)URQW0DWWHU 7DEOHRI&RQWHQWV $ERXWWKH$XWKRU
/LQX[&OXVWHULQJ%XLOGLQJDQG0DLQWDLQLQJ/LQX[&OXVWHUV
&KDUOHV%RRNPDQ
3XEOLVKHU1HZ5LGHUV3XEOLVKLQJ
)LUVW(GLWLRQ-XQH ,6%1SDJHV
/LQX[&OXVWHULQJ%XLGLQJDQG0DLQWDLQLQJ/LQX[&OXVWHUVSURYLGHV/LQX[XVHUVZLWK LQIRUPDWLRQDERXWEXLOGLQJWKHLURZQ/LQX[FOXVWHUIURPWKHJURXQGXS,WJLYHVEHVW SUDFWLFHVKHOSIXOKLQWVDQGJXLGHOLQHVDERXWEXLOGLQJRQHVHUYHURUKXQGUHGVRIVHUYHUVDWD OHYHOWKDWDGPLQLVWUDWRUVDWDQ\H[SHULHQFHOHYHOFDQXQGHUVWDQG
)URPLQVWDOODWLRQRIWKHDLUFRQGLWLRQLQJDQGSRZHULQWKHGDWDFHQWHUWRDOWHUQDWLYHILOH V\VWHPVWRWKHILQDOSURGXFWLRQUXQWKLVERRNSURYLGHV\RXZLWKHYHU\WKLQJWKDW\RXQHHGWR NQRZ/LQX[&OXVWHULQJ%XLGLQJDQG0DLQWDLQLQJ/LQX[&OXVWHUVZDONV\RXWKURXJKWKH LQLWLDOGHVLJQDQGVHOHFWLRQRIWKHEHVWSRVVLEOHW\SHVRIFOXVWHUVDVZHOODVFRYHULQJ PRQLWRULQJWRROVDQGSURYLGLQJIRUGLVDVWHUUHFRYHU\1RWRQO\GRHVWKLVERRNSURYLGH LQIRUPDWLRQRQSDUDOOHODQG%HRZXOIW\SHFOXVWHUV&KDUOHV%RRNPDQJRHVLQWRGHSWKRQKLJK DYDLODELOLW\FOXVWHUVORDGEDODQFLQJDQGSURYLGHVDGYLFHIRUZULWLQJ\RXURZQGLVWULEXWLQJ DSSOLFDWLRQVDVZHOO,QFRUSRUDWLQJEHVWSUDFWLFHVDQGFXWWLQJHGJHDSSURDFKHV%RRNPDQ SURYLGHVVWHSE\VWHSDQGWULHGDQGWUXHPHWKRGVRIEULQJLQJXSD/LQX[FOXVWHUWR SURGXFWLRQOHYHO
/LQX[&OXVWHULQJ%XLOGLQJDQG0DLQWDLQLQJ/LQX[&OXVWHUV
&RS\ULJKWE\1HZ5LGHUV3XEOLVKLQJ
$OOULJKWVUHVHUYHG1RSDUWRIWKLVERRNPD\EHUHSURGXFHGRU WUDQVPLWWHGLQDQ\IRUPRUE\DQ\PHDQVHOHFWURQLFRU
PHFKDQLFDOLQFOXGLQJSKRWRFRS\LQJUHFRUGLQJRUE\DQ\ LQIRUPDWLRQVWRUDJHDQGUHWULHYDOV\VWHPZLWKRXWZULWWHQ SHUPLVVLRQIURPWKHSXEOLVKHUH[FHSWIRUWKHLQFOXVLRQRIEULHI TXRWDWLRQVLQDUHYLHZ
/LEUDU\RI&RQJUHVV&DWDORJ&DUG1XPEHU
,QWHUSUHWDWLRQRIWKHSULQWLQJFRGH7KHULJKWPRVWGRXEOHGLJLW QXPEHULVWKH\HDURIWKHERRN¶VSULQWLQJWKHULJKWPRVWVLQJOH GLJLWQXPEHULVWKHQXPEHURIWKHERRN¶VSULQWLQJ)RUH[DPSOH WKHSULQWLQJFRGHVKRZVWKDWWKHILUVWSULQWLQJRIWKHERRN RFFXUUHGLQ
3ULQWHGLQWKH8QLWHG6WDWHVRI$PHULFD 7UDGHPDUNV
$OOWHUPVPHQWLRQHGLQWKLVERRNWKDWDUHNQRZQWREH
WUDGHPDUNVRUVHUYLFHPDUNVKDYHEHHQDSSURSULDWHO\FDSLWDOL]HG 1HZ5LGHUV3XEOLVKLQJFDQQRWDWWHVWWRWKHDFFXUDF\RIWKLV LQIRUPDWLRQ8VHRIDWHUPLQWKLVERRNVKRXOGQRWEHUHJDUGHGDV DIIHFWLQJWKHYDOLGLW\RIDQ\WUDGHPDUNRUVHUYLFHPDUN
:DUQLQJDQG'LVFODLPHU
HIIRUWKDVEHHQPDGHWRPDNHWKLVERRNDVFRPSOHWHDQGDV DFFXUDWHDVSRVVLEOHEXWQRZDUUDQW\RIILWQHVVLVLPSOLHG 7KHLQIRUPDWLRQLVSURYLGHGRQDQDVLVEDVLV7KHDXWKRUVDQG 1HZ5LGHUV3XEOLVKLQJVKDOOKDYHQHLWKHUOLDELOLW\QRU
UHVSRQVLELOLW\WRDQ\SHUVRQRUHQWLW\ZLWKUHVSHFWWRDQ\ORVVRU GDPDJHVDULVLQJIURPWKHLQIRUPDWLRQFRQWDLQHGLQWKLVERRNRU IURPWKHXVHRIWKHGLVFVRUSURJUDPVWKDWPD\DFFRPSDQ\LW 3XEOLVKHU
'DYLG'Z\HU
$VVRFLDWH3XEOLVKHU
6WHSKDQLH:DOO 3URGXFWLRQ0DQDJHU
*LQD.DQRXVH 0DQDJLQJ(GLWRU
.ULVW\.QRRS $FTXLVLWLRQV(GLWRU
'HERUDK+LWWHO6KRDI 'HYHORSPHQW(GLWRU
1DQF\6L[VPLWK
3URGXFW0DUNHWLQJ0DQDJHU
.DWK\0DOPORII 3XEOLFLW\0DQDJHU
6XVDQ1L[RQ 6HQLRU(GLWRU
6KHUL&DLQ &RS\(GLWRU
&ULV0DWWLVRQ ,QGH[HU
*LQQ\%HVV0XQURH
0DQXIDFWXULQJ&RRUGLQDWRU
/LQX[&OXVWHULQJ%XLOGLQJDQG0DLQWDLQLQJ/LQX[&OXVWHUV
$ERXWWKH$XWKRU
$ERXWWKH7HFKQLFDO5HYLHZHUV $FNQRZOHGJPHQWV
7HOO8V:KDW<RX7KLQN ,QWURGXFWLRQ
:KR6KRXOG5HDG7KLV%RRN :KR7KLV%RRN,V1RW)RU 2YHUYLHZ
&RQYHQWLRQV
,$Q2YHUYLHZRI&OXVWHULQJIRU/LQX[3UHSDULQJ<RXU1HWZRUNDQG/LQX[6HUYHUV &OXVWHULQJ)XQGDPHQWDOV
&OXVWHULQJIRUWKH(QWHUSULVH
&OXVWHUV$UHQ¶W-XVWIRU+LJK3HUIRUPDQFH$Q\PRUH 603DQGWKH3ULPDU\3URFHVVRU3DUDGLJP
4XLFNDQG'LUW\&OXVWHULQJ $OWHUQDWH)LOH6\VWHPV 1HWZRUNLQJIRU&OXVWHUV 6XPPDU\
3UHSDULQJ<RXU/LQX[&OXVWHU 3ODQQLQJWKH7RSRORJ\ 6HOHFWWKH5LJKW'LVWULEXWLRQ 3ODQQLQJWKH(QYLURQPHQW $)HZ:RUGV$ERXW6HFXULW\ 'HYHORSLQJD%DFNXS3ROLF\ 6XPPDU\
,QVWDOOLQJDQG6WUHDPOLQLQJWKH&OXVWHU 6HWWLQJ8SWKH'+&36HUYHU
8QDWWHQGHG5HG+DW,QVWDOOZLWK.LFNVWDUW 6\VWHP,PDJHU
3RVW,QVWDOODWLRQ3URFHGXUHV 6XPPDU\
$OWHUQDWLYH)LOH6\VWHPV ([W8QGHUD0LFURVFRSH
%RRN'HVLJQHU
/RXLVD.OXF]QLN &RYHU'HVLJQHU
%UDLQVWRUP'HVLJQ,QF &RYHU3URGXFWLRQ
$UHQ+RZHOO &RPSRVLWLRQ
-HII%UHGHQVWHLQHU
/RRSEDFN)LOH6\VWHPV 7KH([W)LOH6\VWHP 5HLVHU)6
7KH/RJLFDO9ROXPH0DQDJHU 6XPPDU\
,,%XLOGLQJ&OXVWHUV
+LJK$YDLODELOLW\DQG)DXOW7ROHUDQW&OXVWHUV +DYHQ¶W:H+HDUGRI7KLV6RPHZKHUH%HIRUH" +HDUWEHDW&RQQHFWLYLW\
+RXVWRQ:H+DYHD3UREOHP 3XWWLQJ,W$OO7RJHWKHU 6XPPDU\
/RDG%DODQFLQJ
:KDW,V7KLV/RDG%DODQFLQJ7KLQJ$Q\ZD\" %DODQFH
(GGLH0LVVLRQ
&RQILJXULQJWKH(QKDQFHG'166HUYHU /LQX[9LUWXDO6HUYHU
6XPPDU\
'LVWULEXWHG&RPSXWLQJ 2QH)RU$OODQG$OO)RU2QH 'LVWULEXWHG)LOH6KDULQJ 'LVWULEXWHG'HQLDORI6HUYLFH &RQGRU
0RVL[.HUQHO%DVHG'LVWULEXWHG&RPSXWLQJ 8VLQJ'LVNOHVV&OLHQWVZLWK0RVL[
6XPPDU\
3DUDOOHO&RPSXWLQJ
3DUDOOHO&RPSXWLQJLQD1XWVKHOO &OXVWHU,QVWDOODWLRQ
6XPPDU\
,,,7KH&DUHDQG)HHGLQJRID&OXVWHU 3URJUDPPLQJD3DUDOOHO&OXVWHU
&RDUVH*UDQXODULW\LQD)LQHO\*UDQXODU:RUOG 3URJUDPPLQJLQD&OXVWHUHG(QYLURQPHQW 03,
6XPPDU\
&OXVWHU0DQDJHPHQW /HDUQWR8VHWKH5LJKW7RROV
&RQILJXULQJV\VORJGIRU<RXU&OXVWHU *HQHUDO3XUSRVH5HSRUWLQJZLWKPRQ %LJ%URWKHU,V:DWFKLQJ
6XPPDU\
5HFRYHULQJ:KHQ'LVDVWHU6WULNHV 7URXEOHVKRRWLQJ7KURXJK/D\HUV +HOSIXO7RROVWR'LDJQRVH<RXU&OXVWHU :KHQ:RUVH&RPHVWR:RUVW
7KLV7RR6KDOO3DVV 6XPPDU\
,9$SSHQGL[HV $&OXVWHU5HVRXUFHV
'HVLJQLQJD&OXVWHU /LQX[)LOH6\VWHPV 0RQLWRUV
+LJK$YDLODELOLW\&OXVWHUV 3DUDOOHO&OXVWHUV
%.LFNVWDUW2SWLRQV DXWRVWHS2SWLRQDO $XWKHQWLFDWLRQ ERRWORDGHU
FOHDUSDUW5HPRYLQJ3DUWLWLRQV%DVHGRQ3DUWLWLRQ7\SH GHYLFH
GHYLFHSUREH GULYHUGLVN ILUHZDOO LQVWDOO
,QVWDOODWLRQ0HWKRGV FGURP
KDUGGULYH XUO LQWHUDFWLYH NH\ERDUG ODQJ ODQJVXSSRUW OLOR
OLORFKHFN2SWLRQDO PRXVH
QHWZRUN SDUW UDLG
UHERRW2SWLRQDO URRWSZ5HTXLUHG VNLS[2SWLRQDO WH[W2SWLRQDO WLPH]RQH5HTXLUHG XSJUDGH2SWLRQDO [FRQILJ
]HURPEU3DUWLWLRQ7DEOH,QLWLDOL]DWLRQ SDFNDJHV3DFNDJH6HOHFWLRQ
SUH3UH,QVWDOODWLRQ&RQILJXUDWLRQ6HFWLRQ SRVW3RVW,QVWDOODWLRQ&RQILJXUDWLRQ6HFWLRQ &'+&32SWLRQV
'&RQGRU&ODVV$G0DFKLQH$WWULEXWHV
$ERXWWKH$XWKRU
&KDUOHV%RRNPDQIHOOLQORYHZLWKWKHSHUVRQDOFRPSXWHUZKHQKHZDV+HZRXOGVWD\DIWHUVFKRROWR WHDFKKLPVHOISURJUDPPLQJRQWKH&RPPRGRUH3HW+LVH[SHULHQFHVZLWK/LQX[VWDUWHGGXULQJWKH GD\VZKHQKHWRRNWKHZRUNFRPSXWHUDWKLVFRXQVHOLQJMREDQGFRQYHUWHGLWLQWRVRPHWKLQJWKDWQRERG\ WKHUHKDGHYHUVHHQ$IWHUWKH\ILUHGKLPKHNQHZWKDWKHZDVRQWRVRPHWKLQJDQGKDVEHHQD/LQX[ HYDQJHOLVWHYHUVLQFH
&KDUOHV¶KREELHVLQFOXGHEHLQJXSWRQRJRRGXVLQJVDUFDVPOLVWHQLQJWRPXVLFEHLQJVQREELVKDERXWDUW SOD\LQJEDVVDQGJXLWDUDQGSDLQWLQJDQGGUDZLQJZKHQKHILQGVWKHWLPH+H¶OONLFN\RXUEXWWDWWDEOH WHQQLVDQGLVOHDUQLQJDJUHDWJDPHRISRRODVZHOO
KLJKSHUIRUPDQFHFOXVWHU+HUXQVDGHVLJQFRPSDQ\DQGFRQVXOWVLQKLVVSDUHWLPH
$ERXWWKH7HFKQLFDO5HYLHZHUV
7KHVHUHYLHZHUVFRQWULEXWHGWKHLUFRQVLGHUDEOHKDQGVRQH[SHUWLVHWRWKHHQWLUHGHYHORSPHQWSURFHVVIRU
/LQX[&OXVWHULQJ%XLOGLQJDQG0DLQWDLQLQJ/LQX[&OXVWHUV$VWKHERRNZDVEHLQJZULWWHQWKHVHGHGLFDWHG SURIHVVLRQDOVUHYLHZHGDOOWKHPDWHULDOIRUWHFKQLFDOFRQWHQWRUJDQL]DWLRQDQGIORZ7KHLUIHHGEDFNZDV FULWLFDOWRHQVXULQJWKDWWKLVERRNILWVRXUUHDGHUV¶QHHGIRUWKHKLJKHVWTXDOLW\WHFKQLFDOLQIRUPDWLRQ
-RH³=RQNHU´%URFNPHLHUKDVEHHQXVLQJ/LQX[VLQFHDQGZULWLQJDERXWLWIRUQHDUO\DVORQJ$ UHIXJHHIURPWKHZRUOGRIGRWFRPV=RQNHUUHJXODUO\ZULWHVIRU/LQX[0DJD]LQH8QL[5HYLHZFRPDQG RWKHURQOLQHDQGSULQWSXEOLFDWLRQV<RXFDQFRQWDFW=RQNHUWKURXJKKLVZHEVLWHDW
ZZZGLVVRFLDWHGSUHVVQHW
-RKQ0DUTXDUWKDVVHYHQ\HDUVRIFRPSXWHULQGXVWU\H[SHULHQFH+LVIRFXVKDVEHHQ81,;V\VWHP DGPLQLVWUDWLRQZLWKDQHPSKDVLVRQ/LQX[-RKQZRUNHGIRU,QGLDQD8QLYHUVLW\PDQDJLQJWKH'LJLWDO /LEUDU\3URJUDP¶VVHUYHULQIUDVWUXFWXUHDQGGLJLWDODVVHWV+HQRZZRUNVIRU3ODQDO\WLFVZKHUHKHLV UHVSRQVLEOHIRUWKHVWDQGDUGL]DWLRQLQWHJUDWLRQDQGDXWRPDWLRQRIWKHFRPSDQ\¶V81,;SODWIRUPV-RKQ UHFHLYHGDGHJUHHIURP,QGLDQD8QLYHUVLW\LQ&RJQLWLYH6FLHQFHZLWKDIRFXVRQ$,V\VWHPV
$FNQRZOHGJPHQWV
.LGVGRQ¶WWU\WKLVDWKRPH:ULWLQJDERRNWDNHVSHUVRQDOVDFULILFHLQFOXGLQJPDQ\KRXUVVWDULQJDW\RXU PRQLWRUZKLOHMXVWNQRZLQJWKDWQRERG\ZLOODFWXDOO\UHDGWKLVH[FHSW\RXUUHODWLYHV$QGHYHQWKHQLW EHFRPHVREYLRXVWKDWWKH\¶OOQRGWKHLUKHDGVZLWKDYDFXRXVORRNRQWKHLUIDFHVDQGVD\³&OXVWHULQJZKDW" 'RHVWKDWLQFOXGH1RXJDWLQVRPHIDVKLRQ"´
:LWKWKDWRIIP\FKHVWPDQ\SHRSOHVWRRGEHVLGHPHDQGKHOSHGPHDJUHDWGHDOZKLOH,ZURWHWKLVERRN ,PXVWWKDQN%UDG6WRQHIRUWULFNLQJPHLQWRFDOOLQJP\EOXIIDERXWZULWLQJDERRN,DOVRZDQWWRWKDQN(G :LQWHUVRQHRIWKRVHJX\VZKRJLYHVHQGOHVVO\%HQ&RWWUHOOIRULQWURGXFLQJPHWRWKHMR\VRI81,;DQG 'DYH3UDGRIRUEHOLHYLQJLQPHHQRXJKWRJLYHPHP\ILUVWFKDQFH,¶GDOVROLNHWRWKDQN-RHO%DNHURI 0QHPRV\QH&RQVXOWLQJIRUKLVLQYDOXDEOHDGYLFHUHJDUGLQJKLJKDYDLODELOLW\FOXVWHULQJ
7RP\ZLIH&KULVVIRUEHLQJWKHUHIRUPHWKURXJKWKLFNDQGWKLQDQGIRUEHLQJP\EHVWIULHQGIRU\HDUV )LQDOO\,ZRXOGOLNHWRWKDQNP\IULHQGVZKRKDYHVWRRGE\PHDQGNQHZ,FRXOGGRWKLVHYHQZKHQ, GLGQ¶W
$VWKHUHDGHURIWKLVERRN\RXDUHWKHPRVWLPSRUWDQWFULWLFDQGFRPPHQWDWRU:HYDOXH\RXURSLQLRQDQG ZDQWWRNQRZZKDWZH¶UHGRLQJULJKWZKDWZHFRXOGGREHWWHUZKDWDUHDV\RX¶GOLNHWRVHHXVSXEOLVKLQ DQGDQ\RWKHUZRUGVRIZLVGRP\RX¶UHZLOOLQJWRSDVVRXUZD\
$VWKH$VVRFLDWH3XEOLVKHUIRU1HZ5LGHUV3XEOLVKLQJ,ZHOFRPH\RXUFRPPHQWV<RXFDQID[HPDLORU ZULWHPHGLUHFWO\WROHWPHNQRZZKDW\RXGLGRUGLGQ¶WOLNHDERXWWKLVERRN²DVZHOODVZKDWZHFDQGRWR PDNHRXUERRNVVWURQJHU
