6HVVLRQ
$&ORVHU/RRNDW3ULQWHG&LUFXLW%RDUG0LOOLQJ
$QGUHZ6WHULDQ
*UDQG9DOOH\6WDWH8QLYHUVLW\
$EVWUDFW
6HYHUDOVFKRROVKDYHUHFHQWO\LQFRUSRUDWHGSULQWHGFLUFXLWERDUG3&%PLOOVLQWR((((7HGXFD
WLRQDVDPHDQVRISURGXFLQJ3&%©VLQKRXVH&RPSDUHGWREUHDGERDUGVRUSURWRERDUGVWKHREYL
RXVEHQHILWRIWKHPLOOLQJWHFKQRORJ\LVWKHDELOLW\WREXLOGFLUFXLWVZLWKPRUHUREXVWQHVVDQG
SHUPDQHQFH&RPSDUHGWRFRPPHUFLDOERDUGPDQXIDFWXUHUV3&%PLOOLQJRIIHUVTXLFNHUWXUQ
DURXQGDQGORZHUSHUERDUGFRVW3UHYLRXVSDSHUVKDYHGHVFULEHGKRZ3&%PLOOVKDYHEHHQLQWH
JUDWHGLQWRWKHFXUULFXOXPEXWWKHUHKDVQRWEHHQDQ\GHWDLOHGFRPSDULVRQRIWKHWUDGHRIIV
EHWZHHQLQKRXVHPLOOLQJDQGFRPPHUFLDOPDQXIDFWXULQJ,QWKLVSDSHUZHGUDZXSRQRXUH[SHUL
HQFHVLQXVLQJERWKFLUFXLWERDUGPLOOLQJDQGFRPPHUFLDO3&%PDQXIDFWXULQJIRUVHYHUDOVWXGHQW
GHVLJQSURMHFWV:HFRPSDUHFRVWVFLUFXLWERDUGTXDOLW\DQGHDVHRIDVVHPEO\IDFXOW\WLPHLQYHVW
PHQWVXSSRUWLVVXHVDQGPRVWLPSRUWDQWO\KRZWKHWZRDSSURDFKHVWR3&%FRQVWUXFWLRQIXQGD
PHQWDOO\DIIHFWHQJLQHHULQJLQVWUXFWLRQ:HKDYHLGHQWLILHGVHYHUDOGLVDGYDQWDJHVRI3&%PLOOLQJ
LQFOXGLQJKLJKLQLWLDOFRVWPRUHFRPSOH[ERDUGOD\RXWDQGURXWLQJDQGFRQVHTXHQWOLPLWVRQFLU
FXLWFRPSOH[LW\:HKDYHDOVREHHQVXUSULVHGE\VRPHXQH[SHFWHGDGYDQWDJHVRI3&%PLOOLQJ
VXFKDVKLJKHUPRGXODULW\LQSURMHFWGHVLJQVDQGJUHDWHUULVNWDNLQJ2XUJRDOLVWRSURYLGHWKH
EHQHILWRIH[SHULHQFHWRVFKRROVFRQVLGHULQJDQLQYHVWPHQWLQ3&%PLOOLQJ
,QWURGXFWLRQ
6WXGHQWVKDYHWZREURDGRSWLRQVIRUFRQVWUXFWLQJHOHFWURQLFFLUFXLWVLSURWRW\SLQJPHWKRGV
LQFOXGLQJEUHDGERDUGVZLUHZUDSDQGSURWRERDUGVDQGLLFLUFXLWERDUGVZLWKVROGHUHGFRPSR
QHQWV&LUFXLWERDUGVDUHPRVWVXLWDEOHIRUSURMHFWVWKDWDUHWRRFRPSOH[IRUEUHDGERDUGVRUUHTXLUH
VRPHGHJUHHRISHUPDQHQFHUHOLDELOLW\FRPSDFWQHVVRUUHTXLUHGVKDSH7KHGHVLJQRIDFLUFXLW
ERDUGSODFHPHQWOD\RXWDQGURXWLQJDOVRDIIRUGVWKHVWXGHQWVH[SRVXUHWRPRGHUQ&$'WRROV
WKDWDUHSUHYDOHQWLQWKHLQGXVWU\EXWDUHQRWDSSOLFDEOHWRWKHSURWRW\SLQJDSSURDFKHV
,QRXUMXQLRUOHYHOFRXUVHRQGLJLWDOGHVLJQZHLQFRUSRUDWHDVHPHVWHUORQJSURMHFWFXOPLQDWLQJLQ
DFLUFXLWERDUGUHDOL]DWLRQRIDVWXGHQWWHDP©VFLUFXLWGHVLJQ:HLQLWLDOO\XVHGDFRPPHUFLDOERDUG
PDQXIDFWXUHUWKDWZDVFDSDEOHRISURGXFLQJLQH[SHQVLYHEDUHERDUGV5HFHQWO\ZHSXUFKDVHGD
FLUFXLWERDUGPLOOLQRUGHUWRSURGXFHEDUHERDUGVLQKRXVH,QWKLVSDSHUZHFRPSDUHWKHVHWZR
PHWKRGVRIERDUGIDEULFDWLRQ:HSURYLGHDEULHIORRNDWWKHGHWDLOVRIFLUFXLWERDUGPLOOLQJDQG
KRZLWGLIIHUVIURPFRPPHUFLDOIDEULFDWLRQ:HDOVRGLVFXVVWKHLPSDFWWKDWDFLUFXLWERDUGPLOO
KDVKDGRQVWXGHQWOHDUQLQJERWKLQRXUFRXUVHVDQGLQRWKHUSURMHFWV
3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
Page 6.12.1
:HDUHDVVXPLQJWKDWWKHFLUFXLWERDUGVWKDWQHHGWREHIDEULFDWHGDUHDWPRVWWZROD\HUERDUGV
KDYHORZWRPRGHUDWHGHQVLW\FRPSULVHPDLQO\WKURXJKKROHFRPSRQHQWVZLOOEHSRSXODWHGDQG
