVWKHWLFDQG3V\FKRORJLFDO$VSHFWV+DPEXUJ+HOPXW %XVNH )ROHQD*LDQIUDQFR µ³9ROJDUL]]DUH´H³WUDGXUUH¶´LQ/D7UDGX]LRQH6DJJLH6WXGL 7ULHVWH/,17± ²² µ/HVODQJXHVGHODFRPpGLHHWODFRPpGLHGHVODQJXHV¶LQ&KULVWLDQ%HFDQG,UqQH0DPF]DU]HGV /H 7KpkWUHLWDOLHQHWO¶(XURSH;9H;9,,HVLqFOHV3DULV3UHVVHV8QLYHUVLWDLUHVGH)UDQFH± ²² 9ROJDUL]]DUHHWUDGXUUH7XULQ(LQDXGL )RUVWHU/HRQDUG 7KH3RHW¶V7RQJXHV0XOWLOLQJXDOLVPLQ/LWHUDWXUH/RQGRQ1HZ
H

H

)RXFKHFRXU&KDUOHV+HQULGH 0RUDOLD/HV1RWLRQVPRUDOHVGDQVODOLWWpUDWXUHSHUVDQHGH DX VLqFOHV3DULVeGLWLRQV5HFKHUFKHVXUOHV&LYLOLVDWLRQV )RZOHU( µ5HQGHULQJ:RUGV7UDYHUVLQJ&XOWXUHV2QWKH$UWDQG3ROLWLFVRI7UDQVODWLQJ0RGHUQ-DSDQHVH )LFWLRQ¶-RXUQDORI-DSDQHVH6WXGLHV± )RZOHU5RJHU µ3RZHU¶LQ7YDQ'LMNHG +DQGERRNRI'LVFRXUVH$QDO\VLVYRO/RQGRQ$FDGHPLF3UHVV ²² /LQJXLVWLF&ULWLFLVP2[IRUG2[IRUG8QLYHUVLW\3UHVV )R]& µ/DWUDGXFWLRQDSSURSULDWLRQOHFDVGHVWUDGXFWHXUVWROpGDQVGHVHHWHVLqFOHV¶7757UDGXFWLRQ 7HUPLQRORJLH5HGDFWLRQ ± ²² µ3UDWLTXHGHODWUDGXFWLRQHQ(VSDJQHDX0R\HQÆJHOHVWUDYDX[WROpGDQV¶LQ5(OOLVHG D± )UDQN$UPLQ3DXOHG 'HUODQJH6FKDWWHQNXU]HU*HVFKLFKWHQ$PHULNDQLVFKH.XU]SURVDLQGHXWVFKHQ hEHUVHW]XQJHQ*|WWLQJHU%HLWUlJH]XU,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJ %HUOLQ(ULFK6FKPLGW ²²DQG+(VVPDQQ µ7UDQVODWLRQ$QWKRORJLHV$3DUDGLJPDWLF0HGLXPRI,QWHUQDWLRQDO/LWHUDU\7UDQVIHU¶ $PHULNDVWXGLHQ$PHULFDQ6WXGLHV ± 5/DXHU)3DXO%6FKXOW]H-YRQ6WDFNHOEHUJ+7XUNDQG7K:ROSHUVHGV ± µ*|WWLQJHU%HLWUlJH]XU ,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJ¶VHULHV%HUOLQ(ULFK6FKPLGW ²².XUW-UJHQ0DDVV)ULW]3DXODQG+RUVW7XUNHGV hEHUVHW]HQ9HUVWHKHQ%UFNHQEDXHQ *HLVWHVZLVVHQVFKDIWOLFKHVXQGOLWHUDULVFKHVhEHUVHW]HQLPLQWHUQDWLRQDOHQ.XOWXUDXVWDXVFK*|WWLQJHU%HLWUlJH]XU ,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJ %HUOLQ(ULFK6FKPLGW )UDQNRZVNL- ³µ%LEOLD7\VLąFOHFLD´²WáRLSUREOHPDW\NDSU]HNáDGX¶>7KHµ0LOOHQLXP



3DJH %LEOH¶%DFNJURXQGDQG6RPH7KHRUHWLFDO,VVXHV@LQ3ROODNHG )UDVHU-DQHW µ3XEOLF$FFRXQWV8VLQJ9HUEDO3URWRFROVWR,QYHVWLJDWH&RPPXQLW\7UDQVODWLRQ¶$SSOLHG /LQJXLVWLFV ± ²² µ7UDQVODWLQJ3UDFWLFHLQWR7KHRU\$3UDFWLFDO6WXG\RI4XDOLW\LQ7UDQVODWRU7UDLQLQJ¶LQ&DWULRQD3LFNHQ HG ,7,&RQIHUHQFH3URFHHGLQJV/RQGRQ,QVWLWXWHRI7UDQVODWLRQDQG,QWHUSUHWLQJ ²² µ7KH7UDQVODWRU,QYHVWLJDWHG/HDUQLQJIURP7UDQVODWLRQ3URFHVV$QDO\VLV¶7KH7UDQVODWRU ± )UDZOH\:LOOLDPHG D 7UDQVODWLRQ/LWHUDU\/LQJXLVWLFDQG3KLORVRSKLFDO3HUVSHFWLYHV/RQGRQDQG 7RURQWR$VVRFLDWHG8QLYHUVLW\3UHVVHV ²²E µ3UROHJRPHQRQWRD7KHRU\RI7UDQVODWLRQ¶LQ)UDZOH\HG D )UHJH* µhEHU6LQQXQG%HGHXWXQJ¶=HLWVFKULIWIU3KLORVRSKLHXQG3KLORVRSKLVFKH.ULWLN±WUDQV 0%ODFNDVµ2Q6HQVHDQG5HIHUHQFH¶LQ3*HDFKDQG0%ODFNHGV 7UDQVODWLRQVIURPWKH3KLORVRSKLFDO :ULWLQJVRI*RWWORE)UHJH2[IRUG%DVLO%ODFNZHOO )UHLKRII5RODQG µhEHUOHJXQJHQ]XU&XUULFXOXPSODQXQJXQGHQWZLFNOXQJLP%HUHLFKGHU7UDQVODWLRQ¶ 7(;7FRQ7(;7± )ULDU. µ2Q7UDQVODWLRQ¶LQ0RGHUQ*UHHN3RHWU\)URP&DYDILVWR(O\WLV1HZ $Q,QWURGXFWLRQWRWKH7KHRU\RI7UDQVODWLRQ@0RVFRZ ,]GDWHOVWYROLWHUDWXU\QDLQRVWUDQQ\NK\D]\NDNK ²² 2VQRY\REVKFKH\WHRULLSHUHYRGD>)RXQGDWLRQVRID*HQHUDO7KHRU\RI7UDQVODWLRQ@0RVFRZ9\VVKD\D VKNROD *DFKHFKLODG]H*5 µ5HDOLVPDQG'LDOHFWLFVLQWKH$UWRI7UDQVODWLRQ%DEHO ²² 9YHGHQLHYWHRUL\XNKXGR]KHVWYHQQRJRSHUHYRGD>$Q,QWURGXFWLRQWRWKH7KHRU\RI/LWHUDU\7UDQVODWLRQ@ 7ELOLVL,]GDWHOVWYR7*8 *DG% 6LOOH%H\HUVEHDUEHMGHOVHDI:LOOLDP6KDNHVSHDUHV/\VWVSLO>6LOOH%H\HU¶V$GDSWDWLRQVRI:LOOLDP 6KDNHVSHDUH¶V&RPHGLHV@6WXGLHUIUDVSURJRJROGWLGVIRUVNQLQJHQ &RSHQKDJHQ*DG *DGDPHU+DQV*HRUJ :DKUKHLWXQG0HWKRGH*UXQG]JHHLQHUSKLORVRSKLVFKHQ+HUPHQHXWLN 7ELQJHQ0RKUWUDQV*DUUHWW%DUGHQDQG-RKQ&XPPLQJVDV7UXWKDQG0HWKRG1HZ 7\SRORJ\RI7H[WXDO /DQJXDJH7UDQVIRUPDWLRQLQ7UDQVODWLRQ@LQ$'6KYHLWVHUHG 7HNVWLSHUHYRG>7H[WDQG7UDQVODWLRQ@0RVFRZ 1DXND± *iO, +XQJDU\DQGWKH$QJOR6D[RQ:RUOG%XGDSHVW2IILFLQD *DODQ)UDQWLãHN +LVWRULF6WUXFWXUHV7KH3UDJXH6FKRRO3URMHFW±$XVWLQ8QLYHUVLW\RI7H[DV 3UHVV *DOODJKHU7 µ3RHWU\LQ7UDQVODWLRQ/LWHUDU\,PSHULDOLVPRU'HIHQGLQJWKH0XVN2[¶3DUQDVVXV²7KH3RHWU\ 5HYLHZ ± *DPELHU


3DJH *DXYLQ/LVHDQG5DLQLHU*UXWPDQ µ/DQJXHVHWOLWWpUDWXUHVpOpPHQWVGHELEOLRJUDSKLH¶/LWWpUDWXUH± *DYURQVN\6 µ7KH7UDQVODWRU)URP3LHW\WR&DQQLEDOLVP¶6XE6WDQFH± *HEKDUGW3 $:6FKOHJHOV6KDNHVSHDUHhEHUVHW]XQJ8QWHUVXFKXQJHQ]XVHLQHPhEHUVHW]XQJVYHUIDKUHQDP %HLVSLHOGHV+DPOHW*|WWLQJHQ9DQGHQKRHFNDQG5XSUHFKW *HOE,JQDFH- $6WXG\RI:ULWLQJ&KLFDJR8QLYHUVLW\RI&KLFDJR3UHVV *HOOHUVWDP0DUWLQ µ7UDQVODWLRQHVHLQ6ZHGLVK1RYHOV7UDQVODWHGIURP(QJOLVK¶LQ/:ROOLQDQG+/LQGTXLVW HGV 7UDQVODWLRQ6WXGLHVLQ6FDQGLQDYLD/XQG&:.*OHHUXS *HQHWWH* )LJXUHV,,,3DULV6HXLO *HQWLOH$GROIR8OGLV2]ROLQVDQG0DU\9DVLODNDNRVZLWK/HRQJ.RDQG7RQ7KDW4X\QK'X /LDLVRQ ,QWHUSUHWLQJ$+DQGERRN0HOERXUQH0HOERXUQH8QLYHUVLW\3UHVV *HQWLOH*LRYDQQL µ7RUWRHGLULWWRGHOOHWUDGX]LRQL¶LQ6FULWWLYDUL,)UDPPHQWLGLFULWLFDH/HWWHUDWXUD /DQFLDQR&DUDEED *HQW]OHU(GZLQ &RQWHPSRUDU\7UDQVODWLRQ7KHRULHV/RQGRQDQG1HZ 7KH (VWDEOLVKPHQWRIWKH3UHVODYDQG2KULGD/LWHUDU\6FKRROVLQ0HGLHYDO%XOJDULD@LQWKH$QQXDO%RRNRI6RILD 8QLYHUVLW\6RILD'HSDUWPHQWRI3KLORORJ\1DXNDL,]NXVWYR3XEOLVKHUV *pUDUG$DDQGE (XURSHDQODQJXDJH:ULWLQJLQ6XE6DKDUDQ$IULFDYROV,DQG,,%XGDSHVW$NDGpPLDL .LDGR *HUORII3 µ6HFRQG/DQJXDJH/HDUQHUV¶5HSRUWVRQWKH,QWHUSUHWLYH3URFHVV7DONDORXG3URWRFROVRI 7UDQVODWLRQ¶LQ+RXVHDQG%OXP.XONDHGV *HUYHU'DYLG µ(PSLULFDO6WXGLHVRI6LPXOWDQHRXV,QWHUSUHWDWLRQ$5HYLHZDQGD0RGHO¶LQ%ULVOLQHG ± ²²DQG+:DOODFH6LQDLNRHGV /DQJXDJH,QWHUSUHWDWLRQDQG&RPPXQLFDWLRQ1$72&RQIHUHQFH6HULHV 1HZ 0HQGHOVVRKQ¶V.RKHOHW0XVVDULQ,WV+LVWRULFDO &RQWH[W@-HUXVDOHP7KH,VUDHO$FDGHP\RI6FLHQFHVDQG+XPDQLWLHV *ODVVH&\ULOHG 7KH&RQFLVH(QF\FORSHGLDRI,VODP/RQGRQ6WDFH\,QWHUQDWLRQDO *OHDVRQ+$-U µ&RQWUDVWLYH$QDO\VLVLQ'LVFRXUVH6WUXFWXUH¶LQ-DPHV($ODWLVHG *HRUJHWRZQ 8QLYHUVLW\WK$QQXDO5RXQG7DEOH0HHWLQJRQ/LQJXLVWLFVDQG/DQJXDJH6WXGLHV&RQWUDVWLYH/LQJXLVWLFVDQGLWV 3HGDJRJLFDO,PSOLFDWLRQV0RQRJUDSK6HULHVRQ/DQJXDJHDQG/LQJXLVWLFV :DVKLQJWRQ'&*HRUJHWRZQ 8QLYHUVLW\3UHVV *ORVVLNL(SLNLQRQLDNH(OOLQLNL*ORVVDVWLQ(YURSDLNL.LQRWLWD0HWDIUDVL3URJUDPPD/LQJXD>/LQJXLVWLF &RPPXQLFDWLRQDQG*UHHN/DQJXDJHLQWKH(XURSHDQ&RPPXQLW\7UDQVODWLRQ/LQJXD3URJUDPPH@6HOHFWLRQIURP WKH&RQIHUHQFH3URFHHGLQJV$WKHQV&RPPLVVLRQRIWKH(XURSHDQ&RPPXQLWLHV *RGDUG%DUEDUD µ7KHRUL]LQJ)HPLQLVW'LVFRXUVH7UDQVODWLRQ¶LQ%DVVQHWWDQG/HIHYHUHHGV ± *RGGHQ0DQG0/DSLGJHHGV 7KH&DPEULGJH&RPSDQLRQWR2OG(QJOLVK/LWHUDWXUH&DPEULGJH &DPEULGJH8QLYHUVLW\3UHVV *RHWKH-RKDQQ:ROIJDQJYRQ>@ µ7KH7KUHH(SRFKVRI7UDQVODWLRQ¶H[FHUSWHGIURPWKHQRWHVWR:HVW gVWOLFKHU'LYDQDQGWUDQVODWHGE\$QGUp/HIHYHUH± *RHWVFK3DXO µ)UHPGVSUDFKHQLQGHU/LWHUDWXU(LQW\SRORJLVFKHUhEHUEOLFN¶LQ3DXO*RHWVFKHG 'LDOHNWH XQG)UHPGVSUDFKHQLQGHU/LWHUDWXU7ELQJHQ1DUU± *RIILQ5RJHU µ3RXUXQHIRUPDWLRQXQLYHUVLWDLUH³VXLJHQHULV´GXWUDGXFWHXU5pIOH[LRQVVXUFHUWDLQDVSHFWV PpWKRGRORJLTXHVHWVXUODUHFKHUFKHVFLHQWLILTXHGDQVOHGRPDLQHGHODWUDGXFWLRQ¶0HWD± *ROG'/ µ3ODQQLQJD6FKRROIRU7UDQVODWRUVDQG,QWHUSUHWHUV¶%DEHO ± *RQoDOYHV5RGULJXHV$$ $WUDGXomRHP3RUWXJDO±/LVERQ,PSUHQVD1DFLRQDO&DVDGD0RHGD *RQGD-DQHG +LVWRU\RI,QGLDQ/LWHUDWXUHYROV:LHVEDGHQ2WWR+DUUDVVRZLW] *RQWFKDUHQNR6 µ7KH3RVVLEOHLQWKH,PSRVVLEOH7RZDUGVD7\SRORJ\RI3RHWLF7UDQVODWLRQ¶LQ+%KOHU HG ± *RQ]iOH]'XHxxV5RVHDQQ9LFWRULD9iVTXH]DQG+ROO\0LNNHOVRQ )XQGDPHQWDOVRI&RXUW,QWHUSUHWDWLRQ 7KHRU\3ROLF\DQG3UDFWLFH'XUKDP1&&DUROLQD$FDGHPLF3UHVV



3DJH *RQ]iOH]5 µ7KH)HGHUDO&RXUW,QWHUSUHWHU&HUWLILFDWLRQ3URMHFW'HILQLQJ:RUOG&ODVV6WDQGDUGVIRU&RXUW ,QWHUSUHWDWLRQ¶LQ3URFHHGLQJVRI,-(7%ULVEDQH8QLYHUVLW\RI4XHHQVODQG *RQ]iOH]3DOHQFLD$ µ1RWLFLDVVREUHGRQ5DLPXQGRDU]RELVSRGH7ROHGR± ¶6SDQLVFKH )RUVFKXQJHQ ± *RRGPDQ*- 7KH'XWFK,PSDFWRQ-DSDQ± /HLGHQ%ULOO *RRGPDQ.DQG61LUHQEXUJHGV 7KH.%07SURMHFW$&DVH6WXG\LQ.QRZOHGJH%DVHG0DFKLQH 7UDQVODWLRQ6DQ0DWHR&$0RUJDQ.DXIPDQQ *RRGULFK/&DUULQJWRQDQG&KDR\LQJ)DQJHGV 'LFWLRQDU\RI0LQJ%LRJUDSK\YROV1HZ 6XEWLWOLQJ²6\QFKURQRXV6FUHHQ7UDQVODWLRQ@'$2 &RSHQKDJHQ&HQWUHIRU7UDQVODWLRQ6WXGLHV&RSHQKDJHQ8QLYHUVLW\ *RWWVFKHG-& $XVIXHKUOLFKH5HGHNXQVW/HLS]LJQRSXEOLVKHU ²² 9HUVXFKHLQHU&ULWLVFKHQ'LFKWNXQVW/HLS]LJ%UHLWNRSI *|W]'LHWHUDQG7KRPDV+HUEVW µ'HUIUKH9RJHOIlQJWGHQ:XUP(UVWHhEHUOHJXQJHQ]XHLQHU7KHRULHGHU 6\QFKURQLVDWLRQ(QJOLVK'HXWVFK ¶$$$²$UEHLWHQDXV$QJOLVWLNXQG$PHULNDQLVWLN ± *RXDGHF'IRUWKFRPLQJ $VVXUDQFHTXDOLWpHQWUDGXFWLRQ²3HUVSHFWLYHVSURIHVVLRQQHOOHV,PSOLFDWLRQV SpGDJRJLTXHV *UDGGRO'-&KHVKLUHDQG-6ZDQQ 'HVFULELQJ/DQJXDJHQGHGQ%XFNLQJKDPDQG%ULVWRO3$2SHQ 8QLYHUVLW\3UHVV *UDPVFL$QWRQLR 4XDGHUQLGHOFDUFHUH7XULQ(LQDXGL *UDQ/DXUDDQG-RKQ'RGGVHGV 7KH7KHRUHWLFDODQG3UDFWLFDO$VSHFWVRI7HDFKLQJ&RQIHUHQFH ,QWHUSUHWDWLRQ8GLQH&DPSDQRWWR *UDVHV3 µ7UDGXFFLRQHVGHLQWHUpVSROtWLFRFXOWXUDOHQODpSRFDGHOD,QGHSHQGHQFLDGH9HQH]XHOD¶LQ ,QVWLWXFLRQHV\QRPEUHVGHOVLJOR;,;2EUDV%DUFHORQD(GLWRULDO6HL[%DUUDO± *UDXU$O µ7UDGXFHUHDHVWHSRVLELOă"¶>,V7UDQVODWLRQ3RVVLEOH"@LQ$O*UDXUHG 6FULHULGHLHULúLGHD]L %XFKDUHVW6FLHQWLILF3XEOLVKLQJ+RXVH± *UDYHV5 µ0RUDO3ULQFLSOHVLQ7UDQVODWLRQ¶(QFRXQWHU ± *UHHQ*DQG-0RUJDQ µ3UDJPDWLFV*UDPPDUDQG'LVFRXUVH¶LQ3&ROHHG 5DGLFDO3UDJPDWLFV1HZ /DQJXDJHDQGLWV6KDGRZ@3DULV6HXLO *UHHQEHUJ- 6WXGLHVLQ$IULFDQ/LQJXLVWLF&ODVVLILFDWLRQ%ORRPLQJWRQ,QGLDQD8QLYHUVLW\3UHVV *UHJRU\0LFKDHO µ$VSHFWVRI9DULHWLHV'LIIHUHQWLDWLRQ¶-RXUQDORI/LQJXLVWLFV± ²² µ3HUVSHFWLYHVRQ7UDQVODWLRQIURPWKH)LUWKLDQ7UDGLWLRQ¶0HWD ± ²²DQG6&DUUROO /DQJXDJHDQG6LWXDWLRQ/DQJXDJH9DULHWLHVDQGWKHLU6RFLDO&RQWH[WV/RQGRQ5RXWOHGJH DQG.HJDQ3DXO *UHLPDV$- 6HPDQWLTXHVWUXFWXUDOH3DULV/DURXVVH ²² 'XVHQV,,²(VVDLVVpPLRWLTXHV3DULV6HXLO ²²DQG-&RXUWpV 6pPLRWLTXHGLFWLRQQDLUHUDLVRQQpGHODWKpRULHGXODQJDJH3DULV+DFKHWWH *ULFH+3 µ/RJLFDQG&RQYHUVDWLRQ¶LQ3&ROHDQG-/0RUJDQHGV 6\QWD[DQG6HPDQWLFVYRO6SHHFK $FWV1HZ


3DJH *UXF]D)HG *ORWWRG\GDNW\NDDWUDQVODWRU\ND>/DQJXDJH7HDFKLQJDQG7UDQVODWLRQ6WXGLHV@:DUVDZ :\GDZQLFWZR8QLZHUV\WHWX:DUV]DZVNLHJR ²²HG /LQJZLVW\NDJORWWRG\GDNW\NDWUDQVODWRU\ND>/LQJXLVWLFV/DQJXDJH7HDFKLQJ7UDQVODWLRQ6WXGLHV@ :DUVDZ:\GDZQLFWZR8QLZHUV\WHWX:DUV]DZVNLHJR ²²HG 3UREOHP\WUDQVODWRU\NLLG\GDNW\NLWUDQVODWRU\F]QHM>2Q7UDQVODWLRQ6WXGLHVDQGWKH7HDFKLQJRI 7UDQVODWLRQ@:DUVDZ:\GDZQLFWZR8QLZHUV\WHWX:DUV]DZVNLHJR *UXWPDQ5DLQLHU µ/HELOLQJXLVPHOLWWpUDLUHFRPPHUHODWLRQLQWHUV\VWpPLTXH¶&DQDGLDQ5HYLHZRI &RPSDUDWLYH/LWHUDWXUH± ± ²² µ/¶pFULYDLQIODPDQGHWVHVODQJXHV1RWHVXUODGLJORVVLHGHVSHULSKHULHV¶5HYXHGHO¶,QVWLWXWGHVRFLRORJLH ± ²² µ0RQRYHUVXVVWHUHRELOLQJXDOLVP¶VGRXEOHIDFH¶9LVLEOH/DQJXDJH± ± ²² µ+RQRUp%HDXJUDQGWUDGXFWHXUGHOXLPrPH¶(OOLSVH± ²² µ(IIHWVKpWpUROLQJXHVGDQVOHURPDQTXpEpFRLVGX;,;HVLqFOH¶/LWWpUDWXUH± *XHQWKQHU)DQG0*XHQWKQHU5HXWWHUHGV 0HDQLQJDQG7UDQVODWLRQ3KLORVRSKLFDODQG/LQJXLVWLF $SSURDFKHV/RQGRQ'XFNZRUWK *XLOOHPLQ)OHVFKHU- 6\QWD[HFRPSDUpHGXIUDQoDLVHWGHO¶DQJODLV3UREOqPHVGHWUDGXFWLRQ3DULV2SKU\V *XOLFK(DQG:5DLEOH µ7H[WVRUWHQ3UREOHPH¶LQ/LQJXLVWLVFKH3UREOHPHGHU7H[WDQDO\VH-DKUEXFKGHV ,QVWLWXWVIU'HXWVFKH6SUDFKHLQ0DQQKHLP'VVHOGRUI3lGDJRJLVFKHU9HUODJ6FKZDQQ *XO\D-DQG1/RVVDXHGV $QWKRORJLHXQGLQWHUNXOWXUHOOH5H]HSWLRQ2SXVFXOD)HQQR8JULFD*RWWLQJHQVLD )UDQNIXUW/DQJ *XPEUHFKW+8 µ/LWHUDU\7UDQVODWLRQDQGLWV6RFLDO&RQGLWLRQLQJLQWKH0LGGOH$JHV)RXU6SDQLVK5RPDQFH 7H[WVRIWKHWK&HQWXU\¶WUDQV+%HQQHWW
+DPƗGDK6KDZTL $MHHEDO/XJKD>7KH:RQGHUVRI$UDELF /DQJXDJH@%HLUXW1RIDO +DPEXUJHU0LFKDHO &HODQ¶V3RHPV1HZ


3DJH +DQVRQ+ µ7KH7UDQVODWLRQRI3RHWU\¶7UDQVODWLRQ5HYLHZ± +DQVVRQ6 $IVDWWSn6ZHQVNRWDOHWVWU\FNWD|YHUVlWWQLQJVOLWWHUDWXU>7UDQVODWHGLQWR6ZHGLVK3ULQWHG 7UDQVODWLRQ/LWHUDWXUHLQWKFHQWXU\6ZHGHQ@*|WHERUJ/LWWHUDWXUYHWHQVNDSOLJDLQVWLWXWLRQHQ +DUDV]WL=HG 7KH%D\3VDOP%RRN$)DFVLPLOH5HSULQWRIWKH)LUVW(GLWLRQRI&KLFDJR8QLYHUVLW\ RI&KLFDJR3UHVV +DUJUHDYHV+ µ7KH:\FOLIILWH9HUVLRQV¶LQ*:/DPSHHG 7KH&DPEULGJH+LVWRU\RIWKH%LEOHYRO &DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV± +DUSHU. µ:ULWLQJLQ,QXNWLWXW$Q+LVWRULFDO3HUVSHFWLYH¶,QXNWLWXW± +DUUDV*LVHOD .RPPXQLNDWLYH+DQGOXQJVNRQ]HSWHRGHU(LQH0|JOLFKNHLW+DQGOXQJVDEIROJHQDOV =XVDPPHQKlQJH]XHUNOlUHQH[HPSODULVFKDQ7KHDWHUWH[WHQ5HLKH*HUPDQLVWLVFKH/LQJXLVWLN 7ELQJHQ1DUU +DUULV%ULDQ µ7KH,PSRUWDQFHRI1DWXUDO7UDQVODWLRQ¶:RUNLQJ3DSHUVRQ%LOLQJXDOLVP± ²² µ1RUPVLQ,QWHUSUHWDWLRQ¶7DUJHW ± ²² µ8QLQWpUSUHWHGLSORPiWLFRLQJOpVHQHOVLJOR;,;HQ-DSyQ¶/LYLXV± ²² $7D[RQRPLF6XUYH\RI3URIHVVLRQDO,QWHUSUHWLQJ3DUW'UDIWIRUWKH,QWHUQDWLRQDO&RQIHUHQFHRQ ,QWHUSUHWLQJ7XUNX±6HSWHPEHU ²²DQG*HRIIUH\.LQJVFRWW /DQJXDJH,QWHUQDWLRQDO'LUHFWRU\RI7UDQVODWLRQDQG,QWHUSUHWLQJ6FKRROV $PVWHUGDPDQG3KLODGHOSKLD-RKQ%HQMDPLQV +DUULV5R\DQG7DOERW-7D\ORU µ7KH%LEOHRQWKH2ULJLQDQG'LYHUVLILFDWLRQRI/DQJXDJH¶&KDSWHU /DQGPDUNVLQ/LQJXLVWLF7KRXJKW/RQGRQDQG1HZ


3DJH HG 6lPWOLFKH:HUNH>&ROOHFWHG:RUNV@+LOGHVKHLP ²²>±@ )UDJPHQWHH[FHUSWHGDQGWUDQVOE\$QGUp/HIHYHUHLQ/HIHYHUH± +HUPDQV7KHRHG D 7KH0DQLSXODWLRQRI/LWHUDWXUH6WXGLHVLQ/LWHUDU\7UDQVODWLRQ/RQGRQDQG6\GQH\ &URRP+HOP ²²E µ,PDJHVRI7UDQVODWLRQ0HWDSKRUDQG,PDJHU\LQWKH5HQDLVVDQFH'LVFRXUVHRQ7UDQVODWLRQ¶LQ +HUPDQVHG D± ²² µ/LWHUDU\7UDQVODWLRQ7KH%LUWKRI$&RQFHSW¶1HZ&RPSDULVRQ± ²² µ9DQ³+HEEDQROODYRJDOD´WRW(UQVWYDQ$OWHQD/LWHUDLUHYHUWDOLQJHQ1HGHUODQGVH OLWHUDWXXUJHVFKLHGHQLV¶>)URPµ+HEEDQROODYRJDOD¶WR(UQVWYDQ$OWHQD/LWHUDU\7UDQVODWLRQDQG'XWFK/LWHUDU\ +LVWRU\@LQYDQGHQ%URHFNHG E ± ²²D µ7UDQVODWLRQDO1RUPVDQG&RUUHFW7UDQVODWLRQV¶LQYDQ/HXYHQ=ZDUWDQG1DDLMNHQVHGV ²²E µ7UDQVODWLQJ³5KHWRULMFNHOLMFN´RU³JKHWURXZHOLMFN´6RPH&RQWH[WVRI'XWFK5HQDLVVDQFH$SSURDFKHV WR7UDQVODWLRQ¶LQ-)HQRXOKHWDQG7+HUPDQVHGV 6WDQGLQJ&OHDU)HVWVFKULIWIRU530HLMHU/RQGRQ&HQWUHIRU /RZ&RXQWULHV6WXGLHV ²²F 6WXGLHVRYHU1HGHUODQGVHYHUWDOLQJHQ(HQELEOLRJUDILVFKHOLMVW>6WXGLHVLQ'XWFK7UDQVODWLRQV$ %LEOLRJUDSKLFDO/LVW@7KH+DJXH%LEOLRJUDSKLD1HHUODQGLFD ²² µ2Q0RGHOOLQJ7UDQVODWLRQ0RGHOV1RUPVDQGWKH)LHOGRI7UDQVODWLRQ¶/LYLXV± ²² µ7RXU\¶V(PSLULFLVP9HUVLRQ2QH¶7KH7UDQVODWRU ± ²² µ1RUPVDQGWKH'HWHUPLQDWLRQRI7UDQVODWLRQ¶LQ5$OYDUH]DQG&$9LGDOHGV 7UDQVODWLRQ3RZHU 6XEYHUVLRQ&OHYHGRQ0XOWLOLQJXDO0DWWHUV± +HURGRWXV 7KH+LVWRULHVWUDQV$XEUH\GH6HOLQFRXUWUHYLVHGZLWKDQLQWURGXFWLRQDQGQRWHVE\$5 %XUQV+DUPRQGVZRUWK3HQJXLQ +HUUHQ5 ,QGLRVFDUDSiOLGDV%DUFHORQD3ODQHWD ²² 'RxD0DULQDOD0DOLQFKH%DUFHORQD3ODQHWD +HUYH\6iQGRUDQG,DQ+LJJLQV 7KLQNLQJ7UDQVODWLRQ$&RXUVHLQ7UDQVODWLRQ0HWKRG)UHQFKWR(QJOLVK /RQGRQDQG1HZ 7KH7UDQVODWRUV²,QWHUPHGLDULHVRI&XOWXUH@LQ+-lUY HG 'HQVYHQVNDERNHQnU>7KH6ZHGLVK%RRNLQ\HDUV@6WRFNKROP/LEHU± +MHOPVOHY/ 3UROHJRPHQDWRD7KHRU\RI/DQJXDJHWUDQV)-:KLWILHOG0DGLVRQ8QLYHUVLW\RI :LVFRQVLQ3UHVV +MRUW$0 µ7UDQVODWLRQDQGWKH&RQVHTXHQFHVRI6FHSWLFLVP¶LQ%DVVQHWWDQG/HIHYHUHHGV ± +MRUWK( 'HVFULSWLYH7RROVIRU(OHFWURQLF3URFHVVLQJRI'LFWLRQDU\'DWD/H[LFRJUDSKLFDVHULHVPDLRU 7ELQJHQ1LHPH\HU +RFKHO%UDĖR 3UHNODGDNRNRPXQLNiFLD%UDWLVODYD6ORYHQVNêVSLVRYDWHĎ +RGJH%RE*.UHVVDQG*-RQHV µ7KH,GHRORJ\RI0LGGOH0DQDJHPHQW¶LQ5)RZOHU%RE+RGJH*.UHVV DQG7RQ\7UHZHGV /DQJXDJHDQG&RQWURO/RQGRQ5RXWOHGJHDQG.HJDQ3DXO +RIPDQQ1 5HGXQGDQ]XQGbTXLYDOHQ]LQGHUOLWHUDULVFKHQhEHUVHW]XQJGDUJHVWHOOWDQIQIGHXWVFKHQ hEHUVHW]XQJHQGHV+DPOHW7ELQJHQ1LHPH\HU +RODQGD6%GH 5Dt]HVGR%UDVLOVWHGQ5LRGH-DQHLUR2O\PSLR +ROPHV-DPHV6 µ)RUPVRI9HUVH7UDQVODWLRQDQGWKH7UDQVODWLRQRI9HUVH)RUP¶LQ+ROPHVGH+DDQDQG 3RSRYLþHGV ²²D 7KH1DPHDQG1DWXUHRI7UDQVODWLRQ6WXGLHV8QSXEOLVKHGPDQXVFULSW$PVWHUGDP7UDQVODWLRQ6WXGLHV 6HFWLRQ'HSDUWPHQWRI*HQHUDO6WXGLHV5HSULQWHGLQ*LGHRQ7RXU\HG 7UDQVODWLRQ$FURVV&XOWXUHV1HZ 'HOKL%DKUL3XEOLFDWLRQVDQGLQ+ROPHV± ²²E µ5HEXLOGLQJWKH%ULGJHDW%RPPHO1RWHVRQWKH/LPLWVRI7UDQVODWDELOLW\¶LQ+ROPHV± ²² µ'HVFULELQJ/LWHUDU\7UDQVODWLRQV0RGHOVDQG0HWKRGV¶LQ+ROPHV± ²² 7UDQVODWHG3DSHUVRQ/LWHUDU\7UDQVODWLRQDQG7UDQVODWLRQ6WXGLHV$PVWHUGDP5RGRSL ²²)GH+DDQDQG$3RSRYLþHGV 7KH1DWXUHRI7UDQVODWLRQ(VVD\VRQWKH7KHRU\DQG3UDFWLFHRI /LWHUDU\7UDQVODWLRQ7KH+DJXH0RXWRQ -/DPEHUWDQG5YDQGHQ%URHFNHGV /LWHUDWXUHDQG7UDQVODWLRQ1HZ3HUVSHFWLYHVLQ/LWHUDU\6WXGLHV /HXYHQ$FFR +|OVFKHU$DQG'0|KOH µ&RJQLWLYH3ODQVLQ7UDQVODWLRQ¶LQ)DHUFKDQG.DVSHUHGV 7KH+RO\4XUƗQ(QJOLVK7UDQVODWLRQRIWKH0HDQLQJVDQG&RPPHQWDU\QG 7KH3UHVLGHQF\RI,VODPLF 5HVHDUFKHV,IWD&DOODQG*XLGDQFHQRWUDQVODWRUDFNQRZOHGJHG +RO]0lQWWlUL-XVWD 7UDQVODWRULVFKHV+DQGHOQ7KHRULHXQG0HWKRGH$QQDOHV$FDGHPL 6FLHQWLDUXP )HQQLF %



