Issuu on Google+

UNCTAD

TRADE TRADE ANDAND ENVIRONMENT ENVIRONMENT REVIEW REVIEW 20132013

KEY MESSAGES

TRADE AND ENVIRONMENT REVIEW 2013 UNITED NATIONS

• The 2008 food crisis was an important catalyst for realizing the need for a fundamental transformation and questioning some of the assumptions that had driven food, agricultural and trade policy in recent decades. However, actual results achieved since 2008 suggest that a paradigm shift has started, but is largely incomplete. Priority remains heavily focused on increasing industrial agricultural production, mostly under the slogan “growing more food at less cost to the environment”. The perception that there is a supply-side productivity problem is however questionable. Hunger and malnutrition are mainly related to lack of purchasing power and/or inability of rural poor to be self-sufficient. Meeting the food security challenges is thus primarily about empowerment of the poor and their food sovereignty. Furthermore, the current demand trends for biofuels, concentrate animal feed, excessively meat-based diets and post-harvest food waste are regarded as given, rather than challenging their rational. • The fundamental transformation of agriculture may well turn out to be one of the biggest challenges, including for international security, of the 21st century. Much slower agricultural productivity growth in the future, a quickly rising population in the most resource-constrained and climate-change-exposed regions (in particular in sub-Saharan Africa and South Asia) and a burgeoning environmental crises of agriculture are the seeds for mounting pressures on food security and the related access to land and water. This is bound to increase the frequency and severity of riots, caused by food-price hikes, with concomitant political instability, and international tension, linked to resource conflicts and migratory movements of staving populations. • The world needs a paradigm shift in agricultural development: from a “green revolution” to an “ecological intensification” approach. This implies a rapid and significant shift from conventional, monoculture-based and highexternal-input-dependent industrial production towards mosaics of sustainable, regenerative production systems that also considerably improve the productivity of small-scale farmers. We need to see a move from a linear to a holistic approach in agricultural management, which recognizes that a farmer is not only a producer of agricultural goods, but also a manager of an agro-ecological system that provides quite a number of public goods and services (e.g. water, soil, landscape, energy, biodiversity, and recreation). • The required transformation is much more profound than simply tweaking the existing industrial agricultural system. Rather, what is called for is a better understanding of the multi-functionality of agriculture, its pivotal importance for pro-poor rural development and the significant role it can play in dealing with resource scarcities and in mitigating and adapting to climate change. However, the sheer scale at which modified production methods would have to be adopted, the significant governance issues, the power asymmetries’ problems in food input and output markets as well as the current trade rules for agriculture pose considerable challenges. • Elements and key achievements of the required transformation of agriculture, elaborated upon by the authors of this Review, include: - Increasing soil carbon content and better integration between crop and livestock production, and increased incorporation (not segregation) of trees (agroforestry) and wild vegetation. - Reduction of direct and indirect (i.e. through the feed chain) greenhouse-gas emissions of livestock production. - Reduction of indirect (i.e. changes in land-use-induced) GHG emissions through sustainable peatland, forest and grassland management. - Optimization of organic and inorganic fertilizer use, including through closed nutrient cycles in agriculture. - Reduction of waste throughout the food chains. - Changing dietary patterns towards climate-friendly food consumption. - Reform of the international trade regime for food and agricultural products. • In pursuing a fundamental transformation of agriculture, one should take into account systemic considerations in particular (i) the need for a holistic understanding of the challenges involved due to inter-linkages between sometimes competing objectives; (ii) the merits and demerits of single climate-friendly practices versus those of systemic changes (such as agro-ecology, agro-forestry, organic agriculture); and (iii) the need for a two-track approach that drastically reduces the environmental impact of conventional agriculture, on the one hand, and broadens the scope for agro-ecological production methods, on the other.

U n i t e d N at i o n s C o n f e r e n c e o n T r a d e A n d D e v e l o p m e n t

MAKE AGRICULTURE MAKE AGRICULTURE TRULY SUSTAINABLE TRULY SUSTAINABLE NOW FOR NOW FOOD FORSECURITY FOOD SECURITY IN A CHANGING IN A CHANGING CLIMATE CLIMATE EMBARGO The contents of this Report must not be quoted or summarized in the print, broadcast or electronic media before 18 September 2013, 17:00 hours GMT


KEY MESSAGES tThe 2008 food crisis was an important catalyst for realizing the need for a fundamental transformation and questioning some of the assumptions that had driven food, agricultural and trade policy in recent decades.)PXFWFS BDUVBMSFTVMUT BDIJFWFETJODFTVHHFTUUIBUBQBSBEJHNTIJGUIBTTUBSUFE CVUJTMBSHFMZJODPNQMFUF1SJPSJUZSFNBJOTIFBWJMZGPDVTFEPO JODSFBTJOHJOEVTUSJBMBHSJDVMUVSBMQSPEVDUJPO NPTUMZVOEFSUIFTMPHBOiHSPXJOHNPSFGPPEBUMFTTDPTUUPUIFFOWJSPONFOUw 5IFQFSDFQUJPOUIBUUIFSFJTBTVQQMZTJEFQSPEVDUJWJUZQSPCMFNJTIPXFWFSRVFTUJPOBCMF)VOHFSBOENBMOVUSJUJPOBSFNBJOMZ SFMBUFEUPMBDLPGQVSDIBTJOHQPXFSBOEPSJOBCJMJUZPGSVSBMQPPSUPCFTFMGTVGýDJFOU.FFUJOHUIFGPPETFDVSJUZDIBMMFOHFT JTUIVTQSJNBSJMZBCPVUFNQPXFSNFOUPGUIFQPPSBOEUIFJSGPPETPWFSFJHOUZ'VSUIFSNPSF UIFDVSSFOUEFNBOEUSFOETGPS CJPGVFMT DPODFOUSBUFBOJNBMGFFE FYDFTTJWFMZNFBUCBTFEEJFUTBOEQPTUIBSWFTUGPPEXBTUFBSFSFHBSEFEBTHJWFO SBUIFS UIBODIBMMFOHJOHUIFJSSBUJPOBM tThe fundamental transformation of agriculture may well turn out to be one of the biggest challenges, including for international security, of the 21st century. .VDI TMPXFS BHSJDVMUVSBM QSPEVDUJWJUZ HSPXUI JO UIF GVUVSF  B RVJDLMZ SJTJOH QPQVMBUJPOJOUIFNPTUSFTPVSDFDPOTUSBJOFEBOEDMJNBUFDIBOHFFYQPTFESFHJPOT JOQBSUJDVMBSJOTVC4BIBSBO"GSJDBBOE 4PVUI"TJB BOEBCVSHFPOJOHFOWJSPONFOUBMDSJTFTPGBHSJDVMUVSFBSFUIFTFFETGPSNPVOUJOHQSFTTVSFTPOGPPETFDVSJUZ BOEUIFSFMBUFEBDDFTTUPMBOEBOEXBUFS5IJTJTCPVOEUPJODSFBTFUIFGSFRVFODZBOETFWFSJUZPGSJPUT DBVTFECZGPPEQSJDF IJLFT XJUIDPODPNJUBOUQPMJUJDBMJOTUBCJMJUZ BOEJOUFSOBUJPOBMUFOTJPO MJOLFEUPSFTPVSDFDPOþJDUTBOENJHSBUPSZNPWFNFOUT PGTUBWJOHQPQVMBUJPOT tThe world needs a paradigm shift in agricultural development: from a “green revolution” to an “ecological intensification” approach. 5IJT JNQMJFT B SBQJE BOE TJHOJýDBOU TIJGU GSPN DPOWFOUJPOBM  NPOPDVMUVSFCBTFE BOE IJHI FYUFSOBMJOQVUEFQFOEFOUJOEVTUSJBMQSPEVDUJPOUPXBSETNPTBJDTPGTVTUBJOBCMF SFHFOFSBUJWFQSPEVDUJPOTZTUFNTUIBUBMTP DPOTJEFSBCMZJNQSPWFUIFQSPEVDUJWJUZPGTNBMMTDBMFGBSNFST8FOFFEUPTFFBNPWFGSPNBMJOFBSUPBIPMJTUJDBQQSPBDIJO BHSJDVMUVSBMNBOBHFNFOU XIJDISFDPHOJ[FTUIBUBGBSNFSJTOPUPOMZBQSPEVDFSPGBHSJDVMUVSBMHPPET CVUBMTPBNBOBHFS PGBOBHSPFDPMPHJDBMTZTUFNUIBUQSPWJEFTRVJUFBOVNCFSPGQVCMJDHPPETBOETFSWJDFT FHXBUFS TPJM MBOETDBQF FOFSHZ  CJPEJWFSTJUZ BOESFDSFBUJPO  tThe required transformation is much more profound than simply tweaking the existing industrial agricultural system. 3BUIFS XIBUJTDBMMFEGPSJTBCFUUFSVOEFSTUBOEJOHPGUIFNVMUJGVODUJPOBMJUZPGBHSJDVMUVSF JUTQJWPUBMJNQPSUBODFGPSQSPQPPS SVSBMEFWFMPQNFOUBOEUIFTJHOJýDBOUSPMFJUDBOQMBZJOEFBMJOHXJUISFTPVSDFTDBSDJUJFTBOEJONJUJHBUJOHBOEBEBQUJOHUP DMJNBUFDIBOHF)PXFWFS UIFTIFFSTDBMFBUXIJDINPEJýFEQSPEVDUJPONFUIPETXPVMEIBWFUPCFBEPQUFE UIFTJHOJýDBOU HPWFSOBODFJTTVFT UIFQPXFSBTZNNFUSJFTQSPCMFNTJOGPPEJOQVUBOEPVUQVUNBSLFUTBTXFMMBTUIFDVSSFOUUSBEFSVMFTGPS BHSJDVMUVSFQPTFDPOTJEFSBCMFDIBMMFOHFT tElements and key achievements of the required transformation of agriculture, elaborated upon by the authors of this Review, include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tIn pursuing a fundamental transformation of agriculture, one should take into account systemic considerations JOQBSUJDVMBS J UIFOFFEGPSBIPMJTUJDVOEFSTUBOEJOHPGUIFDIBMMFOHFTJOWPMWFEEVFUPJOUFSMJOLBHFTCFUXFFOTPNFUJNFT DPNQFUJOHPCKFDUJWFT JJ UIFNFSJUTBOEEFNFSJUTPGTJOHMFDMJNBUFGSJFOEMZQSBDUJDFTWFSTVTUIPTFPGTZTUFNJDDIBOHFT TVDI BTBHSPFDPMPHZ BHSPGPSFTUSZ PSHBOJDBHSJDVMUVSF BOE JJJ UIFOFFEGPSBUXPUSBDLBQQSPBDIUIBUESBTUJDBMMZSFEVDFTUIF FOWJSPONFOUBMJNQBDUPGDPOWFOUJPOBMBHSJDVMUVSF POUIFPOFIBOE BOECSPBEFOTUIFTDPQFGPSBHSPFDPMPHJDBMQSPEVDUJPO NFUIPET POUIFPUIFS


LL

75$'($1'(19,5210(175(9,(:

1RWH

7KHYLHZVH[SUHVVHGLQWKHDUWLFOHVFRQWDLQHGLQWKLV5HYLHZDUHWKHSHUVRQDOYLHZVRIWKHDXWKRUVDQGGRQRW QHFHVVDULO\UHÁHFWWKHSRVLWLRQVRIWKHLUUHVSHFWLYHRUJDQL]DWLRQVRULQVWLWXWLRQV7KHUHIRUHWKHYLHZVH[SUHVVHG LQWKLV5HYLHZVKRXOGEHDWWULEXWHGWRWKHDXWKRUVDQGQRWWRDQ\LQVWLWXWLRQRUWR81&7$'RULWVPHPEHU6WDWHV $Q\UHIHUHQFHWRDFRPSDQ\DQGLWVDFWLYLWLHVVKRXOGQRWEHFRQVWUXHGDVDQHQGRUVHPHQWE\81&7$'RUE\WKH DXWKRUVRUWKHLULQVWLWXWLRQVRIWKHFRPSDQ\RULWVDFWLYLWLHV

0DWHULDOLQWKLVSXEOLFDWLRQPD\EHIUHHO\TXRWHGRUUHSULQWHGEXWDFNQRZOHGJHPHQWLVUHTXHVWHGWRJHWKHUZLWK DUHIHUHQFHWRWKHGRFXPHQWQXPEHU$FRS\RIWKHSXEOLFDWLRQFRQWDLQLQJWKHTXRWDWLRQRUUHSULQWVKRXOGEHVHQW WRWKH2IÀFHRIWKH'LUHFWRU'LYLVLRQRQ,QWHUQDWLRQDO7UDGHLQ*RRGVDQG6HUYLFHVDQG&RPPRGLWLHV3DODLVGHV 1DWLRQV*HQHYD6ZLW]HUODQG

)RUFRPPHQWVRQWKLVUHYLHZSOHDVHFRQWDFWWUDGHHQYLURQPHQW#XQFWDGRUJ7KLVUHYLHZLVDOVRDYDLODEOHDW KWWSXQFWDGRUJHQ3DJHV',7&7UDGHDQG(QYLURQPHQW5HYLHZ6HULHVDVS[

81&7$'',7&7(' 81,7('1$7,21638%/,&$7,21  ,661  &RS\ULJKW‹8QLWHG1DWLRQV $OOULJKWVUHVHUYHG


LLL

)RUHZRUG

)RUHZRUG

1RWORQJDIWHUWKHIRRGSULFHFULVLVKLJKDQGYRODWLOHIRRGSULFHVDUHEDFNLQWKHLQWHUQDWLRQDODJHQGD FUHDWLQJUHQHZHGFRQFHUQVIRUZRUOGIRRGVHFXULW\2QFHDJDLQGLVFXVVLRQVDUHPRVWO\IRFXVHGRQVXJJHVWLQJ TXLFNÀ[HVOLQNHGWRVRPHVSHFLÀFFRQWULEXWLQJIDFWRUVVXFKDVIRRGSULFHVSHFXODWLRQRUWKHLQFUHDVLQJXVH RIELRHQHUJ\,QVXIÀ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Á\DIIHFWHGE\JOREDOZDUPLQJEXWDOVRRQHRILWVGULYLQJIRUFHV 4XLFNÀ[HVZLOOQRWEHDEOHWRHIIHFWLYHO\GHDOZLWKWKHFRPSOH[LQWHUSOD\EHWZHHQHQHUJ\LQWHQVLW\JUHHQKRXVH JDVHPLVVLRQVJOREDOZDUPLQJDQGIRRGVHFXULW\QHHGV5DWKHUZKDWLVFDOOHGIRULVDEHWWHUXQGHUVWDQGLQJRI WKHPXOWLIXQFWLRQDOLW\RIDJULFXOWXUHLWVSLYRWDOLPSRUWDQFHIRUSURSRRUUXUDOGHYHORSPHQWDQGWKHVLJQLÀFDQWUROH LWFDQSOD\LQGHDOLQJZLWKUHVRXUFHVFDUFLWLHVDQGLQPLWLJDWLQJDQGDGDSWLQJWRFOLPDWHFKDQJH 'HVSLWHVLJQLÀFDQWLQFUHDVHVLQDJULFXOWXUDOSURGXFWLYLW\DQGWKHIDFWWKDWWKHZRUOGFXUUHQWO\DOUHDG\SURGXFHV VXIÀFLHQWFDORULHVSHUKHDGWRIHHGDJOREDOSRSXODWLRQRIELOOLRQKXQJHUKDVUHPDLQHGDNH\FKDOOHQJH $URXQGRQHELOOLRQSHRSOHFKURQLFDOO\VXIIHUIURPVWDUYDWLRQDQGDQRWKHUELOOLRQDUHPDOQRXULVKHG6RPHSHU FHQWRIWKHVHSHRSOHDUHWKHPVHOYHVVPDOOIDUPHUVRUDJULFXOWXUDOODERUHUV7KHUHIRUHKXQJHUDQGPDOQXWULWLRQ DUHQRWSKHQRPHQDRILQVXIÀFLHQWSK\VLFDOVXSSO\EXWUHVXOWVRISUHYDLOLQJSRYHUW\DQGDERYHDOOSUREOHPVRI DFFHVVWRIRRG(QDEOLQJWKHVHSHRSOHWREHFRPHIRRGVHOIVXIÀ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´PRUHZLWKOHVVµ 7KHFXUUHQWO\SXUVXHGDSSURDFKLVVWLOOYHU\PXFKELDVHGWRZDUGVH[SDQVLRQ RI ´VRPHZKDWOHVVSROOXWLQJµ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ÁLFWVDQGPLJUDWRU\PRYHPHQWVRIVWDUYLQJSRSXODWLRQV7KXVWKH IXQGDPHQWDOWUDQVIRUPDWLRQRIDJULFXOWXUHPD\ZHOOWXUQRXWWREHRQHRIWKHELJJHVWFKDOOHQJHVLQFOXGLQJIRU LQWHUQDWLRQDOVHFXULW\RIWKHVWFHQWXU\ ,QSDUDJUDSKRIWKH5LR'HFODUDWLRQDGRSWHGLQ-XQH+HDGVRI6WDWHUHDIÀUPWKHLU´FRPPLWPHQWV UHJDUGLQJWKHULJKWRIHYHU\RQHWRKDYHDFFHVVWRVDIHVXIÀFLHQWDQGQXWULWLRXVIRRGFRQVLVWHQWZLWKWKHULJKW WRDGHTXDWHIRRGDQGWKHIXQGDPHQWDOULJKWRIHYHU\RQHWREHIUHHIURPKXQJHU 7KH\ DFNQRZOHGJHWKDWIRRG


LY

75$'($1'(19,5210(175(9,(:

VHFXULW\DQGQXWULWLRQKDVEHFRPHDSUHVVLQJJOREDOFKDOOHQJHDQGLQWKLVUHJDUG WKH\ IXUWKHUUHDIÀUP WKHLU  FRPPLWPHQWWRHQKDQFLQJIRRGVHFXULW\DQGDFFHVVWRDGHTXDWHVDIHDQGQXWULWLRXVIRRGIRUSUHVHQWDQGIXWXUH JHQHUDWLRQVµ,WLVKLJKWLPHIRUWKHVHFRPPLWPHQWVWRFRPHWRUHDOLW\EHIRUHWKH0'*V·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

*HQHYD0DUFK

&DUORV3pUH]GHO&DVWLOOR &KDLUPDQ&RQVRUWLXP%RDUG *OREDO5HVHDUFK3DUWQHUVKLSIRU D)RRG6HFXUH)XWXUH &*,$5 


Y

&RQWHQWV

&RQWHQWV

)RUHZRUG&DUORV3p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OOHUDQG$*DWWLQJHU5HVHDUFK,QVWLWXWHRI2UJDQLF$JULFXOWXUH )L%/ 6ZLW]HUODQG &RPPHQWDU\,,,7KHSRWHQWLDORIVXVWDLQDEOHDJULFXOWXUHIRUFOLPDWHFKDQJHDGDSWDWLRQ  $0OOHUDQG81LJJOL5HVHDUFK,QVWLWXWHRI2UJDQLF$JULFXOWXUH )L%/ 6ZLW]HUODQG &RPPHQWDU\,9)RRGFOLPDWHFKDQJHDQGKHDOWK\VRLOV7KHIRUJRWWHQOLQN  *5$,1 &RPPHQWDU\90LWLJDWLQJFOLPDWHFKDQJHZLWKVRLORUJDQLFPDWWHULQRUJDQLFSURGXFWLRQV\VWHPV  $QGUH/HX3UHVLGHQW,QWHUQDWLRQDO)HGHUDWLRQRI2UJDQLF$JULFXOWXUDO0RYHPHQWV ,)2$0

&RPPHQWDU\9,$JURHFRORJ\$VROXWLRQWRWKHFULVHVRIIRRGV\VWHPVDQGFOLPDWHFKDQJH  2OLYLHUGH6FKXWWHU816SHFLDO5DSSRUWHXURQWKH5LJKWWR)RRG &RPPHQWDU\9,,3URPRWLQJUHVLOLHQWDJULFXOWXUHLQVXE6DKDUDQ$IULFDDVDPDMRUSULRULW\LQ FOLPDWHFKDQJHadaptation  0DUFXV.DSODQ&KLQZH,IHMLND6SHUDQ]DDQG,PPH6FKRO]*HUPDQ'HYHORSPHQW,QVWLWXWH &RPPHQWDU\9,,,<LHOGDQG\LHOGTXDOLW\RIPDMRUFHUHDOVXQGHUFOLPDWHFKDQJH  3HWUD+|J\DQG$QGUHDV)DQJPHLHU8QLYHUVLW\RI+RKHQKHLP,QVWLWXWHIRU/DQGVFDSHDQG3ODQW(FRORJ\ &RPPHQWDU\,;&RPSDUDWLYHDQDO\VLVRIRUJDQLFDQGQRQRUJDQLFIDUPLQJV\VWHPV DFULWLFDODVVHVVPHQWRIIDUPSURÀWDELOLW\  1RpPL1HPHV)$2 &RPPHQWDU\;6WUHQJWKHQLQJUHVLOLHQFHRIIDUPLQJV\VWHPV$SUHUHTXLVLWHIRUVXVWDLQDEOH DJULFXOWXUDOSURGXFWLRQ  0LJXHO$$OWLHUL8QLYHUVLW\RI&DOLIRUQLD%HUNHOH\DQG3DUYL].RRKDINDQ)$2 &RPPHQWDU\;,'HPRFUDWL]LQJFRQWURORIDJULFXOWXUHWRPHHWWKHQHHGVRIWKHWZHQW\ÀUVWFHQWXU\  0DUFLD,VKLL(LWHPDQ3HVWLFLGH$FWLRQ1HWZRUN1RUWK$PHULFD &RPPHQWDU\;,,$JULFXOWXUHIRRGDQGHQHUJ\  *XQQDU5XQGJUHQ*UROLQN$%&RQVXOWDQF\6ZHGHQ


YL

75$'($1'(19,5210(175(9,(:

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Ã&#x20AC;WW3ULQFLSDO5HVRXUFH$QDO\VW2DNGHQH+ROOLQV$\OHVEXU\8QLWHG.LQJGRPDQG 0DUN%DUWKHO6SHFLDO$GYLVRU:DVWHDQG5HVRXUFHV$FWLRQ3URJUDPPH%DQEXU\8QLWHG.LQJGRP &RPPHQWDU\;9,,,7KHUROHRIVXVWDLQDEOHFRQVXPSWLRQLQIRVWHULQJDIXQGDPHQWDO WUDQVIRUPDWLRQRIDJULFXOWXUH  /XFLD5HLVFK&RSHQKDJHQ%XVLQHVV6FKRRO'HQPDUN &RPPHQWDU\;,;)RRGVDIHW\DQGV\VWHPLFFKDQJH/LPLWDWLRQVRIIRRGFRQWUROVIRU VDIHJXDUGLQJIRRGVDIHW\  -XWWD-DNVFKH3ROLF\2IÃ&#x20AC;FHU)RRG)HGHUDWLRQRI*HUPDQ&RQVXPHU2UJDQLVDWLRQV 5HIHUHQFHV  1RWHV  &KDSWHU/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW /HDG$UWLFOH/LYHVWRFNSURGXFWLRQDQGIRRGVHFXULW\LQDFRQWH[WRIFOLPDWHFKDQJHDQG HQYLURQPHQWDODQGKHDOWKFKDOOHQJHV  $QLWD,GHO)HGHUDWLRQRI*HUPDQ6FLHQWLVWVDQG7RELDV5HLFKHUW*HUPDQZDWFK $(IIHFWVRILQH[SHQVLYHHQHUJ\DQGQLWURJHQIHUWLOL]HUV  %6XVWDLQDELOLW\UHTXLUHVDQHZGHÃ&#x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·6LOYD&RPSDVVLRQLQ:RUOG)DUPLQJ &RPPHQWDU\,,,,QWHJUDWHGFURSOLYHVWRFNDQGHQHUJ\PDQDJHPHQW7KHFDVHRIELRJDVLQ UXUDO(WKLRSLD  6WDQOH\*ZDYX\D.QRZOHGJH0DQDJHPHQW&RRUGLQDWRU3DUWQHUVKLSIRU 'HYHORSPHQW,QLWLDWLYH7UXVW=LPEDEZH 5HIHUHQFHV  1RWHV 


&RQWHQWV

YLL

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À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ÁLFWV  1QLPPR%DVVH\([HFXWLYH'LUHFWRU(QYLURQPHQWDO5LJKWV$FWLRQ&KDLU)ULHQGVRI WKH(DUWK,QWHUQDWLRQDODQGFRRUGLQDWRU2LOZDWFK,QWHUQDWLRQDO


YLLL

75$'($1'(19,5210(175(9,(:

&RPPHQWDU\,,(YDOXDWLRQRIODQGLQYHVWPHQWGHDOVLQ$IULFD3UHOLPLQDU\À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²7KHQHHGIRU VXSSRUWLYHDJULFXOWXUDOWUDGHUXOHV  1LNRODL)XFKV1H[XV)RXQGDWLRQDQG8OULFK+RIIPDQQ81&7$'VHFUHWDULDW &RPPHQWDU\,,)URPGXPSLQJWRYRODWLOLW\7KHOHVVRQVRIWUDGHOLEHUDOL]DWLRQIRUDJULFXOWXUH  %HQ/LOOLVWRQDQG.DUHQ+DQVHQ.XKQ,QVWLWXWHIRU$JULFXOWXUHDQG7UDGH3ROLF\ &RPPHQWDU\,,,5HWKLQNLQJIRRGVHFXULW\VWUDWHJLHVLQWLPHVRIFOLPDWHFKDQJH7KH FDVHIRUUHJLRQDOL]DWLRQRIDJULFXOWXUDOWUDGHDQGORFDOPDUNHWV  &KULVWLQH&KHPQLW]+HLQULFK%|OO)RXQGDWLRQDQG7LOPDQ6DQWDULXV*HUPDQZDWFK &RPPHQWDU\,9*HWWLQJIDUPHUVRIIWKHWUHDGPLOO$GGUHVVLQJFRQFHQWUDWLRQLQDJULFXOWXUDO LQSXWVSURFHVVLQJDQGUHWDLOPDUNHWV  (OHQLWD&'DxR$FWLRQ*URXSRQ(URVLRQ7HFKQRORJ\DQG&RQFHQWUDWLRQ &RPPHQWDU\96RDULQJRLODQGIRRGSULFHVWKUHDWHQDIIRUGDEOHIRRGVXSSO\  5LFKDUG+HLQEHUJ3RVW&DUERQ,QVWLWXWH &RPPHQWDU\9,$FULWLFDODQDO\VLVRIFRPPRGLW\DQGIRRGSULFHVSHFXODWLRQ  'LUN0OOHU)LQDQFH(WKLFV &RPPHQWDU\9,,/HWWKHJRRGSURGXFWVJURZDQGÁRZ  6RSKLD7ZDURJ81&7$'VHFUHWDULDW &RPPHQWDU\9,,,&RPPXQLW\VXSSRUWHGRUJDQLFSURGXFWLRQ7KHFDVHRIWKH5HJLRQDO 9DOXHDGGHG&LWL]HQ6KDUHKROGHU&RUSRUDWLRQLQVRXWKHUQ*HUPDQ\  &KULVWLDQ+LVV5HJLRQDO9DOXHDGGHG&LWL]HQ6KDUHKROGHU&RUSRUDWLRQ &RPPHQWDU\,;7KH6(.(0LQLWLDWLYH$FRUQHUSLOODUIRUWKHFRPPXQLW\  +HOP\$ERXOHLVKDQG0DWWKLDV.HLWHO6(.(0(J\SW 5HIHUHQFHV  1RWHV 

7DEOHV &KDSWHU  $JULFXOWXUDOODERXUSURGXFWLYLW\   *UHHQSRWHQWLDORIRUJDQLFDJULFXOWXUHDQGDQDHURELFGLJHVWLRQLQ&KLQD   *UHHQSRWHQWLDORI'UHDP)DUP   3HUFHQWDJHRIDJULFXOWXUDOZDWHUWKUHDWHQHGLQWKHJHRSROLWLFDOUHJLRQVQLQHVFHQDULRV 


&RQWHQWV

L[

&KDSWHU  &RVWEHQHÀWDQDO\VLVRIELRJDVSODQWVFRPSDUHGZLWKGLIIHUHQWWUDGLWLRQDOVRXUFHVRI KRXVHKROGHQHUJ\LQ(WKLRSLD  &KDSWHU  *UHHQVFHQDULR,PSDFWRIJUHHQLQYHVWPHQWVLQDJULFXOWXUH DPRXQWLQJWRSHUFHQWRI*'3    &KDQJHVLQIRRGVHFXULW\LQ$UJHQWLQD  &KDSWHU  *OREDOODQGXVHDQGFRYHUW\SHVDQGPDMRUVSDWLDOFKDQJHV   *URZWKRIOLYHVWRFNDQGVKDUHVRIGLIIHUHQWOLYHVWRFNE\UHJLRQ²   $VVHVVPHQWRIVPDOOVFDOHYHUVXVODUJHVFDOHIDUPLQJDWWKHJOREDOOHYHO   6DPSOLQJRIIDUPODQGOHDVHIHHVE\ODQGGHDO   6DPSOLQJRIDYHUDJHIDUPODQGSULFHVE\VHOHFWHGFRXQWULHV  &KDSWHU  ,PSRUWVXUJHVRIVHOHFWHGFRPPRGLWLHVDQGWKHLULPSDFWRQORFDOSURGXFWLRQYROXPHYDULRXV\HDUV   :RUOG·VWRSVHHGFRPSDQLHV   :RUOG·VWRSDJURFKHPLFDOFRPSDQLHV   :RUOG·VWRSIRRGDQGEHYHUDJHFRPSDQLHV   :RUOG·VWRSIRRGUHWDLOHUV   .H\VXVWDLQDEOHPDQDJHPHQWFULWHULD   2YHUYLHZRINH\LQYHVWPHQWVRI5HJLRQDO9DOXHDGGHG&LWL]HQ6KDUHKROGHU&RUSRUDWLRQ 

%R[HV &KDSWHU  7KHFRQFHSWRIDGDSWDWLRQ   'LIÀFXOWLHVLQDQDO\VLQJ\LHOGVIURPFRPSDUDWLYHVWXGLHV   3URÀWDELOLW\RIRUJDQLFFRWWRQSURGXFWLRQ   ([DPSOHVRIHQYLURQPHQWDOFRVWV   3ROLF\RSWLRQVWRVXSSRUWDWUDQVLWLRQWRVXVWDLQDEOHDJULFXOWXUH   &RUSRUDWHLQÁXHQFHRYHUSXEOLFSROLF\   5HYROYLQJGRRU  &KDSWHU  .H\ÀQGLQJVRIWKH(XURSHDQ1LWURJHQ$VVHVVPHQW   5HDVRQVIRUWKHLQVXIÀFLHQWSHUFHSWLRQRIWKHSRWHQWLDORIVXVWDLQDEOHDJULFXOWXUHWR FRQWULEXWHWRIRRGVHFXULW\DQGVXVWDLQDEOHUXUDOGHYHORSPHQW   (UURQHRXVFRQFOXVLRQVRQH[WHQVLYHDQGLQWHQVLYHOLYHVWRFNSURGXFWLRQV\VWHPVGXHWR LOOGHÀQHGV\VWHPERXQGDULHV   7ZHOYHIDUPDQLPDOZHOIDUHFULWHULD   7KHÀYHIUHHGRPV  &KDSWHU  %URNHULQJWKH6RXWK$PHULFDQ3DSD$QGLQDVXVWDLQDEOHYDOXHFKDLQLQQRYDWLRQQHWZRUN   ,QQRYDWLRQEURNHULQJIRULQFOXVLYHGHPDQGGULYHQUHVHDUFKDQGLQQRYDWLRQLQ,QGLD 1DWLRQDO$JULFXOWXUDO,QQRYDWLRQ3URJUDPPH  &KDSWHU  7KHLPSDFWRIWUDGHOLEHUDOL]DWLRQLQ*KDQD   7KHWUHDGPLOORIH[WHUQDOLQSXWLQWHQVLYHSURGXFWLRQH[SHULHQFHRIDVR\IDUPHULQ$UJHQWLQD   6RLOIHUWLOLW\DQGWKHLPSRUWDQFHRIKXPXV   $YRLGLQJFRQIXVLRQRQWKHWHUPV´UHJLRQDO´DQG´ORFDOµ 


[

75$'($1'(19,5210(175(9,(:

)LJXUHV &KDSWHU  'HYHORSPHQWRIIRRGDQGIHUWLOL]HUSULFHV²   7RS*+*HPLWWLQJFRXQWULHVIURPDJULFXOWXUH   /'&*+*HPLVVLRQVE\VHFWRU   3URMHFWHGFOLPDWHFKDQJHFDXVHGFKDQJHVLQDJULFXOWXUDOSURGXFWLYLW\E\ LQFRUSRUDWLQJWKHHIIHFWRIFDUERQIHUWLOLVDWLRQ   6\VWHPLFHPEHGGLQJRIFOLPDWHIULHQGO\DJULFXOWXUH   *KDQDFKLFNHQSURGXFWLRQDQGLPSRUWDWLRQ²   +DwWL5LFHSURGXFWLRQDQGLPSRUWV   &XVWRPWDULIIVLQWKH(8DQGWKH:HVWHUQ$IULFDQ(FRQRPLFDQG0RQHWDU\8QLRQ 8(02$    &RQWULEXWLRQRIWKHJOREDOIRRGSURGXFWLRQV\VWHPWRWRWDO*+*HPLVVLRQV  /DQGIRUDJULFXOWXUDOXVH²  &2HPLVVLRQVIURPODQGXVHFKDQJHLQVHOHFWHGGHYHORSLQJUHJLRQV²  6WUXFWXUHRIWKHJOREDOVHHGLQGXVWU\RYHUWKHSHULRG²  86$,'IXQGHG$JULFXOWXUDO%LRWHFKQRORJ\6XSSRUW3URMHFW $%633KDVH,, WDUJHWFRXQWULHV  *(FURSVLQGHYHORSPHQWDQGSURMHFWSDUWQHUV  'UHDP)DUPDQLQWHJUDWHGIRRGDQGHQHUJ\V\VWHP  7RWDOSURMHFWHGPXQLFLSDOZDWHUXVHLQ2(&'YHUVXVQRQ2(&'FRXQWULHV²  :DWHUZLWKGUDZDOVIRUDJULFXOWXUHDVDSHUFHQWDJHRIPHDQDQQXDOUXQRIILQ  2YHUYLHZRI&2VHTXHVWUDWLRQDQG*+*HPLVVLRQVLQDFURSEDVHGYDOXHFKDLQ  &DUERQIRRWSULQWDORQJWKHYDOXHFKDLQIRURQHEUHZHGFXSRI7FKLER5DULW\0DFKDUH3ULYDWH&RIIHH  &DUERQIRRWSULQWLQSUHSDULQJDFXSRIFRIIHH  2QIDUPHPLVVLRQVE\FDWHJRU\RIIDUPVLQ%DUDJZL.HQ\D  *URZWKUDWHRIPHDWFRQVXPSWLRQRYHUWKHSDVW\HDUV  &KDSWHU  :RUOGIHUWLOL]HUFRQVXPSWLRQ²   (8LPSRUWVRIVR\EHDQFDNHDQGVR\EHDQV²WR²   $UHDXQGHUVR\FXOWLYDWLRQVHOHFWHGFRXQWULHV²   7KHLPSRUWDQFHRIFRZORQJHYLW\WRSURWHFWWKHHQYLURQPHQWWKHFOLPDWHDQGWKHHFRQRP\  &KDSWHU  7KHF\FOHRIODQGGHJUDGDWLRQDQGVRFLDOGHSULYDWLRQ   $UHSUHVHQWDWLRQRIWKH\LHOGJDSLQDJULFXOWXUHDQGWKHVWHSVQHHGHGWRFORVHWKHJDS   3URFHGXUHVIRUFORVLQJWKH\LHOGJDS   ,QFRPHJHQHUDWHGIURPWUHHVDOHVE\YLOODJHQXUVHULHVDVVRFLDWHGZLWKUXUDOUHVRXUFHVFHQWUHVLQ QRUWKDQGQRUWKZHVWUHJLRQVRI&DPHURRQDIWHUDQG\HDUV   'HJUHHVRIFRPPLWPHQWWR*0DJULFXOWXUH HVWLPDWHVIRU    &RPSDUDWLYH\LHOGVLQ*0DGRSWLQJDQGQRQDGRSWLQJDJULFXOWXUDOV\VWHPV²   )RRGVHFXULW\LQ*0DQGQRQ*0DGRSWLQJFRXQWULHVLQ6RXWK$PHULFDFRPSDUHG²  &KDSWHU  $FWXDODQGSRWHQWLDOEHQHÃ&#x20AC;WVIURPDJULFXOWXUDODFWLYLWLHVDFFRUGLQJWRFXUUHQWDJULFXOWXUDOSRWHQWLDO  &KDSWHU  'HYHORSPHQWRIIRRGDQGPDLQDJULFXOWXUDOLQSXWSULFHVWRPLG   (YROXWLRQRIIRRGDQGIXHOSULFHV²   &RUUHODWLRQEHWZHHQWKHQXPEHURI27&FRQWUDFWVDQGFRPPRGLW\SULFHGHYHORSPHQW²   'HYHORSPHQWRIWKHSULFHRIRLO :7, ²   &RUUHODWLRQEHWZHHQVKDUHDQGFRPPRGLW\SULFHV6HSW²6HSW 


[L

$FNQRZOHGJHPHQWV

   

(YROXWLRQRISURGXFWLRQDQGFRQVXPSWLRQRIZKHDW  7KHFRQFHSWXDOVWUXFWXUHRI5HJLRQDO9DOXHDGGHG&LWL]HQ6KDUHKROGHU&RUSRUDWLRQ  6(.(0·VDFWLYLWLHVEDVHGRQLWVYLVLRQIRU(J\SW  7KH6XVWDLQDELOLW\)ORZHU 

$FNQRZOHGJHPHQWV 7KLV7UDGHDQG(QYLURQPHQW5HYLHZZDVHGLWHGDQGFRPSLOHGE\8OULFK+RIIPDQQ6HQLRU7UDGH3ROLF\$GYLVRU 2IÃ&#x20AC;FHRIWKH'LUHFWRU'LYLVLRQRQ,QWHUQDWLRQDO7UDGHLQ*RRGVDQG6HUYLFHVDQG&RPPRGLWLHV)UDQN*URWKDXV DVVLVWHG LQ SURRIUHDGLQJ WKH PDQXVFULSW ,W ZDV SUHSDUHG IRU SXEOLVKLQJ E\ 5DIH 'HQW ZLWK DVVLVWDQFH RQ JUDSKLFVE\6RSKLH&RPEHWWHDQG1DGHJH+DGMHPLDQ7KHPDQXVFULSWZDVODQJXDJHHGLWHGE\3UDYHHQ%KDOOD


[LL

75$'($1'(19,5210(175(9,(:

$FURQ\PVDQGDEEUHYLDWLRQV $$$6 $$7) $E/  $%63 $&3 $) $)73V $+%), $.67 $R$ $5, $526 $6$/V $6$5(&$ $6($1 $632 $95'& %$8 %I5 ELUU %,6 %0(/)  %5,& %6( %6, %W %7, %9/ & & & &$)7$ &$3 &$5( &$:0$ &%' &%27 && &&3 &&7(& &'( &'0 &(2 &(7,0 &)$5 &)6 &)6+/3(  &*& &*,$5 &+ &,) &,)25 &,00<7

$PHULFDQ$VVRFLDWLRQIRUWKH$GYDQFHPHQWRI6FLHQFH $IULFDQ$JULFXOWXUDO7HFKQRORJ\)RXQGDWLRQ $VVRFLDWLRQIRUVXVWDLQDEOHLHPRUHVRFLDOO\DQGHQYLURQPHQWDOO\EHQHÃ&#x20AC;FLDODJULFXOWXUH  $UEHLWVJHPHLQVFKDIWElXHUOLFKH/DQGZLUWVFKDIW*HUPDQ\

$JULFXOWXUDO%LRWHFKQRORJ\6XSSRUW3URMHFW $IULFDQ&DULEEHDQDQG3DFLÃ&#x20AC;FFRXQWULHV DJURIRUHVWU\ DJURIRUHVWU\WUHHSURGXFWV $+DUYHVW%LRWHFK)RXQGDWLRQ,QWHUQDWLRQDO DJULFXOWXUDONQRZOHGJHVFLHQFHDQGWHFKQRORJ\ $JUHHPHQWRQ$JULFXOWXUH RIWKH:72

$IULFDQ5HJUHHQLQJ,QLWLDWLYH $VLDQ5HJLRQDO2UJDQLF6WDQGDUG DULGDQGVHPLDULGODQGV $VVRFLDWLRQIRU6WUHQJWKHQLQJ$JULFXOWXUDO5HVHDUFKLQ(DVWHUQDQG&HQWUDO$IULFD $VVRFLDWLRQRI6RXWKHDVW$VLDQ1DWLRQV $VVRFLDWLRQIRUWKH6WXG\RI3HDN2LO *DV 8QLWHG6WDWHV  7KH:RUG9HJHWDEOH&HQWHU EXVLQHVVDVXVXDO VFHQDULR

)HGHUDO,QVWLWXWHIRU5LVN$VVHVVPHQW *HUPDQ\

(WKLRSLDQFXUUHQF\ %DQNIRU,QWHUQDWLRQDO6HWWOHPHQWV *HUPDQ)HGHUDO0LQLVWU\IRU)RRG$JULFXOWXUHDQG)RUHVWV VLQFHNQRZQDVWKH)HGHUDO 0LQLVWU\IRU)RRG$JULFXOWXUHDQG&RQVXPHU3URWHFWLRQ  JURXSLQJWKDWUHIHUVWRWKHFRXQWULHV%UD]LOWKH5XVVLDQ)HGHUDWLRQ,QGLDDQG&KLQD ERYLQHVSRQJLIRUPHQFHSKDORSDWK\ PDGFRZGLVHDVH

%ULWLVK6WDQGDUGV,QVWLWXWLRQ EDFLOOXVWKXULQJLHQVLV %R\FH7KRPSVRQ,QVWLWXWH )HGHUDO2IÃ&#x20AC;FHRI&RQVXPHUDQG)RRG6DIHW\ *HUPDQ\

FDUERQ SKRWRV\QWKHWLFSDWKZD\ FDUERQÃ&#x20AC;[DWLRQ SKRWRV\QWKHWLFSDWKZD\

&HQWUDO$PHULFD'RPLQLFDQ5HSXEOLF8QLWHG6WDWHV)UHH7UDGH$JUHHPHQW &RPPRQ$JULFXOWXUDO3ROLF\ &RRSHUDWLYHIRU$VVLVWDQFHDQG5HOLHI FRPSUHKHQVLYHDVVHVVPHQWRIZDWHUPDQDJHPHQWLQDJULFXOWXUH &RQYHQWLRQRQ%LRORJLFDO'LYHUVLW\ &KLFDJR%RDUGRI7UDGH FOLPDWHFKDQJH &RPPLWWHHRQ&RPPRGLW\3UREOHPV )$2  &RUQHOO8QLYHUVLW\&ROOHJHRI$JULFXOWXUHDQG/LIH6FLHQFHV &HQWUHIRU'HYHORSPHQWDQG(QYLURQPHQW 8QLYHUVLW\RI%HUQ6ZLW]HUODQG

&OHDQ'HYHORSPHQW0HFKDQLVP FKLHIH[HFXWLYHRIÃ&#x20AC;FHU &HQWUH(XURSH7LHUV0RQGH &OLPDWH)RUHFDVWLQJIRU$JULFXOWXUDO5HVRXUFHV SURMHFW  &RPPLWWHHRQ:RUOG)RRG6HFXULW\ )$2

+LJK/HYHO3DQHORI([SHUWVRQ)RRG6HFXULW\DQG1XWULWLRQWRWKH)$2&RPPLWWHHRQ :RUOG)RRG6HFXULW\ &KLQHVHFRQVWUXFWLRQFRPSDQ\RZQHGE\6,123(& &RQVXOWDWLYH*URXSRQ,QWHUQDWLRQDO$JULFXOWXUDO5HVHDUFK PHWKDQH FRVWLQVXUDQFHDQGIUHLJKW &HQWHUIRU,QWHUQDWLRQDO)RUHVWU\5HVHDUFK ,QWHUQDWLRQDO0DL]HDQG:KHDW,PSURYHPHQW&HQWHU


$FURQ\PVDQGDEEUHYLDWLRQV

&,3 &,5$' &,6 &,:) &/,581,, &19 &2 &2H&2HT &25$) &2526 &UDG/ &5& &5) &5, &5, &53 &6' &6( &6,52 &63 &87 '$& '$3 '()5$ ',7& '2.WULDOV ($&& ($236 (%'$ (& (($ ((' ((65& ()5V ()6$ (+(& (- (0%2 (1$ (5('3& (52, (60$3 (7% (7&*URXS (8 (XURVWDW )$2 )$267$7 )$5$ )$7 )$:& )$= )', ))6 )L%/ ),63 )2% )3,)

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ÀFDQG,QGXVWULDO5HVHDUFK2UJDQL]DWLRQ &RQVHUYDWLRQ6WHZDUGVKLS3URJUDP &RPSRVW8WLOL]DWLRQ7ULDO 'HYHORSPHQW$VVLVWDQFH&RPPLWWHH RIWKH2(&'

GLDPPRQLXPSKRVSKDWH 'HSDUWPHQWIRU(QYLURQPHQW)RRGDQG5XUDO$IIDLUV 8QLWHG.LQJGRP  'LYLVLRQRQ,QWHUQDWLRQDO7UDGHLQ*RRGVDQG6HUYLFHVDQG&RPPRGLWLHV 81&7$'

ELRG\QDPLFELRRUJDQLFFRQYHQWLRQDO FRPSDULVRQ

:RUOG%DQNV(FRQRPLFVRI$GDSWDWLRQWR&OLPDWH&KDQJHDQDO\VLV (DVW$IULFDQ2UJDQLF3URGXFWV6WDQGDUG (J\SWLDQ%LRG\QDPLF$VVRFLDWLRQ (XURSHDQ&RPPLVVLRQ (XURSHDQ(QYLURQPHQW$JHQF\ &KXUFK'HYHORSPHQW6HUYLFH *HUPDQ\  (WKLRSLDQ(QHUJ\6WXG\DQG5HVHDUFK&HQWHU HQYLURQPHQWDOÁRZUHTXLUHPHQWV (XURSHDQ8QLRQ)RRG6DIHW\$XWKRULW\ HFROLEDFWHULXP H[DMRXOH (XURSHDQ0ROHFXODU%LRORJ\2UJDQL]DWLRQ (XURSHDQ1LWURJHQ$VVHVVPHQW (WKLRSLD5XUDO(QHUJ\'HYHORSPHQW$VVHVVPHQWDQG3URPRWLRQ&HQWHU HQHUJ\UHWXUQRQHQHUJ\LQYHVWHG (QHUJ\6HFWRU0DQDJHPHQW$VVLVWDQFH3URJUDPPH 81'3:RUOG%DQN  (WKLRSLDQELUU (URVLRQ7HFKQRORJ\DQG&RQFHQWUDWLRQ*URXS (XURSHDQ8QLRQ (XURSHDQ6WDWLVWLFDO2IÀFH )RRGDQG$JULFXOWXUDO2UJDQL]DWLRQRIWKH8QLWHG1DWLRQV 6WDWLVWLFV'LYLVLRQRIWKH)$2 )RUXPIRU$JULFXOWXUDO5HVHDUFKLQ$IULFD 6ZLVV5HVHDUFK,QVWLWXWHIRU$JULFXOWXUHDQG$JULFXOWXUDO(QJLQHHULQJ )DUP$QLPDO:HOIDUH&RXQFLO )UDQNIXUWHU$OOJHPHLQH=HLWXQJ DQDWLRQZLGH*HUPDQQHZVSDSHU

IRUHLJQGLUHFWLQYHVWPHQW IDUPHUÀHOGVFKRROV 5HVHDUFK,QVWLWXWHIRU2UJDQLF$JULFXOWXUH 6ZLW]HUODQG

)DUP,QSXW6XEVLG\3URJUDP IUHHRQERDUG )RUHLJQ3ROLF\LQ)RFXV

[LLL


[LY

)38V )6& )67 IW )7$ V  )92 * *$3 *$77 *&0V *&0V *'3 *( *($ *() *(2 *)5$6 *+* *,*$ *,= */3 *0 *02 *20$ *5, *52 *W *7= *:3 KD +J +/3( +5& ,$$67' ,$3 ,$73 ,&*(% ,&5$) ,&5,6$7 ,&7 V  ,&76' ,($ ,(&$ ,(5 ,)$' ,I(8 ,)2$0 ,)35, ,*%3 ,,(' ,,7$ ,. ,.6 ,/& ,/5, ,/8& ,0$3 ,0)

75$'($1'(19,5210(175(9,(:

IRRGSURGXFWLRQXQLWV IRRGVXSSO\FKDLQ IDUPV\VWHPVWULDO IHHW IUHHWUDGHDJUHHPHQW V

)RRGDQG9HWHULQDU\2IÃ&#x20AC;FH (8

JURXSRIGHYHORSHGFRXQWULHV JRRGDJULFXOWXUDOSUDFWLFH *HQHUDO$JUHHPHQWRQ7DULIIVDQG7UDGH JHQHUDOFLUFXODWLRQPRGHOV JOREDOFOLPDWHPRGHOV JURVVGRPHVWLFSURGXFW JHQHWLFDOO\HQJLQHHUHGJHQHWLFHQJLQHHULQJ *UHHQLQJWKH(FRQRP\ZLWK$JULFXOWXUH *OREDO(QYLURQPHQW)DFLOLW\ *OREDO(QYLURQPHQW2XWORRN 81(3SXEOLFDWLRQ  *OREDO)RUXPIRU5XUDO$GYLVRU\6HUYLFHV JUHHQKRXVHJDV HPLVVLRQV

*HUPDQ,QVWLWXWHIRU*OREDODQG$UHD6WXGLHV *HUPDQ$JHQF\IRU,QWHUQDWLRQDO&RRSHUDWLRQ JOREDOODQGSURMHFW JHQHWLFDOO\PRGLÃ&#x20AC;HG JHQHWLFDOO\PRGLÃ&#x20AC;HGRUJDQLVPV *OREDO2UJDQLF0DUNHW$FFHVVSURMHFW )$2,)2$0 81&7$'

*OREDO5HSRUWLQJ,QLWLDWLYH JROGHQULFHRQOLQH JLJDWRQ *HUPDQ$JHQF\IRU7HFKQLFDO&RRSHUDWLRQ QRZ*,=VHHDERYH

JOREDOZDUPLQJSRWHQWLDO KHFWDUH V

KHFWRJUDPV +LJKOHYHO3DQHORI([SHUWVRQ)RRG6HFXULW\DQG1XWULWLRQ )$2  +XPDQ5LJKWV&RXQFLO ,QWHUQDWLRQDO$VVHVVPHQWRI$JULFXOWXUDO.QRZOHGJH6FLHQFHDQG7HFKQRORJ\IRU'HYHORSPHQW ,QWHUQDWLRQDO$VVRFLDWLRQIRU3DUWQHUVKLSLQ(FRORJ\DQG7UDGH ,QVWLWXWHIRU$JULFXOWXUHDQG7UDGH3ROLF\ ,QWHUQDWLRQDO&HQWHUIRU*HQHWLF(QJLQHHULQJDQG%LRWHFKQRORJ\ ,QWHUQDWLRQDO&HQWUHIRU5HVHDUFKLQ$JURIRUHVWU\ ,QWHUQDWLRQDO&URSV5HVHDUFK,QVWLWXWHIRUWKH6HPL$ULG7URSLFV LQIRUPDWLRQDQGFRPPXQLFDWLRQWHFKQRORJ\ LHV

,QWHUQDWLRQDO&HQWUHIRU7UDGHDQG6XVWDLQDEOH'HYHORSPHQW ,QWHUQDWLRQDO(QHUJ\$JHQF\ ,QWHUQDWLRQDO(URVLRQ&RQWURO$VVRFLDWLRQ ,QVWLWXWG·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


[Y

,1%, ,16$+ ,3 ,3&& ,3*5, ,30 ,33& ,35V ,5, ,52&% ,55, ,6$$$ ,6,6 ,62 ,62)$5 ,7& ,:0, NFDO .'*&%3 NJ V  NP N:K /$3 OEVDF /'&/'&V /($' /(' /(* /+6 //& /7$5 /8&&* 0 , 0$5 0'* V  0($ 0(1$ 0- PP 0W 1 1 U  1 12 1$)7$ 1$,3 1$6 1$6$ 1%3( 1&$5 1&&5 1)$ 1*2 1+ 113& 12 133 139

&HQWUHIRU,QWHJUDWHG5HVHDUFKLQ%LRVDIHW\ ,QVWLWXWGX6DKHO LQWHOOHFWXDOSURSHUW\ ,QWHUJRYHUQPHQWDO3DQHORQ&OLPDWH&KDQJH ,QWHUQDWLRQDO3ODQW*HQHWLF5HVRXUFHV,QVWLWXWH LQWHJUDWHGSHVWPDQDJHPHQW ,QWHJUDWHG3ROOXWLRQDQG&RQWURO (8GLUHFWLYH

LQWHOOHFWXDOSURSHUW\ULJKWV ,QWHUQDWLRQDO5HVHDUFK,QVWLWXWHIRU&OLPDWH3UHGLFWLRQV ,QWHUQDWLRQDO5HTXLUHPHQWVIRU&RQIRUPLW\$VVHVVPHQW%RGLHV ,QWHUQDWLRQDO5LFH5HVHDUFK,QVWLWXWH ,QWHUQDWLRQDO6HUYLFHIRUWKH$FTXLVLWLRQRI$JUL%LRWHFK$SSOLFDWLRQV ,QVWLWXWHRI6FLHQFHLQ6RFLHW\ ,QWHUQDWLRQDO2UJDQL]DWLRQIRU6WDQGDUGL]DWLRQ ,QWHUQDWLRQDO6RFLHW\RI2UJDQLF$JULFXOWXUH5HVHDUFK ,QWHUQDWLRQDO7UDGH&HQWUHRI81&7$':72 ,QWHUQDWLRQDO:DWHU0DQDJHPHQW,QVWLWXWH NLORFDORULH .HQ\D'DLU\*RDWDQG&DSDFLW\%XLOGLQJ3URMHFW NLORJUDP V

FXELFNLORPHWHU NLORZDWWKRXU /LE\D$IULFD,QYHVWPHQW3RUWIROLR SRXQGVSHUDFUH OHDVWGHYHORSHGFRXQWU\LHV /LYHVWRFN(QYLURQPHQWDQG'HYHORSPHQW,QLWLDWLYH OLJKWHPLWWLQJGLRGH RUJDQLFOHJXPHV\VWHP OHIWKDQGVLGH OLPLWHGOLDELOLW\FRPSDQ\ ORQJWHUPDJURHFRORJLFDOUHVHDUFK /DQG8VH&OLPDWH&KDQJH5HSRUW WRWKH:HOVK$VVHPEO\*RYHUQPHQW  PXQLFLSDODQGLQGXVWULDO PHDQDQQXDOUXQRII 0LOOHQQLXP'HYHORSPHQW*RDO V

0LOOHQQLXP(FRV\VWHP$VVHVVPHQW 0LGGOH(DVWDQG1RUWK$IULFD UHJLRQ

PHJDMRXOHV PLOOLPHWHU PHJDWRQV QLWURJHQ LQVRLO

UHDFWLYHQLWURJHQ QLWURJHQ PROHFXOHRIWZRDWRPV

QLWURXVR[LGH 1RUWK$PHULFDQ)UHH7UDGH$JUHHPHQW 1DWLRQDO$JULFXOWXUDO,QQRYDWLRQ3URJUDPPH RIWKH,QGLDQ&RXQFLORI$JULFXOWXUDO5HVHDUFK

1DWLRQDO$FDGHP\RI6FLHQFHV 86  1DWLRQDO$HURQDXWLFVDQG6SDFH$GPLQLVWUDWLRQ 1DWLRQDO%LRJDV3URJUDPPH(WKLRSLD 1DWLRQDO&HQWHUIRU$WPRVSKHULF5HVHDUFK 8QLWHG6WDWHV

6ZLVV1DWLRQDO&HQWUHRI&RPSHWHQFHLQ5HVHDUFK 1DWLRQDO)RRG$GPLQLVWUDWLRQ RI6ZHGHQ

QRQJRYHUQPHQWDORUJDQL]DWLRQ DPPRQLXP 1LJHULDQ1DWLRQDO3HWUROHXP&RUSRUDWLRQ QLWULFR[LGH JOREDOWHUUHVWULDO QHWSULPDU\SURGXFWLRQ QHWSUHVHQWYDOXH


[YL

18( 2'$ 2', 2($ 2(&' 2(&''$& 2*6V 2, 27& 27'6 3$11$ 3$6 3%6 3&) 3(3 3*$ 3*6 3,&7,3$3$ SSP 35$, 36'$ 39 3Z& 5 ' 5$6)) 5('' 5(1 5+6 51( 56 56% 5X%3 59$&6& 66( 6$1 6$1&2 6$5 6$5' 6&$5 6&17 6&23( 6&25( 6') 6'7 6(.(0 61135 619 62& 62)$ 620 63 65(6 66$ 66* 660 69& W&2HT 7('

75$'($1'(19,5210(175(9,(:

QLWURJHQXVHHIÃ&#x20AC;FLHQF\ RIÃ&#x20AC;FLDOGHYHORSPHQWDVVLVWDQFH 2YHUVHDV'HYHORSPHQW,QVWLWXWH (QYLURQPHQWDO$VVHVVPHQWRI2JRQLODQG 2UJDQL]DWLRQIRU(FRQRPLF&RRSHUDWLRQDQG'HYHORSPHQW 2(&''HYHORSPHQW$VVLVWDQFH&RPPLWWHH RUJDQLFJXDUDQWHHV\VWHPV 2DNODQG,QVWLWXWH RYHUWKHFRXQWHU WUDQVDFWLRQV

RYHUDOOWUDGHGLVWRUWLQJVXSSRUW 3HVWLFLGH$FWLRQ1HWZRUN1RUWK$PHULFD 3XEOLF$YDLODEOH6SHFLÃ&#x20AC;FDWLRQ 3URJUDPIRU%LRGLYHUVLW\ 3URGXFW&DUERQ)RRWSULQW SKRVSKRHQROS\UXYDWH SKRVSKRJO\FHUDWH SDUWLFLSDWRU\JXDUDQWHHV\VWHP ,QWHUQDWLRQDO3RWDWR/DWH%OLJKW7HVWLQJ3URJUDP SDUWVSHUPLOOLRQ 3ULQFLSOHVIRU5HVSRQVLEOH$JULFXOWXUDO,QYHVWPHQW 3ULYDWH6HFWRU'HYHORSPHQWLQ$JULFXOWXUH SKRWRYROWDLF 3ULFHZDWHUKRXVH&RRSHUV UHVHDUFKDQGGHYHORSPHQW 5DSLG$OHUW6\VWHPRI)RRGDQG)HHG (8

UHGXFWLRQRIHPLVVLRQVIURPGHIRUHVWDWLRQDQGIRUHVWGHJUDGDWLRQ 5HQHZDEOH(QHUJ\3ROLF\1HWZRUNIRUWKHVW&HQWXU\ ULJKWKDQGVLGH *HUPDQ&RXQFLOIRU6XVWDLQDEOH'HYHORSPHQW 5R\DO6RFLHW\ 5RXQGWDEOHRQ6XVWDLQDEOH%LRIXHOV ULEXORVHELVSKRVSKDWH 5HJLRQDO9DOXHDGGHG&LWL]HQ6KDUHKROGHU&RUSRUDWLRQ 6RXWK6RXWK(DVW 6XVWDLQDEOH$JULFXOWXUH1HWZRUN 'LUHFWRUDWH*HQHUDOIRU+HDOWKDQG&RQVXPHU$IIDLUV (XURSHDQ&RPPLVVLRQ

6SHFLDO$GPLQLVWUDWLYH5HJLRQ VXVWDLQDEOHDJULFXOWXUHDQGUXUDOGHYHORSPHQW 6WDQGLQJ&RPPLWWHHRQ$JULFXOWXUDO5HVHDUFK RIWKH(XURSHDQ&RPPLVVLRQ

6RPDWLF&HOO1XFOHDU7UDQVIHU FORQLQJ

6FLHQWLÃ&#x20AC;F&RPPLWWHHRQ3UREOHPVRIWKH(QYLURQPHQW 6XVWDLQDEOH&RQVXPSWLRQ5HVHDUFK([FKDQJH 6(.(0'HYHORSPHQW)RXQGDWLRQ VSHFLDODQGGLIIHUHQWLDOWUHDWPHQW DQFLHQW(J\SWLDQIRU´YLWDOLW\IURPWKHVXQµ 6RXWKHUQ1DWLRQV1DWLRQDOLWLHVDQG3HRSOHV5HJLRQ 1HWKHUODQGV'HYHORSPHQW2UJDQL]DWLRQ VRLORUJDQLFFDUERQ 7KH6WDWHRI)RRGDQG$JULFXOWXUH )$2SXEOLFDWLRQ

VRLORUJDQLFPDWWHU VSHFLDOSURGXFWV 6SHFLDO5HSRUWRQ(PLVVLRQV6FHQDULRV ,3&&  VXE6DKDUDQ$IULFD VSHFLDODJULFXOWXUDOVDIHJXDUG VSHFLDOVDIHJXDUGPHFKDQLVPV 6FLHQWLÃ&#x20AC;F9HWHULQDU\&RPPLWWHH (8  WRQVRIFDUERQGLR[LGHHTXLYDOHQW 7UDGH(QYLURQPHQW&OLPDWH&KDQJHDQG'HYHORSPHQW %UDQFKRI81&7$'


[YLL

7(5 WRHV WRQQHV&KD 8( 8(02$ 8. 81 81'(6$ 81&7$' 81'3 81(3 81(6&2 81)&&& 81*& 81,6,67 811$'$) 815,6' 8162 86&56 8686$ 86$,' 86'$ 86)'$ 8: 9$0 9((7& 9=%9 :$5'$ :% :)3 :+2 :02 :2&$7 :5$3 :5, :6& :7, :72 :8( \U

7UDGHDQG(QYLURQPHQW5HYLHZ WRQVRIRLOHTXLYDOHQWV WRQQHVRIFDUERQSHUKHFWDUH 8QLRQHXURSpHQQH :HVWHUQ$IULFDQ(FRQRPLFDQG0RQHWDU\8QLRQ 8QLWHG.LQJGRP 8QLWHG1DWLRQV 81'HSDUWPHQWRI(FRQRPLFDQG6RFLDO$IIDLUV 8QLWHG1DWLRQV&RQIHUHQFHRQ7UDGHDQG'HYHORSPHQW 8QLWHG1DWLRQV'HYHORSPHQW3URJUDPPH 8QLWHG1DWLRQV(QYLURQPHQW3URJUDPPH 8QLWHG1DWLRQV(GXFDWLRQDO6FLHQWLÃ&#x20AC;FDQG&XOWXUDO2UJDQL]DWLRQ 8QLWHG1DWLRQV)UDPHZRUN&RQYHQWLRQRQ&OLPDWH&KDQJH 8QLWHG1DWLRQV*OREDO&RPSDFW 8QLWHG1DWLRQV,QWHUQDWLRQDO6FLHQWLÃ&#x20AC;F,QIRUPDWLRQ6\VWHP 8QLWHG1DWLRQV1HZ$JHQGDIRUWKH'HYHORSPHQWRI$IULFD 8QLWHG1DWLRQV5HVHDUFK,QVWLWXWHIRU6RFLDO'HYHORSPHQW 8QLWHG1DWLRQV6WDWLVWLFDO2IÃ&#x20AC;FH 8QLWHG6WDWHV&RQJUHVVLRQDO5HVHDUFK6HUYLFHV 8QLWHG6WDWHVRI$PHULFD 86$JHQF\IRU,QWHUQDWLRQDO'HYHORSPHQW 8QLWHG6WDWHV'HSDUWPHQWRI$JULFXOWXUH 8QLWHG6WDWHV)RRGDQG'UXJ$GPLQLVWUDWLRQ 8QLYHUVLW\RI:LVFRQVLQ YHVLFXODUDUEXVFXODUP\FRUUKL]DH IXQJL

9ROXPHWULF(WKDQRO([FLVH7D[&UHGLW 86

)HGHUDWLRQRI*HUPDQ&RQVXPHU2UJDQLVDWLRQV 9HUEUDXFKHU]HQWUDOH%XQGHVYHUEDQG

:HVW$IULFD5LFH'HYHORSPHQW$VVRFLDWLRQ :RUOG%DQN 81:RUOG)RRG3URJUDPPH :RUOG+HDOWK2UJDQL]DWLRQ :RUOG0HWHRURORJLFDO2UJDQL]DWLRQ :RUOG2YHUYLHZRI&RQVHUYDWLRQ$SSURDFKHVDQG7HFKQRORJLHV :DVWHDQG5HVRXUFHV$FWLRQ3URJUDPPH :RUOG5HVRXUFHV,QVWLWXWH :RUOG6KLSSLQJ&RXQFLO :HVW7H[DV,QWHUPHGLDWH RLOSULFH

:RUOG7UDGH2UJDQL]DWLRQ ZDWHUXVHHIÃ&#x20AC;FLHQF\ \HDU


[YLLL

75$'($1'(19,5210(175(9,(:

([SODQDWRU\QRWHV &ODVVLÃ&#x20AC;FDWLRQE\FRXQWU\RUFRPPRGLW\JURXS 7KHFODVVLÃ&#x20AC;FDWLRQRIFRXQWULHVLQWKLV5HYLHZKDVEHHQDGRSWHGVROHO\IRUWKHSXUSRVHVRIVWDWLVWLFDORUDQDO\WLFDO FRQYHQLHQFHDQGGRHVQRWQHFHVVDULO\LPSO\DQ\MXGJHPHQWFRQFHUQLQJWKHVWDJHRIGHYHORSPHQWRIDSDUWLFXODU FRXQWU\RUDUHD 7KHPDMRUFRXQWU\JURXSLQJVXVHGLQWKLV5HYLHZIROORZWKHFODVVLÃ&#x20AC;FDWLRQE\WKH8QLWHG1DWLRQV6WDWLVWLFDO2IÃ&#x20AC;FH 8162 7KH\DUHGLVWLQJXLVKHGDV Â&#x2021; 'HYHORSHGRULQGXVWULDO L]HG FRXQWULHVWKHFRXQWULHVPHPEHUVRIWKH2(&' RWKHUWKDQ0H[LFRWKH5HSXEOLF RI.RUHDDQG7XUNH\ SOXVWKHQHZ(8PHPEHUFRXQWULHVDQG,VUDHO Â&#x2021; 7UDQVLWLRQHFRQRPLHVUHIHUVWR6RXWK(DVW(XURSHDQGWKH&RPPRQZHDOWKRI,QGHSHQGHQW6WDWHV &,6  Â&#x2021; 'HYHORSLQJFRXQWULHVDOOFRXQWULHVWHUULWRULHVRUDUHDVQRWVSHFLÃ&#x20AC;HGDERYH 7KHWHUPV´FRXQWU\µ´HFRQRP\µUHIHUDVDSSURSULDWHDOVRWRWHUULWRULHVRUDUHDV 5HIHUHQFHVWR´/DWLQ$PHULFDµLQWKHWH[WRUWDEOHVLQFOXGHWKH&DULEEHDQFRXQWULHVXQOHVVRWKHUZLVHLQGLFDWHG 5HIHUHQFHVWR´VXE6DKDUDQ$IULFDµLQWKHWH[WRUWDEOHVGRQRWLQFOXGH6RXWK$IULFDXQOHVVRWKHUZLVHLQGLFDWHG )RUVWDWLVWLFDOSXUSRVHVUHJLRQDOJURXSLQJVDQGFODVVLÃ&#x20AC;FDWLRQVE\FRPPRGLW\JURXSXVHGLQWKLV5HYLHZIROORZ JHQHUDOO\WKRVHHPSOR\HGLQWKH81&7$'+DQGERRNRI6WDWLVWLFV 8QLWHG1DWLRQVSXEOLFDWLRQVDOHVQR() ,,' XQOHVVRWKHUZLVHVWDWHG7KHGDWDIRU&KLQDGRQRWLQFOXGHWKRVHIRU+RQJ.RQJ6SHFLDO$GPLQLVWUDWLYH 5HJLRQ +RQJ.RQJ6$5 0DFDR6SHFLDO$GPLQLVWUDWLYH5HJLRQ 0DFDR6$5 DQG7DLZDQ3URYLQFHRI&KLQD 2WKHUQRWHV 7KHWHUP´GROODUµ  UHIHUVWR8QLWHG6WDWHVGROODUVXQOHVVRWKHUZLVHVWDWHG 7KHWHUP´ELOOLRQµVLJQLÃ&#x20AC;HVPLOOLRQ 7KHWHUP´WRQVµUHIHUVWRPHWULFWRQV $QQXDOUDWHVRIJURZWKDQGFKDQJHUHIHUWRFRPSRXQGUDWHV ([SRUWVDUHYDOXHG)2%DQGLPSRUWV&,)XQOHVVRWKHUZLVHVSHFLÃ&#x20AC;HG 8VH RI D GDVK ²  EHWZHHQ GDWHV UHSUHVHQWLQJ \HDUV HJ ² VLJQLÃ&#x20AC;HV WKH IXOO SHULRG LQYROYHG LQFOXGLQJWKHLQLWLDODQGÃ&#x20AC;QDO\HDUV $QREOLTXHVWURNH  EHWZHHQWZR\HDUVHJVLJQLÃ&#x20AC;HVDÃ&#x20AC;VFDORUFURS\HDU $GRW  LQGLFDWHVWKDWWKHLWHPLVQRWDSSOLFDEOH 7ZRGRWV  LQGLFDWHWKDWWKHGDWDDUHQRWDYDLODEOHRUDUHQRWVHSDUDWHO\UHSRUWHG $GDVK  RUD]HUR  LQGLFDWHVWKDWWKHDPRXQWLVQLORUQHJOLJLEOH 'HFLPDOVDQGSHUFHQWDJHVGRQRWQHFHVVDULO\DGGXSWRWRWDOVEHFDXVHRIURXQGLQJ




75$'($1'(19,5210(175(9,(:

'#&46+%.'U      U  

                  8OULFK+RIIPDQQ 81&7$'VHFUHWDULDW

$EVWUDFW 7KHSUREOHPVRIFOLPDWHFKDQJHKXQJHUDQGSRYHUW\HFRQRPLFVRFLDODQGJHQGHULQHTXLW\SRRUKHDOWK DQG QXWULWLRQ DQG HQYLURQPHQWDO VXVWDLQDELOLW\ DUH LQWHUUHODWHG DQG QHHG WR EH VROYHG E\ OHYHUDJLQJ DJULFXOWXUH·VPXOWLIXQFWLRQDOLW\$JDLQVWWKLVEDFNJURXQGDIXQGDPHQWDOWUDQVIRUPDWLRQWRZDUGVFOLPDWH IULHQGO\DJULFXOWXUHFRQVLVWLQJRIDPRVDLFRIDJURHFRORJLFDOSURGXFWLRQSUDFWLFHVPXVWEHFRPHWKHQHZ SDUDGLJPEXWLWVKRXOGQRWFRPSURPLVHRWKHUYHU\LPSRUWDQWGHYHORSPHQWREMHFWLYHV Â&#x2021; $GGUHVVLQJWKHHTXLW\FKDOOHQJHQRWDEO\IRRGVHFXULW\DQGIDUPHUOLYHOLKRRGV Â&#x2021; (QKDQFLQJVXVWDLQDEOHSURGXFWLYLW\EDVHGRQDQHZV\VWHPLFDOO\GLIIHUHQWGHÃ&#x20AC;QLWLRQWKDWIRFXVHVRQ WRWDOIDUPRXWSXWLQVWHDGRISURGXFWLYLW\SHUXQLWRIODERXUDQG Â&#x2021; 6WUHQJWKHQLQJUHVLOLHQFHWRUHVRXUFHDQGHQHUJ\VFDUFLW\DQGFOLPDWHFKDQJH ,WLVWKHUHIRUHLPSRUWDQWWRWKLQNLQV\VWHPVUDWKHUWKDQRYHUHPSKDVL]LQJDFOLPDWHIRFXV

$,QWURGXFWLRQ &OLPDWH FKDQJH &&  KDV WKH SRWHQWLDO WR GDPDJH LUUHYHUVLEO\ WKH QDWXUDO UHVRXUFH EDVH RQ ZKLFK DJULFXOWXUH GHSHQGV ZLWK JUDYH FRQVHTXHQFHV IRU IRRG VHFXULW\ && FRXOG DOVR VLJQLÃ&#x20AC;FDQWO\ FRQVWUDLQ HFRQRPLFGHYHORSPHQWLQWKRVHGHYHORSLQJFRXQWULHV WKDW ODUJHO\ UHO\ RQ DJULFXOWXUH IRU PRUH LQIRUPDWLRQ VHH /LP /L &KLQJ   7KHUHIRUH PHHWLQJ WKH GXDO FKDOOHQJH RI DFKLHYLQJ IRRG VHFXULW\ DQG RWKHU GHYHORSPHQWDO FREHQHÃ&#x20AC;WV RQ WKH RQH KDQG DQG PLWLJDWLQJ DQG DGDSWLQJ WR && RQ WKH RWKHU UHTXLUHVSROLWLFDOFRPPLWPHQWDWWKHKLJKHVWOHYHOIRUD IXQGDPHQWDODQGXUJHQWWUDQVIRUPDWLRQRIDJULFXOWXUH ,Q IDFW WLPH LV JHWWLQJ WKH PRVW LPSRUWDQW VFDUFLW\ IDFWRULQGHDOLQJZLWK&& +RIIPDQQ  7KH 81&7$' 7UDGH DQG (QYLURQPHQW 5HYLHZ  JLYHV DQ RSSRUWXQLW\ WR PRUH WKDQ  H[SHUWV WR DQDO\]H YDULRXV VSHFLÃ&#x20AC;F DVSHFWV RI WKH IXQGDPHQWDO WUDQVIRUPDWLRQ RI DJULFXOWXUDO SURGXFWLRQ PHWKRGV DQG V\VWHPV UHTXLUHG IRU GHDOLQJ ZLWK WKH VHULRXV FKDOOHQJHV HPDQDWLQJ IURP JOREDO ZDUPLQJ DQG WKH

WUDGHRIIVWREHPDGHLQHQKDQFLQJWKHPLWLJDWLRQDQG DGDSWDWLRQSRWHQWLDORIDJULFXOWXUHDVSDUWDQGSDUFHO RI D SURSRRU GHYHORSPHQW DSSURDFK LQ DJULFXOWXUH IXOO\H[SORLWLQJDJULFXOWXUH·VPXOWLIXQFWLRQDOLW\

%$JULFXOWXUHDNH\GULYHUDQGDPDMRU YLFWLPRIJOREDOZDUPLQJ $V PRVW RI WKH JUHHQKRXVH JDVHV *+*  ZLWK WKH H[FHSWLRQ RI PHWKDQH KDYH D KDOI OLIH RI RYHU D KXQGUHG \HDUV JOREDO *+* HPLVVLRQV ZLOO KDYH WR SHDNE\DQGGURSE\SHUFHQWLQWKHSHULRG WR  WR OLPLW JOREDO ZDUPLQJ WR  GHJUHHV 7KH &OLPDWH*URXS <HWWRWDO*+*HPLVVLRQV IRUDUHHVWLPDWHGWRKDYHLQFUHDVHGE\PRUHWKDQ  SHU FHQW D KLVWRULFDO UHFRUG 7KH *XDUGLDQ  DQG,($D IROORZHGE\DQHVWLPDWHGLQFUHDVH RISHUFHQWLQ$OVRDFFRUGLQJWRHVWLPDWHV RIDQDO\VWVDW3ULFHZDWHUKRXVH&RRSHUV 3Z& JOREDO FDUERQ LQWHQVLW\ LH FDUERQ HPLVVLRQV SHU XQLW RI *'3 KDVLQFUHDVHGIRUWKHÃ&#x20AC;UVWWLPHLQPDQ\\HDUV ´,QVWHDG RI PRYLQJ WRR VORZO\ LQ WKH ULJKW GLUHFWLRQ ZHDUHQRZPRYLQJLQWKHZURQJGLUHFWLRQµVDLGRQH




.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

RIWKH3Z&DQDO\VWV,QSULQFLSDOZHIROORZWKH*+* HPLVVLRQVWUHQGVXQGHUWKHZRUVWFDVHVFHQDULRRIWKH ,QWHUJRYHUQPHQWDO 3DQHO RQ &OLPDWH &KDQJH ,3&&  DQGWKH,QWHUQDWLRQDO(QHUJ\$JHQF\ ,($  )LQDQFLDO 7LPHV  $JULFXOWXUDO HPLVVLRQV RI PHWKDQH &+  DQG QLWURXV R[LGH 12  ZKLFK DFFRXQW IRU RYHU  SHU FHQW RI WRWDODJULFXOWXUDO*+*HPLVVLRQVJUHZE\SHUFHQW LQWKHSHULRG² ,3&&D URXJKO\ SURSRUWLRQDWH IRU LQVWDQFH WR WKH LQFUHDVH LQ JOREDO FHUHDOV· SURGXFWLRQ YROXPH EXW DERXW WKUHH WLPHV DV IDVW DV SURGXFWLYLW\ LQFUHDVHG LQ JOREDO FHUHDOV· SURGXFWLRQ 7KHVH *+* HPLVVLRQV DUH SUHGLFWHG WR ULVH E\  SHU FHQW E\  LQ UHVSRQVH WR SRSXODWLRQJURZWKDQGFKDQJLQJGLHWVLQGHYHORSLQJ FRXQWULHV LQ SDUWLFXODU WRZDUGV JUHDWHU FRQVXPSWLRQ RI UXPLQDQW PHDWV DQG GDLU\ SURGXFWV DV ZHOO DV WKH IXUWKHU VSUHDG RI LQGXVWULDO DQG IDFWRU\ IDUPLQJ SDUWLFXODUO\ LQ GHYHORSLQJ FRXQWULHV ,3&& D   ,Q RWKHU ZRUGV LQVWHDG RI FXWWLQJ DJULFXOWXUDO HPLVVLRQVE\VRPHSHUFHQWE\LQUHDOLW\ZH IROORZH[DFWO\WKHRSSRVLWHWUHQG $V FDQ EH VHHQ IURP Ã&#x20AC;JXUH  WKH UHFHQW DQG IXWXUH ULVH LQ JOREDO DJULFXOWXUDO *+* HPLVVLRQV LV PDLQO\ RFFXUULQJ LQ GHYHORSLQJ FRXQWULHV ,Q  WKH

ODWWHU DFFRXQWHG IRU WKUHH TXDUWHUV RI QLWURXV R[LGH DQG PHWKDQH HPLVVLRQV LQ WKH DJULFXOWXUDO VHFWRU 7KHVH HPLVVLRQV DUH PDLQO\ FDXVHG E\ VRPH  GHYHORSLQJ FRXQWULHV VHH Ã&#x20AC;JXUH   7KH FRXQWULHV LQ Ã&#x20AC;JXUH  FDXVH RYHU  SHU FHQW RI DJULFXOWXUDO HPLVVLRQV ZRUOGZLGH $OWKRXJK WKH OHDVW GHYHORSHG FRXQWULHV /'&V  DUH QRW D VLJQLÃ&#x20AC;FDQW FRQWULEXWRU WR JOREDODJULFXOWXUDOHPLVVLRQVWKHODWWHUDFFRXQWIRUWKH EXON RI QDWLRQDO *+* HPLVVLRQV DV FDQ EH VHHQ LQ Ã&#x20AC;JXUH  LQ /'&V DJULFXOWXUHUHODWHG *+* HPLVVLRQV DFFRXQWIRUDERXWSHUFHQWRIWRWDO*+*HPLVVLRQV  *OREDOZDUPLQJLVDWKUHDWPXOWLSOLHULHFRPSRXQGLQJ VXSSOHPHQWLQJRUUHLQIRUFLQJRWKHUWKUHDWVVRWKDWWKH ELRSK\VLFDO YXOQHUDELOLW\ RI DJULFXOWXUH LQFUHDVHV 7KH PDLQ LPSDFW RI JOREDO ZDUPLQJ RQ DJULFXOWXUDO SURGXFWLRQFDQEHVXPPDUL]HGDVIROORZV Â&#x2021; +LJKHU WHPSHUDWXUHV DIIHFW SODQW DQLPDO DQG IDUPHUV·KHDOWKHQKDQFHSHVWVDQGUHGXFHZDWHU VXSSO\ LQFUHDVLQJ WKH ULVN RI JURZLQJ DULGLW\ DQG ODQGGHJUDGDWLRQ Â&#x2021; 0RGLÃ&#x20AC;HG SUHFLSLWDWLRQ SDWWHUQV ZLOO HQKDQFH ZDWHU VFDUFLW\ DQG DVVRFLDWHG GURXJKW VWUHVV IRU FURSV DQGDOWHULUULJDWLRQZDWHUVXSSOLHV7KH\DOVRUHGXFH WKHSUHGLFWDELOLW\IRUIDUPHUV·SODQQLQJ Â&#x2021; 7KH HQKDQFHG IUHTXHQF\ RI ZHDWKHU H[WUHPHV

)LJXUH(VWLPDWHGKLVWRULFDODQGSURMHFWHGQLWURXVR[LGHDQGPHWKDQHHPLVVLRQVLQWKHDJULFXOWXUDOVHFWRURI GHYHORSLQJDQGGHYHORSHGFRXQWULHV²LQWKRXVDQGW&2HT  1  2 0 DQXUH 1  2 6 RLOV 1  2 % XUQLQJ & +  5 LFH & +  0 DQXUH & +  ( QWHULF & +  % XUQLQJ













 









'HYHORSLQJFRXQWULHV

6RXUFH,3&& D 















'HYHORSHGFRXQWULHV








75$'($1'(19,5210(175(9,(:

UK

Venezuela

Ethiopia

Vietnam

Canada

DRC

Turkey

Mexico

Myanmar

Pakistan

Bangladesh

6RXUFH:RUOG5HVRXUFHV,QVWLWXWHTXRWHGLQ0Â OOHUHWDO D  1RWH &2HPLVVLRQVDUHFRQĂ&#x20AC;QHGWRIRVVLOIXHOFRPEXVWLRQRQO\

)LJXUH/'&*+*HPLVVLRQVE\VHFWRU SHUFHQWRIWRWDOHPLVVLRQV

0 DQXIDFWXULQJDQG FRQVWUXFWLRQ  7 UDQVSRUWDWLRQ 

( OHFWULFLW\DQGKHDW 

) XJLWLY HHP LVVLRQV  ,QGXVWULDOSURFHVVHV 

2 WKHUIXHOFRP EXVWLRQ  : DVWH  ( QHUJ\ 

$ JULFXOWXUH 

6RXUFH81&7$'  

/DQGXVHFKDQJHVDQG IRUHVWU\ 

Per capita (million metric tons CO2-e/person)

-0

Germany

0-

Thailand

-1

Colombia

200 -

France

-2

Austria

400 -

Nigeria

-3

Russia

600 -

Indonesia

-4

Argentina

800 -

India

-5

US

1,000 -

Brazil

-6

EU-27

1,200 -

China

Total (million metric tons CO2-e)

)LJXUH7RS*+*HPLWWLQJFRXQWULHVIURPDJULFXOWXUH WRWDODQGSHUFDSLWDHPLVVLRQVLQ&2HTIRUWKH\HDU


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



)LJXUH3URMHFWHGFOLPDWHFKDQJHFDXVHGFKDQJHVLQDJULFXOWXUDOSURGXFWLYLW\E\LQFRUSRUDWLQJWKHHIIHFWRI FDUERQIHUWLOLVDWLRQ

<-25 -25 to -15 -15 to -5 -5 to 0 0 to 5 5 to 15 15 to 25 >25 n.a.

6RXUFH&OLQH  DQG<RKH 

6RXUFH&OLQH  DQG<RKQHWDO  

‡

‡

‡

‡

‡

‡

PD\VLJQLÀFDQWO\LQÁXHQFHERWKFURSDQGOLYHVWRFN SURGXFWLRQ ,W PD\ DOVR FRQVLGHUDEO\ LPSDFW RU GHVWUR\SK\VLFDOLQIUDVWUXFWXUHIRUDJULFXOWXUH (QKDQFHG DWPRVSKHULF FRQFHQWUDWLRQV RI &2 PD\ IRU D OLPLWHG SHULRG RI WLPH OHDG WR ¶QDWXUDO· FDUERQ IHUWLOL]DWLRQ DQG WKXV D VWLPXOXV WR FURS SURGXFWLYLW\ +LJKHUWHPSHUDWXUHVJRKDQGLQKDQGZLWKKLJKHU R]RQH FRQFHQWUDWLRQV 2]RQH LV KDUPIXO WR DOO SODQWV EXW VR\EHDQV ZKHDW RDWV JUHHQ EHDQV SHSSHUVDQGVRPHW\SHVRIFRWWRQDUHSDUWLFXODUO\ YXOQHUDEOH )$2D  *OREDO ZDUPLQJ ZLOO DOVR QHJDWLYHO\ LPSDFW WKH QXWULWLRQDO TXDOLW\ RI VRPH IRRG LQ SDUWLFXODU WKH SURWHLQ DQG PLFURQXWULHQWV· FRQWHQW IRU PRUH LQIRUPDWLRQ VHH WKH FRPPHQW RI +|J\ DQG )DQJPHLHULQWKLV&KDSWHU  +LJKHU WHPSHUDWXUHV DUH OLNHO\ WR LQFUHDVH WKH H[SRVXUH RI SODQWV DQG DQLPDOV WR GLVHDVHV DQG SHVWV WKXV LQFUHDVLQJ SURGXFWLRQ DQG KDQGOLQJ ORVVHV 6HD OHYHO ULVH LV OLNHO\ WR LQÁXHQFH WUDGH LQIUD VWUXFWXUH IRU DJULFXOWXUH PD\ LQXQGDWH SURGXFLQJ DUHDVDQGDOWHUDTXDFXOWXUHSURGXFWLRQFRQGLWLRQV *OREDOZDUPLQJLVQRWXQLIRUPO\SUREOHPDWLF,WZLOO OHDG WR LPSURYHG FURS SURGXFWLYLW\ LQ SDUWV RI WKH WURSLFDOKLJKODQGVDQGH[WHQGFURSSLQJSHULRGVRU DOORZ PXOWLSOH KDUYHVWV LQ WHPSHUDWH ]RQHV )$2 D 

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¶EX\· IRRGVHFXULW\DWOHDVWLQWKHVKRUWUXQ )$2D  7KH LPSDFW RI JOREDO ZDUPLQJ KDV VLJQLÀFDQW FRQVHTXHQFHV IRU DJULFXOWXUDO SURGXFWLRQ DQG WUDGH RI GHYHORSLQJ FRXQWULHV DV ZHOO DV DQ LQFUHDVHG ULVN RIKXQJHU3UHOLPLQDU\HVWLPDWHVIRUWKHSHULRGXSWR  VXJJHVW D GHFOLQH RI VRPH  SHU FHQW RI DJULFXOWXUDO SURGXFWLYLW\ LQ WKH PRVW FOLPDWHFKDQJH H[SRVHG GHYHORSLQJFRXQWU\ UHJLRQV  $IULFD 6RXWK $VLDDQG&HQWUDO$PHULFD VHHÀJXUH )RUVRPH FRXQWULHVLQWKHVHUHJLRQVWRWDODJULFXOWXUDOSURGXFWLRQ FRXOGGHFOLQHE\XSWRSHUFHQW$FFRUGLQJWR)$2 D   ´LQ VRPH ORFDWLRQV D FRPELQDWLRQ RI WHPSHUDWXUH DQG SUHFLSLWDWLRQ FKDQJHV PLJKW UHVXOW LQ FRPSOHWH ORVV RI DJULFXOWXUDO DFWLYLW\ LQ D IHZ ORFDWLRQV DJULFXOWXUH PLJKW EHFRPH LPSRVVLEOHµ




7KH SRRUHVW IDUPHUV ZLWK OLWWOH VDIHJXDUGV DJDLQVW FOLPDWHFDODPLWLHVRIWHQOLYHLQDUHDVSURQHWRQDWXUDO GLVDVWHUV 0RUH IUHTXHQW H[WUHPH HYHQWV ZLOO FUHDWH ERWKDKXPDQLWDULDQDQGDIRRGFULVLV )$2D  $JULFXOWXUHSURYLGHVHVVHQWLDOQRXULVKPHQWIRUSHRSOH DQG LV WKH QHFHVVDU\ EDVLV IRU PDQ\ HFRQRPLF DFWLYLWLHV,QDODUJHQXPEHURIGHYHORSLQJFRXQWULHV DJULFXOWXUH DFFRXQWV IRU EHWZHHQ  RI *'3 DQG SURYLGHV WKH OLYHOLKRRGV IRU DSSUR[LPDWHO\  ELOOLRQ SHRSOH LH VRPH  RI JOREDO SRSXODWLRQ  )$2D :KDWLVPRUHDFFRUGLQJWR'H-DQYU\ DQG 6DGRXOHW   DJULFXOWXUHGULYHQ JURZWK LV WKUHH WLPHV PRUH OLNHO\ WR UHGXFH SRYHUW\ WKDQ *'3 JURZWKLQRWKHUVHFWRUVRIWKHHFRQRP\ 7KHFXUUHQWV\VWHPRILQGXVWULDODJULFXOWXUHSURGXFWLYH DV LW KDV EHHQ LQ UHFHQW GHFDGHV VWLOO OHDYHV DERXW  ELOOLRQ SHRSOH XQGHUQRXULVKHG DQG SRYHUW\ VWULFNHQRIZKRPOLYHLQUXUDODUHDV0LOOHQQLXP 'HYHORSPHQW *RDO 0'*  RQH DLPV DW HUDGLFDWLQJ H[WUHPHKXQJHUDQGSRYHUW\2QHRIWKHPRVWHIIHFWLYH ZD\VRIKDOYLQJERWKWKHQXPEHURIKXQJU\DQGSRRU E\  LV WR WDNH WKH QHFHVVDU\ VWHSV RI WUDQVLWLRQ WRZDUGV PRUH VXVWDLQDEOH IRUPV RI DJULFXOWXUH WKDW

75$'($1'(19,5210(175(9,(:

QRXULVKWKHODQGDQGSHRSOHDQGSURYLGHDQRSSRUWXQLW\ IRU GHFHQW ÀQDQFLDOO\ UHZDUGLQJ DQG JHQGHU HTXDO MREV 0HHWLQJ KHDOWK WDUJHWV IURP 0'*  DQG  DUH DOVR OLQNHG WR PDMRU FKDQJHV LQ DJULFXOWXUH UHVXOWLQJ LQDPRUHGLYHUVHVDIHQXWULWLRXVDQGDIIRUGDEOHGLHW 7KHUHIRUHWKHSUREOHPVRIFOLPDWHFKDQJHKXQJHUDQG SRYHUW\ HFRQRPLF VRFLDO DQG JHQGHU LQHTXLW\ SRRU KHDOWK DQG QXWULWLRQ DQG HQYLURQPHQWDO VXVWDLQDELOLW\ DUHLQWHUUHODWHGDQGQHHGWREHVROYHGE\OHYHUDJLQJ DJULFXOWXUH·VPXOWLIXQFWLRQDOLW\ +HUUHQHWDO  $JDLQVW WKLV EDFNJURXQG FOLPDWHIULHQGO\ DJULFXOWXUH PXVW EHFRPH WKH QHZ SDUDGLJP EXW LW VKRXOG QRW FRPSURPLVH RWKHU YHU\ LPSRUWDQW GHYHORSPHQWDO REMHFWLYHV ‡ $GGUHVVLQJ WKH HTXLW\ FKDOOHQJH QRWDEO\ IRRG VHFXULW\DQGIDUPHUOLYHOLKRRGV ‡ (QKDQFLQJ VXVWDLQDEOH SURGXFWLYLW\ EDVHG RQ D QHZ V\VWHPLFDOO\ GLIIHUHQW GHÀQLWLRQ WKDW IRFXVHV RQWRWDOIDUPRXWSXWLQVWHDGRISURGXFWLYLW\SHUXQLW RIODERXU ‡ 6WUHQJWKHQLQJ UHVLOLHQFH WR UHVRXUFH DQG HQHUJ\ VFDUFLW\DQGFOLPDWHFKDQJHDQG ‡ 5HÁHFWLQJDQGFDSLWDOL]LQJRQWKHPXOWLIXQFWLRQDOLW\ RIDJULFXOWXUH

)LJXUH6\VWHPLFHPEHGGLQJRIFOLPDWHIULHQGO\DJULFXOWXUH

22SSRVLWHGLUHFWLRQ 66DPHGLUHFWLRQ 55HLQIRUFQJORRS %%DODQFLQJORRS

6RXUFH+HUUHQ  


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

,WLVWKHUHIRUHLPSRUWDQWWRWKLQNLQV\VWHPVUDWKHUWKDQ RYHUHPSKDVL]LQJDFOLPDWHIRFXV VHHÃ&#x20AC;JXUH 

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Â&#x2021; ,QFUHDVLQJWKHVRLOFDUERQFRQWHQWFRPELQHGZLWK FORVHGQXWULHQWF\FOHVDQGDQLQWHJUDWHGDSSURDFK WRDJULFXOWXUDOSURGXFWLRQ Â&#x2021; 5HGXFWLRQ RI GLUHFW DQG LQGLUHFW LH WKURXJK WKH IHHGFKDLQ *+*HPLVVLRQVRIOLYHVWRFNSURGXFWLRQ Â&#x2021; 5HGXFWLRQ RI LQGLUHFW LH FKDQJHV LQ ODQGXVH LQGXFHG HPLVVLRQVWKURXJKVXVWDLQDEOHSHDWODQG IRUHVWDQGJUDVVODQGPDQDJHPHQW Â&#x2021; 2SWLPL]DWLRQ RI RUJDQLF DQG LQRUJDQLF IHUWLOL]HU XVH LQFOXGLQJ WKURXJK FORVHG QXWULHQW F\FOHV LQ DJULFXOWXUH Â&#x2021; 5HGXFWLRQRIZDVWHWKURXJKRXWWKHIRRGFKDLQV Â&#x2021; &KDQJLQJGLHWDU\SDWWHUQVWRZDUGVFOLPDWHIULHQGO\ IRRGFRQVXPSWLRQ Â&#x2021; 5HIRUP RI WKH LQWHUQDWLRQDO WUDGH UHJLPH IRU IRRG DQGDJULFXOWXUDOSURGXFWV ,Q LPSOHPHQWLQJ WKH DERYHRXWOLQHG HOHPHQWV RI D IXQGDPHQWDOWUDQVIRUPDWLRQRIDJULFXOWXUHRQHVKRXOG QRWRYHUORRN  7KHLQWHUOLQNDJHVEHWZHHQWKHHOHPHQWV  7KH PHULWV DQG GHPHULWV RI VLQJOH FOLPDWHIULHQGO\ SUDFWLFHV YHUVXV WKRVH RI V\VWHPLF FKDQJHV



WKURXJK DJURHFRORJ\ DJURIRUHVWU\ RUJDQLF DJULFXOWXUH  7KHQHHGIRUDWZRWUDFNDSSURDFK  L  UHGXFLQJ HQYLURQPHQWDO LPSDFW RI FRQYHQWLRQDO DJULFXOWXUHDQG  LL  EURDGHQLQJ VFRSH IRU DQG IXUWKHU GHYHORSLQJ DJURHFRORJLFDOSURGXFWLRQPHWKRGV

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´PRUH ZLWK OHVVµ  7KH FXUUHQWO\SXUVXHGDSSURDFKLVVWLOOYHU\PXFKELDVHG WRZDUGV H[SDQVLRQ RI ´VRPHZKDWOHVVSROOXWLQJµ LQGXVWULDO DJULFXOWXUH UDWKHU WKDQ PRUH VXVWDLQDEOH DQG DIIRUGDEOH SURGXFWLRQ PHWKRGV $OVR WKH PDLQ SUREOHPRIKXQJHULVVWLOOQRWDSSUHFLDWHGDFFHVVWR DIIRUGDEOH IRRG LQ UXUDO DUHDV WKH ODFN RI PHDQV RI SURGXFWLRQDQGDFFHVVWRUHVRXUFHVIRUVPDOOKROGHUV 2QH GRHV VWLOO QRW UHFRJQL]H WKDW D SDUDGLJP VKLIW LV UHTXLUHG UHVXOWLQJ IURP L  GHHSHQLQJ LQWHJUDWLRQ RI IRRG HQHUJ\ DQG Ã&#x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




‡ 5HGXFH IXHOLQWHQVLYH H[WHUQDO LQSXWGHSHQGHQW DJULFXOWXUDO SURGXFWLRQ PHWKRGV WRZDUGV DJUR HFRORJLFDO SUDFWLFHV UHFRJQL]LQJ WKH PXOWL IXQFWLRQDOLW\RIDJULFXOWXUH ‡ 'LVFRXUDJH LQGXVWULDO OLYHVWRFN SURGXFWLRQ DQG DVVRFLDWHGPDVVLYHXVHRIFRQFHQWUDWHIHHG ‡ 'LVFRXUDJH H[SDQVLRQ RI ELRIXHO SURGXFWLRQ GLVFRQWLQXH EOHQGLQJ TXRWDV UHGXFH VXEVLGLHV UHYLVHWUDGHUHVWULFWLRQV ‡ 5HGXFH ÀQDQFLDO VSHFXODWLRQ LH ÀQDQFLDOL]DWLRQ RI IRRG PDUNHWV  DQG OLPLW LUUHVSRQVLEOH ODQG LQYHVWPHQWV VHH WKH FRPPHQWDU\ RI 0OOHU LQ &KDSWHU 

75$'($1'(19,5210(175(9,(:

‡ 5HIRUP JOREDO DJULFXOWXUDO WUDGH UXOHV JLYLQJ JUHDWHU SROLF\ VSDFH IRU DVVXULQJ QDWLRQDO IRRG VRYHUHLJQW\ FOLPDWHFKDQJH DGDSWDWLRQUHVLOLHQFH UHWKLQN IRFXV RQ LQWHJUDWLQJ VPDOOKROGHUV LQWR JOREDOVXSSO\FKDLQV VHH&KDSWHU  ‡ 5HGXFH IRRG SULFH YRODWLOLW\ ZLWKRXW EHGGLQJ H[FOXVLYHO\RQKHGJLQJRSWLRQV ,QHVVHQFHDVSRLQWHGRXWE\1DHUVWDG SDUW,, S   ´D PRUH UDGLFDO WUDQVIRUPDWLRQ RI DJULFXOWXUH LV QHHGHG RQH JXLGHG E\ WKH QRWLRQ WKDW HFRORJLFDO FKDQJH LQ DJULFXOWXUH FDQQRW EH SURPRWHG ZLWKRXW FRPSDUDEOH FKDQJHV LQ WKH VRFLDO SROLWLFDO FXOWXUDO DQGHFRQRPLFDUHQDVWKDWDOVRFRQIRUPDJULFXOWXUHµ


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U   )4+%7.674'U0+37''%614+0 %101/+%X %1.1)+%#.#0&1%+#.'4/5 -HDQ)H\GHU $PEDVVDGRU)RUPHU3HUPDQHQW5HSUHVHQWDWLYHRI/X[HPERXUJWRWKH81DQG:72LQ*HQHYD

$EVWUDFW 0RUHWKDQRQHELOOLRQSHRSOHDUHVXIIHULQJIURPKXQJHUDQGPDOQXWULWLRQ3DUDGR[LFDOO\PRVWRIWKHPDUHLQ UXUDODUHDVDQGRQO\SHUFHQWDUHLQFLW\VOXPVZKLOHDVPDOOPLQRULW\DUHYLFWLPVRIZDURUFLYLOFRQÁLFW /RZSULFHVRIIRRGSURGXFWVSURGXFHGE\VPDOOKROGHUIDUPHUVFDQDIIHFWWKHLULQFRPHVDQGFRQWULEXWHWR SRYHUW\DQGKXQJHU2QO\VWDEOHDQGIDLUSULFHVZLOOJLYHWKHPLQGLVSHQVDEOHEX\LQJSRZHU $GHTXDWH UHJXODWLRQ RI DJULFXOWXUDO PDUNHWV LV QHHGHG WR VKLHOG VPDOO SURGXFHUV IURP LQWHUQDWLRQDO FRPSHWLWLRQDQGGXPSLQJRIIRRGLPSRUWV )DVWGHWHULRUDWLQJHFRV\VWHPVFOLPDWHFKDQJHDQGZDWHUVFDUFLW\VHULRXVO\WKUHDWHQIRRGVHFXULW\7KHVH FKDOOHQJHVFDQEHVWEHPHWWKURXJKWKHDGRSWLRQRIDJURHFRORJ\RUJDQLFDQGRWKHUVXVWDLQDEOHIDUPLQJ PHWKRGV

$JULFXOWXUHKDVWREHSXWDWWKHKHDUWRIDQ\SRYHUW\ UHGXFWLRQ VWUDWHJ\ ,W LV D PXOWLGLPHQVLRQDO VHFWRU GLUHFWO\ OLQNHG WR WKH ÀJKW DJDLQVW KXQJHU DQG PDOQXWULWLRQ DQG WR IRRG VHFXULW\ $W WKH VDPH WLPH LW LV VWURQJO\ LQÁXHQFHG E\ LQWHUQDWLRQDO WUDGH ÀQDQFH GHYHORSPHQW FRRSHUDWLRQ DQG LQFUHDVLQJO\ LW LV DIIHFWHG E\ FOLPDWH FKDQJH DQG HQYLURQPHQWDO GHJUDGDWLRQ7KLVGLYHUVLW\RIIXQFWLRQVDQGDFWLYLWLHV UHTXLUHVWKDWLVVXHVUHODWLQJWRDJULFXOWXUHEHWUHDWHG LQDKROLVWLFPDQQHUDQGWKDWWKHFKDOOHQJHRISROLF\ FRKHUHQFHEHWDFNOHGERWKDWQDWLRQDODQGLQWHUQDWLRQDO OHYHOV IRUPRUHGHWDLOVHH)H\GHU  +XQJHU DQG PDOQXWULWLRQ DUH WKH PDLQ FDXVHV RI PRUWDOLW\LQWKHZRUOGWRGD\(DFKGD\WKH\NLOODERXW SHRSOHPRVWO\FKLOGUHQ$VDUHVXOWWKHLUULJKW WROLIHDQGWKHLUULJKWWRIRRGDUHPRVWÁDJUDQWO\YLRODWHG 7KHLQWHUQDWLRQDOFRPPXQLW\DJUHHGWRZDJHZDURQ WKLV VFRXUJH RI KXPDQLW\ ZKHQ +HDGV RI 6WDWH DQG *RYHUQPHQW DGRSWHG WKH 0LOOHQQLXP 'HYHORSPHQW *RDOV 0'*V  7KH ÀUVW JRDO FRPPLWWHG WR KDOYH E\  WKH SURSRUWLRQ RI WKH ZRUOG·V SRSXODWLRQ VXIIHULQJ IURP KXQJHU DQG PDOQXWULWLRQ ² VRPH  PLOOLRQSHRSOH +RZHYHU\HDUVODWHUPRUHWKDQDELOOLRQSHRSOH² RQHSHUVRQLQVHYHQ²DUHVWLOOVXIIHULQJIURPKXQJHU DQGPDOQXWULWLRQ7KLVLVXQGRXEWHGO\RQHRIWKHPRVW OHWKDO HIIHFWV RI WKH ZRUOG IRRG DQG ÀQDQFLDO FULVHV WRJHWKHUZLWKWKHHFRQRPLFUHFHVVLRQRIWKHSDVWIHZ

\HDUV 7KHVH FULVHV KDYH UHYHUVHG WKH IRUPHU WUHQG RI D GHFUHDVLQJ QXPEHU RI SHRSOH VXIIHULQJ IURP KXQJHU DQG PDOQXWULWLRQ %XW WKH )$2 DOVR VWUHVVHV WKDWWKLVWUHQGREVHUYHGEHIRUHWKHFULVHVZRXOGQRW LQIDFWKDYHEHHQVXIÀFLHQWWRDFKLHYHWKHÀUVWRIWKH 0LOOHQQLXP'HYHORSPHQW*RDOV 3DUDGR[LFDOO\ PRVW RI WKH YLFWLPV RI KXQJHU DQG PDOQXWULWLRQ UHVLGH LQ UXUDO DUHDV $FFRUGLQJ WR WKH )$2SHUFHQWRIWKHPDUHVPDOOSHDVDQWVSHU FHQWDUHODQGOHVVSHUFHQWDUHQRPDGLFKHUGVPHQ RUVPDOOÀVKHUPHQDQGSHUFHQWOLYHLQFLW\VOXPV 2QO\ D VPDOO PLQRULW\ VXIIHU EHFDXVH RI ZDU RU FLYLO FRQÁLFW$QGZKHUHDVLQWKH(8WKHIDUPLQJSRSXODWLRQ FRQVWLWXWHVRQO\SHUFHQWRIWKHWRWDOSRSXODWLRQLWLV DERXWSHUFHQWLQ&KLQDSHUFHQWLQ,QGLDDQG EHWZHHQ  DQG  SHU FHQW LQ VXE6DKDUDQ $IULFD )H\GHU  7KLV UXUDO VRFLDO FODVV LV DERYH DOO RIWHQ D YLFWLP RI PDUJLQDOL]DWLRQ DQG H[FOXVLRQ IURP LWV JRYHUQLQJ FODVVHV SROLWLFDOHFRQRPLFDQGÀQDQFLDO DVZHOODV IURPWKHXUEDQPLOLHXZKHUHWKHUHLVDFRQFHQWUDWLRQ RI SRZHU DQG NQRZOHGJH DQG WKHUHIRUH PRQH\ LQFOXGLQJIXQGVIRUGHYHORSPHQW2IWHQWKHXUEDQDQG UXUDO ZRUOGV DUH VHSDUDWHG E\ D FXOWXUDO DE\VV ZLWK WKH IRUPHU GLVSOD\LQJ LQGLIIHUHQFH LQFRPSUHKHQVLRQ DQGFRQWHPSW +XQGUHGV RI PLOOLRQV RI VPDOO SHDVDQWV PDLQO\ ZRPHQFXOWLYDWHDQDYHUDJHRIEHWZHHQRQHDQGWZR




7KHÃ&#x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²LIDWDOO²WR UHGXFLQJ &2 HPLVVLRQV WKHLU SURGXFWLRQ FRQWLQXHV WRVRDU 2QH RI WKH PDLQ DQG PRUH VWUXFWXUDO FDXVHV RI WKH IRRG FULVLV LV GLVLQYHVWPHQW LQ DJULFXOWXUH D VHFWRU WKDW KDV ORQJ EHHQ QHJOHFWHG 2IÃ&#x20AC;FLDO GHYHORSPHQW DVVLVWDQFH WR UXUDO DQG DJULFXOWXUDO GHYHORSPHQW GURSSHGIURPSHUFHQWWRSHUFHQWEHWZHHQ DQG )H\GHU  6WUXFWXUDO DGMXVWPHQW SROLFLHV KDYH OHG WR PDVVLYH WUDGH OLEHUDOL]DWLRQ DQG WKH RSHQLQJ XS RI PDUNHWV JLYLQJ FRQVXPHUV DFFHVV WR FKHDS LPSRUWHG IRRG 0HDQZKLOH SHDVDQWV KDYH EHHQ HQFRXUDJHG WR FRQFHQWUDWH RQ SURGXFLQJ H[SRUW FURSV +RZHYHU WKH  IRRG FULVLV KDV UDGLFDOO\ FKDOOHQJHG WKH UHOHYDQFHRIWKLVGHYHORSPHQWPRGHO ,Q WKH GHYHORSLQJ FRXQWULHV HVSHFLDOO\ WKH /'&·V LPSRUWVRIFKLFNHQULFHWRPDWRFRQFHQWUDWHDQGPLON SRZGHU KDYH ULVHQ UDSLGO\ UXLQLQJ ORFDO SURGXFWLRQ DQG WKH VXUYLYDO FRQGLWLRQV RI WHQV RI PLOOLRQV RI SHDVDQW IDPLOLHV QRW WR PHQWLRQ WKH ORVV RI MREV LQ WKHFUDIWDQGLQGXVWULDOVHFWRUVDVWKH\WRRKDYHEHHQ XQDEOHWRZLWKVWDQGLQWHUQDWLRQDOFRPSHWLWLRQ Ã&#x20AC;JXUH DQG 7KHWUDGHEDODQFHLQIRRGSURGXFWVIRUOHDVW GHYHORSHGFRXQWULHVPRYHGIURPDELOOLRQVXUSOXV \HDUVDJRWRDGHÃ&#x20AC;FLWRIELOOLRQLQDQG ELOOLRQLQ )H\GHU 

)LJXUH*KDQDFKLFNHQSURGXFWLRQDQGLPSRUWDWLRQ 

80,000 70,000 60,000 -

Chicken production Chicken imports

50,000 Tons

KHFWDUHVRIODQG²DQGRIWHQHYHQOHVV²ZLWKKRHVDQG PDFKHWHVZKLFKDUHWKHRQO\WRROVDWWKHLUGLVSRVDO %\ FRQWUDVW D :HVWHUQ (XURSHDQ IDUPHU SRVVHVVHV DQ DYHUDJH KROGLQJ RI  KHFWDUHV FXOWLYDWHG ZLWK LQFUHDVLQJO\ SRZHUIXO WUDFWRUV DQG RWKHU PDFKLQHU\ DQG HPSOR\V ODUJH TXDQWLWLHV RI SHVWLFLGHV DQG IHUWLOL]HUV7KLVDOVRH[SODLQVWKHKXJHSURGXFWLYLW\JDS LQ DJULFXOWXUH EHWZHHQ LQGXVWULDOL]HG FRXQWULHV DQG D QXPEHU RI HPHUJLQJ FRXQWULHV VXFK DV %UD]LO RQ WKH RQH KDQG DQG WKH JUHDW PDMRULW\ RI GHYHORSLQJ FRXQWULHVRQWKHRWKHU

75$'($1'(19,5210(175(9,(:

40,000 30,000 20,000 10,000 02002

2007

6RXUFH)$267$7 7KXVWKHGXPSLQJRIIRRGRQWRGHYHORSLQJFRXQWULHV KDVSHQDOL]HGGRPHVWLFSURGXFHUVZKRDUHIRUFHGWR VHOO DW UHGXFHG SULFHV WR IHZHU EX\HUV $FFRUGLQJ WR 81&7$'WKHSULFHVRIIRRGSURGXFWVDQGDJULFXOWXUDO UDZ PDWHULDOV IHOO E\  SHU FHQW DQG  SHU FHQW UHVSHFWLYHO\ EHWZHHQ  DQG  ,Q  WKH SULFH RI FRIIHH ZDV RQO\  SHU FHQW RI ZKDW LW KDG EHHQLQDQGWKDWRIFRWWRQZDVSHUFHQW 1XUL SVHHDOVR)$2GÃ&#x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Ã&#x20AC;FLHQW LQ ULFH SURGXFWLRQ ZKLFK LV RQH RI LWV PDLQ VWDSOH FURSV +RZHYHU DV D FRQVHTXHQFH RI LWV VWUXFWXUDO DGMXVWPHQWSURJUDPPHWKHFXVWRPVWDULIILQFOXGLQJ RQULFHLPSRUWHGLQWR+DLWLZDVUHGXFHGIURPSHU FHQW WR  SHU FHQW PDNLQJ LW WKH PRVW ´OLEHUDOL]HGµ FRXQWU\LQWKHZRUOG7RGD\OHVVWKDQSHUFHQWRI LWVULFHQHHGVDUHPHWE\ORFDOSURGXFWLRQ Ã&#x20AC;JXUH  )RU\HDUVLQVHYHUDO8QLWHG1DWLRQVERGLHVLQFOXGLQJ




.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

)LJXUH+DwWL5LFHSURGXFWLRQDQGLPSRUWV 

)LJXUH&XVWRPWDULIIVLQWKH(8DQGWKH:HVWHUQ$IULFDQ (FRQRPLFDQG0RQHWDU\8QLRQ 8(02$

100 -

100,000 50,000 -

60 50 40 30 -

Sugar products

150,000 -

70 -

Milk powder

200,000 -

Rice imports

Cereals

Tons

250,000 -

UEMOA

80 -

Rice production

Customs tariffs (per cent)

300,000 -

UE

90 -

Meat

350,000 -

20 -

01980

2004

2009

10 0-

6RXUFH)$267$7

6RXUFH%HUWKHORW

DV&KDLURI81&7$'·V7UDGHDQG'HYHORSPHQW%RDUG , KDYH EHHQ GHQRXQFLQJ WKLV QHJDWLYH LPSDFW RQ DJULFXOWXUDO DQG LQGXVWULDO GHYHORSPHQW LQ FRXQWULHV OLNH +DLWL $W WKH EHJLQQLQJ RI 0DUFK  IRUPHU 8QLWHG 6WDWHV 3UHVLGHQW %LOO &OLQWRQ ZKR LV FXUUHQWO\ WKH 8QLWHG 1DWLRQV 6HFUHWDU\*HQHUDO·V 6SHFLDO 5HSUHVHQWDWLYH IRU +DLWL SXEOLFO\ DFNQRZOHGJHG EHIRUH D 8QLWHG 6WDWHV 6HQDWH FRPPLWWHH WKDW WKLV SROLF\ ZKLFK KH VXSSRUWHG DV IRUPHU 8QLWHG 6WDWHV 3UHVLGHQW KDG EHHQ D PLVWDNH +H PDGH D VLPLODU VWDWHPHQW FRQFHUQLQJ DJULFXOWXUH LQ $IULFD ZKHQ KH VDLG ´ZH EOHZ LWµ +H ZHQW RQ WR VXJJHVW ZH GUDZ OHVVRQVIURPWKHVHHUURUVDQGKHOSFRXQWULHVOLNH+DLWL WR ÀQG WKHLU ZD\ EDFN WR VHOIVXIÀFLHQF\ LQ WKH IRRG VHFWRU

:RUOG%DQNQRZDUJXHVWKLVZRXOGQRWRQO\LQFUHDVH DJULFXOWXUDOSURGXFWLYLW\EXWDOVRUHGXFHSRYHUW\WKUHH WRIRXUWLPHVPRUHUDSLGO\WKDQLQRWKHUVHFWRUVRIWKH HFRQRP\ :RUOG%DQN %XWWKHFRPPLWPHQWV PDGH DW WKH /·$TXLOD 6XPPLW RI WKH * LQ  WR UHVHUYHPRUHWKDQELOOLRQRYHUDWKUHH\HDUSHULRG IRULQYHVWPHQWLQDJULFXOWXUHDUHIDUIURPEHLQJIXOÀOOHG

7KHVROXWLRQVIRUIHHGLQJWKHJURZLQJZRUOGSRSXODWLRQ DQGRYHUFRPLQJKXQJHUDQGPDOQXWULWLRQDUHFRPSOH[ DQG PXVW WDNH LQWR DFFRXQW WKH GLYHUVLW\ DQG PXOWL IXQFWLRQDOLW\ RI DJULFXOWXUH WKH VSHFLÀF FRQGLWLRQV RI HDFKFRXQWU\DVZHOODVFOLPDWHFKDQJHDQGLQFUHDVLQJ ZDWHU VFDUFLW\ ,Q GHYHORSLQJ WKHLU DJULFXOWXUDO SROLF\ JRYHUQPHQWV VKRXOG VHHN WKH DFWLYH SDUWLFLSDWLRQ RI IDUPHUV·DVVRFLDWLRQV 6LQFH  YDULRXV LQWHUQDWLRQDO FRQIHUHQFHV KDYH EHHQ VWUHVVLQJ WKH QHHG IRU UHQHZHG LQYHVWPHQW LQ DJULFXOWXUHLQRUGHUWRUHODXQFKDJULFXOWXUDOSURGXFWLRQ 0RUH QDWLRQDO DQG LQWHUQDWLRQDO IXQGV DUH QHHGHG WR KHOS LPSURYH UXUDO LQIUDVWUXFWXUHV DQG IDFLOLWDWH DFFHVV WR LQSXWV FUHGLW DQG NQRZOHGJH $V WKH

$ SROLF\ RI IDLU DQG VWDEOH SULFHV LV HVVHQWLDO WR HQDEOH SHDVDQWV WR HPHUJH IURP SRYHUW\ DQG WR SURYLGH WKHP ZLWK VXIÀ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ÀJXUH  ,Q RUGHU WR LQWURGXFH WKHVH FKDQJHV WKH FRQFHUQHG JRYHUQPHQWV QHHG WR PDNH PD[LPXP XVH RI WKH ÁH[LELOLW\ EHWZHHQ DSSOLHG DQG ERXQG UDWHV RIIHUHG XQGHU:72UXOHV7KLVDSSURDFKKDVWREHXQGHUVWRRG DFFHSWHG DQG HYHQ HQFRXUDJHG E\ DOO FRQFHUQHG




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Ã&#x20AC;VKUHVRXUFHV6XGGHQO\SHDVDQWVZRUOGZLGHKDYHWR UHDOL]HZLWKXQEHOLHYDEOHEUXWDOLW\WKDWWKHFRQGLWLRQV

75$'($1'(19,5210(175(9,(:

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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U   10%'267#.#0&4#%6+%#.52'%651(.+/#6' *#0)'+6+)#6+10*417)*)4+%7.674'U '&7%+0) 4''0*175' #5 /+55+105#0& 0%4'#5+0)1+.#4$10'37'564#6+10 $0OOHUDQG$*DWWLQJHU 5HVHDUFK,QVWLWXWHRI2UJDQLF$JULFXOWXUH )L%/ 6ZLW]HUODQG

$EVWUDFW 0LWLJDWLRQLQDJULFXOWXUHQHHGVWREHEDVHGRQWZRSLOODUV ‡ 7HFKQLFDOO\QLWURJHQLQSXWVVKRXOGEHUHGXFHGRUJDQLFIHUWLOL]HUVVKRXOGUHSODFHV\QWKHWLFIHUWLOL]HUV DQG VWRUDJH ORVVHV VKRXOG EH PLQLPL]HG ,QWHJUDWHG V\VWHPV ZLWK FORVHG HIÀFLHQW QXWULHQW F\FOHV VKRXOGEHWKHRUGHURIWKHGD\LQWKHIXWXUH ‡ 6RFLDOO\IRRGZDVWDJHVKRXOGEHPLQLPL]HGDQGPHDWFRQVXPSWLRQUHGXFHG

,Q JHQHUDO UHGXFLQJ *+* HPLVVLRQV DQG LQFUHDVLQJ VHTXHVWUDWLRQ LQ DJULFXOWXUH LV QR HDV\ WDVN HLWKHU FRQFHSWXDOO\RULQSUDFWLFH%XWWKHUHDUHDWOHDVWÀYH FOHDU H[FHSWLRQV SOXV RQH SRVVLEOH H[FHSWLRQ DW WKH FRQFHSWXDOOHYHO )LUVW DYRLGLQJ RSHQ EXUQLQJ RI ELRPDVV UHGXFHV HPLVVLRQV *LYHQ WKDW RSHQ ELRPDVV EXUQLQJ LV WKH WKLUGODUJHVWFRQWULEXWRURIGLUHFW*+*HPLVVLRQVIURP DJULFXOWXUH ² DFFRXQWLQJ IRU PRUH WKDQ  SHU FHQW ²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² SHU FHQW RI IRRG LV ORVW JOREDOO\ PDLQO\ DV D UHVXOW RI ZDVWDJH LQ LQGXVWULDOL]HG FRXQWULHV DQG E\ VWRUDJH ORVVHV LQ GHYHORSLQJ FRXQWULHV $YRLGLQJORVVHVDQGZDVWDJHZRXOGWKHUHIRUHUHGXFH

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ÀYH DVSHFWV DUH XQFRQWHVWHG EXWUHJUHWWDEO\WKH\DUHWKHRQO\RQHVRIVXFKFODULW\ DQGLPSRUWDQFH$GGUHVVLQJWKHRWKHUPRVWUHOHYDQW HPLVVLRQ VRXUFHV LQ DJULFXOWXUH HJ QLWURXV R[LGH HPLVVLRQV IURP VRLOV PHWKDQH IURP ULFH SURGXFWLRQ PDQXUHPDQDJHPHQW LVRIWHQKLJKO\FRPSOH[7KHUH DUHLQGLFDWLRQVWKDWDFWLRQVDQGVWUDWHJLHVUHODWLQJWR HDFK RI WKH VRXUFHV PD\ UHGXFH HPLVVLRQV EXW WKH




KLJK GHJUHH RI FRPSOH[LW\ DQG FRQWH[W GHSHQGHQF\ RI WKH XQGHUO\LQJ SURFHVVHV DQG WKHLU LQWHUDFWLRQV ZLWK RWKHU SURFHVVHV RIWHQ KLQGHU FOHDU VWDWHPHQWV )RUH[DPSOHUHGXFHGQLWURJHQLQSXWWHQGVWRUHGXFH QLWURXV R[LGH HPLVVLRQV EXW FRQVLGHUDWLRQV RI RWKHU FKDUDFWHULVWLFV RI D ORFDWLRQ DQG FURSSLQJ V\VWHP VXFK DV WHPSHUDWXUH KXPLGLW\ VRLO W\SH FURSV DQG IHUWLOL]HU W\SHV PD\ GRPLQDWH RU UHGXFHG ÁRRGLQJ RI ULFH ÀHOGV FXWV PHWKDQH HPLVVLRQV EXW WHQGV WR LQFUHDVH QLWURXV R[LGH HPLVVLRQV 1HYHUWKHOHVV LQGLFDWLRQV DUH VWURQJ HQRXJK WR PHQWLRQ UHGXFHG QLWURJHQ DSSOLFDWLRQV DV D VL[WK UHDOLVWLF RSWLRQ WKH ULJKWW\SHSODFHUDWHDQGWLPLQJRIQLWURJHQIHUWLOL]HU DSSOLFDWLRQV DUH LPSRUWDQW IRU PRUH GHWDLOV VHH 0OOHUHWDOD0OOHUDQG$XEHUW  5HJDUGLQJ HPLVVLRQV IURP HQHUJ\ XVH DJULFXOWXUH SOD\VDPLQRUUROHIDUPPDFKLQHU\DFFRXQWVIRURQO\ SHUFHQWRIGLUHFWDJULFXOWXUDO*+*HPLVVLRQVZKLOH HIÀFLHQF\LPSURYHPHQWVLQLUULJDWLRQZRXOGFRQWULEXWH VRPHZKDW PRUH DV LUULJDWLRQ DFFRXQWV IRU DERXW  SHUFHQWRIHPLVVLRQV %HOODUE\HWDO +RZHYHU UHGXFWLRQ RI HQHUJ\ XVH DORQJ WKH DJULFXOWXUDO YDOXH FKDLQ KDV XQGRXEWHG PLWLJDWLRQ SRWHQWLDO 7KHUH DUH VLJQLÀFDQW HPLVVLRQV IURP WUDQVSRUW SURFHVVLQJ DQG VWRUDJH DOO RI ZKLFK DUH DWWULEXWHG E\ HPLVVLRQ LQYHQWRULHV WR VHFWRUV RWKHU WKDQ DJULFXOWXUH 7KXV LQFUHDVLQJHIÀFLHQF\DQGUHGXFLQJWKHDPRXQWRIURDG DQGDLUWUDQVSRUWZRXOGFRQVLGHUDEO\UHGXFHHPLVVLRQV IURPWKHIRRGV\VWHP IRUPRUHLQIRUPDWLRQRQVXSSO\ FKDLQUHODWHG *+* HPLVVLRQV VHH FRPPHQWV E\ 5XQGJUHQ.UDLQ/LQQHDQG*DHEOHULQWKLVFKDSWHU  5HJDUGLQJWUDQVSRUWLWLVZRUWKSRLQWLQJRXWWKDWWKHUH LV VLJQLÀFDQW PLVUHSRUWLQJ RI HPLVVLRQV LQ QDWLRQDO *+* LQYHQWRULHV DV LPSRUWV DUH QRW DFFRXQWHG IRU 1DWLRQDO ERXQGDULHV DUH WKH EDVLV IRU HPLVVLRQV DFFRXQWLQJ DQG ´JUH\µ HPEHGGHG HPLVVLRQV LQ LPSRUWHGSURGXFWLRQLQSXWVDQGFRQVXPSWLRQJRRGV DUH DGGHG WR WKH EDODQFH RI WKH FRXQWULHV RI RULJLQ 7KLVFRQVLGHUDEO\GLVWRUWVQDWLRQDOHPLVVLRQVIURPWKH IRRGV\VWHPVRIFRXQWULHVZKHUHLPSRUWVDQGH[SRUWV SOD\DFUXFLDOUROH :LWK WKHVH UHPDUNV ZH KRSH WR KDYH RIIHUHG VRPH RSWLRQV DW WKH FRQFHSWXDO OHYHO $W WKH SUDFWLFDO OHYHO WKHUH DUH VRPH GLIÀFXOWLHV EXW GLIIHUHQWLDWLQJ WKUHHSKDVHVKHOSV3UDFWLFDOLPSOHPHQWDWLRQPHDQV RIIHULQJ LQFHQWLYHV DQG HVWDEOLVKLQJ PRQLWRULQJ DQG HQIRUFHPHQWPHFKDQLVPV 3URYLGLQJLQFHQWLYHVDQGHQIRUFHPHQWDUHDFKDOOHQJH LQPDQ\UHVSHFWVEXWPRQLWRULQJLVUHODWLYHO\HDV\IRU

75$'($1'(19,5210(175(9,(:

WKH ÀYH SURSRVDOV RXWOLQHG DERYH DYRLGLQJ EXUQLQJ UHGXFLQJDQLPDOQXPEHUVDYRLGLQJORVVHVDQGZDVWH DQG SUHYHQWLQJ GHIRUHVWDWLRQ DQG ODQG FRQYHUVLRQ 0RQLWRULQJ VRLO FDUERQ FKDQJHV FDQ EH PRUH GHPDQGLQJEXWLWLVIHDVLEOH*LYHQWKHQHFHVVLW\RI IXQGDPHQWDO FKDQJHV LQ DJULFXOWXUDO SURGXFWLRQ LQ RUGHUWRLQFUHDVHLWVVXVWDLQDELOLW\WKHVHÀYHDVSHFWV QHHG WR SOD\ D FHQWUDO UROH LQ DQ\ PLWLJDWLRQ SROLF\ IRU DJULFXOWXUH ,Q DGGLWLRQ UHGXFLQJ QLWURJHQ LQSXWV VKRXOG EH D NH\ SROLF\ WDUJHW DQG FKDQJHV LQ KRZ HPLVVLRQV IURP LPSRUWV DQG H[SRUWV DUH DFFRXQWHG IRUDUHQHHGHGWRHQDEOHXQELDVHGDQGPRUHDFFXUDWH DVVHVVPHQWVRIFRXQWULHV·HPLVVLRQV :H GR QRW WRXFK RQ HQIRUFHPHQW KHUH EXW ZKDW IROORZVDUHVRPHUHPDUNVRQDFWLRQVWKDWQHHGWREH WDNHQWRPRYHWRZDUGVDPRUHVXVWDLQDEOHDJULFXOWXUDO V\VWHPDVRXWOLQHGDERYH )LUVW RSHQ EXUQLQJ RI DJULFXOWXUDO ZDVWH VKRXOG EH SURKLELWHG DV KDV EHHQ LPSOHPHQWHG VXFFHVVIXOO\ E\ LQGXVWULDOL]HG FRXQWULHV ,QIRUPDWLRQ DQG WUDLQLQJ DQGLIQHFHVVDU\HYHQVRPHÀQDQFLDOVXSSRUWVKRXOG DFFRPSDQ\VXFKDEDQ7KLVZLOOSDUWO\LQÁXHQFHZHHG DQGSHVWPDQDJHPHQWDQGDOWHUVRPHQXWULHQWÁRZV WKRXJK VRPH DGGLWLRQDO LQYHVWPHQW RU ODERXU FRVWV PD\ DFFUXH HJ LQ VXJDUFDQH ZLWKRXW SUHKDUYHVW EXUQLQJ  7KH ELRPDVV QRW EXUQHG LV D YDOXDEOH UHVRXUFH ZKLFK FDQ EH XVHG DV VRXUFH PDWHULDO IRU FRPSRVW RU PXOFK LH DV RUJDQLF IHUWLOL]HU  RU IRU ELRHQHUJ\SURGXFWLRQ&OHDUO\WKHVHDOWHUQDWLYHXVHV QHHG WR EH VXSSRUWHG E\ LQIRUPDWLRQ DQG WUDLQLQJ DQGSHUKDSVDOVRE\LQYHVWPHQWVXSSRUW7KHUHPD\ EH VRPH RSWLRQV IRU REWDLQLQJ ÀQDQFLDO DVVLVWDQFH IURP WKH FDUERQ PDUNHWV HJ UHQHZDEOH HQHUJ\ RU FRPSRVWLQJ SURMHFWV XQGHU WKH &OHDQ 'HYHORSPHQW 0HFKDQLVPV  6HFRQG UHGXFHG DQLPDO QXPEHUV DQG ODQGXVH FKDQJH FDQ EH DGGUHVVHG RQ WKH SURGXFHUV· VLGH WKURXJK RSWLPDO VWRFNLQJ UDWHV HIÀFLHQW JUDVVODQG PDQDJHPHQW DQG SDVWRUDOLVP IRUHVW SURWHFWLRQ DQG ODQGXVHOHJLVODWLRQ$QRSWLPDOFRPELQDWLRQRIFURS IDUPLQJ DQG DQLPDO KXVEDQGU\ SURGXFHV WKH PRVW HIÀFLHQW QXWULHQW F\FOHV +RZHYHU UHGXFLQJ DQLPDO QXPEHUV LV XVXDOO\ QRW DQ LVVXH IRU VPDOOKROGHUV LQ GHYHORSLQJ FRXQWULHV DQG DQLPDO KXVEDQGU\ LV HVVHQWLDO IRU WKHLU IRRG VHFXULW\ $FWLRQV RQ WKH SURGXFHUV· VLGH ZRXOG LQFOXGH PDNLQJ LQSXWV PRUH H[SHQVLYH DQG FRUUHVSRQGLQJO\ LQFUHDVLQJ RXWSXW SULFHVZKLFKWRVRPHH[WHQWZRXOGUHGXFHGHPDQG 2QWKHGHPDQGVLGHLWLVSULPDULO\DQLVVXHRQDJOREDO VFDOHDQGFRQFHUQVPDLQO\PRUHZHDOWK\FRQVXPHUV


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

ZKRVH LQFUHDVLQJ GHPDQG IRU PHDW DQG GDLU\ SURGXFWVQHHGVWREHGLVFRXUDJHG2QHSRVVLEOHZD\ WRUHGXFHGHPDQGZRXOGEHE\LPSRVLQJD´PHDWWD[µ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À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ÁRZVLQWR DJULFXOWXUHDQGWKHIRRGV\VWHP VHHWKHFRPPHQWDU\



RI3DUÀWWDQG%DUWKHOLQWKLVFKDSWHU  )RXUWK UHGXFHG QLWURJHQ LQSXWV FDQ EH DFKLHYHG WKURXJK UHJXODWLRQ IROORZLQJ WKH H[DPSOH RI WKH VXFFHVVIXO (8 1LWURJHQ 'LUHFWLYH 7D[LQJ LQSXWV LV DQRWKHU RSWLRQ D KHDY\ FDUERQ WD[ ZRXOG VHUYH D VLPLODUJRDOGXHWRWKHXVHRIIRVVLOIXHOIRUV\QWKHWLF IHUWLOL]HU SURGXFWLRQ +RZHYHU QLWURJHQ UHJXODWLRQ VKRXOG JR IXUWKHU WKDQ RQO\ LQSXW UHGXFWLRQ &ORVHG QXWULHQWF\FOHVDQGLQFUHDVHGXVHRIRUJDQLFIHUWLOL]HUV VKRXOG EH WKH ÀQDO JRDO DV WKLV ZRXOG DOVR KDYH KLJKO\EHQHÀ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À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




75$'($1'(19,5210(175(9,(:

1//'06#4; U  *'16'06+#.1(756#+0#$.')4+%7.674'(14 .+/#6'*#0)'&#26#6+10 $0OOHUDQG81LJJOL 5HVHDUFK,QVWLWXWHRI2UJDQLF$JULFXOWXUH )L%/ 6ZLW]HUODQG

$EVWUDFW $GDSWDWLRQLQDJULFXOWXUHQHHGVWREHEDVHGRQIRXUSLOODUV ‡ ,QFUHDVLQJVRLOIHUWLOLW\WKLVFDQEHDFKLHYHGE\UHSODFLQJV\QWKHWLFIHUWLOL]HUVZLWKRUJDQLFIHUWLOL]HUV DQGPRQRFXOWXUHVZLWKGLYHUVHFURSURWDWLRQV ‡ ,QFUHDVLQJELRGLYHUVLW\WKURXJKGLYHUVHPHDVXUHVVXFKDVFURSURWDWLRQVXVHRIORFDOYDULHWLHVFDWFK FURSVKHGJHVDQGRWKHUODQGVFDSHHOHPHQWV7KLVDSSOLHVWRÀHOGIDUPDQGODQGVFDSHOHYHOV,Q DGGLWLRQ WKH XVH RI VXVWDLQDEOH DQG HVSHFLDOO\ RUJDQLF FURS SURWHFWLRQ ZLOO IRVWHU ELRGLYHUVLW\ RI LQVHFWVZHHGVHDUWKZRUPVDQGRWKHURUJDQLVPV ‡ 3URYLGLQJLQIRUPDWLRQDQGH[WHQVLRQVHUYLFHVWRVXSSRUWVXVWDLQDEOHDJULFXOWXUDOSUDFWLFHVDQGRUJDQLF DJULFXOWXUHDJURHFRORJ\DQGDJURIRUHVWU\ ‡ &UHDWLQJDOHYHOSOD\LQJÀHOGIRUVXVWDLQDEOHDJULFXOWXUHDWWKHJOREDOOHYHO7KLVLQYROYHVDEROLVKLQJ GLVWRUWLQJVXEVLGLHVVXFKDVIRUV\QWKHWLFIHUWLOL]HUVDQGLQWHUQDOL]DWLRQRIH[WHUQDOFRVWV 2UJDQLFDJULFXOWXUHLVDQLGHDOVROXWLRQDVLWUHVSRQGVWRWKHÀUVWWKUHHSLOODUV,QDGGLWLRQJOREDOSROLFLHV DQGWUDGHDQGFRPSHWLWLRQLVVXHVQHHGVHSDUDWHDWWHQWLRQ

$GDSWLQJDJULFXOWXUHWRFOLPDWHFKDQJHLVXQDYRLGDEOH )RUDGDSWDWLRQ RQWKHFRQFHSWVHHER[ WRVXFFHHG LWLVQHFHVVDU\IRUIDUPVWRWDNHFRQFUHWHDGDSWDWLRQ PHDVXUHVEXWDOVRJHQHUDOORQJWHUPVRFLHWDODFWLRQV DUH QHHGHG 2XU FRPPHQWV KHUH IRFXV PDLQO\ RQ DGDSWDWLRQPHDVXUHVIRUIDUPV $QDVSHFWRIWHQQHJOHFWHGLQFXUUHQWGLVFXVVLRQVRQ DGDSWDWLRQLQDJULFXOWXUH GLVFXVVHGLQGHWDLOLQ0OOHU HWDO LVWKDWDGDSWDWLRQVWUDWHJLHVDOVRQHHGWR RIIHU IDUPLQJ IDPLOLHV VROXWLRQV RXWVLGH DJULFXOWXUH LI DJULFXOWXUDOSURGXFWLRQEHFRPHVLPSRVVLEOHIRUWKHP )RUH[DPSOHGURXJKWUHVLVWDQWYDULHWLHVDQGLPSURYHG HIÀFLHQF\RIZDWHUXVHZRXOGKHOSDGDSWDWLRQEXWLQ VRPH FDVHV ZDWHU DYDLODELOLW\ PD\ EHFRPH WRR ORZ WR FRQWLQXH ZLWK DJULFXOWXUH ,Q VXFK VLWXDWLRQV WKH NH\TXHVWLRQLVZKHUHDJULFXOWXUDOSURGXFWLRQPD\EH RSWLPDOO\ ORFDWHG RYHU WKH QH[W IHZ GHFDGHV ZKHUH LW PD\ EH EHWWHU WR DEDQGRQ LW DQG ZKLFK OLYHOLKRRG DOWHUQDWLYHVZLOOEHDYDLODEOH 7KHUH DUH ÀYH NH\ LPSDFWV DQG FKDUDFWHULVWLFV RI FOLPDWH FKDQJH LQ DJULFXOWXUH HJ (DVWHUOLQJ HW DO  0HHKO HW DO  5RVHQ]ZHLJ DQG 7XELHOOR  

‡ &OLPDWHFKDQJHLPSDFWVZLOOYDU\FRQVLGHUDEO\E\ UHJLRQVRPHUHJLRQVZLOOEHDIIHFWHGSRVLWLYHO\DQG RWKHUVQHJDWLYHO\+RZHYHUFKDQJHVLQSURGXFWLRQ FRQGLWLRQV ZLOO RFFXU HYHU\ZKHUH QHFHVVLWDWLQJ DGDSWDWLRQ 5HJLRQV EHQHÀWLQJ IURP WKH SRVLWLYH HIIHFWV RI FOLPDWH FKDQJH VKRXOG EH DEOH WR WDNH IXOODGYDQWDJHRIWKHLUFKDQJHGFLUFXPVWDQFHV ‡ :DWHU ZLOO EHFRPH D NH\ LVVXH ,Q VRPH UHJLRQV WKHUHZLOOEHLQFUHDVHGZDWHUVFDUFLW\DQGGURXJKW ZKLOHLQRWKHUVH[WUHPHSUHFLSLWDWLRQZDWHUORJJLQJ DQGÁRRGLQJZLOOEHFRPHPRUHIUHTXHQW ‡ 3UHVVXUH IURP ZHHGV SHVWV DQG GLVHDVHV ZLOO LQFUHDVH ‡ ,QFUHDVLQJ QXPEHUV RI H[WUHPH ZHDWKHU HYHQWV HJKHDWZDYHVDQGKHDY\SUHFLSLWDWLRQ ZLOOSRVH DIXUWKHUFKDOOHQJHWRDJULFXOWXUDOSURGXFWLRQ ‡ 5LVNV LQ DJULFXOWXUDO SURGXFWLRQ ZLOO LQFUHDVH GXH SDUWO\WRJUHDWHUFOLPDWHYDULDELOLW\ $GDSWDWLRQLQDJULFXOWXUHQHHGVWRUHGXFHH[SRVXUHWR WKHVHLPSDFWVDVZHOODVVHQVLWLYLW\DQGYXOQHUDELOLW\WR WKHP7KLVFDQEHDFKLHYHGE\DGRSWLQJVXVWDLQDEOH DJULFXOWXUDOSURGXFWLRQV\VWHPVVXFKDVDJURHFRORJ\ DJURIRUHVWU\ RU RUJDQLF DJULFXOWXUH 0LOHVWDG DQG


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



%R[7KHFRQFHSWRIDGDSWDWLRQ :HXVHWKHWKUHHFRQFHSWVRI´H[SRVXUHµ´VHQVLWLYLW\µDQG´YXOQHUDELOLW\µWRIUDPHDGDSWDWLRQLQDJULFXOWXUH´([SRVXUHµ GHVFULEHVWKHOLNHOLKRRGWKDWDV\VWHPZLOOH[SHULHQFHFHUWDLQFRQGLWLRQVVXFKDVGURXJKW HJ6PLWDQG:DQGHO  ´6HQVLWLYLW\LVWKHGHJUHHWRZKLFKDV\VWHPLVDIIHFWHGHLWKHUDGYHUVHO\RUEHQHÀFLDOO\E\FOLPDWHYDULDELOLW\RUFKDQJHµ ,3&&E ´9XOQHUDELOLW\LVWKHGHJUHHWRZKLFKDV\VWHPLVVXVFHSWLEOHWRDQGXQDEOHWRFRSHZLWKDGYHUVHHIIHFWV RIFOLPDWHFKDQJHµ ,3&&E 

'DUQKRIHU%RUURQ1LJJOL(O+DJH 6FLDODEED DQG 0OOHU/LQGHQODXI  0OOHU HW DO  

VKHOWHU DQG IDYRXUDEOH PLFURFOLPDWHV LPSURYLQJ PRLVWXUHPDQDJHPHQWDQGFDSDFLW\WRDGDSWWRKLJK WHPSHUDWXUHV

7KHUHDUHPDQ\UHDVRQVZK\VXVWDLQDEOHDJULFXOWXUHLV DV\VWHPZHOOVXLWHGWRDGDSWDWLRQ)LUVWWUDGLWLRQDOO\LW XVHVORFDOO\DGDSWHGYDULHWLHVDQGFURSSLQJSUDFWLFHV DQGLWFDQWKHUHIRUHEHWWHUDGMXVWWRORFDOYDULDELOLW\RI FOLPDWHFKDQJHLPSDFWV

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ÀHGRUJDQLFSURGXFWLRQRIIHUIXUWKHUSRWHQWLDOIRU LPSURYLQJ SURGXFHUV· HFRQRPLF VLWXDWLRQV $OO WKHVH DVSHFWV FRPELQHG SURYLGH LQH[SHQVLYH EXW HIIHFWLYH ULVN PDQDJHPHQW VWUDWHJLHV LQ SDUWLFXODU LQVXUDQFH DJDLQVWFURSIDLOXUH (O+DJH6FLDODEEDDQG+DWWDP (\KRUQ 

6HFRQGLWFDQUHVSRQGWRLQFUHDVHGZDWHUVWUHVVE\ PDLQWDLQLQJ DQG LQFUHDVLQJ VRLO RUJDQLF PDWWHU DV WKLV LQFUHDVHV WKH VRLO·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ÁRRGLQJ DQG ZDWHUORJJLQJ DQG HURVLRQ 6LHJULVW HW DO  )OLHVVEDFK HW DO  1LJJOL  (O+DJH 6FLDODEED DQG 0OOHU/LQGHQODXI   ,Q DGGLWLRQ PXOFKLQJ DQG FRYHU FURSV DUH FRPPRQ SUDFWLFHV LQ VXVWDLQDEOH DJULFXOWXUH EDUH IDOORZV DUH DYRLGHG DQGHURVLRQLVFRUUHVSRQGLQJO\UHGXFHG/DQGVFDSH HOHPHQWV VXFK DV KHGJHV RU DJURIRUHVWU\ SURYLGH

$JURHFRORJ\ DJURIRUHVWU\ DQG LQ SDUWLFXODU RUJDQLF DJULFXOWXUH WKXV UHGXFH YXOQHUDELOLW\ WKURXJK ULVN UHGXFWLRQ EDVHG RQ GLYHUVLÀFDWLRQ RI OLYHOLKRRG VWUDWHJLHV FURSSLQJ SDWWHUQV DQG ORZHU LQSXW FRVWV 7KH IRFXV RQ VRLO IHUWLOLW\ VRLO KHDOWK DQG KLJK ELRGLYHUVLW\ UHGXFHV VHQVLWLYLW\ 7KLV LV RI SDUWLFXODU UHOHYDQFH IRU RSWLPDO ZDWHU PDQDJHPHQW DQG IRU RSWLPDO VWUDWHJLHV WR FRSH ZLWK SHVWV DQG GLVHDVHV 5HGXFLQJH[SRVXUHLVWKHPRVWGLIÀFXOWDVWKLVPHDQV VKLIWLQJFURSSLQJORFDWLRQVRUDEDQGRQLQJDJULFXOWXUH DOWRJHWKHULQVRPHFLUFXPVWDQFHV +RZ VXFK IXQGDPHQWDO FKDQJHV FDQ EH VXSSRUWHG ZKHUH QHFHVVDU\ QHHGV IXUWKHU UHVHDUFK +RZHYHU WKHUHDUHVRPHUHDGLO\DYDLODEOHVWUDWHJLHVWKDWUHGXFH YXOQHUDELOLW\DQGVHQVLWLYLW\DVEULHÁ\GHVFULEHGEHORZ )LUVW VRLO IHUWLOLW\ QHHGV WR EH EXLOW XS DQG VRLO GHJUDGDWLRQ KDOWHG )RU WKLV VXEVLGLHV IRU V\QWKHWLF IHUWLOL]HUV VKRXOG EH DEDQGRQHG ZKHUH SRVVLEOH ZLWKRXWFRPSURPLVLQJIRRGVHFXULW\:KHUHWKLVLVDQ LVVXHFDUHIXOO\GHVLJQHGWUDQVIRUPDWLRQIURPV\QWKHWLF




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ÀQDQFLDOLQFHQWLYHPHFKDQLVPWRHQFRXUDJHWKHVH SUDFWLFHV 7KLV OLQNV WR WKH WKLUG SRLQW LQIRUPDWLRQ DQG WUDLQLQJ

75$'($1'(19,5210(175(9,(:

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ÁHFWHG LQ WKH SULFH :LWKRXW WKLV FRQYHQWLRQDO SURGXFWLRQ ZLOO DOZD\V KDYH DQ XQIDLU FRPSHWLWLYH DGYDQWDJH GXH WR GLVWRUWHG SURGXFWLRQ FRVWV WKDW GR QRW LQFOXGH DOO WKH HQYLURQPHQWDO DQG VRFLDOFRVWVRISURGXFWLRQ,IWKRVHH[WHUQDOFRVWVZHUH WR EH LQFOXGHG LQ FRQYHQWLRQDO SURGXFWLRQ LW ZRXOG SURYHWREHPRUHFRVWO\WKDQVXVWDLQDEOHDJULFXOWXUH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U  11&X.+/#6'*#0)'#0& '#.6*;1+.5U *' 14)166'0+0*5$,1

$EVWUDFW $JULFXOWXUH LV VWDUWLQJ WR JHW PRUH DWWHQWLRQ LQ LQWHUQDWLRQDO QHJRWLDWLRQV DURXQG FOLPDWH FKDQJH 7KH FRQVHQVXV LV WKDW LW FRQWULEXWHV ² SHU FHQW RI DOO JOREDO DQWKURSRJHQLF JUHHQKRXVH JDV *+*  HPLVVLRQV PDNLQJ LW RQH RI WKH NH\ GULYHUV RI FOLPDWH FKDQJH %XW ORRNLQJ DW DJULFXOWXUH DORQH LV QRW HQRXJKLWLVDOVRQHFHVVDU\WRORRNDWWKHODUJHUIRRGV\VWHP%H\RQGWKHHPLVVLRQVWKDWRFFXURQWKH IDUPWRGD\·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Ã&#x20AC;[HV:KDWLVQHHGHGDUHWKHULJKWSROLFLHV DQGSURJUDPPHVWKDWEULQJDERXWDVKLIWIURPWKHFXUUHQWLQGXVWULDOIRRGV\VWHPWRDVXVWDLQDEOHHTXLWDEOH DQGWUXO\SURGXFWLYHRQH

$)RRGDQGFOLPDWHSLHFLQJWKH SX]]OHWRJHWKHU $FFRUGLQJ WR PRVW VWXGLHV WKH FRQWULEXWLRQ RI DJULFXOWXUDO HPLVVLRQV ² WKH HPLVVLRQV SURGXFHG RQ WKHIDUP²LVEHWZHHQDQGSHUFHQWRIDOOJOREDO HPLVVLRQV:KDWRIWHQJRHVXQVDLGKRZHYHULVWKDW PRVW RI WKHVH HPLVVLRQV DUH JHQHUDWHG E\ LQGXVWULDO IDUPLQJ SUDFWLFHV WKDW UHO\ RQ FKHPLFDO QLWURJHQ  IHUWLOL]HUVKHDY\PDFKLQHU\UXQRQSHWURODQGKLJKO\ FRQFHQWUDWHG LQGXVWULDO OLYHVWRFN RSHUDWLRQV WKDW SXPSRXWPHWKDQH 7KH GDWD IRU DJULFXOWXUH·V FRQWULEXWLRQ DOVR RIWHQ QHJOHFW WR WDNH LQWR DFFRXQW WKH FRQWULEXWLRQ RI ODQGXVH FKDQJHV DQG GHIRUHVWDWLRQ ZKLFK DUH UHVSRQVLEOHIRUQHDUO\DÃ&#x20AC;IWKRIJOREDO*+*HPLVVLRQV :5, XQGDWHG ,3&&   :RUOGZLGH DJULFXOWXUH LV SXVKLQJ LQWR VDYDQQDKV ZHWODQGV FHUUDGRV DQG IRUHVWVDQGLVSORXJKLQJKXJHDPRXQWVRIODQG7KH H[SDQVLRQRIWKHDJULFXOWXUDOIURQWLHULVWKHGRPLQDQW FRQWULEXWRUWRGHIRUHVWDWLRQDFFRXQWLQJIRU²SHU FHQW RI JOREDO GHIRUHVWDWLRQ )$2  .DQQLQHQ HW DO   7KLV PHDQV WKDW VRPH ² SHU FHQW RI JOREDO *+* HPLVVLRQV DUH SURGXFHG E\ ODQGXVH FKDQJH DQG GHIRUHVWDWLRQ IRU DJULFXOWXUH $QG KHUH WRRWKHJOREDOIRRGV\VWHPDQGWKHLQGXVWULDOPRGHO RI DJULFXOWXUH DUH WKH FKLHI FXOSULWV 7KH PDLQ GULYHU

RI WKLV GHIRUHVWDWLRQ LV WKH H[SDQVLRQ RI LQGXVWULDO SODQWDWLRQVIRUWKHSURGXFWLRQRIFRPPRGLWLHVVXFKDV VR\VXJDUFDQHRLOSDOPPDL]HDQGUDSHVHHG6LQFH  WKH DUHD SODQWHG ZLWK WKHVH Ã&#x20AC;YH FRPPRGLW\ FURSVJUHZHQRUPRXVO\E\SHUFHQW *5$,1  7KHVH HPLVVLRQV IURP DJULFXOWXUH DFFRXQW IRU RQO\ D SRUWLRQ RI WKH IRRG V\VWHP·V RYHUDOO FRQWULEXWLRQ WR FOLPDWHFKDQJH(TXDOO\LPSRUWDQWDUHWKHHPLVVLRQV FDXVHG DOO DORQJ WKH FKDLQ IURP ZKHQ WKH SURGXFH OHDYHVWKHIDUPXQWLOLWLVFRQVXPHG )RRG SURGXFWLRQ LV WKH ZRUOG·V ODUJHVW HFRQRPLF DFWLYLW\ LQYROYLQJ PRUH WUDQVDFWLRQV DQG HPSOR\LQJ PRUHSHRSOHE\IDUWKDQDQ\RWKHUVHFWRU7RGD\IRRG LVSUHSDUHGDQGGLVWULEXWHGXVLQJHQRUPRXVDPRXQWV RI SURFHVVLQJ SDFNDJLQJ DQG WUDQVSRUWDWLRQ DOO RI ZKLFK JHQHUDWH *+* HPLVVLRQV DOWKRXJK GDWD RQ VXFK HPLVVLRQV DUH KDUG WR Ã&#x20AC;QG 6WXGLHV ORRNLQJ DW WKH (8 FRQFOXGH WKDW DERXW RQH TXDUWHU RI RYHUDOO WUDQVSRUWDWLRQ LQYROYHV FRPPHUFLDO IRRG WUDQVSRUW (XURVWDW   6FDWWHUHG Ã&#x20AC;JXUHV RQ WUDQVSRUWDWLRQ DYDLODEOH IRU RWKHU FRXQWULHV VXFK DV .HQ\D DQG =LPEDEZH LQGLFDWH WKDW WKH SHUFHQWDJH LV HYHQ KLJKHU LQ QRQLQGXVWULDOL]HG FRXQWULHV ZKHUH ´IRRG SURGXFWLRQ DQG GHOLYHU\ DFFRXQWV IRU  RI WKH WRWDO HQHUJ\ ² KXPDQ SOXV DQLPDO SOXV IXHO ² XVHGµ .DUHNH]L DQG /D]DUXV    :LWK WUDQVSRUWDWLRQ




75$'($1'(19,5210(175(9,(:

)LJXUH&RQWULEXWLRQRIWKHJOREDOIRRGSURGXFWLRQV\VWHPWRWRWDO*+*HPLVVLRQV 2 WKHUQRQIRRGUHODWHG HP LVVLRQV

: DVWH

3 URFHVVLQJWUDQVSRUW SDFNLQJDQGUHWDLO

/DQGXVHFKDQJHDQG GHIRUHVWDWLRQ

$ JULFXOWXUDOSURGXFWLRQ 

6RXUFH(VWLPDWHVRI*5$,1 DFFRXQWLQJIRUSHUFHQWRIJOREDO*+*HPLVVLRQV (8GDWDHQDEOHDQHVWLPDWH²DOEHLWDFRQVHUYDWLYHRQH ²IRUWKHFRQWULEXWLRQRIWKHWUDQVSRUWRIIRRGWR*+* HPLVVLRQV RI DW OHDVW  SHU FHQW 6LPLODUO\ (8 GDWD GHULYHG IURP VWXGLHV RQ SURFHVVLQJ DQG SDFNDJLQJ RI IRRG ZLWKLQ WKH (8 VKRZ WKDW WKHVH DFWLYLWLHV DFFRXQWIRU²SHUFHQWRI*+*HPLVVLRQV %ROOD DQG 3HQGRORYVND   ZKLOH UHIULJHUDWLRQ RI IRRG DFFRXQWVIRU²SHUFHQWRIWRWDOHPLVVLRQV *DUQHWW DQG-DFNVRQ DQGIRRGUHWDLOIRUDQRWKHUSHU FHQW 7DVVRXHWDO9HQNDW%DNDV  %DVHGRQWKHGDWDIRUWKH(8DQGH[WUDSRODWLQJIURP WKH VFDUFH Ã&#x20AC;JXUHV WKDW H[LVW IRU RWKHU FRXQWULHV ZH FDQHVWLPDWHFRQVHUYDWLYHO\WKDWDWOHDVW²SHUFHQW RIHPLVVLRQVUHVXOWIURPIRRGWUDQVSRUW²SHUFHQW IURP IRRG SURFHVVLQJ DQG SDFNDJLQJ ² SHU FHQW IURPUHIULJHUDWLRQDQGDQRWKHU²SHUFHQWIURPUHWDLO 7KLVDPRXQWVWRDWRWDOFRQWULEXWLRQRI²SHUFHQW RIJOREDOHPLVVLRQVIURPDOOWKHVHDFWLYLWLHV 1RW DOO RI ZKDW WKH IRRG V\VWHP SURGXFHV JHWV FRQVXPHG 7KH LQGXVWULDO IRRG V\VWHP GLVFDUGV XS WR KDOI RI DOO WKH IRRG WKDW LW SURGXFHV LQ LWV MRXUQH\ IURP IDUPV WR WUDGHUV WR IRRG SURFHVVRUV WR VWRUHV DQGVXSHUPDUNHWV7KLVLVHQRXJKWRIHHGWKHZRUOG·V KXQJU\ VL[ WLPHV RYHU 6WXDUW   0XFK RI WKLV ZDVWHURWVRQJDUEDJHKHDSVDQGODQGÃ&#x20AC;OOVSURGXFLQJ VXEVWDQWLDO  DPRXQWV RI *+*V 'LIIHUHQW VWXGLHV LQGLFDWHWKDWEHWZHHQDQGSHUFHQWRIJOREDO *+* HPLVVLRQV FRPH IURP ZDVWH DQG WKDW RYHU 

SHU FHQW RI WKHP FRPH IURP PDWHULDOV RULJLQDWLQJ LQ DJULFXOWXUH DQG LWV SURFHVVLQJ %RJQHU HW DO   7KLVPHDQVWKDWWKHGHFRPSRVLWLRQRIRUJDQLFZDVWH RULJLQDWLQJ LQ IRRG DQG DJULFXOWXUH LV UHVSRQVLEOH IRU ²SHUFHQWRIJOREDO*+*HPLVVLRQV &RQVLGHULQJ DOO WKHVH IDFWRUV LW ZRXOG DSSHDU WKDW WKH FXUUHQW JOREDO IRRG V\VWHP SURSHOOHG E\ DQ LQFUHDVLQJO\ SRZHUIXO WUDQVQDWLRQDO IRRG LQGXVWU\ LV UHVSRQVLEOHIRUDURXQGKDOIRIDOODQWKURSRJHQLF*+* HPLVVLRQV²EHWZHHQDORZRISHUFHQWDQGDKLJK RISHUFHQW

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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

WRWKHLPSRUWDQFHRIRUJDQLFPDWWHULQWKHVRLO $ ZLGH UDQJH RI VFLHQWLÀF UHSRUWV LQGLFDWH WKDW FXOWLYDWHG VRLOV KDYH ORVW  WR  SHU FHQW RI WKHLU RUJDQLFPDWWHUGXULQJWKHWZHQWLHWKFHQWXU\ZKLOHVRLOV XQGHUSDVWXUHVDQGSUDLULHVKDYHW\SLFDOO\ORVWXSWR SHUFHQW:LWKRXWGRXEWWKHVHORVVHVKDYHSURYRNHG DVHULRXVGHWHULRUDWLRQRIVRLOIHUWLOLW\DQGSURGXFWLYLW\ DV ZHOO DV D KLJKHU ULVN H[SRVXUH WR GURXJKWV DQG ÁRRGV 7DNLQJ DV D EDVLV VRPH RI WKH PRVW FRQVHUYDWLYH ÀJXUHVSURYLGHGE\WKHVFLHQWLÀFOLWHUDWXUHWKHJOREDO DFFXPXODWHG ORVV RI VRLO RUJDQLF PDWWHU 620  RYHU WKH SDVW FHQWXU\ FDQ EH HVWLPDWHG WR EH EHWZHHQ DQGELOOLRQWRQV1RWDOOWKLVRUJDQLFPDWWHU KDVHQGHGXSLQWKHDLUDV&2VLJQLÀFDQWDPRXQWV KDYH EHHQ ZDVKHG DZD\ E\ HURVLRQ DQG GHSRVLWHG DW WKH ERWWRP RI ULYHUV DQG RFHDQV +RZHYHU LW FDQ EH HVWLPDWHG WKDW DW OHDVW  WR  ELOOLRQ WRQV RI &2 KDYH EHHQ UHOHDVHG WR WKH DWPRVSKHUH GXH WR WKHJOREDOGHVWUXFWLRQRIVRLORUJDQLFPDWWHU,QRWKHU ZRUGVWRSHUFHQWRIWKHFXUUHQWH[FHVVRI&2 LQWKHDWPRVSKHUHUHVXOWVIURPWKHGHVWUXFWLRQRIVRLOV DQGWKHLURUJDQLFPDWWHU 7KHUHLVVRPHJRRGQHZVKLGGHQLQWKHVHGHYDVWDWLQJ À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²SHUFHQWRIFXUUHQWJOREDODQQXDO*+* HPLVVLRQV 7KH QHZ VFHQDULR ZRXOG UHTXLUH D UDGLFDO FKDQJH LQ DSSURDFK IURP WKH FXUUHQW LQGXVWULDO DJULFXOWXUH PRGHO,WZRXOGIRFXVRQWKHXVHRIWHFKQLTXHVVXFK DV GLYHUVLÀHG FURSSLQJ V\VWHPV EHWWHU LQWHJUDWLRQ EHWZHHQFURSDQGDQLPDOSURGXFWLRQDQGLQFUHDVHG LQFRUSRUDWLRQ RI WUHHV DQG ZLOG YHJHWDWLRQ 6XFK DQ LQFUHDVH LQ GLYHUVLW\ ZRXOG LQ WXUQ LQFUHDVH WKH SURGXFWLRQSRWHQWLDODQGWKHLQFRUSRUDWLRQRIRUJDQLF PDWWHU ZRXOG SURJUHVVLYHO\ LPSURYH VRLO IHUWLOLW\



FUHDWLQJ D YLUWXRXV F\FOH RI KLJKHU SURGXFWLYLW\ DQG JUHDWHUDYDLODELOLW\RIRUJDQLFPDWWHU7KHFDSDFLW\RI VRLOWRKROGZDWHUZRXOGLQFUHDVHZKLFKZRXOGPHDQ WKDWH[FHVVLYHUDLQIDOOZRXOGOHDGWRIHZHUOHVVLQWHQVH Á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·V VPDOO IDUPHUV UDWKHU WKDQ XQGHUPLQLQJ DQG IRUFLQJ WKHPRIIWKHLUODQGVDVLVQRZWKHFDVH$JOREDOVKLIW WRZDUGVDQDJULFXOWXUHWKDWEXLOGVXSRUJDQLFPDWWHULQ WKHVRLOZRXOGDOVRFRQWULEXWHWRUHPRYLQJVRPHRIWKH RWKHUPDMRUVRXUFHVRI*+*VIURPWKHIRRGV\VWHP 7KHUH DUH WKUHH RWKHU PXWXDOO\ UHLQIRUFLQJ VKLIWV WKDW QHHGWRWDNHSODFHLQWKHIRRGV\VWHPWRVXSSRUWLWV RYHUDOOFRQWULEXWLRQWRFOLPDWHFKDQJH7KHÀ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·V IDUPHUV DOUHDG\ SRVVHVV WKH UHTXLVLWH NQRZOHGJH DQG VNLOOV DQG WKHVH FDQ EH IXUWKHU GHYHORSHG 7KH RQO\ KXUGOHV DUH SROLWLFDO ZKLFKLVZKHUHZHQHHGWRIRFXVRXUHIIRUWV




75$'($1'(19,5210(175(9,(:

1//'06#4;U +6+)#6+0).+/#6'*#0)'9+6*1+.4)#0+% #66'4+04)#0+%41&7%6+10;56'/5 $QGUH/HX 3UHVLGHQW,QWHUQDWLRQDO)HGHUDWLRQRI2UJDQLF$JULFXOWXUDO0RYHPHQWV ,)2$0

$EVWUDFW 3DVW DQG SUHVHQW JOREDO HIIRUWV DLPHG DW UHGXFLQJ FDUERQ GLR[LGH HPLVVLRQV E\ LPSURYLQJ HQHUJ\XVH HIÃ&#x20AC;FLHQF\DQGWKHDGRSWLRQRIUHQHZDEOHHQHUJ\VRXUFHVKDYHEHHQXQVXFFHVVIXO,WLVWKHUHIRUHFULWLFDOWR ORRNDWDOOUHDGLO\DYDLODEOHRSWLRQVWKDWFRXOGVLJQLÃ&#x20AC;FDQWO\PLWLJDWHUXQDZD\FOLPDWHFKDQJH 6HTXHVWHULQJ&2LQWRWKHVRLOFRXOGEULQJDERXWDVLJQLÃ&#x20AC;FDQWUHGXFWLRQLQ*+*OHYHOV7KHUHLVVFLHQWLÃ&#x20AC;F HYLGHQFH WKDW WKLV FDQ EH DFKLHYHG ZLWK FXUUHQW JRRG RUJDQLF DJULFXOWXUDO SUDFWLFHV DQG WKDW WKH EHVW RUJDQLFIDUPLQJSUDFWLFHVFDQDFKLHYHHYHQKLJKHUOHYHOVRI&2VHTXHVWUDWLRQ%XLOGLQJXSVRLORUJDQLF PDWWHULVRQHRIWKHOHDVWFRVWO\FOLPDWHFKDQJHPLWLJDWLRQPHWKRGV +HOSLQJIDUPHUVDGRSWWKHVHPHWKRGVRQDZLGHVSUHDGEDVLVZRXOGPDNHDVLJQLÃ&#x20AC;FDQWGLIIHUHQFHWRWKH OHYHOV RI &2 LQ WKH DWPRVSKHUH DQG LQ WKH ZRUOG·V RFHDQV ,PSRUWDQWO\ WKLV LV QRW EDVHG RQ XQWHVWHG FRQFHSWVVXFKDVFDUERQFDSWXUHDQGVWRUDJHLWLVEDVHGRQFXUUHQWSUDFWLFHVWKDWFDQEHDGRSWHGE\ RWKHUODQGPDQDJHUV 7KLVFRXOGEHÃ&#x20AC;QDQFHGWKURXJKFDSDQGWUDGHV\VWHPVWKDWWD[HPLVVLRQV7KHVHWD[HVFRXOGWKHQEHXVHG WRSD\IDUPHUVIRUWKHLUHFRV\VWHPVHUYLFHVWKDWÃ&#x20AC;[WKHDWPRVSKHULF&2LQWKHVRLO6XFKDV\VWHPFRXOG EHHLWKHUJRYHUQPHQWDGPLQLVWHUHGRUPDUNHWEDVHG

$,QWURGXFWLRQ 7KHZRUOGLVIDLOLQJWRUHGXFH*+*HPLVVLRQVGHVSLWH FRPPLWPHQWV PDGH XQGHU WKH .\RWR 3URWRFRO $FFRUGLQJ WR WKH ,QWHUQDWLRQDO (QHUJ\ $JHQF\ ,($ E  HQHUJ\UHODWHG &2 HPLVVLRQV UHDFKHG D UHFRUGKLJKRIJLJDWRQQHV *W LQ²DSHU FHQWMXPSIURPWKHSUHYLRXVUHFRUGLQ0RUHRYHU WKH UHGXFWLRQ LQ HFRQRPLF DFWLYLW\ GXH WR WKH JOREDO HFRQRPLF DQG Ã&#x20AC;QDQFLDO FULVLV KDV QRW UHGXFHG WKH JURZWKRI*+*HPLVVLRQV :KLOHWKHÃ&#x20AC;UVWFRPPLWPHQWSHULRGRIWKH.\RWR3URWRFRO DQGLWV&OHDQ'HYHORSPHQW0HFKDQLVP &'0 OHGWR DVPDOOUHGXFWLRQLQHPLVVLRQVE\WKH$QQH[SDUWLHV WRWKH3URWRFROWKH\IDLOHGWRUHGXFHWKHRYHUDOOUDWH RI JOREDO *+* HPLVVLRQV 7KH &'0 KDV KDG YHU\ OLWWOHLPSDFWEHFDXVHLWVFRPSOH[UXOHVPDNHLWGLIÃ&#x20AC;FXOW WR DFKLHYH HIIHFWLYH SURMHFW UHVXOWV $ PDMRU LVVXH KDV EHHQ *+* OHDNDJH RU UDWKHU RXWVRXUFLQJ  IURP WKH $QQH[  FRXQWULHV WR GHYHORSLQJ FRXQWULHV $Q\ VPDOO JDLQV WKDW KDYH EHHQ DFKLHYHG E\ WKH IRUPHU LQ UHGXFLQJ *+* HPLVVLRQV KDYH EHHQ PRUH WKDQ

ORVWE\WKHSROOXWLQJLQGXVWULHVPRYLQJWRGHYHORSLQJ FRXQWULHVDQGLPSRUWLQJ*+*LQWHQVLYHSURGXFWVIURP WKHUH 7KH QRQ$QQH[  FRXQWULHV QRZ DFFRXQW IRU WKH PDMRULW\ RI WKH ZRUOG·V *+* HPLVVLRQV FDXVHG E\H[SDQGLQJLQGXVWULHVGHIRUHVWDWLRQWKHEXUQLQJRI VDYDQQDKVDQGWKHORVVRIVRLOFDUERQWKURXJKSRRU DJULFXOWXUDOSUDFWLFHV 7KH FXUUHQW VWDWH RI WKH HFRQRPLHV RI GHYHORSHG FRXQWULHVZLWKWKHLUPDVVLYHGHEWVPHDQVWKDWWKH\ GRQRWKDYHWKHIXQGVWRVKLIWVLJQLÃ&#x20AC;FDQWO\WRWKHXVH RIUHQHZDEOHHQHUJLHVDQGLPSURYHHQHUJ\HIÃ&#x20AC;FLHQF\ LQ WKH VKRUW WHUP )XUWKHUPRUH WKH SROLWLFDO FOLPDWH KDV FKDQJHG VLQFH WKH 8QLWHG 1DWLRQV &OLPDWH &KDQJH &RQIHUHQFH LQ &RSHQKDJHQ LQ  ZLWK YHU\IHZJRYHUQPHQWVZLOOLQJWRDFFHSWDVORZGRZQLQ HFRQRPLFDFWLYLW\WRPHHWHPLVVLRQUHGXFWLRQWDUJHWV RUWRLQWURGXFHPDMRU*+*UHGXFWLRQVWUDWHJLHV 7KH&DQFXQ&OLPDWH&KDQJH$JUHHPHQWVPHDQWKDW VHTXHVWUDWLRQ KDV WR EH SDUW RI DQ\ VWUDWHJ\ PL[ WR VWDELOL]H WKH OHYHO RI DWPRVSKHULF &2 81)&&&   7KLV JDV DFFRXQWV IRU DURXQG  SHU FHQW RI DQWKURSRJHQLF*+*V :02 


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

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·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´$JULFXOWXUH QRW RQO\ VXIIHUV WKH LPSDFWV RI FOLPDWHFKDQJHLWLVDOVRUHVSRQVLEOHIRUSHUFHQWRI JOREDOJUHHQKRXVHJDVHPLVVLRQV%XWDJULFXOWXUHKDV WKH SRWHQWLDO WR EH DQ LPSRUWDQW SDUW RI WKH VROXWLRQ WKURXJK PLWLJDWLRQ ³ UHGXFLQJ DQGRU UHPRYLQJ ³ D VLJQLÃ&#x20AC;FDQW DPRXQW RI JOREDO HPLVVLRQV 6RPH  SHUFHQWRIWKLVPLWLJDWLRQSRWHQWLDOFRXOGEHUHDOL]HGLQ GHYHORSLQJFRXQWULHVµ )$2E 

&6RLOFDUERQVHTXHVWUDWLRQWKURXJK DJULFXOWXUDOSUDFWLFHV 7KHDELOLW\RIVRLOVWRDEVRUEHQRXJK&2LQRUGHUWR VWDELOL]H FXUUHQW DWPRVSKHULF &2 OHYHOV LV D FULWLFDO LVVXHDQGWKHUHLVDPDMRUGHEDWHRYHUZKHWKHUWKLV FDQEHDFKLHYHGWKURXJKIDUPLQJSUDFWLFHV /DO 6DQGHUPDQHWDO  7ZRLQGHSHQGHQWJOREDOPHWDUHYLHZVKDYHORRNHGDW WKH DYHUDJH DPRXQW RI &2 VHTXHVWHUHG E\ RUJDQLF IDUPLQJV\VWHPV $ SUHOLPLQDU\ VWXG\ E\ )L%/ SXEOLVKHG E\ )$2 FROODWHGSHHUUHYLHZHGFRPSDULVRQWULDOVEHWZHHQ



RUJDQLF DQG FRQYHQWLRQDO V\VWHPV WKDW XVHG  GDWDVHWV )$2E 7KHVHVWXGLHVLQFOXGHGGDWD IURPJUDVVODQGVDUDEOHFURSVDQGSHUPDQHQWFURSV LQ VHYHUDO FRQWLQHQWV $ VLPSOH DQDO\VLV RI WKH GDWD VKRZV WKDW RQ DYHUDJH WKH RUJDQLF V\VWHPV KDG KLJKHU OHYHOV RI VRLO FDUERQ VHTXHVWUDWLRQ *DWWLQJHU HWDO  $QGUHDV *DWWLQJHU DQG FROOHDJXHV REVHUYHG   ´,Q VRLOV XQGHU RUJDQLF PDQDJHPHQW WKH 62& >VRLO RUJDQLF FDUERQ@ VWRFNV DYHUDJHG  WRQQHV&KDLQFRPSDULVRQWRWRQQHV&KD XQGHU QRQRUJDQLF PDQDJHPHQWµ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Ã&#x20AC;FDQWDPRXQWVRIFDUERQ0RVWLPSRUWDQWO\WKLVLV QRWEDVHGRQXQWHVWHGFRQFHSWVOLNH´FDUERQFDSWXUH DQGVWRUDJHµDQG´FOHDQFRDOµLWLVEDVHGRQFXUUHQW SUDFWLFHVWKDWFDQEHDGRSWHGE\RWKHUIDUPHUV

'3RWHQWLDORIRUJDQLFSUDFWLFHV %DVHGRQWKHVHÃ&#x20AC;JXUHVWKHZLGHVSUHDGDGRSWLRQRI FXUUHQWRUJDQLFSUDFWLFHVJOREDOO\KDVWKHSRWHQWLDOWR VHTXHVWHU*WRI&2ZKLFKLVDURXQGSHUFHQW RIWKHZRUOG·VFXUUHQW*+*HPLVVLRQV *UDVVODQG KD $UDEOHFURSV KD 3HUPDQHQWFURSV KD 7RWDO KD 6RXUFH )$2  2UJDQLF#WRQVSHUKHFWDUH*WRI&2 $]HH]

$QQXDO*+*HPLVVLRQV *WRIFDUERQGLR[LGH   HTXLYDOHQW &2H

  ,3&&F 




(3RWHQWLDOH[LVWVIRUKLJKHUOHYHOVRI&2 VHTXHVWUDWLRQ $OO GDWD VHWV WKDW XVH DYHUDJLQJ KDYH RXWO\LQJ GDWD 7KHVH DUH H[DPSOHV WKDW DUH VLJQLÃ&#x20AC;FDQWO\ KLJKHU RU VLJQLÃ&#x20AC;FDQWO\ORZHUWKDQWKHDYHUDJH7KH\DUHDOZD\V ZRUWK H[DPLQLQJ WR Ã&#x20AC;QG RXW ZK\ 5HVHDUFK LQWR WKHP ZLOO DOORZ DQ XQGHUVWDQGLQJ RI ZKLFK SUDFWLFHV VLJQLÃ&#x20AC;FDQWO\LQFUHDVHVRLOFDUERQDQGZKLFKGHFUHDVH RUGRQRWLQFUHDVHLW 7KHUH DUH VHYHUDO H[DPSOHV RI VLJQLÃ&#x20AC;FDQWO\ KLJKHU OHYHOV RI FDUERQ VHTXHVWUDWLRQ WKDQ WKH DYHUDJHV TXRWHG LQ WKH VWXGLHV DERYH 7KH 5RGDOH ,QVWLWXWH LQ 3HQQV\OYDQLD 8QLWHG 6WDWHV KDV EHHQ FRQGXFWLQJ ORQJUXQQLQJFRPSDULVRQVRIRUJDQLFDQGFRQYHQWLRQDO FURSSLQJ V\VWHPV IRU RYHU  \HDUV ZKLFK FRQÃ&#x20AC;UP WKDW RUJDQLF PHWKRGV DUH HIIHFWLYH DW UHPRYLQJ &2 IURP WKH DWPRVSKHUH DQG Ã&#x20AC;[LQJ LW DV RUJDQLF PDWWHU LQWKHVRLO/D6DOOHDQG+HSSHUO\  ZURWH´,Q WKH)67>IDUPV\VWHPVWULDO@RUJDQLFSORWVFDUERQZDV VHTXHVWHUHGLQWRWKHVRLODWWKHUDWHRIOEVDF\HDU LQDFURSURWDWLRQXWLOL]LQJUDZPDQXUHDQGDWDUDWHRI DERXWOEVDF\HDULQDURWDWLRQXVLQJOHJXPHFRYHU FURSV 'XULQJWKHVUHVXOWVIURPWKH&RPSRVW8WLOL]DWLRQ 7ULDO &87  DW 5RGDOH ,QVWLWXWH ² D \HDU VWXG\ FRPSDULQJ WKH XVH RI FRPSRVWV PDQXUHV DQG V\QWKHWLF FKHPLFDO IHUWLOL]HU ² VKRZ WKDW WKH XVH RI FRPSRVWHG PDQXUH ZLWK FURS URWDWLRQV LQ RUJDQLF V\VWHPV FDQ UHVXOW LQ FDUERQ VHTXHVWUDWLRQ RI XS WR  OEVDF\HDU %\ FRQWUDVW Ã&#x20AC;HOGV XQGHU VWDQGDUG WLOODJH UHO\LQJ RQ FKHPLFDO IHUWLOL]HUV ORVW DOPRVW  SRXQGVRIFDUERQSHUDFUHSHU\HDUµ &RQYHUWLQJ WKHVH Ã&#x20AC;JXUHV LQWR NLORJUDPV RI &2 VHTXHVWHUHG SHU KHFWDUH XVLQJ WKH DFFHSWHG FRQYHUVLRQ UDWH RI  SRXQG SHU DFUH   NJKDDQGVRLORUJDQLFFDUERQ[ &2JLYHVWKH IROORZLQJUHVXOWV Â&#x2021; 7KH)67OHJXPHEDVHGRUJDQLFSORWVVKRZHGWKDW FDUERQ ZDV VHTXHVWHUHG LQWR WKH VRLO DW WKH UDWH RI DERXW  OEVDF\HDU 7KLV LV HTXLYDOHQW WR D VHTXHVWUDWLRQUDWHRINJRI&2KD\U Â&#x2021; 7KH)67PDQXUHGRUJDQLFSORWVVKRZHGWKDWFDUERQ ZDVVHTXHVWHUHGLQWRWKHVRLODWWKHUDWHRIOEV DF\HDU7KLVLVHTXLYDOHQWWRDVHTXHVWUDWLRQUDWHRI NJRI&2KD\U Â&#x2021; 7KH &RPSRVW 8WLOL]DWLRQ 7ULDO VKRZHG WKDW FDUERQ ZDV VHTXHVWHUHG LQWR WKHVRLO DW WKHUDWH RI OEVDF\HDU 7KLV LV HTXLYDOHQW WR D VHTXHVWUDWLRQ UDWHRINJRI&2KD\U

75$'($1'(19,5210(175(9,(:

7KXV WKHUH DUH VLJQLÃ&#x20AC;FDQW EHQHÃ&#x20AC;WV IURP DGGLQJ FRPSRVW

)7KHSRWHQWLDOLQGHVHUWFOLPDWHV 6HNHPLVWKHROGHVWELRG\QDPLFIDUPLQ(J\SW,WZDV IRXQGHGLQE\'U,EUDKLP$ERXOHLVK7KH/RXLV %RON,QVWLWXWHDQG6RLO 0RUHWZRRUJDQLVDWLRQVEDVHG LQWKH1HWKHUODQGVKDYHPDGHDVWXG\WRFDOFXODWHVRLO FDUERQ VHTXHVWUDWLRQ DW 6HNHP 7KHLU UHVXOWV VKRZ WKDW RQ DYHUDJH 6HNHP·V PDQDJHPHQW SUDFWLFHV KDYH UHVXOWHG LQ  NJV RI FDUERQ EHLQJ VWRUHG LQ WKHVRLOSHUKHFWDUHSHU\HDULQWKHÃ&#x20AC;HOGVWKDWZHUH \HDUVROG8VLQJWKHDFFHSWHGIRUPXODRI62&[ &2WKLVPHDQVWKDW6HNHPKDVVHTXHVWHUHG NJRI&2SHUKHFWDUHSHU\HDUIRU\HDUV /XVNHDQG YDQGHU.DPS.RRSPDQVHWDO %DVHG RQWKHVHÃ&#x20AC;JXUHVWKHZLGHVSUHDGDGRSWLRQRI6HNHP·V SUDFWLFHV JOREDOO\ KDV WKH SRWHQWLDO WR VHTXHVWHU  *WRI&2ZKLFKLVDURXQGSHUFHQWRIWKHZRUOG·V FXUUHQW*+*HPLVVLRQVLQWRVRLOV KD[ NJV JW&2\U 

*7KHSRWHQWLDOLQWURSLFDOFOLPDWHV 5HVHDUFKHUV DW WKH 5R\DO 7KDL 2UJDQLF 3URMHFW QHDU &KLDQJ0DLLQ7KDLODQGKDYHPDQDJHGWRLQFUHDVHWKHLU VRLORUJDQLFPDWWHUOHYHOVIURPSHUFHQWWRSHUFHQW RYHUDSHULRGRIHLJKW\HDUV SHUVRQDOFRPPXQLFDWLRQ  7KLV PHDQV WKDW  WRQV RI &2KD KDYH EHHQ VHTXHVWHUHG WKURXJK WKLV SURMHFW ZKLFK HTXDWHV WR  WRQV RI &2KD\U ,I WKLV ZDV DSSOLHG JOREDOO\ LW ZRXOGVHTXHVWHU*W&2KD\U²PRUHWKDQGRXEOH WKHZRUOG·VFXUUHQW*+*HPLVVLRQV KD [WRQVRI&2KD\U *W&2\U 

+'HHSHUFDUERQV\VWHPV 7KHUH LV DQ HPHUJLQJ ERG\ RI VFLHQFH ZKLFK VKRZV WKDWWKHPRVWVWDEOHIUDFWLRQVRIVRLOFDUERQDUHVWRUHG GHHSHULQWKHVRLOWKDQPRVWRIWKHFXUUHQWVRLOFDUERQ PHDVXUHPHQWVXVHGRQIDUPV0RVWVRLOWHVWVWHQGWR ZRUNDWDGHSWKRIDURXQGWRFPDVWKLVLVWKH XVXDO URRW ]RQH IRU PDQ\ FURSV 5HVHDUFK LV Ã&#x20AC;QGLQJ WKDWDVLJQLÃ&#x20AC;FDQWDPRXQWRIFDUERQLVVWRUHGDWORZHU GHSWKVDQGWKDWWKLVWHQGVWREHYHU\VWDEOH 5HVHDUFK E\ 5HWKHPH\HU DQG FROOHDJXHV XVLQJ UDGLRFDUERQWHFKQLTXHVWRDQDO\VHYDULRXVVRLOFDUERQ IUDFWLRQVLQGLFDWHGDSURJUHVVLYHHQULFKPHQWRIVWDEOH RUJDQLFFRPSRXQGVZLWKLQFUHDVLQJVRLOGHSWKWR FP 5HWKHPH\HUHWDO 


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

5HVHDUFK E\ 3URIHVVRU 5DWWDQ /DO DQG FROOHDJXHV IURP 2KLR 6WDWH 8QLYHUVLW\ FRPSDUHG FDUERQ OHYHOV EHWZHHQ QRWLOO DQG FRQYHQWLRQDO WLOODJH Ã&#x20AC;HOGV DQG IRXQG WKDW LQ VRPH FDVHV FDUERQ VWRUDJH ZDV JUHDWHU LQ FRQYHQWLRQDO WLOODJH Ã&#x20AC;HOGV 7KH NH\ LV VRLO GHSWK 7KH\ FRPSDUHG WKH FDUERQ VWRUDJH EHWZHHQ QRWLOODQGSORXJKHGÃ&#x20AC;HOGVZLWKWKHSORXJKGHSWK²WKH Ã&#x20AC;UVWLQFKHV FP RIWKHVRLO²DQGIRXQGWKDWWKH FDUERQVWRUDJHZDVJHQHUDOO\PXFKJUHDWHULQQRWLOO Ã&#x20AC;HOGVWKDQLQSORZHGÃ&#x20AC;HOGV:KHQWKH\H[DPLQHG LQFKHV FP  DQG GHHSHU WKH\ IRXQG PRUH FDUERQ VWRUHG LQ SORXJKHG Ã&#x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² FP VRLO GHSWKV ´,Q PDQ\ SDUWV RI WKH ZRUOG RUJDQLF IDUPLQJ V\VWHPV DUHUHO\LQJRQWKHVRLOIHUWLOLW\EXLOGXSRIGHHSURRWLQJ JUDVVOHJXPH PL[WXUHV DQG RQ WKH LQFRUSRUDWLRQ RI SODQW UHVLGXHV E\ GHHSGLJJLQJ HDUWKZRUPV PDNLQJ LW TXLWH OLNHO\ WKDW WKH FXUUHQWO\ DYDLODEOH GDWD VHWV XQGHUHVWLPDWHWKH62&VWRFNVLQRUJDQLFDOO\PDQDJHG VRLOV 7KLV LV SDUWLFXODUO\ VLJQLÃ&#x20AC;FDQW FRQVLGHULQJ WKDW LQ GHHSHU VRLO KRUL]RQV 62& VHHPV WR EH PRUH VWDELOL]HGµ )OLHVVEDFKHWDO

,*UD]LQJV\VWHPV 7KHPDMRULW\RIWKHZRUOG·VDJULFXOWXUDOODQGV SHU FHQW  DUH XVHG IRU JUD]LQJ )$2   7KHUH LV DQ HPHUJLQJ ERG\ RI SXEOLVKHG HYLGHQFH ZKLFK VKRZV WKDW SDVWXUHV DQG SHUPDQHQW JURXQG FRYHU VZDUGV LQSHUHQQLDOKRUWLFXOWXUHEXLOGXSVRLORUJDQLFFDUERQ IDVWHU WKDQ DQ\ RWKHU IDUPLQJ V\VWHP DQG ZLWK FRUUHFWPDQDJHPHQWWKLVLVVWRUHGGHHSHULQWKHVRLO )OLHVVEDFKHWDO6DQGHUPDQHWDO  2QH RI WKH VLJQLÃ&#x20AC;FDQW UHDVRQV IRU WKLV KDV EHHQ WKH KLJKHU SURSRUWLRQ RI SODQWV WKDW XVH WKH & SDWKZD\ RISKRWRV\QWKHVLVDVWKLVPDNHVWKHPPRUHHIÃ&#x20AC;FLHQW DWFROOHFWLQJ&2IURPWKHDWPRVSKHUHHVSHFLDOO\LQ ZDUPHUDQGGULHUFOLPDWHV$FFRUGLQJWR2VERUQHDQG



%HHUOLQJ  ´3ODQWVZLWKWKH&SKRWRV\QWKHWLF SDWKZD\ GRPLQDWH WRGD\·V WURSLFDO VDYDQQDKV DQG JUDVVODQGV DQG DFFRXQW IRU VRPH  RI JOREDO WHUUHVWULDOFDUERQÃ&#x20AC;[DWLRQ7KHLUVXFFHVVVWHPVIURPD SK\VLRORJLFDO &2FRQFHQWUDWLQJ SXPS ZKLFK OHDGV WRKLJKSKRWRV\QWKHWLFHIÃ&#x20AC;FLHQF\LQZDUPFOLPDWHVDQG ORZDWPRVSKHULF&2FRQFHQWUDWLRQVµ 7KLV NQRZOHGJH LV QRZ EHLQJ DSSOLHG LQ LQQRYDWLYH ZD\VVXFKDVKROLVWLFVWRFNPDQDJHPHQWHYHUJUHHQ IDUPLQJ DJURIRUHVWU\ LQ SDVWXUHV DQG SDVWXUH FURSSLQJ

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Ã&#x20AC;FDQWO\ PRUH WKDQ WKH ZRUOG·V *+* HPLVVLRQV RI  *W DQG ZRXOG KHOS UHYHUVH FOLPDWH FKDQJH 7KH LQFUHDVH LQ VRLO FDUERQ ZRXOG DOVR VLJQLÃ&#x20AC;FDQWO\ LPSURYH WKH SURGXFWLRQ DQG DGDSWDWLRQ FDSDFLWLHVRIJOREDOJUD]LQJV\VWHPV

.7KHXUJHQWQHHGIRUPRUHSHHU UHYLHZHGUHVHDUFK ,W LV QRW WKH LQWHQWLRQ RI WKLV SDSHU WR XVH WKH DERYH W\SHV RI JHQHULF H[HUFLVHV RI JOREDOO\ H[WUDSRODWLQJ GDWD DV VFLHQWLÃ&#x20AC;F SURRI RI ZKDW FDQ EH DFKLHYHG E\ VFDOLQJ XS RUJDQLF V\VWHPV 7KHVH W\SHV RI YHU\




VLPSOHDQDO\VHVDUHXVHIXOIRUSURYLGLQJDFRQFHSWXDO LGHDRIWKHFRQVLGHUDEOHSRWHQWLDORIRUJDQLFIDUPLQJ WR UHGXFH *+* HPLVVLRQV RQ D ODQGVFDSH VFDOH 7KH FULWLFDO LVVXH KHUH LV WKDW XUJHQW SHHUUHYLHZHG UHVHDUFK LV QHHGHG WR XQGHUVWDQG KRZ DQG ZK\ DQG IRU WKH VFHSWLFV ² LI  WKHVH V\VWHPV VHTXHVWHU VLJQLÃ&#x20AC;FDQWOHYHOVRI&2DQGWKHQORRNDWKRZWRDSSO\ WKHÃ&#x20AC;QGLQJVIRUVFDOLQJXSRQDJOREDOOHYHOLQRUGHUWR DFKLHYHDVLJQLÃ&#x20AC;FDQWOHYHORI*+*PLWLJDWLRQ 7KHSRWHQWLDORIWKHVHIDUPLQJPHWKRGVLVHQRUPRXV FRQVLGHULQJ WKDW WKHVH GDWD DUH EDVHG RQ FXUUHQW SUDFWLFHV

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·VUHVHDUFK LVFRQVLVWHQWZLWKWKHÃ&#x20AC;QGLQJVRI&KULVWRSKHU/DODQG 0LVKUD  DQG5HWKHPH\HUHWDO   /RQJWHUP UHVHDUFK FRQGXFWHG IRU PRUH WKDQ  \HDUV DW WKH 5RWKDPVWHG 5HVHDUFK 6WDWLRQ LQ WKH 8QLWHG.LQJGRPDQGWKH8QLYHUVLW\RI,OOLQRLV0RUURZ 3ORWV LQ WKH 8QLWHG 6WDWHV VKRZHG WKDW WKH WRWDO VRLO FDUERQOHYHOVFRXOGVWHDGLO\LQFUHDVHDQGWKHQUHDFK DQHZVWDEOHHTXLOLEULXPLQIDUPLQJV\VWHPVWKDWXVH RUJDQLF PDWWHU LQSXWV 7KLV PHDQV WKDW JRRG VRLO RUJDQLF PDWWHU PDQDJHPHQW V\VWHPV FDQ LQFUHDVH

75$'($1'(19,5210(175(9,(:

DQGPDLQWDLQWKHODELOHIUDFWLRQVDVZHOODVWKHVWDEOH IUDFWLRQVRYHUWKHWLPHSHULRGVUHTXLUHGE\WKH&'0 /DO 

0$GDSWDWLRQ (YHQ LI WKH ZRUOG VWRSSHG SROOXWLQJ WKH SODQHW ZLWK *+*VLWZRXOGWDNHPDQ\GHFDGHVWRUHYHUVHFOLPDWH FKDQJH7KLVPHDQVWKDWIDUPHUVKDYHWRDGDSWWRWKH LQFUHDVLQJ LQWHQVLW\ DQG IUHTXHQF\ RI DGYHUVH DQG H[WUHPHZHDWKHUHYHQWVVXFKDVGURXJKWVDQGKHDY\ GDPDJLQJ UDLQIDOO ,QGHHG PDQ\ DUHDV RI WKH SODQHW DUHDOUHDG\H[SHULHQFLQJWKLV $QGHUVRQ6WHHU  

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²SHUFHQWKLJKHU LQWKHWZRRUJDQLFV\VWHPV7KH\LHOGVZHUHDQG NJSHUKDLQWKHRUJDQLFDQLPDODQGWKHRUJDQLF OHJXPH V\VWHPV UHVSHFWLYHO\ FRPSDUHG ZLWK  NJSHUKDLQWKHFRQYHQWLRQDOV\VWHP 3LPHQWHOHWDO  7KHUHVHDUFKHUVDWWULEXWHGWKHKLJKHU\LHOGVLQ WKHGU\\HDUVWRWKHDELOLW\RIWKHVRLOVRQRUJDQLFIDUPV WR EHWWHU DEVRUE UDLQIDOO 7KLV LV GXH WR WKH KLJKHU OHYHOVRIRUJDQLFFDUERQLQWKRVHVRLOVZKLFKPDNHV WKHPPRUHIULDEOHDQGEHWWHUDEOHWRVWRUHDQGFDSWXUH UDLQZDWHUZKLFKFDQWKHQEHXVHGIRUFURSV /D6DOOH DQG+HSSHUO\ 

2,PSURYHGHIÃ&#x20AC;FLHQF\RIZDWHUXVH 5HVHDUFKDOVRVKRZVWKDWRUJDQLFV\VWHPVXVHZDWHU PRUHHIÃ&#x20AC;FLHQWO\GXHWREHWWHUVRLOVWUXFWXUHDQGKLJKHU OHYHOVRIKXPXVDQGRWKHURUJDQLFPDWWHUFRPSRXQGV /RWWHU6HLGHODQG/LHEKDUW3LPHQWHOHWDO 


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

/RWWHUDQGFROOHDJXHVFROOHFWHGGDWDIRURYHU\HDUV GXULQJWKH5RGDOH)677KHLUUHVHDUFKVKRZHGWKDWWKH RUJDQLFPDQXUHV\VWHPDQGRUJDQLFOHJXPHV\VWHP /(*  WUHDWPHQWV LPSURYH WKH VRLOV· ZDWHUKROGLQJ FDSDFLW\LQÃ&#x20AC;OWUDWLRQUDWHDQGZDWHUFDSWXUHHIÃ&#x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

3&ULWLFDOGLIIHUHQFHVEHWZHHQRUJDQLF DQGFRQYHQWLRQDOIDUPLQJ 2UJDQLF IDUPLQJ KDV D UDQJH RI SUDFWLFHV WKDW DUH UHJDUGHG DV HVVHQWLDO IRU DOORZLQJ WKH V\VWHP WR EH FHUWLÃ&#x20AC;HGDVRUJDQLF0RVWRIWKHVHSUDFWLFHVDUHHDVLO\ WUDQVIHUUDEOH WR RWKHU IDUPLQJ V\VWHPV DQG PDQ\ RI WKHP DUH QRZ EHLQJ DGRSWHG XQGHU WKH HPHUJLQJ WHUP´FOLPDWHVPDUWµDJULFXOWXUH )$2F 

47KHDGGLWLRQRIRUJDQLFPDWWHU 7KH WHUP RUJDQLF IDUPLQJ LV GHULYHG IURP WKH IDFW WKDWRUJDQLFIDUPLQJV\VWHPVLPSURYHVRLOKHDOWKDQG IHUWLOLW\WKURXJKWKHUHF\FOLQJRIRUJDQLFPDWWHU7KHUH LV D YHU\ VWURQJ ERG\ RI HYLGHQFH ZKLFK VKRZV WKDW WKH DGGLWLRQ RI RUJDQLF PDWWHU LPSURYHV VRLO RUJDQLF FDUERQ 62&  OHYHOV DQG WKLV LV PRUH HIIHFWLYH WKDQ V\QWKHWLF ZDWHU VROXEOH IHUWLOL]HUV /DO   SURYLGHVDQH[WHQVLYHOLVWIURPWKHVFLHQWLÃ&#x20AC;FOLWHUDWXUH WKDWGHPRQVWUDWHVWKLV ´$SSOLFDWLRQ RI PDQXUHV DQG RWKHU RUJDQLF DPHQGPHQWV LV DQRWKHU LPSRUWDQW VWUDWHJ\ RI 62& VHTXHVWUDWLRQ 6HYHUDO ORQJWHUP H[SHULPHQWV LQ (XURSHKDYHVKRZQWKDWWKHUDWHRI62&VHTXHVWUDWLRQ LV JUHDWHU ZLWK DSSOLFDWLRQ RI RUJDQLF PDQXUHV WKDQ ZLWK FKHPLFDO IHUWLOL]HUV -HQNLQVRQ  :LWWHU HW DO  &KULVWHQVHQ  .RUVFKHQV  0XOOHU  6PLWK HW DO   ,QFUHDVH LQ WKH 62& SRRO LQ WKH ² FP GHSWK E\ ORQJWHUP XVH RI PDQXUH FRPSDUHG WR FKHPLFDO IHUWLOL]HUV ZDV  RYHU 



\HDUV LQ 'HQPDUN &KULVWHQVHQ    RYHU  \HDUV LQ *HUPDQ\ .RUVFKHQV  0XOOHU    RYHU\HDUVDW5RWKDPVWHG8. -HQNLQVRQ  DQGRYHU\HDUVLQ6ZHGHQ :LWWHUHWDO  7KH GDWD IURP 0RUURZ SORWV LQ ,OOLQRLV LQGLFDWHG WKDW PDQXUHG SORWV FRQWDLQHG 0JKDï PRUH 62& WKDQ XQPDQXUHG FRQWURO $QGHUVRQ HW DO   ,Q +XQJDU\$UHQGV &DVWK  REVHUYHGDQLQFUHDVH LQ62&FRQFHQWUDWLRQE\²E\PDQXULQJ6PLWK HW DO   HVWLPDWHG WKDW DSSOLFDWLRQ RI PDQXUH DW WKH UDWH RI 0JKDï WR FURSODQG LQ (XURSH ZRXOG LQFUHDVH WKH 62& SRRO E\  RYHU  \HDUV ,Q 1RUZD\ 8KOHQ   DQG 8KOHQ  7YHLWQHV   UHSRUWHGWKDWPDQXUHDSSOLFDWLRQZRXOGLQFUHDVH62& VHTXHVWUDWLRQDWWKHUDWHRI².JKDï\UïRYHU ²\HDUSHULRGµ

5&RPSRVWV·PXOWLSOHEHQHÃ&#x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

6$YRLGHGHPLVVLRQV &XUUHQWO\ PRVW RI WKH IRRG DQG RWKHU SURGXFWV IURP IDUPV DUH H[SRUWHG IURP WKH IDUP DQG VHQW WR FLWLHV 7KH GLVSRVDO RI WKH RUJDQLF UHVLGXHV LQ ODQGÃ&#x20AC;OOV LV UHVSRQVLEOH IRU PHWKDQH HPLVVLRQV 0HWKDQH LV D VLJQLÃ&#x20AC;FDQW*+*&RUUHFWFRPSRVWLQJDQGELRGLJHVWHU PHWKRGV DUH QRZ UHFRJQL]HG DV HIIHFWLYH ZD\V RI DYRLGLQJVXFKHPLVVLRQV IRUPRUHLQIRUPDWLRQRQWKH VFLHQFHRIVRLOPHWKDQHDQGVRLORUJDQLFPDWWHUVHH $QQH[ 5HVHDUFKE\)L%/VKRZVWKDWPRUH*+*V FDQEHDYRLGHGE\WKHVHPHWKRGVWKDQE\PRVWRWKHU IDUPLQJSUDFWLFHV *DWWLQJHUHWDO )RUH[DPSOH WKH FRPSRVW SURMHFW DW 6HNHP LQ (J\SW KDV RIIVHW PHWKDQHHPLVVLRQVVLQFH-DQXDU\%\XVLQJWKH FRUUHFW FRPSRVWLQJ PHWKRGV IRU RUJDQLF PDWHULDOV




WKHSURMHFWZDVDEOHWRUHGXFHPHWKDQHHPLVVLRQVE\ WRQQHVRI&2H +HOP\$ERXOHLVKSHUVRQDO FRPPXQLFDWLRQ  &RPSRVWLQJ WKH RUJDQLF ZDVWHV LQ FLWLHV DQG WUDQVSRUWLQJWKHPWRWKHIDUPEULQJVPXOWLSOHEHQHÃ&#x20AC;WV LQFORVLQJWKHQXWULHQWF\FOHE\UHWXUQLQJWKHQXWULHQWV WKDW DUH H[SRUWHG IURP WKH IDUP DYRLGLQJ PHWKDQH HPLVVLRQV DQG LQFUHDVLQJ WKH UDWH RI VRLO FDUERQ VHTXHVWUDWLRQ

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Ã&#x20AC;FLHQW LQXVLQJQLWURJHQWKDQFRQYHQWLRQDOIDUPLQJV\VWHPV 6LJQLÃ&#x20AC;FDQWO\ EHFDXVH RI WKLV HIÃ&#x20AC;FLHQF\ YHU\ OLWWOH QLWURJHQOHDYHVWKHIDUPVDV*+*VRUDVQLWUDWHWKDW SROOXWHV DTXDWLF V\VWHPV 'ULQNZDWHU :DJRQHU DQG 6DUUDQWRQLR0DGHUHWDO 

8'LYHUVHFURSSLQJV\VWHPV $QRWKHU FULWLFDO DVSHFW RI RUJDQLF SURGXFWLRQ LV WKH XVH RI GLYHUVH FURSSLQJ V\VWHPV &HUWLÃ&#x20AC;HG RUJDQLF SURGXFWLRQV\VWHPVSURKLELWFRQWLQXRXVPRQRFXOWXUHV

75$'($1'(19,5210(175(9,(:

LQ FURSSLQJ V\VWHPV (YHU\ FHUWLÃ&#x20AC;HG RUJDQLF IDUP QHHGV WR KDYH D PDQDJHPHQW SODQ WKDW RXWOLQHV LWV FURS DQG VWRFN  URWDWLRQ V\VWHPV /DO   FLWHVWKHVFLHQWLÃ&#x20AC;FOLWHUDWXUHWRLQGLFDWHWKDWWKLVGRHV PDNHDGLIIHUHQFH ´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² FP OD\HU LQFUHDVHG OLQHDUO\ZLWKLQFUHDVHLQIUHTXHQF\RISDVWXUHLQWKHFURS URWDWLRQF\FOH,QFRPSDULVRQZLWKFRQWLQXRXVFURSSLQJ LQFRUSRUDWLRQ RI FRYHU FURSV LQ WKH URWDWLRQ F\FOH HQKDQFHG 62& FRQFHQWUDWLRQ LQ WKH VXUIDFH OD\HU E\ LQ6ZHGHQ 1LOVVRQ LQ7KH1HWKHUODQGV 9DQ'LMN DQGLQWKH8. -RKQVWRQ RYHU >D@²\HDUSHULRG6LPLODUUHVXOWVZHUHUHSRUWHGE\ /DOHWDO  IRUWKH86FURSODQGµ

9(URVLRQDQGVRLOORVV 7KHKLJKHVWSHUFHQWDJHRIVRLOFDUERQLVFRQWDLQHGLQ WKH Ã&#x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´WKH RUJDQLFDOO\IDUPHG VRLO KDG VLJQLÃ&#x20AC;FDQWO\ KLJKHU RUJDQLF PDWWHU FRQWHQW WKLFNHU WRSVRLO GHSWK KLJKHU SRO\VDFFKDULGH FRQWHQW ORZHU PRGXOXV RI UXSWXUH DQG OHVV VRLO HURVLRQ WKDQ WKHFRQYHQWLRQDOO\IDUPHGVRLOµ 5HJDQROGHWDO  


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

&ULWLFVRIRUJDQLFV\VWHPVSRLQWWRFRQYHQWLRQDOQRWLOO SURGXFWLRQ V\VWHPV DV VXSHULRU WR RUJDQLF V\VWHPV EHFDXVHWKHODWWHUXVHWLOODJH7RRXUNQRZOHGJHWKHUH LVRQO\RQHSXEOLVKHGVWXG\FRPSDULQJFRQYHQWLRQDO QRWLOO ZLWK RUJDQLF WLOODJH V\VWHPV 7KH UHVHDUFKHUV IRXQGWKDWWKHRUJDQLFV\VWHPKDGEHWWHUVRLOTXDOLW\ $FFRUGLQJ WR 7HDVGDOH &RIIPDQ DQG 0DQJXP   ´ WKH 25 >RUJDQLF@ V\VWHP LPSURYHG VRLO SURGXFWLYLW\ VLJQLÃ&#x20AC;FDQWO\ DV PHDVXUHG E\ FRUQ \LHOGVLQWKHXQLIRUPLW\WULDOKLJKHUOHYHOVRIVRLO&DQG 1ZHUHDFKLHYHGGHVSLWHWKHXVHRIWLOODJH FKLVHOSORZ DQG GLVN  IRU LQFRUSRUDWLQJ PDQXUH DQG RI FXOWLYDWLRQ ORZUHVLGXHVZHHSFXOWLYDWRU IRUZHHGFRQWURO2XU UHVXOWV VXJJHVW WKDW V\VWHPV WKDW LQFRUSRUDWH KLJK DPRXQWV RI RUJDQLF LQSXWV IURP PDQXUH DQG FRYHU FURSV FDQ LPSURYH VRLOV PRUH WKDQ FRQYHQWLRQDO QR WLOODJHV\VWHPVGHVSLWHUHOLDQFHRQDPLQLPXPOHYHORI WLOODJHµ 7KHODWHVWLPSURYHPHQWLQRUJDQLFORZQRWLOOV\VWHPV GHYHORSHG E\ WKH 5RGDOH ,QVWLWXWH VKRZV WKDW WKHVH V\VWHPV FDQ GHOLYHU KLJK \LHOGV DV ZHOO DV H[FHOOHQW HQYLURQPHQWDORXWFRPHV 5RGDOH0R\HU 

:6RLOFDUERQVHTXHVWUDWLRQFDQKHOS DOOHYLDWHSRYHUW\ 7KH DJUHHPHQWV RI WKH 81)&&& FRQIHUHQFH LQ &DQFXQSURSRVHGWKDWKXQGUHGVRIELOOLRQVRIGROODUV VKRXOGEHXVHGIRUIXQGLQJFOLPDWHFKDQJHPLWLJDWLRQ DFWLYLWLHV )$2 EHOLHYHV WKDW  SHU FHQW RI WKH SRWHQWLDOEHQHÃ&#x20AC;WVIURPDJULFXOWXUDOPLWLJDWLRQFRXOGJR WRIDUPHUVLQGHYHORSLQJFRXQWULHV )$2F  6FKHPHV WKDW SD\ IDUPHUV IRU VHTXHVWHULQJ FDUERQ LQWR WKH VRLO FRXOG KHOS DOOHYLDWH UXUDO SRYHUW\ DQG SURYLGH D VWURQJ Ã&#x20AC;QDQFLDO LQFHQWLYH WR DGRSW JRRG IDUPLQJSUDFWLFHVLIWKH\DUHGRQHIDLUO\DQGSURSHUO\ $W DQ DYHUDJH RI  WRQV RI &2 SHU KHFWDUH DW  SHU WRQ IDUPHUV FRXOG HDUQ  SHU KHFWDUH SHU \HDU:KLOHWKLVPD\QRWVHHPOLNHPXFKIRUPDQ\RI WKH ZRUOG·V IDUPHUV ZRUNLQJ RQ RQO\ D IHZ KHFWDUHV DQG HDUQLQJ OHVV WKDQ  D \HDU DQ H[WUD  LV H[WUHPHO\ YDOXDEOH 2Q D FRPPXQLW\ VFDOH LW ZRXOG PHDQPDQ\WKRXVDQGVRIGROODUVJRLQJLQWRYLOODJHV ZKLFKZRXOGEHVSHQWLQWKHORFDOFRPPXQLW\FUHDWLQJ WKH PXOWLSOLHU HIIHFW RI DGGHG EHQHÃ&#x20AC;WV 9HU\ FULWLFDOO\ LIWKLVLVORRNHGDWRYHUWKHORQJWHUPWKHVHDPRXQWV FDQ EHFRPH YHU\ ZRUWKZKLOH WR WKH IDUPHUV $V DQ H[DPSOH 6HNHP KDV VHTXHVWHUHG  NJV RI &2 SHUKHFWDUHSHU\HDUIRU\HDUV$WDWRQWKLVLV ZRUWK D WRWDO RI  SHU KHFWDUH IRU WKH WRWDO WLPH



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Ã&#x20AC;FDWLRQ VFKHPHV VXFK DV WKLUG SDUW\ V\VWHPV DQG SDUWLFLSDWRU\ JXDUDQWHH V\VWHPV 3*6  ,W ZRXOG EH UHODWLYHO\ VLPSOH WR LQFOXGH D VRLO FDUERQPHDVXUHPHQWV\VWHPLQFXUUHQWRUJDQLFDXGLW V\VWHPV 6XFK V\VWHPV FRXOG EH JURZHU FRQWUROOHG DQGGHVLJQHGWRHQVXUHIDLUQHVVDQGWUDQVSDUHQF\VR WKDWWKHIXQGVUHDFKWKHIDUPHUVDQGWKHLUFRPPXQLWLHV UDWKHUWKDQEHQHÃ&#x20AC;WLQJWKHPRQH\PDUNHWWUDGHUV ,PSOHPHQWHGSURSHUO\WKHVHVFKHPHVFRXOGEHVHHQ DV VRFLDO MXVWLFH V\VWHPV ZKHUH WKH &2SROOXWLQJ LQGXVWULHV ZRXOG EH SD\LQJ PDQ\ RI WKH SRRUHVW SHRSOHRQWKHSODQHWIRUWKHLUHFRV\VWHPVHUYLFHVRI VHTXHVWHULQJ *+*V )RU H[DPSOH  ELOOLRQ KHFWDUHV DW  SHU KHFWDUH KDV WKH SRWHQWLDO WR UHGLVWULEXWH  ELOOLRQ IURP &2SROOXWLQJ LQGXVWULHV WR UXUDO FRPPXQLWLHV$VLJQLÃ&#x20AC;FDQWSURSRUWLRQRIWKLVFRXOGJR WRVPDOOKROGHUVLQGHYHORSLQJFRXQWULHV )$2F  :HOOGHVLJQHG VRLO FDUERQ VFKHPHV WKDW LQFOXGH VRLO FDUERQ VHTXHVWUDWLRQ KDYH WKH SRWHQWLDO WR UHGXFH *+*HPLVVLRQVLQWKHDWPRVSKHUHDVZHOODVDOOHYLDWH UXUDOSRYHUW\LQGHYHORSLQJFRXQWULHVDQGWKH\ZRXOG SURYLGHDVXEVWDQWLDOÃ&#x20AC;QDQFLDOLQFHQWLYHWRDGRSWJRRG IDUPLQJSUDFWLFHV 7KH\ FRXOG EH Ã&#x20AC;QDQFHG WKURXJK JRYHUQPHQW DGPLQLVWHUHGFDSDQGWUDGHV\VWHPV7KHVHV\VWHPV SXWDFDSRQWKHWRWDODPRXQWRIHPLVVLRQVDQGE\ WD[LQJHPLVVLRQVWKDWDUHDERYHWKHWDUJHWVWKH\IRUFH WKH HPLWWHUV WR UHDFK WKHLU WDUJHWV WKURXJK HQHUJ\ HIÃ&#x20AC;FLHQF\ WKH DGRSWLRQ RI UHQHZDEOH HQHUJ\ RU E\ RWKHURIIVHWV7KHFDSFRXOGEHSURJUHVVLYHO\ORZHUHG WKHUHE\ IRUFLQJ WKH LQGXVWULHV WR FRQWLQXRXVO\ Ã&#x20AC;QG ZD\V WR UHGXFH HPLVVLRQV 7KHVH WD[HV FRXOG WKHQ EHXVHGWRSD\IDUPHUVIRUWKHLUHFRV\VWHPVHUYLFHV RIVWULSSLQJWKH&2RXWRIWKHDWPRVSKHUHDQGÃ&#x20AC;[LQJ




75$'($1'(19,5210(175(9,(:

LW LQ WKH VRLO 7KH VFKHPHV FRXOG EH JRYHUQPHQW DGPLQLVWHUHGRUPDUNHWEDVHG 7KHUH KDYH EHHQ PDQ\ FRQFHUQV H[SUHVVHG DERXW PDUNHWEDVHG V\VWHPV HVSHFLDOO\ WKRVH WKDW ZDQW WR GHYHORS FRPSOH[ À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ÀFDQWUHGXFWLRQLQWKHSULFHRIFDUERQLQ LQWKHJRYHUQPHQWDGPLQLVWHUHG(XURSHDQ8QLRQ VFKHPH VKRZV WKH QHHG IRU D UHDOLVWLF JRYHUQPHQW

$QQH[WR&RPPHQWDU\9 3DVWXUHFURSSLQJ²DQQXDOVLQD SHUHQQLDOV\VWHP 3DVWXUHFURSSLQJLVZKHUHWKHDQQXDOFURSLVSODQWHG LQ D SHUHQQLDO SDVWXUH LQVWHDG RI LQ D SORJKHG ÀHOG 7KLV ZDV ÀUVW GHYHORSHG E\ &ROLQ 6HLV LQ $XVWUDOLD 7KH SULQFLSOH LV EDVHG RQ D VRXQG HFRORJLFDO IDFW QDPHO\WKDWDQQXDOSODQWVJURZLQSHUHQQLDOV\VWHPV 7KH NH\ LV WR DGDSW WKLV SULQFLSOH WR WKH DSSURSULDWH PDQDJHPHQWV\VWHPIRUWKHVSHFLÀFFDVKFURSVDQG FOLPDWH ,Q &ROLQ·V V\VWHP WKH SDVWXUH LV ÀUVW JUD]HG XVLQJ KROLVWLF PDQDJHPHQW WR HQVXUH WKDW LW LV YHU\ VKRUW 7KLVDGGVRUJDQLFPDWWHULQWKHIRUPRIPDQXUHFXW JUDVV DQG VKHG URRWV DQG VLJQLÀFDQWO\ UHGXFHV WKH FRPSHWLWLRQ IURP WKH SDVWXUH ZKHQ WKH FDVK FURS LV VHHGHGDQGJHUPLQDWHV7KHFURSLVGLUHFWO\SODQWHG LQWKHSDVWXUH $FFRUGLQJ WKH &ROLQ 6HLV ´,W ZDV DOVR OHDUQW WKDW VRZLQJ D FURS LQ WKLV PDQQHU VWLPXODWHG SHUHQQLDO JUDVVVHHGOLQJVWRJURZLQQXPEHUVDQGGLYHUVLW\JLYLQJ FRQVLGHUDEO\PRUHWRQHVKHFWDUHRISODQWJURZWK7KLV SURGXFHVPRUHVWRFNIHHGDIWHUWKHFURSLVKDUYHVWHG DQGWRWDOO\HOLPLQDWHVWKHQHHGWRUHVRZSDVWXUHVLQWR

PDQGDWHG ÁRRU SULFH IRU FDUERQ WR HQVXUH WKDW ODQGKROGHUV DUH DGHTXDWHO\ FRPSHQVDWHG IRU WKHLU VHUYLFHVRIVHTXHVWHULQJ&2DQGQRWVXEMHFWHGWRWKH YDJDULHVRIPDUNHWSULFHÁ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ÀQDQFLDOO\ UHZDUG IDUPHUV ZKR HQJDJH LQ SURYHQ SUDFWLFHV VXFK DV RUJDQLF DJULFXOWXUHWKDWVHTXHVWHU&2LQWRWKHVRLO

WKH FURSSHG DUHDV &URSSLQJ PHWKRGV XVHG LQ WKH SDVWUHTXLUHWKDWDOOYHJHWDWLRQLVNLOOHGSULRUWRVRZLQJ WKHFURSDQGZKLOHWKHFURSLVJURZLQJµ ´)URPDIDUPHFRQRPLFSRLQWRIYLHZWKHSRWHQWLDOIRU JRRG SURÀW LV H[FHOOHQW EHFDXVH WKH FRVW RI JURZLQJ FURSV LQ WKLV PDQQHU LV D IUDFWLRQ RI FRQYHQWLRQDO FURSSLQJ7KHDGGHGEHQHÀWLQDPL[HGIDUPVLWXDWLRQ LVWKDWXSWRVL[PRQWKVH[WUDJUD]LQJLVDFKLHYHGZLWK




.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

WKLV PHWKRG FRPSDUHG ZLWK WKH ORVV RI JUD]LQJ GXH WR JURXQG SUHSDUDWLRQ DQG ZHHG FRQWURO UHTXLUHG LQ WUDGLWLRQDO FURSSLQJ PHWKRGV $V D JHQHUDO UXOH DQ XQGHUOLQLQJ SULQFLSOH RI WKH VXFFHVV RI WKLV PHWKRG LV ¶2QH KXQGUHG SHUFHQW JURXQG FRYHU RQH KXQGUHG SHUFHQWRIWKHWLPH¶µ ´«D  +D FURS RI (FKLGQD RDWV WKDW ZDV VRZQ DQG KDUYHVWHGLQRQ«´:LQRQDµ7KLVFURS·V\LHOGZDV WRQQH+D EDJVDFUH 7KLV\LHOGLVDWOHDVWHTXDO WR WKH GLVWULFW DYHUDJH ZKHUH IXOO JURXQG GLVWXUEDQFH FURSSLQJ PHWKRGV ZHUH XVHGµ 7KLV SURÃ&#x20AC;W GRHV QRW LQFOXGH WKH YDOXH RI WKH H[WUD JUD]LQJ 2Q :LQRQD LW LV EHWZHHQ>DQG@KDEHFDXVHWKHSDVWXUHLVJUD]HG XSWRWKHSRLQWRIVRZLQJ:KHQXVLQJWUDGLWLRQDOFURSSLQJ SUDFWLFHV ZKHUH JURXQG SUHSDUDWLRQ DQG ZHHG FRQWURO PHWKRGVDUHXWLOLVHGIRUSHULRGVRIXSWRIRXUWRVL[PRQWKV EHIRUH WKH FURS LV VRZQ WKHQ QR TXDOLW\ JUD]LQJ FDQ EH DFKLHYHG ´2WKHU EHQHÃ&#x20AC;WV DUH PRUH GLIÃ&#x20AC;FXOW WR TXDQWLI\ 7KHVH DUH WKH YDVW LPSURYHPHQW LQ SHUHQQLDO SODQW QXPEHUV DQG GLYHUVLW\ RI WKH SDVWXUH IROORZLQJ WKH FURS 7KLV PHDQV WKDWWKHUHLVQRQHHGWRUHVRZSDVWXUHVZKLFKFDQFRVW LQ H[FHVV RI  SHU KHFWDUH DQG FRQVLGHUDEO\ PRUH VKRXOGFRQWUDFWRUVEHXVHGIRUSDVWXUHHVWDEOLVKPHQWµ ,QGHSHQGHQW VWXGLHV DW :LQRQD RQ SDVWXUH FURSSLQJ E\ >WKH@ 'HSDUWPHQWRI/DQGDQG:DWHUKDYHIRXQGWKDW SDVWXUHFURSSLQJLVPRUHSURÃ&#x20AC;WDEOHWKDQFRQYHQWLRQDO DJULFXOWXUH >DQG@ WKLV LV FRXSOHG ZLWK JUHDW HQYLURQPHQW EHQHÃ&#x20AC;WV WKDW ZLOO LPSURYH WKH VRLO DQG UHJHQHUDWH RXU ODQGVFDSHVµ

%XLOGLQJVRLOIHUWLOLW\ZLWKRXW V\QWKHWLFIHUWLOL]HUV &KULVWLQH -RQHV KDV FRQGXFWHG UHVHDUFK DW &ROLQ 6LHV·VSURSHUW\ZKLFKVKRZVWKDWLQWKHODVW\HDUV WKDRI&2ZDVVHTXHVWHUHG Â&#x2021; 7KHVHTXHVWUDWLRQUDWHLQWKHODVWWZR\HDUV ²   KDV EHHQ  WRQV RI &2 SHU KHFWDUH SHU \HDU

&RPSDULVRQRIVRLOEHWZHHQ :LQRQDDQGQHLJKERXU ,Q WKLV SDLUHG VLWH FRPSDULVRQ SDUHQW PDWHULDO VORSHDVSHFWUDLQIDOODQGIDUPLQJHQWHUSULVHVDUH WKHVDPH/HYHOVRIVRLOFDUERQLQERWKSDGGRFNV ZHUHRULJLQDOO\WKHVDPH /+6²FPVRLOSURÃ&#x20AC;OHIURPDSDGGRFNLQZKLFK JURXQGFRYHUKDVEHHQDFWLYHO\PDQDJHG FURSSHG DQGJUD]HG WRHQKDQFHSKRWRV\QWKHWLFFDSDFLW\ 5+6 ² FP VRLO SURÃ&#x20AC;OH IURP D FRQYHQWLRQDOO\ PDQDJHG QHLJKERXULQJ SDGGRFN  PHWUHV WKURXJKWKHIHQFH WKDWKDVEHHQVHWVWRFNHGDQG KDVDORQJKLVWRU\RISKRVSKDWHDSSOLFDWLRQ 1RWHV L 7KHFDUERQOHYHOVLQWKH²FPLQFUHPHQWDUH YHU\ VLPLODU 7KLV VXUIDFH FDUERQ UHVXOWV IURP WKH GHFRPSRVLWLRQ RI RUJDQLF PDWWHU OHDYHV URRWV PDQXUH HWF  IRUPLQJ VKRUWFKDLQ XQVWDEOH ¶ODELOH· FDUERQ LL 7KHFDUERQEHORZFPLQWKH/+6SURÃ&#x20AC;OHKDV UDSLGO\LQFRUSRUDWHGLQWRWKHKXPLF QRQODELOH VRLO IUDFWLRQ /RQJFKDLQ QRQODELOH FDUERQ LV KLJKO\ VWDEOH -RQHV




‡ 7KLVLQFUHDVHRFFXUUHGGXULQJWKHZRUVWGURXJKWLQ UHFRUGHG$XVWUDOLDQKLVWRU\ ‡ 7KHIROORZLQJLQFUHDVHVLQVRLOPLQHUDOIHUWLOLW\KDYH RFFXUUHG LQ  \HDUV ZLWK RQO\ WKH DGGLWLRQ RI D VPDOO DPRXQW RI SKRVSKRUXV FDOFLXP  SHU FHQWPDJQHVLXPSHUFHQWSRWDVVLXPSHU FHQW VXOSKXU  SHU FHQW SKRVSKRUXV  SHU FHQW]LQFSHUFHQWLURQSHUFHQWFRSSHU

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ÀFDQWDPRXQW RIPHWKDQHLVELRGHJUDGHGLQVRLOVDQGWKDWWKLVKDV EHHQXQGHUHVWLPDWHGGXHWRDODFNRIUHVHDUFK:KLOH WKH YDQ *URHQLJHQ HW DO VWXG\ VKRZV DQ LQFUHDVH LQ PHWKDQH RXWSXW IURP VRLOV ZKHQ WKH WHPSHUDWXUH

75$'($1'(19,5210(175(9,(:

SHUFHQWERURQSHUFHQWPRO\EGHQXP SHUFHQWFREDOWSHUFHQWDQGVHOHQLXPSHU FHQW -RQHV  )RUPRUHLQIRUPDWLRQRQ ‡ 3DVWXUH FURSSLQJ VHH KWWSZZZZLQRQDQHWDX IDUPLQJKWPO ‡ +ROLVWLFPDQDJHPHQWVHH KWWSKROLVWLFPDQDJHPHQWRUJ

LQFUHDVHVWKH+HOOHEUDQGDQG+HUSSLFKVWXGLHVVKRZ WKDWWKHLQFUHDVHLQWHPSHUDWXUHZLOOGULYHXSWKHUDWH RIELRORJLFDOGHJUDGDWLRQRIPHWKDQHE\PHWK\ORWURSLF EDFWHULD DQG RWKHU PHWKDQRWURSKLF PLFURRUJDQLVPV 7KLV H[SODLQV ZK\ KLVWRULFDO DWPRVSKHULF PHWKDQH OHYHOV KDYH EHHQ UHODWLYHO\ VWDEOH DQG DOVR ZK\ QDWXUDOO\SURGXFHGPHWKDQHOHYHOVPD\QRWLQFUHDVH DVWKHFOLPDWHJHWVZDUPHU 0DQ\ VWXGLHV RI PHWKDQH SURGXFWLRQ RQO\ FDOFXODWH WKHPHWKDQHSURGXFHGE\WKHV\VWHPVDVDRQHZD\ RXWSXW LQWR WKH DWPRVSKHUH 7KLV FDQ EH FRUUHFW IRU VRPH SURGXFWLRQ V\VWHPV VXFK DV FRQÀQHG DQLPDO IHHGORWVDQGJDUEDJHVHQWWRODQGÀOOKRZHYHULWLVQRW FRUUHFW IRU PRVW QDWXUDO SURGXFWLRQV V\VWHPV VXFK DV DQLPDO JUD]LQJ RQ JUDVVODQGV FURS SURGXFWLRQ RQ ELRORJLFDOO\ DFWLYH VRLOV RUFKDUGV DQG IRUHVWV DV WKHVHV\VWHPVDUHEDVHGRQF\FOHVWKDWDOVRGHJUDGH PHWKDQH 7KLV RYHUVLJKW RI WKH DPRXQW RI PHWKDQH WKDWFDQEHELRGHJUDGHGE\WKHVRLORUWKHRFHDQVLVD PDMRUÁDZWKDWQHHGVWREHUHFWLÀHG 8QWLO WKH GHFD\ F\FOHV DUH SURSHUO\ LGHQWLÀHG PHDVXUHG DQG PRGHOOHG WKH DPRXQWV RI PHWKDQH WKDW DUH HPLWWHG E\ V\VWHPV DUH QRW DQ DFFXUDWH PHDVXUH RI PHWKDQH·V FRQWULEXWLRQ WR WRWDO *+*V 8QGHUVWDQGLQJ WKHVH F\FOHV DQG WKH ELRORJLFDO FRQGLWLRQV QHHGHG WR ELRGHJUDGH PHWKDQH ZLOO JLYH VFLHQWLVWV DQG ODQGKROGHUV D PDMRU WRRO WR PDQDJH RQHRIWKHPRVWLPSRUWDQW*+*V

7KHQHHGIRUJRRGVRLOPDQDJHPHQWSUDFWLFHV $VWXG\E\)XX0LQJ.DLHWDO  VXJJHVWVWKDW WKH UHFHQW UHGXFWLRQV LQ PHWKDQH RXWSXW DUH GXH WR FKDQJHV LQ IDUPLQJ SUDFWLFHV 7KLV VWXG\ DGGV WR WKHGDWDVKRZLQJWKDWWKHUHLVJRRGHYLGHQFHRIWKH SRWHQWLDO WR UHGXFH WKH DPRXQW RI PHWKDQH LQ WKH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

DWPRVSKHUH WKURXJK WKH IROORZLQJ VRLO PDQDJHPHQW SUDFWLFHVDVGHVFULEHGEHORZ  $YRLGLQJDQDHURELFVRLOFRQGLWLRQV0HWKDQHIRUPV LQDQDHURELFFRQGLWLRQVVXFKDVULFHSDGGLHV1HZ PHWKRGVVXFKDVWKHV\VWHPRIULFHLQWHQVLÃ&#x20AC;FDWLRQ 65,  XVH PRUH IUHTXHQW VKRUWHU ZDWHULQJ F\FOHV WKDW DYRLG DQDHURELF FRQGLWLRQV WKHUHE\ VLJQLÃ&#x20AC;FDQWO\UHGXFLQJPHWKDQHSURGXFWLRQ  2SHQ ZHOODHUDWHG VRLOV 2UJDQLF PDWWHU FDQ YRODWLOL]H LQWR &2 PHWKDQH DQG RWKHU JDVHV LQ IDUPLQJ V\VWHPV +RZHYHU FRUUHFW PDQDJHPHQW V\VWHPVFDQFRQWLQXRXVO\LQFUHDVHWKHSURSRUWLRQ RI WKH QRQYRODWLOH FRPSRXQGV DQG IRUP VWDEOH IUDFWLRQV RI VRLO RUJDQLF PDWWHU 7KH UHVHDUFK FRQGXFWHG E\ -RQHV DW :LQRQD VKRZHG WKDW WKH



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




75$'($1'(19,5210(175(9,(:

1//'06#4; U   )41'%1.1);U1.76+10616*'4+5'51( 11& ;56'/5#0&.+/#6'*#0)' 2OLYLHUGH6FKXWWHU 816SHFLDO5DSSRUWHXURQWKH5LJKWWR)RRG

$EVWUDFW 7KH IRRG SULFH KLNHV RI  DQG ² ZHUH SDUWO\ WKH UHVXOW RI ZHDWKHUUHODWHG HYHQWV OLQNHG WR FOLPDWH FKDQJH DQG SDUWO\ GXH WR WKH GHSHQGHQFH RI IRRG SURGXFWLRQ RQ IRVVLO HQHUJLHV WKDW FDXVHG D PHUJHU EHWZHHQ IRRG DQG HQHUJ\ PDUNHWV RQ WKLV LVVXH VHH DOVR WKH FRPPHQW E\ 5XQGJUHQ LQ WKLV FKDSWHU DVZHOODVWKHÀ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

$5HLQYHVWLQJLQDJULFXOWXUH 7KH IRRG SULFH VSLNHV RI  DQG ² SURPSWHG JRYHUQPHQWV WR VWDUW UHLQYHVWLQJ LQ DJULFXOWXUHDVHFWRUWKDWKDVEHHQQHJOHFWHGLQPDQ\ GHYHORSLQJFRXQWULHVIRUWKHSDVW\HDUV+RZHYHU LQYHVWPHQWV WKDW LQFUHDVH IRRG SURGXFWLRQ ZLOO QRW PDNH VLJQLÀFDQW SURJUHVV LQ FRPEDWLQJ KXQJHU DQG PDOQXWULWLRQLIWKH\GRQRWOHDGWRKLJKHULQFRPHVDQG LPSURYHG OLYHOLKRRGV IRU WKH SRRUHVW ² SDUWLFXODUO\ VPDOOVFDOH IDUPHUV LQ GHYHORSLQJ FRXQWULHV $QG VKRUWWHUP JDLQV ZLOO EH RIIVHW E\ ORQJWHUP ORVVHV LI WKH\ FDXVH IXUWKHU GHJUDGDWLRQ RI HFRV\VWHPV WKXV WKUHDWHQLQJ WKH DELOLW\ WR PDLQWDLQ FXUUHQW OHYHOV RI SURGXFWLRQ LQ WKH IXWXUH 7KH TXHVWLRQ WKHUHIRUH LV QRWVLPSO\KRZPXFKEXWDOVRKRZWKHLQYHVWPHQWV DUH PDGH 3RXULQJ PRQH\ LQWR DJULFXOWXUH ZLOO QRW EH VXIÀFLHQW WKH LPSHUDWLYH WRGD\ LV WR WDNH VWHSV WKDW IDFLOLWDWH WKH WUDQVLWLRQ WRZDUGV D ORZFDUERQ UHVRXUFHFRQVHUYLQJ W\SH RI DJULFXOWXUH WKDW EHQHÀWV WKHSRRUHVWIDUPHUV $JURHFRORJ\ FDQ SOD\ D FHQWUDO UROH LQ DFKLHYLQJ WKLV JRDO 'H 6FKXWWHU D 'H 6FKXWWHU DQG 9DQORTXHUHQ   ,W LV SRVVLEOH WR VLJQLÀFDQWO\ LPSURYH DJULFXOWXUDO SURGXFWLYLW\ ZKHUH LW KDV EHHQ ODJJLQJ EHKLQG DQG WKXV WR LQFUHDVH SURGXFWLRQ ZKHUH LW QHHGV PRVW WR EH LQFUHDVHG LH SULPDULO\ LQ SRRU IRRGGHÀFLHQW FRXQWULHV  ZKLOH DW WKH VDPH WLPHLPSURYLQJWKHOLYHOLKRRGVRIVPDOOKROGHUIDUPHUV

DQG FRQVHUYLQJ HFRV\VWHPV 7KLV ZRXOG DOVR VORZ WKH WUHQG WRZDUGV LQFUHDVLQJ XUEDQL]DWLRQ LQ WKH FRXQWULHVFRQFHUQHGZKLFKLVSODFLQJVWUHVVRQWKHLU SXEOLFVHUYLFHV0RUHRYHULWZRXOGFRQWULEXWHWRUXUDO GHYHORSPHQW DQG SUHVHUYH WKH DELOLW\ RI VXFFHHGLQJ JHQHUDWLRQV WR PHHW WKHLU RZQ QHHGV ,Q DGGLWLRQ WKHUHVXOWLQJKLJKHULQFRPHVLQWKHUXUDODUHDVZRXOG FRQWULEXWH WR WKH JURZWK RI RWKHU VHFWRUV RI WKH HFRQRP\E\VWLPXODWLQJGHPDQGIRUQRQDJULFXOWXUDO SURGXFWV $GHOPDQ 

%7KHGLDJQRVLV 6LQFH WKH JOREDO IRRG FULVHV PRVW RI WKH IRFXV KDV EHHQRQLQFUHDVLQJRYHUDOOSURGXFWLRQXVLQJPHWKRGV FRQVLVWHQWZLWKFODVVLF*UHHQ5HYROXWLRQDSSURDFKHV 7KH FULVHV KDYH EHHQ DWWULEXWHG WR D PLVPDWFK EHWZHHQ VXSSO\ DQG GHPDQG UHÁHFWLQJ D JDS EHWZHHQ VORZHU SURGXFWLYLW\ JURZWK DQG LQFUHDVLQJ QHHGV $ ZLGHO\ FLWHG HVWLPDWH LV WKDW WDNLQJ LQWR DFFRXQW GHPRJUDSKLF JURZWK DV ZHOO DV FKDQJHV LQ WKH FRPSRVLWLRQ RI GLHWV DQG FRQVXPSWLRQ OHYHOV DVVRFLDWHG ZLWK JURZLQJ XUEDQL]DWLRQ DQG KLJKHU KRXVHKROGLQFRPHVWKHRYHUDOOLQFUHDVHLQDJULFXOWXUDO SURGXFWLRQVKRXOGUHDFKSHUFHQWE\ %XUQH\ HWDO  +RZHYHUDSDUWIURPWKHIDFWWKDWWKLVHVWLPDWHWDNHV WKH FXUUHQW GHPDQG FXUYHV DV JLYHQ DQG GRHV QRW FRQVLGHU WKH OHDNDJHV DQG ZDVWH LQ WKH FXUUHQW


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

IRRGV\VWHPV 81(3 WKHIRFXVRQLQFUHDVLQJ SURGXFWLRQ PD\ QRW DGHTXDWHO\ FRQVLGHU WKH IDFW WKDW KXQJHU WRGD\ LV QRW VR PXFK D FRQVHTXHQFH RI VWRFNV EHLQJ WRR ORZ RU WR JOREDO VXSSOLHV EHLQJ XQDEOH WR PHHW GHPDQG UDWKHU LW LV GXH WR SRYHUW\ ,W LV WKHLU ODFN RI SXUFKDVLQJ SRZHU WKDW PDNHV LW GLIÀ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i]DU  6ZDQVRQ   WKH XQVXVWDLQDEOHXVHRIZDWHUDVZHOODVWKHGHJUDGDWLRQ DQG SROOXWLRQ RI VRLOV DQG ZDWHU XQGHUPLQH WKH FRQWLQXLQJ DELOLW\ RI WKH HDUWK·V QDWXUDO UHVRXUFHV WR VXSSRUWDJULFXOWXUH&OLPDWHFKDQJHZKLFKWUDQVODWHV LQWRPRUHIUHTXHQWDQGH[WUHPHZHDWKHUHYHQWVVXFK DVGURXJKWVDQGÁ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



SURFHVV RI IDEULFDWLQJ QLWURJHQEDVHG IHUWLOL]HUV DFFRXQWLQJ IRU DQRWKHU  SHU FHQW  $OOHQ HW DO 0HLQKDXVHQHWDO  $JURHFRORJ\ LV LQFUHDVLQJO\ VHHQ DV RQH ZD\ WR DGGUHVV WKHVH FRQVLGHUDEOH FKDOOHQJHV $ ZLGH UDQJHRIH[SHUWVZLWKLQWKHVFLHQWLÀFFRPPXQLW\DQG LQWHUQDWLRQDODJHQFLHVVXFKDVWKH)$2DQG%LRYHUVLW\ ,QWHUQDWLRQDO  DQG81(3  YLHZLWDVDZD\ WR LPSURYH WKH UHVLOLHQFH DQG VXVWDLQDELOLW\ RI IRRG V\VWHPV ,$$67' D :H]HO HW DO D  ,W LV DOVRJDLQLQJJURXQGLQFRXQWULHVDVGLYHUVHDV%UD]LO )UDQFH*HUPDQ\DQGWKH8QLWHG6WDWHV :H]HOHWDO  

&$JURHFRORJ\PLPLFNLQJQDWXUH $JURHFRORJ\ KDV EHHQ GHÀQHG DV WKH ´DSSOLFDWLRQ RI HFRORJLFDO VFLHQFH WR WKH VWXG\ GHVLJQ DQG PDQDJHPHQW RI VXVWDLQDEOH DJURHFRV\VWHPVµ $OWLHUL  *OLHVVPDQ   ,W VHHNV WR LPSURYH DJULFXOWXUDO V\VWHPV E\ PLPLFNLQJ RU DXJPHQWLQJ QDWXUDOSURFHVVHVWKXVHQKDQFLQJEHQHÀFLDOELRORJLFDO LQWHUDFWLRQVDQGV\QHUJLHVDPRQJWKHFRPSRQHQWVRI DJURELRGLYHUVLW\ $OWLHUL   &RPPRQ SULQFLSOHV RI DJURHFRORJ\ LQFOXGH UHF\FOLQJ QXWULHQWV DQG HQHUJ\ RQ IDUPV UDWKHU WKDQ DXJPHQWLQJ QXWULHQWV ZLWK H[WHUQDO LQSXWV LQWHJUDWLQJ FURSV DQG OLYHVWRFN GLYHUVLI\LQJ VSHFLHV DQG JHQHWLF UHVRXUFHV LQ WKH DJURHFRV\VWHPVRYHUWLPHDQGVSDFHIURPWKHÀHOG WR ODQGVFDSH OHYHOV DQG LPSURYLQJ LQWHUDFWLRQV DQG SURGXFWLYLW\WKURXJKRXWWKHDJULFXOWXUDOV\VWHPUDWKHU WKDQ IRFXVLQJ RQ LQGLYLGXDO VSHFLHV $JURHFRORJ\ LV KLJKO\ NQRZOHGJHLQWHQVLYH EDVHG RQ WHFKQLTXHV WKDWDUHQRWGHOLYHUHGWRSGRZQEXWGHYHORSHGRQWKH EDVLV RI IDUPHUV· NQRZOHGJH DQG H[SHULPHQWDWLRQ ,WVSUDFWLFHVUHTXLUHGLYHUVLI\LQJWKHWDVNVRQWKHIDUP DQGOLQNLQJWKHPWRWKHGLYHUVLW\RIVSHFLHV LQFOXGLQJ DQLPDOV WKDWLQWHUDFWDWÀHOGOHYHO $ YDULHW\ RI WHFKQLTXHV KDYH EHHQ GHYHORSHG DQG VXFFHVVIXOO\WHVWHGLQDUDQJHRIUHJLRQVWKDWDUHEDVHG RQ WKLV DSSURDFK 3UHWW\   ,QWHJUDWHG QXWULHQW PDQDJHPHQWUHFRQFLOHVWKHQHHGWRÀ[QLWURJHQLQWKH VRLO E\ LPSRUWLQJ LQRUJDQLF DQG RUJDQLF VRXUFHV RI QXWULHQWVDQGUHGXFLQJQXWULHQWORVVHVWKURXJKHURVLRQ FRQWURO 7KXV LW DOVR EXLOGV XS VRLO RUJDQLF PDWWHU ZKLFKHQKDQFHV VRLO IHUWLOLW\DQGFDQ ELQG VLJQLÀFDQW DPRXQWV RI FDUERQ LQ WKH VRLO VHH FRPPHQWDU\ RI /HX RQ WKLV LVVXH LQ WKLV FKDSWHU  $JURIRUHVWU\ LQFRUSRUDWHV PXOWLIXQFWLRQDO WUHHV LQWR DJULFXOWXUDO V\VWHPV :DWHU KDUYHVWLQJ LQ GU\ODQG DUHDV HQDEOHV




WKHFXOWLYDWLRQRIIRUPHUO\DEDQGRQHGDQGGHJUDGHG ODQGVDQGLPSURYHVWKHZDWHUSURGXFWLYLW\RIFURSV 7KHLQWHJUDWLRQRIOLYHVWRFNLQWRIDUPLQJV\VWHPVVXFK DVGDLU\FDWWOHSLJVDQGSRXOWU\LQFOXGLQJXVLQJ]HUR JUD]LQJ FXW DQG FDUU\ SUDFWLFHV SURYLGHV D VRXUFH RI SURWHLQ WR IDPLOLHV ZKLOH DOVR IHUWLOL]LQJ VRLOV 7KH LQFRUSRUDWLRQ RI Ã&#x20AC;VK VKULPSV DQG RWKHU DTXDWLF UHVRXUFHVLQWRIDUPV\VWHPVVXFKDVLQWRLUULJDWHGULFH Ã&#x20AC;HOGVDQGÃ&#x20AC;VKSRQGVSURYLGHVVLPLODUEHQHÃ&#x20AC;WV7KHVH DSSURDFKHVLQYROYHWKHPDLQWHQDQFHRULQWURGXFWLRQRI DJULFXOWXUDOELRGLYHUVLW\DVDUHVXOWRIWKHLQWHJUDWLRQRI GLYHUVHFURSVOLYHVWRFNDJURIRUHVWU\Ã&#x20AC;VKSROOLQDWRUV LQVHFWVVRLOELRWDDQGRWKHUFRPSRQHQWV 6XFK UHVRXUFHFRQVHUYLQJ ORZH[WHUQDOLQSXW WHFKQLTXHV KDYH D KXJH \HW VWLOO ODUJHO\ XQWDSSHG SRWHQWLDO WR DGGUHVV WKH FRPELQHG FKDOOHQJHV RI SURGXFWLRQFRPEDWLQJUXUDOSRYHUW\DQGFRQWULEXWLQJ WR UXUDO GHYHORSPHQW ZKLOH DOVR SUHVHUYLQJ HFRV\VWHPVDQGPLWLJDWLQJFOLPDWHFKDQJH

$JURHFRORJ\DVDUHVSRQVHWRVXSSO\FRQVWUDLQWV $JURHFRORJLFDO WHFKQLTXHV KDYH D SURYHQ SRWHQWLDO WR VLJQLÃ&#x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Ã&#x20AC;FDWLRQ ZDV GHYHORSHG GXULQJ WKH V UHDFKHG VLPLODU FRQFOXVLRQV

7KHSRWHQWLDORIDJURHFRORJ\WRLQFUHDVHWKH LQFRPHVRIVPDOOVFDOHIDUPHUV 2QH DGYDQWDJH RI DJURHFRORJ\ LV LWV UHOLDQFH RQ ORFDOO\ SURGXFHG LQSXWV 0DQ\ $IULFDQ VRLOV DUH QXWULHQWSRRU DQG KHDYLO\ GHJUDGHG DQG WKHUHIRUH QHHGUHSOHQLVKPHQW$GGLQJQXWULHQWVWRWKHVRLOFDQ EH GRQH E\ DSSO\LQJ QRW RQO\ PLQHUDO IHUWLOL]HUV EXW DOVROLYHVWRFNPDQXUHRUE\JURZLQJJUHHQPDQXUHV )DUPHUV FDQ DOVR HVWDEOLVK ZKDW KDV EHHQ FDOOHG D ´IHUWLOL]HU IDFWRU\ LQ WKH Ã&#x20AC;HOGVµ E\ SODQWLQJ WUHHV WKDW WDNHQLWURJHQRXWRIWKHDLUDQG´Ã&#x20AC;[µLWLQWKHLUOHDYHV ZKLFK DUH VXEVHTXHQWO\ LQFRUSRUDWHG LQWR WKH VRLO :RUOG $JURIRUHVWU\ &HQWUH   $JURHFRORJ\

75$'($1'(19,5210(175(9,(:

UHGXFHV WKH GHSHQGHQFH RI IDUPHUV RQ DFFHVV WR H[WHUQDO LQSXWV ² DQG WKXV RQ VXEVLGLHV ² DQG RQ ORFDO UHWDLOHUV RI IHUWLOL]HUV RU SHVWLFLGHV DV ZHOO DV RQ ORFDO PRQH\OHQGHUV 'LYHUVLÃ&#x20AC;HG IDUPLQJ V\VWHPV SURGXFHWKHLURZQIHUWLOL]HUVDQGSHVWFRQWUROV\VWHPV WKXV UHGXFLQJ WKH QHHG IRU SHVWLFLGHV 'H 6FKXWWHU   7KH ORFDO DYDLODELOLW\ RI DGDSWHG VHHGV SODQWLQJ PDWHULDOV DQG OLYHVWRFN EUHHGV DOVR RIIHUV PXOWLSOH DGYDQWDJHV ERWK IRU WKH IDUPHU DQG IRU HQVXULQJWKHVXSSO\RIWKHUHTXLUHGGLYHUVLW\RIVXFK PDWHULDOVIRUPDMRUFURSVVXFKDVPDL]HULFHPLOOHW VRUJKXP SRWDWR DQG FDVVDYD 'H 6FKXWWHU D  7KLV LV SDUWLFXODUO\ EHQHÃ&#x20AC;FLDO WR VPDOOVFDOH IDUPHUV ²HVSHFLDOO\ZRPHQ²ZKRKDYHORZRUQRDFFHVVWR FUHGLW DQG DOVR ODFN FDSLWDO DQG DFFHVV WR IHUWLOL]HU GLVWULEXWLRQ V\VWHPV SDUWLFXODUO\ VLQFH WKH SULYDWH VHFWRU LV XQOLNHO\ WR LQYHVW LQ WKH PRVW UHPRWH DUHDV ZKHUHFRPPXQLFDWLRQURXWHVDUHSRRUDQGZKHUHIHZ HFRQRPLHVRIVFDOHFDQEHDFKLHYHG

$JURHFRORJ\·VFRQWULEXWLRQWRUXUDOGHYHORSPHQW DQGWRRWKHUVHFWRUVRIWKHHFRQRP\ $JURHFRORJ\ FRQWULEXWHV WR UXUDO GHYHORSPHQW EHFDXVH LW LV UHODWLYHO\ ODERXULQWHQVLYH DQG LV PRVW HIIHFWLYHO\SUDFWLFHGRQUHODWLYHO\VPDOOSORWVRIODQG 7KH LQLWLDO SHULRG LV SDUWLFXODUO\ ODERXULQWHQVLYH EHFDXVHRIWKHFRPSOH[LW\RIWKHWDVNVRIPDQDJLQJ GLIIHUHQW SODQWV DQG DQLPDOV RQ WKH IDUP DQG RI UHF\FOLQJWKHZDVWHSURGXFHGEXWWKLVKLJKHUODERXU LQWHQVLW\ RI DJURHFRORJ\ GLPLQLVKHV VLJQLÃ&#x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Ã&#x20AC;FLDO WR RWKHU VHFWRUV RI WKH HFRQRP\ LI LW LV EURDGEDVHG DQG LQFUHDVHV WKH LQFRPHV RI D ODUJH QXPEHU RI IDUPLQJ KRXVHKROGV UDWKHU WKDQ OHDGLQJ WRDIXUWKHUFRQFHQWUDWLRQRILQFRPHVLQWKHKDQGVRI D IHZ UHODWLYHO\ ODUJH ODQGRZQHUV ZKR UHO\ RQ ODUJH VFDOH KHDYLO\ PHFKDQL]HG SODQWDWLRQV $GHOPDQ  


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

$JURHFRORJ\·VFRQWULEXWLRQWRLPSURYLQJQXWULWLRQ 7KHDSSURDFKHVHVSRXVHGE\WKH*UHHQ5HYROXWLRQLQ WKHSDVWIRFXVHGSULPDULO\RQERRVWLQJWKHSURGXFWLRQ RIFHUHDOFURSV²ULFHZKHDWDQGPDL]H²LQRUGHUWR SUHYHQW IDPLQHV +RZHYHU WKHVH FURSV DUH PDLQO\ D VRXUFH RI FDUERK\GUDWHV DQG FRQWDLQ UHODWLYHO\ IHZ SURWHLQV DQG WKH RWKHU QXWULHQWV HVVHQWLDO IRU DGHTXDWHGLHWV<HWRIWKHRYHUSODQWVSHFLHV DYDLODEOH WR KXPDQV WKHVH WKUHH FURSV VXSSO\ WKH EXON RI RXU SURWHLQ DQG HQHUJ\ QHHGV WRGD\ )ULVRQ HW DO   7KH VKLIW IURP GLYHUVLÃ&#x20AC;HG FURSSLQJ V\VWHPVWRVLPSOLÃ&#x20AC;HGFHUHDOEDVHGV\VWHPVKDVWKXV FRQWULEXWHG WR PLFURQXWULHQW PDOQXWULWLRQ LQ PDQ\ GHYHORSLQJ FRXQWULHV 'HPPHQW HW DO   $V D UHVXOWQXWULWLRQLVWVQRZLQFUHDVLQJO\LQVLVWRQWKHQHHG IRUPRUHYDULHGDJURHFRV\VWHPVLQRUGHUWRHQVXUHD PRUHGLYHUVLÃ&#x20AC;HGQXWULHQWRXWSXWIURPIDUPLQJV\VWHPV $OORZD\'H&OHUFNHWDO 7KHGLYHUVLW\RI VSHFLHVRQIDUPVPDQDJHGIROORZLQJDJURHFRORJLFDO SULQFLSOHVDVZHOODVLQXUEDQRUSHULXUEDQDJULFXOWXUH LVDQLPSRUWDQWDVVHWLQWKLVUHJDUG

$JURHFRORJ\DQGFOLPDWHFKDQJH $JURHFRORJ\ FDQ VXSSRUW WKH SURYLVLRQ RI D QXPEHU RI VHUYLFHV WR HFRV\VWHPV LQFOXGLQJ E\ SURYLGLQJ D KDELWDW IRU ZLOG SODQWV VXSSRUWLQJ JHQHWLF GLYHUVLW\ DQG SROOLQDWLRQ DQG ZDWHU VXSSO\ DQG UHJXODWLRQ ,W DOVR VWUHQJWKHQV UHVLOLHQFH WR FOLPDWH FKDQJH ZKLFK LV FDXVLQJ PRUH H[WUHPH ZHDWKHUUHODWHG HYHQWV 5HVLOLHQFHLVVWUHQJWKHQHGE\WKHXVHDQGSURPRWLRQ RIDJULFXOWXUDOELRGLYHUVLW\DWHFRV\VWHPIDUPV\VWHP DQGÃ&#x20AC;HOGOHYHOVPDGHSRVVLEOHE\PDQ\DJURHFRORJLFDO DSSURDFKHV 3ODWIRUP IRU $JURELRGLYHUVLW\ 5HVHDUFK  $JURHFRORJ\DOVRSXWVDJULFXOWXUHRQWKHSDWK RI VXVWDLQDELOLW\ E\ GHOLQNLQJ IRRG SURGXFWLRQ IURP D UHOLDQFH RQ IRVVLO HQHUJ\ RLO DQG JDV  ,Q DGGLWLRQ LW FRQWULEXWHV WR PLWLJDWLQJ FOLPDWH FKDQJH ERWK E\ LQFUHDVLQJ FDUERQ VLQNV LQ VRLO RUJDQLF PDWWHU DQG DERYHJURXQG ELRPDVV DQG E\ UHGXFLQJ &2 DQG RWKHU *+* HPLVVLRQV WKURXJK ORZHU GLUHFW DQG LQGLUHFWHQHUJ\XVH

'6FDOLQJXSDJURHFRORJ\ 7KHUH LV D FOHDU DQG XUJHQW QHHG IRU D UHRULHQWDWLRQ RIDJULFXOWXUDOGHYHORSPHQWWRZDUGVV\VWHPVWKDWXVH IHZHU H[WHUQDO LQSXWV OLQNHG WR IRVVLO HQHUJLHV DQG LQVWHDGXVHSODQWVWUHHVDQGDQLPDOVLQFRPELQDWLRQ PLPLFNLQJ QDWXUH LQVWHDG RI LQGXVWULDO SURFHVVHV DW WKH Ã&#x20AC;HOG OHYHO +RZHYHU WKH VXFFHVV RI VXFK D



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Ã&#x20AC;FLDULHV 7KXV IDUPHUWRIDUPHU OHDUQLQJ LQ IDUPHU Ã&#x20AC;HOG VFKRROV RU WKURXJK IDUPHUV· PRYHPHQWV VKRXOG EH HQFRXUDJHG DV LQ WKH &DPSHVLQRD &DPSHVLQRPRYHPHQWLQ&HQWUDO$PHULFDDQG&XED 'HJUDQGH HW DO  +ROW*LPpQH]  5RVVHW HWDO  $QLPSURYHGGLVVHPLQDWLRQRINQRZOHGJHE\KRUL]RQWDO IDUPHUWRIDUPHU PHDQV WUDQVIRUPV WKH QDWXUH RI NQRZOHGJH LWVHOI ZKLFK EHFRPHV WKH SURGXFW RI D QHWZRUN :DUQHUDQG.LUVFKHQPDQQ ,WVKRXOG HQFRXUDJH IDUPHUV SDUWLFXODUO\ VPDOOVFDOH IDUPHUV OLYLQJ LQ WKH PRVW UHPRWH DUHDV DQG WKRVH HNLQJ RXW D OLYLQJ IURP WKH PRVW PDUJLQDO VRLOV WR ZRUN ZLWK H[SHUWV WRZDUGV D FRFRQVWUXFWLRQ RI NQRZOHGJH HQVXULQJ WKDW DGYDQFHV DQG LQQRYDWLYH VROXWLRQV ZLOO EHQHÃ&#x20AC;W WKHP DV D PDWWHU RI SULRULW\ UDWKHU WKDQ RQO\ EHQHÃ&#x20AC;WLQJWKHEHWWHURIISURGXFHUV 8SKRIID  7KLV LV NH\ WR WKH UHDOL]DWLRQ RI WKH ULJKW WR IRRG )LUVW LW HQDEOHV SXEOLF DXWKRULWLHV WR EHQHÃ&#x20AC;W IURP WKH H[SHULHQFHV DQG LQVLJKWV RI WKH IDUPHUV 5DWKHU WKDQ WUHDWLQJ VPDOOKROGHU IDUPHUV DV EHQHÃ&#x20AC;FLDULHV RI DLG WKH\ VKRXOG EH VHHQ DV H[SHUWV ZKR KDYH NQRZOHGJH WKDW LV FRPSOHPHQWDU\ WR IRUPDOL]HG H[SHUWLVH 6HFRQG SDUWLFLSDWLRQ FDQ HQVXUH WKDW SROLFLHVDQGSURJUDPPHVDUHWUXO\UHVSRQVLYHWRWKH QHHGV RI YXOQHUDEOH JURXSV DV WKRVH JURXSV ZLOO TXHVWLRQ SURMHFWV WKDW IDLO WR LPSURYH WKHLU VLWXDWLRQ 7KLUGSDUWLFLSDWLRQHPSRZHUVWKHSRRU²DYLWDOVWHS WRZDUGVSRYHUW\DOOHYLDWLRQEHFDXVHODFNRISRZHULV D VRXUFH RI SRYHUW\ DV PDUJLQDO FRPPXQLWLHV RIWHQ UHFHLYHOHVVVXSSRUWWKDQWKHJURXSVWKDWKDYHEHWWHU FRQQHFWLRQV ZLWK JRYHUQPHQW 0RUHRYHU SRYHUW\ H[DFHUEDWHV WKLV ODFN RI SRZHU FUHDWLQJ D YLFLRXV FLUFOHRIIXUWKHUGLVHPSRZHUPHQW)RXUWKSROLFLHVWKDW DUHFRGHVLJQHGZLWKIDUPHUVKDYHJUHDWHUOHJLWLPDF\ DQG WKXV IDYRXU EHWWHU SODQQLQJ RI LQYHVWPHQW DQG SURGXFWLRQDQGEHWWHUXSWDNHE\RWKHUIDUPHUV )$2 DQG,,(' 3DUWLFLSDWLRQRIIRRGLQVHFXUHJURXSV




LQ WKH SROLFLHV WKDW DIIHFW WKHP VKRXOG EHFRPH D FUXFLDOHOHPHQWRIDOOIRRGVHFXULW\SROLFLHVIURPSROLF\ GHVLJQWRWKHDVVHVVPHQWRIUHVXOWVWRWKHGHFLVLRQRQ UHVHDUFKSULRULWLHV,QGHHGLPSURYLQJWKHVLWXDWLRQRI PLOOLRQVRIIRRGLQVHFXUHVPDOOKROGHUIDUPHUVFDQQRW EHGRQHZLWKRXWWKHP