VROGHUHGE\KDQGDQGDUHQHHGHGLQRQO\VPDOOTXDQWLWLHV:HH[SHFWWKDWWKHVHDVVXPSWLRQVDUH
FRQVLVWHQWZLWKWKHQHHGVRIPRVW((((7GHSDUWPHQWVIRULQVWUXFWLRQDOXVH
2YHUYLHZRI&RPPHUFLDO%RDUG)DEULFDWLRQ
+DYLQJFLUFXLWERDUGVIDEULFDWHGE\DFRPPHUFLDOPDQXIDFWXUHULVDIDLUO\VLPSOHSURFHVVWKDW
UHTXLUHVWKHHOHFWURQLFVXEPLVVLRQRI*HUEHULH56;ILOHVIRUDUWZRUNDGULOOGUDZLQJDQ
([FHOORQGULOOILOHDQGDQ\VSHFLDOLQVWUXFWLRQV0RGHUQ&$'SURJUDPVDUHFDSDEOHRIJHQHUDWLQJ
WKHVHILOHVDXWRPDWLFDOO\IURPDERDUGOD\RXW2WKHUILOHVDQGILOHIRUPDWVPD\EHLQYROYHGIRU
H[DPSOHVROGHUPDVNRUVLONVFUHHQGHSHQGLQJXSRQWKHERDUGPDQXIDFWXUHUDQGVRPHPDQXIDF
WXUHUVGLUHFWO\DFFHSWVDYHGZRUNVSDFHVIURPSRSXODU&$'SURJUDPV3ULFHVYDU\GHSHQGLQJ
XSRQWKHUHTXLUHGWXUQDURXQGWLPHWKHQXPEHURIERDUGOD\HUVWKHERDUGDUHDWKHQXPEHUDQG
YDULHW\RIGULOOVZKHWKHURUQRWVLONVFUHHQDQGVROGHUPDVNDUHLQFOXGHGDQGVRRQ)HDWXUHZLGWKV
RI§DUHFRPPRQO\VXSSRUWHG
$VDQH[DPSOHZHKDGWZR§[§WZROD\HUERDUGVIDEULFDWHGIRUDSSUR[LPDWHO\ZLWKDWZR
GD\WXUQDURXQG7KHVHERDUGVZHUHWKURXJKKROHSODWHGEXWGLGQRWKDYHVLONVFUHHQRUVROGHU
VHUYLQJWKHORZYROXPHSURWRW\SHPDUNHWDUHOLVWHG
PDVN6HYHUDOFLUFXLWERDUGPDQXIDFWXUHUV
LQWKHELEOLRJUDSK\
2YHUYLHZRI&LUFXLW%RDUG0LOOLQJ
:HGHVFULEHWKHSURFHVVRIFLUFXLWERDUGPLOOLQJIURPH[SHULHQFHZLWKRXURZQV\VWHPDQ/3.)
3URWRPDW&V :KLOHVRPHGHWDLOVPD\GLIIHUEHWZHHQV\VWHPVIRUH[DPSOH77HFKRIIHUVD
FRPSDUDEOHPLOOLQJV\VWHP WKHHVVHQWLDOSURFHVVHVDUHWKHVDPH
$FLUFXLWERDUGPLOOLVHVVHQWLDOO\DWKUHHD[LVSORWWHULQWKDWWKH¦SORWWLQJKHDG§LVFDSDEOHRIILQH
JUDLQPRYHPHQWLQWKH;<SODQHDQGPD\DOVREHOLIWHGXSRUSUHVVHGGRZQ6LQFHWKLVLVDPLOO
WKH¦SORWWLQJKHDG§LVDFWXDOO\DKLJKVSHHGPRWRUWKDWLVILWWHGZLWKHLWKHUDURXWHUELWRUDGULOOELW
)RUFUHDWLQJFRSSHUWUDFHVDURXWHUELWLVXVHG7KHURXWHULVSUHVVHGGRZQRQWRWKHVXUIDFHRIFRS
SHUFODGERDUGDQGLVWKHQPRYHGLQWKH;<SODQH$VLWPRYHVWKHURXWHUUHPRYHVFRSSHUWKXV
FUHDWLQJDQLVRODWLRQFKDQQHO$FRSSHUWUDFHLVFUHDWHGRUPRUHSUHFLVHO\OHIWEHKLQGZKHQWZR
LVRODWLRQFKDQQHOVDUHPLOOHGRQHLWKHUVLGH6HH)LJXUH IRUDQH[DPSOHRIDWUDFHFUHDWHGE\
PLOOLQJDQGDSKRWRJUDSKRIDW\SLFDOFLUFXLWERDUGPLOO7KHODWWHUVKRZVWKHWKUHHPDLQFRPSR
QHQWVRIDPLOOLQJV\VWHPWKHPLOOWKHFRQWUROOLQJFRPSXWHUDQGDYDFXXPPDFKLQH
7KHKROHVLQWKHFLUFXLWERDUGDUHFUHDWHGE\UHSODFLQJWKHURXWHUELWZLWKDGULOOELW7KHGULOOELWLV
PRYHGZLWKWKHPLOOLQJKHDGXSWRWKHGHVLUHG;<SRVLWLRQWKHQWKHKHDGLVSUHVVHGGRZQ
EULHIO\WKHQUHOHDVHG$YDULHW\RIGULOOELWVL]HVDUHXVHGGHSHQGLQJXSRQWKHQHHGVRIWKHFLUFXLW
ERDUG
7KHPLOOLQJSURFHVVEHJLQVZLWKWKHVDPHILOHVGHVFULEHGLQ6HFWLRQ 7KDWLV*HUEHUILOHVIRUDUW
ZRUNDQGDQ([FHOORQILOHIRUGULOOLQIRUPDWLRQ6SHFLDOL]HGLVRODWLRQVRIWZDUHLQFOXGHGZLWKWKH
PLOOFRQYHUWVWKHVHILOHVLQWRDVHWRILQVWUXFWLRQVWKDWLQGLFDWHZKHUHWKHPLOOVKRXOGWUDYHOLQ
