Загрузил Oleg Roizman

ABB Transformer Handbook

реклама
Transformer Handbook
1
)25(:25'
7KH REMHFWLYH RI WKLV 7UDQVIRUPHU +DQGERRN LV WR IDFLOLWDWH WKH SK\VLFDO XQGHUVWDQGLQJ VHOHFWLRQ
RUGHULQJRSHUDWLRQDQGPDLQWHQDQFHRIWKHZKROHUDQJHRISRZHUDQGGLVWULEXWLRQWUDQVIRUPHUV
7KHWDUJHWUHDGHUVDUHSHUVRQQHOLQYROYHGLQWKHYDULRXVVWDJHVRIDWUDQVIRUPHU¶VVHUYLFHOLIHIURP
SODQQLQJWKHLQYHVWPHQWWRWKHGLVSRVDORIWKHWUDQVIRUPHUDIWHUXVH
7KH KDQGERRN LV DUUDQJHG ZLWK WKH VHFWLRQV IROORZLQJ WKH WUDQVIRUPHU¶V OLIH IURP LQLWLDO
FRQVLGHUDWLRQVDQGSODQQLQJWKURXJKRUGHULQJLQVWDOODWLRQRSHUDWLRQPDLQWHQDQFHDQGVFUDSSLQJ
2WKHUXVHIXOLQIRUPDWLRQLQFOXGLQJPRUHWKHRUHWLFDOWRSLFVLVLQFOXGHG
1DYLJDWLRQ WKURXJK WKH KDQGERRN LV IDFLOLWDWHG WKURXJK D WKUHH OHYHO FRQWHQWV OLVW IROORZLQJ WKLV
IRUHZRUGDQGWKH,QGH[6HFWLRQSDJHDWWKHHQG(DFKVHFWLRQPD\EHUHDGLQGHSHQGHQWO\
RIWKHRWKHUVHFWLRQV
6RPHWRSLFVRUSKHQRPHQDDUHGHOLEHUDWHO\PHQWLRQHGVHYHUDOSODFHVLQWKHWH[WIRUWKHSXUSRVH
WKDWUHDGHUVPLJKWQRWUHDGWKHZKROHFRQWHQWRIWKLVERRNIURPWKHEHJLQQLQJWRWKHHQGEXWRQO\
FKDSWHUVRISDUWLFXODULQGLYLGXDOLQWHUHVW
7KH ILUVW HGLWLRQ 5HY RI WKLV KDQGERRN LVVXHG DW WKH HQG RI ZDV OLPLWHG WR GLVWULEXWLRQ
WUDQVIRUPHUVDQGWKH³,(&ZRUOG´
%DVHG RQ IHHGEDFN IURP WKH UHDGHUV DQG WKH IDFW WKDW $%% KDV PHUJHG DOO WUDQVIRUPHU DFWLYLWLHV
LQWR RQH %XVLQHVV 8QLW 7UDQVIRUPHUV WKLV VHFRQG HGLWLRQ RI WKH KDQGERRN QRZ FRYHUV DOO
WUDQVIRUPHUW\SHVIXOILOOLQJWKHUHTXLUHPHQWVRI,(&DQGUHOHYDQW$16,,(((VWDQGDUGV
7KLVKDQGERRNLVEDVHGRQ$%%¶VNQRZOHGJHDQGH[SHULHQFHDQGLVPHDQWWREHDJXLGHWRDVVLVW
WKH UHDGHUV LQ KDQGOLQJ WUDQVIRUPHU PDWWHUV $%% DQG WKH DXWKRUV RI WKH KDQGERRN FDQQRW
KRZHYHUEHKHOGUHVSRQVLEOHIRUDQ\OHJDOWHFKQLFDORUFRPPHUFLDOXVHRIWKHLQIRUPDWLRQKHUHLQ
1RDGYLFHRULQIRUPDWLRQFRQWDLQHGLQWKLVKDQGERRNVKDOOFUHDWHDQ\ZDUUDQW\RUELQGLQJREOLJDWLRQ
QRW H[SUHVVO\ VWDWHG LQ DQ DSSOLFDEOH ZULWWHQ FRQWUDFW $OWKRXJK GDWD WHFKQLFDO GUDZLQJV
FRQILJXUDWLRQV DQG FDWDORJXH OLVWLQJV DUH EHOLHYHG WR EH DFFXUDWH DW WKH GDWH RI SXEOLFDWLRQ WKH
UHDGHUVVKRXOGLQGHSHQGHQWO\HYDOXDWHWKHDFFXUDF\RIWKHLQIRUPDWLRQDQGWKHXVHIXOQHVVWRWKHLU
SDUWLFXODUQHHGVRIDQ\SURGXFWRUVHUYLFH+RZHYHUWHFKQLFDOGDWDDUHRQO\DSSUR[LPDWHILJXUHV
6SHFLILFDWLRQVIRUSURGXFWVDQGVHUYLFHVDUHVXEMHFWWRFKDQJHZLWKRXWQRWLFH
$%%VKDOOLQQRFDVHEHOLDEOHXQGHURULQFRQQHFWLRQZLWKWKHKDQGERRNWRZDUGVDQ\SHUVRQRU
HQWLW\LQYLHZRIDQ\GDPDJHVRUORVVHVLUUHVSHFWLYHRIWKHOHJDOJURXQGV,QSDUWLFXODU$%%VKDOOLQ
QRHYHQWEHOLDEOHIRUDQ\LQGLUHFWFRQVHTXHQWLDORUVSHFLDOGDPDJHVVXFKDV±EXWQRWOLPLWHGWR±
ORVV RI SURILW ORVV RI UHYHQXH ORVV RI HDUQLQJV &RVW RI FDSLWDO RU FRVW FRQQHFWHG ZLWK DQ
LQWHUUXSWLRQRIEXVLQHVV
7KHVWDQGDUGV,(&&(1(/(&DQG$16,,(((PHQWLRQHGLQWKHWH[WUHIHUWRWKHHGLWLRQJLYHQLQ
WKHOLVWRIVWDQGDUGV)RUSUDFWLFDOXVHRQO\ODWHVWHGLWLRQVRIWKHVWDQGDUGVVKRXOGEHXVHG
$%%3RZHU7HFKQRORJLHV'LYLVLRQWKDQNVWKH,QWHUQDWLRQDO(OHFWURWHFKQLFDO&RPPLVVLRQ ,(& IRU
SHUPLVVLRQ WR UHSURGXFH LQIRUPDWLRQ IURP LWV ,QWHUQDWLRQDO 6WDQGDUGV $OO VXFK H[WUDFWV DUH
FRS\ULJKW RI ,(& *HQHYD 6ZLW]HUODQG $OO ULJKWV UHVHUYHG )XUWKHU LQIRUPDWLRQ RQ WKH ,(& LV
DYDLODEOH IURP ZZZLHFFK ,(& KDV QR UHVSRQVLELOLW\ IRU WKH SODFHPHQW DQG FRQWH[W LQ ZKLFK WKH
H[WUDFWVDQGFRQWHQWVDUHUHSURGXFHGE\$%%3RZHU7HFKQRORJLHV'LYLVLRQQRULV,(&LQDQ\ZD\
UHVSRQVLEOHIRUWKHRWKHUFRQWHQWRUDFFXUDF\WKHUHLQ
6LPLODUO\ $%% 3RZHU 7HFKQRORJLHV 'LYLVLRQ WKDQNV 7KH $PHULFDQ 1DWLRQDO 6WDQGDUGV ,QVWLWXWH
$16, DQG 7KH ,QVWLWXWH RI (OHFWULFDO DQG (OHFWURQLFV (QJLQHHUV ,QF ,((( IRU SHUPLVVLRQ WR
UHSULQW H[FHUSWV IURP LWV VWDQGDUGV $OO VXFK H[FHUSWV DUH FRS\ULJKW RI $16,,((( WKH \HDU
SXEOLVKHG$OOULJKWVUHVHUYHG)XUWKHULQIRUPDWLRQRQWKH$16,,(((LVDYDLODEOHIURPZZZDQVLRUJ
DQG ZZZLHHHRUJ $16,,((( KDV QR UHVSRQVLELOLW\ IRU WKH SODFHPHQW DQG FRQWH[W LQ ZKLFK WKH
H[FHUSWV DUH UHSURGXFHG E\ $%% 3RZHU 7HFKQRORJLHV 'LYLVLRQ 7KH $16,,((( GLVFODLPV DQ\
UHVSRQVLELOLW\RUOLDELOLW\UHVXOWLQJIURPWKHSODFHPHQWDQGXVHLQWKHGHVFULEHGPDQQHU
([WUDFWVIURPWKH$%%6ZLWFKJHDU0DQXDODUHTXRWHGE\NLQGDSSURYDOE\WKHLVVXHU
8. (QJOLVK KDV EHHQ VHOHFWHG IRU WKLV GRFXPHQW WR FRPSO\ ZLWK WKH ODQJXDJH LQ ,(& VWDQGDUGV
$OVRWKHXVHRI³´DQG³´LQQXPEHUVIROORZVWKHSUDFWLFHXVHGLQ,(&VWDQGDUGV7KHUHDUHQRUHDO
GLIIHUHQFHVEHWZHHQWKHYRFDEXODU\DSSOLHGLQ,(&DQG,((( $16, VWDQGDUGV7KHRQO\H[FHSWLRQ
LVWKHXVHRIWKHZRUGV³HDUWK´´HDUWKHG´ DFFRUGLQJWR,(& DQG³JURXQG´´JURXQGHG´ DFFRUGLQJWR
,((( 3OHDVHDOVRREVHUYHWKH1RWHDWWKHHQGRIWKHKDQGERRN
7UDQVIRUPHU+DQGERRN3DJH
&217(176
)25(:25'
,1752'8&7,21
$%%*5283
$%%32:(57(&+12/2*,(6%86,1(6681,775$16)250(56
75$16)250(57<3(6$1'7+(,5$33/,&$7,21
32:(5*(1(5$7,2175$160,66,21$1'',675,%87,21
&2002175$16)250(5&+$5$&7(5,67,&6
',675,%87,2175$16)250(56
/$5*(',675,%87,2175$16)250(56/'7
0(',80',675,%87,2175$16)250(560'7
60$//',675,%87,2175$16)250(566'7
'5<7<3(',675,%87,2175$16)250(56
27+(575$16)250(57<3(6
32:(575$16)250(56
*(1(5$72567(38375$16)250(56
67(3'2:175$16)250(56
6<67(0,17(57,(75$16)250(56
,1'8675,$/75$16)250(56
75$&7,2175$16)250(56
5($&7256
6+8175($&7256
&855(17/,0,7,1*5($&7256
1(875$/($57+,1*5($&7256
&$3$&,725'$03,1*5($&7256
781,1* ),/7(5 5($&7256
($57+,1*75$16)250(56 1(875$/&283/(56 $5&68335(66,215($&7256
60227+,1*5($&7256
48$/,7<,17(51$/&21752/6867$,1$%,/,7<
0$1$*(0(176<67(06
48$/,7<
,17(51$/&21752/
(19,5210(17$/6<67(0
6867$,1$%/('(9(/230(17
&86720(55(9,(:2)0$1$*(0(176<67(06
6$)(7<35(&$87,216
/266&$3,7$/,6$7,21$1'237,08075$16)250(5'(6,*1
,1)250$7,215(48,5(':,7+(148,5<$1'25'(5
1250$/,1)250$7,21
63(&,$/,1)250$7,21
3$5$//(/23(5$7,216
75$16)250(5'(6,*1
&25(6
:,1',1*6
7$1.
($57+48$.(:,7+67$1'$%,/,7<
75$16)250(5&20321(176
7(50,1$/6
%86+,1*6
&$%/(&211(&7,216
6)&211(&7,216
&22/(56
5$',$7256
&2558*$7('7$1.6
)$16
)25&('2,/)25&('$,5+($7(;&+$1*(56
2,/:$7(5&22/(56
2,/38036
92/7$*(5(*8/$7,21(48,30(17
2))&,5&8,77$3&+$1*(56
21/2$'7$3&+$1*(56
$8720$7,&92/7$*(5(*8/$7,21
$&&(6625,(6
7<3(62)$&&(6625,(6
32:(575$16)250(5$1'2,/,00(56('5($&725$&&(6625,(6
',675,%87,2175$16)250(5$&&(6625,(6
3DJH7UDQVIRUPHU+DQGERRN
,167$//$7,21$1'&200,66,21,1*
*(1(5$/
5(63216,%,/,7,(6
,1&27(506 75$16)(52)5(63216,%,/,7< ,167$//$7,21
32:(5$1'/$5*(',675,%87,2175$16)250(56
',675,%87,2175$16)250(56
&200,66,21,1*
(1(5*,6,1*
'2&80(17$7,21
23(5$7,21021,725,1*$1'0$,17(1$1&(
*(1(5$/35(&$87,216
23(5$7,21
/,)(7,0(
7(03(5$785(5,6($1'/2$'&$3$&,7<
3$5$//(/23(5$7,21
)5(48(1&<
3527(&7,21
021,725,1*
*(1(5$/
+,*+/(9(/021,725,1*
/2:/(9(/021,725,1*
,163(&7,21,1(1(5*,6('&21',7,21
,163(&7,21,1'((1(5*,6('&21',7,21
0$,17(1$1&(
*(1(5$/
0$,17(1$1&(,1(1(5*,6('&21',7,21
0$,17(1$1&(,1'((1(5*,6('&21',7,21
,19(67,*$7,212)75$16)250(5',6785%$1&(6
75$16)250(5/,48,'$1',168/$7,21
%86+,1*6$1'-2,176
2))&,5&8,77$3&+$1*(5
21/2$'7$3&+$1*(5
02725'5,9(81,7
2,/),/7(5,1*81,7
&22/(56
/,48,'&216(59$725:,7+58%%(5',$3+5$*0
*$6.(76
'5<7<3(75$16)250(56
685)$&(3527(&7,21
',6326$/$)7(586(
/2&$/5(*8/$7,216
5(86(
/$1'),//
/,)(&<&/($66(660(17 /&$ 3&%&217$0,1$7('2,/
3+<6,&$/)81'$0(17$/6
,1752'8&7,21
&+2,&(2)6<67(092/7$*(
%$6,&3+<6,&62)7+(75$16)250(5
(48,9$/(17',$*5$0
92/7$*(5$7,2$1'92/7$*('523 255,6( ()),&,(1&<
12/2$' 0$*1(7,6,1* &855(17$1'12/2$'/266(6
/2$'/266(6
6+257&,5&8,7,03('$1&(
(/(&7520$*1(7,&)25&(6
75$16)250(56281'
7+5((3+$6(75$16)250(5&211(&7,216
75$16)250(50$7(5,$/6
&25(0$7(5,$/6
&21'8&7250$7(5,$/6
,168/$7,210$7(5,$/6
62/,',168/$7,210$7(5,$/6
)/8,'6
27+(5)/8,'6
7(67,1*2)75$16)250(56
*(1(5$/5(48,5(0(176
5287,1(7(676
7<3(7(676
63(&,$/7(676
7UDQVIRUPHU+DQGERRN3DJH
29(592/7$*(6$1'29(592/7$*(/,0,7$7,21
/,0,7$7,212)7(0325$5<29(592/7$*(6
29(592/7$*(6'8(72($57+)$8/7
/2$'5(-(&7,2129(592/7$*(6
29(592/7$*(6'8(72)(5525(621$1&(
/,0,7$7,212)75$16,(1729(592/7$*(6
63(&,$/35(&$87,216)25'5<7<3(75$16)250(56
,17(51$/29(592/7$*(6&$86('%<+,*+)5(48(1&<26&,//$7,216
75$16)(55('29(592/7$*(6,175$16)250(56
0,6&(//$1(286
&(57,),&$7,21$33529$//$%(//,1*
'(&/$5$7,212)&21)250,7<
,3&/$66,),&$7,21
*(1(5$/
'(*5((62)3527(&7,21$*$,16762/,'2%-(&76
'(*5((62)3527(&7,21$*$,167:$7(5
&203$5,621721(0$5$7,1*6
7(50,1$/'(6,*1$7,21,'(17,)<,1*7(50,1$/6
6,1*/(3+$6(75$16)250(5
7+5((3+$6(75$16)250(5
5$7,1*3/$7(
(/(&7520$*1(7,&&203$7,%,/,7< (0& '(),1,7,216
(/(&7520$*1(7,&',6785%$1&(62175$16)250(56
(/(&7520$*1(7,&),(/',17+(9,&,1,7<2)75$16)250(56
())(&72)(/(&7520$*1(7,&),(/'621+80$16
81,76$1'&219(56,217$%/(6
%$6,&6/81,76
08/7,3/(6$1'68%08/7,3/(62)81,76
(/(&75,&$/$1'0$*1(7,&48$17,7,(6
*(1(5$/(/(&7527(&+1,&$/6<0%2/6
/,672)$%%5(9,$7,216$1'$&521<06
&2175,%87256
)(('%$&.
2%7$,1,1*&23,(62)7+(+$1'%22.
%,%/,2*5$3+<
75$16)250(55(/(9$1767$1'$5'6
,(&67$1'$5'6
&(1(/(&67$1'$5'6
,(((67$1'$5'6
&203$5,621%(7:((1$16,,(((67$1'$5'6$1',(&67$1'$5'6
,(&67$1'$5'6
&(1(/(&67$1'$5'6
$16,,(((67$1'$5'6
27+(55(/(9$1767$1'$5'6$1'/,77(5$785(
(;75$&76)520,(& 32:(5,167$//$7,216
(;&((',1*.9$&3$57&2002158/(6
5(
5(
)81'$0(17$/5(48,5(0(176
*(1(5$/
5(
,168/$7,21
5(
5(
(48,30(17
*(1(5$/5(48,5(0(176
5(
5(
,167$//$7,216
*(1(5$/5(48,5(0(176
5(
5(
6$)(7<0($685(6
3527(&7,21$*$,167),5(
5(
5(
3527(&7,21&21752/$1'$8;,/,$5<6<67(06
021,725,1*$1'&21752/6<67(06
5(
($57+,1*6<67(06
5( *(1(5$/
5( )81'$0(17$/5(48,5(0(176
,1'(;
3DJH7UDQVIRUPHU+DQGERRN
,1752'8&7,21
,QDOPRVWHYHU\SODFHZKHUHSHRSOHOLYHDQGZRUN\RXZLOOILQGDWOHDVWRQHWUDQVIRUPHU%XWDVORQJ
DVLWNHHSVZRUNLQJDQGVXSSO\LQJSRZHUWRWKHHVFDODWRULQWKHGHSDUWPHQWVWRUHWKHKRWHOOLIWWKH
RIILFH FRPSXWHU WKH RYHQ LQ WKH ORFDO EDNHU\ WKH IDUP PDFKLQHU\ RU WKH SHWURFKHPLFDO SODQW
QRERG\JLYHVLWDVHFRQGWKRXJKW
+RZHYHU WUDQVIRUPHUV DUH RQH RI WKH PRVW LPSRUWDQW XQLWV LQ HYHU\ SURGXFWLRQ SURFHVV :LWKRXW
WKHP WKH FRUH DFWLYLWLHV RI QHDUO\ HYHU\ EXVLQHVV DQG IDFWRU\ ZRXOG FRPH WR D VWDQGVWLOO ± ZLWK
VHULRXVILQDQFLDOFRQVHTXHQFHV
$IWHUPRUHWKDQ\HDUVLQWKHGHYHORSPHQWDQGPDQXIDFWXUHRIWUDQVIRUPHUV$%%7UDQVIRUPHUV
DUH ZHOO DZDUH RI WKLV GHSHQGHQFH 7KLV LV ZK\ ZH QHYHU FRPSURPLVH RQ WKH SHUIRUPDQFH
VHFXULW\ TXDOLW\ RU UHOLDELOLW\ RI RXU SURGXFWV QRU RQ GHVLJQ PDWHULDOV PDQXIDFWXULQJ PHWKRGV
HQYLURQPHQWDOSURWHFWLRQRUUHF\FOLQJ
$OORYHUWKHZRUOGLQXQGHUJURXQGUDLOZD\VLQDPXVHPHQWSDUNVDQGLQHYHU\NLQGRIIDFWRU\\RX
ZLOOILQG$%%WUDQVIRUPHUVDWZRUN
$%%*5283
$%%LVDOHDGHULQSRZHUDQGDXWRPDWLRQWHFKQRORJLHVWKDWHQDEOHXWLOLW\DQGLQGXVWU\FXVWRPHUVWR
LPSURYHSHUIRUPDQFHZKLOHORZHULQJHQYLURQPHQWDOLPSDFW7KH$%%*URXSRIFRPSDQLHVRSHUDWHV
LQDURXQGFRXQWULHVDQGHPSOR\VDURXQGSHRSOH $%% 3RZHU 7HFKQRORJLHV VHUYHV HOHFWULF JDV DQG ZDWHU XWLOLWLHV DV ZHOO DV LQGXVWULDO DQG
FRPPHUFLDO FXVWRPHUV ZLWK D EURDG UDQJH RI SURGXFWV V\VWHPV DQG VHUYLFHV IRU SRZHU
WUDQVPLVVLRQGLVWULEXWLRQDQGDXWRPDWLRQ
$%% $XWRPDWLRQ 7HFKQRORJLHV EOHQGV D UREXVW SURGXFW DQG VHUYLFH SRUWIROLR ZLWK HQGXVHU
H[SHUWLVH DQG JOREDO SUHVHQFH WR GHOLYHU VROXWLRQV IRU FRQWURO PRWLRQ SURWHFWLRQ DQG SODQW
LQWHJUDWLRQDFURVVWKHIXOOUDQJHRISURFHVVDQGXWLOLW\LQGXVWULHV
$VDEXVLQHVVWREXVLQHVVVXSSOLHU$%%NQRZVWKDWYDOXHFUHDWLRQJURZVRXWRIFORVHUHODWLRQVKLSV
ZLWKFXVWRPHUV7KDWPHDQVWKHEHWWHUZHNQRZRXUFXVWRPHUV¶EXVLQHVVFKDOOHQJHVWKHEHWWHUZH
FDQVHUYHWKHP:HVWUHQJWKHQRXUUHODWLRQVKLSVE\EXLOGLQJWUXVWDVDVRFLDOO\UHVSRQVLEOHVXSSOLHU
RIHQYLURQPHQWDOO\VRXQGSURGXFWVDQGVHUYLFHV
$%%3RZHU7HFKQRORJLHV%XVLQHVV8QLW7UDQVIRUPHUV
$%% LV DPRQJ WKH ZRUOGV OHDGLQJ VXSSOLHUV RI WUDQVIRUPHUV RIIHULQJ D IXOO UDQJH RI SURGXFWV
OLTXLGGU\ WHVWHGDFFRUGLQJWRDQGIXOILOOLQJVSHFLILHGUHTXLUHPHQWVLQDOOZLGHO\DSSOLHGVWDQGDUGV
VXFKDV,(&&(1(/(&$16,,(((DVZHOODVORFDOVWDQGDUGV
$%% 7UDQVIRUPHUV KDV DOPRVW SURGXFWLRQ IDFLOLWLHV DURXQG WKH ZRUOG ZLWK HPSOR\HHV
$OORIWKLVPHDQVWKDWZLWK$%%7UDQVIRUPHUV\RXKDYHDFFHVVWRDZRUOGZLGHQHWZRUNRIIDFWRULHV
DQGIDFLOLWLHVVHUYLQJ\RXORFDOO\ZLWKWKHPRVWXSWRGDWHWHFKQRORJLHVSURYLGLQJWKHKLJKHVWTXDOLW\
IRU VWDQGDUG DQG VSHFLDOLW\ SURGXFWV DV ZHOO DV VROXWLRQV 2XU ZDUUDQW\ SURYLGHV $%% TXDOLW\
VHUYLFHDQGVXSSRUW2XUSURGXFWLRQIDFLOLWLHVDUH,62FHUWLILHG
$%% 7UDQVIRUPHUV REMHFWLYH LV WR VXSSRUW \RX DQG WR DGG YDOXH WR \RXU DFWLYLWLHV ZLWK D ORZ WRWDO
FRVWRIRZQHUVKLS
KLJKHVW TXDOLW\ IRU VWDQGDUG DQG VSHFLDOLW\ SURGXFWV DV ZHOO DV VROXWLRQV 2XU ZDUUDQW\ SURYLGHV
XQLILHG$%%TXDOLW\VHUYLFHDQGVXSSRUW2XUSURGXFWLRQIDFLOLWLHVDUH,62FHUWLILHG
$%%'LVWULEXWLRQ7UDQVIRUPHUVREMHFWLYHLVWRVXSSRUW\RXDQGWRDGGYDOXHWR\RXUDFWLYLWLHVZLWKD
ORZWRWDOFRVWRIRZQHUVKLS
7UDQVIRUPHU+DQGERRN3DJH
75$16)250(57<3(6$1'7+(,5$33/,&$7,21
32:(5*(1(5$7,2175$160,66,21$1'',675,%87,21
7UDQVPLVVLRQRIHQHUJ\LVJHQHUDOO\GLYLGHGLQWZRSDUWVILUVWLVWUDQVPLVVLRQRYHUORQJGLVWDQFHVDW
KLJK YROWDJHV ZKLFK LVVXSSRUWHG E\ 3RZHU 7UDQVIRUPHUV 7KHVHFRQG SDUW LV GLVWULEXWLRQRI WKH
HQHUJ\ IURP VXEVWDWLRQV WR WKH YDULRXV XVHUV WKLV LV VXSSRUWHG E\ 'LVWULEXWLRQ 7UDQVIRUPHUV LQ
YDULRXVKLHUDUFKLHV
$%% RIIHUV D IXOO UDQJH RI WUDQVIRUPHUV IXOILOOLQJ WKH UHTXLUHPHQWV LQ ,(& &(1(/(& $16,,(((
RWKHUVWDQGDUGVDQGFXVWRPHUVSHFLILFUHTXLUHPHQWV
3RZHUWUDQVIRUPHUVKDYHSULPDU\YROWDJHVXSWRN9/LTXLGILOOHGGLVWULEXWLRQWUDQVIRUPHUVKDYH
SULPDU\YROWDJHVXSWRN9DQGGU\W\SHWUDQVIRUPHUVZLWKRSHQRUHQFDSVXODWHGZLQGLQJVKDYH
SULPDU\YROWDJHVXSWRN9
3DJH7UDQVIRUPHU+DQGERRN
&2002175$16)250(5&+$5$&7(5,67,&6
,Q,(&6WDQGDUG3RZHUWUDQVIRUPHUV3DUW*HQHUDODSRZHUWUDQVIRUPHULVGHILQHGDVD
VWDWLF SLHFH RI DSSDUDWXV ZLWK WZR RU PRUH ZLQGLQJV ZKLFK E\ HOHFWURPDJQHWLF LQGXFWLRQ
WUDQVIRUPVDV\VWHPRIDOWHUQDWLQJYROWDJHDQGFXUUHQWLQWRDQRWKHUV\VWHPRIYROWDJHDQGFXUUHQW
XVXDOO\ RI GLIIHUHQW YDOXHV DQG DW WKH VDPH IUHTXHQF\ IRU WKH SXUSRVH RI WUDQVPLWWLQJ HOHFWULFDO
SRZHU
7KHVDPHGHILQLWLRQLVIRXQGLQWKH,QWHUQDWLRQDO(OHFWURWHFKQLFDO9RFDEXODU\>,(9@
7KHVFRSHRIWKLVVWDQGDUGLQFOXGHVVLQJOHSKDVHWUDQVIRUPHUVZLWKUDWHGSRZHUGRZQWRN9$DQG
WKUHHSKDVHWUDQVIRUPHUVGRZQWRN9$
,(&VWDQGDUGVGRQRWGLVWLQJXLVKEHWZHHQGLVWULEXWLRQWUDQVIRUPHUVDQGSRZHUWUDQVIRUPHUV7KH\
DUH DOO SRZHU WUDQVIRUPHUV LQ WKH VHQVH WKDW WKHLU SXUSRVH LV WR WUDQVPLW SRZHU IURP RQH YROWDJH
OHYHOWRDQRWKHU
7UDGLWLRQDOO\ WUDQVIRUPHUV WKDW WUDQVIRUP WKH YROWDJH GRZQ WR WKH GRPHVWLF FRQVXPHU YROWDJH
XVXDOO\ 9 RU OHVV DUH FDOOHG GLVWULEXWLRQ WUDQVIRUPHUV $%% LQFOXGHV WUDQVIRUPHUV ZLWK WKH
KLJKHVWYROWDJHXSWRN9DQGSRZHUUDWLQJXSWRDIHZWHQVRI09$LQWKHFDWHJRU\GLVWULEXWLRQ
WUDQVIRUPHUV 7KH WHUP SRZHU WUDQVIRUPHU LV LQ HYHU\GD\ ODQJXDJH XVHG IRU WUDQVIRUPHUV ZLWK
KLJKHUYROWDJHDQGSRZHUUDWLQJ
&RPPRQIRUPRVWSRZHUWUDQVIRUPHUVUHJDUGOHVVRIVL]HDQGDSSOLFDWLRQLVWKHEDVLFSK\VLFVDQG
WKHGRPLQDQWPDWHULDOVOLNH
•
VSHFLDOW\SHVRIWKLQPDJQHWLFVWHHOSODWHVLQWKHFRUHZKLFKSURYLGHVWKHQHFHVVDU\VWURQJ
PDJQHWLFILHOGEHFDXVHRIWKHXQLTXHPDJQHWLFSURSHUWLHVRILURQ:LWKRXWLURQWKHZLGHO\
VSUHDGDSSOLFDWLRQRIHOHFWULFHQHUJ\ZRXOGEHLPSRVVLEOH
•
FRSSHURUDOXPLQLXPDVFRQGXFWRUPDWHULDOVLQWKHZLQGLQJV
•
FHOOXORVHSURGXFWVOLNHKLJKGHQVLW\SDSHUDQGSUHVVERDUGDVVROLGLQVXODWLRQPDWHULDOVKDV
EHHQDQGZLWKIHZH[FHSWLRQVVWLOOLVGRPLQDQW
•
PLQHUDORLOLVWKHGRPLQDQWLQVXODWLQJIOXLGZKLFKDOVRKDVDFRROLQJIXQFWLRQ
,Q SUDFWLFDO WUDQVIRUPHU GHVLJQ WKH PDQXIDFWXUHU KDV WKH FKRLFH EHWZHHQ WZR GLIIHUHQW EDVLF
FRQFHSWV
•
•
FRUHW\SHVHH)LJXUH
VKHOOW\SHVHH)LJXUH
7KH RQH RU WKH RWKHU RI WKHVH FRQFHSWV KDV QR LQIOXHQFH RQ RSHUDWLRQDO FKDUDFWHULVWLFV RU WKH
VHUYLFH UHOLDELOLW\ RI WKH WUDQVIRUPHU EXW WKHUH DUH HVVHQWLDOO\ GLIIHUHQFHV LQ WKH PDQXIDFWXULQJ
SURFHVV (DFK PDQXIDFWXUHU FKRRVHV WKH FRQFHSW WKDW KH ILQGV PRVW FRQYHQLHQW IURP D
PDQXIDFWXULQJSRLQWRIYLHZDQGWHQGVWRXVHWKLVFRQFHSWIRUWKHZKROHSURGXFWLRQYROXPH
,QDQXWVKHOOZHFDQVD\WKDWZKLOHWKHZLQGLQJVRIDFRUHW\SHHQFORVHWKHFRUHWKHFRUHRIDVKHOO
W\SH HQFORVHV WKH ZLQGLQJV /RRNLQJ DW WKH DFWLYH SDUW LH WKH FRUH ZLWK WKH ZLQGLQJV RI D FRUH
W\SHWKHZLQGLQJVDUHZHOOYLVLEOHEXWWKH\KLGHWKHFRUHOLPEV2QO\WKHXSSHUDQGORZHU\RNHRI
WKHFRUHDUHYLVLEOH,QVKHOOW\SHWKHFRUHKLGHVWKHPDMRUSDUWRIWKHZLQGLQJV
7UDQVIRUPHU+DQGERRN3DJH
$QRWKHU GLIIHUHQFH LV WKDW WKH D[LV RI WKH FRUHW\SH ZLQGLQJV LV QRUPDOO\ YHUWLFDO ZKLOH LW FDQ EH
KRUL]RQWDORUYHUWLFDOLQDVKHOOW\SH
7RGD\PXFKPRUHFRUHW\SHWUDQVIRUPHUVWKDQVKHOOW\SHSRZHUWUDQVIRUPHUVDUHPDQXIDFWXUHGLQ
WKHZRUOG7KHFRPPRQWUDQVIRUPHUFRQFHSWLQ$%%LVWKHFRUHW\SH
&RUHW\SH
6KHOOW\SH
)LJXUH
)LJXUH
$ZRXQGW\SHRIFRUHXVHGLQVLQJOHSKDVHGLVWULEXWLRQWUDQVIRUPHUVLVVKRZQLQ)LJXUH
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
',675,%87,2175$16)250(56
/DUJHGLVWULEXWLRQWUDQVIRUPHUV/'7
,(&6WDQGDUG
3RZHUUDQJH
N9$DQGDERYH
3ULPDU\YROWDJH
8SWRN9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7UDQVIRUPHUV RI WKLV W\SH DUH XVHG IRU UHFHLYLQJ WKH
HQHUJ\ IURP KLJKHU YROWDJH OHYHOV DQG WR WUDQVIRUP DQG
GLVWULEXWH WKH HQHUJ\ WR ORZHU YROWDJH OHYHO VXEVWDWLRQ RU
GLUHFWO\WRODUJHLQGXVWULDOFRQVXPHUV
7UDQVIRUPHUVLQWKLVUDQJHDUHWKUHHSKDVHDQGFDQEHPDQXIDFWXUHGZLWKRIIFLUFXLWWDSFKDQJHURU
RQORDGWDSFKDQJHU7UDQVIRUPHUVSURYLGHGZLWKRQORDGWDSFKDQJHUXVXDOO\KDYHDVHSDUDWHWDS
ZLQGLQJ
7KH FRUH LV FRQVWUXFWHG RI JUDLQ RULHQWHG VWHHO ODPLQDWLRQV 7KH ZLQGLQJV DUH PDGH RI SDSHU
LQVXODWHG UHFWDQJXODU ZLUH LQ WKH IRUP RI PXOWLOD\HU GLVF RU KHOLFDO ZLQGLQJV DQG WKH FRQGXFWRU
PDWHULDOVDUHHLWKHUFRSSHURUDOXPLQLXP7KHWDQNVW\SLFDOO\KDYHUDGLDWRUVKRZHYHUWKHVPDOOHU
VL]HVPLJKWKDYHFRUUXJDWHGWDQNZDOOV
$16,,(((6WDQGDUG
6XEVWDWLRQDQG8QLW6XEVWDWLRQ
3RZHUUDQJH
N9$09$
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
8SWRN9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7KH 6XEVWDWLRQ DQG 8QLW 6XEVWDWLRQ 7UDQVIRUPHU DUH
WKUHH SKDVH DQG FDQ EH PDQXIDFWXUHG ZLWK RIIFLUFXLW WDS
FKDQJHU RU RQORDG WDS FKDQJHU 7KH FRUH LV PDGH RI JUDLQ
RULHQWHGVLOLFRQHVWHHOODPLQDWLRQV7KHFRLOLVPDGHRIHLWKHU
DOXPLQLXPRUFRSSHUERWKLQKLJKDQGORZYROWDJHZLQGLQJV7KHWDQNLVHTXLSSHGZLWKUDGLDWRUV
7UDQVIRUPHU+DQGERRN3DJH
6XEVWDWLRQWUDQVIRUPHUVDUHVXSSOLHGZLWKFRYHUPRXQWHG
EXVKLQJVIRUFRQQHFWLRQWRRYHUKHDGXWLOLW\OLQHVDQG8QLW
6XEVWDWLRQWUDQVIRUPHUVZLWKZDOOPRXQWHGEXVKLQJVRQHLWKHU
WKHSULPDU\VHFRQGDU\RUERWKVLGHVRIWKHWUDQVIRUPHUIRUFORVH
FRQQHFWLRQWRDVVRFLDWHGVZLWFKJHDU
3DGPRXQWHGWUDQVIRUPHUV
3RZHUUDQJH
N9$09$
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
8SWRN9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7KLV W\SH RI WUDQVIRUPHUV LV GHVLJQHG IRU VKRSSLQJ FHQWUHV
DSDUWPHQWDQGRIILFHEXLOGLQJVVFKRROVDQGLQGXVWULDOORFDWLRQV
HWF 7KH\ FDQ EH 8/ 8QGHUZULWHUV /DERUDWRU\ OLVWHG DQG DUH
XVHG ZKHUHSRZHU LV QHHGHG LQ FORVH SUR[LPLW\ WR WKH JHQHUDO
SXEOLFE\FRPPHUFLDOLQGXVWULDODQGXWLOLW\FXVWRPHUV
7KHGHVLJQSURYLGHDUHVLVWDQWUREXVWFRQVWUXFWLRQZLWKQR
H[WHUQDOO\DFFHVVLEOHEROWVKLQJHVVFUHZVRUIDVWHQHUV
SURYLGLQJDVDIHVHOIFRQWDLQHGXQLWWKDWSUHYHQWVHQWU\E\XQ
DXWKRUL]HGSHUVRQQHO8QVLJKWO\IHQFHVRURWKHUSHUVRQDOVDIHW\
SURWHFWLRQDUHQRWQHFHVVDU\
0HGLXPGLVWULEXWLRQWUDQVIRUPHUV0'7
,(&6WDQGDUG
3RZHUUDQJH
±N9$
3ULPDU\YROWDJH
8SWRN9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7UDQVIRUPHUV RI WKLV W\SH DUH XVHG WR VWHS GRZQ WKUHHSKDVH
KLJK YROWDJH WR ORZ YROWDJH IRU HQHUJ\ GLVWULEXWLRQ PDLQO\ LQ
PHWURSROLWDQDUHDVDQGIRULQGXVWULDODSSOLFDWLRQV
7KH WUDQVIRUPHUV LQ VWDQGDUG YHUVLRQV DUH WKUHH SKDVH
KHUPHWLFDOO\ VHDOHG )OH[LEOH FRUUXJDWHG WDQN ZDOOV HQDEOH
VXIILFLHQWFRROLQJRIWKHWUDQVIRUPHUDQGFRPSHQVDWHIRUFKDQJHV
LQWKHRLOYROXPHGXHWRWHPSHUDWXUHYDULDWLRQVGXULQJRSHUDWLRQ
$Q DGYDQWDJH RI KHUPHWLFDOO\ VHDOHG WUDQVIRUPHUV LV WKDW WKH RLO LV QRW LQ FRQWDFW ZLWK WKH
DWPRVSKHUHWKXVDYRLGLQJDEVRUSWLRQRIPRLVWXUHIURPWKHHQYLURQPHQW
2QFXVWRPHUUHTXHVWWKHWUDQVIRUPHUPD\EHHTXLSSHGZLWKRLOFRQVHUYDWRU
3DJH7UDQVIRUPHU+DQGERRN
$16,,(((6WDQGDUG
1HWZRUNWUDQVIRUPHU
3RZHUUDQJH
N9$N9$
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
8SWR9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
1HWZRUNV WUDQVIRUPHUV DUH FRPPRQO\ XVHG LQ D JULGW\SH VHFRQGDU\
V\VWHP LQ DUHDV RI KLJK ORDG GHQVLW\ UHTXLUHG IRU ODUJH FLWLHV 1HWZRUN
7UDQVIRUPHUV DUH GHVLJQHG IRU HLWKHU VXEZD\ RU YDXOW DSSOLFDWLRQV
1HWZRUN WUDQVIRUPHUV DUH GHVLJQHG IRU IUHTXHQW RU FRQWLQXRXV
XQGHUJURXQGRSHUDWLRQ
3DGPRXQWHGWUDQVIRUPHU
3RZHUUDQJH
8SWRN9$
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
8SWRN9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7KLV W\SH RI WUDQVIRUPHU LV GHVLJQHG IRU VKRSSLQJ FHQWUHV DSDUWPHQW DQG
RIILFH EXLOGLQJV VFKRROV DQG LQGXVWULDO ORFDWLRQV HWF 7KH\ FDQ EH 8/
8QGHUZULWHUV/DERUDWRU\ OLVWHGDQGDUHXVHGZKHUHVDIHUHOLDEOHSRZHULV
QHHGHG LQ FORVH SUR[LPLW\ WR WKH JHQHUDO SXEOLF E\ FRPPHUFLDO LQGXVWULDO
DQGXWLOLW\FXVWRPHUV
7KHGHVLJQSURYLGHDUHVLVWDQWFRQVWUXFWLRQZLWKQRH[WHUQDOO\DFFHVVLEOH
EROWVKLQJHVVFUHZVRUIDVWHQHUVSURYLGLQJDVDIHVHOIFRQWDLQHGXQLWWKDW
SUHYHQWVHQWU\E\XQDXWKRUL]HGSHUVRQQHO8QVLJKWO\IHQFHVRURWKHU
SHUVRQDOVDIHW\SURWHFWLRQDUHQRWQHFHVVDU\
6PDOOGLVWULEXWLRQWUDQVIRUPHUV6'7
,(&6WDQGDUG
3RZHUUDQJH
8SWRN9$
3ULPDU\YROWDJH
8SWRN9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7UDQVIRUPHUV RI WKLV W\SH DUH XVHG WR VWHS GRZQ WKUHHSKDVH KLJK
YROWDJH WR ORZ YROWDJH IRU HQHUJ\ GLVWULEXWLRQ PDLQO\ LQ WKH
FRXQWU\VLGHRUORZGHQVLW\SRSXODWHGDUHDV
7KH WUDQVIRUPHUV DUH WKUHH SKDVH RLO LPPHUVHG KHUPHWLFDOO\ VHDOHG
DGDSWDEOHIRUSROHPRXQWLQJRUDVVHPEO\LQVXEVWDWLRQV
2Q FXVWRPHU UHTXHVW WKH WUDQVIRUPHU FDQ EH HTXLSSHG ZLWK DQ RLO
FRQVHUYDWRU
+RW GLS ]LQF FRDWLQJ LV RIWHQ WKH SUHIHUUHG VXUIDFH WUHDWPHQW IRU
RXWGRRUDSSOLFDWLRQV
7UDQVIRUPHU+DQGERRN3DJH
6LQJOH3KDVH3ROHPRXQWHG
3RZHUUDQJH
N9$
9ROWDJH
8SWRN9
$SSOLFDEOHIOXLG
0LQHUDORLO
7UDQVIRUPHUVRIWKLVW\SHDUHJHQHUDOO\RLOLPPHUVHGDQGVXLWDEOHIRUSROHPRXQWLQJ
7KH\ UHSUHVHQW DQ HFRQRPLFDO RSWLRQ IRU FHUWDLQ QHWZRUNV SDUWLFXODUO\ WKRVH ZLWK
ORZ SRSXODWLRQ GHQVLWLHV 'HSHQGLQJ RQ FXVWRPHU UHTXLUHPHQWV WUDQVIRUPHUV PD\
EHFRQQHFWHGEHWZHHQWZRSKDVHVRIDWKUHHSKDVHV\VWHP WZR+9EXVKLQJV RU
IURP RQH SKDVH WR JURXQG VLQJOH +9 EXVKLQJ 7KH\ DUH VXLWDEOH IRU UHVLGHQWLDO
RYHUKHDG GLVWULEXWLRQ ORDGV DV ZHOO DV OLJKW FRPPHUFLDO RU LQGXVWULDO ORDGV DQG
GLYHUVLILHGSRZHUDSSOLFDWLRQV
$16,,(((6WDQGDUG
3DGPRXQWHGWUDQVIRUPHUV
3RZHUUDQJH
N9$N9$
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
8SWR9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7KH 0LQL7KUHH 3KDVH 3DGPRXQWHG 7UDQVIRUPHU 073 LV GHVLJQHG IRU
WKH QHHGV RI XWLOLW\ FXVWRPHUV WR UHGXFH FRVWV DQG LPSURYH DHVWKHWLFV
7KLVW\SHLVHDV\WRKDQGOHLQVWDOODQGPDLQWDLQ7KHGLVFUHHWSURILOHRIWKH
073 LV LGHDO IRU FRPPHUFLDO DSSOLFDWLRQV VXFK DV EDQNV VWRUHV DQG
UHVWDXUDQWV7KH073IHDWXUHVDKRRGDQGUHPRYDEOHVLOOLQVWHDGRIGRRUV
7KH GHVLJQ DOORZV HDV\ DFFHVV IRU LQVWDOODWLRQ DQG PDLQWHQDQFH RI WKH
WUDQVIRUPHU
7KHFRQQHFWLRQFDEOHVDUHDUUDQJHGXQGHUQHDWKWKHWUDQVIRUPHU
3ROHPRXQWHGWUDQVIRUPHUV
3RZHUUDQJH3KDVH
N9$±N9$
3RZHUUDQJH3KDVH
N9$N9$
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
8SWR9
$YDLODEOHIOXLGV
0LQHUDORLOV\QWKHWLF
K\GURFDUERQV
7KH3ROHPRXQWHGGLVWULEXWLRQWUDQVIRUPHUVDUHVSHFLILFDOO\
GHVLJQHGIRUVHUYLFLQJUHVLGHQWLDORYHUKHDGGLVWULEXWLRQORDGV7KH\
DUHDOVRVXLWDEOHIRUOLJKWFRPPHUFLDOORDGVLQGXVWULDOOLJKWLQJDQG
GLYHUVLILHGSRZHUDSSOLFDWLRQV
7KH3ROHPRXQWHGWUDQVIRUPHUVDUHDYDLODEOHLQERWKVLQJOHDQG
WKUHHSKDVHGHVLJQV$%%DOVRRIIHUVWULSOH[GHVLJQVIRU
DSSOLFDWLRQVZKHUHODUJHPRWRUVDUHWKHORDGVHJIRURLOSXPSLQJ
DQGLUULJDWLRQ³7&RQQHFWHG´ 6FRWW WKUHHSKDVHGHVLJQVDUH
DYDLODEOHWRVHUYHPRVWWKUHHSKDVHDSSOLFDWLRQV
3DJH7UDQVIRUPHU+DQGERRN
6LQJOH3KDVH3DGPRXQWHG
3RZHUUDQJH
N9$N9$
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
8SWR9
$YDLODEOHIOXLGV
0LQHUDORLOGLPHWK\OVLOLFRQH
HVWHUVDQGV\QWKHWLF
K\GURFDUERQV
7KH0LQL3DNLVGHVLJQHGIRUFURVVIHHG 7\SH ORRSIHHGRUUDGLDO
IHHGRQDJURXQGHGZ\HFRQQHFWLRQXQGHUJURXQGGLVWULEXWLRQV\VWHP
,WFDQEHIXUQLVKHGLQDFRPSOHWHOLQHRIUDWLQJVDQGLQDZLGHUDQJHRI
FRQILJXUDWLRQVWRPHHWWKHUHOLDELOLW\VDIHW\DQGRSHUDWLQJUHTXLUHPHQWV
RIDQ\GLVWULEXWLRQV\VWHP
'U\W\SHGLVWULEXWLRQWUDQVIRUPHUV
'U\W\SHWUDQVIRUPHUVDUHXVHGWRPLQLPL]HILUHKD]DUGDQGRWKHUHQYLURQPHQWDOFRQWDPLQDWLRQRQ
VXUURXQGLQJV DQG SHRSOH OLNH LQ ODUJH RIILFH EXLOGLQJV KRVSLWDOV VKRSSLQJ FHQWUHV DQG
ZDUHKRXVHV VHD JRLQJ YHVVHOV RLO DQG JDV SURGXFWLRQ IDFLOLWLHV DQG RWKHU VLWHV ZKHUH D ILUH KDV
SRWHQWLDOIRUFDWDVWURSKLFFRQVHTXHQFHV
$%% RIIHUV D IXOO UDQJH RI GU\W\SH WUDQVIRUPHUV ZLWK SULPDU\ YROWDJHV XS WR N9 IXOILOOLQJ WKH
UHTXLUHPHQWVLQ,(&&(1(/(&DQG$16,,(((VWDQGDUGV
$SSOLFDWLRQDUHDVIRUERWKW\SHVDUHTXLWHVLPLODUKRZHYHU5HVLEORFŠ KDVDQDGYDQWDJHLQH[WUHPH
FOLPDWLFFRQGLWLRQV
9DFXXPFDVWUHVLQGU\W\SHWUDQVIRUPHUV
3RZHUUDQJH
N9$XSWR09$
3ULPDU\YROWDJH
8SWRN9
&OLPDWHFODVV
& ,(& ,QVXODWLRQFODVV
ƒ& $16,,((( 9DFXXP FDVW PHDQV WKDW WKH KLJK YROWDJH ZLQGLQJV DUH FDVWLQ LQ HSR[\ DQG FXUHG LQ YDFXXP
7KHKLJKYROWDJHZLQGLQJVDUHW\SLFDOO\GLVFZLQGLQJ
7\SLFDO,(&SURGXFW 7\SLFDO$16,SURGXFW
7UDQVIRUPHU+DQGERRN3DJH
5HVLEORFŠGU\W\SHWUDQVIRUPHUV
3RZHUUDQJH
N9$XSWR09$
3ULPDU\YROWDJH
8SWRN9
&OLPDWHFODVV
& ,(& ,QVXODWLRQFODVV
ƒ& $16,,((( 5HVLEORFŠLVDQ$%%SDWHQWHGSURFHVVIRUWKHKLJKYROWDJHZLQGLQJ7KHKLJKYROWDJHZLQGLQJLV
PXOWL OD\HU W\SH ZLWK D FURVV ZRXQG JODVV ILEUH LQVXODWLRQ VRDNHG LQ HSR[\ FXUHG LQ RSHQ
DWPRVSKHUH
7\SLFDO,(&SURGXFW
7\SLFDO$16,SURGXFW
$16,,(((6WDQGDUG
93, 9DFXXPSUHVVXUHLPSUHJQDWHG DQG
93( 9DFXXPSUHVVXUHHQFDSVXODWHG GU\W\SHWUDQVIRUPHUV
3RZHUUDQJH
8SWR09$
3ULPDU\YROWDJH
8SWRN9
,QVXODWLRQFODVV
'HJUHH&
93,WUDQVIRUPHUVIHDWXUHDVLQJOHFRDWRISRO\HVWHUYDUQLVKDQG93(WUDQVIRUPHUVIHDWXUHDPXOWLSOH
FRDWLQJRIVLOLFRQHUHVLQIRUHQKDQFHGHQYLURQPHQWDOSURWHFWLRQ7KH\DOZD\VXVH8/ 8QGHUZULWHUV
/DERUDWRU\ OLVWHGPDWHULDOVIRUƒ&WHPSHUDWXUHFODVV
93( 9DFXXPSUHVVXUHHQFDSVXODWHG 93, 9DFXXPSUHVVXUHLPSUHJQDWHG
2WKHUWUDQVIRUPHUW\SHV
'ULYHVWUDQVIRUPHUV
9DULDEOH 6SHHG 'ULYH 96' WUDQVIRUPHUV SURYLGH WKH YROWDJH
WUDQVIRUPDWLRQ DV ZHOO DV HOHFWULF LVRODWLRQ WKDW LV QHFHVVDU\ IRU
PRWRU GULYHV DSSOLFDWLRQV &RQYHUWHU GULYHV DUH QRUPDOO\ IHG E\
PHGLXPYROWDJHQHWZRUNVIURPN9XSWRN9DQGWKHFRQYHUWHU
VXSSO\ YROWDJH XVXDOO\ UDQJHV IURP 9 XS WR N9 7KH 96'
WUDQVIRUPHU WUDQVIRUPV WKH PHGLXP QHWZRUN YROWDJH WR WKH
FRQYHUWHU VXSSO\ YROWDJH $ W\SLFDO DSSOLFDWLRQ LV VXEPHUVLEOH RLO
SXPS GULYHV DQG VLPLODU HTXLSPHQW ZKHUH RQO\ +9 PRWRU
DSSOLFDWLRQV DUH DYDLODEOH 96' WUDQVIRUPHUV DUH SURGXFHG LQ RLO
LQVXODWHG DQG GU\W\SH FRQILJXUDWLRQV XS WR 09$ UDWLQJV IRU
YDULRXVW\SHVRIFRQYHUWHUVDQGRXWSXWYROWDJHV7UDQVIRUPHUVDUH
LQGLYLGXDOO\GHVLJQHGDQGPDQXIDFWXUHGDFFRUGLQJWRV\VWHPUHTXLUHPHQWV
3DJH7UDQVIRUPHU+DQGERRN
:LQGWXUELQHDSSOLFDWLRQV
'U\W\SHDQGOLTXLGLPPHUVHGWUDQVIRUPHUVIRUZLQGWXUELQHDSSOLFDWLRQDUHVSHFLDOGHVLJQZLWKORZ
ORVVHV DQGVPDOO RXWHU GLPHQVLRQ LQ WKH WUDQVYHUVDO GLUHFWLRQ HQDEOLQJ WKHXQLW WR EH WUDQVSRUWHG
WKURXJKQDUURZGRRURSHQLQJV
'U\W\SH
3RZHUUDQJH
N9$ XS WR N9$
RUKLJKHURQUHTXHVW
3ULPDU\YROWDJH
8SWRN9
&OLPDWHFODVV
& ,(& 6SHFLDOIHDWXUHV
•
/9WHUPLQDOVDUHORFDWHGDWWKHERWWRP
•
1RERWWRPIUDPHRUZKHHOV
•
2SWLRQIRUDWHUWLDU\ZLQGLQJIRUDX[LOLDULHVORDG
/LTXLGLPPHUVHG
3RZHUUDQJH
XSWRN9$
3ULPDU\YROWDJH
XSWRN9
$YDLODEOHIOXLGV
'LPHWK\OVLOLFRQHRUHVWHUV
6SHFLDOIHDWXUHV
•
+HUPHWLFDOO\VHDOHG
•
+RWGLS]LQFFRDWHGDQGSDLQWHG
•
3OXJLQEXVKLQJVRQ+9VLGH
•
3URWHFWHG/9EXVKLQJV
•
,QWHJUDWHGSURWHFWLQJGHYLFHJDVRLOOHYHOWHPSHUDWXUHSUHVVXUH
6XEVHDWUDQVIRUPHUV
3RZHUUDWLQJ
2QUHTXHVW
3ULPDU\YROWDJH
8SWRN9
6HFRQGDU\YROWDJH
N9
0D[LPXPGHSWK
P
$YDLODEOHIOXLGV
0LQHUDORLO
7KHFKDOOHQJHZLWKRIIVKRUHIUHHIORZRLOSURGXFWLRQLVWKHGHFUHDVLQJSUHVVXUHLQVLGHWKHRLOZHOO
7KHSUHVVXUHGURSGHFUHDVHVWKHSURGXFWLRQOLIHWLPHRIWKHZHOODQGWKHSURGXFWLRQGHSWK
6XEVHDERRVWHUSXPSVPDNHVRLOSURGXFWLRQDWODUJHUGHSWKSRVVLEOHFDXVHGE\DQDUWLILFLDOOLIWWR
WKHRLO7KHSXPSVDUHGULYHQE\ORZYROWDJHHOHFWULFDOPRWRUV7KHSRZHULVVXSSOLHGE\ORQJ+9
FDEOHVIURPWKHSURGXFWLRQYHVVHOV7KHPDLQUHDVRQVIRUXVLQJ+9VXSSO\DUHWRUHGXFHWKHZHLJKW
RIWKHFDEOHVDVZHOODVWKHYROWDJHGURSLQWKHFDEOHV6WHSGRZQWUDQVIRUPHUVDUHLQVWDOOHGDWWKH
VHDEHGQHDUWKHERRVWHUSXPSV
7UDQVIRUPHU+DQGERRN3DJH
8QGHUJURXQGWUDQVIRUPHUV
$16,,(((6WDQGDUG
3RZHUUDQJH
N9$
9ROWDJH
8SWRN9
$SSOLFDEOHIOXLG
0LQHUDO RLO HVWHUV DQG V\QWKHWLF
K\GURFDUERQV
7KH8QGHUJURXQG&RPPHUFLDO7UDQVIRUPHU 8&7 LVGHVLJQHGIRUORRS
IHHG GHDG IURQW DSSOLFDWLRQ DQG LV HTXLSSHG ZLWK ED\RQHW IXVLQJ RU
GU\ZHOO FXUUHQW OLPLWLQJ IXVH SURWHFWLRQ LQWHUORFNHG ZLWK DQ /%25 RLO
ORDGEUHDNURWDU\VZLWFK7KHUHDUHVL[ZHOGHGLQKLJKYROWDJHXQLYHUVDO
EXVKLQJVZHOOVIRUORRSIHHGFRQQHFWLRQ
32:(575$16)250(56
7UDQVIRUPHUPDQXIDFWXUHUVIDFHVHYHUDOFKDOOHQJHVLQWKHGHVLJQRIODUJHSRZHUWUDQVIRUPHUVZLWK
H[WUDKLJKYROWDJHV (+9 WKDWLVV\VWHPYROWDJHVXSWRDQGLQFOXGLQJN9
7UDQVLHQWRYHUYROWDJHV
2QHRIWKHFKDOOHQJHVLVWRHQDEOHWKHGHVLJQHUWRSUHGLFW
WKH WUDQVLHQW YROWDJH GLVWULEXWLRQ ZLWKLQ ZLQGLQJV ZKHQ
WUDQVLHQW YROWDJHV RI FHUWDLQ VKDSHV DUH DSSOLHG WR WKH
WUDQVIRUPHU WHUPLQDOV 7KH YROWDJH GLVWULEXWLRQ YDULHV
GHSHQGLQJ RQ D QXPEHU RI ZLQGLQJ SDUDPHWHUV
&RPSUHKHQVLYH PHDVXUHPHQWV ZLWK PRGHUQ PHDVXULQJ
HTXLSPHQW RQ D ODUJH QXPEHU RI ZLQGLQJV RI YDULRXV
W\SHVKDYHEHHQPDGHLQRUGHUWRGHYHORSPDWKHPDWLFDO
PRGHOV IRU FDOFXODWLRQ RI WKH YROWDJH GLVWULEXWLRQ 7KLV
GHYHORSPHQW KDV LQ $%% JRQH RQ IRU PDQ\ \HDUV ZLWK
JUDGXDOO\ GHFUHDVLQJ GHYLDWLRQV EHWZHHQ FDOFXODWHG DQG
PHDVXUHGYDOXHV
SKDVHSRZHU
WUDQVIRUPHU09$
)LJXUH
)LJXUH VKRZV DQ H[DPSOH RI WKH YROWDJH GLVWULEXWLRQ LQ D ZLQGLQJ ZKHQ D VWDQGDUG OLJKWQLQJ
LPSXOVH ZLWKPLFURVHFRQGIURQWWLPHDQGPLFURVHFRQGVWLPHIURPVWDUWWRWKHYROWDJHKDV
GHFOLQHG WR KDOI WKH SHDN YDOXH LV DSSOLHG WR WKH ZLQGLQJ WHUPLQDO 7KH OHQJWK RI WKH ZLQGLQJ LV
LQGLFDWHG DORQJ WKH / D[LV DQG WKH WLPH DORQJ WKH 7 D[LV 7KH PHDVXUHG YROWDJHV WR HDUWK DUH
LQGLFDWHGDORQJWKH8D[LV
7KHILJXUHUHPLQGVRQHRIDVWRQ\KLOO:KHUHWKHKLOOLVYHU\VWHHSLQWKH/GLUHFWLRQWKHUHDUHODUJH
YROWDJHGLIIHUHQFHVEHWZHHQSRLQWVLQWKHZLQGLQJWKDWDUHQHDUE\HDFKRWKHU
3DJH7UDQVIRUPHU+DQGERRN
7KHDELOLW\RIWKHLQVXODWLRQWRZLWKVWDQGWKHORFDOGLHOHFWULFVWUHVVHVDWQXPHURXVGLIIHUHQWVSRWVLQ
WKHZLQGLQJLVQRWRQO\GHSHQGHQWRQWKHSHDNYDOXHRIWKHVWUHVVEXWRQLWVGXUDWLRQDVZHOO$%%
KDV GRQH LQGHSWK UHVHDUFK RQ EDVLF GLHOHFWULF SKHQRPHQD LQ WUDQVIRUPHU LQVXODWLRQ DQG $%%¶V
SUHVHQW FRPSHWHQFH RQ HQDEOLQJ WUDQVIRUPHUV WR ZLWKVWDQG WUDQVLHQW RYHUYROWDJHV LV WKH UHVXOW RI
VHYHUDO GHFDGHV RI ZRUN +RZHYHU WKH VHUYLFH UHOLDELOLW\ RI WKH WUDQVIRUPHU LV EDVHG RQ WKH
FRQGLWLRQWKDWWKHWUDQVIRUPHULVDGHTXDWHO\SURWHFWHGDJDLQVWWUDQVLHQWRYHUYROWDJHVLQFRPSOLDQFH
ZLWKJRRGLQVXODWLRQFRRUGLQDWLRQSUDFWLFH
8QOLNHWKHVPDOOHUGLVWULEXWLRQWUDQVIRUPHUVZKLFKWRDFRQVLGHUDEOHGHJUHHDUHVWDQGDUGLVHGODUJH
SRZHUWUDQVIRUPHUVDUHXVXDOO\LQGLYLGXDOO\GHVLJQHG
7KHPDJQHWLFOHDNDJHILHOG
7KHPDJQHWLFOHDNDJHILHOGLQFUHDVHVZLWKWKHSRZHUUDWLQJDQGWKHVKRUWFLUFXLWLPSHGDQFHRIWKH
WUDQVIRUPHU )RU WKH ODUJHVW WUDQVIRUPHUV VSHFLDO SUHFDXWLRQV PXVW EH WDNHQ WR HQVXUH WKDW WKH
OHDNDJHILHOGGRHVQRWFDXVHKDUPIXOKHDWLQJLQZLQGLQJVDQGVWUXFWXUDOSDUWVOLNHFRUHFODPSVDQG
WDQN
([FHVVLYHKHDWLQJFDXVHVJDVEXEEOHVZKLFKUHSUHVHQWZHDNSRLQWVLQWKHRLO,IVXFKEXEEOHVULVH
WKURXJKGLHOHFWULFKLJKVWUHVVDUHDVLQWKHWUDQVIRUPHUEUHDNGRZQPD\RFFXU,QDGGLWLRQKRWVSRWV
LQFRQWDFWZLWKWKHRLOZLOOGHWHULRUDWHWKHRLO)RUPDQ\\HDUV$%%KDVPDGHFRPSUHKHQVLYHVWXGLHV
RI WKH OHDNDJH ILHOG DQG WKH WHPSHUDWXUH GLVWULEXWLRQ LQ WUDQVIRUPHUV E\ PHDQV RI WKHUPRFRXSOHV
DQGILEUHRSWLFVWRREWDLQNQRZOHGJHRQKRZWRDYRLGKRWSRLQWVWKDWFRXOGMHRSDUGLVHWKHVHUYLFH
UHOLDELOLW\RIWKHWUDQVIRUPHUV
0HFKDQLFDOIRUFHV
$WKLUGLPSRUWDQWWRSLFLVWRPDNHODUJHSRZHUWUDQVIRUPHUVDEOHWRZLWKVWDQGWKHODUJHPHFKDQLFDO
SXOVDWLQJ IRUFHV WKDW DULVH GXULQJ VKRUW FLUFXLW FXUUHQWV WKURXJK WKH ZLQGLQJV /DUJH SRZHU
WUDQVIRUPHUVDUHQRUPDOO\LQVWDOOHGLQV\VWHPVZLWKYHU\KLJKVKRUWFLUFXLWSRZHU:KLOHWKHUPDORU
HFRQRPLF ORVV FRQVLGHUDWLRQV XVXDOO\ GHWHUPLQH WKH FXUUHQW GHQVLW\ LQ WKH ZLQGLQJ FRQGXFWRUV RI
VPDOOHU WUDQVIRUPHUV WKH PHFKDQLFDO VWUHVVHV GXULQJ VKRUW FLUFXLW FXUUHQWV RIWHQ GHWHUPLQH WKH
ZLQGLQJFRQGXFWRUFURVVVHFWLRQLQVRPHZLQGLQJVRIODUJHUWUDQVIRUPHUV
7KHEDVLVRI$%%¶VGHVLJQUXOHVDQGPDQXIDFWXULQJSUDFWLFHWRDFKLHYHWUDQVIRUPHUVZLWKDELOLW\WR
ZLWKVWDQGVKRUWFLUFXLWFXUUHQWVLVWKHRUHWLFDOFRQVLGHUDWLRQVFRPELQHGZLWKH[SHULHQFHIURPIXOOVKRUW
FLUFXLW FXUUHQW WHVWLQJ RI FRPSOHWH WUDQVIRUPHUV 0RUH WKDQ RQH KXQGUHG SRZHU WUDQVIRUPHUV RI DOO
VL]HVXSWRWKHKLJKHVWSRZHUUDWLQJVPDQXIDFWXUHGE\$%%KDYHEHHQVXEMHFWWRVXFKWHVWLQJ
$ FRPSUHKHQVLYH WUHDWLVH RQ PHFKDQLFDO IRUFHV LQ WUDQVIRUPHUV GXULQJ VKRUW FLUFXLW FRQGLWLRQV LV
JLYHQLQ>@SDJH
$OO LQ DOO WKLV LOOXVWUDWHV WKDW WR GHVLJQ DQG PDQXIDFWXUH UHOLDEOH ODUJH SRZHU WUDQVIRUPHUV IRU KLJK
YROWDJHVLQDQHFRQRPLFDODQGFRPSHWLWLYHZD\UHTXLUHVFRQVLGHUDEOHUHVRXUFHVDQGORQJH[SHULHQFH
$%%PDQXIDFWXUHVODUJHSRZHUWUDQVIRUPHUVIRUV\VWHPYROWDJHVXSWRDQGLQFOXGLQJN9DQG
ZLWKWKHKLJKHVWSRZHUUDWLQJVGHPDQGHGE\WKHPDUNHW
(YHQDWUDQVIRUPHUIRUD8+9WHVWOLQHRIN9V\VWHPYROWDJHKDVEHHQGHOLYHUHG
3RZHUUDWLQJOLPLWDWLRQV
:KHQ WUDQVSRUWLQJ WKH WUDQVIRUPHU IURP WKH IDFWRU\ WR WKH VLWH OLPLWDWLRQV LQ WKH WUDQVSRUW SURILOH
PLJKWEHHQFRXQWHUHGZKLFKUHVWULFWWKHSRZHUUDWLQJRIWKHWUDQVIRUPHU7KHWUDQVIRUPHUKHLJKWLV
RIWHQWKHOLPLWLQJGLPHQVLRQ,QWKDWFDVHWKHWUDQVIRUPHUGHVLJQHUKDVWKHSRVVLELOLW\WRUHGXFHWKH
KHLJKWE\FKRRVLQJDOLPEFRUHLQVWHDGRIDOLPEFRUH6HHVHFWLRQSDJH
*HQHUDWRUVWHSXSWUDQVIRUPHUV
7KHVHWUDQVIRUPHUVWDNHWKHYROWDJHIURPWKHJHQHUDWRUYROWDJHOHYHOXSWRWKHWUDQVPLVVLRQYROWDJH
OHYHOZKLFKPD\JRXSWRN9V\VWHPYROWDJH6XFKWUDQVIRUPHUVDUHXVXDOO\<QGFRQQHFWHG
7KHUHDUHVHYHUDOUHDVRQVIRUFRQQHFWLQJWKHORZYROWDJHZLQGLQJLQGHOWDLQVWHDGRIVWDU
•
WKH GHOWDFRQQHFWHG ZLQGLQJ NHHSV WKH ]HUR VHTXHQFH LPSHGDQFH RI WKH WUDQVIRUPHU
UHDVRQDEO\ORZ
•
IRU ODUJH WUDQVIRUPHUV WKH OLQH FXUUHQW RQ WKH ORZ YROWDJH VLGH LV YHU\ KLJK ,Q D GHOWD
FRQQHFWHGZLQGLQJWKHFXUUHQWWKURXJKWKHZLQGLQJLVHTXDOWRWKHOLQHFXUUHQWGLYLGHGE\¥
ZKLFKPDNHVWKHZLQGLQJZRUNLQWKHIDFWRU\HDVLHUZLWKDFRUUHVSRQGLQJO\VPDOOHUEXQGOHRI
ZLQGLQJFRQGXFWRUV
7UDQVIRUPHU+DQGERRN3DJH
7KH KLJK YROWDJH QHXWUDO LV LQ PRVW FDVHV VROLGO\ HDUWKHG DQG WKH LQVXODWLRQ LQ WKH KLJK YROWDJH
ZLQGLQJLVJUDGHGWKDWLVWKHLQVXODWLRQOHYHOLQWKHQHXWUDOLVORZHUWKDQLQWKHSKDVHHQGRIWKH
ZLQGLQJ
)XOO XWLOLVDWLRQ RI WKH JHQHUDWRU¶V DELOLW\ WR VXSSO\ DFWLYH SRZHU WR WKH V\VWHP DQG LQ DGGLWLRQ LWV
DELOLW\WRVXSSO\UHDFWLYHSRZHUWRWKHV\VWHPDQGDEVRUEUHDFWLYHSRZHUIURPWKHV\VWHPUHTXLUHV
WKDW IRXU WUDQVIRUPHU FKDUDFWHULVWLFV VKRXOG EH VHOHFWHG RQ WKH EDVH RI D WKRURXJK VWXG\ 7KHVH
IRXUFKDUDFWHULVWLFVDUH
•
•
•
•
7KHVKRUWFLUFXLWLPSHGDQFHRIWKHWUDQVIRUPHU
7KHVHFRQGDU\ KLJK YROWDJHUDWLQJ
7KHWUDQVIRUPHU09$UDWLQJ
7KHSULPDU\ ORZ YROWDJHUDWLQJ
,(((&±70,(((JXLGHIRU7UDQVIRUPHUV'LUHFWO\&RQQHFWHGWR*HQHUDWRUVGHVFULEHV
DQDQDO\VLVPHWKRGIRUVHOHFWLRQRIWKHVHFKDUDFWHULVWLFV
,QRUGHUWRHQVXUHWKDWWKHWUDQVIRUPHUGRHVQRWUHVWULFWWKHH[FKDQJHRIUHDFWLYHSRZHUEHWZHHQ
WKHJHQHUDWRUDQGWKHSRZHUV\VWHPLWPD\EHQHFHVVDU\WRSURYLGHWDSSLQJVLQWKHKLJKYROWDJH
ZLQGLQJRIWKHWUDQVIRUPHU7KHVHWDSSLQJVDUHQRUPDOO\SODFHGDWWKHQHXWUDOHQGRIWKHZLQGLQJ
,QXQGHUJURXQGK\GURSRZHUVWDWLRQVWKHFLUFXLWEUHDNHURQWKHKLJKYROWDJHVLGHLVRIWHQORFDWHGDW
DGLVWDQFHRIVHYHUDOKXQGUHGPHWUHVIURPWKHWUDQVIRUPHU7KHWUDQVIRUPHUDQGWKHFLUFXLWEUHDNHU
DUHFRQQHFWHGWRHDFKRWKHUE\PHDQVRIDFDEOH:KHQHQHUJLVLQJWKHWUDQVIRUPHUIURPWKHKLJK
YROWDJH VLGH KLJK IUHTXHQF\ RVFLOODWLRQV DULVH RQ WKH WHUPLQDOV GXH WR WUDYHOOLQJ ZDYHV WKDW DUH
UHIOHFWHGEDFNDQGIRUWKLQWKHFDEOH6HH>@6HFWLRQSDJH
(YHU\ WUDQVIRUPHU ZLQGLQJ KDV D QXPEHU RI UHVRQDQFH IUHTXHQFLHV ZKLFK FDQ EH LGHQWLILHG E\
PHDQV RI PHDVXUHPHQWV LQ WKH IDFWRU\ $W VRPH RI WKHVH IUHTXHQFLHV KLJK LQWHUQDO RYHUYROWDJHV
PD\DULVHLIWKHIUHTXHQF\RIWKHRVFLOODWLRQVWKDWRFFXUGXULQJHQHUJLVDWLRQFRLQFLGHZLWKRQHRIWKH
FULWLFDOUHVRQDQFHIUHTXHQFLHVRIWKHWUDQVIRUPHUZLQGLQJ7KLVSRWHQWLDOO\GDQJHURXVVLWXDWLRQFDQ
EH DYRLGHG E\ HQHUJLVLQJ WKH WUDQVIRUPHU IURP WKH JHQHUDWRU VLGH DQG WKHQ V\QFKURQLVLQJ WKH
JHQHUDWRUZLWKWKHV\VWHPE\PHDQVRIWKHFLUFXLWEUHDNHUDWWKHKLJKYROWDJHVLGH
7KHUHPD\EHDIL[HGFRQQHFWLRQEHWZHHQWKHWUDQVIRUPHUDQGWKHJHQHUDWRURUDFLUFXLWEUHDNHU
PD\EHVLWXDWHGLQEHWZHHQ
:KHQWKHUHLVDIL[HGHOHFWULFDOFRQQHFWLRQWKHJHQHUDWRUDQGWKHWUDQVIRUPHUDUHLQVHSDUDEOHDQG
DFWDVRQHXQLW,QFDVHRIIDLOXUHRQHLWKHUVLGHRIWKHWUDQVIRUPHUUHOD\VPD\TXLFNO\WULJJHUWKH
FLUFXLWEUHDNHURQWKHKLJKYROWDJHVLGHRIWKHWUDQVIRUPHUWRGLVFRQQHFWWKHXQLWIURPWKHV\VWHP
7KLVVXGGHQORDGUHMHFWLRQPD\FDXVHKLJKHUYROWDJHRQWKHJHQHUDWRUWHUPLQDOVDQGFRQVHTXHQWO\
WRRYHUH[FLWDWLRQRIWKHWUDQVIRUPHU7KHPDJQLWXGHDQGGXUDWLRQRIWKLVRYHUH[FLWDWLRQGHSHQGRI
WKH FKDUDFWHULVWLFV RI WKH JHQHUDWRU DQG LWV H[FLWDWLRQ V\VWHP 7KH SXUFKDVHU VKRXOG LQIRUP WKH
WUDQVIRUPHUVXSSOLHUDERXWWKHPD[LPXPPDJQLWXGHDQGGXUDWLRQRIWKLVWHPSRUDU\RYHUYROWDJHDV
HDUO\ DV SRVVLEOH LQ WKH SURMHFW SURFHVV DQG LQ DQ\ FDVH LQ GXH WLPH EHIRUH WKH GHVLJQ RI WKH
WUDQVIRUPHULVILQDOO\GHWHUPLQHG
2YHUYROWDJHSURWHFWLRQRIWKHORZYROWDJHZLQGLQJRIJHQHUDWRUVWHSXSWUDQVIRUPHUVQHHGVVSHFLDO
FRQVLGHUDWLRQEHFDXVHRIWKHRIWHQODUJHGLIIHUHQFHLQYROWDJHDQGFRQVHTXHQWO\LQVXODWLRQOHYHORQ
WKHWZRVLGHVDQGWKHPDJQLWXGHRIWUDQVIHUUHGWUDQVLHQWDQGWHPSRUDU\RYHUYROWDJHVIURPWKHKLJK
YROWDJHWRWKHORZYROWDJHVLGH
,WLVUHFRPPHQGHGWKDWVXUJHDUUHVWHUVEHLQVWDOOHGEHWZHHQHDFKORZYROWDJHWHUPLQDODQGHDUWK
DQG DOVR EHWZHHQ WHUPLQDOV RI GLIIHUHQW SKDVHV DQG LQ DGGLWLRQ FDSDFLWRUV EHWZHHQ SKDVH
WHUPLQDOVDQGHDUWK7\SLFDOFDSDFLWDQFHWKDWKDVEHHQXVHGLVȝ)
7KH WUDQVIHUUHG RYHUYROWDJHV FDQ EH HVSHFLDOO\ FULWLFDO ZKHQ WKH ORZ YROWDJH ZLQGLQJ LV
GLVFRQQHFWHGIURPWKHJHQHUDWRU
,Q VHYHUDO FDVHV EXV GXFWV HQFORVH HDFK SKDVH FRQGXFWRU EHWZHHQ WKH WUDQVIRUPHU DQG WKH
JHQHUDWRU LQ RUGHU WR PLQLPLVH WKH ULVN RI VKRUW FLUFXLWV EHWZHHQ WKH SKDVH FRQGXFWRUV )RU ODUJH
JHQHUDWRU VWHSXS WUDQVIRUPHUV WKH FXUUHQW LQ WKHVHFRQGXFWRUV DUH YHU\ KLJKZLWK DFFRPSDQ\LQJ
VWURQJPDJQHWLFILHOGVZKLFKPD\FDXVHXQDQWLFLSDWHGFLUFXODWLQJFXUUHQWVLQWUDQVIRUPHUWDQNVDQG
FRYHUV EXVKLQJV DQG LQ WKH EXV GXFWV WKHPVHOYHV 7KH ORVVHV FDXVHG E\ WKHVH XQDQWLFLSDWHG
FXUUHQWV UHVXOW LQ RYHUKHDWLQJ LI FRUUHFWLYH PHDVXUHV DUH QRW LQFOXGHG LQ WKH GHVLJQ 7KH
RYHUKHDWLQJRIWKHWUDQVIRUPHUFRPSRQHQWVGHSHQGVXSRQWKHPHWKRGRIWHUPLQDWLQJWKHEXVGXFWV
DW WKH WUDQVIRUPHU HQG ,Q RUGHU WR PLWLJDWH WKH KHDWLQJ SUREOHP LW LV VXJJHVWHG WKDW GHVLJQ
FRRUGLQDWLRQ PHHWLQJV EH DUUDQJHG EHWZHHQ WKH EXV GXFW VXSSOLHU WKH WUDQVIRUPHU PDQXIDFWXUHU
DQGWKHSXUFKDVHUSULRUWRWKHGHVLJQRIWKHEXVGXFW
3DJH7UDQVIRUPHU+DQGERRN
)LJXUH
)LJXUH VKRZV DQ H[DPSOH RI D ODUJH WKUHHSKDVH JHQHUDWRU VWHS XS WUDQVIRUPHU 7KH UDWHG
SRZHU LV 09$ DQG WKH YROWDJH UDWLR N9 ,Q WKLV FDVH WKH WUDQVIRUPHU LV PDGH DV D
VKHOOW\SH
6WHSGRZQWUDQVIRUPHUV
6WHSGRZQ WUDQVIRUPHUV WDNH WKH YROWDJH GRZQ IURP WKH WUDQVPLVVLRQ YROWDJH WR DQ DSSURSULDWH
GLVWULEXWLRQYROWDJH7KHSRZHUUDWLQJRIVWHSGRZQWUDQVIRUPHUVPD\UDQJHXSWRSRZHUUDWLQJRI
WKHWUDQVPLVVLRQOLQH7KH\IUHTXHQWO\DUHHTXLSSHGWRYDU\WKHWXUQUDWLR“LQVWHSVRI
E\PHDQVRIDQRQORDGWDSFKDQJHU 6HHVHFWLRQSDJH 7KH HOHFWULFLW\ VXSSO\ V\VWHP RIWHQ KDV VHYHUDO GLIIHUHQW GLVWULEXWLRQ YROWDJH OHYHOV DV WKH VXSSO\
V\VWHPEUDQFKHVRXWEHIRUHWKHYROWDJHLVILQDOO\WDNHQGRZQWRWKHGRPHVWLFFRQVXPSWLRQYROWDJH
OHYHOVHHSDJH
%HWZHHQ WKHVH GLIIHUHQW GLVWULEXWLRQ YROWDJH OHYHOV WKHUH DUH VWHSGRZQ WUDQVIRUPHUV ZLWK
GHFUHDVLQJ SRZHU UDWLQJ DV WKH V\VWHP DSSURDFKHV WKH FRQVXPHU 7KH\ DUH PRVWO\ UHJXODWLQJ
WUDQVIRUPHUVDQGWKHLUWXUQUDWLRLVRIWHQFRQWUROOHGE\PHDQVRIYROWDJHUHJXODWLRQUHOD\VLQRUGHU
WRNHHSWKHRXWSXWYROWDJHFRQVWDQW+RZHYHULQPHVKQHWZRUNVZLWKUHODWLYHO\VWURQJV\VWHPVRQ
ERWKVLGHVRIWKHWUDQVIRUPHUFKDQJLQJWKHWXUQUDWLRRIWKHWUDQVIRUPHUPD\QRWHVVHQWLDOO\FKDQJH
WKH YROWDJH RQO\ LQIOXHQFH WKH H[FKDQJH RI UHDFWLYH SRZHU EHWZHHQ WKH WZR VLGHV RI WKH
WUDQVIRUPHU ([SHULHQFH VKRZV WKDW WKH YROWDJH UHJXODWLRQ UHOD\ LQ VXFK VLWXDWLRQV VHQGV WKH RQ
ORDGWDSFKDQJHUWRLWVHQGSRVLWLRQZLWKRXWDQ\QRWLFHDEOHFKDQJHLQWKHYROWDJHRQWKHVHFRQGDU\
VLGHRIWKHWUDQVIRUPHU
6\VWHPLQWHUWLHWUDQVIRUPHUV
6\VWHPLQWHUWLHWUDQVIRUPHUVFRQQHFWWUDQVPLVVLRQV\VWHPVZLWKGLIIHUHQWYROWDJHVWRJHWKHUZLWKWKH
SXUSRVHWKDWDFWLYHDVZHOODVUHDFWLYHSRZHUFDQEHH[FKDQJHGEHWZHHQWKHV\VWHPV
7KH SRZHU UDWLQJ RI VXFK WUDQVIRUPHUV PD\ EH TXLWH KLJK IRU H[DPSOH 09$ DQG WKH\ DUH
VRPHWLPHVPDGHDXWRFRQQHFWHGLQRUGHUIDFLOLWDWHWKHWUDQVSRUWIURPWKHIDFWRU\WRWKHVLWHE\WKH
ORZHUZHLJKWDQGSK\VLFDOGLPHQVLRQV,QDGGLWLRQWKHPDQXIDFWXULQJFRVWZLOOEHORZHUFRPSDUHGWR
DWUDQVIRUPHUZLWKVHSDUDWHZLQGLQJV
7KH WXUQ UDWLR RI VXFK WUDQVIRUPHUV LV VRPHWLPHV IL[HG ZKLOH WDSSLQJV PD\ EH SURYLGHG LQ RWKHU
FDVHV 7KH GLIIHUHQW WDSSLQJV PD\ QRW QRWLFHDEO\ LQIOXHQFH WKH YROWDJH RQ HLWKHU VLGH RI WKH
WUDQVIRUPHU+RZHYHUWKHWDSSLQJVSURYLGHWKHDELOLW\WRLQIOXHQFHWKHH[FKDQJHRIUHDFWLYHSRZHU
EHWZHHQWKHV\VWHPV
7UDQVIRUPHU+DQGERRN3DJH
7KHLQVXODWLRQRIWKHZLQGLQJVLVQRUPDOO\JUDGHG,QVHSDUDWHZLQGLQJVWUDQVIRUPHUVWDSSLQJVDUH
SODFHG LQ WKH QHXWUDO HQG RI RQH RI WKH ZLQGLQJV ,Q DXWRFRQQHFWHG WUDQVIRUPHUV WDSSLQJV DUH
W\SLFDOO\ORFDWHGLQWKHSKDVHVRIWKHORZYROWDJHVLGH6HH)LJXUH
,
L
,,
LL
,,,
1
LLL
)LJXUH
7KH WDSSLQJV DUH VRPHWLPHV ORFDWHG DW WKH QHXWUDO SRLQW RI DXWRFRQQHFWHG WUDQVIRUPHUV ZKHUH
WKH YROWDJH OHYHO WR HDUWK DQG WKH YROWDJH GLIIHUHQFHV EHWZHHQ SKDVHV DUH ORZHU WKDQ ZKHQ WKH
WDSSLQJV DUH VLWXDWHG DW WKH DXWR WDS $ VLPSOHU DQG FKHDSHU WDS FKDQJHU FDQ WKHQ EH XVHG 2Q
WKH RWKHU KDQG WDSSLQJV DW WKH QHXWUDO ZLOO QHHG D ODUJHU QXPEHU RI WXUQV LQ WKH WDSSLQJ UDQJH WR
DFKLHYH WKH VDPH YDULDWLRQ LQ WKH WXUQ UDWLR DV ZKHQ WKH WDSSLQJV DUH VLWXDWHG DW WKH DXWR WDS RU
DWWKHKLJKYROWDJHWHUPLQDO
7KH WZR PDLQ ZLQGLQJV LQ DQ DXWRFRQQHFWHG WUDQVIRUPHU RU VLPSO\ DXWRWUDQVIRUPHU DUH FDOOHG
WKHFRPPRQZLQGLQJDQGWKHVHULHVZLQGLQJ7KHFRPPRQZLQGLQJLVFRQQHFWHGWRWKHQHXWUDODQG
DV WKH QDPH LQGLFDWHV WKH WXUQV RI WKLV ZLQGLQJ DUH FRPPRQ IRU ERWK VLGHV RI WKH WUDQVIRUPHU
7KH VHULHV ZLQGLQJ LV FRQQHFWHG DW RQH HQG WR WKH FRPPRQ ZLQGLQJ DQG DW WKH RWKHU HQG WR WKH
KLJKYROWDJHWHUPLQDO
7KH KLJK YROWDJH FXUUHQW IORZV WKURXJK WKH VHULHV ZLQGLQJ 7KH FXUUHQW IORZLQJ LQ WKH FRPPRQ
ZLQGLQJ LV WKH GLIIHUHQFH EHWZHHQ WKH ORZ YROWDJH DQG WKH KLJK YROWDJH FXUUHQW 7KH FXUUHQW LQ
WKHFRPPRQZLQGLQJIORZVLQWKHRSSRVLWHGLUHFWLRQWRWKHFXUUHQWLQWKHVHULHVZLQGLQJ
7KH FRPPRQ ZLQGLQJ DQG WKH VHULHV ZLQGLQJ DUH DUUDQJHG DV FRQFHQWULF F\OLQGULFDO VKHOOV
DQGWKHDPSHUHWXUQVLQWKHWZRZLQGLQJVDUHHTXDOLQYDOXHDQGRSSRVLWHLQGLUHFWLRQ
7KHDGYDQWDJHRIDQDXWRWUDQVIRUPHUFRPSDUHGWRDWUDQVIRUPHUZLWKVHSDUDWHZLQGLQJVLVWKDWWKH
DXWRWUDQVIRUPHUUHTXLUHVOHVVPDWHULDODQGFRQVHTXHQWO\KDVVPDOOHUWRWDOGLPHQVLRQVORZHUPDVV
ORZHUPDQXIDFWXULQJFRVWVDQGORZHUORVVHV
7KHHTXLYDOHQWVHSDUDWHWZRZLQGLQJSRZHUUDWLQJRIDQDXWRWUDQVIRUPHULQGLFDWHVWKHPDJQLWXGHRI
VDYLQJVDQGLVJLYHQE\WKHIROORZLQJHTXDWLRQ
6H = 6U ⋅
8U+9 − 8U/9
8U+9
7KHWHUPVLQWKLVHTXDWLRQDUHWKHIROORZLQJ
6HLVWKHHTXLYDOHQWVHSDUDWHWZRZLQGLQJSRZHUUDWLQJRIWKHWUDQVIRUPHU
6ULVWKHSRZHUUDWLQJRIWKHWUDQVIRUPHU
8U+9LVWKHUDWHGKLJKYROWDJHRIWKHWUDQVIRUPHU
8U/9LVWKHUDWHGORZYROWDJHRIWKHWUDQVIRUPHU
(TXDWLRQ VWDWHV WKDW WKH HTXLYDOHQW VHSDUDWH WZR ZLQGLQJ SRZHU UDWLQJ LV SURSRUWLRQDO WR
WKH GLIIHUHQFH EHWZHHQ WKH UDWHG KLJK YROWDJH DQG WKH UDWHG ORZ YROWDJH RI WKH WUDQVIRUPHU 7KH
WUDQVIRUPHUPDVVWRWDOGLPHQVLRQVPDQXIDFWXULQJFRVWDQGWKHORVVHVDUHQRWGLUHFWO\SURSRUWLRQDO
WR WKH HTXLYDOHQW VHSDUDWH WZR ZLQGLQJ SRZHU UDWLQJ EXW DOO WKHVH SURSHUWLHV VKRZ D GHFUHDVLQJ
WUHQGZLWKGHFUHDVLQJHTXLYDOHQWVHSDUDWHWZRZLQGLQJSRZHUUDWLQJ
3DJH7UDQVIRUPHU+DQGERRN
7KH VPDOOHU WKH GLIIHUHQFH LV EHWZHHQ WKH KLJK DQG WKH ORZ YROWDJH WKH VPDOOHU ZLOO EH 6H DQG
WKH ODUJHU WKH VDYLQJ LQ PDNLQJ WKH WUDQVIRUPHU DXWRFRQQHFWHG LQVWHDG RI D VHSDUDWH ZLQGLQJ
WUDQVIRUPHU
$OVR WKH VKRUW FLUFXLW LPSHGDQFH RI WKH WUDQVIRUPHU VKRZV D GHFUHDVLQJ WUHQG ZLWK GHFUHDVLQJ
GLIIHUHQFH EHWZHHQ WKH KLJK DQG WKH ORZ YROWDJH :KHQ WKLV YROWDJH GLIIHUHQFH LV YHU\ VPDOO WKH
VKRUW FLUFXLW LPSHGDQFH RI WKH WUDQVIRUPHU EHFRPHV DOVR VPDOO ZKLFK PDNHV WKH YROWDJH GURS LQ
WKHWUDQVIRUPHUORZ7KLVLVDQDGYDQWDJH
2QWKHRWKHUKDQGWKHORZVKRUWFLUFXLWLPSHGDQFHLQWKHWUDQVIRUPHUPD\PDNHWKHVKRUWFLUFXLW
FXUUHQW RI WKH V\VWHP VR KLJK WKDW WKH PHFKDQLFDO IRUFHV LQ WKH WUDQVIRUPHU H[FHHG LWV ZLWKVWDQG
DELOLW\ $ VROXWLRQ WR WKLV SUREOHP FRXOG EH WR LQVWDOO FXUUHQW OLPLWLQJ UHDFWRUV LQ VHULHV ZLWK WKH
DXWRFRQQHFWHGWUDQVIRUPHU
$QRWKHU GUDZEDFNRI DXWRWUDQVIRUPHUV LV WKDW GXH WR WKH PHWDOOLFFRQQHFWLRQ EHWZHHQ WKHFLUFXLWV
RQERWKVLGHVRIWKHWUDQVIRUPHUDGLVWXUEDQFHLQRQHRIWKHFLUFXLWVDOVRLQYROYHVWKHRWKHUFLUFXLW
,IIRUH[DPSOHDVLQJOHSKDVHHDUWKIDXOWRFFXUVLQRQHRIWKHFLUFXLWVYROWDJHULVHWRHDUWKRQWKH
KHDOWK\SKDVHVZLOORFFXULQERWKFLUFXLWV,IWKHHDUWKIDXOWRFFXUVLQWKHFLUFXLWKDYLQJWKHKLJKHVW
YROWDJHWKHYROWDJHULVHWRHDUWKRQWKHKHDOWK\SKDVHVRIWKHORZYROWDJHFLUFXLWPD\EHFRPHYHU\
KLJK GHSHQGDQW RQ WKH GLIIHUHQFH LQ V\VWHP YROWDJH RI WKH WZR FLUFXLWV 'LUHFW HDUWKLQJ RI WKH
QHXWUDOZLOOPLWLJDWHWKLVSKHQRPHQRQ
2QHRIWKHFRPPRQHVWDSSOLFDWLRQVRIWKHDXWRFRQQHFWLRQLVLQODUJHKLJKYROWDJHV\VWHPLQWHUWLH
WUDQVIRUPHUVZKHUHWKHV\VWHPQHXWUDOLVGLUHFWO\HDUWKHG7KHVHWUDQVIRUPHUVDUHRIWHQYHU\ODUJH
XQLWV ZLWK OLPE FRUHV $ WHUWLDU\ GFRQQHFWHG ZLQGLQJ LV QRUPDOO\ LQFOXGHG WR SURYLGH ORZ ]HUR
VHTXHQFH LPSHGDQFH DQG WULSOH KDUPRQLF PDJQHWLVLQJ FXUUHQWV WR DYRLG WULSOH KDUPRQLFV LQ WKH
PDJQHWLFIOX[DQGLQWKHLQGXFHGYROWDJHV,IWKHWHUWLDU\ZLQGLQJLVQRWLQWHQGHGIRUFRQQHFWLRQWR
DQ\ SRZHU V\VWHP RQH FRUQHU RI WKH ZLQGLQJ VKRXOG EH VROLGO\ HDUWKHG WR IL[ WKH SRWHQWLDO RI WKH
ZLQGLQJ
,W LV LPSRUWDQW WKDW VXFK DXWRWUDQVIRUPHUV DUH SURWHFWHG DJDLQVW WUDQVLHQW RYHUYROWDJHV RQ ERWK
VLGHVE\PHDQVRIVXUJHDUUHVWHUVEHWZHHQSKDVHVDQGHDUWK
:LWKLQFHUWDLQJHRJUDSKLFDUHDVV\VWHPYROWDJHVRQVHYHUDOGLIIHUHQWYROWDJHOHYHOVPD\H[LVWRIWHQ
PDLQO\RIKLVWRULFDOUHDVRQVDQGWKHUHLVRIWHQDQHHGWRFRQQHFWWKLVV\VWHPVWRJHWKHUE\PHDQV
RI WUDQVIRUPHUV 'XH WR WKH ODUJH GHSHQGHQFH RQ HOHFWULF SRZHU LQ WKH PRGHUQ VRFLHW\ VSDUH
WUDQVIRUPHUVIRUWKHVHV\VWHPFRQQHFWLRQSRLQWVDUHQHHGHG
,QRUGHUWRDYRLGDODUJHQXPEHURIVSDUHWUDQVIRUPHUVHDFKZLWKRQHVSHFLILFYROWDJHUDWLRVXLWDEOH
IRU XVH DW D SDUWLFXODU FRQQHFWLRQ SRLQW LQ WKH SRZHU V\VWHP D VSDUH WUDQVIRUPHU ZLWK VHYHUDO
GLIIHUHQWYROWDJHUDWLRVFDQEHPDGH6XFKDWUDQVIRUPHUZLOOWKHQEHDSSOLFDEOHDWVHYHUDOGLIIHUHQW
FRQQHFWLRQSRLQWV
$QH[DPSOHRIFRQQHFWLRQGLDJUDPIRUVXFKDWUDQVIRUPHULVVKRZQLQ)LJXUH7KHWUDQVIRUPHU
LV<1DXWRFRQQHFWHGZLWKDQRQORDGWDSFKDQJHULQWKHQHXWUDO7KHORZYROWDJHWHUPLQDOFDQEH
FRQQHFWHGWRRQHRIVHYHUDOWDSSLQJVLQRIIFLUFXLWFRQGLWLRQ,QWKLVZD\WKHIROORZLQJYROWDJHUDWLRV
DUHDFKLHYHGN9WRN9N9WRN9N9WRN9N9WRN9DQGN9WR
N9%\PHDQVRIWKHRQORDGWDSFKDQJHUWKHWXUQUDWLRFDQEHDGMXVWHGVRPHSHUFHQWVXSRU
GRZQ YDU\LQJ VRPHZKDW ZLWK WKH SDUWLFXODU V\VWHP YROWDJHV WKH WUDQVIRUPHU LV XVHG IRU 7KH
PD[LPXPSRZHUUDWLQJLV09$DWYROWDJHUDWLRN9$WRWKHUYROWDJHUDWLRVWKHSRZHU
UDWLQJLVLQWKHUDQJHWR09$GHSHQGHQWRQWKHYROWDJHUDWLRXVHG
7KH WUDQVIRUPHU KDV DOVR D GHOWDFRQQHFWHG WHUWLDU\ ZLQGLQJ ZKLFK OLPLWV WKH ]HUR VHTXHQFH
LPSHGDQFH RI WKH WUDQVIRUPHU WR D UHDVRQDEO\ ORZ YDOXH 7KH YROWDJH DQG SRZHU UDWLQJ RI WKH
WHUWLDU\ZLQGLQJLVGHSHQGHQWRQWKHYROWDJHDSSOLHGDWWKHKLJKYROWDJHWHUPLQDORUN9
7UDQVIRUPHU+DQGERRN3DJH
)LJXUH
)LJXUHVKRZVDSLFWXUHRIWKHWUDQVIRUPHUZKLFKLVPDGHDVDVKHOOW\SH
09$DXWRFRQQHFWHGV\VWHPLQWHUWLHWUDQVIRUPHU
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
3KDVHVKLIWLQJWUDQVIRUPHUV
$ SKDVHVKLIWLQJ WUDQVIRUPHU LV D VSHFLDO W\SH RI
V\VWHP LQWHUWLH WUDQVIRUPHUV ,W SURYLGHV WKH
SRVVLELOLW\WRLQVHUWDYROWDJHZLWKDQDUELWUDU\SKDVH
DQJHOLQWKHSRZHUV\VWHP7KLVLVXVHGIRUWZRPDLQ
SXUSRVHV
•
7RFRQWUROWKHSRZHUIORZEHWZHHQWZRODUJH
LQGHSHQGHQWSRZHUV\VWHPV
•
7REDODQFHWKHORDGLQJZKHQSRZHUV\VWHPV
DUH FRQQHFWHG WRJHWKHU LQ PRUH WKDQ RQH
SRLQWVRWKDWORRSVH[LVWDQGWKHLPSHGDQFHV
LQ SDUDOOHO SDWKV UHVXOWV LQ XQGHVLUHG
GLVWULEXWLRQRISRZHUIORZLQWKHSDWKV
:HFDQLOOXVWUDWHWKLVE\PHDQVRIH[DPSOHV
ǻ8
*
=
*
,
8
$
%
)LJXUH
$ DQG % LQ )LJXUH DUH WZR VWURQJ SRZHU V\VWHPV FRQQHFWHG E\ D OLQH ZLWK LPSHGDQFH = 7R
WUDQVPLWDFWLYHSRZHUIURPV\VWHP$WRV\VWHP%WKHYROWDJHWRWKHOHIWRI=8PXVWEHOHDGLQJLQ
UHODWLRQWRWKHYROWDJHWRWKHULJKWRI=7RPDNHWKHSULQFLSOHLOOXVWUDWLRQVLPSOHWKHUHDOSDUWRI=LV
QHJOHFWHG DQG WKH SRZHU IDFWRU DW % LV DVVXPHG WR EH 7KH WUDQVIRUPHU LV D SKDVHVKLIWLQJ
WUDQVIRUPHULQVHUWLQJDYROWDJHǻ8LQVHULHVZLWKWKHLPSHGDQFH=7KHWUDQVIRUPHULVFRQVLGHUHG
WREHLGHDOWKDWLVWKHWUDQVIRUPHULPSHGDQFHLVQHJOHFWHG
7KHYROWDJHVDW$DQG%DUHDSSUR[LPDWHO\HTXDO8$§8%ǻ8LVDGMXVWHGVRWKDW
ǻ8±,‡= 7KHIROORZLQJYHFWRUGLDJUDPDSSOLHV
,‡=
8
8%
)LJXUH
,QDQRWKHUH[DPSOHWKHUHDUHWZRSRZHUV\VWHPVWKDWDUHOLQNHGWRJHWKHULQWZRSRLQWV7KHSRZHU
IORZ JRHV WKHQ LQ WZR EUDQFKHV ZLWK LPSHGDQFHV =$ DQG =% 7KH YDOXH RI WKH WZR LPSHGDQFHV
GHWHUPLQHV WKH GLVWULEXWLRQ RI SRZHU IORZ WKURXJK WKH WZR EUDQFKHV 7KLV GLVWULEXWLRQ PD\ QRW
FRPSO\ZLWKWKHGHVLUHGGLVWULEXWLRQ
7UDQVIRUPHU+DQGERRN3DJH
)LJXUH
%\PHDQVRIDSKDVHVKLIWLQJWUDQVIRUPHUDYROWDJHǻ8LVLQVHUWHGLQV\VWHP%ZKLFKLQFUHDVHVWKH
FXUUHQW ,B DQG GHFUHDVHV ,A DW D JLYHQ WRWDO ORDG FXUUHQW , :H ZLOO LOOXVWUDWH WKLV E\ PHDQV RI D
QXPHULFDOH[DPSOH
$VVXPHWKHGLIIHUHQFHEHWZHHQ=$DQG=%LVTXLWHODUJHVD\=$ ȍDQG=% ȍWKDWLVWKH
UHODWLRQ)RUWKHVDNHRIVLPSOLFLW\LQWKHGHPRQVWUDWLRQRIWKHSULQFLSOHHIIHFWRIWKHXVHRID
SKDVHVKLIWLQJWUDQVIRUPHUWKHUHDOSDUWRI=$DQG=% LVQHJOHFWHG$VVXPHIXUWKHUWKDWWKHV\VWHP
YROWDJHLVN9DQGWKDWWKHWRWDOSRZHUWKDWLVWUDQVPLWWHGIURPWKHOHIWWR WKHULJKWVLGHLQWKH
ILJXUH LV 09$ 7KH WRWDO FXUUHQW , LV WKHQ $ /HW XV ILUVW DVVXPH WKDW ǻ8 LQ RWKHU
ZRUGVWKHUHLVQRSKDVHVKLIWLQJWUDQVIRUPHULQV\VWHP%6LPSOHFDOFXODWLRQVVKRZWKDW,$ $
DQG,% $ZKLFKLVDQGRIWKHWRWDOORDGFXUUHQWUHVSHFWLYHO\
/HWWKHGHVLUHGORDGFXUUHQWGLVWULEXWLRQEHIRUH[DPSOHRIWKHWRWDOFXUUHQWLQHDFKRIWKHWZR
V\VWHPV$DQG%$FDXVHVDYROWDJHGURSRI9DFURVV=$DQG9DFURVV=%$Q
DGGLWLRQDO YROWDJH ǻ8 LQVHUWHG LQ V\VWHP % WR LQFUHDVH WKH FXUUHQW WKURXJK =% IURP WR $
PXVWWKHQFRPSHQVDWHWKHGLIIHUHQFHRI9EHWZHHQWKHWZRYROWDJHGURSV$SKDVHVKLIWLQJ
WUDQVIRUPHUFDQSURYLGHWKLVDGGLWLRQDOYROWDJH
$VVXPH WKDW WKH SRZHU IDFWRU RI WKH ORDG FXUUHQW , LV 7KH IROORZLQJ YHFWRU UHODWLRQVKLSV H[LVW
EHIRUHDQGDIWHUWKHLQVHUWLRQRIǻ8VHH)LJXUH
,$Â=$
8
8 8
,%Â=%
8
,$Â=$
8
8
,%Â=%
ǻ8
87
8
8
į
ǻ8
ǻ8 )LJXUH
7RDFKLHYHǻ8WKHSKDVHVKLIWLQJWUDQVIRUPHUPXVWDWLWVVHFRQGDU\WHUPLQDOSURYLGHDYROWDJH87
ZKLFK LV KLJKHU WKDQ WKH SULPDU\ YROWDJH 8 DQG LQ DGGLWLRQ GLVSODFHG DQ DQJOH įҏ LQ WKH SRVLWLYH
GLUHFWLRQ LQ UHODWLRQ WR 8 WKH SRVLWLYH GLUHFWLRQ GHILQHG FRXQWHUFORFNZLVH į FDQ EH FDOFXODWHG
IURPWKHYHFWRUGLDJUDPWRWKHULJKWDQGLVLQWKLVFDVHƒ
,IWKHWRWDOORDGFXUUHQWLVRQO\WKHKDOIRI$DQGWKHGLVWULEXWLRQEHWZHHQV\VWHP$DQG
% VWLOO LV GHVLUHG WKH YROWDJH GURSV DFURVV =$ DQG =% EHFRPHV RQO\ WKH KDOI RI WKRVH LQ WKH ODVW
H[DPSOH7KHQHHGIRUDGGLWLRQDOYROWDJHWRGULYHWKHGHVLUHGFXUUHQWWKURXJK=%ZLOOWKHQDOVREH
RQO\WKHKDOIWKDWLVÂ9 97KHGLVSODFHPHQWDQJOHįEHFRPHVQRZƒ
,I=%KDGEHHQVPDOOHUWKDQ=$WKHGLUHFWLRQRIǻ8PXVWWKHRSSRVLWHWRSUHYHQWWKDWWKHFXUUHQW,%
ZRXOGEHWRRKLJKLQUHODWLRQWRWKHGHVLUHGORDGGLVWULEXWLRQ
$OVRWKHSRZHUIDFWRU FRVij ҏRIWKHORDGFXUUHQW,LQIOXHQFHVWKHUHTXLUHGGLVSODFHPHQWDQJOH
3DJH7UDQVIRUPHU+DQGERRN
,QWKHSUHFHGLQJWKHLPSHGDQFHRIWKHSKDVHVKLIWLQJWUDQVIRUPHUKDVEHHQLJQRUHG,QUHDOLW\WKH
WUDQVIRUPHULPSHGDQFHZLOODGGWRWKHV\VWHPLPSHGDQFHDQGPD\FDXVHQHHGIRUDODUJHUDQJOH
GLVSODFHPHQW
,WVKRXOGEHQRWHGWKDWWKHSKDVHVKLIWLQJWUDQVIRUPHUKDVDQLPSDFWRQWKHH[FKDQJHRIERWKDFWLYH
DQGUHDFWLYHSRZHUEHWZHHQV\VWHPVRUEUDQFKHVRIV\VWHPV
7RIXOILOWKHXVHU¶VLQWHQWLRQVWKHSKDVHVKLIWLQJWUDQVIRUPHUPXVWEHDEOHWRYDU\WKHGLVSODFHPHQW
DQJOHLQDSSURSULDWHVWHSVZLWKLQDFHUWDLQUDQJH
7KH EDVLF ZD\ WR SURYLGH YDULDEOH DQJOH GLVSODFHPHQW SKDVHVKLIWLQJ EHWZHHQ WKH SULPDU\ DQG
VHFRQGDU\ YROWDJH LQ D WUDQVIRUPHU LV WR FRQQHFW WKH ZLQGLQJ RI RQH OLPE LQ D WKUHHSKDVH
WUDQVIRUPHULQVHULHVZLWKDZLQGLQJVLWXDWHGRQRQHRIWKHRWKHUOLPEV
8
3KDVH,,
8
8
3KDVH,
:LQGLQJFRQQHFWLRQ
GLDJUDP
δ
9HFWRUGLDJUDP
)LJXUH
7KH DQJOH GLVSODFHPHQW FDQ EH REWDLQHG LQ SULQFLSOH DFKLHYHG E\ PHDQV RI D VLQJOH FRUH WKUHH
SKDVH WUDQVIRUPHU +RZHYHU WKH DSSOLFDWLRQ RI SKDVHVKLIWLQJ WUDQVIRUPHUV LV PDLQO\ LQ V\VWHPV
ZLWK YHU\ KLJK YROWDJH DQG WKH WKURXJKSXW SRZHU UDWLQJ LV TXLWH ODUJH ,Q RUGHU WR ILW YROWDJH DQG
FXUUHQW WR DYDLODEOH WDSFKDQJHUV LW PD\ EH QHFHVVDU\ WR XVH WZR VHSDUDWH WUDQVIRUPHUV RQH
PDJQHWLVLQJ WUDQVIRUPHU DQG RQH ERRVWHU WUDQVIRUPHU ,Q WKH FLUFXLW ZKHUH WKH WDSFKDQJHU LV
ORFDWHGWKHYROWDJHFDQEHFKRVHQLQGHSHQGHQWO\RIWKHVHUYLFHYROWDJHRIWKHSRZHUV\VWHP
)LJXUH
)LJXUHVKRZVDSULQFLSDOGLDJUDPRIKRZWKHPDJQHWLVLQJWUDQVIRUPHUDQGWKHERRVWHU
WUDQVIRUPHUDUHFRQQHFWHGWRJHWKHU7KHWDSFKDQJHULVW\SLFDOO\ORFDWHGDWWKHVHFRQGDU\VLGHRI
WKHPDJQHWLVLQJWUDQVIRUPHU
$PRUHGHWDLOHGWKUHHSKDVHFRQQHFWLRQGLDJUDPLVVKRZQLQ)LJXUH$YROWDJHZKLFKFDQEH
YDULHGLQVL]HIURPWKHVHFRQGDU\VLGHRIWKHPDJQHWLVLQJWUDQVIRUPHULVDSSOLHGWRDGLIIHUHQW
SKDVHRIWKHSULPDU\VLGHRIWKHERRVWHUWUDQVIRUPHU7KHYROWDJHWUDQVIHUUHGWRWKHVHFRQGDU\
KLJK YROWDJHVLGHRIWKHERRVWHUWUDQVIRUPHUZLOOWKHQEHGLVSODFHGDQDQJOH2πLQUHODWLRQWRWKH
VRXUFHVLGHYROWDJH%\YDU\LQJWKHVL]HRIWKHYROWDJHLQVHUWHGE\WKHERRVWHUWUDQVIRUPHUD
YDULDEOHDQJOHδ LVDFKLHYHGEHWZHHQWKHYROWDJHRQWKHVRXUFHVLGHDQGWKHWRWDOYROWDJHRQWKH
ORDGVLGHRIWKHSKDVHVKLIWLQJWUDQVIRUPHUZKLFKLVWKHYHFWRULDOVXPRIWKHYROWDJHRQWKHVRXUFH
VLGHDQGWKH2πGLVSODFHGYROWDJHSURYLGHGE\WKHERRVWHUWUDQVIRUPHU
7UDQVIRUPHU+DQGERRN3DJH
)LJXUH
7KH DUUDQJHPHQW ZLWK PDJQHWLVLQJ DQG ERRVWHU WUDQVIRUPHU FDQ DOVR EH PDGH LQ PDQ\ RWKHU
GLIIHUHQWZD\V
7KHSKDVHGLVSODFHPHQWUHTXLUHVDFHUWDLQDSSDUHQWSRZHUZKLFK)LJXUHLOOXVWUDWHV
δ
6VLQ δ
6
6į
δ
)LJXUH
)URPWKHGLDJUDPLWDSSHDUVWKDW6δ = 2Â6ÂVLQ Âδ ZKHUH6δ LVWKH SKDVHVKLIWLQJSRZHUDQG6WKH
DSSDUHQWWKURXJKSXWSRZHU7KHPDJQHWLVLQJWUDQVIRUPHUDVZHOODVWKHERRVWHUWUDQVIRUPHUPXVWEH
UDWHGIRUWKHPD[LPXPSKDVHVKLIWLQJSRZHU
,V IRU H[DPSOH WKH PD[LPXP DQJOH δ ƒ DQG WKH UDWHG DSSDUHQW WKURXJKSXW SRZHU UDWLQJ 09$ WKH UDWLQJ RI WKH PDJQHWLVLQJ DQG WKH ERRVWHU WUDQVIRUPHU ZLOO EH 09$ HDFK
ÂÂVLQ 7KHVHUYLFHYROWDJHLVLQPRVWFDVHVDOVRKLJK
,Q RWKHU ZRUGV WKH XQLWV DUH TXLWH ODUJH %HFDXVH RI WUDQVSRUW OLPLWDWLRQV WKH WZR WUDQVIRUPHUV DUH
XVXDOO\SODFHGLQVHSDUDWHWDQNV
5HJDUGLQJ GLIIHUHQWLDO UHOD\ SURWHFWLRQ RI SKDVHVKLIWLQJ WUDQVIRUPHUV LW VKRXOG EH QRWHG WKDW D
FRQVLGHUDEOHSKDVHDQJOHGLIIHUHQFHEHWZHHQWKHVRXUFHDQGWKHORDGFXUUHQWFDXVHVDPXFKKLJKHU
QRUPDO FXUUHQW GLIIHUHQFH WKDQ LQ RUGLQDU\ SRZHU WUDQVIRUPHUV VR D VSHFLDO GLIIHUHQWLDO VFKHPH LV
UHTXLUHG
$VKRUWFLUFXLWLQWKHFLUFXLWEHWZHHQWKHPDJQHWLVLQJDQGERRVWHUWUDQVIRUPHUZRXOGEHYHU\KDUPIXO
WR WKH WUDQVIRUPHUV DQG LW LV UHFRPPHQGHG WKDW EXV GXFWV DUH SURYLGHG DURXQG WKH FRQGXFWRUV
FRQQHFWLQJWKHVHFRQGDU\VLGHRIWKHPDJQHWLVLQJWUDQVIRUPHUDQGWRWKHSULPDU\VLGHRIWKHERRVWHU
WUDQVIRUPHU
,QSKDVHVKLIWLQJWUDQVIRUPHUVZLWKPDJQHWLVLQJDQGERRVWHUWUDQVIRUPHU WZRFRUHGHVLJQ WKHUHLVD
GLHOHFWULFGHVLJQTXHVWLRQWKDWQHHGVVSHFLDODWWHQWLRQ,IDWUDQVLHQWYROWDJHRFFXUVDWHLWKHUVLGHRI
WKHVHULHVZLQGLQJRIWKHERRVWHUWUDQVIRUPHUWKHFRQQHFWHGZLQGLQJRIWKHPDJQHWLVLQJWUDQVIRUPHU
ZLOO DOVR EH H[SRVHG WR D KLJK YROWDJH DQG KLJK IUHTXHQF\ RVFLOODWLRQV PD\ DULVH RQ WKH OHDGV
FRQQHFWLQJ WKH WZR WUDQVIRUPHUV 0RUH FRPSUHKHQVLYH PDWKHPDWLFDO PRGHOV PD\ EH UHTXLUHG WR
FDOFXODWHWKHWUDQVLHQWYROWDJHGLVWULEXWLRQLQWKLVFRQILJXUDWLRQWKDQLQDVLQJOHFRUHWUDQVIRUPHU
$ GLDORJXH EHWZHHQ WKH SXUFKDVHU DQG WKH VXSSOLHU UHJDUGLQJ WKH RYHUYROWDJH SURWHFWLRQ LV
UHFRPPHQGHG
3DJH7UDQVIRUPHU+DQGERRN
,QIRUPDWLRQWREHSURYLGHGE\WKHSXUFKDVHUDWHQTXLU\
,QDGGLWLRQWRWKHLQIRUPDWLRQQHHGHGUHJDUGLQJRUGLQDU\SRZHUWUDQVIRUPHUVLVILUVWRIDOOWKHGHVLUHG
WRWDO DQJOH GLVSODFHPHQW UDQJH 7KH GLVSODFHPHQW UDQJH VKRXOG SULPDULO\ EH VSHFLILHG LQ QR ORDG
FRQGLWLRQ +RZHYHU WKH SXUFKDVHU PXVW DVFHUWDLQ WKDW WKH UDQJH LV VXIILFLHQWO\ ODUJH DOVR XQGHU
UHOHYDQW ORDG FRQGLWLRQV EHFDXVH WKH LPSHGDQFH RI WKH WUDQVIRUPHU ZKLFK PD\ YDU\ FRQVLGHUDEO\
RYHUWKHUHJXODWLQJUDQJHLQSKDVHVKLIWLQJWUDQVIRUPHUVPDNHVWKHGLVSODFHPHQWUDQJHVPDOOHUWKDQ
LQ QR ORDG FRQGLWLRQ 6R WKH SXUFKDVHU VKRXOG WKHQ VSHFLI\ WKH GHVLUHG GLVSODFHPHQW UDQJH XQGHU
VSHFLILFORDGFRQGLWLRQVRUDOWHUQDWLYHO\VWDWHDFFHSWDEOHUDQJHVIRUWKHWUDQVIRUPHULPSHGDQFH
)XUWKHUWKHSXUFKDVHUVKRXOGSURYLGHLQIRUPDWLRQWRWKHVXSSOLHUUHJDUGLQJ
•
•
•
•
•
•
WKHSRZHUV\VWHPZKHUHWKHWUDQVIRUPHULVJRLQJWRRSHUDWH
WKHSXUSRVHRIWKHWUDQVIRUPHU
WKHVZLWFKLQJDUUDQJHPHQWVWREHXVHGWRWDNHWKHWUDQVIRUPHULQDQGRXWRIRSHUDWLRQ
ZKHWKHUDE\SDVVVZLWFKZLOOEHLQVWDOOHG
ZKHWKHUWKHWUDQVIRUPHUZLOORSHUDWHLQVHULHVZLWKVHULHVFDSDFLWRUEDQNV
ZKHWKHUWKHWUDQVIRUPHUZLOORSHUDWHZLWKWZRRUPRUHRWKHUSKDVHVKLIWLQJWUDQVIRUPHUVLQ
SDUDOOHORULQVHULHV
7KHDERYHOLVWRILWHPVVKRXOGQRWEHFRQVLGHUHGDVH[KDXVWLYH
5HIHUHQFHLVDOVRPDGHWR,(((6WG&70,(((*XLGHIRUWKH$SSOLFDWLRQ6SHFLILFDWLRQ
DQG 7HVWLQJ RI 3KDVH6KLIWLQJ 7UDQVIRUPHUV $ UHYLVLRQ RI WKLV VWDQGDUG PLJKW WDNH SODFH LQ D FR
RSHUDWLRQEHWZHHQ,(&DQG,(((ZLWKWKHSXUSRVHWRLVVXHDQHZHGLWLRQRIWKHVWDQGDUGZKLFKLV
DSSURYHGE\ERWKRUJDQLVDWLRQVDQGZLWKDQ,(&,(((GXDOORJR
+9'&WUDQVIRUPHUV
+9'& PHDQV +LJK 9ROWDJH 'LUHFW &XUUHQW 7KH
ILUVW +9'& WUDQVPLVVLRQ OLQH ZDV HVWDEOLVKHG
LQ 6ZHGHQ LQ 6LQFH WKHQ PDQ\ +9'&
WUDQVPLVVLRQ V\VWHPV KDYH EHHQ LQVWDOOHG DURXQG
WKH ZRUOG $%% KDV GHOLYHUHG PRUH WKDQ KDOI
RI WKH FRQYHUWRU VWDWLRQV ZKLFK DUH NH\
FRPSRQHQWV
+9'& WUDQVPLVVLRQ LV VRPHWLPHV DQ HFRQRPLFDO
DQG WHFKQLFDOO\ DGYDQWDJHRXV DOWHUQDWLYH WR DF
WUDQVPLVVLRQ 7KDW DSSOLHV SDUWLFXODUO\ ZKHQ ODUJH
EXONVRISRZHUDUHWUDQVPLWWHGRYHUORQJGLVWDQFHV
E\ RYHUKHDG OLQH RU XQGHU WKH VHD E\ PHDQV RI
VXEPDULQHFDEOH
7KH EDVLF GLDJUDP IRU D +9'& WUDQVPLVVLRQ LV
VKRZQLQ)LJXUH
3
a
a
)LJXUH
$Q +9'& WUDQVPLVVLRQ KDV D FRQYHUWRU VWDWLRQ DW HDFK HQG RI WKH OLQH RU FDEOH 7KH PDLQ
FRPSRQHQWVRIWKHFRQYHUWRUVWDWLRQVDUHWKHWUDQVIRUPHUVDQGWKHYDOYHV7KHDOWHUQDWLQJYROWDJH
RI D VXSSO\ V\VWHP LV WUDQVIRUPHG WR D YROWDJH OHYHO VXLWLQJ WKH FRQYHUWRU UHFWLILHU WR WUDQVPLW WKH
LQWHQGHGSRZHU,WLVWKHQUHFWLILHGLQDFRQYHUWRUDUUDQJHPHQWZLWKFRQWUROOHGYDOYHVFRQVLVWLQJRI
PDQ\WK\ULVWRUVVHPLFRQGXFWRUV$WWKHUHFHLYLQJHQGRIWKHOLQHRUFDEOHWKHUHLVDQRWKHUFRQYHUWHU
VWDWLRQ7KLVLVRSHUDWHGDVDQLQYHUWHUWKDWFRQYHUWVWKHGLUHFWFXUUHQWEDFNWRDOWHUQDWLQJFXUUHQW
ZKLFKWKHQLVWUDQVIRUPHGWRWKHYROWDJHRIWKHQHWZRUNEHLQJVXSSOLHG7KHGLUHFWLRQRISRZHUIORZ
FDQHDVLO\EHFKDQJHGZLWKRXWLQWHUUXSWLRQLQWKHRSHUDWLRQ
7UDQVIRUPHU+DQGERRN3DJH
&RPSDUHG WR DF WUDQVPLVVLRQ OLQHV GF OLQHV FDQ RSHUDWH ZLWK QDUURZHU FRUULGRUV /DUJH DUHDV RI
IDUPODQG RU IRUHVWV PD\ WKHQ EH VDYHG )XUWKHU VWDELOLW\ DVSHFWV GR QRW OLPLW WKH SRZHU
WUDQVPLVVLRQFDSDELOLW\RIWKHOLQH
)RU D JLYHQ TXDQWLW\ RI FRQGXFWRU PDWHULDO LQ WKH OLQH WKH ORVVHV LQ D GF OLQH DUH ORZHU WKDQ WKH
ORVVHVLQDQDFOLQH
%\PHDQVRI+9'&QRQV\QFKURQRXVDFV\VWHPVFDQEHOLQNHGWRJHWKHU7KHWUDQVIRUPHUVSURYLGH
WKDWWKHUHDUHQRJDOYDQLFFRQWDFWVEHWZHHQWKHGFHTXLSPHQWDQGWKHDFV\VWHPV7KLVSUHYHQWV
WKHGLUHFWFXUUHQWIURPHQWHULQJWKHDFV\VWHPV
7KH FXUUHQWV IORZLQJ WKURXJK WKH ZLQGLQJV RI FRQYHUWRU WUDQVIRUPHUV FRQWDLQ FHUWDLQ KDUPRQLFV
ZKRVHPDJQLWXGHVGHSHQGRIWKHSDUDPHWHUVRIWKHconvertorVWDWLRQ7KHPHWKRGWRGHWHUPLQHWKH
WUDQVIRUPHU ORDG ORVVHV LV EDVHG XSRQ WZR ORDG ORVV PHDVXUHPHQWV FHUWDLQ DVVXPSWLRQV DQG D
VSHFLILFFDOFXODWLRQVFKHPH6HHVHFWLRQDQGRI,(&
7KHWUDQVIRUPHUVXSSOLHUVKDOOFDOFXODWHWKHYDOXHRIWKHDFWXDOVHUYLFHORDGORVVEDVHGRQDJLYHQ
KDUPRQLFVSHFWUXPIRUWKHORDGFXUUHQW7KHSXUFKDVHUVKDOOSURYLGHWKLVVSHFWUXP
)LJXUHVKRZVDQH[DPSOHRIDKDUPRQLFFXUUHQWVSHFWUXPRIDSXOVHFRQQHFWLRQ
([DPSOHRQKDUPRQLFFXUUHQWVSHFWUXPLQSXRIWKHIXQGDPHQWDOIUHTXHQF\FXUUHQWLQDSXOVH
FRQQHFWLRQ
)LJXUH
)LJXUHVKRZVWKDWWKHWKDQGWKKDUPRQLFVDUHWKHODUJHVW+LJKHUKDUPRQLFVGHFUHDVHZLWK
LQFUHDVLQJKDUPRQLFQXPEHU
SXOVHFRQQHFWLRQPHDQVWKDWWKHUHDUHSXOVHVLQWKHGLUHFWYROWDJHSHUSHULRGRIWKHIXQGDPHQWDO
DFYROWDJHDVVKRZQLQ)LJXUHEHORZ
3DJH7UDQVIRUPHU+DQGERRN
)LJXUH
)LJXUH VKRZV KRZ WKH GLUHFW YROWDJH YDULHV GXULQJ RQH SHULRG RI WKH DF V\VWHP YROWDJH 7KH
GLUHFW YROWDJH FRQVLVWV RI SXOVHV GXULQJ RQH SHULRG ,W LV QRW DQ LGHDO VWUDLJKW OLQH WKH SXOVHV
DSSHDUDVDULSSOHRQWKHGLUHFWYROWDJH
7KH ULSSOH FDQ EH UHGXFHG E\ FRPELQLQJ WZR SXOVH YDOYH EULGJHV WR D SXOVH FRQQHFWLRQ DV
VKRZQLQ)LJXUH7KHQWKHWKDQGWKHWKKDUPRQLFVGLVDSSHDUIURPWKHFXUUHQWVXSSOLHGIURP
WKHDFQHWZRUN+RZHYHUWKHWKDQGWKKDUPRQLFVVWLOOFLUFXODWHEHWZHHQWKHWZRWUDQVIRUPHUVRI
WKH SXOVH JURXS DQG PD\ JLYH FRQVLGHUDEOH FRQWULEXWLRQV WR WKH WRWDO ORDG ORVVHV LQ WKH
WUDQVIRUPHUV7KHWKKDUPRQLFPD\DPRXQWWRQHDUO\RIWKHIXQGDPHQWDOIUHTXHQF\FXUUHQW
,Q WKH VWDWLRQ ZKHUH WKH GF FXUUHQW LV FRQYHUWHG WR DQ DF FXUUHQW WKH FXUUHQW FDQ LQ SULQFLSOH EH
FRQYHUWHGWRDQ\IUHTXHQF\7KHIUHTXHQF\FDQEHJLYHQE\WKHDFV\VWHPLWVHOIRUE\DVHSDUDWH
V\QFKURQRXVPDFKLQH6RDQ+9'&OLQNLVVXLWDEOHIRUFRQQHFWLQJWRJHWKHUDFV\VWHPVZLWKGLIIHUHQW
IUHTXHQFLHVIRUH[DPSOHDQG+]
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
7KH YROWDJHV DW WKH YDOYH VLGHV RI WKH WZR WUDQVIRUPHUV LQ )LJXUH DUH GLVSODFHG HOHFWULFDO
GHJUHHV LQ UHODWLRQ WR HDFK RWKHU E\ FRQQHFWLQJ RQH RI WKH ZLQGLQJV LQ VWDU DQG WKH RWKHU RQH LQ
GHOWD 1RWLFH WKDW WKH SKDVHWRSKDVH YROWDJHV RI WKH WZR WUDQVIRUPHUV DUH WKH VDPH RQ WKH YDOYH
VLGHDVZHOODVRQWKHDFQHWZRUNVLGH
)LJXUH
)LJXUHLOOXVWUDWHVWKHUHGXFHGULSSOHRQWKHGLUHFWYROWDJHRIDSXOVHFRQQHFWLRQFRPSDUHGWR
WKHSXOVHFRQQHFWLRQLQ)LJXUH
7KHUHODWLRQEHWZHHQWKHLGHDOGFYROWDJHDFURVVWKHWZREULGJHVLQ)LJXUHDQGWKHSKDVHWR
SKDVHYROWDJHRQWKHYDOYHVLGHRIWKHWUDQVIRUPHUVFDQLQQRORDGFRQGLWLRQEHZULWWHQDV
8' =
⋅ 8DF ⋅ FRV α π
,QWKLVHTXDWLRQ
8DLVWKHGFYROWDJHDFURVVWKHWZRVHULHVFRQQHFWHGYDOYHEULGJHVLQ)LJXUH
8acLVWKHSKDVHWRSKDVHYROWDJHRQWKHYDOYHVLGHRIWKHWUDQVIRUPHU
ĮLVWKHYDOYHGHOD\DQJOH FRQWURODQJOH )RUĮ WKHYROWDJH8'EHFRPHV8DF,QORDGHGFRQGLWLRQYROWDJHGURSLQWKHWUDQVIRUPHUDQG
WKHYDOYHVUHGXFHVWKHFRQYHUVLRQIDFWRUIURPWRWKHUDQJH±QRUPDOO\
7KH ORVVHV LQ D FRQYHUWHU EULGJH DUH DURXQG KDOI D SHUFHQW RI WKH WKURXJKSXW SRZHU ZKLOH WKH
LQGXFWLYHGURSLV±
7KHYDOYHVLGHZLQGLQJIRUWKHORZHUEULGJH WKHEULGJHFORVHVWWRHDUWK LQ)LJXUHLVH[SRVHGWR
DGFSRWHQWLDORIDURXQGRQHIRXUWKRIWKHGFOLQHSRWHQWLDODQGWKHYDOYHVLGHZLQGLQJIRUWKHXSSHU
EULGJHRIWKUHHIRXUWKRIWKHVDPHSRWHQWLDO
7KHYROWDJHGLVWULEXWLRQEHWZHHQVROLGDQGIOXLGWUDQVIRUPHULQVXODWLRQLVFDSDFLWLYHZKHQH[SRVHGWR
DF7KLVPHDQVWKDWWKHYROWDJHGLVWULEXWLRQDQGGLHOHFWULFVWUHVVHVDUHGHWHUPLQHGE\WKHSHUPLWWLYLW\
RIWKHPDWHULDOV
,Q FRQWUDVW ZKHQ H[SRVHG WR GFSRWHQWLDO WKH YROWDJH GLVWULEXWLRQ DQG GLHOHFWULF VWUHVVHV DUH
GHWHUPLQHG E\ WKH UHVLVWLYLW\ RI WKH PDWHULDOV 7KH LQVXODWLRQ PDWHULDOV DUH EDVLFDOO\ WKH VDPH
PLQHUDO RLO DQG FHOOXORVH SURGXFWV %HFDXVH WKH UHVLVWLYLW\ RI WKH VROLG LQVXODWLRQ PDWHULDOV LV
FRQVLGHUDEO\ KLJKHU WKDQ WKH UHVLVWLYLW\ RI WKH WUDQVIRUPHU RLO DOPRVW DOO WKH GFYROWDJH OLHV DFURVV
WKH VROLG LQVXODWLRQ &RQVHTXHQWO\ +9'& WUDQVIRUPHUV FRQWDLQ D PXFK KLJKHU VKDUH RI VROLG
LQVXODWLRQWKDQLQDFWUDQVIRUPHUVDURXQGWKUHHWLPHVDVPXFK
3DJH7UDQVIRUPHU+DQGERRN
7UDQVPLVVLRQV\VWHPVZLWKGFYROWDJHVXSWR“N9DUHLQRSHUDWLRQ7RGHPRQVWUDWHWKHDELOLW\WR
ZLWKVWDQGGFYROWDJHWKHYDOYHZLQGLQJVRI+9'&WUDQVIRUPHUVDUHLQWKHGHOLYHU\WHVWVXEMHFWWR
•
•
GFVHSDUDWHVRXUFHYROWDJHZLWKVWDQGWHVW6HHVHFWLRQDQGRI,(&
SRODULW\UHYHUVDOWHVW6HHVHFWLRQDQGRI,(&
7RFRQWUROWKHVHUYLFHYROWDJH+9'&WUDQVIRUPHUVDUHHTXLSSHGZLWKDIDLUO\ODUJHWDSSLQJUDQJHRQ
WKH OLQH VLGH )XUWKHU WKHUH LV D QHHG IRU VWULFW FRQWURO RI WKH VKRUW FLUFXLW LPSHGDQFH RI WKH
WUDQVIRUPHUV7KHGHYLDWLRQLQLPSHGDQFHEHWZHHQLQGLYLGXDOSKDVHVPXVWEHNHSWVPDOO
,(&VSHFLILHVWKDWWKHLPSHGDQFHYDULDWLRQDWWKHSULQFLSDOWDSSLQJDQGWKHYDULDWLRQRIWKH
LPSHGDQFHRYHUWKHWDSSLQJUDQJHIRUWUDQVIRUPHUVRIGXSOLFDWHRUVLPLODUGHVLJQIRUWKHSXUSRVHRI
LGHQWLFDODSSOLFDWLRQLQVHUYLFHRULQWHUFKDQJHDELOLW\VKDOOQRWH[FHHG“RIWKHPHDQWHVWYDOXHV
7KHUHDVRQIRUWKLVUHTXLUHPHQWLVWRDJUHDWH[WHQWWKHQHHGIRUHIILFLHQWFDQFHOOLQJRIKDUPRQLFVLQ
DSXOVHEULGJHFRQQHFWLRQ/DUJHYDULDWLRQVEHWZHHQSKDVHVXQLWVDQGVWDUDQGGHOWDFRQQHFWHG
ZLQGLQJVZLOOLQFUHDVHWKHVL]HRIWKHILOWHUV
$OWHUQDWLYHO\WRWKHWUDQVIRUPHUVVKRZQLQ)LJXUHZLWKWZRSKDVHWUDQVIRUPHUVRQHZLWKGHOWD
DQG RQH ZLWK VWDU FRQQHFWHG ZLQGLQJ DW WKH YDOYH VLGH WKUHH VLQJOHSKDVH WUDQVIRUPHUV FRXOG EH
XVHG,QWKDWFDVHHDFKWUDQVIRUPHUKDVWZRYDOYHVLGHZLQGLQJVRQHIRUGFRQQHFWLRQDQGRQHIRU
\FRQQHFWLRQLQDEDQNZLWKWKHWZRRWKHUVLQJOHSKDVHWUDQVIRUPHUV
,IDVSDUHWUDQVIRUPHULVGHVLUHGWKHVLQJOHSKDVHWUDQVIRUPHUVROXWLRQKDVWKHDGYDQWDJHWKDWMXVW
RQHVLQJOHSKDVHWUDQVIRUPHUFDQFRYHUWKHQHHG7KHFKRLFHRIVROXWLRQSKDVHRUVLQJOHSKDVH
WUDQVIRUPHUVPD\DOVRGHSHQGRQUHVWULFWLRQVLQXQLWGLPHQVLRQVDQGZHLJKW
7KH PRGHUQ KLJK YROWDJH DQG KLJK FDSDFLW\ FRQYHUWHU LV D VRSKLVWLFDWHG SURGXFW UHTXLULQJ
H[SHULHQFHDQGKLJKVNLOOLQGHVLJQDQGVSHFLILFTXDOLW\FRQWUROLQSURGXFWLRQ
,QGXVWULDOWUDQVIRUPHUV
)XUQDFHWUDQVIRUPHUV
7UDQVIRUPHUVRIWKLVW\SHDUHXVHGLQWKHVWHHOPHOWLQJDQG
PHWDOOXUJLFDO LQGXVWU\ 7KH\ DUH FKDUDFWHULVHG E\ KLJK
VHFRQGDU\ FXUUHQW IRU VWHHO XS WR N$ DQG IRU IHUURDOOR\
XS WR N$ HOHFWURGH FXUUHQW DQG D ZLGH VHFRQGDU\
YROWDJHUDQJH7KHVHFRQGDU\YROWDJHLVQRUPDOO\UHJXODWHG
E\ DQ RQORDG WDS FKDQJHU 2/7& ORFDWHG LQ WKH KLJK
YROWDJH ZLQGLQJ RU LQ DQ LQWHUPHGLDWH FLUFXLW RI D WZRFRUH
GHVLJQ ERRVWHU UHJXODWLRQ ZLWKLQ WKH WUDQVIRUPHU WDQN
)XUQDFHWUDQVIRUPHUVKDYHVHFRQGDU\YROWDJHVXSWR
9 )XUQDFH WUDQVIRUPHUV FDQ URXJKO\ EH GLYLGHG LQWR WZR
JURXSV
•
$&)XUQDFHV
o
o
o
•
$UFIXUQDFHV
5HGXFWLRQIXUQDFHV
)XUQDFHVIRUVSHFLDOSXUSRVHV
'&)XUQDFHV
09$VWHHO($)7UDQVIRUPHU
,QWHUQDOFORVXUH
$UF IXUQDFH WUDQVIRUPHUV DUH XVHG IRU PHOWLQJ VFUDS PHWDO 8VXDOO\ LQ FRPELQDWLRQ ZLWK DQ DUF
IXUQDFH WKHUH LV D ODGOH IXUQDFH 7KH ODGOH IXUQDFH LV XVHG LQ WKH SURFHVV RI UHILQLQJ WKH PHWDO
PHOWHGE\WKHDUFIXUQDFH$UFIXUQDFHWUDQVIRUPHUVDUHQRUPDOO\GHVLJQHGDVWKUHHSKDVHXQLWV
