(3,JUHIP3DJH)ULGD\1RYHPEHU30
:KDW,V³(SL´DERXW(SLJHQHWLFV"
-$0(6*5,(6(0(5
'HSDUWPHQWRI3KLORVRSK\8QLYHUVLW\RI&DOLIRUQLD'DYLV
'DYLV&DOLIRUQLD86$
$%675$&7:KDWFRXQWVDVHSLJHQHWLFGHSHQGVRQZKDWFRXQWVDVJHQHWLF
,WLVDUJXHGWKDW:HLVPDQQLVPWKHGRFWULQHRIJHQHWLFFRQWLQXLW\DQGVR
PDWLFGLVFRQWLQXLW\LVWKHEDVLVIRUDQRYHUO\LQFOXVLYHFRQFHSWRIHSLJHQHW
LFV DV HYHU\ LQKHULWHG UHVRXUFH ³EH\RQG WKH JHQHV´ $Q DOWHUQDWLYH
WKHRUHWLFDOSHUVSHFWLYHWKH³UHSURGXFHU´FRQFHSWLVLQWURGXFHGWRIDFLOL
WDWH DQDO\VLV RI PXOWLSOH LQKHULWDQFH V\VWHPV ZLWKRXW ODEHOLQJ DOO QRQ
JHQHWLFLQKHULWDQFH³HSLJHQHWLF´
.(<:25'6HSLJHQHWLFV:HLVPDQQLVPUHSURGXFWLRQ
7$.,1*$3(563(&7,9(21(3,*(1(7,&6
,WLVQRWP\DLPWRSUHVHQWHSLJHQHWLFRUJHQHWLFPRGHOVIRUELRORJLFDOSKH
QRPHQDWRGHVFULEHQHZSKHQRPHQDWRGHULYHSUHGLFWLRQVIURPPRGHOVRU
WRRIIHUWHVWVRISUHGLFWLRQVIURPPRGHOV7KXV,GRQRWDLPWRPDNHDQHP
SLULFDOFRQWULEXWLRQWRHSLJHQHWLFV1RUGR,DLPWRV\QWKHVL]HWKHZHDOWKRI
SKHQRPHQDDQGWKHLUPRGHOGHVFULSWLRQVLQWRDQHZRUGLIIHUHQWO\RUJDQL]HG
WKHRU\RIHSLJHQHWLFV,QVWHDGP\DLPLVWRGHYHORSDQHZWKHRUHWLFDOSHU
VSHFWLYHRQWKHSURMHFWRIHSLJHQHWLFV,QGRLQJWKLV,DOVRWDNHDQHZSHUVSHF
WLYH RQ JHQHWLFV VLQFH HSLJHQHWLFV LV QHDUO\ DOZD\V GHILQHG LQ UHODWLRQ WR
JHQHWLFV),*
7KHRUHWLFDOSHUVSHFWLYHVFRRUGLQDWHPRGHOVDQGSKHQRPHQDWKURXJKFRP
PLWPHQWVUHVHDUFKHUVPDNHWRFRQVWUXFWLQJPRGHOVLQWHUPVRISDUWLFXODUFDW
HJRULHV PDQLIHVW LQ WKH VWDWH YDULDEOHV RI WKH PRGHOV DQG LQ MXGJLQJ ILW
EHWZHHQPRGHOVDQGSKHQRPHQDLQSDUWLFXODUUHVSHFWVDQGGHJUHHV
$NH\WKHRUHWLFDOSHUVSHFWLYHWKDWKDVGRPLQDWHGELRORJ\LQWKHWKFHQWXU\
LV:HLVPDQQLVPWKHGRFWULQHRIWKHFRQWLQXLW\RIJHUPDQGGLVFRQWLQXLW\RI
VRPD ,Q LWV PRVW DEVWUDFW IRUP :HLVPDQQLVP H[SUHVVHV WKH EDVLF FDXVDO
VWUXFWXUHXVHGWRDUWLFXODWHLGHDVQRWRQO\DERXWJHUPLQDODQGVRPDWLFFHOOV
EXWDOVRDERXWJHQRW\SHDQGSKHQRW\SHKHUHGLW\DQGGHYHORSPHQWHYROXWLRQ
$GGUHVVIRUFRUUHVSRQGHQFH-DPHV*ULHVHPHU'HSDUWPHQWRI3KLORVRSK\2QH6KLHOGV$YH
QXH'DYLV&$9RLFHID[
MUJULHVHPHU#XFGDYLVHGX
$QQ1<$FDG6FL±‹1HZ<RUN$FDGHP\RI6FLHQFHV
(3,JUHIP3DJH)ULGD\1RYHPEHU30
$11$/61(:<25.$&$'(0<2)6&,(1&(6
),*85( 7KHRUHWLFDOSHUVSHFWLYHV7KHRUHWLFDOSHUVSHFWLYHVFRRUGLQDWHPRGHOVRI
SKHQRPHQDWKURXJKVFLHQWLILFFRPPLWPHQWVLQWKHUHVHDUFKSURFHVV7KH\JRYHUQWKHUHO
HYDQWUHVSHFWVDQGDFFHSWDEOHGHJUHHVRIILWLQWKHHYDOXDWLRQRIWKHRUHWLFDOK\SRWKHVHV
WKXVIRFXVLQJVFLHQWLILFDWWHQWLRQRQUHOHYDQWDVSHFWVRIPRGHOVDQGHVWDEOLVKLQJFRQGL
WLRQVIRUDFFHSWDQFHDQGUHMHFWLRQRIK\SRWKHVHV7KHSDUWRIWKHILJXUHUHSUHVHQWLQJVFL
HQWLILFHYDOXDWLRQLQWHUPVRIUHODWLRQVEHWZHHQSKHQRPHQRQPRGHOGDWDDQGSUHGLFWLRQ
LVDIWHU*LHUH
DQGVHOHFWLRQ$FFRUGLQJWR:HLVPDQQLVPDOOFDXVDOLW\RWKHUWKDQWKDWGXHWR
HQYLURQPHQWVZKLFKLVLJQRUHGDWWKHOHYHORIWKHLQGLYLGXDOFHOORURUJDQLVP
WUDFHVWRJHUPRUJHQHVWKHERG\RULWVSKHQRW\SHLVDFDXVDOGHDGHQG),*
7KH:HLVPDQQLVWSHUVSHFWLYHKDVDOVREHHQH[WHQGHGWRWKHPROHFXODUOHY
HOWKURXJKUHFRJQLWLRQRILWVLVRPRUSKLVPWR&ULFN¶VFHQWUDOGRJPDRIPR
OHFXODU JHQHWLFV 7KHVH IRUPXODWLRQV WRJHWKHU VWUXFWXUH RXU EDVLF
UHSUHVHQWDWLRQVDQGPRGHOVRIZKDWFRXQWVDVJHQHWLFDQGWKHUHIRUHRXUED
VLFUHSUHVHQWDWLRQVRIZKDWFRXQWVDVHSLJHQHWLF
7KHFXULRXVSRZHURIWKHRUHWLFDOSHUVSHFWLYHVLVWKDWWKH\FDQEHFRPHHQ
WUHQFKHGLQVFLHQWLILFSUDFWLFHHYHQDPRQJWKRVHZKRUHMHFWWKHP,WKLQNWKLV
LVWKHFDVHZLWKHSLJHQHWLFVUHVHDUFK,QRUGHUWRLQWHUSUHWHSLJHQHWLFSKHQRP
HQDLWLVW\SLFDOWRPDNHXVHRIWKH:HLVPDQQLVWFDXVDOVWUXFWXUHWRH[SUHVV
LGHDVHYHQLIWKHUHVXOWVRIHSLJHQHWLFUHVHDUFKLPSO\WKDW:HLVPDQQLVPLV
IDOVH,IIRUH[DPSOHF\WRVLQHPHWK\ODWLRQFDQFDXVHVHTXHQFHFKDQJHVYLD
K\GURO\WLFGHDPLQDWLRQRIPHWK\OF\WRVLQHWRIRUPWK\PLGLQH:HLVPDQ
(3,JUHIP3DJH)ULGD\1RYHPEHU30
*5,(6(0(5:+$7,6³(3,´$%287(3,*(1(7,&6"
),*85( :HLVPDQQLVP:HLVPDQQLVPLVWKHGRFWULQHRIWKHVHSDUDWLRQRIJHUP
DQGVRPDLQZKLFKWKHJHUPJLYHVULVHWRWKHVRPDWKHJHUPLVWUDQVPLWWHGIURPJHQHUD
WLRQWRJHQHUDWLRQDQGWKHUHLVQRVRPDWLFLQSXWLQWRWKHJHUPOLQH7KXVWKHUHLVWUDQV
JHQHUDWLRQFRQWLQXLW\RIWKHJHUPOLQHDQGGLVFRQWLQXLW\RIWKHVRPD0D\QDUG6PLWKLO
OXVWUDWHGWKHLVRPRUSKLVPEHWZHHQ:HLVPDQQ¶VGRFWULQHDQG&ULFN¶VFHQWUDOGRJPDRI
PROHFXODUJHQHWLFV)LJXUHGUDZQDIWHU0D\QDUG6PLWK)LJS
QLVPDQGWKH&HQWUDO'RJPDDUHERWKIDOVH7KDWLVLWLVQRWWKHFDVHWKDWFDX
VDWLRQ IORZV RQO\ IURP WKH JHQHV WR WKH SURWHLQV RU IURP JHQRW\SH WR