RUGHUWROHDYHEHKLQGFRSSHULQWKHGHVLUHGSODFHVDQGDOVRZKHUHWKHPLOOKHDGLVWRGULOOKROHV
$VHSDUDWHPLOOFRQWUROOHUSURJUDPDOVRLQFOXGHGZLWKWKHPLOOUHDGVWKHVHLQVWUXFWLRQVDQGVHQGV
FRPPDQGVWRWKHPLOORYHUDVHULDOFRQQHFWLRQWRDFWXDOO\PRYHWKHKHDGVWDUWWKHPRWRUHWF
Page 6.12.2
3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
)LJXUH7KHSKRWRJUDSKRQWKHOHIWVKRZVWKHERWWRPOD\HURIDW\SLFDOPLOOHGERDUG7KH
SKRWRJUDSKRQWKHULJKWVKRZVRXUPLOOLQJV\VWHP7KHPLOOOHIWLVFRQWUROOHGE\D3&FRP
SXWHUYLDDVWDQGDUGVHULDOSRUWFRQQHFWLRQ7KHYDFXXPV\VWHPLVSDUWLDOO\YLVLEOHXQGHUWKH
WDEOH1RWVKRZQDUHWKHVXSSOLHVERDUGVGULOOELWVHWFWKDWRFFXS\DGGLWLRQDOVSDFHWRWKH
OHIWRIWKHPLOO
,QWKHRU\WKHQWKHUHLVQRGLIIHUHQFHLQWKH&$'SURFHVVZLWKUHVSHFWWRWKHLQWHUIDFHEHWZHHQWKH
GHVLJQHUDQGWKHPDQXIDFWXUHURUPLOOWKH&$'ILOHVDUHWKHVDPH,QSUDFWLFHWKHPLOOLQJSURFHVV
GRHVUHDFKGRZQWRWKHGHVLJQOHYHODVZHGLVFXVVEHORZ$GHVLJQHUZLOOQHHGWREHDZDUHIURP
WKHEHJLQQLQJZKHWKHUWKHERDUGZLOOEHPDQXIDFWXUHGFRPPHUFLDOO\RUPLOOHG
&RPSDULVRQRIPLOOLQJYVIDEULFDWLRQ
)RUWKH((((7GHSDUWPHQWFRQVLGHULQJWKHSXUFKDVHRIDFLUFXLWERDUGPLOOZHEHOLHYHLWLVXVH
IXOWRFRPSDUHWKHSURFHVVHVRIPLOOLQJDJDLQVWFRPPHUFLDOIDEULFDWLRQ
3HUERDUGFRVWV
$PDMRUEHQHILWRILQKRXVHPLOOLQJLVWKDWPLOOHGERDUGVDUHYHU\LQH[SHQVLYHLIIL[HGFRVWVDUH
QRWFRQVLGHUHGLHFRVWRIWKHPLOOLWVHOIFRVWRIPDLQWHQDQFHHWF)RUH[DPSOHDVVXPLQJD
§[§ERDUGWKDWUHTXLUHVPHWUHVRIPLOOKHDGWUDYHOZHHVWLPDWHWKHFRVWRIWKLVERDUGLQ
DFWXDOERDUGXVDJHDQGURXWHUELWZHDUWREH7KLVGRHVQRWLQFOXGHZHDURQGULOOELWVFRVW
RIYDFXXPEDJVHWFDVWKHVHKDYHQHJOLJLEOHSHUERDUGFRVWV7KHFRVWIRUPLOOLQJDERDUGWKHQ
LVPXFKORZHUWKDQWKHDSSUR[LPDWHO\WKDWLWFRVWVWRKDYHDERDUGFRPPHUFLDOO\IDEULFDWHG
RISURWRW\SHTXDOLW\7KHHQGUHVXOWLVWKDWWKHUHLVPXFKOHVVSUHVVXUHRQVWXGHQWVWRQRWPDNH
PLVWDNHV,IDERDUGGHVLJQKDVEHHQVREDGO\LPSOHPHQWHGWKHFRVWIRUPLOOLQJDQHZERDUGLV
RQO\DIHZGROODUVDQGVRPHWLPHIRUWKHPLOORSHUDWRUSHUKDSVHYHQWKHVWXGHQW
3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
Page 6.12.3
7KLVGHFUHDVHGHPSKDVLVRQDFKLHYLQJDFRUUHFWERDUGGHVLJQKDVWZREHQHILWV)LUVWO\LW
DOORZVVWXGHQWVWRVSHQGOHVVWLPHFKHFNLQJWKHERDUGGHVLJQDQGVSHQGPRUHWLPHRQWKHVFKH
PDWLFDQGRWKHUDVSHFWVRIWKHGHVLJQ6HFRQGO\FLUFXLWERDUGVWKDWGRKDYHHUURUVSURYLGHDFRQ
FUHWHOHDUQLQJRSSRUWXQLW\IRUVWXGHQWVWKH\DSSUHFLDWHILUVWKDQGWKHQHFHVVLW\IRUFDUHIXOFRUUHFW
ZRUNDVWKHFRVWRISRVWIDEULFDWLRQIL[HVLVPXFKODUJHUWKDQWKHFRVWRIPDNLQJVXUHLWLVULJKWWKH
ILUVWWLPH,QRXUH[SHULHQFHQRQXPEHURIDGPRQLWLRQVWRZRUNFDUHIXOO\FKHFNDOOSLQRXWVVSRW
FKHFNURXWHGFRQQHFWLRQVHWFLVDVJRRGDPRWLYDWLRQWRGRJRRGZRUNDVLVDERDUGWKDWQHHGV
VHYHUDOFXWVDQGMXPSHUVLQRUGHUWRIL[VORSS\ZRUN,IWKHERDUGLVWUXO\XQVDOYDJHDEOHWKHFRVW