5HGXFWLRQIXUQDFHWUDQVIRUPHUVDUHPDLQO\XVHGLQWKHPHWDOOXUJLFDOLQGXVWU\3URGXFWLRQRIIHUUR
DOOR\V LV DQ LPSRUWDQW DSSOLFDWLRQ 7KH PDMRU DOOR\V DUH IHUURVLOLFRQ VLOLFRQ PHWDO DQG IHUUR
PDQJDQHVH2WKHUVLJQLILFDQWDOOR\VDUHIHUURQLFNHODQGIHUURFKURPH5HGXFWLRQIXUQDFHVDUHDOVR
XVHGLQWKHSURGXFWLRQRIQRQIHUURXVPHWDOVVXFKDVFRSSHUQLFNHOWLQOHDGDQG]LQF5HGXFWLRQ
IXUQDFHV DUH DOVR XVHG LQ WKH SURGXFWLRQ RI FDOFLXP FDUELGH 7KH PRVW FRPPRQ GHVLJQ IRU
UHGXFWLRQIXUQDFHWUDQVIRUPHUVLVVLQJOHSKDVH
([DPSOHVRQIXUQDFHWUDQVIRUPHUVIRUVSHFLDOSXUSRVHVFDQEHIRUSURGXFWLRQRIHOHFWURGHPDWHULDO
DQGHOHFWURVODJUHILQLQJZKHUHWKHODWWHULVSURGXFWLRQRIYHU\KLJKTXDOLW\VWHHO
7UDQVIRUPHU+DQGERRN3DJH
$&IXUQDFHWUDQVIRUPHUVDUHPDGHERWKDVVLQJOHDQGWKUHHSKDVH,QPDQ\LQVWDOODWLRQVDURXQG
WKH ZRUOG IXUQDFH WUDQVIRUPHUV KDYH EHHQ GHVLJQHG DV VKHOO W\SH $OO RWKHU WUDQVIRUPHUV IRU WKLV
SXUSRVHDUHPDGHDVFRUHW\SH0DQXIDFWXULQJRIQHZ$&IXUQDFHWUDQVIRUPHUVDUHPDGHDVFRUH
W\SHZLWKDIHZH[FHSWLRQV
'& IXUQDFH WUDQVIRUPHUV DUH DOVR XVHG WR PHOW VFUDS PHWDO VWHHO 7KUHHSKDVH LV WKH PRVW
FRPPRQGHVLJQ6LQFHGLUHFWFXUUHQWLVXVHGLQWKHPHOWLQJSURFHVVWKHWUDQVIRUPHULVLQVWDOOHGLQ
FRPELQDWLRQZLWKDUHFWLILHUZKLFKIHHGVWKHIXUQDFH
&RQYHUWRUWUDQVIRUPHUV
2QHRIWKHPDLQGLIIHUHQFHVIURPRWKHUW\SHVRIWUDQVIRUPHUV
LVWKDWWKHORDGFXUUHQWVFRQWDLQKLJKHUKDUPRQLFVGXHWRWKH
GLVWRUWHG ZDYHIRUP 7KH GLVWRUWHG FXUUHQW ZDYHIRUP LV
FDXVHG E\ WKH FRQYHUWRU FRQQHFWHG WR WKH WUDQVIRUPHU
&XUUHQWV ZLWK PXOWLSOH IUHTXHQFLHV RI WKH QHW IUHTXHQF\ IORZ
IURP WKH FRQYHUWRU WR WKH WUDQVIRUPHU 7KLV KDV WR EH
FRQVLGHUHG ZKHQ WKH WUDQVIRUPHU LV GHVLJQHG EHFDXVH
KDUPRQLFFXUUHQWOHDGVWRKLJKHUORVVHVDQGWHPSHUDWXUHVLQ
WKHWUDQVIRUPHU1HWZRUNUHJXODWLRQVDOVRUHTXLUHUHGXFWLRQRI
KDUPRQLFGLVWRUWLRQ
7KHPRVWFRPPRQXVHIRUFRQYHUWRUWUDQVIRUPHUVLVIRXQGLQ
DSSOLFDWLRQVVXFKDV
•
•
9DULDEOHVSHHGGULYHV96'
$OXPLQLXPHOHFWURO\VLV
09$5HFWLILHU7UDQVIRUPHU
&RPPRQWDQN
2WKHUDSSOLFDWLRQVFDQEHFKHPLFDOHOHFWURO\VLV'&DUFIXUQDFH VHHVHFWLRQ JUDSKLWL]LQJ
IXUQDFHVWUDFWLRQVXEVWDWLRQV VHHVHFWLRQ FRSSHUUHILQLQJHWF
96'WUDQVIRUPHUVDUHXVHGLQDSSOLFDWLRQVZKHUHDYDULDEOHVSHHGLVUHTXLUHGRQWKHPRWRUVKDIW
96'DUHXVHGLQDZLGHYDULHW\RIDSSOLFDWLRQVVXFKDVUROOLQJPLOOGULYHVVKLSSURSXOVLRQV\VWHPV
PLQH KRLVW GULYHV ZLQG WXQQHOV GULYHV HWF )LJXUH VKRZV D EDVLF FLUFXLW GLDJUDP IRU D 96'
V\VWHPFRQILJXUDWLRQ IRUD ZLQG WXQQHO 7KH WUDQVIRUPHU LV DSXOVH XQLW WKDW IHHGV WZRSXOVH
UHFWLILHUV ZKLFK DUH FRXSOHG YLD D GFOLQN FRQWDLQLQJ WZR
VPRRWKLQJ UHDFWRUV WKDW DUH FRQQHFWHG WR WZR LQYHUWHUV ZKLFK
LQWXUQLVFRQQHFWHGWRDV\QFKURQRXVPRWRU7KHWUDQVIRUPHULV
DOVR HTXLSSHG ZLWK D WHUWLDU\ ZLQGLQJ ZKLFK LV FRQQHFWHG WR D
ILOWHU7KHSXUSRVHRIWKHILOWHULVWRUHGXFHWKHKDUPRQLFYROWDJH
GLVWRUWLRQ LQ WKH +9 VXSSO\ V\VWHP DV ZHOO DV LQFUHDVLQJ WKH
SRZHUIDFWRURIWKHORDG
09$'ULYHV&RQYHUWHU
7UDQVIRUPHUSXOVH
3DJH7UDQVIRUPHU+DQGERRN
)LJXUH
2QH PDMRU FRQYHUWRU WUDQVIRUPHU DSSOLFDWLRQ LV DOXPLQLXP HOHFWURO\VLV 6XFK FRQYHUWRU
WUDQVIRUPHUVDUHFKDUDFWHULVHGE\KLJKVHFRQGDU\FXUUHQWVVHFRQGDU\YROWDJHVXSWR9DQGD
ODUJHYROWDJHUHJXODWLQJUDQJH'XHWRWKHFRQYHUWRUYDOYHVWKHFXUUHQWVLQWKHWUDQVIRUPHUZLQGLQJV
ZLOO QRW EH VLQXVRLGDO EXW FRQWDLQ KDUPRQLFV ZKLFK PXVW EH FRQVLGHUHG ZKHQ GHVLJQLQJ WKH
WUDQVIRUPHU ,QWHJUDWHG WUDQVIRUPHU DQG FRQYHUWRU XQLWV IRU '& FXUUHQWV XS WR PRUH WKDQ N$
KDYHEHHQPDQXIDFWXUHG
8VXDOO\ IRXU ILYH RU VL[ FRQYHUWRU WUDQVIRUPHUV DUH FRQQHFWHG LQ SDUDOOHO WR IHHG RQH DOXPLQLXP
SRWOLQH 'HSHQGLQJ RQ WKH GHJUHH RI GLVWXUEDQFH WROHUDWHG RQ WKH QHWZRUN DQGRU RQ WKH '&
FXUUHQW RXWSXW WKH WUDQVIRUPHUV FDQ EHFRQQHFWHG DV RUSXOVHV\VWHP 7KH
GLVWXUEDQFHRQWKHQHWZRUNDQGRQWKHRXWSXW'&FXUUHQWGHFUHDVHVZLWKLQFUHDVLQJSXOVHQXPEHU
$SXOVHV\VWHPLVPDGHE\WZRSXOVHV\VWHPVZLWKGHJUHHVSKDVHVKLIWEHWZHHQWKHWZR
V\VWHPV7KLVLVDFKLHYHGE\FRQQHFWLQJRQHSXOVHV\VWHPLQGHOWDDQGWKHRWKHULQVWDU Z\H $GLDJUDPIRUDW\SLFDOXQLWIRUWKLVSXUSRVHLVDSXOVHWUDQVIRUPHUZLWKSKDVHVKLIWZLQGLQJDV
VKRZQLQ)LJXUH
3ULPDU\
6HFRQGDU\
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
$W\SLFDODOXPLQLXPSRWOLQHLVEXLOWDVDSXOVHV\VWHPZLWKIRXUUHFWLILHUWUDQVIRUPHUVFRQQHFWHG
LQ SDUDOOHO ,Q WKLV FDVH WKH V\VWHP LV EXLOW XS E\ IRXU SXOVH XQLWV ZLWK GLIIHUHQW SKDVH VKLIW
ZLQGLQJV$SXOVHV\VWHPFDQEHDFKLHYHGE\WKHIROORZLQJSKDVHVKLIWDQJOHV°°
°DQG±°
$V PHQWLRQHG RQH RI WKH FKDUDFWHULVWLFV RI UHFWLILHU WUDQVIRUPHUV IRU DOXPLQLXP SODQWV LV D YHU\
ODUJHUHJXODWLQJYROWDJHUDQJHIURP]HURYROWVXSWRVHYHUDOKXQGUHGYROWV7KHPDJQLWXGHRIWKH
VHFRQGDU\YROWDJHGHSHQGVRQKRZPDQ\SRWVWKDWDUHFRQQHFWHGLQVHULHV
:KHQ GLRGHV DUH XVHG LW LV QHFHVVDU\ WR PDNH D VHSDUDWH UHJXODWLQJ WUDQVIRUPHU HTXLSSHG ZLWK
RQORDGWDSFKDQJHULQVHULHVZLWKWKHUHFWLILHUWUDQVIRUPHUWRUHJXODWHWKHVHFRQGDU\YROWDJH7KH
UHJXODWLQJ WUDQVIRUPHU LV RIWHQ DXWRFRQQHFWHG ,Q FRPELQDWLRQ ZLWK GLRGH UHFWLILHUV WUDQVGXFWRUV
DUH QRUPDOO\ XVHG WR UHJXODWH WKH YROWDJH EHWZHHQ WKH VWHSV RI WKH RQORDG WDS FKDQJHU 7KH
UHJXODWLQJWUDQVIRUPHUWKDWLVIHHGLQJWKHUHFWLILHUWUDQVIRUPHUPD\EHEXLOWLQWKHVDPHWDQNDVWKH
UHFWLILHU WUDQVIRUPHU RU LW PD\ EH PDGH DV D VHSDUDWH XQLW $QRWKHU SRVVLELOLW\ WR UHJXODWH WKH
VHFRQGDU\ YROWDJH LV WR XVH WK\ULVWRU UHFWLILHUV ZKLFK PD\ UHSODFH WKH UHJXODWLQJ WUDQVIRUPHU DQG
WKH WUDQVGXFWRUV :KHQ WK\ULVWRU UHFWLILHUV DUH XVHG LW PD\ EH VXIILFLHQW WR HTXLS WKH UHFWLILHU
WUDQVIRUPHUZLWKDQRIIFLUFXLWWDSFKDQJHU 2&7& $WLQTXLU\DQGRUGHUWKHWHFKQLFDOVSHFLILFDWLRQIRUWKHFRQYHUWRUWUDQVIRUPHUQHHGVVRPHDGGLWLRQDO
LQIRUPDWLRQFRPSDUHGWRSRZHUWUDQVIRUPHUVSHFLILFDWLRQV7KLVLQIRUPDWLRQVKRXOGEHSURYLGHGE\
WKH V\VWHP GHVLJQHU RU WKH SXUFKDVHU 6XFK LQIRUPDWLRQ LV YDOYH ZLQGLQJ FXUUHQW ZDYHIRUP LH
KDUPRQLF FXUUHQW VSHFWUXP ³7KH KDUPRQLF FRQWHQW LQIOXHQFHV WKH WUDQVIRUPHU ORVVHV LQ JHQHUDO
EXWPRUHLPSRUWDQWO\ORFDOLVHGZLQGLQJORVVDQGKHQFHSRWHQWLDOKRWVSRWWHPSHUDWXUHV´>'UDIW,(&
FRQYHUWRUWUDQVIRUPHUV3DUW$SSOLFDWLRQJXLGH6HFWLRQ@
:KHQ WKLV LQIRUPDWLRQ LV NQRZQ WKH ZLQGLQJV FDQ EH GHVLJQHG WR DYRLG XQDFFHSWDEOH
WHPSHUDWXUHV 7KH GLVWRUWLRQ RI WKH SRZHU V\VWHP YROWDJH FDXVHG E\ WKH KDUPRQLF FXUUHQW LV
DQRWKHUDVSHFWWRFRQVLGHU'LVWXUEDQFHGXHWKHKDUPRQLFFRQWHQWRIWKHFXUUHQWVFDQEHUHGXFHG
E\LQFUHDVLQJWKHSXOVHQXPEHUDVPHQWLRQHGDERYH
7KHUH PD\ DOVR EH VSHFLDO UHTXLUHPHQWV UHJDUGLQJ WROHUDQFHV RQ WKH WUDQVIRUPHU VKRUW FLUFXLW
LPSHGDQFHEHFDXVHWKLVLPSHGDQFHLQIOXHQFHVWKHHIILFLHQF\RIWKHHOHFWURO\VLVSURFHVV
7UDFWLRQWUDQVIRUPHUV
7UDFWLRQV\VWHPVFDQEURDGO\EHGLYLGHGLQWRWZRPDMRUJURXSVWKRVHZKRXVHDOWHUQDWLQJFXUUHQW
$& DQGWKRVHZKRXVHGLUHFWFXUUHQW '& ,Q(XURSHWKHIROORZLQJV\VWHPVDUHIRXQG
• N9$&+]
• N9$&+]
• N9'&
• N9'&
• N9'&
6WDWLRQDU\WUDQVIRUPHUV OLQHIHHGHUWUDQVIRUPHUV 5HJDUGLQJ VWDWLRQDU\ WUDQVIRUPHUV VXSSO\ IHHGLQJ WUDQVIRUPHUV IRU $& GLVWULEXWLRQ WKHUH DUH
PDLQO\WKUHHGLIIHUHQWV\VWHPVLQXVH
6LQJOHSKDVHIHHGLQJV\VWHPZLWKUHWXUQFRQGXFWRU
6LQJOHSKDVHIHHGLQJV\VWHPZLWKERRVWHUWUDQVIRUPHU
7ZRSKDVHIHHGLQJV\VWHPZLWKDXWRWUDQVIRUPHU
)LJXUHVKRZVV\VWHPQXPEHUVLQJOHSKDVHIHHGLQJV\VWHPZLWKUHWXUQFRQGXFWRU
6\VWHPQXPEHU6LQJOHSKDVHIHHGLQJV\VWHPZLWKUHWXUQFRQGXFWRU
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
7KLVLVWKHVLPSOHVWZD\RIIHHGLQJWKHWUDLQVXVLQJRQO\RQHSKDVHFRQQHFWHGWRWKHFRQWDFWZLUH
ZLWK WKH UHWXUQ FXUUHQW WKURXJK WKH UDLOV DYRLGLQJ UHWXUQ HDUWK FXUUHQWV E\ PHDQV RI GUDLQLQJ
WUDQVIRUPHUV7KLVLVDVLPSOHDQGFRVWHIIHFWLYHV\VWHPEXWKDVWKHGLVDGYDQWDJHVRIKLJKV\VWHP
LPSHGDQFH DQG KLJK ORVVHV 7KLV V\VWHP LV DSSOLHG LQ +] +] DSSOLFDWLRQV DQG LV
SDUWLFXODUO\VXLWDEOHIRUPHGLXPGLVWDQFHVSHHGURXWHV
)LJXUHVKRZVV\VWHPQXPEHUVLQJOHSKDVHIHHGLQJV\VWHPZLWKERRVWHUWUDQVIRUPHU
6\VWHPQXPEHU6LQJOHSKDVHIHHGLQJV\VWHPZLWKERRVWHUWUDQVIRUPHU
)LJXUH
$ PDMRU LPSURYHPHQW LV IRXQG LQ WKLV V\VWHP ZKHUH D ERRVWHU WUDQVIRUPHU XQLW\ UDWLR LV
LPSOHPHQWHG7KHSULPDU\FLUFXLWLVFRQQHFWHGDFURVVDJDSLQWKHFRQWDFWZLUHDQGWKHVHFRQGDU\
DFURVVDQLQVXODWHGUDLOVHFWLRQ,QOLQHDUPRGH ZKHQWKHERRVWHUWUDQVIRUPHULVQRWVDWXUDWHG WKH
WUDFWLRQ UHWXUQ FXUUHQW IORZLQJ WKURXJK WKH VHFRQGDU\ FLUFXLW LV IRUFHG WR EH HTXDO WR WKH FXUUHQW
IORZLQJWKURXJKWKHRYHUKHDGOLQHDQGLQWKHSULPDU\FLUFXLW7KLVV\VWHPLVFRPPRQO\XVHG
)LJXUHVKRZVV\VWHPQXPEHUWZRSKDVHIHHGLQJV\VWHPZLWKDXWRWUDQVIRUPHU
6\VWHPQXPEHU7ZRSKDVHIHHGLQJV\VWHPZLWKDXWRWUDQVIRUPHU
)LJXUH
,Q WKH WKLUG V\VWHP WKH VHFRQGDU\ ZLQGLQJ RI WKH VXSSO\ WUDQVIRUPHU SURYLGH WZR HTXDO YROWDJHV
ZLWK°SKDVHGLVSODFHPHQWE\GLYLGLQJWKHVHFRQGDU\ZLQGLQJLQWRWZRHTXDOSDUWV2QHSKDVHLV
FRQQHFWHGWRWKHFRQWDFWZLUHDQGWKHRWKHUSKDVHLVFRQQHFWHGWRDVHSDUDWHRYHUKHDGOLQHFDOOHG
WKH QHJDWLYH IHHGHU 7KH LQWHUPHGLDWH SRLQW RI WKH VHFRQGDU\ ZLQGLQJ LV FRQQHFWHG WR WKH UDLO $W
$XWR7UDQVIRUPHU6WDWLRQ $76 ORFDWLRQWKHZLQGLQJLVFRQQHFWHGWRWKHFRQWDFWZLUHWKHQHJDWLYH
IHHGHU DQG WKH UDLO LV FRQQHFWHG WR DQ LQWHUPHGLDWH SRLQW RI WKH DXWRWUDQVIRUPHU ZLQGLQJ 7KH
DGYDQWDJHZLWKWKLVV\VWHPLVWKDWWKHVSDFLQJEHWZHHQIHHGHUVWDWLRQVLVLQFUHDVHG7KHV\VWHPLV
H[WHQVLYHO\XVHGLQ)UDQFHIRUWKH)UHQFKKLJKVSHHGWUDLQ7*90DQ\FRXQWULHVZLWKKLJKVSHHG
SURMHFWVKDYHDGRSWHGWKHFRQFHSW
,Q V\VWHPV ZKHUH WKH ORFRPRWLYH LV IHG E\ '& FXUUHQW D WKUHH SKDVH UHFWLILHU WUDQVIRUPHU LV
UHTXLUHGWRIHHGWKHUHFWLILHU
7UDQVIRUPHU+DQGERRN3DJH
/RFRPRWLYHWUDQVIRUPHUV
7KLV WUDQVIRUPHU LV LQVWDOOHG RQ WKH ORFRPRWLYH )DFWRUV
RILPSRUWDQFHIRUVXFKWUDQVIRUPHUVDUHVL]HDQGZHLJKW
7RDFKLHYHORZZHLJKWDQGYROXPHOHVVPDWHULDOLVXVHG
ZKLFK LQ WXUQ LQFUHDVHV ORVVHV DQG WHPSHUDWXUHV LQ WKH
WUDQVIRUPHU 7R GHDO ZLWK WKH KLJK WHPSHUDWXUHV
LQVXODWLRQ ZKLFK FDQ ZLWKVWDQG KLJK WHPSHUDWXUHV DUH
XVHGVXFKDVDUDPLGSRO\LPLGHRUSRO\HVWHUJODVVDQG
YDULRXVKLJKWHPSHUDWXUHLQVXODWLQJOLTXLGV
5($&7256
7KLVVHFWLRQGHVFULEHVUHDFWRUVIRUDQXPEHURIGLIIHUHQWDSSOLFDWLRQV
6XSSOHPHQWDU\LQIRUPDWLRQFDQEHIRXQGLQ,(&3DUW5HDFWRUV $WSUHVHQWLQSURFHVV 6KXQWUHDFWRUV
7KH QHHG IRU ODUJH VKXQW UHDFWRUV DSSHDUHG ZKHQ ORQJ SRZHU
WUDQVPLVVLRQ OLQHV IRU V\VWHP YROWDJH N9 DQG KLJKHU ZHUH
EXLOW 7KH FKDUDFWHULVWLF SDUDPHWHUV RI D OLQH DUH WKH VHULHV
LQGXFWDQFH GXH WR WKH PDJQHWLF ILHOG DURXQG WKH FRQGXFWRUV DQGWKHVKXQWFDSDFLWDQFH GXHWRWKHHOHFWURVWDWLFILHOGWRHDUWK $QHTXLYDOHQWGLDJUDPIRUDOLQHLVVKRZQLQ)LJXUH
%RWK WKH LQGXFWDQFH DQG WKH FDSDFLWDQFH DUH GLVWULEXWHG DORQJ
WKH OHQJWK RI WKH OLQH 6R DUH WKH VHULHV UHVLVWDQFH DQG WKH
DGPLWWDQFHWRHDUWK
:KHQ WKH OLQH LV ORDGHG WKHUH LV D YROWDJH GURS DORQJ WKH OLQH
GXHWRWKHVHULHVLQGXFWDQFHDQGWKHVHULHVUHVLVWDQFH:KHQWKH
OLQH LV HQHUJLVHG EXW QRW ORDGHG RU RQO\ ORDGHG ZLWK D VPDOO
FXUUHQWWKHUHLVDYROWDJHULVHDORQJWKHOLQH WKH)HUUDQWLHIIHFW 6KXQWUHDFWRUN909$U
)LJXUH
,QWKLVVLWXDWLRQWKHFDSDFLWDQFHWRHDUWKGUDZVDFXUUHQWWKURXJKWKHOLQHZKLFKPD\EHFDSDFLWLYH
:KHQDFDSDFLWLYHFXUUHQWIORZVWKURXJKWKHOLQHLQGXFWDQFHWKHUHZLOOEHDYROWDJHULVHDORQJWKH
OLQH
7R VWDELOLVH WKH OLQH YROWDJH WKH OLQH LQGXFWDQFH FDQ EH FRPSHQVDWHG E\ PHDQV RI VHULHV
FDSDFLWRUV DQG WKH OLQH FDSDFLWDQFH WR HDUWK E\ VKXQW UHDFWRUV 6HULHV FDSDFLWRUV DUH SODFHG DW
GLIIHUHQWSODFHVDORQJWKHOLQHZKLOHVKXQWUHDFWRUVDUHRIWHQLQVWDOOHGLQWKHVWDWLRQVDWWKHHQGVRI
OLQH,QWKLVZD\WKHYROWDJHGLIIHUHQFHEHWZHHQWKHHQGVRIWKHOLQHLVUHGXFHGERWKLQDPSOLWXGH
DQGLQSKDVHDQJOH
6KXQWUHDFWRUVPD\DOVREHFRQQHFWHGWRWKHSRZHUV\VWHPDWMXQFWXUHVZKHUHVHYHUDOOLQHVPHHW
RUWRWHUWLDU\ZLQGLQJVRIWUDQVIRUPHUV
7UDQVPLVVLRQFDEOHVKDYHPXFKKLJKHUFDSDFLWDQFHWRHDUWKWKDQRYHUKHDGOLQHV/RQJVXEPDULQH
FDEOHV IRU V\VWHP YROWDJHV RI N9 DQG PRUH QHHG VKXQW UHDFWRUV 7KH VDPH JRHV IRU ODUJH
XUEDQ QHWZRUNV WR SUHYHQW H[FHVVLYH YROWDJH ULVH ZKHQ D KLJK ORDG VXGGHQO\ IDOOV RXW GXH WR D
IDLOXUH
3DJH7UDQVIRUPHU+DQGERRN
6KXQW UHDFWRUV IRU V\VWHP YROWDJHV XS WR N9 KDYH QRZ EHHQ LQ VHUYLFH IRU VHYHUDO WHQV RI
\HDUV$WSUHVHQWVWLOOPRUHVKXQWUHDFWRUVDUHEHLQJLQVWDOOHG
6KXQW UHDFWRUV FRQWDLQ WKH VDPH FRPSRQHQWV DV SRZHU WUDQVIRUPHUV OLNH ZLQGLQJV FRUH WDQN
EXVKLQJV DQG LQVXODWLQJ RLO DQG DUH VXLWDEOH IRU PDQXIDFWXULQJ LQ WUDQVIRUPHU IDFWRULHV 7KH PDLQ
GLIIHUHQFH LV WKH UHDFWRU FRUH OLPEV ZKLFK KDYH QRQPDJQHWLF JDSV LQVHUWHG EHWZHHQ SDFNHWV RI
FRUHVWHHO
)LJXUHVKRZVDGHVLJQRIDVLQJOHSKDVHVKXQWUHDFWRU7KHKDOIWRWKHULJKWLVDSLFWXUHRIWKH
PDJQHWLF ILHOG 7KH ZLQGLQJ HQFORVHV WKH PLGOLPE ZLWK WKH QRQPDJQHWLF JDSV $ IUDPH RI FRUH
VWHHOHQFORVHVWKHZLQGLQJDQGSURYLGHVWKHUHWXUQSDWKIRUWKHPDJQHWLFILHOG
SKDVHUHDFWRUVFDQDOVREHPDGH7KHVHPD\KDYHRUOLPEHGFRUHV6HH)LJXUH,QD
OLPEHGFRUHWKHUHLVVWURQJPDJQHWLFFRXSOLQJEHWZHHQWKHWKUHHSKDVHVZKLOHLQDOLPEHGFRUH
WKHSKDVHVDUHPDJQHWLFDOO\LQGHSHQGHQWGXHWRWKHHQFORVLQJPDJQHWLFIUDPHIRUPHGE\WKHWZR
\RNHVDQGWKHWZRXQZRXQGVLGHOLPEV
7KH QHXWUDO RI VKXQW UHDFWRUV PD\ EH GLUHFWO\ HDUWKHG HDUWKHG WKURXJK DQ HDUWKLQJUHDFWRU RU
XQHDUWKHG
)LJXUH
:KHQ WKH UHDFWRU QHXWUDO LV GLUHFWO\ HDUWKHG WKH ZLQGLQJ DUH QRUPDOO\ GHVLJQHG ZLWK JUDGHG
LQVXODWLRQLQWKHHDUWKHGHQG7KHPDLQWHUPLQDOLVDWWKHPLGGOHRIWKHOLPEKHLJKWDQGWKHZLQGLQJ
FRQVLVWV RI WZR SDUDOOHOFRQQHFWHG KDOYHV RQH EHORZ DQG RQH DERYH WKH PDLQ WHUPLQDO 7KH
LQVXODWLRQ GLVWDQFH WR WKH \RNHV FDQ WKHQ EH PDGH UHODWLYHO\ VPDOO 6RPHWLPHV D VPDOO H[WUD
ZLQGLQJIRUORFDOHOHFWULFLW\VXSSO\LVLQVHUWHGEHWZHHQWKHPDLQZLQGLQJDQG\RNH
7UDQVIRUPHU+DQGERRN3DJH
)LJXUH
:KHQHQHUJLVHGWKHJDSVDUHH[SRVHGWRODUJHSXOVDWLQJFRPSUHVVLYHIRUFHVZLWKDIUHTXHQF\RI
WZLFHWKHIUHTXHQF\RIWKHV\VWHPYROWDJH7KHSHDNYDOXHRIWKHVHIRUFHVPD\HDVLO\DPRXQWWR
1P WRQP )RUWKLVUHDVRQWKHGHVLJQRIWKHFRUHPXVWEHYHU\VROLGDQGWKHPRGXOXV
RIHODVWLFLW\RIWKHQRQPDJQHWLF DQGQRQPHWDOOLF PDWHULDOXVHGLQWKHJDSVPXVWEHKLJK VPDOO
FRPSUHVVLRQ LQRUGHUWRDYRLGODUJHYLEUDWLRQDPSOLWXGHVZLWKKLJKVRXQGOHYHODVDFRQVHTXHQFH
7KH PDWHULDOLQ WKH JDSVPXVW DOVREH VWDEOH WRDYRLG HVFDODWLQJ YLEUDWLRQDPSOLWXGHV LQ WKH ORQJ
UXQ
7HVWLQJ RI UHDFWRUV UHTXLUHV FDSDFLWLYH SRZHU LQ WKH WHVW ILHOG HTXDO WR WKH QRPLQDO SRZHU RI WKH
UHDFWRU ZKLOH D WUDQVIRUPHU FDQ EH WHVWHG ZLWK D UHDFWLYH SRZHU HTXDO WR ± RI WKH
WUDQVIRUPHUSRZHUUDWLQJE\IHHGLQJWKHWUDQVIRUPHUZLWKQRPLQDOFXUUHQWLQVKRUWFLUFXLWFRQGLWLRQ
'LHOHFWULF WHVWLQJ ZLWK DF YROWDJH SHUIRUPHG DW LQFUHDVHG IUHTXHQF\ UHTXLUHV VWLOO PRUH FDSDFLWLYH
SRZHULQWKHWHVWILHOG$ODUJHVKXQWUHDFWRUZLWKUDWLQJ±09$UHTXLUHVDWOHDVWWKHVDPH
DPRXQWRIFDSDFLWLYHSRZHUDVSRZHUWUDQVIRUPHURI±09$
6LQFH WKH SRZHU IDFWRU RI VKXQW UHDFWRUV LV YHU\ ORZ ORVV PHDVXUHPHQWV XVLQJ FRQYHQWLRQDO
ZDWWPHWHU PHWKRGV PD\ EH VXEMHFW WR FRQVLGHUDEOH HUURUV $ EULGJH PHWKRG PD\ EH XVHG WR
DGYDQWDJH
7KHORVVLQWKHYDULRXVSDUWVRIWKHUHDFWRU ,5LURQORVVDQGDGGLWLRQDOORVV FDQQRWEHVHSDUDWHG
E\ PHDVXUHPHQW ,W LV WKXV SUHIHUDEOH LQ RUGHU WR DYRLG FRUUHFWLRQV WR UHIHUHQFH WHPSHUDWXUH WR
SHUIRUPWKHORVVPHDVXUHPHQWZKHQWKHDYHUDJHWHPSHUDWXUHRIWKHZLQGLQJVLVSUDFWLFDOO\HTXDO
WRWKHUHIHUHQFHWHPSHUDWXUH
:KHQVSHFLI\LQJVKXQWUHDFWRUVIRUHQTXLU\WKHIROORZLQJGDWDVKRXOGEHJLYHQ
•
•
•
•
•
•
•
•
•
•
•
•
5HDFWLYHSRZHU4
5DWHGYROWDJH8
0D[LPXPFRQWLQXRXVRSHUDWLQJYROWDJH
,QVXODWLRQOHYHO/,6,
)UHTXHQF\+]
$&WHVWYROWDJHV
3HUPLVVLEOHWHPSHUDWXUHULVHIRURLODQGZLQGLQJ
6RXQGOHYHODQGOLQHDULW\FULWHULDLIUHTXLUHG
7\SHRIFRROLQJIDQSXPSUDGLDWRUV
3HULSKHUDOIHDWXUHVLIUHTXLUHG
6DIHW\DQGPRQLWRULQJHTXLSPHQW
/RVVFDSLWDOLVDWLRQ
6KXQWUHDFWRUVZLWKRQORDGWDSFKDQJHUV 2/7& 5HDFWRUV HTXLSSHG ZLWK DQ 2/7& DUH LQWHQGHG WR DOORZ DGMXVWPHQW RI WKH UHDFWLYH FRPSHQVDWLRQ
GHSHQGLQJ RQ WKH ORDG FRQGLWLRQ RI WKH OLQHQHWZRUN 'XULQJ OLJKW ORDGLQJ WKH PD[LPXP UHDFWLYH
FRPSHQVDWLRQ DW WKH WDS ZLWK PLQLPXP QXPEHU RI WXUQV LV XVHG DQG IRU IXOO ORDG FRQGLWLRQV WKH
UHDFWRULVVZLWFKHGWRWKHWDSZLWKWKHPD[LPXPQXPEHURIWXUQV$W\SLFDOWDSSLQJUDQJHDOORZVD
UHGXFWLRQRIWKHUHDFWLYHSRZHUIURPWRDSSUR[
3DJH7UDQVIRUPHU+DQGERRN
6ZLWFKLQJRIVKXQWUHDFWRUV
6ZLWFKLQJ RI VKXQWUHDFWRUV UHTXLUHV VSHFLDO SUHFDXWLRQV ,Q WKH HDUO\ KLVWRU\ RI VKXQW UHDFWRUV
GDPDJH QRZ DQG WKHQ RFFXUUHG WR WKH UHDFWRUV GXULQJ VZLWFKLQJ RSHUDWLRQV ,Q VRPH FDVHV WKH
FLUFXLW EUHDNHU ZDV DOVR GDPDJHG DW WKH VDPH WLPH 7KH UHDVRQ IRU WKH IDLOXUHV DUH QRZ ZHOO
SK\VLFDOO\ H[SODLQHG DQG XQGHUVWRRG DQG DGHTXDWH SUHFDXWLRQV WR DYRLG RU DW OHDVW UHGXFH WKH
SUREDELOLW\RIVXFKIDLOXUHVDUHDYDLODEOH
,W LV SDUWLFXODUO\ ZKHQ GLVFRQQHFWLQJ WKH UHDFWRU IURP WKH SRZHU V\VWHP WKDW VHYHUH RYHUYROWDJHV
PD\DULVH:KHQWKHEUHDNHUFRQWDFWVVHSDUDWHDQDUFVWDUWVEXUQLQJEHWZHHQWKHFRQWDFWV:KLOH
WKHDUFLVEXUQLQJWKHUHLVVWLOODQHOHFWULFDOFRQQHFWLRQEHWZHHQWKHSRZHUV\VWHPDQGWKHUHDFWRU
$IWHU D FHUWDLQ WLPH WKH FLUFXLW EUHDNHU ZLOO H[WLQJXLVK WKH DUF 7KHQ WKH FRQQHFWLRQ EHWZHHQ WKH
SRZHUV\VWHPDQGWKHUHDFWRULVEURNHQDQGWKHORDGVLGHRIWKHFLUFXLWEUHDNHUZLWKWKHUHDFWRULV
OHIW RQ LWV RZQ ,Q PDQ\ FDVHV WKH DUF ZLOO EH H[WLQJXLVKHG EHIRUH WKH FXUUHQW UHDFKHV LWV QDWXUDO
SDVVDJHWKURXJK]HUR7KLVPHDQVWKDWZKHQWKHDUFH[WLQJXLVKHVDFHUWDLQTXDQWLW\RIPDJQHWLF
HQHUJ\LVVWRUHGLQWKHUHDFWRUFRUHDQGWKHUHDFWRUKDVQRSRVVLELOLW\WRIHHGWKLVHQHUJ\EDFNWR
WKHSRZHUV\VWHP6RPHRIWKHHQHUJ\ZLOOUHPDLQLQWKHUHDFWRUFRUHDVUHPDQHQWPDJQHWLVPEXW
DSDUWRIWKHHQHUJ\ZLOOFKDUJHWKHVWUD\FDSDFLWDQFHWRHDUWKRIWKHHTXLSPHQWRQWKHORDGVLGHRI
WKH FLUFXLW EUHDNHU 6LQFH WKLV FDSDFLWDQFH LV XVXDOO\ TXLWH VPDOO WKH YROWDJH DFURVV WKLV
FDSDFLWDQFHZLOOEHUHODWLYHO\KLJKDQGFRQVHTXHQWO\DOVRWKHYROWDJHDWWKHUHDFWRUWHUPLQDO:LWK
VRPHVLPSOLILFDWLRQZHFDQZULWH
/ ⋅ L Ÿ & ⋅ X ,QWKLVH[SUHVVLRQ
/LVWKHLQGXFWDQFHRIWKHUHDFWRU
LLVWKHFXUUHQWDWWKHPRPHQWRIFKRSSLQJ
&LVWKHVWUD\FDSDFLWDQFHRIWKHHTXLSPHQW LQFOXGLQJWKHUHDFWRU DWWKHORDGVLGHRIWKH
FLUFXLWEUHDNHU
XLVWKHYROWDJHULVHDFURVVWKH&
([SUHVVHGLQZRUGV UHIOHFWVWKDWWKHPDJQHWLFHQHUJ\LQWKHUHDFWRU OHIWVLGHRIWKHDUURZ LVWUDQVIRUPHGWRHOHFWURVWDWLFHQHUJ\LQ& ULJKWVLGHRIWKHDUURZ ,WIROORZVWKDW
X = L⋅
/
&
:KHQ XVLQJ PRGHUQ 6) FLUFXLW EUHDNHUV WKH VL]H RI WKH YROWDJH GXH WR WKH FXUUHQW FKRSSLQJ LV
W\SLFDOO\LQWKHUDQJHWRSXDQGVRPHZKDWKLJKHUIRURWKHUW\SHVRIFLUFXLWEUHDNHUV7KH
UDWHRIYROWDJHULVHLVUHODWLYHO\PRGHUDWH
+RZHYHU ZKHQ WKH DUF LQ WKH FLUFXLW EUHDNHU LV H[WLQJXLVKHG D NLQG RI FRPSHWLWLRQ VWDUWV LQ WKH
FLUFXLWEUHDNHU7KHRQHFRPSHWLWRULVWKHYROWDJHLQFUHDVHEHWZHHQWKHWZRFRQWDFWVLQWKHFLUFXLW
EUHDNHU WKH RWKHU LV WKH LQFUHDVH LQ EUHDNGRZQ YROWDJH EHWZHHQ WKH FLUFXLW EUHDNHU FRQWDFWV
EHFDXVHWKHFRQWDFWVHSDUDWLRQVWLOOFRQWLQXHVDQGWKHGLVWDQFHEHWZHHQWKHFRQWDFWVLQFUHDVHV
,IWKHODWWHUFRPSHWLWRUZLQVWKHYROWDJHDFURVVWKHUHDFWRUZLOORVFLOODWHGXHWRWKHHQHUJ\WKDWLV
IORZLQJIRUWKDQGEDFNEHWZHHQWKHVWUD\FDSDFLWDQFH&DQGWKHLQGXFWDQFH/RIWKHUHDFWRU7KH
RVFLOODWLRQZLOOEHGDPSHGGXHWRWKHUHVLVWDQFHWKDWDOZD\VLVSUHVHQWLQDFLUFXLW$W\SLFDOFRXUVH
RIWKHYROWDJHDFURVVWKHUHDFWRULVVKRZQLQ)LJXUH
)LJXUH
7KLV YROWDJH FRXUVH ZKHQ GLVFRQQHFWLQJ WKH UHDFWRU ZLOO EH KDUPOHVV WR WKH UHDFWRU DQG WKH
VXUURXQGLQJV
7UDQVIRUPHU+DQGERRN3DJH
7KH RWKHU DOWHUQDWLYH LV WKDW WKH YROWDJH EHWZHHQ WKH VHSDUDWHG EUHDNHU FRQWDFWV WKH VRFDOOHG
UHFRYHU\YROWDJH ZLQVZKLFKPHDQVWKDWLWDWDFHUWDLQPRPHQWH[FHHGVWKHYROWDJHEUHDNGRZQ
YROWDJH EHWZHHQ WKH FRQWDFWV 7KHQ D QHZ DUF ZLOO DULVH EHWZHHQ WKH FRQWDFWV 7KLV LV FDOOHG
UHLJQLWLRQ$WUHLJQLWLRQWKHYROWDJHRQWKHEUHDNHUFRQWDFWRQWKHORDGVLGHYHU\TXLFNO\FKDQJHVWR
QHDUO\WKHVDPHYROWDJHDVWKHEUHDNHUFRQWDFWRQWKHVRXUFHVLGH7KLVYROWDJHFKDQJHPD\WDNH
SODFH LQ WKHFRXUVH RI DVPDOO IUDFWLRQRI D PLFURVHFRQG 7KH YROWDJH RQ WKHUHDFWRU WHUPLQDO ZLOO
FORVHO\IROORZWKHYROWDJHRQWKHEUHDNHUFRQWDFW
7KH H[WUHPHO\ UDSLG YROWDJH FKDQJH LV IROORZHG E\ D GDPSHG RVFLOODWLRQ RI YHU\ KLJK IUHTXHQF\
(YHQ QHZ DUFV IROORZHG E\ UHLJQLWLRQV PD\ RFFXU EHIRUH WKH GLVFRQQHFWLRQ RI WKH UHDFWRU LV
ILQDOLVHG LQ )LJXUH VKRZV D W\SLFDO YROWDJH FRXUVH RQ WKH UHDFWRU WHUPLQDO ZLWK MXVW RQH
UHLJQLWLRQLQWKHFLUFXLWEUHDNHU
)LJXUH
'XULQJVXFKDYROWDJHFRXUVHWKHUHDFWRUZLQGLQJLVKLJKO\VWUHVVHGHVSHFLDOO\DWWKHEHJLQQLQJRI
WKH ZLQGLQJ 7KHVH VWUHVVHV PD\ H[FHHG WKH VWUHVVHV WKDW WKH ZLQGLQJ LV H[SRVHG WR GXULQJ WKH
VWDQGDUG WUDQVLHQW YROWDJH WHVWV DQG PD\ OHDG WR EUHDNGRZQ LQ WKH ZLQGLQJ 7KH VWUHVVHV LQ WKH
ZLQGLQJDUHQRWRQO\GHSHQGHQWRQWKHVL]HRIWKHYROWDJHFKDQJHEXWDOVRRQKRZIDVWWKHYROWDJH
FKDQJHV GXGW 6R HYHQ WUDQVLHQW YROWDJHV ZLWK SHDN YDOXH EHORZ WKH VXUJH DUUHVWHU SURWHFWLRQ
OHYHOPD\GDPDJHWKHUHDFWRU
7KH URRW RI WKH SUREOHP LV WKH UHLJQLWLRQV WKDW PD\ RFFXU LQ DOO W\SHV RI FLUFXLW EUHDNHUV
6)YDFXXPRLOFRPSUHVVHGDLU $ZD\WRHOLPLQDWHUHLJQLWLRQVLQWKHFLUFXLWEUHDNHUDQGWKHUHE\
DYRLGGDPDJHWRWKHUHDFWRUDQGHTXLSPHQWLQWKHVXUURXQGLQJVLVWRDSSO\V\QFKURQRXVRSHQLQJRI
WKH FLUFXLW EUHDNHU DOVR FDOOHG SRLQWRQZDYH FRQWUROOHG RSHQLQJ 7KH SULQFLSOH LV LOOXVWUDWHG LQ
)LJXUH
)LJXUH
%\VWDUWLQJWKHFRQWDFWVHSDUDWLRQDWDFHUWDLQOHYHORQWKHULVLQJSDUWRIWKHFXUUHQWFXUYHWKHOHYHO
EHLQJVXIILFLHQWO\KLJKWRDYRLGWKDWWKHFLUFXLWEUHDNHUGRHVQRWFKRSWKHFXUUHQWWKHDUFZLOOEXUQ
XQWLOWKHFXUUHQWKDVSDVVHGLWVPD[LPXPYDOXHDQGSURFHHGVIXUWKHUWRZDUGVLWVQDWXUDOSDVVDJH
WKURXJK]HUR$WDFHUWDLQOHYHOEHIRUHWKHFXUUHQWUHDFKHV]HURWKHFLUFXLWEUHDNHUZLOOH[WLQJXLVK
WKHDUFDQGFKRSWKHFXUUHQWEXWWKHQWKHFRQWDFWVKDYHKDGVXIILFLHQWWLPHWRVHSDUDWHTXLWHIDU
IURPHDFKRWKHU&RQVHTXHQWO\WKHEUHDNGRZQYROWDJHRIWKHGLVWDQFHEHWZHHQWKHFRQWDFWVKDV
DOVR LQFUHDVHG WR D YDOXH KLJK HQRXJK WR SUHYHQW WKH UHFRYHU\ YROWDJH WR FDXVH D EUHDN GRZQ
UHLJQLWLRQ 7KHVLJQDOIRUV\QFKURQLVDWLRQFRPHVIURPDFDSDFLWRUYROWDJHWUDQVIRUPHU &97 6LQFH V\QFKURQLVHG VZLWFKLQJ ZDV LQWURGXFHG VKXQW UHDFWRU IDLOXUHV DWWULEXWDEOH WR VZLWFKLQJ
RSHUDWLRQV VHHP WR KDYH GLVDSSHDUHG (QFRXUDJHG E\ WKLV JRRG VHUYLFH H[SHULHQFH $%% DOZD\V
UHFRPPHQGV HTXLSPHQW 6ZLWFKV\QF70 >@ IRU V\QFKURQLVHG VZLWFKLQJ ZKHQ RIIHULQJ FLUFXLW
EUHDNHUVIRUVKXQWUHDFWRUVZLWFKLQJ
0RUHGHWDLOHGLQIRUPDWLRQRQFRQWUROOHGVZLWFKLQJFDQEHIRXQGLQ>@DYDLODEOHRQUHTXHVWWRWKH
QHDUHVW$%%RIILFH
3DJH7UDQVIRUPHU+DQGERRN
&XUUHQWOLPLWLQJUHDFWRUV
&XUUHQWOLPLWLQJ UHDFWRUV DUH VHULHV UHDFWRUV LQWHQGHG WR
UHGXFH WKH VKRUW FLUFXLW FXUUHQWV LQ WKH SRZHU V\VWHP 7KH
PRWLYH WR UHGXFH WKH VKRUW FLUFXLW FXUUHQWV LV WR XVH FLUFXLW
EUHDNHUV ZLWK ORZHU VKRUW FLUFXLW FXUUHQW EUHDNLQJ FDSDFLW\
DQGFRQVHTXHQWO\OHVVH[SHQVLYHFLUFXLWEUHDNHUV
6RPHWLPHV RWKHU V\VWHP FRPSRQHQWV DOVR QHHG SURWHFWLRQ
DJDLQVWWRRKLJKVKRUWFLUFXLWFXUUHQWVOLNHIRULQVWDQFHDXWR
FRQQHFWHG WUDQVIRUPHUV WKDW DUH QRW VHOISURWHFWLQJ GXH WR
WKHLUORZLPSHGDQFH
$QRWKHU DSSOLFDWLRQ LV OLPLWDWLRQ RI WKH LQUXVK FXUUHQW ZKHQ
VWDUWLQJODUJHPRWRUV
&XUUHQWOLPLWLQJ UHDFWRUV DUH VRPHWLPHV XVHG WR OLPLW
GLVFKDUJHFXUUHQWVRIFDSDFLWRUEDQNV,QVXFKFDVHVDELILODU
ZRXQGUHVLVWDQFHZLUHLVLQFOXGHGDQGFRQQHFWHGLQSDUDOOHO
ZLWKWKHLQGXFWDQFH
2QHSKDVHRIDGU\W\SHUHDFWRU
ZLWKDOLIWLQJGHYLFHDVVHPEOHG
'U\W\SHFXUUHQWOLPLWLQJUHDFWRUV
)RUPRGHUDWHYROWDJHVDQGSRZHUUDWLQJVWKHFKHDSHVWW\SHRIFXUUHQWOLPLWLQJUHDFWRUVLVXVXDOO\
WKH VLPSOH QDNHG GU\W\SH UHDFWRU ZLWKRXW LURQ FRUH DQG DQ\ HQFORVXUH FRROHG E\ QDWXUDO DLU
FLUFXODWLRQ 1XPHURXV UHDFWRUV RI WKLV W\SH DUH LQ RSHUDWLRQ DURXQG LQ WKH ZRUOG PRVW RI WKHP
SUREDEO\LQPHGLXPKLJKYROWDJHSRZHUV\VWHPV
7KH PDJQLWXGH RI WKH LQGXFWDQFH RI WKHVH UHDFWRUV LV QRUPDOO\ LQ WKH RUGHU RI PLOOLKHQU\ 7KH
LQGXFWDQFH UHPDLQV FRQVWDQW ZKHQ VKRUW FLUFXLW FXUUHQW IORZV WKURXJK WKH UHDFWRU 7KHUH LV QR
GHFOLQHLQWKHLQGXFWDQFHGXHWRVDWXUDWLRQLQDQLURQFRUH
7KHFRQGXFWRUPDWHULDOLQWKHZLQGLQJPD\EHHLWKHUFRSSHURUDOXPLQLXP7KHLQVXODWLRQDQGWKH
VXSSRUWLQJ PDWHULDOV IRU WKH ZLQGLQJ DUH QRZDGD\V V\QWKHWLF IUHTXHQWO\ ZLWK D KLJK WHPSHUDWXUH
FODVV:KHQVKRUWFLUFXLWFXUUHQWGXHWRIDLOXUHLQWKHSRZHUV\VWHPIORZVWKURXJKWKHUHDFWRUKLJK
PHFKDQLFDOIRUFHVDULVHLQWKHUHDFWRUZLWKLQHDFKSKDVHZLQGLQJDVZHOODVEHWZHHQSKDVHV7KH
UHDFWRUVPXVWEHGHVLJQHGWRZLWKVWDQGWKHVHIRUFHVZKLFKRIWHQGHWHUPLQHVWKHGLPHQVLRQLQJRI
WKHUHDFWRU
7KHDEVHQFHRIDQLURQFRUHPDNHVWKHZLQGLQJFDSDFLWDQFHWRHDUWKTXLWHVPDOOZKLFKJLYHVWKH
DGYDQWDJH WKDW WKH YROWDJH GLVWULEXWLRQ ZLWKLQ WKH ZLQGLQJ GHYLDWHV MXVW PRGHUDWHO\ IURP OLQHDULW\
GXULQJWUDQVLHQWYROWDJHFRQGLWLRQV
)LJXUHVKRZVDVNHWFKRIRQHSKDVHRIVXFKDUHDFWRU
7KH WZR UHFWDQJOHV LOOXVWUDWH WKH RXWHU FRQWRXUV RI WKH
ZLQGLQJ D LV WKH WRWDO KHLJKW DQG U LV WKH UDGLDO ZLGWK RI WKH
ZLQGLQJ ' LV WKH PHDQ ZLQGLQJ GLDPHWHU 7KH LQGXFWDQFH LV
SURSRUWLRQDO WR WKH VTXDUH RI WKH QXPEHU RI WXUQV ' DQG D
IDFWRUWKDWGHSHQGVRQWKHTXRWLHQWVD'DQGU'
'
7KH PXWXDO LQGXFWDQFH EHWZHHQ WKH SKDVHV FRPHV LQ
DGGLWLRQGHSHQGLQJRQWKHGLVWDQFHEHWZHHQWKHSKDVHVDQG
ZKHWKHUWKHSKDVHVDUHSODFHGDERYHHDFKRWKHURUEHVLGHV
HDFKRWKHUVHH)LJXUH
D
U
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
9HUWLFDO
DVVHPEO\
+RUL]RQWDODVVHPEO\
)LJXUH
7KH DLU FRUH UHDFWRUV PD\ UHTXLUH UHODWLYHO\
ODUJH VSDFH EHFDXVH WKH PDJQHWLF ILHOG
VSUHDGV IUHHO\ LQ WKH VXUURXQGLQJV DQG PD\
FDXVHH[FHVVLYHKHDWLQJLQLURQUHLQIRUFHPHQWV
LQ FRQFUHWH ZDOOV IORRUV DQG FHLOLQJV ZLUH
IHQFHV DQG RWKHU PHWDO LWHPV $SSURSULDWH
GLVWDQFHIURPWKHUHDFWRUVPXVWWKHQEHNHSW
7KH GLVWDQFH VKRXOG EH VXIILFLHQWO\ ODUJH WR
NHHS WKH PDJQHWLF ILHOG EHORZ $P DW WKH
IORRU DQG DW WKH FHLOLQJ $W DGMDFHQW ZDOO WKH
PDJQHWLFILHOGVKRXOGQRWH[FHHG$P
)LJXUH
7KHVH ILHOG YDOXHV DUH UHIHUUHG WR FRQWLQXRXV UDWHG FXUUHQW WKURXJK WKH UHDFWRU RU WR WHPSRUDU\
FXUUHQWVODVWLQJPRUHWKDQDIHZPLQXWHV
7KH WKHUPDO WLPH FRQVWDQW RI UHLQIRUFHPHQW LURQ DQG ZLUH IHQFHV LV VKRUW 7KH VXSSOLHU VKRXOG
LQIRUPWKHSXUFKDVHUUHJDUGLQJQHFHVVDU\GLVWDQFHVIURPWKHUHDFWRUDWZKLFKWKHPDJQHWLFILHOG
YDOXHVKDYHGHFOLQHGWRWKRVHPHQWLRQHGDERYH
)LJXUH LOOXVWUDWHV WKH PDJQHWLF ILHOG DWWULEXWHG WR DQ DLUFRUH UHDFWRU ZLWKRXW DQ\ VKLHOG
&RQVLGHUDEOHIRUFHVGXHWRWKHILHOGFDQGUDZORRVHLURQLWHPVLQWKHYLFLQLW\LQWRWKHUHDFWRUDQG
FDXVHGDPDJH6RLWLVUHFRPPHQGHGWRNHHSWKHVXUURXQGLQJVFOHDQ
3RVVLEOH GLVWXUELQJ LQIOXHQFH RI WKH PDJQHWLF ILHOG RQ WKH IXQFWLRQLQJ RI RWKHU HOHFWURWHFKQLFDO
SURGXFWLQWKHYLFLQLW\PXVWEHFRQVLGHUHG
+XPDQVVKRXOGQRWUHJXODUO\VWD\IRUORQJHUWLPHQHDUWKHVWURQJPDJQHWLFILHOGIURPVXFKUHDFWRUV
ZKHQFXUUHQWLVIORZLQJWKURXJKWKHZLQGLQJV
127(3HUVRQVEHDULQJSDFHPDNHUVKRXOGVWD\IDUDZD\IURPVXFKUHDFWRUV
2LOLPPHUVHGFXUUHQWOLPLWLQJUHDFWRUV
'U\W\SHUHDFWRUVIRUKLJKHUYROWDJHVPD\QRWEHVXLWDEOHLQKHDYLO\SROOXWHGDUHDVEHFDXVHRIWKH
ULVNRIGLHOHFWULFIDLOXUH,QVXFKFDVHVRLOLPPHUVHGUHDFWRUVPLJKWEHPRUHUHOLDEOH
7R DYRLG H[FHVVLYH KHDWLQJ LQ WKH WDQN D IUDPH RI ODPLQDWHG FRUH VWHHO PXVW HQFORVH WKH RLO
LPPHUVHGUHDFWRUZLQGLQJ6HH)LJXUH$FRUHVWHHOOLPEZLWKJDSVLQWKHFHQWUHRIWKHZLQGLQJ
PD\ QRW EH QHFHVVDU\ 7KH GLPHQVLRQLQJ RI WKH UHDFWRU PXVW EH VXFK WKDW WKH LQGXFWDQFH LV
VXIILFLHQWO\ ODUJH ZKHQ VKRUW FLUFXLW FXUUHQW IORZV WKURXJK WKH UHDFWRU DQG ZKHQ VDWXUDWLRQ PD\
RFFXULQWKHFRUH
7KHHGG\FXUUHQWORVVHVLQWKHZLQGLQJVRIUHDFWRUVZLWKRXWDJDSSHGFHQWUHOLPERIODPLQDWHGFRUH
VWHHO DUH TXLWH KLJK EHFDXVH RI WKH VWURQJ PDJQHWLF ILHOG ZKHUH WKH ZLQGLQJ FRQGXFWRUV DUH
VLWXDWHG $ JDSSHG FHQWUH OLPE ZRXOG UHGXFH WKHVH HGG\ ORVVHV EXW RQ WKH RWKHU KDQG WKH FRUH
ZRXOGEHPRUHFRPSOLFDWHGDQGFRVWO\
3DJH7UDQVIRUPHU+DQGERRN
7KH PDJQHWLF ILHOG FDQ DOVR EH VKLHOGHG E\ PHDQV RI SODWHV RI KLJKO\ FRQGXFWLYH PDWHULDOV OLNH
FRSSHU RU DOXPLQLXP +RZHYHU WKH ORVVHV ZLOO EH KLJK LQ WKH VKLHOGV GXH WR WKH KLJK FRXQWHU
FLUFXODWLQJFXUUHQWVVRWKLVVKLHOGLQJPHWKRGLVRQO\DSSOLFDEOHIRUVPDOOHUUHDFWRUSRZHUUDWLQJV
7KH FRVW RI DQ RLOLPPHUVHG UHDFWRU ZLOO EH FRQVLGHUDEO\ KLJKHU WKDQ RI D GU\W\SH ZKLOH WKH RLO
LPPHUVHGUHDFWRUPLJKWEHOHVVVSDFHFRQVXPLQJ
6LQJOH
SKDVH
UHDFWRUZLWK
IUDPHFRUH
SKDVH
UHDFWRUZLWK
IUDPHFRUH
)LJXUH
:KHQHQTXLULQJIRUDFXUUHQWOLPLWLQJUHDFWRUWKHIROORZLQJLQIRUPDWLRQVKRXOGEHJLYHQ
•
•
•
•
•
•
•
•
6\VWHPYROWDJH
)UHTXHQF\
6KRUWFLUFXLWSRZHURIWKHIHHGLQJV\VWHP
,QVXODWLRQOHYHO
5DWHGFRQWLQXRXVFXUUHQWDQGRUUDWHGVKRUWWLPHFXUUHQWDQGGXUDWLRQ
5DWHG LPSHGDQFH RI WKH UHDFWRU RU DOWHUQDWLYHO\ WKH UHGXFHG VKRUW FLUFXLW SRZHU DIWHU
LQFOXGLQJWKHLPSHGDQFHFRQWULEXWLRQIURPWKHUHDFWRU
'U\W\SHRURLOLPPHUVHG
,QGRRURURXWGRRULQVWDOODWLRQ
1HXWUDOHDUWKLQJUHDFWRUV
7KHQHXWUDOSRLQWRISRZHUV\VWHPVFDQHLWKHUEHGLUHFWO\HDUWKHGRUDWWKHRWKHUHQGRIWKHVFDOH
LVRODWHG%RWKDOWHUQDWLYHVKDYHWKHLUDGYDQWDJHVDQGGUDZEDFNV
'LUHFWHDUWKLQJJLYHVWKHORZHVWYROWDJHRQWKHKHDOWK\SKDVHVGXULQJDVLQJOHSKDVHHDUWKIDXOW,W
RIIHUVDOVRHFRQRPLFVDYLQJWKURXJKWKHSRVVLELOLW\WRDSSO\ORZHULQVXODWLRQOHYHOLQWKHQHXWUDOHQG
RI WKH WUDQVIRUPHU ZLQGLQJ 7KH GUDZEDFN LV WKH KLJK IDLOXUH FXUUHQW ZKLFK WKH HTXLSPHQWKDV WR
FRSHZLWK
,VRODWHG QHXWUDO RU HDUWKLQJ WKURXJK KLJK LQGXFWLYH LPSHGDQFH OLPLWV WKH IDLOXUH FXUUHQW EXW WKH
YROWDJH RQ WKH KHDOWK\ SKDVHV GXULQJ D VLQJOHSKDVH HDUWK IDXOW ZLOO EH KLJKHU 6HH )LJXUH SDJHWKHSDUWRIWKHGLDJUDPIRUSRVLWLYH LQGXFWLYH YDOXHVRI;; (DUWKLQJWKURXJKDQDUFVXSSUHVVLRQUHDFWRU DOVRFDOOHGUHVRQDQWHDUWKLQJ LVDKLJKLPSHGDQFH
HDUWKLQJ ZKLFK JLYHV ORZ IDLOXUH FXUUHQW 6HH VHFWLRQ 7KH YROWDJH RQ WKH KHDOWK\ SKDVHV
GXULQJVLQJOHSKDVHHDUWKIDXOWZLOOKRZHYHUEHQHDUO\WKHVDPHDVZKHQWKHQHXWUDOLVLVRODWHG
1HXWUDOUHDFWRU HDUWKLQJ LV DQ HDUWKLQJ ZLWK UHODWLYHO\ ORZLPSHGDQFH VRPHZKHUH EHWZHHQ GLUHFW
HDUWKLQJDQLVRODWHGQHXWUDOOLPLWLQJWKHIDLOXUHFXUUHQWWRDQDFFHSWDEOHOHYHOZLWKRXWLQYROYLQJWRR
KLJKYROWDJHRQWKHKHDOWK\SKDVHV
8QGHU QRUPDO V\VWHP FRQGLWLRQV WKH YROWDJH DFURVV D QHXWUDOHDUWKLQJ UHDFWRU LV VPDOO DQG
FRQVHTXHQWO\ WKH FXUUHQW WKURXJK WKH UHDFWRU LV DOVR VPDOO 'XULQJ V\VWHP IDXOW WKH FXUUHQW ZLOO
LQFUHDVHFRQVLGHUDEO\DQGLWVGXUDWLRQLVXVXDOO\OLPLWHGWRVHFRQGV
/RVVHVLQQHXWUDOHDUWKLQJUHDFWRUVDUHZLWKRXWHFRQRPLFLPSRUWDQFH7KHGHVLJQHGFXUUHQWGHQVLW\
LQWKHZLQGLQJLVGHWHUPLQHGE\WKHUHDFWRU¶VDELOLW\WRZLWKVWDQGWKHPHFKDQLFDOIRUFHVGXHWRWKH
VKRUWWLPHIDXOWFXUUHQW
7UDQVIRUPHU+DQGERRN3DJH
7KH GHVLJQ FDQ EH GU\W\SH ZLWK DLU FRUH RU RLOLPPHUVHG ZLWK D JDSSHG FRUH RU ZLWK D PDJQHWLF
VKLHOG ,Q WKH ODWWHU FDVHV WKH LQGXFWDQFH RI WKH UHDFWRU PXVW EH KLJK HQRXJK XQGHU V\VWHP IDXOW
FRQGLWLRQVWROLPLWWKHIDLOXUHFXUUHQWWRWKHLQWHQGHGYDOXH
7KH LQVXODWLRQ OHYHO DW WKH WHUPLQDO FRQQHFWHG WR WKH V\VWHP QHXWUDO LV XVXDOO\ WKH VDPH DV WKH
LQVXODWLRQOHYHORIWKHQHXWUDO,QDOLJKWQLQJLPSXOVHWHVWRQWKHUHDFWRUDWHVWLPSXOVHZLWKDORQJHU
IURQWWLPHWKDQȝVXSWRȝVPD\EHDSSOLHG7KHUHDVRQLVWKDWWKHIURQWWLPHRIDOLJKWQLQJ
VXUJHIURPWKHOLQHZLOOEHSURORQJHGZKHQLWSDVVHVWKURXJKWKHWUDQVIRUPHUZLQGLQJEHIRUHLWKLWV
WKHUHDFWRU
7KH LQVXODWLRQ OHYHO DW WKH HDUWKHG WHUPLQDO RI WKH UHDFWRU PD\ EH PDGH ORZHU WKDQ DW WKH RWKHU
WHUPLQDO
&DSDFLWRUGDPSLQJUHDFWRUV
&DSDFLWRUGDPSLQJUHDFWRUVDUHXVHGIRUOLPLWLQJWKHLQUXVKFXUUHQWVRFFXUULQJGXULQJWKHVZLWFKLQJ
RIFDSDFLWRUEDWWHULHVWRDFQHWZRUNV7KH\DUHFRQQHFWHGLQVHULHVZLWKWKHFDSDFLWRUV
'XULQJ QRUPDO RSHUDWLRQ WKH FDSDFLWRU UDWHG FXUUHQW IORZV WKURXJK WKH GDPSLQJ UHDFWRU 7KH
PD[LPXPSHUPLVVLEOH RYHUORDG FXUUHQWRIWKHGDPSLQJUHDFWRULVHTXDOWRWKHFRUUHVSRQGLQJYDOXH
RIWKHFDSDFLWRUEDWWHU\DVFDOOHGIRULQUHOHYDQWVWDQGDUGVIRUSRZHU VKXQW FDSDFLWRUV
5HDFWRUVDUHDOVRXVHGWRGHWXQHFDSDFLWRUEDQNVWRDYRLGUHVRQDQFHZLWKWKHSRZHUV\VWHP
&DSDFLWRUGDPSLQJUHDFWRUVDUHVLQJOHSKDVHRUWKUHHSKDVHXVXDOO\GU\W\SHVHOIFRROHGZLWKDLU
FRUHIRULQGRRUVRURXWGRRUVLQVWDOODWLRQ
&DSDFLWRU GDPSLQJ UHDFWRUV DUH DEOH WR ZLWKVWDQG D UDWHG LQUXVK FXUUHQW ZKLFK PXVW EH KLJK
HQRXJK WR FRYHU DOO UHFRJQLVHG FDVHV RI VZLWFKLQJ WKH FDSDFLWRU EDWWHU\ RU EDWWHU\ VHFWLRQV 7KH
V\VWHP SODQQHU PXVW SURYLGH LQIRUPDWLRQ WR WKH UHDFWRU VXSSOLHU UHJDUGLQJ WKH UHOHYDQW LQUXVK
UHVRQDQW IUHTXHQF\ 7KH UHDFWRU VXSSOLHU VXSSOLHV LQIRUPDWLRQ DERXW WKH 4IDFWRU WKH UDWLR
UHDFWDQFHWRUHVLVWDQFH RIWKHGDPSLQJUHDFWRUDWWKLVIUHTXHQF\
7XQLQJ )LOWHU UHDFWRUV
7XQLQJ UHDFWRUV DUH FRQQHFWHG ZLWK FDSDFLWRUV WR WXQHG ILOWHU FLUFXLWV ZLWK UHVRQDQFH LQ WKH DXGLR
IUHTXHQF\ UDQJH WR UHGXFH EORFN RU ILOWHU KDUPRQLFV RU FRPPXQLFDWLRQ IUHTXHQFLHV 7KH WXQLQJ
UHDFWRUVDUHFRQQHFWHGHLWKHULQDSDUDOOHOFRQILJXUDWLRQLQWKHV\VWHP ZLWKV\VWHPYROWDJHDSSOLHG
DFURVVWKHP RULQDVHULHVFRQILJXUDWLRQ ZLWKORDGFXUUHQWIORZLQJWKURXJKWKHP )LJXUHLOOXVWUDWHVWKHWZRPDLQW\SHVRIILOWHUVLQWKHLUEDVLFIRUPV
&
&
/
/
6HULHVUHVRQDQWILOWHU
3DUDOOHOUHVRQDQWILOWHU
)LJXUH
$SDUDOOHOUHVRQDQWILOWHUKDVDKLJKLPSHGDQFHWKDWEORFNVIRUFXUUHQWVRIDFHUWDLQIUHTXHQF\ZKLOH
DVHULHVUHVRQDQWILOWHUKDVDORZLPSHGDQFHWKDWOHDGVDZD\FXUUHQWVRIDFHUWDLQIUHTXHQF\IURP
SDUWVRIWKHSRZHUV\VWHPZKHUHDUHXQGHVLUHG
)LOWHUVDUHSUHIHUDEO\ORFDWHGDVFORVHDVSRVVLEOHWRWKHVSRWZKHUHWKHKDUPRQLFVDUHJHQHUDWHG
7XQLQJ UHDFWRUV DUHVLQJOHSKDVH RU WKUHHSKDVH UHDFWRUVRLOLPPHUVHG RU GU\W\SH 7KHUHDFWRUV
PD\ EH GHVLJQHG ZLWK PHDQV IRU DGMXVWLQJ WKH LQGXFWDQFH YDOXH ZLWKLQ D OLPLWHG UDQJH HLWKHU E\
WDSSLQJVRUE\PRYHPHQWRIFRUHDQGRUFRLOV7KHSUHIHUUHGRUUHFRPPHQGDEOHGHVLJQVROXWLRQLQ
HDFKSDUWLFXODUFDVHVKRXOGEHLQGLFDWHGDOUHDG\LQWKHHQTXLU\RUWKHWHQGHU
1DNHG GU\W\SH DLU FRUH UHDFWRUV PLJKW RIIHU WKH ORZHVW SXUFKDVH SULFH +RZHYHU ZKHQ HUHFWHG
RXWGRRUVDWPRLVWDQGKHDYLO\SROOXWHGORFDWLRQVVXFKUHDFWRUVPD\EHPRUHYXOQHUDEOHWRGLHOHFWULF
IDLOXUHWKDQRLOLPPHUVHGUHDFWRUV
3DJH7UDQVIRUPHU+DQGERRN
7XQLQJUHDFWRUVIRUDXGLRIUHTXHQF\VLJQDOVPD\EHHTXLSSHGZLWKDVHFRQGZLQGLQJFRQQHFWHGWR
WKHDXGLRIUHTXHQF\VRXUFHRUWRRWKHUFRPSRQHQWV
:KHQ FRQQHFWHG LQ SDUDOOHO FRQILJXUDWLRQ WKH UHDFWRUV DUH VXEMHFWHG WR LQUXVK WUDQVLHQWV DW
VZLWFKLQJ RSHUDWLRQV :KHQ FRQQHFWHG LQ VHULHV FRQILJXUDWLRQ WKH\ DUH DOVR VXEMHFWHG WR
RYHUFXUUHQWVGXHWRV\VWHPIDXOWVZKLFKWKH\PXVWZLWKVWDQGXQGHUUHFRJQLVHGFRQGLWLRQV
,Q WKUHHSKDVH ILOWHU FLUFXLWV DWWHQWLRQ VKRXOG EH SDLG WR WKH PDJQHWLF FRXSOLQJ EHWZHHQ GLIIHUHQW
UHDFWRUSKDVHV
$ FXUUHQW ZLWK WKH IUHTXHQF\ RI WKH SRZHU V\VWHP IORZV WKURXJK WKH UHDFWRU ZLQGLQJ ,Q DGGLWLRQ
FRPHVDFXUUHQWRIWKHUHVRQDQFHIUHTXHQF\RIWKHILOWHUFLUFXLWZKHUHWKHUHDFWRULVDFRPSRQHQW
7KHODWWHUFXUUHQWPD\EHFRQWLQXRXVRULQWHUPLWWHQW7KHVXPRIWKHVHWZRFXUUHQWFRPSRQHQWVLV
RQHRIWKHSDUDPHWHUVWKDWGHWHUPLQHWKHGLPHQVLRQLQJRIWKHUHDFWRU
7KHYROWDJHDFURVVWKHUHDFWRULVWKHVXPRIWKHYROWDJHGURSGXHWRWKHSRZHUIUHTXHQF\FXUUHQW
DQGWKHWXQLQJIUHTXHQF\FXUUHQW
7KHUDWHGLQGXFWDQFH/RIWKHUHDFWRULVUHIHUUHGWRWKHWXQLQJIUHTXHQF\
:KHQ GHVLJQLQJ D WXQLQJ RU ILOWHU UHDFWRU WKH YDOXH RI WKH PD[LPXP VKRUWWLPH FXUUHQW DQG LWV
GXUDWLRQPXVWEHNQRZQ
7KHVSHFWUXPRIVLJQDOIUHTXHQF\YROWDJHDQGFXUUHQWLQWKHV\VWHPVKRXOGDOVREHNQRZQ
$SURSHUW\RILQWHUHVWLVWKH4IDFWRURIWKHUHDFWRUZKLFKLVWKHUDWLREHWZHHQWKHUHDFWRUUHDFWDQFH
DQGUHVLVWDQFHDWWXQLQJIUHTXHQF\DQGUHIHUHQFHWHPSHUDWXUH
7KHLQVXODWLRQOHYHORIWXQLQJUHDFWRUVFRUUHVSRQGVXVXDOO\WRWKHKLJKHVWYROWDJHIRUHTXLSPHQW8P
RI WKH V\VWHP ZKHUH WKH UHDFWRU LV LQVWDOOHG XQOHVV SDUWLFXODU UHDVRQV PRWLYDWH D GLIIHUHQW OHYHO
,IRQHWHUPLQDORIWKHUHDFWRULVLQWHQGHGIRUGLUHFWHDUWKLQJQRQXQLIRUPLQVXODWLRQPD\EHDSSOLHG
,IDQDXGLRVLJQDOUHDFWRUKDVDVHFRQGZLQGLQJWKLVZLQGLQJVKRXOGEHGHVLJQHGZLWKFRQVLGHUDWLRQ
RISRVVLEOHWUDQVIHUUHGRYHUYROWDJHVIURPWKHSRZHUV\VWHP
(DUWKLQJWUDQVIRUPHUV 1HXWUDOFRXSOHUV (DUWKLQJWUDQVIRUPHUVDUHXVHGWRFUHDWHDQHXWUDOSRLQWLQDWKUHHSKDVHV\VWHPZKLFKSURYLGHV
SRVVLELOLW\IRUQHXWUDOHDUWKLQJ7KHHDUWKLQJFDQEHWKURXJKDQDUFVXSSUHVVLRQUHDFWRU VHH
SDJH DQHXWUDOHDUWKLQJUHDFWRU VHHSDJH RUUHVLVWRURUGLUHFWO\
7KH GHVLJQ FDQ EH D WUDQVIRUPHU ZLWK MXVW RQH ZLQGLQJ ZKLFK LV ]LJ]DJ FRQQHFWHG 7KH ]HUR
VHTXHQFHLPSHGDQFHRIVXFKDZLQGLQJLVQRUPDOO\TXLWHORZEXWLWFDQEHLQFUHDVHGLIWKHSXUSRVH
LVWROLPLWWKHFXUUHQWWKURXJKWKHWUDQVIRUPHULQFDVHRIDQHDUWKIDXOWVRPHZKHUHLQWKHV\VWHP
)LJXUH VKRZV WKH FRQQHFWLRQ GLDJUDP 'XULQJ XQGLVWXUEHG V\VWHP RSHUDWLRQ ZLWK EDODQFHG
V\PPHWULFDO YROWDJHVWKHFXUUHQWWKURXJKWKHHDUWKLQJWUDQVIRUPHULVVPDOODQGRIWKHVDPHVL]H
DVWKHPDJQHWLVLQJFXUUHQW8QEDODQFHGYROWDJHVZLOOFDXVHVRPHKLJKHUFXUUHQWVIORZLQJWKURXJK
WKHHDUWKLQJWUDQVIRUPHUZKLFKLWPXVWEHFDSDEOHWR
FDUU\
5
$Q DOWHUQDWLYH FRQQHFWLRQ WR WKH ]LJ]DJ LV VWDUGHOWD
FRQQHFWLRQ ZKHUH WKH GHOWD FRQQHFWHG ZLQGLQJ ZLOO
FRPSHQVDWH WKH ]HUR VHTXHQFH PDJQHWLF ILHOG VR LW
ZLOO EH FRQILQHG WR D OHDNDJH ILHOG EHWZHHQ WKH VWDU
DQG WKH GHOWD ZLQGLQJ DQG PDNH WKH ]HUR VHTXHQFH
LPSHGDQFH RI WKH WUDQVIRUPHU UHODWLYHO\ VPDOO
+RZHYHU LI LW LV GHVLUHG WR LQFUHDVH WKH ]HUR
VHTXHQFH LPSHGDQFH WKLV FDQ EH DFKLHYHG E\
RSHQLQJWKHGHOWDFRQQHFWLRQDQGLQVHUWDUHDFWRURU
UHVLVWRU
6
7
1
)LJXUH
,WLVSRVVLEOHWRSURYLGHWKHHDUWKLQJWUDQVIRUPHUZLWKDVHFRQGDU\ZLQGLQJIRUFRQWLQXRXVDX[LOLDU\
VWDWLRQVXSSO\
(DUWKLQJ WUDQVIRUPHUV DUH XVXDOO\ RLO LPPHUVHG DQG PD\ EH LQVWDOOHG RXWGRRU ,Q FDVHV ZKHUH D
VHSDUDWH UHDFWRU LV FRQQHFWHG EHWZHHQ WKH WUDQVIRUPHU QHXWUDO DQG HDUWK WKH UHDFWRU DQG WKH
WUDQVIRUPHUFDQEHLQFRUSRUDWHGLQWKHVDPHWDQN
7UDQVIRUPHU+DQGERRN3DJH
:KHQ WKH HDUWKLQJ WUDQVIRUPHU LV JRLQJ WR EH XVHG WRJHWKHU ZLWK DQ DUFVXSSUHVVLRQ UHDFWRU WKH
UDWHG FXUUHQW DQG LWV GXUDWLRQ RI WKH HDUWKLQJ WUDQVIRUPHU ZLOO EH GHWHUPLQHG E\ WKH GDWD IRU WKH
DUFVXSSUHVVLRQUHDFWRU
,I WKH HDUWKLQJ WUDQVIRUPHU LV XVHG IRU GLUHFWO\ HDUWKLQJ RU WKURXJK D FXUUHQW OLPLWLQJ UHDFWRU WKH
QHXWUDO FXUUHQW WKURXJK WKH WUDQVIRUPHU ZLOO EH KLJK EXW WKH GXUDWLRQ LV OLPLWHG WR D IHZ VHFRQGV
(DUWKLQJ WUDQVIRUPHU PXVW EH GHVLJQHG WR ZLWKVWDQG WKH WKHUPDO DQG PHFKDQLFDO HIIHFWV RI WKH
UDWHGQHXWUDOFXUUHQW
7KHFKDUDFWHULVWLFRIHDUWKLQJWUDQVIRUPHUVKRXOGEHVHOHFWHGWRPDWFKWKHSURSHUW\RIWKHV\VWHP
6HHVHFWLRQSDJH
0RVW RI WKH WLPH LQ VHUYLFH WKH ORDGLQJ RI HDUWKLQJ WUDQVIRUPHUV LV YHU\ ORZ ,W LV WKH UDQGRPO\
RFFXUULQJ VKRUWGXUDWLRQ FXUUHQWV WKDW FDXVH DQ\ KHDWLQJ RI VLJQLILFDQFH $JHLQJ RI WKH FHOOXORVH
PDWHULDOV LV WKHQ QRW D PDWWHU RI FRQFHUQ 5HJDUGLQJ DFFHSWDEOH WHPSHUDWXUHV WKHUH DUH WZR
DVSHFWVWRFRQVLGHU
7KH WHPSHUDWXUH GXULQJ FXUUHQWV RI VD\ VHFRQGV GXUDWLRQ PXVW QRW FDXVH VRIWHQLQJ RI WKH
ZLQGLQJFRQGXFWRUPDWHULDOVD\ƒ&IRUFRSSHUDQGƒ&IRUDOXPLQLXP 6HH7DEOHLQ,(&
3RZHUWUDQVIRUPHUV±3DUW$ELOLW\WRZLWKVWDQGVKRUWFLUFXLW )RU FXUUHQWV ZLWK GXUDWLRQ LQ WKH RUGHU RI KRXUV RU PRUH WHPSHUDWXUHV WKDW FDXVH H[FHVVLYH JDV
GHYHORSPHQW LQ WKH RLO VKRXOG EH DYRLGHG 7HPSHUDWXUHV IRU LWHPV LQ GLUHFW FRQWDFW ZLWK WKH RLO
VKRXOGWKHQQRWH[FHHGƒ&
7KHV\VWHPHDUWKIDXOWSURWHFWLRQUHOD\PD\QRWEHHIIHFWLYHDWORZFXUUHQWV7RSUHYHQWGDPDJHWR
HDUWKLQJ WUDQVIRUPHU E\ VXFK FXUUHQW RLO WKHUPRPHWHU ZLWK DODUPWULS FRQWDFWV LV UHFRPPHQGHG
$OWHUQDWLYHO\ WKH YDOXH RI PD[LPXP FRQWLQXRXV HDUWK IDXOW FXUUHQW PD\ EH GHFODUHG DQG VHQVLWLYH
SURWHFWLRQSURYLGHG
)RUHDUWKLQJWUDQVIRUPHUVWKDWFDUU\FRQWLQXRXVORDGEHFDXVHRIDVHFRQGDU\ZLQGLQJWKDWVXSSOLHV
ORFDO FRQVXPHUV WKH WHPSHUDWXUH OLPLWV LQ ,(& 3RZHU WUDQVIRUPHUV 3DUW 7HPSHUDWXUHULVHDSSO\
$UFVXSSUHVVLRQUHDFWRUV
$UFVXSSUHVVLRQ UHDFWRUV DUH DOVR QDPHG HDUWK IDXOW QHXWUDOLVHUV RU 3HWHUVHQFRLOV DIWHU :
3HWHUVHQZKRODXQFKHGWKHLGHDRIWKLVSDUWLFXODUUHDFWRUDSSOLFDWLRQHDUO\LQWKHSUHYLRXVFHQWXU\
%DFNJURXQG
,QKLJKYROWDJHSRZHUV\VWHPVVLQJOHSKDVHHDUWKIDXOWVPD\WDNHSODFH7KHVHPD\EHLQLWLDWHGE\
WUDQVLHQW RYHUYROWDJHV RIWHQ FRPELQHG ZLWK UHGXFHG GLHOHFWULF VWUHQJWK GXH WR FRQWDPLQDWHG
LQVXODWRUV RU WKH SUHVHQFH RI DQLPDOV OLNH ELUGV VTXLUUHO HWF $UFV DULVH ZKLFK OHDG FDSDFLWLYH
FXUUHQWV,IWKHFXUUHQWLVDERYHFHUWDLQOHYHOVWKHDUFPD\ODVWIRUDORQJWLPHDQGFDXVHFRQGXFWRU
UXSWXUHDQGGDPDJHWRPDWHULDOOLNHLQVXODWRUV,WPD\HYHQFDXVHILUH
,WLVJHQHUDOO\DVVXPHGWKDWDUFVH[WLQJXLVKE\WKHPVHOYHVZKHQWKHDUFFXUUHQWLVEHORZ$
7KH SXUSRVH RI WKH DUFVXSSUHVVLRQ UHDFWRU LV WR UHGXFH WKH DUF FXUUHQW DQG WKXV SURYLGH WKH
FRQGLWLRQ IRU WKH DUF WR H[WLQJXLVK ,Q RUGHU WR GHWHUPLQH WKH DSSURSULDWH LQGXFWDQFH RI DQ DUF
VXSSUHVVLRQ UHDFWRU LW LV QHFHVVDU\ WR NQRZ WKH HDUWKIDXOW FXUUHQW 7KLV LV LQ WXUQ JLYHQ E\ WKH
FDSDFLWDQFHWRHDUWK&HRIHDFKSKDVHFRQGXFWRURIWKHSRZHUV\VWHP
%DVLFSULQFLSOHRIWKHDUFVXSSUHVVLRQUHDFWRU
7RLOOXVWUDWHWKHHIIHFWRIDQDUFVXSSUHVVLRQUHDFWRUZHZLOOXVHDQH[DPSOHZKLFKLVVRPHZKDW
VLPSOLILHGEXWVWLOOVXIILFLHQWWRH[SODLQWKHSULQFLSOH
3DJH7UDQVIRUPHU+DQGERRN
7
6
,F7
,F6
,H
5
&H
,H
)LJXUH
)LJXUHVKRZVWRWKHOHIWDQHQHUJ\VRXUFHWKDWPLJKWEHDVHFRQGDU\ZLQGLQJRIDWUDQVIRUPHU
ZLWKWKHWHUPLQDOV56DQG7,WLVFRQQHFWHGWRDV\VWHPZKHUHHDFKSKDVHKDVDFDSDFLWDQFHWR
HDUWK&H7KLVFDSDFLWDQFHLVGLVWULEXWHGDORQJWKHZKROHOHQJWKRIWKHFRQGXFWRUVEXWLVLQGLFDWHG
DVRQHFRQFHQWUDWHGFDSDFLWRU&HSHUSKDVH$VVXPHWKDWWKLVFDSDFLWDQFHLVWKHVDPHLQDOOWKUHH
SKDVHVZKLFKPHDQVWKDWWKHSKDVHFRQGXFWRUVRIRYHUKHDGOLQHVDUHSHUIHFWO\UHYROYHG
$QHDUWKIDXOWLVLQGLFDWHGLQSKDVH5)RUWKHVDNHRIVLPSOLFLW\ZHDVVXPHWKDWWKHLPSHGDQFHDW
WKHIDLOXUHVSRWLVVRVPDOOWKDWLWFDQEHQHJOHFWHG,QRWKHUZRUGVWKHSRWHQWLDORISKDVH5LVHTXDO
WRWKHHDUWKSRWHQWLDOZKLFKLQXQGLVWXUEHGDQGV\PPHWULFDOFRQGLWLRQOLHVLQRUFORVHWRWKHQHXWUDO
SRLQW VWDUSRLQW RIWKHWUDQVIRUPHUZLQGLQJ
'XHWRWKHHDUWKIDXOWWKHSRWHQWLDOVWRHDUWKRISKDVHV6DQG7KDYHLQFUHDVHG,QQRUPDORSHUDWLRQ
WKHUHLVDQH[FKDQJHRIFXUUHQWVEHWZHHQWKHV\VWHPDQGHDUWKLQVXFKDZD\WKDWWKHFDSDFLWDQFH
WRHDUWKRIRQHSKDVHVHUYHVDVUHWXUQSDWKIRUWKHFXUUHQWWKURXJKWKHFDSDFLWDQFHRIWKHWZRRWKHU
SKDVHVDQGYLFHYHUVD
7KHHDUWKIDXOWKDVDOWHUHGWKLVFDSDFLWLYHFXUUHQWIORZ1RZWKHUHWXUQRIWKHFXUUHQWWRHDUWKIURP
SKDVH6DQG7JRHVWKURXJKWKHHDUWKIDXOWDQGLQWRSKDVH5%HFDXVHRIWKHLQFUHDVHGSRWHQWLDOV
WRHDUWKRISKDVH6DQG7WKHFXUUHQWVWRHDUWKIURPWKHVHSKDVHVKDYHDOVRLQFUHDVHG7KHYHFWRU
UHODWLRQVKLSVEHWZHHQYROWDJHVDQGFXUUHQWVDUHVKRZQLQ)LJXUH
7
6
8W
,FV
R
R
,H
8V
∆X
5
,FW
)LJXUH
,Q WKLV H[DPSOH WKH SRWHQWLDO LQ UHODWLRQ WR HDUWK RQ WKH VRXQGSKDVHV 6 DQG7 LV DVVXPHG WR EH
HTXDOWRWKHQRUPDOV\VWHPYROWDJH8 OLQHWROLQH ,QRWKHUZRUGVWKHSRWHQWLDOWRHDUWKRQWKHVH
SKDVHVKDVLQFUHDVHGE\DIDFWRURI¥ 7KLVIDFWRUPD\LQSUDFWLFHEHORZHURUKLJKHUWKDQ ¥ 7KHQHXWUDOKDVVKLIWHGǻXZKLFKLQWKLVFDVHLVHTXDOWRWKHQRUPDOOLQHWRQHXWUDOYROWDJH
7UDQVIRUPHU+DQGERRN3DJH
7KHFDSDFLWLYHFXUUHQWVWRHDUWKIURPSKDVH6DQG7,FVDQG,FWDUHOHDGLQJƒLQUHODWLRQWR8VDQG
8WUHVSHFWLYHO\7KHFDSDFLWLYHFXUUHQWLQWKHHDUWKIDXOW,HLVWKHYHFWRULDOVXPRI,FVDQG,FW
,FV = ,FW = 8 ⋅ ω ⋅ & H ,H = ⋅ 8 ⋅ ω ⋅ & H ⋅ FRV R = ⋅ 8 ⋅ ω ⋅ & H 'HSHQGLQJ RQ &H ZKLFK LV SURSRUWLRQDO WR WRWDO OHQJWK RI OLQHV DQG FDEOHV LQ WKH V\VWHP ,H PD\
EHFRPHTXLWHKLJKDQGPD\VXVWDLQDQDUFDWWKHIDLOXUHVSRW
6
,F7
7
,F6
,H
/
5
,/
,H
&H
,/
,/
)LJXUH
:KHQFRQQHFWLQJDQDUFVXSSUHVVLRQUHDFWRU/EHWZHHQWKHQHXWUDORIWKHWUDQVIRUPHUZLQGLQJDQG
HDUWKDQLQGXFWLYHFXUUHQWIORZVWKURXJK/WRHDUWKZKHUHLWILQGVLWVUHWXUQSDWKWKURXJKWKHHDUWK
IDXOW 7KH LQGXFWLYH FXUUHQW WKURXJK WKH HDUWK IDXOW KDV WKH RSSRVLWH GLUHFWLRQ RI WKH FDSDFLWLYH
FXUUHQWSURYLGHGE\SKDVHV6DQG7
7
6
8W
,FV
,H
8V
∆X
R
R
5
,/
,FW
)LJXUH
)LJXUH VKRZV WKH ,/ YHFWRU DGGHG WR WKH SUHYLRXV YHFWRU GLDJUDP LQ )LJXUH EHIRUH WKH
SUHVHQFH RI WKH DUFVXSSUHVVLRQ UHDFWRU ǻX LV WKH YROWDJH WKDW GULYHV WKH FXUUHQW ,/ WKURXJK WKH
UHDFWRUDQG,/LVQDWXUDOO\ODJJLQJƒLQUHODWLRQWRǻX
%\ DGMXVWLQJ WKH UHDFWDQFH RI WKH UHDFWRU ,/ FDQ EH JLYHQ WKH VDPH QXPHULFDO YDOXH DV ,H DQG
EHFDXVH,HDQG,/KDYHRSSRVLWHGLUHFWLRQVWKHUHVXOWLQJFXUUHQWWKURXJKWKHIDXOWZLOOEHFRPH]HUR
RUFORVHWR]HUR7KHQWKHDUFDWWKHIDLOXUHVSRWLVJLYHQDKLJKSUREDELOLW\WRH[WLQJXLVKE\LWVHOI
DQGWKHRSHUDWLRQRIWKHSRZHUV\VWHPFDQFRQWLQXHXQGLVWXUEHGDQGZLWKRXWDQ\LQWHUUXSWLRQRIWKH
HOHFWULFLW\VXSSO\
3DJH7UDQVIRUPHU+DQGERRN
'HWHUPLQDWLRQRIUHDFWRUGDWD
$VGHVFULEHGLQWKHSUHYLRXVVHFWLRQWKHFXUUHQWWKURXJKWKHUHDFWRUVKDOOHTXDOLVHWKHFDSDFLWLYH
FXUUHQWGHWHUPLQHGE\WKHFDSDFLWDQFHWRHDUWKRIWKHV\VWHPZKHUHWKHUHDFWRULVWREHLQVWDOOHG
7KHQLWLVQHFHVVDU\WRNQRZ&H
&HFDQEHIRXQGE\GLUHFWPHDVXUHPHQWLQWKHSRZHUV\VWHP+RZHYHUWKHV\VWHPPLJKWUDUHO\EH
DWGLVSRVDOIRUVXFKPHDVXUHPHQWVVR&HPXVWWKHQEHHVWLPDWHGRQWKHEDVLVRIFDOFXODWLRQV
6\VWHPV PD\ FRQWDLQ ERWK RYHUKHDG OLQHV DQG FDEOHV DQG RQH NLORPHWUH RI FDEOH KDV D PXFK
KLJKHU FDSDFLWDQFH WR HDUWK WKDQ RQH NLORPHWUH RI RYHUKHDG OLQH 7KH FRQWULEXWLRQ WR &H IURP WKH
FDEOHVFDQEHFDOFXODWHGEDVHGRQVSHFLILFGDWDIURPWKHFDEOHVXSSOLHUVDQGWKHWRWDOOHQJWKRIWKH
FDEOHV
7KH FRQWULEXWLRQ WR &H IURP WKH RYHUKHDG OLQHV PLJKW QRW EH MXVW DV HDVLO\ WR GHWHUPLQH ZLWK WKH
VDPHDFFXUDF\DVIRUFDEOHV&HIRURYHUKHDGOLQHVLVGHWHUPLQHGE\VHYHUDOSDUDPHWHUVVXFKDV
•
•
•
•
WKHKHLJKWRIWKHFRQGXFWRUVDERYHWKHHDUWK
WKHJHRPHWULFFRQILJXUDWLRQRIWKHWKUHHSKDVHFRQGXFWRUV
WKHQXPEHURISDUDOOHOFRQGXFWRUVSHUSKDVH
WKHQXPEHURIHDUWKZLUHVLIDQ\DQGWKHLUGLVWDQFHWRWKHSKDVHFRQGXFWRUVDQGWRWKH
HDUWK
• WKHGLPHQVLRQVRIWKHFRQGXFWRUV
• WKHH[WHQWRIYHJHWDWLRQEHORZWKHOLQH
• VHDVRQDOYDULDWLRQVGXHWRLFHDQGVQRZ
([DFW IRUPXODV IRU WKH FDSDFLWDQFH WR HDUWK XQGHU LGHDOLVHG FRQGLWLRQV SODQH HDUWK FRQVWDQW
GLVWDQFHV WR HDUWK DQG EHWZHHQ FRQGXFWRUV DUH GHGXFHG LQ WKH OLWHUDWXUH IRU H[DPSOH >@
+RZHYHU WDNLQJ LQWR FRQVLGHUDWLRQ WKDW WKH UHDFWDQFH RI DUFVXSSUHVVLRQ UHDFWRUV FDQ EH YDULHG
ZLWKLQZLGHOLPLWVVLPSOHUDSSUR[LPDWHFDOFXODWLRQPHWKRGVRI&HZLOOEHVXIILFLHQWIRUWKHSXUSRVH
+XQWHU DQG /LJKW >@ KDYH IRXQG VRPH W\SLFDO YDOXHV RI &H RI RYHUKHDG OLQHV DW D QXPEHU RI
GLIIHUHQWVHUYLFHYROWDJHOHYHOVDQGFRUUHVSRQGLQJHDUWKIDXOWFXUUHQWVSHUN9V\VWHPYROWDJHDQG
NP OLQH OHQJWK KDYH WKHQ EHHQ FDOFXODWHG E\ PHDQV RI HTXDWLRQ 7KH UHVXOW LV VKRZQ LQ
7DEOHEHORZ
7DEOH
6\VWHPYROWDJH
N9
(DUWKIDXOWFXUUHQW
$ N9 NP )LJXUH D DQG E VKRZV W\SLFDO FKDUJLQJ FXUUHQWV HDUWK IDXOW FXUUHQWV LQ DQ RYHUKHDG OLQH
V\VWHPDVIXQFWLRQVRIWKHOLQHOHQJWKZLWKWKHV\VWHPYROWDJHVDVSDUDPHWHUV7KHGLDJUDPVDUH
YDOLG IRU +] )RU +] WKH FXUUHQWV PXVW EH LQFUHDVHG E\ )URP WKHVH GLDJUDPV WKH
FDSDFLWLYHIDXOWFXUUHQWFDQHDVLO\EHHVWLPDWHG7KHQRPLQDOFXUUHQWRIDQDUFVXSSUHVVLRQUHDFWRU
VKRXOGEHWKHVDPHDVWKHFDSDFLWLYHIDXOWFXUUHQWZKLFKPHDQVWKDWWKHUHDFWRUPXVWEHFDSDEOH
WRFDUU\WKLVFXUUHQWIRUDFHUWDLQWLPHDQGLQDGGLWLRQWKHUHDFWDQFHRIWKHUHDFWRUPXVWEHVXFK
WKDWLWOHWVWKLVFXUUHQWWKURXJKZKHQDFHUWDLQYROWDJHDSSHDUDFURVVWKHUHDFWRU7KLVYROWDJHVKDOO
EH WKH KLJKHVW YROWDJH WKH UHDFWRU ZLOO EH H[SRVHG WR LQ VHUYLFH ,Q SUDFWLFH WKLV LV WDNHQ DV WKH
KLJKHVW V\VWHP YROWDJH GLYLGHG E\ ¥ 7KDW LV WKH SKDVHWR QHXWUDO YROWDJH ZKHQ WKH V\VWHP LV
EDODQFHG V\PPHWULFDO 7UDQVIRUPHU+DQGERRN3DJH
$PSHUHVFKDUJLQJFXUUHQWLQD
VLQJOHOLQHWRHDUWKIDXOWDW+]
N9
N9
N9
D
N9
N9
/HQJWKRIRYHUKHDGOLQHV NP
$PSHUHVFKDUJLQJFXUUHQWLQD
VLQJOHOLQHWRHDUWKIDXOWDW+]
N9
N9
E
N9
N9
N9
/HQJWKRIRYHUKHDGOLQHV NP
)LJXUH
:KHQDOVRFDEOHVDUHSDUWVRIWKHV\VWHPWKHFRQWULEXWLRQIURPWKHFDEOHVWRWKHHDUWKIDXOWFXUUHQW
PXVW EH WDNHQ LQWR DFFRXQW 7KLV VKRXOG SUHIHUDEO\ EH EDVHG RQ LQIRUPDWLRQ IURP WKH FDEOH
VXSSOLHUVEXWLQFDVHVXFKLQIRUPDWLRQLVODFNLQJZHSURYLGHVRPHGDWDDVJXLGDQFH
7KHFDSDFLWDQFHWRHDUWKRIFDEOHVPD\YDU\ZLWKLQDUDQJHRI±ȝ)NPGHSHQGLQJRQWKH
FDEOHGHVLJQDQGGLPHQVLRQV:HFRQVLGHUWKUHHGLIIHUHQWGHVLJQVZKLFKDUHVKRZQLQ)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
6KLHOG
6KHDWK
%HOWHGWKUHHFRUH
&DEOHZLWKVHSDUDWHO\
VKLHOGHGSKDVH
FRQGXFWRUV +W\SH DQG
VHSDUDWHOHDGVKHDWKHG
FDEOH 6/W\SH 6LQJOHFRUH
)LJXUH
7KH HDUWKLQJ FDSDFLWDQFH IRU HDFK SKDVH &H H[SUHVVHG LQ ȝ)NP FDEOH LV LQGLFDWHG RQ WKH
RUGLQDWHD[LVLQWKHIROORZLQJ)LJXUH)LJXUHDQG)LJXUH
µ )NP
(DUWKFDSDFLWDQFH
N9
N9
N9
N9
&RQGXFWRUDUHDPP
&RQGXFWRU±WRHDUWKFDSDFLWDQFH&HRIEHOWHGWKUHHFRUHFDEOHV
DVDIXQFWLRQRIFRQGXFWRUFURVVVHFWLRQ3DSHULQVXODWLRQ
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
(DUWKFDSDFLWDQFH
µ)NP
N9
N9
N9
N9
N9
N9
&RQGXFWRUDUHDPP
&RQGXFWRUWRHDUWKFDSDFLWDQFH&HRIVLQJOHFRUH6/DQG+W\SHFDEOHV
DVDIXQFWLRQRIFRQGXFWRUFURVVVHFWLRQ3DSHULQVXODWLRQ
)LJXUH
(DUWKFDSDFLWDQFH
µ )NP
N9
N9
N9
N9
N9
&RQGXFWRUDUHDPP
&RQGXFWRU±WRHDUWKFDSDFLWDQFH&HRI;/3(LQVXODWHGFDEOHV
DVDIXQFWLRQRIFRQGXFWRUFURVVVHFWLRQ
)LJXUH
7RGHWHUPLQHWKHFDSDFLWLYHHDUWKIDXOWFXUUHQWEDVHGRQWKHGLDJUDPVLQ)LJXUHVRU
WKH RUGLQDWH < UHDG IURP WKH FRQGXFWRU DUHD RQ WKH [D[LV DQG WKH FXUYH IRU WKH UHOHYDQW V\VWHP
YROWDJHVKRXOGEHLQVHUWHGLQWKHIROORZLQJIRUPXOD
, H = ⋅ ⋅ π ⋅ I ⋅ < ⋅ 8 ⋅ / F ⋅ 3DJH7UDQVIRUPHU+DQGERRN
,QWKLVIRUPXOD
,HLVWKHFDSDFLWLYHHDUWKIDXOWFXUUHQWLQDPSHUHV
ILVWKHSRZHUIUHTXHQF\
<LVWKHRUGLQDWHIURPRQHRIWKHGLDJUDPVLQ)LJXUH)LJXUHRU)LJXUHLQȝ)NP
8LVWKHV\VWHPYROWDJH OLQHWROLQH LQN9
/FLVWKHWRWDOOHQJWKRIWKHDFWXDOW\SHRIFDEOHLQWKHV\VWHPLQNP
7KHWRWDOFDSDFLWLYHHDUWKIDXOWFXUUHQW
7KHWRWDOFDSDFLWLYHHDUWKIDXOWFXUUHQWLVGHWHUPLQHGE\DGGLQJDULWKPHWLFDOO\WKHFRQWULEXWLRQVIURP
WKHRYHUKHDGOLQHVDQGIURPWKHFDEOHV7KHUDWHGFXUUHQWRIWKHDUFVXSSUHVVLRQUHDFWRUVKRXOGEH
DW OHDVW WKH VDPH DV WKH WRWDO FDSDFLWLYH HDUWK IDXOW FXUUHQW 3UHIHUDEO\ IXWXUH H[WHQVLRQV VKRXOG
DOVREHWDNHQLQWRDFFRXQW,QJHQHUDOWKHUDWHGFXUUHQWRIWKHUHDFWRUVKRXOGQRWEHWRRVPDOO,Q
FDVH RI LPSHUIHFW WXQLQJ RI WKH UHDFWRU WKH UHVLGXDO UHDFWLYH FXUUHQW VKRXOG EH LQGXFWLYH $
FDSDFLWLYHUHVLGXDOFXUUHQWPD\FDXVHWKDWWKHYROWDJHWRHDUWKRQWKHKHDOWK\SKDVHVEHFRPHVVWLOO
KLJKHUWKDQWKHOLQHWROLQHV\VWHPYROWDJH
'HVLJQ
$UFVXSSUHVVLRQ UHDFWRUV DUH VLQJOH SKDVH 7KH\ KDYH D FRUH FRQVLVWLQJ RI VWHHO VKHHWV MXVW OLNH
WUDQVIRUPHUFRUHV,QPRVWFDVHVWKHFRUHKDVDFHQWUHOLPEZKLFKLVHQFORVHGE\WKHZLQGLQJDQG
WZRXQZRXQGVLGHOLPEVDQGWKHXSSHUDQGORZHU\RNHVFORVHWKHPDJQHWLFSDWK7KHFRUHGLIIHUV
IURPWUDQVIRUPHUFRUHVVLQFHWKHFHQWUHOLPEFRQVLVWVRIDQXPEHURIFRUHVWHHOSDFNHWVZLWKQRQ
PDJQHWLFJDSVLQEHWZHHQ
7KHZLQGLQJLVVLPLODUWRWUDQVIRUPHUZLQGLQJV,WPD\KDYHWDSSLQJVIRUWXQLQJWKHUHDFWDQFHWRWKH
FDSDFLWDQFH WR HDUWK RI WKH V\VWHP 7KH UHDFWDQFH FDQ EH YDULHG ZLWKLQ D FHUWDLQ UDQJH 7KH
UHODWLRQEHWZHHQWKHKLJKHVWDQGWKHORZHVWUHDFWDQFHLVIRUSUDFWLFDOUHDVRQVOLPLWHGWR)RU
ORZHUV\VWHPYROWDJHV N9DQGORZHU WKHUHODWLRQFDQEH
,IODUJHUDUDQJHLVUHTXLUHGFDQEHDFKLHYHGE\UHJXODWLQJWKHJDSVLQWKHFRUH5HJXODWLRQ
RI WKH JDSV FDQ EH PDGH E\ PHDQV RI DQ HOHFWULF PRWRU 7KLV UHJXODWLRQ LV FRQWLQXRXV ZKLOH
UHJXODWLRQE\PHDQVRIWDSSLQJVLQWKHZLQGLQJLVLQVWHSV
,QHVWDEOLVKHGV\VWHPVZKHUHWKHVLWXDWLRQLVTXLWHVWDEOHWKDWLVWKHUHDUHQRRUYHU\UDUHFKDQJHV
LQ WKH HDUWK FDSDFLWDQFH RI WKH V\VWHP UHDFWDQFH DGMXVWPHQW LQ VWHSV E\ PHDQV RI DQ RIIFLUFXLW
WDSFKDQJHU ZLOO EH DGHTXDWH ,Q V\VWHPV ZKLFK DUH VXEMHFW WR IUHTXHQW H[WHQVLRQV RU
VHFWLRQDOLVLQJDXWRPDWLFWXQLQJE\YDU\LQJWKHJDSVLQWKHFRUHPD\EHSUHIHUUHG
$UFVXSSUHVVLRQUHDFWRUVDUHRLOLPPHUVHGLQPRVWFDVHV
$UFVXSSUHVVLRQ UHDFWRUV DUH QRUPDOO\ HTXLSSHG ZLWK D VHFRQGDU\ ZLQGLQJ IRU LQGLFDWLRQ DQG
PHDVXUHPHQWRIWKHYROWDJHDFURVVWKHUHDFWRU7KHVHFRQGDU\ZLQGLQJLVVRPHWLPHVORDGHGZLWKD
UHVLVWDQFH LQ RUGHU WR LQFUHDVH WKH DFWLYH FRPSRQHQW RI WKH IDLOXUH FXUUHQW WR DFWLYDWH VHOHFWLYH
HDUWKIDXOWUHOD\VLQFDVHRIDSHUPDQHQWHDUWKIDXOW$QDUFVXSSUHVVLRQUHDFWRUGRHVRIFRXUVHQRW
UHPRYH DQ HDUWKIDXOW ZKHQ IRU H[DPSOH D FRQGXFWRU RI DQ RYHUKHDG OLQH KDV IDOOHQ GRZQ WR WKH
HDUWK+RZHYHUWKHUHDFWRUFDQLQVXFKFDVHVOLPLWWKHPDWHULDOGDPDJHVE\PLQLPLVLQJWKHIDXOW
FXUUHQW
1RUPDOO\ DUFVXSSUHVVLRQ UHDFWRUV KDYH D EXLOWLQ FXUUHQW WUDQVIRUPHU IRU LQGLFDWLRQ DQG
PHDVXUHPHQWRIWKHFXUUHQWWKURXJKWKHUHDFWRU
6\VWHPFRQQHFWLRQ
$UFVXSSUHVVLRQUHDFWRUVDUHFRQQHFWHGEHWZHHQWKHSRZHUV\VWHPQHXWUDODQGHDUWK7KHV\VWHP
QHXWUDOPD\EHDYDLODEOHDWWKHQHXWUDOEXVKLQJRIVWDURU]LJ]DJFRQQHFWHGWUDQVIRUPHUZLQGLQJV
,I D WUDQVIRUPHU ZLWK VXFK D ZLQGLQJ LV PLVVLQJ DW WKH ORFDWLRQ ZKHUH LQVWDOODWLRQ RI DQ DUF
VXSSUHVVLRQ UHDFWRU LV GHVLUHG DQ HDUWKLQJ UHDFWRU DOVR FDOOHG QHXWUDO FRXSOHU FDQ SURYLGH D
QHXWUDOSRLQW 6HHSDJH :KHQ GHWHUPLQLQJ WKH UHDFWDQFH RI DQ DUFVXSSUHVVLRQ UHDFWRU WKH ]HUR VHTXHQFH UHDFWDQFH RI
WKH WUDQVIRUPHU RU HDUWKLQJ UHDFWRU PXVW EH WDNHQ LQWR DFFRXQW 7KLV ]HUR VHTXHQFH UHDFWDQFH
FRPHVLQVHULHVZLWKWKHUHDFWRUUHDFWDQFH,WLVWKHQWKHVXPRIUHDFWRUUHDFWDQFHDQGRQHWKLUGRI
WKH]HURVHTXHQFHUHDFWDQFHRIWKHFRQQHFWHGWUDQVIRUPHURUHDUWKLQJUHDFWRUWKDWVKDOOHTXDOLVH
WKH V\VWHP FDSDFLWDQFH 7R GHWHUPLQH WKH UHDFWDQFH RI WKH DUFVXSSUHVVLRQ UHDFWRU WKH ]HUR
VHTXHQFHUHDFWDQFHRIWKHWUDQVIRUPHUZKHUHLWLVFRQQHFWHGPXVWEHNQRZQ
7UDQVIRUPHU+DQGERRN3DJH
7UDQVIRUPHU]HURVHTXHQFHLPSHGDQFH
,(& 3RZHUWUDQVIRUPHUV3DUW*HQHUDOGHILQHVWKH]HURVHTXHQFHLPSHGDQFH
RI D WKUHHSKDVH ZLQGLQJ DV WKH LPSHGDQFH H[SUHVVHG LQ RKPV SHU SKDVH DW UDWHG IUHTXHQF\
EHWZHHQ WKH OLQH WHUPLQDOV RI D WKUHHSKDVH VWDUFRQQHFWHG RU ]LJ]DJFRQQHFWHG ZLQGLQJ
FRQQHFWHGWRJHWKHUDQGLWVQHXWUDOWHUPLQDO
7KLVFDQEHIRXQGE\PHDVXUHPHQWLQWKHIROORZLQJZD\
0HDVXUHPHQWRI]HURVHTXHQFHLPSHGDQFH
)LJXUH
7KH]HURVHTXHQFHLPSHGDQFHLQRKPSKDVHLVJLYHQE\
= =
8
,
7KH ]HUR VHTXHQFH LPSHGDQFH PD\ DOVR EH H[SUHVVHG LQ SHU FHQW RI WKH UHIHUHQFH RU EDVH LPSHGDQFHRIWKHWUDQVIRUPHU=ref
] =
= ⋅ = UHI
= UHI =
8
6U
LQ ZKLFK 8 LV WKH UDWHG YROWDJH OLQHWROLQH LQ N9 DQG 6r LV WKH UHIHUHQFH SRZHU UDWLQJ RI WKH
WUDQVIRUPHULQ09$
7KH]HURVHTXHQFHLPSHGDQFHPD\KDYHVHYHUDOYDOXHVEHFDXVHLWPD\GHSHQGRQKRZWKHRWKHU
ZLQGLQJ RU ZLQGLQJV DUH FRQQHFWHG RU ORDGHG 7KH NH\ TXHVWLRQ LV ZKHWKHU DQ\ RWKHU ZLQGLQJ
SURYLGHEDODQFLQJDPSHUHWXUQVRUQRW
,IWKHUHLVDGHOWDFRQQHFWHGZLQGLQJLQWKHWUDQVIRUPHUEDODQFLQJDPSHUHWXUQVZLOOEHSURYLGHGE\
D FXUUHQW FLUFXODWLQJ ZLWKLQ WKH WULDQJOH RI WKH GHOWDFRQQHFWHG ZLQGLQJ ,Q WKLV FDVH WKH ]HUR
VHTXHQFH LPSHGDQFH ZLOO EH DSSUR[LPDWHO\ HTXDO WR WKH SOXV DQG PLQXV VHTXHQFH VKRUWFLUFXLW
LPSHGDQFHRIWKHSDLURIZLQGLQJVVWDUDQGGHOWD
=LJ]DJFRQQHFWHG ZLQGLQJV KDYH WKH VSHFLDO SURSHUW\ WKDW WKH\ FDQ EH FRQQHFWHG LQ VXFK D ZD\
WKDWWKH\SURYLGHEDODQFLQJDPSHUHWXUQWKHPVHOYHVEHFDXVHFXUUHQWVHTXDOLQVL]HZLWKRSSRVLWH
SRODULW\ IORZ WKURXJK WKH WZR KDOYHV RI VXFK ZLQGLQJV RQ HDFK RI WKH WKUHH OLPEV 7KH FXUUHQW
FUHDWHV D PDJQHWLF OHDNDJH ILHOG EHWZHHQ WKH WZR ZLQGLQJ KDOYHV DQG WKH ]HUR VHTXHQFH
UHDFWDQFHRIWKH]LJ]DJZLQGLQJEHFRPHVORZDQGHTXDOWRWKHVKRUWFLUFXLWUHDFWDQFHEHWZHHQWKH
WZRKDOYHV
3DJH7UDQVIRUPHU+DQGERRN
<\QFRQQHFWHG WUDQVIRUPHUV ZLWKRXW DQ\ WHUWLDU\ GHOWDFRQQHFWHG ZLQGLQJ KDYH YHU\ KLJK ]HUR
VHTXHQFH UHDFWDQFH RU HYHQ PRUH ,I WKH FRUH KDV OLPEV RU LI LW LV D VKHOOW\SH
WUDQVIRUPHU RU LI WKUHH VLQJOHSKDVH WUDQVIRUPHUV DUH FRQQHFWHG VWDUVWDU LQ EDQN WKH ]HUR
VHTXHQFHLPSHGDQFHZLOOEHRIWKHVDPHRUGHUDVWKHPDJQHWLVLQJLPSHGDQFHEHFDXVHWKHUHLVQR
SRVVLELOLW\ IRU FRXQWHUDFWLQJ DPSHUHWXUQV LQ DQ\ RWKHU ZLQGLQJ :KHQ FRQQHFWLQJ DQ DUF
VXSSUHVVLRQ UHDFWRU WR <1\ RU <\QFRQQHFWHG WUDQVIRUPHUV LW PD\ EH QHFHVVDU\ WR UHGXFH WKH
UHDFWDQFHRIWKHUHDFWRUE\RQHWKLUGRIWKH]HURVHTXHQFHUHDFWDQFHRIWKHWUDQVIRUPHU,IWKH]HUR
VHTXHQFHUHDFWDQFHRIWKHWUDQVIRUPHULVQHJOHFWHGWKHUHDFWDQFHRIWKHDUFVXSSUHVVLRQUHDFWRU
VKRXOGEH
;/ =
ω& H
:KHQWKH]HURVHTXHQFHUHDFWDQFHRIWKHWUDQVIRUPHULVKLJKFRPSDUHGWRȦ&e;LVKRXOGEH
DGMXVWHGDFFRUGLQJWR
;/ =
;
− W ω& H
ZKHUH;0tLVWKH]HURVHTXHQFHUHDFWDQFHRIWKHWUDQVIRUPHU
$QRWKHU DVSHFW RI FRQQHFWLQJ DUFVXSSUHVVLRQ UHDFWRUV WR WUDQVIRUPHUV ZKHUH WKH ]HUR VHTXHQFH
PDJQHWLF ILHOG IORZV XQFRPSHQVDWHG OLNH LQ <1\ DQG <\QFRQQHFWHG WUDQVIRUPHUV LV WKDW WKLV
PDJQHWLFILHOGPD\FDXVHH[FHVVLYHKHDWLQJLQWKHWDQNZDOODQGLQFODPSVNHHSLQJWKHODPLQDWHG
VWHHOSODWHVRIWKHFRUHWRJHWKHU7KHWKHUPDOWLPHFRQVWDQWIRUWKHVHLWHPVLVVKRUWVRWKHKHDWLQJ
LVQRWLFHDEOHLQWKHFRXUVHRIIHZVHFRQGV6XFKH[FHVVLYHKHDWLQJPD\FDXVHJDVGHYHORSPHQWLQ
WKH RLO DQG HYHQ JDV EXEEOHV WKDW PD\ MHRSDUGLVH WKH VDIH RSHUDWLRQ RI WKH WUDQVIRUPHU ,I WKH
GXUDWLRQRIWKHIDXOWFXUUHQWLVOLPLWHGWRMXVWDIHZVHFRQGVVXFKSRWHQWLDOULVNFDQEHGLVUHJDUGHG
/RQJHUGXUDWLRQORDGLQJRIWKHWUDQVIRUPHUQHXWUDOVKRXOGEHFODULILHGZLWKWKHWUDQVIRUPHUVXSSOLHU
7KHQHXWUDORI]LJ]DJFRQQHFWHGZLQGLQJVLVDOZD\VVXLWDEOHIRUFRQQHFWLRQRIDQDUFVXSSUHVVLRQ
UHDFWRUUHJDUGOHVVRIDQ\RWKHUZLQGLQJRQWKHFRUH7KHQHXWUDORIVWDUFRQQHFWHGZLQGLQJVLVDOVR
VXLWDEOH IRU FRQQHFWLRQRIDQ DUFVXSSUHVVLRQUHDFWRU SURYLGHG WKDW WKH WUDQVIRUPHU WKDW WKH VWDU
FRQQHFWHGZLQGLQJEHORQJVWRKDVDQRWKHUZLQGLQJWKDWLVGHOWDFRQQHFWHG
2SHUDWLRQDOFKDUDFWHULVWLFV
$ TXHVWLRQ RI IDUUHDFKLQJ LPSRUWDQFH LV KRZ ORQJ WKH LQYROYHG SDUWV RI WKH SRZHU V\VWHP LV
SHUPLWWHGWRRSHUDWHZLWKDVLQJOHSKDVHHDUWKIDXOWWKDWGRHVQRWGLVDSSHDUDIWHUDIHZVHFRQGV
EHIRUHWKHVHFWLRQZKHUHWKHIDLOXUHLVORFDWHGPXVWEHGLVFRQQHFWHGIURPWKHYROWDJHVRXUFH7KLV
TXHVWLRQGRHVQRWRQO\LQYROYHWKHGLPHQVLRQLQJRIWKHDUFVXSSUHVVLRQUHDFWRUDQGWKHGHVLJQRI
WKHWUDQVIRUPHUZKHUHLWLVFRQQHFWHG,WLQYROYHVDOVRLQJHQHUDOWKHFKRLFHRIVXUJHDUUHVWHUVLQWKH
V\VWHP 7KH WHPSRUDU\ RYHUYROWDJH WR HDUWK RQ WKH KHDOWK\ SKDVHV GXULQJ D VLQJOHSKDVH HDUWK
IDXOWDQGLWVGXUDWLRQGHWHUPLQHVWKHFKRLFHRIVXUJHDUUHVWHUVWKHLUSURWHFWLRQOHYHOWKHLQVXODWLRQ
OHYHO RI V\VWHP FRPSRQHQWV DQG WKH VDIHW\ PDUJLQ EHWZHHQ WKH LQVXODWLRQ OHYHO DQG WKH DUUHVWHU
SURWHFWLRQOHYHO
7XQLQJ
6HWWLQJRIWKHUHDFWDQFHRIDQDUFVXSSUHVVLRQUHDFWRU RUWXQLQJWKHUHDFWRU FDQEHPDGHZLWKRXW
PDNLQJ DQ\ DUWLILFLDO HDUWK IDXOW E\ GHOLEHUDWHO\ FRQQHFWLQJ RQH SKDVH RI WKH V\VWHP WR HDUWK ,Q
PDQ\ FDVHV WKH FDSDFLWDQFHV WR HDUWK DUH QRW H[DFWO\ HTXDO LQ DOO WKUHH SKDVHV 7KLV FDXVHV D
FHUWDLQ GLVSODFHPHQW RI WKH QHXWUDO ,Q RWKHU ZRUGV WKHUH ZLOO EH VRPH YROWDJH DFURVV WKH DUF
VXSSUHVVLRQUHDFWRUZKLFKFDQEHUHDGRQDYROWPHWHUFRQQHFWHGWRWKHORZYROWDJHPHDVXUHPHQW
ZLQGLQJRIWKHUHDFWRU:KHQWKHUHDFWDQFHRIWKHUHDFWRULVYDULHGWKHQHXWUDOGLVSODFHPHQWDQG
WKH YROWDJH DFURVV WKHUHDFWRUZLOO DOVRYDU\ 7KH UHDFWRU LV LQUHVRQDQFHZLWK WKH FDSDFLWDQFH WR
HDUWKRIWKHSRZHUV\VWHPZKHQWKHQHXWUDOGLVSODFHPHQWDQGWKHYROWDJHDFURVVWKHUHDFWRUKDYH
WKHLUPD[LPXP
7KHFDSDFLWDQFHWRHDUWKLQFDEOHVDUHTXLWHHTXDODQGLIFDEOHVLVDGRPLQDQWSDUWRIWKHV\VWHPLQ
UHODWLRQ WR RYHUKHDG OLQHV WKH QHXWUDO GLVSODFHPHQW PLJKW EHFRPH WRR VPDOO WR PDNH XVH RI WKLV
WXQLQJ PHWKRG ,Q VXFK FDVHV LQVWDOOLQJ D VXLWDEOH FDSDFLWRU WR HDUWK LQ RQH RI WKH SKDVHV FDQ
SURYLGHDQXQEDODQFHZKLFKJLYHVDQDGHTXDWHQHXWUDOGLVSODFHPHQW
0D[LPLVLQJWKHQHXWUDOGLVSODFHPHQWLVDOVRWKHEDVLFSULQFLSOHIRUDXWRPDWLFWXQLQJRIWKHUHDFWRULQ
VHUYLFH
7UDQVIRUPHU+DQGERRN3DJH
$IWHU D SHULRG ZKHQ FLUFXLW EUHDNHUV ZLWK IDVW UHFORVXUH IUHTXHQWO\ ZHUH LQVWDOOHG LQVWHDG RI DUF
VXSSUHVVLRQ UHDFWRUV LQ RUGHU WR VROYH WKH HDUWK IDXOW SUREOHP WKH DUFVXSSUHVVLRQ UHDFWRUV QRZ
VHHP WR REWDLQ VRPH RI D UHQDLVVDQFH 7KH UHDVRQ LV SUREDEO\ WKH FRQWLQXDOO\ LQFUHDVLQJ
GHSHQGHQFHRIUHOLDEOHHOHFWULFLW\VXSSO\LQWKHVRFLHW\'XHWRWKHXVHRIPRUHDQGPRUHPRGHUQ
HOHFWURQLF HTXLSPHQW HYHQ YHU\ VKRUW LQWHUUXSWLRQV LQ WKH HOHFWULFLW\ VXSSO\ FDXVHV FRQVLGHUDEOH
LQFRQYHQLHQFHDQGSUREOHPV
$FFRUGLQJWRVWDWLVWLFVHDUWKIDXOWDUFVLQDGHTXDWHO\WXQHGSRZHUV\VWHPVTXLFNO\H[WLQJXLVKLQWKH
PDMRULW\RIFDVHVZLWKRXWDQ\LQWHUUXSWLRQLQWKHHOHFWULFLW\VXSSO\7XQHGDUFVXSSUHVVLRQUHDFWRUV
DOVRFDXVHDGHOD\LQUHHVWDEOLVKLQJWKHQRUPDOVHUYLFHYROWDJHWRHDUWKLQWKHIDXOW\SKDVH7KH
ULVNRIDUFUHLJQLWLRQLVWKHQUHGXFHG
6PRRWKLQJUHDFWRUV
7KH GLUHFW FXUUHQW WKDW FRPHV IURP WKH UHFWLILHU LQ GF V\VWHPV KDV VXSHULPSRVHG KDUPRQLF
FRPSRQHQWV DOVR FDOOHG ULSSOH 7KH VPRRWKLQJ UHDFWRU LV FRQQHFWHG LQ VHULHV UHFWLILHU FRQYHUWRU DQG WKH ZKROH ORDG FXUUHQW LQFOXGLQJ WKH GF FXUUHQW DQG VPDOO DF KDUPRQLF FXUUHQWV IORZV
WKURXJKLW
)LJXUH
2LOLPPHUVHGVPRRWKLQJ
UHDFWRULQWKH5LKDQG'HKOL
+9'&WUDQVPLVVLRQ
7KH SXUSRVH RI WKH UHDFWRU LV WR SURYLGH KLJK LPSHGDQFH WR WKH IORZ RI WKH KDUPRQLF FXUUHQWV
UHGXFH WKHLU PDJQLWXGH DQG WKXV PDNLQJ WKH GF FXUUHQW PRUH VPRRWK 7KH KLJKHU UHDFWRU
LQGXFWDQFH WKH VPDOOHU UHPDLQLQJ KDUPRQLF FXUUHQWV ULSSOH EXW DW WKH VDPH WLPH KLJKHU UHDFWRU
FRVWV DQG ORVVHV 7KH YROWDJH GURS DFURVV WKH UHDFWRU LV WKH QRWFKHV LQ WKH YROWDJH IURP WKH
UHFWLILHU
$VPRRWKLQJUHDFWRUKDVQRQRPLQDOSRZHUUDWLQJLQWKHVDPHVHQVHDVDFUHDFWRUV+RZHYHUD
VL]HFRPSDULVRQFDQEHPDGHRQWKHEDVHRIWKHVWRUHGPDJQHWLFHQHUJ\,QWKLVUHVSHFWWKHVL]HRI
DVPRRWKLQJUHDFWRULQ+9'&V\VWHPVFDQEHPXFKKLJKHUWKDQHYHQWKHODUJHVWVKXQWUHDFWRUV
ZKLFKDOVRLVUHIOHFWHGLQWKHSK\VLFDOGLPHQVLRQV6RPHWLPHVLWLVQHFHVVDU\WRVKDUHWKHZLQGLQJ
ZKLFKQDWXUDOO\LVVLQJOHSKDVH RQWZRFRUHOLPEVLQRUGHUWRNHHSWKHRXWHUGLPHQVLRQVZLWKLQWKH
WUDQVSRUWSURILOH
3DJH7UDQVIRUPHU+DQGERRN
%HVLGHVUHGXFLQJWKHFXUUHQWULSSOHWKHVPRRWKLQJUHDFWRUKDVRWKHUIXQFWLRQVWRFRYHUOLNH
•
•
•
•
SUHYHQWLQJFRPPXWDWLRQIDLOXUHLQWKHLQYHUWHUE\OLPLWLQJWKHUDWHRI±ULVHRIFXUUHQWGXULQJ
FRPPXWDWLRQLQRQHEULGJH WKHWUDQVIHURIFXUUHQWIURPRQHYDOYHWRDQRWKHULQWKHVDPH
URZLQWKHEULGJH DQGGXULQJFROODSVHRIYROWDJHLQDQRWKHUEULGJH
UHGXFLQJWKHUDWHRIULVHRIFXUUHQWLIIDLOXUHVRFFXURQWKHGFV\VWHP
LPSURYLQJWKHG\QDPLFVWDELOLW\RIWKHWUDQVPLVVLRQV\VWHP
UHGXFLQJWKHULVNRIFRPPXWDWLRQIDLOXUHGXULQJDFV\VWHPYROWDJHGURS
7KHGHVLJQPD\EHGU\W\SHRURLOLPPHUVHGZLWKRUZLWKRXWJDSSHGLURQFRUHRUPDJQHWLFVKLHOG
7KHPDJQHWLFFKDUDFWHULVWLFPD\EHOLQHDURUQRQOLQHDU
,QODUJH+9'&V\VWHPVWKHVPRRWKLQJUHDFWRUVLVRSHUDWLQJDWDKLJKGFSRWHQWLDOWRHDUWK:KHQ
GU\W\SHDLUFRUHUHDFWRUVKDYHEHHQXVHGWKH\KDYHEHHQSODFHGRQSODWIRUPVZKLFKKDYHDKLJK
LQVXODWLRQOHYHOWRHDUWK'U\W\SHDLUFRUHUHDFWRUVZLOOSUREDEO\LQPDQ\FDVHVGHSHQGLQJRQWKH
UHTXLUHG LQGXFWDQFH DQG WKH VHUYLFH YROWDJH EH FKHDSHU DQG OLJKWHU WKDQ RLOLPPHUVHG UHDFWRUV
+RZHYHUHYHQGU\W\SHDLUFRUHUHDFWRUZHLJKWPD\DPRXQW
WR ± WRQ VR DQ LQVXODWLQJ SODWIRUP PXVW EH RI D
PHFKDQLFDOUREXVWGHVLJQ
'U\W\SH DLU FRUH UHDFWRUV KDYH D OLQHDU LQGXFWDQFH
FKDUDFWHULVWLFZKLOHRLOLPPHUVHGUHDFWRUVPD\KDYHDQRQ
OLQHDU LQGXFWDQFH FKDUDFWHULVWLF GXH WR VDWXUDWLRQ LQ
IHUURPDJQHWLFFRUHRUVKLHOGGHSHQGLQJRQWKHFKRVHQIOX[
GHQVLW\ZKHQGHVLJQLQJWKHUHDFWRU
7KH GLUHFW FXUUHQW IORZLQJ WKURXJK VPRRWKLQJ UHDFWRUV
FDXVHV D PDJQHWLVLQJ ELDV ZKHUH WKHDF PDJQHWLVDWLRQ LV
VXSHULPSRVHG 7KH PDJQHWLF IOX[ ZLOO WKHQ QRW RVFLOODWH
V\PPHWULFDOO\ DURXQG ]HUR EXW DURXQG D IOX[ YDOXH
GHWHUPLQHG E\ WKH GF PDJQHWLVDWLRQ ,Q WKH SDUW RI WKH
F\FOH ZKHQ WKH GF IOX[ DQG WKH DF IOX[ KDYH WKH VDPH
GLUHFWLRQWKHLURQFRUHPD\EHVDWXUDWHG
$LUFRUHVPRRWKLQJUHDFWRULQWKH
)HQQR6NDQ+9'&WUDQVPLVVLRQ
)LJXUH VKRZV DQ H[DPSOH ZKHUH WKH YHUWLFDO UHG OLQH LQGLFDWHV WKH ELDV GF PDJQHWLVDWLRQ
FDXVHGE\WKHGFFXUUHQWIORZLQJWKURXJKWKHUHDFWRU7KHWZRGRWWHGKRUL]RQWDOOLQHVLQGLFDWHWKH
UDQJHRIOLQNHGIOX[YDULDWLRQFDXVHGE\WKHVXSHULPSRVHGKDUPRQLFDFYROWDJH7KH\DUHORFDWHG
V\PPHWULFDOO\DURXQGWKHGFOLQNHGPDJQHWLFIOX[7KHWZRGRWWHGYHUWLFDOOLQHVLQGLFDWHWKHOLPLWV
IRUWKHFRUUHVSRQGLQJKDUPRQLFDFFXUUHQW7KHODWWHUOLPLWVDUHORFDWHGDV\PPHWULFDOO\LQUHODWLRQ
WRWKHGFPDJQHWLVLQJFXUUHQW
DFFXUUHQW
DFYROWDJH
GFPDJQHWLVDWLRQ
/LQNHGPDJQHWLFIOX[
ψ
0DJQHWLVLQJFXUUHQW
L
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
7KHLQGXFWDQFH/RIWKHUHDFWRULVGHILQHGDV
/=
GΨ
GL
7KLVLVLGHQWLFDOWRWKHVORSHRIWKHPDJQHWLVDWLRQFXUYHZKLFKYDULHVZLWKWKHPDJQHWLVLQJFXUUHQW
7KHORZHUSDUWRIWKHFXUYHLVOLQHDUDQGLQWKLVUDQJH/LVFRQVWDQW:KHUHWKHFRUHLVFRPSOHWHO\
VDWXUDWHG WKH FXUYH LV DOVR OLQHDU DQG / LV DOVR FRQVWDQW EXW KHUH WKH VORSH RI WKH FXUYH
FRUUHVSRQGV WR WKH LQGXFWDQFH RI DQ DLU FRUH UHDFWRU DV LI WKH LURQ FRUH GRHV QRW H[LVW %HWZHHQ
WKHVH WZR OLQHDU UDQJHV WKHUH LV D UDQJH ZKHUH WKH FXUYH LV QRQOLQHDU ,Q WKLV UDQJH / LV QRW
FRQVWDQW EXW YDULHV GXULQJ WKH F\FOH RI WKH DF YROWDJH DQG FXUUHQW 7KH UHVXOWLQJ / LV FDOOHG WKH
LQFUHPHQWDO LQGXFWDQFH ZKLFK LV ORZHU WKDQ WKH LQGXFWDQFH LQ WKH ORZ OLQHDU UDQJH RI WKH FXUYH
&RQVHTXHQWO\WKHUHGXFWLRQRIWKHFXUUHQWULSSOHZLOODOVREHORZHUFRPSDUHGWRWKHUHGXFWLRQWKDW
ZRXOGEHDFKLHYHGLIWKHUHDFWRUZHUHRSHUDWHGLQWKHORZOLQHDUUDQJHRIWKHPDJQHWLVDWLRQFXUYH
2QWKHRWKHUKDQGKRZHYHUWKLVZRXOGFDXVHDPRUHH[SHQVLYHUHDFWRU
6PRRWKLQJUHDFWRUVLQODUJH+9'&WUDQVPLVVLRQV\VWHPVPDQXIDFWXUHGE\$%%DUHQRZDGD\VRLO
LPPHUVHGDQGGHVLJQHGZLWKJDSSHGLURQFRUHMXVWOLNHODUJHVKXQWUHDFWRUV)RUVXFKUHDFWRUVWKH
LQFUHPHQWDO LQGXFWDQFH LV DQ HVVHQWLDO SDUDPHWHU ,W FDQ EH PHDVXUHG GXULQJ WKH GHOLYHU\ WHVW
SURYLGHG WKHUH LV D VXIILFLHQWO\ ODUJH GF VRXUFH DYDLODEOH LQ WKH WHVW ODERUDWRU\ $OWHUQDWLYHO\ WKH
LQFUHPHQWDOLQGXFWDQFHFDQEHFDOFXODWHGEDVHGRQDUHFRUGLQJRIWKHPDJQHWLVDWLRQFXUYHRIWKH
UHDFWRU
6PRRWKLQJUHDFWRUVLQ+9'&OLQNVDUHVXEMHFWWRVSHFLDOGLHOHFWULFVWUHVVHVZKHQWKHGLUHFWLRQRI
SRZHU IORZ LQ WKH OLQN FKDQJHV 7R YHULI\ WKH DELOLW\ RI WKH UHDFWRU WR ZLWKVWDQG VXFK VWUHVVHV D
SRODULW\ UHYHUVDO WHVW LV SHUIRUPHG EHIRUH GHOLYHU\ IURP WKH IDFWRU\ )LJXUH VKRZV D YROWDJH
YHUVXV WLPH GLDJUDP IRU VXFK D WHVW $ SHULRG ZLWK QHJDWLYH SRODULW\ LV IROORZHG E\ D SHULRG RI
SRVLWLYH SRODULW\ DQG ILQDOO\ D SHULRG EDFN WR QHJDWLYH SRODULW\ 7R GHPRQVWUDWH WKDW WKHUH LV D
VDWLVIDFWRU\ VDIHW\ PDUJLQ WKH WHVW YROWDJH 8SU VKRXOG EH KLJKHU WKDQ WKH UDWHG GF YROWDJH LQ
RSHUDWLRQIRUH[DPSOHRURWKHUYDOXHDFFRUGLQJWRDJUHHPHQW
)LJXUH
7KH SRODULW\ UHYHUVDO WHVW LV IROORZHG E\ DQ DF YROWDJH WHVW RI KRXU GXUDWLRQ ZLWK 3'
PHDVXUHPHQW
7KHGLHOHFWULFWHVWLQJLQFOXGHVDOVRDZLWKVWDQGWHVWZLWKGFYROWDJHHTXDOWRWLPHVWKHUDWHG
VHUYLFHYROWDJHRIKRXUGXUDWLRQDQGZLWK3'PHDVXUHPHQW
6XSSOHPHQWDU\LQIRUPDWLRQLVIRXQGLQ
•
,(& 5HDFWRUVZKLFKLVLQWKHSURFHVVRIEHLQJUHYLVHGDQGZLOOEHLVVXHGZLWK
WKHQXPEHU,(&
•
,((( 6WG ,((( 6WDQGDUG *HQHUDO 5HTXLUHPHQWV DQG 7HVW &RGH IRU 'U\7\SH
DQG2LO,PPHUVHG6PRRWKLQJ5HDFWRUVIRU'&3RZHU7UDQVPLVVLRQ
3DJH7UDQVIRUPHU+DQGERRN
48$/,7<,17(51$/&21752/6867$,1$%,/,7<
0$1$*(0(176<67(06
4XDOLW\
7KH IXQFWLRQDO UHOLDELOLW\ RI WUDQVIRUPHU LQVWDOODWLRQV GHSHQGV RI WKH VXLWDELOLW\ DQG TXDOLW\ RI WKH
WUDQVIRUPHU FRPSRQHQWV DQG WKH SURFHVVHV HPSOR\HG $%% WUDQVIRUPHU IDFWRULHV KDYH DGRSWHG
WKH,QWHUQDWLRQDOVWDQGDUGRITXDOLW\PDQDJHPHQWV\VWHP
,62
4XDOLW\PDQDJHPHQWV\VWHPV
5HTXLUHPHQWV
7KLVVWDQGDUGHPSKDVL]HVFXVWRPHUVDWLVIDFWLRQSURFHVVDSSURDFKDQGFRQWLQXRXVLPSURYHPHQW
0RVW$%%IDFWRULHVRSHUDWH,62FHUWLILHGPDQDJHPHQWV\VWHPV
,QWHUQDOFRQWURO
$%% IDFWRULHV FRPSO\ ZLWK QDWLRQDO LQWHUQDO FRQWURO UHJXODWLRQV GHILQLQJ UHTXLUHPHQWV IRU KHDOWK
VDIHW\DQGZRUNLQJHQYLURQPHQW+6(
(QYLURQPHQWDOV\VWHP
$%% UHTXLUHV WKDW DOO PDQXIDFWXULQJ VLWHV RSHUDWH D FHUWLILHG HQYLURQPHQWDO PDQDJHPHQW V\VWHP
DFFRUGLQJWRWKH,QWHUQDWLRQDOVWDQGDUG
,62 (QYLURQPHQWDOPDQDJHPHQWV\VWHPV
6SHFLILFDWLRQZLWKJXLGDQFHIRUXVH
7KXV$%%KDVFRPPLWWHGLWVHOIWRZRUNIRUHQYLURQPHQWDOLPSURYHPHQWDQGSROOXWLRQUHGXFWLRQ
6XVWDLQDEOHGHYHORSPHQW
$%%LVDVLJQDWRU\WRWKH
,QWHUQDWLRQDO&KDPEHURI&RPPHUFH ,&& %XVLQHVV&KDUWHUIRU6XVWDLQDEOH'HYHORSPHQW
DQGZRUNVDFWLYHO\WROLYHXSWRWKLVFRPPLWPHQWDQGWRIXOILOLWVVRFLDOUHVSRQVLELOLWLHV
$%% LV DFWLYHO\ SURPRWLQJ XVH RI HQHUJ\HIILFLHQW HTXLSPHQW LQ VHDUFK IRU PLQLPL]LQJ WKH FRVW RI
ORVVHVIRUWKHVRFLHW\7KLVZLOODOVRFRQWULEXWHWRUHGXFWLRQRIWKHHQHUJ\VKRUWDJH6HHDOVR/LIH
F\FOHDVVHVVPHQWVHFWLRQSDJH
&86720(55(9,(:2)0$1$*(0(176<67(06
&XVWRPHUV PD\ UHYLHZ WKH JHQHUDO PDQDJHPHQW V\VWHP RI WKH PDQXIDFWXULQJ VLWHV KRZHYHU
FRPSDQ\VHFUHWVPD\EHH[FOXGHG