SKHQRW\SH3UHVXPDEO\ZKHWKHUGHDPLQDWLRQRFFXUVGRHVQRWGHSHQGRQDQ\
SDUWLFXODU VHTXHQFH YDULDWLRQ LQ WKH JHQHV FRGLQJ IRU WKH PHWK\ODWLRQ HQ
]\PHVVRFDXVDWLRQFDQQRWEHWUDFHGLQGLUHFWO\WRJHQHVYLDGHWHUPLQDWLRQ
RIHQ]\PHVHTXHQFHHLWKHU7KHHQWUHQFKPHQWRI:HLVPDQQLVPLVPDQLIHVW
LQWKLVH[DPSOHEHFDXVHWKHVDPHSDSHUWKDWGHVFULEHVLWDOVRGHILQHVHSLJH
QHWLFHIIHFWVDVUHVXOWLQJ³LQDKHULWDEOHFKDQJHLQSKHQRW\SHLQWKHDEVHQFH
RIDQ\FKDQJHLQWKHQXFOHRWLGHVHTXHQFHRIWKHJHQRPH´,QRWKHUZRUGV
(3,JUHIP3DJH)ULGD\1RYHPEHU30
$11$/61(:<25.$&$'(0<2)6&,(1&(6
ZKLOHWKHSDSHUDFNQRZOHGJHVDYLRODWLRQRIWKHSHUVSHFWLYHWKDWLGHQWLILHV
ZKDWFRXQWVDVJHQHWLFZLWKWKHFDXVDOLWQHYHUWKHOHVVODEHOVHSLJHQHWLFDSUR
FHVVWKDWLVEH\RQGWKHJHQHV%XWLIWKHXSVKRWLVWRXQGHUPLQHWKHFRQFHSWXDO
EDVLVIRUVLQJOLQJRXWJHQHVDVWKHKHDUWRIZKDWLVJHQHWLFWKHQLWLVVXUHO\D
FRQFHSWXDOPLVWDNHWRODEHOPHWK\ODWLRQ±GHDPLQDWLRQ³HSLJHQHWLF´
7KHSUREOHPRIDUWLFXODWLQJDQHZWKHRUHWLFDOSHUVSHFWLYHLVH[WUHPHO\GLI
ILFXOWEHFDXVHRIWKLVIDFWRIHQWUHQFKPHQW,WLVW\SLFDOLQVFLHQFHWRWUHDWGLV
WLQFWPRGHOVDVFRPSHWLWRUVWRWKHWUXWKDERXWQDWXUH,IWZRPRGHOVGLIIHULQ
IXQGDPHQWDOUHVSHFWVLWLVDVVXPHGWKH\FDQQRWERWKEHWUXHDQGDFHQWUDO
JRDORIVFLHQFHLVWRGHYLVHHPSLULFDOWHVWVWKDWFDQGHFLGHEHWZHHQWKHP,
YLHZPRGHOVGLIIHUHQWO\DQGLQLPSRUWDQWUHVSHFWVQRQFRPSHWLWLYHO\,WDNH
WKHYLHZFKDPSLRQHGE\:LOOLDP:LPVDWWWKDWWUXWKGLVFRYHUHGWKURXJKPRG
HOVGHSHQGVRQILQGLQJHPSLULFDOUHVXOWVWKDWDUHUREXVWWRDYDULHW\RILQGH
SHQGHQWLGHDOL]DWLRQVDQGIDOVLI\LQJDEVWUDFWLRQV,QWKHVDPHZD\,WKLQND
YDULHW\RISHUVSHFWLYHVLVQHHGHGWRJXLGHWKHHYDOXDWLRQRIPRGHOVWRSURGXFH
UREXVWWKHRULHV7KXVLQRIIHULQJDQHZSHUVSHFWLYHLWVKRXOGEHFOHDUWKDWP\
JRDOLVQRWWRUHSODFH:HLVPDQQLVPEXWUDWKHUWRFRPSOHPHQWLWVRDVWRLP
SURYHWKHFKDQFHVWKDWRXUHPSLULFDOWKHRULHVDUHUREXVW
,QWKLVSDSHU,ZLOOFRQVLGHULVVXHVUDLVHGE\HSLJHQHWLFVSKHQRPHQDDQG
PRGHOVWKDWIDFLOLWDWHWKHZD\VLQZKLFK:HLVPDQQLVPLVLQDGHTXDWHDVDWKH
RUHWLFDOSHUVSHFWLYHDQGVXJJHVWLYHRIZD\VWRIRUPXODWHDQHZRQH,EHJLQ
E\FRQVLGHULQJEULHIO\VRPHGHWDLOVRIWKHORJLFRI:HLVPDQQLVPZKLFKRS
SRVHVKHUHGLW\WRGHYHORSPHQWDVGLVWLQFWDQGVHSDUDEOHNLQGVRIELRORJLFDO
SURFHVVHV7KHQ,ZLOOJRRQWRFRQVLGHUHSLJHQHWLFSKHQRPHQDVXJJHVWLQJ
WKDWLQVWHDGRIWKLVRSSRVLWLRQGHYHORSPHQWFDQEHYLHZHGDVKHUHGLW\DQG
KHUHGLW\FDQEHYLHZHGDVGHYHORSPHQW,WKHQGHYHORSDQHZSHUVSHFWLYHWKDW
H[SUHVVHVWKHZD\LQZKLFKKHUHGLW\DQGGHYHORSPHQWDUHLQWHUWZLQHG7KLV
QHZSHUVSHFWLYHFDQWKHQEHXVHGWRSLQSRLQWVXFFHVVHVDQGIDLOXUHVRI:HLV
PDQQLVPZKLFK ,ZLOOQRWGLVFXVVKHUH ,FORVH ZLWK WKH REVHUYDWLRQWKDW
IURPWKHSRLQWRIYLHZRI:HLVPDQQLVPHYHU\WKLQJLQDQGDERXWELRORJLFDO
HQWLWLHVRWKHUWKDQ'1$VHTXHQFHVLVHSLJHQHWLF7KLV,DUJXHLVZKDWPDNHV
:HLVPDQQLVPUDWKHUXQKHOSIXOIRURUJDQL]LQJWKHRULHVRIHSLJHQHWLFV,ZLOO
WKHQGUDZVRPHSRVVLEO\KDVW\FRQFOXVLRQVDERXWZKDWLQOLJKWRIWKHQHZ
SHUVSHFWLYHFRXQWVDV³HSL´DERXWHSLJHQHWLFV%HFDXVHWKLVZLOOWXUQRXWQRW
WREHQHDUO\DVH[WHQVLYHDVZKDWFRXQWVDVHSLJHQHWLFVXQGHU:HLVPDQQLVP
,FRQFOXGHWKDWLWPD\EHIUXLWIXOO\GLIIHUHQWDQGWKXVSRWHQWLDOO\RIHPSLULFDO
YDOXHWRXVHLWLQWDONLQJDERXWHSLJHQHWLFV
+(5(',7<9(5686'(9(/230(17
,KDYHDOUHDG\LQWURGXFHG:HLVPDQQLVPZLWKDVLPSOHGLDJUDPDQGFRP
SDULVRQWRWKHFHQWUDOGRJPDVR,ZLOOFRQWLQXHXVLQJLWWRPDNHWKHIXUWKHU
SRLQWWKDWWKLVWKHRUHWLFDOSHUVSHFWLYHGUDZVDVWURQJGLVWLQFWLRQEHWZHHQSUR
(3,JUHIP3DJH)ULGD\1RYHPEHU30
*5,(6(0(5:+$7,6³(3,´$%287(3,*(1(7,&6"
FHVVHVRILQKHULWDQFHDQGSURFHVVHVRIGHYHORSPHQW(OVHZKHUH,KDYHGLV
FXVVHGWKHKLVWRU\RIWKLVDEVWUDFWUHSUHVHQWDWLRQDQGKRZLWHPHUJHGIURP
WKFHQWXU\F\WRHPEU\RORJ\,QP\YLHZWKHRSSRVLWLRQRIKHUHGLW\DQG
GHYHORSPHQWHPHUJHGIURPWKHPRGHOLQJSUDFWLFHVDQGZDVQRWLPSRVHGDW
WKHLURULJLQWRGLVWLQJXLVKEHWZHHQWKHWZRGLVFLSOLQHVRIJHQHWLFVDQGGHYHO
RSPHQWDOELRORJ\
7KHGLDJUDPFDQEHUHDGDVH[SUHVVLQJVHYHUDOFODLPVDERXWFDXVDOVWUXF
WXUH,QWKHFHQWUDOGRJPDWKHSDWKVUHSUHVHQWWKHIORZRIJHQHWLFLQIRUPD
WLRQ$V&ULFNVDLG³RQFHJHQHWLFLQIRUPDWLRQJHWVLQWRSURWHLQVLWFDQQRWJHW
RXW DJDLQ´ ,Q LWV FODVVLFDO IRUP :HLVPDQQLVP H[SUHVVHV WKH GRFWULQH RI
FRQWLQXLW\RIJHUPFHOOOLQHDJHIURPJHQHUDWLRQWRJHQHUDWLRQDQGGLVFRQWLQX
LW\RIVRPDWLFFHOOOLQHDJH%XWZHFDQDOVRORRNDWLWDVH[SUHVVLQJWKHFDXVDO
DXWRQRP\RISURFHVVHVRIKHUHGLW\JHUPWRJHUPRUJHQRW\SHWRJHQRW\SH
DQG GHYHORSPHQW JHUP WR VRPD RU JHQRW\SH WR SKHQRW\SH $V WKH HDUO\
WUDQVPLVVLRQJHQHWLFLVWVDUJXHGWKHSURFHVVHVRIJHQHWLFWUDQVPLVVLRQFRXOG