3DJH +HOVLQNL6XRPDODLQHQ7LHGHDNDWHPLD)LQQLVK$FDGHP\RI6FLHQFH ²² µ7UDQVODWRULVFKHV+DQGHOQ²WKHRUHWLVFKIXQGLHUWH%HUXIVSURILOH¶LQ0DU\6QHOO+RUQE\HG hEHUVHW]XQJVZLVVHQVFKDIW(LQH1HXRULHQWLHUXQJ7ELQJHQ)UDQNH± ²² µ7UDQVODWLRQXQGGDVELRORJLVFKVR]LDOH*HIJH0HQVFK¶LQ-XVWD+RO]0lQWWlULHG 7UDQVODWLRQVWKHRULH ²*UXQGODJHQXQG6WDQGRUWH6WXGLDWUDQVODWRORJLDVHU$YRO 7DPSHUH± ²² µ(QWZLFNOXQJHQLQGHU7KHRULHQELOGXQJEHUSURIHVVLRQHOOHQ7H[WEDXYRP,QVWUXNWLRQVDXVIKUHQGHQ]XP 3URMHNWPDQDJHU¶LQ+HLGHPDULH6DOHYVN\HG :LVVHQVFKDIWOLFKH*UXQGODJHQGHU6SUDFKPLWWOXQJ)UDQNIXUW/DQJ ± ²² µ%LOGXQJVVWUXNWXUHQXQG1HW]ZHUNHIUHLQ7lWLJNHLWHQIHOG7H[WGHVLJQ¶7(;7FRQ7(;7± +RQLJ(HG 7KH3RHW¶V2WKHU9RLFH&RQYHUVDWLRQVRQ/LWHUDU\7UDQVODWLRQ$PKHUVW7KH8QLYHUVLW\RI 0DVVDFKXVHWWV3UHVV +|QLJ+DQVDQG3DXO.XVVPDXO 6WUDWHJLHGHUhEHUVHW]XQJ7ELQJHQ1DUU +RRI+YDQ 3HWLWHKLVWRLUHGHODWUDGXFWLRQHQ2FFLGHQW/RXYDLQOD1HXYH&DED\ +RRNZD\& 4XLQH/DQJXDJH([SHULHQFHDQG5HDOLW\2[IRUG3ROLW\3UHVV +RUDFH4XLQWXV+RUDWLXV)ODFFXV µ7KH$UWRI3RHWU\¶WUDQV(&:LFNKDPLQ+D]DUG$GDPVHG &ULWLFDO 7KHRU\6LQFH3ODWR1HZ


3DJH +XPPHO$UWKXU: (PLQHQW&KLQHVHRIWKH&K¶LQJ3HULRG± 1HZ
,QJDOOV'DQLHO++ $Q$QWKRORJ\RI6DQVNULW&RXUW3RHWU\+DUYDUG2ULHQWDO6HULHV &DPEULGJH0$ +DUYDUG8QLYHUVLW\3UHVV ,QJDUGHQ5 µ2WáXPDF]HQLDFK¶>2Q7UDQVODWLRQ@LQ=WHRULL LIROR]RILF]Q\FKSRGVWDZORJLNL>2QWKH 7KHRU\RI/DQJXDJHDQG3KLORVRSKLFDO)RXQGDWLRQVRI/RJLF&ROOHFWHG3DSHUVRI5,QJDUGHQ@:DUVDZ3DĔVWZRZH :\GDZQLFWZR1DXNRZH ,QJR5 /lKW|NLHOHVWlNRKGHNLHOHHQ-RKGDWXVWDNllQQ|VWLHWHHVHHQ>)URP6RXUFH/DQJXDJHWR7DUJHW /DQJXDJH$Q,QWURGXFWLRQWR7UDQVODWLRQ6WXGLHV@3RUYRR:62< ,QXNWLWXW µ:ULWLQJ6\VWHPVDQG7UDQVODWLRQV¶VSHFLDOLVVXH 2WWDZD0LQLVWHURI,QGLDQ$IIDLUVDQG 1RUWKHUQ'HYHORSPHQW ,RQHVFX* 2UL]RQWXOWUDGXFHULL>7KH+RUL]RQRI7UDQVODWLRQ@%XFKDUHVW8QLYHUV3XEOLVKLQJ+RXVH ,UHODQG-HDQHWWH µ,GHRORJ\0\WKDQGWKH0DLQWHQDQFHRI&XOWXUDO,GHQWLW\¶(/5-RXUQDO± ,UYLQJ7KRPDV%$O+DMM7D¶OLPµ$OL 7KH1REHO4XU¶ƗQ$UDELF7H[WDQG(QJOLVK7UDQVODWLRQ$PPDQ -RUGDQ'DU0DMGDODZL ,VDEHOOH30'\PHWPDQDQG(0DFNORYLWFK µ&5,77(5$7UDQVODWLRQ6\VWHPIRU$JULFXOWXUDO0DUNHW 5HSRUWV¶LQ'9DUJKDHG &2/,1*%XGDSHVW3URFHHGLQJVRIWKHWK,QWHUQDWLRQDO&RQIHUHQFHRQ&RPSXWDWLRQDO /LQJXLVWLFV%XGDSHVW-RKQYRQ1HXPDQQ6RFLHW\IRU&RPSXWLQJ6FLHQFHV± ,VHU:ROIJDQJ 7KH$FWRI5HDGLQJ$7KHRU\RI$HVWKHWLF5HVSRQVH/RQGRQ5RXWOHGJHDQG.HJDQ3DXO ²² µ2Q7UDQVODWDELOLW\9DULDEOHVRI,QWHUSUHWDWLRQ¶7KH(XURSHDQ(QJOLVK0HVVHQJHU ± ,VKDP:3 µ7KH5ROHRI0HVVDJH$QDO\VLVLQ,QWHUSUHWDWLRQ¶LQ0/0F,QWLUHHG 3URFHHGLQJVRIWKH1LQWK 1DWLRQDO&RQYHQWLRQRIWKH5HJLVWU\RI,QWHUSUHWHUVIRUWKH'HDI6LOYHU6SULQJ0'5,'3XEOLFDWLRQV± ²² µ0HPRU\IRU6HQWHQFH)RUPDIWHU6LPXOWDQHRXV,QWHUSUHWDWLRQ(YLGHQFHERWKIRUDQGDJDLQVW 'HYHUEDOL]DWLRQ¶LQ6/DPEHUWDQG%0RVHU0HUFHUHGV ± ²² µ2QWKH5HOHYDQFHRI6LJQHG/DQJXDJHVWR5HVHDUFKLQ,QWHUSUHWDWLRQ¶7DUJHW ± ²²DQG+/DQH µ6LPXOWDQHRXV,QWHUSUHWDWLRQDQGWKH5HFDOORI6RXUFHODQJXDJH6HQWHQFHV¶/DQJXDJHDQG &RJQLWLYH3URFHVVHV ± ,62 3ULQFLSOHVDQG0HWKRGVRI7HUPLQRORJ\*HQHYD,QWHUQDWLRQDO6WDQGDUGV2UJDQL]DWLRQ



3DJH ²² +DQGERRN,QIRUPDWLRQDQG'RFXPHQWDWLRQ*HQHYD,QWHUQDWLRQDO6WDQGDUGV2UJDQL]DWLRQ ,WHUUDQWH&&HG 6WDQGDUGLVDWLRQRI7HFKQLFDO7HUPLQRORJ\,QIRUPDWLRQ7UDQVIHU3KLODGHOSKLD$670 ,YDUVVRQ-DQ 6XEWLWOLQJIRUWKH0HGLD$+DQGERRNRIDQ$UW6WRFNKROP7UDQVHGLW ,YDúFX* ,VWRULDOLWHUDWXULLURPkQH>+LVWRU\RI5RPDQLDQ/LWHUDWXUH@%XFKDUHVW6FLHQWLILF3XEOLVKLQJ+RXVH -llVNHOlLQHQ0HG 6XRPHQQRVNLUMDVXRPDODLQHQNLUMD5DDPDWXQNllQQ|VWHQMDNDQVDQNLHOHQPHUNLW\NVHVWl NLUMDOOLVXXGHVVDPPH>7UDQVODWHG%RRN²)LQQLVK%RRN7KH6LJQLILFDQFHRI%LEOH7UDQVODWLRQVDQGWKH9HUQDFXODULQ )LQQLVK/LWHUDWXUH@-\YlVN\Ol-\YlVN\OlQ\OLRSLVWRQNLUMDOOLVXXGHQODLWRNVHQPRQLVWHQR -llVNHOlLQHQ5+ µ:KDW+DSSHQVLQD7UDQVODWLRQ3URFHVV7KLQNDORXG3URWRFROVRI7UDQVODWLRQ¶ 3RVWJUDGXDWHWKHVLV6DYRQOLQQD6FKRRORI7UDQVODWLRQ8QLYHUVLW\RI-RHQVXX ²² µ)HDWXUHVRI6XFFHVVIXO7UDQVODWLRQ3URFHVVHV$7KLQNDORXG3URWRFRO6WXG\¶8QSXEOLVKHGOLFHQWLDWH WKHVLV6DYRQOLQQD6FKRRORI7UDQVODWLRQ6WXGLHV8QLYHUVLW\RI-RHQVXX ²²DQG67LUNNRQHQ&RQGLW µ$XWRPDWLVHG3URFHVVHVLQ3URIHVVLRQDOYV1RQSURIHVVLRQDO7UDQVODWLRQ$ 7KLQNDORXG3URWRFRO6WXG\¶LQ7LUNNRQHQ&RQGLWHG -DFREVHQ(ULF 7UDQVODWLRQ$7UDGLWLRQDO&UDIW&RSHQKDJHQ*O\GHQGDOH -DFTXDUW' µ/¶pFROHGHVWUDGXFWHXUV¶LQ/RXLV&DUGDLOODFHG 7ROqGH;,,H²;,,,H0XVXOPDQVFKUpWLHQVHW MXLIVOHVDYRLUHWODWROHUDQFH6pULHµ0pPRLUH¶ 3DULV$XWUHPHQW± -DNREVHQ$UQW/\NNH µ7KH(DUOLHVW7UDQVODWLRQVIURP(QJOLVKLQWR'DQLVK¶LQ*&DLHDQG+1¡UJDDUGHGV $ /LWHUDU\0LVFHOODQ\3UHVHQWHGWR(ULF-DFREVHQ3'(YRO &RSHQKDJHQ$WKHQHXP ²² µ7UDQVODWLRQDV7H[WXDO5H SURGXFWLRQ¶3HUVSHFWLYHV6WXGLHVLQ7UDQVODWRORJ\± ²² 7UDQVODWLQJ/637H[WV6RPH7KHRUHWLFDO&RQVLGHUDWLRQV&RSHQKDJHQ6WXGLHVLQ/DQJXDJH &RSHQKDJHQ&RSHQKDJHQ%XVLQHVV6FKRRO -DNREVRQ5RPDQ 2FKHVKNRPVWLNKH>2Q&]HFK9HUVH@%HUOLQQRSXEOLVKHUFLWHGWUDQVDV=iNODG\þHVNpKR YHUãH>7KH)RXQGDWLRQVRI&]HFK9HUVH@3UDJXHQRSXEOLVKHUFLWHG ²² µ2SĜHNODGXYHUãĤ¶>2Q9HUVH7UDQVODWLRQ@3OiQ± ²²± µ&RMHSRH]LH"¶WUDQV0+HLQDVµ:KDWLV3RHWU\"¶LQ/0DWHMNDDQG,57LWXQLNHGV 6HPLRWLFVRI $UW3UDJXH6FKRRO&RQWULEXWLRQV&DPEULGJH0$0,73UHVV ²² µ2Q/LQJXLVWLF$VSHFWVRI7UDQVODWLRQ¶LQ%URZHUHG ± ²² µ&ORVLQJ6WDWHPHQW/LQJXLVWLFVDQG3RHWLFV¶LQ76HEHRNHG 6W\OHLQ/DQJXDJH&DPEULGJH0$0,7 3UHVV± ²² µ2Q/LQJXLVWLF$VSHFWVRI7UDQVODWLRQ¶LQ-DNREVRQ6HOHFWHG:ULWLQJV,,:RUGDQG/DQJXDJH7KH +DJXHDQG3DULV0RXWRQ± -DPHV&DUO &RQWUDVWLYH$QDO\VLV/RQGRQ/RQJPDQ -DQGO(UQVW /DXWXQG/XLVH2OWHQ -lQLV0 .LUMDOOLVXXWWDMDWHDWWHULWHNVWL7XWNLPXVQl\WHOPLHQNllQWlPLVHVWlHVLPHUNNLDLQHLVWRQD$QWRQ 7VHKRYLQ.ROPHQVLVDUHQVXRPHQQRNVHW>/LWHUDWXUHDQG7KHDWUH7H[W$6WXG\RI'UDPD7UDQVODWLRQZLWK5HIHUHQFH WR)LQQLVK7UDQVODWLRQVRI&KHNKRY¶V7KUHH6LVWHUV@ %DEHO/LYLQJ0\WK@6HFROXO ± -DVSHU'HG 7UDQVODWLQJ5HOLJLRXV7H[WV7UDQVODWLRQ7UDQVJUHVVLRQDQG,QWHUSUHWDWLRQ/RQGRQ 0DFPLOODQ -HQVHQ0 µ6LPSO\5HDGLQJWKH*HQHYD%LEOH7KH*HQHYD%LEOHDQGLWV5HDGHUV¶/LWHUDWXUHDQG7KHRORJ\ ± -HURPH(XVHELXV+LHURQ\PXV µ2QWKH%HVW.LQGRI7UDQVODWRU¶/HWWHUWR3DPPDFKLXV WUDQV3DXO&DUUROO LQ7KH6DWLULFDO/HWWHUVRI6W-HURPH&KLFDJR*DWHZD\± -HVXGDVDQ&DQG+HS]LEDK-HVXGDVDQ $+LVWRU\RI7DPLO/LWHUDWXUH&DOFXWWD<0&$3XEOLVKLQJ+RXVH -LDQJ:HQKDQ 0LQJ4LQJMLDQ]DL+XDGHWLDQVKXMLDR\HVXKXL>-HVXLWVLQ&KLQDLQWKH0LQJDQG4LQJ '\QDVWLHV@6KDQJKDL=KLVKL3XEOLVKLQJ&R -LUiW9RMWČFK 'YDSĜHNODG\)DXVWD>7ZR7UDQVODWLRQVRI)DXVW@3UDJXH)U%RURYê -RKDQVVRQ6WLJ µ0HQVVDQDLQFRUSRUHVDQR2QWKH5ROHRI&RUSRUDLQ/LQJXLVWLF5HVHDUFK¶7KH(XURSHDQ (QJOLVK0HVVHQJHU ± ²²DQG.+RIODQG 7RZDUGVDQ(QJOLVK1RUZHJLDQSDUDOOHOFRUSXV¶LQ8)ULHV*7RWWLHDQG36FKQHLGHUHGV &UHDWLQJDQG8VLQJ(QJOLVK/DQJXDJH&RUSRUD3DSHUVIURPWKH)RXUWHHQWK,QWHUQDWLRQDO&RQIHUHQFHRQ(QJOLVK /DQJXDJH5HVHDUFKRQ&RPSXWHUL]HG&RUSRUD=XULFK -(EHOLQJDQG.+RIODQG µ&RGLQJDQG$OLJQLQJWKH(QJOLVK1RUZHJLDQ3DUDOOHO&RUSXV¶LQ.$LMPHU% $OWHQEHUJDQG0-RKDQVVRQHGV /DQJXDJHVLQ&RQWUDVW3DSHUVIURPD6\PSRVLXPRQ7H[WEDVHG&URVVOLQJXLVWLF 6WXGLHV/XQG±0DUFK/XQG/XQG8QLYHUVLW\3UHVV -RKQV)$ µ0DQLIHVWDWLRQVRI$UWKXU



3DJH :DOH\6RPH%LEOLRJUDSKLFDODQG2WKHU1RWHV¶%ULWLVK/LEUDU\-RXUQDO± -RKQVRQ6DPXHO 7KH,GOHUDQG7KH$GYHQWXUHUHGV:-%DWH-RKQ0%XOOLWWDQG/)3RZHOO1HZ+DYHQ DQG/RQGRQ 2Q7UDQVODWLQJ&KLQHVH3RHWU\[email protected] .DNULGLV, 7R0HWDSKUDVWLNR3URYOLPD>7KH7UDQVODWLRQ3UREOHP@$WKHQVQRSXEOLVKHU ²² µ,$UFKDLL(OOLQHVNH,;HQHV*ORVVHV¶>7KH$QFLHQW*UHHNVDQG)RUHLJQ/DQJXDJHV@0HOHWHVNH$UWKUD >6WXGLHVDQG$UWLFOHV@7KHVVDORQLNL .DOH05 7KH$EKLMQDQDVDNXQWDODPRI.DOLGDVDWKHGQ'HOKL0RWLODO%DQDUVLGDVV .DPHL6HG .LQGDL1LKRQQR+RQ\DNX%XQND>7UDQVODWLRQ&XOWXUHLQ0RGHUQ-DSDQ@7RN\R&Kǌǀ.ǀURQ 6KD .DSODQ(GZDUG. 7KH3DULVLDQ3URZOHU$WKHQV*$8QLYHUVLW\RI*HRUJLD .DSODQ5% µ&XOWXUDO7KRXJKW3DWWHUQVLQ,QWHUFXOWXUDO(GXFDWLRQ¶/DQJXDJH/HDUQLQJ± ± ²² µ&RQWUDVWLYH5KHWRULFDQG6HFRQG/DQJXDJH/HDUQLQJ1RWHVWRZDUGVD7KHRU\RI&RQWUDVWLYH5KHWRULF¶ LQ$&3XUYHVHG :ULWLQJ$FURVV/DQJXDJHVDQG&XOWXUHV,VVXHVLQ&RQWUDVWLYH5KHWRULF1HZEXU\3DUN6DJH .DUDQWD\6XDW µ7KH7UDQVODWLRQ2IILFHRIWKHV1RUPVDQG)XQFWLRQV¶LQ'RXZH)RNNHPDHG 3URFHHGLQJVRIWKH;,,,WK&RQJUHVVRIWKH,QWHUQDWLRQDO&RPSDUDWLYH/LWHUDWXUH$VVRFLDWLRQYRO6SDFHDQG%RXQG DULHV0XQLFK,XGLFLXP9HUODJ± .DULPL+DNNDN$KPDG µ)URP7UDQVODWLRQWR$SSURSULDWLRQ3RHWLF&URVVEUHHGLQJLQ(DUO\7ZHQWLHWK FHQWXU\,UDQ¶&RPSDUDWLYH/LWHUDWXUH ± .DVDQML/ µ*XLGHOLQHIRU*RYHUQPHQW$JHQFLHVIRU+LULQJ,QWHUSUHWHUV¶(WKQLF$IIDLUV6HUYLFH'HSDUWPHQW RI,QWHUQDO$IIDLUV .DVLQLV. /RJRWHFKQLNL0HWDSKUDVL&KDUWRJUDSKLVLWRQ5HYPDWRQNH7DVHRQWRXNH$L>/LWHUDU\ 7UDQVODWLRQ$0DSSLQJRIWKH&XUUHQWVDQG7UHQGVLQWKHWKDQGWK&HQWXULHV@8QSXEOLVKHGSDSHUSUHVHQWHGDW WKH*RXODQGULV+RUQ)RXQGDWLRQ$WKHQV0D\ .DWDJLUL. 2UDQGD7VǌMLQR.HQN\ǌ>$6WXG\RIWKH'XWFK,QWHUSUHWHUV@7RN\R [email protected]ǀ7DLNHL>0RGHUQ -DSDQHVH7KRXJKW6\VWHPVYRO@7RN\R,ZDQDPL6KRWHQ .DW]-HUUROG- µ(IIDELOLW\DQG7UDQVODWLRQ¶LQ*XHQWKQHUDQG*XHQWKQHU5HXWWHUHGV ± .DZDPRUL< +RQ\DNX%XQJDNX>7UDQVODWHG/[email protected]%XQJDNX.DQVKǀ.ǀ]D>0RGHUQ /LWHUDWXUH$SSUHFLDWLRQ6HULHVYRO@7RN\R.DGRNDZD6KRWHQ .DZDPXUD- 1LKRQJRQR6HNDL+RQ\DNXQR1LKRQJR>7UDQVODWLQJ-DSDQHVHLQ7KH:RUOGRIWKH-DSDQHVH /DQJXDJHYRO@7RN\R&Kǌǀ.ǀURQVKD .D\0 µ7KH0,1'6\VWHP¶LQ55XVWLQHG 1DWXUDO/DQJXDJH3URFHVVLQJ1HZ


3DJH (NPHOHGGLQ,KVDQR÷OXHG 7UDQVIHURI0RGHUQ6FLHQFHDQG7HFKQRORJ\WRWKH0XVOLP:RUOG,VWDQEXO,5&,&$ ± .HHOH\( µ7KH&RPPHUFHRI7UDQVODWLRQ¶3(1$PHULFDQ&HQWHU1HZVOHWWHU)DOO ± .HHQDQ(GZDUG/ µ6RPH/RJLFDO3UREOHPVLQ7UDQVODWLRQ¶LQ*XHQWKQHUDQG*XHQWKQHU5HXWWHUHGV ± .HHQH' 'DZQWRWKH:HVW-DSDQHVH/LWHUDWXUHRIWKH0RGHUQ(UD3RHWU\'UDPD&ULWLFLVP1HZ 7UDQVODWLRQ3DVWDQG3UHVHQW@6RXVD7XQLVLD'DUDO 0DFƗULI .LHODU% 7áXPDF]HQLHLNRQFHSFMHWUDQVODWRU\F]QH>7UDQVODWLRQ3UDFWLFHDQG7KHRUHWLFDO&RQFHSWV@ :URFáDZ2VVROLQHXP .LPXUD. µ1LKRQ+RQ\DNXVKL*DLNDQ¶>$Q2YHUYLHZRIWKH+LVWRU\RI7UDQVODWLRQLQ-DSDQ@LQ0HLML +RQ\DNX%XQJDNXVKǌ0HLML%XQJDNX=HQVKǌ7UDQVODWHG/LWHUDWXUHLQWKH0HLML3HULRGLQ/LWHUDWXUHLQWKH0HLML 3HULRGYRO 7RN\R&KLNXPD6KREǀ .LQJ- (QJOLVK5HIRUPDWLRQ/LWHUDWXUH7KH7XGRU2ULJLQVRIWKH3URWHVWDQW7UDGLWLRQ1HZ-HUVH\3ULQFHWRQ 8QLYHUVLW\3UHVV .LUDO\'RQDOG 3DWKZD\VWR7UDQVODWLRQ.HQW2+.HQW6WDWH8QLYHUVLW\3UHVV .LUNRY'LPLWHU µ&ULWHULDIRUWKH$SSUDLVDORI%HOOHVOHWWUHVLQ7UDQVODWLRQ¶%DEHO ± .LWDJDNL0 3ULQFLSOHVDQG3UREOHPVRI7UDQVODWLRQLQ6HYHQWHHQWKFHQWXU\(QJODQG.\RWR 7KHRU\DQG 3UDFWLFHRI7UDQVODWLRQ:LWK,OOXVWUDWLRQVLQ(QJOLVK*HUPDQ)UHQFKDQG5XVVLDQ@%XGDSHVW6FKRODVWLFD .OHLQ/DWDXG&KULVWLQHDQG$JQqV:KLWILHOGHGV µ/HIHVWLQGH%DEHO%DEHO¶VIHDVWODFRSUpVHQFHGHVODQJXHV GDQVOHVWH[WHV¶VSHFLDOLVVXHRI7757UDGXFWLRQ7HUPLQRORJLH5HGDFWLRQ .OHPHQVLHZLF]= µ3U]HNáDGMDNR]DJDGQLHQLHMĊ]\NR]QDZF]H¶>7UDQVODWLRQDVD/LQJXLVWLF,VVXH@LQ:NUHJX OLWHUDFNLHJRLDUW\VW\F]QHJR>2QWKH/LWHUDU\DQG3RHWLF/DQJXDJH&ROOHFWHG3DSHUVRI=.OHPHQVLHZLF]@ :DUVDZ3DĔVWZRZH:\GDZQLFWZR1DXNRZH .ORHSIHU5 'LH7KHRULHGHUOLWHUDULVFKHQhEHUVHW]XQJ5RPDQLVFKGHXWVFKHU6SUDFKEHUHLFK)UHLEXUJHU 6FKULIWHQ]XUURPDQLVFKHQ3KLORORJLH 0XQLFK:LOKHOP)LQN .QDSS3RWWKRII$DQG..QDSS µ7KH0DQRU:RPDQ LQWKH0LGGOH'LVFRXUVDO$VSHFWV



3DJH RI1RQSURIHVVLRQDO,QWHUSUHWLQJ¶LQ..QDSS::LQQLQJHUDQG$.QDSS3RWWKRIIHGV $QDO\]LQJ,QWHUFXOWXUDO &RPPXQLFDWLRQ%HUOLQ0RXWRQGH*UX\WHU .QRZOHV0XUUD\DQG.LUVWHQ0DOPNM U µ/DQJXDJH3RZHUDQGWKH:RUOGRIWKH7LQ6ROGLHU¶(/5-RXUQDO ±%LUPLQJKDP8QLYHUVLW\RI%LUPLQJKDP .QRZOVRQ-HG +DSS\'D\V2K/HV%HDX[-RXUVE\6DPXHO%HFNHWW/RQGRQ)DEHU .QR[5 7ULDOVRID7UDQVODWRU1HZ ,PSRUWDQW0RPHQWVLQ WKH+LVWRU\RIWKH5RPDQLDQ+XQJDULDQ&XOWXUDO5HODWLRQVKLS@LQ9&RPDQHG 7HVWLPRQLHVDQG(YRFDWLRQV 2UDGHD3XEOLVKLQJ+RXVHRIWKH2UWKRGR[%LVKRSULF ²² 9LUWXĠLOHFRPSHQVDWRULLDOHOLPELLURPkQHLQWUDGXFHUH>&RPSHQVDWRU\9LUWXHVRI5RPDQLDQLQ 7UDQVODWLRQ@7LPLúRDUD)DFOD3XEOLVKLQJ+RXVH ²² µ6XJHVWLLSHQWUXYDORULILFDUHDWUDGXFHULORUODRUHOHGHOLPELPRGHUQH¶>6XJJHVWLRQVIRU8VLQJ7UDQVODWLRQV LQ)/7@LQ56kUEX</XFXĠD0ğHQFKHD7%HúXDQDQG90ROGRYDQHGV 6WXGLHVLQ0RGHUQ/DQJXDJHVDQG /LWHUDWXUHV7LPLúRDUD8QLYHUVLW\3UHVV± ²² µ,QWHUIHUHQĠHWUDGXFHUHFUHDĠLHOD0LKDL(PLQHVFX,QVHPQăULSHPDUJLQHDXQHLWUDGXFHUL WLPSXULL¶>,QWHUIHUHQFHDQG&UHDWLYH7UDQVODWLRQLQ(PLQHVFX¶V:RUN5HPDUNVRQDQ(DUO\7UDQVODWLRQ@/DQJXDJH DQG/LWHUDWXUH± ²²DQG.LQJD.ODXG\HGV µ7UDQVIHUUHQHFHVVHHVW«¶&XUUHQW,VVXHVRI7UDQVODWLRQ7KHRU\SURFHHGLQJVRID V\PSRVLXPLQKRQRXURI*\|UJ\5DGy6]RPEDWKHO\'DQLHO%HU]VHQ\L&ROOHJH .ROOHU:HUQHU (LQIKUXQJLQGLHhEHUVHW]XQJVZLVVHQVFKDIWWKHGQ+HLGHOEHUJDQG:LHVEDGHQ4XHOOH XQG0H\HU ²² µ(TXLYDOHQFHLQ7UDQVODWLRQ7KHRU\¶LQ&KHVWHUPDQHG ²² µ=XP*HJHQVWDQGGHUhEHUVHW]XQJVZLVVHQVFKDIW¶LQ$UQW]DQG7KRPHHGV ± ²² µ=XP%HJULIIGHU³HLJHQWOLFKHQ´hEHUVHW]XQJ¶LQ-XVWD+RO]0lQWWlULDQG&KULVWLDQH1RUGHGV 7UDGXFHUH1DYHP)HVWVFKULIWIU.DWKDULQD5HLȕ]XP*HEXUWVWDJ7DPSHUH ²² µ7KH&RQFHSWRI(TXLYDOHQFHDQGWKH2EMHFWRI7UDQVODWLRQ6WXGLHV¶7DUJHW ± .RPLVVDURY91 µ(NVSOLWVLURYDQL\HNDNSUREOHPDSHUHYRGD¶>([SOLFDWLRQDVD3UREOHPRI7UDQVODWLRQ@ 3UREOHPLSULNODGQR\OLQJYLVWLNL>3UREOHPVRI$SSOLHG/LQJXLVWLFV@0RVFRZ7'9. ²² 6ORYRRSHUHYRGH>$:RUG$ERXW7UDQVODWLRQ@0RVFRZ0H]KGXQDURGQ\HRWQRVKHQL\D ²² /LQJYLVWLNDSHUHYRGD>7KH/LQJXLVWLFVRI7UDQVODWLRQ@0RVFRZ0H]KGXQDURGQ\HRWQRVKHQL\D ²² 7HRUL\DSHUHYRGD>7UDQVODWLRQ7KHRU\@0RVFRZ9\VVKD\DVKNROD .RQGǀ0 µ³&DVVHWWH(IIHFW´LQ-DSDQHVH7UDQVODWLRQ:RUGV¶7KH,QWHUSUHWHUV¶1HZVOHWWHUVSHFLDOLVVXHQR ± .|QLJ)DQG9HUQRQ1 µ7UDQVODWLRQ:RUNVKRS$Q$OWHUQDWLYHWR'HYHORSLQJ/LWHUDU\,QVLJKW¶&DQDGLDQ 0RGHUQ/DQJXDJH5HYLHZ ± .RSDQHY3, 9RSURV\WHRULLLLVWRULLNKXGR]KHVWYHQQRJRSHUHYRGD>,VVXHVRIWKH7KHRU\DQG+LVWRU\RI /LWHUDU\7UDQVODWLRQ@0LQVN,]GDWHOVWYR%*8 ²²DQG)%H\HU 7HRUL\DLSUDNWLNDXVWQRJRSHUHYRGD>7KH7KHRU\DQG3UDFWLFHRI,QWHUSUHWLQJ@0LQVN 9\VVKD\DVKNROD .RSF]\ĔVNL$ &RQIHUHQFH,QWHUSUHWLQJ6RPH/LQJXLVWLFDQG&RPPXQLFDWLYH3UREOHPV3R]QDĔ8QLZHUV\WHW LP$GDPD0LFNLHZLF]D $+DQIWZXUFHO(.DUVNDDQG/5\ZLQHGV 7KH0LVVLRQRIWKH7UDQVODWRU7RGD\DQG7RPRUURZ 3URFHHGLQJVRIWKH,;WK:RUOG&RQJUHVVRIWKH,QWHUQDWLRQDO)HGHUDWLRQRI7UDQVODWRUV:DUVDZ),7 .RUSHO/XF 2YHUKHWQXWHQGHZLM]HGHUYHUWDOLQJHQ1HGHUODQGVHYHUWDDOUHIOHFWLH± LQHHQ :HVWHXURSHHVNDGHU>2QWKH8VHIXOQHVVDQGWKH0DQQHURI7UDQVODWLRQV'XWFK'LVFRXUVHVRQ7UDQVODWLRQ± LQD:HVWHUQ(XURSHDQ)UDPHZRUN@$PVWHUGDP5RGRSL ²²D µ5KHWRULFDQG'XWFK7UDQVODWLRQ7KHRU\± ¶7DUJHW ± ²²HG E ,Q1HGHUGXLWVFKJHZDDG1HGHUODQGVHEHVFKRXZLQJHQRYHUYHUWDOHQ±>,Q'XWFK*DUE 'XWFK'LVFRXUVHVRQ7UDQVODWLRQ±@7KH+DJXH%LEOLRJUDSKLD1HHUODQGLFD .RXWVLYLWLV9 7KHRULDWLV0HWDSKUDVLV>7KHRU\RI7UDQVODWLRQ@$WKHQV*UHHN8QLYHUVLW\3XEOLFDWLRQV .RYDOD8HG 0DDLOPDQNLUMDOOLVXXGHQMDVHQNODVVLNNRMHQVXRPHQWDPLVHVWD2VDW,,,,>7KH)LQQLVK 7UDQVODWLRQRI:RUOG/LWHUDU\&ODVVLFV(QJOLVKVXPPDULHVLQYRO,,,@-\YlVN\Ol-\YlVN\OlQ\OLRSLVWRQ NLUMDOOLVXXGHQODLWRNVHQPRQLVWHHWQRV± .UDVKHQ6' 3ULQFLSOHVDQG3UDFWLFHLQ6HFRQG/DQJXDJH$FTXLVLWLRQ2[IRUG3HUJDPRQ3UHVV .UDW]' µ$Q,QWHUYLHZZLWK1RUPDQ6KDSLUR¶7UDQVODWLRQ5HYLHZ± .UHVV*XQWKHU /LQJXLVWLF3URFHVVHVLQ6RFLRFXOWXUDO3UDFWLFH9LFWRULD'HDNLQ8QLYHUVLW\3UHVV