7KHFXVWRPHUVDUHREOLJHGWRRQO\XVHLQIRUPDWLRQUHJDUGLQJ$%%/WGREWDLQHGLQWKLVZD\IRUWKHLU
RZQXVHDQGQRWGLVFORVHDQ\WKLQJWRDQ\WKLUGSDUW\XQOHVVWKLVLVDJUHHGZLWK$%%/WGLQZULWLQJ
6$)(7<35(&$87,216
3OHDVHREVHUYHWKHIROORZLQJDQGDQ\RWKHUVDIHW\DGYLFHVEHIRUHLQVWDOODWLRQFRPPLVVLRQLQJDQG
PDLQWHQDQFH
• 1HYHUZRUNRQHQHUJL]HGWUDQVIRUPHUVRUDQ\HQHUJL]HGLQVWDOOHGHOHFWULFDOHTXLSPHQWDORQH
• 'RQRWPRYHRUOLIWDWUDQVIRUPHUZLWKRXWDGHTXDWHHTXLSPHQWDQGVDIHW\SUHFDXWLRQV
• 'RQRWPDNHDQ\FRQQHFWLRQVZKLFKGRQRWFRPSO\ZLWKWKHUDWLQJSODWH
• 'RQRWDSSO\DEQRUPDOPHFKDQLFDOVWUDLQRQWKHWHUPLQDOV
• 'RQRWUHFRQQHFWZKHQWKHWUDQVIRUPHULVHQHUJL]HG
• 'R QRW DWWHPSW WR FKDQJH WDS VHWWLQJ RQ RIIFLUFXLW WDS FKDQJHUV ZKLOH WKH WUDQVIRUPHU LV
HQHUJL]HG
• 'RQRWHQHUJL]HRUSHUIRUPPDLQWHQDQFHRQWKHWUDQVIRUPHUZLWKRXWSURSHUHDUWKFRQQHFWLRQ
• 'RQRWRSHUDWHWKHWUDQVIRUPHUZLWKRXWDODUPDQGPRQLWRULQJV\VWHPVFRQQHFWHG
• 'RQRWUHPRYHDQ\HQFORVXUHSDQHOVZKLOHWKHWUDQVIRUPHULVHQHUJL]HG
7UDQVIRUPHU+DQGERRN3DJH
• 'RQRWWDPSHUZLWKLQWHUORFNVDODUPVDQGFRQWUROFLUFXLWV
• %HDZDUHRISRVVLEOHQHHGIRUPDJQHWLFILHOGSURWHFWLRQ
• 3HUIRUPDILQDOLQVSHFWLRQSULRUWRHQHUJL]LQJ
o $OOH[WHUQDOFRQQHFWLRQVKDYHEHHQPDGHSURSHUO\
o 5HYLHZDQGFKHFNDOODODUPDQGWULSIXQFWLRQV
o 5HPRYHDOOWHPSRUDU\HDUWKLQJFRQQHFWLRQV
o 7KHWUDQVIRUPHUWDQNLVSURSHUO\HDUWKHG
o 1HXWUDOWHUPLQDOVRIVWDUFRQQHFWHGZLQGLQJVDUHFRUUHFWO\HDUWKHGRUVXUJHSURWHFWHG
o $OOFRQQHFWLRQVDUHWLJKWDQGVHFXUH
o $OOVHFRQGDU\FLUFXLWVRIFXUUHQWWUDQVIRUPHUVDUHFORVHGDQGHDUWKHG
o $OODFFHVVRU\FLUFXLWVDUHRSHUDWLRQDO
o $OOWDSFRQQHFWLRQVDUHSURSHUO\SRVLWLRQHG
o 7KHQHXWUDODQGHDUWKFRQQHFWLRQVKDYHEHHQSURSHUO\PDGH
o )DQV±LIVXSSOLHG±DUHRSHUDWLRQDO
o 3URSHUFOHDUDQFHLVPDLQWDLQHGIURPKLJKYROWDJHEXVWRWHUPLQDOHTXLSPHQW
o 7KHFRUUHFWWUDQVIRUPHUUDWLRH[LVWVIRUXQLWVZLWKLQWHUQDOWHUPLQDOERDUGV
o $OOZLQGLQJVDUHIUHHIURPXQLQWHQGHGHDUWKV$UHOHYDQWPHJJHULVUHFRPPHQGHG
o 7KHUHLVFRQWLQXLW\LQDOOZLQGLQJV
o 7KHUHLVQRGXVWGLUWRUIRUHLJQPDWHULDORQFRUHDQGFRLOV GU\W\SHWUDQVIRUPHUV o 7KHUHLVQRYLVLEOHPRLVWXUHRQRULQVLGHWKHFRUHDQGFRLOV GU\W\SHWUDQVIRUPHUV o $OOSODVWLFZUDSSLQJVDUHUHPRYHGIURPWKHFRUHDQGFRLOV GU\W\SHWUDQVIRUPHUV o $OOVKLSSLQJPHPEHUVKDYHEHHQUHPRYHG
o 7KHUHDUHQRREVWUXFWLRQVLQRUQHDUWKHRSHQLQJVIRUYHQWLODWLRQ
o &RROLQJZDWHUVXSSO\LVDGHTXDWH
o 1RWRROVRURWKHUDUWLFOHVDUHOHIWLQVLGHRURQWRSRIWKHFRUHFRLOVWDQNRUHQFORVXUHV
o $OOSURWHFWLYHFRYHUVDUHFORVHGDQGWLJKWHQHG
• &RPSO\ZLWKDQ\LQVWUXFWLRQVVXSSOLHGE\WKHWUDQVIRUPHUPDQXIDFWXUHU
• &RPSO\ZLWKUHOHYDQW,QWHUQDO&RQWURO5HJXODWLRQV
6HHDOVRUHOHYDQWVDIHW\VHFWLRQVRQVDIHW\DQGSURWHFWLRQLQ([WUDFWVIURP,(& 3RZHULQVWDOODWLRQVH[FHHGLQJN9DF±3DUW&RPPRQUXOHVLQ6HFWLRQSDJHRIWKH
KDQGERRN
3DJH7UDQVIRUPHU+DQGERRN
/266&$3,7$/,6$7,21$1'237,08075$16)250(5'(6,*1
7KHWRWDOWUDQVIRUPHUFRVWIRUDXVHUFRQVLVWVRIWZRPDLQFRPSRQHQWV
7KHLQLWLDOFRVWVWKDWLVWKHSXUFKDVHSULFHDQGWKHLQVWDOODWLRQFRVW
7KHRSHUDWLRQDOFRVWVGXULQJWKHWLPHLQXVH
7KHLQLWLDOFRVWVJHQHUDWHFDSLWDOFRVWV7KHRSHUDWLRQDOFRVWVFRQVLVWRIVXUYHLOODQFHPDLQWHQDQFH
LQVXUDQFHDQGWD[HVDQGQRWWKHOHDVWWKHFRVWVIRUWKHHQHUJ\QHHGHGWRFRYHUWKHORVVHVLQWKH
WUDQVIRUPHU
7UDQVIRUPHUVXSSOLHUVRIIHUWUDQVIRUPHUVZLWKWKHXVHU¶VUHTXHVWHGSRZHUUDWLQJDQGYROWDJHUDWLR
ZKLFKLQDGGLWLRQIXOILOFHUWDLQGLHOHFWULFWKHUPDODQGPHFKDQLFDOUHTXLUHPHQWV$WUDQVIRUPHUPD\
EHGHVLJQHGWRDFKLHYHWKHORZHVWSRVVLEOHSXUFKDVHSULFH7KHORVVHVRIVXFKDWUDQVIRUPHUDUH
UHODWLYHO\KLJKDQGWKHRSHUDWLRQDOFRVWVZLOOEHDFFRUGLQJO\KLJK
+RZHYHU E\ LQFUHDVLQJ WKH FURVV VHFWLRQ RI WKH ZLQGLQJ FRQGXFWRUV DQGRU WKH FRUH EH\RQG WKH
PLQLPXPQHHGHGIRUDUHOLDEOHWUDQVIRUPHUDZLGHUDQJHRIWUDQVIRUPHUGHVLJQVZLWKORZHUORVVHV
FDQEHDFKLHYHG7KHTXDQWLW\RIPDWHULDOVZLOOEHKLJKHUDQGQDWXUDOO\DOVRWKHSXUFKDVHSULFH
)LJXUHVKRZVLQSULQFLSOHKRZWKHPDQXIDFWXULQJFRVW WKHEOXHFXUYHUHODWHGWRWKHOHIWYHUWLFDO
D[LV DQGWKHORVVHV WKHUHGFXUYHUHODWHGWRWKHULJKWYHUWLFDOD[LV YDU\ZLWKWKHWUDQVIRUPHUPDVV
RU WKH FRQVXPSWLRQ RI PDWHULDO 7KH PDQXIDFWXULQJ FRVW LQFUHDVHV ZLWK LQFUHDVLQJ WUDQVIRUPHU
PDVVZKLOHWKHORVVHVGHFUHDVHZLWKLQFUHDVLQJWUDQVIRUPHUPDVV
N:
0DQXIDFWXULQJFRVW
/RVVHV
7UDQVIRUPHUPDVV NJ
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
,Q)LJXUHWKHPRQHWDU\YDOXHRIWKHORVVHVLVLQVHUWHGLQVWHDGRIWKHORVVHV
0DQXIDFWXULQJFRVW
0RQH\YDOXHRI
O
0DQXIDFWXULQJFRVW
0RQH\YDOXHRIORVVHV
7UDQVIRUPHUPDVV NJ
)LJXUH
7KHEODFNFXUYHLVWKHVXPRIWKHPDQXIDFWXULQJFRVWDQGWKHPRQH\YDOXHRIWKHORVVHVWKDWLVWKH
WRWDOFRVWV7KLVFXUYHKDVDPLQLPXPSRLQWDVFDQEHVHHQLQ)LJXUH
7KHFXVWRPHU¶VEHVWEX\LVDWUDQVIRUPHUWKDWJLYHVWKHPLQLPXPWRWDOFRVWVZKLFKLVWREHIRXQG
VRPHZKHUH RQ WKH VFDOH EHWZHHQ WKH PLQLPXP SXUFKDVH SULFH DQG WKH SULFH IRU D WUDQVIRUPHU
ZKLFK IURP D SXUH WHFKQLFDO SRLQW RI YLHZ LV PRUH RU OHVV RYHUVL]HG +RZ PXFK VKRXOG WKHQ WKH
TXDQWLW\RIPDWHULDOVEHLQFUHDVHGWRREWDLQWKHRSWLPXPORVVWUDQVIRUPHU"
7RDQVZHUWKLVTXHVWLRQWKHGHVLJQHUQHHGVDOUHDG\DWWKHHQTXLU\VWDJHPRQH\YDOXHVSHUNLORZDWW
IRU WKH QR ORDG DQG WKH ORDG ORVVHV ZKLFK PXVW EH SURYLGHG E\ WKH SXUFKDVHU %DVHG RQ WKHVH
YDOXHVWKHWUDQVIRUPHUGHVLJQHUZRUNVRXWWKHEHVWFRPSURPLVHEHWZHHQLQLWLDOFRVWDQGSRZHUORVV
H[SHQGLWXUH
7KH PRQH\ YDOXHV IRU WKH ORVVHV WKH VRFDOOHG FDSLWDOLVHG ORVV YDOXHV H[SUHVV WKH PD[LPXP
DPRXQWRIPRQH\WKHXVHULVZLOOLQJWRLQYHVWWRUHGXFHWKHWUDQVIRUPHUORVVHVE\RQHNLORZDWW
:HZLOOLQWKLVFKDSWHUGHVFULEHDZD\WRDFKLHYHUHDVRQDEOHFDSLWDOLVHGORVVYDOXHV
7KH ORVVHV LQ WKH WUDQVIRUPHU DUH WUDGLWLRQDOO\ H[SUHVVHG LQ WHUPV RI WZR VHSDUDWH TXDQWLWLHV
GHWHUPLQHGE\WZRVHSDUDWHWHVWV
•
•
1RORDGORVVDWUDWHGYROWDJH
/RDGORVVDWUDWHGFXUUHQW
7KHQRORDGORVVILJXUHLVREWDLQHGLQDWHVWZLWKUDWHGYROWDJHDSSOLHGWRRQHRIWKHZLQGLQJVDQGDOO
RWKHUZLQGLQJVRSHQFLUFXLWHG
7KHORDGORVVLVE\GHILQLWLRQWDNHQDVWKHDFWLYHSRZHUFRQVXPHGLQDVKRUWFLUFXLWWHVWZKHUHUDWHG
FXUUHQW RI UDWHG IUHTXHQF\ LV IHG LQWR RQH ZLQGLQJ DQG DQRWKHU ZLQGLQJ VKRUWFLUFXLWHG 3RVVLEOH
RWKHUZLQGLQJVVKDOOEHRSHQ7KHORVVLVJXDUDQWHHGDQGGHWHUPLQHGDWDUHIHUHQFHWHPSHUDWXUHLQ
WKHZLQGLQJV ž&DFFRUGLQJWR,QWHUQDWLRQDO6WDQGDUGV ,(& ž&DFFRUGLQJWR$16,,(((7KH
UHIHUHQFHWHPSHUDWXUHIRUGU\W\SHWUDQVIRUPHUVGHSHQGVRQWKHW\SHRILQVXODWLRQPDWHULDODQGWKH
FRUUHVSRQGLQJSHUPLWWHGZLQGLQJWHPSHUDWXUH 1RORDGORVV
7KHQRORDGORVVLVDVVXPHGWREHSUHVHQWZLWKLWVPHDVXUHGUHIHUHQFHYDOXHIRUWKHZKROHWLPH
WKDW WKH WUDQVIRUPHU LV HQHUJLVHG 1R DFFRXQW LV WDNHQ RI WKH GLIIHUHQFH EHWZHHQ VHUYLFH YROWDJH
DQGUDWHGYROWDJHRURISRVVLEOHFRPELQDWLRQHIIHFWVRIOHDNDJHIOX[UXQQLQJWKURXJK\RNHSDUWV$
V\VWHPLQWHUWLHWUDQVIRUPHURUUHFHLYLQJWUDQVIRUPHULVHQHUJLVHGFRQWLQXRXVO\EXWJHQHUDWLQJVHWV
PD\EHVWDUWHGDQGVWRSSHG SHDNORDGJHQHUDWLRQ ,QGXVWULDOSURFHVVWUDQVIRUPHUVPD\DOVRKDYH
LQWHUPLWWHQWGXW\F\FOHV
3DJH7UDQVIRUPHU+DQGERRN
/RDGORVV
7KH HYDOXDWLRQ RI ORDG ORVV LV PRUH FRPSOLFDWHG )RU D WUDQVIRUPHU LQ JHQHUDO WUDQVPLVVLRQ RU
GLVWULEXWLRQGXW\WKHORDGKDVDGDLO\YDULDWLRQDZHHNO\YDULDWLRQDQGDVHDVRQDOYDULDWLRQ7KLVLVWKHQ
IXUWKHU FRPELQHG ZLWK D ORQJWHUP WUHQG RI JHQHUDOO\ ULVLQJ ORDGLQJ RYHU D QXPEHU RI \HDUV XQWLO WKH
LQVWDOODWLRQ EHFRPHV IXOO\ ORDGHG DQG KDV WR EH UHOLHYHG RU UHLQIRUFHG ,W ZRXOG EH SUDFWLFDEOH ZLWK
WRGD\¶V FRPSXWHU IDFLOLWLHV WR UXQ D VXPPDWLRQ RYHU DQ HVWLPDWHG OLIH F\FOH VFHQDULR WDNLQJ LQWR
DFFRXQW GHWDLOHG ORDG YDULDWLRQV WDSFKDQJHU VHWWLQJV DQG RSHUDWLQJ WHPSHUDWXUHV ZLWK YDULDEOH
DPELHQW ZKLFK LV FRYDULDQW ZLWK VHDVRQDO ORDG YDULDWLRQ +RZHYHU LQ YLHZ RI WKH FRQVLGHUDEOH
XQFHUWDLQW\ RI WKH DVVXPSWLRQV D PXFK VLPSOHU PHWKRG LV VDWLVIDFWRU\ IRU WKH SXUSRVH $FWXDO
WHPSHUDWXUH DQG YROWDJH WDSFKDQJHU SRVLWLRQ YDULDWLRQV DUH GLVUHJDUGHG DQG RQO\ WKH YDULDWLRQ RI
ORDGLQJLVXVHG7KHPRPHQWDU\ORDGORVVLVWDNHQWRYDU\VWULFWO\ZLWKWKHVTXDUHRIWKHORDG
$Q LPSRUWDQW DVSHFW LV WKDW WUDQVIRUPHU LQVWDOODWLRQV PXVW SURYLGH VXIILFLHQW SRZHU FDSDFLW\ IRU
EDFNXS VHUYLFH LQ FDVH RI GLVWXUEDQFH $ FHUWDLQ RYHUORDG IRU D OLPLWHG SHULRG RI WLPH LV
SHUPLVVLEOH +RZHYHU DZDUHQHVV VKRXOG EH GUDZQ WR WKH IDFW WKDW RYHUORDGLQJ DQG LQFUHDVHG
DYHUDJHZLQGLQJWHPSHUDWXUHDERYHƒ&LQFUHDVHVWKHSUREDELOLW\RIEXEEOLQJLQWKHRLOZKLFK
XQGHU XQIRUWXQDWH FLUFXPVWDQFHV PD\ FDXVH GLHOHFWULF EUHDNGRZQ LQ WKH WUDQVIRUPHU 7KH ULVN RI
EXEEOLQJLQFUHDVHVDOVRZLWKWKHFRQWHQWRIPRLVWXUHLQWKHFHOOXORVHLQVXODWLRQ7KHFHOOXORVHDFWV
DVDNLQGRIUHVHUYRLUIRUWKHPRLVWXUH 7KHUDWLRRIEDFNXSORDGLQJRYHUWKHSUHFHGLQJXQGLVWXUEHGORDGLQJLVLQPDQ\FDVHVODUJHUWKDQWKH
UDWLR RI SHUPLVVLEOH RYHUORDG DERYH UDWHG ORDG 7KLV PHDQV WKDW WKH VSDUH FDSDFLW\ UHTXLUHPHQW LI
DSSOLHGUHVWULFWVPD[LPXPXQGLVWXUEHGORDGLQJWREHORZUDWHGSRZHULQPDQ\W\SLFDODSSOLFDWLRQV
7DNHDVDQH[DPSOHDFDVHZKHUHWZRHTXDOWUDQVIRUPHUVDUHZRUNLQJLQSDUDOOHODQGRQHRIWKHP
IDOOVRXW7KHSHUPLVVLEOHRYHUORDGLVVD\7KLVZRXOGPHDQWKDWWKHLQVWDOODWLRQLVDWLWVVDIHW\
OLPLW ZKHQ HDFK RI WKH WZR XQLWV UHDFKHV ORDGLQJ DQG FRQVHTXHQWO\ GUDZ DERXW RI
UHIHUHQFH ORVV +LJKHU ORDGLQJ WKDQ RI HDFK WUDQVIRUPHU ZRXOG PHDQ PRUH WKDQ ORDGLQJRIWKHUHPDLQLQJWUDQVIRUPHULIRQHRIWKHPIDOOVRXW
6HYHUDO SDUDPHWHUV LQIOXHQFH WKH FDSLWDOLVHG ORVV YDOXHV 6RPH RI WKHVH SDUDPHWHUV PXVW EH
SUHGLFWHGIRUDQXPEHURIIXWXUH\HDUV&RQVHTXHQWO\VXFKSUHGLFWLRQVDUHVXEMHFWWRFRQVLGHUDEOH
XQFHUWDLQW\
1HYHUWKHOHVV DQ DWWHPSW WR DQDO\VH WKH VLWXDWLRQ WR REWDLQ UHDVRQDEO\ UHOHYDQW FDSLWDOLVHG ORVV
ILJXUHVZLOOPRVWOLNHO\OHDGWRDPRUHHFRQRPLFFKRLFHRIWUDQVIRUPHUWKDQQHJOHFWLQJWKHFRVWRI
WKHORVVHVFRPSOHWHO\DQGMXVWJRIRUWKHORZHVWSXUFKDVHSULFH
5HOHYDQWSDUDPHWHUV
D
HQHUJ\FRVWDQGKRZWKLVHYROYHVGXULQJWKH\HDUVWKHWUDQVIRUPHUZLOOEHLQRSHUDWLRQ
7KHHQHUJ\FRVWSHUN:KLVLQIOXHQFHGE\PDQ\IDFWRUVOLNHIXHOPDUNHWSULFHVXSSO\DQG
GHPDQGRIHOHFWULFLW\WD[HVLQIODWLRQSROLWLFDOVLWXDWLRQVDQGGHFLVLRQVFOLPDWLFYDULDWLRQV
HWF,WPD\LQFUHDVHRUGHFUHDVHIURPRQH\HDUWRDQRWKHUDQGPD\HYHQIOXFWXDWHGXULQJ
WKHKRXUGD\7KLVPDNHVDILQHWXQHGSUHGLFWLRQRIWKHHYROXWLRQRIWKHHQHUJ\FRVWV
LPSRVVLEOH,QDSHUVSHFWLYHRIDVHULHVRI\HDUVWKHHQHUJ\FRVWVZLOOSUREDEO\LQFUHDVH
$V DQ DSSUR[LPDWLRQ WKH HYROXWLRQ RI HQHUJ\ FRVWV FDQ EH FDOFXODWHG E\ PHDQV RI DQ
DYHUDJH LQFUHDVH UDWH SHU \HDU ,Q D FDOFXODWLRQ PRGHO IRU WKH FDSLWDOLVHG FRVWV RI WKH
ORVVHV LW LV WKHQ SRVVLEOH WR FDOFXODWH VHYHUDO DOWHUQDWLYH LQFUHDVH UDWHV LQ RUGHU WR VHH
KRZWKHILQDOUHVXOWLVLQIOXHQFHG
E
WKHORDGLQJSDWWHUQRIWKHWUDQVIRUPHU
7KH ORDGLQJ SDWWHUQ PD\ YDU\ PXFK IURP RQH WUDQVIRUPHU WR DQRWKHU ,Q LQGXVWULDO
DSSOLFDWLRQVOLNHIRUH[DPSOHDOXPLQLXPHOHFWURO\VLVWKHWUDQVIRUPHUVZLOOEHIXOO\ORDGHG
IURPWKHEHJLQQLQJDQGZLOOUXQVRFRQWLQXRXVO\H[FHSWIRUVKXWGRZQSHULRGVRIWKHSRW
OLQHGXHWRPDLQWHQDQFHORZDOXPLQLXPSULFHVGXHWRPDUNHWVDWXUDWLRQRURWKHUUHDVRQV
7UDQVIRUPHUVIRURSHUDWLRQLQV\VWHPVIRUJHQHUDOHOHFWULFLW\VXSSO\WRVRFLHW\QRUPDOO\KDYH
D SRZHU UDWLQJ ZKLFK LV FRQVLGHUDEO\ KLJKHU WKDQ WKH ORDG MXVW DIWHU LQVWDOODWLRQ LQ RUGHU WR
PHHW IXWXUH QHHGV DQG SRVVLEOH GLVWXUEDQFH VLWXDWLRQV 7KH LQLWLDO ORDG PD\ WKHQ EH HYHQ
EHORZRQHKDOIWKHSRZHUUDWLQJRIWKHWUDQVIRUPHU7KLVPHDQVWKDWWKHORDGORVVLVEHORZ
RQHIRXUWKRIWKHUHIHUHQFHORVV7KHORZORDGLQJPLJKWSUHYDLOIRUVHYHUDO\HDUVEHIRUHWKH
ORDGFXUUHQWVORZO\DSSURDFKHVWKHQRPLQDOFXUUHQWRIWKHWUDQVIRUPHULIWKHQHHGIRUVSDUH
FDSDFLW\ SHUPLWV that KLJK ORDGLQJ 7KH FDSLWDOLVHG ORDG ORVV IRU D WUDQVIRUPHU ZLWK VXFK D
ORDGLQJ SDWWHUQ ZLOO QDWXUDOO\ EH VLJQLILFDQWO\ ORZHU WKDQ IRU D WUDQVIRUPHU ZKHUH WKH ORDG
FXUUHQWLVHTXDOWRWKHQRPLQDOFXUUHQWMXVWDIWHUHQHUJLVLQJWKHWUDQVIRUPHU
7UDQVIRUPHU+DQGERRN3DJH
F
WKHWLPHKRUL]RQ
1XPHURXV WUDQVIRUPHUV DUH RSHUDWLQJ VDWLVIDFWRULO\ DIWHU PRUH WKDQ KDOI D FHQWXU\ LQ
VHUYLFH 7KH FRQVLGHUDEOH DFFXPXODWHG VDYLQJ SRWHQWLDO GXULQJ this ORQJ WLPH VKRXOG
PDNH DQ LQYHVWPHQW WR DFKLHYH ORZ WUDQVIRUPHU ORVVHV TXLWH DWWUDFWLYH 7KH DPRXQW RI
PRQH\ WKH SXUFKDVHULQYHVWRU DFFHSWV WR LQYHVW SHU N: UHGXFHG ORVV LV KRZHYHU
GHWHUPLQHGE\WKHQXPEHURI\HDUV Q KHLVZLOOLQJWRZDLWXQWLOWKHDFFXPXODWHGVDYLQJ
HTXDOVWKHLQYHVWHGDPRXQWSRVVLEO\DOVRDGMXVWHGDFFRUGLQJWRWKHJHQHUDOLQIODWLRQUDWH
%HIRUH WKHVH Q \HDUV KDYH HODSVHG WKHUH LV QR QHW UHYHQXH RQ WKH LQYHVWPHQW 7KH
HDUQLQJVDUHFRPLQJLQWKHIROORZLQJ\HDUV
6XFK DQ LQYHVWPHQW ZLOO FRPSHWH ZLWK DOWHUQDWLYH LQYHVWPHQWV REMHFWV FRQVLGHULQJ
SURILWDELOLW\SRWHQWLDODQGHFRQRPLFULVNOHYHO
7KHULVNOHYHOFRQQHFWHGWRDGHTXDWHO\LQVXUHGWUDQVIRUPHUVIRUJHQHUDOHOHFWULFLW\VXSSO\
WR KLJKO\ SRSXODWHG XUEDQ DUHDV LV QRUPDOO\ ORZ ZKLOH LW PD\ EH KLJKHU IRU LQGXVWULDO
WUDQVIRUPHUV EHFDXVH WKH RZQHU FRPSDQ\ PLJKW QRW EH YLDEOH IRU PRUH WKDQ UHODWLYHO\
IHZ\HDUV
G
WLPHLQGHHQHUJLVHGFRQGLWLRQGXHWRPDLQWHQDQFHRURWKHUUHDVRQV
H
LQVXUDQFHSUHPLXP
7KH DQQXDO LQVXUDQFH SUHPLXP LV QRUPDOO\ D FHUWDLQ SHUFHQWDJH RI WKH DFTXLVLWLRQ FRVW
DQG DGGV WR WKH RSHUDWLRQDO FRVWV ,W LV RIWHQ DGMXVWHG DFFRUGLQJ WR WKH LQIODWLRQ UDWH
+RZHYHU WKLV SDUDPHWHU KDV QRUPDOO\ QRW DQ\ ODUJH LQIOXHQFH RQ WKH FDSLWDOLVHG ORVV
YDOXHVDQGPD\EHGLVUHJDUGHG
I
WD[HV
7KHSURSHUW\WD[LVQRUPDOO\DFHUWDLQSHUFHQWDJHRIWKHDFTXLVLWLRQFRVWDQGDGGVDOVRWR
WKHRSHUDWLRQDOFRVWV5XOHVIRUGHSUHFLDWLRQIRUWKHHTXLSPHQWLQTXHVWLRQYDU\IURPRQH
FRXQWU\WRDQRWKHU$IWHUDFHUWDLQQXPEHURI\HDUVWKHYDOXHRIWKHWUDQVIRUPHULVZULWWHQ
GRZQDQGWKHSURSHUW\WD[PD\GLVDSSHDU
J
K
WKHFRVWRIWKHORVVHVLQWKHIHHGLQJV\VWHP LQFOXGLQJJHQHUDWRUVWUDQVIRUPHUVOLQHVDQG
FDEOHV FDXVHGE\WKHORVVHVLQWKHWUDQVIRUPHUXQGHUFRQVLGHUDWLRQ
JHQHUDWLRQLQVWDOODWLRQFRVWV
,QYHVWPHQWV DUH QHHGHG WR EXLOG HOHFWULF SRZHU VWDWLRQV ZLWK EXLOGLQJV JHQHUDWRUV
WXUELQHVQXFOHDUUHDFWRUVFRROLQJWRZHUVK\GURUHJXODWLRQVZLWKGDPVDQGWXQQHOVDQG
VR RQ )RU D FHUWDLQ LQYHVWHG DPRXQW D QXPEHU RI 0: HOHFWULF SRZHU KDV EHHQ PDGH
DYDLODEOH
L
WUDQVPLVVLRQLQVWDOODWLRQFRVWV
,QYHVWPHQWV DUH QHHGHG WR WUDQVPLW WKH HOHFWULF SRZHU IURP WKH SRZHU VWDWLRQ WR WKH
WHUPLQDOVRIWKHWUDQVIRUPHUXQGHUFRQVLGHUDWLRQ
M
FRVW IRU WKH HQHUJ\ FRQVXPHG E\ WKH FRROLQJ HTXLSPHQW IDQV DQG SXPSV 6HSDUDWH
FDSLWDOLVHGYDOXHVIRUSRZHUQHHGHGIRUWKHFRROLQJHTXLSPHQWLVVRPHWLPHVVSHFLILHG
3DUDPHWHUVJ K DQGL DUHLQWKHIROORZLQJWH[WDVVXPHGWREHLQFOXGHGLQWKHN:KSULFH G DWWKH
SULPDU\WHUPLQDOVRIWKHWUDQVIRUPHULQTXHVWLRQ
3DJH7UDQVIRUPHU+DQGERRN
&DSLWDOLVDWLRQRIQRORDGORVV
7KHZDQWHGILJXUHLVWKHPD[LPXPDPRXQWRIPRQH\ ; WKHSXUFKDVHULVZLOOLQJWRLQYHVWLQRUGHU
WRUHGXFHWKHWUDQVIRUPHUQRORDGORVVE\N:
>5HDGHUV ZLVKLQJ WR XVH WKH ORVV FDSLWDOLVDWLRQ IRUPXODV ZLWKRXW JRLQJ WKURXJK WKH
EDFNJURXQGDQGWKHGHYHORSPHQWRIWKHIRUPXODVFDQJRWRHTXDWLRQV DQG IRU
QRORDGORVVHVDQGORDGORVVHVUHVSHFWLYHO\@
$VVXPHDVDQH[DPSOHDWUDQVIRUPHUSXUFKDVHUZKREX\VWKHHOHFWULFHQHUJ\IURPDXWLOLW\DWWKH
SULPDU\WHUPLQDOVRIWKHWUDQVIRUPHUDWDSULFHRIGN:K7KHSULFHGLVDVVXPHGWRFRYHUDOOWKH
FRVWVWRJHQHUDWHN:KDQGWUDQVPLWWKLVHQHUJ\IURPWKHJHQHUDWRUWHUPLQDOVWRWKHSRLQWLQWKH
V\VWHP ZKHUH WKH WUDQVIRUPHU LV VLWXDWHG LQFOXGLQJ WKH ORVVHV LQ WKH JHQHUDWRU DQG WKH IHHGLQJ
WUDQVPLVVLRQ V\VWHP G LV LQWHQGHG WR EH D UHSUHVHQWDWLYH FRQVWDQW YDOXH IRU WKH YDULDEOH HQHUJ\
SULFHGXULQJWKHILUVW\HDURIWUDQVIRUPHURSHUDWLRQ7KHHQHUJ\FRVWIRUN:WKHILUVW\HDUZLOOWKHQ
EHÂGSURYLGHGWKHSRZHULVFRQVXPHGFRQWLQXRXVO\GXULQJDOOWKHKRXUVRIWKHZKROH
\HDU
$VVXPHWKDWWKHHQHUJ\SULFHLQFUHDVHVSSHU\HDUDVDQDYHUDJHIRUDQXPEHURIQ\HDUV7KH
HQHUJ\FRVWIRUN:GXULQJWKHVHFRQG\HDURIRSHUDWLRQZLOOWKHQEH
· ⋅ G ⋅ §¨ + S
¸¹
©
)RUWKHWKLUG\HDU
· ⋅ G ⋅ §¨ + S
¸¹
©
)RUWKHQWK\HDU
·
⋅ G ⋅ §¨ + S
¸¹
©
Q −
6HWWLQJ
T = + S
WKHVXPRIWKHHQHUJ\FRVWIRU
FRQVXPLQJN:FRQWLQXRXVO\GXULQJQ\HDUVEHFRPHV
(
)
⋅ G ⋅ + T + T + ⋅ ⋅ ⋅ ⋅ + TQ − ZKHUHWKHH[SUHVVLRQZLWKLQWKH
EUDFNHWVLVDJHRPHWULFVHULHVZLWKWKHTXRWLHQWT7KHVXPVRIWKLVVHULHVLV
V=
TQ − T −
7RFDOFXODWHWKHWRWDOFRVWIRUN:GXULQJQ\HDUVWKHFRVWIRUWKHILUVW\HDUÂGPXVWWKHQEH
PXOWLSOLHGZLWKWKHIDFWRUV
7UDQVIRUPHU+DQGERRN3DJH
7KHGLDJUDPLQ)LJXUHLOOXVWUDWHVKRZWKLVIDFWRUYDULHVZLWKSDQGQ
0XOWLSOLFDWLRQIDFWRUV
Q
Q
Q
Q
Q
§¨ + S
· −
¸¹
©
V=
S
¨§ + ·¸ − ©
¹
$YHUDJHDQQXDOLQFUHDVHLQHQHUJ\SULFHS
)LJXUH
)RUH[DPSOHWKHDFFXPXODWHGFRVWRIN:QRORDGORVVDIWHU\HDUVLVWLPHVWKHFRVWRIWKH
ILUVW\HDULIWKHDYHUDJHDQQXDOLQFUHDVHLQWKHHQHUJ\SULFHLV
7KH GLDJUDP LQ )LJXUH VKRZV WKH PXOWLSOLFDWLRQ IDFWRU IRU WKH ZKROH SK\VLFDO OLIHWLPH RI WKH
WUDQVIRUPHU VD\Q \HDUV YHUVXVWKHDYHUDJHDQQXDOLQFUHDVHLQHQHUJ\SULFH,WLQGLFDWHVWKDW
GXULQJWKHOLIHWLPHRIDWUDQVIRUPHUWKHVDYLQJSRWHQWLDOE\ORZHULQJWKHWUDQVIRUPHUORVVPLJKWEH
TXLWHFRQVLGHUDEOH
Q
§¨ + S
· −
¸¹
V=©
S
¨§ + ·¸ − ©
¹
0XOWLSOLFDWLRQIDFWRUV
Q $YHUDJHDQQXDOLQFUHDVHLQHQHUJ\SULFHS
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
$W DQ DYHUDJH DQQXDO LQFUHDVH UDWH RI IRU H[DPSOH WKH VDYLQJV GXULQJ WKH OLIHWLPH RI WKH
WUDQVIRUPHUIRUN:ORZHUQRORDGORVVZRXOGEHPRUHWKDQWLPHVWKHHQHUJ\FRVWIRUN:QR
ORDGORVVWKHILUVW\HDULQRSHUDWLRQ
+RZ PXFK VKRXOG D SXUFKDVHULQYHVWRU EH UHFRPPHQGHG WR SD\ IRU N: UHGXFHG QR ORDG ORVV
FRQVLGHULQJ WKDW WKH UHWXUQ RQ WKH LQYHVWPHQWV KDV WKH IRUP RI DYRLGHG H[SHQGLWXUH GXULQJ WKH
\HDUVWKHWUDQVIRUPHUZLOOEHLQRSHUDWLRQ"
7KHILUVWVWHSWRILQGDQDQVZHULVWKDWWKHSXUFKDVHUVKRXOGGHWHUPLQHKRZPDQ\\HDUVWKDWDUH
DOORZHGWRHODSVHEHIRUHWKHDFFXPXODWHGVDYLQJHTXDOVWKHLQYHVWHGDPRXQWRIPRQH\2ULQRWKHU
ZRUGVGHFLGHKRZPDQ\\HDUV Q DUHDOORZHGWRHODSVHEHIRUHWKHLQYHVWRUKDVJRWWKHLQYHVWHG
DPRXQW EDFN LQ WKH IRUP RI DYRLGHG H[SHQGLWXUH 7KH LQYHVWRU PLJKW DOVR UHTXLUH WKH LQYHVWHG
DPRXQWEDFNDGMXVWHGIRUDQHVWLPDWHGDYHUDJHDQQXDOLQIODWLRQUDWHRILGXULQJWKHQ\HDUV
:KHQQDQGLDUHGHWHUPLQHGDFRUUHVSRQGLQJDYHUDJHDQQXDOLQWHUHVWUDWHDFDQEHFDOFXODWHG
DVVKRZQLQWKHIROORZLQJ
7KHDQQXDOUHWXUQRIDQLQYHVWHGDPRXQW;LV
;⋅
D
Q⋅ ;⋅
D
)RUQ\HDUVWKLVVXPVXSWR
:LWKDQDYHUDJHDQQXDOLQIODWLRQUDWHRILWKHLQYHVWHGDPRXQW;PXVWDIWHUQ\HDUVEHDGMXVWHG
WR
Q
L ·
§
; ⋅ ¨ +
¸
© ¹ WRPDLQWDLQWKHRULJLQDOUHDOYDOXHRI;
7KHIROORZLQJHTXDWLRQFDQWKHQEHVHWXS
Q
Q⋅ ;⋅
D
L ·
§
= ; ⋅ ¨ +
¸
© ¹ 7KLVHTXDWLRQJLYHVWKHFRUUHODWLRQEHWZHHQWKHWKUHHYDULDEOHVQLDQGD
Q
D=
§
L ·
⋅ ¨ +
¸
Q © ¹ 7KHWRWDOUHWXUQRQWKHLQYHVWHGDPRXQW;WRREWDLQN:OHVVQRORDGORVVVKRXOGEHHTXDOWRWKH
UHGXFHGHQHUJ\FRVWIRUN:OHVVQRORDGORVVDFFXPXODWHGGXULQJQ\HDUVRIRSHUDWLRQ
Q
§¨ + S
· −
¸¹
©
⋅ G ⋅
§¨ + S
· −
¸¹
©
7KHIROORZLQJEDVLFHTXDWLRQFDQWKHQEHZULWWHQ
Q
§¨ + S
· −
¸¹
D
Q⋅ ;⋅
= ⋅ G ⋅ ©
§¨ + S
· −
¸¹
©
7KHH[SUHVVLRQRQWKHOHIWVLGHRIWKHHTXDOVLJQLQ UHSUHVHQWVWKHUHWXUQUHTXLUHPHQWRQWKH
LQYHVWPHQW;7KHULJKWVLGHUHSUHVHQWVWKHHFRQRPLFYDOXHRIWKHHQHUJ\VDYLQJ
7UDQVIRUPHU+DQGERRN3DJH
,WIROORZVWKDW
Q
§
·¸ − ·¸
⋅ G ⋅ ¨¨ §¨ + S
¸
¹
©©
¹ ⋅ ⋅ ;=
Q⋅D⋅S
7RFDOFXODWHDQH[DPSOHZLWKILJXUHV
$YHUDJHHQHUJ\FRVWUDWHWKHILUVW\HDURIRSHUDWLRQ
$YHUDJHDQQXDOLQFUHDVHLQHQHUJ\FRVWUDWH
1XPEHURI\HDUVEHIRUHLQYHVWHGDPRXQWVKDOOEHSDLGEDFN
$YHUDJHDQQXDOJHQHUDOLQIODWLRQUDWH $QQXDOLQWHUHVWUDWHRQLQYHVWHGDPRXQW;DFFWR G N:K
S Q L D ,QVHUWHGLQHTXDWLRQ JLYHV
; N:
,IWKHQXPEHURI\HDUVQLVFKDQJHGWRDQGWKHRWKHUIUHHYDULDEOHVGSDQGLUHPDLQXQFKDQJHG
REVHUYHWKDWDLVDGHSHQGHQWYDULDEOHRILDQGQ WKHUHVXOWZLOOEH
; N:
,QFUHDVLQJWKHQXPEHURI\HDUVWKHLQYHVWRUDOORZVWRHODSVHEHIRUHWKHLQYHVWHGDPRXQWLVVDYHG
IURPWRLQFUHDVHVWKHFDSLWDOLVHGORVVYDOXHE\PRUHWKDQN:
$QDGGLWLRQDOSDUDPHWHUFRXOGEHDGGHG,IWKHWUDQVIRUPHULVQRWHQHUJLVHGFRQWLQXRXVO\GXULQJWKH
\HDU EXW D OLWWOH OHVV GXH WR PDLQWHQDQFH LQ WKH V\VWHP RU GLVWXUEDQFH 6D\ IRU H[DPSOH WKH
WUDQVIRUPHU LV RQO\ HQHUJLVHG RI WKH WLPH WKH KRXUV PXVW EH PXOWLSOLHG E\ 7KH
FDSLWDOLVHGORVVYDOXHZLOOEHUHGXFHGE\WKHVDPHIDFWRU
&DSLWDOLVDWLRQRIORDGORVV
7KH QR ORDG ORVV LV FRQVWDQW ZKHQ WKH WUDQVIRUPHU LV HQHUJLVHGDQG LVSUDFWLFDOO\ LQGHSHQGHQW RI
WKHORDGLQJRIWKHWUDQVIRUPHU7KHHQHUJ\FRQVXPSWLRQGXULQJD\HDUGXHWRWKHQRORDGORVVLQWKH
WUDQVIRUPHULVWKHQVLPSO\WKHFRQVWDQWQRORDGORVVPXOWLSOLHGZLWKWKHQXPEHURIKRXUVLQD\HDU
WKHWUDQVIRUPHULVHQHUJLVHG
&RQWUDU\ WR WKH QR ORDG ORVV WKH ORDG ORVV YDULHV ZLWK WKH VTXDUH RI WKH LQVWDQWDQHRXV ORDGLQJ
FXUUHQW ZKLFK PD\ YDU\ ZLWKLQ D ODUJH UDQJH 7KH HQHUJ\ FRQVXPSWLRQ GXULQJ D \HDU GXH WR WKH
ORDG ORVV LQ WKH WUDQVIRUPHU LV WKH VXP RI HQHUJ\ FRQVXPHG ZLWKLQ D KLJK QXPEHU RI VPDOO WLPH
LQWHUYDOVǻWRIWKHZKROH\HDU$VVXPHWKDWWKHVHWLPHLQWHUYDOVDUHVRVPDOOWKDWWKHLQVWDQWDQHRXV
ORDGLQJFXUUHQW,LFDQEHUHJDUGHGDVFRQVWDQWZLWKLQHDFKLQWHUYDO7KHHQHUJ\FRQVXPSWLRQZLWKLQ
VXFKDQLQWHUYDOZLOOWKHQEH
FRQVWDQWÂ 7KHHQHUJ\FRQVXPSWLRQIRUDZKROH\HDULVWKHVXP
FRQVWDQWÂ ,QWURGXFH QRZ D SDUDPHWHU FDOOHG WKH HTXLYDOHQW ORDGLQJ FXUUHQW ,HT 7KDW LV D FRQVWDQW ORDGLQJ
FXUUHQWWKDWFRQVXPHVWKHVDPHDPRXQWRIHQHUJ\GXULQJWKHKRXUVRID\HDUDVDFFRUGLQJWR
H[SUHVVLRQ ,HT =
Σ,L ⋅ ∆W
7KHORDGORVVLVSURSRUWLRQDOWRWKHVTXDUHRI,HT,1,QWKHIROORZLQJ,HTZLOOEHH[SUHVVHGLQSXRI
WKHQRPLQDOFXUUHQW,1RIWKHWUDQVIRUPHU7KHORDGORVVLVWKHQSURSRUWLRQDOWRWKHVTXDUHRI,HT
7KHWDUJHWLVWRILQGFDSLWDOLVHGYDOXHIRUWKHORDGORVV2QHTXHVWLRQLVKRZPXFKDUHWKHVDYLQJV
RI N: UHGXFHG UHIHUHQFH ORDG ORVV UHIHUUHG WR QRPLQDO FXUUHQW ,1 DQG UHIHUHQFH WHPSHUDWXUH DFFXPXODWHGRYHUDFHUWDLQQXPEHURI\HDUV"
3DJH7UDQVIRUPHU+DQGERRN
7RDQVZHUWKLVDFRXSOHRIPRUHYDULDEOHVPXVWEHWDNHQLQWRFRQVLGHUDWLRQ
WKHHTXLYDOHQWORDGLQJFXUUHQWWKHILUVW\HDULQRSHUDWLRQ,HTLQLW
WKHDQQXDODYHUDJHLQFUHDVHLQWKHHTXLYDOHQWORDGLQJFXUUHQW]
7KHDYHUDJHHQHUJ\SULFHWKHILUVW\HDULQRSHUDWLRQLVGN:KDQGWKHDYHUDJHDQQXDOLQFUHDVHLQ
WKHHQHUJ\SULFHLVSDVIRUWKHQRORDGORVV
7KHVDYLQJVIRUN:OHVVUHIHUHQFHORDGORVVWKHILUVW\HDULQRSHUDWLRQLV
,HTLQLW ⋅ ⋅ G
)RUWKHVHFRQG\HDU
(
,HTLQLW ⋅ + ]
) ⋅ ⋅ G ⋅ §¨© + S ·¸¹
)RUWKHWKLUG\HDU
(
)
(
)
(
)
º
·
,HTLQLW ⋅ ª + ]
⋅ ⋅ G ⋅ §¨ + S
«¬
»¼
¸¹
©
)RUWKHIRXUWK\HDU
º
·
,HTLQLW ⋅ ª + ]
⋅ ⋅ G ⋅ §¨ + S
«¬
»¼
¸¹
©
)RUWKHQWK\HDU
º
,HTLQLW ⋅ ª + ]
»¼
«¬
Q−
·
⋅ ⋅ G ⋅ §¨ + S
¸¹
©
Q−
7KHVXPRIWKHVDYLQJVIRUQ\HDUVEHFRPHV
,HTLQLW
(
(
)
)
(
)
º
ª
· § S
§ S
· §
·
]
]
« + + ⋅ ¨© + ¸¹ + ¨© + ¸¹ ⋅ ¨© + ¸¹ + ⋅ ⋅ ⋅»
»
⋅ ⋅ G ⋅ «
Q−
Q−
»
« §
· § + S
·¸
]
+
+
¨
¨
¸
»
« ©
¹
¹ ©
¼ ¬
7KHH[SUHVVLRQZLWKLQWKHPDLQEUDFNHWVLVDJHRPHWULFVHULHVZLWKWKHTXRWLHQW
(
T = + ]
) ⋅ §¨© + S ·¸¹
DQGWKHVXP
(
(
)
)
Q
ª + ]
·º − ⋅ § + S
¨©
¸¹»¼
T − «¬
=
VQ =
T −
· −
⋅ § + S
+ ]
¨©
¸¹
Q
,QDVKRUWHUH[SUHVVLRQWKDQ WKHDFFXPXODWHGVDYLQJVGXULQJQ\HDUVIRUN:UHGXFHGORDG
ORVVEHFRPH
,HTLQLW
(
(
)
)
Q
ª + ]
·º − ⋅ § + S
«¬
¨©
¸¹»¼
⋅ ⋅ G ⋅
· −
⋅ § + S
+ ]
¨©
¸¹
$QDORJRXVWRWKHH[SUHVVLRQV ZHFDQVHWXSWKHIROORZLQJHTXDWLRQ
7UDQVIRUPHU+DQGERRN3DJH
Q⋅<⋅
D
= ,HTLQLW
(
(
)
)
Q
ª + ]
·º − ⋅ § + S
«¬
¨©
¸¹»¼
⋅ ⋅ G ⋅
· −
⋅ § + S
+ ]
¨©
¸¹
ZKHUH<LVWKHDPRXQWLQYHVWHGWRUHGXFHWKHUHIHUHQFHORDGORVVN:<FDQEHREWDLQHGIURP
HTXDWLRQ <=
,HTLQLW
(
(
)
)
Q
ª + ]
·º − ⋅ § + S
⋅ ⋅ G «¬
¨©
¸¹»¼
⋅
⋅ Q⋅D
· −
⋅ § + S
+ ]
¨©
¸¹
1XPHULFDOH[DPSOHV
$VVXPH
,HTLQLW LQSXRIWKHQRPLQDOFXUUHQWRIWKHWUDQVIRUPHU
7KHDYHUDJHHQHUJ\SULFHWKHILUVW\HDULQRSHUDWLRQ
G N:K
7KHDYHUDJHLQFUHDVHLQORDGLQJFXUUHQWSHU\HDU ] 7KHDYHUDJHDQQXDOLQFUHDVHLQHQHUJ\FRVWUDWH S 7KHDYHUDJHDQQXDOLQIODWLRQUDWH
L 1XPEHURI\HDUVEHIRUHWKHLQYHVWHGDPRXQWVKDOOEHSDLGEDFN
Q $QQXDOLQWHUHVWUDWHRQLQYHVWHGDPRXQW<DFFWR D 5HVXOW
< N:
,IWKHQXPEHURI\HDUVQ DQGWKHRWKHUIUHHYDULDEOHVG]SDQGLUHPDLQXQFKDQJHG REVHUYH
WKDWDLVDGHSHQGHQWYDULDEOHRILDQGQ WKHUHVXOWEHFRPHV
< N:
&DSLWDOLVDWLRQRIDX[LOLDU\SRZHUFRQVXPHGLQWKHFRROLQJHTXLSPHQW
6RPH SXUFKDVHUV ZDQW WR HYDOXDWH WKH SRZHU RI IDQV DQG SXPSV EHORQJLQJ WR WKH FRROLQJ
HTXLSPHQWDVZHOO7KLVPXVWDOVREHEDVHGRQFHUWDLQDVVXPSWLRQV
)RUH[DPSOHLIWKHIDQVDQGSXPSVPXVWUXQHYHQZKHQWKHWUDQVIRUPHULVXQORDGHGEXWHQHUJLVHG
WKHFDSLWDOLVHGDX[LOLDU\ORVVZLOOLQSULQFLSOHEHWKHVDPHDVWKHFDSLWDOLVHGQRORDGORVV+RZHYHU
WKHHQHUJ\SULFHGN:KPLJKWEHGLIIHUHQWDWWKHORZYROWDJHOHYHORIWKHIDQDQGSXPSPRWRUV
DQGWKHFDSLWDOLVDWLRQYDOXHPXVWEHDGMXVWHGDFFRUGLQJO\
)RUODUJHUSRZHUWUDQVIRUPHUVWKHFRROLQJHTXLSPHQWPD\FRQVLVWRIVHYHUDOVHFWLRQV)RUH[DPSOH
WZRVHFWLRQVZKHUHRQHVHFWLRQSURYLGHVVXIILFLHQWFRROLQJXSWRORDGDQGWKHRWKHUVHFWLRQLV
UXQQLQJRQO\ZKHQWKHORDGH[FHHGV,QVXFKDFDVHWZRFDSLWDOLVDWLRQYDOXHVDSSO\RQHIRU
WKH ILUVW VHFWLRQ DQG RQH IRU WKH VHFRQG 7KH UHDVRQ LV WKDW WKH VHFRQG VHFWLRQ SUREDEO\ ZLOO EH
UXQQLQJ D OHVV QXPEHU RI KRXUV WKDQ WKH ILUVW VHFWLRQ ,W PD\ HYHQ ODVW VHYHUDO \HDUV DIWHU
LQVWDOODWLRQEHIRUHWKHWUDQVIRUPHUORDGLQJPDNHVLWQHFHVVDU\WRUXQERWKVHFWLRQV
,IQ WKHQXPEHURI\HDUVWKHLQYHVWRULVZLOOLQJWRZDLWEHIRUHKHKDVJRWEDFNWKHLQYHVWHGDPRXQW
WRUHGXFHWKHSRZHULQWKHVHFRQGVHFWLRQE\N: LVIRUH[DPSOHDQGWKHVHFRQGVHFWLRQZLOO
QRWEHLQRSHUDWLRQDWDOOWKHILUVW\HDUVDIWHUWKHWUDQVIRUPHULQVWDOODWLRQWKHFDSLWDOLVHGORVVIRU
WKHVHFRQGVHFWLRQZLOOEH]HUR
7DNHDVDQRWKHUH[DPSOHWKDWWKHVHFRQGVHFWLRQLVLQRSHUDWLRQKRXUVHDFK\HDUWKHILUVWQ
\HDUV WKH EDVLF HTXDWLRQ VWLOO DSSO\ ZLWK WKH H[FHSWLRQ WKDW WKH QXPEHU PXVW EH
UHSODFHGE\
,IWKHQXPEHURIRSHUDWLRQDOKRXUVLVHVWLPDWHGWRYDU\IURPRQH\HDUWRDQRWKHUWKHULJKWVLGHRI
FDQEHVSOLWLQWRVHYHUDO\HDUE\\HDUWHUPV
3DJH7UDQVIRUPHU+DQGERRN
&RPPHQWV
•
7KH HDUQLQJV RI LQYHVWPHQW LQ ORZHU WUDQVIRUPHU ORVVHV KDYH WKH IRUP RI DYRLGDQFH RI IXWXUH
H[SHQVHV 7KH DFFXPXODWHG DYRLGHG H[SHQGLWXUH LQFUHDVHV GXULQJ WKH ZKROH WLPH WKH
WUDQVIRUPHULVLQRSHUDWLRQ7KHVWUDWHJLFNH\TXHVWLRQIRUWKHSXUFKDVHULQYHVWRULVKRZPDQ\
\HDUV KH LV SUHSDUHG WR ZDLW EHIRUH WKH DYRLGHG H[SHQGLWXUH HTXDOV WKH LQYHVWHG DPRXQW
SRVVLEO\ DGMXVWHG IRU WKH JHQHUDO LQIODWLRQ LQ ORZHU ORVVHV DW WKH WLPH RI SXUFKDVH ,Q RWKHU
ZRUGVWKHFKRLFHRIQLQHTXDWLRQV DQG •
QLVWKHRQO\SDUDPHWHULQHTXDWLRQV DQG WKHSXUFKDVHULQYHVWRULVIUHHWR
FKRRVH +H FDQ RQO\ PDNH WKH EHVW SRVVLEOH HVWLPDWH RI ] S DQG L VHH EXW KDV QR
LQIOXHQFHRQWKHLUIXWXUHUHDOQXPHULFDOYDOXHV
•
QDQGGDUHWKHWZRSDUDPHWHUVWKDWKDYHWKHODUJHVWLQIOXHQFHRQWKHFDSLWDOLVHGYDOXHV
•
SDQGLLQIOXHQFHVUHVSHFWLYHO\WKHULJKWDQGWKHOHIWVLGHRI LQWKHVDPHGLUHFWLRQSDQGL
WHQG WR IROORZ HDFK RWKHU )RU WKHVH UHDVRQV S DQG L KDYH RQO\ D PRGHUDWH LQIOXHQFH RQ WKH
FDSLWDOLVHG ORVV YDOXHV +RZHYHU LW LV QRW XQUHDVRQDEOH WR DVVXPH WKDW WKH LQFUHDVH UDWH RI
HQHUJ\FRVW S ZLOOEHKLJKHUWKDQWKHJHQHUDOLQIODWLRQUDWH L 7KHSUHVHQWFDOFXODWLRQPHWKRG
RIIHUVWKHRSSRUWXQLW\WRGLVWLQJXLVKEHWZHHQWKHWZR
•
7KH XQFHUWDLQW\ LQ WKH HVWLPDWLRQ RI WKH SDUDPHWHUV ] S DQG L LQFUHDVHV WKH IXUWKHU LQWR WKH
IXWXUHRQHJRHV KLJKQ ZKLFKLQWXUQLQIOXHQFHVWKHUHOHYDQFHRIWKHFDSLWDOLVHGORVVYDOXHV
•
)RUDLUFRROHGWUDQVIRUPHUVVLWXDWHGLQGRRUDQGIRUZDWHUFRROHGWUDQVIRUPHUVWKHSURYLVLRQRI
VXIILFLHQWTXDQWLW\RIFRROLQJDLURUZDWHUPD\LQYROYHFRVWV6XFKFRVWVH[SUHVVHGLQWHUPVRI
N: RUDQ\RWKHUFXUUHQF\WKDWLVXVHGIRUG VKRXOGEHDGGHGWRWKHFDSLWDOLVHGORVVYDOXHV
REWDLQHGIURPHTXDWLRQ DQG •
7KHVXPRIWKHPDQXIDFWXULQJFRVWVDQGWKHHFRQRPLFYDOXHRIWKHWRWDOWUDQVIRUPHUORVVHVLV
FDOOHGWKHFRPSDULVRQSULFH7KHDLPRIWKHWUDQVIRUPHURSWLPLVDWLRQLVWRREWDLQDWUDQVIRUPHU
ZLWKGLPHQVLRQVDQGORVVHVWKDWJLYHVWKHPLQLPXPFRPSDULVRQSULFH,QYHVWLJDWLRQVVKRZWKDW
WKH FRPSDULVRQ SULFH RI WUDQVIRUPHUV WKDW DUH RSWLPLVHG ZLWK FDSLWDOLVHG ORVV YDOXHV WKDW OLH
ZLWKLQ“±RID³FRUUHFW´YDOXHGRHVQRWLQFUHDVHWKHFRPSDULVRQSULFHE\PRUHWKDQ
DERXW&RQVHTXHQWO\WKHWRWDOHFRQRP\RIWKHLQVWDOODWLRQLVQRWFULWLFDOO\GHSHQGHQWRQD
YHU\DFFXUDWHIRUHFDVWRIFRUUHFWFDSLWDOLVHGORVVYDOXHV%XWWRWDOO\XQUHDOLVWLFYDOXHVVKRXOGEH
DYRLGHG
•
2Q D ORQJWHUP EDVH LQYHVWPHQW LQ ORZHU ORVVHV LV YHU\ SURILWDEOH ,Q DGGLWLRQ LQYHVWPHQW LQ
ORZHU ORVVHV LQ D WUDQVIRUPHU LQVWDOOHG WR GD\ FRQWULEXWHV WR OHVV HQHUJ\ FRQVXPSWLRQ LQ WKH
VRFLHW\LQWKHIXWXUHDQGWREHWWHUHQYLURQPHQW
•
)LQDOO\ DQRWKHU SDUDPHWHU DVVRFLDWHG ZLWK WKH WUDQVIRUPHU HIILFLHQF\ LV WKH VKRUW FLUFXLW
LPSHGDQFH RI WKH WUDQVIRUPHU ZKLFK FDXVHV D YROWDJH GURS RQ WKH VHFRQGDU\ VLGH ZKHQ WKH
WUDQVIRUPHULVORDGHG$KLJKVKRUWFLUFXLWLPSHGDQFHFDXVHVDKLJKYROWDJHGURSDQGDORZHU
SRZHUVXSSOLHGWRWKHVHFRQGDU\V\VWHP6HHVHFWLRQSDJH
2QWKHRWKHUKDQGORZVKRUWFLUFXLWLPSHGDQFHZLOOLQFUHDVHWKHVKRUWFLUFXLWFXUUHQWWKURXJKWKH
ZLQGLQJV LQ FDVH RI D VKRUW FLUFXLW RQ WKH VHFRQGDU\ VLGH 7KH PHFKDQLFDO IRUFHV RQ WKH
ZLQGLQJVLQFUHDVHZLWKWKHVTXDUHRIWKHVKRUWFLUFXLWFXUUHQWDQGLWPD\EHFRPHQHFHVVDU\WR
LQFUHDVH WKH FURVV VHFWLRQ RI WKH ZLQGLQJ FRQGXFWRUV LQ RUGHU WR HQDEOH WKH ZLQGLQJV WR
ZLWKVWDQGWKHIRUFHV,QWXUQWKLVZLOOLQFUHDVHWKHGLPHQVLRQVDQGWKHZHLJKWRIWKHWUDQVIRUPHU
DQGFRQVHTXHQWO\WKHPDQXIDFWXULQJFRVW
7KHFKRLFHRIVKRUWFLUFXLWLPSHGDQFHZLOOEHDFRPSURPLVHEHWZHHQWKHWZRDVSHFWVYROWDJH
GURSDQGWKHIRUFHVDFWLQJRQWKHZLQGLQJVGXULQJVKRUWFLUFXLWFXUUHQW7KHSXUFKDVHUPD\DOVR
GHVLUH WR XVH WKH VKRUW FLUFXLW LPSHGDQFH RI WKH WUDQVIRUPHU DV D VKRUW FLUFXLW FXUUHQW OLPLWLQJ
GHYLFHWRSURWHFWHTXLSPHQWLQWKHV\VWHPRQWKHVHFRQGDU\VLGH
3URYLGLQJ WKH WUDQVIRUPHU ZLWK D UHJXODWLQJ ZLQGLQJ DQG D WDS FKDQJHU FDQ FRPSHQVDWH WKH
YROWDJH GURS LQ WKH WUDQVIRUPHU ,QVWDOOLQJ FRPSHQVDWLQJ FDSDFLWRUV LQ WKH V\VWHP LV DQ
DOWHUQDWLYH
7UDQVIRUPHU+DQGERRN3DJH
,1)250$7,215(48,5(':,7+(148,5<$1'25'(5
)RUDSSOLFDWLRQIRUTXRWDWLRQVDQGSRVVLEOHRUGHULQJWUDQVIRUPHUVFRQWDFW\RXUQHDUHVW$%%RIILFH
RUVHDUFKIRU\RXUSURGXFWDQG$%%FRQWDFWRQKWWSZZZDEEFRP
7KHLQIRUPDWLRQJLYHQLQWKLVVHFWLRQLVPRVWO\DQH[WUDFWIURP,(&$QQH[$ &RS\ULJKW‹
,(&*HQHYD6ZLW]HUODQGZZZLHFFK
7KHOLVWLVQRWH[KDXVWHGEXWFDQLQDQ\FDVHEHXVHGDVDFKHFNOLVW
1250$/,1)250$7,21
7KHIROORZLQJLQIRUPDWLRQVKDOOEHJLYHQLQDOOFDVHV
• 3DUWLFXODUV RI WKH VSHFLILFDWLRQV WR ZKLFK WKH WUDQVIRUPHU VKDOO FRPSO\
(J LQWHUQDWLRQDO DQG QDWLRQDO VWDQGDUGV ORFDO VWDQGDUGV UHJXODWLRQV DQG SDUWLFXODU
FXVWRPHUUHTXLUHPHQWV
• .LQGRIWUDQVIRUPHUIRUH[DPSOHVHSDUDWHZLQGLQJWUDQVIRUPHUDXWRWUDQVIRUPHURUERRVWHU
WUDQVIRUPHU
• 6LQJOHRUWKUHHSKDVHXQLW
• 1XPEHURISKDVHVLQV\VWHP
• )UHTXHQF\
(JLQ1RUWK$PHULFDSDUWVRI6RXWK$PHULFDKDOIRI-DSDQRIWHQRQERDUGVKLSV+]LV
XVHG PRVW RWKHUFRXQWULHV XVH +] 2WKHU IUHTXHQFLHV PD\EH DFWXDO +]RQ ERDUG
DHURSODQH +] IRU UDLOZD\ &RQWLQXRXV RSHUDWLRQ DW IUHTXHQF\ OHVV WKDQ RI UDWHG
YDOXHKDVWREHVSHFLILHG
• 'U\W\SHRUOLTXLGILOOHG,IOLTXLGILOOHGZKHWKHUPLQHUDORLORUV\QWKHWLFLQVXODWLQJOLTXLG,IGU\
W\SHGHJUHHRISURWHFWLRQ VHH,(& ,IGU\W\SHWKHLQVXODWLRQV\VWHPWHPSHUDWXUHFODVVLILFDWLRQVKRXOGEHDJUHHG(JDGU\W\SH
VROXWLRQPD\JLYHOHVVH[SHQVLYHEXLOGLQJVEXWDYDLODELOLW\FRQFHUQLQJSRZHUDQGYROWDJHDUH
OLPLWHG+LJKILUHSRLQWOLTXLGEDVHGRQPLQHUDORLORURWKHUV\QWKHWLFIOXLGVDVIRULQVWDQFH
GLPHWK\OVLOLFRQHIOXLGPD\JLYHEXLOGLQJVDYLQJV
• ,QGRRURURXWGRRUW\SH
• 7\SHRIFRROLQJ
5HIHUHQFHLVPDGHWRVHFWLRQSDJH
• 5DWHG SRZHU IRU HDFK ZLQGLQJ DQG IRU WDSSLQJ UDQJH H[FHHGLQJ “ WKH VSHFLILHG
PD[LPXPFXUUHQWWDSSLQJ
5HFRPPHQGHGSRZHUUDWLQJV
±±±±±±±±±±HWF
2IWHQXVHGSUDFWLFHLVWRKDYHWKHVDPHSRZHURYHUWKHZKROHWDSSLQJUDQJH5HGXFHG
SRZHURIVRPHPLQXVWDSLVDOVRFRPPRQEXWLQDQ\FDVHLWVKRXOGEHVSHFLILHG
$16,,(((VWDQGDUGUHTXLUHWKDWSRZHUIORZGLUHFWLRQKDYHWREHVSHFLILHG
,IDSSOLFDEOHWKHWUDQVIRUPHULVVSHFLILHGZLWKDOWHUQDWLYHPHWKRGVRIFRROLQJWKHUHVSHFWLYH
ORZHUSRZHUYDOXHVDUHWREHVWDWHGWRJHWKHUZLWKWKHUDWHGSRZHU ZKLFKUHIHUVWRWKHPRVW
HIILFLHQWFRROLQJ 7\SLFDO VSHFLILFDWLRQ FRXOG EH 21$1 21$) RU DV RYHUORDG 21$121$)
• 5DWHGYROWDJHIRUHDFKZLQGLQJ
• )RUDWUDQVIRUPHUZLWKWDSSLQJV
:KLFKZLQGLQJLVWDSSHG
WKHQXPEHURIWDSSLQJVDQG
WKHWDSSLQJUDQJHRUWDSSLQJVWHS
:KHWKHU RIIFLUFXLW RU RQORDG WDSFKDQJLQJLVUHTXLUHG
,IWKHWDSSLQJUDQJHLVPRUHWKDQ“WKHW\SHRIYROWDJHYDULDWLRQDQGWKHORFDWLRQRI
WKHPD[LPXPFXUUHQWWDSSLQJLIDSSOLFDEOHVHH,(&± FODXVH
1RUPDOVSHFLILHGW\SHRIYROWDJHYDULDWLRQLV&)99 FRQVWDQWIOX[YROWDJHYDULDWLRQ DQGLQ
VSHFLDOFDVHV9)99 YDULDEOHIOX[YROWDJHYDULDWLRQ %XWQRUPDORSHUDWLRQZLOORIWHQEH&E99
FRPELQHGYROWDJHYDULDWLRQ • +LJKHVW YROWDJH IRU HTXLSPHQW 8P IRU HDFK ZLQGLQJ ZLWK UHVSHFW WR LQVXODWLRQ VHH ,(&
3DJH7UDQVIRUPHU+DQGERRN
8PDFFRUGLQJVWDQGDUGYROWDJHOHYHOV6SHFLILHGYROWDJHLQVRPHWDSFKDQJHUSOXVSRVLWLRQV
PD\ EH KLJKHU WKDQ 8P 0D[LPXP V\VWHP YROWDJH %XW FRQWLQXRXV RSHUDWLRQ DW YROWDJH
DERYH8PKDVWREHVSHFLILHG
• 0HWKRGRIV\VWHPHDUWKLQJ IRUHDFKZLQGLQJ • ,QVXODWLRQOHYHO VHH,(& IRUHDFKZLQGLQJ
8QXVXDOYROWDJHFRQGLWLRQLQFOXGLQJWUDQVLHQWRYHUYROWDJHVUHVRQDQFHVZLWFKLQJVXUJHV
HWFZKLFKPD\UHTXLUHVSHFLDOLQVXODWLRQGHVLJQKDVWREHFRQVLGHUHG
• &RQQHFWLRQV\PERODQGQHXWUDOWHUPLQDOVLIUHTXLUHGIRUDQ\ZLQGLQJ
,I DOUHDG\ D FRQQHFWLRQ EHWZHHQ GLIIHUHQW YROWDJH V\VWHPV H[LVWV LQ WKH QHWZRUN LW LV
PDQGDWRU\WRVSHFLI\DSSURSULDWHFRQQHFWLRQV\PERO,QFRQQHFWLRQV\PERO<1\QWKHOHWWHUV
³1´DQG³Q´PHDQVQHXWUDOSRLQWVDFFHVVLEOHRQH[WHUQDOWHUPLQDOV
• $Q\ SHFXOLDULWLHV RI LQVWDOODWLRQ DVVHPEO\ WUDQVSRUW DQG KDQGOLQJ 5HVWULFWLRQV RQ
GLPHQVLRQVDQGPDVV
,Q DUHDV ZLWK XQNQRZQ LQIUDVWUXFWXUH LW LV PDQGDWRU\ WR FODULI\ DW DQ HDUO\ VWDJH KDQGOLQJ
WUDQVSRUWDQGOLIWLQJSRVVLELOLWLHVDQGOLPLWDWLRQV
• 'HWDLOVRIDX[LOLDU\VXSSO\YROWDJH IRUIDQVDQGSXPSVWDSFKDQJHUDODUPVHWF • )LWWLQJV UHTXLUHG DQG DQ LQGLFDWLRQ RI WKH VLGH IURP ZKLFK PHWHUV UDWLQJ SODWHV RLOOHYHO
LQGLFDWRUVHWFVKDOOEHOHJLEOH
• 7\SHRIRLOSUHVHUYDWLRQV\VWHP
6HHSDJH2LOSUHVHUYDWLRQV\VWHPV
• )RU PXOWLZLQGLQJ WUDQVIRUPHUV UHTXLUHG SRZHUORDGLQJ FRPELQDWLRQV VWDWLQJ ZKHQ
QHFHVVDU\WKHDFWLYHDQGUHDFWLYHRXWSXWVVHSDUDWHO\HVSHFLDOO\LQWKHFDVHRIPXOWLZLQGLQJ
DXWRWUDQVIRUPHUV
&DSLWDOLVDWLRQRIORVVHVVHHVHFWLRQSDJH
63(&,$/,1)250$7,21
7KHIROORZLQJDGGLWLRQDOLQIRUPDWLRQPD\QHHGWREHJLYHQ
• ,IDOLJKWQLQJLPSXOVHYROWDJHWHVWLVUHTXLUHGZKHWKHURUQRWWKHWHVWLVWRLQFOXGHFKRSSHG
ZDYHV VHH,(& ,Q ,(& VWDQGDUG /,& OLJKWQLQJ LPSXOVH FKRSSHG RQ WDLO LV D VSHFLDO WHVW ,Q $16,,(((
VWDQGDUG /,& LV SDUW RI QRUPDO /, WHVW SURFHGXUH 6RPH QDWLRQDO VWDQGDUGV LQIOXHQFHG E\
$16,,(((KDYHDGRSWHG/,&DVSDUWRI/,WHVWHYHQLIWKH\PDLQO\VWLFNWR,(&
• :KHWKHUDVWDELOL]LQJZLQGLQJLVUHTXLUHGDQGLIVRWKHPHWKRGRIHDUWKLQJ
,I QHXWUDO SRLQW LQ D VWDU FRQQHFWHG ZLQGLQJ LV QRW LVRODWHG LW FDQ EH ORDGHG DQG WKH ]HUR
VHTXHQFHFXUUHQWKDVWREHFRPSHQVDWHGLQDGHOWDFRQQHFWHGZLQGLQJ,QWUDQVIRUPHUZLWK
OHJFRUHDGHOWDFRQQHFWHGZLQGLQJLVQHHGHGWROLPLWWKH]HURVHTXHQFHLPSHGDQFH
6HHDOVRVHFWLRQ
• 6KRUWFLUFXLWLPSHGDQFHRULPSHGDQFHUDQJH VHH,(&$QQH[& )RUPXOWLZLQGLQJ
WUDQVIRUPHUV DQ\ LPSHGDQFH¶V WKDW DUH VSHFLILHG IRU SDUWLFXODU SDLUV RI ZLQGLQJV WRJHWKHU
ZLWKUHOHYDQWUHIHUHQFHUDWLQJVLISHUFHQWDJHYDOXHVDUHJLYHQ 7KH WUDQVIRUPHU LPSHGDQFH OLPLWV WKH GLPHQVLRQLQJ VKRUW FLUFXLW SRZHU LQ WKH VHFRQGDU\
QHWZRUN2QWKHRWKHUKDQGKLJKVKRUWFLUFXLWLPSHGDQFHUHGXFHVWKHWUDQVIRUPHUHIILFLHQF\
• 7ROHUDQFHV RQ YROWDJH UDWLRV DQG VKRUWFLUFXLW LPSHGDQFH¶V DV OHIW WR DJUHHPHQW LQ ,(&
7DEOHRUGHYLDWLQJIURPYDOXHVJLYHQLQWKHWDEOH
7KH UHTXLUHPHQW UHJDUGLQJ YROWDJH UDWLR DFFRUGLQJ WR 7DEOH LV “ RQ SULQFLSDO WDS
RWKHU WDSV DFFRUGLQJ WR DJUHHPHQW EXW PRVW WUDQVIRUPHU VXSSOLHUV QRUPDOO\ IXOILOV WKH
UHTXLUHPHQWRI“RQDOOWDSV
• :KHWKHUDJHQHUDWRUWUDQVIRUPHULVWREHFRQQHFWHGWRWKHJHQHUDWRUGLUHFWO\RUVZLWFKJHDU
DQGZKHWKHULWZLOOEHVXEMHFWHGWRORDGUHMHFWLRQFRQGLWLRQV
:KLFKFDQJLYHXSWRWLPHVQRUPDOYROWDJHLQVHFRQGV
•
:KHWKHUDWUDQVIRUPHULVWREHFRQQHFWHGGLUHFWO\RUE\DVKRUWOHQJWKRIRYHUKHDGOLQHWR
JDVLQVXODWHGVZLWFKJHDU *,6 $OVRFRQQHFWLRQRIODUJHSRZHUWUDQVIRUPHUZLWKKLJKFXUUHQWLVRODWHGSKDVHEXVGXFWKDVWR
EHPHQWLRQHG
• $OWLWXGHDERYHVHDOHYHOLILQH[FHVVRIP IW 7UDQVIRUPHU+DQGERRN3DJH
• 6SHFLDODPELHQWWHPSHUDWXUHFRQGLWLRQV VHH,(&VHFWLRQE RUUHVWULFWLRQVWR
FLUFXODWLRQRIFRROLQJDLU
,QDGGLWLRQIRUH[DPSOHOLPLWDWLRQVLQRLODQGZLQGLQJWHPSHUDWXUHULVHV HJLQVWHDGRI
ƒ& PD\EHJLYHQ
7KH DPELHQW FRQGLWLRQV IRU LQVWDQFH VHPL LQGRRU DUUDQJHPHQW RU WURSLFDO LQVWDOODWLRQ PXVW
EHFRQVLGHUHGDQGVSHFLILHGWHPSHUDWXUHULVHDGMXVWHGDFFRUGLQJO\
:KHQ ZDWHUFRROHG WUDQVIRUPHU LI WHPSHUDWXUH RI FRROLQJ ZDWHU LV RXWVLGH VWDQGDUG
FRQGLWLRQ
$OVRRWKHUVSHFLDODPELHQWFRQGLWLRQVDVGDPDJLQJIXPHVRUYDSRXUVH[FHVVLYHRUDEUDVLYH
GXVW H[SORVLYH PL[WXUHV RI GXVW RU JDVHV VWHDP VDOW VSUD\ H[FHVVLYH PRLVWXUH GULSSLQJ
ZDWHURUKDUVKHQYLURQPHQWVDVFRDVWDORUGXW\KDVWREHPHQWLRQHG
• ([SHFWHGVHLVPLFDFWLYLW\DWWKHLQVWDOODWLRQVLWHZKLFKUHTXLUHVVSHFLDOFRQVLGHUDWLRQ
6HHDOVRVHFWLRQSDJH
%HDOVRDZDUHRIRWKHUFDXVHGYLEUDWLRQWLOWLQJVKRFNHWF
• 6SHFLDO LQVWDOODWLRQ VSDFH UHVWULFWLRQV ZKLFK PD\ LQIOXHQFH WKH LQVXODWLRQ FOHDUDQFHV DQG
WHUPLQDOORFDWLRQVRQWKHWUDQVIRUPHUDOVRWKHPDLQWHQDQFH
• :KHWKHU ORDG FXUUHQW ZDYH VKDSH ZLOO EH KHDYLO\ GLVWRUWHG :KHWKHU XQEDODQFHG SKDVH
ORDGLQJLVDQWLFLSDWHG,QERWKFDVHVGHWDLOVWREHJLYHQ
/RDG ZLWK DEQRUPDO KDUPRQLFV FXUUHQW KDUPRQLF IDFWRU DERYH PD\ FDXVH H[FHVVLYH
ORVVHVDQGDEQRUPDOKHDWLQJ
2WKHUVSHFLDORSHUDWLRQFRQGLWLRQVVXFKDV
&RQWLQXRXVORDGRSHUDWLRQDWYROWDJHDQGYROWDJHSHU+HUW]DERYHRIUDWHGYDOXHVDQG
DERYHLQQRORDGFRQGLWLRQ
&RQWLQXRXVRSHUDWLRQDWORDGSRZHUIDFWRUOHVVWKDQ
• :KHWKHU WUDQVIRUPHUV ZLOO EH VXEMHFWHG WR IUHTXHQW RYHUFXUUHQWV IRU H[DPSOH IXUQDFH
WUDQVIRUPHUVDQGWUDFWLRQIHHGLQJWUDQVIRUPHUVDQGRWKHULPSDFWGXW\VXFKDVFKLSSHUPLOOLQ
WLPEHUKDQGOLQJHWFDQGDOVRKHDY\FDSDFLWLYHPRWRUGXW\
• 'HWDLOVRILQWHQGHGUHJXODUF\FOLFRYHUORDGLQJRWKHUWKDQFRYHUHGE\,(&± FODXVH WRHQDEOHWKHUDWLQJRIWKHWUDQVIRUPHUDX[LOLDU\HTXLSPHQWWREHHVWDEOLVKHG • $Q\RWKHUH[FHSWLRQDOVHUYLFHFRQGLWLRQV
8QXVXDOVWURQJPDJQHWLFILHOGV
• ,I D WUDQVIRUPHU KDV DOWHUQDWLYH ZLQGLQJ FRQQHFWLRQV KRZ WKH\ VKRXOG EH FKDQJHG DQG
ZKLFKFRQQHFWLRQLVUHTXLUHGH[ZRUNV
• 6KRUWFLUFXLW FKDUDFWHULVWLFV RI WKH FRQQHFWHG V\VWHPV H[SUHVVHG DV VKRUWFLUFXLW SRZHU RU
FXUUHQWRUV\VWHPLPSHGDQFHGDWD DQGSRVVLEOHOLPLWDWLRQVDIIHFWLQJWKHWUDQVIRUPHUGHVLJQ
VHH,(& 8QXVXDO VKRUWFLUFXLW DSSOLFDWLRQ FRQGLWLRQ DQG SODQQHG VKRUW FLUFXLWV DV SDUW RI UHJXODU
RSHUDWLRQRUUHOD\LQJSUDFWLFH
• :KHWKHUVRXQGOHYHOPHDVXUHPHQWLVWREHFDUULHGRXW VHH,(& 7KHVRXQGOHYHOFDQEHJLYHQDVVRXQGSUHVVXUHRUDVVRXQGSRZHUQRUPDOO\$ZHLJKWHG
VHHSDJH
• 9DFXXPZLWKVWDQGRIWKHWUDQVIRUPHUWDQNDQGSRVVLEO\WKHFRQVHUYDWRULIDVSHFLILFYDOXH
LVUHTXLUHG
,W LV UHFRPPHQGHG WR VSHFLI\ ERWK WDQN DQG FRQVHUYDWRU WR VXVWDLQ IXOO YDFXXP IRU ODUJHU
XQLWV7KLVDOORZVRLOILOOLQJXQGHUYDFXXPDWVLWH
• $Q\WHVWVQRWUHIHUUHGWRDERYHZKLFKPD\EHUHTXLUHG
7KLVVKRXOGEHPHQWLRQHGVHSDUDWHO\DQGPD\OHDGWRDGGLWLRQDOFRVWDQGORQJHUGHOLYHU\
WLPH
$Q\LQIRUPDWLRQUHJDUGLQJWKHUHTXLUHGFRUURVLRQUHVLVWDQFHRIWKHVXUIDFHWUHDWPHQWLQUHIHUHQFHWR
WKHJHRJUDSKLF]RQHDQGSROOXWLRQ]RQHKDVWREHVWDWHG
3DJH7UDQVIRUPHU+DQGERRN
3$5$//(/23(5$7,216
,I SDUDOOHO RSHUDWLRQ ZLWK H[LVWLQJ WUDQVIRUPHUV LV UHTXLUHG WKLV VKDOO EH VWDWHG DQG WKH IROORZLQJ
LQIRUPDWLRQRQWKHH[LVWLQJWUDQVIRUPHUVJLYHQ
• 5DWHGSRZHU
• 5DWHGYROWDJHUDWLR
• 9ROWDJHUDWLRVFRUUHVSRQGLQJWRWDSSLQJVRWKHUWKDQWKHSULQFLSDOWDSSLQJ
• /RDG ORVV DW UDWHG FXUUHQW RQ WKH SULQFLSDO WDSSLQJ FRUUHFWHG WR WKH DSSURSULDWH UHIHUHQFH
WHPSHUDWXUH
• 6KRUWFLUFXLWLPSHGDQFHRQWKHSULQFLSDOWDSSLQJDQGDWOHDVWRQWKHH[WUHPHWDSSLQJVLIWKH
WDSSLQJUDQJHRIWKHWDSSHGZLQGLQJH[FHHGV“
• 'LDJUDPRIFRQQHFWLRQVRUFRQQHFWLRQV\PERORUERWK
127(
2QPXOWLZLQGLQJWUDQVIRUPHUVVXSSOHPHQWDU\LQIRUPDWLRQZLOOJHQHUDOO\EHUHTXLUHG
7UDQVIRUPHU+DQGERRN3DJH
75$16)250(5'(6,*1
7KLVFKDSWHUJLYHVDOLWWOHPRUHGHWDLOHGGHVFULSWLRQRIWKHPDLQSDUWVRIWKHWUDQVIRUPHU7KHDFWLYH
SDUWZKHUHWKHWUDQVIRUPDWLRQWDNHVSODFHFRQVLVWVRIWKHFRUHDQGWKHZLQGLQJV
&25(6
7KLVVHFWLRQGHVFULEHVYDULRXVW\SHVRIFRUHV7KHFRUHPDWHULDOLVGHVFULEHGLQVHFWLRQSDJH
)LJXUHVKRZVDWKUHHSKDVHFRUHZLWKWKUHHOLPEVZKLFKDUHPDJQHWLFDOO\FRQQHFWHGZLWKHDFK
RWKHU DW WKH XSSHU DQG ORZHU HQGV E\ \RNHV 7KH VSDFH DYDLODEOH IRU WKH ZLQGLQJV LV FDOOHG WKH
ZLQGRZ1RUPDOO\WKHOLPEVDUHDUUDQJHGLQRQHSODQHDQGZLWKYHUWLFDORULHQWDWLRQ
)LJXUH
)LJXUH
,Q WKUHHSKDVH WUDQVIRUPHUV DOO WKH ZLQGLQJV IRU HDFK SKDVH DUH ORFDWHG RQ WKHLU RZQ OLPE 7KH
WKUHHOLPEVDUHPDJQHWLFDOO\FRXSOHGWRJHWKHUE\WKHXSSHUDQGORZHU\RNHV,QQRUPDOV\PPHWULF
RSHUDWLRQWKHVXPRIWKHYROWDJHVDQGWKHVXPRIWKHFXUUHQWVDUHDWDQ\LQVWDQWHTXDOWR]HUR7KH
VXPRIWKHIOX[HVLQWKHWKUHHOLPEVLVDOVRHTXDOWR]HUR$OOWKHIOX[ZLOOUHPDLQLQWKHFRUHZKHQ
WKHWKUHHOLPEVDUHFRQQHFWHGWRJHWKHUDWWKHXSSHUDQGORZHUHQGV7KHIOX[ZLWKLQWKHOLPEYDULHV
VLQXVRLGDOO\OLNHWKHYROWDJH,QWKH\RNHWKHIOX[GLYLGHVDQGKDVLQDWKUHHOLPEFRUHLWVUHWXUQSDWK
LQWKHWZRRWKHUOLPEV6HH)LJXUH
,QDWKUHHSKDVHWKUHHOLPEFRUHWKH\RNHVPXVWEHDEOHWRFDUU\WKHVDPHIOX[DVLQWKHOLPEV,Q
SUDFWLFHWKHFURVVVHFWLRQRIWKH\RNHVLVWKHVDPHDVRIWKHOLPEVRUVRPHZKDWODUJHU
,Q WKUHHSKDVH ILYHOLPE FRUHV WKH IOX[ IURP WKH WKUHH PDLQ OLPEV ZLWK ZLQGLQJV KDYH DGGLWLRQDO
UHWXUQSDWKVWKURXJKWKHWZRRXWHUVLGHOLPEV7KLVPHDQVWKDWWKHPDLQIOX[GLYLGHVZKHQLWFRPHV
WRWKH\RNH6HH)LJXUH7KH\RNHVDQGWKHVLGHOLPEVFDQWKHQEHGLPHQVLRQHGIRURQHKDOIRI
WKHPDLQIOX[,QRWKHUZRUGVWKHFURVVVHFWLRQRIWKH\RNHVDQGWKHVLGHOLPEVLVRQHKDOIRIWKH
FURVV VHFWLRQ RI WKH PDLQ OLPEV ,Q WXUQ WKLV JLYHV WKH GHVLJQHU WKH SRVVLELOLW\ WR UHGXFH WKH WRWDO
KHLJKWRIWKHFRUHDQGWKHWUDQVSRUWKHLJKWZKLOHWKHOLPEKHLJKWDQGWKHVSDFHRIWKHZLQGRZPD\
UHPDLQWKHVDPHDVLQDWKUHHOLPEFRUH
$ILYHOLPEFRUHLVPRUHH[SHQVLYHWKDQDWKUHHOLPEFRUHVRWKHODWWHULVWKHSUHIHUUHGFKRLFHDV
IDUDVWKHWUDQVSRUWSURILOHSHUPLWV
)URP DQ RSHUDWLRQDO SRLQW RI YLHZ XVHUV VKRXOG EH DZDUH WKDW ILYHOLPE WUDQVIRUPHUV KDYH
H[WUHPHO\ KLJK ]HUR VHTXHQFH LPSHGDQFH OLNH VKHOOW\SH WUDQVIRUPHUV XQOHVV D GHOWD FRQQHFWHG
ZLQGLQJLVSURYLGHG
$QRWKHU SRVVLELOLW\ WR FRSH ZLWK WUDQVSRUW SURILOH RU WUDQVSRUW ZHLJKW UHVWULFWLRQV LV WR PDNH WKUHH
VLQJOHSKDVH WUDQVIRUPHUV LQVWHDG RI RQH WKUHHSKDVH WUDQVIRUPHU 7KH FRUH IRU VLQJOHSKDVH
WUDQVIRUPHUV FDQ EH PDGH LQ WZR GLIIHUHQW ZD\V HLWKHU ZLWK RQH PLGOLPE ZLWK ZLQGLQJV DQG WZR
VLGHOLPEVIRUWKHUHWXUQRIWKHIOX[RUZLWKWZROLPEVZLWKZLQGLQJV6HH)LJXUHDQG)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
)LJXUH
)LJXUH
7KHGHVLJQLQ)LJXUHLVLQJHQHUDOPRUHHFRQRPLFDOWKDQWKDWLQ)LJXUH+RZHYHULQFHUWDLQ
FDVHVIRUH[DPSOHZKHQWZRJHQHUDWRUVDUHIHHGLQJRQHWUDQVIRUPHUWKHWZROLPEGHVLJQPD\EH
SUHIHUUHGEHFDXVHLWLVTXLWHFRQYHQLHQWWROHWRQHJHQHUDWRUIHHGWKHORZYROWDJHZLQGLQJRQRQH
OLPEDQGWKHRWKHUJHQHUDWRUIHHGWKHZLQGLQJRQWKHRWKHUOLPE
$QRWKHU DGYDQWDJH ZLWK VLQJOHSKDVH WUDQVIRUPHUV LV WKDW D VLQJOHSKDVH VWDQGE\ VSDUH XQLW LV
FKHDSHUWKDQDWKUHHSKDVHRQH
6RPHWLPHVWKHSRZHUUDWLQJRIWKHWUDQVIRUPHULVVRKLJKWKDWDOWKRXJKWKHSRZHUUDWLQJLVVKDUHG
DPRQJWKUHHVLQJOHSKDVHWUDQVIRUPHUVWKHVLQJOHSKDVHZLQGLQJVPXVWEHSODFHGRQWZRZRXQG
OLPEVRIWKHVLQJOHSKDVHFRUH$FRUHVWHHOIUDPHFRQVLVWLQJRIWZRXQZRXQGVLGHOLPEVDQGWKH
\RNHVZLWKDFURVVVHFWLRQRIKDOIWKHFURVVVHFWLRQRIWKHZRXQGOLPEVPXVWEHSURYLGHGLQRUGHUWR
NHHSWKHWUDQVIRUPHUKHLJKWZLWKLQWKHSHUPLWWHGWUDQVSRUWSURILOH)LJXUHVKRZVDQH[DPSOHRQ
VXFKDFRUH
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
7KHVKDSHRIWKHWKLQ DIHZWHQWKVRIDPLOOLPHWUH VKHHWVKDVEHHQGHVLJQHGWRDFKLHYHORZORVVHV
DQG ORZ PDJQHWLVLQJ FXUUHQW 7KH FRQQHFWLRQ EHWZHHQ OLPE DQG \RNH LV DUUDQJHG DV GHJUHHV
PLWUHGMRLQWVLQRUGHUWRDFKLHYHDODUJHFURVVRYHUVHFWLRQDQGORZIOX[GHQVLW\ZKHUHWKHPDJQHWLF
IOX[GRHVQRWSURFHHGLQDSUHIHUUHGGLUHFWLRQ7KHVKHHWVDUHODLGLQSDFNHWVRIWZRRUIRXUVKHHWV
ZKHUH HDFK SDFNHW KDV WKH MRLQW GLVSODFHG UHODWLYH WR WKH DGMDFHQW SDFNHW 6XFK DQ RYHUODSSLQJ
JLYHVDULJLGPHFKDQLFDOVWUXFWXUHRIWKHFRUHWRJHWKHUZLWKDUHGXFWLRQRIWKHIULQJHHIIHFWIRUWKH
IOX[WUDYHUVLQJWKHMRLQW
*HQHUDOVWDFNLQJSDWWHUQIRUDWKUHHSKDVHWKUHHOLPEFRUHZLWKFRQYHQWLRQDORUVWHSODSMRLQWV
)LJXUH
,QUHFHQW\HDUVWKHVWHSODSMRLQWKDVEHHQPRVWDSSOLHG%\PDNLQJDVWHSZLVHVKLIWRIWKHMRLQWVLW
LVSRVVLEOHWRUHGXFHWKHPDJQHWLVDWLRQORVVHVVWLOOIXUWKHULQWKHMRLQWVEHWZHHQWKHOLPEVDQGWKH
\RNHV7KHWZRMRLQWLQJPHWKRGVDUHLOOXVWUDWHGLQ)LJXUH
*HQHUDOO\WKHFRUHODPLQDWLRQVDUHLQVXODWHGIURPHDUWKDQGGHOLEHUDWHO\HDUWKHGLQRQHSRLQWRQO\
,WLVWKHQSRVVLEOHWRUHYHDODQ\XQLQWHQWLRQDOHDUWKLQJZKLFKPD\JLYHULVHWRFLUFXODWLQJFXUUHQWVLI
PRUHWKDQRQHSRLQWRIWKHFRUHKDVFRQQHFWLRQWRHDUWK,QFXVWRPHUVSHFLILFDWLRQVWKHUHLVRIWHQD
FODXVHVD\LQJWKDWWKHFRUHVKDOOEHHDUWKHGLQRQHSRLQWRQO\DQGWKDWWKHGLHOHFWULFZLWKVWDQGVKDOO
EHN9DF
7KHKLJKQXPEHURIWKHWKLQFRUHVWHHOVKHHWVLQWKHOLPEVLVNHSWWRJHWKHUE\PHDQVRIJOXHIRUWKH
VPDOOHUWUDQVIRUPHUVIRUWKHODUJHUWUDQVIRUPHUVE\PHDQVRIVWHHOVWUDSVDURXQGWKHOLPEVRUDQ
HSR[\FXUHG VWRFNLQJ %HVLGHV ULJLG PHFKDQLFDO SURSHUWLHV WKH IDEULF VWRFNLQJ LV PDGH VOLJKWO\
FRQGXFWLYHLQRUGHUWRUHGXFHWKHHOHFWULFILHOGVWUHVVDURXQGWKHVKDUSFRUQHUVRQWKHODPLQDWLRQ
SDFNHWV LQ WKH OLPE +ROHV WKURXJK WKH ODPLQDWLRQV DUH WKHQ DYRLGHG ZKLFK ZRXOG GLVWXUE WKH
PDJQHWLFIOX[GLVWULEXWLRQZLWKLQWKHFRUHDQGVHWXSDGGLWLRQDOORVVHV&RUHFODPSVZLWKFXUYHGWLH
EROWVNHHSWKH\RNHODPLQDWLRQVWRJHWKHU
)RUFODPSLQJDQGVXSSRUWRIWKHZLQGLQJVLQWKHLUD[LDOGLUHFWLRQWKHFHQWUHSRUWLRQRIWKH\RNHVDUH
PDGHZLWKSODQHVXUIDFHVLQWKHFRUHZLQGRZ7KHVHSODQHVXUIDFHVDUHH[WHQGHGRXWVLGHWKHFRUH
ODPLQDWLRQV DQG VXSSRUWHG E\ WKH FRUH FODPSV 2Q ODUJH XQLWV ZLWK KLJK OHDNDJH IOX[ WKH RXWHU
VHFWLRQRIWKLVSODQHPD\EHFRYHUHGE\FRUHVWHHOODPLQDWLRQV HOHFWURPDJQHWLFZLQGLQJVXSSRUWV ,QDGGLWLRQWREHLQJDVWUXFWXUDOPHPEHULWSURYLGHVDORZUHOXFWDQFHUHWXUQ
SDWKYLDWKHFRUHIRUWKHOHDNDJHIOX[,QPRGHUQWUDQVIRUPHUVWKHLQVXODWLRQ
UHTXLUHPHQWKDVDOVREHHQH[WHQGHGWRWKHFRUHFODPSV
7KH VWDFNHG FRUH GHVFULEHG LQ WKLV VHFWLRQ LV WKH GRPLQDQW W\SH RI FRUH
XVHGLQODUJHWUDQVIRUPHUV:RXQGFRUHVDUHXVHGLVDQHFRQRPLFDOW\SH
IRUVLQJOHSKDVHGLVWULEXWLRQWUDQVIRUPHUV7KLVW\SHLVVKRZQLQ)LJXUH
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
:,1',1*6
7KHVKDSHRIWKHZLQGLQJFRQGXFWRULQSRZHUWUDQVIRUPHUVLVXVXDOO\UHFWDQJXODULQRUGHUWRXWLOLVH
WKH DYDLODEOH VSDFH HIIHFWLYHO\ (YHQ LQ VPDOOHU WUDQVIRUPHUV IRU GLVWULEXWLRQ SXUSRVHV ZKHUH WKH
QHFHVVDU\FRQGXFWRUFURVVVHFWLRQHDVLO\FDQEHREWDLQHGE\PHDQVRIDVPDOOFLUFXODUZLUHWKLV
ZLUHLVRIWHQIODWWHQHGRQWZRVLGHVWRLQFUHDVHWKHVSDFHIDFWRULQWKHFRUHZLQGRZ
:LWKLQFUHDVLQJFRQGXFWRUDUHDWKHFRQGXFWRUPXVWEHGLYLGHGLQWRWZRRUPRUHSDUDOOHOFRQGXFWRU
HOHPHQWVLQRUGHUWRUHGXFHWKHHGG\FXUUHQWORVVHVLQWKHZLQGLQJDQGHDVHWKHZLQGLQJZRUN7KH
UHFWDQJXODU VKDSHG FRQGXFWRU HOHPHQW LV FDOOHG D VWUDQG 7KH ZRUG µFRQGXFWRU¶ LV WKHQ XVHG LQ D
PRUHDEVWUDFWVHQVHDVDFRPSRVLWHZRUGIRUµZLQGLQJFXUUHQWFDUULHU¶
(DFK VWUDQG LV LQVXODWHG HLWKHU E\ SDSHU ODSSLQJ RU E\ DQ
HQDPHO ODFTXHU 7ZR VHSDUDWHO\ LQVXODWHG DQG HOHFWULFDOO\
SDUDOOHO VWUDQGV PD\ VRPHWLPHV KDYH D FRPPRQ SDSHU
FRYHULQJ 7KH WZR LQVXODWHG VWUDQGV LQ D FRPPRQ SDSHU
FRYHULQJLVFDOOHGDFDEOH
7KH ZRUG µFDEOH¶ LV XVHG KHUH WR GHQRWH WKH VPDOOHVW YLVLEOH
FRQGXFWRU HOHPHQW ZKHQ YLHZLQJ WKH ZLQGLQJ H[WHUQDOO\ 7KLV
FDQEHGHVFULEHGDVIROORZVRQHRUVHYHUDOFDEOHVLQSDUDOOHO
PD\FDUU\WKHZLQGLQJFXUUHQWZKHUHWKHFDEOHVDUHVHSDUDWHO\
LQVXODWHG (DFK FDEOH FDQ LQ WXUQ FRQWDLQ RQH RU VHYHUDO
VWUDQGVLQSDUDOOHO
&RQGXFWRUVWUDQGZLWKLQVXODWLRQ
SDSHUODSSLQJ
7KH SDSHU ODSSLQJ LV EXLOW XS RI WKLQ D IHZ WHQV RI
PLFURPHWHUV SDSHU VWULSV D IHZ FHQWLPHWUHV ZLGH ZRXQG
DURXQG DQG DORQJ WKH VWUDQG DV LQGLFDWHG LQ )LJXUH 7KH
SDSHULVODSSHGLQVHYHUDOOD\HUVWRREWDLQWKHQHFHVVDU\WRWDO
WKLFNQHVVVHWE\WKHHOHFWULFDODQGPHFKDQLFDOVWUHVVHV
)LJXUH
$ VSHFLDO NLQG RI ZLQGLQJ FRQGXFWRU LV WKH FRQWLQXRXVO\
WUDQVSRVHG FDEOH 7KLV FDEOH LV EXLOW XS RI WZR OD\HUV RI
HQDPHO
ODFTXHU LQVXODWHG VWUDQGV DUUDQJHG D[LDOO\ XSRQ
HDFK RWKHU DV VKRZQ LQ )LJXUH %\ WUDQVSRVLQJ WKH
RXWHUVWUDQGRIRQHOD\HUWRWKHQH[WOD]HUZLWKDUHJXODU
SLWFKDQGDSSO]LQJFRPPRQRXWHULQVXODWLRQDFRQWLQXRXV
WUDQVSRVHGFDEOHLVDFKLHYHG
&RQWLQXRXVO\WUDQVSRVHGFDEOH
:KHQ WUDYHUVLQJ WKH VDPH IOX[ IRU D ZKROH WUDQVSRVLWLRQ
F\FOHDOOVWUDQGORRSVUHFHLYHWKHVDPHLQGXFHGYROWDJH
DQGFLUFXODWLQJFXUUHQWVEHWZHHQWKHVWUDQGVDUHDYRLGHG
)LJXUH
$WUDQVSRVHGFDEOHPD\FRQWDLQXSWRDKXQGUHGVWUDQGVLQSDUDOOHO:LWKDWUDQVSRVLWLRQSLWFKRI
FPDIXOOF\FOHLVFRPSOHWHGDIWHUVRPHPHWUHV
7UDQVSRVLWLRQV RI VWUDQGV PXVW DOVR EH PDGH LQ ZLQGLQJV ZLWK FRQYHQWLRQDO FRQGXFWRUV WR DYRLG
FLUFXODWLQJFXUUHQWV7KHVHWUDQVSRVLWLRQVDUHWKHQPDGHGXULQJWKHZRUNLQWKHZLQGLQJPDFKLQH
7R PDNH WKHVH WUDQVSRVLWLRQV LV TXLWH WLPH FRQVXPLQJ 7KH PDQXIDFWXUHUV RI FRQWLQXRXVO\
WUDQVSRVHG FDEOHV PDNH WKH WUDQVSRVLWLRQV LQ DQ DXWRPDWLF PDFKLQH ,I QHFHVVDU\ IRU LQFUHDVHG
PHFKDQLFDOVWUHQJWK WKHVWUDQGVDUH FRYHUHGZLWKHSR[\ JOXHZKLFK FXUHVGXULQJ SURFHVVLQJ WKH
ZLQGLQJ )RU ORZHU YROWDJHV D QHWWLQJ DURXQG WKH WUDQVSRVHG FDEOH LV XVHG WR NHHS WKH VWUDQGV
WRJHWKHU)RUKLJKHUYROWDJHVLQVXODWLRQSDSHUFRYHUVWKHFDEOH
7UDQVIRUPHU+DQGERRN3DJH
,QRUGHUWRDYRLGKLJKORFDOGLHOHFWULFVWUHVVHVWKHFRQGXFWRUVXUIDFHLVVPRRWKDQGZLWKRXWVFDUV
7KHFRUQHUVDUHURXQGHG7KHFRQGXFWRUPDWHULDOLVRIWHQDQQHDOHGZKHQWKHSDSHUODSSLQJVWDUWV
7KH PDWHULDO LV PHFKDQLFDOO\ VRIW ,Q RUGHU WR ZLWKVWDQG WKH VKRUWFLUFXLW IRUFHV LW LV VRPHWLPH
QHFHVVDU\ WR LQFUHDVH WKH VWUHQJWK RI WKH PDWHULDO E\ PHDQVRI FROG ZRUNLQJ2QHZD\ WRGR WKH
FROGZRUNLQJSURFHVVLVWRH[SRVHWKHVWUDQGWRDUHSHWLWLYHEHQGLQJRSHUDWLRQ
,Q ODUJH SRZHU WUDQVIRUPHUV WKH PHFKDQLFDO IRUFHV GXULQJ VKRUW FLUFXLW FXUUHQW KDYH RIWHQ PRUH
LQIOXHQFHRQWKHZLQGLQJGLPHQVLRQVWKDQWKHUPDODVSHFWVDQGORVVFRQVLGHUDWLRQV
:LQGLQJW\SHV
:LQGLQJVFDQEHGLYLGHGLQWRIRXUPDLQW\SHV
•
•
•
•
/D\HUZLQGLQJV
+HOLFDOZLQGLQJV
'LVFZLQGLQJV
)RLOZLQGLQJV
7KH QXPEHU RI WXUQV DQG WKH FXUUHQW LQ WKH ZLQGLQJ SULPDULO\
GHWHUPLQHWKHFKRLFHRIZLQGLQJW\SH
/D\HUZLQGLQJV
7KHWXUQVDUHDUUDQJHGD[LDOO\DORQJWKHZLQGLQJ7KHFRQVHFXWLYH
WXUQV DUH ZRXQG FORVH WR HDFK RWKHU ZLWKRXW DQ\ LQWHUPHGLDWH
VSDFH7KHZLQGLQJPD\EHPDGHDVDVLQJOHRUPXOWLOD\HUZLQGLQJ
:LWKLQ $%% VLQJOH DQG PXOWLOD\HU ZLQGLQJV DUH XVHG PDLQO\ IRU
VPDOO DQG PHGLXP VL]H WUDQVIRUPHUV )RU ODUJH WUDQVIRUPHUV WKLV
ZLQGLQJ W\SHLV XVHG IRUUHJXODWLQJZLQGLQJV 6LQJOH OD\HU RU PXOWL
OD\HUW\SHVDUHXVHG
5HJXODWLQJZLQGLQJLQ
OD\HUW\SHGHVLJQ
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
6NHWFKRIDGRXEOHWKUHDGHG
KHOLFDOZLQGLQJ
)LJXUH
+HOLFDOZLQGLQJV
7KH KHOLFDOZLQGLQJFDQ EH VHHQ DV DYDULDQW RI WKH PXOWLOD\HUZLQGLQJEXW ZLWK VSDFHUV EHWZHHQ
HDFK WXUQ RU WKUHDG LQ WKH ZLQGLQJ 7KH KHOLFDO ZLQGLQJ LV VXLWDEOH IRU KLJK FXUUHQWV ZKHUH WKH
FXUUHQW LV VKDUHG EHWZHHQ VHYHUDO SDUDOOHO VWUDQGV 7KHQ WKH GLPHQVLRQV RI HDFK VWUDQG FDQ EH
NHSWUHDVRQDEO\VPDOOLQRUGHUWRNHHSWKHHGG\FXUUHQWORVVHVORZ
$OO FDEOHV RQH RU VHYHUDO VWUDQGV LQ FRPPRQ SDSHU FRYHULQJ LQ D GLVF EHORQJ WR WKH VDPH
HOHFWULFDOWXUQDQGWKH\DUHDOOFRQQHFWHGLQSDUDOOHO7KHZLQGLQJFDQEHPDGHDVVLQJOHWKUHDGHG
RUPXOWLWKUHDGHGZLWKWZRRUPRUHGLVFVHOHFWULFDOO\LQSDUDOOHO
7KHSDUDOOHOFRQQHFWHGZLQGLQJFRQGXFWRUVDQGVWUDQGVDUHVLWXDWHGLQDPDJQHWLFILHOGWKDWYDULHV
IURPSRLQWWRSRLQWLQVLGHWKHYROXPHRFFXSLHGE\WKHZLQGLQJ7RDYRLGFLUFXODWLQJFXUUHQWV
EHWZHHQWKHVWUDQGVWKHSRVLWLRQRIHDFKVWUDQGDORQJWKHZLQGLQJLVFKDQJHGLQVXFKDZD\DORQJ
WKHZLQGLQJWKDWHDFKVWUDQGHQFORVHVWKHVDPHDPRXQWRIPDJQHWLFILHOG7KHLQGXFHGYROWDJHLQ
HDFKORRSIRUPHGE\HDFKVWUDQGZLOOWKHQEHWKHVDPH
:LWKRXW WKLV SUHFDXWLRQ FDOOHG WUDQVSRVLWLRQ RI FRQGXFWRUV DQG VWUDQGV WKH FXUUHQW GLVWULEXWLRQ
DPRQJ WKH VWUDQGV ZRXOG EH YHU\ XQHYHQ 6RPH VWUDQGV ZRXOG FDUU\ KLJK FXUUHQWV ZKLOH RWKHU
VWUDQGV ZRXOG FDUU\ ORZ FXUUHQWV 7KLV ZRXOG FUHDWH XQQHFHVVDU\ KLJK WHPSHUDWXUH VSRWV DQG
LQFUHDVHGORVVHV
7KH KHOLFDO ZLQGLQJ LV WKH SUHIHUUHG FRQFHSW ZKHQ WKH QXPEHU RI WXUQV DQG WKH WRWDO DPRXQW RI
FXUUHQWSHUPLW7KHTXDQWLW\RIFRQGXFWLQJPDWHULDOWKDWFDQEHILWWHGLQVLGHDJLYHQYROXPHLVKLJK
FRPSDUHGWRRWKHUW\SHVRIZLQGLQJ,WLVVDLGWKDWKHOLFDOZLQGLQJVKDYHDKLJKVSDFHIDFWRUZKLFK
LVEHQHILFLDOIRUDQRYHUDOOWRWDOPDVV±WRWDOORVVUHODWLRQ0RUHRYHULWLVPHFKDQLFDOO\UREXVWDQG
HDV\WRPDQXIDFWXUHSDUWLFXODUO\ZKHQFRQWLQXRXVO\WUDQVSRVHGFDEOHLVXVHG
'LVFZLQGLQJV
7UDQVIRUPHU+DQGERRN3DJH
'LVFZLQGLQJV
7KH GLVFZLQGLQJ FRQFHSW LV XVHG IRU ZLQGLQJV ZLWK D ODUJH QXPEHU RI WXUQV DQG UHODWLYHO\ VPDOO
FXUUHQWV 7KH GLVF ZLQGLQJ LV EXLOW XS RI D QXPEHU RI GLVFV FRQQHFWHG LQ VHULHV ,Q HDFK GLVF WKH
WXUQVDUHZRXQGLQUDGLDOGLUHFWLRQOLNHDVSLUDOLQLQZDUGVDQGRXWZDUGVGLUHFWLRQLQDGMDFHQWGLVFV
*HQHUDOO\GLVFZLQGLQJZLOOEHSUHIHUUHGLQVWHDGRIKHOLFDOZLQGLQJZKHQWKHQXPEHURIWXUQVLVKLJK
,Q D KHOLFDO ZLQGLQJ WKH KHLJKW RI VWUDQGV ZLOO GHFUHDVH E\ LQFUHDVLQJ QXPEHU RI WXUQV +HLJKWV
EHORZDIHZPLOOLPHWUHVDUHQRWIHDVLEOH,QDGGLWLRQWKHUHODWLRQEHWZHHQWKHTXDQWLW\RIFRQGXFWRU
DQGLQVXODWLRQEHFRPHVXQHFRQRPLFDOO\ORZ/RZVWUDQGKHLJKWKDVDOVRDQHJDWLYHLPSDFWRQWKH
PHFKDQLFDOVWUHQJWKRIWKHZLQGLQJ
7KHPDMRUGLIIHUHQFHEHWZHHQDKHOLFDODQGDGLVFZLQGLQJLVWKHQXPEHURIWXUQVSHUGLVF,QKHOLFDO
ZLQGLQJVWKHUHDUHQHYHUPRUHWKDQRQHWXUQSHUGLVFZKLOHGLVFZLQGLQJVKDYHPRUHWKDQRQHWXUQ
SHUGLVF'LVFZLQGLQJVRIIHUIUHHGRPWRFKRRVHWKHQXPEHURIGLVFVDQGWKHQXPEHURIWXUQVSHU
GLVFDVORQJDVWKHSURGXFWRIWKHWZRHTXDOVWKHGHVLUHGWRWDOQXPEHURIWXUQV
7KHPHFKDQLFDOSURSHUWLHVRIGLVFZLQGLQJVDUHVLPLODUWRWKHKHOLFDOZLQGLQJ
7KH FDSDFLWDQFH EHWZHHQ VHJPHQWV RI
FRQYHQWLRQDO GLVF ZLQGLQJV LV IDLUO\ ORZ LQ
FRPSDULVRQ ZLWK WKH FDSDFLWDQFH EHWZHHQ
VHJPHQWVDQGHDUWK)RUIDVWWUDQVLHQWYROWDJHV
FRPLQJ IURP WKH FRQQHFWHG SRZHU V\VWHP
KLWWLQJ WKH WUDQVIRUPHU WKLV UHVXOWV LQ D
SURQRXQFHG QRQOLQHDU YROWDJH GLVWULEXWLRQ
ZLWKLQ WKH ZLQGLQJ DQG KLJK ORFDO GLHOHFWULF
VWUHVVHV SDUWLFXODUO\ LQ WKH EHJLQQLQJ RI WKH
ZLQGLQJ
2QH ZD\ WR DOOHYLDWH WKLV SKHQRPHQRQ LV WR
LQWHUOHDYH WKH WXUQV RI DGMDFHQW GLVFV $IWHU
KDYLQJSDVVHGKDOIRIWKHQXPEHURIWXUQVLQD
GLVF WKH FRQGXFWRU JRHVWR WKH QH[W GLVF DQG
WKHQ UHWXUQV WR WKH SUHYLRXV GLVF IRU WKH
UHPDLQLQJ WXUQV 6XFK DQ DUUDQJHPHQW
LQFUHDVHV WKH FDSDFLWDQFH DORQJ WKH ZLQGLQJ
WKH VHULHV FDSDFLWDQFH ZKLFKLQWXUQ JLYHV D
PRUH OLQHDU YROWDJH GLVWULEXWLRQ DORQJ WKH
ZLQGLQJGXULQJWUDQVLHQWYROWDJHFRQGLWLRQV
6NHWFKRIDGLVFZLQGLQJ
$ PDMRU DSSOLFDWLRQ IRU WKH GLVF ZLQGLQJ LV LQ
ZLQGLQJV IRU WKH KLJKHVW YROWDJHV 7KHVH DUH
ZLQGLQJV ZKHUH WKH GLHOHFWULF VWUHVVHV QHHG
VSHFLDO FDUH 2QH SDUWLFXODU LWHP IRU KLJK
YROWDJH GLVF ZLQGLQJV LV WKH ORFDWLRQ RI WKH
ZLQGLQJWHUPLQDO
+LJKHU YROWDJH V\VWHPV DUH LQ PRVW FDVHV
RSHUDWHG ZLWK GLUHFWO\ HDUWKHG QHXWUDO SRLQW
ZKLFK PHDQV WKDW WKH V\VWHP QHXWUDO LV
HIIHFWLYHO\ WLHG WR HDUWK SRWHQWLDO :LWK WKH
WKUHHSKDVH ZLQGLQJ FRQQHFWHG LQ VWDU WKH
PRVWFRPPRQFRQQHFWLRQIRUKLJKHUYROWDJHV WKH OLQH HQG LV RQ D KLJK SRWHQWLDO DQG WKH
QHXWUDO HQG FORVH WR HDUWK SRWHQWLDO 7KH
ZLQGLQJLQVXODWLRQWRZDUGVHDUWKFDQWKHQEH
EXLOW DFFRUGLQJ WR WKH DFWXDO YROWDJH WR HDUWK
LQHDFKVHFWLRQRIWKHZLQGLQJ7KHWHUPµQRQ
XQLIRUPLQVXODWLRQ¶LQWKH,(&VWDQGDUGPHDQV
IXOO LQVXODWLRQ OHYHO DW WKH OLQH HQG DQG
UHGXFHGLQVXODWLRQOHYHOLQWKHQHXWUDO
&RQYHQWLRQDODQGLQWHUOHDYHG
GLVFZLQGLQJ
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
,QWUDQVIRUPHUVZLWKQRQXQLIRUPLQVXODWLRQDQHFRQRPLFGHVLJQVROXWLRQ
LV WR SODFH WKH OLQH HQWU\ DW WKH PLG RI WKH ZLQGLQJ KHLJKW DV VKRZQ LQ
)LJXUH 7KH ZLQGLQJ KDV WZR KDOYHV ZLWK RSSRVLWH ZLQGLQJ
GLUHFWLRQDQGWKHWZRKDOYHVDUHFRQQHFWHGLQSDUDOOHO7KHSRWHQWLDODW
WKH WRS DQG WKH ERWWRP RI WKH ZLQGLQJ LV LQ VHUYLFH FORVH WR HDUWK
SRWHQWLDOZKLFKPHDQVWKDWWKHGLVWDQFHVEHWZHHQWKHZLQGLQJDQGWKH
\RNHV FDQ EH VPDOOHU DQG WKH LQVXODWLRQ V\VWHP WRZDUGV DQ DGMDFHQW
ZLQGLQJVLPSOHUWKDQLIERWKHQGVKDGIXOOLQVXODWLRQOHYHO
$VSHFLDONLQGRIGLVFZLQGLQJLVWKHGRXEOHGLVFZLQGLQJ7KLVZLQGLQJ
W\SH LV XVHG IRU WKH KLJKHVW FXUUHQWV LQ WKH PDJQLWXGH RI N$ OLNH
LQ IXUQDFH WUDQVIRUPHUV DQG UHFWLILHU WUDQVIRUPHUV IRU LQGXVWULDO
DSSOLFDWLRQV7KHYROWDJHLVORZVHOGRPPXFKDERYHN9RIWHQORZHU
7KH ZLQGLQJ KDV D QXPEHU RI SDUDOOHOFRQQHFWHG JURXSV HDFK JURXS
FRQVLVWLQJ RI WZR GLVFV FRQQHFWHG LQ VHULHV 7KH JURXSV DUH VLWXDWHG
DERYH HDFK RWKHU RQ WKH OLPE DQG WKH\ DUH SDUDOOHO FRQQHFWHG E\
PHDQVRIWKLFNEXVEDUVRULHQWHGYHUWLFDOO\DORQJWKHZLQGLQJ%HFDXVH
RIWKHEXVEDUVDGRXEOHGLVFZLQGLQJLVDOZD\VWKHXWPRVWZLQGLQJRQ
WKHOLPE
'LVNZLQGLQJZLWK
FHQWHUHQWU\
)LJXUH
)RLOZLQGLQJV
)RLOZLQGLQJVDUHPDGHRIZLGHFRSSHURUDOXPLQLXPVKHHWIURPVRPHWHQWKVRIDPLOOLPHWUHXSD
IHZ PLOOLPHWUHV WKLFN 7KH PDLQ WHFKQLFDO DGYDQWDJH LV WKDW D[LDOPHFKDQLFDO IRUFHV DFWLQJRQ WKH
ZLQGLQJV LQ WKH WUDQVIRUPHU GXULQJ VKRUW FLUFXLW FXUUHQWV EHFRPH LQVLJQLILFDQW EHFDXVH LQGXFHG
HGG\FXUUHQWVLQWKHIRLOZHDNHQWKHUDGLDOFRPSRQHQWRIWKHPDJQHWLFOHDNDJHILHOGDWWKHWRSDQG
WKHERWWRPRIWKHZLQGLQJ$GUDZEDFNLVWKDWWKHVHHGG\FXUUHQWVFDXVHDGGLWLRQDOORVVHVLQDUHDV
FORVHWRWKHHGJHVRIWKHIRLO)RLOZLQGLQJVKDYHWKHRWKHUDGYDQWDJHWKDWWKHPDQXIDFWXULQJWLPHLV
VKRUW
)RLOZLQGLQJVDUHZLGHO\DSSOLHGLQORZYROWDJHZLQGLQJVRIGLVWULEXWLRQWUDQVIRUPHUV7KH\DUHDOVR
XVHG LQ ODUJHU WUDQVIRUPHUV DQG QRW DW OHDVW LQ WUDQVIRUPHUV WKDW LQ QRUPDO VHUYLFH DUH IUHTXHQWO\
H[SRVHGWRKLJKRYHUFXUUHQWVRIVKRUWGXUDWLRQ
5HJXODWLQJZLQGLQJV
7DSSLQJV IRU WXUQ UDWLR UHJXODWLRQ RI WKH YROWDJH PD\ EH SURYLGHG LQ ZLQGLQJV ZKHQ WKH ZLQGLQJ
FXUUHQWLVQRWWRRKLJKDQGWKHUHJXODWLRQUDQJHLVQRWWRRZLGH+RZHYHULIWDSSLQJVDUHPDGHLQD
GLVF ZLQGLQJ D VHFWLRQRI WKH ZLQGLQJZLOO EHZLWK QR DPSHUHWXUQV 7KLV ZLOOGLVWXUE WKH DPSHUH
WXUQ EDODQFH ZLWK RWKHU ZLQGLQJV LQ WKH WUDQVIRUPHU $ UDGLDO FRPSRQHQW RI WKH PDJQHWLF IOX[ ZLOO
DULVHZKLFKLQWXUQFUHDWHVHQKDQFHGD[LDOVKRUWFLUFXLWIRUFHV7KHWUDQVIRUPHUFDQEHGHVLJQHGWR
ZLWKVWDQGVXFKIRUFHVSURYLGHGWKHUDGLDOFRPSRQHQWRIWKHPDJQHWLFILHOGLVQRWWRRODUJH
)RU ODUJHU UHJXODWLQJ UDQJHV WKH UHJXODWLQJ WXUQV DUH DUUDQJHG LQ D VHSDUDWH ZLQGLQJ VKHOO 7KH
KHLJKWRIWKLVUHJXODWLQJZLQGLQJLVDSSUR[LPDWHO\WKHVDPHDVRIWKHRWKHUZLQGLQJV7KHZLQGLQJ
W\SHLVOD\HURUKHOLFDO7KHWXUQVRIHDFKUHJXODWLQJVWHSDUHGLVWULEXWHGDORQJWKHZKROHRUQHDUO\
WKHZKROHZLQGLQJKHLJKW7KHWXUQVRIHDFKUHJXODWLQJVWHSDUHFRQQHFWHGLQVHULHVE\PHDQVRI
FDEOHFRQQHFWLRQVRXWVLGHWKHZLQGLQJ&DEOHVSURYLGHFRQQHFWLRQVEHWZHHQHDFKUHJXODWLQJVWHS
DQGWKHWDSFKDQJHU
7KHPRVWHFRQRPLFDOGHVLJQVROXWLRQLVWRORFDWHWKHUHJXODWLQJZLQGLQJ HOHFWULFDOO\ DWWKHQHXWUDO
SRLQWRIDVWDUFRQQHFWHGZLQGLQJZKHUHWKHSRWHQWLDOGLIIHUHQFHEHWZHHQWKHWKUHHSKDVHVLVVPDOO
7KLVJLYHVWKHVLPSOHVWDQGFKHDSHVWWDSFKDQJHU
7UDQVIRUPHU+DQGERRN3DJH
7KHWKUHHEDVLFZD\VWRDUUDQJH
YROWDJHUHJXODWLRQOLQHDUSOXVPLQXV
DQGFRDUVHILQH
)LJXUH
7DSFKDQJHUVIRURSHUDWLRQGXULQJORDG 2/7& DVZHOODVWKHFKHDSHUW\SHRQO\RSHUDEOHLQGH
HQHUJLVHG FRQGLWLRQ DUH DYDLODEOH 7KH ODWWHU W\SH LV FDOOHG RIIFLUFXLW WDS FKDQJHU 2&7& WR
HPSKDVL]HWKDWLWFDQQRWEHRSHUDWHGZKHQWKHWUDQVIRUPHULVHQHUJLVHG-XVWQRFXUUHQWWKURXJK
WKHWDSFKDQJHUFRQWDFWVLVDQLQVXIILFLHQWFRQGLWLRQWRDOORZRSHUDWLRQRIDQ2&7&
7KH WDS FKDQJHU DQG WKH UHJXODWLQJ ZLQGLQJ DUUDQJHPHQW FDQ EH PDGH LQ WKUHH GLIIHUHQW ZD\V
HLWKHU DV OLQHDU SOXVPLQXV RU FRDUVHILQH UHJXODWLRQ )RU VPDOO UHJXODWLQJ UDQJHV VD\ RI
QRPLQDO YDOXH LW LV FRPPRQ WR XVH OLQHDU UHJXODWLRQ 7KLV PHDQV WKDW WKH YROWDJH DFURVV WKH
UHJXODWLQJ ZLQGLQJ LV DGGHG WR WKH YROWDJH DFURVV WKH PDLQ ZLQGLQJ VHH WKH OHIW VNHWFK LQ )LJXUH
)RUODUJHUUHJXODWLQJUDQJHVDSOXVPLQXVUHJXODWLRQPD\EHPRUHVXLWDEOHVHHPLGGOHVNHWFK,QD
SOXVPLQXV UHJXODWLRQ WKH WDSSHG ZLQGLQJ LV FRQQHFWHG WR WKH PDLQ ZLQGLQJ YLD D VHSDUDWH SOXV
PLQXV VZLWFK 7KLV VZLWFK SHUPLWV WKH YROWDJH DFURVV WKH WDSSHG ZLQGLQJ WR EH DGGHG WR RU
VXEWUDFWHGIURPWKHYROWDJHDFURVVWKHPDLQZLQGLQJ
$ WKLUG DUUDQJHPHQW LV FRDUVHILQH UHJXODWLRQ ZKHUH WKH UHJXODWLRQ IXQFWLRQ LV VSLOW LQWR WZR
ZLQGLQJVRQHIRUWKHFRDUVHVWHSDQGRQHIRUWKHILQHVWHSV
7KHFKRLFHRIWDSSLQJDUUDQJHPHQWDIIHFWVDPRQJRWKHUV
•
•
•
7KHQXPEHURIOHDGVWRWKHWDSFKDQJHU
7KHORVVSDWWHUQRYHUWKHWDSSLQJUDQJH
7KHUHODWLYHQXPEHURIWXUQVLQWKHPDLQDQGWKHUHJXODWLQJZLQGLQJ
3DJH7UDQVIRUPHU+DQGERRN
0DLQLQVXODWLRQ
7KH ZLQGLQJV DUH DUUDQJHG DV FRQFHQWULF VKHOOV DURXQG WKH FRUH OLPE 7KH\ KDYH WKH VDPH
DSSUR[LPDWH KHLJKW DQG DQ HYHQ WXUQ GLVWULEXWLRQ DORQJ WKH KHLJKW (TXDO KHLJKWV DQG HYHQ WXUQ
GLVWULEXWLRQVDUHEHQHILFLDOLQUHVSHFWRIORZDGGLWLRQDOORVVHVDQGORZVKRUWFLUFXLWVWUHVVHV
7KHLQVXODWLRQEHWZHHQWKHZLQGLQJVDQGZLQGLQJWRFRUHLVEXLOWDVDEDUULHUV\VWHP7KHLQVXODWLRQ
GLVWDQFHEHWZHHQWZRFRPSRQHQWVRIGLIIHUHQWSRWHQWLDO WZRZLQGLQJVRUZLQGLQJWRFRUHRUHDUWK LVGLYLGHGLQWRDQXPEHURIVHJPHQWVE\SUHVVERDUGVKHHWVSHUSHQGLFXODUWRWKHILHOGVWUHVV7KLV
PHDQVWKDWWKHSUHVVERDUGVKHHWVVKRXOGLGHDOO\EHVKDSHGDORQJHTXLSRWHQWVXUIDFHV
9HUWLFDOO\RULHQWHGSUHVVERDUGVWLFNVJRYHUQWKHGLVWDQFHEHWZHHQWZRDGMDFHQWEDUULHUVDQGWKXV
DOVRWKHZLQGLQJVVHH)LJXUHDQG)LJXUH
%DUULHUDUUDQJHPHQWEHWZHHQ
ZLQGLQJV
$KHOLFDOZLQGLQJFORVHVWWRWKHFRUH
IROORZHGE\DGLVFZLQGLQJDQGDOD\HU
ZLQGLQJIRUYROWDJHUHJXODWLRQ
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
:LQGLQJVZLWKDKLJKSRWHQWLDODWWKHLUHQGVKDYHWKHEDUULHUV\VWHPH[WHQGHGWRFRYHUWKHGLVWDQFHWR
\RNH$QJOHVKDSHGSUHVVERDUGHOHPHQWVDUHSRVLWLRQHGDOWHUQDWHO\RQWKHLQVLGHDQGWKHRXWVLGHRI
WKHZLQGLQJEDUULHUV\VWHP7KHGHVLJQSURYLGHVQHFHVVDU\RSHQLQJVIRUWKHRLOWRHQWHUDQGOHDYHWKH
ZLQGLQJVHH)LJXUH
+LJKYROWDJHZLQGLQJVDUHHQFORVHGE\DQJOHVKDSHG
EDUULHUVWRZDUGVWKH\RNHVDQGVKLHOGULQJVDWWKH
ZLQGLQJHQGVIRUGLHOHFWULFFRQWURO
)LJXUH
)LJXUHDOVRVKRZVWKHDUUDQJHPHQWZLWKVKLHOGULQJV$VKLHOGULQJZLWKLWVODUJHHGJHUDGLLDQG
LQVXODWLRQLPSURYHWKHVWUHVVSDWWHUQDWWKHZLQGLQJHQGV,QDGGLWLRQWKHVKLHOGULQJLQFUHDVHVWKH
VHULHV FDSDFLWDQFH RI GLVF ZLQGLQJV ZKLFK LQ WXUQ UHGXFHV WKH QRQOLQHDULW\ RI WKH YROWDJH
GLVWULEXWLRQ DORQJ WKH ZLQGLQJ GXULQJ WUDQVLHQW YROWDJH FRQGLWLRQV DQG ORZHU GLHOHFWULF VWUHVVHV
ZLWKLQWKHZLQGLQJLVDFKLHYHG
7KHVKLHOGULQJKDVDFRUHRIKDUGSUHVVERDUG$PHWDOIRLOLVZRXQGDURXQGWKLVFRUHEXWWKHIRLO
GRHVQRWIRUPDFORVHGWXUQ7KHIRLOLVFRQQHFWHGWRDZLQGLQJFRQGXFWRUFORVHWRWKHZLQGLQJHQG
2XWVLGHWKHIRLOLVDSDSHUFRYHULQJ
3DJH7UDQVIRUPHU+DQGERRN
&RROLQJRIZLQGLQJV
7KHZLQGLQJVDUHODUJHKHDWSURGXFHUVZKLFKQHHGFRROLQJ2LOKDVDKLJKYDOXHRIKHDWFDSDFLW\
N:VNJ. ZKLOH VWHHO DQG FRSSHU KDV ± ,WV WUDQVSRUW FDSDFLW\ IRU GLVVLSDWHG KHDW LV
WKHUHIRUHJUHDWEXWWKHUHLVVWLOODQHHGIRUFRQVLGHUDEOHUDWHVRIRLOIORZWKURXJKWKHFRROLQJGXFWV
LQWKHZLQGLQJV
$ VLPSOH H[DPSOH 6XSSRVH WKDW N: RI ZLQGLQJ ORVVHV VKDOO EH UHPRYHG 7KH WHPSHUDWXUH
GLIIHUHQFHEHWZHHQLQOHWDQGRXWOHWRLOPD\EHGHJUHHV7KHQWKHQHFHVVDU\IORZRIRLOLVNJ
SHUVHFRQG [[ 7KHH[DPSOHZRXOGEHW\SLFDOIRUD±09$WUDQVIRUPHU$
ODUJH V\VWHP WUDQVIRUPHU ZRXOG QHHG VD\ WHQ WLPHV DV KLJK RLO IORZ WKDW LV FXELF PHWHUV SHU
PLQXWH
)LJXUH
,Q PRVW WUDQVIRUPHUV WKH RLO FLUFXODWLRQ WKURXJK WKH ZLQGLQJV LV GUDZQ DXWRPDWLFDOO\ IURP WKHIUHH
YROXPHLQWKHWDQNE\WKHUPRVLSKRQHIIHFW7KHIORZZLOODGMXVWLWVHOIWRDQHTXLOLEULXPEHWZHHQWKH
WKHUPRVLSKRQGULYLQJKHDGDQGWKHIORZUHVLVWDQFHLQWKHGXFW$QRWKHULPSRUWDQWSK\VLFDOSURSHUW\
RIWKHRLOWKHQDSSHDUVQDPHO\LWVYLVFRVLW\FKDUDFWHULVWLFXQGHUYDU\LQJWHPSHUDWXUH
)LJXUHVKRZVDWUDQVIRUPHUZLWKQDWXUDORLOFLUFXODWLRQ&XUYHLQWKHGLDJUDPWRWKHULJKWLV
WKHWHPSHUDWXUHSURILOHLQZLQGLQJDQGWDQN&XUYHLVWKHWHPSHUDWXUHSURILOHLQWKHUDGLDWRUV7KH
VKDGHGDUHDEHWZHHQWKHWZRFXUYHVLQGLFDWHVDYDLODEOHGULYLQJKHDG
,QKRWFOLPDWHWKLVLVRIOLWWOHFRQFHUQEXWLQDQDUWLFFOLPDWHWKHUHPD\EHUHDOSUREOHPVZLWK³FROG
VWDUW´WKDWLVZKHQDWUDQVIRUPHUKDVEHHQGLVFRQQHFWHGIRUVRPHWLPHDQGKDVWREHVWDUWHGXS
IURPDYHU\ORZWHPSHUDWXUH,WPD\EHVREDGWKDWSXPSPRWRUVVWDOO2ULQDVHOIFRROHGXQLWWKH
FLUFXODWLRQEHWZHHQWDQNDQGUDGLDWRUVGRHVQRWVWDUWDOWKRXJKWKHWHPSHUDWXUHLQWKHWDQNKDVJRQH
XS
,QFROGFOLPDWHWKHUHIRUHDQRLOZLWKDORZHUYLVFRVLW\LQGH[LVXVXDOO\VSHFLILHG7KHUHTXLUHPHQWV
UHJDUGLQJ YLVFRVLW\ DUH H[SUHVVHG LQ WHUPV RI D KLJKHVW DOORZDEOH YLVFRVLW\ DW D VSHFLILHG ORZ
WHPSHUDWXUHDQGDKLJKHVWDOORZDEOH³SRXUSRLQW´WHPSHUDWXUHWKDWLVWKHWHPSHUDWXUHZKHUHWKH
RLOMXVWEDUHO\IORZVDWDOO
,QVRPHFRXQWULHVLWLVWUDGLWLRQWRGHVLJQYHU\ODUJHWUDQVIRUPHUVZLWK³IRUFHGJXLGHG´RLOIORZWKDW
LVWKHRLOLVSXPSHGLQDFORVHGV\VWHPRIGXFWVULJKWLQWRWKHZLQGLQJV7KHSXPSIRUFHVDGHILQHG
DQGFRQVWDQWIORZDQGLWLVVHFXUHGHYHQZLWKFRQVLGHUDEOHIORZUHVLVWDQFHLQWKHFRROLQJGXFWV,Q
RWKHUFRXQWULHVWKLVSUDFWLFHLVGHQRXQFHGEHFDXVHDQ\ORVVRIDX[LOLDU\SRZHUZRXOGQHFHVVLWDWH
WULSSLQJRIWKHWUDQVIRUPHUZLWKYHU\VKRUWQRWLFH
7UDQVIRUPHU+DQGERRN3DJH
6KRUWFLUFXLWZLWKVWDQG
7KLVVHFWLRQGHVFULEHVWKHIRUFHSDWWHUQRQDQGZLWKLQDZLQGLQJGXULQJDQH[WHUQDOVKRUWFLUFXLW,Q
DFFRUGDQFHZLWKWKHGLYLVLRQRIWKHIRUFHVLQWRUDGLDODQGD[LDOFRPSRQHQWVZLWKVWDQGFULWHULDFDQ
EHHVWDEOLVKHGIRUWKHWZRGLUHFWLRQV
7KHHOHFWURPDJQHWLFIRUFHVDUHSURSRUWLRQDOWRWKHVTXDUHRIWKHLQVWDQWDQHRXVYDOXHRIWKHFXUUHQW
:LWKDQDOWHUQDWLQJFXUUHQWWKHFRUUHVSRQGLQJIRUFHVDUHUHSHWLWLYHDQGYDU\LQJ$VWKHFXUUHQWDOVR
LQFOXGHV D GDPSHG DQG GHFD\LQJ GFFRPSRQHQW WKH ILUVW FXUUHQW SHDN ZLOO LQYRNH WKH KLJKHVW
HOHFWURPDJQHWLFIRUFH,QJHQHUDOZLWKVWDQGFULWHULDDUHEDVHGRQWKLVILUVWSHDNYDOXHRIIRUFHVDQG
FXUUHQWV 8QGHU VRPH FLUFXPVWDQFHV D PRUH FRPSOHWH DQDO\VLV LV QHFHVVDU\ ZKHUH WKH G\QDPLF
EHKDYLRXURIWKHZLQGLQJLVFRQVLGHUHG
,QDZHOOEDODQFHGWUDQVIRUPHUERWKWKHLQQHUDQGRXWHUZLQGLQJVDUHVXEMHFWWRFRPSUHVVLYHD[LDO
IRUFHV7KHUDGLDOIRUFHVWHQGWRFRPSUHVVDQLQQHUZLQGLQJ UHGXFHLWVGLDPHWHU DQGH[SDQGDQ
RXWHUZLQGLQJ LQFUHDVHLWVGLDPHWHU 7KHIRUFHVDFWLQVXFKDZD\WKDWWKH\WHQGWRLQFUHDVHWKH
YROXPHRIWKHOHDNDJHIOX[VSDFHEHWZHHQWKHZLQGLQJV
3HUPLVVLEOHD[LDOIRUFHVDUHOLPLWHGE\WKHPHFKDQLFDOVWUHQJWKRIWKHZLQGLQJHQGVXSSRUWVDQGWKH
VSDFHUV EHWZHHQ GLVFV )RU KHOLFDO DQG GLVF ZLQGLQJV WKHUH LV DQ LQFUHDVLQJ SUREDELOLW\ IRU WKH
FRQGXFWRUVWRWLOWZKHQLQFUHDVLQJWKHD[LDOIRUFHV
6PDOOFRQGXFWRUGLPHQVLRQVLQUDGLDOGLUHFWLRQDQG
ODUJHKHLJKWLQD[LDOGLUHFWLRQLQFUHDVHVWKHULVNIRU
WLOWLQJ 2Q WKH RWKHU KDQG D VPDOO GLPHQVLRQ LQ
UDGLDO GLUHFWLRQ LV SUHIHUUHG LQ RUGHU WR UHGXFH WKH
ZLQGLQJ HGG\ FXUUHQW ORVVHV 7KH GHVLJQHU KDV WR
ILQGDFRQGXFWRUGLPHQVLRQZKLFKJLYHVVDWLVIDFWRU\
PHFKDQLFDO VWUHQJWK ZLWKRXW VDFULILFLQJ WKH
UHTXLUHPHQWIRUORZORVVHV
7LOWLQJRIFRQGXFWRUVXQGHUD[LDOVWUHVV
)LJXUH
7KH PD[LPXP SHUPLVVLEOH UDGLDO IRUFH RQ DQ LQQHU ZLQGLQJ LV VHW E\ WKH EXFNOLQJ VWUHQJWK 7KH
IDLOXUHPRGHFDQEHGHVFULEHGDVDUDGLDOVOLGHRIRQHRUVHYHUDOVHFWLRQVRIWKHZLQGLQJVKHOO7KH
ZLQGLQJ EXFNOHV 'XH WR WKH F\OLQGULFDO VKDSH RI WKH ZLQGLQJ WKH UDGLDO IRUFH FDXVH D WDQJHQWLDO
VWUHVVLQWKHFRQGXFWRUPDWHULDO
,QRUGHUWRYLVXDOLVHDEXFNOLQJIDLOXUHPRGHDGLVFVHFWLRQRIWKH
ZLQGLQJ KHOLFDORUGLVFZLQGLQJ FDQEHUHSUHVHQWHGE\DQXPEHU
RI SDUDOOHO EHDPV EHWZHHQ WZR VSDFHUV 7KH EHDPV DUH VHFXUHG
IURP WZLVWLQJ E\ WKH VSDFHUV WKH DQJOH EHWZHHQ WKH VSDFHU DQG
WKH EHDP UHPDLQV XQFKDQJHG EXW WKH VSDFHU WRJHWKHU ZLWK WKH
EHDPHQGVDUHIUHHWRPRYHD[LDOO\
:LWK WKLV PRGHO LW FDQ EH VHHQ WKDW WKH EXFNOLQJ ZLWKVWDQG
LQFUHDVHV ZLWK LQFUHDVLQJ FRQGXFWRU ZLGWK +RZHYHU LQ DGGLWLRQ
RWKHU IDFWRUV RU LPSRUWDQW VXFK DV WKH IUHH OHQJWK RI WKH EHDP
WKDW LV WKH GLVWDQFH EHWZHHQ WZR VSDFHUV DQG WKH PRGXOXV RI
HODVWLFLW\RIWKHFRQGXFWRU
7KH EXFNOLQJ ZLWKVWDQG LVRIWHQ D GLPHQVLRQLQJ IDFWRU RI DQ LQQHU
ZLQGLQJDQGFRQVHTXHQWO\RIWKHZKROHWUDQVIRUPHU
7\SLFDOH[DPSOHRQEXFNOLQJ
RIDQLQQHUZLQGLQJ
$%%¶V GHVLJQ DQG PDQXIDFWXULQJ SUDFWLFH LV EDVHG XSRQ WKH
H[SHULHQFH IURP VKRUW FLUFXLW WHVWLQJ RI DERXW RQH KXQGUHG SRZHU
WUDQVIRUPHUV7KHVHUYLFHUHFRUGRI$%%WUDQVIRUPHUVLVH[FHOOHQW
UHJDUGLQJWKHLUDELOLW\WRZLWKVWDQGVKRUWFLUFXLWFXUUHQWV
)LJXUH
3DJH7UDQVIRUPHU+DQGERRN
7$1.