RIPLOOLQJDQRWKHULVVPDOO
$QRWKHUEHQHILWRIORZSHUERDUGFRVWLVWKDWVWXGHQWVDSSHDUPRUHOLNHO\WRWDNHULVNV:KHQZH
XVHGDFRPPHUFLDOIDEULFDWLRQSURFHVVZHFOHDUO\WROGWKHVWXGHQWVWKDWWKH\KDGRQO\RQHRSSRU
WXQLW\WRJHWLWULJKWVLQFHZHVLPSO\FRXOGQ©WDIIRUGWRKDYHPXOWLSOHERDUGVIDEULFDWHG6WXGHQWV
WKHQZHUHYHU\FDXWLRXVDQGXQGHUVWDQGDEO\VR:LWKLQKRXVHPLOOLQJVRPHVWXGHQWVFKRVHULVN
LHUDQGPRUHLQWHUHVWLQJSURMHFWVEHFDXVHWKHFRVWRIIDLOXUHZDVVLPSO\VRPHUHGHVLJQDQG
DQRWKHUPLOOLQJSDVV
2WKHUFRVWV
:LWKWKHDVVXPHGSHUERDUGFRVWVGHWDLOHGDERYHIRUPLOOLQJIRUFRPPHUFLDOIDEULFD
WLRQLWZRXOGUHTXLUHWKHPLOOLQJRIRYHUERDUGVIRUWKHVDYLQJVWRUHFRYHUWKHLQLWLDOFRVWRI
WKHPLOO:KHWKHURUQRWDFLUFXLWERDUGPLOOLVDZLVHILQDQFLDOLQYHVWPHQWFOHDUO\
GHSHQGVXSRQWKHERDUGPDNLQJQHHGVDQGKDELWVRIDSDUWLFXODUGHSDUWPHQWDVZHOODVWKHQDWXUH
RIWKHIXQGLQJIRUWKHPLOO
7KHODUJHVWUHFXUULQJFRVWVRIDFLUFXLWERDUGPLOODUHOLNHO\WREHD\HDUO\ZDUUDQW\FRQWUDFW
FRSSHUFODGERDUGVDQGEDFNLQJVIRUDSDFNDJHRIDQGURXWHUELWVIRUD
SDFNDJHRI
7KURXJKKROHSODWLQJ
3HUKDSVWKHPRVWVLJQLILFDQWGLIIHUHQFHEHWZHHQFLUFXLWERDUGPLOOLQJDQGFRPPHUFLDOIDEULFDWLRQ
LVWKHLVVXHRIWKURXJKKROHSODWLQJ$WZROD\HUERDUGZLWKSODWHGWKURXJKKROHVKDVWZRPDMRU
EHQHILWVYLDVGRQRWQHHGWREHPDQXDOO\VROGHUHGDQGGHYLFHSLQVDFWDVYLDV7KHILUVWEHQHILW
UHSUHVHQWVDVDYLQJVLQVROGHULQJWLPHDQGHIIRUWEXWWKHODWWHUEHQHILWFDQIXQGDPHQWDOO\DIIHFW
WKHGHVLJQRIWKHERDUG:KHQDGHYLFHSLQLVQRWDYLDLWPXVWEHVROGHUHGRQWKHVROGHUVLGHRI
WKHERDUGXQOHVVWKHGHYLFHSDFNDJHOHQGVLWVHOIWRFRPSRQHQWVLGHVROGHULQJHJUHVLVWRUV
FDSDFLWRUVHWF)RUVLQJOHOD\HUERDUGVWKLVLVQRWDQLVVXH)RUWZROD\HUERDUGVWKLVUHVWULFWLRQ
FDQJUHDWO\LQFUHDVHWKHQXPEHURIYLDVWKDWDUHUHTXLUHGDQGWKHUHE\GHFUHDVHWKHURXWDELOLW\RI
WKHERDUG7KHHQGUHVXOWLVWKDWERDUGVZLWKRXWWKURXJKKROHSODWLQJDUHOLPLWHGLQFRPSOH[LW\IRU
DJLYHQVL]H
3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
Page 6.12.4
7KHODFNRIDWKURXJKKROHSODWLQJSURFHVVVKRXOGEHFRQVLGHUHGDWWKHGHVLJQVWDJH$GHQVH
ERDUGOD\RXWPD\QRWEHDFKLHYDEOHZLWKRXWDKLJKQXPEHURIYLDV$OVRWKH&$'SURJUDPEHLQJ
XVHGPXVWEHDEOHWRVXSSRUWDXWRURXWLQJZLWKRXWWKHDVVXPSWLRQRIWKURXJKKROHSODWLQJ)RU
H[DPSOHWKH(DJOH&$'SURJUDPZHXVHFDQQRWEHGLUHFWO\LQVWUXFWHGWRURXWHRQWZROD\HUVEXW
QRWURXWHGLUHFWO\WRGHYLFHSLQVRQWKHWRSOD\HU)RUWXQDWHO\WKLVSURJUDPDOORZVXVHUVFULSWVWR
EHZULWWHQWRGLUHFWO\PDQLSXODWHWKH&$'GDWD:HKDGWRZULWHVXFKDVFULSWWRSODFH¦UHVWULFWLRQ
FLUFOHV§DERYHHDFKGHYLFHSLQRQWKHWRSOD\HUWRIRUELGWKHDXWRURXWHUIURPPDNLQJDFRQQHFWLRQ
WKHUHDQGIRUFLQJLWWRXVHDYLDWRVZLWFKOD\HUV:KLOHZRUNDEOHWKLVUHSUHVHQWVDQH[WUDVWHSLQ
WKHGHVLJQSURFHVVDQGJHQHUDOO\LQFUHDVHGFRPSOH[LW\HJJUHDWHUDXWRURXWLQJWLPH
