Download as pdf or txt
Download as pdf or txt
You are on page 1of 30

(VVD\VLQ$QFLHQW*UHHN3KLORVRSK\9$ULVWRWOH

V2QWRORJ\
(GLWHGE\
$QWKRQ\3UHXV
DQG
-RKQ3$QWRQ

6WDWH8QLYHUVLW\RI1HZ<RUN3UHVV

 
3URGXFWLRQE\5XWK)LVKHU0DUNHWLQJE\)UDLO.HQHVWRQ
3XEOLVKHGE\6WDWH8QLYHUVLW\RI1HZ<RUN3UHVV$OEDQ\

6WDWH8QLYHUVLW\RI1HZ<RUN
$OOULJKWVUHVHUYHG

3ULQWHGLQWKH8QLWHG6WDWHVRI$PHULFD

1RSDUWRIWKLVERRNPD\EHXVHGRUUHSURGXFHGLQDQ\PDQQHUZKDWVRHYHUZLWKRXWZULWWHQSHUPLVVLRQH[FHSWLQWKHFDVHRIEULHITXRWDWLRQVHPERGLHGLQFULWLFDO
DUWLFOHVDQGUHYLHZV

)RULQIRUPDWLRQDGGUHVVWKH6WDWH8QLYHUVLW\RI1HZ<RUN3UHVV6WDWH8QLYHUVLW\3OD]D$OEDQ\1<

/LEUDU\RI&RXJUHVV&DWDORJLQJLQ3XEOLFDWLRQ'DWD

5HYLVHGIRUYRO 
(VVD\VLQDQFLHQW*UHHN3KLORVRSK\
3DSHUVRULJLQDOO\SUHVHQWHGDWWKHDQQXDOPHHWLQJV
RIWKH6RFLHW\IRU$QFLHQW*UHHN3KLORVRSK\
9ROHGLWHGE\-RKQ3$QWRQDQG$QWKRQ\3UHXV
,QFOXGHVELEOLRJUDSKLFDOUHIHUHQFHVDQGLQGH[HV
&RQWHQWVY>ZLWKRXWVSHFLDOWLWOH@
Y3ODWRY$ULVWRWOH
VHWKLFV$ULVWRWOH
V2QWRORJ\
,3KLORVRSK\$QFLHQW&RQJUHVVHV,$QWRQ-RKQ
3HWHU.XVWDV*HRUJH/,,,3UHXV
$QWKRQ\,96RFLHW\IRU$QFLHQW*UHHN3KLORVRSK\ 86
%$
,6%1; Y



 
3DJH

7KH7D[RQRPLFDO,QWHUSUHWDWLRQRI$ULVWRWOH
V&DWHJRULHV$&ULWLFLVP
'RQDOG0RUULVRQ

&DWHJRULHVEUHDGV2IWKLQJVVDLGZLWKRXWFRPELQDWLRQVHDFKVLJQLILHVHLWKHUVXEVWDQFHRUTXDQWLW\RUTXDOLW\RUDUHODWLYHRUZKHUHRUEHLQJLQDSRVLWLRQRU
KDYLQJRUGRLQJRUEHLQJDIIHFWHG6FKRODUVDQFLHQWDQGPRGHUQKDYHGLVDJUHHGRQZKDWLVEHLQJFODVVLILHGLQWKLVSDVVDJHZKHWKHULWLVZRUGVFRQFHSWVRUEHLQJV
RUVRPHYDULDWLRQRUFRPELQDWLRQWKHUHRI%XWWKDWVRPHWKLQJRURWKHULVEHLQJFODVVLILHGLVQRWPXFKLQGLVSXWH2QHDQFLHQWWLWOHRIWKLVZRUNZDV2QWKH*HQHUDRI
%HLQJDQRWKHUZDV2QWKH7HQ*HQHUD7KHLQWHUSUHWDWLRQRIWKH
FDWHJRULHV
LPSOLFLWLQWKHVHWLWOHVLVDQDWXUDORQHVLQFH$ULVWRWOHKLPVHOIFDOOVWZRRIWKHFDWHJRULHV

JHQHUD
DWDDQGE8VLQJWKHWHUP
JHQHUD
VXJJHVWVWKDW
WKHV\VWHPRIWKHFDWHJRULHV
KDVPRUHVWUXFWXUHWRLWWKDQDVLPSOHWHQIROGFODVVLILFDWLRQ,WVXJJHVWV
WKDWHDFKFDWHJRU\VHUYHVDVWKHJHQXVIRUDJURXSRILPPHGLDWHO\VXERUGLQDWHNLQGVRUVSHFLHVZKLFKLQWXUQVHUYHDVJHQHUDIRUIXUWKHUVSHFLHVVXERUGLQDWHWRWKHP
DQGVRRQXQWLORQHUHDFKHVDOHYHODWZKLFKQRIXUWKHUGLYLVLRQLVSRVVLEOH$ULVWRWOH
VGLVFXVVLRQRISULPDU\DQGVHFRQGDU\VXEVWDQFHLQFKDSWHULPSOLHVWKDWIRU
VXEVWDQFHVDWOHDVWWKHORZHVWOHYHOFRQVLVWVRISDUWLFXODUVWKHLQGLYLGXDOPDQDQGWKHLQGLYLGXDOKRUVH+LVGLVFXVVLRQRI
VDLGRI
DQG
LQ
LQFKDSWHUVXJJHVWVDIXUWKHU
ELWRIVWUXFWXUHWKDWLWHPVVXSHURUGLQDWHLQDFDWHJRU\DUH
VDLGRI
RUHVVHQWLDOO\SUHGLFDWHGRIDOOLWHPVVXERUGLQDWHWRWKHPLQWKDWFDWHJRU\EXWLWHPVLQRQHFDWHJRU\
DUHQHYHU
VDLGRI
LWHPVLQDQRWKHUFDWHJRU\7KXVWKHLGHDTXLWHQDWXUDOO\DULVHVWKDWLQWKH&DWHJRULHV$ULVWRWOHLVZRUNLQJQRWZLWKDPHUHFODVVLILFDWLRQLQWRWHQNLQGV
EXWUDWKHUZLWKDIXOOIOHGJHGWD[RQRP\RIWKLQJVEHLQJVZRUGVFRQFHSWVRUZKDWHYHULQWRDQHODERUDWHFODVVLILFDWRU\V\VWHPZLWKWHQKLJKHVWNLQGVHDFKKDYLQJD
KLJKO\FRPSOH[VWUXFWXUHXQGHUQHDWKLW

+LVWRULFDOO\WKHPRVWLQIOXHQWLDOWD[RQRPLFFRQFHSWLRQRIWKHFDWHJRULHVKDVEHHQWKHIDPRXV7UHHRI3RUSK\U\ ,VDJRJH %XW

 
3DJH

LWLVIDLUWRVD\WKDWVRPHVRUWRIWUHHOLNHWD[RQRPLFSLFWXUHKDVEHHQDWZRUNLQPRVWVFKRODUO\FRPPHQWDU\RQWKH&DWHJRULHVIURPDQWLTXLW\WRWKHSUHVHQW
8QIRUWXQDWHO\LWLVRIWHQGLIILFXOWWREHFHUWDLQDERXWWKHGHWDLOVRIWKHWD[RQRPLFVWUXFWXUHDJLYHQLQWHUSUHWHUKDVLQPLQGEHFDXVHRIWHQPDQ\RIWKHUHOHYDQWIRUPDO
IHDWXUHVDUHQRWH[SOLFLWO\GLVFXVVHG

)RUWKLVUHDVRQDXVHIXOZD\WRSURFHHGZLOOEHWRGHILQHDVHULHVRIIHDWXUHVZKLFKWDNHQWRJHWKHUZLOOFRQVWLWXWHDPRGHOWD[RQRPLFYLHZ7KLVPRGHOVKRXOGEH
FRPSUHKHQVLYHVRWKDWDOWKRXJKPDQ\LQWHUSUHWHUVZLOOGLVDJUHHZLWKRQHRUPRUHHOHPHQWVHYHU\RQHZKRZRUNVZLWKZKDWPD\SODXVLEO\EHFDOOHGDWD[RQRPLF
DSSURDFKZLOODJUHHZLWKDWOHDVWVRPHRIWKHP,WZLOOEHXVHIXODOVRIRUWKHPRGHOWREHH[WUHPHLHIRUWKHIHDWXUHVWDNHQWRJHWKHUWRDVFULEHDPD[LPDODPRXQWRI
VWUXFWXUHWRWKHFDWHJRULHV0\FDQGLGDWHIRUZKDW,ZLOOFDOODVWULFWWD[RQRPLFYLHZRI$ULVWRWOH
VFDWHJRULHVLVWKLV

 (;+$867,9(1(667KHFDWHJRULHVDUHH[KDXVWLYH (YHU\LWHPEHLQJZRUGFRQFHSWZKDWHYHULVLQFOXGHGLQDWOHDVWRQHFDWHJRU\

 (;&/86,9,7<7KHFDWHJRULHVDUHH[FOXVLYH 1RLWHPLVLQPRUHWKDQRQHFDWHJRU\

7KLVSULQFLSOHFRPHVLQDVWURQJDQGDZHDNIRUP

D 67521*(;&/86,9,7<1RLWHPLVLQPRUHWKDQRQHFDWHJRU\DWDOOHLWKHUDFFLGHQWDOO\RUHVVHQWLDOO\

E :($.(;&/86,9,7<1RLWHPLVHVVHQWLDOO\LQPRUHWKDQRQHFDWHJRU\ WKRXJKLWPD\EHLQRWKHUFDWHJRULHVDFFLGHQWDOO\ 

$QLPSRUWDQWSDUWRIWKHWD[RQRPLFSLFWXUHLVWKHLGHDWKDWFDWHJRULHVDUHJHQHUD+HUHDWOHDVWWKUHHSULQFLSOHVQHHGWREHGLVWLQJXLVKHG

 &$7(*25,(6$5(*(1(5$7KHFDWHJRULHVDUHWKHKLJKHVW DQGWKHUHIRUHFRRUGLQDWH JHQHUD

D &$7(*25,$/0(0%(56+,3,6*(1(5,&68%25',1$7,21,$QLWHPLVLQDFDWHJRU\LIDQGRQO\LIWKDWFDWHJRU\LVLWVKLJKHVWJHQXV

E &$7(*25,$/0(0%(56+,3,6*(1(5,&68%25',1$7,21,,)RUVRPHWKLQJWREHLQDFDWHJRU\MXVWLVIRULWWRKDYHWKDWFDWHJRU\DVLWVKLJKHVW
JHQXV

 
3DJH

)URP  LWIROORZVWKDW  LVDVSHFLDOFDVHRI

 *(1(5,&(;&/86,9,7<1RLWHPIDOOVXQGHUWZR RUPRUH FRRUGLQDWHJHQHUD

 &5266&$7(*25,$/$&&,'(1&(1RLWHPLVSUHGLFDWHGHVVHQWLDOO\RIDQ\LWHPLQDQRWKHUFDWHJRU\

 ,175$&$7(*25,$/(66(1&((YHU\LWHPLVSUHGLFDWHGHVVHQWLDOO\RIHYHU\WKLQJEHORZLWLQLWVFDWHJRU\

 &$7(*25,$/'(),1,7,21$/$1$/<6,67KHIXOODQDO\VLVRIWKHHVVHQFHRIDQ\LWHPFDQEHJRWWHQE\VWULQJLQJWRJHWKHUWKHQDPHRIWKHFDWHJRU\DQGWKH
QDPHVRIDOOWKHLQWHUYHQLQJGLIIHUHQWLDH

 &$7(*25,$/,7<7KHRUGHUO\VWUXFWXUHRIWKHFDWHJRULHVLVWREHFRQWUDVWHGZLWKFHUWDLQRWKHUNLQGVNQRZQWRWKHODWHUWUDGLWLRQDV

WUDQVFHQGHQWDOV
7UDQVFHQGHQWDLVKDYHVXENLQGVDVFDWHJRULDOVGREXWWUDQVFHQGHQWDONLQGVDUHHLWKHUQRW
LWHPV
 EHLQJVZRUGVFRQFHSWV DWDOORUDWOHDVWQRWLQWKHVDPHVHQVHDV
FDWHJRULDOLWHPVDUH2QHVLJQRIWKLVLVWKDWWKHVWUXFWXUHVLQWRZKLFKWKH\DUHRUJDQL]HGDUHPXFKORRVHUWKDQWKHVWUXFWXUHVZLWKLQWKHV\VWHPVRIFDWHJRULHV

,QWKLVSDSHU,VKDOOSUHVHQWWH[WXDODQGRWKHUHYLGHQFHWKDWWKHVWULFWWD[RQRPLFSLFWXUHRIWKH&DWHJRULHVLVIDOVH7KHVHTXHQFHRIP\GLVFXVVLRQZLOOEHGHWHUPLQHGE\
YDULRXVFRQFUHWHLVVXHVUDLVHGE\WKHWH[WUDWKHUWKDQE\WKHRUGHURIWKHSULQFLSOHVLQWKHPRGHO6HFWLRQ,,FRQWDLQVVRPHSUHOLPLQDU\VRIWHQLQJXS,Q6HFWLRQV,,,9,,
,VKDOODUJXHWKDW$ULVWRWOH
VSURMHFWLQWKH&DWHJRULHVGRHVQRWLQFOXGHSULQFLSOHV    RIWKHPRGHODERYHH[FHSWIRU  ZKLFKFRQFHUQVJHQHUDDQGQRW
FDWHJRULHV

7KHPRVWVHFXUHHOHPHQWVRIWKHVWULFWWD[RQRPLFPRGHODUH  DQG  8QOLNHWKHRWKHUSULQFLSOHVLQWKHFDVHVRI  DQG  VKDOOQRWDUJXHWKDWWKHUHLVGLUHFW


WH[WXDOHYLGHQFHDJDLQVWWKHP,QVWHDGLQ6HFWLRQ9,,,,VKDOOFDVWGRXEWRQWKHPE\VKRZLQJWKDWWKHUHDUHDVSHFWVRI$ULVWRWOH
VYLHZVZKLFKPDNHWKHP
SKLORVRSKLFDOO\GLIILFXOWWRPDLQWDLQ

7KHFXPXODWLYHHIIHFWRIP\DUJXPHQWVZLOOWKHUHIRUHEHWKDWWKHWD[RQRPLFPRGHORI$ULVWRWOH
VFDWHJRULHVLVQRWMXVWZURQJLQWKLVRUWKDWGHWDLOEXWWKDWDOORILWVEDVLF
HOHPHQWVDUHZURQJRUDWOHDVWVHULRXVO\SUREOHPDWLF

 
3DJH

,,

%HIRUHEHJLQQLQJDGHWDLOHGH[DPLQDWLRQRIWH[WVDIHZJHQHUDOUHPDUNVDUHLQRUGHU,WLVLPSRUWDQWWRUHDOL]HZKDWDUHPDUNDEOHDFKLHYHPHQWWKHV\VWHPRIWKH
FDWHJRULHVDVWUDGLWLRQDOO\FRQFHLYHGZRXOGKDYHEHHQLI$ULVWRWOHKDGLQIDFWDFKLHYHGLW3ODWRLQWKHODWHGLDORJXHVUDLVHVWKHVSHFWHUWKDWGLYLVLRQOHDGVWRFKDRV
GLVPD\LQJO\PDQ\)RUPVDUHFORVHO\LQWHUZRYHQZLWKGLVPD\LQJO\PDQ\RWKHUVVRPH)RUPVDUHLQWHUZRYHQZLWKDOORWKHUV7KHQXPEHURIGLIIHUHQWGLYLVLRQVZKLFKOHDG
WRDQ\JLYHQ)RUPLVGLVPD\LQJO\ODUJH&OHDUO\RQHRIWKHWDVNVWKHHDUO\$FDGHP\IDFHGZDVWRPDNHRUGHURIWKLVPHVV7KHGLVWLQFWLRQLQWKH6RSKLVW FG 
EHWZHHQHVVHQWLDODQGQRQHVVHQWLDOSUHGLFDWLRQZDVRQHWRROLQYHQWHGIRUWKLVSXUSRVHWKH$FDGHPLFGLVWLQFWLRQEHWZHHQWKHFDWHJRULHVNDWK
KDXWRDQGSURVWLZDV
DQRWKHU)RU$ULVWRWOHWRKDYHGHYHORSHGFULWHULDSRZHUIXOHQRXJKWRGHWHUPLQHXQLTXHO\DVLQJOHVWUXFWXUHRIHYHU\WKLQJWKHUHLVWRKDYHVROYHGWKLVSUREOHP
FRPSOHWHO\ZRXOGKDYHEHHQH[WUDRUGLQDU\