7KH WDQN LV SULPDULO\ WKH FRQWDLQHU IRU WKH RLO DQG D SK\VLFDO SURWHFWLRQ IRU WKH DFWLYH SDUW ,W DOVR
VHUYHVDVVXSSRUWVWUXFWXUHIRUDFFHVVRULHVDQGFRQWUROHTXLSPHQW
7DQNZLWKVWLIIHQHUVRIER[EHDPGHVLJQVKRZLQJ
MDFNLQJSDGOLIWLQJKRRNVDQGUDLOIRUWUDQVSRUW
EUDFNHW
)LJXUH
%HIRUHILOOLQJWKHRLOWKHWDQNZLWKWKHDFWLYHSDUWLQVLGHLWLVHYDFXDWHGLQRUGHUWRUHPRYHDOODLUWKDW
ZRXOG HQGDQJHU WKH GLHOHFWULF VWUHQJWK RI WKH WUDQVIRUPHU LQVXODWLRQ &RQVHTXHQWO\ WKH WDQN LV
GHVLJQHG WR ZLWKVWDQG WKH SUHVVXUH IURP WKH DWPRVSKHUH ZLWK D PLQLPXP RI GHIRUPDWLRQV 7KH
WLJKWQHVVDWRXWVLGHDQGLQVLGHRYHUSUHVVXUHLVYHULILHGWKURXJKVXLWDEOHWHVWV
7KHFRYHUPD\EHEROWHGRUZHOGHGWRWKHWDQNIUDPH6RPHXVHUVSUHIHUDEHOOW\SHWDQNZKHUHWKH
WDQNLVZHOGHGRUEROWHGWRWKHWDQNERWWRP
7RNHHSWKHWDQNGLPHQVLRQVZLWKLQWKHVSHFLILHGWUDQVSRUWSURILOHDQGDWWKHVDPHWLPHHQFORVH
WKH DFWLYH SDUW LQ WKH WDQN LQ ZLWK QHFHVVDU\ LQVXODWLRQ FOHDUDQFHV DQG VWLOO REWDLQ D UHDVRQDEO\
VLPSOH GHVLJQ RIWHQ PDNHV WKH GHVLJQHU¶V WDVN D FRQVLGHUDEOH FKDOOHQJH ZKHQ GHVLJQLQJ ODUJH
WUDQVIRUPHUV
$QRWKHU SKHQRPHQRQ WR WDNH LQWR DFFRXQW ZKHQ GHVLJQLQJ WDQNV LV WKDW DFRLQFLGHQFH RI VRXQG
IUHTXHQFLHVJHQHUDWHGE\WKHWUDQVIRUPHUFRUHDQGWKHUHVRQDQFHIUHTXHQFLHVRISDUWVRIWKHWDQN
PD\HQKDQFHWKHVRXQGUDGLDWHGWRWKHHQYLURQPHQW
7UDQVIRUPHU+DQGERRN3DJH
&RQVHUYDWRUZLWKDGLDSKUDJP
EHWZHHQWKHRLODQGWKHDLU
)LJXUH
7KH WDQN LV GHVLJQHG WR SHUPLW WKH WHPSHUDWXUH GHSHQGHQW H[SDQVLRQ RI WKH RLO 0RVW RIWHQ D
VHSDUDWHH[SDQVLRQYHVVHOLVLQVWDOOHGDOVRFDOOHGFRQVHUYDWRU6LQFHWKHFRQVHUYDWRULVYHQWHGWR
WKH DLU WKH RLO SUHVVXUH LQ WKH WUDQVIRUPHU UHPDLQV IDLUO\ FRQVWDQW DQG LQGHSHQGHQW RI WKH
WHPSHUDWXUH7KHIUHHDFFHVVRIWKHVXUURXQGLQJDLULVOLPLWHG*RRGGLHOHFWULFSURSHUWLHVRIWKHRLO
UHTXLUHWKDWWKHRLOLVFOHDQDQGKDVORZPRLVWXUHFRQWHQW0RLVWXUHLQWKHRLOZLOODOVRDFFHOHUDWHWKH
DJHLQJ RI WKH FHOOXORVH LQVXODWLRQ $LU HQWHULQJ WKH FRQVHUYDWRU LV WKHUHIRUH ILOWHUHG DQG
GHKXPLGLILHG ,Q DGGLWLRQ D GLDSKUDJP LQ IRUP RI D UXEEHU VDFN WKDW VHSDUDWHV WKH RLO LQ WKH
FRQVHUYDWRUIURPWKHDLULVUHFRPPHQGHGRQSRZHUWUDQVIRUPHUV6HH)LJXUH
:LWKLQFUHDVLQJWUDQVIRUPHUSRZHUUDWLQJWKHHIIHFWVRIODUJHFXUUHQWVLQDQGRXWRIWKHWUDQVIRUPHU
LQIOXHQFHWKHGHVLJQ7KHVDPHJRHVIRUWKHOHDNDJHIOX[LQVLGHWKHWDQN,QVHUWVRIQRQPDJQHWLF
PDWHULDODURXQGKLJKFXUUHQWEXVKLQJVUHGXFHWKHULVNRIH[FHVVLYHKHDWLQJ7DQNOLQLQJZLWKKLJK
FRQGXFWLYHVKLHOGVH[SHOVWKHIOX[IURPHQWHULQJWKHWDQNZDOO$OWHUQDWLYHO\ORZUHOXFWDQFHPDWHULDO
WDNHVFDUHRIWKHIOX[EHIRUHLWHQWHUVLQWRWKHWDQNZDOO
($57+48$.(:,7+67$1'$%,/,7<
7UDQVIRUPHUV WR EH LQVWDOOHG LQ VHLVPLF DFWLYH DUHDV VKRXOG EH VXEMHFW WR D VHLVPLF LQWHUDFWLRQ
DQDO\VLV
7KHPDJQLWXGHRIWKHVHLVPLFORDGWREHH[SHFWHGDQGWKHWUDQVIRUPHUVKDOOZLWKVWDQGVKRXOGEH
GHWHUPLQHG$GHVLJQHDUWKTXDNHPD\EHVHW
,QFHUWDLQDUHDVWKHUHDUHORFDOUHTXLUHPHQWVWRVXFKDQDO\VLV
7KHVHLVPLFIRUFHVDQGWKHHIIHFWVRQWKHWUDQVIRUPHULWVFRPSRQHQWVDQGWKHVXSSRUWVKRXOGEH
HYDOXDWHG 7KHVH IRUFHV LQWHUDFW ZLWK WKH RWKHU IRUFHV RQ WKH WUDQVIRUPHU HJ VWDWLF DQG ORDG
IRUFHV
,Q DQDO\VLQJ WKH VHLVPLF EHKDYLRXU WKH QDWXUDO IUHTXHQFLHV WKH DFFHOHUDWLRQV WKH IRUFHV WKH
GLVSODFHPHQWVDQGWKHPRWLRQVDUHGHWHUPLQHG
$ ILQLWH HOHPHQW PHWKRG PD\ EH SHUIRUPHG LQ GHWHUPLQLQJ WKH VWUHVVHV LQ VHOHFWHG SRLQWV RQ WKH
WUDQVIRUPHU ,Q WKLV DQDO\VLV DQ DSSUR[LPDWLRQ RI WKH SK\VLFDO SURSHUWLHV DQG JHRPHWU\ LV
JHQHUDWHG $ VXSHUSRVLWLRQ WHFKQLTXH LV XVHG WR REWDLQ WKH UHVXOWDQW GLVSODFHPHQWV IRUFHV DQG
DFFHOHUDWLRQVIRUWKHDVVHPEO\XQGHUWKHG\QDPLFORDGLQJRIDGHVLJQHDUWKTXDNH
6SHFLDOFRQVLGHUDWLRQVKRXOGEHJLYHQWRFRUHDQGZLQGLQJVXSSRUWDQGWRDWWDFKHGHTXLSPHQWDV
EXVKLQJV FRQVHUYDWRU FRROLQJ HTXLSPHQW DQG DFFHVVRULHV $OVR WKH VXSSRUW DQG WKH VXSSRUW
VWUXFWXUHDQGH[WHUQDOFRQQHFWLRQVVKRXOGEHFRQVLGHUHG
6RPHFXVWRPHUVDQGORFDOUHJXODWLRQVUHTXLUHWKHVHLVPLFLQWHUDFWLRQDQDO\VLVWREHDSSURYHGE\
DQLQGHSHQGHQWDXWKRULW\
7KHFXVWRPHUVKRXOGVSHFLI\WKHHDUWKTXDNHUHTXLUHPHQWVLQWKHWUDQVIRUPHULQTXLU\FRQWUDFW
3DJH7UDQVIRUPHU+DQGERRN
75$16)250(5&20321(176
7(50,1$/6
,QGU\W\SHWUDQVIRUPHUVWKHWHUPLQDOVPD\MXVWEHHQGHGRQDWHUPLQDOERDUGLQIRUPRIVWXGVRU
EODGHFRQQHFWRUV7KHWHUPLQDOVPD\EHVLWXDWHGLQVLGHDQHQFORVXUH,QRLORUOLTXLGLQVXODWHGW\SH
WUDQVIRUPHUPHDQVRIEULQJLQJWKHHOHFWULFDOFRQQHFWLRQIURPWKHLQVLGHWRWKHRXWVLGHWKHWDQNKDV
WREHSURYLGHG
%XVKLQJV
7HUPLQDOVGHYLFHLQIRUPRIEXVKLQJEULQJVWKHFRQQHFWLRQIURPWKHWUDQVIRUPHULQVXODWLRQPHGLXP
WR WKH H[WHUQDO LQVXODWLRQ PHGLXP ZKLFK LQ PRVW FDVHV DUH DLU EXW FDQ DOVR EH RLO LQ D FDEOH
WHUPLQDWLRQER[RU6)LQDJDVLQVXODWHGVZLWFKJHDU,QWUDQVIRUPHUGHVLJQVZLWKJDVFXVKLRQWKH
ORZHUSDUWRIWKHEXVKLQJKDVWREHH[WHQGHGWRUHDFKGRZQLQWRWKHWUDQVIRUPHULQVXODWLRQPHGLXP
7KHEXVKLQJVSURYLGHWKHQHFHVVDU\LQVXODWLRQEHWZHHQWKHZLQGLQJVHOHFWULFDOFRQQHFWLRQDQGWKH
PDLQ WDQN ZKLFK LV DW HDUWK SRWHQWLDO 7KH\ SURYLGH DOVR QHFHVVDU\ LQVXODWLRQ LQ WKH H[WHUQDO
PHGLXP7KH\QHHGWRIXOILOQHFHVVDU\FXUUHQWFDSDFLW\7KLVPDNHVDZLGHUDQJHRIUHTXLUHPHQWV
DQGDFFRUGLQJO\DZLGHUDQJHRIVROXWLRQV
7KHDLUVLGHRIDQRLOWRDLUEXVKLQJPD\EHGRQHLQDVLPSOHUZD\LIRQO\IRULQGRRUXVH
/RZYROWDJHEXVKLQJV
$ VLPSOH ORZ YROWDJH RLOWRDLU EXVKLQJ PD\ EH D URG RI FRQGXFWLQJ PDWHULDO
LQVHUWHGLQWRDSRUFHODLQWXEH7KLVKDVDFHQWUDOFXUUHQWFDUU\LQJEROWXVXDOO\
RI FRSSHU DQG WKH LQVXODWLRQ LV SURYLGHG E\ D FRPELQDWLRQ RI WKH SRUFHODLQ
VKHOODQGWKHWUDQVIRUPHURLO8QGHURLOWKHSRUFHODLQVXUIDFHFUHHSVWUHQJWKLV
YHU\PXFKJUHDWHUWKDQLQDLUVRWKHRLOSRUWLRQRIWKHEXVKLQJLVVKRUWDQGKDV
DPRUHRUOHVVSODLQSRUFHODLQVXUIDFH7KHDLUSRUWLRQLVORQJHUDQGKDVVKHG
SURILOHLQRUGHUWRSURYLGHDYHU\PXFKORQJHUFUHHSSDWKDSRUWLRQRIZKLFKLV
SURWHFWHGVRWKDWLWUHPDLQVGU\LQUDLQ\RUIRJJ\FRQGLWLRQV7KHUHDUHJDVNHWV
VHDOLQJ EHWZHHQ URG DQG SRUFHODLQ DQG EHWZHHQ SRUFHODLQ DQG WDQN ZDOO WR
SUHYHQWRLOOHDNV
7KH QRUPDO OLPLW IRU WKHVH VLPSOH SRUFHODLQ EXVKLQJV LV XS WR N9 V\VWHP
YROWDJHDQGFXUUHQWXSLQUDQJHRIN$
6SHFLDOORZYROWDJHEXVKLQJVDUHDYDLODEOHZKHUHH[WUDHIIRUWVDUHSXWLQWRWKH
GHVLJQWRJHWYHU\ORZSDUWLDOGLVFKDUJHOHYHOV
7UDQVIRUPHU+DQGERRN3DJH
&RQGHQVHUEXVKLQJV
)RU EXVKLQJV ZLWK KLJKHU UDWHG YROWDJH WKDW LV LQ WKH
UHJLRQ RI IURP N9 WR N9 RU KLJKHU GHSHQGHQW
XSRQ WKH GHVLJQ DQG WKH FXVWRPHU UHTXLUHPHQW LW LV
QHFHVVDU\ WR LQWURGXFH DFWLYH FRQWURO RI YROWDJH
GLVWULEXWLRQ EHWZHHQ WKH FHQWUDO KLJK YROWDJH OHDG DQG
WKHH[WHUQDOPHWDOPRXQWLQJIODQJHDWJURXQGSRWHQWLDO
6XFK FRQWURO LV DFKLHYHG E\ D FDSDFLWLYH YROWDJH
GLVWULEXWLRQ ,Q DVLPSOH IRUP WKHFHQWUDO URG RU WXEHLV
ZRXQG XS ZLWK SDSHU LQ D QXPEHU RI OD\HUV DQG
FRQFHQWULFDOO\ DUUDQJHGFRQGXFWLYH IRLOV VHSDUDWH HDFK
OD\HU 7KLV DUUDQJHPHQW LV RIWHQ FDOOHG D FRQGHQVHU
ERG\EXVKLQJ
6XFKGHVLJQVKDGDOUHDG\EHHQGHYHORSHGEHIRUH
EXWZHUHQRWIXOO\XWLOL]HGXQWLOWR\HDUVODWHU)RU
D ORQJ WLPH ODPLQDWHV RI SKHQROLF SDSHU ZHUH DOPRVW
XQLYHUVDOO\ XVHG 7KLV PDWHULDO LV DOVR QDPHG %DNHOLWH
7KH %DNHOLWH ERGLHV ZHUH PHFKDQLFDOO\ VWURQJ EXW
QHYHU FRPSOHWHO\ IUHH IURP VKULQNDJH FUDFNV LQ ZKLFK
FRURQD GHYHORSHG LQ VHUYLFH 7KH EXVKLQJV ZHUH
UHODWLYHO\ LPPXQH WR WKLV LQQHU FRURQD EXW LW FRXOG LQ
PDQ\ FDVHV QR ORQJHU EH WROHUDWHG ZKHQ LQGLFDWLRQ RI
SDUWLDO GLVFKDUJHV EHJDQ WR EH XVHG DV D GLDJQRVWLF
WRROIRUWUDQVIRUPHUVLQFRXUVHRIWKHVDQGV
7KH EXVKLQJ WHFKQRORJ\ WKHQ FKDQJHG RYHU WR ERGLHV
RISDSHULPSUHJQDWHGZLWKWUDQVIRUPHURLO7KLVHQWDLOHG
DFRPSOLFDWLRQLQWKDWWKHEXVKLQJVZHUHQRWRLOWLJKWLQ
WKHERG\LWVHOI7KH\KDGWREHSURYLGHGZLWKDVHDOLQJ
SRUFHODLQ VKURXG EHORZ WKH PRXQWLQJ IODQJH RQ WKH RLO
VLGH
,Q WKH GHVLJQ RI FRQYHQWLRQDO FRQGHQVHU EXVKLQJ WKH
FRQGHQVHUERG\LVZRXQGRQDFHQWUDOWXEHZKLFKPD\
EHFXUUHQWFRQGXFWLQJ,ISRVVLEOHWKHERG\LVFRLOHGXS
IURP IXOO ZLGWK SDSHU RWKHUZLVH QDUURZ VWULSV ZLOO EH
ZRXQG LQ RYHUODS IURP HQG WR HQG $W UHJXODU LQWHUYDOV HTXDOLVDWLRQ SODWHV DUH FRQVWUXFWHG XVLQJ
HLWKHUDOXPLQLXPIRLOLQVHUWVRUFRQGXFWLYHLQNIXVHGWRWKHILEUHVRIWKHSDSHUWRFUHDWHFRQFHQWULF
F\OLQGHUV 7KH OHQJWKV RI WKHVH HTXDOLVDWLRQ SODWHV DUH VWHSSHG 7KH FDSDFLWDQFH EHWZHHQ
FRQVHFXWLYHOD\HUVLVHTXDOL]HGDVOD\HUVZLWKKLJKHUGLDPHWHUDUHRIVKRUWHUOHQJWK7KHRXWVLGHRI
WKH ERG\ KDV D ILQDOL]LQJ FRQGXFWLYH OD\HU ZKLFK LV FRQQHFWHG WR WKH PRXQWLQJ IODQJH WKURXJK D
MXPSHU7KLVFRQQHFWLRQPD\EHRSHQHGVRWKDWDFDSDFLWRURUVRPHRWKHUHOHPHQWPD\EHLQVHUWHG
EHWZHHQWKHRXWHUIRLODQGWKHJURXQGIRUWKHSXUSRVHRIPHDVXUHPHQWRUSURWHFWLRQ7KHERG\LV
SRVLWLRQHG LQ WKH HDUWKHG IODQJH DQG LQVLGH D ZHDWKHUSURRI LQVXODWRU WKDW FDQ EH LQ WZR SDUWV DQ
XSSHUSDUWPDGHRISRUFHODLQRUVLOLFRQHSRO\PHUZLWKVKHGVDQGDORZHUSDUWQRUPDOO\XQGHURLO
PDGHRISRUFHODLQRUHSR[\UHVLQ,QFDVHWKHDLUVLGHDQGRLOVLGHSRUFHODLQVDUHFRPSUHVVHGD[LDOO\
ZLWKVHDOLQJJDVNHWVWRZDUGVWKHPRXQWLQJIODQJHDQGWRZDUGVWKHERWWRPDQGWRSDUPDWXUHV7KH
DVVHPEOLQJ SUHVVXUH LV VXVWDLQHG E\ VSULQJV DOORZLQJ H[SDQVLRQ DQG FRQWUDFWLRQ RI GLIIHUHQW
FRPSRQHQWV GXULQJ WHPSHUDWXUH FKDQJHV 7KH LQVLGH RI WKH EXVKLQJ WKH YROXPH EHWZHHQ WKH
FHQWUDOFRQGXFWRUDQGWKHRXWHUFDVLQJLVILOOHGZLWKWUDQVIRUPHURLOVHSDUDWHGIURPWKHWUDQVIRUPHU
DQGWKHFRQGHQVHUERG\LVIXOO\LPSUHJQDWHG7KHEXVKLQJKHDGRUGRPHSURYLGHVRLOH[SDQVLRQ
VSDFH DQG PD\ EH ILWWHG ZLWK D VLJKW JODVV WR JLYH LQGLFDWLRQ RI WKH EXVKLQJ RLO OHYHO 7KH KHDG
DOORZV VSDFH IRU DQ DLU RU JDV FXVKLRQ WR DOORZ IRU H[SDQVLRQ DQG FRQWUDFWLRQ RI WKH RLO 7KLV
H[SDQVLRQ VSDFH PXVW EH DGHTXDWHO\ VHDOHG DJDLQVW WKH LQJUHVV RI DWPRVSKHULF DLU DQG KHQFH
PRLVWXUH%XVKLQJVZLWKRLOLPSUHJQDWHGFRQGHQVHUERG\DUHSULPDULO\GHVLJQHGIRULQVWDOODWLRQDW
RUQHDUWKHYHUWLFDOSRVLWLRQ%XWZLWKVSHFLDOSUHFDXWLRQVLQWKHGHVLJQWKH\PD\EHLQYHQWHGIRU
HYHQKRUL]RQWDOLQVWDOODWLRQ
'LIIHUHQW VROXWLRQV DUH XVHG WR FUHDWH WKH HOHFWULFDO SDWK IRU WKH FXUUHQW WKURXJK WKH EXVKLQJ
GHSHQGLQJRQWKHEXVKLQJGHVLJQDQGWKHUDWHGFXUUHQWQHHGHG
7KHFHQWUDOFRQGXFWRUPD\EHDFRSSHUEROWZLWKFRQQHFWLRQWHUPLQDOVVWXGLQERWKHQGV
)RUKLJKHUFXUUHQWUDWLQJVWKHFHQWUDOFRQGXFWRULVDWKLFNZDOOWXEHGXHWRWKHVNLQHIIHFW
3DJH7UDQVIRUPHU+DQGERRN
7KHFHQWUDOWXEHLQWKHEXVKLQJFDQEHDWKLQZDOOPHWDOWXEHQRWGLPHQVLRQHGIRUFXUUHQWFDUU\LQJ
7KH FXUUHQW JR WKURXJK D GUDZ OHDG FRQQHFWLRQ FRQVLVWLQJ RI D PXOWL VWUDQGHG IOH[LEOH FRQGXFWRU
MRLQHGWRWKHWHUPLQDORIWKHZLQGLQJ7KLVOHDGLVGUDZQXSWKURXJKWKHFHQWUDOWXEHRIWKHEXVKLQJ
,W LV FXW WR WKH FRUUHFW OHQJWK DQG SURYLGHGZLWKD WRS FRQQHFWRU WKDW LV IDVWHQHG WR WKH WRS RI WKH
EXVKLQJ:KHQWKHWUDQVIRUPHULVVKLSSHGZLWKEXVKLQJVUHPRYHGWKHGUDZOHDGLVORZHUHGGRZQ
LQWR WKH WDQN $Q DGYDQWDJH LV WKDW QR DFFHVV WR WKH ORZHU HQG RI WKH EXVKLQJ LV QHHGHG ZKHQ
PRXQWLQJDQGGLVPRXQWLQJWKHEXVKLQJ
,IIXOOFXUUHQWFDSDFLW\RIVXFKEXVKLQJKDVWREHXWLOL]HGDVROLGURGVROXWLRQLVLQYHQWHG7KLVLVD
VROLGURGRIFRSSHUZKLFKPRVWO\ILOOVWKHDYDLODEOHVSDFHLQWKHFHQWUDOWXEH7KHORZHUSDUWRIWKH
URGLVFRQQHFWHGWRWKHH[WHQGHGZLQGLQJWHUPLQDODQGWKHXSSHUSDUWKDVDWHUPLQDWLRQILWWLQJWRWKH
WRS RI WKH EXVKLQJ :KHQ PRXQWLQJ WKH EXVKLQJ LW LV ORZHUHG RYHU WKLV URG :KHQ EXVKLQJ LV
GLVPRXQWHGIRUWUDQVSRUWDWLRQWKHURGKDVDVSOLWIDFLOLW\DWOHYHORIWKHEXVKLQJIODQJHRUWDQNFRYHU
)RUEXVKLQJVZLWKFHQWUDOWXEHGLPHQVLRQHGIRUFXUUHQWFDUU\LQJ$%%KDVGHYHORSHGWKHGUDZURG
V\VWHPXVHGZKHQWKHZLQGLQJWHUPLQDOLVSURYLGHGZLWKDVWDWLFVKLHOGLQJERG\WKDWVKDOOVXUURXQG
WKH ERWWRP HQG RI WKH EXVKLQJ 7KLV VKLHOG LV SHUPDQHQWO\ LQVWDOOHG RQ WKH DFWLYH SDUW RI WKH
WUDQVIRUPHU DQG LW FRQWDLQV D VOLJKWO\ PRYDEOH FRQWDFW VWXG WKDW LV SHUPDQHQWO\ FRQQHFWHG WR WKH
ZLQGLQJWHUPLQDO7KLVFRQWDFWVWXGFDUULHVDUHODWLYHO\OLJKWGUDZURGRIVWHHOH[WHQGLQJQHDUO\WRWKH
OHYHO RI WKH FRYHU :KHQ WKH EXVKLQJ LV ILWWHG WKH ERWWRP SDUW RI WKH GUDZ URG LV MRLQHG WR DQ
DGGLWLRQDOORQJHUSDUWWKDWH[WHQGVWKURXJKWKHEXVKLQJ7KHEXVKLQJLVJXLGHGDORQJWKHFRPSOHWH
URGGRZQLQWRWKHVKLHOGERG\DQGWKHFRQWDFWVWXGLVSHUPDQHQWO\SUHVVHGKDUGDJDLQVWWKHERWWRP
HQGRIWKHEXVKLQJZKHQWKHGUDZURGLVWHQVLRQHGDQGIL[HGDWWKHXSSHUHQGRIWKHEXVKLQJ7KH
V\VWHPLQFOXGHVVSULQJVWRSURYLGHWKHFRQWDFWSUHVVXUHDQGGHYLFHWRFRPSHQVDWHIRUWHPSHUDWXUH
HORQJDWLRQV
7KHH[WHUQDOFRQQHFWLRQWRWKHEXVKLQJWRSLVXVXDOO\DVWUDLJKWF\OLQGULFDOVWXGEXWFXVWRPHU¶VORFDO
VWDQGDUGV PD\ UHTXLUH RWKHU YDULDQWV 7KH FXVWRPHU VXSSOLHV VSHFLDO KDUGZDUH DUPDWXUHV ZKLFK
DUHVXLWHGWRWKHLUEXVEDU$WKLJKV\VWHPYROWDJHVWKHEXVEDUFRQGXFWRUZLOOEHPXOWLSOHZLUHVRU
VRPHWLPHKRUL]RQWDODOXPLQLXPWXEHV&HUWDLQIOH[LELOLW\PXVWEHSURYLGHGLQWKHODWWHUFDVHLQRUGHU
WRSHUPLWWHPSHUDWXUHYDULDWLRQVDQGWRUHOLHYHWKHEXVKLQJIURPVKRUWFLUFXLWSRZHUDFWLQJRQWKH
EDUV7KHEXVKLQJVKDOOLQSULQFLSDOEHFRPSOHWHO\XQVWUHVVHGDQGPXVWQRWEHXVHGDVVXSSRUW
LQVXODWRUWRVWUHWFKXSKRUL]RQWDOZLUHV
,Q+9FRQGHQVHUEXVKLQJVSURYLVLRQFDQEHPDGHIRUDFFRPPRGDWLRQRIDQXPEHURIWRURLGZRXQG
FXUUHQW WUDQVIRUPHUV E\ LQFRUSRUDWLQJ DQ HDUWK EDQG DW WKH RLOLPPHUVHG HQG MXVW EHORZ WKH
PRXQWLQJIODQJH
7KH DLUVLGH RI RLO WR DLU RXWGRRUV EXVKLQJ LV H[SRVHG WR FOLPDWLF LQIOXHQFHV UDLQ DQG SRVVLEO\
SROOXWLRQZLWKVDOWDQGGXVW7KLVLVVXEMHFWWRVSHFLILFVWDQGDUGVUHTXLUHPHQWVDQGW\SHWHVWV7KH
H[WHUQDOZLWKVWDQGFDSDELOLW\RIWKHEXVKLQJLVSURYLGHGZLWKWKHDLGRIVKHGVRQWKHSRUFHODLQZKLFK
DUH LQWHQGHG WR NHHS SURWHFWHG SDUWV RI WKH LQVXODWLRQ VXUIDFH GU\ DQG FOHDQ 7KH VWDQGDUGV
PHQWLRQWRWDOFUHHSVGLVWDQFHSURWHFWHGFUHHSGLVWDQFHDQGWKHVWUDLJKWOLQHGLVWDQFHEHWZHHQWRS
DQGERWWRPDQGLWLVWRVRPHH[WHQGXSWRFXVWRPHUWRVSHFLI\UHTXLUHPHQWV
3ODQW IRU KLJK YROWDJH '& LV GHVLJQHG ZLWK HOHYDWHG UHTXLUHPHQWV RQ H[WHUQDO LQVXODWLRQ 7KH '&
YROWDJH ZLOO XQGHU FHUWDLQ FLUFXPVWDQFHV SURYLGH DQ HOHFWURVWDWLF SUHFLSLWDWRU HIIHFW UHVXOWLQJ LQ
PXFKKHDYLHUSROOXWLRQWKDQZLOOEHIRXQGLQSODQWDWDFRPSDUDEOH$&YROWDJH
7KH VSHFLDO GHPDQGV RQ +9'& EXVKLQJV KDV DOVR OHDG WR WKH LQWURGXFWLRQ RI EXVKLQJV ZLWK
UHGXFHGRLOYROXPHDQGWKHPDLQLQVXODWLRQPDGHE\DFRPELQDWLRQRI6)JDVVWDWLFVKLHOGVDQG
WUDGLWLRQDOWHFKQRORJ\
7KH EXVKLQJ PDQXIDFWXUHU FRQGXFWV URXWLQH WHVWV DV SHU LQGXVWU\ VWDQGDUGV EHIRUH GHOLYHU\
5RXWLQHWHVWVFDQLQFOXGHVHDOLQWHJULW\FDSDFLWDQFHWDQ įRUSRZHUIDFWRUSRZHUIUHTXHQF\DQG
SDUWLDOGLVFKDUJH/LPLWVDUHVHWE\WKHVWDQGDUGVEDVHGRQW\SHDQGUDWLQJ7\SHWHVWVDUHUHTXLUHG
ZKHQQHZGHVLJQVDUHLQWURGXFHGDQGUHTXLUHDVHULHVRIDGGLWLRQDOWHVWV
$WHVWRIWKHH[WHUQDOLQVXODWLRQRIEXVKLQJVLVFRQGXFWHGXQGHUDUWLILFLDOUDLQLQWKHODERUDWRU\ZLWK
$& YROWDJH DSSOLHG IRU RQH PLQXWH DQG SRVVLEO\ ZLWK VZLWFKLQJ LPSXOVH ,PSXOVH WHVWV ZLWK
VWDQGDUG ZDYH —VHF DUH PDGH RQ WKH EXVKLQJ LQ GU\ FRQGLWLRQV ,W LV DVVXPHG WKDW ZDWHU
GURSOHWVGRQRWLQIOXHQFHWKHZLWKVWDQGYROWDJHYDOXHVDWVWDQGDUGLPSXOVH
+LJKYROWDJHFRQGHQVHUEXVKLQJVDUHDYDLODEOHZKHUHWKHFRQGHQVHUERG\LVPDGHRIHSR[\UHVLQ
YDFXXP LPSUHJQDWHG SDSHU 7KHVH EXVKLQJV ZHUH RULJLQDOO\ GHYHORSHG IRU XVH ZLWK 6) EXW DUH
QRZ ZLGHO\ XVHG IRU RLO WR DLU LQWHUIDFHV 7KHVH EXVKLQJV IRU KLJK YROWDJH LPSOHPHQWDWLRQ DUH
DYDLODEOHZLWKSRUFHODLQRLOILOOHGXSSHUFDVLQJEXWWKHXQGHURLOHQGLVWRWDOO\UHVLQHQFDSVXODWHG
2XWHU KRXVLQJ RI SRUFHODLQ IRU RXWGRRU EXVKLQJV LV VWLOO GRPLQDQW GXH WR WKHVH PDWHULDO H[FHOOHQW
SURSHUWLHVRIZHDWKHULQJDQGDEUDVLRQUHVLVWDQFH
7UDQVIRUPHU+DQGERRN3DJH
)RUPHGLXPYROWDJHVXSWRN9WRWDORLOIUHHGHVLJQLVLQYHQWHG7KHFRQGHQVHUERG\LVPDGHRI
HSR[\ UHVLQ YDFXXP LPSUHJQDWHG SDSHU 7KH DLUVLGH RXWHU SURWHFWLYH KRXVLQJ LV PDGH RI VLOLFRQH
SRO\PHU PRXOGHG GLUHFWO\ RQWR WKH FRQGHQVHU RU LW FDQ EH D KROORZ FRPSRVLWH LQVXODWRU ILODPHQW
ZRXQG WXEH SOXV VLOLFRQH PRXQWHG RXWVLGH DQG WKH JDS EHWZHHQ ILOOHG ZLWK D VROLG GLHOHFWULF
PHGLXP7KHRXWHUSURWHFWLRQRIVLOLFRQHLVIRUPHGZLWKVKHGV7KHEXVKLQJLVOLJKWZHLJKW,WFDQEH
LQVWDOOHGLQDQ\SRVLWLRQ)RUWUDQVIRUPHUVH[SRVHGWRHDUWKTXDNHRUYDQGDOLVPE\VWRQHWKURZLQJ
WKLVPD\EHDVDIHUVROXWLRQWKDQSRUFHODLQ
+LJKFXUUHQWEXVKLQJV
%XVKLQJVIRUYHU\KLJKFXUUHQWVLQWKHUDQJHXSWRN$KDYHDYHU\
ODUJH PDVVLYH FHQWUDO FRQGXFWRU ,WV SXUSRVH LV WR FRQGXFW KHDW 7KH
FXUUHQWIORZVQHDUWKHVXUIDFHDQGSHQHWUDWHVRQO\DERXW±FP7KH
KHDW WKDW LV GHYHORSHG HYHQ DW WKH FRQWDFW VXUIDFH RI WKH DLUVLGH LV
ODUJHO\ FDUULHG GRZQZDUG DQG FDUULHG DZD\ E\ WKH WRS RLO LQ WKH
WUDQVIRUPHU
%HFDXVH RI WKH VNLQ HIIHFW LW LV DGYDQWDJHRXV WR DUUDQJH DW OHDVW WKH
DLUVLGH WHUPLQDOV RQ WKH VLGHV RI D UHFWDQJOH RU SRO\JRQ 7KLV FROOHFW
WKH FXUUHQW IURP WKH FLUFXPIHUHQFH ZHUH LW IORDW DQG WKH EXVKLQJ FDQ
HDVLO\EHFRQQHFWHGWRDWXEHIRUPHGEXVE\VHWVRIIOH[LEOHV
+LJKFXUUHQWRXWOHWRIODUJHWUDQVIRUPHUVLVRIWHQDUUDQJHGDVEXVGXFW
ZKLFK PD\ JLYH H[WUD KLJK WHPSHUDWXUH HQYLURQPHQW DQG VSHFLDO
GHVLJQHGKLJKWHPSHUDWXUHEXVKLQJVKDYHWREHXVHG
+LJK FXUUHQW WHUPLQDOV ZLWK ORZ YROWDJH RQ WUDQVIRUPHUV IRU IXUQDFHV
DQGHOHFWURO\VLVDUHQRWPDGHDVSURSHUEXVKLQJVEXWLQWKHIRUPRIIODW
EDUSDOPVRUF\OLQGULFDOVWXGVPRXQWHGLQSDQHOVRISODVWLFODPLQDWH
&DEOHFRQQHFWLRQV
7KH JHQHUDO GHVLJQ RI WKLV W\SH RI FRQQHFWLRQ LV WKDW WKH FDEOH LV WHUPLQDWHG LQ RLO ILOOHG
FRPSDUWPHQW DFFRUGLQJ WR FDEOH PDQXIDFWXUHU¶V UHFRPPHQGDWLRQ )URP WKHUH LW LV FRQQHFWHG
WKURXJK D VHSDUDEOH OLQN RQWR DQ RLOWRRLO EXVKLQJ WKURXJK WKH WDQN ZDOO 7KH VHSDUDWLQJ OLQN LV
SURYLGHGWRSHUPLWGLVFRQQHFWLRQRIWKHFDEOHIURPWKHWUDQVIRUPHUIRULQVXODWLRQWHVWVRQWKHFDEOH
,WLVIXUWKHUDYRLGHGWKDWWKHLQQHUSDUWVRIWKHWUDQVIRUPHUZLOOEHH[SRVHGGXULQJWKHWLPHZKHQWKH
FDEOHLVLQVWDOOHGRQO\WKHVHSDUDWHFRQWDLQHURUER[LQYROYHG
0RGHUQ SODVWLF FDEOHV IRU ORZHU V\VWHP YROWDJH DUH XVXDOO\ QRW ER[HG LQ WKLV PDQQHU WKH\ DUH
WHUPLQDWHGLQRSHQDLU
7KHUHLVDOVRDGLIIHUHQWWHFKQRORJ\ZLWKGU\SOXJLQEXVKLQJVXSWR
N9 OHYHO $ FRQLFDO SOXJ LV PRXQWHG RQ WKH WUDQVIRUPHU ZDOO
DQG D FRUUHVSRQGLQJ IHPDOH SDUW LV PRXQWHG RQ WKH HQG RI WKH
FDEOH :KHQ WKH SDUWV DUH MRLQHG WKLV SURYLGH DQ DLUWLJKW DQG
PRLVWXUHWLJKWERQG7KHFRPSRQHQWVDUHVDIHWRWRXFKZKLOHOLYH
)RU ORZHU YROWDJH OHYHO LW LV SRVVLEOH WR GLVFRQQHFW DQ XQORDGHG
WUDQVIRUPHU E\ MXVW SXOOLQJ WKH SOXJV RXW ZLWK DQ LQVXODWLQJ URG
7KH LQVXODWLQJ URG LV WR SURWHFW DJDLQVW DUFLQJ VKRXOG DQ DWWHPSW
EHPDGHWRGLVFRQQHFWDORDGHGFDEOH
7KH RLO WR RLO EXVKLQJ PD\ EH RPLWWHG DQG WKH OHDG IURP WKH
ZLQGLQJ WHUPLQDO LV EURXJKW GLUHFWO\ WR WKH FDEOH WHUPLQDWLRQ
WKURXJKDVXIILFLHQWRSHQLQJLQWKHWDQNZDOOEHWZHHQWKHWDQNDQG
FDEOHER[
3DJH7UDQVIRUPHU+DQGERRN
6)FRQQHFWLRQV
7HUPLQDORIWUDQVIRUPHUWKDWDUHGLUHFWO\IODQJHGWRZDUGV6)EXVGXFWVKDYHSDUWLFXODUEXVKLQJV
,QVXODWLRQGLVWDQFHVLQWKHFRPSUHVVHGJDVDWPRVSKHUHDUHDERXWWKHVDPHDVLQRLODQGERWKHQGV
RIWKHEXVKLQJORRNDERXWWKHVDPH
%XVKLQJV IRU VXFK DSSOLFDWLRQ DUH WRGD\ DYDLODEOH ZLWK FRQGHQVHU ERG\ PDGH RI HSR[\ UHVLQ
YDFXXP LPSUHJQDWHG SDSHU IL[HG LQ D IODQJH 7KH FRPSUHVVHG JDV KDV DQ RYHUSUHVVXUH RI WKH
RUGHURIDWPRVSKHUHV7KHUHDUHPXOWLSOHVHDOLQJV\VWHPVEHWZHHQWKHPDLQLQVXODWLQJERG\DQG
WKHEXVKLQJIL[LQJIODQJHDVZHOODVEHWZHHQWKHERG\DQGWKHFXUUHQWFRQGXFWRU:LWKLQWKHIODQJH
EHWZHHQWKHJDVVLGHDQGWKHRLOVLGHVHDOVWKHUHLVDQDQQXODUFKDPEHULQZKLFKWKHJDVZLOOEH
WUDSSHG LQ FDVH RI DQ 6) OHDNDJH DQG IURP ZKLFK WKH JDV FDQ EH OHW RXW ZLWKRXW HQWHULQJ WKH
WUDQVIRUPHU6XFKOHDNDJHRI6)JDVZLOODOVREHGHWHFWHG
2LOWR6)EXVKLQJVDUHDOVRDYDLODEOHZLWKFRQGHQVHUERG\RIRLOLPSUHJQDWHGSDSHUKRXVHGLQVLGH
XSSHU DQG ORZHU SRUFHODLQ ZLWK D PHWDO IODQJH EHWZHHQ 7KHVH EXVKLQJV KDYH DQ RLO YROXPH
VHSDUDWHG IURP WKH WUDQVIRUPHU RLO DQG ZLWK VHDOLQJ V\VWHPV WRZDUGV WKH RLO V\VWHP RI WKH
WUDQVIRUPHURQRQHVLGHDQGWRZDUGVWKHEXVEDUJDVHQFORVXUHRQWKHRWKHUVLGH7KHFORVHGRLO
YROXPHRIWKHEXVKLQJLVSUHVVXUHPRQLWRUHGVRWKDWDSRVVLEOHOHDNDJHIURPWKHJDVV\VWHPZLOOEH
LQGLFDWHG
&22/(56
7KHFRROLQJHTXLSPHQWFROOHFWVKRWRLODWWKHWRSRIWKHWDQNDQGUHWXUQVFRROHGRLOORZHUGRZQRQ
WKHVLGH7KHFRROLQJDUUDQJHPHQWFDQEHVHHQDVWZRRLOFLUFXLWVZLWKDQLQGLUHFWLQWHUDFWLRQRQH
LQQHU DQG RQH RXWHU FLUFXLW 7KH LQQHU FLUFXLW WUDQVIHUV WKH ORVV HQHUJ\ IURP WKH KHDW SURGXFLQJ
VXUIDFHVWRWKHRLO,QWKHRXWHUFLUFXLWWKHRLOWUDQVIHUWKHKHDWWRDVHFRQGDU\FRROLQJPHGLXP7KH
DPELHQWDLUQRUPDOO\FRROVWUDQVIRUPHUV
,WLVSRVVLEOHWREXLOGDLUFRROHUVZLWKIRUFHGDLUFLUFXODWLRQPRUHFRPSDFWO\WKDQFRROHUZLWKQDWXUDO
GUDXJKW+RZHYHUVXFKDFRROHUDOVRKDVIDLUO\KLJKLPSHGDQFHWRWKHRLOFLUFXODWLRQLQWKHLQWHUQDO
FLUFXLWZKLFKQHFHVVLWDWHVWKDWWKHRLOEHSXPSHGWKURXJKWKHFRROHU)RUEXLOWLQWUDQVIRUPHUVHJ
GHHSXQGHUJURXQGSRZHUFDYHUQVRULQVRPHLQGXVWULDODSSOLFDWLRQRLOWRZDWHUKHDWH[FKDQJHUVDUH
XVHG DV LQ VXFK FDVHV VXIILFLHQW DLU IRU FRROLQJ PD\ QRW EH DYDLODEOH 7KH V\VWHP DOVR SHUPLWV
VPDOO SK\VLFDO GLPHQVLRQV 7KH GLVDGYDQWDJH RI WKH FRPSDFW GHVLJQ LV WKDW DX[LOLDU\ SRZHU PXVW
DOZD\VEHDYDLODEOH
3UHVHQW VWDQGDUGV JLYH FOHDU GHILQLWLRQV RI WKH GLIIHUHQW W\SHV RI FRROLQJ WRJHWKHU ZLWK VSHFLDO
GHVLJQDWLRQV7KHH[DPSOHVEHORZDUHWDNHQIURP,(&
21$1±2LOQDWXUDO
21$) ±2LOQDWXUDO
2)$1 ±2LOIRUFHG
2)$) ±2LOIRUFHG
2):)±2LOIRUFHG
±DLUQDWXUDO
±DLUIRUFHG
±DLUQDWXUDO
±DLUIRUFHG
±ZDWHUIRUFHG
2QWKHRLOVLGHWKHRLOFDQEHGLUHFWHGWRWKHKHDWSURGXFLQJVXUIDFHVE\WKHRLOSXPSV
2'
±2LOGLUHFWHG
$ JLYHQ WUDQVIRUPHU FDQ KDYH D FRPELQDWLRQ RI FRROLQJ W\SHV WR SHUPLW D FKDQJH LQ WKH W\SH RI
FRROLQJHJ21$121$)HWF
3XPSV DV ZHOO DV IDQV VRPHWLPHV VXIIHU EUHDNGRZQV ,W PXVW EH SRVVLEOH WR H[FKDQJH VXFK
FRPSRQHQWV ZLWKRXW HPSW\LQJ WKH WUDQVIRUPHU RU HYHQ WDNLQJ LW RXW RI VHUYLFH $OO FRROLQJ FLUFXLWV
VKRXOGWKHUHIRUHEHSURYLGHGZLWKQHFHVVDU\YDOYHVIRUVKXWWLQJRIIHDFKVHSDUDWHRLOFLUFXLW
7KHOHWWHU2LVXVHGIRUPLQHUDORLODQGLQVXODWLQJOLTXLGZLWKILUHSRLQW”ƒ&
7KHOHWWHU.LVXVHGIRULQVXODWLQJOLTXLGZLWKILUHSRLQW!ƒ&
7KHOHWWHU/LVXVHGIRULQVXODWLQJOLTXLGZLWKQRPHDVXUDEOHILUHSRLQW
5DGLDWRUV
5DGLDWRUVDUHDYDLODEOHLQYDULRXVSDWWHUV7KH\DOPRVWFRQVLVWEDVLFDOO\RIQXPEHURIIODWSDVVDJHV
RI HGJHZHOGHG SODWHV FRQQHFWLQJ D WRS DQG ERWWRP KHDGHU ,W LV SRVVLEOH WR PDNH WKH UDGLDWRUV
VOLJKWO\KLJKHUWKDQWKHWDQNVRWKDWWKHWRSKHDGHUKDVDVZDQQHFNHGVKDSHWKLVKDVWKHDGGHG
EHQHILW WKDW LW DOVR LPSURYHV WKH RLO FLUFXODWLRQ E\ LQFUHDVLQJ WKH WKHUPDO KHDG GHYHORSHG LQ WKH
UDGLDWRU 7KH UDGLDWRUV KDYH D YHQWLQJ SOXJ LQ WKH WRS KHDGHU DQG D GUDLQLQJ SOXJ LQ WKH ERWWRP
KHDGHU 5DGLDWRUV DUH DOPRVW IODQJHG GLUHFW WR WKH WUDQVIRUPHU WDQN RU WR WKH KHDGHUV LQ
IUHHVWDQGLQJFRROHUEDQNVWKURXJKDEXWWHUIO\YDOYHSHUPLWWLQJLQGLYLGXDOUDGLDWRUVWREHVKXWRIIDQG
HYHQHDVLO\UHPRYHG
7UDQVIRUPHU+DQGERRN3DJH
$VHSDUDWHVHOIVXSSRUWLQJUDFNIRUPLQJDIUHHVWDQGLQJFRROHUEDQNHQWDLOVWKHFRVWIRUDVHSDUDWH
PRXQWLQJSDGDQGILWWLQJRIWKHSLSHZRUN2QHDGYDQWDJHLVWKDWWKHFRQVHUYDWRUPD\EHSODFHGRQ
WKHEDQN7KLVVLPSOLILHVWKHRULHQWDWLRQRIEXVKLQJVZLWKUHJDUGWRFOHDUDQFHV
%HFDXVH RI WKHLU FRQVWUXFWLRQ LW LV GLIILFXOW WR SUHSDUH WKH VXUIDFH DGHTXDWHO\ DQG WR DSSO\ SDLQW
SURWHFWLRQ WR UDGLDWRUV XQGHU VLWH FRQGLWLRQ ,W LV WKHUHIRUH UHFRPPHQGHG WR KDYH VKHHWVWHHO
UDGLDWRUVKRWGLSJDOYDQL]HG
&RUUXJDWHGWDQNV
7KHFRUUXJDWHGWDQNLVERWKWDQNDQGFRROLQJVXUIDFHIRUVPDOODQGPHGLXP
GLVWULEXWLRQWUDQVIRUPHUV7KHWDQNFRQVLVWVRIFRYHUFRUUXJDWHGWDQNZDOOV
DQGERWWRPER[
7KHVWDQGDUGWDQNGHVLJQLVKHUPHWLFDOO\VHDOHGW\SHZKHUHWKHFRUUXJDWHG
ZDOOV DUH RI VXFK D IOH[LEOH FRQVWUXFWLRQ WKDW WKH\ H[SDQG DQG FRQWUDFW
GHSHQGLQJRQWKHFKDQJHVLQWKHRLOYROXPHGXHWRWHPSHUDWXUHYDULDWLRQV
GXULQJ RSHUDWLRQ 1XPEHU DQG GHSWK RI FRUUXJDWLRQV RQ HDFK VLGH RI WKH
WDQNFDQEHRSWLPLVHGWRPHHWWKHFRROLQJDQGG\QDPLFSUHVVXUHYDULDWLRQ
UHTXLUHPHQWV
6WDQGDUGLVHG W\SH WHVW IRU KHUPHWLFDOO\ VHDOHG FRUUXJDWHG WDQN VLPXODWLQJ
WKH SUHVVXUH YDULDWLRQV WKURXJKRXW WKH H[SHFWHG VHUYLFH OLIH RI WKH WUDQVIRUPHU KDV EHHQ
VXFFHVVIXOO\SHUIRUPHG
+HUPHWLFDOO\VHDOHGWUDQVIRUPHUVFRPSDUHGZLWKDFRQVHUYDWRUW\SHKDYHVHYHUDODGYDQWDJHV2QH
LVWKDWWKHRLOLVQRWLQFRQWDFWZLWKWKHDWPRVSKHUHWKXVDYRLGLQJDEVRUSWLRQRIPRLVWXUHIURPWKH
HQYLURQPHQWDQRWKHURQHLVWKDWLWLVHDVLHUWRPDLQWDLQ FOHDQ )DQV
)RUODUJHUXQLWVLWLVSRVVLEOHWRVXVSHQGIDQVEHORZRURQWKHVLGHRIUDGLDWRUVWRSURYLGHDIRUFHG
GUDXJKW DQG DFKLHYH 21$) FRROLQJ DUUDQJHPHQW 7KLV PLJKW HQDEOH WKH WUDQVIRUPHU ORDGLQJ
FDSDFLW\WREHLQFUHDVHGE\VRPH7KHUDGLDWRUVKDYHWREHJURXSHGLQVXFKDZD\WRREWDLQ
FRYHUDJHE\WKHIDQV
7KH FRROLQJ IDQV ZLOO JHQHUDWH D ORZ IUHTXHQF\ QRLVH ZKLFK ZLOO EH DGGHG WR WKH QRLVH IURP WKH
WUDQVIRUPHU LWVHOI 7KH LQWHQVLW\ GHSHQGV RQ IDQ VL]H URWDWLRQ VSHHG DQG WKH GHVLJQ RI WKH IDQ
EODGH)DQVDUHDYDLODEOHLQDULFKVHYHUDORIGHVLJQV,QEDVLFLWLVDVWDQGDUGVTXLUUHOFDJHPRWRU
WRWDOO\ HQFORVHG ZLWK D SURSHOOHU PRXQWHG GLUHFW WR WKH VKDIW DQG LQ D FDVLQJ SURYLGHG ZLWK
QHFHVVDU\ZLUHJXDUGV
)DQLVDOVRDSDUWRIDIRUFHGDLUKHDWH[FKDQJHU
)RUFHGRLOIRUFHGDLUKHDWH[FKDQJHUV
)RUODUJHWUDQVIRUPHUVLWEHFDPHYHU\VSDFHFRQVXPLQJWRUHPRYHWKHKHDWZLWKQDWXUDOFLUFXODWLRQ
WKURXJK UDGLDWRUV 7KH VSDFH UHTXLUHPHQW RI FRPSDFW FRROHUV LV GUDVWLFDOO\ ORZHU WKDQ IRU VLPSOH
UDGLDWRU EDWWHULHV )RU VSDFH UHDVRQV LW PD\ EH HFRQRPLFDO WR XVH FRPSDFW FRROHUV ZLWK
DSSUHFLDEOHIORZUHVLVWDQFHZKLFKUHTXLUHVIRUFHGFLUFXODWLRQRIWKHRLOE\SXPSVDQGVWURQJIDQV
IRUDLUEORZLQJ
6XFK 2)$) KHDW H[FKDQJHUV XVXDOO\ FRQVLVW RI URXQG WXEHV ZLWK WKLQ VZDJHG FRROLQJ ILQV RU
HOHPHQWVRIIODWFRUUXJDWHGWXEHV6RPHGHVLJQVDUHYHU\FRPSDFWZLWKQDUURZGXFWVRQWKHDLUVLGH
DQGKLJKIDQSUHVVXUH
:KHQ XVLQJ VHYHUDO FRROHUV IRU 2)$) FRROHG WUDQVIRUPHUV LW LV SUHIHUUHG WR DUUDQJH WZR RU PRUH
LQGLYLGXDOFRROHUVLQVHULHVLQVWHDGRISDUDOOHOLQRUGHUWRUHDFKDKLJKHUWHPSHUDWXUHGURS2QODUJH
WUDQVIRUPHU WKH FRROLQJ HTXLSPHQW LV VHSDUDWHG LQWR VHYHUDO JURXSV RU FLUFXLWV DQG WKHVH FDQ EH
DFWLYDWHG RU GHDFWLYDWHG DV UHTXLUHG FRQWUROOHG E\ WKHUPRVWDWV RU PD\ LQ VRPH PRUH DGYDQFHG
ZD\
7KH PRXQWLQJ RI FRROHUV IRU IRUFHG FRROLQJ ZLWK SXPSV DQG IDQV KDYH VHYHUDO RSWLRQV IRU WKH
RULHQWDWLRQ DQG JURXSLQJ RQ WKH WDQN GHSHQGLQJ RQ ORFDO FRQGLWLRQV ,Q FHUWDLQ FDVHV VHSDUDWH
UDFNVDUHDOVRDQRSWLRQ
3DJH7UDQVIRUPHU+DQGERRN
2LOZDWHUFRROHUV
:DWHUFRROLQJPD\EHDQDWWUDFWLYHDOWHUQDWLYHZKHQWUDQVIRUPHUVDUHLQVWDOOHGLQDFDYHVWDWLRQRU
LQKDUVKLQGXVWULDOHQYLURQPHQWVDVVWHHOZRUNVHWF%XWWKHFKRLFHKDVWREHHYDOXDWHGDJDLQVWWR
SXPSWKHFRROLQJRLORXWLQWKHDLUHQYLURQPHQWWRDQDLUFRROHU$QREYLRXVULVNZLWKZDWHUFRROLQJ
LQDWHPSHUDWHFOLPDWHLVIUHH]LQJ,QKRWWHUFOLPDWHVLWPD\PRUHFULWLFDOWRKDYHFRROLQJZDWHULQ
VXIILFLHQWTXDQWLWLHV
:DWHUFRROHUVDUHFRPSDFW7KH\DUHDOPRVWFRQYHQWLRQDOF\OLQGULFDOWXEXODUKHDWH[FKDQJHUVZLWK
UHPRYDEOHWXEHV6XFKKHDWH[FKDQJHUVDUHYHU\FRPPRQDQGUHSUHVHQWFODVVLFDOWHFKQRORJ\DQG
DUH VXSSOLHG IRU TXLWH PDQ\ GLIIHUHQW SXUSRVHV LQ WHFKQRORJ\ 0RUH UHFHQW GHVLJQV IRU LQVWDQFH
PHPEUDQHW\SHIODWKHDWH[FKDQJHUVKDYHKDUGO\EHHQXVHG
$FHQWUDOSUREOHPLVWKHSURSHUWLHVRIWKHFRROLQJZDWHUZLWKUHJDUGWRFRUURVLRQRIWKHPDWHULDOVLQ
ZDWHUWXEHV/HDNDJHRIZDWHULQWRWKHRLOV\VWHPLVIDWDOWRDWUDQVIRUPHUDQGVXFKV\VWHPVPXVW
EHPRQLWRUHGZLWKPHWLFXORXVFDUH7KHLQVWDOODWLRQVKRXOGEHDUUDQJHGVRWKDWWKHSUHVVXUHRQRLO
VLGHLVKLJKHUWKDQWKHSUHVVXUHRQZDWHUVLGHEXWWKLVPD\QRWDOZD\VEHSRVVLEOHWRVDIHJXDUG
&RUURVLRQ FDQ EH DSUREOHP &RROLQJZDWHU DQDO\VLV LVUHFRPPHQGHG LQ RUGHU WRVHOHFW WKH PRVW
VXLWDEOH PDWHULDOV LQ WKH FRROHU 6RSKLVWLFDWHG PDWHULDOV VXFK DV WLWDQLXP WXEH FRROHUV PD\ EH
XVHG
'HSRVLWLRQ KDV WR EH DYRLGHG E\ HQVXULQJ WKDW DQ DGHTXDWH UDWH RI ZDWHU IORZ LV PDLQWDLQHG EXW
DOORZLQJWKLVWREHFRPHH[FHVVLYHZLOOOHDGWRWXEHHURVLRQ
'RXEOHWXEH FRROHU PD\ EH DSSOLHG :LWK VXFK DQ DUUDQJHPHQW WKH RLO DQG ZDWHU FLUFXLWV DUH
VHSDUDWHGE\DQLQWHUVSDFHGVRWKDWDQ\IOXLGOHDNDJHZLOOEHFROOHFWHGLQWKLVVSDFHDQGZLOOUDLVH
DQDODUP
2LOSXPSV
&LUFXODWLRQSXPSVIRURLOFRROLQJHTXLSPHQWDUHVSHFLDOFRPSDFWWRWDOO\VHDOHGPRGHOV7KHPRWRU
LVLPPHUVHGLQWKHWUDQVIRUPHURLODQGWKHUHDUHQRVWXIILQJER[HV
7KHVRXQGOHYHORIWKHVHSXPSVLVORZFRPSDUHGWRWKHWUDQVIRUPHUVRXQGOHYHO
7UDQVIRUPHU+DQGERRN3DJH
92/7$*(5(*8/$7,21(48,30(17
7KHPDMRULW\RIDOOWUDQVIRUPHUVLQFRUSRUDWHVRPHPHDQVRIDGMXVWLQJWKHLUYROWDJHUDWLRE\DGGLQJ
RUUHPRYLQJWDSSLQJWXUQV
7KLV DGMXVWPHQW PD\ EH PDGH E\ DQ RQORDG WDSFKDQJHU RU E\ PHDQV RI DQ RIIFLUFXLW WDS
FKDQJHU RU E\ WKH VHOHFWLRQ RI EROWHG OLQN SRVLWLRQV ZLWK WKH WUDQVIRUPHU GLVFRQQHFWHG DQG
JURXQGHG
7KHGHJUHHRIVRSKLVWLFDWLRQRIWKHV\VWHPRIWDSVHOHFWLRQGHSHQGVRQWKHIUHTXHQF\ZLWKZKLFKLW
LVUHTXLUHGWRFKDQJHWDSVDQGWKHVL]HDQGLPSRUWDQFHRIWKHWUDQVIRUPHU
2II&LUFXLWWDSFKDQJHUV
7KH RIIFLUFXLW WDSFKDQJHU LV RI UDWKHU VLPSOH GHVLJQ JLYLQJ FRQQHFWLRQ WR D VHOHFWHG WDS LQ WKH
ZLQGLQJ $V WKH QDPH VD\V LW LV GHVLJQHG RQO\ WR EH RSHUDWHG RQO\ ZKHQ WKH WUDQVIRUPHU LV GH
HQHUJLVHG
7KHFRQWDFWSUHVVXUHPD\RFFXUWREHUHWDLQHGE\VRPHNLQGRIVSULQJDUUDQJHPHQWDQGWKHQVRPH
YLEUDWLRQ LV SRVVLEOH ,Q RIIFLUFXLW WDSFKDQJHUV RSHUDWLQJ RQ WKH VDPH WDS SRVLWLRQ IRU \HDUV WKH
FRQWDFWUHVLVWDQFHWKHQPD\VORZO\LQFUHDVHGXHWRORFDOGHJUDGDWLRQDQGR[LGDWLRQRIPDWHULDOLQ
WKHFRQWDFWSRLQW+HDWLQJZLOOWDNHSODFHUHVXOWLQJLQDEXLOGXSRIS\URO\WLFIRUPHGFDUERQZKLFK
ZLOO LQFUHDVH WKH FRQWDFW UHVLVWDQFH IXUWKHU DQG DOVR UHGXFH WKH FRROLQJ 8OWLPDWHO\ D UXQDZD\
VLWXDWLRQ LVUHDFKHG DQG WKH WUDQVIRUPHU ZLOO SUREDEO\ WULS RQJDVDFWXDWHG SURWHFWLRQRUZRUVH D
VWHSVKRUWFLUFXLWRFFXUV7RDYRLGWKLVLWLVYLWDOWKDWWKHWDSFKDQJHULVRSHUDWHGRIIFLUFXLWWKURXJK
LWV FRPSOHWH UDQJH D IHZ WLPHV GXULQJ UHJXODU URXWLQH PDLQWHQDQFH WR ZLSH WKH FRQWDFW VXUIDFHV
FOHDQEHIRUHUHWXUQLQJLWEDFNWRWKHVHOHFWHGWDSSLQJ
2IFRXUVHWKHVDPHDGYLFHLVYDOLGLIDQRQORDGWDSFKDQJHULVOHIWLQVHUYLFHEXWZLWKRXWRSHUDWLRQ
IRUDORQJSHULRG
3DJH7UDQVIRUPHU+DQGERRN
2QORDGWDSFKDQJHUV
7KH RQORDG WDSFKDQJHU KDV WR SURYLGH XQLQWHUUXSWHG FXUUHQW IORZ GXULQJ WKH WUDQVLWLRQ RSHUDWLRQ
IURPRQHWDSWRWKHRWKHU7KHFXUUHQWIORZPXVWEHPDLQWDLQHGXQLQWHUUXSWHGZLWKRXWSDUWLDOVKRUW
FLUFXLWLQJRIWKHWDSSHGZLQGLQJ
$V HDUO\ DV EHWZHHQ DQG DUUDQJHPHQWV ZHUH LQWURGXFHG IRU FKDQJHRYHU EHWZHHQ
WDSSLQJVRIWKHWUDQVIRUPHUZLWKRXWLQWHUUXSWLRQRIVXSSO\
7UDQVIRUPHU+DQGERRN3DJH
7KHRSHUDWLRQRIDQRQORDGWDSFKDQJHUFDQEHXQGHUVWRRGE\WZRLGHQWLILDEOHIXQFWLRQV,WLPSOLHV
D VZLWFKLQJ GHYLFH WKDW WUDQVIHUV WKH WKURXJKSXW SRZHU IURP RQH WDS RI WKH WUDQVIRUPHU WR DQ
DGMDFHQW RQH 'XULQJ WKLV RSHUDWLRQ WKH WZR WDSV ZLOO EH FRQQHFWHG WKURXJK ILWWHG WUDQVLWLRQ
LPSHGDQFH,QWKLVSKDVHWKHWZRWDSVZLOOVKDUHWKHORDGFXUUHQW7KHUHDIWHUWKHFRQQHFWLRQWRWKH
IRUPHU WDS ZLOO EH LQWHUUXSWHG DQG WKH ORDG KDV EHHQ WUDQVIHUUHG WR WKH QHZ WDS 7KH GHYLFH WKDW
SHUIRUPVWKLVVZLWFKLQJLVFDOOHGGLYHUWHUVZLWFK
7KHFRQQHFWLRQVWRWKHWZRWDSVWKDWLQYROYHWKHGLYHUWHUVZLWFKDUHPD\EHWUDQVIHUUHGRQHSRVLWLRQ
DORQJ WKH VHULHV RI SK\VLFDO WDSV RI WKH UHJXODWLQJ ZLQGLQJ IRU HDFK RSHUDWLRQ 7KLV LV WKH WDS
VHOHFWRUIXQFWLRQ7KHWDSVHOHFWLRQLVFRQGXFWHGZLWKRXWDQ\FXUUHQWUXSWXUH
$UDWKHULPSRUWDQWLPSURYHPHQWRIWDSFKDQJHUVUHVXOWHGIURPWKHLQYHQWLRQRIWKHIDVWDFWLQJIOLS
IORSGLYHUWHUVZLWFKQDPHGWKH-DQW]HQSULQFLSOHDIWHUWKHLQYHQWRU7KH-DQW]HQSULQFLSOHLPSO\WKDW
WKHVZLWFKFRQWDFWVDUHVSULQJORDGHGDQGWKH\IOLSRYHUIURPRQHSRVLWLRQWRDQHZZLWKRQO\DYHU\
VKRUWLQWHUYDORIFRQQHFWLRQEHWZHHQWKHWZRWDSVDQGWKURXJKWUDQVLWLRQUHVLVWRU
$QDOWHUQDWLYHWRWKHSULQFLSOHZLWKIDVWDFWLQJVZLWFKLQJVHTXHQFHDQGUHVLVWRUVLVWRXVHUHDFWRU,Q
DUHDFWRUW\SHWDSFKDQJHULWLVLQVWHDGPRUHGLIILFXOWWREUHDNWKHFLUFXODWLQJUHDFWLYHFXUUHQWDQG
WKLVZLOOUDWKHUOLPLWVWHSYROWDJHVEXWLWZLOOZRUNVZHOODWUHODWLYHO\KLJKFXUUHQWV7KLVFRPSDUHGWRD
IDVWRSHUDWLQJUHVLVWDQFHWDSFKDQJHUZKLFKFDQKDQGOHKLJKHUYROWDJHEXWQRWKLJKFXUUHQW7KLV
OHDGV WR UHDFWRU WDSFKDQJHU EHLQJ XVXDOO\ ORFDWHG RQ ORZ YROWDJH RI WKH WUDQVIRUPHU ZKLOH
UHVLVWDQFHWDSFKDQJHUZLOOEHFRQQHFWHGRQWKHKLJKYROWDJHVLGH
,Q D UHDFWRU W\SH WDSFKDQJHU WKH ORVVHV LQ WKH PLGSRLQW UHDFWRU GXH WR WKH ORDG FXUUHQW DQG WKH
VXSHULPSRVHGFLUFXODWLQJFXUUHQWEHWZHHQWKHWZRLQYROYHGWDSLVVPDOODQGWKHUHDFWRUFDQEHOHIW
SHUPDQHQWO\LQFLUFXLWEHWZHHQWKHP7KLVSURYLGHDQLQWHUPHGLDWHVWHSEHWZHHQWZRWDSVDQGWKLV
JLYHVWZLFHDVPDQ\ZRUNLQJSRVLWLRQVDVWKHQXPEHURIWDSVLQWKHZLQGLQJ
)URPWKH¶VWDSFKDQJHUVZLWKYDFXXPEUHDNHUVKDYHEHHQDYDLODEOH9DFXXPEUHDNHUVKDYH
ORZ FRQWDFW HURVLRQ DQG WKLV JLYHV WDSFKDQJHUV ZLWK LQFUHDVHG QXPEHU RI RSHUDWLRQ EHWZHHQ
QHFHVVDU\VHUYLFHV7KHGHVLJQLVKRZHYHUJHQHUDOO\EHFRPLQJPRUHFRPSOH[
$OVRH[SHULPHQWDOGHVLJQVRIWDSFKDQJHUVZKHUHWKHFKDQJHRYHUIXQFWLRQLVHIIHFWXDWHGE\SRZHU
VHPLFRQGXFWRU HOHPHQWV KDYH EHHQ LQ WKH PDUNHW 7KHVH GHVLJQV DOVR ZLWK WKH DLP RI UHGXFHG
VHUYLFHVLQWHUYDOV
,QUHVLVWRUW\SHWDSFKDQJHUVWKHGLYHUWHUVZLWFKLVHQFORVHGLQDFRQWDLQHUZLWKRLOVHSDUDWHGIURP
WKHRLOLQWKHWUDQVIRUPHU7KHRLOLQWKLVFRQWDLQHUZLOOEHYHU\FRQWDPLQDWHGLQGXHFRXUVHDQGPXVW
EH NHSW VHSDUDWH IURP WKH RLO V\VWHP RI WKH WUDQVIRUPHU LWVHOI DQG VKRXOG DOVR KDYH D FRPSOHWH
VHSDUDWHFRQVHUYDWRUYROXPHZLWKLWVRZQEUHDWKHU
7KHWDSVHOHFWRULVDFDJHRUDQLQVXODWLQJF\OLQGHUZLWKVHULHVRIFRQWDFWVWRZKLFKWDSVIURPWKH
UHJXODWLQJZLQGLQJDUHFRQQHFWHG,QVLGHWKHFDJHWZRFRQWDFWDUPVPRYHIURPVWHSWRVWHSDFURVV
WKH UHJXODWLQJ ZLQGLQJ %RWK DUPV DUH HOHFWULFDOO\ FRQQHFWHG WR WKH LQFRPLQJWHUPLQDOV RI GLYHUWHU
VZLWFK2QHDUPZLOOEHDWDFWXDOWDSSRVLWLRQDQGFDUU\WKHORDGFXUUHQWWKHRWKHUDUPLVXQORDGHG
DQGLVIUHHWRPRYHWRQH[WWRFRPHWDSSRVLWLRQ7KHVHOHFWRUFRQWDFWVQHYHUEUHDNDQ\FXUUHQWDQG
FDQEHVLWXDWHGLQWKHWUDQVIRUPHURLOLWVHOI
:KHQWKHIUHHDUPKDVIRXQGLWVSRVLWLRQWKHGLYHUWHUVZLWFKWUDQVIHUWKHORDGRYHU7KHRSHUDWLQJ
F\FOHVRIWKHGLYHUWHULVVKRZQLQ)LJXUH)ODJF\FOH
)ODJ F\FOH DULVH IURP WKH UHFWDQJXODU YHFWRU GLDJUDP RI WUDQVIRUPHU RXWSXW YROWDJH ZKHQ PRYLQJ
IURPRQHWDSSLQJWRDQDGMDFHQWRQH
3DJH7UDQVIRUPHU+DQGERRN
)ODJF\FOH
)LJXUH
D 7KHWDSFKDQJHUKDVFRPHIURPWDSDQGLVSUHVHQWO\FRQQHFWHGDWWDSDQGVKDOOFRQQHFW
WRWDS
E 6HOHFWRUDUP+PRYHVIURPWDSWRWDS
F 7KHGLYHUWHUVZLWFKHQJDJHVWKHUHVLVWRUWKHORDGFXUUHQWIURPWDSJRWKURXJK5\
G 6WHSDQGDUHVKRUWFLUFXLWHGWKURXJK5\SOXV5XWKHUHVLVWRUVDUHGLPHQVLRQHGWR
SUHYHQWDVKRUWFLUFXLWRIWKHORRSEXWDOVRWRNHHSDFFHSWDEOHYROWDJHGLVWXUEDQFH7KH
FLUFXODWLQJFXUUHQWLVLQWKHUDQJHDVWKHUDWHGORDGFXUUHQW
H 7KHGLYHUWHUEUHDNVWKHFRQQHFWLRQZLWKWDSDQGORDGFXUUHQWFRPHVIURPWDSWKURXJK
5X
I &KDQJHRYHUUHVLVWRULVE\SDVVHGDQGFRQQHFWLRQGLUHFWWRVWHSLVHVWDEOLVKHG
7DSFKDQJHUV IRU OLJKWHU GXW\ PRGHUDWH YROWDJHV WR HDUWK DQG RYHU WKH UHJXODWLQJ UDQJH DUH RI
VRPH PDQXIDFWXUHUV EXLOW LQ D VLPSOHU PDQQHU ,Q VXFK WDSFKDQJHUV ERWK WKH VHOHFWLRQ DQG
VZLWFKLQJDUHFDUULHGRXWRQWKHVDPHFRQWDFW7KHLQWHUPHGLDWHFRQWDFWVDQGWKHWUDQVLWLRQUHVLVWRU
DUH PRXQWHG RQ RQH WKH PRYLQJ DUP 7KH DUP PRYHV LQ UDSLG MHUNV DQG SDVVHV WKH VHULHV RI
FRQWDFWVWKDWDUHLQVWDOOHGDORQJDFLUFXODUDUFZKHQJRLQJIURPWDSFRQWDFWWRWKHQH[W$OVRLQWKLV
W\SHWKHF\FOHFRQVHTXHQWO\LQYROYHVDQLQWHUUXSWLRQRISRZHUZKLFKHQWDLOVDUFDQGFRQWDFWHURVLRQ
DQGWKHWDSFKDQJHUKRXVLQJKDVWREHFORVHGIURPWKHWUDQVIRUPHURLO
7DSFKDQJHUVRIVXFKGHVLJQLVUHIHUUHGWRDVVHOHFWRUVZLWFKW\SH
)ODJF\FOHLQDVHOHFWRUVZLWFKW\SH
)LJXUH
6XFK WDSFKDQJHU KDV DOVR EHHQ DYDLODEOH ZLWK D VLPSOHU WUDQVLWLRQ PRGH ZKLFK XVH RQO\ RQH
UHVLVWRU ,Q VXFK D VLQJOH UHVLVWRU W\SH WDSFKDQJHU WKH ORDG FXUUHQW DQG WKH UHVLVWRU FLUFXODWLQJ
FXUUHQWKDYHWREHDUUDQJHGWREHVXEWUDFWLYHZKLFKGLFWDWHVWKHSRZHUIORZGLUHFWLRQWKURXJKWKH
WUDQVIRUPHURUDWOHDVWUHGXFHGUDWLQJZLWKUHYHUVHSRZHUIORZ
7KHVLQJOHUHVLVWRUW\SHLVQDPHGWRIROORZDSHQQDQWF\FOH7KHWHUPVDULVHIURPWKHDSSHDUDQFH
RIWKHYHFWRUGLDJUDPVKRZLQJWKHFKDQJHLQRXWSXWYROWDJHRIWKHWUDQVIRUPHUZKHQPRYLQJIURP
RQHWDSSLQJWRWKHDGMDFHQWRQH
,QVDPHPDQQHUWKHGRXEOHUHVLVWRUW\SHLVQDPHGWRIROORZDIODJF\FOH7KHIODJF\FOHJLYHVQR
UHVWULFWLRQWRSRZHUIORZGLUHFWLRQ
7UDQVIRUPHU+DQGERRN3DJH
3HQQDQWF\FOH
)LJXUH
:KHQ RQO\ OLPLWHG UHJXODWLQJ UDQJH XS WR RI QRPLQDO YDOXH LV UHTXLUHG LW LV FRPPRQ WR
DUUDQJH WKH UHJXODWLQJ ZLQGLQJ IRU OLQHDU UHJXODWLRQ 7KLV PHDQV WKDW WKH LQGXFHG YROWDJH LQ WKH
UHJXODWLQJZLQGLQJLVDGGHGWRWKHYROWDJHLQWKHPDLQZLQGLQJ)RUODUJHUUHJXODWLRQUDQJHVRFDOOHG
SOXVPLQXV UHJXODWLRQ PD\ EH PRUH DGHTXDWH ,Q D SOXVPLQXV UHJXODWLRQ WKH WDSSHG ZLQGLQJ LV
FRQQHFWHGWRWKHPDLQZLQGLQJYLDDVHSDUDWHSOXVPLQXVVZLWFK7KLVVZLWFKSHUPLWVWKHLQGXFHG
YROWDJHLQWKHWDSSHGZLQGLQJWREHDGGHGWRRUVXEWUDFWHGIURPWKHYROWDJHLQWKHPDLQZLQGLQJ
7KHWKLUGDUUDQJHPHQWLVDFRDUVHILQHUHJXODWLRQZKHUHWKHYROWDJHUHJXODWLRQIXQFWLRQLVVSOLWLQWR
WZRZLQGLQJRQHIRUWKHFRDUVHVWHSDQGRQHIRUWKHILQHVWHSV
6RPHFRPSDULVRQVRIWKHWKUHHDUUDQJHPHQWV
•
•
•
•
•
$OOWKUHHQHHGWKHVDPHWRWDOQXPEHURIWXUQVLQWKHZLQGLQJV
/LQHDUQHHGGRXEOHQXPEHURIVWHSVLQDILQHZLQGLQJFRPSDUHGWRSOXVPLQXVRU
FRDUVHILQHZKLFKLVDGLVDGYDQWDJHZKHQODUJHUUHJXODWLRQUDQJH%RWKGXHWRWKH
GHVLJQRIWKHZLQGLQJDQGFRPSOH[LW\RIWKHWDSFKDQJHU
3OXVPLQXVQHHGRQHVHSDUDWHZLQGLQJOHVVFRPSDUHGWRFRDUVHILQH
&RDUVHILQHJLYHOHVVORDGORVVHVLQWKHPLQXVSDUWRIWKHUHJXODWLRQUDQJHFRPSDUHGWR
SOXVPLQXV
7KHSOXVPLQXVWDSFKDQJHUDQGWKHFRDUVHILQWDSFKDQJHUDUHDOPRVWHTXDOWKH
VHOHFWRULQERWKFRQWDLQVDFKDQJHRYHUVHOHFWRU
7KHUHDUHVHYHUDOGLIIHUHQWZD\VRIDUUDQJLQJWKHUHJXODWLRQZLWKUHJDUGWRWKHVL]HDQGWKHORFDWLRQ
RI WKH UHJXODWLRQ ZLQGLQJ $ UHJXODWLQJ ZLQGLQJ LV GLIILFXOW DQG H[SHQVLYH WR PDQXIDFWXUH DQG LW
UHSUHVHQWV DQ LQVXODWLRQ ULVN EHFDXVH WKRVH SDUWV WKDW DUH QRW FRQQHFWHG LQ FLUFXLW ZLOO RVFLOODWH
IUHHO\ZKHQWKHWUDQVIRUPHULVVXEMHFWHGWRRYHUYROWDJHVXUJHV7KHUHLVHYHU\UHDVRQWRPDNHWKH
UHJXODWLQJUDQJHDQGWKHUHJXODWLQJZLQGLQJDVVPDOODVSRVVLEOH
,Q KLJK YROWDJH V\VWHPV WUDQVIRUPHU WKH ZLQGLQJV DUH QRUPDOO\ <FRQQHFWHG 7KH ORFDWLRQ RI WKH
UHJXODWLQJZLQGLQJVFDQWKHQSUHIHUDEO\EHLQWKHYLFLQLW\RIWKHQHXWUDOSRLQW7KHLQVXODWLRQOHYHOWR
HDUWKDQGEHWZHHQSKDVHVLQWKHWDSFKDQJHUPD\WKHQEHORZ
7DS FKDQJHUV DUH SURYLGHG ZLWK FRXQWHU WKDW LQGLFDWHG WKH QXPEHU RI H[HFXWHG FKDQJHRYHU
RSHUDWLRQV DQG RI FRXUVH ZLWK DQ LQGLFDWRU IRU WKH DFWXDO WDSSLQJ WKDW LV FRQQHFWHG ,W LV RIWHQ
UHTXLUHGWKDWWKLVLQGLFDWLRQVKDOODOVREHUHPRWHO\DYDLODEOHLQWKHFRQWUROURRP
)RUWKHGULYLQJRIWKHWDSFKDQJHUWKHUHLVDQHHGIRUDX[LOLDU\PRWRUSRZHUDQGLQDGGLWLRQDX[LOLDU\
YROWDJHVIRUFRQWURODQGPRQLWRULQJFLUFXLWVDQGLQGLFDWRUV
7KH WDSFKDQJHU LV D PRYLQJ PHFKDQLVP DQG DFWXDOO\ WKH\ DUH WKH RQO\ YLWDO SDUWV RI WKH
WUDQVIRUPHUWKDWGRPRYHDQGLWVKRXOGEHVHUYLFHGUHJXODUO\
3DJH7UDQVIRUPHU+DQGERRN
$XWRPDWLFYROWDJHUHJXODWLRQ
7KHWDSFKDQJHULVLQVWDOOHGWRPHHWYROWDJHYDULDWLRQLQWKHV\VWHPVFRQQHFWHGWRWKHWUDQVIRUPHU
,WLVQRWFHUWDLQWKDWWKHJRDOZRXOGEHWRPDLQWDLQDFRQVWDQWVHFRQGDU\YROWDJHDWDOOWLPHV7KH
RXWJRLQJQHWZRUNPD\DOVRKDYHYROWDJHGURSDQGWKLVPD\KDYHWREHFRPSHQVDWHGIRUDVZHOO
7KHHTXLSPHQWIRUFRQWURORIWKHWDSFKDQJHUGRHVQRWEHORQJWRWKHWDSFKDQJHUDVVXFKEXWWRWKH
UHOD\ V\VWHP LQ WKH VWDWLRQ ,Q SULQFLSOH WKH WDSFKDQJHU MXVW UHFHLYHV RUGHUV UDLVH RU ORZHU
+RZHYHUFHUWDLQIXQFWLRQVIRUFRRUGLQDWLRQEHWZHHQGLIIHUHQWWUDQVIRUPHUVLQWKHVDPHVWDWLRQDUH
SDUW RI WKH WDSFKDQJHU WHFKQRORJ\ :KHQ GLIIHUHQW WUDQVIRUPHUV DUH GLUHFWO\ SDUDOOHO FRQQHFWHG
WKHLUWDSFKDQJHUVKRXOGPRYHLQVWHSZLWKHDFKRWKHU7KLVLVDUUDQJHGLQVXFKDZD\WKDWRQHLV
ZLUHGDVDPDVWHUDQGWKHRWKHUDVDVODYH$EVROXWHO\VLPXOWDQHRXVRSHUDWLRQZLOOQRWEHDFKLHYHG
EXWWKHUHLVDVPDOOLQWHUYDOZLWKFLUFXODWLQJFXUUHQWEHWZHHQWKHWZRWUDQVIRUPHUV7KLVLVKRZHYHU
ZLWKRXWDQ\SUDFWLFDOLPSRUWDQFH
$&&(6625,(6
7\SHVRIDFFHVVRULHV
*DVDFWXDWHGUHOD\
,Q WKH FRQQHFWLRQ WXEH EHWZHHQ WKH WDQN DQG WKH FRQVHUYDWRU WKHUH LV QRUPDOO\ D JDVDFWXDWHG
UHOD\7KHUHOD\KDVWZRIXQFWLRQV
&ROOHFWVIUHHJDVEXEEOHVRQWKHLUZD\XSWRFRQVHUYDWRUIURPWKHWUDQVIRUPHUWDQN
6HQVLWLYHZKHQWKHRLOIORZEHWZHHQWDQNDQGFRQVHUYDWRUH[FHHGVDSUHVHWYDOXH
$QDOWHUQDWHQDPHIRUWKLVJDVDFWXDWHGUHOD\LV%XFKKRO]UHOD\DIWHULWVLQYHQWRU
)UHHJDVPD\EHDQLQGLFDWLRQRIDQLQFLSLHQWIDXOWZLWKLQWKHWUDQVIRUPHU7KHJDVLVFROOHFWHGLQ
WKHJDVUHOD\7KHJDVZLOOGLVSODFHWKHOLTXLGLQWKHUHOD\DQGDIORDWZLOOVLQNGRZQ7KHSURWHFWLRQ
LVWKHUHIRUHDUUDQJHGLQVXFKDZD\WKDWZKHQDPLQRUDPRXQWRIJDVLVFROOHFWHGLQJDVUHOD\DQ
DODUP VLJQDO LV DFWXDWHG ,I DQ DGGLWLRQDO DPRXQW RI JDV LV FROOHFWHG WULSSLQJ FRQWDFW PD\ EH
DFWXDWHG
:KHQDVHULRXVIDXOWDVDUFLQJRFFXUVLQWKHWUDQVIRUPHUWKHJDVHYROXWLRQZLOOSXVKDEXUVWRIRLOXS
WRZDUGV WKH FRQVHUYDWRU YHVVHO DQG D IODS LV DFWXDWHG 6XGGHQ LQFUHDVH LQ RLO IORZ LV QRUPDOO\
MXGJHGWREHDVHUYHLQGLFDWLRQDQGWKHVLJQDOIURPWKHIODSLVWKHQZLUHGWRWULSSLQJFLUFXLW
5HOD\ZLWKRQO\RQHRIWKHWZRIXQFWLRQVLVXWLOL]HG)RULQVWDQFHKHUPHWLFDOO\VHDOHGWUDQVIRUPHUV
ZLWKRXW JDV FXVKLRQ KDV D VPDOO FKDPEHU RQ WRS RI WKH FRYHU ZLWK D IORDW ZKLFK ZLOO DFWXDWH D
FRQWDFW LI JDV LV FROOHFWHG 7KLV VLPSOH UHOD\ FDQ DOVR EH XVHG RQ VPDOO WUDQVIRUPHUV HYHQ LI D
FRQVHUYDWRU H[LVWV $ UHOD\ RQO\ VHQVLWLYH WR RLO IORZ PD\ EH XVHG EHWZHHQ WDS FKDQJHU GLYHUWHU
VZLWFKFKDPEHUDQGLWVFRQVHUYDWRUWDQN
7HPSHUDWXUHLQGLFDWLRQ
7KHUPRPHWHUVDUHQRUPDOO\LQVWDOOHGIRUPHDVXUHPHQWRIWRSRLOWHPSHUDWXUHDQGZLQGLQJKRWVSRW
LQGLFDWLRQ
7KH WRS RLO WHPSHUDWXUH FDQ EH PHDVXUHG GLUHFWO\ E\ VHQVRU LQ WKH RLO WRS OD\HU LQ WKH WDQN )RU
UHPRWHLQGLFDWLRQRIWRSRLOD3WHOHPHQWFDQEHDUUDQJHGDVWKHWKHUPRPHWHUVHQVRU
7KHPHDVXUHPHQWRIZLQGLQJWHPSHUDWXUHLVFDUULHGRXWLQDQLQGLUHFWZD\7KHZLQGLQJKRWVSRWLV
DVVXPHG WR EH QHDU WKH ZLQGLQJ WRS HQG ZKHUH LW LV VXUURXQGHG E\ RLO DW WRS RLO WHPSHUDWXUH
)XUWKHU WKH WHPSHUDWXUH JUDGLHQW EHWZHHQ ZLQGLQJ KRW VSRW DQG WKH WRS RLO LV GHSHQGHQW RQ WKH
ORVVHVLQWKHZLQGLQJZKLFKLQWXUQDUHSURSRUWLRQDOWRWKHVTXDUHRIWKHFXUUHQW7KHWKHUPRPHWHU
WKHUHIRUH PHDVXUHV WKH WRS RLO WHPSHUDWXUH WR ZKLFK LW DGGV WKH WHPSHUDWXUH GLIIHUHQFH RI WKH
ZLQGLQJWRVXUURXQGLQJRLO
7KHZLQGLQJWKHUPRPHWHULVWKHQDUUDQJHGDVDVHQVRULQVLGHDUHVLVWRULPPHUVHGLQWKHWRSRLO$
FXUUHQW WUDQVIRUPHU ZKLFK UHIOHFWV WKH ZLQGLQJ FXUUHQW IHHGV WKH UHVLVWRU $ VKXQW DFURVV WKH
UHVLVWRULVDGMXVWHGWRJLYHDWHPSHUDWXUHFRQWULEXWLRQHTXDOWRWKHZLQGLQJJUDGLHQWDVFDOFXODWHGRU
PHDVXUHGGXULQJKHDWUXQWHVW
)RUUHPRWHLQGLFDWLRQRIZLQGLQJKRWVSRWD3WHOHPHQWFDQEHDUUDQJHGDVWKHWKHUPRPHWHU
VHQVRU
6RPH ZLQGLQJ WKHUPRPHWHU GHVLJQV SHUIRUP WKH ZLQGLQJ JUDGLHQW DGGLWLRQ LQ WKH WKHUPRPHWHU
GLVSOD\XQLWXVLQJRQO\WKHWRSRLOWHPSHUDWXUHVHQVRUDQGWKHZLQGLQJFXUUHQWWUDQVIRUPHURXWSXW
7UDQVIRUPHU+DQGERRN3DJH
7KH WKHUPRPHWHUV DUH SURYLGHG ZLWK HOHFWULFDO FRQWDFWV $W D SUH VHW KLJK WHPSHUDWXUH DQ DODUP
VLJQDO LV JLYHQ $ SUH VHW FULWLFDO WHPSHUDWXUH UHVXOW LQ D WULSSLQJ VLJQDO WR WKH WUDQVIRUPHU FLUFXLW
EUHDNHUV$GGLWLRQDOHOHFWULFDOFRQWDFWVPD\EHXVHGIRUFRQWURORIIRUFHGFRROLQJHTXLSPHQW
'HYLFH IRU GLUHFW PHDVXUHPHQW RI FRQGXFWRU WHPSHUDWXUH E\ ILEUH RSWLFV SODFHG GLUHFWO\ LQ WKH
ZLQGLQJVDWVHOHFWHGVSRWVLVDYDLODEOH
)RUGU\W\SHWUDQVIRUPHUVRSHQWHPSHUDWXUHLQGLFDWRUVDUHXWLOL]HGDWWKHWRSDUHD
%XLOWLQFXUUHQWWUDQVIRUPHUV
&XUUHQW WUDQVIRUPHUV FDQ EH DUUDQJHG LQVLGH WUDQVIRUPHU RIWHQ DURXQG WKH HDUWKHG VOHHYH RI WKH
EXVKLQJRLOVLGHEXWDOVRRQORZYROWDJHEXVEDUV7KLVLVDPDWWHURIFRVWDQGVSDFHDVZHOODV
VDIHW\%\WKLVDUUDQJHPHQWDQXPEHURIVHSDUDWHFXUUHQWWUDQVIRUPHUVLQWKHVZLWFK\DUGZLWKERWK
H[WHUQDODQGLQWHUQDOLQVXODWLRQIRUKLJKVHUYLFHYROWDJHPD\EHDYRLGHG
,QVSHFLDOFDVHVZLWKHOHYDWHGUHTXLUHPHQWVLWPD\QRWEHSRVVLEOHWRSURYLGHDGHVLJQDURXQGWKH
EXVKLQJWDLORURQDEXVEDUZKHUHFRQFHSWXDORQO\RQHVLQJOHSULPDU\WXUQFDQEHUHDOL]HG
'HK\GUDWLQJEUHDWKHUV
,W LV QHFHVVDU\ WR H[FOXGH PRLVWXUH IURP WKH DLU VSDFH DERYH WKH FRQVHUYDWRU RLO OHYHO LQ RUGHU WR
PDLQWDLQWKHGU\QHVVRIWKHWUDQVIRUPHURLO7KLVVSDFHLVYHQWHGWKURXJKDGHYLFHFRQWDLQLQJDGU\LQJ
DJHQWXVXDOO\VLOLFDJHO7KHSURSHUW\RIVLOLFDJHOLVLWVKLJKDEVRUSWLRQSRZHURIKXPLGLW\7KLVLVWRWDO
XQWLOLWKDVDEVRUEHGZDWHUIRUDERXWRILWVZHLJKWVDWXUDWLRQLVUHDFKHGZKHQLWKDVDEVRUEHG
WRRILWVZHLJKW8QWLOUHFHQWO\WKHVLOLFDJHOKDVEHHQLPSUHJQDWHGZLWKFREDOWFKORULGHDVFRORXU
LQGLFDWRU &REDOW FKORULGH LPSUHJQDWHG VLOLFD JHO FKDQJHV IURP EOXH WR SLQN ZKHQ LW LV DERXW KDOI
VDWXUDWHG ZLWK ZDWHU 1RZ DQ HQYLURQPHQWDOO\ IULHQGO\ RUJDQLF FRORXU LQGLFDWRU UHSODFHV WKLV KHDY\
PHWDODGGLWLYH7KLVQHZW\SHRIVLOLFDJHOVKRZVDQDOWHUDWLRQIURPRUDQJHWRFRORXUOHVV
:KHQWKHPRLVWXUHFRQWHQWRIWKHVLOLFDJHOEHFRPHVH[FHVVLYHLQGLFDWHGE\WKHFKDQJHLQFRORXU
RIPRUHWKDQRIWKHFRQWHQWLWVDELOLW\WRH[WUDFWPRLVWXUHLVUHGXFHGDQGLWLVUHFRPPHQGHGWKDW
LW EH UHSODFHG E\ D IXUWKHU FKDUJH RI GU\ PDWHULDO 'U\LQJ LQ DQ RYHQ ZLOO UHDFWLYDWH WKH PRLVWXUH
VDWXUDWHGJHODQGWKHFRORXUZLOOUHYHUW
$ UHIULJHUDWLRQ EUHDWKHU FDQ EH DQ DOWHUQDWLYH RQ ODUJH RU LPSRUWDQW XQLWV DOVR ZKHQ RSHUDWLQJ LQ
YHU\ KXPLG FOLPDWHV 7KH UHIULJHUDWLRQ EUHDWKHU IUHH]HGULHV WKH DLU YHQWLQJ LQWR WKH FRQVHUYDWRU
7KHDLULQFRQVHUYDWRURYHUWKHRLOZLOODOVRFLUFXODWHYLDUHYHUVHFRQYHFWLRQWKURXJKWKHUHIULJHUDWLRQ
GHYLFHZKHWKHUWKHWUDQVIRUPHULVEUHDWKLQJRUQRWVRWKLVDLULVFRQWLQXDOO\GULHGLQVHUYLFH
2LOSUHVHUYDWLRQV\VWHPV
0RVWFRPPRQLVWKHRSHQFRQVHUYDWRUWDQNZKHUHDLUVSDFHDERYHWKHRLOOHYHOLVYHQWHGWKURXJKD
GHKXPLGLILHUXQLW
7KHWUDQVIRUPHUFRQVHUYDWRUWDQNFDQEHSURYLGHGZLWKDQDLUEDJV\VWHP$V\QWKHWLFUXEEHUEDJ
RFFXSLHV WKH VSDFH DERYH RLO 7KH LQWHULRU RI WKH EDJ LV WKHQ FRQQHFWHG WR DWPRVSKHUH VR LW FDQ
EUHDWKH LQ DLU ZKHQ WUDQVIRUPHU FRROV DQG WKH RLO YROXPH LV UHGXFHG DQG EUHDWKH RXW ZKHQ
WUDQVIRUPHUKHDWVXS
$YDULDWLRQLVDFRQVHUYDWRUKRUL]RQWDOO\GLYLGHGE\DPHPEUDQHRUGLDSKUDJPV\VWHPZKLFKDOORZV
IRU H[SDQVLRQ DQG FRQWUDFWLRQ RI WKH RLO ZLWKRXW DFWXDOO\ DOORZLQJ WKLV WR FRPH LQWR GLUHFW FRQWDFW
ZLWKWKHH[WHUQDODLU
7KHVSDFHDERYHRLOLQWKHFRQVHUYDWRUWDQNFDQEHILOOHGZLWKQLWURJHQ7KLVFDQEHSURYLGHGIURPD
F\OLQGHU RI FRPSUHVVHG JDV YLD D SUHVVXUHUHGXFLQJ YDOYH :KHQ WUDQVIRUPHU EUHDWKV LQ WKH
SUHVVXUHUHGXFLQJYDOYHDOORZVPRUHQLWURJHQWREHUHOHDVHG:KHQWKHYROXPHLQFUHDVHVQLWURJHQ
LVYHQWHGWRDWPRVSKHUHE\PHDQVRIDYHQWYDOYH
7R PLQLPL]H WKH XVH RI QLWURJHQ D FHUWDLQ VSDQ LQ SUHVVXUH FDQ EH VHW EHWZHHQ ILOOLQJ LQ DQG
EOHHGLQJRXWQLWURJHQ
7KH WUDQVIRUPHUV FDQ EH KHUPHWLFDOO\ VHDOHG )RU VPDOOHU RLO ILOOHG GLVWULEXWLRQ WUDQVIRUPHUV D
IOH[LEOH FRUUXJDWHG WDQN FDQ WDNH XS DOO WKH H[SDQVLRQ RI RLO 2WKHU YLFH LWV QHFHVVDU\ WR SURYLGH
VSDFHDERYHRLOLQWKHWUDQVIRUPHUWDQNILOOHGZLWKHLWKHUGU\DLURUQLWURJHQWRDFWDVDFXVKLRQIRU
H[SDQVLRQDQGFRQWUDFWLRQRIWKHRLO
6RPHFRPELQDWLRQVKDYHDOVREHHQSUDFWLFHG7KHWUDQVIRUPHUWDQNFDQEHWRWDOO\ILOOHGZLWKRLODQG
WKHQ HTXLSSHG ZLWK DQ HQODUJHG FRQVHUYDWRU WDQN ZLWK HQRXJK YROXPH IRU RLO H[SDQVLRQ DQG WKH
QHFHVVDU\ JDV FXVKLRQ 7KH JDV FXVKLRQ FDQ EH H[WHQGHG E\ DQ H[WUD WDQN PD\ EH DW JURXQG
OHYHO 7R OLPLW WKH YROXPH RI WKH JDV FXVKLRQ LW FDQ DOORZ WR EUHDWK WR WKH DWPRVSKHUH DW VHW
PLQLPXPDQGPD[LPXPLQWHUQDOSUHVVXUHV
3DJH7UDQVIRUPHU+DQGERRN
2LOOHYHOLQGLFDWRUV
2LO OHYHO LQGLFDWRUV DUH XVHG WR VKRZ WKH RLO OHYHO LQ WKH FRQVHUYDWRU WDQN QRUPDOO\ DV D GLDO
LQVWUXPHQW SODFHG GLUHFWO\ RQ WKH FRQVHUYDWRU WDQN 2Q ODUJH WUDQVIRUPHUV WKH VL]H RI WKH GLDO LV
DGDSWHGWREHUHDGDEOHIURPJURXQGOHYHO2LOOHYHOLQGLFDWRUVIRUUHPRWHLQGLFDWLRQDWWKHJURXQG
OHYHODUHDYDLODEOH
7KHLQGLFDWRUPD\EHHTXLSSHGZLWKVZLWFKHVIRUKLJKDQGORZRLOOHYHO
3UHVVXUHUHOLHIGHYLFHV
$ IODVK RYHU RU D VKRUW FLUFXLW RFFXUULQJ LQ RLO ILOOHG WUDQVIRUPHU LV XVXDOO\ DFFRPSDQLHG E\ DQ
RYHUSUHVVXUHLQWKHWDQNGXHWRJDVEHLQJIRUPHGE\WKHGHFRPSRVLWLRQDQGWKHHYDSRUDWLRQRIWKH
RLO 7KH SUHVVXUH UHOLHI GHYLFH LV DLPHG WR OLPLW WKH WDQN RYHUSUHVVXUH RQ DQ LQWHUQDO IDXOW DQG
WKHUHE\ UHGXFH WKH ULVN IRU UXSWXUH RI WKH WDQN DQG XQFRQWUROOHG VSLOO RI RLO ZKLFK PLJKW DOVR
DJJUDYDWHDILUHDVVRFLDWHGZLWKWKHIDXOW/RZPDVVRIWKHYDOYHGLVFSOXVORZVSULQJUDWHRIFORVLQJ
VSULQJVSHUPLWIDVWDQGZLGHRSHQLQJ7KHYDOYHQRUPDOO\FORVHVDJDLQZKHQWKHRYHUSUHVVXUHLV
UHOHDVHG
7KHSUHVVXUHUHOLHIGHYLFHLVWRVRPHH[WHQWFRQWURYHUVLDO7KHTXHVWLRQLVZKHWKHULWZLOORSHUDWH
VDWLVIDFWRULO\ 0DQ\ FODLP WKDW GXULQJ VHYHUH WUDQVIRUPHU IDXOWV DQG LI WKH GLVWDQFH IURP WKH IDXOW
ORFDWLRQLQVLGHWKHWDQNWRWKHYDOYHLVQRWH[WUHPHO\VKRUWDQGGLUHFWWKHWDQNZLOOUXSWXUHDQ\KRZ
6XGGHQSUHVVXUHUHOLHIGHYLFHV
7KHVXGGHQSUHVVXUHUHOD\LVDLPHGWRSLFNXSWKHRLOSUHVVXUHZDYHLQWKHWUDQVIRUPHUWDQNZKHQ
DVHULRXVIDXOWRFFXUV7KHGHYLFHLVDEOHWRGLVWLQJXLVKEHWZHHQUDSLGDQGVORZUDWHVRISUHVVXUH
ULVH DQG ZLOO WULS D VZLWFK LI SUHVVXUH LQFUHDVH IDVWHU WKDQ D VSHFLILHG UDWH ,W SHUPLWV DQ HDUO\
GHWHFWLRQ RI D IDXOW LQVLGH WKH WUDQVIRUPHU DQG WKXV HQDEOHV D IDVW WULSSLQJ RI WKH WUDQVIRUPHU ,Q
WUDQVIRUPHUZLWKRXWVHSDUDWHFRQVHUYDWRUWDQNWKLVGHYLFHFDQVXEVWLWXWHWKHVXGGHQLQFUHDVHLQRLO
IORZIXQFWLRQRIDJDVDFWXDWHGUHOD\
2YHUYROWDJHSURWHFWLRQGHYLFHV
,QWHUQDORYHUYROWDJHSURWHFWLRQ
,QVRPHKLJKYROWDJHUHJXODWLQJZLQGLQJV\VWHPZLWKODUJHUHJXODWLQJUDQJHRULQDXWRKLJKYROWDJH
UHJXODWLQJWUDQVIRUPHUVWKHGHVLJQHUPD\ILQGLWQHFHVVDU\WRSURWHFWWKHUHJXODWLQJZLQGLQJV\VWHP
E\EXLOWLQRYHUYROWDJHSURWHFWLQJHOHPHQWVFODPSLQJSDUWVRIWKHZLQGLQJV/DGGHUVRI=Q2 ]LQN
R[LGH YDULVWRUVHOHPHQWVQRUPDOO\DUUDQJHWKLV
([WHUQDORYHUYROWDJHSURWHFWLRQ
7UDQVIRUPHU WHUPLQDOV KDYH DOZD\V WR EH RYHU YROWDJH SURWHFWHG 7KH VLPSOHVW ZD\ LV E\ VSDUN
JDSVRQWKHEXVKLQJV%XWVSDUNJDSVDVWKHRQO\RYHUYROWDJHSURWHFWLRQRIDWUDQVIRUPHUVKRXOG
EHOLPLWHGWRORZHUV\VWHPYROWDJHVDQGDWOHVVLPSRUWDQWSDUWVRIWKHQHWZRUN,WLVUHFRPPHQGHG
WRPLQLPLVHWKHJDSGLVWDQFHWRDFKLHYHRSWLPDOSURWHFWLRQRIWKHWUDQVIRUPHU5HFRPPHQGHGDUF
KRUQJDSGLVWDQFHGHSHQGLQJRIWUDQVIRUPHU%,/LVVHWLQIROORZLQJWDEOH
6\VWHPYROWDJH
%,/
'LVWDQFH
N9
N9
PP
7KHLQWHQWLRQRIXVLQJRQO\VSDUNJDSVRYHUYROWDJHSURWHFWLRQRIDWUDQVIRUPHUVKRXOGEHVWDWHGLQ
WKHWHFKQLFDOVSHFLILFDWLRQ
%HWWHUSURWHFWLRQLVDFKLHYHGE\VXUJHDUUHVWRUVORFDWHGFORVHWRWKHWHUPLQDOVDVSRVVLEOHGLUHFWRQ
WKH WUDQVIRUPHU WDQN RU DGMDFHQW WR WKH WUDQVIRUPHU $OVR WKH JURXQG FRQQHFWLRQ EHWZHHQ WKH
DUUHVWRUSDGDQGWKHWUDQVIRUPHUWDQNVKRXOGEHDVVKRUWDQGGLUHFWDVSRVVLEOH
,I RYHU YROWDJH SURWHFWLRQ KDV WR EH VLWXDWHG VRPH GLVWDQFH DSDUW IURP WUDQVIRUPHU GXH WR IRU
LQVWDQFHGLUHFW FRQQHFWLRQ WR 6) VZLWFKJHDU RU GLUHFW FDEOHFRQQHFWLRQ WKLV KDV WR EH WDNHQ LQWR
FRQVLGHUDWLRQZKHQVHOHFWLQJWUDQVIRUPHULQVXODWLRQOHYHO
6HHDOVRVHFWLRQSDJH
7UDQVIRUPHU+DQGERRN3DJH
7UDQVSRUWZKHHOVVNLGV
,WLVQRUPDOO\QRWSUDFWLFDOWROLIWODUJHUXQLWVE\FUDQHGLUHFWWRILQDOSRVLWLRQRQIXQGDPHQWLWKDYHLQ
VRPHZD\WREHPRYHGIURPWKHYHKLFOHWRWKHSDG,IDFDVWLQUDLOVV\VWHPH[LVWEHWZHHQXQORDG
DUHDDQGILQDOSRVLWLRQWKHXQLWPD\EHHTXLSSHGZLWKZKHHOVDOORZLQJLWWREHUROOHGLQGHJUHHV
WXUQLQWUDQVSRUWGLUHFWLRQFDQEHDUUDQJHGE\ELGLUHFWLRQDOZKHHOV7KHXQLWLVMDFNHGXSDQGWKH
ZKHHOV DUH WXUQHG ,Q SRVLWLRQ WKH XQLW FDQ EH OHIW RQ LWV ORFNHG ZKHHOV RU WKH ZKHHOV FDQ EH
UHPRYHG DQG UHSODFHG E\ VXSSRUW EORFNV RU WKH XQLW FDQ EH ORZHUHG GRZQ GLUHFWO\ RQ WKH
IXQGDPHQW
,IQRUDLOV\VWHPH[LVWVDWHPSRUDU\V\VWHPRIQRUPDOO\IODWEHDPVLVDUUDQJHGDQGWKHXQLWLVSXOOHG
GLUHFWO\LQSRVLWLRQRQJUHDVHGEHDPVRUE\KHOSRIFDWHUSLOODUWUDFNV
:KHQLQSRVLWLRQWKHXQLWPD\EHZHOGHGWRWKHIRXQGDWLRQ,WPD\DOVREHSODFHGRQYLEUDWLRQSDGV
WRUHGXFHWKHVRXQGWUDQVPLVVLRQWRWKHIRXQGDWLRQ
+RZ WR WUDQVSRUW DQG SRVLWLRQ WKH XQLW RQWR WKH IRXQGDWLRQ KDV WR EH FODULILHG DW DQ HDUO\ VWDJH
EHWZHHQWKHSXUFKDVHUDQGWKHPDQXIDFWXUHU$OVRWREHFODULILHGDUHWKDWWUDQVSRUWEHDPVMDFNLQJ
SRLQWV ERWK DW WKH WUDQVIRUPHU DQG DW WKH IRXQGDWLRQ DV ZHOO DV KDXOLQJ KRRNV KDYH FRUUHFW
GLPHQVLRQVDQGDUHLQWKHEHVWSRVLWLRQ
&RPEXVWLEOH*DV'HWHFWRU
7KHFRPEXVWLEOHJDVGHWHFWRULQGLFDWHVK\GURJHQLQWKHRLO7KHK\GURJHQLVSLFNHGXSWKURXJKD
GLDO\WLFPHPEUDQH7KLVV\VWHPJLYHVDQHDUO\LQGLFDWLRQRIVORZJDVJHQHUDWLRQEHIRUHIUHHJDVLQ
RLOVWDUWVEXEEOLQJWRZDUGVWKHJDVDFFXPXODWLRQUHOD\,WPD\EHXVHGLQDGGLWLRQWRDJDVDFWXDWHG
UHOD\ EHFDXVH LW JLYHV HDUOLHU ZDUQLQJ ,Q WUDQVIRUPHUV ZLWKRXW VHSDUDWH FRQVHUYDWRU WDQNV WKLV
GHWHFWRUVXEVWLWXWHWKHJDVDFFXPXODWLRQIXQFWLRQRIDJDVDFWXDWHGUHOD\
)ORZLQGLFDWRU
)RUWKHFRQWURORIWKHRLOIORZRXWRIWKHSXPSVRQWUDQVIRUPHUZLWKIRUFHGRLOFRROLQJHTXLSPHQWRLO
IORZLQGLFDWRUVDUHLQVWDOOHG7KHLQGLFDWRULVRIWHQEDVHGRQDPHWKRGRIPHDVXULQJWKHSUHVVXUH
GLIIHUHQFHDFURVVDQREVWDFOHLQWKHRLOIORZ
)ORZLQGLFDWRUVDUHDOVRXVHGLQWKHZDWHUIORZRIZDWHUFRROHGWUDQVIRUPHUV
7KHLQGLFDWRUVDUHQRUPDOO\HTXLSSHGZLWKDQDODUPVZLWFK,WFDQDOVRLQFOXGHDGLDO
3RZHUWUDQVIRUPHUDQGRLOLPPHUVHGUHDFWRUDFFHVVRULHV
0LQLPXPDFFHVVRULHV
*DVDFWXDWHGUHOD\ZLWKDODUPDQGWULS
7RSRLOWKHUPRPHWHUZLWKDODUPDQGWULS
2LOOHYHOLQGLFDWRUZLWKDODUPDWKLJKDQGORZOHYHO
,I2/7&
7DSFKDQJHUSURWHFWLRQGHYLFHZLWKWULS
,IRLOIRUFHGFRROLQJ
2LOIORZLQGLFDWRUZLWKDODUP
2SWLRQDO
:LQGLQJKRWVSRWWKHUPRPHWHUZLWKDODUPDQGWULS
3DJH7UDQVIRUPHU+DQGERRN
2QOLQHPRQLWRUV\VWHPV
:LWKLQ$%%GLIIHUHQWRQOLQHPRQLWRULQJV\VWHPVIRUGLIIHUHQWSXUSRVHVDUHDYDLODEOH
7KHUHLVRQHV\VWHPIRUUHFRUGLQJRIWUDQVLHQWYROWDJHVHJFDXVHGE\RSHUDWLRQVRIFLUFXLWEUHDNHUV
%\ XVLQJ WKLV V\VWHP GDQJHURXV VLWXDWLRQV FDXVHG E\ RYHUYROWDJHV FDQ EH UHYHDOHG 7KH V\VWHP
JLYHVLQIRUPDWLRQDERXWGLIIHUHQWNLQGVRIRYHUYROWDJHVDQGFRUUHFWLYHPHDVXUHVFDQEHWDNHQ
2WKHU V\VWHPV DYDLODEOH DUH VXUYHLOODQFH V\VWHPV WKDW FRQWLQXRXVO\ UHFRUG VRPH NH\ SDUDPHWHUV
YLDVHQVRUV7KHVHSDUDPHWHUVDUHDOOHVVHQWLDOWRGHWHUPLQHWKHFRQGLWLRQRIWKHWUDQVIRUPHUDQG
WR LGHQWLI\ SRVVLEOH IDXOWV 6XFK V\VWHPV ZRUN ZLWK PRGHOV ZKLFK JHW WKHLU LQSXW YDOXHV IURP WKH
VHQVRUV 7KH PRGHOV DUH DGYDQFHG FDOFXODWLRQ DOJRULWKPV EDVHG RQ VWDQGDUGV GHVLJQ DQG $%%
NQRZOHGJHWKDWFRPSDUHWKHRXWSXWZLWKSUHVHWOLPLWV$VPHQWLRQHGWKHLQSXWYDOXHVWRWKHPRGHOV
FRPHIURPWKHVHQVRUV7KHPRVWHVVHQWLDOSDUDPHWHUVPHDVXUHGDUH
•
•
•
•
•
•
•
.H\JDVHVLQRLO
:DWHUFRQWHQWLQRLO
7HPSHUDWXUHV
/RDGFXUUHQWV
/LQHYROWDJHV
3DUWLDOGLVFKDUJHV 3' 'LVVLSDWLRQSRZHUIDFWRULQEXVKLQJV
7KHPRGHOVDYDLODEOHDUHDVIROORZV
•
•
•
•
•
•
•
&RQWLQXRXVFDOFXODWLRQRIORDG
:LQGLQJKRWVSRWFDOFXODWLRQ
,QVXODWLRQDJHLQJFRQVXPHGOLIHWLPH
2QORDGWDSFKDQJHUFRQWDFWZHDUDQGWDSSRVLWLRQWUDFNLQJ
0RLVWXUHDQDO\VLVPRLVWXUHLQRLOSDSHUEXEEOLQJWHPSHUDWXUH
&RROLQJHIILFLHQF\
&RROLQJFRQWURO
,QDGGLWLRQPDQXDOPRGHOVIRUFDOFXODWLRQJDVDQDO\VLVEDVHGRQXVHULQSXWDUHDYDLODEOH
7UDQVIRUPHU+DQGERRN3DJH
'LVWULEXWLRQWUDQVIRUPHUDFFHVVRULHV
7KLVLVDOLVWRIDYDLODEOHDFFHVVRULHVWREHVHOHFWHGLQFRRSHUDWLRQZLWKWKHXVHU
$FFHVVRU\W\SH
7DSFKDQJHU
2IIFLUFXLW
2QORDG
• 9ROWDJHUHJXODWLRQUHOD\
• (OHFWULFDOSRVLWLRQLQGLFDWRU
• 3DUDOOHORSHUDWLRQHTXLSPHQW
&RQVHUYDWRU
6LOLFDJHOGHK\GUDWLQJEUHDWKHU
3RFNHWWRSOLTXLGWKHUPRPHWHU
'LDOWKHUPRPHWHU
3UHVVXUHUHOLHIYDOYH
3UHVVXUHUHOLHIGHYLFHZLWKVLJQDO
*DVDFWXDWHGUHOD\
,QWHJUDWHGSURWHFWLYHGHYLFHPRXQWHG
RQWKHFRYHU
7HPSHUDWXUHPRQLWRULQJV\VWHP
(DUWKLQJWHUPLQDOV
:KHHOV ELGLUHFWLRQDO 'UDLQYDOYHDWWDQNERWWRP
/LTXLGOHYHOJDXJH
/LTXLGVDPSOLQJYDOYH
&DEOHER[HVRQ/9±DQG+9VLGH
PRXQWHGRQWKHFRYHU
3OXJLQ+9 /9EXVKLQJVHTXLSSHG
ZLWKWKHUREXVWSURWHFWLRQV
(QFORVXUHV
RIGLIIHUHQWSURWHFWLRQFODVV 2YHUYROWDJHSURWHFWLRQGHYLFHV
• 6XUJHDUUHVWRUV
• $UFKLQJKRUQV
2YHUFXUUHQWSURWHFWLRQIXVHV
%XLOWLQFXUUHQWWUDQVIRUPHUV
0XOWLIXQFWLRQGHYLFHVSUHVVXUH
WHPSHUDWXUHRLOOHYHODQGJDV
7\SHRIWUDQVIRUPHU
6'70'7
/'7
'U\
%ROWHGOLQNV
6
2
2QUHTXHVW
2
2
2
2
2
2
6
1$
2 6
1$
2 6
1$
2
6
6
6 2
1$
2
2
1$
2
6
1$
2
2
1$
1$
6
6 6
2 2 1$
6
6
6
6
6
2
6
6
1$
1$
1$
2 2 1$
2
2
1$
1$
1$
2
2
2
2
2
2
2
2
2
2
2
1$
2
1$
7KHDEEUHYLDWLRQV6 VWDQGDUGDFFHVVRU\ 2 RSWLRQDO DQG1$ QRWDSSOLFDEOH DUHDQ
LQGLFDWLRQRIZKHUHWKHGLIIHUHQWDFFHVVRULHVDUHPRVWFRPPRQLQXVH
2QO\XVHGZKHQFRQVHUYDWRU
7KHUPRPHWHUSRFNHWLVDQRSWLRQRQ6'7DQGVWDQGDUGRQ0'7
6WDQGDUGRQ6'70'7ZLWKFRQVHUYDWRU
6WDQGDUGRQKHUPHWLFDOO\VHDOHG
3OXJLQEXVKLQJVLVWKHSUHIHUUHG$%%VROXWLRQLQVWHDGRIFDEOHER[HV
GXHWRHDV\DVVHPEO\DQGORZHUFRVWDQGUHGXFHGGLVWDQFHVLQWKHVXEVWDWLRQ
3DJH7UDQVIRUPHU+DQGERRN
,167$//$7,21$1'&200,66,21,1*
7KLV VHFWLRQ GHVFULEHV $%%¶V JHQHUDO H[SHULHQFHUHFRPPHQGDWLRQV DQG PLQLPXP UHTXLUHPHQWV
KRZHYHULWPD\EHRYHUUXOHGRUVXSSOHPHQWHGE\ORFDOUHJXODWLRQVDQGWKHVXSSOLHU¶VRUSXUFKDVHU¶V
VSHFLILFLQVWUXFWLRQV
*(1(5$/
5HVSRQVLELOLWLHV
)RUSRZHUWUDQVIRUPHUVWKHLQVWDOODWLRQDQGFRPPLVVLRQLQJDUHQRUPDOO\SHUIRUPHGE\$%%
'LVWULEXWLRQWUDQVIRUPHUVDUHQRUPDOO\LQVWDOOHGDQGFRPPLVVLRQHGE\WKHEX\HU
,QVRPHFDVHVWKHLQVWDOODWLRQDQGFRPPLVVLRQLQJLVHJSHUIRUPHGE\WKHFXVWRPHUDQG
VXSHUYLVHGE\$%%
5HVSRQVLELOLWLHVDUHGHILQHGLQWKHSXUFKDVHFRQWUDFWZLWKUHIHUHQFHWR*HQHUDOFRQGLWLRQVHJ
25*$/,0(
/LPLWDWLRQRIUHVSRQVLELOLWLHVVKRXOGEHGHILQHGHJZKHQUHFRPPHQGHGSURWHFWLRQLVQRWLQVWDOOHG
,QFRWHUPV 7UDQVIHURIUHVSRQVLELOLW\ ,QFRWHUPV GHILQHG E\ ,QWHUQDWLRQDO &KDPEHU RI &RPPHUFH ,&& PDNH LQWHUQDWLRQDO WUDGH HDVLHU
DQGKHOSWUDGHUVLQGLIIHUHQWFRXQWULHVWRXQGHUVWDQGRQHDQRWKHU
,QFRWHUPV DUH VWDQGDUG GHILQLWLRQV RI WUDGH WHUPV DQG DUH LQWHUQDWLRQDOO\ UHFRJQL]HG DV
LQGLVSHQVDEOHHYLGHQFHRIWKHEX\HU¶VDQGVHOOHU¶VUHVSRQVLELOLWLHVXQGHUDVDOHVFRQWUDFW,QFRWHUPV
ZLOOQRWDSSO\XQOHVVVSHFLILFDOO\LQFRUSRUDWHGLQWRWKHFRQWUDFW
7KRVH VWDQGDUG WUDGH GHILQLWLRQV WKDW DUH PRVW FRPPRQO\ XVHG LQ LQWHUQDWLRQDO FRQWUDFWV DUH
SURWHFWHG E\ ,&& FRS\ULJKW KRZHYHU D ZDOO FKDUW PD\ EH YLHZHG RQ
KWWSZZZLFFZERRUJLQGH[BLQFRWHUPVDVSZKHUHDZDOOFKDUWLQSUHIHUUHGODQJXDJHPD\DOVREH
SXUFKDVHG
,167$//$7,21
3RZHUDQGODUJHGLVWULEXWLRQWUDQVIRUPHUV
,QVWDOODWLRQ DQG FRPPLVVLRQLQJ VKRXOG SUHIHUDEO\ EH SHUIRUPHG E\ WKH VXSSOLHU RU LQ FORVH
FRRSHUDWLRQZLWKWKHVXSSOLHU7KHFRQWUDFWGHVFULEHVZKDWWREHSHUIRUPHGE\WKHSDUWLHV
$OORFDWLRQRIUHVSRQVLELOLWLHVEHWZHHQVXSSOLHUDQGSXUFKDVHU
$IWHU WKH )DFWRU\ $FFHSWDQFH 7HVW )$7 WKH WUDQVIRUPHU LV GLVDVVHPEOHG DQG PDGH UHDG\ IRU
VKLSSLQJ'HSHQGLQJRQWKHVL]HDQGYROWDJHFODVVRIWKHWUDQVIRUPHUPRUHRUOHVVRIWKHHTXLSPHQW
RQWKHWUDQVIRUPHULVGLVPDQWOHGSULRUWRWUDQVSRUW1RUPDOO\FRQVHUYDWRUFRROHUVDQGKLJKYROWDJH
EXVKLQJV DUH GLVPDQWOHG SULRU WR VKLSSLQJ DQG WUDQVSRUWHG VHSDUDWHO\ 8VXDOO\ ODUJH SRZHU
WUDQVIRUPHUVDUHVKLSSHGZLWKRXWRLO:KHQWKHWUDQVIRUPHULVVKLSSHGZLWKRXWRLOWKHWUDQVIRUPHU
RLO LV WUDQVSRUWHG RQ WDQN ORUU\ VXLWHG IRU WKLV SXUSRVH DQGRU LQ EDUUHOV 'XULQJ WUDQVSRUW WKH
WUDQVIRUPHULVILOOHGZLWKGU\DLUZLWKDFHUWDLQRYHUSUHVVXUHLQRUGHUWRDYRLGPRLVWXUHDEVRUSWLRQLQ
WKH LQVXODWLRQ %HIRUH OHDYLQJ WKH IDFWRU\ D WLJKWQHVV WHVW LV SHUIRUPHG 6PDOOHU WUDQVIRUPHUV OLNH
ODUJHGLVWULEXWLRQWUDQVIRUPHUPLJKWEHVKLSSHGZLWKRLO7KHZHLJKWOLPLWIRUZKHQWKHWUDQVIRUPHULV
WUDQVSRUWHGZLWKRUZLWKRXWRLOGHSHQGVRQVHYHUDOIDFWRUVOLNHWKHWUDQVSRUWIDFLOLWLHV WUXFNVERDW
FUDQHV ZHLJKWOLPLWVRQURDGVEULGJHVHWF
)RU WUDQVIRUPHUV ZLWK D WUDQVSRUW ZHLJKW DERYH WRQ ZKLFK XVXDOO\ LV WKH FDVH IRU SRZHU DQG
ODUJHGLVWULEXWLRQWUDQVIRUPHUVVSHFLDOWUDQVSRUWLVUHTXLUHG7KLVPHDQVWUDQVSRUWLVSHUIRUPHGE\
H[SHUWVLQKDQGOLQJKHDY\JRRGV
'XULQJWUDQVSRUWWKHWUDQVIRUPHUVKRXOGEHHTXLSSHGZLWKDQLPSDFWUHFRUGHU7KLVLVWRUHFRUGLI
DQ\WKLQJ VKRXOG KDSSHQ WR WKH WUDQVIRUPHU GXULQJ WUDQVSRUW DQG GXULQJ KDQGOLQJ DW VLWH 6RPH
UHFRUGHUVUHJLVWHU LPSDFWV *IRUFHV LQ[ \ DQG ]GLUHFWLRQ DQG H[DFWO\ ZKHQ WKH LPSDFWV RFFXU
7KLV LV HVVHQWLDO LQ WKH HYHQW WKH WUDQVIRUPHU KDV EHHQ H[SRVHG WR DEQRUPDO LPSDFWV DQG WR