75$'($1'(19,5210(175(9,(:


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U   41/16+0)'5+.+'06)4+%7.674'+07$g #*#4#0(4+%##5##,144+14+6;+0.+/#6'g *#0)'&#26#6+10 0DUFXV.DSODQ&KLQZH,IHMLND6SHUDQ]DDQG,PPH6FKRO] *HUPDQ'HYHORSPHQW,QVWLWXWH/ Deutsches Institut für Entwicklungspolitik (DIE)

$EVWUDFW ‡ 3ROLFLHVWRSURPRWHDGDSWDWLRQWRFOLPDWHFKDQJHLQVXE6DKDUDQ$IULFDZKLOHDOVRKHOSLQJWRDOOHYLDWH SRYHUW\ZLOOUHTXLUHPXOWLSOHLQYHVWPHQWVLQUXUDODUHDVWRUDLVHDJULFXOWXUDOSURGXFWLYLW\DQGLPSURYH HFRQRPLFLQIUDVWUXFWXUHDQGVRFLDOVHUYLFHVDVSULRULWLHV ‡ ,QFUHDVHG LQYHVWPHQW LQ DJULFXOWXUH VKRXOG WDNH LQWR DFFRXQW LWV PXOWLSOH VRFLDO HFRQRPLF DQG HQYLURQPHQWDO IXQFWLRQV LQ RUGHU WR DFKLHYH SRYHUW\ UHGXFWLRQ DQG IRRG VHFXULW\ DQG LPSURYH WKH UHVLOLHQFHRIUXUDOOLYHOLKRRGVWRPXOWLSOHVKRFNVLQFOXGLQJFOLPDWHFKDQJH ‡ 6FHQDULRV RI WKH ORFDO LPSDFWV RI FOLPDWH FKDQJH VKRXOG LQFOXGH H[WUHPH ZHDWKHU DQG FOLPDWH FRQGLWLRQV LH ZLWK UHJDUG WR WHPSHUDWXUH RU YDULDELOLW\ RI UDLQIDOO  LQ RUGHU WR EH SUHSDUHG IRU WKH HIIHFWVRIGDQJHURXVFOLPDWHFKDQJH LHPRUHIUHTXHQWDQGLQWHQVLYHGURXJKWVDQGÁRRGV WKDWLQ WKHZRUVWFDVHFRXOGIRUFHORFDOSRSXODWLRQVWRSHUPDQHQWO\PRYHRXWRIDIIHFWHGDUHDV

$&KDOOHQJHVIDFLQJDJULFXOWXUHLQVXE 6DKDUDQ$IULFD

EXWDOVRWRWDNHDEURDGHUYLHZDQGDLPWRLQFUHDVHWKH RYHUDOOUHVLOLHQFHRIUXUDOSHRSOHDQGWKHLUOLYHOLKRRGV

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OOHU  )RUH[DPSOHIRUDQXPEHURIDUHDVLQ:HVWHUQ$IULFD VRPH JOREDO FLUFXODWLRQ PRGHOV H[SHFW LQFUHDVHV LQ SUHFLSLWDWLRQ ZKLOH RWKHUV SURMHFW OHVV UDLQIDOO IRU WKH FRPLQJ GHFDGHV 'HVSLWH WKLV XQFHUWDLQW\ DJULFXOWXUH WKURXJKRXW$IULFDIDFHVDVHULRXVULVNRIH[SHULHQFLQJ QHJDWLYH LPSDFWV IURP FOLPDWH FKDQJH 0OOHU HW DO E 8QGHUVXFKFLUFXPVWDQFHVLWZLOOEHSDUWLFXODUO\ FKDOOHQJLQJ IRU SRRU IDUPHUV WR SUHSDUH IRU WKH XSFRPLQJ FKDQJHV ,W LV WKHUHIRUH DGYLVDEOH WR IRFXV QRWRQO\RQGLUHFWPHDVXUHVWRVXSSRUWDGDSWDWLRQRI DJULFXOWXUDODFWLYLWLHVWRWKHLPSDFWVRIFOLPDWHFKDQJH

0RVWSRRUSHRSOHLQGHYHORSLQJFRXQWULHVOLYHLQUXUDO DUHDV 7KH:RUOG%DQN PDQ\RIZKRPGHSHQG RQ DJULFXOWXUDO DFWLYLWLHV IRU WZR SXUSRVHV ÀUVW WR HQVXUHIRRGVHFXULW\IRUWKHLUIDPLOLHVDQGVHFRQGIRU LQFRPHJHQHUDWLRQDVDJULFXOWXUHLVRIWHQWKHLUPDLQRU HYHQRQO\HFRQRPLFDFWLYLW\%RWKDVSHFWVDOVRKDYH LPSOLFDWLRQV IRU RWKHU QRQIDUP UXUDO KRXVHKROGV HLWKHUWKURXJKWKHGHJUHHRIDYDLODELOLW\RIIRRGZKLFK FDQFDXVHÁ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




SUDFWLFHV ZLWK QHJDWLYH HFRORJLFDO LPSDFWV :DWHU VWUHVV DQG VFDUFLW\ DUH LQFUHDVLQJ ZKLOH ELRGLYHUVLW\ LV GHFOLQLQJ 6RLO GHJUDGDWLRQ DQG GHFOLQLQJ IHUWLOLW\ WKURXJKIRUH[DPSOHLQDSSURSULDWHVRLOPDQDJHPHQW DQG ORZ LQSXWV FUHDWH VHULRXV SUREOHPV IRU FXUUHQW DQG IXWXUH DJULFXOWXUDO SURGXFWLYLW\ LQ PDQ\ SDUWV RI 66$ 0F,QW\UH HW DO D 9OHN /H DQG 7DPHQH   )XUWKHUPRUH ORZRXWSXW DJULFXOWXUH QHFHVVLWDWHVWKHXVHRIPRUHODQGWRPDLQWDLQLWVOHYHO RI SURGXFWLRQ ZKLFK LV ZK\ DJULFXOWXUH LV WKH PDLQ GULYHURIGHIRUHVWDWLRQLQQHDUO\DOOGHYHORSLQJFRXQWULHV 6FKHUU DQG 6WKDSLW   6XFK ODQGXVH FKDQJHV IRUIRRGSURGXFWLRQFDXVH&2HPLVVLRQVWKURXJKWKH UHOHDVH RI FDUERQ IURP DERYHJURXQG ELRPDVV DQG JUD]LQJ OLYHVWRFN UHGXFHG FDUERQ VHTXHVWUDWLRQ LQ VRLOVDQGXQVXVWDLQDEOHDJULFXOWXUDOSUDFWLFHV 6FKHUU DQG 6WKDSLW   $V D UHVXOW ODQGXVH FKDQJHV LQFOXGLQJ GHIRUHVWDWLRQ  DFFRXQW IRU DERXW  SHU FHQWRIWRWDODQWKURSRJHQLF*+*HPLVVLRQV 6PLWKHW DOE ZKLOHELRPDVVEXUQLQJDQGWKHFRQYHUVLRQ RI ZHWODQGV FRQWULEXWH WR PHWKDQH &+  HPLVVLRQV DQGWKHDSSOLFDWLRQRIIHUWLOL]HUVUHVXOWVLQQLWURXVR[LGH HPLVVLRQV 81)&&&  7RGD\QHZJOREDOSDWWHUQVFUHDWHDGGLWLRQDOFKDOOHQJHV WKDW IXUWKHU DJJUDYDWH WKHVH NQRZQ FRQVWUDLQWV RQ D SURGXFWLYH DQG VXVWDLQDEOH DJULFXOWXUDO VHFWRU LQ 66$,QDGGLWLRQWRHFRQRPLFWUHQGVVXFKDVJUHDWHU LQWHUQDWLRQDO FRPSHWLWLRQ IRU ODQG IRU YDULRXV XVHV Á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

75$'($1'(19,5210(175(9,(:

OHYHO,QDGGLWLRQWKHVKDUHRIWKHDJULFXOWXUDOVHFWRULQ RIÀFLDOGHYHORSPHQWDVVLVWDQFH 2'$ GHFOLQHGIURP  SHU FHQW LQ  WR  SHU FHQW LQ  :RUOG %DQN 7RGD\WKHLPSRUWDQFHRIDJULFXOWXUHIRU HFRQRPLFJURZWKKDVJHQHUDOO\EHHQUHFRJQL]HGDQG QDWLRQDOUHJLRQDODQGLQWHUQDWLRQDORUJDQL]DWLRQVDUH PDNLQJ JUHDWHU HIIRUWV WR VXSSRUW LWV GHYHORSPHQW &KDOOLQRU HW DO  +D]HOO HW DO   ,Q WKHLU 0DSXWR 'HFODUDWLRQ RI  PHPEHU FRXQWULHV RI WKH $IULFDQ 8QLRQ FDOOHG XSRQ $IULFDQ JRYHUQPHQWV WRLQFUHDVHLQYHVWPHQWLQWKHDJULFXOWXUDOVHFWRUWRDW OHDVWSHUFHQWRIWKHLUQDWLRQDOEXGJHWV+RZHYHU PRVW $IULFDQ FRXQWULHV DUH VWLOO IDU IURP UHDFKLQJ WKLVWDUJHW0RUHRYHUHYHQWKRXJKWKHVHFWRULVQRZ UHFHLYLQJPRUHDWWHQWLRQRZLQJWRWKHORQJSHULRGRI QHJOHFWWKHPDQ\FKDOOHQJHVDKHDGZLOOEHGLIÀ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ÀFLHQF\LQWKHHQHUJ\DQGWUDQVSRUW VHFWRUVZKLOHDGDSWDWLRQDQGPLWLJDWLRQLQDJULFXOWXUH DUHVWLOOXQGHUIXQGHG/RRNLQJDWELODWHUDO2'$DJDLQ DJULFXOWXUH UHFHLYHG RQO\  SHU FHQW RI DOO IXQGV GHGLFDWHG WR PLWLJDWLRQ FRPSDUHG ZLWK  SHU FHQW IRUDGDSWDWLRQDFWLYLWLHVLQ 81(3 

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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

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Ã&#x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Ã&#x20AC;FDWLRQ DQG LPSURYLQJWKHSURYLVLRQRIHQYLURQPHQWDOVHUYLFHV$W WKH VDPH WLPH WKHLU ORZ XVH RI IHUWLOL]HUV DQG RWKHU H[WHUQDO LQSXWV FDQ UHGXFH DGYHUVH LPSDFWV RQ HFRV\VWHPFRPSRQHQWVDQGUHVXOWLQORZHUHPLVVLRQV IURPWKHSURGXFWLRQDQGWUDQVSRUWSURFHVV,QVWHDGRI UHO\LQJRQODUJHTXDQWLWLHVRIH[WHUQDOPDWHULDOLQSXWV IDUPHUV· NQRZOHGJH LV WKH PDMRU UHVRXUFH DQG NH\ WR WKH DSSURSULDWH DSSOLFDWLRQ RI LQSXWV DQG WR WKH VXFFHVVIXO LPSOHPHQWDWLRQ RI QHZ PDQDJHPHQW SUDFWLFHV ,W LV VWLOO XQFHUWDLQ ZKHWKHU PXOWLIXQFWLRQDO DQG LQWH JUDWHG PDQDJHPHQW SUDFWLFHV FDQ HQVXUH IRRG VHFXULW\ DQG ZKHWKHU WKH\ DUH FRPSHWLWLYH ZLWK FRQYHQWLRQDO KLJKLQSXW DJULFXOWXUDO V\VWHPV ZLWK UHJDUG WR SURGXFWLYLW\ :KLOH WKHVH DVSHFWV DUH VWLOO WKH VXEMHFW RI RQJRLQJ GLVFXVVLRQV %DGJOH\ HW DO  &RQQRU  *LDQHVVL  3LPHQWHOHWDO   WKHUH LV VRPH HYLGHQFH WKDW FRPSDUHG ZLWK KLJK\LHOGLQJV\VWHPVLQGHYHORSHGFRXQWULHVRUJDQLF DJULFXOWXUHDQGRWKHUW\SHVRILQWHJUDWHGDSSURDFKHV UHVXOW LQ ORZHU \LHOGV %DGJOH\ HW DO  &RQQRU



  +RZHYHU LQ PDQ\ UHJLRQV LQ 66$ ORZLQSXW V\VWHPVSUHYDLOVRPHRIZKLFKFDQEHUHJDUGHGDV RUJDQLFV\VWHPVDVWKH\XVHIHZLIDQ\H[WHUQDOLQSXWV WKDW DUH HLWKHU QRW DFFHVVLEOH RU DUH WRR H[SHQVLYH ,Q VXFK V\VWHPV D FRPSOHWH VKLIW WR LQWHJUDWHG DQG DGHTXDWHO\ PDQDJHG V\VWHPV PD\ LQFUHDVH \LHOGV %DGJOH\ HW DO  3UHWW\  81(381&7$'   )RU D PRUH GHWDLOHG GLVFXVVLRQ RI WKH SURGXFWLYLW\DQGSURÃ&#x20AC;WDELOLW\RIRUJDQLFDJULFXOWXUHVHH WKHFRPPHQWDU\RI1HPHVLQWKLVFKDSWHU

7KH$IULFDQFRQWLQHQWVWLOOIDFHVWKHKLJKHVWSRSXODWLRQ JURZWK UDWHV LQ WKH ZRUOG )$2  %LQVZDQJHU 0NKL]H   7KLV DORQJ ZLWK FXUUHQW GHÃ&#x20AC;FLHQFLHV LQ IRRG VHFXULW\ DQG SRVVLEOH IXWXUH FKDQJHV LQ GLHWV UHLQIRUFHV WKH XUJHQF\ WR LQFUHDVH DJULFXOWXUDO SURGXFWLRQ :KHWKHU WKLV REMHFWLYH VKRXOG EH PDLQO\ SXUVXHGE\HLWKHULQWHQVLI\LQJSURGXFWLRQRQH[LVWLQJ DJULFXOWXUDO ODQG RU E\ H[SDQGLQJ DJULFXOWXUDO ODQG WR SUHYLRXVO\ XQXVHG DUHDV LV FXUUHQWO\ DQ LVVXH RI GHEDWH(YHQLQDODQGULFKFRQWLQHQWVXFKDV$IULFD WKHDPRXQWRIODQGVXLWDEOHIRUDJULFXOWXUDOSXUSRVHV LVGHFOLQLQJUDSLGO\ Ã&#x20AC;JXUH DQGWKHFRQYHUVLRQRI RWKHU ODQG XVHV SDUWLFXODUO\ IRUHVWV  IRU DJULFXOWXUDO SXUSRVHVSURGXFHVDGGLWLRQDO&2HPLVVLRQV Ã&#x20AC;JXUH   0RUHRYHU ODQG FRQYHUVLRQ PD\ MHRSDUGL]H WKH OLYHOLKRRGV RI SHRSOH ZKR JHQHUDWH HFRV\VWHP VHUYLFHV IURP WKH IRUPHU ODQG XVHV IRU D PRUH HODERUDWHGLVFXVVLRQVHHWKHFRPPHQWVRI3LPHQWHO DQG*5$,1LQWKLVFKDSWHU  ,QWHQVLÃ&#x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Ã&#x20AC;FXOW RU ZLOO QR ORQJHU EH YLDEOH GXH WR FOLPDWH FKDQJH DQG




75$'($1'(19,5210(175(9,(:

)LJXUH/DQGIRUDJULFXOWXUDOXVH² KDSHUFDSLWD

4.0 Sub-Saharan Africa 3.5 -

Hectares per capita

3.0 -

North Africa

2.5 -

2.0 -

North America

1.5 World 1.0 -

2010 -

2000 -

1990 -

1960 -

0.0 -

1980 -

Asia

1970 -

0.5 -

6RXUFH%DVHGRQ)$267$7 )LJXUH&2HPLVVLRQVIURPODQGXVHFKDQJHLQVHOHFWHGGHYHORSLQJUHJLRQV² 1,000 -

600 -

Latin America

400 -

S and SE Asia

200 -

Tropical Africa

0-200 -

1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 -

CO2 emmissions (TgCy-1)

800 -

6RXUFH*OREDO&DUERQ3URMHFW

HQYLURQPHQWDOGHJUDGDWLRQ HJ)LVFKHUHWDO  ,Q WKRVH LQVWDQFHV DGDSWDWLRQ VWUDWHJLHV VKRXOG EH DGRSWHG WKDW DLP WR GLYHUVLI\ WKH OLYHOLKRRGV RI UXUDO KRXVHKROGV 'LYHUVLÃ&#x20AC;FDWLRQ LQ IDUPLQJ UHODWHV WR ULVN VSUHDGLQJWKURXJKYDULRXVDJULFXOWXUDOSUDFWLFHV VXFK DV DJURIRUHVWU\  RU PL[HG FURSOLYHVWRFN V\VWHPV WKDW UHO\ RQ D ODUJHU QXPEHU RI GLIIHUHQW FURSV DQG RU OLYHVWRFN SURGXFWV  WR UHGXFH WKH WKUHDW RI FURS IDLOXUH LQ FDVH RI XQIDYRXUDEOH FOLPDWLF FRQGLWLRQV ,QFRPHGLYHUVLÃ&#x20AC;FDWLRQLQWRQRQIDUPDFWLYLWLHVUHGXFHV WKH GLUHFW GHSHQGHQFH RQ HFRV\VWHP VHUYLFHV DQG

FDQ RIWHQ JHQHUDWH KLJKHU LQFRPHV WKDQ DJULFXOWXUDO DFWLYLWLHV 7KLV VXSSOHPHQWDU\ LQFRPH FDQ DJDLQ EH XVHG IRU DGGLWLRQDO LQYHVWPHQWV LQ DJULFXOWXUDO DFWLYLWLHV ZKLFK LQ WXUQ FRXOG LQFUHDVH LQFRPH JHQHUDWLRQ IURP IDUPLQJ (OOLV DQG )UHHPDQ   2WKHU DVSHFWV VXFK DV LPSURYHPHQW RI HGXFDWLRQ LQUXUDODUHDV -D\QH0DWKHUDQG0JKHQ\L RU EHWWHULQIUDVWUXFWXUHPD\DOVRFRQWULEXWHWRLQFUHDVLQJ WKHUHVLOLHQFHRIUXUDOOLYHOLKRRGVZLWKRXWEHLQJGLUHFWO\ UHODWHGWRDJULFXOWXUH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

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Ã&#x20AC;UVW DGGUHVVLQJWKHIXQGDPHQWDOLVVXHVEHIRUHUHVSRQGLQJ WRFOLPDWHFKDQJH5DWKHUDOOFXUUHQWFKDOOHQJHVKDYH WR EH WDFNOHG WKURXJK DQ LQWHJUDWHG HIIRUW WRJHWKHU ZLWKDSSURSULDWHPHDVXUHVWRVXSSRUWDGDSWDWLRQDQG LQFUHDVHWKHRYHUDOOUHVLOLHQFHRIDJULFXOWXUDOV\VWHPV DQGUXUDOOLYHOLKRRGV 6SHFLÃ&#x20AC;F RSWLRQV IRU GRPHVWLF DFWLRQ DQG H[WHUQDO VXSSRUWIRUWKRVHDFWLRQVDUHGLVFXVVHGEHORZ

3URYLGLQJDFFHVVWRODQG 3URSHU ODQG UHIRUP ODQG UHJLVWUDWLRQ DQG VHFXUH ODQGWHQXUH ULJKWV IRU ZRPHQ DQG PHQ QHHG WR EH JXDUDQWHHG WR HQDEOH LQYHVWPHQW LQ VXVWDLQDEOH IDUPLQJSUDFWLFHVWKHEHQHÃ&#x20AC;WVRIZKLFKRIWHQDFFUXH RQO\ LQ WKH ORQJ WHUP 5HFHQWO\ LQFUHDVHG IRUHLJQ GLUHFWLQYHVWPHQWLQODQGKDVUHFHLYHGPXFKDWWHQWLRQ LQ$IULFDDVLWFRQWULEXWHV²DWOHDVWLQVRPHFRXQWULHV ² WR FRPSURPLVLQJ WUDGLWLRQDO ODQG XVH ULJKWV IRU D PRUHHODERUDWHDQDO\VLVVHHWKHFRPPHQWRI0LWWDOLQ FKDSWHU )RUWKHVHUHDVRQVLQWHUQDWLRQDOJXLGHOLQHV IRU PDQDJLQJ WKH LPSDFWV RQ ORFDO ODQG WHQXUH RI ODUJH IRUHLJQ  LQYHVWPHQWV LQ ODQG DUH QHHGHG 7KH UHFHQW VXFFHVVIXO FRQFOXVLRQ RI LQWHUJRYHUQPHQWDO QHJRWLDWLRQV RQ 9ROXQWDU\ *XLGHOLQHV RQ WKH 5HVSRQVLEOH*RYHUQDQFHRI7HQXUHRI/DQG)LVKHULHV DQG )RUHVWV )$2   OHG E\ WKH &RPPLWWHH RQ :RUOG)RRG6HFXULW\ &)6 DQGWKHUHSRUWRIWKH+LJK /HYHO3DQHORI([SHUWVRIWKH&)6 )$2F PDUNV D VWDUWLQJ SRLQW ,W LV YLWDO WKDW QDWLRQDO JRYHUQPHQWV IROORZ WKHVH JXLGHOLQHV UHYLHZ WKHLU ODQG ODZV DQG LQFRUSRUDWH FKHFNV DQG EDODQFHV WR HQVXUH WKDW WKH LQYHVWPHQWVLPSURYHUXUDOGHYHORSPHQWDUHSURSRRU DQGGRQRWMHRSDUGL]HDGDSWLYHFDSDFLWLHV ,QYHVWPHQW LPSDFW DVVHVVPHQWV DUH DQRWKHU KHOSIXO LQVWUXPHQW 7KH\ VKRXOG EH FDUULHG RXW SULRU WR D



ODQG LQYHVWPHQW DQG QHHG WR DQDO\VH L  ZKHWKHU DQG KRZ PXFK DQ LQYHVWPHQW LQ ODQG KLQGHUV ORFDO SHRSOH·VDFFHVVWRUHVRXUFHVWKDWWKH\DOUHDG\XVHRU DUHOLNHO\WRXVHLQWKHIXWXUHDVDQDGDSWDWLRQRSWLRQ DQG LL  KRZ PXFK WKH LQYHVWPHQW LV FRQWULEXWLQJ WR HPSOR\PHQWDQGKXPDQFDSDFLW\EXLOGLQJ,QYHVWPHQW LPSDFW DVVHVVPHQWV VKRXOG EH FDUULHG RXW E\ DQ DJULFXOWXUDO VHFWRU FRRUGLQDWLRQ XQLW WKDW LQFOXGHV WKH Ã&#x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

(QVXULQJVNLOOHGDJULFXOWXUDOPDQSRZHUIRU LQQRYDWLYHDJULFXOWXUDOSURGXFWLRQV\VWHPV &XUUHQWO\ORZSURGXFWLYLW\OHYHOVRIDJULFXOWXUHLQ66$ DOUHDG\ LQGLFDWH WKDW VNLOO GHÃ&#x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Ã&#x20AC;FDQWO\ LPSURYH VRLO UHVLOLHQFH DQG LWV ZDWHU UHWHQWLRQ FDSDFLW\ ,W DOVR LQFOXGHV WKH XVH RI ELRPDVV DQG RUJDQLF ZDVWH IRU RIIJULG HQHUJ\JHQHUDWLRQ 7KHQHHGIRULQQRYDWLRQRIIHUVRSSRUWXQLWLHVIRUSXEOLF SULYDWHSDUWQHUVKLSVLQDGDSWDWLRQWRFOLPDWHFKDQJH DVWKHIROORZLQJWZRH[DPSOHVVKRZ)LUVWLQQRYDWLYH




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Ã&#x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Ã&#x20AC;FHUVUHFRJQL]HGE\ WKHJRYHUQPHQWLQRUGHUWRRIIHUH[WHQVLRQVHUYLFHVWR RWKHUIDUPHUVZKRODFNWKLVFDSDFLW\7KLVFRXOGKHOS WRDGGUHVVPDQ\VKRUWFRPLQJVRIFXUUHQWJRYHUQPHQW H[WHQVLRQ VHUYLFHV VXFK DV WKH OLPLWHG IXQGLQJ DQG WKHIUHTXHQWWUDQVIHUVRIH[WHQVLRQRIÃ&#x20AC;FHUVIURPRQH ORFDWLRQ WR DQRWKHU ZKLFK SUHYHQW WKH GHYHORSPHQW RI DQ HFRORJLFDO DQG VRFLRHFRQRPLF PHPRU\ WKDW PLJKW XQGHUSLQ WKH FRQVROLGDWLRQ RI GHYHORSPHQW LQWHUYHQWLRQV )RUPDOO\ WUDLQHG H[WHQVLRQ RIÃ&#x20AC;FHUV FRXOGWKHQIRFXVRQPRUHVSHFLDOL]HGVHUYLFHVVXFK

75$'($1'(19,5210(175(9,(:

DV FURSVSHFLÃ&#x20AC;F VHUYLFHV IRU PRUH LQIRUPDWLRQ VHH WKH FRPPHQW RI .OHUN[ LQ FKDSWHU  RI WKLV 5HYLHZ  )LQDOO\ VWXGLHV RQ WKH DGRSWLRQ RI FRQVHUYDWLRQ DJULFXOWXUDOSUDFWLFHVVKRZWKDWSDUWQHUVKLSVEHWZHHQ UHVHDUFKJRYHUQPHQWH[WHQVLRQVHUYLFHVDQGSULYDWH FRPSDQLHV DUH FUXFLDO IRU LQFUHDVLQJ IDUPHUV· SURGXFWLYLW\

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Ã&#x20AC;FHUVDQG1*2JURXSVDERXWQHZYDULHWLHV7KHVH OHDUQLQJ H[SHULHQFHV DUH DOVR LPSRUWDQW IRU WHVWLQJ QHZ YDULHWLHV LQ WKH Ã&#x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Ã&#x20AC;QDQFLDOO\ VXSSRUW ORFDO VHHG EUHHGLQJ FRPSDQLHV DQG GLVWULEXWHIUHHWULDOVWRIDUPHUVRQDSURPRWLRQDOEDVLV DIWHU ZKLFK WKH\ ZRXOG KDYH WR SD\ IRU VXEVHTXHQW VXSSOLHV0LFURFUHGLWIRULQQRYDWLYHIDUPLQJZLOODOVREH QHFHVVDU\WRKHOSRYHUFRPHWKHKLJKXSIURQWFRVWVRI QHZPDQDJHPHQWSUDFWLFHVUHTXLUHGIRUFRQVHUYDWLRQ IDUPLQJDQGRWKHULQWHJUDWHGDSSURDFKHV)RUDQLQLWLDO


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

WUDQVLWLRQSHULRGJRYHUQPHQWVXEVLGLHVPD\DOVREH ZDUUDQWHGDVLQ0DODZLZKHUHD)DUP,QSXW6XEVLG\ 3URJUDP ),63  KDV EHHQ VKRZQ WR LQFUHDVH PDL]H DQGOHJXPHSURGXFWLRQ &KLEZDQDHWDO DQG KDV EHHQ GHVFULEHG DV D VPDUW VXEVLG\ +RZHYHU &KLEZDQD  HW DO   DOVR KLJKOLJKW WKH GLIÀFXOW\ RIVXFKLQWHUYHQWLRQVUHDFKLQJWKHSRRUDV´WKHPRVW YXOQHUDEOHSHRSOHLQWKH0DODZLDQFRPPXQLWLHVZHUH QRWWKHPDLQUHFLSLHQWVRI),63FRXSRQVµHYHQZKHQ LQWHQGHG DV WKH WDUJHW JURXSV 7KH LQSXW VXEVLGLHV LQLWLDOO\ OHG WR D JUHDWHU VSHFLDOL]DWLRQ LQ PDL]H DQG WRUHGXFHGFURSGLYHUVLÀFDWLRQDQGDOORFDWLRQRIODQG WR OHJXPH FURSV GXH WR D ODFN RI OHJXPH VHHGV LQ WKHPDUNHW7KH),63ODWHUOHGWRLQFUHDVHGPDL]HDQG OHJXPHFURSSURGXFWLRQZKHQIDUPHUVZHUHSURYLGHG ZLWK ERWK LPSURYHG PDL]H DQG OHJXPH VHHGV &KLEZDQDHWDO  WKXVDUJXHWKDWZKLOHWKH),63 FRQWULEXWHG WR 0DODZLDQ IRRG VHFXULW\ LW QHHGV WR EH DGDSWHG WR PDNH LW OHVV SURQH WR WKH XQLQWHQGHG HIIHFWV RI FRQFHQWUDWLQJ SURGXFWLRQ RQ RQH FURS UHODWLYHWRWKHRWKHUVLQSDUWLFXODUZLWKUHJDUGWRKLJK LQSXWSULFHV

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

$GRSWLQJDVHFWRUDODSSURDFKWRDGDSWDWLRQ $JULFXOWXUHLVVWLOOWKHPDMRUGULYHURIUXUDOHFRQRPLHVLQ GHYHORSLQJFRXQWULHVLQFUHDVLQJUHVLOLHQFHWRFOLPDWH



FKDQJH UHTXLUHV D VHFWRUDO DSSURDFK UDWKHU WKDQ D QDUURZ IRFXV RQ WKH SURGXFWLYLW\ RI FURSV OLYHVWRFN DQG À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ÁLFWVRYHUODQG WHQXUHULJKWV 0DQ\ DSSURDFKHV WKDW JHQHUDWH DGDSWDWLRQ EHQHÀ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




75$'($1'(19,5210(175(9,(:

1//'06#4; U   +'.&#0&+'.&7#.+6;1(#,14'4'#.5 0&'4.+/#6'*#0)' 3HWUD+|J\DQG$QGUHDV)DQJPHLHU 8QLYHUVLW\RI+RKHQKHLP,QVWLWXWHIRU/DQGVFDSHDQG3ODQW(FRORJ\

$EVWUDFW $WPRVSKHULF&2HQULFKPHQWPD\SURYLGHWKHEHQHÃ&#x20AC;WVRIKLJKHU\LHOGVEXWFRQFRPLWDQWO\LWFRXOGZRUVHQ FHUHDO TXDOLW\ LQ WHUPV RI SURWHLQ DPLQR DFLG DQG PLQHUDO FRQWHQW &XUUHQWO\ DOPRVW KDOI RI WKH ZRUOG·V KXPDQSRSXODWLRQDOUHDG\VXIIHUVIURPPLFURQXWULHQWGHÃ&#x20AC;FLHQFLHVDQGWKLVJOREDOKHDOWKSUREOHPZLOOIXUWKHU GHWHULRUDWHDVDUHVXOWRI&2HQULFKPHQW2QWKHRWKHUKDQGDQLQFUHDVHLQWHPSHUDWXUHDQGFKDQJLQJ SUHFLSLWDWLRQSDWWHUQVPD\UHGXFH\LHOGZKLOHKDYLQJDSRVLWLYHHIIHFWRQQXWULWLYHYDOXHDQGSURFHVVLQJ

$OWKRXJKVHYHUDOGHYHORSPHQWVLQDJULFXOWXUHVXFKDV EUHHGLQJDQGPDQDJHPHQWSUDFWLFHVKDYHLQFUHDVHG \LHOG SURGXFWLYLW\ DQG DYDLODELOLW\ RI FHUHDOEDVHG IRRGV RYHU WKH SDVW  \HDUV PRUH WKDQ RQH ELOOLRQ SHRSOHZRUOGZLGHDUHDWULVNRIIRRGLQVHFXULW\WRGD\ )$2 E  )RRG LQVHFXULW\ DULVHV ZKHQ SHRSOH GR QRW KDYH DFFHVV WR VXIÃ&#x20AC;FLHQW DQG QXWULWLRXV IRRG WR PHHW WKHLU GLHWDU\ QHHGV $Q DGHTXDWH LQWDNH RI FDORULHVGRHVQRWDXWRPDWLFDOO\HQVXUHWKDWWKHQHHG IRUPLFURQXWULHQWVKDVEHHQPHW,QWKHIXWXUHFOLPDWH FKDQJHPD\UHSUHVHQWDQDGGLWLRQDOO\XQSUHFHGHQWHG WKUHDW WR JOREDO IRRG VHFXULW\ HVSHFLDOO\ IRU SHRSOH LQ GHYHORSLQJ FRXQWULHV ZKR GHSHQG KHDYLO\ RQ DJULFXOWXUHIRUWKHLUOLYHOLKRRGV 7KHPDLQGULYLQJIRUFHEHKLQGFOLPDWHFKDQJHLVWKH UHOHDVHRIJUHHQKRXVHJDVHV *+*V VXFKDVFDUERQ GLR[LGH &2 GXHWRKXPDQDFWLYLWLHV$QGWKLVLVOLNHO\ WRLQFUHDVHRYHUWKHQH[WIHZGHFDGHV ,3&&G  %\FRQVHUYDWLYHHVWLPDWHVWKHFXUUHQWFRQFHQWUDWLRQRI DWPRVSKHULF&2RIDERXWSDUWVSHUPLOOLRQ SSP  ZLOOLQFUHDVHWRQHDUO\SSPE\LQGHHGLW LVLQFUHDVLQJIDVWHUWKDQH[SHFWHG$PLGUDSLGO\ULVLQJ IRRG GHPDQG JOREDO DWPRVSKHULF &2 HQULFKPHQW ZLOODIIHFWDJURHFRV\VWHPVERWKGLUHFWO\DQGLQGLUHFWO\ UHVXOWLQJ LQ FKDQJHV LQ \LHOG RI PDMRU FHUHDOV EXW SRWHQWLDOO\DIIHFWLQJ\LHOGTXDOLW\WUDLWVDVZHOO$VFHU HDOVVXSSO\WKHEXONRIFDORULHVIRUPDQ\SRSXODWLRQV LQ WKH GHYHORSLQJ ZRUOG ZKLOH DOVR FRQVWLWXWLQJ WKH SULPDU\ VRXUFH RI ERWK SURWHLQ DQG PLFURQXWULHQWV FOLPDWH FKDQJH LV VHW WR H[DFHUEDWH PDQ\ RI WKH SUREOHPV ZKLFK GHYHORSLQJ FRXQWULHV DOUHDG\ KDYH WR GHDO ZLWK &XUUHQWO\ WKHUH KDV EHHQ VXUSULVLQJO\ OLWWOH UHVHDUFK VSHFLÃ&#x20AC;FDOO\ JHDUHG WR PDLQWDLQLQJ RU

HQKDQFLQJWKHSURGXFWLYLW\RIDJULFXOWXUDOHFRV\VWHPV XQGHUFOLPDWHFKDQJH1HLWKHUKDVWKHUHEHHQPXFK UHVHDUFK WKDW DGGUHVVHV WKH LVVXH RI YXOQHUDELOLW\ WR FOLPDWHFKDQJHRIRWKHUDVSHFWVRIIRRGV\VWHPVVXFK DV\LHOGTXDOLW\ 5LFKDUGVRQHWDO 

$'LUHFWHIIHFWVRIDWPRVSKHULF&2 HQULFKPHQW $WPRVSKHULF&2LVWKHSULPDU\VRXUFHRIFDUERQIRU FHUHDOVZKLFKLVWDNHQXSE\WKHOHDIWKURXJKVWRPDWD &HUHDOV PXVW DEVRUE OLJKW WR HQDEOH SKRWRV\QWKHVLV WR FRQYHUW &2 LQWR RUJDQLF FRPSRXQGV VXFK DV FDUERK\GUDWHVDQGDPLQRDFLGV:DWHUDQGQXWULHQWV DUHXVXDOO\DFTXLUHGIURPWKHVRLODQGWRJHWKHUZLWK SKRWRV\QWKDWHDUHXVHGWRFUHDWHQHZSODQWWLVVXHV &2 HIIHFWV GLIIHU DFFRUGLQJ WR WKH SKRWRV\QWKHWLF SDWKZD\ (OHYDWHG &2 DIIHFWV & FHUHDOV E\ LPSURYLQJ QLWURJHQ XVH HIÃ&#x20AC;FLHQF\ 18(  DQG ZDWHU XVHHIÃ&#x20AC;FLHQF\ :8( ZKLOH&FHUHDOVDUHDIIHFWHG H[FOXVLYHO\ YLD LPSDFWV RQ :8( 0DMRU FHUHDOV WKDW KDYH WKH & SKRWRV\WKHWLF SDWKZD\ LQFOXGH ZKHDW EDUOH\DQGULFHZKLOHPDL]HVRUJKXPDQGVXJDUFDQH DUH&VSHFLHV,Q&FHUHDOVHOHYDWHG&2LVH[SHFWHG WR KDYH SRVLWLYH SK\VLRORJLFDO HIIHFWV E\ VWLPXODWLQJ SKRWRV\QWKHVLV PDLQO\ E\ HQKDQFLQJ &2 Ã&#x20AC;[DWLRQ RI WKH FKORURSODVW HQ]\PH 5XELV&2 DQG LQGXFLQJ VWRPDWDO FORVXUH $V D FRQVHTXHQFH HOHYDWHG &2 UHVXOWVLQVKLIWVLQELRPDVVDOORFDWLRQDQGKLJKHU\LHOG SURGXFWLRQ WKH VRFDOOHG ´&2 IHUWLOL]DWLRQ HIIHFWµ UHIHUUHG WR E\ 3ULWFKDUG DQG $PWKRU   *LYHQ DGHTXDWHZDWHUWKHHIIHFWRI&2HQULFKPHQWRQ\LHOG SHUIRUPDQFH LV KLJKHU IRU & FHUHDOV ² SHU


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

FHQWSSP&2+DUWÃ&#x20AC;HOGHWDO WKDQIRU& FURSV  SHU FHQW SSP &2 +DUWÃ&#x20AC;HOG HW DO   EHFDXVH & SKRWRV\QWKHVLV LV QRW VDWXUDWHG XQGHUDPELHQW&2OHYHOV 2Q WKH RWKHU KDQG ERWK & DQG & FHUHDOV PLJKW EHQHÃ&#x20AC;W IURP HOHYDWHG &2 XQGHU GURXJKW VWUHVV GXH WR LPSURYHPHQWV LQ ZDWHU XVH HIÃ&#x20AC;FLHQF\ +RZHYHU WKHSRVLWLYH\LHOGUHVSRQVHWRHOHYDWHG&2KDVRIWHQ EHHQGXHWRPRUHJUDLQVUDWKHUWKDQODUJHUJUDLQV,Q DGGLWLRQ WR WKHVH HIIHFWV RQ WKH TXDQWLW\ LW DSSHDUV WKDW&2HQULFKPHQWDOVRDIIHFWVWKHQXWULWLRQDOTXDOLW\ RI & FHUHDOV .LPEDOO .RED\DVKL DQG %LQGL   ,Q PDQ\ LQVWDQFHV WKH H[WUD FDUERQ LV FRQYHUWHG LQWR FDUERK\GUDWHV VXFK DV VWDUFK &RQVLVWHQWO\ WKH DP\ORVH FRQWHQW RI ULFH JUDLQV ZKLFK LV DPDMRU GHWHUPLQDQWRIFRRNLQJTXDOLW\KDVEHHQREVHUYHGWR LQFUHDVHXQGHU&2HQULFKPHQW &RQUR\HWDO  UHVXOWLQJLQPRUHÃ&#x20AC;UPQHVVRIFRRNHGULFHJUDLQV $ QHJDWLYH LQWHUDFWLRQ EHWZHHQ QLWURJHQ VWDWXV LQ SODQWV DQG JUDLQ TXDOLW\ KDV EHHQ REVHUYHG LQ & FHUHDOV PDGH ZRUVH E\ &2 HQULFKPHQW GXH WR FKDQJHVLQOHDIQLWURJHQPHWDEROLVP6XFKFKDQJHV DUHODUJHO\WKHUHVXOWRIVPDOOHUSDUWLWLRQLQJRIQLWURJHQ LQ SKRWRV\QWKHWLF SURFHVVHV .LPEDOO HW DO   $VVPDOOJUDLQHGFHUHDOVVXFKDVEDUOH\ZKHDWDQG ULFHPD\UHPRELOL]HXSWRSHUFHQWRIWKHQLWURJHQ IURPWKHYHJHWDWLYHSODQWSDUWVGXULQJJUDLQÃ&#x20AC;OOLQJOHVV QLWURJHQ LQYHVWPHQW LQ WKH SODQW XQGHU HOHYDWHG &2 FRXOGEHWKHSULPDU\FDXVHRIUHGXFWLRQLQJUDLQSURWHLQ FRQFHQWUDWLRQ$OWKRXJKLWLVNQRZQWKDWQLWURJHQLVD NH\UHJXODWRURISODQWUHVSRQVHVWR&2WKHFKDQJHV LQ QLWURJHQ PHWDEROLVP DUH QRW ZHOO XQGHUVWRRG DW D ELRFKHPLFDO OHYHO +RZHYHU WKH QXWULWLRQDO YDOXH RI WKHVH WKUHH FHUHDOV PD\ GHWHULRUDWH GXH WR &2 LQGXFHGGHFUHDVHVLQJUDLQSURWHLQFRQFHQWUDWLRQE\ ²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Ã&#x20AC;FLHQF\DQGWRPDLQWDLQERWK\LHOGVDQG SURWHLQFRQFHQWUDWLRQVLQJUDLQV+RZHYHULWVKRXOGEH



NHSWLQPLQGWKDWHVSHFLDOO\LQGHYHORSLQJFRXQWULHV WKH DYDLODELOLW\ RI QLWURJHQ LQ DJULFXOWXUH LV RIWHQ LQVXIÃ&#x20AC;FLHQWWRDFKLHYHDGHTXDWHFURS\LHOGVDQGWKLV LV RQH RI WKH FDXVHV RI PDOQXWULWLRQ 0RUHRYHU &2 LQGXFHG DOWHUDWLRQV LQ WKH FRPSRVLWLRQ RI SURWHLQV DQGDPLQRDFLGVPD\DOVRDIIHFWWKHQXWULWLYHYDOXHRI JUDLQVDQGSURFHVVLQJTXDOLW\VXFKDVEUHDGPDNLQJ +|J\ DQG )DQJPHLHU  +|J\ HW DO   ,Q DGGLWLRQ VXEWOH LPEDODQFHV LQ PDFUR DQG PLFUR HOHPHQWSURSHUWLHVPD\RFFXUXQGHU&2HQULFKPHQW UHVXOWLQJ LQ KLJKHU ULVN RI ´KLGGHQ KXQJHUµ DQG PDOQXWULWLRQ /RODG]H  ,QULFHFRQFHQWUDWLRQVRILURQDQG]LQF²LPSRUWDQWIRU KXPDQQXWULWLRQ²ZHUHVHHQWREHORZHUXQGHUHOHYDWHG &2 6HQHZHHUDDQG&RQUR\ 6LPLODUO\+|J\HW DO  UHSRUWHGDGHFUHDVHLQLURQLQZKHDWJUDLQV XQGHU&2HQULFKPHQW7KHVHÃ&#x20AC;QGLQJVDUHYLWDOIRUWKH LPSRUWDQWWDVNRIWDFNOLQJPLFURQXWULHQWGHÃ&#x20AC;FLHQFLHVRI LURQ]LQFFRSSHULRGLQHDQGVHOHQLXPDVWKHPDMRU JUDLQFURSVDUHDFULWLFDOVRXUFHRIWKHVHQXWULHQWVIRU PDQ\ SRSXODWLRQV DURXQG WKH ZRUOG &DXOÃ&#x20AC;HOG DQG %ODFN6WROW]IXVHWDO &XUUHQWO\DOPRVW KDOI RI WKH KXPDQ SRSXODWLRQ DOUHDG\ VXIIHUV IURP PLFURQXWULHQW GHÃ&#x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·VGLHWVZLOOEHQHHGHGLQDKLJK &2 ZRUOG 7KH HIIHFWV RI &2 LQ WHUPV RI UHGXFLQJ WKHQXWULWLRQDOYDOXHRIFHUHDOVZRXOGSULPDULO\LPSDFW RQSRSXODWLRQVLQSRRUHUFRXQWULHVZKRDUHOHVVDEOH WRFRPSHQVDWHE\HDWLQJPRUHIRRGDQGPRUHYDULHG GLHWV RU SRVVLEO\ WDNLQJ QXWULWLRQDO VXSSOHPHQWV 7R PHHW WKH LQFUHDVLQJ GHPDQG IRU KHDOWK\ IRRG DQG ZLWK WKH ZRUOG·V SRSXODWLRQ SUHGLFWHG WR LQFUHDVH WR ELOOLRQE\ 8QLWHG1DWLRQV LWZLOOEH




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´KLGGHQ KXQJHUµ DQG PDOQXWULWLRQ HVSHFLDOO\ LQ GHYHORSLQJ FRXQWULHV

%,QGLUHFWHIIHFWVRIULVLQJWHPSHUDWXUHV DQGFKDQJHVLQSUHFLSLWDWLRQSDWWHUQV ,QGLUHFW LPSDFWV RI DWPRVSKHULF &2 HQULFKPHQW RQ DJULFXOWXUDO HFRV\VWHPV PD\ RFFXU GXH WR JOREDO ZDUPLQJ*OREDOWHPSHUDWXUHVDUHOLNHO\WRLQFUHDVHE\ DWOHDVWƒ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ÀUP WKDW D ƒ& ULVH LQ WHPSHUDWXUH FRUUHVSRQGV WR D URXJKO\  SHU FHQW UHGXFWLRQ LQ \LHOG RI PDMRU FHUHDOV VXFK DVZKHDWULFHDQGPDL]HGXHWRDVKRUWHQLQJRIWKH JUDLQÀOOGXUDWLRQ %DWWLVWLDQG1D\ORU/REHOOHW DO  7KH UHVSRQVH RI FHUHDOV WR WHPSHUDWXUH FKDQJH KDV EHHQ REVHUYHG WR EH QRQOLQHDU EHFDXVH RI WKH LQWHUDFWLRQ RI ZDWHU DQG KHDW VWUHVV /REHOO   0RUHRYHU FHUHDOV UHVSRQG GLIIHUHQWO\ WR WHPSHUDWXUH GXULQJ WKHLU OLIH F\FOH ZLWK D KLJKHU WHPSHUDWXUH RSWLPXP GXULQJ WKHLU YHJHWDWLYH GHYHORSPHQW FRPSDUHG ZLWK WKH SHULRG RI UHSURGXFWLYH GHYHORSPHQW 7KH SROOLQDWLRQ SKDVH RI GHYHORSPHQW LQ SDUWLFXODU LV RQH RI WKH PRVW VHQVLWLYH WR HSLVRGLF WHPSHUDWXUH LQFUHDVH DQG WHPSHUDWXUH H[WUHPHV GXULQJ WKH UHSURGXFWLYH VWDJH FDQ SURGXFH VRPH RI WKH JUHDWHVW LPSDFWV

75$'($1'(19,5210(175(9,(:

RQ FHUHDO SURGXFWLRQ )ORUDO VWHULOLW\ FDXVHG E\ HOHYDWHGWHPSHUDWXUHPD\ORZHUVLQNGHPDQGVIRU FDUERK\GUDWHVDQGWKXVKLQGHUWKHWUDQVORFDWLRQRI SKRWRV\QWKDWHVIURPVKRRW VRXUFH WRJUDLQ VLQN  UHVXOWLQJ LQ DQ DFFXPXODWLRQ RI GU\ PDWWHU LQ WKH VKRRW HYHQ DIWHU Á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ÀOOLQJWLPHDQGWKHQLWURJHQVKRUWDJHGXHWR UHGXFWLRQRIQLWURJHQXSWDNHIURPVRLOE\FHUHDOURRWV $JDLQWKHWLPLQJRIVWUHVVRFFXUUHQFHLVDQLPSRUWDQW IDFWRU LQ GHWHUPLQLQJ WKH HIIHFW RQ JUDLQ SURWHLQ FRQFHQWUDWLRQ,QULFHKLJKWHPSHUDWXUHVGXULQJJUDLQ ÀOOLQJ ZHUH REVHUYHG WR LQFUHDVH WKH DFFXPXODWLRQ RI DOO FODVVHV RI VWRUDJH SURWHLQV DW WKH HDUO\ ÀOOLQJ VWDJH ZKHUHDV WKH\ UHGXFHG WKH DFFXPXODWLRQ RI SURODPLQVDWPDWXUDWLRQ /LQHWDO ,QFRQWUDVW FDUERK\GUDWH V\QWKHVLV LQ JUDLQV GHSHQGV SULPDULO\ RQFRQFXUUHQWFDUERQÀ[DWLRQGXULQJJUDLQÀOOLQJWKXV JUDLQ VWDUFK GHFOLQHG GXH WR VKRUWHQHG GXUDWLRQ RI VWDUFK DFFXPXODWLRQ RU GXH WR WKH LQKLELWLRQ RI NH\ HQ]\PHVLQYROYHGLQVWDUFKV\QWKHVLV &KDQJHVLQSUHFLSLWDWLRQ ERWKDPRXQWDQGIUHTXHQF\  FDQDOVRKDYHGHYDVWDWLQJLPSDFWVRQDJULFXOWXUHZLWK JUDYH FRQVHTXHQFHV IRU KXPDQ QXWULWLRQ DQG JOREDO KHDOWK 6LQFH ZDWHU VWDWXV LV LPSRUWDQW IRU PLQHUDO PRELOL]DWLRQZDWHUGHÀ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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

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

&2XWORRN &2LQGXFHG HIIHFWV RQ JUDLQ \LHOG DQG FURS TXDOLW\



ZLOOOLNHO\GLIIHUVXEVWDQWLDOO\DPRQJLQGLYLGXDOFXOWLYDUV DQGVSHFLHVXQGHUYDU\LQJUHJLRQDOFOLPDWLFFRQGLWLRQV $V KLJK &2 FRQFHQWUDWLRQV FDXVH DOWHUDWLRQV LQ HYDSRWUDQVSLUDWLRQWKLVPD\DOVRUHVXOWLQIHHGEDFNRQ ZDWHUPDJDJHPHQWDQGGURXJKWV:DWHUFRQVHUYDWLRQ PD\DOORZH[WHQVLRQRIWKHJURZWKSHULRGZKHQZDWHULV OLPLWHG/HVVLQIRUPDWLRQLVDYDLODEOHRQWKHLQWHUDFWLYH HIIHFWV RI FOLPDWH YDULDELOLW\ DQG &2 HQULFKPHQW RQ WKH HIÃ&#x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Ã&#x20AC;FLHQW VXSSOLHV RI FHUHDOV EXW DOVR WKHLU QXWULWLYH TXDOLW\,QRUGHUWRDVVXUHIRRGVHFXULW\LQWKHIXWXUH LW LV YLWDOO\ LPSRUWDQW WR XQGHUVWDQG WKH FRPSOH[ UHODWLRQVKLSVEHWZHHQJOREDOHQYLURQPHQWDOFKDQJHV IDUPLQJSUDFWLFHVGLHWDQGKXPDQKHDOWK




75$'($1'(19,5210(175(9,(:

1//'06#4; U   1/2#4#6+8'0#.;5+51(4)#0+%#0& 10g4)#0+% #4/+0);56'/5U4+6+%#. 55'55/'061( #4/41(+6#$+.+6; 1RpPL1HPHV )$2

$EVWUDFW $QDQDO\VLVRIRYHUHFRQRPLFVWXGLHVGHPRQVWUDWHVWKDWLQWKHPDMRULW\RIFDVHVRUJDQLFV\VWHPVDUH PRUHSURÃ&#x20AC;WDEOHWKDQQRQRUJDQLFV\VWHPV+LJKHUPDUNHWSULFHVDQGSUHPLXPVRUORZHUSURGXFWLRQFRVWV RUDFRPELQDWLRQRIWKHWZRJHQHUDOO\UHVXOWLQKLJKHUUHODWLYHSURÃ&#x20AC;WVIURPRUJDQLFDJULFXOWXUHLQGHYHORSHG FRXQWULHV7KHVDPHFRQFOXVLRQFDQEHGUDZQIURPVWXGLHVLQGHYHORSLQJFRXQWULHVEXWWKHUHKLJKHU\LHOGV FRPELQHGZLWKKLJKSUHPLXPVDUHWKHXQGHUO\LQJFDXVHVRIWKHLUUHODWLYHO\JUHDWHUSURÃ&#x20AC;WDELOLW\

2UJDQLF DJULFXOWXUH KDV WULJJHUHG D FRQWURYHUVLDO GHEDWHRYHUWKHSDVWIHZGHFDGHVODUJHO\EHFDXVHLW H[SRVHVWKHWUXHFRVWVDQGGDUNHUVLGHVRIFKHPLFDO LQWHQVLYH LQGXVWULDO IDUPLQJ V\VWHPV 7KHUH LV QRZ D VWURQJERG\RIHYLGHQFHWRSURYHWKDWRUJDQLFIDUPLQJ LV PRUH HQYLURQPHQWDOO\ IULHQGO\ SRWHQWLDO EHQHÃ&#x20AC;WV DULVHIURPIRUH[DPSOHLPSURYHGVRLOIHUWLOLW\RUJDQLF PDWWHU FRQWHQW DQG ELRORJLFDO DFWLYLW\ EHWWHU VRLO VWUXFWXUH DQG OHVV VXVFHSWLELOLW\ WR HURVLRQ UHGXFHG SROOXWLRQ IURP QXWULHQW OHDFKLQJ DQG SHVWLFLGHV DQG LPSURYHG SODQW DQG DQLPDO ELRGLYHUVLW\ .DVSHUF]\N DQG .QLFNHO   +RZHYHU LW LV QRW FOHDU ZKHWKHU RUJDQLF DJULFXOWXUH FRXOG EH HFRQRPLFDOO\ DWWUDFWLYH HQRXJKWRWULJJHULWVZLGHVSUHDGDGRSWLRQ,IRUJDQLF IDUPLQJ RIIHUV EHWWHU HQYLURQPHQWDO TXDOLW\ DQG KHDOWKLHU IRRGV EXW QRW VXIÃ&#x20AC;FLHQW HFRQRPLF UHWXUQV WR WKH PDMRULW\ RI IDUPHUV LW ZLOO REYLRXVO\ UHPDLQ D OX[XU\ IRUP RI IRRG SURGXFWLRQ YLDEOH IRU RQO\ D YHU\ VPDOO IUDFWLRQ RI IDUPHUV +RZHYHU WKH FRQWLQXHG JURZWK RI RUJDQLFDOO\ PDQDJHG ODQGV ZRUOGZLGH HVSHFLDOO\LQGHYHORSLQJFRXQWULHVGRHVQRWVXSSRUW WKLVK\SRWKHVLV

$&RPSDULQJWKHHFRQRPLFVRIRUJDQLF YHUVXVQRQRUJDQLFIDUPLQJ 7KHUH DUH ZHOO RYHU  VWXGLHV WKDW FRPSDUH WKH UHODWLYH SURÃ&#x20AC;WDELOLW\ RI RUJDQLF YHUVXV QRQRUJDQLF DJULFXOWXUH +RZHYHU WKHUH DUH IHZHU ORQJWHUP FRPSDUDWLYH VWXGLHV WKDW DQDO\VH WKH GHYHORSPHQW RI SURÃ&#x20AC;WV IURP HDFK RI WKHVH V\VWHPV 5HJUHWWDEO\ WKHJHRJUDSKLFDOGLVWULEXWLRQRIWKHVHVWXGLHVWHQGV

WR FRQFHQWUDWH RQ GHYHORSHG FRXQWULHV PDLQO\ WKH 8QLWHG6WDWHV DQGRQFHUWDLQFDVKFURSV HJFRUQ VR\ ZKHDW  )RU WKH SXUSRVH RI WKLV DQDO\VLV RQO\ VWXGLHVXVLQJGDWDIURPFHUWLÃ&#x20AC;HGRUJDQLFIDUPVZHUH FRQVLGHUHG FRYHULQJ D PLQLPXP SHULRG RI WKUHH \HDUV IRUGHYHORSHGFRXQWULHV DIWHUFRQYHUVLRQDQG XQGHUWDNHQDIWHU'XHWRWKHODFNRIORQJWHUP HFRQRPLF VWXGLHV LQ GHYHORSLQJ FRXQWULHV VWXGLHV FRYHULQJ RQH DQG WZR \HDUV ZHUH LQFOXGHG IURP WKHVH FRXQWULHV 6WXGLHV WKDW HYDOXDWHG \LHOGV DQG FHUWDLQ SURGXFWLRQ FRVWV EXW QRW SURÃ&#x20AC;WV ZHUH QRW FRQVLGHUHG 6HYHUDO IDFWRUV FRPSOLFDWH WKH WDVN RI FRPSDULQJ HFRQRPLF VWXGLHV DFURVV VSDFH DQG WLPH VXFK DV GLIIHUHQW FRVWV RI OLYLQJ DQG SXUFKDVLQJ SRZHU GLIIHUHQW LQWHUSUHWDWLRQV RI ODERXU FRVWV DQG WKH FKDQJLQJ HFRQRPLF DQG SROLWLFDO HQYLURQPHQW 0RUHRYHU PHWKRGRORJLFDO FKRLFH WKH WLPH SHULRG DQDO\VHGDQGWKHVHOHFWLRQSURFHGXUHIRUFRPSDUDEOH FRQYHQWLRQDO IDUPV KDYH D FRQVLGHUDEOH EHDULQJ RQ SURÃ&#x20AC;WDELOLW\ 6LPLODUO\ WKH H[WHQW RI WKH HFRQRPLF DVVHVVPHQW FDQ YDU\ DFURVV VWXGLHV ZLWK VRPH VWXGLHV IRFXVLQJ PHUHO\ RQ WKH IDUP OHYHO ZKLOH RWKHUVEURDGHQWKHSLFWXUHWRWKHOHYHORIVRFLHW\DQG WKLV FDQ OHDG WR GLIIHUHQW RXWFRPHV 'HSHQGLQJ RQ WKLV FKRLFH RSSRUWXQLW\ FRVWV DQG H[WHUQDOLWLHV DUH HLWKHU LQFOXGHG VRFLHW\ OHYHO  RU DV LQ PRVW FDVHV H[FOXGHG IDUP OHYHO  :KHQ ORRNLQJ DW SURÃ&#x20AC;WDELOLW\ VWXGLHVDFRUUHFWLQWHUSUHWDWLRQRIWKHGDWDLVFUXFLDO RYHUDOO FRPSDULVRQV FDQQRW EH PDGH IRU H[DPSOH EHWZHHQFDVHVWXGLHVDQGÃ&#x20AC;HOGH[SHULPHQWVEHWZHHQ GHYHORSHG DQG GHYHORSLQJFRXQWU\ UHVXOWV DQG


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

EHWZHHQ VWXGLHV ZLWK D YHU\ JRRG GDWD EDVH DQG VWXGLHVEDVHGRQIDUPHUV·RSLQLRQV

%<LHOGV (YLGHQFH IURP WKH PRUH WKDQ  VWXGLHV DQDO\VHG VKRZHGWKDW\LHOGVLQZHOOHVWDEOLVKHGRUJDQLFIDUPV LQ GHYHORSHG FRXQWULHV DUH XVXDOO\ ORZHU WKDQ WKRVH IURP FRQYHQWLRQDO IDUPV WR YDU\LQJ GHJUHHV 0RVW (XURSHDQ VWXGLHV LQFOXGLQJ WKRVH RI RUJDQLF FHUHDO YHJHWDEOH DQG PL[HG IDUPLQJ V\VWHPV VKRZHG WKDW WKH\ SURGXFHG VRPHZKDW ORZHU \LHOGV %0(/) ² )$7  2IIHUPDQQ DQG 1LHEHUJ  ZKHUHDVPLON\LHOGVPRVWRIWHQVKRZHGVLPLODU UHVXOWV ZKHQ PHDVXUHG LQ OLWUHV SHU FRZ <RXQLH HW DO)$72IIHUPDQQDQG1LHEHUJ  2QWKHRWKHUKDQGWKHPDMRULW\RIORQJWHUPVWXGLHV LQYROYLQJ VR\FRUQ URWDWLRQ LQ WKH 8QLWHG 6WDWHV VKRZHG WKDW RUJDQLF \LHOGV RQ DYHUDJH ZHUH QRW VLJQLÀFDQWO\GLIIHUHQW &KDVHDQG'XII\+DQVRQ /LFKWHQEHUJ DQG 3HWHUV  'ULQNZDWHU :DJRQHU DQG6DUUDQWRQLR'HODWHHWDO3LPHQWHOHW DO 'HVSLWHORZHUVR\\LHOGVIURPRUJDQLFIDUPV LQVRPHRWKHU8QLWHG6WDWHVVWXGLHV 0DKRQH\HWDO  &KDVH  0F%ULGH DQG *UHHQH   KLJKSUHPLXPV 0F%ULGHDQG*UHHQH RUORZHU SURGXFWLRQFRVWV 0DKRQH\HWDO&KDVH 



UHQGHUHGDOORUJDQLFV\VWHPVPRUHSURÀWDEOH 6HYHUDORIWKH8QLWHG6WDWHVVWXGLHVLQYHVWLJDWHGGULHU DUHDVDVZHOODQGIRXQGKLJKHU\LHOGVLQWKHRUJDQLF V\VWHPV 6WDQKLOO'LHEHO:LOOLDPVDQG/OHZHO\Q 'REEVDQG6PROLN+DQVRQ/LFKWHQEHUJ DQG 3HWHUV  3LPHQWHO HW DO   VXJJHVWLQJ WKDW WKRVH V\VWHPV DUH PRUH UHVLVWDQW WR GURXJKW 6LPLODUO\VWXGLHVLQGHYHORSLQJFRXQWULHVVKRZHGWKDW RUJDQLF\LHOGVZHUHJHQHUDOO\KLJKHUXQGHUQRUPDORU IDYRXUDEOH FRQGLWLRQV ,)$'  5DM HW DO  *LEERQ DQG %ROZLJ  6HWERRQVDUQJ <HXQJ DQG &DL   DQG VLJQLÀ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

%R['LIÀFXOWLHVLQDQDO\VLQJ\LHOGVIURPFRPSDUDWLYHVWXGLHV ‡ 2EMHFWRIFRPSDULVRQ FRPPRGLW\RUZKROHIDUPEDVHG 6RPHDXWKRUVRQO\ORRNDW\LHOGVRIRQHRUWZRFDVK FURSVVHSDUDWHO\ &KDVHDQG'XII\'REEVDQG6PROLNVWXGLHVIURPGHYHORSLQJFRXQWULHV ZKHUHDV RWKHUVDOVRHYDOXDWHDYHUDJH\LHOGVRIWKHZKROHURWDWLRQ +DQVRQHWDO&KDVH DQGRILQWHUFURSV (\ KRUQ5DPDNULVKQDQDQG0lGHU 7KHODWWHULVPRUHUHOHYDQWDOWKRXJKPRUHFRPSOH[IRUREWDLQLQJPHDQLQJIXO UHVXOWV ‡ 8QLWRIFRPSDULVRQ SHUKDRUSURGXFW 6RPHVWXGLHVHYDOXDWHFRZ\LHOGSHUKHFWDUH ZKLFKLVXVXDOO\ORZHULQ RUJDQLFGXHWRORZHUVWRFNLQJGHQVLWLHV ZKHUHDVRWKHUVHYDOXDWHFRZ\LHOGSHUDQLPDO ZKLFKRIWHQSURYLGHVVLPLODU UHVXOWV DQGWKLVPDNHVFRPSDULVRQVGLIÀFXOW ‡ 'LIIHUHQWYDULHWLHV9DULHWLHVEUHGIRULQWHQVLYHH[WHUQDOLQSXWFRQGLWLRQVDUHVHOGRPVXLWDEOHIRUORZH[WHUQDOLQSXW V\VWHPV2UJDQLFV\VWHPVHVSHFLDOO\LQGHYHORSLQJFRXQWULHVRIWHQXVHORFDOEUHHGVDQGYDULHWLHVZKLFKKDYHORZHU \LHOGVEXWZKLFKDUHPRUHDGDSWHGWRORZH[WHUQDOLQSXWFRQGLWLRQVLQWKDWWKH\UHTXLUHOHVVQXWULHQWVDQGZDWHULQSXWV RUKDYHKLJKHUSHVWGLVHDVHUHVLVWDQFH+RZHYHUDXWKRUVJHQHUDOO\GRQRWVSHFLI\WKDWGLIIHUHQFHVLQ\LHOGVPD\EH GXHWRGLIIHUHQWYDULHWLHV ‡ 'LIIHUHQWJURZWKSHULRGV8VLQJGLIIHUHQWYDULHWLHVDOVRLQÁXHQFHVWKHHFRQRPLFVRIWKHZKROHURWDWLRQV\VWHPIRU H[DPSOHPDQ\RUJDQLFIDUPHUVLQ,QGLDXVHGHVLFRWWRQZKLFKLVDZKROHVHDVRQFURSWKXVDIWHUKDUYHVWIDUPHUV FDQQRWJURZDQ\WKLQJHOVHLQWKHURWDWLRQ0RVWFRQYHQWLRQDOIDUPHUVJURZK\EULGYDULHWLHVXQGHULUULJDWLRQ LQWKH VWXGLHVDQDO\VHG ZKLFKHQDEOHVWKHFXOWLYDWLRQRIWZRRUWKUHHFURSVSHU\HDU -DFNVRQ  ‡ 0DQDJHULDOEDFNJURXQG7KHLQWHQVLW\RISUHYLRXVO\PDQDJHGFRQYHQWLRQDOIDUPVLVDVLJQLÀFDQWIDFWRUFRQWULEXWLQJ WRWKH\LHOGGHFUHDVHVGXULQJDQGDIWHUFRQYHUVLRQWRRUJDQLF<HWRIWHQWKHEDFNJURXQGRIRUJDQLFIDUPVLVQRWFOHDU IURPWKHVWXGLHVHYHQWKRXJKLWLQÁXHQFHVWKHFRPSDUDWLYHEDVHOLQH




H[WHQWE\SURSHUVRLOPDQDJHPHQWVKDGHWUHHV VXFK DV LQ FRIIHH FXOWLYDWLRQ  WLPHO\ UHPRYDO RI GLVHDVHG SODQWV DQG D KHDOWK\ EDODQFH EHWZHHQ SHVWV DQG QDWXUDO HQHPLHV DV ELRORJLFDO FRQWUROV 9DQ GHU 9RVVHQ   1HYHUWKHOHVV DOWKRXJK DQ LPSRUWDQW HOHPHQWRISURÃ&#x20AC;WDELOLW\\LHOGVDORQHGRQRWQHFHVVDULO\ LQGLFDWHSURÃ&#x20AC;WDELOLW\

&3URGXFWLRQFRVWV ,QIDUPHFRQRPLFVWKHUHLVQRDEVROXWHGHÃ&#x20AC;QLWLRQRI ZKDW KDV WR EH FRQVLGHUHG DV YDULDEOH FRVWV RU DV Ã&#x20AC;[HG FRVWV LW GHSHQGV RQ WKH DLP RI WKH UHVHDUFK 6RPHVWXGLHVFRQVLGHURQO\YDULDEOHFRVWVWRFDOFXODWH JURVVPDUJLQV <RXQLH+DPLOWRQDQG1HYLVRQ  ZKHUHDV RWKHUV LQFOXGH Ã&#x20AC;[HG FRVWV :\QHQ  *LEERQ DQG %ROZLJ   DQG \HW RWKHUV GR QRW GLIIHUHQWLDWH EHWZHHQ WKH WZR W\SHV RI FRVWV 2OVRQ DQG0DKRQH\'HODWHHWDO %\GHÃ&#x20AC;QLWLRQ Ã&#x20AC;[HGFRVWVDUHSDUWRIWKHWRWDOIDUPFRVWVWKDWGRQRW YDU\ VLJQLÃ&#x20AC;FDQWO\ ZLWK WKH YROXPH RI RXWSXW DQG FDQ RQO\ EH FKDQJHG LQ WKH ORQJ UXQ ZKHUHDV YDULDEOH FRVWV DUH WKRVH WKDW YDU\ GLUHFWO\ ZLWK WKH YROXPH RI RXWSXW 7KH GLIIHUHQWLDWLRQ EHWZHHQ YDULDEOH DQG Ã&#x20AC;[HG FRVWV LV RQO\ LPSRUWDQW ZKHQ JURVV PDUJLQV DUH FDOFXODWHG DV Ã&#x20AC;[HG FRVWV DUH QRW DFFRXQWHG IRU LQ WKRVH PDUJLQV +RZHYHU Ã&#x20AC;[HG FRVWV DUH FUXFLDO IRU IDUPSURÃ&#x20AC;WDELOLW\'XULQJFRQYHUVLRQIRU LQVWDQFH VHYHUDOVXEVWDQWLDOLQYHVWPHQWVKDYHWREHPDGH HJ QHZ DQLPDOIULHQGO\ KRXVLQJ V\VWHP QHZ RUFKDUG YDULHWLHVWKDWFDQEHWWHUZLWKVWDQGELRSK\VLFDOVWUHVV  WKDW DUH RIWHQ FRXQWHG DV Ã&#x20AC;[HG FRVWV DQG IRU PDQ\ IDUPHUVWKHVHFRVWVDUHWKHGHWHUPLQLQJIDFWRUDVWR ZKHWKHU FRQYHUWLQJ WR RUJDQLF PD\ EH SURÃ&#x20AC;WDEOH RU QRW (YHQ WKRXJK PRVW VWXGLHV PDNH WKH GLVWLQFWLRQ EHWZHHQWKHWZRW\SHVRIFRVWVWKH\PD\QRWVSHFLI\ ZKLFKFRVWVDUHFRYHUHGE\HDFKRIWKHP0HQWLRQLQJ PHUHO\ YDULDEOH DQG Ã&#x20AC;[HG FRVWV GRHV QRW DOORZ IRU WKH DSSUHFLDWLRQ RI WKH YDULDEOHV XVHG DQG WKXV IRU SURSHUFRPSDULVRQV $Q HYHQ PRUH FRPSOLFDWHG LVVXH LV WKH LQFOXVLRQ RI ODERXU FRVWV VRPH FRPSDULVRQV RPLW ODERXU FRVWV IURPWKHWRWDOFDOFXODWLRQRIQHWUHYHQXHV HJ+DQVRQ /LFKWHQEHUJ DQG 3HWHUV  'HODWH HW DO   ZKLOHPRVWLQFOXGHKLUHGODERXULQWKHYDULDEOHFRVWV :\QHQ  (\KRUQ 5DPDNULVKQDQ DQG 0lGHU  *LEERQ DQG %ROZLJ  &KDVH   VRPH FRXQW KLUHG  ODERXU FRVWV DV Ã&#x20AC;[HG FRVWV WKXV RPLWWLQJ WKHP IURP JURVV PDUJLQ UHVXOWV )$7  %0(/) DQG\HWRWKHUVFRXQWIDPLO\ODERXUDV DQ RSSRUWXQLW\ FRVW RU OHDYH WKLV RXW FRPSOHWHO\ DV

75$'($1'(19,5210(175(9,(:

LQ PRVW VWXGLHV RI GHYHORSLQJ FRXQWULHV  $QRWKHU DSSURDFKXVHGE\:\QHQ  IRULQVWDQFHFRXQWV KLUHG ODERXU DV D YDULDEOH FRVW DQG IDPLO\ ODERXU DV DÃ&#x20AC;[HGFRVW9HU\RIWHQLQGHYHORSLQJFRXQWULHVRQO\ FDVK FRVWV DUH LQFOXGHG DQG QRQFDVK FRVWV HJ RZQ ODERXU DQG VHHGV  DUH H[FOXGHG 5HJDUGOHVV RI ZKHWKHU ODERXU FRVWV DUH WUHDWHG XQGHU Ã&#x20AC;[HG DQGRU YDULDEOHFRVWVWKHPRVWLPSRUWDQWDVSHFWLVWKDWWKH\ DUHWUHDWHGFRQVLVWHQWO\ZLWKLQWKHFDVHVWXG\DQGDUH QRWRYHUORRNHG )URP WKH DQDO\VLV RI VWXGLHV LW IROORZV WKDW HYHQ LI WKH GLIIHUHQW FRVW HOHPHQWV ZHUH VWDQGDUGL]HG YDULDWLRQVDPRQJSURGXFWLRQFRVWVZRXOGRFFXUGXH WRWKHXQLTXHFKDUDFWHURIWKHRSHUDWLRQVDQGIDFWRUV EH\RQG WKH FRQWURO RI WKH IDUPHUV IRU H[DPSOH PDFKLQHU\FRVWVGHSHQGDOVRRQDJHVL]HDQGXVH LUULJDWLRQ FRVWV DUH VXEMHFW WR YDULDWLRQV LQ UDLQIDOO WHPSHUDWXUH DQG HIÃ&#x20AC;FLHQF\ RI LUULJDWLRQ V\VWHPV DQG ODERXU FRVWV GHSHQG RQ ZDJH UDWHV ZRUNLQJ FRQGLWLRQV DQG HIÃ&#x20AC;FLHQF\ RI WKH ZRUNHUV 7KLV EHLQJ VDLGSURGXFWLRQFRVWVWHQGWREHORZHULQHVWDEOLVKHG RUJDQLF V\VWHPV HJ +HOPHUV /DQJHPHLHU DQG $WZRRG  +DQVRQ /LFKWHQEHUJ DQG 3HWHUV 2OVRQDQG0DKRQH\'HODWHHWDO 0HQGR]D  (\KRUQ 5DPDNULVKQDQ DQG 0lGHU   ,Q PRVW RI WKH(XURSHDQ VWXGLHV DQDO\VHG E\ 2IIHUPDQQDQG1LHEHUJLQWRWDOFRVWVLQFXUUHG E\RUJDQLFIDUPVZHUHRQDYHUDJHVOLJKWO\ORZHUWKDQ WKRVH LQFXUUHG E\ FRPSDUDEOH FRQYHQWLRQDO IDUPV :KLOHYDULDEOHFRVWVZHUHJHQHUDOO\VLJQLÃ&#x20AC;FDQWO\ORZHU ² SHU FHQW  LQ WKH RUJDQLF V\VWHPV WKHLU Ã&#x20AC;[HG FRVWVZHUHXSWRSHUFHQWKLJKHUWKDQWKRVHRIWKH FRQYHQWLRQDOUHIHUHQFHJURXSLQVHYHUDOFRXQWULHV7KH IHZFDVHVZLWKVLJQLÃ&#x20AC;FDQWO\KLJKHUSURGXFWLRQFRVWVLQ RUJDQLF IDUPV ZHUH WKH RQHV IRFXVLQJ RQ YHJHWDEOH SURGXFWLRQRUWKRVHLQGHYHORSLQJFRXQWULHV $OO DQDO\VHG VWXGLHV UHOLHG RQ UHODWLYHO\ FKHDS LQSXW FRVWV EDVHG RQ FKHDS IRVVLO IXHO  WKDW KDYH EHHQ YDU\LQJ WUHPHQGRXVO\ RYHU WKH SDVW IHZ \HDUV ,QSXW FRVWV DUH ERXQG WR LQFUHDVH LQ WKH ORQJ UXQ JOREDO QLWURJHQ IHUWLOL]HU SULFHV VXUJHG E\  SHU FHQW GXULQJ WKH Ã&#x20AC;UVW TXDUWHU RI  DQG IRVVLOIXHO EDVHG DJULFXOWXUDO LQSXWV D VXEVWDQWLDO SURSRUWLRQ RISURGXFWLRQFRVWV ZLOOVRRQHURUODWHUVXEVWDQWLDOO\ DIIHFWIDUPLQJV\VWHPVWKDWUHO\RQWKHLQWHQVLYHXVH RI V\QWKHWLF IHUWLOL]HUV DQG SHVWLFLGHV ,Q WKH FDVH RI RUJDQLFDJULFXOWXUHRLOEDVHGLQSXWVQHJDWLYHO\DIIHFW SURGXFWLRQ FRVWV ZKHUH SODVWLF PXOFK LV XVHG DQG PRUHJHQHUDOO\ZKHQWKHV\VWHPLVPHFKDQL]HG


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

'2YHUDOOSURÃ&#x20AC;WDELOLW\ 2YHUVWXGLHVZHUHDQDO\VHGLQWHUPVRIWKHLUUHVHDUFK RQ IDUP SURÃ&#x20AC;WDELOLW\ DQG DOWKRXJK PHWKRGRORJLFDO GLIIHUHQFHV SUHYHQWHG XV IURP FRPSDULQJ WKHP V\VWHPDWLFDOO\WKHVLPLODULWLHVEHWZHHQWKHVWXGLHVIURP PDQ\FRXQWULHVDQGFRQWH[WVDOORZHGXVWRGUDZVRPH JHQHUDO FRQFOXVLRQV 3URÃ&#x20AC;WDELOLW\ FHUWDLQO\ GHSHQGV RQWKHFKRLFHRIFURSZKLFKRIFRXUVHLVGHWHUPLQHG SDUWO\ E\ HQYLURQPHQWDO FRQGLWLRQV DQG SDUWO\ E\ WKH GHPDQG IRU SURGXFWV DQG E\ WKH DYDLODELOLW\ RI JRYHUQPHQWSURJUDPPHVWKDWVXSSRUWWKHFXOWLYDWLRQ RISDUWLFXODUFURSV$FRPSDULVRQRIUHODWLYHSURÃ&#x20AC;WDELOLW\ GHSHQGV ODUJHO\ RQ WKH NLQG RI FRPSDULVRQ JURXS VHOHFWHG7KXVIDUPVL]HIDUPW\SHDQGORFDWLRQDUH LPSRUWDQW IDFWRUV LQ VHOHFWLQJ WKH VXLWDEOH FDQGLGDWH IDUPVIRUFRPSDULVRQ3ULFHSUHPLXPVDOVRVHHPWR EHDFUXFLDOIDFWRUFRQWULEXWLQJWRWKHJRRGHFRQRPLF SHUIRUPDQFHRIRUJDQLFV\VWHPVDQGLQPRVWFDVHV WKH\PDNHRUJDQLFIDUPVPRUHSURÃ&#x20AC;WDEOH+RZHYHUDW OHDVWDGR]HQVWXGLHVVKRZHGWKDWSULFHSUHPLXPVDUH QRWDOZD\VQHFHVVDU\IRURUJDQLFV\VWHPVWREHPRUH SURÃ&#x20AC;WDEOHWKDQFRQYHQWLRQDOV\VWHPV,IKLJKHUSULFHV DUH QRW DYDLODEOH WR FRPSHQVDWH IRU SRVVLEOH ORVVHV RI RUJDQLF \LHOGV Ã&#x20AC;QDQFLDO SURÃ&#x20AC;WDELOLW\ ZLOO GHSHQG HQWLUHO\RQDFKLHYLQJFRVWUHGXFWLRQV 2YHUDOO WKH FRPSLOHG GDWD VXJJHVW WKDW RUJDQLF DJULFXOWXUH LV HFRQRPLFDOO\ PRUH SURÃ&#x20AC;WDEOH QHW UHWXUQV WDNLQJ WRWDO FRVWV LQWR DFFRXQW PRVW RIWHQ SURYHG WR EH KLJKHU LQ RUJDQLF V\VWHPV 7KHUH ZHUH ZLGH YDULDWLRQV DPRQJ \LHOGV DQG SURGXFWLRQ FRVWV EXW HLWKHU KLJKHU PDUNHW SULFHV DQG SUHPLXPV RU ORZHU SURGXFWLRQ FRVWV RU D FRPELQDWLRQ RI WKHVH WZR JHQHUDOO\ UHVXOWHG LQ KLJKHU UHODWLYH SURÃ&#x20AC;WV IURP RUJDQLFDJULFXOWXUHLQGHYHORSHGFRXQWULHV7KHVDPH



FRQFOXVLRQFDQEHGUDZQIURPVWXGLHVLQGHYHORSLQJ FRXQWULHVEXWWKHUHKLJKHU\LHOGVFRPELQHGZLWKKLJK SUHPLXPV VHHPHG WR EH WKH XQGHUO\LQJ UHDVRQV IRU KLJKHUUHODWLYHSURÃ&#x20AC;WDELOLW\ (VWDEOLVKLQJ RUJDQLF PDUNHWV IRU VWDSOH FURSV HJ RUJDQLF VR\EHDQV ZKHDW FKLOOLHV  WKDW DUH SDUW RI D URWDWLRQ RIIHUV FRQVLGHUDEOH SRWHQWLDO WR IXUWKHU LPSURYHWKHSURÃ&#x20AC;WDELOLW\RIRUJDQLFIDUPVLQGHYHORSLQJ FRXQWULHV,IWKHVHFURSVFRXOGEHVROGDWDSUHPLXP SULFH WKH UHYHQXHV RI RUJDQLF IDUPV ZRXOG IXUWKHU LQFUHDVH,QGHYHORSHGFRXQWULHVDIXUWKHUUHGXFWLRQ LQSURGXFWLRQFRVWV HQHUJ\IXHOIHHG DQGWKHXVHRI EHWWHUYDULHWLHV HJLQWHUPVRIUHVLVWDQFHDQG\LHOG  FRXOGUHVXOWLQDQLQFUHDVHLQWKHUHODWLYHSURÃ&#x20AC;WDELOLW\RI RUJDQLFIDUPV

(7KHQHHGIRUIDLUHFRQRPLF FRPSDULVRQV 2UJDQLFV\VWHPVDUHJHQHUDOO\PRUHSURÃ&#x20AC;WDEOHGHVSLWH XQIDLU FRPSHWLWLRQ LQ WKH PDUNHWSODFH GXH WR FXUUHQW JRYHUQPHQW VXEVLG\ VFKHPHV IRU FRQYHQWLRQDO SURGXFWLRQ XQHTXDO DYDLODELOLW\ RI UHVHDUFK DQG H[WHQVLRQVHUYLFHVDQGWKHIDLOXUHRIPDUNHWSULFHVRI FRQYHQWLRQDOIRRGVWRFDSWXUHWKHUHDOHQYLURQPHQWDO VRFLDO DQG KHDOWK H[WHUQDOLWLHV ([LVWLQJ HFRQRPLF FRPSDULVRQV DUH WKHUHIRUH KHDYLO\ ELDVHG LQ IDYRXU RI FRQYHQWLRQDO IDUPLQJ 7KHUH LV DQ XUJHQW QHHG WR GLUHFW PXFK PRUH UHVHDUFK DQG LQYHVWPHQWV LQWR H[WHQVLRQVHUYLFHVWRVXSSRUWRUJDQLFDJULFXOWXUHDQG VKLIWWKHEXONRISXEOLFVXSSRUWIURPSROOXWLQJDFWLYLWLHV WR VXVWDLQDEOH SUDFWLFHV WR JLYH DQ HTXDO IRRWLQJ WR RUJDQLF IDUPLQJ V\VWHPV ,Q DGGLWLRQ FRPSDUDWLYH VWXGLHV QHHG WR WDNH LQWR DFFRXQW WKH GLIIHUHQFHV LQ H[WHUQDO FRVWV DQG EHQHÃ&#x20AC;WV VR DV WR FDSWXUH WKH

%R[3URÃ&#x20AC;WDELOLW\RIRUJDQLFFRWWRQSURGXFWLRQ $Q,QGR6ZLVVUHVHDUFKWHDPFRPSDUHGDJURQRPLFGDWDRIRUJDQLFDQGFRQYHQWLRQDOIDUPVRYHUWZR\HDUV (\ KRUQ5DPDNULVKQDQDQG0lGHU DQGFDPHWRWKHFRQFOXVLRQWKDWRUJDQLFIDUPLQJRIFRWWRQZDVPRUHSURÃ&#x20AC;WDEOH YDULDEOHSURGXFWLRQFRVWVZHUH²SHUFHQWORZHUDQGFRVWVRILQSXWVZHUHSHUFHQWORZHU\HW\LHOGVZHUH²SHU FHQWKLJKHULQWKHWZR\HDUVDQGDVDUHVXOWJURVVPDUJLQVIRUFRWWRQZHUHSHUFHQWKLJKHU$OWKRXJKWKHUHZDV QRSULFHSUHPLXPIRUWKHFURSVJURZQLQURWDWLRQZLWKFRWWRQRUJDQLFIDUPVHDUQHG²SHUFHQWKLJKHULQFRPHVWKDQ FRQYHQWLRQDOIDUPV ,QDQ,QGLDQVXUYH\RIRUJDQLFFRWWRQIDUPHUVSHUFHQWRIUHVSRQGHQWVVDZWKHLUDJULFXOWXUDOLQFRPHLQFUHDVHE\ SHUFHQWRQDYHUDJHDIWHUDGRSWLQJRUJDQLFDJULFXOWXUDOSUDFWLFHVZKLFKPRVWRIWKHPDWWULEXWHGPDLQO\WRUHGXFHG FRVWVRISURGXFWLRQDQGKLJKHUVDOHVSULFHV 0DF'RQDOG 6LPLODUO\LQWKH,QGLDQVWDWHRI$QGKUD3UDGHVK5DMHW DO  IRXQGWKDWJURZLQJRUJDQLFFRWWRQZDVPXFKPRUHSURÃ&#x20AC;WDEOHWKDQJURZLQJFRQYHQWLRQDOFRWWRQ LQFRPHZDV SHUDFUHRQRUJDQLFFRPSDUHGZLWKSHUDFUHRQFRQYHQWLRQDOIDUPV ,QFRQFOXVLRQDOOVWXGLHVIRXQGRUJDQLF FRWWRQIDUPLQJWREHPRUHSURÃ&#x20AC;WDEOHWKDQFRQYHQWLRQDO




75$'($1'(19,5210(175(9,(:

%R[([DPSOHVRIHQYLURQPHQWDOFRVWV $VWXG\E\3UHWW\HWDO  HVWLPDWHGWKHDQQXDOH[WHUQDOFRVWVRIDJULFXOWXUHLQWKH8QLWHG.LQJGRPLQDWÂ&#x2026; ELOOLRQ ELOOLRQ HTXLYDOHQWWRÂ&#x2026;KD KD RIDUDEOHDQGSHUPDQHQWSDVWXUH7KLVZDVSHUFHQWRIWKHDYHU DJHQHWIDUPLQFRPHIRU6LJQLÃ&#x20AC;FDQWFRVWVDURVHIURPWKHFRQWDPLQDWLRQRIGULQNLQJZDWHUZLWKSHVWLFLGHVQLWUDWH DQGSKRVSKDWHIURPGDPDJHWRZLOGOLIHKDELWDWVKHGJHURZVIURP*+*HPLVVLRQVIURPVRLOHURVLRQDQGRUJDQLFFDU ERQORVVHVIURPIRRGSRLVRQLQJDQGIURP%6($QRWKHUVWXG\ZKLFKFDOFXODWHGWKHH[WHUQDOFRVWVRIDJULFXOWXUHLQWKH 8QLWHG6WDWHVLQFOXGLQJGDPDJHWRZDWHUVRXUFHVWRVRLODQGDLUWRZLOGOLIHDQGHFRV\VWHPELRGLYHUVLW\DQGWRKXPDQ KHDOWKHVWLPDWHGWKHFRVWVWRUDQJHEHWZHHQELOOLRQDQGELOOLRQDQQXDOO\RU²KDRIFURSODQG 7HJW PHLHUDQG'XII\ 7KHVHVWXGLHVRQO\HVWLPDWHGH[WHUQDOLWLHVWKDWJDYHULVHWRÃ&#x20AC;QDQFLDOFRVWVWKXVWKH\DUHOLNHO\WR KDYHXQGHUHVWLPDWHGWKHWRWDOQHJDWLYHLPSDFWVDULVLQJIURPWKHLQWHQVLYHXVHRIDJURFKHPLFDOV

UHDODQGPXOWLSOHSURÃ&#x20AC;WVRIWKHUHVSHFWLYHV\VWHPVRI DJULFXOWXUH

*RYHUQPHQWVXSSRUW 1DWLRQDO RU UHJLRQDO DJULFXOWXUDO SURJUDPPHV DQG VXEVLGLHV DUH PRVWO\ JHDUHG WRZDUGV VXSSRUWLQJ ODUJHVFDOH DJULFXOWXUH WKDW PDNHV LQWHQVLYH XVH RI FKHPLFDO LQSXWV ZKLFK DUWLÃ&#x20AC;FLDOO\ ORZHUV WKH SULFH RI FRQYHQWLRQDO SURGXFWV 3DLQWHU   FRPSDUHG QHW UHWXUQVRIRUJDQLFDQGFRQYHQWLRQDOIDUPVDWWKHHQG RIWKHVDQGIRXQGWKDWWKHDYHUDJHJRYHUQPHQWDO VXEVLG\ SHU KHFWDUH ZDV  SHU FHQW KLJKHU IRU FRQYHQWLRQDO SURGXFWLRQ 5HVHDUFKHUV LQ WKH V DOVRIRXQGWKDWFRQYHQWLRQDOV\VWHPVEHQHÃ&#x20AC;WHGPRUH IURPJRYHUQPHQWVXEVLGLHVWKDQRUJDQLFRQHV 'LHEHO :LOOLDPV DQG /OHZHO\Q  6PROLN 'REEV DQG 5LFNHUO ,IVXEVLGLHVZHUHH[SDQGHGWRVXSSRUW ORQJWHUPDVSHFWVRIDJULFXOWXUDOSURGXFWLYLW\VXFKDV VRLOEXLOGLQJJUDVVDQGOHJXPHFURSVWKHSURÃ&#x20AC;WDELOLW\ RIRUJDQLFIDUPLQJZRXOGEHHYHQKLJKHU :KLOH RUJDQLF IDUPV LQ (XURSH UHFHLYH FRQVLGHUDEOH VXSSRUW IURP WKH (8·V DJULHQYLURQPHQWDO SURJ UDPPHVWKHGHVLJQRIWKHÃ&#x20AC;UVWSLOODURIWKH&RPPRQ $JULFXOWXUDO 3ROLF\ &$3  SXW RUJDQLF IDUPLQJ DW D GLVDGYDQWDJH LQ WKH SDVW 7KH  &$3 UHIRUP FKDQJHGWKLVVLWXDWLRQSDUWLFXODUO\E\GHFRXSOLQJGLUHFW SD\PHQWV +RZHYHU WKH UHVXOWV RI D VXUYH\ VKRZHG WKDWRQO\SHUFHQWRIRUJDQLFIDUPHUVWKRXJKWWKDW GHFRXSOLQJKDGKDGDSRVLWLYHLPSDFWRQWKHLUSURÃ&#x20AC;WV 6DQGHUV 2IIHUPDQQ DQG 1LHEHUJ   7KHUH LV PXFKGHEDWHRQZKHWKHUWKHFXUUHQWOHYHOVRIRUJDQLF VXSSRUWDUHDSSURSULDWH1HYHUWKHOHVVLWLVFOHDUWKDW D VKDUS UHGLUHFWLRQ RI SXEOLF VXSSRUW IURP SROOXWLQJ DFWLYLWLHV WR VXVWDLQDEOH SUDFWLFHV LV QHFHVVDU\ ERWK LQ GHYHORSHG DQG GHYHORSLQJ FRXQWULHV 6XEVLGLHV VKRXOGHQFRXUDJHSRVLWLYHH[WHUQDOLWLHVZKLOHDGYLVRU\ DQG LQVWLWXWLRQDO PHFKDQLVPV OHJDO PHDVXUHV DQG HFRQRPLF LQVWUXPHQWV VKRXOG FRUUHFW QHJDWLYH H[WHUQDOLWLHV

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lGHU   7KXV FRPSDULVRQV RI \LHOG DQG IDUP HFRQRPLFVEHWZHHQFRQYHQWLRQDODQGRUJDQLFFDQEH FRQVLGHUHGXQIDLUDVORQJDVWKHODWWHUGRQRWEHQHÃ&#x20AC;W IURP VLPLODU UHVHDUFK DQG H[WHQVLRQ VHUYLFH VXSSRUW WKDWDUHGLUHFWHGWRFRQYHQWLRQDODJULFXOWXUH

([WHUQDOLWLHV 7KH SURÃ&#x20AC;WDELOLW\ RI D IDUPLQJ V\VWHP PXVW EDODQFH HFRQRPLF FRVWV DJDLQVW HQYLURQPHQWDO VRFLDO DQG KHDOWK FRVWV DV WKHVH FRVWV KDYH GHOD\HG LPSDFWV DQG LQGLUHFW HIIHFWV RQ IDUP HFRQRPLFV $W SUHVHQW FRPSDUDWLYH HFRQRPLF VWXGLHV RI WKH WZR IDUPLQJ V\VWHPV RQO\ FRQVLGHU GLUHFW HFRQRPLF LQSXWV DQG RXWSXWV LQ WKH HTXDWLRQ DQG EURDGO\ RYHUORRN WKH HQYLURQPHQWDO VRFLDO DQG KHDOWK FRVWV $FFRXQWLQJ IRU H[WHUQDOLWLHV VXFK DV FRVWV DVVRFLDWHG ZLWK UXQ RII VSLOOV GHSOHWLRQ RI QDWXUDO UHVRXUFHV DQG KHDOWK FRVWV WR IDUPHUV H[SRVHG WR SHVWLFLGHV DUH ODFNLQJ <HW JHQHUDOO\ RUJDQLF GHOLYHUV PRUH SXEOLF JRRGV VXFKDVHQYLURQPHQWDODQGKHDOWKEHQHÃ&#x20AC;WV7DNLQJWKH GLIIHUHQFHVLQH[WHUQDOFRVWVDQGEHQHÃ&#x20AC;WVLQWRDFFRXQW ZRXOGJLYHDPRUHDFFXUDWHSURÃ&#x20AC;WDELOLW\SLFWXUHRIWKH GLIIHUHQWV\VWHPV ,Q WKHVH FRPSOHWHO\ GLVWRUWHG PDUNHWV WKDW IDLO


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

WR SURYLGH D OHYHO SOD\LQJ ÀHOG EHWZHHQ RUJDQLF DQG FRQYHQWLRQDO DJULFXOWXUH VXEVLGLHV DUH RQH ZD\ RI KHOSLQJ RUJDQLF IDUPHUV WR FRQWLQXH ZLWK HQYLURQPHQWDOO\ IULHQGO\ IDUPLQJ SUDFWLFHV 3ULFH VXSSRUWV FRXOG WDNH WKH IRUP RI FRPSHQVDWLRQ WKDW UHZDUGV IDUPHUV IRU WKH HFRV\VWHP DQG VRFLHWDO VHUYLFHV HJ ODQGVFDSH  WKH\ DUH SHUIRUPLQJ IRU WKHFRPPRQJRRG%RWKH[WHUQDOFRVWVDQGEHQHÀWV



FRXOGEHTXDQWLÀHGLQHFRQRPLFWHUPV HJSROOXWLRQ DEDWHPHQW FRVWV  DQG WKXV FRXOG EH WDNHQ LQWR DFFRXQW LQ FRPSDUDWLYH VWXGLHV 7KLV ZRXOG PHDQ D UHGLUHFWLRQ RI HFRQRPLF WKLQNLQJ ZKLFK ZRXOG EHWWHU UHÁHFW WKH WUXH FRVW RI IDUPLQJ SUDFWLFHV DQG KRSHIXOO\OHDGWRWKHUHIRUPXODWLRQRISROLFLHVVRWKDW WKH\QRORQJHUVXSSRUWSROOXWLQJDFWLYLWLHVEXWLQVWHDG FRUUHFWQHJDWLYHH[WHUQDOLWLHVDVIDUDVSRVVLEOH




75$'($1'(19,5210(175(9,(:

1//'06#4;U 64'0)6*'0+0)'5+.+'0%'1( #4/+0);56'/5U 4'4'37+5+6'(14756#+0#$.')4+%7.674#. 41&7%6+10 0LJXHO$$OWLHUL8QLYHUVLW\RI&DOLIRUQLD%HUNHOH\DQG 3DUYL].RRKDINDQ)$2

$EVWUDFW 7UDGLWLRQDOIDUPLQJV\VWHPVKDYHHQDEOHGIDUPHUVWRJHQHUDWHVXVWDLQHG\LHOGVWRPHHWWKHLUVXEVLVWHQFH QHHGVLQWKHFRQWH[WRIFOLPDWLFYDULDELOLW\3DUWRIWKLVSHUIRUPDQFHLVOLQNHGWRWKHKLJKOHYHOVRIDJURELRGLYHU VLW\H[KLELWHGE\WUDGLWLRQDODJURHFRV\VWHPV6WUDWHJLHVWRHQKDQFHGLYHUVLW\LQDJURHFRV\VWHPVLQFOXGH VXSSRUWWRIDPLO\DJULFXOWXUHDQGWRVPDOOKROGHUVDQGG\QDPLFFRQVHUYDWLRQRIJOREDOO\LPSRUWDQWDJULFXOWXUDO KHULWDJH V\VWHPV 'LYHUVLÀFDWLRQ LV WKHUHIRUH DQ LPSRUWDQW IDUP VWUDWHJ\ IRU PDQDJLQJ SURGXFWLRQ ULVN LQ IDUPLQJ V\VWHPV 6WUDWHJLHV WR UHVWRUH GLYHUVLW\ LQ PRGHUQ IDUPLQJ V\VWHPV LQFOXGH SURPRWLQJ VHHG GLYHUVLW\FURSURWDWLRQVFRYHUFURSVLQWHUFURSSLQJDQGFURSOLYHVWRFNPL[LQJ'LYHUVLÀHGIDUPLQJV\VWHPV PDQDJHGZLWKPRGHUQHTXLSPHQWDOORZFRPSOHPHQWDU\LQWHUDFWLRQVWKDWERRVW\LHOGVZLWKORZLQSXWVWKXV LQFUHDVLQJSURÀWVDQGJLYHQWKHGLYHUVLW\RIFURSVPLQLPL]LQJSURGXFWLRQULVNV

7RGD\ D PDMRU FKDOOHQJH IDFLQJ KXPDQLW\ LV KRZ WR DFKLHYH D VXVWDLQDEOH DJULFXOWXUH WKDW SURYLGHV VXIÀFLHQW IRRG DQG HFRV\VWHP VHUYLFHV IRU SUHVHQW DQG IXWXUH JHQHUDWLRQV LQ DQ HUD RI FOLPDWH FKDQJH ULVLQJ IXHO FRVWV VRFLDO WHQVLRQV FDXVHG E\ IRRG SULFH KLNHV ÀQDQFLDO LQVWDELOLW\ DQG DFFHOHUDWLQJ HQYLURQPHQWDO GHJUDGDWLRQ 7KH FKDOOHQJH LV FRPSRXQGHG E\ WKH IDFW WKDW WKH PDMRULW\ RI WKH ZRUOG·V DUDEOH ODQG LV XQGHU ´PRGHUQµ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ÀFDWLRQ RI QR[LRXV FKHPLFDOV %HFDXVH ELRGLYHUVLW\PHGLDWHG UHQHZDO SURFHVVHV DQG HFRORJLFDO VHUYLFHV DUH ODUJHO\ ELRORJLFDO WKHLU FRQWLQXHGIXQFWLRQLQJGHSHQGVXSRQWKHPDLQWHQDQFH RIELRORJLFDOLQWHJULW\DQGGLYHUVLW\LQDJURHFRV\VWHPV ,Q JHQHUDO QDWXUDO HFRV\VWHPV DSSHDU WR EH PRUH VWDEOH DQG OHVV VXEMHFW WR ÁXFWXDWLRQV LQ \LHOG DQG LQ WKH SRSXODWLRQV RI RUJDQLVPV PDNLQJ XS WKH FRPPXQLW\ (FRV\VWHPV ZLWK KLJKHU GLYHUVLW\ DUH PRUHVWDEOHEHFDXVHWKH\H[KLELWJUHDWHUUHVLVWDQFH RUWKHDELOLW\WRDYRLGRUZLWKVWDQGGLVWXUEDQFHVDQG JUHDWHU UHVLOLHQFH RU WKH DELOLW\ WR UHFRYHU IROORZLQJ GLVWXUEDQFHV %LRGLYHUVLW\ HQKDQFHV HFRV\VWHP IXQFWLRQV EHFDXVH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

WKRVH FRPSRQHQWV WKDW DSSHDU UHGXQGDQW DW RQH SRLQW LQ WLPH PD\ EHFRPH LPSRUWDQW ZKHQ VRPH HQYLURQPHQWDO FKDQJH RFFXUV :KDW LV LPSRUWDQW LV WKDW ZKHQ HQYLURQPHQWDO FKDQJH RFFXUV WKH UHGXQGDQFLHV RI WKH V\VWHP HQDEOH FRQWLQXHG HFRV\VWHP IXQFWLRQLQJ DQG SURYLVLRQLQJ RI VHUYLFHV 9DQGHUPHHUHWDO  7UDGLWLRQDO IDUPLQJ V\VWHPV ZKLFK VWLOO SHUVLVW LQ PDQ\ GHYHORSLQJ FRXQWULHV RIIHU D ZLGH DUUD\ RI PDQDJHPHQW RSWLRQV DQG GHVLJQV WKDW HQKDQFH IXQFWLRQDOELRGLYHUVLW\LQFURSÀHOGVDQGFRQVHTXHQWO\ VXSSRUW WKH UHVLOLHQFH RI DJURHFRV\VWHPV 8SKRII E 7ROHGR DQG %DUUHUD%DVVDOV   7KH P\ULDGRIWUDGLWLRQDOV\VWHPVDUHDJOREDOO\LPSRUWDQW LQJHQLRXV DJULFXOWXUDO KHULWDJH ZKLFK UHÁHFWV WKH YDOXH RI WKH GLYHUVLW\ RI DJULFXOWXUDO V\VWHPV WKDW DUH DGDSWHG WR GLIIHUHQW HQYLURQPHQWV 7KH\ WHOO D IDVFLQDWLQJ VWRU\ RI WKH DELOLW\ DQG LQJHQXLW\ RI KXPDQV WR DGMXVW DQG DGDSW WR WKH YDJDULHV RI D FKDQJLQJ SK\VLFDO DQG PDWHULDO HQYLURQPHQW IURP JHQHUDWLRQWRJHQHUDWLRQ:KHWKHUUHFRJQL]HGRUQRW E\WKHVFLHQWLÀ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´FUHDWLYLW\µ RI VPDOO IDUPHUV WKURXJKRXW WKH GHYHORSLQJZRUOG :LONHQ 7RGD\ZHOOLQWRWKH ÀUVW GHFDGH RI WKH WZHQW\ÀUVW FHQWXU\ PLOOLRQV RI VPDOOKROGHUV IDPLO\ IDUPHUV DQG LQGLJHQRXV SHRSOH



DUH FRQWLQXLQJ WR SUDFWLFH UHVRXUFHFRQVHUYLQJ IDUPLQJ 6XFK WUDGLWLRQDO V\VWHPV DUH WHVWDPHQW WR WKH UHPDUNDEOH UHVLOLHQFH RI DJURHFRV\VWHPV WR FRQWLQXRXV HQYLURQPHQWDO DQG HFRQRPLF FKDQJH ZKLFK GHVSLWH FKDQJHV FRQWLQXH WR FRQWULEXWH VXEVWDQWLDOO\ WR DJURELRGLYHUVLW\ FRQVHUYDWLRQ DQG IRRG VHFXULW\ DW ORFDO UHJLRQDO DQG QDWLRQDO OHYHOV 1HWWLQJ  +RZHYHUFOLPDWHFKDQJHFDQSRVHVHULRXVSUREOHPV IRU WKH PDMRULW\ RI WKH  PLOOLRQ RI WKH ZRUOG·V SRRUHVWZKROLYHLQDUHDVRIWHQORFDWHGLQDULGRUVHPL DULG]RQHVDQGLQHFRORJLFDOO\YXOQHUDEOHPRXQWDLQV DQG KLOOV &RQZD\   ,Q PDQ\ FRXQWULHV PRUH DQGPRUHSHRSOHSDUWLFXODUO\WKRVHDWORZHULQFRPH OHYHOV DUH QRZ IRUFHG WR OLYH LQ PDUJLQDO DUHDV LH Á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ÀFDWLRQSUDFWLFHVVXFKDV FRYHUFURSVLQWHUFURSSLQJDQGDJURIRUHVWU\VXIIHUHG OHVV GDPDJH WKDQ WKHLU QHLJKERXUV ZKR SUDFWLFHG FRQYHQWLRQDO PRQRFXOWXUH 7KH VXUYH\ VSHDUKHDGHG E\ WKH &DPSHVLQR D &DPSHVLQR PRYHPHQW PRELOL]HG  IDUPHUWHFKQLFLDQ WHDPV WR FDUU\ RXW SDLUHG REVHUYDWLRQV RI VSHFLÀF DJURHFRORJLFDO LQGLFDWRUV RQ  QHLJKERXULQJ VXVWDLQDEOH DQG FRQYHQWLRQDO IDUPV 7KH VWXG\ VSDQQHG  FRPPXQLWLHV DQG  GHSDUWPHQWV LQ *XDWHPDOD +RQGXUDV DQG 1LFDUDJXD ,W IRXQG WKDW SORWV ZKHUH IDUPHUV DGRSWHG VXVWDLQDEOH IDUPLQJ SUDFWLFHV KDG




WRSHUFHQWPRUHWRSVRLOJUHDWHUVRLOPRLVWXUH DQGOHVVHURVLRQDQGH[SHULHQFHGVPDOOHUHFRQRPLF ORVVHV WKDQ WKHLU FRQYHQWLRQDO QHLJKERXUV +ROW *LPpQH]   6LPLODUO\ LQ 6RWRQXVFR &KLDSDV FRIIHH V\VWHPV H[KLELWLQJ KLJK OHYHOV RI YHJHWDWLRQ FRPSOH[LW\ DQG SODQW GLYHUVLW\ VXIIHUHG OHVV GDPDJH IURP +XUULFDQH 6WDQ WKDQ PRUH VLPSOLÃ&#x20AC;HG FRIIHH V\VWHPV 3KLOSRWWHWDO $QGLQ&XEDGD\V DIWHU+XUULFDQH,NHKLWWKHFRXQWU\LQUHVHDUFKHUV FRQGXFWLQJDIDUPVXUYH\LQWKHSURYLQFHVRI+ROJXLQ DQG/DV7XQDVIRXQGWKDWGLYHUVLÃ&#x20AC;HGIDUPVH[KLELWHG ORVVHV RI  SHU FHQW FRPSDUHG WR  RU  SHU FHQW LQ QHLJKERXULQJ PRQRFXOWXUH IDUPV /LNHZLVH DJURHFRORJLFDOO\ PDQDJHG IDUPV VKRZHG D IDVWHU UHFRYHU\RISURGXFWLYLW\ ²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Ã&#x20AC;HG VPDOO IDUPLQJ V\VWHPV XQGHUVWDQGLQJ WKH DJURHFRORJLFDO IHDWXUHV RI WUDGLWLRQDO DJURHFRV\VWHPV LV DQ XUJHQW PDWWHU DV WKLV FDQ VHUYH DV WKH IRXQGDWLRQ IRU WKH GHVLJQ RI DJULFXOWXUDO V\VWHPV WKDW DUH UHVLOLHQW WR FOLPDWH FKDQJH $OWLHULDQG.RRKDINDQ 

%5HVWRULQJDJURELRGLYHUVLW\LQPRGHUQ DJURHFRV\VWHPV 6LQFH WKH PRGHUQL]DWLRQ RI DJULFXOWXUH IDUPHUV DQG UHVHDUFKHUV KDYH EHHQ IDFHG ZLWK D PDMRU HFRORJLFDOGLOHPPDDULVLQJIURPWKHKRPRJHQL]DWLRQ RI DJULFXOWXUDO V\VWHPV QDPHO\ WKH LQFUHDVHG YXOQHUDELOLW\RIFURSVWRSHVWVDQGGLVHDVHVDQGQRZ WR FOLPDWLF YDULDELOLW\ %RWK WKHVH SKHQRPHQD FDQ EH GHYDVWDWLQJ LQ JHQHWLFDOO\ XQLIRUP ODUJHVFDOH PRQRFXOWXUH FRQGLWLRQV 0RQRFXOWXUHV PD\ RIIHU VKRUWWHUP HFRQRPLF DGYDQWDJHV WR IDUPHUV EXW LQ WKH ORQJ WHUP WKH\ GR QRW UHSUHVHQW DQ HFRORJLFDO RSWLPXP 5DWKHU WKH GUDVWLF QDUURZLQJ RI FXOWLYDWHG SODQWGLYHUVLW\KDVSXWWKHZRUOG·VIRRGSURGXFWLRQLQ JUHDWHUSHULO 3HUIHFWR9DQGHUPHHUDQG:ULJKW  *LYHQ WKH QHZ FOLPDWH FKDQJH VFHQDULRV SUHGLFWHG RYHU WKH QH[W WZR GHFDGHV RU VR E\ VRPH VFLHQWLVWV

75$'($1'(19,5210(175(9,(:

HJ 5RVHQ]ZHLJ DQG +LOOHO   WKH VHDUFK IRU SUDFWLFDO VWHSV WR EUHDN WKH PRQRFXOWXUH QDWXUH RI PRGHUQ DJURHFRV\VWHPV DQG WKXV UHGXFH WKHLU HFRORJLFDO YXOQHUDELOLW\ LV LPSHUDWLYH $V WUDGLWLRQDO IDUPHUV KDYH GHPRQVWUDWHG ZLWK IDUPLQJ V\VWHPV WKDW VWRRG WKH WHVW RI WLPH UHVWRULQJ DJULFXOWXUDO ELRGLYHUVLW\ DW WKH Ã&#x20AC;HOG DQG ODQGVFDSH OHYHO LV NH\ WR HQKDQFLQJ UHVLOLHQFH *UHDWHU GLYHUVLW\ RI VSHFLHV LV SUREDEO\ QHHGHG WR UHGXFH WHPSRUDO YDULDELOLW\ RI HFRV\VWHP SURFHVVHV LQ FKDQJLQJ HQYLURQPHQWV 7KH PRVW REYLRXV DGYDQWDJH RI GLYHUVLÃ&#x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Ã&#x20AC;QGLQJKDVSUDFWLFDO LPSOLFDWLRQV IRU DJURHFRV\VWHP PDQDJHPHQW ,I LW LV HDVLHU WR PLPLF VSHFLÃ&#x20AC;F HFRV\VWHP SURFHVVHV UDWKHUWKDQDWWHPSWLQJWRGXSOLFDWHDOOWKHFRPSOH[LW\ RI QDWXUH WKHQ WKH IRFXV VKRXOG EH SODFHG RQ LQFRUSRUDWLQJDSDUWLFXODUELRGLYHUVLW\FRPSRQHQWWKDW SOD\VDVSHFLÃ&#x20AC;FUROHVXFKDVSODQWVWKDWÃ&#x20AC;[QLWURJHQ SURYLGHFRYHUIRUVRLOSURWHFWLRQRUKDUERXUUHVRXUFHV IRUQDWXUDOHQHPLHVRILQVHFWSHVWV &RQWHPSRUDU\QRWLRQVRIPRGHUQPHFKDQL]HGIDUPLQJ HPSKDVL]H WKH QHFHVVLW\ RI PRQRFXOWXUHV 7KHUH LV OLWWOHTXHVWLRQKRZHYHUWKDWJLYHQVXIÃ&#x20AC;FLHQWPRWLYDWLRQ DSSURSULDWH WHFKQRORJ\ FRXOG EH GHYHORSHG WR PHFKDQL]H PXOWLSOH FURSSLQJ V\VWHPV +RUZLWK   6LPSOHU GLYHUVLÃ&#x20AC;FDWLRQ VFKHPHV EDVHG RQ  RU  SODQW VSHFLHV PD\ EH PRUH DPHQDEOH WR ODUJH VFDOH IDUPHUV DQG FDQ EH PDQDJHG XVLQJ PRGHUQ HTXLSPHQW 2QH VXFK VFKHPH LV VWULS LQWHUFURSSLQJ ZKLFKLQYROYHVWKHSURGXFWLRQRIPRUHWKDQRQHFURSLQ VWULSVWKDWDUHQDUURZHQRXJKIRUWKHFURSVWRLQWHUDFW \HW ZLGH HQRXJK WR SHUPLW LQGHSHQGHQW FXOWLYDWLRQ $JURQRPLFDOO\ EHQHÃ&#x20AC;FLDO VWULS LQWHUFURSSLQJ V\VWHPV KDYHXVXDOO\LQFOXGHGFRUQRUVRUJKXPZKLFKUHDGLO\ UHVSRQGWRKLJKHUOLJKWLQWHQVLWLHV )UDQFLVHWDO  6WXGLHV ZLWK FRUQ DQG VR\EHDQ VWULSV  WR  URZV ZLGHGHPRQVWUDWHGLQFUHDVHGFRUQ\LHOGV WRSHU FHQWKLJKHU DQGGHFUHDVHGVR\EHDQ\LHOGV WR SHUFHQWORZHU DVVWULSVJRWQDUURZHU$OWHUQDWLQJFRUQ DQGDOIDOIDVWULSVSURYLGHGJUHDWHUJURVVUHWXUQVWKDQ


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

VLQJOHFURSV6WULSVRIIW DSSUR[LPDWHO\PHWHUV  ZLGWKZHUHWKHPRVWDGYDQWDJHRXVZLWKVXEVWDQWLDOO\ KLJKHUHFRQRPLFUHWXUQVWKDQWKHVLQJOHFURSV :HVW DQG *ULIÃ&#x20AC;WK   7KLV DGYDQWDJH LV FULWLFDO IRU IDUPHUVZKRKDYHGHEWWRDVVHWUDWLRVRISHUFHQW RUKLJKHU RIGHEWIRUHYHU\RIDVVHWV 6XFK DOHYHOKDVDOUHDG\EHHQUHDFKHGE\PRUHWKDQ² SHUFHQWRIIDUPHUVLQWKHPLGZHVWHUQ8QLWHG6WDWHV ZKR GHVSHUDWHO\ QHHG WR FXW FRVWV RI SURGXFWLRQ E\ DGRSWLQJGLYHUVLÃ&#x20AC;FDWLRQVWUDWHJLHV /HJXPHV LQWHUFURSSHG ZLWK FHUHDOV LV D NH\ GLYHUVLÃ&#x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Ã&#x20AC;YH OHYHOV RI PRLVWXUHDYDLODELOLW\UDQJLQJIURPWRPPRI ZDWHUDSSOLHGRYHUWKHFURSSLQJVHDVRQ,QWHUHVWLQJO\ WKHUDWHRIRYHU\LHOGLQJDFWXDOO\LQFUHDVHGZLWKZDWHU VWUHVVVXFKWKDWWKHUHODWLYHGLIIHUHQFHVLQSURGXFWLYLW\ EHWZHHQ PRQRFXOWXUHV DQG SRO\FXOWXUHV EHFDPH PRUHDFFHQWXDWHGDVVWUHVVLQFUHDVHG 1RWLOOURZFURSSURGXFWLRQLVDOVRSURPLVLQJJLYHQLWV VRLOFRQVHUYDWLRQDQGLPSURYHPHQWSRWHQWLDOEXWLWLV KLJKO\ GHSHQGHQW RQ KHUELFLGHV +RZHYHU WKHUH DUH VRPHRUJDQLFIDUPHUVZKRSUDFWLFHLWZLWKRXWV\QWKHWLF KHUELFLGHV$EUHDNWKURXJKRFFXUUHGZLWKWKHGLVFRYHU\ WKDWFHUWDLQZLQWHUDQQXDOFRYHUFURSVQRWDEO\FHUHDO U\H DQG KDLU\ YHWFK FDQ EH NLOOHG E\ PRZLQJ DW D VXIÃ&#x20AC;FLHQWO\ODWHVWDJHLQWKHLUGHYHORSPHQWDQGFXWWLQJ FORVH WR WKH JURXQG 7KHVH SODQWV JHQHUDOO\ GR QRW



UHJURZVLJQLÃ&#x20AC;FDQWO\DQGWKHFOLSSLQJVIRUPDQLQVLWX PXOFKWKURXJKZKLFKYHJHWDEOHVFDQEHWUDQVSODQWHG ZLWK QR RU PLQLPDO WLOODJH 7KH PXOFK KLQGHUV ZHHG VHHGJHUPLQDWLRQDQGVHHGOLQJHPHUJHQFHRIWHQIRU VHYHUDOZHHNV$VWKH\GHFRPSRVHPDQ\FRYHUFURS UHVLGXHV FDQ UHOHDVH DOOHORSDWKLF FRPSRXQGV WKDW PD\VXSSUHVVZHHGJURZWK 0R\HU E\PHDQV RISK\WRWR[LFVXEVWDQFHVWKDWDUHSDVVLYHO\OLEHUDWHG WKURXJK GHFRPSRVLWLRQ RI SODQW UHVLGXHV 7KHUH DUH VHYHUDOJUHHQPDQXUHVSHFLHVWKDWKDYHDSK\WRWR[LF HIIHFWZKLFKLVXVXDOO\VXIÃ&#x20AC;FLHQWWRGHOD\WKHRQVHWRI ZHHGJURZWKXQWLODIWHUWKHFURS·VPLQLPXPZHHGIUHH SHULRG 7KLV PDNHV SRVWSODQW FXOWLYDWLRQ KHUELFLGHV RUKDQGZHHGLQJXQQHFHVVDU\\HWH[KLELWVDFFHSWDEOH FURS\LHOGV7RPDWRHVDQGVRPHODWHVSULQJEUDVVLFD SODQWLQJV SHUIRUP HVSHFLDOO\ ZHOO DQG VRPH ODUJH VHHGHG FURSV VXFK DV PDL]H DQG EHDQV FDQ EH VXFFHVVIXOO\ GLUHFWVRZQ LQWR FRYHU FURS UHVLGXHV 1RW RQO\ FDQ FRYHU FURSV SODQWHG LQ QRWLOO Ã&#x20AC;HOGV Ã&#x20AC;[ QLWURJHQ LQ WKH VKRUW WHUP WKH\ FDQ DOVR UHGXFH VRLO HURVLRQDQGPLWLJDWHWKHHIIHFWVRIGURXJKWLQWKHORQJ WHUP DV WKH PXOFK FRQVHUYHV VRLO PRLVWXUH &RYHU FURSV EXLOG YHUWLFDO VRLO VWUXFWXUH DV WKH\ SURPRWH GHHSPDFURSRUHVLQWKHVRLOZKLFKDOORZPRUHZDWHU WR SHQHWUDWH GXULQJ WKH ZLQWHU PRQWKV DQG WKXV LPSURYHVRLOZDWHUVWRUDJH

&&RQFOXVLRQV 7KHUH LV JHQHUDO DJUHHPHQW DW WKH LQWHUQDWLRQDO OHYHO RQ WKH XUJHQW QHHG WR SURPRWH D QHZ DJULFXOWXUDO SURGXFWLRQ SDUDGLJP LQ RUGHU WR HQVXUH WKH SURGXFWLRQRIDEXQGDQWKHDOWK\DQGDIIRUGDEOHIRRG IRU DQ LQFUHDVLQJ KXPDQ SRSXODWLRQ 7KLV FKDOOHQJH ZLOOQHHGWREHPHWZLWKDVKULQNLQJDUDEOHODQGEDVH ZLWKOHVVDQGPRUHH[SHQVLYHSHWUROHXPLQFUHDVLQJO\ OLPLWHGVXSSOLHVRIZDWHUDQGQLWURJHQDQGDWDWLPH RI UDSLGO\ FKDQJLQJ FOLPDWH VRFLDO WHQVLRQV DQG HFRQRPLF XQFHUWDLQW\ ,$$67' D  7KH RQO\ DJULFXOWXUDOV\VWHPWKDWZLOOEHDEOHWRFRSHZLWKIXWXUH FKDOOHQJHVLVRQHWKDWZLOOH[KLELWKLJKOHYHOVRIGLYHUVLW\ DQGUHVLOLHQFHZKLOHGHOLYHULQJUHDVRQDEOH\LHOGVDQG HFRV\VWHPVHUYLFHV0DQ\WUDGLWLRQDOIDUPLQJV\VWHPV VWLOO SUHYDOHQW LQ GHYHORSLQJ FRXQWULHV FDQ VHUYH DV PRGHOVRIVXVWDLQDELOLW\DQGUHVLOLHQFH 5HVLOLHQFHLQDJULFXOWXUDOV\VWHPVLVDIXQFWLRQRIWKH OHYHO RI GLYHUVLW\ ZLWKLQ WKH DJULFXOWXUDO HFRV\VWHP ,W LV WKHUHIRUH HVVHQWLDO WKDW VWUDWHJLHV IRU DQ DGDSWLYH UHVSRQVH WR FOLPDWH FKDQJH IRFXV RQ EUHDNLQJ DZD\ IURP WKH PRQRFXOWXUH QDWXUH RI PRGHUQ DJURHFRV\VWHPV6PDOOFKDQJHVLQWKHPDQDJHPHQW




RI LQGXVWULDO V\VWHPV VXFK DV LQWHUFURSSLQJ DQGRU XVH RI URWDWLRQDO FRYHU FURSSLQJ LQ QRWLOO V\VWHPV FDQ VXEVWDQWLDOO\ HQKDQFH WKH DGDSWLYH FDSDFLW\ RI FURSSLQJ V\VWHPV :HDWKHU H[WUHPHV LQFOXGLQJ ORFDOGURXJKWDQGÁRRGLQJDUHSUHGLFWHGWREHFRPH PRUH FRPPRQ DV D UHVXOW RI UDSLG FOLPDWH FKDQJH

75$'($1'(19,5210(175(9,(:

(QYLURQPHQWDOO\ UHVSRQVLEOH ZDWHU PDQDJHPHQW ZLOO WKHUHIRUH KDYH WR EH D FULWLFDO SDUW RI VXVWDLQDEOH DJULFXOWXUH LQ WKH IXWXUH $JURHFRORJLFDO VWUDWHJLHV IRUFRQVHUYLQJZDWHULQFOXGHFKRRVLQJZDWHUHIÀFLHQW FURSVUHVRXUFHFRQVHUYLQJFURSURWDWLRQVHQKDQFLQJ VRLORUJDQLFPDWWHUDQGLQWHUFURSSLQJV\VWHPV


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U   '/1%4#6+<+0)10641.1()4+%7.674'61''6 6*'''&51(6*'9'06;g(+456'0674; 0DUFLD,VKLL(LWHPDQ 3HVWLFLGH$FWLRQ1HWZRUN1RUWK$PHULFD

$EVWUDFW 3RZHUIXOFRPPHUFLDOLQWHUHVWVDQGODFNRISROLWLFDOUHVROYHKDPSHUWKHHVWDEOLVKPHQWDQGLPSOHPHQWDWLRQ RISROLFLHVWRDGYDQFHVXVWDLQDEOHDQGHTXLWDEOHGHYHORSPHQW7RDFFRPSOLVKWKHGHHSVHDWHGFKDQJH UHTXLUHG WR RYHUFRPH WKHVH LPSHGLPHQWV GHFLVLYH DQG FRRUGLQDWHG DFWLRQ DPRQJ SXEOLF DQG SULYDWH VHFWRUDFWRUVDQGFLYLOVRFLHW\LVQHHGHG3ULRULWLHVIRUDFWLRQVKRXOGLQFOXGH ‡ &XUWDLOLQJ FRUSRUDWH FRQFHQWUDWLRQ LQ WKH IRRG V\VWHP DQG LQFUHDVLQJ PDUNHW DFFHVV DQG FRPSHWLWLYHQHVVRIVPDOODQGPHGLXPVFDOHIDUPHUVWRLPSURYHIRRGDQGOLYHOLKRRGVHFXULW\ ‡ 5HGXFLQJWKHXQGXHLQÁXHQFHRIODUJHWUDQVQDWLRQDOFRUSRUDWLRQVRYHUSXEOLFSROLF\UHVHDUFKDQG WUDGHDJHQGDVDQG ‡ 6WUHQJWKHQLQJ WKH UROH RI FLYLO VRFLHW\ ² LQFOXGLQJ IDUPHUV· RUJDQL]DWLRQV ² LQ GHVLJQLQJ DQG LPSOHPHQWLQJSROLFLHVDQGLQJXLGLQJSDUWQHUVKLSVGHGLFDWHGWRSXEOLFLQWHUHVWRXWFRPHV

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² RXWOLQHG EHORZ ² DUH V\VWHPLF D IHZ VXSHUÀFLDOFKDQJHVZLOOQRWPDNHDVLJQLÀFDQWHQRXJK GLIIHUHQFH WR DFKLHYH FRQFUHWH RXWFRPHV 5DWKHU KLJKO\WDUJHWHGDQGVWUDWHJLFLQWHUYHQWLRQVDUHQHHGHG WKDWWDFNOHWKHFRUHRIWKHSUREOHPDQGGHPRFUDWL]H FRQWURORYHUDJULFXOWXUH

$&RQVWUDLQWVRQWKHWUDQVIRUPDWLRQRI DJULFXOWXUH 0DUNHWIDLOXUHVDQGWKHQHHGIRUIXOOFRVW DFFRXQWLQJ $ IXQGDPHQWDO IDLOXUH RI JOREDO PDUNHWV WRGD\ LV WKH ODFNRISULFHVLJQDOVWKDWLQFRUSRUDWHWKHIXOODUUD\RI KHDOWK HQHUJ\ DQG HQYLURQPHQWDO FRVWV DVVRFLDWHG ZLWK DJULFXOWXUH &RQVHTXHQWO\ SROLF\PDNHUV EDVH WKHLUGHFLVLRQVRQLQDFFXUDWHIRUHFDVWVRIWKHSRWHQWLDO DQG DFWXDO FRVWV )XOO FRVW DFFRXQWLQJ PHDVXUHV VXFK DV QDWLRQDO ´JUHHQ DFFRXQWVµ RU ´WRWDO PDWHULDO ÁRZ HVWLPDWHVµ DUH JRRG HFRQRPLF SUDFWLFHV WKDW PRUH DFFXUDWHO\ UHÁHFW WKH WUXH FRVWV RI IRRG DQG DJULFXOWXUDO LQGXVWULHV DQG FDQ FRQVHTXHQWO\ EHWWHU LQIRUP SROLF\ GHFLVLRQV 6ZHGHQ IRU H[DPSOH HVWDEOLVKHG D QDWLRQDO SROLF\ WR WUDQVLWLRQ WRZDUGV RUJDQLF IDUPLQJ EDVHG ODUJHO\ RQ WKH ÀQGLQJV RI D IXOOFRVWDQDO\VLVRIWKHFOLPDWHUHODWHGHQHUJ\ZDWHU HQYLURQPHQWDO DQG RWKHU HFRV\VWHP VHUYLFH FRVWV HPEHGGHGLQLWV´IRRGVKHGµ -RKDQVVRQ 

&RUSRUDWHFRQFHQWUDWLRQLQIRRGDQGDJULFXOWXUH ,Q 1RUWK $PHULFD JURZLQJ PDUNHW FRQFHQWUDWLRQ LQ PXOWLSOH DJULFXOWXUDO DFWLYLWLHV FRXSOHG ZLWK VXFFHVVLYH URXQGV RI GHUHJXODWLRQ KDYH OHG WR




75$'($1'(19,5210(175(9,(:

%R[3ROLF\RSWLRQVWRVXSSRUWDWUDQVLWLRQWRVXVWDLQDEOHDJULFXOWXUH $VLGHQWLÀHGE\WKH,$$67' DDQGE SURPLVLQJSROLF\RSWLRQVWRDGYDQFHVXVWDLQDEOHDQGHTXLWDEOHGHYHORSPHQW JRDOVLQFOXGH ‡ 6WUHQJWKHQLQJWKHVPDOOVFDOHIDUPVHFWRULQSDUWLFXODUIDUPHUV·ZRPHQ·VLQGLJHQRXVDQGRWKHUFRPPXQLW\EDVHG RUJDQL]DWLRQVDQGLQFUHDVLQJSXEOLFLQYHVWPHQWLQUXUDODUHDV ‡ %XLOGLQJORFDODQGQDWLRQDOFDSDFLW\LQELRGLYHUVHHFRORJLFDOO\UHVLOLHQWIDUPLQJWRFRSHZLWKLQFUHDVLQJHQYLURQPHQWDO VWUHVVHV ‡ ,QFUHDVLQJORFDOSDUWLFLSDWLRQDQGOHDGHUVKLSLQDJULFXOWXUDOUHVHDUFKGLUHFWLRQVHWWLQJSROLF\IRUPDWLRQDQGGHFLVLRQ PDNLQJSURFHVVHV ‡ 5HYLWDOL]LQJ ORFDO DQG UHJLRQDO UXUDO HFRQRPLHV DQG IRRG V\VWHPV DQG PRUH FORVHO\ UHJXODWLQJ JOREDOL]HG IRRG V\VWHPVWRHQVXUHJRRGSXEOLFRXWFRPHV ‡ 0RELOL]LQJSXEOLFDQGSULYDWHVHFWRULQYHVWPHQWVDQGSURYLGLQJPDUNHWEDVHGLQFHQWLYHVWRDGYDQFHHTXLWDEOHDQG VXVWDLQDEOHGHYHORSPHQWJRDOV ‡ (VWDEOLVKLQJHTXLWDEOHUHJLRQDODQGJOREDOWUDGHDUUDQJHPHQWVWRVXSSRUWGHYHORSLQJFRXQWULHV·IRRGDQGOLYHOLKRRG VHFXULW\JRDOVDQGUHYLVLQJRZQHUVKLSODZVWRHQVXUHSRRUDQGRUYXOQHUDEOHFRPPXQLWLHV·HTXLWDEOHXVHDFFHVVWR DQGFRQWURORYHUODQGZDWHUVHHGVDQGJHUPSODVPDQG ‡ (VWDEOLVKLQJQHZWUDQVSDUHQWGHPRFUDWLFDOO\JRYHUQHGLQVWLWXWLRQDODUUDQJHPHQWVWRDFFRPSOLVKWKHVHJRDOV 6RXUFH,$$67'DDQGE VHHDOVR,VKLL(LWHPDQDQG+RIIPDQQ 

XQSUHFHGHQWHG OHYHOV RI FRUSRUDWH FRQWURO RI WKH UHJLRQ·V IRRG DQG DJULFXOWXUDO V\VWHP +HQGULFNVRQ HW DO   $V WKHVH FRUSRUDWLRQV KDYH H[WHQGHG WKHLURSHUDWLRQVLQWR/DWLQ$PHULFD$VLDDQG(DVWHUQ (XURSH WKHLU JOREDO LQÁXHQFH KDV H[SDQGHG ZLWK DGYHUVH FRQVHTXHQFHV IRU VPDOOVFDOH IDUPHUV DURXQGWKHZRUOG 0F,QW\UHHWDODE 7KH UHVXOW KDV EHHQ D GUDPDWLF UHGXFWLRQ LQ FRPSHWLWLRQ DQG IDLU DFFHVV WR PDUNHWV IRU VPDOO DQG PHGLXP VFDOH SURGXFHUV ODERXU LQGHSHQGHQW UHWDLOHUV DQG FRQVXPHUV$VFRQVROLGDWLRQKDVLQFUHDVHGDKDQGIXO

RIWUDQVQDWLRQDODJULEXVLQHVVHVKDYHJDLQHGJURZLQJ LQÁXHQFHRYHUWKHSURGXFWLRQDQGGLVWULEXWLRQRIIRRG ERWK GRPHVWLFDOO\ DQG LQWHUQDWLRQDOO\ +HQGULFNVRQ HWDO+XEEDUG'H6FKXWWHUFVHH DOVRÀJXUHEHORZ 7KLVLQWXUQKDVHQDEOHGWKHP WRH[HUWVLJQLÀFDQWSROLWLFDOLQÁXHQFHRYHUSXEOLFSROLF\ DQGUHVHDUFK

&RUSRUDWHLQÁXHQFHRYHUSXEOLFSROLF\ $JULEXVLQHVVHV VSHQG ELOOLRQV RI GROODUV OREE\LQJ

%R[&RUSRUDWHLQÁXHQFHRYHUSXEOLFSROLF\ 7UDQVQDWLRQDOFRUSRUDWLRQVH[HUFLVHVLJQLÀFDQWLQÁXHQFHRYHUWKHIRUPDWLRQRIQDWLRQDODQGLQWHUQDWLRQDOSXEOLFSROLF\ %HORZDUHVRPHLOOXVWUDWLYHH[DPSOHV ‡ 6RRQDIWHUIRUHVWÀUHVLQWKH5XVVLDQ)HGHUDWLRQGHYDVWDWHGLWVZKHDWFURSVLQWKHPXOWLQDWLRQDOJUDLQWUDGHU *OHQFRUH VSHFXODWLQJ RQ D SURÀWDEOH VSLNH LQ ZKHDW SULFHV XUJHG WKH 5XVVLDQ )HGHUDWLRQ WR EDQ ZKHDW H[SRUWV WKHUHE\SURYRNLQJWKHGHVLUHGSULFHVXUJHWKDWKDGJOREDOUHSHUFXVVLRQV 3DWHO  ‡ ,Q%UD]LOD&RQJUHVVLRQDOELOOFRDXWKRUHGE\DODZ\HUIRUWKH&RXQFLOIRU%LRWHFKQRORJ\,QIRUPDWLRQOLQNHGWR 0RQVDQWR%$6)%D\HU&DUJLOO'XSRQWDQGRWKHUVSURSRVHGUHSHDORID%LRVDIHW\/DZSURKLELWLRQRQ´JHQHWLFXVH UHVWULFWLRQWHFKQRORJLHVµDOVRNQRZQDV´WHUPLQDWRUWHFKQRORJLHVµ &DPDUJR  ‡ 0RQVDQWRDQGLWVDIÀOLDWHVOREELHG,QGRQHVLDQOHJLVODWRUVLQWKHVWRVXSSRUWJHQHWLFDOO\HQJLQHHUHG *( FURSV ,QWKHÀUPZDVÀQHGPLOOLRQE\WKH8QLWHG6WDWHV'HSDUWPHQWRI-XVWLFHIRUYLRODWLQJWKH)RUHLJQ&RUUXSW 3UDFWLFHV$FWE\EULELQJDVHQLRU,QGRQHVLDQ(QYLURQPHQW0LQLVWU\RIÀFLDO %LUFKDOO  ‡ &KHPLFDOFRPSDQLHVFRPPRQO\VLWRQSDQHOVDQGFRPPLWWHHVWKDWDGYLVHUHJXODWRUV)RUH[DPSOHDUHSUHVHQWDWLYH IURP'RZ&KHPLFDOLVVHUYLQJRQWKH(QGRFULQH'LVUXSWRU6FUHHQLQJDQG7HVWLQJ$GYLVRU\&RPPLWWHHRIWKH8QLWHG 6WDWHV(QYLURQPHQWDO3URWHFWLRQ$JHQF\ ‡ ,Q0DOD\VLDEDQQHGWKHKLJKO\WR[LFFKHPLFDOKHUELFLGH3DUDTXDW,WVPDQXIDFWXUHU6\QJHQWDMRLQHG0DOD\ VLD·VLQÁXHQWLDOSDOPRLOLQGXVWU\LQSUHVVXULQJWKH*RYHUQPHQWWRUHYHUVHWKHEDQZKLFKLWGLGLQ0DOD\VLD·V 3HVWLFLGH%RDUGVXEVHTXHQWO\UXOHGWKDW3DUDTXDWXVHFRXOGFRQWLQXHSHQGLQJUHVXOWVIURPDVWXG\RQDOWHUQDWLYHV 7KHVWXG\KDVQRWEHHQUHOHDVHGDQG3DUDTXDWFRQWLQXHVWREHXVHG :DWWV 


DeKalbAyala

Paras

Novartis

Zeneca

SturdyGrow

Sandoz

NorthrupKing

Mogen

AstraZeneca

Fischer

ResourceSeeds

Goldsmith SPS

Astra Sanbei

ISG

Western

Calgene

FirstLine

HubnerSeed

REA

ZeraimGedera

AgriPro

AWB

Pioneer

DoisMarcos

Verdia

ProteinTech. Int./ Solae

DunhuangPioneer

CurrySeed

Dunhuang

OptimumQualityGrains

DuPont

Hybrinova

CargillNorthAmerica

JGBoswell

Wensman

AgrEvo

GeneXSorghum

DairylandSeed

DuoMaize

RenzeHybrids

EmpresaBrasileira

HarvestStates

AdvancedAgriTraits

IllinoisFoundation

Pharmaceutical/Chemical Companies

Partial Ownership

Full Ownership

Other Companies

Cenex

CenexHarvest

FarmlandIndustries

CooperativeBusinessIntl

SpecialtyGrains

Agriliance

CPBTwyford

LochowPetkus (1967)

SementesRibeiral

KWS

Brodbeck

Seed Companies

BioPlantResearch

MTI

Dow

Sudwestsaat

Land O'Lakes

ABIAlfalfa

(1995)

CottonSeedIntl

AgrEvoCotton

Granja4Irmaos

PlanTecBiotech

PGS

RioColorado

Proagro

Nunza (1986)

Sunseeds

Triumph

Agromen

FFRCoop

SOYGENETICS

Hytest

ProducersHybrids

DinamilhoCarol

Mycogen

Phytogen

Morgan

Schering

Hoechst

SementesFartura

AgReliant

HibridosColorado

NickersonVerneuil

BiogeneticaDeMilho UnitedAgriseeds

Westhove

YuanLongping

Avesthagen

Swaghat

HarrisMoran

Clause

RhoBio

Roussel -Uclaf

Paragon Nunhems (1995)

LeenDeMos

SeedEx

MitlaPesquisa

Aventis

RhonePoulenc

HollandCottonseed

Bayer

RelianceGenetics

Stoneville

Biogemma

Limagrain -Vilmorin

Bunge

VandenBerg

Innoseeds

Kyowa

Hazera

CarlSperling

PauEuralis

eldSeedDelinting

Phil Howard, Assistant Professor, Michigan State University http://www.msu.edu/~howardp

Denghai

ShandongDenghaiPioneer

Sunseeds

PSAGenetics

BASF

CeeKay

SvalofWeibull

BioSeeds

AdvantaEUVegetable

AustralianGrainTech

HybriTechEurope

Cargill

HelenaCotton

GermainsCotton

CaliforniaPlantingCotton

AssocFarmersDelinting

Gustafson

Nidera

NideraSemillas

6RXUFH5HSURGXFHGZLWKWKHNLQGSHUPLVVLRQRI+RZDUGIURPKWWSZZZPVXHGXaKRZDUGSVHHGLQGXVWU\KWPO 1RWH&RQVROLGDWLRQKDVLQFUHDVHGLQWKHLQWHUQDWLRQDOVHHGLQGXVWU\LQUHFHQWGHFDGHV7KHFKDUWGHSLFWVUHODWLRQVKLSVEHWZHHQPDMRUVHHGFRPSDQLHVDQG WKHLUVXEVLGLDULHVLQDIWHU\HDUVRIFRQVROLGDWLRQ7KHODUJHVWĂ&#x20AC;UPVDUHUHSUHVHQWHGDVFLUFOHVZLWKWKHVL]HSURSRUWLRQDOWRWKHLUVKDUHLQWKH JOREDOFRPPHUFLDOVHHGPDUNHW

GreenLeafGenetics

GoldenHarvest

LongReach

DiaEngei

AdvantaNACornSoybeans

Gutwein

CropDesign

Thurston

HybriTech (1995)

JacobHartz (1995)

ExSeed

AgriProWheat

CottonStates

LimagrainCanada

iCORN

Renessen

Cargill Intl.SeedDivision

Terrazawa

Ciagro

SyngentaGlobalCottonDivision

Seed Industry Structure 1996 - 2008

CDMMandiyu

EIDParryRallis

Garst

HeartlandHybrids

FieldersChoice

InterstatePayco

Jung

BoCa

Agracetus

DeltaPineLand

Marmot

SpecialtyHybrids

MoweaquaSeeds

GoldCountry

Peotec

AlyParticipacoes

SementesAgroceres

Mahyco

CornBelt

Sieben

Syngenta

ConradFafard

Size proportional to global seed market share

Zimmerman

Agritrading

Maisadour

CibaGeigy

KoipesolAgrosemAgra

Hawkeye

ASI

Kruger

StoneSeeds

LewisHybrids

CampbellSeed

HeritageSeeds

NebraskaIrrigated

StewartSeeds

NCPlusHybrids

Trisler

Diener

CornStatesHybrid

CNDK

Monsanto

Carnia

AdvantaCanola

CornStatesIntl

Sensako

Agroeste

TrelaySeeds

ChannelBio

Mahendra

Poloni

DeKalb (1995)

Ecogen

EmergentGenetics

Fontanelle

Crows

WilsonSeeds

Indusem

PBIC

Holdens

Asgrow

DeRuiter

Monsoy

Horticeres

Barham

Genecorp (1994)

Agroceres

CustomFarmSeed

Daehnfeldt

EridaniaBeghinSay/ Koipe

RoyalSluis (1995)

Seminis

Bruinsma (1994)

InterstateCanola

MidwestSeedGenetics

Unilever

Ayala

ChoongAng

Hungnong

Petoseed (1995)

FTSementes

ChinaSeed

)LJXUH6WUXFWXUHRIWKHJOREDOVHHGLQGXVWU\RYHUWKHSHULRG²

.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH 




75$'($1'(19,5210(175(9,(:

%R[5HYROYLQJGRRU &RUSRUDWHH[HFXWLYHVIURPPDMRUDJULEXVLQHVVHVDSSRLQWHGWRSXEOLFDJHQFLHVKDYHIUHTXHQWO\SDUWLFLSDWHGLQWKHGUDIW LQJRIUHJXODWRU\UXOHVWKDWDUHIDYRXUDEOHWRWKHLULQGXVWU\·VLQWHUHVWVD%HORZDUHVRPHH[DPSOHVIURPYDULRXVUHSRUWV ‡ $%UD]LOLDQDWWRUQH\UHSUHVHQWHG0RQVDQWRDQGLWV%UD]LOLDQVXEVLGLDU\0RQVR\LQYDULRXVFRXUWFDVHVEHWZHHQ DQG0RYLQJWRJRYHUQPHQWVHUYLFHLQKHFRRUGLQDWHGWKHKLJKOHYHOLQWHUPLQLVWHULDOZRUNLQJJURXSWKDW HVWDEOLVKHGWKHGHFUHHWRLPSOHPHQW%UD]LO·VSUR*(%LRVDIHW\/DZ7KHODZ²DSSODXGHGE\0RQVDQWRE²HVWDEOLVKHG D 1DWLRQDO %LRVDIHW\ &RXQFLO RQ ZKLFK WKH IRUPHU 0RQVDQWR DWWRUQH\ VHUYHG DV H[HFXWLYH VHFUHWDU\ IURP  WR  ‡ $6\QJHQWDOREE\LVWWKDWUHSUHVHQWHGWKHELRWHFKFRPSDQ\DWDQ(8KHDULQJLQKDGSUHYLRXVO\ZRUNHGIRUWKH (XURSHDQ8QLRQ)RRG6DIHW\$XWKRULW\ ()6$ ZKHUHVKHKDGGHYHORSHG*(JXLGDQFHGRFXPHQWV+HUPRYHYLR ODWHGWKH()6$·VUHTXLUHGWZR\HDUZDLWLQJSHULRG7KHOREE\LVWLVFXUUHQWO\6\QJHQWD·V+HDGRI%LRWHFK5HJXODWRU\ $IIDLUVIRU(XURSH$IULFDDQGWKH0LGGOH(DVW 7HVWELRWHFKDQG63,QWHUQDWLRQDO  ‡ $ODZ\HUIRU0RQVDQWRPRYHGWRWKH8QLWHG6WDWHV)RRGDQG'UXJ$GPLQLVWUDWLRQ )'$ DQGWKH8QLWHG6WDWHV'H SDUWPHQWRI$JULFXOWXUH 86'$ LQWKHVGXULQJZKLFKWLPHKHDSSURYHG0RQVDQWR·VFRQWURYHUVLDO*(ERYLQH JURZWKKRUPRQHDQGGHYHORSHGSURDJULFXOWXUDOELRWHFKQRORJ\SROLFLHVEDVHGRQWKHFRQFHSWRI´VXEVWDQWLDOHTXLYD OHQFHµ+HUHWXUQHGWR0RQVDQWRDVYLFHSUHVLGHQWIRUSXEOLFSROLF\LQEHIRUHUHMRLQLQJWKH)'$LQ 1HVWOH 86)'$  ‡ $IRUPHUFRUSRUDWHFRXQVHOIRUWKHSHVWLFLGHDQGELRWHFKQRORJ\FRPSDQ\'X3RQWZDVDSSRLQWHGLQ-DQXDU\WR VHUYHDVJHQHUDOFRXQVHOIRUWKH86'$6RRQDIWHUWKH86'$SURSRVHGDGUDPDWLFUHGXFWLRQLQDJHQF\UHVSRQVLELOLW\ IRUUHJXODWLQJ*(FURSV$WZR\HDUSLORWSURJUDPODXQFKHGLQ$SULOQRZDOORZVELRWHFKQRORJ\ÀUPVWRFRQGXFW HQYLURQPHQWDOUHYLHZVRIWKHLURZQ*(SURGXFWVDVSDUWRIWKH8QLWHG6WDWHV·UHJXODWRU\SURFHVVF,Q1RYHPEHU 86'$DQQRXQFHGDGGLWLRQDOSODQVWRVWUHDPOLQHLWV*(UHJXODWRU\DSSURYDOSURFHVVLQRUGHUWR´UHGXFHWKHOHQJWKRI WKHSHWLWLRQSURFHVVµG 1RWH D  6HH DOVR &HQWHU IRU 5HVSRQVLYH 3ROLWLFV  $JULEXVLQHVV OREE\LQJ DW ZZZRSHQVHFUHWVRUJOREE\ LQGXVSKS"LG $ \HDU DQG5HYROYLQJGRRUDWZZZRSHQVHFUHWVRUJUHYROYLQJLQGH[SKS E6HH0RQVDQWR0RQVDQWRHQFRXUDJHGE\HQDFWPHQWRI%UD]LOLDQELRVDIHW\ODZ1HZVUHOHDVH0DUFK DWKWWSPRQVDQWRPHGLDURRPFRPLQGH[SKS"V  LWHP  F 86'$   6ROLFLWDWLRQ RI /HWWHUV RI ,QWHUHVW WR 3DUWLFLSDWH LQ 1DWLRQDO (QYLURQPHQWDO 3ROLF\ $FW 3LORW 3URMHFW$QLPDODQG3ODQW+HDOWK,QVSHFWLRQ6HUYLFH>'RFNHW1R$3+,6²²@)HGHUDO5HJLVWHU9RO 1R7KXUVGD\$SULO1RWLFHV²:DVKLQJWRQ'&86'$·VSLORWSURJUDPPHLV GHVFULEHGDWZZZDSKLVXVGDJRYELRWHFKQRORJ\QHSDBSLORWVKWPO G86'$·V1RYHPEHUSODQVWRVSHHGXSWKH*(DSSURYDOSURFHVVDUHGHVFULEHGDWZZZDSKLVXVGD JRYQHZVURRPJHBSHWLWLRQBSURFHVVVKWPO 7KH FROODERUDWLRQ EHWZHHQ 0RQVDQWR DQG 86'$ LQ SUHSDUDWLRQRIHQYLURQPHQWDOUHYLHZVRI0RQVDQWR·V*(SURGXFWVLVDQDO\VHGDWZZZWUXWKRXWRUJXQGHU LQGXVWU\SUHVVXUHXVGDZRUNVVSHHGDSSURYDOPRQVDQWRVJHQHWLFDOO\HQJLQHHUHGFURSV *RYHUQPHQWGRFXPHQWVREWDLQHGXQGHUD)UHHGRPRI,QIRUPDWLRQ$FWUHTXHVWDUHDYDLODEOHDWZZZWUXWK RXWRUJZK\PRQVDQWRDOZD\VZLQV

SXEOLF DJHQFLHV DQG RIÀFLDOV LQ ERWK QDWLRQDO DQG LQWHUQDWLRQDOSROLF\PDNLQJDUHQDVDQGKDYHLQPDQ\ LQVWDQFHVLQÁXHQFHGSROLF\GHFLVLRQVWRWKHLUEHQHÀW ER[HVDQG 7KLVLQÁXHQFHZHDNHQVJRYHUQPHQW FRPPLWPHQW WR PRUH VWULFWO\ UHJXODWH FRPPHUFLDO DFWRUV UHPRYH SHUYHUVH LQFHQWLYHV WKDW IDYRXU FRUSRUDWHSURÀWRYHUSXEOLFLQWHUHVWUHYLVHRZQHUVKLS ODZV DQG UHVWRUH SXEOLF DFFHVV WR DQG FRQWURO RYHU SURGXFWLYHUHVRXUFHVWKDWKDYHEHHQSULYDWL]HG

/HJDOLPSHGLPHQWVWRVXVWDLQDEOHDJULFXOWXUDO UHVHDUFKDQGSUDFWLFH 6HFXULW\RIWHQXUHDQGDFFHVVWRODQGDUHYLWDOWRHQDEOH

IDUPHUVWRLQYHVWLQORQJHUWHUPUHVRXUFHFRQVHUYLQJ VWUDWHJLHVDQGPHHWOLYHOLKRRGDQGIRRGVHFXULW\JRDOV DWKRXVHKROGDQGQDWLRQDOOHYHOV7KHODFNRIQDWLRQDO ODZVWRVHFXUHVPDOOVFDOHIDUPHUV·WHQXUHDQGDFFHVV WRSURGXFWLYHUHVRXUFHV HJVHHGVJHUPSODVPODQG ZDWHU XQGHUPLQHVHIIRUWVWRSURPRWHDFRQYHUVLRQWR VXVWDLQDEOH SUDFWLFHV ,QVWHDG LQWHOOHFWXDO SURSHUW\ ,3 ODZVKDYHSULYDWL]HGWKRVHUHVRXUFHVWUDQVIHUULQJ RZQHUVKLSWRFRPPHUFLDOLQWHUHVWV ,$$67'D  ,3 ODZV DUH DOVR GULYLQJ DJULFXOWXUDO UHVHDUFK LQ VXSSRUW RI SULYDWH VHFWRU JRDOV DVVRFLDWHG ZLWK SURGXFWGHYHORSPHQWUDWKHUWKDQHFRORJLFDOUHVLOLHQFH RUSRYHUW\UHGXFWLRQ7KH%D\K'ROH$FWRIIRU


6RXUFH3HVWLFLGH$FWLRQ1HWZRUN1RUWK$PHULFD  *UDSKLFGHYHORSHGE\$0XQLPXVIURPSURMHFWLQIRUPDWLRQ SURYLGHGDWKWWSZZZDEVSFRUQHOOHGX

)LJXUH86$,'IXQGHG$JULFXOWXUDO%LRWHFKQRORJ\6XSSRUW3URMHFW $%633KDVH,, WDUJHWFRXQWULHV*(FURSVLQGHYHORSPHQWDQGSURMHFWSDUWQHUV

.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH 




H[DPSOHUDGLFDOO\DOWHUHGWKHSROLWLFDODQGHFRQRPLF ODQGVFDSH RI SXEOLF VHFWRU UHVHDUFK LQ WKH 8QLWHG 6WDWHV PDQGDWLQJ SDWHQWV RQ UHVHDUFK RXWFRPHV :KHQ XQLYHUVLWLHV DVVLJQ H[FOXVLYH OLFHQVLQJ ULJKWV WR FRUSRUDWLRQV FRUH UHVHDUFK EHQHÀWV DUH UHPRYHG IURPWKHSXEOLFGRPDLQ 6FLHQWLVWV LQ GHYHORSLQJ FRXQWULHV DUH HQFRXUDJHG E\ LQFHQWLYHV DQG WHFKQLFDO VXSSRUW IURP XQLYHUVLW\ SDWHQW RIÀFHV WR XQGHUWDNH UHVHDUFK WKDW LV OLNHO\ WR HDUQ UR\DOW\ UHYHQXHV IRU WKH XQLYHUVLW\ DV REVHUYHG LQ 8JDQGD /RXZDDUV HW DO   ,QFUHDVLQJO\ XQLYHUVLWLHVDUHUHGLUHFWLQJWKHLUUHVHDUFKWRPHHWWKH VKRUWWHUPÀQDQFLDOJRDOVRIVSRQVRULQJFRUSRUDWLRQV UDWKHUWKDQEURDGHUSXEOLFLQWHUHVWJRDOVDVUHÁHFWHG LQWKHHPHUJHQFHRID´XQLYHUVLW\LQGXVWULDOFRPSOH[µ 3UHVVDQG:DVKEXUQ:DVKEXUQ  6FLHQWLVWV· DELOLW\ WR FRQGXFW LQGHSHQGHQW DVVHVVPHQWVRISDWHQWHG*(VHHGVLVDOVRLPSHGHG E\,3UXOHVWKDWUHTXLUHWKHPWRÀUVWVHFXUHDSSURYDOIRU WKHLUUHVHDUFKSODQIURPWKHSDWHQWKROGHU +XEEDUG  ,QGHHGLQLQDOHWWHUWRWKH8QLWHG6WDWHV (QYLURQPHQWDO 3URWHFWLRQ $JHQF\ RYHU WZR GR]HQ XQLYHUVLW\VFLHQWLVWVFRPSODLQHGRIWKHVWLÁ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

,QVWLWXWLRQDOELDVHV %LDVZLWKLQLQVWLWXWLRQDODUUDQJHPHQWV²VKDSHGE\SUH DQDO\WLF DVVXPSWLRQV SURIHVVLRQDO LQHUWLD DQG ´SDWK GHSHQGHQF\µ DQG XSKHOG E\ JHRSROLWLFDO FRQFHUQV DQG WKH LQÁXHQFH RI YHVWHG LQWHUHVWV ² FDQ VWURQJO\ SULYLOHJHRQHGHYHORSPHQWPRGHORYHURWKHUV 'UH\IXV HWDO ,QWKHFDVHRIDJULFXOWXUHSROLWLFDOO\DQG HFRQRPLFDOO\ GRPLQDQW DFWRUV VXFK DV WKH :RUOG %DQNLQWHUQDWLRQDOUHVHDUFKFHQWUHVDQGGHYHORSHG

75$'($1'(19,5210(175(9,(:

FRXQWU\DLGDQGWUDGHDJHQFLHVDOOSOD\HGDIRUPDWLYH UROHLQHVWDEOLVKLQJWKH´*UHHQ5HYROXWLRQµPRGHODV RQH WR EH UHSOLFDWHG DQG HPXODWHG DW WKH H[SHQVH RIDOWHUQDWLYHPRGHOVWKDWHPSKDVL]HGPRUHKROLVWLF HFRORJLFDODQGIDUPHUOHGDSSURDFKHV %URRNVHWDO  'UH\IXV HW DO  &XOODWKHU  %URRNV DQG  7KH SHUVLVWHQFH RI WKHVH ELDVHV WRGD\ LV UHÁHFWHG LQ WKH QXPEHU RI VWUDWHJLF LQLWLDWLYHV RI PDMRU LQWHUQDWLRQDO GRQRUV WKDW VHHN WR SURPRWH KLJK H[WHUQDOLQSXW FRPPHUFLDO RU LQGXVWULDO DJULFXOWXUH HYHQ DPRQJ VPDOOVFDOH IDUPHUV GHVSLWH HYLGHQFH WKDW UHYHDOV WKH GDPDJLQJ HIIHFWV RI WKLV DSSURDFK DQG WKH QHHG WR VWUHQJWKHQ VLWHVSHFLÀF HFRORJLFDO DSSURDFKHV WKDW SURYLGH PXOWLIXQFWLRQDO EHQHÀWV )RU H[DPSOH HPSKDVLV RQ LQFUHDVLQJ SURGXFWLYLW\ WKURXJKWKHUHVHDUFKGHYHORSPHQWDQGH[SRUWRIQHZ SURGXFWV DQG ELRWHFKQRORJLHV XQGHUSLQV WKH 8QLWHG 6WDWHV )HHG WKH )XWXUH ,QLWLDWLYH WKH $JULFXOWXUDO %LRWHFKQRORJ\ 6XSSRUW 3URJUDP RI WKH 8QLWHG 6WDWHV $JHQF\ IRU ,QWHUQDWLRQDO 'HYHORSPHQW  WKH DJULFXOWXUH SURJUDPPH RI WKH ZRUOG·V ODUJHVW SULYDWH IRXQGDWLRQ %LOO DQG 0HOLQGD *DWHV )RXQGDWLRQ   DQG WKH &RQVXOWDWLYH *URXS RQ ,QWHUQDWLRQDO $JULFXOWXUDO5HVHDUFK (GZDUGV%URRNV DQG)HHGWKH)XWXUH7XFNH\ 0DQ\ RIWKHVHGHYHORSPHQWLQLWLDWLYHVDUHFORVHO\LQWHUZRYHQ DQGVKDUHWKHVDPHFRUSRUDWHSDUWQHUV ÀJXUH ,Q VXFKFDVHVELODWHUDODQGPXOWLODWHUDOGHYHORSPHQWDLG SURYLGHVDQHIIHFWLYHYHKLFOHIRUPDUNHWHQWU\

*OREDOWUDGHGULYHURUFRQVWUDLQW" *OREDOWUDGHKDVVLJQLÀ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ÁXHQFH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

RIDIHZSRZHUIXOFRXQWULHVDQGFRPPHUFLDOLQWHUHVWV RSHUDWLQJ LQ JOREDO SROLF\ DUHQDV VXFK DV WKH :RUOG 7UDGH2UJDQL]DWLRQ :72 $QWLGHPRFUDWLFSURFHVVHV DQGDV\PPHWULFDOSRZHUUHODWLRQVKLSVZLWKLQWKH:72 SUHYHQW FLYLO VRFLHW\ DQG JRYHUQPHQWV RI GHYHORSLQJ FRXQWULHV IURP VHFXULQJ UHIRUP RI WKH JOREDO WUDGH UHJLPH UHFRPPHQGHG E\ IRU H[DPSOH WKH ,$$67' DQG 81&7$' .KRU  DQG  6RXWK &HQWUH  

%&XUWDLOLQJFRQFHQWUDWLRQRISRZHUDQG H[FHVVRILQÁXHQFHLQWKHJOREDOL]HG V\VWHP 7KH GHPRFUDWL]LQJ RI LQVWLWXWLRQV WKDW VKDSH JOREDO IRRG DQG DJULFXOWXUH UHTXLUHV ERWK FRXUDJH DQG VXVWDLQHGHQJDJHPHQWE\YLVLRQDU\SROLWLFDOOHDGHUV UHVHDUFKHUV SULYDWH VHFWRU DFWRUV DQG DOO VHFWRUV RI FLYLO VRFLHW\ 7KH SDUWLFLSDWLRQ RI DOO VWDNHKROGHUV SDUWLFXODUO\KLVWRULFDOO\PDUJLQDOL]HGUXUDOFRPPXQLWLHV LQGHYHORSLQJFRXQWULHVDVHTXDOSDUWQHUV²DQGQRW VLPSO\DVVWHSSLQJVWRQHVLQD´FRQVXOWDWLYHµSURFHVV ² LV DQ HVVHQWLDO LQJUHGLHQW IRU UHYLWDOL]LQJ ORFDO DQG UHJLRQDOIRRGV\VWHPVGULYLQJLQQRYDWLRQWKDWPHHWV JOREDOIRRGDQGOLYHOLKRRGQHHGVDQGEXLOGLQJUREXVW ORFDOHFRQRPLHV $SURJUHVVLYHDSSURDFKWRRYHUFRPLQJWKHLQVWLWXWLRQDO DQGPDUNHWSRZHUFRQVWUDLQWVLGHQWLÀHGDERYHVKRXOG LQFOXGHFRPPLWPHQWWR ‡ 8QGHUWDNHDIXOOFRVWDQDO\VLVRIQDWLRQDODQGJOREDO IRRGDQGDJULFXOWXUDOV\VWHPV ‡ 3URYLGH LQVWLWXWLRQDO VXSSRUW IRU VPDOOVFDOH IDUPHUVDQGZRPHQ·VDQGZRUNHUV·RUJDQL]DWLRQV WKDWVWUHQJWKHQVWKHLUQHJRWLDWLQJSRZHULQPDUNHWV GRPLQDWHGE\WUDQVQDWLRQDOEX\HUV ‡ 6WUHQJWKHQ DQG EURDGHQ WKH VFRSH RI QDWLRQDO DQG LQWHUQDWLRQDO FRPSHWLWLRQ SROLFLHV WR UHYHUVH WUHQGVLQIDUPDQGDJULEXVLQHVVFRQFHQWUDWLRQHQG

‡

‡

‡

‡

‡

‡

‡



XQIDLU EXVLQHVV SUDFWLFHV DFURVV WKH JOREDO IRRG SURGXFWLRQDQGVXSSO\FKDLQDQGFXUWDLOGRPLQDQW EX\HUSRZHUZKLFKWKUHDWHQVVPDOOVFDOHIDUPHUV· IRRG DQG OLYHOLKRRG VHFXULW\ VHH 'H 6FKXWWHU F  (VWDEOLVK DQG HQIRUFH VWURQJ FRGHV RI FRQGXFW WR JRYHUQ SULYDWHSXEOLF SDUWQHUVKLSV DQG SXEOLF SROLF\PDNLQJ SURFHVVHV LQ RUGHU WR PLQLPL]H SRWHQWLDO FRQÁLFWV RI LQWHUHVW ZKLFK XQIDLUO\ RU LQDSSURSULDWHO\EHQHÀWSULYDWHVHFWRUDFWRUV (VWDEOLVK DQ LQWHUQDWLRQDO UHYLHZ PHFKDQLVP WR LQYHVWLJDWH DJULIRRG VHFWRU FRQFHQWUDWLRQ DQWL FRPSHWLWLYHSUDFWLFHVDQGLPSDFWVDFURVVQDWLRQDO ERUGHUVGHYHORSVWDQGDUGVRIFRUSRUDWHEHKDYLRXU DQGUHFRPPHQGSROLF\RSWLRQV 5HYLVH,3DQGRWKHURZQHUVKLSUXOHVDQGLQFHQWLYHV LQ RUGHU WR UHRULHQW SXEOLF SROLF\ DQG UHVHDUFK WRZDUGV HTXLWDEOH DQG VXVWDLQDEOH GHYHORSPHQW JRDOV (VWDEOLVK PHDQV RI SUHYHQWLQJ FRQÁLFW RI LQWHUHVW LQ SDUWQHUVKLSV LQYHVWPHQWV DQG SROLF\PDNLQJ SURFHVVHV %XLOG GHYHORSLQJ FRXQWULHV· FDSDFLWLHV IRU WUDGH DQDO\VLVDQGQHJRWLDWLRQOHDGLQJWRPRUHHTXLWDEOH WUDGH UXOHV 6WUDWHJLF LPSDFW DVVHVVPHQWV FRXOG SURYLGH XVHIXO HPSLULFDO HYLGHQFH RI WKH VRFLDO HQYLURQPHQWDODQGHFRQRPLFWUDGHRIIVRIYDULRXV WUDGHLQVWUXPHQWV 5HVWUDLQ ÀQDQFLDO VSHFXODWLRQ RYHU IRRG FRPPRGLWLHV WKDW GLVWRUWV PDUNHWV DQG SULFH VLJQDOVDQG (VWDEOLVK DQG VWUHQJWKHQ GHPRFUDWLF GHFLVLRQ PDNLQJ SURFHVVHV DQG LQFUHDVH FLYLO VRFLHW\ SDUWLFLSDWLRQ LQ SROLF\PDNLQJ SURFHVVHV 7KH VXFFHVVRIWKH7DPLO1DGX:RPHQ·V&ROOHFWLYHLQ WUDQVIRUPLQJUHJLRQDOIRRGDQGDJULFXOWXUDOV\VWHPV E\VXSSRUWLQJUXUDOZRPHQDVFRGHFLVLRQPDNHUV LQWKHFRPPXQLW\DQGLQSROLWLFDORIÀFHLVLQVWUXFWLYH LQWKLVUHVSHFW ,$73 




75$'($1'(19,5210(175(9,(:

1//'06#4; U )4+%7.674'X 11&#0& 0'4); *XQQDU5XQGJUHQ *UROLQN$%&RQVXOWDQF\6ZHGHQ

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

$,QWURGXFWLRQ $ FRPELQDWLRQ RI FKHDS IRVVLO IXHO DQG PDUNHW RULHQWDWLRQOHGWRWKHLQGXVWULDOL]DWLRQRIIDUPLQJ:KLOH ODERXU SURGXFWLYLW\ LQ DJULFXOWXUH KDV VN\URFNHWHG HQHUJ\ SURGXFWLYLW\ KDV SOXPPHWHG 7KH ZLQQHUV KDYHEHHQDJULEXVLQHVVHVDQGWKHORVHUVKDYHEHHQ VPDOOIDUPVHVSHFLDOO\LQGHYHORSLQJFRXQWULHV:LWK LQFUHDVLQJ VKRUWDJHV RI IRVVLOIXHOEDVHG HQHUJ\ DQG QDWXUDO UHVRXUFHV DQG WKH UDSLG JURZWK RI WKH ZRUOG·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

WKHIRRGFRQVXPSWLRQRISHRSOH7KDWUHSUHVHQW WKH´HQHUJ\VODYHVµ LQWKHIRUPRIIRVVLOIXHO ZRUNLQJ IRU KLP RU KHU $QRWKHU ZD\ RI ORRNLQJ DW LW IURP DQ HFRQRPLFSHUVSHFWLYHLVWKDWDEDUUHORIRLOUHSUHVHQWV WKH HQHUJ\ RI  KRXUV RI KXPDQ WRLO LH  SHUVRQV ZRUNLQJ IRU D \HDU XQGHU QRUPDO ODERXU VWDQGDUGV (YHQZLWKDQRLOSULFHRIVHYHUDOKXQGUHG GROODUV SHU EDUUHO WKLV LV YHU\ FKHDS FRPSDUHG ZLWK KXPDQODERXU 5XQGJUHQ 

%ELOOLRQHQHUJ\VODYHV

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

7RKDYHDQLGHDRIKRZLPSRUWDQWWKHGHSOR\PHQWRI H[WHUQDO HQHUJ\ VRXUFHV KDV EHHQ IRU RXU PRGHUQ VRFLHWLHVRQHFDQFRQWUDVWWKHHQHUJ\HPEHGGHGLQ KXPDQ ODERXU ZLWK WKH H[WHUQDO HQHUJ\ VRXUFHV WKDW DUHH[SORLWHG$URXJKFDOFXODWLRQVKRZVWKDWWKH WRQVRIRLOHTXLYDOHQWV WRHV RIHQHUJ\XVHGDQQXDOO\ E\ WKH DYHUDJH $PHULFDQ FRPSDUHG ZLWK  WRHV XVHG E\ WKH DYHUDJH 6HQHJDOHVH  FRUUHVSRQGV WR

7KHWRWDOHQHUJ\KDUYHVWHGSHUKHFWDUHFDQLQFUHDVH VXEVWDQWLDOO\ ZLWK LQFUHDVHG XVH RI DQFLOODU\ HQHUJ\ ZKLFK FDQ WDNH WKH IRUP RI EHWWHU DQG WLPHOLHU  VRLO SUHSDUDWLRQ LUULJDWLRQ DQG WKH DSSOLFDWLRQ RI FKHPLFDO IHUWLOL]HUVWKDWDUHYHU\HQHUJ\GHPDQGLQJ WRQDPHDIHZ7KHUDWLREHWZHHQHQHUJ\UHWXUQDQG HQHUJ\ LQSXW LH HIÃ&#x20AC;FLHQF\ LQ XVH RI HQHUJ\  VHHPV WREHIDLUO\FRQVWDQWXSWRDFHUWDLQOHYHODIWHUZKLFK


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

LWGHWHULRUDWHVUDSLGO\,QGXVWULDOIDUPLQJV\VWHPVKDYH ORQJ SDVVHG WKLV OHYHO +DUYHVWHG HQHUJ\ SHU ODERXU XQLW LQFUHDVHV GUDPDWLFDOO\ ZLWK LQFUHDVHG LQSXW RI HQHUJ\ E\ D IDFWRU RI EHWZHHQ  DQG  DOORZLQJ WKHPRVWDGYDQFHGDJULFXOWXUDOV\VWHPVWRKDYHRQH IDUPHU IRU PRUH WKDQ  SHUVRQV %D\OLVV6PLWK  

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ÀJXUHV GR QRW LQFOXGH HPEHGGHG HQHUJ\ FRVWV LQ LWHPV VXFK DV EXLOGLQJV DQG PDFKLQHU\ ZKLFK PHDQV WKDW WKH DFWXDO VKDUH RI HQHUJ\ FRVWV LV VXEVWDQWLDOO\ KLJKHU ,Q $UJHQWLQD HQHUJ\FRVWVZHUHFDOFXODWHGDVDFFRXQWLQJIRUSHU FHQWRIWKHSURGXFWLRQFRVWVRIJUDLQLQ %DOW]HU +DQVHQ DQG /LQG   :KHQ HQHUJ\ SULFHV ULVH DJULFXOWXUDOFRPPRGLW\SULFHVIROORZVXLWDVZDVVHHQ LQWKHIRRGDQGRLOSULFHKLNHVLQ²+LJKHU HQHUJ\ SULFHV LQÁXHQFH IRRG SULFHV LQ IRXU GLIIHUHQW ZD\V L  %\PDNLQJIRRGSURGXFWLRQPRUHH[SHQVLYH LL  %\PDNLQJWKHSURGXFWLRQRIFURSVIRUELRIXHOPRUH UHPXQHUDWLYHDQGWKHUHIRUHUHGXFLQJWKHSURGXFWLRQ RIIRRGWKHUHE\OHDGLQJWRKLJKHUIRRGSULFHV LLL ,QFUHDVLQJWUDQVSRUWDWLRQFRVWVZKLFKKDYHDGLUHFW LPSDFWRQIRRGSULFHV LY 5HGXFLQJ FRPSHWLWLRQ LQ WKH IRRG VHFWRU LH LQFUHDVHG WUDQVSRUWDWLRQ FRVWV DOOHYLDWH WKH SUHVVXUH RI JOREDO FRPSHWLWLRQ  5XQGJUHQ  

',WWDNHVPRUHHQHUJ\WRHDWWKDQWRIDUP 7KH LQFUHDVH RI HQHUJ\ XVH LQ DJULFXOWXUH ZDV SDUWLFXODUO\ UDSLG GXULQJ WKH SHULRG EHWZHHQ WKH 6HFRQG :RUOG :DU DQG WKH ÀUVW RLO SULFH VKRFN LQ )RUH[DPSOHLQWKH8QLWHG.LQJGRPZKLOHWKH



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²SHUFHQWSURFHVVLQJIRU² SHUFHQWGLVWULEXWLRQDQGUHWDLOIRU²SHUFHQWDQG FRQVXPSWLRQIRU²SHUFHQW$QRWKHU²SHUFHQW RIWKHWRWDOHQHUJ\LVFRQVXPHGE\PXFKGLVFXVVHG WUDQVSRUW SDUWLFXODUO\ LQ WKH ÀQDO VWUHWFK WR WKH SRLQW RISXUFKDVHE\WKHFRQVXPHU)RULQVWDQFHDSHUVRQ GULYLQJDFDUDGLVWDQFHRIÀYHNLORPHWUHVIRUVKRSSLQJ XVHV D ORW PRUH HQHUJ\ SHU IRRG XQLW WKDQ D VKLS WUDQVSRUWLQJPHDWRUVR\IURPDQRWKHUFRQWLQHQW$OVR LQVRPHGHYHORSLQJFRXQWULHVFRQVXPSWLRQWDNHVWKH OLRQ·VVKDUHRIHQHUJ\XVHIRUIRRGLQWKLVFDVHPDLQO\ IURP FRRNLQJ RYHU DQ RSHQ ÀUH 7KH HQHUJ\ XVHG E\ WKLV WUDGLWLRQDO PHWKRG RI FRRNLQJ LV HTXLYDOHQW WR DERXW  N:K SHU FDSLWD FRUUHVSRQGLQJ WR VOLJKWO\ PRUH WKDQ D FXELF PHWUHRI ÀUHZRRG ZKLFK LV VRPHZKHUHEHWZHHQKDOI DQG RQHWKLUG RIZKDW LV XVHGSHUFDSLWDIRUFRRNLQJLQ6ZHGHQRUWKH8QLWHG 6WDWHV 8KOLQ   &RRNLQJ UHSUHVHQWV PRUH WKDQ D ÀIWK RI WKH WRWDO HQHUJ\ FRQVXPSWLRQ LQ $IULFD DQG $VLD DQG LQ VRPH FRXQWULHV LW UHSUHVHQWV XS WR RU RYHU  SHU FHQW RI KRXVHKROG HQHUJ\ FRQVXPSWLRQ ,($   &RRNLQJ FRQVXPHV PRUH HQHUJ\ WKDQ WKHIRRGFRQWDLQV7KXVZKLOHIDUPLQJLQGHYHORSLQJ FRXQWULHV DQG WUDGLWLRQDO V\VWHPV LV HQHUJ\ HIÀFLHQW FRRNLQJLVQRW




75$'($1'(19,5210(175(9,(:

7DEOH$JULFXOWXUDOODERXUSURGXFWLYLW\ SHUSHUVRQ\HDU

/RZLQFRPHFRXQWULHV 0LGGOHLQFRPHFRXQWULHV +LJKLQFRPHFRXQWULHV )UDQFH 8QLWHG.LQJGRP 8QLWHG6WDWHV %UD]LO ,QGLD &KLQD 0DODZL

²

²

         

         

$JULFXOWXUH DVDVKDUHRI*'3 

        



6RXUFH:RUOG%DQN

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Ã&#x20AC;QGLQJ D QHZ EDODQFH WKDW ZRUNV RQ D JOREDO VFDOH DQG LV VXVWDLQDEOH 5HQHZDEOHHQHUJ\VXFKDVELRHQHUJ\ZLQGPLOOVDQG ZDWHUPLOOVKDYHEHHQXVHGLQIDUPLQJIRUWKRXVDQGV RI\HDUV7KHVHFRXOGEHLPSURYHGDQGPRUHZLGHO\ DGRSWHGDQGVRODUHQHUJ\DQGELRJDVFRXOGDOVREH DGGHGWRWKHPL[,WLVQRWOLNHO\WKDWUHQHZDEOHHQHUJ\ ZLOO DOORZ VXFK ZDVWHIXO V\VWHPV DV H[LVW WRGD\ )RU H[DPSOHYHU\FKHDSHQHUJ\PDNHVLWSURÃ&#x20AC;WDEOHWRXVH WKDW HQHUJ\ WR ELQG DWPRVSKHULF QLWURJHQ LQVWHDG RI XVLQJQDWXUDOQLWURJHQÃ&#x20AC;[DWLRQ

(8QHTXDOHQHUJ\DFFHVVDQGXQHTXDO WHUPVRIWUDGH &RPPHUFLDOL]DWLRQ LV SURPRWHG DV WKH UHFLSH IRU GHYHORSPHQW IRU WKH DOPRVW KDOI D ELOOLRQ VPDOOKROGHU

IDUPHUVLQWKHZRUOG7KHLUWUDGLWLRQDOPRGHVRIIDUPLQJ DUH EXLOW RQ D UDWKHU KLJK GHJUHH RI DXWRQRP\ DQG WKHVH UHJHQHUDWH PRVW RI WKH QHHGHG UHVRXUFHV VXFK DV ODERXU FDSLWDO VRLO IHUWLOLW\ DQG SHVW FRQWURO ZLWKLQWKHIDUPLQJV\VWHP%\QDWXUHSHDVDQWVUHVLVW FRPPHUFLDOL]DWLRQEHFDXVHWKH\ZLVKWRPLQLPL]HULVN DQGGHSHQGHQFH 9DQGHU3ORHJ ,IWKH\ZHUH WR EH FRHUFHG LQWR FRPPHUFLDOL]LQJ WKHLU SURGXFWLRQ PRVWRIWKHPZRXOGVLPSO\QRWVXUYLYHLQWKHVWUXJJOH IRU´PRGHUQL]DWLRQµDQGLIWKH\VXUYLYHGWKHUHZRXOG EH HQRUPRXV RYHUSURGXFWLRQ (XURSHDQ IDUPV H[SHULHQFHG GLIÃ&#x20AC;FXOWLHV FRSLQJ ZLWK FRPSHWLWLRQ IURP 1RUWK $PHULFD HVSHFLDOO\ DIWHU WKH LQWURGXFWLRQ RI VWHDPVKLS WUDQVSRUW 7KH UHVSRQVH ZDV WR LQWURGXFH SURWHFWLRQLVW PHDVXUHV HYHQ WKRXJK WKH\ IDFHG PXFK OHVV FRPSHWLWLYH SUHVVXUH WKDQ WRGD\·V SRRU IDUPHUVLQGHYHORSLQJFRXQWULHV,QDGGLWLRQEHFDXVH RI SURGXFWLYLW\ JDLQV LQ GHYHORSHG FRXQWULHV JOREDO DJULFXOWXUDOFRPPRGLW\SULFHVIHOOE\DERXWSHUFHQW GXULQJ WKH SHULRG ² 'RUZDUG HW DO   2YHUWKHSDVWIHZGHFDGHVDVSURGXFWLYLW\DQGHQHUJ\ XVHE\WKHSRRUHVWIDUPHUVKDYHUHPDLQHGPXFKWKH VDPHWKHSURGXFWLYLW\JDSKDVZLGHQHGERWKUHODWLYHO\ DQGLQDEVROXWHQXPEHUV WDEOH $VDUHVXOWLWLVFOHDU WKDWVPDOOKROGHUIDUPHUVLQGHYHORSLQJFRXQWULHVKDYH EHHQORVLQJRXW$WFXUUHQWSULFHVLWZRXOGUHTXLUHRQH OLIHWLPHRIODERXUE\DIDUPHURQDQRQPHFKDQL]HG IDUPWRDFTXLUHDSDLURIR[HQDQGVPDOODQLPDOGUDZQ HTXLSPHQW DQG WHQ JHQHUDWLRQV RI ODERXU WR EX\ D VPDOOWUDFWRU 0D]R\HUDQG5RXGDUW  ,W LV HQWLUHO\ XQUHDOLVWLF WR EHOLHYH WKDW VPDOOKROGHU IDUPHUV LQ GHYHORSLQJ FRXQWULHV ZLWK WKHLU OLPLWHG UHVRXUFHV ZRXOG EH DEOH WR FRPSHWH LQ ZRUOG


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

PDUNHWV IRU VWDSOH IRRGV ZKHUH HQHUJ\ DFFHVV LV WKH PDLQ IDFWRU RI FRPSHWLWLYH DGYDQWDJH ,Q UHDOLW\ DQ LQFUHDVLQJ QXPEHU RI GHYHORSLQJ FRXQWULHV DUH EHFRPLQJ QHW IRRG LPSRUWHUV &KHDS HQHUJ\ PD\ KDYHEHHQFRQVLGHUHGDZD\RXWRIWKLVVLWXDWLRQEXW WKLVKDVQRWEHHQWKHFDVH,QGHHGLWLVFKHDSHQHUJ\ WKDWKDVNHSWGRZQWKHSULFHVRIDJULFXOWXUDOSURGXFWV DQGWKHUHE\WKHPDUNHWYDOXHRIVPDOOKROGHUIDUPHUV· ODERXUWRDGROODUSHUGD\$QGLWLVFKHDSHQHUJ\WKDW KDVDOORZHGLQFRPHJDSVWRZLGHQWRXQSUHFHGHQWHG OHYHOVEHFDXVHWKHULFKSURGXFHUVKDYHDOZD\VEHHQ DEOH WR XVH PRUH FKHDS HQHUJ\ WKDQ WKH SRRU 7KXV WKHJDSEHWZHHQWKRVHUHO\LQJRQWKHLURZQODERXUDQG WKRVHUHO\LQJRQWKHXVHRIIRVVLOIXHOKDVLQFUHDVHG (QHUJ\VFDUFLW\DQGULVLQJHQHUJ\SULFHVZLOOUHVXOWLQ



OHVVJOREDOFRPSHWLWLRQDQGKLJKHUIRRGSULFHV6XFKD GHYHORSPHQWZKLOHSDLQIXOIRUPDQ\VRFLHWLHVDQGIRU QHWIRRGLPSRUWHUVLQWKHVKRUWUXQZLOOQHYHUWKHOHVV EH EHWWHU IRU WKH VPDOOKROGHU IDUPHUV LQ GHYHORSLQJ FRXQWULHV LQ WKH ORQJ UXQ EHFDXVH LW ZLOO HQFRXUDJH HQHUJ\HIÃ&#x20AC;FLHQWORZH[WHUQDOLQSXWGHSHQGHQWFORVHG ORRSUHJHQHUDWLYHIRUPVRIDJULFXOWXUHZLWKDJUHDWHU IRFXVRQUHJLRQDOPDUNHWV3ROLF\PDNHUVVKRXOGVHL]H WKLVRSSRUWXQLW\WRSURPRWHDSDUDGLJPVKLIWWRZDUGV WKLVIRUPRIDJULFXOWXUHLQVWHDGRISURPRWLQJFRQWLQXHG RU LQFUHDVHG GHSHQGHQFH RI DJULFXOWXUH RQ H[WHUQDO LQSXWV HJIHUWLOL]HUVJHQHWLFDOO\PRGLÃ&#x20AC;HGRUJDQLVPV DQG FUHGLWV  DQG FRQWLQXHG JOREDO FRPSHWLWLRQ LQ D PDUNHWZKHUHWKHELJSOD\HUVKDYHXQOLPLWHGDFFHVV WRFKHDSHQHUJ\




75$'($1'(19,5210(175(9,(:

1//'06#4; U   756#+0#$.')4+%7.674'#0&((g 4+& '0'9#$.' 0'4); 0DH:DQ+R ,QVWLWXWHRI6FLHQFHLQ6RFLHW\/RQGRQ

$EVWUDFW 6PDOOLQWHJUDWHGIDUPVZLWKRIIJULGUHQHZDEOHHQHUJ\PD\EHWKHSHUIHFWVROXWLRQWRWKHIRRGDQGÃ&#x20AC;QDQFLDO FULVHVZKLOHPLWLJDWLQJDQGDGDSWLQJWRFOLPDWHFKDQJH

$)RRGFULVLVJOREDOHFRQRPLFLQVWDELOLW\ DQGSROLWLFDOXQUHVW 6RDULQJIRRGSULFHVZHUHDPDMRUWULJJHUIRUWKHULRWV WKDWGHVWDELOL]HG1RUWK$IULFDDQG:HVW$VLDDQGKDYH VLQFHVSUHDGWRPDQ\RWKHU$IULFDQFRXQWULHV +DUYH\ +RG 7KH)$2)RRG3ULFH,QGH[KLWDQDOO WLPHKLJKLQ)HEUXDU\DQGUHDFKHGSRLQWV LQ1RYHPEHUVRPHSRLQWVORZHUWKDQDWLWV SHDNEXWSRLQWVKLJKHUWKDQWKHDYHUDJHIRU 7KLV KDV EHHQ KDSSHQLQJ DV WKH JOREDO HFRQRP\ LV VWLOO VWDJJHULQJ IURP WKH  Ã&#x20AC;QDQFLDO DQG IRRG  FULVLVZLWKSXEOLFGHEWH[SDQGLQJDQGXQHPSOR\PHQW VN\KLJK )LOJHU  /HVWHU %URZQ   YHWHUDQ ZRUOGZDWFKHU QRWHV WKDW IRRG KDV TXLFNO\ EHFRPH WKH KLGGHQ GULYHU RI ZRUOG SROLWLFV DQG IRRG FULVHV DUH JRLQJ WR EHFRPH LQFUHDVLQJO\ FRPPRQ +H VD\V ´6FDUFLW\ LV WKH QHZ QRUPµ7KHZRUOGLVIDFLQJJURZLQJGHPDQGIRUIRRG DVSRSXODWLRQLQFUHDVHV\HWIRRGFURSVDQGODQGDUH EHLQJGLYHUWHGWRSURGXFHELRIXHOV,QWKH8QLWHG 6WDWHVDORQHWXUQHGPLOOLRQWRQVRILWVPLOOLRQ WRQVRIFRUQKDUYHVWLQWRHWKDQRO$WWKHVDPHWLPHWKH ZRUOG·VDELOLW\WRSURGXFHIRRGLVGLPLQLVKLQJ$TXLIHUV DUHUXQQLQJGU\LQWKHPDMRUIRRGSURGXFLQJFRXQWULHV ZKHUH KDOI RI WKH ZRUOG·V SRSXODWLRQ OLYHV 7KHUH LV ZLGHVSUHDGVRLOHURVLRQDQGGHVHUWLÃ&#x20AC;FDWLRQDQGJOREDO ZDUPLQJDQGZHDWKHUH[WUHPHVDUHDOUHDG\UHGXFLQJ FURS \LHOGV 3HQJ HW DO  /REHOO 6FKOHQNHU DQG &RVW5REHUWV  -RQHV  6FLHQFH 'DLO\   KLWWLQJ WKH PRVW YXOQHUDEOH SHRSOH LQ VXE 6DKDUDQ$IULFDDQG6RXWK$VLDWKHKDUGHVW %URZQ   ZDUQV ´:H DUH QRZ VR FORVH WR WKH HGJH WKDW D EUHDNGRZQ LQ WKH IRRG V\VWHP FRXOG FRPHDWDQ\WLPHµ+HDGGV´$WLVVXHQRZLVZKHWKHU WKHZRUOGFDQJREH\RQGIRFXVLQJRQWKHV\PSWRPV RIWKHGHWHULRUDWLQJIRRGVLWXDWLRQDQGLQVWHDGDWWDFN

WKH XQGHUO\LQJ FDXVHV ,I ZH FDQQRW SURGXFH KLJKHU FURS\LHOGVZLWKOHVVZDWHUDQGFRQVHUYHIHUWLOHVRLOV PDQ\DJULFXOWXUDODUHDVZLOOFHDVHWREHYLDEOH«,IZH FDQQRWPRYHDWZDUWLPHVSHHGWRVWDELOL]HWKHFOLPDWH ZHPD\QRWEHDEOHWRDYRLGUXQDZD\IRRGSULFHV« 7KHWLPHWRDFWLVQRZ²EHIRUHWKHIRRGFULVLVRI EHFRPHVWKHQHZQRUPDOµ

%7KHLPSRUWDQFHRIVPDOOIDPLO\IDUPV 7KHUH LV DQ HPHUJLQJ VFLHQWLÃ&#x20AC;F FRQVHQVXV WKDW D VKLIW WR VPDOOVFDOH VXVWDLQDEOH DJULFXOWXUH DQG ORFDOL]HG IRRG V\VWHPV ZLOO DGGUHVV PRVW LI QRW DOO RI WKH XQGHUO\LQJ FDXVHV RI GHWHULRUDWLQJ DJULFXOWXUDO SURGXFWLYLW\DVZHOODVWKHFRQVHUYDWLRQRIQDWXUDOVRLO DQGZDWHUUHVRXUFHVZKLOHVDYLQJWKHFOLPDWH +RHW DO  ,$$67' XQGDWHG  +RIIPDQQ  'H 6FKXWWHU  6PDOOIDPLO\IDUPLQJLVWKHGRPLQDQWIRUPRIDJULFXOWXUH LQWKHZRUOGHVSHFLDOO\LQWKHGHYHORSLQJFRXQWULHVRI $IULFDDQG$VLD$SSUR[LPDWHO\ELOOLRQSHRSOHOLYHLQ UXUDODUHDVLQGHYHORSLQJFRXQWULHVZKLFKDOVRLQFOXGH SHUFHQWRIWKHSRRU$URXQGELOOLRQSHRSOHDUH LQYROYHGLQDJULFXOWXUHDVIDUPHUVRUZRUNHUVDQGDW OHDVWSHUFHQWRIIDUPVLQWKHPDMRULW\RI$VLDQDQG $IULFDQFRXQWULHVDUHKDRUVPDOOHU 4XDQ $V +RIIPDQQ  SRLQWVRXW0LOOHQQLXP'HYHORSPHQW *RDO 0'*   DLPV DW HUDGLFDWLQJ H[WUHPH KXQJHU DQG SRYHUW\ DQG RQH RI WKH PRVW HIIHFWLYH ZD\V RI KDOYLQJERWKWKHQXPEHURIKXQJU\DQGSRRUE\ LV WR PDNH WKH WUDQVLWLRQ WRZDUGV PRUH VXVWDLQDEOH IRUPVRIDJULFXOWXUH´WKDWQRXULVKWKHODQGDQGSHRSOH DQG SURYLGH DQ RSSRUWXQLW\ IRU GHFHQW Ã&#x20AC;QDQFLDOO\ UHZDUGLQJDQGJHQGHUHTXDOMREVµ$WWKHVDPHWLPH WKLV ZRXOG KHOS PHHW WKH KHDOWK WDUJHWV RI 0'*V  DQGLQSURYLGLQJDPRUHGLYHUVHVDIHQXWULWLRXVDQG DIIRUGDEOHGLHW VHHDOVR+RHWDO 


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

6PDOOIDUPVJHQHUDOO\SURGXFHPRUHSHUKHFWDUHWKDQ ODUJH RQHV VR PXFK VR WKDW HFRQRPLVWV KDYH ORQJ REVHUYHG DQG GHEDWHG WKLV DSSDUHQWO\ SDUDGR[LFDO LQYHUVHUHODWLRQVKLSEHWZHHQIDUPVL]HDQGSURGXFWLYLW\ 4XDQ   6PDOO IDUPV DUH  WR  WLPHV DV SURGXFWLYH DQG PXFK PRUH SURÃ&#x20AC;WDEOH DQG QRW MXVW LQ GHYHORSLQJ FRXQWULHV 5RVVHW    7KH 8QLWHG 6WDWHV $JULFXOWXUDO &HQVXV RI  IRXQG D VKDUS GHFOLQH LQ QHW LQFRPH IURP DFUH WR DFUH DV IDUP VL]H LQFUHDVHG IURP  DFUHV WR  DFUHV 5RVVHW 6PDOOIDUPVDUHDOVRDVVRFLDWHGZLWK ´LQWHQVLYH XVH RI KRXVHKROG DQG FRPPXQLW\ ODERXU KLJKOHYHOVRIPRWLYDWLRQDQGPXFKORZHUVXSHUYLVLRQ DQGWUDQVDFWLRQFRVWVµ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´WKHUPRG\QDPLFV RI RUJDQLVPV DQG VXVWDLQDEOH V\VWHPVµ 

&7KHLPSRUWDQFHRIUHQHZDEOHHQHUJ\ 7RVXEVWDQWLDOO\LPSURYHOLYLQJVWDQGDUGVVXVWDLQDEOH IDUPLQJ LV QRW HQRXJK DFFHVV WR PRGHUQ HQHUJ\ LV DOVR FUXFLDO ,QGHHG ODFN RI DFFHVV WR PRGHUQ HQHUJ\ LV JHQHUDOO\ UHFRJQL]HG DV WKH ELJJHVW REVWDFOH WR VXVWDLQDEOH GHYHORSPHQW $FFRUGLQJ WR WKH ,QWHUQDWLRQDO (QHUJ\ $JHQF\ ,($   ´/DFN RI DFFHVV WR PRGHUQ HQHUJ\ VHUYLFHV LV D VHULRXV KLQGUDQFHWRHFRQRPLFDQGVRFLDOGHYHORSPHQWDQG PXVWEHRYHUFRPHLIWKH810LOOHQQLXP'HYHORSPHQW *RDOV 0'*V  DUH WR EH DFKLHYHGµ 7KLV YLHZ LV HFKRHG E\ WKH $FDGHP\ RI 6FLHQFH RI 6RXWK $IULFD   ZKLFK VWDWHV ´$FFHVV WR PRGHUQ HQHUJ\ VHUYLFHV GHÃ&#x20AC;QHG DV HOHFWULFLW\ DQG FOHDQ FRRNLQJ IXHOVLVFHQWUDOWRDFRXQWU\·VGHYHORSPHQWµ :RUOGZLGHELOOLRQSHRSOHODFNDFFHVVWRHOHFWULFLW\ SHUFHQWRIZKRPOLYHLQUXUDODUHDVDQGELOOLRQ SHRSOHVWLOOUHO\RQWUDGLWLRQDOELRPDVVIXHOVIRUFRRNLQJ DQGKHDWLQJ ,($ 7KHJUHDWHVWFKDOOHQJHLVLQ VXE6DKDUDQ $IULFD ZKHUH RQO\  SHU FHQW RI WKH SRSXODWLRQKDVDFFHVVWRHOHFWULFLW\WKHORZHVWOHYHOLQ



WKHZRUOGDQGLI6RXWK$IULFDLVH[FOXGHGRQO\SHU FHQWKDYHVXFKDFFHVV 7KHUH LV D FORVH FRUUHODWLRQ EHWZHHQ LQFRPH OHYHOV DQGDFFHVVWRPRGHUQHQHUJ\&RXQWULHVZLWKDODUJH SURSRUWLRQRIWKHSRSXODWLRQOLYLQJRQDQLQFRPHRIOHVV WKDQSHUGD\WHQGWRKDYHORZHOHFWULÃ&#x20AC;FDWLRQUDWHV DQG D KLJK SHUFHQWDJH RI WKH SRSXODWLRQ WKDW UHOLHV RQWUDGLWLRQDOELRPDVV7KH:RUOG+HDOWK2UJDQL]DWLRQ :+2   HVWLPDWHV WKDW  PLOOLRQ SHRSOH GLH SUHPDWXUHO\ HDFK \HDU IURP KRXVHKROG DLU SROOXWLRQ GXH WR LQHIÃ&#x20AC;FLHQW ELRPDVV FRPEXVWLRQ D VLJQLÃ&#x20AC;FDQW SURSRUWLRQEHLQJ\RXQJFKLOGUHQ7KLVLVJUHDWHUWKDQ SUHPDWXUHGHDWKVIURPPDODULDRUWXEHUFXORVLV 6PDOODJURHFRORJLFDOIDUPVDUHLGHDOO\VHUYHGE\QHZ UHQHZDEOHHQHUJLHVWKDWFDQEHJHQHUDWHGDQGXVHG RQVLWHDQGLQRIIJULGVLWXDWLRQVPRVWRIWHQIRXQGLQ GHYHORSLQJFRXQWULHV +RHWDO+RD 7KH UHQHZDEOH HQHUJLHV JHQHUDWHG FDQ DOVR VHUYH ORFDO EXVLQHVVHV VWLPXODWH ORFDO HFRQRPLHV DQG FUHDWH QXPHURXVHPSOR\PHQWRSSRUWXQLWLHV

'2IIJULGUHQHZDEOHSRZHUV\VWHPVDUH HQWHULQJWKHPDLQVWUHDPZRUOGZLGH :LWKLQ WKH SDVW IHZ \HDUV RIIJULG SRZHU V\VWHPV KDYH HQWHUHG WKH PDLQVWUHDP GULYHQ E\ WKH UHDG\ DYDLODELOLW\RIUHQHZDEOHHQHUJ\RSWLRQVWKDWFDQFRVW OHVVWKDQJULGFRQQHFWLRQV $ 8QLWHG .LQJGRP FRPSDQ\ (QHUJ\ 6ROXWLRQV DGYHUWLVHV RQ LWV ZHEVLWH WKDW KRPHV LQ (XURSH LQFOXGLQJ WKH 8QLWHG .LQJGRP ´DUH ORRNLQJ DW WKH SRWHQWLDO EHQHÃ&#x20AC;WV RI VXSSO\LQJ VRPH LI QRW DOO WKHLU GRPHVWLF SRZHU UHTXLUHPHQW IURP RIIJULG VRXUFHVµ 7KLV FRXOG EH IRU D YDULHW\ RI UHDVRQV VXFK DV FRQQHFWLRQ WR WKH JULG EHLQJ WRR H[SHQVLYH DQG WKH GHVLUH WR UHGXFH HQHUJ\ ELOOV SURWHFWLRQ IURP SRZHU FXWVDQGUHGXFWLRQRI*+*HPLVVLRQV6RODUSDQHOV ZLQG WXUELQHV DQG VPDOO JHQHUDWRUV DUH VXLWDEOH IRU PRVWKRPHVDQGDV\VWHPZLWKDEDWWHU\FRQQHFWHG WRDEDWWHU\FKDUJHULQYHUWHULVWKHPRVWFRQYHQLHQW ([DPSOHV RI VPDOOVFDOH RIIJULG HQHUJ\ SURYLVLRQ EDVHGRQUHQHZDEOHVFDQEHIRXQGDFURVV6FRWODQG &RPPXQLW\ (QHUJ\ 6FRWODQG   VXFK DV LQ UHPRWH IHUU\ ZDLWLQJ URRPV RQ WKH :HVWHUQ ,OHV DQG WKH &KDUOHV ,QJOLV &ODUN 0HPRULDO KXW RQ %HQ 1HYLV WKDW XVHV VPDOO ZLQG WXUELQHV 3KRWRYROWDLF 39  LQVWDOODWLRQV LQWHJUDWHG ZLWK EDWWHULHV DUH RIWHQ XVHG ZKHUHRQO\DVPDOODPRXQWRISRZHULVUHTXLUHGDVIRU OLJKWLQJPDLQWDLQLQJSRZHUIRUPRQLWRULQJHTXLSPHQW




75$'($1'(19,5210(175(9,(:

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·V6RFLDOLVW&RXQWU\VLGH +RF 

JURZLQJ UHQHZDEOH HQHUJ\ RUJDQL]DWLRQV WKURXJK D V\VWHP RI PLFURÃ&#x20AC;QDQFLQJ WUDLQLQJ RI WHFKQLFLDQV PDLQO\ ZRPHQ  IRU LQVWDOODWLRQ PDLQWHQDQFH DQG UHSDLUDQGSURYLVLRQRIVHUYLFHVLQFOXGLQJEX\EDFN ,WUXQVWHFKQRORJ\FHQWUHVIRUWUDLQLQJWKURXJKRXWWKH FRXQWU\ VHH+RDIRUGHWDLOV $WWKHHQGRI0D\  *UDPHHQ 6KDNWL KDG LQVWDOOHG  VRODU KRPH V\VWHPV  ELRJDV SODQWV DQG  LPSURYHG FRRNLQJ VWRYHV ,W KDG DOVR WUDLQHG D WRWDO RI  WHFKQLFLDQV LQ  WHFKQRORJ\ FHQWUHV QDWLRQZLGHFRYHULQJDOOWKHGLVWULFWV,WVEHQHÃ&#x20AC;FLDULHV DUH  YLOODJHV ZLWK D WRWDO RI DERXW  PLOOLRQ SHRSOH *UDPHHQ 6KDNWL   :KDW EHJDQ DV D JUDVVURRWV HQGHDYRXU WR SURYLGH VRODU OLJKW IRU WKH UXUDOSRSXODWLRQKDVQRZDWWUDFWHGWKHEDFNLQJRIWKH :RUOG%DQN

*UDPHHQ6KDNWLLVDQRQSURÃ&#x20AC;WRUJDQL]DWLRQIRXQGHG LQ  WR SURPRWH GHYHORS DQG VXSSO\ UHQHZDEOH HQHUJ\WRWKHUXUDOSRRURI%DQJODGHVK,WVWDUWHGE\ WUDLQLQJ ´EDUHIRRW ZRPHQ HQJLQHHUVµ IRU LQVWDOOLQJ PDLQWDLQLQJ DQG UHSDLULQJ VRODU SDQHOV OLJKWV WHOHSKRQHFKDUJLQJEDWWHULHVDQGRWKHUDFFHVVRULHV,W KDVQRZEHFRPHRQHRIWKHZRUOG·VODUJHVWDQGIDVWHVW

/LJKWLQJ $IULFD LV QRZ D MRLQW :RUOG %DQN DQG ,QWHUQDWLRQDO )LQDQFH &RUSRUDWLRQ SURJUDPPH WKDW DLPV WR KHOS GHYHORS FRPPHUFLDO RIIJULG OLJKWLQJ

)LJXUH'UHDP)DUPDQLQWHJUDWHGIRRGDQGHQHUJ\V\VWHP &DUERQFUHGLWV

7KHUPRHOFWULF ZDVWHKHDW KDUYHVWLQJ  FRROLQJ

([SHULPHQWVLQQHZ WHFKQRORJLHV

5HVWDXUDQW

/DWULQH

6PDOOZLQGWXUELQHV

6XQ

6RODUSDQHOV &RPELQHGKHDWDQGSRZHUJHQHUDWLRQ &RPELQHGKHDWDQGSRZHUJHQHUDWLRQV\VWHP )RRGSURFHVVLQJ 0HWKDQHSXULILFDWLRQDQGFRPSUHVVLRQIRUPRELOHXVHV &RQQHFWLRQWRSRZHUJULG 0LFURK\GURHOHFWULF

&DUER FDSWXUH

%LRJDV

:DVWH ZDWHU %LRJDVGLJHVWHU

$OJDHEDVLQV

0HDW 0DQXUHFURSVUHVLGXHV GDLU\ IRRGUHPDLQVSDSHUHWF XVHGZDWHU SURGXFH

&RZV 6KHHS 3LJV *RDWV

0XVKURRP KDUYHVWV

)LVKSRQGV $TXDFXOWXUH

5LFKIHUWLOLVHU

0XVKURRPV

)HUWLJDWLRQ 'LYHUVHFURSV *UDVVSDVWXUH

6DYLQJVRQ IXHOELOOV

%LRGLHVHO

3XULILHGZDWHU

%LRJDVGLJHVWHU

6XUSOXVHOHFWULFLW\ FUHGLWV

:RRGODQGV 2UFKDUGV

&RPSRVW

&KLFNHQV 'XFNV *HHVH

&RQVHUYDWRU\ $TXDFXOWXUH :DUPZDWHUILVKSRQGV :DWHUFRQVHUYDWLRQ

)LVK KDUYHVWV 3RXOWU\ KDUYHVWV :RUPV &URS IRRG UHVLGXHV

9HJHWDEOHV )ORZHUV +HDOWK EHQHILWV

6DYLQJVRQIHUWLOLVHUV SHVWLFLGHV &URSKDUYHVWV &DUERQFUHGLWV

6RXUFH+RHWDO

5DLQZDWHU KDUYHVWLQJ

3XUHZDWHU

$QDO\WLFDOODE




.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

7DEOH*UHHQSRWHQWLDORIRUJDQLFDJULFXOWXUHDQGDQDHURELFGLJHVWLRQLQ&KLQD &2HVDYLQJV 0W

QDWLRQDO

(QHUJ\VDYLQJV (-

2UJDQLFDJULFXOWXUH 1IHUWLOL]HUVVDYLQJ 12SUHYHQWHG &DUERQVHTXHVWUDWLRQ 7RWDOIRURUJDQLFDJULFXOWXUH

   

   









$QDHURELFGLJHVWLRQ /LYHVWRFNPDQXUH*+*VDYLQJ 0HWKDQHSURGXFHG +XPXVPDQXUHPHWKDQH 6WUDZPHWKDQH 7RWDOIRUDQDHURELFGLJHVWLRQ

    

    

   

   









&2HVDYLQJV 0W

  

QDWLRQDO

QDWLRQDO 

  

(QHUJ\VDYLQJV (-

  









7RWDORYHUDOO

QDWLRQDO 

6RXUFH+RE 1RWH0W PHJDWRQV(- ([DMRXOH 7DEOH*UHHQSRWHQWLDORI'UHDP)DUP

2UJDQLFDJULFXOWXUH $QDHURELFGLJHVWLRQ (QHU\VDYLQJVORFDOJHQ 7RWDO

  

6RXUFH+RE PDUNHWV LQ VXE6DKDUDQ $IULFD DV SDUW RI WKH :RUOG %DQN *URXS·V ZLGHU HIIRUWV WR LPSURYH DFFHVV WR HQHUJ\  ,W DLPV WR SURYLGH VDIH DIIRUGDEOH DQG PRGHUQRIIJULGOLJKWLQJWRPLOOLRQSHRSOHLQ$IULFD E\  DQG WR  PLOOLRQ E\  7KH PDUNHW IRU RIIJULG OLJKWLQJ SURGXFWV LV SURMHFWHG WR JURZ DW  WRSHUFHQWDQQXDOO\,QDORQHVDOHVRIVRODU SRUWDEOH ODQWHUQV WKDW KDG SDVVHG /LJKWLQJ $IULFD·V TXDOLW\ FRQWURO WHVWV JUHZ E\  SHU FHQW LQ $IULFD UHVXOWLQJLQPRUHWKDQSHRSOHKDYLQJDFFHVV WRFOHDQHUVDIHUUHOLDEOHOLJKWLQJDQGLPSURYHGHQHUJ\ VHH+REIRUGHWDLOV  ,Q &KLQD SURYLVLRQ RI ELRJDV LV DQ LPSRUWDQW SDUW RI WKH FRXQWU\·V 1HZ 6RFLDOLVW &RXQWU\VLGH SURJUDPPH ODXQFKHGLQWRLPSURYHWKHZHOIDUHRIWKRVHOLYLQJ RXWVLGH ERRPLQJ FLWLHV ZKLFK LQFOXGH WKH FRXQWU\·V  PLOOLRQ PLJUDQW ZRUNHUV DQG UXUDO SRRU &KLQD LV RQH RI WKH Ã&#x20AC;UVW FRXQWULHV LQ WKH ZRUOG WR XVH ELRJDV WHFKQRORJ\ DQG LW KDV EHHQ UHYLYHG LQ VXFFHVVLYH FDPSDLJQV E\ WKH SUHVHQW JRYHUQPHQW WR SURYLGH

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·V 0LQLVWU\ RI $JULFXOWXUH :DQJ    PLOOLRQKRXVHKROGELRJDVWDQNVKDGEHHQLQVWDOOHGE\ WKHHQGRIWKURXJKELRJDVSURMHFWV7KLV H[SRQHQWLDOJURZWKSKDVHWKDWVWDUWHGDURXQGLV




VHWWRFRQWLQXHDORQJZLWKPHGLXPDQGELJGLJHVWHUV IRUFRPPXQLW\DQGLQGXVWULDOXVH$QDHURELFGLJHVWLRQ RIRUJDQLFZDVWHVLVDNH\RIIJULGUHQHZDEOHHQHUJ\ WHFKQRORJ\ IRU D WUXO\ JUHHQ FLUFXODU HFRQRP\ WKDW FRXOGPDNHDUHDOGLIIHUHQFHIRULPSURYLQJWKHOLYHVRI WKHUXUDOSRRU

(,QWHJUDWLQJVXVWDLQDEOHIDUPLQJDQG UHQHZDEOHHQHUJLHVLQDFLUFXODU HFRQRP\ $PRGHOWKDWH[SOLFLWO\LQWHJUDWHVVXVWDLQDEOHIDUPLQJ DQG UHQHZDEOH HQHUJLHV LV 'UHDP )DUP  ZKLFK RSWLPL]HV WKH VXVWDLQDEOH XVH RI UHVRXUFHV DQG PLQLPL]HV ZDVWH LQ DFFRUGDQFH ZLWK WKH FLUFXODU HFRQRP\ SULQFLSOHV ÀJXUH  VHH DOVR +R HW DO   ,W LV SDWWHUQHG RQ D GHVLJQ GHYHORSHG E\ HQYLURQPHQWDO HQJLQHHU *HRUJH &KDQ DQG WKH G\NH SRQG V\VWHP RI WKH 3HDUO 5LYHU 'HOWD WKDW &KLQHVH SHDVDQWVKDYHSHUIHFWHGRYHUWKRXVDQGVRI\HDUV²D V\VWHPVRSURGXFWLYHWKDWLWVXSSRUWHGSHRSOHSHU KHFWDUHLQLWVKH\GD\ +R  ,QWKHGLDJUDPDJUH\EDFNJURXQGZLWKGRWWHGERUGHUV LVIRUHQHUJ\JUHHQIRUDJULFXOWXUDOSURGXFHJUH\WH[W IRU ZDWHU FRQVHUYDWLRQ DQG Á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

75$'($1'(19,5210(175(9,(:

HQHUJ\DQGQXWULHQWVIRUDJULFXOWXUH 6RPH SUHOLPLQDU\ HVWLPDWHV EDVHG RQ GDWD DQG VWDWLVWLFVPDGHDYDLODEOHE\WKH&KLQHVH*RYHUQPHQW DQG DFDGHPLFV RQ WKH HQHUJ\ DQG FDUERQ VDYLQJV LQYROYHGDUHSUHVHQWHGLQWDEOHVDQG $V FDQ EH VHHQ IURP WDEOH  WKH FRPELQDWLRQ RI RUJDQLF DJULFXOWXUH DQG DQDHURELF GLJHVWLRQ KDV WKH SRWHQWLDO WR PLWLJDWH DW OHDVW  SHU FHQW RI QDWLRQDO *+* HPLVVLRQV DQG VDYH  SHU FHQW RI HQHUJ\ FRQVXPSWLRQ LQ &KLQD ,I 'UHDP )DUP  ZHUH WR EH DSSOLHGWKURXJKRXWWKHFRXQWU\&KLQDZRXOGPLWLJDWH  SHU FHQW RI LWV *+* HPLVVLRQV DQG VDYH  SHU FHQWRIHQHUJ\FRQVXPSWLRQRQO\FRXQWLQJDQDHURELF GLJHVWLRQ EDVLFDOO\ DV D UHVXOW RI HIÀFLHQF\ VDYLQJV IURPXVLQJ´ZDVWHµKHDWLQFRPELQHGKHDWDQGSRZHU JHQHUDWLRQ DQG DYRLGLQJ ORVV IURP ORQJ GLVWDQFH WUDQVPLVVLRQ RI HOHFWULFLW\ $ FRQVHUYDWLYH DOORZDQFH RISHUFHQWHIÀ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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U   1+. 415+10U*4'#661 11&'%74+6;#0& .+/#6'*#0)' 'DYLG3LPHQWHODQG0LFKDHO%XUJHVV &ROOHJHRI$JULFXOWXUHDQG/LIH6FLHQFHV&RUQHOO8QLYHUVLW\,WKDFD1HZ<RUN

$EVWUDFW 6RLOLVWKHPRVWYDOXDEOHUHVRXUFHIRUZRUOGIRRGSURGXFWLRQ+XPDQVZRUOGZLGHREWDLQPRUHWKDQ SHUFHQWRIWKHLUIRRG FDORULHV IURPODQGDQGOHVVWKDQSHUFHQWIURPWKHRFHDQVDQGRWKHUDTXDWLF HFRV\VWHPV(DFK\HDUDERXWPLOOLRQKHFWDUHV KD  RUDERXWSHUFHQW RIFURSODQGDUHORVWGXHWR VRLOHURVLRQWKXVUHGXFLQJWKHFURSODQGDYDLODEOHIRUZRUOGIRRGSURGXFWLRQ7KLVORVVLVDVHULRXVSUREOHP EHFDXVHDVWKH:RUOG+HDOWK2UJDQL]DWLRQDQGWKH)RRGDQG$JULFXOWXUH2UJDQL]DWLRQRIWKH8QLWHG1DWLRQV UHSRUWDWSUHVHQWSHUFHQWRIWKHZRUOGSRSXODWLRQ LHELOOLRQSHRSOH LVPDOQRXULVKHG0HDQZKLOH JOREDOZDUPLQJLVZRUVHQLQJDQGFDQEHWUDFHGEDFNWRDQRWLQVLJQLÀFDQWH[WHQWWRLQFUHDVHGVRLOHURVLRQ IRVVLOIXHOXVHDQGWKHFOHDULQJRIIRUHVWVZRUOGZLGH

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·V IRRG VXSSO\ EDVLFDOO\ GHSHQGV RQ WKH SURGXFWLYLW\DQGTXDOLW\RIDOOVRLOV +XPDQLQGXFHG VRLO HURVLRQ DQG WKH DVVRFLDWHG GHWHULRUDWLRQ LQ VRLO TXDOLW\ RYHU PDQ\ \HDUV KDYH UHVXOWHG LQ WKH ORVV RI YDOXDEOH VRLOV DQG UHGXFHG SURGXFWLYLW\ RI WKH ODQG ZLWK VRPH FURSODQG EHLQJ DEDQGRQHG HDFK\HDU 3LPHQWHOHWDO<RXQJ  3LPHQWHO   &OHDUO\ ZKHQ VRLO HURVLRQ GLPLQLVKHV VRLO TXDOLW\ LW UHGXFHV WKH SURGXFWLYLW\

RI QDWXUDO DJULFXOWXUDO DQG IRUHVW HFRV\VWHPV ,Q DGGLWLRQWKHLPSRUWDQWGLYHUVLW\RISODQWVDQLPDOVDQG PLFUREHVLVUHGXFHG ,QWKLVSDSHUWKHGLYHUVHIDFWRUVWKDWFDXVHVRLOHURVLRQ DUH DVVHVVHG DQG WKH H[WHQW RI GDPDJH DVVRFLDWHG ZLWKVXFKHURVLRQLVDQDO\VHGZLWKHPSKDVLVRQWKH LPSDFWWKLVPD\KDYHRQIXWXUHKXPDQIRRGVHFXULW\ DQGFOLPDWHFKDQJH

%&DXVHVRIHURVLRQ (URVLRQ RFFXUV ZKHQ VRLO LV OHIW H[SRVHG WR UDLQ RU ZLQG HQHUJ\ )RU H[DPSOH DERXW  PP RI UDLQ IDOOLQJRQRQHKHFWDUH KD RIODQGLQ1HZ<RUN6WDWH SURYLGHV WKH HQHUJ\ HTXLYDOHQW RI  NFDO SHU \HDU 7KLV LV DERXW WKH HTXLYDOHQW RI WKH HQHUJ\ LQ  OLWUHVRIJDVROLQH5DLQGURSVKLWWLQJVRLOORRVHQLWDQG HYHQ LI WKHUH LV D JUDGLHQW RI RQO\  SHU FHQW LW ZLOO FDXVHWKHVRLOWRÁRZGRZQKLOO7KLVVRFDOOHGVKHHW HURVLRQLVWKHGRPLQDQWW\SHRIHURVLRQ 7URHK+REEV DQG 'RQRKXH   7KH LPSDFW RI VRLO HURVLRQ LV LQWHQVLÀHGRQDOOVORSLQJODQGZKHUHPRUHWKDQKDOIRI WKHVXUIDFHVRLOLVFDUULHGDZD\DVWKHZDWHUVSODVKHV GRZQKLOOLQWRYDOOH\VDQGVWUHDPV :LQGHQHUJ\DOVRKDVFRQVLGHUDEOHSRZHUWRGLVORGJH VXUIDFH VRLO SDUWLFOHV DQG WUDQVSRUW WKHP RYHU ORQJ GLVWDQFHV $ GUDPDWLF H[DPSOH RI WKLV ZDV WKH ZLQG HURVLRQLQ.DQVDVGXULQJWKHUHODWLYHO\GU\DQGZLQG\ ZLQWHURI²'XULQJMXVWWKLVRQHZLQWHUSHULRG DSSUR[LPDWHO\WRQVKDRIVRLOZHUHHURGHGIURPWKLV




YDOXDEOH FURSODQG :LQG HQHUJ\ LV VXIÀFLHQWO\VWURQJ WR SURSHO VRLO SDUWLFOHV WKRXVDQGV RI NLORPHWUHV DV LOOXVWUDWHG E\ 1$6$·V UHSRUW RI D FORXG RI VRLO EHLQJ EORZQ IURP WKH $IULFDQ FRQWLQHQW WR WKH 6RXWK DQG 1RUWK$PHULFDQFRQWLQHQWV

75$'($1'(19,5210(175(9,(:

RIDGMDFHQWPRYLQJZDWHU,QFUHDVHGVRLOORVVRFFXUV RQ VWHHS VORSHV ZLWK JUDGLHQWV RI  SHU FHQW RU PRUH  ZKHQ D VWUHDP FXWV WKURXJK DGMDFHQW ODQG EXWHYHQRQUHODWLYHO\ÁDWODQGZLWKRQO\DSHUFHQW JUDGLHQWVWUHDPEDQNVDUHHURGHGGXULQJKHDY\UDLQV DQGÁRRGLQJ

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

&$VVHVVLQJVRLOHURVLRQ

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

6RLOHURVLRQRQFURSODQGZRUOGZLGH

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

,W LV HVWLPDWHG WKDW DSSUR[LPDWHO\  ELOOLRQ WRQV RI IHUWLOH VRLOV ZRUOGZLGH DUH ORVW IURP DJULFXOWXUDO V\VWHPVHDFK\HDU 0\HUV ZKHUHDVUHODWLYHO\ OLWWOH HURVLRQ RFFXUV LQ QDWXUDO HFRV\VWHPV 6RLO VFLHQWLVWV /DO DQG 6WHZDUW   DQG :HQ   UHSRUWWKDWDQQXDOO\ELOOLRQWRQVRIVRLODUHORVWLQ ,QGLDDQGELOOLRQWRQVLQ&KLQD&RQVLGHULQJWKHVH WZRFRXQWULHVWRJHWKHURFFXS\RQO\SHUFHQWRIWKH ZRUOG·V WRWDO ODQG DUHD WKH HVWLPDWHG  ELOOLRQ WRQV RIVRLOORVWHDFK\HDUZRUOGZLGHLVFRQVHUYDWLYH7KH DPRXQW RI VRLO ORVW DQQXDOO\ LQ WKH 8QLWHG 6WDWHV LV HVWLPDWHGWREHDERXWELOOLRQWRQV 1$6 

&XUUHQWO\DERXWSHUFHQWRIWKHZRUOG·VDJULFXOWXUDO ODQG VXIIHUV PRGHUDWH WR VHYHUH HURVLRQ ZKLOH  SHU FHQW H[SHULHQFHV VOLJKW HURVLRQ 6SHWK   :RUOGZLGHHURVLRQRQFURSODQGDYHUDJHVDERXWW KD\UDQGUDQJHVIURPWRWKD\U 3LPHQWHOHW DO $VDUHVXOWRIVRLOHURVLRQRYHUWKHSDVW \HDUVDERXWSHUFHQWRIWKHZRUOG·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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

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

(URVLRQUDWHVRQSDVWXUHVDQGUDQJHODQGV ,QWKH8QLWHG6WDWHVLQFRQWUDVWWRWKHDYHUDJHVRLOORVV RIWKD\UIURPFURSODQGSDVWXUHVORVHVRLODWWKH UDWHRIDERXWWKD\U 1$6 +RZHYHUHURVLRQ UDWHV RQ SDVWXUHV LQWHQVLI\ ZKHUHYHU RYHUJUD]LQJ LV DOORZHGWRRFFXU(YHQLQWKH8QLWHG6WDWHVDERXW SHU FHQW RI QRQ)HGHUDO ODQGV UHTXLUH FRQVHUYDWLRQ WUHDWPHQWV WR UHGXFH JUD]LQJ SUHVVXUH -RKQVRQ  0RUHWKDQKDOIRIDOOUDQJHODQGVLQWKHFRXQWU\ ²ERWKQRQ)HGHUDODQG)HGHUDO²DUHRYHUJUD]HGDQG KDYH EHFRPH VXEMHFW WR KLJK HURVLRQ UDWHV %DLOH\   $OWKRXJK HURVLRQ UDWHV RQ FURSODQG LQ WKH 8QLWHG 6WDWHVKDYHGHFUHDVHGGXULQJWKHSDVWWZRGHFDGHV WKRVHRQSDVWXUHVDQGUDQJHODQGVUHPDLQKLJK WKD \U  1$6 ,QGHHGKLJKHURVLRQUDWHVDUHW\SLFDO RQPRVWRIWKHZRUOG·VSDVWXUHVDQGUDQJHODQGV :5,   ,Q PDQ\ GHYHORSLQJ FRXQWULHV KHDY\ JUD]LQJ E\ FDWWOH VKHHS DQG JRDWV KDV UHPRYHG PRVW RI WKHYHJHWDWLYHFRYHUH[SRVLQJWKHVRLOWRVHYHUHVRLO HURVLRQ ,Q $IULFD DERXW  SHU FHQW RI WKH SDVWXUH DQG UDQJHODQG LV VHULRXVO\ HURGHG DQG GHJUDGHG 811$'$) 7KHSULPHFDXVHVRIWKLVH[SRVHG VRLODUHRYHUJUD]LQJDQGWKHUHPRYDORIFURSUHVLGXHV IRUXVHDVFRRNLQJIXHO

6RLOHURVLRQLQIRUHVWODQG ,Q VWDEOH IRUHVW HFRV\VWHPV ZKHUH VRLO LV SURWHFWHG E\YHJHWDWLRQHURVLRQUDWHVDUHUHODWLYHO\ORZUDQJLQJ IURP RQO\  WR  WKD\U 5RRVH   7UHH OHDYHVDQGEUDQFKHVQRWRQO\LQWHUFHSWDQGGLPLQLVK



UDLQGURS DQG ZLQG HQHUJ\ EXW DOVR FRYHU WKH VRLO XQGHU WKH WUHHV ZKLFK IXUWKHU SURWHFWV LW +RZHYHU WKH VLWXDWLRQ FKDQJHV GUDPDWLFDOO\ ZKHQ IRUHVWV DUH FOHDUHG IRU FURS SURGXFWLRQ RU ZKHQ SDVWXUHV DUH GHYHORSHG IRU OLYHVWRFN SURGXFWLRQ 6RXWKJDWH DQG :KLWDNHU 

'(IIHFWVRIVRLOHURVLRQ :DWHUDYDLODELOLW\ :DWHU LV D PDMRU OLPLWLQJ IDFWRU RI FURS SURGXFWLYLW\ LQ DOO WHUUHVWULDO HFRV\VWHPV EHFDXVH DOO YHJHWDWLRQ UHTXLUHV HQRUPRXV TXDQWLWLHV RI ZDWHU IRU LWV JURZWK DQG IRU WKH SURGXFWLRQ RI IUXLW )RU H[DPSOH  KD RI FRUQZLOOWUDQVSLUHDERXWPLOOLRQOLWUHVRIZDWHUGXULQJ WKHJURZLQJVHDVRQRIDERXWWKUHHPRQWKV 3LPHQWHO HWDO DQGORVHDQDGGLWLRQDOPLOOLRQOLWUHVRI ZDWHU E\ HYDSRUDWLRQ IURP WKH VRLO 'XULQJ HURVLRQ E\ UDLQIDOO WKH DPRXQW RI ZDWHU UXQRII VLJQLÀFDQWO\ LQFUHDVHV ZLWK OHVV ZDWHU HQWHULQJ WKH VRLO DQG WKHUHIRUHOHVVZDWHUDYDLODEOHWRVXSSRUWWKHJURZLQJ YHJHWDWLRQ2QDYHUDJHDFRUQFURSRINJUHTXLUHV DERXW  OLWUHV RI ZDWHU IRU SURGXFWLRQ ZKLOH ULFH UHTXLUHVDERXWOLWUHV

1XWULHQWORVV (URGHG VRLO FDUULHV DZD\ YLWDO SODQW QXWULHQWV VXFK DV QLWURJHQ SKRVSKRUXV SRWDVVLXP DQG FDOFLXP 7\SLFDOO\ HURGHG VRLO FRQWDLQV DERXW WKUHH WLPHV PRUH QXWULHQWV WKDQ WKRVH OHIW LQ WKH UHPDLQLQJ VRLO /DQJGDOH HW DO   2QH WRQ RI IHUWLOH WRSVRLO RU HURGHGIHUWLOHVRLOFRQWDLQVDQDYHUDJHRIWRNJRI QLWURJHQWRNJRISKRVSKRUXVDQGWRNJRI SRWDVVLXP ZKHUHDV WKH WRSVRLO RQ HURGHG ODQG KDV DQDYHUDJHQLWURJHQFRQWHQWRIRQO\WRNJSHU WRQ /DQJGDOHHWDO  7R FRPSHQVDWH IRU WKH QXWULHQW ORVVHV LQÁLFWHG RQ FURS SURGXFWLRQ ODUJH TXDQWLWLHV RI IHUWLOL]HUV DUH RIWHQ DSSOLHG 7URHK HW DO   SRLQW RXW WKDW WKH ORVWVRLOQXWULHQWVFRVWDJULFXOWXUHLQWKH8QLWHG6WDWHV VHYHUDO ELOOLRQV RI GROODUV DQQXDOO\ ,I WKH VRLO EDVH LV UHODWLYHO\GHHS DERXWPP DQGLIRQO\²WRQV RI VRLO LV ORVW SHU KHFWDUH SHU \HDU WKH ORVW QXWULHQWV FDQ EH UHSODFHG ZLWK WKH DSSOLFDWLRQ RI FRPPHUFLDO IHUWLOL]HUV DQGRU OLYHVWRFN PDQXUH +RZHYHU VXFK D UHSODFHPHQWVWUDWHJ\LVH[SHQVLYHIRUIDUPHUVDQGWKH FRXQWU\ DQG XVXDOO\ LV QRW DIIRUGDEOH E\ WKH SRRUHU IDUPHUV1RWRQO\DUHWKHIHUWLOL]HULQSXWVGHSHQGHQWRQ IRVVLOHQHUJ\EXWDOVRWKHFKHPLFDOVFDQKDUPKXPDQ KHDOWKDQGSROOXWHWKHHQYLURQPHQW 1$6 




6RLORUJDQLFPDWWHU 6RLORUJDQLFPDWWHULVDYDOXDEOHUHVRXUFHEHFDXVHLW IDFLOLWDWHVWKHIRUPDWLRQRIVRLODJJUHJDWHVDQGWKHUHE\ LQFUHDVHV VRLO SRURVLW\ 7KH LPSURYHG VRLO VWUXFWXUH LQ WXUQ IDFLOLWDWHV ZDWHU LQÃ&#x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² SHU FHQW RI WKHLU WRWDO VRLO ZHLJKW  3LPHQWHOHWDO ZKLFKKDVDERXWSHUFHQWRI QLWURJHQDQG²SHUFHQWRISKRVSKRUXV%HFDXVH PRVW RI WKH VRLO RUJDQLF PDWWHU LV IRXQG FORVH WR WKH VRLO VXUIDFH DV GHFD\LQJ OHDYHV DQG VWHPV LW LV VLJQLÃ&#x20AC;FDQWO\UHGXFHGE\HURVLRQ%RWKZLQGDQGZDWHU HURVLRQ VHOHFWLYHO\ UHPRYH WKH Ã&#x20AC;QH RUJDQLF SDUWLFOHV LQ WKH VRLO OHDYLQJ EHKLQG ODUJH VRLO SDUWLFOHV DQG VWRQHV 6HYHUDO VWXGLHV KDYH GHPRQVWUDWHG WKDW WKH VRLOUHPRYHGE\HLWKHUZDWHURUZLQGHURVLRQLVWR  WLPHV ULFKHU LQ RUJDQLF PDWWHU WKDQ WKH UHPDLQLQJ VRLOV UHVXOWLQJ LQ ORZHU FURS \LHOG )RU H[DPSOH WKH UHGXFWLRQRIVRLORUJDQLFPDWWHUUDQJLQJIURPWR SHUFHQWZDVIRXQGWRORZHUWKHFURS\LHOGSRWHQWLDOIRU JUDLQE\SHUFHQW /LEHUW  &ROOHFWLYHO\ DQG LQGHSHQGHQWO\ WKH GLYHUVH LPSDFWV RI HURVLRQ UHGXFH FURS ELRPDVV ERWK EHFDXVH RI GHJUDGHGVRLOVWUXFWXUHDQGQXWULHQWGHSOHWLRQ

6RLOGHSWK *URZLQJ SODQWV UHTXLUH VRLOV RI DGHTXDWH GHSWK LQ ZKLFK WR H[WHQG WKHLU URRWV 9DULRXV VRLO ELRWD VXFK DV HDUWKZRUPV DOVR UHTXLUH D VXLWDEOH VRLO GHSWK 3LPHQWHOHWDO:DUGOHHWDO 7KXVZKHQ HURVLRQUHGXFHVVRLOGHSWKVXEVWDQWLDOO\IURPFP WR OHVV WKDQ  FP WKHUH LV PLQLPDO VSDFH IRU SODQW URRWV VR WKDW SODQW JURZWK ZLOO EH VWXQWHG DQG \LHOG UHGXFHG

%LRPDVVDQGELRGLYHUVLW\ 7KH ELRORJLFDO GLYHUVLW\ H[LVWLQJ LQ DQ\ HFRV\VWHP LV

75$'($1'(19,5210(175(9,(:

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Ã&#x20AC;FDQWO\ WR ELRGLYHUVLW\ HVSHFLDOO\ LQ PRLVW RUJDQLF VRLOV +H\ZRRG  3LPHQWHOHWDO  (URVLRQ UDWHV WKDW DUH  WR  WLPHV DERYH WKH VXVWDLQDELOLW\ UDWH RU VRLO IRUPDWLRQ UDWHV RI ²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Ã&#x20AC;UPHG LQ Ã&#x20AC;HOG H[SHULPHQWV ZLWK FROODUGV LQ ZKLFK DUWKURSRGVSHFLHVGLYHUVLW\URVHIRXUIROGLQH[SHULPHQWDO SORWV ZLWK WKH KLJKHVW FROODUG ELRPDVV FRPSDUHG ZLWK WKDWLQFRQWUROFROODUGSORWV5HSRUWVVXJJHVWWKDWZKHQ


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



WKHELRPDVVLQFUHDVHGWKUHHIROGWKHQXPEHURIVSHFLHV LQFUHDVHG IROG ,Q D VWXG\ RI ELUG SRSXODWLRQV D VWURQJ FRUUHODWLRQ EHWZHHQ SODQW ELRPDVV SURGXFWLYLW\ DQGELUGVSHFLHVGLYHUVLW\ZDVUHSRUWHGZKHQDIROG LQFUHDVHLQSODQWELRPDVV\LHOGHGDIROGLQFUHDVHLQ ELUGGLYHUVLW\ :ULJKW 

 WRQV RI FDUERQ WR WKH DWPRVSKHUH $ IHHGEDFN PHFKDQLVPH[LVWVZKHUHLQLQFUHDVHGJOREDOZDUPLQJ LQWHQVLÃ&#x20AC;HVUDLQIDOOZKLFKLQWXUQLQFUHDVHVHURVLRQDQG FRQWLQXHVWKHF\FOH /DO 

6RLO ELRWD SHUIRUP PDQ\ EHQHÃ&#x20AC;FLDO DFWLYLWLHV WKDW LPSURYH VRLO TXDOLW\ DQG XOWLPDWHO\ LWV SURGXFWLYLW\ :LWW6XJGHQ6WRQHDQG$VK3LPHQWHO HW DO   )RU H[DPSOH VRLO ELRWD UHF\FOH EDVLF QXWULHQWVUHTXLUHGE\SODQWVIRUWKHLUJURZWK 3LPHQWHO HWDO ,QDGGLWLRQWKHWXQQHOLQJDQGEXUURZLQJ DFWLYLWLHVRIHDUWKZRUPVDQGRWKHUVRLOELRWDHQKDQFH FURSSURGXFWLYLW\E\LQFUHDVLQJZDWHULQÃ&#x20AC;OWUDWLRQ :LWW  (DUWKZRUPVIRULQVWDQFHPD\FRQVWUXFWXSWR WXQQHORSHQLQJVSHUVTXDUHPHWUHZKLFKHQDEOH WKH ZDWHU WR LQÃ&#x20AC;OWUDWH UDSLGO\ LQWR WKH VRLO 2WKHU VRLO ELRWDDOVRFRQWULEXWHWRVRLOIRUPDWLRQDQGSURGXFWLYLW\ E\PL[LQJWKHVRLOFRPSRQHQWVHQKDQFLQJDJJUHJDWH VWDELOLW\ DQG SUHYHQWLQJ VRLO FUXVWLQJ 7KLV FKXUQLQJ DQG PL[LQJ RI WKH XSSHU VRLO UHGLVWULEXWHV QXWULHQWV DHUDWHV WKH VRLO H[SRVHV LW WR WKH FOLPDWH IRU VRLO IRUPDWLRQDQGLQFUHDVHVLQÃ&#x20AC;OWUDWLRQUDWHVWKXVPDNLQJ VRLOFRQGLWLRQVIDYRXUDEOHIRULQFUHDVHGVRLOIRUPDWLRQ DQG SODQW SURGXFWLYLW\ (DUWKZRUPV EULQJ IURP  WR  WKD\U RI VRLO IURP XQGHUJURXQG WR WKH VRLO VXUIDFHZKLOHVRPHLQVHFWVVXFKDVDQWVPD\EULQJ DVPXFKDVWKD\URIVRLOWRWKHVXUIDFH /RFNDE\ DQG $GDPV   6QDLOV DUH UHSRUWHG WR KHOS WKH IRUPDWLRQRIWKD\URIVRLO

([WHQVLYHEXUQLQJRIIRVVLOIXHOVDQGIRUHVWVDSSHDUVWR EHLQFUHDVLQJWKHOHYHORI&2DQGRWKHUJUHHQKRXVH JDVHV *+*V  LQ WKH DWPRVSKHUH ZKLFK UDLVHV VHYHUDO HWKLFDO LVVXHV DQG FKRLFHV &OHDUO\ WKHUH LV DQ XUJHQW QHHG WR UHGXFH IRVVLO IXHO FRQVXPSWLRQ DQG GHIRUHVWDWLRQ WR VORZ GRZQ WKH UDWH RI JOREDO FOLPDWHFKDQJH5HGXFLQJIRVVLOIXHOFRQVXPSWLRQZLOO DOVR FRQVHUYH IRUHVWV DQG FRQWUROOLQJ GHIRUHVWDWLRQ KDV RWKHU EHQHÃ&#x20AC;WV LQFOXGLQJ FRQVHUYLQJ ELRORJLFDO GLYHUVLW\

6RLOVHGLPHQWV 7KH ORQJUDQJH WUDQVSRUW RI GXVW E\ ZLQG KDV LPSOLFDWLRQV IRU KXPDQ KHDOWK ZRUOGZLGH *ULIÃ&#x20AC;Q .HOORJJDQG6KLQQ  UHSRUWWKDWDERXWKXPDQ LQIHFWLRXV GLVHDVHFDUU\LQJ RUJDQLVPV VXFK DV DQWKUD[ DQG WXEHUFXORVLV DUH HDVLO\ WUDQVSRUWHG E\ WKHZLQGLQVRLOSDUWLFOHV 6RLO HURVLRQ DOVR FRQWULEXWHV WR JOREDO ZDUPLQJ EHFDXVH FDUERQ GLR[LGH &2  LV DGGHG WR WKH DWPRVSKHUHZKHQHQRUPRXVDPRXQWVRIELRPDVVDUH H[SRVHG DQG R[LGL]HG 3KLOOLSV DQG +HOPHF]L  /DO  :DOVK DQG 5RZH   2QH KHFWDUH RI VRLOPD\FRQWDLQDERXWWRQVRIRUJDQLFPDWWHURU ELRPDVV ZKLFK LI HURGHG ZRXOG FRQWULEXWH DERXW

*OREDOFOLPDWHFKDQJH

$ ODUJH QXPEHU RI PHWHRURORJLVWV DQG SK\VLFDO VFLHQWLVWV HVWLPDWH WKDW WKH FRQWLQXHG LQFUHDVH LQ &2 DQG RWKHU *+*V ZLOO ZDUP WKH HDUWK IURP  GHJUHHV &HOVLXV WR  GHJUHHV &HOVLXV E\ WKH HQG RIWKLVFHQWXU\7KHSUHFLVHUDWHH[WHQWDQGUHJLRQDO YDULDWLRQVDUHGLIÃ&#x20AC;FXOWWRSUHGLFWEXWQHJDWLYHLPSDFWV DUHJHQHUDOO\SURMHFWHGHVSHFLDOO\RQFURSSURGXFWLRQ $GGLWLRQDO QHJDWLYH LPSDFWV RQ VRPH FURSV FRXOG UHVXOW IURP DOWHUDWLRQV LQ WKH R]RQH OD\HU 7KXV WKH RYHUDOOFKDQJHVLQWHPSHUDWXUHPRLVWXUH&2LQVHFW SHVWV SODQW SDWKRJHQV DQG ZHHGV DVVRFLDWHG ZLWK JOREDO FOLPDWH FKDQJH DUH SURMHFWHG WR UHGXFH IRRG SURGXFWLRQZRUOGZLGH 3LPHQWHO 7KHH[WHQWRI DOWHUDWLRQVRIFURS\LHOGVZLOOGHSHQGRQVSHFLÃ&#x20AC;FFURSV DQG WKHLU SDUWLFXODU HQYLURQPHQWDO UHTXLUHPHQWV +RSHIXOO\ LPSOHPHQWDWLRQ RI LPSURYHG DJULFXOWXUDO WHFKQRORJLHV FRXOG SDUWLDOO\ RIIVHW VRPH RI WKLV GHFUHDVHLQ\LHOGV,QDGGLWLRQSURGXFWLYHDJULFXOWXUH DQG DQ LQFUHDVH LQ VRLO FDUERQ FRXOG KHOS PLWLJDWH FOLPDWH FKDQJH DOVR VHH WKH FRPPHQWDU\ RI /HX LQ WKLVFKDSWHU  ,Q$IULFDWKHSURMHFWHGULVHLQUDLQIDOODVVRFLDWHGZLWK JOREDOFOLPDWHFKDQJHFRXOGKHOSLPSURYHFURS\LHOGV WR VRPH H[WHQW EXW LW ZLOO QRW HQWLUHO\ VROYH $IULFD·V IRRGVKRUWDJHVJLYHQWKHUDSLGUDWHRILQFUHDVHRILWV SRSXODWLRQ:DWHUVKRUWDJHVDUHSURMHFWHGWRSHUVLVW DQGSHVWVDUHH[SHFWHGWRFRQWLQXHWRUHVXOWLQVHULRXV FURSORVVHV 3LPHQWHO 7KHVHIDFWRUVDVZHOODV VHULRXV HFRQRPLF DQG SROLWLFDO SUREOHPV LPSO\ WKDW IRRGSURGXFWLRQLQ$IULFDLVOLNHO\WRUHPDLQVORZ




75$'($1'(19,5210(175(9,(:

1//'06#4;U   1/2'6+6+10(14#6'4(14)4+%7.674' 6*417)*FNINIG %UHQW%RHKOHUW,QGXVWULDO(FRQRPLFV,QFDQG .HQQHWK6WU]HSHN0DVVDFKXVHWWV,QVWLWXWHRI7HFKQRORJ\

$EVWUDFW 2ZLQJWRULVLQJSRSXODWLRQVLQFUHDVLQJSHUFDSLWDZDWHUXVHHQYLURQPHQWDOÁRZUHTXLUHPHQWVDQGFOLPDWH FKDQJHRXUUHVXOWVVXJJHVWWKDWE\WKHUHZLOOEHVLJQLÀFDQWWKUHDWVWRZDWHUDYDLODELOLW\IRUDJULFXOWXUH LQPDQ\UHJLRQVRIWKHZRUOG,IULVLQJDJULFXOWXUDOGHPDQGVDQGWKHIXOOVSHFWUXPRIFOLPDWHFKDQJHHIIHFWV DUHWDNHQLQWRDFFRXQWWKUHDWVWRZDWHUDYDLODELOLW\ZLOOEHFRQVLGHUDEO\PRUHSURQRXQFHG,WLVWKHUHIRUH OLNHO\WKDWXQOHVVEURDGFKDQJHVDUHPDGHWRWKHZD\HQYLURQPHQWDODQGZDWHUUHVRXUFHVDUHJRYHUQHG FRQÁLFWVRYHUZDWHUIRUDJULFXOWXUHZLOOLQFUHDVHPDUNHGO\E\WKHPLGGOHRIWKHWZHQW\ÀUVWFHQWXU\&KDQJHV LQJRYHUQDQFHPD\LQFOXGHUHIRUPLQJWKHSROLFLHVDQGLQVWLWXWLRQVWKDWPDQDJHDQGDOORFDWHZDWHULPSURYLQJ DFFHVVWRZDWHULQWKHSRRUHVWUHJLRQVRIWKHZRUOGHQKDQFLQJHFRV\VWHPVHUYLFHVUHFRJQL]LQJZDWHUDV DQHFRQRPLFJRRGLQRUGHUWRSURPRWHHIÀFLHQF\RIXVHLPSURYLQJUDLQIHGDQGLUULJDWLRQLQIUDVWUXFWXUHWR LQFUHDVH´FURSSHUGURSµDQGPDNLQJDJULFXOWXUHPRUHUHVLOLHQWWRFKDQJHVLQFOLPDWH,QWKHOLJKWRIWKHVH WKUHDWVWRZDWHUIRUDJULFXOWXUHDQGWKHUHIRUHWRJOREDOIRRGDYDLODELOLW\LWLVLPSRUWDQW²DQGXUJHQW²WKDW ZDWHUSODQQLQJHIIRUWVEHFRRUGLQDWHGDQGLQWHJUDWHGDFURVVVHFWRUVSDUWLFXODUO\LQWKHPRVWYXOQHUDEOH UHJLRQV

)LJXUH7RWDOSURMHFWHGPXQLFLSDOZDWHUXVHLQ2(&' YHUVXVQRQ2(&'FRXQWULHV²

600 non-OECD

500 Billion m3

400 300 200 -

OECD

2050 -

2040 -

2030 -

2020 -

0-

2010 -

100 2000 -

*OREDOO\NPRIZDWHUDUHZLWKGUDZQHDFK\HDU WR LUULJDWH FURSV UHSUHVHQWLQJ RYHU WZR WKLUGV RI DOO ZLWKGUDZDOV E\ SHRSOH $V ZDWHU VFDUFLW\ LQWHQVLÀHV DQGPDQ\RIWKHZRUOG·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

6RXUFH+XJKHV&KLQRZVN\DQG6WU]HSHN 1RWH6TXDUHVZLWKVROLGOLQHVQRQ2(&' GLDPRQGVZLWKVROLGOLQHV2(&' 6LPXOWDQHRXVO\ WR PHHW KLJKHU IRRG GHPDQGV IRU JURZLQJ SRSXODWLRQV DJULFXOWXUH LV H[SDQGLQJ WR QHZ UHJLRQV DQG EHFRPLQJ PRUH SURGXFWLYH ZKLFK UDSLGO\ LQFUHDVHV WKH GHPDQG IRU ZDWHU $V D UHVXOW JURXQGZDWHU VXSSOLHV RQ ZKLFK PXFK RI DJULFXOWXUH UHOLHV DUH GHFOLQLQJ JOREDOO\ .RQLNRZ DQG .HQG\   $W WKH VDPH WLPH HQHUJ\ FRQVXPSWLRQ DQG RWKHU LQGXVWULDO DFWLYLWLHV LQ PDQ\ FRXQWULHV DUH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

FRQWLQXLQJ WR LQFUHDVH FDXVLQJ LQGXVWULDO ZDWHU FRQVXPSWLRQWRULVH3HUKDSVPRVWLPSRUWDQWO\²DQG PRVW RYHUORRNHG ² HQYLURQPHQWDO ÁRZ UHTXLUHPHQWV ()5V  DUH LQFUHDVLQJO\ EHLQJ UHFRJQL]HG DV D FUXFLDO HOHPHQW RI D IXQFWLRQLQJ ULSDULDQ HFRV\VWHP DQG DFFRUGLQJO\ DUH SURJUHVVLYHO\ EHLQJ LQVWDWHG DV SDUW RI HQYLURQPHQWDO PDQDJHPHQW )DONHQPDUN DQG5RFNVWU|P6PDNKWLQ $V()5VDUH HVWDEOLVKHG UHPDLQLQJ ZDWHU IRU DJULFXOWXUH ZLOO EH IXUWKHUGLPLQLVKHG,QDGGLWLRQWRWKHJURZLQJGHPDQG RQ ZDWHU UHVRXUFHV FOLPDWH FKDQJH ZLOO VLJQLÀ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´KRWVSRWVµ ZKHUH ZDWHU IRU DJULFXOWXUH FRXOGEHVXEVWDQWLDOO\UHGXFHG

$0HWKRGVPRGHOOHGWKUHDWVWRZDWHU IRUDJULFXOWXUH &RQVLGHULQJWKHGHPDQGDQGVXSSO\VLGHIDFWRUVWKDW

ZLOODIIHFWWKHDPRXQWRIZDWHUDYDLODEOHIRUDJULFXOWXUH ZH PRGHO WKH SRVVLEOH LPSOLFDWLRQV IRU DJULFXOWXUDO ZDWHUDYDLODELOLW\WKURXJKXQGHUFOLPDWHFKDQJH 6SHFLÀ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ÁRZV QHFHVVDU\ WR PDLQWDLQ ULSDULDQ HFRV\VWHPV LQ ´IDLUµ FRQGLWLRQ IRU GHWDLOV VHH 6PDNKWLQ 5HYHQJD DQG'|OO )RUWKHFOLPDWHFKDQJHDQDO\VLVZH HYDOXDWHDEDVHOLQH LHQRFOLPDWHFKDQJH VFHQDULR DQGWZRFOLPDWHFKDQJHVFHQDULRVEDVHGRQWKHUDQJH RI DYDLODEOH JHQHUDO FLUFXODWLRQ PRGHOV *&0V  :H IROORZWKH:RUOG%DQN·V(FRQRPLFVRI$GDSWDWLRQWR &OLPDWH&KDQJH ($&& DQDO\VLV :RUOG%DQN  DQGPRGHOWKHFOLPDWHFKDQJHVFHQDULRVXQGHUWKH$ 65(6HPLVVLRQVVFHQDULR VHH,3&& XVLQJWKH JOREDO FOLPDWH PRGHOV *&0V  RI WKH 8QLWHG 6WDWHV· 1DWLRQDO &HQWHU IRU $WPRVSKHULF 5HVHDUFK 1&$5  DQG RI WKH &RPPRQZHDOWK 6FLHQWLÀF DQG ,QGXVWULDO

)LJXUH:DWHUZLWKGUDZDOVIRUDJULFXOWXUHDVDSHUFHQWDJHRIPHDQDQQXDOUXQRII 0$5 LQ

6RXUFH$XWKRUV·FDOFXODWLRQV






75$'($1'(19,5210(175(9,(:

IRU  HFRQRPLF UHJLRQV RI WKH ZRUOG ZH LQWHUVHFW WKH  ULYHU EDVLQV ZLWK WKHVH HFRQRPLF UHJLRQV WR IRUPIRRGSURGXFWLRQXQLWV )38V  VHH6WU]HSHN DQG 0F&OXVNH\  DQG 5RVHJUDQW HW DO D DQG E  ZKLFK IRUP WKH JHRJUDSKLF XQLW RI RXU DQDO\VLV )RU HDFK )38 RXU EDVHOLQH GDWD LQFOXGH FXUUHQW0$5YDOXHVDJULFXOWXUDOZLWKGUDZDOVDQG 0 ,ZLWKGUDZDOV,QURXJKO\SHUFHQWRI ZRUOGZLGH0$5ZDVZLWKGUDZQIRUDJULFXOWXUHDQG SHUFHQWZDVZLWKGUDZQIRU0 ,XVH ÀJXUH 

5HVHDUFK2UJDQLVDWLRQ RI$XVWUDOLD ZKLFKWKH:RUOG %DQNFRQVLGHUVWRUHSUHVHQWJHQHUDOO\ZHWWHUDQGGULHU FOLPDWH PRGHOV UHVSHFWLYHO\ ,Q WRWDO ZH FRQVLGHU QLQHVFHQDULRVHDFKZLWKDGLIIHUHQWFOLPDWHGHPDQG FRPELQDWLRQDQGWKHQFRPSDUHHDFKWRWKH\HDU EDVHOLQH 7R PRGHO FKDQJHV LQ 0$5 ZH XVH WKH &/,581 ,, K\GURORJLF PRGHO 6WU]HSHN HW DO IRUWKFRPLQJ  ZKLFKLVWKHODWHVWPRGHOLQWKH´.DF]PDUHNVFKRROµ RI K\GURORJLF PRGHOV <DWHV   GHYHORSHG VSHFLÀFDOO\ IRU DQDO\VLQJ WKH LPSDFW RI FOLPDWH FKDQJH RQ UXQRII DQG H[WUHPH HYHQWV RQ DQ DQQXDO EDVLV &/,581 ,, PRGHOV UXQRII LQ  ZRUOG ULYHU EDVLQV ZLWK FOLPDWH LQSXWV DQG VRLO FKDUDFWHULVWLFV DYHUDJHG RYHU HDFK ULYHU EDVLQ %HFDXVH GDWD RQ  DJULFXOWXUDO DQG 0 , ZLWKGUDZDOV DUH DYDLODEOH

%)LQGLQJVWKUHDWVWRZDWHU IRUDJULFXOWXUH :HÀQGWKDW()5VDQGLQFUHDVHG0 ,ZDWHUGHPDQGV WRJHWKHU ZLOO FDXVH DQ  SHU FHQW UHGXFWLRQ LQ WKH

7DEOH3HUFHQWDJHRIDJULFXOWXUDOZDWHUWKUHDWHQHGLQWKHJHRSROLWLFDOUHJLRQVQLQHVFHQDULRVD 1RFOLPDWHFKDQJH 5HJLRQFRXQWU\

:RUOG (XURSH (XURSHDQ8QLRQ 1RUWK:HVWHUQ (XURSH 8QLWHG.LQJGRP )RUPHU6RYLHW8QLRQ $IULFD 6XE6DKDUDQ$IULFD 1LOH5LYHU%DVLQ 1RUWK$PHULFD $VLD &KLQD ,QGLD /DWLQ$PHULFDDQG WKH&DULEEHDQ %UD]LO 2FHDQLD

$JULFXOWXUDO 0 , ZLWKGUDZDOV 0 ,   ()5V  DQG ELOOLRQP  



()5V 

                        

         

         

         

     

  

1&$5 ZHW  &6,52 GU\ FOLPDWHFKDQJH FOLPDWHFKDQJH 0 , 0 , 0 ,  0 , ()5V ()5V DQG  DQG  



()5V 

()5V 





                           

         

         

         

         

         

     

  

  

  

  

1RWHD$JULFXOWXUDOZDWHUDYDLODELOLW\LQ1RUWK$PHULFDLQFUHDVHVE\SHUFHQWXQGHUWKH0 ,VFHQDULRV 7KLVRFFXUVEHFDXVH0 ,DQGDJULFXOWXUDOZLWKGUDZDOVLQ1RUWK$PHULFDH[FHHG0$5LQWKH &RORUDGRDQG5LR*UDQGHEDVLQVEXW0 ,GHFOLQHVLQ$VDUHVXOWDGGLWLRQDOZDWHULVPDGH DYDLODEOHWRWKHVHFRQVWUDLQHGEDVLQV ()5VHQYLURQPHQWDOÁRZUHTXLUHPHQWV 0 ,PXQLFLSDODQGLQGXVWULDOGHPDQG


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

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



ZDWHU E\ YROXPH 0RGHOOLQJ UHVXOWV LQGLFDWH WKDW LQFUHDVHV LQ ()5V DQG 0 , GHPDQG WRJHWKHU ZLOO WKUHDWHQ QHDUO\  SHU FHQW RI DJULFXOWXUDO ZDWHU LQ FRXQWULHV RI WKH (XURSHDQ 8QLRQ DQG WKH IRUPHU 6RYLHW8QLRQ,QVXE6DKDUDQ$IULFDUDSLGO\ULVLQJ0 , GHPDQGVDOVRWKUHDWHQZDWHUIRUDJULFXOWXUH &OLPDWH FKDQJH ZLOO DIIHFW WKH VSDWLDO DQG WHPSRUDO GLVWULEXWLRQ RI UXQRII DQG WKXV FKDQJH DYDLODELOLW\ IURPWKHVXSSO\VLGH%DVHGRQZHWDQGGU\FOLPDWH VFHQDULRVZHÃ&#x20AC;QGWKDWZDWHUDYDLODELOLW\IRUDJULFXOWXUH ZLOOLQFUHDVHLQ1RUWK$PHULFDDQG$VLDDQGGHFUHDVH LQ $IULFD DQG /DWLQ $PHULFD DQG WKH &DULEEHDQ ,Q (XURSHZDWHUDYDLODELOLW\ZLOOLQFUHDVHXQGHUWKHZHW PRGHO DQG GHFUHDVH XQGHU WKH GU\ PRGHO 2YHUDOO WKHVH UHVXOWV VXJJHVW WKDW E\  DOWKRXJK WKH HIIHFWV RI FOLPDWH FKDQJH RQ DQQXDO DJULFXOWXUDO ZDWHU DYDLODELOLW\ ZLOO EH VLJQLÃ&#x20AC;FDQW WKH HIIHFWV RI JURZLQJ0 ,GHPDQGVDQG()5VPD\EHHYHQPRUH SURQRXQFHG ,PSRUWDQWO\ WKHVH FOLPDWH FKDQJH UHVXOWV FRQVLGHU FKDQJHV LQ 0$5 RQO\ DQG WKXV GR QRW DFFRXQW IRU SRWHQWLDO FKDQJHV LQ VHDVRQDO ZDWHU DYDLODELOLW\ LQFUHDVHV LQ FURS ZDWHU GHPDQG FDXVHG E\ KLJKHU WHPSHUDWXUHV FKDQJHV LQ WKH IUHTXHQF\ DQGVHYHULW\RIH[WUHPHHYHQWVFKDQJHVLQ\LHOGIURP VWRUDJH UHVHUYRLUV DQG D YDULHW\ RI RWKHU LPSRUWDQW FOLPDWHFKDQJHHIIHFWV




75$'($1'(19,5210(175(9,(:

1//'06#4; U  *' /2#%61()4+(11&722.;*#+0510 4''0*175' #5 /+55+105U*'#5'1(# 1((''#.7'*#+0$'69''0#0<#0+##0& '4/#0; (.UDLQ./LQQHDQG0*DHEOHU *,=*HUPDQ\

$EVWUDFW $JULFXOWXUHLVDPDMRUVRXUFHRIJUHHQKRXVHJDV *+* HPLVVLRQVDQGWKXVFRQWULEXWHVVLJQLÀFDQWO\WR FOLPDWHFKDQJH$WWKHVDPHWLPHLWKDVKXJHSRWHQWLDOWRUHGXFHHPLVVLRQVDQGFRXOGHYHQFRQWULEXWHWR FDSWXULQJ VHTXHVWHULQJ FDUERQGLR[LGH &2 IURPWKHDWPRVSKHUHWKURXJKWKHFXOWLYDWLRQRIWUHHFURSV ,WLVGLIÀFXOWWRDVVHVVZKHUHWRPDNHHIIHFWLYHFKDQJHVZLWKRXWNQRZLQJIDFWVRQHPLVVLRQVRXUFHVDQG TXDQWLWLHV²\RXFDQRQO\PDQDJHZKDW\RXFDQPHDVXUH7KHUHIRUHPHWKRGVWRHVWLPDWHVHTXHVWUDWLRQ DQG HPLVVLRQV DUH FXUUHQWO\ EHLQJ GHYHORSHG DQG WKHLU UHVXOWV LQGLFDWHG LQ ´SURGXFW FDUERQ IRRWSULQWVµ LH*+*HPLVVLRQVSHUXQLWRISURGXFW :KLOHPHWKRGVYDU\ZLGHO\WKH\VHHPWRFRQYHUJHDURXQGWKH HPHUJLQJ,62VWDQGDUG 7KHUHDUHRQO\DIHZSUDFWLFDOH[DPSOHVRIFDUERQIRRWSULQWHVWLPDWHVDORQJHQWLUHDJULIRRGFKDLQVEXW WKH\ VHUYH DV YDOXDEOH FDVH VWXGLHV IURP ZKLFK WR GUDZ VRPH FRQFOXVLRQV )LUVWO\ &2 VHTXHVWUDWLRQ HVWLPDWLRQV KDYH JHQHUDOO\ EHHQ H[FOXGHG IURP WKH HTXDWLRQ ZKLFK GLVFULPLQDWHV DJDLQVW WUHH FURS DJULFXOWXUDO SURGXFWLRQ V\VWHPV 6HFRQGO\ HPLVVLRQV IURP SULPDU\ SURGXFWLRQ KDYH XVXDOO\ EHHQ ZHOO UHÁ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

