Laboratory Phonology 8: Varieties of Phonological Competence

Laboratory Phonology 8 ≥ Phonology and Phonetics 4-2 Editor Aditi Lahiri Mouton de Gruyter Berlin · New York Lab...

Author: Conference in Laboratory Phonology 2002 | Louis M. Goldstein | D. H. Whalen | Catherine T. Best

195 downloads 809 Views 5MB Size Report

This content was uploaded by our users and we assume good faith they have the permission to share this book. If you own the copyright to this book and it is wrongfully on our website, we offer a simple DMCA procedure to remove your content from our site. Start by pressing the button below!
Report copyright / DMCA form

DOWNLOAD PDF

Laboratory Phonology 8

≥

Phonology and Phonetics 4-2

Editor

Aditi Lahiri

Mouton de Gruyter Berlin · New York

Laboratory Phonology 8

edited by

Louis Goldstein D. H. Whalen Catherine T. Best

Mouton de Gruyter Berlin · New York

Mouton de Gruyter (formerly Mouton, The Hague) is a Division of Walter de Gruyter GmbH & Co. KG, Berlin.

앝 Printed on acid-free paper which falls within the guidelines 앪 of the ANSI to ensure permanence and durability.

Library of Congress Cataloging-in-Publication Data Conference in Laboratory Phonology (8th : 2002 ; New Haven, Conn.) Laboratory phonology 8 / edited by Louis Goldstein, D. H. Whalen, Catherine T. Best. p. cm. ⫺ (Phonology and phonetics ; 4/2) “Papers from Eighth Conference on Laboratory Phonology, held in New Haven, CT”⫺ Chap. 1. Includes bibliographical references and index. ISBN-13: 978-3-11-017678-0 (cloth : alk. paper) ISBN-10: 3-11-017678-5 (cloth : alk. paper) 1. Grammar, Comparative and general ⫺ Phonology ⫺ Congresses. 2. Sign language ⫺ Congresses. 3. Language acquisition ⫺ Congresses. I. Goldstein, Louis, 1955⫺ II. Whalen, D. H. III. Best, Catherine T. IV. Title. V. Title: Laboratory phonology eight. VI. Series. P217.C658 2002 414⫺dc22 2006015539

Bibliographic information published by Die Deutsche Bibliothek Die Deutsche Bibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data is available in the Internet at ⬍http://dnb.ddb.de⬎.

ISBN-13: 978-3-11-017678-0 ISBN-10: 3-11-017678-5 ISSN 1861-4191 쑔 Copyright 2006 by Walter de Gruyter GmbH & Co. KG, D-10785 Berlin. All rights reserved, including those of translation into foreign languages. No part of this book may be reproduced in any form or by any means, electronic or mechanical, including photocopy, recording, or any information storage and retrieval system, without permission in writing from the publisher. Cover design: Christopher Schneider, Berlin. Printed in Germany.

7DEOHRIFRQWHQWV ,QWURGXFWLRQ 'HGLFDWLRQ

L[ [Y

,4XDOLWDWLYHDQGYDULDEOHIDFHVRISKRQRORJLFDOFRPSHWHQFH 6SRNHQODQJXDJHV ³'LVWLQFWLYHSKRQHV´LQVXUIDFHUHSUHVHQWDWLRQ '5REHUW/DGG 7KHIXQFWLRQDOLW\RILQFRPSOHWHQHXWUDOL]DWLRQLQ'XWFK 7KHFDVHRISDVWWHQVHIRUPDWLRQ 0LUMDP(UQHVWXVDQG+DUDOG%DD\HQ

'\QDPLFVLQJUDPPDU&RPPHQWRQ/DGGDQG(UQHVWXV %DD\HQ $GDPDQWLRV,*DIRVFRPPHQWDU\

7KHVWDWLVWLFDOEDVLVRIDQXQQDWXUDODOWHUQDWLRQ -DQHW%3LHUUHKXPEHUW

0RGHOLQJLQWRQDWLRQLQ(QJOLVK$SUREDELOLVWLFDSSURDFKWR SKRQRORJLFDOFRPSHWHQFH $XGUD'DLQRUD

7KHGLDFKURQ\RIODELDOLW\LQ7ULTXHDQGWKHIXQFWLRQDOUHOHYDQFH RIJUDGLHQFHDQGYDULDWLRQ 'DQLHO6LOYHUPDQ

&RQYHUJHQFHVDQGGLYHUJHQFHVRIVLJQHGDQGVSRNHQODQJXDJHV (IIHFWVRIODQJXDJHPRGDOLW\RQZRUGVHJPHQWDWLRQ$QH[SHULPHQWDO VWXG\RISKRQRORJLFDOIDFWRUVLQDVLJQODQJXDJH 'LDQH%UHQWDUL

YL

7DEOHRIFRQWHQWV

3KRQRORJ\SKRQHWLFVDQGWKHQRQGRPLQDQWKDQG :HQG\6DQGOHU

/H[LFDOUHWULHYDOLQ$PHULFDQ6LJQ/DQJXDJHSURGXFWLRQ 'DYLG3&RULQDDQG+HDWKHU3.QDSS

3KRQRORJLFDOSULPLQJLQ%ULWLVK6LJQ/DQJXDJH 0DWWKHZ:*'\HDQG6KXL,6KLK

6LJQHG/DQJXDJHV 3KRQHWLFLPSOHPHQWDWLRQDQGSKRQHWLFSUHVSHFL¿FDWLRQLQ VLJQODQJXDJHSKRQRORJ\ +DUU\YDQGHU+XOVWDQG(OVYDQGHU.RRLM 9DULDELOLW\LQYHUEDODJUHHPHQWIRUPVDFURVVIRXUVLJQHGODQJXDJHV *DXUDY0DWKXUDQG&KULVWLDQ5DWKPDQQ 6RPHFXUUHQWFODLPVDERXWVLJQODQJXDJHSKRQHWLFVSKRQRORJ\ DQGH[SHULPHQWDOUHVXOWV 'DYLG03HUOPXWWHUFRPPHQWDU\

,,6RXUFHVRIYDULDWLRQDQGWKHLUUROHLQWKHDFTXLVLWLRQRI SKRQRORJLFDOFRPSHWHQFH *HWWLQJWKHUK\WKPULJKW$FURVVOLQJXLVWLFVWXG\RI VHJPHQWDOGXUDWLRQLQEDEEOLQJDQG¿UVWZRUGV 0DULO\Q0D\9LKPDQ6DWVXNL1DNDLDQG5RU\'H3DROLV )OH[LELOLW\LQWKHIDFHRILQFRPSDWLEOH(QJOLVK927V\VWHPV -DPHV06FREELH 2QWKHVFRSHRISKRQRORJLFDOOHDUQLQJ,VVXHVDULVLQJIURP VRFLDOO\VWUXFWXUHGYDULDWLRQ *HUDUG'RFKHUW\3DXO)RXONHV-HQQ\7LOORWVRQDQG'RPLQLF:DWW

7DEOHRIFRQWHQWV

9DULDWLRQLQGHYHORSLQJSKRQRORJLHV&RPPHQWVRQ9LKPDQDQG FROOHDJXHV'RFKHUW\DQGFROOHDJXHVDQG6FREELH 6KHOOH\9HOOHPDQFRPPHQWDU\

YLL

,,,.QRZOHGJHRIODQJXDJHVSHFL¿FRUJDQL]DWLRQRI VSHHFKJHVWXUHV ,QWHUDFWLRQRISURVRG\DQGJHVWXUHV 3URVRG\¿UVWRUSURVRG\ODVW"(YLGHQFHIURPWKHSKRQHWLFVRI ZRUG¿QDOWLQ$PHULFDQ(QJOLVK 6WHIDQLH6KDWWXFN+XIQDJHO )RFXVLQJSURVRGLFSKUDVLQJDQGKLDWXVUHVROXWLRQLQ*UHHN 0DU\%DOWD]DQL

(DUO\YVODWHIRFXV3LWFKSHDNDOLJQPHQWLQWZRGLDOHFWVRI 6HUELDQDQG&URDWLDQ 5DMND6PLOMDQLþ

0DQLIHVWDWLRQRISURVRGLFVWUXFWXUHLQDUWLFXODWRU\YDULDWLRQ (YLGHQFHIURPOLSNLQHPDWLFVLQ(QJOLVK 7DHKRQJ&KR

5HODWLQJSURVRG\DQGG\QDPLFHYHQWV&RPPHQWVRQWKHSDSHUVE\ &KRDQG6PLOMDQLþ 'DQL%\UGFRPPHQWDU\

/RFDOJHVWXUHLQWHUDFWLRQDQGSHUFHSWLRQ 6\OODEOHSRVLWLRQHIIHFWVDQGJHVWXUDORUJDQL]DWLRQ $UWLFXODWRU\HYLGHQFHIURP5XVVLDQ $OH[HL.RFKHWRY 3HUFHSWXDOVDOLHQFHDQGSDODWDOL]DWLRQLQ5XVVLDQ 'DU\D.DYLWVND\D

YLLL

7DEOHRIFRQWHQWV

,QWHJUDWLQJFRDUWLFXODWLRQDVVLPLODWLRQDQGEOHQGLQJLQWRDPRGHORI DUWLFXODWRU\FRQVWUDLQWV 'DQLHO5HFDVHQV

([FUHVFHQWVFKZDDQGYRZHOOD[LQJ&URVVOLQJXLVWLFUHVSRQVHV WRFRQÀLFWLQJDUWLFXODWRU\WDUJHWV %U\DQ*LFNDQG,DQ:LOVRQ

$XWKRULQGH[ 6XEMHFWLQGH[ /DQJXDJHLQGH[ /LVWRIFRQWULEXWRUV

,QWURGXFWLRQ

7KH¿UVW&RQIHUHQFHRQ/DERUDWRU\3KRQRORJ\ZDVKHOGLQDWWKH2KLR 6WDWH 8QLYHUVLW\ ,W EURXJKW WRJHWKHU WKHRUHWLFDO SKRQRORJLVWV DQG SKRQHWL FLDQVZKRVHUHVSHFWLYHDUHDVRIUHVHDUFKZHUHDWWKDWPRPHQWIDLUO\ZHOO GHPDUFDWHG3KRQRORJLVWVVWXGLHGWKHNLQGVRIIRUPDOUHSUHVHQWDWLRQVDQG RSHUDWLRQV WKDWZHUHQHFHVVDU\WRDFFRXQWIRUVSHDNHUV¶NQRZOHGJHRIWKH SDWWHUQLQJRIVHJPHQWVDQGKLJKHUOHYHOSKRQRORJLFDOXQLWVLQWKHLUODQJXDJH WKHLU OH[LFDO UHJXODULWLHV DQG WKHLU DOWHUQDWLRQV ZKHQ OH[LFDO XQLWV FRPELQH LQWRODUJHUVWUXFWXUHV7KHGDWDZHUH SULPDULO\WUDQVFULSWLRQVRI XWWHUDQFHV DQGQDWLYHVSHDNHUZHOOIRUPHGQHVVMXGJPHQWV3KRQHWLFLDQVODUJHO\VWXGLHG KRZ VHJPHQWV DUH SURGXFHG LQ FRQWH[W WKHLU UHVXOWLQJ DFRXVWLF SURSHUWLHV DQGKRZWKRVHDFRXVWLFSURSHUWLHVFRXOGEHXVHGE\OLVWHQHUVWRSHUFHLYHWKH VHJPHQWDOVHTXHQFHV7KHLUGDWDZHUHDUWLFXODWRU\DQGDFRXVWLFPHDVXUHVRI VSHHFK SURGXFWLRQ DQG SHUFHSWXDO MXGJPHQWV7KH RUJDQL]HUV KDG WKH IRUH VLJKW WR KDYH SKRQHWLFLDQV DQG SKRQRORJLVWV SURYLGH FRPPHQWDU\ RQ HDFK RWKHUV¶SDSHUVLQRUGHUWRHQFRXUDJHFRPPXQLFDWLRQDFURVVWKHGLYLGH %XWWKHPHHWLQJWRRNSODFHLQDFOLPDWHRIJURZLQJDZDUHQHVVWKDWWKLV ZD\RIGLYLGLQJXSWKHOLQJXLVWLFVWXG\RIWKHKXPDQVSHHFKV\VWHPPLJKW QRWEHWKHEHVWRQHDQGLQGHHGWKLVZDVRQHRIWKHPRWLYDWLRQVIRUWKHHYHQW /DERUDWRU\ZRUNKDGEHJXQWRGHPRQVWUDWHWKDWVRPHDVSHFWVRIODQJXDJH VSHFL¿FSKRQRORJLFDONQRZOHGJHFRXOGEHPRVWV\VWHPDWLFDOO\H[SUHVVHGLQ WHUPV RI WKH FRQWUROV IRU WKH VSHHFK SURGXFWLRQ SURFHVV HJ VSDUVHO\ GLV WULEXWHGWRQHRUDUWLFXODWRU\WDUJHWVRYHUODSSLQJRUJDQL]DWLRQRIDUWLFXODWRU\ JHVWXUHV UDWKHUWKDQLQWKHOLQHDUVHTXHQFLQJRIVHJPHQWVDQGIHDWXUHV7KLV VHHPHGLQWULJXLQJO\FRPSDWLEOHZLWKWKHFRQWHPSRUDQHRXVGHYHORSPHQWRI QRQOLQHDUSKRQRORJLFDOUHSUHVHQWDWLRQV,QWKLVFRQWH[WWKHGDWDUHOHYDQWIRU SURELQJRIDVSHDNHU¶VSKRQRORJLFDONQRZOHGJHEHJDQWREHJHQHUDOL]HGEH \RQGSKRQHWLFWUDQVFULSWLRQVDQGMXGJPHQWVRIWKHLUJUDPPDWLFDOLW\WRPRUH ¿QHJUDLQHGTXDQWLWDWLYHGHVFULSWLRQVRIVSHHFK7KXVZDVERUQ/DERUDWRU\ 3KRQRORJ\ 7KH (LJKWK FRQIHUHQFH RQ /DERUDWRU\ 3KRQRORJ\ KHOG LQ 1HZ +DYHQ &7 DQG KRVWHG E\ V@DQG>O@ ±IRUVD\LQJWKDWWZRSK\VLFDOVSHHFKHYHQWVZKLFKZHNQRZWREHGLIIHUHQW LQ SK\VLFDO GHWDLO FRXQW DV ³WKH VDPH´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± DV D VXEVWLWXWH IRU TXDQWLWDWLYH GHVFULSWLRQ IDXWH GH PLHX[-RRV 6RPHZKHUHDORQJWKHOLQHKRZHYHUV\VWHPDWLFSKRQHW LFVEHFDPHRQHRIWKHELJLGHDVRIWZHQWLHWKFHQWXU\SKRQRORJ\SURPRWHG E\3LNH $EHUFURPELHHJ DQGRWKHUVWKHGH¿QLWLYHVWDWHPHQW RIWKLVYLHZVHHPVWREH/DYHU 7KHFHQWUDOLGHDRIV\VWHPDWLFSKR QHWLFVLVWKDWWKHUHLVDSULQFLSOHGXQLYHUVDOVHWRISKRQHWLFFDWHJRULHVWKDW DEVWUDFWDZD\IURPWKHLQ¿QLWHYDULDELOLW\RIWKHSK\VLFVRIVSHHFK7KLVLQ WXUQ LPSOLHV WKDW LW VKRXOG EH SRVVLEOH WR JLYH D V\PEROLF RU QRQTXDQWLWD WLYH GHVFULSWLRQ WKDW IXOO\ FKDUDFWHUL]HV WKH OLQJXLVWLFDOO\ VLJQL¿FDQW GHWDLO RI DQ\ XWWHUDQFH RI DQ\ ODQJXDJH 7KLV DVVXPSWLRQ LV WKH EDVLV RQ ZKLFK &KRPVN\ FKDUDFWHUL]HGV\VWHPDWLFSKRQHWLFWUDQVFULSWLRQDVDOHYHO RI UHSUHVHQWDWLRQ LQ KLV IRUPDOL]DWLRQ RI SKRQRORJ\ DV KDV EHHQ SRLQWHG RXW E\ 3LHUUHKXPEHUW DQG %HFNPDQ FK WKH 63( PRGHO &KRP VN\DQG+DOOH DVVXPHVWKDWRQO\XQLYHUVDOELRPHFKDQLFDOSURSHUWLHV RI VSHHFK QHHG WR EH WUHDWHG LQ WHUPV RI FRQWLQXRXV PDWKHPDWLFV$V ZH MXVWVDZKRZHYHUWKHUHLVDJUHDWGHDORIUHFHQWODERUDWRU\UHVHDUFKVKRZ LQJ WKDW PDQ\ ODQJXDJHVSHFL¿F SKRQRORJLFDO SKHQRPHQD FDQ RQO\ EH IXOO\GHVFULEHGLQTXDQWLWDWLYHWHUPV6\VWHPDWLFSKRQHWLFWUDQVFULSWLRQDS SHDUV LQFDSDEOH LQ SULQFLSOH RI VHUYLQJ DV D IRUPDO OHYHO RI UHSUHVHQWDWLRQ RIVSHHFK ,IZHLQVLVWRQWKH³LQIRUPDOVKRUWKDQG´VWDWXVRIV\VWHPDWLFSKRQHWLFV \HWUHWDLQWKHQRWLRQWKDWWKHUHLVDQLQWHUIDFHUHSUHVHQWDWLRQWKHQWKHRWKHU WUDGLWLRQDO W\SH RI V\PEROLF UHSUHVHQWDWLRQ WKDW VXJJHVWV LWVHOI IRU RXU SXU

'5REHUW/DGG

SRVHVLVWKH³FODVVLFDOSKRQHPLFÚHSUHVHQWDWLRQ2QWKHIDFHRILWWKLVGRHV QRWORRNOLNHDYHU\SURPLVLQJLGHD$IWHUDOOWKHFUXVKLQJFULWLTXHVE\+DOOH DQG&KRPVN\ UHYHDOHGIXQGDPHQWDOWKHRUHWLFDOSUREOHPVZLWK WKH FODVVLFDO SKRQHPH DQG WKHLU FULWLTXHV KDYH QHYHU EHHQ DQVZHUHG %XW WKHUHDUHJRRGUHDVRQVIRUFRQVLGHULQJWKLVDSSURDFKDQ\ZD\ 7KHPRVWREYLRXVUHDVRQWRWDNHWKHFODVVLFDOSKRQHPHVHULRXVO\LVWKDW LWVWLOOSOD\VDODUJHGHIDFWRUROHLQSKRQRORJLFDOGLVFXVVLRQQRWZLWKVWDQG LQJ+DOOHDQG&KRPVN\,QSUDFWLFH±LQVSHHFKWKHUDS\LQVSHHFKWHFKQRO RJ\LQRUWKRJUDSK\GHVLJQLQVWXGLHVRIODQJXDJHDFTXLVLWLRQDQGIRUWKDW PDWWHULQPRVWGHVFULSWLYHZRUNZLWKLQ2SWLPDOLW\7KHRU\±WKHSKRQHPH QRWLRQFRQWLQXHVWREHDSSOLHGDVLIWKHUHZHUHQRVHULRXVSUREOHPZLWKLW )RUDWKHRUHWLFDOFRQVWUXFWWKDWZDVGLVFUHGLWHGIRUW\\HDUVDJRWKHFODVVLFDO SKRQHPHLVDFWXDOO\VWLOOGRLQJ SUHWW\ZHOO7KLV KDV EHHQ WUXH WKURXJKRXW WKHKLVWRU\RIJHQHUDWLYHSKRQRORJ\2QO\WKUHH\HDUVDIWHUWKHSXEOLFDWLRQ RI63(6FKDQH ZDVDOUHDG\SRLQWLQJRXWWKDWZKHQHYHUJHQHUDWLYH SKRQRORJLVWVLJQRUHGVRFDOOHG³ORZOHYHOSKRQHWLFGHWDLO´±ZKLFKZDVPRVW RIWKHWLPH±WKHLUDQDO\VHVJHQHUDWHGDVXUIDFHUHSUHVHQWDWLRQ³DOPRVWDPD] LQJO\LGHQWLFDOWRDFODVVLFDOSKRQHPLFUHSUHVHQWDWLRQ ´$WWKH YHU\OHDVWWKLVPHDQVWKDWPDQ\OLQJXLVWVRIYDU\LQJWKHRUHWLFDOSHUVXDVLRQV RYHUPDQ\\HDUVKDYHIRXQGDQDEVWUDFWLRQOLNHWKHFODVVLFDOSKRQHPLFUHS UHVHQWDWLRQXVHIXO 7KLVEHLQJWKHFDVHOHWXVJREDFNDQGUHH[DPLQH+DOOH¶VDQG&KRPVN\¶V HYLGHQFHIRUGLVFUHGLWLQJWKHFODVVLFDOSKRQHPHLQWKH¿UVWSODFH,IZHGR WKDWZHVHHWKDWWKHUHLVDQ$FKLOOHV¶+HHOWRWKHLUFULWLTXHV±QDPHO\WKH\ GHSHQGFUXFLDOO\RQWKHLGHDWKDWV\VWHPDWLFSKRQHWLFVLVDOHYHORIUHSUHVHQ WDWLRQ 1RWH WKDW 63( SKRQRORJ\ DVVXPHV DQ LQWHUIDFH YLHZ RI SKRQRORJ\ DQGSKRQHWLFVWKDWLVPRUHRUOHVVLGHQWLFDOLQRYHUDOOVWUXFWXUHWRWKHYLHZ VNHWFKHGLQ DERYH6SHFL¿FDOO\WKH63(PRGHOOLNHWKHRQHLQ DV VXPHVDQDEVWUDFWOHYHOVKRZLQJWKHPRUSKHPLFLGHQWLW\RISKRQRORJLFDOO\ FRQGLWLRQHGDOORPRUSKVZKLFK&KRPVN\FDOOHG³V\VWHPDWLFSKRQHPLFUHS UHVHQWDWLRQ´DFRQFUHWH³SK\VLFDOSKRQHWLFÓHYHOWKDWFKDUDFWHUL]HVVSHHFK HYHQWVLQTXDQWLWDWLYHWHUPVDQGDQLQWHUPHGLDWHOHYHOWKDWH[SUHVVHVOLQJXLV WLFDOO\UHOHYDQWSKRQHWLFGLVWLQFWLRQVLQWHUPVRIDEVWUDFWV\PEROLFFDWHJRULHV WKDWFDQEHPDQLSXODWHGE\DJUDPPDU7KH63(YHUVLRQRI LVVKRZQLQ :KDW+DOOHDQG&KRPVN\FULWLFL]HGDERXWFODVVLFDOSKRQHPLFWKHRU\ZDV WKDW LQ WKHLU YLHZ LW ZDV DFWXDOO\ D IRXUOHYHO PRGHO ZLWK WZR UHSUHVHQ WDWLRQVLQWHUPHGLDWHEHWZHHQWKHPRUSKRSKRQRORJLFDODQGWKHSK\VLFDODV VKRZQLQ

³'LVWLQFWLYHSKRQHV´LQVXUIDFHUHSUHVHQWDWLRQ

/HYHOVRISKRQRORJLFDOUHSUHVHQWDWLRQLQ63( XQGHUO\LQJPRUSKHPLFLGHQWLW\ ³V\VWHPDWLFSKRQHPLFUHSUHVHQWDWLRQ´ 3KRQRORJLFDOUXOHV VXUIDFHSKRQRORJLFDOUHSUHVHQWDWLRQ ³V\VWHPDWLFSKRQHWLFUHSUHVHQWDWLRQ´ 3KRQHWLFUHDOL]DWLRQFRPSRQHQW 3K\VLFDODQGSV\FKRSK\VLFDOHYHQWV ³SK\VLFDOSKRQHWLFV´

&ODVVLFDOSKRQHPLFWKHRU\DFFRUGLQJWR&KRPVN\ V\VWHPDWLFSKRQHPLFUHSUHVHQWDWLRQ

0RUSKRSKRQHPLFUXOHV

³WD[RQRPLFSKRQHPLFUHSUHVHQWDWLRQ´

³V\VWHPDWLFSKRQHWLFUHSUHVHQWDWLRQ´

3KRQHWLFUHDOL]DWLRQFRPSRQHQW

SK\VLFDOSKRQHWLFV 7KHIXQGDPHQWDOSUREOHPWKDWERWK+DOOHDQG&KRPVN\LGHQWL¿HGLQFODV VLFDO SKRQHPLF WKHRU\ DV UHSUHVHQWHG LQ ZDV WKDW LW LQYROYHV D PDS

'5REHUW/DGG

SLQJEHWZHHQRQHLQWHUPHGLDWHV\PEROLFUHSUHVHQWDWLRQDQGDQRWKHU*LYHQ WKH IRXUOHYHO SLFWXUH LQ &KRPVN\ DUJXHG WKDW YDULRXV SUREOHPV DULVH IURP SRVLWLQJ WZR LQWHUPHGLDWH V\PEROLF UHSUHVHQWDWLRQV DQG SURSRVHG WR GRDZD\ZLWKWKHWD[RQRPLFSKRQHPLFOHYHO+DOOH¶VIDPRXVDUJXPHQWEDVHG RQ 5XVVLDQ REVWUXHQW YRLFLQJ DVVLPLODWLRQ +DOOH UHDFKHG WKH VDPH FRQFOXVLRQRQVLPLODUJURXQGV +RZHYHUWKH+DOOH&KRPVN\DUJXPHQWZRUNVRQO\LIV\VWHPDWLFSKRQHW LFVLVDIRUPDO³OHYHORIUHSUHVHQWDWLRQ´,IZHJREDFNWRWKHRULJLQDO,3$ FRQFHSWLRQRIV\VWHPDWLFSKRQHWLFVDVDVKRUWKDQGIRUWKLQJVWKDWRXJKWWREH GHVFULEHGTXDQWLWDWLYHO\DQGLIZHWDNHVHULRXVO\DOOWKHUHFHQWODERUDWRU\HY LGHQFHDERXWWKHQRQFDWHJRULFDOQDWXUHRIDVVLPLODWLRQDQGGHOHWLRQDQGVR IRUWKWKHQWKH+DOOH&KRPVN\DUJXPHQW±JLYHQWKHVLPLODULW\RI WR ±DFWXDOO\IDYRUVUHWDLQLQJWKHFODVVLFDOSKRQHPLFOHYHO,QHIIHFW+DOOHDQG &KRPVN\ZHUHULJKWWRVD\WKDWRQHRIWKHLQWHUPHGLDWHUHSUHVHQWDWLRQVLQ LVVXSHUÀXRXVZLWKWKHEHQH¿WRIIRUW\\HDUV¶KLQGVLJKWKRZHYHUZHFDQ VHHWKDWWKH\HOLPLQDWHGWKHZURQJRQH,GRQRWRIFRXUVHPHDQWRVXJJHVW WKDWZHVKRXOGVLPSO\HTXDWHWKHLQWHUIDFHUHSUHVHQWDWLRQLQ ZLWKDV SKRQHPLFWUDQVFULSWLRQDQGSLFNXSZKHUHZHOHIWRIIKDOIDFHQWXU\DJR0\ SRLQWLVMXVWWKDWLIWKHUHLVQRV\VWHPDWLFSKRQHWLFVWKHQ+DOOH¶VDQG&KRP VN\¶VDUJXPHQWVDJDLQVWWKHFODVVLFDOSKRQHPHORVHPXFKRIWKHLUIRUFH

2QUH¿QLQJWKHSKRQHPH :H PD\ VXPPDUL]H WKH DUJXPHQW VR IDU DV IROORZV )LUVW WKHUH DUH JRRG UHDVRQVIRUDQDSSURDFKWRSKRQRORJ\WKDWLQYROYHVDQLQWHUIDFHEHWZHHQD JUDPPDUOLNHFRPSRQHQWWKDWGHDOVLQSKRQRWDFWLFVWUXFWXUHVDQGFRQVWUDLQWV DQGDSK\VLFDOUHDOL]DWLRQFRPSRQHQWWKDWGHDOVLQTXDQWLWDWLYHSDUDPHWHUV 6HFRQG WKHUH DUH JRRG UHDVRQV IRU VXVSHFWLQJ WKDW WKH LQWHUIDFH UHSUHVHQ WDWLRQLVJRLQJWRORRNVRPHWKLQJOLNHDFODVVLFDOSKRQHPLFUHSUHVHQWDWLRQ LHEDVHGRQDQLQYHQWRU\RIODQJXDJHVSHFL¿FHOHPHQWVRUFDWHJRULHV7KLV PHDQV WKDW ZH QRZ QHHG WR FRQVLGHU KRZ ZH PLJKW SXW WKH FODVVLFDO SKR QHPHQRWLRQRQD¿UPHUHPSLULFDODQGWKHRUHWLFDOEDVLV

3KRQHPHVDVSKRQHWLFFDWHJRULHV ,QP\YLHZWKHNH\WRUH¿QLQJWKHSKRQHPHFRQFHSWLVWRWDNHVHULRXVO\WKH LGHD RI SKRQHWLF DEVWUDFWLRQ ZLWK ZKLFK WKH SDSHU EHJDQ DQG WR VHH SKR


QHPHVSULPDULO\DVODQJXDJHVSHFL¿FSKRQHWLFFDWHJRULHV±ODQJXDJHVSHFLI LFDEVWUDFWLRQVDZD\IURPSKRQHWLFGHWDLO7KHVHDUHWKH³GLVWLQFWLYHSKRQHV´ RI P\ WLWOH 3KRQHPLF GLVWLQFWLRQV DUH LQ WKH ¿UVW LQVWDQFH DERXW VRXQGLQJ GLIIHUHQWWRWKHQDWLYHVSHDNHUQRWDERXWVLJQDOLQJGLIIHUHQWPHVVDJHV,IZH VHHWKLQJVLQWKLVOLJKWWKHQZHDUHLQDSRVLWLRQWRGHDOZLWKVRPHRIWKHFODV VLFWKHRUHWLFDOSUREOHPVRIWKHSKRQHPHRQWKHEDVLVRIZKDWZHNQRZDERXW FRJQLWLYHFDWHJRULHVPRUHJHQHUDOO\ $OWKRXJK DV D PDWWHU RI WKHRU\ PDQ\ DGKHUHQWV RI WKH FODVVLFDO SKR QHPHZRXOGSUHVXPDEO\KDYHHQGRUVHGWKHSURSRVLWLRQWKDWSKRQHPHVPXVW ³VRXQGGLIIHUHQW´WRQDWLYHVSHDNHUVRIDODQJXDJHLQSUDFWLFHWKHEDVLVRI WKLVSURSRVLWLRQZDVWKHDELOLW\RIVRXQGVXEVWLWXWLRQVWRVLJQDOGLIIHUHQFHV RI PHDQLQJ 7KH PLQLPDO SDLU WHVW ZDV WKH PHWKRGRORJLFDO JROG VWDQGDUG RISKRQHPLFWKHRU\LIVXEVWLWXWLQJRQHVRXQGIRUDQRWKHU\LHOGVDGLIIHUHQW ZRUGRUVHQWHQFHWKHQWKHWZRVRXQGVDUHGHHPHGWRVRXQGGLIIHUHQW,QWKLV UHVSHFWWUDGLWLRQDOSKRQHPLFWKHRU\KDVGLVWLQFWO\:KRU¿DQRYHUWRQHVWKH PLQLPDOSDLUSURFHGXUHLQGH¿QLQJSKRQHPHVVXJJHVWVWKDWOH[LFDOFRQWUDVW ZLOO GLFWDWH ZKLFK SKRQHWLF GLVWLQFWLRQV D VSHDNHU RI WKH ODQJXDJH ZLOO EH FDSDEOHRISHUFHLYLQJ7KHUHDUHREYLRXVO\JRRGUHDVRQVIRUDVVXPLQJWKDW OH[LFDOFRQWUDVWLVUHOHYDQWWRSKRQRORJLFDOV\VWHPVEXWWKDWLVQRUHDVRQWR DFFHSWWKHVWURQJHUYLHZWKDWGLIIHUHQFHVRIPHDQLQJLQVRPHIDLUO\QDUURZ VHQVH GH¿QHWKHVWDWXVRIGLIIHUHQFHVRIVRXQGLQVRPHIDLUO\ORRVHVHQVH GH¿QHGLQSUDFWLFHE\WKH,3$V\PEROV\VWHP 7KHSUREOHPVLQKHUHQWLQWKH VWURQJHUYLHZZHUHH[WHQVLYHO\GLVFXVVHGLQWKHKH\GD\RIFODVVLFDOSKRQH PLFWKHRU\LQWKHVDQGV,RXWOLQHWKHPEULHÀ\LQWKHIROORZLQJ SDUDJUDSK 2QH SUREOHP LV ZKDW ZH PLJKW FDOO DOORSKRQLF DZDUHQHVV ,Q FDVHV RI WKLVVRUWQDWLYHVSHDNHUVRIDODQJXDJHFRQVLVWHQWO\KHDUWKHGLIIHUHQFHEH WZHHQWZRSKRQHVWKDWDUHVXSSRVHGWREHDOORSKRQHVRIWKHVDPHSKRQHPH 7KHGLVWLQFWLRQEHWZHHQ*HUPDQLFK/DXWDQGDFK/DXWDQGSVHXGRPLQLPDO SDLUVOLNH.XFKHQµFDNH¶YV.XKFKHQµFRZGLPLQXWLYH ¶LVSUREDEO\WKHFODV VLFH[DPSOH/HRSROG0DF)DUODQGDQG3LHUUHKXPEHUW0RXOWRQ EXWWKHUHDUHRWKHUV$QRWKHUSUREOHPZKLFKZDVDFWXDOO\UDUHO\UHF RJQL]HGDVDSUREOHPXQWLOWKHDGYHQWRIYDULDWLRQLVWVRFLROLQJXLVWLFV LVWKH QRWLRQRIIUHHYDULDWLRQ7KLVLVDSUREOHPEHFDXVHFORVHLQVSHFWLRQDOPRVW DOZD\V¿QGVWKDWWKHFKRLFHRI³IUHHÝDULDQWVLVFRPPXQLFDWLYHO\VLJQL¿FDQW LQVRPHZD\$QH[DPSOHKHUHZRXOGEHWKHGLIIHUHQFHEHWZHHQDSLFDODQG XYXODUULQVHYHUDOODQJXDJHVRI:HVWHUQ(XURSHZKLFKQHYHUPDNHVDOH[L FDOGLIIHUHQFHEXWFHUWDLQO\PDNHVDVRFLROLQJXLVWLFRQHDQGZKLFKLVUHFRJ QL]HGHYHQLQOD\SKRQHWLFWHUPLQRORJ\6WLOODQRWKHUORQJVWDQGLQJSUREOHP

'5REHUW/DGG

IRUFODVVLFDOSKRQHPLFWKHRULVWVZDVWKHH[LVWHQFHRIPDUJLQDOSKRQHPHVIRU H[DPSOHWKHXVHRIDYHODUIULFDWLYHLQWKHQDPH%DFKE\VSHDNHUVRI(QJOLVK ZKRLQRWKHUUHVSHFWV³GRQ¶WKDYHDSKRQHPH[´'RZHFRXQW[DVDSKR QHPHIRUWKRVHVSHDNHUVRUQRW"$PRUHVHULRXVYHUVLRQRIWKHVDPHSUREOHP LV ZKDW )ULHV DQG 3LNH UHIHUUHG WR DV FRH[LVWHQW SKRQHPLF V\VWHPV 7KLVSUREOHPLVH[HPSOL¿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¶V SKRQHWLFWD[RQRP\EXWLWLVQRWWKHRQO\RQH$OONLQGVRIIDFWRUVFDQSOD\D UROHLQVHQVLWL]LQJVSHDNHUVRIDODQJXDJHWRGLIIHUHQFHVEHWZHHQWZRSKRQHW LFDOO\GLVWLQFWW\SHVVRFLROLQJXLVWLFGLVWLQFWLRQVIRONGHVFULSWLRQVRIVRXQG W\SHVH[SRVXUHWRQHLJKERULQJODQJXDJHVRUGLDOHFWVDQGSDUDOLQJXLVWLFXV DJHRISRWHQWLDOO\OH[LFDOO\FRQWUDVWLYHVRXQGVOLNHWKHGLIIHUHQFHEHWZHHQ DQDSLFDODQGDODWHUDOFOLFNLQ(QJOLVK±WKHVRXQGVRI³WXWWXWWLQJ´DQGRI HQFRXUDJLQJDKRUVHUHVSHFWLYHO\ ,IZHUHPRYHWKHREOLJDWRU\OH[LFDOEDVLVIRUSKRQHWLFFDWHJRUL]DWLRQZH KDYHQRWURXEOHDFFRXQWLQJIRUWKHIDFWWKDWEDELHVEHJLQWRDFTXLUHWKHSKR QHWLFFDWHJRULHVRIWKHDPELHQWODQJXDJHEHIRUHWKH\UHDOO\KDYHDOH[LFRQ :HKDYHQRWURXEOHDFFRPPRGDWLQJWKHRWKHUZLVHVXUSULVLQJ¿QGLQJE\7HHV DQG:HUNHU WKDW (QJOLVK VSHDNHUV ZKR KDG EHHQ H[SRVHG WR +LQGL DV EDELHV EXW QRW VXEVHTXHQWO\ ZHUH DEOH WR GLVWLQJXLVK +LQGL GHQWDO DQG UHWURÀH[VWRSVDVDGXOWVHYHQWKRXJKWKH\VSRNHQR+LQGLDWDOO:HKDYH QRWURXEOHXQGHUVWDQGLQJZK\(QJOLVKVSHDNHUVDUHSHUIHFWO\FDSDEOHRIGLV WLQJXLVKLQJDSLFDOIURPODWHUDOFOLFNVEXWDUHOLNHO\WRKDYHWURXEOHZLWKWKH GLVWLQFWLRQEHWZHHQVD\YRLFHGQDVDODQGDVSLUDWHGODWHUDOFOLFNVZKLFKDUH OH[LFDOO\GLVWLQFWLYHLQVRPHODQJXDJHV 7KHLGHDVMXVWVNHWFKHGDUHVLPLODUWRWKRVHXQGHUO\LQJ3LHUUHKXPEHUW¶V QRWLRQRID³IDVWSKRQRORJLFDOSUHSURFHVVRU´3LHUUHKXPEHUW ZKLFK LVLQWHQGHGWRDFFRXQWIRUWKHFDWHJRULFDOQDWXUHRIPDQ\VSHHFKSHUFHSWLRQ SKHQRPHQD,QDSDSHUWKDWGLGQRWFRPHWRP\DWWHQWLRQXQWLODIWHU,KDG


SUHSDUHGD¿QDOYHUVLRQRIWKLVSDSHU3LHUUHKXPEHUW VXJJHVWVWKDWWKH OLNHO\EDVLVIRUVXFKFDWHJRULFDOSUHSURFHVVLQJLVWKHVWDWLVWLFDOGLVWULEXWLRQRI SKRQHWLFWRNHQVLQWKHLQSXWDYDLODEOHWRDOLVWHQHU'LVWULEXWLRQDOIDFWVZLOO EHLQÀXHQFHGE\OH[LFDOFRQWUDVWRIFRXUVHEXWVWDWLVWLFDOGLVWULEXWLRQLVSUL PDU\LQIDFW3LHUUHKXPEHUWH[SOLFLWO\VXJJHVWVWKDWWKHSKRQHWLFFDWHJRULHV RIDJLYHQODQJXDJHFRUUHVSRQGFORVHO\WRWKH³SRVLWLRQDODOORSKRQHV´RIWUD GLWLRQDOSKRQHPLFWKHRU\7KHVHDUHWKH³GLVWLQFWLYHSKRQHV´SURSRVHGKHUH

3DUWLDOVLPLODULW\EHWZHHQFDWHJRULHV ,QDGGLWLRQWRZLGHQLQJWKHEDVLVRQZKLFKQDWLYHVSHDNHUVDUHDVVXPHGWR HVWDEOLVKWKHLULQYHQWRU\RISKRQHWLFFDWHJRULHVZHQHHGWRDGGUHVVWKHDV VXPSWLRQWKDWSKRQHPLFLGHQWLW\LVVKDUSO\GH¿QHGDQGWKHVDPHLQDOOFRQ WH[WV7KLVDVVXPSWLRQZDVVXPPHGXSLQWKHKH\GD\RIWKHFODVVLFDOSKR QHPHLQWKHSKUDVH³RQFHDSKRQHPHDOZD\VDSKRQHPH´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¡K@ LQ VLGH DQG WLGH7KHXQFHUWDLQSKRQHPLFVWDWXVRIWKHWZRYDULDQWVRIDLFDQDOVREH VHHQ LQ WKH IDFW WKDW LQ PRQRPRUSKHPLF EXW GLV\OODELF ZRUGV OLNH VSLGHU DQG%LEOHVSHDNHUVPD\GLIIHUDPRQJWKHPVHOYHVZKLFKDOORSKRQHWKH\XVH DQGDQ\JLYHQVSHDNHUPD\XVHRQHDOORSKRQHLQVRPHVXFKZRUGVDQGWKH RWKHULQRWKHUV$UHZHGHDOLQJZLWKRQHSKRQHPHRUWZR",QP\H[SHULHQFH ¿UVW\HDUOLQJXLVWLFVVWXGHQWVZKRDUHQDWLYHVSHDNHUVRI6FRWWLVK6WDQGDUG

'5REHUW/DGG

(QJOLVKDUHRIWHQSX]]OHGE\WKHVWDWXVRIWKHYDULDQWVRIWKHDLGLSKWKRQJ ZKHQWKH\DUHLQWURGXFHGWRWKHSKRQHPHFRQFHSW7KHUHDUHDQXPEHURI RWKHUVLPLODUFDVHVRISDUWLDOVLPLODULW\RUTXDVLFRQWUDVWWKDWDUHIDLUO\ZHOO NQRZQLQFOXGLQJWKH$PHULFDQ(QJOLVKFRWFDXJKWFRQWUDVWWKH(DVW&RDVW $PHULFDQGLVWLQFWLRQEHWZHHQFDQµEHDEOHWR¶DQGFDQµPHWDOFRQWDLQHU¶HJ %ORFK WKHGLVWLQFWLRQEHWZHHQYRLFHGVWRSVZLWKDQGZLWKRXWSUH FHGLQJQDVDOLQ0RGHUQ*UHHNHJ$UYDQLWLDQG-RVHSK WKHPDUJLQDO VWDWXVRIWKHGLIIHUHQFHEHWZHHQORQJGRUWKRJUDSKLFHHHHK DQGORQJ 'RUWKRJUDSKLFlRUlK LQ*HUPDQDQGRIFRXUVHWKHGLVWLQFWLRQEHWZHHQ *HUPDQLFK/DXWDQGDFK/DXWGLVFXVVHGHDUOLHU /HWXVFRQVLGHULQGHWDLORQHVSHFL¿FFDVHRISDUWLDOVLPLODULW\QDPHO\WKH PLGYRZHOVLQ)UHQFKDQG,WDOLDQ$FFRUGLQJWRDWUDGLWLRQDOSKRQHPLFDQDO\ VLVERWKODQJXDJHVVKRZDFRQWUDVWEHWZHHQKLJKHUDQGORZHUPLGYRZHOV LQ,WDOLDQG±'DQGQ±nLQ)UHQFKG±'Q±nDQG1± 6RPH PLQLPDOSDLUVDUHJLYHQLQ

D ,WDOLDQ>¥R'UMC@µSHDFK¶YV>¥RGUMC@µ¿VKLQJ¶>¥Hn4n@µIRUXP¶YV >¥HQ4n@µKROH¶ E )UHQFK>GV'@µZDV¶YV>GVG@ µVXPPHU¶>UnV@µVWXSLGIHP ¶YV>UQV@µMXPSV¶

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«)URPDSXUHO\SKRQHWLFSRLQWRIYLHZWKHGLIIHUHQFHEHWZHHQ)UHQFKL DQGHLVQRWJUHDWHUWKDQWKHGLIIHUHQFHEHWZHHQHDQG'%XWWKHFORVHQHVVRI WKHUHODWLRQVKLSEHWZHHQHDQG'LVDSSDUHQWWRDQ\)UHQFKPDQZKLOHLQWKH FDVHRILDQGHWKHUHFDQEHQRTXHVWLRQRIDQ\SDUWLFXODUFORVHQHVV

7UXEHW]NR\¶V REVHUYDWLRQV DERXW WKH SV\FKRORJLFDO OLQN EHWZHHQ WKH PLG YRZHOVDUHDVWXWHDQG,WKLQNWKH\DSSO\HTXDOO\ZHOOWR,WDOLDQ


6HYHUDOIDFWRUVSURYLGHHYLGHQFHIRUWKH³SDUWLFXODUFORVHQHVV´³EHVRQ GHUH ,QWLPLWlW´ LQ WKH RULJLQDO WKDW 7UXEHW]NR\ WDONV DERXW )LUVW LQ ERWK ODQJXDJHVZH¿QGVSHDNHUVZKRGRQRWPDNHDGLVWLQFWLRQEHWZHHQWKHPHP EHUVRIWKHPLQLPDOSDLUVRUZKRPDNHDGLVWLQFWLRQEXWPDNHLWLQWKHRS SRVLWHGLUHFWLRQ6HFRQGHVSHFLDOO\LQ)UHQFKWKHUHLVDOVRVRPHGHJUHHRI SUHGLFWDELOLW\IURPWKHSKRQHWLFHQYLURQPHQWZKHWKHUZHJHWWKHKLJKHURU ORZHUYRZHO±ZHPLJKWFDOOWKLVTXDVLFRPSOHPHQWDU\GLVWULEXWLRQ7KLUG ±DQGWKLVSDUWLDOO\FRQWUDGLFWVWKHSUHGLFWDELOLW\RIWKHTXDVLFRPSOHPHQWDU\ GLVWULEXWLRQ±WKHOH[LFDOGLVWULEXWLRQRIWKHKLJKHUDQGORZHUYRZHOVLVLQ VRPHFDVHVTXLWHYDULDEOHIURPVSHDNHUWRVSHDNHUVRPHZRUGVFRQVLVWHQWO\ KDYHRQHRUWKHRWKHUEXWPDQ\RWKHUZRUGVPD\KDYHHLWKHU,WVHHPVHV SHFLDOO\ WHOOLQJ WKDW LQ ERWK ODQJXDJHV PDQXDOV RI JRRG XVDJH ZULWWHQ IRU QDWLYHVSHDNHUVIUHTXHQWO\GHYRWHVSDFHWRWKHLVVXHRIZKLFKYRZHOLVXVHG LQZKLFKZRUGV 7KLV ZKROH VLWXDWLRQ VHHPV WR GHPDQG VRPH FRPPHQW 5LJRURXVO\ DS SOLHG FODVVLFDO SKRQHPLF WKHRU\ ZRXOG KDYH QRWKLQJ WR VD\ H[FHSW ³RQFH DSKRQHPHDOZD\VDSKRQHPH´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¶VH[SODQDWLRQRIWKHVSHFLDOUHODWLRQVKLSEHWZHHQWKH)UHQFK PLGYRZHOVZDVEDVHGRQWKHIDFWWKDWWKHGLVWLQFWLRQEHWZHHQWKHPLVQHX WUDOL]HGLQOH[LFDOO\XQVWUHVVHGV\OODEOHV+HGLVWLQJXLVKHGEHWZHHQ³FRQVWDQW´ DQG³QHXWUDOL]DEOH´RSSRVLWLRQVDQGSURSRVHGWKDWQHXWUDOL]DEOHRSSRVLWLRQV ZRXOGKDYHDGLIIHUHQWSV\FKRORJLFDOVWDWXV7KLVFDQ¶WEHULJKW)LUVWVRPH RIWKHFDVHVRITXDVLFRQWUDVWOLNHWKH6FRWWLVKVLGHVLJKHGFDVHVGRQRWLQ YROYHQHXWUDOL]DWLRQDWDOO6HFRQGDQGPRUHLPSRUWDQWLIWKHQHXWUDOL]DELOLW\ RIWKHRSSRVLWLRQZHUHWKHH[SODQDWLRQIRUWKHVHREVHUYDWLRQVWKHQZHZRXOG H[SHFWWR¿QGWKHVDPHOLQNLQDQ\FDVHRIQHXWUDOL]DWLRQ)RUH[DPSOHZH ZRXOGH[SHFWVSHDNHUVRI$PHULFDQ(QJOLVKWREHDZDUHRIVRPHVSHFLDOUH ODWLRQVKLSEHWZHHQWDQGGEHFDXVHWKLVGLVWLQFWLRQLVQHXWUDOL]HGLQWHUYR FDOLFDOO\E\VRFDOOHG³ÀDSSLQJ´ZHZRXOGH[SHFWVSHDNHUVRIDQ\ODQJXDJH ZLWK¿QDOGHYRLFLQJWREHDZDUHRIVRPHVSHFLDOUHODWLRQVKLSEHWZHHQWKH

'5REHUW/DGG

PHPEHUVRIYRLFHGYRLFHOHVVSKRQHPHSDLUV,NQRZRIQRHYLGHQFHWKDWWKLV LVWUXH ,IZHUXOHRXWQHXWUDOL]DELOLW\DVWKHVRXUFHRIWKH³SDUWLFXODUFORVHQHVV´ EHWZHHQ WKH 5RPDQFH PLG YRZHOV FDQ ZH ¿QG DQ\ RWKHU H[SODQDWLRQ" ,I SUHVVHG RQ WKLV SRLQW PRVW SKRQRORJLVWV ZRXOG SUREDEO\ VXJJHVW WKDW WKLV LVDFDVHRIVRXQGFKDQJHLQSURJUHVVVSHFL¿FDOO\WKHSDLUVRIKLJKHUDQG ORZHUPLGYRZHOVDUHPHUJLQJLQWRVLQJOHSKRQHPHV6LPLODUO\LQWKHFDVH RIWKH6FRWWLVK6WDQGDUG(QJOLVKDLGLSKWKRQJZHFRXOGVD\WKDWWKHWZRDO ORSKRQHVDUHVSOLWWLQJWRIRUPWZRVHSDUDWHSKRQHPHVD@DQG>D@[@DQG>o@ 'XWFKVSHDN HUVZLOOKDYHDVKDUSERXQGDU\EHWZHHQWZRFDWHJRULHVEXWLQDGLIIHUHQWSODFH IURPWKHERXQGDU\LQ*HUPDQEDVHGRQWKHVRFLROLQJXLVWLFGLVWLQFWLRQEHWZHHQ VRFDOOHG³VRIW*ÚRXJKO\[ DQG³KDUG*ÚRXJKO\: 1RWHWKDWQRQHRI WKRVHODQJXDJHVKDVDQ\OH[LFDOFRQWUDVWVDPRQJGRUVDOIULFDWLYHVDWDOO 2EYLRXVO\ WKLV FKDUDFWHUL]DWLRQ RI FODVVLFDO SKRQHPLF WKHRU\ PDNHV QR DOORZ DQFH IRU QHXWUDOL]DWLRQ 6RPH YHUVLRQV RI WKH WKHRU\ GLG DWWHPSW WR GHDO ZLWK QHXWUDOL]DWLRQHJWKHQRWLRQRIWKH³DUFKLSKRQHPH´ EXWLWVHHPVIDLUWRVD\ WKDWQHXWUDOL]DWLRQDQGUHODWHGSKHQRPHQDSRVHGDIXQGDPHQWDOSUREOHPIRUWKH WKHRU\6HHIXUWKHUWKHGLVFXVVLRQRIH[DPSOHVD DQGE ,IZHDOORZDULFKHUVHWRIUHODWLRQVEHWZHHQSKRQHWLFFDWHJRULHVZHPD\KDYH DQDWXUDOPHFKDQLVPIRUVSOLWVDQGPHUJHUVWKURXJKWKHG\QDPLFVRIODQJXDJH DFTXLVLWLRQ:HFDQVHHKRZLWPLJKWEHSRVVLEOHIRUFKLOGUHQWRDFTXLUHDVXEWO\ GLIIHUHQWJUDPPDUIURPWKDWRIWKHLUSDUHQWVZLWKRXWDQ\VXSHU¿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

'5REHUW/DGG

5HIHUHQFHV $EHUFURPELH'DYLG (OHPHQWV RI *HQHUDO 3KRQHWLFV (GLQEXUJK (GLQEXUJK 8QLYHUVLW\ 3UHVV $QGHUVRQ6WHSKHQ5 3KRQRORJ\LQWKH7ZHQWLHWK&HQWXU\&KLFDJR8QLYHUVLW\RI&KLFDJR 3UHVV $UYDQLWL$PDOLDDQG%ULDQ'-RVHSK 9DULDWLRQLQYRLFHGVWRSSUHQDVDOLVDWLRQLQ*UHHN*ORVVRORJLD± ± $WWHUHU0LFKDHODDQG'5/DGG 2QWKHSKRQHWLFVDQGSKRQRORJ\RI³VHJPHQWDODQFKRULQJ´RI)HYL GHQFHIURP*HUPDQ-RXUQDORI3KRQHWLFV± %ORFK%HUQDUG $VHWRISRVWXODWHVIRUSKRQHPLFDQDO\VLV/DQJXDJH± %URZPDQ&DWKHULQH3DQG/RXLV0*ROGVWHLQ 7RZDUGVDQDUWLFXODWRU\SKRQRORJ\3KRQRORJ\W@LQ=DWPV? µDVVRFLDWLRQ¶LVQRWLGHQWLFDOWRWKH>W@LQ=DWPV?µFRORUIXO¶(YHQWKRXJKERWK DUHWUDQVFULEHGDV>W@WKHPHDQRIWKHYDULDEOHLQGH[LQJYRLFHOHVVQHVVGLIIHUV EHWZHHQWKH>±9RLFHG@DQGWKHVXUIDFHUHDOL]DWLRQVRIXQGHUO\LQJ >9RLFHG@ FRQVRQDQWV 7KH ODWWHU¶V PHDQ LV VOLJKWO\ VKLIWHG WRZDUG OHVV H[WUHPH YDO XHVRIGHYRLFLQJRUWRZDUGPRUH³VOLJKWYRLFLQJ´LQ(UQHVWXVDQG%DD\HQ¶V WKLVYROXPH WHUPV6SHFL¿FDOO\GLIIHUHQFHVFDQEHREVHUYHGLQWKHGXUDWLRQ RIWKHSUHFHGLQJYRZHOLQWKHGXUDWLRQRIFRQVRQDQWDOFORVXUHDQGJORWWDO SXOVLQJGXULQJWKDWFORVXUHDQGLQWKHGXUDWLRQRIWKHEXUVWDVVRFLDWHGZLWK FRQVRQDQWUHOHDVH6HHDPRQJRWKHUV'LQQVHQ IRUDUHYLHZRIRWKHU LQVWDQFHVRILQFRPSOHWHQHXWUDOL]DWLRQ'LQQVHQDQG&DUOHV/XFH RQ &DWDODQ¿QDOGHYRLFLQJ)RXJHURQDQG6WHULDGH RQ)UHQFKVFKZDHOL VLRQ DQG &KDUOHV/XFH RQ &DWDODQ YRLFLQJ DVVLPLODWLRQ DQG (QJOLVKÀDSSLQJ 6HFRQGQHXWUDOL]DWLRQVKRZVDVXEWOHGHSHQGHQF\RQWKHFRPPXQLFDWLYH FRQWH[W7KLVFDQEHLOOXVWUDWHGZLWKWKHIROORZLQJWDVNIURP3RUWDQG&UDZ IRUG ,QRQHH[SHULPHQWDOFRQGLWLRQVSHDNHUVDUHDVNHGWRUHDGDOLVW

'\QDPLFVLQJUDPPDU&RPPHQWV

RIZRUGVLQLVRODWLRQ,QDQRWKHUFRQGLWLRQVSHDNHUVDUHDVNHGWRUHDGVHQ WHQFHVOLNH,FKKDEH5DW5DG JHVDJWQLFKW5DG5DW ³,VDLG5DW5DG QRW 5DG5DW ´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¿QDOGHYRLFLQJDQGLWVV\VWHPDWLFGHSHQGHQFHRQ FRQWH[WDUHFKDUDFWHULVWLFRIWKHÀH[LELOLW\DQGVWDELOLW\RIWKHSKRQHWLFVSKR QRORJ\V\VWHP2QWKHRQHKDQGWKHUHLVDFRQVLVWHQWO\UHSURGXFLEOHDVSHFW RIWKHSKRQHWLFVSKRQRORJ\RI*HUPDQLGHQWL¿HGZLWK¿QDOGHYRLFLQJVWD ELOLW\ 2QWKHRWKHUKDQGWKHSKRQHWLFVSKRQRORJ\V\VWHPLVÀH[LEOHLQDO ORZLQJVSHDNHU¶VLQWHQWLRQVWRVKLIWWKHSKRQHWLFRXWSXWLQZD\VWKDWGHYLDWH VOLJKWO\IURPWKHLGHDOJUDPPDWLFDORSWLPXPÀH[LELOLW\ &RQVLGHUKRZWKHGHULYDWLRQDOYLHZRISKRQHWLFVSKRQRORJ\GHDOVZLWK VWDELOLW\ DQG ÀH[LELOLW\ LQ JHQHUDO7KH V\PEROLF FRQVWUXFWV RI SKRQRORJ\ DUHE\GH¿QLWLRQVWDEOH±WKH\DUHPHQWDOUHDOLWLHVDEVWUDFWHGIURPWKHHQYL URQPHQW D[LRPDWLF VWDELOLW\ 7KH JUDPPDU LV VWDEOH EHFDXVH LWV HVVHQWLDO FRQVWUXFWV DUH V\PEROLF LQ QDWXUH )OH[LELOLW\ HQWHUV WKH OLIH RI WKH SKRQHW LFVSKRQRORJ\ V\VWHP LQ SKRQHWLF LPSOHPHQWDWLRQ DIWHU WKH JUDPPDU KDV FRPSXWHGDQRXWSXWRUµLQWHUIDFHUHSUHVHQWDWLRQ¶LQ/DGG¶VWHUPV,QSKRQHWLF LPSOHPHQWDWLRQV\PEROLFXQLWVDUHWUDQVODWHGWRYRFDOWUDFWDFWLRQXQGHUGLI IHUHQWFRQGLWLRQV±GLIIHUHQWVSHHFKUDWHVVW\OHVVRFLDOFRQWH[WVHWF±DQG HQYLURQPHQWDOYDULDEOHVEHJLQWRLQWURGXFHWKHLUHIIHFWV +RZHYHUWKHLQFRPSOHWHQHVVRIQHXWUDOL]DWLRQGRHVQRW¿WFRPIRUWDEO\LQ WKLVYLHZ7KLVLVLOOXVWUDWHGLQ )LQDO'HYRLFLQJFKDQJHVWKHYRLFLQJYDO XHRIWKH¿QDOREVWUXHQWLQEXQGWR>±9RLFHG@7KLVHOLPLQDWHVWKHFRQWUDVW EHWZHHQ WKH ¿QDO FRQVRQDQWV RI EXQG EXQW DW WKH RXWSXW RI SKRQRORJ\ H[DFWO\DVDµQHXWUDOL]DWLRQ¶UXOHVKRXOGGR&RQVHTXHQWO\SKRQHWLFLPSOH PHQWDWLRQZKRVHUROHLVWRÀHVKRXWSKRQRORJ\¶VRXWSXWDVYRFDOWUDFWDFWLRQ LVQRZXQDEOHWRGHOLYHUWKHGLIIHUHQFHVREVHUYHGLQWKHVXUIDFHUHDOL]DWLRQV RIWKH¿QDOREVWUXHQWVLQEXQWYHUVXVEXQG

5XOHRI)LQDO'HYRLFLQJ)' >9RLFHG±6RQRUDQW@A>±9RLFHG@BB@m

$GDPDQWLRV,*DIRV

8QGHUO\LQJIRUPV 2XWSXWRISKRQRORJ\ 9RFDOWUDFWDFWLRQ EXQW A>EXQW@ >W@FRPSOHWHO\YRLFHOHVV EXQG A>EXQW@YLD)' " >W@WUDFHVRIYRLFLQJ

,W LV FOHDU WKDW LQFRPSOHWH QHXWUDOL]DWLRQ UHTXLUHV VRPH UHYLVLRQ RI WKH VWDQGDUG SKRQRORJ\SKRQHWLFV YLHZ $FFRUGLQJO\ WKH LQFRPSOHWHQHVV RI ¿QDO GHYRLFLQJ KDV OHG WR DUJXPHQWV IRU UHOD[LQJ RQH RI WKH IRXQGDWLRQDO DVVXPSWLRQVRIWKDWYLHZWKHRUGHULQJRISKRQRORJ\EHIRUHSKRQHWLFLPSOH PHQWDWLRQ6HH'LQQVHQDQG&KDUOHV/XFH IRU&DWDODQDQG6ORZL DF]HNDQG'LQQVHQ IRU3ROLVK $QRWKHUDSSURDFKLVWRDSSO\)LQDO'HYRLFLQJDWWKHVDPHWLPHDVSKR QHWLFLPSOHPHQWDWLRQ(UQHVWXVDQG%DD\HQWKLVYROXPH3RUWDQG2¶'HOO $V(UQHVWXVDQG%DD\HQREVHUYHWKHPDLQSUREOHPZLWKWKLVSURSRVDO LVWKDWSKRQRORJ\EHFRPHVLQGLVWLQJXLVKDEOHIURPSKRQHWLFLPSOHPHQWDWLRQ )LQDOGHYRLFLQJLVDQDVSHFWRI*HUPDQSKRQRORJ\%\PRYLQJLWWRSKRQHWLF LPSOHPHQWDWLRQ¿QDOGHYRLFLQJPXVWEHUHIRUPXODWHGLQDGLIIHUHQWIRUPDO ODQJXDJHWKHODQJXDJHRISKRQHWLFLPSOHPHQWDWLRQXVLQJFRQWLQXRXVPDWK HPDWLFV7KH SURSRVDO WR EH ÀHVKHG RXW KHUH EHJLQV ZLWK WKH FKDOOHQJH RI PDLQWDLQLQJWKHGLVWLQFWLRQEHWZHHQTXDOLWDWLYHYHUVXVTXDQWLWDWLYHDVSHFWV RI SKRQHWLFVSKRQRORJ\ E\ SURSRVLQJ DQ DSSURSULDWH IRUPDOL]DWLRQ RI WKH SKRQHWLFVSKRQRORJ\UHODWLRQ 7KHVHFRQGHTXDOO\LPSRUWDQWFKDUDFWHULVWLFRILQFRPSOHWHQHXWUDOL]DWLRQ LVLWVV\VWHPDWLFGHSHQGHQFHRQWKHFRPPXQLFDWLYHFRQWH[W7RGDWH,DPQRW DZDUHRIDQ\SUHYLRXVIRUPDOWUHDWPHQWRIWKLVHIIHFW7KLVSKHQRPHQRQLVDQ H[DPSOHRIZKDW/LEHUPDQUHIHUVWRDVSKRQRORJLFDOV\VWHPDWLFLWLHVZKLFK DUH ³PRGXODWHG E\ « SDUDOLQJXLVWLF SDUDPHWHUV´ DQG ZKLFK DUH ³QRW ZHOO PRGHOHGDVIHDWXUHRUVWUXFWXUHFKDQJLQJUXOHV´ 7KHJUDPPDU RXWSXWLVTXDQWLWDWLYHO\VKLIWHGE\VSHDNHUV¶LQWHQWLRQVWRFRQYH\DFRQWUDVW EXWLQWHQWLRQVDUHQRWWKHNLQGVRISULPLWLYHVWKDWDUHGHVFULEHGDVEHLQJSDUW RIWKHJUDPPDU±WKH\DUHH[WUDJUDPPDWLFDORUSDUDOLQJXLVWLF 7KHFKDOOHQJHIRUWKHGHULYDWLRQDOYLHZRISKRQHWLFVSKRQRORJ\LVWKDW RQWKHRQHKDQGSODFLQJ¿QDOGHYRLFLQJLQWKHSKRQRORJ\FDSWXUHVWKHIDFW WKDW ¿QDO GHYRLFLQJ LV D TXDOLWDWLYH SURSHUW\ RI *HUPDQ EXW LW FDQQRW DF FRXQW IRU WKH ÀH[LELOLW\ RI WKH SKRQHWLFVSKRQRORJ\ V\VWHP 2Q WKH RWKHU KDQGPRYLQJ¿QDOGHYRLFLQJWRSKRQHWLFLPSOHPHQWDWLRQZRXOGDOORZLWWR EHPRGXODWHGE\H[WUDJUDPPDWLFDOFRQWLQXRXVIDFWRUVEXWORVHVVLJKWRIWKH IDFWWKDW¿QDOGHYRLFLQJLVDQDVSHFWRI*HUPDQSKRQRORJ\ 7KHDOWHUQDWLYHWREHSURSRVHGKHUHLVDQRQGHULYDWLRQDOSDUDOOHO ZD\RI UHODWLQJGLVFUHWHDVSHFWVRIWKHJUDPPDUDQGFRQWLQXRXVHQYLURQPHQWDOYDUL


DEOHV7KLVSURPLVHVWRE\SDVVWKHRUGHULQJSUREOHPXQGHUWKHDVVXPSWLRQ WKDWWKHUHLVDFRKHUHQWZD\WRPDNHFRQWLQXLW\DQGGLVFUHWHQHVVFRH[LVWZLWK LQWKHVDPHIRUPDOODQJXDJHDQGDOVRWKDWWKHUHLVDZD\WRDWOHDVWGHVFULEH DQGDWEHVWGHULYHSKHQRPHQDOLNHLQFRPSOHWHQHXWUDOL]DWLRQ7KHPDWKHPDW LFVRIQRQOLQHDUG\QDPLFVVDWLV¿HVWKH¿UVWDVVXPSWLRQDVGLVFXVVHGLQWKH QH[WVHFWLRQ6XEVHTXHQWVHFWLRQVWDNHXSWKHLVVXHRIGHULYLQJLQFRPSOHWH QHXWUDOL]DWLRQXVLQJEDVLFFRQFHSWVRIQRQOLQHDUG\QDPLFV %HIRUHOHDYLQJWKLVVHFWLRQ,FRQVLGHUZKHWKHUSKRQRORJLFDOPRGHOVGHDO LQJ ZLWK YDULDELOLW\ FDQ EH RI KHOS ZLWK WKH SUREOHP IDFHG KHUH ,Q D UXOH EDVHGPRGHO&KRPVN\DQG+DOOH ZHPD\FRQVLGHUµYDULDEOHUXOHV¶DV LQ6DQNRII RU&HGHUJUHQDQG6DQNRII ,Q2SWLPDOLW\7KHRU\ 3ULQFH DQG 6PROHQVN\ KHQFHIRUWK 27 ZH PD\ FRQVLGHU WKH µVWR FKDVWLFHYDOXDWLRQ¶PHWKRGIRUFRQVWUDLQWLQWHUDFWLRQDVSURSRVHGLQ%RHUVPD DQG +D\HV 7R LOOXVWUDWH LQ WKH ODWWHU PRGHO LI WZR FRQVWUDLQWV DUH VXI¿FLHQWO\FORVHRQDUDQNVFDOHDVPDOOVKLIWLQWKHLUUDQNYDOXHVFDQUH VXOWLQ&!!&RU&!!&,QWKHVSHFL¿FH[DPSOHWKHFRQVWUDLQWVDUH & 1292,&('&2'$& )$,7+9RLFH 7KHLUYDULDEOHUDQNLQJZRXOGJLYH ULVHWRXQGHUO\LQJO\YRLFHGREVWUXHQWVEHLQJSURGXFHGVRPHWLPHVYRLFHOHVV ZKHQ&!!& DQGVRPHWLPHVYRLFHGZKHQ&!!& 7KHVHPRGHOVGHDOZLWKDGLIIHUHQWW\SHRIYDULDWLRQIURPWKDWDGGUHVVHG LQ WKLV SDSHU7KH\ GHDO ZLWK YDULDWLRQ DPRQJ GLVFUHWH DOWHUQDWLYHV ,Q WKH SUHVHQWFDVHKRZHYHULWLVQRWWKDWWKHYRLFHGREVWUXHQWLVSURGXFHGVRPH WLPHVYRLFHGDQGVRPHWLPHVYRLFHOHVV5DWKHUWKHPHDQYDOXHRIYRLFHOHVV QHVVGULIWVWRZDUGOHVVH[WUHPHYDOXHVDQGLWGRHVVRODZIXOO\DVDIXQFWLRQ RIWKHFRPPXQLFDWLYHFRQWH[W+HQFHWKRVHPRGHOVDUHLQDSSOLFDEOHWRWKLV W\SHRIYDULDWLRQZKLFK,ZLOOFDOOODZIXOFRQWLQXRXVYDULDWLRQ 7KHUHLVKRZHYHUDQRWKHUFODVVRIPRGHOVZLWKWKHFDSDFLW\RIKDQGOLQJ FRQWLQXRXVGLPHQVLRQVWKHVRFDOOHGH[HPSODUPRGHOVRIPHPRU\DQGFDW HJRUL]DWLRQ+LQW]PDQ 5HFHQWO\3LHUUHKXPEHUW KDVGH YHORSHG DQ DSSOLFDWLRQ RI WKH H[HPSODU SDUDGLJP WR SKRQHWLFVSKRQRORJ\ ZLWKDWWHQWLRQWRYDULDWLRQDQG¿QHSKRQHWLFGHWDLOVLQWKHUHDOL]DWLRQRISKR QRORJLFDO FDWHJRULHV 6SHFL¿FDOO\ LQ WKDW DSSOLFDWLRQ YDULDWLRQ LQ SURGXF WLRQLVDFKLHYHGE\DYHUDJLQJDQGRUUDQGRPL]DWLRQRYHUDVHWRIPHPRUL]HG H[HPSODUVRIDFDWHJRU\JHQHUDWLQJDVRFDOOHGµHFKR¶RIWKHFDWHJRU\7KH FUXFLDOREVHUYDWLRQKHUHLVWKDWWKHYDULDWLRQLQYROYHGLQ¿QDOGHYRLFLQJKDV DV\VWHPDWLFFRPSRQHQWDVFKDQJHVLQHQYLURQPHQWDOYDULDEOHVUHVXOWLQV\V WHPDWLFJUDGXDOGULIWVWRZDUGPRUHRUOHVVYRLFLQJ7KLVFRQWH[WGHSHQGHQF\ LVQRWDFFRXQWHGIRUE\DQDYHUDJLQJDQGRUUDQGRPL]DWLRQPHWKRGDVLQIDFW QRWHGLQ3LHUUHKXPEHUW

$GDPDQWLRV,*DIRV

3KRQHWLFVSKRQRORJ\LQDG\QDPLFDOVHWWLQJ 7RGHYHORSDSDUDOOHOYLHZRISKRQHWLFVSKRQRORJ\WKHHVVHQWLDOLQVLJKWVRI WKH¿HOGPXVWEHUHFDVWXVLQJWKHPDWKHPDWLFVRIQRQOLQHDUG\QDPLFV7KXV SKRQHWLF FDWHJRULHV UHSUHVHQWDWLRQV FRQVWUDLQWV DQG JUDPPDUV PXVW EH JLYHQDG\QDPLFDOIRUPXODWLRQ)RUSKRQHWLFFDWHJRULHVDQGUHSUHVHQWDWLRQV VRPHRIWKHIRXQGDWLRQDOZRUNLQWKHVHGRPDLQVKDVEHHQFRXFKHGLQWHUPV WKDWDUHDWOHDVWFRQVLVWHQWZLWKWKHG\QDPLFDODSSURDFK6HH6WHYHQV 3HWLWRW&RFRUGD .LQJVWRQDQG'LHKO DQGUHIHUHQFHVLQ VHFWLRQRQ%URZPDQDQG*ROGVWHLQ¶VZRUN,QWKLVVHFWLRQ,IRFXVRQFRQ VWUDLQWVDQGJUDPPDUV7RDQWLFLSDWHP\VSHFL¿FSURSRVDOLVWKDWFRQVWUDLQWV DUHDWWUDFWRUVDQGWKDWJUDPPDUVDUHDWWUDFWRUODQGVFDSHV%RWKQRWLRQVDUH EDVLFWRQRQOLQHDUG\QDPLFV 7R EHJLQ SKRQRORJLFDO FRQVWUDLQWV DUH IRUPXODWHG DV FRPSHWLQJ DWWUDF WRUV7KRPSVRQDQG6WHZDUW $WWUDFWRUV GH¿QH SUHIHUUHG PRGHV IRUWKHPDFURVFRSLFSDUDPHWHUVRISKRQRORJ\)RUH[DPSOHFRQVWUDLQWVOLNH ³%(&2521$/´DQG³%(92,&(/(66´ VWDWHSUHIHUUHGYDOXHVIRU WKHSKRQRORJL FDOSDUDPHWHUVRI3ODFHRIDUWLFXODWLRQDQG9RLFLQJ,Q WZRFRPSHWLQJ FRQVWUDLQWV&&DUHGHSLFWHGDVWZRDWWUDFWRUVDWWUDFWRUµKDYHSURSHUW\ 3¶ DWWUDFWRU µQRW 3¶ 7DNLQJ 9RLFLQJ DV DQ H[DPSOH WKH V\VWHP FDQ EH LQWZRVWDWHV(LWKHULWLV³9RLFHOHVV´LWKDVSURSHUW\3RULWLV³9RLFHG´LW GRHVQRWKDYHSURSHUW\3)RULOOXVWUDWLRQSXUSRVHVOHWXVLQGH[WKHGHJUHHRI YRLFLQJZLWKWKHSDUDPHWHURIJORWWDODSHUWXUH7KHQWKH³9RLFHOHVV´VWDWH LVUHSUHVHQWHGZLWKWKHPLQLPXPDWVRPHSRVLWLYHYDOXHRIJORWWDORSHQLQJ DQGWKH³9RLFHG´VWDWHZLWKWKHPLQLPXPDWWKHVRPHQHJDWLYHYDOXHRIJORW WDORSHQLQJWKHDFWXDOQXPHULFYDOXHVDQGWKHLUVLJQVDUHQRWFUXFLDOLQWKH SUHVHQWFRQWH[W 7KH ¿JXUH LQ UHSUHVHQWV WKH DVVXPSWLRQ WKDW LQ D ODQJXDJH ZLWK D 9RLFHOHVV9RLFHG FRQWUDVW WKH 9RLFLQJ SDUDPHWHU GUDZV YDOXHV IURP WZR UHFRJQL]DEO\ GLVWLQFW SDUWV RI LWV VWDWH VSDFH WKH VWDWH VSDFH LV WKH HQWLUH [ D[LV ,W WKXV GHVFULEHV TXDOLWDWLYHO\ GLVWLQFW PRGHV RI WKH YRLFLQJ V\V WHP RU LQ RWKHU ZRUGV LW GHVFULEHV D GLPHQVLRQ RI PDFURVFRSLF RUGHU LQ SKRQRORJLFDOIRUP)RUWKLVUHDVRQLWLVFDOOHGDQRUGHUSDUDPHWHU+DNHQ ,QWXLWLYHO\ZHPD\LQWHUSUHWWKHEHKDYLRURIDQRUGHUSDUDPHWHUE\PHDQV RIDEDOOPRYLQJLQWKHSRWHQWLDO9[ VKRZQDERYH&OHDUO\WKHEDOOHQGVXS LQRQHRIWKHWZRDWWUDFWRUVWKHPDFURVFRSLFREVHUYDEOHVRIWKHV\VWHP7KH DWWUDFWRUODQGVFDSHVKRZQWKHUHLVNQRZQDVWKHµDQKDUPRQLFRVFLOODWRU¶DQG LWLVGHVFULEHGE\WKHSRWHQWLDOIXQFWLRQ9[ ± [A [A