GHWHUPLQHZKLFKSDUW\KDVWKHWUDQVSRUWUHVSRQVLELOLW\DWWKHWLPHRIWKHLPSDFW7KHUHFRUGHUVKDOO
QRWEHGLVPDQWOHGDQGWKHUHFRUGLQJILQDOO\UHDGEHIRUHWKHWUDQVIRUPHULVDWLWVILQDOGHVWLQDWLRQ,I
VSHFLILHGWKLVVKDOOEHSHUIRUPHGLQWKHSUHVHQFHRIWKHSDUWLHVUHVSRQVLEOHIRUWKHYDULRXVVHFWLRQV
RIWKHWUDQVSRUW
7UDQVIRUPHU+DQGERRN3DJH
7KHWUDQVIRUPHUVKRXOGEHLQVXUHGGXULQJWKHWUDQVSRUWDWLRQHLWKHUE\WKHVXSSOLHURUWKHSXUFKDVHU
GHSHQGLQJRQWKHWHUPVRIGHOLYHU\ ,1&27(506VHHVHFWLRQSDJH 7HUPVRIGHOLYHU\
DUHLQFOXGHGLQWKHFRQWUDFWEHWZHHQWKHVXSSOLHUDQGWKHSXUFKDVHU
(J LI WKH WHUPV DUH (;: WKH SXUFKDVHU WDNHV RYHU WKH UHVSRQVLELOLW\ ULVN IRU WKH WUDQVIRUPHU
ZKHQLWLVOHDYLQJWKHVXSSOLHU¶VSUHPLVHV,IWKLVLVWKHFRQGLWLRQLWLVXSWRWKHSXUFKDVHUZKHWKHU
RUQRWWKHWUDQVIRUPHUVKRXOGEHHTXLSSHGZLWKDQLPSDFWUHFRUGHU
:KHQ$%%VXSSOLHVQHZSRZHUDQGODUJHGLVWULEXWLRQWUDQVIRUPHUVWKHSUHIHUUHGWHUPVRIGHOLYHU\
QRUPDOO\DUH''3RU''8,QWKLVFDVHWKHVXSSOLHU $%% LVUHVSRQVLEOHIRUWKHWUDQVIRUPHUXQWLO
WKH DUULYDO DW WKH DJUHHG GHVWLQDWLRQ 7KH WUDQVIRUPHU VKRXOG WKHQ EH HTXLSSHG ZLWK LPSDFW
UHFRUGHU
:KHQ WKH WUDQVIRUPHU DUULYHV DW VLWH LW VKDOO EH LQVSHFWHG 'XULQJ WKLV LQVSHFWLRQ DOO QHFHVVDU\
GRFXPHQWDWLRQVKDOOEHDYDLODEOH5HSUHVHQWDWLYHVIURPWKHVXSSOLHU VXSHUYLVRU VKRXOGEHSUHVHQW
GXULQJWKLVLQVSHFWLRQ,QDQ\FDVHLQWKHHYHQWRISRVVLEOHWUDQVIRUPHUGDPDJHGXULQJWUDQVSRUW
WKHVXSSOLHUVKDOOEHQRWLILHGDQGFRQVXOWHGEHIRUHDQ\DFWLRQVDUHWDNHQ,IWKHSXUFKDVHUXQORDGVD
WUDQVIRUPHUZLWKSRVVLEOHWUDQVSRUWGDPDJHZLWKRXWFRQVXOWLQJWKHVXSSOLHUWKHSXUFKDVHUKDVWKH
IXOOUHVSRQVLELOLW\
,ILWLVVSHFLILHGWKDWDOOKDQGOLQJOLIWLQJLQVWDOODWLRQRLOILOOLQJDQGRLOSURFHVVLQJVKDOOEHFDUULHGRXW
E\WKHVXSSOLHURUXQGHUVXSHUYLVLRQRIDUHSUHVHQWDWLYHIURPWKHVXSSOLHUWKHZDUUDQW\LVRQO\YDOLG
ZKHQWKLVUHTXLUHPHQWLVIXOILOOHG7KHLPSDFWUHFRUGHUVKDOOQRWEHUHPRYHGXQWLOWKHWUDQVIRUPHULV
SODFHGDQGIL[HGRQLWVILQDOVLWHIRXQGDWLRQ
,IVWRUDJHRIWKHWUDQVIRUPHULVUHTXLUHGSULRUWRHQHUJLVLQJWKLVVKDOOEHSHUIRUPHGDFFRUGLQJWRWKH
VXSSOLHU¶V LQVWUXFWLRQV DQG WKH FRQGLWLRQV IRU H[WHQGHG ZDUUDQW\ VKDOO EH DJUHHG EHWZHHQ WKH
SDUWLHV
'LVWULEXWLRQWUDQVIRUPHUV
7UDQVSRUW
7KH WUDQVIRUPHU LV VXSSOLHG ILOOHG ZLWK OLTXLG DQG QRUPDOO\ DOO DFFHVVRULHV ILWWHG H[FHSW IRU WKH
ODUJHVWXQLWV7KHUDGLDWRUVPD\EHGLVPDQWOHGGXULQJWUDQVSRUW
'XULQJWUDQVSRUWWKHIROORZLQJVKRXOGEHFRQVLGHUHG
• $QJOHRIWLOWLQJH[FHHGLQJžPXVWEHVSHFLILHGLQWKHFRQWUDFW
• 3UHYHQWLRQRIGDPDJHWREXVKLQJVFRUUXJDWHGSDQHOVRUUDGLDWRUVDQGDFFHVVRULHV
• /DUJHUWUDQVIRUPHUVVKRXOGSUHIHUDEO\EHSRVLWLRQHGZLWKWKHORQJLWXGLQDOD[LVLQWKHGLUHFWLRQ
RIPRYHPHQW
• 6HFXUHDJDLQVWPRYHPHQWE\PHDQVRIHJZRRGHQEORFNVDQGODVKHV
• $GDSWYHKLFOHVSHHGWRWKHURDGFRQGLWLRQV
• 9HKLFOHFDSDFLW\VKDOOEHDGHTXDWHIRUWKHWUDQVSRUWZHLJKWRIWKHWUDQVIRUPHU
• $Q\LPSDFWUHFRUGHUVWREHVSHFLILHGLQWKHFRQWUDFW
• $Q\XVHRIFUDWHVRUFRQWDLQHUV
+DQGOLQJOLIWLQJ
2QO\DSSURYHGDQGVXLWDEOHOLIWLQJHTXLSPHQWVKDOOEHXVHG
8VHDIRUNOLIWRQO\RQWUDQVSRUWSDOOHWVRUWUDQVIRUPHUERWWRP
'RQRWDSSO\ORDGWRFRUUXJDWHGILQVRUUDGLDWRUVDQGWKHLUVXSSRUWV
8VHWKHSURYLGHGOLIWLQJOXJVRQO\
:KHQOLIWLQJDWUDQVIRUPHUZLWKFDEOHER[HVRQWKHFRYHUVSHFLDOFDUHPXVWEHWDNHQ
:KHQK\GUDXOLFMDFNVDUHXVHGRQO\SURYLGHGMDFNLQJSRLQWVVKDOOEHXVHGDQGLQVXFKDZD\WKDW
WZLVWLQJIRUFHVRQWKHWUDQVIRUPHUWDQNDUHDYRLGHG
3DJH7UDQVIRUPHU+DQGERRN
7UDQVIRUPHUOLIWLQJH[DPSOH
5HFHLYLQJWKHWUDQVIRUPHUDWVLWH
7UDQVIRUPHUV PDQXIDFWXUHG E\ $%% DUH WKRURXJKO\ WHVWHG DQG LQVSHFWHG SULRU WR VKLSSLQJ EXW
XSRQUHFHLYLQJWKHWUDQVIRUPHUDWVLWHLWVKRXOGEHLQVSHFWHGFDUHIXOO\
7REHLQVSHFWHG
• 7KHZD\LQZKLFKWKHWUDQVIRUPHUKDVEHHQVHFXUHGRQWKHWUDLOHU
• 7KDWWKHGHOLYHU\LVFRPSOHWHDFFRUGLQJWRRUGHUFRQILUPDWLRQ
• &RPSDUHWKHSDFNLQJOLVWZLWKWKHJRRGVUHFHLYHG
• 7KHWUDQVIRUPHUQDPHSODWH
• /LTXLGOHYHOZKHQDSSOLFDEOH$Q\OHDNDJHV"
• ([WHUQDOGDPDJHHJFUDFNVLQEXVKLQJV
• ,PSDFWUHFRUGHUVLQGLFDWLRQVZKHQDSSOLFDEOH
7KHUHFHLSWRIWKHXQLWVKDOOEHVLJQHGIRUDQGWKHUHVXOWRIWKHLQVSHFWLRQVKDOOEHQRWHG
7UDQVIRUPHUVKLSPHQWVDUHQRUPDOO\LQVXUHG
,QFDVHRIGDPDJHUHYHDOHGGXULQJWKHUHFHLYLQJLQVSHFWLRQGRDQ\RIWKHIROORZLQJ
• 0DNHQHFHVVDU\DUUDQJHPHQWWRDYRLGIXUWKHUGDPDJH
• &RQWDFWWKHLQVXUDQFHFRPSDQ\FRQFHUQHGDQG$%%
• 0DNHDUHSRUWRIWKHGDPDJHLPPHGLDWHO\
• 1RUHSDLUVVKRXOGEHVWDUWHGXQWLOUHVSRQVLELOLWLHVDUHFODULILHGDQGDFWLRQVDUHDJUHHGXSRQ
DOOLQYROYHGSDUWLHV
6WRUDJHSULRUWRHQHUJL]LQJ
:KHQVWRUDJHRIWKHWUDQVIRUPHULVUHTXLUHGWKHIROORZLQJUHFRPPHQGDWLRQVVKRXOGEHQRWHG
• 3UHIHUDEO\LQGU\DQGFOHDQORFDWLRQVZLWKRXWDQ\SRVVLELOLWLHVRIPHFKDQLFDOGDPDJHDQGRQ
DVROLGIRXQGDWLRQ
• ,IWKHWUDQVIRUPHUGRHVQRWKDYHDVWUXFWXUDOVWHHOEDVHLWVKRXOGEHSODFHGXSRQVXSSRUWVWR
DOORZYHQWLODWLRQXQGHUWKHERWWRPRIWKHWUDQVIRUPHUEDVH
• 7KH OLTXLG FRQVHUYDWRU DQG GHK\GUDWLQJ EUHDWKHU PXVW EH FKHFNHG WR HQVXUH WKDW GU\ DLU LV
EUHDWKHG &RQVHUYDWRUW\SHRQO\ /LTXLGVDPSOHVWREHDQDO\VHGUHJDUGLQJPRLVWXUHFRQWHQW
SULRUWRHQHUJL]LQJ
• +XPLGLW\FRQGHQVDWLRQLQFRQWUROFXELFOHVGULYLQJPHFKDQLVPIRURQORDGWDSFKDQJHUFDEOH
ER[HVGU\W\SHWUDQVIRUPHUVHWFVKRXOGEHLQVSHFWHGUHPRYHG
• 0LQLPXP VWRUDJH WHPSHUDWXUH IRU GU\W\SH WUDQVIRUPHU LV LQ JHQHUDO ƒ& KRZHYHU IRU
5HVLEORF±ƒ&
• 3ULRU WR HQHUJL]LQJ SHUIRUP D PHJJHU WHVW EHWZHHQ WKH GLIIHUHQW ZLQGLQJV DQG IURP WKH
ZLQGLQJVWRHDUWK7KLVDSSOLHVWRGU\W\SHLQSDUWLFXODU
7UDQVIRUPHU+DQGERRN3DJH
(UHFWLRQDWVLWH
,Q GHWHUPLQLQJ WKH ORFDWLRQ RI D WUDQVIRUPHU JLYH FDUHIXO FRQVLGHUDWLRQ WR DFFHVVLELOLW\ VDIHW\
YHQWLODWLRQ DQG HDVH RI LQVSHFWLRQ 0DNH VXUH WKH IRXQGDWLRQ IRU PRXQWLQJ WKH WUDQVIRUPHU LV
HQWLUHO\DGHTXDWH
9HQWLODWHWKHHUHFWLRQVLWHSURSHUO\$VDJXLGHHDFKNLORZDWWRIORVVHVUHTXLUHVFXELFPHWHUVRIDLU
FLUFXODWLRQSHUPLQXWH)UHVKDLULQWDNHDWIORRUOHYHODQGDYHQWLODWLRQGXFWOHDGLQJWRRXWHUDLUPXVW
EHEXLOWLQWRWKHFHLOLQJRUXSSHUSDUWRIWKHZDOO7KHLQWDNHDQGRXWOHWRSHQLQJVVKRXOGEHORFDWHG
DWRSSRVLWHVLGHVRIWKHURRP7KHGXFWFURVVVHFWLRQRIWKHRXWOHWVKRXOGEHPRUHWKDQWKH
FURVVVHFWLRQRIWKHLQOHWRSHQLQJGXHWRWKHLQFUHDVHRIYROXPHRIWKHKRWDLU
2EVHUYH ORFDO DXWKRULWLHV UHJXODWLRQV IRU FLYLO HQJLQHHULQJ RI WUDQVIRUPHU FHOOV VDIHW\ UHJXODWLRQV
ILUHSURWHFWLRQUHJXODWLRQV$OLTXLGFRQWDLQPHQWWDQNPD\EHUHTXLUHG
$WUDQVIRUPHUHTXLSSHGZLWKZKHHOVPXVWEHSUHYHQWHGIURPPRYLQJE\FKRFNLQJWKHZKHHOV
1HWZRUNFRQQHFWLRQ
(OHFWULFDOFOHDUDQFHVLQDLU
0D[LPXPV\VWHPYROWDJH N9 /LJKWQLQJLPSXOVHZLWKVWDQGYROWDJH N9 0LQLPXPFOHDUDQFHDFFRUGLQJWR,(&
SKDVHWRSKDVHDQGSKDVHWR
HDUWK PP &RS\ULJKW‹,(&*HQHYD6ZLW]HUODQGZZZLHFFK
1RWH7HVWLQJRUZHOOGRFXPHQWHGORFDOSUDFWLFHFDQDOORZWKHXVHRIUHGXFHGFOHDUDQFHV
&RQQHFWLQJWUDQVIRUPHUWHUPLQDOVWRWKHQHWZRUNV
2EVHUYHORFDODXWKRULWLHVVDIHW\UHJXODWLRQVDQGUHJXODWLRQVIRUHOHFWULFDOLQVWDOODWLRQV
&RQGXFWRUV EXV EDUV DQG FDEOHV VKDOO EH LQVWDOOHG VXFK WKDW PLQLPDO PHFKDQLFDO VWUHVV LV
WUDQVIHUUHGWRWKHEXVKLQJV
&RQLFDOZDVKHUVVKDOOEHXVHGLQRUGHUWRREWDLQWKHUHTXLUHGFRQWDFWSUHVVXUH1XWVVKRXOGEH
DGHTXDWHO\ORFNHG
)OH[LEOHFRQQHFWRUVVKDOOEHXVHGEHWZHHQWKHWHUPLQDOVDQGWKHEDUVZKHQFRQQHFWLQJWRORZ
YROWDJHEXVEDUV6XLWDEOHFDEOHOXJVVKDOOEHXVHGZKHQFRQQHFWLQJORZYROWDJHFRSSHUFDEOHV
+LJK YROWDJH FRQQHFWLRQ LV QRUPDOO\ SHUIRUPHG E\ FRSSHU FDEOHV DQG FRSSHU FDEOH OXJV ,Q
VRPHFDVHVKHDWVKULQNDEOHFRQQHFWRUVRUHOERZFRQQHFWRUVDUHXVHG
)RUDOXPLQLXPFRSSHUMRLQWVWKHFRSSHULVFRDWHGZLWKWLQRUELPHWDOVKHHWV RQHVLGHRIFRSSHU
DQGWKHRWKHURIDOXPLQLXP FDQEHXVHGEHWZHHQWKHMRLQW
7KHDOXPLQLXPVXUIDFHPXVWEHODUJHUWKDQWKHFRSSHUVXUIDFH
$OXPLQLXPSDUWVVKDOODOZD\VEHSODFHGDERYHFRSSHUSDUWVVRWKDWZDWHUFDQQRWGUDLQIURPWKH
FRSSHUSDUWVRQWRWKHDOXPLQLXP FRUURVLRQ ,WPXVWEHUHPHPEHUHGWKDWJRRGFRQWDFWEHWZHHQMRLQHGDOXPLQLXPVXUIDFHVFDQEHDFKLHYHG
RQO\ LI WKH QR FRQGXFWLQJ R[LGH ILOP LV UHPRYHG ZLWK D ZLUH EUXVK ILOH RU VLPLODU LPPHGLDWHO\
EHIRUHMRLQLQJDQGUHQHZHGR[LGDWLRQLVSUHYHQWHGE\DSSO\LQJDWKLQSURWHFWLYHILOPRIJUHDVH
SHWUROHXPMHOO\ -RLQWLQJFRPSRXQGZKLFKSUHYHQWVWKHDFFHVVRIDLUDQGKXPLGLW\LQWRMRLQWVPXVWEHXVHGLQ
WKHMRLQW7KH]LQFFU\VWDOVRIWKHFRPSRXQGEUHDNGRZQWKHOD\HURIR[LGHRQWKHDOXPLQLXP
0LQLPXPHOHFWULFDOFOHDUDQFHVVKDOOEHREWDLQHG
6XLWDEO\VWURQJVWHHOEROWVDQGQXWVPXVWEHXVHGIRUWLJKWHQLQJWKHMRLQW7KHWLJKWHQLQJWRUTXH
YDOXHVJLYHQEHORZDUHUHFRPPHQGHGWREHXVHGLQH[WHUQDOWUDQVIRUPHUMRLQWV
&DEOHDQGEXVEDUORDGFDSDFLWLHVDUHRXWVLGHWKHVFRSHRIWKLVKDQGERRNKRZHYHUGHDOWZLWKLQ
GHWDLOLQ$%%6ZLWFKJHDU0DQXDO
3DJH7UDQVIRUPHU+DQGERRN
7LJKWHQLQJWRUTXH
%ROWVL]H
0
0
0
0
0
0
5HFRPPHQGHGWLJKWHQLQJWRUTXH1P
3URSHUW\&ODVV
%ROW1XW
:KHQGLVNW\SHVSULQJZDVKHUVDUHXVHGWKHQXWVVKRXOGRQO\EH
WLJKWHQHGXQWLOWKHZDVKHUEHFRPHVIODW
(DUWKLQJ
(DUWKWKHWUDQVIRUPHUDWWKHHDUWKLQJWHUPLQDOVSURYLGHG
(DUWKLQJUHVLVWDQFHDFFRUGLQJWRHOHFWULFLW\XWLOLWLHVRUQDWLRQDOVWDQGDUGV
3URWHFWLYHHTXLSPHQW
&RQQHFWWKHHTXLSPHQWDQGFKHFNWKHIXQFWLRQV
• 7KHUPRPHWHUZLWKFRQWDFWVIRUDODUPDQGWULSSLQJVLJQDOV
• :KHQDSSOLFDEOHRLOOHYHOLQGLFDWRUZLWKFRQWDFWVIRUDODUPVLJQDO
• *DVUHOD\ZLWKFRQWDFWVIRUDODUPDQGWULSSLQJVLJQDOV
• 3UHVVXUHUHOLHIGHYLFHZLWKFRQWDFWVIRUDODUPVLJQDO:KHQSURYLGHG
• 5HFRPPHQGHGWKHUPRPHWHUVHWWLQJVIRU21$1WUDQVIRUPHUV
7\SHRIWHPSHUDWXUHHTXLSPHQW
2LOWKHUPRPHWHUVHWWLQJ
2LOWKHUPRPHWHUVHWWLQJZKHQFRPELQHGZLWKD
ZLQGLQJWHPSHUDWXUHLQGLFDWRU
:LQGLQJWHPSHUDWXUHLQGLFDWRUVHWWLQJ
$ODUP
ž&
ž&
7ULSSLQJ
ž&
ž&
ž&
ž&
• 5HFRPPHQGHGWKHUPRPHWHUVHWWLQJVIRUGU\W\SHWUDQVIRUPHUVDFFRUGLQJWR
WKHUHOHYDQWWHPSHUDWXUHFODVV
7HPSHUDWXUHFODVV
$ ( % ) + $ODUP
ž&
ž&
ž&
ž&
ž&
7ULSSLQJ
ž&
ž&
ž&
ž&
ž&
,QVXODWLRQUHVLVWDQFH
&KHFNWKHLQVXODWLRQUHVLVWDQFHEHWZHHQ+9DQG/9DVZHOODVZLQGLQJVWRHDUWK0LQLPXPYDOXHLV
RKPSHUYROWVHUYLFHYROWDJH 0D[LPXPP$PS 2IIFLUFXLWRQORDGWDSFKDQJHU
• &KHFNWKHJDOYDQLFFRQWDFWEHWZHHQWKHZLQGLQJDQGWKHWDSFKDQJHULQDOOSRVLWLRQV
• &RPSDUH WKH YROWDJH UDWLR RI WKH WUDQVIRUPHU DQG WKH QHWZRUN YROWDJHV DQG VHOHFW WKH
VXLWDEOHWDSFKDQJHUSRVLWLRQ
0HFKDQLFDOFKHFNV
• &KHFNWKHOLTXLGOHYHO
• 7LJKWHQDOOOHDNLQJJDVNHWVFDUHIXOO\
• $IWHUFRPSOHWHGLQVWDOODWLRQZRUNVXUIDFHGDPDJHFDXVHGE\WUDQVSRUWDWLRQDQGLQVWDOODWLRQ
ZRUNVKDOOEHUHSDLUHG
• &RQGLWLRQRIGHK\GUDWLQJEUHDWKHU )RUFRQVHUYDWRUW\SHRQO\ • )LQDOO\WKHWUDQVIRUPHUPXVWEHFOHDQHG
7UDQVIRUPHU+DQGERRN3DJH
&200,66,21,1*
(QHUJLVLQJ
3ULRUWRHQHUJLVLQJWKHWUDQVIRUPHUKDVWREHFKHFNHG,IDSSOLFDEOHWKHIROORZLQJLWHPVVKRXOGEH
UHYLHZHG
•
,QVSHFWLRQRIWUDQVIRUPHU
•
&KHFNLPSDFWUHFRUGHU
o ,ILPSDFWVDERYHDFHUWDLQOHYHODUHUHFRUGHGWKHWUDQVIRUPHUPXVWEHFKHFNHGIRU
WUDQVSRUWGDPDJH
•
&KHFNSDLQWLQJOHDNDJHVDQGIDVWHQLQJ
•
%OHHGLQJ
o &RQVHUYDWRUFRYHUWDQNDQGFRROHUV
o &RYHUEXVKLQJVWDSFKDQJHU%XFKKRO]UHOD\FRROLQJHTXLSPHQW
•
(DUWKLQJRI
o
•
•
&RROLQJHTXLSPHQW
o
2):) &KHFN WKH PRXQWLQJ GLUHFWLRQ RI RLO SXPSV RLO IORZ DQG ZDWHU IORZ
LQGLFDWRUV$GMXVWZDWHUDQGRLOIORZLQGLFDWRUV&KHFNWKHURWDWLRQGLUHFWLRQRIWKH
PRWRUVPRWRUYROWDJHPRWRUSURWHFWLRQ&KHFNWKDWDOOYDOYHVDUHRSHQ
o
2)$)&KHFNWKHPRXQWLQJGLUHFWLRQRIRLOSXPSVRLOIORZLQGLFDWRUV$GMXVWRLOIORZ
LQGLFDWRUV &KHFN WKH URWDWLRQ GLUHFWLRQ RI WKH PRWRUV PRWRU YROWDJH PRWRU
SURWHFWLRQ&KHFNWKDWYDOYHVDUHRSHQ
o
21$)&KHFNWKHURWDWLRQGLUHFWLRQRIWKHPRWRUVPRWRUYROWDJHPRWRUSURWHFWLRQ
FKHFNWKDWYDOYHVDUHRSHQ
o
21$1&KHFNWKDWYDOYHVDUHRSHQ
7DSFKDQJHURLOILOWHUDQGPRWRUGULYHXQLW
o
•
6KRXOG EH FKHFNHG DFFRUGLQJ WR JXLGHOLQHV JLYHQ E\ WKH PDQXIDFWXUHU IRU WKLV
HTXLSPHQW HJ ORFNLQJ RI VKDIW FRQQHFWLRQV PRXQWLQJ GLUHFWLRQ SURWHFWLYH UHOD\
V\PPHWULFDO FRXSOLQJ PRWRU YROWDJH SKDVH URWDWLRQ PRWRU SURWHFWLRQ HQG OLPLW
VZLWFKHV HOHFWULFDO DQG PHFKDQLFDO HPHUJHQF\ VWRS ± UDLVH DQG ORZHU VZLWFK
VWHSE\VWHSUHPRWHFRQWUROOLQJHWF7KHFKHFNOLVWPD\YDU\GHSHQGLQJRQVHOHFWHG
PDQXIDFWXUHUW\SHRIWDSFKDQJHUDQGHTXLSPHQWLQVWDOOHG
&XUUHQWWUDQVIRUPHUV
o
•
7UDQVIRUPHU FDELQHWV FXUUHQW WUDQVIRUPHUV VXUJH DUUHVWHUV 5&QHWZRUN WDS
FKDQJHUVRLOILOWHUHWF
&KHFNSRODULW\DQGWKDWDOOVHFRQGDU\&7FLUFXLWVDUHFORVHGEHIRUHHQHUJLVLQJWKH
WUDQVIRUPHU ,I D FXUUHQW WUDQVIRUPHU LVQRW LQ XVH LWKDV WR EHVKRUW FLUTXLWHGDQG
HDUWKHG $Q RSHQ FLUFXLWHG FXUUHQW WUDQVIRUPHU JLYHV KD]DUGRXV YROWDJHV DQG LV
GDQJHURXV WR SHUVRQQHO DQG HTXLSPHQW ,W FDQ UHVXOW LQ SHUVRQDO LQMXU\ GHDWK RU
SURSHUW\GDPDJH
3URWHFWLYHHTXLSPHQW
o
&KHFN WKDW DOO DODUP VLJQDOV IURP SURWHFWLYH HTXLSPHQW LV IXQFWLRQLQJ VXFK DV
WKHUPRPHWHUVRLOOHYHOLQGLFDWRUV%XFKKRO]UHOD\RLOIORZZDWHUIORZLQGLFDWRUVHWF
o
&KHFN WKDW DOO WULS VLJQDOV IURP SURWHFWLYH HTXLSPHQW LV IXQFWLRQLQJ VXFK DV
WKHUPRPHWHUV RLO OHYHO LQGLFDWRUV %XFKKRO] UHOD\ WDSFKDQJHU SURWHFWLYH UHOD\
HWF7ULSVLJQDOVDUHKDUGZLUHGWRWKHFLUFXLWEUHDNHUDQGDOOWULSVLJQDOVVKRXOGEH
FKHFNHGWRYHULI\WKDWWKHFLUFXLWEUHDNHURSHQVZKHQDWULSVLJQDOLVDFWLYDWHG
3DJH7UDQVIRUPHU+DQGERRN
•
2LOVDPSOH
o
•
2LO VDPSOH PXVW EH FROOHFWHG DQG DQDO\VHG WR FKHFN WKDW WKH RLO FRQGLWLRQ
GLHOHFWULFZLWKVWDQG YROWDJH DQG PRLVWXUH OHYHO IXOILOV WKH UHTXLUHPHQWV RI ,(& RU
$16,,(((VWDQGDUGV
(OHFWULFDOWHVWV
o
(OHFWULFDOWHVWVUHFRPPHQGHGE\WKHVXSSOLHUVKRXOGEHSHUIRUPHG
$IWHUWKHWUDQVIRUPHUKDVEHHQIRXQGWREHLQJRRGFRQGLWLRQDQGWKHSURWHFWLYHHTXLSPHQWLVIRXQG
LQ RUGHU DFFRUGLQJ WR WKH DERYH OLVW WKH WUDQVIRUPHU LV UHDG\ WR EH FRQQHFWHG WR WKH QHWZRUN
HQHUJLVHG ,QSDUWLFXODUZKHQFRQQHFWLQJGLVWULEXWLRQWUDQVIRUPHUVWRWKHQHWZRUNIXVHVPD\EORZLPPHGLDWHO\
FDXVHG E\ KLJK LQUXVK FXUUHQW 7KLV GRHV QRW QHFHVVDULO\ PHDQ WKDW WKHUH LV D IDXOW LQ WKH
WUDQVIRUPHU 5HSODFH EORZQ IXVHV DQG WU\ HQHUJLVLQJ DJDLQ EHFDXVH WKH PDJQLWXGH RI WKH LQUXVK
FXUUHQWLVDVWDWLVWLFDOYDULDEOHZLWKODUJHVSUHDG0RGHUQRYHUFXUUHQWDQGGLIIHUHQWLDOUHOD\VFRQWDLQ
D ILOWHU ZKLFK PDNHV WKH UHOD\V LQVHQVLWLYH WR LQUXVK FXUUHQWV 2OGHU UHOD\V PD\ WULS WKH FLUFXLW
EUHDNHU LPPHGLDWHO\ 6HH DOVR VHFWLRQ SDJH SDUDJUDSK ³,QUXVK FXUUHQW´ $IWHU WKH
WUDQVIRUPHUKDVEHHQFRQQHFWHGWRWKHQHWZRUNJDVPD\EHSUHVHQWZKLFKFDXVHWKHJDVUHOD\WR
WULSWRJLYHDQDODUP,WFRXOGEHDIDOVHDODUPFDXVHGE\DQDLUEXEEOHWUDSSHGXQGHUWKHFRYHU
DQG WKHQ PRYHG LQWR WKH JDV UHOD\ $LU LV FRORXUOHVV DQG RGRXUOHVV ,I QRW DLU D JDV DQG DQ RLO
VDPSOHVKRXOGEHWDNHQIRUDQDO\VLV
'DWHIRUIRUPDOWDNHRYHUFDQYDU\EXWVKDOOEHFOHDUO\VWDWHGLQWKHFRQWUDFWEHWZHHQVXSSOLHUDQG
SXUFKDVHU7KLVFDQEHDIWHUWKHWUDQVIRUPHULVHQHUJLVHGRUDIWHUDWHVWSHULRGRIWKHWUDQVIRUPHU$
KDQGRYHUSURWRFROVKRXOGEHHVWDEOLVKHGVLJQHGE\ERWKSDUWLHVVHHDOVRVHFWLRQSDJH
'RFXPHQWDWLRQ
7KH IROORZLQJ GRFXPHQWDWLRQ ZLOO EH KDQGHG RYHU WR WKH SXUFKDVHU DW WLPH RI WDNHRYHU DV
DSSOLFDEOH
•
•
•
•
•
•
•
•
•
•
•
•
•
7UDQVIRUPHUVSHFLILFDWLRQ
2XWOLQHGUDZLQJ
7UDQVSRUWGUDZLQJ
6FKHPDWLFGUDZLQJ
:LULQJGLDJUDP
$VVHPEO\RSHUDWLRQDQGPDLQWHQDQFHPDQXDO
7HFKQLFDOGRFXPHQWDWLRQIURPVXEVXSSOLHUV EXVKLQJVWDSFKDQJHUFRROHUVHWF 'DWDVKHHWWUDQVIRUPHURLO
7HVWSURWRFRO )$7 7UDQVSRUW VKLSSLQJ GRFXPHQWDWLRQ
7URXEOHVKRRWLQJJXLGH
&RPPLVVLRQLQJUHSRUW
7DNHRYHUSURWRFRO
7UDQVIRUPHU+DQGERRN3DJH
23(5$7,21021,725,1*$1'0$,17(1$1&(
*(1(5$/35(&$87,216
• 3HUIRUPDVDIHW\MREDQDO\VLVEHIRUHWKHZRUNVWDUWV
• 1HYHUZRUNRQWUDQVIRUPHUVRUDQ\LQVWDOOHGHOHFWULFDOHTXLSPHQWDORQH
• 'RQRWFKDQJHWKHSRVLWLRQRIRIIFLUFXLWWDSFKDQJHUVZKLOHWKHWUDQVIRUPHULVHQHUJL]HG
• 'RQRWHQHUJL]HRUSHUIRUPPDLQWHQDQFHRQWKHWUDQVIRUPHUZLWKRXWSURSHUHDUWKFRQQHFWLRQ
)RUPRUHLQIRUPDWLRQVHHVHFWLRQSDJHRQVDIHW\DVSHFWV
23(5$7,21
/LIHWLPH
7KHOLIHWLPHRIDWUDQVIRUPHUFDQEHGLYLGHGLQWRWZRFDWHJRULHVHFRQRPLFDODQGWHFKQLFDO
(FRQRPLFDOOLIHWLPH
(FRQRPLFDO OLIHWLPH HQGV ZKHQ WKH FDSLWDOL]HG FRVW RI FRQWLQXHG RSHUDWLRQ RI WKH H[LVWLQJ
WUDQVIRUPHUH[FHHGVWKHFDSLWDOL]HGFRVWRIDQHZLQYHVWPHQW
,QSUDFWLFDOWHUPVW\SLFDOO\ZKHQWKHFRVWRIWKHWRWDOORVVHVRIWKHROGWUDQVIRUPHUDUHWRRKLJK
&RQVHTXHQWLDOULVNVDQGFRVWVDVVRFLDWHGZLWKHOHFWULFLW\GRZQWLPHDUHRILQFUHDVLQJLPSRUWDQFH
7HFKQLFDOOLIHWLPH7KHDJHLQJSURFHVVRIFHOOXORVH
7KH FHOOXORVH PDWHULDOV XQGHUJR FKHPLFDO GHJUDGDWLRQ ± DJHLQJ ± LQ VHUYLFH 7KH GRPLQDQW
SURFHVVHV KDYH WKH FKDUDFWHU RI R[LGDWLRQ DQG UHVXOW LQ EUHDNV RI WKH ORQJ FHOOXORVH FKDLQ
PROHFXOHV LQWR VKRUWHU IUDJPHQWV DQG WKH PDWHULDO EHFRPHV JUDGXDOO\ PRUH EULWWOH 2OG SDSHU
EUHDNV XS LQWR VPDOO IODNHV %XW HYHQ LQ WKLV VWDWH WKH GLHOHFWULF EUHDNGRZQ YROWDJH LV KDUGO\
DIIHFWHGDWDOO
7KHSUDFWLFDOFRQVHTXHQFHRIWKHDJHLQJLVDKLJKHUULVNRIPHFKDQLFDOUXSWXUHDQGPHWDOWRPHWDO
FRQWDFWDVDUHVXOWRIPHFKDQLFDOVKRFNDQGYLEUDWLRQV
7KH FHOOXORVH PROHFXOH KDV D ULQJ VWUXFWXUH DV VKRZQ WR WKH OHIW LQ )LJXUH 6HYHUDO RI WKHVH
PROHFXOHVDUHOLQNHGWRJHWKHUWRDFKDLQE\R[\JHQDWRPV7KLVLVFDOOHGSRO\PHULVDWLRQ
)LJXUH
7KHUH LV D VWDQGDUGLVHG PHWKRG RI FKHPLFDO DQDO\VLV ZKLFK SURYLGHV LQIRUPDWLRQ RI WKH DYHUDJH
QXPEHU RI ULQJV LQ WKH FKDLQV RI FHOOXORVH PROHFXOHV 7KLV QXPEHU LV FDOOHG WKH GHJUHH RI
SRO\PHULVDWLRQ RU DEEUHYLDWHG WKH '3 QXPEHU 9LUJLQ SDSHU PDGH RI VORZ JURZLQJ SLQH LQ FROG
FOLPDWHKDVW\SLFDOO\D'3QXPEHURI±7KHUHLVDFRUUHODWLRQEHWZHHQWKH'3QXPEHU
DQG WKH WHQVLOH VWUHQJWK RI WKH PDWHULDO DQG WKH GHJUHH RI DJHLQJ FDQ EH H[SUHVVHG E\ WKH
GHFUHDVHLQ'3QXPEHU:KHQWKH'3QXPEHUKDVIDOOHQWRWKHPDWHULDOLVTXLWHEULWWOH,WLV
FRPPRQWRH[SUHVVWKHFRQGLWLRQRIWKHPDWHULDOE\PHDQVRIWKH'3QXPEHULQVWHDGRIWKHWHQVLOH
VWUHQJWKEHFDXVHWKH'3QXPEHUFDQEHGHWHUPLQHGZLWKOHVVPHDVXUHPHQWXQFHUWDLQW\WKDQWKH
WHQVLOHVWUHQJWKZKHQWKHDJHLQJSURFHVVKDVFRPHWRDFHUWDLQVWDJH
7KH DJHLQJ LV D FXPXODWLYH SURFHVV GHSHQGLQJ RQ LQIOXHQFHV IURP WKH HQYLURQPHQW LQ WKH
WUDQVIRUPHU7KHUDWHRIWKHFKHPLFDOUHDFWLRQULVHVZLWKWKHWHPSHUDWXUH900RQWVLQJHU¶VUXOH
HVWDEOLVKHG DIWHU PDQ\ \HDUV RI LQWHQVLYH UHVHDUFK VWDWHV WKDW WKH UDWH RI WKH FKHPLFDO
GHWHULRUDWLRQ SURFHVV LV GRXEOHG IRU HDFK ƒ& WHPSHUDWXUH ULVH +RZHYHU WKLV UDWH LV
FRQVLGHUDEO\LQFUHDVHGE\WKHSUHVHQFHRIZDWHUPROHFXOHVDQGIUHHR[\JHQGLVVROYHGLQWKHRLO
3DJH7UDQVIRUPHU+DQGERRN
$VWKHSDSHUGXHWRDJHLQJEHFRPHVJUDGXDOO\ZHDNHULQUHVSHFWRIWHQVLOHVWUHQJWKWKHUHZLOOEHD
FRUUHVSRQGLQJO\ LQFUHDVLQJ ULVN WKDW WKH WUDQVIRUPHU ZLOO IDLO LI D VKRUW FLUFXLW LQ WKH SRZHU V\VWHP
RFFXU ,Q DEVHQFH RI VXFK H[WHUQDO HYHQWV WKH WUDQVIRUPHU PD\ RSHUDWH VDWLVIDFWRULO\ HYHQ ZLWK
VROLG LQVXODWLRQ ZLWK YHU\ ORZ '3 QXPEHUV EHFDXVH WKH FRPSUHVVLYH VWUHQJWK DQG WKH GLHOHFWULF
VWUHQJWKRIWKHFHOOXORVHDUHKDUGO\UHGXFHGDWDOOE\WKHDJHLQJSURFHVV
6KRUWFLUFXLWWHVWVWKDWGHPRQVWUDWHWKHDELOLW\RIDWUDQVIRUPHUWRZLWKVWDQGWKHVKRUWFLUFXLWFXUUHQWV
DUHDOPRVWDOZD\VSHUIRUPHGRQQHZWUDQVIRUPHUVZKLFKQHYHUKDYHEHHQLQVHUYLFH7KHVRFDOOHG
µHQGRIOLIH¶WHUPLVDPDWWHURIGHILQLWLRQ7KHWHUPFRXOGEHUHODWHGWRDSHUFHQWDJHRIWKHRULJLQDO
WHQVLOHVWUHQJWKRIWKHLQVXODWLRQIRUH[DPSOHRURUWRDQDEVROXWHYDOXHRIWKHWHQVLOH
VWUHQJWKLQ1PP2UWRDFHUWDLQPLQLPXPRIWKH'3QXPEHU7KHUHLVQRXQLYHUVDOO\YDOLGILJXUH
WRFKRRVH7KHOLNHOLKRRGRIVKRUWFLUFXLWVLQWKHSRZHUV\VWHPSOD\VDQLPSRUWDQWUROH
$FRPSUHKHQVLYHLQWHUQDWLRQDOLQYHVWLJDWLRQSHUIRUPHGVRPH\HDUVDJRFRQFOXGHGWKDWWKHIDLOXUH
UDWHRIODUJHSRZHUWUDQVIRUPHUVGXHWRVKRUWFLUFXLWFXUUHQWVZDVYHU\ORZIDLOXUHVSHU
WUDQVIRUPHU VHUYLFH \HDUV WKDW LV SHU WKRXVDQG 7KH LQYHVWLJDWLRQ LQFOXGHG ERWK µ\RXQJ¶
WUDQVIRUPHUV DQG WUDQVIRUPHUV WKDW KDYH EHHQ LQ RSHUDWLRQ IRU VHYHUDO GHFDGHV 7KLV IDLOXUH UDWH
PLJKW LQFUHDVH VRPHWLPH LQ WKH IXWXUH GXH WR IXUWKHU DJLQJ RI WKH ZKROH EXON RI WUDQVIRUPHUV LQ
VHUYLFH,QJHQHUDOIRUWKHWLPHEHLQJWKHUDWHRIIDLOXUHVGXHWRVKRUWFLUFXLWFXUUHQWVGRHVQRWVHHP
WREHDPDWWHURIODUJHFRQFHUQ+RZHYHULWLVMXVWLILHGWRPDNHHIIRUWVWRNHHSWKHLQWHULRURIWKH
WUDQVIRUPHUGU\DQGFOHDQ
&HOOXORVHLVRQHRIWKHPRVWK\JURVFRSLFH[LVWLQJPDWHULDOVZKLFKPHDQVWKDWLWKDVDKLJKDELOLW\WR
DEVRUEPRLVWXUH:KHQVWRUHGLQDLUWKHZDWHUFRQWHQWLVW\SLFDOO\±E\ZHLJKWGHSHQGHQW
RQWKHUHODWLYHPRLVWXUHFRQWHQWLQWKHDPELHQWDLU&HOOXORVHZLWKWKDWKLJKPRLVWXUHFRQWHQWZRXOG
EH XQVXLWDEOH IRU LQVXODWLRQ LQ WUDQVIRUPHUV EHFDXVH PRLVWXUH IURP WKH FHOOXORVH ZRXOG EH
WUDQVIHUUHGWRWKHRLODQGZRXOGGUDVWLFDOO\UHGXFHWKHGLHOHFWULFVWUHQJWKRIWKHRLO,QDGGLWLRQWKH
DJHLQJSURFHVVLQWKHFHOOXORVHZRXOGEHDFFHOHUDWHG
7R PDNH WKH FHOOXORVH D VXLWDEOH LQVXODWLRQ PDWHULDO LW KDV WR EH GULHG WR PRLVWXUH FRQWHQW ZHOO
EHORZEHIRUHILOOLQJWKHRLORQWKHWUDQVIRUPHULQWKHIDFWRU\7KHKLJKWHPSHUDWXUHQHHGHGLQ
WKLVGU\LQJSURFHVVZLOOFDXVHDQRWLFHDEOHUHGXFWLRQLQWKHRULJLQDO'3QXPEHURIWKHFHOOXORVH
,Q RUGHU WR NHHS WKH WHQVLOH VWUHQJWK RI WKH FHOOXORVH PDWHULDOV DV JRRG DV SRVVLEOH LQ VHUYLFH
SHQHWUDWLRQ RI PRLVWXUH IURP WKH DPELHQW DLU LQWR WKH WUDQVIRUPHU FDQ EH DYRLGHG E\ PDNLQJ WKH
WDQN KHUPHWLFDOO\ VHDOHG RQ VPDOOHU GLVWULEXWLRQ WUDQVIRUPHUV )RU ODUJHU WUDQVIRUPHUV LW LV
UHFRPPHQGHGWRVHSDUDWHWKHRLOLQWKHFRQVHUYDWRUIURPWKHDLUE\PHDQVRIDGLDSKUDJP
+RZHYHUZDWHUDQGIUHHR[\JHQZLOOEHSURGXFHGLQVLGHWKHWUDQVIRUPHUGXHWRWKHQDWXUDODJHLQJ
SURFHVV 7KH ZDWHU FRQWHQW LQ WKH RLO FDQ EH PHDVXUHG IURP RLO VDPSOHV WDNHQ IURP WKH
WUDQVIRUPHU)URPWKHZDWHUFRQWHQWLQWKHRLOWKHZDWHUFRQWHQWLQWKHFHOOXORVHLQVXODWLRQFDQEH
HVWLPDWHGE\PHDQVRIWKHGLDJUDPLQ)LJXUH
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
7KHGLDJUDPVKRZVHTXLOLEULXPOLQHVIRUWKHZDWHUFRQWHQWLQFHOOXORVHDQGWKHZDWHUFRQWHQWLQRLO
7KH HTXLOLEULXP FRQGLWLRQ GHSHQGV RQ WKH PHDQ WHPSHUDWXUH RI WKH RLO SSP ZDWHU LQ WKH RLO
FRUUHVSRQGVWR ZDWHU LQ WKH FHOOXORVH DW ƒ& RLO WHPSHUDWXUH $W ƒ& SSP LQ WKH RLO
FRUUHVSRQGVWRLQWKHFHOOXORVH6RLQRUGHUWRHVWLPDWHWKHZDWHUFRQWHQWLQWKHFHOOXORVHIURP
WKHZDWHUFRQWHQWLQDQRLOVDPSOHLWLVLPSRUWDQWWRNQRZWKHDYHUDJHRLOWHPSHUDWXUHZKHQWKHRLO
VDPSOHZDVWDNHQ
7KHFHOOXORVHLVDEOHWRDEVRUEPXFKPRUHZDWHUWKDQWKHRLODOWKRXJKWKHTXDQWLW\RIRLOLVPXFK
ODUJHUWKDQWKHTXDQWLW\RIFHOOXORVH7KHFHOOXORVHLVWKHODUJHUHVHUYRLURIZDWHULQWKHWUDQVIRUPHU
QRWWKHRLO
)URP WKH GLDJUDP LW DSSHDUV WKDW LI WKH FHOOXORVH FRQWDLQV IRU H[DPSOH ZDWHU DQG WKH
WHPSHUDWXUH LQFUHDVHV IURP WR ƒ& WKH ZDWHU FRQWHQW LQ RLO LQFUHDVHV IURP WR SSP ,Q
RWKHU ZRUGV E\ LQFUHDVLQJ WKH WHPSHUDWXUH ZDWHU LV WUDQVIHUUHG IURP WKH FHOOXORVH WR WKH RLO
+RZHYHUZKLOHWKHLQFUHDVHLQWKHZDWHUFRQWHQWLQWKHRLOLVFRQVLGHUDEOHWKHUHODWLYHGHFUHDVHLQ
WKHZDWHUFRQWHQWLQWKHFHOOXORVHLVYHU\VPDOO)URPWKLVFRQVLGHUDWLRQWKHFRQFOXVLRQLVWKDWGU\LQJ
WKHRLOLVQRWDQHIILFLHQWPHWKRGWRUHPRYHPRLVWXUHIURPWKHFHOOXORVH
,IWKHZDWHUFRQWHQWLQRLOVDPSOHVLQGLFDWHVWKDWWKHZDWHUFRQWHQWLQWKHFHOOXORVHDIWHUVRPH\HDUV
LQ VHUYLFH KDV LQFUHDVHG EH\RQG DQ DFFHSWDEOH YDOXH WKH RLO PXVW EH HPSWLHG IURP LQ WKH
WUDQVIRUPHUEHIRUHDQ\GU\LQJSURFHVVWRUHPRYHWKHZDWHUIURPWKHFHOOXORVHVWDUWV
7KH GLDJUDP LQ )LJXUH VKRZV KRZ WKH DF EUHDNGRZQ ILHOG W\SLFDOO\ GHFOLQHV ZLWK LQFUHDVLQJ
PRLVWXUHFRQWHQWDWƒ&WHPSHUDWXUH 7HVWHGDFFRUGLQJWR,(& ,QVXODWLQJOLTXLGV
±'HWHUPLQDWLRQRIWKHEUHDNGRZQYROWDJHDWSRZHUIUHTXHQF\±7HVWPHWKRG %UHDNGRZQHOHFWULFILHOG N9PP
0RLVWXUHFRQWHQWLQWKHRLO SSP
)LJXUH
7KHPRLVWXUHFRQWHQWLQWKHRLOZKHQSHUIRUPLQJWKHGHOLYHU\WHVWRQDQHZWUDQVIRUPHULVPD[LPXP
SSP,WVKRXOGEHQRWHGWKDWWKHDFEUHDNGRZQILHOGGHFOLQHVTXLWHPXFKDVVRRQDVWKHPRLVWXUH
FRQWHQW H[FHHGV SSP &RQVHTXHQWO\ WKHUH ZLOO EH D IDOO DOVR LQ WKH GLHOHFWULF VWUHQJWK DQG WKH
VHUYLFHUHOLDELOLW\RIWKHWUDQVIRUPHU
)LJXUH VKRZV KRZ WKH '3 QXPEHU GHFUHDVHV ZLWK WKH WLPH LQ D WHVW DW ƒ& ,Q D QHZ
WUDQVIRUPHUWKHPRLVWXUHFRQWHQWLQWKHVROLGLQVXODWLRQLVGULHGWR7KHFXUYHLQ)LJXUHLV
WKHUHVXOWRIDPDWHULDOWHVWZKHUHVDPSOHVZLWKDQGVDPSOHVZLWKPRLVWXUHFRQWHQWDWWKH
EHJLQQLQJ RI WKH WHVW ZHUH H[SRVHG WR ƒ& 7KH YHUWLFDO D[LV LQGLFDWHV WKH TXRWLHQW RI
VLPXOWDQHRXVYDOXHVRI'3QXPEHUV7KHGHFOLQLQJFXUYHWKDWWKH'3QXPEHUIRUWKHVDPSOHVZLWK
PRLVWXUHLVUHGXFHGDWDKLJKHUUDWHWKDQWKHVDPSOHVZLWKPRLVWXUH>@
3DJH7UDQVIRUPHU+DQGERRN
'3'3
:HHNV
)LJXUH
.HHSLQJWKHPRLVWXUHFRQWHQWLQWKHVROLGLQVXODWLRQDQGLQWKHRLOORZLQFUHDVHVWKHSUREDELOLW\RI
UHOLDEOHWUDQVIRUPHURSHUDWLRQGXULQJPDQ\\HDUVRIWHQPRUHWKDQKDOIDFHQWXU\
,(&(G/RDGLQJJXLGHIRURLOLPPHUVHGSRZHUWUDQVIRUPHUSURYLGHVVLPSOLILHGPHWKRGV
RQKRZDWKHRUHWLFDOFRQVXPSWLRQRILQVXODWLRQOLIHFDQEHFDOFXODWHGZKHQRYHUORDGLQJ
WUDQVIRUPHUVFRQWLQXRXVO\DQGWHPSRUDULO\
3UDFWLFDO H[SHULHQFH VKRZV WKDW PDQ\ WUDQVIRUPHUV KDYH EHHQ RSHUDWHG VDWLVIDFWRULO\ XQWLO D
FKDQJHLQV\VWHPYROWDJHKDVQHFHVVLWDWHGDUHSODFHPHQW
7HPSHUDWXUHULVHDQGORDGFDSDFLW\
7KHUPDOFODVVLVGHILQHGWRZLWKVWDQGDFRQWLQXRXVWHPSHUDWXUHRI°&IRU\HDUVZLWKRXW
ORRVLQJ PRUH WKDQ RI LWV RULJLQDO PHFKDQLFDO VWUHQJWK &ODVV LV GHILQHG WR ZLWKVWDQG D
FRQWLQXRXVWHPSHUDWXUHRI°&IRU\HDUVDQGVRIRUWKIRUDOORWKHULQVXODWLRQFODVVHV
7KHVXPRIDPELHQWDYHUDJHWHPSHUDWXUHULVHRIDQ\RIWKHZLQGLQJV°& WRDOORZIRUWKDW
PD[LPXPWHPSHUDWXUHULVHLQDZLQGLQJLV°&DERYHDYHUDJH VKRXOGQRWH[FHHG°&
$JHLQJVHWVFHUWDLQOLPLWDWLRQVWRWKHORDGFDSDFLW\RIWKHWUDQVIRUPHU7KHVHOLPLWDWLRQVDUHGHILQHG
LQ ,(& SXEOLFDWLRQ ³/RDGLQJ JXLGH IRU RLO LPPHUVHG WUDQVIRUPHUV´ :LWKLQ VKRUW WLPH WR EH
UHSODFHGE\,(& &RQWLQXRXV ORDG FDSDFLW\ DW GLIIHUHQW FRQVWDQW DPELHQW DLU WHPSHUDWXUHV KDV EHHQ FDOFXODWHG
DFFRUGLQJWR,(&
3HUPLVVLEOHFRQWLQXRXVV\PPHWULFDOORDGLQJFDSDFLW\DWGLIIHUHQWDPELHQWDLU
WHPSHUDWXUHVIRU21$1GLVWULEXWLRQWUDQVIRUPHUV
&RQVWDQWDPELHQW
DLUWHPSHUDWXUHž&
3HUPLVVLEOHFRQWLQXRXV
ORDGIDFWRU
7HPSHUDWXUHULVHž&
3HUPLVVLEOHFRQWLQXRXV
ORDGIDFWRU
7HPSHUDWXUHULVHž&
,QSUDFWLFHWKHWUDQVIRUPHULVQRWFRQWLQXRXVO\IXOO\ORDGHG7KHORDGDQGWKHWHPSHUDWXUHIOXFWXDWH
E\VHDVRQVDQGWLPHRIWKHGD\
7KH SHUPLVVLEOH VKRUWWHUP RYHUORDG GHSHQGV RQ WKH VWDUWLQJ FRQGLWLRQV SOXV GXUDWLRQ DQG WKH
UHSHWLWLYHF\FOHRIWKHRYHUORDG7KLVLVGHILQHGLQWKH,(&DQGPXVWEHDQDO\VHGRQDFDVH
WRFDVHEDVLV
%DVHGRQWKHDERYHWKHUHLVDFHUWDLQHPHUJHQF\RYHUORDGFDSDFLW\IRUWKHWUDQVIRUPHU
6SHFLDODWWHQWLRQVKDOOEHSDLGWRWKHIDFWWKDWWKHWUDQVIRUPHU¶VVKRUWWHUPORDGFDSDFLW\FDQQRWEH
MXGJHG RQ WKH EDVLV RI WKH RLO WHPSHUDWXUH DORQH EHFDXVH WKH RLO WHPSHUDWXUH FKDQJHV PXFK
VORZHUZLWKWKHORDGWKDQWKHWHPSHUDWXUHULVHRIWKHZLQGLQJ
2YHUORDGLQJ D WUDQVIRUPHU LPSOLHV WKDW WKH FRQVWUXFWLRQ DQG WKH DFFHVVRULHV VXFK DV WKH WDS
FKDQJHU DQGWKH EXVKLQJV DUH FRUUHVSRQGLQJO\ UDWHG 1RUPDOO\ WKH DFFHVVRULHV DUH VHOHFWHGZLWK
UDWHGFXUUHQWQRWOHVVWKDQRIUDWHGFXUUHQWRIWKHWUDQVIRUPHU )RUEXVKLQJVVHH,(& 7UDQVIRUPHU+DQGERRN3DJH
&RUUHVSRQGLQJ FRQVLGHUDWLRQV DUH PDGH IRU GU\W\SH WUDQVIRUPHUV DQG DUH GHVFULEHG LQ
,(&/RDGLQJJXLGHIRUGU\W\SHSRZHUWUDQVIRUPHUV 8QGHUXSGDWLQJ )URP,(((67'&1RUPDOOLIHH[SHFWDQF\
7KHEDVLFORDGLQJRIDGLVWULEXWLRQWUDQVIRUPHUIRUQRUPDOOLIHH[SHFWDQF\LVFRQWLQXRXVORDGLQJDW
UDWHG RXWSXW ZKHQ RSHUDWHG XQGHU XVXDO VHUYLFH FRQGLWLRQV DV LQGLFDWHG LQ RI ,((( 6WG
&,WLVDVVXPHGWKDWRSHUDWLRQXQGHUWKHVHFRQGLWLRQVLVHTXLYDOHQWWRRSHUDWLRQLQD
FRQVWDQWƒ&DPELHQWWHPSHUDWXUH7KHKRWWHVWVSRWFRQGXFWRUWHPSHUDWXUHLVWKHSULQFLSDOIDFWRU
LQGHWHUPLQLQJOLIHGXHWRORDGLQJ'LUHFWWHPSHUDWXUHPHDVXUHPHQWRIWKHKRWWHVWVSRWPD\QRWEH
SUDFWLFDO RQ FRPPHUFLDO GHVLJQV 7KH LQGLFDWHG KRWWHVWVSRW WHPSHUDWXUHV KDYH WKHUHIRUH EHHQ
REWDLQHGIURPWHVWVPDGHLQWKHODERUDWRU\DQGPDWKHPDWLFDOPRGHOV7KHKRWWHVWVSRWWHPSHUDWXUH
DWUDWHGORDGLVWKHVXPRIWKHDYHUDJHZLQGLQJWHPSHUDWXUHDQGDKRWWHVWVSRWDOORZDQFHXVXDOO\
ƒ& 1RUPDO OLIH H[SHFWDQF\ ZLOO UHVXOW IURP RSHUDWLQJ FRQWLQXRXVO\ ZLWK KRWWHVWVSRW FRQGXFWRU
WHPSHUDWXUHRIƒ&RUDQHTXLYDOHQWGDOO\WUDQVLHQWF\FOH)RUPLQHUDORLOLPPHUVHGWUDQVIRUPHUV
RSHUDWLQJ FRQWLQXRXVO\ XQGHU WKH IRUHJRLQJ FRQGLWLRQV WKLV WHPSHUDWXUH KDV EHHQ OLPLWHG WR D
PD[LPXP RI ƒ& 1RUPDO OLIH H[SHFWDQF\ RI WUDQVIRUPHU LQVXODWLRQ XVLQJ GLIIHUHQW FULWHULD LV
JLYHQLQWDEOHLQ,(((67'&'LVWULEXWLRQDQGSRZHUWUDQVIRUPHUPRGHOWHVWVLQGLFDWH
WKDWWKHQRUPDOOLIHH[SHFWDQF\DWDFRQWLQXRXVKRWWHVWVSRWWHPSHUDWXUHRIƒ&LV\HDUV
3DUDOOHORSHUDWLRQ
:KHQWZRRUPRUHWUDQVIRUPHUVDUHFRQQHFWHGLQSDUDOOHOWKHIROORZLQJLVUHTXLUHG
• 2QO\ WUDQVIRUPHUV KDYLQJ WKH VDPH SKDVH GLVSODFHPHQW EHWZHHQ SULPDU\ DQG VHFRQGDU\
YROWDJH FDQ RSHUDWH LQ SDUDOOHO 7KH FORFNKRXU ZKLFK LQGLFDWH WKH SKDVH GLVSODFHPHQW LV
VWDPSHGRQWKHWUDQVIRUPHUUDWLQJSODWHHJ'\Q<G
• 3ROHVZLWKWKHVDPHSRODULW\RQ+9DQG/9VLGHVKDOOEHFRQQHFWHGLQSDUDOOHO
• 7UDQVIRUPHUVVKRXOGKDYHDSSUR[LPDWHO\WKHVDPHYROWDJHUDWLR
• 7KHVKRUWFLUFXLWLPSHGDQFHYROWDJHVKRXOGEHWKHVDPHZLWKLQ
• 7KHSRZHUUDWLQJRIWKHWUDQVIRUPHUVVKRXOGQRWGHYLDWHPRUHWKDQ
• 7DSFKDQJHUVVKRXOGKDYHWDSSRVLWLRQJLYLQJYROWDJHUDWLRVDVFORVHDVSRVVLEOH
'HYLDWLRQIURPWKHDERYHUHTXLUHPHQWVLVSRVVLEOHSURYLGHGDGHTXDWHNQRZOHGJHLVDYDLODEOH
)RU IXUWKHU GHWDLOV UHIHUHQFH LV PDGH WR ,(& 3RZHU WUDQVIRUPHUV ± $SSOLFDWLRQ JXLGH
FODXVHSDJH )UHTXHQF\
$ WUDQVIRUPHU GHVLJQHG IRU +] FDQ EH XVHG IRU +] EXW QRW YLFH YHUVD KRZHYHU HOHFWULF
HTXLSPHQWIRUDFFHVVRULHVVKRXOGEHFRQVLGHUHG
3URWHFWLRQ
2YHUFXUUHQWSURWHFWLRQ
7KHUHDUHWZRW\SHVRIRYHUFXUUHQWSURWHFWLRQ
• )XVHV
• 2YHUFXUUHQWUHOD\VZKLFKVHQGWULSSLQJVLJQDOVWRWKHFLUFXLWEUHDNHU
2YHUFXUUHQW SURWHFWLRQ LV PDLQO\ LQWHQGHG IRU SURWHFWLRQ DJDLQVW KLJK RYHUFXUUHQWV GXH WR
H[WHUQDOVKRUWFLUFXLWV
'LIIHUHQWLDOSURWHFWLRQ
'LIIHUHQWLDOUHOD\VUHDFWXSRQGLIIHUHQWDPSHUHWXUQVRQWKHWZRVLGHVRIWKHWUDQVIRUPHUZKLFK
LQGLFDWHVWKDWWKHUHPD\EHDQLQWHUQDOIDXOWLQWKHWUDQVIRUPHU
3DJH7UDQVIRUPHU+DQGERRN
$ODUPDQGWULSVLJQDOVIURPWKHWUDQVIRUPHU
6LJQDOVIURPWKHWUDQVIRUPHUFDQHLWKHUEHORFDORUUHPRWH7KHDFFHVVRULHVRQWKHWUDQVIRUPHU
GHWHUPLQHWKHNLQGRIVLJQDOV7KLVLVDJDLQGHSHQGVRQWKHW\SHRIWUDQVIRUPHUDQGFXVWRPHU
UHTXLUHPHQWV
,QLWVVLPSOHVWIRUPWKHVLJQDOLVORFDODQGZLWKRQO\YLVXDOLQGLFDWLRQDWWKHWUDQVIRUPHUZKLFK
HJ PD\ EH IURP D OLTXLG OHYHO LQGLFDWRU RU D GLDO WKHUPRPHWHU PHDVXULQJ WKH WRS RLO
WHPSHUDWXUH
)URP PRVW DFFHVVRULHV UHPRWH VLJQDOV PD\ EH FROOHFWHG 7KH QRUPDO ZD\ WR GR WKLV LV WR
WUDQVIHU DOO VLJQDOV WR D FRPPRQ FRQQHFWLRQ ER[ RQ VPDOO WUDQVIRUPHUV RU WR D WHUPLQDWLRQ
FDELQHW IRU ODUJHU WUDQVIRUPHUV )URP KHUH WKH FXVWRPHU PD\ WUDQVIHU WKH VLJQDOV IXUWKHU WR D
FRQWUROURRP
([DPSOHV
• 7RSRLOWHPSHUDWXUH
• :LQGLQJWHPSHUDWXUH
• *DVDFWXDWHGUHOD\
• 2LOOHYHOLQGLFDWRU
• 3UHVVXUHUHOLHIGHYLFHV
• 2LODQGZDWHUIORZLQGLFDWRUV
• 2QORDGWDSFKDQJHUSRVLWLRQLQGLFDWLRQ
• 2QOLQHPRQLWRULQJV\VWHP
6HHVHFWLRQSDJHIRUIXUWKHUGHWDLOVRQDFFHVVRULHV
2YHUYROWDJHSURWHFWLRQ
6HHVHFWLRQSDJH
021,725,1*
*HQHUDO
0RVWWUDQVIRUPHUVDUHHTXLSSHGZLWKSURWHFWLRQV\VWHPVWRDYRLGGDPDJHWRWKHWUDQVIRUPHUVWKH
QHWZRUNRUERWKLQWKHHYHQWRIQRQQRUPDORSHUDWLRQRIWKHWUDQVIRUPHURUWKHQHWZRUN([DPSOHV
RI VXFK SURWHFWLRQ V\VWHPV DUH WKH QHWZRUN DQG WUDQVIRUPHU SURWHFWLRQ FXUUHQW WUDQVIRUPHUV
PRXQWHGXVXDOO\DWWKHWUDQVIRUPHUWHUPLQDOVIHHGLQJUHOD\V RYHUFXUUHQWGLIIHUHQWLDO WKHJDVDQG
RLODFWLYDWHGUHOD\ %XFKKRO] DQGWKHZLQGLQJDQGRLOWHPSHUDWXUHLQGLFDWRUV :7,DQG27, 7KHVH
V\VWHPV DUH FRPPRQ WR PRVW SRZHU WUDQVIRUPHUV LQFOXGLQJ VRPH GLVWULEXWLRQ WUDQVIRUPHUV
+RZHYHUPRQLWRUVDUHPRVWO\FRQILQHGWRPHGLXPWRODUJHSRZHUWUDQVIRUPHUVLQSDUWLFXODUWKRVH
WKDW DUH VWUDWHJLFDOO\ LPSRUWDQW LQ D QHWZRUN RU DV LQ WKH FDVH RI JHQHUDWRU VWHSXS WUDQVIRUPHUV
DQG+9'&FRQYHUWHUWUDQVIRUPHUVZKHUHWKHWUDQVIRUPHUVDUHWKHRQO\PHDQVRISRZHUWUDQVIHULQ
QHWZRUNV $Q XQSODQQHG WUDQVIRUPHU RXWDJH LQ WKHVH QHWZRUNV FDQ KDYH VHYHUH WHFKQLFDO DQG
HFRQRPLF FRQVHTXHQFHV IRU WKH QHWZRUN RSHUDWRU 7KH PDLQ SXUSRVH RI ILWWLQJ PRQLWRUV WR WKHVH
WUDQVIRUPHUV LV IRU FRQGLWLRQ DVVHVVPHQW ZLWK WKH SXUSRVH RI PLWLJDWLQJ VRPH RI WKH DERYH
GLIILFXOWLHV>'UDIW,(&&RQYHUWRUWUDQVIRUPHUV3DUW$SSOLFDWLRQJXLGH@
0RQLWRULQJRIWUDQVIRUPHUVFDQURXJKO\EHGLYLGHGLQKLJKDQGORZOHYHOPRQLWRULQJ
•
+LJKOHYHO
o 2QOLQHPRQLWRULQJ
•
/RZOHYHO
o 3HULRGLFUHFRUGLQJRIDIHZSDUDPHWHUVYLVXDOLQVSHFWLRQ
o 2LOFRQGLWLRQPRQLWRULQJ
o 2IIOLQHPRQLWRULQJ
7UDQVIRUPHU+DQGERRN3DJH
+LJKOHYHOPRQLWRULQJ
7KH PDMRU JRDOV RI DQ RQOLQH PRQLWRULQJ V\VWHP DUH WR SUHYHQW PDMRU IDLOXUHV WR DFKLHYH EHWWHU
XWLOLVDWLRQ RI ORDG FDSDFLW\ RSWLPLVH PDLQWHQDQFH DQG WR H[WHQG WKH UHPDLQLQJ OLIHWLPH
7UDQVIRUPHUV RI VWUDWHJLFDOO\ LPSRUWDQFH VKRXOG EH HTXLSSHG ZLWK RQOLQH PRQLWRULQJ V\VWHPV LQ
RUGHUWRHQVXUHUHOLDEOHRSHUDWLRQDPLQLPXPRIPDLQWHQDQFH FRQGLWLRQEDVHGPDLQWHQDQFH DQG
ORZOLIHF\FOHFRVW
7KHRQOLQHPRQLWRULQJV\VWHPUHFHLYHDQGDUFKLYHDOOLQIRUPDWLRQQHHGHGIURPMXVWDIHZVHQVRUV
RWKHU QHFHVVDU\ SDUDPHWHUV DUH FDOFXODWHG EDVHG RQ WKH FRPSLOHG GDWD 7KH RQOLQH PRQLWRULQJ
V\VWHPUHFHLYHVW\SLFDOO\WKHIROORZLQJLQIRUPDWLRQIURPVHQVRUV
•
•
•
•
•
•
•
7HPSHUDWXUHV
*DVLQRLO
0RLVWXUH
3DUWLDOGLVFKDUJH
&XUUHQWV
9ROWDJHV
7DS&KDQJHU
7KH PHDVXUHG DQG FDOFXODWHG SDUDPHWHUV DUH XVHG LQ DOJRULWKPV XVHG LQ PRGHOV IRU FDOFXODWLQJ
DQGUHFRUGLQJ
•
•
•
•
•
•
&RROLQJRYHUORDGIRUHFDVW
5HDOWLPHVWDWXVDYDLODELOLW\
/LIHWLPH
(YHQWUHFRUGLQJ
&RQGLWLRQEDVHGPDLQWHQDQFH
2SHUDWLRQDQGXSGDWHV
(JE\NQRZLQJWKHFXUUHQWDWHDFK2/7&RSHUDWLRQDQGWKHQXPEHURIRSHUDWLRQVWKHZHDURIWKH
FRQWDFWV FDQ EH FDOFXODWHG 0DLQWHQDQFH FDQ WKHQ EH SHUIRUPHG DV FRQGLWLRQ EDVHG LQVWHDG RI
SHULRGLFDOO\7KHDGYDQWDJHRIFRQGLWLRQEDVHGPDLQWHQDQFHLVWKDWWKHPDLQWHQDQFHLVSHUIRUPHG
ZKHQQHFHVVDU\DQGQRWWRHDUO\RUORQJRYHUGXH:LWKVXFKV\VWHPVHDUO\ZDUQLQJVDUHJLYHQDQG
QHFHVVDU\SUHFDXWLRQVZLWKUHJDUGVWRPDLQWHQDQFHFDQEHWDNHQLQRUGHUWRDYRLGIDLOXUHVWKDWPD\
KDYHODUJHHFRQRPLFDOFRQVHTXHQFHV
6\VWHPVIRUFRQWURODQGPRQLWRULQJDUHDYDLODEOHZLWKLQ$%%2QHRIWKHV\VWHPVLV7(&ZKLFKLVD
WUDQVIRUPHUFRQWURODQGPRQLWRULQJV\VWHPWKDWQHZWUDQVIRUPHUVFDQEHHTXLSSHGZLWK)LJXUH
VKRZVWKHOD\RXWRIWKH7(&V\VWHP
)LJXUH
2OGHUWUDQVIRUPHUFDQEHHTXLSSHGZLWKDPRQLWRULQJV\VWHPFDOOHG70RQLWRU
3DJH7UDQVIRUPHU+DQGERRN
/RZOHYHOPRQLWRULQJ
0RVW WUDQVIRUPHUV KDYH D PLQLPXP RI PRQLWRULQJ /RZ OHYHO PRQLWRULQJ FDQ EH GLYLGHG LQWR WKH
IROORZLQJ
•
3HULRGLFUHFRUGLQJRIDIHZSDUDPHWHUVYLVXDOLQVSHFWLRQ
•
2LOFRQGLWLRQPRQLWRULQJ
•
2IIOLQHPRQLWRULQJ
3HULRGLFDOO\ UHFRUGLQJ LV QRUPDOO\ GRQH ZKHQ WKH WUDQVIRUPHU LV HQHUJLVHG ,W LV LPSRUWDQW WR WDNH
WKHQHFHVVDU\VDIHW\SUHFDXWLRQVZKHQWKHLQVSHFWLRQLVSHUIRUPHG7KHSDUDPHWHUVUHFRUGHGFDQ
EH RLO OHYHO WRS RLO WHPSHUDWXUH ZLQGLQJ WHPSHUDWXUH ORDG FXUUHQW DQG WKH QXPEHU RI RSHUDWLRQV
VLQFHODVWPDLQWHQDQFHRIWKHWDSFKDQJHU7KHDPRXQWRIHTXLSPHQWZLOOYDU\GHSHQGLQJW\SHRI
WUDQVIRUPHU LPSRUWDQFH RI WUDQVIRUPHU HWF 'HSHQGLQJ RQ WKH LPSRUWDQFH RI WKH WUDQVIRUPHU WKH
UHFRUGLQJ RI WKHVH SDUDPHWHUV FRXOG EH GRQH GDLO\ ZHHNO\ PRQWKO\ RU HYHQ PRUH UDUHO\ $W WKH
VDPHWLPHDVWKHDERYHPHQWLRQHGSDUDPHWHUVDUHUHFRUGHGDYLVXDOLQVSHFWLRQRIWKHWUDQVIRUPHU
IRUOHDNDJHVDQGFUDFNVLQEXVKLQJVVKRXOGEHSHUIRUPHG
3HULRGLFDQDO\VLVRIWKHRLOLQDWUDQVIRUPHU RLOFRQGLWLRQPRQLWRULQJ LVE\IDUWKHPRVWZLGHO\XVHG
PHWKRG IRU PRQLWRULQJ WKH JHQHUDO FRQGLWLRQ RI D WUDQVIRUPHU 7KH FRQGLWLRQ RI WKH RLO DQG LQ
SDUWLFXODURIWKHWUDQVIRUPHUVLQVXODWLRQV\VWHPVFDQEHGHWHUPLQHGE\WDNLQJRLOVDPSOHVIURPWKH
WUDQVIRUPHU IRU GLVVROYHG JDV DQDO\VLV '*$ DQG RWKHU WHVWV 7KH WHVWV DUH FRPSUHKHQVLYHO\
GHVFULEHG IRU H[DPSOH LQ WKH ,(& 6WDQGDUG DQG WKH *XLGHV DQG 7KH
SUHVHQFHRIDQLQFLSLHQWIDXOWLQDWUDQVIRUPHUZLOOQRUPDOO\EHGHWHFWHGE\WKLVPHDQV7KRXJKWKH
LQWHUSUHWDWLRQRIWKHIDXOWPHFKDQLVPDQGLWVORFDWLRQFRXOGEHPRUHGLIILFXOWWRGHWHUPLQH>'UDIW,(&
&RQYHUWRUWUDQVIRUPHUV3DUW$SSOLFDWLRQJXLGH@
1RUPDOO\ RLO VDPSOHV DUH WDNHQ ZKHQ WKH WUDQVIRUPHU LV HQHUJLVHG DQG QHFHVVDU\ VDIHW\
SUHFDXWLRQVVKRXOGEHWDNHQ7KHIUHTXHQF\RIKRZRIWHQWKHRLOVDPSOHVVKRXOGEHWDNHQZLOOYDU\
GHSHQGLQJ RQ WKH LPSRUWDQFH RI WKH WUDQVIRUPHU 7KH PRVW FRPPRQ IUHTXHQF\ IRU RLO FRQGLWLRQ
PRQLWRULQJ LV DQQXDOO\ :KHQ WKHUH LV VXVSLFLRQ RI DQ LQFLSLHQW IDXOW LQ SURJUHVV WKH RLO VDPSOHV
VKRXOGEHWDNHQPRUHIUHTXHQWO\HJHYHU\WKUHHPRQWKV
,PSURYHPHQWVLQWKHWHVWSURFHGXUHDQGDQDO\VLVKDYHRFFXUUHGIURPWLPHWRWLPHDVWKHODERUDWRU\
WHVW HTXLSPHQW DQG WKH XQGHUVWDQGLQJ RI WKH FKHPLFDO SURFHVVHV RFFXUULQJ LQ WUDQVIRUPHUV DQG
WKHLUDQDO\VLVLPSURYH$QH[DPSOHRIWKLVLVWKHPHDVXUHPHQWRIWKHIXUIXUDOGHK\GH ))$ FRQWHQW
LQ WUDQVIRUPHU RLO VDPSOHV 7KH PDJQLWXGH RI WKH ))$ FRQVWLWXHQW SUHVHQW LQ WUDQVIRUPHU RLO
VDPSOHVLVDQLPSRUWDQWIDFWRUIRUDVVHVVLQJWKHDJHLQJRIWKHWUDQVIRUPHULQVXODWLRQDQGLQGLUHFWO\
RIIHUVDQDVVHVVPHQWRI WUDQVIRUPHU OLIH H[SHFWDQF\ >'UDIW ,(&&RQYHUWRU WUDQVIRUPHUV 3DUW$SSOLFDWLRQJXLGH@
2IIOLQHFRQGLWLRQPRQLWRULQJWDNHVSODFHGXULQJDWUDQVIRUPHURXWDJHIRUPDLQWHQDQFHRUZKHQDQ
RXWDJHKDVRFFXUUHGDVWKHUHVXOWRIDWUDQVIRUPHURUQHWZRUNIDXOW7HVWVDUHRQWKHWUDQVIRUPHUDW
VLWHZLWKWKHWUDQVIRUPHUGHHQHUJLVHG
7KHJHQHUDOFRQGLWLRQRIWKHWUDQVIRUPHUDQGRIWKHLQVXODWLRQV\VWHPVFDQEHGHWHUPLQHGE\WDNLQJ
RLO VDPSOHV IURP WKH WUDQVIRUPHU IRU GLVVROYHG JDV DQDO\VLV '*$ DQG RWKHU WHVWV DV GHVFULEHG
DERYH
,QDGGLWLRQVSHFLILFVLWHWHVWVFDQEHSHUIRUPHGWRGHWHUPLQHWKHHOHFWULFDODQGPHFKDQLFDOVWDWXVRI
WKH WUDQVIRUPHU 7KH SDUDPHWHUV WKDW FDQ EH PHDVXUHG DQG XVHG IRU WKLV SXUSRVH LQFOXGH >GUDIW
,(&&RQYHUWRUWUDQVIRUPHUV3DUW$SSOLFDWLRQJXLGH@
•
:LQGLQJUHVLVWDQFHV
•
0DJQHWLVLQJFXUUHQWV
•
,PSHGDQFHYROWDJHV
•
'LHOHFWULFORVVIDFWRU
•
,QVXODWLRQUHVLVWDQFHLQFOXGLQJFRUHDQG\RNHFODPSVWRHDUWK
•
,QWHUZLQGLQJDQGZLQGLQJWRHDUWKFDSDFLWDQFHPHDVXUHPHQWV
•
'LHOHFWULFUHVSRQVHPHDVXUHPHQWRIPRLVWXUHLQVROLGLQVXODWLRQ
$OO WKH DERYH WHVWV DUH QRQLQYDVLYH ZLWK WKH H[FHSWLRQ SRVVLEO\ RI WKH FRUH LQVXODWLRQ UHVLVWDQFH
PHDVXUHPHQWV 8QOHVV WKH FRUH DQG FODPSV HDUWKLQJ FRQQHFWLRQV KDYH EHHQ EURXJKW RXW IRU
H[WHUQDO JURXQGLQJ WKHVH SDUWLFXODU WHVWV PD\ KDYH WR EH PDGH E\ RSHQLQJ WKH WUDQVIRUPHU WR
REWDLQDFFHVVWRWKHFRQQHFWLRQV´
7UDQVIRUPHU+DQGERRN3DJH
,QVSHFWLRQLQHQHUJLVHGFRQGLWLRQ
,QVSHFWLRQGXULQJRSHUDWLRQVKDOORQO\EHSHUIRUPHGDIWHUWDNLQJVDIHW\PHDVXUHVLQWRFRQVLGHUDWLRQ
DVDSSOLFDEOH
• ,I WKHUH LV D PD[LPXP LQGLFDWRU RQ WKH WKHUPRPHWHU WKH PD[LPXP WHPSHUDWXUH VKRXOG EH
UHFRUGHG
• 2LOOHYHOVWUDQVIRUPHUWDSFKDQJHU
• &KHFNRLOZDWHUIORZ
• 3UHVVXUHJDXJHVOHDNDJHGHWHFWRUV
• 6XUJHDUUHVWHUFRXQWHUV
• 0RWRUGULYHXQLWVFRXQWHUV
• 6XUJHDUUHVWHUOHDNDJHFXUUHQWV
• 2/7&SUHVVXUHRLOILOWHUPDQRPHWHUV
• ,QVSHFWLRQIRUFRQWDPLQDWLRQHVSHFLDOO\RQEXVKLQJV
• ,QVSHFWLRQRIVXUIDFHFRQGLWLRQ
• 'HK\GUDWLQJEUHDWKHU7KHVLOLFDJHOVKDOOEHFKDQJHGZKHQDSSUR[RIWKHVLOLFDJHOKDV
FKDQJHGIURPEOXHWRUHGFRORXU ROGW\SH RUIURPSLQNWRZKLWHUHVSHFWLYHO\ &RQVHUYDWRU
W\SHRQO\ • ,QVSHFWLRQIRUOHDNDJHV
• ,UUHJXODUQRLVHIURPWUDQVIRUPHURLOSXPSVPRWRUVDQGFRROLQJIDQVHTXLSPHQW
• 2WKHULUUHJXODUFRQGLWLRQVDODUPVWULSVHWF
• 0DLQWHQDQFHFDUULHGRXW
,QVSHFWLRQLQGHHQHUJLVHGFRQGLWLRQ
$IWHU WKH WUDQVIRUPHU LV GLVFRQQHFWHG DQG SURSHUO\ HDUWKHG LQVSHFWLRQ LQ GHHQHUJLVHG FRQGLWLRQ
PD\EHSHUIRUPHG,QDGGLWLRQWRWKHLWHPVOLVWHGLQVHFWLRQLWLVSRVVLEOHWRLQVSHFWLWHPVWKDW
QRW DUH YLVLEOH LQ HQHUJLVHG FRQGLWLRQ W\SLFDOO\ HTXLSPHQW ORFDWHG RQ WKH WUDQVIRUPHU FRYHU
)XUWKHULIQHFHVVDU\LQWHUQDOLQVSHFWLRQRIWKHWUDQVIRUPHUPD\EHSHUIRUPHGDIWHUGUDLQLQJWKHRLO
3DJH7UDQVIRUPHU+DQGERRN
0$,17(1$1&(
*HQHUDO
7KHSULPDU\SXUSRVHRIWUDQVIRUPHUPDLQWHQDQFHLVWRHQVXUHWKHLQWHUQDODQGH[WHUQDOSDUWVRIWKH
WUDQVIRUPHU DQG DFFHVVRULHV DUH NHSW LQ JRRG FRQGLWLRQ DQG ³ILW IRU SXUSRVH´ DQG DEOH WR RSHUDWH
VDIHO\DWDOOWLPHV$VHFRQGDU\DQGHTXDOO\HVVHQWLDOSXUSRVHLVWRPDLQWDLQDKLVWRULFDOUHFRUGRI
WKH FRQGLWLRQ RI WKH WUDQVIRUPHU >GUDIW ,(& &RQYHUWRU WUDQVIRUPHUV 3DUW $SSOLFDWLRQ
JXLGH@
7UDQVIRUPHUPDLQWHQDQFHFDQEHGRQHSHULRGLFDOO\RUDVFRQGLWLRQEDVHGPDLQWHQDQFH7KHODWWHU
LVXVXDOO\WKHPRVWHFRQRPLFDOZD\RIGRLQJPDLQWHQDQFH5HFRPPHQGHGPDLQWHQDQFHDUHWKHQ
GRQH EDVHG RQ RQH RU PRUH RI WKH IROORZLQJ LQVSHFWLRQV DQDO\VLV RI RLO VDPSOHV HOHFWULFDO
PHDVXUHPHQWVWHVWRIHTXLSPHQWPHDVXUHPHQWRIWHPSHUDWXUHVE\XVLQJDKHDWVHQVLWLYHFDPHUD
PRQLWRULQJ RIIOLQHDQGRURQOLQH 0DLQWHQDQFHLQHQHUJLVHGFRQGLWLRQ
)RUSHUVRQDOVDIHW\UHDVRQVRQO\DOLPLWHGDPRXQWRIPDLQWHQDQFHDFWLYLWLHVVKRXOGEHSHUIRUPHG
RQWKHWUDQVIRUPHUZKHQLWLVLQRSHUDWLRQ:KHQQHFHVVDU\VDIHW\SUHFDXWLRQVKDYHEHHQWDNHQWKH
IROORZLQJPDLQWHQDQFHFDQEHGRQHLQHQHUJLVHGFRQGLWLRQ
•
•
•
•
,QVSHFWLRQIRUOHDNDJHVFUDFNVLQSRUFHODLQEXVKLQJVFKHFNRIDX[LOLDU\HTXLSPHQWHWF
&KHFNGU\LQJPDWHULDOLQWKHGHK\GUDWLQJEUHDWKHU &RQVHUYDWRUW\SHRQO\ 0HDVXUHPHQWRIWHPSHUDWXUHVRIMRLQWVEXVKLQJVHWFE\XVLQJDKHDWVHQVLWLYHFDPHUD
2LOVDPSOHV &RQVHUYDWRUW\SHRQO\ 0DLQWHQDQFHLQGHHQHUJLVHGFRQGLWLRQ
%HIRUH VWDUWLQJ PDLQWHQDQFH ZRUN WKH WUDQVIRUPHU KDV WR EH GLVFRQQHFWHG IURP WKH QHWZRUN DQG
HDUWKHG:KHQWKHFLUFXLWEUHDNHUDQGWKHLVRODWRUKDYHEHHQRSHQHGWKH\VKDOOEHORFNHGLQRSHQ
SRVLWLRQWRSUHYHQWLQDGYHUWHQWO\FORVLQJGXULQJPDLQWHQDQFHZRUN
,WHPVWREHFRQVLGHUHGDUH
• %XVKLQJ JDVNHWV LI OHDNV RFFXU WLJKWHQLQJ XVXDOO\ ZLOO KHOS LI WKH JDVNHW KDV ORVW LWV
HODVWLFLW\LWPXVWEHUHSODFHG7KHUHDVRQIRUORVVRIHODVWLFLW\FRXOGEHH[FHVVLYHKHDWLQJRU
DJLQJ
• &RYHUJDVNHWVYDOYHVDQGJDVNHWVRIWKHWDSFKDQJHU,IWKHUHDUHOHDNDJHVEROWWLJKWHQLQJ
ZLOORIWHQKHOS
• :HOGHGMRLQWV/HDNLQJMRLQWVFDQEHUHSDLUHGRQO\E\ZHOGLQJ$VNLOOHGZHOGHUDQGDZHOGLQJ
LQVWUXFWLRQDUHUHTXLUHG&RQWDFW$%%IRUIXUWKHULQVWUXFWLRQV
• &OHDQLQJFRQWDPLQDWHGEXVKLQJV FOHDQLQJDJHQWHJPHWK\ODWHGVSLULW • &OHDQLQJJODVVHVRQJDVUHOD\WKHUPRPHWHUDQGOLTXLGOHYHOLQGLFDWRU
• )XQFWLRQDOLQVSHFWLRQDQGWHVWLQJRIDSSOLFDEOHDFFHVVRULHV
• 0RYHWDSFKDQJHUWKURXJKDOOSRVLWLRQVDIHZWLPHVDOOW\SHVRIWDSFKDQJHUV
• /LTXLGVDPSOLQJIURPERWWRPGUDLQYDOYHIRUODUJHUXQLWVDVUHTXLUHG
• &KHFNGU\LQJPDWHULDOLQWKHGHK\GUDWLQJEUHDWKHU &RQVHUYDWRUW\SHRQO\ • $PHQGVXUIDFHWUHDWPHQWGHIHFWV
• 2LODQGLQVXODWLRQPDLQWHQDQFHGU\LQJDQGUHFODLPLQJVHHVHFWLRQSDJH
• 7DSFKDQJHUPDLQWHQDQFHVHHVHFWLRQVSDJHDQGSDJH
• ,QVSHFWLRQ DQG PDLQWHQDQFH RQ WKH DFWLYH SDUW VKRXOG QRW EH SHUIRUPHG XQOHVV WKHUH DUH
XQDPELJXRXVLQGLFDWLRQVRIGHIHFWV
,QDGGLWLRQIRUGU\W\SHWUDQVIRUPHUV
• ,QVSHFWLRQDQGHJYDFXXPFOHDQLQJDVUHTXLUHG
• +XPLGLW\UHPRYDO
• 7LJKWHQLQJZLQGLQJVXSSRUWV
,QKHDYLO\FRQWDPLQDWHGLQVWDOODWLRQVPRUHIUHTXHQWLQVSHFWLRQVPD\EHQHHGHG
7UDQVIRUPHU+DQGERRN3DJH
,QYHVWLJDWLRQRIWUDQVIRUPHUGLVWXUEDQFHV
,I GXULQJ RSHUDWLRQ WKH SURWHFWLYH HTXLSPHQW RI WKH WUDQVIRUPHU JLYHV DQ DODUP RU WULSV WKH
WUDQVIRUPHU IURP WKH QHWZRUN RQH VKRXOG LPPHGLDWHO\ LQYHVWLJDWH WKH UHDVRQ IRU LW 6WXGLHV PD\
UHYHDOZKHWKHULWLVDTXHVWLRQRIWUDQVIRUPHUGDPDJHRUVRPHRWKHUGLVWXUEDQFHVLQWKHV\VWHP
)DXOWORFDOLVDWLRQDGYLFHGU\W\SHWUDQVIRUPHUV
)RURLOW\SHWUDQVIRUPHUVVHHVHFWLRQIRUIXUWKHULQIRUPDWLRQ)RUGU\W\SHWUDQVIRUPHUVVHH
WDEOHEHORZLQDGGLWLRQ
6<037206
/RZLQVXODWLRQ
UHVLVWDQFH
352%$%/(&$86(6
62/87,216
3UHVHQFHRIKXPLGLW\RQVXUIDFH
RIZLQGLQJV
&OHDQZLWKGU\DLU
9HQWLODWH
&RQWDPLQDWLRQ$JHLQJ
&OHDQ&RQWDFW$%%
:LQGLQJV'HIHFWLYHZLQGLQJV
&RQWDFW$%%
7DSFKDQJHURUEROWHGOLQNV
7KHDXWRPDWLF
SURWHFWLRQGHYLFH
WULSVDVVRRQDVWKH
WUDQVIRUPHULV
HQHUJL]HG
8QH[SHFWHGVHFRQGDU\
YROWDJH
1RQV\PPHWULFDO
YROWDJHVRQWKH
VHFRQGDU\VLGH
6SXULRXVWULJJHULQJ
GXULQJRSHUDWLRQ
7KHSULPDU\YROWDJHGRHVQRW
FRLQFLGHZLWKWKHSRVLWLRQRU
FRQQHFWLRQ
&KHFNWKDWWKHSRVLWLRQRU
FRQQHFWLRQFRPSO\ZLWK
WKHSULPDU\YROWDJH
)XVHVEORZV
)XVHVLQFRUUHFWO\FDOLEUDWHG
&KDQJHIXVHV
&RQVLGHUGLIIHUHQWUDWLQJ
3URWHFWLRQUHOD\V
7LPLQJDQGRUFXUUHQWLV
LQFRUUHFWO\DGMXVWHG
&KHFNWLPLQJDQGFXUUHQW
VHWWLQJ
3ULPDU\YROWDJH
$EVHQFHRISULPDU\YROWDJH
&KHFNLQVWDOODWLRQDQG
FRQWDFWWKHHOHFWULFLW\
XWLOLW\
7DSFKDQJHURUEROWHGOLQNV
LQFRUUHFWO\SRVLWLRQHGRU
FRQQHFWHG
&KDQJHSRVLWLRQRU
FRQQHFWLRQ
:LQGLQJUXSWXUH
&RQWDFW$%%
%ROWHGOLQNVLQFRUUHFWO\FRQQHFWHG
LQRQHRIWKHSKDVHV
&KHFNWKHFRQQHFWLRQV
&KHFNLQVWDOODWLRQDQG
FRQWDFWWKHHOHFWULFLW\
XWLOLW\
)XVHKDVEORZQLQRQHSKDVH
&KDQJHIXVH
:LQGLQJUXSWXUH
&RQWDFW$%%
/9LQVWDOODWLRQ
1RQV\PPHWULFDOORDGRQWKH
VHFRQGDU\VLGH
&KHFN/9LQVWDOODWLRQ
1RYROWDJHDSSOLHGLQRQHRIWKH
SKDVHVRQWKHSULPDU\VLGH
&RQWDFWWKHHOHFWULFLW\
XWLOLW\
7ULJJHULQJDQGDODUPLQFRUUHFWO\
VHW
,QFRUUHFWWKHUPRPHWHURSHUDWLRQ
&KHFNVHWWLQJV
&KHFNWKHUPRPHWHU
'HIHFW3WVHQVRUVRU
WKHUPLVWRUV
&KHFNVHQVRUVRU
WKHUPLVWRUV
)XVH%ORZQIXVH
&KDQJHIXVH
5HOD\V,QFRUUHFWWLPLQJ
&KHFNWLPLQJ
3DJH7UDQVIRUPHU+DQGERRN
6<037206
352%$%/(&$86(6
7ULJJHULQJRIWKH
RYHUFXUUHQWUHOD\RU
EORZQ+9IXVHVGXULQJ
RSHUDWLRQ
6KRUWFLUFXLWLQWKHV\VWHPRQWKH
VHFRQGDU\VLGH
3HUIRUDWLRQRILQVXODWLQJPDWHULDO
)DLOXUHLQWKHWUDQVIRUPHU
7ULJJHULQJRIGLIIHUHQWLDO
)DLOXUHLQFXUUHQWWUDQVIRUPHUV
UHOD\GXULQJRSHUDWLRQ
IHHGLQJWKHUHOD\
$EQRUPDORSHUDWLQJ
WHPSHUDWXUH
+LJKYROWDJHWRHDUWK
+LJKDFRXVWLFDOVRXQG
OHYHO
6PRNH
62/87,216
5HPRYHWKHIDLOXUHLQWKH
V\VWHP
&RQWDFW$%%
&RQWDFW$%%
&KHFNFXUUHQW
WUDQVIRUPHUV
,QVXIILFLHQWYHQWLODWLRQ+LJK
DPELHQWWHPSHUDWXUH
&KHFNYHQWLODWLRQRI
SUHPLVHV&RQVLGHU
LQVWDOODWLRQRIFRROLQJIDQV
7UDQVIRUPHURYHUORDGHG
&RQVLGHUORDGUHGXFWLRQ
RULQVWDOODWLRQRID
WUDQVIRUPHUZLWKKLJKHU
SRZHUUDWLQJ
/RFDOKHDWLQJDWWKHWUDQVIRUPHU
WHUPLQDOV
&OHDQFRQWDFWVXUIDFHV
DQGUHWLJKWHQ
([FHVVLYHFDEOHKHDWLQJ
&KHFNWKHFXUUHQW
FDUU\LQJFDSDFLW\RIWKH
FDEOH&RQVLGHU
LQVWDOODWLRQDUUDQJHPHQW
DQGWKHVL]HRIWKHFDEOH
(DUWKIDLOXUHRQRQHSKDVH
5HPRYHIDLOXUH
6XSSO\YROWDJHKLJKHUWKDQ
SUHVXSSRVHG
&KDQJHEROWHGOLQNV
FRQQHFWLRQ
/RRVHDFFHVVRULHVRUHOHPHQWV
5HWLJKWHQ
5HIOHFWLRQIURPZDOOVDQGRWKHU
HOHPHQWV
,QVWDOOVRXQGGDPSLQJ
SDQHOV3ODFHWKH
WUDQVIRUPHULQQRQSDUDOOHO
GLUHFWLRQWRWKHZDOOV8VH
GDPSLQJSDGVEHORZWKH
WUDQVIRUPHU
/RZIUHTXHQF\
&RQWDFWHOHFWULFLW\XWLOLW\
,QVXODWLRQIDLOXUH
&RQWDFW$%%
127(&RQWDFWVSHFLDOLVWVEHIRUHLQVSHFWLRQDGMXVWPHQWDQGUHSDLURIYLWDOSDUWV
2EVHUYHJXDUDQWHHFRQGLWLRQV
)DXOWORFDOLVDWLRQDGYLFHVRLOLPPHUVHGWUDQVIRUPHUV
7KHWDEOHEHORZLQFOXGHVDOOW\SHVRIRLOLPPHUVHGWUDQVIRUPHUV
6<037206
352%$%/(&$86(6
62/87,216
/RZLQVXODWLRQ
UHVLVWDQFH
(DUWKIDXOW2LOGHILFHQF\
&RQWDFW$%%
3ULPDU\YROWDJH
$EVHQFHRISULPDU\YROWDJH
&KHFNLQVWDOODWLRQDQG
FRQWDFWWKHHOHFWULFLW\
XWLOLW\
7DSFKDQJHURUEROWHGOLQNV
LQFRUUHFWO\SRVLWLRQHGRU
FRQQHFWHG
&KDQJHSRVLWLRQRU
FRQQHFWLRQ
:LQGLQJUXSWXUH
&RQWDFW$%%
%ORZQIXVHLQRQHSKDVH
&KDQJHIXVH
8QH[SHFWHGVHFRQGDU\
YROWDJH
7UDQVIRUPHU+DQGERRN3DJH
6<037206
1RQV\PPHWULFDO
YROWDJHVRQWKH
VHFRQGDU\VLGH
352%$%/(&$86(6
62/87,216
%ROWHGOLQNVLQFRUUHFWO\FRQQHFWHG
LQRQHRIWKHSKDVHV
&KHFNWKHFRQQHFWLRQV
&KHFNLQVWDOODWLRQDQG
FRQWDFWWKHHOHFWULFLW\
XWLOLW\
:LQGLQJUXSWXUH
&RQWDFW$%%
/9LQVWDOODWLRQ
7ULJJHULQJRIWKHRYHU
FXUUHQWUHOD\
1RQV\PPHWULFDOORDGRQWKH
VHFRQGDU\VLGH
&KHFN/9LQVWDOODWLRQ
1RYROWDJHDSSOLHGLQRQHRIWKH
SKDVHVRQWKHSULPDU\VLGH
&RQWDFWWKHHOHFWULFLW\
XWLOLW\
6KRUWFLUFXLWLQWKHV\VWHPRQWKH
VHFRQGDU\VLGH
5HPRYHWKHIDLOXUHLQWKH
V\VWHP
:LQGLQJUXSWXUH
&RQWDFW$%%
,QWHUQDOIDLOXUHLQWKHWUDQVIRUPHU
7ULJJHULQJRIGLIIHUHQWLDO
)DLOXUHLQFXUUHQWWUDQVIRUPHUV
UHOD\GXULQJRSHUDWLRQ
IHHGLQJWKHUHOD\
6SXULRXVWULJJHULQJ
GXULQJRSHUDWLRQ
$EQRUPDORSHUDWLQJ
WHPSHUDWXUHPHDVXUHG
E\WKHUPRJUDSK\
:LQGLQJDQGRU7RSRLO
WKHUPRPHWHUDODUP
DQGRUWULS
&RQWDFW$%%
&KHFNFXUUHQW
WUDQVIRUPHUV
7ULJJHULQJDQGDODUPLQFRUUHFWO\
VHW
,QFRUUHFWWKHUPRPHWHURSHUDWLRQ
&KHFNVHWWLQJV
&KHFNWKHUPRPHWHU
'HIHFW3WVHQVRUVRU
WKHUPLVWRUV
&KHFNVHQVRUVRU
WKHUPLVWRUV
5HOD\VLQFRUUHFWWLPLQJ
&KHFNWLPLQJ
6KRUWFLUFXLWLQWKHFRQWUROV\VWHP
RQWKHVHFRQGDU\VLGH
5HPRYHWKHIDLOXUHLQWKH
FRQWUROV\VWHP
/RFDOKHDWLQJDWWKHWUDQVIRUPHU
WHUPLQDOV
&OHDQFRQWDFWVXUIDFHV
DQGUHWLJKWHQ
([FHVVLYHFDEOHKHDWLQJ
8QGHUVL]HGFDEOHV
,QVXIILFLHQWYHQWLODWLRQ+LJK
DPELHQWWHPSHUDWXUH
&KHFNYHQWLODWLRQRI
SUHPLVHV&RQVLGHU
LQVWDOODWLRQRIFRROLQJIDQV
7UDQVIRUPHURYHUORDGHG
&RQVLGHUORDGUHGXFWLRQ
RULQVWDOODWLRQRID
WUDQVIRUPHUZLWKKLJKHU
SRZHUUDWLQJ
5HGXFHGRLOZDWHURUDLU
FLUFXODWLRQ
&KHFNRLOZDWHUDQGDLU
FLUFXODWLRQ
7RRKLJKRLOWHPSHUDWXUH
5HGXFHORDG
7RRKLJKZDWHUWHPSHUDWXUH
5HGXFHORDG
0HDVXUHPHQWRI
XQH[SHFWHGYROWDJHWR
HDUWK
(DUWKIDLOXUHRQRQHSKDVH
5HPRYHIDLOXUH
+LJKDFRXVWLFDOVRXQG
OHYHO
6XSSO\YROWDJHKLJKHUWKDQ
SUHVXSSRVHG
/RRVHDFFHVVRULHVRUHOHPHQWV
5HGXFHVXSSO\YROWDJHRU
FKDQJHSRVLWLRQRQ
WDSFKDQJHU
5HWLJKWHQ
5HIOHFWLRQIURPZDOOVDQGRWKHU
HOHPHQWV
,QVWDOOVRXQGGDPSLQJ
SDQHOV3ODFHWKH
WUDQVIRUPHULQQRQSDUDOOHO
GLUHFWLRQWRWKHZDOOV8VH
GDPSLQJSDGVEHORZWKH
WUDQVIRUPHU
3DJH7UDQVIRUPHU+DQGERRN
6<037206
352%$%/(&$86(6
62/87,216
/RZIUHTXHQF\
&RQWDFWHOHFWULFLW\XWLOLW\
2LOFLUFXODWLRQWRRORZ
2SHQYDOYHVLQRLOFLUFXLW
2LOSXPSSURWHFWLRQ
&KHFNRLOSXPSDQG
SURWHFWLRQ
2LOIORZWULS
*DVEXEEOHVFDXVHGE\ORFDO
RYHUKHDWLQJ
'HHQHUJL]HWKH
WUDQVIRUPHU
,IWKHFDSWXUHGJDVLV
LQIODPPDEOH
&DUU\RXWGLVVROYHGJDV
DQDO\VLV '*$ &RQWDFW$%%
*DVEXEEOHVFDXVHGE\
LQFRPSOHWHEOHHGLQJ
,IWKHFDSWXUHGJDVLVQRW
LQIODPPDEOH
%OHHGWKHWUDQVIRUPHU
SURSHUO\DQGHQHUJL]H
$UFLQJLQDFWLYHSDUW
&DUU\RXWGLVVROYHGJDV
DQDO\VLV '*$ &RQWDFW$%%
2LOOHYHOWRRORZ
$GMXVWRLOOHYHODQGUHSDLU
OHDNDJHV
:HOGLQJRQWKH
WUDQVIRUPHULVRQO\
DOORZHGLIWKHWUDQVIRUPHU
LVILOOHGE\RLOLQHUWJDV
QLWURJHQ 2LOOHYHOLQGLFDWRU
$ODUPKLJKOHYHORU
7ULSORZOHYHO
,QFRUUHFWRLOOHYHO
$GMXVWRLOOHYHO
5HSDLUOHDNDJHVLIDQ\
:HOGLQJRQWKH
WUDQVIRUPHULVRQO\
DOORZHGLIWKHWUDQVIRUPHU
LVILOOHGE\RLOLQHUWJDV
QLWURJHQ :DWHUIORZVZLWFK
LQGLFDWRUDODUP
7RRORZZDWHUIORZ
,QFUHDVHZDWHUIORZ
FOHDQZDWHU
FLUFXLWFRROHU
3UHVVXUHGLIIHUHQWLDO
UHOD\DODUP
3UHVVXUHGLIIHUHQFHRLOZDWHU
OHVVWKDQEDU
5HGXFHZDWHUSUHVVXUH
FKHFNZDWHUIORZFOHDQ
ZDWHUFLUFXLWFRROHU
/HDNDJHGHWHFWRU
DODUP
/HDNDJHLQFRROHU
5HSDLUFKDQJHWKH
FRROHU
2QORDGWDSFKDQJHU
SURWHFWLYHUHOD\WULS
6XGGHQSUHVVXUHULVH
WDSFKDQJHUFRPSDUWPHQW
,QVSHFWLRQUHSDLURIWDS
FKDQJHUGLYHUWHUVZLWFK
2QORDGWDSFKDQJHU
RXWRIVWHSWULS
2SHUDWLRQRIWDSFKDQJHUIDLOHG
&KHFNWDSFKDQJHU
LQWHUORFNLQJDQG
V\QFKURQLVP
%XFKKRO]JDVUHOD\
DODUP
%XFKKRO]JDVUHOD\WULS
3UHVVXUHUHOLHIGHYLFH
WULS
*DVPRQLWRULQJDODUP
7UDQVIRUPHU+DQGERRN3DJH
6XGGHQSUHVVXUHULVHWUDQVIRUPHU
&DUU\RXWGLVVROYHGJDV
DQDO\VLV '*$ &RQWDFW$%%
*DVGHWHFWLRQ
&DUU\RXWGLVVROYHGJDV
DQDO\VLV '*$ &RQWDFW$%%
127( &RQWDFWVSHFLDOLVWVEHIRUHLQVSHFWLRQDGMXVWPHQWDQGUHSDLURIYLWDOSDUWV
2EVHUYHJXDUDQWHHFRQGLWLRQV
5HFRUGLQJRIGLVWXUEDQFHV
• 'DWHDQGWLPHRIWKHRFFXUUHQFH
• 'DWDIRULQVWDOOHGRYHUYROWDJHSURWHFWLRQ
• 1HWZRUN GDWD ZHUH FRQQHFWLRQV RU RWKHU UHOHYDQW WKLQJV PDGH ZKHQ WKH GLVWXUEDQFH WRRN
SODFHZKDWZDVWKHORDGLQJOLNHSRVVLEOHUHOD\RSHUDWLRQVZKLFKWRRNSODFHHOVHZKHUHLQWKH
QHWZRUN HJHDUWKIDXOWUHOD\ • :HDWKHUGDWD WKXQGHUVWRUPUDLQHWF • ,VWKHJDVUHOD\ILOOHGZLWKJDVFRORXUDQGTXDOLW\"
• ,VRLOVRRW\"
• 7KHUPRPHWHUUHDGLQJV
• :HUHFRROHUVRUWDQNGDPDJHG"
• $UHWKHUHYLVLEOHPDUNVRIDUFLQJRQHJWKHEXVKLQJVFRYHURUFRQVHUYDWRU"
• ,QFDVHRIGU\W\SHWUDQVIRUPHUVDUHWKHUHKXPLGLW\FRQWDPLQDWLRQRUYLVLEOHPDUNVRIDUFLQJ
RQZLQGLQJVFOHDWVDQGOHDGV"
• *DVLQRLODQDO\VLVIRU/'7XQLWVDQGSRZHUWUDQVIRUPHUV"
• $Q\RWKHUREVHUYDWLRQ
)XQFWLRQRIWUDQVIRUPHUSURWHFWLYHHTXLSPHQW
2SHUDWLRQRIVRPHSURWHFWLYHHTXLSPHQWVXFKDVJDVUHOD\RUGLIIHUHQWLDOUHOD\GRHVQRWDOZD\V
PHDQWKDWWKHWUDQVIRUPHULVGDPDJHG
7KHJDVUHOD\FDQRSHUDWHIRUH[DPSOHZKHQ
$Q DLU EXEEOH KDV EHHQ OHIW XQGHU WKH WUDQVIRUPHU FRYHU $Q DLU EXEEOH LV FRORXUOHVV DQG
RGRXUOHVV
$VKRUWFLUFXLWFXUUHQWKDVSDVVHGWKHWUDQVIRUPHU1RJDVEXEEOHV
+RZHYHULIWKHJDVKDVFRORXURUVPHOOWKHWUDQVIRUPHULVGDPDJHG
0HDVXUHPHQWV
,QDGGLWLRQWRWKHDERYHLQVWUXFWLRQVWKHIROORZLQJLQVSHFWLRQPHDVXUHPHQWVFDQEHFDUULHGRXW
• ,QVXODWLRQUHVLVWDQFH
7RREWDLQUHOLDEOHUHVXOWVWKHLQVXODWRUVKDYHWREHGU\FOHDQDQGRYHUYROWDJHSURWHFWLRQ
VXUJHDUUHVWHUV5&QHWZRUNV KDVWREHGLVFRQQHFWHGIURPWKHWUDQVIRUPHU
• 1RORDGFXUUHQWPHDVXUHPHQWE\PHDQVRIDYDULDEOHORZYROWDJHVRXUFH
7KHYROWDJHGXULQJPHDVXUHPHQWVKRXOGJUDGXDOO\EHLQFUHDVHG7KHPHDVXUHGFXUUHQW
VKRXOGEHFRPSDUHGZLWKWKHQRORDGFXUUHQWPHDVXUHGLQWKHGHOLYHU\WHVW
)RUKLJKHUYROWDJHVRQWKHORZYROWDJHVLGHRIWKHWUDQVIRUPHUWKHPHDVXUHGFXUUHQWZLOOEH
LQWKHUDQJHRIDIHZPLOOLDPSHUHVIRUDVRXQGWUDQVIRUPHU
• 9ROWDJHUDWLR
• '& UHVLVWDQFHV RI ZLQGLQJV VKRXOG EH FRPSDUHG ZLWK WKH '& UHVLVWDQFH PHDVXUHG GXULQJ
GHOLYHU\WHVW7KHWHPSHUDWXUHZKHQWKHPHDVXUHPHQWVZHUHPDGHPXVWEHFRQVLGHUHG
3DJH7UDQVIRUPHU+DQGERRN
7UDQVIRUPHUOLTXLGDQGLQVXODWLRQ
7KH WDVN RI RLO LQ D WUDQVIRUPHU LV WR DFW DV DQ HOHFWULFDO LQVXODWLRQ DQG WR WUDQVIHU KHDW IURP WKH
WUDQVIRUPHU¶VDFWLYHSDUWVLQWRFRROHUV2LODFWVDVDJRRGHOHFWULFDOLQVXODWLRQRQO\DVORQJDVLWLV
VDWLVIDFWRULO\GU\DQGFOHDQ
0RLVWXUH EDODQFH EHWZHHQ WKH RLO DQG WKH VROLG LQVXODWLRQ LPSOLHV WKDW PRVW RI WKH PRLVWXUH ZLOO
JDWKHULQWKHSDSHULQVXODWLRQ
0RLVWXUH LQ LQVXODWLRQ LV RQH RI WKH GRPLQDQW DJHLQJ DFFHOHUDWRUV ,W LV UHFRPPHQGHG WR GU\ WKH
LQVXODWLRQ ZKHQ WKH PRLVWXUH H[FHHGV D FHUWDLQ OHYHO 'U\LQJ RI WKH LQVXODWLRQ DQG RLO LV
UHFRPPHQGHG IRU ODUJH GLVWULEXWLRQ DQG SRZHU WUDQVIRUPHUV VLQFH WKLV FDQ EH WHFKQLFDOO\ DQG
HFRQRPLFDOO\ PRWLYDWHG (TXLSPHQW IRU GU\LQJ WUDQVIRUPHUV DW VLWH LV DYDLODEOH DQG WKH UHVLGXDO
PRLVWXUHLQWKHLQVXODWLRQZLOOEHOHVVWKDQDIWHUGU\LQJZLWKORZIUHTXHQF\KHDWLQJHTXLSPHQW
'XULQJGU\LQJWKHWUDQVIRUPHUKDVWREHGHHQHUJLVHG'U\LQJWLPHFDQYDU\IURPRQHWRWZRZHHNV
GHSHQGLQJRQWKHWUDQVIRUPHUVL]HDPRXQWRILQVXODWLRQDQGLQLWLDOPRLVWXUHOHYHOLQWKHLQVXODWLRQ
7HVWLQJ RI RLO LQ WUDQVIRUPHUV VKRXOG QRUPDOO\ EH SHUIRUPHG PRQWKV DIWHU ILOOLQJ RU UHILOOLQJ
VXEVHTXHQWO\DQQXDOO\RQODUJHGLVWULEXWLRQDQGSRZHUWUDQVIRUPHUV$%%RIIHUVGLIIHUHQWWHVWVDQG
DQDO\VHV RI RLO VDPSOHV GHSHQGLQJ RI WUDQVIRUPHU W\SH VL]H VHUYLFH UHFRUG DQG VWUDWHJLF
LPSRUWDQFHIRUVDIHHOHFWULFLW\VXSSO\
7HVWLQJRIRLOLQRQORDGWDSFKDQJHUVPXVWEHSHUIRUPHGDFFRUGLQJWRWKHWDSFKDQJHUVXSSOLHU¶V
UHFRPPHQGDWLRQV
7RWDNHRLOVDPSOHVIURPKHUPHWLFDOO\VHDOHGWUDQVIRUPHUVLVQRUPDOO\QRWQHFHVVDU\DQGVKRXOG
RQO\EHSHUIRUPHGDIWHUFRQVXOWDWLRQZLWK$%%7KHRLOLQWKLVW\SHRIWUDQVIRUPHUVLVQRWLQFRQWDFW
ZLWKWKHDWPRVSKHUHDQGOHVVH[SRVHGWRPRLVWXUH
(VSHFLDOO\ IRU ODUJH GLVWULEXWLRQ DQG SRZHU WUDQVIRUPHUV RLO UHJHQHUDWLRQUHFODLPLQJ RI RLO PD\ EH
WHFKQLFDOO\DQGHFRQRPLFDOO\PRWLYDWHG5HFODLPLQJLPSOLHVILOWHULQJGHJDVVLQJUHPRYDORIDJHLQJ
E\SURGXFWVDQGDGGLWLRQRILQKLELWRULIUHTXLUHG5HFODLPLQJRIRLOLVSHUIRUPHGZLWKWKHWUDQVIRUPHU
LQVHUYLFH RSHUDWLRQ 7KHWUDQVIRUPHULVRQO\GHHQHUJLVHGIRUDIHZKRXUVZKHQWKHHTXLSPHQWLV
FRQQHFWHG DQG GLVFRQQHFWHG IURP WKH WUDQVIRUPHU ,I WKH RLO LV LQ JRRG FRQGLWLRQ H[FHSW IURP
SDUWLFOHVSUHVHQWLQWKHRLOILOWHULQJFDQEHUHFRPPHQGHGIRUUHPRYDORIWKHSDUWLFOHV
2IWHQLWLVUHFRPPHQGHGWRGRERWKGU\LQJDQGUHFODLPLQJRQWKHVDPHWUDQVIRUPHU'RQHDWWKH
ULJKWWLPHUHFRPPHQGHGE\WKHVXSSOLHULHEHIRUHWKHGHJUDGDWLRQRIRLODQGLQVXODWLRQKDVJRQH
WRRIDUWKHOLIHWLPHRIWKHWUDQVIRUPHUFDQEHH[WHQGHGZLWKVHYHUDO\HDUV
%XVKLQJVDQGMRLQWV
7KHSRUFHODLQLQVXODWRUVRIWUDQVIRUPHUEXVKLQJVRXJKWWREHFOHDQHGGXULQJVHUYLFHLQWHUUXSWLRQV
DV RIWHQ DV QHFHVVDU\ 7KLV LV SDUWLFXODUO\ LPSRUWDQW IRU SODFHV H[SRVHG WR FRQWDPLQDWLRQ DQG
PRLVWXUH
0HWK\ODWHGVSLULWRUHDVLO\HYDSRUDWLQJFOHDQLQJDJHQWVFDQEHXVHGIRUFOHDQLQJ
7KHFRQGLWLRQRIH[WHUQDOFRQGXFWRUDQGEXVEDUMRLQWVRIWUDQVIRUPHUEXVKLQJVVKDOOEHFKHFNHGDW
UHJXODULQWHUYDOVEHFDXVHUHGXFHGFRQWDFWSUHVVXUHLQWKHMRLQWVOHDGVWRRYHUKHDWHGEXVKLQJVHWF
DQGPD\FDXVHWKHDGMDFHQWJDVNHWWREHGHVWUR\HGE\WKHKHDW$KHDWVHQVLWLYHFDPHUDFDQEH
XVHGWRFKHFNWKHWHPSHUDWXUHVLQMRLQWVEXVKLQJVHWF
0DLQWHQDQFHRI+9FRQGHQVHUEXVKLQJVVKDOOEHSHUIRUPHGDFFRUGLQJWRWKHLQVWUXFWLRQVJLYHQE\
WKHEXVKLQJVXSSOLHU
7UDQVIRUPHU+DQGERRN3DJH
2IIFLUFXLWWDSFKDQJHU
7KHWUDQVIRUPDWLRQUDWLRFDQEHDGMXVWHGZLWKDQRIIFLUFXLWWDSFKDQJHUZKHQWKHWUDQVIRUPHULVQRW
HQHUJLVHG
7KH FRQWURO VKDIW RI WKH RIIFLUFXLW WDSFKDQJHU LV EURXJKW WKURXJKWKH FRYHU RUWKH WDQNZDOO 7KH
VKDIWHQGLVSURYLGHGZLWKDKDQGOHSRVLWLRQLQGLFDWRUDQGORFNLQJGHYLFH:KHQWKHWDSFKDQJHULV
WXUQHG WKH ORFNLQJ GHYLFH PXVW EH VHFXUHG EHFDXVH WKDW DVVXUHV WKDW WKH RIIFLUFXLW WDS FKDQJHU
KDVEHHQVHWWRRSHUDWLQJSRVLWLRQ
2IIFLUFXLW WDS FKDQJHUV GR QRUPDOO\ QRW UHTXLUH UHJXODU PDLQWHQDQFH EXW LW LVUHFRPPHQGHG WKDW
WKH RIIFLUFXLW WDS FKDQJHU LV PRYHG IURP RQH H[WUHPH SRVLWLRQ WR WKH RWKHU D IHZ WLPHV GXULQJ
VHUYLFH LQWHUUXSWLRQ 7KLV LV QHFHVVDU\ HVSHFLDOO\ ZKHQ WKH WDS FKDQJHU LV PRYHG LQIUHTXHQWO\
0RYLQJIURPRQHSRVLWLRQWRDQRWKHULVSHUIRUPHGHLWKHUPDQXDOO\E\DKDQGZKHHORUE\DPRWRU
GULYHXQLW
7RWDO H[SHFWHG OLIHWLPH GHSHQGV RQ WKH QXPEHU RI RSHUDWLRQV QRUPDO FXUUHQW HWF ,QVSHFWLRQ PDLQWHQDQFHRIWDSFKDQJHUVPXVWRQO\EHFDUULHGRXWE\WUDLQHGDQGH[SHULHQFHGSHUVRQQHO6HH
VXSSOLHU¶VGRFXPHQWDWLRQSURYLGHG
)RUGU\W\SHWUDQVIRUPHUVWKHRIIFLUFXLWWDSFKDQJLQJLVJHQHUDOO\GRQHE\PHDQVRIEROWHGOLQNV
2QORDGWDSFKDQJHU
0DLQWHQDQFHRIRQORDGWDSFKDQJHUVKDOOEHSHUIRUPHGDFFRUGLQJWRWKHLQVWUXFWLRQVJLYHQE\WKH
VXSSOLHURIWKHWDSFKDQJHU
5HIHUHQFHVKRXOGEHPDGHWR,(& 7DSFKDQJHUV DQG,(& $SSOLFDWLRQJXLGHIRURQ
ORDG WDSFKDQJHUV DQG HVSHFLDOO\ WR WKH WDSFKDQJHU PDQXIDFWXUHUV RSHUDWLRQ DQG PDLQWHQDQFH
LQVWUXFWLRQV ,Q DGGLWLRQ LW LV VWURQJO\ UHFRPPHQGHG WKDW RQO\ VXLWDEO\ WUDLQHG SHUVRQQHO VKRXOG
XQGHUWDNH 2/7& H[DPLQDWLRQ DQG PDLQWHQDQFH >,(& &RQYHUWRU WUDQVIRUPHUV 3DUW $SSOLFDWLRQJXLGH@
2QORDG WDSFKDQJHUV KDYH WR EH PDLQWDLQHG UHJXODUO\ 0DLQWHQDQFH LQWHUYDO DQG WRWDO H[SHFWHG
OLIHWLPHGHSHQGVRQQXPEHURIRSHUDWLRQVQRUPDOFXUUHQWLIRLOILOWHULQJXQLWLVSURYLGHGHWF
0RWRUGULYHXQLW
0RWRUGULYHXQLWVKDYHWREHPDLQWDLQHGUHJXODUO\0DLQWHQDQFHLQWHUYDODQGWRWDOH[SHFWHGOLIHWLPH
GHSHQGV RQ QXPEHU RI RSHUDWLRQV 2QO\ WUDLQHG DQG H[SHULHQFHG SHUVRQQHO PXVW FDUU\ RXW
PDLQWHQDQFHRIPRWRUGULYHXQLWV6HHVXSSOLHU¶VGRFXPHQWDWLRQSURYLGHG
2LOILOWHULQJXQLW
7KHSDSHUILOWHULQWKHRLOILOWHULQJXQLWIRUWKHRQORDGWDSFKDQJHUKDVWREHFKDQJHGZKHQSUHVVXUH
ORVVKDVUHDFKHGDSSUR[LPDWHO\EDUVRQWKHSUHVVXUHJDXJH6HHWKHVXSSOLHU¶VGRFXPHQWDWLRQ
&RROHUV
&RROHUVDUHFOHDQHGE\PHDQVRIHJEUXVKLQJLQVLGHWKHZDWHUWXEHVRUDLUVLGHYDFXXPFOHDQLQJ
ZKHQ QHFHVVDU\ 1HHG IRU FOHDQLQJ LV LQGLFDWHG E\ LQFUHDVHG SUHVVXUH ORVV GHFUHDVHG
WHPSHUDWXUHGLIIHUHQFH RLOZDWHUDLU LQRXW LQFUHDVHG WUDQVIRUPHU WHPSHUDWXUH GHFUHDVHG ZDWHU
IORZHWF6HHWKHVXSSOLHU¶VGRFXPHQWDWLRQ
/LTXLGFRQVHUYDWRUZLWKUXEEHUGLDSKUDJP
7KH V\VWHP FRQVLVWLQJ RI RLO FRQVHUYDWRU ZLWK UXEEHU VDFN GRHV QRUPDOO\ QRW UHTXLUH DQ\ RWKHU
PDLQWHQDQFH WKDQ LQVSHFWLRQ RI WKH VLOLFD JHO EUHDWKHU 7KH VLOLFD JHO VKDOO EH FKDQJHG ZKHQ
DSSUR[RIWKHVLOLFDJHOKDVFKDQJHGIURPEOXHWRUHGFRORXU ROGW\SHRIVLOLFDJHO RUIURPSLQN
WRZKLWHUHVSHFWLYHO\
3DJH7UDQVIRUPHU+DQGERRN
*DVNHWV
7KHJDVNHWVRIWKHFRYHUDQGIODQJHVDVZHOODVEHWZHHQEXVKLQJVDQGFRYHUDUHXVXDOO\PDGHRI
OLTXLGUHVLVWDQWYXOFDQLVHGFRUNVKHHWQLWULOHUXEEHURUVLOLFRQHVHDODQW
,IWKHJDVNHWVDUHOHDNLQJOHDNVFDQXVXDOO\EHVHDOHGE\WLJKWHQLQJWKHVFUHZV EROWV :KHQWKHVHJDVNHWVKDYHWREHUHSODFHGLWLVUHFRPPHQGHGWRFRQWDFW$%%
/LTXLG UHVLVWDQW UXEEHU ULQJV DUH XVHG DV JDVNHW IRU EXVKLQJ EROWV VKDIWV DQG VSLQGOHV $OO WKHVH
JDVNHWVFDQEHWLJKWHQHGDQGUHSODFHGIURPRXWVLGHWKHWDQN
:KHQWLJKWHQLQJWKHJDVNHWVVSHFLDOFDUHPXVWEHWDNHQWRSUHYHQWWKHEUHDNLQJRIVFUHZV EROWV RUWKHJDVNHW³IORDWVDZD\´ LIQRWLQDJURRYH FDXVHGE\WKHKHDY\SUHVVXUH,QSDUWLFXODUVWXGQXWV
PXVWEHWLJKWHQHGYHU\FDUHIXOO\
'U\W\SHWUDQVIRUPHUV
'XVWDQGGLUWRQWKHWUDQVIRUPHUOHDGVWRUHGXFHGGLDOHFWLFDOVWUHQJWKDQGFRROLQJGXHWRGLIIHUHQW
HQYLURQPHQWDOFRQGLWLRQVZKHUHYHQWLODWHGGU\W\SHWUDQVIRUPHUVDUHLQVWDOOHG$SHULRGLFSURJUDP
IRUFOHDQLQJVKRXOGEHHVWDEOLVKHGIRUHDFKLQVWDOODWLRQ+RUL]RQWDOVXUIDFHVVKRXOGEHFOHDQHGZLWK