3OHDVHQRWHWKDW,FDQQRWKHOS\RXZLWKWHFKQLFDOSUREOHPVUHODWHGWRWKHWRSLFRIWKLVERRNDQGWKDWGXHWR WKHKLJKYROXPHRIPDLO,UHFHLYH,PLJKWQRWEHDEOHWRUHSO\WRHYHU\PHVVDJH:KHQ\RXZULWHSOHDVHEH VXUHWRLQFOXGHWKLVERRN¶VWLWOHDQGDXWKRUDVZHOODV\RXUQDPHDQGSKRQHRUID[QXPEHU,ZLOOFDUHIXOO\ UHYLHZ\RXUFRPPHQWVDQGVKDUHWKHPZLWKWKHDXWKRUDQGHGLWRUVZKRZRUNHGRQWKHERRN
,QWURGXFWLRQ
/LQX[KDVEHHQLQFUHDVLQJLQSRSXODULW\HYHUVLQFHLWVLQFHSWLRQ:LWKWKHH[SORVLYHJURZWKRIWKHRSHQ VRXUFHPRYHPHQWDQGWKHYLDELOLW\RIZKDWLWFDQGRZLWKDQDOWHUQDWLYHRSHUDWLQJV\VWHP/LQX[KDVJURZQ LQWRDPDWXUHVWDEOHHQYLURQPHQWLQZKLFKWRKRVWPLVVLRQFULWLFDODSSOLFDWLRQVDQGUHVHDUFK
,W¶VWKLVYHU\QDWXUHRI/LQX[DQGLWVRSHQVRXUFHFRGHWKDWPDNHVLWDWWUDFWLYHIRUKREE\LVWVHGXFDWRUVDQG UHVHDUFKHQYLURQPHQWV7KRXVDQGVRISURJUDPVDUHDYDLODEOHWRHQKDQFHWKHXVHUH[SHULHQFHDQGDOORZWKH VHULRXVDGPLQLVWUDWRUWRHQKDQFHRUFUHDWHKLVHQYLURQPHQWZLWK/LQX[,W¶VWKLVIOH[LELOLW\DQGPDWXULW\RI WKHRSHUDWLQJV\VWHPWKDWDOORZVSHRSOHWRHDVLO\FOXVWHUWKHLU/LQX[PDFKLQHV
+DYLQJWZRRUPRUHPDFKLQHVDFWLQFRQFHUWZLWKRQHDQRWKHULVQ¶WURFNHWVFLHQFHLQIDFWDQ\RQHZLWKDQ\ PRWLYDWLRQDQGDVNLOOIRUUHDGLQJDERRNFDQPDNHFRPSXWHUVGRZRQGURXVWKLQJV)URPORDGEDODQFLQJWR GHYHORSLQJDWKRXVDQGQRGHSDUDOOHOFRPSXWHU/LQX[LVPRUHWKDQDEOHWRKDQGOHWKHWDVN
7KLVERRNWDNHV\RXWKURXJKWKHFRQVWUXFWLRQRIVHYHUDOW\SHVRIFOXVWHULQJE\XVLQJ/LQX[DQGH[SODLQV VWHSE\VWHSKRZWRJHWWKHUH:H¶OOFRYHUKDQG\WLSVRQWKHZD\DVZHOODVH[SODLQZK\WKLQJVZRUNWKH ZD\WKH\GR,QQRWLPH\RX¶OOEHDEOHWRFUHDWHKLJKDYDLODELOLW\DQG%HRZXOIW\SHFOXVWHUVZLWKWKHEHVWRI WKHP
:KR6KRXOG5HDG7KLV%RRN
7KLVERRNLVIRU/LQX[HQWKXVLDVWVDQGXVHUVZKRZDQWWRJHWD/LQX[FOXVWHUXSDQGUXQQLQJZLWKWKHOHDVW DPRXQWRIIXVV$GPLQLVWUDWRUVZLOOILQGWKLVERRNSDUWLFXODUO\KHOSIXOLQOHDUQLQJWKHZK\¶VDQGKRZ¶VRI JHWWLQJ/LQX[WRGRDPD]LQJWKLQJVZLWKPRUHWKDQRQHFRPSXWHUDW\RXUGLVSRVDO
7KLVERRNZLOOKHOSLI\RXQHHGWRLQWURGXFHDODUJHSDUDOOHORUGLVWULEXWHGFRPSXWLQJFOXVWHUWR\RXU
HQYLURQPHQWDQGWKHZD\VWKDWRQHFDQVROYHODUJHFRPSXWDWLRQDOSUREOHPVXVLQJ/LQX[0HWKRGVWRLQVWDOO PDLQWDLQDQGEDFNXSODUJHFOXVWHUIDUPVDUHGLVFXVVHG:H¶OODOVRFRYHUWKHVRIWZDUHDQGKDUGZDUHQHHGHG WRFUHDWHVXFKDVROXWLRQ
,I\RX¶UHORRNLQJIRUDQHQWHUSULVHOHYHOORDGEDODQFLQJRUKLJKDYDLODELOLW\VROXWLRQWR\RXUHQYLURQPHQW &KDSWHUVDQGFRYHULQVWDOODWLRQDQGFRQILJXUDWLRQRI/LQX[VROXWLRQVWRWKHVHLVVXHV1RWRQO\GRHVWKLV ERRNFRYHUWKHEDVLFVEHKLQGWKHVHEXWLWDOVRWHOOVWKHEHVWSUDFWLFHVDQGPHWKRGVWRJHWDVROXWLRQXSLQWKH
)D[
(PDLO VWHSKDQLHZDOO#QHZULGHUVFRP 0DLO 6WHSKDQLH:DOO
TXLFNHVWDPRXQWRIWLPH6RIWZDUHLQVWDOODWLRQDQGFRQILJXUDWLRQH[DPSOHVDUHJLYHQWREULQJUHDGHUVXSWR VSHHG
:KR7KLV%RRN,V1RW)RU
7KLVERRNDVVXPHVWKDWWKHUHDGHULVFRPIRUWDEOHZLWK/LQX[,WGRHVQRWOHDGWKHXVHUWKRXJKEDVLFWDVNV VXFKDVLQVWDOODWLRQRIWKHRSHUDWLQJV\VWHPDGGLQJXVHUVRUZLQGRZPDQDJHUFRQILJXUDWLRQ0RUH NQRZOHGJHPLJKWQHHGWREHJDUQHUHGWREULQJWKHXVHUXSWRVSHHG
7KLVERRNLVDOVRQRWIRUVHDVRQHGSURIHVVLRQDOVZKRKDYHDGHHSXQGHUVWDQGLQJRIFOXVWHULQJ7KLVERRN GRHVQRWFRYHUSHUIRUPDQFHWXQLQJRUGHHSFOXVWHUWKHRU\7KLVERRNLVVSHFLILFDOO\GHVLJQHGIRUWKRVHZKR QHHGDFOXVWHUXSQRZ7KLVERRNLVQRWGHVLJQHGIRUWKRVHZKRDOUHDG\KDYHDFOXVWHUSODQQHGRUUXQQLQJLQ WKHLUHQYLURQPHQW
2YHUYLHZ
7KLVERRNLVGLYLGHGLQWRIRXUSDUWVWKDWGHVFULEHWKHSODQQLQJDQGFRQILJXUDWLRQRI/LQX[FOXVWHUV3DUW,LV GHVLJQHGDVDQLQWURGXFWLRQWRSODQQLQJDQGFRQILJXULQJWKHHQYLURQPHQWWKDWLVQHHGHGWREULQJDFOXVWHUXS WRVSHHGLQWKHVKRUWHVWSRVVLEOHWLPH3DUW,,LVGHYRWHGWRWKHLQVWDOODWLRQDQGVXSSRUWRIWKHYDULRXVW\SHVRI /LQX[FOXVWHUV3DUW,,,LQWURGXFHVSURJUDPPLQJOLEUDULHVDQGZKDWWRGRZKHQDFOXVWHUIDLOV
3DUW,LVVHSDUDWHGLQWRIRXUFKDSWHUV&KDSWHU³&OXVWHULQJ)XQGDPHQWDOV´EULHIO\LQWURGXFHV/LQX[ FOXVWHULQJLQJHQHUDODQGZK\LWPLJKWEHDSSOLFDEOHWR\RXRU\RXUHQYLURQPHQW&KDSWHU³3UHSDULQJ \RXU/LQX[&OXVWHU´GLVFXVVHVKRZEHVWWRVHOHFWWKHSDUWVWKDWDUHQHHGHGWRLQVWDOO\RXUFOXVWHUDQGWKH HQYLURQPHQWLQZKLFKLW¶VKRXVHG&KDSWHU³,QVWDOOLQJDQG6WUHDPOLQLQJWKH&OXVWHU´GLVFXVVHVEHVW SUDFWLFHPHWKRGVRQKRZWRLQVWDOOODUJHQXPEHUVRIPDFKLQHVLQWKHVKRUWHVWDQGHDVLHVWDPRXQWRIWLPH
&KDSWHU³$OWHUQDWLYH)LOH6\VWHPV´GLVFXVVHVWKHOLPLWDWLRQVRIWKHFXUUHQWVWDQGDUGILOHV\VWHPH[WDQG GLVFXVVHVRWKHUPHWKRGVWRLPSURYHRQLWDQGILOHV\VWHPWULFNV
3DUW,,LQFOXGHVIRXUFKDSWHUVWKDWGHDOZLWKWKHFOXVWHULQJWHFKQRORJLHVWKHPVHOYHV&KDSWHU³+LJK $YDLODELOLW\DQG)DXOW7ROHUDQW&OXVWHUV´LQWURGXFHVKLJKDYDLODELOLW\V\VWHPVKRZWKH\ZRUNDQGKRZ EHVWWRLPSOHPHQWWKHKDUGZDUHDQGVRIWZDUH&KDSWHU³/RDG%DODQFLQJ´WDONVDERXWWKHEHVWZD\VWKDW /LQX[FDQGLUHFWWUDIILFWRPXOWLSOHPDFKLQHV&KDSWHU³'LVWULEXWHG&RPSXWLQJ´LQWURGXFHVWKH
GLVWULEXWHGPRGHODVDPHDQVWRVROYHODUJHFRPSXWDWLRQDOSUREOHPV&KDSWHU³3DUDOOHO&RPSXWLQJ´DOVR H[SDQGVRQWKLVPRGHOLQDVOLJKWO\GLIIHUHQWDSSURDFK7KLVFKDSWHULVVNHZHGWRSDUDOOHODQGFRPPRGLW\ FRPSXWHUV
3DUW,,,GHDOVZLWKWKHFDUHDQGIHHGLQJRIDFOXVWHU&KDSWHU³3URJUDPPLQJD3DUDOOHO&OXVWHU´UHIHUHQFHV SURJUDPPLQJOLEUDULHVDQGSURJUDPVWKDWLOOXVWUDWHWKHVHOLEUDULHV&KDSWHU³&OXVWHU0DQDJHPHQW´ GLVFXVVHVEHVWSUDFWLFHVWRNHHS\RXUFOXVWHULQFKHFNDQGPRQLWRUHGIRUSUREOHPV7KHILQDOFKDSWHU
&KDSWHU³5HFRYHULQJ:KHQ'LVDVWHU6WULNHV´GHDOVSULPDULO\ZLWKGLVDVWHUUHFRYHU\
3DUW,9FRQWDLQVUHIHUHQFHPDWHULDOIRUWKHFOXVWHUGHVLJQHU$SSHQGL[$LQFOXGHVFOXVWHUUHVRXUFHVRQWKH ZHEDQGZKHUHWRILQGPRUHLQIRUPDWLRQ$SSHQGL[%LVDUHIHUHQFHIRU.LFNVWDUWRSWLRQVIRU5HG+DW/LQX[ 8VLQJWKHVHRSWLRQVRQHFDQSRSXODWHDFOXVWHULQQRWLPHZLWKDQXQDWWHQGHGLQVWDOO$SSHQGL[&GHWDLOV '+&3RSWLRQVLQJUHDWHUGHSWKIRUWKHFOXVWHUVRWKDWRQHFDQPDLQWDLQODUJHFOXVWHUVLQDFHQWUDOORFDWLRQ ZLWKHDVH)LQDOO\$SSHQGL['GHWDLOVFODVVDWWULEXWHVIRU&RQGRUZKLFKLVDGLVWULEXWHGHQYLURQPHQW FOXVWHU
,I\RX¶UHIDPLOLDUZLWKFOXVWHUVLQJHQHUDOLWPLJKWEHKRRYH\RXWRSHUXVH3DUW,DQGPRYHULJKWRQWR3DUW,,
ZKHUHWKHFOXVWHU\RX¶UHLQWHUHVWHGLQLVGLVFXVVHG<RX¶OOZDQWWRKLW3DUW,,,ULJKWDIWHUEHFDXVHRIWKH LQIRUPDWLRQWKDWGLVFXVVHVNHHSLQJ\RXUDSSOLFDWLRQVDQGVHUYHUVXS
&RQYHQWLRQV
z ,WDOLFVLQGLFDWHQHZWHUPVWKHILUVWWLPHWKH\¶UHLQWURGXFHGDQGDUHXVHGIRUHPSKDVLV z $VSHFLDOPRQRVSDFHIRQWLQGLFDWHVFRGHDILOHQDPHRUSDWKQDPHRUDQ,QWHUQHWDGGUHVV
3DUW,$Q2YHUYLHZRI&OXVWHULQJIRU/LQX[3UHSDULQJ<RXU
1HWZRUNDQG/LQX[6HUYHUV
3DUW,$Q2YHUYLHZRI&OXVWHULQJIRU/LQX[3UHSDULQJ<RXU1HWZRUNDQG/LQX[6HUYHUV
&OXVWHULQJ)XQGDPHQWDOV
3UHSDULQJ<RXU/LQX[&OXVWHU
,QVWDOOLQJDQG6WUHDPOLQLQJWKH&OXVWHU
$OWHUQDWLYH)LOH6\VWHPV
&KDSWHU&OXVWHULQJ)XQGDPHQWDOV
$VNDQ\RQHRQWKHVWUHHWDQGWKH\OOWHQGWRDJUHHZLWK\RX%LJJHULVEHWWHU*HWPRUHEDQJIRUWKHEXFN+H ZKRGLHVZLWKWKHPRVWWR\VZLQV,WVWDQGVWRUHDVRQWKDWLQPRVWFDVHVPRUHLVEHWWHUWKDQRQO\RQH,IRQH LVJRRGWZRPXVWEHJUHDW
,WFRPHVDVQRVXUSULVHWKHQWKDWFRPSXWLQJKDVIROORZHGWKLVWUHQGIURPLWVLQIDQF\:K\HYHQWKH(1,$& ZLGHO\UHJDUGHGDVWKHZRUOG¶VILUVWFRPSXWHUGLGQ¶WKDYHMXVWDIHZSDUWV,WKDGYDFXXPWXEHV UHOD\VDQGKXQGUHGVRIWKRXVDQGVRIUHVLVWRUVFDSDFLWRUVDQGLQGXFWRUV
KWWSIWSDUODUP\PLOaPSKLVWHQLDFVWRU\KWPO:K\GLGWKHIRXQGHUVXVHVRPDQ\SDUWV",I\RXKDGD GHYLFHWKDWFRXOGDGGWZRQXPEHUVWRJHWKHUWKDWZRXOGEHRQHWKLQJ%XWJLYHQWKHEXGJHWZK\QRWDGG WKUHHRUHYHQIRXUWRJHWKHU"0RUHPXVWEHEHWWHU
$VWLPHZHQWRQDQGFRPSXWLQJVWDUWHGWRPDWXUHWKH³PRUHLVEHWWHU´DSSURDFKVHHPHGWRIXQFWLRQTXLWH ZHOO:KHUHRQHSURFHVVRUZRUNHGZHOOWZRSURFHVVRUVFRXOGDWOHDVWGRXEOHWKHSURFHVVLQJSRZHU:KHQ FRPSXWHUPDQXIDFWXUHUVVWDUWHGPDNLQJODUJHUDQGPRUHHIILFLHQWVHUYHUVFRPSDQLHVFRXOGXVHWKHLQFUHDVHG KRUVHSRZHUWRSURFHVVPRUHGDWD,WEHFDPHHYLGHQWHDUO\RQWKDWPRUHSURFHVVRUVHTXDOHGPRUHFRPSXWLQJ SRZHU(YHQZLWKWKHDGYHQWRI,QWHO¶VSURFHVVRUPDJD]LQHVUHSRUWHGWKDWDVLQJOHFRPSXWHUFRXOG KDQGOHWKHZRUNORDGRIHPSOR\HHV
7KHGHVFHQGDQWVRI(1,$&ZHUHPRQVWHUFRPSXWHUVLQWKHLURZQULJKWDOWKRXJKDVZHNQRZZLWKWKH DGYHQWRIWKHWUDQVLVWRUWKHSDUWVLQVLGHJRWVPDOOHUDQGVPDOOHU0RUHSDUWVZHUHDGGHGWRPDFKLQHVWKHVL]H RIUHIULJHUDWRUVWRPDNHWKHPIDVWHU\HWWKHVHVXSHUFRPSXWHUVZHUHRXWRIWKHILQDQFLDOUHDFKRIPRVW
&OXVWHULQJIRUWKH(QWHUSULVH
7RGD\¶VFRPSXWLQJHQYLURQPHQWVUHTXLUHWKHQHHGVRIPDQ\FRPSXWHUVWRVROYHWKHWDVNVWKDWRQO\RQH ZRXOGQ¶WEHDEOHWRKDQGOH7RGD\¶VODUJHVFDOHFRPSXWLQJHQYLURQPHQWVLQYROYHWKHXVHRIODUJHVHUYHU IDUPVZLWKHDFKQRGHFRQQHFWHGWRHDFKRWKHULQDFOXVWHUHGHQYLURQPHQW7KH$6&,3URMHFW$FFHOHUDWHG 6WUDWHJLF&RPSXWLQJ,QLWLDWLYHIRULQVWDQFHFRQVLVWVRIVHYHUDOGLIIHUHQWFOXVWHUHGHQYLURQPHQWVLQDELGWR SURYLGH³WHUDVFDOH´FRPSXWLQJ$6&,:KLWHFDSDEOHRIWULOOLRQFDOFXODWLRQVSHUVHFRQGUXQVRQ,%0¶V 56KDUGZDUHDQGLVEHFRPLQJLQFUHDVLQJO\W\SLFDORIVROXWLRQVWRODUJHVFDOHFRPSXWLQJSUREOHPV7KH $6&,SODQWDW6DQGLD1DWLRQDO/DERUDWRULHVLVFRPSULVHGRI/LQX[PDFKLQHVWKDWUXQRQ,QWHOKDUGZDUHDQG DUHSDUWRIWKHJURZLQJWUHQGWRHPXODWHVXSHUFRPSXWHUSHUIRUPDQFH
&OXVWHUHGFRPSXWLQJDWLWVPRVWEDVLFOHYHOLQYROYHVWZRRUPRUHFRPSXWHUVVHUYLQJDVLQJOHUHVRXUFH $SSOLFDWLRQVKDYHEHFRPHFOXVWHUHGDVDZD\RIKDQGOLQJLQFUHDVHGGDWDORDG7KHSUDFWLFHRIVSUHDGLQJ DWWULEXWHVIURPDVLQJOHDSSOLFDWLRQRQWRPDQ\FRPSXWHUVQRWRQO\LPSURYHVSHUIRUPDQFHEXWDOVRFUHDWHV UHGXQGDQF\LQFDVHRIIDLOXUH$SULPHH[DPSOHRIDEDVLFFOXVWHULVWKH'RPDLQ1DPH6HUYLFH'16ZLWK LWVEXLOWLQSULPDU\VHFRQGDU\DQGFDFKHVHUYHUV2WKHUSURWRFROVKDYHDOVREXLOWLQFOXVWHUHGUHGXQGDQF\ FKDUDFWHULVWLFVVXFKDV1,6DQG6073