3KRQRORJLFDOFRQVWUDLQWVDVFRPSHWLQJDWWUDFWRUV

*LYHQWKDWPDFURVFRSLFRUGHULVH[SUHVVHGYLDRUGHUSDUDPHWHUVDQGFRQ VWUDLQWVUHIHUULQJWRWKHVHZKDWLVWKHUHODWLRQEHWZHHQWKHVHSDUDPHWHUVDQG WUDGLWLRQDOV\PEROV"6SHFL¿FDOO\ZKDWLVWKHV\PERO>±9RLFHG@LQWKHG\ QDPLFDO IRUPXODWLRQ RI WKH YRLFLQJ GLVWLQFWLRQ" ,Q WKH G\QDPLFDO IRUPXOD WLRQWKHV\PEROLVLQVHSDUDEO\OLQNHGZLWKLWVSKRQHWLFVXEVWDQFH,WLVQRW GHULYDWLRQDOO\ DQWHFHGHQW WR WKDW VXEVWDQFH DQG WKHUHIRUH LW GRHV QRW QHHG WR EH WUDQVODWHG WR WKDW VXEVWDQFH (FR ZKR KDV VWXGLHG WKH IRXQGDWLRQDO QRWLRQRIV\PEROFORVHO\ZULWHV³2QHFDQQRWVSHDNRIDIRUPZLWKRXWSUH VXSSRVLQJDPDWWHUDQGOLQNLQJLWLPPHGLDWHO\QHLWKHUEHIRUHQRUDIWHU WR VXEVWDQFH´ 1H[W KRZ LV WKH VWDELOLW\ RI PDFURVFRSLF RUGHU DFKLHYHG LQ D G\QDPL FDO IRUPXODWLRQ RI SKRQHWLFVSKRQRORJ\"$WWUDFWLYH PRGHV DUH G\QDPLFDO O\ VWDEOH WKDW LV WKH\ H[KLELW VPDOO À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¿QGLQJ [ ZLWKLQ D JLYHQLQWHUYDORIYDOXHVRI[7KLVSUREDELOLW\LVGHVFULEHGE\WKHSUREDELOLW\ GLVWULEXWLRQIXQFWLRQI[ PXOWLSOLHGE\WKHOHQJWKRIWKHLQWHUYDO7ZRSURE

$GDPDQWLRV,*DIRV

DELOLW\ GLVWULEXWLRQ IXQFWLRQV FRUUHVSRQGLQJ WR WZR GLIIHUHQW SRWHQWLDOV DUH VKRZQLQ 7KHSRWHQWLDOWRWKHOHIWLVPRQRVWDEOHWKDWLVLWKDVDVLQJOH DWWUDFWRUDQGWKHRQHWRWKHULJKWLVELVWDEOH

9[ DQGSUREDELOLW\GLVWULEXWLRQIXQFWLRQI[ IRUWZRSRWHQWLDOV

,W FDQ EH VHHQ WKDW WKH SUREDELOLW\ WR ¿QG WKH V\VWHP DURXQG WKH PHDQ VWDWHV RIWKHDWWUDFWRUV LVTXLWHKLJK7KHSUREDELOLW\WR¿QGWKHV\VWHPDW


VRPHRWKHUSRLQWGHFUHDVHVTXLFNO\DVZHPRYHDZD\IURPWKHPHDQVWDWHV EXWLWPD\QRWEH]HUR,QVKRUWWKHSUHIHUUHGPRGHVRIRUGHUSDUDPHWHUVWKH DWWUDFWRUVDUHUHVLVWDQWWRQRLVHLQDSUREDELOLVWLFVHQVH 1RLVHLVLQKHUHQWWRWKHSURFHVVRIPRGHOLQJDSKHQRPHQRQLQG\QDPLFDO WHUPV DQG LW FDQ EH XVHG WR JHQHUDWH SUHGLFWLRQV 6SHFL¿FDOO\ QRLVH KDV D GLIIHUHQWLDOHIIHFWRQWKHRUGHUSDUDPHWHUVGHSHQGLQJRQWKHVWUHQJWKRIWKH DWWUDFWRU7RLOOXVWUDWHLPDJLQHWKHEDOOLQWKHZHOORIDVWURQJDWWUDFWRU$VD FODVVLFH[DPSOHFRQVLGHUWKHEDOODWSRLQW%EHORZ+HUHQRLVHKDVDVPDOO HIIHFWLQFDXVLQJPLQXWHSHUWXUEDWLRQVDURXQGWKHPHDQVWDWH

8QVWDEOH$ DQGVWDEOH% HTXLOLEULD

1RZLPDJLQHZKDWKDSSHQVZKHQWKHEDOOLVSXWDWSRLQW$'XHWRUDQ GRPÀXFWXDWLRQVWKHEDOOHQGVXSIDOOLQJDWWKHOHIWRUWKHULJKWVLGH$LVDQ XQVWDEOHSRLQW7KLVLOOXVWUDWHVWKDWÀXFWXDWLRQVFDQKDYHGUDPDWLFHIIHFWVDW KLJKO\XQVWDEOHUHJLRQVRIWKHVWDWHVSDFHVHH%HQXV*DIRVDQG*ROGVWHLQ WRDSSHDUIRUDQDSSOLFDWLRQRIWKLVWRPRGHOLQJVXI¿[DOYDULDWLRQLQ+XQ JDULDQYRZHOKDUPRQ\ ,QG\QDPLFVWKHQLWLVSRVVLEOHWRH[SORLWQRLVHWR GLVFRYHUWKHVWDEOHDWWUDFWRUVRIWKHV\VWHP7KHFRQVHTXHQFHVRIQRLVHFDQ EHPHDVXUHGE\WKHYDULDQFHRUVWDQGDUGGHYLDWLRQRIVRPHHVVHQWLDOYDULDEOH [DURXQGWKHDWWUDFWLYHVWDWH7KH PRUH VWDEOH WKH DWWUDFWRUWKH VPDOOHU WKH GHYLDWLRQIURPWKHDWWUDFWLYHVWDWH ,QRZWXUQWRDIXQGDPHQWDOLQVLJKWRQJUDPPDUVQDPHO\WKHLGHDWKDWWKH TXDOLWDWLYHDVSHFWVRIOLQJXLVWLFIRUPDUHWKHUHVXOWRIFRQVWUDLQWRSWLPL]DWLRQ DQGVSHFL¿FDOO\WKHQRWLRQRIFRQVWUDLQWUDQNLQJ%RWKRIWKHVHGHULYHIURP 273ULQFHDQG6PROHQVN\ ,QWKHSURSRVHGPRGHOFRQVWUDLQWUDQNLQJ LVPRGHOHGDVUHRUJDQL]DWLRQRIWKHDWWUDFWRUODQGVFDSH7KLVLVLOOXVWUDWHGLQ WKH¿JXUHVEHORZZKLFKVKRZWZRTXDOLWDWLYHO\GLIIHUHQWUHRUJDQL]DWLRQVRI WKHDWWUDFWRUODQGVFDSHLQ

$GDPDQWLRV,*DIRV

&RQVWUDLQWUDQNLQJDVUHRUJDQL]DWLRQRIWKHDWWUDFWRUODQGVFDSH ±FRPSDUHZLWK

6XFKGUDPDWLFUHRUJDQL]DWLRQLQODQGVFDSHVFDQEHHIIHFWHGIRUPDOO\E\ FKDQJHVLQVRFDOOHGµFRQWURO¶SDUDPHWHUVWKDWHQWHUWKHPDWKHPDWLFDOPRGHO XQGHUO\LQJ WKH SKHQRPHQRQ RI LQWHUHVW ,Q WKH H[DPSOHV LOOXVWUDWHG EHORZ WKHVHFKDQJHVDUHEURXJKWDERXWE\DGMXVWLQJWKHFRQWUROSDUDPHWHUNLQWKH SRWHQWLDO IXQFWLRQ 9[ N [ ± [A [A ZKLFK GHWHU PLQHV WKH WLOW DQG GLUHFWLRQ RI WKH SRWHQWLDO VHH 7XOOHU HW DO IRU DQ


DSSOLFDWLRQWRSHUFHSWLRQ 7KXVLQ WKHSRWHQWLDOWRWKHULJKWUHSUHVHQW LQJWKH&!!&UDQNLQJFRUUHVSRQGVWRN DQGWKHSRWHQWLDOWRWKHOHIW UHSUHVHQWLQJWKH&!!&UDQNLQJFRUUHVSRQGVWRN ±7KHSRWHQWLDOLQ FRUUHVSRQGVWRN ZKHUHWKHWZRFRQVWUDLQWVDUHXQUDQNHG,WFDQEH VHHQWKHQWKDWWKHJUDPPDUVKLIWIURP&!!&WR&!!&RUYLFHYHUVD LPSOLHVDQLQWHUPHGLDWHVWDJHZKHUHWKHWZRFRQVWUDLQWVDUHXQUDQNHGVLQFH WRJRIURPWR±NPXVWSDVVWKURXJK 7KXVJUDPPDUFKDQJHQHFHVVDU LO\ ,03/,(6DQLQWHUPHGLDWHVWDJHRIYDULDWLRQ7KLVFRUROODU\RIWKHG\QDPL FDOIRUPXODWLRQRIFRQVWUDLQWUHUDQNLQJVHHPVFRQVLVWHQWZLWKWKHFRXUVHRI VRXQGFKDQJHHJ/DVVII6RPPHUVWHLQ± 0RUH RYHUDVLQWKHVWRFKDVWLF2SWLPDOLW\7KHRU\PRGHOLQ%RHUVPDDQG+D\HV LWLVSRVVLEOHWRPRGHO¿QHSUREDELOLVWLFYDULDWLRQLQFRQVWUDLQWUDQN LQJE\VPRRWKO\YDU\LQJWKHFRQWUROSDUDPHWHUN$VNPRGL¿HVWKHDWWUDFWRU ODQGVFDSHWKHSUREDELOLW\GLVWULEXWLRQIXQFWLRQRYHUWKDWODQGVFDSHFKDQJHV DFFRUGLQJO\WKHUHE\PRGXODWLQJWKHSUREDELOLWLHVRIWKHGLIIHUHQWVWDWHVWKH V\VWHP PD\ UHVLGH LQ UHFDOO WKH GLVFXVVLRQ DURXQG +RZHYHU , FDQQRW LOOXVWUDWH LQ GHWDLO WKHVH FRQVHTXHQFHV RI WKH SURSRVHG G\QDPLF PRGHO IRU FRQVWUDLQWUDQNLQJKHUH ,QZKDWIROORZV,EULHÀ\GLVFXVVRQHGH¿QLWLRQDOSURSHUW\RIQRQOLQHDU G\QDPLFVWKDWLVRIFULWLFDOLPSRUWDQFHLQPRGHOLQJFRPSOH[V\VWHPVLQJHQ HUDODQGSKRQHWLFVSKRQRORJ\LQSDUWLFXODU7KLVLVWKHSURSHUW\LVQRQOLQHDU LW\$V\VWHPH[KLELWVQRQOLQHDULW\ZKHQODUJHRUGLVFRQWLQXRXVFKDQJHVFDQ EHREVHUYHGLQWKHEHKDYLRURIWKDWV\VWHPDVVRPHFRQWUROSDUDPHWHUYDULHV VPRRWKO\([DPSOHVLQQDWXUDOV\VWHPVDERXQG+DNHQ:LQIUHH 2QH VXFK H[DPSOH IURP ELRORJLFDO FRRUGLQDWLRQ LV EULHÀ\ PHQWLRQHG KHUH .HOVR REVHUYHGWKDWZKHQDGXOWVDUHDVNHGWRPRYHWKHLULQGH[ ¿QJHUVLQDQDQWLSKDVHSDWWHUQERWK¿QJHUVPRYHWRWKHOHIWRUWKHULJKWDW WKHVDPHWLPH WKH\FDQSHUIRUPWKLVWDVNRYHUDZLGHUDQJHRIF\FOLQJIUH TXHQFLHV%XWDVIUHTXHQF\LVLQFUHDVHGVXEMHFWVVKRZDVSRQWDQHRXVVKLIWWR DQLQSKDVHSDWWHUQWKDWLVWRDSDWWHUQZKHUHWKH¿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

$GDPDQWLRV,*DIRV

DUHTXDOLWDWLYHO\GLIIHUHQW7KH\FRUUHVSRQGWRGLVWLQFW2SWLPDOLW\7KHRUHWLF JUDPPDUV³&&XQUDQNHG´LQ DQG³&!!&´³&!!&´LQ :KDWPDNHVWKLVIRUPXODWLRQRIFRQVWUDLQWUDQNLQJSDUWLFXODUO\UHOHYDQWWR SKRQHWLFVSKRQRORJ\LVWKDWLWFRPHVZLWKDKDQGOHIRUGULYLQJWKHV\VWHP IURPRQHTXDOLWDWLYHVWDWHWRDQRWKHUDVDFRQVHTXHQFHRIYDU\LQJWKHFRQWURO SDUDPHWHUN6RIURPVPRRWKFRQWLQXRXVYDULDWLRQLQVRPHFRQWUROSDUDP HWHUGLVWLQFWJUDPPDUVFDQHPHUJH,QQRQOLQHDUG\QDPLFVWKHQFRQWLQXLW\ DQG GLVFUHWHQHVV FRH[LVW DQG LQWHUDFW ZLWKLQ D XQL¿HG IUDPHZRUN %\ FRQ WUDVWLQDGHULYDWLRQDOSKRQHWLFVSKRQRORJ\WKHUHLVQRZD\WRH[SUHVVWKLV LQWHUSOD\EHWZHHQFRQWLQXLW\DQGGLVFUHWHQHVV,QVXFKDPRGHOYDULDWLRQLQ FRQWLQXRXVRUHQYLURQPHQWDOSDUDPHWHUVFDQQRWDIIHFWWKHGLVFUHWHDVSHFWVRI SKRQHWLFVSKRQRORJ\ 3KRQRORJLVWV ZRUNLQJ RQ WKH SKRQHWLF EDVHV RI SKR QRORJLFDOSDWWHUQVKDYHHQFRXQWHUHGLQVWDQFHVRI WKLVOLPLWDWLRQUHSHDWHGO\ 6WHULDGH KDVH[SUHVVHGWKLVPRVWDFFXUDWHO\DQGVXFFLQFWO\³SKRQHW LFLPSOHPHQWDWLRQKDVWROLYHZLWKSULRUGHFLVLRQVWDNHQLQWKHSKRQRORJ\´ 7RJHQHUDOL]HWKHVDPHLQWKHGHULYDWLRQDOPRGHOWKHFRQWLQXRXV DVSHFWVRISKRQHWLFVSKRQRORJ\DUHHQVODYHGE\WKHGLVFUHWHGLPHQVLRQVRI WKHV\VWHP%XWDV%URZPDQDQG*ROGVWHLQKDYHSRLQWHGRXWWKHUHDUHFOHDU FDVHVRIELGLUHFWLRQDOLQWHUDFWLRQEHWZHHQWKHGLVFUHWHDQGWKHFRQWLQXRXV RU EHWZHHQ WKH PDFUR DQG PLFUROHYHOV RI GHVFULSWLRQ LQ WKHLU WHUPV VHH %URZPDQDQG*ROGVWHLQ 1H[W,FRQVLGHUKRZWKHFRQFHSWVLQWURGXFHGKHUHFDQEHDSSOLHGWRRXU VSHFL¿FSUREOHPWKHLQFRPSOHWHQHVVRIQHXWUDOL]DWLRQDQGLWVGHSHQGHQFHRQ WKHFRPPXQLFDWLYHFRQWH[W

*UDPPDUG\QDPLFV $¿UVWVWHSLQDG\QDPLFDOPRGHORIDQDWXUDOV\VWHPLVPDSSLQJWKHPDF URVFRSLFREVHUYDEOHVWRDWWUDFWRUVRIDK\SRWKHVL]HGPRGHOXQGHUO\LQJWKDW V\VWHP.HOVR'LQJDQG6FK|QHU &RQVLGHUWKHVSHFL¿FSKHQRPHQRQDGGUHVVHGKHUHDODQJXDJHZLWKV\O ODEOH¿QDO GHYRLFLQJ 7KH UHOHYDQW PDFURVFRSLF REVHUYDEOHV DUH WKDW FRGD REVWUXHQWVDUHYRLFHOHVVDQGWKDWRQVHWREVWUXHQWVFDQEHYRLFHGRUYRLFHOHVV 7RVSHOORXWWKHVHODQJXDJHSDUWLFXODUSURSHUWLHVLQG\QDPLFDOWHUPVDJUDP PDU SRWHQWLDO IXQFWLRQ PXVW EH VSHFL¿HG WKDW FRQWULEXWHV DWWUDFWRUV DW DS SURSULDWHYDOXHVRIYRLFLQJ6LQFHFRGDREVWUXHQWVFDQRQO\EHYRLFHOHVVWKH JUDPPDUSRWHQWLDOLQWKHFRGDHQYLURQPHQWPXVWFRQWULEXWHDVLQJOHDWWUDFWRU DWDYDOXHRIYRLFLQJFRUUHVSRQGLQJWRYRLFHOHVVREVWUXHQWV/HWXVDVVXPH


WKDWGHJUHHRIYRLFLQJLVLQGH[HGZLWKWKHSDUDPHWHU[RIJORWWDODSHUWXUHD WUDFWYDULDEOHLQ%URZPDQDQG*ROGVWHLQ¶VG\QDPLFDOUHSUHVHQWDWLRQV7KHQ DVVKRZQLQ IRUWKHFRGDSRVLWLRQWKHJUDPPDUDWWUDFWRUDSSHDUVDWWKH ULJKWVLGHRIWKH[D[LVDWVRPHSRVLWLYHYDOXHRIJORWWDORSHQLQJFKDUDFWHULV WLFRIYRLFHOHVVREVWUXHQWV%HORZ,H[SODLQKRZWRGHULYHWKHVSHFL¿FJUDP PDUSRWHQWLDOIXQFWLRQIURPEDVLFDVVXPSWLRQV

&RGDSRWHQWLDOLQDG\QDPLFDOPRGHORI¿QDOGHYRLFLQJ±RQHDWWUDF WRUSUHVHQW

2QVHWREVWUXHQWVFDQEHYRLFHGRUYRLFHOHVVVRWKHSRWHQWLDOLQWKDWHQYL URQPHQWPXVWEHELVWDEOHDVVKRZQLQ ZLWKDWWUDFWRUVDWYRLFLQJYDOXHV DSSURSULDWHIRUYRLFHGDQGYRLFHOHVVFRQVRQDQWV /HWXVFRPSDUHWKLVG\QDPLFDOPRGHORIFRGDGHYRLFLQJWRDQ27JUDP PDUIRUWKHVDPHSKHQRPHQRQ³1292,&('&2'$!!)$,7+9RLFH ´&RQVLGHU ZKDWKDSSHQVWRDEDOOZKHQLWLVSODFHGZLWKLQWKHODQGVFDSHVVSHFL¿HGLQ :HZLOOLQWHUSUHWWKHLQLWLDOFRRUGLQDWHRIWKHEDOORQWKH[D[LVDVWKH YRLFLQJYDOXHLQWKH,QSXWZKHUH,QSXWLVDVGH¿QHGLQ27 ,QFRGDSRVL WLRQWKHUHLVDXQLTXHDWWUDFWRU$VDFRQVHTXHQFHRIWKHJUDPPDUG\QDPLFV WKHEDOOHQGVXSLQWKH9RLFHOHVVVWDWHDQGWKLVLVWKHRQO\VWDEOHVWDWHZKHUH WKH EDOO FDQ HQG XS ,Q RWKHU ZRUGV LUUHVSHFWLYH RI WKH ,QSXW YRLFLQJ YDO XHWKH2XWSXWYRLFLQJYDOXHLVDOZD\VYRLFHOHVVFI³5LFKQHVVRIWKH%DVH´ LQ27

$GDPDQWLRV,*DIRV

2QVHWSRWHQWLDOLQDG\QDPLFDOPRGHORI¿QDOGHYRLFLQJ±WZRDWWUDF WRUVSUHVHQW

)RUWKHSRWHQWLDOLQ RQWKHRWKHUKDQGWKHUHDUHWZRDWWUDFWRUVDQGWKHDW WUDFWRUWKHEDOOHQGVXSLQLVDIXQFWLRQRILWVLQLWLDOSRVLWLRQZKHQWKH,QSXW YRLFLQJYDOXHLVLQWKHYLFLQLW\RIWKH³9RLFHG´³9RLFHOHVV´DWWUDFWRUWKH 2XWSXWHQGVXSLQWKH³9RLFHG´³9RLFHOHVV´VWDWHFIWKHQRWLRQRI)DLWKIXO QHVVLQ27,QHIIHFWWKHG\QDPLFDOVWDWHPHQWRIFRGDGHYRLFLQJFDSWXUHVWKH HVVHQWLDOSURSHUWLHVRIWKHFRUUHVSRQGLQJ27JUDPPDU+RZHYHUDVZLOOEH VKRZQODWHURQWKHG\QDPLFDOIRUPXODWLRQDOORZVXVWRPRGHOWKHJUDPPDU¶V LQWHUDFWLRQZLWKFRQWH[WDQG XOWLPDWHO\GHULYHSKHQRPHQDOLNHLQFRPSOHWH QHXWUDOL]DWLRQ ,QRZGHVFULEHWKHJUDPPDUG\QDPLFVIRUPDOO\$VLQDQ\DXWRQRPRXV G\QDPLFDOV\VWHPJUDPPDUG\QDPLFVLVGH¿QHGE\DGLIIHUHQWLDOHTXDWLRQ RIWKHJHQHUDOIRUPG[GW *[ ZKHUH*[ LVDQRQOLQHDUIXQFWLRQRI[ ,QWXLWLYHO\ WKLV HTXDWLRQ HPERGLHV WKH µG\QDPLF ODZ¶ REH\HG E\ WKH V\V WHP$SURSRVHGG\QDPLFDOPRGHORIVRPHSKHQRPHQRQLVDJRRGPRGHOWR WKHH[WHQWWKDWDVSHFWVRIWKHSKHQRPHQRQLQTXHVWLRQFRUUHVSRQGZHOOZLWK TXDOLWDWLYHSURSHUWLHVRILWVPDWKHPDWLFDOIRUPXODWLRQVHHVHFWLRQ $VD ZRUNLQJK\SRWKHVLV,DVVXPHWKDWWKHµWLOWHG¶DQKDUPRQLFRVFLOODWRUSURYLGHV D¿UVWDSSUR[LPDWLRQIRUWKHJUDPPDUG\QDPLFV*[ G[GW ±N[±[A 7KHFUXFLDOFKRLFHKHUHLVWKDWWKLVSRO\QRPLDOKDVWREHFXELFWKHODUJHVW H[SRQHQWRI[LV 7KLVLVEHFDXVHZHQHHGDWOHDVWWZRGLVWLQFWDWWUDFWRUV RQHIRUWKHYRLFHOHVVDQGDQRWKHUIRUWKHYRLFHGVWDWH,WFDQEHVKRZQWKDWD


SRO\QRPLDORIGHJUHHOHVVWKDQWKUHHDOORZVIRUDWPRVWRQHDWWUDFWRU$UQROG *LYHQ±G9[ G[ G[GWDQG*[ ±N[±[AZHFDQFRPSXWHE\ LQWHJUDWLRQ WKH SRWHQWLDO IRU WKH JUDPPDU G\QDPLFV9[ N [ ± [A [A XSWRVRPHFRQVWDQWWHUP&ZKLFKFDQEHLJQRUHGDV LWGRHVQRWDIIHFWWKHGLVFXVVLRQRUWKHTXDOLWDWLYHUHVXOWVRIWKHVLPXODWLRQV 7KLV9[ LVWKHSRWHQWLDOVKRZQLQWKH DERYH$VLPLODUPHWKRGDOORZVXV WRGHULYHWKHSRWHQWLDO9[ VKRZQLQ :LWKWKHIRUPDODVSHFWVRIWKHPRGHOVSHFL¿HGZHDUHQRZLQDSRVLWLRQ WRVNHWFKKRZWKHJUDPPDULVOLQNHGWRHQYLURQPHQWDOYDULDEOHVDQGWRVLWX DWHRXUJUDPPDULQFRPPXQLFDWLYHFRQWH[W:HNQRZWKDW*[ KDVDVWDEOH SRLQWDWWKHJUDPPDWLFDOO\UHTXLUHGYDOXHRI[ [³9RLFHOHVV´ :HDOVR NQRZ WKDW WKH REVHUYHG YDOXH RI YRLFLQJ LV PRGXODWHG E\ H[WUDJUDPPDWL FDOSDUDPHWHUV9RLFLQJLVPRGXODWHGE\RUWKRJUDSK\DVVKRZQLQ(UQHVWXV DQG%DD\HQ¶VZRUNWKLVYROXPH DQGE\LQWHQWLRQVDVVKRZQLQ3RUWDQG &UDZIRUG¶V ZRUN,QZKDWIROORZV,XVHLQWHQWLRQDVWKHH[WUDJUDP PDWLFDOSDUDPHWHUZLWKRXWORVVRIJHQHUDOLW\ 7KHEDVLFIDFWRILQWHUHVWLVWKDWLQWHQWLRQVFDQVKLIWWKHSUHIHUUHGJUDP PDU PRGHV +RZ FDQ ZH IRUPXODWH WKLV LQ D SULQFLSOHG ZD\" 7KH FRUH LGHD WR EH ÀHVKHG RXW LV WKDW LQWHQWLRQV FRQWULEXWH WR WKH JUDPPDU DQ DW WUDFWRUFRUUHVSRQGLQJWRWKHLQWHQGHGIRUP7KHLQWHQWLRQWRFRPPXQLFDWH D OH[HPH ZLWK D ¿QDO YRLFHG FRQVRQDQW LQ SDUWLFXODU LV GH¿QHG DV D SDUW RI D G\QDPLFV WKDW DWWUDFWV WKH RUGHU SDUDPHWHU WRZDUG WKH LQWHQGHG YRLF LQJ ,Q WXUQ LQWHQWLRQV DUH FRQVWUDLQHG E\ WKH JUDPPDU G\QDPLFV QDPH O\ E\ KRZ IRUPV µVKRXOG EH SURGXFHG¶ LQ VSHFL¿F FRQWH[WV 2YHUDOO WKHQ JUDPPDWLFDO UHTXLUHPHQWV VRPHWLPHV FRPSHWH DQG VRPHWLPHV FRRSHUDWH ZLWK YDULDEOH HQYLURQPHQWDO FRQGLWLRQV LQWHQWLRQV 7KH SKRQHWLF RXW SXWLVWKHUHVXOWRIWKLVFRPELQDWLRQRIJUDPPDUG\QDPLFVDQGLQWHQWLRQDO G\QDPLFV ,QFRPSOHWH QHXWUDOL]DWLRQ ZLOO IROORZ DV D VSHFLDO FDVH RI WKLV LQWHUDFWLRQ

,QWHQWLRQDOG\QDPLFV 7RVLWXDWHJUDPPDULQFRPPXQLFDWLYHFRQWH[WZHQHHGDQDSSURSULDWHG\ QDPLFIRUPXODWLRQRILQWHQWLRQV ,QIRUPDOO\LQWHQWLRQVDUHFRPPXQLFDWLYHJRDOV/HWXVDVVXPHDFRPPX QLFDWLYHDFWZKHUHLQWKHVSHDNHU¶VJRDOLVWRFRQYH\WKHOH[HPH5DGµZKHHO¶ DVRSSRVHGWR5DWµDGYLFH¶,QWHQWLRQDOG\QDPLFVDGGVDQDWWUDFWRUDWWKHUH

$GDPDQWLRV,*DIRV

TXLUHGYDOXHRIYRLFLQJ^±[[`ZKHUH[µ ¶>±9RLFHG@±[µ ¶>9RLFHG@ 7KHSRWHQWLDO9,[ IRUWKHVHWZRYDOXHVLVVKRZQEHORZ1RWHWKDWLQWHQWLRQV DUHPXWXDOO\H[FOXVLYH2QHFDQ¶WLQWHQG5DGDQG5DWDWWKHVDPHWLPH±YL] WKHEDOOFDQRQO\EHLQRQHRIWKHWZRDWWUDFWRUVDVLQ ,QRZGHVFULEHWKHIRUPDOPRGHOIRULQWHQWLRQV7KHG\QDPLFVRILQWHQ WLRQVLQWKHFRQWH[WRIDJUDPPDU*LVPRGHOHGE\WKHHTXDWLRQG[GW *[ ,[ IROORZLQJ 6FK|QHU DQG .HOVR RQ FRRUGLQDWHG PRYHPHQW E\ KXPDQV,QWXLWLYHO\WKHµG\QDPLFODZ¶REH\HGE\WKHFRPELQHGV\VWHPLV JLYHQE\DOLQHDUFRPELQDWLRQRIWKHJUDPPDUG\QDPLFV*[ DQGWKHLQWHQ WLRQDOG\QDPLFV,[ ,[ LVWKHVLPSOHVWIXQFWLRQWKDWVSHFL¿HVDQDWWUDFWRUDW WKHLQWHQWLRQDOO\ UHTXLUHGYDOXHRIYRLFLQJ7KDWLV,[ LQWHQW [5(4±[ ,QWKLVIXQFWLRQµLQWHQW¶LVDOLQHDUWHUPUHSUHVHQWLQJWKHUHODWLYHVWUHQJWKRI WKHLQWHQWLRQDOFRQWULEXWLRQ7KHKLJKHUWKHYDOXHRIµLQWHQW¶WKHVWURQJHULV WKHLQWHQWLRQ7KHWHUP[5(4WDNHVYDOXHVIURP^±[[`WKDWLVWKHYDOXHVIRU JORWWDODSHUWXUHFRUUHVSRQGLQJWR>9RLFHG@DQG>±9RLFHG@ '\QDPLFDOPRGHORI³9RLFHG´DQG³9RLFHOHVV´LQWHQWLRQV

*LYHQ WKHVH DVVXPSWLRQV WKH FRQWULEXWLRQ WR WKH JUDPPDU G\QDP LFV WKDW DGGV DQ DWWUDFWRU DW WKH UHTXLUHG YDOXH RI YRLFLQJ LV JLYHQ E\ WKH SRWHQWLDOV VKRZQ DERYH 7R GHULYH WKHVH SRWHQWLDOV ZH VWDUW ZLWK ±G9[ G[ G[GW *[ LQWHQW [5(4±[ DQGE\EDVLFFDOFXOXVZHFRPSXWH WKHSDUWRIWKHSRWHQWLDOWKDWFRUUHVSRQGVWRWKHLQWHQWLRQDOG\QDPLFV9,[


LQWHQW [A ± LQWHQW [5(4 [ XS WR D FRQVWDQW & ZKLFK FDQ EH GURSSHG VLQFH LW LV RI QR TXDOLWDWLYH VLJQL¿FDQFH LQ WKH FRQWH[W RI WKLV GLVFXVVLRQ DQG WKH VLPXODWLRQV ,W LV WKLV 9,[ WKDW LV VKRZQ LQ WKH JUDSK DERYH ,QRZVXPXSWKHHVVHQWLDOLQJUHGLHQWVRIWKHSURSRVDOLQ 7KHUHLV DSDUDPHWHUL]DWLRQLQWHUPVRIDQRUGHUSDUDPHWHUDQGDFRQWUROSDUDPHWHU LQDE UHVSHFWLYHO\2UGHUSDUDPHWHUVGHVFULEHWKHPDFURVFRSLFIRUPRI SKRQRORJ\DQGJUDPPDUSULQFLSOHVUHIHUWRVXFKSDUDPHWHUVVHH*DIRV RQJHVWXUDOFRRUGLQDWLRQUHODWLRQV ,QRXUH[DPSOHWKHFRQWUROSDUDPHWHULV LQWHQWLRQDOVWUHQJWK$VVKRZQLQF WKHUHLVDOVRDQµLQWHUIDFH¶WKHK\ SRWKHVL]HGPRGHOUHODWLQJWKHVHWZRSDUDPHWHUVG[GW *[ LQWHQW [5(4 ±[ ZKHUH*[ ±N[±[A&UXFLDOO\KRZHYHUWKLVµLQWHUIDFH¶GRHVQRW WUDQVODWHV\PEROVWRFRQWLQXRXVVLJQDOV5DWKHULWVWDWHVDG\QDPLFOLQNDJH LQWKHIRUPRIDWHVWDEOHUHODWLRQEHWZHHQDJUDPPDWLFDORUGHU SDUDPHWHU DQG DQ H[WUDJUDPPDWLFDO FRQWURO SDUDPHWHU 7KH OLQNDJH LV G\QDPLF EH FDXVHWKHWZRSDUDPHWHUVLWUHODWHVDUHLQWHUGHSHQGHQWDQGFKDQJLQJTXDQWL WLHVDVVHHQLQVHFWLRQ 1RQOLQHDUG\QDPLFVDVWKHOLQNDJHEHWZHHQWKHTXDOLWDWLYHDQGWKH TXDQWLWDWLYH D [GHJUHHRIYRLFLQJ E LQWHQWGHJUHHRILQWHQWLRQDOVWUHQJWK F G[GW ±N[±[ALQWHQW [5(4±[

RUGHUSDUDPHWHUJUDPPDWLFDO FRQWUROSDUDPHWHUQRQJUDPPDWLFDO WKHµLQWHUIDFH¶WKHG\QDPLFOLQNDJH EHWZHHQWKHRUGHUDQGFRQWURO SDUDPHWHUV

,QVKRUWWKLVLVWKHFRUHSURSRVDORIWKLVSDSHUDQDOWHUQDWLYHFRQFHSWLRQ RIWKHµSKRQHWLFVSKRQRORJ\LQWHUIDFH¶ZKHUHG\QDPLFVRIIHUVDQRQGHULYD WLRQDOZD\RIUHODWLQJTXDOLWDWLYHDQGTXDQWLWDWLYHDVSHFWVRISKRQHWLFVSKR QRORJ\

6LPXODWLRQVRIJUDPPDULQYDU\LQJLQWHQWLRQDOFRQWH[WV ,QRZVLPXODWHWKHFRPELQHGG\QDPLFVJUDPPDUZLWKLQWHQWLRQDOLQIRUPD WLRQ 7KH SDUDPHWHUV PDQLSXODWHG LQ WKH VLPXODWLRQV DUH LQWHQWLRQ DQG LWV DVVRFLDWHGVWUHQJWK,QWHQWLRQLVFDWHJRULFDOO\HLWKHU9RLFHOHVVRU9RLFHGFRU UHVSRQGLQJWRWKHXQGHUO\LQJYDOXHRIWKH¿QDOREVWUXHQWLQH[DPSOHVOLNH

$GDPDQWLRV,*DIRV

5DW5DG,QWHQWLRQDOVWUHQJWKLVDVFDODUYDULDEOHZKLFKYDULHVFRQWLQXRXVO\ LQWKHLQWHUYDO>@$YDOXHFORVHUWRFRUUHVSRQGVWRDFRQWH[WZKHUHWKH VSHDNHU¶V LQWHQWLRQ WR FRPPXQLFDWH WKH FRQWUDVW EHWZHHQ 5DW DQG 5DG LV ZHDN DV ZRXOG EH WKH FDVH LQ WKH ZRUGOLVW UHDGLQJ DVVLVWDQWDEVHQW FRQ GLWLRQ+LJKHUYDOXHVFRUUHVSRQGWRFRPPXQLFDWLYHFRQWH[WVZLWKVWURQJHU UHTXLUHPHQWVIRUH[SUHVVLQJWKHFRQWUDVWDVZRXOGEHWKHFDVHLQWKHDVVLVWDQW SUHVHQWFRQGLWLRQ &RQVLGHU¿UVWWKHFDVHZKHUHWKHLQWHQWLRQLVD9RLFHOHVVREVWUXHQW5DW µDGYLFH¶7KHLQWHQWLRQDOO\UHTXLUHGYRLFLQJYDOXHFRLQFLGHVZLWKWKHJUDP PDWLFDOO\SUHVFULEHGYDOXH7KH\DUHERWK9RLFHOHVV,QWKLVFDVHWKHQZH KDYHFRRSHUDWLRQRILQWHQWLRQDOUHTXLUHPHQWVDQGJUDPPDUG\QDPLFV$VWKH ¿JXUHEHORZLOOXVWUDWHVWKHUHLVQRTXDOLWDWLYHFKDQJHLQWKHUHVXOWLQJG\QDP LFVLQGLFDWHGE\WKHIDFWWKDWWKHVWDEOHSRLQWUHPDLQV¿[HGDWWKHVDPHYDOXH RI[[µ ¶>±9RLFHG@ *UDPPDUG\QDPLFVDVPRGL¿HGE\LQWHQWLRQDOLQIRUPDWLRQ>±9RLFHG@

&RQVLGHUQRZWKHPRUHLQWHUHVWLQJFDVHZKHUHWKHLQWHQWLRQLVD9RLFHG REVWUXHQW5DGµZKHHO¶+HUHWKHJUDPPDUG\QDPLFVFRQWULEXWHVDQDWWUDFWRU DWWKHYRLFHOHVVHQGRIWKH[D[LVWKHULJKWVLGH DQGWKH9RLFHGLQWHQWLRQFRQ WULEXWHVDQDWWUDFWRUDWWKHYRLFHGHQGRIWKH[D[LVWKHOHIWVLGH ,QWKLVFDVH WKHQWKHLQWHQWLRQDOO\UHTXLUHGYDOXHGRHVQRWFRLQFLGHZLWKWKHJUDPPDWL FDOO\SUHVFULEHGYDOXH:HKDYHFRPSHWLWLRQEHWZHHQJUDPPDUDQGLQWHQWLRQ $QLQVWDQFHRIWKLVFRPSHWLWLRQLVVKRZQLQ EHORZ


&RPSHWLWLRQEHWZHHQJUDPPDUDQGLQWHQWLRQZKHQLQWHQWLRQLV 9RLFHG

7KHUHVXOWLVWKDWWKH9RLFHOHVVDWWUDFWRUGULIWVWRZDUGOHVVH[WUHPHYDOXHV 7KLVVFDOLQJRIWKHV\VWHP¶VG\QDPLFVLVVKRZQPRUHFOHDUO\LQWKH¿JXUHLQ *UDPPDUG\QDPLFVDVPRGL¿HGE\LQWHQWLRQDOLQIRUPDWLRQ>9RLFHG@

$GDPDQWLRV,*DIRV

,WLVREVHUYHGWKDWDVLQWHQWLRQDOVWUHQJWKLQFUHDVHVWKHSRWHQWLDOLVJUDGXDOO\ SXOOHGDZD\IURPWKH>±9RLFHG@PLQLPXPWRZDUGPRUHYRLFLQJ_AÀa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¶VG\QDPLFVDVDUHVXOWRIDFRQWLQXRXVLQFUHDVH LQLQWHQWLRQDOVWUHQJWK,QGHHGLIQHFHVVDU\*HUPDQVSHDNHUVFDQSURGXFH 9RLFHGREVWUXHQWVDVYRLFHGLQWKHQHXWUDOL]LQJFRQWH[W5DGDV>¯CF@ 7R VXP XS WKH SUHVHQW PRGHO FRPELQHV WZR VHHPLQJO\ LQFRPSDWLEOH LGHDVIURP(UQHVWXVDQG%DD\HQ¶VWKLVYROXPH SDSHU7KH¿UVWLVWKDW³LQ FRPSOHWHQHXWUDOL]DWLRQVHHPVWREHSDUWDQGSDUFHORIWKHJUDPPDU´ ,Q WKHPRGHOWKLVLVUHÀHFWHGLQWKHZD\LQWHQWLRQVSDUDPHWHUL]HWKHJUDPPDU 7KHVHFRQGLGHDLVWKDW³LQFRPSOHWHQHXWUDOL]DWLRQPD\ZHOOEHSULPDULO\D OH[LFDOHIIHFW´ 7KLVLVUHÀHFWHGE\LGHQWLI\LQJLQWHQWLRQVZLWKEDVLFOH[L FDOIRUPV7KHLQWHQWLRQIRU5DWLVLGHQWL¿HGZLWKDQDWWUDFWRUDWWKHYRLFHOHVV HQGZKHUHDVWKDWIRU5DGZLWKDQDWWUDFWRUDWWKHYRLFHGHQGRIWKHRUGHU SDUDPHWHU9RLFLQJ $VDFRQVHTXHQFHLQWHQWLRQVDWWUDFWWKHRUGHUSDUDPHWHU WRZDUGWKHLQWHQGHGµOH[LFDO¶YRLFLQJ)RUYRLFHGREVWUXHQWVVSHFL¿FDOO\LQ FRPSOHWHQHXWUDOL]DWLRQIROORZV

&RQFOXVLRQ 7KH YLHZ RI D SKRQRORJLFDO FRPSRQHQW SUHFHGLQJ D SKRQHWLF LPSOHPHQWD WLRQFRPSRQHQWLVRQHZD\RIH[SUHVVLQJWKHLQWXLWLRQWKDWSKRQHWLFVSKRQRO RJ\LVDV\VWHPZLWKTXDOLWDWLYHDQGTXDQWLWDWLYHDVSHFWV/DGGWKLVYROXPH +RZHYHULWPD\QRWEHWKHRQO\ZD\$ORRNDWRWKHUFRPSOH[V\VWHPVPD\ SURYLGH FOXHV IRU DOWHUQDWLYH GHVLJQ PHWKRGRORJLHV *LYHQ WKH SUHHPLQHQW YLHZ RI ODQJXDJH DV D µELRORJLFDO REMHFW¶ &KRPVN\ ELRORJLFDO V\V WHPV DUH WKH QDWXUDO FDQGLGDWHV ,Q WKHRUHWLFDO ELRORJ\ :DGGLQJWRQ 3DWWHH RUJDQLVPVGHVFULEHGDWWKHPDFURVFRSLFOHYHOH[KLELWORZGL


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±EDFN±ORZ±FRQV@

JURXSVWRJHWKHUWKHNVDOWHUQDWLRQDQGWKHDOWHUQDWLRQRIJZLWK FW@PD\KDYHYDULDEO\SHUVHYHUDWHGLQWR WKHGRUVDOFORVXUHFKDUDFWHULVWLFRI>M@>M @*HQHUDOSHUVHUYHUDWLRQRIURXQG LQJKDVEHHQGRFXPHQWHGLQ1HZWM9#@ LQ7ULTXH8QIRUWXQDWHO\WKHSURSRVDOVXIIHUVIURPDIDWDOÀDZ7KHSUREOHP LVWKDWFHUWDLQRWKHUFRQVRQDQWVPD\MXVWDVUHDGLO\EHSURGXFHGZLWKSHUVH YHUDWLYHODELDOLW\DVPD\>M@7KXVIRUH[DPSOHDQDOYHRODUVWRSLQYROYHV DW\SLFDOO\UDSLG WRQJXHWLSUDLVLQJJHVWXUHZKLFKFDQEHDFKLHYHGODUJHO\ LQGHSHQGHQWO\RIWKHGRUVDOEDFNLQJJHVWXUHFKDUDFWHULVWLFRI>W@:HPLJKW WKXVSUHGLFWOLWWOHWRQRDV\PPHWU\LQWKHGLDFKURQLFFRPSRUWPHQWRI WM# DQGVD\ WV#WV9#@ ,QVWHDGWKHVSUHDGLQJDV\PPHWU\PD\VHUYHWRHQKDQFHWKHDFRXVWLFGLV WLQFWLRQEHWZHHQWKHWZRFRQWUDVWLYHYDOXHV6LQFHDFFRUGLQJWR/RQJDFUH¶V UHFRQVWUXFWLRQV WM9VHTXHQFHVZHUHDEVHQWLQWKHSURWRODQJXDJHVSUHDG LQJ ODELDOLW\ DFURVV WKH YHODU LQFUHDVHG WKH DFRXVWLF GLVWLQFWLRQ EHWZHHQ WKHYHODUVDQGWKHDOYHRODUVZLWKRXWLQGXFLQJKRPRSKRQ\$FFRPSDQ\LQJ WUDQVDOYHRODUVSUHDGLQJE\FRQWUDVWZRXOGVHUYHWRGLPLQLVKWKHDFRXVWLF

7KHGLDFKURQ\RIODELDOLW\LQ7ULTXH

GLVWLQFWLRQ 7KLV LV VXJJHVWHG VSHFWURJUDSKLFDOO\ LQ ZKHUH ZDYHIRUPV ZLGHEDQGVSHFWURJUDPVDQGIRUPDQWWUDFNVDUHSURYLGHGIRUWKHVHTXHQFHV >WF#@>WF9#@>WI#@DQG>WI9#@VSRNHQE\DQDWLYHVSHDNHURI1HZWF9#@

>WI#@

>WI9#@

2EVHUYHWKH)RQVHWYDOXHVDIWHUVWRSUHOHDVHLQWKHFLUFOHGUHJLRQV) RQVHWYDOXHVDUH>WF#@+]>WF9#@+]>WI#@+]>WI9#@ +]7KXV>WI9#@DQG>WF#@DUHPD[LPDOO\GLVWLQFW 7RVXPPDUL]HWKHSURSRVDOE\FRQVLGHULQJWKHDFRXVWLFDQGFRQVHTXHQW IXQFWLRQDOEHQH¿WRIVSUHDGLQJODELDOLW\DFURVVYHODUV±DSDWWHUQZKLFKPLJKW EHSUHVHQWGXHWRWKHYDULDWLRQLQKHUHQWLQVSHHFKSURGXFWLRQ±DQGWKHFRXQ WHUIXQFWLRQDOLW\RIVSUHDGLQJODELDOLW\DFURVVDOYHRODUVZHPLJKWPRWLYDWH WKH7ULTXHVRXQGFKDQJH7KLVSURSRVHGPHFKDQLVPRIVRXQGFKDQJHLVQRW VSHDNHULQGXFHGWKURXJKDQHIIRUWWRHQKDQFHWKHGLVWLQFWQHVVDPRQJFRQ WUDVWLYHHOHPHQWV DVKDVEHHQVXJJHVWHGE\VRPHUHVHDUFKHUV)RUH[DPSOH .LQJVWRQ FRQFOXGHVWKDW³>6@SHDNHUVH[HUWWKHPVHOYHVWRFRQYH\FRQ WUDVWV LQ ZD\V WKDW DUH HQWLUHO\ XQH[SHFWHG LI WKH\ FRXOGQ¶W RSWLPL]H WKHLU SURQXQFLDWLRQV WR HQVXUH WKDW FRQWUDVWV DUH FRQYH\HG´ DQG WKDW ³6SHDNHUV PXVW EH DOWUXLVWV´ HPSKDVLV PLQH ,QVWHDG , SURSRVH D OLVWHQHUEDVHG DF FRXQWE\ZKLFKFRQWUDVWVPLJKWEHHQKDQFHGSDVVLYHO\HYROYLQJRYHUJHQ HUDWLRQVRIVSHDNHUVGXHWRWKHFRPPXQLFDWLYHVXFFHVVRIVRPHWRNHQVDQG WKHFRPPXQLFDWLYHIDLOXUHRIRWKHUV1RWHHVSHFLDOO\WKDWWKHODELDOJOLGHKDV QRWVXGGHQO\SRSSHGRXWRIWKHHWKHULQDQHIIRUWRQWKHSDUWRIWKHVSHDNHU WRHQKDQFHWKHGLVWLQFWLRQDPRQJWKHUHOHYDQWFRQWUDVWLYHFRQ¿JXUDWLRQV,Q VWHDGODELDOLW\ZDVDOUHDG\ORLWHULQJLQWKHQHLJKERUKRRGVRWRVSHDNDQG ZDVSDVVLYHO\KDUQHVVHGWRSOD\DQHZIXQFWLRQDOO\EHQH¿FLDOUROH

'DQLHO6LOYHUPDQ

([SHULPHQW $ODERUDWRU\FRQGLWLRQPD\VHUYHWRUHFDSLWXODWHHOHPHQWVRIWKHK\SRWKHVL]HG KLVWRULFDO VFHQDULR LQ ³VSHHGHGXS´ IRUP E\ LQWURGXFLQJ ZKLWH QRLVH LQWR WKHVSHHFKVLJQDODQGKDYLQJOLVWHQHUVUHSRUWRQWKHLUSHUFHSWLRQ$OWKRXJK RQO\ WKH DXWKRU¶V VSHHFK ZDV HPSOR\HG VXEVHTXHQW LQYHVWLJDWLRQ RI WKUHH RWKHUQDWLYHVSHDNHUVRI(QJOLVKUHYHDOHGODUJHO\FRPSDUDEOH)RQVHWYDO XHV

6XEMHFWVDQGPHWKRGV 7KHVXEMHFWVIRUWKLVGRXEOHEOLQGVWXG\ZHUH8QLYHUVLW\RI,OOLQRLVVWX GHQWVLQOLQJXLVWLFVDOOQDWLYH(QJOLVKVSHDNHUV6RXQG¿OHVFRQVLVWLQJRIWKH IRXUUHOHYDQWSKRQHWLFVHTXHQFHVZHUHGLJLWDOO\UHFRUGHGLQWKH'HSDUWPHQW RI/LQJXLVWLFV¶SKRQHWLFVODEDWDVDPSOLQJUDWHRI+]>WF#@>WF9#@ >WI#@>WI9#@ (DFK¿OHZDVRYHUODLGZLWKIRXUOHYHOVRIZKLWHQRLVHZLWKHDFKQRLVH OHYHOLQFUHDVHGLQDPSOLWXGHIURPWKHSUHYLRXVOHYHO,QFOXGLQJDQRQRLVH OHYHO WKLV UHVXOWHG LQ D WRWDO RI IRXU FRQWLQXD ZLWK ¿YH QRLVH OHYHOV HDFK IRUDWRWDORIWZHQW\VRXQG¿OHV6WRSFORVXUHGXUDWLRQVIRUWKHIRXUIRUPV ZHUH >WF#@ PVHF >WF9#@ PVHF >WI#@ PVHF >WI9#@ PVHF6HFRQGYRZHOGXUDWLRQVIURPVWRSUHOHDVHWKXVLQFOXGLQJWKHJOLGHV ZHUH >WF#@ PVHF >WF9#@ PVHF >WI#@ PVHF >WI9#@ PVHF 3LWFK WUDFNV DQG LQWHQVLW\ FRQWRXUV ZHUH FRPSDUDEOH DFURVV VWLPXOL 8VLQJ 3V\6FRSH VXEMHFWV OLVWHQHG ZLWK KHDGSKRQHV LQ D TXLHW URRP WR WULDOV±RIHDFKRIWKHVRXQG¿OHV±LQUDQGRPO\JHQHUDWHGEORFNV RIZLWKDVHFRQGLQWHUWULDOLQWHUYDODQGXQWLPHGUHVWVEHWZHHQEORFNV 8VLQJ WKH NH\ERDUG VXEMHFWV UHSRUWHG ZKLFK VRXQG VHTXHQFH WKH\ KHDUG >WF#@>WF9#@>WI#@RU>WI9#@ 6XEMHFWVZHUHHQFRXUDJHGWRJXHVVLIWKH\ ZHUHXQGHFLGHG

5HVXOWV ,Q RUGHU WR HOLPLQDWH DQ\ ÀRRU RU FHLOLQJ HIIHFWV WKH QRQRLVH FRQGLWLRQ LQFRUUHFWUHVSRQVHV DQGPD[LPXPQRLVHFRQGLWLRQLQFRUUHFWUH VSRQVHV ZHUH QRW SRROHG7KH KLJKHVW WRWDO RI SRROHG HUURUV LV


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¶ FODVVL¿FDWLRQV $ FRQIXVLRQ PDWUL[ DOVR H[FOXGLQJ WKH QRQRLVH DQG PD[LPXPQRLVH FRQGLWLRQVLVSURYLGHGLQ &RUUHFWUHVSRQVHVDUHEROGER[HG3HUFHQWDJHV UHÀHFWWKHQXPEHURIUHVSRQVHVRXWRIHDFKDWWKHPLGGOHWKUHH QRLVHOHYHOVQRWDOOVWLPXOLZHUHUHVSRQGHGWR

&RQIXVLRQPDWUL[

SHUFHLYHGÆ SUHVHQWHGÈ WF# WF9# WI# WI9#

WF#

WF9#

WI#

WI9#

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±DQGRQO\WKHVHWZRVXEMHFWV±UHVSRQGHGLQWKLVIDVKLRQEXW

'DQLHO6LOYHUPDQ

WKHLULGLRV\QFUDWLFSHUIRUPDQFHPLJKWEHDQDOWHUQDWLYHUHDVRQIRUDVSHFWVRI WKHREVHUYHGSDWWHUQRIHUURUV ,Q WKH FRQIXVLRQ PDWUL[ LV UHDUUDQJHG DFFRUGLQJ WR LQFUHDVLQJO\ GLVWLQFW ) RSSRVLWLRQV /HYHOV WKURXJK (VWLPDWHG DEVROXWH ) RQ VHW GLIIHUHQFHV DUH SDUHQWKHWLFDOO\ QRWHG$V SUHVHQWHG LQ LW EHFRPHV FOHDU WKDW WKH SUHVHQFH YHUVXV DEVHQFH RI WKH JOLGH LV UHDGLO\ SHUFHLYHG EXWFRQIXVLRQLQFUHDVHVEHWZHHQIRUPVZKLFKGLIIHUVROHO\LQWHUPVRIWKH VWRS¶V SODFH RI DUWLFXODWLRQ HVSHFLDOO\ ZKHQ ODELDOLW\ LV SUHVHQW 7KH GH JUHH RI FRQIXVLRQ WKXV GRHV LQGHHG FRUUHODWH ZHOO ZLWK WKH GHJUHH RI ) VLPLODULW\

)EDVHGFRQIXVLRQPDWUL[

SHUFHLYHGÌ SUHVHQWHGÈ WF# WF9# WI# WI9#

/HYHO &RUUHFWO\ DQVZHUHG WF# WF9# WI# WI9#

/HYHO 1HDUHVW)

/HYHO 0LG)

/HYHO )XUWKHVW)

WI#+] WI9#+] WF#+] WF9#+]

WF9#+] WI#+] WF9#+] WI#+]

WI9#+] WF#+] WI9#+] WF#+]

$UHSHDWHGPHDVXUHV$129$FRQ¿UPHGDPDLQHIIHFWIRU)VLPLODULW\ ) S3DLUZLVHFRPSDULVRQVZLWK%RQIHUURQLDGMXVWPHQW UHYHDOHGDVLJQL¿FDQWGLIIHUHQFHEHWZHHQ/HYHOVDQGDQGEHWZHHQ/HY HOV DQG S 7KH GLIIHUHQFH EHWZHHQ /HYHOV DQG ZDV QRW VLJ QL¿FDQWS! HYHQZKHQLQFOXGLQJWKHLGLRV\QFUDWLFUHVSRQVHVRIWKHWZR DIRUHPHQWLRQHG VXEMHFWV VXJJHVWLQJ WKDW ZKHQ ) GLIIHUHQFHV VXUSDVVHG D FHUWDLQYDOXHWKHUDWHRIPLVSHUFHSWLRQOHYHOHGRII

'LVFXVVLRQ %HIRUHHPEDUNLQJRQDGLVFXVVLRQRIFHUWDLQWKHRUHWLFLPSOLFDWLRQVRI7ULTXH W\SHVRXQGFKDQJHV,ZDQWWREULHÀ\FRQVLGHUDPHFKDQLVPE\ZKLFKRQH


VRXQGPLJKWJUDGXDOO\FKDQJHLQWRDQRWKHU0DUWLQHW¶VWDNHRQWKLVPDWWHU HQFDSVXODWHGLQWKHTXRWHZKLFKRSHQVWKLVSDSHULPSOLFDWHVWKHLPSRUWDQFH RIWKHJUDGLHQFHDQGYDULDWLRQZKLFKDUHLQKHUHQWLQVSHHFKSURGXFWLRQWKH JUDGXDOQDWXUHRIVRPHVRXQGFKDQJHVFDQEHH[SODLQHGE\FRQVLGHULQJWKH JUDGLHQWDQGYDULDEOHQDWXUHRIVSHHFKSURGXFWLRQLWVHOI6LPLODUSURSRVDOV KDYH PDGH IRU H[DPSOH E\ 3DXO +RFNHWW $QWWLOD 2KDOD DQG-DQGDDQG-RVHSK %XWJLYHQWKLVLQKHU HQWJUDGLHQFHDQGYDULDWLRQDJDLQZKDWLVWKHDFWXDOPHFKDQLVPE\ZKLFK WKH\PLJKWLQGXFHVRXQGVWRFKDQJH"7RDQVZHUWKLVTXHVWLRQ,EULHÀ\WXUQ WRWKHIRUDJLQJEHKDYLRURIUDWVDQGGXFNV

3UREDELOLW\PDWFKLQJ *DOOLVWHO UHSRUWVRQDVWXG\LQZKLFKUDWVLQD70D]HZHUHUH ZDUGHGZLWKIRRGRIWKHWLPHDWRQHHQGRIWKHWLPHDWWKHRWKHU :KHQSURYLGHGZLWKIHHGEDFNWKHVHUDWVPDWFKHGWKHSUREDELOLW\RIUHZDUG ±UXQQLQJWRWKHRQHHQGRIWKHWLPHWKHRWKHUHQGRIWKHWLPH±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¶OH[LFDOVHPDQWLFFRQWHQWWROLVWHQHUVZKHQOLVWHQ HUVEHFRPHVSHDNHUVWKH\ODUJHO\PDWFKWKHLURZQYDULDWLRQRISURGXFWLRQWR WKDWZKLFKWKH\SHUFHLYHLQFOXGLQJERWK³EHWWHUÝDULDQWVPRUHGLVWLQFWIURP RWKHUZRUGV DQG³ZRUVHÝDULDQWVOHVVGLVWLQFWIURPRWKHUZRUGV 6HHIRU H[DPSOH3UHVWRQDQGWM#WM #WM9#@DQG>WV#WV#WV9#@DUHDPRQJWKHSRVVLEOH YDULDQWV,I/RQJDFUH¶VUHFRQVWUXFWLRQVDUHDFFXUDWHWKHQLQWKHSURWRVWDJHV SURGXFWLRQVOHDQHGKHDYLO\WRZDUG>WM#@DQG>WV#@+RZHYHUVWUD\>WM # WM9#@OLNHYDULDQWVUHQGHUHGWKH>W@YHODU9VHTXHQFHVPRUHGLVWLQFWIURP WKHLU>W@DOYHRODU9FRXQWHUSDUWV7KHUHIRUHWKHVHYDULDQWVZHUHPRUHOLNHO\ FRPPXQLFDWHGXQDPELJXRXVO\WROLVWHQHUV$PELJXRXVWRNHQV±VSHFL¿FDOO\ >WV9#@OLNHYDULDQWV±ZHUHVRPHWLPHVPLVFDWHJRUL]HGPLVLQWHUSUHWHGDVDQ XQLQWHQGHGZRUG EXWDOVRZHUHVRPHWLPHVXQFDWHJRUL]HGVLPSO\LJQRUHG DQG KHQFH ZHUH QRW DGGHG WR WKH SRRO RI WRNHQV RYHU ZKLFK SUREDELOLWLHV


ZHUHFDOFXODWHGDQGVR>WV#@VXUYLYHGODUJHO\LQWDFW7KDWLVWKHYDULDWLRQ HQJDJHGLQE\HOGHUVZDVODUJHO\PDWFKHGE\OHDUQHUVEXWQRQHWKHOHVVGXH WRWKHJUHDWHUOLNHOLKRRGRIXQDPELJXRXVSHUFHSWLRQRIFHUWDLQYDULDQWVRYHU RWKHUV ± >WM9#@ RYHU >WM#@ >WV#@ RYHU >WV9#@ ± OHDUQHUV¶ FDOFXODWHG SURE DELOLWLHV PD\ KDYH GLIIHUHG VOLJKWO\ IURP WKHLU HOGHUV¶ LQ WKDW WKH YDULDQWV ZKLFK FRQWUDVW PRUH VKDUSO\ ZLWK RWKHU ZRUGV ZHUH PRUH RIWHQ SHUFHLYHG FRUUHFWO\KHQFHLQWXUQPRUHOLNHO\SURGXFHG&RQVHTXHQWO\OLVWHQHUVZHUH PRUH OLNHO\ WR SHUFHLYH >WM9#@ DQG >WV#@ DV XQDPELJXRXVO\ EHORQJLQJ WR GLIIHUHQWFDWHJRULHVDQGKHQFHDVWKHJHQHUDWLRQVSURFHHGHGVSHDNHUVZHUH LQFUHDVLQJO\PRUHOLNHO\WRSURGXFH>WM9#@DQGFRQWLQXHWRSURGXFH>WV#@LQ WKHLURZQVSHHFKDVDFRQVHTXHQFHRISUREDELOLW\PDWFKLQJ,WLVTXLWHOLNHO\ WKDWWKHYHU\ZRUGVDWJUHDWHVWULVNRIKRPRSKRQ\±ZRUGVLQGHQVHOH[LFDO QHLJKERUKRRGV±ZRXOGOHDGVXFKDVKLIW,QGLUHFWVXSSRUWRIWKLVK\SRWKHVLV FRPHVIURPVWXGLHVE\3RUWDQG&UDZIRUG DQG&KDUOHV/XFH %RWKUHSRUWV¿QGWKDWLQVHPDQWLFDOO\DPELJXRXVFRQWH[WVVSHDNHUVDUHOHVV OLNHO\WRLPSOHPHQWJHQXLQHO\QHXWUDOL]HGYDULDQWVRISRWHQWLDOO\KRPRSKR QRXV IRUPV WKDQ WKH\ DUH LQ VHPDQWLFDOO\ XQDPELJXRXV FRQWH[WV &KDUOHV /XFHZULWHV ³7KLVLVQRWWRVXSSRVHWKDWWKLVLVFRQVFLRXVEHKDY LRU,WPD\EHTXLWHDXWRPDWLFDQGOHDUQHGWKURXJKH[SHULHQFHZLWKFRPPX QLFDWLRQ´DOWKRXJK&KDUOHV/XFHVHHPVWRJLYHH[SHULHQFHZLWKVSHDNLQJDW OHDVWDVPXFKRIDUROHWRSOD\DVH[SHULHQFHZLWKOLVWHQLQJ,WLVDOVRSRVVLEOH WKDWWRNHQIUHTXHQF\IDFWRUVLQÀ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¿FV\VWHPRIFRQWUDVWVDQGWKHFRQWUDVWLYHYDOXHV¶IXQFWLRQDO ORDGLQ7ULTXHWKHLQWURGXFWLRQRIODELRYHODUVZDVFRQWUDVWHQKDQFLQJVLQFH VSUHDGLQJGLGQRWLQGXFHKRPRSKRQ\,QVRPHRWKHUODQJXDJHDSUHYDOHQFH RIFRQWUDVWLYHODELDOL]HGYHODUVPLJKWYHU\ZHOOSDVVLYHO\LQGXFHWKHFXUWDLO PHQWRIVXFKDVRXQGFKDQJHVHHgKPDQ0DQXHOIRUVXJ JHVWLYHV\QFKURQLFHYLGHQFH

'DQLHO6LOYHUPDQ

'LDFKURQLFIRUFHVDWZRUN >WM#WM #WM9#@

OHVVGLVWLQFW IURP>WV#@

PRUHGLVWLQFW IURP>WV#@

OHVVOLNHO\ PRUHOLNHO\ SHUFHLYHG SHUFHLYHG XQDPELJXRXVO\ XQDPELJXRXVO\

OHVVOLNHO\ SURGXFHG

PRUHOLNHO\ SURGXFHG

JUDGXDOPRYHWRZDUGV>WM9#@

>WV#WV#WV9#@

PRUHGLVWLQFW IURP>WM9 #@

OHVVGLVWLQFW IURP>WM9 #@

PRUHOLNHO\ OHVVOLNHO\ SHUFHLYHG SHUFHLYHG XQDPELJXRXVO\ XQDPELJXRXVO\

PRUHOLNHO\ SURGXFHG

OHVVOLNHO\ SURGXFHG

VWDELOLW\RI>WV#@

0XOWLSOHWUDFHWKHRU\ 7KHVSHHFKVLJQDOLVULIHZLWKSKRQHWLFGHWDLOWRZKLFKOLVWHQHUVDUHGHPRQ VWUDEO\VHQVLWLYHDVWKH\OLVWHQDQGOHDUQVLQFHWKH\ODUJHO\UHFDSLWXODWHLQ WKHLURZQVSHHFKWKHYHU\YDULDWLRQZKLFKWKH\SHUFHLYH,QGHHGH[DFWO\EH FDXVHJUDGLHQFHDQGYDULDWLRQDUHFRQYHQWLRQDOL]HGLQWKHREVHUYHGPDQQHU ZHKDYHFOHDUEHKDYLRUDOHYLGHQFHWKDWLWLVSDUWRIVSHDNHUV¶SKRQRORJLFDO NQRZOHGJH$FFRUGLQJWRPXOWLSOHWUDFHWKHRU\DOVRNQRZQDV³HSLVRGLF´RU ³H[HPSODU´ WKHRU\ *OXFN DQG %RZHU *ROGLQJHU -RKQ VRQ.UXVFKNH1RVRIVN\3LHUUHKXPEHUW DE6WHHOV%\EHH/RWWR:ULJKW HPHUJHQWSHU FHSWXDOFDWHJRULHVDUHGH¿QHGDVWKHVHWRIDOOH[SHULHQFHGLQVWDQFHVRIWKH FDWHJRU\VXFKWKDWYDULDWLRQDFURVVH[HPSODUVDFWXDOO\FRQWULEXWHVWRWKHFDW HJRULFDOSURSHUWLHVWKHPVHOYHV,WLVNQRZOHGJHRI±DQGVHQVLWLYLW\WR±WKLV YDULDWLRQWKDWVXUHO\LQÀXHQFHG0DUWLQHW¶VDVVHUWLRQWKDW³GLVFUHWHQHVVGRHV QRWUXOHRXWLQ¿QLWHYDULHW\´ :LWKERWKSUREDELOLW\PDWFKLQJDQGPXOWLSOHWUDFHWKHRU\WRZRUNZLWK ZHDUHQRZDEOHWRGUDZVRPHSUHOLPLQDU\WKHRUHWLFDOFRQFOXVLRQVUHJDUGLQJ WKHGLDFKURQ\RIODELDOVSUHDGLQJLQ7ULTXH7KHFRQYHQWLRQVHVWDEOLVKHGE\


VSHHFKFRPPXQLWLHVEHWUD\DQXDQFHGPDVWHU\RIWKHSKRQHWLFYDULDWLRQLQWHU QDOL]HGE\LQGLYLGXDOVSHDNHUVWKDWLVGHPRQVWUDEO\DSDUWRIWKHVHVSHDNHUV¶ OLQJXLVWLFNQRZOHGJH7KHH[TXLVLWHDUWLFXODWRU\FRQWUROWKDWVSHDNHUVGLVSOD\ LQWKHLUSURGXFWLRQVLVEHVWHYLGHQFHGE\WKHIDFWWKDWWKH\DUHDEOHWRODUJHO\ PDWFKWKHYDULDWLRQSUHVHQWLQWKHDPELHQWSDWWHUQ2QWKLVYLHZOHDUQHUV¶DU WLFXODWRU\WDOHQWVPD\EHKDUQHVVHGODUJHO\LQVHUYLFHWRFRS\LQJRULPLWDWLQJ QRW PRGLI\LQJ LPSURYLQJ XSRQ RU RWKHUZLVH WKH DPELHQW VSHHFK SDWWHUQ 7KHIDFWVRISUREDELOLW\PDWFKLQJDUHWKXVFRQVLVWHQWZLWKWKHK\SRWKHVLVWKDW FDWHJRULFDOSKRQRORJLFDOSKRQHWLF WDUJHWVPD\QRWH[LVW5DWKHUFRQVLVWHQW ZLWKPXOWLSOHWUDFHWKHRU\WKHWDUJHWRISKRQRORJLFDODFTXLVLWLRQPD\EHWKH JUDGLHQFH DQG YDULDWLRQ LWVHOI %XW VWLOO VSHDNHUV¶ PLPHWLF WDOHQWV DUH QRW SHUIHFW6WUD\WRNHQVDUHLQHYLWDEOHDQGLWLVWKHIXQFWLRQDOEHQH¿WRIFHUWDLQ RIWKHVHVWUD\VZKLFKPLJKWXOWLPDWHO\WDNHKROGLQDV\VWHPDQGFRPHWR SHUPHDWHWKHOH[LFRQ,IODQJXDJHWKHRULVWVLQVLVWRQPDLQWDLQLQJDGLVWLQFWLRQ EHWZHHQVSHDNHUV¶SKRQHWLFVDQGSKRQRORJ\WKHQZHPLJKWVD\WKDWJHQXLQH VWUD\VDUHSKRQHWLFZKLOHDOOYDULDWLRQWKDWLVSUREDELOLW\PDWFKHGLVSKRQR ORJLFDOLQRULJLQ

&RQFOXVLRQ ,Q WKLV VWXG\ , KDYH HPSOR\HG WKH ODERUDWRU\ LQ DQ DWWHPSW WR UHFDSLWXODWH WKHIRUFHVUHVSRQVLEOHIRUDVRXQGFKDQJHZKLFKWRRNSODFHLQ7ULTXH2Q WKH ZRUNLQJ DVVXPSWLRQ WKDW VRPH VRXQG FKDQJHV DUH D FRQVHTXHQFH RI OLVWHQHUV PLVLQWHUSUHWLQJ WKH ZRUGV LQWHQGHG E\ VSHDNHUV WKH SURSHU ODER UDWRU\ FRQGLWLRQV PD\ UHÀHFW UHDOZRUOG KLVWRULFDO SDWWHUQV LQ FRPSUHVVHG IRUP 7KH RSHUDWLYH DVVXPSWLRQ LQ WKH SUHVHQW H[SHULPHQW KDV EHHQ WKDW QRLVHLQWURGXFHGLQWRWKHVSHHFKVLJQDOPLJKWLQGXFHD³VSHHGHGXSÚDWHRI PLVSHUFHSWLRQLQFHUWDLQFRQWH[WVDQGWKXVUHÀHFWRQHRULJLQRIUHDOZRUOG VRXQG FKDQJH *LYHQ WKDW ODQJXDJH OHDUQHUV ODUJHO\ WKRXJK LPSHUIHFWO\ PDWFK WKH YDULDWLRQ WKH\ SHUFHLYH WKH VRUWV RI SHUFHSWXDO HUURUV LQGXFHG LQ WKH SUHVHQW VWXG\ PLJKW RQO\ UHÀHFW WKH FXOPLQDWLRQ RI D VORZ JHQHUD WLRQWRJHQHUDWLRQ DFFUHWLRQ RI VXFK HUURUV UDWKHU WKDQ RIIHULQJ DQ\ PDMRU LQVLJKWV LQWR WKH RQOLQH SURFHVVLQJ RI QDWXUDO VSHHFK 7KH JUDGLHQFH DQG YDULDWLRQLQKHUHQWLQVSHHFKSURGXFWLRQPD\EHWKHIRGGHUIRUWKHVHVRUWVRI VRXQGVFKDQJHVWKHPRUHGLVWLQFWWKHYDULDQWIURPDQDFRXVWLFDOO\VLPLODU ZRUGWKHPRUHOLNHO\WKDWLWZLOOEHLQWHUSUHWHGFRUUHFWO\DQGVRWKHPRUH OLNHO\WKHV\VWHPZLOOZHQGWRZDUGVWKLVYDOXH,QWKHSUHVHQWH[SHULPHQW WKHOHDVWFRQIXVDEOHIRUPV>WF#@DQG>WI9#@ DUHH[DFWO\WKRVHZKLFKDFWX