0RUHRYHURQZKDWKDVEHFRPHDVWDQGDUGYLHZ$ULVWRWOH
VDFKLHYHPHQWLVHYHQPRUHH[WUDRUGLQDU\WKDQWKLV6LQFHWKHZRUNRI(UQVW.DSS  LWKDVEHHQ
UHFRJQL]HGWKDWDPDMRUVRXUFHRI$ULVWRWOH
VWKHRU\RIFDWHJRULHVLVKLVUHVHDUFKLQWRWRSLFVLQWRFODVVHVRIWHUPVRUWKLQJVVXFKWKDWWKHPHPEHUVRIHDFKFODVVVKDUH
FHUWDLQORJLFDOSURSHUWLHVXVHIXOLQFRQVWUXFWLQJDUJXPHQWV$UPHGZLWKDWKHRU\RIWRSLFVRQHQHHGRQO\GHWHUPLQHLQWRZKLFKFODVVDWKLQJEHORQJVLQRUGHUWRNQRZLWV
ORJLFDOO\PRVWLPSRUWDQWSURSHUWLHV7RSLFV,LQWURGXFHVDWKHRU\RIFDWHJRULHVDVSDUWRIWKHWKHRU\RIWRSLFV$V0LFKDHO)UHGHKDVUHFHQWO\VWUHVVHGWKHFDWHJRULHV
LQWKH7RSLFVDUHNLQGVRISUHGLFDWHVRUSUHGLFDWLRQVZKHUHDVLQWKH&DWHJRULHVZHKDYHWRGRZLWKNLQGVRIWKLQJ%XWLQWKH&DWHJRULHV$ULVWRWOHLVFDUHIXOWR
GLVFXVVWKHORJLFDOSURSHUWLHVRIHDFKFDWHJRU\ZKHWKHULWDGPLWVRIFRQWUDULHVRUQRWZKHWKHULWYDULHVLQGHJUHHDQGVRRQ6RPHKRZWKHWKHRU\RINLQGVRIWKLQJLQ
WKH&DWHJRULHVVHHPVWREHDGHYHORSPHQWRIWKHWKHRU\RINLQGVRISUHGLFDWHRUSUHGLFDWLRQLQWKH7RSLFV,IWKLVLVDFFHSWHGWKHQZKHQLWLVFRPELQHGZLWKWKH
WUDGLWLRQDOLQWHSUHWDWLRQZHJHWWKHIROORZLQJWKHVLVWKHSURMHFWRIRUJDQL]LQJEHLQJVLQWHUPVRIJHQXVDQGVSHFLHVLQWRWKHLUXOWLPDWHGLYLVLRQVDQGWKHSURMHFWRI
JURXSLQJWKLQJVDFFRUGLQJWRWKHLUEDVLFORJLFDOSURSHUWLHVFRLQFLGHLQWKHLUUHVXOWV7KHVDPHXOWLPDWHFODVVHVDUHDUULYHGDWE\WKHVHWZRYHU\GLIIHUHQWLQTXLULHV,I
$ULVWRWOHGLGFODLPWKLVIRUKLVWKHRU\RIFDWHJRULHVWKHQKHFODLPHGDYHU\VWURQJDQGUHPDUNDEOHUHVXOW

 
3DJH

2IFRXUVH$ULVWRWOHZDVDQH[WUDRUGLQDU\PDQ%XWDV,VKDOOWU\LQWKLVSDSHUWRVKRZWKHUHLVDPSOHHYLGHQFHLQWKH&DWHJRULHVWKDWKHGLGQRWWDNHKLPVHOIWRKDYH
DFFRPSOLVKHGWKLVUHVXOW(YHQVRWKHWD[RQRPLFSLFWXUHQHHGQRWEHZKROO\JLYHQXS$QDWWUDFWLYHO\PRGHUDWHWD[RQRPLFLQWHUSUHWDWLRQRIWKH&DWHJRULHVPLJKWKROG
WKDWDOWKRXJK$ULVWRWOHZDVDWWHPSWLQJWRFRQVWUXFWDXQLYHUVDOWD[RQRP\KHZDVQRWZKROO\VXFFHVVIXO

$OWKRXJKDQHYHQILQHUDQDO\VLVFRXOGEHJLYHQDWWKLVSRLQWWKUHHSRVVLEOHYLHZVQHHGWREHGLVWLQJXLVKHG  $ULVWRWOHZDVVWURQJO\FRPPLWWHGWRWKHSRVVLELOLW\RI
FRQVWUXFWLQJDXQLYHUVDOWD[RQRP\ EHFDXVHHJKHKDGPHWDSK\VLFDODQGORJLFDOYLHZVZKLFKLPSO\LW DQGKHZDVWKHUHIRUHDFWLYHO\ZRUNLQJRQWKHSURMHFW  
$ULVWRWOHZDVLQWHUHVWHGLQWKHSURMHFWRIXQLYHUVDOWD[RQRP\DQGZDVZRUNLQJRQLWEXWKLVPRWLYHZDVVLPSOHLQWHOOHFWXDOFXULRVLW\DQGKHGLGQRWKDYHDQ\VWURQJ
FRPPLWPHQWWRLWRUWKHRUHWLFDOVWDNHLQLWVVXFFHVV  $ULVWRWOHZDVQRWLQWHUHVWHGLQWKHSURMHFWRIXQLYHUVDOWD[RQRP\ SHUKDSVEHFDXVHKHZDVFRQYLQFHGLWZDVQRW
SRVVLEOH DQGWKXVZDVQRWZRUNLQJRQLW DOWKRXJKKLVZLGHORJLFDOLQWHUHVWVVXUHO\GLGLQFOXGHDQLQWHUHVWLQYDULRXVSULQFLSOHVZKLFKZRXOGEHUHOHYDQWWRWKHSURMHFWLI
RQHZHUHZRUNLQJRQLW 

7RGLVFRYHUZKLFKRIWKHVHDOWHUQDWLYHVLVFRUUHFWRQHPXVWSD\FORVHDWWHQWLRQWROLWHUDU\FRQVLGHUDWLRQVDVZHOODVGRFWULQHDQGHVSHFLDOO\WR$ULVWRWOH
VWRQHRIYRLFH
:KHQ$ULVWRWOHDFFHSWVDSULQFLSOHWKDWSRVHVDSUREOHPIRUWD[RQRP\GRHVKHGRVRFDOPO\RUUHOXFWDQWO\"+RZUHOXFWDQWO\":KHQKHFRQIURQWVDQDSRULDKRZ
YLROHQWDUHWKHVLJQVRIVWUXJJOH",VWKHHPRWLRQDOWRQHDQGWHPSHUDWXUHPRUHOLNHWKDWRI0HWDSK\VLFV=ZKHUHWKHPHWDSK\VLFDOIDWHRIWKHZRUOGKDQJVRQWKHDSRULDH
JHWWLQJUHVROYHGLQWKHULJKWZD\RUPRUHOLNHWKH7RSLFVZKHUH$ULVWRWOHRIWHQH[SUHVVHVXQFHUWDLQW\DERXWDORJLFDOSULQFLSOHDQGWKHQPRYHVRQFDOPO\OHWWLQJWKH
PDWWHUGURSEHFDXVHQRWKLQJGHSHQGVRQLWEH\RQGWKHWUXWKRIWKHSULQFLSOHLWVHOI7KHUHDGHUVKRXOGUHUHDGWKH&DWHJRULHVZLWKWKLVTXHVWLRQLQPLQGDQGMXGJHIRU
KLPRUKHUVHOIEXW,FDQUHSRUWWKDWWKHWRQHDVZHOODVWKHGRFWULQHRIWKH&DWHJRULHVVHHPVWRPHIDUFORVHUWRWKDWRIWKH7RSLFVWKDQWKDWRIWKH0HWDSK\VLFV

,I$ULVWRWOHZHUHVWURQJO\FRPPLWWHGWRWKHWD[RQRPLFSURMHFWEXWIDFHGREVWDFOHVZKLFKKHFRXOGQRW \HW UHPRYHWKHUHZRXOGEHVLJQVRIVWUHVVDQGVWUDLQLQWKH


&DWHJRULHVWKDWDUHMXVWQRWWKHUH7KLVLVP\PDMRUDUJXPHQWDJDLQVWDOWHUQDWLYH  DFUXFLDOWH[WIRUZKLFKWKLVLVVXHDULVHVLVGLVFXVVHGLQVHFWLRQ9,0\DUJXPHQW
DJDLQVWDOWHUQDWLYH  WKDW$ULVWRWOHZDVDFWLYHO\ZRUNLQJRQWKHSURMHFWRIXQLYHUVDOWD[RQRP\WKRXJKKHZDVQRWVWURQJO\FRPPLWWHGWRLWZLOOEHSUHVHQWHGLQVHFWLRQ
9,,,W

 
3DJH

WRRLVOLWHUDU\UDWKHUWKDQSKLORVRSKLFDOWKHFODLPLVWKDW$ULVWRWOH
VOLVWVRIFDWHJRULDLVXENLQGVLQWKH&DWHJRULHVDUHQRWWKRVHZKLFKDSHUVRQZKRZDVHQJDJHGLQWKH
SURMHFWRIXQLYHUVDOWD[RQRP\ZRXOGSUHVHQW

,,,

7KHUHPDUNV,KDYHPDGHVRIDUPD\PRWLYDWHDFHUWDLQKHDOWK\VNHSWLFLVPRIWKHWD[RQRPLFLQWHUSUHWDWLRQEXWWKH\GRQRWE\WKHPVHOYHVVKRZWKDWLWLVZURQJ)RU
KDUGFRUHFRXQWHUHYLGHQFHZHPXVWWXUQWRWKHWH[WLWVHOI7KHILUVWSUREOHPWREHUDLVHGLVWKHVWDWXVRIWKHGLIIHUHQWLD:KHUHDUHGLIIHUHQWLDHORFDWHGZLWKLQWKHV\VWHP
RIWKHFDWHJRULHV"6LQFHWKLVFDVHUDLVHVWKHJUHDWHVWGLIILFXOWLHV,VKDOOIRFXVRQWKHGLIIHUHQWLDRIVXEVWDQFHHJ
UDWLRQDO
DVWKHGLIIHUHQWLDRI
KXPDQEHLQJ
,V
UDWLRQDO

ORFDWHG  LQWKHFDWHJRU\RIVXEVWDQFHRU  LQVRPHRWKHUFDWHJRU\HJTXDOLW\RU  LQERWKRU  LQQHLWKHU"(DFKRIWKHVHIRXUDQVZHUVKDVKDGLWVDGYRFDWHV
DQGHDFKRQHFDXVHVWURXEOHIRUWKHWD[RQRPLFLQWHUSUHWDWLRQRIWKHFDWHJRULHV

7KHSUREOHPVFDXVHGE\DQVZHUV  DQG  DUHFOHDU3ODFLQJDVLQJOHGLIIHUHQWLDLQWZRFDWHJRULHVDWRQFHYLRODWHV([FOXVLYLW\ZKLOHSODFLQJLWLQQRFDWHJRU\DWDOO


YLRODWHV([KDXVWLYHQHVV$QVZHU  WKDWWKHGLIIHUHQWLDLVVXEVWDQFHFDXVHVPRUHFRPSOLFDWHGSUREOHPV,IDGLIIHUHQWLDVXFKDV
UDWLRQDO
LVLQWKHFDWHJRU\RI
VXEVWDQFHWKHTXHVWLRQDULVHV,VWKLVGLIIHUHQWLDLWVHOIDQDO\]DEOHLQWRJHQXVDQGVSHFLHVRUQRW",ILWLV HJ
UDWLRQDO
DV
DELOLW\WRXVHODQJXDJH
WKHQSODFLQJWKH
GLIIHUHQWLDLQWKHFDWHJRU\RIVXEVWDQFHULVNVSXWWLQJLWLQDGLIIHUHQWFDWHJRU\IURPLWVJHQXV 7KHJHQXVRI
UDWLRQDO
ZLOOEH
DELOLW\
ZKLFKDFFRUGLQJWR$ULVWRWOHLVD
TXDOLW\QRWDVXEVWDQFH 6LQFHJHQHUDDUHSUHGLFDWHGHVVHQWLDOO\RIWKHLUVXEMHFWVWKLVZRXOGYLRODWH&URVV&DWHJRULDO$FFLGHQFHWKHSULQFLSOHWKDWQRLWHPLV
SUHGLFDWHGHVVHQWLDOO\RIDQ\LWHPLQDQRWKHUFDWHJRU\

2QWKHRWKHUKDQGLIWKHGLIIHUHQWLDLVQRWDQDO\]DEOHWKHQDYDVWQXPEHURIEHLQJVRQHIRUHYHU\GLIIHUHQWLDWHGVSHFLHVZLOOWXUQRXWWREHVLPSOHDQGXQDQDO\]DEOH
7KLVVHHPVDKHDY\SULFHWRSD\

$QVZHU  WKDWWKHGLIIHUHQWLDEHORQJVLQVRPHFDWHJRU\RWKHUWKDQVXEVWDQFHFUHDWHVDSUREOHPIRUWKHWD[RQRPLFSLFWXUHZKHQLWLVFRPELQHGZLWKFHUWDLQGRFWULQHV
SUHVHQWHGE\$ULVWRWOHLQFKDSWHURIWKH&DWHJRULHV$W&DWDEZHDUHWROGWKDWQRWRQO\VXEVWDQFHVEXWDOVRGLIIHUHQWLDHDUHVDLGRIEXWDUHQRWLQWKHLU
VXEMHFWV)URPWKLVLWIROORZVZHDUHWROGWKDWWKHGHILQLWLRQVQRWRQO\RIVXEVWDQFHVEXWDOVRRI

 
3DJH

WKHLUGLIIHUHQWLDHDUHSUHGLFDWHGRIWKHLUVXEMHFWV1RZDVLWLVXVHGKHUH
VDLGRI
LVDWHFKQLFDOWHUP,WGRHVQRWUHSUHVHQWMXVWDQ\UHODWLRQRISUHGLFDWLRQEXWWKHYHU\
VSHFLDORQHUHIHUUHGWRLQ$ULVWRWOH
VRWKHUZRUNVDVHVVHQWLDO NDWK
KDXWR SUHGLFDWLRQ&DWDEWHOOVXVWKDWWKHGLIIHUHQWLDLVSUHGLFDWHGHVVHQWLDOO\RIWKH
VSHFLHVLWGLIIHUHQWLDWHV,IWKHGLIIHUHQWLDLVLQDGLIIHUHQWFDWHJRU\IURPZKDWLWLVSUHGLFDWHGRIWKHQDEFRPPLWV$ULVWRWOHWRHVVHQWLDOSUHGLFDWLRQDFURVV
FDWHJRULHVZKLFKYLRODWHV&URVV&DWHJRULDO$FFLGHQFH

0RUHRYHU
VDLGRI
UHODWLRQVZLOOQHFHVVDULO\FURVVFDWHJRULDOERXQGDULHVQRWRQO\EHWZHHQVXEVWDQFHDQGQRQVXEVWDQFHFDWHJRULHVEXWSUREDEO\DOVREHWZHHQYDULRXV
QRQVXEVWDQFHFDWHJRULHV,IIRUH[DPSOH
SHQHWUDWLQJ
LVWKHGLIIHUHQWLDRI
SDOH
DQG
SHQHWUDWLQJ
LVDQDFWLYLW\ZKLOH
SDOH
LVDTXDOLW\ZHZLOOKDYHDQLWHPLQWKH
FDWHJRU\RIDFWLYLW\VDLGRIDQLWHPLQWKHFDWHJRU\RITXDOLW\,IWKH
VDLGRI
UHODWLRQLQWKH&DWHJRULHVLVHVVHQWLDOSUHGLFDWLRQDQGLIWKHGLIIHUHQWLDRIVXEVWDQFHLVLQ
DQRWKHUFDWHJRU\WKHQ&DWHJRULHVDDLPSOLHVWKDWLQVRIDUDVWKHEDVLFVWUXFWXUHRIWKHFDWHJRULHVLVFRQFHUQHGQRWKLQJSUHYHQWVWKHUHEHLQJHVVHQWLDO
SUHGLFDWLRQVDFURVVFDWHJRULHV7KHWH[WRIWKH&DWHJRULHVGRHVQRWHYHQH[FOXGHWKHSRVVLELOLW\RIVXEVWDQFHVEHLQJ
VDLGRI
 DQGKHQFHHVVHQWLDOO\SUHGLFDWHGRI 
QRQVXEVWDQFHV)RUWKHUHPLJKWEHJRRGVFLHQWLILFUHDVRQVWRFRQFOXGHWKDWFHUWDLQVXEVWDQFHVIXQFWLRQDVWKHGLIIHUHQWLDHRIFHUWDLQQRQVXEVWDQFHVIRUH[DPSOHWKDW

VQXE
LVGLIIHUHQWLDWHGIURPRWKHUNLQGVRIFRQFDYLW\E\WKHVXEVWDQFHLWLVFKDUDFWHULVWLFDOO\LQWKHQRVH

$OOIRXUYLHZVRQWKHVWDWXVRIWKHGLIIHUHQWLDRIVXEVWDQFHLQWKH&DWHJRULHVKDYHKDGUHSXWDEOHGHIHQGHUV0\RZQYLHZLVWKDWDQVZHU  LVFRUUHFWWKHGLIIHUHQWLD
RIVXEVWDQFHLVLQVRPHQRQVXEVWDQFHFDWHJRU\7KHUHIRUH&URVV&DWHJRULDO$FFLGHQFHIDLOV8QIRUWXQDWHO\DIXOOH[DPLQDWLRQDQGGHIHQVHRIWKLVDQVZHUZRXOG
UHTXLUHDSDSHULQLWVHOI+HUH,ZLOOVLPSO\JLYHRQHLPSRUWDQWFRQVLGHUDWLRQZKLFKIDYRUVWKHYLHZ

7KHPRVWLPSRUWDQWDUJXPHQWWKDWLQWKH&DWHJRULHVWKHGLIIHUHQWLDLVQRWVXEVWDQFHLVWH[WXDO'HIHQGHUVRIWKHWKHVLVWKDWWKHGLIIHUHQWLDLVVXEVWDQFHVRPHWLPHVZULWH
DVLI$ULVWRWOHLPSOLHGWKDWWKHGLIIHUHQWLDLVVXEVWDQFHE\GLVFXVVLQJGLIIHUHQWLDLQFKDSWHUZKLFKLVGHYRWHGWRVXEVWDQFH%XWZKDW$ULVWRWOHVD\VDWDDQGDLV
WKDWFHUWDLQIHDWXUHVZKLFKRQHPLJKWWKLQNDUHXQLTXHWRVXEVWDQFHDUHQRWXQLTXHWRLWEHFDXVHWKRVHIHDWXUHVDOVREHORQJWRWKHGLIIHUHQWLD7KLVZD\RISXWWLQJWKH
PDWWHUFOHDUO\LPSOLHVWKDWWKHGLIIHUHQWLDLVQRWVXEVWDQFH

 
3DJH

,9

$QRWKHUGLIILFXOW\IRUWKHWD[RQRPLFPRGHOLVSRVHGE\WH[WVZKLFKLPSO\DFFLGHQWDOSUHGLFDWLRQZLWKLQDVLQJOHFDWHJRU\WKXVYLRODWLQJ,QWUDFDWHJRULDO(VVHQFH$IWHU
GLVFXVVLQJDOLVWRITXDQWLWLHVIRUH[DPSOH$ULVWRWOHVD\V2QO\WKHVHDUHFDOOHGTXDQWLWLHVVWULFWO\>NXULRV @DOOWKHRWKHUVDUHFDOOHGTXDQWLWLHVDFFLGHQWDOO\)RULWLVWR
WKHVHWKDWZHORRNZKHQZHFDOOWKHRWKHUVTXDQWLWLHV DE 7KHZKLWH>WKLQJ@LVODUJHEHFDXVHWKHVXUIDFHZKLFKLVZKLWHLVODUJHDQGWKHDFWLRQLVORQJEHFDXVHLW
WDNHVDORQJWLPH7KHZKLWHLVODUJHDQGWKHDFWLRQLVORQJKRZHYHUQRWHVVHQWLDOO\ E EXWDFFLGHQWDOO\