+RZ&OXVWHULQJ&DQ+HOS
$OWKRXJKFOXVWHULQJPLJKWQRWEHDSDQDFHDIRUWRGD\¶VLOOVLWPLJKWKHOSWKHRUJDQL]DWLRQWKDWLVWU\LQJWR PD[LPL]HVRPHRILWVH[LVWLQJUHVRXUFHV$OWKRXJKQRWHYHU\SURJUDPFDQEHQHILWIURPFOXVWHULQJ
RUJDQL]DWLRQVWKDWVHUYHDSSOLFDWLRQVVXFKDVZHEVHUYHUVGDWDEDVHVDQGIWSVHUYHUVFRXOGEHQHILWIURPWKH WHFKQRORJ\DVORDGVRQWKHV\VWHPVLQFUHDVHG&OXVWHUVFDQHDVLO\EHGHVLJQHGZLWKVFDODELOLW\LQPLQGPRUH V\VWHPVFDQEHDGGHGDVWKHUHTXLUHPHQWVLQFUHDVHZKLFKVSUHDGVWKHORDGDFURVVPXOWLSOHVXEV\VWHPVRU PDFKLQHV
(QWLWLHVWKDWUHTXLUHDJUHDWGHDORIGDWDFUXQFKLQJFDQEHQHILWIURPKLJKSHUIRUPDQFHFRPSXWLQJZKLFK JUHDWO\UHGXFHVWKHDPRXQWRIWLPHQHHGHGWRFUXQFKQXPEHUV2UJDQL]DWLRQVVXFKDVWKH1DWLRQDO2FHDQLF DQG$WPRVSKHULF$GPLQLVWUDWLRQDUHDEOHWRXVHFOXVWHUVWRIRUHFDVWWUHQGVLQSRWHQWLDOO\GHDGO\ZHDWKHU FRQGLWLRQV7KHVWDIIDW/DZUHQFH/LYHUPRUH/DEXVHFOXVWHUHGFRPSXWHUVWRVLPXODWHDQHQWLUHQXFOHDU H[SORVLRQZLWKRXWKDUPWRDQ\RQHH[FHSWWKHEDFNXSRSHUDWRUVZKRKDYHWRPDLQWDLQDOOWKDWGDWD
&RPSDQLHVVHUYLQJDJUHDWGHDORIEDQGZLGWKFDQEHQHILWIURPORDGEDODQFHGFOXVWHUV7KLVW\SHRIFOXVWHU WDNHVLQIRUPDWLRQIURPDFHQWUDOL]HGVHUYHUDQGVSUHDGVLWDFURVVPXOWLSOHFRPSXWHUV$OWKRXJKWKLVPLJKW VHHPWULYLDODWILUVWORDGEDODQFLQJFDQWDNHSODFHLQDORFDOVHUYHUURRPRUDFURVVZLGHDUHDQHWZRUNV
:$1VVSDQQLQJWKHJOREH/DUJHUZHESRUWDOVXVHORDGEDODQFLQJWRVHUYHGDWDIURPPXOWLSOHDFFHVVSRLQWV ZRUOGZLGHWRVHUYHORFDOFXVWRPHUV1RWRQO\GRHVWKLVFXWGRZQRQEDQGZLGWKFRVWVEXWYLVLWRUVDUHVHUYHG WKDWPXFKPRUHTXLFNO\
7KHVHORDGEDODQFHGVHUYHUVDOVRZLOOEHQHILWIURPWKH+LJK$YDLODELOLW\+$PRGHO7KLVPRGHOFDQ LQFOXGHUHGXQGDQF\DWDOOOHYHOV6HUYHUVLQD+$FOXVWHUEHQHILWIURPKDYLQJWZRSRZHUVXSSOLHVWZR QHWZRUNFDUGVWZR5$,'FRQWUROOHUVDQGVRRQ,W¶VXQOLNHO\WKDWDOOWKHGXSOLFDWHGHYLFHVRID+$FOXVWHU ZLOOIDLODWRQFHEDUULQJVRPHPDMRUFDWDVWURSKH:LWKWKHDGGLWLRQRIDQH[WUDFRPSRQHQWWRWKHSULPDU\ VXEV\VWHPRUWKHDGGLWLRQRIDQH[WUDVHUYHUDQH[WUDFRPSRQHQWFDQEHSXWLQSODFHWRKHOSLQFDVHRI IDLORYHU7KLVLVNQRZQDV1UHGXQGDQF\DQGLVIRXQGLQFOXVWHUV5$,'FRQILJXUDWLRQVSRZHUDUUD\VRU ZKHUHYHUDQRWKHUFRPSRQHQWFDQWDNHRYHULQFDVHRIIDLOXUH
8VLQJ/LQX[IRU&OXVWHULQJ
6RZK\DUHWKHVHFRPSDQLHVVWDUWLQJWRHPEUDFH/LQX[ZKHQWKH\KDYHWKHLURZQSURGXFWOLQHV":LWKWKH H[FHSWLRQRI0LFURVRIWWKHVHYHQGRUVDUHVWDUWLQJWRUHFRJQL]HWKHYDOXHRIRSHQVRXUFHVRIWZDUH7KH\ UHDOL]HWKDWE\LQFRUSRUDWLQJ/LQX[LQWRWKHLUEXVLQHVVVWUDWHJLHVWKH\¶OOXWLOL]HWKHEHQHILWVRIKXQGUHGVLI QRWWKRXVDQGVRISURJUDPPHUVVFUXWLQL]LQJWKHLUFRGHDQGPDNLQJKHOSIXOVXJJHVWLRQV$OWKRXJKRSHQ VRXUFHPHWKRGRORJ\UHPDLQVWREHVHHQDVDYLDEOHEXVLQHVVPRGHOODUJHFRPSDQLHVUHDSWKHVRFLDOLVWLF EHQHILWVRIKDYLQJVXFKDSKLORVRSK\
/LQX[UXQVRQMXVWDERXWDQ\KDUGZDUHSODWIRUPLPDJLQDEOH-XVWDVLW¶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¶WZULWHWKHHQWLUHWKLQJKLPVHOI
1RRWKHU26DOORZVIRUWKLVOHYHORIYHUVDWLOLW\,W¶VWKLVDSSURDFKWRPRGXODUFRPSXWLQJWKDWPDNHV/LQX[ SHUIHFWIRUFOXVWHUV
'LVDGYDQWDJHVRI8VLQJ/LQX[
$OWKRXJK/LQX[KDVPDQ\DGYDQWDJHVIRUFOXVWHULQJLWDOVRKDVIDXOWVWKDWPLJKWPDNHLWDQXQDWWUDFWLYH VROXWLRQIRUFHUWDLQW\SHVRIFOXVWHUV7KHERWWRPOLQHLVWKDW/LQX[LVDUHODWLYHO\QHZ26DOEHLWEDVHGRQ WULHGDQGWUXHWHFKQRORJLHV)RUWKHPRVWSDUW\RX¶YHJRWDQ26ZULWWHQE\YROXQWHHUVLQWKHLUVSDUHWLPH 7KRXJKWKHFRGHLVUHDGLO\DYDLODEOHIRUVFUXWLQ\E\DQ\RQHWKHWKRXJKWGRHVH[LVWWKDWWRSQRWFK
SURJUDPPHUVPLJKWEHZKLVNHGDZD\E\FRPSDQLHVWKDWFDQDIIRUGWRSD\WRSVDODULHV2IFRXUVHWKDWGRHV KDSSHQDQGIRUVRPHUHDVRQSURJUDPPHUVHYHQPDQDJHWRZRUNRQ/LQX[ZLWKVRPHWKLQJFDOOHGVSDUH WLPH
7KHOHYHORIVXSSRUWLVQRWDVUREXVWDV\RXFDQJHWZLWKRWKHURSHUDWLQJV\VWHPV7KDWLVQ¶WWRVD\WKDW\RX FDQ¶WJHWJRRGYHQGRUVXSSRUWRQWKHFRQWUDU\WKHTXDOLW\RIVXSSRUWIRU/LQX[LVWRSQRWFK7KHUHMXVWLVQ¶W DVPXFKVXSSRUWRXWWKHUHIRUWKHSURGXFWDVWKHUHLVIRURWKHURSHUDWLQJV\VWHPV
$IHZEXJVDUHVWLOOLQKHUHQWZLWKWKH26DQGNHUQHO7KHQDWLYHILOHV\VWHPH[WGRHVQ¶WVXSSRUW
MRXUQDOLQJ86%VXSSRUWKDVW\SLFDOO\EHHQVSRWW\7KHUHWHQGVWREHDVPDOOHUDPRXQWRIGULYHUVIRU/LQX[ WKDQWKHUHDUHIRURWKHURSHUDWLQJV\VWHPVHYHQWKRXJKWKHPRVWFRPPRQVROXWLRQVDUHDGGUHVVHG
+RZHYHUPRVWLIQRWDOORIWKHVHLVVXHVDUHEHLQJDGGUHVVHG5REXVWILOHV\VWHPVDUHDYDLODEOHIRU/LQX[ RWKHUWKDQH[WDQGVXSSRUWIRU86%LVLPSURYLQJZLWKHDFKUHOHDVHDVRIDQ\ZD\7\SLFDOO\PRVW RIWKHVHLVVXHVGRQ¶WFRPHLQWRSOD\ZKHQ\RX¶UHGHSOR\LQJODUJHFOXVWHUIDUPV0RVWRIWKHVHOLPLWDWLRQV ZLOORQO\EHDSSOLFDEOHZKHQ\RXXVH/LQX[RQWKHGHVNWRS%XWWKHGHYHORSPHQWRIWKH/LQX[NHUQHOLV UDSLGO\RXWSDFLQJWKHGHYHORSPHQWRIRWKHURSHUDWLQJV\VWHPVDVWKHGHYHORSHUVVWULYHWRIL[LVVXHVVXFKDV 86%VXSSRUW
7KHV\VWHPDGPLQLVWUDWRUKDVWRNHHSDVHQVHRISHUVSHFWLYHZKHQUROOLQJRXWDQ\26/LQX[LVSULPDULO\D VHUYHUFODVV26,W¶VGHVLJQHGWRKDQGOHODUJHWDVNVVXSSRUWLQJPDQ\XVHUVDQGSURFHVVRUVDQGLWGRHVWKDW ZHOO:LWKWKHVXSSRUWRISURMHFWVVXFKDV*QRPHDQG.'(QRWWRPHQWLRQHYHU\RWKHUZLQGRZPDQDJHU RXWWKHUH/LQX[FDQEHXVHGSULPDULO\DVDZRUNVWDWLRQLQDGGLWLRQWRDVHUYHU7KHGHYHORSPHQWIRU/LQX[ EDVHGZRUNVWDWLRQFODVVFRPSXWHUVLVPRUHDGYDQFHGWKDQPRVWRWKHU81,;V\VWHPV+RZHYHUERWK 0DFLQWRVKDQG0LFURVRIWWHQGWRRZQPRUHPDUNHWVKDUHDQGXVDELOLW\WKDQWKHUDSLGO\DGYDQFLQJ/LQX[ GHVNWRS
&OXVWHUV$UHQ¶W-XVWIRU+LJK3HUIRUPDQFH$Q\PRUH
IDUDVWKHH\HFDQVHH(YRFDWLRQVRIWKHJLDQWPDFKLQHDUHLPPHGLDWHO\EURXJKWWRDWWHQWLRQDVWKHDOPRVW KDXQWLQJLPDJHRIDVLQJOHHQWLW\EHDUVGRZQXSRQWKHRQORRNHU
2ND\VRHYHQWKRXJKLW¶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¶WEHJLQDQGHQGZLWKWKHSDUDOOHORU9HFWRU FRPSXWHU
6RQRZWKDW\RXKDYHDEDVLFXQGHUVWDQGLQJRIWKHGLIIHUHQWW\SHVRIFOXVWHUVWKDWZHGLVFXVVLQWKLVERRN ,¶PVXUH\RX¶UHDVNLQJ³<HVWKDW¶VDOOZHOODQGJRRGEXWZKDWGRHVLWDOOPHDQ"´)RUWKDW\RXVKRXOG FRQVXOW\RXUIDYRULWHUHOLJLRXVWH[W)RUWKHSHUVRQZKRLVFRPIRUWDEOHZLWKKLVRUKHUEHOLHIVDQGZDQWVWR JHWLQWRWKHEXVLQHVVRIVHWWLQJXS/LQX[FOXVWHUV&KDSWHU³3UHSDULQJ\RXU/LQX[&OXVWHU´ZRXOGEH SHUIHFW)RUWKHFXULRXVLQGLYLGXDOZKRZDQWVWRXQGHUVWDQGWKHWKHRULHVEHKLQGFOXVWHULQJWHFKQRORJLHVWKH UHVWRIWKLVFKDSWHULVIRU\RX
0DNLQJWZRRUPRUH/LQX[PDFKLQHVLQWHUDFWZLWKHDFKRWKHULVTXLWHHDV\7KHVLPSOHVWZD\LVWRDVVLJQ HDFKPDFKLQHDQ,3DGGUHVVDQGDVXEQHWPDVNDWWDFKDFURVVRYHUFDEOHEHWZHHQWKHPDQGYRLOD²LQVWDQW QHWZRUN7KLQJVVWDUWWRJHWPRUHFRPSOLFDWHGZKHQWKHUH¶VDIHZPRUHPDFKLQHVLQYROYHGDOWKRXJKLW¶V VWLOOQRWURFNHWVFLHQFH$GGDQRWKHUFRPSXWHUDQG\RXKDYHWRDGGDVZLWFKRUKXE&RQQHFW\RXUFRPSXWHU WRDQRWKHUQHWZRUNDQG\RXKDYHWRDGGDURXWHURIVRPHNLQG*HWWLQJFOXVWHUHGFRPSXWHUVWRWDONWRHDFK RWKHUDWWKHPRVWEDVLFOHYHOLVDVVLPSOHDVVHWWLQJXSDQHWZRUN+RZHYHUJHWWLQJWKHPWRLQWHUDFWLQ GLIIHUHQWZD\VLVDQRWKHUVWRU\
+LJK$YDLODELOLW\DQG)DXOW7ROHUDQW&OXVWHUV
&RPSXWHUVKDYHDQDQQR\LQJWHQGHQF\WREUHDNGRZQZKHQ\RXOHDVWH[SHFW,W¶VDUDUHILQGWRFRPHDFURVV DV\VWHPDGPLQLVWUDWRUWKDWKDVQ¶WUHFHLYHGDSKRQHFDOOLQWKHPLGGOHRIWKHQLJKWZLWKWKHGUHDGHGQHZVWKDW DFULWLFDOV\VWHPLVGRZQDQGZRXOG\RXSOHDVHDWWHQGWRWKLVVLWXDWLRQDW\RXURZQFRQYHQLHQFHULJKW QRZ
7KHFRQFHSWRIKLJKO\DYDLODEOHDQGIDXOWWROHUDQWFOXVWHUVWHQGWRJRKDQGLQKDQG,IDV\VWHPLVJRLQJWR DFKLHYHKLJKXSWLPHVWKHPRUHUHGXQGDQWVXEV\VWHPVLWQHHGVWRUHPDLQRSHUDWLQJ²VXFKDVWKHDGGLWLRQRI VHUYHUVLQDFOXVWHUHGFRQILJXUDWLRQ7KHERWWRPOLQHIRUKLJKDYDLODELOLW\FOXVWHUVLVWKDWWKHDSSOLFDWLRQLVRI VXFKKLJKLPSRUWDQFHWKDW\RXWDNHH[WUDVWHSVWRPDNHVXUHLW¶VDYDLODEOH
6LQJOH3RLQWRI)DLOXUH
7KHVLQJOHSRLQWRIIDLOXUH632)LVDFRPPRQWKHPHLQ+$FOXVWHUV+DYLQJDVLQJOHFRPSRQHQWLVMXVW DVNLQJIRUWURXEOHDQGWKH632)LVDSDUDGLJPWREHDYRLGHGDWDOOFRVWV,QDSHUIHFWZRUOGHDFKVHUYHU ZRXOGKDYHDUHGXQGDQWVXEV\VWHPIRUHDFKFRPSRQHQWLQFDVHWKHSULPDU\GLHGRUVWRSSHGUHVSRQGLQJ &ULWLFDOVXEV\VWHPVWKDWXVXDOO\IDLOLQFOXGHKDUGGULYHVSRZHUVXSSOLHVDQGQHWZRUNFDUGV,W¶VDVDGIDFWRI OLIHEXWXVHUHUURUWHQGVWRDFFRXQWIRUPRVWGRZQWLPH2SHUDWRUVKDYHEHHQNQRZQWRXQPRXQWYROXPHVRI FULWLFDOOLYHGDWDDQGFRQWUDFWRUVUHRUJDQL]HFDEOHVWKDWDUHSRRUO\ODEHOHG
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¶VDILQHOLQHEHWZHHQKDQGOLQJDQ632)DQGWRWDO UHGXQGDQF\RIDOOV\VWHPVZKHUHEXGJHWLVXVXDOO\WKHGHFLGLQJIDFWRU
FORVHWRWKDW$PRUHUHDOLVWLFJRDOWRVHWZKHQSODQQLQJD+$VROXWLRQLVSURYLGLQJIRUDQXSWLPHRI SHUFHQWRUKLJKHU,QGRLQJVR\RXFDQSODQVFKHGXOHGGRZQWLPHIRUPDLQWHQDQFHEDFNXSVDQGSDWFKHV UHTXLULQJUHERRWV+DYLQJDQXSWLPHUHTXLUHPHQWRIJUHDWHUWKDQSHUFHQWUHTXLUHVGLIIHUHQWPRGHOVVXFK DVUHGXQGDQWV\VWHPV
6HUYHU5HGXQGDQF\
$OWKRXJKWKHUHDUHVHUYHUVGHVLJQHGZLWKUHGXQGDQF\LQPLQGWKHLUSULFHVWHQGWREHPXFKODUJHUWKDQ632) VHUYHUV7KHUHDUHFRPSDQLHVWKDWGHYHORSVHUYHUVZLWKQR632)LQFOXGLQJWZRPRWKHUERDUGVWZR&38V WZRSRZHUVXSSOLHVDQGVRRQ7KHVHDUHHYHQPRUHH[SHQVLYHEXWIRUWKHRUJDQL]DWLRQWKDWFDQ¶WDIIRUG GRZQWLPHWKHFRVWWRGDWDLQWHJULW\UDWLRHYHQVRXW
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
,Q)LJXUHWZRFRPSXWHUVDUHFRQQHFWHGWRWKHVDPHQHWZRUN$KHDUWEHDWDSSOLFDWLRQWKDWUXQVEHWZHHQ WKHPDVVXUHVHDFKFRPSXWHUWKDWWKHRWKHULVXSDQGUXQQLQJLQJRRGKHDOWK,IWKHVHFRQGDU\FRPSXWHU FDQQRWGHWHUPLQHWKHKHDOWKRIWKHSULPDU\FRPSXWHUWKDWFRPSXWHUWDNHVRYHUWKHVHUYLFHVRIWKHSULPDU\ 7KLVLVW\SLFDOO\GRQHZLWK,3DOLDVLQJDQGDIORDWLQJDGGUHVVWKDW¶VDVVLJQHGZLWK'167KLVIORDWLQJDGGUHVV ZLOOIDLORYHUWRWKHVHFRQGDU\FRPSXWHUDVVRRQDVWKHKHDUWEHDWGHWHFWVDQHYHQWVXFKDVWKHSULPDU\VHUYHU RUDSSOLFDWLRQIDLOLQJ7KLVPHWKRGZRUNVZHOOLIDOOWKHVHUYHGGDWDLVVWDWLF,IWKHGDWDLVG\QDPLFDPHWKRG WRNHHSWKHGDWDV\QFKHGQHHGVWREHLPSOHPHQWHG