3DJH ²²DQG5RJHU)RZOHU µ,QWHUYLHZV¶LQ5RJHU)RZOHU%RE+RGJH*XQWKHU.UHVVDQG7RQ\7UHZ/DQJXDJH DQG&RQWURO/RQGRQ5RXWOHGJHDQG.HJDQ3DXO .ULQJV+3 :DVLQGHQ.|SIHQYRQhEHUVHW]HUQYRUJHKW(LQHHPSLULVFKH8QWHUVXFKXQJ]XU6WUXNWXUGHV hEHUVHW]XQJVSUR]HVVHVDQIRUWJHVFKULWWHQHQ)UDQ]|VLVFKOHUQHUQ7ELQJHQ1DUU ²² µ7KH8VHRI,QWURVSHFWLYH'DWDLQ7UDQVODWLRQ¶LQ)DHUFKDQG.DVSHUHGV ± ²² µ%OLFNLQGLH³%ODFN%R[´²(LQH)DOOVWXGLH]XPhEHUVHW]XQJVSUR]H‰EHL%HUXIVEHUVHW]HUQ¶LQ5$UQW] HG 7H[WOLQJXLVWLNXQG)DFKVSUDFKH$NWHQGHV,QWHUQDWLRQDOHQEHUVHW]XQJVZLVVHQVFKDIWOLFKHQ$,/$6\PSRVLRQV +LOGHVKHLP±$SULO+LOGHVKHLP2OPV .ULVWHYD- /H7H[WHGXURPDQ7KH+DJXH0RXWRQ .ULW]HFN- 3HWHUWKH9HQHUDEOHDQG,VODP3ULQFHWRQ1-3ULQFHWRQ8QLYHUVLW\3UHVV .URQWLULV7LQD µ%UHDNLQJ%DUULHUVRI*HQUHDQG*HQGHU0DUJDUHW7\OHU¶V7UDQVODWLRQRIWKH0LUURXURI .QLJKWKRRG¶(QJOLVK/LWHUDU\5HQDLVVDQFH± ²² 2SSRVLWLRQDO9RLFHV:RPHQDV:ULWHUVDQG7UDQVODWRUVRI/LWHUDWXUHLQWKH(QJOLVK5HQDLVVDQFH /RQGRQ5RXWOHGJH .UXJHU$HG 1HZ3HUVSHFWLYHVRQ7HDFKLQJ7UDQVODWRUVDQG,QWHUSUHWHUVLQ6RXWK$IULFD'HSDUWPHQWRI /LQJXLVWLFV8QLYHUVLW\RI6RXWK$IULFD .U]HV]RZVNL73 µ&RQWUDVWLYH*HQHUDWLYH*UDPPDU¶6WXGLD$QJOLFD3RVQDQLHQVLD± ²² µ7áXPDF]HQLHMDNRF]\QQRĞüSUDJPDW\F]QD¶>7UDQVODWLRQDVD3UDJPDWLF3URFHVV@LQ*UXF]DHG ²² µ7KH6RFDOOHG³6LJQ7KHRU\´DVWKH)LUVW0HWKRGLQ&RQWUDVWLYH/LQJXLVWLFV¶LQ83LHSHUDQG$6WLFNHO HGV 6WXGLD/LQJXLVWLFD'LDFKURQLFDHW6\QFKURQLFD%HUOLQ0RXWRQGH*UX\WHU± ²² &RQWUDVWLQJ/DQJXDJHV7KH6FRSHRI&RQWUDVWLYH/LQJXLVWLFV7KH+DJXH0RXWRQGH*UX\WHU .XIQHURYi=ODWD0LOHQD3ROiþNRYi-DURPtU3RYHMãLO=GHQD6NRXPDORYiDQG9ODVWD6WUDNRYi 3ĜHNOiGiQtD þHãWLQD>2Q7UDQVODWLQJDQG&]HFK@3UDJXH++ .XKLZF]DN3 µ7UDQVODWLRQDV$SSURSULDWLRQ7KH&DVHRI0LODQ.XQGHUD¶V7KH-RNH¶LQ%DVVQHWWDQG /HIHYHUHHGV ± .XLYDVPlNL5 µ6XRPHQQRNVHWQXRULVRNLUMDOOLVXXWHPPHNHKLW\NVHVVl¶>7KH,QIOXHQFHRI7UDQVODWLRQVRQ )LQQLVK-XYHQLOH/LWHUDWXUH@LQ$2OOLNDLQHQHG .XNKDUHQNR9$ µ(NVSOLNDWVL\DVRGKHU]KDQL\DWHNVWDYSURFHVVHSHUHYRGD¶>([SOLFDWLRQRIWKH&RQWHQWVRID 7H[WGXULQJWKH3URFHVVRI7UDQVODWLRQ@LQ$'6KYHLWVHUHG 7HNVWLSHUHYRG>7H[WDQG7UDQVODWLRQ@0RVFRZ 1DXND± .XOWXUKLVWRULVNOHNVLNRQIRUQRUGLVNPLGGHODOGHUIUDYLNLQJHWLGWLOUHIRUPDWLRQVWLG>&XOWXUDOKLVWRULFDO(QF\FORSHGLDRI WKH1RUGLF0LGGOH$JHVIURPWKH9LNLQJVWRWKH5HIRUPDWLRQ@QGHGQ &RSHQKDJHQ5RVHQNLOGHRJ%DJJHU .XSVFK/RVHUHLW6LJULG µ6FKHLQWHLQHVFK|QH6RQQH"RGHU:DVLVWHLQhEHUVHW]XQJVIHKOHU"¶/HEHQGH 6SUDFKHQ ± .XUDQ1HGUHW µ7KH)LUVW*RHWKH7UDQVODWLRQVLQ7XUNLVK¶LQ'RXZH)RNNHPDHG 3URFHHGLQJVRIWKH;,,,WK &RQJUHVVRIWKH,QWHUQDWLRQDO&RPSDUDWLYH/LWHUDWXUH$VVRFLDWLRQYRO6SDFHDQG%RXQGDULHV0XQLFK,XGLFLXP 9HUODJ± .XUH-HQVHQ/LVH µ,VDN'LQHVHQLQ(QJOLVK'DQLVKDQG7UDQVODWLRQ$UH:H5HDGLQJWKH6DPH7H[W"¶LQ 2OJD$QDVWDVLD3HOHQVN\HG ,VDN'LQHVHQ&ULWLFDO9LHZV$WKHQV2+2KLR8QLYHUVLW\3UHVV± .XUHPDWVX$ µ2YHUYLHZRI6SHHFK7UDQVODWLRQDW$75¶LQ61LUHQEXUJHG 3URJUHVVLQ0DFKLQH 7UDQVODWLRQ$PVWHUGDP,263UHVV7RN\R2KPVKD .UW|VL.DWDOLQ µ3RHWVRI%LIXUFDWHG7RQJXHVRURQWKH3OXULOLQJXDOLVPRI&DQDGLDQ+XQJDULDQSRHWV¶775 7UDGXFWLRQ7HUPLQRORJLH5HGDFWLRQ ± .XUXF]*\DQG/6]RUHQ\LHGV +XQJDULD/HWWHUDULD(XURSDHILOLD>/LWHUDU\+XQJDU\'DXJKWHURI (XURSH@%XGDSHVW7KH+XQJDULDQ3XEOLVKHUV¶DQG%RRNVHOOHUV¶$VVRFLDWLRQ0DJ\DU.|Q\YNLDGyNpV .|Q\YWHUMHV]WĘN(J\HVOHWH .XU],QJULG µ7KH5RFN7RPEVRIWKH3ULQFHVRI(OHSKDQWLQH(DUOLHVW5HIHUHQFHVWR,QWHUSUHWDWLRQLQ 3KDUDRQLF(J\SW¶%DEHO ± ²² µ7KH,QWHUSUHWHU)HOLSLOORDQGKLV5ROHLQWKH7ULDORIWKH,QFD5XOHU$WDKXDOSD¶7KH-HURPH4XDUWHUO\ :DVKLQJWRQ ± ²²DQG)UDQ]3|FKKDFNHU µ4XDOLW\LQ,QWHUSUHWLQJ¶7UDQVODWLR± ± .XVVPDXO3DXO µ&UHDWLYLW\LQWKH7UDQVODWLRQ3URFHVV(PSLULFDO$SSURDFKHV¶LQYDQ/HXYHQ=ZDUWDQG 1DDLMNHQVHGV ± ²² 7UDLQLQJWKH7UDQVODWRU$PVWHUGDPDQG3KLODGHOSKLD-RKQ%HQMDPLQV .XW*XQD\ µYH<X]\LO7XUN(GHEL\DWLQD7RSOX%DNLV¶DQGµ<X]\LO7XUN(GHEL\DWLQD7RSOX %DNLV¶>6XUYH\RIWKWKDQGWKFHQWXU\7XUNLVK/LWHUDWXUH@LQ2VPDQOLODUGDYH$YUXSD¶GD&DJGDV.XOWXUXQ 2OXVXPX±<X]\LOODU>7KH(YROXWLRQRI0RGHUQ&XOWXUHLQ(XURSHDQGWKH2WWRPDQ(PSLUHLQWKHWKWK &HQWXULHV@,VWDQEXO0HWLV


3DJH /DGR5 /LQJXLVWLFVDFURVV&XOWXUHV$QQ$UERU8QLYHUVLW\RI0LFKLJDQ3UHVV /DIDUJD) /DVWUDGXFFLRQHVHVSDxRODVGHOWHDWURIUDQFpV± %LEOLRJUDItDGHLPSUHVRV%DUFHORQD 3XEOLFDFLRQVL(GLFLRQVGHOD8QLYHUVLWDWGH%DUFHORQD /DNRII*DQG0-RKQVRQ 0HWDSKRUVZH/LYHE\&KLFDJRDQG/RQGRQ8QLYHUVLW\RI&KLFDJR3UHVV /DOOHPDQG3DXO 'H3DUQDVVR2UDWRULDQR3DULV7KRULQ /DPE0 µ7KH&RRNH6LVWHUV$WWLWXGHV7RZDUG/HDUQHG:RPHQLQWKH5HQDLVVDQFH¶LQ+DQQD\HG ± /DPEHUW-RVp µ+RZ(PLOH'HVFKDPSV7UDQVODWHG6KDNHVSHDUH¶V0DFEHWKRU7KHDWUH6\VWHPDQG7UDQVODWLRQ 6\VWHPLQ)UHQFK¶LQ$/HIHYHUHDQG.'-DFNVRQHGV 7KH$UWDQG6FLHQFHRI7UDQVODWLRQ'LVSRVLWLR± ± ²² µ7KpRULHOLWWpUDLUHKLVWRLUHOLWWpUDLUHpWXGHGHVWUDGXFWLRQV¶LQ(.XVKQHUHG 5HQRXYHOOHPHQWVGDQVOD WKpRULHGHO¶KLVWRLUHOLWWpUDLUH0RQWUHDO/D6RFLpWp5R\DOHGX&DQDGD± ²² µ/DWUDGXFWLRQOHVJHQUHVHWO¶pYROXWLRQGHODOLWWpUDWXUHSURSRVLWLRQVPpWKRGRORJLTXHV¶3URFHHGLQJVRI WKH;WK,&/$&RQJUHVV1HZ 7UDQVODWLRQ3UREOHPVRI7KHRU\ 3UDFWLFHDQG7HDFKLQJ0HWKRGRORJ\@0RVFRZ3URVYHVKFKHQLH /DXHU$QJHOLND+HLGUXQ*HU]\PLVFK$UERJDVW-RKDQQ+DOOHUDQG(ULFK6WHLQHUHGV hEHUVHW]XQJVZLVVHQVFKDIWLP8PEUXFK)HVWVFKULIWIU:LOVV]XP*HEXUWVWDJ7ELQJHQ*XQWHU1DUU



3DJH /DXNNDQHQ- µ5RXWLQHYV1RQURXWLQH3URFHVVHVLQ7UDQVODWLRQ$7KLQNDORXG3URWRFRO6WXG\¶8QSXEOLVKHG JUDGXDWHWKHVLV6DYRQOLQQD6FKRRORI7UDQVODWLRQ6WXGLHV8QLYHUVLW\RI-RHQVXX /DYLRVD%UDLWKZDLWH6DUD µ7KH(QJOLVK&RPSDUDEOH&RUSXV$5HVRXUFHDQGD0HWKRGRORJ\IRUWKH(PSLULFDO 6WXG\RI7UDQVODWLRQ¶3DSHUSUHVHQWHGDWµ8QLW\LQ'LYHUVLW\¶,QWHUQDWLRQDO7UDQVODWLRQ6WXGLHV&RQIHUHQFH'XEOLQ &LW\8QLYHUVLW\±0D\ /DZHQGRZVNL%3 µ2Q6HPLRWLF$VSHFWVRI7UDQVODWLRQ¶LQ76HEHRNHG 6LJKW6RXQG6HQVH %ORRPLQJWRQ,1,QGLDQD8QLYHUVLW\3UHVV /DZUHQFH'+ :RPHQLQ/RYH+DUPRQGVZRUWK3HQJXLQ ²² /RYH)HPPHVDPRXUHXVHV WUDQV0DXULFH5DQFqVDQG*HRUJHV/LPERXU3DULV*DOOLPDUG /DZVRQ9 µ7LJHUVDQG3RODU%HDUVRU7UDQVODWLQJDQGWKH&RPSXWHU¶7KH,QFRUSRUDWHG/LQJXLVW± /HDO, /LEURV\ELEOLRWHFDVHQ9HQH]XHODFRORQLDO²±&DUDFDV(GGHOD)DFGH+XPDQLGDGHV\ (GXFDFLyQ8&9 /HFRPWHGX1R\3 µ7UDQVODWLRQDWWKH8QLWHG1DWLRQV¶LQ&DWULRQD3LFNHQHG ,7,&RQIHUHQFH:LQGRZV RQWKH:RUOG3URFHHGLQJV/RQGRQ$VOLE /HGHUHU0DULDQQH /DWUDGXFWLRQVLPXOWDQpH²H[SHULHQFHHWWKpRULH3DULV/HWWUHV0RGHUQHV ²²HG eWXGHVWUDGXFWRORJLTXHVHQKRPPDJHD'DQLFD6HOHVNRYLWFK3DULV/HWWUHV0RGHUQHV0LQDUG ²² µ)RQGHPHQWVGHODWKpRULHLQWHUSUHWDWLYHGHODWUDGXFWLRQ¶LQ&DWULRQD3LFNHQHG 7UDQVODWLRQWKH9LWDO /LQNSURFHHGLQJVRIWKH;,,,WK),7:RUOG&RQJUHVVYRO/RQGRQ,QVWLWXWHRI7UDQVODWLRQDQG,QWHUSUHWLQJ ²² /DWUDGXFWLRQDXMRXUG¶KXL3DULV+DFKHWWH ²²DQG),VUDHOHGV /DOLEHUWpHQWUDGXFWLRQSURFHHGLQJVRIWKH,QWHUQDWLRQDO&ROORTXLXPKHOGDW(6,7 3DULV-XQHFROOHFWLRQ7UDGXFWRORJLHQR3DULV'LGLHUeUXGLWLRQ /HH' &RPSHWLQJ'LVFRXUVHV3HUVSHFWLYHDQG,GHRORJ\LQ/DQJXDJH/RQGRQ/RQJPDQ /HHFK* 3ULQFLSOHVRI3UDJPDWLFV/RQGRQ/RQJPDQ ²² µ7KH6WDWHRIWKH$UWLQ&RUSXV/LQJXLVWLFV¶LQ.$LMPHUDQG%$OWHQEHUJHGV (QJOLVK&RUSXV /LQJXLVWLFV/RQGRQDQG1HZ


3DJH /HQNHL+ SHWĘILDYLOiJLURGDORPEDQ>3HWĘILLQ:RUOG/LWHUDWXUH@%XGDSHVW.XQRVV\ /HSSLKDOPH5 &XOWXUH%XPSV2QWKH7UDQVODWLRQRI$OOXVLRQV+HOVLQNL8QLYHUVLW\RI+HOVLQNL'HSDUWPHQW RI(QJOLVK6WXGLHV /HVNLHQ$ µ'HUhEHU]HORQ\VNXQVWGHV([DUFKHQ-RKDQQHV¶$UFKLYIUVODYLVFKH3KLORORJLHYRO /HVVHU5 µ3(1*HWVWKH/LEUDU\RI&RQJUHVVWR&DWDORJXHE\7UDQVODWRUV¶1DPHV¶7KH3(11HZVOHWWHU ± /HYL3 7KH(QJOLVK%LEOHIURP:\FOLIWR:LOOLDP%DUQHV±/RQGRQ&RQVWDEOH /HYLDQW&XUW .LQJ$UWXV$+HEUHZ$UWKXULDQ5RPDQFHRI1HZ $*XLGHIRU7UDQVODWRUVIURP(QJOLVKLQWR 5RPDQLDQ@%XFKDUHVW6FLHQWLILFDQG(QF\FORSHGLF3XEOLVKLQJ+RXVH /HY\&- µ7KH*URZLQJ*HOWLQ2WKHUV¶:RUGV¶7KH1HZ &]HFK7KHRULHVRI7UDQVODWLRQ@3UDJXH61./ ²² 8PČQtSĜHNODGX3UDJXHýHVNRVORYHQVNêVSLVRYDWHO7UDQVE\:6FKDPVFKXODDV'LHOLWHUDULVFKH hEHUVHW]XQJ7KHRULHHLQHU.XQVWJDWWXQJ)UDQNIXUWDQG%RQQ$WKHQlXP9HUODJQGHGQ8PČQtSĜHNODGX 3UDJXH3DQRUDPD ²² µ7UDQVODWLRQDVD'HFLVLRQ0DNLQJ3URFHVV¶LQ7R+RQRU5RPDQ-DNREVRQYRO7KH+DJXH0RXWRQ ± ²² %XGHOLWHUiQLYČGDH[DNWQLYČGRX">:LOOWKH7KHRU\RI/LWHUDWXUHEHDQ([DFW6FLHQFH@3UDJXH ýHVNRVORYHQVNêVSLVRYDWHO ²² µ7KH7UDQVODWLRQRI9HUEDO$UW¶LQ/0DWHMNDDQG,57LWXQLNHGV 6HPLRWLFVRI$UW3UDJXH6FKRRO &RQWULEXWLRQV&DPEULGJH0$0,73UHVV /HZLV%HUQDUG 7KH(PHUJHQFHRI0RGHUQ7XUNH\/RQGRQDQG1HZ 7KH+LVWRU\RI6FLHQFH'RFXPHQW7UDQVODWLRQLQ &KLQD@+HIHL8QLYHUVLW\RI6FLHQFHDQG7HFKQRORJ\RI&KLQD3UHVV /LQGEHUJ'DYLG& µ7KH7UDQVPLVVLRQRI*UHHNDQG$UDELF/HDUQLQJWRWKH:HVW¶LQ/LQGEHUJHG 6FLHQFH LQWKH0LGGOH$JHV&KLFDJRDQG/RQGRQ7KH8QLYHUVLW\RI&KLFDJR3UHVV± /LQHOO3&:DGHQVM|DQG/-|QVVRQ µ(VWDEOLVKLQJ&RPPXQLFDWLYH&RQWDFWWKURXJKD'LDORJXH,QWHUSUHWHU¶ LQ$*ULQGVWHGDQG-:DJQHUHGV &RPPXQLFDWLRQIRU6SHFLILF3XUSRVHV²)DFKVSUDFKOLFKH.RPPXQLNDWLRQ 7ELQJHQ*XQWHU1DUU± /LQJV.. HG '\QDPLVNWRONQLQJ>'\QDPLF,QWHUSUHWLQJ@&RSHQKDJHQ6SHFLDO3HGDJRJLVNIRUODJ /LWWDX. µ,QWHUWH[WXDOLW\DQG7UDQVODWLRQ7KH:DVWH/DQGLQ)UHQFKDQG*HUPDQ¶LQ&DWULRQD3LFNHQHG 7UDQVODWLRQ²7KH9LWDO/LQNYROSURFHHGLQJVRI;,,,),7:RUOG&RQJUHVV±$XJXVW%ULJKWRQ,7, /OR\G-RQHV* 7KH'LVFRYHU\RI+HEUHZLQ7XGRU(QJODQG$7KLUG/DQJXDJH0DQFKHVWHU0DQFKHVWHU 8QLYHUVLW\3UHVV /RPKHLP6\OIHVW 2PVHWMLQJVWHRUL7UDQVODWLRQ7KHRU\ 2VOR8QLYHUVLWHWVIRUODJ /RUHQWVHQ$/0RJHQVHQDQG$)DXVLQJ 2YHUV°WWHOVHRJQ\WHNQRORJL>7UDQVODWLRQDQG1HZ7HFKQRORJ\@ cOERUJcOERUJ8QLYHUVLWHWVIRUODJ /|UVFKHU:ROIJDQJD 7UDQVODWLRQ3HUIRUPDQFH7UDQVODWLRQ3URFHVVDQG7UDQVODWLRQ6WUDWHJLHV$ 3V\FKROLQJXLVWLF,QYHVWLJDWLRQ7ELQJHQ*XQWHU1DUU ²²E µ7KLQNLQJDORXGDVD0HWKRGIRU&ROOHFWLQJ'DWDRQ7UDQVODWLRQ3URFHVVHV¶LQ7LUNNRQHQ&RQGLWHG ± ²² µ3URFHVVRULHQWHG5HVHDUFKLQWR7UDQVODWLRQDQG,PSOLFDWLRQVIRU7UDQVODWLRQ7HDFKLQJ¶7757UDGXFWLRQ 7HUPLQRORJLH5HGDFWLRQ ± ²² µ7UDQVODWLRQ3URFHVV$QDO\VLV¶LQ*DPELHUDQG7RPPRODHGV /RWELQLqUH+DUZRRG6XVDQQHGH 5HEHOOHHWLQILGqOH/DWUDGXFWLRQFRPPHSUDWLTXHGHUppFULWXUHDXIpPLQLQ 7KH%RG\%LOLQJXDO7UDQVODWLRQDVD5HZULWLQJLQWKH)HPLQLQH4XHEHF/HVpGLWLRQVGXUHPXHPpQDJH7KH :RPHQ¶V3UHVV /RWPDQ-0 µ7KHVHVRQWKH6HPLRWLF6WXG\RI&XOWXUHVDV$SSOLHGWR6ODYLF7H[WV ¶LQ7K$6HEHRNHG 7KH7HOOWDOH6LJQ$6XUYH\RI6HPLRWLFV/LVVHGH5LGGHU3UHVV± ²² µ/HSKpQRPqQHGHODFXOWXUH¶0HWD ± /RZHOO5 ,PLWDWLRQV1HZ


3DJH LQ(XURSHDQ7HOHYLVLRQ0DQFKHVWHU7KH(XURSHDQ,QVWLWXWHIRUWKH0HGLD /\RQV-RKQ 6HPDQWLFVYRO&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV ²² µ3URQRXQVRI$GGUHVVLQ$QQD.DUHQLQD7KH6W\OLVWLFVRI%LOLQJXDOLVPDQGWKH,PSRVVLELOLW\RI 7UDQVODWLRQ¶LQ6LGQH\*UHHQEDXP*HRIIUH\/HHFKDQG-DQ6YDUWYLNHGV 6WXGLHVLQ(QJOLVK/LQJXLVWLFVIRU 5DQGROSK4XLUN/RQGRQ/RQJPDQ± /\RWDUG-HDQ)UDQoRLV 7KH'LIIHUHQGWUDQV*HRUJHYDQGHQ$EEHHOH6W3DXO8QLYHUVLW\RI0LQQHVRWD 0D=X\L =KRQJJXRIDQ\LMLDQVKL>$%ULHI+LVWRU\RI7UDQVODWLRQLQ&KLQD@%HLMLQJ=KRQJJXRGXLZDL3XE&R ²² µ+LVWRU\RI7UDQVODWLRQLQ&KLQD¶LQ&KDQDQG3ROODUGHGV ± 0F$OLVWHU* µ7HDFKLQJ7UDQVODWLRQLQWRD)RUHLJQ/DQJXDJH²6WDWXV6FRSHDQG$LPV¶LQ'ROOHUXSDQG /RGGHUJDDUGHGV 0F&DOOHQ% (QJOLVK$:RUOG&RPPRGLW\/RQGRQ7KH(FRQRPLVW,QWHOOLJHQFH8QLW/WG 0F'RQDOG3IRUWKFRPLQJ µ7KH*UHHNVLQ,UHODQG,ULVK3RHWVDQG*UHHN7UDJHG\¶7UDQVODWLRQDQG/LWHUDWXUH 0DFGRQQHOO$UWKXU$ $6DQVNULW*UDPPDUIRU6WXGHQWVUGHGQ2[IRUG2[IRUG8QLYHUVLW\3UHVV 0F'RZHOO( µ3XEOLVKLQJ1RWHVIURP)UDQNIXUW¶7KH1HZ 1RWHVRQ)LQQLVK 7UDQVODWLRQ+LVWRU\IURPWKH1LQHWHHQWK&HQWXU\@LQ,6RUYDOLHG .llQQ|VWXWNLPXNVHQVXXQQLWWHOX²MD QHXYRWWHOXSlLYlW2XOX±>7UDQVODWLRQ5HVHDUFK3ODQQLQJ6HPLQDU2XOX±0DUFK@2XOX2XOXQ 7KH)LUVW&]HFK7UDQVODWLRQVRI%\URQ¶V 3RHWU\@$8&$FWD8QLYHUVLWDWLV&DUROLQDH 3KLORORJLFD0RQRJUDSKLFD3UDJXH&KDUOHV8QLYHUVLW\ 0DQQKHLP. ,GHRORJ\DQG8WRSLD/RQGRQ5RXWOHGJHDQG.HJDQ3DXO 0DUFK.DWKOHHQ1 µ(OELOLQJLVPROLWHUDULR\ODYHURVLPLOLWXG¶5HYLVWDGHOLWHUDWXUD ± 0DUGLQ6HULI 7KH*HQHVLVRI



3DJH 2WWRPDQ7KRXJKW²$6WXG\LQWKH0RGHUQL]DWLRQRI7XUNLVK3ROLWLFDO,GHDV3ULQFHWRQ1-3ULQFHWRQ8QLYHUVLW\3UHVV 0DUJROLV0 7KH6WRU\RI%LEOH7UDQVODWLRQV3KLODGHOSKLD-HZLVK3XEOLFDWLRQ6RFLHW\RI$PHULFD 0DUJU\3HG 'pFRXYHUWHVHWpWDEOLVVHPHQWVGHV)UDQoDLVGDQVO¶RXHVWHWGDQVOHVXGGHO¶$PpULTXH VHSWHQWULRQDOH± YRO3DULV'-RXDVW 0DULQDL(&3HWHUVDQG(3LFFKL µ%LOLQJXDO5HIHUHQFH&RUSRUD&UHDWLRQ4XHU\LQJ$SSOLFDWLRQV¶LQ) .LHIHU*.LVVDQG-3DM]VHGV 3DSHUVLQ&RPSXWDWLRQDO/H[LFRJUDSK\&RPSOH[µ%XGDSHVW/LQJXLVWLFV,QVWLWXWH +XQJDULDQ$FDGHP\RI6FLHQFHV 0DUWLQ-5 )DFWXDO:ULWLQJ([SORULQJDQG&KDOOHQJLQJ6RFLDO5HDOLW\9LFWRULD'HDNLQ8QLYHUVLW\3UHVV 0DUWLQGDOH- (QJOLVK+XPDQLVP:\DWWWR&RZOH\/RQGRQ&URRP+HOP 0DUWLQV:± +LVWyULDGDLQWHOLJrQFLDEUDVLOHLUDYROV6mR3DXOR(GLWRUD&XOWUL[ 0DUWRQ: µ(TXLYDOHQFHDQG&RQJUXHQFHLQ7UDQVIRUPDWLRQDO&RQWUDVWLYH6WXGLHV¶6WXGLD$QJOLFD 3RVQDQLHQVLD± 0DVFDUR-XDQ 7KH%KDJDYDG*LWD+DUPRQGVZRUWK3HQJXLQ ²² 7KH8SDQLVKDGV+DUPRQGVZRUWK3HQJXLQ 0DVRQ,DQDQG&KULVWLQH3DJQRXOOHHGV &URVVZRUGV,VVXHVDQG'HEDWHVLQ/LWHUDU\DQG1RQOLWHUDU\ 7UDQVODWLRQ/LqJH(QJOLVK'HSDUWPHQW8QLYHUVLW\RI/LqJH 0DWHMND/DGLVODYDQG.U\VW\QD3RPRUVND 5HDGLQJVLQ5XVVLDQ3RHWLFV)RUPDOLVWDQG6WUXFWXUDOLVW9LHZV &DPEULGJH0$0,73UHVV 0DWKHVLXV9LOpP µ2SUREOpPHFKþHVNpKRSĜHNODGDWHOVWYt¶>2Q3UREOHPVRI&]HFK7UDQVODWLRQ@3ĜHKOHG ± 0DWLODO%. 7KH:RUGDQGWKH:RUOG,QGLD¶V&RQWULEXWLRQWRWKH6WXG\RI/DQJXDJH'HOKL2[IRUG 8QLYHUVLW\3UHVV 0DWUDW&0 ,QYHVWLJDWLQJWKH7UDQVODWLRQ3URFHVV7KLQNLQJ$ORXGYHUVXV-RLQW$FWLYLW\$QQ$UERU 8QLYHUVLW\0LFURILOPV,QWHUQDWLRQDO 0DWWHUQ- µ3XEOLVKLQJ7UDQVODWLRQVLQ)UDQFH¶,Q2WKHU:RUGV1RYHPEHU /RQGRQ-RXUQDORIWKH 7UDQVODWRUV$VVRFLDWLRQ 0DWWKLHVVHQ)2 7UDQVODWLRQ$Q(OL]DEHWKDQ$UW&DPEULGJH0$+DUYDUG8QLYHUVLW\3UHVV 0D\+) 7KH(QOLJKWHQPHQWLQ$PHULFD2[IRUG2[IRUG8QLYHUVLW\3UHVV 0D\5DFKHO 7KH7UDQVODWRULQWKH7H[W2Q5HDGLQJ5XVVLDQ/LWHUDWXUHLQ(QJOLVK(YDQVWRQ,/ 1RUWKZHVWHUQ8QLYHUVLW\3UHVV 0HGL]%ROLR$QWRQLR (OOLEURGH&KLODP%DODPGH&KXPD\HO0H[LFR8QLYHUVLGDG$XWRQRPDGH 0H[LFR 0HKDQQD$KPDG,EUDKƯP 'LUƗVDKDZOWDUMDPDWDO4XU¶ƗQDO.DUƯP>2Q7UDQVODWLQJWKH1REOH4XU¶ƗQ@ &DLUR$O6KD¶E3XEOLFDWLRQV 0HOE\$ µ0XOWLOHYHO7UDQVODWLRQ$LGVLQD'LVWULEXWHG6\VWHP¶LQ-+RUHFN\HG &2/,1*3URFHHGLQJV RIWKH1LQWK,QWHUQDWLRQDO&RQIHUHQFHRQ&RPSXWDWLRQDO/LQJXLVWLFV3UDJXH-XO\±3UDJXH$FDGHPLD ²² µ5HFLSHIRUD7UDQVODWRU:RUNVWDWLRQ¶8QSXEOLVKHGSDSHU%ULJKDP %RRNVIRU(WHUQLW\ 6SLULWXDO/LWHUDWXUHLQWKH0LGGOH$JHV@$PVWHUGDP3URPHWKHXV 0HVFKRQQLF+ 3RXUODSRpWLTXH,,eSLVWpPRORJLHGHO¶pFULWXUHSRpWLTXHGHODWUDGXFWLRQ3DULV*DOOLPDUG ²² µ$ORUVODWUDGXFWLRQFKDQWHUD¶5HYXHGµ(VWKpWLTXHQR/D7UDGXFWLRQ 0HWD 6SHFLDOLVVXH µ7KH+LVWRU\RI7UDQVODWLRQLQ&DQDGD¶ ²² VSHFLDOLVVXH RQWUDQVODWLRQLQWKH6SDQLVKDQG3RUWXJXHVHZRUOG 0H\HU,/%RZNHUDQG.(FN &RJQLWHUP$Q([SHULPHQWLQ%XLOGLQJD7HUPLQRORJLFDO.QRZOHGJH%DVH 3URFHHGLQJVRI(XUDOH[7DPSHUH 0H\HUKRI0D[ µ2QWKH7UDQVPLVVLRQRI*UHHNDQG,QGLDQ6FLHQFHWRWKH$UDEV¶,VODPLF&XOWXUH-DQXDU\ ± 0H]HL.DWK\ µ6SHDNLQJ:KLWH/LWHUDU\7UDQVODWLRQDVD9HKLFOHRI$VVLPLODWLRQLQ4XHEHF¶&DQDGLDQ /LWHUDWXUH± 0KLQD*$ µ7KH3ODFHRI.LVZDKLOLLQWKH)LHOGRI7UDQVODWLRQ¶%DEHO ± 0LJQH-3 3DWURORJLD*UDHFDYROV 3DULV-30LJQH 0LNR)UDQWLãHN (VWHWLNDYêUD]X7HyULDY\UD]XDãW\Ď%UDWLVODYD7DWUDQ ²² µ/DWKpRULHGH¶H[SUHVVLRQHWODWUDGXFWLRQ¶LQ+ROPHVGH+DDQDQG3RSRYLþHGV ± ²² +RGQRW\DOLWHUDUQ\SURFHV%UDWLVODYD7DWUDQ ²²DQG$3RSRYLþ 7YRUEDDUHFHSFLD(VWHWLFNiNRPPXQLNiFLDDPHWDNRPXQLNiFLD%UDWLVODYD7DWUDQ 0LOOiV9DOOLFURVD-0 (VWXGLRVVREUHKLVWRULDGHODFLHQFLDHVSDxROD%DUFHORQD&RQVHMR6XSHULRUGH ,QYHVWLJDFLRQHV&LHQWtILFDV



3DJH 0LOOHU*(*DODQWHUDQG.+3ULEUDP 3ODQVDQGWKH6WUXFWXUHRI%HKDYLRU1HZ &RQVHFXWLYH,QWHUSUHWLQJ@0RVFRZ9RHQL]GDW ²² 2EVKFKD\DWHRUL\DSHUHYRGDLXVWQ\SHUHYRG>*HQHUDO7UDQVODWLRQ7KHRU\DQG,QWHUSUHWLQJ@0RVFRZ 9RHQL]GDW 0RKDQW\1LUDQMDQ µ$Q,QGLDQ([SHULHQFH¶/DQJXDJH,QWHUQDWLRQDO ± 0RNKWDU0RKDPHG .LWƗEDO7DZIƯTƗWDO,OKƗPL\\DIL0XTƗUDQDWDO7DZƗUƯNKDO+LMUL\\DELOVLQHHQDO ,IUDQML\\DZDO4LEWL\\D>+LMUD'DWHVDQGWKHLU(TXLYDOHQWVLQ*UHJRULDQDQG&RSWLF +RPHU7UDQVODWLRQVDQG+H[DPHWHU3RHPV@ &RSHQKDJHQ 0RQDFR0 6KDNHVSHDUHRQWKH)UHQFK6WDJHLQWKH;9,,,WK&HQWXU\3DULV'LGLHU 0RQHU0LFKHO µ&HUYDQWHV\ODWUDGXFFLyQ¶1XHYD5HYLVWDGH)LORORJtD+LVSiQLFD ±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¶(VFK\OHDOD5HQDLVVDQFHHGLWLRQWUDGXFWLRQFRPPHQWDLUHVHWLPLWDWLRQ $FDGpPLHUR\DOHGH%HOJLTXH&ODVVHOHWWUHV)RQGV5HQp'UDJXHW /RXYDLQ3HHWHUV 0XUDNDPL7 µ2QWKH&RQFHSWVRI,QGLYLGXDO6RFLHW\DQG/RYHLQ0RGHUQ-DSDQ¶LQ+\XQDQG/DPEHUWHGV 0XVD.DPHODQGF$OL'DKUXJ .D\ID1DIKDPDO4XU¶ƗQ>+RZZH8QGHUVWDQGWKH4XU¶ƗQ@%HLUXWDO0DKUXVD 0X\ODHUW:LOOHP-RKDQ1RRWHQV'DQLHO3RHVPDQVDQG$.3XJK µ'HVLJQDQG8WLOLVDWLRQRI6XEWLWOHVRQ )RUHLJQ/DQJXDJH7HOHYLVLRQ3URJUDPPHV¶LQ3+1HOGHHG 7KHRULH0HWKRGHQXQG0RGHOOHGHU.RQWDNWOLQJXLVWLN %RQQ'PPOHU± 0YHQJ( /¶DUWHWO¶DUWLVDQDWDIULFDLQV


3DJH 1DWVXPH6 .RNRUR7RN\R6KLQFKRVKDWUDQV(0F&OHOODQGDV.RNRUR7RN\R&KDUOHV(7XWWOH &RPSDQ\ 1DYDUUR)HUQDQGR 0DQXDOGHELEOLRJUDItDHVSDxRODGHWUDGXFFLyQH,QWHUSUHWDFLyQ±$OLFDQWH 3XEOLFDFLRQHVGHOD8QLYHUVLGDGGH$OLFDQWH 1DYYDEL'DYXG 7DULNKFKHK\H7DUMRPHKD])DUDQVHKEHK)DUVLGDU,UDQD]$JKD]WD.RQXQ>+LVWRU\RI 7UDQVODWLRQIURP)UHQFKLQWR3HUVLDQIURPWKH%[email protected] 1HGHUJDDUG/DUVHQ%LUJLW µ&XOWXUDO)DFWRUVLQ6XEWLWOLQJ¶3HUVSHFWLYHV6WXGLHVLQ7UDQVODWRORJ\ ± 1HHGKDP-RVHSK µ7KH7UDQVODWLRQRI2OG&KLQHVH6FLHQWLILFDQG7HFKQLFDO7H[WV¶LQ$'%RRWKHWDOHGV $VSHFWVRI7UDQVODWLRQ/RQGRQ6HFNHUDQG:DUEXUJ 1HKUX-DZDKDUODO 7KH'LVFRYHU\RI,QGLD/RQGRQ0HULGLDQ%RRNV 1HNHPDQ3DXOHG 7UDQVODWLRQ2XU)XWXUH;,WK:RUOG&RQJUHVVRI),70DDVWULFKW(XURWHUP 1HXEHUW$OEUHFKW 7H[WDQG7UDQVODWLRQhEHUVHW]XQJZLVVHQVFKDIWOLFKH%HLWUlJH /HLS]LJ9(%9HUODJ (Q]\NORSlGLH ²²D µ&RPSHWHQFHLQ7UDQVODWLRQ$&RPSOH[6NLOO+RZWR6WXG\DQG+RZWR7HDFKLW¶LQ6QHOO+RUQE\ 3|FKKDFNHUDQG.DLQGOHGV ²²E ³µ$+RXVHRI0DQ\5RRPV´7KH5DQJHRI7UDQVODWLRQ6WXGLHV¶LQ.DGLVKDQG0DVVDUGLHU.HQQH\ HGV ²²DQG*UHJRU\06KUHYH 7UDQVODWLRQDV7H[W.HQW2+.HQW6WDWH8QLYHUVLW\3UHVV 1HZ(QJOLVK%LEOHWKH2OG7HVWDPHQW ,QWURGXFWLRQ2[IRUGDQG&DPEULGJH2[IRUGDQG&DPEULGJH 8QLYHUVLW\3UHVVHV 1HZPDQ$U\HK 0DSSLQJ7UDQVODWLRQ(TXLYDOHQFH/HXYHQ$FFR ²² µ7UDQVODWLRQ(TXLYDOHQFH1DWXUH¶LQ5($VKHUDQG-0<6LPSVRQHGV 7KH(QF\FORSHGLDRI/DQJXDJH DQG/LQJXLVWLFV2[IRUGDQG1HZ 7KH$UWRI7UDQVODWLRQ@5RPkQLDOLWHUDUă± 1LGD($ 7RZDUGD6FLHQFHRI7UDQVODWLQJ/HLGHQ(-%ULOO µ6FLHQFHRI7UDQVODWLRQ¶/DQJXDJH± ²²HG 7KH%RRNRID7KRXVDQG7RQJXHVQGHGQ /RQGRQ8QLWHG%LEOH6RFLHWLHV ²²D /DQJXDJH6WUXFWXUHDQG7UDQVODWLRQ6WDQIRUG6WDQIRUG8QLYHUVLW\3UHVV ²²E ([SORULQJ6HPDQWLF6WUXFWXUHV0XQLFK:LOKHOP)LQN ²² µ:K\VR0DQ\%LEOH7UDQVODWLRQV"¶LQ/OR\G5%DLOH\HG 7KH:RUGRI*RG$*XLGHWR(QJOLVK 9HUVLRQVRIWKH%LEOH$WODQWD*$-RKQ.QR[3UHVV ²²DQG&KU57DEHU 7KH7KHRU\DQG3UDFWLFHRI7UDQVODWLRQ/HLGHQ(-%ULOO 1LHQKDXVHU: HG 7KH,QGLDQD&RPSDQLRQWR7UDGLWLRQDO&KLQHVH/LWHUDWXUH7DLSHL60&3XEOLVKLQJ,QF 1LHW]VFKH)ULHGULFK 'LHIU|KOLFKH:LVVHQVFKDIW/HLS]LJ5HSULQWHGLQ6W|ULJHG ²² 7KH&RPSOHWH:RUNVRI)ULHGULFK1LHW]VFKHYRO7KH-R\IXO.QRZOHGJH1HZ