7KHGLIILFXOW\WKLVSDVVDJHSRVHVIRUDWD[RQRPLFSLFWXUHRIWKHFDWHJRULHVKDVQRWEHHQPXFKUHPDUNHGRQE\PRGHUQFRPPHQWDWRUV3KLORSRQXVDQG$PPRQLXV
UHFRJQL]HWKHSUREOHPDQGUHVSRQGWRLWE\VD\LQJWKDWLWLVSDUWRI$ULVWRWOH
VMREWRGLVFXVVQRWRQO\ZKDWGRHVEHORQJWRWKHVXEMHFWEXWDOVRZKDWVHHPVWREXWLQ
WUXWKGRHVQRW7KXVWKH\VROYHWKHSUREOHPE\VXSSRVLQJWKDWDFFLGHQWDOTXDQWLWLHVDUHQRWTXDQWLWLHVDWDOO+RZHYHUWKLVLVQRWDSODXVLEOHLQWHUSUHWDWLRQRI
$ULVWRWOH
VWH[W1RZKHUHHOVHLQ$ULVWRWOHLV
EHLQJDFFLGHQWDOO\;
HTXLYDOHQWWRLQUHDOLW\QRWEHLQJ;DWDOO

3RVVLEOHVXSSRUWIRUWKHYLHZWKDW$ULVWRWOHGRHVQRWLQWHQGWRLQFOXGHDFFLGHQWDOTXDQWLWLHVLQWKHFDWHJRU\RITXDQWLW\DSSHDUVDWEZKHUHDFFRUGLQJWRPRGHUQ
HGLWLRQVRIWKHWH[W$ULVWRWOHFORVHVWKHGLVFXVVLRQRIDFFLGHQWDOTXDQWLWLHVWKXV6RWKDWRQO\WKHLWHPVPHQWLRQHGDUHTXDQWLWLHVVWULFWO\DQGHVVHQWLDOO\RIWKHRWKHUV
QRQHLVHVVHQWLDOO\>DTXDQWLW\@EXWLIDWDOO>HLDUD@DFFLGHQWDOO\ E ,IDWDOO HODUD H[SUHVVHVGRXEWDVOLJKWGRXEWEXWDGRXEW2QWKHRWKHUKDQGLW
ZRXOGEHZLVKIXOWKLQNLQJIRULQWHUSUHWHUVZKRGRQRWOLNHDFFLGHQWDOFDWHJRULDOVWRLQWHUSUHWWKLVGRXEWDVDGHQLDO0RUHRYHUWKHZRUGHLLQHLDUDLVRQO\RQHSRVVLEOH
UHDGLQJRIWKHWH[W7KHDOWHUQDWLYHUHDGLQJVHJLQ%RHWKLXV
VWUDQVODWLRQDQGLQWKH0DUFLDQXVH[SUHVVQRGRXEWDWDOO

7KDWWKH&DWHJRULHVGRHVPHDQWRLQFOXGHLWHPVDFFLGHQWDOO\LQDFDWHJRU\DVLQWKDWFDWHJRU\LVHYHQFOHDUIURPWKHLQLWLDOPHQWLRQRIWKHFDWHJRULHVDW+HUH
$ULVWRWOHZULWHVWKDWHDFKXQFRPSRXQGHGWKLQJVLJQLILHVHLWKHUVXEVWDQFHRUTXDQWLW\RU,IKHKDGZDQWHGKHFRXOGKDYHZULWWHQVLJQLILHVHVVHQWLDOO\7KLV
ZRXOGKDYHPDGHDPXFKVWURQJHUFODLP%XWDVLWVWDQGV&DWHJRULHVEDOORZVERWKDFFLGHQWDOO\DQGHVVHQWLDOO\SUHGLFDWHGVXEVWDQFHVTXDQWLWLHVHWFWRFRXQWDV
LQWKHUHVSHFWLYHFDWHJRU\

$FFLGHQWDOSUHGLFDWLRQVFDQRFFXULQRWKHUFDWHJRULHVDVZHOO$WE$ULVWRWOHVD\VWKDWDOOWKLQJVDUHUHODWLYHZKLFKDUHFDOOHGMXVWZKDWWKH\DUHLQUHODWLRQWR
VRPHWKLQJHOVH7KHQKHVD\VWKDWDPRXQWDLQLVFDOOHG

 
3DJH

ODUJHUHODWLYHWRVRPHWKLQJ6LQFHWKHPRXQWDLQLVZKDWLVFDOOHGVRPHWKLQJUHODWLYHWRVRPHWKLQJE\WKHDFFRXQWDWEWKHPRXQWDLQLVDUHODWLYH 7KHUHDUHWZR


SRVVLELOLWLHVKHUHPRXQWDLQVDUHODUJHHLWKHUHVVHQWLDOO\RUDFFLGHQWDOO\,IHVVHQWLDOO\WKHQVLQFHPRXQWDLQVDUHFRKHUHQWERGLHVDQGFRKHUHQWERGLHVDUHHVVHQWLDOO\
VXEVWDQFHV FI0HWDSK\VLFV'HOWDDQG VRPHWKLQJVIRUH[DPSOHPRXQWDLQVEHORQJHVVHQWLDOO\WRWZRFDWHJRULHVIRUH[DPSOHVXEVWDQFHDQGUHODWLYH7KLVRI
FRXUVHYLRODWHV([FOXVLYLW\

7KHRWKHUSRVVLELOLW\LVWKDWDPRXQWDLQLVDQRWKHUH[DPSOHRIVRPHWKLQJWKDWLVLQDFDWHJRU\DFFLGHQWDOO\WKLVWLPHLQWKHFDWHJRU\RIUHODWLYH$VIRUTXDOLW\$ULVWRWOH
V
WH[WJLYHVQRH[SOLFLWDFFLGHQWDOSUHGLFDWLRQVLQWKDWFDWHJRU\%XWKLVGLVFXVVLRQDWEGRHVVXJJHVWWKDW

DPDQLVDER[HUZRXOGEHDFDVHZKHUHDPDQLV
DFFLGHQWDOO\TXDOLILHG SRLRV LQDZD\WKDWSDUDOOHOVDPRXQWDLQLVODUJH

:KHQDOORIWKHHYLGHQFHLVWDNHQWRJHWKHUWKHUHLVOLWWOHURRPIRUGRXEWWKDW$ULVWRWOHEHOLHYHGLQDFFLGHQWDOFDWHJRULDOV2QHTXHVWLRQZKLFKDULVHVLVMXVWKRZ
ZLGHVSUHDGDUHWKH\",IWREHDFFLGHQWDOO\LQDFDWHJRU\LWVXIILFHVWREHDFFLGHQWDOO\UHODWHGWRVRPHWKLQJLQWKDWFDWHJRU\ LHHLWKHUE\LQKHULQJLQLWRUE\EHLQJ
LQKHUHGLQE\LWRUE\LQKHULQJLQVRPHWKLQJZKLFKLWLQKHUHVLQ WKHQSUDFWLFDOO\HYHU\WKLQJLVLQSUDFWLFDOO\HYHU\FDWHJRU\:KLWHLVHVVHQWLDOO\DTXDOLW\EXW
DFFLGHQWDOO\LWLVDVXEVWDQFHHJEHFDXVHLWLQKHUHVLQWKHVNLQRIDQLPDOVDQGLWLVDFFLGHQWDOO\DUHODWLYHEHFDXVHLWLQKHUHVLQWKHVXUIDFHRIDEXLOGLQJZKLFKLQWXUQLV
ODUJHUWKDQLWVVXUURXQGLQJVDQGLWLVDFFLGHQWDOO\DQDFWLRQEHFDXVHLWLQKHUHVLQH[WUHPHO\KRWLURQEDUVZKLFKKHDWRWKHUWKLQJV$QLQGLYLGXDOVXEVWDQFHVXFKDV
6RFUDWHVLVHVVHQWLDOO\DVXEVWDQFHEXWDWDQ\JLYHQPRPHQWKHLVYHU\OLNHO\WREHLQHDFKRIWKHRWKHUFDWHJRULHVQRWMXVWLQRQHZD\EXWPDQ\WLPHVRYHU

-XVWKRZWKUHDWHQLQJWRWKHWD[RQRPLFSLFWXUHDUHDFFLGHQWDOFDWHJRULDOV")RURQHWKLQJWKH\IRUFHWKHDEDQGRQPHQWRI,QWUDFDWHJRULDO(VVHQFHWKHGRFWULQHWKDWDOO
LQWUDFDWHJRULDOSUHGLFDWLRQVDUHHVVHQWLDO%XWWKDWE\LWVHOIQHHGQRWEHYHU\WKUHDWHQLQJ)RUWKHSRVVLELOLW\UHPDLQVWKDWDVXEVHWRIWKHFRQWHQWRIWKHFDWHJRULHV
QDPHO\WKHQRQDFFLGHQWDORUHVVHQWLDOFDWHJRULDOVZKHQWDNHQDVDJURXSE\WKHPVHOYHVGRIRUPDQHDWWD[RQRPLFV\VWHP7KHWKHVLVWKDW$ULVWRWOHLQWKH&DWHJRULHV
LVZRUNLQJZLWKWKHLGHDRIDWD[RQRP\RIHVVHQFHVFDQEHPDLQWDLQHG:KDWPXVWEHJLYHQXSKRZHYHULVWKHWKHVLVWKDWWKHSXUSRVHRIWKHFDWHJRULHVLHWKH
WHQIROGGLYLVLRQLQWRVXEVWDQFHTXDQWLW\DQGVRRQLVWRSURYLGHVXFKDWD[RQRP\7RSXWWKHSRLQWDQRWKHUZD\WKHWD[RQRP\RIHVVHQFHV RUEDVLFFRQFHSWVRU
QDWXUDONLQGWHUPV FDQQRORQJHUEHLGHQWLILHGZLWKWKHV\VWHPRIFDWHJRULHVVLQFHWKHFDWHJRULHVWXUQRXWWRLQFOXGHDJUHDWGHDOHOVHDVZHOO7KHPRGHUDWLRQRIWKH
VWULFWWD[RQRPLF

 
3DJH

PRGHOZKLFKDEDQGRQV,QWUDFDWHJRULDO(VVHQFHEXWUHWDLQVWKHRWKHUSULQFLSOHVOLVWHGLQ6HFWLRQ,FDQUHWDLQDQHDWWUHHOLNHWD[RQRP\EXWLWPXVWUHYLVHLWVFRQFHSWLRQ
RIWKHFDWHJRULHV

7KHLGHDRIDQHDWWD[RQRP\RIHVVHQFHVLVPRUHVHULRXVO\WKUHDWHQHGE\WKHSURVSHFWWKDWDQLWHPFDQEHORQJHVVHQWLDOO\LQPRUHWKDQRQHFDWHJRU\5HFDOOWKHWZR
YHUVLRQVRI([FOXVLYLW\

D 67521*(;&/86,9,7<1RLWHPLVLQPRUHWKDQRQHFDWHJRU\DWDOOHLWKHUDFFLGHQWDOO\RUHVVHQWLDOO\

E :($.(;&/86,9,7<1RLWHPLVHVVHQWLDOO\LQPRUHWKDQRQHFDWHJRU\ WKRXJKLWPD\EHLQDGGLWLRQDOFDWHJRULHVDFFLGHQWDOO\ 

,QJHQHUDOWKHUHMHFWLRQRI,QWUDFDWHJRULDO(VVHQFHFUHDWHVZLGHVSUHDGRSSRUWXQLW\IRUWKHYLRODWLRQRI([FOXVLYLW\VLQFHDQLWHPWKDWEHORQJVDFFLGHQWDOO\WRRQH
FDWHJRU\LVTXLWHOLNHO\WREHORQJHLWKHUHVVHQWLDOO\RUDFFLGHQWDOO\WRDQRWKHUDQGWKXVEHORQJWRERWK%XWIRUVRPHWKLQJWREHORQJHVVHQWLDOO\WRWZRFDWHJRULHVDWRQFH
LVDPRUHVHULRXVYLRODWLRQRI([FOXVLYLW\7KRVHZKRKROGWKDW$ULVWRWOH
VVFKHPHGRHVLQFOXGHDFFLGHQWDOFDWHJRULDOVDUHOLNHO\WRILQG6WURQJ([FOXVLYLW\LPSODXVLEO\
VWURQJ ,WUHTXLUHVWKDWDFFLGHQWDOFDWHJRULDOVQRWEHHVVHQWLDOO\LQDQ\FDWHJRU\DWDOO %XW:HDN([FOXVLYLW\PD\VWLOOVHHPZRUWKSUHVHUYLQJ

7KHODUJHPRXQWDLQDWEPD\EHDYLRODWLRQRI:HDN([FOXVLYLW\$FOHDUHUH[DPSOHDSSHDUVDWDZKHUH$ULVWRWOHFRQIURQWVWKHSUREOHPWKDWVRPH
VXEVWDQFHVVHHPDOVRWREHUHODWLYHV+HDGDQGKDQGDUHVXEVWDQFHV%XWDKHDGLVFDOOHGVRPHRQH
VKHDGDQGDKDQGVRPHRQH
VKDQGZKLFKVHHPVWRPDNHWKHP
UHODWLYHVDVZHOO7KLVPD\EHVR$ULVWRWOHVD\VEXWLWPD\DOVREHDYRLGDEOHLIZHFKDQJHWKHGHILQLWLRQRIUHODWLYHVRDVWRFRXQWDVDUHODWLYHRQO\ZKDWKDVUHODWLYLW\LQ
LWVYHU\EHLQJ$ULVWRWOHWKHQDUJXHVWKDWEHLQJUHODWLYHWRVRPHWKLQJLVQRWSDUWRIZKDWDKHDGLVEHFDXVHZHFDQNQRZGHILQLWHO\ZKDWDKHDGLVZLWKRXWKDSSHQLQJWR
NQRZZKRVHLWLV

7KLVSDVVDJHUDLVHVPDQ\SUREOHPVRIGHWDLOZKLFKPXVWEHOHIWDVLGHKHUH)RUSUHVHQWSXUSRVHVWKHPRVWLPSRUWDQWWKLQJWRQRWHLVWKDW$ULVWRWOH
VUHYLVHGGHILQLWLRQ
KDVWKHHIIHFWRIUHVWULFWLQJWKHFODVVRIUHODWLYHVWRHVVHQWLDOUHODWLYHV)RUDWKLQJKDVUHODWLYLW\LQLWVYHU\EHLQJ WR

 
3DJH

HLQDLD WKDWLVLQLWVHVVHQFHMXVWLQWKHFDVHWKDWLWLVHVVHQWLDOO\ NDWK


KDXWR DUHODWLYH"6R$ULVWRWOHWULHVWRVROYHKLVSUREOHPDERXWKHDGVEHLQJERWK
VXEVWDQFHVDQGUHODWLYHVE\UHVWULFWLQJWKHFODVVRIUHODWLYHVWRZKDWLVHVVHQWLDOO\UHODWLYH

7KDW$ULVWRWOH
VUHYLVHGGHILQLWLRQDPRXQWVWRDUHVWULFWLRQRIWKHFODVVRIUHODWLYHVWRHVVHQWLDOUHODWLYHVKDVDWOHDVWWZRLPSRUWDQWFRQVHTXHQFHV)LUVWLWPDNHVFOHDU
WKDWDFFRUGLQJWR$ULVWRWOHKLVILUVWGHILQLWLRQRIUHODWLYHVGLGLQFOXGHDFFLGHQWDOUHODWLYHV7KHILUVWGHILQLWLRQLQFOXGHGDFFLGHQWDOUHODWLYHVVLPSO\EHFDXVHLWGLGQRW
H[SOLFLWO\H[FOXGHWKHPWKURXJKWKHLQFOXVLRQRIDFODXVHUHVWULFWLQJWKHVFRSHWRHVVHQWLDOUHODWLYHV%\SDULW\RIUHDVRQLQJWKHDFFRXQWVRIDQ\RWKHUFDWHJRULHVZKLFK
GRQRWLQFOXGHDQH[SOLFLWUHVWULFWLRQZLOOWKHUHIRUHH[WHQGWRERWKHVVHQWLDODQGDFFLGHQWDOO\SUHGLFDWHGLWHPV%XWWKLVLQFOXGHVDOORIWKHRWKHUDFFRXQWVRIFDWHJRULHVLQ
WKH&DWHJRULHV

7KHVHFRQGFRQVHTXHQFHEHFRPHVHYLGHQWZKHQRQHDVNVWKHTXHVWLRQ:K\GLG$ULVWRWOHQRWXVHWKHGLVWLQFWLRQEHWZHHQHVVHQWLDODQGDFFLGHQWDOFDWHJRULDOVWRVROYH
KLVSUREOHPLQVWHDGRIUHYLVLQJKLVGHILQLWLRQ"$VZHVDZLQWKHODVWVHFWLRQ$ULVWRWOHKDGWKHFRQFHSWXDOUHVRXUFHVDYDLODEOHWRVROYHWKHSUREOHPLQWKLVRWKHUZD\
6ROYLQJWKHSUREOHPZLWKWKHNDWK
KDXWRONDWDVXPEHEHNRV GLVWLQFWLRQZRXOGKDYHEHHQPXFKHDVLHUDQGPRUHHOHJDQW%XWLQ&DWHJRULHV&KDSWHUWKHWHUPVNDWK

KDXWRDQGNDWDVXPEHEHNRV GRQRWDSSHDUHYHQRQFH$ULVWRWOHLVH[WUHPHO\XQOLNHO\WRKDYHEHHQXQDZDUHRIWKHRWKHUVROXWLRQ7KHUHIRUHKHPXVWKDYHKDGVRPH
VSHFLDOUHDVRQIRUJLYLQJDUHYLVHGGHILQLWLRQLQVWHDG7KHPDLQGLIIHUHQFHEHWZHHQWKHWZRVROXWLRQVLVWKDWWKHUHYLVHGGHILQLWLRQRI
UHODWLYH
UXOHVRXWLWHPVOLNH
KHDG