D YDFXXP FOHDQHU &RLOV FRROLQJ GXFWV VKRXOG EH FOHDQHG XVLQJ GU\ FRPSUHVVHG DLU RU QLWURJHQ
PD[LPXPSUHVVXUHEDU ,I WKH WUDQVIRUPHU LV LQVWDOOHG LQ DQ HQFORVXUH WKH HQFORVXUH VKRXOG EH FOHDQHG OLNH VZLWFKJHDU
FXELFOHV 'XVW DFFXPXODWLRQ RQ WKH HQFORVXUH YHQWLODWLRQ RSHQLQJ LV DQ LQGLFDWLRQ WKDW DQ LQWHUQDO
LQVSHFWLRQVKRXOGEHPDGH
,QDGGLWLRQWRFOHDQLQJWKHIROORZLQJVKRXOGDOVREHFDUULHGRXWGXULQJWKHLQVSHFWLRQ
•
•
•
•
7KHFRQGLWLRQRIH[WHUQDOEROWHGHOHFWULFDOFRQQHFWLRQVVKDOOEHFKHFNHGDQGUHWLJKWHQHG
/RRVHZLQGLQJFODPSVVKDOOEHUHWLJKWHQHG
7KHIXQFWLRQRIDOOZDUQLQJGHYLFHVVKDOOEHFKHFNHG
&RROLQJ IDQV VKDOO EH FOHDQHG OLNH WKH WUDQVIRUPHU $IWHUZDUGV FKHFN WKHLU IXQFWLRQ DQG
RSHUDWLRQ
6XUIDFHSURWHFWLRQ
3DLQWHGVXUIDFHV
:KHQ UHSDLULQJ GDPDJHG SDLQW WKH SRLQWV WR EH UHSDLQWHG VKRXOG EH FOHDQHG IURP UXVW GLUW DQG
JUHDVHEHIRUHSULPLQJZLWKD]LQFULFKSULPHUSULRUWRWRSFRDWSDLQW7KHILQDOSDLQWWKLFNQHVVVKRXOG
DWOHDVWEHHTXDOWRWKHRULJLQDOSDLQWWKLFNQHVV
%\PDMRUSDLQWGDPDJHVFRQWDFWZLWKDVSHFLDOLVHGVXUIDFHFRDWLQJFRPSDQ\LVUHFRPPHQGHG
=LQFFRDWHGVXUIDFHV
=LQFFRDWHGVXUIDFHVKDYHDVHOIUHSDLULQJSDVVLYDWLQJFKDUDFWHULVWLF6PDOOGDPDJHVDVVFUDWFKHV
GR QRUPDOO\ QRW QHHG UHSDLULQJ /DUJHU DUHDV DERYH PP PD\ QHHG UHSDLU $IWHU WKRURXJKO\
FOHDQLQJ DSSO\ ]LQFULFK EHWZHHQ ]LQF E\ ZHLJKW RU ! E\ ZHLJKW PHWDOOLF ]LQF LQ GU\
ILOP SDLQWWRDWOHDVWWKHVDPHWKLFNQHVVDVWKHRULJLQDO]LQFFRDWLQJ'RQRWUHPRYHDQ\RULJLQDO
]LQFGXULQJFOHDQLQJ7KHSDLQWPD\EHRQHFRPSRQHQW SUHIHUUHG RUWZRFRPSRQHQW
7UDQVIRUPHU+DQGERRN3DJH
',6326$/$)7(586(
6FUDSSHG WUDQVIRUPHUV PD\ KDUP WKH HQYLURQPHQW WKH\ PD\ KRZHYHU DOVR UHSUHVHQW D YDOXH LI
WUHDWHGFRUUHVSRQGLQJO\
6RPHWUDQVIRUPHURZQHUVSUHIHUWRVFUDSXVHGWUDQVIRUPHUVWKHPVHOYHV
,I QRW $%% KDYH DJUHHPHQWV ZLWK ORFDO ZDVWH SURFHVVLQJ SODQWV DQG PD\ GLVSRVH RI XVHG
WUDQVIRUPHUVWDNLQJVXVWDLQDEOHGHYHORSPHQWLQWRFRQVLGHUDWLRQ
0DWHULDO GLVSRVDO WHFKQRORJ\ LV FRQWLQXRXVO\ LPSURYLQJ WKXV WKH VDOYDJH YDOXH RI D WUDQVIRUPHU
LV H[SHFWHG WR LQFUHDVH LQ WKH IXWXUH 7UDQVIRUPHUV DFTXLUHG WRGD\ PD\ DIWHU VHUYLFH OLIH HJ
\HDUV UHSUHVHQW D KLJKHU YDOXH WKDQ WKRVH VFUDSSHG WRGD\ ,W LV DOVR H[SHFWHG WKDW PDWHULDOV
ZKLFKWRGD\DUHQRWUHF\FODEOHPD\EHWUHDWHGGLIIHUHQWO\LQWKHIXWXUH
/2&$/5(*8/$7,216
/RFDOUHJXODWLRQVVKDOODOZD\VEHDGKHUHGWRLQGLVSRVLQJXVHGWUDQVIRUPHUV/RFDODXWKRULWLHVPD\
JLYHJXLGDQFHDOVR,QWHUQHWFRPPXQLW\KRPHSDJHVPD\JLYHDGYLFH
,ILQGRXEWWKHORFDO$%%&RPSDQ\FDQDVVLVW
5(86(
7UDQVIRUPHUVFRQWDLQYDOXDEOHPDWHULDOVZKLFKPD\EHUHXVHGHLWKHUDVLVRUDIWHUUHSURFHVVLQJ
([DPSOHVDUH
• &RSSHU
• $OXPLQLXP
• 2LO
• 6WHHO
,QVXODWLRQPDWHULDOSUHVVERDUGDQGSDSHUUHSUHVHQWHQHUJ\
/$1'),//
0DWHULDOVQRWUHFLUFXODWHGJRWRODQGILOORUHQHUJ\SURGXFWLRQ7KHODQGILOOSRUWLRQRIWKHWUDQVIRUPHU
VKRXOGEHPLQLPL]HG
/,)(&<&/($66(660(17 /&$ 7KHHQYLURQPHQWDOLPSDFWRIWUDQVIRUPHUVPD\EHGLYLGHGLQWRILYHOLIHF\FOHFDWHJRULHV
5DZPDWHULDOH[WUDFWLRQPDQXIDFWXULQJDQGWUDQVSRUW
7UDQVIRUPHUSURGXFWLRQ
7UDQVSRUWWRVLWH
(QHUJ\ORVVHVGXULQJVHUYLFH
'LVSRVDODIWHUXVH
/&$FDOFXODWLRQVVKRZWKDWFDWHJRULHVDQGDUHQHJOLJLEOHFRPSDUHGWR
$SDUWRIFDWHJRU\LVUHJDLQHGGXULQJGLVSRVDOSURYLGHGUHXVHRIPDWHULDOVRUHQHUJ\H[WUDFWLRQ
/LIHF\FOHDVVHVVPHQWVKRZVWKDWWKHGRPLQDWLQJHQYLURQPHQWDOLPSDFWGXULQJDWUDQVIRUPHUVOLIHLV
HQHUJ\ORVVHVGXULQJVHUYLFH7KHWRWDOORVVHVFRQVLVWRIORDGORVVHVDQGQRORDGORVVHVERWKDUH
VLJQLILFDQW7KHUHODWLRQEHWZHHQORDGDQGQRORDGORVVHVGHSHQGVRQWKHWUDQVIRUPHUORDGLQJ
7KH OLIHWLPH HQHUJ\ ORVVHV DUH RQH RI WKH UHDVRQV ZK\ $%% UHFRPPHQGV DQ HQHUJ\HIIHFWLYH
WUDQVIRUPHUOD\RXWVHHVHFWLRQSDJH
3&%&RQWDPLQDWHGRLO
3&%ZDVXVHGLQPDQ\ZD\VDQGZDVLQFOXGHGLQVHYHUDOGLIIHUHQWSURGXFWVLQFOXGLQJWUDQVIRUPHU
DQGFRQGHQVHURLOKRZHYHULWLVKDUPIXOWRWKHHQYLURQPHQWDQGGHYHORSVFDQFHUFDXVLQJGLR[LGHV
GXULQJQRUPDOFRPEXVWLRQ7KHXVHRI3&%LVQRZSURKLELWHG
1RWDOO$%%WUDQVIRUPHUPDQXIDFWXUHUVXVHG3&%DQGWKRVHZKRGLGVWRSSHGXVLQJLWORQJEHIRUH
WKHIDFWRULHVZHUHDFTXLUHGE\$%%
$%%FDQDVVLVWLQWKHGLVSRVDORI3&%FRQWDPLQDWHGRLO
3DJH7UDQVIRUPHU+DQGERRN
3+<6,&$/)81'$0(17$/6
,1752'8&7,21
$WUDQVIRUPHULVDVWDWLFGHYLFHZLWKWZRRUPRUHZLQGLQJVWKDWDUHOLQNHGWRHDFKRWKHUE\PHDQVRI
D VWURQJ PDJQHWLF ILHOG 7UDQVIRUPHUV DUH GHVLJQHG IRU VSHFLILF SXUSRVHV VXFK DV WKH
PHDVXUHPHQW RI YROWDJH DQG FXUUHQW RU WKH WUDQVIHU RI VLJQDOV RU HOHFWULF SRZHU 7KH GHVLJQ
UHTXLUHPHQWV RI WUDQVIRUPHUV GHSHQG RQ WKH DSSOLFDWLRQ ,Q PHDVXUHPHQW WUDQVIRUPHUV WKH
TXDQWLW\ PHDVXUHG PXVW EH WUDQVIHUUHG IURP WKH SULPDU\ FLUFXLW WR WKH VHFRQGDU\ DV H[DFWO\ DV
SRVVLEOHZKLOHLQVLJQDOWUDQVIRUPHUVWKHVLJQDOPXVWEHWUDQVIHUUHGZLWKDPLQLPXPRIGLVWRUWLRQ
7KLVWH[WFRQFHQWUDWHVRQSRZHUWUDQVIRUPHUVZKHUHWKHPDLQUHTXLUHPHQWLVWKDWLWVKDOOWUDQVIHUD
FHUWDLQDPRXQWRIHOHFWULFSRZHUDWDFRQVWDQWIUHTXHQF\ZKLOHWKHYROWDJHLVEHLQJFKDQJHGIURP
RQHOHYHOWRDQRWKHUZLWKDPLQLPXPRISRZHUORVVHV
&+2,&(2)6<67(092/7$*(
/DUJHSRZHUVWDWLRQVZKHUHWKHHOHFWULFHQHUJ\LVJHQHUDWHGDUHRIWHQVLWXDWHGIDUDZD\IURPWKH
QXPHURXV SODFHV ZKHUH WKH HOHFWULF HQHUJ\ LV FRQVXPHG 7KH QHHG IRU KLJK YROWDJH OHYHOV LQ
HOHFWULFSRZHUWUDQVPLVVLRQLVLOOXVWUDWHGLQWKHIROORZLQJ
7KH SRZHU ORVV S LQ D SKDVH WUDQVPLVVLRQ OLQH ZLWK D UHVLVWDQFH 5 SHU SKDVH DQG D FXUUHQW ,
IORZLQJLQHDFKSKDVHLV
S = ⋅ 5 ⋅ , :
:
$
:
$WDV\VWHPYROWDJH8WKHWUDQVPLWWHGDFWLYHSRZHULV
3 = ⋅ 8 ⋅ , ⋅ FRV ϕ (TXDWLRQ FDQEHUHZULWWHQDV
,=
3
⋅ 8 ⋅ FRV ϕ
,QVHUWHGLQWKHHTXDWLRQ JLYHV
S = 3
5
8 ⋅ FRV ϕ
(TXDWLRQ LQGLFDWHVWKDWWKHSRZHUORVVLQWKHOLQHLVSURSRUWLRQDOWRWKHVTXDUHRIWKHWUDQVPLWWHG
DFWLYHSRZHUDQGLQYHUVHO\SURSRUWLRQDOWRWKHVTXDUHRIWKHV\VWHPYROWDJH
,QRWKHUZRUGVWKHSRZHUORVVZLOOEHORZHUZKHQWKHV\VWHPYROWDJHLVLQFUHDVHG
7KHFKRLFHRIV\VWHPYROWDJHLVDPDWWHURIHFRQRPLFEDODQFH$KLJKV\VWHPYROWDJHUHGXFHVWKH
WUDQVPLVVLRQ ORVVHV EXW RQ WKH RWKHU VLGH LW UHTXLUHV PRUH H[SHQVLYH OLQHV FDEOHV DQG
WUDQVIRUPHUV
6HYHUDOKXQGUHGVRINLORYROWVDUHXVHGIRUOLQHVWUDQVSRUWLQJODUJHTXDQWLWLHVRIHOHFWULFSRZHURYHU
ORQJ GLVWDQFHV &ORVHU WR WKH FRQVXPHUV WKH SRZHU LV GLVWULEXWHG DW ORZHU YROWDJH OHYHOV 7KH
YROWDJHLVWDNHQGRZQLQVHYHUDOVWHSV:KLOHJHQHUDWRUWUDQVIRUPHUVDUHVWHSXSWUDQVIRUPHUVWKH
GLVWULEXWLRQ WUDQVIRUPHUV DUH QRUPDOO\ VWHSGRZQ WUDQVIRUPHUV 7KH SRZHU UDWLQJ RI GLVWULEXWLRQ
WUDQVIRUPHUVLVXVXDOO\ORZHUWKHFORVHUWRWKHFRQVXPHUWKHWUDQVIRUPHUVDUHVLWXDWHG
%$6,&3+<6,&62)7+(75$16)250(5
7KHIXQFWLRQRIDWUDQVIRUPHULVPDLQO\EDVHGRQWZRSK\VLFDOSKHQRPHQD
2QHRIWKHPLVWKHHOHFWURPDJQHWLFLQGXFWLRQZKLFKZDVGLVFRYHUHGE\)DUDGD\LQWKH¶V7KH
LQGXFWLRQODZZDVIRUPXODWHGE\1HXPDQQLQ
&RQVLGHUDORRSRIDFRQGXFWLQJPDWHULDOHQFORVLQJDPDJQHWLFILHOGĭ,IDFKDQJHǻĭWDNHVSODFH
GXULQJ D VKRUW WLPHLQWHUYDO ǻW D YROWDJH ZLOO EH LQGXFHG ZKLFK ZLOO GULYH D FXUUHQW DURXQG LQ WKH
ORRS 7KH LQGXFHG YROWDJH XL LV SURSRUWLRQDO WR WKH TXRWLHQW ǻĭ ǻW RU PRUH FRUUHFWO\ ZULWWHQ RQ
GLIIHUHQWLDOIRUP
XL =
GΦ
GW
9
7UDQVIRUPHU+DQGERRN3DJH
7KLVLVWKHVFDODUYDOXHRIWKHLQGXFHGYROWDJH7RLQGLFDWHDOVRWKHGLUHFWLRQRIWKHLQGXFHGYROWDJH
WKHLQGXFWLRQODZLVZULWWHQDV
XL = −
GΦ
GW
9
ZKHUH WKH PLQXV VLJQ LQGLFDWH WKDW XL KDV WKH
GLUHFWLRQ WKDW LW ZLOO GULYH D FXUUHQW WKURXJK WKH ORRS ZKLFK VHWV XS D PDJQHWLF ILHOG ZLWK WKH
RSSRVLWH GLUHFWLRQ RI WKH FKDQJH Gĭ ,Q RWKHU ZRUGV WKH LQGXFHG FXUUHQW VWULYHV WR UHVLVW DQ\
FKDQJH LQ WKH PDJQHWLF ILHOG :KHQ WKH IOX[ LQFUHDVHV WKH LQGXFHG FXUUHQW KDV WKHGLUHFWLRQ WKDW
JLYHV D IOX[ ZLWK D GLUHFWLRQ RSSRVLWH WKH GLUHFWLRQ RI ĭ :KHQ WKH IOX[ GHFUHDVHV WKH LQGXFHG
FXUUHQWKDVWKHGLUHFWLRQWKDWJLYHVDIOX[ZLWKDGLUHFWLRQLQSKDVHZLWKĭ
ĭ
)LJXUH
,IWKHORRSLVUHSODFHGE\DFRLOZLWK1QXPEHURIVHULHVFRQQHFWHGWXUQVWKHVDPHLQGXFHGYROWDJH
ZLOOWDNHSODFHLQHDFKRIWKHWXUQV7KHYROWDJHLQGXFHGLQWKHZKROHFRLOZLOOWKHQEH
XL = −1 ⋅
GΦ
GW
9
7KHRWKHUSK\VLFDOSKHQRPHQRQLVWKDWDFRQGXFWRUFDUU\LQJDQHOHFWULFDOFXUUHQWLVVXUURXQGHGE\
DPDJQHWLFILHOG
+
,
)LJXUH
7RFUHDWHDPDJQHWLFILHOGWKDWYDULHVLQWLPHLQDWUDQVIRUPHUDVLQXVRLGDOYROWDJHLVDSSOLHGWRWKH
SULPDU\ZLQGLQJZKLFKFUHDWHVDPDJQHWLVLQJFXUUHQW
7KHZLQGLQJVDUHPDGHDVFRQFHQWULFVKHOOVDURXQGDFHQWUDOFRUHRIODPLQDWHGVWHHOSODWHVZKLFK
LVIRUPHGDVDFORVHGORRSIRUWKHPDJQHWLFILHOG'XHWRWKHPDJQHWLFSURSHUWLHVRIWKHVWHHOWKH
PDJQHWLFIOX[ZLOOEHVHYHUDOWKRXVDQGWLPHVKLJKHUWKDQLWZRXOGKDYHEHHQZLWKRXWWKHVWHHOFRUH
ZKLFKPDNHVWKHPDJQHWLFFRXSOLQJEHWZHHQWKHZLQGLQJVVWURQJ
3DJH7UDQVIRUPHU+DQGERRN
:KHQWKHWHUPLQDOVRIWKHVHFRQGDU\ZLQGLQJDUHRSHQWKHUHODWLRQEHWZHHQWKHDSSOLHGYROWDJHRQ
WKHSULPDU\VLGHDQGWKHRXWSXWYROWDJHRQWKHVHFRQGDU\VLGHLVWKHVDPHDVWKHUHODWLRQEHWZHHQ
WKHQXPEHURIWXUQVLQWKHSULPDU\ZLQGLQJDQGWKHVHFRQGDU\ZLQGLQJUHVSHFWLYHO\
8
1
= 8 1
RU
8 = 8 ⋅
1
1
9
:KHQWKHVHFRQGDU\ZLQGLQJLVORDGHGWKHYROWDJHUDWLRPD\GLIIHUFRQVLGHUDEO\IURPWKHWXUQUDWLR
VHH ZKLOHWKHUDWLREHWZHHQWKHSULPDU\DQGVHFRQGDU\FXUUHQWVIXOILOVWKHHTXDWLRQ
, ⋅ 1 = , ⋅ 1 ZLWKDGHYLDWLRQRIRQHSHUFHQWRUOHVV
(48,9$/(17',$*5$0
$VLPSOHHTXLYDOHQWGLDJUDPIRUWKHWUDQVIRUPHUFDQEHGUDZQEDVHGRQWZRPHDVXUHPHQWVRQWKH
WUDQVIRUPHURQHLQQRORDGDQGRQHLQVKRUWFLUFXLWHGFRQGLWLRQ
=
,
=
8
8
=/
)LJXUH
,QQRORDGFRQGLWLRQ RSHQVHFRQGDU\WHUPLQDOV WKHWRWDOPDJQHWLVLQJFXUUHQWDQGWKHDFWLYHSRZHU
FRQVXPSWLRQDUH PHDVXUHG DW UDWHG YROWDJH 7KH FXUUHQW KDV RQH GRPLQDQW LQGXFWLYH FRPSRQHQW
DQGRQHVPDOOHUDFWLYHFRPSRQHQW7KHVHFDQEHFDOFXODWHGIURPWKHPHDVXUHPHQWVDQGWKHUHDO
DQG WKH LPDJLQDU\ FRPSRQHQWV RI WUDQVIRUPHU¶V QR ORDG LPSHGDQFH = FDQ EH IRXQG 7KLV
LPSHGDQFHLVQRWFRQVWDQWEXWZLOOYDU\QRQOLQHDUO\ZLWKWKHDSSOLHGYROWDJHGXHWRWKHQRQOLQHDULW\
RIWKHPDJQHWLVDWLRQFXUYH7KHUHDOSDUWRI=UHSUHVHQWVWKHQRORDGORVVHV
7KH RWKHU LPSHGDQFH LQ WKH GLDJUDP = LV IRXQG E\ VKRUWFLUFXLWLQJ WKH VHFRQGDU\ WHUPLQDOV DQG
DSSO\LQJDYROWDJHDWWKHSULPDU\VLGH7KHFXUUHQWLQWKHZLQGLQJVGXULQJWKLVPHDVXUHPHQWVKDOO
EH HTXDO WR WKH UDWHG FXUUHQW 7R DFKLHYH WKLV FXUUHQW DQ DSSOLHG YROWDJH RI MXVW D IUDFWLRQ RI WKH
UDWHG YROWDJH ZLOO EH VXIILFLHQW 7KLV YROWDJH LV FDOOHG WKH VKRUWFLUFXLW YROWDJH DQG LV XVXDOO\
H[SUHVVHG DV D SHUFHQWDJH RI WKH UDWHG YROWDJH 7KH LPSHGDQFH RI WKH FLUFXLW LV JLYHQ E\ WKH
TXRWLHQWRIWKHVKRUWFLUFXLWYROWDJHGLYLGHGE\WKHUDWHGFXUUHQW7KHFLUFXLWLVDSDUDOOHOFRQQHFWLRQ
RI=DQG=%HFDXVH=!!=WKHLPSHGDQFHRIWKHSDUDOOHOFRQQHFWLRQLVHTXDOWR=ZLWKDQHJOLJLEOH
GLIIHUHQFH7KHUHDOSDUWRI=UHSUHVHQWVWKHORDGORVVHVRIWKHWUDQVIRUPHUDQGWKHLPDJLQDU\SDUW
LVDWWULEXWHGWRWKHPDJQHWLFOHDNDJHILHOG7KDWLVWKHSDUWRIWKHPDJQHWLFILHOGZKLFKLVVLWXDWHG
RXWVLGHWKHFRUH
92/7$*(5$7,2$1'92/7$*('523 255,6( 7KH YROWDJH UDWLR RI D WUDQVIRUPHU LV QRUPDOO\ VSHFLILHG LQ QR ORDG FRQGLWLRQ DQG LV GLUHFWO\
SURSRUWLRQDOWRWKHUDWLRRIWKHQXPEHURIWXUQVLQWKHZLQGLQJV
:KHQWKHWUDQVIRUPHULVORDGHGWKHYROWDJHRQWKHVHFRQGDU\WHUPLQDOVFKDQJHVIURPWKDWLQQR
ORDGFRQGLWLRQGHSHQGLQJRQ
• WKHDQJOHijEHWZHHQWKHYROWDJHRQWKHVHFRQGDU\WHUPLQDOVRIWKHWUDQVIRUPHU8DQGWKH
VHFRQGDU\FXUUHQW,
• WKHYDOXHRIWKHVHFRQGDU\FXUUHQW,
• WKH VKRUWFLUFXLW LPSHGDQFH RI WKH WUDQVIRUPHU = DQG LWV DFWLYH DQG UHDFWLYH FRPSRQHQWV
UDQG“M[UHVSHFWLYHO\
7UDQVIRUPHU+DQGERRN3DJH
$WQRORDGWKHVHFRQGDU\YROWDJHLV8:LWKWKHORDG=/FRQQHFWHGWKHYROWDJHDWWKHVHFRQGDU\
WHUPLQDOVFKDQJHVWR87KHFRUUHVSRQGLQJYHFWRUGLDJUDPLVVKRZQLQ)LJXUH,QWKHIROORZLQJ
FRQVLGHUDWLRQV V\PPHWULFDO ORDGLQJ LV DVVXPHG 7KH LQIOXHQFH RI WKH VPDOO PDJQHWLVLQJ FXUUHQW
XVXDOO\LQWKHPDJQLWXGHRIRIWKHUDWHGFXUUHQW LVQHJOLJLEOH
8
X[
ij
ǻ8
ij
XU
8
,
ij
)LJXUH
)URPWKHYHFWRUGLDJUDPLQ)LJXUHWKHIROORZLQJUHODWLRQVKLSDSSHDUV
9
∆8 = , ⋅ U ⋅ FRV ϕ + , ⋅ [ ⋅ VLQ ϕ + 8 − 8 − (, ⋅ U ⋅ VLQ ϕ − , ⋅ [ ⋅ FRV ϕ) ∆8LVWKHYROWDJHGURSWKHDULWKPHWLFGLIIHUHQFHEHWZHHQ8DQG8XU DQGX[DUHWKHDFWLYHDQG
WKHUHDFWLYHVKRUWFLUFXLWYROWDJHVDWUDWHGFXUUHQWUHODWHGWRWKHUDWHGYROWDJH8
7R FDOFXODWH WKH UHODWLYH YROWDJH GURS DW DQ\ UHODWLYH ORDGLQJ Q VHH HTXDWLRQ FDQ EH
UHZULWWHQDV
∆8
8
= Q(XU FRV ϕ + X[ VLQ ϕ) + − − Q (XU VLQ ϕ − X[ FRV ϕ) Q=
,
([DPSOHQ ∆8 8 XU , 1
X[ FRVij LQGXFWLYH
= ⋅ ( ⋅ + ⋅ ) + − − ⋅ ( − ⋅ ) = ∆8 = ⋅ 8 9
8 = 8 − ∆8 = ( − ) ⋅ 8 = ⋅ 8 9
,QRWKHUZRUGVZKHQDWUDQVIRUPHUZLWKWKHVHYDOXHVIRUXUDQGX[LVORDGHGZLWKUDWHGFXUUHQWZLWK
DSRZHUIDFWRURILQGXFWLYHWKHYROWDJHRQWKHVHFRQGDU\WHUPLQDOVGHFUHDVHVWRRIWKH
YROWDJHDWQRORDG
3DJH7UDQVIRUPHU+DQGERRN
88
Q Q Q $QJOH ϕ
ϕ GHJUHHV RIORDGLQJFXUUHQW
)LJXUH
)LJXUHVKRZVDQH[DPSOHRIKRZWKHVHFRQGDU\YROWDJHYDULHVZLWKYDULRXVDQJOHVRIϕDQG
ORDG FXUUHQWV IRU WKH SDUWLFXODU YDOXHV XU DQG X[ 1HJDWLYH DQJOHV RI ϕ PHDQ
ODJJLQJ LQGXFWLYH ORDGFXUUHQW3RVLWLYHDQJOHVRIϕPHDQOHDGLQJ FDSDFLWLYH ORDGFXUUHQW
1RWHWKDWDWDQJOHijDERYHDFHUWDLQSRVLWLYHYDOXHWKHVHFRQGDU\YROWDJHLQFUHDVHVFRPSDUHGWR
YROWDJHDWQRORDG
88
3RZHUIDFWRU 3RZHUIDFWRU 3RZHUIDFWRU 3RZHUIDFWRU X[
)LJXUH
)LJXUHVKRZVDQRWKHUH[DPSOHRIKRZWKHVHFRQGDU\YROWDJHPD\YDU\DWYDULRXVYDOXHVRI
WKH VKRUW FLUFXLW UHDFWDQFH X[ DQG RI FRVij ,Q JHQHUDO WKH VHFRQGDU\ YROWDJH GHFUHDVHV ZLWK
LQFUHDVLQJX[1RWHWKDWIRUH[DPSOHDWX[ DQGFRVij WKHVHFRQGDU\YROWDJHKDVGURSSHG
WRRIWKHQRORDGYROWDJH
7UDQVIRUPHU+DQGERRN3DJH
7KH YROWDJH GURS LV GXH WR WKH FRQVXPSWLRQ RI DFWLYH DQG UHDFWLYH SRZHU LQ WKH WUDQVIRUPHU
$FFRUGLQJWRWKH,(&GHILQLWLRQV VHHFODXVHRI,(& LWLVLPSOLHGWKDWWKHUDWHGSRZHURI
DWZRZLQGLQJWUDQVIRUPHULVWKHLQSXWSRZHU7KHRXWSXWSRZHUGLIIHUVIURPWKHUDWHGSRZHU
7KLVLVGLIIHUHQWIURPWKHGHILQLWLRQLQ$16,,(((ZKLFKVWDWHVWKDWWKHRXWSXWSRZHUVKDOOEHHTXDO
WR WKH UDWHG SRZHU DQG WKDW WKH YROWDJH DSSOLHG RQ WKH SULPDU\ VLGH VKDOO EH DGMXVWHG WR
FRPSHQVDWHIRUWKHYROWDJHGURS RUULVH LQWKHWUDQVIRUPHU
8VHUV DQG LQVWDOODWLRQ SODQQHUV DUH UHFRPPHQGHG WR WDNH WKH YDULDWLRQ RI WKH VHFRQGDU\ YROWDJH
GXULQJORDGLQJLQWRDFFRXQWZKHQVSHFLI\LQJWKHWUDQVIRUPHUGDWD7KLVPD\EHHVSHFLDOO\LPSRUWDQW
IRUH[DPSOHLQDFDVHZKHUHDODUJHPRWRUUHSUHVHQWVWKHPDLQORDGRIWKHWUDQVIRUPHU7KHKLJKO\
LQGXFWLYHVWDUWLQJFXUUHQWRIWKHPRWRUPD\WKHQEHFRQVLGHUDEO\KLJKHUWKDQWKHUDWHGFXUUHQWRIWKH
WUDQVIRUPHU &RQVHTXHQWO\ WKHUH PD\ EH D FRQVLGHUDEOH YROWDJH GURS WKURXJK WKH WUDQVIRUPHU ,I
WKHIHHGLQJSRZHUVRXUFHLVZHDNWKLVZLOOFRQWULEXWHWRDQHYHQORZHUYROWDJHRQWKHVHFRQGDU\
VLGHRIWKHWUDQVIRUPHU
7KHSRZHUIDFWRUV FRVϕ LQ)LJXUHDUHLQGXFWLYH%RWK)LJXUHDQG)LJXUHLQGLFDWH
WKDWWKHYROWDJHGURSLQWKHWUDQVIRUPHUGHFUHDVHVZKHQWKHSRZHUIDFWRULQFUHDVHV$ORZYROWDJH
GURSLQFUHDVHVWKHHIILFLHQF\RIWKHWUDQVIRUPHU
(IILFLHQF\
7KHHIILFLHQF\RIDWUDQVIRUPHULVFDOFXODWHGDFFRUGLQJWR
η =
⋅ 3 + 3/ ⋅ Q +
3 ⋅ Q
ZKHUH
3LVWKHQRORDGORVVN : DWUDWHGYROWDJH
3/LVWKHORDGORVV N: DWUDWHGFXUUHQW
3LVWKHDFWLYHSRZHU N: VXSSOLHGWRWKHORDG
QLVWKHUHODWLYHGHJUHHRIORDGLQJ$WUDWHGFXUUHQWQ 3LVFDOFXODWHGDFFRUGLQJWR
3 = ⋅ , ⋅ 8 ⋅ −
∆8 ([DPSOH
8 ⋅ FRV ϕ N9$WUDQVIRUPHU
3 N: 3/ N:
X] Q FRVϕ FRVϕ η η 7KHHIILFLHQF\RIWUDQVIRUPHUVLVLQJHQHUDOTXLWHKLJK
12/2$' 0$*1(7,6,1* &855(17$1'12/2$'/266(6
7KH QR ORDG FXUUHQW DQG QR ORDG ORVVHV DUH DWWULEXWHG WR WKH FRUH DQG WKH VSHFLDO PDJQHWLF
SURSHUWLHVRIWKHFRUHVWHHO
)HUURPDJQHWLFPDWHULDOVDUHFKDUDFWHULVHGE\WKHLUSDUWLFXODUKLJKUHODWLYHSHUPHDELOLW\XSWR
7KLVPHDQVWKDWDUHODWLYHO\VPDOOQXPEHURIPDJQHWLVLQJDPSHUHWXUQSHUPHWHUOHQJWKRIWKH
PDJQHWLF IOX[ OLQHV LV UHTXLUHG WR REWDLQ D VWURQJ PDJQHWLF ILHOG ZKLFK JLYHV D VWURQJ FRXSOLQJ
EHWZHHQWKHZLQGLQJVRIDWUDQVIRUPHU
8QOLNH WKH SHUPHDELOLW\ RI RWKHU PDWHULDOV ZKLFK KDYH FRQVWDQW SHUPHDELOLW\ D GLDJUDP LV
QHFHVVDU\WRGHVFULEHWKHSHUPHDELOLW\RIIHUURPDJQHWLFPDWHULDOVVHH)LJXUH
:KHQDVLQXVRLGDODFYROWDJHLVDSSOLHGWRWKHWHUPLQDOVRIDWUDQVIRUPHUZLQGLQJDPDJQHWLVLQJ
FXUUHQWZLOOIORZWKURXJKWKHZLQGLQJDQGDPDJQHWLFIOX[ZLOOIORDWLQWKHFRUH7KHPDJQHWLFIOX[ZLOO
DOVREHRIVLQXVRLGDOVKDSHODJJLQJGHJUHHVDIWHUWKHDSSOLHGYROWDJH7KHPDJQHWLVLQJFXUUHQW
ZLOOQRWEHVLQXVRLGDOEXWFRQVLGHUDEO\GLVWRUWHG
)LJXUHVKRZVFRUUHVSRQGLQJYDOXHVRIPDJQHWLFIOX[DQGPDJQHWLVLQJFXUUHQWGXULQJRQHF\FOH
RI WKH DSSOLHG YROWDJH 6WDUWLQJ DW SRLQW D LQ WKH GLDJUDP ZKHUH WKH IOX[ GHQVLW\ DQG WKH
PDJQHWLVLQJ FXUUHQW KDYH WKHLU PD[LPXP QHJDWLYH YDOXH :KHQ WKH PDJQHWLVLQJ FXUUHQW DQG WKH
3DJH7UDQVIRUPHU+DQGERRN
PDJQHWLFIOX[SURFHHGWRZDUGVVPDOOHUQHJDWLYHYDOXHVWKH\IROORZWKHFXUYHIURPDWRE$WSRLQWE
WKHPDJQHWLVLQJFXUUHQWLV]HUREXWWKHUHLVVWLOOUHPDLQLQJDPDJQHWLFIOX[LQWKHFRUH7KLVIOX[LV
FDOOHGWKHUHPDQHQWPDJQHWLFIOX[
:KHQSURFHHGLQJIXUWKHUDORQJWKHFXUYHWRWKHULJKWLQWKHGLDJUDPWKHPDJQHWLVLQJIRUFHFKDQJHV
WR SRVLWLYH GLUHFWLRQ $W SRLQW F WKH IOX[ GHQVLW\ LQ WKH FRUH EHFRPHV ]HUR 7KLV YDOXH RI WKH
PDJQHWLVLQJIRUFHLVFDOOHGWKHFRHUFLYHIRUFH
,QFUHDVLQJWKHPDJQHWLVLQJIRUFHIXUWKHUIURPSRLQWFDIOX[LQWKHSRVLWLYHGLUHFWLRQVWDUWVWRIORZLQ
WKHFRUH$WSRLQWGWKHFXUUHQWDQGWKHIOX[VWDUWWRGHFUHDVH+RZHYHUDVWKHVHYDOXHVGHFUHDVH
WKH\IROORZWKHFXUYHWRWKHOHIWUDWKHUWKDQWRWKHULJKW
7 9VP
G
%
H
I
F
+
$P
E
D
)LJXUH
$W SRLQW H WKH FXUUHQW KDV GHFUHDVHG WR ]HUR $QG DJDLQ WKHUH LV D UHPDQHQW IOX[ IORDWLQJ LQ WKH
FRUHWKLVWLPHZLWKWKHRSSRVLWHGLUHFWLRQFRPSDUHGWRWKHUHPDQHQWIOX[DWSRLQWE,QFUHDVLQJWKH
FXUUHQWQRZLQWKHQHJDWLYHGLUHFWLRQWKHIOX[GHFUHDVHVIXUWKHUDQGEHFRPHV]HURDWSRLQWI)URP
SRLQWIRQWKHIOX[FKDQJHVGLUHFWLRQDQGLQFUHDVHVLQWKHQHJDWLYHGLUHFWLRQXQWLOLWUHDFKHVSRLQWD
1RZRQHF\FOHRIWKHDSSOLHGYROWDJHLVFRPSOHWHG
7KHSK\VLFDOH[SODQDWLRQIRUWKHGHVFULEHGFRXUVHRIHYHQWVLVH[SUHVVHGLQWKHIROORZLQJVLPSOLILHG
ZD\ D IHUURPDJQHWLF PDWHULDO KDV QXPHURXV VPDOO PDJQHWV DWWDFKHG WR LWV FU\VWDOOLQH PROHFXODU
VWUXFWXUH:LWKLQFHUWDLQGRPDLQVWKHVHPDJQHWVKDYHWKHVDPHRULHQWDWLRQ,QWKHRULJLQDOVWDWHRI
WKH PDWHULDO WKHVH GRPDLQV DUH UDQGRPO\ RULHQWDWHG DQG WKH PDJQHWLF ILHOG IURP HDFK RI WKHP
SUDFWLFDOO\FDQFHOVHDFKRWKHUVRWKHUHLVQRUHVXOWLQJPDJQHWLFILHOG
,IWKHPDWHULDOLVSODFHGLQDQH[WHUQDOPDJQHWLFILHOGWKLVZLOOKDYHDQLPSDFWRQWKHRULHQWDWLRQRI
WKH GRPDLQV $V WKH H[WHUQDO ILHOG LV LQFUHDVLQJ PRUH DQG PRUHRI WKH GRPDLQVZLOO FKDQJH WKHLU
GLUHFWLRQVRWKHGLUHFWLRQRIWKHLUPDJQHWLFILHOGFRLQFLGHVZLWKWKHGLUHFWLRQRIWKHH[WHUQDOILHOG
,I WKH H[WHUQDO ILHOG JUDGXDOO\ GHFUHDVHV PRUH DQG PRUH GRPDLQV ZLOO VOLGH RXW RI WKH RULHQWDWLRQ
WKH\REWDLQHGGXHWRWKHH[WHUQDOILHOG%XWZKHQWKHH[WHUQDOILHOGKDVGLVDSSHDUHGWKHUHZLOOVWLOO
EHDFRQVLGHUDEOHQXPEHURIGRPDLQVZKLFKUHPDLQLQWKHVDPHGLUHFWLRQDVWKH\ZHUHXQGHUWKH
LQIOXHQFHRIWKHIRUHJRLQJH[WHUQDOILHOG
([SRVHGWRDQLQFUHDVLQJH[WHUQDOILHOGRIRSSRVLWHGLUHFWLRQPRUHDQGPRUHGRPDLQVZLOOFKDQJH
RULHQWDWLRQ$WDFHUWDLQYDOXHRIWKHH[WHUQDOILHOGWKHRULHQWDWLRQRIWKHGRPDLQVZLOOEHVRPL[HG
WKDWWKHUHLVQRUHVXOWLQJPDJQHWLFILHOGIURPWKHP)XUWKHULQFUHDVHRIWKHH[WHUQDOILHOGZLOOFDXVH
PRUHDQGPRUHGRPDLQVWRFKDQJHWKHLUGLUHFWLRQJUDGXDOO\VRWKHGLUHFWLRQRIWKHLUPDJQHWLFILHOG
FRLQFLGHVZLWKWKHQHZGLUHFWLRQRIWKHH[WHUQDOILHOG
'XH WR WKH PDQ\ PDJQHWLF GRPDLQV WKDW EHFRPH XQLGLUHFWLRQDO WKH WRWDO PDJQHWLF ILHOG ZLOO EH
WKRXVDQGVRIWLPHVKLJKHUWKDQWKHRULJLQDOH[WHUQDOILHOGWKDWGLUHFWHGWKHGRPDLQV
7UDQVIRUPHU+DQGERRN3DJH
5HRULHQWDWLRQRIWKHGRPDLQVLVDJUDGXDOSURFHVVWKDWUHTXLUHVVRPHWLPH7KLVLVWKHUHDVRQZK\
WKHPDJQHWLFIOX[ODJVEHKLQGWKHPDJQHWL]LQJIRUFHZKLFKWKHGLDJUDPLQ)LJXUHLOOXVWUDWHV
7KLVGLDJUDPLVFDOOHGWKHK\VWHUHVLVORRS7KHZRUGK\VWHUHVLVFRPHVIURPWKH*UHHNK\VWHUHR ODJEHKLQG
7KH K\VWHUHVLV ORRS LOOXVWUDWHV DOVR WKDW WKH VORSH RI WKH FXUYH GHFUHDVHV ZLWK LQFUHDVLQJ
PDJQHWL]LQJ IRUFH $W D FHUWDLQ IOX[ GHQVLW\ WKH VORSH RI WKH FXUYH ZLOO EHFRPH HTXDO WR ȝ WKH
SHUPHDELOLW\RIDLU
7KLV PHDQV WKDW QR IXUWKHU LQFUHDVH LQWKH PDJQHWLF IOX[ FDQEHREWDLQHG IURP WKH IHUURPDJQHWLF
PDWHULDO$OOWKHGRPDLQVKDYHQRZDOLJQHGWKHLUILHOGZLWKWKHH[WHUQDOILHOG7KLVLVFDOOHGPDJQHWLF
VDWXUDWLRQ )RU WKH EHVW FRPPHUFLDOO\ DYDLODEOH FRUH PDWHULDO WRGD\ WKH VDWXUDWLRQ IOX[ GHQVLW\ LV
VOLJKWO\DERYH7HVOD 9VP 7KH SHUPHDELOLW\ LV HTXDO WR WKH VORSH RI WKH K\VWHUHVLV ORRS %HFDXVH WKLV VORSH YDULHV GXULQJ D
F\FOH RI WKH DSSOLHG YROWDJH WKH SHUPHDELOLW\ LV QRW D FRQVWDQW EXW YDULHV GXULQJ WKH F\FOH DQG
YDULHVDOVRZLWKWKHSHDNYDOXHRIWKHIOX[GHQVLW\
7R WXUQ WKH GLUHFWLRQ RI WKH PDJQHWLF GRPDLQV UHTXLUHV D VXSSO\ RI DFWLYH HQHUJ\ 7KH UHTXLUHG
HQHUJ\LVUHSUHVHQWHGE\WKHDUHDZLWKLQWKHK\VWHUHVLVORRSZKLFKKDVWKHXQLWRI:VPRIFRUH
PDWHULDO7KHVXSSOLHGHQHUJ\FKDQJHVWRKHDWZKLFKLQFUHDVHVWKHWHPSHUDWXUHRIWKHFRUH2QH
FRXOG LPDJLQH WKDW WKHUH LV IULFWLRQ SUHVHQW LQ WKH PDWHULDO ZKHQ WKH GRPDLQV WXUQ DURXQG 7KH
VXSSOLHGHQHUJ\DSSHDUVDVORVVHVLQWKHWUDQVIRUPHU7KH\DUHFDOOHGK\VWHUHVLVORVVHVDQGWKH\
DUHSURSRUWLRQDOWRWKHIUHTXHQF\$W+]WKHK\VWHUHVLVORRSLVUXQWKURXJKWLPHVSHUVHFRQG
7KH K\VWHUHVLV ORVVHV SHU VHFRQG ZLOO WKHQ EH WLPHV WKH DUHD RI WKH ORRS 7KH ORRS FDQ EH
GLVSOD\HGRQWKHVFUHHQRIDQRVFLOORVFRSH
0DWHULDOVZLWKDQDUURZK\VWHUHVLVORRSWKDWLVORZFRHUFLYHIRUFHKDYHORZK\VWHUHVLVORVVHV
$VPHQWLRQHGSUHYLRXVO\WKHQRORDGFXUUHQWLVQRWVLQXVRLGDO
)LJXUH
)LJXUH VKRZV D W\SLFDO VKDSH RI WKLV FXUUHQW ZKLFK FDQ EH FRQVWUXFWHG IURP WKH K\VWHUHVLV
ORRS,WKDVDVKRUWSHDNYDOXHGXHWRWKHORZVORSHRIWKHPDJQHWLVLQJFXUYHV WKHULJKWDQGWKHOHIW
VWULQJVRIWKHK\VWHUHVLVORRS DWKLJKIOX[GHQVLWLHV,WLVQRQV\PPHWULFDORQWKHWZRVLGHVRIWKH
SHDNYDOXHGXHWRWKHZLGWKRIWKHK\VWHUHVLVORRS
7KHQRORDGFXUUHQWPHDVXUHGDWWKHGHOLYHU\WHVWDQGQRWHGLQWKHWHVWUHSRUWLVWKHUPVYDOXHRI
WKH QRQVLQXVRLGDO QR ORDG FXUUHQW )RUWKUHHSKDVH WUDQVIRUPHUV WKH DYHUDJH YDOXH IRU WKH WKUHH
SKDVHVLVQRWHG
(GG\FXUUHQWORVVHV
$QRWKHU FRPSRQHQW RI WKH QR ORDG ORVVHV LV WKH HGG\ FXUUHQW ORVVHV 7KH WLPHYDULDEOH PDJQHWLF
IOX[ LQGXFHV FXUUHQWV UXQQLQJ LQ SDWKV SHUSHQGLFXODU WR WKH GLUHFWLRQ RI WKH IOX[ 7KHVH FXUUHQWV
SURGXFH ORVVHV LQ WKH FRUH SODWHV 7KHVH ORVVHV FDQ EH FDOFXODWHG E\ PHDQV RI WKH IROORZLQJ
IRUPXOD
3DJH7UDQVIRUPHU+DQGERRN
3 HGG\ = ⋅ σ ⋅ ω ⋅ G ⋅ % ⋅ 9 :
ZKHUH
ıLVWKHFRQGXFWLYLW\RIWKHFRUHPDWHULDO
ȦLVWKHDQJXODUIUHTXHQF\
GLVWKHWKLFNQHVVRIWKHFRUHSODWHV
%LVWKHSHDNYDOXHRIWKHIOX[GHQVLW\
9LVWKHYROXPHRIWKHFRUH
7KHIRUPXODGHVHUYHVVRPHFRPPHQWV,WDSSHDUVWKDWWKHHGG\FXUUHQWORVVHVDUHSURSRUWLRQDOWR
WKH FRQGXFWLYLW\ RI WKH FRUH PDWHULDO ,Q PRGHUQ FRUH SODWH D IHZ SHUFHQWV RI VLOLFRQ LV DOOR\HG WR
UHGXFH WKH FRQGXFWLYLW\ DQG WKH HGG\ FXUUHQW ORVVHV %XW LI WKH VLOLFRQ FRQWHQW H[FHHGV D FHUWDLQ
OLPLWWKHPDWHULDOZLOOEHGLIILFXOWWRUROOVOLWDQGFXW
7KHHGG\FXUUHQWORVVHVDUHSURSRUWLRQDOWRWKHVTXDUHRIWKHWKLFNQHVVRIWKHSODWHV7KHFKRLFHRI
SODWH WKLFNQHVV LV D PDWWHU RI HFRQRPLF EDODQFH EHWZHHQ WKH FDSLWDOLVHG YDOXH RI WKH ORVVHV DQG
PDQXIDFWXULQJFRVWV,QSUDFWLFHWKHWKLFNQHVVLVQRUPDOO\ZLWKLQWKHUDQJH±PP
$QRPDORXVORVVHV
)RU WKH VDNH RI FRPSOHWHQHVV WKHUH LV D WKLUG FRPSRQHQW LQ WKH QR ORDG ORVVHV ZKLFK LV FDOOHG
DQRPDORXV ORVVHV WKDW KDYH EHHQ DVFULEHG WR D GLIIXVLRQ SKHQRPHQD LQ WKH FU\VWDO JULG RI WKH
PDWHULDO
7KHWUDGLWLRQDOZD\WRPHDVXUHWKHVSHFLILFWRWDOORVVHVLQFRUHVWHHOH[SUHVVHGLQ:SHUNJFRUH
VWHHO KDV EHHQ E\ PHDQV RI WKH (SVWHLQ IUDPH 7KLV LV D TXDGUDWLF IUDPH PDGH RI WKH ODPLQDWHG
FRUH VWHHO WR EH LQYHVWLJDWHG 7KH PHWKRG LV GHVFULEHG LQ ,(& 0DJQHWLF
PDWHULDOV ± 3DUW 0HWKRGV RI PHDVXUHPHQW RI WKH PDJQHWLF SURSHUWLHV RI HOHFWULFDO VWHHO VKHHW
DQGVWULSE\PHDQVRIDQ(SVWHLQIUDPH
,WLVUHODWLYHO\ODERULRXVDQGWLPHFRQVXPLQJWRSUHSDUHWKHVDPSOHVIRUWKH(SVWHLQPHDVXUHPHQW
,Q RUGHU WR HVWDEOLVK D TXLFNHU PHWKRG WKDW IDFLOLWDWHV PHDVXUHPHQWV RQ D KLJKHU QXPEHU RI
VDPSOHV VLQJOH VKHHW WHVWHUV ZHUH GHYHORSHG 7KLV PDNHV LW SRVVLEOH WR VWDWH DYHUDJH DQG
YDULDELOLW\YDOXHVZLWKKLJKHUVWDWLVWLFDOFRQILGHQFH
,QVLQJOHVKHHWWHVWHUVDPDJQHWLFILHOGLVFUHDWHGWKDWLVDSSOLHGSHUSHQGLFXODUWRWKHVXUIDFHRIWKH
VDPSOHVKHHWDWRQHHQGIORDWVDORQJWKHOHQJWKRIWKHVKHHWDQGJRHVRXWDJDLQSHUSHQGLFXODUWR
WKH VXUIDFH DJDLQ DW WKH RWKHU HQG 7KH PHWKRG LV VWDQGDUGLVHG DQG GHVFULEHG LQ ,(& (G 0DJQHWLF PDWHULDOV ± 3DUW 0HWKRGV RI PHDVXUHPHQW RI WKH PDJQHWLF
SURSHUWLHVRIPDJQHWLFVKHHWDQGVWULSE\PHDQVRIDVLQJOHVKHHWWHVWHU
7KH QR ORDG ORVVHV LQ D WUDQVIRUPHU FRUH LQ: SHU NJ FRUHVWHHOZLOO QRUPDOO\EH KLJKHU WKDQ WKH
YDOXHVREWDLQHGIURPWHVWVDPSOHVLQDODERUDWRU\7KHUHDUHVHYHUDOUHDVRQVIRUWKLV
0RGHUQORZORVVFRUHVWHHOLVTXLWHVHQVLWLYHWRPHFKDQLFDOVWUDLQDQGWUHDWPHQW7KHODUJHQXPEHU
RI WKLQ FRUH SODWHV PXVW EH NHSW WRJHWKHU E\ PHDQV RI D FHUWDLQ SUHVVXUH ZKLFK DOVR PD\ EH
XQHYHQO\ GLVWULEXWHG DORQJ WKH FRUH OLPEV DQG \RNHV 7KH MRLQWV EHWZHHQ OLPEV DQG \RNHV ZKHUH
WKHIOX[GLUHFWLRQFKDQJHVPD\QRWEHSHUIHFWGXHWRWROHUDQFHVLQWKHPDQXIDFWXULQJ3DUWLFXODUO\
WKHMRLQWVEHWZHHQOLPEVDQGWKHXSSHU\RNHDUHFULWLFDOEHFDXVHWKHSODWHVRIWKHXSSHU\RNHDUH
PRUHRUOHVVIRUFHGGRZQDIWHUWKHFRUHLVUDLVHGDQGWKHZLQGLQJVDUHDVVHPEOHGRQWKHOLPEV
%XUUVDWWKHHGJHVRIWKHFRUHSODWHVLQIOXHQFHWKHORVVHVXQIDYRXUDEO\7KHLQFUHDVHLQORVVHVLQD
UHDOWUDQVIRUPHUFRUHFRPSDUHGWRWKHPDWHULDOPHDVXUHPHQWVLQODERUDWRULHVLVRIWHQH[SUHVVHGE\
PHDQVRIDIDFWRUFDOOHGWKHµEXLOGLQJIDFWRU¶7KLVIDFWRUYDULHVZLWKWKHFURVVVHFWLRQDUHDRIWKH
FRUHDQGZLWKWKHGHVLJQDVZHOO
([SHULHQFHG PDQXIDFWXUHUV DUH QRUPDOO\ DEOH WR SUHGLFW WKH QR ORDG ORVVHV ZLWK QRW PRUH WKDQ D
IHZ SHUFHQW GHYLDWLRQ IURP WKH PHDVXUHG ORVVHV 7KLV LV GXH WR VWXGLHV RI WKH IOX[ SDWWHUQ LQ
WUDQVIRUPHU FRUHV DQG PDWKHPDWLFDO PRGHOV GHULYHG IURP UHJUHVVLRQ DQDO\VLV RI WKH PHDVXUHG
ORVVHVRIDODUJHQXPEHURIWUDQVIRUPHUV
,QUXVKFXUUHQWV
,QUXVKFXUUHQWVKDYHVRPHWLPHVEHHQDSUREOHPIURPDSURWHFWLRQSRLQWRIYLHZ)XVHVKDYHEORZQ
RU UHOD\V KDYH GLVFRQQHFWHG WKH WUDQVIRUPHU LPPHGLDWHO\ DIWHU HQHUJL]LQJ 7KLV PD\ FUHDWH WKH
VXVSLFLRQWKDWWKHUHLVVRPHWKLQJZURQJZLWKWKHWUDQVIRUPHU$QH[SODQDWLRQRIWKHSKHQRPHQRQ
ZLOOEHJLYHQLQWKHIROORZLQJ
7KH PDJQLWXGH RI WKH LQUXVK FXUUHQW LV D VWDWLVWLFDO YDULDEOH GHSHQGLQJ RQ ZKHUH RQ WKH VLQXVRLGDO
YROWDJH FXUYH WKH FLUFXLW EUHDNHU FRQQHFWV WKH WUDQVIRUPHU WR WKH YROWDJH VRXUFH 7KH KLJKHVW LQUXVK
FXUUHQWRFFXUVZKHQWKHFLUFXLWEUHDNHUFRQQHFWVWKHWUDQVIRUPHUZKHQWKHYROWDJHSDVVHVWKURXJK]HUR
7UDQVIRUPHU+DQGERRN3DJH
:KHQ WKH FLUFXLW EUHDNHU GLVFRQQHFWV WKH WUDQVIRUPHU IURP WKH YROWDJH VRXUFH WKHUH ZLOO DOZD\V
UHPDLQ D UHPDQHQW IOX[ LQ WKH FRUH XQOHVV WKH GLVFRQQHFWLRQ WDNHV SODFH H[DFWO\ ZKHQ WKH IOX[
SDVVHV ]HUR 7KH UHPDQHQW IOX[ ZLOO EH D VWDWLVWLFDO YDULDEOH ,W ZLOO EH DW LWV PD[LPXP LI WKH
GLVFRQQHFWLRQKDSSHQVZKHQWKHIOX[KDVLWVPD[LPXP7KHSRODULW\RIWKHUHPDQHQWIOX[PD\EH
SRVLWLYHRUQHJDWLYH
7KH LQGXFWLRQ ODZ VWDWHV WKDW WKH LQGXFHG YROWDJH LV SURSRUWLRQDO WR WKH WLPH GHULYDWLYH RI WKH
PDJQHWLFIOX[
X = GΦ
9
GW
7KLVFDQDOVREHVHHQWKHRSSRVLWHZD\WKHPDJQHWLFIOX[LVWKHWLPHLQWHJUDORIWKHYROWDJH
GΦ = X ⋅ GW 9V Φ = ³ X ⋅ GW 9V $VVXPLQJ WKDW WKH YROWDJH LV VLQXVRLGDO DQG WKH LQWHJUDO LV WDNHQ RYHU WKH ILUVW KDOI F\FOH RI WKH
YROWDJHWKDWLVIURPWRπ, ZKHUHLVWKHWLPHZKHQWKHFLUFXLWEUHDNHUPDNHVDQGπLVWKHWLPH
ZKHQWKHYROWDJHFKDQJHVGLUHFWLRQ
π
Φ = ³ 8 ⋅ VLQ ωW ⋅ G ωW = 8(− FRV π − − FRV ) = 8 9V 7RFRPSDUHWKLVUHVXOWZLWKWKHVLWXDWLRQZKHQWKHFLUFXLWEUHDNHUPDNHVDWWKHSHDNYDOXHRIWKH
YROWDJHWKHLQWHJUDOLVWDNHQEHWZHHQWKHOLPLWVπDQGπ.
Φ=
π
³ 8 ⋅ VLQ ωW
π
⋅ G ωW = 8 − FRV π − − FRV π
=8
(9V)
(22)
(TXDWLRQ FRPSOLHVZLWKWKHVLWXDWLRQLQFRQWLQXRXVQRUPDOVHUYLFH
)URPHTXDWLRQ LWDSSHDUVWKDWWKHPDJQHWLFIOX[UHDFKHVDYDOXHZKLFKLVWZLFHDVODUJHDVLWLV
LQQRUPDOVHUYLFHLIWKHFLUFXLWEUHDNHUPDNHVZKHQWKHYROWDJHSDVVHVWKURXJK]HUR7KLVPHDQV
WKDWWKHSRLQWRIPDJQHWLFVDWXUDWLRQLQWKHFRUHZLOOEHH[FHHGHG7KHUHDFWDQFHRIWKHWUDQVIRUPHU
LVWKHQYHU\ORZFRPSDUHGWRWKHODUJHUHDFWDQFHDWQRUPDOIOX[$KLJKFXUUHQWZLOOWKHQEHGUDZQ
IURPWKHHQHUJ\VRXUFH7KLVFXUUHQWZLOOEHRIWKHVDPHPDJQLWXGHDQGFKDUDFWHUDVDVKRUWFLUFXLW
FXUUHQW DQG ZLOO FDXVH FRQVLGHUDEOH PHFKDQLFDO IRUFHV LQ WKH SULPDU\ ZLQGLQJ 7KH IRUFHV DUH
SURSRUWLRQDOWRWKHVTXDUHRIWKHFXUUHQW
,IWKHUHPDQHQWIOX[ΦUKDVWKHVDPHGLUHFWLRQDVWKHIOX[FDOFXODWHGLQWKHIRUHJRLQJWKHWRWDOIOX[
ZLOOEH
Φ W = Φ + Φ U 9V ZKLFKPDNHVWKHLQUXVKFXUUHQWHYHQKLJKHU
)LJXUH
)LJXUH LOOXVWUDWHV WKH VLWXDWLRQ 7KH OLJKW JUH\ FXUYH PDUNHG Φ¶ LV WKH PDJQHWLF IOX[ LQ WKH
QRUPDOVWDWLRQDU\FRQGLWLRQ
3DJH7UDQVIRUPHU+DQGERRN
:KHQ WKH YROWDJH FKDQJHV GLUHFWLRQ DW π WKH FXUUHQW ZLOO GHFUHDVH %XW DW π WKH FXUUHQW ZLOO
LQFUHDVH DJDLQ 7KLV FRXUVH RI HYHQWV ZLOO FRQWLQXH ZLWK JUDGXDOO\ GHFUHDVLQJ SHDN YDOXHV RI WKH
FXUUHQW 7KH LQIOXHQFH RI WKH RULJLQDO UHPDQHQW IOX[ ZLOO DOVR JUDGXDOO\ GLVDSSHDU 7KH QXPEHU RI
F\FOHV EHIRUH VWDWLRQDU\ QRUPDO RSHUDWLRQ LV UHDFKHG UDQJHV IURP OHVV WKDQ F\FOHV IRU VPDOO
WUDQVIRUPHUVXSWRVHYHUDOPLQXWHVIRUODUJHUWUDQVIRUPHUV
$VXGGHQLQFUHDVHGVRXQGOHYHOWKDWIROORZVWKHVDPHGHFOLQLQJGHYHORSPHQWDVWKHPDJQHWLFIOX[
FDQEHKHDUG
7KHVWDWLVWLFDOSUREDELOLW\WKDWWKHDEVROXWHZRUVWFDVHZLOORFFXULVQRWKLJK,QPRVWFDVHVHOHFWULFDO
FRQQHFWLRQEHWZHHQWKHWZRSROHVRIWKHFLUFXLWEUHDNHUZLOOEHHVWDEOLVKHGEHIRUHPHWDOOLFFRQWDFW
EHWZHHQ WKH SROHV WDNHV SODFH EHFDXVH RI DUFLQJ EHWZHHQ WKH SROHV 7KHUH LV KLJKHU SUREDELOLW\
WKDWVXFKDUFKLQJZLOORFFXUZKHQWKHYROWDJHGLIIHUHQFHEHWZHHQWKHSROHVLVLQWKHUDQJHRIWKH
YROWDJHPD[LPXPWKDQZKHQWKLVYROWDJHGLIIHUHQFHLVFORVHWR]HUR
7KH VKRUWFLUFXLW SRZHU RI WKH IHHGLQJ VRXUFH KDV DOVR LQIOXHQFH RQ WKH PDJQLWXGH RI WKH LQUXVK
FXUUHQW,IWKHVKRUW±FLUFXLWLPSHGDQFHRIWKHVRXUFHLVKLJKWKHLQUXVKFXUUHQWZLOOFDXVHDYROWDJH
GURSDFURVVWKLVLPSHGDQFHZKLFKZLOOUHGXFHWKHYROWDJHDWWKHWUDQVIRUPHUWHUPLQDOV,WFDQDOVR
EHQRWHGWKDWWKHZRUVWFDVHRQO\RFFXUVLQRQHRXWRIWKHWKUHHSKDVHV
$FKDUDFWHULVWLFRIWKHLQUXVKFXUUHQWLVWKDWLWFRQWDLQVDVHFRQGKDUPRQLFFRPSRQHQWEHFDXVHRI
DV\PPHWULFDOKDOIF\FOHV0RGHUQRYHUFXUUHQWUHOD\VDQGGLIIHUHQWLDOUHOD\VFRQWDLQDFRQWUROFLUFXLW
WKDWUHGXFHVWKHVHQVLWLYLW\RIWKHUHOD\ZKHQDVHFRQGKDUPRQLFLQWKHFXUUHQWH[LVWV,QWKDWZD\D
UHOHDVLQJVLJQDOIURPWKHUHOD\WRWKHFLUFXLWEUHDNHULVSUHYHQWHGGXULQJLQUXVKFXUUHQWZKLFKLVD
QRUPDOSK\VLFDOSKHQRPHQRQDQGQRWDIDLOXUH
,QUXVKFXUUHQWVWHQGWREHKLJKHURQPRGHUQWUDQVIRUPHUVFRPSDUHGWRWUDQVIRUPHUVPDQXIDFWXUHG
VD\\HDUVDJR7KHUHDVRQLVWKDWPRGHUQORZORVVFRUHVWHHODOORZVKLJKHUIOX[GHQVLWLHVLQWKH
FRUHZLWKRXWXQDFFHSWDEOHKLJKFRUHWHPSHUDWXUHVDVDFRQVHTXHQFH
/2$'/266(6
7KHFXUUHQWVIORDWLQJLQWKHZLQGLQJVFUHDWHORVVHVGXHWRWKHUHVLVWDQFHLQWKHZLQGLQJV7KH\DUH
HTXDO WR 5, LQ HDFK RI WKH ZLQGLQJV ZKHUH 5 LV WKH GLUHFW FXUUHQW ZLQGLQJ UHVLVWDQFH DQG , WKH
FXUUHQWWKURXJKWKHZLQGLQJ
7KH HGG\ FXUUHQW ORVVHV FRPH LQDGGLWLRQ 7KHZLQGLQJ FRQGXFWRUV DUHVLWXDWHG LQ D WLPHYDU\LQJ
PDJQHWLF ILHOG GXH WR WKH FXUUHQW IORDWLQJ LQ WKH FRQGXFWRUV WKHPVHOYHV 6HH )LJXUH 7KLV
PDJQHWLF ILHOG FUHDWHV HGG\ FXUUHQWV LQ WKH ZLQGLQJ FRQGXFWRUV 7KH FRQVHTXHQFH RI WKH HGG\
FXUUHQWVLVWKDWWKHUHVXOWLQJFXUUHQWLQWKHFRQGXFWRUVLVXQHYHQO\GLVWULEXWHGLQWKHFURVVVHFWLRQRI
WKHFRQGXFWRUZKLFKLQWXUQLQFUHDVHVWKHORVVHV
7KH PDJQHWLF IOX[ GHQVLW\ YDULHV DOVR DFURVV WKH UDGLDO ZLGWK RI WKH ZLQGLQJ ,Q D VLPSOH ZLQGLQJ
FRQILJXUDWLRQ RI D WZRZLQGLQJ WUDQVIRUPHU ZKHUH WKH ZLQGLQJV DUH VLWXDWHG DV WZR FRQFHQWULF
VKHOOVWKHIOX[GHQVLW\LVKLJKHVWDWFRQGXFWRUVQHDUHVWWKHGXFWEHWZHHQWKHVKHOOV&RQVHTXHQWO\
WKHORVVHVDQGDOVRWKHWHPSHUDWXUHZLOOKLJKHVWLQWKHVHFRQGXFWRUV
7RDYRLGKLJKHGG\FXUUHQWORVVHVWKHFRQGXFWRUGLPHQVLRQSHUSHQGLFXODUWRWKHPDJQHWLFIOX[OLQHV
PXVW EH NHSW VPDOO )XUWKHU WDOO DQG VOLP ZLQGLQJV KDYH ORZHU HGG\ FXUUHQW ORVVHV WKDQ ORZ DQG
ZLGH ZLQGLQJV +RZHYHU LQ SUDFWLVH WKH GHVLJQ RI D WUDQVIRUPHU LV RIWHQ D FRPSURPLVH EHWZHHQ
GLIIHUHQWFRQVLGHUDWLRQVOLNHIRUH[DPSOHVKRUWFLUFXLWLPSHGDQFHDQGVSDFHOLPLWDWLRQV
%HFDXVH RI WKH PDJQHWLF OHDNDJH ILHOG DGGLWLRQDO ORVVHV DULVH LQ WKH WDQN DQG LQ PHWDO GHWDLOV
NHHSLQJWKHFRUHDQGWKHZLQGLQJVILUPO\WRJHWKHU
7KH5,ORVVHVLQFUHDVHZLWKWKHWHPSHUDWXUHZKLOHWKHDGGLWLRQDOORVVHVGHFUHDVHZLWKLQFUHDVLQJ
WHPSHUDWXUH 7KH WHPSHUDWXUH WKDW JXDUDQWHHG ORVVHV VKDOO EH UHIHUUHG WR LV VWDWHG LQ WKH
VWDQGDUGV
6+257&,5&8,7,03('$1&(
8VHUV KDYH VRPHWLPHV SDUWLFXODU UHTXLUHPHQWV UHJDUGLQJ WKH VKRUWFLUFXLW LPSHGDQFH 6XFK
UHTXLUHPHQWVPD\EHGHWHUPLQHGE\
• SDUDOOHORSHUDWLRQZLWKH[LVWLQJXQLWV
• OLPLWDWLRQRIYROWDJHGURS
• OLPLWDWLRQRIVKRUWFLUFXLWFXUUHQWV
7UDQVIRUPHU+DQGERRN3DJH
7KHWUDQVIRUPHUGHVLJQHUFDQPHHWWKHUHTXLUHPHQWVLQGLIIHUHQWZD\V
• 7KH VL]H RI WKH FRUH FURVVVHFWLRQ $ ODUJH FURVVVHFWLRQ JLYHV D ORZ LPSHGDQFH DQG YLFH
YHUVD
• $WDOOWUDQVIRUPHUJLYHVDORZLPSHGDQFHDQGYLFHYHUVD
)RUHDFKWUDQVIRUPHUWKHUHLVKRZHYHUDVPDOOHUUDQJHZKLFKJLYHVWKHRSWLPXPWUDQVIRUPHUIURP
DQHFRQRPLFSRLQWRIYLHZWKDWLVWKHORZHVWVXPRIWKHPDQXIDFWXULQJFRVWVDQGWKHFDSLWDOLVHG
YDOXHRIWKHORVVHV
5HJDUGLQJVPDOOHUGLVWULEXWLRQWUDQVIRUPHUVDKLJKGHJUHHRIVWDQGDUGLVDWLRQLQWKHPDQXIDFWXULQJ
PD\LQFHUWDLQFDVHVFRQVWUDLQWKHGHVLJQHU¶VDELOLW\WRPHHWWKHUHTXLUHPHQWV
6KRUWFLUFXLW LPSHGDQFH = LV RIWHQ H[SUHVVHG DV X] LQ SX RU LQ DFFRUGLQJ WR WKH IROORZLQJ
IRUPXODV
X ] = ,U ⋅ = 8 U SX
X ] = ⋅ ,U ⋅ = 8U )RUPXODV DQG DUHYDOLGIRUIRUVLQJOHSKDVHWUDQVIRUPHUVZKHUH,UDQG8UDUHUDWHGYDOXHV
RI FXUUHQW DQG YROWDJH RQ HLWKHU VLGH RI WKH WUDQVIRUPHU )RU SKDVH WUDQVIRUPHUV WKH QRPLQDWRU
PXVWEHPXOWLSOLHGZLWK¥
%DVHGRQPHDVXUHGVKRUWFLUFXLWYROWDJHWKHYDOXHRI=NH[SUHVVHGLQRKPFDQEHFDOFXODWHGIURP
WKHIROORZLQJIRUPXOD
==
X ] ⋅ 8 U
⋅ ,U
=
X ]
⋅ 8U
6U
Ÿ
Ÿ
IRUVLQJOHSKDVHWUDQVIRUPHUVDQG
==
X ] ⋅ 8U
⋅ ⋅ ,U
=
X ]
⋅ 8U
6U
IRUSKDVHWUDQVIRUPHUV6ULVWKHUDWHGSRZHURIWKHWUDQVIRUPHU
)URP IRUPXODV DQG LW DSSHDUV WKDW = H[SUHVVHG LQRKPLV GLIIHUHQW GHSHQGLQJ RQZKLFK
VLGHRIWKHWUDQVIRUPHULWLVUHIHUUHGWREHFDXVHWKHUDWLR8U,URU8U6ULVGLIIHUHQWRQHDFKVLGHRI
WKHWUDQVIRUPHUXQOHVVWKHWXUQUDWLRLVHTXDOWR
,WIROORZVWKDW
§1 ·
= § 8 U ·
¸ = ¨¨ ¸¸ =¨
= ¨© 8 U ¸¹
© 1 ¹
ZKHUH WKH LQGLFHV DQG UHIHUV WR WKH WZR VLGHV RI WKH WUDQVIRUPHU 7KH UHODWLRQ EHWZHHQ WKH
VKRUWFLUFXLWLPSHGDQFHH[SUHVVHGLQRKPUHIHUUHGWRWKHWZRVLGHVRIWKHWUDQVIRUPHULVHTXDOWR
WKHVTXDUHRIWKHWXUQUDWLRRUVTXDUHRIWKHUDWHGYROWDJHUDWLR
=KDVWKHDFWLYHDQGUHDFWLYHFRPSRQHQWV5DQGM;7RILQGWKHVHFRPSRQHQWVWKHORDGORVVHV 3/ DUHUHJLVWHUHGE\PHDQVRIZDWWPHWHUVGXULQJWKHVKRUWFLUFXLWPHDVXUHPHQW7KHQ
5 3/,U
ȍ
ȍ
5 ⋅ ,U
8U
SX
5 ⋅ ,U
⋅ 8U
;=
= − 5 7KHUHDOSDUWRIWKHVKRUWFLUFXLWYROWDJHLV
XU =
XU =
)RU WKUHHSKDVH WUDQVIRUPHUV D IDFWRU ¥ LV LQVHUWHG LQ WKH QRPLQDWRU 7KHUH LV D VLPSOH UHODWLRQ
EHWZHHQXUWKHORDGORVVHV3/DQGWKHUDWHGSRZHU6URIWKHWUDQVIRUPHU
3DJH7UDQVIRUPHU+DQGERRN
5 ⋅ ,U
5 ⋅ ,U
3
SX
=
= / 8U
8U ⋅ ,U
6U
7KH UHODWLRQ XU 3/6U LV DOVR YDOLG IRU SKDVH WUDQVIRUPHUV 7KH LPDJLQDU\ SDUW RI X] FDQ EH
FDOFXODWHGDV
XU =
X [ = X ] − X U SX
RU
ȍ
;=
= −5 :KLOH ; LV PDLQO\ OLQNHG WR WKH PDJQHWLF ILHOG LQ WKH FRUH ; LV OLQNHG WR PDJQHWLF OHDNDJH ILHOG
ZKLFKPDLQO\UXQVWKURXJKWKHZLQGLQJVDQGWKHGXFWVEHWZHHQZLQGLQJV
)LJXUH
:KHQWKHWUDQVIRUPHULVHQHUJL]HGEXWQRWORDGHGWKHSUDFWLFDOO\WKHZKROHPDJQHWLFILHOGJRHVLQ
WKHFRUH:KHQORDGLQJWKHWUDQVIRUPHUZLWKDODJJLQJFXUUHQWDSDUWRIWKHPDJQHWLFILHOGLVGUDZQ
RXW IURP WKH FRUH WR WKH FRUH ZLQGRZ ZKHUH WKH ZLQGLQJV DUH VLWXDWHG 6HH )LJXUH 7KH
PDJQHWLFIOX[LQWKHFRUHEHFRPHVVPDOOHU7\SLFDOO\IRUGLVWULEXWLRQWUDQVIRUPHUVWKHKLJKYROWDJHLV
DSSOLHG WR WKH RXWHU ZLQGLQJ 7KH VHFRQGDU\ ORZ YROWDJH ZLQGLQJ LV WKH LQQHU ZLQGLQJ ZKHUH WKH
YROWDJHGHFUHDVHV
,IDFDSDFLWLYHORDGLVDGGHGWKHUHVXOWLQJFXUUHQWGHFUHDVHVEHFDXVHWKHFDSDFLWLYHFXUUHQWSDUWO\
FRPSHQVDWHV WKH LQGXFWLYH FXUUHQW 7KH OHDNDJH ILHOG EHFRPHV VPDOOHU DQG WKH IOX[ LQ WKH FRUH
LQFUHDVHVDQGPDNHVWKHYROWDJHGURSRQWKHVHFRQGDU\VLGHVPDOOHU
,IWKHWUDQVIRUPHULVORDGHGZLWKDOHDGLQJFXUUHQWWKDWLVDFXUUHQWZLWKDUHVXOWLQJUHDFWLYHFXUUHQW
ZKLFKLVFDSDFLWLYHWKLVFDSDFLWLYHORDGVXSSOLHVUHDFWLYHSRZHUWRWKHWUDQVIRUPHU7KHPDJQHWLF
IOX[LQWKHFRUHDQGWKHVHFRQGDU\YROWDJHLQFUHDVH
7KHUHDFWLYHSRZHURIWKHPDJQHWLFHQHUJ\RIWKHOHDNDJHILHOGLV
4 = ω ⋅ /, = πI/, = ;, 9$ U +HUH,LVWKHORDGFXUUHQWIORZLQJLQHLWKHURIWKHZLQGLQJVDQG;WKHUHDFWDQFHLQRKPUHIHUUHGWR
VDPHVLGHRIWKHWUDQVIRUPHUDV,
;FDQEHFDOFXODWHGEDVHGRQWKHJHRPHWULFGLPHQVLRQVRIWKHZLQGLQJVDQGWKHQXPEHURIWXUQV
)RUDVLPSOHWZRZLQGLQJDUUDQJHPHQWWKHIRUPXODLV
; = π ⋅ − W +
W + W / + / N 5 1 ⋅ πI KZ
ȍ
'LPHQVLRQV LQ PHWHU 1 LV WKH QXPEHU RI WXUQV LQ WKH ZLQGLQJ RQ WKH VLGH WR ZKLFK ; VKDOO EH
UHIHUUHG6HH)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
⊗
,1
W
,1
W
KZ
W
)LJXUH
,Q WKH IRUPXOD / DQG / DUH WKH PHDQ FLUFXPIHUHQFH IRU WKH LQQHU DQG RXWHU ZLQGLQJV
UHVSHFWLYHO\7KHIRUPXODLVEDVHGRQWKHDVVXPSWLRQWKDWWKHPDJQHWLFILHOGOLQHVJRHVYHUWLFDOO\
DORQJWKHZKROHKHLJKWKZRIWKHZLQGLQJV7KLVLVLQUHDOLW\QRWWKHFDVH,WFDQEHVHHQIURP)LJXUH
WKDWVRPHRIWKHILHOGOLQHVWRZDUGVWKHHQGVRIWKHZLQGLQJVKDYHDQLQFUHDVLQJKRUL]RQWDORU
UDGLDO FRPSRQHQW 7KH *HUPDQ SURIHVVRU : 5RJRZVNL PDGH D FDUHIXO VWXG\ RQ KRZ WR
FRPSHQVDWH IRU WKLV GHYLDWLRQ IURP WKH DVVXPSWLRQ LQ WKH IRUPXOD 7KH UHVXOW RI WKLV VWXG\
SXEOLVKHGHDUO\LQWKHODVWFHQWXU\ ZDVDFRUUHFWLRQIDFWRU
N5 = −
(W + W + W ) §¨
πK Z
πK Z
·
−
− H (W + W + W ) ¸ ¨
¸
©
¹
7KLVIDFWRUKDVLVNQRZQDVWKHWKH5RJRZVNLIDFWRU,QPRVWSUDFWLFDOFDVHVLWVQXPHULFDOYDOXHLV
ZLWKLQ WKH UDQJH ± ,W PDNHV WKH OHQJWK RI WKH OHDNDJH ILHOG GXFW D OLWWOH ORQJHU KZN5
LQVWHDGRIKZ
7KHIRUPXODIRUX[H[SUHVVHGDVDSHUFHQWDJHRIWKHUDWHGYROWDJH8ULV
X [ = W +
W + W / + / (,1) I − N5
KZ
H W ZKHUHHWLVWKHQXPEHURIYROWVSHUWXUQLQQRORDGFRQGLWLRQ
&RUUHVSRQGLQJ KDQG IRUPXODV H[LVW DOVR IRU PRUH FRPSOLFDWHG ZLQGLQJ DUUDQJHPHQWV 7KH VKRUW
FLUFXLW UHDFWDQFH RU VKRUWFLUFXLW YROWDJH FDOFXODWHG E\ PHDQV RI WKHVH IRUPXODV FRPSO\ YHU\ ZHOO
ZLWK WKH PHDVXUHG YDOXHV +RZHYHU IRU KLJK FXUUHQWV DQ DGGLWLRQ IRU WKH UHDFWDQFH LQ WKH OHDG
DVVHPEO\PXVWEHPDGH
(/(&7520$*1(7,&)25&(6
,(& 3RZHU WUDQVIRUPHUV ± 3DUW $ELOLW\ WR ZLWKVWDQG VKRUW FLUFXLW LGHQWLILHV WKH
UHTXLUHPHQWVIRUWUDQVIRUPHUVWRVXVWDLQZLWKRXWGDPDJHWKHHIIHFWVRIRYHUFXUUHQWVRULJLQDWHGE\
H[WHUQDOVKRUWFLUFXLWV
)RUWKUHHSKDVHWUDQVIRUPHUVZLWKWZRVHSDUDWHZLQGLQJVWKHUPVYDOXHRIWKHV\PPHWULFDOVKRUW
FLUFXLWFXUUHQWLVFDOFXODWHGDV
, VF =
8
⋅ = + =V
N$
:KHUH=VLVWKHVKRUWFLUFXLWLPSHGDQFHRIWKHV\VWHP
=V =
8 V
6
,QRKPVSHUSKDVH HTXLYDOHQWVWDUFRQQHFWLRQ 3DJH7UDQVIRUPHU+DQGERRN
:KHUH
8VLVWKHUDWHGYROWDJHRIWKHV\VWHPLQNLORYROWV N9 6LVWKHVKRUWFLUFXLWDSSDUHQWSRZHURIWKHV\VWHPLQPHJDYROWDPSHUHV 09$ 8DQG=DUHGHILQHGDVIROORZV
8LVWKHUDWHGYROWDJH8URIWKHZLQGLQJXQGHUFRQVLGHUDWLRQLQNLORYROWV N9 = LV WKH VKRUWFLUFXLW LPSHGDQFH RI WKH WUDQVIRUPHU UHIHUUHG WR WKH ZLQGLQJ XQGHU
FRQVLGHUDWLRQLWLVFDOFXODWHGDVIROORZV
==
X ] ⋅ 8U
⋅ 6 U
,QRKPVSHUSKDVH HTXLYDOHQW
VWDUFRQQHFWLRQ ZKHUH
XV LV WKH PHDVXUHG VKRUWFLUFXLW LPSHGDQFH DW UDWHG FXUUHQW DQG IUHTXHQF\ DW UHIHUHQFH
WHPSHUDWXUHDVDSHUFHQWDJH
6ULVWKHUDWHGSRZHURIWKHWUDQVIRUPHULQPHJDYROWDPSHUHV 09$ 7KH GXUDWLRQ RI WKH V\PPHWULFDO VKRUWFLUFXLW FXUUHQW PXVW EH OLPLWHG WR DYRLG H[FHVVLYH
RYHUKHDWLQJ$FFRUGLQJWR,(&WKHGXUDWLRQVKDOOEHVXQOHVVRWKHUZLVHDJUHHGEHWZHHQ
SXUFKDVHUDQGVXSSOLHU'XULQJWKLVWLPHWKHWHPSHUDWXUHLQWKHZLQGLQJVVKDOOQRWH[FHHGFHUWDLQ
YDOXHVJLYHQLQ,(&ZKHQFDOFXODWHGE\PHDQVRIIRUPXODVJLYHQLQWKHVWDQGDUG
$QRWKHU DVSHFW RI WKH VKRUW FLUFXLW WRSLF LV WKH PHFKDQLFDO IRUFHV LQ WKH ZLQGLQJV GXH WR
RYHUFXUUHQWV 8QOLNH WHPSHUDWXUHV WKDW QHHG VRPH WLPH WR ULVH WKH PHFKDQLFDO IRUFHV IROORZ WKH
FXUUHQWLQVWDQWDQHRXVO\7KHILUVWF\FOHVRIDVKRUWFLUFXLWFXUUHQWDUHDV\PPHWULFZLWKUHVSHFWWRWKH
WLPH D[LV 7KH GHJUHH RI DV\PPHWU\ GHSHQGV RQ SRLQW RI WKH VLQXVRLGDO YROWDJH FXUYH ZKHUH WKH
VKRUWFLUFXLWRFFXUV7KHGHJUHHRIDV\PPHWU\LVDVWDWLVWLFDOYDULDEOHZLWKLWVPD[LPXPZKHQWKH
VKRUWFLUFXLW RFFXUV LQ WKH UDQJH ZKHUH WKH YROWDJH SDVVHV WKURXJK ]HUR DQG LWV PLQLPXP LQ WKH
UDQJHZKHUHWKHYROWDJHKDVLWVSHDNYDOXH7KLVZLOOEHGHPRQVWUDWHGLQWKHIROORZLQJ
5
;
Ö VLQ ωW + α
8
LW
)LJXUH
&RQVLGHU WKH FLUFXLW LQ )LJXUH $VVXPH WKDW WKH VZLWFK PDNHV DW WKH LQVWDQW W WKXV
VLPXODWLQJDVKRUWFLUFXLW7KHFXUUHQWL W LVH[SUHVVHGE\WKHIROORZLQJHTXDWLRQ
L W = Ö, ⋅ (VLQ ωW + α − ϕ) − H
−W
τ
⋅ VLQ α − ϕ $
LQZKLFK
Ö
Ö, = 8 =
$
WKDWLVWKHSHDNYDOXHRIWKHV\PPHWULFDOVWDWLRQDU\VKRUWFLUFXLWFXUUHQW
= 5MȦ/
>ȍ@
α VZLWFKLQJDQJOHRIWKHYROWDJHX W DWWKHLQVWDQWRIWKHVKRUWFLUFXLW>UDG@
ϕ
SKDVHDQJOHRIWKHFLUFXLWLPSHGDQFH DUFWJω/5 >UDG@
τ /5 WJϕω [V] (WKHWLPHFRQVWDQWRIWKHFLUFXLW ω ÂπÂI>V@
7UDQVIRUPHU+DQGERRN3DJH
7KHFXUUHQWVWDUWVIURP]HURDQGFRQVLVWVRIWZRFRPSRQHQWV
• DQDOWHUQDWLQJVWHDG\VWDWHFRPSRQHQWRIIXQGDPHQWDOIUHTXHQF\
• DQXQLGLUHFWLRQDOFRPSRQHQWGHFUHDVLQJH[SRQHQWLDOO\ZLWKWLPH
7KH ILUVW SHDN YDOXH RI WKH VKRUWFLUFXLW FXUUHQW GHWHUPLQHV WKH PD[LPXP IRUFH WKDW DFWV RQ WKH
ZLQGLQJV7KHPD[LPXPYDOXHRIWKLVFXUUHQWGHSHQGVRQWKH;5UDWLRDQGWKHVZLWFKLQJDQJOHα. ,W
RFFXUVLQDOPRVWDOOFDVHVZKHQα RUπ ,QSRZHUV\VWHPV;!!5ZKLFKPHDQVWKDWϕ §π
(TXDWLRQ FDQWKHQZLWKUHDVRQDEOHDSSUR[LPDWLRQEHZULWWHQDV
L W = Ö, ⋅ VLQ ωW −
π
−W
+H τ $
7KHILUVWFXUUHQWSHDNFORVHO\FRUUHVSRQGVWRWKHWLPHZKHQωW π
,VF SX W
)LJXUH
L = Ö, ⋅ N = , VF ⋅ ⋅ N = , VF PD[ $
ZKHUHWKHDV\PPHWU\IDFWRUNLV
N = + H
− π5
;
)LJXUHVKRZVDQH[DPSOHRQKRZWKHVKRUWFLUFXLWFXUUHQWHODSVHV
,QWKLVH[DPSOH;5 N 7KHSHDNIDFWRULVNÂ¥DQGLWVGHSHQGHQFHRI;5LVVKRZQLQ)LJXUH7KHSHDNIDFWRUYDOXH
LQWKHH[DPSOHLQ)LJXUHLV7KHYDOXHRIWKHILUVWSHDNRIWKHVKRUWFLUFXLWFXUUHQWLVWKH
UPVYDOXHRIWKHVWDWLRQDU\VKRUWFLUFXLWFXUUHQWPXOWLSOLHGZLWKWKHSHDNIDFWRU
,QDUHDOFDVHZLWKDWUDQVIRUPHULQVWDOOHGLQDQHWZRUN
; WKHVXPRIWKHQHWZRUNDQGWKHWUDQVIRUPHUUHDFWDQFH>ȍ@
5 WKHVXPRIWKHQHWZRUNDQGWKHWUDQVIRUPHUUHVLVWDQFH>ȍ@
;5DQGWKHSHDNIDFWRULQFUHDVHZLWKLQFUHDVLQJWUDQVIRUPHUSRZHUUDWLQJ
3DJH7UDQVIRUPHU+DQGERRN
N¥
;5
)LJXUH
0HFKDQLFDOIRUFHVLQWKHZLQGLQJV
&XUUHQWIORZVWKURXJKWKHZLQGLQJFRQGXFWRUVZKLFKDUHVLWXDWHGLQWKHPDJQHWLFOHDNDJHILHOG7KH
FRQGXFWRUVDUHWKHQVXEMHFWWRPHFKDQLFDOIRUFHV
7KHVH IRUFHV DUH QRW VWDWLF 7KH\ DUH SXOVDWLQJ (DFK WLPH WKH FXUUHQW SDVVHV WKURXJK ]HUR WKH
IRUFHVDUHDOVR]HUR$WQRUPDOORDGFXUUHQWWKHIRUFHVDUHVPDOO7KH\LQFUHDVHZLWKWKHVTXDUHRI
WKH FXUUHQW VR GXULQJ WKH KLJK RYHUFXUUHQWV WKDW DULVH LI D VKRUWFLUFXLW LQ WKH V\VWHP RFFXU WKH
IRUFHV PXVW EH JLYHQ DWWHQWLRQ ZKHQ GHVLJQLQJ WKH WUDQVIRUPHU 7KH VKRUW FLUFXLW FXUUHQW PD\
DPRXQWWR±WLPHVWKHUDWHGFXUUHQWRIWKHWUDQVIRUPHUZKLFKPHDQVWKDWWKHIRUFHVLQWKH
ZLQGLQJVPD\EH±WLPHVODUJHUDWDVKRUWFLUFXLWWKDQLQQRUPDOVHUYLFH)RUWUDQVIRUPHUV
ZLWKH[WUHPHO\ORZVKRUWFLUFXLWLPSHGDQFHWKHILJXUHVPLJKWEHVWLOOKLJKHU
7KHIRUFHVFDXVHODUJHPRYHPHQWVLQWKHZLQGLQJV7KHVHPRYHPHQWVDUHLQYLVLEOHIRUWKHKXPDQ
H\H%XWUDSLGILOPUHFRUGLQJVSOD\HGLQVORZPRWLRQVKRZWKHVL]HRIWKHPRYHPHQWVDQGLOOXVWUDWH
WKHYLROHQFHRIWKHIRUFHV
,
%
) ,ɏ%
)LJXUH
:KHQFRQVLGHULQJWKHDELOLW\RIDGHVLJQWRZLWKVWDQGLWLVXVXDOWRVSOLWWKHIRUFHVLQWRUDGLDODQG
D[LDOFRPSRQHQWVDVLQGLFDWHGLQ)LJXUHZKLFKVKRZVDQXSSHUSDUWRIDQRXWHUZLQGLQJ7KH
UDGLDO IRUFH LV GLUHFWHG RXWZDUGV DQG FDXVHV D WHQVLOH IRUFH LQ WKH ZLQGLQJ FRQGXFWRUV ,Q WKH
FRUUHVSRQGLQJLQQHUZLQGLQJWKHUDGLDOFRPSRQHQWLVGLUHFWHGLQZDUGV7KDWPD\FDXVHEXFNOLQJRI
WKHZLQGLQJLILWKDVQRWEHHQPDGHUREXVWHQRXJK
7KH D[LDO IRUFHV DUH FDXVHG E\ WKH UDGLDO FRPSRQHQW RI WKH PDJQHWLF ILHOG DW WKH HQGV RI
WKH ZLQGLQJV 7KHVH IRUFHV PD\ OHDG WR WLOWLQJ RI WKH FRQGXFWRUV EHWZHHQ WKH D[LDO VSDFHUV LQ
WKH ZLQGLQJ 7KH IRUFH RQ HDFK WXUQ RU GLVF DGGV WRJHWKHU 7KH VXP RI WKH IRUFHV LV EDODQFHG DW
WKH RWKHU HQG RI WKH ZLQGLQJ 7KH ZKROH ZLQGLQJ LV VXEMHFW WR D VWURQJ D[LDO SUHVVXUH 6HH
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
$
%
$$[LDOFXUUHQWIRUFHV
%5HVXOWLQJD[LDOSUHVVXUH
)LJXUH
7KH DELOLW\ WR ZLWKVWDQG WLOWLQJ RI WKH FRQGXFWRUV GHSHQGV RQ WKH GLDPHWHU RI WKH ZLQGLQJ WKH
GLVWDQFHEHWZHHQWKHVSDFHUVDURXQGWKHFLUFXPIHUHQFHDQGWKHGLPHQVLRQVRIWKHFRQGXFWRU
,Q FDVH RI D[LDO ³RSHQLQJV´ LQ WKH ZLQGLQJ WKDW LV RQH RU PRUH SODFHV DORQJ WKH KHLJKW RI WKH
ZLQGLQJ ZKHUH WKHUH DUH QR DPSHUHWXUQV WKHUH ZLOO EH D[LDO IRUFHV GLUHFWHG WRZDUGV WKH \RNHV
7KHIUDPHZRUNNHHSLQJWKHFRUHDQGZLQGLQJVWRJHWKHUPXVWEHGHVLJQHGWREHDEOHWRZLWKVWDQG
VXFKIRUFHV
$PRUHFRPSUHKHQVLYHWUHDWPHQWRIWKHVKRUWFLUFXLWWRSLFLVJLYHQLQWKHERRN³6+257&,5&8,7
'87<2)32:(575$16)250(56±7+($%%$3352$&+´E\*LRUJLR%HUWDJQROOLLVVXHGE\
$%%7KHERRNLVDYDLODEOHIURP$%%DWUHTXHVW
75$16)250(56281'
7UDQVIRUPHUVLQVHUYLFHFDXVHVRXQGZKLFKLQWKHORQJUXQPD\VHULRXVO\GLVFRPIRUWSHRSOHLQWKH
HQYLURQPHQW
6RXQGPD\EHGHILQHGDVDQ\SUHVVXUHYDULDWLRQLQDLU RURWKHUHODVWLFPHGLD WKDWWKHKXPDQHDU
FDQ GHWHFW 7KH SUHVVXUH YDULDWLRQV WUDYHO WKURXJK WKH PHGLXP IURP WKH VRXQG VRXUFH WR WKH
OLVWHQHU¶VHDUV7KHQXPEHURIF\FOLFSUHVVXUHYDULDWLRQVSHUVHFRQGLVFDOOHGWKHIUHTXHQF\RIWKH
VRXQGDQGLVH[SUHVVHGLQ+HU] +] 7KHIUHTXHQF\RIDVRXQGSURGXFHVLWVRZQGLVWLQFWLYHWRQH
$ WUDQVIRUPHU µKXP¶ LV ORZ IUHTXHQF\ IXQGDPHQWDOO\ +] RU +] ZKLOH D ZKLVWOH LV KLJK
IUHTXHQF\W\SLFDOO\DERYHN+]7KHQRUPDOUDQJHRIKHDULQJIRUDKHDOWK\\RXQJSHUVRQH[WHQGV
IURPDSSUR[LPDWHO\+]WRN+]
$IXUWKHUFKDUDFWHULVWLFXVHGWRGHVFULEHDVRXQGLVWKHDPSOLWXGHRIWKHSUHVVXUHYDULDWLRQVZKLFK
LVH[SUHVVHGLQ3DVFDOV 3D 7KHZHDNHVWVRXQGWKDWDKHDOWK\KXPDQHDUFDQGHWHFWLVVWURQJO\
GHSHQGHQW RQ WKH IUHTXHQF\ DW N+] LW KDV DPSOLWXGH RI ȝ3D 7KH WKUHVKROG RI SDLQ
FRUUHVSRQGVWRDVRXQGSUHVVXUHRIPRUHWKDQDPLOOLRQWLPHVKLJKHU7KHUHIRUHWRDYRLGWKHXVHRI
ODUJHQXPEHUVWKHGHFLEHOVFDOH G% LVXVHG
3DJH7UDQVIRUPHU+DQGERRN
7KHG%VFDOHLVORJDULWKPLFDQGXVHVµ3DDVWKHUHIHUHQFHOHYHOS ZKLFKWKHQFRUUHVSRQGVWR
G%6RXQGSUHVVXUHOHYHO/SH[SUHVVHGLQG%LVGHILQHGLQWKHIROORZLQJHTXDWLRQ
/ S = ⋅ OJ
S
S G%
ZKHUH S LV WKH VRXQG SUHVVXUH PHDVXUHG E\ D PLFURSKRQH 6RXQG SUHVVXUH LV D VFDODU TXDQWLW\
ZKLFKPHDQVLWKDVPDJQLWXGHRQO\
7R SURYLGH D IHHOLQJ RI KRZ D IHZ ZHOONQRZQ W\SHVRI VRXQG DUH VLWXDWHGRQ WKH G%VFDOHVRPH
YDOXHVDUHOLVWHGEHORZ
6RXUFHRIVRXQG
6RXQGSUHVVXUHOHYHOLQG%
4XLHWOLYLQJDUHD
1RUPDOFRQYHUVDWLRQDWPGLVWDQFH
0HGLXPIDFWRU\QRLVH
)DFWRU\PD[LPXPOLPLW
&LW\VWUHHWZLWKKHDY\WUDIILF
&LUFOHVDZDWPGLVWDQFH
&RPSUHKHQVLYH LQYHVWLJDWLRQV DUH PDGH WR FRUUHODWH KXPDQ SHUFHSWLRQ RI µORXGQHVV¶ DW YDULRXV
IUHTXHQFLHV DQG VRXQG SUHVVXUHV 7KH FXUYHV LQ )LJXUH DUH UHVXOWV RI VXFK LQYHVWLJDWLRQV
7KHVHFXUYHVZLOOYDU\VRPHZKDWIURPRQHSHUVRQWRDQRWKHUEXWWKH\FDQEHUHJDUGHGDVDYHUDJH
FXUYHVIRUKRZ\RXQJSHUVRQVZLWKKHDOWK\HDUVUHVSRQG
(DFKFXUYHUHSUHVHQWVVRXQGWKDWLVSHUFHLYHGDVµHTXDOO\ORXG¶DFURVVWKHZKROHIUHTXHQF\UDQJH
7KH ORZHVW FXUYH WKDW JRHV WKURXJK ]HUR G% VRXQG SUHVVXUH DW +] UHSUHVHQWV WKH KHDULQJ
WKUHVKROG7KHKXPDQHDULVQRWDEOHWRKHDUDQ\WKLQJEHORZWKLVFXUYH,WDSSHDUVWKDWWKHHDULV
PRVWVHQVLWLYHLQWKHIUHTXHQF\UDQJHEHWZHHQDQGN+]ZKHUHDVRXQGSUHVVXUHHYHQEHORZ
ȝ3DLVDXGLEOH
)RU IUHTXHQFLHV EHORZ +] WKH WKUHVKROG FXUYH DVFHQGV ZKLFK PHDQV WKDW IRU WKH ORZHU
IUHTXHQFLHV WKH VRXQG SUHVVXUH KDV WR EH LQFUHDVHG WR PDNH WKH VRXQG DXGLEOH 7KH FXUYH DOVR
ULVHVDWIUHTXHQFLHVDERYHN+]
7KH WKUHH XSSHU FXUYHV JR WKURXJK DQG G% DW N+] $ PLFURSKRQH UHVSRQGV TXLWH
GLIIHUHQWO\WRVRXQGSUHVVXUH,QRUGHUWRLPLWDWHWKHUHVSRQVHFXUYHVRIWKHKXPDQHDUILOWHUVDUH
LQVHUWHG LQ WKH PHDVXULQJ HTXLSPHQW 7KUHH GLIIHUHQW ILOWHUV DUH VWDQGDUGL]HG QDPHG $ % DQG &
ILOWHUV7KH\LPLWDWHWKHFXUYHVJRLQJWKURXJKDQGG%DWN+]UHVSHFWLYHO\
0HDVXUHPHQWUHVXOWVPDGHZLWKRQHRIWKHWKUHHILOWHUVLQVHUWHGDUHGHQRWHGG% $ G% % RUG% & 6RXQGSUHVVXUH G%
(DUVHQVLYLW\FXUYHV
&ZHLJKWHGILOWHU
%ZHLJKWHGILOWHU
$ZHLJKWHGILOWHU
+HDULQJWKUHVKROG
6RXQGIUHTXHQF\ +]
)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
:KHQ PHDVXULQJ WKH VRXQG SUHVVXUH DURXQG D WUDQVIRUPHU WKH $ILOWHU LV XVHG EHFDXVH WKLV
FRUUHVSRQGVWRWKHVRXQGSUHVVXUHOHYHOWKDWQRUPDOO\SUHYDLOV
7KHVRXQGSUHVVXUHFDXVHGE\DWUDQVIRUPHULVPHDVXUHGLQVHYHUDOSRLQWVDURXQGWKHWUDQVIRUPHU
DW D GLVWDQFH RI PHWHUV IURP WKH RXWHU YHUWLFDO VXUIDFH RI WKH WUDQVIRUPHU 7KLV PHDVXUHPHQW
UHVXOW LV LQ LWVHOI RI OLPLWHG LQWHUHVW EHFDXVH QRERG\ QRUPDOO\ LV VWDQGLQJ PHWHUV IURP WKH
WUDQVIRUPHU 0RUH LQWHUHVWLQJ LV WKH VRXQG SUHVVXUH OHYHO DW ODUJHU GLVWDQFH IURP WKH WUDQVIRUPHU
ZKHUHSHRSOHPD\VWD\
7R EH DEOH WR HVWLPDWH WKH VRXQG SUHVVXUH DW ODUJHU GLVWDQFH WKH VRXQG SRZHU OHYHO RI WKH
WUDQVIRUPHUPXVWEHGHWHUPLQHG7KHWHUP¶VRXQGSRZHU¶QHHGVWREHH[SODLQHG
$VRXQGVRXUFHUDGLDWHVSRZHULQWRWKHVXUURXQGLQJDLUUHVXOWLQJLQDVRXQGSUHVVXUHILHOG6RXQG
SRZHULVWKHFDXVH6RXQGSUHVVXUHLVWKHHIIHFW7KHVRXQGSUHVVXUHZKLFKLVKHDUGRUPHDVXUHG
ZLWK D PLFURSKRQH LV GHSHQGHQW RQ WKH GLVWDQFH IURP WKH VRXUFH DQG WKH DFRXVWLF HQYLURQPHQW
6RWKHVRXQGSUHVVXUHDWDFHUWDLQGLVWDQFHIURPWKHVRXUFHDORQHFDQQRWTXDQWLI\WKHVWUHQJWKRI
WKHVRXUFH,WLVQHFHVVDU\WRGHWHUPLQHWKHVRXQGSRZHURIWKHVRXUFHZKLFKLVLQGHSHQGHQWRIWKH
HQYLURQPHQWDQGDXQLTXHGHVFULSWRURIWKHVWUHQJWKRIWKHVRXQGVRXUFH
6RXQGSRZHULVWKHUDWHDWZKLFKHQHUJ\SHUXQLWWLPHLVUDGLDWHGIURPWKHVRXUFH,WVGLPHQVLRQLV
:DWW+RZHYHUVRXQGSRZHU/ZLVQRUPDOO\DOVRH[SUHVVHGLQG%DQGORJDULWKPLFVFDOHDFFRUGLQJ
WRWKHIROORZLQJIRUPXOD
/ Z = ⋅ OJ
:
:
GE
,QWKLVIRUPXOD:LVDQDUELWUDULO\FKRVHQUHIHUHQFHYDOXHHTXDOWR:DWWZKLFKFRUUHVSRQGVWR
D TXLWH ZHDN VRXQG VRXUFH 7KLV UHIHUHQFH YDOXH LV FKRVHQ ZLWKRXW UHJDUG WR WKH SUHYLRXVO\
PHQWLRQHGUHIHUHQFHYDOXHIRUVRXQGSUHVVXUH
7KHVRXQGSRZHURIRQHRIWKHVWURQJHVWVRXQGSRZHUVRXUFHVRIFRQFHUQDODUJHMHWPRWRUKDVD
VRXQGSRZHURIDERXW:DWWV7KHWRWDOSRZHUUDQJHWRGHDOZLWKLVWKHQ,QVWHDGRI
ZRUNLQJZLWKVXFKH[WUHPHO\KLJKILJXUHVLQDFRXVWLFDOVXEMHFWVWKHZKROHSRZHUUDQJHLVFRYHUHG
E\G%
%DVHG RQ WKH PHDVXUHG VRXQG SUHVVXUH WKH VRXQG SRZHU RI WKH WUDQVIRUPHU LQ G% FDQ EH
FDOFXODWHGDFFRUGLQJWRIRUPXODVJLYHQLQ,(&(G
,QDODUJHIUHHILHOGWKHVRXQGSUHVVXUHDWODUJHUGLVWDQFHVIURPWKHWUDQVIRUPHUFDQEHFDOFXODWHG
,QSUDFWLFHWKHUHDUHRIWHQRQHRUPRUHZDOOVRURWKHULWHPVLQWKHVXUURXQGLQJVRIWKHWUDQVIRUPHU
WKDWZLOOUHIOHFWVRXQGIURPWKHWUDQVIRUPHUDQGPDNHDSUHGLFWLRQRIWKHVRXQGSUHVVXUHDWYDULRXV
SODFHVLQWKHQHLJKERXUKRRGGLIILFXOW
6RXUFHVRIVRXQGJHQHUDWLRQ
7KHGRPLQDQWJHQHUDWLQJVRXUFHRIWUDQVIRUPHUVRXQGLVPDJQHWRVWULFWLRQ0DJQHWRVWULFWLRQLVWKH
FKDQJHLQGLPHQVLRQVZKLFKWDNHVSODFHLQFHUWDLQPDWHULDOVZKHQWKH\DUHVXEMHFWHGWRDFKDQJH
LQ PDJQHWLF IOX[ ,Q PDJQHWLF FRUH VWHHO WKH GLPHQVLRQDO FKDQJH LV LQ WKH UDQJH RI WR PHWHUVSHUPHWHUOHQJWKDWW\SLFDOLQGXFWLRQOHYHOV
7KHHIIHFWGRHVQRWGHSHQGRQWKHVLJQRIWKHIOX[RQO\RQLWVPDJQLWXGHDQGRULHQWDWLRQUHODWLYHWR
FHUWDLQ FU\VWDOORJUDSKLF D[HV RI WKH PDWHULDO 7KHUHIRUH ZKHQ H[FLWHG E\ D VLQXVRLGDO IOX[ WKH
IXQGDPHQWDOIUHTXHQF\RIWKHGLPHQVLRQDOFKDQJHZLOOEHWZLFHWKHH[FLWLQJIUHTXHQF\7KHHIIHFWLV
KLJKO\QRQOLQHDUHVSHFLDOO\DWKLJKQHDUVDWXUDWLRQLQGXFWLRQOHYHOV7KHQRQOLQHDULW\UHVXOWVLQD
VLJQLILFDQWKDUPRQLFFRQWHQWLQWKHYLEUDWLRQVSHFWUXPRIWKHFRUH
,Q WKUHHSKDVH FRUHV WKH FKDQJH LQ GLPHQVLRQ LQ HDFK FRUH OLPE GRHV QRW RFFXU VLPXOWDQHRXVO\
ZKLFKPHDQVWKDWWKHZKROHFRUHZLOOEHVXEMHFWWRSXOVDWLQJGLVWRUWLRQVWKDWDOVRJHQHUDWHVRXQG
$'&ELDVLQDGGLWLRQWRWKH$&PDJQHWL]DWLRQRIWKHFRUHPD\VLJQLILFDQWO\LQFUHDVHWKHYLEUDWLRQ
DPSOLWXGHV RI WKH FRUH DQG FRQVHTXHQWO\ WKH VRXQG OHYHO 7KH '& ELDV PD\ DOVR FDXVH D
FRQVLGHUDEOHGLIIHUHQFHLQWKHSRVLWLYHDQGQHJDWLYHSHDNVRIWKHIOX[GHQVLW\ZKLFKLQWXUQPDNHV
WKH IXQGDPHQWDO IUHTXHQF\ RI WKH VRXQG HTXDO WR WKH IUHTXHQF\ RI WKH VHUYLFH YROWDJH LQVWHDG RI
WZLFHWKLVIUHTXHQF\
3DJH7UDQVIRUPHU+DQGERRN
7KHUHDUHDIHZPHDQVDYDLODEOHWRWKHWUDQVIRUPHUGHVLJQHUWRUHGXFHWKHVRXQGJHQHUDWHGIURP
WKHFRUH
• 5HGXFHWKHIOX[GHQVLW\LQWKHFRUHIURPWKHXVXDO±7HVODGRZQWR7HVOD7KLV
FDQEHGRQHHLWKHUE\LQFUHDVLQJWKHFRUHFURVVVHFWLRQRUE\LQFUHDVLQJWKHQXPEHURIWXUQV
LQWKHZLQGLQJV7KHUHLVQRWPXFKWRJDLQLQUHGXFHGVRXQGOHYHOE\JRLQJEHORZ7HVOD
5HGXFHG IOX[ GHQVLW\ JLYHV ODUJHU JHRPHWULF GLPHQVLRQV LQFUHDVHG ORDG ORVVHV DQG KLJKHU
ZHLJKWDQGPDQXIDFWXULQJFRVWV7KHQRORDGORVVHVZLOOGHFUHDVH
• $YRLG FRPELQDWLRQV RI FRUH FURVV VHFWLRQ DQG OLPEKHLJKW WKDWPDNH QDWXUDO IUHTXHQFLHVRI
WKHFRUHFRLQFLGHZLWKIUHTXHQFLHVRIWKHPDJQHWLFILHOG
• 0DNLQJWKHIUDPHZRUNWKDWKROGVWKHFRUHWRJHWKHUKHDYLHUDQGVWLIIHU
• ,QVHUWLQJDSDGRIGDPSLQJPDWHULDOEHWZHHQWKHDFWLYHSDUWRIWKHWUDQVIRUPHUDQGWKHWDQN
ERWWRP
$QRWKHU VRXUFH RI VRXQG IURP WUDQVIRUPHUV LV YLEUDWLRQV LQ WKH ZLQGLQJV GXH WR SXOVDWLQJ
PHFKDQLFDO IRUFHV DFWLQJ RQ WKH ZLQGLQJ FRQGXFWRUV 7KH ZLQGLQJV DUH VLWXDWHG LQ WKH PDJQHWLF
OHDNDJHILHOG7KHIRUFHDFWLQJRQDZLQGLQJFRQGXFWRULVSURSRUWLRQDOWRWKHSURGXFWRIWKHFXUUHQW
IORDWLQJ LQ WKH FRQGXFWRU DQG WKH ORFDO IOX[ GHQVLW\ RI WKH PDJQHWLF ILHOG ZKHUH WKH FRQGXFWRU LV
VLWXDWHG
$WQRUPDOIOX[GHQVLWLHVLQWKHFRUH7DQGDERYHWKHVRXQGGXHWRWKHFRUHZLOORYHUVKDGRZ
WKHVRXQGIURPWKHZLQGLQJV%XWLQFDVHVZKHUHHVSHFLDOO\ORZVRXQGOHYHOVDUHVSHFLILHGDQGWKH
IOX[GHQVLW\LQWKHFRUHLVORZ GRZQWR7 LQRUGHUWRIXOILOWKHUHTXLUHGVRXQGOHYHOWKHVRXQG
SURGXFHG E\ WKH ZLQGLQJV PD\ JLYH D QRWLFHDEOH FRQWULEXWLRQ WR WKH WRWDO VRXQG OHYHO RI WKH
WUDQVIRUPHU
3ODQH PHWDO SODWHV EHWZHHQ VWLIIHQHUV LQ WKH WUDQVIRUPHU WDQN PD\ DFW OLNH D PHPEUDQH RI D
ORXGVSHDNHU LI DQ\ QDWXUDO IUHTXHQF\ RI WKH SODWH FRLQFLGHV ZLWK D GRPLQDQW IUHTXHQF\ RI WKH
YLEUDWLRQVIURPWKHDFWLYHSDUW7KHWRWDOVRXQGOHYHORIWKHWUDQVIRUPHUPD\LQVXFKVLWXDWLRQVEH
FRQVLGHUDEO\LQFUHDVHG
7KH PHDVXUHPHQW RI VRXQG IURP WUDQVIRUPHUV PD\ VRPHWLPHV EH GLVWXUEHG E\ KLJK EDFNJURXQG
VRXQGRUVRXQGIURPRQHRUVHYHUDORWKHUVWURQJVRXQGVRXUFHVLQWKHVXUURXQGLQJV7RGHWHUPLQH
WKH VRXQG SRZHU RI WKH WUDQVIRUPHU LQ VXFK VLWXDWLRQV VRXQG LQWHQVLW\ PHDVXUHPHQWV DUH PDGH
6RXQGLQWHQVLW\LVWKHWLPHDYHUDJHGSURGXFWRIWKHSUHVVXUHDQGSDUWLFOHYHORFLW\RIWKHPHGLXPLQ
ZKLFK WKH VRXQG ZDYHV DUH SURSDJDWLQJ 6RXQG LQWHQVLW\ LV D YHFWRU TXDQWLW\ GHVFULELQJ WKH
PDJQLWXGHDQGGLUHFWLRQRIWKHQHWIORZRIVRXQGHQHUJ\DWDJLYHQSRVLWLRQ
,WLVRXWVLGHWKHVFRSHRIWKLVFKDSWHUWRH[SODLQWKHSK\VLFVWKDWIRUPWKHEDVLVIRUGHWHUPLQLQJWKH
VRXQGSRZHURIDVRXUFHE\PHDQVRIVRXQGLQWHQVLW\PHDVXUHPHQWV:HZLOOMXVWPHQWLRQWKDWWZR
FORVHO\VSDFHGPLFURSKRQHVDUHXVHGDQGWKDWWKHPHDVXUHPHQWSURFHGXUHDQGWKHGHWHUPLQDWLRQ
RIWKHUHVXOWVDUHGHVFULEHGLQ,(&
&RROLQJ IDQV FUHDWH WXUEXOHQW IORZV RI DLU UHVXOWLQJ LQ SUHVVXUH IOXFWXDWLRQV ZLWK D ZLGH UDQJH RI
IUHTXHQFLHV7KHVRXQGOHYHOLVKLJKO\GHSHQGHQWRQWKHVSHHGRIWKHIDQZKHHOSHULSKHU\
7KHWUDQVPLVVLRQRIVRXQGIURPWKHWUDQVIRUPHUWRWKHVXUURXQGLQJVFDQEHUHGXFHGE\LQVWDOOLQJ
VRXQGGDPSLQJSDQHOVDURXQGWKHWUDQVIRUPHURUSODFHWKHWUDQVIRUPHULQVLGHDVHSDUDWHEXLOGLQJ
:LWKLQ ODUJH EXLOGLQJV WUDQVIRUPHU VRXQG PD\ SURSDJDWH ZLGHO\ WKURXJK VWUXFWXUDO SDUWV RI WKH
EXLOGLQJOLNHIORRUVDQGZDOOV,QVHUWLQJSODWHVRIVXLWDEOHGDPSLQJPDWHULDOEHWZHHQWKHWUDQVIRUPHU
DQGLWVIXQGDPHQWFDQHIIHFWLYHO\UHGXFHWKLV
7KH,(&WUDQVIRUPHUVWDQGDUGVGRQRWSUHVFULEHDQ\SHUPLVVLEOHOLPLWVIRUWUDQVIRUPHUVRXQG7KH\
MXVWGHVFULEHKRZVRXQGFKDUDFWHULVWLFVRIWUDQVIRUPHUVFDQEHGHWHUPLQHG3HUPLVVLEOHOLPLWVDUH
HQWLUHO\VXEMHFWWRDJUHHPHQWEHWZHHQSXUFKDVHUDQGVXSSOLHULQHDFKFDVH
7KH&(1(/(&WUDQVIRUPHUVWDQGDUG+'6KDVVWDQGDUGL]HGOLPLWVIRUWKHVRXQGOHYHO
IRUWKHVPDOOHVWGLVWULEXWLRQWUDQVIRUPHUV
7UDQVIRUPHU+DQGERRN3DJH
7+5((3+$6(75$16)250(5&211(&7,216
7KHUH DUH WKUHH EDVLF ZD\V WR FRQQHFW WKH SKDVH ZLQGLQJV RI HDFK VLGH LQ WKUHHSKDVH
WUDQVIRUPHUV
•
<FRQQHFWLRQDOVRFDOOHGVWDUFRQQHFWLRQZKHUHRQHHQGRIWKHWKUHHSKDVHZLQGLQJV
DUHFRQQHFWHGWRJHWKHULQRQHSRLQWFDOOHGWKHQHXWUDOSRLQWRUWKHVWDUSRLQW )LJXUH
WRWKHOHIW •
'FRQQHFWLRQ DOVR FDOOHG GHOWD FRQQHFWLRQ ZKHUH WKH WKUHH SKDVH ZLQGLQJV DUH
FRQQHFWHGLQVHULHVDQGIRUPDULQJ WULDQJOH )LJXUHLQWKHPLGGOH •
=FRQQHFWLRQDOVRFDOOHGLQWHUFRQQHFWHGVWDURU]LJ]DJFRQQHFWLRQ )LJXUHWRWKH
ULJKW )LJXUH
7KH SULPDU\ VHFRQGDU\ DQG WHUWLDU\ VLGHV RI D WUDQVIRUPHU PD\ LQ SULQFLSOH EH FRQQHFWHG
LQGLYLGXDOO\LQDQ\RIWKHWKUHHZD\VLQGLFDWHGDERYH7KLVRIIHUVVHYHUDOGLIIHUHQWFRPELQDWLRQV
RIFRQQHFWLRQVLQDWUDQVIRUPHUZLWKGLIIHUHQWFKDUDFWHULVWLFVZKLFKDOVRPD\EHLQIOXHQFHGE\
WKH W\SH RI FRUH ,Q WKLV KDQGERRN WKH GHVFULSWLRQ ZLOO EH OLPLWHG WR WKH PRVW IUHTXHQWO\ XVHG
FRQQHFWLRQFRPELQDWLRQV
7KH <FRQQHFWLRQ LV WKH QDWXUDO FKRLFH RI FRQQHFWLRQ IRU WKH KLJKHVW YROWDJHV DQG ZKHQ WKH
QHXWUDO LV LQWHQGHG IRU ORDGLQJ ,Q DQ\ FDVH D QHXWUDO EXVKLQJ VKRXOG EH SURYLGHG HLWKHU IRU
RYHUYROWDJHSURWHFWLRQSXUSRVHRUIRUGLUHFWHDUWKLQJ,QWKHODWWHUFDVHWKHLQVXODWLRQOHYHORIWKH
QHXWUDOPD\EHPDGHORZHUWKDQLQWKHSKDVHHQGRIWKHZLQGLQJZLWKHFRQRPLFDOEHQHILW
7KH <FRQQHFWHG ZLQGLQJ KDV DOVR WKH EHQHILW WKDW WDSSLQJV IRU WXUQ UDWLR UHJXODWLRQ FDQ EH
SURYLGHGDWWKHQHXWUDOHQGZKHUHDOVRDWDSFKDQJHUFDQEHORFDWHG7KHWDSFKDQJHUZLOOWKHQ
RSHUDWHDWDORZYROWDJHOHYHOWRHDUWKDQGWKHYROWDJHGLIIHUHQFHEHWZHHQWKHSKDVHVLVORZDV
ZHOO $ FKHDSHU WDS FKDQJHU FDQ EH VHOHFWHG FRPSDUHG WR D WDS FKDQJHU ORFDWHG DW D KLJKHU
YROWDJHOHYHO
:KHQ<FRQQHFWLRQLVXVHGLQRQHVLGHRIWKHWUDQVIRUPHURQHRWKHUVLGHVKRXOGSUHIHUDEO\EH
GHOWD FRQQHFWHG HVSHFLDOO\ ZKHQ WKH QHXWUDO RI WKH <FRQQHFWHG ZLQGLQJ LV LQWHQGHG WR EH
ORDGHG 7KH GHOWD FRQQHFWHG ZLQGLQJ SURYLGHV DPSHUHWXUQ EDODQFH IRU WKH ]HUR VHTXHQFH
FXUUHQWIORDWLQJWKURXJKWKHQHXWUDODQGHDFKSKDVHRIWKH<ZLQGLQJZKLFKJLYHVDUHDVRQDEOH
]HUR VHTXHQFH LPSHGDQFH :LWKRXW D 'FRQQHFWHG ZLQGLQJ WKH ]HUR VHTXHQFH FXUUHQW ZRXOG
FUHDWHD]HURVHTXHQFHILHOGLQWKHFRUH,IWKHFRUHKDVOLPEVVXFKDILHOGZLOOILQGLWVSDWK
IURP\RNHWR\RNHWKURXJKWKHWDQNZDOODQGFUHDWHH[FHVVLYHKHDWLQJWKHUH,IWKHFRUHKDV
OLPEVRULVDVKHOOW\SHFRUHWKHILHOGZLOOILQGLWVSDWKIURP\RNHWR\RNHWKURXJKWKHXQZRXQG
VLGHOLPEVDQGWKH]HURVHTXHQFHLPSHGDQFHZLOOEHH[WUHPHO\KLJK$FRQVHTXHQFHLVWKDWWKH
FXUUHQWLQFDVHRIDQHDUWKIDXOWPLJKWEHFRPHVRVPDOOWKDWWKHSURWHFWLQJUHOD\VGRQRWUHDFW
,QD'FRQQHFWHGZLQGLQJWKHFXUUHQWWKURXJKHDFKSKDVHZLQGLQJLVWKHOLQHFXUUHQWGLYLGHGE\
¥ZKLOHLQD<FRQQHFWHGZLQGLQJWKHOLQHFXUUHQWIORDWLQJWKURXJKHDFKSKDVHZLQGLQJLVHTXDO
WRWKHOLQHFXUUHQW2QWKHRWKHUKDQGWKH'FRQQHFWHGZLQGLQJUHTXLUHV¥WLPHVDVPDQ\WXUQV
DVD<FRQQHFWHGZLQGLQJIRUWKHVDPHYROWDJH
7KH'FRQQHFWHGZLQGLQJLVDGYDQWDJHRXVLQODUJHSRZHUWUDQVIRUPHUVZKHQWKHFXUUHQWLVKLJK
DQGWKHYROWDJHUHODWLYHO\ORZOLNHIRUH[DPSOHLQWKHORZYROWDJHZLQGLQJRIJHQHUDWRUVWHSXS
WUDQVIRUPHUV
3DJH7UDQVIRUPHU+DQGERRN
$'FRQQHFWHGZLQGLQJHQDEOHVWULSOHKDUPRQLFFXUUHQWVWRFLUFXODWHLQVLGHWKHWULDQJOHIRUPHG
E\WKHWKUHHVHULHVFRQQHFWHGSKDVHZLQGLQJV7ULSOHKDUPRQLFVLQWKHPDJQHWLVDWLRQFXUUHQWLV
UHTXLUHG WR DYRLG GLVWRUWLRQ RI WKH PDJQHWLF IOX[ LQ WKH FRUH DQG LQ WXUQ GLVWRUWLRQ IURP WKH
VLQXVRLGDOVKDSHRIWKHLQGXFHGYROWDJH7KHWULSOHKDUPRQLFFXUUHQWVDUHHTXDOLQWLPHSKDVHLQ
DOOWKUHHSKDVHVDQGWKHVHFXUUHQWVFDQQRWIORDWLQD<FRQQHFWHGZLQGLQJXQOHVVWKHQHXWUDORI
WKHZLQGLQJLVFRQQHFWHGWRDUHWXUQSDWK
/DFN RI WULSOH KDUPRQLFV LQ WKH PDJQHWLVLQJ FXUUHQW PD\ FDXVH FRQVLGHUDEOH GLVWRUWLRQ RI WKH
LQGXFHGYROWDJHZKHQWKHFRUHKDVOLPEVRULVDVKHOOW\SHFRUH$'FRQQHFWHGZLQGLQJLQWKH
WUDQVIRUPHU ZLOO UHPRYH WKLV GLVWXUEDQFH EHFDXVH WKH 'FRQQHFWHG ZLQGLQJ ZLOO SURYLGH WKH