$,QWURGXFWLRQ 7KH TXHVWLRQ RI KRZ WR FRSH ZLWK FOLPDWH FKDQJH DQG UHGXFH *+* HPLVVLRQV LV FXUUHQWO\ KLJK RQ WKH LQWHUQDWLRQDODJHQGD6LQFHDJULFXOWXUHLVFRQVLGHUHG RQHRIWKHNH\VHFWRUVFRQWULEXWLQJWRVXFKHPLVVLRQV LWLVQHFHVVDU\WRFRQVLGHUZD\VDQGPHDQVE\ZKLFK DJULFXOWXUDO SUDFWLFHV FRXOG ORZHU HPLVVLRQV RU HYHQ FDSWXUH WKHP HJ WKURXJK VHTXHVWUDWLRQ  /RZHULQJ HPLVVLRQVLVSRVVLEOHE\UHGXFLQJYDULRXVDJULFXOWXUDO LQSXWVZKLOHPDLQWDLQLQJRXWSXWDWWKHVDPHOHYHO7KLV LVJHQHUDOO\XQGHUVWRRGDVLQFUHDVLQJWKHHIÀFLHQF\RI DSURFHVV$VHFRQGLQWHUYHQWLRQLVWRUHPRYH*+*V IURPWKHDWPRVSKHUHE\IRUH[DPSOH´VHTXHVWUDWLRQµ ZKLFKFDSWXUHV&2LQELRPDVVIURPWKHDWPRVSKHUH 7KLV LV DQ RSWLRQ SDUWLFXODUO\ VXLWHG WR WKH FXOWLYDWLRQ

RI SHUHQQLDOV LH WUHH FURSV  7KHVH SODQWV VWRUH D ODUJH SURSRUWLRQ RI WKH FDSWXUHG &2 DV FDUERQ LQ WKHLU VWDQGLQJ DQG URRW ELRPDVV DQG HYHQ LQ WKHLU OHDYHV DQG IUXLW EXW WKH ODWWHU DUH XVXDOO\ TXLFNO\ FRQVXPHGRUGLVSRVHGRIWKHUHE\UHWXUQLQJWKH&2 WR WKH DWPRVSKHUH +RZHYHU WKH RYHUDOO EDODQFH RI &2VWRUHGLQELRPDVVDQGRYHUVHYHUDO\HDUVPD\ EHTXLWHVXEVWDQWLDODQGZRUWKFRQVLGHULQJLQWHUPVRI FOLPDWHFKDQJHPLWLJDWLRQ

7KHJHQHULF*+*IRRWSULQWRIDWUHHFURS YDOXHFKDLQ :KHQORRNLQJJHQHULFDOO\DWDWUHHFURSEDVHGYDOXH FKDLQ ² IURP LQSXW VXSSO\ WR SULPDU\ SURGXFWLRQ WUDQVSRUW SURFHVVLQJ WUDGH UHWDLO DQG FRQVXPSWLRQ ² WKHUH DUH PDQ\ VWDJHV LQYROYLQJ *+* HPLVVLRQV


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



)LJXUH2YHUYLHZRI&2VHTXHVWUDWLRQDQG*+*HPLVVLRQVLQDFURSEDVHGYDOXHFKDLQ

6RXUFH$GDSWHGIURP.UDLQHWDO

XVXDOO\ FDOFXODWHG LQ &2 HTXLYDOHQWV ² &2H  DQG RQHORFDWLRQZKHUHVHTXHVWUDWLRQWDNHVSODFH ÀJXUH  

‡ )LQDOO\ HPLVVLRQV UHVXOWLQJ IURP HQHUJ\ FRQVXPSWLRQLQIRRGSUHSDUDWLRQDWWKHKRXVHKROG OHYHO

7KH OLJKW SDUWV RI WKH IRRWSULQWV LQ WKH DERYH ÀJXUH GHQRWH WKDW &2 LV VHTXHVWHUHG ZKLOH WKH UHGGDUN SDUWV UHSUHVHQW HPLVVLRQV 7KH VL]H RI WKH IRRWSULQW LQGLFDWHV WKH YROXPH RI HPLWWHG RU FDSWXUHG &2H XVXDOO\H[SUHVVHGLQWRQVRI&2HSHURXWSXWXQLW,Q WKHDERYHH[DPSOHLWLVDVVXPHGWKDWPRUH&2HLV FDSWXUHGWKDQHPLWWHGGXULQJWKHSULPDU\SURGXFWLRQ SURFHVV ZKHUHDV KLJK DPRXQWV RI HPLVVLRQV RFFXU ZKHQ WKH SURGXFW LV SUHSDUHG IRU FRQVXPSWLRQ DQG FRQVXPHG ,Q EHWZHHQ WKHUH DUH HPLVVLRQV FRQQHFWHGZLWKWKHRWKHUVWDJHVRIWKHYDOXHFKDLQ

,QRUGHUWREHDEOHWRGHFLGHZKHUHWRUHGXFHHPLVVLRQV ZLWKLQDYDOXHFKDLQLWLVQHFHVVDU\WRGHWHUPLQHKRZ PXFK*+*LVEHLQJHPLWWHG RUVHTXHVWHUHG DWHDFK VWDJH RI WKH YDOXH FKDLQ DV D EDVLV IRU LGHQWLI\LQJ WKH KRWVSRWV ² \RX FDQ RQO\ PDQDJH ZKDW \RX FDQ PHDVXUH )RU WKLV FXUUHQWO\ WKHUH DUH PRUH WKDQ  LQLWLDWLYHV ZRUNLQJ RQ YDULRXV IRRWSULQWLQJ PHWKRGV DQGVWDQGDUGVVXFKDV,62WKH*UHHQKRXVH *DV 3URWRFRO 3URGXFW $FFRXQWLQJ DQG 5HSRUWLQJ 6WDQGDUGDQG3$6+RZHYHUVRIDUWKHUHLVQR VLQJOH FRPPRQ FDOFXODWLRQ PHWKRG DOWKRXJK WKHUH VHHPVWREHFRQYHUJHQFHDURXQGWKHHPHUJLQJ,62 VWDQGDUGZKLFKDSSHDUHGDVGUDIWLQ%XW QRQH RI WKH VWDQGDUGV DUH SURGXFWVSHFLÀF DQG ZLOO VWLOOQHHGWREHEURNHQGRZQWRVHFWRUSURGXFWJURXS VSHFLÀFUXOHV$QRWKHUPDMRUWDVNVWLOOWREHWDFNOHGLV WRGHYHORSDPHWKRGWKDWUHÁHFWVWKHDFWXDOVLWXDWLRQ RQ WKH IDUP VXIÀFLHQWO\ DFFXUDWHO\ ZKLOH UHPDLQLQJ UHDVRQDEOHZLWKUHVSHFWWRHIIRUWVDQGFRVWV

,QWKHIROORZLQJWKHYDULRXVVWDJHVIURPLQSXWVXSSO\ WRFRQVXPSWLRQDUHGLVFXVVHGEULHÁ\ 0DLQHPLVVLRQKRWVSRWV ‡ /DQGXVH FKDQJH HVSHFLDOO\ ZKHQ SULPDU\ IRUHVW LVFRQYHUWHGLQWRODQGIRUDQQXDOFURSSURGXFWLRQ  ‡ $SSOLFDWLRQ RI DJURFKHPLFDOV HVSHFLDOO\ QLWURJHQ IHUWLOL]HU SURGXFHG WKURXJK DQ LQWHQVLYH HQHUJ\ FRQVXPLQJ LQGXVWULDO SURFHVV DQG QLWURJHQ ÀHOG HPLVVLRQVLQWKHIRUPRIQLWURXVR[LGH  ‡ )RVVLO IXHO DQG HQHUJ\FRQVXPLQJ SURFHVVHV GXULQJ ODQG SUHSDUDWLRQ FURS PDLQWHQDQFH KDUYHVWLQJDQGFRQVHUYLQJRIKDUYHVWV ‡ (PLVVLRQVIURPZDVWHZDWHU PHWKDQH  ‡ )RVVLOIXHODQGHQHUJ\FRQVXPLQJSURFHVVHVVXFK DV LQGXVWULDO SURFHVVLQJ DQG LQWHUQDO GRPHVWLF DQGWUDQVQDWLRQDOWUDQVSRUWDWLRQ

%6RPHH[SHULHQFHVZLWKFDUERQ IRRWSULQWLQJLQDJULFXOWXUDO YDOXHFKDLQV 6R IDU IRU DJULFXOWXUH WKHUH DUH RQO\ YHU\ IHZ FDVHV SXEOLVKHGWKDWVSDQDQHQWLUHYDOXHFKDLQ2QHVXFK H[DPSOHLVH[DPLQHGEHORZLQPRUHGHWDLO




75$'($1'(19,5210(175(9,(:

)LJXUH&DUERQIRRWSULQWDORQJWKHYDOXHFKDLQIRURQHEUHZHGFXSRI7FKLER5DULW\0DFKDUH3ULYDWH&RIIHH

6RXUFH$GDSWHGIURP7FKLER*PE+3&)3LORW3URMHFW*HUPDQ\

8QGHU WKH 3URGXFW &DUERQ )RRWSULQW 3&)  SURMHFW *HUPDQ\ YDULRXV FRPPRGLWLHV ZHUH H[DPLQHG ZLWK UHVSHFWWRWKHLU*+*HPLVVLRQVRQHRIWKHPEHLQJD UDULW\FRIIHHIURP0DFKDUHIDUPLQWKH8QLWHG5HSXEOLF RI 7DQ]DQLD 7KH DVVHVVPHQWV ZHUH EDVHG RQ ,62  DQG 3$6  D SLRQHHULQJ PHWKRG GHYHORSHGE\WKH%ULWLVK6WDQGDUGV,QVWLWXWLRQ %6, WR DVVHVV*+*HPLVVLRQVLQWKHOLIHF\FOHVRIJRRGVDQG VHUYLFHV $OOHPLVVLRQVPHDVXUHGLQÃ&#x20AC;JXUHZHUHFDOFXODWHG ZLWKUHIHUHQFHWRRQHEUHZHGFXSRIFRIIHHFRQWDLQLQJ  PO RI ZDWHU DQG  J RI FRIIHH ,W VKRZV WKDW WKH PDMRU HPLVVLRQV RFFXU GXULQJ SULPDU\ SURGXFWLRQ  SHU FHQW  IROORZHG E\ FRQVXPSWLRQ  SHUFHQW 6XUSULVLQJO\HPLVVLRQVIURPURDVWLQJ  SHUFHQW DQGHYHQIURPLQWHUQDWLRQDOWUDQVSRUW  SHU FHQW  ZHUH UDWKHU ORZ 7KH VWXG\ PHQWLRQV WKDW 0DFKDUHIDUPLVDQROGFRIIHHIDUPDQGWKDWFKDQJHV LQODQGXVHZHUHQRWFRQVLGHUHG1RUPDOO\HPLVVLRQV IURPODQGXVHFKDQJHVDUHWDNHQLQWRDFFRXQWLIWKH\ KDYH WDNHQ SODFH ZLWKLQ WKH ODVW  \HDUV LH DIWHU   0RVW RI WKH HPLVVLRQV ZHUH UHODWHG WR WKH DSSOLFDWLRQRIDJURFKHPLFDOV+RZHYHURQHLPSRUWDQW IDFWRU QDPHO\ WKH VHTXHVWUDWLRQ RI &2 WKURXJK WKH FRIIHHSODQWVVKDGHWUHHVRURWKHUWUHHVLQWKHFRIIHH Ã&#x20AC;HOGZDVRPLWWHG,IWKDWKDGEHHQWDNHQLQWRDFFRXQW

WKH Ã&#x20AC;JXUHV IRU HPLVVLRQV GXULQJ SULPDU\ SURGXFWLRQ ZRXOGKDYHEHHQVLJQLÃ&#x20AC;FDQWO\ORZHU)RUH[DPSOHWKH HPLVVLRQ EDODQFH IRU WKH .HQ\DQ %DUDJZL )DUPHUV· &RRSHUDWLYH6RFLHW\LQÃ&#x20AC;JXUHVKRZVWKDWWRWDO*+* HPLVVLRQVDWSURGXFWLRQVWDJHZHUHHYHQQHJDWLYH 7KH LGHQWLÃ&#x20AC;FDWLRQ RI FRQVXPSWLRQ DV D KRWVSRW DSDUW IURP SULPDU\ SURGXFWLRQ  EHFRPHV HYHQ PRUHLQWHUHVWLQJZKHQORRNLQJDWWKHYDULRXVZD\VRI SUHSDULQJFRIIHH &RIIHHLVXVXDOO\SUHSDUHGIRUFRQVXPSWLRQLQGLIIHUHQW ZD\V DQG WKHVH FDQ KDYH YHU\ GLIIHUHQW FDUERQ IRRWSULQWVDVÃ&#x20AC;JXUHVKRZV7KHVWXG\DVVXPHGD PL[RISUHSDUDWLRQPHWKRGVZLWKDQDYHUDJHRI JRI&2HSHUFXS7KHQRUPDOÃ&#x20AC;OWHUGULSPHWKRGKDV D IRRWSULQW RI RQO\  J RI &2 ZKLOH D PRGHUQ DXWRPDWLF FRIIHH PDFKLQH ² ZKLFK QHHGV D ORW RI HQHUJ\WRSUHVVWKHZDWHUYDSRXUWKURXJKWKHFRIIHH SRZGHU ² HPLWV DQ HQRUPRXV TXDQWLW\ RI  J RI &2H ,I DOO WKH 0DFKDUH FRIIHH ZRXOG KDYH EHHQ SUHSDUHG XVLQJ RQO\ DXWRPDWLF FRIIHH PDFKLQHV WKLV ZRXOG KDYH FKDQJHG WKH WRWDO FDUERQ IRRWSULQW RIWKHYDOXHFKDLQWRJRI&2H ²    ZLWK WKH FRIIHH PDFKLQH DFFRXQWLQJ IRU FORVH WR  SHU FHQW RI DOO *+* HPLVVLRQV RI WKH YDOXHFKDLQ/RRNLQJEH\RQGWKHVHÃ&#x20AC;JXUHVLWPXVWEH




.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

)LJXUH&DUERQIRRWSULQWLQSUHSDULQJDFXSRIFRIIHH Carbon footprint in the use phase

Mix of preparation methods

17.90

Automatic coffee machine

60.27

Filter drip

10.04

French press

10.04 0

10

20

30

40

50

60 70 g CO2 e / cup of coffee

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Ã&#x20AC;HG DQG HIIHFWLYH FKDQJHV PDGH

&5HGXFLQJWKHFDUERQIRRWSULQWE\ LQFUHDVLQJWUHHFURSELRPDVVDQG FKDQJLQJFURSSLQJV\VWHPV ,W LV XQIRUWXQDWH WKDW PRVW RI WKH FDUERQ IRRWSULQW DVVHVVPHQW PHWKRGV RPLW RU GR QRW FRQVLGHU ELRPDVV FUHDWLRQ DQG WKXV VHTXHVWUDWLRQ WKURXJK WUHH FURS V\VWHPV 7KH XQGHUO\LQJ DUJXPHQW JRHV WKDW RQ WKH RQH KDQG WKH DPRXQW RI WUHHV LQ VXFK V\VWHPVLVXVXDOO\VPDOODQGWKDWRQWKHRWKHUKDQG WKH\ZLOOVRRQHURUODWHUEHFXWDQGUHWXUQWKHLUVWRUHG *+*WRWKHDWPRVSKHUH )LUVW RI DOO KRZ PXFK &2 FDQ EH FDSWXUHG LQ

DJULFXOWXUDO WUHH FURSV" 7KHUH DUH YHU\ GLIIHUHQW VLWXDWLRQVDQGWKXVGDWDYDU\DORW$PDQJRWUHHFDQ EHJURZQZLWKDKXJHFDQRS\²DVLVRIWHQWKHFDVHLQ VPDOOKROGHUIDUPV²DQGFDQWKHUHIRUHEHYHU\VLPLODU WR D IRUHVW WUHH RU LW FDQ EH NHSW VKRUW DQG SUXQHG DV LQ LQWHQVLYH RUFKDUG V\VWHPV )ROORZLQJ D UHYLHZ RI D QXPEHU RI UHSRUWV D JHQHUDO FRQFOXVLRQ LV WKDW WKHDPRXQWRI&2FDSWXUHGLQELRPDVVLVURXJKO\LQ WKH RUGHU RI D IDFWRU RI  IURP DQQXDO FURSV ² WRQVRI&2KD WRRUFKDUGWUHHV ²WRQVRI&2 KD DQGIRUHVWV ²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Ã&#x20AC;FDQWDPRXQWVRIFDUERQDQG DSDUW IURP HPLWWLQJ *+* LW LV DOVR DEOH WR ELQG DQG VWRUH FDUERQ )URP RXU RZQ H[SHULHQFH LQ .HQ\D .UDLQHWDO VRLOVZLWKDGHSWKRIFP²FP FRQWDLQDURXQGWRQVRI&2KD²RIWHQXSWR  WLPHVPRUHWKDQWKHWUHHELRPDVV7KXVIDUPLQJDQG FURSSLQJV\VWHPVDVZHOODVWKHLUZD\VDQGPHWKRGV RIFXOWLYDWLRQGLIIHUZLGHO\ZLWKUHVSHFWWRWKHLUDELOLW\ WR VHTXHVWHU DQG VWRUH RU HPLW &2 )RU H[DPSOH




75$'($1'(19,5210(175(9,(:

)LJXUH2QIDUPHPLVVLRQVE\FDWHJRU\RIIDUPVLQ%DUDJZL.HQ\D NJRI&2HSHUNJRIFRIIHHFKHUU\

1.5 1.0 Carbon stock change

0.5 -

Kg. of CO2-e

0-0.5 -

Fertilizer production

Fertilizer induced emissions

Pesticides

Total emissions

Crop residue management

-1.0 -1.5 -2.0 -

Weighted average Average

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·&RRSHUDWLYH6RFLHW\ZHUH VDPSOHG LQ 'HFHPEHU  WR GHWHUPLQH HPLVVLRQV DQGVHTXHVWHUHGDPRXQWVRI&2HZLWKWKHKHOSRIWKH &RRO)DUP7RRO /LQQHHWDO ,WIRXQGWKDWRQ IDUPQHWHPLVVLRQVZHUHRQDYHUDJHNJRI&2H SHU NJ RI FRIIHH FKHUULHV Ã&#x20AC;JXUH   7KH ZHLJKWHG DYHUDJH DFFRUGLQJ WR HDFK IDUP·V SURGXFWLRQ

YROXPHZDVNJRI&2HNJRIFRIIHHFKHUULHV (PLVVLRQV IURP IHUWLOL]HU SURGXFWLRQ DQG LQGXFHG HPLVVLRQVIURPIHUWLOL]HUXVHDORQJZLWKFURSUHVLGXH PDQDJHPHQW ZHUH WKH SULPDU\ HPLVVLRQ VRXUFHV ² HPLVVLRQ KRWVSRWV &DUERQ VHTXHVWUDWLRQ IURP DERYH JURXQG ELRPDVV DQG PDQDJHPHQW SUDFWLFHV VXFK DV LQFRUSRUDWLRQ RI UHVLGXHV FRPSRVW DQG PDQXUH DFFRXQWHG IRU WKH PRVW VLJQLÃ&#x20AC;FDQW FDUERQ VWRFNFKDQJHVLQWKHV\VWHPZKLFKODUJHO\RIIVHWWKH HPLVVLRQV

'&RQFOXVLRQV &XUUHQW*+*DFFRXQWLQJV\VWHPVGLIIHUFRQVLGHUDEO\ LQLPSRUWDQWDVSHFWVVXFKDVLQWHUPVRIZKHWKHUWKH\ LQFOXGHRURPLWVHTXHVWUDWLRQ,IDSSURSULDWHPLWLJDWLRQ VWUDWHJLHVDUHWREHGHYHORSHGKDUPRQL]HGPHWKRGV DUH QHHGHG WKDW VKRXOG PRUH DFFXUDWHO\ SRUWUD\ WKH RYHUDOO SLFWXUH DQG DSDUW IURP WKH PDLQ VRXUFHV RI HPLVVLRQVDOVRUHSRUWDGHTXDWHO\RQVHTXHVWUDWLRQ


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U  11&#56''&7%6+10U .1$#. /2'4#6+8' -XOLDQ3DUÀWW3ULQFLSDO5HVRXUFH$QDO\VW2DNGHQH+ROOLQV$\OHVEXU\8QLWHG.LQJGRPDQG 0DUN%DUWKHO6SHFLDO$GYLVRU:DVWHDQG5HVRXUFHV$FWLRQ3URJUDPPH%DQEXU\8QLWHG.LQJGRP

$EVWUDFW ‡ )RRGZDVWHLVDQLVVXHRILPSRUWDQFHWRJOREDOIRRGVHFXULW\DQGJRRGHQYLURQPHQWDOJRYHUQDQFH <HWWKHUHLVLQVXIÀFLHQWUHOLDEOHGDWDIURPZKLFKWRHVWLPDWHWKHSURSRUWLRQRIJOREDOIRRGSURGXFWLRQ WKDWLVZDVWHG ‡ $YRLGDEOH ORVVHV DUH UHJDUGHG DV JOREDOO\ VLJQLÀFDQW DQG WKHUHIRUH FRQVWLWXWH D PDMRU VRFLDO DQG HQYLURQPHQWDOEXUGHQ+RZHYHUOHVVWKDQSHUFHQWRIDOOIXQGLQJIRUDJULFXOWXUDOUHVHDUFKLVDOORFDWHG WRSRVWKDUYHVWV\VWHPV .DGHU  7KHUHDUHWKUHHSDUWLFXODUUHDVRQVZK\WKLVLVVXHQHHGVWREHDGGUHVVHGZLWKXUJHQF\ ‡ 6RPHHVWLPDWHVVXJJHVWWKDWZDVWHFRXOGDFFRXQWIRUEHWZHHQDWKLUG )$2H DQGRQHKDOI /XQGTYLVWGH)UDLWXUHDQG0ROGHQ RIDOOFXUUHQWIRRGSURGXFWLRQ5HGXFWLRQRISRVWKDUYHVW ZDVWH LQ GHYHORSLQJ FRXQWULHV DQG FRQVXPHU ZDVWH LQ KLJKLQFRPH FRXQWULHV DSSHDU WR RIIHU WKH JUHDWHVWSRWHQWLDOVRFLDODQGHQYLURQPHQWDOJDLQV ‡ 7KHDEVROXWHTXDQWLW\RIIRRGZDVWHDOWKRXJKODUJHO\XQTXDQWLÀHGZLOOLQHYLWDEO\JURZRYHUWKHFRPLQJ GHFDGHV DV SURGXFWLRQ LQFUHDVHV WR PHHW IXWXUH GHPDQG DQG DV LQFRPHV ULVH DPRQJVW JURZLQJ SRSXODWLRQVLQQHZPHJDFLWLHVQRWDEO\LQWKH%5,&FRXQWULHV LH%UD]LOWKH5XVVLDQ)HGHUDWLRQ,QGLD DQG&KLQD DQGDVGLHWVEHFRPHPRUHGLYHUVLÀHGDZD\IURPVWDUFK\VWDSOHIRRGVWRZDUGVIUHVKIUXLW DQGYHJHWDEOHVGDLU\PHDWDQGÀVK ‡ 5HGXFWLRQRIIRRGZDVWHZRXOGFRQWULEXWHWRZLGHUSROLF\DJHQGDVWKDWDUHFULWLFDOWRWKHIXWXUHQDPHO\ LQFUHDVLQJSURGXFWLRQUHGXFLQJIRRGLQVHFXULW\DQGIRRGSULFHLQFUHDVHVLPSURYLQJVXVWDLQDELOLW\RI WKHJOREDOIRRGVXSSO\FKDLQ )6& UHGXFLQJSUHVVXUHVRQODQGXVHDQGIUHVKZDWHUUHVRXUFHVDQG UHGXFLQJJUHHQKRXVHJDVHV

$UHFHQWUHYLHZRIJOREDOIRRGZDVWHDQGSRWHQWLDOIRU ZDVWHUHGXFWLRQFDUULHGRXWE\WKHDXWKRUVRIWKLVDUWLFOH IRUWKH*RYHUQPHQWRIWKH8QLWHG.LQJGRP·V)RUHVLJKW 3URJUDPPH7KH)XWXUHRI)RRGDQG)DUPLQJ )RUHVLJKW D  SURYLGHV DQ RYHUYLHZ RI WKH FKDOOHQJHV DQG SRVVLEOHVROXWLRQVIRUGHYHORSLQJFRXQWULHV

$:KDWFRXQWVDVIRRGZDVWH" 'LIIHUHQWZD\VRIGHÀQLQJIRRGZDVWHUHÁHFWGLIIHUHQW UHVHDUFK REMHFWLYHV )URP D KXPDQ IRRG VXSSO\ SHUVSHFWLYH LW FDQ EH GHÀQHG DV HGLEOH PDWHULDO LQWHQGHG IRU KXPDQ FRQVXPSWLRQ WKDW LV GLVFDUGHG ORVW GHJUDGHG RU FRQVXPHG E\ SHVWV IURP KDUYHVW WR FRQVXPHU )$2   )URP D JOREDO UHVRXUFH HIÀFLHQF\ SHUVSHFWLYH WKH GHÀQLWLRQ PLJKW EH H[WHQGHGWR LQFOXGH IRRG ÀW IRU KXPDQ FRQVXPSWLRQ EXW LQWHQWLRQDOO\ XVHG DV DQLPDO IHHG 6WXDUW  

&XUUHQWO\  SHU FHQW RI JOREDO JUDLQ LV IHG WR FDWWOH 81(3  7KHWHUP´SRVWKDUYHVWORVVµLVRIWHQXVHGWRGHVFULEH ORVVHV EHWZHHQ KDUYHVW DQG WKH RQZDUG VXSSO\ RI SURGXFHWRPDUNHWVDQGHTXDWHVEURDGO\ZLWKZDVWH LQ WKH )6& 7KH ODWWHU WHUP LV JHQHUDOO\ DSSOLHG WR SRVWKDUYHVW SURFHVVLQJ GLVWULEXWLRQ DQG UHWDLOLQJ LQ KLJKLQFRPHFRXQWULHVDQGLQFUHDVLQJO\LQHPHUJLQJ HFRQRPLHV7KH)6&WKHUHIRUHHQFRPSDVVHVDZLGH UDQJH RI DFWLYLWLHV WKDW LQFOXGH SURFHVVLQJ VWRUDJH WUDQVSRUW DQG GLVWULEXWLRQ PDQXIDFWXULQJ ZKROHVDOH DQG UHWDLO )XUWKHU XSVWUHDP WKHUH DUH IDFWRUV DW WKH LQLWLDO ´SUHKDUYHVWµ VWDJHV WKDW DOVR FRQWULEXWH WR ORVVHV )RU H[DPSOH WKH FDSWXUH DQG GLVFDUGLQJ RI ÀVK VWRFNV EHIRUH WKH\ DUH ODQGHG XVXDOO\ UHVXOWLQJ LQ WKHLU GHPLVH  6XFK ÀVK E\FDWFK UHSUHVHQWV D VLJQLÀFDQWSURSRUWLRQRIÀVKFDXJKWLQJOREDOÀVKHULHV




)$2   7KH SDUDOOHO VLWXDWLRQ LQ DJULFXOWXUDO V\VWHPV LQYROYHV ORVVHV WKDW RFFXU ZKHQ FURSV DUH QRW KDUYHVWHG EXW DUH SORXJKHG EDFN LQWR WKH VRLO 6XFKIURQWHQGORVVHVDUHE\WKHLUYHU\QDWXUHGLIÃ&#x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´IRRG ZDVWHµ DV WKH UHVXOWLQJ EHQHÃ&#x20AC;WV DUHVPDOOFRPSDUHGZLWKWKHYDOXHRIWKHRULJLQDOIRRG SURGXFWDQGWKHHQYLURQPHQWDOVDYLQJVDUHJHQHUDOO\ PRGHVW YLVjYLV WKH FXPXODWLYH HQYLURQPHQWDO LPSDFWV DVVRFLDWHG ZLWK WKH DJULFXOWXUDO DQG )6& VWDJHVRIWKHIRRGSURGXFWOLIHF\FOHV

%3RVWKDUYHVWORVVHVLQWKHIRRG VXSSO\FKDLQ ,QPDQ\GHYHORSLQJFRXQWULHVDJULFXOWXUHUHPDLQVWKH GRPLQDQWHFRQRPLFVHFWRU )$2F \HWPRVWRI WKH UXUDO SRRU UHO\ RQ VKRUW IRRG VXSSO\ FKDLQV ZLWK OLPLWHG SRVWKDUYHVW LQIUDVWUXFWXUH DQG WHFKQRORJLHV ZKLFK FRQWULEXWH WR VXEVWDQWLDO SRVWKDUYHVW ORVVHV &HUHDOV WKH PRVW VWXGLHG IRRG FRPPRGLW\ JURXS LQ UHODWLRQ WR SRVWKDUYHVW ORVVHV 3DUÃ&#x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

75$'($1'(19,5210(175(9,(:

QDWXUH DUH KLJKHU WKDQ WKRVH RI FHUHDOV DQG YDU\ FRQVLGHUDEO\E\UHJLRQDQGE\FRPPRGLW\W\SH'DWD DYDLODEOH IURP ORZLQFRPH FRXQWULHV IRU D OLPLWHG UDQJHRIIUHVKIUXLWDQGYHJHWDEOHVVXJJHVWORVVHVRI RYHUSHUFHQW )$2H $OWKRXJKLWKDVEHHQ VXJJHVWHG WKDW SRVWKDUYHVW ORVVHV DUH VRPHWLPHV RYHUHVWLPDWHG 3DUÃ&#x20AC;WW %DUWKHO DQG 0DFQDXJKWRQ   WKLV SDUWO\ UHODWHV WR WKH GLIÃ&#x20AC;FXOW\ RI GHULYLQJ ´W\SLFDOµ ORVV HVWLPDWHV IRU D FURS DQG UHJLRQ ZKHQ WKHOLPLWHGGDWDIURPÃ&#x20AC;HOGPHDVXUHPHQWVPD\UHODWHWR VSHFLÃ&#x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Ã&#x20AC;FLHQF\ DQG UHGXFH WKH ODERXU LQWHQVLW\ RI WKH WHFKQRORJLHV WKDW DUH XVHG )RUHVLJKW F +RGJHV %X]E\ DQG %HQQHWW   $WWHPSWV WR UHGXFHSRVWKDUYHVWORVVHVQHHGWRWDNHLQWRDFFRXQW FXOWXUDO DQG Ã&#x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Ã&#x20AC;FDQWO\ 8QLWHG1DWLRQV +RZHYHU LQIUDVWUXFWXUDO LPSURYHPHQWV SDUWLFXODUO\ GU\ DQG FROGVWRUDJH IDFLOLWLHV SDFN KRXVHV URDGV SRUWV WHOHFRPPXQLFDWLRQV DQG SRZHU VXSSOLHV KDYH WKH SRWHQWLDO WR FRXQWHUDFW VXFK GHYHORSPHQWV ,Q VRPH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

%5,& FRXQWULHV SXEOLF VHFWRU LQYHVWPHQW LV EHLQJ FRQVLGHUHGIRUDFFHOHUDWLQJWKLVSURFHVV)RUH[DPSOH LQ,QGLDWKH*RYHUQPHQWLVGLVFXVVLQJDQ´HYHUJUHHQ UHYROXWLRQµZKLFKZLOOLQYROYHWKHGHYHORSPHQWRIIRRG SURFHVVLQJXQLWV )RUHVLJKWF 

&(PHUJLQJHFRQRPLHVDQGKLJK LQFRPHFRXQWULHV ,Q HPHUJLQJ HFRQRPLHV DQG KLJKLQFRPH FRXQWULHV )6&VLQYROYHFORVHUOLQNVEHWZHHQJURZHUVVXSSOLHUV SURFHVVRUVGLVWULEXWLRQV\VWHPVDQGPDUNHWVWKHUHE\ HQVXULQJJUHDWHUHFRQRPLHVRIVFDOHFRPSHWLWLYHQHVV DQG HIÀFLHQF\ 'HYHORSPHQW RI PRUH LQGXVWULDOL]HG )6&VFRXOGDOVRIRVWHUJURZWKLQWKHIRRGSURFHVVLQJ VHFWRU,QPHGLXPDQGKLJKLQFRPHFRXQWULHVLWKDV RIWHQ EHHQ DUJXHG WKDW WKH FHQWUDOL]HG SURFHVVLQJ RI IRRG OHDGV WR EHWWHU UHVRXUFH HIÀFLHQF\ DQG OHVV ZDVWH RYHUDOO +RZHYHU UHVHDUFK RQ FRQVXPHU IRRG ZDVWHVXJJHVWVWKDWWKLVLVQRWWKHFDVH :5$3  FRQVXPHUV ZDVWH VLJQLÀFDQW TXDQWLWLHV RI IRRG WKXV SRWHQWLDOO\ QHJDWLQJ WKH EHQHÀWV RI FHQWUDOL]HG IRRG SURFHVVLQJ )XUWKHU ORVVHV DUH DVVRFLDWHG ZLWK FRVPHWLFTXDOLW\VWDQGDUGVDSSOLHGE\UHWDLOHUVWRIUHVK IUXLWDQGYHJHWDEOHVZKLFKFDQUHGXFHWKHYROXPHRI PDUNHWDEOHDQGHGLEOHIRRGUHDFKLQJFRQVXPHUV7KLV WUHQG LV LQFUHDVLQJO\ EHLQJ FRXQWHUEDODQFHG E\ WKH JURZLQJ LQÁXHQFH RI UHWDLOHUV DQG PDQXIDFWXUHUV LQ DJULFXOWXUDO GHYHORSPHQW JURXSV FURS VXVWDLQDELOLW\ JURXSV DQG VXVWDLQDEOH DJULFXOWXUH LQLWLDWLYHV DOO RI ZKLFK DUH EULQJLQJ DERXW LPSURYHPHQWV LQ JURZLQJ SUDFWLFHV DQG IXUWKHU UHGXFWLRQV LQ SRVWKDUYHVW ORVVHV ,Q HPHUJLQJ HFRQRPLHV VXSHUPDUNHWV DUH WKH PDLQ YHKLFOH IRU SURYLGLQJ GLYHUVLÀHG GLHWV IRU WKH H[SDQGLQJ PLGGOH FODVVHV DQG WKH XUEDQ SRRU 7KHVH GHYHORSPHQWV DUH DOPRVW HQWLUHO\ GHSHQGHQW RQ IRUHLJQ GLUHFW LQYHVWPHQW DQG VKRZ KLJK JURZWK UDWHV LQ (DVWHUQ (XURSH SDUWV RI $VLD DQG /DWLQ $PHULFD 5HDUGRQ 7LPPHU DQG %HUGHJXp   7KH QDWXUH DQG SDFH RI WKHVH GHYHORSPHQWV DUH LQÁXHQFHG E\ WKH H[WHQW WR ZKLFK UHWDLOHUV E\SDVV H[LVWLQJPDUNHWVDQGWUDGLWLRQDOZKROHVDOHUVWRVHFXUH SURGXFHRIWKHUHTXLUHGVWDQGDUGDQGYROXPH0DQ\ RIWKHIDFWRUVWKDWPD\LQFUHDVHZDVWHLGHQWLÀHGLQWKH )6&VRIHPHUJLQJHFRQRPLHVDUHVLPLODUWRWKRVHLQ KLJKLQFRPH FRXQWULHV VXFK DV SD\PHQW WHUPV WKDW GLVFRXUDJHVPDOOJURZHUVDQGV\VWHPVIRUGHPDQG IRUHFDVWLQJ RUGHU SODQQLQJ DQG UHSOHQLVKPHQW WKDW VRPHWLPHV OHDG WR RYHUSURGXFWLRQ +RZHYHU WKHUH DUH OHVVRQV WKDW PLJKW EH OHDUQW IURP LQGXVWULDOL]HG



FRXQWULHV )RU LQVWDQFH WKH FRPELQHG HIIHFWV RI FRQWUDFWXDO SHQDOWLHV IRU QRQGHOLYHU\ RI RUGHU YROXPHVUHVLGXDOVKHOIOLIHSURGXFWWDNHEDFNFODXVHV DQGSRRUGHPDQGIRUHFDVWLQJZHUHHVWLPDWHGWRGULYH XSRYHUSURGXFWLRQDQGKLJKHUOHYHOVRIZDVWDJHE\ SHUFHQWLQWKH8QLWHG.LQJGRP)6& 'HIUD 

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

(&RQFOXVLRQVORZLQFRPHFRXQWULHV VKRZWKHJUHDWHVWSRWHQWLDOIRUIRRG ZDVWHUHGXFWLRQ $VLJQLÀFDQWUHGXFWLRQLQJOREDOIRRGZDVWHLVDQLP SRUWDQW VWHS WRZDUGV VHFXULQJ IRRG IRU WKH JURZLQJ JOREDOSRSXODWLRQZKLFKLVHVWLPDWHGWRH[FHHGQLQH ELOOLRQ SHRSOH E\  7KH SRWHQWLDO WR PHHW WKH UHVXOWLQJLQFUHDVHLQGHPDQGFDQQRWEHPHWWKURXJK IXUWKHU SURGXFWLYLW\ JDLQV DORQH RU E\ H[WHQGLQJ WKH DUHDRIODQGIRUDJULFXOWXUDOSURGXFWLRQ,WLVWKHUHIRUH HVVHQWLDOWRREWDLQPRUHIURPJOREDOIRRGSURGXFWLRQ E\ZDVWLQJOHVV7KLVZLOOUHTXLUHDFWLRQRQPDQ\IURQWV DFURVVKLJKLQFRPHDQGORZHULQFRPHFRXQWULHVDOLNH 7KH)RUHVLJKW5HYLHZ )RUHVLJKWG LGHQWLÀHGWKH PDLQDFWLRQVQHHGHGLQRUGHUWREULQJWKHPD[LPXP EHQHÀW WR GHYHORSLQJ FRXQWULHV 7KHVH DUH EULHÁ\ GLVFXVVHGEHORZ *UHDWHU LQYHVWPHQW LQ VWRUDJH SDFNDJLQJ DQG WUDQVSRUW LQIUDVWUXFWXUH LQ ORZLQFRPH FRXQWULHV E\ QDWLRQDO JRYHUQPHQWV DQG WKH GRQRU FRPPXQLW\ 5HODWLYHO\ ORZFRVW LQWHUYHQWLRQV WKDW FRXOG DFKLHYH VL]HDEOH IRRG ZDVWH UHGXFWLRQ LQFOXGH EDVLF SDFNDJLQJIRUWUDQVSRUWRIIUHVKSURGXFHLQQRYDWLRQ




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·V 3XUFKDVH IRU 3URJUHVV LQLWLDWLYH ZKLFK LQFOXGHV WKH SURYLVLRQ RI JXDUDQWHHGFRQWUDFWVDJULFXOWXUDOH[WHQVLRQVHUYLFHV

75$'($1'(19,5210(175(9,(:

DQG FURS LQVXUDQFH IRU ORFDO FRPPXQLWLHV DQG D VRFLDOVDIHW\QHWDVZHOODVIRRGDLGIURPORFDOUDWKHU WKDQ LQWHUQDWLRQDO VRXUFHV 6XFK PHDVXUHV KHOS WR UHGXFH SRVWKDUYHVW ORVVHV DV WKH\ HQFRXUDJH LQYHVWPHQW LQ SRVWKDUYHVW LQIUDVWUXFWXUH DQG UHGXFH SULFHÁ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À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ÁXHQFHGORVVHV


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1//'06#4; U  *'1.'1(756#+0#$.'1057/26+10+0

156'4+0)# 70&#/'06#.4#05(14/#6+101( )4+%7.674' /XFLD5HLVFK &RSHQKDJHQ%XVLQHVV6FKRRO'HQPDUN

$EVWUDFW Â&#x2021; 0DMRUFKDQJHVLQIRRGEHKDYLRXUWRZDUGVPRUHVXVWDLQDEOHFRQVXPSWLRQV\VWHPVPXVWKDSSHQLQ SDUWLFXODULQWKHLQGXVWULDOL]HGFRXQWULHV Â&#x2021; .H\LVVXHVRIFRQFHUQDUHH[FHVVLYHPHDWDQGGDLU\VXJDUDQGIDWFRQVXPSWLRQLQ´PRGHUQGLHWVµ RYHUFRQVXPSWLRQLQVRPHSDUWVRIWKHZRUOGDQGXQGHUFRQVXPSWLRQLQRWKHUVDVZHOODVIRRGZDVWH Â&#x2021; ,QRUGHUWRIRVWHUVXVWDLQDEOHIRRGFRQVXPSWLRQLWLVQHFHVVDU\WRFRRUGLQDWHSROLFLHVUHODWLQJWRIRRG WKHHQYLURQPHQWKHDOWKDQGVRFLDOFRKHVLRQ

$'HÃ&#x20AC;QLWLRQRIVXVWDLQDEOHIRRG FRQVXPSWLRQ 7KH2VOR5RXQGWDEOHRQ6XVWDLQDEOH3URGXFWLRQDQG &RQVXPSWLRQ KDV GHÃ&#x20AC;QHG VXVWDLQDEOH FRQVXPSWLRQ LQ JHQHUDO DV ´WKH XVH RI JRRGV DQG VHUYLFHV WKDW UHVSRQG WR EDVLF QHHGV DQG EULQJ D EHWWHU TXDOLW\ RIOLIHZKLOHPLQLPL]LQJWKHXVHRIQDWXUDOUHVRXUFHV WR[LFPDWHULDOVDQGHPLVVLRQVRIZDVWHDQGSROOXWDQWV RYHUWKHOLIHF\FOHVRDVQRWWRMHRSDUGL]HWKHQHHGV RI IXWXUH JHQHUDWLRQVµ 1RUZHJLDQ 0LQLVWU\ RI WKH (QYLURQPHQW   $V UHJDUGV FRQVXPSWLRQ LQ WKH IRRGGRPDLQWKHUHLVQREURDGO\DFFHSWHGGHÃ&#x20AC;QLWLRQ WR GDWH EXW VHYHUDO DWWHPSWV WR FODULI\ DQG VKDUSHQ WKH FRQFHSW KDYH EHHQ PDGH 'HÃ&#x20AC;QLWLRQV GLIIHU GHSHQGLQJ RQ WKH WKHPDWLF IRFXV ² HQYLURQPHQW DQG FOLPDWH SXEOLF KHDOWK DQG OLIH RSSRUWXQLWLHV PDOQXWULWLRQ DQG FULWLFDO DFFHVV WR IRRG 6WLOO D FRUH VHW RI FULWHULD FDQ EH GLVWLOOHG 3HUKDSV WKH PRVW HQFRPSDVVLQJ DSSURDFK KDV EHHQ LQWURGXFHG E\ WKH 6XVWDLQDEOH 'HYHORSPHQW &RPPLVVLRQ   RI WKH8QLWHG.LQJGRP7KHFRPPLVVLRQFRQVLGHUVIRRG DQGGULQNVVXVWDLQDEOHLIWKH\ Â&#x2021; $UH VDIH KHDOWK\ DQG QXWULWLRXV IRU FRQVXPHUV LQ SODFHV VXFK DV VKRSV UHVWDXUDQWV VFKRROV DQG KRVSLWDOV Â&#x2021; &DQPHHWWKHQHHGVRIOHVVZHOORIISHRSOH Â&#x2021; 3URYLGHDYLDEOHOLYHOLKRRGIRUIDUPHUVSURFHVVRUV DQG UHWDLOHUV ZKRVH HPSOR\HHV HQMR\ D VDIH DQG K\JLHQLF ZRUNLQJ HQYLURQPHQW ZKHWKHU QDWLRQDOO\ RUDEURDG Â&#x2021; 5HVSHFW ELRSK\VLFDO DQG HQYLURQPHQWDO OLPLWV LQ

WKHLU SURGXFWLRQ DQG SURFHVVLQJ ZKLOH UHGXFLQJ HQHUJ\ FRQVXPSWLRQ DQG LPSURYLQJ WKH ZLGHU HQYLURQPHQW Â&#x2021; 0HHW WKH KLJKHVW VWDQGDUGV RI DQLPDO KHDOWK DQG ZHOIDUH FRPSDWLEOH ZLWK WKH SURGXFWLRQ RI DIIRUGDEOHIRRGIRUDOOVHFWRUVRIVRFLHW\DQG Â&#x2021; 6XSSRUWUXUDOHFRQRPLHVDQGWKHGLYHUVLW\RIUXUDO FXOWXUHVLQSDUWLFXODUWKURXJKDQHPSKDVLVRQORFDO SURGXFWVWKDWNHHSIRRGPLOHVWRDPLQLPXP 'HÃ&#x20AC;QLWLRQVIURPDVRFLDOVFLHQFHSHUVSHFWLYHKLJKOLJKW WKHLPSRUWDQFHRIWKHVRFLRFXOWXUDOGLPHQVLRQ²WKH QHFHVVDU\´Ã&#x20AC;WµRIIRRGSDWWHUQVZLWKSHRSOH·VHYHU\GD\ OLYHV²IRUGHYHORSLQJHIIHFWLYHSROLFLHV HJ+D\QHW DO   +HUH IRRG FRQVXPSWLRQ LV FRQVLGHUHG VXVWDLQDEOHRQO\LILW Â&#x2021; ,VHQYLURQPHQWDOO\VRXQG ZLWKUHJDUGWRZDWHUVRLO FOLPDWH ELRGLYHUVLW\ DYRLGDQFH RI XQQHFHVVDU\ ULVNV  Â&#x2021; ,VKHDOWKSURPRWLQJ Â&#x2021; $OORZVIRUVRFLRFXOWXUDOGLYHUVLW\DQG Â&#x2021; ,VDSSOLFDEOHLQHYHU\GD\OLIHVW\OHV )URP D ZRUOGZLGH SHUVSHFWLYH WKH TXHVWLRQ RI IDLU GLVWULEXWLRQ DQG DFFHVV WR KHDOWK\ DQG VDIH IRRG ² GLVFXVVHGXQGHUWKHNH\WHUP´IRRGVHFXULW\µ²FRPHV WR WKH IRUH $FKLHYLQJ VXVWDLQDEOH FRQVXPSWLRQ RI IRRG UHTXLUHV FRQIURQWLQJ SUREOHPV RI ERWK XQGHUFRQVXPSWLRQDQGRYHUFRQVXPSWLRQ$VUHJDUGV WKHIRUPHUELOOLRQSHRSOHH[LVWRQLQFRPHVRID GD\RUOHVVDQGRYHUPLOOLRQSHRSOHDUHKXQJU\RU VWDUYLQJ<HWWKHSUREOHPRIIRRGVHFXULW\JRHVEH\RQG




75$'($1'(19,5210(175(9,(:

)LJXUH*URZWKUDWHRIPHDWFRQVXPSWLRQRYHUWKHSDVW\HDUV NJSHUVRQ\U

6RXUFH&RPSDVVLRQLQ:RUOG)DUPLQJ7UXVWEDVHGRQGDWDIURP)$2VWDW WKDWRIKXQJHUDQGDFFHVVLWDOVRFRYHUVWKHSUREOHP RI´KLGGHQKXQJHUµ LHGHÀFLWVLQYLWDOPLFURQXWULHQWV  ZKLFK DFFRUGLQJ WR D :+2 HVWLPDWH DIIHFWV DERXW ELOOLRQSHRSOHZRUOGZLGH$WWKHVDPHWLPHWKHUHLV DZRUOGZLGHLQFUHDVHLQWKHQXPEHURISHRSOHZKRDUH RYHUZHLJKWRUREHVHERWKLQGHYHORSLQJDQGDIÁXHQW LQGXVWULDOFRXQWULHV :KLOHWKHHQYLURQPHQWDOLPSDFWVRIIRRGFRQVXPSWLRQ DQG SURGXFWLRQ KDYH EHHQ GHEDWHG VLQFH WKHV ²ZLWKDIRFXVRQJUHHQKRXVHJDV *+* HPLVVLRQV ² WKH FRQQHFWLRQV EHWZHHQ FOLPDWHHQYLURQPHQW DQG KHDOWK KDYH RQO\ UHFHQWO\ EHFRPH D FRQFHUQ LQ SROLWLFDO GRFXPHQWV HJ +HDOWK &RXQFLO RI WKH 1HWKHUODQGV   $FFRUGLQJ WR WKLV DSSURDFK D V\VWHPVSHUVSHFWLYHRIVXVWDLQDEOHIRRGFRQVXPSWLRQ VHHPVWRUHSODFHWKHWUDGLWLRQDO´VLORSHUVSHFWLYHµRI VHSDUDWHVXVWDLQDELOLW\GLPHQVLRQVSURPLQHQWLQPDQ\ QDWLRQDOSROLFLHV,QWKH(XURSHDQ&RPPLVVLRQ OLVWHGWKHIROORZLQJFULWHULDIRUGLHWVWREHFRQVLGHUHG DVKDYLQJD´KHDOWKYDOXHµ ‡ 1XWULHQWDQGHQHUJ\FRQWHQW QXWULWLRQDOYDOXH  ‡ 1DWXUDOIRRGSURSHUWLHV ´DHVWKHWLFJXVWDWRU\µDQG ´GLJHVWLYHµ  ‡ (FRORJLFDO QDWXUH RI IRRG SURGXFWLRQ VXVWDLQDEOH DJULFXOWXUH  ‡ +HDOWKDQGWR[LFRORJLFDOFULWHULD IRRGVDIHW\ 

$V UHJDUGV WKH ODWWHU FRQVXPHUV· SHUFHSWLRQ RI IRRG VDIHW\ LV FORXGHG E\ XQKHDOWK\ IRRG DGGLWLYHV WR[LF UHVLGXHV DQG RWKHU E\SURGXFWV DV ZHOO DV SRWHQWLDO ULVNV IURP JHQHWLFDOO\ PRGLÀHG DQG QDQR WHFKQRORJLFDOO\ HQKDQFHG IRRGV 7KLV SURYLGHV D PDMRULPSHWXVIRUWKHJURZWKRIRUJDQLFIRRGVDOHV %DVHG RQ D EURDG XQGHUVWDQGLQJ RI VXVWDLQDEOH FRQVXPSWLRQ DV UHÁHFWHG LQ WKH GHÀQLWLRQV FLWHG DERYH ZH GHÀQH VXVWDLQDEOH IRRG FRQVXPSWLRQ DV D FKRLFH RI IRRG ZKLFK LV EHQHÀFLDO DQG OLIH HQKDQFLQJ IRU LQGLYLGXDOV VRFLHW\ DQG WKH SODQHW +RZHYHU VXVWDLQDEOH IRRG FRQVXPSWLRQ LQ VXFK D FRPSUHKHQVLYHVHQVHLVVHOGRPFRQVLGHUHGLQSROLF\ PDNLQJ 7KH IROORZLQJ VHFWLRQ LOOXVWUDWHV ZK\ PDMRU FKDQJHVLQIRRGEHKDYLRXUWRZDUGVPRUHVXVWDLQDEOH FRQVXPSWLRQV\VWHPVPXVWWDNHSODFHSDUWLFXODUO\LQ LQGXVWULDOL]HGFRXQWULHV

%0DLQSUREOHPDWLFWUHQGVDQG QHHGHGFKDQJHV *LYHQWKHJURZLQJZRUOGSRSXODWLRQDQGGHPRJUDSKLF FKDQJH SUREOHPV DUH SUHGLFWHG WR EHFRPH PRUH VHULRXV LQ WKH IXWXUH IRU H[DPSOH DJULFXOWXUDO SURGXFWLRQPXVWIDFHWKHLPSDFWVRIFOLPDWHFKDQJH FRQÁLFWV RYHU ODQG XVH DUH SUHGLFWHG WR LQFUHDVH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

DQG KHDOWK DQG VRFLDO FRVWV ² ERWK DW WKH LQGLYLGXDO DQG VRFLDO OHYHO ² ZLOO ULVH EHFDXVH RI IRRGUHODWHG KHDOWK WKUHDWV $ NH\ HWKLFDO LVVXH LV HQVXULQJ IRRG VHFXULW\ IRU WKH ZRUOGV· JURZLQJ SRSXODWLRQ ² D JRDO WKDW ZLOO QRW HDVLO\ EH DFKLHYHG ,Q PDQ\ GHYHORSLQJ FRXQWULHV VKRUWDJH RI GULQNLQJ ZDWHU ZLOO DOVR EH D PDMRUSUREOHP7RPHHWWKHQHHGVRIDJURZLQJZRUOG SRSXODWLRQ DQG WKH LQFUHDVLQJ GHPDQG IRU PHDW LQ GHYHORSLQJ FRXQWULHV SDUWLFXODUO\ LQ &KLQD DQG ,QGLD À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À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ÀF IRRGVDQGWKHLUVXSSO\ LHDYDLODELOLW\DQGDFFHVVLELOLW\ RIIRRGVWXIIV 6XFKSUHIHUHQFHVDQGWDVWHVWRJHWKHU ZLWK ÀQDQFHV WLPH DQG RWKHU FRQVWUDLQWV HJ ZRUN



SDWWHUQV KRXVHKROG GHFLVLRQPDNLQJ  LQÁXHQFH IRRG FRQVXPSWLRQ 3ULFH LQ SDUWLFXODU LV D PDMRU GHWHUPLQDQW)RRGSUHIHUHQFHVDOVRGLIIHUVLJQLÀFDQWO\ E\ KRXVHKROGVSHFLÀF FKDUDFWHULVWLFV VXFK DV DJH LQFRPHHGXFDWLRQIDPLO\W\SHDQGVWDWXVLQWKHODERXU IRUFH DV ZHOO DV QDWLRQDOLW\ (XURSHDQ &RPPLVVLRQ   5HVHDUFKHUV KDYH WKHUHIRUH PDGH DQ HIIRUW WR FOXVWHU FRQVXPHUV LQWR JURXSV WKDW UHSUHVHQW GLIIHUHQW´QXWULWLRQVW\OHVµRU´IRRGVW\OHVµVRWKDWWKH\ FDQEHWDUJHWHGZLWKPHVVDJHVDERXW´SURSHUIRRGµ 0LFKDHOLVDQG/RUHN)ULHGOHWDO6FKXOW] DQG6WLH‰  7KH IROORZLQJ REVHUYDEOH GHYHORSPHQWV DQG WUHQGV LQ IRRG FRQVXPSWLRQ LQ PDQ\ 2(&' DQG PRVW (8 FRXQWULHV DUH SUREOHPDWLF ZLWK UHJDUG WR VXVWDLQDEOH IRRGFRQVXPSWLRQ 5HLVFK6FKROODQG(EHUOH  ‡ &KDQJHV LQ GLHW 3DUWLFXODUO\ LQ 2(&' DQG (8 FRXQWULHV WKHUH LV D WUHQG WRZDUGV KLJKHU FRQVXPSWLRQRIPHDW HVSHFLDOO\SRUNDQGSRXOWU\  FKHHVH DQG ERWWOHG GULQNV DQG D GHFOLQLQJ FRQVXPSWLRQ RI PLON DQG SRWDWRHV 2(&'  (XURSHDQ(QYLURQPHQW$JHQF\  ‡ :HDNHQLQJ RI QXWULWLRQDO FRPSHWHQFLHV GHVSLWH LQFUHDVLQJ NQRZOHGJH RI KHDOWK\ QXWULWLRQ &RPSHWHQFLHV LQ QXWULWLRQ DQG KRPH HFRQRPLFV LH FRRNLQJ DQG IRRG VWRULQJ DQG ÀQDQFLDO FRPSHWHQFLHV  KDYH GHFOLQHG $W WKH VDPH WLPH NQRZOHGJH RI KHDOWK\ IRRGV DQG KHDOWK\ QXWULWLRQ KDVLQFUHDVHG ‡ $GHFOLQHLQWLPHVSHQWRQQXWULWLRQ7LPHVSHQWRQ IRRGSXUFKDVLQJDQGFRRNLQJDVZHOODVRQHDWLQJ KDV GHFUHDVHG VLJQLÀFDQWO\ RYHU WKH SDVW IHZ \HDUV,QJHQHUDOKRZHYHUZRPHQVWLOOVSHQGPRUH WLPH WKDQ PHQ RQ IRRG SXUFKDVLQJ DQG FRRNLQJ +DPHUPHVK  ‡ $ GHFOLQH LQ UHODWLYH FRQVXPHU VSHQGLQJ RQ IRRG $OWKRXJKDEVROXWHKRXVHKROGH[SHQGLWXUHVRQIRRG LQFUHDVHGGXULQJWKHVLQPDQ\(8FRXQWULHV WKH DYHUDJH VKDUH RI H[SHQGLWXUH RQ IRRG LQ WRWDO KRXVHKROG H[SHQGLWXUH LQ (XURSHDQ KRXVHKROGV KDVGHFOLQHGVWHDGLO\ZLWKULVLQJLQFRPHV 0LFKDHOLV DQG /RUHN  (XURSHDQ (QYLURQPHQW $JHQF\  )RUPDQ\FRQVXPHUVSULFHLVWKHGRPLQDQW FULWHULRQ LQ IRRG SXUFKDVH IROORZHG E\ TXDOLW\ IUHVKQHVV ORQJ VKHOIOLIHDQGWDVWH ‡ $Q LQFUHDVH LQ FRQYHQLHQFH UHDG\PDGH DQG IDVW IRRGVDQG RXWRIKRPH FRQVXPSWLRQ,QDGGLWLRQ WRDWHQGHQF\WRZDUGVFRQVXPLQJKLJKO\SURFHVVHG IRRGV IDVWDQGFRQYHQLHQFHIRRG FRQVXPSWLRQRI UHDG\PDGH PHDOV LV FRQWLQXLQJ WR ULVH ZLWKLQ WKH (8 576   2XWRIKRPH FRQVXPSWLRQ DOVR




DFFRXQWV IRU D VLJQLÃ&#x20AC;FDQW DQG JURZLQJ SURSRUWLRQ RI (XURSHDQ IRRG LQWDNH IRU H[DPSOH LQ  RQH IRXUWK RI PHDOV DQG VQDFNV ZHUH HDWHQ RXW 0LFKDHOLVDQG/RUHN  Â&#x2021; ,QFUHDVLQJ GLHWUHODWHG XQFHUWDLQW\ RQ WKH SDUW RI FRQVXPHUV$GHFDGHRIIRRGVFDUHVWRJHWKHUZLWK GLIIHULQJ H[SHUW HYDOXDWLRQV RI ULVN FRQWUDGLFWRU\ DQG VKRUWOLYHG QXWULWLRQUHODWHG LQIRUPDWLRQ LQ WKH PHGLDDJUHDWHUYDULHW\RIDYDLODEOHIRRGVWXIIVDQG WKHJOREDOL]DWLRQDQGGLVWDQFLQJRIIRRGSURGXFWLRQ KDYH SURGXFHG JURZLQJ FRQVXPHU XQFHUWDLQW\ DERXW IRRG %HUJPDQQ   ,QGHHG UDWKHU WKDQKHOSLQJFRQVXPHUVQDYLJDWHWKHYDVWDUUD\RI LQIRUPDWLRQDERXWIRRGWKHPXOWLWXGHRIIRRGODEHOV KDV OHG WR FRQVXPHU FRQIXVLRQ DQG LQIRUPDWLRQ RYHUORDG WKDW SUHYHQWV WKHP IURP TXLFNO\ Ã&#x20AC;QGLQJ UHOHYDQW NH\ LQIRUPDWLRQ 'HUE\ DQG /HY\  +DZNHV $VDUHVXOW UH EXLOGLQJFRQVXPHU WUXVW LQ WKH LQIRUPDWLRQ DERXW IRRG SURYLGHG E\ ERWKWKH6WDWHDQGWKHPDUNHWLVDPDMRUFKDOOHQJH .MDHUQHV+DUYH\DQG:DUGH  Â&#x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Â&#x2021; &RPSOH[LW\ RI IRRG FKRLFHV 7KH DERYH GHYHORSPHQWVLQIRRGVXSSO\KDYHJUHDWO\LQFUHDVHG WKH FRPSOH[LW\ RI IRRG FKRLFH WKH PRUH RSWLRQV DQG QRYHOWLHV RQ RIIHU WKH PRUH FRPSOLFDWHG LW EHFRPHVWRÃ&#x20AC;QGWKHULJKWLQIRUPDWLRQDQGWKHPRUH FRPSOH[ WKH GHFLVLRQPDNLQJ SURFHVV $OWKRXJK LQIRUPDWLRQEURNHUV²IURPWHVWLQJRUJDQL]DWLRQVWR IRRGPDJD]LQHVWR:HE6ORZ)RRGFRPPXQLWLHV ²PD\EHDEOHWRUHGXFHVXFKFRPSOH[LW\IRUDIHZ SHRSOH PDQ\ FRQVXPHUV UHPDLQ RYHUZKHOPHG DQGSUHIHUWRVWLFNWRWKHLUKDELWXDOFKRLFHV 0LFN %URQLDUF]\NDQG+DLGW 7KHVXFFHVVRIIRRG GLVFRXQWHUV VXFK DV 7UDGHU -RH·V LQ WKH 8QLWHG 6WDWHVZKLFKRIIHUVDYHU\QDUURZIRRGDVVRUWPHQW LV GXH WR DQ DWWUDFWLYH PL[ RI IHZ FKRLFHV DQG KHQFH ORZ VHDUFK FRVWV  DQG WKHLU SURYLVLRQ RI VWDQGDUGTXDOLW\RUJDQLFSURGXFWVVROGDWIDLUDQG ORZSULFHV7KLVLVLQFRQWUDVWZLWKZKDWHVWDEOLVKHG

75$'($1'(19,5210(175(9,(:

VXSHUDQGK\SHUPDUNHWVRIIHU Â&#x2021; ,QFUHDVLQJ IRRG ZDVWH 7RGD\ ODUJH TXDQWLWLHV RI IRRG DUH ZDVWHG SDUWLFXODUO\ E\ IRRG UHWDLO Ã&#x20AC;UPV DQG FRQVXPHUV )RU LQVWDQFH DFFRUGLQJ WR RQH UHFHQW VWXG\ KRXVHKROGV LQ WKH 8QLWHG .LQJGRP ZDVWHRQHWKLUGRIWKHIRRGWKH\EX\SHUFHQWRI ZKLFKFRXOGKDYHEHHQHDWHQLILWKDGEHHQEHWWHU PDQDJHG 0XFK KRSH LV SLQQHG RQ WKH LQFUHDVLQJ FRQVXPHU LQWHUHVWLQRUJDQLFDQGIDLUWUDGHIRRGV7KHPDUNHWV IRU RUJDQLFDOO\ JURZQ SURGXFWV DQG IRU IDLU WUDGHG IRRGSURGXFWVKDYHJURZQVWHDGLO\ .ULHU:LOOHU <XVVHÃ&#x20AC;0HQ]OHUDQG6RUHQVVHQ 1HYHUWKHOHVV WKH PDUNHW VKDUH UHPDLQV ORZ ZLWK RUJDQLF IRRG DFFRXQWLQJIRU²SHUFHQW :LOOHU<XVVHÃ&#x20AC;0HQ]OHU DQG6RUHQVHQ DQGIDLUWUDGHGIRRGIRUOHVVWKDQ SHUFHQWRIWKHWRWDOIRRGPDUNHW .ULHU $OVR WXUQRYHULVVWDJQDWLQJLQPDQ\PDUNHWVEHFDXVHRID IDOOLQWKHSULFHVRIQRQRUJDQLFIRRGVDQGDQLQFUHDVH LQSULFHFRPSHWLWLRQ

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·KHDOWKWKHLUOLYHV HJ VWDQGDUGV RI K\JLHQH  DQG WKHLU HFRQRPLF LQWHUHVWV HJFRPSHWLWLRQSROLFLHV  :LWK UHJDUG WR VXVWDLQDELOLW\ LQ WKH IRRG VHFWRU JRYHUQPHQWV DQG WKHLU DGPLQLVWUDWLRQV JHQHUDOO\ EHFRPH LQYROYHG RQO\ DV RUJDQL]HUV RI SXEOLF  FHUWLÃ&#x20AC;FDWLRQVWDQGDUGL]DWLRQDQGLQVSHFWLRQVFKHPHV 2QH H[DPSOH RI WKLV UROH LV HYLGHQW LQ WKH 6WDWHUXQ


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

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²HVSHFLDOO\ WKH8QLWHG.LQJGRPDQG6ZHGHQ²GHPRQVWUDWHWKDW VXFK VHOIUHJXODWLRQ UHTXLUHV WLPH DQG HIIRUW DQG VHHPV WR EH HIIHFWLYH DQG LPSURYH WKH TXDOLW\ RI WKH IRRG VHUYHG RQO\ ZKHQ WKH LQLWLDWLYHV DUH FORVHO\ PRQLWRUHG E\ WKH JRYHUQPHQWV 6XVWDLQ   $ UHFHQWUHSRUWFRQFOXGHVXQDPELJLRXVO\WKDW´WKHRQO\ ZD\WRDFKLHYHDUDGLFDOLPSURYHPHQWLQSXEOLFVHFWRU IRRG²IRUH[DPSOHLQRXUVFKRROVKRVSLWDOVDQGFDUH KRPHV ² LV IRU JRYHUQPHQW WR LQWURGXFH D QHZ ODZ ZKLFK VHWV KLJK DQG ULVLQJ VWDQGDUGV IRU WKH IRRG VHUYHGµ 6XVWDLQ  0DUNHWEDVHG LQVWUXPHQWV WDUJHWLQJ KRXVHKROGV DQG LQGLYLGXDOV VHHP WR EH OHVV SUHYDOHQW LQ WKH IRRG GRPDLQWKRXJKWKH\DUHDSSOLHGXSVWUHDPLQWKHIRRG VXSSO\FKDLQ HJVXEVLGLHVWRRUJDQLFIDUPHUV 9HU\ UHFHQWO\LQLWLDWLYHVKDYHEHHQODXQFKHGWRWD[FHUWDLQ IRRG W\SHV VXFK DV ´MXQN IRRGµ LQ +XQJDU\ RU WKHLU LQJUHGLHQWVVXFKDVDWD[RQVSHFLÃ&#x20AC;FW\SHVRIIDWLQ 'HQPDUN 7KHGRPLQDQWSROLF\LQVWUXPHQWLQWKHIRRGGRPDLQLV DQLQIRUPDWLRQEDVHGDQGHGXFDWLYHIRFXVRQUDLVLQJ DZDUHQHVV 7KLV LV RIWHQ DFFRPSDQLHG E\ YROXQWDU\ LQVWUXPHQWV RI VHOIFRPPLWPHQW FRRSHUDWLRQ DQG QHWZRUNLQJ :KLOH HIIRUWV WR HGXFDWH FRQVXPHUV HVSHFLDOO\\RXQJFRQVXPHUVLQJURZLQJSURFHVVLQJ FRRNLQJ DQG VWRULQJ IRRG DUH GHFOLQLQJ LQ PRVW VRFLHWLHV ² GXH WR WKH LQFUHDVH LQ RXWRIKRPH DQG UHDG\PDGH IRRG FRQVXPSWLRQ DQG LQ RWKHU SULRULWLHVLQIRUPDOVFKRROFXUULFXOD²WKHUHDUHVRPH RQJRLQJ HIIRUWV WR GHYHORS ´IRRG OLWHUDF\µ DPRQJ \RXQJ FRQVXPHUV ZLWK UHJDUG WR FKRRVLQJ DQG SUHSDULQJKHDOWK\ HJPRUHIUXLWDQGYHJHWDEOHV DQG VXVWDLQDEOH LHRUJDQLFUHJLRQDOIDLUWUDGH IRRG$V RQH HOHPHQW RI D QDWLRQDO IRRG VWUDWHJ\ )UDQFH KDV UHFHQWO\VWDUWHGWRV\VWHPDWLFDOO\WUDLQWKHVHQVRU\DQG WDVWHFRPSHWHQFHVRIVFKRROFKLOGUHQ



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Ã&#x20AC;F HYLGHQFH LV QRW FRQFOXVLYH DQG WKDW VRPH UHFRPPHQGDWLRQV WR FRQVXPHUV VXFK DV WKH UHFRPPHQGDWLRQ WKDW RUJDQLF RU ORFDO SURGXFWV VKRXOG DOZD\V EH SUHIHUUHG WR FRQYHQWLRQDO RU LPSRUWHG SURGXFWV PLJKW QRW EH ZHOOIRXQGHG ´2UJDQLFµ DQG ´ORFDOµ DUH WZR SLOODUV RI VXVWDLQDEOH IRRGFRQVXPSWLRQWKDWKDYHUHFHQWO\EHHQFKDOOHQJHG E\VFLHQWLÃ&#x20AC;FUHSRUWV HJ5HLQKDUGWHWDO  $YDLODEOH UHVHDUFK JHQHUDOO\ DJUHHV RQ WKH LVVXHV JLYLQJ ULVH WR WKH ODFN RI VXVWDLQDELOLW\ RI WKH FXUUHQW IRRG GRPDLQ 5HLVFK 6FKROO DQG (EHUOH   WKH GLVWDQFHEHWZHHQIRRGFRQVXPHUVDQGSURGXFHUV LQ PLOHVDVZHOODVPLQGV WKHVLJQLÃ&#x20AC;FDQWORVVRIELRPDVV IURPWKHÃ&#x20AC;HOGWRWKHWDEOH LQFOXGLQJJHQHUDWHGZDVWH  DQGWKHKLJKOHYHORIFRQVXPSWLRQRIDQLPDOSURGXFWV LQWKHIRUPRIPHDWDQGGDLU\SURGXFWV&RQVHTXHQWO\ WKHVHDUHWKHFULWLFDODVSHFWVRIQRQVXVWDLQDELOLW\WKDW JRYHUQPHQWVQHHGWRDGGUHVVDVDSULRULW\ 'HVSLWHWKHJURZLQJDWWHQWLRQSDLGWRIRRGLVVXHVDW WKHSROLF\OHYHODSSURDFKHVWKDWLQWHJUDWHWKHGLIIHUHQW VXVWDLQDELOLW\LVVXHVLQWRFRKHUHQWSROLF\DSSURDFKHV RUDFWLRQSODQV²RUDWOHDVWLQWRSROLF\WRROVWKDWGR QRW FRQWUDGLFW HDFK RWKHU ² DUH KDUG WR Ã&#x20AC;QG 7KH VDPH LV WUXH IRU H[SOLFLW VWUDWHJLHV IRU VXVWDLQDEOH FRQVXPSWLRQ 3ROLFLHV UHODWLQJ WR QXWULWLRQ DQG IRRG WKH HQYLURQPHQW KHDOWK DQG VRFLDO FRKHVLRQ DUH VHOGRP FRRUGLQDWHG )XUWKHUPRUH H[SOLFLW SROLFLHV IRUVXVWDLQDEOHFRQVXPSWLRQLQJHQHUDODQGIRUIRRG FRQVXPSWLRQ LQ SDUWLFXODU DUH UDUH 3ROLF\ WRROV DUH XVXDOO\GHVLJQHGRQHGLPHQVLRQDOO\IRUVSHFLÃ&#x20AC;FSROLF\ GRPDLQV DQG DGRSWHG SROLF\ WRROV SULPDULO\ WDUJHW LQGLYLGXDOFRQVXPHUV $V D UHVXOW RI WKH FXUUHQW SRZHU VWUXFWXUH LQ WKH (XURSHDQ IRRG GRPDLQ ZKLFK LV FKDUDFWHUL]HG E\ D GRPLQDQW KLJKO\ FRQFHQWUDWHG SRZHUIXO UHWDLO LQGXVWU\ JRYHUQPHQWV WHQG WR OLPLW WKHPVHOYHV WR D PDUJLQDO UROH DQG WR QRQLQYDVLYH LQVWUXPHQWV VXFK




DV FRQVXPHU LQIRUPDWLRQ DQG HGXFDWLRQ $QRWKHU UHDVRQIRUWKHUHOXFWDQFHWRLPSOHPHQWVWULFWQDWLRQDO IRRGSROLFLHVLVWKDWVXVWDLQDELOLW\JRDOVDQGSROLFLHV ULVNFRQÁLFWLQJZLWK(XURSHDQODZV)RULQVWDQFHWKH (8 KDV UHFHQWO\ UHTXHVWHG WKDW 6ZHGHQ ZLWKGUDZV LWV1DWLRQDO)RRG$GPLQLVWUDWLRQ·V 1)$ SURSRVDOWR WKH(8RQJXLGHOLQHVIRUFOLPDWHIULHQGO\IRRGFKRLFHV EHFDXVHWKH\PD\FRQÁLFWZLWK(XURSHDQWUDGHJRDOV 7KH(8&RPPLVVLRQIRXQGWKDWWKHUHFRPPHQGDWLRQ WR HDW PRUH ORFDOO\ SURGXFHG IRRG FRQWUDYHQHV WKH (8·VSULQFLSOHVRIIUHHPRYHPHQWRIJRRGV *RYHUQPHQWV DOVR VWUXJJOH WR XQGHUVWDQG WKH GHÀ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ÀWV ÀVFDO SROLFLHV DQLPDO ZHOIDUH DQG LQIRUPDWLRQ DQG VRFLDO PDUNHWLQJ 5REHUWVRQ /REVWHLQ DQG .QDL   $UHYLHZRIFXUUHQW(XURSHDQVXVWDLQDEOHGHYHORSPHQW VWUDWHJLHV DQG DFWLRQ SODQV KLJKOLJKWV WKH IROORZLQJ PDMRUJRDOVUHJDUGLQJVXVWDLQDEOHIRRGFRQVXPSWLRQ LQRUGHURISULRULW\  ‡ /RZHULQJREHVLW\OHYHOVDQGLQFUHDVLQJKHDOWK ‡ ,QFUHDVLQJ RUJDQLF IRRG FRQVXPSWLRQ DQG SURGXFWLRQ ‡ 5HGXFLQJ*+*HPLVVLRQVDQG ‡ 5HGXFLQJIRRGZDVWH $VVXVWDLQDEOHGHYHORSPHQWVWUDWHJLHVDUHDUHVXOWRI VRFLHWDOGHEDWHVLQWKHYDULRXVFRXQWULHVWKH\UHÁHFW PDLQVWUHDPWKLQNLQJDERXWWKHDUHDVLQZKLFKSROLF\ LQVWUXPHQWVDUHDSSURSULDWHDQGQHFHVVDU\+RZHYHU WKHVHH[SOLFLWJRDOVQHJOHFWRWKHUUHOHYDQWDVSHFWVRI IRRGDQGGULQNVXVWDLQDELOLW\WKHVRFLDODQGHFRQRPLF GLPHQVLRQV LQ ERWK WKH JOREDO DQG ORFDO VHQVH 7KH 8QLWHG .LQJGRP·V 6XVWDLQDEOH 'HYHORSPHQW &RPPLVVLRQ   HPSKDVL]HV WKH QHHG WR PRYH EH\RQG UHÁHFWLRQV RQ ´VDIH KHDOWK\ DQG QXWULWLRXV IRRGµWRLQFOXGHFRQVLGHUDWLRQRI´WKHQHHGVRIWKHOHVV ZHOO RIIµ 7KDW LV LW LV QHFHVVDU\ WR FRQVLGHU GHFHQW

75$'($1'(19,5210(175(9,(:

HFRQRPLF OLYLQJ DQG ZRUNLQJ FRQGLWLRQV RI WKRVH ZRUNLQJ DORQJ WKH IRRG FKDLQ UHVSHFW IRU DQLPDOV VXSSRUWIRUUXUDOHFRQRPLHVDQGFXOWXUDODVSHFWV $QRWKHU LVVXH LV UHÁHFWHG LQ UHFHQW GLVFXVVLRQV LQ DFDGHPLF FLUFOHV WKDW KDV QRW \HW UHFHLYHG VXIÀFLHQW DWWHQWLRQ IURP SROLF\PDNHUV VHOIVXIÀ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ÀFDWLRQ RI KRZ WR UHGHVLJQ IRRG V\VWHPV 5HLVFK /RUHN DQG %LHW]   $ SDUDOOHO GHEDWH RQ D ´(XURSHDQ IRRG PRGHOµ DQG LWV FRPPRQ YDOXHV IRU H[DPSOH DV UHJDUGV JHQHWLFDOO\ PRGLÀHG RUJDQLVPV DQG QDQRWHFKQRORJLHV LVDOVRQHFHVVDU\6XFKDGHEDWH VKRXOG LQFOXGH WKH SRVVLELOLW\ RI D ´JUHHQ HFRQRP\µ VWUDWHJ\IRUWKHIRRGVHFWRU +RZHYHU GHYHORSLQJ VXFK LQWHJUDWLYH VWUDWHJLHV DQG LGHQWLI\LQJ WKH PRVW VXVWDLQDEOH ZD\ WR HQVXUH WKH QXWULWLRQ RI WKH ZRUOG·V FXUUHQW DQG IXWXUH SRSXODWLRQVUHTXLUHVIXUWKHUUHVHDUFK0RUHUHVHDUFK LVDOVRQHHGHGRQZD\VWRDFKLHYHVXVWDLQDEOHIRRG FRQVXPSWLRQSDWWHUQV7KHRYHUZKHOPLQJYLHZLQWKH VFLHQWLÀFOLWHUDWXUHLVWKDWWKHPRVWHIIHFWLYHZD\VIRU DIÁXHQWVRFLHWLHVWRUHGXFHWKHHQYLURQPHQWDOLPSDFW RIWKHLUGLHWVDUHWRFXWGRZQRQWKHDPRXQWRIPHDW DQG GDLU\ SURGXFWV FRQVXPHG HVSHFLDOO\ EHHI EX\ RUJDQLFVHDVRQDODQGORFDOO\DYDLODEOHIRRGSURGXFWV DQGDYRLGSURGXFWVWUDQVSRUWHGE\DHURSODQH 2YHUDQGDERYHWKHVHFRQFHUQVJRYHUQPHQWVVKRXOG GHYHORSFURVVVHFWRUDOSRSXODWLRQZLGHSROLFLHVRQD YDULHW\RILVVXHVLQFOXGLQJWKRVHUHODWLQJWRDJULFXOWXUH DQG IRRG VXSSO\ DYDLODELOLW\ RI DQG DFFHVV WR IRRG SK\VLFDO DFWLYLW\ ZHOIDUH DQG VRFLDO EHQHÀWV VRXQG HQYLURQPHQWDO SURGXFWLRQ DQG FRQVXPSWLRQ ÀVFDO SROLFLHV WKH UROH RI LQGLYLGXDO FRQVXPHU GHFLVLRQ PDNLQJ SXEOLF SURFXUHPHQW DQG SXEOLF SURYLVLRQ RI IRRG %DVHG RQ WKHVH SROLFLHV JRYHUQPHQWV VKRXOG GHYHORS DFWLRQ SODQV RQ VXVWDLQDEOH IRRG FRQVXPSWLRQ


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

&XUUHQWIRRGFRQVXPSWLRQSDWWHUQVQRWRQO\WKUHDWHQ WKHTXDOLW\RIOLIHRILQGLYLGXDOVWKH\DOVRKDYHQHJDWLYH HQYLURQPHQWDO VRFLDO DQG HFRQRPLF LPSDFWV 3ROLFLHV DQG SURJUDPPHV WR FRXQWHUDFW WKHVH LPSDFWV DUH FRPSOLFDWHG EHFDXVH RI WKH PXOWLSOH LQWHUGHSHQGHQFLHV EHWZHHQ WKH DFWRUV DQG LVVXHV LQYROYHGLQWKHIRRGV\VWHP:KLOHXVHIXODQGXVHDEOH FRQVXPHU LQIRUPDWLRQ RQ WKH FRQVHTXHQFHV RI IRRG FRQVXPSWLRQ HDUO\ FRQVXPHU HGXFDWLRQ DQG FDVH EDVHG FRQVXPHU DGYLFH FDQ HPSRZHU FRQVXPHUV



EHWWHU NQRZOHGJH ZLOO QRW DXWRPDWLFDOO\ FKDQJH SUHIHUHQFHV DQG EHKDYLRXU 5DWKHU DYDLODELOLW\ DIIRUGDELOLW\DQGVRFLDODWWUDFWLRQRIVXVWDLQDEOHIRRG FKRLFHVDVZHOODVHDV\DFFHVVWRWKHPVHHPWREH WKHNH\OHYHUVWRIRVWHUVXVWDLQDEOHIRRGFRQVXPSWLRQ E\ LQGLYLGXDO FRQVXPHUV ´0DNLQJ WKH VXVWDLQDEOH FKRLFH WKH HDV\ FKRLFHµ SURPRWLQJ KHDOWK\ IRRGV UHWKLQNLQJ PHQXV LQ FDQWHHQV DQG VLPSOLI\LQJ IRRG ODEHOOLQJ DUH ZRUWKZKLOH SROLF\ LQLWLDWLYHV WR H[SORUH NHHSLQJ LQ PLQG WKH GLYHUVLW\ RI VRFLDO VHWWLQJV DQG ZHOFRPLQJFXOWXUDOGLYHUVLW\LQIRRGFRQVXPSWLRQ




75$'($1'(19,5210(175(9,(:

1//'06#4; U 11&#('6;#0&;56'/+%*#0)'U+/+6#6+105 1( 11&10641.5(14#(')7#4&+0) 11&#('6; -XWWD-DNVFKH3ROLF\2IÃ&#x20AC;FHU)RRG )HGHUDWLRQRI*HUPDQ&RQVXPHU2UJDQLVDWLRQV 9HUEUDXFKHU]HQWUDOH%XQGHVYHUEDQG9=%9

$EVWUDFW ,QFUHDVLQJJOREDOL]DWLRQKDVDFFHOHUDWHGWKHLQGXVWULDOL]DWLRQRIDJULFXOWXUDOSUDFWLFHVDQGFRVWSUHVVXUHV DPRQJSURGXFHUV7KLVKDVOHGWRODUJHUVFDOHVRISURGXFWLRQRIDYHU\OLPLWHGQXPEHURIFRPPHUFLDOO\ OXFUDWLYH DJULFXOWXUDO JRRGV LQ D GHFUHDVLQJ QXPEHU RI SURGXFWLRQ XQLWV ZLWK VHYHUDO XQUHVROYHG IRRG VDIHW\ULVNVWKDWDUHGLIÃ&#x20AC;FXOWWRPDQDJH ,QWKHDEVHQFHRIHIIHFWLYHUHJXODWLRQSURGXFWLRQVWDQGDUGVLQJOREDOL]HGPDUNHWVZLOOIROORZD´UDFHWRWKH ERWWRPµZLWKWKHUHVXOWWKDWLQWHUPVRIHQYLURQPHQWDOVRFLDODQGHWKLFDOFULWHULDWKHFKHDSHVWDQGORZHVW VWDQGDUGVPLJKWEHDSSOLHG $OWKRXJK WKHUH DUH FRPSUHKHQVLYH FRQWURO PHFKDQLVPV WR HQVXUH IRRG VDIHW\ WKH\ DUH LQVXIÃ&#x20AC;FLHQW WR JXDUDQWHH IRRG VDIHW\ IRU DOO LQWHUQDWLRQDOO\ WUDGHG SURGXFWV :KDW LV ODFNLQJ LV D SURDFWLYH SUHYHQWLYH DSSURDFK 7KHFXUUHQWDSSURDFKHVWRDVVXULQJIRRGVDIHW\DUHFRPSOLFDWHGDQGH[SHQVLYHHVSHFLDOO\IRUVPDOOVFDOH SURGXFHUVDQGLQWKHHQGSURGXFHUVDQGFRQVXPHUVSD\WKHDGGLWLRQDOFRVWV7KHQRWLRQWKDWPRUHFRQWUROV DUH VXIÃ&#x20AC;FLHQW WR JXDUDQWHH DGHTXDWH IRRG VDIHW\ KDV SURYHG ZURQJ DGGLWLRQDO FRQWUROV KDYH QRW EHHQ DEOHWRKDOWRUUHYHUVHWKHWUHQGRILQFUHDVLQJFRQWDPLQDQWVLQIRRGSURGXFWVDQGJUHDWHUHQYLURQPHQWDO SROOXWLRQ$V\VWHPLFFKDQJHWRZDUGVORZULVNVXVWDLQDEOHSURGXFWLRQWHFKQLTXHVZLOOHDVHWKHSUREOHPV RIIRRGVDIHW\DQGPD\DOVRLPSURYHWKHOHYHORIWUXVWRIFRQVXPHUVLQDJULFXOWXUDOSURGXFWV

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´D UDFH WR WKH ERWWRP´ LV JRLQJ WR EH WKH RYHUZKHOPLQJPRGHOIRULQYHVWPHQW )RU H[DPSOH :HVWHUQ GHPDQG IRU LPSRUWHG DQLPDO IHHG GULYHV WKH SURGXFWLRQ RI VR\EHDQV FRUQ DQG ZKHDW RYHUVHDV DQG OHDGV WR QRQVLWHVSHFLÃ&#x20AC;F SURGXFWLRQ VFKHPHV 7KH (XURSHDQ DJULFXOWXUDO DQG

IRRG VHFWRU LV KLJKO\ GHSHQGHQW RQ IHHG LPSRUWV ZKLFKHQDEOHLWWREHWKHZRUOG·VELJJHVWH[SRUWHURI IRRGSURGXFWV $FFRUGLQJ WR HVWLPDWHV RI D *HUPDQ JURXS RI DVVRFLDWLRQVFRRUGLQDWHGE\WKH$UEHLWVJHPHLQVFKDIW ElXHUOLFKH /DQGZLUWVFKDIW $E/  DQG WKH (XUR1DWXU 6WLIWXQJ    ´WKH (8·V QHHG IRU DJULFXOWXUDO ODQGV RXWVLGH RI WKH &RPPXQLW\ LQFOXGLQJ VRPH  PLOOLRQ KHFWDUHV IRU WKH SURGXFWLRQ RI LPSRUWHG VR\ DQG SURWHLQ IHHGV  LV HVWLPDWHG WR EH LQ WKH RUGHU RI  PLOOLRQ KHFWDUHV ² WKLV LV WZLFH WKH XWLOL]HG DJULFXOWXUDO DUHD RI *HUPDQ\µ 7KH UHODWLRQVKLS EHWZHHQ IHHG OLYHVWRFN DQG DQLPDO PDQXUHKDVEHHQQHJOHFWHGZLWKQHJDWLYHHIIHFWVRQ WKH HQYLURQPHQW JURXQG ZDWHU RFHDQV ELRGLYHUVLW\ DQLPDOZHOIDUHDQGSXEOLFKHDOWK/LYHVWRFNSURGXFWLRQ QRZ QHHGV WR EH UHOLQNHG WR ORFDOO\ DYDLODEOH DJULFXOWXUDO ODQG DQG GHOLQNHG IURP EHLQJ D GLUHFW FRPSHWLWRURIKXPDQIRRGVXSSO\ $QRWKHU WUHQG FRQFHUQV WKH GHJOREDOL]DWLRQ RI IRRG


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

FKDLQV,QDVXUYH\RIFRQVXPHUVZKLFKDVNHGWKHP WRZKDWH[WHQWWKH\ZHUHFRQFHUQHGDERXWIRRGVDIHW\ LQJOREDOVXSSO\FKDLQVSHUFHQWUHSOLHGWKDWWKH\ ZHUHYHU\FRQFHUQHGZKLOHSHUFHQWUHVSRQGHGWKDW WKH\ZHUHVRPHZKDWZRUULHG (XURSHDQ&RPPLVVLRQ   7KHUH LV JURZLQJ FRQVXPHU SUHIHUHQFH IRU UHJLRQDO SURGXFWV RYHU SURGXFWV IURP YHU\ GLVWDQW FRXQWULHV RIRULJLQ$FFRUGLQJWRDVXUYH\E\1HVWOp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



LQ DJULFXOWXUDO SURGXFWLRQ V\VWHPV QRW HQRXJK LV EHLQJ GRQH WR SUHYHQW WKHP 7KLV OHDGV WR QHJDWLYH DQG XQVXVWDLQDEOH LQWHUGHSHQGHQFLHV EHWZHHQ DJULFXOWXUDOSURGXFWLRQDQGSXEOLFKHDOWKDVLOOXVWUDWHG E\WKHH[DPSOHRIDQWLELRWLFUHVLVWDQFH7KH(XURSHDQ )RRG 6DIHW\ $XWKRULW\ ()6$  HYDOXDWHG WKH SXEOLF KHDOWK ULVN RI EDFWHULDO VWUDLQV UHVLVWDQW WR FHUWDLQ DQWLPLFURELDOV LQ IRRG DQG IRRGSURGXFLQJ DQLPDOV ,W GUHZ WKH FRQFOXVLRQ WKDW WKH XVH RI DQWLPLFURELDOV LQ IRRGSURGXFLQJ DQLPDOV ZDV D ULVN IDFWRU IRU WKH VSUHDG RI WKRVH EDFWHULDO VWUDLQV DQG IRU SXEOLF KHDOWK$VDUHVXOWRIWKLVVWXG\H[SHUWVUHFRPPHQGHG LPSRVLQJ UHVWULFWLRQV DQG EDQQLQJ FHUWDLQ DQWLELRWLFV ()6$   7KH H[SHUWV DOVR FRQFOXGHG WKDW WKH H[WHQVLYHLQWUD(8WUDGHLQDQLPDOVZDVDQDGGLWLRQDO ULVNIDFWRUIRUDQWLELRWLFUHVLVWDQFH

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

7KHUHQHHGVWREHJUHDWHUDWWHQWLRQWRFRPEDWLQJDQG DYRLGLQJ JOREDO HSLGHPLFV ² VRFDOOHG SDQGHPLFV PDQ\RIZKLFKDUH]RRQRVHV LHGLVHDVHVZKLFKFDQ EHWUDQVPLWWHGIURPDQLPDOVWRKXPDQV $SDSHUE\ WKH (XURSHDQ &RPPLVVLRQ·V 'LUHFWRUDWH *HQHUDO IRU +HDOWKDQG&RQVXPHU$IIDLUV 6$1&2 GHÃ&#x20AC;QHV SUHYHQWLRQ DV FRQVLVWLQJ RI PHDVXUHV WR GHFUHDVH RFFXUUHQFH DQG WUDQVPLVVLRQ RI DQLPDO GLVHDVHV E\ IDUPLQJDQGIRRGFKDLQSUDFWLFHVDQGDQLPDOWUDQVSRUW LQRUGHUWRHQVXUHDKLJKOHYHORIDQLPDOKHDOWKSXEOLF KHDOWK DQG IRRG VDIHW\ 7KLV LQFOXGHV OLPLWLQJ WKH LQFLGHQFHRI]RRQRVHVLQKXPDQVDQGRWKHUELRORJLFDO ULVNV6$1&2HVWLPDWHVWKDWWKHFRVWIRUDYDFFLQDWLRQ EDQNDW(8OHYHOPDLQWDLQLQJRQO\WKHYDFFLQHVIRUIRRW DQGPRXWKGLVHDVHLVDERXWÄ&#x201E;PLOOLRQSHU\HDU7KH WRWDOYDOXHRIWKHDQWLJHQVWRUHGLQDYDFFLQHEDQNLV HVWLPDWHGDWÄ&#x201E;PLOOLRQIURPRQZDUGVDQGWKH VWRFNKDVWREHUHQHZHGHYHU\Ã&#x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

,W LV FOHDU WKDW ZKLOH HIIRUWV DUH EHLQJ PDGH WR FRPEDW DQLPDO GLVHDVHV DQG SURGXFW FRQWDPLQDWLRQ

)LUVW RI DOO ZH QHHG D FRQFHSW IRU VXVWDLQDEOH DJULFXOWXUDO SURGXFWLRQ DQG QRW RQO\ IRU (XURSH

7KH SDVW IHZ GHFDGHV KDYH ZLWQHVVHG D PDVVLYH FKDQJH LQ SURGXFWLRQ DV ZHOO DV LQ SURFHVVLQJ DQG FRQVXPSWLRQ KDELWV .QRZOHGJH RQ KRZ WR SUHSDUH IRRG KDV EHHQ ORVW DQG FRQYHQLHQFH IRRGV DQG HDWLQJRXWDVDUHVXOWRIWLPHSUHVVXUHKDYHEHFRPH LQFUHDVLQJO\ SRSXODU &RVWV RI IRRG SDFNDJLQJ RIWHQ H[FHHGWKHFRVWVRIWKHIRRGVWKHPVHOYHV

%6XVWDLQDEOHDJULFXOWXUH




7KLV KDV WR EH GHÀQHG DFFRUGLQJ WR VLWHVSHFLÀF FRQGLWLRQV 5HVHDUFKHUV KDYH GHÀQHG FULWLFDO ´SODQHWDU\ ERXQGDULHVµ WR HQVXUH KXPDQ VDIHW\ WKH WUDQVJUHVVLQJ RI ZKLFK FRXOG EH FDWDVWURSKLF 5RFNVWU|P HW DO   1LQH RI WKH ERXQGDULHV LGHQWLÀHG DUH FOLPDWH FKDQJH VWUDWRVSKHULF R]RQH ODQGXVHFKDQJHIUHVKZDWHUXVHELRORJLFDOGLYHUVLW\ RFHDQ DFLGLÀFDWLRQ QLWURJHQ DQG SKRVSKRUXV HPLVVLRQVLQWRWRWKHELRVSKHUHDQGRFHDQVDHURVRO ORDGLQJ DQG FKHPLFDO SROOXWLRQ $FFRUGLQJ WR D UHSRUW E\ 5RFNVWU|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ÀF DQG VXVWDLQDEOHEHFDXVHRILWVFLUFXODUÁRZRILQSXWV$V GHPDQG IRU RUJDQLF SURGXFWV LV KLJKHU WKDQ VXSSO\ LQ*HUPDQ\WKHUHLVXSZDUGSUHVVXUHRQSULFHVDQG PRUHDQGPRUHRUJDQLFSURGXFWVDUHEHLQJLPSRUWHG 7KXV JURZLQJ RUJDQLF IRRGV IRU H[SRUW FRXOG ZHOO EH DQ RSWLRQ IRU VPDOOVFDOH SURGXFHUV DV QRWHG E\ DQ HYDOXDWLRQ RI &KXUFK 'HYHORSPHQW 6HUYLFH (YDQJHOLVFKHU(QWZLFNOXQJVGLHQVW DQG%UHDGIRUWKH :RUOG %URWIUGLH:HOW   +RZHYHUPDUNHWVLQ WKLV VHJPHQW DUH GHYHORSLQJ QHDUO\ DORQJ WKH VDPH OLQHV DV FRQYHQWLRQDO PDUNHWV UHVXOWLQJ LQ XQIDLU FRPSHWLWLRQ EHWZHHQ SURGXFHUV ZLWKLQ WKH (8 DQG WKRVHDEURDG 0DQ\ZHOOLQIRUPHGFRQVXPHUVDUHDSSDOOHGDWWKHZD\ *HUPDQIDUPLQJV\VWHPVRSHUDWH6RPHDJULFXOWXUHLQ (XURSHPD\QHYHUEHHFRQRPLFDOZLWKRXWVXEVLGLHV 3XEOLFPRQH\VKRXOGQRWEHVSHQWIRUSUHVHUYLQJWKLV NLQG RI DJULFXOWXUH 6XEVLGLHV VKRXOG EH VSHQW IRU D V\VWHPRIDJULFXOWXUDOSURGXFWLRQWKDWLVÀWDQGYLDEOH IRUWKHIXWXUHLQDPDQQHUWKDWLVDGDSWHGWRWKHVRLOV DQGOLYLQJFRQGLWLRQVRIDQLPDOVDQGSHRSOH7KHUHLV DQXUJHQWQHHGIRUFKDQJHWRSURWHFWSXEOLFJRRGV

75$'($1'(19,5210(175(9,(:

&)RRGFRQWURO 7KH RXWEUHDN RI WKH %6( FULVLV VRPH  \HDUV DJR FUHDWHGDPDVVLYHFULVLVRIFRQÀ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ÀVK DQG GLR[LQV LQ SRUN )RUW\WZR SHU FHQW RI WKRVH VXUYH\HGGLGQRWEHOLHYHWKDWWKHSXEOLFDXWKRULWLHVLQ WKH(8YLHZHGWKHKHDOWKRIFLWL]HQVDVPRUHLPSRUWDQW WKDQ WKH SURÀWV RI SURGXFHUV DQG PRUH WKDQ  SHU FHQW IHOW WKDW SXEOLF DXWKRULWLHV VKRXOG GR PRUH WR HQVXUHWKDWIRRGLVKHDOWK\DQGLQIRUPSHRSOHDERXW KHDOWK\GLHWVDQGOLIHVW\OHV 7KH:KLWH3DSHURQ)RRG6DIHW\PDNHVPDQXIDFWXUHUV LPSRUWHUV FDUULHUV DQG UHWDLOHUV UHVSRQVLEOH IRU WKH IRRG VDIHW\ RI SURGXFWV 7KH\ KDYH WR HQVXUH DQG GRFXPHQW WKH VDIHW\ RI WKHLU JRRGV $GGLWLRQDOO\ D V\VWHPRIIRRGFRQWUROVLVEHLQJLPSOHPHQWHGWKURXJK


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

RIÀFLDOPRQLWRULQJRIIRRGDQGYHWHULQDU\PDWWHUV7KH FRPSHWHQW DXWKRULWLHV WU\ WR GHWHFW SUREOHPV ZLWK IRRGVDIHW\DVHDUO\DVSRVVLEOHDQGWDNHDSSURSULDWH PHDVXUHV7KH)HGHUDO2IÀFHRI&RQVXPHUDQG)RRG 6DIHW\ %9/  LQ *HUPDQ\ WULHG WR GHYHORS HPHUJLQJ ULVN LGHQWLÀFDWLRQ V\VWHPV %XW LW LV QRW FOHDU KRZ HIIHFWLYH WKHVH FDQ EH 2QH RI WKH REOLJDWLRQV RI EXVLQHVVHV LV WR WUDFH WKH RULJLQ RI SURGXFWV ZKHQ WKH\DUHREVHUYHGWRSRVHDKHDOWKKD]DUGDQGKHOS UHPRYHWKRVHSURGXFWVIURPWKHPDUNHWDVTXLFNO\DV SRVVLEOH7KHLGHDLVWRWUDFHWKHFRPSOHWHIRRGDQG IHHGSURGXFWLRQFKDLQIURPWKHVRXUFHRISURGXFWLRQ WRWKHUHWDLOHU

'/LPLWVRIIRRGVDIHW\ )RRG VDIHW\ LV FORVHO\ OLQNHG WR TXHVWLRQV RI DQLPDO DQG SODQW KHDOWK DQG DQLPDO ZHOIDUH ,Q WKH (8 WKH )RRG DQG 9HWHULQDU\ 2IÀFH )92  LV UHVSRQVLEOH IRU YHULI\LQJ FRPSOLDQFH ZLWK (8 VWDQGDUGV FRQFHUQLQJ WKHVH WKUHH DUHDV $FFRUGLQJ WR 6$1&2   LW FDUULHV RXW  LQVSHFWLRQV DQQXDOO\ RI ZKLFK RQH WKLUGDUHXQGHUWDNHQLQGHYHORSLQJFRXQWULHV7KH)92 ORRNV DW WKH OHJDO IUDPHZRUN DQG ZKHWKHU UHJXODWRU\ PHDVXUHVDUHLQSODFHWRHQVXUHWKDWSURGXFHUVDSSO\ WKH VWDQGDUGV VWLSXODWHG DQG HQIRUFH WKHP ,W DOVR FKHFNV WKH ZRUN RI WKH FRPSHWHQW DXWKRULWLHV DQG WKHLUVXUYHLOODQFHDQGFRQWUROPHDVXUHV HJZKHWKHU WKH\ KDYH DGHTXDWH IDFLOLWLHV VXFK DV ODERUDWRULHV LQGHSHQGHQFHRIZRUNLQIRUPDWLRQSROLF\FHUWLÀFDWLRQ SUDFWLFHVFRQWUROV\VWHPVDQGUHFRUGV ,WDOVRORRNV DW SURGXFWLRQ HVWDEOLVKPHQWV KDQGOLQJ DQG VWRUDJH VLWHVDQGODERUDWRULHV $FFRUGLQJ WR 6$1&2 ZH NQRZ IURP WKH ZRUN RI )92 WKDW WKH PDLQ IRRG VDIHW\ SUREOHPV FRQFHUQ WKH IROORZLQJ DUHDV WKH OHJDO DQG DGPLQLVWUDWLYH LQIUDVWUXFWXUH D ODFN RI XQGHUVWDQGLQJ RI FRQWURO V\VWHPUHTXLUHPHQWV HVSHFLDOO\RI(8UHTXLUHPHQWV  LQDGHTXDWH FRQWURO DQG HQIRUFHPHQW PHFKDQLVPV DQG ODFN RI RU LQDGHTXDWH IDFLOLWLHV IRU FRQWURO DQG FHUWLÀFDWLRQSXUSRVHV 6$1&2 $OWKRXJKWKHUH LVQRGRXEWWKDWWKHUHLVJUHDWHUFRRSHUDWLRQEHWZHHQ WKHFRPSHWHQWRXWKRULWLHVLQWKHGLIIHUHQWFRXQWULHVLQ WHFKQLFDODVVLVWDQFHDQGFDSDFLW\EXLOGLQJZLWKUHJDUG WR(XURSHDQIRRGVDIHW\WKHUHDUHSUREOHPVVXFKDV LQDGHTXDWH LQIUDVWUXFWXUH LQ H[SRUWLQJ FRXQWULHV ,Q DGGLWLRQWRWKDWVRPHRIÀFLDOIRRGDQGIHHGDXWKRULWLHV UHÁHFWPRUHWKHLQWHUHVWVRIWKHEXVLQHVVFRPPXQLW\ WKDQFRQVXPHULQWHUHVWV)RRGVDIHW\LVDOVRLQGDQJHU EHFDXVH RI D JURZLQJ DPRXQW RI XQVDIH SURGXFWV VXFKDVGLHWDU\VXSSOHPHQWV RIIHUHGYLDWKH,QWHUQHW



7KH JURZLQJ PDUNHW IRU HQULFKHG IRRG HJ FRQWDLQLQJ YLWDPLQV DQG PLQHUDOV  SUHVHQWV IRRG VDIHW\ ULVNV EHFDXVH RI WKH ULVN RI RYHUFRQVXPSWLRQ RI WKRVH DGGLWLYHV $QRWKHU SUREOHP DULVHV IURP SKDUPDFHXWLFDOO\ DFWLYH VXEVWDQFHV QRW DSSURYHG LQ (XURSHDQGVROGDVIRRGRQWKH,QWHUQHW ,PSRUWHG SURGXFWV DUH VWLOO ODUJHO\ D ´EODFN ER[µ LQ WKHVHQVHWKDWODERUDWRULHVLQ(XURSHDUHRQO\DEOHWR ÀQGUHVLGXHVWKH\DUHORRNLQJIRU:LWKRXWLQIRUPDWLRQ DERXWWKHDJULFXOWXUDOSURGXFWLRQPHWKRGVDQGUHODWHG LQSXWV IRULQVWDQFHWKHXVHRIYHWHULQDU\GUXJVLQDQLPDO KXVEDQGU\ WKRVHODERUDWRULHVDUHXQOLNHO\WRÀQGWKH UHVLGXHV 7KH FRQWURO V\VWHP LQ WKH (8 QHHGV WR EH FRQWLQXRXVO\ LPSURYHG ,Q FRQWUDVW ZLWK WKH LQGXVWU\ WKHDXWKRULWLHVDUHQRWVXIÀFLHQWO\LQWHUFRQQHFWHGDQG DUH DOZD\V RQH VWHS EHKLQG QHZ WHFKQRORJLHV QHZ DFWLYHSKDUPDFHXWLFDOLQJUHGLHQWVDQGQHZSURGXFWV WKDWSRVHQHZULVNV)URPQRWLÀFDWLRQVDERXWXQVDIH IRRGV LQ WKH (8·V 5DSLG $OHUW 6\VWHP RI )RRG DQG )HHG 5$6))  LW LV HYLGHQW WKDW IRRG DQG IHHG SURGXFWV LPSRUWHG LQWR WKH (8 DUH QRW DXWRPDWLFDOO\ VDIH 3DWKRJHQLF PLFURRUJDQLVPV DOOHUJHQV JHQHWLFDOO\ PRGLÀHG RUJDQLVPV *02V  P\FRWR[LQV DQGUHVLGXHVLQIRRGUHOHDVHGIURPSDFNDJLQJDUHWKH SULQFLSDO FDXVHV RI XQVDIH IRRGV )RRG VDIHW\ DQG IRRGTXDOLW\UHTXLUHJOREDOHIIRUWVE\WKHLQGXVWU\DQG WKHRIÀFLDOUHJXODWRU\DQGFRQWUROOLQJDXWKRULWLHV)LYH SHUFHQWRIIRRGVWXIIFRQVXPHGLQWKH(8RULJLQDWHV IURP WKLUG FRXQWULHV 6$1&2   7KH TXHVWLRQ WKHUHIRUHDULVHVDVWRKRZDJOREDODOHUWV\VWHPFRXOG EH RUJDQL]HG DQG ZKHWKHU WKH (XURSHDQ V\VWHP LV VXLWDEOH IRU RWKHU FRXQWULHV SDUWLFXODUO\ GHYHORSLQJ FRXQWULHV -RKQ 'DOOL WKH IRUPHU &RPPLVVLRQHU IRU +HDOWK DQG &RQVXPHU 3ROLF\    QRWHG WKDW ´PRUH WKDQ VL[W\FRXQWULHVRXWVLGHWKH(8ZHUHFRQQHFWHGWRWKH 5$6)):LQGRZDQHZRQOLQHSODWIRUPZKLFKDOORZ>V@ WKHP WR GRZQORDG 5$6)) QRWLÀFDWLRQV WKDW PLJKW FRQFHUQ WKHP 7KH &RPPLVVLRQ ZRXOG FRQWLQXH LWV HIIRUWV WR VXSSRUW WKRVH FRXQWULHV LQ VHWWLQJ XS WKHLU DOHUW V\VWHPV WKURXJK WKH %HWWHU 7UDLQLQJ IRU 6DIHU )RRG SURJUDPPH WR HQDEOH WKHP WR WDFNOH IRRG VDIHW\LQFLGHQWVWKDWJUDGXDOO\EHFRPHPRUHJOREDOLQ QDWXUHµ&RRSHUDWLRQEHWZHHQFRXQWULHVDQGEHWZHHQ SXEOLF KHDOWK DQG IRRG VDIHW\ DXWKRULWLHV LV HVVHQWLDO WR PDQDJH KD]DUGV LQ IRRG 7KLV KDV EHHQ VWDUNO\ LOOXVWUDWHG E\ WKH FDVH RI (+(& 2 + D GHDGO\ (FROL EDFWHULXP VWUDLQ FDXVHG E\ FRQWDPLQDWHG VSURXWV WKDW NLOOHG DW OHDVW  SHRSOH DQG FDXVHG D PDMRUIRRGFULVLVLQ*HUPDQ\LQ




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KOHLE   )RU LQVWDQFH WKHUH DUH FRQÁLFWV EHWZHHQFRQVXPHUVLQWKH(8DQGH[SRUWLQJEXVLQHVV LQ WKH 8QLWHG 6WDWHV RYHU *02V FKORULQDWHG SRXOWU\ DQG KRUPRQHV LQ PHDW DQG GDLU\ SURGXFWLRQ 7KH PDMRULW\RI(XURSHDQFRQVXPHUVDUHZDU\RISURGXFWV RI FORQHG DQLPDOV RU JHQHWLFDOO\ PRGLÀHG ÀVK EXW FRPPHUFLDO SUHVVXUH JURXSV RIWHQ WU\ WR LQÁXHQFH SXEOLFGHEDWHDQGVHQWLPHQWRQWKLVLVVXH $FFRUGLQJ WR 7DQ]PDQQ   WKH &KXUFK 'HYHORSPHQW 6HUYLFH DQG %UHDG IRU WKH :RUOG ZDQW IRRGVWDQGDUGVWREHQHJRWLDWHGDWWKHPXOWLQDWLRQDO OHYHO%XWWKHVROXWLRQLVQRWWKDWVWDQGDUGVVKRXOGEH ORZHUHGWRDOHYHOWKDWZRXOGHQDEOHFRPSOLDQFHE\DOO SURGXFHUV &RQVXPHUV· GHVLUH IRU IRRG VDIHW\ YDULHV GHSHQGLQJRQWKHFXOWXUDOEDFNJURXQGRIWKHFRXQWU\ ZKHUHSURGXFWVDUHFRQVXPHG,IWKH)HGHUDO,QVWLWXWH IRU 5LVN $VVHVVPHQW %I5  LQ *HUPDQ\ IRU LQVWDQFH GHÀQHV WKH OLPLW YDOXHV IRU UHVLGXHV WKHVH UHIHU WR WKH PLQLPDO TXDOLW\ SURGXFHUV KDYH WR FRPSO\ ZLWK 7KLV LV ZK\ WKHUH ZLOO DOZD\V EH D FRQÁLFW EHWZHHQ WKH LQWHUHVWV RI FRQVXPHUV LQ GHYHORSHG FRXQWULHV DQG SURGXFHUV LQ GHYHORSLQJ FRXQWULHV +RUWRQ DQG :ULJKW   KDYH VKRZQ WKDW GHYHORSLQJ FRXQWULHV ZRXOG VWDQG WR EHQHÀW LI WKH 8QLWHG 6WDWHV DQG (XURSH DGRSWHG WKH VDPH VWDQGDUGV %XW IURP WKH SHUVSHFWLYH RI (XURSHDQ FRQVXPHUV KDUPRQL]DWLRQ

75$'($1'(19,5210(175(9,(:

RI 8QLWHG 6WDWHV DQG (XURSHDQ VWDQGDUGV ZRXOG LQ PRVW LQVWDQFHV KDYH QHJDWLYH HIIHFWV DV LOOXVWUDWHG E\WKHH[DPSOHRIFKORULQDWHGSRXOWU\

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À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

*&RQFOXVLRQV ,QFUHDVLQJ JOREDOL]DWLRQ KDV DFFHOHUDWHG WKH LQGXVWULDOL]DWLRQ RI DJULFXOWXUDO SUDFWLFHV DQG FRVW SUHVVXUHV DPRQJ SURGXFHUV 7KLV KDV OHG WR ODUJHU VFDOHV RI SURGXFWLRQ RI KRPRJHQHRXV DJULFXOWXUDO JRRGV LQ D GHFUHDVLQJ QXPEHU RI SURGXFWLRQ XQLWV ZLWK VHYHUDO XQUHVROYHG IRRGVDIHW\ ULVNV WKDW DUH GLIÀFXOWWRPDQDJH 0DQ\ IRRG VDIHW\ LVVXHV DUH UHODWHG WR GLVHDVHV RI SODQWVDQGDQLPDOVDQGWRWKHXVHRIH[WHUQDOLQSXWV VXFK DV DJURFKHPLFDOV DQG DQWLELRWLFV ,QWHQVLÀHG DJULFXOWXUDO SURGXFWLRQ KDV D QHJDWLYH LPSDFW RQ SXEOLFKHDOWKDQGZHOOEHLQJDQGWKDWSURFHVVVHHPV WRKDYHUHDFKHGLWVOLPLWV%HFDXVHRIWKHSUHVVXUHV RI FRPSHWLWLRQ SURGXFHUV DUH FRQVWDQWO\ VHHNLQJ WR UHGXFHWKHLUSURGXFWLRQFRVWV7KLVPHDQVWKDWLQWKH DEVHQFHRIHIIHFWLYHUHJXODWLRQSURGXFWLRQVWDQGDUGV ZLOOIROORZD´UDFHWRWKHERWWRPµZLWKWKHUHVXOWWKDWLQ WHUPVRIHQYLURQPHQWDOVRFLDODQGHWKLFDOFULWHULDWKH FKHDSHVWDQGORZHVWVWDQGDUGVPLJKWEHDSSOLHG


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH

$OWKRXJK WKHUH DUH FRPSUHKHQVLYH FRQWURO PHFKDQ LVPV WR HQVXUH IRRG VDIHW\ WKH\ DUH LQVXIÃ&#x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Ã&#x20AC;FLHQWWRJXDUDQWHHDGHTXDWH IRRG VDIHW\ KDV SURYHG ZURQJ DGGLWLRQDO FRQWUROV KDYH QRW EHHQ DEOH WR KDOW RU UHYHUVH WKH WUHQG RI



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




75$'($1'(19,5210(175(9,(:

5HIHUHQFHV $FDGHP\RI6FLHQFHRI6RXWK$IULFD  7XUQLQJVFLHQFHRQ,PSURYLQJDFFHVVWRHQHUJ\LQVXE6DKDUDQ$IULFDQ 6L[WKDQQXDOPHHWLQJRIWKH$IULFDQ6FLHQFH$FDGHP\'HYHORSPHQW,QLWLDWLYH²1RYHPEHU$YDLODEOHDWKWWS ZZZQDWLRQDODFDGHPLHVRUJDVDGLB&RQIHUHQFH3')V7XUQLQJ6FLHQFH2QSGI $GHOPDQ,  %H\RQGH[SRUWOHGJURZWK:RUOG'HYHORSPHQW  ² $MD\L&2$NLQQLIHVL).6LOHVKL*DQG.DQMLSLWH:  /DERXULQSXWVDQGÃ&#x20AC;QDQFLDOSURÃ&#x20AC;WDELOLW\RIFRQYHQWLRQDODQG DJURIRUHVWU\EDVHGVRLOIHUWLOLW\PDQDJHPHQWSUDFWLFHVLQ=DPELD$JUHNRQ  6HSWHPEHU² $NHU-&DQG0ELWL,0  0RELOHSKRQHVDQGHFRQRPLFGHYHORSPHQWLQ$IULFD&*':RUNLQJ3DSHU&HQWHUIRU *OREDO'HYHORSPHQW:DVKLQJWRQ'&$YDLODEOHDWKWWSZZZPHPSRZHUPHQWRUJZSFRQWHQWXSORDGV 0RELOH3KRQHVDQG(FRQRPLF'HYHORSPHQWLQ$IULFDSGI $OOHQ0)UDPH'-+XQWLQJIRUG&-RQHV&'-DVRQ$/RZH-$0HLQVKDXVHQ0DQG0HLQVKDXVHQ1  :DUPLQJ FDXVHGE\FXPXODWLYHFDUERQHPLVVLRQVWRZDUGVWKHWULOOLRQWKWRQQH1DWXUH² $OORZD\%-HG  0LFURQXWULHQW'HÃ&#x20AC;FLHQFLHVLQ*OREDO&URS3URGXFWLRQ1HZ<RUNDQG+HLGHOEHUJ6SULQJHU9HUODJ $OWLHUL0$DQG1LFKROOV&  $JURHFRORJ\DQGWKHVHDUFKIRUDWUXO\VXVWDLQDEOHDJULFXOWXUH%HUNHOH\&$8QLYHUVLW\ RI&DOLIRUQLD $OWLHUL 0$ 3RQWL / DQG 1LFKROOV &   (QKDQFHG SHVW PDQDJHPHQW WKURXJK VRLO KHDOWK WRZDUG D EHORZJURXQG KDELWDWPDQDJHPHQWVWUDWHJ\%LRG\QDPLFV 6XPPHU ² $OWLHUL 0$   $JURHFRORJ\ 7KH 6FLHQFH RI 6XVWDLQDEOH $JULFXOWXUH 6HFRQG HGLWLRQ %RXOGHU &2 :HVWYLHZ 3UHVV $OWLHUL0$  $JURHFRORJ\WKHVFLHQFHRIQDWXUDOUHVRXUFHPDQDJHPHQWIRUSRRUIDUPHUVLQPDUJLQDOHQYLURQPHQWV $JULFXOWXUH(FRV\VWHPVDQG(QYLURQPHQW² $OWLHUL0$DQG.RRKDINDQ3  (QGXULQJIDUPV&OLPDWHFKDQJHVPDOOKROGHUVDQGWUDGLWLRQDOIDUPLQJFRPPXQLWLHV (QYLURQPHQWDQG'HYHORSPHQW6HULHV3HQDQJ7KLUG:RUOG1HWZRUN $OWLHUL0$DQG1LFKROOV&  %LRGLYHUVLW\DQG3HVW0DQDJHPHQWLQ$JURHFRV\VWHPV6HFRQGHGLWLRQ%RFD5DWRQ )/&5&3UHVV $QGHUVRQ,  )RRWDQG0RXWK'LVHDVH$5HYLHZDQG/HVVRQV/HDUQHG/RQGRQ $QGHUVRQ6+*DQW]HU&-DQG%URZQ-5&  6RLOSK\VLFDOSURSHUWLHVDIWHU\HDUVRIFRQWLQXRXVFXOWLYDWLRQ -RLQW6RLO:DWHU&RQVHUYDWLRQ $QGHUVRQ,  $JULFXOWXUDOGHYHORSPHQWIRRGVHFXULW\DQGFOLPDWHFKDQJH,QWHUVHFWLQJDWDJOREDOFURVVURDGV $YDLODEOHDWKWWSZHEZRUOGEDQNRUJ:%6,7((;7(51$/723,&6(;76'1(7FRQWHQW0'.aSDJH 3.aSL3.aWKH6LWH3.KWPO $UEHLWVJHPHLQVFKDIW ElXHUOLFKH /DQGZLUWVFKDIW $E/  (XUR1DWXU 6WLIWXQJ   &RQVLVWHQW 5HIRUP RI WKH (8 $JULFXOWXUDO 3ROLF\ 1RZ 3DSHU MRLQWO\ SURGXFHG E\ DVVRFLDWLRQV HQJDJHG LQ HQYLURQPHQWDO SURWHFWLRQ QDWXUH FRQVHUYDWLRQ DJULFXOWXUH GHYHORSPHQW SROLF\ FRQVXPHU DIIDLUV DQG DQLPDO ZHOIDUH 5KHLQEDFK+DPP -XQH $YDLODEOH DW KWWSZZZGLHEHVVHUHDJUDUSROLWLNGHXSORDGVW[BJDSGRF*HUPDQB3ODWIRUP3DSHUB(8*$3 HQJOBSGI $UHQGV7DQG&DVWK3  7KHFRPSDUDWLYHHIIHFWRIHTXLYDOHQWDPRXQWVRI13.DSSOLHGLQIDUP\DUGPDQXUHRULQ IHUWLOL]HUVDVDIXQFWLRQRIVRLOSURSHUWLHV$JURNPDV7DODMWDQ $UQHOO1  &OLPDWHFKDQJHDQGZDWHUUHVRXUFHVLQ%ULWDLQ&OLPDWH&KDQJH² $]HH]*  6RLOFDUERQDQGRUJDQLFIDUPLQJ%ULVWRO6RLO$VVRFLDWLRQKWWSZZZVRLODVVRFLDWLRQRUJ:K\RUJDQLF &OLPDWHIULHQGO\IRRGDQGIDUPLQJ6RLOFDUERQWDELG'HIDXOWDVS[ %DGJOH\ & 0RJKWDGHU - 4XLQWHUR ( =DNHP ( &KDSSHOO 0- $YLOpV9i]TXH] . 6DPXORQ $ 3HUIHFWR ,   2UJDQLFDJULFXOWXUHDQGWKHJOREDOIRRGVXSSO\5HQHZDEOH$JULFXOWXUHDQG)RRG6\VWHPV² %DLOH\$:  0DQDJLQJ&DQDGLDQUDQJHODQGVDVDVXVWDLQDEOHUHVRXUFH3ROLF\,VVXHVUDQJHODQGVLQDVXVWDLQDEOH ELRVSKHUH,Q3URFHHGLQJVRIWKH)LIWK,QWHUQDWLRQDO5DQJHODQG&RQJUHVVYROXPH² %DNDV,  )RRGDQGJUHHQKRXVHJDV *+* HPLVVLRQV&RSHQKDJHQ5HVRXUFH,QVWLWXWH &5, $YDLODEOHDWKWWS ZZZVFSNQRZOHGJHHXVLWHVGHIDXOWÃ&#x20AC;OHV.8B)RRGB*+*BHPLVVLRQVSGI


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



%DOW]HU.+DQVHQ+/LQG.0  $QRWHRQWKHFDXVHVDQGFRQVHTXHQFHVRIWKHUDSLGO\LQFUHDVLQJLQWHUQDWLRQDO IRRGSULFHV&RSHQKDJHQ,QVWLWXWHRI)RRGDQG5HVRXUFH(FRQRPLFV8QLYHUVLW\RI&RSHQKDJHQ %DWWLVWL '6 DQG 1D\ORU 5/   +LVWRULFDO ZDUQLQJV RI IXWXUH IRRG LQVHFXULW\ ZLWK XQSUHFHGHQWHG VHDVRQDO KHDW 6FLHQFH² %D\OLVV6PLWK73  7KH(FRORJ\RI$JULFXOWXUDO6\VWHPV&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV %HOODUE\-)RHUHLG%+DVWLQJV$DQG6PLWK3  &RRO)DUPLQJ&OLPDWHLPSDFWVRIDJULFXOWXUHDQGPLWLJDWLRQ SRWHQWLDO $PVWHUGDP *UHHQSHDFH ,QWHUQDWLRQDO $YDLODEOH DW KWWSZZZJUHHQSHDFHRUJLQWHUQDWLRQDO*OREDO LQWHUQDWLRQDOSODQHWUHSRUWFRROIDUPLQJIXOOUHSRUWSGI %HUJPDQQ.  'HDOLQJZLWK&RQVXPHU8QFHUWDLQW\3XEOLF5HODWLRQVLQWKH)RRG6HFWRU+HLGHOEHUJ6SULQJHU %HUWKHORW-  3RXUXQPRGqOHDJULFROHGDQVOHVSD\VGX6XG0RQGH'LSORPDWLTXH1RYHPEHU %LOO 0HOLQGD*DWHV)RXQGDWLRQ  $JULFXOWXUDOGHYHORSPHQWVWUDWHJ\RYHUYLHZ6HDWWOH$YDLODEOHDWKWWSZZZ JDWHVIRXQGDWLRQRUJ %LQVZDQJHU0NKL]H+3  &KDOOHQJHVDQG2SSRUWXQLWLHVIRU$IULFDQ$JULFXOWXUHDQG)RRG6HFXULW\+LJK)RRG 3ULFHV&OLPDWH&KDQJH3RSXODWLRQ*URZWKDQG+,9$,'63DSHUSUHVHQWHGDWWKH)$2([SHUW0HHWLQJRQ+RZ WRIHHGWKH:RUOGLQ5RPH %LUFKDOO-  0RQVDQWRDJUHHVWRPFURSEULEHSHQDOW\)LQDQFLDO7LPHV-DQXDU\$YDLODEOHDWKWWSZZZ IWFRPLQWOFPVVGDFGEGIHFKWPOD[]]7]8,-UI/ %OD\3DOPHU$  )RRG)HDUV)URP,QGXVWULDOWR6XVWDLQDEOH)RRG6\VWHPV$OGHUVKRW$VKJDWH %ORRP$-%XUJHU0$VHQVLR-65DQG&RXVLQV$%  &DUERQGLR[LGHHQULFKPHQWLQKLELWVQLWUDWHDVVLPLODWLRQLQ $UDELGRSVLVDQGZKHDW6FLHQFH² %0(/) ² $JUDUEHULFKW%XQGHVPLQLVWHULXPIU(UQlKUXQJ/DQGXQG)RUVWZLUWVFKDIW%RQQ %0(/)   $JUDUEHULFKWH GHU %XQGHVUHJLHUXQJ %RQQ %XQGHVPLQLVWHULXP IU (UQlKUXQJ /DQGZLUWVFKDIW XQG )RUVWHQ &LWHGE\3DGHO6DQG=HUJHU8(FRQRPLFVRIRUJDQLFIDUPLQJLQ*HUPDQ\,Q/DPSNLQ1DQG3DGHO6 HGV7KH(FRQRPLFVRI2UJDQLF)DUPLQJ$Q,QWHUQDWLRQDO3HUVSHFWLYH:DOOLQJIRUG&$%,QWHUQDWLRQDO  %RJQHU-3LSDWWL5+DVKLPRWR6'LD]&0DUHFNRYD.'LD]/.MHOGVHQ30RQQL6)DDLM$*DR4=KDQJ7$KPHG 0$ 6XWDPLKDUGMD 570 DQG *UHJRU\ 5   0LWLJDWLRQ RI JOREDO JUHHQKRXVH JDV HPLVVLRQV IURP ZDVWH &RQFOXVLRQVDQGVWUDWHJLHVIURPWKH,QWHUJRYHUQPHQWDO3DQHORQ&OLPDWH&KDQJH)RXUWK$VVHVVPHQW5HSRUWRI :RUNLQJ*URXS,,, 0LWLJDWLRQ $YDLODEOHDWKWWSZPUVDJHSXEFRPFRQWHQWVKRUW"UVV  VVRXUFH PIF %RKDF-DQG3RNDU]KHYVN\$  (IIHFWRIPDQXUHDQG13.RQVRLOPDFURIDXQDLQFKHUQR]HPVRLO,Q6]HJL-HG 6RLO %LRORJ\ DQG &RQVHUYDWLRQ RI %LRVSKHUH 3URFHHGLQJV RI WKH WK ,QWHUQDWLRQDO 6\PSRVLXP ² %XGDSHVW $NDGHPLDL.LDGR %ROOD9DQG3HQGRORYVND9  'ULYLQJIRUFHVEHKLQG(8JUHHQKRXVHJDVHPLVVLRQVRYHUWKHGHFDGH 6WDWLVWLFVLQIRFXV$YDLODEOHDWKWWSWLQ\XUOFRPEKHVRJ %RUURQ6  %XLOGLQJUHVLOLHQFHIRUDQXQSUHGLFWDEOHIXWXUH+RZRUJDQLFDJULFXOWXUHFDQKHOSIDUPHUVDGDSWWR FOLPDWHFKDQJH5RPH)$2 %UHQQDQ03UD\&1DVHHP$DQG2HKPNH-  $QLQQRYDWLRQPDUNHWDSSURDFKWRDQDO\]LQJLPSDFWVRIPHUJHUV DQGDFTXLVLWLRQVLQWKHSODQWELRWHFKQRORJ\LQGXVWU\$J%LR)RUXP² %URRNV6  5LFH%LRIRUWLÀFDWLRQ/HVVRQVIRU*OREDO6FLHQFHDQG'HYHORSPHQW/RQGRQ(DUWKVFDQ %URRNV6  ,VLQWHUQDWLRQDODJULFXOWXUDOUHVHDUFKDJOREDOSXEOLFJRRG"7KHFDVHRIULFHELRIRUWLÀFDWLRQ-RXUQDORI 3HDVDQW6WXGLHV  ²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




75$'($1'(19,5210(175(9,(:

,QQRYDWLRQVWKDW1RXULVKWKH3ODQHW:DVKLQJWRQ'&::1RUWRQ &RPSDQ\² %XUQH\-$'DYLV6-DQG/REHOO'%  *UHHQKRXVHJDVPLWLJDWLRQE\DJULFXOWXUDOLQWHQVLÀFDWLRQ3URFHHGLQJVRI WKH1DWLRQDO$FDGHP\RI6FLHQFHV  ² %X\DQRVNL+$DQG:DJQHU*+  &DUERQF\FOLQJLQFXOWLYDWHGODQGDQGLWVJOREDOVLJQLÀFDQFH*OREDO&KDQJH %LRO %X\DQRVNL +$ %URZQ -5 :DJQHU *+   6DQKRUQ ÀHOG (IIHFWV RI  \HDUV RI FURSSLQJ RQ VRLO SDUDPHWHUV LQÁXHQFLQJ FURS SURGXFWLYLW\ ,Q 6RLO RUJDQLF PDWWHU LQ WHPSHUDWH HFRV\VWHPV LQ 1RUWK $PHULFD HGV 3DXO ($ 3DXVWLDQ((OOLRW7&ROH&9- SS%RFD5DWRQ)/&5&3UHVV &DNPDN,3IHLIIHU:+DQG0F&ODIIHUW\%  %LRIRUWLÀFDWLRQRIGXUXPZKHDWZLWK]LQFDQGLURQ&HUHDO&KHPLVWU\ ² &DPDUJR5  3URMHWRGHOtGHUGRJRYHUQRpUHGLJLGRSRUOREE\&RQJUHVVRHP)RFR'HFHPEHU$YDLODEOHDW KWWSFRQJUHVVRHPIRFRXROFRPEUQRWLFLDVPDQFKHWHVDQWHULRUHVSURMHWRGHOLGHUGRJRYHUQRHUHGLJLGRSRU OREE\ &DPSEHOO$.DSRV96FKDUOHPDQQ-3:%XEE3&KHQHU\$&RDG/'LFNVRQ%'RVZDOG1.KDQ06,.HUVKDZ )DQG5DVKLG0  5HYLHZRIWKHOLWHUDWXUHRQWKHOLQNVEHWZHHQELRGLYHUVLW\DQGFOLPDWHFKDQJH,PSDFWV DGDSWDWLRQDQGPLWLJDWLRQ7HFKQLFDO6HULHV1R0RQWUHDO6HFUHWDULDWRIWKH&RQYHQWLRQRQ%LRORJLFDO'LYHUVLW\ &DXOÀHOG /( DQG %ODFN 5(   =LQF GHÀFLHQF\ ,Q 0 (]]DWL HW DO HGV &RPSDUDWLYH 4XDQWLÀFDWLRQ RI +HDOWK 5LVNV*OREDODQG5HJLRQDO%XUGHQRI'LVHDVH$WWULEXWDEOHWR6HOHFWHG0DMRU5LVN)DFWRUV*HQHYD:RUOG+HDOWK 2UJDQL]DWLRQ² &KDOOLQRU$:KHHOHU7*DUIRUWK&&UDXIXUG3.DVVDP$  $VVHVVLQJWKHYXOQHUDELOLW\RIIRRGFURSV\VWHPVLQ $IULFDWRFOLPDWHFKDQJH&OLPDWLF&KDQJH² &KDVH&  3ULFLQJIRUSURÀW$PHV,$,RZD6WDWH8QLYHUVLW\$YDLODEOHDWKWWSZZZH[WHQVLRQLDVWDWHHGXDJGP ZKROHIDUPKWPOFKWPO &KDVH&$DQG'XII\0'  $QHFRQRPLFDQDO\VLVRIWKH1DVKXDWLOODJHVWXG\²-RXUQDORI3URGXFWLRQ $JULFXOWXUH²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UGLH:HOW   /REE\EULHI/HEHQVPLWWHOVWDQGDUGVXQGGLH5HIRUPGHU(8$JUDUSROLWLN$YDLODEOHDWKWWSZZZHHGGH À[ÀOHVGRFB$NWXHOOBB*$3B/REE\%ULHIHSGI &,00<7  ,,7$  '70$ 3URMHFW SODWIRUP -DQXDU\  $SULO  $YDLODEOH DW KWWSGWPDFLPP\WRUJLQGH[SKS FRPSRQHQWGRFPDQGRFBGRZQORDGGWPDSURMHFWSODWIRUPMDQXDU\DSULO &OLQH :   *OREDO ZDUPLQJ DQG DJULFXOWXUH ,PSDFW HVWLPDWHV E\ FRXQWU\ &HQWUH IRU *OREDO 'HYHORSPHQW :DVKLQJWRQ'&$YDLODEOHDWZZZFJGHYRUJFRQWHQWSXEOLFDWLRQVGHWDLO &RPPXQLW\ (QHUJ\ 6FRWODQG   &RPPXQLW\ 5HQHZDEOH (QHUJ\ 7RRONLW $YDLODEOH DW KWWSZZZ FRPPXQLW\HQHUJ\VFRWODQGRUJXNFRPPXQLW\UHQHZDEOHHQHUJ\WRRONLWDVS &RPSDVVLRQLQ:RUOG)DUPLQJ7UXVW  5HGXFLQJPHDWFRQVXPSWLRQ²WKHFDVHIRUXUJHQWUHIRUP3HWHUVÀHOG 8QLWHG.LQJGRP$YDLODEOHDWZZZFLZIRUJXNLQFOXGHVGRFXPHQWVFPBGRFVJJOREDOBEHQHÀWVBVXPPDU\ SGI &RQQRU'-  2UJDQLFDJULFXOWXUHFDQQRWIHHGWKHZRUOG)LHOG&URSV5HVHDUFK² &RQUR\ -3 6HQHZHHUD 6 %DVUD $6 5RJHUV * DQG 1LVVHQ:RROOHU %   ,QÁXHQFH RI ULVLQJ DWPRVSKHULF &2 FRQFHQWUDWLRQV DQG WHPSHUDWXUH RQ JURZWK \LHOG DQG JUDLQ TXDOLW\ RI FHUHDO FURSV $XVWUDOLDQ -RXUQDO RI 3ODQW 3K\VLRORJ\  ²


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



&RQZD\*5  7KH'RXEO\*UHHQ5HYROXWLRQ/RQGRQ3HQJXLQ &RUEHOOLQL00D]]D/&LDIÃ&#x20AC;0/DÃ&#x20AC;DQGUD'DQG%RUJKL%  (IIHFWRIKHDWVKRFNGXULQJJUDLQÃ&#x20AC;OOLQJRQSURWHLQ FRPSRVLWLRQDQGWHFKQRORJLFDOTXDOLW\RIZKHDWV(XSK\WLFD &XOODWKHU1  7KH+XQJU\:RUOG$PHULFD·V&ROG:DU%DWWOHDJDLQVW3RYHUW\LQ$VLD&DPEULGJH0$DQG/RQGRQ +DUYDUG8QLYHUVLW\3UHVV 'DOOL-  )RUHZRUG,Q$QQXDO5HSRUW5DSLG$OHUW6\VWHPIRU)RRGDQG)HHG 5$6)) %UXVVHOV(XURSHDQ 8QLRQ$YDLODEOHDWKWWSHFHXURSDHXIRRGIRRGUDSLGDOHUWGRFVUHSRUWBHQSGI 'D0DWWD)0*UDQGLV$$UHQTXH%&DQG%XFNHULGJH06  ,PSDFWVRIFOLPDWHFKDQJHVRQFURSSK\VLRORJ\DQG IRRGTXDOLW\)RRG5HVHDUFK,QWHUQDWLRQDO² 'H6FKXWWHU2  %XLOGLQJ5HVLOLHQFH$+XPDQ5LJKWV)UDPHZRUNIRU:RUOG)RRGDQG1XWULWLRQ6HFXULW\5HSRUWRI WKH6SHFLDO5DSSRUWHXURQWKH5LJKWWR)RRGWRWKH8QLWHG1DWLRQV+XPDQ5LJKWV&RXQFLO$+5&*HQHYD 6HSWHPEHU$YDLODEOHDWKWWSZZZVUIRRGRUJLPDJHVVWRULHVSGIRIÃ&#x20AC;FLDOUHSRUWVRUDKUFÃ&#x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Ã&#x20AC;QJQRWH8QLWHG1DWLRQV+XPDQ5LJKWV &RXQFLO*HQHYD'HFHPEHU$YDLODEOHDWKWWSZZZVUIRRGRUJLPDJHVVWRULHVSGIRWKHUGRFXPHQWVB EULHÃ&#x20AC;QJQRWHBHQSGI 'H6FKXWWHU2  $JURHFRORJ\DQGWKH5LJKWWR)RRG5HSRUWSUHVHQWHGDWWKH6L[WHHQWK6HVVLRQRIWKH8QLWHG 1DWLRQV +XPDQ 5LJKWV &RXQFLO $JHQGD LWHP $+5& *HQHYD  'HFHPEHU $YDLODEOH DW KWWSZZZ VUIRRGRUJLPDJHVVWRULHVSGIRIÃ&#x20AC;FLDOUHSRUWVBDKUFBDJURHFRORJ\BHQSGI 'H6FKXWWHU2DQG9DQORTXHUHQ*  7KHQHZ*UHHQ5HYROXWLRQ+RZWZHQW\Ã&#x20AC;UVWFHQWXU\VFLHQFHFDQIHHGWKH ZRUOG7KH6ROXWLRQV-RXUQDO9RO,VVXH$YDLODEOHDWZZZWKHVROXWLRQVMRXUQDORUJ 'H&OHUFN)$-)DQ]R-3DOP&DQG5HPDQV5  (FRORJLFDODSSURDFKHVWRKXPDQQXWULWLRQ)RRGDQG1XWULWLRQ %XOOHWLQ VXSSO 6²6 'HIUD  5HSRUWRIWKH)RRG,QGXVWU\6XVWDLQDELOLW\6WUDWHJ\·V&KDPSLRQV·*URXSRQ:DVWH/RQGRQ'HSDUWPHQW IRU (QYLURQPHQW )RRG DQG 5XUDO $IIDLUV $YDLODEOH DW KWWSDUFKLYHGHIUDJRYXNIRRGIDUPSROLF\IRRGLQGXVWU\ GRFXPHQWVUHSRUWZDVWHPD\SGI 'HJUDQGH $ .DQPHJQH - 7FKRXQGMHX = 0SHFN 0/ 6DGR 7 DQG 7VREHQJ $   0HFKDQLVPV IRU VFDOLQJXS WUHH GRPHVWLFDWLRQ +RZ JUDVVURRWV RUJDQLVDWLRQV EHFRPH DJHQWV RI FKDQJH 1DLUREL ,QWHUQDWLRQDO &HQWUH IRU 5HVHDUFKLQ$JURIRUHVWU\ ,&5$)  'H -DQYU\ $ DQG 6DGRXOHW (   $JULFXOWXUDO JURZWK DQG SRYHUW\ UHGXFWLRQ $GGLWLRQDO HYLGHQFH :RUOG %DQN 5HVHDUFK2EVHUYHU9RO1R:DVKLQJWRQ'&$YDLODEOHDWKWWSHFRQSDSHUVUHSHFRUJDUWLFOHRXSZEUREV YBDBD\BDBDLBDBDSBDKWP 'HODWH.'XII\0&KDVH&+ROVWH$)ULHGULFK+DQG:DQWDWH1  $QHFRQRPLFFRPSDULVRQRIRUJDQLFDQG FRQYHQWLRQDOJUDLQFURSVLQDORQJWHUPDJURHFRORJLFDOUHVHDUFK /7$5 VLWHLQ,RZD$PHULFDQ-RXUQDORI$OWHUQDWLYH $JULFXOWXUH² 'HOJDGR-$6SDUNV57)ROOHW5)6KDUNRII-/5LJJHQEDFK55  8VHRIZLQWHUFRYHUFURSVWRFRQVHUYHVRLODQG ZDWHUTXDOLW\LQWKH6DQ/RLV9DOOH\RI6RXWK&HQWUDO&RORUDGR,Q(URVLRQLPSDFWRQVRLOTXDOLW\ HG/DO5 SS %RFD5DWRQ)/&5& 'HPPHQW0:<RXQJ00DQG6HQVHQLJ5/  3URYLGLQJPLFURQXWULHQWVWKURXJKIRRGEDVHGVROXWLRQV$NH\WR KXPDQDQGQDWLRQDOGHYHORSPHQW-RXUQDORI1XWULWLRQ²




75$'($1'(19,5210(175(9,(:

'HQHYDQ:0  3UHKLVWRULFDJULFXOWXUDOPHWKRGVDVPRGHOVIRUVXVWDLQDELOLW\$GYDQFHG3ODQW3DWKRORJ\² 'HUE\%0DQG/HY\$6  'RIRRGODEHOVZRUN",Q%OXP31DQG*XQGODFK*7HGV+DQGERRNRI0DUNHWLQJDQG 6RFLHW\7KRXVDQG2DNV6DJH² 'LFN:$9DQ'RUHQ-U'07ULSOHWW-U&%+HQU\-(  ,QÁXHQFHRIORQJWHUPWLOODJHDQGURWDWLRQFRPELQDWLRQVRQ FURS\LHOGVDQGVHOHFWHGVRLOSDUDPHWHUV5HVXOWVREWDLQHGIRUD0ROOLF2FKUDTXDOIVRLO2$5'&5HV%XOO :RRVWHU2+ 'LHEHO3/:LOOLDPV-5DQG/OHZHO\Q59  $QHFRQRPLFFRPSDULVRQRIFRQYHQWLRQDODQGDOWHUQDWLYHFURSSLQJ V\VWHPVIRUDUHSUHVHQWDWLYHQRUWKHDVW.DQVDVIDUP5HYLHZRI$JULFXOWXUDO(FRQRPLFV  ² 'REEV7/DQG6PROLN-'  3URGXFWLYLW\DQGSURÀWDELOLW\RIFRQYHQWLRQDODQGDOWHUQDWLYHIDUPLQJV\VWHPV$ORQJ WHUPRQIDUPSDLUHGFRPSDULVRQ-RXUQDORI6XVWDLQDEOH$JULFXOWXUH  ²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² 'ULQNZDWHU/(:DJRQHU3DQG6DUUDQWRQLR0  /HJXPHEDVHGFURSSLQJV\VWHPVKDYHUHGXFHGFDUERQDQG QLWURJHQORVVHV1DWXUH² 'XVVHOGRUS0DQG6DXWHU$  )RUVFKXQJ]XU/|VXQJGHV:HOWHUQlKUXQJVSUREOHPV²$QVDW]SXQNWH6WUDWHJLHQ 8PVHW]XQJ %UR IU 7HFKQLNIROJHQ$EVFKlW]XQJ EHLP 'HXWVFKHQ %XQGHVWDJ (QGEHULFKW ]XP 7$3URMHNW $UEHLWVEHULFKW1U)HEUXDU\ (DVWHUOLQJ :( $JJDUZDO 3. %DWLPD 3 %UDQGHU .0 (UGD / +RZGHQ 60 .LULOHQNR $ 0RUWRQ - 6RXVVDQD -) 6FKPLGKXEHU-DQG7XELHOOR)1  )RRGÀEUHDQGIRUHVWSURGXFWV,Q,3&&3DUU\0/HWDOHGV&OLPDWH &KDQJH,PSDFWV$GDSWDWLRQDQG9XOQHUDELOLW\&RQWULEXWLRQRI:RUNLQJ*URXS,,WRWKH)RXUWK$VVHVVPHQW 5HSRUWRIWKH,QWHUJRYHUQPHQWDO3DQHORQ&OLPDWH&KDQJH&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV² (GZDUGV0  -XVWDQRWKHUHPSHURU"7KHP\WKVDQGUHDOLWLHVRISKLODQWKURFDSLWDOLVP1HZ<RUN'HPRVDQG7KH <RXQJ)RXQGDWLRQ ()6$   ()6$ HYDOXDWHV WKH SXEOLF KHDOWK ULVN RI EDFWHULDO VWUDLQV UHVLVWDQW WR FHUWDLQ DQWLPLFURELDOV LQ IRRG DQG IRRGSURGXFLQJ DQLPDOV 3UHVV UHOHDVH  $XJXVW  $YDLODEOH DW KWWSZZZHIVDHXURSDHXHQSUHVV QHZVDKWP (O+DJH6FLDODEED1+DWWDP&HGV  2UJDQLF$JULFXOWXUH(QYLURQPHQWDQG)RRG6HFXULW\5RPH)$2$YDLODEOH DWZZZIDRRUJGRFUHS\H\HKWP (O+DJH6FLDODEED10OOHU/LQGHQODXI0  2UJDQLFDJULFXOWXUHDQGFOLPDWHFKDQJH5HQHZDEOH$JULFXOWXUHDQG )RRG6\VWHPV  ² (OOLV)DQG)UHHPDQ+$  5XUDO/LYHOLKRRGVDQG3RYHUW\5HGXFWLRQ6WUDWHJLHVLQ)RXU$IULFDQ&RXQWULHV-RXUQDO RI'HYHORSPHQW6WXGLHV² (OWRQ&6  $QLPDO(FRORJ\/RQGRQ6LGJZLFNDQG-DFNVRQ (VTXLQDV$OFi]DU -   3URWHFWLRQ RI FURS JHQHWLF GLYHUVLW\ IRU IRRG VHFXULW\ 3ROLWLFDO HWKLFDO DQG WHFKQLFDO FKDOOHQJHV1DWXUH'HFHPEHU² (XURSHDQ&RPPLVVLRQ  :KLWH3DSHURQ)RRG6DIHW\%UXVVHOV-DQXDU\'RFXPHQW&20  ÀQDO $YDLODEOHDWKWWSHFHXURSDHXGJVKHDOWKBFRQVXPHUOLEUDU\SXESXEBHQSGI (XURSHDQ&RPPLVVLRQ  6SHFLDO(XUREDURPHWHU+HDOWKDQG)RRG%UXVVHOV (XURSHDQ &RPPLVVLRQ   (XUREDURPHWHU 6XUYH\ 5HSRUW RQ 5LVN 3HUFHSWLRQ LQ WKH (8 (XUREDURPHWHU 6SHFLDO %UXVVHOV (XURSHDQ (QYLURQPHQW $JHQF\   +RXVHKROG FRQVXPSWLRQ DQG WKH HQYLURQPHQW (($ 5HSRUW 1R  &RSHQKDJHQ$YDLODEOHDWKWWSZZZHHDHXURSDHXSXEOLFDWLRQVHHDBUHSRUWBBDWBGRZQORDGÀOH


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



(XURVWDW  )URPIDUPWRIRUNDVWDWLVWLFDOMRXUQH\DORQJWKH(8·VIRRGFKDLQ,VVXHQXPEHU$YDLODEOHDW KWWSWLQ\XUOFRPWFKPDQGKWWSWLQ\XUOFRPNMVF (\KRUQ)  2UJDQLF)DUPLQJIRU6XVWDLQDEOH/LYHOLKRRGVLQ'HYHORSLQJ&RXQWULHV"7KH&DVHRI&RWWRQLQ,QGLD =ULFK YGI+RFKVFKXOYHUODJ $YDLODEOH DW KWWSZZZYGIHWK]FKORDG$OO)UDPHVDVS"VKRZ$UW'HWDLO  6HH DOVR(\KRUQ$VVHVVLQJWKHSRWHQWLDORIRUJDQLFIDUPLQJIRUVXVWDLQDEOHOLYHOLKRRGVLQGHYHORSLQJFRXQWULHVWKH FDVHRIFRWWRQLQ,QGLD$YDLODEOHDWKWWSZZZ]EXQLEHFKGRZQORDGHOGLVVH\KRUQBISGI  (\KRUQ ) 5DPDNULVKQDQ 0 DQG 0lGHU 3   7KH YLDELOLW\ RI FRWWRQEDVHG RUJDQLF IDUPLQJ V\VWHPV LQ ,QGLD ,QWHUQDWLRQDO-RXUQDORI$JULFXOWXUDO6XVWDLQDELOLW\  ² )DHWK3DQG&URVVRQ3  %XLOGLQJWKHFDVHIRUVXVWDLQDEOHDJULFXOWXUH(QYLURQPHQW  ² )DONHQPDUN0DQG5RFNVWU|P-  7KHQHZEOXHDQGJUHHQZDWHUSDUDGLJP%UHDNLQJQHZJURXQGIRUZDWHU UHVRXUFHVSODQQLQJDQGPDQDJHPHQW-RXUQDORI:DWHU5HVRXUFHV3ODQQLQJDQG0DQDJHPHQW0D\-XQH²  )$2  )RRGORVVSUHYHQWLRQLQSHULVKDEOHFURSV)$2$JULFXOWXUDO6HUYLFH%XOOHWLQ)$26WDWLVWLFV'LYLVLRQ5RPH )$2  &KDSWHUVDQG,Q)$2)XWXUH(QHUJ\5HTXLUHPHQWVIRU$IULFD·V$JULFXOWXUH3UHSDUHGIRUWKH$IULFDQ (QHUJ\ 3URJUDPPH RI WKH $IULFDQ 'HYHORSPHQW %DQN 5RPH )$2 $YDLODEOH DW KWWSZZZIDRRUJGRFUHS 9(YHKWP&RQWHQWV )$2  7KH(QHUJ\DQG$JULFXOWXUH1H[XV5RPH )$2  0LQLVWHULDO5RXQG7DEOHRQWKH5ROHRI:DWHUDQG,QIUDVWUXFWXUHLQ(QVXULQJ6XVWDLQDEOH)RRG6HFXULW\ 5RPH1RYHPEHU²'HFHPEHU$YDLODEOHDWZZZIDRRUJ'2&5(30((7,1*-(+70 )$2  'LVFDUGVLQWKHZRUOG·VPDULQHÀVKHULHV²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À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ÀOHDGPLQXVHUBXSORDGDJV SXEOLFDWLRQV*)/BZHESGI )$2 D  )RRG VHFXULW\ DQG FOLPDWH FKDQJH 5HSRUW RI WKH +LJKOHYHO 3DQHO RI ([SHUWV RQ )RRG 6HFXULW\ DQG 1XWULWLRQWRWKH&RPPLWWHHRQ:RUOG)RRG6HFXULW\5HSRUW1R5RPH-XQH$YDLODEOHDWZZZIDRRUJ )$2 E &OLPDWHVPDUWDJULFXOWXUHIRUGHYHORSPHQW$YDLODEOHDWKWWSZZZIDRRUJFOLPDWHFKDQJHFOLPDWHVPDUW HQ




75$'($1'(19,5210(175(9,(:

)$2 F &OLPDWH6PDUW$JULFXOWXUH5RPH$YDLODEOHDWKWWSZZZIDRRUJFOLPDWHFKDQJHFOLPDWHVPDUWHQ )$2DQG%LRYHUVLW\,QWHUQDWLRQDO  6XVWDLQDEOHDJULFXOWXUHDQGUXUDOGHYHORSPHQW 6$5' 3ROLF\%ULHI5RPH )$2DQG,,(' ,QWHUQDWLRQDO,QVWLWXWHIRU(QYLURQPHQWDQG'HYHORSPHQW   7KHULJKWWRIRRGDQGDFFHVVWRQDWXUDO UHVRXUFHV8VLQJKXPDQULJKWVDUJXPHQWVDQGPHFKDQLVPVWRLPSURYHUHVRXUFHDFFHVVIRUWKHUXUDOSRRU5LJKW WR)RRG6WXG\)$25RPH )$7  %HULFKWEHUELRORJLVFKEHZLUWVFKDIWHWH%HWULHEH(LGJ)RUVFKXQJVDQVWDOWIU%HWULHEVZLUWVFKDIWXQG /DQGWHFKQLN 7lQLNRQ 6ZLW]HUODQG &LWHG E\ 0KOHEDFK , DQG 0KOHEDFK - (FRQRPLFV RI RUJDQLF IDUPLQJ LQ 6ZLW]HUODQG,Q/DPSNLQ1+DQG3DGHO6HGV7KH(FRQRPLFVRI2UJDQLF)DUPLQJ$Q,QWHUQDWLRQDO3HUVSHFWLYH :DOOLQJIRUG&$%,QWHUQDWLRQDO  )$7   %HULFKW EHU ELRORJLVFK EHZLUWVFKDIWHWH %HWULHEH  (UJHEQLVVH GHU =HQWUDOHQ $XVZHUWXQJ YRQ %XFKKDOWXQJVGDWHQ7lQLNRQ(LGJHQ|VVLVFKH)RUVFKXQJVDQVWDOWIU$JUDUZLUWVFKDIWXQG/DQGWHFKQLN )HHGWKH)XWXUH  *XLGH$YDLODEOHDWZZZIHHGWKHIXWXUHJRY )H\GHU-  0RUGVKXQJHU²:HUSURÀWLHUWYRP(OHQGGHUDUPHQ/lQGHU" +XQJHUNLOOV:KRSURÀWVIURPWKHPLVHU\ RISRRUFRXQWULHV" )UDQNIXUW:HVWHQG $OVRLQ)UHQFK/D)DLPWXHO·+DUPDWWDQ  )LOJHU6  *OREDOÀQDQFLDOFULVLVYHUVXV,VKLVWRU\DERXWWRUHSHDWLWVHOI"-XQH$YDLODEOHDWKWWS ZZZJOREDOHFRQRPLFFULVLVFRPEORJDUFKLYHVWDJÀQDQFLDOFULVLV )LQDQFLDO7LPHV  6SHFLDOUHSRUWRQPDQDJLQJFOLPDWHFKDQJH/RQGRQ1RYHPEHU$YDLODEOHDWZZZIWFRP FOLPDWHFKDQJH )LVFKHU*6KDK07XELHOOR)1YDQ9HOKXL]HQ+  6RFLRHFRQRPLFDQGFOLPDWHFKDQJHLPSDFWVRQDJULFXOWXUH $QLQWHJUDWHGDVVHVVPHQW²3KLORVRSKLFDO7UDQVDFWLRQVRIWKH5R\DO6RFLHW\%² )OLHVVEDFK $ ,PKRI ' %UXQQHU 7 DQG :WKULFK &   7LHIHQYHUWHLOXQJ XQG ]HLWOLFKH '\QDPLN GHU PLNURELHOOHQ %LRPDVVHLQELRORJLVFKXQGNRQYHQWLRQHOOEHZLUWVFKDIWHWHQ%|GHQ5HJLR%DVLOLHQVLV² )OLHVVEDFK$2EHUKRO]HU+5*XQVW/DQG0lGHU3  6RLORUJDQLFPDWWHUDQGELRORJLFDOVRLOTXDOLW\LQGLFDWRUV DIWHU\HDUVRIRUJDQLFDQGFRQYHQWLRQDOIDUPLQJ$JULFXOWXUH(FRV\VWHPV (QYLURQPHQW² )RUHVLJKW D  7KH )XWXUH RI )RRG DQG )DUPLQJ )LQDO SURMHFW UHSRUW /RQGRQ *RYHUQPHQW 2IÀFH IRU 6FLHQFH $YDLODEOH DW ZZZELVJRYXNDVVHWVELVSDUWQHUVIRUHVLJKWGRFVIRRGDQGIDUPLQJIXWXUHRIIRRGDQG IDUPLQJUHSRUWSGI )RUHVLJKW E 6FLHQFH5HYLHZ65*OREDO)RRG:DVWH5HGXFWLRQ3ULRULWLHVIRUD:RUOGLQ7UDQVLWLRQ$YDLODEOH DW ZZZELVJRYXNIRUHVLJKWRXUZRUNSURMHFWVSXEOLVKHGSURMHFWVJOREDOIRRGDQGIDUPLQJIXWXUHVaPHGLD %,63DUWQHUV)RUHVLJKWGRFVIRRGDQGIDUPLQJVFLHQFHVUJOREDOIRRGZDVWHUHGXFWLRQSULRULWLHVDVK[ )RUHVLJKW F ([SHUW)RUXPRQWKH5HGXFWLRQRI)RRG:DVWH8.6FLHQFHDQG,QQRYDWLRQ1HWZRUNDQG)RUHVLJKW /RQGRQ²)HEUXDU\$YDLODEOHDWZZZELVJRYXNDVVHWVELVSDUWQHUVIRUHVLJKWGRFVIRRGDQGIDUPLQJ ZRUNVKRSVZH[SHUWIRUXPUHGXFWLRQRIIRRGZDVWHSGI )RUHVLJKW G 7KH)XWXUHRI)RRGDQG)DUPLQJ6\QWKHVLV5HSRUW&5HGXFLQJZDVWH$YDLODEOHDWZZZELVJRY XNDVVHWVELVSDUWQHUVIRUHVLJKWGRFVIRRGDQGIDUPLQJV\QWKHVLVFUHGXFLQJZDVWHSGI )UDQFLV&$-RQHV$&URRNVWRQ.:LWWOHU.DQG*RRGPDQ6  6WULSFURSSLQJFRUQDQGJUDLQOHJXPHV$UHYLHZ $PHULFDQ-RXUQDORI$OWHUQDWLYH$JULFXOWXUH² )ULHGO%+DPPHU0-lJHU-/RUHN62PDQQ,DQG3DFN$  68)275236XVWDLQDEOH)RRG&RQVXPSWLRQ 7UHQGVDQG2SSRUWXQLWLHV)LQDOUHSRUW\HDU9LHQQD$XVWULDQ$FDGHP\RI6FLHQFHV3UHVV )ULVRQ($6PLWK,)-RKQV7&KHUIDV-(\]DJXLUUH3%  $JULFXOWXUDOELRGLYHUVLW\QXWULWLRQDQGKHDOWK0DNLQJD GLIIHUHQFHWRKXQJHUDQGQXWULWLRQLQWKHGHYHORSLQJZRUOG)RRGDQG1XWULWLRQ%XOOHWLQ  ² )XOOHQ0$DQG$Y.  (IIHFWVRIJUDVVOH\VHWDVLGHRQUXQRIIHURVLRQDQGRUJDQLFPDWWHUOHYHOVLQVDQG\VRLOLQ (DVW6KURSVKLUH8.6RLO7LOO5HV )XX0LQJ.DL7\OHU6&5DQGHUVRQ-7DQG%ODNH'5  5HGXFHGPHWKDQHJURZWKUDWHH[SODLQHGE\GHFUHDVHG 1RUWKHUQ+HPLVSKHUHPLFURELDOVRXUFHV1DWXUH² *DUQHWW7DQG-DFNVRQ7  )URVW%LWWHQ$QH[SORUDWLRQRIUHIULJHUDWLRQGHSHQGHQFHLQWKH8.IRRGFKDLQDQGLWV LPSOLFDWLRQVIRUFOLPDWHSROLF\3DSHUSUHVHQWHGDWWKHWK(XURSHDQ5RXQG7DEOHRQ6XVWDLQDEOH&RQVXPSWLRQ DQG3URGXFWLRQ%DVHO-XQH)RRG&OLPDWH5HVHDUFK1HWZRUN&HQWUHIRU(QYLURQPHQWDO6WUDWHJ\8QLYHUVLW\RI


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



6XUUH\ $YDLODEOH DW ZZZIFUQRUJXNUHVHDUFKOLEUDU\UHIULJHUDWLRQJHQHUDOIURVWELWWHQUHIULJHUDWLRQGHSHQGHQFH XNIRRGFKDLQ *DWWLQJHU$0OOHU$+lQL02HKHQ%6WRO]H0DQG1LJJOL8  6RLOFDUERQVHTXHVWUDWLRQRIRUJDQLFFURSDQG OLYHVWRFN V\VWHPV DQG SRWHQWLDO IRU DFFUHGLWDWLRQ E\ FDUERQ PDUNHWV ,Q )$2 2UJDQLF $JULFXOWXUH DQG &OLPDWH &KDQJH0LWLJDWLRQ$UHSRUWRIWKH5RXQG7DEOHRQ2UJDQLF$JULFXOWXUHDQG&OLPDWH&KDQJH5RPH'HFHPEHU ² *HUPDQ$FDGHP\RI6FLHQFHV/HRSROGLQD  6WDWHPHQW%LRHQHUJ\&KDQFHVDQG/LPLWV%HUOLQ$YDLODEOHDW ZZZOHRSROGLQDRUJXSORDGVW[BOHRSXEOLFDWLRQB6WHOOXQJQDKPHB%LRHQHUJLHB/$<BHQBÀQDOSGI *HUPDQ &RXQFLO IRU 6XVWDLQDEOH 'HYHORSPHQW   5DW IU 1DFKKDOWLJH (QWZLFNOXQJ 51(  *ROG6WDQGDUG gNRODQGEDX )U HLQH QDFKKDOWLJH *HVWDOWXQJ GHU $JUDUZHQGH (PSIHKOXQJHQ GHV 5DWHV IU 1DFKKDOWLJH (QWZLFNOXQJYRP-XOL7H[WH1U *LDQHVVL /   7KH SRWHQWLDO IRU RUJDQLF DJULFXOWXUH WR IHHG WKH ZRUOG LV EHLQJ RYHUVROG 2XWORRNV RQ 3HVW 0DQDJHPHQW  ² *LEERQ3DQG%ROZLJ6  7KHHFRQRPLFVRIFHUWLÀ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² *OLHVVPDQ6  $JURHFRORJ\7KH(FRORJ\RI6XVWDLQDEOH)RRG6\VWHPV%RFD5DWRQ)/&5&3UHVV *OREDO&DUERQ3URMHFW  &DUERQ%XGJHW$YDLODEOHDWKWWSZZZJOREDOFDUERQSURMHFWRUJFDUERQEXGJHW *RGIUD\ + %HGGLQJWRQ - &UXWH , +DGGDG / /DZUHQFH ' 0XLU - 3UHWW\ - 5RELQVRQ 6 7KRPDV 6 DQG 7RXOPLQ &  )RRGVHFXULW\7KHFKDOOHQJHRIIHHGLQJELOOLRQSHRSOH6FLHQFH *UDFH 3 DQG 2DGHV -0   /RQJWHUP À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ÀQ':.HOORJJ&$DQG6KLQQ($  'XVWLQWKHZLQG/RQJUDQJHWUDQVSRUWRIGXVWLQWKHDWPRVSKHUHDQGLWV LPSOLFDWLRQVIRUJOREDOSXEOLFDQGHFRV\VWHPKHDOWK*OREDO&KDQJH +XPDQ+HDOWK  ² *XHQWKHU'DQG:LOO0  )RRG4XDOLW\DQG6DIHW\6WDQGDUGVDV5HTXLUHGE\(8/DZDQGWKH3ULYDWH,QGXVWU\ $3UDFWLWLRQHUV·5HIHUHQFH%RRN6HFRQGHGLWLRQ(VFKERUQ*7=$YDLODEOHDWZZZJW]GHGRNXPHQWHELE SGI +DPHUPHVK'6  7LPHWRHDW+RXVHKROGSURGXFWLRQXQGHULQFUHDVLQJLQFRPHLQHTXDOLW\$PHULFDQ-RXUQDORI $JULFXOWXUDO(FRQRPLFV  ²$PHULFDQ$JULFXOWXUDO(FRQRPLFV$VVRFLDWLRQ +DQGUHN.  2UJDQLF0DWWHUDQG6RLOV0HOERXUQH&6,523XEOLVKLQJ UHSULQWHG  +DQGUHN.DQG%ODFN1  *URZLQJ0HGLDIRU2UQDPHQWDO3ODQWVDQG7XUI6\GQH\816:3UHVV +DQVRQ-/LFKWHQEHUJ(DQG3HWHUV6(  2UJDQLFYHUVXVFRQYHQWLRQDOJUDLQSURGXFWLRQLQWKHPLG$WODQWLF$Q HFRQRPLFDQGIDUPLQJV\VWHPRYHUYLHZ$PHULFDQ-RXUQDORI$OWHUQDWLYH$JULFXOWXUH  ² +DUWÀHOG-/%RRWH.-.LPEDOO%$=LVND/$,]DXUUDOGH5&2UW'7KRPVRQ$0DQG:ROIH':  &OLPDWHLPSDFWV RQDJULFXOWXUH,PSOLFDWLRQVIRUFURSSURGXFWLRQ$JURQRP\-RXUQDO  ² +DUYH\)  )DLOXUHWRDFWRQFURSVKRUWDJHVIXHOOLQJSROLWLFDOLQVWDELOLW\H[SHUWVZDUQ7KH*XDUGLDQ)HEUXDU\ $YDLODEOHDWKWWSZZZJXDUGLDQFRXNHQYLURQPHQWIHEFURSVKRUWDJHVSROLWLFDOLQVWDELOLW\




75$'($1'(19,5210(175(9,(:

+DZNHV &   1XWULWLRQ /DEHOV DQG +HDOWK &ODLPV 7KH *OREDO 5HJXODWRU\ (QYLURQPHQW *HQHYD :RUOG +HDOWK 2UJDQL]DWLRQ +D\Q'(EHUOH86WLH‰,DQG+QHFNH.  (UQlKUXQJLP$OOWDJ,Q(EHUOH8HWDOHGV(UQlKUXQJVZHQGH(LQH +HUDXVIRUGHUXQJIU3ROLWLN8QWHUQHKPHQXQG*HVHOOVFKDIW0XQLFK2HNRP² +D]HOO33RXOWRQ&:LJJLQV6'RUZDUG$  7KHIXWXUHRIVPDOOIDUPVIRUSRYHUW\UHGXFWLRQDQGJURZWK 'LVFXVVLRQ3DSHU1R,QWHUQDWLRQDO)RRG3ROLF\5HVHDUFK,QVWLWXWH:DVKLQJWRQ'& +HDOWK&RXQFLORIWKH1HWKHUODQGV  *XLGHOLQHVIRUD+HDOWK\'LHW7KH(FRORJLFDO3HUVSHFWLYH3XEOLFDWLRQQR (7KH+DJXH +HLPDQQ0  $WPRVSKHULFVFLHQFH(QLJPDRIWKHUHFHQWPHWKDQHEXGJHW1DWXUH +HOOHEUDQG+-DQG+HUSSLFK:  0HWKDQHGHJUDGDWLRQLQVRLOV,QÁXHQFHRISODQWVDQGIHUWLOLVDWLRQ-DKUHVWDJXQJ GHU*HVHOOVFKDIWIUg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iWLORYi0  &KDQJHVLQDJULFXOWXUHDQGIRRGSURGXFWLRQLQ1$( VLQFH,Q0F,QW\UHHWDOHGV1RUWK$PHULFDDQG(XURSH5HJLRQDO5HSRUW:DVKLQJWRQ'&,$$67' +HUUHQ+5  5LR:KDWDUHWKHRSWLRQVZKHQ´EXVLQHVVDVXVXDOµLVQRWDQRSWLRQ"3UHVHQWDWLRQDWWKH%LR)DFK ZRUNVKRSRQ5LRDQGWKH*UHHQ(FRQRP\²3XWWLQJ2UJDQLF)RRG )DUPLQJ&HQWUH6WDJH1XUHPEHUJ )HEUXDU\ +HUUHQ+5%LQQV31DMDP$.KDQV+DOEHUJ1&LP/L&KLQJ7UH\HU6/DO5$WDSDWWX6.RGLWXZDNNX'7DPR 01HXHQVFKZDQGHU3)HUQDQGH]0%DVVL$.DVVDP$'H)UDLWXUH&.LQJDPNRQR53HUIHFWR<.KDQ =5  81(3*UHHQ(FRQRP\5HSRUW$JULFXOWXUH1DLUREL$YDLODEOHDWZZZXQHSRUJJUHHQHFRQRP\ +H\ZRRG9+  *OREDO%LRGLYHUVLW\$VVHVVPHQW&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV +R0:  &LUFXODUHFRQRP\RIWKHG\NHSRQGV\VWHP6FLHQFHLQ6RFLHW\² +R0:  7KH5DLQERZDQGWKH:RUPWKH3K\VLFVRI2UJDQLVPV7KLUGHGLWLRQ6LQJDSRUHDQG/RQGRQ:RUOG 6FLHQWLÀF$YDLODEOHDWKWWSZZZLVLVRUJXNUQEZZUPSKS +R0: D *UHHQJURZWKIRUGHYHORSLQJQDWLRQV6FLHQFHLQ6RFLHW\² +R 0: E  6XVWDLQDEOH DJULFXOWXUH HVVHQWLDO IRU JUHHQ FLUFXODU HFRQRP\ ,6,6 OHFWXUH DW WKH 7HQ2QH &RQIHUHQFH %UDGIRUG 8QLYHUVLW\  1RYHPEHU² 'HFHPEHU  $YDLODEOH DW KWWSZZZLVLVRUJXN VXVWDLQDEOH$JULFXOWXUH(VVHQWLDO*UHHQ&LUFXODU(FRQRP\SKS +R0: D *UDPHHQ6KDNWLIRUUHQHZDEOHHQHUJLHV6FLHQFHLQ6RFLHW\² +R0: E /LJKWLQJ$IULFD6FLHQFHLQ6RFLHW\² +R0: F %LRJDVIRU&KLQD·V1HZ6RFLDOLVWFRXQWU\VLGH6FLHQFHLQ6RFLHW\²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ÀHOG3*RPH](+DUYHOO('6DOH3)(GZDUGV$- &DOGHLUD..QRZOWRQ1(DNLQ&0,JOHVLDV3ULHWR50XWKLJD1%UDGEXU\5+'XEL$DQG+DW]LRORV0(  


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



&RUDOUHHIVXQGHUUDSLGFOLPDWHFKDQJHDQGRFHDQDFLGLÀFDWLRQ6FLHQFH² +RIIPDQQ8  $VVXULQJIRRGVHFXULW\LQGHYHORSLQJFRXQWULHVXQGHUWKHFKDOOHQJHVRIFOLPDWHFKDQJH.H\WUDGH DQG GHYHORSPHQW LVVXHV RI D IXQGDPHQWDO WUDQVIRUPDWLRQ RI DJULFXOWXUH 81&7$' 'LVFXVVLRQ 3DSHU 1R  *HQHYD0DUFK$YDLODEOHDWZZZXQFWDGRUJHQ'RFVRVJGSBHQSGI +|J\ 3 DQG )DQJPHLHU $   (IIHFWV RI HOHYDWHG DWPRVSKHULF &2 RQ JUDLQ TXDOLW\ RI ZKHDW -RXUQDO RI &HUHDO 6FLHQFH² +|J\3:LHVHU+.|KOHU36FKZDGRUI.%UHXHU-)UDQ]DULQJ-0XQWLIHULQJ5DQG)DQJPHLHU$  (IIHFWVRI HOHYDWHG&2RQJUDLQ\LHOGDQGTXDOLW\RIZKHDW5HVXOWVIURPDWKUHH\HDU)$&(H[SHULPHQW3ODQW%LRORJ\ ² +ROW*LPpQH](  0HDVXULQJIDUPHUV·DJURHFRORJLFDOUHVLVWDQFHDIWHU+XUULFDQH0LWFKLQ1LFDUDJXD$FDVHVWXG\ LQSDUWLFLSDWRU\VXVWDLQDEOHODQGPDQDJHPHQWLPSDFWPRQLWRULQJ$JULFXOWXUH(FRV\VWHPVDQG(QYLURQPHQW ² +ROW*LPpQH] (   &DPSHVLQR D &DPSHVLQR 9RLFHV IURP /DWLQ $PHULFD·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² +RZDUG3+  9LVXDOL]LQJFRQVROLGDWLRQLQWKHJOREDOVHHGLQGXVWU\²6XVWDLQDELOLW\  'HFHPEHU $YDLODEOHDWKWWSZZZPGSLFRP +XEEDUG.  2XWRIKDQG)DUPHUVIDFHWKHFRQVHTXHQFHVRIDFRQVROLGDWHGVHHGLQGXVWU\)DUPHUWR)DUPHU &DPSDLJQ$YDLODEOHDWKWWSIDUPHUWRIDUPHUFDPSDLJQFRP +XJKHV*&KLQRZVN\3DQG6WU]HSHN.  7KHFRVWVRIDGDSWDWLRQWRFOLPDWHFKDQJHIRUZDWHULQIUDVWUXFWXUHLQ 2(&'FRXQWULHV8WLOLWLHV3ROLF\  ² ,$$67' D  ,QWHUQDWLRQDO DVVHVVPHQW RI DJULFXOWXUDO NQRZOHGJH VFLHQFH DQG WHFKQRORJ\ IRU GHYHORSPHQW :DVKLQJWRQ'&,VODQG3UHVV$FFHVVLEOHDWZZZDJDVVHVVPHQWRUJ ,$$67' E 6XPPDU\IRUGHFLVLRQPDNHUV:DVKLQJWRQ'&$YDLODEOHDWZZZDJDVVHVVPHQWRUJ ,$$67' XQGDWHG  :KDW LV WKH ,QWHUQDWLRQDO $VVHVVPHQW RI $JULFXOWXUDO .QRZOHGJH 6FLHQFH  7HFKQRORJ\" $ FRPSLODWLRQIURPLWVSOHQDU\GHFLVLRQVDQGRIÀFLDOGRFXPHQWV$YDLODEOHDWKWWSZZZDJDVVHVVPHQWZDWFKRUJ GRFV,$$67'BRQBWKUHHBSDJHVSGI ,$73 ,QVWLWXWHIRU$JULFXOWXUHDQG7UDGH3ROLF\   :RPHQDWWKHFHQWHURIFOLPDWHIULHQGO\DSSURDFKHVWRDJULFXOWXUH DQG ZDWHU 0LQQHDSROLV $YDLODEOH DW KWWSZZZLDWSRUJGRFXPHQWVZRPHQDWWKHFHQWHURIFOLPDWHIULHQGO\ DSSURDFKHVWRDJULFXOWXUHDQGZDWHUXVH ,&5,6$7 ,QWHUQDWLRQDO&URSV5HVHDUFK,QVWLWXWHIRUWKH6HPL$ULG7URSLFV   &OLPDWHFKDQJHDGDSWDWLRQ0RYLQJ IRUZDUG ZLWK KRSH IRU WKH ´SRRUHVW RI WKH SRRUµ LQ WKH VHPLDULG WURSLFV $YDLODEOH DW KWWSXQIFFFLQWÀOHV DGDSWDWLRQVEVWDBDJHQGDBLWHPBDGDSWDWLRQDSSOLFDWLRQSGILFULVDWBPD\SGI ,GVR6%DQG,GVR.(  (IIHFWVRIDWPRVSKHULF&2HQULFKPHQWRQSODQWFRQVWLWXHQWVUHODWHGWRDQLPDODQGKXPDQ KHDOWK(QYLURQPHQWDODQG([SHULPHQWDO%RWDQ\² ,($  :RUOG(QHUJ\2XWORRN3DULV2(&',($ ,($  (QHUJ\3RYHUW\+RZWRPDNH0RGHUQ(QHUJ\$FFHVV8QLYHUVDO6SHFLDOHDUO\H[FHUSWRIWKH:RUOG(QHUJ\ 2XWORRNIRUWKH8QLWHG1DWLRQV*HQHUDO$VVHPEO\RQWKH0LOOHQQLXP'HYHORSPHQW*RDOV3DULV ,($ D  ,QWHUQDWLRQDO (QHUJ\ $JHQF\ &2 HPLVVLRQV IURP IXHO FRPEXVWLRQ +LJKOLJKWV  (GLWLRQ 3DULV $YDLODEOHDWZZZLHDRUJFRKLJKOLJKWV ,($ E  3URVSHFW RI OLPLWLQJ WKH JOREDO LQFUHDVH LQ WHPSHUDWXUH WR ž& JHWWLQJ EOHDNHU 3UHVV UHOHDVH  0D\ $YDLODEOHDWZZZLHDRUJQHZVURRPDQGHYHQWVQHZVPD\QDPHHQKWPO ,(&$  (URVLRQ&RQWURO²$*OREDO3HUVSHFWLYH3URFHHGLQJVRI&RQIHUHQFH;;,,,QWHUQDWLRQDO(URVLRQ&RQWURO $VVRFLDWLRQ6WHDPERDW6SULQJV&2²)HEUXDU\




75$'($1'(19,5210(175(9,(:

,)$'  7KHDGRSWLRQRIRUJDQLFDJULFXOWXUHDPRQJVPDOOIDUPHUVLQ/DWLQ$PHULFDDQGWKH&DUULEEHDQ5HSRUW QR5RPH ,IHMLND6SHUDQ]D&  5HVLOLHQW$GDSWDWLRQWR&OLPDWH&KDQJHLQ$IULFDQ$JULFXOWXUH',(6WXGLHV'HXWVFKHV ,QVWLWXWI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² ,:0, ,QWHUQDWLRQDO:DWHU0DQDJHPHQW,QVWLWXWH   :DWHUIRU)RRG:DWHUIRU/LIH$YDLODEOHDWKWWSZZZLZPL FJLDURUJDVVHVVPHQW3XEOLFDWLRQVERRNVKWP ,]DF $0  (JHO\QJ + )HUUHLUD * 'XWKLH ' +XEHUW % DQG /RXZDDUV 1   2SWLRQV IRU HQDEOLQJ SROLFLHV DQG UHJXODWRU\ HQYLURQPHQWV ,Q 0F,QW\UH HW DO HGV $JULFXOWXUH DW D &URVVURDGV *OREDO 5HSRUW :DVKLQJWRQ '& ,$$67'$YDLODEOHDWZZZDJDVVHVVPHQWRUJ -DFN : DQG 6XUL 7   0RELOH 0RQH\ 7KH (FRQRPLFV RI 03(6$ $YDLODEOH DW KWWSZZZJHRUJHWRZQHGX IDFXOW\ZJMSDSHUV-DFNB6XUL(FRQRPLFVRI03(6$SGI -DFNVRQ*-  2UJDQLF&RWWRQ)DUPLQJLQ.XWFK*XMDUDW,QGLD2XWORRNVRQ3HVW0DQDJHPHQW)HEUXDU\ -D\QH760DWKHU'DQG0JKHQ\L(  3ULQFLSDOFKDOOHQJHVFRQIURQWLQJVPDOOKROGHUDJULFXOWXUHLQVXE6DKDUDQ $IULFD:RUOG'HYHORSPHQW² -HQNLQVRQ '6   7KH WXUQRYHU RI RUJDQLF FDUERQ DQG QLWURJHQ LQ VRLO 3KLORVRSKLFDO 7UDQVDFWLRQV RI WKH 5R\DO 6RFLHW\%%LRORJLFDO6FLHQFHV -RKDQVVRQ6  7KH6ZHGLVKIRRGVKHG5HLPDJLQLQJRXUVXSSRUWDUHD,Q)DUQZRUWK&-LJJLQV-DQG7KRPDV (9HGV&UHDWLQJ)RRG)XWXUHV7UDGH(WKLFVDQGWKH(QYLURQPHQW$OGHUVKRW*RZHU² -RKQVRQ3:  $JULFXOWXUH)RRGDQG'UXJ$GPLQLVWUDWLRQ5XUDO'HYHORSPHQW:DVKLQJWRQ'&*RYHUQPHQW 3ULQWLQJ2IÀFH -RKQVWRQ$(  7KHHIIHFWVRIOH\DQGDUDEOHFURSSLQJV\VWHPVRQWKHDPRXQWRIRUJDQLFPDWWHULQWKH5RWKDPVWHDG DQG:REXUQOH\DUDEOHH[SHULPHQWV5RWKDPVWHDG5HSRUWIRU3DUWSS -RQHV&(  &DUERQWKDWFRXQWV6RLO&DUERQ&RDOLWLRQ$YDLODEOHDWKWWSVRLOFDUERQFRDOLWLRQRUJÀOHV-21(6 &DUERQWKDWFRXQWV0DUSGI -RQHV 1   &OLPDWH FKDQJH FXUEV FURSV 1DWXUH 1HZV  0D\ $YDLODEOH DW KWWSZZZQDWXUHFRP QHZVIXOOQHZVKWPO -XR$65DQG7KXURZ7/  6XVWDLQDEOHWHFKQRORJLHVIRUXVHDQGFRQVHUYDWLRQRI6WHHSODQGV%XOOHWLQ)RRG )HUWLOL]HU7HFKQRORJ\&HQWHUIRUWKH$VLDQDQG3DFLÀF5HJLRQ7DLSHL$YDLODEOHDWZZZIIWFDJQHWRUJOLEUDU\SKS "IXQF YLHZ LG  W\SHBLG 


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



.DGHU$$  $SHUVSHFWLYHRQSRVWKDUYHVWKRUWLFXOWXUH+RUWLFXOWXUDO6FLHQFH² .DGHU$$  ,QFUHDVLQJIRRGDYDLODELOLW\E\UHGXFLQJSRVWKDUYHVWORVVHVRIIUHVKSURGXFH$FWD+RUWLFXOWXUDH ² .DQQLQHQ0HWDO  'RWUHHVJURZRQPRQH\")RUHVW3HUVSHFWLYH-DNDUWD&HQWHUIRU,QWHUQDWLRQDO)RUHVWU\ 5HVHDUFK &,)25  .DUHNH]L6DQG/D]DUXV0  )XWXUH(QHUJ\5HTXLUHPHQWVIRU$IULFD·V$JULFXOWXUH &KDSWHUVDQG $YDLODEOH DWKWWSZZZIDRRUJGRFUHS9(YHKWP&RQWHQWV .DVSHUF]\N1DQG.QLFNHO.  (QYLURQPHQWDOLPSDFWVRIRUJDQLFIDUPLQJ,Q.ULVWLDQVHQ35HJDQROG-DQG7DML $HGV2UJDQLF$JULFXOWXUH$*OREDO3HUVSHFWLYH&ROOLQJZRRG&6,52²$YDLODEOHDWKWWSZZZSXEOLVK FVLURDXSLGKWP .HDQH-3DJH6.HUJQD$DQG.HQQDQ-  &OLPDWHFKDQJHDQGGHYHORSLQJFRXQWU\DJULFXOWXUHDQRYHUYLHZRI H[SHFWHGLPSDFWVDGDSWDWLRQDQGPLWLJDWLRQFKDOOHQJHVDQGIXQGLQJUHTXLUHPHQWV,&76',QWHUQDWLRQDO)RRG  $JULFXOWXUDO7UDGH3ROLF\&RXQFLO,VVXH%ULHI1R$YDLODEOHDWZZZLFWVGRUJ .HQGDOO+:DQG3LPHQWHO'  &RQVWUDLQWVRQWKHH[SDQVLRQRIWKHJOREDOIRRGVXSSO\$PELR² .KDQ6$0XOYDQH\5/(OOVZRUWK75DQG%RDVW&:  7KHP\WKRIQLWURJHQIHUWLOL]DWLRQIRUVRLOFDUERQVHTXHVWUDWLRQ -RXUQDORI(QYLURQPHQWDO4XDOLW\  2FWREHU² .KRU 0  7KHLPSDFWRIWUDGHOLEHUDOL]DWLRQRQDJULFXOWXUHLQGHYHORSLQJFRXQWULHV7KHH[SHULHQFHRI*KDQD 3HQDQJ7KLUG:RUOG1HWZRUN .KRU 0   7KH IRRG FULVLV FOLPDWH FKDQJH DQG WKH LPSRUWDQFH RI VXVWDLQDEOH DJULFXOWXUH (QYLURQPHQW  'HYHORSPHQW6HULHV3HQDQJ7KLUG:RUOG1HWZRUN3DSHUSUHVHQWHGDWWKH+LJK/HYHO&RQIHUHQFHRQ:RUOG )RRG6HFXULW\7KH&KDOOHQJHVRI&OLPDWH&KDQJHDQG%LRHQHUJ\5RPH²-XQH .LMLPD<  1HZWHFKQRORJ\DQGHPHUJHQFHRIPDUNHWV(YLGHQFHIURP1(5,&$ULFHLQ8JDQGD$YDLODEOHDW KWWSZZZFVDHR[DFXNFRQIHUHQFHV('L$SDSHUV.LMLPDSGI .LPEDOO%$.RED\DVKL.DQG%LQGL0  5HVSRQVHVRIDJULFXOWXUDOFURSVWRIUHHDLU&2HQULFKPHQW$GYDQFHVLQ $JURQRP\² .LPEDOO %$ 0RUULV &) 3LQWHU -U 3- :DOO *: +XQVDNHU '- $GDPVHQ )- /D0RUWH 5/ /HDYLWW 6: 7KRPSVRQ 7/ 0DWWKLDV$'DQG%URRNV7-  (OHYDWHG&2GURXJKWDQGVRLOQLWURJHQHIIHFWVRQZKHDWJUDLQTXDOLW\1HZ 3K\WRORJLVW² .M UQHV8+DUYH\0DQG:DUGH$  7UXVWLQ)RRG$&RPSDUDWLYHDQG,QVWLWXWLRQDO$QDO\VLV1HZ<RUN3DOJUDYH .RQLNRZ/)DQG.HQG\(  *URXQGZDWHUGHSOHWLRQ$JOREDOSUREOHP+\GURJHRORJ\-RXUQDO² .RRKDINDQ3DQG$OWLHUL0$  *OREDOO\LPSRUWDQWDJULFXOWXUDOKHULWDJHV\VWHPV$OHJDF\IRUWKHIXWXUH5RPH )$2 .RRSPDQV&-%RV00DQG/XVNH%  5HVLOLHQFHWRDFKDQJLQJFOLPDWH&DUERQVWRFNVLQWZRRUJDQLFIDUPLQJ V\VWHPV LQ $IULFD ,Q 1HXKRII ' +DOEHUJ 1 5DVPXVVHQ , +HUPDQVHQ / 6VHN\HZD & DQG 0RN 6RKQ 6 HGV 2UJDQLF LV /LIH ² .QRZOHGJH IRU 7RPRUURZ 3URFHHGLQJV RI WKH 7KLUG 6FLHQWLÀF &RQIHUHQFH RI WKH ,QWHUQDWLRQDO 6RFLHW\RI2UJDQLF$JULFXOWXUH5HVHDUFK ,62)$5 6HSWHPEHU²2FWREHU9RO6RFLR(FRQRP\/LYHVWRFN )RRG4XDOLW\$JURHFRORJ\DQG.QRZOHGJH'LVVHPLQDWLRQ1DP\DQJMX5HSRI.RUHD² .RUFKHQV0DQG0OOHU$  7KHVWDWLFH[SHULPHQW%DG/DXFKVW*HUPDQ\,Q(YDOXDWLRQRIVRLORUJDQLFPDWWHU PRGHOVXVLQJH[LVWLQJGDWDVHWV HGV3RZOVRQ'66PLWK3DQG6PLWK-8 1$72$6,+HLGHOEHUJ *HUPDQ\6SULQJHU .UDLQ ( 0DYUDNLV ( 0RKDPXG 0 :DQMRKL 3 DQG ,QJZH $   &OLPDWH &KDQJH DQG GLYHUVLÀFDWLRQ RI FRIIHH SURGXFWLRQ3URVSHFWVRIFXOWLYDWLQJSDVVLRQIUXLWDVDQDOWHUQDWLYHWRFRIIHHLQ.HQ\D1DLUREL3URPRWLRQRI3ULYDWH 6HFWRU'HYHORSPHQWLQ$JULFXOWXUH 36'$ 'HXWVFKH*HVHOOVFKDIWIU,QWHUQDWLRQDOH=XVDPPHQDUEHLW *,=  .UDLQ(1J·HQGR0'LHW]-1GHJZD'11MHUX-DQG&KHJH3  &OLPDWHFKDQJHLQYDOXHFKDLQGHYHORSPHQW &RQFHSWXDO LGHDV EDVHG RQ H[SHULHQFHV ZLWK WKH WHD SDVVLRQ IUXLW DQG HQHUJ\ VDYLQJ VWRYHV YDOXH FKDLQV LQ .HQ\D1DLUREL3URPRWLRQRI3ULYDWH6HFWRU'HYHORSPHQWLQ$JULFXOWXUH 36'$ *HUPDQ7HFKQLFDO&RRSHUDWLRQ $JHQF\ *7=  .ULHU-0  )DLU7UDGHLQ(XURSH%UXVVHOV(XURSHDQ3DUOLDPHQW$YDLODEOHDWKWWSIDLUWUDGHQHWVLWHVQHZV )DLU7UDGHLQ(XURSHSGI




75$'($1'(19,5210(175(9,(:

/DO5  2QHDQVZHUIRUFOHDQHUDLUZDWHU%HWWHUDJULFXOWXUDOSUDFWLFHV2KLR6WDWH5HVHDUFK1HZV$YDLODEOH DWKWWSUHVHDUFKQHZVRVXHGXDUFKLYHVHTXHVWKWP /DO5  &DUERQVHTXHVWUDWLRQ3KLORVRSKLFDO7UDQVFULSWLRQVRIWKH5R\DO6RFLHW\%²%LRORJLFDO6FLHQFHV   )HEUXDU\² /DO5  6HTXHVWUDWLRQRIDWPRVSKHULF&2LQJOREDOFDUERQSRROV(QHUJ\DQG(QYLURQPHQWDO6FLHQFH² /DO 5 .LPEOH -0 )ROOHWW 5) &ROH &9   7KH SRWHQWLDO RI 86 FURSODQG WR VHTXHVWHU FDUERQ DQG PLWLJDWH WKH JUHHQKRXVHHIIHFW&KHOVHD0,$QQ$UERU3UHVV /DO5DQG6WHZDUW%$  6RLO'HJUDGDWLRQ1HZ<RUN6SULQJHU /DQJGDOH*::HVW/7%UXFH550LOOHU:3DQG7KRPDV$:  5HVWRUDWLRQRIHURGHGVRLOZLWKFRQVHUYDWLRQ WLOODJH6RLO7HFKQRORJ\² /D6DOOH 7- DQG +HSSHUO\ 3   5HJHQHUDWLYH RUJDQLF IDUPLQJ $ VROXWLRQ WR JOREDO ZDUPLQJ .XW]WRZQ 3$ 7KH 5RGDOH,QVWLWXWH /D]DURII&  %LRGLYHUVLW\JLYHVFDUERQVLQNVDERRVW(QYLURQPHQW1HZV6HUYLFH$SULO /HH.(DQG)RVWHU5&  6RLOIDXQDDQGVRLOVWUXFWXUH$XVWUDOLDQ-RXUQDORI6RLO5HVHDUFK² /HJJ:DQG+XDQJ+  &OLPDWHFKDQJHDQGDJULFXOWXUH2(&'2EVHUYHUQR0DUFK7UDGHDQG$JULFXOWXUH 'LUHFWRUDWH2(&'3DULV$YDLODEOHDWKWWSWLQ\XUOFRPXKIN /HYLQH8<7HDO7.5REHUWVRQ*3DQG6FKPLGW70  $JULFXOWXUH·VLPSDFWRQPLFURELDOGLYHUVLW\DQGDVVRFLDWHG ÁX[HVRIFDUERQGLR[LGHDQGPHWKDQH,60(-RXUQDO  ² /L.0DQG+R0:  %LRJDV&KLQD6FLHQFHLQ6RFLHW\² /LEHUW%  7KH(QYLURQPHQWDO+HULWDJHRI6RYLHW$JULFXOWXUH2[IRUG&$%,QWHUQDWLRQDO /LP/L&KLQJ  &OLPDWHFKDQJHLPSOLFDWLRQVIRUDJULFXOWXUHLQ6XE6DKDUDQ$IULFD)$2,QVWLWXWHIRU6XVWDLQDEOH 'HYHORSPHQW7KLUG:RUOG1HWZRUNUHVHDUFKSDSHU5RPH$YDLODEOHDWZZZIDRRUJ /LQ%%  5HVLOLHQFHLQDJULFXOWXUHWKURXJKFURSGLYHUVLÀFDWLRQDGDSWLYHPDQDJHPHQWIRUHQYLURQPHQWDOFKDQJH %LR6FLHQFH² /LQ&-/L&</LQ6.<DQJ)++XDQJ--/LX<+/XU+6  ,QÁXHQFHRIKLJKWHPSHUDWXUHGXULQJJUDLQÀOOLQJRQ WKHDFFXPXODWLRQRIVWRUDJHSURWHLQVDQGJUDLQTXDOLW\LQULFH 2U\]DVDWLYD/ -RXUQDORI$JULFXOWXUDODQG)RRG &KHPLVWU\²$YDLODEOHDWKWWSSXEVDFVRUJGRLDEVMIM /LQQH . $UFKHU - 6FKPLGW * DQG .XKUW &   &OLPDWH &KDQJH $GDSWDWLRQ DQG 0LWLJDWLRQ LQ WKH .HQ\DQ &RIIHH 6HFWRU *XLGH ERRN &OLPDWH 0RGXOH 6DQJDQD 333 'HXWVFKH *HVHOOVFKDIW IU ,QWHUQDWLRQDOH =XVDPPHQDUEHLW *,= (FRP$JURLQGXVWULDO*URXS$YDLODEOHDWKWWSZZZFFRIIHHDVVRFLDWLRQRUJLQGH[SKS"LG  /LX-)ULW]6YDQ:HVHQEHHN&)$)XFKV0<RX/2EHUVWHLQHU0<DQJ+  $VSDWLDOO\H[SOLFLWDVVHVVPHQWRI FXUUHQWDQGIXWXUHKRWVSRWVRIKXQJHULQVXE6DKDUDQ$IULFDLQWKHFRQWH[WRIJOREDOFKDQJH*OREDODQG3ODQHWDU\ &KDQJH² /REHOO'%  &KDQJHVLQGLXUQDOWHPSHUDWXUHDQGQDWLRQDOFHUHDO\LHOGV$JULFXOWXUDODQG)RUHVW0HWHRURORJ\² /REHOO '% /REHOO % %XUNH 0% 7HEDOGL & 0DVWUDQGUHD 0' )DOFRQ :3 DQG 1D\ORU 5/   3ULRULWL]LQJ FOLPDWH FKDQJHDGDSWDWLRQQHHGVIRUIRRGVHFXULW\LQ6FLHQFH² /REHOO'%6FKOHQNHU:DQG&RVW5REHUWV-  &OLPDWHWUHQGVDQGJOREDOFURSSURGXFWLRQVLQFH6FLHQFH   ²$YDLODEOHDWKWWSZZZVFLHQFHPDJRUJFRQWHQW /RFNDE\ %* DQG $GDPV -&   3HGRWXUEDWLRQ RI D IRUHVW VRLO E\ ÀUH DQWV -RXUQDO RI  6RLO 6FLHQFH 6RFLHW\ RI $PHULFD² /RODG]H ,   5LVLQJ DWPRVSKHULF &2 DQG KXPDQ QXWULWLRQ 7RZDUG JOREDOO\ LPEDODQFHG SODQW VWRLFKLRPHWU\" 7UHQGVLQ(FRORJ\ (YROXWLRQ² /RUHDX01DHHP6,QFKDXVWL3%HQJWVVRQ-*ULPH-3+HFWRU$+RRSHU'8+XVWRQ0$5DIIDHOOL'6FKPLG% 7LOPDQ'DQG:DUGOH'$  %LRGLYHUVLW\DQGHFRV\VWHPIXQFWLRQLQJ&XUUHQWNQRZOHGJHDQGIXWXUHFKDOOHQJHV 6FLHQFH² /RWWHU ': 6HLGHO 5 DQG /LHEKDUW :   7KH SHUIRUPDQFH RI RUJDQLF DQG FRQYHQWLRQDO FURSSLQJ V\VWHPV LQ DQ H[WUHPHFOLPDWH\HDU$PHULFDQ-RXUQDORI$OWHUQDWLYH$JULFXOWXUH  ²


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



/RXZDDUV17ULSS5(DWRQ'+HQVRQ$SROORQLR9+X50HQGR]D00XKKXNX)3DO6DQG:HNXQGDK-   ,PSDFWVRIVWUHQJWKHQHGLQWHOOHFWXDOSURSHUW\ULJKWVUHJLPHVRQWKHSODQWEUHHGLQJLQGXVWU\LQGHYHORSLQJFRXQWULHV $V\QWKHVLVRIÀYHFDVHVWXGLHV:DJHQLQJHQ&HQWUHIRU*HQHWLF5HVRXUFHV /XQGTYLVW-GH)UDLWXUH&DQG0ROGHQ'  6DYLQJZDWHU)URPÀHOGWRIRUN²&XUELQJORVVHVDQGZDVWDJHLQ WKHIRRGFKDLQ6,:,3ROLF\%ULHI6WRFNKROP6WRFNKROP,QWHUQDWLRQDO:DWHU,QVWLWXWH$YDLODEOHDWZZZVLZLRUJ GRFXPHQWV5HVRXUFHV3ROLF\B%ULHIV3%B)URPB)LOHGBWRB)RUNBSGI /XVNH%DQGYDQGHU.DPS-  &DUERQVHTXHVWUDWLRQSRWHQWLDORIUHFODLPHGGHVHUWVRLOVLQ(J\SW'ULHEHUJHQ 7KH1HWKHUODQGV6RLODQG0RUH,QWHUQDWLRQDODQGWKH+HOLRSROLV$FDGHP\DQGWKH/RXLV%RON,QVWLWXWH'HSDUWPHQW RI$JULFXOWXUH 0DF'RQDOG 0   $JULLPSDFW DVVHVVPHQW ² ,, 0RUH IURP WKH FRWWRQ ÀHOGV $JURFHO ,QGXVWULHV /WG -DQXDU\ $YDLODEOH DW KWWSZZZWUDLGFUDIWFRXN2QH6WRS&06&RUH&UDZOHU5HVRXUFH6HUYHUDVS["UHVRXUFH ($' )'%)$&&&(' PRGH OLQN JXLG DHIGIEHHEIEHFIG 0DFKDGR6  'RHVLQWHUFURSSLQJKDYHDUROHLQPRGHUQDJULFXOWXUH"-RXUQDORI6RLODQG:DWHU&RQVHUYDWLRQ $$²$ 0DGHU3)OLH‰EDFK$'XERLV'*XQVW/)ULHG3DQG1LJJOL8  6RLOIHUWLOLW\DQGELRGLYHUVLW\LQRUJDQLFIDUPLQJ 6FLHQFH   0DKRQH\32OVRQ.'3RUWHU0+XJJLQV'53HULOOR&$DQG&URRNVWRQ5.  3URÀWDELOLW\RIRUJDQLFFURSSLQJ V\VWHPVLQVRXWKZHVWHUQ0LQQHVRWD-RXUQDORI5HQHZDEOH$JULFXOWXUHDQG)RRG6\VWHPV  ² 0D]R\HU0DQG5RXGDUW/  $+LVWRU\RI:RUOG$JULFXOWXUH)URPWKH1HROLWKLF$JHWRWKH&XUUHQW&ULVLV 7UDQVODWLRQ E\-DPHV+0HPEUH] /RQGRQ(DUWKVFDQ 0F%ULGH:'DQG*UHHQH&5  7KHSURÀWDELOLW\RIRUJDQLFVR\EHDQSURGXFWLRQ5HQHZDEOH$JULFXOWXUHDQG)RRG 6\VWHPV  ²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ƒ&1DWXUH² 0HQGR]D7&  &RPSDUDWLYHSURGXFWLYLW\SURÀWDELOLW\DQGHQHUJ\XVHLQRUJDQLF/(,6$DQGFRQYHQWLRQDOULFH SURGXFWLRQ LQ WKH 3KLOLSSLQHV 3DSHU SUHVHQWHG DW WKH WK :RUOG &RQJUHVV ,)2$0 9LFWRULD &DQDGD ² $XJXVW 0LFKDHOLV / DQG /RUHN 6   &RQVXPSWLRQ DQG WKH (QYLURQPHQW LQ (XURSH 7UHQGV DQG )XWXUHV &RSHQKDJHQ 'DQLVK(3$ 0LFN'*%URQLDUF]\N0DQG+DLGW-  &KRRVHFKRRVHFKRRVHFKRRVHFKRRVHFKRRVHFKRRVH(PHUJLQJ DQGSURVSHFWLYHUHVHDUFKRQWKHGHOHWHULRXVHIIHFWVRIOLYLQJLQFRQVXPHUK\SHUFKRLFH-RXUQDORI%XVLQHVV(WKLFV ² 0LOHVWDG5DQG'DUQKRIHU,  %XLOGLQJIDUPUHVLOLHQFHWKHSURVSHFWVDQGFKDOOHQJHVRIRUJDQLFIDUPLQJ-RXUQDO RI6XVWDLQDEOH$JULFXOWXUH  ² 0LOOHQQLXP (FRV\VWHP $VVHVVPHQW   (FRV\VWHPV DQG +XPDQ :HOOEHLQJ 6\QWKHVLV :DVKLQJWRQ '& ,VODQG 3UHVV² 0LOO\3&''XQQH.$DQG9HFFKLD$9  *OREDOSDWWHUQRIWUHQGVLQVWUHDPÁRZDQGZDWHUDYDLODELOLW\LQDFKDQJLQJ FOLPDWH1DWXUH² 0LQRW 1 6PDOH 0 (LFKHU & -D\QH 7 .OLQJ - +RUQD ' DQG 0\HUV 5   6HHG GHYHORSPHQW SURJUDPV LQ VXE6DKDUDQ$IULFD$UHYLHZRIH[SHULHQFHV$YDLODEOHDWKWWSZZZDHFPVXHGXIVUHVSRQVHVMD\QHBP\HUVB




75$'($1'(19,5210(175(9,(:

DIULFDQBVHHGBUHYLHZSGI 0RUHWWL &/ 0DWWRV /0 &DOER $* DQG 6DUJHQW 6$   &OLPDWH FKDQJHV DQG SRWHQWLDO LPSDFWV RQ SRVWKDUYHVW TXDOLW\RIIUXLWDQGYHJHWDEOHFURSV$UHYLHZ)RRG5HVHDUFK,QWHUQDWLRQDO  ² 0R\HU-  2UJDQLF1R7LOO)DUPLQJ(PPDXV3$5RGDOH3UHVV 0R\HU-  2UJDQLF1RWLOO)DUPLQJ$FUHV86$$XVWLQ7; 0KOHLE )   /HEHQVPLWWHOVLFKHUKHLW XQG 3UR]HVVTXDOLWlW YRQ /HEHQVPLWWHOQ LQ (XURSD  :DV VLQG XQVHUH $QVSUFKH":LHN|QQHQVLHJHVLFKHUWZHUGHQ"$YDLODEOHDWKWWSZZZY]EYGHPHGLDSLFVOHEHQVPLWWHOVLFKHUKHLWB HXURSDBGRVVLHUBLJZBSGI 0OOHU $ DQG $XEHUW &   7KH SRWHQWLDO RI RUJDQLF DJULFXOWXUH WR PLWLJDWH WKH LPSDFW RI DJULFXOWXUH RQ JOREDO ZDUPLQJ$UHYLHZ,Q3HQYHUQ6HG2UJDQLF)DUPLQJ3URWRW\SHIRU6XVWDLQDEOH$JULFXOWXUHV"%HUOLQ6SULQJHU IRUWKFRPLQJ  0OOHU$-DZWXVFK-DQG*DWWLQJHU$ D 0LWLJDWLQJJUHHQKRXVHJDVHVLQDJULFXOWXUH$FKDOOHQJHDQGRSSRUWXQLW\ IRUDJULFXOWXUDOSROLFLHV6WXG\RI)L%/IRU$FW$OOLDQFH%UHDGIRU$OO&KUXFKRI6ZHGHQDQG'DQ&KXUFK$LG6WXWWJDUW $YDLODEOHDWZZZEURWIXHUGLHZHOWGHGRZQORDGVIDFKLQIRUPDWLRQHQJUHHQKRXVHJDVHVSGI 0OOHU $ 2VPDQ(ODVKD % DQG $QGUHDVHQ /   7KH SRWHQWLDO RI RUJDQLF DJULFXOWXUH IRU FRQWULEXWLQJ WR FOLPDWH FKDQJH DGDSWDWLRQ ,Q +DOEHUJ 1 DQG 0OOHU $ HGV 2UJDQLF $JULFXOWXUH IRU 6XVWDLQDEOH /LYHOLKRRGV /RQGRQ 5RXWOHGJH 0OOHU&  &OLPDWHFKDQJHLPSDFWRQVXE6DKDUDQ$IULFD$QRYHUYLHZDQGDQDO\VLVRIVFHQDULRVDQGPRGHOV 'LVFXVVLRQSDSHU'HXWVFKHV,QVWLWXWIU(QWZLFNOXQJVSROLWLN%RQQ 0OOHU&&UDPHU:+DUH://RW]H&DPSHQ+ E &OLPDWHFKDQJHULVNVIRU$IULFDQDJULFXOWXUH31$6 ² 0XOYDQH\5/.KDQ6$DQG(OOVZRUWK75  6\QWKHWLFQLWURJHQIHUWLOL]HUVGHSOHWHVRLOQLWURJHQ$JOREDOGLOHPPD IRUVXVWDLQDEOHFHUHDOSURGXFWLRQ-RXUQDORI(QYLURQPHQWDO4XDOLW\² 0XUDW $ 9HUKXOVW .5 6DOW]PDQ (6  %DWWOH 02 0RQW]ND 6$  %ODNH '5  7DQJ 4 DQG  3UDWKHU 0-   5HFHQW GHFUHDVHVLQIRVVLOIXHOHPLVVLRQVRIHWKDQHDQGPHWKDQHGHULYHGIURPÀUQDLU1DWXUH² 0XUSK\ 6 DQG :LVH 7 $   5HVROYLQJ WKH IRRG FULVLV $VVHVVLQJ JOREDO SROLF\ UHIRUPV VLQFH  *OREDO 'HYHORSPHQWDQG(QYLURQPHQW,QVWLWXWHDW7XIWV8QLYHUVLW\DQG,QVWLWXWHIRU$JULFXOWXUHDQG7UDGH3ROLF\$YDLODEOH DWKWWSLDWSRUJÀOHVBBB5HVROYLQJ)RRG&ULVLVB60B7:SGI 0\HUV1  *DLD$Q$WODVRI3ODQHW0DQDJHPHQW*DUGHQ&LW\1<$QFKRU'RXEOHGD\ 1DHUVWDG $   $ YLDEOH IRRG IXWXUH SDUW , DQG ,, 7KH 'HYHORSPHQW )XQG 1RUZD\ 2VOR $YDLODEOH DW KWWS ZZZXWYLNOXQJVIRQGHWQRÀOHVXIGRFXPHQWV$B9LDEOHB)RRGB)XWXUHBXSGDWHGBZHESGI DQG KWWSZZZ XWYLNOXQJVIRQGHWQRÀOHVXIGRFXPHQWV5DSSRUWHU$9LDEOHB)RRGB)XWXUHBSDUWBHQBZHESGI 1$6 1DWLRQDO $FDGHP\ RI 6FLHQFHV    )URQWLHUV LQ $JULFXOWXUDO 5HVHDUFK )RRG +HDOWK (QYLURQPHQW DQG &RPPXQLWLHV:DVKLQJWRQ'& 1DWDUDMDQ0DQG:LOOH\5:  7KHHIIHFWVRIZDWHUVWUHVVRQ\LHOGDGYDQWDJHVRILQWHUFURSSLQJV\VWHPV)LHOG &URSV5HVHDUFK² 1HVWOp  'LH1HVWOp6WXGLH²6RLV V W'HXWVFKODQG:DQGHOGHV$OOWDJV:DQGHOGHU(UQlKUXQJ$YDLODEOH DWKWWSZZZQHVWOHGH8QWHUQHKPHQ1HVWOH6WXGLH1HVWOH6WXGLH3DJHVGHIDXOWDVS[ 1HVWOH 0   )RRG 3ROLWLFV +RZ WKH )RRG ,QGXVWU\ ,QÁXHQFHV 1XWULWLRQ DQG +HDOWK %HUNHOH\ /RV $QJHOHV DQG /RQGRQ8QLYHUVLW\RI&DOLIRUQLD3UHVV 1HWWLQJ50F&  6PDOOKROGHUV+RXVHKROGHUV)DUP)DPLOLHVDQGWKH(FRORJ\RI,QWHQVLYH6XVWDLQDEOH$JULFXOWXUH 3DOR$OWR&$6WDQIRUG8QLYHUVLW\3UHVV 1LJJOL 8   2UJDQLF DJULFXOWXUH $ SURGXFWLYH PHDQV RI ORZFDUERQ DQG KLJK ELRGLYHUVLW\ IRRG SURGXFWLRQ ,Q 81&7$'7UDGHDQG(QYLURQPHQW5HYLHZ*HQHYD81&7$'² 1LOVVRQ /*   'DWD RI \LHOG DQG VRLO DQDO\VLV LQ WKH ORQJWHUP VRLO IHUWLOLW\ H[SHULPHQWV -5 6ZHG $FDG $JU )RUHVWU\VXSSO 1RUZHJLDQ0LQLVWU\RIWKH(QYLURQPHQW  2VOR5RXQGWDEOHRQ6XVWDLQDEOH3URGXFWLRQDQG&RQVXPSWLRQ$YDLODEOH DWKWWSZZZLLVGFDFRQVXPHRVORKWPO


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



1XUL$  218'URLWVSRXUWRXVRXORLGXSOXVIRUW"*HQHYD&HQWUH(XURSH²7LHUV0RQGH &(7,0  2GXP(3  )XQGDPHQWDOVRI(FRORJ\1HZ<RUN6DXQGHUV 2(&'   +RXVHKROG IRRG FRQVXPSWLRQ 7UHQGV HQYLURQPHQWDO LPSDFWV DQG SROLF\ UHVSRQVHV 3DULV 2(&' $YDLODEOH DW ZZZRHFGRUJRIÃ&#x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² 2ODK=VXSRV$DQG+HOPHF]L%  7KHHIIHFWRIVRLOFRQGLWLRQHUVRQVRLOPLFURRUJDQLVPV,Q6]HJL-HG6RLO %LRORJ\DQG&RQVHUYDWLRQRIWKH%LRVSKHUH3URFHHGLQJVRIWKHWK,QWHUQDWLRQDO6\PSRVLXP%XGDSHVW$NDGHPLDL .LDGR² 2OVRQ .' DQG 0DKRQH\ 35   /RQJWHUP FURSSLQJ VWXGLHV DW WKH 8QLYHUVLW\ RI 0LQQHVRWD 7KH YDULDEOH LQSXW FURSSLQJPDQDJHPHQWV\VWHPVWXG\:DVKLQJWRQ'&8QLWHG6WDWHV'HSWRI$JULFXOWXUH(FRQRPLF5HVHDUFK 6HUYLFH 2UJDQLF(XURSH  &RXQWU\UHSRUWV$YDLODEOHDWKWWSZZZRUJDQLFHXURSHQHWFRXQWU\BUHSRUWVGHIDXOWDVS 2VERUQH&3%HHUOLQJ'-  1DWXUH·VJUHHQUHYROXWLRQWKHUHPDUNDEOHHYROXWLRQDU\ULVHRI&SODQWV3KLORVRSKLFDO 7UDQVDFWLRQVRIWKH5R\DO6RFLHW\%%LRORJLFDO6FLHQFHV  ² 3DLQWHU.  'RHVVXVWDLQDEOHIDUPLQJSD\"$FDVHVWXG\-RXUQDORI6XVWDLQDEOH$JULFXOWXUH  ² 3DUÃ&#x20AC;WW-%DUWKHO0DQG0DFQDXJKWRQ6  )RRGZDVWHZLWKLQIRRGVXSSO\FKDLQV4XDQWLÃ&#x20AC;FDWLRQDQGSRWHQWLDOIRU FKDQJHWR3KLORVRSKLFDO7UDQVDFWLRQVRIWKH5R\DO6RFLHW\%²$YDLODEOHDWZZZELVJRYXN DVVHWVELVSDUWQHUVIRUHVLJKWGRFVIRRGDQGIDUPLQJGULYHUVGUIRRGZDVWHZLWKLQVXSSO\FKDLQVSGI 3DWHO5  $W*OHQFRUH·VSLQQDFOHRIFDSLWDOLVPHYHQKXQJHULVDFRPPRGLW\7KH*XDUGLDQ0D\$YDLODEOHDW KWWSZZZJXDUGLDQFRXNFRPPHQWLVIUHHPD\JOHQFRUHKXQJHFRPPRGLW\IRRGSULFHV 3HQJ6+XDQJ-6KHHK\-(/D]$D5&9LVSHUDV50=KRQJ;&HQWHQR*6.KXVK*6DQG&DVVPDQ.*   5LFH\LHOGVGHFOLQHZLWKKLJKHUQLJKWWHPSHUDWXUHVIURPJOREDOZDUPLQJ3URFHHGLQJVRIWKH1DWLRQDO$FDGHP\RI 6FLHQFHV² 3HUIHFWR,9DQGHUPHHU-DQG:ULJKW$  1DWXUH·V0DWUL[/LQNLQJ$JULFXOWXUH&RQVHUYDWLRQDQG)RRG6RYHUHLJQW\ /RQGRQ(DUWKVFDQ 3KLOOLSV$DQG+HOPHF]L%  7KHHIIHFWRIVRLOFRQGLWLRQHUVRQVRLOPLFURRUJDQLVPV,Q6]HJL-HG6RLO%LRORJ\ DQG&RQVHUYDWLRQRIWKH%LRVSKHUH3URFHHGLQJVRIWKHWK,QWHUQDWLRQDO6\PSRVLXP%XGDSHVW$NDGHPLDL.LDGR ² 3KLOSRWW 60 /LQ %% -KD 6 DQG %ULQHV 6-   $ PXOWLVFDOH DVVHVVPHQW RI KXUULFDQH LPSDFWV RQ DJULFXOWXUDO ODQGVFDSHVEDVHGRQODQGXVHDQGWRSRJUDSKLFIHDWXUHV$JULFXOWXUH(FRV\VWHPVDQG(QYLURQPHQW² 3LPHQWHO '   6RLO HURVLRQ D IRRG DQG HQYLURQPHQWDO WKUHDW (QYLURQPHQW 'HYHORSPHQW DQG 6XVWDLQDELOLW\  ² 3LPHQWHO'  *OREDO&OLPDWH&KDQJH,WV,PSOLFDWLRQVRQ)RRGDQGWKH(QYLURQPHQW5DFKHO&DUVRQ&RXQFLO,QF 6LOYHU6SULQJ0' 3LPHQWHO'DQG3LPHQWHO0  )RRG(QHUJ\DQG6RFLHW\%RFD5DWRQ)/7D\ORUDQG)UDQFLV 3LPHQWHO'%HUJHU%)LOLEHUWR'1HZWRQ0:ROIH%.DUDELQDNLV%&ODUN63RRQ($EEHWW(DQG1DQGDJRSDO6  :DWHUUHVRXUFHV$JULFXOWXUDODQGHQYLURQPHQWDOLVVXHV%LRVFLHQFH  ² 3LPHQWHO'+DUYH\&5HVRVXGDUPR36LQFODLU..XUW]'0F1DLU0&ULVW66SULW]/)LWWRQ/6DIIRXUL5DQG%ODLU5  (QYLURQPHQWDODQGHFRQRPLFFRVWVRIVRLOHURVLRQDQGFRQVHUYDWLRQEHQHÃ&#x20AC;WV6FLHQFH² 3LPHQWHO'+HSSHUO\3+DQVRQ-'RXGV'DQG6HLGHO5  (QYLURQPHQWDOHQHUJHWLFDQGHFRQRPLFFRPSDULVRQV RIRUJDQLFDQGFRQYHQWLRQDOIDUPLQJV\VWHPV%LRVFLHQFH  ²




75$'($1'(19,5210(175(9,(:

3LPHQWHO'+XDQJ;&RUGRYD$DQG3LPHQWHO0  ,PSDFWRISRSXODWLRQJURZWKRQIRRGVXSSOLHVDQGHQYLURQPHQW 3RSXODWLRQDQG(QYLURQPHQW  ² 3LPHQWHO'3HWURYD75LOH\0-DFTXHW-1J9+RQLJPDQ-DQG9DOHUR(  &RQVHUYDWLRQRIELRORJLFDOGLYHUVLW\LQ DJULFXOWXUDOIRUHVWU\DQGPDULQHV\VWHPV,Q%XUN$5HG)RFXVRQ(FRORJ\5HVHDUFK1HZ<RUN1RYD6FLHQFH 3XEOLVKHUV² $OVRLQ6FKZDUW]-HG  )RFXVRQ%LRGLYHUVLW\5HVHDUFK1HZ<RUN1RYD6FLHQFH 3XEOLVKHUV²  3LPHQWHO'7RUW0'·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²$JURQRP\-RXUQDO9ROXPHLVVXHSS 3RVWHO6/  :DWHUIRUIRRGSURGXFWLRQ:LOOWKHUHEHHQRXJKLQ"%LR6FLHQFH  ² 3UD\&2HKPNH-DQG1DVHHP$  ,QQRYDWLRQDQGG\QDPLFHIÀFLHQF\LQSODQWELRWHFKQRORJ\$QLQWURGXFWLRQWR WKHUHVHDUFKDEOHLVVXHV$J%LR)RUXP² 3UHVV(DQG:DVKEXUQ-  7KHNHSWXQLYHUVLW\7KH$WODQWLF0RQWKO\0DUFK$YDLODEOHDWKWWSZZZWKHDWODQWLF FRPGRFXQLYHUVLW\IRUSURÀW 3UHWW\-  $JULFXOWXUDOVXVWDLQDELOLW\&RQFHSWVSULQFLSOHVDQGHYLGHQFH3KLORVRSKLFDO7UDQVDFWLRQVRIWKH5R\DO 6RFLHW\%%LRORJLFDO6FLHQFHV  ² 3UHWW\ - %UHWW & *HH ' +LQH 5( 0DVRQ &) 0RULVRQ -,/ 5DYHQ + 5D\PHQW 0' DQG YDQ GHU %LMO *   $Q DVVHVVPHQWRIWKHWRWDOH[WHUQDOFRVWVRI8.DJULFXOWXUH$JULFXOWXUDO6\VWHPV  ² 3UHWW\-11REOH$'%RVVLR''L[RQ-+LQH5(3HQQLQJGH9ULHV):7DQG0RULVRQ-,/  5HVRXUFHFRQVHUYLQJ DJULFXOWXUHLQFUHDVHV\LHOGVLQGHYHORSLQJFRXQWULHV(QYLURQPHQWDO6FLHQFHDQG7HFKQRORJ\  ï 3ULWFKDUG6*DQG$PWKRU-6  &URSVDQG(QYLURQPHQWDO&KDQJH1HZ<RUN)RRG3URGXFWLRQ3UHVV 4XDQ-  $IXWXUHIRUVPDOOVFDOHIDUPLQJ6FLHQFH5HYLHZ65)RUHVLJKW3URMHFWRQ*OREDO)RRGDQG)DUPLQJ )XWXUHV*RYHUQPHQW2IÀFHIRU6FLHQFH)RUHVLJKW 5DM'$6ULGKDU.$PEDWLSXGL$/DQWLQJ+DQG%UHQFKDQGUDQ6  &DVHVWXG\RQRUJDQLFYHUVXVFRQYHQWLRQDO FRWWRQLQ.DULPQDJDU$QGKUD3UDGHVK,QGLD6HFRQG,QWHUQDWLRQDO6\PSRVLXPRQ%LRORJLFDO&RQWURORI$UWKURSRGV DYDLODEOHDWKWWSZZZEXJZRRGRUJDUWKURSRGYROFSGI 5DVPXVVHQ3($OEUHFKHW6/6PLOH\5:  6RLO&DQG1FKDQJHVXQGHUWLOODJHDQGFURSSLQJV\VWHPVLQVHPLDULG 3DFLÀF1RUWKZHVWDJULFXOWXUH6RLO7LOO5HV 5HDUGRQ77LPPHU & DQG %HUGHJXp -   6XSHUPDUNHW H[SDQVLRQ LQ /DWLQ $PHULFD DQG $VLD :DVKLQJWRQ '& 8QLWHG6WDWHV'HSDUWPHQWRI$JULFXOWXUH 5HJDQROG -3 (OOLRWW / DQG 8QJHU <   /RQJWHUP HIIHFWV RI RUJDQLF DQG FRQYHQWLRQDO IDUPLQJ RQ VRLO HURVLRQ 1DWXUH1RYHPEHU² 5HJDQROG-3*ORYHU-'$QGUHZV3.DQG+LQPDQ+5  6XVWDLQDELOLW\RIWKUHHDSSOHSURGXFWLRQV\VWHPV1DWXUH ² 5HLG:6  5HJLRQDOHIIHFWVRIVRLOHURVLRQRQFURSSURGXFWLYLW\QRUWKHDVW,Q)ROOHWW5)DQG6WHZDUW%$HGV6RLO (URVLRQDQG&URS3URGXFWLYLW\0DGLVRQ:,$PHULFDQ6RFLHW\RI$JURQRP\² 5HLQKDUGW * *lUWQHU 6 0QFK - DQG +lIHOH 6   gNRORJLVFKH 2SWLPLHUXQJ UHJLRQDO HU]HXJWHU /HEHQVPLWWHO (QHUJLHXQG.OLPDELODQ]HQ+HLGHOEHUJ,QVWLWXWIU(QHUJLHXQG8PZHOW ,I(8  5HLVFK/$DQG*ZR]G]:  &KXEE\FKHHNVDQGFOLPDWHFKDQJH&KLOGKRRGREHVLW\DVDVXVWDLQDEOHGHYHORSPHQW LVVXH,QWHUQDWLRQDO-RXUQDORI&RQVXPHU6WXGLHV  ² 5HLVFK/$/RUHN6DQG%LHW]6  3ROLF\LQVWUXPHQWVIRUVXVWDLQDEOHIRRGFRQVXPSWLRQ&25386'LVFXVVLRQ3DSHU )XQGHGE\WKH(XURSHDQ&RPPLVVLRQ)3_3URMHFW1R$YDLODEOHDWKWWSZZZVFSNQRZOHGJHHX VLWHVGHIDXOWÀOHV)RRGB3ROLF\B3DSHUSGI


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



5HLVFK/$6FKROO*DQG(EHUOH8  6XVWDLQDEOHIRRGFRQVXPSWLRQ&25386'LVFXVVLRQ3DSHU)XQGHGE\WKH (XURSHDQ&RPPLVVLRQ)3_3URMHFW1R$YDLODEOHDWKWWSZZZVFSNQRZOHGJHHXVLWHVGHIDXOWÀOHV )RRGB'LVFXVVLRQB3DSHUBSGI 5HWKHPH\HU-.UDPHU&*OHL[QHU*-RKQ%<DPDVKLWD7)OHVVD+$QGHUVHQ11DGHDX0DQG*URRWHV3   7UDQVIRUPDWLRQRIRUJDQLFPDWWHULQDJULFXOWXUDOVRLOV5DGLRFDUERQFRQFHQWUDWLRQYHUVXVVRLOGHSWK*HRGHUPD ² 5LFKDUGVRQ.6WHIIHQ:6FKHOOQKXEHU+-$OFDPR-%DUNHU7.DPPHQ'0/HHPDQV5/LYHUPDQ'0XQDVLQJKH0 2VPDQ(ODVKD%6WHUQ1DQG:DHYHU2  6\QWKHVLV5HSRUW²&OLPDWH&KDQJH*OREDO5LVNV&KDOOHQJHV DQG'HFLVLRQV,QWHUQDWLRQDO6FLHQWLÀF&RQJUHVVRQ&OLPDWH&KDQJH&RSHQKDJHQ²0DUFK 5LN[RRUWY+  &DUERQIRRWSULQWLQJ,Q*,=HG&OLPDWH0RGXOH6DQJDQD333.RPSHWHQ]IHOG$JUDUKDQGHOXQG 6WDQGDUGV'HXWVFKH*HVHOOVFKDIWIU7HFKQLVFKH=XVDPPHQDUEHLW *,= -XQH 5REHUWVRQ $ /REVWHLQ 7 DQG .QDL &   2EHVLW\ DQG VRFLRHFRQRPLF JURXSV LQ (XURSH (YLGHQFH UHYLHZ DQG LPSOLFDWLRQV IRU DFWLRQ 6$1&2&1875,7,21 )XQGHG E\ WKH (XURSHDQ &RPPLVVLRQ %UXVVHOV (XURSHDQ &RPPLVVLRQ $YDLODEOH DW KWWSHFHXURSDHXKHDOWKSKBGHWHUPLQDQWVOLIHBVW\OHQXWULWLRQGRFXPHQWV HYBUHSBHQSGI 5RFNVWU|P-6WHIIHQ:1RRQH.3HUVVRQc6WXDUW,,,&KDSLQ)/DPELQ(/HQWRQ76FKHIIHU0)RONH&6FKHOOQKXEHU +-1\NYLVW%GH:LW&+XJKHV7YDQGHU/HHXZ65RGKH+6|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² 5RVHJUDQW0:3DLVQHU060HLMHU6:LWFRYHU-  *OREDO)RRG2XWORRN7UHQGV$OWHUQDWLYHVDQG&KRLFHV :DVKLQJWRQ'&,QWHUQDWLRQDO)RRG3ROLF\5HVHDUFK,QVWLWXWH 5RVHJUDQW 0: 5LQJOHU & 0VDQJL 6 6XOVHU 7 =KX 7 DQG &OLQH 6 D  ,QWHUQDWLRQDO PRGHO IRU SROLF\ DQDO\VLV RI DJULFXOWXUDO FRPPRGLWLHV DQG WUDGH ,03$&7  0RGHO GHVFULSWLRQ ,Q ,)35,   ,QWHUQDWLRQDO )RRG 3ROLF\ 5HVHDUFK,QVWLWXWH5HSRUW:DVKLQJWRQ'& 5RVHJUDQW0:5LQJOHU&DQG=KX7 E :DWHUIRUDJULFXOWXUH0DLQWDLQLQJIRRGVHFXULW\XQGHUJURZLQJVFDUFLW\ $QQXDO5HYLHZRI(QYLURQPHQWDQG5HVRXUFHV² 5RVHQ]ZHLJ&DQG+LOOHO'  &OLPDWH&KDQJHDQGWKH*OREDO+DUYHVW,PSDFWVRI(O1LQRDQG2WKHU2VFLOODWLRQV RQ$JURHFRV\VWHPV1HZ<RUN2[IRUG8QLYHUVLW\3UHVV 5RVHQ]ZHLJ & DQG 7XELHOOR )   $GDSWDWLRQ DQG PLWLJDWLRQ VWUDWHJLHV LQ DJULFXOWXUH $Q DQDO\VLV RI SRWHQWLDO V\QHUJLHV0LWLJDWLRQDQG$GDSWDWLRQ6WUDWHJLHVWR*OREDO&KDQJH² 5RVVHW 30   7KH 0XOWLSOH )XQFWLRQV DQG %HQHÀWV RI 6PDOO )DUP $JULFXOWXUH LQ WKH &RQWH[W RI *OREDO 7UDGH 1HJRWLDWLRQV3ROLF\%ULHI)RRG)LUVW6HSWHPEHU 5RVVHW 30   7KH 0XOWLSOH )XQFWLRQV DQG %HQHÀWV RI 6PDOO )DUP $JULFXOWXUH LQ WKH &RQWH[W RI *OREDO 7UDGH 1HJRWLDWLRQV/RQGRQ7KRXVDQG2DNV&$DQG1HZ'HOKL:RUOG)RRG3URJUDPPH7KH6RFLHW\IRU,QWHUQDWLRQDO 'HYHORSPHQWDQG6$*(3XEOLFDWLRQV   5RVVHW306RVD%0-DLPH$05DQGÉYLOD/R]DQR'5  7KH&DPSHVLQRWR&DPSHVLQRDJURHFRORJ\PRYHPHQW RI$1$3LQ&XED6RFLDOSURFHVVPHWKRGRORJ\LQWKHFRQVWUXFWLRQRIVXVWDLQDEOHSHDVDQWDJULFXOWXUHDQGIRRG VRYHUHLJQW\-RXUQDORI3HDVDQW6WXGLHV  ² 576 5HVRXUFH /WG   :HVWHUQ (XURSH UHDG\ PHDOV  :ROYHUKDPSWRQ 576 5HVRXUFH /WG 7KH &UHDWLYH ,QGXVWULHV&HQWUH$YDLODEOHDWKWWSZZZUHDG\PHDOVLQIRFRPUHSRUWV:HVWHUQ(XURSH5HDG\0HDOVSGI 5XQGJUHQ*  *DUGHQ(DUWK)URPKXQWHUDQGJDWKHUHUWRFDSLWDOLVPDQGWKHUHDIWHU5HJHQHUDWLRQ8SSVDOD6ZHGHQ 6DIDULFRP )RXQGDWLRQ   6DIDULFRP )RXQGDWLRQ /LIHOLQH UDGLR SURMHFW XQYHLOHG $YDLODEOH DW KWWSZZZ OLIHOLQHHQHUJ\RUJGRFXPHQWV6DIDULFRPB)RXQGDWLRQBSGI




75$'($1'(19,5210(175(9,(:

6$1&2  )RRGDQGYHWHULQDU\RIÀ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ÀFLHQF\&6,52$YDLODEOHDW KWWSZZZFVLURDXÀOHVÀOHVSZLYSGI 6DQGHUV - 2IIHUPDQQ ) DQG 1LHEHUJ +   ,PSDFW RI WKH &$3 UHIRUP RQ RUJDQLF IDUPLQJ LQ *HUPDQ\ 3DSHU SUHSDUHGIRUWKHWK($$(6HPLQDURQWKH&$3DIWHUWKH)LVFKOHU5HIRUP1DWLRQDO,PSOHPHQWDWLRQV,PSDFW $VVHVVPHQWDQGWKH$JHQGDIRU)XWXUH5HIRUPVLQ9LWHUER,WDO\²1RYHPEHU 6FKHUU 6- DQG 6WKDSLW 6   0LWLJDWLQJ FOLPDWH FKDQJH WKURXJK IRRG DQG ODQG XVH :RUOGZDWFK 5HSRUW  :DVKLQJWRQ'&:RUOGZDWFK,QVWLWXWH 6FKXOW] , DQG 6WLH‰ ,   /LQNLQJ VXVWDLQDEOH FRQVXPSWLRQ WR HYHU\GD\ OLIH D VRFLRHFRORJLFDO DSSURDFK WR FRQVXPSWLRQ UHVHDUFK ,Q 7XNNHU $ &KDUWHU 0 DQG 9H]]ROL & HGV 6\VWHP ,QQRYDWLRQ IRU 6XVWDLQDELOLW\ 9RO  3HUVSHFWLYHVRQ5DGLFDO&KDQJHVWR6XVWDLQDEOH&RQVXPSWLRQDQG3URGXFWLRQ6KHIÀHOG*UHHQOHDI3XEOLVKLQJ ² 6FLHQFH'DLO\  6WXG\PDSVJOREDO¶KRWVSRWV·RIFOLPDWHLQGXFHGIRRGLQVHFXULW\-XQH$YDLODEOHDWKWWSZZZ VFLHQFHGDLO\FRPUHOHDVHVKWP 6HQHZHHUD6DQG&RQUR\-3  *URZWKJUDLQ\LHOGDQGTXDOLW\RIULFH 2U\]DVDWLYD/ LQUHVSRQVHWRHOHYDWHG&2 DQGSKRVSKRUXVQXWULWLRQ6RLO6FLHQFHDQG3ODQW1XWULWLRQ² 6HWERRQVDUQJ6/HXQJ36DQG&DL-  &RQWUDFWIDUPLQJDQGSRYHUW\UHGXFWLRQ7KHFDVHRIRUJDQLFULFHFRQWUDFW IDUPLQJLQ7KDLODQG$'%,QVWLWXWHGLVFXVVLRQSDSHUQR7RN\R$VLDQ'HYHORSPHQW%DQN,QVWLWXWH 6LHJULVW66WDXE'3ÀIIQHU/DQG0lGHU3  'RHVRUJDQLFDJULFXOWXUHUHGXFHVRLOHURGLELOLW\"7KHUHVXOWVRID ORQJWHUPÀHOGVWXG\RQORHVVLQ6ZLW]HUODQG$JULFXOWXUH(FRV\VWHPVDQG(QYLURQPHQW² 6PDNKWLQ9  %DVLQFORVXUHDQGHQYLURQPHQWDOÁRZUHTXLUHPHQWV:DWHU5HVRXUFHV'HYHORSPHQW  ²  6PDNKWLQ 9 5HYHQJD & DQG '|OO 3   $ 3LORW *OREDO $VVHVVPHQW RI (QYLURQPHQWDO :DWHU 5HTXLUHPHQWV DQG 6FDUFLW\:DWHU,QWHUQDWLRQDO  ² 6PLW%DQG:DQGHO-  $GDSWDWLRQDGDSWLYHFDSDFLW\DQGYXOQHUDELOLW\*OREDO(QYLURQPHQWDO&KDQJH²  6PLWK ' 3RZOVRQ 6'6 *OHQGLQLQJ 0- 6PLWK -8   3RWHQWLDO IRU FDUERQ VHTXHVWUDWLRQ LQ (XURSHDQ VRLOV SUHOLPLQDU\HVWLPDWHVIRUÀYHVFHQDULRVXVLQJUHVXOWVIURPORQJWHUPH[SHULPHQWV*OREDO&KDQJH%LRORJ\ 6PLWK-:ROIH0:RRGZDUG/3HDUFH%DQG/DPSNLQ1  2UJDQLFIDUPLQJDQGELRGLYHUVLW\$UHYLHZRIWKH OLWHUDWXUH$EHU\VWZ\WK2UJDQLF&HQWUH:DOHV 6PLWK30DUWLQR'&DL=*ZDU\'-DQ]HQ+.XPDU30F&DUO%2JOH62·0DUD)5LFH&6FKROHV%6LURWHQNR2 +RZGHQ00F$OOLVWHU73DQ*5RPDQHQNRY96FKQHLGHU8DQG7RZSUD\RRQ6 D 3ROLF\DQG7HFKQRORJLFDO &RQVWUDLQWVWR,PSOHPHQWDWLRQRI*UHHQKRXVH*DV0LWLJDWLRQ2SWLRQVLQ$JULFXOWXUH$JULFXOWXUH(FRV\VWHPVDQG (QYLURQPHQW  ²$YDLODEOHDWZZZHOVHYLHUFRPORDFDWHDJUHH 6PLWK30DUWLQR'&DL=*ZDU\'-DQ]HQ+.XPDU30F&DUO%2JOH62·0DUD)5LFH&6FKROHV%DQG6LURWHQNR 2 E $JULFXOWXUH,Q,3&&&OLPDWH&KDQJH0LWLJDWLRQ&RQWULEXWLRQRI:RUNLQJ*URXS,,,WRWKH)RXUWK $VVHVVPHQW5HSRUWRIWKH,QWHUJRYHUQPHQWDO3DQHORQ&OLPDWH&KDQJH&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV 6PROLN -' 'REEV7/ DQG 5LFNHUO '+   7KH UHODWLYH VXVWDLQDELOLW\ RI DOWHUQDWLYH FRQYHQWLRQDO DQG UHGXFHGWLOO IDUPLQJV\VWHPV$PHULFDQ-RXUQDORI$OWHUQDWLYH$JULFXOWXUH  ² 6RXWK&HQWUH  $WUDGHIUDPHZRUNVXSSRUWLYHRIDWUDQVLWLRQWRZDUGVDJUHHQHFRQRP\LQWKHIRRGDQGDJULFXOWXUH VHFWRURIGHYHORSLQJFRXQWULHV3DSHUSUHSDUHGIRUWKH)$2 IRUWKFRPLQJ *HQHYD 6RXWKJDWH ' DQG :KLWDNHU 0   3URPRWLQJ UHVRXUFH GHJUDGDWLRQ LQ /DWLQ $PHULFD 7URSLFDO GHIRUHVWDWLRQ VRLO HURVLRQ DQG FRDVWDO HFRV\VWHP GLVWXUEDQFH LQ (FXDGRU (FRQRPLF 'HYHORSPHQW DQG &XOWXUDO &KDQJH   


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



² 63,QWHUQDWLRQDO  ([SODQDWLRQGHPDQGHGRYHUOREE\LQJE\ELRWHFKÀUP63,QWHUQDWLRQDO5RWWHUGDP-DQXDU\ $YDLODEOH DW KWWSLQWHUQDWLRQDOVSQOEHULFKWH[SODQDWLRQBGHPDQGHGBRYHUBOREE\LQJBE\BELRWHFKB ÀUPKWPO 6SHWK-*  7RZDUGVDQ(IIHFWLYHDQG2SHUDWLRQDO,QWHUQDWLRQDO&RQYHQWLRQRQ'HVHUWLÀFDWLRQ3DSHUSUHSDUHGIRU WKH,QWHUQDWLRQDO&RQYHQWLRQRQ'HVHUWLÀFDWLRQ,QWHUQDWLRQDO1HJRWLDWLQJ&RPPLWWHH8QLWHG1DWLRQV1HZ<RUN 6WDQKLOO*  7KHFRPSDUDWLYHSURGXFWLYLW\RIRUJDQLFDJULFXOWXUH$JULFXOWXUH(FRV\VWHPVDQG(QYLURQPHQW ² 6WDYHU&*XKDUD\)0RQWHUURVR'DQG0XVFKOHU5*  'HVLJQLQJSHVWVXSSUHVVLYHPXOWLVWUDWDSHUHQQLDOFURS V\VWHPV6KDGHJURZQFRIIHHLQ&HQWUDO$PHULFD$JURIRUHVWU\6\VWHPV² 6WHHU $   $JULFXOWXUH IRRG VHFXULW\ DQG FOLPDWH FKDQJH $ WULSOH ZLQ" $YDLODEOH DW KWWSZHEZRUOGEDQNRUJ :%6,7((;7(51$/1(:6FRQWHQW0'.aSDJH3.aSL3.aWKH6LWH3.KWPO 6WHUQ1  7KH(FRQRPLFVRI&OLPDWH&KDQJH7KH6WHUQ5HYLHZ&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV 6WHYHQVRQ-  +XPXVFKHPLVWU\,Q6RLO&KHPLVWU\1HZ<RUN-RKQ:LOH\ 6RQV,QF 6WROW]IXV5-0XOODQ\/DQG%ODFN5(  ,URQGHÀFLHQF\DQHPLD,Q0(]]DWLHWDOHGV&RPSDUDWLYH4XDQWLÀ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ÀHOGV7UHQGVLQ(FRORJ\DQG(YROXWLRQ ²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´%URWIUGLH:HOWµ,Q=XVDPPHQDUEHLWPLWGHU5HGDNWLRQ:HOW6LFKWHQ² 7DVVRX 6$ *H < +DGDZH\ $ 0DUULRWW '   (QHUJ\ FRQVXPSWLRQ DQG FRQVHUYDWLRQ LQ IRRG UHWDLOLQJ $SSOLHG 7KHUPDO(QJLQHHULQJ² 7DXE'50LOOHU%DQG$OOHQ+  (IIHFWVRIHOHYDWHG&2RQWKHSURWHLQFRQFHQWUDWLRQRIIRRGFURSV$PHWD DQDO\VLV*OREDO&KDQJH%LRORJ\² 7FKLER *PE+   3&) SLORW SURMHFW *HUPDQ\ &DVH VWXG\ RI 7FKLER 3ULYDW .DIIHH 5DULW\ 0DFKDUH +DPEXUJ 1RYHPEHU 7HDVGDOH-5&RIIPDQ&%DQG0DQJXP5:  3RWHQWLDOORQJWHUPEHQHÀWVRIQRWLOODJHDQGRUJDQLFFURSSLQJ V\VWHPVIRUJUDLQSURGXFWLRQDQGVRLOLPSURYHPHQW$JURQRP\-RXUQDO6HSW²2FW   7HJWPHLHU(0DQG'XII\0  ([WHUQDOFRVWVRIDJULFXOWXUDOSURGXFWLRQLQWKH8QLWHG6WDWHV,QWHUQDWLRQDO-RXUQDO




75$'($1'(19,5210(175(9,(:

RI$JULFXOWXUDO6XVWDLQDELOLW\  ² 7HPSHOPDQ (   3URGXFW VHUYLFH V\VWHPV IRU QHHG DUHD IRRG $Q RYHUYLHZ LQ 1HZ %XVLQHVV IRU 2OG (XURSH 7LVFKQHU8DQG7XNNHU$ HGLWRUV *UHHQOHDI3XEOLVKLQJ/WG6KHIÀHOG8QLWHG.LQJGRP 7HVWELRWHFK,QVWLWXWH IRU ,QGHSHQGHQW ,PSDFW $VVHVVPHQW LQ %LRWHFKQRORJ\   /HDGLQJ (XURSHDQ )RRG 6DIHW\ $XWKRULW\ VWDII PHPEHU PRYHV LQWR LQGXVWU\ 0XQLFK  1RYHPEHU $YDLODEOH DW KWWSZZZWHVWELRWHFKRUJHQ QRGH 7HVWELRWHFK,QVWLWXWHIRU,QGHSHQGHQW,PSDFW$VVHVVPHQWLQ%LRWHFKQRORJ\  ()6$·VUHYROYLQJGRRUWRELRWHFK LQGXVWU\XQDFFHSWDEOH0XQLFK0DUFK$YDLODEOHDWKWWSZZZWHVWELRWHFKRUJHQQRGH 7KH&OLPDWH*URXS  %UHDNLQJWKHFOLPDWHGHDGORFN$JOREDOGHDOIRURXUORZFDUERQIXWXUH5HSRUWVXEPLWWHG WR WKH * +RNNDLGR 7R\DNR 6XPPLW /RQGRQ $YDLDODEOH DW ZZZ KWWSZZZWKHFOLPDWHJURXSRUJZKDWZHGR SURJUDPV%UHDNLQJWKH&OLPDWH'HDGORFN 7KH*XDUGLDQ  /RQGRQ0D\$YDLODEOHDWZZZJXDUGLDQFRXN 7LOPDQ')DUJLRQH-:ROII%'·$QWRQLR&'REVRQ$+RZDUWK56FKLQGOHU'6FKOHVLQJHU:+6LPEHUORII'DQG 6ZDFNKDPHU'  )RUHFDVWLQJDJULFXOWXUDOO\GULYHQJOREDOHQYLURQPHQWDOFKDQJH6FLHQFH² 7LOPDQ ' 5HLFK 3% .QRSV - :HGLQ ' 0LHONH 7 DQG /HKPDQ &   'LYHUVLW\ DQG SURGXFWLYLW\ LQ D ORQJWHUP JUDVVODQGH[SHULPHQW6FLHQFH² 7LQORW0  ,QWpJUDWLRQGHÀOLqUHVjODPLWLJDWLRQDXFKDQJHPHQWFOLPDWLTXH&DVGHODÀOLqUHDQDFDUGHDX%XUNLQD )DVR0LVVLRQUHSRUW*,=)$25RPH 7LUDGR5DQG&RWWHU-  (FRORJLFDOIDUPLQJGURXJKWUHVLVWDQWDJULFXOWXUH*UHHQSHDFH5HVHDUFK/DERUDWRULHV 8QLYHUVLW\ RI ([HWHU 8QLWHG .LQJGRP $YDLODEOH DW ZZZJUHHQSHDFHRUJLQWHUQDWLRQDOHQSXEOLFDWLRQVUHSRUWV (FRORJLFDOIDUPLQJ'URXJKWUHVLVWDQWDJULFXOWXUH 7LVFKQHU 8 DQG .MDHUQHV 8   6XVWDLQDEOH FRQVXPSWLRQ DQG SURGXFWLRQ LQ WKH DJULFXOWXUH DQG IRRG GRPDLQ ,Q/DKORX6DQG(PPHUW6HGV6&25(3URFHHGLQJV6&3&DVHVLQWKH)LHOGRI)RRG0RELOLW\DQG+RXVLQJ :RUNVKRSRIWKH6XVWDLQDEOH&RQVXPSWLRQ5HVHDUFK([FKDQJH 6&25( 1HWZRUN3DULV-XQH² $YDLODEOHDWKWWSZZZVFRUHQHWZRUNRUJÀOHVB3URFHHGLQJVBZRUVKRSSGI 7ROHGR 90 DQG %DUUHUD%DVVDOV 1   /D 0HPRULD %LRFXOWXUDO /D ,PSRUWDQFLD (FRORJLD GH ODV 6DELGXULDV 7UDGLFLRQDOHV%DUFHORQD,&$5,$(GLWRULDO 7ULPEHO6:DQG0HQGHO$&  7KHFRZDVDJHRPRUSKLFDJHQW$FULWLFDODUWLFOH*HRPRUSKRORJ\ 7URHK)5+REEV$+DQG'RQDKXH5/  6RLODQG:DWHU&RQVHUYDWLRQ8SSHU6DGGOH5LYHU1-3UHQWLFH+DOO 7VFKDUQWNH7&ORXJK<:DQJHU7&-DFNVRQ/0RW]NH,3HUIHFWR,9DQGHUPHHU-DQG:KLWEUHDG$  *OREDO IRRGVHFXULW\ELRGLYHUVLW\FRQVHUYDWLRQDQGWKHIXWXUHRIDJULFXOWXUDOLQWHQVLÀFDWLRQ%LRORJLFDO&RQVHUYDWLRQ9RO ,VVXH -XO\ SS²$YDLODEOHDWZZZVFLHQFHGLUHFWFRPVFLHQFHDUWLFOHSLL6 7XFNH\ %   6WDUYLQJ $IULFD·V IXWXUH" )RUHLJQ 3ROLF\ LQ )RFXV  $XJXVW :DVKLQJWRQ '& ,QVWLWXWH IRU 3ROLF\ 6WXGLHV$YDLODEOHDWKWWSZZZISLIRUJDUWLFOHVVWDUYLQJBDIULFDVBIXWXUH 7\OHU36  0LVFRQFHSWLRQRI)RRG/RVVHV7RN\R8QLWHG1DWLRQV8QLYHUVLW\3UHVV 8KOLQ+(  (QHUJLÁ|GHQLOLYVPHGHOVNHGMDQ (QHUJ\ÁRZLQWKHIRRGFKDLQ 6WRFNKROP1DWXUYn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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



81&7$' DQG &KDPEHU RI /DERXU 9LHQQD   3ULFH IRUPDWLRQ LQ ÀQDQFLDOL]HG FRPPRGLW\ PDUNHWV 7KH UROH RI LQIRUPDWLRQ*HQHYD$YDLODEOHDWZZZXQFWDGRUJHQGRFVJGVBHQSGI 81(3  $JURHFRORJ\DQGWKH6HDUFKIRUD7UXO\6XVWDLQDEOH$JULFXOWXUH0H[LFR 81(3  7KH(QYLURQPHQWDO)RRG&ULVLV7KH(QYLURQPHQW·V5ROHLQ$YHUWLQJ)XWXUH)RRG&ULVHV1DLUREL$YDLODEOH DWZZZXQHSRUJSGI)RRG&ULVLVBORUHVSGI 81(3   %LODWHUDO )LQDQFH ,QVWLWXWLRQV DQG &OLPDWH &KDQJH $ 0DSSLQJ RI  &OLPDWH )LQDQFLDO )ORZV WR 'HYHORSLQJ&RXQWULHV$YDLODEOHDWKWWSZZZXQHSRUJSGIGWLH%LODWHUDO)LQDQFH,QVWLWXWLRQV&&SGI 81(3  7RZDUGVD*UHHQ(FRQRP\3DWKZD\VWR6XVWDLQDEOH'HYHORSPHQWDQG3RYHUW\(UDGLFDWLRQ²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À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²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ÀFHV2IÀFHRI)RRGVXFPKWP 9DQGHU3ORHJ-'  7KH1HZ3HDVDQWULHV6WUXJJOHVIRU$XWRQRP\DQG6XVWDLQDELOLW\LQWKH(UDRI(PSLUHDQG *OREDOL]DWLRQ/RQGRQDQG6WHUOLQJ9$(DUWKVFDQ 9DQGHU9RVVHQ+$0  6WDWHRIWKHDUWRIGHYHORSLQJGXUDEOHUHVLVWDQFHWRELRWURSKLFSDWKRJHQVLQFURSSODQWV VXFKDVFRIIHHOHDIUXVW,Q=DPEROLP/=DPEROLP(0DQG9iU]HD903HGV'XUDEOH5HVLVWDQFHWR&RIIHH/HDI 5XVW9LVFRQGHGR5LR%UDQFR%UD]LO6XSUHPD*UiÀFDH(GLWRUD² 9DQ 'LMN   6XUYH\ RI 'XWFK VRLO RUJDQLF UHVHDUFK ZLWK UHJDUG WR KXPLÀFDWLRQ DQG GHJUDGDWLRQ UDWHV LQ DUDEOH ODQG,Q8VHVHPLQDURQODQGGHJUDGDWLRQ HGV%RHOV'''DYLV%-RKQVWRQ$( SS5RWWHUGDP7KH 1HWKHUODQGV%DONHPD 9DQ*URHQLJHQ.2VHQEHUJ&DQG+XQJDWH%  ,QFUHDVHGVRLOHPLVVLRQVRISRWHQWJUHHQKRXVHJDVHVXQGHU LQFUHDVHGDWPRVSKHULF&21DWXUH² 9DQGHUPHHU - YDQ 1RRUGZLMN 0 $QGHUVRQ - 2QJ & DQG 3HUIHFWR ,   *OREDO FKDQJH DQG PXOWLVSHFLHV DJURHFRV\VWHPV&RQFHSWVDQGLVVXHV$JULFXOWXUH(FRV\VWHPVDQG(QYLURQPHQW² 9HQNDW.  7KHFOLPDWHFKDQJHLPSDFWRI86IRRGZDVWH XSGDWHG &OHDQ0HWULFV7HFKQLFDO%ULHI&OHDQ0HWULFV &RUS$YDLODEOHDWZZZFOHDQPHWULFVFRPSDJHV&OLPDWH&KDQJH,PSDFWRI86)RRG:DVWHSGI




75$'($1'(19,5210(175(9,(:

9OHN3/*/H4%DQG7DPHQH/  /DQG'HFOLQHLQ/DQGULFK$IULFD$&UHHSLQJ'LVDVWHULQWKH0DNLQJ5RPH &*,$56FLHQFH&RXQFLO6HFUHWDULDW 9|U|VPDUW\ &- *UHHQ 3 6DOLVEXU\ - DQG /DPPHUV 5%   *OREDO ZDWHU UHVRXUFHV 9XOQHUDELOLW\ IURP FOLPDWH FKDQJHDQGSRSXODWLRQJURZWK6FLHQFH² :DOVK.1DQG5RZH06  %LRGLYHUVLW\LQFUHDVHVHFRV\VWHPV·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² :DUQHU .' DQG .LUVFKHQPDQQ )   $JURHFRORJ\ LQ $FWLRQ ([WHQGLQJ $OWHUQDWLYH $JULFXOWXUH WKURXJK 6RFLDO 1HWZRUNV&DPEULGJH0$0,73UHVV :DVKEXUQ-  8QLYHUVLW\,QF7KH&RUSRUDWH&RUUXSWLRQRI$PHULFDQ+LJKHU(GXFDWLRQ1HZ<RUN%DVLF%RRNV :DWWV0  3DUDTXDWPRQRJUDSK3HQDQJ3HVWLFLGH$FWLRQ1HWZRUN$VLDDQGWKH3DFLÀF$YDLODEOHDWKWWSZZZ SDQDSQHWVLWHVGHIDXOWÀOHVPRQRJUDSKBSDUDTXDWSGI :HOVK 5   7KH HFRQRPLFV RI RUJDQLF JUDLQ DQG VR\EHDQ SURGXFWLRQ LQ WKH PLGZHVWHUQ 8QLWHG 6WDWHV 3ROLF\ 6WXGLHV5HSRUW1R+HQU\$:DOODFH,QVWLWXWHIRU$OWHUQDWLYH$JULFXOWXUH*UHHQEHOW0$ :HQ'  6RLOHURVLRQDQGFRQVHUYDWLRQLQ&KLQD,Q3LPHQWHO'HG6RLO(URVLRQDQG&RQVHUYDWLRQ1HZ<RUN &DPEULGJH8QLYHUVLW\3UHVV² :HQ'  $JULFXOWXUHLQ&KLQD:DWHUDQGHQHUJ\UHVRXUFHV,Q7VR77XDQ)DQG)DXVW0HGV$JULFXOWXUHLQ &KLQD%HOWVYLOOH0','($/6²$YDLODEOHDWKWWSFRQVHUYDQF\XPQHGXKDQGOH :HVW7'DQG*ULIÀWK'5  (IIHFWRIVWULSLQWHUFURSSLQJFRUQDQGVR\EHDQRQ\LHOGDQGSURÀW-RXUQDORI3URGXFWLRQ $JULFXOWXUH² :H]HO$DQG6ROGDW9  $TXDQWLWDWLYHDQGTXDOLWDWLYHKLVWRULFDODQDO\VLVRIWKHVFLHQWLÀFGLVFLSOLQHRIDJURHFRORJ\ ,QWHUQDWLRQDO-RXUQDORI$JULFXOWXUDO6XVWDLQDELOLW\  ² :H]HO$%HOORQ6'RUp7)UDQFLV&9DOORG'DQG'DYLG&  $JURHFRORJ\DVDVFLHQFHDPRYHPHQWDQGD SUDFWLFH$UHYLHZ$JURQRP\IRU6XVWDLQDEOH'HYHORSPHQW² :+2   1XWULWLRQ IRU +HDOWK DQG 'HYHORSPHQW $ *OREDO $JHQGD IRU &RPEDWLQJ  0DOQXWULWLRQ 3URJUHVV UHSRUW *HQHYD :+2  7KH:RUOG+HDOWK5HSRUW5HGXFLQJ5LVNV3URPRWLQJ+HDOWK\/LIH*HQHYD :+2  )XHOIRU/LIH+RXVHKROG(QHUJ\DQG+HDOWK*HQHYD:RUOG+HDOWK2UJDQL]DWLRQ :+2  ,QGRRUDLUSROOXWLRQDQGKHDOWK)DFWVKHHW1ƒ6HSWHPEHU$YDLODEOHDWZZZZKRLQWPHGLDFHQWUH IDFWVKHHWVIVHQ :LONHQ*&  *RRG)DUPHUV7UDGLWLRQDO$JULFXOWXUDO5HVRXUFH0DQDJHPHQWLQ0H[LFRDQG*XDWHPDOD%HUNHOH\ &$8QLYHUVLW\RI&DOLIRUQLD3UHVV :LOOHU+<XVVHÀ0HQ]OHU0DQG6RUHQVHQ1HGV  7KH:RUOGRI2UJDQLF$JULFXOWXUH6WDWLVWLFVDQG(PHUJLQJ 7UHQGV%RQQ,QWHUQDWLRQDO)HGHUDWLRQRI2UJDQLF$JULFXOWXUH0RYHPHQWV ,)2$0 H9 :LQWHU 7& +DUYH\ - )UDQNH 2/ DQG $OOH\ :0   *URXQG ZDWHU DQG VXUIDFH ZDWHU $ VLQJOH UHVRXUFH 86*6 &LUFXODU8QLWHG6WDWHV*HRORJLFDO6XUYH\ :LVH7$  7KHWUXHFRVWRIFKHDSIRRG7KHJOREDOLVDWLRQRIWKHIRRGPDUNHWKDVPDGHIRRGFKHDSEXWZKRLV EHQHÀWLQJ"5HVXUJHQFH1R0DUFK$SULO :LWNRZVNL7+  )RRGPDUNHWLQJDQGREHVLW\LQGHYHORSLQJFRXQWULHV$QDO\VLVHWKLFVDQGSXEOLFSROLF\-RXUQDO RI0DFURPDUNHWLQJ²


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



:LWW%  8VLQJVRLOIDXQDWRLPSURYHVRLOKHDOWK8QLYHUVLW\RI0LQQHVRWDGLJLWDO&RQVHUYDQF\$YDLODEOHDWKWWS FRQVHUYDQF\XPQHGXELWVWUHDP:LWWSGI :LWWHU(0RUWHQVVRQ$0*DUFLD)9  6L]HRIWKHPLFURELDOPDVVLQDORQJWHUPÀ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aS DJH3.aSL3.aWKH6LWH3.KWPO :RUOG %DQN   (FRQRPLFV RI DGDSWDWLRQ WR FOLPDWH FKDQJH ($&&  $YDLODEOH DW KWWSEHWDZRUOGEDQNRUJ FRQWHQWHFRQRPLFVDGDSWDWLRQFOLPDWHFKDQJHVWXG\KRPHSDJH :+2   7KH (XURSHDQ +HDOWK 5HSRUW  $YDLODEOH DW KWWSZZZHXURZKRLQWBBGDWDDVVHWVSGIB ÀOH(SGI :5$3  +RXVHKROGIRRGDQGGULQNZDVWHLQWKH8.%DQEXU\:DVWHDQG5HVRXUFHV$FWLRQ3URJUDPPH$YDLODEOH DWZZZZUDSRUJXNUHWDLOBVXSSO\BFKDLQUHVHDUFKBWRROVUHVHDUFKUHSRUWBKRXVHKROGKWPO :5, XQGDWHG :RUOG*+*HPLVVLRQVÁRZFKDUWDWKWWSWLQ\XUOFRPIPHEH :5, :RUOG5HVRXUFHV,QVWLWXWH   :RUOG5HVRXUFHV1HZ<RUN2[IRUG8QLYHUVLW\3UHVV :ULJKW '+   +XPDQ LPSDFWV RQ HQHUJ\ ÁRZ WKURXJK QDWXUDO HFRV\VWHPV DQG UHSOLFDWLRQV IRU VSHFLHV HQGDQJHUPHQW$PELR² :\QHQ(  7KHHFRQRPLFVRIRUJDQLFFHUHDOOLYHVWRFNIDUPLQJLQ$XVWUDOLDUHYLVLWHG,Q3URFHHGLQJVRIWKH5,5'& ,QDXJXUDO&RQIHUHQFHRQ2UJDQLF$JULFXOWXUH6\GQH\²$XJXVW <DWHV '   :DW%DO $Q LQWHJUDWHG ZDWHU EDODQFH PRGHO IRU FOLPDWH LPSDFW DVVHVVPHQW RI ULYHU EDVLQ UXQRII ,QWHUQDWLRQDO-RXUQDORI:DWHU5HVRXUFHV'HYHORSPHQW  ²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²