'DQLHO6LOYHUPDQ

DOO\VHHPWRKDYHHYROYHGLQ7ULTXHIURPPRUHFRQIXVDEOHIRUPV>WF#@DQG >WI#@ ,HPSKDVL]HWKDWWKHSURSRVDOVDGYDQFHGKHUHLQVKRXOGQRWEHLQWHUSUHWHG LQWHOHRORJLFDOWHUPV/DQJXDJHLVQRWLQH[RUDEO\KHDGHGWRZDUGDQRSWLPDO VWDWH/DQJXDJHHYROXWLRQLVXQJXLGHGDQGSDVVLYHMXVWDVLQWKHHYROXWLRQ RIVSHFLHV6HHDOVR.HOOHUDQG&URIWIRUH[WHQGHGGLVFXVVLRQ 6SHDNHUVDUHSUREDEO\QRPRUH³DOWUXLVWLF´WKDQDUHVWRZDZD\UDWVRQDJDU EDJHVFRZ,QGHHGIRUHYHU\FDVHRIFRQWUDVWHQKDQFLQJVRXQGFKDQJHW\SL FDOO\DVLQWKH7ULTXHFDVHIRXQGLQSUHYRFDOLFRUVWUHVVHGFRQWH[WVZKHUH WKHUHLVJUHDWHURSSRUWXQLW\IRUFRQWUDVWHQKDQFLQJYDULDWLRQ ZHPLJKWHQ FRXQWHUDFDVHRIFRQWUDVWPHUJLQJVRXQGFKDQJHW\SLFDOO\IRXQGLQSUHFRQ VRQDQWDORUVWUHVVOHVVFRQWH[WVZKHUHWKHUHLVOHVVRSSRUWXQLW\IRUFRQWUDVW HQKDQFLQJYDULDWLRQ )LQDOO\ , QRWH WKDW WKH SUHVHQW SV\FKRDFRXVWLF ¿QGLQJV GR QRW EHDU GL UHFWO\RQWKHLVVXHVRISKRQRORJLFDOFDWHJRUL]DWLRQRUSUREDELOLW\PDWFKLQJ VLQFHQRPHDQLQJVZHUHDVVRFLDWHGZLWKWKHVRXQGVHTXHQFHV1RQHWKHOHVV WKH¿QGLQJVPD\EHVHHQDVFRQVLVWHQWZLWKWKHVRUWVRIGLDFKURQLFVFHQDULRV WKDWDUHOLNHO\JLYHQWKHIDFWVRISUREDELOLW\PDWFKLQJDQGJLYHQWKHWKHR UHWLFDODVVXPSWLRQVRIPXOWLSOHWUDFHWKHRU\

$FNQRZOHGJPHQWV :DUPWKDQNVWR³P\OR\DOVXEMHFWV´WR0DUJDUHW5XVVHOOIRUUXQQLQJWKHH[ SHULPHQW.\OH&KDPEHUVIRUKHOSZLWK3V\6FRSH0ROO\0DFNIRUKHOSZLWK VWDWLVWLFV:RXWHU-DQVHQIRU DQVZHULQJ P\ TXHULHV DQG 'HYLQ &DVHQKLVHU IRUKHOSZLWKHYHU\WKLQJ$OVRPDQ\WKDQNVWR'RXJ:KDOHQ.HLWK-RKQVRQ DQGDQRWKHU/DE3KRQUHYLHZHUIRUGHWHFWLQJDNHUQHORIVRPHWKLQJLQWHUHVW LQJLQWKHWHUULEO\URXJKDQGUXVKHG¿UVWGUDIWRIWKLVSDSHU

5HIHUHQFHV $QWWLOD5DLPR $Q,QWURGXFWLRQWR+LVWRULFDODQG&RPSDUDWLYH/LQJXLVWLFV1HZÀH[HG@RUH[WHQGHGZKHQ DUWLFXODWLQJDVSHFL¿FKDQGVKDSH7KHKDQGVKDSHVLQ&$1'RSHQ@WR>FORVHG@YDULDQWRIWKHKDQGVKDSHZKLFKLVDOR FDOPRYHPHQW)LJXUH

'LDQH%UHQWDUL

0RYHPHQWVKDYHEHHQDUJXHGWREHWKH³YRZHOV´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µWRQH IXVLRQ¶ ZKLFK LV WKH UHODWLYHO\ VKRUW WLPH QHHGHG EHWZHHQ WZR DXGLWRU\ VLJQDOV LQ RUGHUWRSHUFHLYHWKHPDVGLVFUHWHYHUVXVµÀLFNHUIXVLRQ¶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

'LDQH%UHQWDUL

WKHLU SRWHQWLDO UHODWLRQVKLS WR WKH IROORZLQJ HPSLULFDO VWXG\ LV VSHOOHG RXW

7KHVHJPHQWLQVLJQHGDQGVSRNHQODQJXDJHV ,WKDVEHHQDUJXHGLQWKDWRQHPRGDOLW\GLIIHUHQFHEHWZHHQVLJQHGDQGVSR NHQODQJXDJHVLVWKHUHODWLYHLPSRUWDQFHRIVHJPHQWVYDQGHU+XOVW %UHQWDUL &KDQQRQ D E :LWK UHVSHFW WR WKH SURPLQHQFH RI SKRQRORJLFDO XQLWV LQ D IHDWXUHV JHRPHWU\ WKH SRVLWLRQ RI WKH VHJPHQW ±XQGHUVWRRGKHUHDVWLPLQJXQLW±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µ7HHQ¶ DQG µQHDW¶ DUH GLIIHUHQW XQUHODWHG ZRUGV LQ (QJOLVK XVLQJ WKH VDPH SKRQRORJL FDO VHJPHQWV LQ GLIIHUHQW RUGHUV ,Q$6/ WKLV W\SH RI FRQWUDVW LV VHYHUHO\ OLPLWHG&KDQQRQDE ([FHSWLQWKHFDVHRIFRPSRXQGVWKHRU GHURIKDQGVKDSHVLQDVLJQLVODUJHO\SUHGLFWDEOHWKHRQO\KDQGVKDSHWKDW FDQ SUHFHGH RU IROORZ D >FORVHG@ KDQGVKDSH LV LWV >RSHQ@ YDULDQW DQG WKH RQO\SODFHRIDUWLFXODWLRQWKDWFDQSUHFHGHRUIROORZDVSHFL¿HGSODFHLVDQ DOORSKRQLF SODFH ZLWKLQ WKDW UHJLRQ 0RVW FRXQWHUH[DPSOHV WR WKLV JHQHU DOL]DWLRQ±LHSDLUVRIVLJQVVLPLODUWRµQHDW¶¶WHHQ¶ZLWKFRQWUDVWLQJRUGHU LQ$6/DUHVLJQVZLWKWKHRSSRVLWHPHDQLQJVXFKDV&$7&++VÆ+V YV 7+52: +VÆ+V ,03529( 32$Æ32$ YV *(7:256( 32$Æ32$ VKRZLQJWKDWVHJPHQWRUGHUPLJKWKDYHDPRUSKRORJLFDO UDWKHU WKDQ D SKRQRORJLFDO XVH 6LQFH FKDQJHV LQ KDQGVKDSH DQG SODFH RI DUWLFXODWLRQDUHDUJXHGWREHVHJPHQWDOSURSHUWLHVDVGLVFXVVHGHDUOLHUE\ PDQLSXODWLQJWKHVHSDUDPHWHUVLQWKHH[SHULPHQWZHZLOOEHDEOHWRGHWHU PLQHWKHHIIHFWVRIWKHVHJPHQWLQPDNLQJZRUGVHJPHQWDWLRQMXGJPHQWVLQ RXUJURXSV 7KHXQLWXSRQZKLFKPLQLPDOSDLUVDUHEDVHGDOVRVKRZVDODFNRIUHOLDQFH RQWKHVHJPHQW0LQLPDOSDLUVLQ$6/LQYROYHWKHXQLWRIWKHHQWLUHZRUG

(IIHFWVRIODQJXDJHPRGDOLW\RQZRUGVHJPHQWDWLRQ

UDWKHUWKDQWKHV\OODEOHRUWKHVHJPHQWDOXQLW)RUH[DPSOHLQ$6/WKHVXU IDFHGLIIHUHQFHEHWZHHQWKHVLJQV&$1'ÀH[HG@IHDWXUHORFDWHGDWWKHMRLQWVVWUXFWXUH ±$33/(KDVDMRLQWVVWUXFWXUHJLYHQLQEROGLQ)LJXUHDDQG&$1'ÀH[HG@

¿QJHUV ¿QJHUV

TXDQWLW\

QRQEDVH

TXDQWLW\

>RQH@

>RQH@

)LJXUH 5HSUHVHQWDWLRQV RI $33/( OHIW DQG &$1'WLQ@µWHHQ¶DQG>GLQ@µ'HDQ¶ ,QSUHYLRXVZRUN RQ VLJQ ODQJXDJH SKRQRORJ\ D PRGHO PRUH VLPLODU WR WKDW RI VSRNHQ ODQ JXDJHVZDVXVHG&RQVLGHUWKHUHSUHVHQWDWLRQLQ)LJXUHDZKLFKLVDUHS UHVHQWDWLRQLQWKH+ROG0RYHPHQWPRGHORIVLJQODQJXDJHSKRQRORJ\/LG GHOO/LGGHOODQG-RKQVRQ ,QWKLVPRGHOSHULRGVRIVWDVLVZHUH FRQVLGHUHGWKHFRQVRQDQWDOXQLWVRI$6/$VLJQVXFKDV$33/(RU&$1'RSHQ@ÅÆ>FORVHG@ $QRWKHULWHPVZHUHQRWSHUPLVVLEOHPRQR PRUSKHPLFVLJQVLLL IRUPVLQZKLFKERWKKDQGVKDSHVZHUHXQPDUNHG LHWKHLQGH[RUDOO¿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

'LDQH%UHQWDUL

DQGRULHQWDWLRQFKDQJHV LY LOOLFLWFRPELQDWLRQVRIWZRSDWKPRYHPHQWV HJVWUDLJKWDUF Y FRPELQDWLRQVRIDSDWKPRYHPHQWDQGDKDQGVKDSH FKDQJH DQG YL FRPELQDWLRQV RI D SDWK PRYHPHQW DQG DQ RULHQWDWLRQ FKDQJH7KHRUJDQL]DWLRQRIWKHVWLPXOLLVVKRZQLQ7DEOHEROGW\SHIDFH LQGLFDWHVWKDWDIRUPLVJLYHQLQ)LJXUHDVDH[DPSOHVWLPXOXVLWHP%\SXW WLQJFXHVLQFRQÀLFWLQWKLVZD\ZHFDQGLUHFWO\HYDOXDWHWKHIROORZLQJZRUG VHJPHQWDWLRQIDFWRUV 7DEOH 'LVWULEXWLRQ RI LWHPV LQ VWLPXOXV VHW +6X XQPDUNHG KDQGVKDSH +6P PDUNHG KDQGVKDSH 0 PRYHPHQW 32$ SODFH RI DUWLFXODWLRQ 25 RULHQWDWLRQ 6 FKDQJH *UH\ FHOOV LQGLFDWH SK\VLFDOO\ LPSRVVLEOH IRUPV %ROG W\SHIDFH DQG XQGHUOLQLQJ LQGLFDWHV SODFHV IURP ZKLFK WKH VDPSOHVWLPXOXVLWHPVDUHH[WUDFWHGVHH)LJXUH +DQGVKDSH W\SHVÆ 0RYHPHQW W\SHVÈ 029

+6

+6P+6P

+6X+6X

+6X+6P

+6DSHUWXUH6

32$ 32$

32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$

32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$

32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$

32$ 326 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$ 32$

256+66 SDWKSDWK

32$ 32$

SDWK+66 SDWK256 0

32$ 32$ 32$ 32$

)LJXUH 6DPSOHVWLPXOXVLWHPV+6[32$[0VSDWK256OHIW +6 >RSHQ@>FORVHG@ [32$[0VSDWKDSHUWXUHFKDQJHFHQWHU +6V2 [32$[0VUHSHDWHGSDWKULJKW

)LUVWVSHFL¿FDOO\ZLWKUHVSHFWWRJURXSLIVLJQHUVDQGQRQVLJQHUVVKRZ D JHQHUDO GLIIHUHQFH LQ WKH LWHPV WKDW DUH SHUPLVVLEOH VHTXHQFHV RI KDQG

(IIHFWVRIODQJXDJHPRGDOLW\RQZRUGVHJPHQWDWLRQ

VKDSHRUPRYHPHQWZHZLOOVHHDQHIIHFWRI$6/SKRQRORJLFDOFRQVWUDLQWV RQVLJQHUV¶ZRUGVHJPHQWDWLRQMXGJPHQWV)RUKDQGVKDSHWKLVLVFROXPQ IRUPRYHPHQWWKLVLVURZ,IKRZHYHUERWKJURXSV¶ZRUGVHJPHQWDWLRQ SDWWHUQV DUH WKH VDPH IRU WKHVH FRQGLWLRQV ZH ZLOO FRQFOXGH WKDW WKHUH LV OHVVRIDQHIIHFWRIWKHSKRQRORJLFDOFRQVWUDLQWVDQGPRUHRIDPRUHJHQHUDO PRGDOLW\HIIHFW6HFRQGVSHFL¿FDOO\ZLWKUHVSHFWWRWKHXQLWVLIHLWKHUJURXS UHVSRQGV WR VSHFL¿F VHTXHQFHV RI KDQGVKDSHV RU SODFH ZH ZLOO VHH DQ HI IHFWRIWKHVHJPHQW,IZHVHHHLWKHUJURXSUHVSRQGWRVSHFL¿FVHTXHQFHVRI PRYHPHQWVWKLVZLOOEHDQHIIHFWRIWKHV\OODEOH

3URFHGXUHV 7KHWDVNZDVUXQRQD'HOOFRPSXWHUZLWKDQLQFKFRPSXWHUPRQLWRU $SURJUDPZDVFRQVWUXFWHGVSHFL¿FDOO\IRUWKLVH[SHULPHQWWKDWUDQGRPL]HG WKH LWHPV IRU HDFK VXEMHFW SUHVHQWHG WKH LQVWUXFWLRQV LQ (QJOLVK LQVHUWHG µ5($'K@LQWKH VFKHPDWLFUHSUHVHQWDWLRQ7KHVLQJOHPDMRUERG\DUHDLVODEHOHGµ3ODFH¶IRU SODFHRIDUWLFXODWLRQ/RFDWLRQIHDWXUHVVSHFLI\IXUWKHUUH¿QHQHPHQWVRIWKH SODFHFDWHJRU\VXFKDV>SUR[LPDO@>KLJK@>FRQWDFW@HWFFDOOHGVHWWLQJV,Q WKHVLJQSLFWXUHGWKHGRPLQDQWKDQGPRYHVIURPWKH¿UVWORFDWLRQDSRLQW DERYHWKHQRQGRPLQDQWSDOP>SUR[LPDO@ WRWKHVHFRQGORFDWLRQFRQWDFW ZLWKWKHSDOP 7KH6\PPHWU\&RQGLWLRQUHIHUVWROH[HPHVLQZKLFKKLVHVVHQWLDOO\D FRS\RIWKHGRPLQDQWKDQGK,QVXFKVLJQVKLVVLPSO\UHSUHVHQWHGDVD PHPEHURIWKH+DQG&RQ¿JXUDWLRQFODVV6DQGOHUD $QH[DPSOH LV,6/ &$7VKRZQLQ)LJXUHE,QWKLVVLJQWKHKHDGLVWKHSODFHRIDUWLFX ODWLRQDQGWKHVHWWLQJVDUH>LSVLODWHUDO@WRWKHVLJQLQJKDQG>ORZ@LHVLGHRI PRXWKDUHD IRUERWKORFDWLRQV>FRQWDFW@IRUWKH¿UVWORFDWLRQDQG>SUR[LPDO@ IRUWKHVHFRQGORFDWLRQ7KHFKDQJHLQVHWWLQJGHVFULEHVWKHSDWKWUDYHUVHGE\ WKHKDQGV6LJQVLQZKLFKKIXQFWLRQVOLNHDFRS\RIKPD\EHUHSUHVHQWHG DVLQ)LJXUHD7KHKQRGHLVDVVRFLDWHGWRWKHVDPHIHDWXUHFRPSOH[DVK DEEUHYLDWHGKHUHE\WKHKDQGVKDSHLFRQDQGDUWLFXODWHVWKHVDPHORFD WLRQVDQGPRYHPHQW

:HQG\6DQGOHU

,QERWKW\SHVRIWZRKDQGHGZRUGVWKHQRQGRPLQDQWKDQGLVXQGHUVSHFL ¿HG,QWKHGRPLQDQFHW\SH)LJXUH WKHKDQGPXVWHLWKHUKDYHRQHRIRQO\ DIHZXQPDUNHGKDQGVKDSHVRULWLVUHGXQGDQWO\PDUNHGIRUWKHVDPHVKDSH DV K ,Q WKH H[DPSOH WKH K KDQGVKDSH LV WKH XQPDUNHG VKDSH7KH QRWLRQRIPDUNHGQHVVDVVXPHGKHUHLVWKDWRI-DNREVRQ DQGXQGHU VSHFL¿FDWLRQLVVHHQDVDGHYLFHIRUH[SUHVVLQJUHODWLYHPDUNHGQHVVWKHOHVV VSHFL¿HGWKHOHVVPDUNHGVHH6DQGOHUIRUDWUHDWPHQWRIKDQG VKDSHVLQWKLVIUDPHZRUN ,QWKHV\PPHWULFDOW\SH)LJXUH K¶VVKDSH DQG WKH ORFDWLRQV DQG PRWLRQ LW DUWLFXODWHV DUH DOO FRPSOHWHO\ XQVSHFL¿HG DVVXPLQJWKRVHRIKE\GHIDXOW

)LJXUH

$ 3DUWLDOVFKHPDWLFUHSUH )LJXUH VHQWDWLRQRIVLJQZLWKK DVDSODFHRIDUWLFXODWLRQ $77+$7020(17,6/ % ,OOXVWUDWLRQRIWKHVLJQ

$ 3DUWLDOVFKHPDWLFUHSUH VHQWDWLRQRIVLJQZLWKWZR V\PPHWULFDODUWLFXODWRUV &$7,6/ % ,OOXVWUDWLRQRIWKHVLJQ

)XUWKHUPRUHLQWKHSKRQRORJ\DQGPRUSKRORJ\RI$6/KSDWWHUQVZLWK KLQV\PPHWULFDOVLJQVDQGZLWKWKHSODFHRIDUWLFXODWLRQFODVVLQWKHRWKHU W\SHRIWZRKDQGHGVLJQ6DQGOHUD )RUH[DPSOHWKHSODFHFRQ VWUDLQWDSSOLHVWRKLQGRPLQDQFH)LJXUH W\SHVLJQVLIKLVWKHSODFH RIDUWLFXODWLRQWKHQQRRWKHU SODFHRI DUWLFXODWLRQPD\ EH VSHFL¿HG LQ WKH OH[HPH3HUOPXWWHU MXVWDVWKHUHPD\EHQRRWKHUSODFHEHVLGHVWKH KHDGLQWKHVLJQLQ)LJXUH6LPLODUO\LQV\PPHWULFDOVLJQV)LJXUHW\SH K DQG K EHKDYH LGHQWLFDOO\ XQGHU DVVLPLODWLRQ RI KDQG FRQ¿JXUDWLRQ LQ FRPSRXQGV ,QRUGHUWRXQGHUVWDQGWKHEHKDYLRURIWKHKDQGVLQVLJQODQJXDJHSKRQRO RJ\OHW¶VORRNDWDVVLPLODWLRQLQ$6/FRPSRXQGV7KHIRUPRIOH[LFDOL]HG FRPSRXQGVLVRIWHQUHGXFHGLQSDUWE\WRWDOUHJUHVVLYHDVVLPLODWLRQRIWKH +DQG&RQ¿JXUDWLRQ/LGGHOODQG-RKQVRQ6DQGOHU ,IWKH VHFRQGEDVHVLJQKDSSHQVWREHDV\PPHWULFDOWZRKDQGHGVLJQLHLIKLV SDUWRIWKH+&FODVVWKHQERWKKDQGVDVVLPLODWH)LJXUHVKRZVWKHFRP

3KRQRORJ\SKRQHWLFVDQGWKHQRQGRPLQDQWKDQG

SRXQG0,1''523ZKLFKPHDQV)$,17)LJXUHVKRZVVFKHPDWLFDOO\ KRZWKHUXOHZRUNVVHH6DQGOHU6DQGOHUDQG/LOOR0DUWLQIRUIXOO UHSUHVHQWDWLRQV ,QWKLVOH[LFDOSKRQRORJLFDOUXOHWKHHQWLUHKDQGFRQ¿JXUDWLRQLVLQYROYHG DQGLWVSUHDGVGLVFUHWHO\WRWKHEHJLQQLQJRIWKHFRPSRXQGDQGQRIXUWKHU,W LVWREHGLVWLQJXLVKHGIURPSRVWOH[LFDOFRDUWLFXODWRU\SKRQHWLF SURFHVVHV ZKLFKDUHJUDGLHQWDQGRUQRQFDWHJRULFDO)RUH[DPSOH&RULQD GH VFULEHVFRDUWLFXODWLRQEHWZHHQZRUGVWKDWDGGVDVLQJOH¿QJHUIURPWKHKDQG VKDSHRIRQHVLJQWRWKHKDQGVKDSHRIDQDGMDFHQWVLJQ&RDUWLFXODWLRQRIWKLV VRUW EHWZHHQ VLJQV LV QRW FDWHJRULFDO VLQFH RQO\ SDUW RI WKH VKDSH DVVLPL ODWHV,WLVQRQVWUXFWXUHSUHVHUYLQJLQWKHVHQVHWKDWLWPD\FUHDWHVKDSHVWKDW GRQ¶WH[LVWLQWKHKDQGVKDSHLQYHQWRU\,QRWHWKDWQRLQVWUXPHQWDOPHDVXUH PHQWRIWKHVLJQODQJXDJHSKHQRPHQDXQGHUGLVFXVVLRQKDVEHHQXQGHUWDNHQ 7KXVFODLPVDERXWJUDGLHQFHDQGGLVFUHWHQHVVUHO\RQKXPDQMXGJPHQW7KLV VKRUWFRPLQJLVQRWTXLWHDVGLUHDVLWPD\VHHPKRZHYHUIRUWKHIROORZLQJ UHDVRQV XQOLNHWKHDUWLFXODWRUVRIVSHHFKVLJQODQJXDJHDUWLFXODWRUVDUH ODUJHDQGVORZUHODWLYHWRVSHHFKDUWLFXODWRUV VLJQODQJXDJHDUWLFXODWRUV DUHGLUHFWO\REVHUYDEOHE\WKHH\HDQG DOOUHOHYDQWSKHQRPHQDKDYHEHHQ VFUXWLQL]HGRQYLGHRWDSHPDQ\WLPHVLQVORZPRWLRQUDQJLQJIURPRI QRUPDOVSHHGGRZQWRIUDPHE\IUDPHYLHZLQJ7KHIDFWWKDWWKLVPHWKRG FDQGLVWLQJXLVKEHWZHHQQRQFDWHJRULFDOKDQGVKDSHFRDUWLFXODWLRQEHWZHHQ ZRUGVDQGFDWHJRULFDOKDQGVKDSHDVVLPLODWLRQLQFRPSRXQGVHQFRXUDJHVXV WRDFFHSWUHVXOWVDFKLHYHGWKLVZD\DWOHDVWXQWLODEHWWHUPHWKRGFDQEHVDW LVIDFWRULO\LPSOHPHQWHG

$0,1'

%'523 &)$,17$6/

K

K

K

R

R

+&

+&

)LJXUH

$6/OH[LFDOL]HGFRPSRXQGZLWK +DQG&RQ¿JXUDWLRQDVVLPLODWLRQ

)LJXUH 7RWDO+&DVVLPLOD WLRQLQDV\PPHWUL FDOWZRKDQGHG FRPSRXQG

:HQG\6DQGOHU

%HFDXVH WKH WRWDO +& DVVLPLODWLRQ UXOH LQ FRPSRXQG ZRUGV LV OH[LFDO VWUXFWXUHSUHVHUYLQJDQGFDWHJRULFDOUDWKHUWKDQSRVWOH[LFDOQRQVWUXFWXUH SUHVHUYLQJDQGQRQFDWHJRULFDOLWLVSUHVHQWHGKHUHDVDQH[DPSOHRIDSKR QRORJLFDOUXOH3KRQRORJ\LQERWKPRGDOLWLHVWKHQUHFRJQL]HVWKHFDWHJRU\ µZRUG¶DQGLVDIIHFWHGE\GLVFUHWHDVVLPLODWLRQUXOHV)XUWKHUPRUHUHJDUGOHVV RIPRGDOLW\SKRQRORJ\V\VWHPDWLFDOO\DIIHFWVZKROHFODVVHVRIIHDWXUHVHJ &OHPHQWV ,QWKHNLQGRIDVVLPLODWLRQSUHVHQWHGKHUHWKHZKROHKDQG FRQ¿JXUDWLRQFODVVLQFOXGLQJWKHVHOHFWHG¿QJHUVWKHLUSRVLWLRQDQGWKHRUL HQWDWLRQRIWKHKDQGVDVVLPLODWHVD VHPDQWLF SDLULQJ@ DSSOH.(D SKRQRORJLFDO SDLULQJ LQ ZKLFK WZR SD UDPHWHUVKDQGFRQ¿JXUDWLRQDQGPRYHPHQWDUHVKDUHG@ 7KHVHVLJQVZHUH YLGHRWDSHGWKHQGLJLWL]HGHGLWHGDQGQRUPDOL]HGWRPVZLWK0HGLD GLJLWDOYLGHRV\VWHPY 2EMHFWVDQGVLJQVZHUHGLJLWDOO\RYHUODLG ZLWKREMHFWVDSSHDULQJDWIXOOVWUHQJWKDQGLQWHUIHULQJVLJQVDSSHDULQJDW WUDQVSDUHQF\7KH UHVXOW RI WKLV FRPSRVLWLRQ LV RI D IXOO FRORUHG REMHFW DS SHDULQJZLWKDKLJKO\YLVLEOHEXWVHPLWUDQVSDUHQWVLJQHU)LJXUH

FDW3,*

FDW6725WUXQN@DQGWKHVHWWLQJIHDWXUHV >KLJK@>ORZ@ :LWK WKLV EULHI VNHWFK RI WKH 'HSHQGHQF\ 0RGHO LQ SODFH WKH QH[W VHF WLRQIRFXVHVRQRQHGLVWLQFWLYHORFDWLRQWKHWUXQN7KHDLPRIWKLVVHFWLRQ LV WR LOOXVWUDWH WKH UHGXFWLRQ VWUDWHJLHV WKDW ZHUH GLVFXVVHG LQ VHFWLRQ ,W ZLOO EH VKRZQ KRZ D VPDOO VHW RI GLVWLQFWLYH ORFDWLRQ IHDWXUHV FDQ EH SRV WXODWHG ZKHQ D SURSHU UROH LV JLYHQ WR SKRQHWLF LPSOHPHQWDWLRQ UXOHV WR DFFRXQW IRU QRQGLVWLQFWLYH SKRQHWLF SURSHUWLHV DQG WR WKH PHFKDQLVP RI VHPDQWLF SUHVSHFL¿FDWLRQ WR DFFRXQW IRU PHDQLQJGULYHQ SKRQHWLF SURSHUWLHV

$FDVHVWXG\WKHIHDWXUH>WUXQN@ /RFDWLRQIHDWXUHV 7UDGLWLRQDOO\ORFDWLRQRUSODFH LVUHFRJQL]HGDVRQHRIWKHPDMRUFRPSR QHQWVRIVLJQV,QWKHGLIIHUHQWPRGHOVWKDWGHVFULEH$6/SKRQRORJ\ZH¿QG DQDEXQGDQFHRIIHDWXUHVIRUWKLVGLPHQVLRQRIVLJQV7KLVLVGXHLQSDUWWR WKHIDFWWKDWRIWHQHYHU\SKRQHWLFORFDWLRQWKDWLVWRXFKHGE\WKHDUWLFXODWRU LVDGRSWHGDVDSKRQRORJLFDOVSHFL¿FDWLRQLQWKHVHPRGHOV,QWDEOHSDJH DGDSWHGIURPYDQGHU.RRLMD DFRPSDULVRQRIWKHORFDWLRQIHD WXUHVIRU$6/LQYDULRXVVLJQPRGHOVLVSURYLGHG7KHULJKWPRVWFROXPQOLVWV WKH IHDWXUHV UHVXOWLQJ IURP DQ DQDO\VLV RI 1*7 WKDW LQFRUSRUDWHV SKRQHWLF LPSOHPHQWDWLRQ UXOHV DQG VHPDQWLF SUHVSHFL¿FDWLRQ $OWKRXJK WKHVH IHD WXUHVDUHEDVHGRQWKHGHVFULSWLRQRI1*7VLJQVWKHUHVXOWLQJSURSRVDOLVSXW IRUZDUGDVDJHQHUDOK\SRWKHVLVIRUVLJQODQJXDJHSKRQRORJ\LQJHQHUDO &RQWUDU\WRWKHPRGHOVLQWKHPLGGOHFROXPQVWKHUHDUHRQO\DIHZGLV WLQFWLYHORFDWLRQVLQWKHQHZSURSRVDOZKLFKLVDFWXDOO\TXLWHFORVHWRWKDW RI 6WRNRH ,Q )LJXUH D VFKHPDWLF VXPPDU\ RI WKH QHHGHG SODFH VSHFL¿FDWLRQLVRIIHUHG 7KHORFDWLRQVSULQWHGLQLWDOLFVDUHFRQVLGHUHGWREHPDUNHGYLVjYLVWKHLU FRPSOHPHQWDU\FKRLFHV,Q1*7>KHDG@LVWKHPRVWIUHTXHQWERG\UHODWHGOR FDWLRQ 7KLVPDNHV>KHDG@WKHOHDVWPDUNHGERG\UHODWHGORFDWLRQ7KH UHFXUUHQWREVHUYDWLRQWKDWOHVVHUPDUNHGORFDWLRQVDOORZWKHJUHDWHVWDUUD\RI VXEGLYLVLRQVFIYDQGHU+XOVW LVERUQRXWE\WKHIDFWWKDWERWK>KHDG@

+DUU\YDQGHU+XOVWDQG(OVYDQGHU.RRLM

DQG>KDQG@KDYHIXUWKHUVXEGLYLVLRQV,QWKHFDVHRI>KHDG@LWLVDVVXPHGWKDW WKHORFDWLRQIHDWXUHV>PLG@DQG>KLJK@FDQHQWHULQWRDFRPELQDWLRQ(LWKHU IHDWXUHFDQEHLQV\QWDFWLFKHDG RU GHSHQGHQWSRVLWLRQ UHVXOWLQJ LQ D IRXU ZD\GLVWLQFWLRQRQWKHKHDG,QWKHFDVHRI>KDQG@WKHSDOPVLGHRIWKHKDQG LVPRVWIUHTXHQWDQGLVUHSUHVHQWHGE\WKHIHDWXUH>EURDG@7KHWKXPEVLGHRI WKHKDQGZKLFKLVUHSUHVHQWHGE\WKHIHDWXUH>QDUURZ@LVPXFKOHVVIUHTXHQW 7KHEDFNVLGHRIWKHKDQGLVKLJKO\PDUNHGDQGLVUHSUHVHQWHGE\DIXUWKHU VSHFL¿FDWLRQRIWKHIHDWXUH>EURDG@

/RFDWLRQ

%RG\UHODWHG

KHDG PLG

KLJK

QRQKHDG

KLJK

WUXQN

QHFN

PLG

QRQERG\UHODWHG KDQG EURDG QDUURZ

QRQKDQG SODQH

DUP

UHYHUVH

)LJXUH 6FKHPDWLFVXPPDU\RISODFHVSHFL¿FDWLRQVIRUWKH'HSHQGHQF\0RGHO

7KHPDMRUGLVWLQFWLRQLVEHWZHHQERG\UHODWHGDQGQRQERG\UHODWHGORFD WLRQV7KLVGLVWLQFWLRQFRUUHODWHVWRDFHUWDLQH[WHQWZLWKOLQJXLVWLFIXQFWLRQ WKHIRUPHUDUHSULPDULO\UHOHYDQWLQWKHOH[LFDOGRPDLQZKHUHDVWKHODWWHU VHUYHDPRUHPRUSKRV\QWDFWLFUROH ,QWKHW\SRORJ\RIORFDWLRQQRIHDWXUHLVSURSRVHGWRFRYHUWKHSKRQHWLF SURSHUW\RIµQHXWUDOVSDFH¶LHWKHVSDFHLQIURQWRIWKHVLJQHU1HXWUDOVSDFH LV WKH PRVW IUHTXHQW ORFDWLRQ LQ 1*7 OH[LFDO VLQJV *LYHQ WKDW LQ WKLV VWXG\ OH[LFDO IUHTXHQF\ LV FRQVLGHUHG WR EH DQ LPSRUWDQW LQGLFDWRU RI PDUNHGQHVVQHXWUDOVSDFHLVWDNHQWREHWKHOLWHUDOO\XQPDUNHGORFDWLRQLH QR ORFDWLRQ 7KLV UHSUHVHQWDWLRQ RI QHXWUDO VSDFH VLJQV GRHV QRW SUHFOXGH WKDW WKH DUWLFXODWRU FDQ PRYH ZLWK UHVSHFW WR VSHFL¿F ORFDWLRQV LQ QHXWUDO VSDFH7KHVHORFDWLRQVFDQEHSURYLGHGE\RWKHUFRPSRQHQWVRIWKHJUDPPDU 7KHPRUSKRV\QWD[RIDJUHHPHQWPD\SURYLGHWKHORFDWLRQVLQQHXWUDOVSDFH WKDWDUHDVVRFLDWHGZLWKWKHDUJXPHQWVRIDYHUE$OVRWKHVSDWLDOH[SUHVVLRQ RIWLPHµWLPHOLQHV¶VHH6FKHUPHU .RROKRI PD\GHPDQGWKHXVHRI VSHFL¿FORFDWLRQVLQQHXWUDOVSDFH+RZHYHUWKHSUHVHQWPRGHOUHFRJQL]HV RQHGLVWLQFWLYHQRQERG\UHODWHGORFDWLRQLQQHXWUDOVSDFHRQSKRQRORJLFDO SKRQHWLFJURXQGV%DVHGRQDVXUYH\RIPRYHPHQWW\SHVDYLUWXDOKRUL]RQWDO SODQHLQVSDFHLVDVVXPHG(QGKROGPRYHPHQWVLQVSDFHFDQEHDQDO\]HG

3KRQHWLFLPSOHPHQWDWLRQDQGSKRQHWLFSUHVSHFL¿FDWLRQ

LQWKHVDPHZD\DVPRYHPHQWVHQGLQJLQFRQWDFWZLWKVRPHERG\ORFDWLRQ LIRQHDVVXPHVWKDWWKHHQGKROGLVFDXVHGE\DYLUWXDO HQGFRQWDFWZLWKD YLUWXDO KRUL]RQWDOSODQH 7DEOH 2YHUYLHZRIORFDWLRQVSHFL¿FDWLRQVRIYDULRXV$6/PRGHOV 6WRNRH QHXWUDOVSDFH +HDG

6DQGOHU QHXWUDOVSDFH +HDG

%UHQWDUL SODQHV KHDG

)RUHKHDG

IRUHKHDG

0LGIDFH VLGHRIIDFH

(\H &KHHNQRVH

ORZHUIDFH

8SSHUOLS PRXWK &KLQ XQGHUFKLQ QHFN 6KRXOGHU &ODYLFOH WRUVRWRS WRUVRPLG WRUVRERWWRP ZDLVW KLS

1HFN

QHFN

7UXQN

VKRXOGHU WUXQN

8SSHUDUP

DUP

)RUHDUP ZULVWEDFN ZULVWIURQW

ZHDNKDQG ZHDNKDQG VHYHUDOVKDSHV

/LGGHOO -RKQVRQ 9DQGHU.RRLM SODQH WRSRIKHDG KHDGKLJK EDFNRIKHDG IRUHKHDG IRUHKHDGVLGH KHDGPLG !KLJK FKHHN KHDGKLJK !PLG HDU MDZ 1RVH KHDGPLG /LS &KLQ 1HFN 1HFN 6KRXOGHU VWHUQXPFKHVWWUXQN

7UXQN

DEGRPHQ

/HJ XSSHUDUP

XSSHUDUP HOERZIURQW HOERZEDFN IRUHDUPIURQW IRUHDUPEDFN IRUHDUPXOQDU ZULVWEDFN ZULVWIURQW ZHDNKDQG ORFDWLRQV

$UP

ZHDNKDQG ORFDWLRQV

ZHDNKDQG SDOPEDFNVLGH

)RUHDUP

7KHWUXQN 6WRNRH SURSRVHGWKDWQRSKRQRORJLFDOGLVWLQFWLRQVDUHPDGHRQWKH WUXQN7KH$6/VLJQVWKDWXVHWKHH[WUHPHXSSHU$1*(/5(63216,%,/,7< DQG


ORZHU5866,$ OLPLWVRIWKHWUXQNDUHFODLPHGWRFDUU\WKHLUFRQWUDVWLQKDQG FRQ¿JXUDWLRQ DQG PRYHPHQW RQO\ +RZHYHU XQOHVV DOO UHGXQGDQFLHV FRQ FHUQLQJ WKH FRPELQDWLRQ RI KDQGVKDSH DQG ORFDWLRQ DUH LQYHVWLJDWHG WKLV VHHPVDUDWKHUDGKRFDQGXQVDWLVI\LQJVROXWLRQ 2WKHUUHVHDUFKHUVDVVXPHPDQ\GLVWLQFWLRQVRQWKHWUXQNPDLQO\EDVHG RQWKHREVHUYDWLRQWKDWWKHDUWLFXODWRUFRQWDFWVWKHWUXQNLQYDULRXVORFDWLRQV $VDQH[DPSOHRIWKLV¶SKRQHWLF¶DSSURDFK%UHQWDUL DVVXPHVSR WHQWLDOO\GLVWLQFWLYHORFDWLRQVRQWKHWUXQNUHVXOWLQJIURPVHYHQYHUWLFDOOHYHO GLVWLQFWLRQVVKRXOGHUFODYLFOHWRSRIWKHWRUVRWRUVRPLGDQGWRUVRERWWRP ZDLVWKLS FRPELQHGZLWKWZRKRUL]RQWDOOHYHOVDQGWZRGLVWLQFWLRQVSDUDOOHO WRWKHERG\VXUIDFH )ROORZLQJ6WRNRHLWLVSURSRVHGKHUHWKDWWKHUHDUHQRSKRQRORJLFDOFRQ WUDVWVDPRQJORFDWLRQVRQWKHWUXQN7KHUHLVRQO\RQHSKRQRORJLFDOVSHFL¿ FDWLRQ>WUXQN@7KHDFWXDOUHDOL]DWLRQRIDORFDWLRQRQWKHWUXQNFDQEHSUH GLFWHGLQWHUPVRIWKHSKRQHWLFLPSOHPHQWDWLRQUXOHVRUVHPDQWLFSUHVSHFL ¿FDWLRQ7KHSKRQHWLFLPSOHPHQWDWLRQUXOHVWKDWDFFRXQWIRUWKHDOORSKRQLF ORFDWLRQV RQ WKH WUXQN QHHG UHIHUHQFH WR WKH QXPEHU RI KDQGV DQG WR WKH UHODWLYHRULHQWDWLRQRIWKHGRPLQDQWKDQG)RU VRPHWUXQNORFDWLRQVWKHUH LVDPSOHHYLGHQFHIRUWKHUROHRIVHPDQWLFPRWLYDWLRQ7KHXVHRIH[WUHPH OLPLWVRIWKHWUXQNVKRXOGHUVDQGZDLVWHVSHFLDOO\ZLOOEHVKRZQWREHFRQ WUROOHGE\VHPDQWLFV

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


QRQGRPLQDQWKDQGLVSODFHGLQWKHH[DFWPLUURUORFDWLRQWKHPLUURUEHLQJ SODFHG DW WKH PLGVDJLWWDO SODQH$V WKH ORFDWLRQ IRU WKH ZHDN KDQG FDQ EH SUHGLFWHGLQEDODQFHGVLJQVORFDWLRQLQWKHVHVLJQVLVUHSUHVHQWHGE\VSHFLI\ LQJRQO\WKHORFDWLRQIRUWKHVWURQJKDQG+RZHYHUWKLVREVHUYDWLRQQHHGV VRPHUH¿QHPHQW,IWKHWZRKDQGVPDNHFRQWDFWZLWKWKHFKHVWDWWKHHQGRI WKHPRYHPHQWWKHKDQGVWHQGWREHORFDWHGLQWKHFHQWHURIWKHFKHVWRQH KDQGDERYHWKHRWKHU$QH[DPSOHRIVXFKDVLJQLV/21(/QDVDO@IRU


WKHH[SUHVVLRQRIµ¿UVWSHUVRQ¶LQWKH6RXWK$PHULFDQODQJXDJH7HUHQD$NLQODEL $SKRQHWLFSURSHUW\WKDWLVSUHGLFWDEOHLQRQHODQJXDJHPD\RIFRXUVHODWHUEH IRXQGWREHGLVWLQFWLYHLQWKHFRQWH[WRIDQDQDO\VLVRIDQRWKHUODQJXDJH,WLVDV VXPHGKHUHWKDWDSKRQHWLFSURSHUW\LVQRQGLVWLQFWLYHXQWLOVKRZQRWKHUZLVH &RQWUDU\WRRWKHUUHVHDUFKRQLFRQLFLW\LQVLJQODQJXDJHLWLVQRWDVVXPHGKHUH WKDWWKHYRFDEXODU\RIDVLJQODQJXDJHFDQEHSDUWLWLRQHGLQWRQRQRYHUODSSLQJ VHWVRILFRQLFVLJQVDQGQRQLFRQLFRUDUELWUDU\VLJQV9DQGHU.RRLM GHP RQVWUDWHGIRU1*7WKDWVHPDQWLFPRWLYDWLRQLQFOXGLQJLFRQLFPRWLYDWLRQ PD\ RFFXUDWDOOOHYHOVRIGHVFULSWLRQDOVRDWWKHORZHVWOHYHORIIHDWXUHV7KLVLPSOLHV WKDWVLJQVFRQVLVWLQJRIRWKHUZLVHDUELWUDU\IHDWXUHVPD\FRQWDLQDVHPDQWLFDOO\ PRWLYDWHGIRUPHOHPHQWHJDQLFRQLFDOO\PRWLYDWHGORFDWLRQIHDWXUH ,QWKLVDUWLFOHLFRQLFPRWLYDWLRQLVXQGHUVWRRGDVDVXEW\SHRIVHPDQWLFPRWLYD WLRQ,QLFRQLFPRWLYDWLRQWKHUHODWLRQEHWZHHQWKHOLQJXLVWLFIRUPDQGLWVUHIHU HQWLVDQDORJRXVRUGLDJUDPPDWLF7KHIRUPPD\UHIHUWRLWVUHIHUHQWGLUHFWO\RU WKURXJKPHWDSKRU,QFOXGHGKHUHDUHDOVRGHLFWLFVLJQVUHIHUULQJWRERG\SDUWVHJ .,'1(< DQGFDVHVLQZKLFKWKHVHPDQWLFPRWLYDWLRQRIWKHIRUPLVPHGLDWHG WKURXJKVRPHRWKHUOHYHORIV\PEROL]DWLRQHJµORDQ¶KDQGVKDSHVKDQGVKDSHV UHSUHVHQWLQJQXPEHURUOHWWHUVIURPDVXUURXQGLQJVSRNHQODQJXDJH ,QWKHODWWHU FDVHRQHPD\DUJXHIRUFDOOLQJWKHVHIRUPPHDQLQJDVVRFLDWLRQVPRUSKHPHV 7KHVHPD\WKHPVHOYHVKDYHDQLQ¿QLWHDUUD\RISKRQHWLFUHDOL]DWLRQV ,WLVRIFRXUVHKLJKO\TXHVWLRQDEOHWKDWWKHIRUPVKDSHRIVSRNHQODQJXDJHVLV H[FOXVLYHO\DUELWUDU\7RFODLPWKDWZRXOGLJQRUHPDQ\PHDQLQJGULYHQSKHQRP HQDWKDWXVXDOO\JRXQGHUWKHKHDGLQJRIRQRPDWRSRHLDDQGVRXQGV\PEROLVP,I WKH SUHVHQW SURSRVDO WR SUHVSHFLI\ FHUWDLQ SKRQHWLF SURSHUWLHV DV H[WUDSKRQR ORJLFDOLVWHQDEOHDVLPLODUSURSRVDOPLJKWZHOOEHPRWLYDWHGIRUFHUWDLQDVSHFWV RIWKHµSKRQRORJ\¶RIVSRNHQODQJXDJHV 9DQ GHU +XOVW RIIHUV D FRPSDULVRQ RI VWUXFWXUHV LQ WKH VLJQHG DQG WKH VSRNHQPRGDOLWLHV,QWKHSUHVHQWDUWLFOHQRDWWHQWLRQZLOOEHJLYHQWRSDUDOOHOV GHHSRUVXSHU¿FLDOEHWZHHQVLJQODQJXDJHDQGVSRNHQODQJXDJHSKRQRORJLFDO VWUXFWXUHV $GLIIHUHQWVRUWRIIRUPDOOLQNEHWZHHQORFDWLRQDQGPRYHPHQWLVSURSRVHGLQ 8\HFKL 6KHGHYHORSHGDJHRPHWULFPRGHOLQZKLFKWKHVL]HRIWKHOH[LFDO PRYHPHQWLVUHODWLYHWRWKHVL]HRI WKHORFDWLRQ 7KHGLVWLQFWLYHORFDWLRQVUHVXOWVIURPPXOWLSO\LQJWKHVL[PDMRUORFDWLRQVLQ WKLV OLVW E\ WKH SRWHQWLDO VHWWLQJ VSHFL¿FDWLRQV LQ7DEOH ZLWKLQ WKHVH PDMRU ORFDWLRQV 7KHGLVWLQFWLYHORFDWLRQVDUHWDNHQIURP/LGGHOO -RKQVRQ )RUVRPH ORFDWLRQVLQWKHWDEOHGLDFULWLFVDUHDGGHGWRVSHFLI\WKHSUHFLVHVHWWLQJRIWKH DUWLFXODWRUZLWKLQWKHORFDWLRQ ,IWKHKDQGVFURVVWKHPLGVDJLWWDOSODQHWKLVLVVSHFL¿HGE\WKHIHDWXUH>FURVV@LQ WKHPDQQHUQRGH$QH[DPSOHRIVXFKDVLJQLQ1*7LV$8675,$


1*7DWOHDVWDWDOH[LFDOOHYHOKDVVHYHUDOUHJLRQDOYDULHWLHVRUµGLDOHFWV¶WKDW RULJLQDWHIURP'HDIHGXFDWLRQDOLQVWLWXWLRQVORFDWHGLQYDULRXVVXEUHJLRQVRIWKH 1HWKHUODQGV *83XEOLVKHG E\ /27 1HWKHUODQGV *UDGXDWH 6FKRRO RI /LQJXLVWLFV KWWSZZZORWOHWXXQO@ /LGGHOO6. 5-RKQVRQ $PHULFDQ 6LJQ /DQJXDJH &RPSRXQG )RUPDWLRQ 3URFHVVHV /H[LFDO L]DWLRQDQG3KRQRORJLFDO5HPQDQWV1//7± $PHULFDQ 6LJQ /DQJXDJH 7KH 3KRQRORJLFDO %DVH 6LJQ /DQJXDJH 6WXGLHV± 3HUOPXWWHU'0 6RQRULW\DQG6\OODEOH6WUXFWXUHLQ$PHULFDQ6LJQ/DQJXDJH/LQJXLV WLF,QTXLU\± 6DQGOHU: 3KRQRORJLFDO5HSUHVHQWDWLRQRIWKH6LJQ/LQHDULW\DQG1RQOLQHDULW\ LQ$6/3KRQRORJ\'RUGUHFKW)RULV3XEOLFDWLRQV 6FKHUPHU7DQG&.RROKRI 7KH UHDOLW\ RI WLPHOLQHV DVSHFWV RI WHQVH LQ 6LJQ /DQJXDJH RI WKH 1HWKHUODQGV6/1 ,Q63ULOOZLW] 79ROKDEHUHGV 6/5¶± +DPEXUJ6LJQXP 6WRNRH:& 6LJQ/DQJXDJH6WUXFWXUHQGHGLWLRQ6LOYHU6SULQJ0'/LQ VWRN3UHVV 8\HFKL/ 7KH*HRPHWU\RI9LVXDO3KRQRORJ\6WDQIRUG&$&6/3XEOLFDWLRQV >IURPGLVVHUWDWLRQ@

9DULDELOLW\LQYHUEDODJUHHPHQWIRUPV DFURVVIRXUVLJQHGODQJXDJHV *DXUDY0DWKXUDQG&KULVWLDQ5DWKPDQQ

,QVLJQHGODQJXDJHV³DJUHHLQJYHUEV´FKDQJHRULHQWDWLRQDQGRUGLUHFWLRQ RIPRYHPHQWDFFRUGLQJWRWDUJHWVHVWDEOLVKHGE\DQDJUHHPHQWUXOHDQGDV VLJQHGWRORFDWLRQVLQVLJQLQJVSDFH6XFKYHUEVGRQRWDOZD\VPDWFKWKH WDUJHWV 7R GHWHUPLQH WKH QDWXUH DQG VRXUFH RI WKH PLVPDWFKHV WKLV VWXG\ LQYHVWLJDWHGYDULDELOLW\LQWKUHHDJUHHPHQWIRUPVDFURVVWRYHUEVLQ IRXU VLJQHG ODQJXDJHV 2QH PDLQ ¿QGLQJ LV WKDW WZR NLQGV RI FRQVWUDLQWV GHWHUPLQHZKHWKHUWKHSKRQRORJLFDOIRUPRIDYHUEPDWFKHVWKHWDUJHWV LP SRVHGE\WKHDJUHHPHQWUXOHFRQVWUDLQWVRQWKHGHJUHHDQGRQWKHFRPSOH[ LW\RIDUWLFXODWLRQ$QRWKHU¿QGLQJLVWKDWYDULDELOLW\ZDVV\VWHPDWLFDFURVV SDUWLFXODU WDUJHWV IRU WKUHH DJUHHPHQW IRUPV DFURVV DOO YHUEV DQG VLJQHG ODQJXDJHV7DNHQWRJHWKHUWKH¿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

,QWURGXFWLRQ ,Q VLJQHG ODQJXDJHV WKHUH LV D VHW RI YHUEV FDOOHG ³DJUHHLQJ YHUEV´ WKDW FKDQJHRULHQWDWLRQDQGRUGLUHFWLRQRIPRYHPHQWDFFRUGLQJWR³WDUJHWV´7DU JHWVDUHHVWDEOLVKHGWKURXJKDJUHHPHQWZLWKWKHVXEMHFWDQGGLUHFWREMHFWRI DVHQWHQFHLQSHUVRQDQGQXPEHUIHDWXUHV3HUVRQIHDWXUHVLQFOXGH¿UVWSHU

*DXUDY0DWKXUDQG&KULVWLDQ5DWKPDQQ

VRQZKLFKUHIHUVWRWKHVLJQHUDQGQRQ¿UVWSHUVRQZKLFKUHIHUVWRSHRSOH RWKHUWKDQWKHVLJQHU0HLHU ZKLOHQXPEHUIHDWXUHVLQFOXGHVLQJXODU DQG SOXUDO .OLPD DQG %HOOXJL 7KH WDUJHWV DUH DVVLJQHG GXULQJ GLV FRXUVHWRORFDWLRQVLQWKHDUHDLQIURQWRIWKHVLJQHU³VLJQLQJVSDFH´ ZKLFK UHSUHVHQWWKHUHIHUHQWVRIWKHVXEMHFWDQGWKHGLUHFWREMHFW)RUH[DPSOHWR DJUHHZLWKDQRQ¿UVWSHUVRQVLQJXODUVXEMHFWUHSUHVHQWHGE\DORFDWLRQRQ WKHVLJQHU¶VULJKWDQGZLWKDQRQ¿UVWSHUVRQVLQJXODUREMHFWUHSUHVHQWHGE\ DORFDWLRQRQWKHVLJQHU¶VOHIWWKH$6/VLJQ $6.FKDQJHVLWVRULHQWDWLRQVR WKDWWKHSDOPRIWKHKDQGIDFHVWKHORFDWLRQUHSUHVHQWLQJWKHGLUHFWREMHFWDV LQ)LJXUHE&RPSDUHZLWKWKHFLWDWLRQIRUPLQ)LJXUHD,WDOVRFKDQJHV GLUHFWLRQRIPRYHPHQWVRWKDWWKHKDQGPRYHVIURPWKHORFDWLRQUHSUHVHQW LQJWKHVXEMHFWWRWKHORFDWLRQUHSUHVHQWLQJWKHGLUHFWREMHFW6LPLODUIRUPV RI DJUHHPHQW KDYH EHHQ QRWHG LQ DOO WKH VLJQHG ODQJXDJHV GRFXPHQWHG WR GDWH6HHHJ3DGGHQ 0HLHU $URQRII0HLU 6DQGOHU /LOOR0DUWLQ 5DWKPDQQ 0DWKXU DQG /LGGHOO

D

E

$6.

KH$6.KHU

F

VKH$6.KLP

G

VKH$6.KLPDOW

)LJXUH )RUPVRI $6.QRQ¿UVWSHUVRQVLQJXODU7KHKDQGLVD¿VWZLWKLQGH[¿Q JHUH[WHQGHGWKHQEHQWDVLWPRYHVLQDVWUDLJKWOLQH

7KHRUHWLFDOO\WDUJHWVPD\EHDVVLJQHGWRDQLQ¿QLWHQXPEHURIORFDWLRQV 6LQFHDJUHHPHQWLVDJUDPPDWLFDOSURFHVVDQDJUHHLQJYHUEVKRXOGPDWFK HYHU\SRVVLEOHWDUJHW$VLWWXUQVRXWWKLVLVQRWDOZD\VWKHFDVH)LJXUHF SUHVHQWVDQRWKHUH[DPSOHZKHUHWKHORFDWLRQVIRUWKHWDUJHWVLQ)LJXUHE KDYHEHHQVZLWFKHG7KDWLVWKHORFDWLRQRQWKHVLJQHU¶VOHIWVLGHQRZUHS UHVHQWV WKH VXEMHFW DQG WKH ORFDWLRQ RQ WKH ULJKW VLGH UHSUHVHQWV WKH GLUHFW REMHFWDVVHHQE\WKHRULHQWDWLRQDQGGLUHFWLRQRIPRYHPHQWRIWKHVLJQ)RU DQDJUHHLQJYHUEWRDJUHHZLWKWKHWDUJHWVLQ)LJXUHFDULJKWKDQGHGVLJQHU ZRXOGKDYHWRWZLVWWKHULJKWDUPVRWKDWWKHSDOPRIWKHKDQGIDFHVWKHULJKW VLGHDQGWKHQPRYHWKHKDQGIURPWKHOHIWVLGHWRWKHULJKWVLGH)RUPDQ\

9DULDELOLW\LQYHUEDODJUHHPHQWIRUPV

VLJQHUVWZLVWLQJWKHULJKWDUPVRWKDWLWIDFHVWRWKHULJKWDQGHTXLYDOHQWO\ WZLVWLQJ WKH OHIW DUP VR WKDW LW IDFHV WR WKH OHIW LV DUWLFXODWRULO\ DZNZDUG /RQFNH QRWHV WKDW WKLV DZNZDUG FRQ¿JXUDWLRQ PD\ EH UHVROYHG LI WKHUHLVVRPHFRPSHQVDWRU\PRYHPHQWVXFKDVVXSLQDWLRQRIWKHDUPWKDW UHOD[HVWKHDUPRWKHUZLVHLIWKHPRYHPHQWLVOLQHDUPRYLQJWKHKDQGLQD VWUDLJKWOLQHZLWKRXWZULVWDFWLRQ WKHFRQ¿JXUDWLRQUHPDLQVGLI¿FXOWDQGLV SUHFLVHO\ZKDWRFFXUVLQ)LJXUHF,QWKHVHFDVHVVLJQHUVRSWWROHDYHWKH YHUEXQLQÀHFWHGIRUWKHVXEMHFWDQGDGGDSURQRXQRUDQDX[LOLDU\OLNHHOH PHQWLIDYDLODEOHLQWKHODQJXDJH WRFODULI\ZKRWKHVXEMHFWLV7KHSDOPRI WKHKDQGVWLOOIDFHVWKHORFDWLRQRIWKHGLUHFWREMHFWEXWWKHKDQGQRORQJHU PRYHVIURPWKHORFDWLRQRIWKHVXEMHFWUDWKHULWPRYHVIURPWKHFKHVWDVLQ )LJXUHG 7KHUHLVWKHQYDULDELOLW\LQYHUEDJUHHPHQWIRUPVLQVLJQHGODQJXDJHV GHSHQGLQJ ERWK RQ WKH SDUWLFXODU ORFDWLRQV WR ZKLFK WDUJHWV DUH DVVLJQHG DQGRQWKHSKRQRORJLFDOIRUPVRIWKHDJUHHLQJYHUEVZKLFKLQFOXGHOH[LFDO VSHFL¿FDWLRQVIRUKDQGVKDSHRULHQWDWLRQORFDWLRQDQGPRYHPHQWIROORZLQJ 6WRNRH6WRNRH&DVWHUOLQH &URQHEHUJ%DWWLVRQ $Q LQVWUXPHQWDOVWXG\E\&RUPLHU KDVDOVRLGHQWL¿HGYDULDELOLW\LQDJUHH PHQWIRUPVLQ$6/,QSDUWLFXODULWUHYHDOHGVLJQL¿FDQWO\PRUHYDULDELOLW\LQ SOXUDOIRUPVWKDQLQVLQJXODUIRUPV:HDUHQRWVRPXFKLQWHUHVWHGLQZKHWK HURQHDJUHHPHQWIRUPZKHQSURGXFHGRYHUDQGRYHULVVXEMHFWWRJUHDWHU YDULDWLRQWKDQDQRWKHUDVZHDUHLQWKHLVVXHRIZKDWDOORZVVRPHYHUEVEXW QRWRWKHUVWRH[SUHVVDQDJUHHPHQWIRUPLQLWVHQWLUHW\$GGUHVVLQJWKLVLVVXH ZLOOKHOSXVWRXQGHUVWDQGZKDWPDNHVDIRUPDUWLFXODWRULO\GLI¿FXOWMXVWDV 0DQGHO DQG$QQ KDYHGRQHIRUKDQGVKDSH 7KHSUHVHQWVWXG\SXUVXHVVHYHUDOTXHVWLRQVUHJDUGLQJWKHQDWXUHRIWKLV YDULDELOLW\ )LUVW KRZ V\VWHPDWLF LV WKH YDULDELOLW\" 6HFRQG LV LW VXI¿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


7R DGGUHVV WKHVH LVVXHV D V\VWHPDWLF VWXG\ ZDV XQGHUWDNHQ RI WKH YDUL DELOLW\E\H[DPLQLQJDJUHHPHQWIRUPVDFURVVGLIIHUHQWVHWVRIWDUJHWVDFURVV GLIIHUHQWYHUEVDQGDFURVVGLIIHUHQWVLJQODQJXDJHV

0HWKRGV 7KH GDWD FROOHFWLRQ IRU WKLV VWXG\ IROORZHG WKH PHWKRGRORJ\ RI 0DWKXU 5DWKPDQQ DVGHWDLOHGEHORZ

3DUWLFLSDQWV 7KHUHZHUHHLJKWSDUWLFLSDQWVLQWKHVWXG\WZRIRUHDFKRIWKHIRXUVLJQHG ODQJXDJHVXQGHUVWXG\*HUPDQ6LJQ/DQJXDJH'HXWVFKH*HElUGHQVSUDFKH '*6 $XVWUDOLDQ6LJQ/DQJXDJH$XVODQ -DSDQHVH6LJQ/DQJXDJH1LKRQ 6KXZD DQG$PHULFDQ6LJQ/DQJXDJH$6/ 7KHVHVLJQHGODQJXDJHVZHUH FKRVHQ LQ SDUWLFXODU IRU WZR UHDVRQV L WKH\ DUH ZHOOHVWDEOLVKHG VLJQHG ODQJXDJHV WKDW KDYH EHHQ XVHG E\ D VWDEOH 'HDI FRPPXQLW\ RYHU WKH SDVW FHQWXU\DQGLL WKH\DUHKLVWRULFDOO\XQUHODWHGWRRQHDQRWKHUDQGWKXVSUHV HQWDGLYHUVHVDPSOHIRUFRQ¿UPLQJWKDWWKHYDULDELOLW\RIDJUHHPHQWIRUPVLV QRWDODQJXDJHVSHFL¿FHIIHFW )RUHDFKVLJQHGODQJXDJHWKHUHZDVDWOHDVWRQHIHPDOHDQGRQHPDOHSDU WLFLSDQWH[FHSWIRU$6/ZKLFKZDVUHSUHVHQWHGE\WZRIHPDOHSDUWLFLSDQWV $OOSDUWLFLSDQWVUDQJHGLQDJHIURP\HDUVWKURXJK\HDUVZLWKDPHDQ DJHRI\HDUV (DFK SDUWLFLSDQW ZDV VHOHFWHG RQ WKH EDVLV RI WKUHH IXUWKHU FULWH ULD OLVWHG LQ 0DWKXU 5DWKPDQQ 7KH ¿UVW ZDV ³H[SRVXUH WR D VLJQHG ODQJXDJH E\ WKH DJH RI WKUHH´ 0D\EHUU\ DQG %RXGUHDXOW DQG 0D\EHUU\ KDYH IRXQG WKDW H[SRVXUH E\ WKLV DJH LV VXI¿FLHQW WR SHUIRUP FRPSUHKHQVLRQ DQG VHQWHQWLDO MXGJPHQWV RQ SDU ZLWK VLJQHUV H[SRVHG WR $6/ IURP ELUWK $OO WKH SDUWLFLSDQWV PHW WKLV FULWHULRQ E\ EH LQJ ERUQ GHDI WR GHDI SDUHQWV DQGRU E\ HQWHULQJ D UHVLGHQWLDO VFKRRO IRU WKH GHDI E\ WKH DJH RI WKUHH $ VHFRQG FULWHULRQ ZDV WKH ³FDSDELOLW\ WR MXGJH ZLWK HDVH ZKHWKHU RU QRW D VHQWHQFH LV JUDPPDWLFDO´ 7KLV FULWH ULRQHQVXUHGWKDWSDUWLFLSDQWVKDGVWURQJPHWDOLQJXLVWLFVNLOOVZKLFKZHUH UHTXLUHG IRU WKH WDVN 7KH ODVW FULWHULRQ ZDV ³GDLO\ FRQWDFW ZLWK D VLJQHG ODQJXDJHLQWKH'HDIFRPPXQLW\IRUPRUHWKDQ\HDUV´7KLVZDVWRHQ VXUHWKDWWKHSDUWLFLSDQWVZHUHXSWRGDWHRQFXUUHQWXVDJHRIWKHVLJQHGODQ


JXDJHLQTXHVWLRQ(YHU\SDUWLFLSDQWZDVSDLGIRUKLVKHULQYROYHPHQWLQWKH WHVW

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¿W WKH FULWHULD IRU DQ DJUHHLQJ YHUE WUDQVLWLYHZLWK WZR DQLPDWH DUJXPHQWV JHQHUDOO\ ZLWK WKH UROHV RI µDJHQW¶ DQG µSDWLHQW¶9HUEV OLNH µPHHW¶ µUHODWH WR¶ µFRQWDFW¶ RU µDJUHH ZLWK¶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± 6WLPXOXV WDUJHWV 1H[W WR FRPSDUH YDULDELOLW\ DFURVV DJUHHPHQW IRUPV WKUHHWDUJHWVZHUHVHOHFWHGHDFKH[SUHVVLQJUHVSHFWLYHO\WKHQRQ¿UVWSHUVRQ VLQJXODUVXEMHFWIRUPWKHQRQ¿UVWSHUVRQSOXUDOREMHFWIRUPDQGWKH¿UVW SHUVRQSOXUDOREMHFWIRUP7KLVVWUXFNDEDODQFHEHWZHHQHOLFLWLQJDIHDVLEOH


QXPEHURIDJUHHPHQWIRUPVDFURVVDWOHDVWYHUEVDQGREVHUYLQJHQRXJK IRUPVIRUHDFKWRH[DPLQHWKHQDWXUHRIYDULDELOLW\:HVHOHFWHGWKHWDUJHWV IRUWKHLUOLNHOLKRRGWRLQGXFHYDULDELOLW\EDVHGRQWKHIDFWWKDWWKHLUUHDOL]D WLRQUHTXLUHVPDUNHGSKRQRORJLFDOIRUPVDVZLOOEHPDGHFOHDUEHORZZKHUH HDFKWDUJHWLVGHVFULEHG 7KH¿UVWWDUJHWLVRQHPDQLIHVWDWLRQRIWKHQRQ¿UVWSHUVRQVLQJXODUVXE MHFWIRUP+HUHWKHVXEMHFWLVUHSUHVHQWHGE\DORFDWLRQRQWKHFRQWUDODWHUDO VLGHLHWKHVLGHRSSRVLWHWKHGRPLQDQWKDQG DQGWKHREMHFWLVUHSUHVHQWHG E\DORFDWLRQRQWKHLSVLODWHUDOVLGHLHVDPHVLGHDVWKHGRPLQDQWKDQG )RU DULJKWKDQGHGVLJQHUWKLVZRXOGPHDQWKHOHIWDQGWKHULJKWVLGHVUHVSHF WLYHO\DVVKRZQLQ)LJXUHD )RUVRPHYHUEVWKLVWDUJHWLVDFKLHYHGE\KDYLQJWKHSDOPRUWKH¿QJHU WLSVRIWKHKDQGIDFHWKHORFDWLRQUHSUHVHQWLQJWKHREMHFW)RURWKHUYHUEVLW LVDFKLHYHGE\KDYLQJWKHKDQGPRYHIURPWKHVXEMHFWORFDWLRQWRWKHREMHFW ORFDWLRQIRU\HWRWKHUVE\GRLQJERWK)LVFKHUDQG*RXJK$VNLQVDQG 3HUOPXWWHU0DWKXU 3ODFLQJWKHGRPLQDQWKDQGDWDFRQWUDODWHUDO ORFDWLRQDQGWKHQWZLVWLQJWKHSDOPRIWKHKDQGVRWKDWLWIDFHVDQLSVLODWHUDO ORFDWLRQUHTXLUHVWZLVWLQJWKHDUPLQWRDQDZNZDUGFRQ¿JXUDWLRQWKDWPLJKW OHDGWRDQDOWHUQDWLYHIRUP DQRQVW SHUVRQ VLQJXODUVXEM VXEMHFW REMHFW

EQRQVW SHUVRQ SOXUDOREM REMHFW

F¿UVWSHUVRQ SOXUDOREM VXEMHFW

VXEMHFW

REMHFW REMHFW

G¿UVWSHUVRQ H¿UVWSHUVRQ VLQJXODUREM VLQJXODUVXEM WRQRQVWSHUVRQ VLQJXODUREM

VLJQHU

VXEMHFW

REMHFW

VLJQHU

VLJQHU

VXEMHFW VLJQHU

VLJQHU

)LJXUH 7DUJHWVIRUDJUHHPHQWIRUPV

7KHVHFRQGWDUJHWLVDFRPPRQZD\WRH[SUHVVWKHQRQ¿UVWSHUVRQSOXUDO REMHFWIRUPPHDQLQJµ,YHUE\RXDOO¶7RDFKLHYHWKLVWDUJHWWKHPRYHPHQW RIWKHKDQGDUPLVPDGHLQDKRUL]RQWDORXWZDUGDUFWKDWSURFHHGVIURPWKH FRQWUDODWHUDOVLGHWRWKHLSVLODWHUDOVLGHDVVFKHPDWL]HGLQ)LJXUHE,QRWKHU WDUJHWV WKH PRYHPHQW PD\ SURFHHG LQ WKH RSSRVLWH GLUHFWLRQ DQG WKH DUF PD\EHRIIWRWKHVLGHUDWKHUWKDQGLUHFWO\LQIURQWRIWKHVLJQHU7KHFKRLFH


RIWKHSDUWLFXODUWDUJHWGHSHQGVRQGLVFRXUVHFRQWH[W)RUWKHSXUSRVHRIWKLV VWXG\ZHSLFNWKHPRVWFRPPRQO\XVHGWDUJHWIRUWKHQRQ¿UVWSHUVRQSOXUDO REMHFWIRUPWRH[DPLQHKRZLWLQWHUDFWVZLWKWKHSKRQRORJLFDOIRUPRIWKH YHUE6LQFHWKHIRUPUHTXLUHVDFKDQJHQRWRQO\LQWKHGLUHFWLRQEXWDOVRLQ WKHVKDSHRIWKHPRYHPHQWLWKDVWKHSRWHQWLDOWRµFODVK¶ZLWKVRPHYHUEV WKDWUHTXLUHDVSHFL¿FPRYHPHQWVKDSH7KXVWKHIRUPPD\LQGXFHYDULDELO LW\LQLWVH[SUHVVLRQ 7KHODVWWDUJHWFRUUHVSRQGVWRWKH¿UVWSHUVRQSOXUDOREMHFWIRUPZKLFK URXJKO\PHDQVµ\RXVJ YHUEWRXV¶7KHWDUJHWLVVLPLODUWRWKHWDUJHWIRU WKHQRQ¿UVWSHUVRQSOXUDOREMHFWIRUPH[FHSWWKDWWKHPRYHPHQWLVPDGH QHDU WKH VLJQHU¶V FKHVW DQG LV FRQFDYH UDWKHU WKDQ FRQYH[ DV GHSLFWHG LQ )LJXUHF7KHWDUJHWQRWRQO\UHTXLUHVDVSHFL¿FVKDSHRIPRYHPHQWDUF OLNH EXWDOVRUHTXLUHVWKDWWKHSDOPRUWKH¿QJHUWLSVGHSHQGLQJRQWKHYHUE IDFHWKHVLJQHU¶VERG\GXULQJWKHPRYHPHQW7KLVWDUJHWWKHQDGGVDOD\HURI DUWLFXODWRU\FRPSOH[LW\WKDWPD\OHDGWRYDULDELOLW\LQWKHH[SUHVVLRQRIDQ DJUHHPHQWIRUP &RQWURO WDUJHWV 7R HQVXUH WKDW DQ\ YDULDELOLW\ LQ DJUHHPHQW IRUP LV GXHWRSKRQRORJLFDORUSKRQHWLFIDFWRUVZHFRQ¿UPHGWKDWIRUHDFKRIWKH DERYHVWLPXOXVWDUJHWVWKHYHUELVDEOHWRVKRZDQRWKHUVLPLODUDJUHHPHQW IRUP )RU WKH QRQ¿UVWSHUVRQ VLQJXODU VXEMHFW IRUP WKH FRQWURO WDUJHW LV D ¿UVW SHUVRQ VLQJXODU REMHFW IRUP DV LOOXVWUDWHG LQ )LJXUH G ,Q WKLV WDU JHWWKHORFDWLRQUHSUHVHQWLQJ WKH REMHFW LV GLIIHUHQW LH WKH FKHVW IRU ¿UVW SHUVRQ VLQJXODU EXW WKH ORFDWLRQ UHSUHVHQWLQJ WKH QRQ¿UVWSHUVRQ VLQJX ODU VXEMHFW LV WKH VDPH ,I WKH YHUE FDQ VKRZ WKH QRQ¿UVWSHUVRQ VLQJX ODUVXEMHFWLQWKLVIRUPLWVKRXOGEHDEOHWRDFKLHYHWKHVWLPXOXVWDUJHWDV ZHOO 7KH FRQWURO WDUJHW IRU WKH VHFRQG VWLPXOXV WDUJHW WKH QRQ¿UVWSHU VRQ SOXUDO REMHFW IRUP LV WKH RQH IRU WKH QRQ¿UVWSHUVRQ VLQJXODU REMHFW IRUP DV VFKHPDWL]HG LQ )LJXUH H ,Q WKH FRQWURO DQG VWLPXOXV WDUJHWV WKH VDPH ORFDWLRQ UHSUHVHQWV WKH QRQ¿UVWSHUVRQ REMHFW WKH\ GLIIHU LQ ZKHWKHU WKH REMHFW LV VLQJXODU RU SOXUDO ,I WKH YHUE LV DEOH WR VKRZ DJUHH PHQW ZLWK D QRQ¿UVWSHUVRQ VLQJXODU REMHFW EXW QRW ZLWK D QRQ¿UVWSHU VRQSOXUDOREMHFWLWFDQEHGHGXFHGWKDWWKHYDULDELOLW\LVSKRQRORJLFDORU SKRQHWLF 7KHODVWVWLPXOXVWDUJHWKDVWZRFRQWUROWDUJHWV7KH¿UVWRQHLVWKH¿UVW SHUVRQVLQJXODUREMHFWIRUPZKLFKLVDOUHDG\VHHQLQ)LJXUHG7KHVHFRQG RQHLVWKHQRQ¿UVWSHUVRQSOXUDOREMHFWIRUPZKLFKKDSSHQVWREHRQHRI WKHVWLPXOXVWDUJHWVVHH)LJXUHE ,IWKHYHUEFDQDJUHHZLWKD¿UVWSHUVRQ VLQJXODU REMHFWDQGZLWKDQRQ¿UVWSHUVRQ SOXUDOREMHFWLWVKRXOGDJUHH