PLVVLQJ WULSOH KDUPRQLF FXUUHQWV 6RPHWLPHV WUDQVIRUPHUV DUH HTXLSSHG ZLWK D WHUWLDU\ '
FRQQHFWHGZLQGLQJZKLFKLVQRWLQWHQGHGIRUORDGLQJEXWRQO\IRUDYRLGLQJYROWDJHGLVWRUWLRQDQG
UHGXFWLRQRI]HURVHTXHQFHLPSHGDQFH6XFKZLQGLQJVDUHFDOOHGVWDELOLVLQJZLQGLQJV
'LVWULEXWLRQ WUDQVIRUPHUV IRU ORDGLQJ EHWZHHQ SKDVH DQG QHXWUDO KDYH QRUPDOO\ 'FRQQHFWHG
ZLQGLQJRQWKHSULPDU\VLGH+RZHYHUIRUWKHORZHVWSRZHUUDWLQJVWKHFXUUHQWLQD'FRQQHFWHG
ZLQGLQJPLJKWEHYHU\VPDOODQGWKHUHTXLUHGGLPHQVLRQRIWKHZLQGLQJFRQGXFWRULQFRQYHQLHQWO\
VPDOOWRKDQGOHLQWKHIDFWRU\,QVXFKFDVHVWKHKLJKYROWDJHZLQGLQJPD\EH<FRQQHFWHGDQG
WKHVHFRQGDU\ZLQGLQJ]LJ]DJFRQQHFWHG=HURVHTXHQFHFXUUHQWVIORDWLQJLQWKHWZREUDQFKHV
RI WKH =FRQQHFWHG ZLQGLQJ ZLOO EDODQFH HDFK RWKHU DQG WKH ]HUR VHTXHQFH LPSHGDQFH VHHQ
IURP WKH VHFRQGDU\ VLGH LV PDLQO\ GHWHUPLQHG E\ WKH PDJQHWLF OHDNDJH ILHOG EHWZHHQ WKH WZR
ZLQGLQJEUDQFKHVDQGLVTXLWHORZ
%\ DUUDQJLQJ WKH FRQQHFWLRQ RI D SDLU RI ZLQGLQJV LQ GLIIHUHQW ZD\V LW LV SRVVLEOH WR PDNH D
QXPEHU RI GLIIHUHQW GHJUHHV RI YROWDJH GLVSODFHPHQWV EHWZHHQ WKH VLGHV RI WKH WUDQVIRUPHU
7UDQVIRUPHUV WKDW DUH FRQQHFWHG LQ SDUDOOHO RQ ERWK VLGHV UHTXLUH WKH VDPH YROWDJH
GLVSODFHPHQW 7KH IDFH RI D ZDWFK KDV WUDGLWLRQDOO\ EHHQ XVHG WR GHVFULEH WKH YROWDJH
GLVSODFHPHQWEHWZHHQWKHSULPDU\YROWDJHDQGWKHVHFRQGDU\YROWDJHDQGZKHQDSSOLFDEOHWKH
GLVSODFHPHQW EHWZHHQ WKH SULPDU\ DQG WKH WHUWLDU\ 2QH SKDVH RI WKH SULPDU\ LV SRLQWLQJ DW
WZHOYHDQGWKHFRUUHVSRQGLQJSKDVHDWWKHRWKHUVLGHLVSRLQWLQJDWDQ\RIWKHZDWFKQXPEHUV
)LJXUH
7KHIUHTXHQWO\XVHGFRPELQDWLRQ<GPHDQVIRULQVWDQFHWKDWWKHUHLVƒGLVSODFHPHQW
EHWZHHQWKHYROWDJHVRIWKHWZRVLGHVDVLOOXVWUDWHGLQ)LJXUH
7UDQVIRUPHU+DQGERRN3DJH
75$16)250(50$7(5,$/6
&25(0$7(5,$/6
7UDQVIRUPHUFRUHVDUHEXLOWIURPWKLQVKHHWVRIVWHHO7KHVHVKHHWVDUHPDQXIDFWXUHGVSHFLILFDOO\
IRUXVHLQWUDQVIRUPHUV
&RUHVWHHOKDVORZFDUERQFRQWHQW,QFUHDVHGFDUERQFRQWHQWKDVDGHWULPHQWDOLQIOXHQFH
RQWKHK\VWHUHVLVORVVHVDVZHOODVWKHDJHLQJSURSHUWLHV
&RUH VWHHO LV DOOR\HG ZLWK VLOLFRQ 6L 6LOLFRQ LQFUHDVHV WKH VSHFLILF HOHFWULFDO UHVLVWDQFH ZKLFK
DJDLQUHGXFHVWKHHGG\FXUUHQWORVVHVLQWKHFRUH,QFUHDVHGVLOLFRQFRQWHQWPDNHVWKHFRUHVWHHO
EULWWOHWKHUHIRUHWKHFRQWHQWLVNHSWEHORZ
7RGD\RQO\JUDLQRULHQWHGVWHHOLVXVHG%\FROGUROOLQJWKHVWHHOVKHHWVWKHPDJQHWLFGRPDLQVLQ
WKHVWHHOVKHHWZLOOWHQGWREHRULHQWHGLQWKHUROOLQJGLUHFWLRQ
2QHJHWVDPDWHULDOZLWKYHU\JRRGORVVSURSHUWLHVLQWKHUROOLQJGLUHFWLRQDQGFRUUHVSRQGLQJO\SRRU
SURSHUWLHV LQ WKH WUDQVYHUVDO GLUHFWLRQ 7KH UROOLQJ SURFHVV UHTXLUHV VSHFLDO HTXLSPHQW ZLWK YHU\
KLJKVXUIDFHSUHVVXUH
7KHJUDLQRULHQWHGFRUHVWHHOLVDYDLODEOHLQVHYHUDOJUDGHV7KHGLIIHUHQWSURSHUWLHVDUHREWDLQHGE\
WKH UDZ PDWHULDO FRPSRVLWLRQ WKH GHJUHH RI FROG UROOLQJ DQG GLIIHUHQW ILQLVKLQJ WUHDWPHQWV IRU
H[DPSOH ODVHU WUHDWPHQW /DVHU WUHDWPHQW LV D PHFKDQLFDO WUHDWPHQW ZKLFK GLYLGHV WKH PDJQHWLF
GRPDLQVLQWRVPDOOHUGRPDLQVZLWKORZHUORVVHVDVWKHUHVXOW
7R PLQLPLVH HGG\ FXUUHQW ORVVHV WKH VKHHWV PXVW EH LQVXODWHG IURP HDFK RWKHU (DUOLHU LW ZDV
FRPPRQ WR XVH YDUQLVK RU SDSHU 7RGD\ WKH FRUH VWHHO LV GHOLYHUHG UHDG\ LQVXODWHG IURP WKH
PDQXIDFWXUHU 7KH LQVXODWLRQ LV DQ LQRUJDQLF PDWHULDO FRPSDWLEOH ZLWK WUDQVIRUPHU RLO DQG LV
FRUURVLRQ DQG WHPSHUDWXUH UHVLVWDQW 7KH LQVXODWLQJ FRDWLQJ LV YHU\ WKLQ µP $ WKLQ FRDWLQJ
PHDQVDJRRGFRUHILOOIDFWRU
7KHFRUHLVEXLOWXSIURPPDQ\OD\HUVRIFRUHVWHHOVKHHWV6XSSRVHWKHFRUHOLPEZDVEXLOWIURPD
VROLGLURQEROWWKHFRUHZRXOGUHSUHVHQWDVKRUWFLUFXLWHGZLQGLQJDURXQGLWVHOIDQGWKHWUDQVIRUPHU
ZRXOGQRWZRUN7KHPXWXDOO\LQVXODWHGVKHHWVSUHYHQWVXFKDVKRUWFLUFXLW
(GG\ FXUUHQW ORVVHV LQ WKH FRUH VWHHO DUH SURSRUWLRQDO WR WKH VTXDUH RI WKH WKLFNQHVV 7KHUHIRUH
WKH VWHHO VKHHWV KDYH WR EH WKLQ LQ RUGHU WR UHGXFH WKH QR ORDG ORVVHV 7\SLFDO WKLFNQHVV LV IURP
PPWRPP
&21'8&7250$7(5,$/6
)URPDWHFKQLFDODQGHFRQRPLFDOSRLQWRIYLHZWKHUHDUHWZRFRQGXFWRUPDWHULDOVWKDWFDQEHXVHG
FRSSHU &X RUDOXPLQLXP $O 7KHFKRLFHRIFRQGXFWRUPDWHULDOGHSHQGVPDLQO\RQSULFHDQGDYDLODELOLW\7KHVXSSO\DQGGHPDQG
RIFRSSHUDQGDOXPLQLXPFDQYDU\TXLWHVLJQLILFDQWRQWKHZRUOGPDUNHWDQGWKHUHE\DOVRSULFHDQG
DYDLODELOLW\RIFRQGXFWRUVIURPWKHPDQXIDFWXUHUV
6RPHFXVWRPHUVSUHVFULEHFRSSHURQO\IRUGLIIHUHQWUHDVRQVPDLQO\FRQVHUYDWLVP
7KHSK\VLFDOGLPHQVLRQVRIDWUDQVIRUPHUZLWKFRSSHUZLQGLQJVDUHQRUPDOO\VPDOOHUWKDQWKDWRID
WUDQVIRUPHUZLWKDOXPLQLXPZLQGLQJV
&RQGXFWRUVKDSHVDUHIRLOURXQGRUUHFWDQJXODUZLUH
7KHIRLOLVQRWGLUHFWO\LQVXODWHG7KHURXQGDQGUHFWDQJXODUZLUHLVQRUPDOO\FRDWHGE\YDUQLVK
7KH XVHRI YDUQLVK LQVWHDG RI SDSHU LPSURYHV WKHZLQGLQJVSDFH IDFWRU GXHWR VPDOOHU WKLFNQHVV
DQGUHGXFHVWKHZLQGLQJWROLTXLGWHPSHUDWXUHJUDGLHQW ZLQGLQJWRDLUWHPSHUDWXUHJUDGLHQWIRUGU\
W\SHWUDQVIRUPHUV 5HFWDQJXODU ZLUH FDQ DOVR EH LQVXODWHG E\ SDSHU IRU WKHUPDO FODVV RU ZLWK DUDPLG IRU KLJKHU
WHPSHUDWXUHFODVVHV
&ROGZRUNLQJRIWKHFRQGXFWRULQFUHDVHVWKHPHFKDQLFDOVWUHQJWKDQGWKHDELOLW\WRZLWKVWDQGVKRUW
FLUFXLWIRUFHV
3DJH7UDQVIRUPHU+DQGERRN
,168/$7,210$7(5,$/6
6ROLGLQVXODWLRQPDWHULDOV
*HQHUDO
$JRRGLQVXODWLRQPDWHULDOPXVWKDYHWKHIROORZLQJSURSHUWLHV
+LJKGLHOHFWULFVWUHQJWK
*RRGPHFKDQLFDOSURSHUWLHV
/RQJOLIHWLPHDWRSHUDWLQJWHPSHUDWXUH
(DVLO\ZRUNDEOH
,QVXODWLRQPDWHULDOPXVWZLWKVWDQGWKHRSHUDWLQJWHPSHUDWXUHVWKDWRFFXULQWKHWUDQVIRUPHUGXULQJ
WKHOLIHWLPHRIWKHWUDQVIRUPHU
,QVXODWLRQPDWHULDOVWREHXVHGLQOLTXLGLPPHUVHGWUDQVIRUPHUVPXVWEHFRPSDWLEOHWRWKHOLTXLG
&HOOXORVHPDWHULDOV
0DLQO\XVHGLQRLOLPPHUVHGWUDQVIRUPHUVZLWKWKHUPDOFODVV
&HOOXORVH LQVXODWLRQ LV PDGH RI VORZ JURZLQJ W\SHV RI ZRRG KDYLQJ ORQJ ILEUHV /RQJ ILEUHV JLYH
ORQJOLIHWLPHDQGKLJKGHQVLW\JLYHVKLJKGLHOHFWULFVWUHQJWK
&HOOXORVHSURGXFWVDUHFRPSDWLEOHWRPLQHUDORLODQGDUHHDV\WRRLOLPSUHJQDWH
7KH LPSUHJQDWLRQ LV GRQH XQGHU YDFXXP DQG HOHYDWHG WHPSHUDWXUH DQG WKH WLQ\ FDYLWLHV LQ WKH
FHOOXORVHDUHILOOHGZLWKRLO7KHUHE\WKHGLHOHFWULFVWUHQJWKLVIXUWKHULQFUHDVHG,QFDVHWKHFDYLWLHV
ZHUHQRWILOOHGZLWKRLOWKHVHVPDOODLUEXEEOHVZRXOGFDXVHSDUWLDOGLVFKDUJHV3DUWLDOGLVFKDUJHV
PD\LQWKHORQJWHUPHVFDODWHWRDGLHOHFWULFEUHDNGRZQ
&RQWDPLQDQWVUHSUHVHQWZHDNQHVVHVLQWKHLQVXODWLRQWKDWPD\OHDGWRGLHOHFWULFEUHDNGRZQ
&HOOXORVHLQVXODWLRQLVVSHFLILHGLQ,(&IRUSDSHUDQG,(&IRUERDUG
:RRG
/DPLQDWHG ZRRG LV XVHG IRU GLIIHUHQW VXSSRUW SXUSRVHV LQ OLTXLG LPPHUVHG WUDQVIRUPHUV
7KHDSSOLFDEOH,(&VWDQGDUGLV
3RUFHODLQ
3RUFHODLQ LV PDLQO\ XVHG IRU EXVKLQJV LQ RLOLPPHUVHG WUDQVIRUPHUV ,Q VRPH FDVHV DOVR XVHG DV
VXSSRUWVRUVSDFHUVLQGU\W\SHWUDQVIRUPHUV
6ROLGV\QWKHWLFLQVXODWLRQPDWHULDOV
7KHVHPDWHULDOVDUHPDLQO\XVHGLQGU\W\SHWUDQVIRUPHUVRUUHDFWRUVKDYLQJKLJKHUWKHUPDOFODVVHV
7KHVHPDWHULDOVDUHPRUHH[SHQVLYHWKDQFHOOXORVHLQVXODWLRQ
(QDPHOV DUH XVHG DV FRQGXFWRU LQVXODWLRQ DQG QRUPDOO\ GRXEOH FRDWHG 6HYHUDO TXDOLWLHV IRU
GLIIHUHQWDSSOLFDWLRQVDUHDYDLODEOH5HIHUHQFHLVPDGHWR,(&
(SR[\UHVLQVXVHGLQFRPELQDWLRQZLWKILOOHUVIRUH[DPSOHJODVVILEUHDQGTXDUW]SRZGHULVXVHGIRU
LQVXODWLRQEDUULHUVDQGFRPSOHWHYDFXXPFDVWZLQGLQJV
3RO\HVWHUVFDQEHXVHGDVLQVXODWLRQEDUULHUVVSDFHUVDQGGXFWVWLFNV5HIHUHQFHLVPDGHWR,(&
DQG,(&
$UDPLGILEUHDUHXVHGWRPDQXIDFWXUHLQVXODWLRQSDSHURUERDUGVKHHWVLQGLIIHUHQWWKLFNQHVVHV7KH
PDWHULDO VXUIDFH PD\ EH VPRRWK RU SRURXV 7KH SRURXV W\SH FDQ WR D FHUWDLQ H[WHQW EH RLO
LPSUHJQDWHG7KHPDWHULDOKDVYHU\JRRGWKHUPDOSURSHUWLHVWKHUPDOFODVV
$UDPLGLQVXODWLRQLVVSHFLILHGLQ,(&IRUSDSHUDQG,(&IRUERDUG
7UDQVIRUPHU+DQGERRN3DJH
)OXLGV
*HQHUDO
7KHIOXLGLQDWUDQVIRUPHUKDVVHYHUDOIXQFWLRQVWKHWZRPRVWLPSRUWDQWDUHFHUWDLQO\LQVXODWLRQDQG
FRROLQJ $QRWKHU IXQFWLRQ LV WR FDUU\ LQIRUPDWLRQ DERXW WKH FRQGLWLRQ RI WKH DFWLYH SDUW LQVLGH WKH
WUDQVIRUPHU
6HYHUDOUHTXLUHPHQWVKDYHWREHIXOILOOHG
&KHPLFDO
(OHFWULFDO
2[LGDWLRQVWDELOLW\
%UHDNGRZQYROWDJH$&
2[LGDWLRQLQKLELWRUFRQWHQW
%UHDNGRZQYROWDJHLPSXOVH
,QKLELWRULVUHFRPPHQGHG
&RUURVLYHVXOSKXU
'LVVLSDWLRQIDFWRU
:DWHUFRQWHQW
6WUHDPLQJFKDUJLQJ
1HXWUDOL]DWLRQYDOXH
3K\VLFDO
$GGLWLRQDO
9LVFRVLW\
/RZSDUWLFOHFRQWHQW
$SSHDUDQFH
&RPSDWLELOLW\ ZLWK RWKHU WUDQVIRUPHU
PDWHULDOV
'HQVLW\
*DVVLQJSURSHUWLHV
3RXUSRLQW
$URPDWLFVWUXFWXUH
6XUIDFHWHQVLRQ
3RO\DURPDWLFVWUXFWXUH
)ODVKSRLQW
6ROXELOLW\SURSHUWLHV
0LQHUDORLO
,PSRUWDQWSURSHUWLHVRIPLQHUDORLODUHVSHFLILHGLQ,(&
)ODVKSRLQWƒ&GHQVLW\NJGPUHODWLYHSHUPLWWLYLW\
0LQHUDORLOLVWKHPRVWFRPPRQOLTXLGXVHG0LQHUDORLOLVQRUPDOO\WKHUHIHUHQFHWRZKLFKDOORWKHU
OLTXLGVDUHFRPSDUHG
0LQHUDORLORIIHUVLQPRVWFDVHVWKHEHVWFRPSURPLVHEHWZHHQFRVWDQGWHFKQLFDOSURSHUWLHVDQG
FRPSDWLELOLW\ZLWKRWKHUWUDQVIRUPHUPDWHULDOVLVDOVRYHU\JRRG
,QKLELWRUVUHWDUGVWKHDJHLQJSURFHVVRIWKHRLO
3DJH7UDQVIRUPHU+DQGERRN
2WKHUIOXLGV
7KHVHIOXLGVDUHUHVHUYHGIRUVSHFLDODSSOLFDWLRQVDQGDUHW\SLFDOO\WLPHVPRUHH[SHQVLYHWKDQ
PLQHUDORLO
7KHPDLQPRWLYDWLRQIRUXVLQJWKHVHIOXLGVLVLPSURYHGILUHVDIHW\DQGHQYLURQPHQWDOLPSDFW
)XUWKHU WKHVH IOXLGV DUH DSSOLFDEOH IRU RSHUDWLRQ DW HOHYDWHG WHPSHUDWXUHV KRZHYHU KDYH OLPLWHG
FDSDELOLWLHVLQH[WUHPHO\FROGFOLPDWHV
'LPHWK\O6LOLFRQH
,PSRUWDQWSURSHUWLHVRIVLOLFRQHIOXLGDUHVSHFLILHGLQ,(&
)ODVKSRLQWƒ&GHQVLW\NJGPUHODWLYHSHUPLWWLYLW\
6LOLFRQHIOXLGKDVORZHUGLHOHFWULFDQGFRROLQJSURSHUWLHVFRPSDUHGWRPLQHUDORLO
:KHQ LW LJQLWHV LW LV VHOITXHQFKLQJ EHFDXVH LW FUHDWHV D OD\HU RI R[LGH +RZHYHU LW LV QRW VHOI
TXHQFKLQJUHODWHGWRDUFLQJDQGHOHFWULFDOIDLOXUHV
6LOLFRQHIOXLGLVQRWXVHGLQRQORDGWDSFKDQJHUVDRGXHWRLWVSRRUOXEULFDWLRQSURSHUWLHV
6\QWKHWLF(VWHU
,PSRUWDQWSURSHUWLHVRIV\QWKHWLFHVWHUDUHVSHFLILHGLQ,(&
)ODVKSRLQWƒ&GHQVLW\NJGPUHODWLYHSHUPLWWLYLW\
6\QWKHWLF+\GURFDUERQ
,PSRUWDQWSURSHUWLHVRIV\QWKHWLFK\GURFDUERQDUHVSHFLILHGLQ,(&
)ODVKSRLQWƒ&GHQVLW\NJGPUHODWLYHSHUPLWWLYLW\
$JULFXOWXUDO(VWHU
1RDSSOLFDEOH,(&VSHFLILFDWLRQ
)ODVKSRLQWƒ&GHQVLW\NJGPUHODWLYHSHUPLWWLYLW\
7KLVLVJRRGFRPSURPLVHEHWZHHQILUHVDIHW\DQGHQYLURQPHQWDOIULHQGOLQHVV
%,27(03LVDQ$%%GHYHORSHGDQGSDWHQWHGDJULFXOWXUDOHVWHUEDVHGRQVXQIORZHURLOVHHDOVR
ZZZDEEFRPWUDQVIRUPHUVIRUDGGLWLRQDOLQIRUPDWLRQ
7UDQVIRUPHU+DQGERRN3DJH
7(67,1*2)75$16)250(56
7KHLQIRUPDWLRQJLYHQEHORZLVDQH[WUDFWIURP,(& &ODXVH7HVWLQJRIGU\
W\SH WUDQVIRUPHUV LV GHVFULEHG LQ ,(& IRU IXUWKHU LQIRUPDWLRQ &RS\ULJKW ‹ ,(&
*HQHYD6ZLW]HUODQGZZZLHFFK
$%% KDV LVVXHG D FRPSUHKHQVLYH ERRN RQ WKLV VXEMHFW VHH VHFWLRQ SDJH 7KLV ERRN
GHVFULEHVWHVWLQJERWKDFFRUGLQJWR,(&DQG$16,,(((VWDQGDUGV
*(1(5$/5(48,5(0(176
• 7HVWVVKDOOEHPDGHDWDQ\DPELHQWWHPSHUDWXUHEHWZHHQƒ&DQGƒ&DQGZLWKFRROLQJ
ZDWHULIUHTXLUHGDWDQ\WHPSHUDWXUHQRWH[FHHGLQJƒ&
• 7HVWV VKDOO EH PDGH DW WKH PDQXIDFWXUHU V ZRUNV XQOHVV RWKHUZLVH DJUHHG EHWZHHQ WKH
PDQXIDFWXUHUDQGWKHSXUFKDVHU
• $OO H[WHUQDO FRPSRQHQWV DQG ILWWLQJV WKDW DUH OLNHO\ WR DIIHFW WKH SHUIRUPDQFH RI WKH
WUDQVIRUPHUGXULQJWKHWHVWVKDOOEHLQSODFH
• 7DSSHG ZLQGLQJV VKDOO EH FRQQHFWHG RQ WKHLU SULQFLSDO WDSSLQJ XQOHVV WKH UHOHYDQW WHVW
FODXVHUHTXLUHVRWKHUZLVHRUXQOHVVWKHPDQXIDFWXUHUDQGWKHSXUFKDVHUDJUHHRWKHUZLVH
• 7KH WHVW EDVLV IRU DOO FKDUDFWHULVWLFV RWKHU WKDQ LQVXODWLRQ LV WKH UDWHG FRQGLWLRQ XQOHVV WKH
WHVWFODXVHVWDWHVRWKHUZLVH
• $OO PHDVXULQJ V\VWHPV XVHG IRU WKH WHVWV VKDOO KDYH DSSURYHG WUDFHDEOH DFFXUDF\ DQG EH
VXEMHFWWRSHULRGLFFDOLEUDWLRQDFFRUGLQJWRWKHUXOHVRIRI,62
127( 6SHFLILF UHTXLUHPHQWV UHJDUGLQJ DFFXUDF\ DQG YHULILFDWLRQ RI PHDVXULQJ V\VWHPV DUH XQGHU
FRQVLGHUDWLRQZLWKLQ&(1(/(&
:KHUH LW LV UHTXLUHG WKDW WHVWUHVXOWV DUH WR EH FRUUHFWHG WR D UHIHUHQFH WHPSHUDWXUH WKLV VKDOO EH IRU RLO
LPPHUVHGWUDQVIRUPHUVƒ&DQGIRUGU\W\SHWUDQVIRUPHUVDFFRUGLQJWRWKHUHTXLUHPHQWVLQ,(&
5287,1(7(676
•
•
•
•
•
•
0HDVXUHPHQWRIZLQGLQJUHVLVWDQFH ,(& 0HDVXUHPHQWRIYROWDJHUDWLRDQGFKHFNRISKDVHGLVSODFHPHQW ,(& 0HDVXUHPHQWRIVKRUWFLUFXLWLPSHGDQFHDQGORDGORVV ,(& 0HDVXUHPHQWRIQRORDGORVVDQGFXUUHQW ,(& 'LHOHFWULFURXWLQHWHVWV ,(& 7HVWVRQRQORDGWDSFKDQJHUVZKHUHDSSURSULDWH ,(& 3'WHVWZLOOEHDURXWLQHWHVWLQWKHQHZ,(&VWDQGDUGIRUGU\W\SHWUDQVIRUPHUVQRZLQSURFHVV
7<3(7(676
• 7HPSHUDWXUHULVHWHVW ,(& • 'LHOHFWULFW\SHWHVWV ,(& 63(&,$/7(676
•
•
•
•
•
•
•
•
•
'LHOHFWULFVSHFLDOWHVWV ,(& 'HWHUPLQDWLRQRIFDSDFLWDQFHVZLQGLQJVWRHDUWKDQGEHWZHHQZLQGLQJV
'HWHUPLQDWLRQRIWUDQVLHQWYROWDJHWUDQVIHUFKDUDFWHULVWLFV
=HURVHTXHQFHLPSHGDQFH V RQWKUHHSKDVHWUDQVIRUPHUV ,(& 6KRUWFLUFXLWZLWKVWDQGWHVW ,(& 'HWHUPLQDWLRQRIVRXQGOHYHOV ,(& 0HDVXUHPHQWRIWKHKDUPRQLFVRIWKHQRORDGFXUUHQW ,(& 0HDVXUHPHQWRIWKHSRZHUWDNHQE\WKHIDQDQGRLOSXPSPRWRUV
0HDVXUHPHQW RI LQVXODWLRQ UHVLVWDQFH WR HDUWK RI WKH ZLQGLQJV DQGRU PHDVXUHPHQW RI
GLVVLSDWLRQIDFWRU WDQį RIWKHLQVXODWLRQV\VWHPFDSDFLWDQFHV 7KHVHDUHUHIHUHQFHYDOXHV
IRUFRPSDULVRQZLWKODWHUPHDVXUHPHQWLQWKHILHOG1ROLPLWDWLRQVIRUWKHYDOXHVDUHJLYHQ
KHUH 127( ,I WHVWV RWKHU WKDQ WKRVH OLVWHG DERYH DUH VSHFLILHG LQ WKH FRQWUDFW VXFK WHVW PHWKRGV DUH VXEMHFW WR
DJUHHPHQW
3DJH7UDQVIRUPHU+DQGERRN
29(592/7$*(6$1'29(592/7$*(/,0,7$7,21
7UDQVIRUPHUV PD\ LQ VHUYLFH EH H[SRVHG WR YROWDJHV LQ H[FHVV RI WKH QRUPDO RSHUDWLQJ YROWDJH
7KHVHRYHUYROWDJHVDUHFODVVLILHGZLWKUHJDUGWRWKHLUGXUDWLRQLQWZRPDLQJURXSV
• 7HPSRUDU\RYHUYROWDJHV 729 • 7UDQVLHQWRYHUYROWDJHV
$WHPSRUDU\RYHUYROWDJHLVDSRZHUIUHTXHQF\YROWDJHRIUHODWLYHO\ORQJGXUDWLRQUDQJLQJIURPOHVV
WKDQRQHVHFRQGXSWRVHYHUDOKRXUV
$ WUDQVLHQW RYHUYROWDJH LV D VKRUWGXUDWLRQ RYHUYROWDJH UDQJLQJ IURP QDQRVHFRQGV XS WR D IHZ
PLOOLVHFRQGV 7KH IURQW WLPH PD\ YDU\ IURP QDQRVHFRQGV XS WR D IHZ PLOOLVHFRQGV 7UDQVLHQW
RYHUYROWDJHVPD\EHRVFLOODWRU\RUQRQRVFLOODWRU\7KH\DUHXVXDOO\XQLGLUHFWLRQDO
$ WUDQVIRUPHU PD\ DOVR EH H[SRVHG WR FRPELQDWLRQV RI WHPSRUDU\ DQG WUDQVLHQW RYHUYROWDJHV
7UDQVLHQWRYHUYROWDJHVPD\EHLPPHGLDWHO\IROORZHGE\WHPSRUDU\RYHUYROWDJHV
2YHUYROWDJHVDUHDOVRFODVVLILHGLQWZRPDLQJURXSVZLWKUHJDUGWRWKHLURULJLQ
• 2YHUYROWDJHVFDXVHGE\DWPRVSKHULFSKHQRPHQD
• 2YHUYROWDJHVJHQHUDWHGZLWKLQWKHSRZHUV\VWHP
2YHUYROWDJHVFDXVHGE\DWPRVSKHULFSKHQRPHQD
7KHVH DUH WUDQVLHQW RYHUYROWDJHV PRVWO\ GXH WR OLJKWQLQJ VWURNHV WR HDUWK QHDU RYHUKHDG OLQHV
FRQQHFWHGWRWKHWUDQVIRUPHUDOWKRXJKOLJKWQLQJFDQLQVRPHFDVHVDOVRGLUHFWO\VWULNHWKHOLQHRU
HYHQWKHWUDQVIRUPHU
7KH SHDN YDOXH RI WKH YROWDJH GHSHQGV RQ WKH OLJKWQLQJ FXUUHQW ZKLFK LV D VWDWLVWLFDO YDULDEOH
/LJKWQLQJ FXUUHQWV RI PRUH WKDQ N$ KDYH EHHQ UHJLVWHUHG $FFRUGLQJ WR PHDVXUHPHQWV RQ
RYHUKHDGOLQHVWKHSUREDELOLW\SHDNYDOXHRIWKHOLJKWQLQJFXUUHQWLVLQWKHUDQJH±N$LQ
PRVWLQYHVWLJDWLRQV7KHGLVWDQFHEHWZHHQWKHWUDQVIRUPHUDQGWKHVSRWRIWKHOLJKWQLQJVWURNHKDV
DQLQIOXHQFHRQWKHIURQWWLPHRIWKHVXUJHWKDWVWULNHVWKHWUDQVIRUPHUWKHVKRUWHUGLVWDQFHIURPWKH
WUDQVIRUPHUWKHVKRUWHUIURQWWLPH
2YHUYROWDJHVJHQHUDWHGZLWKLQWKHSRZHUV\VWHP
7KLV JURXS FRQWDLQV ERWK WHPSRUDU\ DQG WUDQVLHQW RYHUYROWDJHV GXH WR VXGGHQ FKDQJHV LQ WKH
VHUYLFH FRQGLWLRQV LQ WKH SRZHU V\VWHP 6XFK FKDQJHV DUH FDXVHG E\ VZLWFKLQJ RSHUDWLRQV RU
IDLOXUHV
7HPSRUDU\RYHUYROWDJHVDUHFDXVHGE\HDUWKIDXOWVORDGUHMHFWLRQVDQGORZIUHTXHQF\UHVRQDQFH
SKHQRPHQD
7UDQVLHQW RYHUYROWDJHV RFFXU ZKHQ HTXLSPHQW LV FRQQHFWHG WR RU GLVFRQQHFWHG IURP WKH V\VWHP
7KH\ FDQ DOVR RFFXU ZKHQ H[WHUQDO LQVXODWLRQ IODVKHV RYHU :KHQ VZLWFKLQJ UHDFWLYH ORDGV
WUDQVLHQW YROWDJHV PD\ DPRXQW WR ± SX GXH WR PXOWLSOH WUDQVLHQW FXUUHQW LQWHUUXSWLRQV LQ WKH
FLUFXLWEUHDNHUZLWKIURQWWLPHVGRZQWRIUDFWLRQVRIDPLFURVHFRQG
7UDQVIRUPHUDELOLW\WRZLWKVWDQGRYHUYROWDJHV
7UDQVIRUPHUV DUH GHVLJQHG WR ZLWKVWDQG FHUWDLQ GLHOHFWULF WHVWV EHIRUH GHOLYHU\ IURP WKH IDFWRU\
7KHVHWHVWVVKDOOYHULI\WKDWWKHWUDQVIRUPHUKDVDKLJKSUREDELOLW\RIUHOLDEOHRSHUDWLRQ
7KH WHVWV DUH VSHFLILHG LQ LQWHUQDWLRQDO RU QDWLRQDO VWDQGDUGV 6HUYLFH H[SHULHQFH FRQILUPV WKDW
WUDQVIRUPHUVZKLFKKDYHSDVVHGVXFKWHVWVDUHUHOLDEOHZLWKYHU\IHZH[FHSWLRQV
%XWDQDGGLWLRQDOFRQGLWLRQIRUWKHKLJKVHUYLFHUHOLDELOLW\LVWKDWDGHTXDWHRYHUYROWDJHOLPLWDWLRQLV
SURYLGHG EHFDXVH WKH WUDQVIRUPHU PD\ LQ VHUYLFH DOVR EH H[SRVHG WR PRUH VHYHUH RYHUYROWDJHV
WKDQWKRVHDSSOLHGLQWKHGHOLYHU\WHVW
,Q SRZHU V\VWHP SODQQLQJ WKH LPSRUWDQFH RI FRQVLGHULQJ DOO W\SHV RI RYHUYROWDJHV WKDW WKH
HTXLSPHQWPD\EHH[SRVHGWRVKRXOGEHHPSKDVL]HG7REHDEOHWRGRWKLVLQDQDSSURSULDWHZD\
SK\VLFDOXQGHUVWDQGLQJRIWKHRULJLQRIWKHYDULRXVW\SHVRIRYHUYROWDJHVLVQHFHVVDU\
7KHPDJQLWXGHRIVHYHUDONLQGVRIRYHUYROWDJHVLVDVWDWLVWLFDOYDULDEOH7KHDELOLW\RIWKHLQVXODWLRQ
WRZLWKVWDQGRYHUYROWDJHVLVDOVRDVWDWLVWLFDOYDULDEOH,WLVDWDVNIRUWKHV\VWHPSODQQHUZKRKDV
WKHRYHUYLHZDQGWKHNQRZOHGJHDERXWWKHV\VWHPWRFKRRVHSUHFDXWLRQVWRSUHYHQWRYHUYROWDJH
GDPDJH RQ WKH HTXLSPHQW 7KLV LQFOXGHV EDODQFLQJ WKH FRVWV IRU VXFK SUHFDXWLRQV DJDLQVW WKH
VWDWLVWLFDO ULVN IRU IDLOXUHV DQG WKHLU HFRQRPLFDO FRQVHTXHQFHV 6XSSOLHUV RI WKH HTXLSPHQW PD\
PDNHJXDUDQWHHUHVHUYDWLRQVLQFDVHVZKHUHSUHFDXWLRQVUHJDUGLQJOLPLWDWLRQVRIRYHUYROWDJHVDUH
PLVVLQJRUREYLRXVO\LQVXIILFLHQW
7UDQVIRUPHU+DQGERRN3DJH
/,0,7$7,212)7(0325$5<29(592/7$*(6
2YHUYROWDJHVGXHWRHDUWKIDXOW
$ SKDVHWRHDUWK IDXOW PD\ UHVXOW LQ SKDVHWRHDUWK RYHUYROWDJHV DIIHFWLQJ WKH WZR RWKHU SKDVHV
7KH V\VWHP SDUDPHWHUV GHWHUPLQH VXFK RYHUYROWDJHV ZKLFK FDQ RQO\ EH FRQWUROOHG E\ DIIHFWLQJ
WKHVHSDUDPHWHUVZKLOHGHVLJQLQJWKHV\VWHP
,W VKRXOG EH UHFRJQLVHG WKDW VXUJH DUUHVWHUV DUH QRUPDOO\ QRW VXLWDEOH WR OLPLW WHPSRUDU\
RYHUYROWDJHV GXH WR WKH GXUDWLRQ RI VXFK RYHUYROWDJHV DQG WKH OLPLWHG WKHUPDO FDSDELOLW\ RI WKH
VXUJHDUUHVWHUV
7KHRYHUYROWDJHRQWKHVRXQGSKDVHVGXULQJDQHDUWKIDXOWLVXVXDOO\H[SUHVVHGE\PHDQVRIWKH
HDUWK IDXOW IDFWRU ,Q WKH ,QWHUQDWLRQDO (OHFWURWHFKQLFDO 9RFDEXODU\ ,(9 LVVXHG E\ ,(& WKH HDUWK
IDXOWIDFWRULVJLYHQWKHIROORZLQJGHILQLWLRQ
7KH HDUWK IDXOW IDFWRU LV DW D JLYHQ ORFDWLRQ RI D WKUHHSKDVH V\VWHP DQG IRU D JLYHQ V\VWHP
FRQILJXUDWLRQWKHUDWLRRIWKHKLJKHVWUPVSKDVHWRHDUWKSRZHUIUHTXHQF\YROWDJHRQDKHDOWK\
SKDVHGXULQJDIDXOWWRHDUWKDIIHFWLQJRQHRUPRUHSKDVHVDWDQ\SRLQWRQWKHV\VWHPWRWKHUPV
SKDVHWRHDUWKSRZHUIUHTXHQF\YROWDJHZKLFKZRXOGEHREWDLQHGDWWKHJLYHQORFDWLRQLQDEVHQFH
RIDQ\VXFKIDXOW>,(9@
'XULQJDVLQJOHSKDVHHDUWKIDXOWWKHV\VWHPZLOOEHLQDQQRQV\PPHWULFDOFRQGLWLRQDQGWKHHDUWK
IDXOW IDFWRU LV FDOFXODWHG E\ PHDQV RI V\PPHWULFDO FRPSRQHQWV 7KH FRPSOH[ LPSHGDQFHV RI WKH
V\VWHPVHHQIURPWKHORFDWLRQRIWKHHDUWKIDXOWDUH
= 5M;UHVLVWDQFHDQGUHDFWDQFHRIWKHSRVLWLYHVHTXHQFHV\VWHP
= 5M;UHVLVWDQFHDQGUHDFWDQFHRIWKHQHJDWLYHVHTXHQFHV\VWHP
= 5M;UHVLVWDQFHDQGUHDFWDQFHRIWKH]HURVHTXHQFHV\VWHP
,IWKHIROORZLQJDVVXPSWLRQVDUHPDGH
=§=5;DQGWKDWWKHIDXOWUHVLVWDQFH5 DGLDJUDPWKDWLOOXVWUDWHVKRZWKHHDUWKIDXOWIDFWRUDWWKHORFDWLRQRIWKHIDXOWYDULHVZLWK;;
IRUGLIIHUHQWYDOXHVRI5;FDQEHGUDZQ
7KHGLDJUDPLVVKRZQLQ)LJXUH
7KH FXUYHV VKRZ WKH HDUWKIDXOW IDFWRU DW WKH ORFDWLRQ RI WKH IDXOW ,Q H[WHQGHG UHVRQDQW HDUWKHG
QHWZRUNVWKHHDUWKIDXOWIDFWRUPD\EHKLJKHUDWRWKHUORFDWLRQVWKDQWKHIDXOW
;LVSRVLWLYHIRULQGXFWLYHUHDFWDQFHVDQGQHJDWLYHIRUFDSDFLWLYHUHDFWDQFHV7KHHDUWKIDXOWFXUUHQW
LVLQGXFWLYHIRU;;!DQGFDSDFLWLYHIRU;;:KHQ
;; WKHV\VWHPLVLQDUHVRQDQFHFRQGLWLRQ
,WFDQEHVHHQWKDWXQIDYRXUDEOHFRPELQDWLRQVRIWKHSDUDPHWHUV;;DQG5ZLOOJLYHYHU\KLJK
RYHUYROWDJHV WKDW PD\ GHVWUR\ WKH VXUJH DUUHVWHUV DQG WKH LQVXODWLRQ RI WUDQVIRUPHUV DQG RWKHU
HTXLSPHQW7KHKLJKRYHUYROWDJHVFDQRQO\EHUHGXFHGE\FKDQJLQJWKHVHWKUHHSDUDPHWHUV
:KHQIRUH[DPSOH;DQG5ERWKDUH]HURWKHHDUWKIDXOWIDFWRULVZKLFKPHDQVWKDWWKH
KLJKHVWYROWDJHWRHDUWKRQRQHRIWKHKHDOWK\SKDVHVLVWLPHVWKHQRUPDOYROWDJHEHWZHHQ
SKDVHDQGQHXWUDO,QWKLVFDVHWKHWZRKHDOWK\SKDVHVDUHHDFKRSHUDWLQJDWKDOIWKHOLQHWROLQH
YROWDJHZLWKRSSRVLWHSRODULW\UHIHUUHGWRHDUWK
)RU VPDOO SRVLWLYH YDOXHV RI ;; WKH HDUWKIDXOW IDFWRU LQFUHDVHV ZLWK LQFUHDVLQJ 5 )RU KLJK
YDOXHVRI5WKHHDUWKIDXOWIDFWRUDSSURDFKHV¥
$W KLJK SRVLWLYH RU QHJDWLYH YDOXHV RI ;; WKH HDUWKIDXOW IDFWRU DSSURDFKHV DOVR ¥ QHDUO\
LQGHSHQGHQWRI5
$WORZQHJDWLYHYDOXHVRI;;WKHHDUWKIDXOWIDFWRUPD\EHFRPHYHU\KLJKEXWLWFDQEHUHGXFHG
E\VHOHFWLQJDKLJK5
$ ORZ HDUWKIDXOW IDFWRU KDV WKH DGYDQWDJH WKDW LW DOORZV D ORZ SURWHFWLRQ OHYHO RI WKH VXUJH
DUUHVWHUV 7KXV WKH VDIHW\ PDUJLQ EHWZHHQ WKH LQVXODWLRQ OHYHO %,/ RI WKH WUDQVIRUPHU DQG WKH
SURWHFWLRQOHYHORIWKHVXUJHDUUHVWHUVFDQEHNHSWUHODWLYHO\KLJKGHSHQGLQJRQWKHGXUDWLRQRIWKH
IDXOWZKLFKLVWKHRWKHUPDLQSDUDPHWHUWKDWLQIOXHQFHVWKHFKRLFHRIWKHVXUJHDUUHVWHUV
3DJH7UDQVIRUPHU+DQGERRN
(DUWKIDXOWIDFWRUYHUVXV;;IRUYDULRXV5;
5; (DUWKIDXOWIDFWRU
5; 5; 5; 5; 5; ;;
)LJXUH
7KHGXUDWLRQRIWKHRYHUYROWDJHFRUUHVSRQGVWRWKHGXUDWLRQRIWKHIDXOWDQGZLOOUHPDLQXQWLOIDXOW
FOHDULQJ,QV\VWHPVZLWKRXWHDUWKIDXOWFOHDULQJWKHGXUDWLRQPD\EHVHYHUDOKRXUV7KLVZLOOLPSO\
VXUJH DUUHVWHUV ZLWK KLJKHU SURWHFWLRQ OHYHO DQG ORZHU VDIHW\ PDUJLQ UHJDUGLQJ WUDQVLHQW
RYHUYROWDJHV
,QLQVXODWLRQFRRUGLQDWLRQNQRZOHGJHDERXWWKHHDUWKIDXOWIDFWRUDWYDULRXVSODFHVLQWKHQHWZRUN
LQGLIIHUHQWORDGLQJFRQGLWLRQVDQGV\VWHPFRQILJXUDWLRQVLVRIYLWDOLPSRUWDQFH$WKRURXJKV\VWHP
DQDO\VLVLVQHFHVVDU\
/RDGUHMHFWLRQRYHUYROWDJHV
$IXOOORDGUHMHFWLRQLQPRGHUDWHO\H[WHQGHGV\VWHPVFDQJLYHULVHWRSKDVHWRHDUWKDQGSKDVH±WR
SKDVH RYHUYROWDJHV ZLWK DPSOLWXGH XVXDOO\ EHORZ SX 7KH RYHUYROWDJH GXUDWLRQ GHSHQGV RQ
WKH RSHUDWLRQ RI WKH YROWDJHFRQWURO HTXLSPHQW DQG PD\ EH XS WR VHYHUDO PLQXWHV 6SHFLDO
SUHFDXWLRQV WR SURWHFW GLVWULEXWLRQ WUDQVIRUPHUV DJDLQVW RYHUYROWDJHV GXH WR ORDG UHMHFWLRQ DUH
QRUPDOO\QRWQHHGHG
2YHUYROWDJHVGXHWRIHUURUHVRQDQFH
)HUURUHVRQDQFH PD\ RFFXU LQ FLUFXLWV ZLWK LQGXFWLYH HOHPHQWV KDYLQJ QRQOLQHDU PDJQHWL]LQJ
FKDUDFWHULVWLFV UHDFWRUVZLWKLURQFRUHRUWUDQVIRUPHUVLQQRORDGRUORZORDGFRQGLWLRQ DQGODUJH
FDSDFLWLYHHOHPHQWV OLQHVFDEOHVDQGFDSDFLWRUV 7KHIUHTXHQF\RIWKHVHRYHUYROWDJHVLVHTXDORUFORVHWRWKHIUHTXHQF\RIWKHSRZHUV\VWHPWKDWLV
DORZIUHTXHQF\
2YHUYROWDJHVGXHWRIHUURUHVRQDQFHPD\RFFXULQFHUWDLQIDXOWVLWXDWLRQVOLNH
• PDOIXQFWLRQ RI D FLUFXLWEUHDNHU LI LW IDLOV WR EUHDN RU FORVH LQ RQH RU WZR SKDVHV GXULQJ
VZLWFKLQJRSHUDWLRQ
• RQH RU WZR SKDVH FRQGXFWRUV DUH UXSWXUHG GXULQJ HDUWK IDXOW VKRUWFLUFXLW RU GXH WR
PHFKDQLFDOVWUHVVHV
• IXVHVDUHEORZQLQRQHRUWZRSKDVHV
7UDQVIRUPHU IDLOXUHV FDXVHG E\ RYHUYROWDJHV GXH WR IHUURUHVRQDQFH GR QRW VHHP WR RFFXU
IUHTXHQWO\EXWWKHULVNLVQRWQHJOLJLEOHZKHQWKHFDSDFLWLYHFXUUHQWRIWKHV\VWHPLVRIWKHVDPH
VL]HDVWKHPDJQHWL]LQJFXUUHQWRIWKHWUDQVIRUPHU3URYLGLQJDXWRPDWLFDQGTXLFNGLVFRQQHFWLRQRI
WKH WUDQVIRUPHU LQ FDVH WKH VXSSO\ VKRXOG IDLO LQ RQH RU WZR SKDVHV ZLOO OLPLW WKH GXUDWLRQ RI WKH
RYHUYROWDJHDQGV\VWHPLQVWDELOLW\DQGUHGXFHWKHH[WHQWDQGSUREDELOLW\RIPDWHULDOGDPDJH
7UDQVIRUPHU+DQGERRN3DJH
/,0,7$7,212)75$16,(1729(592/7$*(6
7KHDELOLW\RIDWUDQVIRUPHUWRZLWKVWDQGWUDQVLHQWRYHUYROWDJHVLVFKDUDFWHULVHGE\LWVEDVLFLPSXOVH
OHYHO %,/ ZKLFK FRUUHVSRQGV WR WKH SHDN YDOXH RI WKH VWDQGDUG WHVW YROWDJH LPSXOVH 7KLV LV DQ
DSHULRGLFYROWDJHLPSXOVHZLWKDIURQWWLPHRI—VDQGDWLPHIURPWKHEHJLQQLQJWRKDOIWKHSHDN
YDOXHRI—V7KH%,/RIDWUDQVIRUPHULVDOVRFDOOHGWKHLQVXODWLRQOHYHORIWKHWUDQVIRUPHU
7UDQVIRUPHUV FRQQHFWHG WR RYHUKHDG OLQHV VKRXOG EH SURWHFWHG DJDLQVW WUDQVLHQW RYHUYROWDJHV
FDXVHGE\OLJKWQLQJWRVHFXUHKLJKVHUYLFHUHOLDELOLW\/LPLWDWLRQRIWKHRYHUYROWDJHFDQEHDFKLHYHG
E\PHDQVRI
• QRQOLQHDUUHVLVWRUW\SHVXUJHDUUHVWHUVZLWKVHULHVJDSV
• PHWDOR[LGHVXUJHDUUHVWHUVZLWKRXWJDSV
• VSDUNJDSVWKDWLVDQRSHQDLUJDSEHWZHHQWZRWHUPLQDOV
7KHVHGHYLFHVDUHLQPRVWFDVHVFRQQHFWHGEHWZHHQHDFKSKDVHWHUPLQDORIWKHWUDQVIRUPHUDQG
HDUWK ,I WKH QHXWUDO SRLQW RI \ DQG ]FRQQHFWHG ZLQGLQJV LV LVRODWHG RU HDUWKHG WKURXJK D KLJK
LQGXFWDQFHRUUHVLVWDQFHDWKUHHSKDVHLPSXOVHZDYHZLOOEHUHIOHFWHGZLWKWKHVDPHSRODULW\DQG
DQ LQFUHDVHG SHDN YDOXH DW WKH QHXWUDO SRLQW )RU WKLV UHDVRQ WKH QHXWUDO SRLQW VKRXOG DOVR EH
SURYLGHGZLWKRYHUYROWDJHSURWHFWLRQ
7KH SURWHFWLRQ OHYHO RI VXUJH DUUHVWHUV LV QRUPDOO\ VHOHFWHG ORZHU WKDQ WKH LQVXODWLRQ OHYHO RI WKH
WUDQVIRUPHU LQ RUGHU WR SURYLGH D FHUWDLQ VDIHW\ PDUJLQ $ SURWHFWLRQ OHYHO DURXQG RI WKH
LQVXODWLRQ OHYHO RI WKH WUDQVIRUPHU LV IUHTXHQWO\ DLPHG DW IRU WKH VXUJH DUUHVWHUV DW WKH SKDVH
WHUPLQDOV +RZHYHU ZKHQ XVLQJ QRQOLQHDU UHVLVWRUW\SH VXUJH DUUHVWHUV ZLWK VHULHV JDSV LW PXVW
EH FKHFNHG WKDW WKH DUF LQ WKH VHULHV JDSV ZLOO H[WLQJXLVK ZLWK VXIILFLHQW VDIHW\ PDUJLQ ZKHQ WKH
WUDQVLHQWRYHUYROWDJHKDVSDVVHGDZD\EXWZLWKDVXVWDLQHGWHPSRUDU\RYHUYROWDJHFRUUHVSRQGLQJ
WRWKHDFWXDOHDUWKIDXOWIDFWRU
7KHSURWHFWLRQOHYHORIDVXUJHDUUHVWHULQWKHQHXWUDOSRLQWLVQRUPDOO\FKRVHQWREHDURXQGRI
WKHSURWHFWLRQOHYHORIWKHVXUJHDUUHVWHUVDWWKHSKDVHWHUPLQDOV
7RSURYLGHRSWLPXPSURWHFWLRQWKHGLVWDQFHEHWZHHQWKHVXUJHDUUHVWHUVDQGWKHWHUPLQDOVRIWKH
WUDQVIRUPHUWREHSURWHFWHGVKRXOGEHDVVKRUWDVSRVVLEOH7KHVDPHJRHVIRUWKHGLVWDQFHIURP
WKHHDUWKLQJWHUPLQDORIWKHDUUHVWHUVWRWKHHDUWK,QFDVHVZKHUHVKRUWFRQQHFWLRQVWRWKHVXUJH
DUUHVWHUVDUHGLIILFXOWWRDFKLHYHIRUSUDFWLFDOUHDVRQVVHOHFWLRQRIDKLJKHULQVXODWLRQOHYHOIRUWKH
WUDQVIRUPHUVKRXOGEHFRQVLGHUHG
:LQGLQJVIRUUDWHGYROWDJHVEHORZ9VKRXOGDOVREHSURWHFWHGLQWKHVDPHZD\ZKHQWKH\DUH
FRQQHFWHGWRRYHUKHDGOLQHV
,Q JHQHUDO PHWDOR[LGH VXUJH DUUHVWHUV ZLWKRXW JDSV RIIHUV WKH SRVVLELOLW\ WR VHOHFW D ORZHU
SURWHFWLRQ OHYHO WKDQ WKH QRQOLQHDU UHVLVWRUW\SH VXUJH DUUHVWHUV ZLWK VHULHV JDSV 7KXV DQ
LQFUHDVHGVDIHW\PDUJLQEHWZHHQWKHLQVXODWLRQOHYHORIWKHWUDQVIRUPHUDQGWKHSURWHFWLRQOHYHORI
WKHVXUJHDUUHVWHUFDQEHDFKLHYHG
,WPXVWEHNHSWLQPLQGWKDWPHWDOR[LGHVXUJHDUUHVWHUVDOVRZLOOEHFRQWLQXRXVO\H[SRVHGWRWKH
QRUPDOVHUYLFHYROWDJHDQGLQDGGLWLRQWRDOONLQGVRIVPDOOHUDQGODUJHUWHPSRUDU\DQGWUDQVLHQW
RYHUYROWDJHVFRQWUDU\WRWKHQRQOLQHDUUHVLVWRUW\SHVXUJHDUUHVWHUVZLWKVHULHVJDSV,QWKHODWWHU
W\SH WKH UHVLVWRU LV H[SRVHG RQO\ GXULQJ WUDQVLHQW RYHUYROWDJHV WKDW DUH KLJKHQRXJK WR LJQLWH WKH
VHULHVJDSV
6SDUNJDSVKDYHEHHQZLGHO\XVHGLQWKHSDVWHVSHFLDOO\DWPRGHUDWHUDWHGYROWDJHVEXWWKH\KDYH
VHYHUDOGLVDGYDQWDJHV
• XQSUHGLFWDEOHVSDUNRYHUYROWDJH
• ORQJDQGXQSUHGLFWDEOHWLPHGHOD\WREUHDNGRZQ
• VWURQJGHSHQGHQFHRQZDYHVKDSH
• GHSHQGHQFHRQYROWDJHSRODULW\
• GHSHQGHQFHRQDPELHQWFRQGLWLRQV
• ULVNRIFUHDWLQJDQHYROYLQJIDXOW
• LPSRVLQJDVKRUWFLUFXLWFRQGLWLRQRQWKHQHWZRUN
• FUHDWLQJFKRSSHGZDYHV
3DJH7UDQVIRUPHU+DQGERRN
'XH WR WKH VXSHULRU SURSHUWLHV RI PHWDOR[LGH DUUHVWHUV WKH\ DUH EHFRPLQJ LQFUHDVLQJO\ SUHIHUUHG
RYHU VSDUN JDSV LQ PRGHUQ V\VWHPV %XW LQ ORFDWLRQV ZLWK IUHTXHQW OLJKWQLQJ VWRUPV ZLWK KLJK
OLJKWQLQJFXUUHQWVVSDUNJDSVFDQEHXVHIXOLQFRPELQDWLRQZLWKPHWDOR[LGHDUUHVWHUV6SDUNJDSV
LQVWDOOHGDWRQHRUWZRSROHVRIWKHRYHUKHDGOLQHDZD\IURPWKHWUDQVIRUPHUZLOOOHDGWKHKLJKHVW
FXUUHQWVXUJHVWRHDUWKEHIRUHWKH\UHDFKWKHPHWDOR[LGHDUUHVWHUVDWWKHWUDQVIRUPHUWHUPLQDOV,Q
WKLV ZD\ WKH VSDUN JDSV ZLOO UHGXFH WKH DJHLQJ RI WKH DUUHVWHUV $ KLJK QXPEHU RI KLJK OLJKWQLQJ
FXUUHQWVXUJHVZLOOFRQWULEXWHWRDJHLQJRIWKHDUUHVWHUV
7UDQVIRUPHUVLQVWDOOHGLQORFDWLRQVZKHUHWKH\DUHQRWH[SRVHGWROLJKWQLQJRYHUYROWDJHVZLOOVWLOOEH
H[SRVHGWRWUDQVLHQWRYHUYROWDJHVFDXVHGE\VZLWFKLQJRSHUDWLRQV
7KH VHUYLFHH[SHULHQFH UHJDUGLQJ RLOLPPHUVHG WUDQVIRUPHUV LQVXFK ORFDWLRQV LQGLFDWHV WKDW WKH\
VHHPWRZLWKVWDQGVXFKRYHUYROWDJHVZLWKRXWEHLQJSURWHFWHGE\VXUJHDUUHVWHUV
63(&,$/35(&$87,216)25'5<7<3(75$16)250(56
,Q ORFDWLRQV ZKLFK DUH QRW H[SRVHG WR OLJKWQLQJ RYHUYROWDJHV D KLJKHU IDLOXUH UDWH RQ GU\W\SH
WUDQVIRUPHUVWKDQRQRLOLPPHUVHGWUDQVIRUPHUVKDVEHHQREVHUYHGRQGU\W\SHWUDQVIRUPHUVZKHQ
DGHTXDWHSURWHFWLRQDJDLQVWWUDQVLHQWRYHUYROWDJHVLVPLVVLQJ)DLOXUHVKDYHDOVRRFFXUUHGRQGU\
W\SHWUDQVIRUPHUVLQVSLWHRIEHLQJSURWHFWHGE\VXUJHDUUHVWHUV
7KHH[SODQDWLRQLVWKDWH[WUHPHO\VWHHSRYHUYROWDJHVRFFXUGXULQJSUHVWULNHVDQGUHLJQLWLRQVLQWKH
FLUFXLW EUHDNHU DIWHU WKHFXUUHQW KDV EHHQ FKRSSHGRXWVLGH LWV QDWXUDOSDVVDJH WKURXJK]HUR 7KH
LQWHUQDO RYHUYROWDJHV ZLWKLQ D ZLQGLQJ DUH QRW RQO\ GHSHQGLQJ RQ WKH SHDN YDOXH RI WKH YROWDJH
DULVLQJDWWKHWHUPLQDOVEXWDOVRRQWKHVWHHSQHVVRIWKHYROWDJHFKDQJHDWWKHWHUPLQDOV7KXVD
YROWDJHZLWKDSHDNYDOXHEHORZWKHSURWHFWLRQOHYHORIWKHDUUHVWHUPD\GDPDJHWKHWUDQVIRUPHULI
WKH FKDQJH LQ WHUPLQDO YROWDJH WDNHV SODFH LQ MXVW D IUDFWLRQ RI D PLFURVHFRQG 2LOLPPHUVHG
WUDQVIRUPHUV VHHP WR EH PRUH UREXVW DJDLQVW VXFK VWUHVVHV FRPSDUHG WR GU\W\SH WUDQVIRUPHUV
)RUWKHODWWHUW\SHWKHQHHGIRUDGHTXDWHSURWHFWLRQVKRXOGEHUHFRJQLVHG
$WWHQWLRQ VKRXOG EH SDLG WR WKH SK\VLFDO IDFW WKDW WKH WUDQVLHQW RYHUYROWDJHV WKDW DULVH ZKHQ
EUHDNLQJ LQGXFWLYH FXUUHQWV OLNH WKH PDJQHWL]LQJ FXUUHQW RI D WUDQVIRUPHU LV LQGHSHQGHQW RI WKH
V\VWHP YROWDJH 7KH\ LQFUHDVH ZLWK WKH PDJQHWLF HQHUJ\ VWRUHG LQ WKH WUDQVIRUPHU FRUH DW WKH
PRPHQWRIFXUUHQWFKRSSLQJ,QRWKHUZRUGVWKHVHWUDQVLHQWRYHUYROWDJHVLQFUHDVHZLWKWKHVL]HRI
WKHWUDQVIRUPHUDQGDUHPRVWVHYHUHIRUWUDQVIRUPHUVIRUORZV\VWHPYROWDJHVGXHWRWKHLUORZHU
LQVXODWLRQOHYHO%HFDXVHRIWKHVWDWLVWLFDOQDWXUHRIWKHVL]HRIWKHWUDQVLHQWYROWDJHVWUDQVIRUPHUV
WKDWDUHPRUHIUHTXHQWO\GLVFRQQHFWHGDQGHQHUJL]HGDUHLIQRWDGHTXDWHO\SURWHFWHGPRUHSURQH
WR IDLO WKDQ WUDQVIRUPHUV WKDW DUH FRQWLQXRXVO\ HQHUJL]HG IRU VHYHUDO \HDUV EHWZHHQ HDFK
GLVFRQQHFWLRQ
7R VXPPDULVH WKLV WKH QHHG WR SURWHFW IRU H[DPSOH D N9$ N9 WUDQVIRUPHU WKDW LV
IUHTXHQWO\ VZLWFKHG LQ DQG RXW LV KLJKHU WKDQ WR SURWHFW D N9$ N9 WUDQVIRUPHU WKDW LV
HQHUJL]HGFRQWLQXRXVO\IRUORQJSHULRGVZLWKRXWEHLQJGLVFRQQHFWHG
&DSDFLWRUV EHWZHHQ WUDQVIRUPHU WHUPLQDOV DQG HDUWK ZLOO UHGXFH WKH QXPEHU RI UHLJQLWLRQV LQ WKH
FLUFXLW EUHDNHU RU HYHQ LQ VRPH FDVHV HOLPLQDWH WKHP 7KH FDSDFLWRUV ZLOO DOVR UHGXFH WKH IURQW
VWHHSQHVVRIWKHLQFRPLQJZDYHGXULQJHQHUJL]LQJDQGUHGXFHWKHULVNRIWUDQVIRUPHUIDLOXUH
6ZLWFKLQJ RI FDSDFLWRU EDQNV IRU SKDVH FRPSHQVDWLRQ KDV VRPHWLPHV FDXVHG IDLOXUHV LQ GU\W\SH
WUDQVIRUPHUV 7KH XVH RI FLUFXLW EUHDNHU ZLWK RSHQLQJ DQG FORVLQJ UHVLVWRUV KDV FRQVLGHUDEO\
UHGXFHGVXFKIDLOXUHV
$QRWKHUSRVVLELOLW\LVXVLQJFLUFXLWEUHDNHUZLWKSRLQWRQZDYHFRQWUROZKLFKFORVHDQGRSHQDWWKH
PRVWIDYRXUDEOHWLPHWRPLQLPL]HWKHWUDQVLHQWV
,QWHUQDORYHUYROWDJHVFDXVHGE\KLJKIUHTXHQF\RVFLOODWLRQV
6ZLWFKLQJRSHUDWLRQVDUHDOZD\VIROORZHGE\KLJKIUHTXHQF\RVFLOODWLRQVLQWKHN+]DQG0+]UDQJH
ZLWKVORZRUUDSLGGDPSLQJ,IWKHGDPSLQJLVVORZDQGWKHGRPLQDWLQJIUHTXHQF\RIWKHRVFLOODWLRQV
FRLQFLGH ZLWK RQH RI WKH UHVRQDQFH IUHTXHQFLHV RI WKH WUDQVIRUPHU KLJK ORFDO WXUQWRWXUQYROWDJH
VWUHVVHVZLWKLQWKHZLQGLQJDULVHDQGPD\FDXVHDIDLOXUH
2SHQLQJDQGFORVLQJUHVLVWRUVRQWKHFLUFXLWEUHDNHUZLOOHIIHFWLYHO\GDPSVXFKRVFLOODWLRQV
$OWHUQDWLYHO\WKHGRPLQDWLQJIUHTXHQF\RIWKHRVFLOODWLRQVFRXOGEHFKDQJHG ORZHUHG E\LQVWDOOLQJ
DGGLWLRQDO FDSDFLWDQFH :KHQ FKRRVLQJ WKLV VROXWLRQ WKH UHVRQDQFH FKDUDFWHULVWLFV RI WKH
WUDQVIRUPHUVKRXOGEHNQRZQDQGDFDUHIXOVWXG\RIWKHSRZHUV\VWHPVKRXOGEHPDGH
7UDQVIRUPHU+DQGERRN3DJH
75$16)(55('29(592/7$*(6,175$16)250(56
)RUKLJKIUHTXHQFLHV N+] WKHYROWDJHUDWLRPLJKWEHTXLWHGLIIHUHQWIURPWKHWXUQUDWLRZLWKULVNRI
KLJK YROWDJH WUDQVIHUUHG IURP RQH VLGH WR DQRWKHU WKDW PD\ GDPDJH WKH RWKHU ZLQGLQJ LI WKH
WUDQVIHUUHGYROWDJHLVPDJQLILHGE\UHVRQDQFHHIIHFWV
7UDQVIHUUHGYROWDJHVLQWUDQVIRUPHUVFDQKDYHWKHIROORZLQJPRGHV
• HOHFWURPDJQHWLFWUDQVIHU
• HOHFWURVWDWLFRUFDSDFLWLYHWUDQVIHU
• RVFLOODWRU\WUDQVIHUWKURXJKQDWXUDORVFLOODWLRQVRIWKHSULPDU\DQGRUWKHVHFRQGDU\FLUFXLWVRI
WKH WUDQVIRUPHU 7KH HDUWK FDSDFLWDQFHV DQG WKH VHOILQGXFWDQFHV RI WKH ZLQGLQJV IRUP WKH
RVFLOODWLRQFLUFXLWV
7UDQVIHUUHGRYHUYROWDJHVFDQEHFULWLFDOLI
• WKHVHFRQGDU\ZLQGLQJLVQRWFRQQHFWHGWRWKHQHWZRUN
• WKH VHFRQGDU\ ZLQGLQJ KDV D ORZ UDWHG YROWDJH FRPSDUHG WR WKH UDWHG YROWDJH RI WKH KLJK
YROWDJHZLQGLQJ
• WKHZLQGLQJLVWKHWHUWLDU\RIDWKUHHZLQGLQJWUDQVIRUPHU
6XUJHDUUHVWHUVEHWZHHQSKDVHWHUPLQDOVDVZHOODVEHWZHHQSKDVHVPLJKWEHMXVWLILHG$QQH[(RI
,(&JRHVDOLWWOHPRUHLQGHWDLORQWKLVVXEMHFW
,QDQ\FDVHWKHPLQLPXPSUHFDXWLRQLVWKDWDVHFRQGDU\RUWHUWLDU\ZLQGLQJWKDWLVQRWFRQQHFWHGWR
WKHQHWZRUNVKRXOGEHHDUWKHGLQRQHSRLQWRQHFRUQHURIGHOWDZLQGLQJVDQGSUHIHUDEO\WKHQHXWUDO
RIVWDUZLQGLQJV
3DJH7UDQVIRUPHU+DQGERRN
0,6&(//$1(286
&(57,),&$7,21$33529$//$%(//,1*
7KH &( PDUN &RPPXQDXWp (XURSpHQQH (XURSHDQ &RQIRUPLW\ EDVHG RQ (XURSHDQ 'LUHFWLYHV
DVVLVWV WKH IUHH GLVWULEXWLRQ RI JRRGV RQ WKH (XURSHDQ PDUNHW ,W LV GLUHFWHG WR WKH QDWLRQDO
VWDQGDUGV VXSHUYLVLQJ ERGLHV :KHQ WKH PDQXIDFWXUHU DSSOLHV WKH &( PDUN WKLV VWDWHV WKDW WKH
OHJDO UHTXLUHPHQWV IRU WKH FRPPHUFLDO SURGXFW KDYH EHHQ PHW 7KH &( PDUN LV QRW D TXDOLW\
GHVLJQDWLRQDVDIHW\GHVLJQDWLRQRUDGHVLJQDWLRQRIFRQIRUPLW\WRDVWDQGDUG
7KHIROORZLQJWKUHH(XURSHDQ8QLRQ'LUHFWLYHVPD\EHDSSOLFDEOHWRWUDQVIRUPHULQVWDOODWLRQV
7KH0DFKLQH'LUHFWLYHFRYHUVPRVWW\SHVRIPDFKLQHVZLWKWKHH[FHSWLRQRIFHUWDLQVSHFLDOW\SHV
WKDW DUH VSHFLILFDOO\ H[FOXGHG 7KH SRZHU VXSSO\ FRPSDQLHV DQG WKH PDQXIDFWXUHUV LQ (XURSH
(85(/(&75,&81,3('( DQG &$3,(/ KDYH DOZD\V EHHQ RI WKH XQDQLPRXV RSLQLRQ WKDW KLJK
YROWDJHHTXLSPHQWLVQRWVXEMHFWWRWKH0DFKLQH'LUHFWLYH7KH(XURSHDQ&RPPLVVLRQQRZVKDUHV
WKLV YLHZ ,W VKRXOG DOVR EH QRWHG WKDW PRWRUV E\ GHILQLWLRQ DUH QRW FRYHUHG E\ WKH 0DFKLQH
'LUHFWLYH
7KH (0& 'LUHFWLYH LV LQWHQGHG IRU DSSOLFDWLRQ WR DOPRVW DOO HOHFWULFDO HTXLSPHQW +RZHYHU IL[HG
LQVWDOODWLRQV ZKLFK DUH DVVHPEOHG DW WKH VLWH RI RSHUDWLRQ KDYH WR PHHW WKH (0& SURWHFWLRQ
UHTXLUHPHQWVEXWWKH\GRQRWUHTXLUHDGHFODUDWLRQRIFRQIRUPLW\D&(PDUNQRUDQDSSURYDOE\DQ\
FRPSHWHQW DXWKRULW\ 7KLV DOVR DSSOLHV WR DOO SULPDU\ DQGVHFRQGDU\ GHYLFHVLQ WKHVH LQVWDOODWLRQV
DVFRPSRQHQWVZLWKQRGLUHFWIXQFWLRQ 7KH/RZ9ROWDJH'LUHFWLYH /9' LVDSSOLFDEOHWRLQGHSHQGHQWORZYROWDJHHTXLSPHQWZKLFKLVDOVR
XVHG LQ WUDQVIRUPHUV DQG LQVWDOODWLRQV VXFK DV FRQWURO FLUFXLWV SURWHFWLRQ UHOD\V PHDVXULQJ DQG
PHWHULQJ GHYLFHV WHUPLQDO VWULSV HWF 7KLV HTXLSPHQW PXVW FRQIRUP WR WKH /9' DQG KDYH D &(
PDUNZKHQSXUFKDVHGRQWKHRSHQPDUNHW
+RZHYHULIFRQWUROPHDVXULQJSURWHFWLRQDQGUHJXODWLQJHTXLSPHQWLVDIL[HGFRPSRQHQWRIKLJK
YROWDJHVXEVWDWLRQVDQGRUWUDQVIRUPHUVLWLVQRWFRYHUHGE\WKH/RZ9ROWDJH'LUHFWLYHEHFDXVHE\
GHILQLWLRQ DVSHU,(& WKH\DUHFRQVLGHUHGWREHKLJKYROWDJHSURGXFWV
,Q FRQFOXVLRQ LW LV QRWHG WKDW KLJKYROWDJH HTXLSPHQW DQG LQVWDOODWLRQV LQFOXGLQJ VHFRQGDU\
LQVWDOODWLRQV GR QRW UHTXLUH D &( PDUN +RZHYHU WKH\ DUH VXEMHFW WR WKH UHOHYDQW VWDQGDUGV DQG
UHJXODWLRQV
,Q1RUWK$PHULFDWUDQVIRUPHUVPD\EHGHOLYHUHGZLWK8QGHUZULWHUV/DERUDWRULHV,QF 8/ DQG&6$
UHFRJQLWLRQODEHOV
7UDQVIRUPHU+DQGERRN3DJH
'(&/$5$7,212)&21)250,7<
$'HFODUDWLRQRI&RQIRUPLW\ 'R& DFFRUGLQJWR(1*HQHUDOFULWHULDIRUVXSSOLHU¶VGHFODUDWLRQ
RIFRQIRUPLW\ZLOOEHLVVXHGLIWKHFXVWRPHUUHTXHVWVLW
,QVRPHFDVHVWKHGHVLJQDWLRQ&HUWLILFDWHRI&RQIRUPLW\RUVLPLODULVLQXVH
'R& ZLOO DW PLQLPXP LGHQWLI\ WKH VXSSOLHU WKH SURGXFW WKH FRQIRUPLW\ VWDWHPHQW WKH QRUPDWLYH
GRFXPHQWV ZLWKHGLWLRQGDWHRILVVXH WKHWUDQVIRUPHULVLQFRQIRUPLW\ZLWKDQGSRVVLEOHDGGLWLRQDO
LQIRUPDWLRQ7KH'R&VKDOOGHQRWHSODFHDQGGDWHRILVVXHDVZHOODVQDPHIXQFWLRQDQGVLJQDWXUH
RIWKHDXWKRUL]HGSHUVRQ V DFWLQJRQEHKDOIRIWKHVXSSOLHUVHHH[DPSOH
,3&/$66,),&$7,21
*HQHUDO
,3 FODVVLILFDWLRQ GHVFULEHV WR ZKDW H[WHQW HOHFWULFDO HTXLSPHQW LQ WKLV UHJDUG WKH WUDQVIRUPHU
WHUPLQDOV DV ZHOO DV DFFHVVRULHV DUH SURWHFWHG DJDLQVW WRXFKLQJ DQG H[WHUQDO LQIOXHQFH VXFK DV
GXVWSROOXWLRQPRLVWXUHHWF
5HIHUHQFH LV PDGH WR ,(& IRU D GHWDLOHG GHVFULSWLRQ RQ WKLV VXEMHFW &RS\ULJKW ‹ ,(&
*HQHYD6ZLW]HUODQGZZZLHFFK
([SODQDWLRQRIQXPHUDOV
,3
7KH ILUVW FKDUDFWHULVWLF QXPHUDO GHVFULEHV WKH SURWHFWLRQ DJDLQVW VROLG IRUHLJQ REMHFWV RI PPGLDPHWHUDQGJUHDWHU
7KHVHFRQGFKDUDFWHULVWLFQXPHUDO GHVFULEHVWKHSURWHFWLRQDJDLQVWVSUD\LQJZDWHU
3DJH7UDQVIRUPHU+DQGERRN
'HJUHHVRISURWHFWLRQDJDLQVWVROLGREMHFWV
'HVFULSWLRQ
'HILQLWLRQ
)LUVW&KDUDFWHULVWLF1XPHUDO
1RQSURWHFWHG
3URWHFWHGDJDLQVWVROLG
IRUHLJQREMHFWVRI
PPGLDPHWHUDQG
JUHDWHU
7KHREMHFWSUREHVSKHUHRI
PPGLDPHWHUVKDOOQRW
IXOO\SHQHWUDWH
3URWHFWHGDJDLQVWVROLG
IRUHLJQREMHFWVRI
PPGLDPHWHUDQG
JUHDWHU
7KHREMHFWSUREHVSKHUHRI
PPGLDPHWHUVKDOOQRW
IXOO\SHQHWUDWH
3URWHFWHGDJDLQVWVROLG
IRUHLJQREMHFWVRI
PPGLDPHWHUDQG
JUHDWHU
7KHREMHFWSUREHVSKHUHRI
PPGLDPHWHUVKDOOQRW
SHQHWUDWHDWDOO
3URWHFWHGDJDLQVWVROLG
IRUHLJQREMHFWVRI
PPGLDPHWHUDQG
JUHDWHU
7KHREMHFWSUREHVSKHUHRI
PPGLDPHWHUVKDOOQRW
SHQHWUDWH
'XVWSURWHFWHG
,QJUHVVRIGXVWLVQRWWRWDOO\
SUHYHQWHGEXWGXVWVKDOO
QRWSHQHWUDWHLQDTXDQWLW\
WRLQWHUIHUHZLWKVDWLVIDFWRU\
RSHUDWLRQRIWKHDSSDUDWXV
RUWRLPSDLUVDIHW\
'XVWWLJKW
1RLQJUHVVRIGXVW
'HJUHHVRISURWHFWLRQDJDLQVWZDWHU
'HVFULSWLRQ
1RSURWHFWLRQ
3URWHFWHGDJDLQVW
YHUWLFDOO\IDOOLQJZDWHU
GURSV
3URWHFWHGDJDLQVW
YHUWLFDOO\IDOOLQJZDWHU
GURSVZKHQHQFORVXUH
WLOWHGXSWRGHJUHHV
3URWHFWHGDJDLQVW
VSUD\LQJZDWHU
3URWHFWHGDJDLQVW
VSODVKLQJZDWHU
3URWHFWHGDJDLQVWZDWHU
MHWV
3URWHFWHGDJDLQVW
SRZHUIXOZDWHUMHWV
'HILQLWLRQ
9HUWLFDOO\IDOOLQJZDWHUGURSVVKDOOKDYH
QRKDUPIXOHIIHFWV
9HUWLFDOO\IDOOLQJZDWHUGURSVVKDOOKDYH
QRKDUPIXOHIIHFWVZKHQWKHHQFORVXUHLV
WLOWHGDWDQ\DQJOHXSWRGHJUHHVRQ
HLWKHUVLGHRIWKHYHUWLFDOD[LV
:DWHUVSUD\HGDWDQDQJOHXSWR
GHJUHHGRQHLWKHUVLGHRIWKHYHUWLFDO
D[LVVKDOOKDYHQRKDUPIXOHIIHFWV
:DWHUVSODVKHGDJDLQVWWKHHQFORVXUH
IURPDQ\GLUHFWLRQVKDOOKDYHQRKDUPIXO
HIIHFWV
:DWHUSURMHFWHGLQMHWVDJDLQVWWKH
HQFORVXUHIURPDQ\GLUHFWLRQVKDOOKDYH
QRKDUPIXOHIIHFWV
:DWHUSURMHFWHGLQSRZHUIXOZDWHUMHWV
DJDLQVWWKHHQFORVXUHIURPDQ\GLUHFWLRQ
VKDOOKDYHQRKDUPIXOHIIHFWV
6HFRQGFKDUDFWHULVWLF
QXPHUDO
7UDQVIRUPHU+DQGERRN3DJH
&RPSDULVRQWR1(0$UDWLQJV
,(&GRHVQRWVSHFLI\GHJUHHVRISURWHFWLRQDJDLQVWPHFKDQLFDOGDPDJHRIHTXLSPHQWULVNRI
H[SORVLRQV RU FRQGLWLRQV VXFK DV PRLVWXUH SURGXFHG IRU H[DPSOH E\ FRQGHQVDWLRQ FRUURVLYH
YDSRUVIXQJXVRUYHUPLQ7KH1(0$6WDQGDUGIRU(QFORVXUHVIRU(OHFWULFDO(TXLSPHQWGRHVWHVW
IRUHQYLURQPHQWDOFRQGLWLRQVVXFKDVFRUURVLRQUXVW\LFLQJRLODQGFRRODQWV)RUWKLVUHDVRQDQG
EHFDXVH WKH WHVW DQG HYDOXDWLRQV IRU RWKHU FKDUDFWHULVWLFV DUH QRW LGHQWLFDO WKH ,(& (QFORVXUH
&ODVVLILFDWLRQ 'HVLJQDWLRQV FDQQRW EH H[DFWO\ HTXDWHG ZLWK WKH HQFORVXUH 7\SH QXPEHUV LQ WKH
1(0$6WDQGDUG
7KHIROORZLQJWDEOHSURYLGHVDQHTXLYDOHQWFRQYHUVLRQIURPWKHHQFORVXUH7\SHQXPEHUVLQ1(0$
6WDQGDUG WR WKH ,(& (QFORVXUH &ODVVLILFDWLRQ 'HVLJQDWLRQV 7KH 1(0$ HQFORVXUH W\SH QXPEHUV
PHHWRUH[FHHGWKHWHVWUHTXLUHPHQWVIRUWKHDVVRFLDWHG,(&&ODVVLILFDWLRQIRUWKLVUHDVRQWKHWDEOH
FDQQRWEHXVHGWRFRQYHUWIURP,(&&ODVVLILFDWLRQVWR1(0$HQFORVXUH7\SHQXPEHUV
1(0$(QFORVXUH7\SH1XPEHU
5
6
DQG;
$1'3
$1'.
,(&(QFORVXUH&ODVVLILFDWLRQ'HVLJQDWLRQ
,3
,3
,3
,3
,3
,3
,3
,3
,3
,3
7(50,1$/'(6,*1$7,21,'(17,)<,1*7(50,1$/6
8QOHVV WKH FXVWRPHU VSHFLILHV WHUPLQDO PDUNLQJ RWKHUZLVH $%% VXJJHVWV WKDW WKH WHUPLQDOV VKDOO
EHPDUNHGDFFRUGLQJWR,(&75RU$16,,(((&TM
,(& VWDQGDUGV VSHFLILHV WKDW H[WHUQDO WHUPLQDOV VKDOO EH PDUNHG ZLWK UHIHUHQFH QXPEHUV ZKLFK
VKDOOSUHFHGHDUHIHUHQFHOHWWHU 89: 7KHKLJKYROWDJHWHUPLQDOVVKDOOEHPDUNHGZLWKWKH
UHIHUHQFH QXPEHU DQGWKH RWKHU WHUPLQDOVZLWK « LQ GHVFHQGLQJ VHTXHQFH RI WKHLU UDWHG
YROWDJH 7KH OHWWHU 1 VKDOO PDUN WKH QHXWUDO WHUPLQDOV RQ WUDQVIRUPHUV KDYLQJ VWDU RU ]LJ]DJ
FRQQHFWLRQ
$16,,((( VWDQGDUGV VSHFLILHV WKDW H[WHUQDO WHUPLQDOV VKDOO EH PDUNHG ZLWK FDSLWDO OHWWHU ZKLFK
VKDOO SUHFHGH D UHIHUHQFH VXEVFULSW QXPEHU +++ 7KH KLJKHVW YROWDJH WHUPLQDOV VKDOO EH
PDUNHGZLWKFDSLWDOOHWWHU+WKHRWKHUYROWDJHZLWK;<DQG=LQRUGHURIGHFUHDVLQJYROWDJH7KH
VXEVFULSW QXPEHU VKDOO PDUN WKH QHXWUDO WHUPLQDOV RQ WUDQVIRUPHUV KDYLQJ VWDU RU ]LJ]DJ
FRQQHFWLRQ
6LQJOHSKDVHWUDQVIRUPHU
$FFRUGLQJWR,(&75WKHWZRWHUPLQDOVDWWKHKLJKYROWDJHVLGHVKDOOEHPDUNHGDQG
DQGWKHWZRWHUPLQDOVDWWKHORZYROWDJHVLGHVKRXOGEHPDUNHGDQG
)LJXUH
$FFRUGLQJ WR $16,,((( &TM WKH WZR WHUPLQDOV DW WKH KLJKYROWDJH VLGH VKDOO EH
PDUNHG+1DQG+2DQGWKHWZRWHUPLQDOVDWWKHORZYROWDJHVLGHVKDOOEHPDUNHG;1DQG;2
3DJH7UDQVIRUPHU+DQGERRN
+
+
;
;
)LJXUH
:KHQ6LQJOH3KDVHWUDQVIRUPHUVDUHXVHGLQDWKUHHSKDVHV\VWHPWKH\DUHFRQQHFWHGLQ7KUHH
3KDVH%DQNV,QILJXUH)LJXUHLVDQH[DPSOHZLWKWKUHH6LQJOH3KDVHWUDQVIRUPHUVFRQQHFWHG
∆<XVHGLQ7KUHH3KDVH%DQNVZLWK°DQJXODUGLVSODFHPHQWV
$
%
&
+
+
+
+
+
+
;
;
;
;
;
;
$''7
3/57
$''7
3/57
D
E
$''7
3/57
F
)LJXUH
)RU PRUH LQIRUPDWLRQ DERXW KRZ WR XVH VLQJOHSKDVH WUDQVIRUPHUV LQ WKUHHSKDVH EDQNV VHH
$16,,(((&TM
7KUHHSKDVHWUDQVIRUPHU
$FFRUGLQJWR,(&75WKHWHUPLQDOVVKDOOEHORFDWHGDQGPDUNHGIURPOHIWWRULJKWLQIROORZLQJ
VHTXHQFHDWWKHKLJKYROWDJH:981DQGDWWKHORZYROWDJH:981ERWKVHHQ
IURPWKHORZYROWDJHVLGH 1DQG1DUHWKHQHXWUDOWHUPLQDOV )LJXUH
TM
$FFRUGLQJWR$16,,(((& WKHWHUPLQDOVVKDOOEHORFDWHGDQGPDUNHGIURPOHIWWR
ULJKWLQIROORZLQJVHTXHQFHDWWKHKLJKYROWDJH++++DQGDWWKHORZYROWDJH;;;;
VLGHERWKVHHQIURPWKHORZYROWDJHVLGH +DQG;DUHWKHQHXWUDOWHUPLQDOV 7UDQVIRUPHU+DQGERRN3DJH
)LJXUH
5$7,1*3/$7(
7UDQVIRUPHUVVKDOOEHSURYLGHGZLWKDUDWLQJSODWHRIZHDWKHUSURRIPDWHULDOLQYLVLEOHSRVLWLRQ$OO
HQWULHVRQWKHSODWHVKDOOEHLQGHOLEO\PDUNHG
3OHDVH VHH VWDQGDUG ,(& IRU FRPSOHWH GHVFULSWLRQ WR WKH UDWLQJ SODWH LQIRUPDWLRQ IRU WKH
GLIIHUHQWW\SHVRIWUDQVIRUPHUV &RS\ULJKW‹,(&*HQHYD6ZLW]HUODQGZZZLHFFK
%HORZLVWKHPLQLPXPLQIRUPDWLRQWREHJLYHQIRUHDFKWUDQVIRUPHU
• .LQGRIWUDQVIRUPHU
• 1XPEHURIWKHDSSOLHGVWDQGDUG
• 0DQXIDFWXUHU¶VQDPH
• 0DQXIDFWXUHU¶VVHULDOQXPEHU
• <HDURIPDQXIDFWXUH
• 1XPEHURISKDVHV
• 5DWHGSRZHU N9$RU09$ • 5DWHGIUHTXHQF\ +] • %DVLFLQVXODWLRQOHYHOV
• 5DWHGYROWDJHDQGWDSSLQJUDQJH 9RUN9 • 5DWHGFXUUHQWV $RUN$ • &RQQHFWLRQV\PERO
• 6KRUWFLUFXLWLPSHGDQFH • 7\SHRIFRROLQJ
• 7RWDOPDVV
• 0DVVRILQVXODWLQJRLO
• )RUGU\W\SHWUDQVIRUPHUV
o 7HPSHUDWXUHFODVV
o &OLPDWLFFODVV
o (QYLURQPHQWDOFODVV
o )LUHEHKDYLRXUFODVV
o 'HJUHHRISURWHFWLRQ ,3FODVV %HORZ LV DQ H[DPSOH RI WKH GHIDXOW $%% UDWLQJ SODWH IRU WUDQVIRUPHUV RI W\SH 6'7 DQG GU\W\SH
WUDQVIRUPHUV:KHQFXVWRPHUVSHFLILFDWLRQUHTXLUHVDGGLWLRQDOLQIRUPDWLRQWKLVZLOOEHDGGHGDVDQ
H[WUDSODWHRUDGLIIHUHQWUDWLQJSODWH
6RIDUQRVWDQGDUGLVHGSRZHUWUDQVIRUPHUUDWLQJSODWHVDUHGHILQHGE\$%%
3DJH7UDQVIRUPHU+DQGERRN
7UDQVIRUPHU+DQGERRN3DJH
(/(&7520$*1(7,&&203$7,%,/,7< (0& 'HILQLWLRQV
&RS\ULJKW‹,(&*HQHYD6ZLW]HUODQGZZZLHFFK
7KH,QWHUQDWLRQDO(OHFWURWHFKQLFDO9RFDEXODU\ ,(9 JLYHVWKHIROORZLQJGHILQLWLRQRI(0&
´7KHDELOLW\RIDQHTXLSPHQWRUV\VWHPWRIXQFWLRQVDWLVIDFWRULO\LQLWVHOHFWURPDJQHWLFHQYLURQPHQW
ZLWKRXWLQWURGXFLQJLQWROHUDEOHHOHFWURPDJQHWLFGLVWXUEDQFHVWRDQ\WKLQJLQWKDWHQYLURQPHQW´>,(9
@
2WKHUUHOHYDQWGHILQLWLRQVDUH
(OHFWURPDJQHWLFGLVWXUEDQFH
$Q\ HOHFWURPDJQHWLF SKHQRPHQRQ ZKLFK E\ EHLQJ SUHVHQW LQ WKH HOHFWURPDJQHWLF HQYLURQPHQW
FDQFDXVHHOHFWULFDOHTXLSPHQWWRGHSDUWIURPLWVLQWHQGHGSHUIRUPDQFH>,(9PRGLILHG@
(OHFWURPDJQHWLFLQWHUIHUHQFH (0, 'HJUDGDWLRQ RI WKH SHUIRUPDQFH RI HTXLSPHQW WUDQVPLVVLRQ FKDQQHO RU V\VWHP FDXVHG E\ DQ
HOHFWURPDJQHWLFGLVWXUEDQFH
127(7KHWHUPV³HOHFWURPDJQHWLFGLVWXUEDQFH´DQG³HOHFWURPDJQHWLFLQWHUIHUHQFH´GHQRWHUHVSHFWLYHO\
FDXVHDQGHIIHFWEXWWKH\DUHRIWHQXVHGLQGLVFULPLQDWHO\>,(9@
'LVWXUEDQFHOHYHO
7KH DPRXQW RU PDJQLWXGH RI DQ HOHFWURPDJQHWLF GLVWXUEDQFH PHDVXUHG DQG HYDOXDWHG LQ D
VSHFLILHGZD\>,(9PRGLILHG@
(OHFWURPDJQHWLFFRPSDWLELOLW\OHYHO
7KH VSHFLILHG HOHFWURPDJQHWLF GLVWXUEDQFH OHYHO XVHG DV D UHIHUHQFH OHYHO LQ D VSHFLILHG
HQYLURQPHQWIRUFRRUGLQDWLRQLQWKHVHWWLQJRIHPLVVLRQDQGLPPXQLW\OLPLWV
127( %\FRQYHQWLRQWKHFRPSDWLELOLW\OHYHOLVFKRVHQVRWKDWWKHUHLVRQO\DVPDOOSUREDELOLW\WKDWLWZLOOEH
H[FHHGHGE\WKHDFWXDOGLVWXUEDQFHOHYHO>,(9PRGLILHG@
,PPXQLW\OHYHO
7KH PD[LPXP OHYHO RI D JLYHQ HOHFWURPDJQHWLF GLVWXUEDQFH LQFLGHQW RQ D SDUWLFXODU GHYLFH
HTXLSPHQWRUV\VWHPIRUZKLFKLWUHPDLQVFDSDEOHRIRSHUDWLQJDWDUHTXLUHGGHJUHHRISHUIRUPDQFH
>,(9@
(OHFWURPDJQHWLFGLVWXUEDQFHVRQWUDQVIRUPHUV
7UDQVIRUPHUVPD\EHH[SRVHGWRYDULRXVW\SHVRIHOHFWURPDJQHWLFGLVWXUEDQFHVZKHQRSHUDWLQJLQ
SXEOLFDQGLQGXVWULDOSRZHUVXSSO\V\VWHPV
'LVWXUEDQFHSKHQRPHQDWRFRQVLGHUDUH
• KDUPRQLFV
• LQWHUKDUPRQLFV
• RYHUYROWDJHV
• YROWDJHXQEDODQFH
• RYHUFXUUHQWV
• SRZHUIUHTXHQF\YDULDWLRQ
+DUPRQLFV
+DUPRQLFV DUH VLQXVRLGDO YROWDJHV RU FXUUHQWV KDYLQJ IUHTXHQFLHV WKDW DUH ZKROH PXOWLSOHV RI WKH
SRZHUIUHTXHQF\DWZKLFKWKHVXSSO\V\VWHPLVGHVLJQHGWRRSHUDWH
(TXLSPHQWZLWKDQRQOLQHDUYROWDJHFXUUHQWFKDUDFWHULVWLFFDXVHFXUUHQWKDUPRQLFV
+DUPRQLFFXUUHQWVSURGXFHKDUPRQLFYROWDJHGURSVDFURVVWKHLPSHGDQFHRIWKHQHWZRUN
,(& 3RZHU WUDQVIRUPHUV 3DUW *HQHUDO DVVXPHV WKDW WKH ZDYH VKDSH RI WKH VXSSO\
YROWDJH LV DSSUR[LPDWHO\ VLQXVRLGDO 7KLV UHTXLUHPHQW LV QRUPDOO\ QRW FULWLFDO LQ SXEOLF VXSSO\
V\VWHPVEXWPD\KDYHWREHFRQVLGHUHGLQLQVWDOODWLRQVZLWKFRQVLGHUDEOHFRQYHUWRUORDGLQJ,IWKH
WRWDO KDUPRQLF FRQWHQW H[FHHGV RU WKH HYHQ KDUPRQLF FRQWHQW H[FHHGV WKLV VKRXOG EH
VSHFLILHGLQWKHHQTXLU\DQGLQWKHRUGHU
3DJH7UDQVIRUPHU+DQGERRN
&XUUHQW KDUPRQLFV LQIOXHQFH WKH ORDG ORVVHV DQG WKH WHPSHUDWXUH ULVH ZKLFK PD\ QHHG
FRQVLGHUDWLRQLQWKHWUDQVIRUPHUGHVLJQ
,Q V\VWHPV ZLWK FRQVLGHUDEOH FDSDFLWLYH HOHPHQWV OLNH ORQJ FDEOHV RU SRZHU IDFWRU FRUUHFWLRQ
FDSDFLWRUVWKHUHLVDULVNWKDWKDUPRQLFVFDXVHVKXQWDQGVHULHVUHVRQDQFHLQWKHQHWZRUNZKLFK
LQWXUQFDXVHVYROWDJHPDJQLILFDWLRQHYHQDWDSRLQWUHPRWHIURPWKHGLVWRUWLQJORDG
7KH PDJQHWL]LQJ FXUUHQW RI WUDQVIRUPHUV FRQWDLQV KDUPRQLFV GXH WR WKH QRQOLQHDU PDJQHWL]LQJ
FKDUDFWHULVWLF7KHPDJQHWL]LQJFXUUHQWLVLQQRUPDORSHUDWLRQVPDOOLQWKHRUGHURIRIWKHUDWHG
FXUUHQW RI WKH WUDQVIRUPHUV DQG WKH LQIOXHQFH RI LWV KDUPRQLFV LV QHJOLJLEOH +RZHYHU LI WKH
WUDQVIRUPHU FRUH LV VDWXUDWHG GXH WR DQ DSSOLHG YROWDJH KLJKHU WKDQ WKH UDWHG YROWDJH WKH
PDJQHWL]LQJFXUUHQWDQGLWVKDUPRQLFVZLOOGUDPDWLFDOO\LQFUHDVH
,QWHUKDUPRQLFV
,QWHUKDUPRQLF FXUUHQWV DQG YROWDJHV KDYH IUHTXHQFLHV ZKLFK DUH QRW DQ LQWHJHU PXOWLSOH RI WKH
IXQGDPHQWDOIUHTXHQF\7KH\FDQDSSHDUDVGLVFUHWHIUHTXHQFLHVRUDVDZLGHEDQGVSHFWUXP7KH
VRXUFHV RI LQWHUKDUPRQLFV FDQ EH GLIIHUHQW W\SHV RI FRQYHUWRUV LQGXFWLRQ PRWRUV DUF ZHOGLQJ
PDFKLQHVDQGDUFIXUQDFHV
,QWHUKDUPRQLFVPD\QHHGFRQVLGHUDWLRQLQWKHWUDQVIRUPHUGHVLJQ
2YHUYROWDJHV
4XDVLVWDWLRQDU\ RU VWHDG\ VWDWH RYHUYROWDJH FDXVLQJ DQ LQFUHDVH RI PRUH WKDQ LQ WKH IOX[
GHQVLW\LQWKHWUDQVIRUPHUFRUHLQUHODWLRQWRWKHFRUHIOX[DWUDWHGYROWDJHVKRXOGEHVSHFLILHGLQWKH
HQTXLU\DQGLQWKHRUGHU
7KHVDWXUDWLRQIOX[GHQVLW\RIPRGHUQFRUHVWHHOLV7HVOD)XUWKHULQFUHDVHLQWKHPDJQHWLFIOX[
PD\ FDXVH XQDFFHSWDEOH KHDWLQJ LQ VWUXFWXUDO GHWDLOV NHHSLQJ WKH FRUH WRJHWKHU DQG LQ WKH WDQN
$GUDPDWLFLQFUHDVHLQWKHPDJQHWL]LQJFXUUHQWDQGLWVKDUPRQLFVZLOODOVRWDNHSODFH
7KHWRSLFRIWHPSRUDU\DQGWUDQVLHQWRYHUYROWDJHVLVWUHDWHGLQFKDSWHU
9ROWDJHXQEDODQFH
,(&3RZHUWUDQVIRUPHUV3DUW*HQHUDODVVXPHVWKDWWKHWKUHHSKDVHVXSSO\YROWDJHLV
DSSUR[LPDWHO\V\PPHWULFDOLQQRUPDOVHUYLFHFRQGLWLRQV
7KH SUHGRPLQDQW FDXVH RI YROWDJH XQEDODQFH LV XQEDODQFHG ORDG 'XH WR WKH GLVWRUWHG YROWDJH
WULDQJOHWKHYROWDJHDFURVVRQHRUWZRSKDVHZLQGLQJVZLOOEHKLJKHUWKDQUDWHG&RQVHTXHQWO\WKH
IOX[GHQVLW\LQRQHRUWZROLPEVRIWKHFRUHZLOOLQFUHDVHFRUUHVSRQGLQJO\,IVDWXUDWLRQLQWKHVHOLPEV
LVUHDFKHGXQDFFHSWDEOHKHDWLQJLQVWUXFWXUDOGHWDLOVNHHSLQJWKHFRUHWRJHWKHUDQGLQWKHWDQNPD\
RFFXU,QFUHDVHLQWKHPDJQHWL]LQJFXUUHQWDQGLWVKDUPRQLFVLQWKHDIIHFWHGSKDVHVZLOOEHDQRWKHU
FRQVHTXHQFH7KHVRXQGOHYHORIWKHWUDQVIRUPHUPD\DOVRLQFUHDVH
,WLVQRWSRVVLEOHWRPDNHDJHQHUDOUXOHUHJDUGLQJSHUPLWWHGXQEDODQFHIRUWUDQVIRUPHUV(DFKFDVH
PXVWEHWUHDWHGLQGLYLGXDOO\,IWKHGHJUHHRIXQEDODQFHLVNQRZQEHIRUHRUGHULQJWKHWUDQVIRUPHULW
ZLOO EH SRVVLEOH WR WDNH LW LQWR DFFRXQW LQ WKH GHVLJQ %HIRUH FRQQHFWLQJ D GRPLQDQW VLQJOHSKDVH
ORDGWRDQDOUHDG\H[LVWLQJWUDQVIRUPHULWLVUHFRPPHQGHGWRDQDO\VHWKHVLWXDWLRQILUVW
2YHUFXUUHQWV
,(& ± 3RZHU WUDQVIRUPHUV ± 3DUW /RDGLQJ JXLGH IRU RLOLPPHUVHG WUDQVIRUPHUV LQ
SURFHVV DQG ,(& /RDGLQJ JXLGH IRU GU\W\SH WUDQVIRUPHUV SURYLGH DGYLFH UHJDUGLQJ
RYHUORDGLQJRIWUDQVIRUPHUVFRQWLQXRXVO\RULQWHUPLWWHQWO\
7UDQVIRUPHUV PD\ DOVR EH H[SRVHG WR RYHUFXUUHQWV GXH WR VKRUWFLUFXLWV LQ WKH QHWZRUN 6XFK
FXUUHQWV PD\ DPRXQW WR ± WLPHV WKH UDWHG FXUUHQW RI WKH WUDQVIRUPHU RU HYHQ PRUH /DUJH
SXOVDWLQJ PHFKDQLFDO IRUFHV ZLOO DFW RQ WKH ZLQGLQJV DQG WKHLU VXSSRUWV GXULQJ WKHVH FXUUHQWV ,Q
DGGLWLRQWKHKLJKFXUUHQWGHQVLW\LQWKHZLQGLQJVZLOOUDSLGO\LQFUHDVHWKHZLQGLQJWHPSHUDWXUH
7UDQVIRUPHUV DUH GHVLJQHG WR ZLWKVWDQG FHUWDLQ VKRUWFLUFXLW FXUUHQWV EXW WKH GXUDWLRQ RI WKH
FXUUHQWVPXVWEHOLPLWHGWRPD[LPXPVHFRQGVE\PHDQVRIUHOD\VWKDWGLVFRQQHFWWKHWUDQVIRUPHU
IURPWKHHQHUJ\VRXUFHVXQOHVVDORQJHUGXUDWLRQLVDJUHHGLQWKHFRQWUDFW
6HUYLFH H[SHULHQFH LQGLFDWHV WKDW WUDQVIRUPHUV IURP H[SHULHQFHG PDQXIDFWXUHUV VHOGRP IDLOV
EHFDXVHRIVKRUWFLUFXLWFXUUHQWV
7UDQVIRUPHU+DQGERRN3DJH
3RZHUIUHTXHQF\YDULDWLRQ
,QSXEOLFVXSSO\V\VWHPVWKHWHPSRUDU\IUHTXHQF\GHYLDWLRQIURPWKHQRPLQDOIUHTXHQF\LVQRUPDOO\
QRWPRUHWKDQ“+]7KHVWHDG\VWDWHGHYLDWLRQRIIUHTXHQF\IURPWKHQRPLQDOIUHTXHQF\LVPXFK
OHVV
$IUHTXHQF\RI+]LQVWHDGRI+]ZLOOLQFUHDVHWKHIOX[GHQVLW\LQWKHWUDQVIRUPHUFRUHE\
DWWKHVDPHDSSOLHGYROWDJH
,QVXSSO\V\VWHPVLVRODWHGIURPSXEOLFQHWZRUN IRUH[DPSOHDQLVODQGV\VWHP IUHTXHQF\YDULDWLRQV
XSWR“DUHH[SHFWHG,QVXFKFDVHVWKHIOX[GHQVLW\LQWKHWUDQVIRUPHUFRUHPD\LQFUHDVHXSWR
DQGWKLVVKRXOGEHWDNHQLQWRDFFRXQWZKHQGHVLJQLQJWKHWUDQVIRUPHU
7KH PD[LPXP GLVWXUEDQFH OHYHO LQ D QHWZRUN PD\ EH GHULYHG IURP WKHRUHWLFDO VWXGLHV RU
PHDVXUHPHQWV7KHGLVWXUEDQFHOHYHOLVQRWDVLQJOHYDOXHEXWYDULHVVWDWLVWLFDOO\ZLWKORFDWLRQDQG
WLPH %HFDXVH RI WKLV YDULDELOLW\ LW LV RIWHQ YHU\ GLIILFXOW RU HYHQ LPSRVVLEOH WR GHWHUPLQH WKH UHDO
KLJKHVW OHYHO RI GLVWXUEDQFH ZKLFK PD\ DSSHDU YHU\ LQIUHTXHQWO\ ,W PD\ LQ JHQHUDO QRW EH
HFRQRPLFDO WR GHILQH WKH FRPSDWLELOLW\ OHYHO LQ WHUPV RI WKLV KLJKHVW YDOXH WR ZKLFK PRVW GHYLFHV
ZRXOGQRWEHH[SRVHGWRPRVWRIWKHWLPH
,WVHHPVPRUHDSSURSULDWHWRGHILQHWKHFRPSDWLELOLW\OHYHODVDYDOXHWKDWRQO\ZLOOEHH[FHHGHGE\
WKHGLVWXUEDQFHOHYHOLQYHU\IHZFDVHVIRUH[DPSOHRU
7KHFRPSDWLELOLW\RIWUDQVIRUPHUVUHJDUGLQJRYHUYROWDJHVDQGRYHUFXUUHQWVLVYHULILHGE\PHDQVRI
YDULRXV WHVWV GHVFULEHG LQ WKH ,(& WUDQVIRUPHU VWDQGDUGV DQG :KHQ
SHUIRUPLQJWKHUPDOWHVWLQJRQFRQYHUWRUWUDQVIRUPHUVWKHHIIHFWRIKDUPRQLFFXUUHQWVLVWDNHQLQWR
DFFRUGLQJWR,(&
(OHFWURPDJQHWLFILHOGLQWKHYLFLQLW\RIWUDQVIRUPHUV
'LVWULEXWLRQ WUDQVIRUPHUV ZLWK YROWDJH UDWLR IURP PHGLXP WR ORZ YROWDJH IRU VXSSO\ WR FRPPHUFLDO
DQGLQGXVWULDOFRQVXPHUVDUHRIWHQLQWHJUDWHGLQWRWKHVHFRQVXPHUV¶EXLOGLQJV7KHHOHFWURPDJQHWLF
ILHOGIURPVXFKWUDQVIRUPHUVPD\GLVWXUEWKHSHUIRUPDQFHRIHOHFWURQLFHTXLSPHQWVLWXDWHGQHDUE\
2ULQRWKHUZRUGVWKHPDJQHWLFILHOGPD\H[FHHGWKHLPPXQLW\OHYHORIWKHHOHFWURQLFHTXLSPHQW
,(& ³(OHFWURPDJQHWLF FRPSDWLELOLW\ (0& ± 3DUW (QYLURQPHQW ± 6HFWLRQ /RZ
IUHTXHQF\PDJQHWLFILHOGVLQYDULRXVHQYLURQPHQWV´UHIHUVUHVXOWVIURPPHDVXUHPHQWVWDNHQDWDQ
LQVWDOODWLRQ RI D N9$ GLVWULEXWLRQ WUDQVIRUPHU 7KH PHDVXUHPHQWV ZHUH WDNHQ ZLWK ILHOG FRLOV
DQG DUH FRQVLGHUDEO\ LQIOXHQFHG E\ WKH SUHVHQFH RI KDUPRQLFV )RU WKLV UHDVRQ WZR YDOXHV DUH
VWDWHGIRUHDFKIIRQHDW+]DQGRQHDWN+]WRN+]7\SLFDOPHDVXUHGPD[LPXPYDOXHVDW
YDULRXVORFDWLRQVDUHJLYHQLQWKHIROORZLQJWDEOH
/RFDWLRQ
$GMDFHQWWRWUDQVIRUPHUFRQQHFWLRQV
$ERYHWUDQVIRUPHU
$GMDFHQWWRORZYROWDJHFDEOHV
$GMDFHQWWREXWRXWVLGHWKHURRI
0DJQHWLFILHOG
>$P@
+]
N+]±N+]
0DJQHWLFIOX[GHQVLW\
LQDLU>—7@
+]
N+]±N+]
&RS\ULJKW‹,(&*HQHYD6ZLW]HUODQGZZZLHFFK
7KH PDJQHWLF ILHOG ZDV GHWHFWDEOH XS WR DSSUR[LPDWHO\ P IURP WKH SK\VLFDO HQFORVXUH RI WKH
VXEVWDWLRQ
3UDFWLFDO H[SHULHQFH IURP PHDVXUHPHQWV RI HOHFWURPDJQHWLF ILHOG DURXQG D WUDQVIRUPHU LQGLFDWHV
WKDWWKHPHDVXUHGYDOXHVDUHFRQVLGHUDEO\GHSHQGDQWRQKRZWKHPHDVXUHPHQWVDUHPDGH7KHUH
LV VR IDU QR LQWHUQDWLRQDO VWDQGDUG GHVFULELQJ KRZ PHDVXUHPHQWV RI WKH HOHFWURPDJQHWLF ILHOG
DURXQG WUDQVIRUPHUV VKDOO EH SHUIRUPHG WR DFKLHYH FRQVLVWHQW UHVXOWV 6WLOO WKH DERYH H[DPSOH
LQGLFDWHVWKHPDJQLWXGHRIWKHILHOGWKDWFDQEHH[SHFWHG
&(1(/(& UHSRUW 5 ³*XLGH IRU WKH HYDOXDWLRQ RI HOHFWURPDJQHWLF ILHOGV DURXQG SRZHU
WUDQVIRUPHUV´ LQGLFDWHV IRUPXODV IRU FDOFXODWLRQ RI ILHOG YDOXHV IRU VRPH VLPSOH JHRPHWULF
FRQILJXUDWLRQV
,QFDVHVZKHUHWKHILHOGH[FHHGVWKHLPPXQLW\OHYHOVRIYDULRXVNLQGVRIHOHFWURQLFHTXLSPHQWLQWKH
YLFLQLW\RIWKHWUDQVIRUPHUDSSURSULDWHVKLHOGLQJRIWKHHTXLSPHQWRUPRYLQJWKHHTXLSPHQWIXUWKHU
DZD\IURPWKHWUDQVIRUPHUFDQVROYHWKHSUREOHP$%%KDVGHYHORSHGVROXWLRQVIRUVKLHOGLQJFDEOH
ER[HVZKLFKUHGXFHWKHHOHFWURPDJQHWLFILHOGUHODWHGWRWKH/9FDEOHVDQGFRQQHFWLRQV
3DJH7UDQVIRUPHU+DQGERRN
&RQWDPLQDQWVRQEXVKLQJVRIRLOLPPHUVHGWUDQVIRUPHUVDQGRQZLQGLQJVRIGU\W\SHWUDQVIRUPHUV
PD\HVSHFLDOO\LQWKHSUHVHQFHRIPRLVWXUHFDXVHHOHFWULFDOGLVFKDUJHVZKLFKLQWXUQPD\FDXVH
GLVWXUEDQFH RQ HOHFWURQLF HTXLSPHQW $SSURSULDWH URXWLQHV IRU FOHDQLQJ DUH UHFRPPHQGHG LQ
VHFWLRQ
(IIHFWRIHOHFWURPDJQHWLFILHOGVRQKXPDQV
:LWKUHJDUGWRKHDOWKKD]DUGVDPDJQHWLFIOX[GHQVLW\RIȝ7DW+]VHHPVWREHFRQVLGHUHG
DVDFFHSWDEOHZLWKKLJKVDIHW\IDFWRU )RUVKRUWWLPHH[SRVXUHWKHDFFHSWDEOHOLPLWFDQ
EHGRXEOHG
5HVHDUFKRQWKHHIIHFWRIHOHFWULFDQGPDJQHWLFILHOGVRQKHDOWKLVVWLOOQRWFRPSOHWH
$WWHQWLRQVKRXOGEHSDLGWRWKHSRVVLEOHLQIOXHQFHRIVXFKILHOGVRQKHDUWSDFHPDNHUV
81,76$1'&219(56,217$%/(6
%DVLF6OXQLWV
8QLW
6\PERO
P
NJ
V
$
.
FG
PROH
4XDQWLW\
/HQJWK
0DVV
7LPH
(OHFWULFFXUUHQW
7KHUPRG\QDPLFWHPSHUDWXUH
/XPLQRXVLQWHQVLW\
4XDQWLW\RIVXEVWDQFH
8QLW
1DPH
PHWUH
NLORJUDPPH
VHFRQG
DPSHUH
NHOYLQ
FDQGHOD
PROH
0XOWLSOHVDQGVXEPXOWLSOHVRIXQLWV
)DFWRU
3UHIL[
WHUD
JLJD
PHJD
NLOR
KHFWR
GHND
GHFL
6\PERO
7
*
0
N
K
GD
G
)DFWRU
3UHIL[
FHQWL
PLOOL
PLFUR
QDQR
SLFR
IHPWR
DWWR
6\PERO
F
P
—
Q
S
I
D
(OHFWULFDODQGPDJQHWLFTXDQWLWLHV
6,XQLW
1DPH
6\PERO
2WKHUXQLWV
V\PERO
5HODWLRQVKLS
(OHFWULF
FXUUHQW
PDJQHWLF
SRWHQWLDO
GLIIHUHQFH
DPSHUH
$
(OHFWULF
YROWDJH
HOHFWULF
SRWHQWLDO
GLIIHUHQFH
YROW
9
9 :$
VLHPHQV
6
6 $9
RKP
Ÿ
Ÿ 6
4XDQWLW\
(OHFWULF
FRQGXFWDQFH
(OHFWULF
UHVLVWDQFH
7UDQVIRUPHU+DQGERRN3DJH
6,XQLW
1DPH
6\PERO
2WKHUXQLWV
V\PERO
4XDQWLW\RI
HOHFWULFLW\
HOHFWULF
FKDUJH
FRXORPE
&
DPSHUHKRXU
$K
(OHFWULF
FDSDFLWDQFH
IDUDG
)
) &9
(OHFWULFIOX[
GHQVLW\
FRXORPESHU
VTXDUH
PHWUH
&P
(OHFWULFILHOG
VWUHQJWK
YROWSHU
PHWUH
9P
ZHEHU
YROWVHFRQG
:E9V
:E 9V
0DJQHWLF
IOX[GHQVLW\
LQGXFWLRQ WHVOD
7
7 :EP
,QGXFWDQFH
SHUPHDQFH KHQU\
+
+ ŸV
:E$
0DJQHWLF
ILHOGVWUHQJWK
DPSHUHSHU
PHWUH
$P
4XDQWLW\
0DJQHWLF
IOX[
5HODWLRQVKLS
& $V
$K $V
*HQHUDOHOHFWURWHFKQLFDOV\PEROV
0DWKHPDWLFDOV\PEROVIRUHOHFWULFDOTXDQWLWLHV JHQHUDO 6\PERO
(
HOHFWULFILHOGVWUHQJWK
9P
'
HOHFWULFIOX[GHQVLW\HOHFWULFGLVSODFHPHQW
&Pð
8
HOHFWULFSRWHQWLDOGLIIHUHQFH
9
)P
İ
SHUPLWWLYLW\IRUYDFXXP
İ Â)P
)P
İU
UHODWLYHSHUPLWWLYLW\
&
HOHFWULFFDSDFLWDQFH
)
Ȗı
9
DEVROXWHSHUPLWWLYLW\FRQVWDQW
,
HOHFWULFSRWHQWLDO
&
İ
-6
6,XQLW
TXDQWLW\RIHOHFWULFLW\HOHFWULFFKDUJH
9ij
4XDQWLW\
4
HOHFWULFFXUUHQW
$
HOHFWULFFXUUHQWGHQVLW\
$Pð
VSHFLILFHOHFWULFFRQGXFWLYLW\
6P
ȡ
VSHFLILFHOHFWULFUHVLVWDQFHUHVLVWLYLW\
ŸP
*
HOHFWULFFRQGXFWDQFH
6
5
HOHFWULFUHVLVWDQFH
Ÿ
(
HOHFWURPRWLYHIRUFH
9
3DJH7UDQVIRUPHU+DQGERRN
0DWKHPDWLFDOV\PEROVIRUPDJQHWLFTXDQWLWLHV JHQHUDO 6\PERO
4XDQWLW\
6,XQLW
ĭ
PDJQHWLFIOX[
%
PDJQHWLFLQGXFWLRQ
:E
+
PDJQHWLFILHOGVWUHQJWKPDJQHWL]LQJILHOGVWUHQJWK
7
))P
PDJQHWRPRWLYHIRUFH
88P
PDJQHWLFSRWHQWLDOGLIIHUHQFH
$P
$
$
—
DEVROXWHSHUPHDELOLW\
+P
—
DEVROXWHSHUPHDELOLW\IRUYDFXXP
— ʌÂÂ+P
+P
—U
UHODWLYHSHUPHDELOLW\
/
VHOILQGXFWDQFH
+
PXWXDOLQGXFWDQFH
+
0/PQ
0DWKHPDWLFDOV\PEROVIRUDOWHUQDWLQJFXUUHQW
6\PERO
6
3
4
ij
Ȝ
į
G
=
5
;
4XDQWLW\
DSSDUHQWSRZHU
DFWLYHSRZHU
UHDFWLYHSRZHU
SKDVHGLIIHUHQFH
SRZHUIDFWRU 36 Ȝ)RUWKHVSHFLDOFDVHRIVLQXVRLGDO
YROWDJHDQGFXUUHQWȜ FRVij
ORVVDQJOH
GLVVLSDWLRQIDFWRUG 3 6 − 3 )RUWKHVSHFLDOFDVHRI
VLQXVRLGDOYROWDJHDQGFXUUHQWG WDQį
LPSHGDQFH
UHVLVWDQFH
UHDFWDQFH
6OXQLW
:9$
:
9$ U UDG
UDG
Ÿ
Ÿ
Ÿ
/,672)$%%5(9,$7,216$1'$&521<06
$%%
$VHD%URZQ%RYHULZZZDEEFRP
$16,
$PHULFDQ1DWLRQDO6WDQGDUGV,QVWLWXWH
$76
$XWRWUDQVIRUPHUVWDWLRQ
&E99
&RPELQHGYROWDJHYDULDWLRQ
&(
&)99
''3
'HOLYHUHGGXW\SDLG«
&(1
&(1(/(&
&RPPXQDXWp(XURSpHQQH (XURSHDQ&RQIRUPLW\ ZZZFHPDUNLQJRUJ
&RPLWH(XURSHHQGH1RUPDOLVDWLRQ
(XURSHDQFRPPLWWHHIRUVWDQGDUGL]DWLRQ &RPLWH(XURSHHQGH1RUPDOLVDWLRQ(OHFWURWHFKQLTXH
(XURSHDQ&RPPLWWHHIRU(OHFWURWHFKQLFDO6WDQGDUGL]DWLRQ &RQVWDQWIOX[YROWDJHYDULDWLRQ
''8
'HOLYHUHGGXW\XQSDLG«
',1
'HXWVFKHV,QVWLWXWIU1RUPXQJH9 *HUPDQ,QVWLWXWHIRUVWDQGDUGLVDWLRQ 'R&
'HFODUDWLRQRI&RQIRUPLW\
(+9
([WUDKLJKYROWDJHDERYHN9DQGXSWRDQGLQFOXGLQJN9
(0&
(OHFWURPDJQHWLFFRPSDWLELOLW\
(;:
([ZRUNV«
)$7
)DFWRU\DFFHSWDQFHWHVW
7UDQVIRUPHU+DQGERRN3DJH
*,6
*DVLQVXODWHGVZLWFKJHDU
+9
+LJKYROWDJH
,&&
,QWHUQDWLRQDO&KDPEHURI&RPPHUFH
,(&
,QWHUQDWLRQDO(OHFWURWHFKQLFDO&RPPLVVLRQZZZLHFFK
,(((
7KH,QVWLWXWHRI(OHFWULFDODQG(OHFWURQLFV(QJLQHHUV,QF
,(9
,QWHUQDWLRQDO(OHFWURWHFKQLFDO9RFDEXODU\
,1&27(506
6WDQGDUGGHILQLWLRQVRIWUDGHWHUPV
,3
,QWHUQDWLRQDO3URWHFWLRQ ,(& ,62
,QWHUQDWLRQDO2UJDQL]DWLRQIRU6WDQGDUGL]DWLRQ
/%25
/RDG%UHDN,PPHUVHG6ZLWFK±$%%SURGXFW
/&$
/LIHF\FOH$VHVVPHQW
/'7
/DUJHGLVWULEXWLRQWUDQVIRUPHUV
/,
/LJKWHQLQJLPSXOVHIXOOZDYH
/,&
/LJKWQLQJLPSXOVHFKRSSHGRQWDLO
/9
/RZYROWDJH
0'7
073
1$
1(0$
21$)
0HGLXPGLVWULEXWLRQWUDQVIRUPHUV
0LQL7KUHH3KDVH3DGPRXQWHGWUDQVIRUPHU
1RWDSSOLFDEOH
1DWLRQDO(OHFWULFDO0DQXIDFWXUHUV$VVRFLDWLRQZZZQHPDRUJ
&RROLQJ2LOQDWXUDO$LUIRUFHG
21$1
&RROLQJ2LOQDWXUDO$LUQDWXUDO
25*$/,0(
*HQHUDOFRQGLWLRQV/LPLWDWLRQRIUHVSRQVLELOLWLHV
3&%
3RO\FKORULQDWHGELSKHQ\O
3'
3DUWLDOGLVFKDUJH
SSP
3DUWV3HU0LOOLRQ
37'7
3RZHU7HFKQRORJ\'LVWULEXWLRQ7UDQVIRUPHUV
UPV
5RRWPHDQVTXDUH
6'7
6PDOOGLVWULEXWLRQWUDQVIRUPHUV
6,
6\VWpPH,QWHUQDWLRQDOHG8QLWHV ,QWHUQDWLRQDO6\VWHPRI8QLWV 7*9
)UHQFKKLJKVSHHGWUDLQ
729
7HPSRUDU\RYHUYROWDJH
8&7
8QGHUJURXQGFRPPHUFLDOWUDQVIRUPHU
8+9
8OWUDKLJKYROWDJHDERYHN9
8P
+LJKHVWYROWDJHIRUHTXLSPHQW
9'(
9HUEDQGGHU(OHNWURWHFKQLN(OHNWURQLN,QIRUPDWLRQVWHFKQLNH9
$VVRFLDWLRQIRU(OHFWULFDO(OHFWURQLF ,QIRUPDWLRQ7HFKQRORJLHV 9)99
9DULDEOHIOX[YROWDJHYDULDWLRQ
93(
9DFXXP3UHVVXUH(QFDSVXODWHG
93,
9DFXXP3UHVVXUH,PSUHJQDWHG
96'
9DULDEOHVSHHGGULYHV
3DJH7UDQVIRUPHU+DQGERRN
&2175,%87256
7KHIROORZLQJKDYHFRQWULEXWHGWRWKHSUHSDUDWLRQRIWKLV7UDQVIRUPHU+DQGERRN
1DPH
6HFWLRQ
.DUOVHQ5RDU
URDUNDUOVHQ#QRDEEFRP
/¡YOLHQ6YHLQ2OD
VYHLQORYOLHQ#QRDEEFRP
3DUPD'LHJR
GLHJRSDUPD#FKDEEFRP
6WDQJ*HLU
6WU\NHQ(JLO
JHLUVWDQJ#QRDEEFRP
HJLOVWU\NHQ#QRDEEFRP
6XQG-RKQ%MDUQH
MRKQEMD#RQOLQHQR
7¡GHQHV$UQW6LJPDU
DUQWVLJPDUWRGHQHV#QRDEEFRP
:KLWHIRRW.HYLQ
3URRILQJDQGXVHRIODQJXDJH
NHYLQZKLWHIRRW#QRDEEFRP
:LOKHOPVHQ5HLXOI
UHZLOKH#RQOLQHQR
)(('%$&.
$Q\IHHGEDFNUHJDUGLQJHGLWRULDOFKDQJHVDGGLWLRQDOVXEMHFWSURSRVDOVHWFFDQEHVHQWE\(PDLO
WRHJLOVWU\NHQ#QRDEEFRP
$Q\TXHVWLRQVUHJDUGLQJWKHYDULRXVVXEMHFWVFDQEHVHQWE\(PDLOWRWKHDXWKRUZLWKDFRS\WR
HJLOVWU\NHQ#QRDEEFRP
2%7$,1,1*&23,(62)7+(+$1'%22.