2XUPLOOPDQXIDFWXUHU/3.)RIIHUVWKUHHRSWLRQVIRULPSOHPHQWLQJDWKURXJKKROHSODWLQJSUR
FHVV:HKDYHQRWSXUFKDVHGDQ\RIWKHVHSURFHVVFRPSRQHQWVWKXVRQO\EULHIO\GLVFXVVWKHLUFDSD
ELOLWLHV2QHPHWKRGSUHVVHVFRSSHUEDLOVLQWRHDFKKROHDQGWKHQVROGHUVWKHP7KLVPHWKRGLV
LQWHQGHGIRUDVPDOOQXPEHURIKROHVDQGLVIDLUO\VORZWZREDLOVSHUPLQXWH$QRWKHUPHWKRG
XVHVFRQGXFWLYHSDVWHWKDWLVLQMHFWHGLQWRHDFKKROHXVLQJWKHVDPHPLOOLQJPDFKLQHDQGWKHQ
UHPRYHGWROHDYHDSDVWHUHVLGXH7KLVUHVLGXHWKHQKDUGHQVLQWRDWKLQFRQGXFWLYHOD\HUDIWHUEDN
LQJDWƒ&IRUPLQXWHV7KLVPHWKRGLVLQWHQGHGWREHIDVWHUDQGWRSODWHPRUHKROHVWKDQWKH
FRSSHUEDLOSURFHVV)LQDOO\DQHOHFWURSODWLQJSURFHVVXVLQJVHYHUDOFKHPLFDOEDWKVLVRIIHUHG
7KLVSURFHVVFDQEHXVHGWRSODWHDQ\QXPEHURIKROHVEXWUHTXLUHVXSWRKRXUVRISURFHVVLQJ
WLPH7KHSURFHVVDOVRUHTXLUHVVRPHIDLUO\H[SHQVLYHFKHPLFDOVDVZHOODVSURSHUGLVSRVDORI
WKHVHFKHPLFDOV
%HIRUHLQYHVWLQJLQDFLUFXLWERDUGPLOOLWLVLPSRUWDQWWRFRQVLGHUWKHERDUGPDNLQJQHHGVRIWKH
GHSDUWPHQWLHZLOOKLJKGHQVLW\ERDUGVEHFRPPRQSODFH"DQGGHWHUPLQHZKHWKHUDQDGGLWLRQDO
LQYHVWPHQWVKRXOGEHPDGHLQDSODWLQJSURFHVVRUZKHWKHUFRPPHUFLDOPDQXIDFWXUHLVWKHEHVW
DOWHUQDWLYH
%UHDGERDUGLQJVXSSRUW
$EHQHILWRIKDYLQJDQLQKRXVHPLOOLVWKHDELOLW\WRFUHDWHLQH[SHQVLYHFLUFXLWERDUGVIRUXVHLQD
YDULHW\RIFRXUVHV)RUH[DPSOHLQRXUFRXUVHRQ'\QDPLF6\VWHPVDFRXUVHRQO\WDNHQE\
0HFKDQLFDO(QJLQHHULQJVWXGHQWVWKH/0KLJKFXUUHQWRSDPSLVXVHGLQDPRWRUFRQWURO
ODERUDWRU\EXWWKHSLQVRIWKLVGHYLFHDUHQRWRQ§FHQWHUV7KLVPDNHVWKHGHYLFHQRWVXLWDEOH
IRUEUHDGERDUGLQJLQWKHODERUDWRU\,WZDVDVLPSOHPDWWHUWRGHVLJQDQGPLOODGDSWHUERDUGVWKDW
SURYLGHGDQLQWHUIDFHEHWZHHQWKHSLQVRIWKH/0DQGDVLQJOHURZFRQQHFWRUZLWK§FHQ
WHUVWKDWFRXOGEHLQVHUWHGLQWRDEUHDGERDUG
0RGXODUFLUFXLWGHVLJQ
$QRWKHUEHQHILWRIORZSHUERDUGFRVWLVWKDWDVWXGHQWSURMHFWFDQEHSDUWLWLRQHGRYHUPXOWLSOH
ERDUGVZLWKRXWDGGLWLRQDOH[SHQVH2QHUHFHQWVWXGHQWSURMHFWXVHGWKUHHVPDOOFLUFXLWERDUGVWR
LPSOHPHQWDQ530PHWHUIRUDPRWRUVKDIW7KLVSURMHFWKDGRQHFLUFXLWERDUGZLWKDUHIOHFWLYH
SKRWRVHQVRUPRXQWHGWRLWDORQJZLWKWKHGHWHFWRUORJLF$QRWKHUFLUFXLWERDUGKDGDQ/&'GLV
SOD\DQGFRQQHFWRUPRXQWHGWRLWIRUUHPRWHGLVSOD\7KHWKLUGFLUFXLWERDUGFRPSULVHGWKHPDLQ
ORJLFIRUWKHV\VWHP0XOWLERDUGV\VWHPVVXFKDVWKHVHZRXOGEHGLVFRXUDJHGZKHQHDFKERDUG
LQFXUVIDEULFDWLRQFRVWZLWKDFRPPHUFLDOPDQXIDFWXUHU
3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
Page 6.12.5
$QRWKHUVWXGHQWSURMHFWLQYROYHGWKHXVHRIDKLJKTXDOLW\DQDORJWRGLJLWDOFRQYHUWHULQWHUDFWLQJ
ZLWKDPLFURFRQWUROOHUEDVHGGHVLJQ7KHODWWHUSDUWRIWKHGHVLJQZDVFRPSOHWHDQGZHOOXQGHU
VWRRGEXWWKHVWXGHQWVZHUHQRWFRQILGHQWLQWKHDQDORJWRGLJLWDOFRQYHUWHUDQGDVVRFLDWHGFLU
FXLWU\7KHVWXGHQWVGHFLGHGWREXLOGDFLUFXLWERDUGZLWKDFRQQHFWRULQVWHDGRIWKH$'FRQYHUWHU