EHVWXGLHGLQLVRODWLRQIURPWKHPXFKPRUHGLIILFXOWSUREOHPVRIJHQHH[SUHV
VLRQDQG:HLVPDQQLVPVKRZVKRZWKLVDVVXPSWLRQLVVWUXFWXUHG
$KDOOPDUNRIODWHWKFHQWXU\ELRORJ\KDVEHHQWKHHPHUJHQFHRIYDULRXV
V\QWKHWLFSURMHFWVLQSDUWLFXODUWKHV\QWKHVLVRIJHQHWLFVZLWKGHYHORSPHQW
HYROXWLRQZLWKGHYHORSPHQWDQGVHYHUDORWKHUSHUPXWDWLRQVLQYROYLQJFHOOEL
RORJ\ELRFKHPLVWU\DQGHYHQHFRORJ\,WKLQNLWLVOLNHO\WKDWWKHV\QWKHVLVRI
JHQHWLFVDQGGHYHORSPHQWDSSHDUVWKHPRVW³UHGXFWLRQLVWLF´RIWKHVHDWWHPSWV
EHFDXVHRILWVVWURQJGHSHQGHQFHRQ:HLVPDQQLVPWRJXLGHPRGHOVH[SHUL
PHQWVDQGGHVFULSWLRQVRIUHVXOWV,IJHQHVDUHWKHRQO\SRVVLEOHFDXVHVWKHQ
JHQHVZLOOWXUQRXWWREHWKHSULPDU\H[SODQDWLRQVRIGHYHORSPHQW,WLVQR
VXUSULVHWKDWV\QWKHVHVOHVVGHSHQGHQWRQ:HLVPDQQLVPVRPHWLPHVGLVDJUHH
ZLWK GHYHORSPHQWDO JHQHWLF LQWHUSUHWDWLRQV $ FODVVLF FDVH RI FRQIOLFW EH
WZHHQJHQHWLFDQGGHYHORSPHQWDOLQVLJKWVLVGLVDJUHHPHQWRYHUKRZWRLQWHU
SUHW NQRFNRXW H[SHULPHQWV )DLOXUHV RI JHQH NQRFNRXW WR \LHOG H[SHFWHG
SKHQRW\SLFGHILFLWVUHTXLUHVORRNLQJIRUJHQHLQWHUDFWLRQWRH[SODLQWKHUHVXOWV
RQO\LI:HLVPDQQLVPLVDVVXPHG2WKHUZLVHDZLGHUDQJHRISURFHVVHVEH
\RQGWKHJHQHPLJKWEHLPSOLFDWHG
7KHVWURQJQDWXUHRIWKHFDXVDOUHGXFWLRQLVPLPSOLHGE\:HLVPDQQLVPLV
DSUREOHPDV,LQGLFDWHGLQWKHLQWURGXFWLRQEHFDXVHLWWUHDWVYLUWXDOO\HYHU\
WKLQJRWKHUWKDQVHTXHQFHYDULDWLRQDVHSLJHQHWLFDQGDWWKHVDPHWLPHDV
VHUWVWKDWRQO\JHQHWLFVHTXHQFHYDULDWLRQFDQEHH[SODQDWRU\,GRQ¶WWKLQN
DQ\VHULRXVELRORJLVWDFFHSWVWKLVVWURQJYLHZDQG\HW:HLVPDQQLVPVWUXF
WXUHVELRORJLFDOH[SODQDWLRQDORQJWKHVHOLQHVHYHQIRUDQWLUHGXFWLRQLVWV
'(9(/230(17$6+(5(',7<
+HUH,FRQVLGHUSKHQRPHQDWKDWDUHW\SLFDOO\FODVVLILHGDVHSLJHQHWLFLQWKH
PROHFXODUOLWHUDWXUHRQWKHVXEMHFW0HWK\ODWLRQZKLFKPRGLILHVQXFOHRWLGHV
(3,JUHIP3DJH)ULGD\1RYHPEHU30
$11$/61(:<25.$&$'(0<2)6&,(1&(6
FRYDOHQWO\LVSHUKDSVWKHSDUDGLJPFDVHRIWKLVFODVVRISKHQRPHQDWKRXJK
'1$ELQGLQJSURWHLQVVXFKDVWUDQVFULSWLRQIDFWRUVFKURPRVRPDOSURWHLQV
VXFKDVKLVWRQHVDQGPRUHFRPSOH[VWUXFWXUHVVXFKDVSRO\FRPEPDFKLQHV
DUHDOVRFDVHVRI³FKURPDWLQPDUNLQJV\VWHPV´0DQ\RIWKHVHGHSHQGGL
UHFWO\RQWKHEHKDYLRURI'1$LQUHSOLFDWLRQIRUWKHLUSDUWLFXODUHSLJHQHWLFHI
IHFWVDQGIRUWKHLUTXDOLILFDWLRQDVV\VWHPVRILQKHULWDQFH
,ZDQWWRQRWHWZRIHDWXUHVRIFKURPDWLQPDUNLQJV\VWHPV)LUVWWKH\DUH
FDXVDOO\GHSHQGHQWRQ'1$IRUWKHLUHIIHFWV6HFRQGWKHLULQYHVWLJDWLRQLV
SULPDULO\DLPHGDWXQGHUVWDQGLQJSURFHVVHVRIWKHHVWDEOLVKPHQWUHJXODWLRQ
PDLQWHQDQFHDQGSURSDJDWLRQRIGLIIHUHQWLDWHGFHOOXODUVWDWHVRIFHOOVLQPXO
WLFHOOXODUERGLHV7KDWLVWRVD\WKHSUREOHPRIHSLJHQHWLFVFRQFHUQVWKHZD\V
LQZKLFKWKHGLIIHUHQWLDWLQJDQGGLIIHUHQWLDWHGVWDWHVRIFHOOVDUHHVWDEOLVKHG
LQGHYHORSPHQWDVDIXQFWLRQRIWKHFHOOXODUKHUHGLW\RIHSLJHQHWLFFRQWURO
'HYHORSPHQW DQGPRUHEURDGO\ FHOOXODUGLIIHUHQFH LV WREH XQGHUVWRRG LQ
WHUPVRISURFHVVHVWKDWEULQJDERXWFHOOXODUKHUHGLW\
,QDQRYHUYLHZRIHSLJHQHWLFV+ROOLGD\RIIHUHGDGHILQLWLRQRIHSLJHQHWLFV
WKDW PDNHV H[SOLFLW WKH LQWHUSUHWDWLRQ RI GHYHORSPHQW GLIIHUHQWLDWLRQ LQ
WHUPVRIFHOOXODUKHUHGLW\RSHUDWLQJXQGHUWKH:HLVPDQQLVWSHUVSHFWLYHGH
ILQLQJGHYHORSPHQWDVDIXQFWLRQRIJHQHWLFFDXVHV³7KHVWXG\RIWKHFKDQJHV
LQJHQHH[SUHVVLRQZKLFKRFFXULQRUJDQLVPVZLWKGLIIHUHQWLDWHGFHOOVDQGWKH
PLWRWLFLQKHULWDQFHRIJLYHQSDWWHUQVRIJHQHH[SUHVVLRQ´
+ROOLGD\¶VOLPLWDWLRQRIHSLJHQHWLFVWRPLWRWLFLQKHULWDQFHSHUKDSVH[SUHVV
HVRQO\DIDFWDERXWWKHUHODWLYHO\IUHTXHQWUROHRIFKURPDWLQPDUNLQJLQVR
PDWLFGHYHORSPHQWDVRSSRVHGWRPHLRWLFLQKHULWDQFHWKRXJKWKDWLVUHDOO\DQ
HPSLULFDOTXHVWLRQRIUHODWLYHIUHTXHQF\WKDWRXJKWQRWWREHVHWWOHGE\DGHI
LQLWLRQ$WWKHOHYHORIWKHRUHWLFDOSHUVSHFWLYHVWKHLPSRUWDQWDVSHFWVRIWKH
GHILQLWLRQDUHWKDWGHYHORSPHQWLVWREHXQGHUVWRRGLQWHUPVRIWKHRULJLQ
PDLQWHQDQFHDQGVSUHDGRIHSLJHQHWLFYDULDWLRQZLWKLQDQGDPRQJFHOOOLQHV
DQGWKDWWKHLQWHUSUHWDWLRQRIGHYHORSPHQWLQWHUPVRIFHOOXODUKHUHGLW\GH
SHQGVRQWKHZD\:HLVPDQQLVPIUDPHVWKHUHODWLRQEHWZHHQJHQHWLFDQGHSL
JHQHWLF,QWKLVSHUVSHFWLYHDQ\FDXVDOSURFHVVWKDWGRHVQRWWUDFHGLUHFWO\WR
QXFOHRWLGHVHTXHQFHVDQGVHTXHQFHYDULDWLRQVFRXQWVDVHSLJHQHWLF%XWE\WKH
VDPHWRNHQWKHHSLJHQHWLFLVRIUHODWLYHLQVLJQLILFDQFHEHFDXVHLWLVQRWJHQHW
LF,WLVW\SLFDODPRQJHSLJHQHWLFVUHVHDUFKHUVWRQRWHWKHKHWHURJHQHLW\RIPR
OHFXODUPHFKDQLVPVLQYROYHGLQFHOOXODUKHUHGLW\EXWWKLVKHWHURJHQHLW\LVDW
OHDVWDVPXFKDFRQVHTXHQFHRIGHILQLQJWKHHSLJHQHWLFDVDQ\LQKHULWDQFHLQ