ZLWKD¿UVWSHUVRQSOXUDOREMHFW,WIROORZVWKDWDQ\YDULDELOLW\ZRXOGEHDW WULEXWHGWRSKRQRORJLFDORUSKRQHWLFIDFWRUV

3URFHGXUH )RUHDFKVLJQHGODQJXDJHDQH[SHULPHQWHUZKRZDVERWK'HDIDQGÀXHQW LQWKHODQJXDJHHOLFLWHGDOOWKHGDWDIURPWKHSDUWLFLSDQWV)RU$6/WKHH[ SHULPHQWHUZDVWKH¿UVWDXWKRUIRU'*6LWZDVWKHVHFRQGDXWKRUDQGIRU $XVODQDQG1LKRQ6KXZDUHVSHFWLYHO\LWZDVWKHFRQVXOWDQWZKRDVVLVWHGLQ GHYHORSPHQWRIWKHOLVWRIDJUHHLQJYHUEVIRUWKDWODQJXDJH 7KHH[SHULPHQWHU¿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¿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¿YH YHUEVWKDWZHUHQRWSDUWRIWKHVWXG\WKHH[SHULPHQWHUODLGRXWWKHYLVXDODLG IRUWKH¿UVWDJUHHPHQWIRUP7KHH[SHULPHQWHUWKHQVKRZHGWKHFLWDWLRQIRUP RIWKH¿UVWDJUHHLQJYHUERQWKHOLVWDQGDVNHGWKHSDUWLFLSDQWWRSURGXFHWKH DJUHHPHQW IRUP RQH WLPH DFFRUGLQJ WR WKH WDUJHWV VXJJHVWHG E\ WKH YLVXDO DLG$IWHUWKLVWKHH[SHULPHQWHUVKRZHGWKHQH[WYHUERQWKHOLVWDQGDVNHG WKHSDUWLFLSDQWWRVKRZWKHVDPHDJUHHPHQWIRUPIRUWKDWYHUEDQGVRRQ $IWHUJRLQJWKURXJKWKHHQWLUHOLVWRIYHUEVIRUWKH¿UVWDJUHHPHQWIRUPWKH H[SHULPHQWHU UHSHDWHG WKH SURFHGXUH IRU HDFK RI WKH UHPDLQLQJ DJUHHPHQW IRUPV7KHRUGHURIWKHDJUHHPHQWIRUPVHOLFLWHGYDULHGDFURVVSDUWLFLSDQWV EXWWKHRUGHURIHOLFLWHGYHUEVZDV¿[HGWRIDFLOLWDWHFRGLQJ'XULQJWKHHQWLUH


HOLFLWDWLRQVHVVLRQWKHSDUWLFLSDQW¶VSURGXFWLRQZDVYLGHRUHFRUGHGIRUODWHU FRGLQJ

&RGLQJ %RWKDXWKRUVFRGHGWKHGDWDIURP$6/DQGVSOLWWKHFRGLQJRIWKHUHVWRI WKHGDWD$VD¿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

5HVXOWV 7KHUHVXOWVIRUWKHQRQ¿UVWSHUVRQVLQJXODUVXEMHFWIRUPDQGWKH¿UVWSHUVRQ SOXUDOREMHFWIRUPDUHSDUDOOHOWRRQHDQRWKHUWKHVHDUHUHSRUWHG¿UVW7KH UHVXOWVIRUQRQ¿UVWSHUVRQSOXUDOREMHFWVDUHUHSRUWHGODVW

1RQ¿UVWSHUVRQVLQJXODUVXEMHFWIRUP 7ZRYDULDQWVZHUHIRXQGIRUWKHQRQ¿UVWSHUVRQVLQJXODUVXEMHFWIRUP7KH ¿UVWYDULDQWFRQIRUPVWRH[SHFWDWLRQVLHLWDFKLHYHVWKHWDUJHWVIRUWKHVXE MHFW DQG REMHFW$Q H[DPSOH IURP$6/ LV VHHQ LQ )LJXUH D ,Q WKLV H[DP SOH WKH KDQGV UHDOL]H WKH VXEMHFW WDUJHW E\ VWDUWLQJ IURP WKH FRQWUDODWHUDO VLGH7KH\ DOVR UHDOL]H WKH REMHFW WDUJHW E\ PRYLQJ WRZDUG LWV ORFDWLRQ LS VLODWHUDOO\ ZLWK WKH ¿QJHUWLSV SRLQWLQJ WR WKLV ORFDWLRQ 0RUH H[DPSOHV RI YHUEV IURPDOOWKHODQJXDJHV WKDW VKRZ WKLV YDULDQW DUH SUHVHQWHG LQ7DEOH $SSHQGL[$SURYLGHVLOOXVWUDWLRQVRIDOOVLJQVOLVWHGLQWKLVWDEOHDVZHOO DVRWKHUV


7DEOH 9DULDQWVRIQRQ¿UVWSHUVRQVLQJXODUVXEMHFWIRUP /DQJXDJH $6/

9HUEVVKRZLQJERWKWDUJHWV +(/3

3,&785(

'*6

%((,1)/866(1µLQIOXHQFH¶

9(563277(1µWHDVH¶

(,1/$'(1µLQYLWH¶

/(+5(1µWHDFK¶

$16:(5

&217$&7

$XVODQ 1LKRQ6KXZD

6+2:

9HUEVVKRZLQJRQHWDUJHW *(7+2/'2)

+,5(

)/,57

&+88,6858µDGYLVH¶

'$0$68µGHFHLYH¶

+,+$16858µFULWLFL]H¶

,8µWHOO¶

7KHRWKHUYDULDQWDFKLHYHVWKHREMHFWWDUJHWEXWIDLOVWRDFKLHYHWKHVXE MHFWWDUJHW)LJXUHEVKRZVDQH[DPSOHIURP$6/7KHKDQGVDUHQRWDWWKH WDUJHWHG ORFDWLRQ IRU WKH VXEMHFW LQVWHDG WKH\ DUH QHDU WKH VLJQHU¶V FKHVW 2WKHUZLVHWKH\DFKLHYHWKHREMHFWWDUJHWE\KDYLQJWKHSDOPVRIWKHKDQGV IDFH LWV ORFDWLRQ 7KH VXEMHFW WDUJHW LV H[SUHVVHG WKURXJK D SURQRXQ RU LI DYDLODEOH LQ WKH ODQJXDJH DQ DX[LOLDU\OLNH HOHPHQW$GGLWLRQDO H[DPSOHV RIYHUEVIURPDOOWKHODQJXDJHVWKDWGLVSOD\RQO\WKLVYDULDQWDUHSURYLGHGLQ 7DEOH 7DEOHVKRZVKRZPDQ\YHUEVLQHDFKODQJXDJHFDQDFKLHYHERWKVXEMHFW DQGREMHFWWDUJHWVDQGKRZPDQ\FDQVKRZWKHREMHFWWDUJHW 7DEOH 5HVXOWVRQYDULDELOLW\LQQRQ¿UVWSHUVRQVLQJXODUIRUP /DQJXDJH

1XPEHURIYHUEV VKRZLQJWDUJHWIRU ERWKVXEMHFWDQG REMHFW¿UVWYDULDQW $6/ '*6 $XVODQ 1LKRQ6KXZD

1XPEHURIYHUEV VKRZLQJWDUJHWRQO\ IRUREMHFWVHFRQG YDULDQW

7RWDO r

S

QV

7KHFKLVTXDUHWHVWVKRZVWKDWWKHUHDUHVLJQL¿FDQWO\PRUHYHUEVRUMXVW DVPDQ\LQWKHFDVHRI$XVODQ WKDWDFKLHYHRQO\WKHREMHFWWDUJHWWKDQWKHUH DUHYHUEVWKDWVKRZERWKWKHVXEMHFWDQGREMHFWWDUJHWV 0RUHRYHUWKHFRGLQJUHYHDOVDFRUUHODWLRQEHWZHHQWKHDELOLW\WRDFKLHYH DWDUJHWDQGWKHSKRQRORJLFDOSURSHUWLHVRIDYHUE6SHFL¿FDOO\DOOYHUEVWKDW VKRZERWKWDUJHWVIDOOLQWRRQHRIWZRJURXSV


DKH$%$1'21KHU

EKH$6.KHU

+1'ERWKKDQGVÀDWDQGVSUHDG 097KDQGVPRYHVOLJKWO\IRUZDUG

+1'FURRNHGLQGH[¿QJHU 097KDQGPRYHVLQDVWUDLJKWOLQH ¿QJHUEHQGV

F\RX$6.XV

G\RX$1$/±&HQ WHU@ ,W LV DOVR QHFHVVDU\ WR GLVWLQJXLVK VLJQV DUWLFXODWHG RQ WKH VDPH LSVL ODWHUDO VLGHRIWKHERG\DVWKHDUWLFXODWLQJKDQGIURPWKRVHDUWLFXODWHGRQ WKH RSSRVLWH FRQWUDODWHUDO VLGH ± D GLVWLQFWLRQ WKDW FDQ EH UHSUHVHQWHG E\ WKH IHDWXUH >±,SVL@$OWKRXJK WKH\ GR QRW GLVFXVV WKHVH IHDWXUHV SHU VH +.7DEOH9 XVHWKHVDPHYRFDEXODU\FHQWHULSVLODWHUDOFRQWUDODWHUDO LQ GHVFULELQJ 32$ RQ WKH WUXQN LQ 1*7 ,I WKHLU SURSRVDOV ZHUH PDGH PRUH SUHFLVHWKH\ZRXOGKDYHWRLQFOXGHWKHVHIHDWXUHVZKLFKZRXOGEHFODLPHG WREHSKRQHWLFUDWKHUWKDQSKRQRORJLFDOIHDWXUHV +.¶VSURSRVDOVDUHEDVHGRQDQDQDO\VLVRIRYHUVLJQVLQDGDWDEDVH RI1*7VLJQVLQWKHLUFLWDWLRQIRUPV7KH\RIIHUWKHVHJHQHUDOL]DWLRQV

6RPHFXUUHQWFODLPV

D KDQGHGVLJQVWHQGWREHDUWLFXODWHGLQWKHFHQWHURIWKHFKHVW E KDQGHG³EDODQFHG´ VLJQVWHQGWREHDUWLFXODWHGRQWKHVLGHVRI WKHWUXQN

D±E FRXOGEHLQWHUSUHWHGDVUXOHVRISKRQHWLFLPSOHPHQWDWLRQIRUVLJQVRQ WKHWUXQN

D >±+DQGHG@3ODFH>7UXQN@Æ>&WU@ E >+DQGHG@3ODFH>7UXQN@Æ>±&WU,SVL@

$OWHUQDWLYHO\ LQVWHDG RI EHLQJ UXOHV RI SKRQHWLF LPSOHPHQWDWLRQ D±E FRXOGEHUHGXQGDQF\UXOHVLQWKHOH[LFRQ9DOXHVRI>±&WU@DQG>±,SVL@ VWLOOZRXOGQRWQHHGWREHVSHFL¿HGLQOH[LFDOHQWULHVIRUWKH\ZRXOGEHSUH GLFWHGE\D±E VLPSOLI\LQJWKHOH[LFRQFRUUHVSRQGLQJO\ 7KXV WZR LVVXHV FRQIURQW XV )LUVW DUH D±E UXOHV RI SKRQHWLF LPSOH PHQWDWLRQ RU UHGXQGDQF\ UXOHV LQ WKH OH[LFRQ" 6HFRQG DUH >±&WU@ DQG >±,SVL@SKRQHWLFRUSKRQRORJLFDOIHDWXUHV"/LQNLQJWKHVHLVVXHV\LHOGVWZR FRPSHWLQJK\SRWKHVHVDERXW1*7JUDPPDU

7KH3KRQHWLFV+\SRWKHVLV D D±E DUHUXOHVRISKRQHWLFLPSOHPHQWDWLRQ E >±&WU@DQG>±,SVL@DUHSKRQHWLFIHDWXUHV

7KH3KRQRORJ\+\SRWKHVLV D D±E DUHOH[LFDOUHGXQGDQF\UXOHV E >±&WU@DQG>±,SVL@DUHSKRQRORJLFDOIHDWXUHV

$OWKRXJKZHGRQRWKDYHDFFHVVWR1*7GDWDZHDUJXHWKDWWKHUHDUHLQGLFD WLRQVLQ+.¶VSDSHUWKDWWKH3KRQRORJ\+\SRWKHVLVLVSUHIHUDEOHWRWKH3KR QHWLFV+\SRWKHVLVIRU1*7DVLWLVIRU$6/,QDGGLWLRQ+.IDLOHGWRORRN IRUVRPHRIWKHNH\W\SHVRIHYLGHQFHWKDWVKRZWKH3KRQRORJ\+\SRWKHVLV WREHSUHIHUDEOHIRU$6/7KXVWKHFDVHIRUWKH3KRQHWLFV+\SRWKHVLVLQ1*7 KDVQRWEHHQPDGH

6RPHUHDVRQVWRGRXEWWKH3KRQHWLFV+\SRWKHVLVIRU1*7 7KH¿UVWDUJXPHQWIRUWKH3KRQRORJ\+\SRWKHVLVFRPHVIURPWKHIDFWWKDW WKHJHQHUDOL]DWLRQVLQ± DUHQRWDEVROXWHEXWPHUHO\WHQGHQFLHV+.FDOO

'DYLG03HUOPXWWHU

WKHVHWKH³GHIDXOWLPSOHPHQWDWLRQV´LHWKH\KDYHOH[LFDOH[FHSWLRQV7KLV YLRODWHVZKDWVHHPVWREHDYDOLGJHQHUDOL]DWLRQ

3KRQHWLFVZLWKRXW/H[LFDO([FHSWLRQV3:/( 5XOHVRISKRQHWLFLPSOHPHQWDWLRQGRQRWKDYHOH[LFDOH[FHSWLRQVLH OH[LFDOLWHPVWKDWLGLRV\QFUDWLFDOO\IDLOWRXQGHUJRWKHP

*LYHQ /H[LFDO 3KRQRORJ\¶V FODLP WKDW SRVWOH[LFDO SKRQRORJLFDO UXOHV GR QRWKDYHOH[LFDOH[FHSWLRQVLWZRXOGEHEL]DUUHLIUXOHVRISKRQHWLFLPSOH PHQWDWLRQSDWWHUQHGZLWKUXOHVRIOH[LFDOSKRQRORJ\LQKDYLQJOH[LFDOH[FHS WLRQVZKLOHSRVWOH[LFDOSKRQRORJLFDOUXOHVGLGQRW,QGHHGWKHH[FHSWLRQ OHVVQDWXUHRIUXOHVRISKRQHWLFLPSOHPHQWDWLRQVHHPVWRKDYHEHHQZLGHO\ DVVXPHG,DPXQDZDUHRIDQ\VXFKUXOHVLQWKHOLWHUDWXUHWKDWKDYHOH[LFDO H[FHSWLRQV7KXV3:/( FDQWHQWDWLYHO\EHWDNHQWREHDSULQFLSOHRI JUDPPDU *LYHQWKDWD±E KDYHOH[LFDOH[FHSWLRQVLIWKH\ZHUHSKRQHWLFLPSOH PHQWDWLRQUXOHVWKH\ZRXOGYLRODWH3:/(,IRQWKHRWKHUKDQGWKH\DUH OH[LFDOUHGXQGDQF\UXOHVWKDWSUHGLFWWKHYDOXHVRISKRQRORJLFDOIHDWXUHVLQ OH[LFDOHQWULHVWKHUHLVQRSUREOHP([FHSWLRQVFDQEHPDUNHGZLWKDSSUR SULDWHYDOXHVRI>±&WU@DQG>±,SVL@LQWKHOH[LFRQ6LJQVZKRVHYDOXHVRI WKHVHIHDWXUHVDUHFRUUHFWO\SUHGLFWHGE\D±E QHHGQRWEHOH[LFDOO\PDUNHG IRUWKHVHIHDWXUHVZKRVHYDOXHVZLOOEHVXSSOLHGE\WKHUHGXQGDQF\UXOHVLQ 7KHQHWHIIHFWRID±E LVWRVLPSOLI\WKHOH[LFRQE\PDNLQJLWXQQHF HVVDU\WRVSHFLI\WKHYDOXHVRIWKHVHIHDWXUHVLQWKHOH[LFDOHQWULHVRIPDQ\ VLJQV3:/(WKXVSURYLGHVDQDUJXPHQWIRUWKH3KRQRORJ\+\SRWKHVLVRYHU WKH3KRQHWLFV+\SRWKHVLVLQ1*7 $QRWKHUDUJXPHQWFRXOGFRPHIURPHYLGHQFHIRUE RYHUE LHVLJQV ZKRVHYDOXHVRI>±&WU@DQG>±,SVL@DUHQRWSUHGLFWHGE\D±E DQGWKHUH IRUHPXVWEHPDUNHGLQOH[LFDOHQWULHV$6/H[KLELWVWZRW\SHVRIVXFKHYL GHQFH¿UVWWKHOH[LFDOH[FHSWLRQVWRD±E DQGVHFRQGVLJQVWKDWGRQRW IDOOXQGHUD±E EXWVWLOOPXVWEHPDUNHGIRU>±&WU@DQGRU>±,SVL@$OO WKLVLVHYLGHQFHWKDW>±&WU@DQG>±,SVL@DUHSKRQRORJLFDOIHDWXUHVLQ$6/ 3HUOPXWWHU 2QHRIWKHDUJXPHQWVWKDW>±,SVL@LVSKRQRORJLFDOLQ$6/FRPHVIURP WKHIDFWWKDWGHVSLWHWKHWHQGHQF\IRUKDQGHGVLJQVWREHLSVLODWHUDOWKHUH DUH KDQGHG VLJQV LQ ZKLFK HDFK KDQG LV FRQWUDODWHUDO WKH DUPV FURVVLQJ VR WKH KDQGV FDQ FRQWDFW RSSRVLWH VLGHV RI WKH WUXQN 7KHUH DUH DOVR ERWK LSVLODWHUDO DQG FRQWUDODWHUDO KDQGHG VLJQV 7KXV D VLJQ FDQ EH LSVLODWHU DO RU FRQWUDODWHUDO LQGHSHQGHQWO\ RI ZKHWKHU LW LV RU KDQGHG DOO IRXU

6RPHFXUUHQWFODLPV

FRPELQDWLRQV RI WKHVH WZR SURSHUWLHV H[LVW 7KLV DUJXHV IRU >±,SVL@ DV D SKRQRORJLFDO IHDWXUH LQ$6/ DQG KHQFH IRU WKH GLVWLQFWLYHQHVV RI 32$ RQ WKHWUXQN )URP +.¶V SDSHU ZH FDQQRW WHOO ZKHWKHU WKHUH LV SDUDOOHO HYLGHQFH IRU >±,SVL@DVDSKRQRORJLFDOIHDWXUHLQ1*77KHH[LVWHQFHRIFRQWUDODWHUDO KDQGHGVLJQVPLJKWEHPDVNHGE\WKHLUIHDWXUH>&URVV@LQWURGXFHGIRU KDQGHGVLJQVLQZKLFKWKHKDQGVFURVVLQYLRODWLRQRIWKHLUJHQHUDOL]DWLRQWKDW HDFKKDQGUHPDLQVRQLWVRZQVLGHRIWKHPLGVDJLWWDOSODQH7KLVGRHVQRWWHOO XVZKDWLVFUXFLDOGRHVHDFKKDQGFRQWDFWWKHFRQWUDODWHUDOVLGHRIWKHWUXQN" ,IVRWKHIHDWXUH>&URVV@GRHVQRWDFFRXQWIRUWKLV 7KHGLI¿FXOW\LQIDFWJRHVGHHSHU6XSSRVH+.FODLPWKHUHDUHQRFRQ WUDODWHUDOKDQGHGVLJQVLQ1*7KRZGRZHNQRZZKHWKHUWKHVHDUHLPSRV VLEOHVLJQVRUPHUHO\KDSSHQQRWWRVKRZXSLQ+.¶VGDWDEDVH"7KHNLQGV RIFODLPV+.ZLVKWRPDNHIRU1*7FDQQRWEHEDVHGVROHO\RQDGDWDEDVH ZKLFKFDQQRWGLVWLQJXLVKEHWZHHQDFFLGHQWDODQGV\VWHPDWLFJDSVLQWKHGDWD EDVHOHWDORQHWKHOH[LFRQDVDZKROH 1RLQYHVWLJDWLRQRIZKHWKHUDIHDWXUHLVSKRQHWLFRUSKRQRORJLFDOFDQDI IRUGWRLJQRUHWKHTXHVWLRQRIZKHWKHUWKHUHDUHPLQLPDOSDLUVWKDWFRQWUDVW LQWKDWIHDWXUHDORQH+.¶VOLPLWDWLRQWRDGDWDEDVHRIVLJQVKRZHYHUIRUFHV WKHPWRLJQRUHWKLVTXHVWLRQ:HGRQRWNQRZZKHWKHUVXFKPLQLPDOSDLUV H[LVWEXWKDSSHQQRWWRVKRZXSLQ+.¶VGDWDEDVH ,Q IDFW DVSHFWV RI +.¶V DQDO\VLV FRXOG REVFXUH WKH H[LVWHQFH RI PLQL PDO SDLUV WKDW ZRXOG PRWLYDWH >±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±ERWKLQWKHJHQHUDOYRFDEXODU\DQGLQ DUELWUDU\QDPHVLJQV3HUOPXWWHU6XSDOOD ,QDPLQLPDOSDLULQ WKHJHQHUDOYRFDEXODU\ERWKFRQWUDVWLQJVLJQVKDYHUDGLDOFRQWDFWVRWKHLU FRQWUDVWLQJ YDOXHV RI >±&WU@ FDQQRW EH DWWULEXWHG WR UDGLDO FRQWDFW$UEL WUDU\QDPHVLJQVJHQHUDWHVHWVRIPLQLPDOSDLUVZLWKDOOWKHKDQGVKDSHVRI WKH PDQXDO DOSKDEHW LQFOXGLQJ WKRVH WKDW GR QRW DOORZ UDGLDO FRQWDFW VR 32$FRQWUDVWVFDQQRWEHDWWULEXWHGWRKDQGVKDSHRUUDGLDOFRQWDFW2QHLV

'DYLG03HUOPXWWHU

OHIWWRZRQGHUZKHWKHUVLPLODUFRQWUDVWVH[LVWLQ1*7EXWKDSSHQHGQRWWR DSSHDULQ+.¶VGDWDEDVH +.¶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±&WU@LVDSKRQRORJLFDOUDWKHUWKDQSKRQHWLFIHDWXUH+.GLGQRWDVNDQ\ RIWKHTXHVWLRQVWKDWFRXOGKDYHOHGWRVXFKHYLGHQFHEHFDXVHWKH\OLPLWHG WKHPVHOYHVWRDGDWDEDVHRIVLJQV

,FRQLFLW\DQGLQGH[LFDOLW\LQVLJQODQJXDJHJUDPPDUV ,FRQLFLW\DQGLQGH[LFDOLW\DUHVLJQODQJXDJHSKHQRPHQDWKDWLQLWLDOO\DSSHDU WRKDYHQRFRXQWHUSDUWVLQVSRNHQODQJXDJHVDQGWRUHTXLUHJUDPPDWLFDOGH YLFHVXQOLNHDQ\WKLQJQHHGHGIRUVSRNHQODQJXDJHVDVZHOODVDQH[SDQVLRQ RIWKHVHWRI32$V &RQWUDU\WRWKHLGHDWKDWLFRQLFLW\KDVQRFRXQWHUSDUWLQVSRNHQODQJXDJHV ZHSURSRVHWKDWLWLVDIRUPRIERUURZLQJ±QRWIURPDQRWKHUODQJXDJHEXW IURPWKHSK\VLFDODSSHDUDQFHRIZKDWWKHVLJQQDPHV

7KH/RDQ+\SRWKHVLV ,FRQLFLW\LVDIRUPRIERUURZLQJ,FRQLFVLJQVLQVLJQODQJXDJHVDUH ORDQZRUGV

7KH/RDQ+\SRWKHVLVSUHGLFWVWKDWWKHSKRQRORJ\RILFRQLFVLJQVZLOOEHOLNH ORDQZRUGSKRQRORJ\LQVSRNHQODQJXDJHVLQWZRUHVSHFWV)LUVWLFRQLFVLJQV PD\ YLRODWH SKRQRORJLFDO SDWWHUQV DQG FRQVWUDLQWV WKDW KROG LQ WKH QDWLYH YRFDEXODU\6HFRQGWKH\DUHSUHGLFWHGWRFKDQJHRYHUWLPHVRDVWRFRQIRUP WRWKHP 7KHVHSUHGLFWLRQVDUHFRQ¿UPHG)ULVKEHUJ¶V FODVVLFVWXG\IRXQG WKDW RYHU WLPH LFRQLF$6/ VLJQV WHQG WR EHFRPH OHVV LFRQLF LH QDWLYL]HG

6RPHFXUUHQWFODLPV

OLNH ORDQ ZRUGV LQ VSRNHQ ODQJXDJHV$V WKH\ FRPH WR FRQIRUP WR$6/¶V SKRQRORJLFDOSDWWHUQVDQGFRQVWUDLQWVLFRQLFLW\LVORVW ,I$6/ LV W\SLFDO PRVW LFRQLF VLJQV OLNH PDQ\ ORDQ ZRUGV LQ VSRNHQ ODQJXDJHVFRQIRUPWRWKHERUURZLQJODQJXDJH¶VSKRQRORJLFDOSDWWHUQVDQG FRQVWUDLQWV)RUWKRVHWKDWGRQRWWZRDOWHUQDWLYHVVXJJHVWWKHPVHOYHV8Q GHU RQH QRQFRQIRUPLQJ LFRQLF VLJQV ZRXOG FRQVWLWXWH D VHSDUDWH GRPDLQ RUVWUDWXPLQWKHOH[LFRQZKRVHPHPEHUVDUHVXEMHFWWRFRQVWUDLQWVSDUWLDOO\ RYHUODSSLQJZLWKDQGSDUWLDOO\GLIIHUHQWIURPWKRVHWKDWKROGIRUWKHQDWLYH YRFDEXODU\ DV SURSRVHG E\ ,W{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

:KDWLV³SKRQHWLFSUHVSHFL¿FDWLRQ"´ +.DGPLWWKDW32$RQWKHWUXQNLVQRWDOZD\VSUHGLFWDEOHIURPRWKHUIRU PDWLRQDO SURSHUWLHV RI 1*7 VLJQV )RU VLJQV ZKRVH 32$ LV QRW SUHGLFW DEOH WKH\ SURSRVH VSHFLI\LQJ 32$ LQ OH[LFDO HQWULHV ± DQ XQFRQWURYHUVLDO

'DYLG03HUOPXWWHU

PRYH :KDW LV FRQWURYHUVLDO LV WKHLU FODLP WKDW VXFK VSHFL¿FDWLRQ LV SKR QHWLF³SKRQHWLFSUHVSHFL¿FDWLRQ´ 2QWKHNH\LVVXHRIZKHWKHUVXFKOH[L FDO VSHFL¿FDWLRQV DUH SKRQHWLF RU SKRQRORJLFDO +. SURYLGH QR HYLGHQFH ZKDWHYHU +.DUJXHWKDWZKHUHVLJQV¶32$RQWKHWUXQNPXVWEHOH[LFDOO\VSHFL¿HG WKLVLVGXHWRWKHLUVHPDQWLFV7RVKRZWKLVRQHZRXOGQHHGWRVKRZWKDW32$ LVSUHGLFWDEOHIURPVHPDQWLFLQIRUPDWLRQLQOH[LFDOHQWULHVEXWWKLV+.IDLO WRGR &RQVLGHU WKH GLVWLQFWLRQ EHWZHHQ VLJQV DUWLFXODWHG KLJK YV ORZ RQ WKH WUXQN 7KLV FDQ EH DFFRXQWHG IRU E\ D IHDWXUH >±+LJK@ DV SURSRVHG IRU $6/E\6DQGOHU DPRQJRWKHUV7RDUJXHWKDWWKLVIHDWXUHLV³VHPDQWL FDOO\GULYHQ´+.RIIHUVHPDQWLFJHQHUDOL]DWLRQVHJWKDWVLJQVUHIHUULQJWR WKHVKDSHRIDSLHFHRIFORWKDQGWKHZD\SHRSOHZHDULWRUZKLFKUHODWHWR FDUU\LQJWKLQJVRQWKHVKRXOGHUV DUHPDGHDWVKRXOGHUKHLJKW7KH\LQWHQG WKH¿UVWJHQHUDOL]DWLRQWRHQFRPSDVVWKHVLJQV%($87±+DQGHG@ WR GLVWLQJXLVK VXFK VLJQV DVVXPLQJ D UXOH RI SKRQHWLFLPSOHPHQWDWLRQWKDW PDNHV ERWK KDQGV DFWLYHDUWLFXODWRUVLQ VLJQV PDUNHG>+DQGHG@7KHVHVLJQVDUHFDOOHG³KDQGHG´KHUHDQG³EDODQFHG´LQ YDQGHU+XOVW DQGYDQGHU+XOVWDQGYDQGHU.RRLMWKLVYROXPH 7KH DQDO\VLVRIRVWHQVLEO\KDQGHGVLJQVLQZKLFKWKHZHDNKDQGLVQRWDQDFWLYH DUWLFXODWRULVFRQWURYHUVLDODQGLVEH\RQGWKHVFRSHRIWKLVSDSHU 6HH7DEOH,,,LQYDQGHU+XOVWDQGYDQGHU.RRLMWKLVYROXPH 7KH GLVWLQFWLRQV FDSWXUHG E\ >±&HQWHU@ DQG >±,SVLODWHUDO@ KDYH EHHQ UHFRJ QL]HGLQHDUOLHUUHVHDUFKRQ$6/EXWKDYHQRWDOZD\VEHHQFDSWXUHGLQWKHVDPH ZD\)RUH[DPSOH>±,SVLODWHUDO@¿JXUHVSURPLQHQWO\LQHDUOLHUZRUN6DQGOHU %UHQWDULDPRQJRWKHUV EXW6DQGOHUSRVLWV>±,SVLODWHUDO@DQG>± &RQWUDODWHUDO@DVVHSDUDWHIHDWXUHVLQWHUSUHWLQJ>±,SVLODWHUDO±&RQWUDODWHUDO@DV FHQWUDO +.QRWHWZRH[FHSWLRQVWRWKHVHJHQHUDOL]DWLRQV¿UVWVLJQVLQZKLFKWKHUDGLDO VLGH RI WKH KDQGV FRQWDFWV WKH WUXQN KDYH GLIIHUHQW 32$V RQ WKH WUXQN FRQ WUDODWHUDOIRUKDQGHGDQGFHQWUDOIRUKDQGHGVLJQV DQGVHFRQGLQKDQGHG VLJQVZLWKHQGFRQWDFWWKHKDQGVWHQGWRWRXFKWKHFHQWHURIWKHFKHVWRQHDERYH WKHRWKHU EHORZZRXOGKDYHWREHPRGL¿HGWRDFFRXQWIRUWKHVHH[FHSWLRQV 'HWDLOHGDUJXPHQWVIRUUHMHFWLQJWKH3KRQHWLFV+\SRWKHVLVLQIDYRURIWKH3KR QRORJ\+\SRWKHVLVIRU$6/DUHJLYHQLQ3HUOPXWWHU /RXLV*ROGVWHLQKDVSRLQWHGRXWWRPHWKDWZKLOHQROH[LFDOLWHPLVDQH[FHSWLRQ WR D SKRQHWLF LPSOHPHQWDWLRQ UXOH LW LV KDV EHHQ DUJXHG H[WHQVLYHO\ WKDW LQGL YLGXDOZRUGVGRKDYHWKHLURZQSKRQHWLFVLQWKDWWKH\PD\H[KLELWDSDUWLFXODU SKRQHWLFSKHQRPHQRQHJÀDSSLQJLQ(QJOLVK ZLWKUHOLDEO\GLIIHUHQWIUHTXHQ FLHVDQGGHJUHHV3LHUUHKXPEHUWDPRQJRWKHUV (YHQLIWKHGHJUHHRIÀDS SLQJPXVWEHVSHFL¿HGLQWKHOH[LFRQWKHFODVVRIFDVHVWKDWFDQH[KLELWÀ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

6RPHFXUUHQWFODLPV

RIUDGLDOFRQWDFW+.KRZHYHUGUDZWKHUDWKHUVZHHSLQJFRQFOXVLRQWKDWWKHVH VLJQVKDYHDVHPDQWLFDOO\GULYHQ32$ZKLFKXQLYHUVDOO\RYHUULGHVWKHSKRQHWLF GHIDXOWUXOHV +.DOVRXVHSKRQHWLFSUHVSHFL¿FDWLRQIRUWKHLQGH[LFDOVHJ.,'1(&WU@ZKLOHWKHFRQWUD ODWHUDORQHVZLOOEHPDUNHG>±,SVL@IURPZKLFK>±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lUGHQVSUDFKH RU '*6 $XVWUDOLDQ 6LJQ /DQJXDJH $XVODQ DQG -DSDQHVH 6LJQ /DQJXDJH LQ -DSDQHVH 1LKRQ 6KXZD *LYHQ WKH VLPLODULW\ RI WKH GDWD FLWHGIURPWKHIRXUODQJXDJHVWKHFRQFOXVLRQVZHUHDFKKHUHIRU$6/PD\SURYH YLDEOHIRUWKHRWKHUODQJXDJHVDVZHOO 7KLV WKUHHZD\ GLVWLQFWLRQ LQ KRZ YHUEV UHDOL]H SHUVRQ LQÀHFWLRQ SOD\V D NH\ UROHLQ$VNLQVDQG3HUOPXWWHU DQGKDVEHHQZLGHO\DGRSWHGLQVXEVHTXHQW GLVFXVVLRQV RI $6/ YHUE LQÀHFWLRQ 0DWKXU DPRQJ RWKHUV (DUOLHU GH VFULSWLRQVRI$6/YHUELQÀHFWLRQHJ3DGGHQ GLVFXVVHGRQO\YHUEVZKRVH SHUVRQLQÀHFWLRQLVUHDOL]HGDVGLUHFWLRQRIPRYHPHQWIURPWKHVXEMHFWORFXV WRZDUGWKHREMHFWORFXV $VNLQVDQG3HUOPXWWHUSURSRVHDSKRQRORJLFDODQDO\ VLVXQGHUZKLFKKRZDYHUEUHDOL]HVLQÀHFWLRQIROORZVIURPRWKHUSKRQRORJLFDO SURSHUWLHVDQGWKHUHIRUHQHHGQRWEHPDUNHGLQWKHOH[LFRQ 7KHQRWDWLRQ³´LQGLFDWHVVWSHUVRQVXEMHFWDQGUGSHUVRQREMHFWZKLOH³´ LQGLFDWHVUGSHUVRQVXEMHFWDQGVWSHUVRQREMHFW³´LQGLFDWHVUGSHUVRQVXE MHFWDQGUGSHUVRQREMHFW 7KLVFDQEHFDSWXUHGE\ DSKRQHWLFLPSOHPHQWDWLRQUXOHZKRVH IRUPXODWLRQLV EH\RQGWKHVFRSHRIWKLVSDSHU 1XPEHULQÀHFWLRQLVLJQRUHGKHUH 7KHUHDUHQRSKRQRORJLFDOFRQWUDVWVEHWZHHQLSVLODWHUDODQGFRQWUDODWHUDO32$LQ QHXWUDOVSDFH3HUOPXWWHU 6LQFHLQÀHFWLQJYHUEVDUHDUWLFXODWHGLQQHXWUDO VSDFH RU XVH WKH ZHDN KDQG DV 32$ WKHUH DUH QR VXFK FRQWUDVWV LQ LQÀHFWLQJ YHUEV7KHORFLRIWKHVXEMHFWDQGREMHFWIRUZKLFKWKH\DUHLQÀHFWHGPD\EHRQ WKHLSVLODWHUDORUFRQWUDODWHUDOVLGHKRZHYHU7KXVWKHWHUPV³LSVLODWHUDO´DQG

'DYLG03HUOPXWWHU

³FRQWUDODWHUDO´ZKHQDSSOLHGWRLQÀHFWLQJYHUEVUHIHUWRWKHORFLIRUZKLFKWKH\ DUHLQÀHFWHGQRWWR32$ 7KURXJKRXWWKLVGLVFXVVLRQ,DVVXPHWKHFRUUHFWQHVVRI05¶VGDWD 05¶V GHVFULSWLRQ RI ZKDW LV GLVDOORZHG LQ WHUPV RI$UWLFXODWRU\ 3KRQRORJ\ LV VRPHZKDWGLIIHUHQWWKHUDGLXVXOQDFDQEHSURQDWHGRQO\VRIDUXSWRDURXQG WKHD[LV LHLWLVDGHJUHHRIDUWLFXODWLRQFRQVWUDLQW 05¶VVROXWLRQVHHPVWRKDYHEHHQPRWLYDWHGE\WKHXQZDUUDQWHG DVVXPSWLRQ WKDWWKHVLQJO\LQÀHFWHGIRUPXVHGLQFDVHVZKHUHWKHGRXEO\LQÀHFWHGIRUPLV UXOHGRXWE\ LVGHULYHGIURPWKHGRXEO\LQÀHFWHGIRUPLQWKHSKRQRORJ\$V ± PDNHFOHDUKRZHYHUWKHVLQJO\LQÀHFWHGIRUPH[LVWVLQGHSHQGHQWO\$OO WKDWLVQHHGHGLVIRU WRUXOHRXWWKRVHGRXEO\LQÀHFWHGIRUPVWKDWUHTXLUH UDGLRXOQDUSURQDWLRQ ,QWKHXSSHUOHIWKDQGFRUQHURIHDFKWDEOHDXZHLQGLFDWHWKHLQÀHFWHGIRUPLQ TXHVWLRQDQGZKHWKHUWKHVXEMHFWDQGREMHFWORFLDUHLSVLODWHUDORUFRQWUDODWHUDO 05DOVRGLVFXVVDIRUPLQÀHFWHGIRUDVWSHUVRQSOXUDOREMHFWZKLFKH[KLELWVWKH DUFPRYHPHQWH[SUHVVLQJSOXUDOLQÀHFWLRQ$QRWKHUIRUPLQÀHFWHGIRUDVWSHU VRQREMHFWKDVQRQXPEHULQÀHFWLRQ7KXVLWKDVQRDUFPRYHPHQWDQGLVFRPSDW LEOHZLWKERWKVLQJXODUDQGSOXUDOREMHFWV,QPRVWFDVHVHLWKHUVWSHUVRQREMHFW IRUPFDQEHXVHGZLWKDVWSHUVRQSOXUDOREMHFW 05VKRZWKDWWKHIRUPZLWKSOXUDOLQÀHFWLRQLVLPSRVVLEOHLQFDVHVZKHUHUDGLR XOQDUSURQDWLRQZRXOGEHQHFHVVDU\WRH[HFXWHLW7KH\FODLPWKLVLVGXHWRWKH UDQNLQJ RI ZLWK SKRQRORJLFDO IDLWKIXOQHVV FRQVWUDLQWV$V ZLWK WKH &, IRUPVGLVFXVVHGDERYHKRZHYHU 583521E\LWVHOILVVXI¿FLHQWWRUXOHRXW WKH LOOIRUPHG IRUPV ZKHUH SOXUDO LQÀHFWLRQ FDXVHV UDGLRXOQDU SURQDWLRQ WKH SKRQRORJLFDOFRQVWUDLQWVDUHQRWQHHGHG7KHLQGHSHQGHQWO\H[LVWLQJVWSHUVRQ REMHFWIRUPZLWKRXWSOXUDOLQÀHFWLRQLVXVHGLQWKHVHFDVHV :LWKRQO\VLJQLQJDQGQRQVLJQLQJVXEMHFWVWKDWSUREDELOLW\NQRZQDV WKH³SRZHU´RIWKHH[SHULPHQW ZRXOGPRVWOLNHO\EHLQVXI¿FLHQWWRLQVSLUHFRQ ¿GHQFHWKDWWKHUHLVQRVLJQL¿FDQWGLIIHUHQFHEHWZHHQWKHWZRJURXSV $VSRLQWHGRXWDERYHVLJQHUV¶DZDUHQHVVRIKDQGVKDSHZRXOGHQDEOHWKHPWR EDVHVRPHJXHVVHVRQKDQGVKDSH 7KH]RQHEHORZH\HOHYHOSDUWLFXODUO\WKHPRXWK H[SUHVVHVFHUWDLQPDQQHUDG YHUELDOVDPRQJRWKHUWKLQJV $WKHRU\QHHGQRWVWDWH DVDSULQFLSOH,IPRGDOLW\LVLUUHOHYDQWDWKHRU\RI ZRUGVHJPHQWDWLRQFDQEHGHYHORSHGZLWKRXWVD\LQJDQ\WKLQJDERXWPRGDOLW\

5HIHUHQFHV $VNLQV'DYLGDQG'DYLG03HUOPXWWHU $OORPRUSK\ H[SODLQHG WKURXJK SKRQRORJLFDO UHSUHVHQWDWLRQ 3HUVRQ DQGQXPEHULQÀHFWLRQLQ$PHULFDQ6LJQ/DQJXDJH0DQXVFULSW8QL

6RPHFXUUHQWFODLPV

YHUVLW\RI&DOLIRUQLD6DQ'LHJRDQG8QLYHUVLW\RI5RFKHVWHU3UHVHQW HGDWWKHDQQXDOPHHWLQJRIWKH'HXWVFKH*HVHOOVFKDIWIU6SUDFKZLV VHQVFKDIW*|WWLQJHQ %DWWLVRQ5REELQ /H[LFDO%RUURZLQJLQ$PHULFDQ6LJQ/DQJXDJH6LOYHU6SULQJ0' /LQVWRN3UHVV %UHQWDUL'LDQH $ 3URVRGLF 0RGHO RI 6LJQ /DQJXDJH 3KRQRORJ\ &DPEULGJH 0$ /RQGRQ7KH0,73UHVV WKLVYRO (IIHFWVRIODQJXDJHPRGDOLW\RQZRUGVHJPHQWDWLRQ$QH[SHULPHQWDO VWXG\RISKRQRORJLFDOIDFWRUVLQDVLJQODQJXDJH %UHQWDUL'LDQHDQG&DURO3DGGHQ 1DWLYHDQGIRUHLJQYRFDEXODU\LQ$PHULFDQ6LJQ/DQJXDJH$/H[L FRQZLWKPXOWLSOHRULJLQV,Q'LDQH%UHQWDULHG )RUHLJQ9RFDEXODU\ LQ6LJQ/DQJXDJHV$&URVV/LQJXLVWLF,QYHVWLJDWLRQRI:RUG)RUPD WLRQ±0DKZDK1-/DZUHQFH(UOEDXP$VVRFLDWHV )LVFKHU6XVDQDQG%RQQLH*RXJK 9HUEVLQ$PHULFDQ6LJQ/DQJXDJH6LJQ/DQJXDJH6WXGLHV± )ULVKEHUJ1DQF\ $UELWUDULQHVVDQG,FRQLFLW\/DQJXDJH± +XOVW+DUU\YDQGHU 2QWKHRWKHUKDQG/LQJXD± +XOVW+DUU\YDQGHUDQG(OVYDQGHU.RRLM WKLVYRO 3KRQHWLF LPSOHPHQWDWLRQ DQG SKRQHWLF SUHVSHFL¿FDWLRQ LQ VLJQ ODQ JXDJHSKRQRORJ\ ,W{-XQNRDQG$UPLQ0HVWHU -DSDQHVH SKRQRORJ\ ,Q -RKQ *ROGVPLWK HG +DQGERRN RI 3KRQR ORJLFDO 7KHRU\ ± 2[IRUG&DPEULGJH 0$ %ODFNZHOO 3XE OLVKHUV 0DWKXU*DXUDY 9HUEDJUHHPHQWDVDOLJQPHQWLQVLJQHGODQJXDJHV8QSXEOLVKHGGRF WRUDO GLVVHUWDWLRQ 'HSW RI /LQJXLVWLFV 0DVVDFKXVHWWV ,QVWLWXWH RI 7HFKQRORJ\ 0DWKXU*DXUDYDQG&KULVWLDQ5DWKPDQQ WKLVYRO 9DULDELOLW\LQYHUEDODJUHHPHQWIRUPVDFURVVIRXUVLJQHGODQJXDJHV 3DGGHQ&DURO$ ,QWHUDFWLRQ RI 0RUSKRORJ\ DQG 6\QWD[ LQ$PHULFDQ 6LJQ /DQJXDJH 2XWVWDQGLQJ 'LVVHUWDWLRQV LQ /LQJXLVWLFV 1HZ ¿UVWWRVHFRQGYRZHO@GXUDWLRQUDWLRVIRU WKH)UHQFKLQIDQWVZHUHUHODWLYHO\VWDEOHDQGDGXOWOLNHZKHUHDVWKH$PHUL FDQLQIDQWVVKRZHGRQO\VOLJKWVHFRQGV\OODEOHOHQJWKHQLQJRQDYHUDJHDQG D FRQVLGHUDEO\ KLJKHU OHYHO RI YDULDELOLW\ IRU HDFK V\OODEOH HVSHFLDOO\ WKH ¿UVW WKDQZDVIRXQGLQWKH)UHQFKGDWD´>S@ :HOVK GLV\OODELF ZRUGV OLNH (QJOLVK RQHV DUH SUHGRPLQDQWO\ WURFKDLF :LOOLDPV GLV\OODELFSKUDVHVPD\EHHLWKHULDPELFD IRµWKDW¶VLW¶QD

QLµKHUHZHDUH¶\Q GZ\WµDUHQ¶W\RX"¶ RUWURFKDLF GDGH"µJRRGKXQK"¶

W\GWDµFRPHRQWKHQ¶ DOWKRXJKQRTXDQWLWDWLYHGDWDDVWRWKHW\SLFDOGLV WULEXWLRQDUHFXUUHQWO\DYDLODEOH7KHQDWXUHRIVWUHVVLVTXLWHGLIIHUHQWLQWKH WZRODQJXDJHVKRZHYHU,Q(QJOLVKVWUHVVLVFKDUDFWHUL]HGE\DFRPELQDWLRQ RISHUFHSWXDOO\³VWUHQJWKHQLQJÍDFWRUVDIIHFWLQJWKHYRZHOQXFOHXVJUHDWHU LQWHQVLW\KLJKHUSLWFKORQJHUGXUDWLRQDQGDTXDOLWDWLYHGLIIHUHQFHIXOODV RSSRVHGWRUHGXFHGYRZHO ,QFRQWUDVWWKHVWUHVVHGYRZHOLQ:HOVKWURFKDLF ZRUGVLVLGHQWL¿DEO\VKRUWUDWKHUWKDQORQJLWLVWKHFRQVRQDQWIROORZLQJWKH VWUHVVHGYRZHOWKDWLVPDUNHGE\OHQJWKHQLQJ:LOOLDPV :HOVKVWUHVV LV DOVR FKDUDFWHULVHG E\ JUHDWHU LQWHQVLW\ RQ WKH LQLWLDO V\OODEOH +RZHYHU SLWFK SURPLQHQFH DOWKRXJK OHVV UHOLDEOH WKDQ UHODWLYH GXUDWLRQ DV D FXH WR VWUHVVWHQGVWRIDOORQWKH¿QDOV\OODEOH:DWNLQV:LOOLDPV :H ZLOOVHHEHORZKRZWKHVHGLVWLQFWDFFHQWXDOV\VWHPVUHVXOWLQDXQLTXHGXUD WLRQDOSDWWHUQIRUWKH9&9SRUWLRQRIGLV\OODEOHVLQHDFKRIWKHVHODQJXDJHV ,QRXUDQDO\VHVRIGLV\OODELFXQLWVZHZLOODOVRGLVWLQJXLVKRQRPDWRSRHLF IRUPV±UDUHLQDGXOWGLVFRXUVHLQDOOWKUHHODQJXDJHVEXWPRUHFRPPRQLQ FKLOGGLUHFWHGVSHHFK±IURPRWKHUZRUGVDQGSKUDVHV2QRPDWRSRHLFZRUGV DUHPRUHYDULDEOHLQWHUPVRIDFFHQWXDOSDWWHUQWKDQDUHFRQYHQWLRQDOZRUGV RU SKUDVHV WKH\ DUH DOVR PRUH OLNHO\ WR EH SURGXFHG ZLWK SOD\IXO HPSKD VLVRQHLWKHUV\OODEOH$FFRUGLQJWRVHYHUDOQDWLYHVSHDNHUVRQRPDWRSRHLF ZRUGV DUH FKDUDFWHULVWLFDOO\ LDPELF LQ :HOVK ZKLOH LQ ERWK )UHQFK HJ PLDPPLDPµ\XP\XP¶ DQG$PHULFDQ(QJOLVKWLFNWRFN WKH\DUHPRVWRI WHQ HYHQVWUHVVHG7KXV WKHVH XQFRQYHQWLRQDO OH[LFDO LWHPV WHQG WR GHSDUW IURPWKHGRPLQDQWZRUGDFFHQWSDWWHUQLQDOOWKUHHODQJXDJHV:LWKUHJDUG

0DULO\Q0D\9LKPDQ6DWVXNL1DNDLDQG5RU\'H3DROLV

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¿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³3DLU ZLVH9DULDELOLW\,QGH[´DFURVVVXFFHVVLYHYRFDOLFDQGLQWHUYRFDOLFLQWHUYDOV ZLWKQRUPDOLVDWLRQIRUVSHHFKUDWHIRUWKHYRFDOLFLQGH[7KHGLIIHUHQFHEH WZHHQWKHWZRPHWKRGVIRUDVVLJQLQJUK\WKPFODVVLVLQWKHLQGH[GHULYHGIRU YRFDOLFLQWHUYDOVSURSRUWLRQRIYRFDOLFUHODWLYHWRLQWHUYRFDOLFLQWHUYDOVLQ WKH5DPXVHWDOPRGHOYDULDELOLW\LQWKHGXUDWLRQRIYRFDOLFLQWHUYDOVLQWKH *UDEHDQG/RZPRGHO /DQJXDJHVDUHWKHQSODFHGZLWKLQWKHPDWUL[GH¿QHGE\WKHLQWHUVHFWLRQ RI WKH WZR LQGLFHV WR GH¿QH D JUDGHG UK\WKP FODVV VSDFH7KH LQFLGHQFH RI YRZHO UHGXFWLRQ GLSKWKRQJV DQG WHQVH YRZHOV SOD\V D UROH LQ GH¿QLQJ UK\WKPFODVVXQGHUHLWKHUPRGHODVGRHVWKHLQFLGHQFHRIFRQVRQDQWFOXVWHUV LQFOXGLQJFRQVRQDQWOHQJWKRUJHPLQDWHVDQG¿QDOFRQVRQDQWVDOORIZKLFK FRQWULEXWHWRWKHYDULDELOLW\RIV\OODEOHW\SHVLQDODQJXDJHRQHRIWKHIDF WRUVWKRXJKWWRHQWHULQWRWKHLPSUHVVLRQLVWLFFODVVL¿FDWLRQRIODQJXDJHVE\ UK\WKPW\SHV'DXHU 8VLQJWKLVDSSURDFK(QJOLVKWKHFODVVLFH[DP SOHRIWKH³VWUHVVWLPHGÓDQJXDJHW\SHDJDLQVWDQGVLQFRQWUDVWZLWK)UHQFK ORQJFRQVLGHUHGWREHDSURWRW\SLFDO³V\OODEOHWLPHGODQJXDJH´:HOVKIDOOV LQEHWZHHQ$FFRUGLQJWR*UDEHDQG/RZ¶VFDOFXODWLRQVVHHWKHLU)LJS :HOVK LV FORVHU WR )UHQFK WKDQ WR %ULWLVK (QJOLVK ZKLOH WKH UK\WKP FODVVFKDUDFWHUL]DWLRQXVHGE\5DPXVHWDO ZRXOGSODFH:HOVKDERXW HTXLGLVWDQW IURP %ULWLVK (QJOLVK DQG )UHQFK EXW ZRXOG FODVVLI\ :HOVK DV VWUHVVWLPHGOLNH(QJOLVKVHH)LJ*UDEHDQG/RZS

*HWWLQJWKHUK\WKPULJKW

7KHHPSLULFDOJRDORIWKLVVWXG\ZDVWRWHVWWKHHIIHFWVRQFKLOGUK\WKPLF OHDUQLQJRIGLIIHUHQFHVLQLQSXWVSHHFKDVUHJDUGVUHODWLYHKRPRJHQHLW\DW WKHOHYHORIZRUGRUSKUDVHDFFHQWXDOSDWWHUQDQG WKHOHYHORI&9DOWHUQD WLRQRUVHJPHQWDOVHTXHQFLQJ$OWKRXJKSURVRGLFSDWWHUQVHOLFLWWKHHDUOLHVW OHDUQHGLHODQJXDJHVSHFL¿F SHUFHSWXDOUHVSRQVHVLQLQIDQF\VHJPHQWDO SDWWHUQVEHJLQWREHNQRZQSHUFHSWXDOO\DQGWRLQÀXHQFHLQIDQWV¶YRFDOSUR GXFWLRQSDWWHUQVZLWKLQWKH¿UVW\HDUDVZHOODVQRWHGDERYH2QWKHRWKHU KDQG WKH VHJPHQWDO VHTXHQFHV IRXQG LQ HDUO\ FKLOG ZRUGV DQG FRQWHPSR UDQHRXV EDEEOH DUH KLJKO\ VLPLODU FURVVOLQJXLVWLFDOO\:LWKLQ WKH OLPLWV RI FKLOGUHQ¶VPRWRULFSODQQLQJVNLOOVWKHVSHFL¿FUK\WKPLFSDWWHUQVRIWKHDGXOW ODQJXDJHVKRXOGKDYHVRPHLQÀ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

0HWKRG 'DWD IURP ¿YH FKLOGUHQ HDFK ZHUH GUDZQ IURP ORQJLWXGLQDO VWXGLHV FRQ GXFWHG LQ WKUHH ODQJXDJH FRPPXQLWLHV$PHULFDQ (QJOLVK &DOLIRUQLD SDUWLFLSDQWV LQ WKH RULJLQDO VWXG\ ¿YH RI WKHP ER\V 9LKPDQ HW DO )UHQFK 3DULV )UDQFH %R\VVRQ%DUGLHV DQG 9LKPDQ DQG :HOVK 1RUWK:DOHV $OORIWKHLQIDQWVZHUHQRUPDOO\GHYHORSLQJ$OO¿YHRIWKH $PHULFDQFKLOGUHQZKRVHGDWDDUHLQFOXGHGKHUHWKUHHRI WKH)UHQFK DQG RQHRIWKH:HOVKZHUH¿UVWERUQ7ZR$PHULFDQWKUHH)UHQFKDQGRQH:HOVK FKLOGZHUHPDOH&KLOGUHQZHUHUHFRUGHGDWKRPHRQDZHHNO\(QJOLVK RU ELZHHNO\EDVLV)UHQFKDQG:HOVK RQDXGLRDQGYLGHRLQQDWXUDOLQWHUDFWLRQ ZLWKWKHLUPRWKHUVDQGVRPHWLPHVZLWKWKHREVHUYHUZKRZDVDOZD\VDQDWLYH VSHDNHU


7ZRZRUGSRLQWVZHUHLGHQWL¿HGIRUVDPSOLQJWKHGDWDLQDFRPSDUDEOH ZD\FURVVOLQJXLVWLFDOO\WKHZRUGSRLQWWKH¿UVWPRQWKLQZKLFKWKHFKLOG XVHG IRXU RU PRUH LGHQWL¿DEOH DGXOWEDVHG ZRUGV VSRQWDQHRXVO\ LQ D KDOI KRXU VHVVLRQ ZS WZR VHVVLRQV VDPSOHG DQG WKH ZRUG SRLQW ZS RQH VHVVLRQ VDPSOHG 7KH ODWWHU FRUUHVSRQGV WR DSSUR[LPDWHO\ D ZRUG FXPXODWLYHYRFDEXODU\IRUZRUGLGHQWL¿FDWLRQSURFHGXUHVDQGRWKHUPHWK RGRORJLFDOGHWDLOVXVHGLQDOOWKUHHVWXGLHVVHH9LKPDQDQG0F&XQH )RU(QJOLVKZHXVHGGDWDRQO\IURPWKH¿YHFKLOGUHQZKRKDGUHDFKHGWKH ZS E\ WKH DJH RI PRQWKV ,Q ERWK WKH )UHQFK DQG WKH:HOVK JURXSV D VL[WK FKLOG GURSSHG RXW RI WKH VWXG\ ZKHQ ZRUG SURGXFWLRQ SURYHG WR EH VORZ LQ JHWWLQJ VWDUWHG 7KHUH LV WKXV D VPDOO ELDV WRZDUG SUHFRFLW\ LQ ZRUG SURGXFWLRQ LQ DOO WKUHH JURXSV$OO DQDO\]DEOH GLV\OODEOHV LQFOXGLQJ ERWKZRUGVDQGQRQZRUGVRUEDEEOHYRFDOLVDWLRQVZHUHH[WUDFWHGIURPHDFK FKLOG¶VDQGZRUGSRLQWV,QVRPHLQVWDQFHVVXSSOHPHQWDU\GLV\OODEOHV ZHUH VHOHFWHG IURP WKH ZHHN LPPHGLDWHO\ SUHFHGLQJ WKH ZRUG SRLQW IRU WKH (QJOLVK JURXS VLQFH WKHVH FKLOGUHQ SURGXFHG OHVV GLV\OODEOHV RYHU DOO0HDQJURXSDJHVDQGQXPEHUVRIGLV\OODEOHVDQDO\VHGDUHLQGLFDWHGLQ 7DEOH 7DEOH $JHVDQGWRNHQVDQDO\]HG /DQJXDJH :RUGSRLQW (QJOLVK )UHQFK :HOVK

0HDQDJHLQPRQWKV

7RNHQVDQDO\]HG

6HOHFWLRQ&ULWHULD 7KHVWXG\ZDVOLPLWHGWRGLV\OODELFYRFDOLVDWLRQVRQO\LQFOXGLQJERWKLGHQ WL¿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


H[FOXGHG'LV\OODEOHVZLWKLQWHUIHULQJWDONLQJRURWKHUQRLVHZHUHQRWXVHG 8WWHUDQFHVZKLFKVKRZHGH[FHVVLYHVKLIWVIURPPRGDOUHJLVWHUH[FHVVLYHYR FDOHIIRUWZKLVSHURUFUHDN\YRLFHZHUHDOVRH[FOXGHG1RPRUHWKDQWKUHH VXFFHVVLYHUHSHWLWLRQVRIDVLQJOHZRUGW\SHZHUHLQFOXGHGLQWKHDQDO\VLV RQWKHJURXQGVWKDWD³SURVRGLFVHW´FRXOGEHLQIHUUHGDQGVXFKPHFKDQLFDO UHSHWLWLRQPLJKWELDVWKHUHVXOWV

6SRQWDQHRXVDGXOWGDWDH[WUDFWHGIURPUHFRUGLQJV ,QRUGHUWRREWDLQDUHSUHVHQWDWLYHVDPSOHRIVSRQWDQHRXVDGXOWVSHHFKZKRVH GXUDWLRQDOSURSHUWLHVFRXOGSURYLGHDQLGHDRIWKHUDQJHRIPRGHOVWKHLQIDQWV DUH H[SRVHG WR ZH VHDUFKHG WKURXJK WKH ZS DQG ZS UHFRUGLQJV RI WKH FKLOGUHQ LQFOXGHG LQ WKLV VWXG\ LQ DOO WKUHH ODQJXDJHV IRU DOO SURVRGLFDOO\ LVRODWHGDGXOWGLV\OODELFSURGXFWLRQVZKHWKHUZRUGVRUSKUDVHV:HGH¿QHG ³LVRODWHGGLV\OODEOHV´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

(OLFLWHGDGXOWGDWD ,QRUGHUWRIRUPDFOHDULGHDRIWKH³HQGVWDWH´WRZDUGZKLFKWKHFKLOGUHQ PLJKW EH VXSSRVHG WR EH KHDGLQJ ZKLOH DEVWUDFWLQJ DZD\ IURP WKH GLIIHU HQFHVLQSKRQRWDFWLFVWUXFWXUHEHWZHHQFKLOGDQGDGXOWSURGXFWLRQVZHHOLF LWHGFKLOGOLNHGLV\OODELFSDWWHUQVIURP¿YHIHPDOHQDWLYHVSHDNHUVRIHDFK ODQJXDJH 6LQFH WDUJHW ZRUGV RU WKH DGXOW PRGHOV IRU ZRUGV DWWHPSWHG E\ WKHFKLOGUHQRFFXUUHGRQO\UDUHO\DVLVRODWHGGLV\OODEOHVLQWKHUHFRUGHGVHV VLRQVZHLQFOXGHGLQRXUVWLPXOLWKHPRVWFRPPRQFKLOGZRUGWDUJHWVIRU HDFKODQJXDJHJURXSDORQJVLGHQRQZRUGVPRGHOHGRQIUHTXHQWO\RFFXUULQJ FKLOGUHQ¶VGLV\OODELFQRQZRUGSDWWHUQV7DEOH 1RWHWKDWRQHSKRQRORJLFDO SDWWHUQ±EDEL±ZDVHOLFLWHGLQDOOWKUHHJURXSVIRUGLUHFWFRPSDULVRQDFURVV ODQJXDJHV(QJEREE\)UEDELH:HOEDELµEDE\¶


7DEOH (OLFLWHGDGXOWZRUGDQGQRQZRUGGLV\OODEOHVZRUGVSHOOLQJLVLQLWDOLFV (QJOLVK

)UHQFK

:HOVK

VSHOOLQJ SKRQHWLF VSHOOLQJ SKRQHWLF JORVV

VSHOOLQJ

SKRQHWLF JORVV

DSSOH EDE\ %LJ%LUG ERWWOH EXWWRQ

3RN DG+DK D+IDF D#4N D¡!P

EpEp FKDSHDX PDPDQ SDSD SRXSpH

DGDG 5CRQ OCOC R#R# RWRG

EHEED EHEE\ EREE\ GRRGRR HGGD JRJJD

D'D D'DK D#DK FWFW 'F I#I

DED DLGHX[ EDELH EREHDX GRXGRX

CDC 'F1 DCDK DQDQ FWFW

EDEL FKRRFKRR HWR VLVR WDWD WHGL DGD GHGH GZGZ JDJD JDJDN

DCDK V5WV5W 'Vn UKUn V#V# V'FK CFC F'F' FWFW ICIC ICICM

EDE\ KDW PDPD SDSD GROO\

EDE\ FKRRFKRR DJDLQ VHHVDZ E\HE\H WHGG\

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¿UVW YRZHO9 PHGLDOFRQVRQDQWPLG& DQGVHFRQGYRZHO9 ZHUHEDVHGRQ UHOHYDQWWUDQVLWLRQFXHVGHSHQGLQJRQWKHVXUURXQGLQJVHJPHQWV8WWHUDQFH LQLWLDOFRQVRQDQWVZHUHH[FOXGHGIURPWKHPHDVXUHPHQWV*OLGHVRFFXUULQJ EHWZHHQYRZHODQGFRQVRQDQWRUFRQVRQDQWDQGYRZHOZHUHLQFOXGHGLQWKH YRFDOLFPHDVXUHPHQW


5HVXOWV 'XUDWLRQVRI9&9LQWKHWKUHHODQJXDJHV$GXOWV )LJXUHVKRZVWKHSURSRUWLRQDOGXUDWLRQVRIWKHLQGLYLGXDO9&9HOHPHQWV RIWKHIRUPEDELDVSURGXFHGLQLVRODWLRQE\¿YHDGXOWVSHDNHUVRIHDFKRI WKHWKUHHODQJXDJHV7KHSDWWHUQVLQWKHWKUHHODQJXDJHVDUHFOHDUO\GLVWLQFW $VH[SHFWHGEDVHGRQSULRUUHSRUWV(QJOLVKLVPDUNHGE\ORQJ9)UHQFKE\ ORQJ9DQG:HOVKE\ORQJPLG&$UHSHDWHGPHDVXUHV$129$/DQJXDJH %HWZHHQVXEMHFW IDFWRU (OHPHQW:LWKLQVXEMHFW IDFWRU SHUIRUPHG RQ WKH SURSRUWLRQDOGXUDWLRQVRIDGXOWEDELLQGLFDWHGWKDWWKH/DQJXDJH[(OHPHQW LQWHUDFWLRQLVKLJKO\VLJQL¿FDQW>) S@0XOWLSOHFRPSDUL VRQV%RQIHUURQLFRUUHFWLRQVDSSOLHG UHYHDOHGWKDWWKHIROORZLQJGLIIHUHQFHV DUHVLJQL¿FDQW9(QJOLVK!)UHQFKDQG:HOVKPLG&:HOVK!(QJOLVK DQG)UHQFK9)UHQFK!:HOVK

)LJXUH 3URSRUWLRQDOGXUDWLRQVRIHOHPHQWVRIDGXOWSURGXFWLRQVRIEDEL,QGL YLGXDOVDUHSORWWHGLQGLIIHUHQWOLQHV

'XUDWLRQVRI9&9LQWKHWKUHHODQJXDJHV&KLOGUHQ $ FRPSDULVRQ RI WKH SDUWLFXODU VHJPHQWV XVHG LQ WKH FKLOG YRFDOLVDWLRQV PHDVXUHGLQWKHWKUHHODQJXDJHJURXSVUHYHDOHGDQXPEHURIVLJQL¿FDQWGLI IHUHQFHV WKDW FRXOG EH H[SHFWHG WR DIIHFW WKH RYHUDOO GXUDWLRQV RI9&9 VH TXHQFHV$WERWKZRUGSRLQWVLQDOOWKUHHODQJXDJHJURXSVVWRSVDFFRXQWHG IRUWKHKLJKHVWSURSRUWLRQRIPHGLDOFRQVRQDQWVFORVHWRRUPRUH 7KH


VHFRQGPRVWIUHTXHQWFRQVRQDQWW\SHGLIIHUHGDFURVVJURXSVDQGDJHVQDVDOV IRUWKH$PHULFDQFKLOGUHQDWERWKDJHOHYHOVEXWIULFDWLYHVIRUERWK)UHQFK DQG:HOVKDWWKHZSZLWKDVKLIWWRPRUHQDVDOVE\WKHZSLQERWKWKRVH ODQJXDJHV7KHGXUDWLRQRIFKLOGUHQ¶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¿OHIRUWKHFKLOGUHQ¶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¿QDOV\OODEOH OHQJWKHQLQJ7KHSURSRUWLRQDOGXUDWLRQVRIWKHWKUHHHOHPHQWVWDNHQWRJHWKHU UHYHDOUHODWLYHO\OLWWOHHYLGHQFHRIVSHFL¿FDPELHQWDGXOWODQJXDJHVKDSLQJ KRZHYHU2QO\RQH$PHULFDQFKLOGSURGXFHGHOHPHQWVZKRVHUHODWLYHGXUD WLRQVUHVHPEOHGWKRVHRIWKH$PHULFDQDGXOWV¶HOLFLWHGIRUPVEURDGO\PLG& 99 ZKLOHWZR:HOVKFKLOGUHQSURGXFHGDSDWWHUQUHVHPEOLQJWKDWRIWKH :HOVKDGXOWV9PLG&9 DQGWKUHH)UHQFKFKLOGUHQSURGXFHGDSDWWHUQUH VHPEOLQJWKDWRIWKH)UHQFKDGXOWV9PLG&9 )XUWKHUPRUHFRQVLGHULQJ WKHLQGLYLGXDOFKLOGUHQLQHDFKJURXSRQO\RQH$PHULFDQFKLOGRQH)UHQFK FKLOGDQGWZR:HOVKFKLOGUHQSURGXFHGDOOWKUHHHOHPHQWVZLWKLQWKHUDQJHRI WKHDGXOWYDOXHV DWWKHZS7KH)UHQFKFKLOGUHQ¶VSDWWHUQVJLYHDPRUH KRPRJHQHRXV LPSUHVVLRQ WKDQ GR WKRVH RI WKH RWKHU WZR JURXSV EXW &R FKUDQV&WHVWVLQGLFDWHWKDWWKHFURVVOLQJXLVWLFGLIIHUHQFHVDUHQRWVWDWLVWLFDO O\VLJQL¿FDQW&>@ S IRU9&>@ S IRUPLG&


$PHULFDQFKLOGUHQ

)UHQFKFKLOGUHQ

:HOVKFKLOGUHQ

)LJXUH 3URSRUWLRQDO GXUDWLRQV RI HOHPHQWV RI FKLOG GLV\OODEOHV DW DQG ZS OHIWPRVW SDQHOV ULJKW SDQHOV VKRZ PHGLDQ DQG UDQJH RI GXUDWLRQV RI HDFKHOHPHQWLQDOOHOLFLWHGDGXOWQRQZRUGGLV\OODEOHVIRUHDFKODQJXDJH


:H VHH IURP )LJXUH WKDW LQ DOO WKUHH ODQJXDJH JURXSV WKH FKLOGUHQ¶V YRFDOLVDWLRQVGRVKRZDFKDQJHEHWZHHQWKHWZRVDPSOLQJSHULRGVVXFKWKDW DW WKH ZS WKH\ PRUH FORVHO\ DSSUR[LPDWH WKH DGXOW SDWWHUQ RI WKH WDUJHW ODQJXDJH7KLVQHFHVVDULO\UHTXLUHGGLIIHUHQWSDWWHUQVRIFKDQJHZLWKLQHDFK ODQJXDJHJURXSDQGIRUWKHGLIIHUHQWFKLOGUHQZLWKLQHDFKJURXS2YHUDOOLQ SURSRUWLRQDOWHUPV$PHULFDQFKLOGUHQ¶V9EHFDPHORQJHUDQGPLG&VKRUWHU )UHQFKFKLOGUHQ¶V9EHFDPHVKRUWHUDQG9ORQJHU:HOVKFKLOGUHQ¶V9EH FDPHVKRUWHUZKLOHWKHLUPLG&DQG9EHFDPHORQJHU&RQVLGHULQJLQGLYLGXDO FKLOGUHQKRZHYHU)UHQFKDQG:HOVKFKLOGUHQKDGDFKLHYHGIDUPRUHDGXOW OLNH 969 SURSRUWLRQV WKDQ KDG $PHULFDQ FKLOGUHQ E\ WKH ODWHU GHYHORS PHQWDOSRLQW2IWKH¿YHFKLOGUHQLQHDFKJURXS¿YH)UHQFKDQGIRXU:HOVK FKLOGUHQSURGXFHG969SURSRUWLRQVWKDWDSSUR[LPDWHO\PDWFKHGWKHDGXOW VKDSHZKLOHRQO\RQHRIWKH$PHULFDQFKLOGUHQPDWFKHGWKHUDWLRIRUDOOWKUHH HOHPHQWV$EHWWHUPDWFKEHWZHHQFKLOGDQGDGXOWSURGXFWLRQVIRU)UHQFKDQG :HOVKLQFRPSDULVRQZLWK(QJOLVKDWWKHZSUHVXOWVLQJUHDWHUKRPRJHQH LW\IRUWKHJURXSVRI)UHQFKDQG:HOVKFKLOGUHQDVDZKROH$&RFKUDQV&WHVW LQGLFDWHGWKDWDWWKHZSWKHGLIIHUHQFHLQWKHKRPRJHQHLW\RIYDULDQFHLV VLJQL¿FDQWIRUWKHSURSRUWLRQDOGXUDWLRQRI9ZKHUH$PHULFDQFKLOGUHQGLI IHUHGIURPWKHUHPDLQLQJWZRJURXSV& S 7KHGLIIHUHQFHV IRUWKHRWKHUHOHPHQWVDUHQRWVWDWLVWLFDOO\VLJQL¿FDQWKRZHYHU 7DEOH 1XPEHU SURSRUWLRQ RI WRWDO DQG VWUXFWXUHV RI PRWKHUV¶ LVRODWHG GLV\O ODEOHV 7RWDO SURSRUWLRQ (QJOLVK ZRUGV SKUDVHV RQRPDW 7RWDO )UHQFK ZRUGV SKUDVHV RQRPDW 7RWDO :HOVK ZRUGV SKUDVHV RQRPDW 7RWDO