)LJXUH/RDGEDODQFLQJH[SODLQHG
6KDUHGVWRUDJHLVWKHPHWKRGZKHUHWZRRUPRUHFRPSXWHUVKDYHDFFHVVWRWKHVDPHGDWDIURPRQHRUPRUH ILOHV\VWHPV7\SLFDOO\WKLVFRXOGEHGRQHWKURXJKDPHDQVRIVKDUHG6&6,GHYLFHVWRUDJHDUHDQHWZRUNRU DQHWZRUNILOHV\VWHP7KLVZRXOGHQDEOHWZRRUPRUHFRPSXWHUVWRDFFHVVWKHGDWDIURPWKHVDPHGHYLFH DOWKRXJKKDYLQJWKHGDWDRQRQO\RQHGHYLFHRUILOHV\VWHPFRXOGEHFRQVLGHUHGDQ632)
0DQDJLQJ6KDUHG6WRUDJHDQG'\QDPLF'DWD
RSHQVXSDQHZFDQRIZRUPV+RZGRWZRVHUYHUVDFFHVVWKHVDPHGDWDZLWKRXWWKHIHDURIGHVWUR\LQJWKH GDWD"
/HW¶VH[DPLQHWKLVVFHQDULRPRUHFORVHO\,PDJLQHLI\RXZLOOHPSOR\HHVDW;<=&RUSRUDWLRQZKRLQVWDOOD GDWDEDVHVHUYHULQDKLJKO\DYDLODEOHHQYLURQPHQW7KH\GRWKLVE\FRQQHFWLQJWZRVHUYHUVWRDQH[WHUQDOILOH VWRUDJHGHYLFH6HUYHU$LVWKHSULPDU\ZKLOHVHUYHU%VWDQGVE\LGOHLQFDVHRIIDLORYHU
6HUYHU$LVKDSSLO\FKXJJLQJDZD\ZKHQ-RH2SHUDWRUMXVWVRKDSSHQVWRVWXPEOHFOXPVLO\WKURXJKWKH KHDUWEHDWFDEOHVWKDWNHHSWKHVHUYHUVV\QFKHG6HUYHU%GHWHFWVWKDWVHUYHU$LVGRZQDQGWULHVWRJDLQ FRQWURORIWKHGDWDZKLOHWKHSULPDU\FRQWLQXHVWRZULWH,Q³KLJKDYDLODELOLW\VSHHFK´WKLVLVNQRZQDVD VSOLWEUDLQVLWXDWLRQ9RLOD²DQLQVWDQWUHFLSHIRUGHVWUR\HGGDWD
)HQFLQJLVWKHWHFKQRORJ\XVHGWRDYRLGVSOLWEUDLQVFHQDULRVDQGDLGVLQWKHVHJUHJDWLRQRIUHVRXUFHV7KH +$VRIWZDUHZLOODWWHPSWWRIHQFHRIIWKHGRZQHGVHUYHUIURPDFFHVVLQJWKHGDWDXQWLOLWLVUHVWRUHGDJDLQ W\SLFDOO\E\XVLQJ6&6,UHVHUYDWLRQV+RZHYHUWKHWHFKQRORJ\KDVQRWEHHQIRROSURRI:LWKDGYDQFHVLQWKH /LQX[NHUQHOVSHFLILFDOO\DQGDERYHVHUYHUVFDQQRZHIIHFWLYHO\HQDFWIHQFLQJDQGWKHUHIRUHVKDUH ILOHV\VWHPVZLWKRXWWRRPDQ\KDVVOHV
$OWKRXJKVKDUHGVWRUDJHLVDIHDVLEOHVROXWLRQWRPDQ\G\QDPLFGDWDUHTXLUHPHQWVWKHUHDUHGLIIHUHQW DSSURDFKHVWRKDQGOLQJWKHVDPHGDWD,I\RXFDQDIIRUGWKHQHWZRUNGHOD\DVROXWLRQWKDWUHOLHVRQ1)6RU SHUKDSVUV\QFFRXOGEHDPXFKFOHDQHUVROXWLRQ6KDUHGVWRUDJHDOWKRXJKLWKDVFRPHDORQJZD\DGGV DQRWKHUOD\HURIFRPSOH[LW\DQGDQRWKHUFRPSRQHQWWKDWFRXOGSRWHQWLDOO\JRZURQJ
/RDG%DODQFLQJ
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
)LJXUH/RDGEDODQFLQJ
7KHPDMRUGLVDGYDQWDJHRIORDGEDODQFLQJLVWKDWWKHGDWDKDVWRUHPDLQFRQVLVWHQWDQGDYDLODEOHDFURVVDOO WKHVHUYHUVWKRXJKRQHFRXOGXVHDPHWKRGVXFKDVUV\QFWRNHHSWKHLQWHJULW\RIGDWD
$OWKRXJKORDGEDODQFLQJLVW\SLFDOO\GRQHLQODUJHU,63VE\KDUGZDUHGHYLFHVWKHYHUVDWLOLW\RI/LQX[DOVR VKLQHVKHUH
3URJUDPVVXFKDV%DODQFHDQGWKHJOREDOORDGEDODQFLQJ(GGLH0LVVLRQDUHGLVFXVVHGLQ&KDSWHU³/RDG %DODQFLQJ´
'LVWULEXWHG&RPSXWLQJ
7DNHRYHUWKUHHPLOOLRQXVHUVWHOOWKHPWKDWWKH\WRRFDQMRLQLQWKHVHDUFKIRUH[WUDWHUUHVWULDOOLIHDQGZKDW GR\RXJHW"<RXJHWWKHZRUOG¶VODUJHVWGLVWULEXWHGDSSOLFDWLRQWKH6(7,#KRPHSURMHFW
KWWSVHWLDWKRPHVVOEHUNHOH\HGX2YHU\HDUVRIFRPSXWDWLRQDOWLPHKDVEHHQDFFXPXODWHGE\WKH SURMHFW7KLVLVDJUHDWUHIOHFWLRQRQWKHSRZHURIGLVWULEXWHGFRPSXWLQJDQGWKH,QWHUQHW
'LVWULEXWHGFRPSXWLQJLQDQXWVKHOOWDNHVDSURJUDPDQGDVVLJQVFRPSXWDWLRQDOF\FOHVWRRQHRUPRUH FRPSXWHUVDQGWKHQUHDVVHPEOHVWKHUHVXOWDIWHUDFHUWDLQSHULRGRIWLPH$OWKRXJKFORVHLQVFRSHWRSDUDOOHO FRPSXWHUVDWUXHGLVWULEXWHGHQYLURQPHQWGLIIHUVLQKRZSURFHVVHVDQGPHPRU\DUHGLVWULEXWHG7\SLFDOO\D GLVWULEXWHGFOXVWHULVFRPSULVHGRIKHWHURJHQHRXVFRPSXWHUVZKLFKFDQEHGHGLFDWHGVHUYHUVEXWDUH
W\SLFDOO\HQGXVHUZRUNVWDWLRQV7KHVHZRUNVWDWLRQVFDQEHFDOOHGRQWRSURYLGHFRPSXWDWLRQDOIXQFWLRQDOLW\ XVLQJVSDUH&38F\FOHV$GLVWULEXWHGDSSOLFDWLRQZLOOQRUPDOO\VXVSHQGLWVHOIRUUXQLQWKHEDFNJURXQG ZKLOHDXVHULVDFWLYHO\ZRUNLQJDWKLVFRPSXWHUDQGSLFNXSDJDLQDIWHUDFHUWDLQWLPHRXWYDOXH'LVWULEXWHG FRPSXWLQJUHVRXUFHVFDQHDVLO\EHDSSOLHGRYHUDODUJHJHRJUDSKLFDODUHDFRQVWUDLQHGRQO\E\WKHQHWZRUN LWVHOI
-XVWDERXWDQ\FRPSXWDWLRQDOO\H[SHQVLYHDSSOLFDWLRQFDQEHQHILWIURPGLVWULEXWHGFRPSXWLQJ6(7,#KRPH 5HQGHU)DUPVDFOXVWHUVSHFLILFDOO\VHWXSWRKDUQHVVSURFHVVLQJSRZHUWRGRODUJHVFDOHDQLPDWLRQVWDNH RYHUWKUHHPLOOLRQXVHUVWHOOWKHPWKDWWKH\WRRFDQMRLQLQWKHVHDUFKIRUH[WUDWHUUHVWULDOOLIHDQGZKDWGR \RXJHW"$QGGLIIHUHQWW\SHVRIVLPXODWLRQVFDQDOOEHQHILW
3DUDOOHO&RPSXWLQJ
3DUDOOHOFRPSXWLQJUHIHUVWRWKHVXEPLVVLRQRIMREVRUSURFHVVHVRYHUPRUHWKDQRQHSURFHVVRU3DUDOOHO FOXVWHUVDUHW\SLFDOO\JURXSVRIPDFKLQHVWKDWDUHGHGLFDWHGWRVKDULQJUHVRXUFHV7KHFOXVWHUFDQEHEXLOW ZLWKDVOLWWOHDVWZRFRPSXWHUVKRZHYHUZLWKWKHSULFHRIFRPPRGLW\KDUGZDUHWKHVHGD\VLW¶VQRWKDUGWR ILQGFOXVWHUVZLWKDVOLWWOHDVQRGHVRUSHUKDSVVHYHUDOWKRXVDQG*RRJOHKDVEHHQUHSRUWHGWRKDYHRYHU QRGHVZLWKLQLWV/LQX[FOXVWHU
3DUDOOHOFOXVWHUVKDYHDOVREHHQUHIHUUHGWRDV%HRZXOIFOXVWHUV$OWKRXJKQRWWHFKQLFDOO\DFFXUDWHIRUDOO W\SHVRI+3&VD%HRZXOIW\SHFOXVWHUUHIHUVWR³FRPSXWHUFOXVWHUVEXLOWXVLQJSULPDULO\FRPPRGLW\ FRPSRQHQWVDQGUXQQLQJDQ2SHQ6RXUFHRSHUDWLQJV\VWHP´
3DUDOOHOFRPSXWHUVZRUNE\VSOLWWLQJXSMREVDQGGROLQJWKHPRXWWRGLIIHUHQWQRGHVZLWKLQWKHFOXVWHU +DYLQJVHYHUDOFRPSXWHUVZRUNLQJRQDVLQJOHWDVNWHQGVWREHPRUHHIILFLHQWWKDQRQHFRPSXWHUFKXUQLQJ DZD\RQWKHVDPHWDVNEXWKDYLQJDQRGHFOXVWHUZRQ¶WQHFHVVDULO\VSHHGXS\RXUDSSOLFDWLRQWLPHV 3DUDOOHOFOXVWHUVDUHQ¶WW\SLFDOO\³VHWXSDQGIRUJHWDERXWWKHP´PDFKLQHVWKH\QHHGDJUHDWDPRXQWRI SHUIRUPDQFHWXQLQJWRPDNHWKHPZRUNZHOO2QFH\RX¶YHWXQHG\RXUV\VWHPLW¶VWLPHWRWXQHLWDJDLQ$QG WKHQDIWHU\RX¶YHILQLVKHGWKDWLWPLJKWEHQHILWIURPVRPHPRUHSHUIRUPDQFHWXQLQJ
1RWHYHU\SURJUDPEHQHILWVIURPDSDUDOOHOFRQILJXUDWLRQ6HYHUDOIDFWRUVPXVWEHFRQVLGHUHGWRMXGJH DFFXUDWHO\)RUH[DPSOHLVWKHFRGHZULWWHQWRZRUNXQGHUVHYHUDOSURFHVVRUV"0RVWDSSOLFDWLRQVDUHQ¶W GHVLJQHGWRWDNHDGYDQWDJHRIPXOWLSOHSURFHVVRUVVRGROLQJRXWSLHFHVRI\RXUSURJUDPZRXOGMXVWEHIXWLOH ,VWKHFRGHRSWLPL]HG"7KHFRGHPLJKWZRUNIDVWHURQRQHQRGHLQVWHDGRIVSOLWWLQJXSHDFKSDUWDQG
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
KHWHURJHQHRXVJURXSRIPDFKLQHVWRUXQ&&DQG)RUWUDQDFURVVWKHFOXVWHU0HVVDJH3DVVLQJ,QWHUIDFH 03,DUHODWLYHQHZFRPHUWRWKHVFHQHLVVKDSLQJXSWREHWKHVWDQGDUGLQPHVVDJHSDVVLQJ(DFKLV DYDLODEOHIRUDOPRVWHYHU\V\VWHPLPDJLQDEOHLQFOXGLQJ/LQX[
+RZ1RZ%URZQ&RZ
,QFOXGHGZLWKLQWKH3DUDOOHO3URFHVVLQJPRGHOH[LVWFOXVWHUFRQILJXUDWLRQVFDOOHG12:VDQG&2:V²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
$PGDKO¶V/DZ
)URPWKHHDUOLHVWGD\VRIFRPSXWLQJSHRSOHZRXOGVWDUHDWWKHLUPRQLWRUVZLWKXWWHULPSDWLHQFHDVWKHLU V\VWHPVDWWHPSWHGWRVROYHSUREOHPVDWPLQGERJJOLQJO\VORZVSHHGVRND\HYHQZLWKPRGHUQWHFKQRORJ\ ZHVWLOOKDYHQ¶WVROYHGWKLVSUREOHP,Q*HQH$PGDKOZKRZDVZRUNLQJIRU,%0DWWKHWLPH
WKHRUL]HGWKDWWKHUHZDVDOLPLWWRWKHHIIHFWLYHQHVVRISDUDOOHOSURFHVVLQJIRUDQ\SDUWLFXODUWDVN2QHFRXOG DVVXPHWKDWWKLVWKHRU\ZDVZULWWHQZKLOHZDLWLQJIRUKLVFRPSXWHUWRERRW0RUHVSHFLILFDOO\³HYHU\ DOJRULWKPKDVDVHTXHQWLDOSDUWWKDWXOWLPDWHO\OLPLWVWKHVSHHGXSWKDWFDQEHDFKLHYHGE\DPXOWLSURFHVVRU LPSOHPHQWDWLRQ´5HHYDOXDWLQJ$PGDKO¶V/DZE\-RKQ/*XVWDIVRQ
ZZZVFODPHVODEJRY3XEOLFDWLRQV$PGDKOV/DZ$PGDKOVKWPO,QRWKHUZRUGVWKHUHOLHVFHUWDLQSDUWVWR HDFKFRPSXWDWLRQVXFKDVWKHWLPHLWWDNHVWRZULWHUHVXOWVWRGLVN,2OLPLWDWLRQVDQGVRRQ
$PGDKO¶V/DZLVLPSRUWDQWLQWKDWLWGLVSOD\VKRZXQUHDVRQDEOHLWLVWRH[SHFWFHUWDLQJDLQVDERYHDW\SLFDO WKUHVKROG(YHQWKRXJK$PGDKO¶V/DZUHPDLQVWKHVWDQGDUGLQGHPRQVWUDWLQJWKHHIIHFWLYHQHVVRISDUDOOHO DSSOLFDWLRQVWKHODZUHPDLQVLQGLVSXWHDQGHYHQEHJLQVWRIDOODSDUWDVODUJHUFOXVWHUVDUHEHFRPLQJ FRPPRQSODFH$FFRUGLQJWR-RKQ/*XVWDIVRQLQ5HHYDOXDWLQJ$PGDKO¶V/DZ
³2XUZRUNWRGDWHVKRZVWKDWLWLVQRWDQLQVXUPRXQWDEOHWDVNWRH[WUDFWYHU\KLJKHIILFLHQF\ IURPDPDVVLYHO\SDUDOOHOHQVHPEOH:HIHHOWKDWLWLVLPSRUWDQWIRUWKHFRPSXWLQJUHVHDUFK FRPPXQLW\WRRYHUFRPHWKHµPHQWDOEORFN¶DJDLQVWPDVVLYHSDUDOOHOLVPLPSRVHGE\DPLVXVHRI $PGDKO¶VVSHHGXSIRUPXODVSHHGXSVKRXOGEHPHDVXUHGE\VFDOLQJWKHSUREOHPWRWKHQXPEHU RISURFHVVRUVQRWIL[LQJSUREOHPVL]H´6HH2Q0LFURSURFHVVRUV0HPRU\+LHUDUFKLHVDQG $PGDKO¶V/DZZZZKSFPRKSFPLO+WGRFV8*&8*&SDSHUVDOJ´
$OWKRXJKFHUWDLQSHRSOHGLVSXWHWKHYDOLGLW\RI$PGDKO¶V/DZLWUHPDLQVDQHDV\ZD\WRWKLQNDERXWWKRVH OLPLWDWLRQV
603DQGWKH3ULPDU\3URFHVVRU3DUDGLJP
*HQHUDOO\DZHOOZULWWHQDQGRSWLPL]HGDSSOLFDWLRQSHUIRUPVPXFKEHWWHURQDQ603PDFKLQHWKDQRQWZR RUPRUHFRPSXWHUVZLWKDVLQJOHSURFHVVRU6HYHUDOIDFWRUVGHWHUPLQHWKHVSHHGDWZKLFKWKHDSSOLFDWLRQ UXQVLQFOXGLQJWKHVSHHGRIWKHPRWKHUERDUGEXVWKHPHPRU\WKHVSHHGRIWKHGULYHVDVZHOODVWKH,2 WKURXJKSXW/LNHWKHDGGLWLRQRIPRUHQRGHVIRUSDUDOOHOFRPSXWLQJWKHSURJUDPVKDYHWREHUHZULWWHQRU RSWLPL]HGWRHQDEOHPXOWLSOHWKUHDGV3URFHVVHVDQGNHUQHOVSDFHWKUHDGVDUHQDWXUDOO\GLVWULEXWHGDPRQJ 603PDFKLQHV8VHUSURFHVVHVJHQHUDOO\DUHQ¶WKRZHYHUWKHNHUQHOGRHVDVRUWRIQDWXUDOORDGEDODQFLQJ DFURVVHDFKRIWKH&38V$SSOLFDWLRQVWKDWFDQPDNHXVHRIIRUNFDQEHQHILWIURPDQ603DUFKLWHFWXUH
IRUNDOORZVDSURFHVVWRVSOLWLWVHOILQWRWZRLGHQWLFDOFRSLHVZKLFKGHSHQGLQJRQWKH26ZLOOVKDUHWKH
VDPHPHPRU\\HWZLOOUXQRQDGLIIHUHQW&38,IWKHDSSOLFDWLRQLVSULPDULO\&38GULYHQWKDWDSSOLFDWLRQ ZLOOVHHEHQHILWVIURPWKH603DUFKLWHFWXUH+RZHYHUWKHSULFHIRUFRPSXWHUVZLWKPRUHWKDQRQHSURFHVVRU PLJKWRXWZHLJKWKHEHQHILWVRIDQ603SURFHVVRUPDFKLQH