GHHGDQ\FDXVDWLRQEH\RQGWKHJHQHVDVLWLVDQHPSLULFDOGLVFRYHU\DERXWWKH
UROHRIJHQHVUHODWLYHWRRWKHUGHYHORSPHQWDOUHVRXUFHVLQLQKHULWDQFH
+(5(',7<$6'(9(/230(17
$YHU\GLIIHUHQWWUDGLWLRQRIHSLJHQHWLFVZRUNZKLFKQHYHUWKHOHVVLVDOVR
IUDPHGLQWHUPVRI:HLVPDQQLVPFRQFHUQVHSLJHQHWLFRU³QRQJHQHWLF´LQWHU
(3,JUHIP3DJH)ULGD\1RYHPEHU30
*5,(6(0(5:+$7,6³(3,´$%287(3,*(1(7,&6"
DFWLRQVLQGHYHORSPHQWDERYHWKHPROHFXODUOHYHO&ODVVLFDOZRUNE\HPEU\
RORJLVWV RQ SUREOHPV RI PRUSKRJHQHVLV²WKH GHYHORSPHQWDO SURFHVV RI
HPHUJHQFHRIWLVVXHDQGRUJDQIRUPDQGVWUXFWXUH²DVZHOODVSKHQRPHQDGH
VFULEHGE\:DGGLQJWRQDVFDQDOL]DWLRQDQGJHQHWLFDVVLPLODWLRQIDOOLQWRWKLV
WUDGLWLRQ
1HZPDQDQG0OOHUH[HPSOLI\RQHUHFHQWVWUDQGRIWKLVWUDGLWLRQ7KH\GH
VFULEHHSLJHQHWLFPHFKDQLVPVDV³JHQHUDWLYHDJHQWVRIPRUSKRORJLFDOFKDU
DFWHURULJLQDWLRQ´ZKLFKLVDPXFKEURDGHUYLHZWKDQWKDWHQFRPSDVVHGE\
PROHFXODU:HLVPDQQLVPVLQFHJHQHUDWLYHDJHQWVQHHGQRWEHJHQHV
1HYHUWKHOHVV:HLVPDQQLVPGRPLQDWHVWKLVWUDGLWLRQLQWKHVDPHFXULRXV
ZD\DVLWGRHVPROHFXODUHSLJHQHWLFVEHFDXVHRILWVWLJKWKROGRQ'1$VH
TXHQFHDQGVHTXHQFHYDULDWLRQDVZKDWFRXQWVDVJHQHWLFUHOHJDWLQJHYHU\
WKLQJHOVHDVHSLJHQHWLF,VD\³GRPLQDWHV´DGYLVHGO\EHFDXVHPDQ\RIWKH
ZRUNHUVKHUHDUHDERXWDVIDUIURPWKHLGHRORJ\RI:HLVPDQQLVPDVFDQEH
IRXQGDPRQJSUDFWLFLQJELRORJLVWV7KLVWUDGLWLRQLQFOXGHVVFLHQWLVWVVXFKDV
SDOHRQWRORJLVWVPDQ\RIZKRPGRQRWZRUNZLWKJHQHV
,OXPSWRJHWKHU1HZPDQDQG0OOHU¶VZRUNZLWKWKHKHULWDJHIURP:DG
GLQJWRQIRUWKHIROORZLQJUHDVRQ,QERWKFDVHVHSLJHQHWLFSKHQRPHQDDULVH
IURP³SKHQRW\SLF´LQWHUDFWLRQVDERYHWKHPROHFXODUOHYHODOWKRXJKWKHUHDUH
FOHDUO\PROHFXODUPHFKDQLVPVLQYROYHGLQWKHVHHSLJHQHWLFPHFKDQLVPVRI
FKDUDFWHURULJLQDWLRQ,QJHQHWLFDVVLPLODWLRQSKHQRW\SLFFKDQJHDULVHVGL
UHFWO\ DV D SKHQRW\SLF UHVSRQVH WR HQYLURQPHQWDO SHUWXUEDWLRQ DV LQ :DG
GLQJWRQ¶VIDPRXVRVWULFKFDOORXVH[DPSOH7KHSKHQRW\SHLVWKHQJHQHWLFDOO\
DVVLPLODWHGE\PXWDWLRQRIPRGLILHUVRIWKHJHQHWLFGHWHUPLQDQWVRIWKHFKDU
DFWHUVWKDWLQWHUDFWHGSKHQRW\SLFDOO\WRSURGXFHWKHLQLWLDOFKDQJH,QDVLPL
ODU YHLQ 1HZPDQ DQG 0OOHU WDON DERXW ³SUHPHQGHOLDQ´ SKHQRPHQD LQ
ZKLFKDYDULHW\RILQWHUDFWLRQVRIFHOOVRUWLVVXHVZLWKWKHLUSK\VLRFKHPLFDO
HQYLURQPHQWVFRXOGUHVXOWLQQHZPRUSKRORJLHV$OWKRXJKWKHUHZRXOGKDYH
EHHQDJHQHWLFEDVLVIRUWKHFRPSRQHQWVRIWKHVHLQWHUDFWLRQVVHOHFWLRQQHHG
QRWKDYHIDYRUHGJHQHVWRSOD\DUROHLQWKHHSLJHQHWLFDOO\HPHUJHQWFKDUDF
WHUV*HQHVSOD\DUROHDIWHUFKDUDFWHURULJLQDWLRQWRLQWHJUDWHDQGVWDELOL]H
FKDUDFWHUVSURGXFHGHSLJHQHWLFDOO\7KXV1HZPDQ DQG0OOHUDUJXH IRUD
GLIIHUHQWWLPHRUGHULQWKHUROHRIJHQHVLQWKHHSLJHQHWLFRULJLQDWLRQRIFKDU
DFWHUV LQ HYROXWLRQ WKDQ RFFXUV LQ WKH PROHFXODU HSLJHQHWLF SURFHVVHV GLV
FXVVHGDERYHWKDWSOD\DUROHLQSURGXFLQJWKHVHFKDUDFWHUVLQGHYHORSPHQW
,QWKHLUZRUNDVLQ:DGGLQJWRQ¶VJHQHWLFDVVLPLODWLRQWKHFKDUDFWHUFRPHV
ILUVWDQGWKHJHQHWLFLQWHJUDWLRQDQGVWDELOL]DWLRQFRPHVDIWHU
1HZPDQDQG0OOHUDUJXHIRUWKHYLHZWKDW³GLIIHUHQWHSLJHQHWLFSURFHVVHV
KDYHSUHYDLOHGDWGLIIHUHQWVWDJHVRIPRUSKRORJLFDOHYROXWLRQDQGWKDWWKH
IRUPVDQGFKDUDFWHUVDVVXPHGE\PHWD]RDQRUJDQLVPVRULJLQDWHGLQODUJHSDUW
E\WKHDFWLRQRI>FRQGLWLRQDOQRQSURJUDPPHGSK\VLFRFKHPLFDODQGWLVVXH
LQWHUDFWLRQVLQ@VXFKSURFHVVHV´
,QWKLVNLQGRIYLHZKHUHGLW\LVLQWHUSUHWHGWKURXJKWKHOHQVRIGHYHORSPHQW
UDWKHUWKDQWKHRWKHUZD\DURXQGDVDVWDJHRIHYROXWLRQDU\KLVWRU\WKDWLV
(3,JUHIP3DJH)ULGD\1RYHPEHU30
$11$/61(:<25.$&$'(0<2)6&,(1&(6
GULYHQIXQGDPHQWDOO\E\HSLJHQHWLFFKDUDFWHURULJLQDWLRQQRWE\JHQHWLFVH
TXHQFH FKDQJH DQG PROHFXODU HSLJHQHWLF FRQWURO RI VHTXHQFH H[SUHVVLRQ
*HQHVGRSOD\DUROHEHIRUHWKHHSLJHQHWLFLQWHUDFWLRQVOHDGLQJWRFKDUDFWHU
HPHUJHQFHEXWQRWDVGHWHUPLQDQWVRIWKHHPHUJHQWFKDUDFWHUV
1HZPDQ DQG 0OOHU¶V SHUVSHFWLYH LV H[SOLFLWO\ DQWL:HLVPDQQLVW 7KH\
FRPSODLQWKDW³LQDOOWKHFRQWHQGLQJYLHZV>RIFKDUDFWHUHYROXWLRQ@WKHQRWLRQ
WKDWDQRUJDQLVP¶VPRUSKRORJLFDOSKHQRW\SHLVGHWHUPLQHGE\LWVJHQRW\SHLV
WDNHQIRUJUDQWHG7KLVWHQHWLVDOVRHVVHQWLDOO\XQGLVSXWHGLQGHYHORSPHQWDO
ELRORJ\ZKLFKWRGD\LVFRPPRQO\FKDUDFWHUL]HGDVWKHVWXG\RIµJHQHWLFSUR
JUDPV¶IRUWKHJHQHUDWLRQRIERG\SODQDQGRUJDQIRUP´6RWKHWULFNLQ
SXUVXLQJWKHLUSURMHFWLVWRDYRLGWKHORJLFDODWWUDFWRURIPROHFXODU:HLVPDQ
QLVP LI HSLJHQHWLF WLVVXH LQWHUDFWLRQV OHDG WR QHZ FKDUDFWHUV WKH IDFW WKDW
WKRVH WLVVXHV KDG JHQHWLF DQG PROHFXODU HSLJHQHWLF GHWHUPLQDQWV EHIRUH