FLUFXLWU\DQGODWHUEXLOGDVHSDUDWHERDUGZLWKWKH$'FRQYHUWHUWKDWFRXOGEHSOXJJHGLQWRWKH
FRQQHFWRU7KLVDOORZHGWKHPWRH[SHULPHQWZLWKWKH$'GHVLJQDQGUHSODFHLWZLWKDGLIIHUHQW
GHVLJQLIQHFHVVDU\7KLVPRGXODUDSSURDFKWRWKHLUGHVLJQDOORZHGWKHPWRSURFHHGZLWKERWK
KDUGZDUHDQGVRIWZDUHGHYHORSPHQWHYHQZKHQWKH\ZHUHQRW\HWFRPSOHWHO\FRQILGHQWLQRQH
SDUWRIWKHLUGHVLJQ
'LYLGLQJDFLUFXLWLQWRVHSDUDWHFRQQHFWLQJSDUWVDVLQWKHDERYHH[DPSOHLVDPHWKRGRIPDQDJ
LQJULVNLHUSURMHFWVZKLFKZHPHQWLRQHGLQ6HFWLRQ DUHPRUHOLNHO\WREHSXUVXHGZKHQSHU
ERDUGFRVWVDUHORZ7KHFRVWRIXVLQJFRPPHUFLDOIDEULFDWLRQIRUWKLVDSSURDFKKRZHYHUZRXOG
KDYHEHHQQHDUO\GRXEOHWKHFRVWRIDVLQJOHERDUG:LWKLQKRXVHPLOOLQJWKHDGGLWLRQDOFRVWRI
WKHPRGXODUL]HGGHVLJQZDVQHJOLJLEOH
7XUQDURXQGWLPH
)URPWKHWLPHWKDW&$'ILOHVDUHVHQWWRDFRPPHUFLDOPDQXIDFWXUHUWRWKHWLPHERDUGVDUH
UHFHLYHGFDQEHDVVKRUWDVZRUNLQJGD\V7KHWLPHWRPLOOLQKRXVHKRZHYHULVDSSUR[LPDWHO\
KRXU7KLVUHGXFHGWXUQDURXQGWLPHRSHQVXSVRPHLQWHUHVWLQJSRVVLELOLWLHVLQLQVWUXFWLRQ:H
DUHFRQVLGHULQJDVLQJOHKRXUODERUDWRU\LQZKLFKVWXGHQWVGHVLJQDVLPSOHFLUFXLWSHUIRUP
WKHERDUGOD\RXWDQGURXWLQJWKHQDOOGHVLJQVDUHPLOOHGDVDJURXS$IWHUVROGHULQJVWXGHQWVKDYH
DSK\VLFDOUHDOL]DWLRQRIWKHLUGHVLJQDORQJZLWKDQDSSUHFLDWLRQIRUWKHGHVLJQOD\RXWPLOOSUR
FHVV7KLVW\SHRIODERUDWRU\ZRXOGVWLOOEHSRVVLEOHZLWKFRPPHUFLDOPDQXIDFWXUHEXWLWZRXOG
UHTXLUHDEUHDNRIDIHZGD\VLQWKHODERUDWRU\XQWLOWKHERDUGVZHUHUHFHLYHGSOXVWKHFRVWPD\EH
SURKLELWLYH
(DVHRIVROGHULQJ
:HKDYHIRXQGFRPPHUFLDOO\IDEULFDWHGERDUGVWREHVOLJKWO\HDVLHUWRVROGHU7KLVLVRZLQJWRWZR
IDFWRUVWKHVHERDUGVDUHWLQSODWHGDQGWKH\GRQRWKDYHWKHODUJHDUHDVRIFRSSHUUHPDLQLQJRQ
PLOOHGERDUGV7LQSODWLQJFDQEHDSSOLHGWRPLOOHGERDUGVSULRUWRVROGHULQJIRUIDLUO\ORZFRVW
EXWWKLVUHSUHVHQWVDQH[WUDSURFHVVVWHSDQGDGGLWLRQDOWLPHH[SHQVH7KHODUJHFRSSHUDUHDVRQD
PLOOHGERDUGSUHVHQWRSSRUWXQLWLHVIRUVROGHUEULGJHV7KHVHFRSSHUDUHDVFDQEHUHPRYHGZLWKDQ
H[WUDPLOOLQJVWHSNQRZQDVUXERXWLQZKLFKDVSHFLDOHQGPLOOUHPRYHVZLGHVZDWKVRIFRSSHU
7KHUXERXWSURFHVVKRZHYHULQFXUVH[WUDPLOOLQJWLPHDQGH[WUDFRVWDVWKHHQGPLOOVDUHTXLFNO\
ZRUQRXWDQGDUHUHODWLYHO\H[SHQVLYH
3URFHVVDYDLODELOLW\
$EHQHILWRIFRPPHUFLDOERDUGPDQXIDFWXUHUVLVWKDWWKH\DUHDOZD\VDYDLODEOHDQGHYHQLIRQHLV
QRWRWKHUVDUH$FLUFXLWERDUGPLOOPD\QHHGUHSDLUZKLFKPD\UHTXLUHVKLSPHQWRIWKHXQLWWR
DQGIURPWKHPDQXIDFWXUHU7KLVFDQOHDGWRDGHOD\RIGD\VRUHYHQZHHNVLQDGGLWLRQWRWKHFRVW
RIVKLSSLQJZKLFKLVQRWLQVLJQLILFDQWIRUDKHDY\\HWGHOLFDWHXQLW,I0XUSK\©V/DZDSSOLHVWKH
PLOOZLOOIDLODWWKHZRUVWSRVVLEOHWLPHDQGVWXGHQWSURMHFWVZDLWLQJIRUFRPSOHWLRQZLOOEHVWDOOHG
,IDFLUFXLWERDUGPLOOLVDFHQWUDOUHVRXUFHIRUDFRXUVHWKHLQVWUXFWRUPXVWFRQVLGHUFDUHIXOO\WKH
FRQVHTXHQFHVRIPLOOIDLOXUHDWDFULWLFDOWLPHLQWKHFRXUVH
Page 6.12.6