3OHDVHFRQWDFW\RXUQHDUHVW$%%FRQWDFWIRUREWDLQLQJDFRS\RIWKHKDQGERRN
6HHDOVRZZZDEEFRPWUDQVIRUPHUV
2WKHUZLVHFRQWDFWWKH$%%7UDQVIRUPHUV&RPPXQLFDWLRQ0DQDJHUVRQLDSRWVDGD#GHDEEFRP
7UDQVIRUPHU+DQGERRN3DJH
%,%/,2*5$3+<
75$16)250(55(/(9$1767$1'$5'6
$QXPEHURIWUDQVIRUPHUUHOHYDQWVWDQGDUGVDUHOLVWHGLQWKLVVHFWLRQ7KHVHVWDQGDUGVDUHLVVXHG
E\WKHWKUHHGLIIHUHQWLQVWLWXWLRQV,(&&(1(/(&DQG$16,,(((
,(&VWDQGDUGV
,(&VWDQGVIRU,QWHUQDWLRQDO(OHFWURWHFKQLFDO&RPPLVVLRQZKLFKZDVRIILFLDOO\IRXQGHGLQLQ
/RQGRQ (QJODQG EDVHG RQ D SURSRVDO ODXQFKHG DW D PHHWLQJ LQ WKH ,QWHUQDWLRQDO (OHFWULFDO
&RQJUHVVLQLQ6W/RXLV86$
7KH WHFKQLFDO ZRUN LQ ,(& LV RUJDQLVHG LQ WHFKQLFDO FRPPLWWHHV 7&V FRQVLVWLQJ RI H[SHUWV IURP
WKH PHPEHU FRXQWULHV LQ WKH GLIIHUHQW VXEMHFWV %\ WKH ,(& KDG IRUPHG IRXU WHFKQLFDO
FRPPLWWHHVWRGHDOZLWKQRPHQFODWXUHV\PEROVUDWLQJRIHOHFWULFDOPDFKLQHU\DQGSULPHPRYHUV
7KH )LUVW :RUOG :DU LQWHUUXSWHG ,(& ZRUN ZKLFK UHVXPHG LQ DQG E\ WKH QXPEHU RI
WHFKQLFDOFRPPLWWHHVKDGLQFUHDVHGWR
,Q WKH ,(& SURGXFHG WKH ILUVW HGLWLRQ RI WKH ,QWHUQDWLRQDO (OHFWURWHFKQLFDO 9RFDEXODU\ ,(9 7KHXQLILFDWLRQRIHOHFWURWHFKQLFDOWHUPLQRORJ\ZDVRQHRIWKHSULQFLSDOWDVNVDOORFDWHGWRWKH,(&
E\WKH6W/RXLVFRQJUHVV,QWKHHDUO\GD\VWKH1RPHQFODWXUH&RPPLWWHHZDVHQJDJHGLQSLRQHHU
ZRUNDVQRFRPSDUDEOHLQWHUQDWLRQDOWHFKQLFDOYRFDEXODU\KDG\HWEHHQSXEOLVKHGDQGIHZQDWLRQDO
HOHFWURWHFKQLFDO YRFDEXODULHV H[LVWHG :LWK LWV WHUPV LQ )UHQFK (QJOLVK *HUPDQ ,WDOLDQ
6SDQLVK DQG (VSHUDQWR DQG LWV GHILQLWLRQV LQ )UHQFK DQG (QJOLVK WKH ,(9 FRXOG ULJKWO\ EH
FRQVLGHUHGDVDQRXWVWDQGLQJDFKLHYHPHQW,WDURXVHGZLGHLQWHUHVWDPRQJLQWHUQDWLRQDOWHFKQLFDO
RUJDQL]DWLRQVRXWVLGHWKHHOHFWURWHFKQLFDOILHOG
,Q6HSWHPEHUWKH,(& VDFWLYLW\FDPHWRDVWDQGVWLOOEHFDXVHRIWKH6HFRQG:RUOG:DUDQG
GLGQRWUHVXPHIRUDQRWKHUVL[\HDUV
)URPWRWKHQXPEHURIWHFKQLFDOFRPPLWWHHVJUHZIURPWRDQGEHJDQWRLQFOXGH
VXFKQHZWHFKQRORJLHVDVFDSDFLWRUVDQGUHVLVWRUVVHPLFRQGXFWRUGHYLFHVHOHFWULFDOHTXLSPHQWLQ
PHGLFDOSUDFWLFHDQGPDULWLPHQDYLJDWLRQDQGUDGLRFRPPXQLFDWLRQV\VWHPVDQGHTXLSPHQW
,QWKH&RPPLVVLRQSXEOLVKHGWKHPRVWUHFHQWHGLWLRQRIWKH,(&0XOWLOLQJXDO'LFWLRQDU\,WLV
D FRPSLODWLRQ RI WKH ,(9 ZKLFK QRZ FRQWDLQV HOHFWURWHFKQLFDO FRQFHSWV GLYLGHG LQWR
VXEMHFW DUHDV FRQWDLQLQJ IXOO GHILQLWLRQV LQ )UHQFK DQG (QJOLVK DQG HTXLYDOHQW WHUPV LQ
ODQJXDJHVLQFOXGLQJDQLQGH[LQ*HUPDQ
$W SUHVHQW ,(& KDYH PHPEHU FRXQWULHV DQG WHFKQLFDO FRPPLWWHHV IRU GLIIHUHQW VXEMHFWV
6RPHRIWKHWHFKQLFDOFRPPLWWHHVKDYHVHYHUDOVXEFRPPLWWHHV,QFOXGLQJWKHVXEFRPPLWWHHVWKHUH
DUHWRWDOO\WHFKQLFDOFRPPLWWHHV
7HFKQLFDO FRPPLWWHH QXPEHU 7& GHDOV ZLWK SRZHU WUDQVIRUPHUV DQG UHDFWRUV 7KLV
FRPPLWWHHKDVSDUWLFLSDWLQJFRXQWULHV 3PHPEHUV DQGREVHUYHUFRXQWULHV 2PHPEHUV 7R
EH D 3PHPEHU RU DQ 2PHPEHU LV HDFK FRXQWU\¶V RZQ LQGLYLGXDO FKRLFH 2QO\ WKH SDUWLFLSDWLQJ
FRXQWULHVKDYHWKHULJKWDQGWKHFRPPLWPHQWWRYRWHRQGRFXPHQWVZRUNHGRXWE\WKHFRPPLWWHH
DQGWKHULJKWWRSDUWLFLSDWHLQWKHZRUNLQJJURXSV :*V SUHSDULQJWKHVWDQGDUGV
$GUDIWIRUDQ,(&VWDQGDUGQHHGVDWOHDVWRIWKHYRWLQJ3PHPEHUVWRREWDLQDSSURYDODVDQ
,(&VWDQGDUG(DFK3PHPEHUKDVRQHYRWH7KHSUHVHQW,(&VWDQGDUGVSUHSDUHGE\7&KDYH
DFKLHYHG D FRQVLGHUDEOH KLJKHU SHUFHQWDJH RI YRWHV LQ IDYRXU WKDQ 6R WKH ,(& WUDQVIRUPHU
VWDQGDUGV DUH EDVHG RQ D KLJK GHJUHH RI FRQVHQVXV DPRQJ H[SHUWV LQ WKH FRXQWULHV WKDW DUH 3
PHPEHUVLQ7&DQGWKH\DUHH[WHQVLYHO\DSSOLHGDURXQGWKHZRUOG
7KH XVH RI ,(& VWDQGDUGV LV D YROXQWDU\ PDWWHU &RQWUDFWXDO SDUWQHUV DUH IUHH WR XVH WKH ,(&
VWDQGDUGVRUDQ\WKLQJHOVH7KH\DUHDOVRIUHHWRXVHSDUWVRIDQ,(&VWDQGDUGWRPDNHH[FHSWLRQV
IURPWKHVWDQGDUGVRUDGGLWLRQDOUHTXLUHPHQWV%XWDVVRRQDVDQ,(&VWDQGDUGKDVEHHQPDGHD
SDUW RI D WHFKQLFDO FRQWUDFW VSHFLILFDWLRQ WKH ,(& VWDQGDUG EHFRPHV D OHJDOO\ ELQGLQJ GRFXPHQW
H[FHSWIRUGHYLDWLRQVZULWWHQLQWKHFRQWUDFW
7KH ,(& VWDQGDUGV GR QRW SUHVFULEH KRZ WR GHVLJQ DQG SURGXFH WUDQVIRUPHUV 6R WR VD\ WKDW D
WUDQVIRUPHU VKDOO EH RU LV GHVLJQHG DQG SURGXFHG DFFRUGLQJ WR WKH ,(& VWDQGDUGV ZRXOG EH
PHDQLQJOHVVRULWZRXOGDWOHDVWEHLPSUHFLVHXVHRIODQJXDJH
7KH,(&WUDQVIRUPHUVWDQGDUGVGHVFULEHFHUWDLQWHVWVWKHWUDQVIRUPHUVVKDOOEHVXEMHFWHGWREHIRUH
GHOLYHU\ IURP WKH IDFWRU\ DQG VWDWH WKH DFFHSWDQFH FULWHULD 7KH SXUSRVH RI WKH WHVWV LV WKDW
WUDQVIRUPHUVWKDWKDYHSDVVHGWKHVHWHVWVVKDOOKDYHJRRGSURVSHFWVRIDORQJOLIHDQGKLJKVHUYLFH
UHOLDELOLW\ZKHQDGHTXDWHO\SURWHFWHGDQGPDLQWDLQHG,QWKLVUHVSHFWWKH,(&KDVEHHQVXFFHVVIXO
3DJH7UDQVIRUPHU+DQGERRN
7UDQVIRUPHUVWHVWHGDFFRUGLQJWR,(&VWDQGDUGVDUHRQHRIWKHPRVWUHOLDEOHFRPSRQHQWVLQHOHFWULF
SRZHU V\VWHPV 0DQ\ WUDQVIRUPHUV KDYH EHHQ LQ VHUYLFH IRU PRUH WKHQ KDOI D FHQWXU\ ZLWKRXW
SUREOHPVZRUWKPHQWLRQLQJ
+RZHYHU ,Q WKH )RUHZRUG RI WKH VWDQGDUGV WKH ,(& VWDWHV WKDW WKH ,(& SURYLGHV QR PDUNLQJ
SURFHGXUHWRLQGLFDWHLWVDSSURYDODQGFDQQRWEHUHQGHUHGUHVSRQVLEOHIRUDQ\HTXLSPHQWGHFODUHG
WREHLQFRQIRUPLW\ZLWKRQHRILWVVWDQGDUGV)XUWKHUWKH,(&GUDZVDWWHQWLRQWRWKHSRVVLELOLW\WKDW
VRPHRIWKHHOHPHQWVRILWVVWDQGDUGVPD\EHWKHVXEMHFWRISDWHQWULJKWVDQGVWDWHVWKDWWKH,(&
VKDOOQRWEHKHOGUHVSRQVLEOHIRULGHQWLI\LQJDQ\RUDOOVXFKSDWHQWULJKWV
&(1(/(&VWDQGDUGV
&(1(/(& VWDQGV IRU &RPLWp (XURSpHQ GH 1RUPDOLVDWLRQ (OHFWURWHFKQLTXH LQ (QJOLVK (XURSHDQ
&RPPLWWHHIRU(OHFWURWHFKQLFDO6WDQGDUGLVDWLRQ,WZDVFUHDWHGLQ
&(1(/(&VWDQGDUGV (1VWDQGDUGV DUHLQWHUQDWLRQDOVWDQGDUGVSUHSDUHGE\ZRUNLQJJURXSVDQG
DSSURYHG E\ ZHLJKWHG YRWLQJ DPRQJ FRXQWULHV EHLQJ PHPEHUV RI WKH (XURSHDQ 8QLRQ (8 DQG
RWKHUFRXQWULHVLQFOXGHGLQWKH(XURSHDQ(FRQRPLF$UHD$JUHHPHQW
7KH&(1(/(&WUDQVIRUPHUVWDQGDUGVDUHIRUDODUJHSDUWLGHQWLFDOWRWKH,(&VWDQGDUGVZLWKDIHZ
PLQRUDPHQGPHQWV
+RZHYHU &(1(/(& KDV DOVR LVVXHG VWDQGDUGV FRQFHUQLQJ WUDQVIRUPHU DFFHVVRULHV ZKLFK KDYH
QR FRUUHVSRQGLQJ ,(& VWDQGDUGV $Q H[DPSOH LV WKH VHULHV (1 WKURXJK VSHFLI\LQJ
GHWDLOHG JHRPHWULF GLPHQVLRQV DQG FHUWDLQ SHUIRUPDQFH FKDUDFWHULVWLFV RI LWHPV OLNH JDV UHOD\V
SUHVVXUH GHYLFHV RLO OHYHO DQG IORZ LQGLFDWRUV RLO SXPSV 7KH SXUSRVH LV WR SURYLGH
LQWHUFKDQJHDELOLW\ DQG WR UHPRYH WHFKQLFDO WUDGH EDUULHUV EHWZHHQ &(1(/(& PHPEHU FRXQWULHV
7KHODWWHULVDQ(8WDUJHW
,QOLQHZLWKWKLV&(1(/(&PHPEHUFRXQWULHVDUHERXQGWRZLWKGUDZQDWLRQDOVWDQGDUGVFRQIOLFWLQJ
ZLWK WKH (1 VWDQGDUGV DQG UDWLI\ WKH (1 VWDQGDUGV HLWKHU DV WKH\ DUH RU LQ D ZRUG IRU ZRUG
WUDQVODWLRQ,QSXEOLFSURFXUHPHQWWKHUHLVDQREOLJDWLRQWRDSSO\(1VWDQGDUGVDVWKHILUVWSULRULW\
VWDQGDUGV DV WKH EDVH IRU WKH WHFKQLFDO VSHFLILFDWLRQ DFFRUGLQJ WR 7KH (XURSHDQ 3XEOLF
3URFXUHPHQW'LUHFWLYHLIWKHSURVSHFWLYHFRQWUDFWVXPLVDERYHDFHUWDLQOLPLW
&(1(/(& KDV DOVR LVVXHG D QXPEHU RI +DUPRQL]DWLRQ 'RFXPHQWV +' 7KHLU IRUPDO VWDWXV LV
SUDFWLFDOO\ WKH VDPH DV WKDW RI WKH (1 VWDQGDUGV &(1(/(& KDV GHFLGHG WR SKDVH RXW WKH
+DUPRQL]DWLRQ'RFXPHQWVDQGUHSODFHWKHPE\(1VWDQGDUGV
,(((VWDQGDUGV
,(((VWDQGVIRU7KH,QVWLWXWHRI(OHFWULFDODQG(OHFWURQLFV(QJLQHHUV,QF
&RQWUDU\ WR WKH ,(& VWDQGDUGV ZKLFK DUH LQWHUQDWLRQDO VWDQGDUGV ,((( VWDQGDUGV DUH QDWLRQDO
VWDQGDUGV SUHSDUHG DQG LVVXHG LQ WKH 8QLWHG 6WDWHV RI $PHULFD E\ WKH ,((( 6RFLHWLHV 7KHVH
VWDQGDUGVDUHDOVRVRPHWLPHVXVHGLQRWKHUFRXQWULHVZLWKRXWEHLQJUDWLILHGDVQDWLRQDOVWDQGDUGV
LQWKRVHFRXQWULHV
/LNHWKH,(&VWDQGDUGVWKHXVHRI,(((6WDQGDUGVLVZKROO\YROXQWDU\DQGLWEHFRPHVPDQGDWRU\
RQO\ ZKHQ VSHFLILHG LQ D FRQWUDFWXDO UHODWLRQVKLS RU ZKHQ UHTXLUHG E\ D GXO\ FRQVWLWXWHG OHJDO
DXWKRULW\ 7KH ,((( FOHDUO\ LQGLFDWHV WKDW WKH H[LVWHQFH RI DQ ,((( 6WDQGDUG GRHV QRW LPSO\ WKDW
WKHUHDUHQRRWKHUZD\VWRGHDOZLWKPDWWHUVUHODWHGWRWKHVFRSHRIWKH,(((VWDQGDUG
,Q VRPH UHFHQW VWDQGDUGV WKH ,((( H[SUHVVO\ VWDWHV WKDW ³7KH ,((( GLVFODLPV OLDELOLW\ IRU DQ\
SHUVRQDO LQMXU\ SURSHUW\ RU RWKHU GDPDJH RI DQ\ QDWXUH ZKDWVRHYHU ZKHWKHU VSHFLDO LQGLUHFW
FRQVHTXHQWLDO RU FRPSHQVDWRU\ GLUHFWO\ RU LQGLUHFWO\ UHVXOWLQJ IURP WKH SXEOLFDWLRQ XVH RI RU
UHOLDQFHXSRQWKLVRUDQ\RWKHU,(((6WDQGDUGGRFXPHQW´
,(((VWDQGDUGVDOVRFRQWDLQDUHVHUYDWLRQUHJDUGLQJSDWHQWULJKWVVD\LQJ
³$WWHQWLRQLVFDOOHGWRWKHSRVVLELOLW\WKDWLPSOHPHQWDWLRQRIWKLVVWDQGDUGPD\
UHTXLUHXVHRIVXEMHFWPDWWHUFRYHUHGE\SDWHQWULJKWV%\SXEOLFDWLRQRIWKLVVWDQGDUG
QRSRVLWLRQLVWDNHQZLWKUHVSHFWWRWKHH[LVWHQFHRUYDOLGLW\RIDQ\SDWHQWULJKWVLQ
FRQQHFWLRQWKHUHZLWK7KH,(((VKDOOQRWEHUHVSRQVLEOHIRULGHQWLI\LQJSDWHQWVIRU
ZKLFKDOLFHQVHPD\EHUHTXLUHGE\DQ,(((VWDQGDUGRUIRUFRQGXFWLQJLQTXLULHVLQWR
WKHOHJDOYDOLGLW\RUVFRSHRIWKRVHSDWHQWVWKDWDUHEURXJKWWRLWVDWWHQWLRQ´
7UDQVIRUPHU+DQGERRN3DJH
&RPSDULVRQEHWZHHQ$16,,(((VWDQGDUGVDQG,(&VWDQGDUGV
7KHSXUSRVHRIWKLVVHFWLRQLVWRSRLQWRXWVRPHEDVLFHVVHQWLDOGLIIHUHQFHVEHWZHHQWUDQVIRUPHU
VWDQGDUGVLVVXHGE\WKHWZRLQVWLWXWLRQV7KLVLVQRWPHDQWWREHDQH[KDXVWLYHOLVWRIGLIIHUHQFHV
7RDYRLGSRVVLEOHXQSOHDVDQWVXUSULVHVFRQWUDFWSDUWQHUVQHHGWRSHUIRUPDGHWDLOHGVWXG\RIWKH
VWDQGDUGVVSHFLILHGLQWKHHQTXLU\RUWKHFRQWUDFW
7KH,(&VWDQGDUGVSUHSDUHGE\7&DUHIRXQGLQWKHVHULHVZLWKVXEQXPEHUVDQG
VRRQFRQYHUWRUWUDQVIRUPHUVDUHWUHDWHGLQWKHVHULHVDQGWDSFKDQJHUVLQ
7KH EDVLF $PHULFDQ VWDQGDUGV DUH WKH JHQHUDO & & WDNLQJ FDUH RI WKH
WHUPLQRORJ\ DQG & WUHDWLQJ WKH WHVWLQJ WRSLF ,Q DGGLWLRQ FRPHV D OLVW RI VWDQGDUGV
VSHFLI\LQJ RXWVLGH IHDWXUHV OLNH IRU H[DPSOH WHUPLQDO DUUDQJHPHQW HVSHFLDOO\ IRU VPDOOHU SRZHU
WUDQVIRUPHUVIRUGLVWULEXWLRQDQGIRUGLIIHUHQWHUHFWLRQ SDGPRXQWHGSROHPRXQWHGXQGHUJURXQG DQGIRUGLIIHUHQWUDQJHVRISRZHUDQGYROWDJHUDWLQJ
:LWK WKH H[FHSWLRQ RI WKH PLQLPXP FOHDUDQFHV EHWZHHQ OLYH SDUWV RI WKH EXVKLQJV DQG EHWZHHQ
WKHVHDQGHDUWKWKH,(&VWDQGDUGVGRQRWVSHFLI\RXWVLGHGHWDLOV7KHVHLWHPVDUHOHIWWRQDWLRQDO
VWDQGDUGVRUWRFXVWRPHUVSHFLILFDWLRQV6RWKHRXWVLGHDSSHDUDQFHRIWUDQVIRUPHUVLQIRUH[DPSOH
*HUPDQ\ DQG *UHDW %ULWDLQ PD\ EH TXLWH GLIIHUHQW DOWKRXJK WKH\ DOO IXOILOO WKH ,(& UHTXLUHPHQWV
/RRNLQJDWWKHDFWLYHSDUWWKHUHLVVHOGRPPXFKSULQFLSDOGLIIHUHQFH 7KHDFWLYHSDUWRIFRUHW\SH
DQGVKHOOW\SHGRORRNYHU\GLIIHUHQWEXWQHLWKHUWKH,(&QRUWKH$16,,(((VWDQGDUGVGLVWLQJXLVK
EHWZHHQWKHVHWZRW\SHVH[FHSWIRUWKHPHFKDQLFDOIRUFHVGXULQJVKRUWFLUFXLW 7KHUHDUHVRPHEDVLFGLIIHUHQFHVEHWZHHQWKH,(&DQGWKH$16,,(((VWDQGDUGVZHZRXOGOLNHWR
HPSKDVL]H
'HILQLWLRQRISRZHUUDWLQJ UDWHGNLORYROWDPSHUHV ,(((6WG&KDVWKHIROORZLQJGHILQLWLRQ
³7KHUDWHGN9$RIDWUDQVIRUPHUVKDOOEHWKHRXWSXWWKDWFDQEHGHOLYHUHGIRUWKHWLPHVSHFLILHG
DW UDWHG VHFRQGDU\ YROWDJH DQG UDWHG IUHTXHQF\ ZLWKRXW H[FHHGLQJ WKH VSHFLILHG WHPSHUDWXUH
ULVH OLPLWDWLRQV XQGHU SUHVFULEHG FRQGLWLRQV RI WHVW DQG ZLWKLQ WKH OLPLWDWLRQV RI HVWDEOLVKHG
VWDQGDUGV´
3DUDJUDSK9ROWDJHUDWLQJVVWDWHV
³7KHYROWDJHUDWLQJVVKDOOEHDWQRORDGDQGVKDOOEHEDVHGRQWKHWXUQUDWLR´
:KHQDWUDQVIRUPHULVORDGHGWKHUHLVDYROWDJHGURSLQWKHWUDQVIRUPHU7RDFKLHYHUDWHGYROWDJH
DWWKHVHFRQGDU\WHUPLQDOVWKHYROWDJHDWWKHSULPDU\VLGHKDVWREHUDLVHGDERYHWKHUDWHGYDOXH
WR FRPSHQVDWH IRU WKH YROWDJH GURS LQ WKH WUDQVIRUPHU 7KH YROWDJH GURS GHSHQGV RQ WKH VKRUW
FLUFXLWLPSHGDQFHRIWKHWUDQVIRUPHUWKHORDGFXUUHQWDQGWKHSRZHUIDFWRURIWKHORDG
8QGHU SDUDJUDSK 8VXDO VHUYLFH FRQGLWLRQV WKH ORDG SRZHU IDFWRU LV DVVXPHG WR EH RU
KLJKHU 7KH WUDQVIRUPHU GHVLJQHU KDV WR WDNH WKHVH FLUFXPVWDQFHV LQWR DFFRXQW WR DYRLG WKDW WKH
IOX[ GHQVLW\ GRHV QRW EHFRPH WRR KLJK ZKHQ WKH SRZHU IORZ GLUHFWLRQ LV VXFK WKDW WKH VHFRQGDU\
ZLQGLQJLVQRWWKHLQPRVWZLQGLQJRQWKHFRUH
3DUDJUDSKVSHFLILHVDOVRWKDWQHLWKHUWKHYROWDJHQRUWKHYROWVSHUKHUW]DUHDVVXPHGWRH[FHHG
RIUDWHGYDOXHV7KLVPHDQVWKDWWKHWUDQVIRUPHUFRUHPXVWLQDQ\FDVHEHDEOHWRFDUU\D
PDJQHWLFIOX[WKDWLVKLJKHUWKDQWKHIOX[DWUDWHGYROWDJHLQQRORDGFRQGLWLRQ
,(& KDVWKHIROORZLQJGHILQLWLRQ
³UDWHGSRZHU 6U $ FRQYHQWLRQDO YDOXHRI DSSDUHQW SRZHUDVVLJQHG WRD ZLQGLQJZKLFK
WRJHWKHUZLWKWKHUDWHGYROWDJHRIWKHZLQGLQJGHWHUPLQHVLWVUDWHGFXUUHQW´
DQGVWDWHVIXUWKHULQD127(
³%RWKZLQGLQJVRIDWZRZLQGLQJWUDQVIRUPHUKDYHWKHVDPHUDWHGSRZHUZKLFKE\GHILQLWLRQLV
WKHUDWHGSRZHURIWKHZKROHWUDQVIRUPHU´
3DUDJUDSKGHILQHVWKHUDWHGYROWDJHRIDZLQGLQJ 8U DV
³7KH YROWDJH DVVLJQHG WR EH DSSOLHG RU GHYHORSHG DW QRORDG EHWZHHQ WKH WHUPLQDOV RI DQ
XQWDSSHGZLQGLQJRURIDWDSSHGZLQGLQJFRQQHFWHGWRWKHSULQFLSDOWDSSLQJ VHH )RUD
WKUHHSKDVHZLQGLQJLWLVWKHYROWDJHEHWZHHQOLQHWHUPLQDOV>,(9PRGLILHG@´
,QD127(LWLVDGGHG
³7KHUDWHGYROWDJHVRIDOOZLQGLQJVDSSHDUVLPXOWDQHRXVO\DWQRORDGZKHQWKHYROWDJHDSSOLHG
WRRQHRIWKHPKDVLWVUDWHGYDOXH´
3DJH7UDQVIRUPHU+DQGERRN
7KH UDWHG SRZHU LV WKHQ D IXQFWLRQ RI WKH SURGXFW RI UDWHG YROWDJH DQG UDWHG FXUUHQW 7KH UDWHG
YROWDJHFDQEHDSSOLHGWRWKHSULPDU\WHUPLQDOVDQGUDWHGFXUUHQWZLOOIORZLQWKHSULPDU\ZLQGLQJ
ZKHQ WKH VHFRQGDU\ ZLQGLQJ LV ORDGHG ZLWK LWV UDWHG FXUUHQW 7KH SRZHU DSSOLHG WR WKH SULPDU\
ZLQGLQJLVWKHQHTXDOWRWKHUDWHGSRZHU+RZHYHUWKHVHFRQGDU\YROWDJHZLOOEHGLIIHUHQWIURPWKH
UDWHG VHFRQGDU\ YROWDJH DQG FRQVHTXHQWO\ DOVR WKH SRZHU GHOLYHUHG IURP WKH VHFRQGDU\ ZLQGLQJ
ZLOOEHGLIIHUHQWIURPWKHUDWHGSRZHURIWKHWUDQVIRUPHUGXHWRWKHYROWDJHGURSLQWKHWUDQVIRUPHU
7KLVLPSOLHVWKDWWKHUDWHGSRZHURIWKHWUDQVIRUPHUDFFRUGLQJWRWKH,(&GHILQLWLRQVLVDYDOXHRI
DSSDUHQWSRZHULQSXWWRWKHWUDQVIRUPHULQFOXGLQJLWVRZQDEVRUSWLRQRIDFWLYHDQGUHDFWLYHSRZHU
ZKLOH WKH UDWHG SRZHU DFFRUGLQJ WR WKH ,((( GHILQLWLRQV LV D YDOXH RI DSSDUHQW SRZHU GHOLYHUHG
IURPWKHVHFRQGDU\VLGH 7KLVLPSOLHVIXUWKHUWKDWZKHQ,(&VWDQGDUGVDSSO\WKHXVHUKDVWRFRQVLGHUWKHYROWDJHGURSLQWKH
WUDQVIRUPHU LQ YDULRXV H[SHFWHG VHUYLFH FRQGLWLRQV EHIRUH GHWHUPLQLQJ WKH UDWHG YROWDJHV RI WKH
WUDQVIRUPHU
,QSDUDJUDSK,(& VD\VWKDW
³«D WUDQVIRUPHU VKDOO EH FDSDEOH RI FRQWLQXRXV VHUYLFH ZLWKRXW GDPDJH XQGHU FRQGLWLRQV RI
µRYHUIOX[LQJ¶ZKHUHWKHUDWLRRIYROWDJHRYHUIUHTXHQF\H[FHHGVWKHFRUUHVSRQGLQJUDWLRDWUDWHG
YROWDJHDQGUDWHGIUHTXHQF\E\QRPRUHWKDQ´ ,((( 5HIHUHQFHWHPSHUDWXUHIRUORDGORVVHV
7KHUHIHUHQFHWHPSHUDWXUHIRUWKHORDGORVVHVLQ,(((LVƒ&ZKLOHLWLVƒ&LQ,(&7KLVLPSOLHV
WKDWWKHORDGORVVHVLQRQHDQGWKHVDPHWUDQVIRUPHUZLOODSSHDUKLJKHUZKHQWKH,(((VWDQGDUGV
DSSO\WKDQZKHQ,(&VWDQGDUGVDSSO\
:KHQ RSWLPLVLQJ D WUDQVIRUPHU GHVLJQ EDVHG RQ JLYHQ FDSLWDOLVHG YDOXHV IRU WKH ORVVHV WKH
VSHQGLQJ RI PDWHULDOV ZLOO WHQG WR EH KLJKHU ZKHQ WKH ,((( VWDQGDUGV DSSO\ WKDQ ZKHQ ,(&
VWDQGDUGVDSSO\
8QFHUWDLQW\LQPHDVXUHPHQWV
,((( 6WG & VSHFLILHV LQ 7DEOH DFFXUDF\ UHTXLUHPHQWV LQ WKH PHDVXUHPHQW RI
ORVVHV YROWDJH FXUUHQW UHVLVWDQFH DQG WHPSHUDWXUH %HIRUH WHQGHULQJ RQ WKH EDVH RI WKLV ,(((
VWDQGDUG WKH WHQGHUHU PXVW FDUHIXOO\ HYDOXDWH KLV PHDVXUHPHQW HTXLSPHQW WR VHH ZKHWKHU KH LV
DEOHWRIXOILOOWKHVHUHTXLUHPHQWV
,(&KDVQRFRQFUHWHQXPHULFUHTXLUHPHQWVRQWKLVWRSLFEXWVD\VLQWKH$SSOLFDWLRQJXLGH
SDUDJUDSKWKDW
³6WDWHPHQWVRIOLPLWVRUXQFHUWDLQW\VKDOOEHDYDLODEOHDQGWKHVHVWDWHPHQWVVKDOOEHVXSSRUWHG
E\DGRFXPHQWHGWUDFHDELOLW\ VHH,62 ´
'LHOHFWULFWHVWLQJ
:KHQ OLJKWQLQJ LPSXOVH WHVW LV VSHFLILHG WHVWLQJ ZLWK FKRSSHG ZDYH FKRSSHG RQ WKH WDLO LV D
FRPSXOVRU\ SDUW RI WKH WHVW LQ WKH ,((( VWDQGDUG ,Q ,(& FKRSSHG ZDYH WHVW LV RQO\ PDGH ZKHQ
VSHFLILHG
$ WUDQVIRUPHU ZLWKVWDQGLQJ D IXOO ZDYH WHVW PD\ QRW ZLWKRXW IXUWKHU QRWLFH ZLWKVWDQG D FKRSSHG
ZDYHEHFDXVHWKHFKRSSLQJZLOOLQYROYHDUDSLGIDOOLQWKHYROWDJHZKLFKPD\FDXVHPRUHVHYHUH
VWUHVVHV LQ WKH ZLQGLQJ WKDQ GXULQJ WKH IXOO ZDYH WHVW 7KLV LV D WHVW WKDW PD\ H[SUHVV VRPHWKLQJ
DERXW WKH WUDQVIRUPHU¶V DELOLW\ WR ZLWKVWDQG WKH VWUHVVHV WKDW DULVH ZKHQ UHLJQLWLRQV RFFXU LQ WKH
FLUFXLWEUHDNHUVGXULQJFRQWDFWVHSDUDWLRQZKHQRSHQLQJWKHFLUFXLWEUHDNHU
,((( KDV DOVR DQ RSWLRQ IRU D IURQW RI ZDYH WHVW 7KDW LV D YROWDJH LPSXOVHFKRSSHG RQ WKH IURQW
EHIRUHWKHYROWDJHVXUJHKDVUHDFKHGLWVFUHVWYDOXH7KLVWHVWLVRQO\PDGHZKHQVSHFLILHG,(&
GRHVQRWLQFOXGHWKLVNLQGRIWHVW
6KRUWFLUFXLWUHTXLUHPHQWVDQGWHVWLQJ
7KHGLIIHUHQFHVEHWZHHQ,(&DQG,(((LQUHTXLUHPHQWVUHJDUGLQJDELOLW\WRZLWKVWDQGVKRUWFLUFXLW
FXUUHQWVDQGLQWHVWLQJWRYHULI\WKLVDELOLW\DUHQRWODUJH+RZHYHUWKHUHDUHVRPHGHWDLOVZKHUHWKH
VWDQGDUGVGHYLDWHIURPHDFKRWKHUDQGVRPHRIWKHVHGLVSDULWLHVZLOOEHOLVWHGLQWKHIROORZLQJ
7UDQVIRUPHU+DQGERRN3DJH
•
,(((VWDQGDUGVGLYLGHWKHWUDQVIRUPHUVLQWRIRXUFDWHJRULHVZKLOH,(&KDVWKUHHFDWHJRULHV
EDVHGRQWKHN9$UDWLQJLQERWKVWDQGDUGV(DFKFDWHJRU\LVVXEMHFWWRVRPHZKDWGLIIHUHQW
UHTXLUHPHQWV
•
,QFDVHVZKHUHWKHVKRUWFLUFXLWSRZHURIWKHV\VWHPVWREHFRQQHFWHGWRWKHWUDQVIRUPHULV
QRW VSHFLILHG WKHVH YDOXHV VKDOO EH WDNHQ IURP WDEOHV LQ WKH VWDQGDUGV 7KH V\VWHP VKRUW
FLUFXLW DSSDUHQW SRZHU LV FRQVLGHUDEO\ KLJKHU LQ WKH ,((( VWDQGDUG WKDQ DFFRUGLQJ WR
´FXUUHQW(XURSHDQSUDFWLFH´LQ,(& +RZHYHUWKHWUDQVIRUPHULPSHGDQFHLV
QRUPDOO\PXFKKLJKHUWKDQWKHV\VWHPLPSHGDQFHVRWKHGLIIHUHQFHLQVKRUWFLUFXLWFXUUHQW
IORZLQJWKURXJKWKHWUDQVIRUPHUZLOOEHTXLWHPRGHVW
•
7KH DOJRULWKP IRU FDOFXODWLQJ WKH PD[LPXP DV\PPHWULF SHDN FXUUHQW LV WKH VDPH LQ ERWK
VWDQGDUGV7KHDV\PPHWU\LQFUHDVHVZLWKLQFUHDVLQJ[UZKHUH[DQGUDUHUHVSHFWLYHO\WKH
WRWDO UHDFWDQFH DQG WKH WRWDO UHVLVWDQFH LQ WKH ZKROH FLUFXLW )RU [U! ,(& VWDWHV D
PD[LPXP YDOXH IRU WKH SHDN IDFWRU ZKLOH ,((( GRHV QRW FRQWDLQ VXFK D OLPLWDWLRQ 7KH
FRQVHTXHQFHRIWKLVPD\LQVRPHFDVHVEHWKDWLQYHU\ODUJHWUDQVIRUPHUVWKHFURVVVHFWLRQ
RIWKHZLQGLQJFRQGXFWRUPXVWEHDOLWWOHODUJHUWRIXOILOOWKHVKRUWFLUFXLWUHTXLUHPHQWVLQ,(((
FRPSDUHGWRWKRVHLQ,(&7KHPDQXIDFWXULQJFRVWZLOOWKHQEHVRPHZKDWKLJKHU+RZHYHU
WKLVPD\EHFRPSHQVDWHGE\ORZHUORVVHV
•
,((( VSHFLILHV VL[ ³VKRWV´ SHU SKDVH WZR RI WKRVH VKDOO EH ZLWK IXOO DV\PPHWU\ ,(&
VSHFLILHVWKUHH³VKRWV´SHUSKDVHZLWKIXOODV\PPHWU\RQDOOWKUHH³VKRWV´,WLVKDUGWRMXGJH
ZKLFKRIWKHWZRWHVWSURFHGXUHVLVWKHWRXJKHVWRQHIRUWKHWUDQVIRUPHU
•
%RWK,(((DQG,(&VWDQGDUGVFRQWDLQDOLVWRIFULWHULDWKDWPXVWEHIXOILOOHGWRVWDWHWKDWWKH
WUDQVIRUPHUKDVSDVVHGWKHWHVW7KHVHFULWHULDDUHPRUHRUOHVVWKHVDPHLQERWKVWDQGDUGV
ZLWK RQH H[FHSWLRQ ,((( UHTXLUHV IRU WKH ODUJHVW WUDQVIRUPHUV FDWHJRU\ ,, ,,, DQG ,9 ZLWK
FLUFXODUZLQGLQJV QRWPRUHWKDQGLIIHUHQFHLQWKHRKPLFYDOXHRIWKHWUDQVIRUPHU¶VVKRUW
FLUFXLW LPSHGDQFH PHDVXUHG EHIRUH DQG DIWHU WKH WHVW 7KH FRUUHVSRQGLQJ UHTXLUHPHQW
LQ ,(& IRU WUDQVIRUPHUV ZLWK DSSDUHQW SRZHU UDWLQJ DERYH 09$ LV ,(& KDV WKH
WRXJKHVWUHTXLUHPHQWDWWKLVSRLQW
•
%RWK ,((( DQG ,(& VWDQGDUGV KDYH D UHTXLUHPHQW UHJDUGLQJ WKH ZLQGLQJ FRQGXFWRU
WHPSHUDWXUHULVHGXULQJVKRUWFLUFXLWFXUUHQW7KHWHPSHUDWXUHULVHVKDOOEHFDOFXODWHGEDVHG
RQWKHVWDWLRQDU\YDOXHRIWKHVKRUWFLUFXLWFXUUHQWDQGLWVGXUDWLRQ7KHDOJRULWKPLVEDVLFDOO\
WKHVDPHLQERWKVWDQGDUGVFDOFXODWLQJDVLIQRKHDWWUDQVIHUWRWKHHQYLURQPHQWWDNHVSODFH
GXULQJ WKH VKRUW WLPH WKH VKRUW FLUFXLW FXUUHQW LV IORZLQJ ,(& DVVXPHV WKDW DOO WKH KHDW
GHYHORSHGLVVWRUHGLQWKHFRQGXFWRUPDWHULDOFRSSHURUDOXPLQXP,(((WDNHVLQDGGLWLRQ
LQWRDFFRXQWWKDWVRPHKHDWLVDOVRVWRUHGLQWKHLQVXODWLRQRIWKHFRQGXFWRU7KHPD[LPXP
SHUPLWWHG WHPSHUDWXUH ULVH IRU HDFK ZLQGLQJ LV WKH VDPH LQ ERWK VWDQGDUGV ƒ& IRU
FRSSHUDQGƒ&IRUDOXPLQXP+RZHYHU,(((SHUPLWVDOVRƒ&IRUFHUWDLQDOXPLQXP
DOOR\V ,(& VSHFLILHV WKDW WKH GXUDWLRQ RI WKH FXUUHQW WR EH XVHG ZKHQ FDOFXODWLQJ WKLV
WHPSHUDWXUHULVHVKDOOEHVXQOHVVDGLIIHUHQWGXUDWLRQLVVSHFLILHG7KLVGXUDWLRQLVLQPRVW
FDVHVVKRUWHULQWKH,(((VWDQGDUGV
•
,QDQDPHQGPHQW LQSURFHVV WR,(&DPHWKRGLVGHVFULEHGZKLFKVKRZVKRZWKH
DELOLW\ RI WKH WUDQVIRUPHU WR ZLWKVWDQG WKH PHFKDQLFDO IRUFHV GXULQJ VKRUW FLUFXLW PD\ EH
YHULILHGE\PHDQVRIFDOFXODWLRQDQGFRPSDULVRQZLWKDVLPLODUWUDQVIRUPHUWKDWKDVSDVVHG
DVKRUWFLUFXLWWHVW
,(((KDVQRFRUUHVSRQGLQJPHWKRG
•
,(((&VSHFLILHVWKDWWKHZLQGLQJKRWVSRWWHPSHUDWXUHULVHVKDOOQRWH[FHHG
ƒ&
,(& KDVQRUHTXLUHPHQWRQKRWVSRWZLQGLQJWHPSHUDWXUHULVH
,(& DQG ,((( KDYH H[SUHVVHG WKH LQWHQWLRQ JUDGXDOO\ WR GHFUHDVH RU UHPRYH EDVLF GLIIHUHQFHV
EHWZHHQWKHLUVWDQGDUGV,WLVHQYLVDJHGWKDWDFORVHUFRRSHUDWLRQEHWZHHQWKHWZRRUJDQL]DWLRQV
ZLOO PDNH WKH IXWXUH VWDQGDUGL]DWLRQ ZRUN PRUH FRVW HIILFLHQW %HVLGHV WKDW LW LV UHFRJQL]HG WKDW
EDVLFSK\VLFDOSKHQRPHQDDUHWKHVDPHDOORYHUWKHZRUOG
&RQFHUQLQJWKHWUDQVIRUPHUVXEMHFWVWKHILUVWDSSURDFKLQWKLVUHVSHFWLVDOUHDG\LQSURFHVV,(((
KDV DOUHDG\ LVVXHG D VWDQGDUG RQ SKDVHVKLIWLQJ WUDQVIRUPHUV ,((( 6WG & ,W ZRXOG
VHHPXQUHDVRQDEOHWKDWWKH,(&ZKLFKVRIDUKDVQRVWDQGDUGIRUWKLVW\SHRIWUDQVIRUPHUVVKRXOG
VWDUW ZRUNLQJ RQ WKLV WRSLF IURP VFUDWFK 6R WKH ,(& KDV VHQW WKLV ,((( VWDQGDUG WR WKH 1DWLRQDO
FRPPLWWHHVRIWKH,(&IRUDSUHOLPLQDU\YRWHZLWKWKHSRVVLELOLW\WRFRPPHQWDQGVXJJHVWFKDQJHV
,IWKLVVWDQGDUGDFKLHYHVDSSURYDOZLWKLQWKH,(&WKHVWDQGDUGZLOOEHLVVXHGLQDQHZHGLWLRQZLWK
WKHORJRRIERWKRUJDQL]DWLRQVRQWKHIURQWSDJH
3DJH7UDQVIRUPHU+DQGERRN
,(&6WDQGDUGV
,(& FRUUHFWHGDQGUHSULQWHG /HWWHUV\PEROVWREHXVHGLQHOHFWULFDOWHFKQRORJ\3DUW*HQHUDO
,(&DP $PHQGPHQW/HWWHUV\PEROVWREHXVHGLQHOHFWULFDOWHFKQRORJ\3DUW*HQHUDO
,(& ,QWHUQDWLRQDO(OHFWURWHFKQLFDO9RFDEXODU\6ZLWFKJHDUFRQWUROJHDUDQGIXVHV
,(&DP $PHQGPHQW,QWHUQDWLRQDO(OHFWURWHFKQLFDO9RFDEXODU\6ZLWFKJHDUFRQWUROJHDUDQGIXVHV
,(& +LJKYROWDJHWHVWWHFKQLTXHV±3DUW*HQHUDOGHILQLWLRQVDQGWHVWUHTXLUHPHQWV
,(& ,QVXODWLRQFRRUGLQDWLRQ±3DUW'HILQLWLRQVSULQFLSOHVDQGUXOHV
,(& ,QVXODWLRQFRRUGLQDWLRQ±3DUW$SSOLFDWLRQ*XLGH
,(& (G
3RZHUWUDQVIRUPHUV±3DUW*HQHUDO
,(& 3RZHUWUDQVIRUPHUV±3DUW7HPSHUDWXUHULVH
,(&&RUU &RUULJHQGXP3RZHUWUDQVIRUPHUV±3DUW7HPSHUDWXUHULVH
,(& 3RZHUWUDQVIRUPHUV±3DUW,QVXODWLRQOHYHOVGLHOHFWULFWHVWVDQGH[WHUQDOFOHDUDQFHVLQDLU
,(&&RUU &RUULJHQGXP3RZHUWUDQVIRUPHUV±3DUW,QVXODWLRQOHYHOVGLHOHFWULFWHVWVDQGH[WHUQDO
FOHDUDQFHVLQDLU
,(& 3RZHUWUDQVIRUPHUV±3DUW*XLGHWRWKHOLJKWQLQJLPSXOVHDQGVZLWFKLQJLPSXOVHWHVWLQJ±
3RZHUWUDQVIRUPHUVDQGUHDFWURUV
,(& 3RZHUWUDQVIRUPHUV±3DUW$ELOLW\WRZLWKVWDQGVKRUWFLUFXLW
,(& LQSURFHVV 3RZHUWUDQVIRUPHUV±3DUW/RDGLQJJXLGHIRURLOLPPHUVHGSRZHUWUDQVIRUPHUV
,(& 3RZHUWUDQVIRUPHUV±3DUW$SSOLFDWLRQJXLGH
,(& 3RZHUWUDQVIRUPHUV±3DUW'HWHUPLQDWLRQRIVRXQGOHYHOV
,(& 3RZHUWUDQVIRUPHUV3DUW'U\W\SHWUDQVIRUPHUV
,(& ,QVXODWLQJOLTXLGV±'HWHUPLQDWLRQRIWKHEUHDNGRZQYROWDJHDWSRZHUIUHTXHQF\±7HVW
PHWKRG
,(& 7DSFKDQJHUV±3DUW3HUIRUPDQFHUHTXLUHPHQWVDQGWHVWPHWKRGV
,(& +LJKYROWDJHWHVWWHFKQLTXHV±3DUWLDOGLVFKDUJHPHDVXUHPHQWV
,(& 5HDFWRUV
,(& 6SHFLILFDWLRQIRUXQXVHGPLQHUDOLQVXODWLQJRLOVIRUWUDQVIRUPHUVDQGVZLWFKJHDU
,(&DP $PHQGPHQWQR
7UDQVIRUPHU+DQGERRN3DJH
,(& /RDGLQJJXLGHIRURLOLPPHUVHGSRZHUWUDQVIRUPHUV
,(& 6XSHUYLVLRQDQGPDLQWHQDQFHJXLGHIRUPLQHUDOLQVXODWLQJRLOVLQHOHFWULFDOHTXLSPHQW
,(& 0HWKRGVRIVDPSOLQJOLTXLGGLHOHFWULFV
,(&75 (IIHFWRIFXUUHQWRQKXPDQEHLQJVDQGOLYHVWRFN±3DUW*HQHUDODVSHFWV
,(& 'HJUHHVRISURWHFWLRQSURYLGHGE\HQFORVXUHV ,3&RGH ,(& $SSOLFDWLRQJXLGHIRURQORDGWDSFKDQJHUV
,(&DP $PHQGPHQW1R
,(& 6SHFLILFDWLRQIRUFHOOXORVLFSDSHUVIRUHOHFWULFDOSXUSRVHV3DUW6SHFLILFDWLRQVIRULQGLYLGXDO
PDWHULDOV6KHHW*HQHUDOSXUSRVHHOHFWULFDOSDSHU
,(& *XLGHIRUWKHVDPSOLQJRIJDVHVDQGRIRLOIURPRLOILOOHGHOHFWULFDOHTXLSPHQWDQGIRUWKH
DQDO\VLVRIIUHHDQGGLVVROYHGJDVHV
,(& 0LQHUDORLOLPSUHJQDWHGHOHFWULFDOHTXLSPHQWLQVHUYLFH±*XLGHWRWKHLQWHUSUHWDWLRQRI
GLVVROYHGDQGIUHHJDVHVDQDO\VLV
,(&75 7HUPLQDODQGWDSSLQJPDUNLQJVIRUSRZHUWUDQVIRUPHUV
,(& 6SHFLILFDWLRQIRUSUHVVERDUGDQGSUHVVSDSHUIRUHOHFWULFDOSXUSRVHV±3DUW6SHFLILFDWLRQ
IRULQGLYLGXDOPDWHULDOV±6KHHW5HTXLUHPHQWVIRUSUHVVERDUGW\SHV%%%
%%%%%%DQG%
,(& 6SHFLILFDWLRQIRUSUHVVERDUGDQGSUHVVSDSHUIRUHOHFWULFDOSXUSRVHV±3DUW6SHFLILFDWLRQ
IRULQGLYLGXDOPDWHULDOV±6KHHW5HTXLUHPHQWVIRUSUHVVSDSHUW\SHV333
33DQG3
,(& 'HWHFWLRQDQGGHWHUPLQDWLRQRIVSHFLILHGDQWLR[LGDQWDGGLWLYHVLQLQVXODWLQJRLOV
,(& )LUHKD]DUGWHVWLQJ±3DUW*XLGDQFHIRUDVVHVVLQJWKHILUHKD]DUGRIHOHFWURWHFKQLFDO
SURGXFWV±,QVXODWLQJOLTXLGV
,(&DP $PHQGPHQW1R
,(& ,QVXODWLQJOLTXLGV±RLOLPSUHJQDWHGSDSHUDQGSUHVVERDUG±'HWHUPLQDWLRQRIZDWHUE\
DXWRPDWLFFRXORPHWULF.DUO)LVFKHUWLWUDWLRQ
,(& 6SHFLILFDWLRQIRUVLOLFRQHOLTXLGVIRUHOHFWULFDOSXUSRVHV
,(&&RUU &RUULJHQGXP6SHFLILFDWLRQIRUVLOLFRQHOLTXLGVIRUHOHFWULFDOSXUSRVHV
,(& ,QVXODWLQJOLTXLGV±6SHFLILFDWLRQVIRUXQXVHGOLTXLGVEDVHGRQV\QWKHWLFDURPDWLF
K\GURFDUERQV
1HZHGLWLRQLQSURFHVV
1HZHGLWLRQLQSURFHVV
3DJH7UDQVIRUPHU+DQGERRN
,(& 0HWKRGVIRUWKHGHWHUPLQDWLRQRIWKHOLJKWQLQJEUHDNGRZQYROWDJHRILQVXODWLQJOLTXLGV
,(& /RDGLQJJXLGHIRUGU\W\SHWUDQVIRUPHUV
,(& *XLGHIRUWKHPDLQWHQDQFHRIVLOLFRQHWUDQVIRUPHUOLTXLGV
,(& 0HWKRGVIRUFRXQWLQJDQGVL]LQJSDUWLFOHVLQLQVXODWLQJOLTXLGV
,(& *HQHUDOFODVVLILFDWLRQRILQVXODWLQJOLTXLGV
,(& 0HWKRGIRUHYDOXDWLQJWKHORZWHPSHUDWXUHIORZSURSHUWLHVRIPLQHUDOLQVXODWLQJRLOVDIWHU
DJHLQJ
,(&/DPLQDWHGZRRG
,(&&RUU &RUULJHQGXP0HWKRGIRUHYDOXDWLQJWKHORZWHPSHUDWXUHIORZSURSHUWLHVRIPLQHUDO
LQVXODWLQJRLOVDIWHUDJHLQJ
,(& 6SHFLILFDWLRQIRUXQXVHGV\QWKHWLFRUJDQLFHVWHUVIRUHOHFWULFDOSXUSRVHV
,(&&RUU &RUULJHQGXP6SHFLILFDWLRQIRUXQXVHGV\QWKHWLFRUJDQLFHVWHUVIRUHOHFWULFDOSXUSRVHV
,(& &ODVVLILFDWLRQRILQVXODWLQJOLTXLGVDFFRUGLQJWRILUHSRLQWDQGQHWFDORULILFYDOXH
,(& FRUULJHQGXP 8QXVHGK\GURFDUERQEDVHGLQVXODWLQJOLTXLGV±7HVWPHWKRGVIRUHYDOXDWLQJWKHR[LGDWLRQ
VWDELOLW\
,(& 7HVWPHWKRGIRUWKHGHWHUPLQDWLRQRIR[\JHQLQGH[RILQVXODWLQJOLTXLGV
,(& ,PSUHJQDWHGLQVXODWLQJPDWHULDOV±$SSOLFDWLRQRIGLVVROYHGJDVDQDO\VLV '*$ WRIDFWRU\
WHVWVRQHOHFWULFDOHTXLSPHQW
,(& ,QVXODWLQJOLTXLGV±/LQHDUIODPHSURSDJDWLRQ±7HVWPHWKRGXVLQJDJODVVILEUHWDSH
,(& 6\QWKHWLFRUJDQLFHVWHUVIRUHOHFWULFDOSXUSRVHV±*XLGHIRUPDLQWHQDQFHRIWUDQVIRUPHU
HVWHUVLQHTXLSPHQW
,(&75 ,QVXODWLQJOLTXLGV±'HWHUPLQDWLRQRIWKHSDUWLDOGLVFKDUJHLQFHSWLRQYROWDJH 3',9 ±7HVW
SURFHGXUH
,(& &RQYHUWRUWUDQVIRUPHUV±3DUW7UDQVIRUPHUVIRULQGXVWULDODSSOLFDWLRQV
,(& &RQYHUWRUWUDQVIRUPHUV±3DUW7UDQVIRUPHUIRU+9'&DSSOLFDWLRQV
,(& ,QSURFHVV &RQYHUWRUWUDQVIRUPHUV±3DUW$SSOLFDWLRQJXLGH
,(& ,QVXODWLQJOLTXLGV±&RQWDPLQDWLRQE\SRO\FKORULQDWHGELSKHQ\OV 3&%V ±0HWKRGRI
GHWHUPLQDWLRQE\FDSLOODU\FROXPQJDVFKURPDWRJUDSK\
,(& ,QVXODWLQJOLTXLGV±'HWHUPLQDWLRQRIGLHOHFWULFGLVVLSDWLRQIDFWRUE\PHDVXUHPHQWRIWKH
FRQGXFWDQFHDQGFDSDFLWDQFH±7HVWPHWKRG
,(& 0LQHUDOLQVXODWLQJRLOV±'HWHUPLQDWLRQRINLQHPDWLFYLVFRVLW\DWYHU\ORZWHPSHUDWXUHV
7UDQVIRUPHU+DQGERRN3DJH
,(& ±3RZHULQVWDOODWLRQVH[FHHGLQJN9DF±3DUW&RPPRQUXOHV
,(& ,QVXODWLQJOLTXLGV±'HWHUPLQDWLRQRIDFLGLW\±3DUW$XWRPDWLFSRWHQWLRPHWULFWLWUDWLRQ
&(1(/(&6WDQGDUGV
(1FRUULJHQGXP$SU
%XVKLQJVDERYHN9XSWRN9DQGIURP$WRN$IRUOLTXLGILOOHGWUDQVIRUPHUV
(1
3RZHUWUDQVIRUPHUDQGUHDFWRUILWWLQJV±3DUW*HQHUDO
(1$
3RZHUWUDQVIRUPHUDQGUHDFWRUILWWLQJV±3DUW*DVDQGRLODFWXDWHGUHOD\IRUOLTXLG
LPPHUVHGWUDQVIRUPHUVDQGUHDFWRUVZLWKFRQVHUYDWRU
(1$
3RZHUWUDQVIRUPHUDQGUHDFWRUILWWLQJV±3DUW3URWHFWLYHUHOD\IRUKHUPHWLFDOO\VHDOHG
OLTXLGLPPHUVHGWUDQVIRUPHUVDQGUHDFWRUVZLWKRXWJDVHRXVFXVKLRQ
(1
3RZHUWUDQVIRUPHUDQGUHDFWRUILWWLQJV±3DUW%DVLFDFFHVVRULHV HDUWKLQJWHUPLQDOGUDLQ
DQGILOOLQJGHYLFHVWKHUPRPHWHUSRFNHWZKHHODVVHPEO\ (1$
3RZHUWUDQVIRUPHUDQGUHDFWRUILWWLQJV±3DUW/LTXLGOHYHOSUHVVXUHGHYLFHVDQGIORZ
LQGLFDWRUV
(1
3RZHUWUDQVIRUPHUDQGUHDFWRUILWWLQJV±3DUW&RROLQJHTXLSPHQW±5HPRYDEOHUDGLDWRUVIRU
RLOLPPHUVHGWUDQVIRUPHUV
(1
3RZHUWUDQVIRUPHUDQGUHDFWRUILWWLQJV±3DUW(OHFWULFSXPSVIRUWUDQVIRUPHURLO
(1
2XWGRRUEXVKLQJVIRUN9DQGN9DQGIRUN$DQGN$IRUOLTXLGILOOHGWUDQVIRUPHUV
(1
2LOLPPHUVHGFDEOHFRQQHFWLRQDVVHPEOLHVIRUWUDQVIRUPHUVDQGUHDFWRUVKDYLQJKLJKHVW
YROWDJHIRUHTXLSPHQW8PIURPN9WRN9
(1
%XVKLQJVIRUWUDQVIRUPHUVDQGUHDFWRUFDEOHER[HVQRWH[FHHGLQJN9
(1
%XVKLQJVXSWRN9DQGIURP$WRN$IRUOLTXLGILOOHGWUDQVIRUPHUV
(1
%XVEDUEXVKLQJVXSWRN9DQGIURPN$WRN$IRUOLTXLGILOOHGWUDQVIRUPHUV
(1
,QVXODWLRQFRRUGLQDWLRQ±3DUW'HILQLWLRQVSULQFLSOHVDQGUXOHV
(1$
(1
,QVXODWLRQFRRUGLQDWLRQ±3DUW$SSOLFDWLRQ*XLGH
(1$
(1
3RZHUWUDQVIRUPHUV±3DUW*HQHUDO
(1$
(1
3RZHUWUDQVIRUPHUV±3DUW7HPSHUDWXUHULVH
(1
3RZHUWUDQVIRUPHUV±3DUW,QVXODWLRQOHYHOVGLHOHFWULFWHVWVDQGH[WHUQDOFOHDUDQFHVLQDLU
3DJH7UDQVIRUPHU+DQGERRN
(1
3RZHUWUDQVIRUPHUV±3DUW*XLGHWRWKHOLJKWQLQJLPSXOVHDQGVZLWFKLQJLPSXOVHWHVWLQJ±
3RZHUWUDQVIRUPHUVDQGUHDFWRUV
(1
3RZHUWUDQVIRUPHUV±3DUW$ELOLW\WRZLWKVWDQGVKRUWFLUFXLW
(1
3RZHUWUDQVIRUPHUV±3DUW'HWHUPLQDWLRQRIVRXQGOHYHOV
(1
,QVXODWHGEXVKLQJIRUDOWHUQDWLQJYROWDJHDERYHN9
(1
,QVXODWLQJOLTXLGV±'HWHUPLQDWLRQRIWKHEUHDNGRZQYROWDJHDWSRZHUIUHTXHQF\±7HVW
PHWKRG
(1_
2QORDGWDSFKDQJHUV
(1
7DSFKDQJHUV±3DUW3HUIRUPDQFHUHTXLUHPHQWVDQGWHVWPHWKRGV
(1
*XLGHIRUWKHVDPSOLQJRIJDVHVDQGRIRLOIURPRLOILOOHGHOHFWULFDOHTXLSPHQWDQGIRUWKH
DQDO\VLVRIIUHHDQGGLVVROYHGJDVHV
(1
0LQHUDORLOLPSUHJQDWHGHOHFWULFDOHTXLSPHQWLQVHUYLFH±*XLGHWRWKHLQWHUSUHWDWLRQRI
GLVVROYHGDQGIUHHJDVDQDO\VLV
(1
'U\W\SHWUDQVIRUPHUV
(1
,QVXODWLQJOLTXLGV±RLOLPSUHJQDWHGSDSHUDQGSUHVVERDUG±'HWHUPLQDWLRQRIZDWHUE\
DXWRPDWLFFRXORPHWULF.DUO)LVFKHUWLWUDWLRQ
(1
0HWKRGIRUHYDOXDWLQJWKHORZWHPSHUDWXUHIORZSURSHUWLHVRIPLQHUDOLQVXODWLQJRLOVDIWHU
DJHLQJ
(1
6SHFLILFDWLRQIRUXQXVHGV\QWKHWLFRUJDQLFHVWHUVIRUHOHFWULFDOSXUSRVHV
(1
&ODVVLILFDWLRQRILQVXODWLQJOLTXLGVDFFRUGLQJWRILUHSRLQWDQGQHWFDORULILFYDOXH
(1
8QXVHGK\GURFDUERQEDVHGLQVXODWLQJOLTXLGV±7HVWPHWKRGVIRUHYDOXDWLQJWKHR[LGDWLRQ
VWDELOLW\
(1
,QVXODWLQJOLTXLGV±/LQHDUIODPHSURSDJDWLRQ±7HVWPHWKRGXVLQJDJODVVILEUHWDSH
(1
6\QWKHWLFRUJDQLFHVWHUVIRUHOHFWULFDOSXUSRVHV±*XLGHIRUPDLQWHQDQFHRIWUDQVIRUPHU
HVWHUVLQHTXLSPHQW
(QFRUULJHQGXP1RY
&RQYHUWRUWUDQVIRUPHUV±3DUW7UDQVIRUPHUVIRULQGXVWULDODSSOLFDWLRQV
(1
,QVXODWLQJOLTXLGV±'HWHUPLQDWLRQRIGLHOHFWULFGLVVLSDWLRQIDFWRUE\PHDVXUHPHQWRIWKH
FRQGXFWDQFHDQGFDSDFLWDQFH±7HVWPHWKRG
+'6$
7KUHHSKDVHRLOLPPHUVHGGLVWULEXWLRQWUDQVIRUPHUV+]IURPWRN9$ZLWKKLJKHVW
YROWDJHIRUHTXLSPHQWQRWH[FHHGLQJN9±3DUW*HQHUDOUHTXLUHPHQWVDQGUHTXLUHPHQWV
IRUWUDQVIRUPHUVZLWKKLJKHVWYROWDJHIRUHTXLSPHQWQRWH[FHHGLQJN9
7UDQVIRUPHU+DQGERRN3DJH
+'6
7KUHHSKDVHRLOLPPHUVHGGLVWULEXWLRQWUDQVIRUPHUV+]IURPN9$WR09$ZLWK
KLJKHVWIRUHTXLSPHQWQRWH[FHHGLQJN9±3DUW'LVWULEXWLRQWUDQVIRUPHUVZLWKFDEOH
ER[HVRQWKHKLJK±YROWDJHDQGRUORZYROWDJHVLGH±6HFWLRQ*HQHUDOUHTXLUHPHQWV
+'6
7KUHHSKDVHRLOLPPHUVHGGLVWULEXWLRQWUDQVIRUPHUV+]IURPWRN9$ZLWKKLJKHVW
YROWDJHIRUHTXLSPHQWQRWH[FHHGLQJN9±3DUW'LVWULEXWLRQWUDQVIRUPHUVZLWKFDEOH
ER[HVRQWKHKLJK±YROWDJHDQGRUORZYROWDJHVLGH±6HFWLRQ&DEOHER[HVW\SHIRUXVH
RQGLVWULEXWLRQWUDQVIRUPHUVPHHWLQJWKHUHTXLUHPHQWVRI+'
+'6
7KUHHSKDVHRLOLPPHUVHGGLVWULEXWLRQWUDQVIRUPHUV+]IURPWRN9$ZLWKKLJKHVW
YROWDJHIRUHTXLSPHQWQRWH[FHHGLQJN9±3DUW'LVWULEXWLRQWUDQVIRUPHUVZLWKFDEOH
ER[HVRQWKHKLJK±YROWDJHDQGRUORZYROWDJHVLGH±6HFWLRQ&DEOHER[HVW\SHIRUXVH
RQGLVWULEXWLRQWUDQVIRUPHUVPHHWLQJWKHUHTXLUHPHQWVRI+'
+'6
7KUHHSKDVHRLOLPPHUVHGGLVWULEXWLRQWUDQVIRUPHUV+]IURPWRN9$ZLWKKLJKHVW
YROWDJHIRUHTXLSPHQWQRWH[FHHGLQJN9±3DUW6XSSOHPHQWDU\UHTXLUHPHQWVIRU
WUDQVIRUPHUVZLWKKLJKHVWYROWDJHIRUHTXLSPHQWHTXDOWRN9
+'6
7KUHHSKDVHRLOLPPHUVHGGLVWULEXWLRQWUDQVIRUPHUV+]IURPWRN9$ZLWKKLJKHVW
YROWDJHIRUHTXLSPHQWQRWH[FHHGLQJN9±3DUW'HWHUPLQDWLRQRISRZHUUDWLQJRID
WUDQVIRUPHUORDGHGZLWKQRQVLQXVRLGDOFXUUHQWV
+'6
7KUHHSKDVHRLOLPPHUVHGGLVWULEXWLRQWUDQVIRUPHUV+]IURPWRN9$ZLWKKLJKHVW
YROWDJHIRUHTXLSPHQWQRWH[FHHGLQJN9±3DUW5HTXLUHPHQWVDQGWHVWVFRQFHUQLQJ
SUHVVXULVHGFRUUXJDWHGWDQNV
+'6
6SHFLILFDWLRQIRUVLOLFRQHOLTXLGVIRUHOHFWULFDOSXUSRVHV
+'6
3RZHULQVWDOODWLRQVH[FHHGLQJN9DF
5
*XLGHIRUWKHHYDOXDWLRQRIHOHFWURPDJQHWLFILHOGVDURXQGSRZHUWUDQVIRUPHUV
3DJH7UDQVIRUPHU+DQGERRN
$16,,(((6WDQGDUGV
,(((6WG±70
,(((6WDQGDUG7HVW3URFHGXUHIRU(YDOXDWLRQRI6\VWHPVRI,QVXODWLRQIRU'U\W\SH6SHFLDOW\
DQG*HQHUDO3XUSRVH7UDQVIRUPHUV
,(((6WG± 5 70
,(((*XLGHIRUWKH5HFODPDWLRQRI,QVXODWLQJ2LODQG&ULWHULDIRU8VH
,(((6WG± 5 70
,(((6WDQGDUGIRU4XDOLILFDWLRQRI&ODVV(7UDQVIRUPHUVIRU1XFOHDU*HQHUDWLQJ6WDWLRQV
,(((6WG±70
,(((*XLGHIRUWKH$SSOLFDWLRQRI+LJK7HPSHUDWXUH0DWHULDOVLQ/LTXLG,PPHUVHG3RZHU
7UDQVIRUPHUV
,(((6WG±70
,(((6WDQGDUGVIRU(OHFWURQLF5HSRUWLQJRI7UDQVIRUPHU7HVWV
,(((6WG±70
,(((*XLGHIRU'HWHUPLQDWLRQRI0D[LPXP:LQGLQJ7HPSHUDWXUH5LVHLQ/LTXLG)LOOHG
7UDQVIRUPHUV
,(((6WG&±70
,(((6WDQGDUG*HQHUDOUHTXLUHPHQWVIRU±/LTXLG,PPHUVHG'LVWULEXWLRQ3RZHUDQG
5HJXODWLQJ7UDQVIRUWPHUV
,(((6WG&±70
,(((6WDQGDUG*HQHUDO5HTXLUHPHQWVIRU'U\7\SH'LVWULEXWLRQDQG3RZHU7UDQVIRUPHUV
,QFOXGLQJ7KRVHZLWK6ROLG&DVWDQGRU5HVLQ(QFDSVXODWHG:LQGLQJV
$16,&
N9DQG%HORZWKURXJKN9$6LQJOH3KDVHDQG
WKURXJKN9$7KUHH3KDVH:LWKRXW/RDG7DS&KDQJLQJDQG
WKURXJKN9$ZLWK/RDG7DS&KDQJLQJ²6DIHW\
5HTXLUHPHQW
,(((&±70
$PHULFDQ1DWLRQDO6WDQGDUGIRU2YHUKHDG'LVWULEXWLRQ7UDQVIRUPHUVN9$DQGVPDOOHU
+LJK9ROWDJH9DQGEHORZ/RZ9ROWDJH<9DQGEHORZ±5HTXLUHPHQWV
,(((6WG&±70
$PHULFDQ1DWLRQDO6WDQGDUG5HTXLUHPHQWVIRU3DG0RXQWHG&RPSDUWPHQWDO7\SH6HOI
&RROHG6LQJOH3KDVH'LVWULEXWLRQ7UDQVIRUPHUV:LWK+LJK9ROWDJH%XVKLQJV+LJK
YROWDJH*5<'9ROWVDQG%HORZ/RZ9ROWDJHYROWVN9$DQG
6PDOOHU
,(((6WG&± 5 70
$PHULFDQ1DWLRQDO6WDQGDUGIRU7UDQVIRPHUV±3DG0RXQWHG&RPSDUWPHQWDO7\SH6HOI
&RROHG7KUHH3KDVH'LVWULEXWLRQ7UDQVIRUPHUVZLWK+LJK9ROWDJH%XVKLQJVN9$DQG
6PDOOHU+LJK9ROWDJH*UG<9ROWVDQG%HORZ/RZ9ROWDJH9ROWVDQG
%HORZ±5HTXLUHPHQWV
,(((6WG&±70
,(((6WDQGDUGIRU8QGHUJURXQG7\SH6HOI&RROHG6LQJOH3KDVH'LVWULEXWLRQ7UDQVIRUPHUV
ZLWK6HSDUDEOH,QVXODWHG+LJK9ROWDJH&RQQHFWRUV+LJK9ROWDJH9DQG%HORZ/RZ
9ROWDJH9DQG%HORZN9$DQG6PDOOHU
,(((6WG&±70
$PHULFDQ1DWLRQDO6WDQGDUGIRU7UDQVIRPHUV±8QGHUJURXQG7\SH7KUHH3KDVH'LVWULEXWLRQ
7UDQVIRUPHUVN9$DQG6PDOOHU9ROWDJH*UG<9ROWVDQGEHORZ/RZ
9ROWDJH9ROWVDQG%HORZ±5HTXLUHPHQWV
,(((6WG&70
$PHULFDQ1DWLRQDO6WDQGDUGIRU7UDQVIRUPHUV±3DG0RXQWHG&RPSDUWPHQWDO7\SH6HOI
&RROHG6LQJOH3KDVH'LVWULEXWLRQ7UDQVIRUPHUVZLWK6HSDUDEOH,QVXODWHG+LJK9ROWDJH
&RQQHFWRUV+LJKYROWDJH*UG<9ROWVDQG%HORZ/RZ9ROWDJHYROWV
N9$DQG6PDOOHU5HTXLUHPHQWV
7UDQVIRUPHU+DQGERRN3DJH
,(((6WG&±70
,(((6WDQGDUGIRU3DG0RXQWHG&RPSDUWPHQWDO7\SH6HOI&RROHG7KUHH3KDVH
'LVWULEXWLRQ7UDQVIRUPHUVIRU8VHZLWK6HSDUDEOH,QVXODWHG+LJK9ROWDJH&RQQHFWRUV *UG<9ROWVDQG%HORZN9$DQG6PDOOHU ,(((6WG&±70
$PHULFDQ1DWLRQDO6WDQGDUG3DG0RXQWHGHTXLSPHQW±(QFORVHG,QWHJULW\
,(((6WG&±70
$PHULFDQ1DWLRQDO6WDQGDUG6ZLWFKJHDUDQG7UDQVIRUPHUV3DG0RXQWHG(TXLSPHQW
(QFORVXUH,QWHJULW\IRU&RDVWDO(QYLURQPHQWV
,(((6WG&±70(UUDWD
$PHULFDQ1DWLRQDO6WDQGDUG3DG0RXQWHG(TXLSPHQW(QFORVXUH,QWHJULW\IRU&RDVWDO
(QYLURQPHQWV 5HSODFHPHQW)LJXUHV9HUVLRQ ,(((6WG&±70
,(((6WDQGDUGIRU3ROHPRXQWHG(TXLSPHQW±(QFORVXUH,QWHJULW\
,(((6WG&±70
,(((6WDQGDUGIRU6XEPHUVLEOH(TXLSPHQW(QFORVXUH,QWHJULW\
,(((6WG&±70
,(((6WDQGDUGIRU%DU&RGLQJIRU'LVWULEXWLRQ7UDQVIRUPHUV
,(((6WG&±70
$PHULFDQ1DWLRQDO6WDQGDUGIRU6HFRQGDU\1HWZRUN7UDQVIRUPHUV6XEZD\DQG9DXOW7\SHV
/LTXLG,PPHUVHG ±5HTXLUHPHQWV
,(((6WG&±70
,(((6WDQGDUG5HTXLUHPHQWVIRU6HFRQGDU\1HWZRUN3URWHFWRUV
,(((6WG&±70 5 $PHULFDQ1DWLRQDO6WDQGDUG5HTXLUHPHQWVIRU9HQWLODWHG'U\7\SH'LVWULEXWLRQ
7UDQVIRUPHUVWRN9$6LQJOH3KDVHDQGN9$7KUHH3KDVHZLWK+LJK9ROWDJH
WR9ROWV/RZ9ROWDJHWR9ROWV
,(((6WG&±70 5 $PHULFDQ1DWLRQDO6WDQGDUG5HTXLUHPHQWVIRU9HQWLODWHG'U\7\SH'LVWULEXWLRQ
7UDQVIRUPHUVN9$DQG/DUJHU7KUHH3KDVHZLWK+LJK9ROWDJHWR9ROWV
/RZ9ROWDJH<WR9ROWV
,(((6WG&±70 5 $PHULFDQ1DWLRQDO6WDQGDUG5HTXLUHPHQWVIRU6HDOHG'U\7\SH'LVWULEXWLRQ7UDQVIRUPHUV
N9$DQG/DUJHU7KUHH3KDVHZLWK+LJK9ROWDJHWR9ROWV/RZ9ROWDJH
<WR9ROWV
,(((6WG&±70 5 $PHULFDQ1DWLRQDO6WDQGDUG5HTXLUHPHQWVIRU7UDQVIRUPHUV'U\7\SH7UDQVIRUPHUV8VHG
LQ8QLW,QVWDOODWLRQV,QFOXGLQJ6XEVWDWLRQV&RQIRUPDQFH6WDQGDUG
,(((6WG&±70 5 ,(((6WDQGDUG7HVW3URFHGXUHIRU7KHUPDO(YDOXDWLRQRI,QVXODWLRQ6\VWHPVIRU9HQWLODWHG
'U\7\SH3RZHUDQG'LVWULEXWLRQ7UDQVIRUPHUV
,(((6WG&±70
,(((*XLGHIRU&RQGXFWLQJD7UDQVLHQW9ROWDJH$QDO\VLVRID'U\7\SH7UDQVIRUPHU&RLO
,(((6WG&±70
,(((*XLGHIRU'U\7\SH7UDQVIRUPHU7KURXJK)DXOW&XUUHQW'XUDWLRQ
,(((6WG&±70
,(((*XLGHIRU7HVW3URFHGXUHVIRU7KHUPDO(YDOXDWLRQRI,QVXODWLRQ6\VWHPVIRU6ROLG&DVW
DQG5HVLQ(QFDSVXODWHG3RZHUDQG'LVWULEXWLRQ7UDQVIRUPHUV
,(((6WG&±70
,(((6WDQGDUG7HUPLQDO0DUNLQJVDQG&RQQHFWLRQVIRU'LVWULEXWLRQDQG3RZHUWUDQVIRUPHUV
,(((6WG&±70
,(((6WDQGDUG7HUPLQRORJ\IRU3RZHUDQG'LVWULEXWLRQ7UDQVIRUPHUV
3DJH7UDQVIRUPHU+DQGERRN
,(((6WG&±70
,(((6WDQGDUGWHVW&RGHIRU/LTXLG,PPHUVHG'LVWULEXWLRQ3RZHUDQG5HJXODWLQJ
7UDQVIRUPHUVDQG,(((*XLGHIRU6KRUW&LUFXLW7HVWLQJRI'LVWULEXWLRQDQG3RZHU
7UDQVIRUPHUV
,(((6WG&±70
,(((6WDQGDUG7HVW&RGHIRU'U\7\SH'LVWULEXWLRQDQG3RZHU7UDQVIRUPHUV
,(((6WG&±70
,(((6WDQGDUG3UDFWLFHVDQG5HTXLUHPHQWVIRU6HPLFRQGXFWRU5HFWLILHU7UDQVIRUPHUV
,(((6WG&±70 5 ,(((6WDQGDUG*HQHUDO5HTXLUHPHQWVDQG7HVW3URFHGXUHVIRU2XWGRRU3RZHU$SSDUDWXV
%XVKLQJV
,(((6WG&±70
,(((6WDQGDUG3HUIRUPDQFH&KDUDFWHULVWLFVDQG'LPHQVLRQVIRU2XWGRRU$SSDUDWXV
%XVKLQJV
,(((6WG&±70 5 ,(((6WDQGDUG5HTXLUHPHQWV7HUPLQRORJ\DQG7HVW&RGHIRU%XVKLQJVIRU'&$SSOLFDWLRQV
,(((6WG&±70
,(((*XLGHIRU$SSOLFDWLRQRI3RZHU$SSDUDWXV%XVKLQJV
,(((6WG&±70 5 ,(((*XLGHIRU/RDGLQJ0LQHUDO2LO,PPHUVHG7UDQVIRUPHUV
,(((6WG&±&RU±70
,(((*XLGHIRU/RDGLQJ0LQHUDO2LO,PPHUVHG7UDQVIRUPHUV&RUULJHQGXP &RUULJHQGXPWR
,(((&± 70
,(((6WG&±70
,(((*XLGHIRU,QVWDOODWLRQRI/LTXLG,PPHUVHG3RZHUWUDQVIRUPHUV
,(((&± 5 70
,(((5HFRPPHQGHG3UDFWLFHIRUWKH,QVWDOODWLRQ$SSOLFDWLRQ2SHUDWLRQDQG0DLQWHQDQFH
RI'U\7\SH*HQHUDO3XUSRVH'LVWULEXWLRQDQG3RZHU7UDQVIRUPHUV
,(((6WG&±70
,(((*XLGHIRU/RDGLQJ'U\7\SH'LVWULEXWLRQDQG3RZHU7UDQVIRUPHUV
,(((&± 5 70
,(((*XLGHIRU,PSXOVH7HVWV
,(((6WG&±70
,(((6WDQGDUG7HVW3URFHGXUHIRU7KHUPDO(YDOXDWLRQRI/LTXLG,PPHUVHG'LVWULEXWLRQDQG
3RZHU7UDQVIRUPHUV
,(((6WG&±70
,(((*XLGHIRUWKH,QWHUSUHWDWLRQRI*DVHV*HQHUDWHGLQ2LO,PPHUVHG7UDQVIRUPHUV
,(((6WG&±70 5 ,(((*XLGHIRUWKH$SSOLFDWLRQRI7UDQVIRUPHU&RQQHFWLRQVLQ7KUHH3KDVH'LVWULEXWLRQ
6\VWHPV
,(((6WG&70±70
,(((*XLGHIRU$FFHSWDQFHDQG0DLQWHQDQFHRI,QVXODWLQJ2LOLQ(TXLSPHQW
,(((6WG&±70 5 ,(((*XLGHIRU$FFHSWDQFHRI6LOLFRQH,QVXODWLQJ)OXLGVDQG,WV0DLQWHQDQFHLQ
7UDQVIRUPHUV
,(((6WG&±70 5 ,(((*XLGHIRU3DUWLDO'LVFKDUJH0HDVXUHPHQWLQ/LTXLG)LOOHG7UDQVIRUPHUVDQG6KXQW
5HDFWRUV
,(((6WG&±70 5 ,(((*XLGHIRU7UDQVIRUPHUV'LUHFWO\&RQQHFWHGWR*HQHUDWRUV
,(((6WG&70
,(((/RVV(YDOXDWLRQ*XLGHIRU3RZHU7UDQVIRUPHUVDQG5HDFWRUV
7UDQVIRUPHU+DQGERRN3DJH
,(((6WG&±70
,(((*XLGHIRU$FFHSWDQFHDQG0DLQWHQDQFHRI/HVV)ODPPDEOH+\GURFDUERQ)OXLGLQ
7UDQVIRUPHUV
,(((6WG&±70
,(((*XLGHIRU7UDQVIRUPHU/RVV0HDVXUHPHQW
,(((6WG&±70 5 ,(((5HFRPPHQGHG3UDFWLFHIRUWKH'HWHFWLRQRI3DUWLDO'LVFKDUJHDQGWKH0HDVXUHPHQWRI
$SSDUHQW&KDUJHLQ'U\7\SH7UDQVIRUPHUV
,(((6WG&± 5 70
,(((*XLGHIRU)DLOXUH,QYHVWLJDWLRQ'RFXPHQWDWLRQDQGDQDO\VLVIRU3RZHU7UDQVIRUPHUV
DQG6KXQW5HDFWRUV
,(((6WG&±70
,(((7ULDO8VH*XLGHIRUWKH'HWHFWLRQRI$FRXVWLF(PLVVLRQVIURP3DUWLDO'LVFKDUJHVLQ2LO
,PPHUVHG3RZHU7UDQVIRUPHUV
,(((6WG&±70
,(((6WDQGDUG*HQHUDO5HTXLUHPHQWVDQG7HVW&RGHIRU2LO,PPHUVHG+9'&&RQYHUWHU
7UDQVIRUPHUV
,(((6WG&±70
,(((6WDQGDUG5HTXLUHPHQWVIRU/RDG7DS&KDQJHUV
,(((6WG&±70
,(((*XLGHIRU'HWHUPLQDWLRQRI+RWWHVW6SRW7HPSHUDWXUHLQ'U\7\SH7UDQVIRUPHUV
,(((6WG&±70
,(((*XLGHIRUWKH$SSOLFDWLRQ6SHFLILFDWLRQDQG7HVWLQJRI3KDVH6KLIWLQJ7UDQVIRUPHUV
,(((6WG&±70
,(((*XLGHIRU6RXQG/HYHO$EDWHPHQWDQG'HWHUPLQDWLRQIRU/LTXLGLPPHUVHG3RZHU
7UDQVIRUPHUVDQG6KXQW5HDFWRUV5DWLQJV2YHUN9$
,(((6WG&±70
,(((5HFRPPHQGHG3UDFWLFHIRU5RXWLQH,PSXOVH7HVWIRU'LVWULEXWLRQ7UDQVIRUPHUV
3DJH7UDQVIRUPHU+DQGERRN
27+(55(/(9$1767$1'$5'6$1'/,77(5$785(
>@
&,*5(VHVVLRQ5HSRUW5HVRQDQFH%HKDYLRXURI+LJK9ROWDJH7UDQVIRUPHUVE\
:RUNLQJ*URXS
>@ 5:LOKHLPDQG0:DWHUV1HXWUDO*URXQGLQJLQ+LJK9ROWDJH7UDQVPLVVLRQ(OVHYLHU
3XEOLVKLQJ&RPSDQ\
>@ (0+XQWHUDQG3+/LJKW'HWHUPLQDWLRQRI*URXQG)DXOW&XUUHQWVDQG9ROWDJHVRQ
7UDQVPLVVLRQ6\VWHPV*HQ(O5HY $SULO >@ $%%&DWDORJXHSXEOLFDWLRQ+60HQ&RQWUROOHG6ZLWFKLQJ%X\HU¶V*XLGH(GLWLRQ
>@ $OWHUXQJVPHVVXQJHQDQ3DSLHUÐOSUREHQ(79$3$1U
>@ *LRUJLR%HUWDJQROOL6+257&,5&8,7'87<2)32:(575$16)250(56±7+($%%
$3352$&+
>@ 5GHQEHUJ(OHNWULVFKH6FKDOWYRUJlQJH$XIODJH
,6%16SULQJHU9HUODJ%HUOLQ+HLGHOEHUJ1HZ<RUN
,6%16SULQJHU9HUODJ1HZ<RUN+HLGHOEHUJ%HUOLQ
>@ +HUEHUW%DDW]hEHUVSDQQXQJHQLQ(QHUJLHYHUVRUJXQJVQHW]HQ
6SULQJHU9HUODJ
>@ $%%6ZLWFKJHDU0DQXDOWKHGLWLRQ
>@ ,62 4XDOLW\PDQDJHPHQWV\VWHPV5HTXLUHPHQWV
>@
>@
>@
>@
>@
>@
(1 *HQHUDOFULWHULDIRUVXSSOLHU¶VGHFODUDWLRQRIFRQIRUPLW\
((&
(OHFWURPDJQHWLFFRPSDWLELOLW\
((& /RZYROWDJHHTXLSPHQW
(& 6DIHW\RIPDFKLQHU\
,(9
(OHFWURWHFKQLFDO9RFDEXODU\
$%%7HVWLQJRI3RZHU7UDQVIRUPHUVVWHGLWLRQ
,6%1
>@ $%%cNH&DUOVRQ3RZHU7UDQVIRUPHU'HVLJQ)XQGDPHQWDOV
>@ $%%cNH&DUOVRQ3RZHU6\VWHP)XQGDPHQWDOV
7UDQVIRUPHU+DQGERRN3DJH
([WUDFWVIURP
,(& 32:(5,167$//$7,216
(;&((',1*.9$&±
3$57&2002158/(6 7KHLQIRUPDWLRQJLYHQLQWKLVVHFWLRQLVDQH[WUDFWIURP,(& 3RZHULQVWDOODWLRQV
H[FHHGLQJN9DF&RPPRQUXOHV
)RUIXOOWH[WVHHWKHUHOHYDQWVWDQGDUG7KHQXPEHULQJIROORZVWKHQXPEHULQJLQWKHVWDQGDUGZLWK
SUHFHGLQJ5H
&RS\ULJKW‹,(&*HQHYD6ZLW]HUODQGZZZLHFFK
5H)81'$0(17$/5(48,5(0(176
5H*HQHUDO
,QVWDOODWLRQV DQG HTXLSPHQW VKDOO EH FDSDEOH RI ZLWKVWDQGLQJ HOHFWULFDO PHFKDQLFDO FOLPDWLF DQG
HQYLURQPHQWDOLQIOXHQFHVDQWLFLSDWHGRQVLWH
7KHUHOHYDQWODZVRUUHJXODWLRQVRIDQDXWKRULW\KDYLQJMXULVGLFWLRQVKDOOKDYHSUHFHGHQFH
5H,168/$7,21
$V FRQYHQWLRQDO DLU LQVXODWHG LQVWDOODWLRQV FDQQRW EH LPSXOVH WHVWHG WKH LQVWDOODWLRQ UHTXLUHV
PLQLPXP FOHDUDQFHV EHWZHHQ OLYH SDUWV DQG HDUWK DQG EHWZHHQ OLYH SDUWV RI SKDVHV LQ RUGHU WR
DYRLGIODVKRYHUEHORZWKHLPSXOVHZLWKVWDQGOHYHOVSHFLILHGIRULQGLYLGXDOWHVWHGFRPSRQHQWVRIWKH
LQVWDOODWLRQ
,QVXODWLRQFRRUGLQDWLRQVKDOOEHLQDFFRUGDQFHZLWK,(&
7DEOH±0LQLPXPFOHDUDQFHVLQDLU±9ROWDJHUDQJH, N98P”N9
9ROWDJH
UDQJH
1RPLQDO
YROWDJHRI
V\VWHP
+LJKHVW
YROWDJHIRU
HTXLSPHQW
5DWHGVKRUW
GXUDWLRQSRZHU
IUHTXHQF\
ZLWKVWDQGYROWDJH
5DWHGOLJKWQLQJ
LPSXOVH
ZLWKVWDQG
D
YROWDJH 8Q
UPV
8P
UPV
UPV
—V
SHDNYDOXH ,QGRRU
LQVWDOODWLRQV
2XWGRRU
LQVWDOODWLRQV
N9
N9
N9
PP
PP
N9
E
E
E
E
E
E
E
E
E
7KHUDWHGOLJKWQLQJLPSXOVHLVDSSOLFDEOHWRSKDVHWRSKDVHDQGSKDVHWRHDUWK
,IYDOXHVDUHFRQVLGHUHGLQVXIILFLHQWWRSURYHWKDWWKHUHTXLUHGSKDVHWRSKDVHZLWKVWDQGYROWDJHVDUHPHW
DGGLWLRQDOSKDVHWRSKDVHZLWKVWDQGWHVWVDUHQHHGHG
)RUURGVWUXFWXUH
,
D
E
F
0LQLPXPSKDVHWRHDUWKDQG
F
SKDVHWRSKDVHFOHDUDQFH1 3DJH7UDQVIRUPHU+DQGERRN
5H (48,30(17
5H*HQHUDOUHTXLUHPHQWV
5H6HOHFWLRQ
(TXLSPHQWVKDOOEHVHOHFWHGDQGLQVWDOOHGWRVDWLVI\WKHIROORZLQJUHTXLUHPHQWV
D VDIHFRQVWUXFWLRQZKHQSURSHUO\DVVHPEOHGLQVWDOOHGDQGFRQQHFWHGWRVXSSO\
E VDIHDQGSURSHUSHUIRUPDQFHWDNLQJLQWRDFFRXQWWKHH[WHUQDOLQIOXHQFHVWKDWFDQEHH[SHFWHG
DWWKHLQWHQGHGORFDWLRQ
F
VDIHDQGSURSHUSHUIRUPDQFHGXULQJQRUPDORSHUDWLRQDQGLQWKHHYHQWRIUHDVRQDEO\H[SHFWHG
FRQGLWLRQVRIRYHUORDGDEQRUPDORSHUDWLRQDQGIDXOWZLWKRXWUHVXOWLQJLQGDPDJHWKDWZRXOG
UHQGHUWKHHTXLSPHQWXQVDIH
G SURWHFWLRQRISHUVRQQHOGXULQJXVHDQGPDLQWHQDQFHRIWKHHTXLSPHQW
5H ,167$//$7,216
5H*HQHUDOUHTXLUHPHQWV
7KLV FODXVH VSHFLILHV RQO\ JHQHUDO UHTXLUHPHQWV IRU WKH LQVWDOODWLRQV UHJDUGLQJ FKRLFH RI FLUFXLW
DUUDQJHPHQWFLUFXLWGRFXPHQWDWLRQWUDQVSRUWURXWHVOLJKWLQJRSHUDWLRQDOVDIHW\DQGODEHOOLQJ
'LVWDQFHV FOHDUDQFHV DQG GLPHQVLRQV VSHFLILHG DUH WKH PLQLPXP YDOXHV SHUPLWWHG IRU VDIH
RSHUDWLRQ7KH\DUHJHQHUDOO\EDVHGRQWKHPLQLPXPYDOXHVJLYHQLQWKHIRUPHUQDWLRQDOVWDQGDUGV
RIWKH,(&PHPEHUV$XVHUPD\VSHFLI\KLJKHUYDOXHVLIQHFHVVDU\
127()RUPLQLPXPFOHDUDQFHV 1 RIOLYHSDUWVUHIHUWRDQGWRWDEOHVDQGDQGDQQH[$
1DWLRQDOVWDQGDUGVDQGUHJXODWLRQVPD\UHTXLUHWKHXVHRIKLJKHUFOHDUDQFHYDOXHV
:KHUH DQ H[LVWLQJ LQVWDOODWLRQ LV WR EH H[WHQGHG WKH UHTXLUHPHQWV DSSOLFDEOH DW WKH WLPH RI LWV
GHVLJQDQGHUHFWLRQPD\EHVSHFLILHGDVDQDOWHUQDWLYH
7KH UHOHYDQW VWDQGDUGV IRU RSHUDWLRQ RI HOHFWULFDO SRZHU LQVWDOODWLRQV VKDOO DGGLWLRQDOO\ EH WDNHQ
LQWRDFFRXQW2SHUDWLQJSURFHGXUHVVKDOOEHDJUHHGXSRQEHWZHHQPDQXIDFWXUHUDQGXVHU:KHUH
DSSOLFDEOH WKH GRFXPHQWDWLRQ VKDOO EH SURYLGHG ZLWK HDFK LQVWDOODWLRQ WR DOORZ HUHFWLRQ
FRPPLVVLRQLQJRSHUDWLRQPDLQWHQDQFHDQGHQYLURQPHQWDOSURWHFWLRQ
7KHH[WHQWRIWKHGRFXPHQWDWLRQVKDOOEHDJUHHGXSRQEHWZHHQWKHVXSSOLHUDQGWKHXVHU
'LDJUDPV FKDUWV DQG WDEOHV LI DQ\ VKDOO EH SUHSDUHG LQ DFFRUGDQFH ZLWK ,(& DQG ,(&
5H2SHUDWLRQDOVDIHW\
2SHUDWLRQDO VDIHW\ LQVWDOODWLRQV VKDOO EH GHVLJQHG VR WKDW WKH HVFDSH DQG UHVFXH SDWKV DQG WKH
HPHUJHQF\ H[LW FDQ EH VDIHO\ XVHG LQ WKH HYHQW RI D ILUH DQG WKDW SURWHFWLRQ DQG HQYLURQPHQWDO
FRPSDWLELOLW\DUHHQVXUHG
:KHUH QHFHVVDU\ LQVWDOODWLRQV WKHPVHOYHV VKDOO EH SURWHFWHG DJDLQVW ILUH KD]DUG IORRGLQJ DQG
FRQWDPLQDWLRQ ,I UHTXLUHG DGGLWLRQDO PHDVXUHV VKDOO EH WDNHQ WR SURWHFW LPSRUWDQW LQVWDOODWLRQV
DJDLQVWWKHHIIHFWVRIURDGWUDIILF VDOWVSUD\YHKLFOHDFFLGHQW 5H 6$)(7<0($685(6
,QVWDOODWLRQV VKDOO EH FRQVWUXFWHG LQ VXFK D ZD\ DV WR HQDEOH WKH RSHUDWLQJ DQG PDLQWHQDQFH
SHUVRQQHO WR FLUFXODWH DQG LQWHUYHQH ZLWKLQ WKH IUDPHZRUN RI WKHLU GXWLHV DQG DXWKRUL]DWLRQV
DFFRUGLQJWRFLUFXPVWDQFHVDWDQ\SRLQWRIWKHLQVWDOODWLRQ
6SHFLILFPDLQWHQDQFHZRUNSUHSDUDWLRQDQGUHSDLUZRUNZKLFKLQYROYHZRUNLQJLQWKHYLFLQLW\RIOLYH
SDUWV RU DFWXDO ZRUN RQ OLYH SDUWV DUH FDUULHG RXW REVHUYLQJ WKH UXOHV SURFHGXUHV DQG ZRUN
GLVWDQFHVDVGHILQHGLQQDWLRQDOVWDQGDUGVDQGUHJXODWLRQV
7UDQVIRUPHU+DQGERRN3DJH
5H3URWHFWLRQDJDLQVWILUH
5H*HQHUDO
5HOHYDQWQDWLRQDOSURYLQFLDODQGORFDOILUHSURWHFWLRQUHJXODWLRQVVKDOOEHWDNHQLQWRDFFRXQWLQWKH
GHVLJQRIWKHLQVWDOODWLRQ
127( )LUH KD]DUG DQG ILUH ULVN RI HOHFWULFDO HTXLSPHQW LV VHSDUDWHG LQWR WZR FDWHJRULHV ILUH YLFWLP DQG ILUH
RULJLQ3UHFDXWLRQVIRUHDFKFDWHJRU\VKRXOGEHWDNHQLQWRDFFRXQWLQWKHLQVWDOODWLRQUHTXLUHPHQWV
D 3UHFDXWLRQVWRILUHYLFWLP
L VSDFHVHSDUDWLRQIURPRULJLQRIILUH
LL IODPHSURSDJDWLRQSUHYHQWLRQ
íJUDGLQJ
íOLTXLGFRQWDLQPHQW
íILUHEDUULHUV HJ5(,ILUHUHVLVWDQWPDWHULDOV íH[WLQJXLVKLQJV\VWHP
E 3UHFDXWLRQVWRILUHRULJLQ
L HOHFWULFDOSURWHFWLRQ
LL WKHUPDOSURWHFWLRQ
LLL SUHVVXUHSURWHFWLRQ
LY ILUHUHVLVWDQWPDWHULDOV
&DUHVKDOOEHWDNHQWKDWLQWKHHYHQWRIILUHWKHHVFDSHDQGUHVFXHSDWKVDQGWKHHPHUJHQF\H[LWV
FDQEHXVHG VHH 7KHXVHURURZQHURIWKHLQVWDOODWLRQVKDOOVSHFLI\DQ\UHTXLUHPHQWIRUILUHH[WLQJXLVKLQJHTXLSPHQW
$XWRPDWLF GHYLFHV WR SURWHFW DJDLQVW HTXLSPHQW EXUQLQJ GXH WR VHYHUH RYHUKHDWLQJ RYHUORDGLQJ
DQG IDXOWV LQWHUQDOH[WHUQDO VKDOO EH SURYLGHG GHSHQGLQJ RQ WKH VL]H DQG VLJQLILFDQFH RI WKH
LQVWDOODWLRQ
(TXLSPHQW LQ ZKLFK WKHUH LV D SRWHQWLDO IRU VSDUNV DUFLQJ H[SORVLRQ RU KLJK WHPSHUDWXUH IRU
H[DPSOH HOHFWULFDO PDFKLQHV WUDQVIRUPHUV UHVLVWRUV VZLWFKHV DQG IXVHV VKDOO QRW EH XVHG LQ
RSHUDWLQJ DUHDV VXEMHFW WR ILUH KD]DUG XQOHVV WKH FRQVWUXFWLRQ RI WKLV HTXLSPHQW LV VXFK WKDW
IODPPDEOHPDWHULDOVFDQQRWEHLJQLWHGE\WKHP
,I WKLV FDQQRW EH HQVXUHG VSHFLDO SUHFDXWLRQV IRU H[DPSOH ILUH ZDOOV ILUHUHVLVWDQW VHSDUDWLRQV
YDXOWVHQFORVXUHVDQGFRQWDLQPHQWDUHQHFHVVDU\
5H7UDQVIRUPHUVUHDFWRUV
,QWKHIROORZLQJVXEFODXVHVWKHZRUG WUDQVIRUPHU UHSUHVHQWV WUDQVIRUPHUVDQGUHDFWRUV )RUWKHLGHQWLILFDWLRQRIFRRODQWW\SHVVHH,(&FODVVLILHVLQVXODWLQJOLTXLGVDFFRUGLQJ
WRILUHSRLQWDQGQHWFDORULFYDOXH KHDWRIFRPEXVWLRQ ,(&FODVVLILHVGU\W\SHWUDQVIRUPHUV
LQWHUPVRIWKHLUEHKDYLRXUZKHQH[SRVHGWRILUH
7KH ILUH KD]DUG DVVRFLDWHG ZLWK WUDQVIRUPHUV RI RXWGRRU DQG LQGRRU LQVWDOODWLRQV LV GHSHQGHQW RQ
WKHUDWLQJRIWKHHTXLSPHQWWKHYROXPHDQGW\SHRILQVXODWLQJPHGLXPVWKHW\SHDQGSUR[LPLW\DQG
H[SRVXUH RI QHDUE\ HTXLSPHQW DQG VWUXFWXUHV 7KH XVH RI RQH RU PRUH UHFRJQL]HG VDIHJXDUG
PHDVXUHVVKDOOEHXVHGLQDFFRUGDQFHZLWKWKHHYDOXDWLRQRIWKHULVN
127()RUGHILQLWLRQRIULVNVHH,62,(&*XLGH
&RPPRQVXPSVRUFDWFKPHQWWDQNVLIUHTXLUHGIRUVHYHUDOWUDQVIRUPHUVVKDOOEHDUUDQJHGVRWKDW
DILUHLQRQHWUDQVIRUPHUFDQQRWVSUHDGWRDQRWKHU
7KH VDPH DSSOLHV WR LQGLYLGXDO VXPSV ZKLFK DUH FRQQHFWHG WR WKH FDWFKPHQW WDQNV RI RWKHU
WUDQVIRUPHUV JUDYHO OD\HUV RU SLSHV ILOOHG ZLWK IOXLG FDQ IRU H[DPSOH EH XVHG IRU WKLV SXUSRVH
$UUDQJHPHQWVZKLFKWHQGWRPLQLPL]HWKHILUHKD]DUGRIWKHHVFDSHGIOXLGDUHSUHIHUUHG
5H2XWGRRULQVWDOODWLRQV
7KHOD\RXWRIDQRXWGRRULQVWDOODWLRQVKDOOEHVXFKWKDWEXUQLQJRIDWUDQVIRUPHUZLWKDOLTXLGYROXPH
RIPRUHWKDQOZLOOQRWFDXVHDILUHKD]DUGWRRWKHUWUDQVIRUPHUVRUREMHFWV)RUWKLVSXUSRVH
DGHTXDWHFOHDUDQFHV *VKDOOQHFHVVDU\ *XLGH YDOXHV DUH JLYHQ LQ WDEOH :KHUH WUDQVIRUPHUV
ZLWKDOLTXLGYROXPHEHORZODUHLQVWDOOHGQHDUFRPEXVWLEOHZDOOVVSHFLDOILUHSUHFDXWLRQVPD\
EHQHFHVVDU\GHSHQGLQJRQWKHQDWXUHDQGWKHXVHRIWKHEXLOGLQJ
3DJH7UDQVIRUPHU+DQGERRN
,ILWLVQRWSRVVLEOHWRDOORZIRUDGHTXDWHFOHDUDQFHDVLQGLFDWHGLQWDEOHILUHUHVLVWDQWVHSDUDWLQJ
ZDOOVZLWKWKHIROORZLQJGLPHQVLRQVVKDOOEHSURYLGHG
D EHWZHHQWUDQVIRUPHUV VHHILJXUH VHSDUDWLQJZDOOV)RUH[DPSOH(,LQDFFRUGDQFHZLWK
WKH2IILFLDO-RXUQDORIWKH(XURSHDQ&RPPXQLW\1R&
− KHLJKWWRSRIWKHH[SDQVLRQFKDPEHU LIDQ\ RWKHUZLVHWKHWRSRIWKHWUDQVIRUPHUWDQN
−
OHQJWKZLGWKRUOHQJWKRIWKHVXPS LQWKHFDVHRIDGU\W\SHWUDQVIRUPHUWKHZLGWKRUOHQJWK
RIWKHWUDQVIRUPHUGHSHQGLQJXSRQWKHGLUHFWLRQRIWKHWUDQVIRUPHU E EHWZHHQWUDQVIRUPHUVDQGEXLOGLQJV VHHILJXUH VHSDUDWLQJZDOOV)RUH[DPSOH(,LI
DGGLWLRQDOILUHVHSDUDWLQJZDOOLVQRWSURYLGHGILUHUDWLQJRIWKHEXLOGLQJZDOOVKRXOGEH
LQFUHDVHGIRUH[DPSOH5(,LQDFFRUGDQFHZLWKWKH2IILFLDO-RXUQDORIWKH(XURSHDQ
&RPPXQLW\&
5H,QGRRULQVWDOODWLRQVLQHOHFWULFDOSRZHUV\VWHPV
0LQLPXPUHTXLUHPHQWVIRUWKHLQVWDOODWLRQRILQGRRUWUDQVIRUPHUVDUHJLYHQLQWDEOH
7DEOH±*XLGHYDOXHVIRURXWGRRUWUDQVIRUPHUFOHDUDQFHV
7UDQVIRUPHUW\SH
2LOLQVXODWHG
WUDQVIRUPHUV 2 /HVVIODPPDEOH
OLTXLGLQVXODWHG
WUDQVIRUPHUV . ZLWKRXWHQKDQFHG
SURWHFWLRQ
/HVVIODPPDEOH
OLTXLGLQVXODWHG
WUDQVIRUPHUV . ZLWK
HQKDQFHGSURWHFWLRQ
'U\W\SH
WUDQVIRUPHUV $ /LTXLGYROXPH
/
««
”««
”«
•
««
&OHDUDQFH*WR
RWKHUWUDQVIRUPHUVRU
FRPEXVWLEOHEXLOGLQJ
QRQFRPEXVWLEOH
VXUIDFH
EXLOGLQJVXUIDFH
P
P
•
&OHDUDQFH*WREXLOGLQJVXUIDFHRUDGMDFHQWWUDQVIRUPHUV
+RUL]RQWDO
9HUWLFDO
P
P
)LUHEHKDYLRXUFODVV
)
))
&OHDUDQFH*WREXLOGLQJVXUIDFH
RUDGMDFHQWWUDQVIRUPHUV
9HUWLFDO
+RUL]RQWDO
P
P
1RQH
1RQH
127((QKDQFHGSURWHFWLRQPHDQV
±WDQNUXSWXUHVWUHQJWK
±WDQNSUHVVXUHUHOLHI
±ORZFXUUHQWIDXOWSURWHFWLRQ
±KLJKFXUUHQWIDXOWSURWHFWLRQ
)RUDQH[DPSOHRIHQKDQFHGSURWHFWLRQVHH)DFWRU\0XWXDO*OREDOVWDQGDUGRUHTXLYDOHQW
,IDXWRPDWLFDOO\DFWLYDWHGILUHH[WLQJXLVKLQJHTXLSPHQWLVLQVWDOOHGWKHFOHDUDQFH*FDQEHUHGXFHG
7UDQVIRUPHU+DQGERRN3DJH
7DEOH±0LQLPXPUHTXLUHPHQWVIRUWKHLQVWDOODWLRQRILQGRRUWUDQVIRUPHUV
/LTXLGYROXPH
7UDQVIRUPHUW\SH
6DIHJXDUGV
O
2LOLQVXODWHGWUDQVIRUPHUV
2
/HVVIODPPDEOHOLTXLG
LQVXODWHGWUDQVIRUPHUV . ZLWKRXWHQKDQFHG
SURWHFWLRQ
”
(,UHVSHFWLYHO\5(,
!
(,UHVSHFWLYHO\5(,RU(,UHVSHFWLYHO\5(,
DQGDXWRPDWLFVSULQNOHUSURWHFWLRQ
(,UHVSHFWLYHO\5(,RUDXWRPDWLFVSULQNOHU
SURWHFWLRQ
/HVVIODPPDEOHOLTXLG
LQVXODWHGWUDQVIRUPHUV . ZLWKHQKDQFHGSURWHFWLRQ
” 09$DQG
8P”N9
)LUHEHKDYLRXUFODVV
'U\W\SHWUDQVIRUPHU $
)
))
(,UHVSHFWLYHO\5(,RUVHSDUDWLRQGLVWDQFHVP
KRUL]RQWDOO\DQGPYHUWLFDOO\
(,UHVSHFWLYHO\5(,RUVHSDUDWLRQGLVWDQFHVP
KRUL]RQWDOO\DQGPYHUWLFDOO\
1RQFRPEXVWLEOHZDOOV
127(5(,UHSUHVHQWVEHDULQJV\VWHP ZDOO ZKHUHDV(,UHSUHVHQWVQRQORDGEHDULQJV\VWHP ZDOO ZKHUH5LV
WKHORDGEHDULQJFDSDFLW\(LVWKHILUHLQWHJULW\,LVWKHWKHUPDOLQVXODWLRQDQGUHIHUVWRWLPHLQPLQXWHV
127((QKDQFHGSURWHFWLRQPHDQV
±WDQNUXSWXUHVWUHQJWK
±WDQNSUHVVXUHUHOLHI
±ORZFXUUHQWIDXOWSURWHFWLRQ
±KLJKFXUUHQWIDXOWSURWHFWLRQ
)RUDQH[DPSOHRIHQKDQFHGSURWHFWLRQVHH)DFWRU\0XWXDO*OREDOVWDQGDUGRUHTXLYDOHQW
'RRUVVKDOOKDYHDILUHUHVLVWDQFHRIDWOHDVWPLQ'RRUVZKLFKRSHQWRWKHRXWVLGHDUHDGHTXDWH
LI WKH\ DUH RI ILUHUHWDUGDQW PDWHULDO DQG FRQVWUXFWLRQ 9HQWLODWLRQ RSHQLQJV QHFHVVDU\ IRU WKH
RSHUDWLRQRIWKHWUDQVIRUPHUVDUHSHUPLWWHG:KHQGHVLJQLQJWKHRSHQLQJVWKHSRVVLEOHHVFDSHRI
KRWJDVHVVKDOOEHFRQVLGHUHG
)LJXUH±6HSDUDWLQJZDOOVEHWZHHQWUDQVIRUPHUV
D
7KHZDOOLQWKLVDUHDVKDOOEHGHVLJQHGWRDYRLGVSUHDGRIILUH
3DJH7UDQVIRUPHU+DQGERRN
D
7KHZDOOLQWKLVDUHDVKDOOEHGHVLJQHGWRDYRLGVSUHDGRIILUH
)LJXUH)LUHSURWHFWLRQEHWZHHQWUDQVIRUPHUDQGEXLOGLQJ
127(,QDGGLWLRQWKHZDWHUIURPWKHILUHH[WLQJXLVKLQJ LIDQ\ VKRXOGEHFRQVLGHUHG
D
&RQWDLQPHQWWKHHQWLUHTXDQWLW\RIIOXLGRIWKHWUDQVIRUPHUSOXVUDLQZDWHU
)LJXUH±6XPSZLWKLQWHJUDWHGFDWFKPHQWWDQN
7UDQVIRUPHU+DQGERRN3DJH
D
&RQWDLQPHQWPLQLPXPRIWKHIOXLGIURPWKHWUDQVIRUPHU
)LJXUH±6XPSZLWKVHSDUDWHGFDWFKPHQWWDQN
127(,QDGGLWLRQWKHZDWHUIURPILUHHVWLQJXLVKLQJLQVWDOODWLRQ LIDQ\ VKRXOGEHFRQVLGHUHG
D
&RQWDLQPHQWRXWGRRUWKHHQWLUHTXDQWLW\RIIOXLGRIWKHODUJHVWWUDQVIRUPHUSOXVUDLQ
&RQWDLQPHQWLQGRRUWKHHQWLUHTXDQWLW\RIIOXLGRIWKHODUJHVWWUDQVIRUPHU
)LJXUH±6XPSZLWKLQWHJUDWHGFRPPRQFDWFKPHQWWDQN
127(7KHGRWWHGDUHDGHQRWHVWKHYROXPHRIWKHHQWLUHTXDQWLW\RILQVXODWLQJIOXLGRIWKH
WUDQVIRUPHUVSLOOHGRQWKHIORRU
)LJXUH±([DPSOHIRUVPDOOWUDQVIRUPHUZLWKRXWJUDYHOOD\HUDQGFDWFKPHQWWDQN
3DJH7UDQVIRUPHU+DQGERRN
5H 3527(&7,21&21752/$1'$8;,/,$5<6<67(06
5H0RQLWRULQJDQGFRQWUROV\VWHPV
0RQLWRULQJ SURWHFWLRQ UHJXODWLQJ DQG FRQWURO GHYLFHV VKDOO EH SURYLGHG DV QHFHVVDU\ IRU WKH
FRUUHFWDQGVDIHIXQFWLRQLQJRIWKHHTXLSPHQW
$XWRPDWLF GHYLFHV GHVLJQHG WR RIIHU VHOHFWLYLW\ DQG TXLFN RSHUDWLRQ VKDOO SURYLGH SURWHFWLRQ
DJDLQVWWKHHIIHFWVRIXQDFFHSWDEOHRYHUORDGDQGLQWHUQDODQGH[WHUQDOIDXOWVDSSURSULDWHWRWKHVL]H
DQGVLJQLILFDQFHRILQVWDOODWLRQ
(TXLSPHQW VKDOO FRPSO\ ZLWK WKH VHYHULW\ FODVV VHH ,(& FRUUHVSRQGLQJ WR WKH SDUW RI WKH
LQVWDOODWLRQLQZKLFKLWLVORFDWHG
)DFLOLWLHVVKDOOEHSURYLGHGIRULVRODWLQJWKHFRQWUROFLUFXLWRIHDFKSULPDU\VZLWFKLQJHTXLSPHQWRU
HDFK VZLWFKJHDU ED\ LQ RUGHU WR DOORZ PDLQWHQDQFH RI KLJK YROWDJH HTXLSPHQW WR EH SHUIRUPHG
VDIHO\
3URYLVLRQ VKDOO EH PDGH WR DOORZ IRU UHSDLU PDLQWHQDQFH DQGRU WHVWLQJ WR EH FDUULHG RXW RQ
SURWHFWLRQDQGFRQWUROGHYLFHVZLWKRXWDQ\GDQJHUWRSHUVRQQHORUWKHHTXLSPHQW
&RQWUROFLUFXLWVDQGVLJQDOOLQJFLUFXLWVVKDOOSUHIHUDEO\EHIXQFWLRQDOO\VHSDUDWHG7ULSSLQJVLJQDOV
VKDOOEHGLVSOD\HGRQWKHSURWHFWLRQSDQHOLILWH[LVWV
$ODUP DQG IDXOWLQGLFDWLQJ HTXLSPHQW VKDOO FOHDUO\ LQGLFDWH GDQJHU DQG IDXOW FRQGLWLRQV VHYHUDO
VLJQDOVFDQEHFRPELQHGDVDFRPPRQVLJQDOWREHWUDQVPLWWHGWRDUHPRWHFRQWUROSRLQW
7KHFRQWUROHTXLSPHQWDQGV\VWHPLQFOXGLQJFDEOHVDQGFRUGVVKDOOEHGHVLJQHGDQGLQVWDOOHGWR
PLQLPL]H WKH SRVVLELOLW\ RI GDPDJH WR WKH FRQQHFWHG HTXLSPHQW GXH WR HOHFWURPDJQHWLF
LQWHUIHUHQFH%DVLFUXOHVDUHJLYHQLQ
7KHFRQWUROHTXLSPHQWDQGV\VWHPLQFOXGLQJFDEOHVDQGFRUGVVKDOOEHGHVLJQHGDQGLQVWDOOHGLQ
VXFKDZD\WKDWWKH\PLQLPL]HWKHGDQJHUIURPRSHUDWLQJIDLOXUHLQDGYHUWHQWRSHUDWLRQRULQFRUUHFW
LQIRUPDWLRQ,QPHHWLQJWKLVUHTXLUHPHQWLQIOXHQFHVVXFKDVYROWDJHGLSVVXSSO\IDLOXUHLQVXODWLRQ
IDXOWVDQGHOHFWURPDJQHWLFLQWHUIHUHQFHHIIHFWVVKDOOEHWDNHQLQWRDFFRXQW
5H($57+,1*6<67(06
5H*HQHUDO
7KLV FODXVH SURYLGHV WKH FULWHULD IRU GHVLJQ LQVWDOODWLRQ WHVWLQJ DQG PDLQWHQDQFH RI DQ HDUWKLQJ
V\VWHPVXFKWKDWLWRSHUDWHVXQGHUDOOFRQGLWLRQVDQGHQVXUHVWKHVDIHW\RIKXPDQOLIHLQDQ\SODFH
WRZKLFKSHUVRQVKDYHOHJLWLPDWHDFFHVV,WDOVRSURYLGHVWKHFULWHULDWRHQVXUHWKDWWKHLQWHJULW\RI
HTXLSPHQWFRQQHFWHGDQGLQSUR[LPLW\WRWKHHDUWKLQJV\VWHPLVPDLQWDLQHG
5H)XQGDPHQWDOUHTXLUHPHQWV
5H6DIHW\FULWHULD
7KH KD]DUG WR KXPDQ EHLQJV LV WKDW D FXUUHQW ZLOO IORZ WKURXJK WKH UHJLRQ RI WKH KHDUW ZKLFK LV
VXIILFLHQWWRFDXVHYHQWULFXODUILEULOODWLRQ7KHFXUUHQWOLPLWIRUSRZHUIUHTXHQF\SXUSRVHVVKRXOGEH
GHULYHGIURP,(& FXUYH& )RUVXEVWDWLRQGHVLJQWKLVFXUYHQHHGVWREHWUDQVODWHGLQWR
YROWDJH OLPLWV IRU FRPSDULVRQ ZLWK WKH FDOFXODWHG VWHS DQG WRXFK YROWDJHV WDNLQJ LQWR DFFRXQW WKH
LPSHGDQFHSUHVHQWLQWKHERG\FXUUHQWSDWK$QQH[%VKRZVFXUYHVRIW\SLFDOYROWDJHOLPLWV7KH
YROWDJHOLPLWVVKDOOWDNHLQWRDFFRXQWWKHIROORZLQJIDFWRUV
± SURSRUWLRQRIFXUUHQWIORZLQJWKURXJKWKHUHJLRQRIWKHKHDUW
± ERG\LPSHGDQFHDORQJWKHFXUUHQWSDWK
EDVHGRQWKHYDOXHVRIWDEOHRI,(& ± UHVLVWDQFHEHWZHHQWKHERG\FRQWDFWSRLQWVDQGUHWXUQSDWKV
HJUHPRWHHDUWKHDUWKHOHFWURGH ± IDXOWGXUDWLRQ
± IDXOWFXUUHQWPDJQLWXGH
,W PXVW DOVR EH UHFRJQL]HG WKDW IDXOW RFFXUUHQFH IDXOW FXUUHQW PDJQLWXGH IDXOW GXUDWLRQ DQG
SUHVHQFHRIKXPDQEHLQJVDUHSUREDELOLVWLFLQQDWXUH
7UDQVIRUPHU+DQGERRN3DJH
5H$QQH[$
QRUPDWLYH 9DOXHV RI UDWHG LQVXODWLRQ OHYHOV DQG PLQLPXP FOHDUDQFHV EDVHG RQ
FXUUHQWSUDFWLFHLQVRPHFRXQWULHV
7DEOH$±9DOXHVRIUDWHGLQVXODWLRQOHYHOVDQGPLQLPXPFOHDUDQFHVLQDLUIRU
N98P”N9IRUKLJKHVWYROWDJHVIRUHTXLSPHQW8PQRWVWDQGDUGL]HG
E\WKH,(&EDVHGRQFXUUHQWSUDFWLFHLQVRPHFRXQWULHV
9ROWDJH
UDQJH
,
5DWHGVKRUW
GXUDWLRQSRZHU
IUHTXHQF\
ZLWKVWDQG
YROWDJH
1RPLQDO
YROWDJH
RI
V\VWHP
+LJKHVW
YROWDJHIRU
HTXLSPHQW
8Q
UPV
N9
8P
UPV
N9
5DWHGOLJKWQLQJ
LPSXOVH
ZLWKVWDQG
D
YROWDJH UPV
N9
0LQLPXPSKDVHWRHDUWKDQG
E
SKDVHWRSKDVHFOHDUDQFH1 —V
SHDNYDOXH N9
,QGRRU
LQVWDOODWLRQV
PP
2XWGRRU
LQVWDOODWLRQV
PP
7KHUDWHGOLJKWQLQJLPSXOVHLVDSSOLFDEOHSKDVHWRSKDVHDQGSKDVHWRHDUWK
E
)RUURGVWUXFWXUH
D
&RS\ULJKW‹,(&*HQHYD6ZLW]HUODQGZZZLHFFK
3DJH7UDQVIRUPHU+DQGERRN
,1'(;
DEESRZHUWHFKQRORJ\GLVWULEXWLRQ
WUDQVIRUPHUV DEEJURXS DEEUHYLDWLRQVDQGDFURQ\PV DELOLW\WRZLWKVWDQGVKRUWFLUFXLWFXUUHQWV DFFHVVRULHV DJHLQJ DJULFXOWXUDOHVWHU DODUPDQGWULSVLJQDOVIURPWKH
WUDQVIRUPHU DOORFDWLRQRIUHVSRQVLELOLWLHVEHWZHHQ
VXSSOLHUDQGSXUFKDVHU DQRPDORXVORVVHV DUFVXSSUHVVLRQUHDFWRUV DXWRPDWLFYROWDJHUHJXODWLRQ EDVLFSK\VLFVRIWKHWUDQVIRUPHU EDVLFVOXQLWV ELEOLRJUDSK\ EXLOWLQFXUUHQWWUDQVIRUPHUV EXVKLQJV EXVKLQJVDQGMRLQWV FDEOHFRQQHFWLRQV FDSDFLWRUGDPSLQJUHDFWRUV FDSLWDOLVDWLRQRIDX[LOLDU\SRZHU
FRQVXPHGLQWKHFRROLQJHTXLSPHQW FDSLWDOLVDWLRQRIORDGORVV FDSLWDOLVDWLRQRIQRORDGORVV FHPDUNLQJ FHOOXORVHPDWHULDOV
FHQHOHF FHQHOHFVWDQGDUGV FKRLFHRIV\VWHPYROWDJH FRPEXVWLEOHJDVGHWHFWRU FRPPLVVLRQLQJ FRPPRQUXOHVIRUSRZHULQVWDOODWLRQV
H[FHHGLQJNY FRPPRQWUDQVIRUPHUIHDWXUHV FRPSDULVRQEHWZHHQLHHHDQVL
VWDQGDUGVDQGLHFVWDQGDUGV FRQGHQVHUEXVKLQJV FRQGXFWRUPDWHULDOV FRQQHFWLQJWUDQVIRUPHUWHUPLQDOV
WRWKHQHWZRUNV FRQWULEXWRUV FRQYHUWRUVWDWLRQ FRQYHUWRUWUDQVIRUPHU FRROHUV
FRS\ULJKWQRWH
FRUHPDWHULDOV FRUHV FRUHW\SH FRUUXJDWHGWDQNV FXUUHQWOLPLWLQJUHDFWRUV FXVWRPHUUHYLHZRIWKHPDQDJHPHQW
V\VWHPV GFRQQHFWLRQ GHFODUDWLRQRIFRQIRUPLW\ GHFODUDWLRQRIFRQIRUPLW\ GRF GHILQLWLRQRISRZHUUDWLQJ
UDWHGNLORYROWDPSHUHV GHJUHHVRISURWHFWLRQDJDLQVW
VROLGREMHFWV GHJUHHVRISURWHFWLRQDJDLQVWZDWHU GHK\GUDWLQJEUHDWKHUV GLHOHFWULFVWUHVV GLHOHFWULFWHVWLQJ GLIIHUHQWLDOSURWHFWLRQ GLPHWK\OVLOLFRQH GLVSRVDODIWHUXVH GLVWULEXWLRQRIHQHUJ\ 7UDQVIRUPHU+DQGERRN3DJH
GLVWULEXWLRQWUDQVIRUPHUDFFHVVRULHV GRF GRFXPHQWDWLRQ GULYHVWUDQVIRUPHU GU\W\SH GU\W\SHWUDQVIRUPHUV HDUWKTXDNHZLWKVWDQGDELOLW\ HDUWKLQJ HDUWKLQJV\VWHPV HDUWKLQJWUDQVIRUPHUV QHXWUDOFRXSOHUV HGG\FXUUHQWORVVHV HIIHFWRIHOHFWURPDJQHWLFILHOGV
RQKXPDQV HIILFLHQF\ HOHFWULFDODQGPDJQHWLFTXDQWLWLHV HOHFWULFDOFOHDUDQFHVLQDLU HOHFWURPDJQHWLFFRPSDWLELOLW\ HOHFWURPDJQHWLFGLVWXUEDQFHV
RQWUDQVIRUPHUV HOHFWURPDJQHWLFILHOGLQWKHYLFLQLW\
RIWUDQVIRUPHUV HOHFWURPDJQHWLFLQGXFWLRQ HPF HQHUJL]LQJ HQYLURQPHQW HTXLSPHQW HTXLYDOHQWGLDJUDP HUHFWLRQDWVLWH IDQV IDXOWORFDOLVDWLRQDGYLFH
GU\W\SHWUDQVIRUPHU IDXOWORFDOLVDWLRQDGYLFHV
RLOLPPHUVHGWUDQVIRUPHUV IHHGEDFN IORZLQGLFDWRU IOXLGV IRUFHGRLOIRUFHGDLUKHDWH[FKDQJHUV IRUHZRUG IUHTXHQF\ IUHTXHQF\YDULDWLRQ IXQFWLRQRIWUDQVIRUPHUSURWHFWLYH
HTXLSPHQW IXQGDPHQWDOUHTXLUHPHQWV IXUQDFHWUDQVIRUPHU JDVDFWXDWHGUHOD\ JDVEXEEOHV JDVNHWV JHQHUDOHOHFWURWHFKQLFDOIRUPXODV JHQHUDWRUVWHSXSWUDQVIRUPHU KDQGOLQJOLIWLQJ KDUPRQLFV KLJKFXUUHQWEXVKLQJV KVHKHDOWKVDIHW\DQGHQYLURQPHQW KYGFWUDQVIRUPHUV LGHQWLI\LQJWHUPLQDOV LHF LHFVWDQGDUGV LHHHVWDQGDUGV LHHHVWDQGDUGV LQFRWHUPV LQGRRULQVWDOODWLRQVLQHOHFWULFDO
SRZHUV\VWHPV LQGXVWULDOWUDQVIRUPHUV LQIRUPDWLRQUHTXLUHGZLWKHQTXLU\
DQGRUGHU LQUXVKFXUUHQWV LQVSHFWLRQGXULQJRSHUDWLRQ LQVSHFWLRQLQGHHQHUJLVHGFRQGLWLRQ LQVWDOODWLRQ LQVWDOODWLRQDQGFRPPLVVLRQLQJ LQVXODWLRQ LQVXODWLRQPDWHULDOV LQVXODWLRQUHVLVWDQFH LQWHUKDUPRQLFV LQWHUQDORYHUYROWDJHVFDXVHGE\KLJK
IUHTXHQF\RVFLOODWLRQV LQWURGXFWLRQ LQYHVWLJDWLRQRIWUDQVIRUPHUGLVWXUEDQFHV LSFODVVLILFDWLRQ ODQGILOO ODUJHGLVWULEXWLRQWUDQVIRUPHUV OFD OGW OLIHF\FOHDVVHVVPHQW OFD OLIHWLPH OLJKWQLQJLPSXOVH OLPLWDWLRQRIWHPSRUDU\RYHUYROWDJHV OLPLWDWLRQRIWUDQVLHQWRYHUYROWDJHV OLQHIHHGHUWUDQVIRUPHUV OLTXLGFRQVHUYDWRUZLWK
UXEEHUGLDSKUDJP OLWWHUDWXUH ORDGORVV ORDGORVVHV ORDGUHMHFWLRQRYHUYROWDJHV ORFDOUHJXODWLRQV ORVVFDSLWDOL]DWLRQDQGRSWLPXP
WUDQVIRUPHUGHVLJQ ORZYROWDJHEXVKLQJV PDJQHWLFOHDNDJHILHOG PDLQWHQDQFH PDLQWHQDQFHLQGHHQHUJLVHGFRQGLWLRQ PDLQWHQDQFHLQHQHUJLVHGFRQGLWLRQ PDWKHPDWLFDOV\PEROVIRU
DOWHUQDWLQJFXUUHQWTXDQWLWLHV
DQGQHWZRUNTXDQWLWLHV PDWKHPDWLFDOV\PEROVIRUHOHFWULFDO
TXDQWLWLHV JHQHUDO PDWKHPDWLFDOV\PEROVIRUPDJQHWLF
TXDQWLWLHV JHQHUDO PHDVXUHPHQWV PHFKDQLFDOFKHFNV PHFKDQLFDOIRUFHV PHFKDQLFDOIRUFHVLQWKHZLQGLQJV PHGLXPGLVWULEXWLRQWUDQVIRUPHUV PLQHUDORLO PLVFHOODQHRXV PRQLWRULQJ PRQLWRULQJDQGFRQWUROV\VWHPV PRWRUGULYHXQLW PXOWLSOHVDQGVXEPXOWLSOHVRIXQLWV QHPD QHWZRUNFRQQHFWLRQ QHWZRUNWUDQVIRUPHU QHXWUDOHDUWKLQJUHDFWRUV QRORDG PDJQHWLVLQJ FXUUHQW
DQGQRORDGORVVHV QRORDGORVV QRUPDOLQIRUPDWLRQ REMHFWLYH RIIFLUFXLWWDSFKDQJHU RIIFLUFXLWWDSFKDQJHUV RIIFLUFXLWRQORDGWDSFKDQJHU RLOILOWHULQJXQLW RLOOHYHOLQGLFDWRUV RLOSUHVHUYDWLRQV\VWHPV RLOSXPSV RLOZDWHUFRROHUV RQOLQHPRQLWRUV\VWHPV RQORDGWDSFKDQJHUV RQORDGWDSFKDQJHU RSHUDWLRQ RSHUDWLRQPRQLWRULQJDQGPDLQWHQDQFH RSHUDWLRQDOVDIHW\ RUGHULQJFRSLHV RWKHUIOXLGV RXWGRRULQVWDOODWLRQV RYHUYROWDJHSURWHFWLRQ RYHUYROWDJHSURWHFWLRQGHYLFHV RYHUFXUUHQWSURWHFWLRQ RYHUFXUUHQWV RYHUYROWDJHV RYHUYROWDJHVDQGRYHUYROWDJHOLPLWDWLRQ RYHUYROWDJHVFDXVHGE\DWPRVSKHULF
SKHQRPHQD RYHUYROWDJHVGXHWRHDUWKIDXOW RYHUYROWDJHVGXHWRIHUURUHVRQDQFH RYHUYROWDJHVJHQHUDWHGZLWKLQ
WKHSRZHUV\VWHP SDGPRXQWHGWUDQVIRUPHU SDGPRXQWHGWUDQVIRUPHU SDLQWHGVXUIDFHV SDUDOOHORSHUDWLRQ SFEFRQWDPLQDWHGRLO SKDVHVKLIWLQJWUDQVIRUPHUV SK\VLFDOIXQGDPHQWDOV SO\ZRRG SROHPRXQWHGWUDQVIRUPHU SRUFHODLQ SRZHUUDWLQJOLPLWDWLRQV SRZHUWUDQVIRUPHUDQGRLOLPPHUVHG
UHDFWRUDFFHVVRULHV SRZHUWUDQVIRUPHUV SUHVVXUHUHOLHIGHYLFHV SURWHFWLRQDJDLQVWILUH SURWHFWLRQFRQWURO
DQGDX[LOLDU\V\VWHPV SURWHFWLYHHTXLSPHQW SWHOHPHQW SWWU SXOVH TXDOLW\ UDGLDWRUV UDWLQJSODWH UHFHLYLQJWKHWUDQVIRUPHUDWVLWH UHFRUGLQJRIGLVWXUEDQFHV UHIHUHQFHWHPSHUDWXUHIRUORDGORVVHV UHVLEORF UHVLQ UHXVH URXWLQHWHVWV VDIHW\FULWHULD VDIHW\PHDVXUHV VDIHW\SUHFDXWLRQV VGW VIFRQQHFWLRQV VKHOOW\SH VKRUWFLUFXLWUHTXLUHPHQWVDQGWHVWLQJ VKRUWFLUFXLWLPSHGDQFH VKXQWUHDFWRUV VLQJOHSKDVHWUDQVIRUPHU VPDOOGLVWULEXWLRQWUDQVIRUPHUV VPRRWKLQJUHDFWRUV VROLGLQVXODWLRQPDWHULDOV VROLGV\QWKHWLFLQVXODWLRQPDWHULDOV VRXUFHVRIVRXQGJHQHUDWLRQ VSDUNJDSV VSHFLDOLQIRUPDWLRQ VSHFLDOSUHFDXWLRQVIRUGU\W\SH
WUDQVIRUPHUV VSHFLDOWHVWV VWDWLRQDU\WUDQVIRUPHUV VWHSGRZQWUDQVIRUPHU VWRUDJH VXEVHDWUDQVIRUPHU VXEVWDWLRQ 3DJH7UDQVIRUPHU+DQGERRN
VXEVWDWLRQDQGXQLWVXEVWDWLRQ VXGGHQSUHVVXUHUHOLHIGHYLFHV VXUIDFHSURWHFWLRQ VXVWDLQDELOLW\GHYHORSPHQW V\QWKHWLFHVWHU V\QWKHWLFK\GURFDUERQ V\VWHPLQWHUWLHWUDQVIRUPHU WDQN WHPSHUDWXUHULVHDQGORDGFDSDFLW\ WHUPLQDOGHVLJQDWLRQ WHUPLQDOV WHVWLQJRIWUDQVIRUPHUV WKHUPRPHWHUV WKUHHSKDVHWUDQVIRUPHU WKUHHSKDVHWUDQVIRUPHUFRQQHFWLRQV WLJKWHQLQJWRUTXH WUDFWLRQWUDQVIRUPHU WUDQVIHURIUHVSRQVLELOLW\ WUDQVIHUUHGRYHUYROWDJHVLQWUDQVIRUPHUV WUDQVIRUPHUFRPSRQHQWV WUDQVIRUPHUGHVLJQ WUDQVIRUPHUOLTXLGDQGLQVXODWLRQ WUDQVIRUPHUPDWHULDOV WUDQVIRUPHUVRXQG WUDQVIRUPHUW\SHVDQGWKHLUDSSOLFDWLRQ WUDQVIRUPHUUHOHYDQWVWDQGDUGV WUDQVLHQWRYHUYROWDJHV WUDQVPLVVLRQRIHQHUJ\ WUDQVSRUW WUDQVSRUWZKHHOVVNLGV WXQLQJ ILOWHU UHDFWRUV W\SHWHVWV XQFHUWDLQW\LQPHDVXUHPHQWV XQGHUJURXQGWUDQVIRUPHU XQLWVDQGFRQYHUVLRQWDEOHV YDFXXPFDVW YDFXXPSUHVVXUHHQFDSVXODWHG YDFXXPSUHVVXUHLPSUHJQDWHG YROWDJHUDWLRDQGYROWDJHGURS RUULVH YROWDJHUHJXODWLRQHTXLSPHQW YROWDJHXQEDODQFH ZLQGWXUELQH ZLQGLQJV \FRQQHFWLRQ ]FRQQHFWLRQ ]LQFFRDWHGVXUIDFHV 1RWH
:HUHVHUYHWKHULJKWWRPDNHWHFKQLFDOFKDQJHVRUPRGLI\WKHFRQWHQWVRIWKLVGRFXPHQWZLWKRXWSULRUQRWLFH
:LWKUHJDUGWRSXUFKDVHRUGHUVWKHDJUHHGSDUWLFXODUVVKDOOSUHYDLO
$%% GRHV QRW DFFHSW DQ\ UHVSRQVLELOLW\ ZKDWVRHYHU IRU SRWHQWLDO HUURUV DQG RU SRVVLEOH ODFN RI LQIRUPDWLRQ
LQWKLVGRFXPHQW
:H UHVHUYH WKH ULJKWV LQ WKLV GRFXPHQW DQG LQ WKH VXEMHFW PDWWHU DQG LOOXVWUDWLRQV FRQWDLQHG WKHUHLQ
$Q\UHSURGXFWLRQ±LQZKROHRULQSDUWV±LVIRUELGGHQZLWKRXW$%%¶VSULRUZULWWHQFRQVHQW
5HIHUHQFH LV DOVR PDGH WR FRS\ULJKW QRWHV FRQWDLQHG LQ WKH WH[W HJ WR &RS\ULJKW ‹ ,(& *HQHYD
6ZLW]HUODQGZZZLHFFK
$%%
7UDQVIRUPHU+DQGERRN3DJH
1LAC000010 - 04
Business Unit Transformers
Affolternstrasse 44
8050 Zürich
SWITZERLAND
http://www.abb.com/transformers
e-Mail: info@abb.com
2
Copyright© 2004 ABB
All rights reserved.
Скачать