FKDUDFWHURULJLQDWLRQVKRZVWKDWXOWLPDWHO\1HZPDQDQG0OOHU¶VEUDQGRI
HSLJHQHWLFV PD\ EH UHGXFHG WR D PROHFXODU LQWHUSUHWDWLRQ FRQVLVWHQW ZLWK
:HLVPDQQLVP7KDWLVWKHUHLVDNLQGRIUHJUHVVDUJXPHQWDJDLQVW1HZPDQ
0OOHUHSLJHQHWLFVIRUDQ\HSLJHQHWLFFKDUDFWHURULJLQDWLRQWKHUHPXVWKDYH
EHHQSULRUJHQHWLFGHWHUPLQDWLRQRIWKHFRPSRQHQWFKDUDFWHUVLQYROYHGLQWKH
SKHQRW\SLFLQWHUDFWLRQVOHDGLQJWRWKHHPHUJHQWFKDUDFWHU$GHIHQVHRI1HZ
PDQDQG0OOHUDJDLQVWWKH:HLVPDQQLVWUHJUHVVDUJXPHQWLQYROYHVSRLQWLQJ
RXWWKDWWKHLUZRUNFRQFHUQVWKHHYROXWLRQRIPRUSKRORJLFDOFKDUDFWHUVVRWKH
:HLVPDQQLVWUHJUHVVFDQEHWUDFHGDOOWKHZD\EDFNWRWKHRULJLQRIDOO³FKDU
DFWHUV´DWWKHRULJLQRIOLIH$WWKHRULJLQRIOLIHKRZHYHU:HLVPDQQLVPFDQ
EHGHIHQGHGRQO\E\PDNLQJWKHPRVWH[WUHPH51$ZRUOGDVVXPSWLRQWKDW
OLIHEHJDQZLWKDQDNHGDQGFRPSOHWHULER]\PLFJHQH2WKHUZLVHWKHUHPXVW
KDYHEHHQVRPHFKDUDFWHURULJLQDWLRQWKDWGLGQRWGHSHQGRQJHQHVLQHLWKHU
WKH0HQGHOLDQVHQVHRIIDFWRUVWKDWIROORZ0HQGHO¶VUXOHVRUWKHFODVVLFDOPR
OHFXODUVHQVHRIFRGLQJVHTXHQFHV3XWGLIIHUHQWO\UHJUHVVDUJXPHQWVHPSOR\
LQJWKH:HLVPDQQLVWLGHDWKDWJHQHVDUHWKHXOWLPDWHLILQGLUHFWFDXVHVRIDOO
SKHQRW\SHVPXVWIDLOLIWKHUHJUHVVOHDGVWRDQRULJLQRIOLIHZLWKRXWJHQHV
,GRQRWSUHWHQGWRNQRZKRZWKHVWRU\RIWKHRULJLQRIOLIHZLOOWXUQRXW
0\SRLQWLVVLPSO\WKDWWKHGLIIHUHQWQRWLRQVRIHSLJHQHWLFVLQSOD\ZKHWKHU
DWWKHPROHFXODUOHYHORUDERYHDOOWXUQRXWWRGHSHQGRQWKHIXQGDPHQWDO
:HLVPDQQLVWGLFKRWRP\RIKHUHGLW\DQGGHYHORSPHQW:KHWKHUWKHWKHRUHWL
FDODQGHPSLULFDOVWUDWHJ\IRURYHUFRPLQJ:HLVPDQQLVPLVWRWKLQNRIGHYHO
RSPHQWDVDNLQGRIKHUHGLW\RUKHUHGLW\DVDNLQGRIGHYHORSPHQWWKHORJLF
RI:HLVPDQQLVPVWLOOIUDPHVWKHLVVXHV,WXUQQRZWRDGLIIHUHQWZD\RIIRU
PXODWLQJDFRQFHSWLRQRIKHUHGLW\WKDWGRHVQRWDVVXPH:HLVPDQQLVP
+(5(',7<,17(57:,1(':,7+'(9(/230(17
'HVSLWHWKHGRPLQDQFHRIWKH:HLVPDQQLVWSHUVSHFWLYHLWLVFOHDUWKDWHSL
JHQHWLFSKHQRPHQDGRQRWHDVLO\ILW6RPHRIWKHPLQGLFDWHIORZVRIELRORJ
(3,JUHIP3DJH)ULGD\1RYHPEHU30
*5,(6(0(5:+$7,6³(3,´$%287(3,*(1(7,&6"
LFDOLQIRUPDWLRQWRWKH'1$DVZHOODVDZD\IURPLW6RPHLQGLFDWHSDWKZD\V
RI³VRPDWLF´LQKHULWDQFHDXWRQRPRXVIURPWKHJHQHWLFSDWKZD\OHDGLQJIURP
'1$VHTXHQFHWR'1$VHTXHQFH7KHUHLVDIXUWKHUSRLQWEH\RQGWKHXQHDV\
ILWWR:HLVPDQQLVPWKDWJLYHVDFOXHWRDQHZSHUVSHFWLYHZKLFKLVWKHIDFW
WKDWWKHYDULHW\RIHSLJHQHWLFPHFKDQLVPVSHUPLWVWUHDWLQJKHUHGLW\IURPWKH
SRLQWRIYLHZRIGHYHORSPHQWDQGGHYHORSPHQWIURPWKHSRLQWRIYLHZRIKH
UHGLW\7KLVLVQRWOLFHQVHGE\:HLVPDQQLVPZKLFKWDNHVWKHVHVLPSO\DVGLV
WLQFWSURFHVVHVZLWKQRUHODWLRQRWKHUWKDQWKHLUVKDULQJDFRPPRQFDXVHLQ
WKHJHQHV
,I:HLVPDQQLVPLQGLFDWHVWKHUHODWLRQVKLSEHWZHHQJHUPDQGVRPDDVZHOO
DVJHQRW\SHDQGSKHQRW\SHDVOLQNVLQDFKDLQRIFDXVHVSHUKDSVDGLIIHUHQW
SHUVSHFWLYHFDQEHPRWLYDWHGZLWKWKHPHWDSKRURIDURSHRIFDXVDWLRQ,Q
VWHDG RI OLQNV EHWZHHQ GLVWLQFW HQWLWLHV WKH URSH PHWDSKRU VXJJHVWV LQWHU
WZLQHGSURFHVVHV+HUHGLW\DQGGHYHORSPHQWDUHVWUDQGVRIWKLVURSHDQGHDFK
UXQVWKHZKROHOHQJWKRIWKHURSH:HFDQUHJDUGWKHURSH²WKDWLVWUDFHLWV
SDWK²IURPWKHSRLQWRIYLHZRIHLWKHURIWKHHQWZLQHGVWUDQGVEXWHLWKHUZLOO
WDNHXVWKHHQWLUHGLVWDQFHDORQJWKHSDWK,QDGGLWLRQWKHVSLUDOLQJSDWKZH
WUDFHDVZHWUDYHOWKHRQHVWUDQGWKDWRXUH[SHULPHQWDOSURFHGXUHVKDYHDO
ORZHGXVWRVWXG\ZLOOFDXVHXVWRQHJOHFWWKHSDWKRIWKHRWKHUVWUDQG*HQHWLF
H[SHULPHQWVZLOOWKXVWHQGWRLJQRUHKRZGHYHORSPHQWDOFRQVHTXHQFHVDULVH
ZKLOHGHYHORSPHQWDOH[SHULPHQWVZLOOWHQGWRLJQRUHKRZJHQHWLFYDULDWLRQ
RULJLQDWHVDQGLVVRUWHG),*
,IKHUHGLW\DQGGHYHORSPHQWDUHWKHVWUDQGVRIDURSHZKDWSURFHVVGRHV
WKHURSHUHSUHVHQW"0\DQVZHULVUHSURGXFWLRQ$UHSURGXFWLRQSURFHVVLQ
YROYHVWKHHQWZLQHGSURFHVVHVRIKHUHGLWDU\SURSDJDWLRQDQGGHYHORSPHQWDO
HPHUJHQFH7KHFKDLQPHWDSKRUPLJKWVXJJHVWWKDWUHSURGXFWLRQLVDQHYHQW
DVLQJOHFRQQHFWLRQEHWZHHQSDUHQWDQGRIIVSULQJOLQNVEXWWKHURSHPHWDSKRU
VXJJHVWVDQH[WHQGHGSURFHVV+RZFDQZHWKLQNDERXWUHSURGXFWLRQDVVRPH
WKLQJRFFXUULQJRYHUWKHOLIHF\FOHRIDELRORJLFDOHQWLW\UDWKHUWKDQDVDQHYHQW
VXFKDVJDPHWLFRUQXFOHDUIXVLRQRUFHOOXODUILVVLRQ",VXJJHVWWKHIROORZLQJ
DEVWUDFWSLFWXUH
5HSURGXFWLRQDWLWVPRVWDEVWUDFWLVWKHPXOWLSOLFDWLRQRIHQWLWLHVZLWKDPD
WHULDO RYHUODS RI SDUWV EHWZHHQ SDUHQWV DQG RIIVSULQJ 0DWHULDO RYHUODS
PHDQVWKDWSDUWVRIWKHSDUHQWVDWVRPHWLPHEHFRPHSDUWVRIWKHRIIVSULQJ
DWVRPHRWKHUWLPH7KXVUHSURGXFWLRQLVQRPHUHWUDQVPLVVLRQRUFRS\LQJ
RIIRUP²LWLVDIORZRIPDWWHU$WOHDVWVRPHRIWKHSDUWVWKDWIORZIURPSDU