DOWRJHWKHU7KH\IDLOWKHGHILQLWLRQWKHUHIRUHWKH\DUHQRWUHODWLYHVZKHUHDVWKHRWKHUVROXWLRQDFFHSWVWKHPDVUHODWLYHVDOEHLWDFFLGHQWDORQHV6R$ULVWRWOH
VUHDVRQ
IRUZDQWLQJWRDYRLGVXEVWDQWLDOUHODWLYHVPXVWKDYHEHHQDVSHFLDOUHDVRQRQHZKLFKGRHVQRWDSSO\WRRWKHUYLRODWLRQVRI6WURQJ([FOXVLYLW\VXFKDVWKHDFFLGHQWDO
TXDQWLW\
ZKLWH
ZKLFKKHDFFHSWV

7KLVFRQVLGHUDWLRQDORQHLVVXIILFLHQWWRUXOHRXWRQHRWKHUZLVHSODXVLEOHH[SODQDWLRQRI$ULVWRWOH
VRSSRVLWLRQWRVXEVWDQWLDOUHODWLYHV0RUHRYHUWKLVLVWKHH[SODQDWLRQ
PRVWWLJKWO\ZHGGHGWRWKHWD[RQRPLFSLFWXUH2HKOHUSUHVHQWVWKLVH[SODQDWLRQLQKLVFRPPHQWDU\ZKHQKHVD\VWKDW$ULVWRWOHZDVLQWHQWRQDYRLGLQJVXEVWDQWLDO
UHODWLYHVEHFDXVHDOORZLQJWKHPZRXOGSHUPLWWKHRYHUVWHSSLQJRIFDWHJRULDOERXQGDULHV LHWKHYLRODWLRQRI([FOXVLYLW\ ZKLFKZRXOGGHWUDFWIURPWKHSXUSRVHRI
VHWWLQJXSWKHV\VWHPLQWKHILUVWSODFH:HVDZLQWKHODVWVHFWLRQWKDW$ULVWRWOHGRHVQRWHQGRUVH6WURQJ([FOXVLYLW\VLQFHKHDGPLWVDFFLGHQWDOFDWHJRULDOV%XW
$ULVWRWOH
VGHFLVLRQWRGLVDOORZVXEVWDQWLDOUHODWLYHVFDQQRWEHEDVHGRQDJOREDOLQWHQWLRQWRSURKLELWDQLWHPIURPEHORQJLQJHVVHQWLDOO\

 
3DJH

LQPRUHWKDQRQHFDWHJRU\LIWKDWZHUHWKHSUREOHPLQDKHFRXOGKDYHVROYHGLWPRUHHDVLO\DQGDSSURSULDWHO\E\GHSOR\LQJWKHDFFLGHQWDOHVVHQWLDOGLVWLQFWLRQ
,QVWHDG$ULVWRWOHPXVWKDYHKDGDGLIIHUHQWUHDVRQ2HKOHU
VH[SODQDWLRQLVLQDGHTXDWHDQGWKHUHIRUHWKLVSDVVDJHFDQQRWEHXVHGWRVXSSRUWWKHYLHZWKDW$ULVWRWOH
V
SXUSRVHLVWRPDLQWDLQ:HDN([FOXVLYLW\

6LPSOLFLXVJLYHVWZRRWKHUUHDVRQVIRUUXOLQJRXWVXEVWDQWLDOUHODWLYHV2QHUXQVDVIROORZVUHODWLYHVDUHDFFLGHQWVEXWDVXEVWDQFHFDQQRWEHDQDFFLGHQWVRD
VXEVWDQFHFDQQRWEHDUHODWLYH7KLVDUJXPHQWVHHPVWRJLYHXVWKHVSHFLDOUHDVRQZHQHHGLWUXOHVRXWVXEVWDQWLDOUHODWLYHVEXWGRHVQRWUXOHRXWHJTXDQWLWDWLYHRU
TXDOLWDWLYHUHODWLYHV

7KHNH\SUHPLVHLQWKLVDUJXPHQWLVWKDWUHODWLYHVDUHDFFLGHQWV7KHEDVLVIRUERWKSUHPLVHVLVWKHYLHZWKDWWKHVXEVWDQFHQRQVXEVWDQFHGLVWLQFWLRQFRLQFLGHVZLWKWKH
HVVHQFHDFFLGHQWGLVWLQFWLRQ)URPWKLVLWIROORZVWKDWQRVXEVWDQFHVDUHDFFLGHQWVEXWWKDWDOOQRQVXEVWDQFHVDUHDFFLGHQWV7KDWQRVXEVWDQFHVDUHDFFLGHQWVLV
QRQFRQWURYHUVLDO7KHSULQFLSOHWKDWDOOQRQVXEVWDQFHVDUHDFFLGHQWVKDVKDGZLGHVSUHDGVXSSRUW,WVHHPVWRKDYHEHHQDFFHSWHGE\DOODQFLHQWFRPPHQWDWRUVDQG
SURPLQHQWPRGHUQVFKRODUVKDYHHQGRUVHGLWDVZHOO0RUHRYHUWKHSULQFLSOHFDQUHO\RQWKHH[SOLFLWVXSSRUWRIDWH[WDW3RVWHULRU$QDO\WLFV,E
$ULVWRWOHVD\VWKDWWKLQJVZKLFKDUHQRWVXEVWDQFH WLHVWL DUHDOODFFLGHQWV VXPEHEHNRWD 

1RQHWKHOHVVWKHSULQFLSOHWKDWDOOQRQVXEVWDQFHVDUHDFFLGHQWVLVQRW$ULVWRWHOLDQ7RDUJXHWKLVLQGHWDLOLVXQIRUWXQDWHO\WRRFRPSOH[DWDVNWREHXQGHUWDNHQKHUH
%ULHIO\:KDWWKH3RVWHULRU$QDO\WLFVWH[WVKRZVLVWKDWDOOLWHPVQRWLQWKHILUVWFDWHJRU\RISUHGLFDWLRQ WKHWLHVWLRU
HVVHQFH
DUHDFFLGHQWV%XWIURPWKHIDFWWKDWDQ
LWHPLVQRWLQWKHILUVWFDWHJRU\RISUHGLFDWLRQLWGRHVQRWLPPHGLDWHO\IROORZWKDWWKHLWHPLVQRWLQWKHILUVWFDWHJRU\RIEHLQJLHVXEVWDQFH$V$ULVWRWOHIXOO\UHDOL]HV
ZKHQDJHQXVOLNH
FRORU
LVSUHGLFDWHGRIDVSHFLHVOLNH
JUHHQ
LWLVSUHGLFDWHGLQWKHFDWHJRU\RIHVVHQFHEXWDVDQHQWLW\LWIDOOVLQWKHFDWHJRU\RITXDOLW\6LPLODUO\LI
HJ
KHDG
LVDVXEVWDQWLDOUHODWLYHLWZLOOEHSUHGLFDWHGLQWKHFDWHJRU\RIHVVHQFHEXWDVDQHQWLW\LWZLOOIDOOZLWKLQWZRFDWHJRULHVVXEVWDQFHDQGUHODWLYHDOLNH

6LPSOLFLXV
VVXJJHVWLRQLVRQWKHULJKWWUDFNEXWLWZLOOQRWTXLWHGR$ULVWRWOH
VUHDVRQIRUEHLQJXQFRPIRUWDEOHZLWKVXEVWDQWLDOUHODWLYHVLVQRWDJHQHUDOREMHFWLRQWR
PHPEHUVKLSLQPXOWLSOHFDWHJRULHVQRUDQDUURZHUREMHFWLRQWRPHPEHUVKLSLQVXEVWDQFHSOXVVRPHRWKHUFDWHJRU\+LVREMHFWLRQLV\HWPRUHVSHFLILFWKHUHPXVWEH
VRPHWKLQJDERXWWKHWZRFDWHJRULHVRIVXEVWDQFHDQGUHODWLYHZKLFKPDNHVMRLQWPHPEHUVKLSLQWKHPXQLTXHO\UHSXJQDQW:KDWFRXOGWKLVEH"

 
3DJH

2QHDQVZHULVVXJJHVWHGE\6LPSOLFLXV
VRWKHUDUJXPHQWDJDLQVWVXEVWDQWLDOUHODWLYHV7KLVDUJXPHQWUXQV6XEVWDQFHLVNDWK
KDXWRZKLOHUHODWLYHVKDYHWKHLUEHLQJ
SURVKHWHURQ6LQFHNDWK
KDXWRDQGSURVKHWHURQDUHRSSRVLWHVLWLVFOHDUWKDWQRVXEVWDQFHLVDUHODWLYH  7KLVDUJXPHQWUHOLHVRQDQ$FDGHPLF
WUDGLWLRQRIFDWHJRULDODQDO\VLVDFFRUGLQJWRZKLFKWKHUHDUHWZREDVLFFDWHJRULHVQRWWHQQDPHO\WKHORDWK
KDXWRDQGWKHSURVWLRUSURVKHWHURQ7KHUHIRUHWKLV
VHHPVWREHDQ$FDGHPLFDUJXPHQWUDWKHUWKDQD3HULSDWHWLFRQH'HVSLWHZKDWHYHUSKLORVRSKLFDOLQWHUHVWLWPD\KDYHWKHDUJXPHQWGRHVQRWVHHPSURPLVLQJDVDQ
DFFRXQWRI$ULVWRWOH
VUHDVRQIRUUHMHFWLQJVXEVWDQWLDOUHODWLYHV

$QRWKHUPRUHVDWLVIDFWRU\H[SODQDWLRQIRU$ULVWRWOH
VUHMHFWLRQRIVXEVWDQWLDOUHODWLYHVLVWKLV/HWXVVXSSRVHWKDWLQWKHHDUO\$FDGHP\DWKHRU\ZDVGHYHORSHG
DFFRUGLQJWRZKLFKEHLQJVDUHGLYLGHGLQWRWZREDVLFJURXSVWKHNDWK
KDXWRDQGWKHSURVKHWHURQDQGWKDWWKHVHWZRFDWHJRULHVDUH([FOXVLYHDQG([KDXVWLYH/DWHU
$ULVWRWOHKDGGHYHORSHGKLVWKHRU\RIWHQFDWHJRULHV7KHTXHVWLRQWKHQDULVHV:KDWGLGKHWKLQNZDVWKHUHODWLRQVKLSEHWZHHQKLVFDWHJRULHVDQGWKH$FDGHPLFRQHV"
+LVFDWHJRU\RIVXEVWDQFHFOHDUO\FRUUHVSRQGVWRWKH$FDGHPLFFDWHJRU\RINDWK
KDXWR%XWKLVRWKHUQLQHFDWHJRULHVFDQEHUHJDUGHGLQHLWKHURIWZRZD\V2QHZD\
LVWRUHJDUGWKHPDVWKHMRLQWVXFFHVVRUVWRSURVKHUHWRQ2QWKLVYLHZ$ULVWRWOH
VGLVFRYHU\ZDVWKDWWKHFDWHJRU\RISURVKHWHURQLVQRWDVLQJOHFDWHJRU\EXWUDWKHU
IDOOVLPPHGLDWHO\LQWRQLQH$QRWKHUZD\LVWRUHJDUGWKHFDWHJRU\RISURVWLDVWKHVXFFHVVRUWRSURVKHWHURQ2QWKLVYLHZWKHGLVFRYHU\LVLQVWHDGWKDWWKH$FDGHPLF
GLYLVLRQLQWRNDWK
KDXWRDQGSURVKHWHURQLVQRWH[KDXVWLYHVLQFHHLJKWRWKHUFDWHJRULHVIDOOEHWZHHQWKHP,I$ULVWRWOHVDZWKHUHODWLRQVKLSEHWZHHQKLVFDWHJRULHVDQG
WKH$FDGHPLFRQHVLQWKLVODWWHUZD\WKHQKHPLJKWZHOOKDYHUHDVRQHGDVIROORZV7KH$FDGHP\ZDVULJKWWRVXSSRVHWKDWWKHFDWHJRULHVRINDWK
KDXWRDQGSURV
KHWHURQDUH([FOXVLYH IRUWKH\DUHRSSRVLWHV 6LQFHWKHFDWHJRULHVRIVXEVWDQFHDQGUHODWLYHFRUUHVSRQGWRWKRVHWZR$FDGHPLFFDWHJRULHVWKHLUUHODWLRQVKLSVKRXOG
EH([FOXVLYHDOVR%XWVLQFHWKHRWKHUHLJKWFDWHJRULHVDUHQRWRSSRVLWHVHLWKHUWRVXEVWDQFHWRUHODWLRQRUWRHDFKRWKHU([FOXVLYLW\QHHGQRWKROGEHWZHHQWKHP

7KHVXJJHVWLRQWKDWWKLVZDV$ULVWRWOH
VUHDVRQIRUUHVLVWLQJVXEVWDQWLDOFDWHJRULDOVLVKLJKO\VSHFXODWLYH%XWWKHUHDVRQLQJLVSODXVLEOHDQGLWKDVWKHPHULWRIH[SODLQLQJ
ZK\$ULVWRWOHVKRXOGIHHODQHHGWRPDLQWDLQ([FOXVLYLW\EHWZHHQWKHFDWHJRULHVRIVXEVWDQFHDQGUHODWLRQEXWQRWLQDQ\RWKHUFDVH

$ILQDOLPSRUWDQWFRPSOLFDWLRQLVWKDW$ULVWRWOHHQGVWKLVGLVFXVVLRQLQSHUSOH[LW\UDWKHUWKDQRXWULJKWUHMHFWLRQRIVXEVWDQWLDOUHODWLYHV+HFRQFOXGHV,WLVSHUKDSVKDUG
WRPDNHILUPVWDWHPHQWVRQVXFKTXHVWLRQV

 
3DJH

ZLWKRXWKDYLQJH[DPLQHGWKHPPDQ\WLPHV6WLOOWRKDYHJRQHWKURXJKWKHYDULRXVGLIILFXOWLHVLVQRWXQSURILWDEOH

 E  7KLVUHPDUNVKRZVWKDW$ULVWRWOH
V


SULPDU\PRWLYHLVQHLWKHUWRHOLPLQDWHDFFLGHQWDOFDWHJRULDOVQRUWRSUHYHQWLWHPVIURPVKRZLQJXSLQPRUHWKDQRQHFDWHJRU\,IWKHVHKDGEHHQKLVPRWLYHVKHZRXOG
QRWKDYHVRFDOPO\DQGXQQHFHVVDULO\FDVWGRXEWRQKLVKDUGZRQVROXWLRQ5DWKHULWVHHPVDVLIWKHLQFOXVLRQRIDFFLGHQWDOFDWHJRULDOVLVDSRVLWLYHYDOXHIRUKLP
WKDWLQFOXGLQJWKHPZDVSDUWRIWKHJRDOKHKDGRULJLQDOO\VHWKLPVHOIZKHQHPEDUNLQJRQWKHSURMHFWRIFRQVWUXFWLQJDWKHRU\RIFDWHJRULHV%XWIRUVSHFLDOUHDVRQV
UDWKHUWKDQDGPLWWKDWVRPHVXEVWDQFHVDUHUHODWLYHVKHLVWHPSWHGUHOXFWDQWO\WRDEDQGRQWKDWSDUWRIKLVRULJLQDOJRDOWKRXJKRQO\IRUWKDWRQHFDVH

9,

,QWKLVVHFWLRQ,VKDOOSUHVHQWDGGLWLRQDOHYLGHQFHWKDW$ULVWRWOHUHMHFWHGHYHQ:HDN([FOXVLYLW\LHWKDWKHZDVZLOOLQJWRDOORZLWHPVWRDSSHDUHVVHQWLDOO\LQPRUH
WKDQRQHFDWHJRU\

,QWKHGLVFXVVLRQRITXDQWLW\$ULVWRWOHILUVWDUJXHVWKDWPDQ\DQGIHZDQGODUJHDQGVPDOODUHQRWTXDQWLWLHVEXWUHODWLYHV E 7KHQKHEDFNVRIIZKHWKHURQH


FRXQWVWKHPDVTXDQWLWLHVRUQRW E WKH\KDYHQRFRQWUDU\EHFDXVHUHODWLYHVKDYHQRFRQWUDU\7KHUHDVRQLQJKHUHPXVWEHHYHQLI
PDQ\
DQG
IHZ
DQG
ODUJH

DQG
VPDOO
DUHTXDQWLWLHVWKH\FOHDUO\DUHDOVRUHODWLYHV DVKDVMXVWEHHQVKRZQ VRVLQFHUHODWLYHVFDQQRWKDYHFRQWUDULHVWKHVHTXDQWLWLHVGRQRWKDYHFRQWUDULHV
GHVSLWHDSSHDUDQFHV7KLVLQIHUHQFHIURPPDQ\DQGIHZDQGODUJHDQGVPDOOKDYLQJDSURSHUW\TXDUHODWLYHVWRWKHLUKDYLQJWKHVDPHSURSHUW\TXDTXDQWLWLHVLVRQO\
YDOLGRQWKHDVVXPSWLRQWKDWWKH\DUHERWKTXDQWLWLHVDQGUHODWLYHVHVVHQWLDOO\$ULVWRWOHZDVFKDUDFWHULVWLFDOO\YHU\FDUHIXODERXWWKLVW\SHRILQIHUHQFHWKHUHIRUHKHPXVW
KDYHEHHQDZDUHRIWKLVDVVXPSWLRQ7KXV$ULVWRWOH
VDUJXPHQWIURPEWRDVKRZVWKDWKHLVZLOOLQJWRDOORZLWHPVOLNHPDQ\DQGIHZDQGODUJHDQGVPDOOWREH
QRWMXVWDFFLGHQWDOO\EXWHVVHQWLDOO\LQWZRFDWHJRULHVDWRQFH

6WDWHDQGFRQGLWLRQ KH[LVDQGGLDWKHVLV DUHOLVWHGDVUHODWLYHVDWEDQGDVTXDOLWLHVDWE7KLVVHHPVWRLQGLFDWHWKDWVWDWHVDQGFRQGLWLRQVDUHLQERWKFDWHJRULHV