/LQX[DGGHGVXSSRUWIRU603ZLWKWKHDGGLWLRQRIWKHNHUQHOZKLFKLQFOXGHGVXSSRUWIRU,QWHODQG KLJKHUDQGFORQHVDVZHOODVK\SHUVSDUFPDFKLQHV:LWKWKHDGGLWLRQRIWKHNHUQHO/LQX[DGGHG VXSSRUWIRU8OWUD6SDUF6SDUF6HUYHU$OSKDDQG3RZHU3&PDFKLQHV
$OWKRXJKWKH[DQG[NHUQHOV¶603VXSSRUWLVDGGHGE\GHIDXOWLWFDQEHDGGHGLQZLWKWKHIROORZLQJ VHWWLQJVWKHODWHVWNHUQHOFDQDOZD\VEHIRXQGDWZZZNHUQHORUJRUDWIWSIWSNHUQHORUJSXEOLQX[NHUQHO
z &RQILJXUHWKHNHUQHODQGDQVZHU³\HV´WRWKHTXHVWLRQ³6\PPHWULF0XOWL3URFHVVLQJ6XSSRUW´ z (QDEOH³0HPRU\7\SH5DQJH5HJLVWHU07556XSSRUW´ERWKXQGHU3URFHVVRU7\SHDQG)HDWXUHV z (QDEOHUHDOWLPHFORFNVXSSRUWE\FRQILJXULQJWKH³57&6XSSRUW´LWHPXQGHU&KDUDFWHU'HYLFHV z 2QWKH[NHUQHOGRQRWHQDEOH$GYDQFHG3RZHU0DQDJHPHQW$30$30DQG603DUHQRW
FRPSDWLEOHDQG\RXUV\VWHPZLOODOPRVWFHUWDLQO\FUDVKZKLOHERRWLQJLI$30LVHQDEOHG
<RXPXVWUHEXLOGDOORI\RXUNHUQHODQGNHUQHOPRGXOHVZKHQFKDQJLQJWRDQGIURP603PRGH5HPHPEHU WRPDNHPRGXOHVDQGPDNHPRGXOHVLQVWDOO<RXFDQGLVSOD\WKHUHVXOWZLWKFDWSURFFSXLQIR
4XLFNDQG'LUW\&OXVWHULQJ
$VSUHYLRXVO\PHQWLRQHGFOXVWHUVDUHPDGHXSRIWZRRUPRUHGLIIHUHQWPDFKLQHVRUSURFHVVRUVWKDWVHUYH WKHVDPHDSSOLFDWLRQ(YHQWKRXJKLWWDNHVDOLWWOHPRUHWRPDNHDIXOOIOHGJHGFOXVWHUHGVROXWLRQIRUPRVW DSSOLFDWLRQVLW¶VHDV\WREULQJEDVLFVHUYLFHVWRPRVWQHWZRUNV
$OO/LQX[DFWXDOO\QHHGVWREHLQYROYHGLQDFOXVWHULVWRWDONWRRWKHUPDFKLQHVLQDQHWZRUNZKLFKLQFOXGHV PRVWRIWKHPDFKLQHVRXWWKHUH3XWWZRER[HVWRJHWKHUWKDWWDONWRHDFKRWKHUDQG\RXKDYHDFOXVWHU²QRWD YHU\HIIHFWLYHFOXVWHUPLQG\RXEXWRQHWKDWZRUNV,W¶VDVLPSOHPDWWHUUHDOO\WRHQDEOHEDVLFFOXVWHULQJ IHDWXUHVWRH[LVWLQJVHUYHUV
'LDO3LQJIRU6HUYLFH
$EDVLF+$FOXVWHUFDQEHDFKLHYHGZLWKQRWKLQJPRUHWKDQVWUDLJKWSLQJ,I\RXZHUHWRVHWXSDVFULSWWKDW ZRXOGHQDEOHDIDLORYHUVHUYHUWRSLQJDSULPDU\DSSOLFDWLRQVHUYHUHYHU\PLQXWHRUVRWKHIDLORYHUVHUYHU FRXOGGHWHUPLQHZKHQWKHSULPDU\IDLOHG$VVRRQDVWKHVHFRQGDU\FRXOGQ¶WILQGWKHRWKHUVHUYHULWZRXOG DVVXPHWKDWLWZDVGRZQDQGODXQFKVFULSWVWRHQDEOHLWVRZQVHUYLFHV$IWHUDOOLIWKHIDLORYHUVHUYHUFDQ¶W UHDFKWKHSULPDU\QHLWKHUFDQDQ\RWKHUVHUYLFHRUXVHU
<RXQHHGWRFRQVLGHUVRPHRSWLRQVEHIRUH\RXVWDUWSODQQLQJIRU\RXUEDVLF+$FOXVWHU$UH\RXJRLQJWR KDYHWKHIDLORYHUVHUYHULQVWDQGE\PRGHZLWKDQDSSOLFDWLRQDOUHDG\UXQQLQJUHDG\WRJR",VWKHVWDQGE\ VHUYHUDOUHDG\LQSURGXFWLRQZLWKRWKHUHOHPHQWVUXQQLQJ"+HUH¶VZKDW\RXQHHGWRVHWXSDEDVLF+$ FOXVWHU
z &URQWDEHQWU\WRFDOOWKHVFULSW
z ,IWKHRWKHUVHUYHUUHVSRQGVWKHQVOHHS
z ,IWKHRWKHUVHUYHUGRHVQ¶WUHVSRQGSLQJDJDLQ
z ,IWKHRWKHUVHUYHUVWLOOGRHVQ¶WUHVSRQGDVVXPHIDLORYHUVHTXHQFH z 7DNHRYHU,3DGGUHVVRIIDLOHGVHUYHU
7KHILUVWVWHSZKHQLPSOHPHQWLQJVXFKDFOXVWHULVWRDVVLJQDYLUWXDO,3WRWKHVHUYHUV7KLVVHUYHVDVWKH IORDWLQJDGGUHVVWKDWUHVROYHVWRD'16HQWU\,QLWLDOO\WKHSULPDU\VHUYHURZQVWKH,3DQGWKHQWKH VHFRQGDU\DVVXPHVLWDIWHUIDLORYHU
,3DOLDVLQJKDVWRHLWKHUKDYHEHHQFRPSLOHGLQWKHNHUQHORUKDYHEHHQORDGHGDVDPRGXOH7KHNHUQHO FRQILJXUDWLRQIRU[NHUQHOVLVXQGHU1HWZRUNLQJ2SWLRQV,3$OLDVLQJ6XSSRUWDQGLVXQFKHFNHGE\ GHIDXOW0RGXOHVXSSRUWLVRQO\DYDLODEOHLQ[NHUQHOV[NHUQHOVHLWKHUKDYHVXSSRUWFRPSLOHGLQRU QRW
7KHPRGXOHWKDW\RX¶OOEHORRNLQJIRULVLSBDOLDV7RLQVHUWLWLQWRWKH[NHUQHOXVHWKHLQVPRG
FRPPDQG
5HG+DWGHIDXOWLQVWDOODOORZVIRUDQ,3DOLDVULJKWRXWRIWKHER[$VWRFNGRHVDVZHOO\HW'HELDQ GRHVQ¶WVRFKHFN\RXUGLVWULEXWLRQ
$IWHU,3DOLDVLQJLVDYDLODEOHDQH[WUDDOLDVRUVHYHUDOFDQEHDGGHGZLWKWKHVDPHHDVHDVDUHJXODU,37KH IRUPDWLV
VELQLIFRQILJLQWHUIDFH!YLUWXDOQXPEHU!LS!QHWPDVNQHWPDVN!XS
)RUH[DPSOH
VELQLIFRQILJHWKQHWPDVNXS
EULQJVXSYLUWXDOLQWHUIDFHRQHDQGDWWDFKHVLWWRDGDSWHUHWKZLWKDQ,3RIDQGDFODVV%
QHWPDVN$VVLJQWKHYLUWXDOLQWHUIDFHWRWKHLQWHUIDFHRIWKHSULPDU\VHUYHUDQGPDNHVXUHWKDWWKLVHQWU\LV UHVROYHGE\'16
7KHQH[WVWHSLQFOXGHVVHWWLQJXSWKHIDLORYHUVFULSW7KLVVFULSWSODFHGRQWKHIDLORYHUVHUYHULQLWLDOO\SLQJV WKHSULPDU\VHUYHUDQGH[LWVLIDUHVSRQVHLVJLYHQ,IDUHVSRQVHLVQRWJLYHQWKHSURJUDPZDLWVIRU VHFRQGVDQGSLQJVDJDLQ,IWKHIDLORYHUVHUYHUGRHVQ¶WUHFHLYHDSLQJUHVSRQVHIURPWKHSULPDU\DVHFRQG WLPHWKHVHUYHUWKHQVHWVWKHYLUWXDO,3RQLWVHOIDQGRSWLRQDOO\VHQGVRXWDQRWLILFDWLRQ'RQ¶WIRUJHWWRVHW WKHVFULSWH[HFXWDEOH
ELQEDVK
3RRU0DQV&OXVWHU
6FULSWWR7HVWIRU)DLORYHU
KRVW QHWPDVN ZKLOHWUXHGR
ELQSLQJFLKRVW!GHYQXOO! LI>"JH@WKHQ
7KLVGRHVQWORRNJRRGOHWVWHVWDJDLQ ELQSLQJFLKRVW!GHYQXOO! LI>"JH@WKHQ
:HQHHGWRDVVXPHKRVWLVUHDOO\GRZQ$VVXPH IDLORYHUVHTXHQFH
HFKRKRVWLVGRZQ3OHDVHFKHFNLPPHGLDWHO\!ELQPDLO VKRVWLVGRZQXVHU#KRVWFRP
HOVH
VHFRQGSLQJUHWXUQHGDYDOXH:KHZ
HOVH IL GRQH
7KHVFULSWVKRXOGEHDEOHWRUXQLQWKHEDFNJURXQGDQGPDLOWKHGHVLJQDWHGXVHULIDFRQQHFWLYLW\SUREOHP RFFXUV7KHVFULSWFDQHDVLO\EHDGDSWHGWRSLQJPRUHWKDQRQHKRVWLI\RX¶UHFUHDWLYHHQRXJK
/RDG%DODQFLQJ8VLQJ'165HFRUGV
$TXLFNDQGGLUW\ZD\WRHQDEOHORDGEDODQFLQJFDQEHDFKLHYHGZLWKVLPSOH$UHFRUGVLQ'16$OWKRXJKLW SUHVHQWVLWVHOIDVDGLUW\KDFNHQDEOLQJWKHVDPHQDPHZLWKWZRRUPRUHGLIIHUHQW,3DGGUHVVHVGRHVRIIHUD PHDVXUHRIORDGEDODQFLQJDOEHLWOLPLWHGLQVFRSH7KHVDPHHIIHFWGRHVQRWZRUNKRZHYHUZKHQHQDEOLQJ GLIIHUHQW,3DGGUHVVHVLQHWFKRVWV
7RLOOXVWUDWHZHKDYHWKHIROORZLQJ]RQHHQDEOHG
>URRW#PDWUL[QDPHG@FDW]RQHGQV
=RQHILOHIRU]RQHFRP
#,162$]RQHFRPSRVWPDVWHU]RQHFRP VHULDO
UHIUHVK UHWU\
H[SLUHVHFRQGV PLQLPXPVHFRQGV ,116QV]RQHFRP
,116QV]RQHFRP
KRVW,1$ KRVW,1$ KRVW,1$
,QWKLVH[DPSOHHDFKKRVWFDUULHVWKHVDPHGRPDLQQDPH\HWWKH$UHFRUGSRLQWVWRDGLIIHUHQWDGGUHVV 3LQJVRIWKHPDFKLQHVKRZWKHIROORZLQJ
>URRW#PDWUL[QDPHG@SLQJKRVW
3,1*KRVW]RQHFRPIURPE\WHVRIGDWD >URRW#PDWUL[QDPHG@SLQJKRVW
3,1*KRVW]RQHFRPIURPE\WHVRIGDWD >URRW#PDWUL[QDPHG@SLQJKRVW
3,1*KRVW]RQHFRPIURPE\WHVRIGDWD >URRW#PDWUL[QDPHG@SLQJKRVW
3,1*KRVW]RQHFRPIURPE\WHVRIGDWD
$V\RXFDQVHHLW¶VQRWDIRROSURRIVLWXDWLRQEXWLWGRHVRIIHUVRPHPHWKRGRIORDGEDODQFLQJEHWZHHQKRVWV
$OWHUQDWH)LOH6\VWHPV
-RXUQDOLQJ)LOH6\VWHPV
(QWHUWKHMRXUQDOWKHPRVWSRSXODUDOWHUQDWLYHPHWKRGWRNHHSWUDFNRIWKHILOHV\VWHP'HSHQGLQJRQWKH LPSOHPHQWDWLRQMRXUQDOLQJILOHV\VWHPVXVHGLIIHUHQWPHWKRGVEDVHGRQDGDWDEDVHWRNHHSWUDFNRIILOH V\VWHPGDWD:KDW¶VVRDWWUDFWLYHDERXWMRXUQDOLQJILOHV\VWHPVLVWKDWIVFNLVQ¶WQHHGHG,QWKHHYHQWRID
V\VWHPFUDVKWKHORJVIURPWKHGDWDEDVHFDQEHUHSOD\HGWRUHSUHVHQWWKHGDWDDWWKHWLPHRIDFUDVK7KLV PHWKRGWHQGVWREULQJWKHV\VWHPXSWRDFRQVLVWHQWVWDWHPXFKIDVWHUWKDQDILOHV\VWHPUXQZLWKIVFN KRZHYHULWGRHVQ¶WGRDQ\WKLQJVSHFLDOIRUGDWDUHOLDELOLW\$ODUJH5$,'GHYLFHWKDW¶VXVLQJH[WPLJKWWDNH VHYHUDOKRXUVWRJRWKURXJKIVFNFKHFNVDOWKRXJKZLWKWKHDGGLWLRQRIDMRXUQDOLQJILOHV\VWHPQRFKHFNV
DUHPDGH$OOZULWHVDUHPDGHDQGSOD\HGEDFNIURPWKHMRXUQDOZKLFKUHVXOWVLQDERRWWLPHRIRQO\ PLQXWHV
'LIIHUHQWMRXUQDOLQJILOHV\VWHPVDOVRKDYHVXSSRUWIRUV\QFKURQRXV,2LQFUHDVHGEORFNVL]HVXSSRUW LQWHJUDWLRQZLWK1)6TXRWDVXSSRUWDQGVXSSRUWIRUDFFHVVFRQWUROOLVWV$&/V
1HWZRUN)LOH6\VWHPV
1HWZRUNILOHV\VWHPVPDQDJHWRWDNHRQHRUPRUHGHYLFHVDQGDSSHDUWRWKHVHUYHUDVRQHORJLFDOYROXPH 7KHWULFNKHUHLVWRIRROWKH26LQWRWKLQNLQJWKDWWKHYROXPHLVDORFDOO\DWWDFKHG5$,'RUFOXVWHUHGGHYLFH 7KHQHWZRUNILOHV\VWHPQDWXUDOO\VKRZVVRPHSHUIRUPDQFHORVVGXHWRWKHQHWZRUNRYHUKHDG
1HWZRUNLQJIRU&OXVWHUV
1HWZRUNLQJLVDQHVVHQWLDOSDUWRIFOXVWHULQJ&RPSXWHUVMXVWFDQ¶WWDONWRHDFKRWKHURQWKHLURZQWKDW ZRXOGEHFUHHS\3DUDOOHOQHWZRUNVQHHGDGHGLFDWHGQHWZRUNLQJHQYLURQPHQWZKHUHLQFRPSDULVRQTXLWHD IHZORDGEDODQFHGGLVWULEXWHGDQGHYHQVRPH+$VROXWLRQVDUHGHVLJQHGRYHUD:$1HQYLURQPHQW7R EHWWHUXQGHUVWDQGWKHUHODWLRQVKLSEHWZHHQWKHQHWZRUNDQGWKHFOXVWHUZHQHHGWRXQGHUVWDQGQHWZRUN LVVXHVDQGKRZWKH\DIIHFWFOXVWHUFRPPXQLFDWLRQV$OWKRXJKZHZRQ¶WJHWLQWRDGHWDLOHGH[SODQDWLRQRI 7&3,3DQGQHWZRUNLQJDFXUVRU\H[DPLQDWLRQLVSURYLGHGKHUH
7KH26,1HWZRUNLQJ0RGHO
7KH,QWHUQDWLRQDO2UJDQL]DWLRQIRU6WDQGDUGL]DWLRQ,62DQLQWHUQDWLRQDOERG\FRPSULVHGRIQDWLRQDO VWDQGDUGVERGLHVIURPPRUHWKDQFRXQWULHVFUHDWHGWKH2SHQ6WDQGDUGV,QWHUFRQQHFWLRQ26,PRGHOLQ RUGHUIRUGLIIHUHQWYHQGRUVWRGHVLJQQHWZRUNVWKDWZRXOGEHDEOHWRWDONWRHDFKRWKHU7KH26,PRGHO ILQDOO\VWDQGDUGL]HGLQLVEDVLFDOO\DUHIHUHQFHWKDWVHUYHVDVDJHQHUDOIUDPHZRUNIRUQHWZRUNLQJ ,WZDVQ¶WXQFRPPRQWRILQGYHQGRUVDERXW\HDUVDJRZKRSURGXFHGFRPSXWHUVWKDWGLGQ¶WKDYHWKHDELOLW\ WRWDONWRRWKHUYHQGRUV$ORQJZLWKFUHDWLQJRSHUDWLQJV\VWHPVDQGPDLQIUDPHVWKDWZHUHUDWKHUSURSULHWDU\ WKHFRPPXQLFDWLRQVRIWKHWLPHZHUHPRVWO\SURSULHWDU\DVZHOO,QWKH%ULWLVK6WDQGDUGV2UJDQL]DWLRQ SURSRVHGWRWKH,62WKDWDQLQWHUQDWLRQDOVWDQGDUGIRUGLVWULEXWHGSURFHVVLQJEHFUHDWHG7KH$PHULFDQ 1DWLRQDO6WDQGDUGV,QVWLWXWH$16,ZDVFKDUJHGZLWKSUHVHQWLQJDIUDPHZRUNIRUQHWZRUNLQJDQGWKH\ FDPHXSZLWKD6HYHQ/D\HUPRGHO7KH2ULJLQVRI26,KWWSZLOOLDPVWDOOLQJVFRP([WUDV26,KWPO7KLV PRGHOLVVKRZQLQ)LJXUH
7KHWRSOD\HU/D\HU6HYHQLVWKH$SSOLFDWLRQ/D\HUDQGLVZKHUHWKHHQGXVHUDFWXDOO\LQWHUIDFHVZLWKWKH FRPSXWHULWVHOI/D\HU6HYHQHQFRPSDVVHVVXFKDSSOLFDWLRQVDVWKHZHEWHOQHW66+DQGHPDLO
/D\HU6L[WKH3UHVHQWDWLRQ/D\HUSUHVHQWVGDWDWRWKH$SSOLFDWLRQ/D\HU&RPSXWHUVWDNHJHQHULFGDWDDQG WXUQLWLQWRIRUPDWVVXFKDVWH[WLPDJHVVRXQGDQGYLGHRDWWKLVOD\HU'DWDWUDQVODWLRQFRPSUHVVLRQDQG HQFU\SWLRQDUHKDQGOHGKHUH