3DJH hEHUVHW]HQ7KHRUHWLVFKH*UXQGODJHQ0HWKRGHXQGGLGDNWLVFKH$QZHQGXQJHLQHUEHUVHW]XQJVUHOHYDQWHQ 7H[WDQDO\VH+HLGHOEHUJ-*URRV ²²± hEHUVHW]HQOHUQHQ²OHLFKWJHPDFKW(LQ.XUV]XU(LQIKUXQJLQGDVSURIHVVLRQHOOHhEHUVHW]HQDXVGHP 6SDQLVFKHQLQV'HXWVFKHYROV7UDQVODWRULVFKHV+DQGHOQ +HLGHOEHUJ-*URRV ²²D 7H[W$QDO\VLVLQ7UDQVODWLRQ$PVWHUGDPDQG$WODQWD*$5RGRSL ²²E µ6FRSRV/R\DOW\DQG7UDQVODWLRQ&RQYHQWLRQV¶7DUJHW ± ²² (LQIKUXQJLQGDVIXQNWLRQDOHhEHUVHW]HQ7ELQJHQ)UDQFNH ²² 7UDQVODWLQJDVD3XUSRVHIXO$FWLYLW\0DQFKHVWHU6W-HURPH3XEOLVKLQJ 1RUGDO*67yPDVVRQDQG9ÏODVRQHGV ËVOHQVNEyNPHQQWDVDJD,5H\NMDYLN0iORJ0HQQLQJ 1RUGPH\HU* µ2QWKH2+*,VLGRUDQGLWV6LJQLILFDQFHIRU(DUO\*HUPDQ3URVH:ULWLQJ¶30/$± 1RUWRQ' $+LVWRU\RIWKH%LEOHDV/LWHUDWXUHYROV&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV 1RUWRQ*3 7KH,GHRORJ\DQG/DQJXDJHRI7UDQVODWLRQLQ5HQDLVVDQFH)UDQFHDQGWKHLU+XPDQLVW $QWHFHGHQWV*HQHYD'UR] 1RWW-HGDQGWUDQV 7KH3RHPVRI&DLXV9DOHULXV&DWXOOXVLQ(QJOLVK9HUVHZLWKWKH/DWLQ7H[WUHYLVHG DQG&ODVVLFDO1RWHV/RQGRQ-RVHSK-RKQVRQ 1RYLFN3 7KDW1REOH'UHDP7KHµ2EMHFWLYLW\4XHVWLRQ¶DQGWKH$PHULFDQ+LVWRULFDO3URIHVVLRQ&DPEULGJH &DPEULGJH8QLYHUVLW\3UHVV 1RZRWQ\.DUO$ 7ODFXLFROOL'LHPH[LNDQLVFKHQ%LOGHUKDQGVFKULIWHQ6WLOXQG,QKDOW%HUOLQ*HEU0DQQ 1\VWUDQG0HG :KDW:ULWHUV.QRZ7KH/DQJXDJH3URFHVVDQG6WUXFWXUHRI:ULWWHQ'LVFRXUVH/RQGRQ $FDGHPLF3UHVV 2DWHV-R\FH&DURO µ7KH:ULWHUDV5HYLHZHU¶$PHULFDQ%RRN5HYLHZ1RYHPEHU'HFHPEHU 2EVW+DQG5+&OLQH µ6XPPDU\+LVWRU\RI/DQJXDJH6HUYLFHVLQWKH86'HSDUWPHQWRI6WDWH¶LQ'DQG0 %RZHQHGV 2¶)ODKHUW\:HQG\'RQLJHU µ7KH3RVW9HGLF+LVWRU\RIWKH6RPD3ODQW¶LQ5*RUGRQ:DVVRQ6RPD'LYLQH 0XVKURRPRI,PPRUWDOLW\(WKQRP\FRORJLFDO6WXGLHV 1HZ 'XWFK/HDUQLQJDQG-DSDQHVH&XOWXUH@7RN\R7RN\R'DLJDNX 6KXSSDQNDL 2LNDZD6 µ6KLQWDLVKLQR.\DNXLQ¶>5K\PHLQ1HZ6W\[email protected] 2LWWLQHQ5 ,DP0H²,DP2WKHU2QWKH'LDORJLFVRI7UDQVODWLQJIRU&KLOGUHQ7DPSHUH8QLYHUVLW\RI 7DPSHUH 2NSHZKR, $IULFDQ2UDO/LWHUDWXUH%DFNJURXQGV&KDUDFWHUDQG&RQWLQXLW\%ORRPLQJWRQ,QGLDQD 8QLYHUVLW\3UHVV 2OOLNDLQHQ$HG .XNDORKGXWWDLVL*HQRYHHYDD"1XRULVRNLUMDOOLVXXGHQNllQWlPLVHVWl>2QWKH7UDQVODWLRQ RI-XYHQLOH/LWHUDWXUHLQ)LQODQG@-\YlVN\Ol-\YlVN\OlQ\OLRSLVWRQNLUMDOOLVXXGHQODLWRNVHQPRQLVWHQR ²²DQG03XODNNDHGV .llQWlMlWNXOWWXXULYDLNXWWDMLQD>&XOWXUDO,QIOXHQFHRI7UDQVODWRUVLQWR)LQQLVK@ -\YlVN\Ol-\YlVN\OlQ\OLRSLVWRQNLUMDOOLVXXGHQODLWRNVHQPRQLVWHQR 2OVRQ&KDUOHV 0D\DQ/HWWHUV/RQGRQ&DSH 2QJ:- µ/DWLQ/DQJXDJH6WXG\DV5HQDLVVDQFH3XEHUW\5LWH¶6WXGLHVLQ3KLORORJ\ ± 2RL9 µ7UDQVODWLQJ&XOWXUH$&DQWRQHVH7UDQVODWLRQDQG3URGXFWLRQRI2¶1HLOO¶V/RQJ'D\¶V-RXUQH\LQWR 1LJKW¶LQ=XEHUHG 2RVWURP)YDQHWDO 0LVVHOLNHWRQJKH'H0LGGHOQHGHUODQGVHOHWWHUNXQGHLQLQWHUGLVFLSOLQDLUYHUEDQG >0LGGOH'XWFK/LWHUDWXUHLQDQ,QWHUGLVFLSOLQDU\&RQWH[W@$PVWHUGDP3URPHWKHXV 2UKRQOX&HQJL] µ7HUFXPDQ¶>7UDQVODWRU@,VODP$QVLNORSHGLVL>(QF\FORSHGLDRI,VODP([SDQGHG7XUNLVK 9HUVLRQ@YRO,VWDQEXO0LOOL(JLWLP%DNDQOLJL


3DJH 2]NLULPOL$WLOOD 7XUN(GHEL\DWL$QVLNORSHGLVL>(QF\FORSHGLDRI7XUNLVK/LWHUDWXUH@,VWDQEXO&HP 7HQGHQFLHVDQG3HULRGVLQ,FHODQGLF /LWHUDWXUHIURP@5H\NMDYLN,èXQQ 3DQHWK(YD µ$Q,QYHVWLJDWLRQLQWR&RQIHUHQFH,QWHUSUHWDWLRQ¶0$WKHVLV8QLYHUVLW\RI/RQGRQ 3DQQZLW]5 'LH.ULVLVGHUHXURSDwVFKHQ.XOWXU1XUHPEHUJ+&DUO 3DSHJDDLM%DUWDQG.ODXV6FKXEHUW 7H[W&RKHUHQFHLQ7UDQVODWLRQ'RUGUHFKW)RULV 3DUN:LOOLDP0 7UDQVODWRUDQG,QWHUSUHWLQJ7UDLQLQJLQWKH86$$6XUYH\$UOLQJWRQ9$$PHULFDQ 7UDQVODWRUV$VVRFLDWLRQ 3DUNHU3DWULFLD /LWHUDU\)DW/DGLHV5KHWRULF*HQGHU3URSHUW\/RQGRQDQG1HZ 4XHVWLRQVRI/LWHUDU\7UDQVODWLRQ@3UDJXHýHVNRVORYHQVNê VSLVRYDWHO 3HGHQ0DUJDUHW6D\HUV µ7KH$UGXRXV-RXUQH\¶LQ:HQGHOO0$\FRFNHG 7KH7HOOHUDQGWKH7DOH$VSHFWV RIWKH6KRUW6WRU\/XEERFN7;7H[DV7HFK3UHVV± 3HGHUVHQ9LJJR+M¡UQDJHU 2YHUV°WWHOVHVWHRUL>7UDQVODWLRQ7KHRU\@&RSHQKDJHQ ²² (VVD\VRQ7UDQVODWLRQ&RSHQKDJHQ(UKYHUYV¡NRQRPLVN)RUODJ ²²DQG1RUPDQ6KLQH µ%¡UQHOLWWHUDWXUL(QJODQGRJ'DQPDUNIUDPLGWHQDIGHWnUKXQGHUHGHWLOFD ¶>&KLOGUHQ¶V/LWHUDWXUHLQ(QJODQGDQG'HQPDUNIURPWKH0LGGOHRIWKHWK&HQWXU\WRDERXW@,,,%¡UQ RJ%¡JHU±DQG± 3HLUFH&6± &ROOHFWHG3DSHUVRI&KDUOHV6DQGHUV3HLUFHHG&+DUWVKRUQH3:HLVVDQG$:%XUNVYROV &DPEULGJH0$%HONQDS3UHVV+DUYDUG8QLYHUVLW\3UHVV



3DJH 3HQURG/\QQ. µ7UDQVODWLQJ+pOqQH&L[RXV)UHQFK)HPLQLVPV DQG$QJOR$PHULFDQ)HPLQLVW7KHRU\¶ 7757UDGXFWLRQ7HUPLQRORJLH5HGDFWLRQ 3HUJQLHU0DXULFH µ7UDGXFWLRQHWWKpRULHOLQJXLVWLTXH¶LQeWXGHVGHOLQJXLVWLTXHDSSOLTXpH3DULV'LGLHU ²² /HVIRQGHPHQWVVRFLROLQJXLVWLTXHVGHODWUDGXFWLRQ/LOOH3UHVVHV8QLYHUVLWDLUHVGH/LOOH 3HUNLQV' $+LVWRU\RI0RGHUQ3RHWU\0RGHUQLVPDQG$IWHU&DPEULGJH0$+DUYDUG8QLYHUVLW\3UHVV 3HUOPXWWHU' µ7KH/DQJXDJHRIWKH'HDI5HYLHZRI6HHLQJ9RLFHVE\26DFNV ¶1HZ /LWHUDU\7UDQVODWLRQ2QWKH$UWRI 7UDQVODWLQJ%RRN7ZR@:URFáDZ2VVROLQHXP 3ROWHUPDQQ$QGUHDVHG 'LHhEHUVHW]XQJDOV0HGLXPGHU)UHPGHUIDKUXQJ.DQRQLVHUXQJVSUR]HVVH :LVVHQVFKDIWOLFKHV.ROORTXLXP*|WWLQJHQ7ELQJHQ1LHPH\HU ²²HG /LWHUDWXUNDQRQ²0HGLHQHUHLJQLV².XOWXUHOOHU7H[W)RUPHQLQWHUNXOWXUHOOHU.RPPXQLNDWLRQXQG hEHUVHW]XQJ*|WWLQJHU%HLWUlJH,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJ %HUOLQ(ULFK6FKPLGW 3RQWLHUR*LRYDQQL µ7KH7DVNRIWKH/LWHUDU\7UDQVODWRU¶LQ'ROOHUXSDQG/RGGHUJDDUGHGV ± 3RSH$>@ µ3UHIDFHWR7KH,OLDGRI+RPHU¶LQ0DFNHG 3RSRYLþ$QWRQ µ7KH&RQFHSW³6KLIWRI([SUHVVLRQ´LQ7UDQVODWLRQ$QDO\VLV¶LQ+ROPHVGH+DDQDQG3RSRYLþ HGV



3DJH ²² 3RHWLNDXPHOHFNpKRSUHNODGX%UDWLVODYD7DWUDQ ²² 8PHOHFNêSUHNODGYý665>/LWHUDU\7UDQVODWLRQLQ&]HFKRVORYDNLD@0DUWLQQRSXEOLVKHUFLWHG ²² 7HyULDXPHOHFNpKRSUHNODGX>7KHRU\RI/LWHUDU\7UDQVODWLRQ@%UDWLVODYD7DWUDQ ²² 'LFWLRQDU\IRUWKH$QDO\VLVRI/LWHUDU\7UDQVODWLRQ(GPRQWRQ8QLYHUVLW\RI$OEHUWD ²²HG 2ULJLQiO3UHNODG,QWHUSUHWDþQiWHUPLQROyJLD%UDWLVODYD7DWUDQ 3RUWHU'HQQLV µ3V\FKRDQDO\VLVDQGWKH7DVNRIWKH7UDQVODWRU¶LQ$OH[DQGUH/HXSLQHG /DFDQDQGWKH +XPDQ6FLHQFHV/LQFROQ8QLYHUVLW\RI1HEUDVND3UHVV 3RVQHU0, µ,QWURGXFWLRQ:KDWLVLW/LNHWREHDQ([SHUW"¶LQ07+&KL5*ODVHUDQG0-)DUUHGV 7KH 1DWXUHRI([SHUWLVH+LOOVGDOH1-/DZUHQFH(UOEDXP$VVRFLDWHV 3RXQG(]UD $%&RI5HDGLQJ/RQGRQ)DEHUDQG)DEHU ²² /LWHUDU\(VVD\V/RQGRQ)DEHU ²² 7KH7UDQVODWLRQVRI(]UD3RXQG1HZ 7UDQVODWLRQDQG%XOJDULDQ&XOWXUH@ 6RILD1DURGQD.XOWXUD3XEOLVKHUV 3URFWRU(6 $OIRQVR;RI&DVWLOH3DWURQRI/LWHUDWXUHDQG/HDUQLQJ2[IRUG&ODUHQGRQ3UHVV 7KH3VDOPV+\PQVDQG6SLULWXDO6RQJVRIWKH2OGDQG1HZ7HVWDPHQW)DLWKIXOO\7UDQVODWHGLQWR(QJOLVK0HHWHU /RQGRQ6: 3V]F]RáRZVND/DQG-3X]\QLQD µ7áXPDF]H2GURG]HQLDRVZRLFKSU]HNáDGDFK¶>7KH7UDQVODWRUVRIWKH 5HQDLVVDQFHRQWKHLU:RUN@3RUDGQLN ± 3XJK- µ7KH6WRU\VR)DU$Q(YDOXDWLRQRI0DFKLQH7UDQVODWLRQLQWKH:RUOG7RGD\¶LQ1HZWRQHG 3XOVLDQR3DQG.:ROI HGV 0HGLHYDO6FDQGLQDYLDQ$Q(QF\FORSHGLD1HZ 7KH$UWRIWKH,PSRVVLEOH@2VOR 5iED*\ 6]pSKĦWOHQHN>%HOOHVLQILGqOHV@%XGDSHVW$NDGpPLDL 5DEDVVD*UHJRU\ µ1R7ZR6QRZIODNHVDUH$OLNH7UDQVODWLRQDV0HWDSKRU¶LQ-RKQ%LJXHQHWDQG5DLQHU 6FKXOWHHGV 7KH&UDIWRI7UDQVODWLRQ&KLFDJR8QLYHUVLW\RI&KLFDJR3UHVV± 5DELQ&KDLP µ7KH/LQJXLVWLFVRI7UDQVODWLRQ¶LQ+6PLWKHG $VSHFWVRI7UDQVODWLRQ6WXGLHVLQ &RPPXQLFDWLRQ/RQGRQ 5DFKOLQ+$:/RJǌH-*LEERQDQG0)UDQNHO µ&RJQLWLRQDQG%HKDYLRULQ



3DJH 6WXGLHVRI&KRLFH¶3V\FKRORJLFDO5HYLHZ± 5DGy$ $PDJ\DUPĦIRUGuWiVW|UWpQHWH±>$+LVWRU\RI/LWHUDU\7UDQVODWLRQLQ+XQJDULDQ± @%XGDSHVW5pYDL ²² $IRUGtWiVPĦYpV]HWH>7KH$UWRI7UDQVODWLRQ@%XGDSHVW)UDQNOLQ 5DGy*\ µ6KDNHVSHDUH7HDFKHURIWKH+XQJDULDQ3RHWV¶0HWD± ²² µ7KH%LEOHLQ+XQJDULDQ¶7KH%LEOH7UDQVODWRU7HFKQLFDO3DSHUV± 5DIDHO9LFHQWH/ &RQWUDFWLQJ&RORQLDOLVP7UDQVODWLRQDQG&KULVWLDQ&RQYHUVLRQ,Q7DJDORJ6RFLHW\8QGHU (DUO\6SDQLVK5XOH,WKDFD1<&RUQHOO8QLYHUVLW\3UHVV 5DIIHO%XUWRQ 7KH)RUNHG7RQJXH$6WXG\RIWKH7UDQVODWLRQ3URFHVV7KH+DJXH0RXWRQ ²²D 7KH$UWRI7UDQVODWLQJ3RHWU\8QLYHUVLW\3DUN3$3HQQV\OYDQLD6WDWH8QLYHUVLW\3UHVV ²²E µ6RPH%DVLF3ULQFLSOHVRI7UDQVODWLRQ$6WUXFWXUH(UHFWHGRQD)RXQGDWLRQ¶7UDQVODWLRQ5HYLHZ± ²² µ7KH7UDQVODWLRQRI3RHWU\¶LQ0/DUVRQHG ²² µ7UDQVODWLQJ&HUYDQWHV8QDYH]PiV¶&HUYDQWHV ± 5DLQH. :LOOLDP%ODNH/RQGRQ7KDPHVDQG+XGVRQ 5DL]LV0% *UHHN3RHWU\7UDQVODWLRQV$WKHQV(IVWDWKLDGLV 5DMDJRSDODFKDUL& 0DKDEKDUDWD%RPED\%KDUDWL\D9LG\D%KDYDQ ²² 5DPD\DQD%RPED\%KDUDWL\D9LG\D%KDYDQ 5iNRV6HG 7DQXOPiQ\RNDPĦIRUGuWiVUyO>6WXGLHVLQ/LWHUDU\7UDQVODWLRQ %XGDSHVW8QLRQRI+XQJDULDQ :ULWHUV/LWHUDU\7UDQVODWLRQ6HFWLRQ 5DPDQXMDQ$. 6SHDNLQJRI6LYD+DUPRQGVZRUWK3HQJXLQ 5DPEHUJ%7 'RQDOG'DYLGVRQ¶V3KLORVRSK\RI/DQJXDJH$Q,QWURGXFWLRQ2[IRUG%DVLO%ODFNZHOO 5D\/ µ0XOWLGLPHQVLRQDOWUDQVODWLRQ3RHWU\¶LQ%ULVOLQHG 5HHG, µ+D]DUGVRI$GDSWDWLRQ$QRXLOK¶V$QWLJRQHLQ(QJOLVK¶LQ=XEHUHG 5HLG+HOHQH-% µ/LWHUDWXUHRQWKH6FUHHQ6XEWLWOH7UDQVODWLQJIRU3XEOLF%URDGFDVWLQJ¶LQ%DUW:HVWHUZHHO DQG7KHR'¶KDHQHGV 6RPHWKLQJ8QGHUVWRRG6WXGLHVLQ$QJOR'XWFK/LWHUDU\7UDQVODWLRQ$PVWHUGDP$WODQWD 5RGRSL± 5HLVV.DWDULQD 0|JOLFKNHLWHQXQG*UHQ]HQGHUhEHUVHW]XQJVNULWLN.DWHJRULHQXQG.ULWHULHQIUHLQH VDFKJHUHFKWH%HXUWHLOXQJYRQhEHUVHW]XQJHQ0XQLFK0D[+EHU ²² 7H[WW\SXQGhEHUVHW]XQJVPHWKRGH'HU2SHUDWLYH7H[W.URQEHUJ6FULSWRU ²² µ0HWKRGLVFKH)UDJHQGHUEHUVHW]XQJVUHOHYDQWHQ7H[WDQDO\VH'LH5HLFKZHLWHGHU/DVVZHOO)RUPHO¶ /HEHQGH6SUDFKHQ± ²² µhEHUVHW]XQJVWKHRULHQXQGLKUH5HOHYDQ]IUGLH3UD[LV¶/HEHQGH6SUDFKHQ ± ²² µ'HU7H[WXQGGHUhEHUVHW]HU¶LQ5HLQHU$UQW]HG 7H[WOLQJXLVWLNXQG)DFKVSUDFKH+LOGHVKHLP2OPV ± ²² µ'DV0L‰YHUVWlQGQLVYRPHLJHQWOLFKHQhEHUVHW]HQ¶LQ$UQW]DQG7KRPHHGV ± ²²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µ7KH7UDQVODWLRQRI,QWHUOLQJXDO7H[WV$&KLFDQR([DPSOH¶7UDQVODWLRQ3HUVSHFWLYHV± 5LFKDUGV,$ µ7RZDUGVD7KHRU\RI7UDQVODWLQJ¶LQ$UWKXU):ULJKWHG 6WXGLHVLQ&KLQHVH7KRXJKW &KLFDJR8QLYHUVLW\RI&KLFDJR3UHVV 5LFKDUGV-&DQG765RGJHUV $SSURDFKHVDQG0HWKRGVLQ/DQJXDJH7HDFKLQJ&DPEULGJH&DPEULGJH 8QLYHUVLW\3UHVV 5LFNV&HG 7KH3RHPVRI7HQQ\VRQ/RQGRQ/RQJPDQ1HZ


3DJH ²²DQG07D\OHU µ'HYHORSPHQWRI/HJDO,QWHUSUHWHU(GXFDWLRQLQ1HZ-HUVH\¶LQ'DQG0%RZHQHGV 5REHUWV6PLWK/: µ&RPPXQLFDWLRQ%UHDNGRZQ¶/DZ6RFLHW\-RXUQDO ± 5RELQVRQ'RXJODV 7KH7UDQVODWRU¶V7XUQ%DOWLPRUHDQG/RQGRQ-RKQV+RSNLQV8QLYHUVLW\3UHVV ²² µ'HFRORQL]LQJ7UDQVODWLRQ¶7UDQVODWLRQDQG/LWHUDWXUH± ²² µ7KHRUL]LQJ7UDQVODWLRQLQD:RPDQ¶V9RLFH¶7KH7UDQVODWRU ± ²² 7UDQVODWLRQDQG7DERR,OOLQRLV1RUWKHUQ,OOLQRLV8QLYHUVLW\3UHVV ²² :HVWHUQ7UDQVODWLRQ7KHRU\)URP+HURGRWXVWR1LHW]VFKH0DQFKHVWHU6W-HURPH3XEOLVKLQJ 5RELQVRQ/ +DQGERRNIRU/HJDO,QWHUSUHWHUV6\GQH\7KH/DZ%RRN&RPSDQ\ 5RE\QV&OHP µ7UDQVODWLRQDQG'LVFXUVLYH,GHQWLW\¶3RHWLFV7RGD\ ± 5RFKHU$ODLQ µ/DWUDKLVRQFUpDWULFHDQDWRPLHGXWUDQVIHUWQRWLRQQHOGDQVOHVFXOWXUHVDVLDWLTXHV¶775 7UDGXFWLRQ7HUPLQRORJLH5HGDFWLRQ 5RFKHWWH% µ'XJUHFDXODWLQHWGXODWLQDXJUHFOHVSUREOqPHVGHODWUDGXFWLRQGDQVO¶DQWLTXLWpJUpFRODWLQH¶ /DWRPXV ± 5RGLWL( ,QWHUSUHWLQJ,WV+LVWRU\LQD1XWVKHOO:DVKLQJWRQ'&*HRUJHWRZQ8QLYHUVLW\1DWLRQDO5HVRXUFH &HQWHUIRU7UDQVODWLRQDQG,QWHUSUHWDWLRQ2XWUHDFK3DSHU 5RGULJXHV/RXLV- µ$QJOR6D[RQ9HUVH5XQHV¶'RFWRUDOGLVVHUWDWLRQ%DUFHORQD8QLYHUVLW\RI%DUFHORQD 5RGULJXHV-+ $KLVWyULDYLYD6mR3DXOR*OREDO(GLWRUD 5RGZHOO-0 7KH.RUDQ/RQGRQ(YHU\PDQ¶V/LEUDU\ 5RNHP)UHGGLH 6FDQGLQDYLDQ/LWHUDWXUHVLQ+HEUHZ7UDQVODWLRQ±7HO$YLY7KH0%HUQVWHLQ &KDLURI7UDQVODWLRQ7KHRU\7HO$YLY8QLYHUVLW\ 5RODQG5$ 7UDQVODWLQJ:RUOG$IIDLUV-HIIHUVRQ1&0F)DUODQG 5yQDL3 %DEHOHDQWLEDEHO6mR3DXOR3HUVSHFWLYD ²² $WUDGXomRYLYLGDQGHGQHQOVWSXEE\(GXFRP5LRGH-DQHLUR1RYD)URQWHLUD ²² (VFRODGH7UDGXWRUHVWKHGQUHYDQGHQOVWSXELQE\(GXFRP5LRGH-DQHLUR1RYD)URQWHLUD 5RQDQ&KDUOHV(DQG%RQQLH5&2KHGV (DVW0HHWV:HVW7KH-HVXLWVLQ&KLQD±&KLFDJR /R\ROD8QLYHUVLW\3UHVV 5yQD\*\ )RUGuWiVN|]EHQ>:KLOH7UDQVODWLQJ@%XGDSHVW0DJYHWĘ ²² )RUGtWyNpVIRUGuWiVRN>7UDQVODWRUVDQG7UDQVODWLRQV@%XGDSHVW0DJYHWĘ 5RQGD- /HZLVDQG&ODUNDPRQJWKH,QGLDQV/LQFROQ8QLYHUVLW\RI1HEUDVND3UHVV 5RQGHDX* ,QWURGXFWLRQjOD7HUPLQRORJLH0RQWUHDO&HQWUHpGXFDWLIHWFXOWXUHOLQF ²²DQG+)HOEHUHGV 7H[WHV&KRLVLVGH7HUPLQRORJLH4XHEHF*LUVWHUP 5RVFRPPRQ(DUORI>@ µ$Q(VVD\RQ7UDQVODWHG9HUVH¶LQ756WHLQHUHG 5RVH9 µ3WROHPDHXVXQGGLH6FKXOHYRQ7ROHGR¶+HUPHV ± 5RVHQEODW$ µ/RVFRQTXLVWDGRUHV\VXOHQJXD¶LQ%LEOLRWHFD$QJHO5RVHQEODWYRO(VWXGLRVVREUHHO HVSDxROGH$PHULFD&DUDFDV0RQWH$YLOD(GLWRUHV± 5RVHQWKDO)UDQ] 7KH&ODVVLFDO+HULWDJHLQ,VODPWUDQVE\(PLOHDQG-HQQ\0DUPRUVWHLQ(QJOLVK YHUVLRQRIWKH*HUPDQRULJLQDO'DV)RUWOHEHQGHU$QWLNHLP,VODPILUVWSXEOLVKHG /RQGRQDQG1HZ $+LVWRU\RIWKH 5RPDQLDQ/DQJXDJHVIURPWKH%HJLQQLQJVWRWKH6HYHQWHHQWK&HQWXU\@%XFKDUHVW6FLHQWLILFDQG(QF\FORSHGLF 3XEOLVKLQJ+RXVH 5RVVHWWL'* 7KH:RUNVRI'DQWH*DEULHO5RVVHWWL:05RVVHWWLHG /RQGRQ(OOLV 5RWKHQEHUJ-HURPH 7HFKQLFLDQVRIWKH6DFUHG%HUNHOH\8QLYHUVLW\RI&DOLIRUQLD3UHVV ²² 6KDNLQJWKH3XPSNLQ1HZ 2ULJLQDOVDQG7UDQVODWLRQ@&RSHQKDJHQ 5XVLQHN0HG 6]WXNDSU]HNáDGX>7KH$UWRI7UDQVODWLRQ@:URFáDZ2VVROLQHXP 5XVVHOO& µ6LJQ/DQJXDJH,QWHUSUHWLQJLQ&DQDGD¶3DSHUSUHVHQWHGWRWKH7KLUG1DWLRQDO&RQJUHVVRIWKH &DQDGLDQ7UDQVODWRUVDQG,QWHUSUHWHUV&RXQFLO%DQII$OEHUWD&DQDGD 5XVVHOO3 7UDGXFFLRQHV\WUDGXFWRUHVHQODSHQLQVXODLEpULFD± %HOODWHUUD6HUYLFLRGH 3XEOLFDFLRQHVGHOD8QLYHUVLGDG$XWyQRPDGH%DUFHORQD 5\OH* 7KH&RQFHSWRI0LQG/RQGRQ+XWFKLQVRQ 5\SND-DQ +LVWRU\RI,UDQLDQ/LWHUDWXUH'RUGUHFKW'5HLGHO3XEOLVKLQJ&RPSDQ\ 6D¶DGHGGLQ0$ µ7H[W'HYHORSPHQWDQG$UDELF(QJOLVK1HJDWLYH,QWHUIHUHQFH¶$SSOLHG/LQJXLVWLFV ± 6DGJURYH3& 7KH(J\SWLDQ7KHDWUHLQWKH1LQHWHHQWK&HQWXU\± 5HDGLQJ*DUQHW



3DJH 6DGOHU9 :RUNLQJZLWK$QDORJLFDO6HPDQWLFV'LVDPELJXDWLRQ7HFKQLTXHVLQ'/7'RUGUHFKW)RULV 6DJHU-XDQ& $3UDFWLFDO&RXUVHLQ7HUPLQRORJ\3URFHVVLQJ$PVWHUGDPDQG3KLODGHOSKLD-RKQ%HQMDPLQV ²² /DQJXDJH(QJLQHHULQJDQG7UDQVODWLRQ&RQVHTXHQFHVRI$XWRPDWLRQ$PVWHUGDPDQG3KLODGHOSKLD-RKQ %HQMDPLQV ²²''XQJZRUWKDQG3)0F'RQDOG (QJOLVK6SHFLDO/DQJXDJHV:LHVEDGHQ%UDQGVWHWWHU ²²DQG-RKQ0F1DXJKWD 6HOHFWLYH6XUYH\RI7HUPLQRORJLFDO'DWD%DQNV5DQG'5HSRUW1R/RQGRQ %ULWLVK/LEUDU\ ²²E 6SHFLILFDWLRQRID%ULWLVK/LQJXLVWLF'DWD%DQN5DQG'5HSRUW1R/RQGRQ%ULWLVK/LEUDU\ 6DLG(GZDUG 2ULHQWDOLVP/RQGRQDQG1HZ 5HSRUWRQWKH7UDQVODWLRQ2SHUDWLRQVRIWKH)LQQLVK6WDWH $GPLQLVWUDWLRQ@+HOVLQNL9DOWLRYDUDLQPLQLVWHUL|QMlUMHVWHO\RVDVWR 6DQGHUV0 µ7UDLQLQJIRU&RPPXQLW\,QWHUSUHWHUV¶,7,&RQIHUHQFH3URFHHGLQJVLQ&3LFNHQHG /RQGRQ $VOLE± 6DQWDQJHOR*6DQG&9LQWL /HWUDGX]LRQLLWDOLDQHGHOWHDWURFRPLFRIUDQFHVHGHLVHFROL;9,,H;9,,,5RPH (GL]LRQLGL6WRULDH/HWWHUDWXUD 6DQWR\R-& (OGHOLWRGHWUDGXFLU/HyQ8QLYHUVLGDGGH/HyQ ²² 7HRUtD\FUtWLFDGHODWUDGXFFLyQDQWRORJtD%HOODWHUUD6HUYHLGH3XEOLFDFLyQVGHOD8QLYHUVLWDW $XWyQRPDGH%DUFHORQD ²² µ7UDGXFFLRQHV\DGDSWDFLRQHVWHDWUDOHVHQVD\RGHXQDWLSRORJtD¶&XDGHUQRVGH7HDWUR&OiVLFR± ²² %LEOLRJUDItDGHODWUDGXFFLyQHQHVSDxROFDWDOiQJDOOHJR\YDVFR /HyQ8QLYHUVLGDGGH/HyQ ²²55DEDGiQ7*X]PiQDQG-/&KDPRVDHGV )LGXVLQWHUSUHVDFWDVGHODV3ULPHUDV-RUQDGDV 1DFLRQDOHVGH+LVWRULDGHOD7UDGXFFLyQ/HyQ6HFUHWDULDGRGH3XEOLFDFLRQHVGHOD8QLYHUVLGDGGH/HyQ 6DSLU(GZDUG /DQJXDJH1HZ $7LPHRI8SKHDYDOVLQ7UDQVODWLRQ@7RN\R6HNDLƿUDLVKD 6DW]5 $PHULFDQ,QGLDQ3ROLF\LQWKH-DFNVRQLDQ(UD/LQFROQ8QLYHUVLW\RI1HEUDVND3UHVV 6DXVVXUH) &RXUVGHOLQJXLVWLTXHJpQpUDOHHG&%DOO\DQG$OEHUW6HFKHKD\H3DULVeGLWLRQV3D\RW 6DYRU\7+ 7KH$UWRI7UDQVODWLRQ/RQGRQ&DSH 6Ɨ\LJK$QƯV%DVKƯUELQ6DOƗPDDQG+DQDILELQFƯVD µ1DKZD.KLWDF$UDEL\\D4DZPL\\DOLO 7DUMDPD¶>7RZDUGVD1DWLRQDO$UDE3ODQRI7UDQVODWLRQ@LQ)LDO$GDEZDO7D¶OƯIZDO7DUMDPD 6FKDEHUW,HG UGHGQ 6KDNHVSHDUH+DQGEXFK'LH=HLWGHU0HQVFKGDV:HUNGLH1DFKZHOW6WXWWJDUW .U|QHU 6FKDGHZDOGW: µ'DV3UREOHPGHVhEHUVHW]HQV¶LQ6W|ULJHG ± 6FKlIIQHU&KULVWLQDDQG+HOHQ.HOO\+ROPHVHGV &XOWXUDO)XQFWLRQVRI7UDQVODWLRQ&OHYHGRQ0XOWLOLQJXDO 0DWWHUV 6FKHOH/LQGDDQG0DU\(OOHQ0LOOHU %ORRGRI.LQJV'\QDVW\DQG5LWXDOLQ0D\D$UW1HZ 'XWFK/LWHUDWXUH$ +LVWRU\@*URQLQJHQ1LMKRII