/DWHURQ$ULVWRWOHDFNQRZOHGJHVWKLVWKHVLVDQGGHIHQGVLW
:HVKRXOGQRWEHGLVWXUEHGOHVWVRPHRQHPD\VD\WKDWWKRXJKZHSURSRVHGWRGLVFXVVTXDOLW\ZHDUHFRXQWLQJLQPDQ\UHODWLYHV VLQFHVWDWHVDQGFRQGLWLRQVDUHUHODWLYHV )RU>@
LQSUHWW\ZHOODOOVXFKFDVHVWKHJHQ

 
3DJH

HUDDUHVSRNHQRILQUHODWLRQWRVRPHWKLQJEXWQRQHRIWKHSDUWLFXODUFDVHVLV0RUHRYHU>@LIWKHVDPHWKLQJUHDOO\LVDTXDOLILFDWLRQDQGDUHODWLYHWKHUHLVQRWKLQJDEVXUGLQLWV
EHLQJFRXQWHGLQERWKJHQHUD D

5HFHQWFRPPHQWDWRUVKDYHWHQGHGWRPLVLGHQWLI\$ULVWRWOH
VWRQHRIYRLFHLQWKLVSDVVDJH2HKOHUVD\VWKDW$ULVWRWOHLVLQHYLGHQWDSRULD  $FNULOO 
 FDOOVWKLVDSHUSOH[LQJSDVVDJHLQZKLFK$ULVWRWOHIDFHVDQDVW\GLOHPPD$FNULOOQHDWO\VNLUWVWKHLVVXHZKHWKHU$ULVWRWOHZDVKLPVHOISHUSOH[HGDQGZDVDZDUH
RIWKHGLOHPPD,QIDFW$ULVWRWOH
VZRUGVOHDYHQRGRXEWWKDWKLVDWWLWXGHZDVH[DFWO\WKHRSSRVLWH+HLVQRWLQDSRULDKHGRHVQRWWKLQNWKHLVVXHLVDWDOOSHUSOH[LQJ
,QGHHGKLVJRDOLQWKHSDVVDJHLVWRUHDVVXUHUHDGHUVOLNH2HKOHUDQG$FNULOOZKRPLJKWIDOVHO\WKLQNWKDWWKHUHLVDSUREOHPKHUH2HKOHUDQG$FNULOODUHQRWDORQHLQ
ILQGLQJ$ULVWRWOH
VWZRUHVSRQVHVYHU\SUREOHPDWLFDQGZRUULVRPH7KHUHPDUNDEOHIDFWKRZHYHULVWKDW$ULVWRWOHH[SHFWVKLVUHPDUNVWRKDYHH[DFWO\WKHRSSRVLWH
HIIHFW+HWKLQNVWKDWKHLVJLYLQJWKHUHDGHUVXIILFLHQWUHDVRQWRFRQFOXGHWKDWWKHUHLVQRWKLQJWRJHWH[FLWHGDERXWKHUH$Q\DFFHSWDEOHLQWHUSUHWDWLRQRIWKLVSDVVDJH
PXVWEHDEOHWRH[SODLQ$ULVWRWOH
VEOLWKHDWWLWXGHDQGQRWD[RQRPLFLQWHUSUHWDWLRQRIWKHFDWHJRULHVFDQGRWKDW,I$ULVWRWOHKDGWKHEDFNJURXQGEHOLHIVZKLFK2HKOHU
DQG$FNULOODWWULEXWHWRKLPKHRXJKWWREHYHU\SHUSOH[HGDQGXSVHWLQWKLVSDVVDJH%XWKHLVQRWSHUSOH[HGDQGXSVHWVRHLWKHUKHZDVDQLGLRWVLQFHWKHUHVXOWLQJ
SUREOHPVDUHHDV\WRGHWHFWRUKHGLGQRWKDYHWKRVHEHOLHIV$VZHZLOOVHHWKHEHOLHIVZKLFKFUHDWHWKHSUREOHPVDOOEHORQJWRWKHWD[RQRPLFSLFWXUH([FOXVLYLW\
&URVV&DWHJRULDO(VVHQFHDQG&DWHJRULHVDUH*HQHUD$ULVWRWOH
VWRQHRIYRLFHLQWKLVSDVVDJHOHDYHVQRGRXEWWKDWKHILQGVWKHUHMHFWLRQRIWKHVHSULQFLSOHVWREH
REYLRXVDQGXQSUREOHPDWLF

$ULVWRWOH
VILUVWUHVSRQVHWKDWLQSUDFWLFDOO\DOOVXFKFDVHVWKHJHQHUDDUHVSRNHQRILQUHODWLRQWRVRPHWKLQJEXWQRQHRIWKHSDUWLFXODUFDVHVLVPLQLPL]HVWKHFRQIOLFW
ZLWKKLVREMHFWRUE\PLQLPL]LQJWKHYLRODWLRQRI([FOXVLYLW\&RPPHQWDWRUVIUHTXHQWO\WUHDWWKLVUHVSRQVHDVDSURSRVHGVROXWLRQDVLI$ULVWRWOHZHUHSURSRVLQJWR
HOLPLQDWHWKHFRQIOLFWE\ILQGLQJDZD\WRUHVWRUH([FOXVLYLW\%XWWKDWLVQRWZKDW$ULVWRWOHGRHV7KHZRUGVFKHGRQ SUDFWLFDOO\

DOPRVW LVLPSRUWDQWKHUH(YHQ
XQGHUDUJXPHQWDWLYHSUHVVXUH$ULVWRWOHGRHVQRWVXJJHVWWKDW([FOXVLYLW\LVQHYHUYLRODWHGEXWRQO\WKDWLWKDUGO\HYHULV

$OWKRXJKWKLVUHVSRQVHPLQLPL]HVWKHYLRODWLRQRI([FOXVLYLW\IURPWKHSRLQWRIYLHZRIDWD[RQRPLFSLFWXUHRIWKHFDWHJRULHVWKHFXUHPD\EHZRUVHWKDQWKHGLVHDVH
2QHSUREOHPLVWKLV$FFRUGLQJWR&DWHJRULHVDEHYHQLQWKHQRQVXEVWDQFHFDWHJRULHVWKHJHQXVLVSUHGLFDWHG

 
3DJH

V\QRQ\PRXVO\RILWVVSHFLHVDQGRIWKHLQGLYLGXDOQRQVXEVWDQFH LIWKDWLVGLIIHUHQW  6LQFHWKHJHQXVLVSUHGLFDWHGV\QRQ\PRXVO\RIWKHVSHFLHVLWLVSUHGLFDWHG




HVVHQWLDOO\RILW7KXVE\SXWWLQJWKHJHQXVLQDGLIIHUHQWFDWHJRU\IURPWKHVSHFLHV$ULVWRWOHYLRODWHV&URVV&DWHJRULDO(VVHQFH)RUDQRWKHUSUREOHPFRQVLGHUWKH
IROORZLQJLQFRQVLVWHQWWULDG

5 +(7(52&$7(*25,$/,7<6RPHJHQHUDDUHQRWLQWKHVDPHFDWHJRU\DVWKHLUVSHFLHV

7 *(1(5,&75$16,7,9,7<7KHUHODWLRQ
;LVJHQXVRI<
LVWUDQVLWLYH

D &$7(*25,$/0(0%(56+,3,6*(1(5,&68%25',1$7,21,$QLWHPLVLQDFDWHJRU\LIDQGRQO\LIWKDWFDWHJRU\LVLWVKLJKHVWJHQXV

$ULVWRWOH
VDFFHSWDQFHRI 7 LVXQFRQWURYHUVLDO,WLVSRVVLEOHWKDWKHZDVFRPPLWWHGWRERWK 5 DQG D DVZHOODQGWKHUHIRUHWRWKHLQFRQVLVWHQWWULDG%XWKHZDV
VKDUSHQRXJKDQGKDGEHHQWKLQNLQJKDUGHQRXJKDERXWWKHVHLVVXHVWKDWKHLVXQOLNHO\WRKDYHPDGHWKDWPLVWDNH6LQFHDWD$ULVWRWOHXQKHVLWDWLQJO\SURSRVHVD
SULQFLSOHZKLFKLPPHGLDWHO\HQWDLOV 5 ZHPD\FRQFOXGHWKDWKHUHMHFWV D DQGZLWKLWWKHLGHDWKDWFDWHJRULDOPHPEHUVKLSLVDW\SHRIJHQHULFVXERUGLQDWLRQ

$ULVWRWOH
VDFFHSWDQFHRI 5 LVDQFKRUHGLQRWKHUWH[WV7KHFDVHLQZKLFKWKHJHQXVLVDUHODWLYHDQGLWVVSHFLHVDTXDOLW\LVHQGRUVHGDW7RSLFV,9EDQG
OHVVH[SOLFLWO\ DW6RSKLVWLFDO5HIXWDWLRQVE 7RSLFVEVXJJHVWVWKHSRVVLELOLW\RIWKHUHYHUVHFDVHLQZKLFKWKHJHQXVLVDTXDOLW\DQGWKHVSHFLHV
DUHODWLYH7RSLFV,9EDDQG0HWDSK\VLFV'HOWDEKRZHYHUSUHVHQWWKHRSSRVLWHYLHZ 

,QRZWXUQWR$ULVWRWOH
VVHFRQGUHVSRQVHWKDWLIWKHVDPHWKLQJUHDOO\LVDTXDOLILFDWLRQDQGDUHODWLYHWKHUHLVQRWKLQJDEVXUGLQLWVEHLQJFRXQWHGLQERWKJHQHUD7KLV
UHPDUNLVDQH[SOLFLWGHQLDORI([FOXVLYLW\

:KDWEHWWHUHYLGHQFHIRUDQLQWHUSUHWDWLRQWKDQDQH[SOLFLWHQGRUVHPHQWLQWKHWH[W"+RZHYHUWKHUHLVVRPHGRXEWWKDWDRUHYHQDEHORQJLQWKHWH[W
DWDOO7KHIDPRXVJDSLQWKHWH[WRIWKH&DWHJRULHVEHWZHHQWKHVRFDOOHG3UHGLFDPHQWDDQG3RVWSUHGLFDPHQWDFRPHVRQO\DIHZOLQHVORZHUGRZQDWE7KH
OLQHVIURPEWREDUHFOHDUO\VSXULRXVEHLQJDODWHUDGGLWLRQWRWU\WRFRYHURYHUWKHJDS7KHGLIILFXOWLHVZKLFKDSRVHIRUWKHWD[RQRPLF
LQWHUSUHWDWLRQFRXOGEHUHPRYHGLILWLVVXSSRVHGWKDWWKHLQWHUSRODWLRQEHJLQVVRPHZKDWHDUOLHUHJDWDUDWKHUWKDQE7KHUHDUHHYHQVOLJKWOLQJXLVWLF
JURXQGVIRUUHMHFWLQJDDQGDDVLQDXWKHQWLF

 
3DJH

+RZHYHUDVZHKDYHVHHQWKHWKHVLVWKDWWKH&DWHJRULHVSHUPLWVWKLQJVWREHHVVHQWLDOO\LQPRUHWKDQRQHFDWHJRU\GRHVQRWUHO\RQO\RQD7RUHMHFWWKLVWH[W
RQWKHJURXQGVRIGRFWULQDOGHYLDQFHZRXOGEHDPLVWDNH,IDLVDQLQWHUSRODWLRQWKDWLQWHUSRODWLRQZLOOKDYHDULVHQEHFDXVHWKHJHQXLQH&DWHJRULHVGLGWUHDW
VWDWHVDQGFRQGLWLRQVDVERWKTXDOLWLHVDQGUHODWLYHVDQGVRPHERG\ODWHUZDVGLVWXUEHGE\WKDWIDFW:LWKWKHDSRORJLDUHPRYHGWKHWKHVLVWKDW$ULVWRWOHKLPVHOIZDV
QRWGLVWXUEHGE\WKLVUHVXOWLVHYHQVWURQJHU

7KHDQFLHQWFRPPHQWDWRUVDFFHSW$ULVWRWOH
VVHFRQGUHVSRQVHDVVHULRXVO\LQWHQGHG+RZHYHUPRVWRIWKHPGUDZLWVWHHWKE\LQWHUSUHWLQJLWDVDGHQLDORQO\RI6WURQJ
([FOXVLYLW\6LPSOLFLXVVD\VWKDWQRWKLQJSUHYHQWVVRPHWKLQJIURPEHLQJLQWZRFDWHJRULHVDVORQJDVWKLVLVQRWLQWKHVDPHUHVSHFW$IWHUDOO6RFUDWHVLVLQPDQ\
FDWHJRULHVDVDPDQKHIDOOVLQWKHFDWHJRU\RIVXEVWDQFHDVHJVL[IHHWKLJKLQTXDQWLW\DVDIDWKHULQWKHUHODWLYHDQGVRRQ  

7KLVLQWHUSUHWDWLRQLVLPSODXVLEOH)LUVWDVZHVDZ$ULVWRWOHHDUOLHUUHVWULFWHGWKHFDWHJRU\RIUHODWLYHVWRHVVHQWLDOUHODWLYHV6HFRQGZKHQHYHU$ULVWRWOHLQFOXGHV
DFFLGHQWDOFDWHJRULDOVLQKLVOLVWVKHLVDOZD\VFDUHIXOWRODEHOWKHPDVVXFK+LVQRUPDOSURFHGXUHLVWREHJLQZLWKDOLVWRINLQGVZKLFKEHORQJHVVHQWLDOO\WRDFDWHJRU\
7KHNLQGVZKLFKEHORQJDFFLGHQWDOO\FRPHLQDVHSDUDWHOLVWODWHULIWKH\DUHPHQWLRQHGDWDOO1RZKH[LVDQGGLDWKHVLVDUHLQFOXGHGLQWKHPDLQOLVWVIRUERWK
FDWHJRULHVTXDOLW\DQGUHODWLYH6RZKDW$ULVWRWOHGRHVLQWKRVHFKDSWHUVLVWRLQFOXGHWKHPLQWKHOLVWVRINLQGVZKLFKEHORQJHVVHQWLDOO\WRWKHFDWHJRULHVDQGWKLVLVWKH
GHFLVLRQKHLVGHIHQGLQJKHUH7KLUGVXSSRUWLQJHYLGHQFHFRPHVIURP7RSLFVEIIZKHUH$ULVWRWOHXVHVHVVHQWLDOLVWODQJXDJHLQKLVGLVFXVVLRQRIWKLVLVVXH)RU
WKHVHWKUHHUHDVRQVWKH([FOXVLYLW\ZKLFK$ULVWRWOHVRHDVLO\DQGRIIKDQGHGO\UHMHFWVLQWKLVSDVVDJHPXVWEH:HDN([FOXVLYLW\

9,,

$QRWKHUSUREOHPIRUWKHWD[RQRPLFSLFWXUHRIWKH&DWHJRULHVLVLWVHYLGHQWODFNRIFRQFHUQZLWKJHQXVVSHFLHVUHODWLRQVZLWKLQHDFKFDWHJRU\)RUH[DPSOHWKH
FDWHJRU\RITXDQWLW\LVVXEGLYLGHGWZLFHILUVWLQWRGLVFUHWHTXDQWLWLHVYVFRQWLQXRXVTXDQWLWLHVDQGWKHQLQWRTXDQWLWLHVZKLFKKDYHSRVLWLRQLQUHODWLRQWRHDFKRWKHUYV
WKRVHZKLFKGRQRW1RDWWHPSWLVPDGHWRVXERUGLQDWHRQHRIWKHVHWZRGLYLVLRQVWRWKHRWKHULQVWHDGWKH\DUHSUHVHQWHGDVLIHDFKZHUHDGLUHFWGLYLVLRQRI
TXDQWLW\,I$ULVWRWOH
VDLPLQWKH&DWHJRULHVZHUHWRSURYLGHWKHRXWOLQHVRIDWD[RQRP\RIHVVHQFHVKHZRXOGQRWKDYHSUHVHQWHGWKHFDWHJRU\RITXDQWLW\LQWKLV
ZD\

 
3DJH

$QRWKHUH[DPSOHRIWKLVXQFRQFHUQZLWKWD[RQRP\DSSHDUVQHDUWKHEHJLQQLQJRIKLVGLVFXVVLRQRIUHODWLYHVZKHUHKHVD\VWKDWVXFKWKLQJVDVWKHVHDUHUHODWLYHVVWDWH
FRQGLWLRQSHUFHSWLRQNQRZOHGJHSRVLWLRQ E ,I$ULVWRWOHZHUHFRQFHUQHGLQWKH&DWHJRULHVZLWKJLYLQJDXQLYHUVDOWD[RQRP\KHVKRXOGKHUHEHOLVWLQJWKH
KLJKHVWFRRUGLQDWHVXEJHQHUDRIUHODWLYHV:KDWZHKDYHLQVWHDGLVDGLVRUJDQL]HGOLVWRIVXERUGLQDWHNLQGVSHUFHSWLRQLV LQDZD\ DNLQGRINQRZOHGJHNQRZOHGJH
LVDNLQGRIVWDWHDQGVWDWHDNLQGRIFRQGLWLRQ EII PRUHRYHUFRQGLWLRQDFFRUGLQJWR0HWDSK\VLFV'HOWDLVDNLQGRISRVLWLRQ

6LPLODUO\LQWKHFDWHJRU\RITXDOLW\WKHILUVWNLQGRITXDOLW\LVJLYHQDVVWDWHVDQGFRQGLWLRQV7KHVHFRQGNLQGQDWXUDOFDSDFLW\RULQFDSDFLW\VHHPVWREHDNLQGRI
VWDWH7KHWKLUGNLQGRITXDOLW\DIIHFWLYHTXDOLWLHVDQGDIIHFWLRQV