/D\HU)LYHWKH6HVVLRQ/D\HUKDQGOHVGDWDE\SURYLGLQJDPHDQVRIWUDQVSRUWIRUWKH3UHVHQWDWLRQ/D\HU ([DPSOHVRIDSSOLFDWLRQVWKDWXWLOL]HWKH6HVVLRQ/D\HULQFOXGH;:LQGRZ1)6$SSOH7DONDQG53& 7KH7UDQVSRUW/D\HU/D\HU)RXUSURYLGHVHUURUGHWHFWLRQDQGFRQWUROPXOWLSOH[LQJWUDQVSRUWFRQQHFWLRQV RQWRGDWDFRQQHFWLRQVPXOWLSOH[LQJDOORZVWKHGDWDIURPGLIIHUHQWDSSOLFDWLRQVWRVKDUHRQHGDWDVWUHDP IORZFRQWURODQGWUDQVSRUWWRWKH1HWZRUN/D\HU
/D\HU7KUHHWKH1HWZRUN/D\HULVUHVSRQVLEOHIRUWUDQVPLWWLQJGDWDDFURVVQHWZRUNV7ZRW\SHVRISDFNHWV DUHXVHGDWWKLVOHYHOLQFOXGLQJGDWDSDFNHWVDQGURXWHXSGDWHV5RXWHUVWKDWZRUNRQWKLVOHYHONHHSGDWD DERXWQHWZRUNDGGUHVVHVURXWLQJWDEOHVDQGWKHGLVWDQFHIRUUHPRWHQHWZRUNV
/D\HU7ZRWKH'DWD/LQN/D\HUWUDQVODWHVPHVVDJHVIURPWKH1HWZRUN/D\HULQWRWKH3K\VLFDO/D\HU7KLV OD\HUKDQGOHVHUURUFRQWUROUHOLDELOLW\DQGLQWHJULW\LVVXHV7KH1HWZRUN/D\HUDGGVIUDPHVWRWKHGDWDDQG DGGVDFXVWRPL]HGKHDGHUFRQWDLQLQJWKHVRXUFHDQGGHVWLQDWLRQDGGUHVV7KHOD\HULGHQWLILHVHDFKGHYLFHRQ WKHQHWZRUNDVZHOO
7KHERWWRPOD\HU/D\HU2QHRUWKH3K\VLFDO/D\HUVHQGVDQGUHFHLYHVLQIRUPDWLRQLQWKHIRUPRIRQHVDQG ]HURV7KHFKDUDFWHULVWLFVRIWKLVOD\HULQFOXGHVSHFLILFDWLRQVIRUVLJQDOYROWDJHVZLUHZLGWKDQGOHQJWKDQG VLJQDOLQJ
0DQ\GHYLFHVRSHUDWHDWGLIIHUHQWOHYHOV7KHKXEZKHQFDEOHGRQO\DPSOLILHVRUUHWUDQVPLWVGDWDWKURXJK DOOLWVSRUWV,QWKLVZD\LWRSHUDWHVRQO\RQ/D\HU2QH+RZHYHUDVZLWFKRSHUDWHVRQ/D\HUV2QHDQG7ZR DQGDURXWHURSHUDWHVRQ/D\HUV2QH7ZRDQG7KUHH7KHHQGXVHU¶VZRUNVWDWLRQZRXOGW\SLFDOO\KDQGOH /D\HUV)LYH6L[DQG6HYHQDOWKRXJKWKHYHUVDWLOLW\RI/LQX[FRXOGDOORZLWWRKDQGOHPXFKPRUH 7KHSRLQWRIKDYLQJVXFKDOD\HUHGDSSURDFKLVVRWKDWWKHGLIIHUHQWDVSHFWVRIQHWZRUNLQJFDQZRUNZLWK HDFKRWKHU²\HWUHPDLQLQGHSHQGHQW7KLVDOORZVDSSOLFDWLRQGHYHORSHUVWKHIUHHGRPWRZRUNRQRQHDVSHFW RIDOD\HUZKLOHH[SHFWLQJWKHRWKHUOD\HUVWRZRUNDVSODQQHG:LWKRXWWKHVHOD\HUVWKHGHYHORSHUZRXOG KDYHWRPDNHVXUHWKDWHYHU\DVSHFWRIWKHDSSOLFDWLRQLQFOXGHGVXSSRUWIRUHDFKOD\HU,QRWKHUZRUGV LQVWHDGRIMXVWFRGLQJDVLPSOHJDPHWKHGHYHORSPHQWWHDPZRXOGQRWRQO\KDYHWRFRGHWKHJDPHLWVHOIEXW DOVRWKHSLFWXUHIRUPDWVWKH7&3,3VWDFNDQGKDYHWRGHYHORSWKHURXWHUWRWUDQVPLWWKHLQIRUPDWLRQ
:K\LVOHDUQLQJWKLVVRLPSRUWDQWIRUFOXVWHULQJ")LUVWRIDOOLWDLGVLQWURXEOHVKRRWLQJ.QRZLQJZKHUHWKH SUREOHPOLHVLVWKHPRVWLPSRUWDQWVWHSWRVROYLQJWKHSUREOHP(YHU\WURXEOHVKRRWLQJPHWKRGQHHGVWRVWDUW VRPHZKHUHDQGE\JRLQJRYHUWKH26,PRGHO\RXFDQHDVLO\GLDJQRVHZKHUHWKHSUREOHPOLHV%\LVRODWLQJ HDFKOD\HU\RXFDQWUDFNGRZQSUREOHPVDQGUHVROYHWKHP
1HWZRUN7RSRORJ\
'LIIHUHQWW\SHVRIFOXVWHUVQHHGGLIIHUHQWW\SHVRIQHWZRUNWRSRORJLHVGHSHQGLQJRQWKHIUDPHZRUNLQYROYHG $+$QHWZRUNPLJKWQHHGPRUHDWWHQWLRQWRGHWDLOUHJDUGLQJVHFXULW\WRPDLQWDLQXSWLPHWKDQDGLVWULEXWHG FRPSXWLQJHQYLURQPHQWRUDSDUDOOHOFOXVWHULQJVFHQDULR
3UHVHQFH323LQWKUHHFLWLHVDFURVVWKH8QLWHG6WDWHV(DFKFLW\KDVLWVRZQFOXVWHUZLWKLWVRZQGDWDEDVH DQGHDFKLVFRQQHFWHGGLUHFWO\WRWKH,QWHUQHWIURPLWVRZQFLW\EXW\HWHDFKFLW\KDVWRKDYHDFFHVVWRWKH RWKHU¶VGDWD+RZLVWKLVEHVWDFKLHYHG"7RSRORJLHVKDYHWREHFOHDUO\WKRXJKWDERXWLQDGYDQFH&RQVLGHU WKHWRSRORJ\RIFOXVWHUVVSUHDGDFURVVD:$1IRULQVWDQFH
)LJXUH+LJKDYDLODELOLW\DFURVVWKH:$1
,QWKLVVFHQDULRWKUHHVLWHVDUHFRQQHFWHGRYHUWKHSXEOLF,QWHUQHWZLWKDILUHZDOOIRUVHFXULW\7KLVLVQ¶WWKH PRVWHIIHFWLYHPHWKRGRIDFKLHYLQJKLJKDYDLODELOLW\EXWLW¶VDFRPPRQVFHQDULR
2QHZD\WRJRDERXWUHGHVLJQLQJWKLVVFHQDULRLVWRUHPRYHWZRVDWHOOLWHFLWLHVIURPWKH,QWHUQHWDQGFRQQHFW HDFKRIWKHVHFLWLHVWKURXJKGLUHFWIUDPHUHOD\WRWKHLQWHUQDOQHWZRUNWKHUHE\GURSSLQJWKHILUHZDOOIURP WZRRIWKHVDWHOOLWHRIILFHV$QRWKHUDSSURDFKZRXOGEHWRLPSOHPHQWDORDGEDODQFHGQHWZRUN323VFRXOG HDVLO\EHSODFHGLQNH\ORFDWLRQVDFURVVWKHFRXQWU\VRWKDWFXVWRPHUVFRXOGKDYHUHODWLYHO\ORFDODFFHVVWR WKHILQDQFLDOGDWD%XWEHFDXVHWKHGDWDKDVWREHV\QFKURQL]HGEHWZHHQWKUHHFLWLHVLQUHDOWLPHWKH EDQGZLGWKLQYROYHGZRXOGEHWUHPHQGRXV
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¶UHTXLWHPHVV\EHFDXVHRIDOOWKHLQWHUPHVKHG FDEOLQJ:LWKWKHDGYHQWRIIDVWHWKHUQHWDQGJLJDELWHWKHUQHWDVLPSOHPDQDJHGRUXQPDQDJHGVZLWFKZLOO WDNHFDUHRIPRVWRIWKHEDQGZLGWKSUREOHPV2IFRXUVH³WKHIDVWHUWKHEHWWHU´LVWKHJHQHUDOPRWWRVREH VXUHWRFRQVLGHUWKHQHWZRUNZKHQEXGJHWLQJ\RXUFOXVWHU
6HUYLFHVWR&RQVLGHU
$ORQJZLWKWKHSK\VLFDOGHYHORSPHQWRIWKHFOXVWHUDQGWKHQHWZRUNWRSRORJ\GHFLGLQJZKLFKVHUYLFHVWR HQDEOHLVWKHQH[WVWHSWRZDUGDILQLVKHGFOXVWHULQJVROXWLRQ$OWKRXJKPRVW/LQX[GLVWULEXWLRQVRIIHUDFFHVV WRDOOWKHVWDQGDUGVHUYLFHVOLVWHGLQHWFVHUYLFHVWKHV\VWHPDGPLQLVWUDWRUKDVWRGHWHUPLQHLIWKRVH
VHUYLFHVDUHDSSOLFDEOHWRWKHLUHQYLURQPHQW
,QDKLJKVHFXULW\HQYLURQPHQWWKHV\VWHPDGPLQLVWUDWRUPLJKWKDYHQRFKRLFHEXWWRWLJKWHQGRZQWKHVH UHVRXUFHV7KHPRVWFRPPRQZD\VRIGLVDEOLQJVHUYLFHVLQFOXGHUHVWULFWLQJDFFHVVWRWKHPWKURXJKWKH ILUHZDOOE\VHWWLQJXSDQLQWHUQDOQHWZRUNRUE\XWLOL]LQJKRVWVGHQ\DQGKRVWVDOORZ7KRVHVHUYLFHV
,W¶VQRVXUSULVHWKDWWRHQDEOHZHEVHUYLFHV\RXKDYHWRNHHSDFFHVVWRSRUW²DQGLI\RX¶UHJRLQJWR HQDEOHZHEVXSSRUWRYHU6HFXUH6RFNHWV/D\HU66/,QDGGLWLRQZKDW\RXDOVRKDYHWRNHHSLQPLQGZKHQ GHVLJQLQJ\RXUFOXVWHULVDFFHVVWRWKHEDFNXSGHYLFHVZKHWKHURUQRWWRDOORZ66+WHOQHWRUIWSDQGVRRQ ,QIDFWLW¶VDJRRGLGHDWRWRWDOO\GLVDOORZWHOQHWDFURVVWKHHQYLURQPHQWDQGUHSODFHLWZLWKVHFXUHVKHOO1RW RQO\GRHVWKLVDOORZVHFXUHORJLQVEXWDOVRVHFXUHIWSWUDQVIHUVIRULQWHUQDORIILFHXVH)73VHUYHUVVKRXOG VWLOOXVHUHJXODUIWSRIFRXUVHEXWRQO\IRUGHGLFDWHGVHUYHUV
.HHSLQJ<RXU6HUYLFHV2IIWKH3XEOLF1HWZRUN
$IWHU\RXGHFLGHZKLFKVHUYLFHVWRNHHSRQWKHSXEOLFQHWZRUNLW¶VDZLVHLGHDWRPDNHDQRQURXWDEOH QHWZRUNVWULFWO\IRUPDQDJHPHQWSXUSRVHV7KLVPDQDJHPHQWQHWZRUNVHUYHVWZRSXUSRVHV2QHLWHQDEOHV UHGXQGDQF\7KHDGPLQLVWUDWRUKDVWKHDELOLW\WRJDLQDFFHVVWRWKHER[LIWKHSXEOLFQHWZRUNJRHVGRZQRULV WRWDOO\VDWXUDWHGIURPSXEOLFXVH6HFRQGO\LWJLYHVWKHRSSRUWXQLW\IRUDGHGLFDWHGEDFNXSQHWZRUN7KH EDQGZLGWKIURPQLJKWO\EDFNXSVHDFKQLJKWKDVWKHSRWHQWLDOWRVDWXUDWHDSXEOLFQHWZRUN
5HDOLVWLFDOO\\RXGRQ¶WZDQWWRNHHS\RXUSDUDOOHOFOXVWHURQDSXEOLFQHWZRUN$SULYDWHQHWZRUNOHVVHQVWKH FKDQFHRIFRPSURPLVHGGDWDDQGPDFKLQHV8QOHVV\RXNHHS\RXUFOXVWHUVRWKDWDQ\RQHFDQUXQMREVRQLW WKHDGGHGEHQHILWRIDQRQURXWDEOHQHWZRUNJUHDWO\RXWZHLJKVWKHSRWHQWLDOULVNV
6XPPDU\
-XVWDVWKHVWDWHRIFRPSXWLQJKDVFRPHDORQJZD\VRKDVFOXVWHULQJLQJHQHUDO$V/LQX[PDWXUHVVRGRHV LWVDELOLW\WRKDQGOHODUJHUFOXVWHUVXVLQJFRPPRGLW\KDUGZDUHDVZHOODVPLVVLRQFULWLFDOGDWDDFURVV+$ FOXVWHUV
&OXVWHULQJXQGHU/LQX[LVVLPLODUWRFOXVWHUVXQGHURWKHURSHUDWLQJV\VWHPVDOWKRXJKLWH[FHOVLQLWVDELOLW\WR UXQXQGHUPDQ\GLIIHUHQWFRPPRGLW\KDUGZDUHFRQILJXUDWLRQV:LWKWKHULJKWFRQILJXUDWLRQKRZHYHULWFDQ SURYLGHVXSHUFRPSXWHUOLNHSHUIRUPDQFHDWDIUDFWLRQRIWKHFRVW7KHULJKWFRQILJXUDWLRQRIFRXUVHFKDQJHV XSRQWKHQHHGVRIWKHRUJDQL]DWLRQDQGWKHFOXVWHUWKDWLVLPSOHPHQWHG
&KDSWHU3UHSDULQJ<RXU/LQX[&OXVWHU
%XLOGLQJDFOXVWHUWDNHVDJUHDWGHDORISUHSDUDWLRQDQGIRUHWKRXJKW'HSHQGLQJRQWKHVROXWLRQLQYROYHG FOXVWHUVFDQUXQIURPDIHZKXQGUHGGROODUVLQVSDUHSDUWVWRVHYHUDOKXQGUHGWKRXVDQGIRUWKHODUJHUPRUH LQWULFDWHFOXVWHUV7RFUHDWHWKHULJKWVROXWLRQIRU\RXUFOXVWHUDOOGHVLJQDVSHFWVQHHGWREHWKRXJKWRXW SURSHUO\LQDGYDQFH
,IWKHEXGJHWGRHVQ¶WLQYROYHWKURZLQJPRQH\DWDYHQGRUWRFRPHXSZLWKDQLQVWDQWVROXWLRQSODQQLQJUHVWV RQ\RXUVKRXOGHUV2QFHWKHJRDKHDGKDVEHHQJLYHQLW¶VWLPHWRFUHDWHDQLQVWDOODWLRQFKHFNOLVW
<RXDOVRKDYHWRDVN\RXUVHOIZKDWNLQGRIFOXVWHUZLOOEHVWVXLW\RXUQHHGV,I\RXUFRPSDQ\¶VJRDOLVWR EXLOGDZHEVHUYHUGRHVWKDWVROXWLRQLQFOXGHKLJKDYDLODELOLW\+$DQGORDGEDODQFLQJ"'R\RXUHDOO\QHHG DQ603SURFHVVRUIRU\RXUSDUDOOHODSSOLFDWLRQRUZLOOVLQJOHSURFHVVRUVZRUN"7KLVFKDSWHUH[DPLQHV GLIIHUHQWZD\VWRGHVLJQ\RXUHQYLURQPHQWWREULQJ\RXUYDULRXVFOXVWHUFRQILJXUDWLRQVXSWRVSHHGTXLFNO\ DQGHDVLO\
3ODQQLQJWKH7RSRORJ\
'HVLJQLQJ\RXUFOXVWHUGRHVQ¶WVWRSDWWKHKDUGZDUHOHYHO,I\RXGRQ¶WWDNHLQWRDFFRXQWDQGSODQIRUHYHU\ OLWWOHWKLQJ\RX¶OOILQG\RXUVHOITXLFNO\UXQQLQJRYHUEXGJHW<RXKDYHWRSODQIRUQHWZRUNFDEOLQJSRZHU DQGFRROLQJUHTXLUHPHQWVDQGUHSODFHPHQWFRVWVVKRXOGDQ\WKLQJIDLO7KHSK\VLFDOSODFHPHQWRIWKH FRPSXWHULVLPSRUWDQWVR\RXQHHGWRGHFLGHLIWKHFRUQHUWDEOHLVDSSURSULDWHLIDGHGLFDWHGUDFNVKRXOGEH GHVLJQHGIRUWKHHQYLURQPHQWRUHYHQLIDQHZGDWDFHQWHUZRXOGZRUNEHVW
2QHRIWKHWKLQJVPRVWRYHUORRNHGLQWKHEXGJHWLVWKHPDLQWHQDQFH&OXVWHUVWDNHWLPHDQGRYHUKHDGWRUXQ QRWWRPHQWLRQDTXDOLILHGDGPLQLVWUDWRU,IVRPHWKLQJJRHVZURQJLW¶VQLFHWRKDYHVRPHRQHZKRNQRZV ZKDWWKHSUREOHPLVULJKWDZD\RUKDYHDPDLQWHQDQFHFRQWUDFWWREULQJLQVRPHRQHWRVROYHWKHSUREOHPIRU \RX
2QH)RUPDW<LHOGV2QH6ROXWLRQ
$OWKRXJKLWLVQ¶WDEVROXWHO\QHFHVVDU\SURYLGLQJDVWDQGDUGIRU\RXUHTXLSPHQWKHOSVUHGXFHRYHUKHDGDQG PDLQWHQDQFHFRVWV+DYLQJGLVSDUDWHV\VWHPVPHDQVNHHSLQJWUDFNRIDOOWKHVHSDUDWHLWHPVZKLFKLQFUHDVHV DGPLQLVWUDWLYHRYHUKHDG0RVWV\VWHPDGPLQLVWUDWRUVDOUHDG\KDYHKHWHURJHQHRXVQHWZRUNVWKDWWKH\KDYHWR GHDOZLWKRQDGDLO\EDVLV8QOHVV\RX¶UHIRUWXQDWHHQRXJKWRDGPLQLVWUDWHRQHRSHUDWLQJV\VWHPDQGRQH FRPSXWHUYHQGRUSODQQLQJIRURQHVROXWLRQDOOHYLDWHVKHDGDFKHVGRZQWKHURDG
2QHRIWKHEHQHILWVRIXVLQJVWD\LQJZLWK*18DSSOLFDWLRQVIRUFOXVWHULQJLVWKHDYDLODELOLW\RIVXSSRUW $OWKRXJKWKHGRFXPHQWDWLRQIRUVRIWZDUHFDQEHVSDUVHKHOSLVXVXDOO\DQHPDLORUQHZVJURXSDZD\ZLWK UHVSRQVHVRIWHQFRPLQJIURPWKHZULWHURIWKHDSSOLFDWLRQLWVHOI:KHQVHOHFWLQJVRIWZDUHIRU\RXUFOXVWHU ORRNDQGVHHZKDWVXSSRUWRSWLRQVDUHDYDLODEOH$JUHDWGHDORIVRIWZDUHZULWWHQIRU/LQX[XQGHUWKH *DWHZD\1DPLQJ8WLOLW\*18OLFHQVHLVZULWWHQE\SHRSOHLQWKHLUVSDUHWLPHVRDQVZHUVWRTXHVWLRQVDUH XVXDOO\IRXQGLQWKHVDPHPDQQHU