3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
6LONVFUHHQVDQGVROGHUPDVN
7KHSURFHVVHVRIDSSO\LQJVLONVFUHHQDQGVROGHUPDVNDUHVHSDUDWHIURPPLOOLQJ6RPHFRPPHU
FLDOPDQXIDFWXUHUVRIIHUWKHVHRSWLRQV,IWKHVHDGGLWLRQDOSURFHVVVWHSVDUHUHTXLUHGFRPPHUFLDO
PDQXIDFWXUHLVWKHSUHIHUUHGVROXWLRQXQOHVVLQKRXVHIDFLOLWLHVIRUDSSO\LQJVLONVFUHHQDQGVROGHU
PDVNH[LVW1RWHWKDWDIRUPRIVROGHUPDVNLVSRVVLEOHXVLQJDSURFHVVWKDWPLOOVRXWKROHVIURP
DVSHFLDOIRLO
3URMHFWVXSSRUW
$FLUFXLWERDUGPLOOFDQVXSSRUWGHSDUWPHQWVRXWVLGHRI((((7DQGILQGRWKHUXVHVVXSSRUWLQJ
VWXGHQWSURMHFWVZKHUHFRPPHUFLDOPLOOLQJFRVWVPD\EHWRRKLJK2XUPLOOKDVEHHQXVHGWRFRQ
VWUXFWFLUFXLWVIRUH[WUDFXUULFXODUVWXGHQWDFWLYLWLHVVXFKDVWKH6RODU%RDWFRPSHWLWLRQDQGWKH
)LUHILJKWLQJ5RERWFRPSHWLWLRQ,QWKLVUROHWKHFLUFXLWERDUGPLOOHQKDQFHVWKHTXDOLW\RIVWXGHQW
HGXFDWLRQRXWVLGHRIWKHFODVVURRPDQGLQFUHDVHVWKHOHYHORIVHUYLFHDQGUHFRJQLWLRQRIWKH((
((7GHSDUWPHQW
7LPHLQYHVWPHQW
7KHGHJUHHRIWLPHLQYHVWPHQWE\IDFXOW\DQGODERUDWRU\VXSSRUWSHUVRQQHOPXVWEHFRQVLGHUHG
&LUFXLWERDUGPLOOLQJUHTXLUHVNQRZOHGJHDQGH[SHULHQFHZLWKWKHRSHUDWLRQDQGLQWHUDFWLRQRI
WKUHHVHSDUDWHVRIWZDUHSURJUDPV&$'SURJUDPLVRODWLRQSURJUDPPLOOLQJFRQWUROSURJUDP
DQGDQHZKDUGZDUHGHYLFHWKHPLOOLWVHOIZKLFKPD\EHDYHU\XQIDPLOLDUIRUPRIHTXLSPHQWIRU
((((7IDFXOW\VXFKDVWKHDXWKRURIWKLVSDSHU$FLUFXLWERDUGPLOOLVE\QRPHDQV¦SOXJDQG
SOD\§7KHGHSDUWPHQWSXUFKDVLQJDPLOOPXVWFRQVLGHUFDUHIXOO\ZKHUHWKHH[SHUWLVHIRURSHUDWLQJ
WKHPLOOZLOOUHVLGHDQGZKRZLOOEHUHVSRQVLEOHIRURSHUDWLQJWKHPLOO)DFXOW\WLPHFRPPLWPHQWV
PXVWEHEDODQFHGDJDLQVWFRQWLQXLW\RINQRZOHGJHWKHWLPHLWWDNHVWRWUDLQVWXGHQWVRQWKHVRIW
ZDUHDQGKDUGZDUHWKHSRWHQWLDOIRUGDPDJLQJWKHHTXLSPHQWHWF
&RQFOXVLRQV
:HKDYHSUHVHQWHGVHYHUDOGHWDLOVRIFLUFXLWERDUGPLOOLQJWKDWZLOOKRSHIXOO\EHRIXVHWRWKH
GHSDUWPHQWFRQVLGHULQJDQLQYHVWPHQWLQFLUFXLWERDUGPLOOLQJ7KLVLQYHVWPHQWZHKDYHDUJXHG
VKRXOGEHLQDQLPSURYHGOHDUQLQJH[SHULHQFHIRUWKHVWXGHQWVQRWLQFRVWDVKXQGUHGVRIERDUGV
QHHGWREHPLOOHGIRUVROHO\WKHSXUFKDVHSULFHRIWKHPLOOWREHUHFRYHUHG7KHPDMRUEHQHILWVRI
WKHFLUFXLWERDUGPLOODUHORZSHUERDUGFRVWHQFRXUDJLQJPRGXODUSURMHFWGHVLJQVKLJKHUULVN
SURMHFWVDQGVXSSRUWLQJH[WUDFXUULFXODUDFWLYLWLHVDQGWXUQDURXQGWLPHRQWKHRUGHURIKRXUV
LQVWHDGRIGD\V7KHGUDZEDFNVRIFLUFXLWERDUGPLOOLQJDUHORZHUDOORZDEOHERDUGGHQVLW\XQOHVV
WKURXJKKROHSODWLQJHTXLSPHQWLVDOVRSXUFKDVHGKLJKLQLWLDOFRVWODFNRIVLONVFUHHQDQGVROGHU
PDVNDQGVOLJKWO\PRUHGLIILFXOWVROGHULQJDQGVHUYLFHLQWHUUXSWLRQVGXULQJUHSDLU,Q7DEOH EHORZZHVXPPDUL]HWKHPDLQSRLQWVIURP6HFWLRQ 3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
Page 6.12.7
,QRXUFDVHWKHLQYHVWPHQWLQWKHFLUFXLWERDUGPLOOKDVEHHQDSRVLWLYHH[SHULHQFH'HVSLWHWKH