LQFOXGHVERWKVWDWHVDQG PHUH FRQGLWLRQV DE ,QGHHGWKHVDPHWKLQJHJUHGLV


VRPHWLPHVDVWDWH HJDVLQDURELQ
VEUHDVW DQGVRPHWLPHVDPHUHFRQGLWLRQ DVLQDEOXVKLQJIDFH :KDW$ULVWRWOHZRXOGVD\DERXWWKHIRXUWKNLQGRITXDOLW\
VKDSHDQGFRQGLWLRQLVOHVVFOHDU\HWLWGRHVVHHPWKDWWKHVKDSHRIDOXPSRIPRGHOLQJFOD\LVDPHUHFRQGLWLRQZKLOHWKDWRIDFDFWXVRUDQKRXUJODVVLVDVWDWH$W
D$ULVWRWOHUHIHUVLQSDVVLQJWRWKHGLYLVLRQFRQFHUQHGZLWKTXDOLW\)URPWKHFRPSOH[ZD\KLVIRXUNLQGVLQWHUSHQHWUDWHHDFKRWKHULWLVFOHDUWKDW$ULVWRWOHLV
XVLQJGLYLVLRQKHUHLQDORRVHDQGQRQWHFKQLFDOVHQVH

$ILQDOVLJQRI$ULVWRWOH
VXQFRQFHUQZLWKLQWUDFDWHJRULDOWD[RQRP\LVWKDWWKHRQO\VXEGLYLVLRQRIVXEVWDQFHKHJLYHVLVWKDWEHWZHHQSULPDU\DQGVHFRQGDU\VXEVWDQFH
LHEHWZHHQSDUWLFXODUDQGXQLYHUVDO$ERXWWKHPDMRUNLQGVRIVXEVWDQFHDQGWKHLUUHODWLRQVWRHDFKRWKHUKHVD\VQRWKLQJDWDOO

7KHSUHVHQWREMHFWLRQWRWKHWD[RQRPLFSLFWXUHRIWKHFDWHJRULHVLVOLWHUDU\UDWKHUWKDQSKLORVRSKLFDO7KDW$ULVWRWOHFKRRVHVWRVXEGLYLGHKLVFDWHJRULHVLQDKDSKD]DUG
ZD\GRHVQRWFRQWUDGLFWDQ\RIWKHSULQFLSOHV    ZLWKZKLFKWKLVSDSHUEHJDQ%XWWKHREMHFWLRQLVQRQHWKHOHVVFRQFOXVLYHQRDXWKRUZKRZDVHQJDJHGLQWKH
SURMHFWRIFRQVWUXFWLQJDXQLYHUVDOWD[RQRP\FRXOGKDYHZULWWHQDZRUNZKLFKEHWUD\VVROLWWOHFRQFHUQIRULQWUDFDWHJRULDOWD[RQRP\DVWKH&DWHJRULHV

7KHWKHVLVWKDW$ULVWRWOHLQWKH&DWHJRULHVLVQRWFRQFHUQHGZLWKWD[RQRP\LVVXSSRUWHGE\UHFHQWZRUNRQKLVSKLORVRSK\RIELRORJ\:KHQYLHZHGVXSHUILFLDOO\WKH
ELRORJLFDOZRUNVZRXOGVHHPWREHPXFKPRUHFRQFHUQHGZLWKWD[RQRP\WKDQWKH&DWHJRULHV<HW3LHUUH3HOOHJULQKDVDUJXHGFRQYLQFLQJO\LQDUHFHQWERRN 3HOOHJULQ
 WKDW$ULVWRWOH
VELRORJLFDOSURMHFWLVQRWDWDOOFRQFHUQHGZLWKFRQVWUXFWLQJDXQLYHUVDOWD[RQRP\$OUHDG\LQKLVERRNEXWDOVRLQPRUHUHFHQWZULWLQJV 3HOOHJULQ
DQG 3HOOHJULQKDVVRXJKWWRH[WHQGKLVWKHVLVWRFRYHU$ULVWRWOH
VORJLFDODQGPHWDSK\VLFDOZRUNVDVZHOO,UHJDUGWKHSUHVHQWHVVD\DV

 
3DJH

DFRQWULEXWLRQWR3HOOHJULQ
VODUJHUSURMHFW3HOOHJULQ
VUHVHDUFKDQGPLQHZRUNWRJHWKHUWRVXSSRUWWKHFRQFOXVLRQWKDW$ULVWRWOHQHYHUHPEDUNHGRQWKHSURMHFWRID
XQLYHUVDOWD[RQRP\7KHLGHDRIDXQLYHUVDOWD[RQRP\LVSKLORVRSKLFDOO\EHZLWFKLQJEXWWKHLGHDWKDW$ULVWRWOHWULHGWRFRQVWUXFWRQHLVHYLGHQWO\DVFKRODVWLFP\WK

9,,,

$IXUWKHUGLIILFXOW\IRUWKHWD[RQRPLFSLFWXUHFRQFHUQVWKHVWDWXVRIWKHFDWHJRULHVWKHPVHOYHVVXEVWDQFHTXDOLW\TXDQWLW\DQGVRRQ$WOHDVWWZRGLIIHUHQWLVVXHVDULVH
KHUH2QHFRQFHUQVWKHUHODWLYHVWDWXVRIWKHFDWHJRULHVDQGWKHLWHPVZKLFKIDOOXQGHUWKHP7KLVLVVXH,VKDOOQRWGLVFXVV0RUHLPSRUWDQWIRUP\SXUSRVHVLVWKH
UHODWLYHVWDWXVRIWKHFDWHJRULHVZKHQFRPSDUHGWRZKDWKDYHWUDGLWLRQDOO\EHHQFDOOHG

WUDQVFHQGHQWDOVLWHPVOLNH
EHLQJ

RSSRVLWLRQ
DQG
QDWXUH
ZKLFKVHHPQRW
WRIDOOZLWKLQDQ\FDWHJRU\2QRQHYLHZWKHFDWHJRULHVWKHPVHOYHVDUHEHLQJVVLQFHWKH\DUHWKHKLJKHVWJHQHUDDQGJHQHUDDUHEHLQJV%\FRQWUDVWWUDQVFHQGHQWDOV
OLNH
EHLQJ
DQG
RSSRVLWLRQ
DQG
QDWXUH
DUHQRWEHLQJVEHFDXVHWKH\DUHQRWJHQHUDRUDWOHDVWQRWUHDOJHQHUD7KLVYLHZIDFHVDWOHDVWWKUHHGLIILFXOWLHV

)LUVWWKHWH[WRIWKH&DWHJRULHVJLYHVRQHQRUHDVRQWRVXSSRVHWKDWWKHFDWHJRULHVWKHPVHOYHVDUHJHQHUDLQ$ULVWRWOH
VWHFKQLFDOVHQVHQDPHO\WKHJHQHULFHOHPHQWLQD
GHILQLWLRQ6XEVWDQFHTXDOLW\TXDQWLW\HWFDUHFHUWDLQO\JHQHUDLQWKHORRVHVHQVHRINLQGVRIWKLQJ DE %XWWKH&DWHJRULHVFRQWDLQVQRVLJQWKDWWKH
WUXHGHILQLWLRQVRIWKLQJVDUH
VXEVWDQFH
SOXVDVWULQJRIGLIIHUHQWLDH
TXDOLW\
SOXVDVWULQJGLIIHUHQWLDH

DQGVRRQ,QWKH&DWHJRULHVWKHJHQXVRIVRPHWKLQJLV
DOZD\VVXEFDWHJRULDOIRUH[DPSOH
FRORU
IRU
ZKLWH
DQG
NQRZOHGJH
IRU
JUDPPDU
 EED 6RWKHWUDGLWLRQDOYLHZFDQQRWUHO\RQWKHSULQFLSOH
&DWHJRULHVDUH*HQHUDWRJLYHWKHFDWHJRULHVDGLIIHUHQWRQWRORJLFDOVWDWXVIURPWUDQVFHQGHQWDOV7KHDUJXPHQWWKDW
VXEVWDQFH
DQG
TXDOLW\
DUHUHDOXQLYHUVDOVLQD
VHQVHWKDW
EHLQJ

QDWXUH
DQG
RSSRVLWLRQ
DUHQRWPXVWEHPDGHRQRWKHUJURXQGV

7KHSULQFLSOH&DWHJRULHV$UF*HQHUDKDVDQLPSRUWDQWORJLFDOFRQQHFWLRQWR:HDN([FOXVLYLW\8VLQJ
FRQFHSW
IRUZKDW,KDYHPRUHQHXWUDOO\UHIHUUHGWRDV
LWHPLQD
FDWHJRU\
%UHQWDQRVD\V
LWLVLPSRVVLEOHWKDWWKLQJVFDQFRPHWRVWDQGLQWKHOLQHDJHRIGLIIHUHQWFDWHJRULHVZLWKUHVSHFWWRRQHDQGWKHVDPHFRQFHSW)RULWLVLPSRVVLEOHWKDWRQHDQGWKHVDPHFRQFHSW
VKRXOGKDYHWZRFRRUGLQDWHG LHQRWVXERUGLQDWHRUVXSHURUGLQDWH JHQHUD7KHFDWHJRULHVEHLQJWKHKLJKHVWJHQ

 
3DJH

HUDDUHFRRUGLQDWHGKHQFHQRQHRIWKHPFDQEHUHGXFHGWRDKLJKHUFRQFHSWPXFKOHVVFDQDQ\RIWKHPEHUHGXFHGWRDQRWKHU 

,QHIIHFW%UHQWDQRDUJXHVWKDW:HDN([FOXVLYLW\IROORZVIURP*HQHULF([FOXVLYLW\+RZHYHU:HDN([FOXVLYLW\IROORZVIURP*HQHULF([FOXVLYLW\RQO\LI&DWHJRULHV$UH
*HQHUDIRULIWKHFDWHJRULHVDUHQRWJHQHUDLQ$ULVWRWOH
VWHFKQLFDOVHQVHWKHQ*HQHULF([FOXVLYLW\GRHVQRWDSSO\WRWKHP%UHQWDQRVHHPVWRWKLQNWKDW*HQHULF
([FOXVLYLW\LVIURPDSKLORVRSKLFDOSRLQWRIYLHZREYLRXVDQGKHFLWHVVHYHUDOWH[WVIURPWKH7RSLFVLQLWVVXSSRUW*HQHULF([FOXVLYLW\PD\ZHOOEHVRXQG%XWLQ
YLHZRIWKHHYLGHQFHERWKKHUHDQGHOVHZKHUHWKDW$ULVWRWOHUHMHFWHG:HDN([FOXVLYLW\IRUWKHFDWHJRULHV%UHQWDQR
VDUJXPHQWVKRXOGEHWXUQHGRQLWVKHDG7KH
UHDVRQLQJLVYDOLGEXWWKHSUHPLVHWRUHMHFWLVWKDW&DWHJRULHV$UH*HQHUD$QGLIWKHFDWHJRULHVDUHQRWJHQHUDWKHQWKH\GRQRWSOD\WKHUROHRIWKHJHQXVLQD
GHILQLWLRQDQG&DWHJRULDO'HILQLWLRQDO$QDO\VLVIDOOVDVZHOO

7KHVHFRQGGLIILFXOW\IRUDVKDUSGLVWLQFWLRQEHWZHHQWKHFDWHJRULHVDQGWUDQVFHQGHQWDOVSDUWO\IROORZVRQWKHILUVW7KHXQUHDOLW\RIWKHWUDQVFHQGHQWDOVLVRIWHQWKRXJKW
WRIROORZIURPWKHLUSRO\VHP\,Q0HWDSK\VLFV'HOWD$ULVWRWOHRIWHQLQWURGXFHVKLVGLVFXVVLRQRIDWUDQVFHQGHQWDOE\VD\LQJWKDWLWLVVDLGLQPDQ\ZD\V6LQFHLWLVVDLG
LQPDQ\ZD\VWKHDUJXPHQWJRHVZKDWLWLVWREHWKDWWKLQJRUWRKDYHWKDWFKDUDFWHULVGLIIHUHQWLQHDFKFDVHVRWKHUHLVQRVLQJOHXQLYHUVDOSUHVHQWLQHDFK

7KHWURXEOHZLWKWKLVDUJXPHQWDJDLQVWWKHUHDOLW\RIWUDQVFHQGHQWDOVLVWKDWWKHFDWHJRULHVIDOOYLFWLPWRLWWRR:HILQGWKHIDWDOIRUPXODDWE4XDOLW\LVVDLGLQPDQ\
ZD\V7KHVDPHIRUPXODFRXOGHDVLO\KDYHEHHQXVHGIRUUHODWLYHDQGTXDQWLW\VLQFHWKH\DUHGLYLGHGLPPHGLDWHO\LQWRNLQGVLQWKHVDPHZD\DVTXDOLW\7KDW
IHDWXUHRIWKHWH[WRIWKH&DWHJRULHVZKLFKDSSHDUHGLQWKHGLVFXVVLRQRIWKHODVWREMHFWLRQDVODFNRIFRQFHUQZLWKWD[RQRP\QRZVKRZVXSDVWKHDEVHQFHRIDQ\
SRVLWLYHHYLGHQFHWKDWWKHFDWHJRULHVWKHPVHOYHVDUHSUHGLFDWHGQRQHTXLYRFDOO\RIZKDWIDOOXQGHUWKHP$ULVWRWOH
VRZQGHILQLWLRQRIV\QRQ\PRXVSUHGLFDWLRQDWD
JLYHVQRKHOS)RULIVXEVWDQFHTXDOLW\HWFDUHWKHPVHOYHVXQGHILQDEOHWKDWGHILQLWLRQFDQQRWDSSO\WRWKHP

$SRZHUIXOVRXUFHRISKLORVRSKLFDOPRWLYDWLRQIRUDWWULEXWLQJVKDUSO\GLIIHUHQWRQWRORJLFDOVWDWXVWRWKHFDWHJRULHVDQGWRWUDQVFHQGHQWDOVLVWKHWD[RQRPLFSLFWXUHRIWKH
FDWHJRULHVLWVHOI,IWKHFDWHJRULHVDUHJHQHUDVWDQGLQJDWWKHKHDGRIDZHOOGHILQHGWUHHVWUXFWXUHDQGWKHWUDQVFHQGHQWDOVKDYHQRSODFHLQWKDWVWUXFWXUHEXWIORDW
LQVWHDGDLPOHVVO\RXWVLGHLWWKDWLQLWVHOILVDSV\FKRORJLFDOO\LIQRWDOVRUDWLRQDOO\SRZHUIXOUHDVRQWRUHJDUGWKHFDWHJRULHVDQGWKHLUVXERUGLQDWHFDWHJRULFDOVDV
UHDO

LQDZD\WKDWWKHWUDQVFHQGHQWDOVDUHQRW

 
3DJH

%XWLIFDWHJRULHVDUHQRWJHQHUDDQGLIWKHNLQGVZKLFKIDOOEHQHDWKWKHPDUHDVKDSKD]DUGO\DUUDQJHGDVZHVDZLQVHFWLRQ9,,WKLVGLIIHUHQFHGLVDSSHDUV,QIDFWLQ
0HWDSK\VLFV'HOWDVHYHUDOWUDQVFHQGHQWDONLQGVDUHGLYLGHGLQWRVXENLQGVZLWKIDUPRUHFRQFHUQIRUWKHH[KDXVWLYHQHVVDQGH[FOXVLYLW\RIWKHGLYLVLRQWKDQZHVDZLQ
FKDSWHUVRIWKH&DWHJRULHV([DPSOHVLQFOXGH0HWDSK\VLFV'HOWDRQ
FDXVH
RQ
XQLW\
 VHHDOVR0HW, RQ
EHLQJ
DQGRQ
RSSRVLWH

$QRWKHUUHVSHFWLQZKLFKFDWHJRULHVDQGWUDQVFHQGHQWDLVDUHVLPLODULVWKHZD\LQZKLFKVRPHEXWQRWDOORIWKHPDUHGHILQDEOH$PRQJWKH
PRVWXQLYHUVDO

WUDQVFHQGHQWDOV
EHLQJ
KDVQRGHILQLWLRQEXW
XQLW\
GRHV 0HW,E DVGRHV
HOHPHQW
 0HW'HOWDD ,QWKHORRVHVHQVHRIGHILQLWLRQLQZKLFK
WKHVHWUDQVFHQGHQWDOVKDYHGHILQLWLRQVVRPHFDWHJRULHVKDYHGHILQLWLRQVDOVRDVZHVDZ
UHODWLYH
LVGHILQHGDWDDQG
TXDQWLW\
WKRXJKQRWGHILQHGLQWKH
&DWHJRULHVLVGHILQHGDW0HWDSK\VLFV'HOWDD,QWKH0HWDSK\VLFVWKRXJKQRWLQWKH&DWHJRULHVGHILQDELOLW\LVXVHGDVDQLPSRUWDQWFULWHULRQRIUHDOLW\%\
WKLVFULWHULRQWKHFDWHJRULHVDQGWKHWUDQVFHQGHQWDOVDUHURXJKO\RQDSDU

,QWKLVVHFWLRQ,KDYHDUJXHGWKDW$ULVWRWOHLQWKH&DWHJRULHVGLGQRWFRQFHLYHRIWKHFDWHJRULHVDVKLJKHVWJHQHUD5HO\LQJSDUWO\XSRQWKLVDQGSDUWO\RQRWKHU
FRQVLGHUDWLRQV,KDYHDUJXHGWKDWDVKDUSGLVWLQFWLRQLQRQWRORJLFDOVWDWXVEHWZHHQFDWHJRULDOLWHPVDQGWUDQVFHQGHQWDOVLVGLIILFXOWWRVXVWDLQ7KHVHWZRUHVXOWVDIIHFW
RXUFRQFHSWLRQRI$ULVWRWOH
VSURMHFWLQGLIIHUHQWZD\V,IZKDW,KDYHDUJXHGLVFRUUHFWWKHQ$ULVWRWOHLQWKH&DWHJRULHVKDGQRLQWHUHVWLQUHJDUGLQJWKHFDWHJRULHVDV
JHQHUDRULQFRQVWUXFWLQJDJHQXVVSHFLHVKLHUDUFK\ZLWKWKHFDWHJRULHVDWWKHWRS2QWKHRWKHUKDQGLWVHHPVWKDW$ULVWRWOHGRHVLQWHQGWKHFDWHJRULHVWREH
([KDXVWLYHVRWKDWZKDWHYHUGRHVQRWILWLQWRWKHPLHWKHWUDQVFHQGHQWDOVPXVWQRWFRXQWDVEHLQJV RQWD  RUUHDOFRQFHSWVRUQDWXUDONLQGWHUPVRUZKDWHYHU 
,IWKLVLVULJKWWKHQWKHGLIILFXOWLHV,KDYHUDLVHGIRUWKHGLVWLQFWLRQEHWZHHQFDWHJRULDOVDQGWUDQVFHQGHQWDOVGRQRWDIIHFWRXUFRQFHSWLRQRI$ULVWRWOH
VSURMHFWEXWUDWKHU
RXUHVWLPDWHRILWVSURVSHFWV$VDQ\RQHIDPLOLDUZLWKPHGLDHYDOSKLORVRSK\ZLOONQRZZHOOWKHGLVWLQFWLRQEHWZHHQFDWHJRULDOVDQGWUDQVFHQGHQWDOVUDLVHVSKLORVRSKLFDO
LVVXHVRIJUHDWGHSWKDQGFRPSOH[LW\2QHJUHDWP\VWHU\DERXW$ULVWRWOHLVZK\KHVD\VVROLWWOHDERXWWKHVHLVVXHVZKHQREYLRXVO\KHQHHGVWRVD\VRPXFK