ORQJWHQVH9 GLSKWKRQJJOLGH9 9 9

PHG FOXVWHU

¿QDO FRQVRQDQW


&URVVOLQJXLVWLFFRPSDULVRQRIPRWKHUV¶LVRODWHGGLV\OODEOHV 7DEOH FKDUDFWHULVHV WKH LVRODWHG GLV\OODEOHV H[WUDFWHG IURP WKH PRWKHUV¶ FKLOGGLUHFWHGVSHHFKDQGDQDO\VHGIRUWKHGXUDWLRQRIWKH9&9HOHPHQWV 7KHGLV\OODEOHVDUHFDWHJRULVHGLQWRWKHWKUHHXQLWVWKDWPLJKWEHH[SHFWHG WRGLIIHULQDFFHQWXDOSDWWHUQZRUGVSKUDVHVDQGRQRPDWRSRHLFIRUPV$V H[SHFWHGEDVHGRQHDUOLHUVWXGLHVZRUGVPDNHXSDIDUVPDOOHUSURSRUWLRQRI WKHGLV\OODEOHVSURGXFHGLQFKLOGGLUHFWHGVSHHFKLQ(QJOLVK LQFRP SDULVRQ ZLWK )UHQFK DQG:HOVK 7KH SURSRUWLRQ RI RQRPDWR SRHLFIRUPVLVDOVRVRPHZKDWVPDOOHULQ(QJOLVKDQG)UHQFKWKDQLQ:HOVK 3KUDVHV PDNH XS RYHU KDOI RI WKH PRWKHUV¶ LVRODWHG GLV\OODEOHV LQ (QJOLVK DVFRPSDUHGWRZHOOXQGHUDWKLUGLQWKHRWKHUWZRODQJXDJHV,QSDUWLFXODU FHUWDLQSKUDVHVDUHRIYHU\KLJKLQFLGHQFHLQWKH(QJOLVKGDWDRYHUKDOIDUH ZKTXHVWLRQV VXFK DV ZKR¶V WKDW" ZKDW¶V WKLV" ZKHUH HOVH" )XUWKHUPRUH DOWKRXJKWURFKDLFZRUGVDUHWKHGRPLQDQW(QJOLVKSDWWHUQRQO\RXWRIWKH WRNHQVDQDO\]HGZHUHVWDQGDUGWURFKDLFZRUGVHJEXQQ\FXSFDNHYV DOOJRQHZKRRSHHZKLFKKDYHYDULDEOHDFFHQW 7R EHWWHU VKRZ WKH GLIIHUHQFHV EHWZHHQ (QJOLVK DQG WKH RWKHU WZR ODQ JXDJHVZLWKUHVSHFWWRWKHFRPSOH[LW\RIWKHQXFOHXVDQGRWKHUDVSHFWVRI SKRQRWDFWLF VWUXFWXUH WKDW DIIHFW WKH UK\WKPLF SUR¿OH ZH DOVR LQGLFDWH WKH RFFXUUHQFHRIGLSKWKRQJVDQGFRQWUDVWLYHO\ORQJRUWHQVH9DQG9PHGLDO FOXVWHUVDQG¿QDOFRQVRQDQWVLQWKHPRWKHUV¶GLV\OODEOHV)URPWKLVLWLVFOHDU WKDW WKH SKRQRWDFWLF FRPSOH[LW\ RI RXU VSRQWDQHRXV (QJOLVK GDWD H[FHHGV WKDWRIWKHRWKHUWZRODQJXDJHVRQDOOWKUHHPHDVXUHV

)LJXUH 3URSRUWLRQDOGXUDWLRQVRI9&9HOHPHQWVRIPRWKHUV¶GLV\OODEOHV

)LJXUH VXPPDUL]HV WKH GLVWULEXWLRQ RI SURSRUWLRQDO GXUDWLRQV RI 9 PLG&DQG9IRUWKHDQDO\]DEOHGLV\OODEOHV H[WUDFWHGIURP HDFK PRWKHU¶V


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¿QGLQJVSURYLGHDQDFFXUDWHSLFWXUHRIWKH9&9GXUDWLRQSUR ¿OHVLQLQSXWVSHHFKKRZHYHUZHDUHOHIWZLWKDSX]]OH+RZFDQZHDFFRXQW IRUWKHFKLOGUHQ¶VSURJUHVVWRZDUGGLVWLQFWUK\WKPLFSDWWHUQVE\WKHZSLI LVRODWHGGLV\OODEOHVWDNHQIURPPRWKHUV¶FKLOGGLUHFWHGVSHHFKDUHVRVLPLODU DFURVVWKHODQJXDJHV":KDWWKHQDUHWKHFKLOGUHQ¶VPRGHOV"

&KLOGUHQ¶VGLV\OODELFZRUGVLQUHODWLRQWRWDUJHWV 7KHFKLOGUHQGLIIHUHGDFURVVODQJXDJHVLQWKHW\SHVRIDGXOWGLV\OODELFWDUJHWV WKH\DWWHPSWHGDQGSURGXFHGWRVRPHH[WHQWWKLVUHÀHFWVGLIIHUHQFHVLQDGXOW ODQJXDJHVWUXFWXUHVDQGLQWKHQDWXUHRIWKHLQSXWWRFKLOGUHQLQWKHGLIIHUHQW JURXSVVHH7DEOH $VH[SHFWHGWKH)UHQFKFKLOGUHQSURGXFHGWKHPRVW ZRUGVIROORZLQJWKHGRPLQDQWDGXOWZRUGSDWWHUQLDPELFZRUGV ZLWK WKHUHPDLQGHUGLYLGHGEHWZHHQDIHZRQRPDWRSRHLFIRUPV DQGDODUJHU QXPEHURI³RWKHUÍRUPVLQFOXGLQJLQWHUMHFWLRQVDOOREUDYR RWKHUZRUGV RUSKUDVHVZKRVHDFFHQWXDOSDWWHUQLVYDULDEOHQRQQRQ DQGPRQRV\OODELF ZRUGVSUHFHGHGE\DOLNHO\³¿OOHUV\OODEOH´>j@YRLU>C$C@>GH@O¶HDX>FNQ@ JLYLQJ WKH LPSUHVVLRQ RI DQ LDPELF SKUDVH DOWKRXJK WKH DFWXDO WDUJHW FDQ RQO\EHJXHVVHGDWRQ¿OOHUV\OODEOHVLQ)UHQFKVHH9HQH]LDQRDQG6LQFODLU 7KH:HOVKFKLOGUHQSURGXFHGWZLFHDVPDQ\RQRPDWRSRHLFIRUPVDVHL WKHURIWKHRWKHUWZRJURXSVRIDOOWDUJHWW\SHV ZLWKOHVVWKDQKDOIRI DOOWDUJHWZRUGW\SHVFRQIRUPLQJWRWKHGRPLQDQWZRUGSDWWHUQWURFKDLF ZRUGV 1RSXWDWLYHSKUDVHVFRQVLVWLQJRI¿OOHUPRQRV\OODELFFRQWHQWZRUG ZHUHLGHQWL¿HGDVWDUJHWVIRU:HOVKFKLOGSURGXFWLRQVZLWKWKHH[FHSWLRQRI RK*RGSURGXFHGE\DFKLOGZLWKVHYHUDOROGHUVLEOLQJV


7DEOH $GXOWWDUJHWVIRUFKLOGUHQ¶VGLV\OODEOHVSURSRUWLRQRIDOOWDUJHWW\SHV

(QJOLVK 7RWDO )UHQFK 7RWDO :HOVK

7RWDO

'RPLQDQWSDWWHUQ ZS ZS

2QRPDWRSRHLD ZS ZS

2WKHU ZS ZS

7RWDO ZS ZS

-XVWXQGHUKDOIRIWKHWDUJHWVDWWHPSWHGE\$PHULFDQFKLOGUHQZHUHWUR FKDLFZRUGV ZKLOHDVL]DEOHPLQRULW\IHOOLQWKHFDWHJRU\³RWKHU´LQ FOXGLQJDWOHDVW¿YHPRQRV\OODELFZRUGVSUHFHGHGE\D¿OOHUV\OODEOHZLWK XQYHUL¿DEOHWDUJHW>DWKH@EHDG>V@ LQDGGLWLRQWRRQHLDPELFZRUGEDOORRQ DQGDFHUWDLQQXPEHURIORQJHUZRUGVRUPRQRV\OODEOHVWUHDWHGLQVRPHRWKHU ZD\ 7REHWWHUXQGHUVWDQGWKHGLIIHUHQFHLQYDULDELOLW\RIUK\WKPLFSDWWHUQVDW WKH ZS DFURVV WKH GLIIHUHQW JURXSV RI FKLOGUHQ ZH DQDO\]HG WKH HOLFLWHG DGXOWIRUPVRI¿YHWDUJHWGLV\OODEOHVLQHDFKODQJXDJH7DEOH :HVHOHFWHG IRUDQDO\VLVWKHPRVWIUHTXHQWO\DWWHPSWHGWDUJHWZRUGVLQHDFKJURXSWDN LQJLQWRDFFRXQWWKHQXPEHURIWRNHQVDWWHPSWHGE\HDFKFKLOGDVZHOODVWKH QXPEHU RI FKLOGUHQ DWWHPSWLQJ HDFK ZRUG W\SH )LJXUH SUHVHQWV SURSRU WLRQDO9&9SUR¿OHVIRUWKHVHHOLFLWHGDGXOWSURGXFWLRQV

)LJXUH 3URSRUWLRQDOGXUDWLRQVRIHOHPHQWVRIHOLFLWHGDGXOWSURGXFWLRQVRIWDUJHW GLV\OODELFZRUGV

+HUHZHEHJLQWRJDLQDEHWWHULGHDRIWKHVRXUFHRIWKHGLIIHUHQWLDOYDULDELO LW\RIFKLOGUHQ¶VSURGXFWLRQVLQWKHWKUHHODQJXDJHV7KDWLVZHFDQVHHWKDW


DOWKRXJKDOORIWKH(QJOLVKZRUGVPHDVXUHGKHUHDUHWURFKDLFWKHGXUDWLRQDO YDULDELOLW\RIDOOWKUHHHOHPHQWVUHPDLQVFRQVLGHUDEOHUHÀHFWLQJWKHYDULDELO LW\LQWKHLQWULQVLFGXUDWLRQRIGLIIHUHQWW\SHVRIVHJPHQWVHJWHQVHYVOD[ VWUHVVHGYRZHOIXOOYVUHGXFHGXQVWUHVVHGYRZHO DVZHOODVLQSKRQRWDFWLF FRPSOH[LW\FRQVRQDQWVLQJOHWRQVYVFOXVWHUV 7KHVLPLODULW\EHWZHHQWKHPHGLDQSURSRUWLRQDOGXUDWLRQVSORWWHGIRUWKH GLIIHUHQWFKLOGUHQ¶VGLV\OODEOHVSURGXFHGDWWKHZS)LJ DQGWKRVHRI WKHFRPPRQWDUJHWZRUGV)LJ LVVWULNLQJHVSHFLDOO\LQWKHFDVHRI)UHQFK DQG:HOVK,QRUGHUWRLQYHVWLJDWHWKLV¿QGLQJPRUHFORVHO\ZHXQGHUWRRN IXUWKHUDQDO\VLVRIWKHVHLQGLYLGXDOZRUGWDUJHWV)LJXUHV±SURYLGHDGLUHFW FRPSDULVRQRIWKHSURSRUWLRQDWH9&9GXUDWLRQVRIVHOHFWHGDGXOWPHGLDQ DQGFKLOGSURGXFWLRQV ,Q)LJXUHZHVHHWKHSURSRUWLRQDWHGXUDWLRQVRIIRXU)UHQFKZRUGVFKD SHDXµKDW¶PDPDQµPRWKHU¶SDSDSRXSpHµGROO¶ DVSURGXFHGE\WZRWRIRXU FKLOGUHQDVZHOODVWKHPHGLDQSURGXFWLRQSDWWHUQIRUWKH¿IWHHQWRNHQVHOLF LWHGIURPDGXOWVIRUHDFKRIWKHVHZRUGV7KHIRXUDGXOW9&9SDWWHUQVDUH JHQHUDOO\VLPLODU2QWKHZKROHWKHFKLOGUHQDUHSURGXFLQJPRGHUDWHO\JRRG PDWFKHVWRWKHSDUWLFXODUZRUGWDUJHWHGWKHFKLOGUHQ¶VSDWWHUQVDUHUHODWLYHO\ VLPLODUDFURVVWKHIRXUZRUGVDVZHOO

)LJXUH ,QGLYLGXDO)UHQFKZRUGVHOLFLWHGDGXOWWDUJHWVDQGFKLOGSURGXFWLRQV

,Q)LJXUHZKHUHWKHSURSRUWLRQDWHGXUDWLRQVIRUIRXU:HOVKZRUGVDUH SORWWHGFKRRFKRRHWRµDJDLQ¶WDWDµE\HE\H¶DQGWHGLµWHGG\¶ ZHFDQVHH


DPRUHVWULNLQJPDWFKRIFKLOGSURGXFWLRQVWRLQGLYLGXDODGXOWZRUGPRGHOV (DFKRIWKHWDUJHWZRUGVKDVDGLVWLQFW9&9SDWWHUQDQGWKHFKLOGUHQ¶VSUR GXFWLRQVFRQVWLWXWHJRRGPDWFKHVWRWKHLQGLYLGXDOSDWWHUQRIDWOHDVWWKUHH RIWKHP7KLVVHHPVWRUHÀHFWLWHPOHDUQLQJ7KHGLIIHUHQFHLQWKHEHWZHHQ ZRUGVLPLODULW\IRUDGXOW)UHQFKDVFRPSDUHGZLWK:HOVKIXUWKHUVXJJHVWV WKDWWKHVRXUFHRIWKHFKLOGYDULDELOLW\WKDWZHKDYHREVHUYHGPD\OLHSULPDU LO\LQWKHYDULDELOLW\RIGLIIHUHQWDGXOWPRGHOV

)LJXUH ,QGLYLGXDO:HOVKZRUGVHOLFLWHGDGXOWWDUJHWVDQGFKLOGSURGXFWLRQV

,Q)LJXUHZHVHHDFRPSDUDEOHVHWRIFRPSDULVRQVIRU$PHULFDQ(QJ OLVK1RWLFHWKDWDOWKRXJKDOOIRXUZRUGVDUHWURFKDLFWKHLUDGXOWUK\WKPLF SUR¿OHV DUH QRW WKH VDPH ,Q SDUWLFXODU FRQWUDVW EDE\ ZKLFK HOLFLWV WKUHH UHODWLYHO\JRRGPDWFKHVZLWKWKHRWKHUWKUHHZRUGV,QWKHFDVHRIEXWWRQLQ SDUWLFXODUWKHWRNHQVSURGXFHGE\WKHWZRFKLOGUHQORRNTXLWHGLIIHUHQW2QH RIWKHVHWRNHQVLVWUDQVFULEHGDV>D3VÖK@WKHRWKHUDV>RCÖ0C@ZLWKWKH¿QDO QDVDOPRYHGWRPHGLDOSRVLWLRQDVLQPDQ\RIWKHFKLOG¶VRWKHUZRUGVIRUDQ DFFRXQWRIWKHGHYHORSPHQWRIWKLVZRUGWHPSODWHVHH9LKPDQDQG9HOOHPDQ 0RUH JHQHUDOO\ WKH GLIIHUHQFHV EHWZHHQ WKH ¿GHOLW\ RI WKH LQGLYLGXDO FKLOGUHQ¶VSURGXFWLRQVDVUHJDUGVUK\WKPLFPDWFKWRWKHDGXOWWDUJHWVLQWKH WKUHHODQJXDJHVFDQSODXVLEO\EHDWWULEXWHGWRWKHGLIIHUHQFHLQWKHVWUXFWXUDO FRPSOH[LW\RIWKHWDUJHWZRUGV2IWKH¿YHZRUGVIUHTXHQWO\DWWHPSWHGLQ HDFKJURXSDOORIWKH:HOVKWDUJHWZRUGVDQGDOOEXWRQHRIWKH)UHQFKWDUJHW


ZRUGV KDYH D VLPSOH & 9&9 VWUXFWXUH WKH H[FHSWLRQ LV FKDSHDX ZLWK FKLOGIRUPV>RR DnDQ JCD J CRQ@1RWHWKHYDULDELOLW\RIWKHVHWR NHQVLQ)LJXUH )RU(QJOLVKWKUHHRIWKHWDUJHWZRUGIRUPVLQFOXGHVWRSV GLIIHULQJLQSODFHRIDUWLFXODWLRQ%LJ%LUGERWWOHEXWWRQ WKUHHKDYHDV\O ODELFFRQVRQDQWDVWKHVHFRQGQXFOHXV%LJ%LUGKDVDPHGLDOFRQVRQDQWFOXV WHUDQGHYHQEDE\ZKLFKLQVSLUHVWKHEHVW(QJOLVKPDWFKHVKDVDGLSKWKRQJ IRULWV¿UVWQXFOHXV1RQHRIWKHVHUHODWLYHO\PRUHFRPSOH[VHJPHQWDOW\SHV RFFXU LQ DQ\ RI WKH )UHQFK RU:HOVK WDUJHW ZRUGV WKDW ZHUH IUHTXHQWO\ DW WHPSWHGE\WKHFKLOGUHQ7KHUHODWLYHGLI¿FXOW\SRVHGE\WKH(QJOLVKPRGHOV KDVLWVHTXLYDOHQFHLQWKHSKUDVHVIRXQGLQWKHLQSXW&RQWUDVWWKHIUHTXHQW (QJOLVKZKTXHVWLRQVQRWHGDERYHZLWKWKHLUWZRWRWKUHHFRQVRQDQWFOXV WHUVZLWKWKH)UHQFKHTXLYDOHQWVIRXQGLQRXUGDWDHWoD"µDQGWKDW"¶HWOj" µDQGWKHUH"¶TXLF¶HVW"µZKRLVLW"¶F¶HVWTXRL"µZKDWLVLW"¶

)LJXUH ,QGLYLGXDO(QJOLVKZRUGVHOLFLWHGDGXOWWDUJHWVDQGFKLOGSURGXFWLRQV

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


UHDVRQDEO\JRRGDFFRXQWRIWKHFKLOGUHQ¶VUHODWLYHVXFFHVVLQPDWFKLQJWKH DGXOWUK\WKPLFVWDQGDUGDWWKHZS

'LVFXVVLRQDQGFRQFOXVLRQ $QDO\VLV RI WKH HOLFLWHG FKLOGOLNH GLV\OODELF SDWWHUQV SURGXFHG E\ DGXOWV LQWKHWKUHHODQJXDJHJURXSVVKRZHGOLWWOHZLWKLQODQJXDJHYDULDELOLW\DQG FOHDUEHWZHHQODQJXDJHGLIIHUHQFHVLQWKHUHODWLYHOHQJWKRI9PLG&DQG9 &RPSDULVRQRIWKHVHUHVXOWVZLWKWKH969SURGXFWLRQVRIFKLOGUHQDWWZR GHYHORSPHQWDOSRLQWV\LHOGHGWKUHHSULPDU\¿QGLQJV $WWKHZSFKLOGUHQFRXOGQRWEHUHDGLO\DVVLJQHGWRWKHDSSURSULDWH ODQJXDJHJURXSRQWKHEDVLVRIWKHZD\WKHLUUK\WKPLFSDWWHUQDSSRUWLRQHG OHQJWKWR969$OOWKUHHJURXSVVHHPHGWRVKRZ¿QDOYRZHOOHQJWKHQLQJ DOVRVHHQLQWKHDGXOWODQJXDJHV$VDJURXSWKH)UHQFKFKLOGUHQDSSHDUHG UHODWLYHO\PRUHKRPRJHQHRXVDQGDGXOWOLNHWKDQWKH$PHULFDQDQG:HOVK FKLOGUHQEXWWKHGLIIHUHQFHZDVQRWVLJQL¿FDQW %\WKHODWHUGHYHORSPHQWDOSRLQWWKHUHZDVSURJUHVVWRZDUGWKHDGXOW PRGHOLQDOOJURXSV7KLVDJUHHVZLWKHDUOLHUFURVVOLQJXLVWLFVWXGLHVRIVHJ PHQWDO SURGXFWLRQ RYHU WKLV VDPH SHULRG %R\VVRQ%DUGLHV DQG 9LKPDQ 9LKPDQHWDO ,QWHUJURXSGLIIHUHQFHVZHUHIRXQGLQWKHH[WHQWWRZKLFKWKHFKLOGUHQ VXFFHHGHGLQPDWFKLQJDGXOWUK\WKPLFSDWWHUQLQJ%RWKWKH)UHQFKDQGWKH :HOVKFKLOGUHQJHQHUDOO\FRQIRUPHGUHODWLYHO\FORVHO\WRWKHDGXOWSDWWHUQE\ WKH ZS ,Q FRQWUDVW WKH$PHULFDQ FKLOGUHQ UHPDLQHG PRUH YDULDEOH DQG OHVVFORVHO\PDWFKHGWRWKHDGXOWPRGHOV

6RXUFHVRIYDULDELOLW\ :HH[SORUHGWZRSRWHQWLDOVRXUFHVIRUWKHORZHUYDULDELOLW\DQGJUHDWHUFRQ IRUPLW\WRWKHDGXOWSDWWHUQVHHQLQWKH)UHQFKFKLOGUHQ¶VSURGXFWLRQQDPHO\ JUHDWHU KRPRJHQHLW\ DW WKH OHYHO RI ERWK ODUJHU ZRUG SKUDVH RQRPDWR SRHLD DQG VPDOOHU UK\WKPLF XQLWV VXEOH[LFDO VHJPHQWDO VHTXHQFHV 2Q WKHRQHKDQG)UHQFKVHHPVWRSURYLGHDPRUHKRPRJHQHRXVVHWRIWDUJHW IRUPV WR PRGHO WKDQ HLWKHU (QJOLVK RU :HOVK GXH WR WKH IDFW WKDW )UHQFK GLV\OODELFVSHHFK IRUPV DUH ODUJHO\ LDPELF ZKHWKHU ZRUGV RU SKUDVHV ([ FHSWLRQDOO\ IRUPV PD\ EH HYHQO\ DFFHQWHG RQ ERWK V\OODEOHV RU SURGXFHG ZLWK LQLWLDOV\OODEOH VWUHVV IRU LGLRV\QFUDWLF UHDVRQV DIIHFW SOD\IXO YDULD


WLRQ HWF ,Q FRQWUDVW ERWK (QJOLVK DQG :HOVK SUHVHQW D PL[ RI WURFKDLF LDPELFDQGHYHQVWUHVVHGPRGHOV+RZHYHURXUDQDO\VHVRILVRODWHGGLV\O ODEOHVH[WUDFWHGIURPWKHPRWKHUV¶VSHHFKIDLOHGWRSURYLGHVXSSRUWIRUWKH K\SRWKHVLVWKDWGLIIHUHQFHVLQWKHUK\WKPLFSDWWHUQVRIGLIIHUHQWOH[LFDOW\SHV LVWKHSULPDU\VRXUFHRIGLIIHUHQFHVLQWKHH[WHQWRIFKLOGYDULDELOLW\DFURVV JURXSV $Q DOWHUQDWLYH SURSRVDO KROGV WKDW WKH LQKHUHQW UK\WKPLF YDULDELOLW\ RI D³VWUHVVWLPHGÓDQJXDJHOLNH(QJOLVKSURYLGHVDUHODWLYHO\PRUHGLI¿FXOW PRGHOIRUFKLOGUHQWRPDWFKWKDQGRHV)UHQFKRQHRIWKHFODVVLF³V\OODEOH WLPHGÓDQJXDJHV*UDEH3RVWDQG:DWVRQ LQDVWXG\RIVSHHFKSUR GXFWLRQLQ\HDUROGVDFTXLULQJ%ULWLVK (QJOLVKYV)UHQFKDUJXHWKDWWKH JUHDWHU VXFFHVV VKRZQ E\ )UHQFK FKLOGUHQ LQ PDWFKLQJ WKH UK\WKPLF YDUL DELOLW\OHYHORIDGXOWVLVGXHWRWKHIDFWWKDW)UHQFKLVUK\WKPLFDOO\VLPSOHU WKDQ(QJOLVKEHFDXVH)UHQFKKDVDOHVVYDULDEOHUK\WKPRYHUDOODVGHWHFWHG LQÀXHQWDGXOWVSHHFK 7KH SUHVHQW VWXG\ JHQHUDOO\ VXSSRUWV WKH UK\WKP FODVV PRGHOV *UDEH DQG/RZ5DPXV1HVSRUDQG0HKOHU DVSUHGLFWRUVRIFKLOGUHQ¶V UHODWLYHHDVHRIDFTXLVLWLRQRIUK\WKPLFSDWWHUQLQJ2QWKHRQHKDQGLQRXU HOLFLWHGDGXOWQRQZRUGSURGXFWLRQVZHFRQWUROOHGWKHUK\WKPLFFRPSOH[LW\ RIWKHDGXOWPRGHOVE\HOLFLWLQJWKHNLQGVRIVLPSOHSDWWHUQVW\SLFDOO\SUR GXFHGE\FKLOGUHQDQGIRXQGWKDW)UHQFKDQG:HOVKFKLOGUHQ¶VYRFDOLVDWLRQV ZHUHPRUHDGXOWOLNHWKDQWKRVHRIWKH$PHULFDQFKLOGUHQDWWKHZS2Q WKH RWKHU KDQG ZKHQ ZH FRPSDUHG HOLFLWHG DGXOW SURGXFWLRQV RI ZRUGV DW WHPSWHG E\ WKH FKLOGUHQ LQ WKH WKUHH ODQJXDJHV WKH GLIIHUHQFH LQ YDULDELO LW\LQWKHDGXOWZRUGWDUJHWVZDVHYLGHQW)LJ )XUWKHUPRUHWKHUHODWLYH YDULDELOLW\ RI WKH ¿YH HOLFLWHG WDUJHW ZRUGV LQ HDFK ODQJXDJH ± RUGHUHG DV (QJOLVK!:HOVK!)UHQFKLQDJUHHPHQWZLWKWKHSUHGLFWLRQVRIWKHUK\WKP FODVV PRGHOV ± ERUH D FORVH UHVHPEODQFH WR WKH UHODWLYH YDULDELOLW\ DFURVV WKH ¿YH LQGLYLGXDO FKLOGUHQ ZLWKLQ WKH WKUHH ODQJXDJH JURXSV DW WKH ZS ,Q RWKHU ZRUGV WKH WDUJHW ZRUGV IRU WKH )UHQFK FKLOGUHQ¶V HDUO\ SURGXF WLRQVZHUHWKHPVHOYHVFORVHO\VLPLODUWRRQHDQRWKHUUK\WKPLFDOO\VSHDNLQJ )LJ DQG WKH GLIIHUHQW FKLOGUHQ¶V WRNHQV ZHUH VLPLODU DV ZHOO )LJ ,Q:HOVKLQDFFRUGDQFHZLWKWKH³ODUJHUXQLWÝDULDELOLW\GLVFXVVHGDERYH WKH ZRUGV WDUJHWHG E\ WKH FKLOGUHQ ZHUH PRUH GLVSDUDWH LQ WKHLU UK\WKPLF SDWWHUQWKDQWKH)UHQFKWDUJHWZRUGV)LJV EXWWKHFKLOGUHQJHQHUDOO\ DFKLHYHGJRRGPDWFKHVWRWKHP,Q(QJOLVKLQFRQWUDVWWRERWK)UHQFKDQG :HOVK WKH HOLFLWHG WDUJHW ZRUGV DOWKRXJK DOO WURFKDLF GLIIHUHG FRQVLGHU DEO\ DSSDUHQWO\ UHÀHFWLQJ GLIIHUHQFHV DW WKH VXEOH[LFDO OHYHO )LJV 6SHFL¿FDOO\WKHZRUGWDUJHWVDWWHPSWHGE\WKH$PHULFDQFKLOGUHQLQFOXGHG


PRUHSKRQRWDFWLFDOO\FRPSOH[VHTXHQFHVDQGPRUHVHJPHQWVRIDNLQGQRW W\SLFDOO\ IRXQG LQ FKLOGUHQ¶V HDUOLHVW SURGXFWLRQ UHSHUWRLUHV 2QH FRXOG LQ IHUWKDWLWLVDFRQVHTXHQFHRIWKHJUHDWHUSKRQHWLFFKDOOHQJHSRVHGE\WKH DGXOWPRGHOVWKDWVRPHRIWKH(QJOLVKFKLOGZRUGSURGXFWLRQVGHSDUWPRUH UDGLFDOO\ IURP WKH DGXOW IRUPV WKDQ GR DQ\ RI WKH )UHQFK RU :HOVK FKLOG ZRUGSURGXFWLRQV ,WPD\EHZRUWKQRWLQJ¿QDOO\WKDWDOWKRXJKWKHZRUGWDUJHWVDWWHPSWHG PRVWRIWHQE\WKHFKLOGUHQOHDUQLQJ(QJOLVKZHUHPRUHFRPSOH[WKDQWKRVH RIWKHFKLOGUHQOHDUQLQJWKHRWKHUODQJXDJHVWKRVHWDUJHWVZHUHQHYHUWKHOHVV OHVV FRPSOH[ WKDQ WKH$PHULFDQ PRWKHUV¶ LVRODWHG GLV\OODELF ZRUGV 2QO\ RQHRXWRI¿YHRIWKHFKLOGUHQ¶VIUHTXHQWWDUJHWZRUGV LQFOXGHVHLWKHU DGLSKWKRQJRUDORQJRUWHQVHYRZHOYVRIWKHPRWKHUV¶ZRUGV RUD ¿QDOFRQVRQDQWYVRIPRWKHUV¶ZRUGV :LWKRXWODERULQJWKHSRLQWWKH FKLOGUHQ¶VIUHTXHQWFKRLFHVRIHDUO\ZRUGVWRSURGXFHVHHPWRUHÀHFWWKHNLQG RIVHOHFWLYLW\RIWHQUHSRUWHGLQWKHOLWHUDWXUHVHH6FKZDUW]

7KHUHSUHVHQWDWLRQRIUK\WKPDQGLWHPOHDUQLQJ 5HWXUQLQJWRWKHEURDGHULVVXHRILPSOLFLWSUHOLQJXLVWLFNQRZOHGJHLQUHODWLRQ WRHDUO\ZRUGSURGXFWLRQZLWKZKLFKZHEHJDQZHDUHQRZLQDSRVLWLRQWR UHÀHFWDJDLQRQZKDWWKHFKLOGQHHGVWRNQRZLQRUGHUWR³JHWWKHUK\WKP ULJKW´7RDFKLHYHWKHQDWLYHODQJXDJHSDWWHUQLQSURGXFWLRQWKHFKLOGPXVW HYHQWXDOO\EHDEOHWRPDWFKERWKWKHRYHUDOOPHORG\DQGWKHUK\WKPLFSDW WHUQ RI LQGLYLGXDO ZRUGV ,Q WKH VLQJOHZRUG SURGXFWLRQ SHULRG WKLV PLJKW VHHPQRWWREHRYHUO\FKDOOHQJLQJVLQFHWKHFRPSOLFDWLRQRI¿WWLQJFRQWHQW DQG IXQFWLRQ ZRUGV RU HYHQ D VXFFHVVLRQ RI FRQWHQW ZRUGV LQWR D VLQJOH LQWRQDWLRQDOFRQWRXUGRHVQRW\HWDULVH7KHSUREOHPLVUDWKHURQHRIUHSUH VHQWDWLRQ,QWKH¿UVW\HDUDVLQGLFDWHGDERYHWKHUHLVJRRGHYLGHQFHWKDW WKHFKLOGLVDEOHWRJDLQDVHQVHRIWKHUK\WKPLFSDWWHUQLQJRIWKHODQJXDJH VXI¿FLHQWWRJLYHJUHDWHUDWWHQWLRQWRZRUGV¿WWLQJWKHGRPLQDQWSDWWHUQWKDQ WRRWKHUZRUGV2XUUHVXOWVVXJJHVWWKDWLWLVQRWWKLVJOREDOUHSUHVHQWDWLRQRI WKHUK\WKPLFSDWWHUQLQJLQWKHODQJXDJHWKDWXQGHUOLHVFKLOGUHQ¶VHDUO\ZRUG SURGXFWLRQKRZHYHU :HVDZ¿UVWRIDOOWKDWDWWKHRXWVHWRIZRUGSURGXFWLRQFKLOGUHQ¶VGLV\O ODEOHVGRQRW\HWPDWFKDGXOWUK\WKPLFSDWWHUQLQJ)LJ ,QIDFWGHVSLWHWKH H[WHQVLYHSHUFHSWXDOOHDUQLQJRIWKH¿UVW\HDUZHVHHKHUHWKDWGLIIHUHQWFKLO GUHQDFTXLULQJWKHVDPHODQJXDJHVKRZGLVWLQFWSDWWHUQVRQO\DIHZDFKLHY LQJDURXJKDSSUR[LPDWLRQRIWKHGRPLQDQWUK\WKPLFSDWWHUQRIWKHDPELHQW


ODQJXDJH7KXVWKHFRQVWUXFWLRQRIUHSUHVHQWDWLRQVDWDQHZOHYHOVHHPVWR EH QHHGHG LQYROYLQJ FRQVLGHUDEOH DGGLWLRQDO OHDUQLQJ EHIRUH DPELHQW ODQ JXDJHUK\WKPVFDQEHVXFFHVVIXOO\PDWFKHGLQSURGXFWLRQ6SHFL¿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¶VHDUO\ZRUGVEXLOGRQDUWLFX ODWRU\ SDWWHUQV DOUHDG\ DYDLODEOH LQ EDEEOLQJ $VVXPLQJ WKDW HDUO\ YRFDO SURGXFWLRQSDWWHUQVDUHJURXQGHGLQELRPHFKDQLFDOFRQVWUDLQWVDQGDUHWKXV FRPPRQWRFKLOGUHQOHDUQLQJGLIIHUHQWODQJXDJHVWKHRSSRUWXQLWLHVIRUHDV\ PDWFKLQJZLOOGLIIHUDFFRUGLQJWRWKHSDUWLFXODUDPELHQWODQJXDJH,QDGGL WLRQWKH¿QGLQJVRIWKLVVWXG\DJUHHZLWKHDUOLHUZRUNLQVXJJHVWLQJWKDWWKH FKDOOHQJHVSRVHGE\WKHDGXOWODQJXDJHZLOOEHPHWGLIIHUHQWO\E\GLIIHUHQW FKLOGUHQ&URVVOLQJXLVWLFSKRQRORJLFDODQDO\VHVRI¿UVWZRUGVZS LQFRP SDULVRQZLWKODWHUZRUGVZSRUEH\RQG VXJJHVWWKDWHDFKFKLOGPXVWEH JLQE\GHYHORSLQJDVWRFNRILQGLYLGXDOUHSUHVHQWDWLRQVRISDUWLFXODUOH[LFDO LWHPV9LKPDQ 7KHVHLQLWLDOUHSUHVHQWDWLRQVRUZRUGSURGXFWLRQSDW WHUQVPD\GHULYHIURPPDWFKHVEHWZHHQWKHFKLOG¶VH[LVWLQJYRFDOSDWWHUQV DQGLPSOLFLWO\³SUHVHOHFWHG´ DGXOWZRUGV9LKPDQDQG1DNDL 7KDWLVWKHKLJKO\VHOHFWHG¿UVWZRUGVUHÀHFWH[LVWLQJYRFDOSDWWHUQVGH YHORSHGLQEDEEOLQJWKHVHGLIIHULQFRPSOH[LW\IURPRQHFKLOGWRWKHQH[W 7KURXJKSURGXFWLRQSUDFWLFHZLWKDJURZLQJVWRFNRIDGXOWEDVHGZRUGVWKH FKLOGLVWKHQYHU\JUDGXDOO\DEOHWRLQGXFHWKHPRUHDEVWUDFWVWUXFWXUHRIWKH DGXOWODQJXDJH7KLVLPSOLFDWHVH[SOLFLWDVZHOODVLPSOLFLWOHDUQLQJDVWKH FKLOGPRYHVIURPWKHXVHRIVLWXDWLRQDOO\SULPHG¿UVWZRUGVWRPRUHLQWHQ WLRQDOO\WDUJHWHGDQGPRUHÀH[LEO\GHSOR\HGODWHU³UHIHUHQWLDO´ZRUGV0F &XQHDQG9LKPDQ 2XUVWXG\KDVFDSWXUHGWZRHDUO\SRLQWVLQWKDWSUR FHVV$WWKHZSZKHQEDEEOLQJYRFDOL]DWLRQVPDNHXSPXFKRIWKHFKLOG¶V SURGXFWLRQ WKH LQÀXHQFH RI WKH RYHUDOO UK\WKPLF SDWWHUQV RI WKH DGXOW ODQ JXDJHLVZHDNLIGHWHFWLEOHDWDOO%\WKHZSZKHQWKHFKLOGUHQDUHXVLQJ ZRUGVRUPRUHLQGLYLGXDOZRUGVDUHUHODWLYHO\VXFFHVVIXOO\UHSURGXFHG UHVXOWLQJLQJUHDWHUKRPRJHQHLW\IRUWKH)UHQFKJURXSZLWKLWVOHVVYDULDEOH UK\WKPLFSDWWHUQLQJWKDQIRUWKHRWKHUJURXSV7KHDFKLHYHPHQWRIDGXOWOLNH UK\WKPLFSDWWHUQVZLOOUHTXLUHPDVWHU\RIFRQVLGHUDEO\JUHDWHUSKRQRWDFWLF


FRPSOH[LW\IRUDOOWKHFKLOGUHQEXWSDUWLFXODUO\IRUWKRVHOHDUQLQJ(QJOLVK DFFXUDWHGHSOR\PHQWRIWKHUDQJHRIDFFHQWXDOSDWWHUQVDYDLODEOHIRUZRUGV SKUDVHVDQGRQRPDWRSRHLFIRUPVFDQEHH[SHFWHGWRHPHUJHLQSDUDOOHOZLWK WKDWGHYHORSLQJPDVWHU\DVSDUWRIWKHSURFHVVRIOH[LFDOOHDUQLQJ7KXVWKH LPSOLFLWOHDUQLQJRIQDWLYHODQJXDJHUK\WKPVWKDWRFFXUVLQWKHSUHOLQJXLVWLF SHULRGLVRQO\D¿UVWVWHSLQWKHORQJDSSUHQWLFHVKLSWKDWZLOOFXOPLQDWHLQ DGXOWOLNHUK\WKPLFSURGXFWLRQ

1RWHV

7KHDXWKRUVWKDQNWKH(FRQRPLFDQG6RFLDO5HVHDUFK&RXQFLORIWKH8.IRULWV ¿QDQFLDOVXSSRUW:HDOVRWKDQNWKHSDUWLFLSDWLQJIDPLOLHVIURP&DOLIRUQLD3DULV DQG 1RUWK :DOHV DQG WKH DGXOWV ZKR SURGXFHG WKH HOLFLWHG GDWD /XF\ (YDQV FROOHFWHGDQGWUDQVFULEHGWKH:HOVKLQIDQWGDWD3DP0DUWLQKHOSHGZLWK:HOVK ZRUGLGHQWL¿FDWLRQ'U/OLQRV6SHQFHUDQG'U(QOOL7KRPDVNLQGO\DQVZHUHG TXHVWLRQVDERXW:HOVKZRUGVDQGSKUDVHV 7KHFODVVL¿FDWLRQRI:HOVKE\WKH5DPXVHWDOPHWKRGZDVFDUULHGRXWE\*UDEH DQG/RZEDVHGRQWKHLURZQGDWD 1RWHWKDWWKHVHGLIIHUHQFHVZHUHLGHQWL¿HGRQO\LQWKHVDPSOHRIGLV\OODEOHVWKDW OHQWWKHPVHOYHVWRDQDO\VLVLQWKLVVWXG\)RUDQDO\VHVEDVHGRQDODUJHUVDPSOH RI (QJOLVK DQG )UHQFK FKLOG YRFDOLVDWLRQV VHH %R\VVRQ%DUGLHV DQG 9LKPDQ 7KH JUHDWHU GXUDWLRQ RI VWRSV WKDQ RI IULFDWLYHV LQ DOO WKUHH JURXSV RI FKLOGUHQ LVVXUSULVLQJ:HVSHFXODWHWKDWWKLVPD\EHGXHWRJUHDWHULQWHQWLRQDOLW\RQWKH FKLOG¶VSDUWLQSURGXFLQJDVWRSWKDQDIULFDWLYHDVVXJJHVWHGE\WKHJUHDWHULQFL GHQFH RI IULFDWLYHV LQ EDEEOLQJ WKDQ LQ ZRUGV LQ WKLV SHULRG %R\VVRQ%DUGLHV DQG9LKPDQ 1RWHWKDWIRUTXDQWLWDWLYHDQDO\VHVRIWKHFKLOGUHQ¶VGDWDJLYHQVNHZHGGLVWULEX WLRQDQGVRPHH[WUHPHYDOXHVZHKDYHHQWHUHGWKHPHGLDQPHDVXUHPHQWDVD VXPPDU\¿JXUHIRUHDFKFKLOGDQGIRUWKHVDNHRIFRPSDUDELOLW\IRUWKHDGXOW GDWDDVZHOO &RFKUDQV¶&WHVWVSHUIRUPHGRQSURSRUWLRQDOGXUDWLRQVRIHOHPHQWVSURGXFHGDW WKHWZRGHYHORSPHQWDOSRLQWVLQGLFDWHWKDW)UHQFKFKLOGUHQ¶VSURSRUWLRQDOGXUD WLRQVRI9DQG9DUHVLJQL¿FDQWO\PRUHKRPRJHQHRXVDWWKHZSWKDQDWWKH ZS&>@ S IRU9&>@ S IRU9 1RRWKHU JURXSVGLIIHUHGLQWHUPVRIKRPRJHQHLW\RIYDULDQFH 7KHSULPDU\ODQJXDJHRIDOORIWKH:HOVKFKLOGUHQ¶VKRPHVZDV:HOVK7KHVH FKLOGUHQUDUHO\SURGXFHG(QJOLVKZRUGVEXWVLQFHEH\RQGHDUO\FKLOGKRRGYLUWX DOO\DOOVSHDNHUVRI:HOVKDUHELOLQJXDOWRGD\LWZRXOGKDYHEHHQLPSRVVLEOHWR DYRLGLQFOXGLQJLQWKHVWXG\DQ\:HOVKFKLOGUHQZKRDUHDOVRH[SRVHGWR(QJ OLVK


5HIHUHQFHV %R\VVRQ%DUGLHV%pQpGLFWHGH3LHUUH+DOOp/DXUHQW6DJDUWDQG&DWKHULQH'XUDQG $FURVVOLQJXLVWLFLQYHVWLJDWLRQRIYRZHOIRUPDQWVLQEDEEOLQJ-RXUQDO RI&KLOG/DQJXDJH± %R\VVRQ%DUGLHV%pQpGLFWHGHDQG0DULO\Q09LKPDQ $GDSWDWLRQ WR ODQJXDJH (YLGHQFH IURP EDEEOLQJ DQG ¿UVW ZRUGV LQ IRXUODQJXDJHV/DQJXDJH± 'DXHU5HEHFFD0 6WUHVVWLPLQJDQGV\OODEOHWLPLQJUHDQDO\]HG-RXUQDORI3KRQHWLFV ± 'HODWWUH3LHUUH& &RPSDULQJ WKH 3KRQHWLF )HDWXUHV RI (QJOLVK )UHQFK *HUPDQ DQG 6SDQLVK+HLGHOEHUJ-XOLXV*URRV9HUODJ $FRPSDULVRQRIV\OODEOHOHQJWKFRQGLWLRQLQJDPRQJODQJXDJHV,QWHU QDWLRQDO-RXUQDORI$SSOLHG/LQJXLVWLFV± )HUQDOG$QQH 7UDXWH 7DHVFKQHU -XG\ 'XQQ 0HFKWLOGH 3DSRXVHN %pQpGLFWH GH %R\VVRQ%DUGLHVDQG,NXNR)XNXL $ FURVVODQJXDJH VWXG\ RI SURVRGLF PRGL¿FDWLRQV LQ PRWKHUV¶ DQG IDWKHUV¶ VSHHFK WR SUHYHUEDO LQIDQWV -RXUQDO RI &KLOG /DQJXDJH ± )OHWFKHU-DQHW 5K\WKP DQG ¿QDO OHQJWKHQLQJ LQ )UHQFK -RXUQDO RI 3KRQHWLFV ± *UDEH(VWKHUDQG(H/LQJ/RZ 'XUDWLRQDOYDULDELOLW\LQVSHHFKDQGWKHUK\WKPFODVVK\SRWKHVLV,Q 1DWDVKD:DUQHUDQG&DUORV*XVVHQKRYHQHGV 3DSHUVLQ/DERUDWR U\3KRQRORJ\9,,±&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV *UDEH(VWKHU%UHFKWMH3RVWDQG,DQ:DWVRQ 7KHDFTXLVLWLRQRIUK\WKPLFSDWWHUQVLQ(QJOLVKDQG)UHQFK,Q3UR FHHGLQJV RI WKH ;,9WK ,QWHUQDWLRQDO &RQJUHVV RI 3KRQHWLF 6FLHQFHV ± -XVF]\N3HWHU: 7KH'LVFRYHU\RI6SRNHQ/DQJXDJH&DPEULGJH0$0,73UHVV 0F&XQH/RUUDLQHDQG0DULO\Q09LKPDQ (DUO\SKRQHWLFDQGOH[LFDOGHYHORSPHQW-RXUQDORI6SHHFK/DQJXDJH DQG+HDULQJ5HVHDUFK± 4XHUOHX';5HQDUG)9HUV\S/3DULV'HOUXHDQG*&UpSLQ )HWDOKHDULQJ(XURSHDQ-RXUQDORI2EVWHWULFVDQG5HSURGXFWLYH%LRO RJ\±


5DPXV)UDQFN0DULQD1HVSRUDQG-DFTXHV0HKOHU &RUUHODWHV RI OLQJXLVWLF UK\WKP LQ WKH VSHHFK VLJQDO &RJQLWLRQ ± 6DIIUDQ-HQQ\55LFKDUG1$VOLQDQG(OLVVD/1HZSRUW 6WDWLVWLFDOOHDUQLQJE\PRQWKROGLQIDQWV6FLHQFH± 6FKZDUW]5LFKDUG 3KRQRORJLFDOIDFWRUVLQHDUO\OH[LFDODFTXLVLWLRQ,Q0LFKDHO'6PLWK DQG-RKQ//RFNHHGV 7KH(PHUJHQW/H[LFRQ±1HZR7V@ >H7V@ 7\SH%µSXW¶ >R7*V@ IHPDOHVSHDNHUV >R7V@ PDOHVSHDNHUV

.12:/('*('(5,9(' %DVH NQRZOHGJHUHOH[LFDOFRQWUDVW SKRQRORJLFDODOWHUQDWLRQ %DVH NQRZOHGJHUHVRFLDOO\ VWUXFWXUHGYDULDWLRQ

7\SH&µSXWWLQJ¶ >R7V+P@IHPDOHVSHDNHUV LQFDUHIXOVW\OHV >R7F+P@DOOVSHDNHUV LQFDVXDOVW\OHV )LJXUH 6FKHPDWLFYLHZRIWDVNVLQOHDUQLQJDERXWVRXQGVWUXFWXUH

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µVRFLROLQJXLVWLFFRPSHWHQFH¶LQWUDGLWLRQDOWHUPV 7KHµSUREOHP¶IRUWKHFKLOGLVVKRZQYLD7\SH&GDWD7KHH[DPSOHRI SXWWLQJVKRZVWKDWLQGLYLGXDOH[HPSODUVLQWKHLQSXWPD\HQFRGHERWKW\SHV RILQIRUPDWLRQVLPXOWDQHRXVO\7KHPRUSKRORJLFDOGHULYDWLRQRISXWWLQJGH PDQGV SKRQHWLF DOWHUQDWLRQ IURP WKH EDVH IRUP 6XFK SKRQRORJLFDOO\JRY HUQHGDOWHUQDWLRQLVFOHDUO\DSDUWRI%DVHLQWUDGLWLRQDOWHUPVLWFDQEH GHVFULEHGDVDPRUSKRSKRQHPLFUXOH+RZHYHULQ1HZFDVWOHWKHFKRLFHRI

*HUDUG'RFKHUW\HWDO

YDULDQWVLVYHU\VWURQJO\LQÀXHQFHGE\JHQGHUDQGVSHHFKVW\OH7KHYDULDQW >F@LVWKHGHIDXOWIRUPIRUDOO\RXQJDGXOWVLQFDVXDOLQWHUDFWLRQDQGLVDOVR XVHGE\PRVWPDOHVLQIRUPDOVSHHFKVW\OHV$QDOWHUQDWLYHYDULDQW>V@PD\ DOVREHXVHGEXWWKLVLVPDLQO\UHVWULFWHGWRXVHE\ZRPHQLQIRUPDOVW\OHV 'RFKHUW\ HW DO DQG VHH IXUWKHU EHORZ 7R XQGHUVWDQG WKH VRFLDOO\ FRUUHODWHGXVHRIVXFKIRUPVDQGWROHDUQWRUHSURGXFHVXFKIRUPVDSSURSUL DWHO\PXVWIRUPSDUWRINQRZOHGJH%DVH +RZGRHVWKHFKLOGSHUIRUPWKLVGXDOWDVN",VLWIRUH[DPSOHHDVLHUWR OHDUQ IRUPV WKDW DUH UHODWLYHO\ FRQVLVWHQW SKRQHWLFDOO\ 7\SH$ EXW PRUH GLI¿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³VSHDNZLWKDQ³DFFHQW´W\SLFDORIDQDWLYHVSHDNHU´.XKO ,WLVQRWFOHDUKRZHYHURQZKDWHYLGHQFHFODLPVVXFKDVWKLVDUHEDVHG &OHDUO\FKLOGUHQRIWKLVDJHGRQRWSURGXFHIXOO\PDWXUHVSHHFKSDWWHUQVLW LVWKHUHIRUHDQHPSLULFDOTXHVWLRQRIVRPHLPSRUWDQFHWRDVFHUWDLQSUHFLVHO\ ZKLFK FRPSRQHQWV RI µDFFHQW¶ KDYH EHHQ PDVWHUHG E\ D FKLOG SDUWLFXODUO\ ZLWKUHJDUGWRWKH669ZKLFKSHUYDGHVPDWXUHVSHHFK,WLVDOVRVWULNLQJWKDW IHZ OLQNV KDYH EHHQ PDGH EHWZHHQ ZRUN LQ WKH VRFLROLQJXLVWLF DQG GHYHO RSPHQWDODUHQDVH[FHSWLRQV EHLQJ 3D\QH &KDPEHUV .HUVZLOO ,QRUGHUWRDGYDQFHWKHGLVFXVVLRQRIWKHVHLVVXHVWKHWKUHHTXHVWLRQVZH ZDQWWRDGGUHVVLQWKLVSDSHUDUHDVIROORZV

:KDWLVWKHQDWXUHRIWKH669LQOLQJXLVWLFLQSXWWRFKLOGUHQ" +RZGRFKLOGUHQDFTXLUHWKH669WKDWLVFKDUDFWHULVWLFRIWKHLU FRPPXQLW\" :KDWDUHWKHLPSOLFDWLRQVRIWKHDQVZHUVWR DQG IRURXUXQ GHUVWDQGLQJRIKRZSKRQRORJLFDONQRZOHGJHLVUHSUHVHQWHGLQWKH FKLOG¶VDQGXOWLPDWHO\WKHDGXOW¶VPLQG"

2QWKHVFRSHRISKRQRORJLFDOOHDUQLQJ

:H KDYH VRXJKW WR DGGUHVV WKHVH LVVXHV WKURXJK WZR SURMHFWV7KH ¿UVW RI WKHVH FHQWHUHG RQ DGXOW VXEMHFWV ZKLOH WKH VHFRQG VKLIWHG WKH IRFXV WR FKLOGUHQ,QVHFWLRQZHRXWOLQHWKHRYHUDOODLPVDQGPHWKRGRORJLHVRIHDFK SURMHFWEHIRUHPRYLQJLQVHFWLRQWRDGLVFXVVLRQRIVRPHRIRXU¿QGLQJV DQGWKHLULPSOLFDWLRQVIRUWKHDERYHTXHVWLRQV

3KRQRORJLFDOYDULDWLRQLQ1HZFDVWOH(QJOLVKDLPVDQGPHWKRGV 9DULDELOLW\LQDGXOWVSHHFKWKH39&SURMHFW ,QWKHDGXOWSURMHFW3KRQRORJLFDO9DULDWLRQDQG&KDQJHLQ&RQWHPSRUDU\ 6SRNHQ%ULWLVK(QJOLVKKHQFHIRUWKUHIHUUHGWRDV39&0LOUR\HWDO UHFRUGLQJVZHUHPDGHRIVSHDNHUVHTXDOO\GLYLGHGE\DJH\RXQJJURXS ±ROGHUJURXS± DQGJHQGHU+DOIWKHVDPSOHDWHDFKDJHZHUH GUDZQIURPDVRFLDOQHWZRUNLQDEURDGO\GH¿QHGµPLGGOHFODVV¶QHLJKERU KRRGWKHRWKHUKDOIIURPDQHWZRUNLQDµZRUNLQJFODVV¶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¿QHJUDLQHG ± EXW QHYHUWKHOHVV VRFLDOO\VWUXFWXUHG±YDULDELOLW\LQWKHSKRQHWLFIRUPVXVHGE\WKHLQIRUPDQWV ([DPSOHVRIRXU¿QGLQJVDUHGLVFXVVHGLQ6HFWLRQ

9DULDELOLW\LQFKLOGVSHHFKWKH(69SURMHFW 7KHVHFRQGSURMHFWIRFXVLQJRQFKLOGVXEMHFWVZDVHQWLWOHG7KH(PHUJHQFH RI6WUXFWXUHG9DULDWLRQLQWKH6SHHFKRI7\QHVLGH,QIDQWVKHQFHIRUWK(69 'RFKHUW\HWDO 7ZRSDUDOOHOVWXGLHVZHUHXQGHUWDNHQRQHFURVVVHF WLRQDODQGRQHORQJLWXGLQDO,QWRWDOUHFRUGLQJVZHUHSURGXFHGIURP FKLOGUHQGUDZQIURPWKHVDPHEURDGO\µZRUNLQJFODVV¶FRPPXQLW\LQYHVWL JDWHGLQ39&:HSUHVHQWRQO\DVDPSOHRIWKH¿QGLQJVLQWKLVSDSHUGUDZLQJ PDLQO\IURPWKHFURVVVHFWLRQDOVWXG\7KHFURVVVHFWLRQDOVWXG\ZDVEDVHG

*HUDUG'RFKHUW\HWDO

RQFKLOGUHQZLWKIRXUER\VDQGIRXUJLUOVUHFRUGHGLQHDFKRI¿YHDJH JURXSVDQGPRQWK 7KLVDJHUDQJHZDVFKRVHQ RQWKHEDVLVWKDWWKHOHYHORISKRQRORJLFDOGHYHORSPHQWW\SLFDOO\DFKLHYHG DWZRXOGSUREDEO\EHWKHHDUOLHVWIHDVLEOHVWDUWLQJSRLQWIRUDGGUHVVLQJ WKHUHVHDUFKTXHVWLRQV%H\RQGLWZDVUHDVRQHGWKDWLWZRXOGEHGLI¿FXOW WRFRQWUROIRURWKHUVRXUFHVRILQSXWHJIURPWKHSHHUJURXSDQG\RXQJHU VLEOLQJV$OOFKLOGUHQZHUHERUQWRPRQROLQJXDOSDUHQWVKDGQRUPDOVSHHFK DQGKHDULQJDQGZHUH¿UVWERUQLQRUGHUWRPLQLPLVHWKHLPSDFWRIFRPPX QLFDWLRQZLWKVLEOLQJV7KHSDUHQWVZHUHDOVRWKHPDLQFDUHJLYHUV 7KH SULQFLSDO PDWHULDO FROOHFWHG ZDV D VDPSOH RI LQWHUDFWLRQ EHWZHHQ PRWKHU DQG FKLOG PHGLDWHG E\ WKH ¿HOGZRUNHU 7\SLFDO LQWHUDFWLRQDO VLWX DWLRQVZHUHSOD\LQJZLWKDWR\RUUHDGLQJDERRN0DWHULDOVZHUHFKRVHQWR HOLFLWZRUGVFRQWDLQLQJYDULDEOHVRILQWHUHVW:HZHUHQRWSUHVFULSWLYHDERXW WKHDPRXQWRIPDWHULDOWREHREWDLQHGIURPWKHFKLOGUHQ7KHJRDORIHDFK VHVVLRQZDVWRREWDLQDVPXFKGDWDDVSRVVLEOHZLWKWKHIRFXVRIWKHLQWHUDF WLRQJHDUHGE\WKH¿HOGZRUNHUWRZDUGVHOLFLWLQJWRNHQVRIUHOHYDQWYDULDEOHV 1RDWWHPSWZDVPDGHWRPDQLSXODWHFKLOGUHQ¶VVSHHFKVW\OH 5HFRUGLQJV ZHUH PDGH LQ DV TXLHW VXUURXQGLQJV DV FRXOG EH DFKLHYHG DW WKH VXEMHFWV¶ KRPHV XVLQJ UDGLR ODSHO PLFURSKRQHV DQG GLJLWDO UHFRUG LQJIDFLOLWLHV)LHOGZRUNZDVSHUIRUPHGE\DJURXSRIVSHHFKDQGODQJXDJH WKHUDSLVWVDOOZLWKH[WHQVLYHH[SHULHQFHLQREWDLQLQJODQJXDJHVDPSOHVIURP LQIDQWVDQGWKHLUSDUHQWV$QDO\VLVRIWKHUHVXOWDQWGDWDPDGHXVHRIDFRP ELQDWLRQ RI DFRXVWLF DQG DXGLWRU\ PHWKRGV$XGLWRU\ DQDO\VLV ZDV XVHG WR UHFRUGWUDQVFULSWLRQVXVLQJ,3$V\PEROV7KLVZDVVXSSOHPHQWHGE\DFRXVWLF DQDO\VLVERWKWRUHJLVWHUPHDVXUHPHQWVRINH\SDUDPHWHUVHJYRLFHRQVHW WLPH DQGDOVRWRFRPSLOHDGHWDLOHGSUR¿OHRIWKHDFRXVWLFSURSHUWLHVIRXQG LQHDFKWRNHQ,QWKHFDVHRIW IRUH[DPSOHWKHSUR¿OLQJUHFRUGHGWKHSUHV HQFHRUDEVHQFHRISHULRGLFLW\GXULQJWKHVWRSUHOHDVHEXUVWSUHDVSLUDWLRQ DQGFUHDN\SKRQDWLRQVHHIXUWKHU'RFKHUW\DQG)RXONHV $OOWRNHQV ZHUHDQDO\VHGZKHUHSRVVLEOH)RUW WKLVDPRXQWHGWRRYHUWRNHQV IURPPRWKHUVDQGRYHUIURPFKLOGUHQ

5HVXOWVYDULDELOLW\DQGDFTXLVLWLRQ ,QWKLVVHFWLRQZHWXUQWRWKH¿QGLQJVRIWKHWZR1HZFDVWOHSURMHFWVDQGGLV FXVVWKHLULPSOLFDWLRQVIRURXUXQGHUVWDQGLQJRISKRQRORJLFDOOHDUQLQJ 4XHVWLRQ DERYHDVNVZKDWLVWKHQDWXUHRIWKH669LQOLQJXLVWLFLQSXW FKLOGUHQ UHFHLYH" 2XU ¿UVW WDVN LQ SURYLGLQJ DQ DQVZHU WR WKLV TXHVWLRQ LV


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¶VSHUIRUPDQFHLQDFTXLULQJ YDULDEOHSKRQRORJLFDOWDUJHWV

9DULDELOLW\LQWKHDPELHQWODQJXDJH $OWKRXJKVHYHUDOYDULDEOHVZHUHDQDO\VHGZHUHVWULFWRXUVHOYHVKHUHWRDGLV FXVVLRQRIW DVWKLVLVWKHYDULDEOHZKLFK\LHOGVWKHPRVWH[WHQVLYHVRFLROLQ JXLVWLFDQGSKRQHWLFYDULDELOLW\7DEOHVXPPDULVHVWKHGLVWULEXWLRQRI¿YH YDULDQWVRIW LQZRUG¿QDOSUHYRZHOFRQWH[WHJZKDWLI ZLWKGDWDGUDZQ IURPWKHZRUNLQJFODVVVSHDNHUVLQWKH39&VWXG\ YDULDQW ROGHUIHPDOHV ROGHUPDOHV \RXQJIHPDOHV \RXQJPDOHV

V

V

F

!

Q

7DEOH 3HUFHQWDJH UHDOLVDWLRQV RI W LQ ZRUG¿QDO SUHYRFDOLF FRQWH[W 39& ZRUNLQJFODVVDGXOWV'RFKHUW\HWDO

7DEOHWHVWL¿HVWRDVWULNLQJGHJUHHRIVRFLDOO\FRUUHODWHGKHWHURJHQHLW\ LQWKHGDWD>@LVYHU\VWURQJO\DPDUNHURIIHPDOHVSHHFKZKLOH>V@LVRQO\ IRXQGWRDVLJQL¿FDQWGHJUHHIRUROGHUZRPHQ0DOHVGLVSOD\DKLJKHUXVH RI>V@DQG>F@WKDQWKHFRUUHVSRQGLQJIHPDOHV7KHJORWWDOVWRSLVVWURQJO\ DVVRFLDWHGZLWK\RXQJHUVSHDNHUVDQGDVVXFKUHÀHFWVDFKDQJHLQSURJUHVV DIIHFWLQJWKHGLDOHFW1RWHDOVRWKDWWKH¿YHYDULDQWVFROOHFWLYHO\UHSUHVHQW

*HUDUG'RFKHUW\HWDO

DIDLUO\ZLGHGHJUHHRIYDULDWLRQLQSKRQHWLFIRUP9DULDWLRQLVIRXQGZLWK UHVSHFWWRYRLFLQJSORVLYLW\DQWHULRULW\DQGXVHRIODU\QJHDOFRQVWULFWLRQ 9DULDQWVRIW IRXQGLQRWKHUZRUGSRVLWLRQVGLIIHUVRPHZKDWIURPWKRVH XVHGLQZRUG¿QDOSUHYRFDOLFFRQWH[WV,QZRUGPHGLDOLQWHUVRQRUDQWSRVL WLRQIRUH[DPSOHSXWWLQJERWWOH DOO¿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¶VWKDW" RQO\WZRRIWKH ¿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¿YH YDULDQWV DYDLODEOH LQ ZRUG¿QDO SUHYRZHO SRVLWLRQ RQO\ WZR >V@ DQG >!@ DUH DOVR SHUPLVVLEOH DV UHDOLVDWLRQV RI ZRUG¿QDO W LQ SUHSDXV DO SRVLWLRQ 7KH RWKHU WKUHH YDULDQWV WKHUHIRUH UHÀHFW GLDOHFWVSHFL¿F PRU SKRSKRQRORJLFDO SURFHVVHV DQG PXVW EH OHDUQHG DV SDUW RI µ%DVH ¶ SKR QRORJLFDO NQRZOHGJH$OO ¿YH YDULDQWV DUH IXUWKHUPRUH VXEMHFW WR VRFLDOO\ GHWHUPLQHGYDULDELOLW\DFFRUGLQJWRDVSHDNHU¶VDJHFODVVDQGRUJHQGHU$ FKLOGJURZLQJXSLQRXUµZRUNLQJFODVV¶QHLJKERUKRRGLVWKHUHIRUHOLNHO\WR KHDUDOO¿YHYDULDQWVEHLQJXVHGE\DGXOWVEXWWRGLIIHUHQWGHJUHHVDFFRUGLQJ WRWKHVSHDNHU7KHFKLOGPXVWOHDUQWRLQWHUSUHWDOO¿YHIRUPVDVOLQJXLVWL FDOO\ HTXLYDOHQW DQG PXVW DOVR OHDUQ WR XVH WKH YDULDQWV DSSURSULDWHO\ LQ KLVKHURZQVSHHFKLQRUGHUWRFRQIRUPWRWKHVRFLROLQJXLVWLFQRUPVRIWKH FRPPXQLW\6XFKLQIRUPDWLRQFRQVWLWXWHVSDUWRIµ%DVH¶NQRZOHGJHLQRXU VFKHPDVKRZQLQ)LJXUH6LPLODUO\DQLQWHUORFNLQJFRPSOH[RILQIRUPD


WLRQPXVWEHOHDUQHGZLWKUHVSHFWWRDUWLFXODWLQJDQGXQGHUVWDQGLQJPHGLDO DQGSUHSDXVDOW VRPHRIZKLFKUHODWHVWRSKRQRORJLFDOFRQWH[WDQGVRPH RIZKLFKLVVRFLDOO\JRYHUQHG 7KHH[WHQWRIYDULDELOLW\DSSDUHQWZLWKUHVSHFWWRW SUHVHQWVE\QRPHDQV WKHRQO\GLI¿FXOWWDVNIRUWKHFKLOGOHDUQHU6LPLODUYDULDWLRQPXVWEHKDQGOHG IRUDFKLOGWRPDVWHUWKHDXGLWRU\DQGDUWLFXODWRU\LQIRUPDWLRQFKDUDFWHULVLQJ PDQ\RWKHUSKRQRORJLFDOXQLWVLQFOXGLQJS N U WK DQGVHYHUDOYRZ HOV:DWWDQG0LOUR\

)LJXUH 39&VWXG\GLVWULEXWLRQRISUHDVSLUDWHGYDULDQWVRISUHSDXVDOW LQ1HZ FDVWOH(QJOLVKPHDQ1 WRNHQVSHUJURXSGDWDGUDZQIURPZRUGOLVW LWHPVVRFLDOFODVVHVFRPELQHG

7KHGLDOHFWZHKDYHEHHQLQYHVWLJDWLQJLVQRWXQXVXDOLQWKLVUHJDUG$OO WKHHYLGHQFHDYDLODEOHVXJJHVWVWKDW669LVXELTXLWRXVZLWKLQVSHHFKFRP PXQLWLHV 7KLV UHQGHUV DOO WKH PRUH VWULNLQJ WKH IDFW WKDW ZH GR QRW KDYH DQDFFRXQWRUHYHQYHU\PDQ\GHWDLOHGGHVFULSWLRQVRIKRZWKLVDVSHFWRI VRXQGSDWWHUQLQJHPHUJHVLQSKRQRORJLFDODFTXLVLWLRQ

*HUDUG'RFKHUW\HWDO

$VVHVVLQJYDULDELOLW\LQLQSXWWRFKLOGUHQ :HWXUQQRZWRRXUDQDO\VLVRISKRQRORJLFDOYDULDWLRQLQ&'6,QSDUWWKLV LQYHVWLJDWLRQVRXJKWWRH[DPLQHWKHH[WHQWWRZKLFKWKHFKLOGUHQLQRXUVWXG\ GLGLQGHHGH[SHULHQFHWKHUDQJHRI669DSSDUHQWLQDGXOWWRDGXOWVSHHFKDV GHVFULEHGLQVHFWLRQ,WZDVDOVRXQGHUWDNHQZLWKDQRWKHUDLPLQPLQG QDPHO\ WR DVVHVV ZKHWKHU YDULDWLRQ LQ &'6 GLIIHUV IURP WKDW IRXQG LQ LQ WHUDGXOWVSHHFK,WLVZHOONQRZQIRUH[DPSOHWKDWIHDWXUHVRILQWRQDWLRQ V\QWD[VSHHFKUDWHDQGYRFDEXODU\DUHPRGL¿HGLQVSHHFKDGGUHVVHGWRFKLO GUHQ6QRZ +RZHYHUUHODWLYHO\OLWWOHDWWHQWLRQKDVEHHQSDLGWRWKH VHJPHQWDOSURSHUWLHVRI&'6DQGWKHZRUNWKDWKDVEHHQGRQHSDLQWVDUDWKHU LQFRQVLVWHQW SLFWXUH 6RPH UHVHDUFK VXJJHVWV WKDW &'6 LV FKDUDFWHULVHG E\ PRUHFDUHIXODUWLFXODWLRQWKDQLQWHUDGXOWVSHHFKHJ%HUQVWHLQ5DWQHU OHDGLQJWRWKHFRQFOXVLRQWKDWDWOHDVWZLWKUHVSHFWWRLWVIRUPDOSURSHUWLHV &'6 LV ³D VLPSOHU FOHDQHU FRUSXV IURP ZKLFK WR OHDUQ ODQJXDJH´ 6QRZ 2WKHUZRUNKRZHYHUKDVIRXQG&'6WREHQROHVVYDULDEOHWKDW LQWHUDGXOW VSHHFK HJ 6KRFNH\ DQG %RQG )RXONHV 'RFKHUW\ DQG :DWW SURYLGHDGHWDLOHGRYHUYLHZRIZRUNRQWKHSKRQRORJLFDOSURSHU WLHVRI&'6 $VSDUWRIWKH(69SURMHFWZHWKHUHIRUHDOVRDQDO\VHGWKHVHJPHQWDOSURS HUWLHVRIVSHHFKDGGUHVVHGWRFKLOGUHQ+HUHZHKLJKOLJKWVRPHRIWKH¿QG LQJVIRUZRUGPHGLDOW )RXONHVHWDO ,Q VHFWLRQ ZH QRWHG WKDW LQ LQWHUDGXOW VSHHFK WKHUH ZDV H[WUHPHO\ FRQVLVWHQWXVHRI>F@IRUDOOVSHDNHUVLQFDVXDOVW\OHDYHUDJLQJIRUWKH \RXQJZRUNLQJFODVVZRPHQ7KHIRUPZDVDOVRXVHGE\PRVWPHQLQWKH PRUHIRUPDOZRUGOLVWVW\OHEXWZRPHQLQZRUGOLVWUHDGLQJVWHQGHGWRSUH IHU>W@$QDO\VLVRIWKHPRWKHUV¶ VSHHFK WR WKH FKLOGUHQ LQ WKH (69 FRUSXV UHYHDOHGVKDUSGLIIHUHQFHVFRPSDUHGZLWKWKH¿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ÀXHQFHG YDULDELOLW\ 'LIIHUHQFHV LQ YDULDQW XVH DFURVV WKH VDPSOH RI PRWKHUV ZDV UHODWHG WR WKH JHQGHU RI WKHLU FKLOG 0RWK HUV RI ER\V XVHG VLJQL¿FDQWO\ PRUH >F@ WKDQ GLG PRWKHUV RI JLUOV7KH ODW WHUSURGXFHGDPXFKKLJKHUSURSRUWLRQRI>W@WKDQPRWKHUVRIER\V7DEOH

)LJXUH YDULDQWXVHIRUZRUGPHGLDOLQWHUVRQRUDQWW 1WRNHQV39&ZRPHQ 39& PHQ (69 PRWKHUV (69 IDWKHUV )RXONHV HW DO

*HUDUG'RFKHUW\HWDO

7DEOH 3HUFHQWDJH RFFXUUHQFH RI YDULDQWV LQ ZRUGPHGLDO SRVLWLRQ &'6 )RXONHVHWDO

PRWKHUVRIER\V PRWKHUVRIJLUOV

V

F

Q

$VVHVVLQJYDULDELOLW\LQFKLOGUHQ¶VSHUIRUPDQFH +DYLQJRXWOLQHGVRPHDVSHFWVRIWKHYDULDELOLW\ZKLFKFKLOGUHQIDFHLQWKH LQSXWWKH\KHDUZHWXUQQRZWRDGLVFXVVLRQRIWKHFKLOGUHQ¶VSHUIRUPDQFH $VH[SHFWHGWKHSHUIRUPDQFHRIFKLOGUHQLQWKHVWXG\ZDVLWVHOIKLJKO\YDUL DEOH +RZHYHU ZH GR QRW IRFXV KHUH RQ LQGLYLGXDO YDULDELOLW\ EXW RQ WKH RYHUDOO GLIIHUHQFHV \LHOGHG E\ RXU DQDO\VLV :H GLVFXVV UHVXOWV UHODWLQJ WR WKUHHDVSHFWVRIW SURGXFWLRQ,QHDFKFDVHWKHFHQWUDOLVVXHLVWRLQYHVWLJDWH WRZKDWH[WHQWWKHUHLVHYLGHQFHWKDWDSDUWLFXODUDVSHFWRI669LVHPHUJLQJ LQFKLOGUHQ¶VSHUIRUPDQFH

8VHRIJORWWDOYDULDQWVDFURVVFRQWH[WV :HGUHZDWWHQWLRQLQVHFWLRQVDQGWRVLJQL¿FDQWGLIIHUHQFHVDFURVV FRQWH[WV LQ WKH XVH RI YDULDQWV FRQWDLQLQJ ODU\QJHDOLVDWLRQ =F? DQG >!@ LQ ZRUGPHGLDO SRVLWLRQ SXWWLQJ =F? LV DOPRVW FDWHJRULFDO LQ DGXOWWRDGXOW VSHHFKEXWVLJQL¿FDQWO\OHVVIUHTXHQWLQVSHHFKWRFKLOGUHQ ,QZRUG¿QDO SUHYRZHOFRQWH[WSXWLQ ERWKODU\QJHDOLVHGIRUPVDUHSRVVLEOHEXWWKH\DUH YDULDEOHDFURVVVSHDNHUJURXSVDQGRYHUDOORFFXUVLJQL¿FDQWO\OHVVIUHTXHQWO\ WKDQLQZRUGPHGLDOFRQWH[WV,QSUHSDXVDOSRVLWLRQVSXW ODU\QJHDOLVHG WRNHQVDUHUDUH ,QOLJKWRIWKHVH¿QGLQJVIURPDGXOWVRXULQWHUHVWLQWKHFKLOGUHQ¶VSURGXF WLRQVLVWZRIROG)LUVWGRWKHFKLOGUHQVKRZVLJQVRIGLIIHUHQWLDWLQJWKHLUXVH RIJORWWDOIRUPVDFURVVWKHYDULRXVFRQWH[WV"6HFRQGO\ZKDWLVWKHFKLOGUHQ¶V UHDFWLRQWRWKHVWDUNGLIIHUHQFHVLQZRUGPHGLDOFRQWH[WVZKHUHSDWWHUQVLQ &'6DUHGLIIHUHQWIURPLQWHUDGXOWVSHHFK" 7KH¿QGLQJVIURPWKHFKLOGUHQ¶VGDWDDUHVKRZQLQ)LJXUHZLWKERWK W\SHV RI DGXOW GDWD VKRZQ IRU FRPSDULVRQ &KLOGUHQ¶V GDWD ZHUH FODVVL ¿HG RQ WKH EDVLV RI WKH DFRXVWLF SUR¿OLQJ DQDO\VLV 'RFKHUW\ DQG )RXONHV