75$'($1'(19,5210(175(9,(:

1RWHV 

)RRGVHFXULW\LVJHQHUDOO\GHÀQHGDVFRQVLVWLQJRIIRXUSLOODUV L DYDLODELOLW\ LHWKHVXSSO\VLGHRIIRRGVHFXULW\ UHVXOWLQJIURPSURGXFWLRQVWRFNVDQGWUDGH  LL DFFHVV LQÁXHQFHGE\LQFRPHPDUNHWVDQGSULFHV  LLL XWLOL]DWLRQ UHODWHGWRGLHWVIRRGSUHSDUDWLRQDQGFRQVHUYDWLRQSUDFWLFHV DQG LY VWDELOLW\ LHSHULRGLFVKRUWIDOOVÁXFWXDWLRQ RIVXSSO\ )RUPRUHLQIRUPDWLRQVHHLQWHUDOLD)$2 D 



2QWKHEDVLVRIFXUUHQWWUHQGVFDUERQHPLVVLRQVZLOONHHSJURZLQJE\DERXWSHUFHQWSHUDQQXPDQGDWWKLVUDWH ZLOOUHDFKWKHUHPDLQLQJHPLVVLRQOLPLWRIJLJDWRQVWRNHHSJOREDOZDUPLQJEHORZGHJUHHVZLWKLQQRPRUH WKDQ\HDUVZZZUROOLQJVWRQHFRPSROLWLFVQHZVJOREDOZDUPLQJVWHUULI\LQJQHZPDWK



)RUPRUHLQIRUPDWLRQVHHLELG



$FFRUGLQJ WR )DWLK %LURO WKH ,($·V FKLHI HFRQRPLVW WKH FXUUHQW WUHQGV DUH SHUIHFWO\ LQ OLQH ZLWK D WHPSHUDWXUH LQFUHDVHRIDERXWGHJUHHVODWHUWKLVFHQWXU\,ELG



*OREDO FHUHDO SURGXFWLRQ YROXPH JUHZ E\  SHU FHQW DQG FHUHDO \LHOGV LQFUHDVHG E\  SHU FHQW LQ WKH SHULRG WR DXWKRU·VFDOFXODWLRQEDVHGRQ)$267$7 



)RUPRUHLQIRUPDWLRQVHH.HDQHHWDO  



,W LV RIWHQ RYHUORRNHG WKDW SURGXFWLYLW\ RI RXWGRRU ZRUNHUV LV ERXQG WR FRQVLGHUDEO\ GHFOLQH EHFDXVH RI JOREDO ZDUPLQJ,Q,QGLDIRULQVWDQFHLWLVHVWLPDWHGWKDWSURGXFWLYLW\RIRXWGRRUZRUNHUVKDVDOUHDG\GURSSHGE\SHU FHQWVLQFHWKHHDUO\VDQGWKDWDQRWKHUGHJUHHVWHPSHUDWXUHLQFUHDVHPLJKWUHVXOWLQDQDGGLWLRQDOUHGXFWLRQ RISHUFHQW 5XQGJUHQ 



)RUDQRYHUYLHZRIUHFHQWVLJQLÀFDQWFOLPDWHDQRPDOLHVVHH7LUDGRDQG&RWWHU ² 



7KH UHFHQW FDWDVWURSKLF ÁRRGV LQ 3DNLVWDQ DQG WKH PDVVLYH IRUHVW DQG SHDWVRLO ÀUHV LQ 5XVVLD DUH EXW WZR LOOXVWUDWLYHH[DPSOHVRIWKHLPSDFWWKDWFDQEHH[SHFWHG$VWKHFDVHRI3DNLVWDQGHPRQVWUDWHVERWKWKHFRXQWU\ DQGWKHLQWHUQDWLRQDOFRPPXQLW\DUHSRRUO\SUHSDUHGWRHIIHFWLYHO\FRSHZLWKVXFKH[WUHPHV$SDUWIURPWKHGLUH FRQVHTXHQFHVIRUIXWXUHDJULFXOWXUDOSURGXFWLRQWKHUHLVDOVRWKHULVNRIVHULRXVGHVWDELOL]DWLRQRIVRFLHW\DQGWKH SROLWLFDOV\VWHP(VWLPDWHVRIWKHÁRRGFDXVHGHFRQRPLFGDPDJHDUHDVKLJKDVSHUFHQWRI3DNLVWDQ·V*'3

,WLVHVWLPDWHGWKDWHOHYDWHGDWPRVSKHULF&2FRQFHQWUDWLRQDORQHPD\LQFUHDVHFURS\LHOGVE\VRPH²SHU FHQW&URSVWKDWWHQGWREHQHÀWIURPWKHHIIHFWRIFDUERQIHUWLOL]DWLRQLQFOXGHULFHZKHDWVR\EHDQVÀQHJUDLQV OHJXPHV DQG PRVW WUHHV %HQHÀWV IRU RWKHU FURSV LQFOXGLQJ PDL]H PLOOHW VRUJKXP DQG VXJDUFDQH DUH PRUH OLPLWHG+RZHYHUWKHVHHVWLPDWHVQHHGWREHFRQVLGHUHGZLWKXWPRVWFDUHDVRWKHUFKDQJHVVXFKDVGLVWULEXWLRQ RI SUHFLSLWDWLRQ HOHYDWLRQ RI DWPRVSKHULF 2 FRQFHQWUDWLRQ HQKDQFHG GHPDQG IRU QLWURJHQ DQG LQFUHDVHV LQ WHPSHUDWXUHFDQPDNHWKH\LHOGLQFUHDVHVKLJKO\XQFHUWDLQ 6PLWKHWDOD 6HHDOVRWKHFRPPHQWRI +|J\DQG)DQJPHLHULQWKLV&KDSWHU 7KH TXDOLW\ RI IRRG LV GHWHUPLQHG E\ WKUHH HOHPHQWV L  FDORULHV LH WKH HQHUJ\ FRQWHQW  LL  SURWHLQV DQG LLL  PLFURQXWULHQWV )UXLW DQG YHJHWDEOHV DUH YHU\ YDOXDEOH IRU GHDOLQJ ZLWK PLFURQXWULHQW GHÀFLHQFLHV WKH YDOXH RI JOREDO WUDGH LQ YHJHWDEOHVIRULQVWDQFHH[FHHGVWKDWRIFHUHDOV <HWWKHUHLVLQVXIÀFLHQWNQRZOHGJHDQGUHVHDUFKRQWKHHIIHFWV RIFOLPDWHFKDQJHRQIUXLWDQGYHJHWDEOH\LHOGVDQGTXDOLW\ )$2D  ,WLVHVWLPDWHGWKDWFXUUHQWO\DERXWSHUFHQWRIWKHSRWHQWLDOJOREDOFURS\LHOGLVGHVWUR\HGE\SDWKRJHQVDQG SHVWV 2HUNH  5HVLOLHQFHLVWKHFDSDFLW\WRDEVRUERUFRSHZLWKVKRFNVDQGVWUHVVHV$GDSWLYHFDSDFLW\LVGHÀ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ÁHFWVERWKUHODWLYHDQGDEVROXWHFOLPDWHLPSDFWSHUFRXQWU\IRUPRUHLQIRVHH ZZZJHUPDQZDWFKRUJNOLPDFULKWP 


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



,WLVHVWLPDWHGWKDWDOUHDG\E\FRQWLQXLQJSRSXODWLRQJURZWKDQGFXUUHQWDJULFXOWXUDOSUDFWLFHVZLOOMDFNXS WKHQXPEHURIFRXQWULHVWKDWVXIIHUIURPDQDFXWHVFDUFLW\RIHLWKHUJRRGFURSODQGRUIUHVKZDWHUIURPDWWKH PRPHQWWRVRPHZLWKDWRWDOSRSXODWLRQRIELOOLRQ:DWHUVFDUFLW\PD\EHRQHRIWKHPRVWSRZHUIXOFURS\LHOG UHGXFHUVLQWKHFRPLQJGHFDGHV *LRYDQQXFFLHWDO  7KH HFRQRPLF VLJQLÃ&#x20AC;FDQFH RI DJULFXOWXUH LQ GHYHORSLQJ FRXQWULHV LV XVXDOO\ XQGHUHVWLPDWHG ZKHQ OLPLWLQJ LW WR DJULFXOWXUH·VFRQWULEXWLRQWR*'3EHFDXVHODUJHSDUWVRIDJULFXOWXUDOSURGXFWLRQDUHLQIRUPDODQGQRWSDUWRIWKH PRQHWDU\HFRQRP\ ,WLVDOVRZRUWKQRWLQJWKDWIRUWKHÃ&#x20AC;UVWWLPHLQKLVWRU\WKHUHDUHDVPDQ\RYHUZHLJKWSHRSOHDVXQGHUQRXULVKHG 7KHFRQVHTXHQFHVRIWKHHPHUJLQJGLHWDU\KDELWVDUHRQDGLVDVWURXVWUDMHFWRU\IRUKXPDQDQGHFRV\VWHPKHDOWK 7KHUHIRUHRQHDOVRQHHGVWRWDUJHWWKHTXDOLW\RIQXWULWLRQUDWKHUWKDQVLPSO\´PRUHSURGXFWLRQµ *LRYDQQXFFLHW DOLYDQGYL  $FFRUGLQJWR)$26XE6DKDUDQ$IULFDKDVWKHKLJKHVWVKDUHRIXQGHUQRXULVKHGSHRSOHVRPHSHUFHQWLQ ZKHUHDVWKH$VLD3DFLÃ&#x20AC;FUHJLRQKDVWKHPRVWXQGHUQRXULVKHGSHRSOH DERXWPLOOLRQ 7ZRWKLUGVRIWKHZRUOG·V XQGHUQRXULVKHGOLYHLQMXVWFRXQWULHV%DQJODGHVK&KLQDWKH'HPRFUDWLF5HSXEOLFRI&RQJR(WKLRSLD,QGLD ,QGRQHVLDDQG3DNLVWDQ FLWHGLQ*LRYDQQXFFLHWDO  $V KLJKOLJKWHG E\ 'H 6FKXWWHU DQG 9DQORTXHUHQ   ´ODUJH PHFKDQL]HG PRQRFURSSLQJ RSHUDWLRQV DUHPRUHFRPSHWLWLYHWKDQVPDOOIDUPV«EXWFRPSHWLWLYHQHVVDQGSURGXFWLYLW\DUHGLIIHUHQWWKLQJV%LJIDUPV RXWSHUIRUPVPDOOIDUPVDFFRUGLQJWRRQO\RQHPHDVXUHRIHFRQRPLFHIÃ&#x20AC;FLHQF\SURGXFWLYLW\SHUXQLWRIODERXUµ $FFRUGLQJWR7VFKDUQWNHHWDO  ´LWLVZHOOHVWDEOLVKHGWKDWVPDOODQGGLYHUVLÃ&#x20AC;HGIDUPVUDWKHUWKDQODUJH PRQRFXOWXUHVVKRZJUHDWHUSURGXFWLYLW\SHUDUHDDSKHQRPHQRQUHIHUUHGWRDVWKH¶SDUDGR[RIWKHVFDOH·RUWKH ¶LQYHUVHIDUPVL]HSURGXFWLYLW\UHODWLRQVKLS·µ 6HHDOVR,$$67' D  $VHPSKDVL]HGE\1DHUVWDG SDUW,,S ´VRLORUJDQLFPDWWHUDVKXPXVFDQRQO\EHSURGXFHGE\WKH GLYHUVLW\RIOLIHWKDWH[LVWVLQVRLOVLWFDQQRWEHKXPDQPDGH:KHQWKHVRLORUJDQLFPDWWHUUHF\FOLQJDQGIHUWLOLW\ VHUYLFHLVLPSDLUHGDOOOLIHRQHDUWKLVWKUHDWHQHGDVDOOOLIHLVHLWKHUGLUHFWO\RULQGLUHFWO\UHOLDQWRQSODQWVDQGWKHLU SURGXFWVLQFOXGLQJWKHVXSSO\RIIRRGHQHUJ\QXWULHQWVFRQVWUXFWLRQPDWHULDOVDQGJHQHWLFUHVRXUFHVµ ,QFUHDVLQJ VRLO RUJDQLF PDWWHU E\ JRRG PDQDJHPHQW SUDFWLFHV LV JHQHUDOO\ V\QHUJLVWLF EHFDXVH LW FDSWXUHV DWPRVSKHULF&2LQFUHDVHVVRLOIHUWLOLW\DQGLPSURYHVWKHVRLOVWUXFWXUHIRUPRUHUHVLOLHQFHDQGEHWWHUDGDSWDWLRQ WRFOLPDWHFKDQJH )$2D  7KLVVHFWLRQGUDZVRQÃ&#x20AC;QGLQJVRI0XUSK\DQG:LVH    2QH UHVSRQVH ZDV WKH YROXQWDU\  3ULQFLSOHV IRU 5HVSRQVLEOH $JULFXOWXUDO ,QYHVWPHQW 35$,  GHYHORSHG E\ WKH VHFUHWDULDWV QRWWKHPHPEHUFRXQWULHV RIWKH:RUOG%DQN)$2DQG81&7$'ZKLFKKDYHEHHQZLGHO\FULWLFL]HG DVIDUWRRZHDN 0XUSK\DQG:LVH ,Q0D\WKH)$2·V&RPPLWWHHRQ:RUOG)RRG6HFXULW\ &)6  HQGRUVHG 7KH 9ROXQWDU\ *XLGHOLQHV RQ WKH 5HVSRQVLEOH *RYHUQDQFH RI 7HQXUH RI /DQG )LVKHULHV DQG )RUHVWV LQ WKH &RQWH[W RI 1DWLRQDO )RRG 6HFXULW\ ZKLFK RXWOLQH SULQFLSOHV DQG SUDFWLFHV WKDW JRYHUQPHQWV FDQ UHIHU WR ZKHQPDNLQJODZVDQGDGPLQLVWHULQJODQGÃ&#x20AC;VKHULHVDQGIRUHVWVULJKWV7KHJXLGHOLQHVDUHEDVHGRQDQLQFOXVLYH FRQVXOWDWLRQSURFHVVVWDUWHGE\)$2LQDQGWKHQÃ&#x20AC;QDOL]HGWKURXJK&)6OHGLQWHUJRYHUQPHQWDOQHJRWLDWLRQV WKDW LQFOXGHG SDUWLFLSDWLRQ RI JRYHUQPHQW RIÃ&#x20AC;FLDOV FLYLO VRFLHW\ RUJDQL]DWLRQV SULYDWH VHFWRU UHSUHVHQWDWLYHV LQWHUQDWLRQDORUJDQL]DWLRQVDQGDFDGHPLFV7KHDLPRIWKHJXLGHOLQHVLVWRSURPRWHIRRGVHFXULW\DQGVXVWDLQDEOH GHYHORSPHQWE\LPSURYLQJVHFXUHDFFHVVWRODQGÃ&#x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²SHUFHQWWKH2(&'VXJJHVWVSHUFHQW /HJJDQG+XDQJ DQGWKH :RUOG5HVRXUFHV,QVWLWXWH :5,XQGDWHG VXJJHVWVSHUFHQW  )LJXUHVXVHGIRUWKHFDOFXODWLRQVZHUH D DQDYHUDJHORVVRI²NJRI620PRIDUDEOHODQGDQG²NJRI




75$'($1'(19,5210(175(9,(:

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ÀFLDO PLFURÁRUD DQG IDXQD ZKLFK LPSURYHG \LHOG DQGFRIIHHTXDOLW\6XFKJRRGSUDFWLFHVDUHGHYHORSHGWKURXJKDWULDODQGHUURUSURFHVVE\FRIIHHJURZHUVEXW LGHQWLI\LQJ FRQGLWLRQV IRU VXFFHVV LQ RUGHU WR SURPRWH WKHLU GLVVHPLQDWLRQ PD\ EHQHÀW IURP WKH NQRZOHGJH RI H[SHUWV 6WDYHUHWDO   7KHSHUFHQWÀJXUHUHODWHVWRWKHUHOLDEOH\LHOGFRPSDULVRQVIURPSURMHFWVEXWWKHUHVXOWVZHUHZLGH UDQJLQJZLWKSHUFHQWRIWKHSURMHFWVUHSRUWLQJDSHUFHQWLQFUHDVHRUPRUH  +RZHYHULWVKRXOGEHSRLQWHGRXWWKDWQRWDOOWKHVHSURMHFWVFRPSO\IXOO\ZLWKWKHSULQFLSOHVRIDJURHFRORJ\  5HVHDUFKRQDJURIRUHVWU\LQ=DPELDGRHVQRWVXSSRUW´WKHSRSXODUQRWLRQWKDWDJURIRUHVWU\SUDFWLFHVDUHPRUH ODERXULQWHQVLYHµ $MD\LHWDO   6HHZZZFOLPDWHIXQGVXSGDWHRUJ  $FFRUGLQJWRWKH,3&&DQDWPRVSKHULF&2FRQFHQWUDWLRQRISSPZLOOOHDGWRDƒ&ULVHLQJOREDODYHUDJH WHPSHUDWXUHV  &LVDPHWDEROLFSDWKZD\IRUFDUERQÀ[DWLRQLQSKRWRV\QWKHVLVFRQYHUWLQJ&2DQGULEXORVHELVSKRVSKDWH 5X%3  LQWRWZRFDUERQPROHFXOHVRISKRVSKRJO\FHUDWH 3*$   &LVDPHWDEROLFSDWKZD\IRUFDUERQÀ[DWLRQLQSKRWRV\QWKHVLVZKLFKÀ[HV&2WRSKRVSKRHQROS\UXYDWH 3(3  DQGFRQYHUWVLWLQWRWKHFDUERQLQWHUPHGLDWHPDODWH  7KHZKROHSDSHUFDQEHGRZQORDGHGDWIWSIWSIDRRUJGRFUHSIDRDNHDNHSGI  6WDWHPHQWVE\)HHGWKH)XWXUHRIÀFLDOVDUHUHYHDOLQJWKH\UHIHUWRWKH´GLVFRYHU\DQGGHOLYHU\µRI´EUHDNWKURXJKµ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À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


.H\'HYHORSPHQW&KDOOHQJHVRID)XQGDPHQWDO7UDQVIRUPDWLRQRI$JULFXOWXUH



 6HH/LJKWLQJ$IULFD&DWDO\]LQJPDUNHWVIRUPRGHUQOLJKWLQJDWZZZOLJKWLQJDIULFDRUJ  6HHKWWSHDUWKREVHUYDWRU\QDVDJRY)HDWXUHV'XVW  7KLVSDSHUGUDZVKHDYLO\IURPDDUWLFOHE\WKHDXWKRUVHQWLWOHG&RPSHWLWLRQIRU:DWHUIRUWKH)RRG6\VWHP SXEOLVKHGLQ3KLORVRSKLFDO7UDQVDFWLRQVRIWKH5R\DO6RFLHW\%LRORJLFDO6FLHQFHV  ²  $ WKRURXJK GLVFXVVLRQ RI WKHVH DQG RWKHU VROXWLRQV LV SURYLGHG LQ VHYHUDO FRPSUHKHQVLYH UHSRUWV HJ ,:0,    7KH UHODWLRQVKLS EHWZHHQ SRSXODWLRQ ZDWHU DQG IRRG SURGXFWLRQ KDV EHHQ H[SORUHG LQ GHSWK E\ D QXPEHU RI DXWKRUV VHHIRUH[DPSOH*OHLFN3LPHQWHOHWDO3RVWHO9|U|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´JHRSROLWLFDO UHJLRQVµ DUH (XURSH $IULFD 1RUWK $PHULFD $VLD /DWLQ $PHULFD DQG WKH &DULEEHDQDQG2FHDQLD:LWKLQ(XURSHZHDOVRIRFXVRQWKH(XURSHDQ8QLRQQRUWKZHVWHUQ(XURSHWKH8QLWHG .LQJGRPDQGWKHIRUPHU6RYLHW8QLRQ6XE6DKDUDQ$IULFDDQGWKH1LOH5LYHUEDVLQDUHUHSRUWHGIRU$IULFDDQGLQ $VLDZHUHSRUWÀ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ÁRZV  0HDVXUHPHQWVZHUHWDNHQLQSORWVRISDVVLRQIUXLWLQPL[HGFURSSLQJV\VWHPVLQHDFKRIWZRGLIIHUHQWDUHDVRI WKH&HQWUDODQG:HVWHUQ3URYLQFHVRI.HQ\D  )RUIXUWKHULQIRUPDWLRQVHHZZZFFRIIHHDVVRFLDWLRQRUJRXUVHUYLFHVZRUNRQFOLPDWHFKDQJHKWPO  6HHZZZJURZLQJIRUWKHIXWXUHFRPFRQWHQW&RRO)DUP7RRO  )RUDPRUHGHWDLOHGGLVFXVVLRQRIWKHGHYHORSPHQWRIIRRGVXSSO\FKDLQVLQORZLQFRPHFRXQWULHVDQGHPHUJLQJ HFRQRPLHVVHH3DUÀWW%DUWKHODQG0DFQDXJKWRQ  6HHZZZZISRUJSXUFKDVHSURJUHVV ,QVRPH(8FRXQWULHV HJ*HUPDQ\ DEVROXWHH[SHQGLWXUHRQIRRGKDVUHPDLQHGFRQVWDQWVLQFHWKHV 6HHIRUH[DPSOHZZZQHZHFRQRPLFVRUJSXEOLFDWLRQVLQFRQYHQLHQWVDQGZLFK  )XUWKHU LQIRUPDWLRQ DERXW WKH 3ODWIRUP·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´IRUPDOO\HVWDEOLVKHVWKHSUHFDXWLRQDU\3ULQFLSOHDVDQRSWLRQRSHQWRULVN PDQDJHUV ZKHQ GHFLVLRQV KDYH WR EH PDGH WR SURWHFW KHDOWK EXW VFLHQWLÀF LQIRUPDWLRQ FRQFHUQLQJ WKH ULVN LV LQFRQFOXVLYH RU LQFRPSOHWH LQ VRPH ZD\µ 6HH KWWSHFHXURSDHXIRRGIRRGIRRGODZSUHFDXWLRQDU\LQGH[B HQKWPKWWSHXUOH[HXURSDHX/H[8UL6HUY/H[8UL6HUYGR"XUL &20),1(13')  )RUPRUHGHWDLOVVHH*XHQWKHUDQG:LOO




75$'($1'(19,5210(175(9,(:

'#&46+%.'U              X         $QLWD,GHO)HGHUDWLRQRI*HUPDQ6FLHQWLVWVDQG7RELDV5HLFKHUW*HUPDQZDWFK

$EVWUDFW 7RRSWLPL]HWKHLQWHUUHODWLRQVKLSEHWZHHQWKHJOREDOFOLPDWHDQGFDWWOHDQGPD[LPL]HWKHODWWHU·VFRQWULEX WLRQWRJOREDOIRRGVHFXULW\WKHIROORZLQJVWHSVQHHGWREHWDNHQ Â&#x2021; 0RUHUHVHDUFKRQJUDVVODQGPDQDJHPHQWDLPHGDWRSWLPL]LQJLWVFDSDFLW\WRVHUYHDVDFDUERQVLQN Â&#x2021; 0RUHVXSSRUWIRUJUD]LQJ Â&#x2021; /DQGXVHFKDQJHVKRXOGEHEURXJKWXQGHUVWULFWFRQWUROLQFOXGLQJWKDWUHODWHGWRLPSRUWHGDQLPDO IHHG Â&#x2021; /LYHVWRFNSURGXFWLRQVKRXOGKDYHDVWURQJHUOLQNWRWKHUHJLRQDOIHHGEDVH

3UHYDLOLQJ WUHQGV WRZDUGV IXUWKHU LQGXVWULDOL]DWLRQ RI DJULFXOWXUHDORQJZLWKODQGOHVVODUJHVFDOHOLYHVWRFN SURGXFWLRQ DUH OLNHO\ WR FRQWULEXWH WR DQ LQFUHDVH LQ JUHHQKRXVH JDV *+*  HPLVVLRQV E\ PRUH WKDQ D WKLUGWLOO$FFRUGLQJWRWKHWK,3&&$VVHVVPHQW 5HSRUW ´:LWKRXW DGGLWLRQDO SROLFLHV DJULFXOWXUDO 12 >QLWURXV R[LGH@ DQG &+ >PHWKDQH@ HPLVVLRQV DUH SURMHFWHG WR LQFUHDVH E\  DQG  UHVSHFWLYHO\ WR  WKXV LQFUHDVLQJ PRUH UDSLGO\ WKDQ WKH  LQFUHDVH RI QRQ&2 *+* REVHUYHG IURPWRµ ,3&&  7KHUH LV D WHQGHQF\ WR LJQRUH WKH QHHG WR UHGXFH PHDW FRQVXPSWLRQ DV ZHOO DV WR LPSOHPHQW D OHJDO IUDPHZRUN IRU VXVWDLQDEOH SURGXFWLRQ PHWKRGV WR DGGUHVV WKHLU PHGLXP DQG ORQJWHUP HIIHFWV RQ FOLPDWH HQYLURQPHQW DQG DQLPDO ZHOIDUH ,QGXVWULDO OLYHVWRFNSURGXFWLRQVKRXOGEHFXUEHGVRWKDWWKHWRWDO VWRFNRIUDLVHGDQLPDOVVXFKDVFDWWOHSLJVFKLFNHQV DQGVKHHSLVUHGXFHGDQGWKHFRQVXPSWLRQRIDQLPDO IHHG VKRXOG EH FRPPHQVXUDWH ZLWK VXVWDLQDEOH ORFDO SURGXFWLRQ SRWHQWLDO 5HGXFHG FRQVXPSWLRQ RI DQLPDO SURGXFWV LV D SDUWLFXODU FKDOOHQJH IRU WKRVH FRXQWULHV ZKHUH DQLPDO SURWHLQ FRQVXPSWLRQ LV KLJK ²UHSUHVHQWLQJDIDOVHPRGHORILPDJLQDU\SURVSHULW\ 7KH IDFW WKDW DQ LQFUHDVLQJ QXPEHU RI SHRSOH DUH EHFRPLQJYHJDQVPD\KHOS LQWHUPVRIWKHUHGXFHG GHPDQG IRU DQLPDO SURWHLQ DQG HQHUJ\ULFK IRRG 

EXW ´WR FRQFOXGH WKDW D YHJDQ DJULFXOWXUDO DQG IRRG V\VWHP ZRXOG EH WKH SUHIHUDEOH VROXWLRQ LV IDU WRR VLPSOLVWLFµ *DUQHW  )DLUOLH  '·6LOYD DQG :HEVWHU  2YHU WKH SDVW IHZ GHFDGHV IHHGLQJ V\VWHPV KDYH WXUQHG PRUH DQG PRUH IURP EHLQJ ORFDOUHJLRQDO WR JOREDOWKHEDVLFVRXUFHRIIRGGHULVOHVVDQGOHVVWKH IDUP LWVHOI 7KH UHVXOWLQJ SUREOHP RI H[SDQVLRQ DQG LQWHQVLÃ&#x20AC;FDWLRQ RI OLYHVWRFN SURGXFWLRQ LV DVVRFLDWHG ZLWK WKH VKLIW IURP D IHHG V\VWHP EDVHG RQ JUDVV DQG SODQW UHPDLQV WR RQH EDVHG PDLQO\ RQ FURSV HYHQ IRU UXPLQDQWV +RZHYHU WKH PDMRU LVVXH LV QRW ZKHWKHU OLYHVWRFN LV WKH ZRUOG·V ODUJHVW XVHU RI ODQG EXW UDWKHU KRZ WKH ODQG DQG OLYHVWRFN DUH PDQDJHG :KLOH VXVWDLQDEOH DQG DQLPDOIULHQGO\ V\VWHPV DUH FKDUDFWHUL]HG E\ DUHDVVSDFH IRU RXWGRRU NHHSLQJ DQGJUD]LQJLQGXVWULDODQLPDOUHDULQJLVFKDUDFWHUL]HG DV ODQGOHVV 7KXV WKH GDWD LQGLFDWLQJ OLYHVWRFN DV WKH ZRUOG·V ODUJHVW XVHU RI ODQG DUH DYHUDJH YDOXHV WKDW DOVR LQFOXGH D UHOHYDQW SDUW RI VXVWDLQDEO\ XVHG JUDVVODQGV 7KH LQWHQVLÃ&#x20AC;FDWLRQ RI OLYHVWRFN V\VWHPV DQG HVSHFLDOO\IHHGLQJV\VWHPVKDVJRQHKDQGLQKDQG ZLWK PRUH VSHFLDOL]DWLRQ DQG UDWLRQDOL]DWLRQ WKHUHE\ FUHDWLQJ OLYHVWRFN V\VWHPV WKDW DUH LQFUHDVLQJO\ GHSHQGHQW RQ HQHUJ\ LQSXW DQG IRUHLJQ IRGGHU


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

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´YLUWXDOODQGµ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Ã&#x20AC;F EUHHGLQJ IHHGLQJ DQG JHQHUDO KXVEDQGU\ SUDFWLFHV OHDGV WR HYHU ODUJHU QXPEHUV RI DQLPDOV EHLQJ VXEMHFWHG WR HQRUPRXV DQG LUUHVSRQVLEOH SHUIRUPDQFHDQGUHDULQJVWUHVV ,UUHVSHFWLYH RI WKH DQLPDO SURWHFWLRQ DVSHFW WKH FRQFHSW RI ´ELRVHFXULW\µ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Â&#x2021; 8VHWKHQXWULHQWVFRQWDLQHGLQJUDVVDQGKDUYHVWLQJ



UHVLGXHV DV DQLPDO IHHG WKDW FDQQRW EH GLUHFWO\ XVHGIRUKXPDQFRQVXPSWLRQDQG Â&#x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Ã&#x20AC;QLQJLWDVZDVWHFRQVWLWXWHVDKXJH ORVVRIQXWULHQWVDQGPLQHUDOV VLPLODUWRSRVWKDUYHVW ORVVHVRIIRRG  7KH VXVWDLQDEOH SURGXFWLRQ RI IRRG RI DQLPDO RULJLQ UHTXLUHV WKH GHYHORSPHQW RI FRRSHUDWLRQ RQ D UHJLRQDOOHYHODVZHOODVFRRSHUDWLRQEHWZHHQVPDOO DQG PHGLXPVL]HG IDUPV DQG SDVWRUDOLVWV 7KHUH LV D VLJQLÃ&#x20AC;FDQW XQWDSSHG SRWHQWLDO IRU VXVWDLQDEOH JUDVVODQG DQG UXPLQDQW PDQDJHPHQW LQFOXGLQJ WKHLU XVH E\ SDVWRUDOLVWV 7KH LPSRUWDQFH RI ZRUNLQJ DQLPDOV KDV DOVR EHHQ XQGHUHVWLPDWHG <HW WKH\ DUH SDUWLFXODUO\ XVHIXO LQ WKH FRQWH[W RI SHDN RLO ZKLFK OHDGVWRKLJKHUFRVWVRIPHFKDQL]DWLRQ+RZHYHUWKHLU HIIHFWLYHXWLOL]DWLRQQHHGVWREHRSWLPL]HGDWWKHORFDO OHYHOLQSDUWLFXODUDVUHJDUGVIHHGVHOHFWLRQULJKWRI SDVVDJH DQG WKH IXQFWLRQDOLW\ RI PRVWO\ LQDGHTXDWH HTXLSPHQW

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Ã&#x20AC;FDWLRQ RI DQLPDO SURGXFWLRQ +LJKHU QLWURJHQIHUWLOL]HUXVHEHFRPHVWKHOHDGLQJGULYHURIWKH




75$'($1'(19,5210(175(9,(:

LQFUHDVHVLQDJULFXOWXUDOSURGXFWLRQLQJHQHUDO,WVXVH KDVLQFUHDVHGHLJKWIROGLQWKHSDVW\HDUV Ã&#x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²SHUFHQWRIWKHQLWURJHQIHUWLOL]HUDSSOLHGWRWKHVRLO LVUHOHDVHGDVQLWURXVR[LGH 12 ZKLFKKDVDJOREDO ZDUPLQJSRWHQWLDOWLPHVKLJKHUWKDQWKDWRI&2 6RPHDPPRQLD 1+ LVDOVRUHOHDVHG 6XWWRQHWDO VHHEHORZ  2YHU WKH SDVW IHZ \HDUV OLYHVWRFN V\VWHPV KDYH EHHQLGHQWLÃ&#x20AC;HGDVWKHPDLQFRQWULEXWRUWRDJULFXOWXUDO *+* HPLVVLRQV 2QH FULWLFDO DVSHFW LV WKH LQFUHDVH LQ WKH WRWDO QXPEHU RI OLYHVWRFN +RZHYHU WKH H[WHQW RI *+*V HPLWWHG GHSHQGV RQ WKH JLYHQ DJULFXOWXUDO V\VWHP7KHV\VWHPERXQGDULHVDUHNH\GHWHUPLQDQWV RI WKH UHVXOWLQJ GDWD FRQFHUQLQJ WKH *+* EDODQFH 7KHUHIRUH WUDQVSDUHQF\ UHJDUGLQJ WKHVH V\VWHP ERXQGDULHV LV D QHFHVVDU\ FRQGLWLRQ IRU FRPSDULQJ WKHUHVXOWVRIGLIIHUHQWVWXGLHV6LQFHWKHVHERXQGDULHV DUHRIWHQHLWKHUQRWFOHDUO\GHÃ&#x20AC;QHGRUVHWLQDGHTXDWHO\

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Â&#x2021; 7KH HFRQRPLHV RI VFDOH DVVRFLDWHG ZLWK WKH QRQ LQWHUQDOL]DWLRQ RI HFRORJLFDO VRFLDO KHDOWK DQG FOLPDWH FRVWV DOORZ FKHDS PDVV SURGXFWLRQ RI DQLPDOIHHGEDVHGRQPRQRFURSSLQJZLWKRXWFURS URWDWLRQ Â&#x2021; 7KH ZRUOGZLGH DYDLODELOLW\ RI LQH[SHQVLYH FRQFHQWUDWH IHHG DOORZV WKH UDPSDQW H[SDQVLRQ RI WKH QXPEHU RI DQLPDOV LQGHSHQGHQW IURP WKH ORFDOO\DYDLODEOHDQLPDOIHHGVXSSO\ Â&#x2021; 6\QWKHWLF IHUWLOL]HUV DQG SHVWLFLGHV VXEVWLWXWH IRU FURS URWDWLRQ LQFOXGLQJ WKH JUHHQ IHUWLOL]HUV DQG OHJXPHV UHTXLUHG IRU QLWURJHQ HQULFKPHQW RI WKH

)LJXUH:RUOGIHUWLOL]HUFRQVXPSWLRQ² 10 9All fertilizers (1961=31.2 Mt)

Ratio (1961=1)

876Nitrogenous fertilizers (1961=11.6 Mt) 5432-

6RXUFH 5R\DO6RFLHW\ FLWLQJ)$2)HUWLOL]HU 

2010 -

2000 -

1990 -

1980 -

1970 -

1960 -

1-


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

VRLO$VDUHVXOWWKHIDUP·VLQWHUQDOVXSSO\RIDQLPDO IHHGLVGUDVWLFDOO\UHGXFHG :LWK PRXQWLQJ QXPEHUV RI OLYHVWRFN WKH YROXPH RI DQLPDOH[FUHPHQWV IDHFHVDQGXULQH GUDVWLFDOO\VRDUV 0RVWRIWKHSURWHLQVIHGWROLYHVWRFNLQWKH(8RULJLQDWH IURPFRXQWULHVLQ6RXWK$PHULFDEXWWKHH[FUHPHQWV DUH SURGXFHG LQ (XURSHDQ FRXQWULHV $W WKH VDPH WLPH KRZHYHU H[FUHPHQWV ORVH WKHLU LPSRUWDQFH DV QDWXUDO IHUWLOL]HUV EHFDXVH RI WKH KLJK XVH RI PLQHUDO IHUWLOL]HUV RQ WKH ÀHOGV )RU GHFDGHV UHVHDUFK KDV



EHHQ IRFXVLQJ RQ KRZ WR XVH V\QWKHWLF QLWURJHQ IHUWLOL]HUVPRUHHIÀFLHQWO\'XHWRWKHFRQWDPLQDWLRQRI WKH H[FUHPHQWV ZLWK DQLPDODGPLQLVWHUHG GUXJV DQG GLVLQIHFWDQWV WKH\ SRVH D KXJH GLVSRVDO SUREOHP $V H[FUHPHQWV DUH XVHG OHVV DQG OHVV DV QDWXUDO IHUWLOL]HUVUHODWHGVNLOOVGLPLQLVKDQGUHVHDUFKRQWKLV VXEMHFWLVQRORQJHUGRQH$FRPPRQZD\RIJHWWLQJ ULG RI VOXUU\ LV WR GXPS LW RQ SDVWXUH ODQGV ² RIWHQ DVDNLQGRIZDVWHGLVSRVDO²ZKLFKJUHDWO\UHGXFHV SDVWXUHTXDOLW\

%R[.H\À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´WKHGHOLEHUDWHSURGXFWLRQ DQGUHOHDVHRI1 U >UHDFWLYHQLWURJHQ@LQWKH+DEHU%RVFKSURFHVVFDQEHFRQVLGHUHGDVSHUKDSVWKHJUHDWHVWVLQJOH H[SHULPHQWLQJOREDOJHRHQJLQHHULQJWKDWKXPDQVKDYHHYHUPDGH « :KDWZDVQRWDQWLFLSDWHGZDVWKDWWKLVH[SHUL PHQWZRXOGOHDGWRD¶QLWURJHQLQKHULWDQFH·RIXQLQWHQGHGFRQVHTXHQFHVZLWK1 U OHDNLQJLQWRWKHHQYLURQPHQWLQPXOWLSOH IRUPVFDXVLQJDQHYHQODUJHUQXPEHURIHQYLURQPHQWDOHIIHFWVµ 7KH$VVHVVPHQWIRFXVHVRQ´ÀYHNH\VRFLHWDOWKUHDWVµIURPH[FHVVQLWURJHQXVHLQWHUPVRILWVLPSDFWRQZDWHUTXDOLW\ DLUTXDOLW\JUHHQKRXVHEDODQFHHFRV\VWHPVDQGELRGLYHUVLW\7KHDXWKRUVVWDWHWKDW´WKHXQGHUVWDQGLQJRI1F\FOLQJKDV XQGHUJRQHDSDUDGLJPVKLIWVLQFH8QWLOWKHQWKHSHUFHSWLRQZDVWKDW  1 U PLQHUDOL]DWLRQLVWKHOLPLWLQJVWHS LQ1F\FOLQJ  SODQWVRQO\WDNHXSLQRUJDQLF1 U DQG  SODQWVFRPSHWHSRRUO\IRU1 U DJDLQVWPLFUREHVDQGXVH RQO\WKH1 U ZKLFKLV¶OHIWRYHU·E\PLFUREHV6LQFHWKHQVWXGLHVKDYHVKRZQWKDWSODQWVFRPSHWHHIIHFWLYHO\IRU1 U ZLWK PLFURRUJDQLVPVDQGWDNHXSRUJDQLF1LQDEURDGUDQJHRIHFRV\VWHPVµ 6XWWRQDQG%LOOHQ;;;9,, 7KHDXWKRUV DOVRSRLQWRXWWKDWWLOOWKHLPSUHVVLRQWKDWSODQWVRQO\WDNHXSLQRUJDQLF1 U GHPRQVWUDWHVKRZLQGXVWULDOL]DWLRQRI DJULFXOWXUHKDVLQÁXHQFHGUHVHDUFKDQGH[WHQVLRQVHUYLFHVLQDRQHVLGHGZD\DQGKDVHURGHGWKHLPSRUWDQFHRIUHODWHG ORFDOIDUPLQJNQRZOHGJH 7KHDXWKRUVKLJKOLJKWKRZOLWWOHWKDW´SDUDGLJPVKLIWµKDVEHHQWDNHQLQWRDFFRXQWLQDGYLVRU\DQGFRXQVHOOLQJVHUYLFHV 7KH\QRWH´,QFHUHDOIDUPLQJWKHXVHRIRQO\PLQHUDO1 U IHUWLOL]HUVLQVWHDGRIDQLPDOPDQXUHVRUFRPSRVWVDVZHOODV WKHVLPSOLÀFDWLRQRIWKHFURSURWDWLRQVFKHPHWKDWWKLVKDGPDGHSRVVLEOHKDVLQVRPHFDVHVUHVXOWHGLQDGHFOLQHRI VRLORUJDQLFPDWWHU,QWKHORQJWHUPWKLVSUDFWLFHRIXVLQJRQO\PLQHUDOIHUWLOL]HUKDVGHFUHDVHGWKHEXIIHUFDSDFLW\RIWKH VRLOWRZDUGVLQRUJDQLF1LQSXWVWKXVLQFUHDVLQJLWVSURSHQVLW\WR1OHDFKLQJµ7KH\DGGWKDW´QLWURJHQHQULFKHGWHUUHVWLDO HFRV\VWHPVORVHVLJQLÀFDQWDPRXQWVRI1YLDQLWUDWHOHDFKLQJDQGJDVHRXVHPLVVLRQV 112121+ WRWKHHQYLURQ PHQW(VWLPDWHVRIGHQLWULÀFDWLRQWR1UHPDLQKLJKO\XQFHUWDLQGXHWRGLIÀFXOWLHVLQPHDVXUHPHQWDQGDKLJKGHJUHHRI WHPSRUDODQGVSDWLDOYDULDELOLW\7KHUHUHPDLQVXEVWDQWLDOXQFHUWDLQWLHVLQWKHDYHUDJHIUDFWLRQRI1 U DSSOLHGWRÀHOGVWKDW LVHPLWWHGDV12UDQJLQJIURPWRRIIHUWLOL]HU1DSSOLHGXVLQJERWWRPXSDQGWRSGRZQHVWLPDWHVUHVSHF WLYHO\µ$QGUHJDUGLQJDPPRQLDFWKHDXWKRUVFRQFOXGH´)XUWKHUUHVHDUFKLVQHHGHGWREHWWHUXQGHUVWDQGWKHUHODWLYH FRQWULEXWLRQRIGLUHFWDQGLQGLUHFW12HPLVVLRQVµ 6XWWRQDQG%LOOHQ;;;9,,,  +RZ LQHIIHFWLYH HQIRUFHPHQW DQG LPSOHPHQWDWLRQRIH[LVWLQJQLWURJHQDQG UHODWHG(8GLUHFWLYHVDKDYHEHHQEHFRPHV DSSDUHQWLQWKHDXWKRUV·VXPPDU\´(XURSH (8 LVDKRWVSRWLQWKLVVHQVHSURGXFLQJRIJOREDODQWKURSRJHQLF 1 U HYHQWKRXJKLWVVXUIDFHFRYHUVOHVVWKDQRIWKHWRWDOZRUOGFRQWLQHQWDODUHDµ 6XWWRQDQG%LOOHQ;;;9 7KH DXWKRUVDOVRFULWLFL]HWKHORZSURFXUHPHQWFRVWV´  WKHORZSULFHRI1 U IHUWLOLVHUFRPELQHGZLWKLWVFOHDUEHQHÀWVWR DJULFXOWXUDOSURGXFWLRQGRHVQRWSURYLGHDVWURQJLQFHQWLYHIRUIDUPHUVWRXVHOHVVWKDQWKH SULYDWH HFRQRPLFRSWLPXPµ 6XWWRQDQG%LOOHQ;;;9,  6RXUFH 6XWWRQHWDO  1RWH D )RU LQVWDQFH 1LWUDWHV 'LUHFWLYH :DWHU )UDPHZRUN 'LUHFWLYH *URXQGZDWHU 'LUHFWLYH $PELHQW $LU 4XDOLW\ 'LUHFWLYH 1DWLRQDO (PLVVLRQV &HLOLQJV 'LUHFWLYH 8UEDQ :DVWH :DWHU 7UHDWPHQW 'LUHFWLYH 0DULQH 6WUDWHJ\ )UDPHZRUN'LUHFWLYH,QWHJUDWHG3ROOXWLRQDQG&RQWURO ,33& DQG+DELWDWV'LUHFWLYH




75$'($1'(19,5210(175(9,(:

7KURXJK HFRQRPLHV RI VFDOH IDUPV ZKHUH OLYHVWRFN SURGXFWLRQLVVWLOOEDVHGRQIDUPJHQHUDWHGIHHGFRPH XQGHULQFUHDVLQJHFRQRPLFSUHVVXUH,QGXVWULDOPHJD IDUPVRUIDUPVWKDWDUHPXFKODUJHUWKDQWKHUHJLRQDO DYHUDJHGULYHWKLVWUHQG VHHDOVRWKHFRPPHQWDU\RI 2VWHQGRUIILQWKLVFKDSWHU 

%6XVWDLQDELOLW\UHTXLUHVDQHZGHÃ&#x20AC;QLWLRQ RIWKHWHUPVSURGXFWLYLW\DQGJURZWK 7KH FRQYHQWLRQDO DSSURDFK WR DJULFXOWXUDO JURZWK DLPVDWLQFUHDVLQJFURS\LHOGVSHUKHFWDUHWDNLQJLQWR DFFRXQWWKHFRVWVRISURFXUHGLQSXWVVXFKDVHQHUJ\ IHUWLOL]HUSHVWLFLGHVDQGODERXU7KLVFDOFXODWLRQIDLOVWR FRQVLGHUQRWRQO\WKHH[WHUQDOL]HGFRVWV GDPDJHWR VRLO ZDWHU ERGLHV DQG DLU SROOXWLRQ WKURXJK UHVLGXHV DQGFRQWDPLQDWLRQDVZHOODVWKHVRFLDOLPSOLFDWLRQV  EXWDOVRWKHGHFOLQHLQVRLOIHUWLOLW\WKURXJKVRLOHURVLRQ FRPSDFWLRQDQGQLWULÃ&#x20AC;FDWLRQ²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

QRW WDNHQ LQWR DFFRXQW DQG UHODWHG FRVWV UHPDLQ H[WHUQDOL]HG $FFRUGLQJ WR WKH (XURSHDQ 1LWURJHQ $VVHVVPHQW 6XWWRQ HW DO   WKH WRWDO FRVWV RI QLWURJHQSROOXWLRQRIZDWHUWKHDWPRVSKHUHDQGRWKHU LPSDFWV RQ HFRV\VWHPV DQG FOLPDWH FKDQJH DUH HVWLPDWHGWREHEHWZHHQÄ&#x201E;ELOOLRQDQGÄ&#x201E;ELOOLRQ SHUDQQXP LHÄ&#x201E;²Ä&#x201E;SHUSHUVRQSHU\HDU ZKLFK LVPRUHWKDQWZLFHWKHPRQHWDU\EHQHÃ&#x20AC;WVGHULYHGIURP QLWURJHQLQDJULFXOWXUH %HWZHHQDQGWKHQXPEHURIDQLPDOVUHDUHG IRU PHDW DQG GDLU\ SURGXFWLRQ LQFUHDVHG UDSLGO\ $FFRUGLQJWRWKH)$2 )$267$7 LQDWRWDO DPRXQWRIELOOLRQKHDGVRIFDWWOHDQGEXIIDORZHUH UHDUHGJOREDOO\²WKHQXPEHUGRXEOHGGXULQJWKHODVW \HDUV'XULQJWKHVDPHSHULRGWKHQXPEHURISLJV PRUH WKDQ GRXEOHG IURP  PLOOLRQ WR  PLOOLRQ 7KHQXPEHURIFKLFNHQVJUHZWKHPRVWGUDPDWLFDOO\ DOPRVW Ã&#x20AC;YHIROG IURP  ELOOLRQ WR  ELOOLRQ 6LQFH QRW RQO\ WKH QXPEHU RI DQLPDOV LQFUHDVHG EXW DOVR WKHDYHUDJHZHLJKWSHUDQLPDOPHDWSURGXFWLRQURVH DW DQ HYHQ IDVWHU UDWH EHHI SURGXFWLRQ PRUH WKDQ GRXEOHGWRELOOLRQWRQVLQSRUNSURGXFWLRQ TXDGUXSOHG WR  ELOOLRQ WRQV DQG FKLFNHQ PHDW SURGXFWLRQLQFUHDVHGWHQIROGWRELOOLRQWRQV7KLV UDSLGH[SDQVLRQRIJOREDOPHDWSURGXFWLRQZDVRQO\ SRVVLEOH EHFDXVH WKH IHHG VXSSO\ IRU WKH DQLPDOV LQFUHDVHG DW D VLPLODUO\ GUDPDWLF UDWH 7KH (8 LV D SULPHH[DPSOHLQWKLVUHVSHFW,WVLPSRUWVRIVR\EHDQ FDNH ² D FUXFLDO VRXUFH RI SURWHLQ LQ LQWHQVLYH DQG LQGXVWULDO DQLPDO SURGXFWLRQ ² URVH WHQIROG EHWZHHQ DQGDQGQRZVWDQGVDWDOPRVWELOOLRQ WRQVSHU\HDU Ã&#x20AC;JXUH 7KHIRFXVRQFDNHLVEHFDXVH

)LJXUH(8LPSRUWVRIVR\EHDQFDNHDQGVR\EHDQV²WR² PLOOLRQVRIWRQV

40 000-

Soybeans (cake weight)

30 00020 000Cake of soy

6RXUFH$XWKRUV·FDOFXODWLRQVEDVHGRQ)$267$7

2006-2008 -

2001-2005 -

1996-2000 -

1991-1995 -

1986-1990 -

1981-1985 -

1976-1980 -

1961-1965 -

0-

1971-1975 -

10 0001966-1970 -

Millions of tons

50 000-




/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

)LJXUH$UHDXQGHUVR\FXOWLYDWLRQVHOHFWHGFRXQWULHV² PLOOLRQVRIKHFWDUHV



0LOOLRQVRIKHFWDUHV

 86$ % UD]LO $ UJHQWLQD ,QGLD & KLQD 3 DUDJXD\ & DQDGD

      















6RXUFH$XWKRUV·FDOFXODWLRQVEDVHGRQ)$267$7

RQO\WKLVLVXVHGDVDQLPDOIHHGZKLOHVR\EHDQRLOLV XVHG IRU KXPDQ FRQVXPSWLRQ LQGXVWULDO DQG HQHUJ\ XVH

&7KHUROHRIDJULFXOWXUDODQGWUDGH SROLF\LQWKHLQGXVWULDOL]DWLRQRIDQLPDO SURGXFWLRQ $Q LPSRUWDQW GULYHU RI WKLV GHYHORSPHQW KDV EHHQ WKH (8·V &RPPRQ $JULFXOWXUDO 3ROLF\ &$3  DQG LWV OLQN WR WUDGH SROLF\ 8QWLO WKH HDUO\ V WKH (8 JXDUDQWHHGSULFHVIRUOLYHVWRFNSURGXFWV²HVSHFLDOO\ EHHI DQG GDLU\ SURGXFWV ² WKDW ZHUH VLJQLÀFDQWO\ KLJKHU WKDQ ZRUOG PDUNHW SULFHV 7KLV SURYLGHG DQ HIIHFWLYH LQFHQWLYH IRU (XURSHDQ IDUPHUV WR LQFUHDVH SURGXFWLRQ $W WKH VDPH WLPH WKH &$3 LQWHUYHQHG LQ WKH PDUNHWV IRU IHHGVWRFN :KLOH KLJK SULFHV IRU FHUHDOV LQ WKH (8 ZHUH DOVR JXDUDQWHHG WKHUH ZDV QRVXSSRUWIRURLOVHHGVDQGWKHLUSURGXFWV²RLOVDQG FDNHV 7KLV VLWXDWLRQ LV DOVR UHÁHFWHG LQ WKH (8·V DJULFXOWXUDOWUDGHSROLF\ZKLOHOLYHVWRFNSURGXFWVDQG FHUHDOVZHUHDQGJHQHUDOO\VWLOODUHSURWHFWHGE\KLJK WDULIIVRLOVHHGVDQGWKHLUSURGXFWVKDYHH[SHULHQFHG QR RU RQO\ YHU\ ORZ WDULIIV 7KHVH WDULIIV ZHUH À[HG PXOWLODWHUDOO\LQWKH*HQHUDO$JUHHPHQWRQ7DULIIVDQG 7UDGH *$77  WKH SUHGHFHVVRU RI WKH :RUOG 7UDGH 2UJDQL]DWLRQ :72  ,Q WKH V WKH (8 DWWHPSWHG UHODWLYHO\ VXFFHVVIXOO\WRVXSSRUWRLOVHHGSURGXFWLRQZLWKRWKHU SROLF\ LQVWUXPHQWV VXFK DV SURGXFWLRQ SUHPLXPV +RZHYHUWKHVHZHUHIRXQGWRUXQFRXQWHUWRLWV*$77 FRPPLWPHQWV :LWK WKH VKLIW IURP SULFH VXSSRUW WR

SD\PHQWV EDVHG RQ WKH DUHD SODQWHG ZLWK FHUWDLQ FURSV VRPH VXSSRUW IRU RLOVHHG SURGXFWLRQ FRXOG EHSURYLGHG+RZHYHUWKH%ODLU+RXVH$JUHHPHQWD ELODWHUDODJUHHPHQWEHWZHHQWKH(XURSHDQ&RPPXQLW\ DQG WKH 8QLWHG 6WDWHV ZKLFK SDYHG WKH ZD\ IRU WKH :72 $JUHHPHQW RQ $JULFXOWXUH SODFHG D OLPLW RQ WKH DUHD SODQWHG ZLWK RLOVHHGV LQ WKH (8 WKDW FRXOG EHQHÀWIURPSD\PHQWV$VDUHVXOWWKH(8·VLPSRUWV RIVR\EHDQVDQGVR\EHDQFDNHZKLFKKDGUHPDLQHG DW URXJKO\ D FRQVWDQW OHYHO LQ WKH V VWDUWHG WR LQFUHDVH LQ WKH V 7KH %6( FULVLV LQ ² JDYHDQDGGLWLRQDOERRVWWR(8VR\LPSRUWV,QWKHVH \HDUV DORQH WKH (8·V VR\ LPSRUWV MXPSHG IURP  PLOOLRQ WRQV WR  PLOOLRQ WRQV )$267$7 DQG DXWKRUV·FDOFXODWLRQV  7KH (8·V ULVLQJ LPSRUW GHPDQG ZDV PDLQO\ PHW E\ 6RXWK$PHULFDHVSHFLDOO\$UJHQWLQDDQG%UD]LOZKHUH WKHDUHDSODQWHGZLWKVR\URVHIURPMXVWRYHUPLOOLRQ KD LQ ERWK FRXQWULHV FRPELQHG  LQ  WR RYHU  PLOOLRQKDLQ ÀJXUH 7KLVWULJJHUHGWKHPDVVLYH GHIRUHVWDWLRQ RI WKH WURSLFDO UDLQIRUHVWV LQ %UD]LO DQG WKH FRQYHUVLRQ RI JUDVVODQGV FHUUDGR LQ %UD]LO DQG SDPSDVLQ$UJHQWLQD WRFURSODQG ,W LV HVWLPDWHG WKDW WKH ODQGXVH FKDQJHV GLUHFWO\ UHODWHGWRWKHH[SDQGHGVR\SURGXFWLRQLQ$UJHQWLQD %UD]LO DQG 3DUDJXD\ ZHUH UHVSRQVLEOH IRU RQ DYHUDJH RYHU  PLOOLRQ WRQV RI &2HTXLYDOHQW &2H HPLVVLRQVDQQXDOO\EHWZHHQDQG 5HLFKHUW DQG 5HLFKDUGW   7KLV DPRXQWV WR DERXW  SHU FHQW RI WKH WRWDO *+* HPLVVLRQV RI WKHVHFRXQWULHV




7KHUDSLGH[SDQVLRQRIIHHGLQSDUWLFXODUHQDEOHGWKH (8 QRW RQO\ WR PHHW LWV ULVLQJ GHPDQG IRU PHDW DQG GDLU\SURGXFWVEXWDOVRWREHFRPHDQHWH[SRUWHURI EHHIGDLU\SURGXFWVDQGSRUN6LQFHWKHJXDUDQWHHG GRPHVWLF SULFHV ZHUH XVXDOO\ VLJQLÀFDQWO\ KLJKHU WKDQZRUOGPDUNHWSULFHVH[SRUWVZHUHRQO\SRVVLEOH WKURXJK ´UHIXQGVµ IRU H[SRUWHUV ZKLFK FRYHUHG WKH GLIIHUHQFH EHWZHHQ WKH LQWHUQDO DQG H[WHUQDO SULFHV 7KHVH ´H[SRUW VXEVLGLHVµ WXUQHG RXW WR EH D PDMRU LVVXHRIFRQÁLFWLQLQWHUQDWLRQDOWUDGH7KHVLJQLÀ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ÀF DUHDSD\PHQWVWRIDUPHUV2QHFRQGLWLRQIRUUHFHLYLQJ WKRVH SD\PHQWV ZDV WKDW D FHUWDLQ SURSRUWLRQ RI DUDEOH ODQG ZRXOG KDYH WR EH NHSW LGOH ² WKH PRVW GLUHFWLQVWUXPHQWIRUDGGUHVVLQJWKH´RYHUSURGXFWLRQµ SUREOHP 7KH DPRXQW RI ODQG WR EH ´VHW DVLGHµ ZDV À[HG E\ WKH (8 RQ DQ DQQXDO EDVLV GHSHQGLQJ RQ PDUNHWFRQGLWLRQV2QDYHUDJHLWZDVDURXQGSHU FHQW RI WKH FURSODQG $V D UHVXOW H[SRUWV RI FHUHDOV DQG EHHI IHOO VLJQLÀFDQWO\ DQG ZKLOH WKH (8 UHPDLQV D QHW H[SRUWHU RI ZKHDW LW LV QRZ D QHW LPSRUWHU RI EHHI DQG VXJDU $W WKH VDPH WLPH QHW H[SRUWV RI SRUN PRUH WKDQ GRXEOHG IURP DURXQG  WRQV DQQXDOO\LQWKHODWHVWRDURXQGRQHPLOOLRQWRQV DQQXDOO\ LQ UHFHQW \HDUV 7KH À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

75$'($1'(19,5210(175(9,(:

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ÁHFWHGLQWKHGHFUHDVHLQZLOG EHHV LQPDQ\DUHDVVXIÀFLHQWSROOLQDWRUVDUHODFNLQJ  EXWWHUÁLHV DQG KHGJHV IRU H[DPSOH 7KH ORVV RI EUHHGVDQGWKHORZUHJXODUXWLOL]DWLRQRIWKHUHPDLQLQJ RQHVOHDGWRWKHORVVRIWUDGLWLRQDONQRZOHGJH 7KH PDQ\ \HDUV RI 6WDWH VXSSRUW IRU SHUIRUPDQFH WHVWLQJ DQG HVWLPDWLRQ RI EUHHGLQJ YDOXHV DLPHG XQLTXHO\ DW DFKLHYLQJ PRUH ÀQDQFLDO  \LHOG SHU XQLW UDQFRQWUDU\WRWKHJRDOVUHODWLQJWR´JHQHWLFGLYHUVLW\µ DVHPERGLHGLQWKH&RQYHQWLRQRQ%LRORJLFDO'LYHUVLW\ &%'  ,2H:HWDO 7KH&%'LVEDVHGXSRQWKUHH SLOODUV WKDW UHSUHVHQW WKH DLPV RI LQWHUQDWLRQDO SROLF\ LQ IXWXUH GHYHORSPHQW L  FRQVHUYDWLRQ RI ELRORJLFDO GLYHUVLW\ LL  IDLU DQG HTXLWDEOH DFFHVV DQG EHQHÀW VKDULQJRIELRORJLFDOGLYHUVLW\DQG LLL WKHVXVWDLQDEOH XVH RI DQLPDO DQG SODQW JHQHWLF UHVRXUFHV DQG WKHLU KDELWDWV$VZLOGOLIHDQGZLOGSODQWVQHHGWKHLUVSHFLÀF HQYLURQPHQWVKDELWDWV SODQWV DQG OLYHVWRFN EUHHGV QHHGD´FXOWXUHGKDELWDWµRIZKLFKWKH\DUHDSDUWDQG WKXV LQÁXHQFH DQG DUH LQÁXHQFHG E\ WKDW KDELWDW ,I WKH JHQHWLF UHVRXUFHV RI DQLPDOV DQG SODQWV DUH QRW XVHGWKH\GLVDSSHDUDVSDUWRIWKHZKROHV\VWHPDQG


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

FDQ QR ORQJHU SOD\ WKHLU SDUW LQ WKHLU V\VWHP $JUR ELRGLYHUVLW\VKRXOGEHXVHGLQDZD\WKDWGHYHORSVLW IXUWKHUUDWKHUWKDQEHLQJ´XQGHUXWLOL]HGµDVDWSUHVHQW DQGWKHUHIRUHULVNLQJGLVDSSHDUDQFH

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ÀYHZHHNVRILQWHQVLYH UDLVLQJ \RXQJ SLJV OHVV WKDQ VL[ PRQWKV ROG DUH VODXJKWHUHGZKHQWKH\UHDFKDERXWNJDQGVRPH FRZVDUHEUHGWRPD[LPL]HPLONSURGXFWLRQGHOLYHULQJ RYHU  OLWUHV GXULQJ RQH ODFWDWLRQ SHULRG DORQH PRVWRIWKHPGRQRWJHWROGHUWKDQÀYH\HDUVEHFDXVH RIWKHVHH[FHVVLYHSHUIRUPDQFHUHTXLUHPHQWV 0DQ\ RIWKHVHDQLPDOVVXIIHUIURP´RFFXSDWLRQDOµGLVHDVHV VXFK DV LQÁDPPDWLRQ RI WKH IDOORSLDQ WXEHV LQ KHQV XGGHU LQÁDPPDWLRQ RI FRZV RU SUREOHPV ZLWK MRLQWV LQSLJVKHQVDQGFDWWOHFDXVHGE\H[FHVVLYHO\UDSLG ZHLJKW JDLQ VHH DOVR WKH FRPPHQWDU\ RQ DQLPDO ZHOIDUHLVVXHVRI'·6LOYDLQWKLVFKDSWHU  7KH WHQHW WKDW ´SHUIRUPDQFH LV DQ H[SUHVVLRQ RI JRRGKHDOWKµLVQRORQJHUYDOLG,QGHHGIRUFLQJWKHLU HQKDQFHG SHUIRUPDQFH FDXVHV DQLPDO VWUHVV DQG ´EXUQRXWµ LQSRXOWU\SLJVDQGFDWWOHIRUPDVW UHVXOWLQJ LQDVKRUWOLIHVSDQ GDLU\ DQGUHTXLULQJWKHIUHTXHQW DGPLQLVWHULQJ RI GUXJV VXFK DV DQWLELRWLFV DQG DQDOJHVLFV ,Q DGGLWLRQ KRUPRQHV DUH EHLQJ ZLGHO\ XVHGWRRYHUFRPHIHUWLOLW\SUREOHPVRIFRZVWKDWDUH



EUHG IRU PD[LPL]LQJ PLON SURGXFWLRQ *HQHUDOO\ KLJK H[WHUQDO LQSXW V\VWHPV DLP DW PLQLPL]LQJ WKH HQHUJ\ ORVVHVRIDQLPDOERGLHVFDXVHGE\SK\VLFDOPRYHPHQW DQGDGDSWDWLRQWRFKDQJHVLQWHPSHUDWXUHDQGIHHG 7KLV RVWHQVLEO\ UHGXFHV WKH HQHUJ\ FRQVXPSWLRQ RI ERG\ IXQFWLRQV DQG PD[LPL]HV WKH SURGXFWLRQ RI DQLPDO SURGXFWV 7KHVH FRQVLVWHQWO\ UHVWULFWLYH FRQGLWLRQV DUH D PDMRU IDFWRU WKDW FRQWULEXWHV WR WKH EUHHGLQJ RI XQLIRUP DQLPDOV DQG WKHLU VHOHFWLRQ IRU KLJKSHUIRUPDQFH $VDUHVXOWWKHÁH[LEOHDGDSWLYHFDSDFLW\RIDQLPDOV WR FKDQJLQJ DQG GLYHUJHQW SURGXFWLRQ FRQGLWLRQV KDV EHHQ UHSODFHG E\ LQÁH[LEOH VWDWLF DQG ORFDWLRQ VSHFLÀF EHKDYLRXU $Q H[WUHPH H[DPSOH LV WKH XVH RI VWDQGDUGL]HG FDJHV IRU K\EULG KHQV ZKHWKHU LQ &DOLIRUQLD +RQJ .RQJ 1RUZD\ RU 2PDQ 7KH OLJKW DQG WHPSHUDWXUH LQ WKH VKHGV ZKHUH WKH FDJHV DUH NHSW DORQJ ZLWK WKH FRQFHQWUDWHG IHHG DQG OLPLWHG SK\VLFDO PRYHPHQW DUH DOO GHVLJQHG WR HQVXUH PD[LPXP DQG VWDQGDUGL]HG HJJ SURGXFWLRQ *HQHUDOO\ WKH DGDSWDWLRQ LV DFKLHYHG DW WKH FRVW RI DGDSWLYH FDSDFLW\ WKH DQLPDOV KDYH IHZ UHVHUYHV WR UHVSRQG WR FKDQJLQJ HQYLURQPHQWDO FRQGLWLRQV VXFK DV YDULDWLRQV LQ WHPSHUDWXUH IHHG RU VWUHVV IURP WUDQVSRUW 'HVSLWH WKLV EHLQJ FRPPRQ NQRZOHGJH WKLVVWUHVVIURPEUHHGLQJLVGHDOWZLWKQRWE\FKDQJHV LQ EUHHGLQJ SUDFWLFHV LQFOXGLQJ EUHHGLQJ JRDOV EXW RQO\ E\ FKDQJLQJ WKH UDLVLQJ PHWKRGV FKLFNHQV· EHDNVDQGSLJV·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




FDOYHVRIEUHHGVWKDWDUHVHOHFWHGIRUPD[LPL]LQJPLON SHUIRUPDQFH DUH NLOOHG ² VRPH  HDFK \HDU :HHNV  ,JQRULQJ WKH DQLPDO KHDOWK DQG ZHOIDUH LVVXHV DVVRFLDWHGZLWKWKLVGHYHORSPHQWJHQHWLFHQJLQHHULQJ KDV EHHQ XVHG IRU GHFDGHV WR PD[LPL]H DQLPDO SHUIRUPDQFH $QG LQ VSLWH RI H[WHQVLYH SXEOLF DQG SULYDWH UHVHDUFK RQ JHQHWLF PDQLSXODWLRQ RYHU WKH SDVW  \HDUV XQWLO WRGD\ QR WUDQVJHQLF DQLPDOV DUH XVHG IRU FRPPHUFLDO DJULFXOWXUH SXUSRVHV RZLQJ WR VLJQLÃ&#x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´'ROO\PHWKRGµ$FFRUGLQJWRWKH(XURSHDQ)RRG 6DIHW\$XWKRULW\ ()6$ ´ 7 KHRYHUDOOVXFFHVV UDWH RI WKH FORQLQJ SURFHGXUH LV VWLOO ORZ DQG GLIIHUV JUHDWO\ EHWZHHQ VSHFLHV 7KH RYHUDOO VXFFHVV UDWH H[SUHVVHGDVWKHSHUFHQWDJHRIYLDEOHRIIVSULQJERUQ IURPWUDQVIHUUHGHPEU\RFORQHVUDQJHVDSSUR[LPDWHO\ IURP  WR   GHSHQGLQJ RQ WKH VSHFLHVµ 2I WKH VXUYLYLQJ FORQHG DQLPDOV ´'ROO\µ UHPDLQHG D XQLTXH VSHFLPHQ7KHKRSHWKDWZKROHVWDEOHVFRXOGEHÃ&#x20AC;OOHG ZLWK DQLPDOV FORQHG IURP RQH LQGLYLGXDO LQ RUGHU WR DFKLHYHDQLGHQWLFDOIDWWHQLQJUHVXOWZLWKDVWDQGDUGDQG HFRQRPLFDOIHHGLQJDQGWUHDWPHQWUHJLPH²DKRSHRI XQOLPLWHG PDVV LQGXVWULDO SURGXFWLRQ ²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Ã&#x20AC;QGLQJVFRQÃ&#x20AC;UPWKDWDOPRVWDOODQLPDOVUDLVHGIRU SRXOWU\PHDW VRPHELOOLRQZRUOGZLGH DUHEDVHGRQ RQO\WKUHHUDFHVDQG KHQVUDLVHGIRU PD[LPXPHJJ SURGXFWLRQVWHPIURPRQO\RQHUDFH

75$'($1'(19,5210(175(9,(:

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² DOVR FDOOHG ELRVHFXULW\²LVDIDOODF\,WPD\ZRUNLQVRPHLQGLYLGXDO FDVHV EXW LW LQFUHDVHV WKH LQKHUHQW ULVNV DQG PD\ FRPSRXQGIXWXUHSUREOHPV,QSDUWLFXODUWKHUHJXODU DQGH[WHQVLYHXVHRIDQWLELRWLFVDQGGLVLQIHFWDQWVIRU KXPDQ DQG DQLPDO KHDOWK XQDYRLGDEO\ OHDGV WR WKH HPHUJHQFHRISDWKRJHQVZLWKKLJKHUUHVLVWDQFHDQG LQIHFWLRQSRWHQWLDO %\ ZD\ RI LOOXVWUDWLRQ WKH EDFWHULXP 3VHXGRPRQDV DHUXJLQRVD ZKLFK LV UHVLVWDQW WR PDQ\ DQWLELRWLFV FDQ VXUYLYH GLVLQIHFWDQWV DQG HYHQ WKULYHV RQ K\JLHQH SURGXFWV 6XFK H[WUHPHV KDYH EHHQ NQRZQ IRU GHFDGHV DV ´KRVSLWDO JHUPVµ EHFDXVH WKH\ KDYH PXVKURRPHG LQ KRVSLWDOV 7KH SULQFLSOH LV WKH VDPH WKH XQLQWHQWLRQDO VHOHFWLRQ RI PRUH DQG PRUH GDQJHURXV JHUPV 7KH PRUH UHVLVWDQW D JHUP DOUHDG\LVWRWUHDWPHQWZLWKDQWLELRWLFVWKHJUHDWHUWKH OLNHOLKRRGWKDWLWZLOOVXUYLYHWKHQH[WZDYHRIWUHDWPHQW ZLWKDQWLELRWLFVDQGGLVLQIHFWDQWV $JDLQVW WKLV EDFNJURXQG ´ELRVHFXULW\µ WKURXJK UHSHDWHG XVH RI QHZ DQWLELRWLFV DQG GLVLQIHFWDQWV LV QRW RQO\ QR VROXWLRQ EXW LQ WKH ORQJ WHUP LW LV DOVR KLJKO\ ULVN\ +XPDQV DQG DQLPDOV QHHG WKH FRQWDFW ZLWK PLFURRUJDQLVPV IRU VWUHQJWKHQLQJ WKHLU LPPXQH V\VWHP LQ SDUWLFXODU DW WKH MXYHQLOH VWDJH 7KXV RVWHQVLEOH ´ELRVHFXULW\µ LQ LQWHQVLYH OLYHVWRFN SURGXFWLRQ LV D SUREOHP LQ WKDW LW KDPSHUV WKHGHYHORSPHQWRIDKHDOWK\LPPXQHV\VWHPDQGLW VWUHQJWKHQVWKHUHVLVWDQFHRIJHUPVDQGSDWKRJHQV PDNLQJ LW LQFUHDVLQJO\ GLIÃ&#x20AC;FXOW IRU WKH FKHPLFDO DQG SKDUPDFHXWLFDOLQGXVWU\WRFRQWDLQWKRVHJHUPVDQG SDWKRJHQV 7KH HYROXWLRQDU\ G\QDPLFV RI JHUPV DOORZV WKHP WR TXLFNO\  DGMXVW WR QHZ DQWLELRWLFV RU


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW



%R[5HDVRQVIRUWKHLQVXIÃ&#x20AC;FLHQWSHUFHSWLRQRIWKHSRWHQWLDORIVXVWDLQDEOHDJULFXOWXUHWRFRQWULEXWHWRIRRGVHFXULW\ DQGVXVWDLQDEOHUXUDOGHYHORSPHQW Â&#x2021; 7KHGHVWUXFWLRQZDVWHDQGFRQWDPLQDWLRQRIUHVRXUFHVDVVRFLDWHGZLWKWKHLQGXVWULDOL]DWLRQRIDJULFXOWXUHKDYHFUH DWHGDPLVFRQFHSWLRQWKDWDJULFXOWXUHDOZD\VDQGJHQHUDOO\SRVHVDSUREOHP7KXVLWSURYHVWREHH[WUHPHO\GLIÃ&#x20AC;FXOW WRSHUFHLYHWKHSRWHQWLDOIRUVXVWDLQDEOHDJULFXOWXUDOGHYHORSPHQWLQJUDVVODQGOLYHVWRFNDQGFURSODQGPDQDJHPHQW Â&#x2021; )RUGHFDGHVPRUHDQGPRUHLQWHQVLÃ&#x20AC;HGDJULFXOWXUDOSUDFWLFHVKDYHGDPDJHGWKHHQYLURQPHQW7KXVRQHRIWKHPDLQ REMHFWLYHVRIQDWXUHSURWHFWLRQKDVEHHQVHHQDVWDNLQJODQGDZD\IURPDQ\NLQGRIDJULFXOWXUDOSURGXFWLRQ7KLVKDV LQGLUHFWO\DQGXQZLWWLQJO\OHGWRPRUH´FROODWHUDOGDPDJHµE\FUHDWLQJJUHDWHUSUHVVXUHIRUIXUWKHULQWHQVLI\LQJSURGXF WLRQRQWKHUHPDLQLQJDJULFXOWXUDOODQG,WKDVEHHQEDVHGRQWKHSHUFHSWLRQWKDWWKHPRUHLQWHQVLYHO\H[LVWLQJODQGLV XVHGWKHJUHDWHUZLOOEHWKHDYDLODEOHDUHDIRUQDWXUHFRQVHUYDWLRQ,WRYHUORRNVWKHIDFWWKDWLWLVLQGXVWULDODJULFXOWXUH WKDWKDVH[HUWHGSUHVVXUHRQUHVRXUFHVDQGODQGXVHDQGOHGWRZLGHVSUHDGFRQWDPLQDWLRQRIODQGLQJHQHUDO Â&#x2021; 7KHDYDLODELOLW\RIDPSOHUHODWLYHO\LQH[SHQVLYHHQHUJ\DQGV\QWKHWLFIHUWLOL]HUVKDVGLVWUDFWHGDWWHQWLRQIURPWKHLP SRUWDQFHRIVRLOIHUWLOLW\DVWKHPRVWEDVLFDQGSUHFLRXVUHVRXUFHRIDJULFXOWXUHDQGLWVORVVWKURXJKHURVLRQ5HODWHG WRWKDWWKHSRWHQWLDORIVXVWDLQDEOHJUDVVODQGPDQDJHPHQWDQGSDVWRUDOLVPIRUJOREDOIRRGVHFXULW\VRLODQGFOLPDWH SURWHFWLRQ KDV EHHQ DQG VWLOO LV XQGHUHVWLPDWHG DQG WKHUHIRUH WKH ORQJWHUP GDQJHUV RI FRQYHUWLQJ SHUPDQHQW JUDVVODQGWRRWKHUXVHVDUHRYHUORRNHG Â&#x2021; 7KHLQKHUHQWJURZWKDQGSURGXFWLYLW\SUHVVXUHRILQGXVWULDODJULFXOWXUHKDVGHYDVWDWLQJLPSDFWVRQRXUHQYLURQPHQW DQGZHOOEHLQJDQGWKXVYLRODWHVWKHWKLUGSLOODURIWKH&%' LHWKHVXVWDLQDEOHXVHRIDQLPDODQGSODQWJHQHWLFUH VRXUFHVDQGWKHLUKDELWDWV  Â&#x2021; $Q\DWWHPSWDWPD[LPL]LQJVLQJOHFURS\LHOGVLVLUUHFRQFLODEOHZLWKWKHRSWLPL]DWLRQRIHFRORJLFDOVHUYLFHV<HWSXEOLF DQGSULYDWHVXSSRUWWRVHHGVFXOWLYDWLRQSODQWSURWHFWLRQDQGIHUWLOL]DWLRQIRFXVHQWLUHO\RQVXFKD\LHOGPD[LPL]LQJ VWUDWHJ\&RQYHUVHO\WKHPHDQVIRUH[SORULQJDQGVWXG\LQJWKHHFRV\VWHPLFSRWHQWLDORIDJULFXOWXUHDQGVSHFLÃ&#x20AC;FSUR GXFWLRQV\VWHPVRUPHWKRGVLQGLIIHUHQWODQGVFDSHVKDYHEHHQZRHIXOO\LQDGHTXDWH Â&#x2021; 7KHHFRQRPLFLQWHUHVWVRIGLIIHUHQWHFRQRPLFDFWRUVWKDWGHULYHVLJQLÃ&#x20AC;FDQWSURÃ&#x20AC;WVIURPWKHLQGXVWULDOL]DWLRQRIDJUL FXOWXUHLQFOXGLQJWKHXVHRIFKHPLFDOLQSXWVDUHRQHRIWKHPDLQUHDVRQVIRUWKHODFNRILPSOHPHQWDWLRQRIWKHNH\ UHFRPPHQGDWLRQV RI WKH ,QWHUQDWLRQDO $VVHVVPHQW RI $JULFXOWXUDO .QRZOHGJH 6FLHQFH DQG 7HFKQRORJ\ ,$$67'  QDPHO\WKHSUHYHQWLRQRIVRFLDOHQYLURQPHQWDODQGFOLPDWHGDPDJHLQWHUQDOL]DWLRQRIHQYLURQPHQWDOH[WHUQDOLWLHV DQGDQDO\VLVDQGIXUWKHUGHYHORSPHQWRIWKHPXOWLIXQFWLRQDOLW\RIHFRV\VWHPV 0F,QW\UHHWDO 

DQWLYLUDOGUXJV7KLVRIWHQKDSSHQVPXFKIDVWHUWKDQ WKHWLPHUHTXLUHGE\UHVHDUFKWHDPVWRGHYHORSQHZ DQGHIIHFWLYHPHGLFLQHV 7KHUH VKRXOG QHYHU KDYH EHHQ D FRPSHWLWLYH UDFH EHWZHHQ FKHPLFDO WUHDWPHQWV DQG PLFURRUJDQLVPV DV WKH ODWWHU KDYH HYROYHG RYHU D SHULRG RI DERXW  ELOOLRQ \HDUV 2QO\ H[FHSWLRQDOO\ DJJUHVVLYH DQG UHVLVWDQWFDVHVDUHSHUFHLYHGE\WKHJHQHUDOSXEOLFDV DUHDOGDQJHUEXWHYHQWKRVHFDVHVKDYHEHFRPHPRUH IUHTXHQWRYHUWLPH(YHQVRWKHJHQHUDOWHQGHQF\DQG WKHIDWDOO\ODWHQWGDQJHUDUHEHLQJLJQRUHG

)'HIRUHVWDWLRQDQGDQLPDOIHHG SURGXFWLRQ %R[  OLVWV VRPH H[SODQDWRU\ IDFWRUV IRU WKH ODFN RI DZDUHQHVV RI WKH SRWHQWLDO RI VXVWDLQDEOH JUDVVODQG PDQDJHPHQWZLWKUXPLQDQWVIRUDFKLHYLQJIRRGVHFXUL W\DQGVXVWDLQDEOHGHYHORSPHQW7KHUHLVDZLGHVSUHDG EHOLHIWKDWUDLQIRUHVWVDUHEHLQJGHVWUR\HGRQO\WREH

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·VDZDUHQHVVRIWKH HFRORJLFDO DQG VRFLDO FRQVHTXHQFHV RI DQLPDO IHHG SURGXFWLRQRQIRUPHUIRUHVWDQGSDVWXUHODQG 7KURXJKWKHSUHVVLQJRIVR\DERXWSHUFHQWRIRLO FDQEHJHQHUDWHGLQYROXPHWHUPVDQGSHUFHQWLV OHIW RYHU DV FDNH EUXLVHG JUDLQ  )XWXUH GLVFXVVLRQV RQ VR\ FXOWLYDWLRQ VKRXOG LQFOXGH DQ XQGHUVWDQGLQJ RI WKLV FRPPHUFLDOO\ DWWUDFWLYH GXDO FKDUDFWHU RI VR\EHDQVUHODWLYHWRRWKHUOHJXPLQRXVFURSVVXFKDV




UDSH VHHGV $SDUW IURP DWWUDFWLYH SULFHV LQ GLIIHUHQW PDUNHWVLWLVDOVROLNHO\WKDWGHPDQGLQWKHWKUHHPDUNHW VHJPHQWV²VR\FDNHIRUDQLPDOIHHGDQGVR\RLOIRU YHJHWDEOHRLODQGELRGLHVHO²ZLOOLQFUHDVHIXUWKHUDQG WKXV SURYLGH SURGXFHUV DQG PLOOLQJ FRPSDQLHV ZLWK JUHDWHUÁ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

**UDVVODQGVDQGUXPLQDQWVDQH[DPSOH RIPLVFRQFHSWLRQVDQGRSSRUWXQLWLHV &DWWOH UHDULQJ LV DQ LOOXVWUDWLYH H[DPSOH RI KRZ QRQ WUDQVSDUHQWDQGLOORJLFDOV\VWHPERXQGDULHVFDQOHDG WRZURQJFRQFOXVLRQVLQFOXGLQJWKHPLVFRQFHSWLRQRI WKHFRZEHLQJDPDMRUFRQWULEXWRUWRFOLPDWHFKDQJH )LUVW WKHUH LV WKH LVVXH RI DQ H[FHVVLYHO\ JHQHULF DQDO\VLV RI DQLPDO KXVEDQGU\ ZKLFK GRHV QRW GLVWLQJXLVK EHWZHHQ GLIIHUHQW SURGXFWLRQ V\VWHPV ,QVWHDGRIDFRPSDUDWLYHDQDO\VLVRIGDWDRIUHVRXUFH HIÀFLHQW VXVWDLQDEOH SURGXFWLRQ RQ WKH RQH KDQG DQG HQHUJ\LQWHQVLYH LQGXVWULDO SURGXFWLRQ RQ WKH RWKHU YHU\ RIWHQ DYHUDJH YDOXHV DUH XVHG 6HFRQG WKH DQDO\VLV LV PRVWO\ FRQÀQHG WR RQO\ RQH *+* ² PHWKDQH²DQGH[FOXGHV12HPLVVLRQVPDLQO\FDXVHG E\WKHXVHRIV\QWKHWLFQLWURJHQIHUWLOL]HUVIRULQWHQVLYH SURGXFWLRQRIDQLPDOIHHG7KLUGDVRXQGDVVHVVPHQW RI WKH HIIHFWV RI DJULFXOWXUDO SURGXFWLRQ RQ FOLPDWH UHTXLUHV WDNLQJ LQWR DFFRXQW QRW RQO\ HPLVVLRQV EXW DOVR F\FOHV DV VXVWDLQDEOH DJULFXOWXUH DQG IRUHVWU\ DUH WKH RQO\ HFRQRPLF DFWLYLWLHV ZLWK WKH SRWHQWLDO WR SURYLGHQDWXUDOVLQNIXQFWLRQV FDUERQVHTXHVWUDWLRQ  +RZHYHU UHJDUGLQJ WKH UHOHYDQFH IRU FOLPDWH LQ WKH UHODWLYHO\ FRPPRQ HPLVVLRQ FRPSDULVRQV

75$'($1'(19,5210(175(9,(:

EHWZHHQ FDWWOH UDLVLQJ DQG YHKLFXODU WUDIÀF FDWWOH WHQG WR IDUH EDGO\ $V DQ DSSDUHQWO\ ORJLFDO UHVXOW RI VXFK FRPSDULVRQV HYHQ PRUH LQWHQVLYH OLYHVWRFN SURGXFWLRQ LV EHLQJ DGYRFDWHG LQ SDUWLFXODU WKDW RI FKLFNHQV DQG SLJV :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²DQDELOLW\ LQHYLWDEO\OLQNHGWRPHWKDQHSURGXFWLRQ 7KHH[FOXVLYHIRFXVRQPHWKDQHIURPFRZVLVVKRUW VLJKWHG LI WKH DQDO\VLV LV FRQÀ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²SHUFHQWRIFRQVXPHGQLWURJHQIHUWLOL]HUV DUH FRQYHUWHG LQWR 12 6XWWRQ DQG %LOOHQ  6FKXO]HHWDO  $JDLQVW WKLV EDFNJURXQG EHVLGHV LWV DGYHUVH HFRORJLFDO LPSDFWV LQWHQVLYH IHHGLQJ RI OLYHVWRFN LQ WKHFRQWH[WRIJOREDOKXQJHUDQGZDUPLQJKDVWKUHH




/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

%R[(UURQHRXVFRQFOXVLRQVRQH[WHQVLYHDQGLQWHQVLYHOLYHVWRFNSURGXFWLRQV\VWHPVGXHWRLOOGHÀQHG V\VWHPERXQGDULHV ,QRUGHUWRJLYHDVWURQJHULPSHWXVWRVXVWDLQDEOHSURGXFWLRQLQDJULFXOWXUDOSROLF\UHVHDUFKDQGH[WHQVLRQLQWKHIXWXUHLW LVLPSHUDWLYHWRREMHFWLYHO\HYDOXDWHWKHGLIIHUHQWDJUDULDQV\VWHPV7RGDWHVXIÀFLHQWFRPSDUDWLYHVWXGLHVDUHODFNLQJ,Q DGGLWLRQWKHUHDUHVLJQLÀFDQWGHÀFLHQFLHVLQWHUPVRIWKHFRPSDUDELOLW\RIGDWDDQGWKHODFNRIWUDQVSDUHQF\FRQFHUQLQJ WKHVSHFLÀFV\VWHPERXQGDULHV7KLVRIWHQOHDGVWRGDWDQRWEHLQJFRUUHFWO\DVVLJQHGZKLFKULVNVOHDGLQJWRHUURQHRXV FRQFOXVLRQV$SURPLQHQWH[DPSOHLQWKLVUHJDUGLVWKHVWXG\E\6WHLQIHOGHWDO  ZKLFKGRHVQRWGLVWLQJXLVKEH WZHHQH[WHQVLYHDQGLQWHQVLYHSURGXFWLRQV\VWHPV,QWKDWVWXG\RQO\RQHWDEOHRQPDMRUÁX[HVRIFDUERQDVVRFLDWHGZLWK LQWHQVLYHDQGH[WHQVLYHOLYHVWRFNSURGXFWLRQV\VWHPV $VQHUDQG$UFKHUWDEOH DWWHPSWVWRSURYLGHDVHSD UDWHDFFRXQWRIFDUERQÁX[HVIRUHDFKV\VWHP%XWWKDWWDEOHKDVQXPHURXVDQDO\WLFDOSUREOHPVDQGJRHVVRIDUDVWR VXJJHVWWKDWH[WHQVLYHOLYHVWRFNV\VWHPVZRXOGKDYHVLJQLÀFDQWO\KLJKHUQHJDWLYHFOLPDWHHIIHFWVWKDQLQWHQVLYHV\VWHPV ,PSRUWDQWFDUERQVWUHDPVXQGHULQWHQVLYHDQGH[WHQVLYHOLYHVWRFNSURGXFWLRQV\VWHPV

&DWHJRU\ &2HPLVVLRQVIURPSURGXFWLRQ 1LWURJHQIHUWLOL]HUVIRUDQLPDOIHHGFURSSURGXFWLRQ )XHOIRUWUDQVSRUWRIIHHGWRSURGXFWLRQIDFLOLW\ )XHOIRUWUDQVSRUWRIDQLPDOVLQWKHSURGXFWLRQIDFLOLW\ 3ORXJHGFURSODQG 8QSORXJKHGFURSODQG 3URFHVVLQJRIDQLPDOV )XHOIRUWUDQVSRUWRXWVLGHWKHSURGXFWLRQIDFLOLW\ (FRORJLFDOO\UHODWHG&2HPLVVLRQV 'HVHUWLÀFDWLRQ 'HIRUHVWDWLRQLQWKHWURSLFV 6SUHDGLQJRIEXVK\DUHDV 0HWKDQHHPLVVLRQVRIOLYHVWRFN 'LJHVWLRQRIUXPLQDQWV /LTXLGDQGVROLGPDQXUH  7RWDO&2HPLVVLRQV 7RWDOPHWKDQHHPLVVLRQV 7RWDO*+*HPLVVLRQVLQ&2HTXLYDOHQW

([WHQVLYH

,QWHQVLYH

*W

*W

      



   

  

 

  

 

6RXUFH$VQHUDQG$UFKHUWDEOH )LUVWDQGIRUHPRVWLWLVVXUSULVLQJWKDWWKHVXPRIHPLVVLRQVIURPH[WHQVLYHOLYHVWRFNSURGXFWLRQV\VWHPVLVHVWLPDWHGWR EHJLJDWRQQHV *W DQGWKXVLVKLJKHUWKDQWKHVXPRIHPLVVLRQVRIWKHLQGLYLGXDOLWHPV$QH[SODQDWLRQIRUWKLVLVQRW SURYLGHG(VWLPDWHVIRUWRWDOHPLVVLRQVIURPLQWHQVLYHSURGXFWLRQDUHQRWSURYLGHGDWDOO 2XUFULWLFLVPUHJDUGLQJWKLVDFFRXQWLQJDSSURDFKFRQFHUQVLQSDUWLFXODUWKHDVVLJQPHQWPHWKRGRORJ\ ‡ (PLVVLRQVFDXVHGE\GHIRUHVWDWLRQDUHHQWLUHO\DFFRUGHGWRJUDVVODQGPDQDJHPHQW LHWRH[WHQVLYHPDQDJHPHQW PHWKRGV +RZHYHULQUHDOLW\SDVWXUHXVDJHLVRIWHQRQO\DQLQWHULPXVHRIWKHFRQYHUVLRQRIODQGWKDWLVHYHQWXDOO\ FKDQJHG WR FURSODQG QXWULHQWSRRU VRLOV RI WURSLFDO IRUHVWV DUH FRQYHUWHG WR FURSODQG UHO\LQJ RQ H[WHUQDO IHUWLOL]HU LQSXWV 7KHIDFWWKDWVR\FXOWLYDWLRQLVUHVSRQVLEOHIRUVRPHSHUFHQWRIGHIRUHVWDWLRQLVPHQWLRQHGLQWKHVWXG\·V WH[WEXWWKHWDEOHDFFRUGVWKHVHHPLVVLRQVHQWLUHO\WRH[WHQVLYHSURGXFWLRQV\VWHPVHYHQWKRXJKVR\PHDODVDQLPDO IHHGLVDFHQWUDOFRPSRQHQWRILQWHQVLYHSURGXFWLRQV\VWHPV ‡ $OWKRXJKDÀJXUHIRU&2HPLVVLRQVUHODWHGWRIHUWLOL]HUSURGXFWLRQIRUDQLPDOIHHGSURGXFWLRQLVSURYLGHGDQGLVUH ODWHGWRLQWHQVLYHOLYHVWRFNSURGXFWLRQ12HPLVVLRQVDUHQRWDFFRXQWHGIRU$IRRWQRWHH[SODLQVWKDWWKRVHHPLVVLRQV DUHH[FOXGHGEHFDXVHWKH\DUHGHDOWZLWKLQDQRWKHUFKDSWHU$OWKRXJKWKHLPSRUWDQFHRI12HPLVVLRQVLQLQWHQVLYH V\VWHPVLVLQGHHGKLJKOLJKWHGLQWKDWRWKHUFKDSWHULWVLPSDFWRQFOLPDWHLVQRWTXDQWLÀHG




75$'($1'(19,5210(175(9,(:

%R[ FRQWLQXHG

Â&#x2021; (PLVVLRQVFDXVHGE\ODQGGHJUDGDWLRQDUHRQO\FDOFXODWHGIRUH[WHQVLYHV\VWHPVZKHUHDVODQGGHJUDGDWLRQUHVXOWLQJ IURPLQWHQVLYHDQLPDOIHHGSURGXFWLRQUHPDLQVXQDFFRXQWHGIRU Â&#x2021; 0HWKDQHHPLVVLRQVOLQNHGWRIDHFHVJHQHUDWLRQDUHFRQVLGHUHGWREHRIWKHVDPHPDJQLWXGHLQH[WHQVLYHDQGLQWHQ VLYHV\VWHPVDOWKRXJKPHWKDQHLVQRWJHQHUDWHGLQPDQXUHXQGHUWKHDHURELFFRQGLWLRQVRIH[WHQVLYHSDVWXULQJ $V D UHVXOW HYHQWKLV DQDO\VLV ZKLFK SXUSRUWV WRSURYLGHDQRYHUYLHZRIWKHDYDLODEOHVFLHQWLÃ&#x20AC;FNQRZOHGJHUHJDUGLQJ LQWHQVLYHYHUVXVH[WHQVLYHSURGXFWLRQV\VWHPVFRQWDLQVVRPHVHULRXVPHWKRGRORJLFDOVKRUWFRPLQJV,WLVDSSDUHQWWKDW WKHFRPSDUDWLYHDQDO\VLVXQGHUHVWLPDWHVWKHQHJDWLYHHQYLURQPHQWDODQGFOLPDWHLPSDFWVRILQWHQVLYHSURGXFWLRQV\V WHPVDQGRYHUHVWLPDWHVWKRVHRIH[WHQVLYHSURGXFWLRQV\VWHPV7KLVUHQGHUVWKHUHVXOWVDQGWKHSROLF\UHFRPPHQGDWLRQV VFLHQWLÃ&#x20AC;FDOO\TXHVWLRQDEOHD 1RWHD)RUDPRUHHODERUDWHFULWLTXHVHH,GHODQG

DGGLWLRQDODGYHUVHHIIHFWV Â&#x2021; /LYHVWRFN DUH FRPSHWLQJ ZLWK KXPDQV IRU IRRG 1RUPDOO\OLYHVWRFNSDUWLFXODUO\FDWWOHVKRXOGGHULYH WKHLUIHHGIURPDJULFXOWXUDOODQGRUVRLOVWKDWFDQQRW EHXVHGIRUGLUHFWIRRGSURGXFWLRQIRUKXPDQV2Q WKH FRQWUDU\ FDWWOH FDQ JHQHUDWH PLON DQG PHDW IURP JUDVV DQG WKH\ FDQ DOVR SURYLGH SURGXFWLYH SRZHU Â&#x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Â&#x2021; 7KH LQFUHDVHG XVH RI FRQFHQWUDWH IHHG GLVSODFHV WKH FRQVXPSWLRQ RI JUDVV DQG WKHUHE\ UHPRYHV WKHIROORZLQJSRVLWLYHHIIHFWVRISDVWXUHRQFOLPDWH  7KHSHUPDQHQWDQGGHQVHJUDVVFRYHUSURWHFWV VRLOVDQGSUHYHQWVWKHLUHURVLRQ  6XVWDLQDEOH SDVWXUH DQG JUDVVODQG PDQDJHPHQW SURPRWHV WKH ELRORJLFDO DFWLYLW\ SKRWRV\QWKHVLV  RI JUDVV DQG LWV URRWV ,Q DGGLWLRQ PLFURRUJDQLVPV SDUWLFXODUO\ ZRUPV FRQYHUW ELRPDVV LQWR KXPXV ZKLFK FRQWDLQV RYHUSHUFHQWRIFDUERQ

+*UDVVODQGVRIWKHZRUOG ,QWKH)RRGDQG$JULFXOWXUH2UJDQL]DWLRQRIWKH 8QLWHG1DWLRQV )$2 SXEOLVKHGDVXUYH\RIZRUOGZLGH

JUDVVODQGV 6XWWL 5H\QROGV DQG %DWHOOR   *UDVVODQGV LQ VHPLDULG ]RQHV FRQWDLQ JUHHQ JUDVV RQO\IRUDVKRUWSHULRGDIWHUWKHUDLQ\VHDVRQZKLFKLV RWKHUZLVH FKDUDFWHULVWLF RI WKH UDLQLQWHQVLYH UHJLRQV RIWKHZRUOG&OLPDWHH[SHUWVRIWKH*UDVVODQG&DUERQ :RUNLQJ*URXSVWXGLHGWKHLPSRUWDQFHRIJUDVVODQGV DV FDUERQ VLQNV DQG SXEOLVKHG FRXQWU\VSHFLÃ&#x20AC;F LQIRUPDWLRQ RQ JUDVVODQG HFRV\VWHPV *UDVVODQG FRYHUV D WRWDO DUHD RI  PLOOLRQ NP LH DERXW  SHU FHQW RI WKH WRWDO ODQG VXUIDFH RI RXU SODQHW :KLWH 0XUUD\ DQG 5RKZHGHU   $FFRUGLQJ WR WKH)$2JUDVVODQGDFFRXQWVIRUDERXWWKUHHTXDUWHUV RIWKHELOOLRQKDRIDJULFXOWXUDOO\XVHGODQG(YHQ VR NQRZOHGJH DERXW LWV VSHFLÃ&#x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²LQPDQ\UHJLRQVXSWRDWKLUGRIWKHVWRUHG DPRXQW *XRDQG*LIIRUG3RHSODXHWDO  6RIDUWKHLQFUHDVLQJGHPDQGIRUSURWHLQDQGHQHUJ\ ULFKDQLPDOIHHGIRULQGXVWULDOOLYHVWRFNSURGXFWLRQKDV EHHQ RQH RI WKH PDLQ IDFWRUV EHKLQG WKH UHPRYDO RI WURSLFDO UDLQIRUHVWV DQG WKH FRQYHUVLRQ RI JUDVVODQG WR FURSODQG 'RQ HW DO   $GGLWLRQDOO\ WKH ULVLQJFRQVXPSWLRQRIELRIXHOVLVWDNLQJLWVWROO0DQ\ PRQRFXOWXUHV QRW RQO\ GHVWUR\ HFRV\VWHPV EXW DUH


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

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Ã&#x20AC;FLHQW RUJDQLF QLWURJHQ DQG RWKHU QXWULHQWV IURP WKH H[FUHPHQWV RI JUD]LQJ DQLPDOV 7KHUHDIWHU VRODU HQHUJ\ WKURXJK SKRWRV\QWKHVLV GULYHV WKH JURZWK RI QHZ JUDVV DQG DGGLWLRQDOURRWELRPDVV $Q LOOXVWUDWLYH H[DPSOH IRU VXFK D QDWXUDO SURFHVV ² LQFOXGLQJUHJHQHUDWLYHSHULRGV²FDQEHIRXQGLQWKH ELJJHVWDQQXDOPLJUDWLRQRIDQLPDOVRQRXUSODQHWWKH PLJUDWLRQRIWKHKXJHKHUGVRIJQXVLQ$IULFD6DIDULV WKHUHRIIHUDUHWURVSHFWLYHYLHZRIQDWXUH·VKLVWRU\DV DOORWKHUJUDVVODQGVVDYDQQDKVHPHUJHGIURPWKHFR HYROXWLRQRIJUDVVSODQWVDQGJUD]LQJDQLPDOV+XJH KHUGV RI ELVRQ DQG DXURFKV DQFHVWRUV RI WRGD\·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



PRQRFXOWXUHV VXFK DV VR\ PDL]H RU FHUHDOV KDYH EHHQFXOWLYDWHGIRUGHFDGHV+RZHYHUWKHEHWWHUWKH VLWXDWLRQ LQ VRPH SUHIHUHQWLDO ORFDWLRQV WKH ORZHU LV WKHSHUFHSWLRQRIH[LVWLQJSUREOHPV,QRUGHUWRVKRZ WKDWVRLOTXDOLW\DQGIHUWLOLW\DUHVXIIHULQJIURPLQGXVWULDO VRLOPDQDJHPHQWV\VWHPVWKHKXPXVFRQWHQWRIVRLOV QHHGVWREHUHJXODUO\PRQLWRUHGDQGGRFXPHQWHG

-&DWWOHDVLGHDOXVHUVRIIHHG 7DNLQJ DFFRXQW RI FDUERQ DQG QLWURJHQ F\FOHV QRW RQO\ OHDGV WR D GLIIHUHQW DVVHVVPHQW RI WKH LPSDFWV RI DJULFXOWXUH RQ FOLPDWH LW DOVR SURYLGHV D GLIIHUHQW SHUVSHFWLYH RI DQLPDO KXVEDQGU\ SDUWLFXODUO\ WKDW RI UXPLQDQWV ,JQRUDQFH ZLWK UHJDUG WR WKH SRWHQWLDO RI JUDVVODQGVDULVHVIURPWKHPLVFRQFHSWLRQWKDWFDWWOH DUHSRRUIHHGXVHUVZKLFKVLQFHWKHHQGRIWKHV KDVDOVREHHQWDXJKWWRVWXGHQWV,QWKLVUHJDUGFDWWOH DQGRWKHUUXPLQDQWVDUHQRWFRQWH[WXDOL]HGDVDQLPDOV WKDW GHYHORSHG LQ FRHYROXWLRQ ZLWK JUDVVODQGV RYHU WKRXVDQG RI \HDUV XVLQJ JUDVV DQG KD\ DV IRGGHU WKDW ZLWKRXW DGGLWLRQDO ODERXU ZDV WXUQHG LQWR PHDW DQG PLON ,QVWHDG WKHVH UXPLQDQWV DUH DVVHVVHG LQ WHUPV RI WKHLU HIÃ&#x20AC;FLHQF\ LQ GLJHVWLQJ FHUHDOV PDL]H DQGVR\ 7KH IDFW WKDW FDWWOH FRQVXPH RQ DYHUDJH  NJ RU PRUHRIFHUHDOVSHUNLORJUDPRIEHHI DÃ&#x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Ã&#x20AC;[DWLRQ




75$'($1'(19,5210(175(9,(:

 1HDUO\ DOO FRZV ZLWK DQ DQQXDO PLON SURGXFWLRQ RI  OLWHUV KDYH D ORQJHU WKDQ DYHUDJH OLIH VSDQ &RQYHUVHO\ PRVW FRZV ZLWK DQ DQQXDO PLON SHUIRUPDQFH RI  OLWHUV KDYH D VKRUWHU WKDQ DYHUDJH OLIH VSDQ 7KH KLJKHU WKH PLON SURGXFWLRQ RI WKH DQLPDO SHU GD\ RU SHU \HDU WKH KLJKHU WKH ULVN RI LWV YXOQHUDELOLW\ WR GLVHDVHV DQG EXUQRXW 7KLV LV WKH UHDVRQ ZK\ WKH DYHUDJH OLIH VSDQ RI D FRZ LQ *HUPDQ\ IRU LQVWDQFH KDV IDOOHQ WR OHVV WKDQÀYH\HDUV%XUQRXWLQIHUWLOLW\DQGPDVWLWLVKDYH EHFRPH ´RFFXSDWLRQDO GLVHDVHVµ RI GDLU\ FRZV UHVXOWLQJ LQ WKHLU EHLQJ VODXJKWHUHG SUHPDWXUHO\ DQGVWDWLVWLFDOO\WKH\SURGXFHRQO\FDOYHV )LJXUH7KHLPSRUWDQFHRIFRZORQJHYLW\WRSURWHFWWKH HQYLURQPHQWWKHFOLPDWHDQGWKHHFRQRP\

120 -

Months

100 Cow to be replaced

80 60 -

Substitute cow

40 20 0Cow

 ,Q DGGLWLRQ WR WKH OLIH VSDQ RI WKH FRZ WR EH UHSODFHG IRGGHU DQG DGGLWLRQDO ODERXU DV ZHOO DV *+*HPLVVLRQVE\WKHVXEVWLWXWHFRZQHHGWREH WDNHQLQWRDFFRXQW)LJXUHVKRZVWKDWLUUHVSHFWLYH RI WKH DJH RI WKH FRZ GHVWLQHG IRU VODXJKWHU WKH DJHRIWKHVXEVWLWXWHFRZLVDOZD\VWKHVDPH7KH ODWWHU LV DERXW  PRQWKV ROG  PRQWKV DW WKH WLPH RI LQVHPLQDWLRQ SOXV QLQH PRQWKV JHVWDWLRQ 7KHUHSODFHPHQWUDWHRIDSURGXFWLRQXQLWLQGLFDWHV WKH SHUFHQWDJH RI FRZV WKDW ZLOO KDYH WR EH UHSODFHG DQQXDOO\ WR NHHS WKH GDLU\ SURGXFWLRQ UDWH XQFKDQJHG ,Q SURGXFWLRQ XQLWV ZLWK D YHU\ KLJKGDLU\SHUIRUPDQFHWKHUHSODFHPHQWUDWHRIWHQ H[FHHGV  SHU FHQW 7KDW LV ZK\ ORQJHYLW\ OHDGV WRORZHUUHSODFHPHQWUDWHV+LJKUHSODFHPHQWUDWHV WKXVLPSO\WKDWLQDGGLWLRQWRWKHGLUHFWHFRORJLFDO HIIHFWV RI GDLU\ FRZV WKH HFRORJLFDO DQG FOLPDWH LPSDFWVRIWKHVXEVWLWXWHFRZVKDYHWREHWDNHQLQWR FRQVLGHUDWLRQLQHYDOXDWLQJWKHLUGDLU\SHUIRUPDQFH 7KHHDUOLHUDGDLU\FRZKDVWREHVODXJKWHUHGWKH ORQJHULVWKHSHULRGWKDWDVXEVWLWXWHDQLPDOQHHGV

IHHGLQJDQGHPLWV*+*V)RUDGDLU\FRZ\RXQJHU WKDQ  \HDUV D VXEVWLWXWH DQLPDO ZLOO KDYH WR EH UHDUHGGXULQJKDOIRIWKHOLIHWLPHRIWKHFRZWREH UHSODFHG 7KXV DQ\ SURGXFWLYLW\ FDOFXODWLRQ RI D GDLU\FRZVKRXOGQRWEHFRQÀ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² WKH KLJKHU WKH GDLU\ SURGXFWLRQ RI D FRZ EUHHG WKH ORZHU LWV PHDW RXWSXW LQ SDUWLFXODU WKDW RI WKH VRQV DQG EURWKHUV&RPSDULQJDSURGXFWLRQV\VWHPZLWKDQ DYHUDJH PLON SURGXFWLRQ RI  OLWUHV UHODWLYH WR RQH SURGXFLQJ  OLWUHV SHU \HDU 5RVHQEHUJHU DQG 5XW]PRVHU   QRWH WKDW WKH ODWWHU VKRZV VLJQLÀFDQWO\ KLJKHU HPLVVLRQV RI PHWKDQH  SHUFHQWKLJKHU QLWURJHQ SHUFHQWKLJKHU DQG SKRVSKRURXV SHUFHQWKLJKHU  7KH LQGXVWULDOL]HG DJULFXOWXUDO SURGXFWLRQ V\VWHP H[FOXGHV OLYHVWRFN IURP JUDVVODQGV DQG LQFUHDVHV WKH LQSXW RI SURWHLQULFK FRQFHQWUDWH IHHG GHULYHG IURP PDL]H VR\ DQG FHUHDOV UHVXOWLQJ LQ D VLWXDWLRQ ZKHUH FRZV DQG KXPDQV FRPSHWH IRU IRRG ,Q WKH FRQWH[WRIVXFKLQWHQVLYHIHHGLQJV\VWHPVUXPLQDQWV FRQIXVLQJO\ DUH FRQVLGHUHG LQHIÀFLHQW IRGGHU FRQVXPHUVUHODWLYHWRSLJVDQGFKLFNHQV,QWHUPVRI IHHGFRQVXPSWLRQDQGRXWSXWRQHFRZGRHVWKHUHIRUH QRWHTXDODQRWKHU &DWWOH VKHHS DQG EXIIDORHV KDYH WKH ZRQGHUIXO FDSDFLW\ WR GLJHVW SDVWXUH IRUDJH LQ V\PELRVLV ZLWK PLFURRUJDQLVPVLQWKHUXPHQDQGWXUQLWLQWRPLONDQG PHDW,QWKLVVHQVHFDWWOHDUHLGHDOIRGGHUFRQVXPHUV DQG DUH WKHUHIRUH SUHGHVWLQHG IRU JUD]LQJ LQ WKRVH DUHDV WKDW DUH VXLWDEOH DV SDVWXUHV RU JUDVVODQGV ,Q DGGLWLRQ WKH\ FDQ XVH JUDVV UHVXOWLQJ IURP JUHHQ IHUWLOL]DWLRQWKURXJKVXVWDLQDEOHFURSURWDWLRQLQRUGHU WR SURGXFH PLON PHDW DQG ODERXU $FFRUGLQJO\ LW LV RQO\DWÀUVWJODQFHWKDWPLONDQGPHDWIURPLQWHQVLYH SURGXFWLRQ DSSHDU WR EH FKHDS 7KH WUXH FRVWV RI LQWHQVLYHDQLPDOIHHGSURGXFWLRQDUHUHÁHFWHGLQWHUPV


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

RI L GDPDJHWRWKHHFRV\VWHPDQGWKHFOLPDWH LL  UHGXFWLRQ RI ELRORJLFDO GLYHUVLW\ LLL  WKH FRQYHUVLRQ RI SHUPDQHQW JUDVVODQG DQG FRQYHUWHG UDLQIRUHVWV LQFOXGLQJ WKH &2 WKXV UHOHDVHG IURP WKHLU FDUERQ ULFK VRLOV  LY  RLO FRQVXPSWLRQ IRU WKH SURGXFWLRQ RI V\QWKHWLF QLWURJHQ IHUWLOL]HUV DQG DJURFKHPLFDOV Y  12HPLVVLRQVFDXVHGE\H[FHVVLYHXVHRIV\QWKHWLF IHUWLOL]HUV YL  WKH QLWULÃ&#x20AC;FDWLRQ RI VRLOV DQG ZDWHU FRXUVHV DQG YLL  HQKDQFHG DPPRQLD ORDG LQ WKH DWPRVSKHUH



,WLVWUXHWKDWFDWWOHHPLWPHWKDQHEXWWKH\DQGRWKHU UXPLQDQWVDUHLQGLVSHQVDEOHIRUJOREDOIRRGVHFXULW\ 8QGHUVXVWDLQDEOHSDVWXUHFRQGLWLRQVFDWWOHSURGXFH PLON DQG PHDW IURP JUDVV DQG IRUDJH DQG WKHUHE\ PDNHDVLJQLÃ&#x20AC;FDQWFRQWULEXWLRQWRWKHSUHVHUYDWLRQRI VRLO IHUWLOLW\ DQG WR FOLPDWH FKDQJH PLWLJDWLRQ 7KLV LV ZK\QRWRQO\GRFRZVKDYHWREHUHKDELOLWDWHGEXWWKH FRUUHFWDJULFXOWXUDOV\VWHPQHHGVWREHDGRSWHG7KH GHFLVLRQZKHWKHUZHZLOOSURWHFWRUGHVWUR\WKHFOLPDWH WKURXJKWKHZD\ZHFKRRVHWRUHDUFDWWOHLVXSWRXV




75$'($1'(19,5210(175(9,(:

1//'06#4; U :%'55+8' 0&7564+#.+<#6+101(+8'561%- 41&7%6+10U*'''&(14#'9)4+%7.674#. #4#&+)/ )ULHGULFK2VWHQGRUII 'HSXW\&KDLUPDQ$JULFXOWXUDO&RPPLWWHHRIWKH*HUPDQ3DUOLDPHQW

$EVWUDFW 7KHH[FHVVLYHLQGXVWULDOL]DWLRQRIFKLFNHQDQGSRUNSURGXFWLRQLVDJODULQJH[DPSOHRIWKHLQGXVWULDOPRGHO RIDJULFXOWXUHZKLFKKDVWXUQHGDJULFXOWXUHLQWRDPDMRUFOLPDWHHQYLURQPHQWDOVRFLDODQGDQLPDOZHOIDUH KD]DUG,QRUGHUWRUHGUHVVWKLVVLWXDWLRQSROLFLHVVKRXOGDGRSWDSRVWLQGXVWULDOSDUDGLJPIRUDJULFXOWXUH ZKLFKVXSSRUWVPXOWLIXQFWLRQDOIDUPVLQVWHDGRIDJULFXOWXUDOIDFWRULHV7KLVVKRXOGLQFOXGHWKHDSSOLFDWLRQ RIWKHIRUHUXQQHUDQGWKHSROOXWHUSD\VSULQFLSOHWRÃ&#x20AC;QDQFLDOLQFHQWLYHVVFKHPHVWKHWLJKWHQLQJRIUHJXODWRU\ ODZVEHWWHUPDUNHWVWHZDUGVKLSDQGSUHIHUHQFHIRUWUDQVSDUHQF\DQGIDUPHUDQGFRQVXPHUSDUWLFLSDWLRQ LQSROLF\PDNLQJ

7UHDWLQJ D IDUP DV D IDFWRU\ WKDW XVHV LQSXWV VXFK DV SHVWLFLGHV IHHG IHUWLOL]HUV DQG IXHO WR SURGXFH RXWSXWVVXFKDVFRUQFKLFNHQDQGSRUNKDVEHFRPH WKH GRPLQDWLQJ SULQFLSOH RI WRGD\·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Ã&#x20AC;WV WR D ODUJH H[WHQW IURP VLJQLÃ&#x20AC;FDQW GLUHFW DQG LQGLUHFW VXEVLGLHV  FDQ KDYH GHYDVWDWLQJ LPSDFWV RQ PDQ\ ORFDO PDUNHWV LQ GHYHORSLQJFRXQWULHVDVLOOXVWUDWHGE\WKHH[DPSOHRI (XURSHDQFKLFNHQSDUWVH[SRUWHGWR:HVW$IULFD ,QGXVWULDOL]DWLRQKDVWXUQHGDJULFXOWXUHXSVLGHGRZQ WKHVRXUFHRIIRRGKDVEHFRPHDUHDVRQIRUKXQJHU LQ PDQ\ UHJLRQV RI WKH ZRUOG DQG WKH PDLQ VRXUFH


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

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

$$QHZDJULFXOWXUDOSDUDGLJP $OWKRXJKLQGXVWULDODJULFXOWXUHLVVWLOOZLGHO\SURPRWHG E\ FXUUHQW DJULFXOWXUDO SROLFLHV WKHUH DUH JURZLQJ FDOOV IRU FKDQJH -DFTXHV 'LRXI IRUPHU 'LUHFWRU *HQHUDORIWKH)$2VWDWHG´7KHSUHVHQWSDUDGLJPRI LQWHQVLYHFURSSURGXFWLRQFDQQRWPHHWWKHFKDOOHQJHV RIWKHQHZPLOOHQQLXPµ )$2 ,IWKLVLVWUXHIRU DJULFXOWXUHDVDZKROHZKDWZHQHHGLVDQHZSRVW LQGXVWULDOSDUDGLJPIRUDJULFXOWXUH 7KHSUREOHPZLWKIDFWRU\IDUPLQJOLHVÃ&#x20AC;UVWRIDOOLQLWV IXQGDPHQWDO PLVFRQFHSWLRQ RI DJULFXOWXUH )DUPV VKRXOGQRWEHIDFWRULHV²WKH\VKRXOGQRWEHSODFHVRI ODUJHVFDOH SURGXFWLRQ KDOOV LQVWHDG WKH\ VKRXOG EH KLJKO\ LQWHJUDWHG OLYLQJ V\VWHPV ZKHUH HYHU\ SDUW RI WKH V\VWHP SOD\V D FUXFLDO UROH LQ WKH IXQFWLRQLQJ RI WKHV\VWHPDVDZKROH$WUDGLWLRQDOIDUPLVEDVHGRQ LWV LQWHUQDO UHVRXUFHV UDWKHU WKDQ RQ H[WHUQDO LQSXWV ,WV PDLQ VRXUFH RI HQHUJ\ LV VRODU DQG QRW IRVVLO 7KH DQLPDOV RI WKH IDUP SURGXFH ² EHVLGHV RUJDQLF IHUWLOL]HUV²IRRG PLONHJJVPHDW EDVHGRQSURGXFWV WKDWKXPDQVFDQQRWFRQVXPHDQGGLJHVW HJJUDVV Ã&#x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´ORJLF RI FRPSHQVDWLRQµ WR D ´ORJLFRILQYHVWPHQWLQEHVWSUDFWLFHVµ´3XEOLFPRQH\ IRUSXEOLFJRRGVµVKRXOGEHFRPHWKHGULYLQJSULQFLSOH IRUÃ&#x20AC;QDQFLDOVXSSRUWWRDJULFXOWXUH 7KHSROOXWHUSD\VSULQFLSOHRQWKHRWKHUKDQGREOLJHV IDUP LQGXVWULHV WKDW XVH XQVXVWDLQDEOH SUDFWLFHV WR FRPSHQVDWHVRFLHW\IRUWKHLUQHJDWLYHLPSDFWVRQWKH HQYLURQPHQWDQGRQSXEOLFKHDOWK7KLVSULQFLSOHQHHGV WR UHSODFH WKH SUDFWLFH RI FRPSHQVDWLQJ IDUPHUV IRU QRWSROOXWLQJWKHHQYLURQPHQW

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

'%HWWHUPDUNHWVWHZDUGVKLS $JULFXOWXUDO SROLFLHV VKRXOG HVWDEOLVK QHZ IRUPV RI PDUNHW RUJDQL]DWLRQ ZKLFK VXSSRUW IDUPHUV DQG FRQVXPHUV LQ UHJDLQLQJ RZQHUVKLS RI WKHLU UHJLRQDO DQG ORFDO PDUNHWV )DUPHUV VKRXOG EH VXSSRUWHG LQ HVWDEOLVKLQJ SURGXFHU RUJDQL]DWLRQV WKDW VWUHQJWKHQ WKHLUEDUJDLQLQJSRZHUDQGHQDEOHWKHPWRJHDUIRRG SURGXFWV WR PRUH UHJLRQDOL]HG DQG ORFDO PDUNHWV 6XFK DQ DSSURDFK VKRXOG DOVR LQYROYH D FKDQJH RI




UHJXODWLRQV UHODWLQJ WR FRPSHWLWLRQ LQ RUGHU WR VWRS WKHDEXVHRIEX\HUSRZHUE\ROLJRSROLVWLFSURFHVVLQJ DQG UHWDLOLQJ FRPSDQLHV DQG UHYHUVH WKH FXUUHQW FRQFHQWUDWLRQLQWKHIRRGFKDLQ

(7UDQVSDUHQF\DQGSDUWLFLSDWLRQ 7UDQVSDUHQF\ VKRXOG EHFRPH D NH\ SULQFLSOH RI DJULFXOWXUDO SROLF\ ,QIRUPDWLRQ DERXW WKH UHDOLW\ RI DJULFXOWXUDOSURGXFWLRQWKHVRFLDOVLWXDWLRQRIIDUPHUV DQG IDUP ZRUNHUV WKH HQYLURQPHQWDO LPSOLFDWLRQV RI SURGXFWLRQ SURFHVVHV DQG WKH OLYLQJ FRQGLWLRQV RI DQLPDOVVKRXOGQRWEHKLGGHQDQ\PRUHEHKLQGIDFWRU\ GRRUVDQGOREE\EURFKXUHVLWPXVWEHPDGHSXEOLF 7KH Ã&#x20AC;UVW ELJ DJULFXOWXUHUHODWHG FULVHV RI WKH WZHQW\ Ã&#x20AC;UVWFHQWXU\LQ(XURSH²%6(DQGWKHIRRWDQGPRXWK RXWEUHDNLQ²UHVXOWHGLQFDOOVIRUDIXQGDPHQWDO FKDQJH LQ DJULFXOWXUH $V D FRQVHTXHQFH *HUPDQ\ LPSOHPHQWHGDQ´DJULFXOWXUDOWXUQDURXQGµDWWKHFRUH RI ZKLFK ZDV FRQVXPHU LQYROYHPHQW DQG JUHDWHU WUDQVSDUHQF\LQDJULFXOWXUH 7KH GHYHORSPHQW RI D QHZ DJULFXOWXUDO PRGHO

75$'($1'(19,5210(175(9,(:

VKRXOG QR ORQJHU HPHUJH IURP WRSGRZQ SROLFLHV LPSOHPHQWHG LQ FORVHGGRRU IDFWRULHV ,QVWHDG IDUPHUVDQGFRQVXPHUVVKRXOGSOD\DQDFWLYHSDUWLQ SROLF\PDNLQJ ([DPSOHV IURP WKH FXUUHQW UHIRUP RI WKH(8&RPPRQ$JULFXOWXUDO3ROLF\VKRZWKHGHPDQG IRUDQGVXFFHVVRISDUWLFLSDWRU\SROLF\DSSURDFKHV $JULFXOWXUDO UHVHDUFK VKRXOG DOVR EHFRPH PRUH SDUWLFLSDWLYH DQG LQFOXVLYH DV VWUHVVHG E\ WKH ,QWHUQDWLRQDO $VVHVVPHQW RI $JULFXOWXUDO 6FLHQFH DQG 7HFKQRORJ\ IRU 'HYHORSPHQW ,$$67'  $IWHU D SHULRGRIDOPRVWH[FOXVLYHÃ&#x20AC;QDQFLQJRIELRWHFKQRORJ\ DQG JHQHWLF HQJLQHHULQJ SXEOLF VXSSRUW VKRXOG EH UHGLUHFWHGWRZDUGVLQWHJUDWHGUHVHDUFKWKDWHPEUDFHV IDUPHUV· ORFDO NQRZOHGJH RI EHVW SUDFWLFHV DV ZHOO DV WKH NQRZOHGJH RI VFLHQWLVWV IURP WKH YDULRXV GLVFLSOLQHV FRQFHUQHG ,QYHVWPHQWV LQ SDUWLFLSDWRU\ UHVHDUFK VFKHPHV VKRXOG VSHFLÃ&#x20AC;FDOO\ IRFXV RQ WKH QHZFKDOOHQJHVVXSSRUWLQJPRGHUQORZLQSXWRUJDQLF DQG VRODUEDVHG SURGXFWLRQ VPDOOVFDOH IDUPLQJ HQKDQFHPHQW RI RQIDUP ELRGLYHUVLW\ LPSURYHG JUDVVODQG PDQDJHPHQW DQG FURS GLYHUVLÃ&#x20AC;FDWLRQ WR UHGXFHYXOQHUDELOLW\


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW



1//'06#4; U*; 0&7564+#.+8'561%- #4/+0) 505756#+0#$.' -R\FH'·6LOYD &RPSDVVLRQLQ:RUOG)DUPLQJ

%XWIRUWKHVDNHRIVRPHOLWWOHPRXWKIXORIÁHVKZHGHSULYHDVRXORIWKHVXQDQGOLJKWDQGRIWKDWSUR SRUWLRQRIOLIHDQGWLPHLWKDGEHHQERUQLQWRWKHZRUOGWRHQMR\3OXWDUFK

$EVWUDFW ‡ )DUPDQLPDOVDUHVHQWLHQWEHLQJVZKRVHZHOOEHLQJQHHGVWREHSURWHFWHG ‡ ,QGXVWULDOIDUPLQJNHHSVDQLPDOVLQLVRODWLRQRUFURZGHGWRJHWKHULQWRWDOO\XQQDWXUDOFRQGLWLRQV ‡ $QLPDOVKDYHEHHQVHOHFWLYHO\EUHGIRUWKHLUPHDWRUKLJKPLON\LHOGZLWKGHYDVWDWLQJLPSDFWVRQWKHLU KHDOWKDQGZHOIDUH ‡ ,QGXVWULDOOLYHVWRFNIDUPLQJXVHVKXJHDPRXQWVRIJUDLQDQGVR\WRIHHGWKHDQLPDOVLQDZRUOGZKHUH PDQ\JRKXQJU\

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´JR IRU D ZDONµ LQ WKH FRXQWU\VLGHRUVZLPLQWKHVHD  :KLOH D KXJH SURSRUWLRQ RI WKH HDUWK·V SRSXODWLRQ PDNHWKHLUOLYLQJIURPIDUPLQJWKHODQGRIWHQLQFOXGLQJ EUHHGLQJ RU WHQGLQJ WR VRPH IDUP DQLPDOV WKH FRQÀQHPHQWRIYDVWQXPEHUVRIDQLPDOVLQLQGXVWULDO IDUPVLVDUHODWLYHO\QHZH[SHULHQFHIRUERWKIDUPHUV DQG DQLPDOV 7KLV H[SHULPHQW LQ WKH LQGXVWULDOL]DWLRQ RI OLYHVWRFN IDUPLQJ KDV SURYHG D GLVDVWHU IRU WKH ZHOOEHLQJRIWKHDQLPDOVSURYLGHGVKRUWOLYHGJDLQV IRU DJULEXVLQHVV LQWHUHVWV OHG WR WKH GHYDVWDWLRQ RI SUHFLRXV HFRV\VWHPV DQG JHQHUDWHG KXJH DPRXQWV RIWR[LFJDVHVDQGRWKHUKDUPIXOZDVWHV,WPD\DOVR EH D FRQWULEXWRU\ IDFWRU WR WKH JURZLQJ HSLGHPLF RI REHVLW\ DQG WKH VFDQGDORXV JURZWK LQ QXPEHUV RI PDOQRXULVKHGSHRSOH

5HPRYLQJDQLPDOVIURPWKHODQGKDVOHGWRXQQDWXUDO V\VWHPV RI LQGRRU DQLPDO FRQÀ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ÀQGLQJQRWKLQJWRGRDOOGD\DQGQRHVFDSHIURPWKHLU SHQPDWHVRIWHQUHVXOWLQJLQLQMXU\ 6FLHQFHWRGD\FRQÀUPVZKDWPRVWRIXVNQRZWKURXJK FRPPRQ VHQVH WKDW DQLPDOV DUH LQWHOOLJHQW VHQWLHQW EHLQJV FDSDEOH RI D UDQJH RI HPRWLRQDO VWDWHV DQG FDSDFLWLHV:HQRORQJHUKDUNEDFNWR'HVFDUWHVZKR EHOLHYHGWKDWDVFUHDPLQJGRJEHLQJGLVVHFWHGDOLYH ZDV H[KLELWLQJ D SXUHO\ PHFKDQLFDO UHDFWLRQ 'DUZLQ KLPVHOI UHFRJQL]HG WKDW DQLPDOV ZHUH FDSDEOH RI PDQ\ HPRWLRQV VLPLODU WR KXPDQV ZKHQ KH VWDWHG ´:H KDYH VHHQ WKDW WKH VHQVHV DQG LQWXLWLRQV WKH YDULRXVHPRWLRQVDQGIDFXOWLHVVXFKDVORYHPHPRU\ DWWHQWLRQDQGFXULRVLW\LPLWDWLRQUHDVRQHWFRIZKLFK PDQ ERDVWV PD\ EH IRXQG LQ DQ LQFLSLHQW RU HYHQ




75$'($1'(19,5210(175(9,(:

VRPHWLPHV D ZHOO GHYHORSHG FRQGLWLRQ LQ WKH ORZHU DQLPDOVµ 'DUZLQ   6DGO\ 'DUZLQ·V ZLVGRP LQ WKLVUHVSHFWOD\IRUJRWWHQIRUGHFDGHV

QHXURWLFLVPLQFUDWHGVRZV 69&$WKHQH7UXVW   RU GLVWUHVVHG EHKDYLRXU LQ FRZV GHSULYHG RI WKHLUFDOYHV

3LJV FDQ RSHUDWH FRPSXWHU FKDOOHQJHV ZLWK PRUH DELOLW\ WKDQ GRJV ² EXW WKDW RQO\ SURYHV WKDW VRPH HOHPHQW RI SLJV· LQWHOOLJHQFH LV QRW XQOLNH RXU RZQ 3LJV DUH RI FRXUVH XQLTXHO\ LQWHOOLJHQW DW EHLQJ SLJV 7KH FRQFUHWH DQG VODWWHG ÁRRU RI WKH DYHUDJH SLJ IDFWRU\ IDUP IUXVWUDWHV WKH QDWXUDO H[SORUDWRU\ RU URRWLQJ EHKDYLRXU RI SLJV ZKR OLNH WR VSHQG  SHU FHQWRIWKHLUGD\OLJKWKRXUVLQVXFKEHKDYLRXU 6WROED DQG:RRG*XVK 7KHPHWDOEDUVVXUURXQGLQJ DQG LPPRELOL]LQJ WKH SUHJQDQW VRZ FDQ UHGXFH KHU WR GHVSHUDWH GHVSRQGHQF\ 69&   RU IUDQWLF VWHUHRW\SLFUHSHWLWLYHEHKDYLRXUVXFKDVFKHZLQJRQ WKHEDUV %URRPHWDO 