,;&RQFOXVLRQ

,QWKLVSDSHUP\DWWDFNRQWKHWD[RQRPLFSLFWXUHRIWKH&DWHJRULHVKDVEHHQIDLUO\VHYHUH2IWKHSULQFLSOHVOLVWHGLQVHFWLRQ,,KDYHDUJXHG

 
3DJH

WKDW$ULVWRWOHYLRODWHVRUGHQLHV    DQG     DQGWKDWKHGRHVVRLQVXFKDZD\DVWRPDNHFOHDUWKDWKHKDVQRLQWHUHVWLQGHIHQGLQJWKHP7KHVHSULQFLSOHV




KDYHSOD\HGVXFKDQLPSRUWDQWUROHLPSOLFLWO\RUH[SOLFLWO\LQVRPDQ\LQWHUSUHWHUV
WKLQNLQJDERXWWKH&DWHJRULHVIRUVRORQJWKDW,H[SHFWPDQ\UHDGHUVZLOOZLVKWR
UHVLVWP\FRQFOXVLRQV7KHUHIRUHOHWPHVD\WKDW,GRQRWWKLQNP\DUJXPHQWVDUHH[KDXVWLYHWKHUHUHPDLQVPRUHWREHVDLGSURDQGFRQRQHDFKLVVXH%XW,GRKRSH
WRFRQYLQFHSHRSOHWKDWWKHVHSUREOHPVDUHUHDODQGLPSRUWDQWDQGGHVHUYHPRUHDWWHQWLRQWKDQWKH\KDYHODWHO\JRWWHQ7KHWH[WRIWKH&DWHJRULHVFRQWDLQVUHDO
REVWDFOHVWRDWD[RQRPLFLQWHUSUHWDWLRQ:KHQRQHRIWKHVHREVWDFOHVLVHQFRXQWHUHGE\LWVHOIWKHWHPSWDWLRQLVQDWXUDOWRH[FXVHRUDFFRPPRGDWHLWDVDQDEHUUDWLRQRU
DPLQRUGHIHFWLQWKH6\VWHPRI&DWHJRULHV%XWVRPHRIWKHVHGHIHFWVDUHQRWVRPLQRU0RUHRYHUQRZWKDWWKHVHLQGLYLGXDOREVWDFOHVKDYHEHHQFROOHFWHGWRJHWKHU
WKH\RXJKWWRDSSHDUOHVVDQRPDORXV7KHGHQLDOVRIWKHVHSULQFLSOHVDUHQRWDGKRFORRVHHQGV,QVWHDGWKH\FRPELQHWR\LHOGDXQLILHGDQGFRQVLVWHQWFRQFHSWLRQRI
WKHFDWHJRULHVEXWRQHZKLFKLVQRWDWDOOWD[RQRPLF

6RIDU,KDYHVDLGDJUHDWGHDODERXWZKDW,WKLQNFDWHJRULHVLQ$ULVWRWOH
V&DWHJRULHVDUHQRWEXW,KDYHVDLGDOPRVWQRWKLQJSRVLWLYHDERXWZKDW,WKLQNFDWHJRULHVDUH
,QFRQFOXVLRQ,RZHDWOHDVWDIHZZRUGVRQWKHSRVLWLYHVLGHRIWKHOHGJHU0\YLHZLVWKDWWKHSURMHFWZKRVHWHQWDWLYHUHVXOWVZHILQGUHSRUWHGLQ$ULVWRWOH
V
&DWHJRULHVKDVQRWKLQJWRGRZLWKWKHFRQVWUXFWLRQRIJHQXVVSHFLHVWUHHV WKRXJKLWVUHVXOWVPD\SODFHVRPHFRQVWUDLQWVRQWKHFRQVWUXFWLRQRIVXFKWUHHV :KHQ\RX
WDNHWKHILUVWSDUWRIWKH&DWHJRULHVWRJHWKHUZLWKWKHVHFRQGSDUWWKH3RVWSUHGLFDPHQWDWKHLPSUHVVLRQ\RXDUHOHIWZLWKLVWKDWWKH\DUHSDUWVRIDWUHDWLVHZKRVH
REMHFWZDVWRJLYHXVDSKLORVRSKLFDOLQVWUXPHQWDULXPDQRUJDQRQVRPHZKDWVLPLODUWRWKHGLFWLRQDU\LQ0HW'HOWDH[FHSWPRUHFRQFHUQHGZLWKWKHOD\LQJRXWRI
FHQWUDOORJLFDOIHDWXUHVWKDQZLWKOLVWLQJWKHPHDQLQJVRIWHUPV,WLVZKDW0HW'HOWDZRXOWXUQLQWRLILWZHUHJLYHQWKHPRUHVXEVWDQWLYHWDVNRIVXPPDUL]LQJWKHUHVXOWVRI
DQLQYHVWLJDWLRQOLNHWKDWSUHVHQWHGPRUHH[WHQVLYHO\LQWKH7RSLFVDQGWKH6RSKLVWLFL(OHQFKL7KHGLVWLQFWLRQVLQFKDSWHUV,DQGEHWZHHQKRPRQ\PVDQGV\QRQ\PV
DQGEHWZHHQ
EHLQJVDLGRI
DQG
EHLQJLQ
DVXEMHFWILWWKLVSLFWXUHZHOO(YHQWKRXJKWKH\DUHQRWUHSRUWHGLQWKH7RSLFVWKHLUXVHIXOQHVVLQWKHFRQVWUXFWLRQRI
DUJXPHQWVLVFOHDU

7KHSUHGLFDPHQWDSRUWLRQRIWKH&DWHJRULHVSUHVHQWVWKHIROORZLQJFODVVLILFDWRU\ EXWQRWWD[RQRPLF UHVXOW,WVHHPHGWR$ULVWRWOHWKDWKHKDGIRXQGWKLVPXFKRUGHU


LQWKHXQLYHUVHWKHUHDUHWHQ RUPD\EHIHZHU FODVVHVWKHPHPEHUVRIHDFKFODVVKDYLQJFHUWDLQVLPLODUORJLFDOIHDWXUHVLQWRZKLFKDOOEHLQJVIDOO1RZLWPD\EHWKDW
VRPHEHLQJVIDOOLQWRPRUHWKDQRQHRIWKHVHFODVVHVEXWDQ\ZD\HYHU\EHLQJEHORQJVLQDW

 
3DJH

OHDVWRQHRIWKHP $QGLIP\DUJXPHQWVLQVHFWLRQ9,,,DUHULJKWWKHQ$ULVWRWOHVKRXOGQRWEHDVFRQILGHQWRIWKLVODVWSRLQWDVKHDSSHDUVWREH

7KXVP\SRVLWLYHYLHZRIWKHFDWHJRULHVLVZKDW,VXSSRVHWREHDUDWKHUUDGLFDOSRVLWLRQLQWKHOLQHJRLQJEDFNWR.DSS7KHFDWHJRULHVLQWKH&DWHJRULHVDUHD
UHVLGXHRIWKHOLQHRIUHVHDUFKUHSRUWHGLQWKH7RSLFVDQGQRWKLQJPRUH

1RWHV

7KDQNVDUHGXHWRWKH$OH[DQGHU\RQ+XPEROGW6WLIWXQJIRUJHQHURXVILQDQFLDOVXSSRUWRIP\LQLWLDOZRUNRQWKLVSDSHUDQGWR0LFKDHO)UHGHDQG&\QWKLD)UHHODQG
IRUWKHLUKHOSIXOFRPPHQWV

2QWKHYDULRXVDQFLHQWWLWOHVVHH)UHGHE

7KH*UHHNZRUGNDWHJRULDLVQRWDSSOLHGE\$ULVWRWOHWRWKHVHWHQNLQGVLQWKHWH[WRIWKH&DWHJRULHV1RQHWKHOHVV,VKDOOIROORZWUDGLWLRQDOXVDJHDQGFDOOWKHP
FDWHJRULHV:KHQLWLVLPSRUWDQWWRGLVWLQJXLVKWKHP,VKDOOUHIHUWRWKHWHQ&DWHJRULHVNLQGVDVFDWHJRULHVRIEHLQJDQGWKHWHQNLQGVSUHVHQWHGLQ7RSLFV,DV
FDWHJRULHVRISUHGLFDWLRQ7RDYRLGSRVVLEOHFRQIXVLRQ,VKRXOGPHQWLRQWKDWFDWHJRULHVRIEHLQJ

LVVRPHWLPHVXVHGLQDGLIIHUHQWZD\WRUHIHUWRWKHNLQGVRI
SUHGLFDWLRQRIWKHYHUEEHGLVWLQJXLVKHGHJE\$ULVWRWOHLQ0HW'HOWDD7KLVWKLUGXVHRIFDWHJRU\ZLOOQRWEHGLVFXVVHGLQWKHSUHVHQWSDSHU

1DWXUDOEXWQRWXQH[FHSWLRQDEOHVLQFHDRFFXUVLQDGRXEWIXOVWUHWFKRIWH[WDQGELQDSDVVDJHWKDWLVGHILQLWHO\VSXULRXV

1RWHWKHUHYHUVDORITXDOLILHUVLIWREHORQJDFFLGHQWDOO\LVWREHORQJZHDNO\DQGWREHORQJHVVHQWLDOO\LVWREHORQJVWURQJO\WKHQ6WURQJ([FOXVLYLW\GHQLHVHYHQ
ZHDNMRLQWPHPEHUVKLSDQG:HDN([FOXVLYLW\RQO\UXOHVRXWVWURQJMRLQWPHPEHUVKLS

;HQRFUDWHVIUDJ+HLQ]HIUDJ,VQDUGL3DUHQWH

)UHGHD)UHGHDUJXHVLQIDFWWKDWWKHFDWHJRULHVLQWKH7RSLFVDUHNLQGVRISUHGLFDWLRQQRWSUHGLFDWHVEXWKHUHKLVDUJXPHQWLVQRWFRQFOXVLYH

8VHIXOGLVFXVVLRQVRIWKHVHWZRSURMHFWVDVLQGHSHQGHQWVRXUFHVIRUWKH&DWHJRULHVDUHJLYHQLQ\RQ)ULW].DKQDQGWKHLQWURGXFWLRQWR2HKOHU

3KLORSRQXVDSSHDUVWRKDYHEHHQDZDUHRIDQGZLOOLQJWRVZDOORZWKLVWKRXJKKHGRHVQRWH[SOLFLWO\DFNQRZOHGJHWKHQXPEHU6HHHJ3KLORSRQXV


$QVZHU  \RQ)ULW]$QVFRPEHDQG*HDFK$PPRQLXVII%UHQWDQRQ  5RVVFLWHGLQ

 
3DJH

$QVFRPEHDQG*HDFKDQGSUREDEO\*URWHVHH  3RUSK\U\(OLDVII WKRXJKKHWKLQNVWKDWWKH\DUH


PRUHRXVLD   'H[LSSXVII/OR\G +RZHYHULWLVQRWFOHDUZKHWKHU/OR\GWKLQNVWKLVLVWKHDQVZHU$ULVWRWOHKLPVHOILQWHQGHGRUPHUHO\WKH
RQHZKLFKWKHORJLFRIKLVSRVLWLRQUHTXLUHV 7KDWHDFKRIWKHVHIRXUYLHZVZHUHVLJQLILFDQWO\UHSUHVHQWHGLQDQWLTXLW\LVLPSOLHGE\3KLORSRQXV

7KLVSRLQWLVVHHQE\3KLORSRQXV+LVODPHUHSO\LVWKDW$ULVWRWOHKHUHLVGHOLEHUDWHO\EHLQJPLVOHDGLQJ

$PPRQLXVII3KLORSRQXV

6LPSOLFLXVVHHPVWRDFFHSWDFFLGHQWDOTXDQWLWLHVDVTXDQWLWLHV+RZHYHUKHLQWHUSUHWVWKHP1HR3ODWRQLFDOO\VXJJHVWLQJWKDWDFFLGHQWDOTXDQWLWLHV
SDUWDNH PHWHFKHL LQTXDQWLW\ZKLOHHVVHQWLDOTXDQWLWLHVDUHTXDQWLW\  7KLVFDQEHWDNHQDVDGHQLDOWKDWDFFLGHQWDOTXDQWLWLHVDUH
LQWUXWK
TXDQWLWLHV
WKXVSURYLGLQJDSKLORVRSKLFDOEDVLVIRUWKHYLHZRI$PPRQLXVDQG3KLORSRQXV+RZHYHU GHVSLWH$ULVWRWOH
VXVHRIPHWHFKHLLQWKH7RSLFV 6LPSOLFLXV
HPSOR\PHQWRI
SDUWDNLQJKHUHLVHYLGHQWO\1HR3ODWRQLFDQGQRQ$ULVWRWHOLDQ7KXVKLVVXJJHVWLRQZLOOQRWGRDVDQLQWHUSUHWDWLRQRI$ULVWRWOH
VWH[W

6HH'HQQLVWRQ

6HH:DLW]DGORF%HNNHU
VDSSDUDWXVDQG:DLW]
VFRPPHQWDU\LPSO\WKDWHLKDVQRPDQXVFULSWVXSSRUW+RZHYHU0LQLR3DOXHOOR
VDSSDUDWXVLPSOLHVWKDWHL
LVIRXQGLQ$PEURVLDQXV/DQGKLVUHSRUWLVWREHWUXVWHG,QDQ\FDVHVLQFHWKHWZRUHDGLQJVHLDQGHZRXOGKDYHEHHQLQGLVWLQJXLVKDEOHLQGLFWDWLRQZHKDYHQR
SDODHRJUDSKLFDOJURXQGVWRSUHIHURQHRYHUDQRWKHU

)XUWKHUVXSSRUWIRUWKHYLHZWKDW$ULVWRWOHGRHVQRWLQFOXGHDFFLGHQWDOTXDQWLWLHVLQWKHFDWHJRU\RITXDQWLW\PLJKWEHVRXJKWLQWKHWHUPNRXULRV VWULFWO\DWD
DQGE)RU
SUHGLFDWHGNRXULRV
LVRIWHQXVHGE\$ULVWRWOHLQFRQWUDVWWRSUHGLFDWHGPHWDSKRULFDOO\DQGZKDWLVRQO\PHWDSKRULFDOO\;LVLQWUXWKQRW;DWDOO,I
WKLVFRQWUDVWLVWKHRQHDWZRUNLQRXUSDVVDJHWKHQDFFLGHQWDOTXDQWLWLHVDUHQRWUHDOO\TXDQWLWLHVDWDOOMXVWDVDSLFWXUHRIDPDQLVQRWUHDOO\DKXPDQEHLQJ+RZHYHU

PHWDSKRULFDOO\
LVQRW$ULVWRWOH
VRQO\FRQWUDVWWHUPWRNRXULRV 6HYHUDORIWKHRWKHUVVXFKDVWURSRQWLQDSHLDQGSRV  DOOWUDQVODWDEOHE\LQDZD\ LPSO\ILUPO\
WKDWWKHWKLQJLV;HYHQLILWLVQRW;LQWKHVWULFWHVWVHQVHRUWRWKHKLJKHVWGHJUHH*LYHQWKHZD\$ULVWRWOHQRUPDOO\XVHVWKHSKUDVHNDWDVXPEHEHNRV LWHYLGHQWO\
EHORQJVLQWKHODWWHUJURXS

)RUDFRQWUDU\LQWHUSUHWDWLRQVHH0LJQXFFL

&DWVDEFUHDWHDVHULRXVSUREOHPIRUWKHLQWHUSUHWDWLRQRIWKHVWUXFWXUHRIFDWHJRULHVVLQFHWKH\PDNHFOHDUWKDWTXDOLWLHV HJOLJKWQHVV DUHQRW


TXDOLILHG>WKLQJV@ HJOLJKW 6LQFHWKHFDWHJRU\LQTXHVWLRQFRQVLVWVRITXDOLILHGWKLQJV SRLDE WKLVLPSOLHVWKDWWKHTXDOLWLHVWKHPVHOYHVDUHQRWLQWKHFDWHJRU\ZH
FDOOSHUKDSVFDUHOHVVO\WKHFDWHJRU\RITXDOLW\$VWKHH[DPSOHVDWEPDNHFOHDUWKHFDWHJRU\SRLRQGRHVQRWFRQWDLQTXDOLWLHVEXWRQO\WKHLUSD

 
3DJH

URQ\PRXVRIIVKRRWVWKHTXDOLILHGV6LQFHTXDOLWLHVDUHXQFRPSRXQGHGWKH\PXVWEHLQDFDWHJRU\%XWZKLFKRQH"

$UHPDUNE\7UHQGHOHQEXUJVXJJHVWVDQRWKHUSRVVLELOLW\,QGLVFXVVLQJWKHQRWRULRXVSUREOHPRIWKHFDWHJRULDOVWDWXVRIPRWLRQKHDUJXHV  WKDWPRWLRQLV