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
6SHQGLQJDOLWWOHH[WUDLQPDLQWHQDQFHFDQEHDGRXEOHHGJHGVZRUG2QRQHKDQGVXSSRUWFRQWUDFWVFDQ XVXDOO\EHSXUFKDVHGZKHUHKDUGZDUHVXSSRUWLVQHYHUPRUHWKDQIRXUKRXUVDZD\,QFDVHRIDGRZQHG QRGHSDUWVFDQEHUHSODFHGTXLFNO\E\DWUDLQHGWHFKQLFLDQWREULQJWKHV\VWHPXSFOHDQO\DQGHDVLO\ 6RPHWLPHVWKDWOLPLWVDQRUJDQL]DWLRQGXHWRWKHWUDLQHGWHFKQLFLDQEHLQJWKHRQO\RQHDOORZHGWRIL[WKH VHUYHUE\FRQWUDFW1RZDGD\VVRPHFRPSDQLHVDUHUHSODFLQJWKHLU/LQX[VHUYHUVDQGZRUNVWDWLRQVHYHU\WZR \HDUVRUVRUDWKHUWKDQSD\LQJKLJKPDLQWHQDQFHFRVWV
*HWWKH%HVW&RPSRQHQWVIRUWKH3ULFH
$OWKRXJKWKLVVRXQGVOLNHDQREUDLQHUJHWWLQJWKHEHVWFRPSRQHQWVIRUWKHSULFHLVH[WUHPHO\LPSRUWDQWIRU GHVLJQLQJDFOXVWHU$SHQQ\VDYHGKHUHDQGWKHUHRQSDUWVWKDWDUHQ¶WWRSRIWKHOLQHZLOOFRPHEDFNWRKDXQW \RXZKHQ\RXOHDVWH[SHFWLW
7KHJUHDWHVWERWWOHQHFNLQDQ\FOXVWHUFRQILJXUDWLRQLVWKHQHWZRUN)DVWHUSURFHVVRUVDQGELJJHUKDUGGULYHV GRQ¶WPHDQDQ\WKLQJLIWKHQHWZRUNLVQ¶WWKHUHWREHDEOHWRGULYHLW<RXFDQILQGFKHDSIDVWHWKHUQHWFDUGV WKDWDUHGHVLJQHGWRZRUNXQGHU/LQX[DOWKRXJKWKH\¶UHQRWFRPSDWLEOHZLWKHDFKGLVWULEXWLRQ*LJDELW HWKHUQHWFDUGVDUHEHFRPLQJUHDVRQDEOHDQG0\ULQHWVHHPVWREHWKHFOXVWHUKDUGZDUHRIFKRLFHQRZ,I\RX FDQDIIRUGLWVSHQGDOLWWOHPRUHDQGFKHFNRXWWKHKDUGZDUHFRPSDWLELOLW\OLVWWKDW¶VDVVRFLDWHGZLWK\RXU GLVWULEXWLRQ(YHQWKRXJKDFDUGVD\VWKDWLWZRUNVZLWK/LQX[ILQGRXWLILWZRUNVZLWK\RXUGLVWULEXWLRQ EHIRUH\RXSXUFKDVHLW6RPHFDUGVDUHGHVLJQHGRQO\WRZRUNZLWK530GLVWULEXWLRQVULJKWRIIWKHEDW $OWKRXJK\RXFDQWZHDNWKHGULYHUVWR\RXURZQGLVWULEXWLRQILQGLQJRXWDKHDGRIWLPHVDYHVORWVRI SRWHQWLDOKDVVOHVGRZQWKHURDG<RX¶OOEHWKDQNIXO\RXFKHFNHGDKHDGRIWLPH
5HSODFHPHQW&RQVLGHUDWLRQV
2QHWKLQJWRNHHSLQPLQGLVWKDWWKHFRVWRIWKHKDUGZDUHLVQHJRWLDEOHFRPSDUHGWRWKHGDWDNHSWZLWKLQ +DUGZDUHLVHDVLO\UHSODFHGDQGJHQHUDOO\FKHDSFRPSDUHGWRWKHWLPHLWWRRNWRFUHDWHWKDWGDWD,W¶VYLWDO WKDW\RXNHHSJRRGEDFNXSV:LWKDSDUDOOHORUGLVWULEXWHGFOXVWHUWKHUHOHYDQWGDWDUHVLGHVPDLQO\RQWKH PDVWHUQRGHV7KLVPDNHVLWHDV\WRUHSODFHQRGHVWKDWKDYHIDLOHG:LWKWRGD\¶VFKHDSFRPPRGLW\
FRPSXWHUVLWPLJKWEHHDVLHUWRUHSODFHWKHHQWLUHQRGHLQWKHFOXVWHUWKDQWDNHWKHWLPHQHHGHGWRZRUNRQ WKHXQLW7KLVPDNHVVHQVHZLWKGLVNOHVVFOXVWHUVDVWKHRQO\SDUWVLQYROYHGW\SLFDOO\DUHWKHPRWKHUERDUG &385$0DQGQHWZRUNLQWHUIDFH
$YRLGWKH6LQJOH3RLQWRI)DLOXUH
:KHQGHVLJQLQJ+$RUORDGEDODQFHGQHWZRUNVNHHSLQPLQGZKHUHWKHVLQJOHSRLQWVRIIDLOXUH632) W\SLFDOO\OLH2IWHQWKHLWHPVWKDWKDYHWKHPRVWPRYLQJSDUWVDUHDIIHFWHGWKHPRVWEXWWKHVHLQFLGHQWVRI IDLOXUHFDQEHUHGXFHG+DUGGULYHVFDQEHKRRNHGWRJHWKHULQD5$,'W\SHFRQILJXUDWLRQWROHVVHQWKH FKDQFHRIDVLQJOHGLVNEULQJLQJGRZQWKHHQWLUHPDFKLQH'XDOQHWZRUNFDUGVDWWDFKHGWRWKHVDPHQHWZRUN RIIHUDJRRGOHYHORIUHGXQGDQF\VKRXOGDFDUGIDLO$EHWWHUVROXWLRQLVWRDWWDFKHDFKQHWZRUNLQWHUIDFHFDUG 1,&WRDGLIIHUHQWVZLWFKWKHQWRDGLIIHUHQWQHWZRUNDQGWKHQXOWLPDWHO\WRDGLIIHUHQW,635HPHPEHU WKDWRQO\RQHPHWKRGRIFDOOLQJWKHDGPLQLVWUDWRURQGXW\UHVXOWVLQDQ632)DWWLPHVFHOOXODUVHUYLFHLV VSRWW\7KHDGPLQQHHGVWRFDUU\DSDJHUDVZHOO
3ODQIRU$GPLQLVWUDWLYH2YHUKHDG
2QHRIWKHPRVWRYHUORRNHGDVSHFWVRIDQ\EXGJHWLVDGPLQLVWUDWLRQ6XUHKDUGZDUHLVLQFOXGHGSHUKDSV PDLQWHQDQFHEXWZKDWDERXWWKH/LQX[DGPLQLVWUDWRUWRKDQGOHWKHFOXVWHULWVHOI"<HV\RXPLJKWEHWKH SHUVRQWRVHWXSWKHV\VWHPEXWDUH\RXDYDLODEOHWRPDLQWDLQDQGPRQLWRULWFRQVWDQWO\"'R\RXKDYHWKH SURSHUWUDLQLQJWRVHWXSWKLVQHWZRUN",IQRWWKHEXGJHWPLJKWEHDPHQGHGWRLQFOXGHIRUWUDLQLQJRUWLPHVHW DVLGHWRVWXG\WKHDSSOLFDWLRQVLQFOXGHGZLWKLQWKHFOXVWHU<RXDOVRPLJKWLQFOXGHRYHUWLPHSD\EXGJHWIRU FRQVXOWDQWVWUDLQLQJQHZHPSOR\HHVDQGEXGJHWIRUHPSOR\HHWXUQRYHU
6HOHFWWKH5LJKW'LVWULEXWLRQ
:KHQH[SHULHQFHGXVHUVWDONDERXW/LQX[WKH\¶UHWDONLQJDERXWWKHNHUQHOLWVHOI7KHUHVWRIWKHRSHUDWLQJ V\VWHPKDSSHQVWREHRSWLRQDOGHSHQGLQJRQWKHGLVWULEXWLRQ7KLVOHDYHVHDFKLQGLYLGXDORUFRPSDQ\WRDGG ZKDWHYHUVRIWZDUHWKH\VHHILW,ISDUWVRIWKHVRIWZDUHGRQ¶WILW\RXUQHHGVIHHOIUHHWRHLWKHUDGG\RXURZQ WDNHDZD\WKHWKLQJVWKDWGRQ¶WILWRUPRGLI\WKHNHUQHOLQVXFKDZD\WKDWWKDWLWILWV\RXUQHHGV$VRIWKLV ZULWLQJ/LQX[LVQ¶WDWYHUVLRQDQGZRQ¶WEHIRUVRPHWLPH7KDW¶VDFRPPRQPLVFRQFHSWLRQWKDWSHRSOH ZKRDUHXQIDPLOLDUZLWK/LQX[WHQGWRKDYH
:LOOWKH\EHDEOHWRKDQGOHDQ\GLVWULEXWLRQWKDW\RXWKURZDWWKHPRUZLOOWKH\KDYHWRKDYHDQLQVWDOODWLRQ WKDWJXLGHVWKHPWKURXJKWKHSURFHVV"
7KHUHDUHPRUH/LQX[GLVWULEXWLRQVQRZWKDW\RXFDQVKDNHDVWLFNDWDQGPRUHDUHJURZLQJGDLO\7KHUHDUH GLVWULEXWLRQVIRUDOPRVWHYHU\SXUSRVHLPDJLQDEOH²IURPHPEHGGHGGHYLFHVVHFXULW\IRFXVHGGLVWULEXWLRQV GLVWULEXWLRQVWKDWVWDUWIURPZLWKLQ:LQGRZVWRHYHQGLVWULEXWLRQVWKDWUXQRQJDPHFRQVROHV6RPH
GLVWULEXWLRQVFDWHUWRQHZ/LQX[XVHUVPRUHWKDQRWKHUGLVWULEXWLRQV0RVWGLVWULEXWLRQVOHW\RXFRQILJXUH PRVWRIWKHRSHUDWLQJV\VWHPLQWKHLQVWDOODWLRQGLDORJXHVKRZHYHUWKHUHDUHFHUWDLQGLVWULEXWLRQVZKRVH LQVWDOOHUVDUHPRUHDGYDQFHGWKDQRWKHUV)RUH[DPSOH0DQGUDNH/LQX[DSSHDUVWRKDYHDIXOOIHDWXUHG JUDSKLFDOLQVWDOOWKDWDGMXVWVWRWKHFRUUHFWYLGHRUHVROXWLRQZKHUHDV'HELDQOHDYHVPRUHRIWKH
FRQILJXUDWLRQWRWKHPRUHH[SHULHQFHGXVHULQWKH;)FRQILJILOH 'LIIHUHQFHVLQ'LVWULEXWLRQV
7KHILUVWWKLQJWRNHHSLQPLQGLVWKHOD\RXWRIWKHV\VWHPILOHV5HPHPEHUWKHUH¶VQRWKLQJWKDWVD\VDQ\ /LQX[GLVWULEXWLRQKDVWRKDYHWKLQJVLQFRPPRQZLWKDQ\RWKHU7KLVOHDGVWRIUDJPHQWDWLRQDQGODFNRI VWDQGDUGVZLWKLQWKH/LQX[FRPPXQLW\'LVWULEXWLRQVVXFKDV5HG+DWWHQGWRSODFHWKHLUV\VWHPILOHVLQ QRQWUDGLWLRQDOSODFHV2IFRXUVHLWZRUNVIRUWKHPEXWWKHVHGLVFUHSDQFLHVPXVWEHNHSWLQPLQGZKHQ PRYLQJIURPRQHLQVWDOOWRWKHRWKHU
'LIIHUHQWGLVWULEXWLRQVVXSSRUWWKHLURZQLPSOHPHQWDWLRQRILQLWVFULSWV5HG+DWDQGVLPLODUGLVWULEXWLRQV WHQGWREHPRUH6\V9FRPSOLDQWZKLOHLPDJHVOLNH6ODFNZDUHKDYHQRGLVWLQFWGLUHFWRULHVIRUWKHLUUXQ OHYHOV:KLFKYHUVLRQ\RXFKRRVHLVDSHUVRQDOSUHIHUHQFHEXWNHHSLQPLQGWKDWZKDWZRUNVRQRQHV\VWHP PLJKWQRWZRUNRQDOO/LQX[LPSOHPHQWDWLRQV)RUH[DPSOH6ODFNZDUHVWDUWV1)6LQWKHUFLQHWILOH ZKLFKLQLWLDOL]HVDWERRWWLPH5HG+DWDQGOLNHGLVWULEXWLRQVVWDUWWKRVHVHUYLFHVLQGLYLGXDOO\
LQHWFUFGLQLWG
'LVWULEXWLRQVWR$YRLG
:KHQEXLOGLQJDFOXVWHUDYRLGGLVWULEXWLRQVWKDWGRQ¶WUXQQDWLYHO\ZLWKH[WRUDMRXUQDOLQJILOHV\VWHPVXFK DVH[W6RPHGLVWULEXWLRQVFDQUXQXQGHU'26)$7RUHYHQXVH17)6ILOHV\VWHPV7KHVH/LQX[LQVWDOOV PLPLFWKHQDWLYHH[WILOHVWUXFWXUHDOWKRXJKWKHXQGHUO\LQJILOHVWUXFWXUHLVVWLOO'26RU)$77KLVFUHDWHV DQDEVWUDFWLRQOD\HUEHWZHHQWKH/LQX[ILOHV\VWHPDQGQDWLYHIRUPDWWHGILOHV\VWHPWKDWUHVXOWVLQDODFNRI SHUIRUPDQFH)RURSWLPDOSHUIRUPDQFHVWLFNZLWKDV\VWHPWKDWVWD\VDZD\IURPWKHVHDEVWUDFWLRQOD\HUV &RPPRQVHQVHDOVRZDUQVDJDLQVWXVLQJDQ\/LQX[GLVWULEXWLRQZLWK³3KDW´LQWKHQDPHIRUSURGXFWLRQXVH 806'26DQGORRSEDFNILOHV\VWHPVUXQLQPRVWO\WKHVDPHPDQQHU(VVHQWLDOO\/LQX[FUHDWHVDILOHV\VWHP LQDQLQGLYLGXDOILOHWKDWFDQEHDFFHVVHGE\WKHORFDOKDUGGULYH$OWKRXJKWKHVHGLVWULEXWLRQVDUHILQHIRUD SHUVRQVWDUWLQJRXWZLWK/LQX[WKH\¶UHQRWUHFRPPHQGHGIRUSURGXFWLRQXVHWKRXJKWKH\FRXOGEHXVHGLQD WHVWHQYLURQPHQWRUDQHQFU\SWHGORRSEDFNILOH,I\RXUFRPSDQ\LVVKRUWRQODEHTXLSPHQWDJRRGVROXWLRQ LV90ZDUHZZZYPZDUHFRPZKLFKDOORZVIRUPXOWLSOHYLUWXDO/LQX[LQVWDOOVRQDVLQJOHER[
3ODQQLQJWKH(QYLURQPHQW
$IWHU\RXGHFLGHRQWKHGLVWULEXWLRQDQGW\SHRIFOXVWHU\RX¶UHJRLQJWRLPSOHPHQWWKHQH[WVWHSLVWRSODQ WKHVXUURXQGLQJHQYLURQPHQWWRKRXVHWKHFOXVWHU,IWKHFOXVWHU\RX¶UHLPSOHPHQWLQJFRQWDLQVDQH[FHVVLYH DPRXQWRIFRPSRQHQWV\RXQHHGWRWKLQNDERXWDGGLWLRQDOSRZHUFRROLQJDQG836UHTXLUHPHQWVWR PDLQWDLQWKHP,QDGGLWLRQVSHFLDOW\SHVRIFOXVWHUVQHHGHQKDQFHGVHFXULW\UHTXLUHPHQWV,I\RX¶UHMXVW SXWWLQJXSDVPDOOORDGEDODQFHGVROXWLRQFKDQFHVDUH\RX¶UHQRWJRLQJWRQHHGH[WUDSRZHUUHTXLUHPHQWV,I \RXDOUHDG\KDYHDGDWDFHQWHURU1HWZRUN2SHUDWLRQV&HQWHU12&FKDQFHVDUHWKDW\RX¶YHDOUHDG\JRWWKH LQIUDVWUXFWXUHLQSODFHWRVXSSRUWDIHZH[WUDFRPSXWHUV2IFRXUVHODUJHSDUDOOHOFOXVWHUVRIDIHZWKRXVDQG QRGHVDUHJRLQJWRQHHGVSHFLDOGHVLJQDQGFRQVLGHUDWLRQ
&RQVLGHU3RZHUDQG&RROLQJ5HTXLUHPHQWV
3ODQQLQJWKHSRZHUUHTXLUHPHQWVRIDODUJHFOXVWHUUHTXLUHVIRUHWKRXJKWDQGFDUHIXOOD\RXW$IWHUWKH
VHUYHUV<RXUH[LVWLQJ12&PLJKWKDYHWKHVHFRPSRQHQWVDFFRXQWHGIRUEXWLI\RX¶UHDKRPHXVHURU EXLOGLQJDQ12&IURPWKHJURXQGXS\RX¶UHJRLQJWRKDYHWRSURYLGHIRUWKHSRZHUVRPHKRZ
:KHQSODQQLQJIRUWKHLQIUDVWUXFWXUHWRKRXVH\RXUFOXVWHUUHPHPEHUWKDWWKHUHLVQRPDJLFVROXWLRQ0DQ\ IDFWRUVSOD\DSDUWLQWKHGHVLJQVXFKDVWKHDPRXQWRIVSDFH\RXKDYHWRZRUNZLWKWKHRXWVLGHDYHUDJH WHPSHUDWXUHDQGWKHDPELHQWURRPWHPSHUDWXUH,IWKHIORRURQZKLFKWKHFOXVWHUVLWVLVUDLVHGWKHFRROLQJ UHTXLUHPHQWVZLOOREYLRXVO\EHGLIIHUHQW
(OHFWULFLW\5HTXLUHPHQWV
$VPDOOFOXVWHUVHWXSFDQJHQHUDOO\JHWDZD\ZLWKEHLQJSODFHGRQDDPSFLUFXLW,IWKHJRDOLVKLJK DYDLODELOLW\\RXZRXOGLGHDOO\SODFHHDFKVHUYHURQLWVRZQFLUFXLWDWWDFKHGWRLWVRZQ836$KRPHEXLOW FOXVWHUFDQILWQLFHO\SOXJJHGLQWRQRUPDORXWOHWVUDWHGIRUWKHLUUHJLRQ([FHVVLYHFRROLQJLVQ¶WUHTXLUHG DOWKRXJKUHPHPEHUWKDWDQ\QHWZRUNHTXLSPHQWWHQGVWREHPRUHVHQVLWLYHWRWHPSHUDWXUHFKDQJHVWKDQ\RXU VHUYHUV5HPHPEHUWRH[HUFLVHFDXWLRQ\RX¶OOQRWLFHDQ\RYHUGUDZLQSRZHULIWKHOLJKWVRUPRQLWRUVVWDUW GLPPLQJDQG\RXUHTXLSPHQWVWDUWVVPRNLQJ