HQWVWRRIIVSULQJPXVWKDYHDVSHFLDOFKDUDFWHUWKH\PXVWEHPHFKDQLVPVRI
GHYHORSPHQW $ PHFKDQLVP RI GHYHORSPHQW DW LWV PRVW DEVWUDFW LV D SDUW
ZLWKWKHFDSDFLW\WRDFTXLUHWKHFDSDFLW\WRUHSURGXFH7KXVUHSURGXFWLRQLV
WKHPXOWLSOLFDWLRQRIHQWLWLHVLQVXFKDZD\WKDWWKHSDUWVWUDQVIHUUHGWRWKHRII
VSULQJFRQIHURQWKHPWKHFDSDFLW\WRGHYHORS$QGWKHFDSDFLW\WRGHYHORSLV
WKHFDSDFLW\WRDFTXLUHWKHFDSDFLW\WRUHSURGXFH
7KLVLVDUHFXUVLYHVWUXFWXUHDQGLWVUHFXUVLYHQHVVFDSWXUHVZKDW,PHDQE\
VD\LQJ WKDW KHUHGLW\ DQG GHYHORSPHQW DUH LQWHUWZLQHG LQ UHSURGXFWLRQ SUR
(3,JUHIP3DJH)ULGD\1RYHPEHU30
$11$/61(:<25.$&$'(0<2)6&,(1&(6
),*85( &KDLQYHUVXVURSHPRGHOVRIELRORJLFDOFDXVDWLRQ7KHW\SLFDOFKDLQRI
FDXVDWLRQYLHZSRLQWWRSUHSUHVHQWVFDXVHVDQGHIIHFWVDVHYHQWVOLQNHGLQDFKDLQ,QWKH
ILJXUHWKHUHLVDFKDLQRIJHQHWLFFRQWLQXLW\DQG³LGOH´FDXVDOOLQNVH[WHQGLQJIURPWKH
JHUPLQHDFKJHQHUDWLRQWRWKHVRPDWKDWLWFDXVHV7KHGLVFRQWLQXLW\DFURVVJHQHUDWLRQV
EHWZHHQVRPDWDUHIOHFWVWKHFDXVDOSLFWXUHRI:HLVPDQQLVP7KHDOWHUQDWLYHURSHRIFDX
VDWLRQYLHZSRLQWFRQVLGHUVKHUHGLW\DQGGHYHORSPHQWWREHH[WHQGHGSURFHVVHVH[WHQGLQJ
WKURXJKRXWOLIHF\FOHVDQGDFURVVJHQHUDWLRQV7KHGLVWLQFWLRQEHWZHHQWKHPFRQFHUQVWKH
W\SHRIFRQWLQXLW\WUDFHGUDWKHUWKDQDQ\IXQGDPHQWDOGLVWLQFWLRQEHWZHHQFRQWLQXRXVDQG
GLVFRQWLQXRXVSURFHVVHV'HYHORSPHQWOLNHKHUHGLW\PXVWEHFRQWLQXRXVWKURXJKRXWWKH
OLIHF\FOHDQGVRLVUHSUHVHQWHGDVLQWHUWZLQHGZLWKKHUHGLW\
FHVVHV+HUHGLW\LVWKHFRUUHODWLRQEHWZHHQSDUHQWVDQGRIIVSULQJGXHWRUH
SURGXFWLRQ5HSURGXFWLRQWUDQVIHUVWKHFDSDFLW\WRGHYHORS'HYHORSPHQWLV
WKHDFTXLVLWLRQRIWKHFDSDFLW\WRUHSURGXFH$VORQJDVWKHUHLVDQXOOFRQGL
WLRQVRPHZKHUHLQWKHV\VWHPWKDWLVWKHUHLVVRPHWKLQJWKDWFDQEHERUQZLWK
(3,JUHIP3DJH)ULGD\1RYHPEHU30
*5,(6(0(5:+$7,6³(3,´$%287(3,*(1(7,&6"
WKHFDSDFLW\WRUHSURGXFHZLWKRXWQHHGLQJWRDFTXLUHWKDWFDSDFLW\WKURXJK
GHYHORSPHQWWKHQUHSURGXFWLRQFDQEHUHFXUVLYHO\DQDO\]HG
1RZZKDWLVWKHVFLHQWLILFYDOXHRIVXFKDQDEVWUDFWDQDO\VLVRIUHSURGXF
WLRQKHUHGLW\DQGGHYHORSPHQW",ZDQWWRPDNHWZRSRLQWV7KHILUVWSRLQW
FRQFHUQVPDWHULDORYHUODS$Q\UHSURGXFWLRQSURFHVVDV,KDYHGHILQHGLWLQ
YROYHV VRFDOOHG ³HSLJHQHWLF´ LQKHULWDQFH EHFDXVH QR UHSURGXFWLRQ SURFHVV
FDQUHVXOWPHUHO\IURPDIORZRIJHQHVRWKHUPDWHULDOIORZVIURPSDUHQWWR
RIIVSULQJ DUH UHTXLUHG WR PDNH D QHZ HQWLW\ ZLWK WKH FDSDFLW\ WR GHYHORS
-DEORQNDDQG/DPEGHVFULEHGWKUHHFDWHJRULHVRIHSLJHQHWLFLQKHULWDQFHV\V
WHPWKHFKURPDWLQPDUNLQJV\VWHPVPHQWLRQHGDERYHDQGDOVRVWHDG\VWDWH
³PHWDEROLF´ LQKHULWDQFH V\VWHPV DQG VWUXFWXUDO LQKHULWDQFH V\VWHPV 7KH
EHVW NQRZQ FDVH RI VWUXFWXUDO LQKHULWDQFH WKDW GRHV QRW LQYROYH FKURPDWLQ
PDUNLQJ LV 6RQQHERUQ¶V VWUXFWXUDO LQKHULWDQFH LQ SDUDPHFLD 6RQQHERUQ
VKRZHGWKDWFXWWLQJRXWDQGUHLQVHUWLQJLQDURWDWHGRULHQWDWLRQDSLHFHRIWKH
VXUIDFHFRUWH[RIWKHRUJDQLVPUHVXOWHGLQWKHLQKHULWDQFHRIWKH³HSLPXWDWHG´
FLOLDU\ RUJDQL]DWLRQ 7KDW LV SDUDPHFLD ZLWK D URWDWHG SDWFK KDYLQJ FLOLD
SRLQWLQJWKH³ZURQJ´ZD\SDVVHGWKHWUDLWRQWRWKHLURIIVSULQJ6WHDG\VWDWH
V\VWHPVLQYROYHWKHSHUSHWXDWLRQRIPHWDEROLFSDWWHUQVGXHWRWKHFKHPLFDO
HTXLOEULDWKDWWKHVHV\VWHPVSURGXFH7KHSURSDJDWLRQRIWKHV\VWHPUHVXOWV
IURPWKHZD\PHWDEROLVPVDUHPXOWLSOLHGE\FHOOGLYLVLRQ%HFDXVHPHWDER
OLVPVDUHDXWRFDWDO\WLFDQGIOXLGWKHLUEXONGLYLVLRQLQWRWZRVSDWLDOO\VHS
DUDWHG SDUWV FDXVHV WKH PHWDEROLF VWHDG\VWDWH WR EH WUDQVPLWWHG WR ERWK
RIIVSULQJ³0XWDWLRQ´RIWKHVWDWHWKURXJKHQYLURQPHQWDOSHUWXUEDWLRQFDQUH
VXOWLQDQHZKHULWDEOHVWHDG\VWDWH
%RWKWKHVHNLQGVRIHSLJHQHWLFLQKHULWDQFHGHSHQGRQWKHIDFWWKDWUHSUR
GXFWLRQDOZD\VLQYROYHVPDWHULDORYHUODSRISDUWVLQWKLVFDVHRIWKHHSLJHQHW
LFSDUWVDVZHOODVRIJHQHWLFSDUWV,IDVWHDG\VWDWHRUVWUXFWXUDOV\VWHPSOD\V
DGHYHORSPHQWDOUROHLQWKHVHQVHRIKHOSLQJWRFDXVHWKHDFTXLVLWLRQRIWKH
FDSDFLW\WRUHSURGXFHWKHQWKH\DUHPHFKDQLVPVRIGHYHORSPHQWDVVSHFLILHG
DERYHDQGWKHV\VWHPFRQWDLQLQJWKHPLVD³UHSURGXFHU´,QRWKHUZRUGV
LIHYHU\FDXVHWKDWLVQRWJHQHWLFLVHSLJHQHWLFDVLPSOLHGE\:HLVPDQQLVP
DQGLIVRPHHSLJHQHWLFFDXVHVIRUPLQKHULWDQFHV\VWHPVEHFDXVHWKH\LQYROYH
WKHWUDQVIHURIPDWHULDOSDUWVWKDWFRQIHUGHYHORSPHQWDOFDSDFLWLHVWKHQWKH
IDFWWKDWDOOUHSURGXFWLRQSURFHVVHVUHTXLUHWUDQVPLVVLRQRIVXFKHSLJHQHWLF
FDXVHVWRJHWKHUZLWK:HLVPDQQLVPHQWDLOVHSLJHQHWLFLQKHULWDQFH7KDWFRQ
FOXVLRQVRXQGVWRRVWURQJEXWLWLVRQO\EHFDXVH:HLVPDQQLVPLVWRRVWURQJ