3DJH 6FKLFN. µ,QGHWHUPLQDF\RI7UDQVODWLRQ¶7KH-RXUQDORI3KLORVRSK\ ± 6FKMROGDJHU$ µ$Q([SORUDWRU\6WXG\RI7UDQVODWLRQDO1RUPVLQ6LPXOWDQHRXV,QWHUSUHWLQJ0HWKRGRORJLFDO 5HIOHFWLRQV¶LQ-DQVHQHG ± 6FKOHJHO$XJXVW:LOKHOPYRQ YDULRXVH[FHUSWVIURPKLVZRUNWUDQVE\$QGUp/HIHYHUH ± 6FKOHLHUPDFKHU)ULHGULFK µhEHUGLHYHUVFKLHGHQHQ0HWKRGHQGHVhEHUVHW]XQJV¶LQ6W|ULJ HG ±WUDQVE\$QGUp/HIHYHUH DVµ2QWKH'LIIHUHQW0HWKRGVRI7UDQVODWLQJ¶LQ7UDQVODWLQJ /LWHUDWXUH± ²² µhEHUGLHYHUVFKLHGHQHQ0HWKRGHQGHVhEHUVHW]HQV¶LQ6W|ULJHG ± 6FKOHLQHU/ µ0DUJDUHW7\OHU7UDQVODWRUDQG:DLWLQJ:RPDQ¶(QJOLVK/DQJXDJH1RWHV ± 6FKPLGW'HQQLV- µ+HUPHQHXWLFVDQGWKH3RHWLF0RWLRQ¶LQ6FKPLGWHG +HUPHQHXWLFVDQGWKH3RHWLF 0RWLRQ±7UDQVODWLRQ3HUVSHFWLYHV %LQJKDPWRQ1<&HQWHUIRU5HVHDUFKLQ7UDQVODWLRQ 6FKPLHG-DQG+6FKlIIOHU µ7UDQVODWLRQDQG&RJQLWLYH6WUXFWXUHV¶+HUPHV-RXUQDORI/LQJXLVWLFV± ²² µ$SSURDFKLQJ7UDQVODWLRQHVHWKURXJK3DUDOOHODQG7UDQVODWLRQ&RUSRUD¶LQ,/DQFDVKLUH&3HUF\DQG& 0H\HUHGV 6WXGLHVLQ6\QFKURQLF&RUSXV/LQJXLVWLFV$PVWHUGDPDQG$WODQWD*$5RGRSL 6FKPLW].' µ5HFKQHUJHVWW]WH7HUPLQRORJLHYHUZDOWXQJDPhEHUVHW]HUDUEHLWVSODW]¶7HUPLQRORJLHHW 7UDGXFWLRQ± 6FKRJW+HQU\* /LQJXLVWLFV/LWHUDU\$QDO\VLVDQG/LWHUDU\7UDQVODWLRQ7RURQWR%XIIDORDQG/RQGRQ 8QLYHUVLW\RI7RURQWR3UHVV 6FK|QGRUI.( 'LH7UDGLWLRQGHUGHXWVFKHQ3VDOPHQEHUVHW]XQJ8QWHUVXFKXQJHQ]XU9HUZDQGWVFKDIWXQG hEHUVHW]XQJVWUDGLWLRQGHU3VDOPHQYHUGHXWVFKXQJ]ZLVFKHQ1RWNHUXQG/XWKHU&RORJQHDQG*UD]%RHKODX 6FKRQHYHOG&:HG µW:RUGJURRWHUSODVPDDUQLHW]RµWZDV1HGHUODQGVHEHVFKRXZLQJHQRYHUYHUWDOHQ ±>,W%HFRPHVD/DUJHU3RROEXWQRWWKH:D\LW:DV'XWFK'LVFRXUVHVRQ7UDQVODWLRQ±@7KH +DJXH%LEOLRJUDSKLD1HHUODQGLFD 6FKUHLEHU0 hEHUVHW]XQJXQG%HDUEHLWXQJ7ELQJHQ1DUU 6FKUHLWPOOHU$QGUHDV µ,QWHUOLQJXDOH5HODWLRQHQ¶/HEHQGH6SUDFKHQ ± 6FKU|EOHU, 1RWNHU,,,YRQ6W*DOOHQDOVhEHUVHW]HUXQG.RPPHQWDWRUYRQ%RHWKLXV¶µ'H&RQVRODWLRQH 3KLORVRSKLDH¶+HUPHD1)YRO7ELQJHQ1LHPH\HU 6FKXOWH5DLQHU µ7UDQVODWLRQDQGWKH3XEOLVKLQJ:RUOG¶7UDQVODWLRQ5HYLHZ±± ²²DQG-RKQ%LJXHQHWHGV 7KHRULHVRI7UDQVODWLRQ$Q$QWKRORJ\RI(VVD\VIURP'U\GHQWR'HUULGD &KLFDJRDQG/RQGRQ8QLYHUVLW\RI&KLFDJR3UHVV 6FKXUKDPPHU* )UDQFLV;DYLHU+LV/LIHKLV7LPHVYRO,9-DSDQDQG&KLQD±5RPH7KH-HVXLW +LVWRULFDO,QVWLWXWH 6FKZDUW]%HQMDPLQ ,Q6HDUFKRI:HDOWKDQG3RZHU @ :DYHUOH\HG$QGUHZ+RRN+DUPRQGVZRUWK3HQJXLQ)UDQFLV-HIIUH\¶VUHYLHZLV TXRWHGDWWKHHQGRIWKHQRYHODVDQLQWURGXFWRU\QRWHWRWKH*ORVVDU\RI6FRWWLVKZRUGV 6HDUOH-RKQ 6SHHFK$FWV$Q(VVD\LQWKH3KLORVRSK\RI/DQJXDJH/RQGRQ&DPEULGJH8QLYHUVLW\3UHVV 6HHORZ+ 'LHLVOlQGLVFKHQhEHUVHW]XQJHQGHUGHXWVFKHQ9RONVEFKHU5H\NMDYLN6WRIQXQÈUQD 0DJQ~VVRQDU 6HIHULV* 0HWDJUDSKHV>7UDQVFULSWLRQV&RSLHV@$WKHQV/HVNL 6HJUH&HVDUH µ/DWUDGL]LRQHPDFDURQLFDGD)ROHQJRD*DGGD¶LQ(WWRUH%RQRUDDQG0DULR&KLHVDHGV &XOWXUDOHWWHUDULDHWUDGL]LRQHSRSRODUHLQ7HRILOR)ROHQJR0LODQR)HOWULQHOOL± ²² $YYLDPHQWRDOORVWXGLRGHOWHVWROHWWHUDULR7XULQ(LQDXGLWUDQV DV,QWURGXFWLRQWRWKH$QDO\VLVRI WKH/LWHUDU\7H[W%ORRPLQJWRQ,1,QGLDQD8QLYHUVLW\3UHVV 6pJXLQRW&DQGDFH µ7UDQVODWLQJ,PSOLFLWDWLRQ¶0HWD± ²² µ3UDJPDWLFVDQGWKH([SOLFLWDWLRQ+\SRWKHVLV¶7757UDGXFWLRQ7HUPLQRORJLH5HGDFWLRQ ± ²² µ7KH7UDQVODWLRQ3URFHVV$Q([SHULPHQWDO6WXG\¶LQ6pJXLQRWHG 7KH7UDQVODWLRQ3URFHVV7RURQWR +*3XEOLFDWLRQV



3DJH ²² µ$6WXG\RI6WXGHQW7UDQVODWLRQ6WUDWHJLHV¶LQ7LUNNRQQHQ&RQGLWHG 6HOHVNRYLWFK'DQLFD /¶,QWHUSUqWHGDQVOHVFRQIHUHQFHVLQWHUQDWLRQDOHVSUREOqPHVGHODQJDJHHWGH FRPPXQLFDWLRQ3DULV/HWWUHV0RGHUQHV ²² µ=XU7KHRULHGHV'ROPHWVFKHQV¶LQ9.DSSHG hEHUVHW]HUXQG'ROPHWVFKHU+HLGHOEHUJ4XHOOH XQG0H\HU ²² /DQJDJHODQJXHVHWPpPRLUHpWXGHGHODSULVHGHQRWHVHQLQWHUSUHWDWLRQFRQVHFXWLYH3DULV/HWWUHV 0RGHUQHV ²² µ,QWHUSUHWDWLRQD3V\FKRORJLFDO$SSURDFKWR7UDQVODWLRQ¶LQ%ULVOLQHG ²² µ7DNH&DUHRIWKH6HQVHDQGWKH6RXQGVZLOO7DNH&DUHRI7KHPVHOYHVRU:K\,QWHUSUHWLQJLVQRW 7DQWDPRXQWWR7UDQVODWLQJ/DQJXDJHV¶7KH,QFRUSRUDWHG/LQJXLVW± ²²D µ/DQJXDJHDQG&RJQLWLRQ¶LQ*HUYHUDQG6LQDLNRHGV ²²E ,QWHUSUHWLQJIRU,QWHUQDWLRQDO&RQIHUHQFHV3DULV0LQDUG:DVKLQJWRQ'&3HQDQG%RRWK ²² µ/D7UDGXFWLRQLQWHUSUHWDWLYH¶3DOLPSVHVWHVQR3DULV8QLYHUVLWpGHOD6RUERQQH1RXYHOOH ²² µ7HFKQLFDODQG/LWHUDU\7UDQVODWLRQD8QLI\LQJ9LHZ¶LQ&DWULRQD3LFNHQHG ,7,&RQIHUHQFH /RQGRQ$VOLE ²² µ7HDFKLQJ&RQIHUHQFH,QWHUSUHWLQJ¶LQ.UDZXWVFKNHHG 7UDQVODWRUDQG,QWHUSUHWHU7UDLQLQJDQG )RUHLJQ/DQJXDJH3HGDJRJ\$OEDQ\1<6XQ\ ²²DQG0DULDQQH/HGHUHU ,QWHUSUHWHUSRXUWUDGXLUH&ROOHFWLRQ7UDGXFWRORJLHQR3DULV'LGLHU ²² 3pGDJRJLHUDLVRQQpHGHO¶LQWHUSUpWDWLRQ3DULV2IILFHGHV3XEOLFDWLRQVGHV&RPPXQDXWpVHXURSpHQQHV DQG'LGLHUeUXGLWLRQ 6HOYHU3 7KH$UWRI7UDQVODWLQJ3RHWU\/RQGRQ-RQ%DNHU 6HPHQHWV2 7KH+LVWRU\[email protected],]GDWHOVWYR.*8 6HQ.0UHSU +LQGXLVP+DUPRQGVZRUWK3HQJXLQ 6HQJHU$ 'HXWVFKHhEHUVHW]XQJVWKHRULHLP-DKUKXQGHUW± %RQQ%RXYLHU9HUODJ+HUEHUW *UXQGPDQQ 6HQJXSWD0DKDVZHWD µ7UDQVODWLRQ&RORQLDOLVPDQG3RHWLFV5DELQGUDQDWK7DJRUHLQ7ZR:RUOGV¶LQ %DVVQHWWDQG/HIHYHUHHGV ± ²² µ7UDQVODWLRQDV0DQLSXODWLRQ7KH3RZHURI,PDJHVDQG,PDJHRI3RZHU¶LQ'LQJZDQH\DQG0DLHUHGV 6KDFNPDQ- 7KH5LJKWWREH8QGHUVWRRG$+DQGERRNRQ:RUNLQJZLWK(PSOR\LQJDQG7UDLQLQJ&RPPXQLW\ ,QWHUSUHWHUV&DPEULGJH1DWLRQDO([WHQVLRQ&ROOHJH 6KDGG\9LUJLQLD0 µ-RKQ'U\GHQDQG'¶$EODQFRXUW¶V%HOOHV,QILGqOHV¶6HYHQWHHQWK&HQWXU\5HYLHZ ± 6KDNHVSHDUH7UDQVODWLRQ$QQXDO3XEOLFDWLRQRQ6KDNHVSHDUH7UDQVODWLRQ IURPUHQDPHG6KDNHVSHDUH :RUOGZLGH7UDQVODWLRQDQG$GDSWDWLRQ 7RN\R<XVKRGR6KRWHQ 6KDPD¶D1DMDK µ$/LQJXLVWLF$QDO\VLVRI6RPH3UREOHPVRI$UDELFWR(QJOLVK7UDQVODWLRQ¶'3KLOWKHVLV 2[IRUG8QLYHUVLW\ 6KDSLUR1WUDQV *)DLGLW¶Vµ$.QLJKW:DVZLWK+LV/DG\)RQGO\/\LQJ¶LQ$)ORUHVHG $Q$QWKRORJ\RI 0HGLHYDO/\ULFV1HZ 7UDQVODWHGYV2ULJLQDO/LWHUDWXUHLQWKH&UHDWLRQRIWKH/LWHUDU\ &HQWHULQ(UH],VUDHO@+DVLIUXW/LWHUDWXUH± F

DO6KD\\ƗO-DPƗODO'ƯQ 7ƗUƯNKDO7DUMDPDIL0LVUIL $KG LQ(J\SWGXULQJWKH)UHQFK,QYDVLRQ@&DLUR'DUDO)LNUDOF$UDEL

DO)LULQVL\\D>7KH+LVWRU\RI7UDQVODWLRQ

F

²² 7ƗUƯNK DO7KDTƗIL\\DIL DKG0XKDPPDGF$OL>7KH+LVWRU\RIWKH&XOWXUDO0RYHPHQWXQGHU 0XKDPPDG$OL@&DLUR'DUDO)LNUDOF$UDEL 6KHQ)XZHL =KRQJ[LZHQKXDMLDROLXVKL>+LVWRU\RI6LQR:HVWHUQ&XOWXUDO([FKDQJH@6KDQJKDL5HQPLQ FKXEDQVKH 6KLHOGV.DWKOHHQ µ'HUHN0DKRQ¶V1HUYDO¶7UDQVODWLRQDQG/LWHUDWXUH± 6KLU\DHY$) 6LQNKURQQ\SHUHYRG>6LPXOWDQHRXV,QWHUSUHWLQJ@0RVFRZ9RHQL]GDW 6KLSOH\1 7KH-DPHV(YDQV6WRU\7RURQWR7KH5\HUVRQ3UHVV 6KLSSH\7$ 2OG(QJOLVK9HUVH/RQGRQ+XWFKLQVRQ 6KNORYVN\9LNWRU%RULVRYLFK>@ µ,VNXVVWYRNDNSULHP¶WUDQV//HPRQDQG05HLVDVµ$UWDV 7HFKQLTXH¶LQ//HPRQDQG05HLVHGV 5XVVLDQ)RUPDOLVW&ULWLFLVP)RXU(VVD\V/LQFROQ8QLYHUVLW\RI 1HEUDVND3UHVV± 6KOHVLQJHU0LULDPD µ0RQLWRULQJWKH&RXUWURRP,QWHUSUHWHU¶3DUDOOqOHV&DKLHUVGHO¶eFROHGH7UDGXFWLRQHW G¶,QWHUSUpWDWLRQ$XJXVW± ²²E µ6LPXOWDQHRXV,QWHUSUHWDWLRQDVD)DFWRULQ(IIHFWLQJ6KLIWVLQWKH3RVLWLRQRI7H[WVRQWKH2UDO/LWHUDWH &RQWLQXXP¶8QSXEOLVKHG0$WKHVLV7HO$YLY7HO$YLY8QLYHUVLW\ ²²F µ([WHQGLQJWKH7KHRU\RI7UDQVODWLRQWR,QWHUSUHWDWLRQ1RUPVDVD&DVHLQ3RLQW¶7DUJHW ±



3DJH ²² µ,QWHUSUHWHU/DWLWXGHYV'XH3URFHVV6LPXOWDQHRXVDQG&RQVHFXWLYH,QWHUSUHWDWLRQLQ0XOWLOLQJXDO 7ULDOV¶LQ7LUNNRQHQ&RQGLWHG ± ²² µ6KLIWVLQ&RKHVLRQLQ6LPXOWDQHRXV,QWHUSUHWLQJ¶7KH7UDQVODWRU ± 6KRPDOL4 µ7KH7UDQVODWLRQRI3RHWU\IURP(QJOLVKWR$UDELFDQG9LFH9HUVD¶LQ&DWULRQD3LFNHQHG 7UDQVODWLRQ²WKH9LWDO/LQNYRO%ULJKWRQ,7, 6KRUWHU(QF\FORSDHGLDRI,VODP HG+$5*LEEDQG-+.UDPHUV/HLGHQ%ULOO 6KUHYH*UHJRU\0&KULVWLQD6FKlIIQHU-RVHSK+'DQNVDQG-HQQLIHU*ULIILQ µ,V7KHUHD6SHFLDO.LQGRI ³5HDGLQJÍRU7UDQVODWLRQ"$Q(PSLULFDO,QYHVWLJDWLRQRI5HDGLQJLQWKH7UDQVODWLRQ3URFHVV¶7DUJHW ± 6KYHLWVHU$' 3HUHYRGLOLQJYLVWLND>7UDQVODWLRQDQG/LQJXLVWLFV@0RVFRZ9RHQL]GDWWUDQVDVhEHUVHW]XQJ XQG/LQJXLVWLN%HUOLQ$NDGHPLH9HUODJ ²² 7HRUL\DSHUHYRGD>7UDQVODWLRQ7KHRU\@0RVFRZ1DXND 6LGLURSRXORX0 9DULDWLRQLQ7UDQVODWLRQ$WKHQVQRSXEOLVKHU 6LHEXUWK5LFKDUG +|OGHUOLQ¶V+\PQVDQG)UDJPHQWV3ULQFHWRQ1-3ULQFHWRQ8QLYHUVLW\3UHVV 6LHUUD(µ(OSULPHULQWpUSUHWHEODQFRHQHO5LRGHOD3ODWD¶%DEHO ± 6,,7²6HUYLFLR,EHURDPHULFDQRGH,QIRUPDFLyQVREUHOD7UDGXFFLyQ 5HSHUWRULRGHLQVWLWXFLRQHVUHODFLRQDGDV FRQODWUDGXFFLyQ\ODLQWHUSUHWDFLyQHQORVSDtVHVGHKDEODKLVSDQD\SRUWXJXHVD%HFFDU$UJHQWLQD 6,,7 6LPD4LDQ 5HFRUGVRIWKH*UDQG+LVWRULDQYROVWUDQV%XUWRQ:DWVRQ+RQJ.RQJDQG1HZ 2ULJLQDODQG7UDQVODWLRQ@&RQIHUHQFH3URFHHGLQJV$WKHQVQR SXEOLVKHU 6RODQR)GH µ(OLQWpUSUHWHXQRGHORVHMHVGHODDFXOWXUDFLyQ¶LQ(VWXGLRVVREUHSROtWLFDLQGLJHQLVWDHVSDxROD HQ$PHULFD8QLYHUVLGDGGH9DOODGROLG 6ROLĔVNL: 3U]HNáDGDUW\VW\F]Q\DNXOWXUDOLWHUDFND>/LWHUDU\7UDQVODWLRQDQG/LWHUDU\&XOWXUH@:URFáDZ 2VVROLQHXP 6|OO/XGZLJ µ7UDGXLVLELOLWpHWLQWUDGXLVLELOLWp¶0HWD± ± 6RORPRX& µ7UDLQLQJRI3URIHVVLRQDOVLQD0XOWLFXOWXUDO(QYLURQPHQW7KH9LFWRULDQ$XVWUDOLD3HUVSHFWLYH¶ &DWULRQD3LFNHQHG ;,,,),7:RUOG&RQJUHVV3URFHHGLQJV 6RPDO\$OH[DQGHU µ,V7DUJXPLF$UDPDLF



3DJH 5DEELQLF+HEUHZ"$5HIOHFWLRQRQ0LGUDVKLFDQG7DUJXPLF5HZRUGLQJRI6FULSWXUH¶-RXUQDORI-HZLVK6WXGLHV ± 6RPHNK6DVVRQ µ%LEOLFDO(FKRHVLQ0RGHUQ$UDELF/LWHUDWXUH¶-RXUQDORI$UDELF/LWHUDWXUH± 6RPHUV+DUROG/DQG'-RQHV µ0DFKLQH7UDQVODWLRQ6HHQDV,QWHUDFWLYH0XOWLOLQJXDO7H[W*HQHUDWLRQ¶LQ 7UDQVODWLQJDQGWKH&RPSXWHU7KH7KHRU\DQG3UDFWLFHRI0DFKLQH7UDQVODWLRQ²D0DUULDJHRI&RQYHQLHQFH" /RQGRQ$VOLE ²²,0F/HDQDQG'-RQHV µ([SHULPHQWVLQ0XOWLOLQJXDO([DPSOHEDVHG*HQHUDWLRQ¶LQ$,&0RQDJKDQ HG &61/3UG&RQIHUHQFHRQWKH&RJQLWLYH6FLHQFHRI1DWXUDO/DQJXDJH3URFHVVLQJ'XEOLQ'XEOLQ&LW\ 8QLYHUVLW\ ²²-,7VXMLLDQG'-RQHV µ0DFKLQH7UDQVODWLRQZLWKRXWD6RXUFH7H[W¶LQ+.DUOJUHQHG &2/,1* 3DSHUV3UHVHQWHGWRWKHWK,QWHUQDWLRQDO&RQIHUHQFHRQ&RPSXWDWLRQDO/LQJXLVWLFV+HOVLQNL 7ZR+XQGUHG 6WXGLHVLQ7UDQVODWLRQ6FLHQFH@8OHnERUJ,QVWLWXWLRQHQIRUQRUGLVND VSUnNYLG8OHnERUJVXQLYHUVLWHW 6RX]D0 ,QWHUYLHZE\*3ULFHLQ3ULFHHG /DWLQ$PHULFD7KH:ULWHU¶V-RXUQH\/RQGRQ+DPLVK +DPLOWRQ± 6SHDU3HUFLYDO $+LVWRU\RI,QGLDYRO/RQGRQ3HQJXLQ 6SHUEHU'DQG':LOVRQ 5HOHYDQFH&RPPXQLFDWLRQDQG&RJQLWLRQ2[IRUG%DVLO%ODFNZHOO 6SHUEHUJ0F4XHHQ0DQG/%XUQDUG *XLGHOLQHVIRU(OHFWURQLF7H[W(QFRGLQJDQG,QWHUFKDQJH7(,3 &KLFDJRDQG2[IRUG$&+$&/$//& 6SLYDN*D\DWUL&KDNUDYRUW\D µ$FWLQJ%LWV,GHQWLW\7DON¶&ULWLFDO,QTXLU\ ± ²²E µ7KH3ROLWLFVRI7UDQVODWLRQ¶LQ0LFKqOH%DUUHWWDQG$QQH3KLOOLSVHGV 'HVWDELOL]LQJ7KHRU\ &RQWHPSRUDU\)HPLQLVW'HEDWHV6WDQIRUG&$6WDQIRUG8QLYHUVLW\3UHVV 6SULQJHU2 µ2WIULGYRQ:HLVVHQEXUJ%DUEDULVPXVHW6RO°FLVPXV6WXGLHVLQWKH0HGLHYDO7KHRU\DQG 3UDFWLFHRI7UDQVODWLRQ¶6\PSRVLXP± 6WDFKRZLDN+ µ*HGDQNHQ]XHLQHUDOOJHPHLQHQ7KHRULHGHU0RGHOOH¶6WXGLXP*HQHUDOH± 6WDFNHOEHUJ-UJHQYRQ µ'DV(QGHGHUEHOOHVLQILGqOHV¶LQ.5%DXVFKDQG+0*HLJHUHGV ,QWHUOLQJXLVWLFD6SUDFKYHUJOHLFKXQGhEHUVHW]XQJ)HVWVFKULIW]XP¶*HEXUWVWDJYRQ0DULR:DQGUXV]ND 7ELQJHQ0D[1LHPH\HU ²² hEHUVHW]XQJHQDXV]ZHLWHU+DQG5H]HSWLRQVYRUJlQJHLQGHUHXURSlLVFKHQ/LWHUDWXUYRPELV]XP -DQKUKXQGHUW%HUOLQDQG1HZ 2OG%XOJDULDQ/LWHUDWXUH@± YROV6RILD%XOJDUVNL3LVDWHO3XEOLVKHUV 6WHFFRQL8EDOGRIRUWKFRPLQJ µ6HPLRWLFVLQ7UDQVODWLRQ7HDFKLQJ¶3DSHUSUHVHQWHGWRWKHFRQIHUHQFH3UREOHPVDQG 7UHQGVLQWKH7HDFKLQJRI,QWHUSUHWLQJDQG7UDQVODWLRQ&HQWUR,QWHUQD]LRQDOHGL6WXGLVXOO¶,QWHUSUHWD]LRQHHOD 7UDGX]LRQH0LVDQR$GULDWLFR6HSWHPEHU± 6WHJHPDQ-HOOH hEHUVHW]XQJXQG/HVHU8QWHUVXFKXQJHQ]XUhEHUVHW]XQJVlTXLYDOHQ]GDUJHVWHOOWDQGHU 5H]HSWLRQYRQ0XOWDWXOLVµ0D[+DYHODDU¶XQGVHLQHQGHXWVFKHQhEHUVHW]XQJHQ%HUOLQDQG1HZ $Q2XWOLQHRIWKH+LVWRU\RI3ROLVK /LWHUDWXUH@YROV±:DUVDZ3DĔVWZRZH:\GDZQLFWZR1DXNRZH



3DJH 6WHUQ++ ,VVXHVDQG2SWLRQVLQ/DQJXDJH7HDFKLQJHG3$OOHQDQG%+DUOH\2[IRUG2[IRUG8QLYHUVLW\ 3UHVV 6WHUQEHUJ0HLU µ3RO\OLQJXDOLVPDV5HDOLW\DQG7UDQVODWLRQDV0LPHVLV¶3RHWLFV7RGD\ ± 6WLFK65 µ*UDPPDU3V\FKRORJ\DQG,QGHWHUPLQDF\¶7KH-RXUQDORI3KLORVRSK\ ± 6WLQH3&HG %LEOH7UDQVODWLRQDQGWKH6SUHDGRIWKH&KXUFK7KH/DVW $Q$FFRXQWRIWKH1DJDVDNL,QWHUSUHWHUV@7RN\R6ǀWDNXVKD 6XOOLYDQ-3 (]UD3RXQGDQG6H[WXV3URSHUWLXV$6WXG\LQ&UHDWLYH7UDQVODWLRQ/RQGRQ 6XPLWD(DQG+,LGD µ([SHULPHQWVDQG3URVSHFWVRI([DPSOHEDVHG0DFKLQH7UDQVODWLRQ¶3URFHHGLQJVRIWKH WK$QQXDO0HHWLQJRIWKH$VVRFLDWLRQIRU&RPSXWDWLRQDO/LQJXLVWLFV%HUNHOH\ ± 6XQ%DQJKXD µ/XQ)X -RKQ)U\HU¶V7UDQVODWLRQ&DUHHULQ WKH-LDQJQDQ$UVHQDO@-RXUQDORI&KLQHVH6WXGLHV16 ± 6XSHU5+HG 0DWWKHZ$UQROG2QWKH&ODVVLFDO7UDGLWLRQ$QQ$UERU8QLYHUVLW\RI0LFKLJDQ3UHVV 6ZDOHV- *HQUH$QDO\VLV&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV 6ZDQQ%ULDQ 2QWKH7UDQVODWLRQRI1DWLYH$PHULFDQ/LWHUDWXUHV:DVKLQJWRQ'&6PLWKVRQLDQ 6ZDQWRQ0WUDQV $QJOR6D[RQ3URVH/RQGRQ-0'HQW9HUPRQW&KDUOHV(7XWWOH 6ZHHW+>@ HG50DFNLQ7KH3UDFWLFDO6WXG\RI/DQJXDJHV$*XLGHIRU7HDFKHUVDQG/HDUQHUV 2[IRUG2[IRUG8QLYHUVLW\3UHVV 6\NHV0 µ'LVFULPLQDWLRQLQ'LVFRXUVH¶LQ7YDQ'LMNHG +DQGERRNRI'LVFRXUVH$QDO\VLVYRO/RQGRQ $FDGHPLF3UHVV 6]DEy( $PĦIRUGuWiV>/LWHUDU\7UDQVODWLRQ@%XGDSHVW*RQGRODW 7DEDNRZVND( &RJQLWLYH/LQJXLVWLFVDQGWKH3RHWLFVRI7UDQVODWLRQ7ELQJHQ*XQWHU1DUU 7DLUD0 µ&RQWUDVWLYH6WXGLHVRI0RGDOLW\LQ(QJOLVKDQG6HQWHQFH)LQDO3DUWLFOHVLQ-DSDQHVH¶3K' 8QLYHUVLW\RI&DPEULGJH 7DNHGD. µ:HVWHUQ/LWHUDWXUHLQ-DSDQHVH7UDQVODWLRQ¶LQ.RGDQVKD(QF\FORSHGLDRI-DSDQYRO7RN\R .RGDQVKD/WG 7DQQHQ' &RKHUHQFHLQ6SRNHQDQG:ULWWHQ'LVFRXUVH1RUZRRG1-$EOH[ 7DQSLQDU$KPHW+DPGL XQFX$VLU7XUN(GHEL\DWL7DULKL>+LVWRU\RIWKFHQWXU\7XUNLVK/LWHUDWXUH@ &DJOD\DQ.LWDEHYL,VWDQEXO 7DUJHW VSHFLDOLVVXHRQ,QWHUSUHWLQJ5HVHDUFKHG'DQLHO*LOHYRO 7DUMRPHKGDU1LP4DUQH$NKLU>7UDQVODWLRQLQWKH3DVW+DOIFHQWXU\@ DUHSRUWSUHSDUHGE\WKH(GXFDWLRQDO 'LYLVLRQRIWKH&HQWHUIRU&XOWXUDO6WXGLHVDQG&RRUGLQDWLRQ)DUKDQJYD=HQGHJL± 7DUVNL$OIUHG µ7KH&RQFHSWRI7UXWKLQ)RUPDOL]HG/DQJXDJHV¶LQ7DUVNL/RJLF6HPDQWLFVDQG 0HWDPDWKHPDWLFV3DSHUVIURPWRWUDQV-+:RRGJHU2[IRUG&ODUHQGRQ3UHVV± 7DUWDJOLD1LFFROz (OHPHQWLGL(XFOLGH9HQLFH&XUWLR7URLDQR 7DYDQL*LXVHSSH %LOLQJXLVPRHSOXULOLQJXLVPRURPDQ]RGDO;,,DO;9,VHFROR5RPH'H6DQWLV 7D\ORU%WUDQV -RKDQQ:ROIJDQJYRQ



3DJH *RHWKH)DXVW$7UDJHG\%RVWRQ-DPHV52VJRRGDQG&RPSDQ\ 7HEEHO-RKQ %HWZHHQ&RYHUV7KH5LVHDQG7UDQVIRUPDWLRQRI$PHULFDQ3XEOLVKLQJ2[IRUG2[IRUG 8QLYHUVLW\3UHVV 7HEEOH+ µ$'LVFRXUVH0RGHOIRU'LDORJXH,QWHUSUHWLQJ¶LQ$86,73URFHHGLQJVRIWKH)LUVW3UDFWLWLRQHUV¶ 6HPLQDU&DQEHUUD$XVWUDOLDQ,QVWLWXWHRI,QWHUSUHWHUVDQG7UDQVODWRUV,QF1DWLRQDO2IILFH 7HGORFN'HQQLV µ7KH7UDQVODWRURU:K\WKH&URFRGLOHZDVQRW'LVLOOXVLRQHG$3OD\LQ2QH$FW¶LQ:DUUHQ HG 7HHOH5R\(DUOH 7KURXJKD*ODVV'DUNO\$6WXG\RI(QJOLVK7UDQVODWLRQVRI&KLQHVH3RHWU\$QQ$UERU 8QLYHUVLW\RI0LFKLJDQ3UHVV 7HNLQ*|QO$ dHQJQDPH²$KPHGL'DL&ULWLFDO(GLWLRQDQG7H[WXDO$QDO\VLV>7KH%RRNRI&HQJ² $KPHGL'DL@6RXUFHVRI2ULHQWDO/DQJXDJHVDQG/LWHUDWXUHV7XUNLVK6RXUFHV;,9&DPEULGJH0$+DUYDUG 8QLYHUVLW\3UHVV 7HUUDFLQL%HQYHQXWR ,/SUREOHPDGHOODWUDGX]LRQH0LODQ6HUUDH5LYD 7HUU\3 µ7KH,QYLVLEOH'LIIHUHQFH1RWHVRQWKH7UDQVODWLRQRI3RHWU\¶LQ)UDZOH\HG D 7H\VVLHU3 +LVWRLUHGHODODQJXHSRUWXJDLVH3DULV3UHVVHV8QLYHUVLWDLUHVGH)UDQFHWUDQV&&XQKDDV +LVWyULDGDOtQJXDSRUWXJXHVD/LVERQ/LYUDULD6iGD&RVWD(GLWRUD 7H]OD$ $Q,QWURGXFWRU\%LEOLRJUDSK\LQWKH6WXG\RI+XQJDULDQ/LWHUDWXUH&DPEULGJH0$+DUYDUG 8QLYHUVLW\3UHVV ²² +XQJDULDQ$XWKRUV&DPEULGJH0$+DUYDUG8QLYHUVLW\3UHVV 7KDSDU5RPLOD $+LVWRU\RI,QGLDYRO+DUPRQGVZRUWK3HQJXLQ 7KHOHQ0DUFHODQG%DUEDUD/HZDQGRZVND7RPDV]F]\NHGV 7UDQVODWLRQDQG0HDQLQJ3DUW0DDVWULFKW (XURWHUP ²²HGV 7UDQVODWLRQDQG0HDQLQJ3DUW0DDVWULFKW5LMNVKRJHVFKRRO0DDVWULFKW 7KLMVVHQ6FKRXWH&/ 8LWGHUHSXEOLHNGHUOHWWHUHQ(OIVWXGLHVRSKHWJHELHGYDQGHLGHHsQJHVFKLHGHQLVYDQ GH*RXGHQ(HXZ>)URPWKH5HSXEOLFRI/HWWHUV(OHYHQ6WXGLHVLQWKH)LHOGRIWKH+LVWRU\RI,GHDVRIWKH*ROGHQ $JH@7KH+DJXH1LMKRII 7KRPDV1RHODQG5LFKDUG7RZHOOHGV ,QWHUSUHWLQJDVD/DQJXDJH7HDFKLQJ7HFKQLTXH/RQGRQ&HQWUHIRU ,QIRUPDWLRQRQ/DQJXDJH7HDFKLQJDQG5HVHDUFK 7KRPDV6 µ5HOHYDQFHDQG7UDQVODWLRQ¶LQ7H[W/LQJXLVWLFVDQG7UDQVODWLRQDVSHFLDOLVVXHRI7XUMXPDQ eFROH6XSHULHXUH5RL)DKGGH7UDGXFWLRQ²7DQJHU ± 7KRUQGLNH/\QQ± $+LVWRU\RI0DJLFDQG([SHULPHQWDO6FLHQFHYROV1HZ 7UDQVODWLRQVRI3URVH)LFWLRQLQWR6ZHGLVK±±±@*|WHERUJ/LWWHUDWXUYHWHQVNDSOLJD LQVWLWXWLRQHQ 7RVND=HKUD µ.HOLOHYH'LPQH¶QLQ7XUNFH&HYLULOHUL¶>7XUNLVK7UDQVODWLRQVRI.HOLOHDQG'LPQH@-RXUQDORI 7XUNLVK6WXGLHV)DKLU,])HVWVFKULIW,,HG*XQD\.XWDQG*RQXO$7HNLQ± 7RW]HYD6RSKLD 'DVWKHDWUDOH3RWHQWLDOGHVGUDPDWLVFKHQ7H[WHV(LQ%HLWUDJ]XU7KHRULHYRQ'UDPDXQG 'UDPHQEHUVHW]XQJ)RUXP0RGHUQHV7KHDWHU 7ELQJHQ*XQWHU1DUU 7RXU\*LGHRQ µ1RUPRWVKHOWLUJXPVLIUXWLOHLYULW±¶>1RUPVRI/LWHUDU\7UDQVODWLRQLQWR+HEUHZ ±@8QSXEOLVKHG3K'WKHVLV7HO$YLY8QLYHUVLW\ ²² 1RUPRWVKHOWLUJXPYHKDWLUJXPKDVLIUXWLOHLYULWEDVKDQLP±