DQDFFLGHQWDOTXDQWLW\6LQFHPRWLRQLVQRWFRQFHLYDEOHDSDUWIURPWKHSDWKLWGHVFULEHVLWVUHODWLRQWRTXDQWLW\LVQHFHVVDU\WRPRWLRQDQGWKHUHIRUHLWEHORQJVLQ
TXDQWLW\7KLVVXJJHVWVWKHFULWHULRQWKDWIRUVRPHWKLQJWREHDFFLGHQWDOO\LQDFHUWDLQFDWHJRU\LWPXVWQHFHVVDULO\EHDFFLGHQWDOO\UHODWHGWRWKDWFDWHJRU\$SSO\LQJWKLV
FULWHULRQWR6RFUDWHVVLQFHKHLVQHFHVVDULO\RIVRPHFRORURURWKHUKHLVDFFLGHQWDOO\LQWKHFDWHJRU\RITXDOLW\VLQFHKHLVQHFHVVDULO\RIVRPHVL]HRURWKHUKHLV
DFFLGHQWDOO\LQWKHFDWHJRU\RITXDQWLW\EXWVLQFHKHLVQRWQHFHVVDULO\GRLQJDQ\WKLQJ HJZKHQO\LQJXQFRQVFLRXVDQGVWLOO KHLVQRWHYHQDFFLGHQWDOO\LQWKHFDWHJRU\
RIDFWLRQ

$ULVWRWOH
VH[DPSOHVDWDEILW7UHQGHOHQEXUJ
VGHILQLWLRQZKLWHLVQHFHVVDULO\LQDVXUIDFHZKLFKQHFHVVDULO\KDVVL]HDQGDQDFWLRQQHFHVVDULO\WDNHVWLPH
ZKLFKKDVDGXUDWLRQ%H\RQGWKLVWKHUHLVOLWWOHWH[WXDOHYLGHQFHZKLFKZRXOGHQDEOHRQHWRGHFLGHEHWZHHQWKHVHWZRYLHZV %XWVHH0HW'HOWDEZKHUH
DFFLGHQWDOUHODWLYHVHYLGHQWO\LQFOXGHDOOWLPHVZKLFKDUHDFFLGHQWDOO\UHODWHGWRDUHODWLYH 0\RZQVHQVHKRZHYHULVWKDW7UHQGHOHQEXUJ
VVXJJHVWLRQKRZHYHU
LQJHQLRXVLVZURQJDQG$ULVWRWOHZDVZLOOLQJWRFRXQWDOOLWHPVDFFLGHQWDOO\UHODWHGWRDQLWHPLQDFDWHJRU\DVDFFLGHQWDOO\LQWKDWFDWHJRU\

6LQFHVFKRODUVKDYHQRWH[SOLFLWO\GLVWLQJXLVKHGWKHVHSULQFLSOHVLWLVQRWDOZD\VFOHDUH[DFWO\ZKHUHWKH\VWDQG([FOXVLYLW\ZLWKRXWGLVWLQFWLRQKDVEHHQ
HQGRUVHGHJE\%RQLW]  DQGGRXEWHGE\(GHO  %UHQWDQR  H[SOLFLWO\HQGRUVHV:HDN([FOXVLYLW\DQGE\LPSOLFDWLRQUHMHFWV6WURQJ
([FOXVLYLW\ Q 6LPSOLFLXV  HQGRUVHV:HDN([FOXVLYLW\$OORIWKRVHZKRSODFHWKHGLIIHUHQWLDRIVXEVWDQFHLQERWKTXDOLW\DQG
VXEVWDQFHVKRXOGEHWDNHQWRUHMHFW:HDN([FOXVLYLW\

$QRWKHUSRVVLEOHH[DPSOHLVSURYLGHGE\$ULVWRWOH
VGRFWULQHLQ3K\VLFV,,,WKDWDQDFWLRQDQGLWVFRUUHVSRQGLQJSDVVLRQDUHWKHVDPH7KLVLPSOLHVWKDWWKHYHU\
VDPHWKLQJ YL]WKHFKDQJH LVLQERWKFDWHJRULHVDFWLRQDQGSDVVLRQDWRQFH+RZHYHULWLVGRXEWIXOZKHWKHU$ULVWRWOH
VGRFWULQHLQWKH3K\VLFVVKRXOGEHDWWULEXWHG
WRKLPDOVRLQWKH&DWHJRULHV,QDQ\FDVHZKHWKHUWKH3K\VLFVGRFWULQHLPSOLHVWKDWFKDQJHVEHORQJHVVHQWLDOO\RURQO\DFFLGHQWDOO\LQWKHFDWHJRULHVRIDFWLRQDQG
SDVVLRQLVDOVRQRWFOHDU

7KHEHVWVXUYH\RIWKHVHSUREOHPVLVSURYLGHGE\6LPSOLFLXV)RUDGHWDLOHGUHFHQWGLVFXVVLRQRIWKHSDVVDJHVHH0LJQXFFL

7KHVHDUHVHQVHVRINDWK
KDXWRIRUZKLFKWKLVLVQRWWUXHEXWWKHVHQVHRINDWK
KDXWRUHOHYDQWWRWKH&DWHJRULHVLVRQO\WKHILUVWVHQVHGLVWLQJXLVKHGLQ
0HWDSK\VLFV'HOWDD &I3RV$Q,

+HUH,DJUHHZLWK+XVLN  WKDWWKHUHVWULFWLYHIRUFHRIWKHVHFRQGGHILQLWLRQOLHVLQWKHZRUGVKRLVWRHLQDLWDXWRQHVWLDQGQRWLQWKHQRWR

 
3DJH

ULRXVSKUDVHSURVWLSRV HFKHLQ7KDWWKHILUVWGHILQLWLRQDOORZVHYHU\WKLQJWKDWLVDFFLGHQWDOO\UHODWLYHWRFRXQWDVDUHODWLYHZDVQRWLFHGHJE\6LPSOLFLXV
 (OLDV  $YHUURHV  7UHQGHOHQEXUJ  DQG2HKOHU  

2HKOHU2HKOHUVD\VWKDWLWZRXOGOHDGWR8HEHUVFKQHLGXQJHQGHUHLQ]HOQHQNDWHJRULDOHQ%HVWLPPXQJHQZDVGHUDQJHVWUHEWHQ
.ODVVHQHLQWHLOXQJGHV.DWHJRULHQV\WHPVDEWUDHJOLFKZDHUH

6RDSSDUHQWO\GRHV2HKOHULQYLHZRIKLVHDV\UHIHUHQFHWRDFFLGHQWDOUHODWLYHVLQ

6LPSOLFLXV)RUWKHVDPHREMHFWLRQVHH(OLDV3KLORSRQXV

%RQLW]7UHQGHOHQEXUJPRVWUHFHQWO\ QRWH[SOLFLWO\EXWE\LPSOLFDWLRQ 6WUDQJH(YDQJHOLRX  DUJXHVSODXVLEO\WKDW


3RUSK\U\
VGRFWULQHRI
VXEVWDQWLDOTXDOLWLHV
 RXVLRGHVSRLRWHWHV LQGLUHFWO\GHQLHVWKHH[FOXVLYHQHVVRIWKHGLVMXQFWLRQ:KDW,GRXEWLVWKDW3RUSK\U\RUWKHRWKHU
FRPPHQWDWRUVZKRERUURZHGKLVODQJXDJHZHUHDZDUHRIWKHLPSOLFDWLRQ

7KLVSULQFLSOHDOVRSOD\VDFUXFLDOUROHLQWKHLVVXHZKHWKHUWKHGLIIHUHQWLDRIVXEVWDQFHLVDTXDOLW\

7RSLFV,3RV$QD

6HH;HQRFUDWHVIUDJ+HLQ]HIUDJ,VQDUGL3DUHQWH7KHUHSRUW IURP6LPSOLFLXV LVWRRFRQGHQVHGWREHFOHDU7KLVFDWHJRULDOGLVWLQFWLRQKDVURRWVLQ3ODWR


DERYHDOO6RSKLVWFG

7KLVLQWHSUHWDWLRQLVVXSSRUWHGE\+HUPRGRUXVIUDJ,VQDUGL3DUHQWH

2HKOHUFRPPHQWVULJKWO\  WKDWWKLVUHPDUNPLJKWEHWDNHQWRDSSO\HLWKHUMXVWWRWKHSDUWRI&KDSWHUFRQFHUQHGZLWKVXEVWDQWLDOUHODWLYHVRUWRWKH


ZKROHFKDSWHU%XWVLQFHWKHH[SUHVVLRQRISHUSOH[LW\LPPHGLDWHO\IROORZVWKHUHLWHUDWHGFRQFOXVLRQLWZRXOGEHWUXHWRVD\WKDWQRVXEVWDQFHLVDUHODWLYHLWLV
UKHWRULFDOO\LPSRVVLEOHIRULWQRWWRDSSO\DWOHDVWWRWKDWFODLP

7KH*UHHNFRPPHQWDWRUVWHQGWRLQWHUSUHWWKHUHPDUNLURQLFDOO\LHQRWDVDQH[SUHVVLRQRIJHQXLQHXQFHUWDLQW\DERXWWKHFXUUHQWWRSLFEXWUDWKHUDVDVLJQRI
JHQHUDOSKLORVRSKLFPRGHVW\DQGDVDQLQYLWDWLRQWRWKHUHDGHUWRWKLQNIXUWKHUIRUKLP RUQRZDGD\VDOVRKHU VHOI 6HHHJ3KLORSRQXV

+RZHYHULQKLVGLVFXVVLRQRIUHODWLYHVDWE$ULVWRWOHDUJXHVWKDWUHODWLYHVFDQKDYHFRQWUDULHV

$OODQFLHQWFRPPHQWDWRUVWUHDWWKHSDVVDJHWKLVZD\DVGRHV2HKOHU   GHQ:LGHUVSUXFKDXI]XORHVHQ 

)RUDQHORTXHQWVWDWHPHQWRIWKLVUHDFWLRQVHHWKHILUVWWZRVHQWHQFHVRI$FNULOO
VFRPPHQWDGORF  

 
3DJH

DEDQGDDUHERWKFUXFLDOWH[WVIRUWKHQRWRULRXVSUREOHPZKHWKHULQWKH&DWHJRULHVLQGLYLGXDOQRQVXEVWDQFHVDUHSDUWLFXODURUXQLYHUVDO
)RUWXQDWHO\WKHVROXWLRQWRWKLVSUREOHPGRHVQRWDIIHFWWKHSUHVHQWLVVXH)RUVLPSOLFLW\
VVDNH,VKDOODVVXPHLQP\GLVFXVVLRQWKDWWKHLQGLYLGXDOV$ULVWRWOHKDVLQPLQG
LQDDUHLQGLYLGXDOVSHFLHV

3KLORSRQXVDVVHUWVWKDW$ULVWRWOH
VILUVWUHVSRQVHLVVXSHUILFLDO  ZKHUHVXSHUILFLDOLVDHXSKHPLVPIRUIDOVH 6HHDOVR$PPRQLXV ,
VSHFXODWHWKDW3KLORSRQXVKDGWKHDERYHLQFRQVLVWHQWWULDGLQPLQG7KHSUREOHPZLWKWKHUHVSRQVHKHVD\VLVWKDW

 * JHQHUDDUHDOZD\VLQWKHVDPHFDWHJRU\DVWKHLUVSHFLHV  DQG * IROORZVIURP D DQG 7 

2HKOHU  DOVRFLWHV7RSLFV9,D+RZHYHUWKLVWH[WGRHVQRWGLVFXVVWKHUHODWLYHFDWHJRULDOVWDWXVRIJHQXVDQGVSHFLHVDWDOOEXWUDWKHUWKH


UHODWLYHFDWHJRULDOVWDWXVRIDJHQXVDQGWKHGLIIHUHQWLDHWKDWGLYLGHLW7KHSDVVDJHLVLPSRUWDQWHYLGHQFHFRQFHUQLQJWKHFDWHJRULDOVWDWXVRIWKHGLIIHUHQWLDHRI
QRQVXEVWDQFHVEXWLWKDVQREHDULQJRQWKHSUHVHQWSUREOHP

6HH0)UHGHEDQG2HKOHU
VUHVSRQVH  

3RUSK\U\3KLORSRQXV6LPSOLFLXVII

KRSHUNDORQDQGKRSHUDJDWKRQDWE7KHXVHVRISURVWDXWRDQGNDWKKDXWRLQEDUHDOVRUHOHYDQW

0RUHRYHULWLVQRWSRVVLEOHWRVDWLVIDFWRULO\VXERUGLQDWHRQHWRWKHRWKHU$OOGLVFUHWHTXDQWLWLHVWXUQRXWWRKDYHSDUWVZLWKSRVLWLRQVRPHFRQWLQXRXVTXDQWLWLHVGR
KDYHSDUWVZLWKSRVLWLRQDQGVRPHGRQRW,IGLYLVLRQVDUHUHTXLUHGWREHZKROO\ZLWKLQDJHQXVQHLWKHUZD\RIVXERUGLQDWLQJRQHGLYLVLRQWRWKHRWKHUZLOOZRUN

7KLVRIFRXUVHWKUHDWHQV*HQHULF([FOXVLYLW\

2QHIXUWKHUSUREOHPLVOHVVFHUWDLQEHFDXVHPRUHREVFXUH,QFKDSWHUEIIWKHFDWHJRULHVRITXDQWLW\DQGTXDOLW\DQGVXEVWDQFHDORQJZLWKVXEGLYLVLRQV
RIWKHODVWWZRDSSHDUWREHVHUYLQJDVGLIIHUHQWLDHRIKDYLQJ7KHGLYLVLRQVJLYHQDUHPXWXDOO\H[FOXVLYHEXWDUHQRWGRQHLQDZD\WKDWWKHWUDGLWLRQDOLQWHUSUHWDWLRQ
FDQDFFHSW

(JWKHGLVSXWHEHWZHHQ%RQLW]DQG%UHQWDQRDVWRZKHWKHUWKHFDWHJRULHVDUHUHDOFRQFHSWVRUQRW

6HH0HW'HOWDDE7KHGHILQLWLRQRI
JHQXV
DW7RSLFV,DLVQRWDGHTXDWHWR$ULVWRWOH
VSXUSRVHVVLQFHLWLVDOVRVDWLVILHGE\WKHGLIIHUHQWLD

7KHVHDUHWKHRQO\WZRSODFHVLQWKH&DWHJRULHVZKHUHWKHFDWHJRULHVDUHFDOOHGJHQHUD2IWKHVHELVVSXULRXVDQGDLVGRXEWIXO7KLVORRVH

 
3DJH

VHQVHVKRXOGVXUHO\EHDOORZHGSDUWO\RQWKHEDVLVRIRWKHUZRUNV%XWLWPD\EHWRDYRLGPLVXQGHUVWDQGLQJWKDW$ULVWRWOHDYRLGVWKHORRVHVHQVHRIWKLVWH[W

7RSLFV,9EII,D,9E

7KHPDLQHYLGHQFHIRU&DWHJRULDO'HILQLWLRQDO$QDO\VLVFRPHVIURP$ULVWRWOH
VGHVFULSWLRQRIGHILQLWLRQDOGLYLVLRQDW3RV$Q,,DE+RZHYHUWKLV
SDVVDJHLVGLUHFWHYLGHQFHRQO\IRUDZHDNHUSULQFLSOH
*HQHULF'HILQLWLRQDO$QDO\VLV7KHIXOODQDO\VLVRIWKHHVVHQFHRIDQ\LWHPFDQEHJRWWHQE\VWULQJLQJWRJHWKHUWKHQDPHRILWVJHQXVDQGWKHQDPHVRIDOOWKHLQWHUYHQLQJ
GLIIHUHQWLDH

*HQHULF'HILQLWLRQDO$QDO\VLVLPSOLHV&DWHJRULDO'HILQLWLRQDO$QDO\VLVRQO\LIWKHUHOHYDQWJHQXVLVWKHFDWHJRU\ LHLIWKH
SULPDU\WHUP
DWDLVWKHQDPHRID
FDWHJRU\ 7KLVLVDGXELRXVDVVXPSWLRQWKRXJKQRWDZKROO\LQGHIHQVLEOHRQH7KHLVVXHLVWRRFRPSOH[WRGLVFXVVKHUH6HHDOVR7RS9,,D

7KHGDQJHURXVLPSOLFDWLRQVRIWKLVWH[WDUHUHFRJQL]HGE\6WUDQJH  DQGE\3ORWLQXVDW(QQHDGV9, FLWHGE\6WUDQJH 

6LQFHVXEVWDQFHLVQRWGLYLGHGLQWRNLQGVLQWKLVWH[WLWLVXQVDIHWRVD\KRZLWZRXOGKDYHEHHQGLYLGHG*LYHQWKHFKDQJHVZKLFK$ULVWRWOH
VYLHZRIVXEVWDQFH
XQGHUZHQWLQWKHPHDQWLPH0HWDSK\VLFV'HOWDLVQRWDVDIHJXLGH,QFKDSWHUKDYLQJGRHVVHHPWREHGLYLGHGLQWRNLQGVRIPHDQVRIGLIIHUHQWLDH%XWDVWKHVH
GLIIHUHQWLDHLQFOXGHVXEVWDQFHGHIHQGHUVRIWKHWUDGLWLRQDOLQWHUSUHWDWLRQZLOOQRWZDQWWRFRXQWLWDVDGLVFXVVLRQRIWKHFDWHJRU\KDYLQJ

$OWKRXJKHYHQWKLVFRXOGEHTXHVWLRQHG6RPHHYLGHQFHLQIDYRURI([KDXVWLYHQHVVLVSURYLGHGE\EWRJHWKHUZLWKWKHSDUDOOHOVDWDDQGD7KHSDUWLWLYH
WRQ RQWRQ DWDLVPRVWQDWXUDOO\UHDGDVLPSO\LQJ([KDXVWLYHQHVV WKHSDUWLWLRQFRYHULQJ
DOOEHLQJV
DQGQRWMXVW
VRPHEHLQJV
WKRXJKWKHRWKHUUHDGLQJLV
SRVVLEOH

0RUHRYHU$ULVWRWOHVKRZVVRPHZLOOLQJQHVVWRJLYHXS  DW7RSLFV,9E

+HUH,GHOLEHUDWHO\UHPDLQQHXWUDORQWKHTXHVWLRQZKHWKHUWKHVWDJHRIWKHLQYHVWLJDWLRQSUHVHQWHGLQWKH&DWHJRULHVLVPRUHSULPLWLYHRUPRUHVRSKLVWLFDWHGWKDQ
WKDWLQWKH7RSLFV

 

You might also like