,WPDNHVHYHU\GHYHORSPHQWDOHQWLW\EH\RQGWKHJHQHVWKDWLVWUDQVPLWWHGLQ
UHSURGXFWLRQDFDQGLGDWHLQKHULWDQFHV\VWHP
7KHVHFRQGSRLQWDERXWWKHVFLHQWLILFUHOHYDQFHRIWKHUHSURGXFHUSHUVSHF
WLYHLVWKDWLWLVHQWLUHO\LQGHSHQGHQWRIJHQHVDQGQXFOHLFDFLGV,WZDVLQIDFW
GHVLJQHGWREHLQGHSHQGHQWRIJHQHVLQRUGHUWRGHVFULEHWKHSUREOHPRIHYR
OXWLRQDU\WUDQVLWLRQ²WKHHYROXWLRQDU\RULJLQRIQHZOHYHOVRIELRORJLFDORU
JDQL]DWLRQ²ZLWKRXWUHIHUHQFHWR³UHSOLFDWRUV´)URPWKLVSHUVSHFWLYHZH
FDQGHVFULEHHYROXWLRQDU\WUDQVLWLRQLQDZD\WKDWGRHVQRWDVVXPHWKDWJHQHV
(3,JUHIP3DJH)ULGD\1RYHPEHU30
$11$/61(:<25.$&$'(0<2)6&,(1&(6
H[LVWHGEHIRUHWKHH[LVWHQFHRIV\VWHPVKDYLQJKHULWDEOHYDULDWLRQWKDWLVSUL
RUWRWKHH[LVWHQFHRIXQLWVRIHYROXWLRQZKLFKLVGHVLUDEOHLIRQHZDQWVDQRQ
FLUFXODUHYROXWLRQDU\WKHRU\RIWKHRULJLQRIJHQHV
7KHUHOHYDQWLPSOLFDWLRQKHUHLVIRUKRZZHFDQWKLQNDERXWWKHUHODWLRQ
VKLS EHWZHHQ WKLV DEVWUDFW UHSURGXFHU SHUVSHFWLYH DQG JHQHWLF LQKHULWDQFH
7KLVZLOODOORZXVWRDGMXVWWKHSLFWXUHRIHSLJHQHWLFLQKHULWDQFHLQUHODWLRQWR
ERWKUHSURGXFWLRQDQGFRQYHQWLRQDOJHQHWLFSURFHVVHVZLWKRXWIDOOLQJEDFNRQ
WKHORJLFRI:HLVPDQQLVP
,IELRORJLFDOUHSURGXFWLRQLVPXOWLSOLFDWLRQZLWKPDWHULDORYHUODSRIPHFK
DQLVPVRIGHYHORSPHQWZHFDQGHILQHLQKHULWDQFHDVUHSURGXFWLRQZLWKPD
WHULDO RYHUODS RI HYROYHG PHFKDQLVPV RI GHYHORSPHQW ,Q RWKHU ZRUGV WR
FRXQWDVDQLQKHULWDQFHV\VWHPWKHFRPSRQHQWSDUWVRIGHYHORSPHQWDOPHFK
DQLVPVPXVWKDYHHYROYHGWRSOD\WKDWGHYHORSPHQWDOUROH,QWKLVGHILQLWLRQ
WKHUHLVVWLOOQRUHIHUHQFHWRJHQHV(YROXWLRQFDQRFFXUZLWKRXWDQ\LQKHULW
DQFHV\VWHPDWDOOEHFDXVHHYROXWLRQFDQRSHUDWHRQUHSURGXFHUVLQYLUWXHRI
WKHKHULWDELOLW\WKDWUHVXOWVIURPPDWHULDORYHUODSVLPSOLFLWHU$PRUHILQH
WXQHGVRUWRIDGDSWLYHHYROXWLRQLVSRVVLEOHRQFHWKHPHFKDQLVPVRIGHYHORS
PHQWKDYHHYROYHGVLQFHWKHLUHYROXWLRQEULQJVVSHFLDOL]DWLRQGLYLVLRQRIGH
YHORSPHQWDO ODERU HFRORJLFDO GLYHUVLILFDWLRQ DQG VWDELOL]DWLRQ RI WKH QHZ
OHYHO RI RUJDQL]DWLRQ WR GLVUXSWLRQ IURP XQFRRSHUDWLYH FRPSRQHQWV EHORZ
ZKRVHUHSURGXFWLYHVXFFHVVLVQRZGHSHQGHQWRQWKHQHZKLJKHUOHYHO
$IXUWKHULQQRYDWLRQLVIRUHYROYHGPHFKDQLVPVRIGHYHORSPHQWWREHDU
WLFXODWHGLQWRDYHU\VSHFLDOL]HGNLQGRIVWUXFWXUHWKDWRIDFRGLQJPHFKDQLVP
RIGHYHORSPHQW,FDQQRWKHUHJRLQWRDIXOODFFRXQWRIZKDWFRQVWLWXWHVDFRG
LQJPHFKDQLVPEXWDFRUHSURSHUW\RIDOOVXFKV\VWHPVLVWKHHYROXWLRQRIDX
WRQRP\IURPFRQVWUDLQWVLPSRVHGDWWKHORZHUOHYHO,QJHQHUDOELRORJLFDOO\
DXWRQRPRXVPHFKDQLVPVDUHRQHVWKDWDUHUHOHDVHGLQVRPHUHVSHFWWRVRPH
GHJUHHIURPFKHPLFDOFRQVWUDLQW²DSURSHUW\,ZLOOFDOO³VWRLFKLRPHWULFIUHH
GRP´6WRLFKLRPHWULFIUHHGRPLVSDUWRIWKHEDVLVXSRQZKLFKVHTXHQFHVFRQ
VWLWXWHELRORJLFDOUDWKHUWKDQPHUHO\FKHPLFDOSURSHUWLHVRIPDFURPROHFXODU
SRO\PHUV)RUSUHVHQWSXUSRVHVZHFDQVLPSO\WDNHWKHPRGHUQ'1$EDVHG
V\VWHPRIJHQHWLFFRGLQJDVDQH[HPSODU&DOOWKRVHLQKHULWDQFHV\VWHPVLQ
ZKLFKWKHPHFKDQLVPVRIGHYHORSPHQWWUDQVIHUUHGLQUHSURGXFWLRQDUHFRGLQJ
PHFKDQLVPVJHQHWLFLQKHULWDQFHV\VWHPV
)URP WKHVH GHILQLWLRQV D SLFWXUH EHJLQV WR HPHUJH 5HSURGXFWLRQ LV WKH
PRVWJHQHUDOVRUWRISURFHVVLQZKLFKKHUHGLW\DQGGHYHORSPHQWDUHHQWZLQHG
,WVEDVLFVWUXFWXUHUHVXOWVIURPPDWHULDORYHUODSRISDUWVWKDWKDYHDXWRFDWDO\W
LFRU³DXWRSRLHWLF´VHOIRUJDQL]LQJDQGVHOIPDLQWDLQLQJRUJDQL]DWLRQ
,QKHULWDQFHLVDVSHFLDOFDVHRIUHSURGXFWLRQSURFHVVHVLQZKLFKWKHGHYHORS
PHQWDOPHFKDQLVPVKDYHHYROYHGWRVHUYHGHYHORSPHQWDOIXQFWLRQV*HQHWLF
LQKHULWDQFHLVDVSHFLDOFDVHRILQKHULWDQFHLQZKLFKWKHGHYHORSPHQWDOPHFK
DQLVPVKDYHHYROYHGWRWKH³FRGLQJ´JUDGHRIRUJDQL]DWLRQ
)URPWKLVSRLQWRIYLHZHSLJHQHWLFVGHVFULEHVDYDULHW\RILQKHULWDQFHV\V
WHPV WKDW DUH QRW JHQHWLF %XW LW GRHV QRW UHTXLUH GHILQLQJ ³HSLJHQHWLF´ LQ
(3,JUHIP3DJH)ULGD\1RYHPEHU30
*5,(6(0(5:+$7,6³(3,´$%287(3,*(1(7,&6"
WHUPVRIZKDWFRXQWVDVJHQHWLF,QGHHGJHQHWLFLQKHULWDQFHQHHGQRWKDYH
HYROYHGLQRUGHUWRKDYHHSLJHQHWLFLQKHULWDQFH7KHUHODWLRQVEHWZHHQUHSUR
GXFWLRQ HSLJHQHWLF DQG JHQHWLF LQKHULWDQFH LV LQ WHUPV RI WKH UHODWLRQ EH
WZHHQWKHJHQHUDODQGWKHVSHFLDOQRWLQWHUPVRIFDXVDOUHODWLRQVEHWZHHQWKH
NLQGVRIV\VWHPVRWKHUWKDQWKHLUHYROXWLRQDU\FDXVDOUHODWLRQV%\WKHVDPH
WRNHQ WKH UHSURGXFHU SHUVSHFWLYH FDQ LQWHUSUHW PROHFXODU DQG SK\VLFR
FKHPLFDOLGHDVRIHSLJHQHWLFVSURYLGHGWKDWWKHVHDUHWDNHQWRGHVFULEHERWK
KHUHGLWDU\DQGGHYHORSPHQWDODVSHFWVRIDSURFHVVDQGQRWDVVWDWHVRIDJLYHQ
KLHUDUFKLFDOOHYHOELRORJLFDORUJDQL]DWLRQ