:LWKUHVSHFWWRZRUGPHGLDOWRNHQV)LJXUHSURYLGHVHYLGHQFHWKDWWKH FKLOGUHQKDYHDGRSWHGSURGXFWLRQSDWWHUQVFORVHO\PDWFKLQJWKRVHRIPRWKHUV LQ&'67KHFKLOGUHQ¶VRYHUDOOXVHRIWRNHQVZLWKODU\QJHDOLVDWLRQDPRXQWHG WRFRPSDUHGZLWKWKHPRWKHUV¶DQGLVWKXVGLVWLQFWIURPWKHSDW WHUQW\SLFDORIDGXOWWRDGXOWVSHHFKZKHUH>F@LVVRGRPLQDQW 7KH UHODWLRQVKLS EHWZHHQ FRQWH[WV LV OHVV FOHDU EXW DJDLQ RIIHUV VRPH VXJJHVWLRQVWKDWWKHFKLOGUHQDUHGLIIHUHQWLDWLQJYDULDQWXVHDSSURSULDWHO\,Q ERWKPRGHVRIDGXOWVSHHFKWKHUHDUHPRUHJORWWDOWRNHQVLQZRUGPHGLDOSR VLWLRQWKDQWKHRWKHUWZRFRQWH[WV7KHFKLOGUHQGRQRWGLVSOD\WKHVDPHGLI IHUHQWLDWLRQEHWZHHQZRUGPHGLDODQGZRUG¿QDOSUHYRZHOSRVLWLRQVXVLQJ VOLJKWO\PRUHJORWWDOVLQWKHODWWHUFRQWH[WEXWZLWKWKLVGLIIHUHQFHIDLOLQJWR UHDFKVLJQL¿FDQFH+RZHYHUW LQZRUG¿QDOSRVLWLRQVLVGLIIHUHQWLDWHGGH SHQGLQJRQZKHWKHUWKHZRUGLVIROORZHGE\DYRZHORUDSDXVH7KHFKLOGUHQ SURGXFH VLJQL¿FDQWO\ IHZHU SUHSDXVDO JORWWDOV WKDQ WKH\ GR LQ SUHYRZHO FRQWH[WVWKXVSDUDOOHOLQJWKHSDWWHUQVIRUDGXOWV

)LJXUH 8VH RI JORWWDO WRNHQV DFURVV FRQWH[WV 39& ± DOO :& VSHDNHUV (69 ± PRWKHUV¶&'6(69FKLOGUHQ

*HUDUG'RFKHUW\HWDO

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

)LJXUH 3HUFHQW RFFXUUHQFH RI SUHDVSLUDWHG WRNHQV LQ ZRUG¿QDO SUHSDXVDO FRQ WH[WFKLOGUHQRUGHUHGE\DJHJLUOVWRWKHOHIWER\VWRWKHULJKW

)LJXUHGLVSOD\VGDWDIRUFKLOGUHQLQWKHFURVVVHFWLRQDOFRUSXVDUUDQJHG IURPOHIWWRULJKWLQRUGHURILQFUHDVLQJDJH7KHEDUVRIWKHKLVWRJUDPVKRZ WKH SURSRUWLRQ RI SUHSDXVDO WRNHQV FRQWDLQLQJ SUHDVSLUDWLRQ SURGXFHG E\ HDFK FKLOG 7KHUH LV FOHDUO\ D ZLGH UDQJH RI YDULDELOLW\ LQ WKH FKLOGUHQ¶V SHUIRUPDQFH FRLQFLGHQWDOO\ PDWFKLQJ WKH PRWKHUV¶ UDQJH RI WR +RZHYHU LW LV DOVR DSSDUHQW WKDW SUHDVSLUDWLRQ LV ZHOO HVWDEOLVKHG DFURVV WKH VDPSOH DV D ZKROH VKRZLQJ WKDW WKH PDMRULW\ RI WKH FKLOGUHQ KDYH DF


TXLUHGWKHFDSDFLW\WRUHSURGXFHWKHSDWWHUQWKH\H[SHULHQFHLQWKHLUDPELHQW LQSXW )LJXUHLOOXVWUDWHVWKHUHODWLRQVKLSEHWZHHQSUHDVSLUDWLRQXVHE\PRWK HUVDQGWKHLUFKLOGUHQ

)LJXUH 6FDWWHUSORWVKRZLQJSUHDVSLUDWLRQXVHGE\PRWKHUFKLOGSDLUV

7KHFKLOGUHQ¶VSURSRUWLRQDOXVHRISUHDVSLUDWLRQLVVFDOHGWRWKH[D[LVZLWK WKHPRWKHUV¶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¿FDQFH RIWKHFRUUHODWLRQLPSURYHVWRS +HQFHGHVSLWHDOOWKHRWKHUIDFWRUV PHGLDWLQJEHWZHHQDPELHQWODQJXDJHDQGDFKLOG¶VVSHHFKSHUIRUPDQFHRXU

*HUDUG'RFKHUW\HWDO

UHVXOWVVXJJHVWWKDWPRWKHUVZKRXVHUHODWLYHO\KLJKUDWHVRISUHDVSLUDWLRQ WHQGWRKDYHFKLOGUHQZKRSURGXFHUHODWLYHO\KLJKUDWHVRISUHDVSLUDWLRQ,WLV LPSRUWDQWWRDFNQRZOHGJHWKDWFKLOGUHQUHFHLYHLQSXWIURPPDQ\VRXUFHVQRW MXVWWKHLUPRWKHUVRIFRXUVH+RZHYHUWKH(69FKLOGUHQZHUHVHOHFWHGDF FRUGLQJWRWKHFULWHULRQWKDWWKHSDUHQWVZHUHWKHGRPLQDQWFDUHJLYHUVZKLFK LQPRVWFDVHVPHDQWWKDWWKHEXONRIWKLVUROHZDVXQGHUWDNHQE\WKHPRWKHU $V VXFK WKH PRWKHUV¶ UHFRUGHG GDWD SUHVXPDEO\ UHSUHVHQW D FKDUDFWHULVWLF VDPSOHRIWKHW\SHRISKRQHWLFLQSXWWRZKLFKWKHFKLOGUHQKDYHH[WHQVLYH H[SRVXUH:HPLJKWWKHUHIRUHLQWHUSUHWWKLV¿QGLQJDVLQGLFDWLYHRIOHDUQLQJ RISKRQHWLFGHWDLORQWKHSDUWRIWKHFKLOGUHQLQOLQHZLWKSDWWHUQVLQWKHLQSXW WKH\UHFHLYH )LJXUHVKRZVPRUHFOHDUO\WKHHIIHFWVRIDJHDQGJHQGHURQWKHXVHRI SUHDVSLUDWLRQVXJJHVWLQJWKDWWKHUHPD\EHLQFLSLHQWJHQGHUGLIIHUHQWLDWLRQ DPRQJWKHROGHUFKLOGUHQLQWKHFRUSXV VH[

I P

PHDQSUHDVSLUDWLRQ

FKLOGDJHJURXS\UVPRQWKV

)LJXUH 3HUFHQWRFFXUUHQFHRISUHDVSLUDWLRQLQSUHSDXVDOFRQWH[WE\DJHDQGVH[ RIFKLOG

,Q WKH ¿UVW WKUHH DJH JURXSV QR GLIIHUHQFHV ZHUH IRXQG LQ JLUOV¶ YHUVXV ER\V¶XVHRISUHDVSLUDWLRQ$WDJHKRZHYHUWKHJLUOVXVHVLJQL¿FDQWO\ PRUHSUHDVSLUDWLRQWKDQWKHER\V$VLPLODUGLIIHUHQFHLVIRXQGIRUWKHROGHVW FKLOGUHQQDUURZO\PLVVLQJVLJQL¿FDQFHDWWKHOHYHO:HDSSHDUWRKDYH HYLGHQFH WKHQ WKDW DSSURSULDWH VRFLROLQJXLVWLF PDUNLQJ PD\ EH HPHUJLQJ ZLWKUHVSHFWWRWKLVYDULDQWIROORZLQJWKHPRGHOZHKDYHVHHQLQWKHDGXOW


FRPPXQLW\FIVLPLODU¿QGLQJVE\5REHUWVDE IURPVWXGLHVRI FKLOGUHQDWVLPLODUDJHV 1RWHWKDWWKLVLVWKHRQO\FDVHRIVLJQL¿FDQWJHQGHU GLIIHUHQWLDWLRQ\LHOGHGE\RXUFKLOGUHQ¶VSHUIRUPDQFHGDWDDSRLQWZHUHWXUQ WRLQ6HFWLRQ

'LVFXVVLRQ ,QOLJKWRIRXUGDWDIURPFKLOGUHQDQGDGXOWVZHQRZUHWXUQWRWKHTXHVWLRQV ZHSRVHGDWWKHHQGRIVHFWLRQ

4XHVWLRQ 4XHVWLRQ DVNHG ³ZKDW LV WKH QDWXUH RI WKH 669 LQ WKH OLQJXLVWLF LQSXW FKLOGUHQ UHFHLYH"´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¿QGLQJVSUHVHQWHGLQVHFWLRQWRVRPHH[WHQWEHDURXWWKLVDVVXPS WLRQEXWLQRWKHUZD\VFDVWGRXEWRQLW7KHPRWKHUVGRDSSHDUWRPRGLI\ WKHLUOLQJXLVWLFEHKDYLRXUZKHQDGGUHVVLQJWKHLUFKLOGUHQDQGLQWKHFDVHRI ZRUGPHGLDOW WKHUHLVLQGHHGDVLJQL¿FDQWLQFUHDVHLQ>W@XVDJH+RZHYHU LQ FRPSDULVRQ ZLWK WKH VDPSOH RI W LQ LQWHUDGXOW VSHHFK IURP WKH 39& ZRPHQVHH)LJXUH WKHUHLVDFWXDOO\OHVVFRQVLVWHQF\LQ&'6DVIDUDVWKH FKRLFHRIW YDULDQWLQWKLVFRQWH[WLVFRQFHUQHG,WLVWKHUHIRUHIDUIURPFOHDU WKDWWKHPRWKHUVDUHµVLPSOLI\LQJ¶WKHVHWRIDOWHUQDQWVWKH\XVH7KHSKRQHWLF

*HUDUG'RFKHUW\HWDO

YDULDELOLW\LQ&'6LVGLIIHUHQWLQNH\UHVSHFWVIURPWKDWIRXQGLQ$'6EXWLW LVQRWQRWLFHDEO\VLPSOHUFI6KRFNH\DQG%RQG

4XHVWLRQ 7KLVODVW¿QGLQJOHDGVXVRQWRTXHVWLRQ ³KRZGRFKLOGUHQDFTXLUHWKH669 WKDWLVFKDUDFWHULVWLFRIWKHLUFRPPXQLW\"´7KH¿UVWUHVSRQVHWRPDNHLVWKDW FKLOGUHQFOHDUO\DUHDFTXLULQJVRPHRIWKH¿QHJUDLQHGSDWWHUQVRIUHDOLVDWLRQ ZKLFKDUHVWURQJO\VRFLDOO\PDUNHGLQWKHLUFRPPXQLW\7KHUHLVHYLGHQFHLQ RXUGDWDWKDWERWKER\VDQGJLUOVDUHODWFKLQJRQWRSDWWHUQVZKLFKDUHNQRZQ WREHSUHGRPLQDQWO\IHPDOHPDUNHUVZLWKLQWKHDGXOWFRPPXQLW\HJXVH RI SUHDVSLUDWLRQ 7KLV LV SHUKDSV QRW VXUSULVLQJ JLYHQ WKH FHQWUDO UROH RI WKHPRWKHUVLQFDULQJIRUWKHLUFKLOGUHQDQGLVLQDFFRUGZLWKWKHFODLPVRI /DERY WKDWYDULDEOHIHDWXUHVGRPLQDQWLQZRPHQ¶VVSHHFKKDYHWKH EHVW FKDQFH RI EHLQJ WUDQVPLWWHG WR WKH QH[W JHQHUDWLRQ 7KH IDFW WKDW ZH RQO\¿QGDVLQJOHFDVHRIJHQGHUGLIIHUHQWLDWLRQZLWKLQWKHSHUIRUPDQFHRI WKHFKLOGVXEMHFWVUHÀHFWVWKHOLNHOLKRRGWKDWVRFLROLQJXLVWLFLGHQWLW\HPHUJHV DWDODWHUVWDJHRIGHYHORSPHQWSUREDEO\KHDYLO\LQÀXHQFHGE\SHHUJURXS LQWHUDFWLRQV.HUVZLOO 7KHIDFWWKDWRXUVXEMHFWVDUHEHJLQQLQJE\DJH±WRUHSURGXFH¿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µZRUNHG RXW¶ WKH SURSHUWLHVRIWKHSKRQRORJLFDOV\VWHP,QWKLVUHVSHFWRXU¿QGLQJVVXSSRUW PRGHOVRIDFTXLVLWLRQZKLFKHPSKDVLVHWKHUROHRI³SKRQHWLFJURXQGLQJ´DV DQ³HQWU\SRLQWLQWROLQJXLVWLFVWUXFWXUH´9LKPDQDQG9HOOHPDQ VHHDOVR0DF1HLODJH-XVF]\N ,QUHODWLRQWR ZHPLJKWDOVRIRFXVRQWKHUROHRI&'6,IZHFRQVLGHU WKHVRUWVRINQRZOHGJHWKDWFKLOGUHQPXVWDFTXLUHLQWKHLUSKRQRORJLFDOGH YHORSPHQWDVGLVFXVVHGLQVHFWLRQ LWLVYLWDOWKDWFKLOGUHQEHFRPHDZDUH RI WKHVRUWV RI SKRQHWLFYDULDELOLW\ WKDW DUH SUHVHQW LQ WKH FRPPXQLW\ DQG WKDWDVSHFWVRIWKLVYDULDELOLW\DUHDVVRFLDWHGZLWKSDUWLFXODUW\SHVRIVSHDNHU


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¿QGLQJVGHPRQVWUDWLQJWKDWVXFKGLI IHUHQWLDWLRQLVSUHVHQWLQWKH¿QHSKRQHWLFGHWDLORI&'6

4XHVWLRQ :KDWDUHWKHLPSOLFDWLRQVRIWKHDQVZHUVWR DQG IRUTXHVWLRQ UHODWLQJ WR KRZ SKRQRORJLFDO NQRZOHGJH LV UHSUHVHQWHG LQ WKH FKLOG¶V DQG XOWLPDWHO\ WKH DGXOW¶V PLQG" ,Q 6HFWLRQ ZH FRQWUDVWHG WKH SUHGRPLQDQW YLHZ ZLWKLQ SKRQRORJLFDO WKHRU\ E\ ZKLFK 669 LV DW EHVW SUHVHQW RQ WKH PDUJLQVRIWKHRU\ZLWKDVWDQFHVXJJHVWLQJWKDWWKHLQWHUWZLQHGVWUDQGVRI OH[LFDODQGRWKHUW\SHVRIPHDQLQJHQFRGHGZLWKLQVRXQGSDWWHUQLQJPD\LQ UHDOLW\EHPRUHGLI¿FXOWWRSXOODSDUW7KHUHVXOWVRIRXUVWXG\SURYLGHVRPH VXSSRUWIRUWKLVODWWHUSRVLWLRQ:H¿QGHYLGHQFHRI669HPHUJLQJLQWDQGHP ZLWKRWKHUDVSHFWVRISKRQRORJLFDOOHDUQLQJ7KLVLVQRWWRVD\WKDWFKLOGUHQ KDYHDFTXLUHGDVRFLROLQJXLVWLFLGHQWLW\DWDJH±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nV@DQG >YnF@ZLWKDGULQN%XWWKHVDPHSURFHVVPD\DOVROHDGWRDQDVVRFLDWLRQ RIWKLVZRUGSURGXFHGZLWK>W@WRµPRWKHU¶DQGZLWKDJORWWDOIRUPWRµIDWKHU¶ WKXVVLPXOWDQHRXVO\HQFRGLQJDQRWKHUVWUDQGRIPHDQLQJ$VLQYHVWLJDWRUVRI

*HUDUG'RFKHUW\HWDO

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µQRQLQYDULDQFH¶ SUREOHP E\ HQFRGLQJ YDULDELOLW\ZLWKLQ UHSUH VHQWDWLRQ7KDWLVH[HPSODUVZLWKYDU\LQJSKRQHWLFVKDSHVPD\EHHQFRGHG LQUHVSHFWRIPDQ\RUDOORIWKHGLPHQVLRQVZLWKZKLFKWKH\DUHDVVRFLDWHG HJOH[LFDOPHDQLQJVSHDNHULGHQWLW\VLWXDWLRQDOFRQWH[WHWF 8QOLNHFRQ YHQWLRQDO PRGHOV RI UHSUHVHQWDWLRQ LW LV QRW QHFHVVDU\ WR SRVLW DOJRULWKPV IRU VHSDUDWLQJRXWWKHVHRYHUODLG VWUDQGV QRU WR VWULS RXW WKHµQRLVH¶ LQ WKH VWLPXOXV ZKLFK PDVNV WKH XQGHUO\LQJ LQYDULDQFH 7KXV H[HPSODU PRGHOV PD\RIIHUDSODXVLEOHPHDQVRIDFFRXQWLQJIRUWKHOHDUQLQJDQGHPHUJHQFH RIIHDWXUHVRI669DORQJVLGHRWKHUV\VWHPDWLFDVSHFWVRIVRXQGSDWWHUQLQJ,W LVIDLUWRVD\WKRXJKWKDWSURSRQHQWVRIH[HPSODUPRGHOVKDYHQRW\HWDG GUHVVHGLQDQ\GHSWKWKHDUHDVRIDFTXLVLWLRQRUVSHHFKSURGXFWLRQEXWVHH 3LHUUHKXPEHUW 1HYHUWKHOHVVWKHIDFWWKDWH[HPSODUPRGHOVRIIHUDQ µLQSULQFLSOH¶DFFRXQWRIWKHVRUWRISKRQRORJLFDOOHDUQLQJZHKDYHH[SORUHG LQWKLVFKDSWHUWRJHWKHUZLWKWKHIDFWWKDWWKH\DSSHDUWREHFRPSDWLEOHZLWK ¿QGLQJVRQSKRQHWLFSHUFHSWLRQLQLQIDQWV-XVF]\N-XVF]\NDQG/XFH GRHV RIIHU D FKDQQHO IRU IXWXUH LQYHVWLJDWLRQ ,Q SXUVXLQJ WKLV RQH VSHFL¿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µZRUNRXW¶WKDWWKHUHLVDV\VWHPWRWKHVRXQGSDWWHUQLQJ RIODQJXDJHZKLFKLVDNLQWRWKDWFRQFHLYHGRIE\PRVWSKRQRORJLVWV%XWLW LVHTXDOO\SRVVLEOHWKDWNQRZOHGJHRIWKLVVRUWFRXOGEHSUHVHQWDORQJVLGHWKH RWKHUVRXQGPHDQLQJDVVRFLDWLRQVZKLFKDUHSUHVHQWZLWKLQWKHOLVWHQHU¶VH[ SHULHQFH,QGHHGWKHHYLGHQFHZKLFKKDVEHHQDGGXFHGLQVXSSRUWRIH[HP SODUUHSUHVHQWDWLRQVODUJHO\EDVHGRQHIIHFWVRIPXOWLSOHVSHDNHUVGLIIHUHQW YRLFHVRQPHPRU\UHODWHGWDVNV VXJJHVWVWKDWLIDV\VWHPRIOH[LFDOSKRQR


ORJLFDOFRQWUDVWLVLQGHHGDFTXLUHGHYHQWXDOO\E\DQLQGLYLGXDOWKLVGRHVQRW HQWDLOWKDWLQGLYLGXDOMHWWLVRQLQJRWKHUNH\GLPHQVLRQVRIWKHLUH[SHULHQFHDV OLVWHQHUV

&RQFOXVLRQV 2XUVWXG\KDVDWWHPSWHGWREULGJHWKHZLGHJDSEHWZHHQRQWKHRQHKDQG ZRUN RQ SKRQRORJLFDO DFTXLVLWLRQ DQG WKH SKRQHWLFVSKRQRORJ\ LQWHUIDFH DQG RQ WKH RWKHU WKH LQVLJKWV RI VRFLROLQJXLVWLFV 8VLQJ D FRPELQDWLRQ RI DFRXVWLFDQGDXGLWRU\WHFKQLTXHVDQGDSSHDOLQJWRWKHUHVXOWVRIWZRVWXGLHV ZHKDYHIRXQGHYLGHQFHRIVRFLDOO\VWUXFWXUHGSDWWHUQVRIVSHHFKSURGXFWLRQ HPHUJLQJDORQJVLGHRWKHUV\VWHPDWLFSKRQHWLFEHKDYLRXUDOODWDVWDJHJHQHU DOO\FRQVLGHUHGWREHSULRUWRWKHIXOODFTXLVLWLRQRIDFRPSOHWHµSKRQRORJLFDO V\VWHP¶2XU¿QGLQJVDUHFRPSDWLEOHZLWKDQDFFRXQWRIDFTXLVLWLRQLQZKLFK FKLOGUHQDWWHPSWWRWXQHLQWRV\VWHPDWLFYDULDELOLW\LQWKHDPELHQWODQJXDJH LUUHVSHFWLYHRIZKHWKHULWLVOH[LFDOO\GHULYHGRUDUHÀ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¿QHGJURXSVRIVSHDNHUVPD\EH XQGHUSOD\LQJWKHVLJQL¿FDQFHRIWKHLQGLYLGXDODVDNH\IDFWRULQOLQJXLVWLF YDULDWLRQ0XIZHQH-RKQVWRQHDQG%HDQ6FREELHWKLVYROXPH $IXUWKHUSRLQWLVWKDWZKLOHZHKDYHIRFXVHGRXUGLVFXVVLRQRQWKHMX[WDSRVL WLRQRIOH[LFDOO\DQGVRFLDOO\VWUXFWXUHGVRXQGSDWWHUQLQJZHQHHGWRH[WHQG RXUDFFRXQWWRWDNHLQWRFRQVLGHUDWLRQWKHUROHRIIDFWRUVVXFKDVGLVFRXUVH

*HUDUG'RFKHUW\HWDO

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¶WVLPSO\DVN³&DQWKHFKLOGSURGXFHN"´5DWKHUZHPXVWDVNZKHWKHUD FKLOGFDQSURGXFHNZRUGLQLWLDOO\DQGZRUG¿QDOO\LQFOXVWHUVEHIRUHYRZ HOVDIWHUEDFNYRZHOVLQVWUHVVHGRQVHWVLQXQVWUHVVHGFRGDVDQGVRRQ

7RWKLVOLVWZHZRXOGDOVRDGGWKHULGHUWKDWFKLOGUHQPXVWOHDUQWRXQGHUVWDQG DQG UHSURGXFH VRFLROLQJXLVWLFDOO\ DSSURSULDWH YDULDQWV 7KH DYDLODELOLW\ RI GDWDIURPDGHWDLOHGVWXG\RIWKHDGXOWFRPPXQLW\VXFKDVWKDWDIIRUGHGE\ 39&LVDQREYLRXVVRXUFHRIKHOSLQDVVHVVLQJWKHWDUJHWVFKLOGUHQPXVWDLP IRULQSKRQRORJLFDODFTXLVLWLRQDVZHOODVLGHQWLI\LQJWKHSDUDPHWHUVRIYDUL DELOLW\LQWKRVHWDUJHWV )DLOXUHWRWDNHDFFRXQWRIVXFKIDFWRUVPD\OHDGWRWKHYLHZWKDWYDULDELO LW\LQFKLOGUHQ¶VSHUIRUPDQFHLVWKHUHVXOWRIDKLJKGHJUHHRILQFRQVLVWHQF\ 9DULDELOLW\LWVHOILVZLGHO\UHFRJQLVHGDVRQHRIWKHPRVWREYLRXVFKDUDFWHULV WLFVRIFKLOGUHQ¶VVSHHFK+RZHYHUVRPHLQYHVWLJDWLRQVRIFKLOGUHQ¶VVSHHFK KDYH WHQGHG WR WU\ WR UHGXFH WKLV YDULDELOLW\ FRQFHQWUDWLQJ RQ FKDUDFWHULV LQJWKHSDWWHUQVRIVLPSOL¿FDWLRQEHWZHHQFKLOGDQGDGXOWIRUPVVHHIXUWKHU 0DF1HLODJH 7KHDEXQGDQWYDULDELOLW\IRXQGLQFKLOGVSHHFKKDV RIWHQEHHQDWWULEXWHGWRLPSHUIHFWOHDUQLQJSK\VLFDOSURGXFWLRQFRQVWUDLQWV UDQGRP IDFWRUV DQGRU WKH RSHUDWLRQ RI XQLYHUVDO SKRQRORJLFDO UXOHV )RU LQVWDQFH JORWWDOLVDWLRQ DQG GHOHWLRQ RI W LQ FRGD SRVLWLRQ KDYH EHHQ DQDO \VHGDVWKHUHVXOWRIFKLOGUHQRSHUDWLQJDSKRQRORJLFDOUXOHRIVLPSOL¿FDWLRQ /RFNHII :KLOHVXFKIDFWRUVPD\LQGHHGSOD\DSDUWLQH[SODLQ LQJYDULDELOLW\RXUGDWDRIIHUHYLGHQFHWKDWYDULDELOLW\LQFKLOGVSHHFKLVDW OHDVWWRVRPHH[WHQW OLQNHGWRYDULDELOLW\LQDGXOWVSHHFK7KDWLVFKLOGUHQ¶V YDULDELOLW\ LV LQ SDUW VWUXFWXUHG DQG PRUHRYHU LW LV VWUXFWXUHG LQ OLQH ZLWK WKHLQSXWWKH\UHFHLYH2XU¿QGLQJVWKHUHIRUHRIIHUVXSSRUWWRRWKHUVWXGLHV ZKLFKVKRZHYLGHQFHIRUGHWDLOHGOHDUQLQJEDVHGRQVSHFL¿FDVSHFWVRILQ SXWRIIHDWXUHVLQRWKHUDUHDVRIWKHJUDPPDUHJ6QRZ 7KHFKLOG¶V


WDVNLQDFTXLULQJSKRQRORJ\FDQQRWWKHUHIRUHEHDGHTXDWHO\GHVFULEHGDVWKH OHDUQLQJRIDODQJXDJHVSHFL¿FVHWRIFRQWUDVWV7KHWDVNLVLQIDFWPXFKPRUH FRPSOLFDWHG$VVHVVLQJ WKDW WDVN GHPDQGV DQ XQGHUVWDQGLQJ RI WKH SDUDP HWHUVDQGFRQVWUDLQWVRQYDULDELOLW\LQWKHDPELHQWGLDOHFW 5HWXUQLQJWRWKHRYHUDUFKLQJTXHVWLRQVHWRXWLQ6HFWLRQRXU¿QGLQJV KLJKOLJKWWKHVRFLDOHPEHGGLQJRISKRQRORJLFDOOHDUQLQJDFTXLVLWLRQLVSDUW O\DERXWOHDUQLQJWKHVRXQGSDWWHUQVIRUOH[LFDOFRQWUDVWEXWLWLVDOVRDERXW OHDUQLQJWREHDPHPEHURIRQH¶VIDPLO\DQGEURDGHUFRPPXQLW\DQGWREH DEOHWRFRPPXQLFDWHHIIHFWLYHO\ZLWKLQWKRVHJURXSVLHOHDUQLQJWKHVRFLDO PHDQLQJHPEHGGHGZLWKLQWKHDPELHQWVRXQGSDWWHUQV 2XUXQGHUVWDQGLQJ RIWKLVODWWHUSDUWRIWKHWDVNUHPDLQVVFDQW\WRVD\WKHOHDVWDQGLVQRWIDFLOL WDWHGE\WKHRUHWLFDOIUDPHZRUNVZKLFKDVDPDWWHURISULQFLSOHUXOHWKLVRXW RIVFRSH

1RWHV

7KLVLQYHVWLJDWLRQKDVEHHQVXSSRUWHGE\WKH8.(FRQRPLF 6RFLDO5HVHDUFK &RXQFLO±DZDUGV552XUWKDQNVWR%DUEDUD'RGG*KD GD.KDWWDE-RKQ/RFDO/HVOH\0LOUR\-LP6FREELHDQG-DQH6WXDUW6PLWKIRU KHOSIXOGLVFXVVLRQVDQGWR$OLFH)DEHUDQG%LOO/DERYIRUWKHLUFRPPHQWVRQWKH FKDSWHU:HDUHDOVRJUDWHIXOWRWKH¿HOGZRUNHUVIURPWKH1HZFDVWOH3DHGLDWULFV 6SHHFK /DQJXDJH7KHUDS\VHUYLFHDQGWRWKHSDUWLFLSDWLQJIDPLOLHVZKRJDYH IUHHO\RIWKHLUWLPH 6HJPHQWDOWUDQVFULSWLRQLVXVHGKHUHIRUWKHVDNHRILOOXVWUDWLRQ,WLVQRWLQWHQGHG WRVLJQDODQDSULRULDVVXPSWLRQWKDWHLWKHUDGXOWVRUFKLOGUHQQHFHVVDULO\RSHUDWH ZLWKDSXUHO\VHJPHQWDOSKRQRORJ\ 7KHWHUPVµPLGGOHFODVV¶DQGµZRUNLQJFODVV¶DUHXVHGKHUHDVFRQYHQLHQWODEHOV WRGHVFULEHWZRFRPPXQLWLHVZLWKLQWKHFLW\WKDWDUHFOHDUO\GLIIHUHQWLDWHGDORQJ DQXPEHURIVRFLRHFRQRPLFSDUDPHWHUVLQFOXGLQJKRXVLQJHPSOR\PHQWUDWHV DQGW\SHRIRFFXSDWLRQ ,Q39&YDULDWLRQZDVDQDO\VHGXVLQJORJOLQHDUPRGHOVIRUIXUWKHUGHWDLOVVHH 'RFKHUW\HWDO :LWKLQ(69DUDQJHRIVWDWLVWLFDOSURFHGXUHVZHUHXVHG LQFOXGLQJOLQHDUPRGHOVDQGWKHLGHQWL¿FDWLRQRIGLVMRLQWFRQ¿GHQFHLQWHU YDOV$OODQDO\VHVZHUHGHVLJQHGWRSURYLGHDFRQVHUYDWLYHPHDQVRILGHQWLI\LQJ GLIIHUHQFHVDQGUHODWLRQVKLSVEHWZHHQJURXSVRIVSHDNHUVLQWKHFRQWH[WRIYDU\ LQJVDPSOHVL]HVIURPLQGLYLGXDOVSHDNHUVDQGWKHEHWZHHQVSHDNHUYDULDELOLW\ FKDUDFWHULVWLFRIFKLOGVSHHFK)XUWKHUGHWDLOVDUHJLYHQLQ)RXONHVHWDO 'LIIHUHQFHVUHIHUUHGWRDVVLJQL¿FDQWZHUHIRXQGWREHVRDWDQDOSKDOHYHORIDW OHDVW S:H DUH JUDWHIXO WR 'U7RP &KDGZLFN RI WKH 8QLYHUVLW\ RI 1HZ

*HUDUG'RFKHUW\HWDO

FDVWOH6FKRRORI3RSXODWLRQDQG+HDOWK6FLHQFHVIRUKLVVXSSRUWZLWKWKLVDVSHFW RIRXUVWXG\ 'DWDDUHVKRZQIRUFKLOGUHQ2QHRIWKHUHFRUGLQJVRIWKHPRWKHUVLQWKHFURVV VHFWLRQDOVWXG\SURYHGXQVXLWDEOHIRUDQDO\VLV

5HIHUHQFHV %HUQVWHLQ5DWQHU1DQ 3DWWHUQV RI YRZHO PRGL¿FDWLRQ LQ PRWKHUFKLOG VSHHFK -RXUQDO RI &KLOG/DQJXDJH± &KDPEHUV-DFN 'LDOHFWDFTXLVLWLRQ/DQJXDJH± &ROHPDQ-RKQ 'LVFRYHULQJWKHDFRXVWLFFRUUHODWHVRISKRQRORJLFDOFRQWUDVWV-RXUQDO RI3KRQHWLFV± 'RFKHUW\*HUDUGDQG3DXO)RXONHV 'HUE\DQG1HZFDVWOHLQVWUXPHQWDOSKRQHWLFVDQGYDULDWLRQLVWVWXGLHV ,Q 3DXO )RXONHV DQG *HUDUG 'RFKHUW\ HGV 8UEDQ 9RLFHV ± /RQGRQ$UQROG 'RFKHUW\*HUDUG3DXO)RXONHV%DUEDUD'RGGDQG/HVOH\0LOUR\ 7KH HPHUJHQFH RI VWUXFWXUHG YDULDWLRQ LQ WKH VSHHFK RI 7\QHVLGH LQIDQWV)LQDOUHSRUWWR(65&IRUDZDUG5 'RFKHUW\*HUDUG3DXO)RXONHV-DPHV0LOUR\/HVOH\0LOUR\DQG'DYLG:DOVKDZ 'HVFULSWLYHDGHTXDF\LQSKRQRORJ\DYDULDWLRQLVWSHUVSHFWLYH-RXU QDORI/LQJXLVWLFV± (FNHUW3HQHORSH /LQJXLVWLF9DULDWLRQDV6RFLDO3UDFWLFH2[IRUG%ODFNZHOO (GZDUGV-DQ &RPPHQWDU\/H[LFDOUHSUHVHQWDWLRQVLQDFTXLVLWLRQ,Q0LFKDHO%URH DQG-DQHW3LHUUHKXPEHUWHGV $FTXLVLWLRQDQGWKH/H[LFRQ3DSHUV LQ /DERUDWRU\ 3KRQRORJ\ ± &DPEULGJH &DPEULGJH 8QL YHUVLW\3UHVV )RXONHV3DXO*HUDUG'RFKHUW\DQG'RPLQLF:DWW 3KRQRORJLFDO YDULDWLRQ LQ FKLOGGLUHFWHG VSHHFK /DQJXDJH ± +XPH(OL]DEHWKDQG.HLWK-RKQVRQHGV 7KH5ROHRI6SHHFK3HUFHSWLRQLQ3KRQRORJ\1HZD+@ IRU ELE 12&2'$ DQG &255&RGD DSSHDUIDLUO\ORZLQWKHRYHUDOOUDQNLQJKRZHYHULQGLFDWLQJWKDWERWKDUH IUHTXHQWO\YLRODWHG)XUWKHUPRUHWKHUHLVDZLGHUDQJHLQWKHFKLOGUHQ¶VUDQN LQJVRI12&2'$±IURPQHDUWKHWRSRIWKHKLHUDUFK\UDUHO\YLRODWHG WRQHDU WKHERWWRPUDUHO\VDWLV¿HG ,QIDFWWZRRIWKHFKLOGUHQ0ROO\DQG6HDQ DFWXDOO\UDQN&255&RGD VRPHZKDWKLJKHUWKDQ12&2'$WKH\SURGXFHFR GDVZKHQHYHUWKH\DUHFDOOHGIRU,QDGGLWLRQFHUWDLQIDLWKIXOQHVVFRQVWUDLQWV VXFKDV&255216(7 DUHYHU\UDUHO\YLRODWHGLQ(QJOLVKUHJDUGOHVVRIWKH PDUNHGQHVV RI WKH UHVXOWLQJ IRUP HJ D ZRUG ZLWK D YRZHO RQVHW )XU WKHUPRUHHYHQVRPHLQGLYLGXDOIDLWKIXOQHVVFRQVWUDLQWVWKDWDUHVRPHWLPHV YLRODWHG VXFK DV &255216(7 &2556!@ LQWKHWDU JHWWKHVHQRQVDOLHQWRQVHWVPD\KDYHLQÀXHQFHGWKHPWRGRZQJUDGH216(7 ,QVXPPDU\HDFKFKLOGVSHDNHURIHDFKODQJXDJHVWXGLHGSURYLGHGHYLGHQFH DJDLQVWWKH0DUN!!)DLWKK\SRWKHVLV*HQHUDOWUHQGVDOVRZHUHVHHQDFURVV FKLOGUHQE\ODQJXDJH 2XU ¿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ÀXHQFHVRIVHJPHQWDOFRQVWUDLQWV)RUH[DPSOH'HERUDK¶VSUR GXFWLRQVRINLWW\ZLWKD>VN@RU>MN@PHGLDOFRQVRQDQWFOXVWHUHJDV>M'MNK@ FRXOGUHÀHFWDIDLWKIXOQHVVFRQVWUDLQWUHTXLULQJWKDWWKHODWHUDOIHDWXUHRIWKH PHGLDO ÀDS EH SUHVHUYHG (YHQ LI VR WKH IDFW UHPDLQV WKDW 'HERUDK DOVR SURGXFHGWKLVVDPHZRUGZLWKRXWDPHGLDOFOXVWHUXSRQRFFDVLRQHJDV >M*KYG@ 7KHUHIRUHWKHSXUSRUWHGIDLWKIXOQHVVFRQVWUDLQWZKDWHYHULWPD\ KDYHEHHQDSSOLHGYDULDEO\LHJUDGLHQWO\ WRWKLVZRUG (YLGHQFHLQWKHVHUHVXOWVIRUJUDGLHQWFRQVWUDLQWUDQNLQJDOVRLQFOXGHHYL GHQFHDJDLQVWDUWLFXODWRU\OLPLWDWLRQVDVDQDGHTXDWHH[SODQDWLRQIRUGLVFUHS DQFLHVEHWZHHQWDUJHWIRUPVDQGFKLOGIRUPV,QPDQ\FDVHVWKHFKLOGUHQ¶V HUURUV FRQVWLWXWHG PRUH GLI¿FXOW SURGXFWLRQV WKDQ UHTXLUHG E\ WKH WDUJHW 6RPHWKLQJRWKHUWKDQPRWRUGLI¿FXOW\LVFRPSHOOLQJWKHFKLOGWRSURGXFHD GLIIHUHQW PRUH DUWLFXODWRULO\ FKDOOHQJLQJ IRUP 3KRQRORJL]DWLRQ LH JHQ HUDOL]DWLRQ RI JURXQGHG FRQVWUDLQWV EH\RQG WKHLU PRWLYDWLQJ ZRUG IRUPV VHHPVWKHPRVWOLNHO\H[SODQDWLRQ$QRWKHUSRVVLEOHH[SODQDWLRQLVWKDWWKH FKLOGKDYLQJEHHQH[SRVHGWRV\VWHPDWLFDOO\YDULDEOHIRUPVRIWKHWDUJHWV KDVVWRUHGXQGHUO\LQJIRUPVWKDWLQFOXGHVXFKJUDGLHQWLQIRUPDWLRQDQGWKDW KHUKLVRXWSXWVUHÀHFWWKRVHYDULDEOHWDUJHWV,WKDVEHHQDVVXPHGHJE\ 'LQQVHQ HW DO WKDW WKH FKLOG¶V XQGHUO\LQJ UHSUHVHQWDWLRQV RI ZRUGV

6KHOOH\9HOOHPDQ

PDWFKRQHFDQRQLFDOVXUIDFHDGXOWIRUP7KXVDOOFKLOGUHQOHDUQLQJWKHVDPH ODQJXDJH DUH SUHVXPHG WR KDYH WKH VDPH LQYDULDQW ZRUG WDUJHWV7KLV DV VXPSWLRQLJQRUHVWKHFKLOG¶VSHUFHSWXDOH[SHULHQFHRIYDULDEOHDGXOWSURGXF WLRQV'RFKHUW\HWDOWKLVYROXPH)RXONHV'RFKHUW\DQG:DWW0DW WKHZV6FREELHWKLVYROXPH ,IFRQVWUDLQWVXQGHUO\LQJIRUPVRUERWK DUH LQGXFHG EDVHG XSRQ VWDWLVWLFDO OHDUQLQJ IURP WKH DPELHQW RYHUW IRUPV RUEDVHGXSRQWKHFKLOG¶VRZQPRWRULFH[SHULHQFHRUERWKWKHQYDULDELOLW\ VKRXOGEHDKDOOPDUNRIWKHFKLOG¶VRXWSXWDVLWZLOOKDYHSHUYDGHGKLVKHU H[SHULHQFHRIERWKW\SHV7KHUHVXOWVRIWKLVVWXG\DQGWKRVHRI9LKPDQDQG FROOHDJXHVWKLVYROXPH 'RFKHUW\DQGFRDXWKRUVWKLVYROXPH DQG6FRE ELH WKLV YROXPH FRQ¿UP WKLV DVVXPSWLRQ *UDGLHQW FRQVWUDLQW UDQNLQJV DSSOLHGWRLQYDULDQWWDUJHWVDQGVWULFWO\RUGHUHGFRQVWUDLQWUDQNLQJVDSSOLHG WRV\VWHPDWLFDOO\YDULDQWWDUJHWVUHÀHFWLQJDPELHQWODQJXDJHSDWWHUQV DUH DOWHUQDWLYH PHDQV RI PRGHOLQJ WKLV UHDOLW\ WKH\ PD\ EH HPSLULFDOO\ XQGLI IHUHQWLDEOH 7KXV9HOOHPDQDQG9LKPDQKDYHVKRZQWKDWFKLOGUHQLQWKHYHU\HDUO\ VWDJHVRIZRUGSURGXFWLRQKDYHDOUHDG\PRYHGRQIURPSKRQRORJLFDOXQLYHU VDOVLQWZRUHVSHFWV ± WKH\DOUHDG\VKRZDKLJKGHJUHHRIIDLWKIXOQHVVWRLQGLYLGXDOZRUGIRUPV LWHPOHDUQLQJ DQG ± WKHLU VHWV RI PDUNHGQHVV FRQVWUDLQWV KDYH EHHQ DOWHUHG DV ZHOO DV UH UDQNHG WRPDWFKWKHWHQGHQFLHVRIWKHODQJXDJHVWRZKLFKWKH\KDYHEHHQ H[SRVHG

,Q VXPPDU\ YDULDWLRQ LV DOUHDG\ D KDOOPDUN RI WKH YHU\ HDUOLHVW ZRUG SURGXFWLRQV DQG WKLV YDULDWLRQ LV V\VWHPDWLF DQG QRW PHUHO\ WKH UHVXOW RI SRRUDUWLFXODWRU\FRQWURO%RWKDEVWUDFWLRQDZD\IURPH[DPSODUVDQGLWHP OHDUQLQJSOD\UROHVLQLQGLYLGXDOV¶SKRQRORJLFDOV\VWHPV%RWKOLQJXLVWLFDQG VRFLRORJLFDO YDULDEOHV LQÀXHQFH WKH FKLOG¶V SURGXFWLRQ LQ V\VWHPDWLF ZD\V 2SWLPDOLW\ 7KHRU\ DV RULJLQDOO\ FRQFHLYHG ZLWK ERWK LQYDULDQW WDUJHWV LQ SXWV DQGVWULFWO\UDQNHGFRQVWUDLQWVFDQQRWEHXVHGWRPRGHOWKLVYDULDWLRQ +RZHYHUDPRGHORI2SWLPDOLW\7KHRU\WKDWDOORZVIRUHLWKHUYDULDQWWDUJHWV RUJUDGLHQWO\UDQNHGFRQVWUDLQWVDQGIRUOHDUQHGFKLOGVSHFL¿FDPELHQWGLD OHFWEDVHGPDUNHGQHVVFRQVWUDLQWVZRXOGEHDSSURSULDWHIRUWKLVSXUSRVH

9DULDWLRQLQGHYHORSLQJSKRQRORJLHV&RPPHQWV

5HIHUHQFHV $LWFKLVRQ-HDQDQG6KXOD&KLDW 1DWXUDOSKRQRORJ\RUQDWXUDOPHPRU\"7KHLQWHUDFWLRQEHWZHHQSKR QRORJLFDOSURFHVVHVDQGUHFDOOPHFKDQLVPV/DQJXDJHDQG6SHHFK ± %HUQKDUGW%DUEDUD+DQG-RVHSK36WHPEHUJHU +DQGERRNRI3KRQRORJLFDO'HYHORSPHQWIURPWKH3HUVSHFWLYHRI&RQ VWUDLQW%DVHG1RQOLQHDU3KRQRORJ\6DQ'LHJR$FDGHPLF3UHVV %RHUVPD3DXO 2QWKHQHHGIRUDVHSDUDWHSHUFHSWLRQJUDPPDU06WKHVLV8QLYHU VLW\RI$PVWHUGDP %RHUVPD3DXODQG%UXFH3+D\HV (PSLULFDOWHVWVRIWKHJUDGXDOOHDUQLQJDOJRULWKP/LQJXLVWLF,QTXLU\ ± %RHUVPD3DXODQG&ODUD/HYHOW *UDGXDO FRQVWUDLQWUDQNLQJ OHDUQLQJ DOJRULWKP SUHGLFWV DFTXLVLWLRQ RUGHU,Q(YH9&ODUNHG 3URFHHGLQJVRIWKH7KLUWLHWK&KLOG/DQ JXDJH5HVHDUFK)RUXP9ROXPH±6WDQIRUG&6/,3XEOL FDWLRQV %R\VVRQ%DUGLHV%HQHGLFWHGHDQG0DULO\Q09LKPDQ $GDSWDWLRQ WR ODQJXDJH (YLGHQFH IURP EDEEOLQJ DQG ¿UVW ZRUGV LQ IRXUODQJXDJHV/DQJXDJH± 'DYLGVRQ/LVD3DXO6PROHQVN\DQG3HWHU:-XVF]\N 7KHLQLWLDODQG¿QDOVWDWHV7KHRUHWLFDOLPSOLFDWLRQVDQGH[SHULPHQWDO H[SORUDWLRQV RI ULFKQHVV RI WKH EDVH ,Q 5HQp .DJHU -RH 3DWHU DQG :LP=RQQHYHOGHGV&RQVWUDLQWVLQ3KRQRORJLFDO$FTXLVLWLRQ&DP EULGJH8QLYHUVLW\3UHVV 'HPXWK.DWKHULQH 0DUNHGQHVVDQGWKHGHYHORSPHQWRISURVRGLFVWUXFWXUH,Q-LOO%HFN PDQHG 3URFHHGLQJVRIWKH1RUWK(DVWHUQ/LQJXLVWLF6RFLHW\9RO XPH±$PKHUVW0$*/6$8QLYHUVLW\RI0DVVDFKXVHWWV 7KHSURVRGLFVWUXFWXUHRIHDUO\ZRUGV,Q-DPHV/0RUJDQDQG.DWK HULQH 'HPXWK HGV 6LJQDO WR 6\QWD[ %RRWVWUDSSLQJ )URP 6SHHFK WR*UDPPDULQ(DUO\$FTXLVLWLRQ±0DKZDK1-/DZUHQFH (UOEDXP$VVRFLDWHV 'LQQVHQ'DQLHO$/DXUD:0F*DUULW\.DWKOHHQ02¶&RQQRUDQG.LPEHUO\$ %6ZDQVRQ 2QWKHUROHRIV\PSDWK\LQDFTXLVLWLRQ/DQJXDJH$FTXLVLWLRQ±

6KHOOH\9HOOHPDQ

'RFKHUW\*HUDUG-3DXO)RXONHV-HQQ\7LOORWVRQDQG'RPLQLF:DWW WKLVYRO 2QWKHVFRSHRISKRQRORJLFDOOHDUQLQJ,VVXHVDULVLQJIURPVRFLDOO\ VWUXFWXUHGYDULDWLRQ )HH(-DQH 6\OODEOHVWUXFWXUHDQGPLQLPDOZRUGV,Q%DUEDUD+%HUQKDUGW-RKQ *LOEHUW DQG 'DYLG ,QJUDP HGV 3URFHHGLQJV RI WKH 8%& ,QWHUQD WLRQDO &RQIHUHQFH RQ 3KRQRORJLFDO $FTXLVLWLRQ ± 6RPHUYLOOH 0$&DVFDGLOOD3UHVV )RXONHV3DXO*HUDUG-'RFKHUW\DQG'RPLQLF:DWW 7UDFNLQJ WKH HPHUJHQFH RI VRFLRSKRQHWLF YDULDWLRQ /HHGV :RUNLQJ 3DSHUVLQ/LQJXLVWLFVDQG3KRQHWLFV± *QDQDGHVLNDQ$PDOLD( 0DUNHGQHVVDQGIDLWKIXOQHVVFRQVWUDLQWVLQFKLOGSKRQRORJ\06WKH VLV8QLYHUVLW\RI0DVVDFKXVHWWV$PKHUVW *ROGLQJHU6WHSKHQ' (FKRHVRIHFKRHV"$QHSLVRGLFWKHRU\RIOH[LFDODFHVV3V\FKRORJLFDO 5HYLHZ± +D\HV%UXFH3 3KRQHWLFDOO\ GULYHQ SKRQRORJ\ 7KH UROH RI RSWLPDOLW\ WKHRU\ DQG LQGXFWLYH JURXQG ,Q 0LFKDHO 'DUQHOO (GLWK 0RUDYVFLN 0LFKDHO 1RRQDQ)UHGHULFN1HZPH\HUDQG.DWKOHHQ:KHDWO\HGV )RUPDO LVPDQG)XQFWLRQDOLVPLQ/LQJXLVWLFV*HQHUDO3DSHUV±$P VWHUGDP-RKQ%HQMDPLQV *UDGLHQWZHOOIRUPHGQHVVLQRSWLPDOLW\WKHRU\,Q-RVW'HNNHUV)UDQN YDQGHU/HHXZDQG-HURHQYDQGH:HLMHUHGV 2SWLPDOLW\7KHRU\ 3KRQRORJ\6\QWD[DQG$FTXLVLWLRQ±2[IRUG2[IRUG8QLYHU VLW\3UHVV -RKQVRQ(OL]DEHWK.DQG3HWHU:-XVF]\N :RUGVHJPHQWDWLRQE\PRQWKROGV:KHQVSHHFKFXHVFRXQWPRUH WKDQVWDWLVWLFV-RXUQDORI0HPRU\DQG/DQJXDJH± -RKQVRQ.HLWK 6SHHFKSHUFHSWLRQZLWKRXWVSHDNHUQRUPDOL]DWLRQ,Q.HLWK-RKQVRQ DQG-RKQ:0XOOHQQL[HGV 7DONHU9DULDELOLW\LQ6SHHFK3URFHVV LQJ±6DQ'LHJR$FDGHPLF3UHVV .HKRH0DUJDUHWDQG&DURO6WRHO*UDPPRQ 7KHDFTXLVLWLRQRISURVRGLFVWUXFWXUH$QLQYHVWLJDWLRQRIFXUUHQWDF FRXQWVRIFKLOGUHQ¶VSURVRGLFGHYHORSPHQW/DQJXDJH± /HYHOW&ODUDDQG5XEHQYDQGH9LMYHU 6\OODEOHW\SHVLQFURVVOLQJXLVWLFDQGGHYHORSPHQWDOJUDPPDUV3DSHU SUHVHQWHGDW7KLUG%LDQQXDO8WUHFKW3KRQRORJ\:RUNVKRS8WUHFKW WKH1HWKHUODQGV

9DULDWLRQLQGHYHORSLQJSKRQRORJLHV&RPPHQWV

0DWWKHZV%HQMDPLQ 2QYDULDELOLW\DQGWKHDFTXLVLWLRQRIYRZHOVLQQRUPDOO\GHYHORSLQJ 6FRWWLVKFKLOGUHQ±PRQWKV 3DSHUSUHVHQWHGDW(LJKWK&RQIHU HQFHRQ/DERUDWRU\3KRQRORJ\RX@%UDFNHWVVKRZSURVRGLFERXQGDU\ 99DUHXQGHUOLQHGDQGIRFXVLVVKRZQE\VPDOOFDSV $ % &

PH PH]p 7KDVRX HWRLPiVR pQDQyVWLPR@:GX]iNL ZLOOIRU\RXSUHSDUHVRQHWDVW\ RX]RGLPZLWKWLGELWV µ,¶OOSUHSDUHWDVW\RX]RZLWKWLGELWV¶ $Qp[HLPH]p QyVWLPR@LSX]iNL StQRXQ yORL ,I KDV WLGELWVWDVW\ RX]RGLPGULQNSDOO µ,IWKHWLGELWVDUHWDVW\HYHU\RQHGULQNVRX]R¶ 7KD IiR PH]HGiNL DQtQDLQyVWLPR@,38]iNL GHQStQR :LOOHDWVWLGELWVGLPLI LV WDVW\ RX]RGLPQRW GULQNV µ,¶OOKDYHWLGELWVLIWKH\¶UHWDVW\,ZRQ¶WGULQNRX]R¶

' ( ) *

0DU\%DOWD]DQL 7KDVRX HWRLPDVR pQDQyVWLPRX]iNL GHQERUyQDVXDUQLWKy ZLOOIRU\RXSUHSDUHVRQHWDVW\ RX]RGLPQRWFDQ WR UHIXVHV µ,:,//SUHSDUHWDVW\RX]RIRU\RX,FDQ¶WUHIXVH\RX¶ 7KDVRX HWRLPiVR pQDQyVWLPRX]iNL PH PH]H ZLOOIRU\RXSUHSDUHVRQHWDVW\ RX]RGLPZLWKWLGELWV µ,¶OOSUHSDUHWDVW\RX]R:,7+7,'%,76IRU\RX¶ 7KDVRX HWRLPiVR pQDQRVWLPRX]iNL y[LVDQWLV$QQDV ZLOOIRU\RXSUHSDUHVRQHWDVW\ RX]RGLPQRWOLNH$QQD¶V µ,¶OOSUHSDUH7$67L@ >H@ >D@ >R@ >X@

6ORZ

)DVW

$YHUDJH

)LJXUHVKRZVGXUDWLRQVIURPWKHSUHVHQWVWXG\LQVWULSHGEDUVDQGLQ )RXUDNLV%RWLQLVDQG.DWVDLWLLQVROLGEDUVYRZHOSDLUGXUDWLRQZDVFDOFX ODWHGE\DGGLQJWKHDYHUDJHVIRUVLQJOHYRZHOVIURP7DEOH 0HDQGXUDWLRQV DUHSURYLGHGXQGHUWKHJUDSK,WLVQRWFOHDUKRZVLPLODUSURVRGLFFRQWH[WVLQ WKHWZRVWXGLHVDUHEHFDXVHQRLQWRQDWLRQDOUHDOL]DWLRQGHWDLOVZHUHSURYLGHG LQWKDWSDSHU%HFDXVHRIWKLVDYHUDJHVDFURVVDOOSURVRGLFFRQGLWLRQVZHUH WDNHQ 7KHDYHUDJH99 GXUDWLRQ LQ WKH SUHVHQW VWXG\ LV DOPRVW WKH VDPH DV WKHVXPRIWZRVLQJOH³W\SLFDOÝRZHOV2IFRXUVHDVWKHHUURUEDUVVKRZ

0DU\%DOWD]DQL

GXUDWLRQVIURPGLIIHUHQWSURVRGLFSRVLWLRQVZLWKLQHDFKYRZHOSDLUYDU\FRQ VLGHUDEO\LQVRPHSURVRGLFFRQWH[WV99GXUDWLRQLVDVVKRUWDVDVLQJOH YRZHODQGLQVRPHLWLVPXFKORQJHUWKDQWZRVLQJOHYRZHOV7DEOHVKRZV WKHGXUDWLRQVIRUWKHHLJKWYRZHOSDLUVLQHDFKRIWKHVHYHQSURVRGLFSRVLWLRQV H[DPLQHG3RROHGGXUDWLRQVDUHJLYHQLQHDFKFHOODQGVWDQGDUGGHYLDWLRQV DUHLQFOXGHGLQEUDFNHWV

)LJXUH 'XUDWLRQV LQ WKH SUHVHQW VWXG\ DQG LQ )RXUDNLV %RWLQLV DQG .DWVDLWL

$QDQDO\VLVRIYDULDQFHWHVWHGWKHHIIHFWRISURVRGLFFRQGLWLRQ3U:GLS ,3SRVW)SUH)Z)Z) DVZHOODVWKHW\SHRIYRZHOSDLU>DH@>DR@>HR@ >RH@ >XD@ >RD@ >LD@ >RX@ RQ GXUDWLRQ %RWK IDFWRUV ZHUH VLJQL¿FDQW 3UR VRGLFSRVLWLRQ)>@ S DQG9RZHO3DLU)>@ S 3RVWKRFWHVWVVKRZWKDWIRUDOOYRZHOSDLUVWKHORQJHVWGXUDWLRQ ZDVIRXQGIRUYRZHOVVWUDGGOLQJDVWURQJSURVRGLFERXQGDU\HLWKHUWKDWRIDQ LQWHUPHGLDWHSKUDVHLS RUWKDWRIDQ,QWRQDWLRQDO3KUDVH,3 WKHVHWZRSUR VRGLFSRVLWLRQV,3DQGLSDUHVLJQL¿FDQWO\ORQJHUWKDQDOOWKHUHVW1RRWKHU VLJQL¿FDQWGLIIHUHQFHVZHUHIRXQGIRUWKHUHPDLQLQJSURVRGLFSRVLWLRQV 9RZHOSDLUVZHUHVLJQL¿FDQWO\ORQJHUDURXQGVWURQJSURVRGLFERXQGDULHV VXSSRUWLQJ WKH ¿UVW K\SRWKHVLV 1R VLJQL¿FDQW HIIHFW RI IRFXV RQ GXUDWLRQ ZDV IRXQG UHIXWLQJ WKH VHFRQG K\SRWKHVLV9RZHO SDLUV LQ IRFXV SRVLWLRQV ZHUH ORQJHU WKDQ WKRVH LQ QRQIRFXV SRVLWLRQV EXW WKH GLIIHUHQFH ZDV QRW VLJQL¿FDQW7DEOHVKRZVWKUHHFOXVWHUVLQWKHGXUDWLRQYDOXHVRQHZLWKWKH VWURQJERXQGDU\SRVLWLRQVWKHRQO\RQHVKRZLQJVLJQL¿FDQWGLIIHUHQFH RQH FRPSULVLQJZ)DQGZ)DQGDWKLUGFOXVWHUFRPSULVLQJWKHUHVWDOOSKUDVH

)RFXVLQJSURVRGLFSKUDVLQJDQGKLDWXVUHVROXWLRQLQ*UHHN

PHGLDOSRVLWLRQV7KLVFOXVWHULQJPRUHRUOHVVFRUUHVSRQGVWRWKHLQLWLDOH[ SHULPHQWDOVHWXS,WLVQRWFOHDUZKHWKHUWKHIDLOXUHRIWKHOHQJWKHQLQJLQIR FXVSRVLWLRQVWRUHDFKVLJQL¿FDQFHLVGXHWRWKHVPDOOQXPEHURISDUWLFLSDQWV LQWKLVVWXG\ 7DEOH 'XUDWLRQIRUWKHHLJKWYRZHOSDLUVLQWKHVHYHQSURVRGLFSRVLWLRQV3UR VRGLFZRUGERXQGDU\3U:G LQWHUPHGLDWHSKUDVHERXQGDU\LS ,QWRQD WLRQDO3KUDVHERXQGDU\,3 SRVWIRFDOSRVLWLRQSRVW) SUHIRFDOSRVLWLRQ SUH) IRFXVRQWKH¿UVWZRUGZ) IRFXVRQWKHVHFRQGZRUGZ) 3URVRGLF &RQGLWLRQ 3U:G ,S ,3 SRVW) SUH) :) :)

>DH@

>DR@

>HR@

>LD@

>RD@

>RH@

>RX@

>XD@

7KH IRUPDQWIUHTXHQF\PHDVXUHPHQWV UHSRUWHG LQ VHFWLRQ VKRZ WKH LQÀXHQFHERWKRIWKHSURVRGLFFRQWH[WDQGRIWKHLQSXWYRZHOVRQ99DV VLPLODWLRQ

)RUPDQWIUHTXHQFLHV 6HFWLRQVKRZVZKLFKKLDWXVUHVROYLQJVWUDWHJ\GHOHWLRQPHUJHUSDU WLDODVVLPLODWLRQDQGQRDVVLPLODWLRQ ZDVXVHGIRUWKHGLIIHUHQWYRZHOSDLUV DQGSURVRGLFSRVLWLRQVWHVWHGVKRZVWKHLQÀXHQFHRISURVRGLFFRQWH[W DQGLQSXWYRZHOTXDOLW\RQWKHRXWSXW¿QDOO\JLYHVPRUHHYLGHQFHIRU JUDGLHQFH

0DU\%DOWD]DQL

2XWSXWFODVVL¿FDWLRQ $VDUHIHUHQFHIRUWKHIRUPDQWYDOXHVRI*UHHNYRZHOVGDWDIURP)RXUDNLV %RWLQLVDQG.DWVDLWL ZHUHXVHG7KHVHYRZHOVZHUHSURGXFHGZLWKLQ VHQWHQFHVMXVWOLNHLQWKHSUHVHQWVWXG\VRWKHIRUPDQWYDOXHVEHWZHHQWKH WZRVWXGLHVDUHIDLUO\FRPSDUDEOH$QLPSRUWDQWGLIIHUHQFHEHWZHHQWKHWZR VWXGLHV LV WKDW ZKHUHDV WKH )RXUDNLV %RWLQLV DQG .DWVDLWL H[SHULPHQW KDG RQO\PDOHSDUWLFLSDQWVWKHFXUUHQWH[SHULPHQWLQFOXGHGWKUHHIHPDOHVDQG RQHPDOH,Q7DEOHWKHPDOHVSHDNHUIRUPDQWYDOXHVLQWKHSUHVHQWH[SHUL PHQWLQWKH,3FRQGLWLRQDUHTXLWHVLPLODUWRWKRVHLQWKH)RXUDNLV%RWLQLV DQG.DWVDLWLVWXG\7KRVHSURGXFHGE\WKHIHPDOHVSHDNHUVLQWKH,3FRQGL WLRQDUHORZHUDQGPRUHIURQWWKDQWKRVHSURGXFHGE\PDOHVVFKHPDWLFDOO\ VKRZQLQ)LJXUH 7DEOH 7RSURZ$YHUDJH))IRUPDQWYDOXHVLQWKH)RXUDNLV%RWLQLVDQG.DW VDLWL VWXG\DOOPDOHVSHDNHUV PLGGOHURZWKHPDOHVSHDNHURIWKH SUHVHQWVWXG\ERWWRPURZWKHIHPDOHVSHDNHUVRIWKHSUHVHQWVWXG\ >L@ )

>H@ )

)

>D@ )

)

>R@ )

)

>X@ )

)

)

99WHQGHGWRUHPDLQLQWKHLU³W\SLFDO´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¿QHG LQVHFWLRQEURNHQGRZQE\YRZHOSDLU$OPRVWKDOIRIWKHRXWSXWVVKRZ QHLWKHU GHOHWLRQ QRU WRWDO ODFN RI DVVLPLODWLRQ EXW LQWHUPHGLDWH GHJUHHV RI DVVLPLODWLRQ 7KH TXDOLW\ RI LQSXW YRZHOV DIIHFWV WKH KLDWXV UHVROXWLRQ SURFHVV XVHG 0RUHVSHFL¿FDOO\IRUYRZHOSDLU>LD@WKHUHDUHQRWRNHQVLQWKHGHOHWLRQFDW HJRU\DQGYHU\IHZLQWKHPHUJHUFDWHJRU\)RU>RD@GHOHWLRQLVUDUHZLWK


PHUJHU WKH PRVW IUHTXHQW RXWSXW )RU WKH UHPDLQLQJ YRZHO SDLUV GHOHWLRQ RFFXUVDURXQGRIWKHWLPHV,QWKHQRDVVLPLODWLRQFROXPQWKHDYHUDJH VKRZQLQWKH727$/URZLVYHU\QHDUWKHSHUFHQWDJHIRUHDFKYRZHO SDLU,QWKHSDUWLDODVVLPLODWLRQFROXPQWKHUHDUHWKUHHYDOXHVWKDWGLIIHUIURP WKHDYHUDJH>LD@DQG>XD@KDYHPRUHRXWSXWVWKDQDYHUDJHLQWKLVFDWHJRU\ ZKLOH>RD@KDVH[WUHPHO\IHZ

)LJXUH 7KHIRUPDQWYDOXHVIRXQGLQWKH)RXUDNLV%RWLQLVDQG.DWVDLWL DOO PDOHV DQGWKRVHIRXQGIRUWKHPDOHDQGIHPDOHVSHDNHUVLQWKHSUHVHQW VWXG\ 7DEOH3HUFHQWDJHRIWKHGLIIHUHQWW\SHVRIRXWSXWDFURVVLQSXWYRZHOSDLUV 9RZHO3DLU >DH@ >DR@ >RD@ >LD@ >XD@ >HR@ >RH@ >RX@ $OOSDLUV

'HOHWLRQ

0HUJHU

3DUWLDO$VVLPLODWLRQ

1R$VVLPLODWLRQ

0DU\%DOWD]DQL

7DEOHVKRZVWKHSHUFHQWDJHRIRXWSXWVLQHDFKKLDWXVUHVROYLQJFDWHJRU\ EURNHQGRZQE\SURVRGLFSRVLWLRQV 7DEOH3HUFHQWDJHRIWKHGLIIHUHQWW\SHVRIKLDWXVRXWSXWLQHDFKSURVRGLFSRVLWLRQ 3URVRGLF FRQGLWLRQ 3U:G ,S ,3 SRVW) SUH) Z) Z) $OO&RQGLWLRQV

'HOHWLRQ

0HUJHU

3DUWLDO$VVLPLODWLRQ

1R$VVLPLODWLRQ

7KH KLDWXV UHVROXWLRQ SURFHVV LV QRW XQLIRUP DFURVV SURVRGLF SRVLWLRQV WKDWLVWKHSURVRGLFSRVLWLRQDVSHFL¿FYRZHOSDLULVIRXQGLQLQÀXHQFHVWKH KLDWXVUHVROXWLRQSURFHVV0RUHVSHFL¿FDOO\ ± ,QWKHQRDVVLPLODWLRQFROXPQYDOXHVDUHZLGHO\GLVSHUVHGIURPWKHDYHU DJHQRDVVLPLODWLRQLVWKHPRVWFRPPRQRXWSXWDURXQGVWURQJSURVRGLF ERXQGDULHVDQGDUDUHRXWSXWDURXQGZHDNSURVRGLFERXQGDULHVDQGLQ XQIRFXVHGSRVLWLRQV)XUWKHUPRUHQRDVVLPLODWLRQRFFXUVLQDSSUR[LPDWH O\RQH¿IWKRIWKHRXWSXWVZLWKIRFXVZ)DQGZ)ZKLFKLVFRQVLGHUDEO\ PRUHRIWHQWKDQLQWKHQRQIRFXVSKUDVHPHGLDOSRVLWLRQV ± ,QWKHGHOHWLRQFROXPQWKHGLVWULEXWLRQLVDJDLQXQHYHQ'HOHWLRQQHYHU RFFXUVLQWKH,3FRQGLWLRQDQGUHODWLYHO\VHOGRPLQWKHLSFRQGLWLRQ)RU WKHUHPDLQLQJSURVRGLFSRVLWLRQVWKHGLVWULEXWLRQRIGHOHWLRQRXWSXWVLV EHWZHHQ±ZLWKWKHH[FHSWLRQRISRVLWLRQVZLWKIRFXVRQWKHVHF RQGFDUULHUZRUGZ) ± $V IRU WKH UHVROXWLRQ SURFHVVHV LQ WKH WZR PLGGOH FROXPQV WKHUH DUH ORZ QXPEHUV LQ WKH LS DQG ,3 FRQGLWLRQV DQG IRU WKH UHPDLQLQJ SURVRG LFSRVLWLRQVWKHGLVWULEXWLRQRIPHUJHUDQGSDUWLDODVVLPLODWLRQLVIDLUO\ HYHQ

7ZR PDMRU ¿QGLQJV HPHUJH IURP WKH UHVXOWV LQ WKLV VHFWLRQ )LUVW WKH FODLPPDGHLQWKHSKRQRORJLFDOOLWHUDWXUHWKDWWKHPRVWIUHTXHQWKLDWXVRXW SXWLQ*UHHNLV9GHOHWLRQLVQRWVXSSRUWHG,QVWHDGWKHUHVXOWVKHUHVXSSRUW WKH¿QGLQJVSUHVHQWHGLQ3HOHNDQRXDQG$UYDQLWL $OPRVWDTXDUWHU RIWKHRXWSXWVEHORQJLQWKHGHOHWLRQFDWHJRU\9GHOHWLRQPRVWO\ DQGD


TXDUWHUHDFKEHORQJLQWKHPHUJHUSDUWLDODVVLPLODWLRQDQGQRDVVLPLODWLRQ FDWHJRULHV 6HFRQGWKHGHJUHHRI99DVVLPLODWLRQLVLQÀ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¿HGE\WKHGDWDLQWKHSUHVHQWVWXG\RQO\IRU>L@ QRWIRU>X@ZKLFKGHOHWHVRIWKHWLPH7KHUHSRUWWKDWDURXQG9GRHV QRW GHOHWH LQ DGMHFWLYHQRXQ SDLUV LV QRW YHUL¿HG E\ WKH GDWD EHFDXVH >R@ GHOHWHV RI WKH WLPHV LQ WKH SDLU >RX@ DOWKRXJK HPEHGGHG LQ VXFK DQ HQYLURQPHQW7KHUHSRUWWKDWD9KLJKHULQWKHVRQRULW\KLHUDUFK\>R!D! X!L!H@WKDQ9GRHVQRWGHOHWHLQYHUEDGYHUESDLUVLVQRWYHUL¿HGHLWKHU EHFDXVH>D@GHOHWHVEHIRUH>H@RIWKHWLPH $VIDUDVPHUJHUFRDOHVFHQFH LVFRQFHUQHG&DVDOL LQDQLQÀ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¿FDQW DVZHZLOOVHHLQVHFWLRQ EXWVWURQJHUWKDQWKDWIRUSKUDVHPHGLDOSR VLWLRQV )LQDOO\ WKH UDWHV RI GHOHWLRQ PHUJHU DQG SDUWLDO DVVLPLODWLRQ DUH DSSUR[LPDWHO\HTXDOLQHYHU\SURVRGLFFRQWH[WH[FHSWIRUWKHVWURQJ,3LS ERXQGDULHV ,Q VXPPDU\ WKH PRVW UREXVW HIIHFW RQ KLDWXV UHVROXWLRQ LV H[HUWHG E\ VWURQJERXQGDULHV$ZHDNHIIHFWRIIRFXVLVRQO\VHHQIRUWKHQRDVVLPLODWLRQ

0DU\%DOWD]DQL

VWUDWHJ\,QFRQWH[WVZLWKIRFXVRQRQHRIWKHFDUULHUZRUGVLHZIZI PRUH RXWSXWV VKRZHG WRWDO ODFN RI DVVLPLODWLRQ WKDQ LQ WKH SKUDVHPHGLDO FRQWH[WVLHSRVW)SUH)3U:G ,QDOORWKHUKLDWXVUHVROXWLRQFDWHJRULHV LHGHOHWLRQPHUJHUDQGSDUWLDODVVLPLODWLRQ SURVRGLFSRVLWLRQVUHODWHGWR IRFXVDUHQRWPXFKGLIIHUHQWIURPWKHSKUDVHPHGLDOSURVRGLFSRVLWLRQV

$VVLPLODWLRQDFURVVSURVRGLFSRVLWLRQV ,QWKLVVHFWLRQ,SUHVHQWWKH99(XFOLGHDQGLVWDQFHLQHDFKSURVRGLFSRVL WLRQ DQG WKH FRUUHODWLRQ EHWZHHQ WKLV GLVWDQFH DQG GXUDWLRQ )LUVW7DEOH VKRZVWKH99GLVWDQFH7KHQXPEHUVRQWKHOHIWFROXPQXQGHUHDFKYRZHO SDLUJLYHWKHDEVROXWH99GLVWDQFHSRROHGDFURVVVSHDNHUV 7KHQXPEHUV RQWKHULJKWFROXPQSUHVHQWWKHµQRUPDOL]HG¶GLVWDQFHZKLFKLVWKHGLVWDQFH RIWKHYRZHOLQWKHJLYHQSURVRGLFSRVLWLRQH[SUHVVHGDVDSURSRUWLRQRIWKH GLVWDQFHLQWKH,3FRQGLWLRQLQWKHFROXPQWKXVLQWKH,3FRQGLWLRQ 7KLV ZDVGRQHWRIDFLOLWDWHFRPSDULVRQDFURVVYRZHOSDLUV 7DEOH (XFOLGHDQ99GLVWDQFHDFURVVYRZHOSDLUVLQHDFKSURVRGLFFRQGLWLRQ 7KH¿UVWFROXPQSURYLGHVWKHGLVWDQFHLQDEVROXWHYDOXHVDQGWKHVHFRQG FROXPQSURYLGHVWKHGLVWDQFHLQHDFKSURVRGLFSRVLWLRQDVDSURSRUWLRQRI WKHGLVWDQFHLQFRQGLWLRQ,3 3U:G ,S ,3 SRVW) SUH) Z) Z)