$SDUWIURPNHHSLQJWKHVHDQLPDOVWKURXJKRXWWKHLUOLYHV LQWRWDOO\XQQDWXUDOVRFLDOJURXSLQJVDQGFRQGLWLRQVRI GHSULYDWLRQ LQGXVWULDO IDUPLQJ KDV LQÁLFWHG DQRWKHU VFDQGDORXV WHFKQRORJ\ XSRQ WKHVH FUHDWXUHV ,W KDV WDNHQ VHOHFWLYH EUHHGLQJ WR D ZKROH QHZ OHYHO RI VRSKLVWLFDWLRQZLWKGLVDVWURXVLPSDFWVRQWKHGD\WR GD\OLYHVRIWKHDQLPDOV)RUH[DPSOHWKHUHDUHWKUHH JOREDOFRPSDQLHVQRZUHVSRQVLEOHIRUWKHEUHHGVRI FKLFNHQVEUHGIRUPHDW EURLOHUFKLFNHQV VROGZLGHO\ ZRUOGZLGH7KRVHFKLFNHQVQRZJURZVRIDVWWKDWWKH\ UHDFKVODXJKWHUZHLJKWLQÀYHRUVL[ZHHNV²KDOIWKH WLPHLWWRRN\HDUVDJR%UHGIRUPRUHEUHDVWPXVFOH PHDW WKH\WHQGWRWLSIRUZDUGDQGXQDEOHWRVXSSRUW WKHLUKHDY\ERGLHVKDYHEHFRPHSURQHWRDSSDOOLQJO\ SDLQIXOOHJSUREOHPV$UHVHDUFKWHDPVSRQVRUHGE\ WKH *RYHUQPHQW RI WKH 8QLWHG .LQJGRP IRXQG WKDW SHUFHQWRIFKLFNHQVZHUHSDLQIXOO\ODPHIRUGD\V EHIRUHWKH\ZHQWWRVODXJKWHU .QRZOHVHWDO  -RKQ:HEVWHU (PHULWXV3URIHVVRUDW%ULVWRO8QLYHUVLW\ DQG IRUPHU KHDG RI WKH 9HWHULQDU\ 6FKRRO  REVHUYHG WKDW ´DSSUR[LPDWHO\ RQH TXDUWHU RI KHDY\ VWUDLQV RI EURLOHU FKLFNHQ DQG WXUNH\V DUH LQ FKURQLF SDLQ IRU DSSUR[LPDWHO\RQHWKLUGRIWKHLUOLYHVµ :HEVWHU 

/D\LQJ KHQV NHSW IURP SXEHUW\ LQ D FURZGHG FDJH ZLWK RIWHQ OHVV ÁRRU VSDFH WKDQ D VKHHW RI W\SLQJ SDSHUFDQSURGXFHHJJVIRUDURXQGD\HDUDQGFRXOG FDUU\RQIRUORQJHU%XWE\WKHWLPHWKHVH´VSHQWµKHQV UHDFK WKH VODXJKWHU KRXVH RQH VXUYH\ VKRZHG WKDW SHUFHQWKDYHEURNHQERQHV *UHJRU\HWDO  3URGXFLQJ HQRXJK FDOFLXP WR SURYLGH WKH VKHOOV IRU WKHHJJVVKHOD\VHDFK\HDUFRXSOHGZLWKODFN RIH[HUFLVHIURPEHLQJFDJHGUHQGHUWKHKHQ·VERQHV IUDJLOH DQG EULWWOH ,Q DGGLWLRQ WKH FDJH SUHYHQWV WKH KHQIURPFDUU\LQJRXWWKHUHJXODUVHTXHQFHRIDFWLYLWLHV VKH ZRXOG GR LQ D QDWXUDO HQYLURQPHQW ² SHFNLQJ DW WKH JURXQG IRU IRRG VWUHWFKLQJ DQG ÁDSSLQJ KHU ZLQJVGXVWEDWKLQJWRFOHDQKHUIHDWKHUVÁ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ÁLFWEHWZHHQVFLHQWLÀFSURJUHVVDQG KXPDQ HPSDWK\ ZLWK DQLPDOV 7KH VFLHQWLÀF GRVVLHU RQ WKH VXIIHULQJ FDXVHG WR DQLPDOV LQ LQGXVWULDO IDUPLQJV\VWHPVLVFRQVWDQWO\JURZLQJ1HZUHVHDUFK VKRZV WKH FDSDFLW\ RI FKLFNHQV ² DQG ÀVK ² WR IHHO SDLQ 'DQEXU\ HW DO  6QHGGRQ %UDLWKZDLWH DQG *HQWOH   2WKHU UHVHDUFK VKRZV VWDWHV RI

'DLU\ FRZV VXFK DV WKH XELTXLWRXV EODFNDQGZKLWH +ROVWHLQV KDYH EHHQ EUHG WR SURGXFH VR PXFK PLON WKDWWKH\DUHPHWDEROLFDOO\EHLQJSXVKHGWRWKHOLPLW QRZSURGXFLQJXSWRRUHYHQPRUHWKDQOLWUHV D \HDU PDQ\ WLPHV PRUH WKDQ FDOYHV ZRXOG KDYH GUXQNIURPWKHLUPRWKHUV7KH\DUHSURQHWRVXIIHULQJ IURPKLJKUDWHVRISDLQIXOFRQGLWLRQVOLNHPDVWLWLVDQG ODPHQHVV DVVRFLDWHG ZLWK WKHLU EUHHGLQJ IHHGLQJ DQGKRXVLQJFRQGLWLRQV&RZVWKDWDUHNHSWLQ]HUR JUD]LQJLQGRRUV\VWHPVDUHDWKLJKHUULVNRIPDVWLWLV ODPHQHVVPHWULWLVNHWRVLVWHDWWUDPSGLIÀFXOWELUWKV DQG VRPH EDFWHULDO LQIHFWLRQV ()6$   $JDLQ WKHFRPELQDWLRQRIEUHHGLQJIRUSURGXFWLYLW\DQGWKH WRWDOO\ XQQDWXUDO HQYLURQPHQWV KDV SURYHG KLJKO\ LQMXULRXVWRWKHDQLPDOV· ZHOIDUH<HWVRPHJRVR IDU DV WR DGYRFDWH NHHSLQJ GDLU\ FRZV LQ VHDOHG XQLWV /8&&* VRWKDWWKHLUPHWKDQHHPLVVLRQVFDQ EH´VFUXEEHGµDQGSXWWRJRRGXVH6XFKDP\RSLF UHFRPPHQGDWLRQ ZKLFK GLUHFWO\ DIIHFWV WKH OLYHV RI WKH DQLPDOV WKHPVHOYHV VKRXOG VXUHO\ EH VXEMHFW WR DQ DVVHVVPHQW RI LWV HIIHFWV RQ DQLPDO KHDOWK DQG ZHOIDUH 6R ZKHUH GR WKH EHVW VROXWLRQV OLH" 3HUKDSV WKH DQVZHUV WR WKHVH SUREOHPV RI WR[LF HPLVVLRQV IURP


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

IDFWRU\IDUPVRYHUH[SORLWDWLRQRIWKHHDUWK·VUHVRXUFHV UXUDOSRYHUW\XUEDQREHVLW\DQGSRRUDQLPDOZHOIDUH FDQEHIRXQGLQDSSO\LQJDPL[WXUHRIJRRGVFLHQFH FRPPRQVHQVHDQGFRPSDVVLRQWRSURGXFHJHQXLQH ZLQZLQVLWXDWLRQV ,WLVQRZZHOONQRZQWKDWSHUPDQHQWSDVWXUHFDQDFW DV D FDUERQ VLQN 5HFHQW UHVHDUFK FRPSDULQJ WKH HQYLURQPHQWDOLPSDFWVRIIRXUGLIIHUHQWNLQGVRIGDLU\ IDUPV IRXQG WKDW D ZHOOPDQDJHG GDLU\ KHUG NHSW RXWGRRUV\HDUURXQGOHIWDFDUERQIRRWSULQWSHUFHQW VPDOOHUWKDQWKDWRIDKLJKSURGXFWLRQGDLU\KHUGNHSW LQ SHUPDQHQWKRXVLQJ ,QDGGLWLRQ DYHUDJHQHWIDUP JUHHQKRXVHJDVHPLVVLRQVGHFOLQHGE\DERXWSHU FHQW E\ NHHSLQJ WKH KHUG RXWGRRUV \HDUURXQG DQG FXWDPPRQLDHPLVVLRQVE\DURXQGSHUFHQW 5RW] HWDO $VUXPLQDQWDQLPDOVWKHVHFRZVFRXOG SXUVXHWKHLUQDWXUDOJUD]LQJEHKDYLRXUDQGDOWKRXJK WKHLUSURGXFWLYLW\ZDVORZHULQWHUPVRIOLWUHVSURGXFHG WKHLUPLONZDVKLJKHULQSURWHLQDQGIDWFRQWHQW7KXV WKH QXWULWLRQDO RXWSXW IURP LQGRRU DQG RXWGRRU FRZV ZDVVLPLODU 7R DFKLHYH KLJK ZHOIDUH VWDQGDUGV WKH QHHGV RI WKH DQLPDOVWKHPVHOYHVVKRXOGEHFRQVLGHUHG,ISRXOWU\ VXFKDVFKLFNHQVWXUNH\VDQGGXFNVKDYHZLQJVZLWK ZKLFK WR Á\ WKH\ VKRXOG QRW EH EUHG WR EHFRPH VR KHDY\WKDWWKH\DUHQRORQJHUDEOHWRÁ\DQGLQWKH



FDVHRIWXUNH\VQRORQJHUDEOHWRPDWHQDWXUDOO\GXH WR WKHLU ZHLJKW $QLPDOV VKRXOG QRW EH EUHG LQ ZD\V WKDWWKHLURZQSK\VLRORJ\EHFRPHVWKHLUZRUVWHQHP\ DV LV WKH FDVH ZLWK EURLOHU FKLFNHQV ,I KHQV VWUHWFK WKHLUZLQJVDQGÁDSWKHPWKH\VKRXOGKDYHVSDFHWR GR VR ,I SLJV VSHQG PRVW RI WKHLU WLPH URRWLQJ ZLWK WKHLU KLJKO\ VHQVLWLYH VQRXWV WKH\ VKRXOG QHYHU EH NHSW RQ IXOO\ VODWWHG ÁRRUV ZKHUH VXFK EHKDYLRXU LV LPSRVVLEOH,IWKHDQLPDOVDUHNHSWLQGRRUVWKH\PXVW EH SURYLGHG ZLWK D GHHSO\ HQULFKHG HQYLURQPHQW ZKLFKSURYLGHVFRPIRUWDEOHEHGGLQJPDWHULDOSOHQW\ RI VSDFH DQG RSSRUWXQLWLHV IRU QDWXUDO EHKDYLRXU WR ÁRXULVK $QLPDOV· ERGLHV VKRXOG QRW EH PXWLODWHG WKURXJK SUDFWLFHV VXFK DV GRFNLQJ SLJV· WDLOV LQ RUGHU WR NHHSWKHPLQIDFWRU\IDUPFRQGLWLRQV$QLPDOVVKRXOG EH IHG ZLWK DV QHDU D QDWXUDO GLHW DV SRVVLEOH DQG QRW EH GHSULYHG RI QRUPDO TXDQWLWLHV RI IRRG DV LV WKHFDVHZLWKWKHEUHHGHUELUGVRIWKHEURLOHUYDULHW\ 7KH\ VKRXOG QRW EH GHSULYHG RI QHFHVVDU\ QXWULHQWV DVKDSSHQVZLWKFDOYHVWKDWDUHIHGDORZLURQOLTXLG GLHWWRSURGXFH´ZKLWHµYHDOQRUVKRXOGWKH\EHIRUFH IHGIRUJRXUPHWSXUSRVHVVXFKDVIRUWKHSURGXFWLRQ RI IRLH JUDV 0RUHRYHU DQLPDOV VKRXOG EH SURYLGHG ZLWK WKH FRPSDQ\ RI WKHLU RZQ NLQG LQ QXPEHUV DV FORVHDVSRVVLEOHWRQDWXUDOFRQGLWLRQV,VRODWLRQDQG RYHUFURZGLQJVKRXOGQRWEHDOORZHG

%R[7ZHOYH)DUP$QLPDO:HOIDUH&ULWHULD 6RFLHW\LVSURJUHVVLYHO\UHFRJQL]LQJDQLPDOV·FDSDFLWLHVDQGQHHGV7KH/LVERQ7UHDW\RIWKH(XURSHDQ8QLRQ (8 LQ FOXGHVDQDUWLFOHZKLFKUHFRJQL]HVWKDWDQLPDOVDUH´VHQWLHQWEHLQJVµDQGUHTXLUHVPHPEHU6WDWHVWRSURWHFWWKHLUZHOIDUH (8 )URPWKH(8WRVRPHVWDWHVLQWKH8QLWHG6WDWHVWR1HZ=HDODQGDQG$XVWUDOLDWKHUHDUHPRYHVWRSKDVHRXW DQGEDQVRPHRIWKHPRUHH[WUHPHFRQÀQHPHQWV\VWHPVDVVRFLDWHGZLWKLQGXVWULDOIDUPLQJ 7KH(XURSHDQ&RPPLVVLRQVSRQVRUHG:HOIDUH4XDOLW\UHVHDUFKSURMHFWHVWDEOLVKHGDOLVWRIWZHOYHIDUPDQLPDOZHOIDUH FULWHULD7KHVHDUH ‡ $QLPDOVVKRXOGQRWVXIIHUIURPSURORQJHGKXQJHU ‡ $QLPDOVVKRXOGQRWVXIIHUIURPSURORQJHGWKLUVW ‡ $QLPDOVVKRXOGKDYHFRPIRUWDURXQGUHVWLQJ ‡ $QLPDOVVKRXOGKDYHWKHUPDOFRPIRUW ‡ $QLPDOVVKRXOGKDYHHQRXJKVSDFHWRPRYHDURXQGIUHHO\ ‡ $QLPDOVVKRXOGEHIUHHRISK\VLFDOLQMXULHV ‡ $QLPDOVVKRXOGEHIUHHRIGLVHDVH ‡ $QLPDOVVKRXOGQRWVXIIHUSDLQIURPLQDSSURSULDWHPDQDJHPHQWRUKDQGOLQJ ‡ $QLPDOVVKRXOGEHDEOHWRH[SUHVVQRUPDOQRQKDUPIXOEHKDYLRXUV ‡ $QLPDOVVKRXOGEHDEOHWRH[SUHVVRWKHUVSHFLHVVSHFLÀFQRUPDOEHKDYLRXUV ‡ $QLPDOVVKRXOGEHKDQGOHGZHOOLQDOOVLWXDWLRQV ‡ 3RVLWLYHHPRWLRQVVKRXOGEHSURPRWHGDQGQHJDWLYHHPRWLRQVVXFKDVIHDUGLVWUHVVIUXVWUDWLRQDQGDSDWK\VKRXOG EHDYRLGHG 6RXUFHZZZDQLPDOZHOIDUHSODWIRUPHX




75$'($1'(19,5210(175(9,(:

%R[7KH)LYH)UHHGRPV )UHHGRPIURPKXQJHUDQGWKLUVW²E\UHDG\DFFHVVWRIUHVKZDWHUDQGDGLHWWRPDLQWDLQIXOOKHDOWKDQGYLJRXU )UHHGRPIURPGLVFRPIRUW²E\SURYLGLQJDQDSSURSULDWHHQYLURQPHQWLQFOXGLQJVKHOWHUDQGDFRPIRUWDEOHUHVWLQJ DUHD )UHHGRPIURPSDLQLQMXU\RUGLVHDVH²E\SUHYHQWLRQRUUDSLGGLDJQRVLVDQGWUHDWPHQW )UHHGRPWRH[SUHVVQRUPDOEHKDYLRXU²E\SURYLGLQJVXIÃ&#x20AC;FLHQWVSDFHSURSHUIDFLOLWLHVDQGFRPSDQ\RIWKHDQLPDO·V RZQNLQG )UHHGRPIURPIHDUDQGGLVWUHVV²E\HQVXULQJFRQGLWLRQVDQGWUHDWPHQWZKLFKDYRLGPHQWDOVXIIHULQJ 6RXUFHZZZIDZFRUJXNIUHHGRPVKWP

,W LV YLWDO WKDW WKRVH LQ FKDUJH RI WKH DQLPDOV DUH QRW RQO\ WUDLQHG EXW DUH DOVR FRPSDVVLRQDWH +RZHYHU JRRG PDQDJHPHQW LV QHYHU DQ H[FXVH IRU NHHSLQJ DQLPDOVLQDSRRUHQYLURQPHQWLQWKHÃ&#x20AC;UVWSODFH:HOO PDQDJHG LQGXVWULDO SLJ IDUPV DUH VWLOO GHWULPHQWDO WR DQLPDOZHOOEHLQJHYHQLIWKHLUPDQDJHUVGRWKHLUEHVW WRPLWLJDWHWKHKDUPIXOLPSDFWV 9DULRXV PHWKRGV WR HQVXUH JRRG DQLPDO ZHOIDUH VWDQGDUGV KDYH EHHQ GHYHORSHG VXFK DV WKH PXFK DGPLUHG )LYH )UHHGRPV DQG WKH 7ZHOYH )DUP $QLPDO :HOIDUH &ULWHULD GHYHORSHG IRU WKH (XURSHDQ &RPPLVVLRQ·V :HOIDUH 4XDOLW\ SURMHFW VHH ER[HV  DQG 

FRPSHWH 7KH PHVVDJH WR FRQVXPHUV ZKR FDQ DIIRUGPHDWHYHU\GD\LVWRUHGXFHWKHLUFRQVXPSWLRQ DQG ZKHQ WKH\ EX\ PHDW WR VSHQG D OLWWOH PRUH ² EXW OHVV IUHTXHQWO\ ² RQ SXUFKDVLQJ RQO\ DQLPDO IULHQGO\ HQYLURQPHQWDOO\ IULHQGO\ SURGXFWV $ UHSRUW FRPPLVVLRQHGE\&RPSDVVLRQLQ:RUOG)DUPLQJDQG )ULHQGV RI WKH (DUWK 8QLWHG .LQJGRP  VKRZV WKDW LW ZLOOEHSRVVLEOHWRIHHGWKHZRUOGSRSXODWLRQLQ XVLQJ D FRPELQDWLRQ RI PL[HG IDUPLQJ DQG RUJDQLF PHWKRGV DORQJ ZLWK JRRG DQLPDO ZHOIDUH V\VWHPV EXW RQO\ LI JOREDOO\ FRQVXPHUV RI ODUJH TXDQWLWLHV RI DQLPDO SURGXFWV FXW EDFN RQ WKHLU FRQVXPSWLRQ &RPSDVVLRQ LQ :RUOG )DUPLQJ DQG )ULHQGV RI WKH (DUWKE 

,W LV QRW MXVW IDUPHUV RU DJULEXVLQHVV FRPSDQLHV WKDW QHHG WR DFW WR DFKLHYH DQLPDOIULHQGO\ IDUPLQJ ,I FRQVXPHUV FRQWLQXH WR FDOO IRU ´FKHDS PHDWµ WKH IDFWRU\ IDUPV ZLOO FRQWLQXH 7KH LURQ\ LV WKDW VXFK IDUPV DUH LQ IDFW FRVWO\ WR WKH HQYLURQPHQW WR WKH DQLPDOV DQG WR VPDOOVFDOH IDUPHUV ZKR FDQQRW

*HQXLQHZLQZLQVDUHSRVVLEOH,WLVXSWRLQGLYLGXDOV JRYHUQPHQWV OHQGLQJ EDQNV DQG JOREDO DJULFXOWXUDO DQG IRRG LQVWLWXWLRQV WR PDNH HWKLFDO FKRLFHV DQG GULYHSROLFLHVDQGSUDFWLFHVLQWKHULJKWGLUHFWLRQ7KH HDUWKWKHDQLPDOVDQGRXUIHOORZKXPDQVQHHGVXFK DFRPPLWPHQW


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW



1//'06#4; U 06')4#6'&412X+8'561%-#0& 0'4); #0#)'/'06U*'#5'1(+1)#5+074#. 6*+12+# 6WDQOH\*ZDYX\D .QRZOHGJH0DQDJHPHQW&RRUGLQDWRU3DUWQHUVKLSIRU'HYHORSPHQW,QLWLDWLYH7UXVW=LPEDEZH

$EVWUDFW Â&#x2021; %LRJDVWHFKQRORJ\HQKDQFHVV\QHUJLHVLQFURSOLYHVWRFNDQGHQHUJ\V\VWHPVEHFDXVHWKHE\SURG XFWRIIHUPHQWDWLRQ VOXUU\ IURPVDYHGGXQJLVXVHGDVIHUWLOL]HUDQGWKHVDYHGFURSUHVLGXHVDUHXVHG DVDQLPDOIHHG Â&#x2021; /DERXURWKHUZLVHXVHGIRUFROOHFWLQJÃ&#x20AC;UHZRRGDQGGXQJFDQEHGLUHFWHGWRZDUGVHFRQRPLFDOO\SUR GXFWLYHDFWLYLWLHVVXFKDVDJULFXOWXUH Â&#x2021; ,QFUHDVHGDJULFXOWXUDOSURGXFWLYLW\DQGRURYHUDOOLQFRPHLPSURYHWKHDWWUDFWLYHQHVVRIELRJDVDVD ODERXUVDYLQJWHFKQRORJ\VRWKDWDSRVLWLYHV\QHUJ\HIIHFW OLPLWHGWRKRXVHKROGVFROOHFWLQJWKHLURZQ HQHUJ\ VRXUFHV DQG LQ WKH DEVHQFH RI D VXEVLG\  EHWZHHQ HFRQRPLF GHYHORSPHQW DQG LPSURYHG HQHUJ\XWLOL]DWLRQFDQEHUHDOL]HG

%LRPDVVFRQVLVWLQJRIÃ&#x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

ZRUOGZLGHZKLFKLVKLJKHUWKDQGHDWKVIURPPDODULD DQG DOPRVW KDOI RI DOO +,9$,'6 GHDWKV WKH PDMRULW\ RI ZKLFK RFFXU LQ VXE6DKDUDQ $IULFD ,($   $OWKRXJKÃ&#x20AC;UHZRRGUHPDLQVWKHPDLQELRPDVVHQHUJ\ VRXUFH LW LV EHFRPLQJ VFDUFH LQ WKH UXUDO DUHDV RI (WKLRSLDDQGKRXVHKROGVDUHLQFUHDVLQJO\XVLQJGXQJ DQG FURS UHVLGXHV LQVWHDG 7KH JURZLQJ VFDUFLW\ RI Ã&#x20AC;UHZRRGLVOHDGLQJWRUHGXFHGDJULFXOWXUDOSURGXFWLRQ DVKRXVHKROGVDOORFDWHODERXUDZD\IURPDJULFXOWXUH DV PRUH DJULFXOWXUDO ODQG LV DOORFDWHG WR Ã&#x20AC;UHZRRG SURGXFWLRQ DQG DV KRXVHKROGV XVH PRUH GXQJ DQG FURS UHVLGXHV IRU IXHO UDWKHU WKDQ IRU IHUWLOL]HU DQG DQLPDO IHHG UHVSHFWLYHO\ &RRNH .|KOLQ DQG +\GH  6FDUFLW\RIÃ&#x20AC;UHZRRGDOVRSODFHVDQLQFUHDVLQJ EXUGHQ RQ ZRPHQ DQG FKLOGUHQ ZKR DUH LWV PDLQ FROOHFWRUV

7KH ZLGHVSUHDG XVH RI ELRPDVV HQHUJ\ VRXUFHV KDV EHHQ IRXQG WR EH ODUJHO\ LQHIÃ&#x20AC;FLHQW DGYHUVHO\ DIIHFWLQJ WKH HQYLURQPHQW KXPDQ KHDOWK DQG IRRG VHFXULW\ 'HZHHV  'DQJ  ,($   (QYLURQPHQWDOSUREOHPVDULVHIURPGHIRUHVWDWLRQODQG GHJUDGDWLRQDQGDLUSROOXWLRQWKDWOHDGWRJUHHQKRXVH JDV *+* HPLVVLRQV$QQXDOGHDWKVIURPLQGRRUDLU SROOXWLRQ UHVXOWLQJ IURP WKH XVH RI ELRPDVVVRXUFHG HQHUJ\ KDYH EHHQ HVWLPDWHG DW DURXQG  PLOOLRQ

%LRJDVZKLFKRIIHUVRQHWHFKQLFDOO\SRVVLEOHHQHUJ\ DOWHUQDWLYHIRUUXUDODUHDVFDQKHOSPLWLJDWHVRPHRI WKH FRQVHTXHQFHV RI DQ RYHUUHOLDQFH RQ ELRPDVV HQHUJ\ DQG LV JDLQLQJ SRSXODULW\ LQ $IULFD 81(6&2 DQG 7DWD (QHUJ\ 5HVHDUFK ,QVWLWXWH   :LWK WKH SRWHQWLDOWRVHUYHXSWRPLOOLRQIDPLO\XQLWVELRJDV WHFKQRORJ\KDVEHHQSURPRWHGVLQFHLQRUGHUWR KHOSRYHUFRPHWKHLQFUHDVLQJHQHUJ\FULVLVLQ(WKLRSLD (60$3   +RZHYHU VWXGLHV LQGLFDWH WKDW

$,QWURGXFWLRQDQGEDFNJURXQG




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ÀUHZRRG DQG GXQJ XVH LQ UXUDO (WKLRSLD WR LPSURYH XQGHUVWDQGLQJ RI KRXVHKROG HQHUJ\ XVH SDWWHUQV DQG DQDO\VH WKH SRWHQWLDO RI ELRJDV WHFKQRORJ\ DV D SRVVLEOH DOWHUQDWLYH VR DV WR LQFUHDVH WKH FKDQFHV RI VXFFHVV LQ SURPRWLQJ FOHDQHU HQHUJ\ VRXUFHV 6FKODJ DQG =X]DUWH   7KHÀQGLQJVRIWKHVWXG\DUHSUHVHQWHGEULHÁ\LQWKH QH[WVHFWLRQIROORZHGE\VRPHRILWVFRQFOXVLRQVDQG UHFRPPHQGDWLRQV

%5HVHDUFKÀQGLQJVIURPKRXVHKROG VXUYH\VDQGFRVWEHQHÀ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

75$'($1'(19,5210(175(9,(:

ZKHQ PRUH FURS UHVLGXHV DUH DYDLODEOH 'XQJ FROOHFWLRQ LV PRUH SURPLQHQW GXULQJ WKH GU\ VHDVRQ ZKHQLWLVHDVLHUWRSURFHVV,WLVWKHQVWRUHGIRUXVH GXULQJWKHZHWVHDVRQ

&$QDO\VLVRIWKHSRWHQWLDORI ELRJDVHQHUJ\ $ FRVWEHQHÀW DQDO\VLV RI  P DQG  P ELRJDV SODQWVSURPRWHGE\WKH1%3(ZDVFRQGXFWHG:KLOH WKH  P SODQW LV WKH PRVW FRPPRQ WKH  P SODQW LV DSSURSULDWH XQGHU FRQGLWLRQV ZKHUH OLYHVWRFN QXPEHUV DUH ORZ )RU TXDOLI\LQJ KRXVHKROGV 1%3( UHFRPPHQGVDOLYHVWRFNKROGLQJRIDWOHDVWIRXUFDWWOH IRU WKH  P ELRJDV SODQW DQG VL[ FDWWOH IRU WKH  P ELRJDVSODQW$PRQJWKHVXUYH\HGKRXVHKROGVDERXW  SHU FHQW TXDOLÀ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ÀUHZRRG SHU \HDU ZKHQ RSHUDWLQJ DW IXOO FDSDFLW\ DQG WKH\ FDQ VDYH XS WR  NJ DQG  NJ RI GXQJUHVSHFWLYHO\SHU\HDU+RZHYHUWKHSRWHQWLDOWR UHSODFHÀUHZRRGZLWKELRJDVZDVDVVXPHGWREHRQO\  SHU FHQW DV WKH FXUUHQW VHWXS GRHV QRW VXSSRUW ,QMHUDEDNLQJZKLFKDFFRXQWVIRUXSWRSHUFHQW RIUXUDOKRXVHKROGV·WRWDOHQHUJ\XVH ((65&  2EWDLQHG ELRJDV ZDV YDOXHG LQ WHUPV RI UHSODFHG ÀUHZRRGDQGGXQJ 7RFDSWXUHWKHEHQHÀWVIRUGLIIHUHQWKRXVHKROGW\SHV LQ WHUPV RI HQHUJ\ PDQDJHPHQW D FRVWEHQHÀW DQDO\VLVZDVSHUIRUPHGXVLQJWKUHHVFHQDULRV L IRU KRXVHKROGVWKDWLQYHVWLQELRJDVWRUHSODFHSXUFKDVHG ÀUHZRRGRU LL WRUHSODFHFROOHFWHGÀUHZRRGDQG LLL  IRU KRXVHKROGV WKDW XVH GXQJ DV DQ HQHUJ\ VRXUFH LQ DGGLWLRQ WR FROOHFWHG ÀUHZRRG $OO WKUHH VFHQDULRV DVVXPHG WKDW GXQJ DQG VOXUU\ ZRXOG EH XVHG DV IHUWLOL]HU)RUFROOHFWHGHQHUJ\VRXUFHVZLWKQRPDUNHW YDOXH WKH PDUJLQDO SURGXFWLYLW\ RI IHPDOH ODERXU LQ




/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW

IDUP SURGXFWLRQ ZDV XVHG 'XQJ FDUULHV DGGLWLRQDO YDOXHIRULWVIHUWLOL]HUFRQWHQW$FFRUGLQJWRODERUDWRU\ WHVWV FRQGXFWHG RQ GXQJ VDPSOHV WDNHQ  NJ RI GLDPPRQLXP SKRVSKDWH '$3  LV HTXLYDOHQW WR DSSUR[LPDWHO\NJRIGU\PDQXUH$FFRUGLQJWRWKH VXUYH\ÀQGLQJV'$3KDVDQDYHUDJHIDUPJDWHSULFH SXUFKDVH SULFH SOXV WUDQVSRUW FRVWV  RI  (7%   SHU NLORJUDP 7KLV WUDQVODWHV LQWR  (7% SHUNLORJUDPRIGXQJ&RPELQLQJFROOHFWLRQFRVWVDQG IHUWLOL]HURSSRUWXQLW\FRVWVGXQJKDVDVKDGRZSULFH RI(7%  SHUNLORJUDPDQG(7%   SHUJLJDMRXOHZKHQXVHGDVDQHQHUJ\VRXUFH 7KHVXUYH\IRXQGUDWHVRIUHWXUQRQFDSLWDOLQYHVWHGLQ ELRJDVSODQWVWREHDERYHSHUFHQW WDEOH ZKLFK VKRZHG WKDW DGRSWLQJ ELRJDV WHFKQRORJ\ LV PRUH EHQHÀFLDO IRU KRXVHKROGV WKDW SXUFKDVH DOO RI WKHLU ÀUHZRRG 7KLV IDFWRU DOVR PDNHV ELRJDV DWWUDFWLYH WR WKLV VHJPHQW RI UXUDO KRXVHKROGV DV EHQHÀWV DUH ÀQDQFLDOO\ UHFRYHUHG WKURXJK VDYLQJV RQ ÀUHZRRG SXUFKDVH+RXVHKROGVWKDWXVHGXQJIRUFRPEXVWLRQ VWDQG WR EHQHÀW PRUH KLJKHU QHW SUHVHQW YDOXH 139

 WKDQ WKRVH FROOHFWLQJ ÀUHZRRG E\ DGRSWLQJ ELRJDV WHFKQRORJ\ 8QGHU DOO WKUHH VFHQDULRV GXQJ DQG VOXUU\ XVHG DV IHUWLOL]HU DFFRXQWHG IRU RYHU 

SHU FHQW RI FRVWV DQG EHQHÀWV UHVSHFWLYHO\ 7KHVH UHVXOWVDUHKLJKO\VHQVLWLYHWRFKDQJHVLQWLPHVDYLQJV H[SHQGLWXUH OHYHOV DQG SULFH RI UHSODFHG IXHO LQ DOO WKUHHKRXVHKROGVFHQDULRV7KHVHIDFWRUVDUHFUXFLDO DV WKH\ DUH OLNHO\ WR GHWHUPLQH DQWLFLSDWHG EHQHÀWV DQG SHUFHLYHG RSSRUWXQLW\ FRVWV RI FDSLWDO ZKLFK LQÁXHQFH KRXVHKROGV· GHFLVLRQ RQ ZKHWKHU WR LQYHVW LQELRJDV:LWKRXWWKHVXEVLG\JLYHQWRIDUPHUVE\WKH 1%3( LQYHVWLQJ LQ WKH ELRJDV SODQW LV YHU\ ULVN\ IRU KRXVHKROGVWKDWFROOHFWWKHLURZQÀUHZRRG

'&RQFOXVLRQVDQGUHFRPPHQGDWLRQV %LRJDV WHFKQRORJ\ SUHVHQWV DQ RSSRUWXQLW\ WR HQKDQFH V\QHUJLHV LQ FURS OLYHVWRFN DQG HQHUJ\ V\VWHPV LQ UXUDO (WKLRSLD 7KH E\SURGXFW RI WKH IHUPHQWDWLRQ²VOXUU\²UHWDLQVWKHQXWULHQWFRQWHQWWKDW LV RWKHUZLVH ORVW WKURXJK GLUHFW FRPEXVWLRQ RI GXQJ IRU HQHUJ\ &URS UHVLGXHV WKDW PLJKW RWKHUZLVH EH XVHGIRUHQHUJ\DUHVDYHGIRUDQLPDOIHHG+RZHYHU ORZ VKDGRZ SULFHV RI HQHUJ\ VRXUFHV FROOHFWHG E\ KRXVHKROGV PHDQ WKDW ELRJDV LV XQDEOH WR FRPSHWH XQOHVV KHDYLO\ VXEVLGL]HG 7KH SUHVHQW VXEVLG\ VFKHPH PDNHV ELRJDV DQ DWWUDFWLYH RSWLRQ EXW WKLV

7DEOH&RVWEHQHÀWDQDO\VLVRIELRJDVSODQWVFRPSDUHGZLWKGLIIHUHQWWUDGLWLRQDOVRXUFHVRIKRXVHKROGHQHUJ\LQ (WKLRSLD (WKLRSLDQELUU

3XUFKDVLQJÀUHZRRG P P &RVWV ,QYHVWPHQWFRVWV

0DLQWHQDQFHFRVWV :DWHUFRVWV 'XQJYDOXH 7RWDOFRVWV

&ROOHFWLQJÀUHZRRG P P

&ROOHFWLQJGXQJ P P

    

    

    

    

    

    

    

    

    

    

    

    

























%HQHÀWV %LRJDVYDOXH

/LJKWLQJHQHUJ\VDYHG 7LPHVDYHG 6OXUU\YDOXH 7RWDOEHQHÀWV  1HWSUHVHQWYDOXH ,QWHUQDOUDWHRIUHWXUQ  SHUFHQW

6RXUFH6XUYH\GDWDDQG619 1RWH Ą (7% (7%DZHLJKWHGDYHUDJH $SULO   'LVFRXQWUDWHSHULRGRIXVHRIELRJDVSODQW\HDUV




ZRXOGQRWEHWKHFDVHLIVXEVLGLHVZHUHUHPRYHG )URP WKH FRVWEHQHÃ&#x20AC;W DVVHVVPHQW RI ELRJDV SODQWV LQYHVWLQJKRXVHKROGVVWDQGWREHQHÃ&#x20AC;WPDLQO\WKURXJK WKH XVH RI VOXUU\ DV D IHUWLOL]HU DV ZHOO DV WKURXJK FRVW VDYLQJV RQ HQHUJ\ XVH IRU WUDGLWLRQDO FRRNLQJ DQG OLJKWLQJ DQG WKH DVVRFLDWHG ODERXU VDYLQJV &RQVHTXHQWO\SURÃ&#x20AC;WDELOLW\GHSHQGVODUJHO\RQWKHXVH RI VOXUU\ DV D IHUWLOL]HU DQG RQ WKH SULFH RI UHSODFHG HQHUJ\VRXUFHV7KXVSURPRWLRQRIGXQJDQGVOXUU\ LV YLWDO IRU WKH VXFFHVV RI WKH ELRJDV SURJUDPPH LQ (WKLRSLDDQGIRULPSURYLQJDJULFXOWXUDOSURGXFWLRQIRU IRRGVHFXULW\$V\QHUJ\WREHIXUWKHUH[SORLWHGLVWKH ODERXUVDYLQJ HIIHFW RI ELRJDV FRPSDUHG ZLWK ZRRG

75$'($1'(19,5210(175(9,(:

RU GXQJ FROOHFWLRQ 7KXV WKH PRUH LQFHQWLYHV WKHUH DUH WR VZLWFK WR VXVWDLQDEOH HQHUJ\ VRXUFHV VXFK DV ELRJDV WKH JUHDWHU ZLOO EH WKH SURÃ&#x20AC;WDELOLW\ DQG LPSURYHPHQWRIODERXUSURGXFWLYLW\LQDJULFXOWXUHDQG RWKHUVHFWRUV 7KHHFRQRPLFDWWUDFWLYHQHVVRIELRJDVSODQWVZRXOG EH FRQVLGHUDEO\ LPSURYHG LI VXLWDEOH ELRJDV LQMHUD VWRYHV ZHUH GHYHORSHG IRU XVH E\ LQYHVWLQJ KRXVHKROGV 7KHVH VWRYHV KDYH WKH SRWHQWLDO WR HQKDQFHWKHXVHRIELRJDVSODQWVWKHUHE\LQFUHDVLQJ WKH EHQHÃ&#x20AC;WV DFFUXLQJ WR KRXVHKROGV &KHDSHU DOWHUQDWLYHV WR ELRJDV SODQWV DQG LPSURYHPHQWV LQ WKH WHFKQRORJ\ UHPDLQ DQ RSWLRQ LQ FDWHULQJ WR SRRU KRXVHKROGV


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW



5HIHUHQFHV $VQHU*DQG$UFKHU6  /LYHVWRFNDQGWKHJOREDOFDUERQF\FOH,Q/LYHVWRFNLQDFKDQJLQJODQGVFDSH/RQGRQ 6WHLQIHOG+HWDOHGV² $WKHQH7UXVW  'RHVFORVHFRQÃ&#x20AC;QHPHQWFDXVHGLVWUHVVLQVRZV"$UHYLHZRIWKHVFLHQWLÃ&#x20AC;FHYLGHQFH3UHSDUHGE\ WKH6FRWWLVK)DUP%XLOGLQJV,QYHVWLJDWLRQ8QLW$EHUGHHQ6FRWODQG %ODVEDOJ7/  &KDQJHVLQFRQVXPSWLRQRIRPHJDDQGRPHJDIDWW\DFLGVLQWKH8QLWHG6WDWHVGXULQJWKHWK FHQWXU\$PHULFDQ-RXUQDORI&OLQLFDO1XWULWLRQ²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|KOLQ*DQG+\GH:)  )XHOZRRGIRUHVWVDQGFRPPXQLW\PDQDJHPHQW(YLGHQFHIURPKRXVHKROG VWXGLHV(QYLURQPHQWDQG'HYHORSPHQW(FRQRPLFV² '·6LOYD-DQG:HEVWHU-  7KH0HDW&ULVLV/RQGRQDQG:DVKLQJWRQ(DUWKVFDQ 'DQEXU\7&:HHNV&$:DWHUPDQ3HDUVRQ$(.HVWLQ6&DQG&KDPEHUV-3  6HOIVHOHFWLRQRIWKHDQDOJHVLF GUXJFDUSURIHQE\ODPHEURLOHUFKLFNHQV9HWHULQDU\5HFRUG² 'DQJ+  )XHOVXEVWLWXWLRQLQVXE6DKDUDQ$IULFD(QYLURQPHQWDO0DQDJHPHQW  ² 'DUZLQ&  7KH'HVFHQWRI0DQDQG6HOHFWLRQLQ5HODWLRQWR6H[3ULQFHWRQ1-3ULQFHWRQ8QLYHUVLW\3UHVV 'DYLGVRQ2DQG6RNRQD<  (QHUJ\DQGVXVWDLQDEOHGHYHORSPHQW.H\LVVXHVIRU$IULFD,Q81(33URFHHGLQJVRI WKH+LJK/HYHO5HJLRQDO0HHWLQJRQ(QHUJ\DQG6XVWDLQDEOH'HYHORSPHQWIRUWKH1LQWK6HVVLRQRIWKH&RPPLVVLRQ RQ6XVWDLQDEOH'HYHORSPHQW1DLUREL²-DQXDU\ 'HZHHV3$  7KHZRRGIXHOFULVLVUHFRQVLGHUHG2EVHUYDWLRQVRQWKHG\QDPLFVRIDEXQGDQFHDQGVFDUFLW\:RUOG 'HYHORSPHQW  ² 'RQ$2VERUQH%HWDO  /DQGXVHFKDQJHWRELRHQHUJ\SURGXFWLRQLQ(XURSH,PSOLFDWLRQVIRUWKHJUHHQKRXVH JDVEDODQFHDQGVRLOFDUERQ*OREDO&KDQJH%LRORJ\GRLM[$YDLODEOHDWKWWS RQOLQHOLEUDU\ZLOH\FRPGRLM[DEVWUDFW ODVWFDOOPDUFK  'RQ$6FKXPDFKHU-DQG$)UHLEDXHU  ,PSDFWRIWURSLFDOODQGXVHFKDQFHRQVRLORUJDQLFFDUERQVWRFNV²D PHWDDQDO\VLV*OREDO&KDQJH%LRORJ\9ROLVVXHSS ((65&   7LJUDL HQHUJ\ UHVRXUFHV DQG KRXVHKROG HQHUJ\ FRQVXPSWLRQ 3DSHU SUHVHQWHG DW WKH (QHUJ\ 6\PSRVLXP0HNHOOH8QLYHUVLW\(WKLRSLD²$SULO ()6$  6FLHQWLÃ&#x20AC;FRSLQLRQRIWKH3DQHORQ$QLPDO+HDOWKDQG:HOIDUHRQDUHTXHVWIURP(XURSHDQ&RPPLVVLRQRQ ZHOIDUHRIGDLU\FRZV7KH()6$-RXUQDO² (VWKHWH*6RQGHU.DQG+HHGJH5  5HSRUWRQWKHIHDVLELOLW\VWXG\RIDQDWLRQDOSURJUDPPHIRUGRPHVWLFELRJDV LQ(WKLRSLD1HWKHUODQGV'HYHORSPHQW2UJDQLVDWLRQ 619 (WKLRSLD (60$3  (WKLRSLDHQHUJ\DVVHVVPHQW5HSRUW1R-RLQW81'3:RUOG%DQN(QHUJ\6HFWRU0DQDJHPHQW $VVLVWDQFH3URJUDPPH:DVKLQJWRQ'& (WKLRSLD 5XUDO (QHUJ\ 'HYHORSPHQW DQG 3URPRWLRQ &HQWHU (5('3&  DQG 619 (WKLRSLD   1DWLRQDO %LRJDV 3URJUDPPH(WKLRSLD3URJUDPPHLPSOHPHQWDWLRQGRFXPHQW (8  &RQVROLGDWHG9HUVLRQRIWKH7UHDW\RQWKH)XQFWLRQLQJRIWKH(XURSHDQ8QLRQ2IÃ&#x20AC;FLDO-RXUQDORIWKH(XURSHDQ 8QLRQ&$YDLODEOHDWKWWSHXUOH[HXURSDHX/H[8UL6HUY/H[8UL6HUYGR"XUL 2-&H Q3')




75$'($1'(19,5210(175(9,(:

(XURSHDQ)RRG6DIHW\$XWKRULW\ ()6$   '5$)76FLHQWLÀF2SLQLRQRQ)RRG6DIHW\$QLPDO+HDOWKDQG:HOIDUH DQG(QYLURQPHQWDO,PSDFWRI$QLPDOVGHULYHGIURP&ORQLQJE\6RPDWLF&HOO1XFOHDU7UDQVIHU 6&17 DQGWKHLU 2IIVSULQJDQG3URGXFWV2EWDLQHGIURPWKRVH$QLPDOV%UXVVHOVS )DLUOLH6  0HDW$%HQLJQ([WUDYDJDQFH+DPSVKLUH3HUPDQHQW3XEOLFDWLRQV )$2  :RUOG$JULFXOWXUH7RZDUGV5RPH )$2 D /LYHVWRFN·V/RQJ6KDGRZ(QYLURQPHQWDO,VVXHVDQG2SWLRQV5RPH )$2 E 3URWHFWLQJ$QLPDO*HQHWLF'LYHUVLW\IRU)RRGDQG$JULFXOWXUH7LPHIRU$FWLRQ$QLPDO*HQHWLF5HVRXUFHV *URXS)$25RPH$YDLODEOHDWZZZIDRRUJDJPDJD]LQHSGIDQJUSGI )$2  *UDVVODQGV(QDEOLQJWKHLUSRWHQWLDOWRFRQWULEXWHWRJUHHQKRXVHJDVPLWLJDWLRQ5RPH )$2  )RUHZRUG,Q)$26DYHDQG*URZ$3ROLF\0DNHUV*XLGHWRWKH6XVWDLQDEOH,QWHQVLÀFDWLRQRI6PDOOKROGHU &URS3URGXFWLRQ5RPH )$26WDW  5RPH)$2 )$= )UDQNIXUWHU$OOJHPHLQH=HLWXQJ  /HEHQVPLWWHOSUHLVH*HÁJHOYRQ:LHVHQKRIVROOWHXUHUZHUGHQ)UDQNIXUW DP0DLQWK)HEUXDU\ )LFKWHO.  :RGLH)UKVWFNVHLHULKUHQ8UVSUXQJKDEHQ+DPEXUJHU$EHQGEODWW+DPEXUJVW1RYHPEHU *DUQHW 7   /LYHVWRFN DQG FOLPDWH FKDQJH ,Q '·6LOYD - DQG :HEVWHU - HGV 7KH 0HDW &ULVLV /RQGRQ DQG :DVKLQJWRQ'&(DUWKVFDQ² *UDFH-6DQ-RVH-0HLU30LUDQGD+DQG0RQWHV5  3URGXFWLYLW\DQGFDUERQÁX[HVRIWURSLFDOVDYDQQDV -RXUQDORI%LRJHRJUDSK\² *UHJRU\1*:LONLQV/-(OHSHUXPD6'%DOODQW\QH$-DQG2YHUÀHOG1'  %URNHQERQHVLQGRPHVWLFIRZOV(IIHFW RIKXVEDQGU\V\VWHPDQGVWXQQLQJPHWKRGLQHQGRIOD\KHQV%ULWLVK3RXOWU\6FLHQFH² *XR/DQG*LIIRUG5  6RLOFDUERQVWRFNVDQGODQGXVHFKDQJH$PHWDDQDO\VLV*OREDO&KDQJH%LRORJ\ 2[IRUG² +HOOHEUDQG +- DQG 9 6FKRO]   /DFKJDVHPLVVLRQHQ XQG 7UHLEKDXVELODQ] QDFKZDFKVHQGHU 5RKVWRIIH ZZZ DWESRWVGDPGH+DXSWVHLWHGHXWVFK,QVWLWXW$EWHLOXQJHQ$EW0LWDUEHLWHUMKHOOHEUDQGMKHOOHEUDQGSXEOLNDW12 '3*SGI ,GHO$  6LHQFHRGHU)LFWLRQ"-DKUH.ORQIRUVFKXQJDQ7LHUHQ/DQGZLUWVFKDIW'HU.ULWLVFKH$JUDUEHULFKW +DPP$JUDUEQGQLV (G SS ,GHO$  'LH.XKLVWNHLQ.OLPD.LOOHU:LHGLH$JUDULQGXVWULHGLH(UGHYHUZVWHWXQGZDVZLUGDJHJHQWXQN|QQHQ 0DUEXUJ0HWURSROLV9HUODJ $UHYLVHGDQGHQODUJHG(QJOLVKWUDQVODWLRQRIWKHERRN´7KHFRZLVQRWDFOLPDWHNLOOHU +RZWKHDJULFXOWXUDOLQGXVWU\GHVWUR\VWKHHDUWKDQGZKDWZHFDQGRDJDLQVWLWµLVLQSUHSDUDWLRQ  ,GHO $   .OLPDVFKW]HU DXI GHU :HLGH 7LHUKDOWXQJ .OLPD (UQlKUXQJ XQG OlQGOLFKH (QWZLFNOXQJ FOLPDWH SURWHFWRUV RQ SDVWXUH DQLPDO KXVEDQGU\ FOLPDWH QXWULWLRQ DQG UXUDO GHYHORSPHQW  6WXG\ IRU *HUPDQZDWFK DQG $UEHLWVJHPHLQVFKDIW ElXHUOLFKH /DQGZLUWVFKDIW FRPPLVVLRQHG SURMHFW ´-HW]W KDQGHOQ .OLPD XQG HQWZLFNOXQJVIUHXQGOLFKH$JUDUSROLWLNµ ,GHO$DQG3HWVFKRZ8  'DVJOREDOH+XKQ WKHJOREDOKHQ ,Q5HVVRXUFHQNRQÁLNWH9HUHLQLJXQJ]XU.ULWLNGHU SROLWLVFKHQgNRQRPLHH90QVWHU352./$=HLWVFKULIWIUNULWLVFKH6R]LDOZLUWVFKDIW ,($  (QHUJ\IRUFRRNLQJLQGHYHORSLQJFRXQWULHV,Q,($:RUOG(QHUJ\2XWORRN² ,2H:  2HNR,QVWLWXWH96FKZHLVIXUWK6WLIWXQJ)8%HUOLQ/DQGHVDQVWDOWIU*UR‰VFKXW]JHELHWH (GV 3HWVFKRZ 8$JURELRGLYHUVLWlWHQWZLFNHOQ+DQGOXQJVVWUDWHJLHQIUHLQHQDFKKDOWLJH7LHUXQG3ÁDQ]HQ]XFKW(QGEHULFKW%HUOLQ ,3&&  ²VHH0HW]HWDO  $YDLODEOHDWZZZLSFFFKSXEOLFDWLRQVBDQGBGDWDDUZJHQFRQWHQWVKWPO -HQVHQ3  )L[HULQJHQVHIIHFWSDVLQVXJJRUVEHWHHQGH²HQHWRORJLVNVWXGLH,QVWLWXWLRQHQIRUKXVGMXUVK\JLHQ PHGKRYVODJDUVNRODQ5HSRUW8SSVDOD/DQWEUXNVXQLYHUVLWHW .LQJ)+  )DUPHUVRI)RUW\&HQWXULHV2U3HUPDQHQW$JULFXOWXUHLQ&KLQD.RUHDDQG-DSDQ0LQHROD1<'RYHU 3XEOLFDWLRQV,QF$YDLODEOHDWKWWSZZZJXWHQEHUJRUJHERRNV .QRZOHV7*.HVWLQ6&+DVODP60%URZQ61*UHHQ/(%XWWHUZRUWK$3RSH6-3IHLIIHU'DQG1LFRO&-  /HJ GLVRUGHUVLQEURLOHUFKLFNHQV3UHYDOHQFHULVNIDFWRUVDQGSUHYHQWLRQ3ORV2QH  H


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW



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ÀFDQWDEVHQFHRIUDUHDOOHOHVLQFRPPHUFLDOEUHHGV3URFHHGLQJVRIWKH1DWLRQDO$FDGHP\RI6FLHQFH  1RYHPEHU² 1D\ORU56WHLQIHOG+)DOFRQ:HWDO  /RVLQJWKH/LQNV%HWZHHQ/LYHVWRFNDQG/DQG6FLHQFHYRO    1NRQ\D ( *HUEHU 1 %DXPJDUWQHU 3 YRQ %UDXQ - 'H 3LQWR $ *UDZ 9 .DWR ( .ORRV - DQG :DOWHU 7   7KH HFRQRPLFVRIGHVHUWLÀFDWLRQODQGGHJUDGDWLRQDQGGURXJKW7RZDUGDQLQWHJUDWHGJOREDODVVHVVPHQW:DVKLQJWRQ '&,QWHUQDWLRQDO)RRG3ROLF\5HVHDUFK,QVWLWXWH 3DXO+(UQVWLQJ$6HPLQR6*XUD6DQG/RUFK$  $JULFXOWXUHDQG&OLPDWH&KDQJH5HDO3UREOHPV)DOVH 6ROXWLRQV5HSRUWSXEOLVKHGIRUWKHWK&RQIHUHQFHRIWKH3DUWLHVRIWKH81)&&&LQ&RSHQKDJHQ'HFHPEHU  $YDLODEOH DW ZZZHFRQH[XVLQIRVLWHVHFRQH[XVÀOHV$JULFXOWXUHBFOLPDWHBFKDQJHBFRSHQKDJHQB SGI 3RHSODX&'RQ$HWDO  7HPSRUDOG\QDPLFVRIVRLORUJDQLFFDUERQDIWHUODQGXVHFKDQJHLQWKHWHPSHUDWH]RQH ²FDUERQUHVSRQVHIXQFWLRQVDVDPRGHODSSURDFK*OREDO&KDQJH%LRORJ\9ROXPH,VVXHSS² -XO\ 5HLFKHUW DQG 5HLFKDUGW   6DXPDJHQ XQG 5HJHQZDOG %HUOLQ DQG %RQQ )RUXP 8PZHOW XQG (QWZLFNOXQJ XQG *HUPDQZDWFK 5HLFKKROI-+  'HU7DQ]XPGDVJROGHQH.DOE%HUOLQ'HUgNRNRORQLDOLVPXV(XURSDV² 5RKVWRIIHNRPSDNW  7\VRQ)RRGV²)OHLVFKLQJUR‰HP6WLO,VVXH1UQEHUJ 5RVHQEHUJHU(DQG.5XW]PRVHU  gNRORJLVFKH)ROJHZLUNXQJHQGHU=XFKWDXIK|KHUH0LOFKOHLVWXQJHQ*UXEHU ,QIRSS 5RW] &$ 6RGHU .- 6NLQQHU 5+ 'HOO &- .OHLQPDQ 3- 6FKPLGW -3 DQG %U\DQW 5%   *UD]LQJ FDQ UHGXFH WKH HQYLURQPHQWDOLPSDFWRIGDLU\SURGXFWLRQV\VWHPV3ODQW0DQDJHPHQW1HWZRUN,QWHUQDWLRQDO6W3DXO01$YDLODEOH DWZZZSODQWPDQDJHPHQWQHWZRUNRUJVXEIJUHVHDUFKLPSDFW 5R\DO 6RFLHW\   5HDSLQJ WKH EHQHÀWV 6FLHQFH DQG VXVWDLQDEOH LQWHQVLÀFDWLRQ RI JOREDO DJULFXOWXUH 56 3ROLF\ GRFXPHQW/RQGRQ 6FKODJ1DQG=X]DUWH)  0DUNHWEDUULHUVWRFOHDQFRRNLQJIXHOVLQVXE6DKDUDQ$IULFD$UHYLHZRIWKHOLWHUDWXUH 6WRFNKROP6WRFNKROP(QYLURQPHQW,QVWLWXWH 6FKXO]H('/X\VVDHUW6&LDLV3)UHLEDXHU$-DQVVHQV,  ,PSRUWDQFHRIPHWKDQHDQGQLWURXVR[LGHIRU(XURSH¶V WHUUHVWULDOJUHHQKRXVHJDVEDODQFH1DWXUH*HRVFLHQFH² 6QHGGRQ /8 %UDLWKZDLWH %$ DQG *HQWOH 0-   'R ÀVKHV KDYH QRFLFHSWRUV" (YLGHQFH IRU WKH HYROXWLRQ RI D YHUWHEUDWH VHQVRU\ V\VWHP 3URFHHGLQJV RI WKH 5R\DO 6RFLHW\ /RQGRQ %LRORJLFDO 6FLHQFHV  ² $YDLODEOHDWKWWSUVSEUR\DOVRFLHW\SXEOLVKLQJRUJFRQWHQWIXOOSGI 619  7KH3RWHQWLDORI6PDOO6FDOH%LRJDV'LJHVWHUVWR$OOHYLDWH3RYHUW\DQG,PSURYH/RQJ7HUP6XVWDLQDELOLW\ RI (FRV\VWHP 6HUYLFHV LQ 6XE6DKDUDQ $IULFD $YDLODEOH DW KWWSZZZDEGQDFXNVXVWDLQDEOHLQWHUQDWLRQDO GHYHORSPHQWXSORDGVILOHV)LQDOB5HSRUWBB3RWHQWLDOBRIB6PDOO6FDOHB%LRJDVB'LJHVWHUVBLQB6XE6DKDUDQB $IULFD%'SGI 6WHLQIHOG+0RRQH\+$6FKQHLGHU)DQG1HYLOOH/(HGV  /LYHVWRFNLQD&KDQJLQJ/DQGVFDSH9RODQG &RPPLVVLRQHGE\&,5$')$2/($',/5,6&23(DQGWKH:RRGV,QVWLWXWH:DVKLQJWRQ'&,VODQG3UHVV 6WROED$DQG:RRG*XVK'*0  7KHEHKDYLRXURISLJVLQDVHPLQDWXUDOHQYLURQPHQW$QLPDO3URGXFWLRQ ²




75$'($1'(19,5210(175(9,(:

6XWWL-05H\QROGV6*DQG%DWHOOR&HGV  *UDVVODQGVRIWKH:RUOG5RPH)$2 6XWWRQ 0$ DQG %LOOHQ *   7HFKQLFDO VXPPDU\ ,Q 6XWWRQ 0$ +RZDUG &0 (ULVPDQ -: %LOOHQ * %OHHNHU $ *UHQQIHZOW3YDQ*ULQVYHQ+DQG*UL]HWWL%HGV7KH(XURSHDQ1LWURJHQ$VVHVVPHQW6RXUFHV(IIHFWVDQG3ROLF\ 3HUVSHFWLYHV&DPEULGJH&DPEULGJH8QLYHUVLW\3UHVV;;;9,,, 6XWWRQ0$+RZDUG&0(ULVPDQ-:%LOOHQ*%OHHNHU$*UHQQIHZOW3YDQ*ULQVYHQ+DQG*UL]HWWL%HGV   7KH(XURSHDQ1LWURJHQ$VVHVVPHQW6RXUFHV(IIHFWVDQG3ROLF\3HUVSHFWLYHV&DPEULGJH&DPEULGJH8QLYHUVLW\ 3UHVV 69&   7KH ZHOIDUH RI LQWHQVLYHO\ NHSW SLJV %UXVVHOV 6FLHQWLÀF 9HWHULQDU\ &RPPLWWHH $YDLODEOH DW KWWS HFHXURSDHXIRRGIVVFROGFRPPRXWBHQKWPO 7KHQ&K  -RLQWLQSXWRI7HVWELRWHFKDQG)ULHQGVRIWKH(DUWK(XURSHLQSXWRQIRRGGHULYHGIURPJHQHWLFDOO\ HQJLQHHUHGDQLPDOV0XQLFKDQG%UXVVHOV)ULHQGVRIWKH(DUWK(XURSHDQG7HVW%LRWHFKKWWSZZZWHVWELRWHFK GHQRGH 7KHQ&K  2SHQOHWWHUDERXW(8·VDVVHVVPHQWRI*0DQLPDOV%UXVVHOVDQG0XQLFK(XURJURXSIRUDQLPDOV )ULHQGVRIWKH(DUWK(XURSH,)2$0(8*URXS7HVW%LRWHFK 7LOPDQ'+LOO-DQG/HKPDQ&  &DUERQQHJDWLYHELRIXHOVIURPORZLQSXWKLJKELRGLYHUVLW\JUDVVODQGELRPDVV 6FLHQFH² 7URHK)5+REEV-$DQG'RQDKXH5/  7LOODJHSUDFWLFHVIRUFRQVHUYDWLRQ,Q7URHK)5+REEV-$DQG'RQDKXH 5/HGV6RLODQG:DWHU&RQVHUYDWLRQQGHGLWLRQ(QJOHZRRG&OLIIV1-3UHQWLFH+DOO 81(6&2 DQG 7DWD (QHUJ\ 5HVHDUFK ,QVWLWXWH   &RQVROLGDWLRQ RI LQIRUPDWLRQ $ UHYLHZ RI WKH OLWHUDWXUH RQ SURPRWLRQRIELRJDVV\VWHPV,Q*HQHUDO,QIRUPDWLRQ3URJUDPPHDQG81,6,673DULV YRQ:LW]NH+DQG1ROHSSD6  (8DJULFXOWXUDOSURGXFWLRQDQGWUDGH&DQPRUHHIÀFLHQF\SUHYHQWLQFUHDVLQJ ¶ODQGJUDEELQJ·RXWVLGHRI(XURSH"5HVHDUFKUHSRUW%HUOLQ+XPEROGW8QLYHUVLWlW]X%HUOLQDQGDJULSRO :HEVWHU-  $QLPDO:HOIDUH$&RRO(\H7RZDUGV(GHQ2[IRUG%ODFNZHOO6FLHQFH :HHNV&  8.FDOIWUDQVSRUWDQGYHDOUHDULQJ&RPSDVVLRQLQZRUOGIDUPLQJ/RQGRQKWWSZZZFLZIRUJXN LQFOXGHVGRFXPHQWVFPBGRFVXXNBFDOIBWUDQVSRUWBDQGBYHDOBUHDULQJSGI :KLWH 5 0XUUD\ 6 DQG 5RKZHGHU 0   3LORW DQDO\VLV RI JOREDO HFRV\VWHPV *UDVVODQG (FRV\VWHPV :5, :DVKLQJWRQ*UDFH-6DQ-RVH-0HLU30LUDQGD+DQG50RQWHV3URGXFWLYLW\DQGFDUERQÁX[HVRI WURSLFDOVDYDQQDV-RXUQDORI%LRJHRJUDSK\ :LQWHUV+&  3+:LQ&X[KDYHQHQWZLFNHOWVLFKSRVLWLY$UWLFOHLQ&X[KDYHQHU1DFKULFKWHQ)HEUXDU\&X[KDYHQ :UJHU7  'DV5OSVHQGHU5LQGHU WKHEHOFKLQJRIFDWWOH 'HU6SLHJHO+DPEXUJ


/LYHVWRFN3URGXFWLRQ$&OLPDWH&KDQJHDQG)RRG6HFXULW\+RW6SRW



1RWHV 

$QLPDOVXIIHULQJDQGZHOIDUHDUHGLUHFWO\DIIHFWHGE\LQGXVWULDOOLYHVWRFNSURGXFWLRQ)RUPRUHLQIRUPDWLRQVHHWKH FRPPHQWRI-R\FH'·6LOYDLQWKLVFKDSWHUVHHDOVR'·6LOYDDQG:HEVWHU



,WLVEH\RQGWKHVFRSHRIWKLVDUWLFOHWRDQDO\VHWKHGDPDJLQJHIIHFWVRIOHJDODQGLOOHJDOGLVSRVDORIGDQJHURXV VXEVWDQFHVLQDQLPDOIHHGIRULQGXVWULDOOLYHVWRFNSURGXFWLRQDQGWKHXVHRIFRQWDPLQDWHGVOXGJHDVIHUWLOL]HURQ FURSODQG



7KLVDUWLFOHGRHVQRWGLVFXVVWKHQRQUHF\FOLQJRIKXPDQIDHFHVLQVRLOIRUDGLVFXVVLRQRIWKLVLVVXHVHH.LQJ 



%\ZD\RILOOXVWUDWLRQDIWHULWVDFFHVVLRQWRWKH(85RPDQLDUHVWULFWHGWKHIUHHPRYHPHQWRIKRUVHRUFRZGUDZQ WUDQVSRUWLQIDYRXURIPRWRUL]HGWUDQVSRUW



´,QH[SHQVLYHµRU´FKHDSµKHUHPHDQVWKDWDFRQVLGHUDEOHSURSRUWLRQRIWKHFRVWVRISURGXFWLRQUHPDLQH[WHUQDOL]HG LQSULFHV



7KLVSURFHVVXVHGIRUWKHLQGXVWULDOSURGXFWLRQRIDPPRQLDLQYROYHVWKHQLWURJHQÀ[DWLRQUHDFWLRQRIQLWURJHQJDV DQGK\GURJHQJDVRYHUDQHQULFKHGLURQRUUXWKHQLXPFDWDO\VW



$PPRQLDLVQRWFDWHJRUL]HGDVD*+*WKDWKDVDGLUHFWLPSDFWRQWKHFOLPDWHVXFKDV&212DQG&+EXWLW GRHVKDYHDUHOHYDQWLQGLUHFWLPSDFWWKURXJKLWVHIIHFWRQWKHDWPRVSKHUH



)RU VRPH \HDUV PRQRFXOWXUHV IRU DJURHQHUJ\ SURGXFWLRQ DUH LQFUHDVLQJ WKH DPRXQW RI 12 HPLWWHG IURP DJULFXOWXUH IRUDPRUHHODERUDWHDQDO\VLVVHH+XUQLHWDOLQFKDSWHURIWKLV5HYLHZ 



%HVLGHVWKHJHQHUDOXVHRIDQLPDOH[FUHPHQWVWKLVDOVRFRQFHUQVWKHVHSDUDWHXVHRIXULQHDQGIDHFHV1RUPDOO\ WKHVHSDUDWLRQLVGRQHWKURXJKSDVWXULQJWKHQDWXUDOVHSDUDWLRQIRUPDPPDOVSUHYHQWVWKHPRGLÀFDWLRQRIWKH QLWURJHQFRPSRXQGVLQWKHXULQHWKURXJKWKHEDFWHULDFRQWDLQHGLQWKHIDHFHV

 &DOFXODWHGXVLQJWKH&OLPDWH$QDO\VLV,QGLFDWRUV·7RRORIWKH:RUOG5HVRXUFHV,QVWLWXWHDWKWWSFDLWZULRUJ  7KHIDFWWKDWDQLPDOEUHHGLQJLVPRUHDGYDQFHGWKDQFURSEUHHGLQJGRHVQRWUHÁHFWDKLJKHUOHYHORIWHFKQRORJLFDO LQQRYDWLRQ %\ ZD\ RI LOOXVWUDWLRQ WKH FRPPHUFLDOL]DWLRQ RI VRPH WUDQVJHQLF FURSV LV IDU PRUH GHYHORSHG WKDQ WUDQVJHQLFDQLPDOV  ,QWKHFORQHGVKHHS´'ROO\µZDVERUQDIWHUWKRXVDQGVRIDWWHPSWVZLWKHPEU\RV'ROO\ZDVWKHÀUVWPDPPDO WKDWZDVFUHDWHGE\DQGVXUYLYHGWKHWHFKQRORJ\RIVRPDWLFFHOOQXFOHXVWUDQVIHU 6&17 $OWKRXJKDUPHGZLWKD SDWHQWWKH´'ROO\µPHWKRGLV DVDOORWKHUJHQHWLFDQGFORQLQJPHWKRGV QRWDEOXHSULQWWRJHWLGHQWLFDOFRSLHV  ,QGHHGWKHKXPDQPLFURELDOUHODWLRQVKLSLVH[WUHPHO\FORVH$PDVVLYHDPRXQWRIEDFWHULDH[LVWRQDQGLQ KXPDQV²DQXPEHUWLPHVKLJKHUWKDQWKHELOOLRQFHOOVLQDKXPDQERG\  $JDLQVWWKLVEDFNJURXQGELRIXHOFHUWLÀFDWHVWKDWFRQÀUPWKDWWKHIHHGVWRFNZDVQRWSURGXFHGRQFURSODQGGHULYHG IURPGHIRUHVWDWLRQDUHRQO\XVHIXOLIWKHWLPHVSDQEHIRUHFRQYHUVLRQLVZHOOGHÀ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




75$'($1'(19,5210(175(9,(:

 $VK\EULGSLJVDQGFKLFNHQVDUHIHGZLWKFRQFHQWUDWHVLQLQWHQVLYHSURGXFWLRQV\VWHPVJUDVVIHGODQGUDFHVRI UDUHSLJVJHHVHFKLFNHQVDQGRWKHUVFDQQRWFRPSHWHDJDLQVWWKHPVRWKDWWKH\HQGXSRQWKHOLVWRIVSHFLHVWKDW DUHWKUHDWHQHGZLWKH[WLQFWLRQ IRUPRUHLQIRUPDWLRQVHH)$27KH6WDWHRIWKHZRUOG·VDQLPDOJHQHWLFUHVRXUFHV IRUIRRGDQGDJULFXOWXUHZZZIDRRUJGRFUHSDHDHKWP   7KLVHIIHFWLVDORJLFDOFRQVHTXHQFHRIWKHLQFUHDVHRIWKHVH[VSHFLÀFSHUIRUPDQFHRIIHPDOHDQLPDOV7KHIRFXV RQERRVWLQJGDLU\SHUIRUPDQFHLVDWWKHH[SHQVHRIWKHHQHUJ\EHLQJXVHGIRUPHDWJHQHUDWLRQ%DVHGRQWKHVDPH ORJLFWKHEURWKHUVRIK\EULGOD\LQJKHQVJDLQZHLJKWYHU\VORZO\  ,QWKH8QLWHG.LQJGRPGXHWRXQVDWLVIDFWRU\IDWWHQLQJSHUIRUPDQFHDODUJHSHUFHQWDJHRIPDOHFDOYHVRIKLJK SHUIRUPDQFHGDLU\FRZV LH+ROVWHLQ)ULHVLDQ-HUVH\ DUHEHLQJNLOOHGHYHU\\HDULPPHGLDWHO\DIWHUWKH\DUHERUQ :HHNV   ,QMHUDLVDWKLQÁDWDQGVSRQJ\EUHDGPDGHIURPWHIIÁRXUZLWKDGLDPHWHURIDERXWFPDQGLVDQLPSRUWDQWSDUW RIWKHWUDGLWLRQDOGLHWLQ(WKLRSLD,WLVWUDGLWLRQDOO\SUHSDUHGRQDÁDWFOD\SDQRIPDWFKLQJGLDPHWHU




75$'($1'(19,5210(175(9,(:

'#&46+%.'U       X                   +DQV5+HUUHQ 3UHVLGHQW0LOOHQQLXP,QVWLWXWH

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Ã&#x20AC;[HVDQGTXLFNUHVXOWV,IWKHUHSHWLWLRQRIWKHIRRGFULVHVWKDWDUHEHFRPLQJPRUHIUHTXHQWLVDQ\ LQGLFDWLRQWKHQWKHVHTXLFNÃ&#x20AC;[HVZLOOUXQWKHLUFRXUVHIDVWZLWKHQRUPRXVQHJDWLYHVRFLDOHQYLURQPHQWDO DQGHFRQRPLFFRQVHTXHQFHV 7KHFDVHIRUDFKDQJHLQSDUDGLJPLVZHOOGRFXPHQWHG0HUHO\Ã&#x20AC;QHWXQLQJWKHSUHVHQWV\VWHPVRUUHGHÃ&#x20AC;Q LQJWKHVWDWXVTXRZLWKQHZWHUPVVXFKDV´VXVWDLQDEOHFURSSURGXFWLRQLQWHQVLÃ&#x20AC;FDWLRQµRU´FOLPDWHVPDUW DJULFXOWXUHµDPRQJRWKHUVZLOOQRWEULQJDERXWWKHSDUDGLJPVKLIWQHHGHG7RVWRSWKH´PLQLQJµRIQDWXUDO FDSLWDODQGLQSDUWLFXODUWRGUDVWLFDOO\UHGXFH*+*HPLVVLRQVIURPDJULFXOWXUHDQGPDNHLWPRUHFOLPDWH UHVLOLHQWUHTXLUHVDJHQXLQHIXQGDPHQWDOWUDQVIRUPDWLRQEDFNHGE\DGGLWLRQDOUHVHDUFK$JURHFRORJ\KDV WKHSURSHUIRXQGDWLRQVWRVXSSRUWWKHQHHGHGWUDQVLWLRQIURPZKHUHZHDUHWRGD\WRZKHUHZHQHHGWREH E\ZLWKDOORXUDJULFXOWXUHZKHWKHULWLVVPDOORUODUJHVFDOHERWKDWWKHORFDODQGJOREDOOHYHOV$JUL FXOWXUHDQGIDUPHUVQHHGWREHDPRQJWKHNH\FRQVLGHUDWLRQVRISROLF\PDNHUVDVSHRSOHPD\VXIIHUIURP Ã&#x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


7KH5ROHRI5HVHDUFKDQG7HFKQRORJ\DQG([WHQVLRQ6HUYLFHV

$,QWURGXFWLRQ 7KHUHLVDQLPSHUDWLYHQHHGIRUDIXQGDPHQWDOFKDQJH LQWKHZD\WKHZRUOGJURZVSURFHVVHVDQGFRQVXPHV LWVIRRG$VVWDWHGLQWKH5HSRUWRIWKH,QWHUQDWLRQDO $VVHVVPHQW RI $JULFXOWXUDO .QRZOHGJH 6FLHQFH DQG 7HFKQRORJ\ IRU 'HYHORSPHQW ,$$67'   ´%XVLQHVVDVXVXDOLVQRWDQRSWLRQµ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Ã&#x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Ã&#x20AC;FFRQGLWLRQVDQGQHHGV ,Q  WKH ,$$67' DOUHDG\ REVHUYHG WKDW ZKDW KDSSHQV ZLWK $.67 DQG DJULFXOWXUH LQ JHQHUDO LQ GHYHORSHG FRXQWULHV VWURQJO\ DIIHFWV ZKDW KDSSHQV LQ GHYHORSLQJ FRXQWULHV EHFDXVH RI WKH KLJKO\



LQWHUFRQQHFWHGZRUOGLQWHUPVRIWUDGHDQGNQRZOHGJH H[FKDQJH,WVKRXOGEHQRWHGWKDWZKLOHRYHUDOO5 ' LQ DJULFXOWXUH KDV GLPLQLVKHG LQ LPSRUWDQFH RYHU WKH SDVWWZRGHFDGHVIRUHLJQDLGLVQRZRQWKHULVHDJDLQ DVDUHVSRQVHWRVHYHUDOIRRGFULVHVDOWKRXJKPRVWO\ LQ WKH IRUP RI TXLFN Ã&#x20AC;[HV VXFK DV WKH SURYLVLRQ RI VHHGVSHVWLFLGHVDQGIHUWLOL]HUV)RUHLJQDLGFRQWLQXHV WR FRPPDQG ODUJH LQYHVWPHQWV PRVWO\ FRQWUROOHG DQGGHFLGHGE\GHYHORSHGFRXQWULHVZKLFKVWLOOWHQG WR FRQVLGHU WKHLU DJULFXOWXUH DV WKH ´UROHµ PRGHO IRU GHYHORSLQJ FRXQWULHV 8QIRUWXQDWHO\ WKHUH UHPDLQV D WHQGHQF\ WR LQFUHDVH VKRUWWHUP LQYHVWPHQWV LQ TXLFNÃ&#x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Ã&#x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




RI FOLPDWH FKDQJH DGDSWDWLRQ DQG PLWLJDWLRQ IRRG VHFXULW\ KXQJHU DQG SRYHUW\ UXUDO OLYHOLKRRGV DQG WKHDVVRFLDWHGKHDOWKDQGHQYLURQPHQWDOSUREOHPV +RZHYHU WKH FRPSOH[LW\ RI WKH DJULFXOWXUDO DQG ZLGHU IRRG V\VWHPV XUJHQWO\ UHTXLUHV DQ XSJUDGLQJ DQG FKDQJH RI FRXUVH DZD\ IURP WKH UHGXFWLRQLVW DSSURDFKWRSUREOHPVROYLQJ7KHIDUPRUHVRFLDOO\ HQYLURQPHQWDOO\ DQG XOWLPDWHO\ HFRQRPLFDOO\ UHZDUGLQJ URXWH RI LQYHVWLQJ LQ VPDOOKROGHU DQG IDPLO\UXQDJURHFRORJLFDOIDUPLQJV\VWHPVGRHVQRW UHFHLYHWKHDWWHQWLRQLWGHVHUYHV

75$'($1'(19,5210(175(9,(:

7KHVKLIWLQ$.67LQYHVWPHQWVDWLQWHUQDWLRQDOUHJLRQDO DQGQDWLRQDOOHYHOVWKHUHIRUHQHHGVXUJHQWO\WRDGGUHVV WKHVHIXQGDPHQWDOLVVXHVDVVXJJHVWHGERWKE\WKH ,$$67'DQGPRUHUHFHQWO\E\81(3  

7KHIXQGDPHQWDOLVVXHLQDJULFXOWXUHWRGD\LVQRWWKDW WKHUHLVWRROLWWOHIRRGSURGXFHGDIWHUDOOZHSURGXFH DQ DYHUDJH RI  NFDO SHU SHUVRQGD\ ² URXJKO\ GRXEOH WKH DPRXQW QHHGHG IRU KHDOWK\ QXWULWLRQ $ QXPEHURILVVXHVOLQNHGWRWKLVRYHUSURGXFWLRQQHHG WREHDGGUHVVHGWKURXJKQHZ$.67SROLFLHV

,Q  PHPEHU 6WDWHV RI WKH $IULFDQ 8QLRQ FRPPLWWHG WR VSHQG  SHU FHQW RI WKHLU QDWLRQDO EXGJHWV RQ DJULFXOWXUDO GHYHORSPHQW 6R IDU RQO\ D KDQGIXORIWKHPDUHPHHWLQJWKLVODXGDEOHWDUJHW7KDW GHFLVLRQ ZDV PDGH EDVHG RQ WKH UHFRJQLWLRQ WKDW LW LV LQ HDFK FRXQWU\·V EHVW LQWHUHVW WR KDYH D VWURQJ DJULFXOWXUDO VHFWRU EDFNHG E\ D ZHOOGHYHORSHG UHVHDUFKDQGH[WHQVLRQFDSDFLW\7KHODWHVWIRRGFULVLV LQWKH+RUQRI$IULFDPD\\HWJLYHPRUHFUHGHQFHWR WKH QHHG IRU XUJHQW DFWLRQ LQ SDUWLFXODU WR GHYHORS VXVWDLQDEOH VROXWLRQV WR WKH LQFUHDVLQJ LPSDFWV RI FOLPDWHFKDQJHLQGXFHG SKHQRPHQD VXFK DV WKRVH FDXVHGE\(O1LxRDQGOD1LxD

Â&#x2021; 2QO\DIHZFRPPRGLWLHVPDNHXSWKHEXONRIJOREDO IRRG SURGXFWLRQ ZKLFK GRHV QRW VDWLVI\ WKH QHHG IRUPRUHGLYHUVHDQGORFDOL]HGSURGXFWLRQRITXDOLW\ DQGDIIRUGDEOHIRRG Â&#x2021; 7KH H[FHVV IRRG LV SURGXFHG PRVWO\ LQ LQGXVWULDOL]HG FRXQWULHV ZLWK VRPH GHYHORSLQJ FRXQWU\H[FHSWLRQVVXFKDV,QGLD ZLWKWKHKHOSRI SULFH DQG WUDGHGLVWRUWLQJ VXEVLGLHV DQG DW JUHDW VRFLDOFRVWV Â&#x2021; 7KH H[FHVV IRRG LV SURGXFHG DOVR DW JUHDW HQYLURQPHQWDOFRVWVFRQWULEXWLQJEHWZHHQDQG  SHU FHQW RI WKH WRWDO JUHHQKRXVH JDV *+*  HPLVVLRQV WKDW DUH SDUWO\ UHVSRQVLEOH IRU FOLPDWH FKDQJH VHHWKHFRPPHQWRI*5$,1LQFKDSWHURI WKLV5HYLHZ  Â&#x2021; $QLPDO IHHG SURGXFWLRQ SDUWLFXODUO\ FHUHDOV IRU UXPLQDQWV KDV D QHJDWLYH LPSDFW RQ DQLPDO DQG FRQVXPHU KHDOWK GXH WR PHDW TXDOLW\ DQG DQWLELRWLF DQG KRUPRQH UHVLGXHV  DQG RQ WKH HQYLURQPHQW WKURXJK FDUERQ F\FOHV ZKHQ IHHG LV WUDQVSRUWHG DURXQG WKH ZRUOG 7KHUH LV DOVR WKH HQYLURQPHQWDO SUREOHP RI DQLPDO IDFWRULHV ZKLFK QHHGVWREHRYHUFRPHDORQJZLWKDQHPSKDVLVRQ DQLPDOZHOIDUHFOLPDWHFKDQJHDQGKXPDQKHDOWK FRQVLGHUDWLRQV Â&#x2021; &RQVXPSWLRQ RI ELRIXHOV LQ WKH IRUP RI FHUHDOV DQG YHJHWDEOH RLOV VKRXOG EH UHDVVHVVHG DQG SROLFLHV UHYLVHG WR UHYHUVH WKH VWURQJ JURZWK RI VXFKFRQVXPSWLRQZKLFKLVFOHDUO\XQVXVWDLQDEOH %HVLGHVVRPHREVHUYHUVKDYHIRXQGQRHYLGHQFH RIDGGHGEHQHÃ&#x20AC;WVRIELRIXHOVLQWHUPVRIORZHU*+* HPLVVLRQVEXWWKH\GRDIIHFWIRRGSULFHVQHJDWLYHO\ &)6+/3(/DJLHWDO 

7KH 8QLWHG 1DWLRQV &RQIHUHQFH RQ 6XVWDLQDEOH 'HYHORSPHQW ² 5LR ² KHOG LQ -XQH  ZDV DQRWKHU JRRG RSSRUWXQLW\ WR VWURQJO\ FRPPLW WR D QHZ DJULFXOWXUDO DQG IRRG V\VWHP DORQJ WKH OLQHV RI D PXOWLIXQFWLRQDO DJULFXOWXUDO V\VWHP DV GHÃ&#x20AC;QHG LQ WKH,$$67'UHSRUW$V+RIIPDQQDQG*5$,1LOOXVWUDWH LQ FKDSWHU  RI WKLV 5HYLHZ DJULFXOWXUH LV VWURQJO\ LPSOLFDWHG DV SDUW RI WKH FOLPDWHFKDQJH SUREOHP ,W PXVWWKHUHIRUHDOVREHSDUWRIWKHVROXWLRQ(QRUPRXV KHDOWK SUREOHPV KDYH DULVHQ IURP ´PRGHUQ GLHWVµ RI KLJKO\ SURFHVVHG DQG FKHPLFDOODFHG IRRGVWXIIV QRW WR PHQWLRQ WKH HFRORJLFDO LPSDFWV RI H[LVWLQJ FRQYHQWLRQDO IRRG SURGXFWLRQ V\VWHPV WKDW RYHUXVH ZDWHU IHUWLOL]HUV DQG RWKHU IRVVLOIXHOEDVHG LQSXWV DQG DUH WKHUHIRUH E\ GHÃ&#x20AC;QLWLRQ XQVXVWDLQDEOH )XUWKHUPRUH WKH VRFDOOHG FRQYHQWLRQDOLQGXVWULDO DJULFXOWXUH LV VXSSRUWHG E\ SHUYHUVH VXEVLGLHV LQ GHYHORSHG FRXQWULHV WKDW UHLQIRUFH XQVXVWDLQDEOH SUDFWLFHV RQ WKH RQH KDQG DQG RYHUFRQVXPSWLRQ DQG ZDVWH RQ WKH RWKHU ,Q GHYHORSLQJ FRXQWULHV IDUPHUV WU\LQJ WR FRPSHWH ZLWK WKHVH VXEVLGL]HG SURGXFWV DUH IRUFHG WR FXW FRUQHUV DQG H[SORLW WKHLU QDWXUDO UHVRXUFHV 'XH WR SRRU LQYHVWPHQW LQ DJULFXOWXUH WKHVH IDUPHUV VXIIHU IURP D ODFN RI NQRZOHGJH H[FKDQJH DQG LQVXIÃ&#x20AC;FLHQW RU D FRPSOHWH DEVHQFH RI LQYHVWPHQW FDSDFLW\ WR LQQRYDWH DQG SXUFKDVHPLVFHOODQHRXVLQSXWVLQFOXGLQJLQIRUPDWLRQ DQG HTXLSPHQW 0RUHRYHU WKH\ GR QRW EHQHÃ&#x20AC;W IURP LQVXUDQFH VFKHPHV $JULFXOWXUH HYHU\ZKHUH LV D UDWKHU ULVN\ EXVLQHVV ZKLFK QHHGV WR EH EDFNHG E\ LQVXUDQFHVFKHPHVWRDVVXUHIDUPHUVWKHLUVXUYLYDOLQ EDG\HDUVZKLFKDUHEHFRPLQJPRUHUHJXODUHYHQWV DVFOLPDWHFKDQJHLPSDFWVLQFUHDVH


7KH5ROHRI5HVHDUFKDQG7HFKQRORJ\DQG([WHQVLRQ6HUYLFHV



7KH WUDQVLWLRQ IURP DQ HQHUJ\LQWHQVLYH IRUP RI DJULFXOWXUHEHLWE\LPSRUWLQJWKHLQSXWVRUSURGXFLQJ WKHP ORFDOO\ WR D V\VWHP WKDW EXLOGV SURGXFWLYH HFRV\VWHP VHUYLFHV WR VXVWDLQ PXOWLIXQFWLRQDO VXVWDLQDEOH UHVLOLHQW YLDEOH DQG HTXLWDEOH DJULFXOWXUH UHTXLUHV PDMRU QHZ LQYHVWPHQWV LQ LQVWLWXWLRQV DQG LQIUDVWUXFWXUH 7KLV LQHYLWDEO\ UHTXLUHV WKH FUHDWLRQ RI QHZUHVHDUFKFHQWUHVDQGLQLWLDWLYHVZKLFKVKRXOGEH GHGLFDWHGWRUHVHDUFKHGXFDWLRQDQGH[WHQVLRQXQGHU DIXOO\SDUWLFLSDWRU\V\VWHPWKDWZLOODOVRIDYRXUZRPHQ DQG FRYHU HFRV\VWHP VHUYLFHV RUJDQLF IDUPLQJ DJURHFRORJ\DQGDJURIRUHVWU\7KHXOWLPDWHDLPRIWKRVH FHQWUHVDQGLQLWLDWLYHVVKRXOGEHWKHWUDQVIRUPDWLRQRI WKH SUHVHQW DJULFXOWXUDO UHVHDUFK V\VWHP DW QDWLRQDO UHJLRQDODQGLQWHUQDWLRQDOOHYHOVWRFDWHUWRWKHQHHGV RI D QHZ DJULFXOWXUDO SDUDGLJP VHH WKH FRPPHQWV RI5HLMLQWKLVFKDSWHUDQGRI$OWLHULDQG.RRKDINDQLQ FKDSWHURIWKLV5HYLHZ 7HFKQRORJLFDODQGVFLHQWLÃ&#x20AC;F LQQRYDWLRQV VKRXOG UHVSRQG WR WKH QHHGV LGHQWLÃ&#x20AC;HG E\ WKH HQGXVHUV WR PHHW WKH JRDOV RI PXOWLIXQFWLRQDO DJULFXOWXUHLQVWHDGRIGULYLQJWKRVHQHHGV

FKDOOHQJHVWKDWOLHDKHDGZKLOHSURYLGLQJWKHQHHGHG IRRG DQG QXWULWLRQ VHFXULW\ IRU WKH SURMHFWHG  ELOOLRQ SHRSOH E\  81(3   VRXJKW WR H[DPLQH KRZ JUHHQ LQYHVWPHQWV ZRXOG KHOS DFKLHYH JUHDWHU HFRQRPLF HQYLURQPHQWDO DQG VRFLDO VXVWDLQDELOLW\ )ROORZLQJWKH6WHUQ5HYLHZ·V  UHFRPPHQGDWLRQV WR LQYHVW DQ H[WUD  RU  SHU FHQW RI JURVV GRPHVWLF SURGXFW *'3  LQ D JUHHQ HFRQRP\ WZR VFHQDULRV ZHUH LGHQWLÃ&#x20AC;HG XVLQJ WKH 0LOOHQQLXP ,QVWLWXWH·V 7 V\VWHP G\QDPLFV PRGHO LQ ZKLFK WKH VXJJHVWHG DGGLWLRQDOLQYHVWPHQWVLQJUHHQDJULFXOWXUHZRXOGEH XQGHUWDNHQ JOREDOO\ ,Q WKH Ã&#x20AC;UVW VFHQDULR *  DQ DGGLWLRQDOSHUFHQWRI*'3ZRXOGEHLQYHVWHGLQ JUHHQ DJULFXOWXUH DQQXDOO\ HTXDO WR  ELOOLRQ ² LQ FRQVWDQW  GROODUV  EHWZHHQ  DQG  ,Q WKH VHFRQG VFHQDULR *   SHU FHQW ZRXOG EH LQYHVWHGLQJUHHQDJULFXOWXUHDQQXDOO\ HTXDOWR ELOOLRQ  GXULQJ WKH VDPH SHULRG 7KHVH DGGLWLRQDO LQYHVWPHQWVZRXOGEHXQGHUWDNHQLQHTXDORQHIRXUWK PHDVXUHVLQWKHIROORZLQJIRXUDFWLYLWLHVDORQJWKHOLQHV VXJJHVWHGE\WKH,$$67'  

&RQWUDU\ WR PDQ\ SUHFRQFHSWLRQV DJURHFRORJ\ LV QRW WKH ORZSURGXFWLYLW\ V\VWHP RI RXU DQFHVWRUV UDWKHU LW LV D PRGHUQ NQRZOHGJHEDVHG VFLHQFH DQG WHFKQRORJ\HPSRZHUHG IRRG Ã&#x20AC;EUH DQG IRGGHU SURGXFWLRQV\VWHPDQGLWLVWKHRQO\RQHFDSDEOHRI DVVXULQJIRRGVHFXULW\LQWKHPHGLXPDQGORQJWHUP VHHDOVRWKHFRPPHQWRI1HPHVRQWKHSURGXFWLYLW\ DQG SURÃ&#x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Ã&#x20AC;UVW OLQH RI GHIHQVH IRU SHVW DQG GLVHDVH FRQWURO DQG WKH SURGXFWLRQ RI TXDOLW\ SODQW DQG DQLPDO SURGXFWV WKDW LPSURYH WKH KHDOWK RI FRQVXPHUV DQG WKH HQYLURQPHQW $.67V WKDW IXOÃ&#x20AC;O WKHVH FULWHULD DUH KROLVWLF LQ QDWXUH WDNH D ODQGVFDSH RU ULYHUEDVLQ YLHZ DQG HPSKDVL]H WKH VXVWDLQDEOH XWLOL]DWLRQ RI ELRGLYHUVLW\ ZDWHU VRLO DQG HQHUJ\ZLWKLQWKHDJURHFRV\VWHPV

Â&#x2021; 3URPRWLQJ VXVWDLQDEOH DJULFXOWXUDO PDQDJHPHQW SUDFWLFHV LH HQYLURQPHQWDOO\ VRXQG SUDFWLFHV VXFKDVQRORZWLOODJHDQGRUJDQLFDJULFXOWXUH  Â&#x2021; 0LQLPL]LQJSUHKDUYHVWORVVHVWKURXJKWUDLQLQJDQG SHVWFRQWURODFWLYLWLHV Â&#x2021; 'HYHORSLQJ RU LPSURYLQJ IRRG SURFHVVLQJ IRU WKH SUHYHQWLRQ RI SRVWKDUYHVW ORVVHV DQG EHWWHU VWRUDJHHVSHFLDOO\LQUXUDODUHDV Â&#x2021; 6XSSRUWLQJ UHVHDUFK DQG GHYHORSPHQW LQ DJURQRP\ SKRWRV\QWKHVLV HIÃ&#x20AC;FLHQF\ VRLO ELRORJ\ DQGIHUWLOLW\ WRFORVHWKH\LHOGJDS DGDSWDWLRQWR FOLPDWHFKDQJHWKURXJKELRORJLFDOSURFHVVHVDQG QHZ FURSV DQG IRU HIÃ&#x20AC;FLHQF\ LPSURYHPHQWV LQ HQHUJ\DQGZDWHUXVH

,Q DQ HIIRUW WR HYDOXDWH WKH IHDVLELOLW\ RI VXVWDLQDEOH ´JUHHQµ DJULFXOWXUH WR GHDO ZLWK WKH SUREOHPV DQG

,WVKRXOGEHQRWHGWKDW5 'LPSOLHVWKHSDUWLFLSDWLRQ LQ UHVHDUFK DQG NQRZOHGJH GLVVHPLQDWLRQ RI WKH GLIIHUHQWVWDNHKROGHUVLQSDUWLFXODUIDUPHUV²ZKRDUH RIWHQZRPHQ²LQGHYHORSLQJFRXQWULHV81(3   VKRZV WKDW LQYHVWPHQWV LQ VXVWDLQDEOH DJULFXOWXUH FDQPHHWWKHQHHGIRUIRRGVHFXULW\LQWKHORQJWHUP ZKLOHUHGXFLQJDJULFXOWXUH·VFDUERQIRRWSULQWWKHUHE\ PDNLQJ LW SDUW RI WKH FOLPDWH FKDQJH VROXWLRQ 7KH PRGHOOLQJUHVXOWVVXPPDUL]HGLQWDEOHDUHLQOLQHZLWK WKHH[SHFWDWLRQVRIDQHZDJULFXOWXUDOSDUDGLJPDQG WKH Ã&#x20AC;QGLQJV RI PDQ\ RUJDQLF DQG DJURHFRORJ\ FDVH VWXGLHV 7KH\ VKRZ WKDW QRW RQO\ IRRG VHFXULW\ EXW DOVRHQYLURQPHQWDODQGVRFLDOJRDOVFDQEHDFKLHYHG ZLWKDVXVWDLQDEOHDQGUHVLOLHQWDJULFXOWXUDOV\VWHP ,Q WDEOH  WKH ´JUHHQ VFHQDULRµ *  LV FRPSDUHG




75$'($1'(19,5210(175(9,(:

7DEOH*UHHQVFHQDULR,PSDFWRIJUHHQLQYHVWPHQWVLQDJULFXOWXUH DPRXQWLQJWRSHUFHQWRI*'3

<HDU 6FHQDULR $JULFXOWXUDOSURGXFWLRQ ELOOLRQ\U

&URSV ELOOLRQ\U

/LYHVWRFN ELOOLRQ\U

)LVKHULHV ELOOLRQ\U

(PSOR\PHQW PLOOLRQV

6RLOTXDOLW\ 'PQO

$JULFXOWXUHZDWHUXVH .0\U

+DUYHVWHGODQG ELOOLRQVRIKD

'HIRUHVWDWLRQ PLOOLRQVRIKD\U

&DORULHVSHUFDSLWDGD\ NFDO  DYDLODEOHIRUVXSSO\ &DORULHVSHUFDSLWDGD\ NFDO  DYDLODEOHIRUKRXVHKROGFRQVXPSWLRQ

 %DVH\HDU           





*UHHQ          

%$8D          

*UHHQ          

%$8D          









6RXUFH 81(3 1RWHD%$8 EXVLQHVVDVXVXDO VFHQDULR  ZLWK D ´EXVLQHVVDVXVXDOµ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

%$JULFXOWXUDOSURGXFWLRQDQG YDOXHDGGHG ,QWKHJUHHQVFHQDULRWRWDODJULFXOWXUDOSURGXFWLRQ LH DJULFXOWXUDOSURGXFWVOLYHVWRFNÃ&#x20AC;VKHULHVDQGIRUHVWU\  ZRXOG LQFUHDVH VLJQLÃ&#x20AC;FDQWO\ FRPSDUHG ZLWK WKH %$8 VFHQDULR7KLVFKDQJHZRXOGEHGULYHQE\LQFUHDVHG FURSSURGXFWLRQWKDWZRXOGEHFDSDEOHRIPHHWLQJWKH QHHGVRIDJURZLQJSRSXODWLRQSURMHFWHGWRUHDFKRYHU ELOOLRQE\6LPLODUO\YDOXHDGGHGLQDJULFXOWXUDO SURGXFWLRQZRXOGLQFUHDVHE\PRUHWKDQSHUFHQW FRPSDUHGZLWKWKH%$8VFHQDULR,WLVLPSRUWDQWWRQRWH WKDWGHVSLWHDQLQFUHDVHLQDJULFXOWXUDOSURGXFWLRQDQG

YDOXHDGGHGWKHUHZRXOGEHQRLQFUHDVHLQWKHDUHD KDUYHVWHGZKLOHGHIRUHVWDWLRQUDWHVZRXOGEHKDOYHG DQG ZDWHUHIÃ&#x20AC;FLHQF\ LQFUHDVHG E\ RQH WKLUG 7KLV VXJJHVWV SRVLWLYH V\QHUJLHV EHWZHHQ LQYHVWPHQWV LQ HFRORJLFDODJULFXOWXUHDQGIRUHVWPDQDJHPHQW

&/LYHVWRFNSURGXFWLRQQXWULWLRQDQG OLYHOLKRRGV $GGLWLRQDO LQYHVWPHQWV LQ JUHHQ DJULFXOWXUH ZRXOG DOVR OHDG WR LQFUHDVHG OHYHOV RI OLYHVWRFN SURGXFWLRQ DQGUXUDOOLYHOLKRRGVDQGLPSURYHGQXWULWLRQDOVWDWXV 6XFK LQYHVWPHQWV DUH SURMHFWHG WR OHDG WR JURZWK LQ HPSOR\PHQW RI DERXW  SHU FHQW FRPSDUHG ZLWK FXUUHQWOHYHOVDQGWRDQLQFUHDVHRIDERXWSHUFHQW FRPSDUHGZLWKWKH%$8VFHQDULR7KHPRGHOOLQJDOVR VXJJHVWVWKDWLQYHVWPHQWVLQJUHHQDJULFXOWXUHFRXOG FUHDWHPLOOLRQDGGLWLRQDOMREVFRPSDUHGZLWK%$8 RYHU WKH QH[W  \HDUV 7KH DGGLWLRQDO LQYHVWPHQWV LQ JUHHQ DJULFXOWXUH FRXOG DOVR OHDG WR LPSURYHG QXWULWLRQDVDUHVXOWRIHQKDQFHGSURGXFWLRQPHWKRGV 0HDWSURGXFWLRQZRXOGLQFUHDVHE\SHUFHQWGXH WR DGGLWLRQDO LQYHVWPHQWV EHWZHHQ  DQG  ZKLOH Ã&#x20AC;VK SURGXFWLRQ ZRXOG EH  SHU FHQW EHORZ OHYHOVDQG\HWSHUFHQWKLJKHUWKDQWKH%$8 VFHQDULR E\  0RVW RI WKHVH LQFUHDVHV ZRXOG EH WKH UHVXOW RI JUHDWHU RXWOD\V IRU RUJDQLF IHUWLOL]HUV LQVWHDG RI FKHPLFDO IHUWLOL]HUV DQG UHGXFHG ORVVHV EHFDXVH RI EHWWHU SHVW PDQDJHPHQW DQG ELRORJLFDO FRQWURO




7KH5ROHRI5HVHDUFKDQG7HFKQRORJ\DQG([WHQVLRQ6HUYLFHV

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Ã&#x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Â&#x2021; 5HWXUQVRQLQYHVWPHQWVLQ´EURZQµDJULFXOWXUHZLOO FRQWLQXH WR GHFUHDVH LQ WKH ORQJ UXQ PDLQO\ GXH WRLQFUHDVLQJFRVWVRILQSXWV HVSHFLDOO\ZDWHUDQG HQHUJ\ DQGVWDJQDWLQJGHFUHDVLQJ\LHOGV Â&#x2021; 7KH FRVWV RI QHJDWLYH H[WHUQDOLWLHV RI ´EURZQµ DJULFXOWXUH ZLOO FRQWLQXH WR LQFUHDVH JUDGXDOO\ LQLWLDOO\ QHXWUDOL]LQJ DQG HYHQWXDOO\ H[FHHGLQJ DQ\ HFRQRPLFDQGGHYHORSPHQWJDLQV

Â&#x2021; *UHHQLQJ DJULFXOWXUH DQG IRRG GLVWULEXWLRQ ZLOO UHVXOWLQPRUHFDORULHVSHUSHUVRQGD\PRUHMREV DQG EXVLQHVV RSSRUWXQLWLHV ² HVSHFLDOO\ LQ UXUDO DUHDV ²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

((QDEOLQJFRQGLWLRQV 'HVSLWH WKH FOHDU ORJLF DQG HFRQRPLF UDWLRQDOH IRU PRYLQJPRUHUDSLGO\WRZDUGVVXVWDLQDEOHDJULFXOWXUH WKH WUDQVLWLRQ ZLOO UHTXLUH D VXSSRUWLYH SROLF\ HQYLURQPHQW DQG HQDEOLQJ FRQGLWLRQV WKDW FRXOG KHOS OHYHO WKH SOD\LQJ Ã&#x20AC;HOG EHWZHHQ FRQYHQWLRQDO DQG VXVWDLQDEOH DJULFXOWXUDO SUDFWLFHV ,Q SDUWLFXODU ODUJH LQYHVWPHQWV LQ UXUDO LQIUDVWUXFWXUH LQFOXGLQJ URDGVSRZHULQWHUQHWDFFHVVDFFHVVWRKHDOWKFDUH DQGTXDOLW\VFKRROLQJDVZHOODVLQYHVWPHQWVLQQRQ IDUPLQJ EXW DJULFXOWXUHUHODWHG MREV DUH HVVHQWLDO IRU PDLQWDLQLQJ WKH UXUDO DUHDV DV OLYHO\ LQWHUHVWLQJ DQG UHZDUGLQJ SODFHV VR DV WR NHHS WKH \RXWK IURP PLJUDWLQJWRWKHHYHUJURZLQJXUEDQVOXPV

)7KHZD\IRUZDUG ,PSOHPHQWDWLRQ RI WKH NH\ Ã&#x20AC;QGLQJV DQG RSWLRQV IRU DFWLRQRIWKH,$$67'UHSRUWZLOOPDNHDJULFXOWXUHSDUW RI WKH FOLPDWHFKDQJH VROXWLRQ ,W ZLOO DOVR DVVXUH VXVWDLQDEOHTXDOLW\DQGTXDQWLW\RIIRRGSURGXFWLRQWR




QRXULVKWKHJURZLQJDQGPRUHGHPDQGLQJSRSXODWLRQ ZKLOH VXSSRUWLQJ VWURQJ UXUDO GHYHORSPHQW LQ DJULFXOWXUHUHODWHGMREV 7KHJURXQGEUHDNLQJÃ&#x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Â&#x2021; *UHHQ DJULFXOWXUH LV FDSDEOH RI QRXULVKLQJ D JURZLQJ DQG PRUH GHPDQGLQJ ZRUOG SRSXODWLRQ DW KLJKHU QXWULWLRQDO OHYHOV $Q LQFUHDVH LQ IRRG HQHUJ\ FRQVXPSWLRQ IURP WRGD\·V  NFDO SHU SHUVRQGD\ WR DURXQG  NFDO E\  LV SRVVLEOH ZLWK WKH XVH RI NQRZOHGJH VFLHQFH DQG WHFKQRORJ\LQVXSSRUWRIDJURHFRORJ\,WLVSRVVLEOH WRJDLQVLJQLÃ&#x20AC;FDQWQXWULWLRQDOLPSURYHPHQWVIURPDQ LQFUHDVHLQTXDQWLW\DQGGLYHUVLW\RIIRRG HVSHFLDOO\ QRQFHUHDO  SURGXFWV 3XEOLF SULYDWH DQG FLYLO VRFLHW\ LQLWLDWLYHV IRU LPSURYLQJ IRRG VHFXULW\ DQG VRFLDOHTXLW\ZLOOEHQHHGHGWRHQDEOHDQHIÃ&#x20AC;FLHQW WUDQVLWLRQDWWKHIDUPOHYHODQGWRDVVXUHDVXIÃ&#x20AC;FLHQW TXDOLW\RIQXWULWLRQIRUDOOGXULQJWKLVSHULRG Â&#x2021; $JURHFRORJ\ FDQ VLJQLÃ&#x20AC;FDQWO\ UHGXFH SRYHUW\ DQG

75$'($1'(19,5210(175(9,(:

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² SHUFHQWHVSHFLDOO\RQVPDOOIDUPV Â&#x2021; $ WUDQVLWLRQ WR DJURHFRORJ\ SURYLGHV VLJQLÃ&#x20AC;FDQW HQYLURQPHQWDO EHQHÃ&#x20AC;WV $JURHFRORJ\EDVHG IRRG SURGXFWLRQKDVWKHSRWHQWLDOWRUHEXLOGQDWXUDOFDSL WDOE\UHVWRULQJDQGPDLQWDLQLQJVRLOIHUWLOLW\UHGXFLQJ VRLOHURVLRQDQGLQRUJDQLFDJURFKHPLFDOSROOXWLRQ LQFUHDVLQJ ZDWHU XVH HIÃ&#x20AC;FLHQF\ GHFUHDVLQJ GHIRUHVWDWLRQELRGLYHUVLW\ORVVDQGRWKHUODQGXVH LPSDFWV DQG VLJQLÃ&#x20AC;FDQWO\ UHGXFLQJ DJULFXOWXUDO *+*HPLVVLRQV,PSRUWDQWO\JUHHQDJULFXOWXUHKDV WKH SRWHQWLDO WR WUDQVIRUP DJULFXOWXUH IURP EHLQJ D PDMRU HPLWWHU RI *+*V WR RQH WKDW LV QHW *+* QHXWUDO²DQGSRVVLEO\SURYLGHVHYHQD*+*VLQN ²ZKLOHUHGXFLQJGHIRUHVWDWLRQDQGIUHVKZDWHUXVH E\SHUFHQWDQGSHUFHQWUHVSHFWLYHO\ Â&#x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Â&#x2021; $WUDQVLWLRQWRDJURHFRORJLFDOIDUPLQJSUDFWLFHVZLOO UHTXLUHDGGLWLRQDOLQYHVWPHQWV7KHDJJUHJDWHJOREDO FRVW RI WKH LQYHVWPHQWV DQG SROLF\ LQWHUYHQWLRQV UHTXLUHGIRUDWUDQVLWLRQWRZDUGVJUHHQDJULFXOWXUHLV HVWLPDWHGWRDYHUDJHEHWZHHQDQGELOOLRQ SHUDQQXPRYHUWKHSHULRGWRIRUWKH RU  SHU FHQW *'3 VFHQDULRV UHVSHFWLYHO\ DQG LW ZLOO SURYLGH VLJQLÃ&#x20AC;FDQW DQFLOODU\ EHQHÃ&#x20AC;WV WR RWKHU HFRQRPLF VHFWRUV DQG WKH HQYLURQPHQW ,W VKRXOG EH QRWHG WKDW FRPSDUHG ZLWK WKH SUHVHQW OHYHO RI SHUYHUVH  VXEVLGLHV WR LQGXVWULDO DJULFXOWXUH RI PRUHWKDQELOOLRQSHUDQQXPWKHLQYHVWPHQW


7KH5ROHRI5HVHDUFKDQG7HFKQRORJ\DQG([WHQVLRQ6HUYLFHV

VXJJHVWHG E\ WKH 6WHUQ 5HYLHZ LV YHU\ PRGHVW ² WRR PRGHVW LQ IDFW WR DFKLHYH WKH QHHGHG OHYHOV RI *+* PLWLJDWLRQ DQG UHDOL]H WKH IXOO SRWHQWLDO RI HQYLURQPHQWDOVHUYLFHV  6XVWDLQDEOH DJULFXOWXUH UHTXLUHV LQYHVWPHQWV LQ UHVHDUFK DQG FDSDFLW\EXLOGLQJ LQ WKH IROORZLQJ NH\DUHDVVRLOIHUWLOLW\PDQDJHPHQWPRUHHIÀFLHQW DQG VXVWDLQDEOH ZDWHU XVH FURS DQG OLYHVWRFN GLYHUVLÀFDWLRQ DQG SODQW DQG DQLPDO KHDOWK PDQDJHPHQWDVZHOODVSUHDQGSRVWKDUYHVWORVV UHGXFWLRQ ,W DOVR UHTXLUHV VXEVWDQWLDO LQYHVWPHQWV LQ DSSURSULDWH OHYHOV RI PHFKDQL]DWLRQ EXLOGLQJ XSVWUHDP DQG GRZQVWUHDP VXSSO\ FKDLQV IRU EXVLQHVVHVDQGWUDGHUHGXFWLRQRIIRRGSURFHVVLQJ ZDVWH VXSSRUWLQJ DQG LPSOHPHQWLQJ FDSDFLW\ EXLOGLQJ HIIRUWV VXFK DV IDUPHU ÀHOG VFKRROV LQFOXGLQJ H[SDQGLQJ DQG HTXLSSLQJ DJULFXOWXUDO H[WHQVLRQ VHUYLFHV ZLWK PRGHUQ ,&7 WRROV  DQG IDFLOLWDWLQJLPSURYHGPDUNHWDFFHVVIRUVPDOOKROGHU IDUPHUVDQGFRRSHUDWLYHV  1RW XQOLNH DJULFXOWXUDO PRGHUQL]DWLRQ VXVWDLQDEOH DJULFXOWXUH UHTXLUHV LQVWLWXWLRQDO VWUHQJWKHQLQJ LQFOXGLQJ UHIRUP RI ODQG ULJKWV JRRG JRYHUQDQFH DQG LQIUDVWUXFWXUH GHYHORSPHQW VXFK DV URDGV HOHFWULÀFDWLRQDQGLQWHUQHWDFFHVVLQUXUDODUHDVLQ GHYHORSLQJ FRXQWULHV ,$$67'   7KHVH FDQ EHVXPPHGXSDVHQDEOLQJFRQGLWLRQV



‡ 6XVWDLQDEOH DJULFXOWXUH DOVR UHTXLUHV QDWLRQDO DQG LQWHUQDWLRQDO SROLF\ LQQRYDWLRQV LQFOXGLQJ LQ LQWHUQDWLRQDO WUDGH SROLF\ 6XFK SROLF\ FKDQJHV VKRXOG IRFXV SDUWLFXODUO\ RQ UHIRUPLQJ ´HQYLURQPHQWDOO\KDUPIXOµVXEVLGLHVWKDWDUWLÀ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ÁRRGV DQG VWRUPV UHVXOWLQJ IURP FOLPDWH FKDQJH IRU D PRUH GHWDLOHG GLVFXVVLRQ VHH FKDSWHU  RI WKLV 5HYLHZ 




75$'($1'(19,5210(175(9,(:

1//'06#4; U (('%6+8' :6'05+10'48+%'5(14;56'/+%*#0)'U %*+'8'/'065#0&#44+'4561 /2.'/'06#6+10 /DXUHQV.OHUN[ &RPPXQLFDWLRQDQG,QQRYDWLRQ6WXGLHV:DJHQLQJHQ8QLYHUVLW\:DJHQLQJHQ7KH1HWKHUODQGV

$EVWUDFW 7KHUROHRIH[WHQVLRQVHUYLFHVKDVZLGHQHGEH\RQGVLPSO\GLVVHPLQDWLRQRILQIRUPDWLRQDQGQRZLQFOXGHV WKH EURNHULQJ DQG IDFLOLWDWLRQ RI PXOWLVWDNHKROGHU LQQRYDWLRQ QHWZRUNV 7KLV H[SDQGHG UROH QHHGV WR EH IXUWKHUGHYHORSHGLQWHUPVRIERRVWLQJWKHLUFDSDFLWLHVDQGUHFRJQL]HGDVFDWDO\WLFWRV\VWHPLFFKDQJH

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ÁH[LEOH DQG UHVSRQVLYH FDSDFLWLHV WR DFKLHYH WKLV V\VWHPLF FKDQJH &HQWUDO WR WKLV UHIRUP LV WKH VKLIW IURP D OLQHDU DSSURDFK WR LQQRYDWLRQ LQ ZKLFK SXEOLF VHFWRU DJULFXOWXUDO UHVHDUFKDQGH[WHQVLRQGHOLYHUVQHZWHFKQRORJ\LQD SLSHOLQHFRQÀJXUDWLRQ LHWKURXJKDOLQHDUÁRZIURP UHVHDUFK YLD H[WHQVLRQ WR IDUPHUV  WR D V\VWHPLF DSSURDFKLQZKLFKLQQRYDWLRQLVWKHUHVXOWRIDSURFHVV RI QHWZRUNLQJ LQWHUDFWLYH OHDUQLQJ DQG QHJRWLDWLRQ DPRQJ D KHWHURJHQHRXV VHW RI SXEOLF SULYDWH DQG FLYLOVRFLHW\DFWRUV :RUOG%DQN,$$67'  6XFKDQDSSURDFKUHFRJQL]HVWKDWV\VWHPLFFKDQJH LQDJULFXOWXUHEH\RQGQHZWHFKQLFDOSUDFWLFHVUHTXLUHV LQVWLWXWLRQDO FKDQJH LQYROYLQJ DOWHUQDWLYH ZD\V RI RUJDQL]LQJ IRU H[DPSOH PDUNHWV ODERXU ODQG WHQXUH DQGGLVWULEXWLRQRIEHQHÀWV 7KLVSDSHUGLVFXVVHVWKHFKDQJLQJUROHRIH[WHQVLRQ VHUYLFHV LQ VXFK DQ LQQRYDWLRQ V\VWHP DLPHG DW FRQWULEXWLQJ WR D V\VWHPLF FKDQJH LQ DJULFXOWXUDO SURGXFWLRQV\VWHPV

%&KDQJLQJGHÀQLWLRQVDQG UROHVRIH[WHQVLRQ ,QPDQ\FRXQWULHVDGYLFHWRIDUPHUVLVSURYLGHGQRW MXVW E\ D VLQJOH SXEOLF H[WHQVLRQ VHUYLFH EXW UDWKHU E\VHYHUDOH[WHQVLRQVHUYLFHV DOVRLQFUHDVLQJO\FDOOHG ´DGYLVRU\ VHUYLFHVµ  ZKLFK FRQVLVW RI D SOHWKRUD RI SXEOLF SULYDWH DQG 1*2EDVHG DGYLVHUV 5LYHUD DQG 6XODLPDQ   7KLV LPSOLHV WKDW H[WHQVLRQ V\VWHPV WRGD\ FDQ EH YHU\ EURDGO\ GHÀQHG DV ´V\VWHPVWKDWVKRXOGIDFLOLWDWHWKHDFFHVVRIIDUPHUV WKHLU RUJDQL]DWLRQV DQG RWKHU PDUNHW DFWRUV WR NQRZOHGJH LQIRUPDWLRQ DQG WHFKQRORJLHV IDFLOLWDWH WKHLULQWHUDFWLRQZLWKSDUWQHUVLQUHVHDUFKHGXFDWLRQ DJULEXVLQHVV DQG RWKHU UHOHYDQW LQVWLWXWLRQV DQG DVVLVW WKHP WR GHYHORS WKHLU RZQ WHFKQLFDO RUJDQL]DWLRQDODQGPDQDJHPHQWVNLOOVDQGSUDFWLFHVµ &KULVWRSORV    7KH UROH RI H[WHQVLRQ LQ UXUDO DUHDVKDVWKXVH[SDQGHGWRLQFOXGHVHUYLFHVWKDWJR EH\RQG DJULFXOWXUH DQG PD\ LQFOXGH WKH IROORZLQJ &KULVWRSORV  ‡ 'LVVHPLQDWLRQ RI LQIRUPDWLRQ DERXW WHFKQRORJLHV QHZUHVHDUFKPDUNHWVLQSXWDQGÀQDQFLDOVHUYLFHV DVZHOODVFOLPDWHDQGZHDWKHU ‡ 7UDLQLQJDQGDGYLFHIRULQGLYLGXDOIDUPHUVJURXSV RIIDUPHUVIDUPHURUJDQL]DWLRQVFRRSHUDWLYHVDQG RWKHUDJULEXVLQHVVHVDORQJWKHPDUNHWFKDLQ ‡ 7HVWLQJ DQG SUDFWLFDO DGDSWDWLRQ RI QHZ RQIDUP WHFKQRORJLHVDQGSUDFWLFHV ‡ 'HYHORSPHQW RI EXVLQHVV PDQDJHPHQW VNLOOV DPRQJ VPDOOKROGHU IDUPHUV DQG RWKHU ORFDO HQWUHSUHQHXUV ‡ )DFLOLWDWLQJ OLQNDJHV DPRQJ PDUNHW DFWRUV HJ IRU ÀQDQFLDO DQG QRQÀQDQFLDO LQSXWV SURFHVVLQJ




7KH5ROHRI5HVHDUFKDQG7HFKQRORJ\DQG([WHQVLRQ6HUYLFHV

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·VODEHOZKLFKLVRZQHGE\WKHPXOWLQDWLRQDOFRUSRUDWLRQ3HSVLFR 7KLHOHHWDO 

‡

‡ ‡

‡

‡

‡

‡

‡

‡ ‡ ‡ ‡

DQGWUDGLQJ LQFOXGLQJEURNHULQJFROODERUDWLRQDQG SURPRWLQJOHDUQLQJDPRQJWKHP /LQNLQJ VPDOOKROGHU IDUPHUV UXUDO HQWUHSUHQHXUV DQGRWKHUPHPEHUVRIWKHDJULFXOWXUDOFRPPXQLW\ ZLWKLQVWLWXWLRQVWKDWRIIHUWUDLQLQJDQGHGXFDWLRQLQ À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ÀFDWLRQ RI ¶¶JUHHQ·· IDLU WUDGH DQG RWKHU SURGXFWLRQPHWKRGV )DFLOLWDWLQJ DFFHVV WR QRQH[WHQVLRQ JRYHUQPHQW VXSSRUW VXFK DV ZHDWKHUUHODWHG LQVXUDQFH SK\WRVDQLWDU\ DQG FHUWLÀFDWLRQ VHUYLFHV  DQG VXEVLG\ SURJUDPPHV LQFOXGLQJ SD\PHQW WR IDUPHUV IRU HQYLURQPHQWDO VHUYLFHV DQG RWKHU VFKHPHVUHODWHGWRFDUERQFUHGLWV )DFLOLWDWLQJ DFFHVV WR FUHGLW IURP UXUDO ÀQDQFH LQVWLWXWLRQVIRUIDUPHUVDQGORFDOHQWUHSUHQHXUV 3URYLGLQJQXWULWLRQHGXFDWLRQ 0HGLDWLQJLQFRQÁLFWVRYHUQDWXUDOUHVRXUFHV 3URYLGLQJOHJDODQGÀVFDODGYLFH

&7KHUROHRIH[WHQVLRQDVV\VWHPLF ´LQQRYDWLRQEURNHUVµ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‡ $UWLFXODWLQJGHPDQGDUWLFXODWLQJLQQRYDWLRQQHHGV DQG YLVLRQV DV ZHOO DV FRUUHVSRQGLQJ GHPDQGV LQ WHUPV RI WHFKQRORJ\ NQRZOHGJH IXQGLQJ DQG SROLF\ DFKLHYHG WKURXJK SUREOHP GLDJQRVLV DQG IRUHVLJKWH[HUFLVHV ‡ 6XSSRUWLQJ WKH FUHDWLRQ RI QHWZRUNV IDFLOLWDWLQJ OLQNDJHV DPRQJVW UHOHYDQW DFWRUV LH VFDQQLQJ VFRSLQJ ÀOWHULQJ DQG PDWFKPDNLQJ RI SRVVLEOH FRRSHUDWLRQSDUWQHUV  ‡ 8QGHUWDNLQJ LQQRYDWLRQ SURFHVV PDQDJHPHQW HQKDQFLQJ FRQYHUJHQFH RI JRDOV DQG LQWHUHVWV DQG PXWXDO XQGHUVWDQGLQJ LQ PXOWLVWDNHKROGHU QHWZRUNV FRPSULVLQJ DFWRUV ZLWK GLIIHUHQW LQVWLWXWLRQDO UHIHUHQFH IUDPHV UHODWHG WR QRUPV YDOXHVDQGLQFHQWLYHDQGUHZDUGV\VWHPV 7KHUHDUHVHYHUDOH[DPSOHVRIWKHXVHIXOQHVVRIWKLV LQQRYDWLRQ EURNHU UROH LQ GHYHORSLQJ FRXQWULHV IRU DFKLHYLQJ WKH QHHGHG VLPXOWDQHRXV  DGDSWDWLRQV DW VHYHUDOOHYHOVLQSURGXFWLRQV\VWHPVDQGYDOXHFKDLQV VHHER[HVDQG 




75$'($1'(19,5210(175(9,(:

%R[,QQRYDWLRQEURNHULQJIRULQFOXVLYHGHPDQGGULYHQUHVHDUFKDQGLQQRYDWLRQLQ,QGLD 1DWLRQDO$JULFXOWXUDO,QQRYDWLRQ3URJUDPPH 7RPDNHUHVHDUFKPRUHGHPDQGGULYHQDQGVXSSRUWLYHRIIDUPHUV·LQQRYDWLRQSURFHVVHVWKH1DWLRQDO$JULFXOWXUDO,Q QRYDWLRQ3URJUDPPH 1$,3 RIWKH,QGLDQ&RXQFLORI$JULFXOWXUDO5HVHDUFKIRFXVHVRQHVWDEOLVKLQJFRQVRUWLDRISXEOLF UHVHDUFKRUJDQL]DWLRQVLQSDUWQHUVKLSZLWKIDUPHUV·JURXSVWKHSULYDWHVHFWRUFLYLOVRFLHW\RUJDQL]DWLRQVDQGRWKHUVWDNH KROGHUV DURXQG DJULFXOWXUDO GHYHORSPHQW WKHPHV :LWKLQ 1$,3·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Ã&#x20AC;HOG VFKRROV ))6  WKH XVH RI YLGHR PHGLDWHG OHDUQLQJ DQG WKH XVH RI LQIRUPDWLRQ DQG FRPPXQLFDWLRQ WHFKQRORJLHV ,&7V  DQG PRELOH SKRQHV ))6 DUH D SDUWLFLSDWRU\ PHWKRG RI VXVWDLQDEOH WHFKQRORJ\ GHYHORSPHQW EDVHG RQ DGXOW HGXFDWLRQ SULQFLSOHVVXFKDVH[SHULHQWLDOOHDUQLQJ 'DYLV  DQG D IRUP RI IDUPHUWRIDUPHU H[WHQVLRQ *URXSV RI IDUPHUVPHHWLQDQLQIRUPDOVHWWLQJRQWKHLUIDUPVZLWK DIDFLOLWDWRUVXFKDVDQH[WHQVLRQZRUNHU7KH))6LV DQ LQWHUDFWLYH WUDLQLQJ PHWKRG WR HQDEOH IDUPHUV WR EHFRPH WHFKQLFDO H[SHUWV RQ WKHLU IDUPLQJ V\VWHPV DQG IDUPHUV DUH KHOSHG WR GLDJQRVH SUREOHPV Ã&#x20AC;QG VROXWLRQVFRQGXFWH[SHULPHQWVDQGGLVVHPLQDWHZKDW WKH\KDYHOHDUQHGWRRWKHUIDUPHUV 3DUWLFLSDWRU\ RU IDUPHUOHG YLGHR SUHVHQWDWLRQV DUH D SRZHUIXOWRROWKDWFDQVLJQLÃ&#x20AC;FDQWO\LQFUHDVHWKHLPSDFW RIJRRGSUDFWLFHVDQGUHVHDUFK 9DQ0HOH9DQ 0HOH :DQYRHNH DQG =RVVRX   7KH\ RIIHU WKH

DGYDQWDJH RI EHLQJ PRUH FRVWHIIHFWLYH WKDQ IDUPHU WRIDUPHU H[WHQVLRQ DQG FDQ VRPHWLPHV KDYH D VWURQJHUOHDUQLQJLPSDFWEHFDXVHWKH\RIIHUDEHWWHU PHDQVRIH[SODLQLQJXQGHUO\LQJELRORJLFDORUSK\VLFDO SURFHVVHV )XUWKHUPRUH IDUPHUOHG YLGHRV FDQ YDORUL]HDQGEXLOGRQIDUPHUV·NQRZOHGJHDQGH[SODLQ LQQRYDWLRQ LQ WKHLU RZQ ODQJXDJH 7KH $IULFD 5LFH &HQWHULQ&{WHG·,YRLUHKDVIDFLOLWDWHGWKHGHYHORSPHQW DQGWUDQVODWLRQRIULFHYLGHRV 9DQ0HOH:DQYRHNH DQG =RVVRX   ZKLFK KDYH EHHQ WUDQVODWHG LQWR  $IULFDQ ODQJXDJHV 2SHQ DLU YLGHR VKRZV KDYH HQKDQFHGOHDUQLQJH[SHULPHQWDWLRQFRQÃ&#x20AC;GHQFHWUXVW DQGJURXSFRKHVLRQDPRQJUXUDOSHRSOH7KHIDUPHU OHGOHDUQLQJYLGHRV L HQDEOHXQVXSHUYLVHGOHDUQLQJ LL  IRVWHU ORFDO FUHDWLYLW\ DQG H[SHULPHQWDWLRQ LLL  IDFLOLWDWH LQVWLWXWLRQDO LQQRYDWLRQV DQG LY  LPSURYH VRFLDOLQFOXVLRQRIWKHSRRUWKH\RXWKDQGZRPHQ )ROORZLQJWKHUDSLGVSUHDGRIWKH,QWHUQHWDQGPRELOH SKRQHV LQ PDQ\ GHYHORSLQJ FRXQWULHV D UDQJH RI ,&7V VXFKDVLQIRUPDWLRQNLRVNVDQGWHOHFHQWUHV DQG PRELOHSKRQHEDVHG ´LQIRPHGLDULHVµ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


7KH5ROHRI5HVHDUFKDQG7HFKQRORJ\DQG([WHQVLRQ6HUYLFHV

DOVR LQVWDOOV FRPPXQLW\ SKRQHV DW YHWHULQDU\ VKRSV SRZHUHG E\ VRODU SDQHOV DQG EDWWHULHV LQ YLOODJHV WKDWODFNHOHFWULFLW\7KHSKRQHV\VWHPDOORZVDQLPDO KHDOWKZRUNHUVWRVKDUHLQIRUPDWLRQDQGXSGDWHVDQG FRQGXFW UHIHUUDOV DQG LW UHVXOWV LQ ORZHU WUDQVDFWLRQ FRVWVZKLFKHQKDQFHVWKHHIÃ&#x20AC;FLHQF\RIDQLPDOKHDOWK FDUHSURYLVLRQ

(%DUULHUVWRLPSOHPHQWDWLRQRIHIIHFWLYH H[WHQVLRQVHUYLFHVIRUV\VWHPLFFKDQJH ,PSOHPHQWDWLRQ RI DQ LQQRYDWLRQ EURNHU UROH IRU H[WHQVLRQVHUYLFHVDQGWKHXVHRIH[WHQVLRQPHWKRGV VXFK DV ))6 DQG SDUWLFLSDWRU\ YLGHRV ZKLOH NH\ WR DFKLHYLQJV\VWHPLFFKDQJHDUHQRWZLWKRXWFKDOOHQJHV DQGEDUULHUV7KHVHUHODWHWRFDSDFLW\DQGIXQGLQJ Â&#x2021; &DSDFLW\ ZKLOH H[WHQVLRQ VHUYLFHV DUH XUJHG WR GHYHORSLQWRIDFLOLWDWLQJRUJDQL]DWLRQVWKDWFRQQHFW IDUPHUV ZLWK GLIIHUHQW VHWV RI VHUYLFH SURYLGHUV PDQ\VWLOODGKHUHWRDOLQHDUWUDQVIHURIWHFKQRORJ\ SDUDGLJP 5LYHUDDQG6XODLPDQ ([WHQVLRQ RUJDQL]DWLRQV HLWKHU GR QRW VHH WKH LQQRYDWLRQ



EURNHU