2QWKHRWKHUKDQGSODQQLQJIRUDODUJHFOXVWHURISRZHUIXOVHUYHUVUHTXLUHVVSDFHLQDGDWDFHQWHURUUHVHUYHG URRP,I\RXKDYHQ¶WGHFLGHGWRFRORFDWH\RXUHTXLSPHQW\RXQHHGWRHLWKHUDGGRQWR\RXUH[LVWLQJ12&RU EXLOGRQHIURPVFUDWFK7KHILUVWVWHSLQGHWHUPLQLQJWKHSRZHUUHTXLUHPHQWVLVWRFDWDORJDOOWKHGHYLFHVDQG DGGXSWKHLUSRZHUUHTXLUHPHQWV:KHQFDOFXODWLQJIRU\RXUUHTXLUHPHQWVUHPHPEHUWRFDOFXODWHZLWKWKH WRWDOSRZHUGUDZSRVVLEOHUDWKHUWKDQWKHDYHUDJH<RXUVHUYHUVKRXOGKDYHWKHWRWDORXWSXWODEHOHGRQWKH SRZHUVXSSO\LWVHOIRUVXSSOLHGLQWKHGRFXPHQWDWLRQ,I\RX¶UHQRWVXUHFDOOWKHPDQXIDFWXUHU
'XULQJWKHLQYHQWRU\GRQ¶WIRUJHWWRLQFOXGHDQ\WKLQJWKDWPLJKWKDYHDSRZHUGUDZRUWKDWFRXOGJHQHUDWH KHDW7KLVPLJKWLQFOXGHVSHFLDOFDUGVLQVLGHWKHVHUYHUWKHPRQLWRUVSRZHUHGUDFNVWKHPVHOYHVWKHOLJKWV WDSHGULYHVDQGHYHQWKHSRZHUVWULSVWKHPVHOYHV.HHSLQPLQGH[WUDFDUGVDQGSHULSKHUDOVWKDW\RX¶YH DGGHGWRWKHV\VWHPWKDWPLJKWFDXVHDQH[WUDSRZHUGUDZVXFKDVWDSHGULYHV,IWKHFOXVWHULQTXHVWLRQLVD ODUJHSDUDOOHOFOXVWHUWKLVLVPDGHHDVLHUE\VLPSO\DGGLQJXSWKHSRZHULQDUDFNDQGPXOWLSO\LQJE\WKH QXPEHURIUDFNV
$FOXVWHUQHHGVSURSHURUDGHTXDWHSRZHUUHTXLUHPHQWVDQGFLUFXLWEUHDNHUV$OORXWOHWVQHHGWRKDYHWKUHH ZLUHJURXQGHGSOXJVIRULW¶VRQO\DPDWWHURIWLPHEHIRUH\RXVWDUWSXWWLQJLQSRZHUVWULSVDQGH[WHQGLQJWKH SRZHUGUDZRQWKHH[LVWLQJLQIUDVWUXFWXUH)RUWKLVUHDVRQ\RXQHHGWRHVWLPDWHIRUIXWXUHJURZWKDQGWKH FRVWRIUHSODFHPHQWDIWHUWKHOLIHWLPHRI\RXUHTXLSPHQW:KDWVHHPVDSSURSULDWHWRGD\ZLOOSUREDEO\EH RXWJURZQVRRQHUWKDQODWHU
3URYLVLRQLQJIRU&RROLQJ
$IWHU\RXJHQHUDWHDOONLQGVRIKHDWZLWKWKHHOHFWULFLW\\RX¶UHFRQVXPLQJ\RXPXVWGHFLGHKRZWRJHWULGRI LW7KDQNIXOO\\RX¶YHFRQVLGHUHGWKHUHTXLUHPHQWVDQG\RX¶YHFRPHXSZLWKSURSHUDLUFRQGLWLRQLQJWR DOOHYLDWHWKHKHDWHGDLU%HIRUHSUHSDULQJ\RXUGDWDFHQWHUDUFKLWHFWXUHKHUH¶VVRPHKDQG\WHUPVWKDW\RX¶OO ZDQWWRDUP\RXUVHOIZLWK
z +9$&² +HDWLQJ9HQWLODWLRQDQG$LU&RQGLWLRQLQJ
z %78² %ULWLVK7KHUPDO8QLW$VWDQGDUGRIPHDVXULQJKRZPXFKKHDWLWWDNHVWRUDLVHRUORZHURQH
SRXQGRIZDWHUE\RQHGHJUHH)DKUHQKHLW+HDWJHQHUDWHGLQ%78VHTXDOVWKHWRWDOSRZHULQZDWWV PXOWLSOLHGE\
z 7RQ² %78VSHUKRXURUZDWWV7RQUHIHUVWRDQROGLFHFRROLQJWHUPEDFNZKHQLFH
ZDVXVHGIRUDLUFRQGLWLRQLQJ
$RQHWRQDLUFRQGLWLRQLQJXQLWFDQUHPRYH%78VRIKHDWLQKRXUVZKLOHDWZRWRQDLU FRQGLWLRQHUFDQUHPRYHWZLFHWKLVDPRXQW7RNHHSWKLVLQSHUVSHFWLYHDW\SLFDOVTXDUHIRRWKRXVH ZLOOUHTXLUHDIRXUWRQDLUFRQGLWLRQHU:KHQSODQQLQJIRUDQ+9$&V\VWHPPDNHVXUHWKDWWKHDLULV
RQWKHOD\RXWRIWKHLWHPVLQWKHURRPWKHH[WHUQDOHQYLURQPHQWDQGWKHH[WUDQHRXVVSDFH
$URXJKJXLGHOLQHWRSODQIRUWKHDLUFRQGLWLRQLQJUHTXLUHGLVWRWDNHWKHWRWDOSRZHULQZDWWVDQGPXOWLSO\ WKDWE\$GDWDFHQWHUWKDWSXWVRXWZDWWVZRXOGWKHQSXWRXW%78VSHUKRXUWKDWKDYHWR EHGLVVLSDWHG
&RROLQJWKHFOXVWHUIURPDUDLVHGIORRUFDQEHDFKLHYHGPRUHHIIHFWLYHO\WKDQE\XVLQJDPELHQWURRPDLU FRQGLWLRQHUV7KHKROHVLQWKHIORRUFDQPRYHDLUGLUHFWO\LQWRWKHUDFNVHQDEOLQJWKHDLUWRFLUFXODWHZLWKLQ WKHUDFNVWKHPVHOYHV&RROLQJWKHVHUYHUVLQWKLVZD\LVPRUHHIIHFWLYHWKDQWU\LQJWRFRROWKHVHUYHUVE\ ORZHULQJWKHURRPWHPSHUDWXUH$UDLVHGIORRULQDGDWDFHQWHURIIHUVWKHDELOLW\WRUXQFDEOHVDQGSLSLQJ XQGHUQHDWKWKHVHUYHUUDFNV1RWRQO\GRHVWKLVDOORZIRUJUHDWHUVDIHW\LWNHHSVXQVLJKWO\FDEOHVDQGSLSLQJ RXWRIWKHZD\.HHSLQPLQGWKDWQRUPDOIORRUVFDQ¶WKDQGOHWKHVWUHVVWKDWDODUJHFOXVWHUSODFHVRQLW 6SDFH7KH)LQDO)URQWLHU
:KHQSODQQLQJIRUWKHOD\RXWRI\RXUHTXLSPHQWNHHSLQPLQGWKDW\RX¶OODFWXDOO\KDYHWRUHDFKWKHEDFNRI \RXUVHUYHUVRQFHLQDZKLOH3XWWLQJ\RXUVHUYHUVDJDLQVWWKHEDFNZDOODVVXUHVWKDW\RX¶OOKDYHWRJHWDW WKRVHPRUHRIWHQWKDQQRW7KHUH¶VQRWKLQJOLNHWZLVWLQJ\RXUERG\DURXQGLQSRVLWLRQVWKDWDUHQ¶WKXPDQO\ SRVVLEOH7KHQDJDLQLI\RX¶UHLQWR\RJDPLVSODFHPHQWRIVHUYHUVPLJKWEHDEOHVVLQJ)RUWKHUHVWRIXV VDQHSODFHPHQWRIWKHHTXLSPHQWLVDPXVW
$GHTXDWHVSDFHLVQHHGHGIRUDLUWRFLUFXODWHWKURXJKWKHUDFNV$EDVLFUXOHRIWKXPE.HHSWKHVHUYHUVDW OHDVWLQFKHVIURPWKHVLGHVRIWKHFDELQHWV7KLVDOORZVIRUSURSHUDLUIORZDQGFRROLQJRIWKH
HTXLSPHQW
5DFNVIRU6HUYHUVDQG'HVNWRSV
7KHGHVLJQRIWKHVHUYHUVWRUDJHZLOOPRVWOLNHO\GHSHQGRQWKHFKRLFHRIVHUYHUVWKHPVHOYHV,I\RX¶UHDEOH WREXLOG\RXUSDUDOOHOFOXVWHUIURPVFUDWFKFRQVLGHUVSHQGLQJDOLWWOHH[WUDPRQH\RQ8VHUYHUV7KHVSDFH VDYHGZLWKDUDFNHGV\VWHPVXFKDVWKLVZLOOUHVXOWLQORZHUFRROLQJFRVWVDQGKLJKHUFRROLQJHIILFLHQF\7KH UDFNZLOODOVRSURYLGHKRXVLQJIRUNH\ERDUGYLGHRPRXVH.90VZLWFKHVQHWZRUNJHDUDQGWKH836 5DFNVFDQHDVLO\EHIRXQGLQFRQILJXUDWLRQVRIRYHU´±´KRXVLQJRYHUVHUYHUVLQHDFKUDFN
,I\RX¶UHQRWFRQVLGHULQJVHUYHUUDFNVIRU\RXUFOXVWHU\RXUORFDOKRPHLPSURYHPHQWVWRUHVKRXOGVHOOWRRO UDFNVWKDWIXQFWLRQILQHIRUWKHSODFHPHQWRIGHVNWRSRUWRZHUVHUYHUV%HVXUHWKDWLI\RXXVHWKLVW\SHRI VWRUDJHVROXWLRQWKDWWKHUDFNOHQGVLWVHOIZHOOWRFRROLQJDQGKDVSOHQW\RIDLUIORZDURXQGWKHV\VWHP <RXFDQILQGVSHFLDOL]HGFRPSXWHUFRPSDQLHVWKDWILWPXOWLSOHVHUYHUVLQDVPDOODPRXQWRIVSDFH)RU H[DPSOHH$SSOLDQFH&RUSRUDWLRQVHOOVD8VHUYHUZLWKIRXUKRWVZDSSDEOHVHUYHUVHDFKZLWKWKUHHIDVW HWKHUQHWMDFNVIRUUHGXQGDQF\<RXFDQILQGWKHPDWZZZHDSSOLDQFHFRUSFRP5/;7HFKQRORJLHVKDVD GHYLFHZLWKVHUYHUVRQEODGHVZKLFKILWVQLFHO\LQDVWDQGDUG´8FDELQHWZZZUO[WHFKQRORJLHVFRP 6ZLWFKHVDQG&RQQHFWLYLW\
:LWKWKHVSHHGVRIWRGD\¶VFRPSXWHUVWKHELJJHVWERWWOHQHFNLVWKHQHWZRUN<RXFDQDOOHYLDWHVRPHRI\RXU EDQGZLGWKSUREOHPVZLWKDVLPSOHIDVWHWKHUQHWVROXWLRQ)DVWHWKHUQHWWRGD\LVDFFHSWDEOHIRUPRVW
LPSOHPHQWDWLRQVEXWIRUWKHFOXVWHUWKDWQHHGVWKHPRVWRXWRILWVSHUIRUPDQFHJLJDELWHWKHUQHWLVEHFRPLQJ WKHVWDQGDUG
:KHQFKRRVLQJFRQQHFWLYLW\IRU\RXUSURIHVVLRQDOFOXVWHUVROXWLRQWU\QRWWRVNLPSRQDQ\RIWKHQHWZRUN FRPSRQHQWV7KHFOXVWHULVHVVHQWLDOO\DFRPPXQLFDWLRQPHGLXPEHWZHHQQRGHV:KHQ\RXGURSWKH PHGLXP\RXGRQ¶WKDYHDFOXVWHU
JUHDWHUJUDQXODULW\DWWKHSRUWOHYHO6RPHDOORZIRUWKHLPSOHPHQWDWLRQRIYLUWXDOQHWZRUNV
$VHFRQGLQWHUIDFHLVDJRRGLGHDZKHQLPSOHPHQWLQJKHDUWEHDWFRQQHFWLYLW\EHWZHHQWZRPDFKLQHV7KHVH FDQEHRIDQ\VWDQGDUGKRZHYHUFRQVLGHUXVLQJFURVVRYHUFDEOHVUDWKHUWKDQKRRNLQJWKHLQWHUIDFHVXSWRWKH QHWZRUN,QWKLVFDVHWKHQHWZRUNMXVWDGGVDQRWKHUSRLQWRIIDLOXUHLQFDVHVRPHWKLQJJRHVZURQJ
5HJXODUEWHWKHUQHWFDUGVZLOOEHPRUHWKDQILQHIRUDQ\KRPHQHWZRUNVROXWLRQWKDW¶VGHSHQGHQWRQDQ ,637KHVSHHGRIWKHFDEOHRU'6/OLQNZLOOQRWEHDEOHWRVDWXUDWHWKHHWKHUQHWFDUGDQGUHVSRQVHWLPHVDUH QRWDVFULWLFDOIURPLQWHUQDOVHUYHUV%HFDXVHSHRSOHDUHSUDFWLFDOO\JLYLQJWKHLUEWFDUGVDZD\LQIDYRURI IDVWHWKHUQHWDQ\UHDOKRPHVROXWLRQXVLQJ/LQX[FDQHDVLO\EHLPSOHPHQWHGRQWKHIO\,I\RX¶UH
FRQWHPSODWLQJDSDUDOOHOFOXVWHU\RXFDQXVHWKHOHIWRYHUEWFDUGVEXW\RX¶OOQRWLFHDODUJHSHUIRUPDQFH KLW
'RQDOG%HFNHU&72DQGIRXQGHURI6F\OG&RPSXWLQJ&RUSRUDWLRQZURWHDJUHDWGHDORIWKHHWKHUQHW GULYHUVIRU/LQX[<RXFDQILQGGULYHUVIRUPRVWVXSSRUWHGFDUGVDWZZZVF\OGFRPQHWZRUN
$)HZ:RUGV$ERXW6HFXULW\
:HZRXOGEHGRLQJDJUHDWGLVVHUYLFHWRWKHFRPSXWLQJFRPPXQLW\DVDZKROHLIZHGLGQ¶WVKDUHDIHZ ZRUGVDERXWVHFXULW\$OPRVWHYHU\GD\DQHZH[SORLWLVIRXQGDQHZYLUXVKLWVWKHQHWRUDGHQLDORI VHUYLFHDWWDFNLVODXQFKHG7KHPDMRULW\RIWKHVHDWWDFNVFRVWFRPSDQLHVWKRXVDQGVRIGROODUVLQORVW PDQSRZHUUHFRYHULQJIURPGRZQHGRUGHIDFHGVHUYHUV
:KHUHGRWKHVHDWWDFNVFRPHIURP"$JUHDWPDMRULW\RIWKHDWWDFNVFRPHZLWKLQWKHFRPSDQ\LWVHOI$ GLVJUXQWOHGHPSOR\HHLQDORZVHFXULW\HQYLURQPHQWFDQGHVWUR\\HDUVRIZRUNLQDPDWWHURIPLQXWHV &UDFNHUVDQGWKLHYHVDUHRSSRUWXQLVWV%\PLQLPL]LQJWKHRSSRUWXQLWLHVWKDWH[LVW\RXPLQLPL]HWKH FKDQFHWKDW\RXUFOXVWHUZLOOEHFRPSURPLVHG
0DQ\ERRNVKDYHEHHQZULWWHQRQWKHFRQFHSWRIVHFXULW\DQGLW¶VDIXOOWLPHMREIRUPDQ\DGPLQLVWUDWRUV$ IXOOH[DPLQDWLRQRIVHFXULW\LVEH\RQGWKHVFRSHRIWKLVERRNVRZHFDQQRWKRSHWRHQJDJHDIXOOGLVFXVVLRQ DOWKRXJKZHFDQJRRYHUVRPHLPSRUWDQWVHFXULW\KLJKOLJKWV
6HFXULW\LQ/D\HUV
6HFXULW\DWWKHV\VWHPOHYHOLVRQO\RQHSDUWRIWKHHTXDWLRQ-XVWOLNHWKH26,QHWZRUNLQJPRGHOWKHVHFXULW\ PRGHOHQFRPSDVVHVWKHHQWLUHRUJDQL]DWLRQ7RIXOO\VHFXUH\RXUHQYLURQPHQW\RXQHHGWRUHVWULFWDFFHVVWR WKHVHUYHURQWKH1HWZRUN/D\HUWKH26OHYHODWWKHSK\VLFDOPDFKLQHDQGWKHGDWDFHQWHUDUHD$IWHUD KDFNHUJHWVSK\VLFDODFFHVVWRWKHVHUYHUWKDW¶VLW*DPHRYHU
7KHUHOLHVDUDWLREHWZHHQXVDELOLW\DQGVHFXULW\7KHUHLVQRZD\WRPDNH\RXUV\VWHPWRWDOO\VHFXUH KRZHYHU\RXFDQWDNHVWHSVWRUHGXFHWKHFKDQFHRIDFRPSURPLVH7DNHDSURDFWLYHDSSURDFKLQVHFXULW\ SUHYHQWLRQ6XEVFULEHWRVHFXULW\QHZVOHWWHUVDQGQHZVJURXSV+DYHDZHOOGHILQHGVHFXULW\SROLF\DW\RXU VLWH+DFNLQJDWWKH26OHYHOLVRQO\RQHZD\WRJHWLQ$VRWKHUVPLJKWWHOO\RXVRFLDOHQJLQHHULQJ
EDVLFDOO\WKHDUWRIJHWWLQJSHRSOHWRWHOO\RXSDVVZRUGRUVHFXULW\LQIRUPDWLRQLVHDV\WRSXOORIILI\RX¶UH NQRZOHGJHDEOHHQRXJK7DNHWKHWLPHWRHGXFDWH\RXUXVHUVWHOOWKHPZKRKDVDFFHVVWRZKDWDUHDVDQG ZKLFKSDVVZRUGV(QFRXUDJH\RXUXVHUVWRXVHSDVVZRUGVWKDWDUHKDUGWRJXHVV%DVLFDOO\WKHPRUHSDUWVRI WKHNH\ERDUGWKDW\RXFDQXVHWKHKDUGHULWZLOOEHWRJXHVVDQGRUFUDFNWKHSDVVZRUG<RXPLJKWVXJJHVW DFURQ\PVIRUSKUDVHVUDWKHUWKDQZRUGVRUGDWHV
,W¶VSRVVLEOHWRKDYHWRRPDQ\VHFXULW\PHDVXUHVLQSODFH<RXZDQWWRPDNHVXUHWRKDYHWKHPRVW
UHVWULFWLYHVHFXULW\SROLF\LQSODFHZLWKRXWUHVWULFWLQJDFFHVVWR\RXUQHHGHGVHUYLFHVDQGWKDW¶VDILQHOLQH,I HYHU\RQHLQ\RXUHQYLURQPHQWLVXVLQJIWSWRDFFHVVVHUYLFHVLPSOHPHQWLQJVHFXUHIWSDVDUHSODFHPHQWFDQ EHDQXSKLOOEDWWOH%HUHDG\WRVWULNHVRPHFRPSURPLVH7U\WRJHWXSSHUPDQDJHPHQWLQYROYHGLQWKH GHFLVLRQVDQGJHWWKHPWRVXSSRUWZKDWHYHUVHFXULW\SROLFLHV\RXKDYHLQSODFH2WKHUZLVHWKHEXFNZLOO VWRSZLWK\RX