>DH@

>DR@

>RD@

>LD@

>XD@

>HR@

>RH@

>RX@

$QDQDO\VLVRIYDULDQFHWHVWHGWKHHIIHFWRISURVRGLFSRVLWLRQDQGWKHW\SHV RIYRZHOSDLURQ(XFOLGHDQGLVWDQFH7KHZLWKLQVXEMHFWIDFWRUVFRQVLGHUHG ZHUH 3URVRGLF 3RVLWLRQ 3U:G LS ,3 SRVW) SUH) Z) Z) DQG 9RZHO 3DLUDHDRHRRHXDRDLDRX %RWKVKRZHGVLJQL¿FDQWHIIHFWV3URVRGLF 3RVLWLRQ)>@ S DQG9RZHO3DLU)>@ S 3RVWKRFFRPSDULVRQVVKRZWKDWGLVWDQFHVDFURVVDQ,3DQGDQLS ERXQGDU\ZHUHLQGHHGVLJQL¿FDQWO\JUHDWHUWKDQWKRVHLQWKHUHPDLQLQJSUR VRGLFSRVLWLRQV1RRWKHUSURVRGLFSRVLWLRQGLIIHUHQFHVUHDFKHGVLJQL¿FDQFH


$VIRUWKHYRZHOSDLUVSRVWKRFFRPSDULVRQVVKRZWKDWGLVWDQFHVIRUWKH>LD@ SDLUZHUHVLJQL¿FDQWO\JUHDWHUWKDQWKRVHLQWKHUHPDLQLQJYRZHOSDLUVWKRVH IRU>XD@WKHQH[WJUHDWHVWDQGQRRWKHUVLJQL¿FDQWGLIIHUHQFHVZHUHIRXQG 7DEOHVKRZVWKHFRUUHODWLRQEHWZHHQGLVWDQFHDQGGXUDWLRQIRUHDFK YRZHOSDLUIRUHDFKVSHDNHU7KHYDOXHVFRPSDUHGZHUHDYHUDJHVDFURVVSUR VRGLFSRVLWLRQV 7DEOH &RUUHODWLRQEHWZHHQGXUDWLRQDQGWKH(XFOLGHDQGLVWDQFHIRUHDFKYRZHO SDLUDFURVVSURVRGLFSRVLWLRQVIRUWKHIRXUVSHDNHUV 9RZHOV >DH@ >DR@ >RD@ >LD@ >XD@ >HR@ >RH@ >RX@

6SHDNHU ±

6SHDNHU ±

6SHDNHU

6SHDNHU

)RUPRVWRIWKHYRZHOSDLUVWKHUHLVKLJKFRUUHODWLRQRYHUEHWZHHQ GXUDWLRQDQGGLVWDQFH([FHSWIRUWZRFDVHVWKHFRUUHODWLRQLVSRVLWLYHPHDQ LQJWKDWDVGXUDWLRQLQFUHDVHVVRGRHVWKHUHVLVWDQFHRIDYRZHOSDLUWRDV VLPLODWLRQ 7KH¿QGLQJVLQWKLVVHFWLRQVKRZRQFHPRUHWKHUREXVWLQKLELWLQJHIIHFW RIVWURQJSURVRGLFERXQGDULHVRQDVVLPLODWLRQ7KHGLVWDQFHEHWZHHQWKHWZR YRZHOVLQWKHVWURQJERXQGDU\SRVLWLRQVLVVLJQL¿FDQWO\JUHDWHUWKDQWKDWLQDOO RWKHUSURVRGLFSRVLWLRQV$OHVVUREXVWDVVLPLODWLRQLQKLELWLQJHIIHFWZKLFK GLGQ¶WUHDFKVWDWLVWLFDOVLJQL¿FDQFHZDVIRXQGIRUIRFXVRQDZRUGFDUU\LQJ DKLDWXVYRZHO,QRWKHUZRUGVWKHK\SRWKHVLVWKDWIRFXVZLOOEORFNDVVLPL ODWLRQZDVQRWVXSSRUWHG)LQDOO\SKUDVHPHGLDOSRVLWLRQVZKHUHSURVRGLF ERXQGDULHVDUHZHDNDOORZHGIRUWKHJUHDWHVWGHJUHHRIDVVLPLODWLRQ &RPELQLQJWKHUHVXOWVRIWKLVVHFWLRQZLWKWKHSUHYLRXVRQHLWLVQHFHVVDU\ WRVWUHVVWKDWDOWKRXJKWKHVHRXWSXWVZHUHFODVVL¿HGLQWRIRXUGLIIHUHQWKLDWXV UHVROXWLRQFDWHJRULHVWKHVHFDWHJRULHVGRQRWKDYHVKDUSO\GH¿QHGERUGHUV VLQFHWKHVWDWLVWLFDOUHVXOWVVKRZHGQRVLJQL¿FDQWGLIIHUHQFHIRUPRVWRIWKH GLVWDQFHV7KHRXWSXWVLQWKHQRDVVLPLODWLRQFDWHJRU\±ZKLFKLQWKHPDMRU LW\DUHWKHRXWSXWVLQWKH,3DQGLSFRQGLWLRQV±DUHWKHRQO\H[FHSWLRQEHLQJ VLJQL¿FDQWO\GLIIHUHQWIURPWKHUHVW2IFRXUVHWKHUHDUHVRPHµSURWRW\SLFDO¶ RXWSXWVRIGHOHWLRQQRDVVLPLODWLRQDQGVRRQEXWWKHVHFRQVWLWXWHWKHPLQRU

0DU\%DOWD]DQL

LW\,IWKHIRXUKLDWXVUHVROXWLRQSURFHVVHVGH¿QHGLQWKLVVWXG\DUHVHHQDVD FRQWLQXXPIURPQRDVVLPLODWLRQWRGHOHWLRQWKHQWKHPHDVXUHPHQWVVKRZHG WKDWRXWSXWVDUHVSUHDGDOORYHUWKLVFRQWLQXXPDQGWKHERUGHUVEHWZHHQRQH FDWHJRU\DQGLWVQHLJKERUZHUHQHYHUFOHDUEXWKDGWREHDUWL¿FLDOO\LPSRVHG XSRQWKHGDWD,QRWKHUZRUGVWKLVLVDJUDGLHQWSURFHVVQRWDFDWHJRULFDORQH *UDGLHQFHLVHYLGHQWQRWRQO\DFURVVSURVRGLFSRVLWLRQVEXWDOVRZLWKLQWKHP DVZLOOEHVKRZQLQWKHQH[WVHFWLRQ 7KHGHJUHHRIDVVLPLODWLRQEHWZHHQWKHWZRYRZHOVLQDSDLUDOVRYDULHG DV D IXQFWLRQ RI WKH LQSXW YRZHOV 7KH VWDWLVWLFDO UHVXOWV VKRZ WKDW YRZHO SDLUV>LD@DQG>XD@DUHGLIIHUHQWIURPWKHUHPDLQLQJSDLUVVKRZLQJWKHOHDVW DPRXQW RI DVVLPLODWLRQ DQG DOVR GLIIHUHQW IURP RQH DQRWKHU >LD@ DVVLPLODW LQJ OHVV WKDQ >XD@ 1R VLJQL¿FDQW HIIHFW RI WKH UHPDLQLQJ YRZHO SDLUV ZDV IRXQG )LQDOO\DKLJKSRVLWLYHFRUUHODWLRQZDVIRXQGEHWZHHQGXUDWLRQDQGWKH (XFOLGHDQGLVWDQFHEHWZHHQ9DQG9,WVHHPVWKDWLQDGGLWLRQWRWKHHIIHFW RIERXQGDULHVGXUDWLRQDIIHFWVWKHDVVLPLODWLRQEHWZHHQWKHWZRYRZHOV$O WKRXJKQRVWDWLVWLFDOVXSSRUWZDVJLYHQWRWKHLQLWLDOK\SRWKHVLVWKDWIRFXVLQJ DIIHFWV WKH GHJUHH RI DVVLPLODWLRQ WKH KLJK FRUUHODWLRQ EHWZHHQ VHJPHQWDO GXUDWLRQDQGDVVLPLODWLRQVXJJHVWVWKDWOHQJWKHQLQJLQWKHDEVHQFHRIERXQG DULHVGRHVLQÀXHQFHWKHDVVLPLODWLRQSURFHVV

$VVLPLODWLRQZLWKLQSURVRGLFSRVLWLRQV 6SHDNHUV SURGXFHG WKUHH UHSHWLWLRQV SHU SURVRGLF SRVLWLRQ DQG YRZHO SDLU )RUSDUWRIWKHGDWDWKHGHJUHHRIDVVLPLODWLRQYDULHVDFURVVWKHWKUHHUHSHWL WLRQVZLWKLQWKHVDPHSURVRGLFSRVLWLRQ )RUH[DPSOH7DEOHVKRZVIRUPDQWYDOXHVIRU>LD@LQWZRSURVRGLFFRQ GLWLRQV,3DQGSRVW)SURGXFHGE\VSHDNHU7KHYDOXHVIRUHDFKUHSHWLWLRQ DUHVKRZQVHSDUDWHO\)YDOXHVIRU>L@DQG>D@DUHVKRZQLQFROXPQVWZRDQG WKUHHUHVSHFWLYHO\)YDOXHVDUHVKRZQLQFROXPQVIRXUDQG¿YH7KHODVW FROXPQVKRZV99(XFOLGHDQGLVWDQFH )RUWKH,3FRQGLWLRQIRUPDQWVLQDOOUHSHWLWLRQVDUHFORVHWRW\SLFDO)RU WKHSRVW)FRQGLWLRQWKHRXWSXWLQUHSHWLWLRQLVGLIIHUHQWIURPWKHUHPDLQLQJ WZRWKHGLVWDQFHEHWZHHQWKHWZRYRZHOVLVVPDOOHUEHFDXVH>D@KDVPRYHG WRDPXFKKLJKHUDQGPRUHIURQWSRVLWLRQWKDQLWLVW\SLFDOIRULWDQG>L@KDV PRYHGWRDPXFKPRUHEDFNSRVLWLRQ%RWKYRZHOVKDYHPRYHGWRZDUGVWKH FHQWHUEXWVWLOODUHGLVWLQFWIURPHDFKRWKHUDSDUWLDODVVLPLODWLRQRXWSXW,Q UHSHWLWLRQV DQG WKH IRUPDQW IUHTXHQFLHV VKRZ WKDW WKH YRZHOV RFFXS\


VOLJKWO\ PRUH FHQWUDOL]HG SRVLWLRQV HVSHFLDOO\ >D@ LV DURXQG +] PRUH IURQW WKDQLVW\SLFDOIRUWKHPEXWDFFRUGLQJWRWKHFODVVL¿FDWLRQLQWKLVSDSHU WKHVHDUHQRDVVLPLODWLRQRXWSXWVTXDOLWDWLYHO\DQGTXDQWLWDWLYHO\GLIIHUHQW IURPWKHRXWSXWLQUHSHWLWLRQ 7DEOH )RUPDQWYDOXHVRI>L@DQG>D@LQWKHYRZHOSDLU>LD@LQSURVRGLFFRQGLWLRQV ,3DQGSRVW)SURGXFHGE\VSHDNHU9DOXHVLQHDFKUHSHWLWLRQDUHVKRZQ VHSDUDWHO\ 6SHDNHU>LD@ &RQGLWLRQ,3 5HSHWLWLRQ 5HSHWLWLRQ 5HSHWLWLRQ 6SHDNHU>LD@ &RQGLWLRQSRVW) 5HSHWLWLRQ 5HSHWLWLRQ 5HSHWLWLRQ

) >L@ ) >L@

) >D@ ) >D@

) >L@ ) >L@

) >D@ ) >D@

(XFOLGHDQ 'LVWDQFH (XFOLGHDQ 'LVWDQFH

7DEOHVKRZVKRZPXFKYDULDELOLW\RIWKHW\SHVKRZQLQWKHH[DPSOH DERYHRFFXUUHGZLWKLQSURVRGLFFRQGLWLRQV,QJHQHUDORIWKHGDWDGLV SOD\VXFKYDULDELOLW\7DEOH$VKRZVYDULDELOLW\LQSURVRGLFFRQGLWLRQVDQG %YDULDELOLW\LQYRZHOSDLUV 7DEOH 7KHSHUFHQWDJHRIYDULDELOLW\DPRQJWKHUHSHWLWLRQVLVVKRZQLQHDFKSUR VRGLFSRVLWLRQ$ DQGLQHDFKYRZHOSDLU% $ 3URVRGLF3RVLWLRQ 3U:G LS ,3 SRVW) SUH) :) :) $9(5$*(DFURVV SURVRGLFSRVLWLRQV

% 9DULDELOLW\

9RZHO3DLU >DH@ >DR@ >RD@ >LD@ >XD@ >HR@ >RH@ >RX@ $9(5$*( DFURVV9SDLUV

9DULDELOLW\

0DU\%DOWD]DQL

7KH JUHDWHVW DPRXQW RI YDULDELOLW\ RFFXUV LQ SKUDVHPHGLDO SRVLWLRQV 3U:GSRVW)DQGSUH)7KHUHLVOHVVYDULDELOLW\LQWKHWZRIRFXVSRVLWLRQV Z)DQGZ)DQGWKHOHDVWDPRXQWRIYDULDELOLW\LVIRXQGLQVWURQJERXQG DU\SRVLWLRQ,3&RQWUDU\WRWKHJHQHUDOSDWWHUQREVHUYHGVRIDURILSDQG,3 ERXQGDULHVLQÀ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±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ÀXHQFHV WKLV SURFHVV WKH SURVRGLF SRVLWLRQ HIIHFW LV D WHQGHQF\ QRW DQ DEVROXWH

*HQHUDOGLVFXVVLRQDQGFRQFOXVLRQ 6HYHUDOFRQFOXVLRQVFDQEHGUDZQIURPWKHUHVXOWVRIWKLVH[SHULPHQW)LUVW LWLVHYLGHQWWKDWKLDWXVUHVROXWLRQLQ*UHHNFDQQRWEHGHVFULEHGDVDFDWHJRUL FDOUXOHWKHVDPHVSHDNHULQWKHVDPHSURVRGLFSRVLWLRQSURGXFHGGLIIHUHQW


RXWSXWVZLWKYDU\LQJGHJUHHVRIDVVLPLODWLRQEHWZHHQWKHWZRYRZHOV(YHQ WKRXJKWKHUHLVDFOHDUFXWGLIIHUHQFHEHWZHHQWRWDOODFNRIDVVLPLODWLRQDQG WKH UHPDLQLQJ KLDWXV UHVROXWLRQ SURFHVVHV ZH FDQQRW VSHDN RI FDWHJRULFDO UXOHVDVZKHQHYHUDVVLPLODWLRQKDSSHQVLWGRHVVRLQYDU\LQJGHJUHHV 6HFRQGVHYHUDOIDFWRUVLQÀXHQFHWKHDPRXQWRI99DVVLPLODWLRQ9RZ HOVDURXQGVWURQJERXQGDULHVVKRZVLJQL¿FDQWO\JUHDWHUUHVLVWDQFHWRDVVLPL ODWLRQ WKDQ WKRVH DURXQG ZHDN ERXQGDULHV 0RUHRYHU YRZHOV VKRZ D QRQ VLJQL¿FDQWWUHQGWRDVVLPLODWHOHVVDURXQGIRFXVHGHQYLURQPHQWVWKDQDURXQG QRQIRFXVHGRQHV&RQQHFWHGWRWKHVH¿QGLQJV,VKRZHGWKDWVHJPHQWVKDYH VKRUWHUGXUDWLRQDURXQGZHDNHUERXQGDULHVWKDQDURXQGVWURQJHURQHVDQGLQ QRQIRFXVHQYLURQPHQWVWKDQLQIRFXVHGRQHV$OWKRXJKZHFDQQRWDUJXHIRU DFDXVDOOLQNEHWZHHQWKHDVVLPLODWLRQUHVXOWVDQGWKHGXUDWLRQUHVXOWVWKHUH LV VWURQJ SRVLWLYH FRUUHODWLRQ EHWZHHQ VHJPHQWDO GXUDWLRQ DQG WKH GHJUHH RI DVVLPLODWLRQ 9RZHOV ZLWK ORQJ GXUDWLRQ GLVSOD\ PRUH UHVLVWDQFH WR DV VLPLODWLRQWKDQYRZHOVZLWKVKRUWGXUDWLRQ7KHFRPELQDWLRQRIWKHVHUHVXOWV PDNHVFOHDUWKHQHHGWRLQYHVWLJDWHIXUWKHUWKHHIIHFWVWKDWOHQJWKHQLQJGXH WRIRFXVKDVRQDVVLPLODWLRQWRUHYHDOZKHWKHUOHQJWKHQLQJDORQHZLWKRXW WKH FRQIRXQGLQJ IDFWRU RI SURVRGLF ERXQGDULHV LV ZKDW LQKLELWV DVVLPLOD WLRQ7KLVVWXG\IDLOHGWRHVWDEOLVKVWDWLVWLFDOO\VLJQL¿FDQWHIIHFWVRIIRFXVRQ WKHKLDWXVUHVROXWLRQSURFHVV)XUWKHULQYHVWLJDWLRQLVQHFHVVDU\WRFRQ¿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ÀXHQFHVKLDWXVUHVROXWLRQ7KHUHVXOWVVKRZDVLJQL¿FDQW LQÀXHQFH RI WKH LQSXW YRZHOV ERWK RQ VHJPHQWDO GXUDWLRQ DQG WKH GHJUHH RI DVVLPLODWLRQ6HYHUDO YRZHO SURSHUWLHV ZHUH H[DPLQHG LQ VHFWLRQ LQ FRQQHFWLRQWRWKLVTXHVWLRQDPRQJWKHPYRZHOKHLJKWVRQRULW\KLHUDUFK\ YRZHOURXQGQHVVDQGUHODWLYHKHLJKWEHWZHHQ9DQG9EXWQRVLQJOHJHQ

0DU\%DOWD]DQL

HUDOSURSHUW\FDQDFFRXQWIRUWKHVHUHVXOWV$ODUJHUVFDOHVWXG\PD\UHYHDO JHQHUDOL]DWLRQVWKDWWKHSUHVHQWVWXG\IDLOHGWRGHWHFW ,QVXPPDU\ZHKDYHVKRZQWKDWWKHSURFHVVRIKLDWXVUHVROXWLRQLQ*UHHN LV JUDGLHQW QRW FDWHJRULFDO 0RUHRYHU WKH GHJUHH RI DVVLPLODWLRQ EHWZHHQ KLDWXV YRZHOV LQ *UHHN DQG WKHLU GXUDWLRQ DUH DIIHFWHG E\ WKHLU SURVRGLF SRVLWLRQZLWKOHVVDVVLPLODWLRQDQGPRUHOHQJWKHQLQJIRXQGDURXQGVWURQJ ERXQGDULHVDQGIRFXV

1RWHV

,DPLQGHEWHGWR6XQ$K-XQIRUKHUDGYLFHHQFRXUDJHPHQWDQGLQYDOXDEOHKHOS WKURXJKDOOWKHVWDJHVRIWKLVZRUN,ZRXOGDOVROLNHWRWKDQN3DW.HDWLQJIRUKHU DGYLFH DQG LPSURYHPHQW VXJJHVWLRQV DXGLHQFHV DW 8&/$ DQG /DE3KRQ IRU KHOSIXOFRPPHQWVDVZHOODV0DULRV)RXUDNLVDQGDQDQRQ\PRXVUHYLHZHUIRU PDQ\KHOSIXOFRPPHQWVRQWKH¿UVWYHUVLRQRIWKHPDQXVFULSW 7KLVGLVWDQFHLVWKHVTXDUHURRWRIWKHVXPRIWKHVTXDUHVRIWKHGLIIHUHQFHEH WZHHQWKHYRZHOIRUPDQWIUHTXHQFLHV(' ¥)9±)9 )9±)9 ,WKDQNRQHRIWKHUHYLHZHUVIRUVXJJHVWLQJWKLVPHDVXUH $OO WKUHH SKRQRORJLFDO UXOHV IRU GHOHWLRQ PHQWLRQHG KHUH ZHUH HPSOR\HG LQ .DLVVH

5HIHUHQFHV $UYDQLWL$PDOLDDQG0DU\%DOWD]DQL *UHHN7R%,$V\VWHPIRUWKHDQQRWDWLRQRI*UHHNVSHHFKFRUSRUD,Q 3URFHHGLQJVRIWKH6HFRQG,QWHUQDWLRQDO&RQIHUHQFHRQ/DQJXDJH5H VRXUFHVDQG(YDOXDWLRQ9ROXPH± ,QWRQDWLRQDO DQDO\VLV DQG SURVRGLF DQQRWDWLRQ RI *UHHN VSRNHQ FRU SRUD,Q6XQ$K-XQHG 3URVRGLF7\SRORJ\7KH3KRQRORJ\RI,Q WRQDWLRQDQG3KUDVLQJ2[IRUG2[IRUG8QLYHUVLW\3UHVV %DOWD]DQL0DU\DQG6XQ$K-XQ )RFXV DQG WRSLF LQWRQDWLRQ LQ *UHHN ,Q 3URFHHGLQJV RI WKH ;,9WK ,QWHUQDWLRQDO&RQJUHVVRI3KRQHWLF6FLHQFHV9ROXPH± 6DQ)UDQFLVFR&$ %URZPDQ&DWKHULQH3DQG/RXLV0*ROGVWHLQ 7RZDUGVDQDUWLFXODWRU\SKRQRORJ\3KRQRORJ\@ ,QWKH¿UVW/DE3KRQSURFHHGLQJV %URZPDQDQG*ROGVWHLQVWDWH³>7@KHJHVWXUHVDUHLQYDULDQWDFURVVGLIIHUHQW FRQWH[WV«>2@YHUODSSLQJDFWLYDWLRQ«UHVXOWVLQFRQWH[WYDU\LQJDUWLFXODWRU\ WUDMHFWRULHV´ 1RZDGHFDGHODWHULVKDVEHFRPHFOHDUWKDWRWKHU NLQGVRIVXUIDFHYDULDELOLW\RFFXULQDGGLWLRQWRWKDWGULYHQE\QHLJKERULQJ VHJPHQWDOJHVWXUDO FRQWH[W 3KUDVDO FRQVWLWXHQW VWUXFWXUH DQG SURPLQHQFH VWUXFWXUHDOVRUHVXOWLQDUWLFXODWRU\YDULDELOLW\+RZLVWKLVWREHFDSWXUHGLQ D G\QDPLFDO JHVWXUDO DFFRXQW RI VSHHFK SURGXFWLRQ ZKLOH PDLQWDLQLQJ WKH OLQJXLVWLFLQVLJKWRIVWDEOHXQGHUO\LQJXQLWVWKDWDUHFDOOHGXSRQLQDYDULHW\ RISURVRGLFFRQWH[WV" $VWDEOHOH[LFDOUHSUHVHQWDWLRQUHTXLUHVGH¿QLQJDVHWRIJHVWXUHVWKHLULQ WHUQDODQGUHODWLYHDFWLYDWLRQSDWWHUQVDQGWKHLUXQGHUO\LQJSDUDPHWHUYDOXHV HJWDUJHWVWLIIQHVV >«RSHQLQJ@>FORVLQJRSHQ LQJ«@@KH¿QGVWKDWXQGHUIRFDODFFHQWJHVWXUHVEHFRPHODUJHUORQJHUDQG IDVWHU LQ SHDN YHORFLW\ DW SKUDVDO ERXQGDULHV JHVWXUHV JHW ORQJHU DQG

5HODWLQJSURVRG\DQGG\QDPLFHYHQWV&RPPHQWV

IRU SKUDVHLQLWLDO FORVLQJV VORZHU DQG ODUJHU +H FRPPHQWV WKDW WHPSRUDO FKDUDFWHULVWLFV DUH VLPLODU IRU GRPDLQ¿QDO DQG GRPDLQLQLWLDO RSHQLQJV LQ WKH VHTXHQFH KH LQYHVWLJDWHG :KHQ %HFNPDQ (GZDUGV DQG FROOHDJXHV SUHVHQWHG WKH ¿UVW GDWD RQ DUWLFXODWRU\ NLQHPDWLFV DW ERXQGDULHV ORZHUHG JHVWXUDOVWLIIQHVVSURYLGHGDVHQVLEOHG\QDPLFDODFFRXQWFDSWXULQJWKHGDWD HJ%HFNPDQDQG(GZDUGV :KLOHLWLVFOHDUWKDWWKHLURULJLQDOLQ VLJKWVZHUHFRUUHFWLQDVVHUWLQJWKDWJHVWXUDOVORZLQJZDVDYLWDODVSHFWRI WKLVSKHQRPHQDIXUWKHUHPSLULFDOZRUNVXFKDVWKDWRI&KR¶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¿HGG\QDPLFVRIFRQVWULFWLRQJHVWXUHVLQWHU DFWLQJZLWKJHVWXUHVWKDWUHSUHVHQWERXQGDULHVDVRSSRVHGWRFRQVWULFWLRQV 7KLVDSSURDFKLVPRWLYDWHGLQSDUWE\DGHVLUHIRUWKHRUHWLFDOFRQVLVWHQF\ZLWK KRZFRQWH[WXDOYDULDELOLW\KDVEHHQVXFFHVVIXOO\KDQGOHGLQWKH$UWLFXODWRU\ 3KRQRORJ\IUDPHZRUN1DPHO\LWSUHVHUYHVVWDEOHXQGHUO\LQJFRQVWULFWLRQ JHVWXUHVEXWDOORZVVXUIDFHYDULDELOLW\WRDULVHWKURXJKWKHLQWHUDFWLRQRIFR DFWLYH JHVWXUHV LQ WKLV FDVH FRDFWLYH FRQVWULFWLRQ DQG SURVRGLF JHVWXUHV 7KHVH JHVWXUHV VSDQ D GLVFUHWH WHPSRUDO LQWHUYDO GXULQJ ZKLFK WKH\ DFW YLFDULRXVO\RQDOOFRQFXUUHQWO\DFWLYDWHGFRQVWULFWLRQJHVWXUHVJHVWXUHDF WLYDWLRQLVGHWHUPLQHGE\ERXQGDU\VWUHQJWKDQGLWVHIIHFWLVLQSURSRUWLRQWR DFWLYDWLRQOHYHO6LQFHDFWLYDWLRQZD[HVDQGZDQHVJUDGXDOO\LWLVSUR[LPLW\ WRDMXQFWXUH\LHOGLQJRYHUODSDQGFRDFWLYDWLRQRIDQGFRQVWULFWLRQJHV WXUHV QRWDGMDFHQF\WRWKHERXQGDU\LHQRWVWDWXVDVGRPDLQ¿QDORULQLWLDO SHUVH WKDWLVWKHVRXUFHRIHIIHFWRQDUWLFXODWLRQ

'DQL%\UG

6PLOMDQLþ¶VVWXG\LQWKLVYROXPHLVRILQWHUHVWLQDGLVFXVVLRQRISURVRGLF HYHQWVDVKDYLQJWHPSRUDODFWLYDWLRQ LQWHUYDOVDVVXJJHVWHGLQWKHJHVWXUH DSSURDFK,WSURYLGHVDQH[DPLQDWLRQRIKRZSURVRG\DIIHFWVWKHFRRUGLQD WLRQRIVHJPHQWDOPDWHULDODQGOH[LFDOSLWFKDFFHQW5HFDOOIURP6PLOMDQLþ¶V GHVFULSWLRQWKDWLQ%HOJUDGH6HUELDQDIDOOLQJOH[LFDODFFHQWLVLQGLFDWHGE\ DSLWFKSHDNHDUO\LQWKHYRZHODQGDULVLQJDFFHQWE\DSLWFKSHDNDIWHURU ODWHLQ WKHYRZHO6PLOMDQLþGHPRQVWUDWHVWKDWIRUQDUURZIRFXVLQSKUDVH LQLWLDOSRVLWLRQWKHSLWFKDFFHQWSHDNVHDUOLHU%XWWKLVLVHVSHFLDOO\WKHFDVH IRU WKH IDOOLQJ HDUO\ SHDN DFFHQW VHH KHU )LJ OHIW SDQHOV QRWH FLUFOHV YVVTXDUHV 6KHSURSRVHVDPHFKDQLVPRIFRQWUDVWHQKDQFHPHQW,QSKUDVH ¿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¿QDO SRVLWLRQULJKWFROXPQ :KHQYLHZHGLQVXFKDVFKHPDWLFWKDWFDSWXUHVWHP SRUDOUHODWLRQVDPRQJODU\QJHDORUDODQGSURVRGLFHYHQWVLWVHHPVVHQVLEOH WKDWWKHHDUO\OH[LFDODFFHQWERWWRPURZ VKRXOGEHPRVWDIIHFWHGLQSKUDVH LQLWLDOSRVLWLRQOHIWERWWRP DQGWKHODWHDFFHQWLQ¿QDOSRVLWLRQULJKWWRS 7KLV LV SUHFLVHO\ EHFDXVH WKH JHVWXUH KDV D WHPSRUDO DFWLYDWLRQ LQWHUYDO FRRUGLQDWHGZLWKWKHDUWLFXODWRU\HYHQWV 6PLOMDQLþ¶V¿QGLQJVKDYHDIXUWKHULQWHUHVWLQJDVSHFWZLWKUHJDUGWRSUR VRGLFDOO\GULYHQG\QDPLFDOFKDQJHVDWWKHJHVWXUDOOHYHO$FFHQWDOLJQPHQW GLIIHUHQFHV EHWZHHQ LQLWLDO DQG ¿QDO SRVLWLRQV DUH JUHDWHU LH GDUN PRUH WRWKHOHIWRIOLJKWLQKHU)LJERWKSDQHOV ZKHQ¿QDOYRZHOOHQJWKHQLQJ LVJUHDWHUFRPSDUHGWRLQLWLDOLHGDUNPRUHDERYHOLJKWLQKHU)LJERWK SDQHOV 7KLVVXJJHVWVDUHODWLRQEHWZHHQLQWHUJHVWXUDODQGLQWUDJHVWXUDOHI IHFWV LQ SURVRGLF G\QDPLFV 5HFDOO WKDW &KR¶V VWXG\ VXJJHVWHG WKDW WKH LQ WUDJHVWXUDOFKDQJHRIVWLIIQHVVORZHULQJDWERXQGDULHVZDVQRWVXI¿FLHQWWR DFFRXQWIRUKLVGDWDVHHDOVR6DOW]PDQDQG%\UGE%\UGDQG6DOW]PDQ &KRSRVLWVWKDWPXOWLSOHSDUDPHWHUFKDQJHVZLWKFRPSOH[LQWHUDFWLRQV PLJKWEHDWZRUN%\UGDQG6DOW]PDQDQG6DOW]PDQDQG%\UGE GHPRQVWUDWHWKDWVWLIIQHVVVFDOLQJFDQQRWDFFRXQWIRUFKDQJHVLQUHODWLYHWLP LQJRUSKUDVHLQLWLDOPDJQLWXGHWZRRWKHULPSRUWDQWHIIHFWVDWERXQGDULHVLQ DGGLWLRQWROHQJWKHQLQJ7KLVLVEHFDXVHVXFKVWLIIQHVVDGMXVWPHQWPRGXODWHV


DVLQJOHSRLQWDWWUDFWRUSDUDPHWHUYDOXHEXWGRHVQRWVSHFL¿FDOO\LQÀXHQFH WKHGRPDLQRIJHVWXUDODFWLYDWLRQZKLFKFRQWUROVWKHJDWLQJLQRIPXOWLSOH SDUDPHWHUYDOXHV2QHDSSURDFKWKDWZH¶YHWDNHQLVHQGRZLQJMXQFWXUHVZLWK G\QDPLFVDWWKHDFWLYDWLRQOHYHOUDWKHUWKDQWKHSDUDPHWHUOHYHO%\UGDQG 6DOW]PDQ 7KLVDSSURDFKVORZVWKHWLPHFRXUVHRIJHVWXUDODFWLYDWLRQV DQGKDVERWKLQWUDDQGLQWHUJHVWXUDOWLPLQJFRQVHTXHQFHV7KHMXQFWXUHUH ODWHGFKDQJHVLQJHVWXUDORYHUODSLQWXUQKDYHVSDWLDOFRQVHTXHQFHVWKRXJK VSDWLDOSDUDPHWHUVDUHQRWPDQLSXODWHGGLUHFWO\

)LJXUH 6FKHPDWLF UHSUHVHQWDWLRQ RI 6PLOMDQLþ¶V 6HUELDQ VWLPXOL VKRZQ ZLWK RYHUODSSLQJ JHVWXUHVFRRUGLQDWHGOHIWZDUGLQWKHYRZHOIRUWKHSKUDVH LQLWLDOVLWXDWLRQOHIWFROXPQ DQGULJKWZDUGLQWKHYRZHOIRUSKUDVH¿QDO SRVLWLRQULJKWFROXPQ 7KHPD[LPDOHIIHFWRIWKHJHVWXUHVZRXOGEH REVHUYHG IRU WKH HDUO\SHDN DFFHQW LQ WKH LQLWLDO FRQGLWLRQ DQG WKH ODWH SHDNDFFHQWLQWKH¿QDOFRQGLWLRQ

&KDOOHQJHVIRUDG\QDPLFDODSSURDFKWRSURVRG\ )XUWKHUFKDOOHQJHVIRUG\QDPLFDODFFRXQWVRISURVRG\DERXQGDQGRQHRI WKHVHUHYLVLWVWKHWUDGLWLRQDOSKRQRORJ\SKRQHWLFVWHQVLRQEHWZHHQFDWHJRUL

'DQL%\UG

FDO DQG JUDGLHQW FKDUDFWHUL]DWLRQ RI SKRQRORJLFDO XQLWV 0DQ\ GLVFXVVLRQV RI SURVRG\ DVVXPH D VPDOO ¿[HG VHW RI KLHUDUFKLFDOO\UHODWHG SURVRGLF GR PDLQVZLWKUHFXUVLRQZLWKLQDOHYHOGLVDOORZHGRUDWOHDVWIURZQHGXSRQ HJ 6HONLUN 1HVSRU DQG 9RJHO &DWHJRULFDO GLIIHUHQFHV LQ ERXQGDU\W\SHDUHJHQHUDOO\LPSOLFLWLQWKLVDSSURDFK,WLVZRUWKFDUHIXOO\ HYDOXDWLQJERWKDVVXPSWLRQV±QDPHO\WKHH[LVWHQFHRIDIHZTXDOLWDWLYHO\ GLIIHUHQWSURVRGLFERXQGDULHVLQDODQJXDJHDQGWKHVWULFWOD\HULQJRIWKHVH GRPDLQV 6WULFW /D\HULQJ LPSOLHV WKDW DQ\ GLIIHUHQFH LQ ERXQGDU\ VWUHQJWK LVE\GH¿QLWLRQDGLIIHUHQFHLQERXQGDU\W\SH/DGG6HFWLRQ WR ZKLFK ZH UHIHU WKH LQWHUHVWHG UHDGHU GLVFXVVHV VRPH GLI¿FXOWLHV ZLWK WKLV IRFXVLQJRQWKHSODXVLELOLW\RIUHFXUVLRQ,QWKHFRQWH[WRIWKHSUHVHQW&RP PHQWDU\OHW¶VKHUHWDNHDEULHIORRNDWWKHSRVWXODWLRQRIDVPDOOVHWRIFDW HJRULFDOO\GLIIHUHQWERXQGDU\W\SHVDQGWKHDFFRPPRGDWLRQRIWKLVZLWKLQD G\QDPLFDODSSURDFK:LWKLQ$UWLFXODWRU\3KRQRORJ\WKHG\QDPLFDOGHVFULS WLRQRISKRQRORJLFDOXQLWVDOORZVLQSULQFLSOHJUDGLHQWO\YDU\LQJVSHFL¿FD WLRQ RI JHVWXUDO SDUDPHWHU YDOXHV DQG WKHLU UHODWLYH WLPLQJ VHH HJ %\UG +RZHYHULQPDQ\WKRXJKQRWDOOLQVWDQFHVRQO\FHUWDLQDWWUDFWRUED VLQVLQWKLVSRWHQWLDOFRQWLQXXPDUHREVHUYHGWREHXVHGLQODQJXDJHV6RLI SURVRGLF HYHQWV KDYH D G\QDPLF UHDOLW\ RQH QHHGV WR H[SORUH ZKHWKHU WKH VWUHQJWK DFWLYDWLRQ RI WKHVH SURPLQHQFH DQG MXQFWXUDO HYHQWV LV FRQWLQX RXVO\YDULDEOHHJJUDGLHQW RUZKHWKHUSURVRGLFHYHQWVGHPRQVWUDWHFOHDU DQGVSHFL¿FGLIIHUHQFHVLQWKLVUHJDUGSHUKDSVEHKDYLQJDVVFDODURUHYHQ IXUWKHUFRQVWUDLQHG ,Q&KR¶VVWXG\DQGPDQ\RWKHUVQRGLVWLQFWVHSDUDWLRQDPRQJGDWDIURP GLIIHUHQWERXQGDU\FRQGLWLRQVLVREVHUYHGZLWKLQVXEMHFWVH[FOXGLQJWKRVH FDVHVZLWKSDXVLQJ &RQWUDVWVXFKEHKDYLRUIRUH[DPSOHZLWKWKHGLVWULEX WLRQRIWKHDFRXVWLFRUDUWLFXODWRU\ FRUUHODWHVRIRWKHUFRQWUDVWLYHSKRQHWLF FDWHJRULHV VXFK DV WKH WLPLQJEDVHG927 FRQWUDVW LQ (QJOLVK XQDVSLUDWHG DQGDVSLUDWHGVWRSV,QVXFKFRQWUDVWVWKHWZRFDWHJRULHVDUHGH¿QLWHO\VHSD UDWHGLQWKHLUREVHUYHGYDOXHVLHFRRUGLQDWLRQLQWRWZRFOXVWHUVVHHHJ %OXPVWHLQ )LJ WRS SDQHO 7KLV LV TXLWH GLIIHUHQW WKDQ WKH WLPLQJ EHKDYLRUZHREVHUYHIRUFRQWUDVWLQJSURVRGLFFDWHJRULHVVXFKDV33DQG,3 LQWKHDEVHQFHRISDXVLQJDUJXDEO\DTXDOLWDWLYHO\GLIIHUHQWSKHQRPHQRQ ZKLFKGRHVQ¶WVHHPWRGH¿QLWLYHO\VHSDUDWHLQWRFDWHJRULFDOO\QRQRYHUODS SLQJ JURXSV 2I FRXUVH WKLV LV VHQVLEOH LQ OLJKW RI WKH IDFW WKDW SKRQHPLF FRQWUDVWSOD\VDFULWLFDOUROHLQOH[LFDODFFHVVZKLOHSURVRGLFVWUXFWXUHSOD\V DGLIIHUHQWUROHQDPHO\RQHUHODWHGWRLQIRUPDWLRQSURFHVVLQJE\VSHDNHUV DQG OLVWHQHUV ZKLFK LV LQÀXHQFHG E\ QRQJUDPPDWLF DV ZHOO DV JUDPPDWLF YDULDEOHV


)XUWKHULQSURGXFWLRQH[SHULPHQWVKDYLQJERXQGDULHVFODVVL¿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wYH OLVWHQHUVLQLGHQWLI\LQJERXQGDU\W\SHVLVDQRWKHUNQRWW\LVVXH±VHH6ZHUWV ZKR¿QGVWKDWWH[WXDOFXHVUDWKHUWKDQSURVRGLFYDULDEOHVSUHGRPLQDWH IRUODEHOHUVPDNLQJSURVRGLFMXGJPHQWVEXWVHHGH3LMSHUDQG6DQGHUPDQ IRUFRQWUDVWLQJUHVXOWV WKRXJKDFRQVLGHUDWLRQRISKRQHWLFLQIRUPDWLRQ GRHVLQFUHDVHLQWHUOLVWHQHUFRQVLVWHQF\IRUWKH]HURDQGVWURQJHVWERXQGDU\ UDWLQJVSUHVXPDEO\WKHVWURQJHVWERXQGDULHVDUHWKHRQHVZLWKVXEVWDQWLDO SDXVHV 7KH H[SHULHQFH RI PDQ\ OLQJXLVWV VXJJHVWV IRU H[DPSOH WKDW$F FHQWXDO,QWHUPHGLDWH3KRQRORJLFDODQG,QWRQDWLRQDO3KUDVHVDUHQRWRULRXVO\ GLI¿FXOW WR GH¿QH DQG GLVWLQJXLVK FRQVLVWHQWO\ DV /DGG GHVFULEHV VRPH,QWRQDWLRQDO3KUDVHVVHHPELJJHUWKDQRWKHUV'H3LMSHUDQG6DQGHU PDQ HYDOXDWHDPHDVXUHWHUPHG3HUFHSWXDO%RXQGDU\6WUHQJWKDQG ¿QGWKDWWKHLUUHVXOWVDUJXHDJDLQVWWKH6WULFW/D\HU+\SRWKHVLVLQ³WKDWWKHUH DUHQRDSSDUHQWSHDNVLQWKHGLVWULEXWLRQRI3%6YDOXHV³7KHREVHUYHG 3%6YDOXHVGRQRWDSSHDUWRFOXVWHUDURXQGDOLPLWHGQXPEHURIWDUJHWYDOXHV ZKLFKFRXOGWKHQEHVDLGWRUHÀHFWSURVRGLFFRQVWLWXHQWVWUXFWXUH´S ,QFRQWUDVWOLVWHQHUVVHHPUHODWLYHO\UHOLDEOHDWGHWHUPLQLQJUHODWLYHVWUHQJWK RURUGHULQJ RIERXQGDULHVHJGH3LMSHUDQG6DQGHUPDQ ,IDVFDODUGHVFULSWLRQZHUHWRFDSWXUHLPSRUWDQWDVSHFWVRIDUWLFXODWLRQDW SKUDVHHGJHVODERUDWRU\SKRQRORJLVWVZRXOGZDQWWRFRQVLGHUKRZDG\QDP LFGHVFULSWLRQRIGRPDLQHGJHV±IRUH[DPSOHLQWHUPVRIYDULDEOHVWUHQJWK DFWLYDWLRQ RI SURVRGLF JHVWXUHV DW MXQFWXUHV ± PLJKW EH DSSOLHG WR RWKHU SURVRG\UHODWHGOLQJXLVWLFSKHQRPHQDVXFKDVGRPDLQOLPLWHGSKRQRORJLFDO UXOHV+\PDQ DQGWKHGLVWULEXWLRQRIERXQGDU\WRQHV)RUH[DPSOHWKH SHUPLVVLEOH GLVWULEXWLRQ RI ERXQGDU\ WRQHV LH WKHLU SKRQRWDFWLFV ZRXOG SUHVXPDEO\EHVWURQJO\LQÀXHQFHGRUFRQVWUDLQHGE\WKHVWUHQJWKRIWKHMXQF WXUH ZLWK ZKLFK WKH\ DUH DVVRFLDWHG /LNHZLVH SKRQRORJLFDO SURFHVVHV UH VWULFWHGWRSDUWLFXODUSURVRGLFGRPDLQVRUMXQFWXUHVZRXOGEHH[SHFWHGWREH VHQVLWLYHWRVFDODUERXQGDU\VWUHQJWK,WLVOHVVFOHDUZKHWKHUDG\QDPLFDF FRXQWFRXOGDFFRPPRGDWHDVLWXDWLRQLQZKLFKDSKRQRORJLFDOSKHQRPHQRQ VHOHFWHGDQLQWHUPHGLDWHV\PEROLFDOO\GHVLJQDWHG ERXQGDU\W\SHDQGRQO\

'DQL%\UG

WKDWERXQGDU\QRQHKLJKHUVWURQJHUDQGQRQHORZHUZHDNHU ,QWHUHVWLQJO\ HPSLULFDOO\FRQ¿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¿QLQJDWWULEXWHV RISURVRGLFHYHQWVZLOOEHGHWHUPLQHGWREHKDYHVLPLODUO\+RZHYHUVLQFH SKUDVDODQGSURPLQHQFHLQIRUPDWLRQGRQRWVHUYHWKHUROHRIHQFRGLQJOH[LFDO FRQWUDVWLWPLJKWEHXQVXUSULVLQJIRUHDFKRIWKHVHWREHVFDODURUJUDGLHQWLQ QDWXUHUHÀHFWLQJIRUH[DPSOHGHJUHHRIHPEHGGLQJ$G\QDPLFDOV\VWHPV DSSURDFKWRVSHHFKSURGXFWLRQDOORZVIRUERWKFDWHJRULFDOWKRXJKTXDQWLWD WLYH UDWKHU WKDQ SXUHO\ V\PEROLF GLIIHUHQFHV DPRQJ FRQVWULFWLRQ JHVWXUHV IRUPLQJWKHEDVLVRIFRQWUDVWDQGIRUJUDGLHQWGLIIHUHQFHVDPRQJMXQFWXUDO DQGSURPLQHQFHHYHQWVRUJDQL]LQJLQIRUPDWLRQDERYHWKHVLQJOHZRUGOHYHO ,QFRQWUDVWLWLVGLI¿FXOWWRDFFRPPRGDWHERWKW\SHVRIOLQJXLVWLFSKHQRP HQRQ±FDWHJRULFDODQGJUDGLHQW±VHDPOHVVO\ZLWKLQDV\PEROLFDSSURDFK

3URVRG\ZLWKLQWKHG\QDPLFDODSSURDFK 7KLV FROOHFWLRQ IURP /DE3KRQ HQFRXUDJHV DQ H[SORUDWLRQ RI SURVRG\ IURP D G\QDPLFDO SHUVSHFWLYH ,I D G\QDPLFDO DSSURDFK FDQ EH VXFFHVV IXOO\ GHYHORSHG IRU SKUDVDO DQG SURPLQHQFH VWUXFWXUH WKLV ZLOO DOORZ WKH DUWLFXODWRU\ YDULDELOLW\ HQJHQGHUHG E\ WKH LQIRUPDWLRQDO VWUXFWXUH RI XWWHU DQFHVWREHWUHDWHGLQDZD\FRQFHSWXDOO\SDUDOOHOWRWKHWUHDWPHQWRIYDUL DELOLW\GXHWRVHJPHQWDOFRQWH[W7KHIXWXUHPD\VKRZXVWKDWSKUDVDOMXQF WXUHVDQGSURPLQHQFHHYHQWVMXVWOLNHFRQVWULFWLRQJHVWXUHVKDYHLQKHUHQW WHPSRUDO SURSHUWLHV DUH WHPSRUDOO\ FRRUGLQDWHG DQG KDYH D G\QDPLFDO LQVWDQWLDWLRQ


1RWHV

7KLV ZRUN ZDV VXSSRUWHG E\ 1,+ JUDQW '& 7KH DXWKRU WKDQNV WKH FRQ WULEXWRUVWR/DE3KRQWKHRUJDQL]HUVRI/DE3KRQDQG(GZDUG)OHPPLQJ%RE /DGG0DUN/LEHUPDQ/RXLV*ROGVWHLQ(OOLRW6DOW]PDQDQG'RXJ:KDOHQ 7KH 6WULFW /D\HU +\SRWKHVLV VWDWHV WKDW D FDWHJRU\ RI OHYHO L LQ WKH KLHUDUFK\ LPPHGLDWHO\ GRPLQDWHV D VHTXHQFH RI FDWHJRULHV RI OHYHO L± 6HONLUN /DGG QRWHV WKDW WKH 6WULFW /D\HU +\SRWKHVLV ZDV RULJLQDOO\ IRUPXODWHG E\6HONLUN DVDµXVHIXOZRUNLQJK\SRWKHVLV¶S )RUDPRUHÀ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¿UVWSODFH±D FOHDUFLUFXODULW\SUREOHP

5HIHUHQFHV %HFNPDQ0DU\(DQG-DQ(GZDUGV ,QWRQDWLRQDOFDWHJRULHVDQGWKHDUWLFXODWRU\FRQWURORIGXUDWLRQ,Q¥VCR,¥RCRÓ@RU>¥ITCR,¥MCFX@ 7DEOH 7KHQRQZRUGDQGUHDOZRUGVWLPXOLSUHVHQWHGWRWKHVXEMHFWV$617DQG '.DQGWKHDQDO\VLVRIWKHVHVWLPXOLLQWKHVWXGLHVRILQWHUJHVWXUDOWLPLQJ 7%DQG/$PDJQLWXGHDQGGXUDWLRQ &RQV 3RVLWLRQ M

S

RQVHW

FRGD

S

RQVHW

FRGD

M

RQVHW FRGD

1RQZRUGVWLPXOL ,3$ 7UDQVOLW VCR,CRÓ WDSMDS\ VCRR,CRÓ WDSSMDS\ VCVR,CRÓ WDWSMDS\ VCR,CRÓ WDS¶DS\ VCR,RCRÓ WDS¶SDS\ VCR,VCRÓ WDS¶WDS\ VCR,MCRÓ WDS¶NDS\ VCRCRÓ WDSDS\ VCVRCRÓ WDWSDS\ VCMRCRÓ WDNSDS\ VCRCRÓ WDSDS\ VCRVCRÓ WDSWDS\ VCRMCRÓ WDSNDS\ VCLCRÓ WDMDS\ VCRLCRÓ WDSMDS\ VCLCRÓ WDMDS\ VCLRCRÓ WDMSDS\

5HDOZRUGVWLPXOL $QDO\VLV ,3$ 7UDQVOLW 7LPLQJ 7% NCR,CVL VKODSMDWDMD 9 9 ITCRR,CVX JUDESMDWRJR 9 DTCVR,CVX EUDWSMDWRJR ITCR,CPI,+N JUDE¶DQJHOD 9 9 ITCR,RCFL JUDE¶SDGDMD 9 ITCR,VQOPX JUDE¶WRPQRJR ITCR,MCFX JUDE¶NDçGRJR NCRCFL áODSDGDMD 9 DTCVRCFL EUDWSDGDMD 9 DTCMRCFL EUDNSDGDMD JUDEDQJHOD ITCRCPI,+N ITCRVQOPX JUDEWRPQRJR ITCRMCFX JUDENDçGRJR 9 9 9 9 9 9

/$ 9 9 9 9 9

9 9 9 9

7KHQHHGWRFRQWUROSUHFLVHO\IRUWDUJHWFRQVRQDQWVDQGHQYLURQPHQWVWRRN SUHFHGHQFHRYHUWKHVHPDQWLFSODXVLELOLW\RIWKHVHZRUGFRPELQDWLRQV7KH

$OH[HL.RFKHWRY

UHDO ZRUG XWWHUDQFHV ZHUH YHUEV QRXQDGMHFWLYH FRPELQDWLRQV RI WKH IRO ORZLQJ 5XVVLDQ ZRUGV áOD VKH µZDONHG¶ JUDE¶ µURE¶ LPS JUDE µKRUQ EHDP¶ EUDW µEURWKHU¶ EUDN µÀDZ¶ SMDWDMD µWKH ¿IWK¶ IHP DQJHOD µDQ JHO¶ DFF VJ SMDWRJR µWKH ¿IWK¶ DFF VJ SDGDMD µIDOOLQJ¶ WRPQRJR µIDW¶ DFFVJ NDçGRJRµHYHU\¶ $OOVWLPXOLZHUHHPEHGGHGLQDFDUULHUSKUDVH =¥'V¡ BBBBBB¡¥RLCVL@µ7KLVLVBBBBDJDLQ¶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¶MTCRR,CVXNUDESMDWRJRDTCVR,CVXEUDW SM RQVHW SMDWRJR ITCR,CF7JUDE¶$GXITCR,RCFLJUDE¶SDGDMDITCR,VCPVUÓJUDE¶WDQF\ FRGD ITCR,MCFV5P,+MCJUDE¶NDGRĀQLND S RQVHW RCVSDWDTCVRCFLEUDWSDGDMDDTCMRCFLEUDNSDGDMD MTCRCFÓNUDE$G\MTCRVCPVUNUDEWDQFDMTCRMCFV5P,+MCNUDE FRGD NDGRĀQLND M RQVHW RLCPÓLSMMDQ\M FRGD DCLVEDMWXQLPYRMQ

3URFHGXUHDQGDQDO\VLV 5HFHLYHUV IRU WKH DUWLFXORPHWHU ZHUH SODFHG DW WKH IROORZLQJ PLGVDJLWWDO SRLQWVXSSHUOLSDQGORZHUOLS8/DQG//SODFHGDWWKHERUGHURIYHUPLO OLRQ ORZHULQFLVRUVDVDQHVWLPDWHRIMDZPRYHPHQW DQGIRXUSRLQWVRQ WKHWRQJXH2QHRIWKHWRQJXHUHFHLYHUVZDVSRVLWLRQHGDERXWPPIURPWKH

6\OODEOHSRVLWLRQHIIHFWVDQGJHVWXUDORUJDQLVDWLRQ

WRQJXHWLS77 DQRWKHUUHFHLYHUZDVDWWDFKHGDVIDUEDFNRQWKHWRQJXHDV ZDVSRVVLEOHURXJKO\RQWKHWRQJXHGRUVXP7' 7KHRWKHUWZRUHFHLYHUV WRQJXHERG\7%PRUHDQWHULRU DQGWRQJXHERG\7%PRUHSRVWH ULRU ZHUHSODFHGEHWZHHQWKHVH¿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± WKH OLS DSHUWXUH /$ ±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³OLSDSHUWXUH´/$ DQGWKH³WRQJXH ERG\SRVLWLRQ ´7% 7DQJHQWLDO YHORFLW\ PLQLPD IRU DOO UHFHLYHUV ZHUH DXWRPDWLFDOO\ FDOFX ODWHGEDVHGRQWKHYHORFLW\LQWKH[DQG\FRRUGLQDWHVRIWKHVHUHFHLYHUVVHH &KLWRUDQ *ROGVWHLQ DQG %\UG 7KH YHORFLW\ PLQLPD REWDLQHG ZHUH XVHG WR GHWHUPLQH WHPSRUDO DUWLFXODWRU\ ODQGPDUNV ±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¿UVW PHDVXUHPHQW ZDV GH¿QHG DV D SHULRGRIWLPHEHWZHHQWKHDFKLHYHPHQWRIWZRFRQVWULFWLRQVWKHOLSV/$

$OH[HL.RFKHWRY

RU // DQG7% WKH VHFRQG PHDVXUHPHQW ZDV GH¿QHG DV D SHULRG RI WLPH EHWZHHQWKHUHOHDVHRIWKHVHFRQVWULFWLRQV7KHODJZDVFRQVLGHUHGSRVLWLYHLI WKHDFKLHYHPHQWRUUHOHDVHRIWKH7%IROORZHGWKHFRUUHVSRQGLQJODQGPDUNV RIWKHOLSVLWZDVFRQVLGHUHGQHJDWLYHLIWKHDFKLHYHPHQWRUUHOHDVHRIWKH7% SUHFHGHGWKHFRUUHVSRQGLQJODQGPDUNVRIWKHOLSV7KHVHPHDVXUHPHQWVZHUH OLPLWHGWRWKHPLQLPDOO\FRQWUDVWLYHQRQZRUGDQGUHDOZRUGXWWHUDQFHVZLWK DVLQJOHSMLQV\OODEOHRQVHWDQGFRGD DQGWKHZRUGERXQGDU\VHTXHQFHVRI SDQGMSMDQGMSVHH7DEOH 7KH JHVWXUDO PDJQLWXGH PHDVXUHPHQWV ZHUH EDVHG RQ WKH YHUWLFDO DQG KRUL]RQWDOSHDNYDOXHVRIWKH7%FRQVWULFWLRQDQGWKHYHUWLFDOSHDNYDOXHVRI //DVZHOODVRQWKHPLQLPXPYDOXHVRI/$*HVWXUDOGXUDWLRQZDVREWDLQHG EDVHG RQ WKH VDPH DUWLFXODWRU\ ODQGPDUNV DV WKH DQDO\VLV RI LQWHUJHVWXUDO WLPLQJ ,W LQYROYHG WKH PHDVXUHPHQWV RI WKH GXUDWLRQ RI WKH FORVLQJ PRYH PHQW WKH WLPH IURP WKH RQVHW RI PRYHPHQW WRZDUGV D FRQVWULFWLRQ WR WKH DFKLHYHPHQWRIWKLVFRQVWULFWLRQ DQGSODWHDXWKHWLPHEHWZHHQWKHDFKLHYH PHQWRIWKHFRQVWULFWLRQDQGWKHEHJLQQLQJRIWKHPRYHPHQWDZD\IURPWKLV FRQVWULFWLRQ 7KH7%PHDVXUHPHQWVZHUHGRQHIRUSMDQGMWKH//UDLVLQJ DQG/$PHDVXUHPHQWVZHUHGRQHIRUSMDQGSVHH7DEOH 7KHUHVXOWVRIDOOPHDVXUHPHQWVZHUHIXUWKHUWHVWHGLQDQXPEHURI$QDO\ VHVRI9DULDQFH$129$V VHSDUDWHO\IRUHDFKVXEMHFW(DFKWHVWLQYROYHG WKUHHEHWZHHQLWHPIDFWRUV&RQVRQDQWSSMDQGM 3RVLWLRQV\OODEOH RQVHWYVV\OODEOHFRGD DQG7\SHRIVWLPXOLQRQZRUGVYVUHDOZRUGV ,Q HDFKFDVH7XNH\+6'SRVWKRFWHVWVZHUHSHUIRUPHGWRLQYHVWLJDWHVLJQL¿ FDQWLQWHUDFWLRQV

5HVXOWV ,QWHUJHVWXUDOWLPLQJ 7KHUHVXOWVIRUDFKLHYHPHQWODJDUHSUHVHQWHGLQ)LJXUH+HUHWKHYDOXHVIRU WKHODJLQVHTXHQFHVSMDQGMSDUHJLYHQDWWKHERWWRPDQGWKHYDOXHVIRUSM DWWKHWRS6LJQL¿FDQWHIIHFWVDQGLQWHUDFWLRQVIRUERWKODJPHDVXUHPHQWVDUH VKRZQLQ7DEOH2YHUDOOWKHYDOXHVIRUWKHODJPHDVXUHPHQWVZHUHORZHU LQFRGDSRVLWLRQWKDQLQRQVHWSRVLWLRQLQGLFDWLQJWKDWV\OODEOH¿QDOO\WKH 7%FRQVWULFWLRQZDVERWKDFKLHYHGDQGUHOHDVHGHDUOLHUZLWKUHVSHFWWRWKH /$FRQVWULFWLRQWKDQZDVWKHFDVHLQLQLWLDOSRVLWLRQ7KHUHZDVKRZHYHUD VLJQL¿FDQW&RQVRQDQW;3RVLWLRQLQWHUDFWLRQIRUDOOVXEMHFWVSRLQWLQJWRFRQ VLGHUDEOHGLIIHUHQFHVLQWKHHIIHFWRISRVLWLRQEHWZHHQWKHVHTXHQFHVRIS


DQGMRQWKHRQHKDQGDQGWKHFRQVRQDQWSMRQWKHRWKHU,QDGGLWLRQWKHUH ZDVDPDLQHIIHFWRI&RQVRQDQWIRUVRPHRIWKHVXEMHFWV

)LJXUH 0HDQYDOXHVIRUDFKLHYHPHQWODJIRUSMLQDBDRQVHW DQGDBDFRGD LQQRQZRUGVDQGUHDOZRUGVDQGIRUWKHVHTXHQFHVSMFRPSDUHGZLWK RQVHW DQGMSFRPSDUHGZLWKFRGD LQQRQZRUGVLQPV IRUIRXUVXE MHFWV 7DEOH $VXPPDU\RIVLJQL¿FDQWPDLQHIIHFWVDQGLQWHUDFWLRQVIRUDFKLHYHPHQW ODJD DQGUHOHDVHODJE IRUIRXUVXEMHFWV

D

3RVLWLRQ &RQVRQDQW

E

3RVLWLRQ; &RQVRQDQW 3RVLWLRQ

$6 ) S QRWVLJQL¿FDQW

&RQVRQDQW

) S ) S QRWVLJQL¿FDQW

3RVLWLRQ; &RQVRQDQW

) S

17 ) S ) S ) S ) S ) S ) S

'. ) S ) S ) S ) S ) S ) S

$. ) S ) S QRWDYDLODEOH ) S QRWVLJQL¿FDQW QRWDYDLODEOH

$OH[HL.RFKHWRY

6HTXHQFHVRISDQGM 7KHUHVXOWVIRUWKHVHTXHQFHVIRUWKH¿UVWWKUHHVXEMHFWV$617DQG'. DUHFRQVLGHUHGVHSDUDWHO\IURPWKRVHIRUVXEMHFW$.EHFDXVHRIFHUWDLQGLI IHUHQFHVLQWKHVWLPXOL:HFDQVHHIURP)LJXUHWKDWWKHSRVLWLRQDOGLIIHU HQFHVLQDFKLHYHPHQWODJEHWZHHQWKHVHTXHQFHVSMDQGMSIRUVXEMHFWV$6 17DQG'.ZHUHVXEVWDQWLDO)RUSMWKHDFKLHYHPHQWRI7%IROORZHGWKH DFKLHYHPHQWRI/$E\DERXW±PVRQDYHUDJH±DSRVLWLYHODJ)RUMS WKHDFKLHYHPHQWRI7%SUHFHGHGWKHDFKLHYHPHQWRI/$E\DERXW±PV ±DQHJDWLYHODJ7KHSRVLWLRQDOGLIIHUHQFHVLQUHOHDVHODJZHUHVLPLODUIRU SM7%IROORZHG/$E\DERXW±PVIRUMS7%SUHFHGHG/$E\DERXW ±PV2YHUDOOWKHODJYDOXHVLQGLFDWHWKDWWKHFRQVWULFWLRQVRIWKHWZR JHVWXUHVZHUHWLPHGVHTXHQWLDOO\DVRQHPLJKWH[SHFWIRUVHTXHQFHVRIWZR FRQVRQDQWV\HWWKHUHZDVOHVVODJLQWKHDUWLFXODWLRQRIMSWKDQIRUSM 7KH WLPLQJ REVHUYHG IRU VXEMHFW$. LQ WKH ZRUGLQWHUQDO VHTXHQFH SM ZDVVLPLODUWRWKHWLPLQJIRUWKHRWKHUVXEMHFWVZKHUHSMZDVDZRUGERXQG DU\VHTXHQFH WKHUHZDVDVXEVWDQWLDOSRVLWLYHDFKLHYHPHQWDQGUHOHDVHODJ DERXWDQGPVUHVSHFWLYHO\ $QDGGLWLRQDOH[DPLQDWLRQRIWKHWLPLQJ RI 7% DQG 77 LQ WKH ZRUGLQWHUQDO FOXVWHUV MW DQG MQ DYDLODEOH IRU WKLV VXEMHFWVHH7DEOH VKRZHGQHJDWLYHDFKLHYHPHQWDQGUHOHDVHODJDERXW DQGPV EXWRIDVRPHZKDWOHVVHUGHJUHHWKDQWKH7%/$ODJIRXQGIRU WKHRWKHUVXEMHFWV

7KHFRQVRQDQWSM :HFDQVHHIURP)LJXUHWKHXSSHUEDUV WKDWWKHSRVLWLRQDOGLIIHUHQFHVLQ DFKLHYHPHQW ODJ EHWZHHQ WKH RQVHW DQG FRGD SM ZHUH PXFK VPDOOHU WKDQ EHWZHHQWKHWZRVHTXHQFHV)RUWKHV\OODEOHLQLWLDOSMWKHDFKLHYHPHQWRI 7%IROORZHGWKHDFKLHYHPHQWRI/$E\DERXW±PVPHDQYDOXHV )RU WKHV\OODEOH¿QDOSMWKHODJYDOXHVZHUHPRUHYDULDEOHWKHDFKLHYHPHQWRI 7%SUHFHGHGWKHDFKLHYHPHQWRI/$IRUVXEMHFWV$6'.DQG$.E\DERXW ±PV ZKLOHWKHDFKLHYHPHQWRI7%IROORZHGWKHDFKLHYHPHQWRI/$IRU VXEMHFW 17 E\ DERXW PV $OO VXEMHFWV KRZHYHU VKRZHG D VLJQL¿FDQW GLIIHUHQFHLQODJYDOXHVEHWZHHQWKHRQVHWDQGFRGDSMZKLFKYDULHGIURP DERXWWRPVS± 7KHSRVLWLRQDOGLIIHUHQFHVLQUHOHDVHODJ ZHUHVLPLODUDSRVLWLYHODJRIDERXW±PVIRUWKHV\OODEOHLQLWLDOSMDQG HLWKHUQHJDWLYHRUSRVLWLYHODJUDQJLQJIURP±WRPVIRUWKHV\OODEOH ¿QDO SM 7KUHH RXW RI IRXU VXEMHFWV VKRZHG VLJQL¿FDQW GLIIHUHQFHV LQ ODJ


YDOXHVEHWZHHQWKHRQVHWDQGFRGDSM$6'.$.S± WKHVH GLIIHUHQFHKRZHYHUYDULHGVXEVWDQWLDOO\IURPDERXWPVIRUVXEMHFW$6WR DERXWPVIRUVXEMHFW$. 2YHUDOOWKHWZRFRQVWULFWLRQVLQWKHSURGXFWLRQRIWKHFRQVRQDQWSMZHUH WLPHGUHODWLYHO\VLPXOWDQHRXVO\\HWWKHSRVLWLRQDOGLIIHUHQFHVLQWLPLQJZHUH LQWKHVDPHGLUHFWLRQDVWKHGLIIHUHQFHVEHWZHHQVHTXHQFHVRIFRQVRQDQWVD SRVLWLYHODJIRUWKHRQVHWSMFRPSDUDEOHWRWKHVXEVWDQWLDOSRVLWLYHODJIRU WKHVHTXHQFHSMDQGD]HURWRQHJDWLYHODJIRUWKHFRGDSMLQVRPHFDVHV FRPSDUDEOHWRWKHQHJDWLYHODJIRUWKHVHTXHQFHMS7KHGLIIHUHQFHEHWZHHQ SM DQG WKH VHTXHQFHV RI S DQG M LQ WLPLQJ ZDV DOZD\V PDLQWDLQHG WKH RQVHWSMDQGWKHVHTXHQFHSMGLIIHUHGLQDERXW±PVLQDFKLHYHPHQW ODJDQGLQDERXW±PVLQUHOHDVHODJWKHFRGDSMDQGWKHVHTXHQFHMS GLIIHUHGLQDERXW±PVLQDFKLHYHPHQWODJDQGLQDERXW±PVLQUH OHDVHODJ$QLQIRUPDOH[DPLQDWLRQRIVWDQGDUGGHYLDWLRQVVXJJHVWHGVOLJKWO\ KLJKHUYDULDELOLW\IRUWKHFRGDSMIRUDWOHDVWVRPHVXEMHFWV$617$. VHHHUURUEDUVLQ)LJXUH

0DJQLWXGHDQGGXUDWLRQRI7RQJXH%RG\ 0DJQLWXGH 7KH PDJQLWXGH UHVXOWV IRU PD[LPXP7% KHLJKW ZLWK UHVSHFW WR WKH XSSHU WHHWK D DQG7% IURQWLQJ E DUH SUHVHQWHG LQ7DEOH 7KH YDOXHV IRU V\O ODEOHLQLWLDODQGV\OODEOH¿QDOSMDUHSUHVHQWHGRQWKHOHIWDQGWKRVHIRUM LQWKHVDPHSRVLWLRQVDUHJLYHQRQWKHULJKW7KHUHVXOWVIRU7%KHLJKWVHH 7DEOHD LQGLFDWHWKDWWKHUHZDVDPDLQHIIHFWRI3RVLWLRQIRUDOOIRXUVXEMHFWV >$6) S17) S'. ) S$.) S@7%ZDV VLJQL¿FDQWO\ORZHULQFRGDSRVLWLRQWKDQLQRQVHWSRVLWLRQ7KHUHZDVDPDLQ HIIHFWRI&RQVRQDQWIRUDOOVXEMHFWV>$6) S17 ) S'.) S$.) S@7%GXULQJMZDVVXEVWDQWLDOO\KLJKHUWKDQGXULQJ SM)RURQHVXEMHFWWKHUHZDVDVLJQL¿FDQW&RQVRQDQW;3RVLWLRQLQWHUDFWLRQ >'.) S@WKHIDFWRU3RVLWLRQZDVVLJQL¿FDQWIRUM RQO\2YHUDOOV\OODEOH¿QDOMVKRZHGPRUHUHGXFWLRQRQDYHUDJHE\DERXW WRPP WKDQV\OODEOH¿QDOSMDERXWWRPP 7KHUHGXFWLRQRIWKH 7%IRUMZDVDOVRPRUHFRQVLVWHQWDFURVVVXEMHFWVWKDQWKHUHGXFWLRQRIWKH VDPHJHVWXUHIRUSM$VDUHVXOWWKH7%UDLVLQJGLIIHUHQFHEHWZHHQWKHWZR

$OH[HL.RFKHWRY

FRQVRQDQWV±UDWKHUVXEVWDQWLDOLQRQVHWSRVLWLRQWRPP ±ZDVOHVV DSSDUHQWLQFRGDSRVLWLRQWRPP 7DEOH 0HDQ YDOXHV RI D WRQJXH ERG\ KHLJKW PP DERYH WKH XSSHU LQFLVRUV DQGE WRQJXHERG\IURQWLQJPPSRVWHULRUWRXSSHULQFLVRUV±VPDOOHU QXPEHUVDUHPRUHIURQWHG IRUSMDQGMLQV\OODEOHRQVHWDBDSBD DQGV\OODEOHFRGDDBDDBS LQQRQZRUGVDQGUHDOZRUGVIRUSMRQO\ IRUIRXUVXEMHFWV

D

E

RQVHWSM FRGDSM RQVHWM FRGDM RQVHWSM FRGDSM RQVHWM FRGDM

$61

171

'.1

$.1

)RU7%IURQWLQJVHH7DEOHE WKHUHZDVDPDLQHIIHFWRI3RVLWLRQIRU WKUHHVXEMHFWV>17) S'.) S $.) S@)RUDOORIWKHP7%LQFRGDSRVL WLRQZDVOHVVIURQWLHUHGXFHG WKDQLQRQVHWSRVLWLRQ7KHUHZDVDPDLQHI IHFWRI&RQVRQDQWIRUWKUHHVXEMHFWV>$6) S17) S$.) S@)RUWZRRIWKHVH VXEMHFWVWKH7%JHVWXUHIRUMZDVVOLJKWO\PRUHIURQWWKDQIRUSM$6DQG $. IRUWKHRWKHUVXEMHFW17 WKH7%SRVLWLRQIRUMZDVPRUHWRWKHEDFN WKDQSM7KHUHZDVDVLJQL¿FDQW&RQVRQDQW;3RVLWLRQLQWHUDFWLRQIRUWKUHH VXEMHFWV>17) S'.) S $.) S@)RUWKH¿UVWWZRVSHDNHUVMZDVPRUHVXV FHSWLEOHWRUHGXFWLRQWKDQSMIRUWKHWKLUGVSHDNHUWKHUHYHUVHZDVREVHUYHG 2YHUDOOWKHUHVXOWVRI7%IURQWLQJVKRZHGKLJKLQWHUVSHDNHUYDULDELOLW\7KH SRVLWLRQDOGLIIHUHQFHVZHUHOLPLWHGSULPDULO\WRWKH7%IRUMWKUHHVXEMHFWV ZKLFKZDVPRGHUDWHO\UHGXFHGLQFRGD 7KHUHZHUHQRFRQVLVWHQWGLIIHUHQFHVLQ7%UDLVLQJRUIURQWLQJEHWZHHQ PRUHVSHFL¿FFRQWH[WVWKHSRVWYRFDOLFYVSRVWFRQVRQDQWDORQVHWDBDYV SBD DQG WKH SUHYRFDOLF YV SUHFRQVRQDQWDO FRGD DBD YV DBS $Q H[ DPLQDWLRQRIVWDQGDUGGHYLDWLRQVVHH7DEOH VXJJHVWHGWKDWWKH7%UDLVLQJ DQGIURQWLQJYDOXHVIRUWKHFRGDFRQVRQDQWVDQGSDUWLFXODUO\IRUWKHFRGDM ZHUHPRUHYDULDEOHWKDQWKRVHIRUWKHVDPHFRQVRQDQWVLQRQVHWSRVLWLRQDW


OHDVWIRUVRPHVSHDNHUV$617DQG'. )RUH[DPSOHVWDQGDUGGHYLDWLRQV IRU WKH V\OODEOHLQLWLDO M RI VXEMHFW '. ZHUH PP IRU7% KHLJKW DQG PPIRU7%IURQWLQJZKLOHVWDQGDUGGHYLDWLRQVIRUWKHV\OODEOH¿QDOM ZHUHVXEVWDQWLDOO\KLJKHUPPDQGPPUHVSHFWLYHO\6HH7DEOH 7KH7%JHVWXUHLQWKHUHDOZRUGVZDVOHVVIURQW$617DQG$. WKDQLQ WKHQRQZRUGV

'XUDWLRQ 7KHUHVXOWVIRUWKHFORVLQJPRYHPHQWD DQGWKHSODWHDXE GXUDWLRQRIWKH 7%UDLVLQJJHVWXUHDUHSUHVHQWHGLQ7DEOH 7DEOH 0HDQGXUDWLRQLQPV RIWKHFORVLQJPRYHPHQWD DQGSODWHDXE RIWKH WRQJXHERG\UDLVLQJJHVWXUHIRUSMDQGMLQV\OODEOHRQVHWDBDSBD DQGV\OODEOHFRGDDBDDBS LQQRQZRUGVDQGUHDOZRUGVIRUSMRQO\ IRUIRXUVXEMHFWV

D

E

RQVHWSM FRGDSM RQVHWM FRGDM RQVHWSM FRGDSM RQVHWM FRGDM

$61

171

'.1

$.1

7KH$129$ UHVXOWV IRU WKH FORVLQJ PRYHPHQW LQGLFDWH WKDW WZR VXEMHFWV VKRZHGDPDLQHIIHFWRI3RVLWLRQ>'.) S$. ) S@WKLVPRYHPHQWZDVVLJQL¿FDQWO\VKRUWHULQ FRGDSRVLWLRQHJDERXWVKRUWHUIRUVXEMHFW$. 7KHUHZDVDPDLQ HIIHFWRI&RQVRQDQWIRUWKUHHVXEMHFWV>$6) S17 ) S$.) S@DOWKRXJKLQ GLIIHUHQWGLUHFWLRQVWKHFORVLQJPRYHPHQWZDVORQJHUHLWKHUIRUM$6$. RUIRUSM17 7KHUHZDVQRVLJQL¿FDQW&RQVRQDQW;3RVLWLRQLQWHUDFWLRQ IRUDQ\RIWKHVSHDNHUV )RU WKH SODWHDX GXUDWLRQ WKHUH ZDV QR PDLQ HIIHFW RI 3RVLWLRQ IRU DQ\ RIWKHVXEMHFWV7KHIDFWRU&RQVRQDQWZDVVLJQL¿FDQWIRUWZRVXEMHFWV>$6 ) S'.) S$.)