3DJH >7UDQVODWLRQDO1RUPVDQG/LWHUDU\7UDQVODWLRQLQWR+HEUHZ±@7HO$YLY7KH3RUWHU,QVWLWXWHIRU3RHWLFV DQG6HPLRWLFV7HO$YLY8QLYHUVLW\ ²² µ7KH1DWXUHDQG5ROHRI1RUPVLQ/LWHUDU\7UDQVODWLRQ¶LQ+ROPHV/DPEHUWDQGYDQGHQ%URHFNHGV ± ²²D ,Q6HDUFKRID7KHRU\RI7UDQVODWLRQ7HO$YLY3RUWHU,QVWLWXWH ²²E µ&RPPXQLFDWLRQLQ7UDQVODWHG7H[WV$6HPLRWLF$SSURDFK¶LQ::LOVVHG ²²F µ7KH7UDQVODWRUDVD1RQFRQIRUPLVWWREH2U+RZWR7UDLQ7UDQVODWRUVWR9LRODWH7UDQVODWLRQDO1RUPV¶ LQ6YHQ2ODI3RXOVRQDQG:ROIUDP:LOVVHGV $QJHZDQGWHhEHUVHW]XQJVZLVVHQVFKDIW$DUKXV'HQPDUN ²²D µ7UDQVODWHG/LWHUDWXUH6\VWHP1RUPV3HUIRUPDQFH7RZDUGD77RULHQWHG$SSURDFKWR/LWHUDU\ 7UDQVODWLRQ¶3RHWLFV7RGD\ ± ²²E µ&RQWUDVWLYH/LQJXLVWLFVDQG7UDQVODWLRQ6WXGLHV7RZDUGD7ULSDUWLWH0RGHO¶LQ:ROIJDQJ.KOZHLQ *LVHOD7KRPHDQG:ROIUDP:LOVVHGV .RQWUDVWLYH/LQJYLVWLNXQGhEHUVHW]XQJVZLVVHQVFKDIW$NWHQGHV ,QWHUQDWLRQDOHQ.ROORTYLXPV7ULHU6DDUEUFNHQ0XQLFK:LOKHOP)LQN± ²² µ7UDQVODWLRQ/LWHUDU\7UDQVODWLRQDQG3VHXGRWUDQVODWLRQ¶&RPSDUDWLYH&ULWLFLVP$ +LVWRU\RI/DZ@$WKHQV.RPRWLQL6DNNRXODV 7URVW.ODXV µ8QWHUVXFKXQJHQIUhEHUHNRQ\VWKHRULHXQG3UD[LVGHVVSlWHUHQNLUFKHQVODYLVFKHQ¶)RUXP 6ODYLFXP 7XUN+RUVW µ3UREOHPHGHUhEHUVHW]XQJVDQDO\VHXQGGHUhEHUVHW]XQJVWKHRULH¶-DKUEXFKIU,QWHUQDWLRQDOH *HUPDQLVWLN ± ²² µ7KH4XHVWLRQRI7UDQVODWLELOLW\%HQMDPLQ4XLQH'HUULGD¶LQ.LWWHODQG)UDQNHGV ± ²² µhEHUVHW]XQJRKQH.RPPHQWDU.XOWXUHOOH6FKOVVHOEHJULIIHXQGNRQWURYHUVHU.XOWXUEHJULIIDP%HLVSLHO YRQ*R\WLVRORV³5HLYLQGLFDFLyQGHO&RQGHGRQ-XOLiQ´¶LQ)UHG/|QNHUHG 'LHOLWHUDULVFKHhEHUVHW]XQJDOV 0HGLXPGHU)UHPGHUIDKUXQJ*|WWLQJHU%HLWUlJH]XU,QWHUQDWLRQDOHQhEHUVHW]XQJVIRUVFKXQJ %HUOLQ(ULFK 6FKPLGW± ²² µ2SHUDWLYH6HPDQWLNHQ=XP3UREOHP.XOWXUHOOHU,GHQWLWlWLP$QVFKOXȕDQ(UQVW&DVVLUHU¶,QWHUQDWLRQDOH =HLWVFKULIWIU3KLORVRSKLH± 7XUYLOOH3HWUH 2ULJLQVRI,FHODQGLF/LWHUDWXUH2[IRUG&ODUHQGRQ3UHVV 7XZLP- µ7UDGXWWRUH²WUDGLWRUH¶LQ3HJD] F]\OLSDQRSWLFXPSRHW\FNLH>7KH3HJDVXV5HDULQJRUD 3RHWLFDO3DQRSWLFXP@:DUVDZ&]\WHOQLN 7ZLQH1 /DQJXDJHDQGWKH0RGHUQ6WDWH7KH5HIRUPRI:ULWWHQ-DSDQHVH/RQGRQ5RXWOHGJH 7\DJLVDQDQGD6ZDPL 6YHWDVYDWDURSDQLVDG0DGUDV6UL5DPDNULVKQD0DWK 7\QGDOH:LOOLDP>@ $Q$QVZHUWR6L7KRPDV0RUH¶V'LDORJXHIDFVLPLOHHGQ1HZ $UFKDLVWVDQG,QQRYDWRUV@0RVFRZ$NDGHPLDUHSULQWHG 0XQLFK:LOKHOP)LQN ²² µ2Q/LWHUDU\(YROXWLRQ¶WUDQV&$/XSORZLQ/DGLVODY0DWHMNDDQG.U\VW\QD3RPRUVNDHGV 5HDGLQJV LQ5XVVLDQ3RHWLFV)RUPDOLVWDQG6WUXFWXUDOLVW9LHZV&DPEULGJH0$0,73UHVV 7\WOHU$OH[DQGHU)UDVHU/RUG:RRGKRXVHOHH>@ (VVD\RQWKH3ULQFLSOHVRI7UDQVODWLRQUGHGQ (GLQEXUJK$UFKLEDOG&RQVWDEOHDQG&RPSDQ\/RQGRQ-0'HQWDQG6RQV1HZ


3DJH LQWURGXFWLRQE\-HIIUH\+XQWVPDQ$PVWHUGDP-RKQ%HQMDPLQVDOVRLQ/HIHYHUHHGDQGWUDQV E 81(6&2&RXULHU YROµ7KH,QGLDQ/DQJXDJHVRI/DWLQ$PHULFD¶± 8QJHU7KRUVWHQ%ULJLWWH6FKXOW]HDQG+RUVW7XUNHGV 'LIIHUHQWH/DFKNXOWXUHQ")UHPGH.RPLNXQGLKUH hEHUVHW]XQJ)RUXP0RGHUQHV7KHDWHU 7ELQJHQ*XQWHU1DUU 9DLOODQW$ µ/DSUHIDFHGHO¶pYDQJpOLDLUHYLHX[VODYH¶5HYXHGHVpWXGHVVODYHV± YDQGHQ%URHFN5D\PRQG± µ9HUVFKXLYLQJHQLQGHVWLOLVWLHNYDQYHUWDDOGHOLWHUDLUHWHNVWHQHHQVHPLRWLVFKH EHQDGHULQJ¶>6KLIWVLQWKH6W\OLVWLFVRI7UDQVODWHG/LWHUDU\7H[WV$6HPLRWLF$SSURDFK@/LQJXLVWLFD$QWYHUSLHQVLD± ± ²² µ6HFRQG7KRXJKWVRQ7UDQVODWLRQ&ULWLFLVP$0RGHORI$QDO\WLF)XQFWLRQ¶LQ+HUPDQVHG D ²²D µ*HQHULF6KLIWVLQ7UDQVODWHG7H[WV¶1HZ&RPSDULVRQ± ²²E µ2SYDWWLQJHQRYHUKHWYHUWDOHQLQ1HGHUODQGYDQWRW¶>2SLQLRQVDERXW7UDQVODWLRQLQ+ROODQG IURPWR@'H*LGV ± ²²D µ7UDQVODWLQJIRUWKH7KHDWUH¶LQ-7 /LWHUDWXUHIURP(OVHZKHUH$ERXWWKH7UDQVODWLRQDQGWKH6WXG\RI7UDQVODWHG/LWHUDWXUHLQ'XWFK@/HXYHQDQG $PHUVIRRUW$FFR ²²DQG$QGUp/HIHYHUH 8LWQRGLJLQJWRWGHYHUWDDOZHWHQVFKDS>$Q,QYLWDWLRQWR7UDQVODWLRQ6WXGLHV@ 0XLGHUEHUJ&RXWLQKR YDQ*RUS+ µ/D7UDGXFWLRQOLWWpUDLUHSDUPLOHVDXWUHVPpWDWH[WHV¶LQ+ROPHV/DPEHUWDQGYDQGHQ%URHFN HGV ± YDQ+RRI+HQUL 7KpRULHHWSUDWLTXHGHO¶LQWHUSUpWDWLRQ0XQLFK0D[+XHEHU9HUODJ ²² +LVWRLUHGHODWUDGXFWLRQHQRFFLGHQW)UDQFH*UDQGH%UHWDJQH$OOHPDJQH5XVVLH3D\V%DV3DULVDQG /RXYDLQOD1HXYH'XFXORW YDQ.HVWHUHQ$OR\VLXV µ(TXLYDOHQFH5HODWLRQVKLSVEHWZHHQ6RXUFH7H[WDQG7DUJHW7H[W7RZDUGVD 7\SRORJ\RQWKH%DVLVRI6HPLRWLFV¶LQ+ROPHV/DPEHUWDQGYDQGHQ%URHFNHGV YDQ/HXYHQ=ZDUW.LWW\0 9HUWDOLQJHQRULJLQHHO(HQYHUJHOLMNHQGHEHVFKULMYLQJVPHWKRGHYRRULQWHJUDOH YHUWDOLQJHQRQWZLNNHOGDDQGHKDQGYDQ1HGHUODQGVHYHUWDOLQJHQYDQ6SDDQVHQDUUDWLHYHWHNVWHQ>7UDQVODWLRQDQG 2ULJLQDO$&RPSDUDWLYH'HVFULSWLYH0RGHOIRU,QWHJUDO7UDQVODWLRQV'HYHORSHGRQWKH%DVLVRI'XWFK7UDQVODWLRQV RI6SDQLVK1DUUDWLYH7H[WV@'RUGUHFKW)RULV3XEOLFDWLRQV ²² µ7UDQVODWLRQDQG2ULJLQDO6LPLODULWLHVDQG'LVVLPLODULWLHV,¶7DUJHW ± ²²D µ7UDQVODWLRQDQG2ULJLQDO6LPLODULWLHVDQG'LVVLPLODULWLHV,,¶7DUJHW ± ²²E µ6KLIWVRI0HDQLQJLQ7UDQVODWLRQ'R¶VRU'RQ¶WV"¶LQ7KHOHQDQG/HZDQGRZVND7RPDV]\NHGV ± ²² µ7UDQVODWLRQDQG7UDQVODWLRQ6WXGLHV'LVFRUGRU8QLW\"¶LQ7LUNNRQHQ&RQGLWHG ²²DQG7RQ1DDLMNHQVHGV 7UDQVODWLRQ6WXGLHV7KH6WDWHRIWKH$UW3URFHHGLQJVIURPWKH)LUVW-DPHV6 +ROPHV6\PSRVLXPRQ7UDQVODWLRQ6WXGLHV$PVWHUGDPDQG$WODQWD*$5RGRSL YDQ5RRWHQ/XLVG¶$QWLQ 0RWVG¶+HXUHV*RXVVHV5DPHV/RQGRQDQG6\GQH\$QJXVDQG5REHUWVRQ YDQ6O\SH* µ6\VWUDQ²(YDOXDWLRQRIWKH9HUVLRQRIWKH6\VWUDQ(QJOLVK)UHQFK$XWRPDWLF6\VWHPRI WKH&RPPLVVLRQRIWKH(XURSHDQ&RPPXQLWLHV¶7KH,QFRUSRUDWHG/LQJXLVW± 9DQGHUDXZHUD5LD 'XWFK1RYHOV7UDQVODWHGLQWR(QJOLVK7KH7UDQVIRUPDWLRQRIDµ0LQRULW\¶/LWHUDWXUH $PVWHUGDP5RGRSL 9DQVLQD- 2UDO7UDGLWLRQDV+LVWRU\0DGLVRQ8QLYHUVLW\RI:LVFRQVLQ3UHVV 9DVFRQFHOORV0HG 7HFKQRORJ\DV7UDQVODWLRQ6WUDWHJ\$PHULFDQ7UDQVODWRUV$VVRFLDWLRQ6FKRODUO\ 0RQRJUDSK6HULHVYRO,, %LQJKDPWRQ1<6WDWH8QLYHUVLW\RI1HZ < 9DVHYD, 7HRUL\DLSUDNWLNDSHUHYRGD>7KH7KHRU\DQG3UDFWLFHRI7UDQVODWLRQ@6RILD1DXNDLLVVNXVWYR 9DXTXRLV%HUQDUG>@ µ$6XUYH\RI)RUPDO*UDPPDUVDQG$OJRULWKPVIRU5HFRJQLWLRQDQG 7UDQVIRUPDWLRQLQ0DFKLQH7UDQVODWLRQ¶,),3&RQJUHVV(GLQEXUJK UHSULQWHGLQ%HUQDUG9DXTXRLVHWOD7$2 YLQJWFLQTDQVGHWUDGXFWLRQDXWRPDWLTXH²DQDOHFWHV%HUQDUG9DXTXRLVDQG077ZHQW\ILYH 3RHWU\DQG7UDQVODWLRQ@$WKHQV6WLJPL 9HJD0$HG 7H[WRVFOiVLFRVGHWHRUtDGHODWUDGXFFLyQ0DGULG&iWHGUD 9HKPDV/HKWR, 4XDVLFRUUHFWQHVV$&ULWLFDO6WXG\RI)LQQLVK7UDQVODWLRQVRI5XVVLDQ-RXUQDOLVWLF7H[WV +HOVLQNL1HXYRVWROLLWWRLQVWLWXXWWL 9HQQHEHUJ8 µ3UREOHPVLQ7UDQVODWLQJ6HDQ2¶&DVH\¶V'UDPD-XQRDQGWKH3D\FRFN¶LQ=XEHUHG 9HQXWL/DZUHQFH µ7KH7UDQVODWRU¶V,QYLVLELOLW\¶&ULWLFLVP ± ²² µ*HQHDORJLHVRI7UDQVODWLRQ7KHRU\6FKOHLHUPDFKHU¶7757UDGXFWLRQ7HUPLQRORJLH5HGDFWLRQ ± ²²HG 5HWKLQNLQJ7UDQVODWLRQ'LVFRXUVH6XEMHFWLYLW\,GHRORJ\/RQGRQDQG1HZ



3DJH ²²D µ7KH'HVWUXFWLRQRI7UR\7UDQVODWLRQDQG5R\DOLVW&XOWXUDO3ROLWLFVGXULQJWKH,QWHUUHJQXP¶-RXUQDORI 0HGLHYDODQG5HQDLVVDQFH6WXGLHV ± ²²E µ7UDQVODWLRQDV&XOWXUDO3ROLWLFV5HJLPHVRI'RPHVWLFDWLRQLQ(QJOLVK¶7H[WXDO3UDFWLFH ± ²²D 7KH7UDQVODWRU¶V,QYLVLELOLW\/RQGRQDQG1HZ 6RPHWKLQJDERXWWKH$UWRI7UDQVODWLRQ@LQ9LDQXHG 6WXGLLGH OLWHUDWXUăXQLYHUVDOăúLFRPSDUDWă%XFKDUHVW3XEOLVKLQJ+RXVHRIWKH5RPDQLDQ$FDGHP\± 9LHQQH-HDQ µ7UDGXFWLRQGDQVOHYLGHRXWUDGXFWLRQHQVLWXDWLRQ"¶7(;7FRQ7(;7± ²² µ7RZDUGVD3HGDJRJ\RI³7UDQVODWLRQLQ6LWXDWLRQ´¶3HUVSHFWLYHV± 9LOLNRYVNê-iQ 3UHNODGDNRWYRUED%UDWLVODYD6ORYHQVNêVSLVRYDWHĎ ²² µ7UDQVODWLRQDQG7UDQVODWLRQ&ULWLFLVP²WKH(OXVLYH&ULWHULD¶LQ1HNHPDQHG 9LQD\-3 µ3HXWRQHQVHLJQHUODWUDGXFWLRQ"¶7UDQVODWRUV¶-RXUQDO ± ²² µ5HJDUGVVXUO¶pYROXWLRQGHVWKpRULHVGHODWUDGXFWLRQGHSXLVYLQJWDQV¶0HWD ± ²²DQG-'DUEHOQHW>@ 6W\OLVWLTXHFRPSDUpHGXIUDQoDLVHWGHO¶DQJODLV0pWKRGHGHWUDGXFWLRQ3DULV 'LGLHUWUDQVO-XDQ6DJHUDQG0-+DPHODV&RPSDUDWLYH6W\OLVWLFVRI)UHQFKDQG(QJOLVK$0HWKRGRORJ\IRU 7UDQVODWLRQ$PVWHUGDPDQG3KLODGHOSKLD-RKQ%HQMDPLQV 9LVVDF-$>@ 'HODSRpVLHODWLQHHQ)UDQFH*HQHYD6ODWNLQH 9RLJWV/( µ6FLHQWLILFDQG0HGLFDO%RRNV¶LQ*ULIILWKVDQG3HDUVDOOHGV ± 9ROGHQJ(YHO\QH µ7UDQV/DWD/DWXV¶WUDQV)UDQFHV0RUJDQ7HVVHUD ± 9ROWDLUH>@ /HWWUHVSKLORVRSKLTXHVLQ$)7D\ORUHG 2[IRUG%DVLO%ODFNZHOO :DDUG-DQGHDQG(XJHQH$1LGD )URP2QH/DQJXDJHWR$QRWKHU)XQFWLRQDO(TXLYDOHQFHLQ%LEOH 7UDQVODWLQJ1DVKYLOOH&DPGHQDQG1HZ 6RPH3UDFWLFDO$VSHFWVRI/LWHUDU\7UDQVODWLRQ²WKH&DVHRI*HUPDQDQG(QJOLVK@:DUVDZ3DĔVWZRZH :\GDZQLFWZR1DXNRZH :HDYHU:LOOLDP µ7UDQVODWLRQ¶UHSULQ:1/RFNHDQG$'%RRWKHGV 0DFKLQH7UDQVODWLRQRI /DQJXDJHV&DPEULGJH0$0,73UHVV ²² µ7KH3URFHVVRI7UDQVODWLRQ¶LQ-%LJXHQHWDQG56FKXOWHHGV 7KH&UDIWRI7UDQVODWLRQ&KLFDJRDQG /RQGRQ7KH8QLYHUVLW\RI&KLFDJR3UHVV



3DJH :HEE7 7KH9LROHWLQWKH&UXFLEOH6KHOOH\DQG7UDQVODWLRQ2[IRUG&ODUHQGRQ3UHVV :HLQEHUJ% µ7UDQVODWLRQVDQG&RPPHQWDULHVRI/RQJLQXV¶2QWKH6XEOLPHWR$%LEOLRJUDSK\¶0RGHUQ 3KLORORJ\± :HLQUHLFK0 /DQJXDJHVLQ&RQWDFW1HZ @ µ:DVLVWhEHUVHW]HQ"¶LQ:LODPRZLW]0|OOHQGRUII5HGHQXQG 9RUWUlJHYRO%HUOLQQRSXEOLVKHU± :LONLQVRQ( -DSDQYHUVXVWKH:HVW,PDJHDQG5HDOLW\+DUPRQGVZRUWK3HQJXLQ%RRNV :LOOLDP6 6KDNHVSHDUHRQWKH*HUPDQ6WDJHYRO&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV :LOOLDPV&DURO\Q' 3RSH+RPHUDQG0DQOLQHVV6RPH$VSHFWVRI(LJKWHHQWK&HQWXU\&ODVVLFDO/HDUQLQJ 1HZ 7KH$HVWKHWLFVDQG3RHWLFVRIWKH3UDJXH /LQJXLVWLF&LUFOH@8PMHWQRVWULMHþL ± ²² µ7KH$HVWKHWLFVDQG3RHWLFVRIWKH3UDJXH/LQJXLVWLF&LUFOH¶3RHWLFV± ²² 3RHWLNDSUDãNRMãNRO\LVXYUHPHQDVHPLRWLND>7KH3RHWLFVRIWKH3UDJXH6FKRRODQG&RQWHPSRUDU\ 6HPLRWLFV@1RYL6DG0DWLFDVUSVND ²² µ7KH3UDJPDWLFVRI/LWHUDU\7H[WVDQGWKH3UDJXH/LQJXLVWLF&LUFOH¶6HPLRVLVVSHFLDOLVVXH0D[ %HQVH]XP*HEXUWVWDJHG(OL]DEHWK:DOWKHU DQG :LQQLFRWW' 3OD\LQJDQG5HDOLW\+DUPRQGVZRUWK3HQJXLQ :LWWH+HLGUXQD µ'LH.XOWXUNRPSHWHQ]GHV7UDQVODWRUV²7KHRUHWLVFKDEVWUDNWHU%HJULIIRGHUUHDOLVLHUEDUHV .RQ]HSW"¶7(;7FRQ7(;7± ²²E µ7UDQVODWRUDXVELOGXQJ7H[WDQDO\VHXQG7H[WSURGXNWLRQ²hEXQJHQ]XPWUDQVODWLRQVEH]RJHQHQ8PJDQJ PLW7H[WHQDP%HLVSLHOGHU*UXQGVSUDFKHKLHU'HXWVFK ¶7(;7FRQ7(;7± ²² µ=XUGLGDNWLVFKHQ9HUPLWWOXQJWUDQVODWRULVFKHU.XOWXU²XQG6SUDFKNRPSHWHQ]²(LQNRQWUDVWLYHV 0RGHOO¶7(;7FRQ7(;7± :LWWJHQVWHLQ/XGZLJ 7KH%OXHDQG%URZQ%RRNV/RQGRQ%DVLO%ODFNZHOO :RGDN5 µ7KH,QWHUDFWLRQEHWZHHQ-XGJHDQG'HIHQGDQW¶LQ7YDQ'LMNHG +DQGERRNRI'LVFRXUVH $QDO\VLVYRO/RQGRQ$FDGHPLF3UHVV :RMWDVLHZLF]2$ GRWHRULLWáXPDF]HQLD>$Q,QWURGXFWLRQWRWKH7KHRU\RI7UDQVODWLRQ@:URFáDZ 2VVROLQHXP :ROOLQ/DUVD µ7YnVSUnNRFKIOHUDVNLNWXSSHQEDUHOVHUQDVWH[WWUDGLWLRQ¶>7ZR/DQJXDJHVDQG6HYHUDO/D\HUV 7KH7H[W7UDGLWLRQRIWKH5HYHODWLRQV@LQ71\EHUJHG %LUJLWWDKHQGHVY UNRJKHQGHVNORVWUHL1RUGHQ>%LUJLWWD +HU:RUNDQG&RQYHQWVLQ6FDQGLQDYLD@2GHQVH2GHQVH8QLYHUVLWHWVIRUODJ± ²²E µ.ULQJGHWVYHQVNDELEHOVSUnNHWVKLVWRULD¶>2QWKH+LVWRU\RI%LEOLFDO6ZHGLVK@LQ6YHQVND ELEHOVlOOVNDSHWHG 'HQVYHQVND



3DJH ELEHOQ(WWnUVMXELOHXP>7KH6ZHGLVK%LEOH$WK$QQLYHUVDU\@6WRFNKROP3URSULXV± ²²F µ7KH0RQDVWHU\RI9DGVWHQD,QYHVWLJDWLQJWKH*UHDW7UDQVODWLRQ:RUNVKRSLQ0HGLHYDO6FDQGLQDYLD¶ LQ5(OOLVHG D± ²²IRUWKFRPLQJ )|UIDWWDUQD|YHUVlWWDUQDRFKVSUnNHW7H[WW\SHURFKVUnNVWUXNWXULQXVYHQVNILNWLRQVSURVD>7KH $XWKRUVWKH7UDQVODWRUVDQGWKH/DQJXDJH7\SHVRI7H[WDQG6WUXFWXUHRI/DQJXDJHLQ0RGHUQ6ZHGLVK3URVH )LFWLRQ@ :RQGHUOH\:LOOLDP/ %LEOH7UDQVODWLRQIRU3RSXODU8VH/RQGRQ8QLWHG%LEOH6RFLHWLHV :RRGVZRUWK-XGLWK µ7HDFKLQJWKH+LVWRU\RI7UDQVODWLRQ¶LQ'ROOHUXSDQG$SSHOHGV :RROI/HRQDUG µ1RWH¶LQ9:RROI :RROI9LUJLQLD 5HYLHZLQJ/RQGRQ7KH+RJDUWK3UHVV :RROQHU$OIUHG& ,QWURGXFWLRQWR3UDNULW'HOKL0RWLODO%DQDUVLGDVV :UD[DOO/WUDQV 9LFWRU+XJR¶V/HV0LVpUDEOHV/RQGRQ+XUVWDQG%ODFNHWW :UHQQ&/ 7KH,GHDRI&RPSDUDWLYH/LWHUDWXUH&KLFDJRDQG/RQGRQ0RGHUQ+XPDQLWLHV5HVHDUFK $VVRFLDWLRQ :ULJKW% µ$QJOR$PHULFDQ$WWLWXGHV¶,Q2WKHU:RUGV± :VWHU( ,QWHUQDWLRQDOH6SUDFKQRUPXQJLQGHU7HFKQLN%RQQ%RXYLHU :XWHQRZ5 'DVIUHPGH.XQVWZHUN$VSHNWHGHUOLWHUDULVFKHQhEHUVHW]XQJ*|WWLQJHQ9DQGHQKRHFNDQG 5XSUHFKW :\OH1YRQLQ$YRQ.HOOHUHG 7UDQVODWLRQHQYRQ1LFODVYRQ:\OH6WXWWJDUW9HUHLQQR :\OHU/ µ3XEOLF3HUFHSWLRQRI7UDQVODWLRQLQ%UD]LO¶LQ&DWULRQD3LFNHQHG 7UDQVODWLRQ7KH9LWDO/LQN 3URFHHGLQJVRIWKHWK),7:RUOG&RQJUHVV/RQGRQ,QVWLWXWHRI7UDQVODWLRQDQG,QWHUSUHWLQJ± ;LRQJ<XH]KL ;L[XHGRQJLMDQ\XZDQ4LQJVKHKXL>7KH,QWURGXFWLRQRI:HVWHUQ/HDUQLQJDQG/DWH4LQJ 6RFLHW\@6KDQJKDL5HQPLQ3XEOLVKLQJ&R $&ULWLTXHRI7UDQVODWLRQ6WXGLHV@7RN\R1LKRQ+RQ\DNXND<ǀVHL &HQWUH ²² *RGGRWR-ǀWHL²5HNLVKLQR1DNDQR+RQ\DNXVKD>*RGDQGWKH6XSUHPH%HLQJ²7KH7UDQVODWRULQ +LVWRU\@7RN\R&KLNXPD6KREǀ ²² +RQ\DNXJRVHLULWVXMLMǀ>7KH(PHUJHQFHRID/DQJXDJHRI7UDQVODWLRQ@7RN\R,ZDQDPL6KLQVKR $+LVWRU\RI7UDQVODWLRQLQWKH0HLMLDQG7DLVKǀ3HULRGV@ 7RN\R.HQN\ǌVKD <XVXI$OL$EGXOODK 7KH0HDQLQJRIWKH*ORULRXV4XU¶ƗQ7H[W7UDQVODWLRQDQG&RPPHQWDU\&DLUR'DUDO .LWDEDO0LVU\%HLUXW'DUDO.LWDEDO/XEQDDQ\ <XWDQJ/LQ 7KH:LVGRPRI,QGLD%RPED\-DLFR3XEOLVKLQJ+RXVH ,QWURGXFLQJWKH4XU¶ƗQDQG @.XZDLW 0DNWDEDW =DPERQ05RVD %LEOLRJUDSKLHGXURPDQIUDQoDLVHQ,WDOLH)ORUHQFH(GL]LRQL6DQVRQL$QWLTXDULDWR3DULV /LEUDLULH0DUFHO'LGLHU =DYLUDV* 1HD(OODVRU+HOOLQLNRQ7KHDWURQ$WKHQV0DFHGRQLDQ6WXGLHV$VVRFLDWLRQ =LĊWDUVND- 6]WXNDSU]HNáDGXZSRJODGDFKOLWHUDFNLFKSROVNLHJR2ĞZLHFHQLD>7KH$UWRI7UDQVODWLRQLQWKH /LWHUDU\7KHRU\RIWKH3ROLVK(QOLJKWHQPHQW@:URFáDZ2VVROLQHXP =KDQJ+RQJ =KRQJJXRZHQ[XH]DL &KLQHVH/LWHUDWXUHLQ(QJODQG@&KLQHVH/LWHUDWXUH$EURDG 6HULHV %HLMLQJ+XDFKHQJ3XEOLVKLQJ&R =LGDQ$KPDGDQG'LQD=LGDQ 7UDQVODWLRQRI7KH*ORULRXV4XU¶DQ*XLOGIRUGDQG.LQJ¶V/\QQ =LRPHN- 5HQHVDQV>5HQDLVVDQFH@:DUVDZ3DĔVWZRZH:\GDZQLFWZR1DXNRZH =XEHU2HG 7KH/DQJXDJHVRI7KHDWUH3UREOHPVLQWKH7UDQVODWLRQDQG7UDQVSRVLWLRQRI'UDPD2[IRUG 3HUJDPRQ3UHVV =XEHU5 /HVµ%HOOHVLQILGqOHV¶HWODIRUPDWLRQGXJR€WFODVVLTXH3HUURWG¶$EODQFRXUWHW*XH]GH%DO]DF 3DULV&ROLQ



3DJH =XFN9HG $'LFWLRQDU\RI6FDQGLQDYLDQ/LWHUDWXUH1HZ


3DJH

,QGH[ $DVHQ,YDU $EGRO$]L]1XUL'HKODYL $EGRO4ƗGHU%DGƗFXQL $EUR6DKDN(IHQGL $EX+DQƯID $FRVWD*RQ]DORGH DFWLRQWKHRU\ VNRSRVWKHRU\ WUDQVODWRULDO± DGDSWDWLRQ± )UHQFK/HV%HOOHV,QILGqOHV± OLWHUDU\WUDQVODWLRQ ORFDOYHUVXVJOREDO PRGHVFRQGLWLRQVDQGUHVWULFWLRQV± SRHWU\ 6KDNHVSHDUH± VNRSRVWKHRU\ 7HUHQFH¶VIUHHERUURZLQJV WUDGDSWDWLRQ DGHTXDF\ $GHTXDWH7UDQVODWLRQ$7 OIULF $IULFDQWUDGLWLRQ FRORQLDOHUD± GUXPODQJXDJH SRHWLFV SRVWFRORQLDO± SUHFRORQLDO± UROHRIWUDQVODWRUV[Y WUDQVODWRUWUDLQLQJDQGLQVWLWXWLRQV± W\SHVRIWUDQVODWLRQ[YLL $÷ULER]L$KPHG $JULFROD0LNDHO $JULFROD0LNDHO 3UL]H $JXLODU-HUyQLPRGH $,,&VHH$VVRFLDWLRQLQWHUQDWLRQDOHGHVLQWHUSUqWHVGHFRQIqUHQFH $OEUHFKW-|UQ $OEUHFKWYRQ(\E $OFDOiGH+HQDUHV $OH[DQGHU0LFKDHO $OIRQVR;RI&DVWLOH $OL<XVXI $OL$]L](IHQGL $OL)RUXTL0RKDPPDG $OYDUHV'LRJR $PDGRX$QQD/LVD± $PHULFDQ/LWHUDU\7UDQVODWRUV$VVRFLDWLRQ $PHULFDQ6LJQ/DQJXDJH± $PHULFDQWUDGLWLRQ EXLOGLQJDQDWLRQDOFXOWXUH± FRORQL]DWLRQDQGLPPLJUDWLRQ± FXOWXUDODQGOLQJXLVWLFGLYHUVLW\± (QJOLVK2QO\PRYHPHQW KHJHPRQ\VLQFH::,,± LQWHUSUHWHUWUDLQLQJ 1DWLYH$PHULFDQLQWHUSUHWHUV± SVHXGRWUDQVODWLRQDQG+LDZDWKD SXEOLVKLQJ±±± WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ± $PHULFDQ7UDQVODWRUV$VVRFLDWLRQ $PLUXNLV*HRUJLRV $PRRI*KDQD $PRV) $P\RW-DFTXHV DQDORJXHVWUDWHJLHV PRGHOV± SRHWU\WUDQVODWLRQ DQDORJ\ DQDO\VLV FRQWUDVWLYH± SV\FKROLQJXLVWLFDSSURDFKHV UHJLVWHU± DQDO\WLFDOSKLORVRSK\ $QDVWDVLXV%LEOLRWKHFDULXV $QFKLHWD)DWKHU-RVpGH $QGUDGH2VZDOGGH µ&DQQDEDOLVW0DQLIHVWR¶ $QGURQLFXV/LYLXV $QJHOO2ODY $QJROD $QRXLOK-HDQ± DQWKRORJLHV± $SROOLQDLUH*XLOODXPH± $TXLOD $UDELFWUDGLWLRQ± LQIOXHQFHRIRWKHUODQJXDJHV± LQIOXHQFHRQ$IULFD ,VODPLF(PSLUH± DQG/DWLQ± 2WWRPDQ(PSLUH± DQG3HUVLDQ 6DDGLD¶VWUDQVODWLRQRIWKH7RUDK 6SDLQ± 7KRXVDQGDQG2QH1LJKWV WUDLQLQJ WZHQWLHWKFHQWXU\ VHHDOVR4XU¶ƗQ $UDPDLF 7RUDK $UD~MR$QW{QLRGH

file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_639.html (1 z 2)11/3/2007 10:32:14 PM


$UEHUU\$UWKXU- DUFKLWUDQVHPHV$75 ± $UJHQWLQD± DUJXPHQWDWLRQ $ULVWRWOH ,VODPLF6SDLQ RQPHWDSKRU SRHWLFV $UQROG0DWWKHZ SRHWLFVRIWUDQVODWLRQ 2Q7UDQVODWLQJ+RPHU $UUDJHO5DEEL0RVHV $UWVURXQL*HRUJHV $VDFKL*KHRUJKH $VFKDP5RJHU ÈVJHLUVVRQ0DJQXV $VPL(IHQGL $VVRFLDWLRQLQWHUQDWLRQDOHGHVLQWHUSUqWHVGHFRQIqUHQFH$,,& ± $VWUDQD0DUtQ/XLV $VZDGDO'XDO\ $WDo1XUXOODK DXGLRYLVXDOWUDQVODWLRQVHHGXEELQJ VXEWLWOLQJ



3DJH $XJXVWLQHRI+LSSR6DLQW $XVWLQ-RKQ $XVWUDOLD WUDLQLQJ DXWKRUV DXWRWUDQVODWLRQ± FROODERUDWLRQRQOLWHUDU\ZRUNV DXWRWUDQVODWLRQ± VLPXOWDQHRXVDQGGHOD\HG $XWRPDWLF/DQJXDJH3URFHVVLQJ$GYLVRU\&RPPLWWHH$/3$& ± $YLFHQQD %DDULQJ, %DED6DMǌUǀ±± %DEHO7RZHURI %HQMDPLQ¶VSXUHODQJXDJH %DEHOMRXUQDO %DELWV0LKiO\ %DFFL$QWRQLR %DGLDQR-XDQ %DNHU0RQD FRPSHQVDWLRQ FRUSRUD± HTXLYDOHQFH XQLYHUVDOV %DODEDQRY$OH[DQGHU %DOFHU]DQ(GZDUG %DOODUG0LFKHO %DQGLD3DXO) %DU+LOOHO

LVVXHVLQWUDQVODWLRQ± OLWHUDOYHUVXVLQVSLUHGWUDQVODWLRQV± 2UWKRGR[6ODYRQLF± SDUDSKUDVHLQ7KH/LYLQJ%LEOH SULQFLSOHVDQGSURFHGXUHVRIWUDQVODWLRQ± VWRU\RIWKHWRZHURI%DEHO± 7RUDK± :\FOLIIH¶V± %LHKO&KDUORWWD'RURWKHD %LHOVNL0DUFLQ %LHUQDWRI/XEOLQ ELOLQJXDOLVP LQFHQWLYHIRUWUDQVODWLRQ[YL[YLL VHOIWUDQVODWLRQ± %LRS%LUDJR %LUNRZVNL6]\PRQ %ODFNEXUQ3DXO± %ODWW$ %ORRP$ %OXP.XOND6KRVKDQD± %RGPHU-RKDQQ-DNRE %RHWKLXV$QLFLXV0DQOLXV6HYHULQXV± OLWHUDOWUDQVODWLRQ %RLVHQ0RJHQV %RQFKHY1HVKR %RUFKDUGW5XGROI %RUJHV-RUJH/XLV %RURZ\:DFáDZ± %RVFiQ-XDQ %R\HU$EHO %UDGIRUG:LOOLDP %UD]LOLDQWUDGLWLRQ HDUO\KLVWRU\DQGILUVWWUDQVODWRUV± QDWLYH,QGLDQODQJXDJHV± UHFHQWKLVWRU\DQGOLWHUDWXUH± WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± %UHLWLQJHU-RKDQQ-DNRE %ULVVHW$QQLH %ULWLVK1DWLRQDO&RUSXV %ULWLVK6LJQ/DQJXDJH %ULWLVKWUDGLWLRQ± $IULFDQFRORQL]DWLRQ $QJOR6D[RQUXQHV DQWKRORJLHV %LEOHWUDQVODWLRQ± GRPHVWLFDWLRQRI)UHQFK H[SOLFLWDWLRQ LQWHUQDWLRQDOODQJXDJH LQWHUWHPSRUDOWUDQVODWLRQ± 0LGGOH$JHV± PXOWLOLQJXDOLVP± SXEOLVKLQJ±± 5HIRUPDWLRQDQG5HQDLVVDQFH± WKWRWKFHQWXULHV± WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ ZRUOGXVHRI(QJOLVKODQJXDJH±