)LQDOO\,FRPHWRWKHWRSLFLGHQWLILHGLQWKHWLWOHRIWKLVSDSHU
:+$7,6³(3,´$%287(3,*(1(7,&6"
)URPWKH:HLVPDQQLVWSRLQWRIYLHZHYHU\WKLQJEHVLGHV'1$VHTXHQFHV
DQGVHTXHQFHYDULDWLRQLV³HSLJHQHWLF´:HLVPDQQLVPUHQGHUVWKHFDWHJRU\VR
EURDGDVWRPDNHLWYLUWXDOO\LPSRVVLEOHWRFRPSUHKHQGDQ\NLQGRIJHQHUDO
WKHRUHWLFDORUGHULQWKHSKHQRPHQDPXFKOHVVWRVHDUFKIRUVLPSOHUXOHVRI
RUGHUVXFKDVWKHHDUO\JHQHWLFLVWVIRXQGLQ0HQGHOLVP2QWKHVWULFW:HLV
PDQQLVWLQWHUSUHWDWLRQJHQHVDUHPRQDUFKVLQWKHNLQJGRPRIGHYHORSPHQW
VLQFHWKH\GRQ¶WHYHQFKDQJHWKHLURZQFORWKHV²HYHQJHQHWLFPXWDWLRQWXUQV
RXWWREHHSLJHQHWLF7KHLURQ\LVWKDWE\PDNLQJJHQHVWKHFDXVDOEDVLVRIHY
HU\WKLQJJHQHVDORQHFDQH[SODLQQRWKLQJ
:HKDYHVHHQWKDWWKHYDULRXVNLQGVRIHSLJHQHWLFSURMHFWVFDQEHVRUWHG
LQWRWKRVHWKDWWUHDWKHUHGLW\DVGHYHORSPHQWDQGWKRVHWKDWWUHDWGHYHORSPHQW
DVKHUHGLW\7KH\DUHWKXVDWWHPSWVWRILQGPLGGOHUDQJHWKHRULHVWKDWWU\WR
H[SODLQVRPHVDOLHQWSKHQRPHQDEXWQRWE\PHDQVRIDVLQJOHNLQGRIGHYHO
RSPHQWDOUHVRXUFH²WKHJHQHV²QRUE\UHIHUHQFHWRDQXQZRUNDEOHKROLVP
+RZHYHUWKHVHHIIRUWVDUHVWLOOKDPSHUHGE\:HLVPDQQLVPLQFRQFHSWXDOL]
LQJZKDWFRXQWVDVHSLJHQHWLF
,KDYHDGRSWHGDGLIIHUHQWVWUDWHJ\E\GHYHORSLQJDQDOWHUQDWLYHSHUVSHFWLYH
2QWKHUHSURGXFHUSHUVSHFWLYHZHFDQWDNHWKHSUHIL[³HSL´DOPRVWOLWHUDOO\
PHDQLQJ³XSRQDWRQWKHJURXQGRILQDGGLWLRQ´EHFDXVHZHDUHWDNLQJDPD
WHULDOSURFHVVSHUVSHFWLYHUDWKHUWKDQDIRUPDOVWUXFWXUDORQH:KDWLVHSLLQ
HSLJHQHWLFVLVZKDWLVOLWHUDOO\³XSRQ´WKHJHQHV&KURPDWLQPDUNLQJV\VWHPV
DUHJRRGH[DPSOHVRIHSLJHQHWLFV\VWHPV,QVRIDUDVWKHPHWK\OJURXSVRUWKH
WUDQVFULSWLRQIDFWRUVRUWKHKLVWRQHVDUH³XSRQ´WKHJHQHVWKH\DUHHSLJHQHWLF
2IFRXUVHWKHLQKHULWDQFHRIWKHVHV\VWHPVFDQQRWUHVWVROHO\XSRQWKHJHQHV
VLQFHWKH\FDQQRWEHLQKHULWHGH[FHSWLQWKHFRQWH[WRIVWUXFWXUDODQGVWHDG\
VWDWHLQKHULWDQFHRIWKHPROHFXODUDSSDUDWXVQHFHVVDU\WRPHWK\ODWHDQGGHP
HWK\ODWH'1$LQWKHRIIVSULQJ%XWZHQHHGQRWFDOODOOWKHVHIRUPVRILQKHULW
DQFHHSLJHQHWLF)URPWKHUHSURGXFHUSHUVSHFWLYHWKLVLVVLPSO\LQKHULWDQFH
6RZKLOHWKH:HLVPDQQLVWSHUVSHFWLYHODEHOVQHDUO\HYHU\WKLQJHSLJHQHWLF
DQGXUJHVH[SODQDWLRQRIQHDUO\HYHU\WKLQJLQWHUPVRIQHDUO\QRWKLQJWKHUH
(3,JUHIP3DJH)ULGD\1RYHPEHU30
$11$/61(:<25.$&$'(0<2)6&,(1&(6
SURGXFHUSHUVSHFWLYHODEHOVPXFKOHVVHSLJHQHWLFOHDYLQJURRPIRUDFRRSHU
DWLYHUHODWLRQVKLSDPRQJJHQHWLFLVWVHSLJHQHWLFLVWVDQGWKRVHRIXVLQWHUHVWHG
LQWKHRULJLQDQGHYROXWLRQRIUHSURGXFWLRQDQGGHYHORSPHQW
5()(5(1&(6
*,(5(58QGHUVWDQGLQJ6FLHQWLILF5HDVRQLQJWKHG)RUW:RUWK7;
+DUFRXUW%UDFH&ROOHJH3XEOLVKHUV
*5,(6(0(5-'HYHORSPHQWFXOWXUHDQGWKHXQLWVRILQKHULWDQFH3KLORV
6FL3URFHHGLQJV6±6
0$<1$5' 60,7+ - 7KH 7KHRU\ RI (YROXWLRQ UG HG 0LGGOHVH[
3HQJXLQ
:(,60$11 $ 'DV .HLPSODVPD (LQH WKHRULH GHU 9HUHUEXQJ -HQD
*XVWDY)LVFKHU
&5,&.)2QSURWHLQV\QWKHVLV6\PS6RF([S%LRO±
*5,(6(0(5-5HSURGXFWLRQDQGWKHUHGXFWLRQRIJHQHWLFV,Q7KH&RQ
FHSWRIWKH*HQHLQ'HYHORSPHQWDQG(YROXWLRQ+LVWRULFDODQG(SLVWHPRORJ
LFDO 3HUVSHFWLYHV 3 %HXUWRQ 5 )DON +- 5KHLQEHUJHU (GV ±
1HZ<RUN&DPEULGJH8QLYHUVLW\3UHVV
%(6725 7+ 9/ &+$1'/(5 $3 )(,1%(5* (SLJHQHWLF HIIHFWV LQ
HXNDU\RWLFJHQHH[SUHVVLRQ'HY*HQHW±
:,06$77 :& )DOVH PRGHOV DV PHDQV WR WUXHU WKHRULHV ,Q 1HXWUDO
0RGHOVLQ%LRORJ\01LWHFNL$+RIIPDQ(GV±/RQGRQ2[IRUG
8QLYHUVLW\3UHVV
*5,(6(0(5 -5 :& :,06$77 3LFWXULQJ :HLVPDQQLVP D FDVH
VWXG\RIFRQFHSWXDOHYROXWLRQ,Q:KDWWKH3KLORVRSK\RI%LRORJ\,V(VVD\V
IRU'DYLG+XOO05XVH(G±'RUGUHFKW.OXZHU
-$%/21.$ ( 0 /$0% (SLJHQHWLF ,QKHULWDQFH DQG (YROXWLRQ
2[IRUG2[IRUG8QLYHUVLW\3UHVV
+2//,'$<5(SLJHQHWLFVDQRYHUYLHZ'HY*HQHW±
1(:0$1 6$ *% 0h//(5 (SLJHQHWLF PHFKDQLVPV RI FKDUDFWHU
RULJLQDWLRQ-([S=RRO±
*5,(6(0(5-7KHXQLWVRIHYROXWLRQDU\WUDQVLWLRQ6HOHFWLRQ±
*5,(6(0(5-/LPLWVRIUHSURGXFWLRQDUHGXFWLRQLVWLFUHVHDUFKVWUDWHJ\
LQHYROXWLRQDU\ELRORJ\,Q3URPLVHVDQG/LPLWVRI5HGXFWLRQLVPLQWKH%LR
PHGLFDO 6FLHQFHV 0+9 9DQ 5HJHQPRUWHO ' +XOO (GV ±
&KLFKHVWHU-RKQ:LOH\
9(11-7KH/RJLFRI&KDQFH$Q(VVD\RQWKH)RXQGDWLRQVDQG3URYLQFH
RI WKH 7KHRU\ RI 3UREDELOLW\ ZLWK (VSHFLDO 5HIHUHQFH WR LWV /RJLFDO %HDULQJV
DQGLWV$SSOLFDWLRQWR0RUDODQG6RFLDO6FLHQFHQGHG/RQGRQ0DFPLOODQ
*È17,7(6=$7+0È5< -*5,(6(0(57KH3ULQFLSOHVRI/LIH1HZ
<RUN2[IRUG8QLYHUVLW\3UHVVLQSUHVV
0$<1$5' 60,7+-(6=$7+0È5<7KH0DMRU7UDQVLWLRQVLQ(YROX
WLRQ2[IRUG)UHHPDQ6SHNWUXP
9$5(/$ ) 3ULQFLSOHV RI %LRORJLFDO $XWRQRP\ 1HZ <RUN (OVHYLHU
1RUWK+ROODQG