GUDZEDFNVOLVWHGDERYHZHILUPO\EHOLHYHWKDWRXUVWXGHQWVKDYHGHULYHGEHQHILWIURPLQKRXVH
PLOOLQJFDSDELOLWLHVDQGWKDWWKHLQYHVWPHQWLQWLPHDQGPRQH\ZDVZHOOZRUWKZKLOH
7DEOH6XPPDU\FRPSDULVRQRIFLUFXLWERDUGPLOOLQJYVFRPPHUFLDOIDEULFDWLRQ
)DFWRU
$GYDQWDJH IRU &LUFXLW %RDUG 0LOOLQJ
3HUERDUG FRVWV
$SSUR[LPDWHO\ UDWKHU WKDQ $GYDQWDJH IRU &RPPHUFLDO )DEULFDWLRQ
2WKHU FRVWV
1R LQLWLDO PLOO FRVW DQG QR
FRVWV IRU PLOOLQJ VXSSOLHV
7KURXJKKROH SODWLQJ
&RPPRQO\ DYDLODEOH HQDEOHV JUHDWHU
ERDUG GHQVLW\
%UHDGERDUGLQJ VXSSRUW
,QH[SHQVLYH ZD\ WR VXSSRUW QRQVWDQ
GDUG SLQ VSDFLQJV IRU EUHDGERDUGV
0RGXODU FLUFXLW GHVLJQ
0RGXODU FLUFXLWV DUH PRUH FRVW HIIHF
WLYH DQG OHVV ULVN\
7XUQDURXQG WLPH
2QH KRXU LQVWHDG RI WZR GD\V
(DVH RI VROGHULQJ
7LQ SODWLQJ DQG OHVV UHVLGXDO FRSSHU
LPSURYHV VROGHUDELOLW\
3URFHVV DYDLODELOLW\
$OZD\V DYDLODEOH GRHV QRW KDYH GRZQ
WLPH IRU PDFKLQH VHUYLFH RU UHSDLU
6LONVFUHHQVVROGHU PDVN
(DVLO\ DYDLODEOH SRVVLEO\ IRU H[WUD
FRVW
3URMHFW VXSSRUW
7LPH LQYHVWPHQW
(DV\ WR VXSSRUW H[WUDFXUULFXODU DQG
H[WUDGHSDUWPHQWDO SURMHFWV
1R QHHG WR VXSSRUW HTXLSPHQWVRIWZDUH
DQG ORZHU OHDUQLQJ FXUYH
$FNQRZOHGJPHQWV
,ZRXOGOLNHWRWKDQN'DYLG&DUQH\IRUSURYLGLQJVHYHUDOLQWHUHVWLQJLQVLJKWVUHJDUGLQJFLUFXLW
ERDUGPLOOLQJDWWKH8QLYHUVLW\RI:DWHUORR
%LEOLRJUDSK\
85/ KWWSZZZDSFLUFXLWVFRP! $OEHUWD 3ULQWHG &LUFXLWV D FLUFXLW ERDUG PDQXIDFWXUHU
85/ KWWSZZZSFEFRP! $GYDQFHG &LUFXLWV D FLUFXLW ERDUG PDQXIDFWXUHU
85/ KWWSUXQWRSFE! 2/,0(; D FLUFXLW ERDUG PDQXIDFWXUHU
85/ KWWSZZZOSNIGH! /3.) D FLUFXLW ERDUG PLOO PDQXIDFWXUHU
85/ KWWSZZZWWHFKFRP! 77HFK D FLUFXLW ERDUG PLOO PDQXIDFWXUHU
%UDXQ &* ¦7KH &60 (OHFWURQLFV 3URWRW\SLQJ )DFLOLW\§ 3URFHHGLQJV RI WKH $6(( $QQXDO &RQIHUHQFH
85/ KWWSZZZFDGVRIWFRP! &DG6RIW DXWKRUV RI WKH (DJOH VFKHPDWLFERDUG &$' SURJUDP
85/ KWWSOSNIKHUUOLFKUDPXVFKNDWGHDUWLNHOYLHZH[DPSOHVKWPO! /3.) SKRWRJUDSKV RI PLOOLQJ SURFHVVHV
85/ KWWSOSNIKHUUOLFKUDPXVFKNDWGHDUWLNHOYLHZYLHZ$UWLNHOFIP"DUW*UXSSH,' ,' ! /3.) (DV\
6ROGHU PHWKRG GHVFULELQJ WKH FUHDWLRQ RI VROGHU PDVNV XVLQJ D PLOOLQJ SURFHVV
3URFHHGLQJV RI WKH $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ $QQXDO &RQIHUHQFH ([SRVLWLRQ
&RS\ULJKW ‹ $PHULFDQ 6RFLHW\ IRU (QJLQHHULQJ (GXFDWLRQ
Page 6.12.8
$1'5(: 67(5,$1
$QGUHZ 6WHULDQ LV FXUUHQWO\ DQ $VVLVWDQW 3URIHVVRU LQ WKH 3DGQRV 6FKRRO RI (QJLQHHULQJ DW *UDQG 9DOOH\ 6WDWH 8QLYHU
VLW\ +H UHFHLYHG KLV %$6F LQ (OHFWULFDO (QJLQHHULQJ IURP WKH 8QLYHUVLW\ RI :DWHUORR &DQDGD DQG WKH 06( DQG
3K' LQ (OHFWULFDO (QJLQHHULQJ IURP WKH 8QLYHUVLW\ RI 0LFKLJDQ $QQ $UERU +H KDV WDXJKW FRXUVHV LQ VLJQDO SURFHVV
LQJ GLJLWDO V\VWHPV DQG PLFURFRQWUROOHUV