3DJH %URFN6HEDVWLDQ %URGVN\-RVHSK %URQWs&KDUORWWH %URRNH&KDUORWWH %URZQ5 %URZQLQJ5REHUW %UXQL/HRQDUGR %UXVV(OL]DEHWK %U\DQW:LOOLDP&XOOHQ %XGGH-yQV± %XGGKLVP &KLQHVHWUDQVODWLRQV± PLVVLRQDU\VFKRODUV VSUHDGIURP,QGLD± %KOHU+LOGHJXQG %KOHU.DUO± %XOJDULDQWUDGLWLRQ WKFHQWXU\UHQDLVVDQFHWRPRGHUQ± H[SOLFLWDWLRQ PHGLHYDOSHULRGWRWKFHQWXU\± WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ %XUJH7\OHU %XUJHVV$QWKRQ\ %XUJRV-DYLHUGH %XUJXQGLRRI3LVD %XUQVKDZ6WDQOH\ %XUWRQ6LU5LFKDUG)UDQFLV &DEUHUD,QIDQWH*XLOOHUPR &iFHUHV$ORQVRGH &DLOOp3LHUUH)UDQoRLV± &DLOOp3LHUUH)UDQoRLV 3UL[ &DLOORLV5RJHU &DMDQGHU3DDYR(PLO &DPHURRQ &DPLQKD3HUR9D]GH &DPSRV$XJXVWRDQG+DUROGRGH &DQDGD&RXQFLOSUL]HV &DQDGLDQ$VVRFLDWLRQIRU7UDQVODWLRQ6WXGLHV&$76 &DQDGLDQWUDGLWLRQ[LY XQGHU(QJOLVKUXOH± XQGHU)UHQFKUXOH± OLWHUDU\WUDQVODWLRQ± 1DWLYH$PHULFDQODQJXDJHV±± SXEOLVKLQJ± WUDQVODWRUVLQWKHELOLQJXDOFRQIHGHUDWLRQ± WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ±± &DQDOH0 ýDSHN.DUO &DSULROR(WWRU &DUGHQDO(UQHVWR &DUH\:LOOLDP &DUO\OH7KRPDV &DUR$QQLEDO &DUUROO-% &DUWDJHQD$ORQVRGH± &DUWHU(OL]DEHWK± &DU$GPRQG /DWUDGXFWLRQGDQVOHPRQGHPRGHUQH ZULWWHQYHUVXVRUDO &DU\+HQU$UDQFLV &DVVLRGRUXV± &DWIRUG-& HTXLYDOHQFH OLQJXLVWLFDSSURDFK± $/LQJXLVWLF7KHRU\RI7UDQVODWLRQ OLWHUDOWUDQVODWLRQ UDQNERXQGDQGXQERXQGHGWUDQVODWLRQ UHJLVWHUDQDO\VLV VKLIWV &D[WRQ:LOOLDP dHOHEL.kWLS &HOWLFOLWHUDWXUH &HUYDQWHV6DDYHGUD0LJXHOGH± &HVDURWWL0HOFKLRUUH &HWWL'RPHQLFR &HYGHW$EGXOODK &KDSPDQ*HRUJH &KDUERQQHDX7RXLVVDLQW &KDXFHU*HRIIUH\ &KHVWHUPDQ$QGUHZ QRUPV± VNRSRVWKHRU\ &KH\ILW](ULF &KLODP%DODPERRNV± FKLOGUHQ¶VOLWHUDWXUH &KLOH &KLOHQGDU3DLV\LRI &KLQHVHWUDGLWLRQ %XGGKLVWVFULSWXUHV±± FKDUDFWHUDQGKLVWRU\RIODQJXDJH± &KULVWLDQPLVVLRQDULHV± GLUHFWLRQRIWUDQVODWLRQ LGHRJUDPV ODWHHPSLUH± OLWHUDU\GHYLFHV 0DQGDULQ UROHRIWUDQVODWRUV[Y[YL WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ± WKFHQWXU\± W\SHVRIWUDQVODWLRQ[YLL &KRPVN\1RDP FDXWLRQLQOLQJXLVWLFDSSURDFK FRPPXQLFDWLYHFRPSHWHQFH ODQJXDJHWHDFKLQJ PDFKLQHWUDQVODWLRQ 7UDQVIRUPDWLRQDO*HQHUDWLYH*UDPPDU file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_641.html (1 z 2)11/3/2007 10:32:17 PM


&KRSLQ.DWH &KULVWLDQLW\ $UDELFWUDGLWLRQ± %ULWLVKWUDGLWLRQ FRQFHSWVQHZWR-DSDQHVH GLYHUVLW\LQ5RPDQLD± ,FHODQGLFWUDGLWLRQ± ,VODPLF6SDLQ± /DWLQRIHDUO\&KXUFKDQG0LGGOH$JHV± PLVVLRQDULHVWR&KLQD± 1HZ:RUOGPLVVLRQDULHV 5RPDQ&DWKROLF&KXUFKYLHZV/DWLQDVQRUP± WKFHQWXU\/DWLQ 6ZHGLVKPRQDVWLFSHULRG± VHHDOVR%LEOHWUDQVODWLRQ 2UWKRGR[&KXUFK &KU\VRORUDV0DQXHO FKXFKRWDJHZKLVSHUHGLQWHUSUHWLQJ &LFHUR0DUFXV7XOOLXV± DGDSWDWLRQ ELRJUDSK\ IUHHWUDQVODWLRQ LPLWDWLRQ± LQWR,WDOLDQYHUQDFXODU OLWHUDOWUDQVODWLRQ &ODUNH6DPXHO &ODYLXV&KULVWRSKH &OHUNH%DUWKRORPHZ &O\QH8 &REXLOG%DQNRI(QJOLVK FRGHFUDFNLQJVHHVFULSW FRJQLWLYHFRQWH[W FRKHUHQFHUXOH &ROHULGJH6DPXHO7D\ORU± &ROOLQV'DQLHO &RPPDQGLQR)HGHULFR FRPPXQLFDWLYHIXQFWLRQDOLVWDSSURDFKHV± FRPPXQLFDWLYHHYHQW± ODQJXDJHWH[WDQGWUDQVODWLRQIXQFWLRQ± FRPPXQLW\LQWHUSUHWLQJ GHILQLWLRQDQGUROH± 6RXWK$IULFD 6ZHGHQ



3DJH FRPPXWDWLRQ FRPSHQVDWLRQ± FRPPXQLFDWLYHHYHQW OLQJXLVWLFDSSURDFK SDUDOOHOFRQWLJXRXVRUGLVSODFHG FRPSHWHQFH FRPSXWHUVVHHPDFKLQHWUDQVODWLRQ FRQIHUHQFHDQGVLPXOWDQHRXVLQWHUSUHWLQJ± SURFHVVLQJFDSDFLW\DQGHIIRUWPRGHOV± SV\FKROLQJXLVWLFDQGFRJQLWLYHDSSURDFK 6ZHGHQ WKHRU\ &RQIpUHQFH,QWHUQDWLRQDOHGHV,QVWLWXWV8QLYHUVLWDLUHVGH7UDGXFWHXUVHW,QWHUSUqWHV&,87, FRQILJXUDWHGFRUSRUD FRQILJXUDWLRQVRIDFWLRQV &RQOH\7RP FRQQRWDWLYHPHDQLQJ &RQUDG-RVHSK FRQWHQW IRUPDQGVXEVWDQFH± FRQWUDVWLYHDQDO\VLVDQGWUDQVODWLRQ± FRQYHQWLRQV XQLYHUVDOVRIWUDQVODWLRQ± &RRSHUDWLYH3ULQFLSOH± &RRUQKHUW'LUN9RONHUWV]RRQ &RSHODQG5LWD &RUELQ50 &RUGHLURGD0DWWD-RDTXLP'LDV &RUHVL'HDFRQ &RUQDULXV-RDQQHV-RKDQQ+DJHQEXW FRUSRUDDQGFRUSXVOLQJXLVWLFV± FRPSDUDEOH FRQILJXUDWHG PDFKLQHWUDQVODWLRQ PXOWLOLQJXDO SDUDOOHO &RUSRUDWLRQ3URIHVVLRQQHOOHGHV7UDGXFWHXUVHW,QWHUSUqWHV$JUppVGX4XHEHF&37,$4 FRUUHVSRQGHQFH GHFLVLRQPDNLQJ &RUWi]DU-XOLR &RúEXF*HRUJH± &RVHULX(XJHQLR &RVWLQ1LFRODH &RWWRQ-RKQ FRXUWURRPLQWHUSUHWLQJ± GLVFRXUVHDQDO\VLV± PHFKDQLFV± &RYHUGDOH0LOHV &RZOH\$EUDKDP &RZSHU:LOOLDP FULEWUDQVODWLRQ &ULFN-R\FH FULWLFLVP± &URQLQ0LFKDHO &URZWKHU%LVKRS6DPXHO$MDQML &VXND=ROWiQ &XED &XJQHW)UDQoRLV-RVHSK FXOWXUH FRPSHWHQFH FRQVWUDLQWVRQGXEELQJ IRUHLJQL]LQJ± LGHRORJ\ LQFRPSDWLELOLWLHV OLQJXLVLWLFPRGHOV PHWDSKRURIWUDQVODWLRQ± SRVWFRORQLDOLVP± &\ULO6DLQW±± &]HFKWUDGLWLRQ HDUO\SHULRGWRWKFHQWXU\± LQWHUSUHWHUV 3UDJXH6FKRRODQGWKFHQWXU\± VHHDOVR6ORYDNWUDGLWLRQ '¶$EODQFRXUW1LFRODV3HUURW 'DFLHU$QQH0DULH 'DGLp%HUQDUG 'DJXW0HQDFKHP 'DL$KPHGL '¶$OHPEHUW-HDQOH5RQG± 'DPDVFHQH-RKQ 'DQLVKWUDGLWLRQ± WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ± 'DQNV-+± 'DQTXDK-% 'DQWH$OLJKLHUL± 'DUEHOQHW-HDQ/± OLQJXLVWLFDSSURDFK WUDQVSRVLWLRQDQGPRGXODWLRQ 'DYDQ]DWL%HUQDUGR 'DYLDXOW3LHUUH 'DYLGVRQ'RQDOG± 'D\/HZLV&HFLO SRHWLFVRIWUDQVODWLRQ GH0DQ3DXO± GHFLVLRQPDNLQJ GHFODUDWLYHDQGSURFHGXUDONQRZOHGJH GHFLVLRQPDNLQJ± PRGHOVDQGQRUPV± GHIDPLOLDUL]DWLRQ GHILQLWLRQV± 'HOHDQX,% 'HOLVOH-HDQ 7UDQVODWRUV7KURXJK+LVWRU\ 'HOOLOH-DFTXHV 'HQKDP6LU-RKQ 'HUULGD-DFTXHV



JHQGHUPHWDSKRULFV SUHMXGLFHDJDLQVWQRQSKRQHWLFVFULSW GHVFULSWLYHWUDQVODWLRQVWXGLHVVHHOLWHUDU\WUDQVODWLRQ QRUPV SRHWLFV SRO\V\VWHPWKHRU\ VKLIWV 'HYHFVHUL*iERU 'H\HV$) '¶KXOVW/LHYHQ GL3LHWUR5- GLDOHFWV GUDPDWUDQVODWLRQ OLQJXLVWLFV± W\SHVRIGLIIHUHQFH± GLDORJXHLQWHUSUHWLQJVHHFRPPXQLW\LQWHUSUHWLQJ GLGDFWLFVRIWUDQVODWLRQ± 'LGHURW'HQLV 'LOOLQJHU0LNH 'LOWKH\:LOKHOP GLPHQVLRQDODQGQRQGLPHQVLRQDOPLVPDWFKHV DO'ƯQ.DNXUDYL1DMP 'LRQ\VLXV([LJXXV 'LRS&KHLNK$QWD GLSORPDF\[Y GLUHFWRULQYHUVHWUDQVODWLRQ GLUHFWLRQRIWUDQVODWLRQ± SDUDOOHOFRUSXV SURFHVVLQJFDSDFLW\ VHOIWUDQVODWLRQ GLVFRXUVH GLVFRXUVHDQDO\VLV± JHQUHDQGWH[W± 'PRFKRZVNL)UDQFLV]HN.VDZHU\ 'REURYNVê-RVHI 'RGGV-RKQ0 'RLQDúùW$XJ 'ROFH/RGRYLFR 'ROHW(WLHQQH 'RPHQLFR&DYDOFD)UD



3DJH 'RULRQ(XJqQH3KLOLSSH 'RVRIWHL0HWURSROLWDQRI0ROGDYLD GUDPDWUDQVODWLRQ± DGDSWDWLRQ H[SOLFLWDWLRQ 'UDQW7KRPDV 'U\GHQ-RKQ $HQHLG LPLWDWLRQ PHWDSKUDVH SDUDSKUDVH SRHWLFVRIWUDQVODWLRQ GXEELQJ± H[SHQVH UHYRLFLQJ VHHDOVRVXEWLWOLQJ 'XQODS:LOOLDP 'XUiQ)UD'LHJRGH 'XWFKWUDGLWLRQ $IULFDQFRORQL]DWLRQ KLVWRU\RIODQJXDJH LQIOXHQFHLQ-DSDQ± PHGLHYDODQGUHQDLVVDQFHSHULRGV± PRGHUQSHULRG± VHOIWUDQVODWLRQ± G\QDPLFHTXLYDOHQFH DVVHVVLQJTXDOLW\ LGHRORJ\ DQGOLQJXLVWLFV UHFHSWRUUHVSRQVHRYHUVRXUFHPHVVDJH (DJOHWRQ7HUU\ (EHUVEHUJ:LOOLUDPYRQ± (EQ$EX7DOHE$OL (EQDO0RTDIIDFF$EGROOƗK± (FR8PEHUWR 7KH1DPHRIWKH5RVH eFROH6XSpULHXUHG¶,QWHUSUqWHVHWGH7UDGXFWLRQ(6,7 (FRQRPRV&RQVWDQWLQRV HIIRUWPRGHOV± (JLOVVRQ6YHLQEM|UQ± (J\SWDQG(J\SWLDQ[LY± KLVWRU\RIWUDLQLQJ VHHDOVR$UDELFWUDGLWLRQ (MNKHQEDXP%RULV (NUHP5HFDL]DGH (OIHOW. 3UL]H (OLRW-RKQ (OL]DEHWK,RI(QJODQG (O\WLV2G\VVHXV (PLQHVFX0LKDL (QJOLVK/DQJXDJH7HDFKLQJ(/7 (QQLXV4XLQWXV (Q]LQDV)UDQFLVFRGH (TEDO$VKWLDQL$EEDV HTXLYDOHQFH± FRQQRWDWLYH GLGDFWLFV IRUPDOFRUUHVSRQGHQFH IXQFWLRQDO LQWHUSUHWLYHVHPLRWLFV OLQJXLVWLFDSSURDFK± OLWHUDU\WUDQVODWLRQ QRUPV RQHWRRQH SRHWU\ SRVWXODWH SUDJPDWLFG\QDPLF UHIHUHQWLDOGHQRWDWLYH UHSODFHGE\QRUPV VKLIWV VLWXDWLRQDO VNRSRVWKHRU\ WDUJHWWH[WIRUPV WH[WQRUPDWLYH WH[WXDO XQLWRIWUDQVODWLRQ (UDVPXV'HVLGHULXV (UDVPXV3HWHU± (UKDW$]UD (ULFVVRQ. (ULXJHQD-RKQ6FRWXV (VIDKƗQL0LU]Ɨ+DELE (VWRQLDQ (FWHPƗGDO6DOWDQHK (FWHVƗPDO0RON<XVRI± HWLFYHUVXVHPLF± (XURSHDQ&RPPLVVLRQ (YDQV-DPHV (YHQ=RKDU,WDPDU GHVFULSWLYHVWXGLHV± SRHWLFV SRO\V\VWHPWKHRU\± ([DUFK-RKQ H[SOLFDWLRQ DGGLWLRQV DPSOLILFDWLRQ RSWLRQDO SUDJPDWLF WUDQVODWLRQLQKHUHQW XQLYHUVDOV H[SOLFLWDWLRQ± K\SRWKHVLV± H[SRVLWLRQ H[SUHVVLRQ IRUPDQGVXEVWDQFH± (\ER÷OX6DEDKDWWLQ file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_643.html (1 z 2)11/3/2007 10:32:20 PM


)DLGLW*DXFHOP± )DNKU%DVLOL )DOXG\*\|UJ\ )DZFHWW3HWHU DO)D\\ǌPL6DFƯG )pGpUDWLRQ,QWHUQDWLRQDOHGHV7UDGXFWHXUV),7 ± )HGHURY$9± )HOLSLOORRI3XQi )HW$$ )LFLQR0DUVLOLR ILGHOLW\UXOH ILOPVVHHVXEWLWOLQJ )LQOD\,DQ+DPLOWRQ )LQQLVKWUDGLWLRQ GLUHFWLRQRIWUDQVODWLRQ± SVHXGRWUDQVODWLRQDQGWKH.DOHYDOD UHODWLRQVZLWK)LQQR8JULFODQJXDJHV UHVHDUFKDQGSXEOLFDWLRQ± 5XVVLDQSHULRGDQGLQGHSHQGHQFH± 6ZHGLVKSHULRG± WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± )LUWK-5 )LVFKHU2WRNDU )LVFKPDQ6KHLOD ),7VHH)pGpUDWLRQ,QWHUQDWLRQDOHGHV7UDGXFWHXUV ),71DWKKRUVW3UL]H )LWFK%ULDQ )LWWV'XGOH\ )LW]JHUDOG(GZDUG )ORWRZ/XLVHYRQ )ROHQD*LDQIUDQFR± IRUHLJQL]LQJ± *HUPDQ± OLWHUDOWUDQVODWLRQ± VWUDWHJLHV± IRUPDOFRUUHVSRQGHQFH VKLIWV IRUPDOLVP GHFODUDWLYHDQGSURFHGXUDO )RUVpQ6DPXHO )RVFROR8JR )UDVHU-DQHW IUDXGVVHHSVHXGRWUDQVODWLRQ )UDZOH\:LOOLDP IUHHWUDQVODWLRQ±± PHWDSKRURIVH[XDOILGHOLW\± 6W-HURPH±± )UHJH*RWWORE )UHQFKWUDGLWLRQ $FDGpPLHIUDQoDLVH DGDSWDWLRQ± $IULFDQFRORQL]DWLRQ EHOOHVLQILGqOHV FODVVLFDOLQIOXHQFHDQG)UHQFKWRWKFHQWXU\± FODVVLFLVP



3DJH FRORQL]DWLRQRI$UDEODQGV± FRQWLQJHQWFXOWXUHV GRPHVWLFDWLRQRI(QJOLVK 'XWFKVHOIWUDQVODWLRQ± H[SOLFLWDWLRQ LQIOXHQFHRQ$PHULFD± LQIOXHQFHRQ%UD]LO LQIOXHQFHRQ'XWFK LQIOXHQFHRQ*HUPDQ± LQIOXHQFHRQ,WDOLDQ± LQIOXHQFHRQ5RPDQLDQ PHWDSKRURIVH[XDOILGHOLW\± PXOWLOLQJXDOLVP SVHXGRWUDQVODWLRQ± SXEOLVKLQJ± WKFHQWXU\WRSUHVHQW± 6KDNHVSHDUH 6KDNHVSHDUH¶VWUDQVODWRUV WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ±± VHHDOVR&DQDGLDQWUDGLWLRQ )ULHV&KDUOHV& )URVW5REHUW )XNX]DZD<XNLFKL IXQFWLRQDODSSURDFKHV± )XWDEDWHL6KLPHL± *DFKHFKLODG]H*5 *DOWHUXVGH&DVWHOOLRQH *DPELHU


*UHHNWUDQVODWRUVDEURDG[Y[YL LPLWDWLRQPLPHVLV± LQFHQWLYHIRUWUDQVODWLRQ[YL LQIOXHQFHRQ$UDELF±± LQIOXHQFHRQ%ULWLVK±± LQIOXHQFHRQ)UHQFK± LQIOXHQFHRQ,VODPLF6SDLQ± LQIOXHQFHRQ,WDOLDQ± LQIOXHQFHRQ5RPDQLD LQIOXHQFHRQ5XVVLD LQWHUWHPSRUDOWUDQVODWLRQ DQG/DWLQ± ORQJKLVWRU\± ORZWUDQVODWLRQDFWLYLW\ SXEOLVKLQJWUHQGV± UHVHDUFKDQGSXEOLFDWLRQV± WKHRU\DQGPHWKRGVRIWUDQVODWLRQ± 7RUDKWUDQVODWLRQ WUDQVODWRUV¶WUDLQLQJDQGRUJDQL]DWLRQ± DQG7XUNH\± *UHJRU\0LFKDHO± *ULFH+3 JULRWV± *U|QGDOWKH(OGHU%HQHGLNW *URVVHWHVWH5REHUW *UXQGWYLJ1LFRODL)UHGHULN6HYHULQ *UX\WHU:DOWHUGH *XDUHVFKL*LRYDQQL *XLUHD- *XOúHKUL *XWW(UQVW$XJXVW±± +DEHUPDV-UJHQ +DJEHUJ&DUO$XJXVW +DOEHUVWDGW$OEUHFKWYRQ +DOOJUtPVVRQ-yQDV +DOOLGD\0LFKDHO +DQQD\0 +DQVHQ+DQV -XGDK +DUULV=HOLJ +DUULVRQ7RQ\ +DUXQDO5DVKLG +DUYH\.HLWK +DVWLQJV:DUUHQ



3DJH +DWLP%DVLO FRPSHQVDWLRQ FRQWUDVWLYHDQDO\VLV FULWLFLVP OLQJXLVWLFDSSURDFK +HEUHZWUDGLWLRQ DQWLTXLW\DQG0LGGOH$JHV± WKH%LEOH± (QOLJKWHQPHQW+DVNDOD SHULRG± LQIOXHQFHRIDOSKDEHW± WKHODQJXDJH 5HYLYDOSHULRGDQG,VUDHO± 6W-HURPHVHHNVUDEEL¶VDGYLFH 7RUDKWUDQVODWLRQ± WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± XQLWRIWUDQVODWLRQ XQLYHUVDOVRIWUDQVODWLRQ DQG


,EQ5XVKG ,EQ,EUDKLPDO)D]DUL0XKDPPDG ,FHODQGLFWUDGLWLRQ WKFHQWXU\WRPRGHUQWLPHV 0LGGOH$JHV± LGHRORJ\±± ,KHQDFKR$ ,OJ*pUDUG LPLWDWLRQ± PLPHWLFVWUDWHJ\LQSRHWU\WUDQVODWLRQ LPSOLFDWXUH LPSOLFLWDWLRQVHHH[SOLFLWDWLRQ LPSOLFLWQHVVDQGH[SOLFLWQHVV LQGHWHUPLQDF\± ,QGLDQWUDGLWLRQ DQFLHQWDQGFODVVLFDOSHULRGV± GLYHUVLW\RIODQJXDJHV GRPHVWLFDWLRQDQGFRORQLDOLVP DQG,UDQ PHGLHYDOWRPRGHUQ± UHYLHZLQJDQGFULWLFLVP WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± ,QGR(XURSHDQODQJXDJHV± ,QVWLWXW6XSpULHXUG¶,QWHUSUqWHVHWGH7UDGXFWHXUV,6,7 LQVWUXFWLRQ LQWHQWLRQ LQWHUIHUHQFH LQWHUOLQJXDDSSURDFK ,QWHUQDWLRQDO)HGHUDWLRQRI7UDQVODWRUVVHH)pGpUDWLRQ,QWHUQDWLRQDOHGHV7UDGXFWHXUV ,QWHUQDWLRQDO2UJDQL]DWLRQIRU6WDQGDUGL]DWLRQ,62 ±± ,QWHUQDWLRQDO7UDQVODWLRQ'D\ LQWHUSUHWDQW LQWHUSUHWLQJSURIHVVLRQV $,,&± FRPPXQLW\LQWHUSUHWLQJ± FRQIHUHQFHDQGVLPXOWDQHRXV± FRXUWLQWHUSUHWLQJ± GLIIHUHQFHVEHWZHHQWUDQVODWLRQDQGLQWHUSUHWLQJ± VLJQHGODQJXDJH± WUDLQLQJ LQWHUSUHWLYHDSSURDFK± FRPSUHKHQVLRQUHIRUPXODWLRQDQGYHULILFDWLRQ± LPSOLFLWQHVVYHUVXVH[SOLFLWQHVV± SUDFWLVLQJFRQIHUHQFHLQWHUSUHWDWLRQ± LQWHUSUHWLYHXVH LQWHUWHPSRUDOWUDQVODWLRQ±



3DJH LQWLPDF\WKHRU\ LQWUDOLQJXDOLQWUDOLQJXLVWLF WUDQVODWLRQUHZRUGLQJ LQYDULDQFH±VHHVKLIWV LQYHUVHWUDQVODWLRQ ,ULDUWH7RPiVGH ,ULVK*DHOLF ,VHU:ROIJDQJ ,VIDKDQL(EX1DLP+DIL]L ,VODP 2WWRPDQ(PSLUH± 3HUVLDQSKDVHLQ7XUNH\± 3HUVLDQWH[WV VHHDOVR$UDELFWUDGLWLRQV 4XU¶ƗQWUDQVODWLRQ ,WDOLDQWUDGLWLRQ %DURTXHWRWKFHQWXU\± GXEELQJLQGXVWU\ KXPDQLVPDQGWKHUHQDLVVDQFH± LQWHUWHPSRUDOWUDQVODWLRQ PXOWLOLQJXDOLVP ULVHRIWKHYHUQDFXODU± WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± WKFHQWXU\± ,Wǀ6HL ,YDUVVRQ-DQ ,ZDQR+ǀPHL -llVNHOlLQHQ5+ -DEXWL3UL]H -DFREVHQ(ULF DO-ƗKL] -DNREVRQ5RPDQ G\QDPLFWUDQVODWDELOLW\ IRUPDOLVP SRHWLFV 3UDJXH6FKRRO VFULSW VWUXFWXUDODQGLQWHUSUHWLYHVHPLRWLFV± XQWUDQVODWDEOHSRHWU\ -DPHV&DUO -DPHV:LOOLDP -DQRI.RV]\F]NL -DSDQHVHWUDGLWLRQ $PHULFDQFKRLFHRIOLWHUDWXUH DQG&KLQHVH[YLL± LQIOXHQFHRIVFULSW .RUHDQLQIOXHQFH 0HLMLSHULRG± WKHRU\DQGUHVHDUFK± WUDQVODWRUV¶LQVWLWXWLRQVDQGWUDLQLQJ[Y ZDU\HDUVWRSUHVHQW± :HVWHUQFRQWDFW± -D\3HWHU -HURPH6DLQW DWWDFNVOLWHUDOWUDQVODWLRQ± ELRJUDSK\ IUHHWUDQVODWLRQ± *RGRQWKHVLGHRIWKHVFKRODU OLWHUDOWUDQVODWLRQ PRGHUQL]LQJWUDQVODWLRQV 2OG7HVWDPHQWWUDQVODWLRQ± WDNLQJWKHRULJLQDOFDSWLYH -HZV ,VODPLF6SDLQ -RFKXPVVRQ0DWWKtDV -RKDQVVRQ6WLJ -RKQVRQ0 -RKQVRQ6DPXHO -RQHV)5 -RQHV6LU:LOOLDP -RUGDQ&ODUHQFH -R\FH-DPHV -y]VHI$WWLOD -XQJPDQQ-RVHI .DGH2 .DNULGLV,RDQQLV .DNULGLV3KDQLV .iOGL*\|UJ\ .DPLO3DVKD<XVXI .DSODQ5% .DUDP]LQ1LNRODL .iUROL*iVSiU .DWDUW]LV'LPLWULRV .DW]-HUUROG-± .DZDEDWD


.QLDĨQLQ)UDQFLV]HN'LRQL]\ .QRSI$OIUHG- NQRZOHGJHEDVHGV\VWHPV .QRZOVRQ- .RFKDQRZVNL-DQ .RFKDQRZVNL3LRWU .RHDOOH6: .ROOHU:HUQHU .RPLVVDURY91 .RUDLV$GDPDQGLRV±± .RUDQWUDQVODWLRQVHH4XU¶ƗQWUDQVODWLRQ .RUHDQ .RUQHO]H9ãHKUG9LNWRULQ .RV]WROiQ\L'H]Vy .UDVLFNL,JQDF\ .ULVWHQVHQ7RP .URQWLULV7LQD .U]HV]RZVNL73 .XPDUDMLYD .XU],QJULG3LQWHU /D*XDUGLD)LRUHOOR /DGPLUDO-HDQ5HQp /DIDUJD)UDQFLVFR /DJHUO|I(UODQG /DNRII* /DPEHUW-RVp /DQH+HOHQ ODQJXDJHV $%DQG&FDWHJRULHV IRUPDOVLPLODULW\YHUVXVXVDJH PRGHUQL]DWLRQRIVDPHODQJXDJHWH[WV± WHDFKLQJ± /DSSWUDGLWLRQ /DUEDXG9DOHU\± /DUUD0DULDQR-RVp



3DJH /DVVZHOO+'± /DWLQ$PHULFDQWUDGLWLRQ FRORQLDOSHULRG± GLFWDWRUWKHPHVSRSXODULQ5RPDQLD GLVFRYHU\DQGFRQTXHVWRI1HZ:RUOG± LQGHSHQGHQFHWRSUHVHQW± QDWLYHLQWHUSUHWHUV± WUDLQLQJDQGUHVHDUFK± IRU86PDUNHW /DWLQWUDGLWLRQ DGDSWDWLRQ $JHRI5HDVRQWRSUHVHQW± %LEOHWUDQVODWLRQ± LQ&KLQHVH &KULVWLDQLW\DQG0LGGOH$JHV± FODVVLFDO5RPH± GLUHFWLRQRIWUDQVODWLRQ± GRPHVWLFDWHV*UHHNV IUHHWUDQVODWLRQ± LGHRORJ\ LPLWDWLRQ± LQIOXHQFHRQ%ULWLVK± LQIOXHQFHRQ'XWFK± LQIOXHQFHRQ*HUPDQ± LQIOXHQFHRQ+XQJDU\± LQIOXHQFHRQ,FHODQG LQIOXHQFHRQ,VODPLF6SDLQ± LQIOXHQFHRQ5RPDQLDQ LQIOXHQFHRQ6ZHGLVK OLWHUDOWUDQVODWLRQ SDUDSKUDVH± 5HQDLVVDQFH± VHOIWUDQVODWLRQ 7RUDKWUDQVODWLRQ XVHLQPXOWLOLQJXDOWH[WV VHHDOVR,WDOLDQWUDGLWLRQ /DWLQR-XDQ± /DZUHQFH'+ /D[DU\-HDQ /D[QHVV+DOOGyU.LOMDQ /HDYLV)5 /HGHUHU0DULDQQH /HIHYHUH$QGUp ELRJUDSK\ FXOWXUHDQGLGHRORJ\ GUDPD LGHRORJ\ SRHWLFV SRHWU\WUDQVODWLRQ SRO\V\VWHPWKHRU\ /HJJH-DPHV /HKWRQHQ-RHO /HPEFNH&KULVWLDQ/XGYLJ(GYDUG /HyQ)UD\/XLVGH /HRSDUGL*LDFRPR /HURX[*DVWRQ /HYHQVWRQ(GGLH$ /HYLQH6X]DQQH-LOO /HY\-LĜt±± 7KH$UWRI7UDQVODWLRQ± JDPHWKHRU\± 1LWUD6FKRRO SRHWLFV OH[LFDOGHQVLW\ /LDQJ4LFKDR /LDQJ6KLTXL /LQ6KX±± /LQ<XWDQJ /LQ=H[X /LQDFUH7KRPDV OLQJXLVWLFDSSURDFK WHQRUPRGHDQGGRPDLQ OLQJXLVWLFDSSURDFKHV± DSSOLFDWLRQRIOLQJXLVWLFVWRWUDQVODWLRQ± FRKHUHQFHDQGFRKHVLRQ FXOWXUHDQGLGHRORJ\ LGHDWLRQDODQGLQWHUSHUVRQDO± LPSOLFDWXUH NHUQHOV PDFKLQHWUDQVODWLRQ± PRGHOWKHRU\ SV\FKROLQJXLVWLFFRJQLWLYH± VSHHFKDFWV WHQRUPRGHDQGGRPDLQ WH[W± WKHRUHPV /LVOH/HFRQWHGH OLWHUDOWUDQVODWLRQ± IRUHLJQL]LQJ± /XWKHU¶V%LEOH SRHWU\ VSHFXODWLYHDSSURDFKHV OLWHUDU\WUDQVODWLRQ FROODERUDWLRQZLWKDXWKRU FULWLFLVP± GHVFULSWLYHVWXGLHV± SRHWLFV± SRHWU\± SUDFWLFHV± SUHVWLJHRIWUDQVODWRUV UHVHDUFKLVVXHV± VXEVLGLHV± VHHDOVRSXEOLVKLQJVWUDWHJLHV OLWHUDWXUH DQWKRORJLHV± FDQRQV file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_647.html (1 z 2)11/3/2007 10:32:26 PM


GUDPD± LQWHUSUHWLYHDSSURDFK± VHHDOVROLWHUDU\WUDQVODWLRQ /LYLXV$QGURQLFXV ORFXWLRQLOORFXWLRQDQGSHUORFXWLRQ /RPKHLP6\OIHVW /RPRQRVRY0LNKDLO9DVLOLHYLHFK /RQJIHOORZ+HQU\:DGVZRUWK /|QQURW(OLDV /RSH]GH$\DOD3HUR /|UVFKHU:ROIJDQJ /RZHOO5REHUW /XWKHU0DUWLQ GLUHFWLRQRIWUDQVODWLRQ 6PDOO&DWHFKLVP /XWKHUDQV LQ5RPDQLD± /X\NHQ*HRUJ0LFKDHO± /\WWHOWRQ*HRUJH 0D-LDQ]KRQJ 0F$OLVWHU* 0DF$UWKXU)RXQGDWLRQ 0F&OHOODQ(±PDFKLQHWUDQVODWLRQ &DQDGLDQUHVHDUFK 'HQPDUN HGLWLQJ H[DPSOHEDVHGV\VWHPV )LQODQG± KLVWRU\± LQWHUDFWLYH± LQWHUOLQJXDDSSURDFK PDFKLQHDLGHG± PHWKRGRORJ\± UHVWULFWHGLQSXW± VWDWLVWLFVEDVHG VXEODQJXDJH WDVNV±± WHUPEDQNV± WHUPLQRORJ\± WUDQVIHU 0F,QWRVK$ 0F1DXJKW-RKQ± 0DFSKHUVRQ-DPHV± 0DGULG$ORQVR)HUQiQGH]GH 0DGULJDO$OIRQVRGH± 0DGVKXV2ODY 0DJQ~VVRQÈUQL 0DLPRQLGHV0XVD,EQ0D\PXQ 0DLRUHVFX7LWX 0DOHUPL1LFFROz 0DOLQFKH0DOLQDOOL7HQpSDO [Y 0DOPNM U.LUVWHQ 0DORQH-/ 0DORU\7KRPDV 0DPRXQDV1LFRXVVLRV DO0D¶PǌQ 0DQKHLP5DOSK 0DQQ7KRPDV 0DQQLQHQ2WWR± DO0DQVRXU&DOLSK 0DQVXU0RKDPPDGE=DUULQGDVW 0DRULODQJXDJH DO0DUDJKL6KHLNK0XVWDID 0DUWtQH]GHOD5RVD)UDQFLVFR 0DU[$YHOLQJ(OHDQRU