$OH[HL.RFKHWRY

S@VKRZLQJORQJHUSODWHDXVIRUSMWKDQIRUM,WVKRXOG EHQRWHGKRZHYHUWKDWWKHORQJHUSODWHDXVRISMIRUWKHVHVSHDNHUVZHUH RIWHQ DFFRPSDQLHG E\ UHODWLYHO\ VKRUW FORVLQJ SHULRGV WKHUH ZHUH QR VLJ QL¿FDQWGLIIHUHQFHVEHWZHHQWKHWZRFRQVRQDQWVLQWKHWRWDOGXUDWLRQRIWKH JHVWXUHFORVLQJPRYHPHQWSODWHDX 7KHUHZDVDVLJQL¿FDQW&RQVRQDQW; 3RVLWLRQLQWHUDFWLRQIRURQHVXEMHFWRQO\>$.) S@ LQGLFDWLQJWKDWWKHUHGXFWLRQLQGXUDWLRQLQFRGDSRVLWLRQDIIHFWHGMEXWQRW SM1RWHWKDWWKLVPD\EHGXHWRWKHGLIIHUHQFHLQWKHVWLPXOLXVHGIRUWKLV VXEMHFW $ FRPSDULVRQ RI VWDQGDUG GHYLDWLRQV IRU WKH GXUDWLRQ PHDVXUHPHQWV LQ V\OODEOHLQLWLDODQGV\OODEOH¿QDOSRVLWLRQVUHYHDOHGVRPHZKDWKLJKHUYDULD WLRQLQV\OODEOH¿QDOSMDWOHDVWIRUVRPHVSHDNHUV$617'. 2YHUDOO WKHGXUDWLRQIRUSMDQGMYDULHGVXEVWDQWLDOO\LQERWKSRVLWLRQV,QWHUPVRI WKHW\SHRIVWLPXOLWKHUHZHUHVRPHVLJQL¿FDQWGLIIHUHQFHVEHWZHHQQRQZRUG DQGUHDOZRUGXWWHUDQFHV)RUUHDOZRUGVWKHFORVLQJPRYHPHQWRIWKH7% JHVWXUHZDVVKRUWHU17'.DQG$. ZKLOHWKH7%SODWHDXZDVORQJHUIRU DOOVXEMHFWV

0DJQLWXGHDQGGXUDWLRQRI/LS$SHUWXUH 0DJQLWXGH 7KHUHVXOWVIRUWKHOLSJHVWXUHEDVHGRQWKHPHDVXUHPHQWVRIPD[LPXPORZ HUOLSKHLJKWD DQGOLSDSHUWXUHE DUHVXPPDUL]HGLQ7DEOH 7DEOH 0HDQYDOXHRID ORZHUOLSKHLJKWPPDERYHWKHXSSHULQFLVRUV DQGE OLSDSHUWXUHLQPP IRUSDQGSMLQV\OODEOHRQVHWDBDWBDNBD DQGV\OODEOHFRGDDBDDBWDBN LQQRQZRUGVDQGUHDOZRUGVIRUIRXU VXEMHFWV

D

E

RQVHWS FRGDS RQVHWSM FRGDSM RQVHWS FRGDS RQVHWSM FRGDSM

$61 ± ± ± ± QRWDYDLODEOH QRWDYDLODEOH QRWDYDLODEOH QRWDYDLODEOH

171 ± ± ± ±

'.1 ± ± ± ±

$.1 ± ± ± ±


,Q WHUPV RI WKH PDJQLWXGH RI // WKHUH ZHUH QHLWKHU VLJQL¿FDQW HIIHFWV RI 3RVLWLRQ DQG &RQVRQDQW QRU VLJQL¿FDQW &RQVRQDQW ; 3RVLWLRQ LQWHUDFWLRQ IRUDQ\RIWKHVXEMHFWV7KLVPHDQVWKDWWKHPDJQLWXGHRIWKLVJHVWXUHGLGQRW GLIIHUVLJQL¿FDQWO\EHWZHHQWKHFRQVRQDQWVSMYVSRUEHWZHHQSRVLWLRQV RQVHWYVFRGD )RU/$WKHUHZDVDPDLQHIIHFWRI3RVLWLRQIRUWZRRIWKH WKUHHVXEMHFWV>'.) S$.) S QRGDWDIRU$6@7KHVHVSHDNHUVVKRZHGVPDOOHU/$YDOXHVLHD QDUURZHUFRQVWULFWLRQ LQFRGDSRVLWLRQWKDQLQRQVHWSRVLWLRQ7KHUHZDVQR PDLQHIIHFWRI&RQVRQDQWIRUDQ\RIWKHVXEMHFWVDQGWKHUHZDVQRVLJQL¿FDQW &RQVRQDQW;3RVLWLRQLQWHUDFWLRQ$QLQIRUPDOH[DPLQDWLRQRIWKHVWDQGDUG GHYLDWLRQVRIWKHUHVXOWVVHH7DEOH VXJJHVWVWKDWWKH//PDJQLWXGHZDV VRPHZKDWPRUHYDULDEOHLQRQVHWSRVLWLRQWKDQLQFRGDSRVLWLRQ

'XUDWLRQ 7KHFORVLQJPRYHPHQWDQGSODWHDXGXUDWLRQUHVXOWVIRUWKHIRXUVXEMHFWVDUH VKRZQLQ)LJXUH7KHSURGXFWLRQVIRUV\OODEOHLQLWLDODQGV\OODEOH¿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¿FDQW&RQVRQDQW;3RVLWLRQLQWHUDFWLRQIRUWZR VXEMHFWV>17) S$.) S@ RQH RI WKH VXEMHFWV VKRZHG WKH HIIHFW IRU WKH V\OODEOH¿QDO SM ZKLOH WKH RWKHURQHIRUWKHV\OODEOH¿QDOS,QWHUPVRIYDULDELOLW\EDVHGRQVWDQGDUG GHYLDWLRQVVHHHUURUEDUVLQ)LJXUH WKHGXUDWLRQRIWKHFORVLQJPRYHPHQW

$OH[HL.RFKHWRY

LQRQVHWSRVLWLRQZDVPRUHYDULDEOHWKDQLQFRGDSRVLWLRQ,QWHUPVRIWKH W\SHRIVWLPXOLQRQHRIWKHVLJQL¿FDQWGLIIHUHQFHVLQPDJQLWXGHDQGGXUDWLRQ ZHUHFRQVLVWHQWDFURVVDOOIRXUVXEMHFWV

)LJXUH 0HDQGXUDWLRQRIWKHFORVLQJPRYHPHQWDQGSODWHDXRIWKHORZHUOLSJHV WXUHGXULQJWKHDUWLFXODWLRQRIIRUSDQGSMLQV\OODEOHRQVHWDBDWBD NBD DQGV\OODEOHFRGDDBDDBWDBN LQQRQZRUGVDQGUHDOZRUGVLQ PV IRUVXEMHFWV

'LVFXVVLRQ ,QWKLVVHFWLRQ,GLVFXVVWKHUHVXOWVRIWKH(00$H[SHULPHQWZLWKUHVSHFW WRWKHJHQHUDODQGVSHFL¿FK\SRWKHVHVPDGHLQ6HFWLRQ7KHUHVXOWVRIRXU H[SHULPHQW ODUJHO\ FRQ¿UP WKH JHQHUDO K\SRWKHVLV ZH GR ¿QG VXEVWDQWLDO GLIIHUHQFHVEHWZHHQWKHVDPHFRQVRQDQWVLQGLIIHUHQWV\OODEOHSRVLWLRQV7KH V\OODEOH HIIHFWV DUH PDQLIHVWHG SULPDULO\ LQ D WKH WLPLQJ RI WKH OLSV DQG WRQJXHERG\IRUWKHRQVHWDQGFRGDSMZKLFKIROORZVWKHJHQHUDOSDWWHUQRI WLPLQJLQWKHVHTXHQFHVSMDQGMSE WKHPDJQLWXGHRIWKH7%UDLVLQJJHV


WXUHIRUSMDQGMDQGF WKHGXUDWLRQRIWKH/$JHVWXUHIRUSMDQGS7KH GLIIHUHQFHVLQWKHPDJQLWXGHRI7%IURQWLQJLQWKHGXUDWLRQRI7%UDLVLQJ DQGLQWKHPDJQLWXGHRI/$DUHOHVVFRQVLVWHQWEHLQJIRXQGRQO\IRUFHUWDLQ VSHDNHUV$OOWKHVHGLIIHUHQFHVDUHGLVFXVVHGLQGHWDLOEHORZ :LWKUHVSHFWWRWKHWLPLQJK\SRWKHVLVRXU¿QGLQJVVHH6HFWLRQ LQGL FDWHWKDWWKHJHVWXUHVRI7%DQG/$IRUWKH5XVVLDQSMVKRZPRUHODJDUH PRUHVHTXHQWLDO LQRQVHWSRVLWLRQDQGOHVVODJDUHPRUHV\QFKURQRXV LQ FRGDSRVLWLRQ7KHODJIRUWKHRQVHWSMLVDOZD\VSRVLWLYHWKDWLVWKHPRUH RSHQ JHVWXUH7% LV GHOD\HG ZLWK UHVSHFW WR WKH PRUH FORVHG JHVWXUH /$ 7KHODJIRUWKHFRGDSMLVHLWKHUSRVLWLYHRUQHJDWLYHLQWKHODWWHUSDWWHUQWKH PRUHRSHQJHVWXUH7% VOLJKWO\SUHFHGHVWKHPRUHFORVHGJHVWXUH/$ 7KH REVHUYHGWLPLQJSDWWHUQLVQRWIXOO\FRQVLVWHQWZLWKWKH¿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ÀXHQFHGE\SHU FHSWXDOIDFWRUVVHH0DWWLQJO\DQG6LOYHUPDQRQJHVWXUDOWLPLQJ DQG UHFRYHUDELOLW\ 6SHFL¿FDOO\ D VRPHZKDW ODWHU DFKLHYHPHQW RI WKH7% WDUJHWFRPSDUHGWRWKH/$WDUJHWUHVXOWVLQWKHUHODWLYHO\ORQJDQGSHUFHSWX DOO\VDOLHQW&9WUDQVLWLRQVFKDUDFWHULVWLFRISDODWDOL]HGFRQVRQDQWVLQJHQHUDO PDLQO\KLJK)VHHIRUH[DPSOH/DGHIRJHGDQG0DGGLHVRQVHH .DYLWVND\DWKLVYROXPH.RFKHWRY ,QDGGLWLRQWKLVWLPLQJUHVXOWVLQ DKLJKIUHTXHQF\QRLVHEXUVWRISMZKLFKLVSHUFHSWXDOO\GLIIHUHQWIURPWKH ZHDNEXUVWRIWKHQRQSDODWDOL]HGS,QDGGLWLRQWKHWLPLQJSDWWHUQIRUWKH RQVHWSMDQGWRVRPHGHJUHHIRUWKHFRGDSM LVFRQVLVWHQWZLWKVRQRULW\ JHQHUDOL]DWLRQVDERXWLQWHUJHVWXUDOWLPLQJ6SURDWDQG)XMLPXUD*LFN WKHPRUHRSHQPRUHVRQRURXV7%JHVWXUHLVWLPHGFORVHUWRWKHV\O ODEOHSHDNWKDQWKHPRUHFORVHGOHVVVRQRURXV/$JHVWXUH $QRWKHULPSRUWDQW¿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¿UPRXUSUHGLFWLRQDERXWWKHFRGDUHGXFWLRQRIWKH7%JHVWXUH RIMVLQJOHDQGLQVHTXHQFHV LQPDJQLWXGHSULPDULO\LQ7%UDLVLQJ7KH UHGXFWLRQLQPDJQLWXGHRIWKH7%JHVWXUHZDVLQVRPHFDVHVDFFRPSDQLHG E\DUHGXFWLRQLQGXUDWLRQ7KHUHVXOWVDUHFRQVLVWHQWRYHUDOOZLWKWKH¿QG LQJVIRUWKH(QJOLVKMZKLFKVKRZVFRQVLVWHQWUHGXFWLRQLQ7%PDJQLWXGH ERWKUDLVLQJDQGIURQWLQJ*LFN 7KHUHGXFWLRQRIWKH7%JHVWXUHLQ FRGDZDVDOVRREVHUYHGIRUWKHSDODWDOL]HGVWRSSMWKXVFRQ¿UPLQJWKH¿UVW YHUVLRQRIWKHPDJQLWXGHK\SRWKHVLVIRUWKLVFRQVRQDQW6HH6HFWLRQ 7KLV ¿QGLQJIRU5XVVLDQKRZHYHUFRQWUDVWVZLWKWKHODFNRIUHGXFWLRQDQGVRPH H[SDQVLRQ RI WKH VHFRQGDU\ YHODU DUWLFXODWLRQ RI WKH (QJOLVK O7KXV RXU DOWHUQDWLYHSUHGLFWLRQDERXWWKH7%PDJQLWXGHRIHIIHFWVIRUSMLVQRWVXS SRUWHG 7KH UREXVW 7% PDJQLWXGH GLIIHUHQFHV EHWZHHQ V\OODEOHLQLWLDO DQG V\OODEOH¿QDOSMDVZHOODVWKHWLPLQJGLIIHUHQFHV DSSHDUWRFRUUHODWHZLWK VLJQL¿FDQW GLIIHUHQFHV LQ WKH SHUFHSWLRQ RI WKHVH SRVLWLRQDO YDULDQWV ,Q D SHUFHSWXDO VWXG\ LQ .RFKHWRY ERWK QDWLYH DQG QRQQDWLYH OLVWHQHUV VKRZHGVXEVWDQWLDOO\ORQJHUUHDFWLRQWLPHDQGORZHUUDWHRIFRUUHFWLGHQWL¿ FDWLRQRISMV\OODEOH¿QDOO\WKDQV\OODEOHLQLWLDOO\ $QRWKHULQWHUHVWLQJ¿QGLQJLVWKDWWKH7%JHVWXUHVIRUSMDQGIRUMLQ FOXGLQJIRUMLQWKHVHTXHQFHVSMDQGMS ZHUHVLJQL¿FDQWO\GLIIHUHQWLQ WKHGHJUHHRI7%UDLVLQJDQGIRUVRPHVSHDNHUVLQ7%IURQWLQJDQGGXUDWLRQ 7KH7%RIMZDVKLJKHUWKDQWKDWRISMDQGZDVRIWHQFKDUDFWHUL]HGE\D VKRUWHUSODWHDX7KHWZRFRQVRQDQWVDOVRGLIIHUHGLQWKHGHJUHHRIJHVWXUDO UHGXFWLRQDQGYDULDWLRQZLWKMEHLQJPRUHDIIHFWHGE\WKHSRVLWLRQ7KLV VXJJHVWVWKDWWKH7%JHVWXUHRISMLVDGLVWLQFWDUWLFXODWRU\VWUXFWXUHZLWK GLIIHUHQWWDUJHWSDUDPHWHUVWKDQWKRVHRIMHLWKHUDVDVLQJOHFRQVRQDQWRU LQDVHTXHQFHZLWKS 7KXVWKHFRQVRQDQWSMDQGWKHVHTXHQFHVRISDQG


MLQ5XVVLDQGLIIHUQRWRQO\LQWKHWLPLQJRIWKHJHVWXUHV/$DQG7%EXW DOVRLQWKHPDJQLWXGHRIWKH7%JHVWXUHHVSHFLDOO\IRUWKHRQVHWSMDQGWKH VHTXHQFHSM :KLOHRXUSUHGLFWLRQVDERXWWKHUHGXFWLRQRIWKH7%JHVWXUHDUHIXOO\FRQ ¿UPHGWKHSUHGLFWLRQVDERXWWKHPDJQLWXGHUHGXFWLRQRIWKHOLSJHVWXUHDUH QRWVXSSRUWHGVHH6HFWLRQ 1RQHRIWKHVXEMHFWVVKRZHGDQ\UHGXFWLRQ RIWKLVJHVWXUHLQFRGDLQIDFWWZRVSHDNHUVVKRZHGDWLJKWHUOLSFRQVWULFWLRQ LHH[SDQVLRQLQ/$ LQFRGD,QDGGLWLRQRXUUHVXOWVVKRZQRV\OODEOH¿ QDO/$UHGXFWLRQIRUWKHSDODWDOL]HGSMGLVFRQ¿UPLQJERWKYHUVLRQVRIWKH PDJQLWXGHK\SRWKHVLVIRUWKLVFRQVRQDQW,QWHUHVWLQJO\KRZHYHUWKHOLSJHV WXUHIRUERWKSDQGSMLQFRGDZDVVXEVWDQWLDOO\UHGXFHGLQGXUDWLRQ7KHVH UHVXOWVDUHQRWFRQVLVWHQWZLWKFHUWDLQ¿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±KLJKHUYDULDELOLW\LQRQVHW±VHHPHGWR KROGIRUVRPHOLSPDJQLWXGHDQGGXUDWLRQPHDVXUHPHQWV%DVHGRQWKHVHSUH OLPLQDU\REVHUYDWLRQVWKHYDULDELOLW\K\SRWKHVLVLVRQO\SDUWO\FRQ¿UPHG

6XPPDU\DQGFRQFOXVLRQV :KLOHSURYLGLQJHYLGHQFHIRUWKHJHQHUDOK\SRWKHVLVDQGVRPHRIRXUVSH FL¿FSUHGLFWLRQVWKHUHVXOWVRIRXUH[SHULPHQWFKDOOHQJHVRPHRWKHUSUHGLF WLRQVDQGSODFHGLQWKHFRQWH[WRIRWKHUVWXGLHVUDLVHDQXPEHURITXHVWLRQV )LUVWZK\GRZHREVHUYHV\OODEOHSRVLWLRQHIIHFWVLQWKH¿UVWSODFH":KDWDUH WKHXQGHUO\LQJUHDVRQVIRUWKHSKHQRPHQRQ"6HFRQGKRZFDQZHH[SODLQ WKHREVHUYDWLRQVWKDWRQO\VRPHJHVWXUHVVKRZV\OODEOHSRVLWLRQHIIHFWVDQG

$OH[HL.RFKHWRY

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¿QDOSRVLWLRQ7KH ¿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¿FLHQWWRDFFRXQWIRUWKHGLIIHUHQFHVLQWKH NLQGVDQGGHJUHHVRIJHVWXUDOUHGXFWLRQLQGLIIHUHQWODQJXDJHV,WDSSHDUVWKDW DPRUHSODXVLEOHDOWKRXJKOHVVSDUVLPRQLRXV DOWHUQDWLYHLVWRFRPELQHWKH G\QDPLF DSSURDFK ZLWKLQ$UWLFXODWRU\ 3KRQRORJ\ ZLWK SKRQHWLFDOO\ ULFKHU DQGLQWULQVLFDOO\YDULDEOHH[HPSODUEDVHGOH[LFDOUHSUHVHQWDWLRQV3LHUUHKX PEHUW ,QWKLVYLHZQRWDOOPDQLIHVWDWLRQVRIV\OODEOHSRVLWLRQHIIHFWV DUH GLUHFW FRQVHTXHQFHV RI JHVWXUDO G\QDPLFV 6RPH RI WKHP PD\ UHÀ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


EDVHG RQ DQ LQGLYLGXDO¶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¿FDOO\IURPHVVHQWLDOO\UDQGRPGLIIHUHQFHVWKH ZD\WKHVHSDWWHUQVDUHUHFRYHUHGDQGVWRUHGE\VSHDNHUVOLVWHQHUV7KXVQR RQHWRRQHFRUUHVSRQGHQFHEHWZHHQG\QDPLFSURSHUWLHVRIJHVWXUHVDQGUHDO L]DWLRQVRIV\OODEOH¿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

$FNQRZOHGJPHQWV 7KHDXWKRULVJUDWHIXOWR/RXLV*ROGVWHLQIRUDVVLVWDQFHZLWKWKHGHVLJQRI WKHH[SHULPHQWGDWDFROOHFWLRQDQGGLVFXVVLRQRIWKHUHVXOWV0DQ\WKDQNV WR.HUHQ5LFH5RQ6P\WKDQGWZRDQRQ\PRXVUHYLHZHUVIRUPDQ\KHOSIXO FRPPHQWVDQGVXJJHVWLRQVWR0DULDQQH3RXSOLHU/DULVVD&KHQDQG0DUN 7LHGH IRU LQYDOXDEOH DVVLVWDQFH ZLWK GDWD FROOHFWLRQ DQG DQDO\VLV 7KH UH VHDUFKZDVVXSSRUWHGE\3RVWGRFWRUDO)HOORZVKLSIURPWKH 6RFLDO6FLHQFHVDQG+XPDQLWLHV5HVHDUFK&RXQFLORI&DQDGD66+5& KHOG DW+DVNLQV/DERUDWRULHV1HZ+DYHQ&7$OOHUURUVDUHP\RZQ

$OH[HL.RFKHWRY

5HIHUHQFHV $YDQHVRY5, 5XVVNRH/LWHUDWXUQRH3URL]QRVKHQLH>5XVVLDQOLWHUDU\SURQXQFLDWLRQ@ 0RVFRZ3URVYHVKFKHQLH %DUU\0DUWLQ& 7HPSRUDO PRGHOLQJ RI JHVWXUHV LQ DUWLFXODWRU\ DVVLPLODWLRQ ,Q 3UR FHHGLQJV RI WKH WK ,QWHUQDWLRQDO &RQJUHVV RI 3KRQHWLF 6FLHQFHV %URZPDQ&DWKHULQH3DQG/RXLV*ROGVWHLQ $UWLFXODWRU\JHVWXUHVDVSKRQRORJLFDOXQLWV3KRQRORJ\± *HVWXUDOV\OODEOHSRVLWLRQHIIHFWVLQ$PHULFDQ(QJOLVK,Q)UHGHULFND %HOO%HUWL DQG /DZUHQFH - 5DSKDHO HGV 3URGXFLQJ 6SHHFK &RQ WHPSRUDU\ ,VVXHV IRU .DWKHULQH 6DIIRUG +DUULV ± :RRGEXU\ 1D¡"UV@ QRUGRHVHSHQWKHVLVRFFXUHYHQLQFRGDVZLWKQRVRQRULW\FOLQHHJDFW RU DQHJDWLYHFOLQHHJDG]H 7KLVDSSDUHQWHSHQWKHVLVWKXVDSSHDUVWRUHVXOW IURPTXDOLWLHVPRUHVSHFL¿FWRWKHOLTXLGVDQGWHQVHYRZHOV 2UJXQ IROORZLQJDQDSSURDFKVLPLODUWRWKDWSURSRVHGE\+DOOH DQG,GVDUGL XVHV2SWLPDOLW\7KHRUHWLFFRQVWUDLQWVWRGHDOZLWKVFKZD HSHQWKHVLV7KLV DFFRXQW LV WKH VDPH LQ VSLULW DV WKDW RI 0F&DUWK\ DERYHKRZHYHU2UJXQXVHVSKRQHPHVSHFL¿FFRQVWUDLQWVHJ &RGDU WR GHULYHWKHFRQWH[WIRUWKHVFKZD7KXVZKLOHDEOHWRJHWWKHVFKZDHIIHFWWKLV DSSURDFKLVXOWLPDWHO\GULYHQE\VSHFLI\LQJD³VSHFLDOÚHODWLRQVKLSEHWZHHQ UDQGDSDUWLFXODUVHWRISUHFHGLQJYRZHOV,QERWK2UJXQ¶VDQG+DOOHDQG ,GVDUGL¶VFDVHVWKLVVSHFLDOVWDWXVLVPRWLYDWHGE\WKHYRFDOL]DWLRQRISRVWYR FDOLFULQWKHGLDOHFWLQTXHVWLRQ(0DVVDFKXVHWWV +RZHYHULWLVQRWFOHDU ZK\OVKRXOGDOVRHOLFLWVFKZDHSHQWKHVLVLQWKLVGLDOHFWRUZK\ERWKUDQG OVKRXOGHOLFLWWKHVDPHHIIHFWLQRWKHUGLDOHFWVZLWKRXWUYRFDOL]DWLRQ /DYRLHDQG&RKQ SURSRVHDQDOWHUQDWLYHDQDO\VLVZKHUHE\WHQVH YRZHOOLTXLGVHTXHQFHVFRQVWLWXWHWULPRUDLFV\OODEOHVZKLFKWKH\UHIHUWR DV³VHVTXLV\OODEOHV´ :KLOHWKLVDSSURDFKKROGVIRUWKHKLJKYRZHOVLWGRHV

%U\DQ*LFNDQG,DQ:LOVRQ

QRWH[SODLQZK\WKHORZYRZHODIDLOVWRHOLFLWWKHVFKZDHJKDOO 7KHLU DQDO\VLVRIWKHORZYRZHOVSURSRVHGLQ&RKQDQG/DYRLH RIIHUVWKH FRQVWUDLQWWKDW³UOFDQEHDUDPRUDDIWHU>±ORZ@YRZHOVEXWQRW>ORZ@YRZ HOV´+RZHYHUWKLVFRQVWUDLQWLVHVVHQWLDOO\GHVFULSWLYH$QRWKHUSUREOHPDWLF FDVHIRUWKH/DYRLHDQG&RKQDQDO\VHVLVWKDWWKH\¿QGWKDWWKHYRZHOR JURXSVZLWKWKHORZOD[YRZHOVLQQRWHOLFLWLQJWKHH[FUHVFHQWVFKZDHIIHFW HJ KROH VHH /DYRLH DQG &RKQ ,Q KLV VWXG\ RI WRQJXH URRW SRVLWLRQVLQ(QJOLVKYRZHOV0DF.D\ LGHQWL¿HVDQRWKHUFDVHZKHUH RSDWWHUQVZLWKWKHORZOD[YRZHOV+HUHRZDVWKHRQO\QRQORZ³WHQVH´ YRZHOZLWKDQRQDGYDQFHGWRQJXHURRWSRVLWLRQ%RWKRIWKHVH¿QGLQJVUH JDUGLQJQRQKLJKEDFNYRZHOVWKRXJKVHHPLQJO\H[FHSWLRQDOFRQYHUJHWR VXSSRUWWKHDQDO\VLVZHSURSRVHLQWKLVSDSHU,WLVRQO\ZKHUHWKHUHLVDQRS SRVLWLRQLQWRQJXHURRWGRUVXPSRVLWLRQWKDWZHH[SHFWDWUDQVLWLRQWRPRYH WKURXJK³VFKZDVSDFH´7KXVLQWKHFDVHRIDYRZHOVXFKDVRRUDIRO ORZHGE\DOLTXLGWKHUHLVQRFRQÀLFWLQWRQJXHURRWGRUVXPWDUJHWDVDOORI WKHVHKDYHDUHWUDFWHGWRQJXHSRVLWLRQ WKHUHIRUHQRWUDQVLWLRQRFFXUVDQG WKHWRQJXHGRHVQRWSDVVWKURXJKDVFKZDOLNHFRQ¿JXUDWLRQ:HZLOOSXUVXH WKLVFRQQHFWLRQEHWZHHQWRQJXHURRWSRVLWLRQDQGH[FUHVFHQWVFKZDWKURXJK RXWWKHUHVWRIWKLVSDSHU

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

([FUHVFHQWVFKZDDQGYRZHOOD[LQJ

$VWKHSURSRVDOLQWKHSUHVHQWSDSHUUHVWVXSRQDFRQÀLFWEHWZHHQDUWLFX ODWRU\JHVWXUHVYHUL¿FDWLRQRIWKHDFRXVWLFUHVXOWVSUHVHQWHGLQLQWHUPV RIDUWLFXODWRU\WLPLQJLVSHUKDSVPRUHUHOHYDQW*LFNDQG:LOVRQ UH SRUWDQXOWUDVRXQGH[SHULPHQWFRQGXFWHGWRWHVWWKHK\SRWKHVLVWKDWGXUDWLRQV IURPYRZHORQVHWWR¿QDOFRQVRQDQWFORVXUHDUHVWDEOHUHJDUGOHVVRIWKHQXP EHURILQWHUYHQLQJYRZHO JHVWXUHVDQGUHJDUGOHVVRIVHJPHQWW\SH7KHLUUH VXOWVVKRZQRVLJQL¿FDQWGLIIHUHQFHVLQGXUDWLRQEHWZHHQULPHVHQGLQJLQWKH WKUHHGLIIHUHQW¿QDOFRQVRQDQWVPHDVXUHGS9QYVS9OYVS9GHJSLQHYV SLOHYVSLHGHWF OHQGLQJIXUWKHUVXSSRUWWRWKHSUHGLFWLRQWKDWWKHSUHVHQFH RIWKHH[FUHVFHQWVFKZDGRHVQRWFRQWULEXWHWRWKHGXUDWLRQRIWKHV\OODEOH

*HVWXUDOPRGHOLQJRIWKHSUREOHP $UWLFXODWRU\ 3KRQRORJ\ %URZPDQ DQG *ROGVWHLQ WUHDWV DUWLFXODWRU\ HYHQWV DV EDVLF XQLWV RI SKRQRORJ\ WKXV OHQGLQJ SKRQRORJLFDO PHDQLQJ WR WKHQRWLRQVRILQGLYLGXDOJHVWXUDOWDUJHWVDQGWKHUHE\WKHFRQÀLFWVEHWZHHQ WKHP$VXQLWVRISKRQRORJLFDOUHSUHVHQWDWLRQSKRQRORJLFDOFRQVWUDLQWVPD\ RIFRXUVHEHDSSOLHGWRWKHP7KXVWKHSUHVHQWSDSHUDVVXPHVDUHSUHVHQWD WLRQRIDUWLFXODWRU\JHVWXUHVDVSKRQRORJLFDOXQLWVLQWKH$UWLFXODWRU\3KRQRO RJ\ VHQVH$ IXUWKHU DGYDQWDJH RI$UWLFXODWRU\ 3KRQRORJ\ IRU WKH SUHVHQW VWXG\LVWKDWLWDOORZVWKHFRPSRQHQWJHVWXUHVRIFRPSRXQGPXOWLJHVWXUH VHJPHQWVVXFKDV(QJOLVKOWREHWUHDWHGLQGHSHQGHQWO\7KLVLVFUXFLDODV SUHVXPDEO\LWLVQRUPDOO\RQO\LQGLYLGXDOJHVWXUHVDQGQRWZKROHVHJPHQWV WKDWFRPHLQWRSK\VLFDOFRQÀLFW,QWKHFDVHRIOWKHYDULRXVPDQLIHVWDWLRQV RILWVFRPSRQHQWJHVWXUHVLQGLIIHUHQWDOORSKRQHVHWFKDYHEHHQUHDVRQDEO\ ZHOOVWXGLHGHJ6SURDWDQG)XMLPXUD%URZPDQDQG*ROGVWHLQ *LFN DOORZLQJ XV WR GUDZ XSRQ WKLV SUHYLRXV GDWD WR IXUWKHU XQGHUVWDQGWKH(QJOLVKH[FUHVFHQWVFKZDSKHQRPHQRQDWOHDVWZLWKUHJDUG WRLQWHUDFWLRQVZLWKO7KHIROORZLQJVHFWLRQSURSRVHVDPRGHORIVSHHFK SURGXFWLRQWRKHOSLOOXVWUDWHWKHLPSOLFDWLRQVRIWKHDERYHGXUDWLRQGDWDDQG WROLQNWKHVH¿QGLQJVZLWKWKHGDWDWRIROORZLQWKHUHPDLQGHURIWKHSDSHU

$SURGXFWLRQPRGHOIRUJHVWXUDOWLPLQJLQV\OODEOHFRGDV 6SURDWDQG)XMLPXUD SURSRVHWKDW(QJOLVKOLVFRPSRVHGRIWZRGLV WLQFWW\SHVRIJHVWXUHV$³FRQVRQDQWDO´JHVWXUHWRQJXHWLS>77@UDLVLQJ DQG D³YRFDOLF´JHVWXUHWRQJXHUHDUURRW>75@UHWUDFWLRQ 7KH\EDVHWKLVFDWHJR


UL]DWLRQLQSDUWRQWKHWLPLQJUHODWLRQVKLSEHWZHHQWKHWZRJHVWXUHV:KLOH ERWK RI WKHVH RFFXU PRUH RU OHVV VLPXOWDQHRXVO\ LQ SUHYRFDOLF DOORSKRQHV 75UHWUDFWLRQRFFXUVVLJQL¿FDQWO\HDUOLHUWKDQ77FORVXUHLQSRVWYRFDOLFDO ORSKRQHV7KLVREVHUYDWLRQLVYHU\OLNHO\WREHUHOHYDQWWRWKHSUHVHQWGLVFXV VLRQDVLWLVWKHWUDQVLWLRQIURPWKHSUHFHGLQJYRZHOWRZDUGWKH75JHVWXUH IRUOWKDWLVSURSRVHGKHUHWREHWKHORFXVIRUWKHVFKZDSHUFHSW &RQVLGHUDVHWRIWKUHHV\OODEOHULPHVSDUDOOHOWRWKHH[DPSOHW\SHVFLWHG DERYHLQEXWZKHUHDOOWKUHHULPHVLQYROYHGLIIHUHQWQXPEHUVRIUHWUDF WLRQDGYDQFHPHQWPRYHPHQWVRIWKHWRQJXHSRVWHULRUHJLGDMGDQG DMO7KXVLGLQYROYHVRQO\DVLQJOHYRFDOLFJHVWXUH75DGYDQFHPHQWIRU L DMGLQYROYHVWZRFRQWUDU\YRFDOLFPRYHPHQWVDUHWUDFWLRQIRUDIRO ORZHGE\DQDGYDQFHPHQWIRUM DQGDMOLQYROYHVWKUHHFRQÀLFWLQJPRYH PHQWVUHWUDFWLRQIRUDDGYDQFHPHQWIRUMDQGUHWUDFWLRQDJDLQIRUO ,I WKHRYHUDOOGXUDWLRQLVLQGHHGWKHVDPHDFURVVDOORIWKHVHULPHVDVZDVHV WDEOLVKHGLQ6HFWLRQWKHQDVPRUHFRQÀLFWLQJJHVWXUHVRFFXUZLWKLQWKDW GXUDWLRQWKH\PXVWEHPRUHWLJKWO\SDFNHG7KXVLWPXVWEHWKHFDVHWKDW WKHGXUDWLRQRIWKHWHPSRUDOODJEHWZHHQYRFDOLFDQGFRQVRQDQWDOJHVWXUHV GHFUHDVHVDVWKHQXPEHURIFRQÀLFWLQJPRYHPHQWVLQFUHDVHV$VFKHPDWLF LOOXVWUDWLRQRIWKLVK\SRWKHVLVLVVKRZQLQ)LJXUH

)LJXUH 6FKHPDWLF GLDJUDP RI WRQJXH WLS 77 YV WRQJXH UHDUURRW 75 PRYH PHQWLQD LGE DMGDQGF DMOV\OODEOHULPHV6LQJOHGRWWHGOLQHV VKRZHVWLPDWHGWLPHRIDFKLHYHPHQWRIWKHWRQJXHWLSFORVXUHJHVWXUHIRU WKH¿QDOFRQVRQDQWGRXEOHGRWWHGOLQHVVKRZWLPHRIDFKLHYHPHQWRI75 UHWUDFWLRQ1RWHPXOWLSOHUHWUDFWLRQJHVWXUHVLQF


7KLV PRGHO VXJJHVWV WKDW VWDEOH WLPLQJ LV QRW PDLQWDLQHG ZLWKLQ VHJPHQWV SRVWYRFDOLFDOO\DVFOXVWHUVLQFUHDVHDWOHDVWLQFDVHVWKDWGRQRWDOORZIRUJHV WXUDORYHUODSLHFDVHVRIGLUHFWDUWLFXODWRU\FRQÀLFW 5DWKHULQWKLVPRGHO V\OODEOHFRGDWLPLQJLVDUHODWLRQVKLSEHWZHHQWKHV\OODEOHSHDNDQGWKH¿UVW FRQVRQDQWDO JHVWXUH ZLWK YRFDOLF JHVWXUHV FRPSUHVVHG LQWR WKH DYDLODEOH WLPHZLQGRZ*LFN SURYLGHVPDJQHWRPHWHUGDWDFRQVLVWHQWZLWKWKLV PRGHOVKRZLQJWKDWWKHWHPSRUDO³ODJÉHWZHHQWKH75DQG77JHVWXUHVRIO DUHVKRUWHVWLQRMODQGDMOULPHVWKRVHZLWKWKHODUJHVWQXPEHURIRSSRV LQJ75WDUJHWV 'DWDIURP*LFN DUHVKRZQLQ)LJXUH7KHVHUHVXOWV DJDLQVXSSRUWWKHQRWLRQWKDWMDQGOKDYHFRQÀLFWLQJ75WDUJHWVDQGWKXV WKDWWKHH[FUHVFHQWVFKZDDSSHDUVGXULQJWKHUHVXOWLQJYRFDOLFWUDQVLWLRQ

)LJXUH 7RQJXHWLSODJLQSRVWYRFDOLFODOORSKRQHV¿JXUHUHSURGXFHGIURP*LFN 7KHWKUHHVHWVDODUODZOHOPDQGRMODMO DUHDOOVWDWLVWLFDOO\GLV WLQFW

$SLORWH[SHULPHQWWHVWLQJWKH³VFKZDVSDFH´K\SRWKHVLVIRU(QJOLVK 7KH DERYH VHFWLRQV SUHVHQWHG HYLGHQFH VKRZLQJ WKDW WKH VFKZD SHUFHSW LQ (QJOLVKV\OODEOHULPHVGRHVQRWFRQWULEXWHWRULPHGXUDWLRQDQGSUHVHQWHGD VLPSOHSURGXFWLRQPRGHOZKHUHLQVXFKDQHIIHFWPLJKWEHIHDVLEOH+RZHYHU ZKLOHWKLVLVFRQVLVWHQWZLWKWKHFRQWHQWLRQWKDWWKLVVFKZDLVDE\SURGXFW RIDUWLFXODWRU\FRQÀLFWQRQHRIWKHGDWDWKXVIDURIIHUVDQ\H[SODQDWLRQDVWR ZK\WKLVSDUWLFXODUFRQÀLFWVKRXOGHOLFLWWKHSHUFHSWRIDVFKZDSHUVH±QRU KDVWKHSUHGLFWHGWUDQVLWLRQDFWXDOO\EHHQREVHUYHGWRRFFXUDWDOO7KXVEH IRUHOHDYLQJ(QJOLVKEHKLQGWKHUHVXOWVRIDSLORWH[SHULPHQWFODULI\LQJWKHVH


LVVXHVZLOOEHSUHVHQWHG$QH[SHULPHQWZDVFRQGXFWHGXVLQJGLUHFWXOWUD VRXQG DQGLQGLUHFWDFRXVWLF PHDVXUHPHQWWRLOOXVWUDWH ZKHWKHUWKHSUR SRVHGWUDQVLWLRQIURPDQDGYDQFHGWRDUHWUDFWHGWRQJXHURRWGRUVXPSRVLWLRQ YLVLEO\RFFXUVLQ(QJOLVKKLJKYRZHOJOLGHOFOXVWHUVDQG ZKHWKHUWKH WRQJXHDQGDFRXVWLFVLJQDOVPRRWKO\SDVVWKURXJKDVFKZDOLNHFRQ¿JXUDWLRQ DORQJWKHLUWUDMHFWRULHVLQWKHH[FUHVFHQWVFKZDFDVHVDVSURSRVHGDERYH

0HWKRGV 6XEMHFWV 7ZR QDWLYH VSHDNHUV RI 1RUWK$PHULFDQ (QJOLVK SDUWLFLSDWHG LQ WKLVVWXG\ERWKLQWKHLUODWH¶VDQGERWKXQDZDUHRIWKHQDWXUHRIWKHH[ SHULPHQW:IHPDOH ZDVUDLVHGLQ6RXWKZHVWHUQ2QWDULR0PDOH ZDV UDLVHGLQ6RXWKZHVWHUQ0DQLWRED 6WLPXOL6WLPXOLZHUHSUHVHQWHGLQWKHFDUULHUSKUDVH³3RSLVDBB´7R NHQV LQFOXGHG UHDO DQG QRQVHQVH ZRUGV RI WKH IRUP S9* & ZKHUH9* FRQVLVWHGRIWKHVHWC K CY GL CL nLDQGZKHUH&FRQVLVWHGRIWKHVHW GQOJLYLQJFRPELQDWLRQV,QDGGLWLRQWRWKHVHWKHIRUP>R3"R@ZDV DOVRFROOHFWHGWRSURYLGH³FDQRQLFDO´VFKZDVIRUFRPSDULVRQZLWKH[FUHVFHQW VFKZDV 'DWDFROOHFWLRQDQGDQDO\VLV6L[UHSHWLWLRQVRIHDFKWRNHQZHUHFROOHFWHG DVIROORZV$OOWRNHQVZHUHSUHVHQWHGLQZULWLQJWRWKHVXEMHFWVZKRUHDG WKHPDORXGWKHHQWLUHOLVWZDVUHSHDWHGVL[WLPHV7KH¿UVWUHDGLQJRIWKH OLVWZDVGLVFDUGHGWRHQVXUHWKDWVXEMHFWVZHUHDFFXVWRPHGWRWKHSURFHGXUH 7RNHQV ZLWKLQ WKH OLVW ZHUH SUHVHQWHG LQ EORFNV RI VL[ RI ZKLFK WKH VL[WK PHPEHUZDVGLVFDUGHG*LYHQWKHVPDOOQXPEHURIWRNHQVSHUFRQGLWLRQVWD WLVWLFDOFRPSDULVRQVZHUHQRWPDGHLQWKLVSLORWVWXG\ $UWLFXODWRU\GDWDZHUHUHFRUGHGWR9+6IURPDQ$ORND66'SRUWD EOHXOWUDVRXQGPDFKLQHXVLQJD0+]HOHFWURQLFFRQYH[LQWHUFRVWDOSUREH 867ZLWKDGHJUHH¿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


7KHDFRXVWLFVLJQDOZDVVLPXOWDQHRXVO\UHFRUGHGWR9+6WRHQVXUHV\Q FKURQL]DWLRQZLWKWKHYLGHRVLJQDOXVLQJD3UR6RXQG@ QRWH WKH WRQJXH URRW UHWUDFWLRQ F PV HQG RI UHWURÀH[ DSSUR[LPDQWQRWH WKH WRQJXH URRW UHWUDFWLRQDQG WRQJXH ERG\ ORZHULQJ


$FFRUGLQJWR3XOOH\EODQN DGGLQJWKLVVXI¿[WRDZRUGHQGLQJLQL VXFKDVL+ =VÛK@µFKLFNHQ¶UHVXOWVQRWLQL+T>VÛK°@EXWUDWKHULW³UHTXLUHVWKH LQVHUWLRQRIDVFKZDYRZHOEHIRUHWKHVXI¿[JLYLQJ>VÛLT?´ 3LORWXOWUDVRXQGGDWDZDVFROOHFWHGWRWHVWZKHWKHUWKLVSKHQRPHQRQLV SDUDOOHOWRWKH(QJOLVKH[FUHVFHQWVFKZDE\YHULI\LQJWKDWWKH%HLMLQJ&KL QHVHSRVWYRFDOLFULQYROYHVDWRQJXHURRWRUGRUVXPUHWUDFWLRQRSSRVLQJWKH DGYDQFHGSRVLWLRQIRUL 7KHVSHHFKRIWKUHHDGXOWVSHDNHUVRI%HLMLQJ&KLQHVHZDVPHDVXUHGVHH DERYHIRUGDWDFROOHFWLRQDQGSURFHVVLQJPHWKRGV $OOVSHDNHUVH[KLE LWHGWRQJXHURRWDGYDQFHPHQWIRULDWRQJXHURRWUHWUDFWLRQIRUUDQGWKH SUHGLFWHGWUDQVLWLRQWKURXJKDQDSSDUHQWVFKZDOLNHFRQ¿JXUDWLRQ$VWKHUH LV QR WRQJXH URRW UHWUDFWLRQ LQ WKH SUHYRFDOLF OLTXLG VHH *LFN &DPSEHOO 2KDQG7DPEXUUL:DWWLQSUHVV DQGKHQFHQRFRQÀLFWWKLVDSSHDUVWREHD ODQJXDJHRIW\SH$LQ7DEOH5HVXOWVIRURQHVXEMHFWDUHVKRZQLQ)LJXUH IRULOOXVWUDWLRQ

1XXFKDKQXOWK 1XXFKDKQXOWKIRUPHUO\NQRZQDV1RRWND D:DNDVKDQODQJXDJHVSRNHQ RQWKHZHVWFRDVWRI9DQFRXYHU,VODQG%ULWLVK&ROXPELDLVDODQJXDJHWKDW LQFOXGHV D QXPEHU RI FRQVRQDQWV DUWLFXODWHG LQ WKH XYXODU DQG SKDU\QJHDO DUHDVRIWKHYRFDOWUDFW,QRUGHUWRSURGXFHFRQVWULFWLRQVDWWKHVHDUHDVRIWKH YRFDOWUDFWLWLVQHFHVVDU\IRUWKHWRQJXHGRUVXPURRWWRUHWUDFW7KHUHDUH SULPDULO\WKUHHYRZHOVLQWKHODQJXDJHKWDQGCGLVDOVRXVHGEXW RQO\RFFXUVLQYHU\VSHFL¿FVW\OHVRIVSHHFKH[DPLQHGLQWKH$KRXVDKWGLD OHFW *LYHQWKDWWKHODQJXDJHKDVXYXODUDQGSKDU\QJHDOFRQVRQDQWVDVZHOO DVDKLJKIURQWYRZHOKDQDUWLFXODWRU\FRQÀLFWLVSUHGLFWHGDVVXPLQJWKDW KVSHFL¿HVWRQJXHURRWDGYDQFHPHQWLQWKLVODQJXDJH ,WZLOOEHVKRZQWKDW 1XXFKDKQXOWK HPSOR\V WZR GLIIHUHQW PHWKRGV IRU UHVROYLQJ WKLV FRQÀLFW :KHQKSUHFHGHVDUHWUDFWHGFRQVRQDQWVXFKDVSWRQJXHURRWWDUJHWVDUH QRWFRPSURPLVHGDQGDQLQWHUYHQLQJH[FUHVFHQWVFKZDRIIJOLGHUHVXOWV>KS@ +RZHYHUZKHQKIROORZVSWKHWRQJXHURRWWDUJHWRIKLVFRPSURPLVHG EHFRPHVUHWUDFWHG DQGWKHWRQJXHERG\7% FRPPHQVXUDWHO\ORZHUVUH VXOWLQJLQDORZHUHGDQGRUOD[HGYRZHO>SG@a>S'@7KHYRZHOOD[LQJORZHU LQJFDVHZLOOEHGLVFXVVHGLQ6HFWLRQEHORZ ,QZRUGVWKDWKDYHDQKIROORZHGE\WKHXYXODUVWRSSDYHU\GLVWLQFW VFKZDLVDSSDUHQWLQWKHWUDQVLWLRQIURPKWRS)RUH[DPSOHLQWKHZRUG FLTFLTDµWDONLQJ¶WZRSHUFHLYHGH[FUHVFHQWVFKZDVDUHUHPLQLVFHQWRIWKH


(QJOLVKDQG%HLMLQJ&KLQHVHH[DPSOHVGLVFXVVHGDERYH2QWKHRWKHUKDQG QRH[FUHVFHQWVFKZDVDUHREVHUYHGLQDZRUGZLWKYHODUDVRSSRVHGWRXYXODU VWRSVFLNFLNDµDYHVVHO OLVWLQJWLOWLQJEDFNDQGIRUWK¶,IWKHH[FUHVFHQW VFKZD LQ 1XXFKDKQXOWK LV DV LQ (QJOLVK DQG %HLMLQJ &KLQHVH D SXUHO\ SKRQHWLFE\SURGXFWRIWZRRSSRVLQJWRQJXHURRWWDUJHWVLHDGYDQFHGIRU KDQGUHWUDFWHGIRUS WKHQWKLVFRQÀLFWZLOOEHHYLGHQWIURPWKHWRQJXHLP DJHV)XUWKHUPRUHDVWKHWRQJXHUHWUDFWVIURPLWRTSRVLWLRQWKHWRQJXH LVH[SHFWHGWRSDVVWKURXJK³VFKZDVSDFH´LQWKHFRXUVHRILWVWUDQVLWLRQ7KH 7%ORZHULQJVXJJHVWHGLQWKHWUDQVFULSWLRQWRRFFXUVLPXOWDQHRXVO\ZLWK75 UHWUDFWLRQLVOLNHZLVHQRWVXUSULVLQJJLYHQWKHYROXPHSUHVHUYLQJQDWXUHRI WKHK\GURVWDWLFWRQJXH 8VLQJWKHVDPHPHWKRGVDVGHVFULEHGLQXOWUDVRXQGGDWDZDVFRO OHFWHG IURP WZR QDWLYH VSHDNHUV RI 1XXFKDKQXOWK WR WHVW WKLV K\SRWKHVLV 7KHPRYHPHQWIURPDGYDQFHPHQWWRUHWUDFWLRQFDQEHHQVHHQLQ)LJXUH ZLWK75UHWUDFWLRQDQG7%ORZHULQJRFFXUULQJVLPXOWDQHRXVO\LQWKHWUDQVL WLRQIURPWKHKLQD WRWKHSLQG

)LJXUH 1XXFKDKQXOWKFLTFLTDµWDONLQJ¶D PVVWSDUWRIVWLE PV QGSDUWRIVWLQRWHWKHWRQJXHURRWUHWUDFWLRQDQGERG\ORZHULQJF PVHQGRI>@OHDGLQWRTG PVTXYXODUVWRS


&KLOFRWLQ ,Q&KLOFRWLQDQ$WKDSDVNDQODQJXDJHVSRNHQLQQRUWKHUQ%ULWLVK&ROXPELD WKHUHDUHDQXPEHURIVRFDOOHG³ÀDW´FRQVRQDQWVSURGXFHGZLWKDUHWUDFWHG WRQJXHURRW&RRN 7KHVH FRQVRQDQWV LQFOXGHSKDU\QJHDOL]HG IULFDWLYHVDQGDIIULFDWHVDVZHOODVDVHWRISODLQDQGODELDOL]HGXYXODUVVWRSV IULFDWLYHVDQGDSSUR[LPDQWV ,QDGGLWLRQWKHUHDUHWKUHHSDLUVRIYRZHOVGH VFULEHGE\&RRN DVEHLQJ³WHQVHORQJ ÝHUVXV³OD[VKRUW ´K +3 'DQGW 7QRDUWLFXODWRU\GDWDH[LVWVDV\HWZLWKZKLFKWR YHULI\WKHWRQJXHURRWGRUVXPSRVLWLRQIRUWKHWHQVHOD[GLVWLQFWLRQLQWKHVH YRZHOV 7KXVWKHVWDJHLVVHWDJDLQIRUDFRQÀLFWLQ75WDUJHWVEHWZHHQWKH UHWUDFWHGFRQVRQDQWVDQGWKHSUHVXPDEO\ DGYDQFHGYRZHOV /LNH 1XXFKDKQXOWK &KLOFRWLQ H[KLELWV WKH VDPH WZR VWUDWHJLHV DV GLV FXVVHGDERYHIRUUHVROYLQJWKLV75FRQÀLFW,QWHUHVWLQJO\KRZHYHUWKHWZR VWUDWHJLHV DUH HPSOR\HG LQ H[DFWO\ WKH RSSRVLWH FRQWH[WV IURP 1XXFKDK QXOWK LH YRZHO OD[LQJORZHULQJ RFFXUV SUHFHGLQJ EDFN FRQVRQDQWV DQG H[FUHVFHQWVFKZDDIWHUEDFNFRQVRQDQWV 9RZHOORZHULQJZLOOEHGHVFULEHG LQ6HFWLRQEHORZ $FFRUGLQJ WR &RRN¶V WUDQVFULSWLRQV VHTXHQFHV RI WKHVH ÀDW FRQVRQDQWV DQGWKHKLJKIURQWYRZHOVGRUHVXOWLQWKHSHUFHSWRIDQH[FUHVFHQWVFKZD +RZHYHUXQOLNH1XXFKDKQXOWKZKHUHWKHH[FUHVFHQWVFKZDDSSHDUVLQWKH WUDQVLWLRQIURPKWRDIROORZLQJUHWUDFWHGFRQVRQDQWLQ&KLOFRWLQWKHH[FUHV FHQWVFKZDRFFXUVLQWKHWUDQVLWLRQIURPDSUHFHGLQJUHWUDFWHGFRQVRQDQWWRD WHQVHYRZHO$PLQLPDOSDLUIURP&RRN LVJLYHQEHORZ

VLG >VLW@ V@LG >VLW@

µ,¶ µNLQJ¿VKHU¶

([DPSOH VKRZVWKDWZKHQKSUHFHGHVIROORZVDQRQUHWUDFWHGFRQVRQDQW LWLVUHDOL]HGDV>L@([DPSOH VKRZVWKDWDQH[FUHVFHQWVFKZDUHVXOWVZKHQ KLVSUHFHGHGE\DSKDU\QJHDOL]HGFRQVRQDQW

9RZHOOD[LQJ ,QWKLVVHFWLRQVHYHUDOFDVHVDUHSUHVHQWHGZKHUHWKHVDPHFRPELQDWLRQRI VHJPHQWVKLJKIURQWWHQVHYRZHOUHWUDFWHGFRQVRQDQW FRQVLVWHQWO\\LHOGV DGLIIHUHQWUHVXOWYRZHOORZHULQJOD[LQJ,WDSSHDUVWKDWXQOLNHWKHODQJXDJ HVLQWKHSUHYLRXVVHFWLRQWKLVVHWRIODQJXDJHVSUHIHUVWRFRPSURPLVHWKH


DFKLHYHPHQWRIDUWLFXODWRU\WDUJHWV7KDWLVUDWKHUWKDQOHWWKH75JRWRLWV IXOO\DGYDQFHGSRVLWLRQIRUKWKHVHODQJXDJHVUHGXFHRUHOLPLQDWHWKDWYRZHO JHVWXUHDQGSURGXFHKZLWKRXWDGYDQFHG75UHVXOWLQJLQDOD[HGRUORZHUHG YRZHOXVXDOO\VRPHWKLQJLPSUHVVLRQLVWLFDOO\LQWKHUDQJHRI>+ G'@ 7KH LPSOLFDWLRQVRIWKLVSDWWHUQDUHGLVFXVVHGLQPRUHGHWDLOLQ6HFWLRQEHORZ

.RUHDQ .RUHDQ KDV QRW EHHQ SUHYLRXVO\ GHVFULEHG DV D OD[LQJ ODQJXDJH +RZHYHU .RUHDQZDVFKRVHQIRUWKLVVWXG\IRUWZRUHDVRQV¿UVWEHFDXVHLWJDYHWKH DXGLWRU\LPSUHVVLRQRIVRPHOD[LQJRIWKHYRZHOLEHIRUHODQGVHFRQG RXUHDUOLHUSLORWXOWUDVRXQGZRUNRQ.RUHDQYRZHODUWLFXODWLRQVKRZHGWKDW LDSSHDUHGWREHWKHRQO\YRZHOLQ.RUHDQZLWKWRQJXHURRWDGYDQFHPHQW 7KHVHWZRIDFWRUVFRQVSLUHGWRJLYHWKHLPSUHVVLRQWKDWWKLVDJDLQPD\EHD SRWHQWLDOFDVHRIDUWLFXODWRU\FRQÀLFW$VPDOODFRXVWLFVWXG\ZDVFRQGXFWHG WKHUHIRUHWRWHVWZKHWKHUWKLVDXGLWRU\LPSUHVVLRQRIOD[LQJLVDFFXUDWH $VLQJOHIHPDOHQDWLYHVSHDNHURI.RUHDQLQKHUWKLUWLHVSDUWLFLSDWHGLQ WKLVH[SHULPHQW7KHVXEMHFWSURGXFHGUHSHWLWLRQVRIWKHZRUGVR*KWR*KPDQG R*KOLQD¿[HGFDUULHUSKUDVHFRQWH[W9DOXHVIRU)DQG)ZHUHH[WUDFWHG IURP WKH PLGSRLQW RI HDFK YRZHO XVLQJ 3UDDW VRIWZDUH DFFRUGLQJ WR WKH PHWKRGVGHVFULEHGLQDERYH

)LJXUH (IIHFWRIFRGDFRQVRQDQWRQ)RISUHFHGLQJL

$129$UHVXOWVIRUWKLVVSHDNHULQGLFDWHWKDW)RILLVQRWVLJQL¿FDQWO\ DIIHFWHGE\FRGDFRQVRQDQWEXWWKDW)LVS 3RVWKRFWHVWV)LVKHU¶V


3/6' LQGLFDWHDVLJQL¿FDQWGLIIHUHQFHS EHWZHHQWKHHIIHFWVRQ) ERWKEHWZHHQ¿QDOODQGWDQGEHWZHHQODQGQEXWQRVLJQL¿FDQWGLI IHUHQFH EHWZHHQ WKH HIIHFW RI ¿QDO W DQG Q 7KHVH UHVXOWV DUH VKRZQ LQ )LJXUH7KLV)ORZHULQJHIIHFWVXSSRUWVWKHDXGLWRU\LPSUHVVLRQRIOD[LQJ RI.RUHDQLEHIRUHO$VWKHUHLVQRVXFKHYLGHQFHRIFRQÀLFWLQWKHLQLWLDO DOORSKRQHVHH*LFN&DPSEHOO2KDQG7DPEXUUL:DWW>LQSUHVV@IRUUHOHYDQW DUWLFXODWRU\GDWD .RUHDQPXVWEHFODVVHGZLWK3LWWVEXUJKDQG8WDK(QJOLVK DVDW\SH)ODQJXDJHLQ7DEOH

1XXFKDKQXOWK ,Q6HFWLRQLWZDVPHQWLRQHGWKDWLQDGGLWLRQWRWKHH[FUHVFHQWVFKZD FDVHV1XXFKDKQXOWKDOVRVKRZVYRZHOORZHULQJLHDFRPSURPLVHRIWKH >$75@WDUJHWRIKUHVXOWLQJLQORZHULQJRIWKH7%7ZRH[DPSOHVIURPWKH $KRXVDKWGLDOHFWRI1XXFKDKQXOWKDUHJLYHQLQ DQG EHORZ

UKSKÖ =U+SGÖ ? SKV5KP =SGV5+P@

µWRFRRN¶ µORXVH¶

7KHGLIIHUHQFHEHWZHHQKLQDQRQUHWUDFWHGHQYLURQPHQWDQGKIROORZLQJD UHWUDFWHGFRQVRQDQWLVFOHDUO\VHHQLQ)LJXUH

)LJXUH D )LQDOLLQWKHZRUGCKV5KH\HEURZ ±SKRQHWLFDOO\>L@E )LUVWL LQWKHZRUGSKV5KPORXVH ±SKRQHWLFDOO\>H@

,Q)LJXUHD WKHDGYDQFHG75DQGUDLVHG7%DUHNH\WRSURGXFLQJWKLV>L@ +RZHYHULQ)LJXUHE KLVVHHQWRKDYHDUHWUDFWHG75DQGDORZHUHG7%


UHVXOWLQJLQDYRZHOWUDQVFULEHGDVEHLQJFORVHWR>H@RU>'@*LYHQWKDW1XX FKDKQXOWKVKRZVOD[LQJORZHULQJLQRQVHWVHTXHQFHVEXWVHULDOSURGXFWLRQ ZLWKDQDFFRPSDQ\LQJVFKZDSHUFHSWLQFRGDVHTXHQFHVWKLVODQJXDJHPXVW EHFODVVHGDVW\SH%LQRXU7DEOH

&KLOFRWLQ $VGLVFXVVHGDERYHZKLOHYRZHOORZHULQJWDNHVSODFHDIWHUSLQ1XXFKDK QXOWKLQ&KLOFRWLQLWKDSSHQVEHIRUHS7KLVPLUURULPDJHHIIHFWZDVDOVR VHHQLQWKHEHKDYLRXURIWKHH[FUHVFHQWVFKZDLQWKHVHWZRODQJXDJHVLQ6HF WLRQVDQG([DPSOHV DQG IURP&RRN VKRZWKH ORZHULQJWKDWRFFXUVEHIRUHT

PKSKP =PGSKP@ VU@ăKSK =VUăGSK?`=VUăKSK@

µZHSDGGOHG¶ µZRPDQ¶

7KXVZHPXVWFDWHJRUL]H&KLOFRWLQDVDW\SH'ODQJXDJHLQRXU7DEOH 1RWHWKDWERWKYRZHOORZHULQJSUHFHGLQJTDQGWKHH[FUHVFHQWVFKZD IROORZLQJTRFFXULQWKHZRUGLQ $OVRQRWHWKDWLQ ZKHUHDUHWUDFWHG FRQVRQDQWERWKSUHFHGHVDQGIROORZVWKH¿UVW KWKHUHLVQRFOHDUSUHFH GHQFHWKHUHDOL]DWLRQRIKYDULHVEHWZHHQ>G@DQG=K?

6N\H6FRWV*DHOLF $FFRUGLQJWRWKHGHVFULSWLRQRI%RUJVWU¡P 2IWHGDO 6N\H6FRWV *DHOLFORZHUVDQGUHWUDFWVLERWKEHIRUHDQGDIWHUO:KLOHQRSULPDU\GDWD RQWKLVODQJXDJHLVDYDLODEOHWRWKHDXWKRUVDWSUHVHQWLIWKLVGHVFULSWLRQLV LQGHHGFRUUHFWWKHQWKLVODQJXDJHFRQVWLWXWHVWKHRQO\NQRZQFDVHRIV\P PHWULFUHVSRQVHVWRWKLVFRQÀLFWLHZKHUHWKHVDPHVWUDWHJ\LVHPSOR\HG LQERWKSUHDQGSRVWYRFDOLFSRVLWLRQV DQGPXVWEHFDWHJRUL]HGDVDW\SH( ODQJXDJHLQ7DEOH

&RQÀLFWDYRLGDQFH ,Q DGGLWLRQ WR WKH WZR PDLQ HIIHFWV GLVFXVVHG LQ WKH DERYH VHFWLRQV LW LV ZRUWKPHQWLRQLQJDQDGGLWLRQDOUHVSRQVHWRFRQÀLFWV\VWHPDWLFDYRLGDQFH LHFDVHVZKHUHVHTXHQFHVRI$75YRZHOVOLTXLGVRURWKHUUHWUDFWHGFRQ


VRQDQWVDUHV\VWHPDWLFDOO\DYRLGHG ([DPSOHVRIWKLVW\SHRIODQJXDJHLQ FOXGHD@IROORZLQJU.LWWRDQGGH/DF\ DQG%HUQHUD6FRWV *DHOLFZKHUHWHQVHOGRHVQRWDSSHDUEHIRUHRUDIWHUDVWUHVVHGIURQWYRZHO %RUJVWU¡P DQG 2IWHGDO 7KHVH ODQJXDJHV WKXV DOO IDOO LQWR FDW HJRU\,LQ7DEOH

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¿F TXHV WLRQ WKDW HPHUJHV IURP WKLV VWXG\ UHODWHV VLPLODUO\ WR V\OODEOH DVV\PHWULHV :K\DUHWKHEDFNYRZHOJHVWXUHVRIOLTXLGFRQVRQDQWVLQV\OODEOHLQLWLDODO ORSKRQHVRIOLTXLGVLQPRVWODQJXDJHVUHODWLYHO\VPDOOHULQPDJQLWXGHWKDQ WKRVHLQ¿QDODOORSKRQHV*LFN&DPSEHOO2KDQG7DPEXUUL:DWWLQSUHVV " )XUWKHUUHVHDUFKLQWKHVHDUHDVZLOOEHQHHGHGWRFODULI\WKLVUHODWLRQVKLSEH WZHHQWKHSKRQHWLFDQGSKRQRORJLFDODV\PPHWULHVLQV\OODEOHSURGXFWLRQ ,WKDVEHHQDUJXHGLQWKLVSDSHUWKDWWKHDSSDUHQWVFKZDLQ(QJOLVKWHQVH YRZHOOLTXLGFRPELQDWLRQVLVWKHLQFLGHQWDOUHVXOWRIWKHWRQJXHPRYLQJ WKURXJKDVFKZDOLNHFRQ¿JXUDWLRQGXULQJWKHWUDQVLWLRQIRUFHGE\FRQÀLFW LQJWRQJXHURRWWDUJHWV7KLVSKHQRPHQRQKDVKHOSHGWRLGHQWLI\RWKHUVLPLODU FDVHV RI FRQÀLFWLQJ WDUJHWV DOORZLQJ IRU D FURVVOLQJXLVWLF FRPSDULVRQ RI VWUDWHJLHV HPSOR\HG LQ UHVROYLQJ VXFK DUWLFXODWRU\ FRQÀLFWV 7R DFFRPPR GDWHWKHVHGDWDDPRGHOIRUJHVWXUDOFRRUGLQDWLRQLQV\OODEOHFRGDVKDVEHHQ SUHVHQWHGZKHUHE\FRGDWLPLQJLVGHWHUPLQHGE\WKHUHODWLRQVKLSEHWZHHQ V\OODEOHSHDNDQGFRQVRQDQWFORVXUHEXWZKHUHWLPLQJLVXQDIIHFWHGE\WKH QXPEHU RI LQWHUYHQLQJ YRFDOLF HYHQWV )LQDOO\ LW KDV EHHQ VKRZQ WKDW WKH GLIIHUHQWVWUDWHJLHVW\SLFDOO\HPSOR\HGLQFDVHVRIJHVWXUDOFRQÀLFWPD\EH VWUDLJKWIRUZDUGO\ GHVFULEHG LQ WHUPV RI WKH UDQNLQJ RI SKRQRORJLFDO FRQ VWUDLQWVRQDUWLFXODWRU\JHVWXUHVDQGWKDWWKHSUHGLFWLRQVRIWKLVFRQVWUDLQW EDVHGDSSURDFKDUHVXSSRUWHGLQDFURVVODQJXDJHVXUYH\


$Q DGGLWLRQDO LPSOLFDWLRQ QRW GLVFXVVHG DERYH LQYROYHV WKH SHUFHSWLRQ SURGXFWLRQPLVPDWFKLQWKHQXPEHURIV\OODEOHVLQWKHH[FUHVFHQWVFKZDFDV HV,IWKHDUJXPHQWLQWKHSUHVHQWSDSHULVFRUUHFWWKHQWKHDSSDUHQW³H[WUD´ V\OODEOHLQWKHVHFDVHVLVPRVWFOHDUO\H[SODLQHGDVEHLQJDSXUHO\SK\VLFDO E\SURGXFWRIJHVWXUDOFRQÀLFWDQGLWVHOIKDVQRSKRQRORJLFDOVWDWXV7KXV IRUH[DPSOHIHHODQGIHHGDUHPRVWHI¿FLHQWO\UHSUHVHQWHGDVEHLQJPRQRV\O ODELFFRQWUDU\WRSHUFHSWLRQ7KLVW\SHRIFDVHZLOOQHHGWREHDGGUHVVHGH[ SOLFLWO\E\WKHRULHVRISKRQRORJ\ZKHUHSHUFHSWLRQSOD\VDPRUHSURPLQHQW UROHHJ/DGGWKLVYROXPH

1RWHV

7KH DXWKRUV ZLVK WR WKDQN 6KDI¿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±UHWURÀH[DSSUR[LPDQW>°@LQ,3$ 0DQ\WKDQNVWRDQDQRQ\PRXVUHYLHZHUIRUVXJJHVWLQJWKLVDGGLWLRQDOSRVVLELOLW\ DQGIRUSURYLGLQJWKH%RUJVWU¡P 2IWHGDO UHIHUHQFHV

5HIHUHQFHV %RUJVWU¡P&+DQG02IWHGDO $/LQJXLVWLF6XUYH\RIWKH*DHOLF'LDOHFWVRI6FRWODQG9RO7KH 'LDOHFWVRIWKH2XWHU+HEULGHV2VOR2VOR$VFKHKRXJ


$/LQJXLVWLF6XUYH\RIWKH*DHOLF'LDOHFWVRI6FRWODQG9RO7KH 'LDOHFWVRI6N\HDQG5RVVVKLUH2VOR2VOR$VFKHKRXJ %URZPDQ&3DQG/0*ROGVWHLQ $UWLFXODWRU\SKRQRORJ\$QRYHUYLHZ3KRQHWLFD± *HVWXUDO V\OODEOH SRVLWLRQ HIIHFWV LQ $PHULFDQ (QJOLVK ,Q ) %HOO %HUWL /-5DSKDHOHGV 3URGXFLQJ6SHHFK&RQWHPSRUDU\,VVXHV )RU.DWKHULQH6DIIRUG+DUULV±:RRGEXU\1

Laboratory Phonology 8: Varieties of Phonological Competence

Phonological Structure and Phonetic Form (Papers in Laboratory Phonology)

Laboratory Phonology VII

Approaches to Phonological Complexity (Phonology and Phonetics)

Approaches to Phonological Complexity (Phonology and Phonetics)

Approaches to Phonological Complexity (Phonology and Phonetics)

The Oxford Handbook of Laboratory Phonology

Phonetic Interpretation: Papers in Laboratory Phonology VI (Papers in Laboratory Phonology)

Phonological change

Phonological change

Varieties of Capitalism, Varieties of Approaches

Phonology

A Theory of phonological wieght

Gesture, Segment, Prosody (Papers in Laboratory Phonology II)

The Phonology of Norwegian

The Phonology of Norwegian (The Phonology of the World's Languages)

The Phonology of Hungarian (The Phonology of the World's Languages)

The Phonology of Polish (The Phonology of the World's Languages)

The Phonology of Mongolian (The Phonology of the World's Languages)

Constraints in Phonological Acquisition

The Phonology of Dutch

Principles of Phonology

Aspects of Dynamic Phonology

Varieties of Presence

Varieties of lattices

Varieties of Ultramontanism

Varieties of Interpretation

Varieties Of Religious

Classification of algebraic varieties

Varieties of Presence

Varieties of Cultural History

Laboratory Phonology 8: Varieties of Phonological Competence

Phonological Structure and Phonetic Form (Papers in Laboratory Phonology)

Laboratory Phonology VII

Approaches to Phonological Complexity (Phonology and Phonetics)

Approaches to Phonological Complexity (Phonology and Phonetics)

Approaches to Phonological Complexity (Phonology and Phonetics)

The Oxford Handbook of Laboratory Phonology

Phonetic Interpretation: Papers in Laboratory Phonology VI (Papers in Laboratory Phonology)

Phonological change

Phonological change

Varieties of Capitalism, Varieties of Approaches

Phonology

A Theory of phonological wieght

Gesture, Segment, Prosody (Papers in Laboratory Phonology II)

The Phonology of Norwegian

The Phonology of Norwegian (The Phonology of the World's Languages)

The Phonology of Hungarian (The Phonology of the World's Languages)

The Phonology of Polish (The Phonology of the World's Languages)

The Phonology of Mongolian (The Phonology of the World's Languages)

Constraints in Phonological Acquisition

The Phonology of Dutch

Principles of Phonology

Aspects of Dynamic Phonology

Varieties of Presence

Varieties of lattices

Varieties of Ultramontanism

Varieties of Interpretation

Varieties Of Religious

Classification of algebraic varieties

Varieties of Presence

Varieties of Cultural History

Recommend Documents