3DJH 0DU[LVP± 0DVRQ,DQ FRPSHQVDWLRQ FRQWUDVWLYHDQDO\VLV FULWLFLVP OLQJXLVWLFDSSURDFK 0DWKHVLXV9LOpP 0DWVXL$NLUD 0DXU\-XDQ0DUtD 0DYLOLV/RUHQ]RV 0D[LPWKH*UHHN0LNKDLO7UHYROHV 0D\5DFKHO 0D\DQKLHURJO\SKV± PHDQLQJ DQDO\WLFDOSKLORVRSK\± LPSOLHG± VWLPXOXVPHDQLQJ XQLWRIWUDQVODWLRQ± 0HQGHOVVRKQ0RVHV± 0HQpQGH]\3HOD\R0DUFHOLQR± 0HUFLPHN$KPHG 0HUZLQ:6 0HVFKRQQLF+HQUL PHVVDJHWUDQVPLWWHU 0HVXG.XO± PHWDODQJXDJH PHWDOLQJXLVWLFQDWXUH PHWDSKRU GLVFRXUVHDQDO\VLV± HWKQLFDQGFXOWXUDOWUDQVIHU± JHQGHU± PHWDSKUDVH± 0HWKRGLXV6DLQW±± .LHYDQ5XV 6ODYRQLF%LEOH 0H[LFR[Y KLHURJO\SKV± 0H]HL.DWK\ 0LFX6DPXLO 0LGKDW(IHQGL$KPHG 0LNR)UDQWLãHN 0LOHVFX6SDWKDUXV 0LOHY*HR 0LOO-RKQ6WXDUW 0LOOHU* 0LOWRQ-RKQ PLPHVLVVHHLPLWDWLRQ PLQLPD[WKHRUHP PRGHOVDQGPRGHOWKHRU\± DQDORJXH± GHILQLWLRQ± QRUPDWLYHPRGHO± QRUPV± WKHRUHWLFDO 0RKDQW\1LUDQMDQ 0¡OOHU.DL)ULLV 0¡OOHU1LHOVHQ. 0RQFULHII:6FRWW 0RQWDLJQH0LFKHOGH 0RQWDOH(XJHQLR 0RQWHLUR/REDWR-RVp%HQWR 0RQWHQJyQ3HGUR 0RQWL9LQFHQ]R 0RUD-RVp-RDTXtQGH 0RUJHQVWHUQ2VNDU 0RULƿJDL 0RULWD6KLNHQ 0RUULV5XWK 0RUV]W\Q-DQ$QGU]HM 0RVHU%DUEDUD 0RWRNL5\ǀL 0RWRNL

1HZPDQ)UDQFLV 1HZPDUN3HWHU DGDSWDWLRQ FRPSHQVDWLRQ GLUHFWLRQRIWUDQVODWLRQ LQWHUSUHWLYHDSSURDFK 1LGD(XJHQH$ $IULFDQWUDQVODWLRQVRIWKH%LEOH FRPSHQVDWLRQ GRPHVWLFDWLRQRI%LEOH G\QDPLFHTXLYDOHQFH H[SOLFLWDWLRQ± NHUQHOVLQOLQJXLVWLFDSSURDFK UHFHSWRUUHVSRQVHRYHUVRXUFHPHVVDJH WUDQVODWLQJSRHWU\ 1LHPFHZLF]-DQ8UV\Q 1LHW]VFKH)ULHGULFK 1LJHULD 1LMKRII0DUWLQXV 3UL]H 1LUDQMDQD7HMDVZLQL LGHRORJ\ QRUPDWLYHPRGHO 1MR\D6XOWDQ± 1RJDPL7R\RLFKLU{ QRQYHUEDOVHQVH 1RUG&KULVWLDQH QRUPDOL]DWLRQ XQLYHUVDOVRIWUDQVODWLRQ± QRUPV± FRPSHWHQFH FRQVWLWXWLYHDQGUHJXODWLYH± HTXLYDOHQFH H[SHFWDQF\ LQLWLDO PDWULFLDO PRGHOV± QRUPDWLYHPRGHO± RSHUDWLRQDO SHUIRUPDQFH SRO\V\VWHP SUHOLPLQDU\ SURIHVVLRQDO 1RUWK6LU7KRPDV 1RUWRQ*3 1RUZHJLDQWUDGLWLRQ HDUO\UHODWLRQVKLSWR'HQPDUN± PRGHPZRUNV± SDUDOOHOFRUSXV



3DJH WUDLQLQJ WUDQVODWRUV¶RUJDQL]DWLRQDQGUHVHDUFK± 1RUZLG.DPLO 1RWNHU/DEHRRI6W*DOOHQ 1RWW'U-RKQ 1\HUHUH-XOLXV 2¶&DVH\6HDQ 2¶1HLOO(XJHQH 2¶7RRO0 2GD1LZD -XQ¶LFKLUǀ 2JLOE\-RKQ 2J\X6RUDL 2KULGD&OLPHQWRI 2RL9 2SLW]0DUWLQ RUDOWUDGLWLRQ $IULFDQOLWHUDWXUH± 5RPDQWLFLVPDQGLQWHUHVWLQIRONORUH 2UHVPH1LFRODV RUJDQLFVWUDWHJ\ 2UWHJD\*DVVHWW-RVp 2UWKRGR[&KXUFK FKXUFK6ODYRQLF± 3DWULDUFK*HQQDGLRVGHEDWHVZLWKWKH6XOWDQ 5XVVLDQDQGFKXUFK6ODYRQLF± 6WV&\ULODQG0HWKRGLXV±± 2UWL*LURODPR 2UWL]-XDQ ‘VWE\H3 RYHUWDQGFRYHUWWUDQVODWLRQ RYHUWWUDQVODWLRQ 3DFXYLXV 3DHV-RVp3DXOR 3DODPDV&RVWLV 3DOOLV$OH[DQGURV 3DQHWK(YD 3DQQZLW]5XGROI SDUDOOHOWH[WV PDFKLQHWUDQVODWLRQ SDUDSKUDVH± 3DULV6FKRRO VHHDOVRLQWHUSUHWLYHDSSURDFK 3DYHVH&HVDUH 3D]2FWDYLR 3i]PiQ\&DUGLQDO3HWHU± 3¶%LWHN2NRW 3HGHUVHQ9LJJR+M¡UQDJHU 3HLUFH&KDUOHV6DQGHUV 3HOHWLHUGX0DQV-DFTXHV 3HQQDQHQ(LOD 3HQURG/\QQH. 3pUH]GH2OLYD)HUQiQ 3pULRQ-RDFKLP 3HUU\0HQDNKHP 3HUVLDQWUDGLWLRQ DQFLHQWDQGPHGLHYDO± DQG$UDELF± LQIOXHQFHRQ7XUNLVK± PRGHUQ,UDQ± SRVW0RQJRO± DQGWKH4XU¶ƗQ 7KRXVDQGDQG2QH1LJKWV WUDQVODWRUV¶WUDLQLQJDQGLQVWLWXWLRQV± 3HWHUWKH9HQHUDEOH 3HW|IL6iQGRU 3HWUHVFX&H]DU 3HWURY9DOHUL 3HWU\F\6HEDVWLDQ 3pWXUVVRQ+DOOJUtPXU 3HYHDU5LFKDUG 3p]PpQ\3pWHU 3H]]LQL'RPHQLFR 3KLOOLSV-%± 3KLOR-XGDHXV SKLORVRSK\ PHDQLQJDQGDQDO\WLFDOSKLORVRSKHUV± SUDJPDWLF SKRQRORJLFDOWUDQVODWLRQ 3LDJHW-HDQ 3LFNWKDOO0DUPDGXNH 3LHWDULQSRLND-DDNNR 3LNH. 3LQGHPRQWH,SSROLWR 3LQWHU+DUROG 3LQWHU,QJULGODWHU.XU] 3ODWR 7KH$SRORJ\ 3ODXWXV SRHWLFV± XQLYHUVDOVRIWUDQVODWLRQ± VHHDOVROLWHUDU\WUDQVODWLRQ SRHWU\ SRHWU\± FRQFUHWH± +ROPHV¶VVWUDWHJLHV LPLWDWLRQDQGDGDSWDWLRQ LQIOXHQFHRIVFULSW QDWXUHRIWKHWDVN± SRHWVDQGWUDQVODWRUV± 9LYDVRQ SRHWU\WUDQVODWLRQ PLPHWLFDQDORJLFDORUJDQLFDQGGHYLDQWVWUDWHJLHV WUDQVIHUPHFKDQLVP 3RLURW3/GH 3RODQG SXEOLVKLQJ 3ROLVKWUDGLWLRQ file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_649.html (1 z 2)11/3/2007 10:32:29 PM


WKH%LEOH± KLVWRULFDOEDFNJURXQG± /DWLQLQIOXHQFH 0LGGOH$JHVWRWKFHQWXU\± WKFHQWXU\WRSUHVHQW± WKHRULHVDQGPRGHOV± WUDQVODWRUV¶LGHQWLW\DQGVWDWXV SROLWLFV PXOWLOLQJXDOLVP± 3RO\ODV,DNRYRV SRO\V\VWHP PDQLSXODWLRQRIOLWHUDWXUH WDUJHWRULHQWHGDSSURDFK SRO\V\VWHPWKHRU\± OLWHUDU\WUDQVODWLRQ± SRHWLFV 3RSH$OH[DQGHU ,OLDG ,PLWDWLRQVRI+RUDFH 3RSRYLþ$QWRQ SRHWLFV VKLIWV± 3RUOiNVVRQ-yQ 3RUWXJXHVHWUDGLWLRQ $IULFDQFRORQL]DWLRQ± LQIOXHQFHLQ-DSDQ SXEOLVKLQJ VHHDOVR%UD]LOLDQWUDGLWLRQ SRVWFRORQLDOLVPVHHPHWDSKRU PXOWLOLQJXDOLVP 3RWRFNL-DQ 3RWWV-HUU\ 3RXQG(]UD± ELRJUDSK\± &DQWRV &KLQHVHVFULSW 3RZHOO-(QRFK± SUDJPDWLFV± GUDPD LPSOLHGPHDQLQJDQG&RRSHUDWLYH3ULQFLSOH± OLQJXLVWLFDSSURDFKHV PRGHOIRUTXDOLW\DVVVHVVPHQW SUHVFULSWLYHQHVVVHHQRUPV 3UpYRVW$EEp SURFHVVRULHQWHGVWXGLHVVHHSV\FKROLQJXLVWLFFRJQLWLYHDSSURDFK WKLQNDORXGSURWRFROV



3DJH SURGXFWDQGSURFHVVEDVHGVWXGLHV SURGXFWVSHFLILFDWLRQ SVHXGRWUDQVODWLRQ± SV\FKRDQDO\VLV RHGLSDOPRGHORIWUDQVODWRU¶VUROH SV\FKROLQJXLVWLFFRJQLWLYHDSSURDFKHV± FRQWUDVWLYHDQDO\VLV SXEOLFVHUYLFHLQWHUSUHWLQJVHHFRPPXQLW\LQWHUSUHWLQJ SXEOLVKLQJVWUDWHJLHV JHQHUDODQGVSHFLDOL]HGSXEOLVKHUV± OLWHUDU\WUDQVODWLRQ UDWHFDWHJRU\DQGIORZ± VXEVLGLHV± WKHRU\RIWUDQVODWRULDODFWLRQ± 3XHUWR)UDQFLVFRGHO3DTXLOOR SXUHODQJXDJH± 3XVKNLQ$OH[DQGHU 3XWWHQKDP*HRUJH± 3XXUWLQHQ7LLQD 3\P$QWKRQ\± DO4REDYL$EX1DVU$KPDG TXDOLW\ DVVHVVPHQW± IXQFWLRQDOLVWWUDGLWLRQ 4XLQH:LOODUGYDQ2UPDQ± 4XLQWLOLDQ 4XU¶ƗQWUDQVODWLRQ± $IULFDQODQJXDJHV LQ)UHQFK KLVWRU\RIWUDQVODWLRQV 3HUVLDQWH[WV± LQ7XUNH\± XQWUDQVODWDELOLW\± VHHDOVR$UDELFWUDGLWLRQ 4YDOH3HU 5DEDGiQ5RVD 5DEDVVD*UHJRU\ 5DEHODLV)UDQoRLV 5DELQ&KDLP± UDFHDQGHWKQLFLW\[LY±[Y 5DFKOLQ+ UDGLFDOWUDQVODWLRQ 5DGQyWL0LNOyV 5DGy$QWDO 5DGy*\|UJ\ 5iGXOHVFX+HOLDGH 5DIDHO9LFHQWH/ 5DPDOKR-RmR 5DPXVLRRI7UHYLVR*LRYDQQL%DWWLVWD UDQNERXQGDQGXQERXQGHGWUDQVODWLRQ 5DSKƗLO3qUH$QWǌQ 5lW\$QWWL 5D\PRQG$UFKELVKRSRI7ROHGR UHJLVWHUDQDO\VLV± 5HLG+HOHQH%± 5HLQD&DVLRGRURGH 5HLVV.DWDULQD VNRSRVWKHRU\± VRFLDOFRPPXQLFDWLRQ UHOHYDQFH UHOLJLRQ DQWKRORJLHV %XGGKLVWVFULSWXUHV± HDUO\$PHULFDQZULWLQJV HIIHFWRQ$UDESHRSOHV KLVWRU\RIWUDQVODWHGWH[WV± LGHRORJ\± DVLQFHQWLYHIRUWUDQVODWLRQ[YL OLWHUDOWUDQVODWLRQ± 2UWKRGR[SULQFLSOHRIWUDQVODWLRQ± 3HUVLDQDQG=RURDVWULDQLVP WKHRORJLFDOWHUPLQRORJ\ WUDQVODWRUVDVPHPEHUVRIPLQRULWLHV[LY[Y VHHDOVR%LEOHWUDQVODWLRQ &KULVWLDQLW\ +HEUHZWUDGLWLRQ ,VODP 4XU¶ƗQWUDQVODWLRQ 5HQHU)ULHGULFN UHSHUWRUHPH UHVWULFWHGWUDQVODWLRQ 5HWVNHU<,± UHYLHZLQJDQGFULWLFLVP± UHYLVLRQ 5KR-DFREXV 5LEHLUR$IRQVR 5LFFL0DWWHR 5LFRHXU3DXO 5LHX(9 5LJDV3KHUUDLRV 5LSOH\*HRUJH± 5LVVHW-DFTXHOLQH 5LVYLN.DULDQG.MHOO 5REHUWRI&KHVWHU 5REHUWV5RGD 5REHUWV6PLWK/:± 5RELQVRQ'RXJODV 5RE\QV&OHP 5RGHW$XJXVWLQ 5RGULJXHV-RDR 5RGZHOO-0 5RJHUV-RKQ 5RLGLV(PPDQXHO 5ROOH5LFKDUG 5ROOLQ&KDUOHV± 5RPDQLDQWUDGLWLRQ HDUO\\HDUVDQG(QOLJKWHQPHQW± file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_650.html (1 z 2)11/3/2007 10:32:31 PM


WKDQGWKFHQWXULHV± VSHFLDOUHODWLRQVKLSZLWK+XQJDU\ WUDQVODWRUVDQGWKHRU\WRGD\± 5RQDL3DXOR± 5RVFRPPRQ(DUORI:HQWZRUWK'LOORQ 5RVH0DULO\Q*DGGLV 5RVHQIHOGW1LOV 5RVHWWL&$ 5RVVHWWL'DQWH*DEULHO 5R\5DP0RKDQ± 5R\V5DOSK 5XERZ3DXO 5XVKGLH6DOPDQ 5XVVHOO:LOO\ 5XVVLDQWUDGLWLRQ[LY H[SOLFLWDWLRQ LQIOXHQFHRQ+HEUHZ± .LHYDQ5XVWRWKFHQWXU\± WKFHQWXU\± 6RYLHWSHULRGWRSUHVHQW± WKHRU\± WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± IRU86PDUNHW 6DDGLD 6DDULNRVNL3HQWWL 6DDULWVD3HQWWL 6DF\/HPDLVWUHGH 6DJHU-XDQ&± 6DKDJ~Q)UD%HUQDUGLQRGH 6DLG(GZDUG 6W3LHUUH3DXO 6DOH*HRUJH 6DOHYVN\+HLGHPDULH 6DONLQVRKQ


3DJH 6DPLùHPVHGGLQ± 6iQFKH]GH9LDQD3HUR 6DQVNULW DQFLHQW,QGLD± %XGGKLVWVFULSWXUHV (XURSHDQVOHDUQ PHGLHYDO,QGLD± DQG3HUVLDQ 6DQWLOODQD0DUTXLVGH 6DQWR\R-XOLR&pVDU 6DQ]GHO5LR-XOLiQ 6DSLU(GZDUG 6DUELHZVNL0DFLHM.D]LPLHU] 6DWǀ+DUXR 6DXVVXUH)HUGLQDQGGH 6DYRU\7KHRGRUH 7KH$UWRI7UDQVODWLRQ 6FDJOLRQH$OGRDQG-HDQQH 3UL]H 6FKDOOYRQ%HOO-RKDQQ$GDP 6FKHUU- 6FKOHJHO$XJXVW:LOKHOP± 6FKOHLFKHU$XJXVW 6FKOHLHUPDFKHU)ULHGULFK IRUHLJQL]LQJ JHQGHUPHWDSKRULFV KHUPHQHXWLFV SRZHUUHODWLRQV SULQFLSOHVRIWUDQVODWLRQ± WUDQVODWDELOLW\ 6FKQLW]OHU$UWKXU 6FKRJW+HQU\ 6FKRQ-) 6FKRROFUDIW+HQU\5RZHDQG-DQH-RKQVWRQ 6FKRWWHO*HRUJ 6FKRWWXV$QGUHDV 6FKURGHUXV(ULN 6FKXOWH5DLQHU 6FKZDUW]:HUQHU 6FRWW6LU:DOWHU PXOWLOLQJXDOLVP VFUHHQWUDQVODWLRQVHHGXEELQJ VXEWLWOLQJ 6FULEH(XJqQH VFULSWLQWUDQVODWLRQ DOSKDEHWVDQGKLHURJO\SKV± FRQFUHWHSRHWU\± 6HEDVWLDQR)DXVWR VHFRQGODQJXDJHDFTXLVLWLRQWKHRU\6/$ ± 6HIHULV*HRUJH± 6pJXLQRW&DQGDFH 6HOEHUJ2OH0LFKDHO 6HOHVNRYLWFK'DQLFD VHOIWUDQVODWLRQVHHDXWRWUDQVODWLRQ 6HOYHU3DXO 6HPHUNDQGL(EX¶O/H\VL VHPLRWLFDSSURDFKHV VWUXFWXUDODQGLQWHUSUHWLYH± WH[WVHPLRWLFV± WUDQVODWDELOLW\± VHPLRWLFV FRQWH[W LQWHUOLQJXDOLQWHUOLQJXLVWLF WUDQVODWLRQSURSHU LQWHUSUHWDQW LQWHUOLQJXDOLQWUDOLQJXLVWLF UHZRUGLQJ LQWUDVHPLRWLFDQGLQWHUVHPLRWLF VXEWLWOLQJ 6HQHJDO VHQVH DQDO\WLFDOSKLORVRSK\ QRQYHUEDO RULHQWDWLRQ VSHHFKDFWV VHQVHIRUVHQVHWUDQVODWLRQ± VHUYLFHWUDQVODWLRQ VH[XDOLW\ PHWDSKRU± VHHDOVRJHQGHU 6H\VVHO&ODXGHGH 6KDFNPDQ- 6KDNHVSHDUH:LOOLDP± LQ)UHQFK LQ*HUPDQ LQ+HEUHZ KLVWRU\RIWUDQVODWLRQV LQ+XQJDULDQ 1RUGLFODQJXDJHV SRHWLFV LQ3ROLVK LQ5RPDQLDQ 6KDPD¶D1DMDK 6KDSLUR1RUPDQ± 6KDWE\,PDP 6KDZ*HRUJH%HUQDUG VKLIWV FDWHJRULDO FRQVWLWXWLYHDQGLQGLYLGXDO± GHILQLWLRQDQGFODVVLILFDWLRQ±± JHQHULF LQWUDV\VWHP LQYDULDQFH± OHYHO PRGXODWLRQPRGLILFDWLRQDQGPXWDWLRQ REOLJDWRU\DQGRSWLRQDO WH[WHPH WH[WXDOHTXLYDOHQFH WUDQVHPHVDQGDUFKLWUDQVHPHV± XQLWDQGFODVV file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_651.html (1 z 2)11/3/2007 10:32:32 PM


6KL]XNL7DGDRODWHU1DNDQR5\ǌKR 6KOHVLQJHU0LULDP 6KORQVN\$YUDKDP 6KUHYH*UHJRU\0 6KYHLWVHU$' 6LGQH\0DU\ VLJKWWUDQVODWLRQVHHFRQIHUHQFHDQGVLPXOWDQHRXVLQWHUSUHWLQJ VLJQRULHQWDWLRQ VLJQWKHRU\ VLJQHGODQJXDJH LQVXEWLWOLQJ VLJQHGODQJXDJHLQWHUSUHWLQJ± %ULWLVKDQG$PHULFDQ FRQIHUHQFHV FRXUWLQWHUSUHWLQJ QHHGV SURIHVVLRQDQGWUDLQLQJ± 6ZHGHQ WUDLQLQJ WUDQVOLWHUDWLQJYHUVXVLQWHUSUHWLQJ± 6LPRQ+ WKLQNDORXGSURWRFROV 6LPRQ6KHUU\ ùLQDVL,EUDKLP± 6NDUODWRV1LNRODRV± VNRSRVWKHRU\± DGDSWDWLRQ DGHTXDF\ DVVHVVLQJTXDOLW\± FRKHUHQFHUXOH FULWLFLVPRI± ILGHOLW\UXOH IXQFWLRQ KLVWRU\RIWUDQVODWLRQ RIIHURILQIRUPDWLRQ SUDJPDWLFV WUDQVODWXPDQGWUDQVODW 6NRU\QD)UDQFLV]HN 6OiGHN-RVHI) 6ODYHLNRY35 6ORYDNWUDGLWLRQ± VHHDOVR&]HFKWUDGLWLRQ 6PLUQRY7UR\DQVNLL3HWU 6PLWK$GDP 6PLWK(OL 6QHOO+RUQE\0DU\ FULWLFLVP UHWURVSHFWLYHWUDQVODWLRQ± VNRSRVWKHRU\ 6QHOOPDQ-RKDQ9LOKHOP± 6RFLpWpIUDQoDLVHGHVWUDGXFWHXUV6)7 ± 6RILDQRV1LNRODRV±± 6RUHQVHQ.QXG 6RXWK$IULFD 6SDQLVKWUDGLWLRQ GLUHFWLRQRIWUDQVODWLRQ GLYHUVLW\RIODQJXDJHVXQGHU&DVWLOLDQGRPLQDQFH± PXOWLOLQJXDOLVPRI$PHULFDQDXWKRUV± SVHXGRWUDQVODWLRQ± SXEOLVKLQJ WKH5HFRQTXLVWD± WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± VHHDOVR/DWLQ$PHULFDQWUDGLWLRQ



3DJH VSHFXODWLYHDSSURDFKHV± VSHHFKDFWV SUDJPDWLFDQDO\VLV± VHQVHIRUFHDQGHIIHFW 6WDsO0DGDPHGH± 6WDV]LF6WDQLVáDZ 6WHIDQ0HWURSROLWDQ6LPLRQ 6WHLQHU*HRUJH $IWHU%DEHO DOOFRPPXQLFDWLRQLVWUDQVODWLRQ IRUHLJQL]LQJ JHQGHUPHWDSKRULFV KHUPHQHXWLFPRWLRQ± WKHRU\RIPHDQLQJ WRZHURI%DEHO 6WHLQHU75 6WHLQKRHZHO+HLQULFK 6WHUQH/DXUHQFH VWLPXOXVPHDQLQJ âWtWQê]HâWtWQpKR7RPiã 6WRO]H5 6WRSSDUG7RP VWUDWHJLHV GRPHVWLFDWLQJ± IRUHLJQL]LQJ± 6WUHYHQV3 6WXGLW'DPDVFHQH âW~U/XGRYtW VW\OHVHHOLWHUDU\WUDQVODWLRQ XQLYHUVDOVRIWUDQVODWLRQ VXEWLWOLQJ± DGDSWDWLRQ FDSWLRQV± GLVWLQFWLYHIHDWXUHVRIWUDQVODWLRQ± LQWUDOLQJXDODQGLQWHUOLQJXDO RSHQHGDQGFORVHG SHUVRQDO SLYRW± UHYRLFLQJ VHPLRWLFV W\SHVDQGSURFHVV± VHHDOVRGXEELQJ 6YHQNHUXG+HUEHUW 6ZDKLOL 6ZHGLVKWUDGLWLRQ FKLYDOU\PRQDVWLFLVPDQGWUDQVODWLRQWRWKFHQWXU\± GLUHFWLRQRIWUDQVODWLRQ± WKFHQWXU\WRSUHVHQW± KLVWRU\RIODQJXDJH LQIOXHQFHLQ)LQODQG± WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ±± 6ZHHW+HQU\ 6\NHV0± 6\PPDFKXV V\QWKHVLV 6\ULD[LY 6]DEy'iYLG%DUyWL 6]iV].iURO\ 6]ǀOOǀV\.OiUD 7DEHU&5 7DEOLF%RKXVODY 7DJRUH5DELQGUDQDWK DO7DKWƗZL5LIƗFD5ƗILF 7DOLDIHUUR/DZUHQFH 7DPLO± 7DQL]DNL-XQ¶LFKLUǀ 7DQ]DQLD 7$3VHHWKLQNDORXGSURWRFROV WDUJHWRULHQWHGDSSURDFK 7DUQ|F]L/|UiQG 7DUVNL$OIUHG± 7DUWDJOLD1LFFROz)RQWDQD 7DYHUQHU5LFKDUG 7D\ORU%D\DUG 7HUHQFH WHUPEDQNV± &DQDGLDQUHVHDUFK PDFKLQHWUDQVODWLRQ WHUPLQRORJ\ FRQFHSWVGHILQLWLRQVDQGWHUPV± JHQHUDWLRQ JORVVDULHV VWDQGDUGL]DWLRQ± V\VWHPVRIQRPHQFODWXUH WHUPEDQNV± WHUPFUHDWLRQ± WKHRU\± WUDQVODWLRQYHUVXVDSSOLHG± 7HUUDFLQL%HQYHQXWR WHUWLXPFRPSDUDWLRQLV 7HXUEH7RORQ0LJXHO WH[W DFW± DUFKLWUDQVHPHV± GHILQLQJ GLVFRXUVH HTXLYDOHQFH± IXQFWLRQ± SURGXFWLRQ± SV\FKROLQJXLVWLFDSSURDFKHV TXDOLW\± VHPDQWLFXQLW VHPLRWLFV± WUDQVFULSWLRQ WUDQVODWRULDODFWLRQ± WH[WOLQJXLVWLFV



IHWLVKL]DWLRQ UHJLVWHUDQDO\VLV± VWUXFWXUH WH[WW\SRORJLHV± WH[WXUH± WH[WHPH WKHDWUHWUDQVODWLRQVHHGUDPDWUDQVODWLRQ WKHPH DQGUKHPHDQDO\VLV WKqPH 7KHRGRWLRQ WKpRULHGXVHQV VHHDOVRLQWHUSUHWLYHDSSURDFK WKLQNDORXGSURWRFROV7$3 ± GDWDFROOHFWLRQ± GHFLVLRQPDNLQJ PHQWDOFRQWHQW SURFHVV XQLWRIWUDQVODWLRQ YHUEDOUHSRUWSURFHGXUHV 7KLRQJ¶R1JXJL:D 7KRUDUHQVHQ%MDUQL 7KRUVWHLQVVRQ6WHLQJUtPXU 7LEERQLGIDPLO\ 7LEHW± 7LUNNRQHQ&RQGLW6RQMD 7LVVDUG3LHUUH 7RGRUDNL(IHQGL 7ROG\)HUHQF 7RONLHQ-55 7RPD3HWHU 7RUDKWUDQVODWLRQ± KLVWRU\RIWUDQVODWLRQV -HZLVKDQG&KULVWLDQLQWHUSUHWDWLRQV± 7RUERY7VHNR 7RUGiVL%LVKRS0 7RUUHV$PDW)HOL[ 7yWKÈUSiG 7RXUV0LFKHOGH± 7RXU\*LGHRQ DFDGHPLFWUDQVODWLRQVWXGLHV FRUSXVOLQJXLVWLFV FULWLFLVP HTXLYDOHQFH± QRUPV± SRHWLFV SRO\V\VWHPWKHRU\± VKLIWVDQGDGHTXDWHWUDQVODWLRQ XQLWRIWUDQVODWLRQ XQLYHUVDOVRIWUDQVODWLRQ± WUDLQLQJSURJUDPPHVDQGLQVWLWXWLRQV DFDGHPLFDQGYRFDWLRQDOFULWHULD± FRPPXQLW\LQWHUSUHWLQJ± GLGDFWLFVRIWUDQVODWLRQ± KLVWRULFDOEDFNJURXQG± OLWHUDU\WUDQVODWRUV VLJQHGODQJXDJHV± VHHDOVRXQGHULQGLYLGXDOKLVWRULFDOWUDGLWLRQV 7ĜDQRYVNê-LĜt



3DJH WUDQVFULSWLRQ WUDQVHPHV± WUDQVIHU FXOWXUDO± GLVFRXUVH± PDFKLQHWUDQVODWLRQ PHFKDQLVP WUDQVIHUDSSURDFK PDFKLQHODQJXDJH WUDQVIHUPHFKDQLVP WUDQVODWDELOLW\± ORJLFDOFRQQHFWLYHV RFFDVLRQVWDQGLQJDQGREVHUYDWLRQVHQWHQFHV SXUHODQJXDJH 7KH4XU¶ƗQ VHPLRWLFDSSURDFKHV± VKLIWV VWLPXOXVPHDQLQJ 7UDQVODWLR),71HZVOHWWHU WUDQVODWLRQ FRPSDUHGWRLQWHUSUHWLQJ± HW\PRORJ\DQGPHWDSKRU± IXOOSDUWLDODQGUHVWULFWHG LQFHQWLYHVIRUDFWLYLW\[YL[YLL LQWHUOLQJXDOLQWHUOLQJXLVWLF W\SHVRI[YLL 7UDQVODWLRQ3HUVSHFWLYHVHG5RVH WUDQVODWLRQUXOH WUDQVODWLRQVWXGLHV $PHULFDQDUHDVRIUHVHDUFK± DVDQDFDGHPLFGLVFLSOLQH± GHVFULSWLYH *UHHNEHJLQQLQJV± DQGRWKHUGLVFLSOLQHV± SURGXFWRULHQWHGDQGSURFHVVRULHQWHG SXUHDQGDSSOLHG± UHVWULFWLRQV± WUDQVODWRU SV\FKROLQJXLVWLFDSSURDFKHV WUDQVODWRULDODFWLRQ± WUDQVODWRUV FULWLFLVP PLQRULW\JURXSV[LY[Y SURIHVVLRQDOQRUPV UROHDQGVWDWXV[Y WUDQVOLWHUDWLRQ 7UHGLDNRYVN\9DVLO\.LULORYLFK 7UHYLVD-RKQRI± 7ULDQGDI\OOLGLV0DQROLV WULJJHUV 7VFKHUQLKRYVNL6DXO± 7VFKHUQLKRYVNL6DXO 3UL]H 7VXERXFKL6Kǀ\ǀ 7XUNLVKWUDGLWLRQ (XURSHDQVRXUFHVDQGWKH(QOLJKWHQPHQW± KLVWRULFDORYHUYLHZ± ,VODPLF3HUVLDQSKDVH± UROHRIWUDQVODWRUV[LY[Y[YL WUDQVODWRUV¶RUJDQL]DWLRQDQGWUDLQLQJ± 7XUQRYR(XWKLPLQV± 7XUYLOOH3HWUH 7XVLDO'LQ1DVLU 7XWXROD$PRV 7XZLP-XOLDQ 7\OHU0DUJDUHW 7\QGDOH:LOOLDP 7\QMDQRY-XULM W\SHWRNHQUDWLR W\SRJUDSK\ FRQFUHWHSRHPV± 7\WOHU$OH[DQGHU)UDVHU (VVD\RQWKH3ULQFLSOHVRI7UDQVODWLRQ SRHWLFVRIWUDQVODWLRQ 8HGD%LQ 81(6&2 VXSSRUWIRU),7± XQLWRIWUDQVODWLRQ± FRPSHQVDWLRQ SV\FKROLQJXLVWLFDQGFRJQLWLYHDSSURDFK 8QLWHG6WDWHVVHH$PHULFDQWUDGLWLRQ XQLYHUVDOVRIWUDQVODWLRQ FRUSRUD GLVFRXUVHWUDQVIHUDQGODZRILQWHUIHUHQFH± GLVWLQFWLYHGLVWULEXWLRQ H[SOLFLWDWLRQ ODZRIJURZLQJVWDQGDUGL]DWLRQ QRUPDOL]DWLRQ± UHSHUWRUHPH VLPSOLILFDWLRQDQGDYRLGDQFHRIUHSHWLWLRQ± 8UTXLMR0DULDQR/XLVGH± 8VTXH$EUDKDP± F8WKPƗQ,EQF$IIƗQ 9DOHUD&LSULDQRGH 9DOOD/RUHQ]R 9DOYLV6' 9DPYDV1HRSK\WRV YDQGHQ%URHFN5D\PRQG YDQGHQ9RQGHO-RRVW± YDQGHU1RRW-DQ YDQGHU1RRW7KRPDV YDQ'\FN&RUQHOLXV YDQ(IIHQ-XVWXV YDQ*KLVWHOH&RUQHOLV± YDQ+RRI+HQUL YDQ/HXYHQ=ZDUW.LWW\0± YDQ0DHUODQW-DFRE YDQ9HOGHNH+HQULF file:///e|//www.netlibrary.com/nlreader/nlreader.dll@bookid=97284&filename=page_653.html (1 z 2)11/3/2007 10:32:35 PM


9DQGHUDXZHUD5LD XQLYHUVDOVRIWUDQVODWLRQ± 9DVHYD, 9DXTXRLV%HUQDUG 9HGHO$6¡UHQVHQ 9HILN3DVKD$KPHG 9HKPDV/HKWR, 9HQH]XHOD 9HQXWL/DZUHQFH DEXVLYHILGHOLW\ DFDGHPLFSXEOLVKHUV RQ$UQROG IRUHLJQL]LQJ RQ0DWWKHZ$UQROG QRUPDWLYHPRGHO YHUEDOUHSRUWSURFHGXUHV 9HUtVVLPReULFR 9HUPHHU+DQV- VNRSRVWKHRU\± V\VWHPVPRGHO YHUQDFXODU GHPRWLF*UHHN± GX%HOOD\DUJXHVDJDLQVWWUDQVODWLRQ ,WDOLDQ± VHHDOVR6W&\ULO 6W0HWKRGLXV 9HUVHJK\)HUHQF YHUVLRQV VHHDOVRDGDSWDWLRQ IUHHWUDQVODWLRQ 9LODUDV


3DJH :DOH\$UWKXU :DOL$OODK'LKODZL6KDK :DOOVWHQ76 :HDYHU:DUUHQ .DMHWDQ :HLVHU&RQUDG :HLVVHQEXUJ2WIULGYRQ :KRUI%HQMDPLQ :LOOLDPRI0RHUEHNH :LOOLDPV&DURO\Q :LOOLDPV5RJHU :LOVV:ROIUDP FRPSHQVDWLRQ FULWLFLVP YRFDWLRQDOVLGHRIOLQJXLVWLFV :LOVWHU&KULVWLDQ)UHGHULN± :LQQHPXFFD6DUDK :LWWH+HLGUXQ :RMWDVLHZLF]2OJLHUG± :ROII%HWMH :ROOLQ/DUV :RRGVZRUWK-XGLWK 7UDQVODWRUV7KURXJK+LVWRU\ :UD[DOO/ :\FOLIIH-RKQ± :\OH1LNODVYRQGHU ;X*XDQJTL ;XDQ=DQJ±

Mona Baker - Routledge Encyclopedia Of Translation Studies 1u6h16

Overview 5o1f4z

More details 6z3438

Related Documents c2h70

Mona Baker - Routledge Encyclopedia Of Translation Studies 1u6h16

Mona Baker Translation 1u5e69

Holmes Map Of Translation Studies 29s1h

Munday Introducing Translation Studies 6ros

Critical Translation Studies 58251n

Applied Translation Studies 4y5x3z

More Documents from "Martina" 414c5z

Mona Baker - Routledge Encyclopedia Of Translation Studies 1u6h16

6g3p1u

Comentario De Texto. La Rama Seca 276712

Un Cuento De Amor En Mayo 6u372x

Lk.c2.01 Diskusi Materi Perubahan Fisika Dan Perubahan Kimia 4l3o3s

6g3p1u